Dugs-case-doctrines-tax.pdf

CASE TITLE MADRIGAL VS RAFFERTY

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CONWI VS CTA

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CONSOLIDATED MINES INC VS CTA CIR VS TOURS SPECIALIST INC

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Gross receipts subject to taxed = X include monies or receipts ENTRUSTED to taxpayer Room charges entrusted to foreign travel agencies = X form part of gross receipts Wrong remittance of 1M under litigation = x taxable gain X estafa X tax fraud No actual & intention fraud Sold to farmlands to tenants X tax 100% 50% only Real estate dealer’s tax = X applicable Gain = capital gain = 50% Lifeblood doctrine “Should not kill the hen that lays the golden egg” Stock dividend = X income = X taxable Stock dividend = undistributed increase in the capital of a corp Non-collection of rent = fault of petitioner = ✓constructively received ✓liable for deficiency taxes Alien actually present in the PH = ✓resident alien RP US military bases agreement =✓exempt from income tax à only liable for tax on PH source income BUT must still file ITR

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Income from sale of tickets within

CIR VS JAVIER

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ROXAS VS CTA

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FISHER VS TRINIDAD

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LIMPAN INVESTMENT CORP VS CIR GARRISON VS CA

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CIR VS BOAC

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DOCTRINE Fruit and tree metaphor Capital = fund, wealth, tree Income = flow, service of wealth, fruit Assigned to P&G outside PH Dollar earnings = ✓subject to income tax Rate of mine depletion (?)

NV REEDERIJ VS CIR

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MARUBENI CORP VS CIR

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ACCENTURE INC VS CIR

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GATCHAILAN VS CIR

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PASCUAL VS CIR

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CIR VS SC JOHNSON AND SON INC REYES VS CIR

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EVANGELISTA VS CIR

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ROYAL INTEROCEAN LINES VS CIR

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ONA VS CIR

TAX 2 CASE DOCTRINES

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the PH = income from within PH à ✓taxable Petitioner = FC X doing business in the PH X continuous business transaction Marubeni Japan = NRFC Set aside principal agent relationship Services were performed in Japan = X taxable in PH Zero-rated X tax refund X establish that recipients of its service do business outside PH ✓partnership sweepstakes ticket ✓liable income tax X merely formed community of property X partnership Selling land = isolated case Co-ownership X liable for corporate income tax Royalties Tax refund = tax exemption X able to justify claim = X claim tax refund X valid assessment against estate à X informed in writing of law and facts Premature to determine validity of compromise ✓ income tax and residence tax for corp Lease of land to tenants ✓ engaged in real estate transaction = ✓ partnership 2x transaction only à no branch office in the PH ✓casual business activity FC X doing business in the PH à taxable on income from all sources within PH à 35% of gross income Settlement of estate à leased or sold properties ✓partnership

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✓income tax for corporation Co-ownership of inherits properties is automatically converted into an unregistered partnership the moment said common properties and/or income derived therefrom are used as common fund with the intent to produce profits for the heirs in proportion to their respectibe shares in the inheritance CHAPTER 3- INCOME CIR VS CITY TRUST INVESTMENT Gross receipts = entire receipts PHILS INC without any deduction Actual receipt of interest income = X limited to physical receipt Imposition of 20% FWT & 5% GRT = X double taxation GRT = percentage tax FWT = income tax Being originally owned by these financial institutions as part of their interest income, the FWT should form part of their taxable gross receipts CIR VS MANNING Newly acquired shares = X treasury shares Declaration of shares as TS = complete nullity Earnings should be taxed because X TS (?) BACHRACH VS SEIFERT AND Estate of Bachrach ELIANOFF Stock dividend = fruit or income Massachusetts rule à SD = Capital Pennsylvania à SD = fruit/income => FOLLOW THIS IN PH WISE & CO VS MEER Liquidating dividend = taxable income CIR VS CA Proceeds from redemption = ✓taxable Trust fund doctrine Soriano estate profited Sale of stock dividends = taxable (?)

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AFISCO INSURANCE CORP VS CA

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BANCO DE ORO VS REPUBLIC CIR VS ANGLO CALIFORNIA NATIONAL BANK PH GUARANTY CO INC VS CIR

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Pool of insurance companies = ✓ taxable X double taxation ✓partnership taxable as a corp under Section 24 Quota share reinsurance treaty Deposit substitutes

Domestic insurance company entered reinsurance contract with foreign company Reinsurance premiums = ✓taxable ALEXANDER HOWDEN VS CIR “Income from whatever source” ✓taxable Reinsurance contract with insurance companies CIR VS MARUBENI ✓ exempt from tax Service rendered outside Philippine = X taxable within PH CIR VS AMERICAN AIRLINES INC AMEX PHILS = ✓refund X consumption in PH ✓0% rated Destination principle Exports = 0 rated Imports = ✓ taxed CIR VS PLACER DOME Destination principles TECHNICAL SERVICES INC Placer (NRFC) = ✓refund 0% rated sales CHAPTER 4 – EXCLUSIONS, DEDUCTIONS AND EXEMPTIONS EL ORIENTE FABRICA VS Proceeds of life insurance = X POSADAS income = X taxable CIR VS CA GCL retirement plan = ✓ exempt from income CIR VS HENDERSON Rental and travel allowance = X income = X taxable as income X redound to persona benefit CIR VS CA CIR VS CA Terminal leave pay = X taxable as income Terminal leave pay are given not only at the same time but also for the same policy as retirement benefits Commutation of leave credits CIR VS CA & SORIANO Proceeds of redemption =

TAX 2 CASE DOCTRINES

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CIR VS MITSUBISHI METAL CORP

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SANTOS VS SERVIER

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CIR VS SORIANO

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NITAFAN VS CIR

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CIR VS BOAC

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CIR VS AIR INDIA

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CIR VS ATLAS CONSOLIDATED ZAMORA VS CIR

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GREGORY VS HELVERING

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CALANOC VS CIR

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KUENZIE & SCREIFF VS CIR

PAPER INDUSTRIES CORP VS CA

© Michelle Duguil

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✓taxable Soriano estate profited from the redemption and such profit is taxable Interest income from the loans = ✓taxable ✓deduction of taxes from retirement benefits à X comply with requisites à petitioner was only 41 yrs old (dapat not less than 50) and 8 yrs of service only (10 dapat) Proceeds of redemption = ✓taxable Soriano estate profited from the redemption and such profit is taxable Income of judges = X exempt from income tax Sale of tickets within PH = ✓taxable Sale of tickets in the PH = ✓taxable Promotion/entertainment expense Must prove that it was ordinary & necessary Dollar allocation for combined medical and business trip à x ordinary and necessary expense; personal expense(50% business expense, 50% personal expense) X valid reorganization = no business purpose except to avoid tax Police payment = illegal Expenditures = excessive Amusement tax is valid Test of reasonableness of bonuses No fixed test Amount and quality of the services performed; good faith; character of TP’s business, volume and amount of its net earnings, size of the particular business ✓deduction against income of

CIR VS VDA DE PRIETO

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CIR VS LEDNICKY

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PH REFINING COMPANY VS CA

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HERMANOS VS CIR

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3M PH INC VS CIR

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CALASANZ VS CIR

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TUASON VS LINGAD CIR VS RUFINO ESSO STANDARD EASTERN INC VS CIR

TAX 2 CASE DOCTRINES

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interest payments on loans for the purchase of machinery and equipment Donor’s tax Interest on taxes = interest on indebtedness = ✓deductible Interest paid by respondent for the late payment of her donor’s tax = deductible from her gross income X claim deduction for taxed paid to US X obnoxious double taxation RA deriving income from PH Requisites for bad debts and interest expense to be deductible 1. Valid and subsisting debt 2. Debt must be actually ascertained to be worthless and uncollectible during the taxable year 3. Debt must be charged off during the taxable year 4. Debt must arise from the business or trade of TP This case = X deductible à only showed testimony of accounting to prove bad debts à self-serving Bad debts This case à X deductible because x worthless debt as Palawan was still in operation and Fernandez continued to give advances in those years Improper payment of royalties = X deductible ✓real estate dealer ✓ordinary income; X capital gains graduated 5 to 32% or 30% X capital assets Ordinary income Margin tax fees = X tax = X deductible as business expense Margin = exaction designed to curb the excessive demands upon our international reserves

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CIR VS GENERAL FOOD PHILS INC

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ATLAS CONSOLIDATED

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PIROVANO VS CIR

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CIR VS PALANCA

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BASILAN ESTATES INC VS CIR

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PRC/UNILEVER VS CA AGUINALDO INDUSTRIES COR VS CIR

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CM HOSKINS CO INC VS CIR

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HOSPITAL DE SAN JUAN DE DIOS VS CIR

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In this case, bonus = X deductible X ordinary and necessary business expense No evidence of any service actually rendered by petitioner’s offic e Extraordinary and unusual amounts Annual public relations expense (aka SH relation service fee) paid to PR consultant =X deductible Efforts to establish reputation are akin to capital assets and therefore expenses related thereto are not business expense but capital expenditures ✓ pay donee’s gift tax Consideration for donation was the company’s gratitude for his services Interest on delinquent estate and inheritance tax = ✓deductible from gross income Depreciation of asset beyond its acquisition cost = X allowed Deduction over and above such cost = X allowed Deduction from gross income = privilege Bad debts X satisfy worthlessness of debt Bonus here = X deductible X ordinary and necessary business expense Extraordinary and unusual amounts given to directors without any relation to the measure of their actual service = X deductible bonus Conditions for bonuses to be deductible X pass test of reasonableness Payment to Hoskins of 99K was inordinately large Admin expenses = X deduction or allocated to interest and dividend

REPUBLIC VS MANILA ELECTRIC COMPANY CHINA BANKING CORP VS CA

CIR VS ISABELA CULTURAL CORP

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CIR VS CENTRAL LUZON DRUG CORP

TAX 2 CASE DOCTRINES

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income for income tax purpose Income tax = X included in computation of operating expenses of public utility X bad debt Equity investment in shares of stock = X indebtedness Capital asset; ordinary asset X deductible professional and security services expense Should be paid or incurred during the taxable year Accrual method of accounting – an expense is recognized when it is incurred When accrual method of accounting is used à expenses not being claimed as deductions by a taxpayer in the current year when they are incurred = X claimed the succeeding year Cannot give as an excuse their delayed billing, since it could have inquired into the amount of their obligation and reasonably determine the amount ✓tax credit Senior citizens = 20% discount on medicine Private establishment selling medicine = ✓ claim the cost of discount as a tax credit Such credit can be claimed even if the establishment is operating at a loss Tax credit – amount subtracted from one’s total tax liability; allowance against tax itself; reduces tax due Tax deduction = reduce the income subject to tax in order to arrive at taxable income For the losing establishment to immediately apply such credit, where there is no tax due = X

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BICOLANDIA DRUG CORP VS CIR

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CARLOS SUPERDRUG CORP VS DSWD PANSACOLA VS CIR

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ROXAS VS CTA

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CIR VS YMCA CIR VS CA CIR VS CINCO EDUCATION CORP

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COCONUT OIL REFINERS VS EXECUTIVE SECRETRY COMMISSIONER OF CUSTOMS VS PHIL PHOSPHATE FERRER VS CIR CIR VS ESTATE OF BENIGNO

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correct There ought to be tax liability before the tax credit can be applied 20% discount granted to senior citizens Tax relief equivalent to 35% (corporate income tax rate) of the deduction If there is no current tax due and the establishment reports a net loss for the period à the credit may be carried over to the succeeding taxable year Remedy of refund is not available à discount given to senior citizens may be claimed as tax credit and not as refunds Expended senior citizens act = constitutional X retroactive application of exemptions X real estate dealer Sold land to farmers Rental income tax = X exempt YMCA – non-stock, non-profit institution ✓tax amnesty Educational institution = ✓exempt While acquisition of additional facilities may redound to the benefit of the institution itself è it cannot be positively asserted that the same will redound to the SH The fact that the members may receive benefit on dissolution à contingency only

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FINALS BPRT -

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Liable for amount actually remitted, not applied for

TAX 2 CASE DOCTRINES

15% BPRT Equity share transferred from Makati Shang to ____ = CGT, presumption of gain Depreciation determined at acquisition cost Deduction over and above such cost = x claimed and allowed IAET Immediacy test – reasonable needs of the business = immediate needs of the business Controlling intention of the TP is manifested at the time of accumulation, not intentions subsequently, which are mere afterthoughts ESTATE AND DONOR’S TAX Date of death valuation rule St. Catherine Hispital = 32 beds pay patients = x detract from charitable purpose of hospitals Exempt from realty tax The fact that a charitable hospital admits pay patients does not mean that it is detracting from its main purpose Political donations = subject to donors tax RA 7166 – Nov 25, 1991 o Prior to this, subject to donor’s tax o Now, no more, provided it is duly reported to the comelec Donations of proceeds of insurance policy by corp to children of EE = valid donation Donation to roman catholic church = liable for donee’s gift tax Religius corps = exempt from RPT tax only Sold at price lower Price difference = donor’s tax Even if X donative intent

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VAT

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Bonifacio

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SAN ROQUE

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KEPCO

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CONTEX

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CIR VS CA

© Michelle Duguil

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No undue delegation of powers 12% VAT PEZA registered = exempt from VAT ✓ Claim transition input VAT on the improvements and entire real property Real estate dealer Transitional Input Tax credit benefit for newly VAT registered persons SQ x wait for the 120 period to lapse before filing judicial claim = pre-mature Rule: File credit with 2 years from close of taxable quarter when the sales were made; 120d from date of submission of complete docs; 30d from receipt of decision

CEBU TOYO

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INTEL

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PLACER DOME

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ACESITE

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X state zeo-rated on official receipt = X entitled to claim refund Mandatory requirement GR: VAT system uses the destination principle – goods and services are taxed only in the country in which they are consumed E: 0% VAT rate for services that are performed in the PH paid for in acceptable foreign currency and accounted for in accordance with the R&R of BSP What is transferred is the tax burden not the liability Petitioner corp = X liable for VAT inadvertently passed on to it by supplier since their transaction is 0 rated But petitioner is not the proper party to claim the refund à it is the supplier who will petition the refund of the VAT erroneously paid Any sale of services for a fee is subject to VAT regardless of the profit derived therefrom

MAGSAYSAY

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MIRANT

TAX 2 CASE DOCTRINES

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Sale of service operating on reimbursement cost basis = subject to VAT ✓ Tax credit PEZA registered enterprise = 0 rated PEZA registered enterprise = 0 rated Not required that BIR authority to be print be indicated therein ATP Clean up ad rehab of river in the PH NRFC to perform service Paid for in foreign currency and acct for in BIR à 0 rated E to destination principle Acesite = operator of Holiday Inn hotel Leased portion of premises to PAGCOR for casino W/N Acesite can refund the VAT it paid on rental income and sale of food to pacgcor EFFECTIVELY ZERO RATED Basis of pagcor for claiming exemption: “In lieu of taxes” Sale of vessels = x ordinary course of business = X VAT Isolated transaction = X deemed sale Goevernment privatization program 2 yr prescriptive period in claims for VAT refund/credit must be counted from the close of the taxable qtr when the relevant sales were made Failure to print ATP does not result in outright denial of a claim for refund 0 rate VAT person Sale of raw materials to export oriented enterprise = 0% rate applies to TOTAL sales not just the

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PANASONIC JRA

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ercentage of the sale in proportion to actual export Export sales = 0 rated Absence of 0 rated in receipts = fatal Must be printed, not merely stamped

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TAX 2 CASE DOCTRINES

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