San Beda LAw
Taxation law REVIEW
MG Corp is a vatable taxpayer engaged
in the business of converting steam into
electricity for supply to the National
Power Corporation. It has motor vehicles
in its business which annually
deteriorates using the straight line
basis. Some time after, it offer for sale
in full deteriorated motor vehicles which
it did not subject to VAT on the ground
that the sale is an isolated transaction.
The BIR averred that the sale is
considered incidental as provided in Sec.
105 of the NIRC. Decide
Medicard, a Health Maintenance
Organization(HMO),primarily acts as an
intermediary between the purchasers of
healthcare services(its members) and
the healthcare providers for a fee. 80%
of the membership fees were earmarked
for medical utilisation to be paid to the
healthcare providers and the remaining
20% comprises its service fee. Is the
total amount actually received by
Medicard from its members formed part
of its gross receipts and thus, subject
toVAT?
In 1990, Buckingham Subdivision sold
house and lots to buyers. Under their
Contract to Sell, the selling price shall
be paid in installments for the next 10
years or up to 2000. In 1996, with the
effectivity of the E-Vat Law, installments
due in 1996 became subject to E-Vat. In
his taxpayer’s suit, Sen. Tolentino claims
t h a t t h e E -Va t L a w v i o l a t e s t h e
constitutional guarantee on the ‘non-
impairment of contracts’. Decide
Gasoline station business, water pumps
gas tanks water tanks car wash, car and
truck hoist, form part of real property
tax?
Atty. CabanEIRO
2017-2018 samplex
Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue,
G.R. No. 193301, 194637, [March 11, 2013], 706 PHIL 48-92
Mindanao II's sale of the Nissan Patrol is said to be an isolated transaction.
However, it does not follow that an isolated transaction cannot be an
incidental transaction for purposes of VAT liability. Indeed, a reading of
Section 105 of the 1997 Tax Code would show that a transaction "in the
course of trade or business" includes "transactions incidental thereto."
Mindanao II's business is to convert the steam supplied to it by PNOC-EDC
into electricity and to deliver the electricity to NPC. In the course of its
business, Mindanao II bought and eventually sold a Nissan Patrol. Prior to the
sale, the Nissan Patrol was part of Mindanao II's property, plant, and
equipment. Therefore, the sale of the Nissan Patrol is an incidental
transaction made in the course of Mindanao II's business which should be
liable for VAT.
CHECK:
Page 20-21 of the 2017 Tax Preweek.
Medicard vs. CIR, G.R. No. 222743, 5 April 2017
No. The amounts earmarked and eventually paid by MEDICARD to the
medical service providers do not form part of gross receipts for VATpurposes.
The Court ruled that for purposes of determining the VAT liability of an HMO,
the amounts earmarked and actually spent for medical utilization of its
members should not be included in the computation of its gross receipts.
CHECK:
Page 22 of the 2017 Tax Preweek.
Tolentino vs. Sec. of Finance, G.R. No. 115455, August 25, 1994
It is enough to say that the parties to a contract cannot, through the exercise
of prophetic discernment, fetter the exercise of the taxing power of the State.
For not only are existing laws read into contracts in order to fix obligations as
between parties, but the reservation of essential attributes of sovereign
power is also read into contracts as a basic postulate of the legal order. The
policy of protecting contracts against impairment presupposes the
maintenance of a government which retains adequate authority to secure the
peace and good order of society.
In truth, the Contract Clause has never been thought as a limitation on the
exercise of the State's power of taxation save only where a tax exemption
has been granted for a valid consideration.
CALTEX (PHILIPPINES) INC. vs. CENTRAL BOARD OF ASSESSMENT APPEALS
G.R. No. L-50466 May 31, 1982
The machines and equipment consists of underground tanks, elevated tank,
elevated water tanks, water tanks, gasoline pumps, computing pumps, water
pumps, car washer, car hoists, truck hoists, air compressors and tireflators.
We hold that the said equipment and machinery, as appurtenances to the gas
station building or shed owned by Caltex (as to which it is subject to realty
tax) and which fixtures are necessary to the operation of the gas station, for
without them the gas station would be useless, and which have been
attached or affixed permanently to the gas station site or embedded therein,
are taxable improvements and machinery within the meaning of the
Assessment Law and the Real Property Tax Code.
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 San Beda LAw
Taxation law REVIEW
Atty. CabanEIRO
2017-2018 samplex

X Corp, a VAT registered taxpayer,

claimed for refund of its excess input
VAT attributable to its effectively
serrated sales in 2000. The BIR denied
the Corp’s claim on the ground that the
VAT official receipts submitted by the
corp did not bear the words “Sero-
Rated”. Should X corp claim for refund
be granted?

On January 2011, an ordinance was

passed subjecting all bakery owners to a
3% sales tax. Some bakery owners
complied on February 2011, others on
March 2011, some on April 2011. On
May 2011, a subsequent ordinance was
passed stating that effective June 2011,
all bakery owners shall be exempt from
the payment of the sales tax. Those
bakery owners who have paid ahead in
February, March and April claim for a
refund of what they have paid. They
contend that the subsequent ordinance
violates the uniformity principle in
taxation. Decide

Arturo dies leaving 3 heirs and 3

apartments. Is the estate tax payable by
the heirs?

Is it accurate to state that only this

property belonging to the deceased at
the time of his death are included in the
computation of his gross estate
excluding all those in which third parties
have interest.

E x p l a i n t h e “ S t a t e - Ta x p a y e r s ’
Partnership Doctrine”.

Province imposed an amusement tax.

Municipality imposed a tax of the same
nature. X alleges that the taxes are
oppressive, unfair, and unreasonable.
Decide.

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