Case Digest: Nitafan vs. Commissioner of Internal Revenue

DAVID G. NITAFAN, et al. vs. COMMISSIONER OF INTERNAL REVENUE, and THE FINANCIAL OFFICER OF THE SUPREME COURT OF THE PHILIPPINES

G.R. No. 78780 23 July 1987

FACTS:

Petitioners Nitafan, Polo and Savellano are judges presiding over branches in the RTC of the NCJR Manila who seek to prohibit and/or perpetually enjoin respondents from making any deduction of withholding taxes from their salaries. According to them, said tax deductions constitute a diminution of their salaries, contrary to the provision of Section 10, Article VIII of the Constitution.

ISSUE: Whether or not salaries of the members of the Judiciary are subject to income tax.

RULING:

YES. The salaries of the members of the Judiciary is subject to general income tax applicable to all taxpayers. The clear intent of the ConComm was to delete the proposed express grant of exemption from payment of income tax, so as to give substance to equality among the three branches of Government. Though this intent was not clearly set forth in the final text of the Constitution, the Court since then has authorised the deduction of the withholding tax from the salaries of said members.

Case Digest: Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation

COMMISSIONER OF INTERNAL REVENUE vs. MITSUBISHI METAL CORPORATION, et al.

G.R. NO. L-54908 22 January 1990

FACTS:

In 1970, Atlas Consolidated Mining and Development Corporation entered into a Loan and Sales Contract with Mitsubishi Metal Corporation, a Japanese company, for purposes of the projected expansion of the productive capacity of the former’s mines in Toledo, Cebu. Mitsubishi agreed to extend a loan of $20 million for the installation of a new concentrator for copper production. Atlas in turn undertook to sell to Mitsubishi all the copper concentrates produced from said machine for a period of 15 years. Mitsubishi later undertook a loan with Eximbank for the purposes of its obligation under said contract.

In lieu with the 15% tax on the interest payments paid from 1977-1978 by Atlas to Mitsubishi amounting to almost Php2 million, the latter filed a claim for tax credit requesting that said sum be applied against their existing and future tax liabilities. The CIR not having acted on the claim for tax credit, private respondents filed a petition for review with the CTA. The CTA rendered judgment ordering the petitioner to credit Atlas the aforesaid amount of tax paid.

ISSUE: Whether or not the interest income from the loans extended to Atlas by Mitsubishi is excludible from gross income taxation pursuant to Section 29 (b) (7) (A) of the tax code and, therefore, exempt from withholding tax. 

RULING:

It is too settled a rule in this jurisdiction, as to dispense with the need for citations, that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which onus petitioners have failed to discharge. Significantly, private respondents are not even among the entities which, under Section 29 (b) (7) (A) of the tax code, are entitled to exemption and which should indispensably be the party in interest in this case.

Definitely, the taxability of a party cannot be blandly glossed over on the basis of a supposed "broad, pragmatic analysis" alone without substantial supportive evidence, lest governmental operations suffer due to diminution of much needed funds. Nor can we close this discussion without taking cognizance of petitioner's warning, of pervasive relevance at this time, that while international comity is invoked in this case on the nebulous representation that the funds involved in the loans are those of a foreign government, scrupulous care must be taken to avoid opening the floodgates to the violation of our tax laws. Otherwise, the mere expedient of having a Philippine corporation enter into a contract for loans or other domestic securities with private foreign entities, which in turn will negotiate independently with their governments, could be availed of to take advantage of the tax exemption law under discussion.

Case Digest: COLEGIO DE SAN JUAN DE LETRAN vs. ASSOCIATION OF EMPLOYEES AND FACULTIES OF LETRAN and ELEONOR AMBAS

G.R. No. 141471.              September 18, 2000

Facts:

During the renegotiation of the respondent unions Collective Bargaining Agreement with the petitioner, Eleonor Ambas emerged as the newly elected President of the union. Ambas wanted to continue the renegotiation of the CBA but petitioner, through Fr. Edwin Lao, claimed that the CBA was already prepared for signing by the parties. However, the union members rejected the said CBA.  Thereafter, petitioner accused the union officers of bargaining in bad faith before the NLRC. The Labor Arbiter decided in favor of the petitioner.  This decision was reversed on appeal with the NLRC.

The parties later agreed to disregard the unsigned CBA and to start negotiation on new five-year CBA. During the pendency of approval of proposals, Ambas was informed that her work schedule was being changed.  Ambas protested and requested management to submit the issue to a grievance machinery under the old CBA. 

After the petitioner’s inaction on the CBA, the union filed a notice to strike.  After meeting with the NCMB to discuss the ground rules for renegotiation, Ambas received a letter dismissing her for alleged insubordination.  The petitioner then ceased negotiations when it received news that another labor organization had filed a petition for certification.

The union finally struck, but the Secretary of Labor and Employment ordered them to return to work and for petitioner to accept them back.  The Secretary of Labor and Employment later rendered judgement that the petitioner had been guilty of unfair labor practice. The Court of Appeals affirmed the findings of the former.

Issue(s):

1. Whether petitioner is guilty of unfair labor practice by refusing to bargain with the union when it unilaterally suspended the ongoing negotiations for a new CBA; and
2. Whether the termination of the union president amounts to an interference of the employees’ right to self-organization.

Held:

The Supreme Court found the petition unmeritorious.

1. The petitioner’s failure to act upon the submitted CBA proposal within the ten-day period exemplified in Article 250 of the Labor Code is a clear violation of the governing procedure of collective bargaining.  As the Court has held in Kiok Loy vs. NLRC, the company’s refusal to make counter-proposal to the union’s proposed CBA is an indication of bad faith.  Moreover, the succeeding events are obvious signs that the petitioner had merely been employing delaying tactics to the passage of the proposed CBA.  Moreover, in order to allow the employer to validly suspend the bargaining process, there must be a valid petition for certification election raising a legitimate representation issue.  Hence, the mere filing of a petition for certification election does not ipso facto justify the suspension of negotiation by the employer.
2. The factual backdrop of the termination of Ambas led the Court to no other conclusion that she was dismissed in order to strip the union of a leader who would fight for the right of her co-workers in the bargaining table.  While the Court recognizes the right of the employer to terminate the services of an employee for a just or authorized cause, nevertheless, the dismissal of employees must be made within the parameters of aw and pursuant to the tenets of equity and fair play.  Even assuming arguendo that Ambas was guilty of insubordination, such disobedience was not a valid ground to terminate her employment.  When the exercise of the management to discipline its employees tends to interfere with the employees’ right to self-organization, it amounts to union-busting and is therefore a prohibited act.

Case Digest: Mylene Carvajal vs. Luzon Development Bank and/or Oscar Ramirez

G.R. No. 186169                01 August 2012

FACTS:

Carvajal was employed as a trainee-teller by Luzon Development Bank (Bank) under a six-month probationary employment contract.  Ramirez is the President and CEO of the Bank.  A month into her employment, she was send a Memorandum directing her to explain in writing why she should not be subjected to disciplinary action for her eight tardiness on November 2003.  A second Memorandum was sent to her on January for her again chronic tardiness on December 2003.  She submitted her written explanations for both events and manifested her acceptance of the consequences of her actions.  She was terminated for three days effective 21 January 2004.  However, on 22 January, her termination was lifted but at the same time, her services were terminated.  In the respondents’ position paper to the LA, they explained that the reasons for her absence are chronic tardiness, absenteeism and failure to perform satisfactorily as a probationary employee.

LA Decision: The petitioner was illegally dismissed because she was not afforded the notice in writing informing her of what the Bank would like to bring out to her for the latter to answer in writing.

NLRC Decision: NLRC affirmed the decision of the LA.

CA Decision: The CA found that the petitioner was not entitled to backwages because she was rightfully dismissed for failure to meet the employment standards.

ISSUE:

Whether the petitioner can be considered a regular employee at the time of her dismissal.

HELD:

No. Carvajal’s appointment letter reads that “Possible extension of this contract will depend on the job requirements of the Bank and your overall performance.  Performance review will be conducted before possible renewal can take effect.”  Therefore, petitioner knew, at the time of her engagement, that she must comply with the standards set forth by respondent and perform satisfactorily in order to attain regular status.  Even the NLRC upheld the petitoner’s probationary status, stating that reinstatement is not synonymous to regularization.

Although probationary employees also enjoy security of tenure, he may still be terminated because of just and authorized causes of termination and the additional ground under Article 281 of the Labor Code, i.e. the probationary employee may also be terminated for failure to qualify as a regular employee in accordance to the reasonable standards set by the employer.  Punctuality is a reasonable standard imposed on every employee, whether in government or private sector.  This, together with absenteeism, underperformance and mistake in clearing a check are infractions that cannot be tantamount to satisfactory standards.

In addition to the abovementioned, it has been previously held in PDI vs. Magtibay, Jr., that the second requirement under Article 281 does not require notice and hearing.  Due process of law for this second ground consists of making the reasonable standards expected of the employee during his probationary period known to him at the time of his engagement.  By the very nature of probationary employment, the employee knows from the very start that he will be under close observation and continuous scrutiny by his supervisors.  If termination is for cause, it may be done at anytime during the probation. 

Case Digest: Sehwani, Incorporated and/or Benita’s Fries, Inc. vs. In-n-out Burger, Inc.

Petitioner’s Claims:

Petitioners alleged that the Respondent lack the legal capacity to sue because it was not doing business in the Philippines and that it has no cause of action because its mark is not registered or used in the Philippines.  Sehwani, Inc. also claimed that as the registered owner of the “IN N OUT” mark, it enjoys the presumption that the same was validly acquired and that it has the exclusive right to use the mark.  Moreover, petitioners argued that other than the bare allegation of fraud in the registration of the mark, respondent failed to show the existence of any grounds of cancellation thereof under Section 151 of the IP Code of the Philippines.  It also alleged that the action is barred by laches.

Respondent’s Claims:

Respondent, In-n-out Burger, Inc.,  alleged that it is the owner of the tradename “IN-N-OUT” and trademarks “IN-N-OUT,” “IN-N-OUT Burger & Arrow Design” and “IN-N-OUT Burger Logo” which are used in its business since 1948 up to the present.  These tradename and trademarks were registered in the United States as well as in other parts of the world.  Petitioner Sehwani allegedly had obtained a trademark registration for the mark “IN N OUT” (with the inside letter O formed like a star) without its authority.

Issue/s:

• Whether or not the Respondent has the legal capacity to sue for the protection of its trademarks albeit it is not doing business in the Philippines
• Whether or not a ground exists for the cancellation of the Petitioners’ registration

Ruling:

•  Yes. Section 160 RA No. 8293 provides for the right of foreign corporations to sue in trademark or service mark enforcement action, provided that it meets the requirements under Section 3 thereof, which are:

a.       Any convention, treaty or agreement relation to intellectual property right or the repression of unfair competition wherein Philippines is also a party; and

b.      An extension therein of reciprocal rights.

Moreoever, Article 6bis of The Paris Convention, which governs the protection of well-known trademarks, is a self-executing provision and does not require legislative enactment to give it effect in the member country.  The essential requirement therein is that the trademark must be well-known in the country where protection is sought.  In this case, Director Beltran-Abelardo found that In-n-out Burger and Arrow Design is an internationally well0known mark as evidenced by its trademark registrations around the world and its comprehensive advertisements therein.

• Yes. Section 151(b) of RA 8293 provides that a petition to cancel a registration of a mark may be filed with the Bureau of Legal Affairs by any person who believes that he is or will be damaged by the registration of a mark at any time, if the registered mark becomes the generic name for the goods or services, or a portion thereof, for which it is registered, or has been abandoned, or its registration was fraudulently or contrary to the provisions of this Act, or if the registered mark is being used by or with the permission of, the registrant so as to misrepresent the source of goods or services on or in connection with which the mark is used.  The evidence showed that not only did the petitioners use the IN-N-OUT Burger trademark for the name of their restaurant, but they also used identical or confusingly similar mark for their hamburger wrappers and French-fries receptacles, thereby effectively misrepresenting the source of the goods and services.