TAX LAW REVIEWER

SAINT LOUIS UNIVERSITY BAR OPERATIONS

SUBJECT MATTER: Meaning of Taxation
Petitioner also submits that the thirty percent (30%)
tax imposed is harsh and oppressive, confiscatory, and in
restraint of trade !o"ever, it is beyond serious #uestion that a
tax does not cease to be valid merely because it regulates,
discourages, or even definitely deters the activities taxed The
power to impose taxes is one so unlimited in force and so
searching in extent, that the courts scarcely venture to declare
that it is subject to any restrictions whatever, except such as
rest in the discretion of the authority which exercises it. In
imposing a tax, the legislature acts upon its constituents This is,
in general, a sufficient security against erroneous and
oppressive taxation
The public purpose of a tax may legally exist even if
the motive "hich impelled the legislature to impose the tax "as
to favor one industry over another
$t is inherent in the po"er to tax that a state be free to
select the sub%ects of taxation, and it has been repeatedly held
that &inequities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional
limitation". Taxation has been made the implement of the state's
police power (Tio vs '() *+* ,-(. /00)
It is said that taxes are what we pay for civilied
society. !ithout taxes, the government would be paralyed for
lac" of the motive power to activate and operate it !ence,
despite the natural reluctance to surrender part of one1s hard
earned income to the taxing authorities, every person "ho is
able to must contribute his share in the running of the
government The government for its part, is expected to respond
in the form of tangible and intangible benefits intended to
improve the lives of the people and enhance their moral and
material values This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that it is an
arbitrary method of exaction by those in the seat of power (-$(
vs .lgue *+0 ,-(. 2)
SUBJECT MATTER: 3xtent of the 4egislative Po"er to
Tax
The power of taxation must be exercised fairly,
equally and uniformly and must be exercised with caution to
minimie injury to the proprietary right of a taxpayer. The
imposition thereof cannot be justified under the guise of
taxation. ((oxas ' -T. /3 ,-(. /567 8isher ' Trinidad 93
Phil 253)
$f ob%ective and methods are ali:e constitutionally
valid, no reason is seen "hy the state may not levy taxes to
raise funds for their prosecution and attainment Taxation may
be made the implement of the state's police power $t is inherent
in the po"er to tax that a ,tate be free to select the sub%ects of
taxation and it has been repeatedly held that ;irregularities
"hich result from a singling out of one particular class for
taxation or exemption infringe no -onstitutional limitation< (4ut=
vs .raneta 20 Phil *90)
The test of the constitutionality of a statute requiring
the use of public funds is whether the statute is designed to
promote the public interests, as opposed to the furtherance of
the advantage of individuals, although such advantage to
individuals might incidentally serve the public The validity of a
statute depends upon the po"ers of -ongress at the time of its
passage or approval, not upon events occurring, or acts
performed, subse#uently thereto, unless the latter consists of an
amendment of the organic la", removing, "ith retrospective
operation, the constitutional limitation infringed by said statute
(Pascual vs ,ec of Public >or:s *00 Phil 33*)
The #onstitution as the fundamental law overrides
any legislative or executive act that runs counter to it $n any
case therefore "here it can be demonstrated that the
challenged statutory provision as petitioner here alleges fails to
abide by its command, then this -ourt must so declare and
ad%udge it null The in%ury thus is centered on the #uestion of
"hether the imposition of a higher tax rate on taxable net
income derived from business or profession than on
compensation is constitutionally infirm (,ison vs .ncheta *30
,-(. 6+9)
SUBJECT MATTER: Theory and )asis of Taxation
The power to tax is an attribute of sovereignty. It is a
power emanating from necessity. It is a necessary burden to
preserve the $tate's sovereignty and a means to give the
citienry an army to resist an aggression, a navy to defend its
shores from invasion, a corps of civil servants to serve, public
improvement designed for the enjoyment of the citienry and
those which come within the $tate's territory, and facilities and
protection which a government is supposed to provide
-onsidering that the reinsurance premiums in #uestion "ere
afforded protection by the government and the recipient foreign
reinsurers exercised rights and privileges guaranteed by our
la"s, such reinsurance premiums and reinsurers should share
the burden of maintaining the state (Phil ?uaranty -o, $nc vs
-omm *3 ,-(. 55+)
The obligation to pay taxes rests not upon the
privileges en%oyed by, or the protection afforded to, a citi=en by
the government but upon the necessity of money for the support
of the state %or this reason, no one is allowed to object to or
resist the payment of taxes solely because no personal benefit
to him can be pointed out >hile courts "ill not enlarge, by
construction, the government1s po"er of taxation they also "ill
not place upon tax la"s so loose a construction as to permit
evasions on merely fanciful and insubstantial distinctions >hen
proper, a tax statute should be construed to avoid the
possibilities of tax evasion -onstrued this "ay, the statute,
"ithout resulting in in%ustice to the taxpayer, becomes fair to the
government (4oren=o vs Posadas 69 Phil 3+3)
SUBJECT MATTER: @onArevenue Bb%ective of Taxation
The special assessment at bar is not so
much an exercise of the power of taxation, nor the
imposition of a special assessment, but, the exercise of the
police power for the eneral welfare of the entire countr!" #t
is, therefore, an exercise of a so$erein power which no
pri$ate citi%en ma! lawfull! resist" (Republic V. Bacolod-
Murcia July 9, 1966)
SUBJECT MATTER: -lassification of Taxes
Specific taxes, such as those imposed based on
head or number and re#uire no assessment beyond listing and
classification, cannot be imposed by municipalities for the same
1
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
is an attribute of sovereignty which municipal corporations do
not enjoy (Tan ' Municipal of Pagbilao 5 ,-(. 005 7 >e >a
Cu ' -ity of 4ipa 22 Phil 25+)
SUBJECT MATTER: Tax Distinguished from other
terms
Inspection (License ee) are not taxes but an
incident of the power of regulation and are imposed under the
principle that they are compensation for services rendered in
inspectional supervision by the public officials necessary for
public health, morals or safety >hile taxes are enforced
contribution of money or other property assessed in accordance
"ith some reasonable rule of apportionment by authority of a
sovereign authority or state on persons or property for the
purpose of defraying the public expense (M3(.4-B vs .uditor
?en 5+ Phil */0)
Brdinance @o 36/0 of the -ity of Manila imposing
license fees on the slot machines "as declared as invalid for
under the (evised -harter of The -ity of Manila, the board is
given the ;po"er to regulate and fix license fee on slot
machines,< but this case does not include the po"er to impose
license for revenue purposes The po"er is purely regulatory for
public purpose The amount of P300 is unreasonable and
exceeds the expenses of issuing license and of regulating their
operation (Marcoin vs -ity of Mla 4A*+3+*, 0*E/0E6*)
& charge of a fixed sum which bears no relation at all
to the cost of inspection and regulation may be held to be a tax
rather than an exercise of police power (Prog DevFt -orp vs
Gue=on -ity *5/ ,-(. 6/2)
%ees may be properly regarded as taxes even though
they also serve as an instrument of regulation. It is possible for
an exaction to be both tax and regulation This is true, for
example, of automobile license fees $n such case, the fees
may properly be regarded as taxes even though they also serve
as instrument of regulation. If the purpose is primarily revenue
or is at least one of the real substantial purpose, then the
exaction is properly called a tax ,uch is the case of motor
vehicle registration (P.4 vs 3du *69 ,-(. 3/0)
)y designating a specific place "herein passenger
and freight vehicles may load or unload passengers and
cargoes, benefits are accorded to the cityFs residents in the form
of increased safety and convenience arising from the
decongestion of traffic and for a minimal fee indicates that its
purpose is not for revenue but for regulation (-ity of B=amis vs
4umapas 6+ ,-(. 33)
&n exaction, may be considered both a tax and a
license fee if the purpose is primarily revenue, or if revenue, is,
at least, one of the real and substantial purposes, then the
exaction is properly called a tax ('illegas vs !iu -hiong, 06
,-(. /50)
'unicipality is authoried not only to impose a license
fee but also to tax for revenue purposes. Municipal corporations
are allo"ed "ide discretion in determining the rates of
imposable license fees even in cases of purely police measures
(Procter H ?amble Phil vs Mun of Iagna, 29 ,-(. 029)

& license granted by the $tate is always revocable
The absence of expiry date in a license does not ma:e it
perpetual The license cannot last beyond the life of the basic
authority under "hich it "as issued (?on=alo ,y vs -entral
)an:, 50 ,-(. +50)
. license fee and tax may be imposed on the same
business or occupation, or for selling the same article
(-ompania ?eneral vs -ity of Manila, 0 ,-(. 365)
. municipal corporation is prohibited from imposing
any tax in any form upon goods and merchandise carried into or
out of the to"n or city because it shall be considered in restrain
of trade (,aldana vs -ity of $loilo7 *09 P!$4 /0)
The power to regulate as an exercise of police power
does not include the power to impose fees for revenue
purposes (.merical Mail 4ines vs -ity of )asilan, / ,-(. 302)
(egulatory %ee )must be more than sufficient to cover
the actual cost of inspection or examination as nearly as the
same can be estimated. If it were possible to prove in advance
the exact cost, that would be the limit of the fee (Manila 3lectric
-o vs .uditor ?eneral)
Taxes cannot be subject to compensation or set off for
the simple reason that the *overnment and taxpayers are not
creditor+debtor of each other The exception to the general rule
regarding set+off is where both the claims of the *overnment
and taxpayer against each other have already become due and
demandable as well as fully liquidated -ompensation,
therefore, ta:es place by operation of la", in accordance "ith
the provisions of .rticles */52 and */20 of the -ivil -ode, and
both debts are extinguished to the concurrent amount, thusJ
.(T */00 >hen all the re#uisites mentioned in article */52 are
present, compensation ta:es effect by operation of la", and
extinguished both debts to the concurrent amount, eventhough
the creditors and debtors are not a"are of the compensation
(Domingo vs ?arlitos, 3T .4 ?( @o 4A*0229 Iune /2, *263)

Bert!in" c!ar"es against a vessel are collectible
regardless of the fact that mooring or berthing is made from a
private pier or wharf. This is because the government maintains
bodies of water in navigable condition and it is to support its
operations in this regard that dues and charges are imposed for
the use of piers and wharves regardless of their ownership
('ictoria Milling vs Phil Ports .uthority 00E/5E05)
& #ar"in ee is not a tax but an exaction designed to
curb the excessive demands upon our international reserve .
margin levy on foreign exchange is a form of exchange control
or restriction designed to discourage imports or encourage
exports, and ultimately curtail any excessive demand upon the
international reserve in order to stabili=e the currency (3,,B vs
-$( 05E05E02)
SUBJECT MATTER: 4imitations on the Po"er of
taxation
,niformity in taxation means that all taxable articles or
"inds of property of the same classes shall be taxed at the
same rate. & tax is uniform when it operates with the same force
and effect in every place where the subject of it is found . tax of
P/00 per s#uare meter on all electric sign boards all throughout
the Philippines satisfies the re#uirements of uniformity
(-hurchill vs -oncepcion 39 Phil 262 )
2
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
SUBJECT MATTER: Due Process of 4a"
There is no presumption of the regularity of any
administrative proceeding which results in depriving a citien or
taxpayer of his property. -ue process of law must be shown,
and the burden of proving the regularity of all proceedings
leading up to a tax sale is upon the purchaser at the sale
('alencia vs Iimene= ** Phil 92/)
$otice of tax sales to the delinquent taxpayers and
landowners in particular and to the public in general is an
essential and indispensable requirement of the law, the non+
fulfillment of which vitiates and nullifies the sale (.ragon vs
Iorge 0+ Phil /96)
%rocedural due process is that which hears before it
condemns, which proceeds upon inquiry and renders judgment
only after trial $t contemplates notice and opportunity to be
heard before %udgment is rendered affecting one1s person or
property (Macabing:il vs Catco, 4A/3*59, 02E*0E65)
The sale at public auction of properties by the -hief of
the Department of 8inance and the -ity Treasurer of the
?overnment of Manila "as made and effected "ithout notice to
the deceased 8ermin Pa= or to any of his heirs There "as no
&ue publication in ne"spaper of general circulation and no
posting of the notice re#uired -ompliance of these legal
re#uirements must be strictly complied "ith, other"ise the public
auction "ould be invalid (Trigal vs Tobias / ,-(. **+9)
Due process is usually violated "here the tax imposed
is for private as distinguished from public purposes7 "here a tax
is imposed on property outside the ,tate, ie, extraAterritorial
taxation7 and arbitrary or oppressive methods are used in
assessing and collecting taxes .ut, a tax does not violate the
due process clause, as applied to a particular taxpayer,
although the purpose of the tax will result in an injury rather than
a benefit to such taxpayer. -ue process does not require that
the property subject to the tax or the amount of tax to be raised
should be determined by judicial inquiry, and a notice and
hearing as to the amount of tax and the manner in which it shall
be apportioned are generally not necessary to due process of
law (Pepsi -ola vs Mun of Tanauan 60 ,-(. *93)
In the interest of justice and fair play, rulings or
circulars promulgated by the #ommissioner of Internal (evenue
have no retroactive application where to so apply them would
be prejudicial to taxpayers (.),A-)@ vs -T. *00 ,-(. *93)
"The power to tax I$ /0T the power to destroy while
this court sits". Po"er to tax is the strongest of all the po"ers of
government )ut for all its plenitude, the po"er to tax is not
unconfined as there are restrictions .dversely affecting as it
does property rights, both the due process and e#ual protection
clauses of the -onstitution may properly be invo:ed to invalidate
in appropriate cases a revenue measure ((eyes vs .lman=or)
SUBJECT MATTER: Kniformity and e#uity in taxation
&!ere is discri#ination '!ere a local ta(
'as i#posed on )a"ents or consi"nees o outside
dealers*. &!e classiication o suc! )a"ents or
consi"nees* '!o are ta(able and )local dealers* '!o are
e(e#pt is not based on substantial distinction. (%epsi +ola
Bottlin" +o. ,s. +ity o Butuan -. /+R0 1)
& tax is considered uniform when it operates with the
same force and effect in every place where the subject may be
found ,ection *922 of the (evised .dministrative -ode, as
amended, applies uniformly to, and operates on, all ban:s in the
Philippines "ithout distinction and discrimination, and if the
@ational -ity )an: of @e" Cor: is exempted from its operation
because it is a federal instrumentality sub%ect only to the
authority of -ongress, that alone could not have the effect of
rendering it violative of the rule of uniformity The rule of
uniformity does not call for perfect uniformity or perfect equality,
because this is hardly attainable (Phil Trust -o vs Catco 62 Phil
9/0)
1qual 2rotection #lause does not preclude
classification of individuals who may be accorded different
treatments under the law as long as the classification is not
unreasonable and not arbitrary. The law does not have to
operate in equal force to be conformable ()asco vs Pagcor *25
,-(. 55*)
SUBJECT MATTER: Prohibition against impairment of
obligation of contracts
/ec. 11. o t!e Internal Re,enue 0ct is
not ,alid because it is ,iolati,e o t!e pro,ision o /ec. 2 o
t!e 0ct o +on"ress o July 1, 193-, '!ic! pro,ides t!at no
law impairin the obliation of contracts shall be enacte&.
It see#s t!at t!e 4eed co,erin" t!is particular #inin"
concessions constituted a contract bet'een t!e /panis!
"o,ern#ent and t!e %lainti, t!e obli"ation o '!ic! 'as
i#paired by t!e enact#ent o /ec. 11. o t!e Internal
Re,enue 0ct, t!ereby inrin"in" t!e pro,isions o said 0ct
o +on"ress. &!ereore, t!e said pro,ision o la' is ,oid.
(+assano,a ,s. 5ord 6 %5IL 1-2)
The .ct of the .uditor of the Philippine ?overnment in
refusing to allo" the payment of the salary of the petitioner in
K, currency is un%ustifiable The .ct of -ongress of Iuly *, *20*
as "ell as the Iones .ct of .ugust /2, *2*6 prohibits absolutely
the legislature of the Philippine $slands from adopting any
legislation, "hich "ould impair the obligations of contracts
(-lemons vs @olting 9/ P!$4 50/)
SUBJECT MATTER: Prohibition against infringement of
religious freedom
It 'as contended t!at said ordinances i#posin"
license ee on t!e distribution and sale o bibles and ot!er
reli"ious literature, i#pair t!e ree e(ercise o reli"ion,
speciically t!e ri"!t to disse#inate reli"ious inor#ation.
As between taxation an& reliion, the latter pre$ails.
(0#erican Bible /ociety ,s. +ity o Manila 131 %5IL 166)
3
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
'ree exercise of reliious profession or belief is
superior to contract rihts" In case o conlict, t!e latter
#ust yield to t!e or#er. (Victoriano ,s. 7li8alde Rope
9or:ers ;nion 29 /+R0 2.< Basa ,s. =ederacion >brera
4ela Industria &aba?uera @ >tros &rabaAadores 4e =ilipinas
B=>I&0=C 61 /+R0 91)
&!e e(e#ption under /ec. --(1) 0rt. VI o t!e
+onstitution only co,ers property ta(es assessed on
ce#eteries, c!urc!es, and parsona"es or con,ents,
appurtenant t!ereto and all lands, buildin"s and
i#pro,e#ents used e(clusi,ely or reli"ious purposes.
(Lladoc ,s. +o##issioner o Internal Re,enue 1. /+R0
-9-)
SUBJECT MATTER: Prohibition against taxation of
religious, charitable and educational entities
&!e e(e#ption under /ec. --(1) 0rt. VI o
t!e +onstitution only co,ers ta(es assessed on ce#eteries,
c!urc!es, and parsona"es or con,ents, appurtenant
t!ereto and all lands, buildin"s and i#pro,e#ents used
e(clusi,ely or reli"ious purposes. &!ese ta(es are
property ta(es as contra-distin"uis!ed ro# e(cise ta(es.
In t!e case at bar, '!atDs bein" assessed 'as a doneeDs "it
ta( not on t!e properties t!e#sel,es. The ift tax was an
excise tax upon the use ma&e of the properties, upon the
exercise of the pri$ilee of recei$in the properties" This
(in& of tax is not within the exemptin pro$ision of the
constitution" &!ereore, t!e petitioner as substituted by t!e
5ead o t!e 4iocese, is liable to pay t!e said "it ta(.
(Lladoc ,s. +o##issioner o Internal Re,enue 1. /+R0
-9-)
+onsiderin" t!e c!an"e #ade in t!e pro,ision o
e(e#ption ro# property ta(es o traditional e(e#ptees,
t!ere #ust be proo o t!e actual and direct use o t!e land,
buildin"s, and i#pro,e#ents or reli"ious or c!aritable
purposes to be e(e#pt ro# ta(ation. &!is is because it
!as been a constant and unior# !oldin" t!at exemption
from taxation is not fa$ore& an& is ne$er presume&"
(%ro,ince o 0bra ,s. 5ernando 13E /+R0 13.)
)All lan&s, buil&in an& impro$ements use&
exclusi$el! for reliious, charitable or e&ucational
purposes shall be exempt from taxation rear&less of
whether or not the material profits are &eri$e& from the
operation of the institution in *uestion" (5errera ,s.
Fue8on +ity Board o 0ssess#ent 0ppeals 1 /+R0 166)
The fact that a charitable institution ma(es profits
b! charin fees for pa!in be&s, me&ical an& hospital
fees, &oes not &estro! the tax exemption of such an
institution" (5ospital 4e /an Juan 4e 4ios, Inc. ,s. %asay
+ity 16 /+R0 --6)
The phrase )use& exclusi$el! for
e&ucational purposes+ is not limite& to propert! actuall!
in&ispensable therefor but exten&s to facilities, which are
inci&ental to an& reasonabl! necessar! to the
accomplishment of sai& purposes" (0bra Valley +olle"e ,s.
0?uino 16- /+R0 136)
Exemption from pa!ment of lan& tax,
which refers to lots use& as home of the priest who presi&e
o$er the church must inclu&e not onl! the lot actuall!
occupie& b! the church but also the a&,acent roun&
&estine& to meet the or&inar! inci&ental uses of man"
(Bis!op o $ue,a /e"o,ia ,s. %ro,ince o Ilocos $orte 21
%5IL 12-
The term parsonage should include the house
appurtenant to a cathedral, as "ell as a synagogue or a country
meeting house Thus, the property is properly referred to as a
parsonage The court held that the "ord ad%acent does not
mean contiguous but is generally defined as e#uivalent to close
or near by (-atholic -hurch vs !astings + P!$4 50*)
SUBJECT MATTER: Bther -onstitutional limitations
&o i#pose inco#e ta( on t!e salary o t!e
#e#bers o t!e Judiciary 'ould a#ount to a di#inution o
t!eir co#pensation, t!us ,iolati,e o t!e pro,isions o t!e
+onstitution (%erecto ,s. Meer 62 %5IL 22< 7ndencia and
Ju"o ,s. 4a,id 91 %5IL 696)
&!e true intent o t!e ra#ers o t!e 196E
+onstitution, based on t!eir debates and opinions durin"
t!eir deliberation, 'as to #a:e t!e salaries o t!e #e#bers
o t!e Judiciary ta(able and to delete t!e proposed e(press
"rant o e(e#ption ro# pay#ent o inco#e ta(. &!is is to
"i,e substance to e?uality a#on" t!e t!ree (1) branc!es o
t!e "o,ern#ent. &!us in t!is case, t!e court discarded t!e
rulin" in %erecto ,. Meer and 7ndencia ,. 4a,id, '!ic!
cases declared t!e salaries o #e#bers o t!e Judiciary
e(e#pt ro# pay#ent o t!e inco#e ta( '!ic! 'as t!en
considered as a di#inution o t!eir salaries durin" t!eir
continuance in oice. ($itaan ,s. +IR 12- /+R0 -6.)
SUBJECT MATTER: Public Purpose
The entrustin of the collection of the fees to a
pri$ate in&i$i&ual or corporation &oes not &estro! the
public purpose of the or&inance" &!e ri"!t to ta( depends
upon t!e ulti#ate use, purpose or obAect or '!ic! t!e und
is raised and not on t!e nature or c!aracter o t!e person
or corporation. (Ba"atsin" ,s. Ra#ire8 E. /+R0 136)
&!e su"ar industryDs pro#otion, protection and
ad,ance#ent t!ereore redound "reatly to t!e "eneral
'elare. &!us, t!e contention o plainti t!at t!e 0ct 'as
pro#ul"ated not or public purpose cannot be up!eld.
(Lut8 ,s. 0raneta 96 %5IL 1.6)
>rdinance 99 'as enacted and appro,ed to
increase re,enues o t!e city. &!ereore, it can be said t!at
t!e ordinance 'as enacted or public purpose. (+ity o
Ba"uio ,s. 4e Leon -2 /+R0 916)
It 'as !eld t!at not a sin"le centa,o 'as raised by
ta(ation as t!e unds !eld by t!e +ultural +enter ca#e ro#
donations and contributions. &!us petitioner did not !a,e
a re?uisite personality to contest t!e ,alidity o t!e
e(ecuti,e order as a ta(payer. (Gon8ales ,s. Marcos 62
/+R0 6-.)
4
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
SUBJECT MATTER: Prohibition against delegation of
taxing po"er
8urthermore, the general principle against delegation
of legislative po"er, in conse#uence of the theory of separation
of po"ers is sub%ect to one "ellAestablished exception, namelyJ
legislative powers may be delegated to local government unitsL
to "hich said theory does not apply in respect to matters of local
concern (Pepsi -ola )ottling -o vs -ity of )utuan /9 ,-(.
3)
3egislative powers may be delegated to local
governments in respect of matters of local concern. The
#onstitution grants the autonomous authority to create their own
sources of revenue and to levy taxes (Pepsi -ola )ottling -o
vs Municipality of Tanauan 62 ,-(. 900)
The rule is that so long as the legislature lays down a
policy and the statute establishes a standard, there is not undue
delegation (-ervantes vs .uditor ?eneral 2* P!$4 3+2)
-learly, then President .#uino "as not subAdelegating
her po"er 3B 23 (06), as a delegating la", "as complete in
itself, it sets forth a policy to be carried out and fixed the
standard to "hich the delegate had to conform in the
performance of his functions (Maceda vs Macaraig *25 ,-(.
55*)
&n exception to the general rule, sanctioned by
immemorial practice, permits the central legislative body to
delegate legislative powers to local authorities ((ubi vs ProvFl
)oard)
SUBJECT MATTER: 3xemption of government
agencies or instrumentalities
The tax collected "as declared illegal because the
sales in #uestion are made to instrumentalities of the K,
?overnment, thus, not sub%ect to tax by the Philippine
government (,tandard Bil -ompany vs Iuan Posadas 3+ P!$4
5*+)
Taxes are financial burdens imposed for the purpose
of raising revenues "ith "hich to defray the cost of the operation
of the government. & tax on the properties of the government,
whether national or local, would merely have the effect of ta"ing
money from one poc"et to put it in another poc"et ()oard of
.ssessment .ppeals vs -T. 0 ,-(. //+)
@.PB-B( is liable to pay real property taxes and
special education fund taxes for the years *250 M *209 This is
because of the enactment of 2- 4455 which withdrew from all
units of the government, including government+owned and
controlled corporations li"e /&20#0(, all tax exemptions it
previously enjoyed (@.PB-B( vs Presiding Iudge *20 ,-(.
955)
SUBJECT MATTER: ,itus of sub%ects of taxation
.s "ealth flo"ing from "ithin the taxing %urisdiction of
the Philippines, in consideration of the protection accorded to it
by the Philippines, said income should properly share the
burden of maintaining the government (!o"den vs -ollector
.pril 9, *26+)
The actual situs of the shares of stoc:s is in the
Philippines, the corporation being domiciled therein )esides,
the certificates of stoc: have remained in this country up to the
time of death of 3ye $n other "ords, the o"ner, residing in
-alifornia has extended here her activities "ith respect to her
intangibles so as to avail herself of the protection and benefit of
the Philippine la"s (>ells 8argo )an: vs -ollector 50 P!$4
3/+)
The situs of the shares of stoc:s for purposes of
taxation, being located here in the Philippines and considering
that they are sought to be taxed in this %urisdiction, their fair
mar:et value should be fixed on the basis of the price prevailing
in our country and not of ,an 8rancisco ,toc: 3xchange (ates
(-$( vs Douglas 8isher and )etina 8isher Ianuary /0, *26*)
The 'ilitary .ases &greement does not lend support
to the assertion that said base has become foreign soil or
territory. This country6s jurisdictional rights therein, have been
preserved, not excluding power to tax (>illiam (eagan vs -$(
30 ,-(. 263)
>here the insured is "ithin the Philippines, the ris:
insured against also "ithin the Philippines, and certain incidents
of the contract are to be attended to in the Philippines, such as,
payment of dividends "hen received in cash, sending of an
ad%uster into the Philippines in case of dispute, or ma:ing of
proof of loss, the -ommon"ealth of the Philippines has the
po"er to impose the tax upon the insured, regardless of "hether
the contract is executed in a foreign country and "ith a foreign
corporation -M3(.4-B vs Catco)
SUBJECT MATTER: Multiplicity of situs
&s jurisdiction may exist in more than one
government, that is jurisdiction based on distinct grounds,
citienship of owners, his domicile, source of income, situs of
property and the li"e, efforts have been made to preclude
multiple taxation through the negotiation of appropriate
international conventions (>ells 8argo )an: vs -ollector 50
P!$4 3/+)
8or estate and inheritance tax purposes, the term
&residence& is synonymous "ith the term &domicile& The t"o
terms may be used interchangeably "ithout distinction (-$( vs
4ara)

SUBJECT MATTER: Meaning of Double Taxation
The statute must be sustaine& e$en thouh
&ouble taxation results" Such an arument aainst &ouble
taxation ma! not be in$o(e& where one tax is impose& b!
the state an& the other impose& b! the cit!. (+ity o Ba"uio
,s. 4e Leon -2 /+R0 916)
-ouble taxation is where the same property must be
taxed twice when it should be taxed but once. .oth taxes must
be imposed on the same property or subject matter, for the
same purpose within the same jurisdiction or taxing district,
during the same taxing period, with the same "ind or character
of tax ('illanueva vs -ity of $loilo December /0, *2607 ,an
Miguel )re"ery, $nc vs -ity of -ebuE-ebu Portland -ement
-o vs @aga, -ebu 8ebruary /0, *253)
5
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
.ouble taxation becomes obnoxious onl! where
the taxpa!er is taxe& twice for the benefit of the same
o$ernmental entit!. In t!e case at bar, '!ile t!e ta(payers
'ould !a,e to pay t'o ta(es on t!e sa#e inco#e, t!e
%!ilippine "o,ern#ent only recei,es t!e proceeds o one
ta(. Justice and e?uity de#and t!at t!e ta( on t!e inco#e
s!ould accrue to t!e beneit o t!e %!ilippines, considerin"
t!at it is t!e place '!ere t!e inco#e in ?uestion 'as
earned and '!ere t!e ta(payer is do#iciled. (+IR ,s.
Lednic:y July 11, 196.< %epsi +ola Botllin" +o. ,s.
Municipality o &anauan 69 /+R0 .63)
SUBJECT MATTER: -onstitutionality of double taxation
.ouble Taxation in eneral, is not forbi&&en b!
our fun&amental law. (%epsi +ola Bottlin" +o. ,s. +ity o
Butuan -. /+R0 1< +ity o Manila ,s. Interisland Gas
/er,ice, Inc. 99 %5IL 6.E< ManuacturerDs Lie Insurance
,s. Meer 69 %5IL 121))
There is nothin inherentl! obnoxious in
re*uirement that license fee or taxes be exacte& with
respect to the same occupation, callin or acti$it!, b! both
the state an& the political sub&i$ision" -+ity o Ba"uio ,s.
4e Leon -2 /+R0 916)
This is because double taxation is not prohibited by
the #onstitution 8urthermore, there is double taxation only
"hen the same person is taxed by the same %urisdiction for the
same purpose $n the first case, the annual business tax is a
license tax to engage in the business of "holesale li#uor in
-ebu -ity ,uch license tax constitutes a regulatory measure in
the exercise of police po"er, "hereas that "hich is imposed by
the ordinance is a typical tax or revenue measure (,an Miguel
)re"ery, $nc vs -ity of -ebuE-ebu Portland -ement -o vs
@aga, -ebu 8ebruary /0, *253)
RespondentDs 'are!ousin" business alt!ou"!
carried on in relation to t!e operation o its su"ar central, is
a distinct and separate business ta(able under a dierent
pro,ision o t!e &a( +ode. &!ere can be no double ta(ation
'!ere t!e /tate #erely i#poses a ta( on e,ery separate
and distinct business in '!ic! a party is en"a"ed. (+IR ,s.
5a'aiian-%!ilippine +o#pany 1-3 %5IL -2E)
&!e ar"u#ent a"ainst double ta(ation #ay not be
in,o:ed '!ere one ta( is i#posed by t!e /tate and t!e
ot!er is i#posed by t!e city. This is because it is wi&el!
reconi%e& that there is nothin inherentl! obnoxious in the
re*uirement that license fees or taxes ma! be exacte& with
respect to the same occupation, callin or acti$it! b! both
the State an& the political sub&i$ision thereof. (%unsalan
,s. Municipal Board o Manila 92 %5IL .6)
It is a 'ell-settled rule t!at license ta( #ay be
le,ied upon a business or occupation alt!ou"! t!e land or
property used t!erein is subAect to property ta(.
=urt!er#ore, t!e /tate #ay collect an ad ,alore# ta( on
property used in a callin" and at t!e sa#e ti#e i#pose a
license ta( on t!e pursuit o t!at callin", t!e i#position o
t!e latter :ind o ta( bein" in no sense a double ta(.
(/anc!e8 ,s. +ollector o Internal Re,enue 9E %5IL 66E)
Double taxation has also been defined as taxing the
same person t"ice by the same taxing authority, "ithin the
same %urisdiction and period for the same thing or purpose
,urely, a tax on the plaintiffFs products is different from a tax on
the privilege of storing copra in a bodega situated "ithin the
territorial boundary of the municipality (Procter H ?amble
Philippines vs Municipality of Iagna 29 ,-(. 029)
SUBJECT MATTER: (elations among impact, shifting
and incidence of a tax
-irect taxes are those demanded from the very
person who, it is intended or desired, should pay them, while
indirect taxes are those demanded in the first instance from one
person in the expectation and intention that he can shift the
burden to someone else The contractorFs tax is of course
payable by the contractor but in the last analysis, it is the o"ner
of the building that shoulders the burden of the tax because the
same is shifted by the contractor to the o"ner as a matter of
preservation Thus, it is an indirect tax on the >!B, "hich in
the last analysis is the one that "ill pay the tax indirectly through
the contractor (-$( vs Iohn ?otamco H ,ons *90 ,-(. 36)
SUBJECT MATTER: Tax 3vasion
The purpose of the merger "as to continue the
business of the old corporation, "hose corporate life "as about
to expire, through the ne" corporation to "hich all the assets
and obligations of the former had been transferred Thus, it is
exempt from capital gains tax There "as no taxable gain
derived (-ommissioner vs (ufino *90 ,-(. 9/)
SUBJECT MATTER: 3vidence to prove tax evasion
Since frau& is a state of min&, it nee& not be
pro$e& b! &irect e$i&ence but ma! be inferre& from the
circumstances of the case" &!e ailure o t!e appellant to
declare or ta(ation purposes !is true and actual inco#e
deri,ed ro# !is urniture business at t!e +lar: 0ir Base or
t'o consecuti,e years is an indication o !is raudulent
intent to c!eat t!e "o,ern#ent o its due ta(es. (Republic
,s. Gon8ales 11 /+R0 61.)
SUBJECT MATTER: Tax avoidance not punishable by
la"
The court held that there "as nothing "rong or ob%ectionable
about the estate planning scheme The legal right of a taxpayer
to decrease the amount of what otherwise could be his taxes or
altogether avoid them, by means which the law permits, cannot
be doubted (Delpher Trades -orporation vs $.- *+5 ,-(.
3927 Cutivo ,ons !ard"are vs -$( **0 P!$4 5+*)
SUBJECT MATTER: 3xemption from Taxation
6
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
;nder t!e pertinent la', t!e e(e#ption 'ould
!a,e to be deducted ro# t!e "ross inco#e in order to
deter#ine t!e net inco#e subAect to ta(. )Exemption is an
immunit! or pri$ilee/ the free&om from a chare or bur&en
to which others are sub,ecte&"+ I t!e a#ounts o personal
and additional e(e#ptions i(ed by la' are e(e#pt ro#
ta(ation, t!ey s!ould not be included as part o t!e net
inco#e, '!ic! is ta(able. (Greenield ,s. Meer EE %5IL 19.)
3B @B 603, the charter of the petitioner does not
provide for any real estate tax exemption in its favor $ts
exemption is limited to direct and indirect taxes, duties or fees in
connection "ith the importation of e#uipment not locally
available 8urther, even granting that the national government
o"ns the properties in #uestion, the exemption "ould not apply
because their beneficial use has been granted to petitioner, a
taxable entity Taxation is the rule and exemption is the
exception. &ny claim for tax exemption is strictly construed
against the claimant (4ight (ail Transit .uthority vs -).. 39/
,-(. 623)
1xemption from taxes does not include exemptions
from license fee (M3(.4-B vs Public ,ervice -ommission)
The 4ight (ail Transit .uthority and the Metro Transit
Brgani=ation function as service oriented entities, "hich provide
valuable transportation facilities to the paying public $n the
absence, ho"ever, of any express grant of exemption in their
favor, they are sub%ect to the payment of real property taxes
(4(T. vs -).. ?( @o*/53*6, */ Bct /000
SUBJECT MATTER: (ationale of Tax 3xemptions
$o ta( e(e#ption is "i,en 'it!out any
reason t!ereor. Its a,o'ed purpose is so#e public beneit
or interest, '!ic! t!e la'-#a:in" body considers suicient
to oset t!e #onetary loss entailed in t!e "rant o suc!
e(e#ption. (+IR ,s. %!ilippine 0ce Lines, Inc. -2 /+R0 91-<
+IR ,s B>&57L%>)
SUBJECT MATTER: ?rounds for Tax 3xemption
&!e purpose o Republic 0ct $o. 12, '!ic!
"ranted t!e ta( e(e#ption, is to encoura"e t!e
establis!#ent or e(ploitation o ne' and necessary
industries to pro#ote t!e econo#ic "ro't! o t!e country.
It is a or# o subsidy ro# t!e "o,ern#ent to coura"eous
entrepreneurs sta:in" t!eir capital in an un:no'n ,enture.
/uc! entrepreneur aces uncertainty and assu#ed a ris:
bi""er t!an one en"a"in" in a ,enture already :no'n and
de,eloped. ;sually loss is incurred rat!er t!an proit
#ade. (Marcelo /teel +orporation ,s. +ollector o Internal
Re,enue 139 %5IL 9-1)
SUBJECT MATTER: -ontractual 3xemptions
The rule is that a special and local statute applicable
to a particular case is not replaced by the later statute "hich is
general in its terms, provisions and application even if the terms
of the general act are broad enough to include the cases in the
special la" The presumption is that special statutes are
exceptions to the general law because they pertain to a special
charter granted to meet a particular set of conditions and
circumstances (Province of Misamis Briental vs -agayan
electric Po"er and 4ight -ompany $nc *0* ,-(. 30)
%ranchises spring from contracts between the
sovereign power and private citiens made upon valuable
considerations, for purposes of individual advantage as well as
public benefit $t is generally considered that the obligation
resting upon the grantee to comply "ith the terms and
conditions of the grant constitutes a sufficient consideration
,uch being the case, the franchise is the la" bet"een the
parties and they are bound by the terms thereof To allo"
petitionerFs claim "ould be to defy and ignore the superiority of
a legislative franchise granted by a special enactment over a
mere authori=ation or permit granted in accordance "ith the
provisions of la"s of general application (-ommissioner of
$nternal (evenue vs -T. *2+ ,-(. 999)
The #onstitution provides that a franchise is subject to
amendment, alteration or repeal by the #ongress when the
public interest so requires (-agayan 3lectric vs -$()
SUBJECT MATTER Tax 3xemptionJ -onstruction
,nless expressly provided by law, conviction for
failure or neglect to pay a tax does not include payment of
indemnity to the $tate in the amount of the tax not paid. (People
vs Iean .rnault 2/ Phil /+/)
@othing is better settled than that the Philippines
being independent and sovereign, its authority may be
exercised over its entire domain There is no portion thereof that
is beyond its po"er >ithin its limits, its decrees are supreme, its
commands paramount $ts la"s govern therein, and everyone to
"hom it applies must submit to its terms That is the extent of its
%urisdiction, both territorial and personal @ecessarily, li:e"ise, it
has to be exclusive $f it "ere not thus, there is a diminution of
its sovereignty ((eagan vs -$( ?( @o 4A/6352 December
/5, *262)
$f it had been the legislative intent to exempt petitioner
from paying a tax on the use of imported e#uipments, the
legislative body could have easily done so by expanding the
provisions of par 2 and adding to the exemptions such "ords as
;compensating taxes< or ;purchases from abroad for use in its
business< and the li:e !e cannot ignore the principle that
express mention in a statute of one exemption precludes
reading others into it (Manila 3lectric -ompany vs 'era 65
,-(. 3+*)
The condonation of a tax liability is equivalent and is
in the nature of a tax exemption. .eing so, it should be
sustained only when expressed in explicit terms, and it can not
be extended beyond the plain meaning of those terms. It is the
universal rule that he who claims an exemption from his share
of the common burden of taxation must justify his claim by
showing that the 3egislature intended to exempt him by words
too plain to be mista"en (,urigao -onsolidated Mining co, inc
vs -$( , et al ?( @o 4A*9050 December /6, *263)
,ince the specific language of the .ct spea: of &urea
formaldehyde,& and petitioner admittedly did import urea and
formaldehyde separately, its plea could be granted only if "e
could construe the above provision of la" to read &urea and
formaldehyde &s a refund it undoubtedly parta"es of a nature
7
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
of an exemption, it cannot be allowed unless granted in the
most explicit and categorical language ((esins, $nc vs .uditor
?eneral, et al ?( @o 4A*5000 Bctober /2, *260)
The legal principle on the matter is firmly established
and well+observed7 exemption from taxation is never presumed8
for tax exemption to be recognied, the grant must be clear and
expressed8 it cannot be made to rest on vague implications. Tax
exemption must be clearly expressed and cannot be
established by implication. 1xemption from a common burden
cannot be permitted to exist upon vague implication (Davao
4ight and Po"er co, $nc vs -ommissioner of -ustoms, 3T .4
?( @o 4A/0532 March /2, *25/,
>onder Mechanical 3ngineering -orp vs -T., 1T &3. *.(.
/os. 3+99:;< = 3+95:<: >une ?;, 4@5<A
The exemption contained in the tax statutes must be
strictly construed against the one claiming the exemption
because the law does not loo" with favor on tax exemptions and
that he who would see" to be thus privileged must justify it by
words too plain to be mista"en and too categorical to be
misinterpreted. The rule on enumeration is that the express
mention of one person, thing, act or conse#uence is constructed
to exclude all others 4a"s granting exemption from tax are
construed strictissimi juris against the taxpayer and liberally in
favor of the taxing po"er Taxation is the rule and exemption is
the exception .s a rule finally, claims of tax exemption are
construed strongly against the claimant They must also be
sho"n to exist clearly and categorically, and supported by clear
legal provisions Taxes are the lifeblood of the nation Their
primary purpose is to generate funds for the ,tate to finance the
needs of the citi=enry and to advance the common "ill
(@.PB-B( vs The Province of .lbay *06 ,-(. *20
-yanamid Philippines $nc vs ca 3// ,-(. 632, -$( vs Niener
6+ ,-(. *9/, -ommissioner of -ustoms vs -T. 3/0 ,-(.
0//, -$( vs Mitsubishi Metal -orporation, 3t .l *0* ,-(. /*9)
.nd, even if construction and interpretation of the la"
is insisted upon, follo"ing another fundamental rule that
statutes are to be construed in the light of purposes to be
achieved and the evils sought to be remedied. $t "ill be noted
that the legislature in amending ,ection *20 of the Tax -ode by
(epublic .ct 3*56, as appearing in the records, intended to
provide incentives and inducements to bolster the shipping
industry and not the business of stevedoring (4u=on
,tevedoring -orporation vs -ourt of Tax .ppeals ?( no 4A
30/3/ Iuly /2, *200)
$f there is an express mention or if the taxpayer falls
"ithin the purvie" of the exemption by clear legislative intent,
then the rule on strict construction "ill not apply (-ommissioner
of $nternal (evenue vs .rnoldus -arpentry ,hop, ,nc et al
4<@ $#(& 4@A
This -ourt has laid do"n the rule that as the po"er of
taxation is a high prerogative of sovereignty, the relin#uishment
is never presumed and any reduction or diminution thereof "ith
respect to its mode or its rate, must be strictly construed, and
the same must be coached in clear and unmista:able terms in
order that it may be applied (8loro -ement -orp vs )en%amin
N ?orospe /00 ,-(. 900)
>e hold that under ,ection /2 of the -harter of the
-ity of )acolod they are so exempt $t bears emphasis that the
said section does not contain any #ualification "hatsoever in
providing for the exemption from real estate taxes of &lands and
buildings o"ned by the -ommon"ealth or (epublic of
Philippines& !ence, when the legislature exempted lands and
buildings owned by the government from payment of said taxes,
what it intended was a broad and comprehensive application of
such mandate, regardless of whether such property is devoted
to governmental or proprietary purpose. (,,, vs -ity of
)acolod **+ ,-(. 9*/)
.s the income tax and the obligation to pay the same
are created by statute, as "ell as its collection and payment,
and the $nternal (evenue -ode fails to provide for the collection
of said tax in criminal proceedings, conviction for failure or
neglect to pay such tax does not include payment of indemnity
to the $tate in the amount of the tax not paid, nor can subsidiary
imprisonment be imposed in case of insolvency in the payment
of such indemnity The government is free to avail itself of the
civil remedies provided by the $nternal (evenue -ode to collect
the tax involved (P.4 vs .rnault)
$t is true that in the construction of tax statutes tax
exemptions (and deductions are of this nature) are not favored
in the la", and are construed strictissimi juris against the
taxpayer !o"ever, it is e#ually a recogni=ed principle that
"here the provision of the la" is clear and unambiguous, so that
there is no occasion for the court1s see:ing the legislative intent,
the la" must be ta:en as it is, devoid of %udicial addition or
subtraction ((8M vs -$()
SUBJECT MATTER: .mnesty
$t is therefore decisively clear that (B 9A05 rec:oned
the applicability of the tax amnesty from .ugust //, *206 A the
date "hen 3B 9* too: effect !o"ever, 3xecutive Brder @o
9* contained no limitation "hatsoever delimiting its applicability
to assessments made prior to its effectivity (ather, the said
3B 9* merely provided for a general statement covering all tax
liabilities incurred from *20*A*20+ $f 3xecutive Brder @o 9*
had not been intended to include *20*A*20+ tax liabilities
already assessed (administratively) prior to // .ugust *206, the
la" could have simply so provided in its exclusionary clauses $t
did not 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 sub%ect only to cases specifically
excepted by it ((epublic, vs Precision Printing inc O?( @o
*02*23 8ebruary *, /000P)
>here the disclosure of such previously untaxed
income or "ealth "as not voluntary but rather the
accompaniment or result of tax cases or tax assessments
already pending as of 3* December *253, the claimant is not
entitled to the benefits of PD @o 350 & tax amnesty, much li"e
to a tax exemption, is never favored nor presumed in law and if
granted by statute, the terms of the amnesty li"e that of a tax
exemption must be construed strictly against the taxpayer and
liberally in favor of the taxing authority (Pp vs -astaQeda ?(
@o 4A9600* ,eptember *+, *200)
The mere filing of tax amnesty return under PD *590
and *090 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 tax payer must have
voluntarily disclosed his previously untaxed income and must
have paid the corresponding tax on such previously untaxed
income $t also bears noting that a tax amnesty, much li:e a tax
8
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
exemption, is never favored nor presumed in la" and if granted
by statute, the terms of the amnesty li:e that of a tax exemption
must be construed strictly against the taxpayer and liberally in
favor of the taxing authority ()aQas Ir vs -. O?( @o
*0/265 8ebruary *0, /000P)
. tax amnesty is a general pardon or intentional
overloo:ing by the state of its authority to impose penalties on
persons other"ise guilty of evasion or violation of revenue or
tax la" $t parta:es of an absolute forgiveness or "aiver by the
government of its right to collect "hat is due it and to have tax
evaders "ho "ish to relent a chance to start "ith a clean slate
$f granted, the terms must be construed strictly against the terms
of the amnesty and liberally in favor of the taxing authority (-$(
vs Marubeni -orp ?( @o *35355, *0 Dec /00*)
SUBJECT MATTER: @ature of $nternal revenue 4a"s
Petitioner1s contention that during the last "ar and as
a conse#uence of enemy occupation in the Philippines &there
"as no taxable year& "ithin the meaning of our internal revenue
la"s because during that period they "ere unenforceable, is
"ithout merit. It is well "nown that our internal revenue laws are
not political in nature and as such were continued in force
during the period of enemy occupation and in effect were
actually enforced by the occupation government. .s a matter of
fact, income tax returns "ere filed during that period and income
tax payment "ere effected and considered valid and legal ,uch
tax la"s are deemed to be the la"s of the occupied territory and
not of the occupying enemy (3milio y !ilado vs -ollector of
$nternal (evenue, et al *00 Phil /00)
>ith respect to the petitioner1s contention that the
application of the amended provision (no" ,ec +*Ad of the Tax
-ode) to the cases at bar "ould run counter to the constitutional
restriction against the enactment of ex post facto la"s, it is to be
noted that the collection of interest in these cases is not penal in
nature, thus the imposition of . . . interest is but a just
compensation to the state for the delay in paying the tax, and
for the concomitant use by the taxpayer of funds that rightfully
should be in the government's hands The fact that the interest
charged is made proportionate to the period of delay constitutes
the best evidence that such interest is not penal but
compensatory. (-entral .=ucarera Don Pedro vs -ourt of Tax
.ppeals, et al /0 ,-(. 399)
SUBJECT MATTER: -onstruction of Tax 4a"s
$t is our considered vie" that the freight revenues
accruing to the taxpayer in the present case, even though
collected abroad and, not remitted to its branch office in the
Philippines, are part of its foreign exchange operations and
sub%ect to the common carrier1s tax, computed at the free
mar:et rate then prevailing (-$( vs (oyal $nterocean 4ines, et
al ?( @o 4A/6006 Iuly 30, *250)
The tax on alcohol did not attach as soon as it "as in
existence as such, but on the finished product .nd this must be
so, other"ise a great in%ustice "ould be caused upon a duly
licensed rectifier, "ho, li:e the respondent herein, "ill be made
to pay the specific tax on the alcohol lost thru evaporation, from
"hich no one has been benefited, based on the provision of
la"s then extant, of doubtful application In every case of doubt,
tax statutes are construed most strongly against the
government and in favor of the citiens, because burdens are
not to be imposed beyond what the statutes expressly and
clearly import That in cases "here alcohol has already been
rectified either by original and continuous distillation or by
redistillation is further rectified, no loss for rectification and
handling shall be allo"ed and the rectifier thereof shall pay the
specific tax due on such losses (,ec +, (ep .ct @o *600)
(-$( vs 4a TondeQa $nc, 3T .4 ?( @o 4A*093* Iuly
3*, *26/)
. statute "ill not be construed as imposing a tax
unless does so clearly, expressly and it unambiguously $t is an
ancient principle that a tax can not be imposed "ithout clear and
express "ords for that purpose .ccordingly, the general rule of
re#uiring adherence to the letter in construing statutes applies
"ith peculiar strictness to tax la"s and the provisions of a taxing
act are not to be extended by implication The rule is that taxes
may not be imposed by implication, and "a tax statute is to be
construed strictly and against the subjection to a tax liability
where the question is whether a matter, property or person is
subject to the tax. (Marindu#ue $ron Mines, $nc vs Mun
-ouncil of !inabangan ,amar, 3T .4 ?( @o 4A*02/9 Iune
30, *269)
The exception contained in the tax statutes must be
strictly construed against the one claiming the exception. (Knion
?arment $nc vs -T., 3T .4 ?( @o 4A*6002 Ianuary 3*,
*26/7 Tuason vs 4ingad +0 ,-(. 50)
SUBJECT MATTER: @on (etroactivity of (epeal of
regulations or rulings
It is a settled rule in statutory construction that a
statute operates prospectively only and never retroactively,
unless the legislative intent to the contrary is made manifest
either by the express terms of the statute or by necessary
implication. $n every case of doubt, the doubt must be resolved
against the retrospective effect There is nothing in the context
of the provision in #uestion that "ould manifest the 4egislature1s
intention to have the provision apply to taxes due in the past
$ndeed, li:e other statutes, tax la"s operate prospectively,
"hether they enact, amend or repeal, unless, as aforesaid, the
purpose of the 4egislature to give retrospective effect is
expressly declared or may clearly be implied from the language
used (-ebu Portland -ement $nc vs -$( ?( @o 4A/0+63
Bctober /2, *260)
SUBJECT MATTER: 8orce and 3ffect of (egulations
It can not be denied that the regulation is merely a
directive to the tax officers8 it does not purport to change or
modify the law7 it does not create a liability to the stamp tax
"hen the value of the goods does not appear on the face of the
receipt The practical usefulness of the directive becomes
evident "hen account is ta:en of the fact that tax officers are in
no position to "itness the issuance of receipts and chec: the
value of the goods for "hich they are issued ($nterprovincial
)us -o $nc vs -$( 20 Phil /20)
The validity of ,ection */5 of (egulation @o /6
should be upheld under the principle of legislative approval
by reenactment ,ection */5 of said regulation sought to
implement ,ection *992 (#) and (r) of the (evised
9
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
.dministrative -ode, and the latter provisions "ere
reenacted in ,ection //5 of the @ational $nternal (evenue
-ode ,ection */5 is in the same (egulations as ,ection
*/* (Mindanao )us -o vs -$( ?( @o 4A*9050
8ebruary /9, *26*)
SUBJECT MATTER: .dministrative $nterpretation and
the -ourts
,ection /6+2 of the 3lection 4a", in our opinion,
refers and applies only to those persons "ho are ineligible or
dis#ualified to hold office for not possessing the necessary
#ualifications provided for by la" $n other "ords, said section
/6+2 should be interpreted not in connection "ith section 905 but
sections **3 or */0 of the 3lection 4a", depending as to "hether
the person in #uestion is a senatorAelect or representativeAelect,
and section 909 se# and 93* and 93/ of said la" ,aid section
/6+2, as its very "ords indicate, refers to a person "ho assumes
the office to "hich he had been elected "ithout possessing the
necessary #ualifications to hold public office as provided by la"
-elinquency in the payment of taxes is no longer a
disqualification for assuming a public office. $ection B;5 has
been impliedly repealed (People vs !ernande= +2 Phil /5/)
The underlying principle of all construction is that the
intent of the legislature should be sought in the words employed
to express it, and that when found it should be made to govern.
If the words of the law seem to be of doubtful import, it may then
perhaps become necessary to loo" beyond them in order to
ascertain what was in the legislative mind at the time the law
was enacted8 what the circumstances were, under which the
action was ta"en8 what evil, if any, was meant to be redressed
(Molina vs (afferty 35 Phil +9+)
SUBJECT MATTER: @onAretroactivity of (epeal of
(egulations or (ulings
>hat is applicable in the case at bar is still the
(evenue (uling of Ianuary /*, *200 because private
respondent )urroughs 4imited paid the branch profit remittance
tax in #uestion on March *9, *252 Memorandum -ircular @o 0A
0/ dated March *5, *20/ cannot be given retroactive effect in
the light of ,ection 3/5 of the @ational $nternal (evenue -ode
"hich provides for the non+retroactivity of rulings in cases where
it will be prejudicial to the taxpayer except in the following cases
CaA where the taxpayer deliberately misstates or omits material
facts from his return or in any document required of him by the
.ureau of Internal (evenue8 CbA where the facts subsequently
gathered by the .ureau of Internal (evenue are materially
different from the facts on which the ruling is based, or CcA
where the taxpayer acted in bad faith. (-$( ', )urroughs 4td
?( @o 4A666+3 Iune *2, *206)
SUBJECT MATTER: Prescription
Bnly recently in ?( @o**+5*/, -ommission of
$nternal (evenue vs -ourt of .ppeals, %ebruary /+, *222, "e
held, that the threeAyear prescriptive period of tax assessment of
contractorFs tax should be computed at the time of the filing of
the &final annual percentage tax return, "hen it can be finally
ascertained if the taxpayer still has an unpaid tax, and not from
the tentative #uarterly payments (ProtectorFs ,ervices vs -.
O?( @o **0*56 .pril */, /000P
$t is of course true on Bctober *9, *2+*, .bla=a1s
accountants re#uested a reinvestigation of the assessment of
the income taxes against him, the period of prescription of
action to collect the taxes "as suspended (,ec 333, - . @o
966) The provision of la" on prescription "as adopted in our
statute boo:s upon recommendation of the tax commissioner of
the Philippines "hich declaresJ ,nder the former law, the right
of the *overnment to collect the tax does not prescribe.
Dowever, in fairness to the taxpayer, the *overnment should be
estopped from collecting the tax where it failed to ma"e the
necessary investigation and assessment within < years after the
filing of the return and where it failed to collect the tax within <
years from the date of assessment thereof. just as the
government is interested in the stability of its collection, so also
are the taxpayers entitled to an assurance that they will not be
subjected to further investigation for tax purposes after the
expiration of a reasonable period of time ('ol $$, (eport of the
Tax -ommission of the Philippines, pp 3/*A3//7 (epublic vs
.bla=a *03 Phil **0+)
SUBJECT MATER:,ubse#uent (epealE.mendment
)riefly, then, the time for the payment of the internalA
revenue tax on merchandise, from the date of arrival in port until
%ust before it is "ithdra"n from the customhouse, depending
upon the "ill of the importer or o"ner, the law in force at the
time the payment is made must prevail8 because, voluntary
human acts are governed by the laws in force at the time they
are done, unless there is a legal provision to the contrary
(4u=on )ro:erage vs Posadas ?( @o 4A/50// December
/9, *2/5)
SUBJECT MATTER: -ompensationE,etABff
>e have consistently ruled that there can be no offA
setting of taxes against the claims that the taxpayer may have
against the government . person cannot refuse to pay a tax on
the ground that the government o"es him an amount e#ual to or
greater than the tax being collected The collection of a tax
cannot a"ait the results of a la"suit against the government
The $nternal (evenue Taxes can not be the sub%ect of setAoff or
compensation & claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set+off under the
statutes of set+off, which are construed uniformly, in the light of
public policy, to exclude the remedy in an action or any
indebtedness of the state or municipality to one who is liable to
the state or municipality for taxes @either are they a proper
sub%ect of recoupment since they do not arise out of the contract
or transaction sued on Taxes are not in the nature of contracts
between the party and party but grow out of duty to, and are the
positive acts of the government to the ma"ing and enforcing of
which, the personal consent of individual taxpayers is not
required (8rancia vs $.- 3T .4 ?( @o 4A65692 Iune /0,
*2007 )ut see Domingo vs ?arlitos, supra)
.t least as of date of %udgment, more than *0 years
from Iune *0, *2+0, the date "hen, as expressly stated in the
certificates of indebtedness, the same "ere redeemable, the
obligation thereby evidenced "as un#uestionably already due
and payable7 hence, ,ampaguita "as entitled to a %udgment
against the (epublic for the payment of the face value of the
certificates, the same having already been presented and
10
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
surrendered "ithin the said period of ten years (on Iune 2,
*26*) to the Treasurer of the Philippines $n other "ords, there
can be no #uestion that after the lapse of ten (*0) years from the
declared date of redeemability, payment of the indebtedness
"as already exigible ((epublic vs 3ricta and ,ampaguita
Pictures ?( @o 4A3+/30 .pril /*, *202)
SUBJECT MATTER: (ealty Tax
(ealty tax is enforced throughout the 2hil. and not merely
in a particular municipality or city but the proceeds of the tax
accrue to the province, city, municipality and barangay where
the realty taxed is situated. (Meralco ,ecurities vs -).., **9
,-(. /60)
& charge imposed only on property owners benefited is a
special assessment rather than a tax not withstanding that the
statute calls it a tax. The rule is that an exemption form taxation
does not include exemption from special assessment. .ut the
power to tax carriers with it the power to levy a special
assessment (.postolic Prefect vs Treas of )aguio 5* P!$4
+95)
SUBJECT MATTER: Iurisdiction over Petition for
Prohibition
The trial court has no %urisdiction to entertain a petition
for prohibition absent petitionerFs payment, under protesr, of the
tax assessed as re#uired by ,ec 69 of the (PT- 2ayment of
the tax assessed under protest, is a condition sine qua non
before the trial court could assume jurisdiction over the petition,
and failure to do so, the (T# has no jurisdiction to entertain it
(M3(.4-B vs )arlis ?( @o **9/3*, *0 May /00*)
SUBJECT MATTER: (efund
The right to claim for refund of customs duties is
specifically governed by ,ec *500 of the Tariff and -ustoms
-ode providing that in all claims for refund of customs duties,
the -ollector to "hom such customs duties are paid and upon
receipt of such claim is mandated to verify the same by the
records of his office $f such claim is found correct and in
accordance "ith la", the -ollector shall certify the same to the
commissioner "ith his recommendations together "ith all the
necessary papers and documents This is precisely one of the
reasons "hy the -T. upheld the dismissal of the case on the
ground that the -T.Fs %urisdiction under the Tariff and -ustoms
-ode is not concurrent "ith that of the respondent
commissioner of -ustoms due to the absence of any
certification from the -ollector of -ustoms of Manila (@estleF
Phils 's -. ?( @B *39**9, 6 Iuly /00*)
SUBJECT MATTER: (eal Property Tax7 @otice of Tax
Delin#uency to >hom ?iven
%or purposes of real property taxation, the registered
owner of a property is deemed the taxpayer and, hence, the
only one entitled to a notice of tax delinquency and the resultant
proceedings relative to an auction sale. 2etitioners, who
allegedly acquired the property through an unregistered deed of
sale, are not entitled to such notice, because they are not the
registered owners (Talusan vs Tayag ?( @o *33620 9 .pril
/00*)
SUBJECT MATTER: @ature of Proceedings of .uction ,ale for
the -ollection of delin#uent Taxes
,nli"e registration proceedings, which are in rem,
cases involving an auction sale of land for the collection of
delinquent taxes are in personam Thus, notice by publication,
though sufficient in proceedings in rem, does not as a rule
satisfy the re#uirement ofr proceedings in personam .s, such,
mere publication of the notice of delin#uency "ould not suffice
$t "as therefore still incumbent upon the city treasurer to send
the notice of tax delin#uency directly to the taxpayer in order to
protect the interests of the latter
SUBJECT MATTER: Po"er of the )$( -ommissioner
to .ssign or (eassign Personnel
The -ommissioner of $nternal (evenue is authori=ed
to assign or reassign internal revenue officers or employees of
the )$( as the exigencies of service may re#uire, "ithout
demotion in ran: and salary in accordance "ith -ivil ,ervice
(ules ('in=onsA-hato vs Renorosa, ?( @o */0+32)
SUBJECT MATTER: TaxpayerFs ,uit
It bears stressing that a taxpayer6s suit refers to a
case where the act complained of directly involves the illegal
disbursement of public funds derived from taxation. $nasmuch
as no public funds raised by taxation are involved in this case,
and in the absence of any allegations by petitioners that public
funds are being misspent or illegally expended, petitioners, as
taxpayers, have no legal standing to assail the legality of the
'8. ()ayan, et al vs Ramora, et al ?( @o *30+50, *0 Bct
/000)
SUBJECT MATTER: ,uspension of the (unning of the
,tatute of 4imitations of Tax -ollection
The threeAyear prescriptive period of tax assessment
of contractorFs tax should be computed at the time of the filing of
the ;final annual percentage tax return,< "hen it can be finally
ascertained if the taxpayer still has an unpaid tax, and not from
the tentative #uarterly payments
,ec /5* of the *206 Tax -ode provides that the
running of the statute of limitations on the ma:ing of assessment
and the beginning of distraint or levy or a proceeding in the court
for collection, in respect of any deficiency, shall be suspendedJ
* 8or the period during "hich the
-ommissioner is prohibited from ma:ing the
assessment or beginning distraint or levy or
proceedings in court and for sixty days thereafter7
/ >hen the taxpayer re#uest for
reinvestigation is granted by the -ommissioner
11
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
3 "hen the taxpayer cannot be located in
the address given by him in the return filed upon
"hich a tax is being assessed or collected
The running of the statute of limitations "ill not be suspendedJ
* >hen the "arrant of distraint and levy is duly
served upon the taxpayer, his authori=ed
representative, or a member of hisa household "ith
sufficient discretion, and no property could be located
/ >hen the taxpayer is out of the country
(Protectors ,ervices $nc vs -. ?( @o **0*56, */
.pril /000)
SUBJECT MATTER: Deductibility of Iudicial 3xpenses
>udicial expenses are administration expenses.
&dministration expenses, as an allowable deduction from the
gross estate of the decedent for the purposes of arriving at the
value of the net estate must be )essential to the collection of the
assets, payment of debts or the distribution of the property to
the persons entitled to it.E The expenses must be essential to
the proper settlement of the estate. 1xpenditures incurred for
the individual benefit of the heirs, devisees or legatees are not
deductible $n the case at bar, the notarial fee paid for the
extra%udicial settlement is clearly a deductible expense since
such settlement effected a distribution of Pedro Pa%onarFs estate
to his la"ful heirs ,imilarly, the attorneyFs fees paid to P@) for
acting as the guardian of Pedro Pa%onarFs property during his
lifetime should also be considered as deductible expense (-$(
vs -. ?( @o */3/06, // March /000)
SUBJECT MATTER: Tax on $nstallment ,ale
.s a general rule, the "hole profit accruing from the
sale of property is taxable as income in the year the sale "as
made )ut, if not all of the sale price is received during such
year, and a statute provides that the income shall be taxable in
the year in "hich it is ;received< the profit from an installment
sale is to be apportioned bet"een or among the years in "hich
such installments are paid and received .lthough the proceed
the price of a discounted promissory note is not considered part
of the initial payment, it is still taxable income for the year it "as
converted into cash ()aQas vs -. ?( @o *0/265, *0 8eb
/000)
SUBJECT MATTER: 4ocal Taxation
The exclusionary clause contained in the tax
provisions of ,ec *33 (*) of the 4ocal ?overnment code must
not be held to have had the effect of "ithdra"ing the express
po"er of the 4TB to cause the registration of all motor vehicles
and the issuance of licenses for the driving thereof. Taxation
and 2olice 2ower are for public purpose and legislative in
nature, the similarities just about end there. &lthough correlative
to each other in many aspects, the grant of one does not
necessarily carry the grant of the other (4TB vs -ity of )utuan
?( @o *3*+*/, /0 Iuly /000)
SUBJECT MATTER: (efund7 Prescriptive Period
The two+year prescriptive period for claiming refund
commences to run on the date of the filing of the adjusted final
tax return The court finds that the petition for revie" is filed out
of time 8)T-, after the end of its corporate life on Iune 30,
*20+, should have filed its income tax return "ithin 30 days after
the cessation of its business or 30 days after the approval of the
.rticles of Merger ()P$ vs -$(, ?( @o *996+3, /0 .ug /00*)
SUBJECT MATTER: Protest
If the protest is denied in whole or in part, or is not
acted upon within 4:; days from the submission of documents,
the taxpayer adversely affected by the decision or inaction may
appeal to the #T& within ?; days from receipt of the said
decision, or from the lapse of then 4:;+day period, otherwise
the said period shall become final, executory and demandable.
>urisprudence dictates that a final demand letter for payment of
delinquent taxes may be considered a decision on a disputed or
protested assessment (-$( vs $sabela -ultural -orporation,
?( @o *3+/*0, ** Iuly /00*)
12