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Case Digests Taxation Law TABLE OF CONTENTS A. TAX AMNESTY Republic of the Phil. vs. Court of Appeals G.R. No. 109193, February 1, 2000............................................................2 B. TAX REFUND BPI-Family Savings Bank vs. Court of Appeals G.R. No. 122480, April 12, 2000 ................................................................2 C. IMPROPERLY ACCUMULATED EARNINGS TAX Cyanamid Phil., Inc. vs. Court of Appeals, et al. G.R. No. 108067, January 20, 2000............................................................3 D. PERCENTAGE TAX Protector’s Services vs. Court of Appeals, et al. GR No. 118176, April 12, 2000...................................................................4 E. DEDUCTIONS FROM THE GROSS ESTATE Commissioner of Internal Revenue vs. Court of Appeals G.R. No. 123206, March 22, 2000 .............................................................5 F. VALUE ADDED TAX Commissioner of Internal Revenue vs. Court of Appeals G.R. No.125355, March 30, 2000...............................................................6 G. FORFEITURE PROCEEDINGS IN THE BUREAU OF CUSTOMS The Bureau of Customs & The Economic Intelligence Bureau vs. Ogario & Montelibano G.R. No. 138081, March 30, 2000.........................................6 H.TAX AMNESTY: DISPOSITION OF CAPITAL ASSET ON CASH BASIS VS. INSTALLMENT Bibiano V. Bañas, Jr. vs. Court of Appeals, et al. G.R. No. 102967, February 10, 2000............................................................7 I. TAX ADMINISTRATIVE REGULATIONS Harrison Motors Corporation vs. Rachel A. Navarro G.R. No. 132269, April 27, 2000...................................................................8 J. ACTS OF WITHHOLDING AGENTS OF A GOVERNMENT CORPORATION Azucena B. Garcia vs. Office of the Ombudsman, et al.
G.R. No. 127710, February 16, 2000...........................................................9
A. Tax Amnesty REPUBLIC OF THE PHILIPPINES vs. COURT OF APPEALS G.R. No. 109193 February 7, 2000 Facts: In 1995, the BIR issued an assessment notice and letter against private respondent Precision Printing demanding payment of the deficiency income tax for 1981 inclusive of interest. Despite repeated demands, however, the latter failed to pay within the period prescribed by law. Consequently, said assessment became final and demandable. On October 31, 1986, private respondent filed a Tax Amnesty Return pursuant to Executive Order No. 41 which declared a one time tax amnesty covering unpaid income taxes for the years 1981 to 1985. In 1990, BIR filed a complaint against Precision Printing for the collection of the said deficiency income tax. The former anchors its submission on the fact that the latter was already assessed of its tax deficiency prior to the promulgation of Rev. Reg. 4-87, which implemented E.O. No. 41. Private respondent received the assessment in 1985 while the said Rev. Reg. 4-87 explicitly refers only to assessments made after August 21, 1986. Private respondent contends that it is not liable for such tax deficiency because it availed of the tax amnesty under E.O. No. 41. Issue: Is the tax amnesty under E.O. No. 41 covering unpaid income taxes for the years 1981 to 1985 extinguishes the tax liabilities already assessed even prior to its effectivity? Held: Yes. E.O. No. 41 declaring a tax amnesty on unpaid income taxes was promulgated on August 22, 1986, it was later amended by E.O. Nos. 54 and 64 to include estate and donor’s taxes and taxes on business for the taxable year 1981-1985. Thereafter, Rev. Reg. 4-87 was issued to implement the law. It reckoned the applicability of the tax amnesty from August 22, 1986, the date when E.O. No. 41 took effect. However, E.O. No. 41 contained no limitation whatsoever delimiting its applicability to assessments made prior to its covering all tax liabilities incurred from 1981-1985. If the E.O. No. 41 had not been intended to include 19811985 tax liabilities already assessed prior to 22 August 1986, the law would have simply provided in its exclusionary clauses. It did not. Therefore, the conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to cases specifically excepted by it.
B. Tax Refund BPI-FAMILY SAVINGS BANK vs. COURT OF APPEALS G.R. No. 122480 April 12, 2000 Facts: Petitioner indicated in its 1989 Income Tax Return that it would apply the total refundable amount, inclusive of the 1988 and 1989 tax credit, as a tax credit for the succeeding taxable year, 1990. Later, petitioner informed the BIR that it would claim the amount stated as the 1989 tax credit as a tax refund, alleging that it did not apply the total refundable amount to its 1990 Annual ITR or other tax liabilities due to alleged business losses it incurred for the same year. When no action from the BIR was forthcoming, petitioner filed its claim with the Court of Tax Appeals. However, the CTA and the CA denied the claim for tax refund. The respondents ruled that there is no basis to grant the claim for refund due to petitioner’s failure to show proof that it has not credited to its 1990 ITR the total
refundable amount it previously declared to be applied as a tax credit in 1990. Since tax refunds are in the nature of tax exemptions, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the one claiming the exemption. The petitioner maintained that it suffered a net loss in 1990 and that it could not have applied the amount claimed as tax credits. Issue: Is a taxpayer entitled to a refund, representing excess creditable withholding tax paid for the previous year, even if it fails to prove that it has not applied the same as tax credit for the year it incurred a loss? Held: Yes. It is undisputed that petitioner had excess withholding taxes for the year 1989 and was thus entitled to a refund. Pursuant to Sec. 69 of the 1986 Tax Code which stated that a corporation entitled to a refund may opt either (1) to obtain such refund or (2) to credit said amount for the succeeding taxable year. In the present case, the Return clearly showed that petitioner suffered a net loss in 1990. Contrary to the holding of the CA and the CTA, petitioner could not have applied the amount as a tax credit. It should be stressed that the rationale of the rules of procedure is to secure a just determination of every action. They are tools designed to facilitate the attainment of justice. But there can be no just determination of the present action if we ignore, on grounds of strict technicality, the Return submitted before the CTA and even before this Court. To repeat, the undisputed fact is that petitioner suffered a net loss in 1990; accordingly, it incurred no tax liability to which the tax credit could be applied. Consequently, there is no reason for the BIR and this Court to withhold the tax refund which rightfully belongs to the petitioner.
C. Improperly Accumulated Earnings Tax CYANAMID PHIL., INC. vs. COURT OF APPEALS, ET AL. G.R. No. 108067 January 20, 2000
Facts: Petitioner, Cyanamid Philippines, Inc., is a corporation engaged in the manufacture of pharmaceutical products and chemicals, a wholesaler of imported finished goods, and an importer/indentor. The CIR sent an assessment letter to petitioner Cyanamid Phil., Inc. and demanded the payment of deficiency income tax for 1981. Petitioner then protested the assessments, particularly, (1) the 25% Surtax Assessment; (2) the 1981 Deficiency Income Assessment; and (3) the 1981 Deficiency Percentage Assessment. Petitioner claimed that the surtax for the undue accumulation of earnings was not proper because the said profits were retained to increase petitioner’s working capital and it would be used for reasonable business needs of the company. The CIR, however, refused to allow the cancellation of the assessment notices. Petitioner appealed to the CTA. During the pendency of the case, both parties agreed to compromise the 1981 Deficiency Income Assessment. However, the surtax on improperly accumulated profits remained unresolved. Issue: Is a manufacturing company liable for the accumulated earnings tax, despite its claim that earnings were accumulated to increase working capital and to be used for its reasonable needs, if it fails to present evidence to prove such allegations? Held: Yes. The respondent court correctly decided that the petitioner is liable for the accumulated earnings tax for the year 1981 based on the following grounds:
The amendatory provision of Sec. 25 of the 1977 NIRC, which was PD 1739, enumerated the corporations exempt from the imposition of improperly accumulated tax such as banks, non-bank financial intermediaries, insurance companies and corporations authorized by the Central Bank of the Phils. to hold shares of stocks of banks. The petitioner does not fall among those exempt classes. If the CIR determined that the corporation avoided the tax on shareholders by permitting earnings or profits to accumulate, and the taxpayer contested such a determination, the burden of proving is on the taxpayer. And in order to determine whether profits are accumulated for the reasonable needs of the business to avoid the surtax upon shareholders, it must be shown that the controlling intention of the taxpayer is manifested at the time of accumulation, not intentions declared subsequently, which are mere afterthoughts. Furthermore, the accumulated profits must be used within a reasonable time after the close of the taxable years. In this case, petitioner did not establish, by clear and convincing evidence when such accumulation of profit was for the immediate needs of the business. Lastly, in the present case, the Tax Court opted to determine the working capital sufficiency by using the ratio between current assets to current liabilities. The working capital needs of a business depend upon the nature of the business, its credit policies, the amount of inventories, the rate of turnover, the amount of accounts receivable, the collection rate, the availability of credit to the business, and similar factors. Petitioner, by adhering to the “bardahl” formula, failed to impress the tax court with the required definiteness envisioned by the statute. We agree with the tax court that the burden of proof to establish that the profits accumulated were not beyond the reasonable needs of the company, remained on the taxpayer. Hence, this Court will not set aside lightly the conclusion reached by the CTA, which by the very nature of its function, is dedicated exclusively to the consideration of tax problems and has necessarily developed expertise on the subject unless there has been an abuse of improvident exercise of authority.
D. Percentage Tax PROTECTOR’S SERVICES vs. COURT OF APPEALS, ET AL. G.R. No. 118176, April 12, 2000 Facts: Petitioner was assessed for deficiency percentage taxes including surcharges, penalties and interests thereon for the year 1983, 1984 and 1985. Petitioner filed a protest against the assessment claiming that its gross receipts subject of percentage taxes should exclude the salaries of the security guards as well as the employer’s share of SSS and State Insurance Fund and Medicare contributions. BIR Deputy Commissioner denied with finality the latter’s protest against the subject assessment holding that the salaries paid to security guards form part of the taxable gross receipts in the determination of the 3% and 4% contractor’s tax. Petitioner filed a petition for review before the Court of Tax Appeals (CTA), Issue: Does the term “gross receipts” of a contractor subject to percentage tax include the salaries paid to its employees, its SSS, SIR and Medicare contributions? Held: Yes. The term “gross receipts” means all amounts received by the principal contractor as the total price, undiminished by the amount paid to the subcontractor under a subcontractor arrangement. Hence, gross receipts could not be diminished by the employer’s SSS, SIF and Medicare contributions. The BIR has consistently held that salaries of security guards form part of the taxable gross receipts
of a security agency for purposes of the 4% contractors tax. Since the salaries of the security guards are actually the liability of the agency and that the guards are considered their employees. Hence, for percentage tax purposes, the salaries of the security guards are includible in its gross receipts.
E. Deductions from the Gross Estate COMMISIONER OF INTERNAL REVENUE vs. COURT OF APPEALS G.R. No. 123206 March 22, 2000 Facts: Respondent heirs of Pedro Pajonar, executed extrajudicial settlement of the latter’s estate. Pursuant to the assessments of the BIR for deficiency tax, they paid the estate taxes. Later the administrator filed a protest seeking the refund of the erroneously paid estate taxes or some portion of it. Without the resolution of the protest, a petition for review was then filed with the CTA, which ordered the CIR to refund the heirs. Among the deductions from the gross estate allowed by the CTA were the amounts representing the Proceedings No. 1254 for guardianship over the person and property of the decedent while he was still alive. The CIR assailed the decision contending that the notarial fee for Extrajudicial Settlement and the attorney’s fees in the guardianship proceedings are not deductible expenses. It maintains that only judicial expenses of the testamentary or intestate proceedings are allowed as deduction to gross estate. Issue: Are the notarial fee paid for the extrajudicial settlement and the attorney’s fees in the guardianship proceedings allowed as deductions from the gross estate of the decedent in order to arrive at the value of the net estate? Held: Yes. Although the tax code specifies “judicial expenses of the testamentary or intestate proceedings”, there is no reason why expenses incurred in the administration and settlement of the estate in extrajudicial proceedings should not be allowed. However, deduction is limited to such administration expenses as are actually and necessarily incurred in the collection of the assets of the estate, payment of the debts, and distribution of the remainder among those entitled thereto. It is clear that the extrajudicial settlement was for the purpose of payment of taxes and the distribution of the estate to the heirs. The execution of the extrajudicial settlement necessitated the notarization of the same. It follows then that the notarial fee was incurred primarily to settle the estate of the deceased Pajonar. Said amount should then be considered as administration expense actually and necessarily incurred in the collection of assets of the estate, payment of debts and distribution of the remainder among those entitled thereto. Attorney’s fees on the other hand to be deductible from the gross estate must be essential to the settlement of the estate. The amount claimed as deductible was incurred as attorney’s fees in the guardianship proceedings. The guardianship proceeding in this case was necessary for the distribution of the property of the deceased. As correctly pointed out by the respondent CTA, the PNB was appointed guardian over the assets of the deceased, and that assets of the deceased form part of his gross estate.
F. Value Added Tax COMMISIONER OF INTERNAL REVENUE vs. COURT OF APPEALS G.R. No. 125355 March 30, 2000 Facts: The BIR issued an assessment to private respondent corporation for the deficiency value-added tax for taxable year 1988. The corporation averred that since it was not engaged in business, it was not liable to pay VAT. Furthermore, it contended that the term “in the course of trade or business” required that the “business” be carried on with a view of profit. Since the services it offers were on a “non-profit basis”, thus, “not engaged in business”. The petitioner however avers that VAT is a tax on the value added by the performance of the service. It is immaterial whether profit is derived in rendering the service. Issue: Does the phrase “in the course of trade or business” imply that the transactions should be motivated by profit? Held: No. The phrase “in the course of trade or business” means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit organization or government entity. VAT is a tax on transactions, imposed on every stage of distribution process on the sale, barter, exchange of goods or property, and on the performance of services, even in the absence of profit attributable thereto. NOTE: PERSON LIABLE TO VAT: “Any person who in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods. (Sec. 105 of NIRC)
G. Forfeiture proceedings in the Bureau of Customs THE BUREAU OF CUSTOMS & THE ECONOMIC INTELLIGENCE BUREAU vs. OGARIO & MONTELIBANO G.R. No. 138081 March 30, 2000 Facts: A District Collector of Customs issued a warrant of seizure and detention of 25,000 bags of rice on the basis of the report that the rice had been illegally imported. The enforcers of the seizure order alleged that the mentioned rice was smuggled abroad without even proof that the same were purchased from a particular country. The consignee and his buyer filed a complaint for injunction in the Regional Trial Court (RTC) alleging that the defendants are merely suspicious and the detention was illegal for lack of basis and in fact. The petitioners sought the dismissal of the complaint on the ground that the RTC has no jurisdiction over the subject matter of controversy by virtue of the well-settled provisions of the Tariff and Customs Code and Act No. 1125, as amended, otherwise known as “An Act Creating the Court of Tax Appeals”. Issue: Customs?
Does RTC have jurisdiction to enjoin the forfeiture proceedings in the Bureau of
Held: No. The RTCs are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise to interfere with these proceedings. The question of whether probable cause exists for the seizure is not for the RTC to determine. The Collector of Customs has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The RTC is precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. The actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals. The RTCs have no review powers over such proceedings to avoid unnecessary hindrance on the government’s drive, not only to prevent smuggling and other fraud from Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out its functions. NOTE: Even if it is assumed that in the exercise of the exclusive competence, a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion may oust it of such jurisdiction it seen fit to do so. (Ponce Enrile vs. Vinuya, 27 SCRA 381)
H. Tax Amnesty Disposition of capital asset on cash basis vs. on installment BIBIANO V. BAÑAS, JR. vs. COURT OF APPEALS, ET. AL. G.R. No. 102967 February 10, 2000 Facts: On February 20, 1976, Petitioner sold to AYALA a parcel of land for P2,308,770.00. Petitioner received an initial payment amounting to P461,754.00 with the balance to be paid in four equal consecutive annual installments covered by promissory note. The same day, petitioner discounted the promissory note with AYALA, for its face value. AYALA issued nine (9) checks to petitioner, all dated February 20, 1976, with the uniform amount of P205,224.00. In his 1976 Income Tax Return, petitioner reported only the initial payment as income from disposition of capital asset. In the succeeding years, until 1979, petitioner reported a uniform income corresponding to the annual installment as gain from sale of capital asset. Later, the BIR Regional Director, through its tax examiners, discovered that petitioner had no outstanding receivable from the 1976 land sale to AYALA and concluded that the sale was cash and the entire profit should have been taxable in 1976. Petitioner was assessed deficiency tax with surcharges and penalties for the year 1976. A demand letter was then issued for the settlement of the income tax deficiency. Petitioner failed to pay and insisted that the sale of his land to AYALA was on installment. On June 17, 1981, a criminal complaint for tax evasion was filed against petitioner. On July 2, 1981, petitioner filed an Amnesty Tax Return under P. D. 1740. Likewise, on November 2, 1981, petitioner again filed an Amnesty Tax Return under P.D. 1840. In both, petitioner did not recognize that his sale of land to AYALA was on cash basis. Petitioner maintains that the proceeds of the promissory notes, not yet due, which he discounted to AYALA should not be included as income realized in 1976. Petitioner states that the original agreement in the Deed of Sale should not be affected by the subsequent discounting of the bill.
Issues: 1. Does the mere filing of tax amnesty return under P.D. 1740 and 1840 ipso facto shield a taxpayer from immunity against prosecution? 2. Should petitioner’s income from the sale of land be declared as a cash transaction in his tax return because the buyer discounted the promissory note, issued to the seller, on the same day of the sale? Held: 1. No. The petitioner is not entitled to the benefits of P.D. Nos. 1740 and 1840. The mere filing of tax amnesty return under P.D. 1740 and 1840 does not ipso facto shield him from immunity against prosecution. Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also gives the government a chance to collect uncollected tax from tax evaders without having to go through the tedious process of a tax case. To avail of a tax amnesty granted by the government, and to be immune from suit on its delinquencies, the taxpayer must have voluntarily disclosed his previously untaxed income and must have paid the corresponding tax on such previously untaxed income. PD 1740 and PD 1840 granted any individual, who voluntarily files a return under this Decree and pays the income tax due thereon, immunity from the penalties, civil or criminal, under the NIRC. Petitioner is not entitled to claim immunity from prosecution under the shield of availing tax amnesty. His disclosure in his tax amnesty return did not include the income from his sale of land to AYALA on cash basis. Instead he insisted that such sale was on installment. He did not amend his income tax return. He did not pay the tax which was considerably increased by the income derived from the discounting. He did not meet the twin requirements of P.D. 1740 and 1840, declaration of his untaxed income and full payment of tax due thereon. It also bears noting that a tax amnesty, much like a tax exemption, is never favored nor presumed in law and if granted by statute, the terms of the amnesty like that of a tax exemption must be construed strictly against the taxpayer and liberally in favor of the taxing authority. 2. Yes. The general rule is that the whole profit accruing from a sale of property is taxable as income in the year the sale is made. But, if not all of the sale price is received during such year, and a statute provides that income shall be taxable in the year in which it is "received," the profit from an installment sale is to be apportioned between or among the years in which such installments are paid and received. In this case, although the proceeds of a discounted promissory note is not considered initial payment, still it must be included as taxable income on the year it was converted to cash. When petitioner had the promissory notes covering the succeeding installment payments of the land issued by AYALA, discounted by AYALA itself, on the same day of the sale, he lost entitlement to report the sale as a sale on installment since, a taxable disposition resulted and petitioner was required by law to report in his returns the income derived from the discounting. What petitioner did is tantamount to an attempt to circumvent the rule on payment of income taxes gained from the sale of the land to AYALA for the year 1976. Missda
I. Tax Administrative Regulations HARRISON MOTORS CORPORATION vs. RACHEL A. NAVARRO G.R. No. 132269 April 27, 2000 Facts: Petitioner, a known importer, assembler and manufacturer, sold to private respondent 2 trucks. Subsequently, a Memorandum of Agreement was entered into by the BIR and the LTO, which provided that prior to registration of any assembled or re-assembled motor vehicle which used imported parts, a Certificate of Payment should first be obtained from the BIR to prove payment of all taxes.
Consequently, government agents seized and detained the said trucks due to non-payment of BIR taxes and custom duties, which prompted private respondent (buyer) to secure from petitioner the receipts evidencing payment. However, the latter ignored said request. Private respondent then paid the taxes and custom duties with a warning that petitioner should reimburse her the same. Petitioner argues that it was no longer obliged to pay for the additional taxes and custom duties imposed on the imported component parts by the administrative regulations since such regulations only took effect after the execution of its contract with private respondent. To hold it liable would not only violate the non-impairment clause of the Constitution but also the principle of non-retroactivity of laws under the Civil Code. Petitioner further claimed that private respondent should be the one to pay the taxes and duties since when the regulations took effect, it no longer owned the trucks. Issues: 1) Did the administrative regulations impose additional taxes that impair the obligations of contracts and violate the principle of non-retroactivity? 2) Is the importer-assembler/manufacturer liable to pay the BIR taxes and custom duties, which the administrative regulations sought to enforce? Held: 1) No. What Sec. 10, Art. III of the Constitution prohibits is the passage of a law which enlarges, abridges or in any manner changes the intention of the contracting parties. The Memorandum Orders and the two (2) Memoranda of Agreement do not impose any additional taxes, which would unduly impair the contract of sale between petitioner and private respondent. Instead, these administrative regulations were passed to enforce payment of existing BIR taxes and customs duties at the time of importation. While it is true that administrative rulings and regulations are generally prospective in nature, an inspection of the 2 MOA, however demonstrates that their intent is to enforce payment of taxes on assemblers who import component arts without paying the correct assessments. 2) Yes. Although private respondent is the one required by the administrative regulations to secure the Certificate of Payment for the purpose of registration, petitioner as the importer and the assembler/manufacturer of the two (2) Elf trucks is still the one liable for payment of revenue taxes and custom duties. Petitioner’s obligation to pay does not arise from the administrative regulations but from the tax laws existing at the time of importation. It is also quite obvious that as between petitioner, who is the importerassembler/manufacturer, and private respondent, who is merely the buyer, it is petitioner which has the obligation to pay taxes to the BIR and the BOC. Petitioner would be unjustly enriched if private respondent should be denied reimbursement. It would inequitably amass profits from selling assembled trucks even if it did not pay the taxes due on its imported spare parts. Imposing the tax burden on private respondent would only encourage the proliferation of smugglers who scheme to evade taxes by passing on their tax obligations to their unsuspecting buyers.
J. Acts of Withholding Agents of a Government Corporation AZUCENA B. GARCIA vs. OFFICE OF THE OMBUDSMAN, ET AL. G.R. No. 127710 February 16, 2000 Facts: Petitioner was Dept. Mgr. III for administration of the National Development Company (NDC), a government corporation. In 1991, NDC initiated a program of early retirement of its personnel. Those who availed themselves of early retirement or separation were given tax-exempt retirement and separation benefits. In March 1995, petitioner availed herself of the program, and applied for early retirement under RA1616. NDC approved the application, and in due course paid petitioner her retirement benefits. However, private
respondents, who were controller, disbursing officer, and assistant general manager of NDC deducted withholding tax on the amount of provident fund benefits given to petitioner corresponding to her share over and above her personal contribution. Petitioner protested private respondents' action and requested them to refund the taxes withheld and remitted to the BIR, claiming that such amount was tax exempt. Due to private respondents' refusal to grant her request, on March 8, 1996 petitioner filed with the Ombudsman a complaint against them for violation of Sec. 3 (e) of RA 3019, for causing her undue injury. The Ombudsman dismissed petitioner's complaint. Issue: Did the Ombudsman act with grave abuse of discretion in dismissing petitioner's complaint for violation of Sec. 3(e), RA 3019 against private respondents for deducting withholding taxes on the amount of provident fund benefits petitioner received over and above her personal contribution? Held: No. The elements of violation of Sec. 3 (e) of RA 3019, as amended, are as follows: "(1) The accused is a public officer or a private person charged in conspiracy with the former; "(2) The said public officer commits the prohibited acts during the performance of his or her official duties or in relation to his or her public positions; "(3) That he or she causes undue injury to any party, whether the government or a private party; "(4) Such undue injury is caused by giving unwarranted benefits, advantage or preference to such parties; and "(5) That the public officer has acted with manifest partiality, evident bad faith or gross inexcusable negligence. Obviously, private respondents did not transgress the third and fifth elements abovementioned. Petitioner has not shown that she suffered actual damage nor that private respondents acted with evident bad faith or gross inexcusable negligence. Private respondents merely complied with their duty under the law. They were guided by the prevailing opinion of the BIR that provident fund benefits above the employee's personal contribution were taxable, and hence, it was their duty to withhold the corresponding income taxes thereon. On the contrary, to grant petitioner's request for exemption for the withholding tax would have subjected private respondents to liability for malfeasance in office, if not for violation of the Tax Code, or the Anti- Graft and Corrupt Practices Act. They could not have foreseen that the CIR would change his views on the issue at a later time. The latter's change of opinion, while favoring petitioner, will not make private respondents' act prior thereto amount to bad faith as they relied on the prevailing legal opinion on the issue. Hence, they could not be held criminally liable therefor.