How I Come to Love Taxation Law

The 2014 Bar Exams results is almost out! The date given by the SC is March 26, so keep posted for any updates.

Taxation subject in the bar exams is considered to be one of the most difficult according to many people.  Those who were not fortunate to pass would sometimes point to their relatively low scores in this subject.  So it is it not common for many law students to enjoy this subject.  However, for me, this notoriety only served to pique my interest.

This perception of taxation among law students may be attributed to the fact that nobody really likes taxation as a part of one's duties being a citizen of a state.  It is a fact of life that everyone has to contend with unless you live in Brunei,  Belize or some other countries which do not require their citizens to pay taxes.

I have been curious about taxation as a subject and adamant when I took it. Many people loathe it. Maybe because it has to do with numbers which I hate,  at first I did not enjoy studying it.  Apart from this,  there are so many cases for each topic in the outline that was given to us.  Nevertheless,  I ended up challenging myself to either love it or hate it.  For purposes of enjoying my studies,  I chose to devote more time to this subject.  Perhaps that helped.

I managed to get good grades during my first Tax I.  That gave me an incentive to put on more hours to understand the subject fully.  It may sound sarcastic or sadistic but I came to love taxation.  The cases were especially straightforward meaning you will know what the issue is all about so easily.

That's how I come to love this subject.  When it was time for me to take Tax 2 class,  I thoroughly enjoyed the discussion and in fact,  I preferred it among all my other subjects during the semester. Weird huh?

I often see difficult subjects as challenges and it makes me devote more time and really try to understand it, to the point of obessessing over it.  I think it paid off.

The Blogger
Hi! I'm a law student from Manila, Philippines.  I did Political Science, then Industrial Relations major in H.R. (postgrad) studies from UP.  I vlog, weightlift, experiment with new makeup looks, try Bollywood and bellydance steps, and rant about my cray life in my YouTube channel.  Once in a blue moon, I create content for another YT channel,  10+ blogs,  20+ FB pages and in HubPages.  Check out my official site.  

CIR v. First Express Pawnshop Digest

CIR v. FIRST EXPRESS PAWNSHOP

G.R. Nos.  172054-46,  16 June 2009

Facts:  

In this case, respondent a pawnshop company received the tax assessment on 3 January 2002. On 1 February 2002, respondent submitted its protest and attached the GIS and Balance Sheet as of 31 December 1998. Since petitioner did not act on the protest during the 180-day period,respondent filed a petition before the CTA on 28 August 2002 and contended that petitioner did not consider the supporting documents on the interest expenses and donations which resulted in the deficiency income tax. 

         

Within 60 days from the filing of protest or until 2 April 2002, respondent should submit relevant supporting documents. Respondent, having submitted the supporting documents together with its protest, did not present additional documents anymore.

In a letter dated 12 March 2002, petitioner requested respondent to present proof of payment of DST on subscription. In a letter-reply, respondent stated that it could not produce any proof of DST payment because it was not required to pay DST under the law considering that the deposit on subscription was an advance made by its stockholders for future subscription, and no stock certificates were issued.

Since respondent has not allegedly submitted any relevant supporting documents, petitioner now claims that the assessment has become final, executory and demandable, hence, unappealable. 

Issue: WON assessment has become final

HELD: NO.  The assessment did not become final and unappealable. It cannot be said that respondent failed to submit relevant supporting documents that would render the assessment final because when respondent submitted its protest, respondent attached the GIS and Balance Sheet. Further, petitioner cannot insist on the submission of proof of DST payment because such document does not exist as respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on subscription. After respondent submitted its letter-reply stating that it could not comply with the presentation of the proof of DST payment, no reply was received from petitioner.

The term “relevant supporting documents” should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand what type of supporting documents should be submitted.  Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit.  Respondent has complied with the requisites in disputing an assessment pursuant to Section 228 of the Tax Code.

Section 228 states that if the protest is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the inaction may appeal to the CTA within 30 days from the lapse of the 180-day period. Respondent, having submitted its supporting documents on the same day the protest was filed, had until 31 July 2002 to wait for petitioner’s reply to its protest. On 28 August 2002 or within 30 days after the lapse of the 180-day period counted from the filing of the protest as the supporting documents were simultaneously filed, respondent filed a petition before the CTA.  


The Blogger

Hi! I'm a law student from Manila, Philippines.  I did Political Science, then Industrial Relations major in H.R. (postgrad) studies from UP.  I vlog, weightlift, experiment with new makeup looks, try Bollywood and bellydance steps, and rant about my cray life in my YouTube channel.  Once in a blue moon, I create content for another YT channel,  10+ blogs,  20+ FB pages and in HubPages.  Check out my official site.  

Reyes v CIR Digest

REYES v CIR

GR No. 163581, 27 January 2006

Facts:  By virtue of a sworn affidavit for reward by one Abad, an investigation was conducted by BIR on the estate of the deceased Maria Tancinco who died in 1993 leaving a residential lot and old house in Dasma.  Without submitting a preliminary finding report, an LOA was issued and received by Reyes, one of the heirs on 14 March 1997. 

Then on 12 Feb 1998, a PAN was issued against the estate, and a FAN as well as demand letter was issued on 22 April 1998. For the assessment of P14.9M for estate tax of the estate of Maria Tancinco.    On March 11, 1999, the heirs proposed a compromise settlement of P1,000,000.00.

During those dates, RA 8424 Tax Reform Act was already in effect. RA 8424 stated that the taxpayer must be informed of both the law and facts on which the assessment was based.The notice required under the old law was no longer sufficient under the new law. First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old requirement of merely notifying the taxpayer of the CIR’s findings was changed in 1998 to informing the taxpayer of not only the law, but also of the facts on which an assessment would be made; otherwise, the assessment itself would be invalid.

Due to failure to pay tax on the deadline BIR notified on June 6, 2000 that the subject property would be sold at public auction on August 8, 2000. Reyes filed a protest with the BIR.  Hence the petition for review filed by Reyes in CTA and a TRO to desist and refrain from proceeding with the auction sale of the subject property or from issuing a warrant pending determination of the case and/or unless a contrary order is issued.

CIR filed a motion saying CTA has no jurisdiction since the assessment against the estate is already final and executory; and (ii) that the petition was filed out of time

CTA – Ruled in favour of CIR ordering Reyes to pay the estate tax amounting to 19M. CTA ratiocinated that there can only be a perfected and consummated compromise of the estate’s tax liability[,] if the NEB has approved [Reyes’s] application for compromise in accordance with RR No. 6-2000, as implemented by RMO No. 42-2000.

CA – Partly granted petition. SC – Affirmed, petition w/o merit.

ISSUE:  WON whether the assessment against the estate is valid; and, second, whether the compromise entered into is also valid.

HELD: No. Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed in writing of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being invalid, the assessment cannot in turn be used as a basis for the perfection of a tax compromise. This was clear and mandatory under Section 228.

Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former Section 229¹³ prior to its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

To be simply informed in writing of the investigation being conducted and of the recommendation for the assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. The act cannot be taken to mean that Reyes already knew the law and the facts on which the assessment was based. It does not at all conform to the compulsory requirement under Section 228. Moreover, the Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of investigation and was not even the requisite notice under the law.

Validity of Compromise. It would be premature for this Court to declare that the compromise on the estate tax liability has been perfected and consummated, considering the earlier determination that the assessment against the estate was void. Nothing has been settled or finalized. Under Section 204(A) of the Tax Code, where the basic tax involved exceeds one million pesos or the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the NEB composed of the petitioner and four deputy commissioners.  Finally, as correctly held by the appellate court, this provision applies to all compromises, whether government-initiated or not. Ubi lex non distinguit, nec nos distinguere debemos. Where the law does not distinguish, we should not distinguish.

The Blogger


Hi! I'm a law student from Manila, Philippines.  I did Political Science, then Industrial Relations major in H.R. (postgrad) studies from UP.  I vlog, weightlift, experiment with new makeup looks, try Bollywood and bellydance steps, and rant about my cray life in my YouTube channel.  Once in a blue moon, I create content for another YT channel,  10+ blogs,  20+ FB pages and in HubPages.  Check out my official site.  

Dison v. Posadas Digest

Dison v. Posadas

G.R. No. 36770 November 4, 1932

Butte, J.:

Facts:

1. Plaintiff Luis Dison filed a suit against CIR to recover inheritance tax paid under protest amounting to P2,808.73. Felix Dison, plaintiff's father executed  a deed of gift which transferred 22 tracts of land, reserving to himself during his lifetime the usufruct of 3 tracts. The donation was formally accepted by plaintiff.

2. The plaintiff (herein petitioner) alleged in his complaint that the tax is illegal since he received the property by a deed of gift inter vivos duly accepted and registered before the death of his father. He also contended that Act 2601 being an inheritance tax statute, does not tax gifts. The defendant answered in general denial with a countermand. The court dismissed the countermand. Both sides appealed, but the CIR appeal was dismissed.

Issue: Whether or not the gifts inter vivos are taxable (inheritance tax)

YES.

Inheritance tax is imposed upon the gift inter vivos that plaintiff received from his father as this was really an advancement upon the inheritance to which he would be entitled upon the death of the latter. Sec. 1540 of the Administrative Code did not tax gifts per se but only those which are made to those who shall prove to be heirs, devisees, legatees and donees mortis causa of the donor. The term 'heirs' include those given the status of heirs irrespective of the quantity of property they may receive as such.

Vidal de Roces vs. Posadas Digest

Vidal de Roces v. Posadas

G.R. No. 34937 March 13, 1933

Imperial, J.:

Facts:

1. Sometime in 1925, plaintiffs Concepcion Vidal de Roces and her husband, as well as one Elvira Richards, received as donation several parcels of land from Esperanza Tuazon. They took possession of the lands thereafter and likewise obtained the respective transfer certificates.

2.The donor died a year after without leaving any forced heir. In her will, which was admitted to probate, she bequeathed to each of the donees the sum of P5,000. After the distribution of the estate but before the delivery of their shares, the CIR (appellee) ruled that plaintiffs as donees and legatees should pay inheritance taxes. The plaintiffs paid the taxes under protest.

3. CIR filed a demurrer on ground that the facts alleged were not sufficient to constitute a cause of action. The court sustained the demurrer and ordered the amendment of the complaint but the appellants failed to do so. Hence, the trial court dismissed the action on ground that plaintiffs, herein appellants, did not really have a right of action.

4. Plaintiffs (appellant) contend that  Sec. 1540 of the Administrative Code does not include donation inter vivos and if it does, it is unconstitutional, null and void for violating SEC. 3 of the Jones Law (providing that no law shall embrace more than one subject and that the subject should be expressed in its titles ; that the Legislature has no authority to tax donation inter vivos; finally, that said provision violates the rule on uniformity of taxation.

5. CIR however contends that the word 'all gifts'  refer clearly to donation inter vivos and cited the doctrine in Tuason v. Posadas.

Issue: Whether or not the donations should be subjected to inheritance tax

YES. Sec. 1540 of the Administrative Code clearly refers to those donation inter vivos that take effect immediately or during the lifetime of the donor, but made in consideration of the death of the decedent. Those donations not made in contemplation of the decedent's death are not included as it would be equivalent to imposing a direct tax on property and not on its transmission.

The  phrase 'all gifts' as held in Tuason v. Posadas refers to gifts inter vivos as they are considered as advances in anticipation of inheritance since they are made in consideration of death.

Moran Sison v. Teodoro Digest

Moran Sison vs. Teodoro

G.R. No. L-9271 March 29, 1957

Bautista Angelo, J.:

Facts:

1. The CFI of Manila which had jurisdiction over the estate of Margarita David, issued an order appointing appellantCarlos Moran Sison as judicial administrator without compensation after filing a bond. After entering into his duties as administrator, he filed an accounting of his administration which included items as an expense of administration the premiums he paid on his bond.

2. One of the heirs, herein appellee Narcisa Teodoro, objected to the approval of the items. The court approved the report but disallowed the items objected to on the ground that these cannot be considered as expenses of administration. Moran Sison filed a motion for reconsideration but was denied hence this appeal.

Issue: Whether or not an executor or judicial administrator can validly charge the premiums on his bond as an expense of administration against the estate

NO.

The premiums paid by an executor or administrator serving without a compensation for his bond cannot be charged against the estate. Further Sec. 7 of Rule 86 of the Rules of Court  does not authorize the executor or administrator to charge to the estate the money spent for the bond. As held in the case of Sulit v. Santos (56 Phil 626), the position of an executor or administrator is one of trust. The law safeguards the estates of deceased persons by making as a requirement for qualification the ability to give a suitable bond. The execution of said bond is therefore a condition precedent to acceptance of the responsibilities of the trust.

Further, the giving of the bond is not a necessary expense in the care, management, and settlement of the estate within the meaning of Sec. 680 of the Civil Code of Procedure, since such are the requirements after the executor or administrator has already qualified for the office and has entered the performance of his duties.