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Category Archives: Taxation Law

Response to Kat: Pointers for the Bar Exam

I noticed that my blog had been silent for more than 3 months now. I have been busy back to work since December 2017, and had been (re)answering the 2017 Bar Exam since then. Two months before the release of the bar exam results, I was “interviewed” by my law school classmate who is now a candidate for graduation this June 2018. Having passed by our chat, I decided to post our Q&A. May the reader find this post as source of useful pointers in taking the #Bar2018 [Note: The Q&A is edited/modified to fit this blog-type post.]

 

KAT: First of all, congrats in finishing the bar. That alone takes a huge amount of endurance, and for that, I congratulate you! :’)

ME: Thank you!

KAT: Second, habang fresh pa sayo ang mga bagay-bagay, nais kong humingi ng mga words of advice or tips like:

Ano ang mga bagay na na-realize mo na dapat mong ginawa pero hindi mo nagawa?

ME: Most of the things I planned were accomplished naman, except for that run on the syllabus. Original plan ko kasi ay gagawan ko ng reviewer each and every subject based on syllabus. But since August 2017 na ako nag-start ng review proper ko (take not I did not resign or totally left work), I realized na I will be losing material time just doing such reviewer than focusing on what statistically may come out. So I abandoned the plan, and instead read as many Arellano Bar Review Program (ABRP) materials I’ve collected since 2012 as a premium for being consistently and actively participating in the Bar Operations.

I realized na, if only I have completed that self-made reviewer, maybe I could have better answered some questions. But take note abandoning it is not a bad idea after all. I just feel I could have answered better.

KAT: Mistakes you did or ung mga pagkukulang, if any? Or
Yung mga tamang ginawa mo na tingin mo hindi nagawa ng iba, if any? Hehe

I am not sure if it’s a mistake when I slightly changed my answering style a few months before the bar exam. Napansin ko kasi, if I will maintain my style, parang pare-parehas na mababasa ng examiner na phrasing (like kung susundan mo yung answering style na 3-paragraph rule). I have to admit I am aiming for the top. Without any professional guidance, I tried to trim down my answer into 2-paragraph super direct to the point “answer-reason then basis” approach. Maybe some portions of the correct answer could have been lost somewhere. But nonetheless, I passed. So baka naman hindi mistake.   

I believe I did my best in answering all the questions. That should be every examinee’s objective. Never leave a question unanswered, and always have a spare time to review your work. In my case, I made sure that I am done answering before the 3rd bell (i.e. 30 minutes before time’s up) so I still have at least 25 minutes (I submit my booklet after the 4th bell, i.e. 5 minutes before time’s up with the exception of Legal Ethics where I submitted 45 minutes before time kasi I am excited to go out before the sun sets). That way, I can review my work for any spelling, grammar, or punctuation. To my surprise, I was able to discover (this was during the first Sunday) that I skipped answering some sub-questions. I was able naman to insert my answers because, fortunately, my answers were (extremely) short and I use 1 page in answering even sub-questions.

KAT: Third, sa dami ng binasa mo, ano sa tingin mo ung best material/s (pnka marami kang nahugot sa pagsagot sa bar) and worst (na dapat ndi na basahin ng isang barrista) for each bar subject?

ME: Honestly, I have not read any reference book in the entire review (I tried to borrow some books, but I never had the chance to read it). In our case (Bar 2017), there is no single best material that you can use to survive the exam.  You really have to rely on the years of preparation you have in law school. In my case, I relied mostly on ABRP materials including our very own Pre-Week materials. My observation is that all other review materials are practically the same. They just differ in the presentation and emphasis on certain topics. But they are just like any other review material.

Take note I did not enroll in any other Bar Review simultaneous with the ABRP. To me, simultaneous schooling is not good at all because you will hear different approaches and answers to the same question, which later on may affect you while answering the bar exam. Just choose one set of materials that you are comfortable with. Stick with it, and just be able to identify which part is “poisonous” LoL. 

KAT: Best material (to read) and worst material (to avoid)
Poli-
Labor-
Civil law-
Tax-
Com-
Crim-
Remedial law-
Ethics-

ME: Following my answer above, I do not recommend any best or worst material for any subject. Given enough value and appreciation, our very own ABRP materials are good enough. You will later discover that some of Arellano barristers are reading “Blue Notes”, “Red Notes”, UP Notes, etc. But you will also be amazed to see some Ateneo, San Beda, and UP barristers reading Arellano Last Minute Tips (LMTs) LoL. Just choose which materials are most comfortable for you to use.

Bar materials and LMTs by itself will not, by itself, save you. They are just intended as reminders to what you should have known already way back law school days.

However, there are some notable exceptions to this like in the case of Political Law and Civil Law. AUSL is known to have very good predictions on Political Law (average 50%) and it was maintained.

Labor Law is likewise fair enough. Using Atty. Chan’s pre-week notes is more than enough arsenal.

In the case of Civil Law, there are a lot of basic ObliCon questions and our very own Atty. Rabuya discussed many of the questions which were lifted from the J.Bersamin cases.

Taxation law is again a killer (to me). I cannot give advice on this. But if you have read enough recent tax cases, it will be less painful.

Commercial law is also a pain in the a**. A handful of questions were lifted from the Financial Rehabilitation and Insolvency Act (FRIA). But the questions were basic, so I suggest reading the law (note, it is lengthy) and at least understanding the terms, just in case a “boomerang” happens in your bar exam.

Criminal Law is also complained as a killer subject, but I disagree. The questions are basic. The problem is its presentation. You will get confused by the manner the questions are presented. But I believe the questions are phrased that way to see if the examinee can discern the issue and use only material facts to arrive at a conclusion applying the law. The exceptional term “doli incapax” can be answered if you are familiar with latin root words “dolus” (dolo).  But never mind.

Remedial law is just a walk in the park (Jurassic park LoL) if you have been under Atty. Brondial’s class. If you have not, I suggest you get a copy of Atty. Brondial’s latest syllabus and start reading the cases there. It will be a smooth ride after finishing it.

Legal Ethics questions were mostly recycled questions in the past bar exams. Be prepared on legal forms because it may drain your time in preparing one if you have not practiced doing it. 

 

KAT: Your response will be much appreciated hehe.. thank you!

P.S. sa free time mo po gawin. I am willing to wait.

ME: I don’t want you to wait. Start early and feel relieved early. I hope, though, that I have not increased your stress levels by promptly replying to your queries.

Good luck!

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Toshiba Information Equipment (Phils.) Inc. v. CIR, G.R. No. 157594, 09 March 2010

[LEONARDO-DE CASTRO, J.]

 

FACTS

Toshiba is a domestic corporation registered with the Philippine Economic Zone Authority (PEZA) as an Economic Zone (ECOZONE) export enterprise.It filed two separate applications for tax credit/refund of its unutilized input VAT payments. The CIR denied the application. On appeal, the CTA ruled that Toshiba is entitled to the credit/refund of the input VAT paid on its purchases of goods and services relative to such zero-rated export sales. The Court of Appeals reversed the decision of the CTA in the petition for review stating that Toshiba is a tax exempt entity under R.A. No. 7916 thus not entitled to refund the VAT payments made in the domestic purchase of goods and services.

ISSUE

Is Toshiba entitled to VAT refund?

 

HELD

YES.Such export sales took place before October 15, 1999, when the old rule on the VAT treatment of PEZA-registered enterprises still applied. Under this old rule, it was not only possible, but even acceptable, for Toshiba, availing itself of the income tax holiday option under Section 23 of Republic Act No. 7916, in relation to Section 39 of the Omnibus Investments Code of 1987, to be subject to VAT, both indirectly (as purchaser to whom the seller shifts the VAT burden) and directly (as seller whose sales were subject to VAT, either at ten percent [10%] or zero percent [0%])

 
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Posted by on March 5, 2016 in Case Digests, Investment Law, Taxation Law

 

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National Power Corporation v. Central Board of Assessment Appeals et al., G.R. No. 171470, 30 January 2009

FACTS

First Private Power Corporation (FPPC) entered into a Build-Operate-Transfer (BOT) agreement with NAPOCOR for the construction of Bauang Diesel Power Plant and creation of Bauang Power Plant Corporation (BPPC). The pertinent provisions of the BOT agreement, include among others:“2.03 NAPOCORxxx shall be responsible for the payment of all real estate taxes and assessments, rates, and other charges in respect of the Site and the buildings and improvements thereon. The Municipal Assessor of Bauang issued a Notice of Assessment and Tax Bill to BPPC. NAPOCOR sought tax exemption on the basis if Sec. 234(c) of R.A. No. 7160.

 

ISSUE

Under the terms of the BOT, can the GOCC be deemed the actual, direct, and exclusive user of machineries and equipment for tax exemption purposes? If not, can it pass on its tax-exempt status to its BOT partner, a private corporation, through the BOT agreement?

HELD

NO. Neither can NAPOCOR pass its tax–exempt status to its BOT partner.

NAPOCOR’s basis for its claimed exemption – Section 234(c) of the LGC – is clear and not at all ambiguous in its terms. Exempt from real property taxation are: (a) all machineries and equipment; (b) [that are] actually, directly, and exclusively used by; (c) [local water districts and] government-owned or –controlled corporations engaged in the [supply and distribution of water and/or] generation and transmission of electric power.

By [BOT’s] express terms, BPPC has complete ownership – both legal and beneficial – of the project, including the machineries and equipment used, subject only to the transfer of these properties without cost to NAPOCOR after the lapse of the period agreed upon. As agreed upon, BPPC provided the funds for the construction of the power plant, including the machineries and equipment needed for power generation; thereafter, it actually operated and still operates the power plant, uses its machineries and equipment, and receives payment for these activities and the electricity generated under a defined compensation scheme. Notably, BPPC – as owner-user – is responsible for any defect in the machineries and equipment.

Consistent with the BOT concept and as implemented, BPPC – the owner-manager-operator of the project – is the actual user of its machineries and equipment. BPPC’s ownership and use of the machineries and equipment are actual, direct, and immediate, while NAPOCOR’s is contingent and, at this stage of the BOT Agreement, not sufficient to support its claim for tax exemption.

 
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Posted by on November 24, 2015 in Case Digests, Taxation Law

 

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The Provincial Assessor of Marinduque v. Court of Appeals and Marcopper Mining, G.R. No. 170532, 30 April 2009

[CALLEJO, SR., J.]

FACTS

Petitioner issued against respondent an Assessment Notice, dated March 28, 1994, for real property taxes due on the latter’s real properties, including its Siltation Dam and Decant System which was damaged by typhoon sometime in 1993. Respondent paid the tax demanded, but appealed the assessment before the Local Board of Assessment Appeals (LBAA) on the ground that the subject property is exempt from real property taxation under Section 234(e) of Republic Act (R.A.) No. 7160 or the Local Government Code of 1991, which provides for exemptions from Real Property Tax for “Machinery and equipment used for pollution control and environmental protection.” The LBAA as well as the Central Board of Assessment Appeals (CBAA) on appeal ruled against tax exemption. The Court of Appeals reversed the rulings of LBAA and CBAA and held that the subject property was exempt from real property taxation under Section 91 of R.A. No. 7942 or the Philippine Mining Act of 1995.

ISSUE

Whether the Siltation Dam and Decant System of Marcopper Mining Corporation is exempt from real property tax.

 

HELD

NO.

The disputed assessment notice having taken effect on January 1, 1995, (by virtue of Sec. 221 of R.A. No. 7160) its validity is determined by the provisions of R.A. No. 7160, effective January 1, 1992. R.A. No. 7942 has no bearing on the matter, for this law came into effect only on April 14, 1995. Hence, reference to R.A. No. 7942 by the CA and the respondent are all out of place.Title II of R.A. No. 7160 governs the administration, appraisal, assessment, levy and collection of real property tax. Section 234 thereof grants exemption from real property taxation based on ownership, character or usage.

As held in Mactan Cebu International Airport Authority v. Marcos, the exemption granted under Sec. 234(e) of R.A. No. 7160 to “[m]achinery and equipment used for pollution control and environmental protection” is based on usage. The term usage means direct, immediate and actual application of the property itself to the exempting purpose. Section 199 of R.A. No. 7160 defines actual use as “the purpose for which the property is principally or predominantly utilized by the person in possession thereof.” It contemplates concrete, as distinguished from mere potential, use. Thus, a claim for exemption under Sec. 234(e) of R.A. No. 7160 should be supported by evidence that the property sought to be exempt is actually, directly and exclusively used for pollution control and environmental protection.

The records yield no allegation or evidence by respondent that the subject property was actually, directly and exclusively used for pollution control and environmental protection during the period covered by the assessment notice under protest. Rather, the finding of the CBAA that said property “apparently out of commission and not apt to its function as would control pollution and protect the environment” stands undisputed; [and] that the siltation dam was damaged in 1993 when a typhoon hit Marinduque.

 
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Posted by on November 24, 2015 in Case Digests, Taxation Law

 

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Fels Energy, Inc. v. The Province of Batangas and the Office of the Provincial Assessor of Batangas, G.R. No. 168557, 16 February 2007

[CALLEJO, SR., J.]

FACTS

NPC entered into a lease contract with Polar Energy, Inc. (POLAR) over diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract contained a provision that POLAR may be or become subject to real estate taxes and assessments, rates and other charges in respect of the power barges.Subsequently, POLAR assigned its rights under the Agreement to Fels Energy, Inc. (FELS). Later, FELS received an assessment of real property taxes on the power barges from Provincial Assessor, that the owner or person having legal interest may appeal the matter within 60 days from receipt to the Board of Assessment Appeals of the province.  FELS referred the matter to NPC, which sought reconsideration of the Provincial Assessor’s decision to assess real property taxes on the power barges. However, the motion was denied and the Provincial Assessor advised NPC to pay the assessment. After sixty (60) days from receipt of assessment from, the NPC filed a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as non-taxable items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the necessary corrections.

ISSUE

WhetherNPC’s appeal to LBAA may prosper considering that the timely filing of MR with the Provincial Assessor tolled the running of reglementay period.

HELD

NO.

Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:“SECTION 226. Local Board of Assessment Appeals. – Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.” Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion for reconsideration of the Provincial Assessor’s decision, a remedy not sanctioned by law.

[Citing] the case of Callanta v. Office of the Ombudsman, where [the Supreme Court] ruled that under Section 226 of R.A. No 7160, the last action of the local assessor on a particular assessment shall be the notice of assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not permit the property owner the remedy of filing a motion for reconsideration before the local assessor. It follows ineluctably that the 60-day period for making the appeal to the LBAA runs without interruption.

 
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Posted by on November 24, 2015 in Case Digests, Taxation Law

 

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Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, 16 December 2004

[YNARES-SANTIAGO, J.]

FACTS

The Revenue District Office  of the Bureau of Internal Revenue (BIR) issued Letter of Authority for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioner’s books of account and other accounting records for internal revenue taxes. Revenue District Officer Jaime Concepcion invited petitioner to send a representative to an informal conference for an opportunity to object and present documentary evidence relative to the proposed assessment. Petitioner’s Comptroller, LorenzaTolentino, executed a “Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC)”. Records show that, it did not bear the date of acceptance, that petitioner was not furnished a copy of the waiver, and the waiver was signed only by the Revenue District Officer. The tax liability exceeds One Million Pesos (P1,000,000.00).

ISSUE

Whether the waiver is in accordance with RMO No. 20-90 to validly extend the three-year prescriptive period under the NIRC.

HELD

NO.

The waiver document is incomplete and defective and thus the three-year prescriptive period was not tolled or extended and continued to run. Consequently, the Assessment/Demand was invalid because it was issued beyond the three (3) year period. In the same manner, Warrant of Distraint and/or Levy which petitioner received thereafter is also null and void for having been issued pursuant to an invalid assessment.

The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation. Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time.

A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. xxx Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection.

The waiver is also defective from the government side because it was signed only by a revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain. The conformity of the BIR must be made by either the Commissioner or the Revenue District Officer. This case involves taxes amounting to more than One Million Pesos (P1,000,000.00) and executed almost seven months before the expiration of the three-year prescription period. For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign for the BIR.

 
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Posted by on November 24, 2015 in Case Digests, Taxation Law

 

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Lascona Land Co. Inc. v. Commissioner of Internal Revenue, G.R. No. 171251, 05 March 2012

[PERALTA, J.]

FACTS

The Commissioner of Internal Revenue (CIR) issued an assessment against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56. Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City. On April 12, 1999, Lascona appealed the decision before the CTA. Lascona alleged that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-day period rendered the assessment final and executory. The CIR, however, maintained that Lascona’s failure to timely file an appeal with the CTA after the lapse of the 180-day reglementary period provided under Section 228 of the National Internal Revenue Code (NIRC) resulted to the finality of the assessment.

ISSUE

Whether the subject assessment has become final, executory and demandable due to the failure of petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day period pursuant to Section 228 of the NIRC.

HELD

NO.

[T]he Court has held that in case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. These options are mutually exclusive and resort to one bars the application of the other.

Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR will decide on the protested assessment.

 
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Posted by on November 24, 2015 in Case Digests, Taxation Law

 

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