DAY 1 (PM) Commercial and Taxation Laws Flashcards
(20 cards)
1.
Nympha, a famous author, collaborated with Tobias, a novice illustrator,
to create a children’s book. Tobias offered his services for free. Nympha
gave Tobias the manuscript and discussed with him the inspiration for the
characters. Nympha envisioned a story about two best friends who had a
huge fight but later realized the value of forgiveness. Tobias drew the
characters based on Nympha’s specifications and instructions. Nympha
then published the book and claimed sole copyright ownership. Nympha
argued that she is the author not only of the text but also the images in the
book since Tobias exactly adopted her idea. Is Nympha the copyright
owner of the images or drawings in the book? Explain.
2.
In 1984, the Nova Family established the North Nova, Inc. (NNI), a
pharmaceutical company. On August 31, 1984, NNI was issued its
certificate of incorporation with corporate term of 40 years. On August
31, 2024, the corporate term of NNI expired without the board of directors
renewing its corporate existence. However, the Nova Family continued
NNI’s business operations. South Moon, Inc. (SMI), a rival company,
questioned the Nova Family’s action. SMI argued that the Nova Family
cannot continue to operate NNI without reviving its corporate existence.
Is the Nova Family’s continued operations of NNI valid? Explain.
3.
Ernest Bicycle Corporation (EBC) and Max Speed Corporation (MSC)
are the leading manufacturers and sellers of electric bicycles in the
country. EBC and MSC offer their bestselling models at
PHP 25,000.00 per unit. In 2023, Gryffin Pedals, Inc. (GPI) entered the
market and sold electric bicycles with features similar to EBC and MSC’s
bestselling models for only PHP 20,000.00. GPI has no physical stores
and offers its products in digital marketplaces. After a year, GPI had 75%
share of the market leaving EBC and MSC at 15% and 10% shares,
respectively. EBC and MSC filed a complaint before the Philippine
Competition Commission and alleged that GPI is fast monopolizing the
electric bicycles market because of its dominant position. Will the
complaint against GPI for violation of the competition laws prosper?
Explain.
4.
Audrey read the 24-hour rush sale from Easy Shopping, a known digital
marketplace, which offers free shipping plus 50% cash back for purchases
worth at least PHP 10,000.00. Audrey checked out several items and
placed the orders pursuant to the promotion. Easy Shopping accepted the
orders and marked them “pending payment.” However, Audrey’s digital
wallet had insufficient funds and was reloaded only the following day. At
that time, the cashback and free shipping promotions were no longer
available. Audrey then demanded from Easy Shopping to honor their
transaction based on the promotion and presented a screenshot of her
orders as supporting evidence. On the other hand, Easy
Shopping countered that the transaction is unenforceable absent a written
contract and that Audrey must pay the regular price and normal shipping
rate. Is the transaction enforceable on the basis of the screenshot
of Audrey’s orders with Easy Shopping? Explain.
5.
In 2022, Annie, Brenda, Clara, Donna, and Enola formed Nurturing
Family Organization (NFO), a corporation with the principal purpose of
helping single parents. Gregory, a wealthy philanthropist, donated to NFO
a parcel of land through a public document. Clara accepted the donation
in the same public instrument because NFO was not yet registered with
the Securities and Exchange Commission (SEC). In 2023, the SEC issued
a certificate of incorporation in favor of NFO. In 2024, Clara died and her
heirs included the donated land in the settlement of her estate. The heirs
of Clara argued that she owned the real property and not NFO which
lacked legal personality at the time of the donation. Is the donation of
real property in favor NFO valid despite its lack of legal personality?
Explain.
6.
Pierre and Fonzi derived money from the illegal trade of Philippine
wildlife like pangolins, tarsiers, and palm civets. Pierre and Fonzi
collected PHP 2,000,000.00 each month which they delivered to Phoebe,
an art collector. Phoebe used the funds to buy high-value paintings which
she auctioned off in art galleries. The police officers tracked down the
unlawful wildlife trading and arrested Phoebe. The operatives charged
Phoebe with money laundering. At the trial, Phoebe argued that she
should be acquitted of the charge because she did not participate in the
illegal wildlife trading. Is Phoebe criminally liable for money
laundering? Explain.
7.
Nina and Roxanne are shareholders of Essean & Essaiah Corporation
(EEC) engaged in the pet supplies business. In 2023, the Board of
Directors declared surplus profits and distributed dividends to the
shareholders. The Board of Directors likewise released the shareholders
with unpaid subscriptions from their obligations. Accordingly, Nina and
Roxanne no longer settled the unpaid balance of their subscriptions. Upon
inspection of corporate books, however, it was revealed that EEC has been
experiencing insolvency for the last three years. In 2024, the directors and
shareholders dissolved EEC during their annual meeting and divided
corporate properties and assets among themselves. Aggrieved, the
creditors of EEC filed an action against Nina and Roxanne to collect
corporate debts. In their answer, Nina and Roxanne invoked the distinct
personality of EEC from its shareholders. Nina and Roxanne added that
they are not privy to the transactions between EEC and its creditors. May
the creditors of EEC run after Nina and Roxanne to satisfy their
claims? Explain.
8.
Felix, Ivan, and Ruth formed a partnership to operate a coffee shop. Felix
and Ivan provided the capital while Ruth contributed her labor and
industry. Within the coffee shop, Felix opened his own plant kiosk and
Ruth put up her own souvenir shop. Whereas Ivan set up a coffee stall two
blocks away from the coffee shop. May the partners Felix, Ivan, and
Ruth lawfully engage in their separate businesses? Explain.
9.
Dory is a video blogger with 500,000 subscribers. Dory documented her
life in law school and uploaded the videos in social media platforms. Dory
earned PHP 100,000.00 for each video that gets a hundred thousand
views. In one video, Dory shared her difficulties in reading hundreds of
cases and the application of penalties in Criminal Law. Byron, a law
student, uploaded a 10-minute video in social media using a 30-second
clip from Dory’s vlog showing the case list in Criminal Law. Byron shared
his study habits and discussed how a law student like Dory can easily
memorize the doctrines on the list. Byron’s video got 1,000,000 views and
earned more than what Dory gained. Dory envied Byron and sued him for
copyright infringement and argued that he used her content for monetary
gain. Is Byron liable for copyright infringement? Explain.
10.
Express Innovation Corporation (EIC) applied for registration with the
Securities and Exchange Commission (SEC). The EIC submitted its
proposed Articles of Incorporation which reads:
First: That the name of the corporation shall be, “Express Innovation
Corporation”
….
Third: That the principal office of the corporation is located in
Sakurajima, Konohana Ward, Osaka, Japan.
….
Ninth: That Haru Nikko, a resident of Japan, has been elected by the
subscribers as the Treasurer of the Corporation to act as such until after
the successor is duly elected and qualified in accordance with the by-laws, that as Treasurer, authority has been given to receive in the name
and for the benefit of the corporation, all subscriptions, contributions
or donations paid or given by the subscribers or members, who
certifies the information set forth in the seventh and eighth clauses
above, and that the paid-up portion of the subscription in cash and/or
property for the benefit and credit of the corporation has been duly
received.
If you are the SEC Examiner, will you recommend the approval of
the Articles of Incorporation? Explain.
11.
Duke is a resident of an exclusive subdivision. Duke always heard loud
cars and motorcycles passing through the neighborhood at night. Duke
then set up a closed-circuit television (CCTV) at his gate and recorded the
rowdy vehicles and their plate numbers. Thereafter, Duke requested from
the Land Transportation Office (LTO) the names and addresses of the
registered owners of the vehicles. Duke explained that he will use the
CCTV footage as supporting evidence in his complaint for damages
against the vehicle owners. However, the LTO denied the request on
the ground that personal information of vehicle owners cannot be
disclosed without their consent. Is the LTO correct in denying Duke’s
request for information? Explain.
12.
Blaine Builders Corporation (BBC) has a total of 200,000 outstanding
shares which are all entitled to vote. However, 10,000 of the shares are
under dispute or subject matter of pending litigations. Harold and Joaquin
are BBC’s major stockholders. Harold called a meeting where
stockholders representing 98,400 shares attended and voted for new
members of the board of directors. Joaquin filed an election protest and
claimed that there was no quorum in the meeting which shall consist of
the stockholders representing a majority of the outstanding capital stock.
Harold insisted that there is a quorum after excluding the 10,000 disputed
shares. Is there a required quorum in the stockholders’ meeting that
elected the new members of the board of directors? Explain.
13.
Justin opened a peso savings account with the Ozzy Pay Bank (OPB)
where he deposited his earnings. In 2024, Justin went to OPB to verify his
account. The OPB showed to Justin the transaction history and informed
that he had only PHP 100.00 remaining balance after a series of
withdrawals. Justin denied the transactions and claimed that his signatures
appearing on the withdrawal slips in the sum of PHP 3,000.000.00 were
forged. The investigation revealed that an impostor forged the signature
on the withdrawal slips and delivered the amounts to his conspirator who
opened a peso savings account with OPB using the funds as initial deposit.
Aggrieved, Justin filed a complaint for sum of money against OPB and
alleged that it was negligent in allowing the unauthorized withdrawals.
Meantime, the trial court directed the OPB to produce the bank records of
the conspirator. The OPB refused contending that the conspirator’s bank
account is not the subject of litigation. Did the OPB validly refuse to
disclose the conspirator’s bank records? Explain.
14.
Flavio obtained from Safe Assurance Corporation (SAC), through its
agent Laureen, a fire insurance policy over his residential house for a
period of one year from August 25, 2024 to August 24, 2025. Flavio
delivered on August 26, 2024 a check representing premium payment to
Laureen who then issued an acknowledgment receipt. On August 27,
2024, a fire completely razed Flavio’s house. Oblivious of the incident,
Laureen deposited the check on August 28, 2024 to SAC’s bank account
and was credited on the same day. Thereafter, Flavio filed against SAC
an insurance claim. However, SAC denied the claim and argued that there
was no payment of premium yet to make the insurance policy effective at
the time of the loss. SAC explained that it received the premium payment
only on August 28, 2024 or after the fire occurred on August 27, 2024. Is
there a valid and binding insurance contract between SAC and
Flavio? Explain.
15.
Sierra Electronics Inc. (SEI) has an outstanding capital stock consisting
of 100 common shares and 100 non-voting preferred shares. The common
shares are held by Filipino citizens while the preferred shares are held by
foreigners. SEI planned to buy real property and establish a
manufacturing plant in the Philippines. May the SEI own land in the
Philippines? Explain.
16.
The City Treasurer served to Luminous Star Corporation (LSC) a Notice
of Assessment (NOA) for basic local business taxes (LBT) in the amount
of PHP 900,000.00, exclusive of interest and penalties. LSC filed a protest
before the City Treasurer but was denied. LSC appealed to the
Metropolitan Trial Court (MeTC) and prayed for a writ of preliminary
injunction to prevent the collection of assessed taxes. The City Treasurer
opposed the application for injunctive relief and contended that the courts
cannot enjoin the collection of taxes. May the MeTC issue an injunctive
relief against the City Treasurer from collecting the local taxes?
Explain.
17.
On August 23, 2024, Topaz Gems Industries (TGI) filed with the Bureau
of Internal Revenue (BIR) an administrative claim for refund of overpaid
final withholding tax on dividends paid in 2023. On August 28, 2024, TGI
filed a judicial claim for refund before the Court of Tax Appeals (CTA).
The BIR opposed the judicial claim for refund and contended that the
CTA lacks jurisdiction over the case. The BIR added that the judicial
claim was premature having been filed without prior resolution of the
administrative claim. Does the CTA have jurisdiction over the judicial
claim for refund? Explain.
18.
Fritzie Presley, Inc. (FPI) is a domestic corporation engaged in Value
Added Tax (VAT) zero-rated transactions. In the second quarter of 2022,
the input taxes of FPI from zero-rated sales amounted to
PHP 9,811,152.02. The accountant of FPI advised to refund the input
taxes and not to offset it with output taxes. On July 10, 2023, FPI filed a
claim to refund the input taxes before the Bureau of Internal Revenue
(BIR) but was denied. FPI elevated the case to the Court of Tax Appeals
(CTA). Meantime, the BIR’s assessment against FPI for deficiency output
VAT for the second quarter of 2022 in the amount of PHP 8,501,355.53
became final and executory. After trial, the CTA granted FPI’s claim for
refund but only for PHP 1,309,796.49 representing the difference between
the excess input taxes and deficiency output taxes. The CTA held that
since FPI has deficiency output taxes for 2022, the input taxes must first
be applied against the deficiency taxes, and only the balance should be
allowed for refund. On the other hand, FPI argued that the taxpayerclaimant has the option to charge the input taxes from zero-rated sales
against the output taxes. May the CTA offset the input taxes against
deficiency output taxes even without the taxpayer-claimant choosing
this option? Explain.
19.
The Court of Tax Appeals (CTA) acquitted Stephen in a criminal case for
non-filing of Annual Income Tax Return (ITR) under Section 255 of the
Tax Code. The CTA ruled that the prosecution failed to prove Stephen’s
guilt. However, the CTA imposed upon Stephen civil liability for
deficiency income tax arising from the non-filing of ITR. Stephen
questioned the civil aspect of the case and argued that his acquittal in the
criminal case exonerated him from any civil liability arising from the
offense. May the CTA impose civil liability to pay taxes upon Stephen
despite his acquittal in the criminal case? Explain.
20.
On June 30, 2023, the Commissioner of Internal Revenue (CIR) served a
Letter of Authority (LOA) to Waldorf Weston Corporation (WWC). The
LOA authorized Revenue Officer (RO) Arjun and Group Supervisor (GS)
Simone to examine WWC’s accounting books and records for the taxable
year 2021. Thereafter, WWC received a Memorandum-Referral Letter
signed by Revenue District Officer (RDO) Desmond authorizing RO
Valerie and GS Warren to continue the audit investigation. The
memorandum noted that RO Arjun and GS Simone were already
reassigned to another district office. After proper issuance of a Notice of
Discrepancy and Preliminary Assessment Notice, RO Valerie and GS
Warren jointly recommended that the CIR issue a Final Assessment
Notice (FAN) against WWC because it had unreported gain subject to
income tax for 2021. The CIR adopted the recommendation and served a
FAN upon WWC. Aggrieved, WWC challenged the validity of the
Memorandum-Referral Letter on the ground that it is not equivalent to a
LOA. Is the Memorandum-Referral Letter valid to examine
WWC’s accounting books and records? Explain.
