G.R. No. L-31364 March 30, 1979 MISAEL P.VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional Director, Revenue Region No. 14, Bureau of Internal Revenue, petitioners, vs. HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY respondents. Jaime Araneta in his capacity as Regional Director of BIR filed a Motion for allowance of claim against the estate of Luis D. Tongoy. The claim represents the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in the total sum of P3,254.80. The Administrator opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court. The motion was denied by respondent Judge Fernandez and a motion for reconsideration was also denied. Petitioners filed an appeal on certiorari contending that the claim for taxes was filed beyond the period provided in Section 2, Rule 86 of the Rules of Court and that the same was barred by the said provision. Issue: Whether or not the Government through BIR can claim unpaid taxes from a decedent’s estate Ruling: In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that "taxes assessed against the estate of a deceased person ... need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its control over the administrator, the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the estate." The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. Wherefore the decision appealed from is reversed G.R. No. 106611 July 21, 1994 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, CITYTRUST BANKING CORPORATION and COURT OF TAX APPEALS, respondents. Citytrust filed a claim for refund with BIR in the amount of P19,971,745.00 representing the alleged overpayment of income tax as computed in its final income tax return for the calendar year ending December 31, 1985. To interrupt the prescriptive period, Citytrust filed a petition with the Court of Tax Appeals, claiming the refund of its income tax overpayments for the years 1983, 1984 and 1985. The OSG in their answer contended that the claim of Citytrust from 1983 was not properly documented and that even if they are entitled for such claim the right to claim the same has prescribed with respect to income tax payments prior to August 28, 1984, pursuant to Sections 292 and 295 of the National Internal Revenue Code of 1977, as amended, since the petition was filed only on August 28, 1986. The case was submitted for decision based solely on the pleadings and evidence submitted by herein private respondent Citytrust because the petitioner failed to present evidence due to the failure of Tax Credit/Refund Division of the BIR to transmit the records of the case, as well as the investigation report thereon, to the Solicitor General. The petitioner filed a motion to suspend the proceedings but the same was denied. The case was decided and the Tax court ruled in ordering BIR to refund the overpaid tax for the year 1984 and 1985 only. Petitioner filed a motion for reconsideration contending that Citytrust has an outstanding tax liability amounting to P56M in 1984. Both parties filed a motion for reconsideration which was denied by the CA and the court affirmed the decision of CTA. Hence this petition. Issue: Whether or not the state is bound to the mistakes committed by its agents Ruling: It is a long and firmly settled rule of law that the Government is not bound by the errors committed by its agents. In the performance of its governmental functions, the State cannot be estopped by the neglect of its agent and officers. Although the Government may generally be estopped through the affirmative acts of public officers acting within their authority, their neglect or omission of public duties as exemplified in this case will not and should not produce that effect. Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the Government cannot and must not be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its functions for the welfare of its constituents. The errors of certain administrative officers should never be allowed to jeopardize the Government's financial position, especially in the case at bar where the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy. Wherefore the Judgment of CA is hereby set aside and the case is remanded to CTA G.R. No. L-28896 February 17, 1988 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ALGUE, INC., and THE COURT OF TAX APPEALS, respondents. ALGUE INC received a letter from petitioner stating that it has delinquency of income taxes amounting to P83,183.85 for the years 1958 and 1959. ALGUE filed a request for reconsideration to deduct P75,000 contending that it was a legitimate business expense used as promotional fees. The request was received by the office of the petitioner and was duly stamped. A warrant of distraint and levy was presented to ALGUE through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant. BIR informed ALGUE that they are not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served. After 16 days ALGUE filed a petition for review before the CTA. CTA ruled in favor of ALGUE and that the deduction was legitimately paid by ALGUE for actual service rendered in the form of promotional fees. Hence this petition. Issue: Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns Ruling: It should be remembered that this was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not required. Even so, at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of P75,000.00. Admittedly, everything seemed to be informal. This arrangement was understandable, however, in view of the close relationship among the persons in the family corporation. Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without costs. G.R. No. 124043 October 14, 1998 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC., respondents. YMCA, a non-stock non-profit organization earned an income of P676,829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees collected from non-members. CIR issued an assessment to YMCA amounting to P415,615.01 as deficiency on income tax, expanded withholding tax and withholding tax on wage. YMCA filed a letter of protest but it was denied by the CIR.YMCA filed a petition for review before CTA contending that the income generated by the rents and parking fees were used to cover its operation and maintenance. CTA ruled that the leasing of the property and parking fees collected are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the YMCA. An appeal by the CIR to CA reversed the decision of CTA. YMCA filed a motion for reconsideration before the CA which reversed its earlier decision. Hence this petition. Issue: Whether or not income derived from rentals of real property owned by YMCA is subject to income tax Ruling: Sec. 27 (NIRC). Exemptions from tax on corporations. — The following organizations shall not be taxed under this Title in respect to income received by them as such — xxx xxx xxx (g) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; (h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or member; xxx xxx xxx Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to the tax imposed under this Code. (as amended by Pres. Decree No. 1457) Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, the claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken." The phrase "any of their activities conducted for profit" does not qualify the word "properties." This makes from the property of the organization taxable, regardless of how that income is used — whether for profit or for lofty non-profit purposes. Verba legis non est recedendum, Where the law does not distinguish, neither should we. WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated September 28, 1995 and February 29, 1996 are hereby REVERSED and SET ASIDE. G.R. No. 117359 July 23, 1998 DAVAO GULF LUMBER CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents. Davao Gulf is a concessionaire with TLA granted by the DENR. They purchase mineral oils and diesel from various oil companies which they use in their exploitation and operation. Oil companies paid their specific taxes provided Sections 153 and 156 of the NIRC which were eventually passed to their consumer Davao Gulf. Petitioner filed a claim for refund before the CIR in the amount of P120,825.11, representing 25% of the specific taxes actually paid on the above-mentioned fuels and oils that were used by petitioner in its operations as forest concessionaire. Davao Gulf contended that Section 5 of RA 1435 provides that whenever any oils mentioned above are used by miners or forest concessionaires in their operations, twenty-five per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon submission of proof of actual use of oils…. The refund was denied by the CIR, hence, Davao filed a petition for review before the CTA which granted the petitioner a partial refund based on the on rates deemed paid under RA 1435, and not on the higher rates actually paid by petitioner under Art. 153 and 156 of the NIRC. Davao filed an appeal before the CA which affirms the decision of CTA. Hence this petition. Issue: Whether or not the refund must be computed in favour of the Davao Gulf’s claim Ruling: Because taxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government. Otherwise stated, any exemption from the payment of a tax must be clearly stated in the language of the law; it cannot be merely implied therefrom. A tax cannot be imposed unless it is supported by the clear and express language of a statute; on the other hand, once the tax is unquestionably imposed, "[a] claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken." Since the partial refund authorized under Section 5, RA 1435, is in the nature of a tax exemption, it must be construed strictissimi Juris against the grantee. Hence, petitioner's claim of refund on the basis of the specific taxes it actually paid must expressly be granted in a statute stated in a language too clear to be mistaken. WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. G.R. No. 120880 June 5, 1997 FERDINAND R. MARCOS II, petitioner, vs. COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and HERMINIA D. DE GUZMAN, respondents. Petitioner is the eldest son of the late President Marcos who questions the assessment of the CIR and collecting through the summary remedy of Levy on Real Properties, estate and income tax delinquencies upon the estate and properties of his father, despite the pendency of the proceedings on probate of the will of the late president. Marcos filed a petition for certiorari and Prohibition with an application for writ of preliminary injunction and/or temporary restraining order before the CA against the issuance of CIR of the notice of Levy on Real Property and sale by public auction of the said properties. CA ruled the deficiency assessments for estate and income tax of the late President already become final and unappealable, and may thus be enforced by the summary remedy of levying upon the properties, hence this petition. Marcos contended that the pending probate proceeding puts the properties in custodia legis of the probate court to the exclusion of all other courts and administrative agencies. BIR argued that the sate’s authority to collect internal revenue taxes is paramount. Issue: Whether or not the State can collect taxes on the estate of the deceased despite the pending probate proceeding Ruling: The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52 Phil 803), relied upon by the petitioner-appellant is good authority on the proposition that the court having control over the administration proceedings has jurisdiction to entertain the claim presented by the government for taxes due and to order the administrator to pay the tax should it find that the assessment was proper, and that the tax was legal, due and collectible. Thus, it was in Vera vs. Fernandez that the court recognized the liberal treatment of claims for taxes charged against the estate of the decedent. Such taxes, we said, were exempted from the application of the statute of non-claims, and this is justified by the necessity of government funding, immortalized in the maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae — taxes are the sinews of the state. It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the collection of taxes, is of paramount importance for the sustenance of government. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. [Marcos II vs. Court of Appeals, 273 SCRA 47(1997)] IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition. G.R. Nos. L-49839-46 April 26, 1991 JOSE B. L. REYES and EDMUNDO A. REYES, petitioners, vs. PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in their capacities as appointed and Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H. NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed and Acting Members of the BOARD OF ASSESSMENT APPEALS of Manila; and NICOLAS CATIIL in his capacity as City Assessor of Manila, respondents. J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo which they lease to their tenants for P300 monthly. Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentals in properties used for dwelling where such rental does not exceed P300 a month but allowing an increase in rent by not more than 10% thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease. P. D. No. 20 amended R.A. No. 6359 making the prohibition absolute and suspending the said provision indefinitely excepting leases with definite period. The City Assessor re-classified and reassessed the property of the petitioner which increased their tax rate prompting them to file a Memorandum of Disagreement with the BTAA contending that reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional". The BTAA denied the Memorandum of Disagreement, hence, the Reyeses appealed to CBAA. CBAA conducted an ocular inspection of the property and found out that some of the properties were below street level affected by tides. CBAA affirmed the decision of BTAA with modification allowing a 20% reduction on the market value of the properties affected by tides. A motion for reconsideration by the petitioners was denied by the CBAA, hence, this petition. Petitioners contended that the Honorable Board erred in adopting the "comparable sales approach" method in fixing the assessed value of appellants' properties. Issue: Whether or not the tax imposed by the BTAA is excessive Ruling: The power to tax “is an attribute of sovereignty”. In fact, it is the strongest of all the powers of government. But for all its plenitude, the power to tax is not unconfined as there are restrictions. Adversely effecting as it does property rights, both the due process and equal protection clauses of the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it were otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that “the power to tax involves the power to destroy.” The web or unreality spun from Marshall’s famous dictum was brushed away by one stroke of Mr. Justice Holmes’ pen, thus: “The power to tax is not the power to destroy while this Court sits.” “So it is in the Philippines.” (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439 [1985]). [Reyes vs. Almanzor, 196 SCRA 322(1991)]) Verily, taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which is the promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue, Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties. [Reyes vs. Almanzor, 196 SCRA 322(1991)] PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed decisions of public respondents are REVERSED and SET ASIDE; and (e) the respondent Board of Assessment Appeals of Manila and the City Assessor of Manila are ordered to make a new assessment by the income approach method to guarantee a fairer and more realistic basis of computation. SO ORDERED.