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Volume IV Issue No. 4 A P R I L 2 0 1 2
BIR ISSUANCES


I n s i d e t h i s
I s s u e:


BIR Issuances
1

Jurisprudence
12

JLs Corner
22

REVENUE REGULATIONS NO. 5-
2012 issued on April 2, 2012 estab-
lishes the policy on the binding effect
of rulings issued prior to the effectivity
of the Tax Reform Act of 1997.

All rulings issued prior to January 1,
1998 shall no longer have any binding
effect. Consequently, these rulings
cannot be invoked as basis for any
current business transaction/s. Nei-
ther can these rulings be used as ba-
sis for securing legal tax opinions/
rulings.

REVENUE REGULATIONS NO. 6-
2012 issued on April 2, 2012 clarifies
the taxation on the sale of gold and
other metallic minerals to Bangko
Sentral ng Pilipinas (BSP) and other
persons or entities, amending Reve-
nue Regulations (RR) No. 7-2008,
and further amending RR No. 2-98.
Metallic minerals are subject to 2%
Excise Tax rate based on either the
actual market value of the gross out-
put thereof at the time of removal, in
case of those locally extracted or pro-
duced; or the value used by the Bu-
reau of Customs in computing tariff
and duties, in case of importation.
Possessors of said metallic minerals
must be able to show proof that the
Excise Tax has been paid thereon,
otherwise, they shall be assessed and
be held liable for the payment thereof.

Sale of metallic minerals to persons
and entities, except sale of gold to the
BSP, is subject to 12% Value-Added
Tax (VAT) if the value thereof ex-
ceeds the threshold set by the 1997
Tax Code and existing issuance. Sale
of gold to the BSP is subject to 0%
VAT if the seller is a VAT registered
taxpayer.

Sellers are subject to Income Tax at
the rate prescribed under Section 24
(A), in case of individual taxpayers,
and under Section 27 (A) of the 1997
Tax Code, in the case of corporations.
Further, buyers of said metallic miner-
als are required to withhold 5% of
gross payments made and remit the
same to the Government.

In order for a seller/possessor of said
metallic mineral to be able to claim
the costs of said metallic mineral, said
seller/possessor must be able to
show proof of withholding and remit-
tance of the 5% Withholding Tax on
said product, otherwise all claimed
costs and expenses associated there-
with shall be disallowed.

All buyers of metallic minerals are
hereby constituted as agents for the
collection of 2% Excise Tax on metal-
lic minerals and the 5% Creditable
Withholding Tax thereon. All penalties
under existing laws and regulations
shall attach to buyers who fail to with-
hold and/or pay said taxes.

The BSP, regardless whoever is sell-
ing, is obliged to collect the 2% Ex-
cise Tax on the actual market value of
the gold sold to it, regardless of the
purchase price it paid for the transac-
tion, and remit the same to the BIR. If
the seller is able to produce proof of
payment of Excise Taxes on said
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goods, the BSP shall not be liable an-
ymore for payment of Excise Taxes.

BSP is likewise obliged to withhold
and remit to the BIR the Creditable
Withholding Taxes due from the sale,
regardless whoever is selling. The
withholding tax return shall be filed
and payment shall be made within 10
days after the end of each month, ex-
cept for taxes withheld for the month
of December, which shall be filed on
or before January 15 of the following
year.

However, if the BSP availed of the
Electronic Filing and Payment System
(EFPS), the deadline for electronic
filing of the applicable withholding tax
returns (BIR Form No. 1601-E) and
payment of taxes due thereon re-
mains on the 15th day of the following
month.

REVENUE REGULATIONS NO. 7-
2012 issued on April 2, 2012 amends
the consolidated Revenue Regula-
tions on primary registration, updates
and cancellation, particularly on the
following:
a. Registration, updates and cancella-
tion procedures;
b. Venue, Forms & Documentary Re-
quirements;
c. Annual Registration Fee;
d. Certification Fee; and
e. Penalties for registration-related
violations.

The venue, forms and documentary
requirements for the registration of
each type of applicant-taxpayer are
listed in Annex A of the Regulations.
Application for Taxpayer Identification
Number (TIN) with incomplete docu-
mentary requirements shall not be
processed.

The TIN, once assigned to a particu-
lar taxpayer, is non-transferable and
there shall be no instance where two
or several taxpayers are holders of
the same TIN. Only one TIN shall be
assigned to the taxpayer, regardless
of variety of transactions e.g. employ-
ee who is at the same time engaged
in business. Once assigned with a
TIN, a taxpayer is precluded from ap-
plying for another TIN, except for
banks with both Regular Banking Unit
and with Foreign Currency Deposit
Unit where each unit is assigned with
different TINs. Any person who shall
secure more than one TIN shall be
subject to the penalty prescribed un-
der Section 15 of the Regulations.

The estate of a deceased person or a
trust under an irrevocable trust agree-
ment shall be issued a TIN separate
and distinct from the TIN of the de-
ceased person and/or trustee.

Minors who are earning and/or who
are under the circumstances pre-
scribed under Executive Order (EO)
No. 98, series of 1998 shall be sup-
plied with TIN.

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Non-Resident Aliens Not Engaged in
Trade or Business (NRANETB) or
Non-Resident Foreign Corporations
(NRFC) shall be issued TINs for pur-
poses of withholding taxes on their
income from sources within the Philip-
pines. The withholding agent shall ap-
ply for the TIN in behalf of the NRA-
NETB or NRFC prior to or at the time
of the filing of their monthly Withhold-
ing Tax Return as applicant under EO
98, Series of 1998.

Branches of identified Large Taxpayer
shall be registered at the Large Tax-
payers Service (LTS) where the Head
Office (HO) is registered. All incorpo-
rators of corporations/associations
(stock and non-stock), partners of
partnerships and members of cooper-
atives must have TINs.

While the application and issuance of
TIN is generally made through the
concerned BIR district office, the
same, upon certain circumstances
provided for by existing rules and reg-
ulations, may be obtained either
through the e-REG facility in the BIR
website, or through the Security and
Exchange Commission or through
other facilities/agencies as may be
made available in the future.

Applicants whose TINs have been se-
cured through the e-REG facility shall
complete their registration with the
BIR district office (e.g. persons to en-
gage in business/practice of profes-
sion), but shall no longer be required
to fill out the forms for Application for
Registration. Instead, a printout of
the System Confirmation Page and
the filled out on-line BIR Form 1901,
which is the proof of e-TIN registra-
tion, shall be submitted to the con-
cerned BIR district office, together
with the prescribed documentary re-
quirements.

In the case of corporations/
partnerships (including GOCCs),
which upon registration with the SEC
has already been assigned with a
TIN, the Application for Registra-
tion (BIR Form 1903) shall be com-
pleted and submitted to the BIR dis-
trict office which has jurisdiction over
its principal place of business. The
articles of incorporation, together with
the SEC Registration Certificate
where the TIN is indicated, as well as
proof of authority given to its repre-
sentative must be submitted to the
concerned BIR district office during
the completion of registration of its
business.

The submission of a Mayors Permit
prior to registration is mandatory. Pro-
vided, however, that if it is still in pro-
cess with the concerned Local Gov-
ernment Unit (LGU), a duly stamped
Received application for Mayors
Permit will temporarily suffice to quali-
fy him/ her/ it for registration, provid-
ed, further that a duly approved per-
mit shall be submitted within 30 calen-
dar days from date of registration.
Failure to submit the same shall sub-
ject the taxpayer to Tax Compliance
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Verification Drive/ocular inspection to
be conducted by the BIR district of-
fice.

Consequently, if upon validation it can
be determined that the business is
non-existent and fails to file regularly
the tax returns/declarations for his/
her/its registered tax types, the BIR
district office shall observe the proce-
dures on tagging of the taxpayers
status as Inactive.
Business taxpayers and those re-
quired to issue receipts, shall submit
the following requirements to com-
plete their registration:
a. Application for Authority to Print
(ATP) Receipts/Invoices;
b. Registration of Manual Books of
Accounts; or
c. Application for Permit to use Com-
puterized Accounting System (CAS)
or components thereof, if applicable;
d. Application for Permit to use Loose
Leaf Accounting Records, if applica-
ble;
e. Application for Permit to use Cash
Register Machine (CRM)/Point of
Sales (POS) Machines, and the like, if
applicable;
f. Permit to Operate for taxpayers en-
gaged in activities/transactions involv-
ing products subject to excise taxes.

As a general rule, it shall be mandato-
ry for the BIR district office to process
and issue simultaneously the Certifi-
cate of Registration (COR), ATP and
register the books of accounts of busi-
ness taxpayers immediately after reg-
istration and upon complete submis-
sion of the requirements within the
period prescribed under the existing
process provided by the BIR Citizens
Charter. The BIR district office must
ensure that taxpayers will be issued
their registration certificates/permits
(COR, ATP, Books of Accounts) upon
commencement of their business.

Issuance of TIN Card for the first time
shall be free of charge subject to the
provisions of Section 15 of the Regu-
lations. The same must be processed
and released to the applicant within
the same day upon submission to the
BIR district office of complete docu-
mentary requirements after the cut-off
period of 1:00 p.m. TIN Cards shall be
automatically issued to registered tax-
payers except those TINs issued un-
der EO 98, series of 1998/ONETT
wherein issuance of the TIN card is
optional and only upon request to the
BIR district office where the taxpayer
is registered.

For eREG applicants who are em-
ployees or those registered under EO
98 whose TIN are generated by Em-
ployers/Authorized Users, the
System Confirmation Page and filled
out online BIR Form 1902/BIR Form
1904T shall be presented to the con-
cerned BIR district office for the issu-
ance of the TIN card. The concerned
BIR district office shall only issue the
TIN card upon submission of the doc-
uments prescribed in Annex "A" of the
Regulations.

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The cost of processing of the initial
TIN Card shall not be charged and
collected from the applicant. Subse-
quent requests for the issuance of
TIN Card due to loss or damage shall
be charged with a fee amounting to
P100.00, subject to change upon
evaluation and approval of the Com-
missioner of Internal Revenue (CIR),
to cover cost of reprinting. Applica-
tions for TIN Card of registered tax-
payers can be made at any computer-
ized BIR district office regardless of
registered address of applicant.
Individuals engaged in business or
practice of profession and juridical en-
tities, unless otherwise exempted,
shall:
a. Pay Annual Registration Fee
(ARF), if applicable;
b. Secure COR;
c. Proceed to Secondary Registration;
d. Get Ask for Receipt notice, if ap-
plicable; and
e. Attend the taxpayers initial briefing
to be conducted by the BIR district
office for new registrants in order to
apprise them of their rights and du-
ties/responsibilities. In lieu of the
briefing, the BIR district office may
distribute information materials on
registration to its new applicants in
CD format to be developed by the
Taxpayer Assistance Service.

Every person subject to any internal
revenue tax to be filed/paid periodical-
ly shall complete its registration with
the BIR as follows:
a. For self-employed individuals, es-
tates and trusts, corporations and
their branches, if any on or before
the commencement of business
b. For corporations (Taxable or Non-
taxable)/ONETT before payment of
any tax due
c. For partnerships, associations, co-
operatives, Government Agencies
and Instrumentalities (GAIs) before
or upon filing of any applicable tax re-
turn, statement or declaration as re-
quired by the Code, as amended
d. For employees or individuals who
are registering with the BIR for the
first time by reason of employment
within 10 days from date of employ-
ment
e. For individuals required to secure
TIN for their transactions with govern-
ment agencies (applications under
EO 98, series of 1998) they shall
apply for their TIN from any BIR dis-
trict office (thru the eREG System) at
any time before they complete their
transaction with the government
agency

The COR shall only be issued to indi-
viduals engaged in business or prac-
tice of profession and to juridical per-
sons (whether taxable or exempt) by
the BIR district office concerned (i.e.,
BIR district office of HO/Branch/
Facility) upon compliance with the re-
quirements for registration. Issuance
of COR, whether upon registration or
upon update of taxpayers infor-
mation, is not subject to payment of
Certification Fee unless the taxpayer
requested for a certified copy of said
COR, in which case, the same shall
be subject to the payment of Certifica-
tion Fee.
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Employees, ONETT taxpayers, and/or
persons who have secured a TIN un-
der EO 98, series of 1998 with the
BIR shall not be issued a COR. On
the other hand, each HO and/or
branch shall be issued with a COR
within the period/time prescribed un-
der the existing BIR Citizens Char-
ter. Persons issued with COR shall
post or exhibit his/its original COR
and duly validated ARF Return at his/
its principal place of business and at
each branch and/or facility in a way
that is clearly and easily visible to the
public.

An ARF in the amount of P 500.00 for
every HO and/or branch shall be paid
upon registration and every year
thereafter on or before January 31.
However, the following shall be ex-
empt from the imposition of ARF:
a. Cooperatives duly registered with
the Cooperative Development Author-
ity;
b. Individual residents earning purely
compensation income
c. OCWs/OFWs;
d. Marginal Income Earners;
e. GAIs, in the discharge of their gov-
ernmental functions;
f. LGUs, in the discharge of their gov-
ernmental functions;
g. Tax exempt corporations such as
those enumerated under Section 30
of the Code, as amended, in pursu-
ance of tax-exempt activities;
h. Non-stock/non-profit organizations
not engaged in business;
i. Persons subject to tax under one-
time transactions;
j. Persons registered under EO 98,
series of 1998; and
k. Facility/ies where no sales transac-
tions occur.

Any profit-oriented activity pursued by
GAIs, LGUs and/or tax-exempt entity,
which partakes the nature of an activi-
ty similar to those undertaken by
those engaged in business shall be
treated as an activity in pursuance of
a business for which the payment of
ARF must be imposed. The ARF shall
likewise be paid in cases where parts
of the activities or undertakings con-
ducted in a facility of the business in-
volve sales transactions regardless of
the frequency of the occurrence
thereof.
The ARF shall be paid, in full amount,
to an Authorized Agent Bank (AAB)
located within the BIR district office or
to the Revenue Collection Officer
(RCO) or duly authorized Treasurer of
the City or Municipality where each
place of business or branch is regis-
tered, or thru the BIR-accredited pay-
ment facilities such as Electronic Fil-
ing and Payment System (EFPS) and
G-Cash.

Payment of ARF shall be made thru
EFPS for taxpayers mandated to use
EFPS such as Large Taxpayer, Top
20,000 Corporations, Top 5,000 Indi-
viduals, etc. for their respective HO
and Branches. Registration occurring
during the interim period of the initial
year shall be imposed with the same
full amount of P 500.00 as ARF.
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When any individual who has paid the
ARF dies, and the same business is
continued by the person or persons
interested in his estate, those continu-
ing the business should register as a
separate entity reflecting in said regis-
tration that it is pursuing the business
enterprise as heirs of the estate of the
decedent. Accordingly, the person or
persons interested in the estate
should, within 30 days from the death
of the decedent, submit to the con-
cerned BIR district office inventories
of goods or stocks at the time of
death of the registered individual up-
on registration and the ARF should be
paid. This requirement shall also be
applicable in the case of transfer of
ownership or change of name of the
business establishment.

Every person, who is required to reg-
ister with the BIR under Section 4 of
the Regulations, shall register each
type of internal revenue tax for which
he/it is obligated to file a return or pay
taxes due thereon. Such person shall
update the BIR for any changes in
his/its registration information.
Generally, registration of tax types by
a business entity consists of but not
limited to the following internal reve-
nue taxes/fees:
a. Income tax;
b. Value-Added Tax (VAT) and/or
Percentage Tax;
c. Withholding tax on compensation;
d. Creditable Withholding Tax at
source on certain income payments;
e. Final Withholding Tax on certain
income payments;
f. Documentary Stamp Tax;
g. Excise tax; and
h. Annual Registration Fee.

The nature of the business to which
the taxpayer belongs shall be taken
into consideration in determining the
type of taxes that must be registered.

In order to avoid the generation of in-
valid stop-filer cases in the BIRs da-
tabase, only those tax types, which
the taxpayer is expected to regularly/
periodically file the return and/or pay
the tax shall be registered. In case a
taxpayer fails to update his tax types
prior to filing/payment of a tax return,
the duly authorized BIR personnel
must register the corresponding tax
type for the Tax Return to be filed/
paid except for VAT and/or Percent-
age Taxes, which must be applied for
by the taxpayer. The BIR personnel
initiating the update in behalf of the
taxpayer must inform him of such up-
date, in writing, to give due notice on
his obligation to subsequently file the
return on a regular basis on or before
the prescribed deadline for filing.
The registration of Income Tax as a
tax type does not automatically carry
with it the registration of VAT and/or
Percentage Tax as a covered/
registered tax type. For marginal in-
come earners, the activities of such
individuals are considered principally
for subsistence or livelihood. Moreo-
ver, they are not required to pay any
ARF although they are required to
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register as taxpayers for being poten-
tial Income and Withholding Tax filers.
For purposes of registration, they will
be registered for the tax type Income
Tax and Form Type 1701. Notwith-
standing their exemption from busi-
ness taxes and ARF, they are liable to
pay Income Taxes similar to any other
individual engaged in business or
practice of profession, after applying
the allowable deductions against their
Gross Income/Sales/Receipts and
personal/additional exemptions grant-
ed under the Tax Code.
For those enjoying Income Tax holi-
days, or exemption from other taxes
for a limited time, as granted pursuant
to special laws, the type of taxes the
taxpayer is exempt from paying on
the account thereof, the effectivity and
expiry date shall be indicated. Howev-
er, upon expiration thereof, it shall be
the duty of the taxpayer to update his/
its registration and/or the BIR district
office must be duly informed in writ-
ing.
The rules in determining the proper
tax type of a taxpayer (i.e., whether
VAT or other Percentage Taxes) are
specified in the Regulations.
In case a registered person transfers
his registered address to a new loca-
tion, it shall be his duty to inform the
BIR district office where he is regis-
tered of such fact by filing the pre-
scribed BIR Form specifying therein
the complete address where he in-
tends to transfer. The guidelines rela-
tive to transfer of registration of non-
business individuals, local employees
and taxpayers engaged in business or
practice of profession (individual/non-
individual) are specified in the Regu-
lations.
The new BIR district office of the
transferred taxpayer shall issue the
COR immediately after the transfer of
the taxpayers registration by the old
BIR district office. The COR, Sales
Invoice/Official Receipt (SI/OR) used
in the old business location can still
be used in the new business location
without penalty, until a new COR and
ATP is issued by the new BIR district
office; provided that the taxpayer can
show a copy of duly received update
form filed with the old BIR district of-
fice; provided further that the taxpayer
shall stamp the new address on the
old SI/OR when the same is to be is-
sued in the new business address. In
cases all the SI/OR are consumed
prior to the online transfer of its rec-
ords in the BIRs ITS database, the
taxpayer shall still apply with the old
BIR district office for an ATP for the
new sets of receipts/invoices. The fil-
ing of tax returns and payment of tax-
es to the new BIR district office shall
commence following the issuance of
the new COR. The new BIR district
office shall be responsible for notify-
ing the taxpayer concerned that the
transfer of registration has already
been completed.

Any person registered in accordance
with Section 4(2) of the Regulations
shall, whenever applicable, update his
registration information with the BIR
district office where he is registered
using BIR Form/s prescribed by the
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BIR. The instances when a taxpayer
must update his registration infor-
mation include (but are not limited to)
the following:
a. A change in the nature of the busi-
ness from sale of taxable goods and/
or services to being VAT-exempt;
b. A person whose transactions are
exempt from VAT but voluntarily reg-
istered under the VAT system, and
after the lapse of 3 years after his reg-
istration applies for cancellation of his
VAT registration. However, the op-
tional registration as a VAT taxpayer
of a franchise grantee of radio and/or
television broadcasting whose gross
receipts for the preceding year did not
exceed P 10,000,000.00 shall be ir-
revocable;
c. A VAT-registered person whose
gross sales or receipts for 3 consecu-
tive years did not exceed the amount
of P 1,919,500.00; Provided, That
every 3 years thereafter, the amount
therein stated shall be adjusted to its
present value using the Consumer
Price Index, as published by the Na-
tional Statistics Office (NSO); Provid-
ed further, that such adjustment shall
be published through Revenue Regu-
lations to be issued not later than
March 31 of each year. Upon updat-
ing his registration, the taxpayer shall
become liable to the Percentage Tax
imposed under Section 116 of the
Code, as amended. A short period
return for the remaining period that he
was VAT-registered shall be filed
within 25 days from the date of can-
cellation of his VAT registration as a
tax type and at the same time register
for Percentage Tax as his new tax
type; and
d. Any other changes/updates in reg-
istration information previously sup-
plied, including cancellation or change
in any tax types.

The cancellation of business registra-
tion of an individual shall not automat-
ically cancel his TIN. The TIN shall
remain active subject to subsequent
updates on his registration. In this
case, the BIR district office shall end
date the particular registered form/tax
type of such taxpayer in the ITS data-
base upon complete submission of
the requirements for cancellation of
business registration. If subsequently,
such taxpayer engages in a taxable
activity (e.g. employment or establish-
ment of a new business), the con-
cerned BIR district office shall make
the necessary updates on the regis-
tration records of such taxpayer corre-
sponding to his new activity.

In the case of juridical entities, the
BIR district office shall prepare a
monthly list of non-individual taxpay-
ers filing for cancellation of business
registration for submission to the As-
sistant Commissioner Information
Systems Operations Service, through
the Revenue Data Centers (RDC), for
purposes of tagging said taxpayers as
Inactive. Once tagged as Inactive,
such taxpayer shall no longer be in-
cluded in the roster of active taxpay-
ers under the concerned BIR district
office.
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In the case of TIN issued to an estate
of a decedent under ONETT, upon full
payment of the Estate Tax by the
heirs, administrator or executor, the
issued TIN of the estate shall be
tagged as Inactive. The tagging of
said taxpayer as inactive shall be
coursed through the RDC of con-
cerned BIR district office. However, in
case of additional properties discov-
ered after payment of the Estate Tax,
the TIN previously issued for such es-
tate shall be updated to Active sta-
tus in order to facilitate the filing of the
amended Estate Tax Return and shall
be cancelled upon full settlement of
the tax liabilities of the estate.
Registered taxpayers who failed to file
any tax return for 2 consecutive years
or more shall be tagged as Inactive
and an investigation shall be initiated.
As such, upon classification as Inac-
tive, all CRM/POS Permits issued to
them as well as any unused Official
Receipts/Invoices for which a valid
ATP has been previously granted,
shall be deemed cancelled/invalidated
as of date of tagging.
Provided that the Inactive self-
employed individual is not likewise
employed, non-filing of tax return shall
qualify him for tagging as Inactive.
Where such taxpayer is also regis-
tered as an employee, he or she will
not be tagged as Inactive but any un-
used Official Receipts/Invoices, for
which a valid ATP has been previous-
ly granted for his or her business,
shall be deemed cancelled/invalidated
upon end-dating of its registered
business tax types.
The cancellation of registration may
either pertain to cancellation of busi-
ness registration and/or the assigned
TIN. Application for TIN/Registration
cancellation shall take place upon:
a. Death of individual;
b. Full settlement of the tax liabilities
of the estate;
c. Discovery of a taxpayer having
multiple TINs; and
d. Dissolution, merger or consolida-
tion of juridical person.

Any request for certification that may
be requested by a taxpayer from the
BIR district office where he is regis-
tered on matters relating to his regis-
tration shall be charged with a fee in
an amount not exceeding P 100.00, in
addition to the Documentary Stamp
Tax imposed under Section 188 of the
Code, as amended, subject to change
upon approval of the CIR thru a sub-
sequent issuance. The Certification
Fee shall be collected on each set of
documents regardless of the number
of pages of such document.

The following violations related to pri-
mary registration shall be penalized
as follows:
a. Failure to register (those who are
found unregistered during TCVD
subject to the penalties under pre-
vailing revenue issuances

b. Late Registration (those who are
voluntary registering, but beyond the
prescribed period as indicated in the-
se Regulations) compromise penal-
ty of P 1,000.00, in addition to the un-
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BIR ISSUANCES
paid ARF and penalties due thereon
for every year that the business is in
operation. This provision shall not ap-
ply to application for TIN of employ-
ees

c. Late payment of ARF subject to
25% surcharge and 20% interest per
annum and P 200.00 penalty

d. Failure to register a branch or facili-
ty subject to penalty of P 1,000.00
per unregistered branch or facility

e. Acquisition of Multiple TINs aside
from the criminal liability that may be
imposed, P 1,000.00 for every TIN
acquired in excess of one

f. Failure to and/or erroneous supply
of information P 1,000.00 for every
error/omission, but not to exceed P
25,000.00

g. Any violation of the provisions of
these Regulations shall be subject to
penalties provided under Sections
254 and 275, and other pertinent pro-
visions of the Code, as amended.

Portions of the Regulations, which
can be implemented immediately giv-
en the present capabilities of the BIR
Registration System shall strictly be
complied with upon the effectivity of
the Regulations. Nevertheless, for
provisions hereof, which can only be
implemented as the enhancements
are put in place in the registration da-
tabase, transitory procedures shall be
provided in a separate Revenue
Memorandum Order to be issued for
the purpose. Pending the issuance of
transitory procedures, existing rules
and procedures (status quo) shall be
observed in the meantime.
11
JURISPRUDENCE
FIRST DIVISION
G.R. No. 188497 April 25, 2012
COMMISSIONER OF INTERNAL REVE-
NUE, Petitioner,
vs.
PILIPINAS SHELL PETROLEUM CORPORA-
TION, Respondent.

FACTS:

Respondent Pilipinas Shell Petroleum
Corporation is engaged in the business of pro-
cessing, treating and refining petroleum for the
purpose of producing marketable products and
the subsequent sale thereof.

On July 18, 2002, respondent filed with
the Large Taxpayers Audit & Investigation Divi-
sion II of the Bureau of Internal Revenue (BIR) a
formal claim for refund or tax credit in the total
amount of P28,064,925.15, representing excise
taxes it allegedly paid on sales and deliveries of
gas and fuel oils to various international carriers
during the period October to December 2001.
Subsequently, on October 21, 2002, a similar
claim for refund or tax credit was filed by re-
spondent with the BIR covering the period Janu-
ary to March 2002 in the amount
of P41,614,827.99. Again, on July 3, 2003, re-
spondent filed another formal claim for refund or
tax credit in the amount ofP30,652,890.55 cover-
ing deliveries from April to June 2002.

Since no action was taken by the petition-
er on its claims, respondent filed petitions for re-
view before the CTA. In its decision on the con-
solidated cases, the CTAs First Division ruled
that respondent is entitled to the refund of excise
taxes.

Petitioners motion for reconsideration
was denied by the CTA First Division.

Petitioner elevated the case to the CTA
En Banc which upheld the ruling of the First Divi-
sion. The CTA pointed out the specific exemp-
tion mentioned under Section 135 of the National
Internal Revenue Code of 1997 (NIRC) of petro-
leum products sold to international carriers such
as respondents clients.

ISSUES:
1. Whether or not the herein respond-
ent as manufacturer or producer of
petroleum products is exempt from
the payment of excise tax on such
petroleum products it sold to interna-
tional carriers.
2. Whether or not the herein respondent
is entitled to claim tax refund of the
excise taxes it has paid.

HELD:

1. No, the respondent is not exempt. Consid-
ering that the excise taxes attaches to pe-
troleum products "as soon as they are in
existence as such,"there can be no outright
exemption from the payment of excise tax
on petroleum products sold to international
carriers. The sole basis then of respond-
ents claim for refund is the express grant of
excise tax exemption in favor of internation-
al carriers under Sec. 135 (a) for their pur-
chases of locally manufactured petroleum
products. Pursuant to our ruling in Philip-
pine Acetylene, a tax exemption being en-
joyed by the buyer cannot be the basis of a
claim for tax exemption by the manufacturer
or seller of the goods for any tax due to it
as the manufacturer or seller. The excise
tax imposed on petroleum products under
Sec. 148 is the direct liability of the manu-
facturer who cannot thus invoke the excise
tax exemption granted to its buyers who are
international carriers.

2. No. As to whether respondent has the right to
file a claim for refund or tax credit for the ex-
cise taxes it paid for the petroleum products
sold to international carriers, the Solicitor
General contends that (2)Sec. 130 (D) is ex-
plicit on the circumstances under which a
taxpayer may claim for a refund of excise
Volume IV Issue No. 4 A P R I L 2012
12
JURISPRUDENCE
taxes paid on manufactured products,
which express enumeration did not include
those excise taxes paid on petroleum prod-
ucts which were eventually sold to interna-
tional carriers (expression unius est exclu-
sio alterius). Further, the Solicitor General
asserts that contrary to the conclusion
made by the CTA, the principles laid down
by this Court in Maceda v. Macaraig, Jr.
and Philippine Acetylene Co. v. Commis-
sioner of Internal Revenue are applicable to
this case. Respondent must shoulder the
excise taxes it previously paid on petroleum
products which it later sold to international
carriers because it cannot pass on the tax
burden to the said international carriers
which have been granted exemption under
Sec. 135 (a) of the NIRC. Considering that
respondent failed to prove an express grant
of a right to a tax refund, such claim cannot
be implied; hence, it must be denied.

Under Chapter II "Exemption or Condi-
tional Tax-Free Removal of Certain Goods"
of Title VI, Sections 133, 137, 138, 139 and
140 cover conditional tax-free removal of
specified goods or articles, whereas Sec-
tions 134 and 135 provide for tax exemp-
tions. While the exemption found in Sec. 134
makes reference to the nature and quality of
the goods manufactured (domestic dena-
tured alcohol) without regard to the tax sta-
tus of the buyer of the said goods, Sec. 135
deals with the tax treatment of a specified
article (petroleum products) in relation to its
buyer or consumer. Respondents failure to
make this important distinction apparently
led it to mistakenly assume that the tax ex-
emption under Sec. 135 (a) "attaches to the
goods themselves" such that the excise tax
should not have been paid in the first place.



THIRD DIVISION
G.R. No. 185829 April 25, 2012
ARMANDO ALILING, Petitioner,
vs.
JOSE B. FELICIANO, MANUEL F. SAN
MATEO III, JOSEPH R. LARIOSA, and WIDE
WIDE WORLD EXPRESS CORPORA-
TION, Respondents.

FACTS:
Respondent Wide Wide World Express
Corporation (WWWEC) offered to employ pe-
titioner Armando Aliling (Aliling) as "Account
Executive (Seafreight Sales)," with the follow-
ing compensation package: a monthly salary
of PhP 13,000, transportation allowance of
PhP 3,000, clothing allowance of PhP 800,
cost of living allowance of PhP 500, each pay-
able on a per month basis and a 14th month
pay depending on the profitability and availa-
bility of financial resources of the company.
The offer came with a six (6)-month probation
period condition with this express caveat:
"Performance during [sic] probationary period
shall be made as basis for confirmation to
Regular or Permanent Status."

Aliling and WWWEC inked an Employ-
ment Contract
7
under the following terms,
among others:
Conversion to regular status shall be de-
termined on the basis of work perfor-
mance; and
Employment services may, at any time,
be terminated for just cause or in accord-
ance with the standards defined at the
time of engagement.

Training then started. However, in-
stead of a Seafreight Sale assignment,
WWWEC asked Aliling to handle Ground Ex-
press (GX), a new company product
launched on June 18, 2004 involving domes-
tic cargo forwarding service for Luzon. Mar-
keting this product and finding daily contracts
for it formed the core of Alilings new assign-
ment.

Barely a month after, Manuel F. San
Mateo III (San Mateo), WWWEC Sales and
Marketing Director, emailed Aliling
9
to ex-
press dissatisfaction with the latters perfor-
mance.
Volume IV Issue No. 4 A P R I L 2012
13
JURISPRUDENCE

October 4, 2004, Aliling filed a Com-
plaint
17
for illegal dismissal due to forced res-
ignation, nonpayment of salaries as well as
damages with the NLRC against WWWEC.

Refuting Alilings basic posture,
WWWEC stated in its Position Paper dated
November 22, 2004 that, in addition to the
letter-offer and employment contract adverted
to, WWWEC and Aliling have signed a letter
of appointment on June 11, 2004 containing
this provision: Failure to meet the job re-
quirements during the probation stage means
that your services may be terminated without
prior notice and without recourse to sepa-
ration pay.

ISSUES:

1. Whether or not the petitioner is a regular
employee.
2. Whether or not petitioner was legally dis-
missed.
3. Whether or not petitioner is entitled to
payment of backwages and separation
pay.

HELD:
1. Yes. The CA ruled that petitioner was a
regular employee from the outset inas-
much as he was not informed of the
standards by which his probationary em-
ployment would be measured.

Petitioner was regularized from
the time of the execution of the em-
ployment contract on June 11, 2004,
although respondent company had ar-
bitrarily shortened his tenure. As point-
ed out, respondent company did not
make known the reasonable standards
under which he will qualify as a regular
employee at the time of his engage-
ment. Hence, he was deemed to have
been hired from day one as a regular
employee. To note, the June 2, 2004
letter-offer itself states that the regular-
ization standards or the performance
norms to be used are still to be agreed
upon by Aliling and his supervisor.
WWWEC has failed to prove that an
agreement as regards thereto has
been reached. Clearly then, there
were actually no performance stand-
ards to speak of. And lest it be over-
looked, Aliling was assigned to GX
trucking sales, an activity entirely dif-
ferent to the Seafreight Sales he was
originally hired and trained for. Thus,
at the time of his engagement, the
standards relative to his assignment
with GX sales could not have plausibly
been communicated to him as he was
under Seafreight Sales.

Based on the facts estab-
lished in this case in light of extant
jurisprudence, the CAs holding as to
the kind of employment petitioner
enjoyed is correct.

2. Yes, the Petitioner was illegally
dismissed.
To justify fully the dismissal of
an employee, the employer must, as
a rule, prove that the dismissal was
for a just cause and that the employ-
ee was afforded due process prior to
dismissal. As a complementary prin-
ciple, the employer has the onus of
proving with clear, accurate, con-
sistent, and convincing evidence the
validity of the dismissal.

WWWEC had failed to dis-
charge its twin burden in the instant
case.

First off, the attendant circumstances
in the instant case aptly show that the issue
of petitioners alleged failure to achieve his
quota, as a ground for terminating employ-
ment, strikes the Court as a mere after-
thought on the part of WWWEC. Consider:
Lariosas letter of September 25, 2004 al-
ready betrayed managements intention to
dismiss the petitioner for alleged unauthor-
Volume IV Issue No. 4 A P R I L 2012

14
JURISPRUDENCE
ized absences. Aliling was in fact made to
explain and he did so satisfactorily. But,
look and behold, WWWEC nonetheless pro-
ceeded with its plan to dismiss the petitioner
for non-satisfactory performance, although
the corresponding termination letter dated
October 6, 2004 did not even specifically
state Alilings "non-satisfactory perfor-
mance," or that Alilings termination was by
reason of his failure to achieve his set quo-
ta.

At any event, assuming for argument
that the petitioner indeed failed to achieve
his sales quota, his termination from em-
ployment on that ground would still be un-
justified.

3. Yes. As earlier explained, Aliling cannot
be rightfully considered as a mere proba-
tionary employee. Accordingly, the proba-
tionary period set in the contract of employ-
ment dated June 11, 2004 was of no mo-
ment. In net effect, as of that date June 11,
2004, Aliling became part of the WWWEC
organization as a regular employee of the
company without a fixed term of employ-
ment. Thus, he is entitled to backwages
reckoned from the time he was illegally dis-
missed on October 6, 2004, with a PhP
17,300.00 monthly salary, until the finality of
this Decision.


Article 279 of the Labor Code, as amended
by Section 34 of Republic Act 6715 in-
structs:




Art. 279. Security of Tenure. - In cases of
regular employment, the employer shall not
terminate the services of an employee ex-
cept for a just cause or when authorized by
this Title. An employee who is unjustly dis-
missed from work shall be entitled to rein-
statement without loss of seniority rights and
other privileges and to his full backwages,
inclusive of allowances, and to his other
benefits or their monetary equivalent com-
puted from the time his compensation was
withheld from him up to the time of his actual
reinstatement.

Additionally, Aliling is entitled to separation
pay in lieu of reinstatement on the ground of
strained relationship.


G.R. No. 172538 April 25, 2012
ISABELO ESPERIDA, LORENZO HIPOLITO,
and ROMEO DE BELEN, Petitioners,
vs.
FRANCO K. JURADO, JR., Respondent


FACTS:
On February 5, 2001, petitioners Isa-
beloEsperida, Lorenzo Hipolito, and Romeo
de Belen filed a Complaint for illegal dismis-
sal against respondent Franco K. Jurado, Jr.
before the Labor Arbiter.

On March 14, 2002, the Labor Arbiter
rendered a Decision
3
in favor of petitioners,
declaring that they have been illegally dis-
missed and awarding them their correspond-
ing backwages and separation pay.

Respondent sought recourse before
the Court of Appeals (CA) docketed as CA-
G.R. SP No. 81118. The CA rendered a De-
cision dismissing the petition and affirming
the assailed Resolution of the NLRC. Re-
spondent then filed a motion for reconsider-
ation of the decision, which was eventually
denied in the Resolution.

However, during the pendency of
the motion for reconsideration, or on July
21, 2005, respondent filed before the CA a
Petition to Declare Petitioners in Contempt
of Court against the petitioners. In the said
petition, respondent sought to declare
herein petitioners guilty of indirect con-
tempt of court on the basis of their alleged
acts of dishonesty, fraud, and falsification
Volume IV Issue No. 4 A P R I L 2012
15
JURISPRUDENCE
of documents to mislead the CA to rule in
their favour. Finding the petition to be suffi-
cient in form and substance, the CA issued
a Resolution ordering herein petitioners to
file their Answer within 15 days from notice,
showing cause why they should not be ad-
judged guilty of indirect contempt of court.

On February 8, 2006, counsel for peti-
tioners filed his entry of appearance, together
with a motion for extension of time, seeking
that petitioners be granted 15 days from Febru-
ary 3, 2006, or up to February 18, 2006, within
which to submit their Answer to the petition.
This action of the petitioners was denied by the
court.

The case was then submitted for deci-
sion.On February 21, 2006, the petitioners filed
a Second Motion for Extension alleging that the
Answer to the petition is due on February 18,
2006, but due to counsels work load, they are
praying that they be allowed to submit their An-
swer until February 28, 2006.

On March 20, 2006, petitioners counsel
also filed an Omnibus Motion (For Reconsider-
ation of the March 02, 2006 Resolution; and
For Admission of Respondents An-
swer), reasoning that the late filing of the mo-
tion for extension was because counsel was so
tied up with the preparations of equally im-
portant paper works and pleadings for the oth-
er cases which he is also handling. Counsel
explained that he failed to give instructions to
his liaison officer to mail the motion on the
same day. Also, personal service was not pos-
sible due to the considerable distance between
the parties respective offices

The CA denied both Motions.

ISSUE:
Whether or not the Honorable Court of
Appeals erred in considering the case submit-
ted for decision without giving the petitioners
their inherent and inalienable right to due pro-
cess of law.

HELD:
Yes. Sections 3 and 4, Rule 71 of the
Rules of Court, specifically outlines the proce-
dural requisites before the accused may be
punished for indirect contempt. First, there
must be an order requiring the respondent to
show cause why he should not be cited for
contempt. Second, the respondent must be
given the opportunity to comment on the
charge against him. Third, there must be a
hearing and the court must investigate the
charge and consider respondent's answer.
Finally, only if found guilty will respondent be
punished accordingly. The law requires that
there be a charge in writing, duly filed in court,
and an opportunity given to the person
charged to be heard by himself or counsel.
What is most essential is that the alleged con-
temner be granted an opportunity to meet the
charges against him and to be heard in his
defenses. This is due process, which must be
observed at all times.

In the case at bar, petitioners were in-
deed given ample opportunity to file their An-
swer. In denying petitioners Omnibus Motion
and Second Motion for Extension, the CA rati-
ocinated that the justifications advanced by
petitioners do not warrant the grant of liberality
in the application of the Rules and their omis-
sions are unpardonable and should not be tol-
erated.

It must be stressed, however, that indi-
rect contempt proceedings partake of the na-
ture of a criminal prosecution; hence, strict
rules that govern criminal prosecutions also
apply to a prosecution for criminal contempt;
the accused is to be afforded many of the pro-
tections provided in regular criminal cases;
and proceedings under statutes governing
them are to be strictly construed. Moreover, in
contempt proceedings, if the answer to the
contempt charge is satisfactory, the contempt
proceedings end. In the present recourse, pe-
titioners plead for the liberal application of the
Rules. Admittedly, in their Omnibus Motion
before the appellate court, petitioners counsel
acknowledged his shortcomings in complying
Volume IV Issue No. 4 A P R I L 2012
16
JURISPRUDENCE
with the resolution of the court and took full
responsibility for such oversight and omission.
Petitioners counsel also reasoned that the
lack of personal service of the motion for ex-
tension was due to the considerable distance
between the parties respective offices and
that the failure of filing the motion for exten-
sion on time was due to the fact that counsels
liaison officer failed to follow his instructions.
Indeed, counsels liaison officer attested such
facts in his Explanation/Affidavit, which was
attached to the Omnibus Motion. More im-
portantly, also attached to the Omnibus Mo-
tion was petitioners Answer to the petition to
cite them in contempt.


G.R. No. 171101 April 24, 2012
HACIENDA LUISITA, INCORPO-
RATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION
and RIZAL COMMERCIAL BANKING CORPO-
RATION, Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUN-
CIL; SECRETARY NASSER PANGANDAMAN
OF THE DEPARTMENT OF AGRARIAN RE-
FORM; ALYANSA NG MGA MANGGAGA-
WANG BUKID NG HACIENDA LUISITA, RENE
GALANG, NOEL MALLARI, and JULIO SUNI-
GA
1
and his SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and WINDSOR AN-
DAYA, Respondents.
EN BANC

FACTS:
Before the Court are the Motion to Clari-
fy and Reconsider Resolution of November 22,
2011 dated December 16, 2011 filed by peti-
tioner Hacienda Luisita, Inc. (HLI) and the Mo-
tion for Reconsideration/Clarification dated De-
cember 9, 2011 filed by private respondents
Noel Mallari, Julio Suniga, Supervisory Group
of Hacienda Luisita, Inc. and Windsor Andaya
(collectively referred to as "Mallari, et al.").

In Our July 5, 2011 Decision in the
above-captioned case, this Court denied the
petition for review filed by HLI and affirmed the
assailed Presidential Agrarian Reform Council
(PARC) Resolution No. 2005-32-01 dated De-
cember 22, 2005 and PARC Resolution No.
2006-34-01 dated May 3, 2006 with the modifi-
cation that the original 6,296 qualified farm-
worker-beneficiaries of Hacienda Luisita
(FWBs) shall have the option to remain as
stockholders of HLI.

In Our July 5, 2011 Decision, We stated
that "HLI shall be paid just compensation for
the remaining agricultural land that will be
transferred to DAR for land distribution to the
FWBs." We also ruled that the date of the
"taking" is November 21, 1989, when PARC
approved HLIs SDP per PARC Resolution No.
89-12-2.

Upon separate motions of the parties for
reconsideration, the Court, by Resolution of
November 22, 2011, recalled and set aside the
option thus granted to the original FWBs to re-
main as stockholders of HLI, while maintaining
that all the benefits and homelots received by
all the FWBs shall be respected with no obliga-
tion to refund or return them.
The allegations of HLI:

1. In its Motion for Clarification and Partial
Reconsideration, HLI disagrees with the
foregoing ruling (July 5, 2011) and con-
tends that the "taking" should be reck-
oned from finality of the Decision of this
Court, or at the very least, the reckoning
period may be tacked to January 2,
2006, the date when the Notice of Cov-
erage was issued by the DAR pursuant
to PARC Resolution No. 2006-34-01 re-
calling/revoking the approval of the
SDP.

2. HLI contends that since the SDP is a modality
which the agrarian reform law gives the land-
owner as alternative to compulsory coverage,
then the FWBs cannot be considered as
owners and possessors of the agricultural
lands of Hacienda Luisita at the time the SDP
was approved by PARC. It further claims that
the approval of the SDP is not akin to a No-
Volume IV Issue No. 4 A P R I L 2012
17
JURISPRUDENCE
tice of Coverage in compulsory coverage
situations because stock distribution option
and compulsory acquisition are two (2) dif-
ferent modalities with independent and sep-
arate rules and mechanisms. Concomitant-
ly, HLI maintains that the Notice of Cover-
age issued on January 2, 2006 may, at the
very least, be considered as the date of
"taking" as this was the only time that the
agricultural lands of Hacienda Luisita were
placed under compulsory acquisition in view
of its failure to perform certain obligations
under the SDP.

The allegation of Mallari, et al:
1. Mallari, et al. are of a similar view. They
contend that Tarlac Development Corpo-
ration (Tadeco), having as it were major-
ity control over HLI, was never deprived
of the use and benefit of the agricultural
lands of Hacienda Luisita. Upon this
premise, Mallari, et al. claim the "date of
taking" could not be at the time of the
approval of the SDP. For their part, Mal-
lari, et al. argue that the date of "taking"
for valuation purposes is a factual issue
best left to the determination of the trial
courts.


The allegations of Alyansa ng mga Manggaga-
wa ng Bukid sa Hacienda Luisita (AMBALA):
1. Alleges that HLI should not be paid
just compensation altogether. It argues
that when the Court of Appeals (CA)
dismissed the case the government of
then President Ferdinand E. Marcos
initially instituted and won against Ta-
deco, the CA allegedly imposed as a
condition for its dismissal of the action
that should the stock distribution pro-
gram fail, the lands should be distribut-
ed to the FWBs, with Tadeco receiving
by way of compensation only the
amount of PhP 3,988,000.

2. AMBALA further contends that if HLI
or Tadeco is, at all, entitled to just
compensation, the "taking" should be
reckoned as of November 21, 1989,
the date when the SDP was approved,
and the amount of compensation
should be PhP 40,000 per hectare as
this was the same value declared in
1989 by Tadeco to ensure that the
FWBs will not control the majority
stockholdings in HLI. At the other end
of the spectrum, AMBALA alleges that
HLI should no longer be paid just com-
pensation for the agricultural land that
will be distributed to the FWBs, since
the Manila Regional Trial Court (RTC)
already rendered a decision ordering
the Cojuangcos to transfer the control
of Hacienda Luisita to the Ministry of
Agrarian Reform, which will distribute
the land to small farmers after com-
pensating the landowners P3.988 mil-
lion. In the event, however, that this
Court will rule that HLI is indeed enti-
tled to compensation, AMBALA con-
tends that it should be pegged at forty
thousand pesos (PhP 40,000) per hec-
tare, since this was the same value
that Tadeco declared in 1989 to make
sure that the farmers will not own the
majority of its stocks.

ISSUES:
(1) Whether or not the Honora-
ble Court erred in ruling that in deter-
mining the just compensation, the date
of "taking" is November 21, 1989,
when PARC approved HLIS SDP
[STOCK DISPTRIBUTION PLAN] "in
view of the fact that this is the time that
the FWBS were considered to own
and possess the agricultural lands in
Hacienda Luisita.
(2) Whether or not the revocation
of the option on the part of the original
FWBs to remain as stockholders of HLI
was proper.
(3)Whether or not distribution to
the qualified FWBs of the proceeds from
the sale of the converted land and of the
80.51-hectare Subic-Clark-Tarlac Ex-
pressway (SCTEX ) land was proper.
Volume IV Issue No. 4 A P R I L 2012
18
JURISPRUDENCE
(4) Whether or not just compensa-
tion shall be paid to HLI for the homelots
given to the FWBs.

HELD:
1. No. The Court maintain that the date of
"taking" is November 21, 1989, the date
when PARC approved HLIs SDP per
PARC Resolution No. 89-12-2, in view of
the fact that this is the time that the FWBs
were considered to own and possess the
agricultural lands in Hacienda Luisita. To
be precise, these lands became subject of
the agrarian reform coverage through the
stock distribution scheme only upon the
approval of the SDP, that is, November
21, 1989. Thus, such approval is akin to a
notice of coverage ordinarily issued under
compulsory acquisition. Further, any
doubt should be resolved in favor of the
FWBs.

When the agricultural lands of Hac-
ienda Luisita were transferred by Tadeco
to HLI in order to comply with CARP
through the stock distribution option
scheme, sealed with the imprimatur of
PARC under PARC Resolution No. 89-12-
2 dated November 21, 1989, Tadeco was
consequently dispossessed of the afore-
mentioned attributes of ownership. Nota-
bly, Tadeco and HLI are two different enti-
ties with separate and distinct legal per-
sonalities. Ownership by one cannot be
considered as ownership by the other.

Corollarily, it is the official act by
the government, that is, the PARCs
approval of the SDP, which should be
considered as the reckoning point for
the "taking" of the agricultural lands of
Hacienda Luisita. Although the transfer
of ownership over the agricultural lands
was made prior to the SDPs approval,
it is this Courts consistent view that
these lands officially became subject of
the agrarian reform coverage through
the stock distribution scheme only upon
the approval of the SDP.

Further, if We adhere to HLIs
view that the Notice of Coverage is-
sued on January 2, 2006 should, at the
very least, be considered as the date of
"taking" as this was the only time that
the agricultural portion of the hacienda
was placed under compulsory acquisi-
tion in view of HLIs failure to perform
certain obligations under the SDP, this
Court would, in effect, be penalizing the
qualified FWBs twice for acceding to
the adoption of the stock distribution
scheme: first, by depriving the qualified
FWBs of the agricultural lands that they
should have gotten early on were it not
for the adoption of the stock distribution
scheme of which they only became mi-
nority stockholders; and second, by
making them pay higher amortizations
for the agricultural lands that should
have been given to them decades ago
at a much lower cost were it not for the
landowners initiative of adopting the
stock distribution scheme "for free."
By a vote of 8-6, the Court af-
firmed its ruling that the date of "taking"
in determining just compensation is No-
vember 21, 1989 when PARC ap-
proved HLIs stock option plan.
As regards the issue of interest
on just compensation, We also leave
this matter to the DAR and the LBP,
subject to review by the RTC acting as
a SAC.


2. Yes. On the propriety of the revocation
of the option of the FWBs to remain as
HLI stockholders, the Court, by unani-
mous vote, agreed to reiterate its ruling
in its November 22, 2011 Resolution
that the option granted to the FWBs
stays revoked.

Sec. 4, Art. XIII of the 1987 Constitution pro-
vides:

Section 4. The State shall, by law,
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JURISPRUDENCE
undertake an agrarian reform program
founded on the right of farmers and regu-
lar farmworkers who are landless, to own
directly or collectively the lands they
till or, in the case of other farmworkers, to
receive a just share of the fruits thereof.
To this end, the State shall encourage
and undertake the just distribution of all
agricultural lands, subject to such priori-
ties and reasonable retention limits as the
Congress may prescribe, taking into ac-
count ecological, developmental, or equity
considerations, and subject to the pay-
ment of just compensation. In determining
retention limits, the State shall respect the
right of small landowners. The State shall
further provide incentives for voluntary
land-sharing.

Based on the above-quoted provi-
sions, the notion of farmers and regular
farmworkers having the right to own di-
rectly or collectively the lands they till is
abundantly clear.

The wording of the provision is un-
equivocal the farmers and regular
farmworkers have a right TO OWN DI-
RECTLY OR COLLECTIVELY THE
LANDS THEY TILL.

The SDP was approved by PARC
even if the qualified FWBs did not and
will not have majority stockholdings in
HLI, contrary to the obvious policy by
the government on agrarian reform.
Such an adverse situation for the FWBs
will not and should not be permitted to
stand. For this reason, We maintain Our
ruling that the qualified FWBs will no
longer have the option to remain as
stockholders of HLI.

A revisit of HLIs Proposal for
Stock Distribution under CARP and the
Stock Distribution Option Agreement
(SDOA) upon which the proposal was
based reveals that the total assets of
HLI is PhP 590,554,220, while the value
of the 4,915.7466 hectares is PhP
196,630,000. Consequently, the share
of the farmer-beneficiaries in the HLI
capital stock is 33.296% (196,630,000
divided by 590,554.220);
118,391,976.85 HLI shares represent
33.296%. Thus, even if all the holders
of the 118,391,976.85 HLI shares
unanimously vote to remain as HLI
stockholders, which is unlikely, con-
trol will never be placed in the hands
of the farmer-beneficiaries. Control, of
course, means the majority of 50% plus
at least one share of the common
shares and other voting shares. Apply-
ing the formula to the HLI stockholdings,
the number of shares that will constitute
the majority is 295,112,101 shares
(590,554,220 divided by 2 plus one [1]
HLI share). The 118,391,976.85 shares
subject to the SDP approved by PARC
substantially fall short of the
295,112,101 shares needed by the
FWBs to acquire control over HLI.
Hence, control can NEVER be attained
by the FWBs. There is even no assur-
ance that 100% of the 118,391,976.85
shares issued to the FWBs will all be
voted in favor of staying in HLI, taking
into account the previous referendum
among the farmers where said shares
were not voted unanimously in favor of
retaining the SDP. In light of the fore-
going consideration, the option to re-
main in HLI granted to the individual
FWBs will have to be recalled and re-
voked.

3. Yes. It cannot be denied that the advert-
ed 500-hectare converted land and the
SCTEX lot once formed part of what
would have been agrarian-distributable
lands, in fine subject to compulsory
CARP coverage. And, as stated in our
July 5, 2011 Decision, were it not for the
approval of the SDP by PARC, these
large parcels of land would have been
distributed and ownership transferred to
the FWBs, subject to payment of just
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JURISPRUDENCE
compensation, given that, as of 1989,
the subject 4,915 hectares of Hacienda
Luisita were already covered by CARP.
Accordingly, the proceeds realized from
the sale and/or disposition thereof
should accrue for the benefit of the
FWBs, less deductions of the 3% of the
proceeds of said transfers that were
paid to the FWBs, the taxes and ex-
penses relating to the transfer of titles to
the transferees, and the expenditures
incurred by HLI and Centennary Hold-
ings, Inc. for legitimate corporate pur-
poses, as prescribed in our November
22, 2011 Resolution.

4. Yes. In the present recourse, HLI also
harps on the fact that since the home-
lots given to the FWBs do not form part
of the 4,915.75 hectares covered by the
SDP, then the value of these homelots
should, with the revocation of the SDP,
be paid to Tadeco as the landowner.

The Court, by a unanimous vote, re-
solved to maintain its ruling that the
FWBs shall retain ownership of the
homelots given to them with no obliga-
tion to pay for the value of said lots.
However, since the SDP was already
revoked with finality, the Court directs
the government through the DAR to pay
HLI the just compensation for said
homelots in consonance with Sec. 4,
Article XIII of the 1987 Constitution that
the taking of land for use in the agrarian
reform program is "subject to the pay-
ment of just compensation." Just com-
pensation should be paid to HLI instead
of Tadeco in view of the Deed of As-
signment and Conveyance dated March
22, 1989 executed between Tadeco
and HLI, where Tadeco transferred and
conveyed to HLI the titles over the lots
in question. DAR is ordered to compute
the just compensation of the homelots
in accordance with existing laws, rules
and regulations.


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JLs Corner





-Henry Ward Beecher
V o l u m e I V I s s u e N o . 4 A P R I L 2012
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