Question No.

1:
Mr. Dante Raymundo retired from the government service as Director
of Land Transportation on January 6, 1985. Upon retirement, Mr. Raymundo
received, among other benefits, his terminal leave pay for which the BIR
withheld the sum of P56,000.00 a week following the date of his retirement.
On October 17, 1991, following the decision of the Supreme Court that
the money value of the accumulated leave credits/terminal pay is not subject
to withholding tax, Mr. Raymundo filed a claim for refund of P56,000.00 with
the Commissioner of Internal Revenue.
1) Is Mr. Raymundo within his rights in claiming refund of taxes
withheld on his terminal leave following the Supreme Court
decision?
2) If the retiree is within his legal rights in claiming refund of the taxes
withheld, will the BIR automatically grant his claim automatically
grant his claim? Explain your answer.
3) Assuming that the BIR denies the claim for refund, what could be
the possible reason or statutory basis for such a denial?
4) Discuss the theory of supervening event as it applies to claims for
refund of erroneously/illegally collected taxes. Can the retiree claim
a refund under this theory? Explain.

Question No. 2:
1) What are the legal remedies of an aggrieved taxpayer both at the
administrative and judicial levels? Describe separately the
procedures.
2) Distinguish between a taxpayers remedies in connection with his
tax assessment and/or demand and his claim for refund of taxes
alleged to have been erroneously or illegally collected.
3) What are the requisites before a taxpayers request for
reinvestigation may be granted by BIR? Discuss briefly.
4) If the request for reinvestigation is denied is it possible or advisable
to file a petition for review with any court or agency as last resort?

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Question No. 3:
ABC, a domestic corporation sold in 1989 two (2) condominium units of
Legaspi Towers in Roxas Blvd. for P8,158,142.00. Taxpayer corporation
declared in its income tax return for taxable year 1989, its gains derived
from the sale of two (2) condominium units as follows:
UNIT A

UNIT B

(316.5 sq. ft.) (322 sq. ft.)

Proceeds
From sale

P3,933,678 + P4,224,463= P8,158,142

LESS:
a) Acquisition
Cost
(Deed of Sale
9/9/83)
b) Payment of
Realty Tax
Total (a) (b)
Gains

P1,501,295 + 1,595,755= P3,031,050

P49,248 + P55,413= P104,661

P1,550,543 + P1,585,168= P3,135,711
P2,383,136 + P2,639,295= P5,022,431

Without going into computations, answer the following question:

Since ABC derived gains from the sale of the condominium units,
should it pay the 5% capital gains tax, 35% corporate income tax none of
the above because the corporation is not a real estate dealer? Discuss.
Question No. 4:
Pursuant to the National Internal Revenue Code and under existing
rules and regulation, the Commissioner of Internal Revenue is clothed with
the authority/ power to evaluate facts of tax cases and issue
assessments/demands against a taxpayer for deficiency taxes.
1) If an RTC Judge, on motion of an informer, renders a decision
ordering the Commissioner to assess and collect from the taxpayer
certain deficiency taxes when, in fact the BIR has already
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ascertained that no deficiency taxes are due the taxpayer, what

proper course of action would you advise your informer-client to
undertake?
2) Do you think an action for mandamus with the RTC can prosper to
compel the Commissioner to issue a deficiency assessment?
3) Which courts acts on:
a) Disputed assessments;
b) Tax collection cases filed by the BIR?

Question No. 5:
Your client, United Market Cooperative, is requesting the Commissioner
of Internal Revenue to exempt it from the payment of VAT on its purchase of
prime commodities from food suppliers/manufacturers on the ground that it
is exempt from all taxes, including VAT, under R.A No. 6938, the Cooperative
Code of the Philippines.
Do you think your client can obtain the necessary exemption from the
BIR? If your answer is in the affirmative, explain the basis for the grant. If in
the negative, state the basis for the rejection of the request.

Question No. 6:
On September 10, 1991, a Bank Manager of Peoples Bank, Inc. (PBI),
upon reading an obituary announcing the death of Mr. Roberto Diaz refused
to allow one of his heirs to withdraw Mr. Diaz Deposit amounting to P2
million.
A week later, immediately following said denial, the administrator of
the estate sued the Bank/Bank Manager to compel them to release the
money since such act was arbitrary and constituted a denial if property/
constitutional rights.
1) If you are retained as counsel by the Bank/Bank Manager to defend
their stand in refusing to release the P2 million to the heirs, what would
you raise as a legal defense? Discuss.
2) Under the same set of facts, would you, as administration appeal with
the Commissioner of Internal Revenue or a petition for review with the
Court of Tax Appeals? Explain.

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3) If the Commissioner of Internal Revenue allows the administrator of the

estate or the heirs of the decedent to withdraw from the deposit
account, what are the conditions under the Tax Code which have to be
met first?

Question No. 7:
Mr. Bill Morgan, a Canadian citizen and a resident of Scarborough,
Ontario, sends a gift check of $20,000.00 to his future Filipino daughter-inlaw who is married to his only son in the Philippines.
1) Is the donation by Mr. Morgan subject to tax? Explain.
2) What is the tax consequence, if any, to the done (Filipino daughterin-law of Mr. Morgan)?
3) Can you name one kind of gift that is exempt from donors tax
which is extendible to both residents and non-residents or noncitizens of the Philippines? Include qualifications, if any.

Question No. 8:
A disgruntled employee of Apache Corporation reported to the
Commissioner of Customs that the company is illegally importing electronic
equipment by way of unlawful shipside activities thereby evading payment
of customs duties and taxes on the goods.
Accordingly, the Commissioner of Customs, upon the request of the
Economic Intelligence and Investigation Bureau (EIIB), issued warrants seize
the goods listed in the warrants.
After the seizure of the goods and considering the magnitude of the
value of the goods, counsel for Apache Corporation filed a petition with the
Supreme Court for certiorari, prohibition and mandamus to enjoin the
Commissioner of Customs and his agents from continuing further with the
forfeiture proceedings and praying that the Commissioner return the
confiscated articles on the ground that the warrants were in violation of the
Rules of Court and the Bill of Rights.
If you are a newly-appointed Solicitor in the office of the Solicitor
General representing the Commissioner of Customs, how would you defend
the latter? Give the specific defenses.
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2) Assuming that the enforcement of the warrant had been extended

to the residence of the President of Apache Corporation, is such enforcement
valid? Explain.
3) Do you think the petition for certiorari, prohibition and mandamus
filed by Apache Corporation will prosper in the Supreme Court? Discuss.

Question No. 9:
Ms. Edna Dinoso is the registered owner of a residential lot with twostorey house situated in Naga City. The lot with an area of 328 sq. meters is
described and covered by TCT No. 4739 of the Registry of Deeds of Naga
City.
On September 12, 1977, a 115 sq. meter portion of Ednas property
was expropriated by the Republic of the Philippines for the sum of P6,700.00
representing the assessed value of the aforesaid portion. This amount was
deposited by the Government in Ednas account.
For almost ten (10) years, Edna failed to pay her real estate taxes on
the same property. Thus, on November 5, 1977, her property was sold at
public auction by the City Treasurer of Naga City to satisfy her real estate tax
delinquencies amounting to P5,800.00. The highest bidder for the property
was Angel Chua.
Edna was not present at the public auction although she later admitted
having received the notice of hearing for the petition for entry of a new
certificate of title by Angel Chua. (Both the auction sale and the final bill of
sale were annotated at the back of TCT No. 4739 by the Register of Deeds.)
On March 15, 1979, Edna filed a complaint to annual the auction sale
which was denied by the CFI Judge of Naga City. In fact, the CFI Judge
Ordered the TCT #4739 of Edna be cancelled and that a new title be issued
to Angel Chua.
On appeal, the Court of Appeals affirmed the CFI decision in toto.
Edna then elevated the case to the Supreme Court citing several grave
errors of law, among which are:

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1) Then her tax delinquencies (involving P5,800.00) for non-payment of

real estate taxes were offset by the sum of P6,700.00 which the
government of the Philippines owed her. She claims that her tax
delinquencies have been extinguished by legal compensation.
2) That the price of P5,900.00 paid by Angel Chua was grossly inadequate
and that because of its inadequacy, the same is tantamount to
deprivation of property without due process of law.
3) That the public auction made on her property is void.
Discuss the merit of the appeal.

Question No. 10:

Sometimes in December 1980, a taxpayer donated to his son 3,000
shares of stock of San Miguel Corporation. For failure to file a donors return
on the donation within the statutory period, the taxpayer was assessed the
sum of P102,000.00 as donors tax plus 25% surcharge or P25,500.00 and
20% interest of P20,400.00 which he paid on June 24,1985.
On April 10, 1986, he filed his income tax an amended income tax
return for 1985 claiming among others, a deduction for interest amounting to
P9,500.00 and reported a taxable income of P96,000.00
On November 10, 1986, the taxpayer filed an amended income tax
return for the same calendar year 1985, claiming therein an additional
deduction in the amount of P20,400.00 representing interest paid on the
donors gift tax.
A claim for refund of alleged overpaid income tax for 1985 was filed
with the Commissioner which was subsequently denied.
Upon appeal with the Court of Tax Appeals, the Commissioner took
issue with the Court of Tax Appeals determination that the amount paid by
the taxpayer for interest on his delinquent taxes is deductible from the gross
income for the same year pursuant to Sec. 29 (b) (1) of the National Internal
Revenue Code.
The Commissioner of Internal Revenue pointed out that a tax is not
indebtedness. He argued that there is a tax fundamental distinction between
a tax and a debt. According to the Commissioner, the deductible of
interest on indebtedness from a persons income tax cannot extend to
interest on taxes.
1) What is your opinion on the argument of the Commissioner that a
tax is not indebtedness so that deductibility on the interest on taxes
should not be allowed?
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2) Distinguish between the legal concept of taxes and debts.

3) Pursuant to the National Internal Revenue Code, for interest to be
deductible, what are the requirements to be met? Explain.

Question No. 11:

1) The President of the Philippines and the Prime Minister of Japan
entered into an executive agreement in respect of a loan facility to the
Philippines from Japan whereby it was stipulated that interest on loans
granted by private Japanese financial institutions to private financial
institutions in the Philippines shall not be subject to Philippine income
taxes.
2) In a loan agreement between the Central Bank of the Philippines (as
borrower) and private international bank (as lender), it is stipulated
that all payments of interest by the Central Bank to the lenders shall
be made free and clear from all Philippine taxes which may be imposed
thereon.
Is the stipulation valid? Explain.
Question No. 12:
Corporation X declared cash dividends in favor of its non-resident
stockholders in the United States from which amount, the tax on dividend
income was withheld.
Under the RP-US Tax on dividends paid to the non-resident US
stockholders (representing the difference between the amount of withholding
tax paid and the amount supposed to have been withheld under the
mentioned tax covenant)
Corporation X filed a claim for refund of said overpayment with the
Commissioner of Internal Revenue within the prescribed period which
however, remained un-acted upon, and before the expiration of the two (2)
year reglementary period, it filed a judicial claim for refund with the Court of
Tax Appeals.
Respondent Commissioner of Internal Revenue argues that Corporation
X is not the real party in interest to prosecute a claim for refund of the
overpaid taxes of the non-resident US stockholders, who are the real parties
in interest. But neither could it maintain an action for refund in a
representative capacity having failed to show proof of authorization.
Will corporation Xs case prosper? Explain.
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Question No. 13:

Under Section 2523 of the Tariff and Customs Code, the duty of
verifying the correct weight of a cargo shipment is imposed upon the vessels
master, owner or employee. If a discrepancy between the actual gross
weight and declared gross weight of manifested cargo exceeds 20% and the
Collector shall be of the opinion that such discrepancy was due to the
carelessness or incompetency of the master of pilot in command, owner or
employee of the vessel, a fine of not more than 15% of the value of the
article may be imposed upon the importing vessel.
ABC Corporations vessel was found, after appropriate administrative
proceedings, to have violated the said provision far exceeding the 20%
statutory limitation. The Collector of Customs imposed a dine of P22,600.00
(representing 15% of the value of the discrepancy) which was affirmed by
the Commissioner of Customs.
On appeal by ABC Corporation, the Court of Tax Appeals found the fine
of P22,600.00 harsh and unreasonable for a first offense and reduced the
same to P5,000.00.
The Commissioner of Customs questions the scope of authority of the
Court of Tax Appeals in the determination of the fine imposable under
Section 2523 of the Tariff and Customs Code.
Whose judgment should prevail under the circumstances of the case?
Explain fully.

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