FIRST DIVISION G.R. No. L-29059 December 15, 1987 COMMISSIONER OF INTERNAL REEN!E, petitioner, vs. CE"! #ORTLAND CEMENT COM#AN$ %&' CO!RT OF TA( A##EALS, respondents. CR!), J.: By virtue of a decision of the Court of Ta !ppea"s rendered on #une $1, 1%&1, as 'odi(ed on appea" )y the Supre'e Court on Fe)ruary $*, 1%&+, 1%&+, the Co''issioner of Interna" Revenue Revenue as ordered to refund to the Ce)u -ort"and Ce'ent Co'pany the a'ount of - +%,/0.%, representin2 overpay'ents of ad valorem taes on ce'ent produced and so"d )y it after Octo)er 1%+*. 1 On 3arch $, 1%&, fo""oin2 denia" of 'otions for reconsideration ("ed )y )oth the petitioner and the private respondent, the "atter 'oved for a rit of eecution eecution to enforce the said 4ud2'ent. The 'otion as opposed )y the petitioner on the 2round that the private respondent had an outstandin2 sa"es ta "ia)i"ity to hich the 4ud2'ent de)t had had a"ready )een )een credited. credited. In fact, it as stressed, stressed, there as sti"" a )a"ance oin2 on the sa"es taes in the a'ount of - /,*%,$*%.+ p"us $5 surchar2e. * On !pri" $$, 1%&, the Court of Ta !ppea"s + 2ranted the 'otion, ho"din2 that the a""e2ed sa"es ta "ia)i"ity of the private respondent as sti"" )ein2 6uestioned and therefore cou"d not )e set7o8 a2ainst the refund. In his petition to revie the said reso"ution, the Co''issioner of Interna" Revenue c"ai's that the refund shou"d )e char2ed a2ainst the ta de(ciency of the private respondent on the sa"es of ce'ent under Section 1& of the Ta Code. 9is position is that ce'ent is a 'anufactured and not a 'inera" product and therefore not ee'pt ee'pt fro' sa"es taes. 9e adds that enforce'ent of the said ta de(ciency as proper"y e8ected throu2h his poer of distraint of persona" property under Sections 1& and 1 5 of the said Code and, 'oreover, the co""ection of any nationa" interna" revenue ta 'ay not )e en4oined under Section 0+, su)4ect on"y to the eception prescri)ed in Rep. !ct No. 11$+. 7 This is not app"ica)"e to the instant case. The petitioner a"so denies that the sa"es ta assess'ents have a"ready prescri)ed )ecause the prescriptive prescriptive period shou"d )e counted fro' the ("in2 of the sa"es ta returns, hich had not yet )een done )y the private respondent. For its part, the private respondent disc"ai's "ia)i"ity for the sa"es taes, on the 2round that ce'ent is not a 'anufactured product )ut a 'inera" product. 8 !s such, it as ee'pted fro' sa"es taes under Section 1 of the Ta Code after the e8ectivity of Rep. !ct No. 1$%% on #une 1&, 1%++, in accordance ith Ce)u -ort"and Ce'ent Co. v. Co""ector of Interna" Revenue, 9 decided in 1%&. 9ere #ustice :u2enio !n2e"es dec"ared that ;)efore the e8ectivity of Rep. !ct No. 1$%%, a'endin2 Section $/& of the Nationa" Interna" Revenue Revenue Code, ce'ent as taa)"e as a 'anufactured product under Section 1&, in connection ith Section 1%/. -"ana, after an ehaustive revie of the pertinent cases, dec"ared for a unani'ous Court? Fro' Fro' a"" the fore2oin2 cases, it is c"ear that ce'ent qua ce'ent qua ce'ent as never considered as a 'inera" product ithin the 'eanin2 of Section $/& of the Ta Code, notithstandin2 that at "east 05 of its co'ponents are 'inera"s, for the
1 si'p"e reason that ce'ent is the product of a manufacturing process manufacturing process and is no "on2er the 'inera" product conte'p"ated in the Ta Code 7$0+&, Oct. $%, 1%& <$ SCR! *%= penned )y #ustice :u2enio !n2e"es. For so'e portions of that decision 2ive the i'pression that Repu)"ic !ct No. 1$%%, hich a'ended Section $/&, rec"assi(ed ce'ent as a 'inera" product that as not su)4ect to sa"es ta. ... !fter a carefu" study of the fore2oin2, e conc"ude that re"iance on the decision penned )y #ustice !n2e"es is 'isp"aced. The said decision is no authority for the proposition that after the the enact'ent of Repu)"ic !ct No. 1$%% in 1%++ 7 $0+&= insofar as its pronounce'ents pronounce'ents or any i'p"ication therefro' conGict ith the instant decision. The a)ove vies vies ere ere reiterated reiterated in the reso"ution reso"ution 12 denyin2 12 denyin2 reconsideration of the said decision, thus? The nature of ce'ent as a ;'anufactured product; 7$0+&= that ce'ent as su)4ect to sa"es ta prior to the e8ectivity f Repu)"ic !ct No. 1$%% cannot )e construed to 'ean that, after the "a too e8ect, ce'ent ceased to )e so su)4ect to the ta. To erase any and a"" 'isconceptions that 'ay have )een spaned )y re"iance on the case of Cebu Portland Cement Co. v. Collector of Internal Revenue, Revenue , >7$0+&, Octo)er $%, 1%& <$ SCR! *%= penned )y #ustice :u2enio !n2e"es, the Court has epress"y epress"y overru"ed it insofar as it 'ay conGict ith the decision of !u2ust 10, 1%, no su)4ect of these 'otions for reconsideration. On the 6uestion of prescription, the private respondent c"ai's that the (ve7year re2"e'entary re2"e'entary period for the assess'ent of its ta "ia)i"ity started fro' the ti'e it ("ed its 2ross sa"es returns on #une 0, 1%&$. 9ence, the assess'ent for sa"es taes 'ade on #anuary 1&, 1%& and 3arch /, 1%&, ere a"ready out of ti'e. Ae disa2ree. This contention 'ust fai" for hat C:-OC ("ed as not the sa"es returns re6uired in Section
$ 17$1+1&, !pri" $%, 1%&&, 1& SCR! $**=. Thus C:-OC shou"d have ("ed sa"es ta returns of its 2ross sa"es for the su)4ect periods. Both parties ad'it that returns ere 'ade for the ad valorem 'inin2 ta. C:-OC ar2ues that said returns contain the infor'ation necessary for the assess'ent of the sa"es ta. The Co''issioner does not consider such returns as co'p"iance ith the re6uire'ent for the ("in2 of ta returns so as to start the runnin2 of the (ve7year prescriptive period. Ae a2ree ith the Co''issioner. It has )een he"d in Butuan Sawmill Inc. v. CTA, supra, that the ("in2 of an inco'e ta return cannot )e considered as su)stantia" co'p"iance ith the re6uire'ent of ("in2 sa"es ta returns, in the sa'e ay that an inco'e ta return cannot )e considered as a return for co'pensatin2 ta for the purpose of co'putin2 the period of prescription under Sec. 1. and Transportation Co., Inc. v. Co""ector of Interna" Revenue, .R. Nos. >71$100 and >7111$, 3ay $%, 1%+%=. There )ein2 no sa"es ta returns ("ed )y C:-OC, the statute of stations in Sec. 1 did not )e2in to run a2ainst the 2overn'ent. The assess'ent 'ade )y the Co''issioner in 1%& on C:-OCs ce'ent sa"es durin2 the period fro' #u"y 1, 1%+% to Dece')er 1, 1%&0 is not )arred )y the (ve7year prescriptive period. !)sent a return or hen the return is fa"se or fraudu"ent, the app"ica)"e period is ten <10= days fro' the discovery of the fraud, fa"sity or o'ission. The 6uestion in this case is? Ahen as C:-OCs o'ission to ("e tha return dee'ed discovered )y the 2overn'ent, so as to start the runnin2 of said period 1* The ar2u'ent that the assess'ent cannot as yet )e enforced )ecause it is sti"" )ein2 contested "oses si2ht of the ur2ency of the need to co""ect taes as ;the "ife)"ood of the 2overn'ent.; If the pay'ent of taes cou"d )e postponed )y si'p"y 6uestionin2 their va"idity, the 'achinery of the state ou"d 2rind to a ha"t and a"" 2overn'ent functions ou"d )e para"yHed. That is the reason hy, save for the eception a"ready noted, the Ta Code provides? Sec. $%1. Inunction not available to restrain collection of ta!. J No court sha"" have authority to 2rant an in4unction to restrain the co""ection of any nationa" interna" revenue ta, fee or char2e i'posed )y this Code. It 2oes ithout sayin2 that this in4unction is avai"a)"e not on"y hen the assess'ent is a"ready )ein2 6uestioned in a court of 4ustice )ut 'ore so if, as in the instant case, the cha""en2e to the assess'ent is sti""7and on"y7on the ad'inistrative "eve". There is a"" the 'ore reason to app"y the ru"e here )ecause it appears that even after creditin2 of the refund a2ainst the ta de(ciency, a )a"ance of 'ore than - / 'i""ion is sti"" due fro' the private respondent. To re6uire the petitioner to actua""y refund to the private respondent the a'ount of the 4ud2'ent de)t, hich he i"" "ater have the ri2ht to distrain for pay'ent of its sa"es ta "ia)i"ity is in our vie an Id"e ritua". Ae ho"d that the respondent Court of Ta !ppea"s erred in orderin2 such a charade. A9:R:FOR:, the petition is R!NT:D. The reso"ution dated !pri" $$, 1%&, in CT! Case No. *& is S:T !SID:, ithout any pronounce'ent as to costs. SO ORD:R:D.
account )efore the arrant of distraint and "evy as issued@ indeed, such protest cou"d not )e "ocated in the oKce of the petitioner. It as on"y after !tty. uevara 2ave the BIR a copy of the protest that it as, if at a"", considered )y the ta authorities. Durin2 the intervenin2 period, the arrant as pre'ature and cou"d therefore not )e served.
FIRST DIVISION G.R. No. L-2889 Febr%r/ 17, 1988 COMMISSIONER OF INTERNAL REEN!E, petitioner, vs. ALG!E, INC., %&' TE CO!RT OF TA( A##EALS, respondents. CR!), J.: Taes are the "ife)"ood of the 2overn'ent and so shou"d )e co""ected ithout unnecessary hindrance On the other hand, such co""ection shou"d )e 'ade in accordance ith "a as any ar)itrariness i"" ne2ate the very reason for 2overn'ent itse"f. It is therefore necessary to reconci"e the apparent"y conGictin2 interests of the authorities and the tapayers so that the rea" purpose of taation, hich is the pro'otion of the co''on 2ood, 'ay )e achieved. The 'ain issue in this case is hether or not the Co""ector of Interna" Revenue correct"y disa""oed the -*+,000.00 deduction c"ai'ed )y private respondent !"2ue as "e2iti'ate )usiness epenses in its inco'e ta returns. The coro""ary issue is hether or not the appea" of the private respondent fro' the decision of the Co""ector of Interna" Revenue as 'ade on ti'e and in accordance ith "a. Ae dea" (rst ith the procedura" 6uestion. The record shos that on #anuary 1/, 1%&+, the private respondent, a do'estic corporation en2a2ed in en2ineerin2, construction and other a""ied activities, received a "etter fro' the petitioner assessin2 it in the tota" a'ount of -,1.+ as de"in6uency inco'e taes for the years 1%+ and 1%+%. 1 On #anuary 1, 1%&+, !"2ue Gied a "etter of protest or re6uest for reconsideration, hich "etter as sta'p received on the sa'e day in the oKce of the petitioner. 2 On 3arch 1$, 1%&+, a arrant of distraint and "evy as presented to the private respondent, throu2h its counse", !tty. !")erto uevara, #r., ho refused to receive it on the 2round of the pendin2 protest. * ! search of the protest in the docets of the case proved fruit"ess. !tty. uevara produced his ("e copy and 2ave a photostat to BIR a2ent Ra'on Reyes, ho deferred service of the arrant. On !pri" *, 1%&+, !tty. uevara as (na""y infor'ed that the BIR as not tain2 any action on the protest and it as on"y then that he accepted the arrant of distraint and "evy ear"ier sou2ht to )e served. 5 Siteen days "ater, on !pri" $, 1%&+, !"2ue ("ed a petition for revie of the decision of the Co''issioner of Interna" Revenue ith the Court of Ta !ppea"s. The a)ove chrono"o2y shos that the petition as ("ed seasona)"y. !ccordin2 to Rep. !ct No. 11$+, the appea" 'ay )e 'ade ithin thirty days after receipt of the decision or ru"in2 cha""en2ed. 7 It is true that as a ru"e the arrant of distraint and "evy is ;proof of the (na"ity of the assess'ent; 8 and renders hope"ess a re6uest for reconsideration,; )ein2 ;tanta'ount to an outri2ht denia" thereof and 'aes the said re6uest dee'ed re4ected.; 10 But there is a specia" circu'stance in the case at )ar that prevents app"ication of this accepted doctrine. The proven fact is that four days after the private respondent received the petitioners notice of assess'ent, it ("ed its "etter of protest. This as apparent"y not taen into
!s the Court of Ta !ppea"s correct"y noted,; 11 the protest ("ed )y private respondent as not pro forma and as )ased on stron2 "e2a" considerations. It thus had the e8ect of suspendin2 on #anuary 1, 1%&+, hen it as ("ed, the re2"e'entary period hich started on the date the assess'ent as received, viH., #anuary 1/, 1%&+. The period started runnin2 a2ain on"y on !pri" *, 1%&+, hen the private respondent as de(nite"y infor'ed of the i'p"ied re4ection of the said protest and the arrant as (na""y served on it. 9ence, hen the appea" as ("ed on !pri" $, 1%&+, on"y $0 days of the re2"e'entary period had )een consu'ed. No or 34e b3%&36e e36o&. The petitioner contends that the c"ai'ed deduction of -*+,000.00 as proper"y disa""oed )ecause it as not an ordinary reasona)"e or necessary )usiness epense. The Court of Ta !ppea"s had seen it di8erent"y. !2reein2 ith !"2ue, it he"d that the said a'ount had )een "e2iti'ate"y paid )y the private respondent for actua" services rendered. The pay'ent as in the for' of pro'otiona" fees. These ere co""ected )y the -ayees for their or in the creation of the Ve2eta)"e Oi" Invest'ent Corporation of the -hi"ippines and its su)se6uent purchase of the properties of the -hi"ippine Su2ar :state Deve"op'ent Co'pany. -arenthetica""y, it 'ay )e o)served that the petitioner had Ori2ina""y c"ai'ed these pro'otiona" fees to )e persona" ho"din2 co'pany inco'e 12 )ut "ater confor'ed to the decision of the respondent court re4ectin2 this assertion. 1* In fact, as the said court found, the a'ount as earned throu2h the 4oint e8orts of the persons a'on2 ho' it as distri)uted It has )een esta)"ished that the -hi"ippine Su2ar :state Deve"op'ent Co'pany had ear"ier appointed !"2ue as its a2ent, authoriHin2 it to se"" its "and, factories and oi" 'anufacturin2 process. -ursuant to such authority, !")erto uevara, #r., :duardo uevara, Isa)e" uevara, :dith, OFare"", and -a)"o SancheH, ored for the for'ation of the Ve2eta)"e Oi" Invest'ent Corporation, inducin2 other persons to invest in it. 1 L"ti'ate"y, after its incorporation "ar2e"y throu2h the pro'otion of the said persons, this ne corporation purchased the -S:DC properties. 15 For this sa"e, !"2ue received as a2ent a co''ission of -1$&,000.00, and it as fro' this co''ission that the -*+,000.00 pro'otiona" fees ere paid to the aforena'ed individua"s. 1 There is no dispute that the payees du"y reported their respective shares of the fees in their inco'e ta returns and paid the correspondin2 taes thereon. 17 The Court of Ta !ppea"s a"so found, after ea'inin2 the evidence, that no distri)ution of dividends as invo"ved. 18 The petitioner c"ai's that these pay'ents are (ctitious )ecause 'ost of the payees are 'e')ers of the sa'e fa'i"y in contro" of !"2ue. It is ar2ued that no indication as 'ade as to ho such pay'ents ere 'ade, hether )y chec or in cash, and there is not enou2h su)stantiation of such pay'ents. In short, the petitioner su22ests a ta dod2e, an atte'pt to evade a "e2iti'ate assess'ent )y invo"vin2 an i'a2inary deduction. Ae (nd that these suspicions ere ade6uate"y 'et )y the private respondent hen its -resident, !")erto uevara, and the accountant, Ceci"ia V. de #esus, testi(ed that the pay'ents ere not 'ade in one "u'p su' )ut periodica""y and in di8erent a'ounts as each payees need arose. 19 It shou"d )e re'e')ered that this as a fa'i"y corporation here strict )usiness procedures ere not app"ied and i''ediate issuance of receipts as not re6uired. :ven so, at the end of the year, hen the )oos ere to )e c"osed, each payee 'ade an accountin2 of a"" of the fees received )y hi' or her, to
/ 'ae up the tota" of -*+,000.00. 20 !d'itted"y, everythin2 see'ed to )e infor'a". This arran2e'ent as understanda)"e, hoever, in vie of the c"ose re"ationship a'on2 the persons in the fa'i"y corporation. Ae a2ree ith the respondent court that the a'ount of the pro'otiona" fees as not ecessive. The tota" co''ission paid )y the -hi"ippine Su2ar :state Deve"op'ent Co. to the private respondent as -1$+,000.00. 21!fter deductin2 the said fees, !"2ue sti"" had a )a"ance of -+0,000.00 as c"ear pro(t fro' the transaction. The a'ount of -*+,000.00 as &05 of the tota" co''ission. This as a reasona)"e proportion, considerin2 that it as the payees ho did practica""y everythin2, fro' the for'ation of the Ve2eta)"e Oi" Invest'ent Corporation to the actua" purchase )y it of the Su2ar :state properties. This (ndin2 of the respondent court is in accord ith the fo""oin2 provision of the Ta Code? S:C. 0. "eductions from gross income.77In co'putin2 net inco'e there sha"" )e a""oed as deductions J M, the appea"ed decision of the Court of Ta !ppea"s is !FFIR3:D in toto, ithout costs. SO ORD:R:D.
+ Section $ of Repu)"ic !ct No. $$&/, non as the >oca" !utono'y !ct, pursuant to hich the ordinance in 6uestion as approved )y the 3unicipa" Board of the City of I"oi"o, provides in part? ;S:C. $. Taation. J !ny provision of "a to the contrary notithstandin2, a"" chartered cities, 'unicipa"ities and 'unicipa" districts sha"" have authority to i'pose 'unicipa" "icense taes or fees upon persons en2a2ed in any occupation or )usiness, or eercisin2 privi"e2es in chartered cities, 'unicipa"ities or 'unicipa" districts )y re6uirin2 the' to secure "icenses at rates (ed )y the 'unicipa" )oard or city counci" of the city, the 'unicipa" counci" of the 'unicipa"ity or the 'unicipa" district counci" of the 'unicipa" district@ to co""ect fees and char2es for services rendered )y the city, 'unicipa"ity or 'unicipa" district@ to re2u"ate and i'pose reasona)"e fees for services rendered in connection ith any )usiness, profession or occupation )ein2 conducted ithin the city, 'unicipa"ity or 'unicipa" district and otherise to "evy for pu)"ic purposes, 4ust and unifor' taes, "icenses or fees? -rovided, That 'unicipa"ities and 'unicipa" districts sha"", in no case, i'pose any percenta2e ta on sa"es or other taes in any for' )ased thereon nor i'pose taes on artic"es su)4ect to speci(c ta, ecept 2aso"ine, under the provisions of the Nationa" Interna" Revenue Code? EN "ANC G.R. No. L-18129. :%&%r/ *1, 19*.; C. N. ODGES, Petitioner-Appellant , . TE M!NICI#AL "OARD OF TE CIT$ OF ILOILO, ET AL., Respondents-Appellants . DECISION "A!TISTA ANGELO, J.< On #une 1, 1%&0, the 3unicipa" Board of the City of I"oi"o enacted Ordinance No. , series of 1%&0, pursuant to the provisions of Repu)"ic !ct No. $$&/, non as the >oca" !utono'y !ct, re6uirin2 any person, (r', association or corporation to pay a sa"es ta of 1$ of 15 of the se""in2 price of any 'otor vehic"e and prohi)itin2 the re2istration of the sa"e of the 'otor vehic"e in the 3otor Vehic"es OKce of the City of I"oi"o un"ess the ta has )een paid. It is epress"y re6uired therein that the pay'ent of the 'unicipa" ta sha"" )e a re6uire'ent for re2istration and transfer of onership, the ta to )e paid in the oKce of the city treasurer, and that the ta receipt sha"" )e 'ade part of the docu'ents to )e presented to the 3otor Vehic"es OKce. C. N. 9od2es, ho as en2a2ed in the )usiness of )uyin2 and se""in2 second7hand 'otor vehic"es in the City of I"oi"o, is one of those a8ected )y the enact'ent of the ordinance, and )e"ievin2 that the sa'e is inva"id for havin2 )een passed in ecess of the authority conferred )y "a upon the 'unicipa" )oard, he ("ed on #une $*, 1%&0 a petition for dec"aratory 4ud2'ent ith the Court of First Instance of I"oi"o prayin2 that said ordinance )e dec"ared void a) initio, and that the City of I"oi"o )e ordered to refund to hi' the a'ounts he as re6uired to pay thereunder ithout pre4udice to deter'inin2 its va"idity in an appropriate action. The City of I"oi"o, in its anser, 4usti(ed the approva" of the ordinance a""e2in2 that the sa'e as approved )y virtue of the poer and authority 2ranted to it )y Section $ of Repu)"ic !ct No. $$&/, non as the >oca" !utono'y !ct. ! copy of the petition for dec"aratory 4ud2'ent as furnished the So"icitor enera" in accordance ith Section /, Ru"e &&, of the Ru"es of Court. The case havin2 )een su)'itted under a stipu"ation of facts, the court a 6uo rendered decision on Dece')er , 1%&0 ho"din2 that part of the ordinance hich re6uires the oner of a used 'otor vehic"e to pay a sa"es ta of 1$ of 15 of the se""in2 price is va"id, )ut the portion thereof hich re6uires the pay'ent of the ta as a condition precedent for the re2istration of the sa"e in the 3otor Vehic"es OKce is inva"id for )ein2 repu2nant to Section $ed)etter, + S. :., $d +/$, $1& N.C. /%1.= ;If the poer of 'unicipa"ities are to )e con(ned to those epress"y 2ranted )y the "a, in 'any cases they i"" )e denied even the poer of se"f7preservation as e"" as of the 'eans necessary to acco'p"ish the essentia" o)4ect of their creation. 9ence in 2ivin2 corporations authority to carry out the poers epress"y 2ranted to the', it is understood that they are a"so 2iven the poer to adopt such 'eans as 'ay )e necessary for acco'p"ishin2 their ends.; a, 10th :d., p. &, citin2 S'ith v. Ne Bern, 1& !'. Rep. *&&.= Ae are, therefore, of the opinion that the ordinance in 6uestion is va"id it )ein2 a va"id eercise of the poer of taation 2ranted to I"oi"o City )y Section $ of Repu)"ic !ct No. $$&/. A9:R:FOR:, the decision appea"ed fro' is 'odi(ed )y dec"arin2 Ordinance No. of the City of I"oi"o va"id even ith re2ard to the portion hich re6uires the pay'ent of the ta as a condition precedent for the re2istration of the sa"e in the 3otor Vehic"es OKce of said City. No costs.