Month: February 2020

Succession Case Digest

Testate Estate of the Deceased Damasa Crisostomo. Nazario Trillana, vs. Consorcia P. Crisostomo, et al.

G.R. No. L-3378, August 22, 1951


This is an appeal from an order of the Court of First Instance of Bulacan denying the appellants’ petition for relief from the judgment of the said court allowing the will of October 19, 1948, executed by the deceased Damasa Crisostomo. The appellants in the present case, who merely alleged in their petition for relief that they are nephews and nieces and therefore legal heirs of the deceased Damasa Crisostomo, without specifying the degree of relationship they had with the latter, do not pretend that if the will of October 19, 1949, be disallowed, they will inherit the estate left by the testatrix. They contend that said will should be probated jointly or together with the will of August 16, 1948, and the latter be allowed instead of the former. As in her will of October 19, 1949, as well in that of August 16, 1948, the testatrix is leaving all her properties as legacies to other persons, the appellants have no interest in the probate of said wills, and they can not appeal from the judgment which allowed one of them instead of the other.


Whether or not the trial court erred in allowing the October 19, 1949 will


No. The lower court was right in not setting a date for proving the will of August 16, 1948, because this will was expressly and absolutely revoked by the will of October 19, 1948, executed by the same executrix or deceased, which was filed for allowance on November 1, 1948, with the same Court of First Instance of Bulacan. According to the attorneys for the appellant, the will dated August 16, 1948, was sent together with a writing called “Manifestation” by registered mail on October 30, 1948, from Manila to the Court of First Instance of Bulacan, by Attorney Mr. Tomas V. Barnes, and said will must have been received by the Clerk of Said Court on or after November 1, 1948, the date when the subsequent will of October 19, was filed for probate. It stands to reason that if two wills are presented for allowance but one of them revoked, such will cannot be included in the probate of the latter subsequent will, because it would be a waste of time to allow the revoked will if the subsequent revoking will is allowed. The revoked will may be probated and allowed only if the subsequent revoking will is disallowed.

Succession Case Digest

Donato S. Paulmitan, et al. vs. Court of Appeals, Alicio Paulmitan, et al.

G.R. No. 61584, November 25, 1992


Agatona Sagario Paulmitan, who died sometime in 1953, left Lot No. 1091 with an area of 69,080 square meters. She begot two legitimate children, namely Pascual Paulmitan, who also died in 1953, and Donato Paulmitan, who is one of the petitioners. Petitioner Juliana P. Fanesa is Donato’s daughter. Donato executed on May 28, 1974 a Deed of Sale over the same in favor of petitioner Juliana, his daughter. Sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited and sold at a public auction, with the Provincial Government of Negros Occidental being the buyer. On May 29, 1974, Juliana redeemed the property from the Provincial Government of Negros Occidental for the amount of P2,959.09.

On learning of these transactions, respondents who are children of the late Pascual Paulmitan, brother of Donato, filed with the Court of First Instance of Negros Occidental a Complaint against petitioners to partition the properties plus damages. Petitioner Juliana claimed that she acquired exclusive ownership thereof not only by means of a deed of sale executed in her favor by her father, petitioner Donato Paulmitan, but also by way of redemption from the Provincial Government of Negros Occidental. Acting on the petitioners’ affirmative defense of prescription with respect to Lot No. 757, the trial court issued an order dated April 22, 1976 dismissing the complaint as to the said property. As to Lot No. 1091, the trial court ruled in favor of the respondents who, as descendants of Agatona Sagario Paulmitan, were entitled to one-half (1/2) of Lot No. 1091, pro indiviso.


Whether or not Fanesa acquired ownership over the entire lot by virtue of the redemption


No. When Donato sold the property to his daughter Fanesa, he was only a co-owner with respondents and as such, he could only sell that portion which may be allotted to him upon termination of the co-ownership. The sale did not prejudice the rights of respondents to one half (1/2) undivided share of the land which they inherited from their father. It did not vest ownership in the entire land with the buyer but transferred only the seller’s pro-indiviso share in the property and consequently made the buyer a co-owner of the land until it is partitioned. The right of repurchase may be exercised by co-owner with respect to his share alone. While the records show that petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership. There is no doubt that redemption of property entails a necessary expense. The result is that the property remains to be in a condition of co-ownership. Although petitioner Juliana did not acquire ownership over the entire lot by virtue of the redemption she made, nevertheless, she did acquire the right to reimbursed for half of the redemption price she paid to the Provincial Government of Negros Occidental on behalf of her co-owners. Until reimbursed, Juliana holds a lien upon the subject property for the amount due her.


Tax Digest

Philex Mining Corporation vs. Commissioner of Internal Revenue

G.R. No. 195120. April 19, 2017

Third Division


Philex applied and was approved on April 12, 1998 for zero rating pursuant to Section 4.100-3 of Revenue Regulations No. 7-95. For the second quarter of 2005, Philex filed its original VAT return on July 26, 2005. The amended return filed on December 1, 2005 reported a total zero-rated sale of P1,335,044,466.98, domestic purchase of goods of P825,912.30 with corresponding input tax of P82,591.23 and importation of goods of P62,500,070.00 with corresponding input tax of P6,250,007.00. Philex fied a claim for tax refund/tax credit with the One-Stop Shop Center of the Department of Finance (DOF) on March 20, 2006 in the amount of P6,332,598.23. Respondent Commissioner of Internal Revenue (CIR) has not acted upon the tax refund of Philex impelling the latter to file a petition for review on certiorari before the CTA.  The CTA First Division denied the petition on the ground of prescription.


Whether or not Philex’s claim for refund of unutilized input VAT has prescribed


It is a well-entrenched principle in taxation that a claim for refund is in the nature of a tax exemption and, as such, it is consequently construed strictly against a taxpayer. On the strength of paragraphs (A) and (C) of Section 112 of the 1997 NIRC, as amended, Philex filed its claim for refund of its excess unutilized input VAT for the second quarter of 2005. Entitlement to VAT refund necessitates the observance of the prescriptive periods within which to file the administrative and judicial claims. The reckoning point of the two-year period for the filing of an administrative claim for refund or credit of unutilized input VAT and the applicability of the two-year prescriptive period to both the administrative and judicial claim for refund or credit of unutilized input VAT are among the ancillary matters which remarkably are not novel but nonetheless brought before the Court germane to the disposition of the ultimate issue of whether Philex’s claim for refund of unutilized input VAT is time-barred.

Despite the timely filing of the administrative claim, the Court is compelled to reject Philex’s claim for tax refund/credit for having been filed in clear contravention of the provision of Section 112 of the 1997 NIRC. Indisputably, Philex’s case is one of late judicial filing. The Court agrees with the conclusion of the CTA denying Philex’s application for refund or credit of unutilized input VAT for having been judicially filed out of time. However, the tax court was mistaken as to its ruling that the two-year prescriptive period applies both to administrative and judicial claims for refund. The Court, in the case of CIR v. Aichi Forging Company of Asia, Inc. (646 Phil. 710),  settled this matter with finality holding that it is only the administrative claim that must be filed within the two-year prescriptive period.

Records reveal that Philex filed an administrative claim for refund of unutilized input VAT on March 20, 2006 for the second quarter of 2005 which is well within the two-year prescriptive period or until June 30, 2007 as the close of the second quarter is on June 30, 2005. The CIR or in this case, the One-Stop Shop Center of the DOF has 120 days from March 20, 2006 or until July 18, 2006 within which to act on such claim. However, it failed to do so. Philex could treat the inaction as denial and interpose an appeal before the CTA Division within 30 days from July 18, 2006 or until August 17, 2006. Philex belatedly filed its judicial recourse on July 30, 2007 which is 330 days way beyond the prescribed 30-day period.

Tax Digest

Commissioner Of Internal Revenue vs. Philippine Daily Inquirer, Inc.

G.R. No. 213943, March 22, 2017

Carpio, J.


PDI is a corporation engaged in the business of newspaper publication. On 15 April 2005, it filed its Annual Income Tax Return for taxable year 2004. On 10 August 2006, PDI received a letter dated 30 June 2006 from Region 020 Large Taxpayers’ Service of BIR. BIR alleged that there was an underdeclaration of domestic purchases from its suppliers amounting to P317,705,610.52. In response, PDI submitted reconciliation reports.

On 21 March 2007, PDI executed a Waiver of the Statute of Limitation (First Waiver) consenting to the assessment and/or collection of taxes for the year 2004 which may be found due after the investigation, at any time before or after the lapse of the period of limitations fixed by Sections 203 and 222 of the National Internal Revenue Code (NIRC) but not later than 30 June 2007. The First Waiver was received on 23 March 2007. On 5 June 2007, PDI executed a Waiver of the Statute of Limitation (Second Waiver), which was accepted on 8 June 2007. In a letter dated 12 December 2007, PDI sought reconsideration of the PAN and expressed its willingness to execute another Waiver (Third Waiver), which it did on the same date, thus extending BIR’s right to assess and/or collect from it until 30 April 2008.

On 17 April 2008, PDI received a Formal Letter of Demand dated 11 March 2008 and an Audit Result/ Assessment Notice from the BIR, demanding for the payment of alleged deficiency VAT and income tax. On 16 May 2008, PDI filed its protest. On 12 December 2008, PDI filed a Petition for Review against the Commissioner of Internal Revenue (CIR) alleging that the 180-day period within which the BIR should act on its protest had already lapsed. The Court of Tax Appeals First Division ruled in favor of PDI stating that the period of assessment must not extend indefinitely because doing so will deprive the taxpayer of the assurance that it will not be subjected to further investigation after the expiration of a reasonable period of time. It held that the three-year prescriptive period under Section 203 of the NIRC applies in this case since PDI introduced proof that the determination made by the CIR on the supposed overdeclared input tax of ₱l,601,652.43 is not correct.


Whether or not petitioner’s right to assess respondent for deficiency VAT and income tax has prescribed


Yes. In Commissioner of Internal Revenue v. Javier (276 Phil. 914), this Court ruled that fraud is never imputed. The Court stated that it will not sustain findings of fraud upon circumstances which, at most, create only suspicion. The Court added that the mere understatement of a tax is not itself proof of fraud for the purpose of tax evasion. In this case, the Court does not find enough evidence to prove fraud or intentional falsity on the part of PDI.

Since the case does not fall under the exceptions, Section 203 of the NIRC should apply. It provides:

SEC. 203. Period of Limitation Upon Assessment and Collection. – Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.

Indeed, the Waivers executed by the BIR and PDI were meant to extend the three-year prescriptive period, and would have extended such period were it not for the defects found by the CTA. In this case, the CTA found that contrary to PDI’s allegations, the First and Second Waivers were executed in three copies. However, the CTA also found that the CIR failed to provide the office accepting the First and Second Waivers with their respective third copies, as the CTA found them still attached to the docket of the case. In addition, the CTA found that the Third Waiver was not executed in three copies.

The failure to provide the office accepting the waiver with the third copy violates RMO 20-90 and RDAO 05-01. Therefore, the First Waiver was not properly executed on 21 March 2007 and thus, could not have extended the three-year prescriptive period to assess and collect taxes for the year 2004. To make matters worse, the CIR committed the same error in the execution of the Second Waiver on 5 June 2007. Even if we consider that the First Waiver was validly executed, the Second Waiver failed to extend the prescriptive period because its execution was contrary to the procedure set forth in RMO 20-90 and RDAO 05-01. Granting further that the First and Second Waivers were validly executed, the Third Waiver executed on 12 December 2007 still failed to extend the three-year prescriptive period because it was not executed in three copies. In short, the records of the case showed that the CIR’s three-year prescriptive period to assess deficiency tax had already prescribed due to the defects of all the Waivers.

Clearly, the defects in the Waivers resulted to the non-extension of the period to assess or collect taxes, and made the assessments issued by the BIR beyond the three-year prescriptive period void. Since the three Waivers in this case are defective, they do not produce any effect and did not suspend the three-year prescriptive period under Section 203 of the NIRC.

Tax Digest

Southern Luzon Drug Corporation vs. The Department of Social Welfare and Development (DSWD), et al.

G.R. No. 199669, April 25, 2017

Reyes, J.


R.A. No. 7432, entitled “An Act to Maximize the Contribution of Senior Citizens to Nation-Building, Grant Benefits and Special Privileges and For Other Purposes,” was enacted. Under the said law, a senior citizen, who must be at least 60 years old and has an annual income of not more than P60,000.00, may avail of the privileges provided in Section 4 thereof, one of which is 20% discount on the purchase of medicines. R.A. No. 9257 was later enacted amending some provisions of R.A. No. 7432. The new law retained the 20% discount on the purchase of medicines but removed the annual income ceiling thereby qualifying all senior citizens to the privileges under the law. Further, R.A. No. 9257 modified the tax treatment of the discount granted to senior citizens, from tax credit to tax deduction from gross income, computed based on the net cost of goods sold or services rendered. On May 28, 2004, the DSWD issued the Implementing Rules and Regulations (IRR) of R.A. No. 9257. Article 8 of Rule VI of the said IRR provides “that the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted.

Meanwhile, R.A. No. 7277 pertaining to the “Magna Carta for Disabled Persons” was enacted, codifying the rights and privileges of PWDs. Thereafter, R.A. No. 9442 was enacted, amending R.A. No. 7277. One of the salient amendments in the law is the insertion of Chapter 8 in Title 2 thereof, which enumerates the other privileges and incentives of PWDs, including the grant of 20% discount on the purchase of medicines. Similar to R.A. No. 9257, covered establishments shall claim the discounts given to PWDs as tax deductions from the gross income, based on the net cost of goods sold or services rendered. Pursuant to the foregoing, the IRR of R.A. No. 9442 was promulgated by the DSWD, Department of Education, DOF, Department of Tourism and the Department of Transportation and Communications.

Petitioner filed a petition seeking to declare as unconstitutional (a) Section 4(a) of R.A. No. 9257, and (b) Section 32 of R.A. No. 9442 and Section 5.1 of its IRR, insofar as these provisions only allow tax deduction on the gross income based on the net cost of goods sold or services rendered as compensation to private establishments for the 20% discount that they are required to grant to senior citizens and PWDs.


Whether or not the 20% sales discount for Senior Citizens and PWDs is a valid exercise of police power


Yes. The duty to care for the elderly and the disabled lies not only upon the State, but also on the community and even private entities. As to the State, the duty emanates from its role as parens patriae which holds it under obligation to provide protection and look after the welfare of its people especially those who cannot tend to themselves. It is in the exercise of its police power that the Congress enacted R.A. Nos. 9257 and 9442, the laws mandating a 20% discount on purchases of medicines made by senior citizens and PWDs. It is also in further exercise of this power that the legislature opted that the said discount be claimed as tax deduction, rather than tax credit, by covered establishments.

Unlike in the exercise of the power of eminent domain, just compensation is not required in wielding police power. This is precisely because there is no taking involved, but only an imposition of burden.

The Court also entertains no doubt on the legality of the method taken by the legislature to implement the declared policies of the subject laws, that is, to impose discounts on the medical services and purchases of senior citizens and PWDs and to treat the said discounts as tax deduction rather than tax credit. The measure is fair and reasonable and no credible proof was presented to prove the claim that it was confiscatory. The effect of the subject laws in the financial standing of covered companies depends largely on how they respond and forge a balance between profitability and their sense of social responsibility. The adaptation is entirely up to them and they are not powerless to make adjustments to accommodate the subject legislations.

To reiterate, the subject provisions only affect the petitioner’s right to profit, and not earned profits. Unfortunately for the petitioner, the right to profit is not a vested right or an entitlement that has accrued on the person or entity such that its invasion or deprivation warrants compensation. Right to profits does not give the petitioner the cause of action to ask for just compensation, it being only an inchoate right or one that has not fully developed50 and therefore cannot be claimed as one’s own. It cannot claim deprivation of profit before the consummation of a sale and the purchase by a senior citizen or PWD.

Corollary, whether to treat the discount as a tax deduction or tax credit is a matter addressed to the wisdom of the legislature. After all, it is within its prerogative to enact laws which it deems sufficient to address a specific public concern.

To recognize all senior citizens as a group, without distinction as to income, is a valid classification. The Constitution itself considered the elderly as a class of their own and deemed it a priority to address their needs. When the Constitution declared its intention to prioritize the predicament of the underprivileged sick, elderly, disabled, women, and children, it did not make any reservation as to income, race, religion or any other personal circumstances. It was a blanket privilege afforded the group of citizens in the enumeration in view of the vulnerability of their class.

Tax Digest

Crisanto M. Aala, et al. vs. Hon. Rey T. Uy, in his capacity as the City Mayor of Tagum City, Davao del Norte, et al.

G.R. No. 202781, January 10, 2017

Leonen, J.


Petitioner in this case question the validity of City Ordinance No. 558, s-2012 of the City of Tagum, Davao del Norte. The proposed ordinance sought to adopt a new schedule of market values and assessment levels of real properties in Tagum City During the hearing for the opposition to the Ordinance conducted by the Sanggunian’s Committee on Ways and Means/Games and Amusement, petitioners Aala and Ferido asserted that the proposed ordinance classified and valued those properties located in a predominantly commercial area as commercial, regardless of the purpose to which they were devoted.  According to them, this was erroneous because real property should be classified, valued, and assessed not according to its location but on the basis of actual use. Moreover, they pointed out that the proposed ordinance imposed exorbitant real estate taxes, which the residents of Tagum City could not afford to pay. Nonetheless, the Sangguniang Panlungsod of Tagum City passed Resolution No. 874, s-2012 declaring City Ordinance No. 558, s-2012 as valid.

Alarmed by the impending implementation of City Ordinance No. 558, s-2012, petitioners filed before this Court an original action for Certiorari, Prohibition, and Mandamus. Petitioners allege that Tagum City is predominantly agricultural.  The income level of its 240,000 inhabitants remains constant, and due to unreasonable business taxes, most businesses have either scaled down or closed.  Set against this factual backdrop, petitioners assail the validity of City Ordinance No. 558, s-2012.


Whether or not City Ordinance No. 558, s-2012 is unconstitutional for violation of the equal protection clause, due process clause, and the rule on uniformity in taxation


The Supreme Court denied the petition for serious procedural errors. The issues presented are questions of fact. To determine whether the schedule of fair market values conforms to the principle of actual use requires evidence from the person or persons who prepared it. These individuals must show the process and method they employed in arriving at the schedule of market values.

It is worth mentioning that several of petitioners’ assertions, on which their arguments are based, are purely speculative. For instance, petitioners claim that the Sangguniang Panlungsod of Tagum City usurped the City Assessor’s authority in fixing the schedule of fair market values.  Yet, they offer no evidence to support their allegation. They merely rely on a comparison between the new schedule of market values and the schedule of market values in a previous ordinance.

In order to resolve these factual issues, the Court will be tasked to receive evidence from both parties. However, the initial reception and appreciation of evidence are functions that the Supreme Court cannot perform. These functions are best left to the trial courts. This Court is not a trier of facts.  The factual issues in this case should have been raised and ventilated in the proper forum.

Tax Digest

Jaime N. Soriano, et al. vs. Secretary of Finance and The Commissioner of Internal Revenue

G.R. No. 184450, January 24, 2017

Sereno, C.J.


On 17 June 2008, R.A. 9504 entitled “An Act Amending Sections 22, 24, 34, 35, 51, and 79 of Republic Act No. 8424, as Amended, Otherwise Known as the National Internal Revenue Code of 1997,” was approved and signed into law by President Arroyo. On 24 September 2008, the Bureau of Internal Revenue (BIR) issued RR 10-2008, dated 08 July 2008, implementing the provisions of R.A. 9504.

Petitioners assail the subject RR as an unauthorized departure from the legislative intent of R.A. 9504. The regulation allegedly restricts the implementation of the minimum wage earners’ (MWE) income tax exemption only to the period starting from 6 July 2008, instead of applying the exemption to the entire year 2008. They further challenge the BIR’s adoption of the prorated application of the new set of personal and additional exemptions for taxable year 2008. They also contest the validity of the RR’s alleged imposition of a condition for the availment by MWEs of the exemption provided by R.A. 9504. Supposedly, in the event they receive other benefits in excess of P30,000, they can no longer avail themselves of that exemption. Petitioners contend that the law provides for the unconditional exemption of MWEs from income tax and, thus, pray that the RR be nullified.


1) Whether or not the increased personal and additional exemptions provided by R.A. 9504 should be applied to the entire taxable year 2008

2)Whether or not  Sections 1 and 3 of RR 10-2008 are consistent with the law in providing that an MWE who receives other benefits in excess of the statutory limit of P30,00019 is no longer entitled to the exemption provided by R.A. 9504


1) Yes. R.A. 9504 as a piece of social legislation clearly intended to afford immediate tax relief to individual taxpayers, particularly low-income compensation earners. Indeed, if R.A. 9504 was to take effect beginning taxable year 2009 or half of the year 2008 only, then the intent of Congress to address the increase in the cost of living in 2008 would have been negated. In one case, the test is whether the new set of personal and additional exemptions was available at the time of the filing of the income tax return. In other words, while the status of the individual taxpayers is determined at the close of the taxable year, their personal and additional exemptions – and consequently the computation of their taxable income – are reckoned when the tax becomes due, and not while the income is being earned or received.

In the present case, the increased exemptions were already available much earlier than the required time of filing of the return on 15 April 2009. R.A. 9504 came into law on 6 July 2008, more than nine months before the deadline for the filing of the income tax return for taxable year 2008. Hence, individual taxpayers were entitled to claim the increased amounts for the entire year 2008. This was true despite the fact that incomes were already earned or received prior to the law’s effectivity on 6 July 2008.

2) Yes. To be exempt, one must be an MWE, a term that is clearly defined. Section 22(HH) of Republic Act No. 8424 says he/she must be one who is paid the statutory minimum wage if he/she works in the private sector, or not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned, if he/she is a government employee. R.A. 9504 is explicit as to the coverage of the exemption: the wages that are not in excess of the minimum wage as determined by the wage boards, including the corresponding holiday, overtime, night differential and hazard pays. In other words, the law exempts from income taxation the most basic compensation an employee receives – the amount afforded to the lowest paid employees by the mandate of law. In a way, the legislature grants to these lowest paid employees additional income by no longer demanding from them a contribution for the operations of government.

An administrative agency may not enlarge, alter or restrict a provision of law. The Court is not persuaded that RR 10-2008 merely clarifies the law. The treatment of bonuses and other benefits that an employee receives from the employer in excess of the P30,000 ceiling cannot but be the same as the prevailing treatment prior to R.A. 9504 – anything in excess of P30,000 is taxable; no more, no less.

The treatment of this excess cannot operate to disenfranchise the MWE from enjoying the exemption explicitly granted by R.A. 9504. Moreover, RR 10-2008 does not withdraw the MWE exemption from those who are earning other income outside of their employer­ employee relationship. Section 2.78.1 (B) of RR 10-2008 provides that: MWEs receiving other income, such as income from the conduct of trade, business, or practice of profession, except income subject to final tax, in addition to compensation income are not exempted from income tax on their entire income earned during the taxable year. This rule, notwithstanding, the SMW, Holiday pay, overtime pay, night shift differential pay and hazard pay shall still be exempt from withholding tax.

In sum, the proper interpretation of R.A. 9504 is that it imposes taxes only on the taxable income received in excess of the minimum wage, but the MWEs will not lose their exemption as such. Workers who receive the statutory minimum wage their basic pay remain MWEs. The receipt of any other income during the year does not disqualify them as MWEs. They remain MWEs, entitled to exemption as such, but the taxable income they receive other than as MWEs may be subjected to appropriate taxes.