June 2011 Philippine Supreme Court Decisions on Tax Law

Here are selected June 2011 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code

National Internal Revenue Code; irrevocability of option to carry-over excess income tax payments. The last sentence of Section 76 of the National Internal Revenue Code, stating that “[o]nce the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor,” is clear in its mandate. Once the corporation exercises the option to carry-over and apply the excess quarterly income tax against the tax due for the taxable quarters of the succeeding taxable years, such option is irrevocable for that taxable period. Having chosen to carry-over the excess quarterly income tax, the corporation cannot thereafter choose to apply for a cash refund or for the issuance of a tax credit certificate for the amount representing such overpayment. Commissioner of Internal Revenue vs. Mirant (Philippines) Operations, Corporation, G.R. No. 171742; Mirant (Philippines) Operations, Corporation vs. Commissioner of Internal Revenue, G.R. No. 176165; June 15, 2011.

National Internal Revenue Code; requisites for claiming tax credit or refund of creditable withholding taxes. The requisites for claiming a tax credit or a refund of creditable withholding tax are as follows: (1) the claim must be filed with the Commissioner of Internal Revenue within the two-year period from the date of the payment of the tax; (2) it must be shown on the return that the income received was declared as part of the gross income; and (3) the fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld. Commissioner of Internal Revenue vs. Mirant (Philippines) Operations, Corporation, G.R. No. 171742; Mirant (Philippines) Operations, Corporation vs. Commissioner of Internal Revenue, G.R. No. 176165; June 15, 2011.

Local Government Code

Local Government Code; real property tax; local government unit entitled to collect. Under Presidential Decree No. 464, or the “Real Property Tax Code,” the authority to collect real property taxes is vested in the locality where the property is situated. This requisite was reiterated in Republic Act No. 7160, or the Local Government Code. Thus, while a local government unit is authorized under several laws to collect real estate tax on properties falling under its territorial jurisdiction, it is imperative to first show that these properties are unquestionably within its geographical boundaries. The Court cited the case of Mariano, Jr. v Commission on Elections which stated that “the importance of drawing with precise strokes the territorial boundaries of a local unit of government cannot be overemphasized. The boundaries must be clear for they define the limits of the territorial jurisdiction of a local government unit. It can legitimately exercise powers of government only within the limits of its territorial jurisdiction. Beyond these limits, its acts are ultra vires.” Clearly therefore, the local government unit entitled to collect real property taxes from Sta. Lucia must undoubtedly show that the subject properties are situated within its territorial jurisdiction; otherwise, it would be acting beyond the powers vested to it by law. Sta. Lucia Realty & Development, Inc. vs. City of Pasig, G.R. No. 166838, June 15, 2011.

Local Government Code; real property tax; certificates of title as evidence of location. While a certificate of title is conclusive as to its ownership and location, this does not preclude the filing of an action for the very purpose of attacking the statements therein. As the Court proclaimed in the case of De Pedro vs Romasan Development Corporation: “[W]hile certificates of title are indefeasible, unassailable and binding against the whole world, including the government itself, they do not create or vest title. They merely confirm or record title already existing and vested. That cannot be used to protect a usurper from the true owner, nor can they be used as a shield for the commission of fraud; neither do they permit one to enrich himself at the expense of other.”  Although it is true that “Pasig” is the locality stated in the transfer certificates of title of the subject properties, both taxpayer and the municipality of Cainta aver that the metes and bounds of the subject properties, as they are described in the certificates, reveal that they are within Cainta’s boundaries. This only means that there may be a conflict between the location as stated and the location as technically described in the certificates. Mere reliance therefore on the face of the certificates will not suffice as they can only be conclusive evidence of the subject properties’ locations if both the stated and described locations point to the same area. The Antipolo regional trial court, wherein the boundary dispute case between Pasig and Cainta is pending, would be able to best determine once and for all the precise metes and bounds of both Pasig’s and Cainta’s respective territorial jurisdictions. The resolution of this dispute would necessarily ascertain the extent and reach of each local government’s authority, a prerequisite in the proper exercise of their powers, one of which is the power of taxation. Sta. Lucia Realty & Development, Inc. vs. City of Pasig, G.R. No. 166838, June 15, 2011.


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