November 2012 Philippine Supreme Court Decisions on Tax Law

Here are select November 2012 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; excise taxes; nature. Excise taxes imposed under Title VI of the National Internal Revenue Code (“Tax Code”) are taxes on property which are imposed on “goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported.” Although excises taxes are paid by the manufacturer or producer before removal of domestic products from the place of production or by the owner or importer before the release of imported articles from the customs house, the same partake of the nature of indirect taxes when it passed on to the subsequent purchaser. Indirect taxes are defined as those wherein the liability for the payment of the tax falls on one person but the burden thereof can be shifted to another person. When the seller passes on the tax to his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the purchaser as part of the price of the goods sold or services rendered.  Diageo Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 183553, November 12, 2012.

National Internal Revenue Code; excise taxes; refund; proper party to file. As defined in Section 22 (N) of the Tax Code, a taxpayer means any person subject to tax. He is, therefore, the person legally liable to file a return and pay excise taxes under Section 130 (A) of the Tax Code. The statutory taxpayer remains to be so even if he shifts the burden of tax to another person. Consequently, the right to claim a refund, if legally allowed, belongs to him and cannot be transferred to another without any clear provision of law allowing the same.

Unlike the law on Value-Added Tax which allows the subsequent purchaser under the tax credit method to refund or credit input taxes passed on to it by a supplier, no provision for excise taxes exists granting non-statutory taxpayer the right to claim a refund or credit. It must also be noted that when the excise taxes were included in the purchase price of the goods sold to petitioner, the same was no longer in the nature of a tax but already formed part of the cost of the goods. Diageo Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 183553, November 12, 2012.

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July 2012 Philippine Supreme Court Decisions on Tax Law

Here are select July 2012 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; Value Added Tax; “zero-rated” transaction; recipient of services. The recipient of services must be doing business outside the Philippines for the transaction to qualify it as zero-rated under Section 108 (B) of the National Internal Revenue Code of 1997 (1997 Tax Code). Since Section 108 (B) of the 1997 Tax Code is a verbatim copy of Section 102 (b) of the National Internal Revenue Code of 1977 (1977 Tax Code), any interpretation of the latter holds true for the former. When the Supreme Court decides a case, it does not pass a new law, but merely interprets a pre-existing one. Even though the taxpayer’s present petition was filed before the decision in the case of Commissioner of Internal Revenue v Burmeister and Wain Scandinavian Contractor Mindanao, Inc. was promulgated, the pronouncements made in that case may be applied to the present case without violating the rule against retroactive application. When the Court interpreted Section 102 (b) of the 1977 Tax Code in the Burmeister case, this interpretation became part of the law from the moment it became effective. It is elementary that the interpretation of a law by the Court constitutes part of that law from the date it was originally passed, since the Court’s construction merely establishes the contemporaneous legislative intent that the interpreted law carried into effect.

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June 2011 Philippine Supreme Court Decisions on Political Law

Here are selected June 2011 rulings of the Supreme Court of the Philippines on political law.

Constitutional Law

Commission on Audit; jurisdiction over Boy Scouts.  The issue was whether or not the Boy Scouts of the Philippines (“BSP”) fall under the jurisdiction of the Commission on Audit.  The BSP contends that it is not a government-owned or controlled corporation; neither is it an instrumentality, agency, or subdivision of the government.  The Supreme Court, however, held that not all corporations, which are not government owned or controlled, are ipso facto to be considered private corporations as there exists another distinct class of corporations or chartered institutions which are otherwise known as “public corporations.” These corporations are treated by law as agencies or instrumentalities of the government which are not subject to the tests of ownership or control and economic viability but to a different criteria relating to their public purposes/interests or constitutional policies and objectives and their administrative relationship to the government or any of its departments or offices.  As presently constituted, the BSP is a public corporation created by law for a public purpose, attached to the Department of Education Culture and Sports pursuant to its Charter and the Administrative Code of 1987.  It is not a private corporation which is required to be owned or controlled by the government and be economically viable to justify its existence under a special law.     The economic viability test would only apply if the corporation is engaged in some economic activity or business function for the government, which is not the case for BSP.  Therefore, being a public corporation, the funds of the BSP fall under the jurisdiction of the Commission on Audit.  Boy Scouts of the Philippines vs. Commission on Audit, G.R. No. 177131. June 7, 2011.

Local governments; principle of local autonomy.  The claim of petitioners in this case that the subject proclamation and administrative orders violate the principle of local autonomy is anchored on the allegation that, through them, the President authorized the DILG Secretary to take over the operations of the ARMM and assume direct governmental powers over the region.  The Supreme Court held that in the first place, the DILG Secretary did not take over control of the powers of the ARMM.  The SC observed that after law enforcement agents took respondent Governor of ARMM into custody for alleged complicity in the Maguindanao massacre, the ARMM Vice-Governor, petitioner Ansaruddin Adiong, assumed the vacated post on December 10, 2009 pursuant to the rule on succession found in Article VII, Section 12, of RA 9054.  In turn, Acting Governor Adiong named the then Speaker of the ARMM Regional Assembly, petitioner Sahali-Generale, Acting ARMM Vice-Governor.  In short, the DILG Secretary did not take over the administration or operations of the ARMM.  Datu Zaldy Uy Ampatuan, et al. v. Hon. Ronaldo Puno, et al., G.R. No. 190259. June 7, 2011.

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February 2011 Philippine Supreme Court Decisions on Political Law

Here are selected February 2011 rulings of the Supreme Court of the Philippines on political law.

Constitutional Law

Administrative cases; right to be presumed innocent. The trial court was correct in declaring that respondents had the right to be presumed innocent until proven guilty. This means that an employee who has a pending administrative case filed against him is given the benefit of the doubt and is considered innocent until the contrary is proven. In this case, respondents were placed under preventive suspension for 90 days from 23 May 2002 to 21 August 2002. After serving the period of their preventive suspension and without the administrative case being finally resolved, respondents should have been reinstated and entitled to the grant of step increment. The Board of Trustees of the Government Service Insurance System, et al. v. Albert M. Velasco, et al. G.R. No. 170463, February 2, 2011.

Equal Protection; valid classification. Petitioners argue that there is no substantial distinction between municipalities with pending cityhood bills in the 11th Congress and municipalities that did not have pending bills, such that the mere pendency of a cityhood bill in the 11th Congress is not a material difference to distinguish one municipality from another for the purpose of the income requirement. The SC held that the purpose of the enactment of R.A. No 9009 was merely to stop the “mad rush of municipalities wanting to be converted into cities” and the apprehension that before long the country will be a country of cities and without municipalities. It found that the imposition of the P100 million average annual income requirement for the creation of component cities was arbitrarily made as there was no evidence or empirical data, such as inflation rates, to support the choice of this amount.  The imposition of a very high income requirement of P100 million, increased from P20 million, was simply to make it extremely difficult for municipalities to become component cities. The SC also found that substantial distinction lies in the capacity and viability of respondent municipalities to become component cities of their respective provinces.  Congress, by enacting the Cityhood Laws, recognized this capacity and viability of respondent municipalities to become the State’s partners in accelerating economic growth and development in the provincial regions, which is the very thrust of the LGC, manifested by the pendency of their cityhood bills during the 11th Congress and their relentless pursuit for cityhood up to the present. League of Cities of the Phil. etc., et al. v. COMELEC, et al./League of Cities of the Phil. etc., et al. v. COMELEC, et al./League of Cities of the Phil. etc., et al. v. COMELEC, et al. G.R. No. 176951/G.R. No. 177499/G.R. No. 178056, February 15, 2011.

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Dissension in the Court: February 2011

The following relates to select decisions promulgated by the High Court in February 2011 where at least one Justice felt compelled to express his or her dissent from the decision penned by the ponente.

1.         No Retreat, No Surrender (Velasco vs. Carpio)

The Rome Statute

In December of 2000, the Philippines became a signatory to the Rome Statute, an international treaty which created the International Criminal Court (ICC), through which the International Criminal Court (ICC) was established with “the power to exercise its jurisdiction over persons for the most serious crimes of international concern x x x and shall be complementary to the national criminal jurisdictions.”  The serious crimes covered by the Rome Statute pertain to those considered grave under international law, such as genocide, crimes against humanity, war crimes, and crimes of aggression.  To date, however, the ratification by the Senate of the Rome Statute is still pending.

Included among the provisions of the Rome Statute are certain obligations imposed on parties to the treaty to surrender persons charged with covered crimes upon the request of the ICC.

The Non-Surrender Agreement

In May of 2003, through an Exchange of Notes, the Philippine government agreed to, and accepted the terms of, the United States proposed non-surrender bilateral agreement (NSA).  The NSA in pertinent part, provides that current or former Government officials, employees (including contractors), or military personnel or nationals of one Party that are present in the territory of the other Party shall not, absent the express consent of the first Party, be surrendered by the second Party to any international tribunal or to a third country for purposes of being surrendered to an international tribunal, unless it is to a UN Security Council tribunal.

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Dissension in the Court: August 2010

The following are selected decisions promulgated by the High Court in August 2010 where at least one Justice felt compelled to express his or her dissent from the decision penned by the ponente.

1.         [Union] Shop Talk (Leonardo-De Castro vs. Brion and Carpio)

Apart from the wide-spread paranoia about a possible Y2K global computer cataclysm, one other significant development occurring around the start of the twenty-first century was the merger of two giant banking institutions—Far East Bank and Trust Company (FEBTC) and Bank of the Philippine Islands (BPI)—with BPI being the surviving entity.  One of several legal issues spawned by that merger was the subject matter of Republic of the Philippines vs. Bank of the Philippine Islands penned by Justice Teresita J. Leonardo-De Castro.

At the time of the merger, the BPI Employees Union-Davao Chapter (the “Union”) constituted the exclusive bargaining agent of BPI’s rank and file employees in Davao City.  Their existing collective bargaining agreement (CBA) with BPI included a “Union Shop” clause which read as follows:

Article II:

x     x     x

Section 2.  Union Shop – New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as a condition of their continued employment.  It is understood that membership in good standing in the Union is a condition of their continued employment with the Bank.

Once the FEBTC-BPI merger took effect, the Union required BPI to implement the Union Shop Clause and compel the former FEBTC employees to join the Union.  BPI took the position that the former FEBTC employees were not covered by the Union Security Clause on the ground that the former FEBTC employees were not new employees who were hired and subsequently regularized, but were absorbed employees “by operation of law” because the “former employees of FEBTC can be considered assets and liabilities of the absorbed corporation.”

While the Voluntary Arbitrator sided with BPI, the Court of Appeals reversed the Voluntary Arbitrator’s decision.  The Court of Appeals held that while there is indeed a distinction between “absorbed” employees and “new” employees, such distinction applied only with respect to recognition of the past service of the “absorbed” employees with their former employer, FEBTC.  However, for purposes of applying the Union Shop Clause, they should be deemed to be “new” employees as otherwise, inequities would arise.

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July 2010 Philippine Supreme Court Decisions on Political Law

Here are selected July 2010 rulings of the Supreme Court of the Philippines on political law:

Agrarian reform; coverage.  Lands that are not directly, actually and exclusively used for pasture nor devoted to commercial livestock raising are not excluded from the coverage of the Comprehensive Agrarian Reform Program.  A.Z. Arnaiz Realty, Inc. vs. Office of the President. G.R. No. 170623, July 7, 2010.

Certificate of candidacy; residency requirement.  The Omnibus Election Code provides that a certificate of candidacy may be denied due course or cancelled if there is any false representation of a material fact.  The critical material facts are those that refer to a candidate’s qualifications for elective office, such as his or her citizenship and residence.  The false representation must be a deliberate attempt to mislead, misinform, or hide a fact that would otherwise render a candidate ineligible. Given the purpose of the requirement, it must be made with the intention to deceive the electorate as to the would-be candidate’s qualifications for public office.  Thus, the misrepresentation cannot be the result of a mere innocuous mistake, and cannot exist in a situation where the intent to deceive is patently absent, or where no deception on the electorate results. The foregoing are the legal standards by which the COMELEC must act on a petition to deny due course or to cancel a certificate of candidacy.  Thus, in considering the residency of a candidate as stated in the certificate of candidacy, the COMELEC must determine whether or not the candidate deliberately attempted to mislead, misinform or hide a fact about his or her residency that would otherwise render him or her ineligible for the position sought.  The COMELEC gravely abused its discretion in this case when, in considering the residency issue, it based its decision solely on very personal and subjective assessment standards, such as the nature or design and furnishings of the dwelling place in relation to the stature of the candidate.  Abraham Kahlil B. Mitra vs. Commission on Elections, et al. G.R. No. 191938, July 2, 2010.

Citizenship; election and constructive registration. The statutory formalities of electing Philippine citizenship are the following: (1) a statement of election under oath; (2) an oath of allegiance to the Constitution and Government of the Philippines; and (3) registration of the statement of election and of the oath with the nearest civil registry.  Here, petitioners complied with the first and second requirements upon reaching the age of majority.  However, registration of the documents of election with the civil registry was done belatedly.  Under the facts peculiar to the petitioners, the right to elect Philippine citizenship has not been lost and they should be allowed to complete the statutory requirements for such election.  Their exercise of suffrage, being elected to public office, continuous and uninterrupted stay in the Philippines, and other similar acts showing exercise of Philippine citizenship do not on their own take the place of election of citizenship.  But where, as here, the election of citizenship has in fact been done and documented within the constitutional and statutory timeframe, registration of the documents of election beyond the timeframe should be allowed if in the meanwhile positive acts of citizenship have been done publicly, consistently and continuously.  These acts constitute constructive registration.  In other words, the actual exercise of Philippine citizenship for over half a century by the petitioners is actual notice to the Philippine public, which is equivalent to formal registration of the election of Philippine citizenship.  It is not the registration of the act of election, although a valid requirement under Commonwealth Act No. 625, that will confer Philippine citizenship on the petitioners.  It is only a means of confirming the fact that citizenship has been claimed.  Having a Filipino mother is permanent.  It is the basis of the right of the petitioners to elect Philippine citizenship.  Petitioners elected Philippine citizenship in form and substance.  The failure to register the election in the civil registry should not defeat that election and negate the permanent fact that petitioners have a Filipino mother.  The lacking requirements may still be complied with subject to the imposition of appropriate administrative penalties, if any.  The documents petitioners submitted supporting their allegations that they have registered with the civil registry, although belatedly, should be examined for validation purposes by the appropriate agency, in this case the Bureau of Immigration.  Other requirements embodied in the administrative orders and other issuances of the Bureau of Immigration and the Department of Justice must be complied with within a reasonable time.  Balgamelo Cabiling Ma, et al. vs. Commissioner Alipio F. Fernandez, Jr., et al. G.R. No. 183133, July 26, 2010.

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