G.R. No.

L-26806 July 30, 1970

COMMISSIONER OF INTERNAL REVENUE petitioner,

vs.
ROYAL INTEROCEAN LINES and THE COURT OF TAX APPEALS, respondents.

CONCEPCION, C.J.:

Said Royal Interocean Liner, Inc. hereinafter referred to as the taxpayer is a foreign corporation duly
licensed to do business in the Philippines, and, likewise, an agent and representative of the Holland East
Asia Lines, a Dutch shipping company, from which the taxpayer receive compensation in the form of
commissions for services rendered.

its dollar earnings derived from freight revenues were converted into the Philippine peso equivalent
thereof, under the prevailing free market rate, for purposes of the common carrier's tax prescribed in
Section 192 of the National Internal Revenue Code. Thereafter, the taxpayer discontinued this practice
and, it reported said revenues, in its monthly returns for carrier's tax. Upon examination of the records of
the taxpayer, the Commissioner of Internal Revenue, hereinafter referred to as the petitioner, held that,
applying the free market converse on rate, the taxpayer's gross receipts aggregated and, based thereon
demanded payment of deficiency common carrier's tax, plus surcharge and penalty.

The taxpayer protested against this deficiency assessment, upon the ground that the conversion rate
should be the parity rate, not the current market rate, it being conceded that the freight fees in question
had not been physically remitted, as such, to the taxpayer in the Philippines, but were actually collected
by its head office abroad, which had remitted no funds to the former, except those needed for its
operating expenses. Petitioner having overruled the protest, the taxpayer appealed to the Court of Tax
Appeals, which, reversed petitioner's decision, without costs. Hence this appeal by the petitioner,

It is, thus, our considered view that the freight revenues accruing to the taxpayer in the present case,
even though collected abroad and, not remitted to its branch office in the Philippines, are part of its
foreign exchange operations and subject to the common carrier's tax, computed at the free market rate
then prevailing.

At any rate, neither case nor both suffice to outweigh the above-mentioned six cases declaring that the
provision imposing surcharges is mandatory. The alleged good faith of the taxpayer herein is apart
from being insufficient to justify a departure from the rule laid down and repeatedly applied in said cases
merely based upon the advice said to have been given by its counsel. Considering, moreover, that, up
to December 1961, the taxpayer had reported its earnings at the free market conversion rate thereby
indicating that such was, in its belief, the rate at which its foreign exchange transactions should be
computed its change of policy in 1962, allegedly following said advice of counsel, implied no more than
the taking of a calculated risk.
M.V. Amstelmeer and MY "Amstelkroon, " both of which are vessels of petitioner N.B. Reederij
"AMSTERDAM," called on Philippine ports to load cargoes for foreign destination. The freight fees for
these transactions were paid abroad. In these two instances, petitioner Royal Interocean Lines acted as
agent for a fee or commission on said vessels. No income tax appears to have been paid by petitioner
N.V. Reederij "AMSTERDAM" on the freight receipts. Respondent Commissioner of Internal Revenue,
through examiners, led the corresponding income tax returns for and in behalf of the former under
Section 15 of the National Internal Revenue Code. Commissioner assessed said petitioner of deciency
income tax, as "a non-resident foreign corporation not engaged in trade or business in the Philippines
under Section 24 (b) (1) of the Tax Code. Royal Interocean Lines led an income tax return of the
aforementioned vessels and paid the tax thereon. Royal Interocean Lines as agent of petitioner
N.V.Reederij "AMSTERDAM" led a written protest against the abovementioned assessment. Court of
Tax Appeals praying for the cancellation of the subject assessment. After due hearing, the respondent
court rendered a decision modifying said assessments by eliminating the 50% fraud compromise
penalties imposed upon petitioners. Petitioners led a motion for reconsideration of said decision but this
was denied by the respondent court.

Whether N.V. Reederij "Amsterdam" should be taxed as a foreign corporation not engaged in trade or
business in the Philippines under section 24(b) (1)of the tax code or should be taxed as a foreign
corporation engaged in trade or business in the philippines under section 24(b) (2) in relation to section
37 (e) of the same code

The petition is devoid of merit. Petitioner N.V. Reederij "AMSTERDAM" is a foreign corporation not
authorized or licensed to do business in the Philippines. It does not have a branch ofce in the Philippines
and it made only two calls in Philippine ports. In order that a foreign corporation may be considered
engaged in trade or business, its business transactions must be continuous. A casual business activity in
the Philippines by a foreign corporation, as in the present case, does not amount to engaging in trade or
business in the Philippines for income tax purposes. Foreign corporation doing business in the Philippines
is taxable on income solely from sources within the Philippines, it is permitted to deductions from gross
income but only to the extent connected with income earned in the Philippines. On the other hand, foreign
corporations not doing business in the Philippines are taxable on income from all sources within the
Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities Compensations,
remunerations, emoluments, or other xed or determinable annual or periodical or casual gains, prots
and income and capital gains" As stated above Amsterdam is therefore taxable!
G.R. No. 147375 COMMISSIONER OF INTERNAL REVENUE vs BANK OF THE PHILIPPINE
ISLANDS, June 26, 2006 TINGA, J.:

At issue is the question of whether the 20% final tax on a banks passive income, withheld from the bank
at source, still forms part of the banks gross income for the purpose of computing its gross receipts tax
liability.
Domestic corporate taxpayers, including banks, are levied a 20% final withholding tax on bank deposits
under Section 24(e)(1)[2] in relation to Section 50(a) [3] of Presidential Decree No. 1158, otherwise known
as the National Internal Revenue Code of 1977 (Tax Code). Banks are also liable for a tax on gross
receipts derived from sources within thePhilippines under Section 119[4] of the Tax Code,

As a domestic corporation, the interest earned by respondent (BPI) from deposits and similar
arrangements are subjected to a final withholding tax of 20%. Consequently, the interest income it
receives on amounts that it lends out are always net of the 20% withheld tax. As a bank, BPI is
furthermore liable for a 5% gross receipts tax on all its income.

For the four (4) quarters of the year 1996, BPI computed its 5% gross receipts tax payments by including
in its tax base the 20% final tax on interest income that had been withheld and remitted directly to the
Bureau of Internal Revenue (BIR).

CTA rendered a decision in Asian Bank Corporation v. Commissioner of Internal Revenue, [5] holding that
the 20% final tax withheld on a banks interest income did not form part of its taxable gross receipts for the
purpose of computing gross receipts tax.

BPI wrote the BIR a letter citing the aforementioned CTA Decision and requesting a refund of alleged
overpayment of taxes representing 5% gross receipts taxes paid on the 20% final tax withheld at source.

Inaction by the BIR on this request prompted BPI to file a Petition for Review against the CIR with the
CTA. Conceding its claim for the first three quarters of the year as having been barred by prescription,
BPI only claimed alleged overpaid taxes.

Furthermore, Section 119 (a)[20] of the Tax Code expressly includes interest income as part of the
base income from which the gross receipts tax on banks is computed. This express inclusion of interest
income in taxable gross receipts creates a presumption that the entire amount of the interest income,
without any deduction, is subject to the gross receipts tax. [21]

Section 4(e) of Revenue Regulations No. 12-80 states that [t]he rates of taxes to be imposed on
the gross receipts of such financial institutions shall be based on all items of income actually received,
it goes on to distinguish actual receipt from accrual, i.e., that [m]ere accrual shall not be considered,
but once payment is received on such accrual or in case of prepayment, then the amount actually
received shall be included in the tax base of such financial institutions x x x.

Section 4(e) recognizes that income could be recognized by the taxpayer either at the time of its actual
receipt or its accrual,[24] depending on the accounting method used by the taxpayer, [25] but establishes the
rule that, for purposes of gross receipts tax, interest income is taxable upon actual receipt of the income,
as opposed to the time of its accrual. Section 4(e) does not exclude accrued interest income from gross
receipts but merely postpones its inclusion until actual payment of the interest to the lending bank,
thus mandating that [m]ere accrual shall not be considered, but once payment is received on such
accrual or in case of prepayment, then the amount actually received shall be included in the tax base of
such financial institutions x x x.[26]

if the recipient of interest subjected to withholding taxes is a financial institution, the

interest shall be included as part of the tax base upon which the gross receipts tax is imposed.
the current revenue regulations requires interest income, whether actually received or
merely accrued, to form part of the banks taxable gross receipts. [29]
[G.R. No. 119122. August 8, 2000]

PHILIPPINE BASKETBALL ASSOCIATION, petitioner, vs. COURT OF APPEALS, COURT OF TAX

APPEALS, AND COMMISSIONER OF INTERNAL REVENUE,respondents.

PURISIMA, J.:

petitioner received an assessment letter from CIR for the payment of deficiency amusement tax

petitioner contested the assessment by filing a protest with respondent who denied the same

petitioner filed a petition for review[2] with CTA) questioning the denial by respondent of its tax
protest.

respondent CTA dismissed petitioners petition

1. Is the amusement tax on admission tickets to PBA games a national or local tax? Otherwise
put, who between the national government and local government should petitioner pay
amusement taxes?

2. Is the cession of advertising and streamer spaces to Vintage Enterprises, Inc. (VEI) subject to
the payment of amusement tax?

3. If ever petitioner is liable for the payment of deficiency amusement tax, is it liable to pay a
seventy-five percent (75%) surcharge on the deficiency amount due?

the province can only impose a tax on admission from the proprietors, lessees, or operators
of theaters, cinematographs, concert halls, circuses and other places of amusement. The
authority to tax professional basketball games is not therein included, as the same is expressly
embraced in PD 1959,

it is clear that the "proprietor, lessee or operator of xxx professional basketball games" is required
to pay an amusement tax equivalent to fifteen per centum (15%) of their gross receipts to the
Bureau of Internal Revenue, which payment is a national tax. The said payment of amusement
tax is in lieu of all other percentage taxes of whatever nature and description.

The definition of gross receipts is broad enough to embrace the cession of advertising and
streamer spaces as the same embraces all the receipts of the proprietor, lessee or operator of the
amusement place. The law being clear, there is no need for an extended interpretation. [15]

The last issue for resolution concerns the liability of petitioner for the payment of surcharge and
interest on the deficiency amount due. Petitioner contends that it is not liable, as it acted in good
faith, having relied upon the issuances of the respondent Commissioner. This issue must
necessarily fail as the same has never been posed as an issue before the respondent court.
Issues not raised in the court a quo cannot be raised for the first time on appeal. [16]

All things studiedly considered, the Court rules that the petitioner is liable to pay amusement tax
to the national government, and not to the local government, in accordance with the rates
prescribed by PD 1959.
CIR vs. CA, CTA and FORTUNE TOBACCO CORP.
G.R. No. 119761; August 29, 1996
Facts: Fortune Tobacco Corporation ("Fortune Tobacco"), engaged in the manufacture of different brands
of cigarettes, registered "Champion," "Hope," and "More" cigarettes. BIR classified them as foreign
brands since they were listed in the World Tobacco Directory as belonging to foreign companies.
However, Fortun changed the names of 'Hope' to 'HopeLuxury' and 'More' to 'Premium More,' thereby
removing the said brands from the foreign brand category.

A 45% Ad Valorem taxes were imposed on these brands. Then Republic Act ("RA") No. 7654 was
enacted 55% for locally manufactured foreign brand while 45% for locally manufactured brands. 2
days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was
issued by the BIR saying since there is no showing who the real owner/s are of Champion, Hope and
More, it follows that the same shall be considered locally manufactured foreign brand for purposes of
determining the ad valorem tax - 55%. BIR sent via telefax a copy of RMC 37-93 to Fortune Tobacco
addressed to no one in particular. Then Fortune Tobacco received, by ordinary mail, a certified xerox copy
of RMC 37-93. CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to
P9,598,334.00.

Fortune Tobacco filed a petition for review with the CTA. 8 CTA upheld the position of Fortune. CA
affirmed.

Issue: WON it was necessary for BIR to follow the legal requirements when it issued its RMC

Held. YES. CIR may not disregard legal requirements in the exercise of its quasi-legislative powers which
publication, filing, and prior hearing.
When an administrative rule is merely interpretative in nature, its applicability needs nothing further than
its bare issuance for it gives no real consequence more than what the law itself has already prescribed.
BUT when, upon the other hand, the administrative rule goes beyond merely providing for the means that
can facilitate or render least cumbersome the implementation of the law but substantially increases the
burden of those governed, the agency must accord, at least to those directly affected, a chance to be
heard, before that new issuance is given the force and effect of law.
RMC 37-93 cannot be viewed simply as construing Section 142(c)(1) of the NIRC, as amended, but has,
in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and
"Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to
thereby have them covered by RA 7654 which subjects mentioned brands to 55% the BIR not simply
interpreted the law; verily, it legislated under its quasi-legislativeauthority. The due observance of the
requirements of notice, of hearing, and of publication should not have been then ignored.
National Internal Revenue Code; excise tax; proper party to seek a tax refund. Silkair (Singapore) is a
foreign corporation licensed to do business in the Philippines as an on-line international carrier. It
purchased aviation fuel from Petron and paid the excise taxes. It filed an administrative claim for refund
for excise taxes on the purchase of jet fuel from Petron, which it alleged to have been erroneously paid.

For indirect taxes, the proper party to question or seek a refund of the tax is the statutory taxpayer, the
person on whom the tax is imposed by law and who paid the same even when he shifts the burden
thereof to another. Thus, Petron, not Silkair, is the statutory taxpayer which is entitled to claim a refund.
Excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the
products from their refineries. Even before the aviation jet fuel is purchased from Petron, the excise tax is
already paid by Petron. Petron, being the manufacturer, is the person subject to tax. In this case, Petron,
which paid the excise tax upon removal of the products from its Bataan refinery, is the person liable for
tax. Petitioner is neither a person liable for tax nor a person subject to tax. Silkair (Singapore) Pte.
Ltd. vs. Commissioner of Internal Revenue, G.R. No. 166482, January 25, 2012.
 CIR vs. LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMA LIFE
INSURANCE COMPANY, INC.) and CA
G.R. No. 119176
March 19, 2002
FACTS: Private respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance
Company, Inc.) is a domestic corporation registered with the SEC and engaged in life insurance business.
In the years prior to 1984, private respondent issued a special kind of life insurance policy known as the
Junior Estate Builder Policy, the distinguishing feature of which is a clause providing for an automatic
increase in the amount of life insurance coverage upon attainment of a certain age by the insured without
the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp
taxes due on the policy were paid by petitioner only on the initial sum assured.
[In 1984, private respondent also issued 50,000 shares of stock dividends.. Documentary stamp taxes
were paid based only on the par value ofP5,000,000.00 and not on the book value.]
Subsequently, petitioner CIR issued deficiency documentary stamps tax assessment for the year 1984,
the first corresponding to the amount of automatic increase of the sum assured on the policy issued by
respondent, [and second corresponding to the book value in excess of the par value of the stock
dividends.]

Private respondent questioned the deficiency assessments and sought their cancellation in a petition filed
in the CTA. The CTA found no valid basis for the deficiency tax assessment [on the stock
dividends] as well as on the insurance policy.

Petitioner appealed the CTAs decision to the CA. The CA promulgated a decision affirming the CTAs
decision insofar as it nullified the deficiency assessment on the insurance policy,[ but reversing the
same with regard to the deficiency assessment on the stock dividends. The CTA ruled that the correct
basis of the documentary stamp tax due on the stock dividends is the actual value or book value
represented by the shares.]

ISSUE: WON private respondent should pay issued deficiency documentary stamps tax assessment on
the insurance policy (not on stock dividends <- incidental issue only)

HELD: The decision of the CA is SET ASIDE insofar as it affirmed the decision of the CTA nullifying the
deficiency stamp tax assessment petitioner imposed on private respondent corresponding to
the increase in 1984 of the sum under the policy issued by respondent.
YES

it should be emphasized that while tax avoidance schemes and arrangements are not prohibited, tax laws
cannot be circumvented in order to evade the payment of just taxes. In the case at bar, to claim that the
increase in the amount insured (by virtue of the automatic increase clause incorporated into the policy at
the time of issuance) should not be included in the computation of the documentary stamp taxes due on
the policy would be a clear evasion of the law requiring that the tax be computed on the basis of
the amount insured by the policy.
 G.R. No. 118043. July 23, 1998]

LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMG LIFE INSURANCE
CO. INC.), petitioner, vs. COURT OF APPEALS and COMMISSIONER OF INTERNAL
REVENUE, respondents.
MENDOZA, J.:

Petitioner, now the Jardine-CMG Life Insurance Company, Inc., is a domestic corporation engaged in
the life insurance business. It issued shares of stock as stock dividends, with a par value. Petitioner paid
documentary stamp taxes on each certificate on the basis of its par value.
whether in determining the amount to be paid as documentary stamp tax, it is the par value of the
certificates of stock or the book value of the shares which should be considered.
The Commissioner of Internal Revenue took the view that the book value of the shares should be
used as basis for determining the amount of the documentary stamp tax. Accordingly, respondent Internal
Revenue Commissioner issued a deficiency documentary stamp tax assessment in excess of the par
value of the stock dividends.

Since in dividends, no consideration is technically received by the corporation, petitioner is correct in

basing the assessment on the book value thereof rejecting the principles enunciated in Commissioner of
Internal Revenue vs. Heald Lumber Co. (10 SCRA 372) as the said case refers to purchases of no-par
certificates of stocks and not to stock dividends.[4]

Apparently, the Court of Appeals treats stock dividends as distinct from ordinary shares of stock for
purposes of the then 224 of the National Internal Revenue Code. There is, however, no basis for
considering stock dividends as a distinct class from ordinary shares of stock since under this provision
only certificates of stock are required to be distinguished (into either one with par value or one without)
rather than the classes of shares themselves.
it is clear that stock dividends are shares of stock and not certificates of stock which merely
represent them. There is, therefore, no reason for determining the actual value of such dividends for
purposes of the documentary stamp tax if the certificates representing them indicate a par value.
Second. It is error for the Solicitor General to contend that, under the then 224 of the NIRC, the basis
for assessment is the actual value of the business transaction that is the source of the original issuance
of stock certificates.[9] To the contrary, the documentary stamp tax here is not levied upon the specific
transaction which gives rise to such original issuance but on the privilege of issuing certificates of stock.

A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted
but is an excise upon the privilege, opportunity or facility offered at exchanges for the transaction of the
business. It is an excise upon the facilities used in the transaction of the business separate and apart
from the business itself. With respect to stock certificates,
it is levied upon the privilege of issuing them; not on the money or property received by the issuing
company for such certificates. Neither is it imposed upon the share of stock. As Justice Learned Hand
pointed out in one case, documentary stamp tax is levied on the document and not on the property which
it described.
 China Banking Corporation v CA
Facts:

China Banking Corporation made a 53% equity investment (P16,227,851.80) in the First CBC Capital a
Hongkong subsidiary engaged in financing and investment with deposit-taking function.

It was shown that CBC has become insolvent so China Banking wrote-off its investment as worthless and
treated it as a bad debt or as an ordinary loss deductible from its gross income.

CIR disallowed the deduction on the ground that the investment should not be classified as being
worthless. It also held that assuming that the securities were worthless, then they should be classified as
a capital loss and not as a bad debt since there was no indebtedness between China Banking and CBC.

Issue:

Whether or not the investment should be classified as a capital loss.

Held:

Yes. Section 29.d.4.B of the NIRC contains provisions on securities becoming worthless. It conveys that
capital loss normally requires the concurrence of 2 conditions:

a. there is a sale or exchange

b. the thing sold or exchanges is a capital asset.

When securities become worthless, there is strictly no sale or exchange but the law deems it to be a loss.
These are allowed to be deducted only to the extent of capital gains and not from any other income of the
taxpayer. A similar kind of treatment is given by the NIRC on the retirement of certificates of indebtedness
with interest coupons or in registered form, short sales and options to buy or sell property where no sale
or exchange strictly exists. In these cases, The NIRC dispenses with the standard requirements.

There is ordinary loss when the property sold is not a capital asset.

In the case, CBC as an investee corporation, is a subsidiary corporation of China Banking whose shares
in CBC are not intended for purchase or sale but as an investment. An equity investment is a capital asset
of the investor. Unquestionably, any loss is a capital loss to the investor.

--

Additional notes:

*The loss cannot be deductible as bad debt since the shares of stock do not constitute a loan extended by
it to its subsidiary or a debt subject to obligatory repayment by the latter.
TAMBUNTING PAWNSHOP, INC. vs. COMMISSIONER OF INTERNAL REVENUE- Value Added Tax,
Documentary Stamp Tax

FACTS:

Petitioner was assessed for deficiency Value Added Tax and Documentary Stamp Tax on the premise
that, for the Value Added Tax, it was engaged in the sale of services.
ISSUES:

(1) Is Petitioner liable for the Value Added Tax?

(2) Can the imposition of surcharge and interest be waived on the imposition of deficiency Documentary
Stamp Tax?

HELD:

(1) NO. Since Petitioner is considered a non-bank financial intermediary, it is subject to 10% VAT for the
tax years 1996 to 2002 but since the collection of Value Added Tax from non-bank financial intermediaries
was specifically deferred by law, Petitioner is not liable for Value Added Tax during these tax years. With
the full implementation of the Value Added Tax system on non-bank financial intermediaries starting
January 1, 2003, Petitioner is liable for 10% Value Added Tax for said tax year. And beginning 2004 up to
the present, by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject to percentage
tax on gross receipts from 0% to 5%, as the case may be.

(2) YES. Petitioner's argument against liability for surcharges and interest that it was in good faith in
not paying documentary stamp taxes, it having relied on the rulings of respondent CIR and the CTA that
pawn tickets are not subject to documentary stamp taxes was found to be meritorious. Good faith and
honest belief that one is not subject to tax on the basis of previous interpretations of government
agencies tasked to implement the tax law are sufficient justification to delete the imposition of surcharges
and interest.