Chapter 1 (Digest)

7/29/2019 Chapter 1 (Digest)

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REPUBLIC vs. BACOLOD-MURCIA MILLING COG.R. Nos. L-19824, L-19825 and 19826 July 9, 1966

Facts: Republic Act No. 632 is the charter of the Philippine Sugar Institute (Philsugin) semi-public corporation created to,

among others, raise the necessary funds to carry out the provisions of this Act by levying on the annual sugar production a

tax of TEN CENTAVOS per picul of sugar. The proceeds of the foregoing levy shall be set aside to constitute a special

fund to be known as the "Sugar Research and Stabilization Fund," which shall be available exclusively for the use of the

corporation. All the income and receipts derived from the special fund herein created shall accrue to, and form part of the

said fund to be available solely for the use of the corporation. during the 5 crop years mentioned in the law, defendants (3sugar centrals) left unpaid balance and refused to continue with their contributions to the said fund; maintained that their

obligation to contribute or pay to the said Fund subsists only to the limit and extent that they are benefited by such

contributions since Republic Act 632 is not a revenue measure but an Act which establishes a "Special assessments." And

since the acquisition of the Insular Sugar Refinery resulted to"tremendous losses" incurred by Philsugin in its "disastrous

operation" of the said refinery, the appellants herein argue that they should not only be released from their obligation to

pay the said assessment but be refunded, besides, of all that they might have previously paid. Moreover, they contend that

the levy is a special assessment. As such, the proceeds thereof may be devoted only to the specific purpose for which the

assessment was authorized, and once it has been determined that no benefit accrues or inures to the property owners

paying the assessment, or that the proceeds from the said assessment are being misapplied to the prejudice of those against

whom it has been levied, then the authority to insist on the payment of the said assessment ceases.

They also contend that their refusal to continue paying the assessment under Republic Act 632 may not rightly be equatedwith a taxpayer's refusal to pay his ordinary taxes precisely because there is a substantial distinction between a "special

assessment" and an ordinary tax; that while the refusal of a citizen to pay his ordinary taxes may not indeed be sanctioned

because it would impair government functions, the same would not hold true in the case of a refusal to comply with a

special assessment.

Issue: W/N the subject levy is a special assessment such that a taxpayer may refuse contribution when no benefit accrues

to him.

Held: No. the special assessment/levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the

imposition of a special assessment, but, the exercise of the police power for the general welfare of the entire country. It is,

therefore, an exercise of a sovereign power which no private citizen may lawfully resist.

Besides, under Section 2(a) of the charter, the Philsugin is authorized "to conduct research work for the sugar industry in

all its phases, either agricultural or industrial, for the purpose of introducing into the sugar industry such practices or

processes that will reduce the cost of production, ..., and achieve greater efficiency in the industry." This provision, first of

all, more than justifies the acquisition of the refinery in question. The case dispute that the operation of a sugar refinery is a

phase of sugar production and that from such operation may be learned methods of reducing the cost of sugar

manufactured no less than it may afford the opportunity to discover the more effective means of achieving progress in the

industry. Philsugin's experience alone of running a refinery is a gain to the entire industry. That the operation resulted in a

financial loss is by no means an index that the industry did not profit therefrom, as other farms of a different nature may

have been realized. Thus, from its financially unsuccessful venture, the Philsugin could very well have advanced in its

appreciation of the problems of management faced by sugar centrals.

CITY COUNCIL OF CEBU CITY vs. CUIZONG.R. No. L-28972 October 31, 1972

Facts: plaintiffs-appellants "by themselves and representing the City Council of Cebu, as majority members thereof filed a

complaint against defendants-appellees. Cuizon, as mayor of Cebu City, the actingCity treasurer, PNB and Tropical

arguing that the contract entered into between the Mayor and Tropical for the purchase of road construction equipment is

null and void not having the necessary authority and approval of the city council and the treasurer had not certified to the

mayor as required by the Revised Admin Code

Defendants moved to dismiss the grounds of plaintiffs' lack of legal capacity to sue and failure of the complaint to state a

cause of action against it. plaintiffs asserted intertheir right as city officials and taxpayers to question the validity of the

contract entered into by the defendant city mayor and to contest the expenditures of the city's funds therefor beyond themayor's authority or the disposition thereof in an unlawful or prohibited manner.

the lower court issued the order of dismissal appealed on the ground of their lack of legal capacity to sue and their not

being the "real party in interest," as provided by Article 1397 of the New Civil Code that action for annulment of contracts


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may be instituted by all who are thereby obliged principally or subsidiarily. In other words, the plaintiffs must have an

interest in the contract. In the instant case the plaintiffs, in their capacity as city councilors or tax payers are not parties to

the contract executed by the City of Cebu and there is no evidence to show that because of the contract they may be

prejudiced or may suffer injury different from that of the public in general.

Issue: W/N plaintiffs as city councilors or as taxpayers have no legal standing to maintain the case for annulment of

contract of purchase between the city mayor and Tropical.

Held: The lower court's fundamental error was in treating plaintiffs' complaint as apersonalsuit on their own behalf andapplying the test in such cases that plaintiffs should showpersonalinterest as parties who would be benefited or injured by

the judgment sought. Plaintiffs' suit is patently nota personal suit. Plaintiffs clearly and by the express terms of their

complaint filed the suit as a representative suit on behalf and for the benefit of the city of Cebu.

Plaintiffs' suit is clearly not one brought by them in their personal capacity for the annulment of a particular contract

entered into between two other contracting parties, in which situation Article 1397 of the Civil Code may rightfully be

invoked to question their legal capacity or interest to file the action, since they are not in such case in anyway obliged

thereby principally or subsidiarily.

On the contrary, plaintiffs' suit is one filed on behalf of the City of Cebu, instituted by them in pursuance of their

prerogative and duty as city councilors and taxpayers, in order to question and declare null and void a contract which

according to their complaint was executed by defendant city mayor purportedly on behalf of the city without valid

authority and which had been expressly declared by the Auditor-General to be null and void ab initio and therefore could

not give rise to any valid or allowable monetary claims against the city. plaintiffs as city councilors exclusively

empowered by the city charter to "make all appropriations for the expenses of the government of the city" 21 and who were

the very source of the authority granted to the city mayor to enter into the questioned transactions which authority was

later revoked by them, as per the allegations of the complaint at bar, be deemed to possess the necessary authority, and

interest, if not duty, to file the present suit on behalf of the City and to prevent the disbursement of city funds under

contracts impugned by them to have been entered into by the city mayor without lawful authority and in violation of law.

GASCON v. ARROYOG.R. No. 78389 October 16, 1989

Facts: The Lopez family is the owner of two (2) television stations, namely: Channels 2 and 4 which they have operated

through the ABS-CBN Broadcasting Corporation.When martial law, TV Channel 4 was closed by the military; its facilities

were taken over by the Kanlaon Broadcasting System which operated it as a commercial TV station.After the 1986 EDSA

revolution, the Presidential Commission on Good Government (PCGG) sequestered the aforementioned TV Stations, and,

thereafter, the Office of Media Affairs took over the operation of TV Channel 4.The Lopez family requested for the return

the tv stations. Acting upon the request, respondent Executive Secretary, by authority of the President, entered into with

the ABS-CBN Broadcasting Corporation an "Agreement to Arbitrate. Thereupon, petitioners,as taxpayers, filed the instant

petition.

Issue: whether or not the herein petitioners have the legal personality or standing to the instant case.

Held: no. The present case is not an action to question the constitutionality or validity of a statute or law. It is an action toannul and set aside the "Agreement to Arbitrate", which, as between the parties, is contractual in character. Petitioners

have not shown that they have a legal interest in TV Station Channel 4 and that they will be adversely affected if and when

the said television station is returned to the Lopez family. Petitioners, therefore, have no legal standing to file the present

petition.

CALTEX v. THE HONORABLE COMMISSION ON AUDITG.R. No. 92585 May 8, 1992

Facts: PD 1956 created the Oil Price Stabilization Fund (OPSF) for the purpose of minimizing frequent price changes

brought about by exchange rate adjustments and/or changes in world market prices of crude oil and imported petroleum

products. By virtue thereof, COA directed Petitioner Caltex remit to the OPSF its collection of the additional tax on

petroleum products, to desist from further offsetting the taxes collected against outstanding, and pending such remittance,all of its claims for reimbursement from the OPSF shall be held in abeyance. . Petitioner contends that it should be allowed

to offset its claims from the OPSF against its contributions to the fund as this has been allowed in the past, particularly in


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the years 1987 and 1988 and that the OPSF contributions are not for a public purpose because they go to a special fund of

the government.

Issue: whether or not the amounts due to the OPSF from petitioner may be offset against petitioner's outstanding claims

from said fund.

Held: Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the government;

taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened

industry which is affected with public interest as to be within the police power of the state. 57There can be no doubt thatthe oil industry is greatly imbued with public interest as it vitally affects the general welfare. Any unregulated increase in

oil prices could hurt the lives of a majority of the people and cause economic crisis of untold proportions. It would have a

chain reaction in terms of, among others, demands for wage increases and upward spiralling of the cost of basic

commodities. The stabilization then of oil prices is of prime concern which the state, via its police power, may properly

address.

It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes

cannot be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each

other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

Further, in respect to the taxes for the OPSF, the oil companies merely act as agents for the Government in the latter's

collection since the taxes are, in reality, passed unto the end-users the consuming public. In that capacity, the petitioner,

as one of such companies, has the primary obligation to account for and remit the taxes collected to the administrator of

the OPSF. This duty stems from the fiduciary relationship between the two; petitioner certainly cannot be considered

merely as a debtor. In respect, therefore, to its collection for the OPSF vis-a-vis its claims for reimbursement, no

compensation is likewise legally feasible. Firstly, the Government and the petitioner cannot be said to be mutually debtors

and creditors of each other. Secondly, there is no proof that petitioner's claim is already due and liquidated. Under Article

1279 of the Civil Code, in order that compensation may be proper, it is necessary that:

(1) each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) both debts consist in a sum of :money, or if the things due are consumable, they be of the same kind, and also of

the same quality if the latter has been stated;

(3) the two (2) debts be due;

(4) they be liquidated and demandable;

(5) over neither of them there be any retention or controversy, commenced by third persons and communicated in due

time to the debtor.

Lastly, R.A. No. 6952 does not authorize oil companies to offset their claims against their OPSF contributions. Instead, it

prohibits the government from paying any amount from the Petroleum Price Standby Fund to oil companies which have

outstanding obligations with the government.

GARCIA v. The Executive Secretary[G.R. No. 101273, July 03, 1992]

Facts: EO No. 438 was enacted imposing on all articles imported into the Philippines, an additional duty of five percent

(5%) ad valorem. This additional duty was imposed across the board on all imported articles, including crude oil and other

oil products imported into the Philippines. This was subsequently increased from 5% to 9% by EO. 443. Thereafter EO

475 was issued reducing the rate of additional duty on all imported articles from 9% to 5%, except in the cases of crude oil

and other oil products which continued to be subject to the additional duty of 9%. later, the President issued EO 478,

which levied (in addition to the aforementioned additional duty of 9% and all other existingad valorem duties)

a special duty of P0.95 per liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products.

petitioner Cong. Garcia assails the validity of EOs 475 and 478 as being violative of Section 24, Article VI of the 1987

Constitution providing that All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of

local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may proposeor concur with amendments; that since the Constitution vests the authority to enact revenue bills in Congress, the

President may not assume such power by issuing said EOs which are in the nature of revenue-generating measures.

Furthermore, he argues that said E0s contravene the Tariff and Customs Code, which authorizes the president, according to


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him, to impose additional duties only when necessary to protect local industries or products but not for the purpose of

raising additional revenue for the government; that E.O. Nos. 478 and 475 having nothing to do whatsoever with the

protection of local industries and products for the sake of national economy, general welfare and/or national security.

Issue: W/N the President has no power to issue the questioned EOs which are by nature revenue generating measures, thus,

a violation of the Constitution

W/N said EOs are valid in accordance to authority vested to the President under the Tariff and Customs Code.

Held: Yes. under Section 24, Article VI of the Constitution, the enactment of appropriation, revenue and tariff bills, like

all other bills is, of course, within the province of the Legislative. It does not follow, however, that EO Nos. 475 and 478,

assuming they may be characterized as revenue measures, are prohibited to the President, that they must be enacted instead

by the Congress of the Philippines. Section 28(2) of Article VI of the Constitution provides as follows:

(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and

restrictions asit may impose, tariff rates, import and export quotas, tonage and wharfage dues, and other duties or

imposts within the framework of the national development program of the Government."

There is thus explicit constitutional permission to Congress to authorize the President subject to such limitations and

restrictions as Congress may impose to fix within specific limits tariff rates x x x and other duties or imposts x x x.

On the second issue, there is nothing in the language of either Section 104 or of 401 of the Tariff and Customs Code that

suggest such a sharp and absolute limitation of authority. customs duties which are assessed at the prescribed tariff rates

are very much like taxes which are frequently imposed for both revenue-raising and for regulatory purposes. Thus,

"customs duties" is "the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed

upon merchandise imported from, or exported to, a foreign country." The levying of customs duties on imported goods

may have in some measure the effect of protecting local industries. Simultaneously, however, the very same customs

duties inevitably have the effect of producing governmental revenues. Customs duties like internal revenue taxes are

rarely, if ever, designed to achieve one policy objective only. Most commonly, customs duties, which constitute taxes in

the sense of exactions the proceeds of which become public funds have either or both the generation of revenue and the

regulation of economic or social activity as their moving purposes and frequently, it is very difficult to say which, in a

particular instance, is the dominant or principal objective. In the instant case, since the Philippines in fact produces 10 to

15% of the crude oil consumed here, the imposition of increased tariff rates and a special duty on imported crude oil and

imported oil products may be seen to have some "protective" impact upon indigenous oil production.

OSMEA v. OrbosG.R. No. 99886 March 31, 1993

Facts: PD 1956 was issued 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization

Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum

products resulting from exchange rate adjustments and from increases in the world market prices of crude

oil.Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O. 1024,and ordered released

from the National Treasury to the Ministry of Energy. The same Executive Order also authorized the investment of the

fund in government securities, with the earnings from such placements accruing to the fund.President Corazon C. Aquino,

amended P.D. 1956, promulgated EO 137 expanding the grounds for reimbursement to oil companies for possible cost

underrecovery incurred as a result of the reduction of domestic prices of petroleum products, the amount of the

underrecovery being left for determination by the Ministry of Finance.

Petitioner avers that the creation of the trust fund violates 29(3), Article VI of the Constitution providing that:All money

collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purposes only. Ifthe purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred

to the general funds of the Government.


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The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended, must be treated as a 'SPECIAL

FUND,' not as a 'trust account' or a 'trust fund,' and that if a special tax is collected for a specific purpose, the revenue

generated therefrom shall 'be treated as a special fund' to be used only for the purpose indicated, and not channeled to

another government objective.Petitioner further points out that since "a 'special fund' consists of monies collected throughthe taxing power of a State,such amounts belong to the State, although the use thereof is limited to the special

purpose/objective for which it was created.

He also contends that the "delegation of legislative authority" to the ERB violates 28 (2). Article VI of the

Constitution, viz.:(2) The Congress may, by law, authorize the President to fix, within specified limits, and subject to suchlimitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other

duties or imposts within the framework of the national development program of the Government; and, inasmuch as the

delegation relates to the exercise of the power of taxation, "the limits, limitations and restrictions must be quantitative,

that is, the law must not only specify how to tax, who (shall) be taxed (and) what the tax is for, but also impose a specific

limit on how much to tax."

Issue: W/N the OPSF is a form of revenue measure drawing from a special tax to be expended for a special purpose

W/N the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State.

Held: The OPSF was established precisely to protect local consumers from the adverse consequences that such frequent

oil price adjustments may have upon the economy. Thus, the OPSF serves as a pocket, a buffer mechanism through which

the domestic consumer prices of oil and petroleum products are stabilized, instead of fluctuating every so often, and oilcompanies are allowed to recover those portions of their cost. the establishment and maintenance of the OPSF is well

within that pervasive and non-waivable power and responsibility of the government to secure the physical and economic

survival and well-being of the community, that comprehensive sovereign authority we designate as the police power of the

State. Hence, while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of

the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is

segregated from the general fund;

With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority

upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority

must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing

domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of

the Fund.

the fixing of some definite, quantitative restriction, or "a specific limit on how much to tax."cannot be applied in the case

at bar for what is here involved is not so much the power of taxation as police power. Although the provision authorizing

the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that

the overriding consideration is to enable the delegate to act with expediency in carrying out the objectives of the law which

are embraced by the police power of the State.

For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it

must set forth the policy to be executed by the delegate and (2) it must fix a standard limits of which

are sufficiently determinate or determinable to which the delegate must conform. In the case at bar, the challenged law

sets forth a determinable standard which guides the exercise of the power granted to the ERB.

JOYAv. PCGGG.R. No. 96541 August 24, 1993

Facts: 35 petitioners,Filipino artsists, assails the Consignment agreement between the RP through PCGG and Christie's of

New York concerning the public auction of 82 Old Masters Paintings and antique silverware seized from Malacaang and

the Metropolitan Museum of Manila alleged to be part of the ill-gotten wealth of the late President Marcos, his relatives

and cronies. Respondent argues that petitioners do not possess legal standing to file the instant petition. Petitioners claim

that as Filipino citizens, taxpayers and artists deeply concerned with the preservation and protection of the country's

artistic wealth, they have the legal personality to restrain respondents Executive Secretary and PCGG from acting contrary

to their public duty to conserve the artistic creations as mandated by the 1987 Constitution, particularly Art. XIV, Secs. 14

to 18, on Arts and Culture, and R.A. 4846 known as "The Cultural Properties Preservation and Protection Act," governing

the preservation and disposition of national and important cultural properties. Petitioners also anchor their case on thepremise that the paintings and silverware are public properties collectively owned by them and by the people in general to

view and enjoy as great works of art. They allege that with the unauthorized act of PCGG in selling the art pieces,

petitioners have been deprived of their right to public property without due process of law in violation of the Constitution.


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Issue: W/N petiononers have legal standing to file the instant petition.

Held: The rule is settled that no question involving the constitutionality or validity of a law or governmental act may be

heard and decided by the court unless there is compliance with the legal requisites for judicial inquiry, namely: that the

question must be raised by the proper party; that there must be an actual case or controversy; that the question must be

raised at the earliest possible opportunity; and, that the decision on the constitutional or legal question must be necessary to

the determination of the case itself.

On the first requisite, "Legal standing" means a personal and substantial interest in the case such that the party hassustained or will sustain direct injury as a result of the governmental act that is being challenged. The term "interest" is

material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question

involved, or a mere incidental interest.Moreover, the interest of the party plaintiff must be personal and not one based on a

desire to vindicate the constitutional right of some third and related party.

exceptions to the rule on legal standing, as when a citizen brings a case for mandamusto procure the enforcement of a

public duty for the fulfillment of a public right recognized by the Constitution, and when a taxpayer questions the validity

of a governmental act authorizing the disbursement of public funds.

In the case at bar, petitioners lack the requisite standing. the ownership of these paintings legally belongs to the foundation

or corporation or the members thereof. the pieces of antique silverware were given to the Marcos couple as gifts from

friends and dignitaries from foreign countries on their silver wedding anniversary. The confiscation of these properties by

the Aquino administration however should not be understood to mean that the ownership of these paintings has

automatically passed on the government. Having failed to show that they are the legal owners of the artworks or that the

valued pieces have become publicly owned, petitioners do not possess any clear legal right whatsoever to question their

alleged unauthorized disposition.

Neither can this petition be allowed as a taxpayer's suit. A taxpayer's suit can prosper only if the governmental acts being

questioned involve disbursement of public funds upon the theory that the expenditure of public funds by an officer of the

state for the purpose of administering an unconstitutional act constitutes a misapplication of such funds, which may be

enjoined at the request of a taxpayer. petitioners are not challenging any expenditure involving public funds but the

disposition of what they allege to be public properties. It is worthy to note that petitioners admit that the paintings and

antique silverware were acquired from private sources and not with public money.

PATALINGHUG v. CAG.R. No. 104786 January 27, 1994

Facts: Sangguniang Panlungsod of Davao City enacted Ordinance No. 363 known as the "Expanded Zoning Ordinance of

Davao City," Section 8 of which states:

Sec. 8. USE REGULATIONS IN C-2 DISTRICTS(Shaded light red in the Expanded Zoning Map) AC-2

District shall be dominantly for commercial and compatible industrial uses as provided hereunder:

3.1 Funeral Parlors/Memorial Homes with adequate off street parking space (see parking standards of P.D. 1096)

and provided that they shall be established not less than 50 meters from any residential structures, churches and

other institutional buildings.

Thereafter, petitioner commenced the construction of his funeral parlor. Private respondents file a complaint against the

construction averring that it violated Ordinance

No. 363, since it was allegedly situated within a 50-meter radius from the Iglesia ni Kristo Chapel and several residential

structures. The trial court favored petiononer. On appeal, the CA reversed the lower court ruling that although the

buildings owned by Cribillo and Iglesia ni Kristo were beyond the 50-meter residential radius prohibited by Ordinance

363, the construction of the funeral parlor was within the 50-meter radius measured from the Tepoot's building. The

Appellate Court disagreed with the lower court's determination that Tepoot's building was commercial and ruled that

although it was used by Mr. Tepoot's lessee for laundry business, it was a residential lot as reflected in the tax declaration,

thus paving the way for the application of Ordinance No. 363.Hence, this appeal.

Issue: W/N a building may be categorized as residential or commercial based on tax declarations


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Held: No. a tax declaration is not conclusive of the nature of the property for zoning purposes. A property may have been

declared by its owner as residential for real estate taxation purposes but it may well be within a commercial zone. a tax

declaration only enables the assessor to identify the same for assessment levels. In fact, a tax declaration does not bind a

provincial/city assessor, for under Sec. 22 of the Real Estate Tax Code, 9appraisal and assessment are based on the actualuse irrespective of "any previous assessment or taxpayer's valuation thereon," which is based on a taxpayer's declaration.

In fact, a piece of land declared by a taxpayer as residential may be assessed by the provincial or city assessor as

commercial because its actual use is commercial. The trial court's determination that Mr. Tepoot's building is commercial

and, therefore, Sec. 8 is inapplicable, is strengthened by the fact that the Sangguniang Panlungsod has declared the

questioned area as commercial. Consequently, even if Tepoot's building was declared for taxation purposes as residential,once a local government has reclassified an area as commercial, that determination for zoning purposes must prevail.

Hence, petitioner did not violate Section 8 of Davao City Ordinance No. 363.

SAN CARLOS MILLING v. CIR

G.R. No. 103379 November 23, 1993

Facts: Petitioner domestic corporation had for the taxable year 1982 a total income tax overpayment reflected as creditable

income tax in its annual final adjustment returnnand requested to apply the total creditable amount against its 1984 tax

dues.Respondent CIR disallowed the proffered automatic credit scheme but treated the request as an ordinary claim for

refund/tax credit under Section 292 in relation to Section 295 of the Tax Code and accordingly subjected the same for

verification/investigation. Meanwhile, petitioner filed a petition to the Court of Tax Appeals which dismissed the same and

held that prior investigation by and authority from the Commissioner of Internal Revenue were necessary before a

taxpayer could avail refund under the Tax Code. Petitioner contends that nowhere is it stated that the "imprimatur" or

approval of the Commissioner of Internal Revenue must be secured prior to crediting a refundable tax amount.

Issue: W/N prior authority from the Commissioner of Internal Revenue is necessary before a corporate taxpayer can credit

excess estimated quarterly income taxes paid against the estimated quarterly income tax liabilities for the succeeding

taxable year under the Tax Code.

Held: yes. The choice of a corporate taxpayer for an automatic tax credit does not ipso facto confer on it the right to

immediately avail of the same. An investigation, as a matter of procedure, is necessary to enable the Commissioner to

determine the correctness of the petitioner's returns, and the tax amount to be credited. An opportunity must be given the

internal revenue branch of the government to investigate and confirm the veracity of the claims of the taxpayer. The

absolute freedom that petitioner seeks to automatically credit tax payments against tax liabilities for a succeeding taxableyear, can easily give rise to confusion and abuse, depriving the government of authority and control over the manner by

which the taxpayers credit and offset their tax liabilities, not to mention the resultant loss of revenue to the government

under such a scheme.

the automatic tax credit scheme under the law provides two (2) remedies, that is, the excess may either be refunded or

credited, and insofar as the option of tax credit is concerned, this right should not be construed as an absolute right which

is available to the taxpayer at his sole option. It is our view that tax credit under the cited provision should be construed as

an alternative remedy (to a refund) subject to the fulfillment of certain requirements, i.e., prior verification and approval by

the Commissioner of Internal Revenue.

Further, the cited legal provision itself employs the word "may" in the phrase "may be credited", implying that the

availability of the remedy of tax credit is not absolute and mandatory; it does not confer an absolute right on the taxpayerto avail of the tax credit scheme if it so chooses; neither does it impose a duty on the part of the government to sit back and

allow an important facet of tax collection to be at the sole control and discretion of the taxpayer.

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Chapter 1 (Digest)