Introduction to Taxation

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MARTHA ROSE C. SERRANO

I: TAXATION

1. Definition of Taxation

a. Taxation is the act of laying a tax. The process or means

by which the sovereign through its law making body

raises income to defray the necessary expenses of

government. It is merely a way of apportioning the cost

of government among those who is some measure are

privileged to enjoy its benefits and therefor must bear

its burden.

b. Inherent power of the state to demand enforced

contributions for public purpose or purposes.

2. Nature of Internal Revenue Laws

EMILIO Y. HILADO, PETITIONER, VS. THE COLLECTOR OF

INTERNAL REVENUE AND THE COURT OF

TAX APPEALS, RESPONDENTS; G.R. No. L-9408,

October 31, 1956; Bautista Angelo J

Facts:

On March 31, 1952, petitioner filed his income tax return for 1951 with

the treasurer of Bacolod City wherein he claimed, among other things,

the amount of P12, 837.65 as a deductible item from his gross income

pursuant to General Circular No. V-123 issued by the Collector of

Internal Revenue. On the basis of said return, an assessment notice

demanding the payment of P9, 419 was sent to petitioner, who paid the

tax in monthly installments, the last payment having been made on

January 2, 1953.

Meanwhile, on August 30, 1952, the Secretary of Finance, through the

Collector of Internal Revenue, issued General Circular No. V-139 which

not only revoked and declared voids his general Circular No. V-123 but

laid down the rule that losses of property which occurred during the

period of World War II from fires, storms, shipwreck or other casualty,

or from robbery, theft, or embezzlement are deductible in the year of

actual loss or destruction of said property. The deduction was

disallowed and the CIR demanded from him P3, 546 as deficiency

income tax for said year. The petition for reconsideration filed by

petitioner was denied so he filed a petition for review with the CTA.

The SC affirmed the assessment made by the CIR. Hence, this appeal.

Issue: 1. whether Hilado can claim compensation during the war; and

2. Whether the internal revenue laws can been enforced during

the war

Ruling:

1. No. Assuming that said amount represents a portion of the 75% of his

war damage claim which was not paid, the same would not be

deductible as a loss in 1951 because, according to petitioner, the last

installment he received from the War Damage Commission, together

with the notice that no further payment would be made on his claim,

was in 1950. In the circumstance, said amount would at most be a proper

deduction from his 1950 gross income. In the second place, said amount

cannot be considered as a "business asset" which can be deducted as a

loss in contemplation of law because its collection is not enforceable as a

matter of right, but is dependent merely upon the generosity and

magnanimity of the U. S. government. As of the end of 1945, there was

absolutely no law under which petitioner could claim compensation for

the destruction of his properties during the battle for the liberation of the

Philippines. And under the Philippine Rehabilitation Act of 1946, the

payments of claims by the War Damage Commission merely depended

upon its discretion to be exercised in the manner it may see lit, but the

non-payment of which cannot give rise to any enforceable right.

2. Yes. It is well known that our internal revenue laws are not political

in nature and as such were continued in force during the period of

enemy occupation and in effect were actually enforced by the occupation

government. As a matter of fact, income tax returns were filed during

that period and income tax payment were effected and considered valid

and legal. Such tax laws are deemed to be the laws of the occupied

territory and not of the occupying enemy

ISSUE

Whether the Secretary of Finance acted with valid authority in

revoking General Circular No. V-123 and approving in lieu thereof,

General Circular No. V-139.

HELD

Yes. The Secretary of Finance is vested with authority to revoke, repeal

or abrogate the acts or previous rulings of his predecessors in office

because the construction of a statute by those administering it is not

binding on their successors if the latter becomes satisfied that a different

construction should be given. General Circular No. V-123, having been

issued on a wrong construction by the law, cannot give rise to a vested

right that can be invoked by a taxpayer. A vested right cannot spring

from a wrong interpretation.

An administrative officer cannot change a law enacted by Congress.

Once a regulation which merely interprets a statute is determined

erroneous, it becomes a nullity. The CIR’s erroneous construction of the

law does not preclude or stop the Government from collecting a tax

legally due.

Under Art. 2254 of the Civil Code, no vested/acquired right can arise

from acts/omissions which are against the law or which infringe upon

the rights of others.

3. SCOPE OF TAXATION

a. Sec 28 Art 6 1987 Constitution

i. The rule of taxation shall be uniform and

equitable. The Congress shall evolve a progressive

system of taxation.

ii. The Congress may, by law, authorize the

President to fix within specified limits, and subject

to such limitations and restrictions as it may

impose, tariff rates, import and export quotas,

tonnage and wharfage dues, and other duties or

imposts within the framework of the national

development program of the Government.

iii. Charitable institutions, churches and personages

or convents appurtenant thereto, mosques, non-

profit cemeteries, and all lands, buildings, and

improvements, actually, directly, and exclusively

used for religious, charitable, or educational

purposes shall be exempt from taxation.

a. No law granting any tax exemption

shall be passed without the

concurrence of a majority of all the

Members of the Congress.

- The power of taxation is regarded as unlimited plenary and

supreme.

- The power may be exercised even to the point od destroying eh

commercial or use value of the thing taxed.

- The power to tax is an imperious necessity of all governments

and it not to be restricted by mere legal fictions.

- It is to inhere the obligation of a sovereign state to protect its

citizens.

- Personal property belonging to a foreign sovereign and

temporarily located in a particular country is not subject to state

taxation in hat country.

CHAMBER OF REAL ESTATE AND BUILDERS’ ASSOCIATION,

INC. VS. EXECUTIVE SECRETARY- MINIMUM CORPORATE

INCOME TAX

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MARTHA ROSE C. SERRANO I: TAXATION 1. Definition of Taxation a. Taxation is the act of laying a tax. The process or means by which the sovereign through its law making body raises income to defray the necessary expenses of government. It is merely a way of apportioning the cost of government among those who is some measure are privileged to enjoy its benefits and therefor must bear its burden. b. Inherent power of the state to demand enforced contributions for public purpose or purposes. 2. Nature of Internal Revenue Laws EMILIO Y. HILADO, PETITIONER, VS. THE COLLECTOR OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS, RESPONDENTS; G.R. No. L-9408, October 31, 1956; Bautista Angelo J Facts: On March 31, 1952, petitioner filed his income tax return for 1951 with the treasurer of Bacolod City wherein he claimed, among other things, the amount of P12, 837.65 as a deductible item from his gross income pursuant to General Circular No. V-123 issued by the Collector of Internal Revenue. On the basis of said return, an assessment notice demanding the payment of P9, 419 was sent to petitioner, who paid the tax in monthly installments, the last payment having been made on January 2, 1953. Meanwhile, on August 30, 1952, the Secretary of Finance, through the Collector of Internal Revenue, issued General Circular No. V-139 which not only revoked and declared voids his general Circular No. V-123 but ...
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