Title Tax-Canonical-Doctrines.pdf ✅

U.P LAW BOC abon3298 TAXATION LAW Page 1 of 19 abon3298 TAXATION LAW CANONICAL DOCTRINES TAXATION 1 CASE FACTS HELD DOCTRINE CIR v. Bases Conversion and Development Authority G.R. No. 217898 | January 15, 2020 | J. Lazaro-Javier Respondent BCDA was the owner of four (4) real properties in Bonifacio Global City, Taguig City collectively referred to as the "Expanded Big Delta Lots." It entered into a contract to sell with the "Net Group," an unincorporated joint venture composed of 4 corporations. The "Net Group" committed not to remit to the BIR the total amount of Php 101,637,466.40 as Creditable Tax Withheld at source (CWT) to give time to respondent to present a certification of tax exemption on or before June 09, 2008. BCDA sought from petitioner the aforesaid certification but petitioner CIR did not respond. BCDA and the "Net Group" executed the corresponding Deeds of Absolute Sale. In view of respondent's failure to present a certification of tax exemption, the "Net Group" deducted the amount of P101,637,466.40 as CWT and issued to respondent the corresponding certificates of creditable tax withheld at source. BCDA claimed that it was exempt from all taxes and fees arising from or in relation to the sale, as provided under its charter. SC ruled that the BCDA is exempt from Creditable Withholding Tax (CWT) on the sale of its Global City properties. Sec. 8 of RA 7227: (1) commands that the sale proceeds are deemed appropriated by Congress to each of the aforenamed recipients and for the respective purposes specified therein, thus, these sale proceeds are not BCDA income but public funds subject to the distribution scheme and purposes provided in the law itself; and (2) it expressly enjoins that the proceeds of the sale shall not be diminished by any item or circumstance, including all forms of taxes and fees. Sec. 8 of RA 7227 specifically governs BCDA's disposition of the properties enumerated therein and their sale proceeds. It exempts these sale proceeds from all kinds of fees and taxes as the same law has already appropriated them for specific purposes and for designated beneficiaries. The standard procedural and documentary requirements for tax refund applicable to GOCCs in general do not apply to BCDA vis-a-vis the properties and the sale proceeds specified under Sec. 8 of RA 7227. There is no income to speak of here;
U.P LAW BOC abon3298 TAXATION LAW Page 2 of 19 abon3298 CTA En Banc ruled that while respondent is, indeed, not among the exempt corporations listed under Sec. 27 (C) of the NIRC, nevertheless, insofar as the sale of the "Expanded Big Delta Lots" is concerned, RA 7227 (Bases Conversion and Development Act of 1992) specifically exempts respondent from taxes. SC ruled that the BCDA is exempt from Creditable Withholding Tax (CWT) on the sale of its Global City properties. only the sale proceeds of specific properties which the legislature itself exempts from all taxes and fees. CIR v. Co G.R. No. 241424 | February 26, 2020 | J. Caguoia After a share swap with Puregold, the Respondents who previously owned 66% of Puregold, increased their shareholdings to 76%. Respondents then paid CGT; however, they subsequently claimed for refund arguing that the Deed of Exchange was a tax-exempt transaction pursuant to Sec. 40. (C)(2). The CIR disagreed, arguing that the transaction does not fall under the exemption because the respondents already had control of Puregold even before the exchange; respondents should have also secured a prior confirmatory ruling that the subject transaction qualifies as a tax-free exchange; certification or ruling is important so as to confirm whether the transaction satisfies the conditions set by law, and the authority to do such is vested upon the BIR. [Sec. 40 (C)(2) No gain or loss shall also be recognized if property is transferred to a corporation by a person in exchange for stock or unit of participation The SC granted the claim for refund holding that, pursuant to the case of CIR v. Filinvest (2011), Sec. 40 (C)(2) covers instances of further control, when, as a result of the exchange, the transferors collectively increase their control of the transferee corporation, as in this case. Prior confirmatory BIR ruling is also not required. Rulings merely operate to "confirm" the existence of the conditions for exemption provided under the law; it is not a requirement in itself. Apart from this, Moreover, there is nothing in Section 40(C)(2) which requires the taxpayer to first secure a prior confirmatory ruling before the transaction may be considered as a tax-free exchange. The BIR should not impose additional requirements not provided by law, which would negate the availment of the tax exemption. Requisites for the non- recognition of gain or loss are as follows: (a) the transferee is a corporation; (b) the transferee exchanges its shares of stock for property/ies of the transferor; (c) the transfer is made by a person, acting alone or together with others, not exceeding four persons; and, (d) as a result of the exchange the transferor, alone or together with others, not exceeding four, gains control of the transferee. As regards the element of control, it is not necessary that, after the exchange, each of the transferors individually gains control of the transferee corporation. It also does not prohibit instances when the transferor gains further control of the transferee corporation. The element of control is satisfied even if one of the transferors is already owning at least 51% of the shares of the transferee corporation, as
U.P LAW BOC abon3298 TAXATION LAW Page 3 of 19 abon3298 in such a corporation of which as a result of such exchange said person, alone or together with others, not exceeding four (4) persons, gains control of said corporation] long as after the exchange, the transferors, not more than five, collectively increase their equity in the transferee corporation by 51% or more. The primary purpose of a BIR Ruling is simply to determine whether a certain transaction, under the law, is taxable or not based on the circumstances provided by the taxpayer. Rulings merely operate to "confirm" the existence of the conditions for exemption provided under the law. If all the requirements for exemption set forth under the law are complied with, the transaction is considered exempt, whether or not a prior BIR ruling was secured by the taxpayer. CIR v. Fedgolf G.R. No. 226449 | July 28, 2020 | J. Reyes J. Jr. Federation of Golf Clubs of the Philippines, Inc. (FEDGOLF) questions the validity of RMC No. 35- 2012 issued by the CIR which clarified the taxability of clubs which are organized and operated exclusively for pleasure, recreation, and other non- profit purposes (recreational clubs). Said RMC subjects the income of recreational clubs from whatever source, to income tax; and the gross receipts of such clubs to value- added tax (VAT). The CIR asserted that a recreational club is not among the tax-exempt organizations under Sec. 30 of the 1997 NIRC. RTC declared the same invalid as the CIR exceeded its authority when it effectively imposed tax upon petitioner — a matter within SC held that Revenue Memorandum Circular No. 35-2012 is invalid insofar as it subjected membership dues, assessment fees, and those of similar nature collected by clubs which are organized and operated exclusively for pleasure, recreation, and other non-profit purposes to income tax and VAT. As to income tax, the Court declared that the interpretation contained in RMC No. 35-2012 was erroneous inasmuch as it effectively eradicated the distinction between "income" and "capital" when it classified membership dues, assessment fees, and the like as "income" and therefore subject to income tax. Income is defined as "an amount of money coming For as long as these membership fees, assessment dues, and the like are treated as collections by recreational clubs from their members as inherent consequence of their membership, and are, by nature, intended for the maintenance, preservation, and upkeep of the clubs' general operations and facilities, then these fees cannot be classified as "the income of recreational clubs from whatever source" that are "subject to income tax." Instead, they only form part of capital from which no income tax may be collected or imposed.