Mobil vs City Treasurer
(GR No. 154092, 14 July 2005)
Ponente: Quisumbing, J.
Facts: When petitioner decided to relocate its principal office from Makati to Pasig City, it applied for a retirement of its business in the former. Upon evaluation of its application, it was assessed a total business tax of Php 1,898,106.96, which petitioner paid under protest.
The following year, petitioner claimed a refund for Php 1,331,638.84 which was denied. The argument for the denial being: that petitioner was merely transferring and not retiring its business, and that the gross sales realized while petitioner still maintained office in Makati from January 1 to August 31, 1998 should be taxed in the City of Makati.
(Note: the amount being claimed for refund represents the tax for the gross sales for the period between January-August of 1998. This is income tax, not business tax!)
RTC: The assessment of the Chief of the License Division of Makati is with legal basis and does not constitute double taxation.
MR: denied.
Issue: Are the business taxes paid by petitioner in 1998, business taxes for 1997 or 1998?
Petitioner’s Argument: the 1997 gross sales/revenue is merely the basis for the amount of business taxes due for the privilege of carrying on a business in the year when the tax was paid.
Respondents: since local taxes, which include business taxes, are paid either within the first twenty days of January of each year or of each subsequent quarter, as the case may be, what the taxpayer actually pays during the recorded calendar year is actually its business tax for the preceding year.
Held: The business taxes were paid for 1998. RTC erred.
Business taxes imposed in the exercise of police power for regulatory purposes are paid for the privilege of carrying on a business in the year the tax was paid. It is paid at the beginning of the year as a fee to allow the business to operate for the rest of the year. It is deemed a prerequisite to the conduct of business.
Income tax, on the other hand, is a tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a person’s income, emoluments, profits and the like. It is tax on income, whether net or gross realized in one taxable year. It is due on or before the 15th day of the 4th month following the close of the taxpayer’s taxable year and is generally regarded as an excise tax, levied upon the right of a person or entity to receive income or profits.
The trial court erred when it said that the payments made by petitioner in 1998 are payments for business tax incurred in 1997 which only accrued in January 1998. Likewise, it erred when it ruled that petitioner was still liable for business taxes based on its gross income/revenue for January to August 1998.
Under the Makati Revenue Code, it appears that the business tax, like income tax, is computed based on the previous year’s figures. This is the reason for the confusion. A newly-started business is already liable for business taxes (i.e. license fees) at the start of the quarter when it commences operations. In computing the amount of tax due for the first quarter of operations, the business’ capital investment is used as the basis. For the subsequent quarters of the first year, the tax is based on the gross sales/receipts for the previous quarter. In the following year(s), the business is then taxed based on the gross sales or receipts of the previous year. The business taxes paid in the year 1998 is for the privilege of engaging in business for the same year, and not for having engaged in business for 1997.
Respondent erroneously treated the assessment and collection of business tax as if it were income tax, by rendering an additional assessment of P1,331,638.84 for the revenue generated for the year 1998.
Hongkong & Shanghai Banking Corporation v. Rafferty
(G.R. No. L-13188, November 15, 1918)
Ponente: Malcolm, J.
Facts:Petitioner HSBC is the owner of 2,000 railroad ties it had acquired from the
firm of Pujalte & Co. which the latter assigned to it after it was unable to pay a
large sum of money it then owed to HSBC.
The firm of Pujalte & Co. is engaged in the business of timber, and it was
shown that prior to the assignment of the railroad ties to HSBC it owed to the
BIR forest charges, one of the taxes enumerated in the NIRC, amounting to
P8328.93.It executed a bond of P2000 to secure the payment of the forest
charges and was allowed to remove the timber from the public forests.
More than a year later, when some of the timber were already made into
railroad ties and transferred to third parties like HSBC, the Collector instituted
collection proceedings agains Pujalte.To enforce collection, the CIR went
after thee property of Pujalte & Co. including that which were already in the
possession of HSBC, who at the time it acquiredthe property had no notice
of the lien nor of the delinquent tax due from Pujalte.
Issue: Whether or not the CIR can still enforce the lien?
Held: No, the lien does not follow the property subject to the tax into the handsof a third party when at the time of transfer, no demand for payment had beenmade and when the purchaser then had no notice of the existence of the lien.
Under the general rule of the Civil law, possession of movables is not
necessary to the validity of a lien, whether created by contract or by act of
law.Such lien will attach upon movable property even in the hands of a bona
fide purchaser without notice.Under the law of taxation however, the tax lien
does not establish itself upon property which has been transferred to an
innocent purchaser prior to demand. A demand is necessary to create and
bring the lien into operation.
Furthermore, in order that the lien may follow the property into the hands of a
third party, it is essential that the latter should have notice, either actual or
constructive.The reason behind this is the benevolence of our Constitution
which prohibits the taking of property without due process of law.The policy
of the law is against upholding secret liens and charges against property of
innocent purchasers or encumbrances for value. At the time HSBC acquiredthe property there was nothing to show that Pujalte & Co. were deliquent taxpayers nor were there any public records that may be consulted to protect itfrom loss by reason of the existence of a secret lien.
Minor issue on the right of HSBC to recover interest from the undue
enforcement of the lien: The reckoning date for the computation of interest
should be the date when the taxpayer lost the income from the funds by
payment under protest. In this case, it is not from the filing of the complaint for
collection but on the date HSBC was deprived of the property.
Serfino v. CA
(GR L-40858, 15 September 1987)
Ponente: Paras, J.
Facts: On 25 August 1937, a parcel of land was patented in the name of Pacifico Casamayor (OCT 1839). On 14 December 1945, he sold said land in favor of Nemesia D. Balatazar (TCT No. 57-N, 18 January 1946). OCT 1839 was lost during the war and upon petition of Nemesia Baltazar, the Court of First Instance of Negros Occidental ordered the reconstitution thereof. Pursuant thereto, OCT 14-R (1839) was issued on 18 January 1946 in the name of Pacifico Casamayor. On that same day, TCT 57-N was issued in the name of Nemesia Baltazar but after the cancellation of OCT 14-R (1839). On 15 August 1951, Nemesia Baltazar, sold said property to Lopez Sugar Central Mill Co., and the latter did not present the documents for registration until 17 December 1964 to the Office of the Registry of Deeds. Said office refused registration upon its discovery that the same property was covered by another certificate of title, TCT 38985, in the name of Federico Serfino. On 19 November 1964, the spouses Serfinos mortgaged the land to the Philippine National Bank (PNB) to secure a loan in the amount of P5,000.00; which was inscribed in TCT No. 38985.
The Lopez Sugar Central instituted an action to recover said land; and the lower court rendered a decision ordering the cancellation of TCT No. 38985; issuance of a new TCT in the name of plaintiff; and the payment of the plaintiff PNB the loan of spouses Serfinos secured by said land. Both parties appealed from this decision of the trial court. Ruling on the assignment of errors, the appellate court affirmed the judgment of the trial court with modification in its decision setting aside the decision of the trial court declaring plaintiff liable to PNB for payment, however, ordering the plaintiff to reimburse the Serfino spouses of the sum P1,839.49, representing the unpaid taxes and penalties paid by the latter when they repurchased the property. Hence, the appeal by the spouses Serfino and PNB to the Supreme Court.
Issue: Whether the auction sale of the disputed property was null and void.
Held: The assailed decision of the appellate court declares that the prescribed procedure in auction sales of property for tax delinquency being in derogation of property rights should be followed punctiliously. Strict adherence to the statutes governing tax sales is imperative not only for the protection of the tax payers, but also to allay any possible suspicion of collusion between the buyer and the public officials called upon to enforce such laws. Notice of sale to the delinquent land owners and to the public in general is an essential and indispensable requirement of law, the non-fulfillment of which vitiates the sale. In the present case, Lopez Sugar Central was not entirely negligent in its payment of land taxes. The record shows that taxes were paid for the years 1950 to 1953 and a receipt therefor was obtained in its name. The sale therefore by the Province of Negros Occidental of the land in dispute to the spouses Serfinos was void since the Province of Negros Occidental was not the real owner of the property thus sold. In turn, the spouses Serfinos title which has been derived from that of the Province of Negros Occidental is likewise void. However, the fact that the public auction sale of the disputed property was not valid cannot in any way be attributed to the mortgagee’s fault. The inability of the Register of Deeds to notify the actual owner or Lopez Sugar Central of the scheduled public auction sale was partly due to the failure of Lopez Sugar Central to declare the land in its name for a number of years and to pay the complete taxes thereon. PNB is therefore entitled to the payment of the mortgage loan as ruled by the trial court and exempted from the payment of costs.
The Supreme Court affirmed the assailed decision, with modification that PNB mortgage credit must be paid by Lopez Sugar Central.