Municipality of Makati vs CA

Principle/s:

-        General Rule: Public funds are not subject to levy and execution. Unless otherwise, provided by the statute.

-        State’s inherent power of eminent domain (expropriation)

Municipality of Makati vs CA

GR Nos. 89898-99, 1990

FACTS:

The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private respondent Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and one Araceli P. Jo, involving a parcel of land and improvements thereon located at Mayapis St., San Antonio Village, Makati.

ISSUE:

Whether public funds may be subject to levy and execution?

HELD:

The funds deposited in the second PNB account are public funds of the municipal government. In this jurisdiction, it is a well-settled rule that public funds are not subject to levy and execution. Unless otherwise, provided for by statute. More particularly, the properties of a municipality, whether real or personal, which are necessary for public use cannot be attached and sold at execution sale to satisfy a money judgment against the municipality. Municipal revenues derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the municipality are exempt from execution.

The state’s inherent power of eminent domain as to just compensation provides that not only the correct determination of the amount to be paid to the owner of the land but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered “just” for the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss.  

CIR vs Henderson

Principle/s:

-          Gross Income includes gains, profits, and income derived from salaries, wages, or compensation for personal services whatever kind and in whatever form paid.

Collector of Internal Revenue vs Henderson

GR No. L-12954, 1961

FACTS:

In the foregoing assessments, the Bureau of Internal Revenue considered as part of the spouses (American Citizens) taxable income the taxpayer husband’s allowances for rental, residential expenses, water, electricity and telephone; bonus paid to him; withholding tax and entrance fee to the Marikina Gun and Country Club paid by his employer for his account; and traveling allowance of his wife.

ISSUE:

Whether the allowances shall all be exempted from gross income?

HELD:

“Gross Income” includes gains, profits, and income derived from salaries, wages, or compensation for personal service whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rents, dividends, securities, or the transactions of any business carried on for gain or profit, or gains, profits, and income derived from any source whatever.

Their bills for rental and utilities were paid directly by the employer-corporation to the creditors. Nevertheless, as correctly held by the Court of Tax Appeals, the taxpayers are entitled only to a ratable value of the allowances in question, and only the amount of P4,800.00 annually, the reasonable amount they have spent for home rental and utilities such as light, water, telephone, etc., should be the amount subject to tax, and the excess considered as expenses of the corporation.

CIR vs Lednicky

Principle/s:

- Alien resident’s deduction of Income Taxation from Gross Income paid in their home country

- Double Taxation

Commissioner of Internal Revenue vs W.E. Lednicky and Maria Lednicky

GR Nos. L-18262 and L-21434, 1964

FACTS:

Spouses are both American citizens residing in the Philippines and have derived all their income from Philippine sources for taxable years in question.

On March, 1957, filed their ITR for 1956, reporting gross income of P1,017,287.65 and a net income of P 733,809.44. On March 1959, file an amended claimed deduction of P 205,939.24 paid in 1956 to the United States government as federal income tax of 1956.

ISSUE:

Whether a citizen of the United States residing in the Philippines, who derives wholly from sources within the Philippines, may deduct his gross income from the income taxes he has paid to the United States government for the said taxable year?

HELD:

An alien resident who derives income wholly from sources within the Philippines may not deduct from gross income the income taxes he paid to his home country for the taxable year. The right to deduct foreign income taxes paid given only where alternative right to tax credit exists.

Section 30 of the NIRC, Gross Income “Par. C (3): Credits against tax per taxes of foreign countries.

If the taxpayer signifies in his return his desire to have the benefits of this paragraph, the tax imposed by this shall be credited with: Paragraph (B), Alien resident of the Philippines; and, Paragraph C (4), Limitation on credit.”

An alien resident not entitled to tax credit for foreign income taxes paid when his income is derived wholly from sources within the Philippines.

Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity. In the present case, although the taxpayer would have to pay two taxes on the same income but the Philippine government only receives the proceeds of one tax, there is no obnoxious double taxation.

Delpher Trades Corporation vs Appellate Court

Principle/s:

-          Estate Planning as Tax Avoidance

Delpher Trades Corporation vs Appellate Court, GR L-69259, 1988

FACTS:

Delphin Pacheco and Pilar Angeles who owned in common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their control over the property through the corporation and to avoid taxes; that in order to accomplish this end, two pieces of real estate, including Lot No. 1095 which had been leased to Hydro Pipes Philippines were transferred to the corporation by virtue of deed of exchange for these properties. In exchanged, Pelagia and Delfin acquired 2,500 unissued no par value shares of stock which are equivalent to a 55% majority in the corporation because the owners only owned 2,000 shares. (Estate Planning)

ISSUE:

Whether the act of estate planning illegal?

HELD:

Tax avoidance is the legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted. In this case, estate planning is legal under the said principle. However; after incorporation, one becomes a stock-holder of a corporation by subscription or by purchasing stock directly from the corporation from individual owners thereof. “The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation, formed or to be formed.”

Note: (Edward Keller vs COB, 141 SCRA 1)

Stockholders may be sued by a corporate creditor to the extent of their unpaid SUBSCRIPTION.

Conwi vs CTA

*Definition of Income Taxation

Conwi vs CTA, GR No. 48535, 1992

Income Tax is an amount of money coming to a person or corporation within or specified time, whether as payment for services, interest or profit from investment. Unless otherwise specified, it means cash or its equivalent. Income can also be thought of as a flow of the fruits of one’s labor. Earning and spending in the same foreign currency does not involve conversion hence it does not constitute foreign exchange transaction.

Foreign exchange is defined as the conversion of an amount of money or currency of one country into an equivalent amount of money or currency of another.