Case Digest - Taxation

Obillos et al vs. CIR/CA
GRN – L68118 October 29, 1985
Aquino, J.:

Petitioners sold the lots they inherited from their father and derived a total profit of P33,584 for each of them. They treated the profit as capital gain and paid an income tax thereof. The CIR required petitioners to pay corporate income tax on their shares, .20% tax fraud surcharge and 42% accumulated interest. Deficiency tax was assessed on the theory that they had formed an unregistered partnership or joint venture.

Whether or not partnership was formed by the siblings thus be assessed of the corporate tax.

Petitioners were co-owners and to consider them partners would obliterate the distinction between co-ownership and partnership. The petitioners were not engaged in any joint venture by reason of that isolated transaction.

Art 1769… the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived. There must be an unmistakable intention to form partnership or joint venture.

Mobil Philippines vs. City Treasure of Makati
GRN 154092 July 14, 2005
Quisumbing, J.:

Petitioner’s office was located in Makati City when it filed an application with the City Treasurer for retirement of business within Makati as it moved its business to Pasig City, on September 1998. After evaluation, petitioner was assessed business tax in the amount of P1,898,106.96. Petitioner paid the tax under protest and in 1999, claimed a refund therefrom. RTC denied the petition for refund ratiocinating that… the payments made by mobil in 1998 are payments for business tax for 1997 which occurred in January of 1998.

Whether or not the business taxes paid in 1998, business taxes for 1997.

Business taxes imposed in the exercise of police power for regulatory purposes are paid for the privilege of carrying on a business in the year the tax was paid. It is paid at the beginning of the year as a fee to allow the business to operate for the rest of the year. The business taxes paid n the year 1998 is for the privilege of engaging in business for the same year. Thus we find that the respondent erroneously treated the assessment and collection of business tax as if it were income tax, by rendering an additional assessment of P1,331,638.84 for the revenue generated for the year 1998.

PFDA vs. CA/Navotas

GRN 150301 October 2, 2007

Azcuña, J.:


Respondent Navotas assessed real estate taxes due from petitioner PFDA for the period 1981-1990 on properties under its jurisdiction, management and operation located inside the Navotas Fishing Port Complex. The assessed taxes remained unpaid, the complex was scheduled for a public auction. Despite DOF’s order to make an ocular inspection of said complex, respondent municipality proceeded with the sale. RTC issued writ of preliminary injunction enjoining Navotas from proceeding with the auction. RTC subsequently dismissed the case, ratiocinating that: “assailing the validity of the tax assessments of the NFPC propertiers is not the proper recourse of the plaintiff but to pay first the assessments under protest and then raise the same on appeal to the LBAA, then to CBAA then ultimately to CTA. CA affirmed the ruling.”


Whether or not petitioner is liable to pay the assessed tax.


“Common limitations to the taxing power of LGU’s are those… taxes, fees, charges of any kind on the national government, its agencies and instrumentalities, and local government units.” This does not apply when the beneficial use of the government property has been granted to a taxable person. Thus, as a rule, PFDA, being an instrumentality of the national government, is exempt from real property tax but the exemption does not extend to the portions of the NFPC that were leased to taxable or private persons and entities for their beneficial use. NFPC cannot be sold at public auction in satisfaction of the tax delinquency assessments made by the municipality on the entire complex. The land on which the NFPC property sits is a reclaimed land, which belongs to the state.


GRN 168557 February 16, 2007

Callejo, J.:


Power energy leased its power barge to NPC for a period of 5 years. In the agreement, NPC was made to shoulder any tax expenses related to the power barge then Polar assigned its rights to FELS. Batangas assessed the property and FELS referred the matter to NPC pursuant to the Agreement. NPC sought reconsideration to Provincial Assessor but was denied. LBAA affirmed provincial assessor while CBAA found the power barges exempt from real property tax, consequently reversed its own ruling. FELS & NPC separately filed a petition for review before CA.


Whether or not local assessor has the jurisdiction to entertain any request for a review or readjustment.


The appropriate forum where the aggrieved party may bring his appeal is the LBAA as provided by law. It follows that the 60-day period for making the appeal to LBAA runs without interruption.

If the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due with respect to the taxpayer’s property becomes absolute upon the expiration of the period to appeal. Also, failure of taxpayer to question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable, thus precluding the taxpayer from questioning the correctness of the assessment, or from invoking any defense that would re open the question of its liability on the merits.

Dgigitel vs. Pangasinan

GRN 152 534 February 23, 2007

Chico-Nazario, J:


Pangasinan filed a petition for Mandamus, Collection of Sum of Money and Damages against Digitel on March 1, 2000. LGC withdrew any exemption from payment of a tax on businesses enjoying a franchise and authorized LGU’s to impose a franchise tax, on business enjoying a franchise within its territorial jurisdiction. (Sec 137, RA 7160) under Provincial Ordinance, Digitel was granted a provincial franchise but was required to pay franchise & real property taxes. Pangasinan likewise enacted “The Real Property Tax Ordinance of 1992” and technically expanded the application of franchise to include machineries and other improvements, thereinafter exempted to Digitel. Since 92, 93 & 94, Digitel allegedly had a franchise tax deficiency which hasn’t been paid since the start of its operation. In 1995, congress passed RA 7925, “The public Telecoms Policy Act Section 23 provided: for the application to any previously granted telecoms franchises of any advantage granted under existing franchise.”


Whether or not Digitel is entitled to the exemption from the payment of provincial franchise tax in view of RA 7925.


Prior to the enactment and effectivity of its legislative franchise, with only a provincial franchise to speak of, Digitel did not enjoy any exemption from payment of franchise and real property taxes. The word exemption as used in RA 7925 pertains to an exemption from regulatory or reporting requirements of the DOTC or the NTC and not to the grantee’s tax liability. In many resolved cases, the Court ruled that

“when exemption is claimed, it must be shown indubitably to exist… a well-founded doubt is fatal to the claim. It is only when the terms of the concession are too explicit to admit fairly of any other, construction that the preposition can be supported.”

On whether Congerss may lift the taxing power of LGU, Court said: “the grant of taxing powers to LGU’s under LGC does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of that in interpreting statutory provisions on municipal corporations. Congress exempted real property tax on those properties actually, exclusively and direcdtly used by DIGITEL in the pursuit of its franchise.”

Reyes vs. CA

GRN 118233 December 10, 1999

Quisumbing; J.: en banc


San Juan, MM implemented several tax ordinances and on May 1993, petitioners filed an appeal to DOJ assailing the constitutionality of these ordinances because they were promulgated without a public hearing. Secretary dismissed the case for having been filed out of time, under Sec. 187, RA 7160. CA affirmed.


Whether or not the constitutional validity of Sec 187 of LGC to could be raised for the first time on appeal.


Petitioners claim that the alleged failure of San Juan to conduct public hearing, ordinances were inoperative and that no prescriptive 30-day period to question the validity of the ordinance could toll to bar appeal to DOJ. The provisions of Sec 187, RA 7160 are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. In the instant case, it is our view that failure of petitioners to appeal to the Secretary of Justice within 30 days as required by RA 7160 is fatal to their case. On the issue of its validity, the constitutionality of an act of Congress will not be passed upon by the Court unless at the first opportunity, that question is properly raised and presented in an appropriate case, and is necessary to determination of the case, particularly where the issue of constitutionality is very lis mota presented.

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