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COMMISSIONER OF INTERNAL REVENUE vs.

PHILIPPINE ISLANDS,
G.R. No. 134062 April 17, 2007, First Division

BANK

OF

THE

FACTS:
Commissioner of Internal Revenue (CIR) assessed respondent BPIs
deficiency percentage and documentary stamp taxes for the year 1986 in
the total amount of P129,488,656.63. BPI replied that they were not
informed, even in the vaguest terms, why it is being assessed a deficiency
and requested that the examiner concerned be required to state why he
believes the taxpayer has a deficiency documentary and percentage taxes.
CIR however, did not recognize the letter from BPI as a valid protest. BPI
requested a reconsideration of the assessments but was denied.
Upon appeal by BPI on Feb. 1992, CTA dismissed the case for lack of
jurisdiction. It ruled that BPI failed to protest on time under Section 270 of
the National Internal Revenue Code (NIRC) of 1986 and Section 7 in
relation to Section 11 of RA 1125.
The CA reversed the decision and resolution and ruled that the October 28,
1988 notices were not valid assessments because they did not inform the
taxpayer of the legal and factual bases therefor. It declared that the proper
assessments were those contained in the May 8, 1991 letter which
provided the reasons for the claimed deficiencies. Thus, it held that BPI
filed the petition for review in the CTA on time. Hence, the appeal by CIR.
ISSUE: Whether or not BPI failed to protest on time, and should be
absolved of its liability.
HELD:
Yes. From all the foregoing discussions, SC concludes that [BPI] was indeed
aware of the nature and basis of the assessments, and was given all the
opportunity to contest the same but ignored it despite the notices.
Considering that the October 28, 1988 notices were valid assessments, BPI
should have protested the same within 30 days from receipt thereof. The
December 10, 1988 reply it sent to the CIR did not qualify as a protest
since the letter itself stated that as soon as this is explained and clarified in
a proper letter of assessment, we shall inform you of the tax payers
decision on whether to pay or protest the assessment. Hence, by its own
declaration, BPI did not regard this letter as a protest against the
assessments. As a matter of fact, BPI never deemed this a protest since it
did not even consider the October 28, 1988 notices as valid or proper
assessments. The inevitable conclusion is that BPIs failure to protest the
assessments within the 30-day period provided in the former Section 270

meant that they became final and unappealable. Thus, the CTA correctly
dismissed BPIs appeal for lack of jurisdiction.
Either way (whether or not a protest was made), we cannot absolve BPI of
its liability under the subject tax assessments. We realize that these
assessments (which have been pending for almost 20 years) involve a
considerable amount of money. Be that as it may, we cannot legally
presume the existence of something which was never there. The state will
be deprived of the taxes validly due it and the public will suffer if taxpayers
will not be held liable for the proper taxes assessed against them:
Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure. A principal attribute of
sovereignty, the exercise of taxing power derives its source from the very
existence of the state whose social contract with its citizens obliges it to
promote public interest and common good. The theory behind the exercise
of the power to tax emanates from necessity; without taxes, government
cannot fulfill its mandate of promoting the general welfare and well-being
of the people.

COMMISSIONER OF INTERNAL REVENUE vs. MANUEL B. PINEDA

G.R. No. L-22734 September 15, 1967, EN BANC
FACTS:
On May 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas,
and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer. The
estate was divided among and awarded to the heirs and the proceedings
terminated on June 8, 1948. Manuel Pineda's share amounted to about
P2,500.00. BIR found that the corresponding income tax returns were not
filed in the years 1945, 1946, 1947 and 1948. Subsequently, he appealed
to the CTA alleging that he was appealing "only that proportionate part or
portion pertaining to him as one of the heirs." CTA rendered judgment
reversing the decision of the Commissioner on the ground that his right to
assess and collect the tax has prescribed. The Commissioner appealed and
this Court affirmed the findings of the Tax Court in respect to the
assessment for income tax for the year 1947 but held that the right to
assess and collect the taxes for 1945 and 1946 has not prescribed. (5
years) The CIR has appealed.
ISSUE: Can CIR (as proposed in the appeal) hold Manuel B. Pineda liable for
the payment of all the taxes found by the Tax Court to be due from the

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estate in the total amount of P760.28 instead of only for the amount of
taxes corresponding to his share in the estate?
HELD:
YES. We hold that Pineda is liable for the assessment as an heir and as a
holder-transferee of property belonging to the estate/taxpayer. As an heir
he is individually answerable for the part of the tax proportionate to the
share he received from the inheritance. His liability, however, cannot
exceed the amount of his share.
All told, the Government has two ways of collecting the tax in
question:
1. One, by going after all the heirs and collecting from each one of them
the amount of the tax proportionate to the inheritance received. This
remedy was adopted in Government of the Philippine Islands v. Pamintuan,
supra. In said case, the Government filed an action against all the heirs for
the collection of the tax. This action rests on the concept that hereditary
property consists only of that part which remains after the settlement of all
lawful claims against the estate, for the settlement of which the entire
estate is first liable.6 The reason why in case suit is filed against all the
heirs the tax due from the estate is levied proportionately against them is
to achieve thereby two results: first, payment of the tax; and second,
adjustment of the shares of each heir in the distributed estate as lessened
by the tax.
2. Another remedy, pursuant to the lien created by Section 315 of the Tax
Code upon all property and rights to property belonging to the taxpayer for
unpaid income tax, is by subjecting said property of the estate which is in
the hands of an heir or transferee to the payment of the tax due, the
estate. This second remedy is the very avenue the Government took in this
case to collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the
most expeditious way to collect the tax as may be envisioned in the
particular provision of the Tax Code above quoted, because taxes are the
lifeblood of government and their prompt and certain availability is an
imperious need.7 And as afore-stated in this case the suit seeks to achieve
only one objective: payment of the tax. The adjustment of the respective
shares due to the heirs from the inheritance, as lessened by the tax, is left
to await the suit for contribution by the heir from whom the Government
recovered said tax.
MISAEL P. VERA, CIR and JAIME ARANETA, as Regional Director,
Revenue Region No. 14 vs. HON. JOSE F. FERNANDEZ

G.R. No. L-31364 March 30, 1979, First Division

FACTS: Motion for allowance of claim and for payment of taxes dated May
28, 1969 was filed on June 3, 1969 in the abovementioned special
proceedings. The claim represents the indebtedness of the late Luis D.
Tongoy for deficiency income taxes in the total sum of P3,254.80. The
Administrator opposed the motion solely on the ground that the claim was
barred under Section 5, Rule 86 of the Rules of Court. Finding the
opposition well-founded, the respondent Judge, dismissed the motion for
allowance of claim filed by herein petitioner. On September 18, 1969, a
motion for reconsideration was filed, of the order of July 29, 1969, but was
denied in an Order dated October 7, 1969.
ISSUE: Whether or not the statute of non-claims Section 5, Rule 86 of the
New Rule of Court, bars claim of the government for unpaid taxes
HELD: No,
A perusal of the aforequoted provisions shows that it makes no mention of
claims for monetary obligation of the decedent created by law, such as
taxes which is entirely of different character from the claims expressly
enumerated therein, such as: "all claims for money against the decedent
arising from contract, express or implied, whether the same be due, not
due or contingent, all claim for funeral expenses and expenses for the last
sickness of the decedent and judgment for money against the decedent."
Under the familiar rule of statutory construction of expressio unius est
exclusio alterius, the mention of one thing implies the exclusion of another
thing not mentioned.
Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et al., G.R.
No. L-23081, December 30, 1969, it was held that the assessment,
collection and recovery of taxes, as well as the matter of prescription
thereof are governed by the provisions of the National Internal revenue
Code, particularly Sections 331 and 332 thereof, and not by other
provisions of law.
The reason for the more liberal treatment of claims for taxes against a
decedent's estate in the form of exception from the application of the
statute of non-claims, is not hard to find. Taxes are the lifeblood of the
Government and their prompt and certain availability are imperious need.
(CIR vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105)
Upon taxation depends the Government ability to serve the people for
whose benefit taxes are collected. To safeguard such interest, neglect or
omission of government officials entrusted with the collection of taxes

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should not be allowed to bring harm or detriment to the people, in the

same manner as private persons may be made to suffer individually on
account of his own negligence, the presumption being that they take good
care of their personal affairs. This should not hold true to government
officials with respect to matters not of their own personal concern. This is
the philosophy behind the government's exception, as a general rule, from
the operation of the principle of estoppel.
COMMISSIONER OF INTERNAL REVENUE vs.
COURT OF APPEALS, CITYTRUST BANKING CORPORATION
G.R. No. 106611 July 21, 1994, Second Division
FACTS:
Private respondent corporation filed a claim for refund with the BIR in the
amount of P19,971,745.00 representing the alleged aggregate of the
excess of its carried-over total quarterly payments over the actual income
tax due, plus carried-over withholding tax payments on government
securities and rental income. Two days later, Citytrust filed a petition with
the CTA, claiming the refund of its income tax overpayments for the years
1983, 1984 and 1985 in the total amount of P19,971,745.00. 4
In the answer in behalf of commissioner, it was asserted that the mere
averment that Citytrust incurred a net loss in 1985 does not ipso facto
merits a refund for they are not properly documented; that assuming
arguendo that petitioner is entitled to refund, the right to claim the same
has prescribed with respect to income tax payments prior to August 28,
1984, pursuant to Sections 292 and 295 of NIRC. The case was submitted
for decision based solely on the pleadings and evidence submitted by
Citytrust. Petitioner could not present any evidence by reason of the
repeated failure of the Tax Credit/Refund Division of the BIR to transmit the
records of the case, as well as the investigation report thereon, to the
Solicitor General.
On June 24, 1991, petitioner filed a manifestation and motion praying for
the suspension of the proceedings in since the claim of Citytrust for tax
refund was already being processed by the Tax Credit/Refund Division and
that said bureau was only awaiting the submission by Citytrust of the
required confirmation receipts. Citytrust filed opposition contending that
since the CTA already acquired jurisdiction over the case, it could no longer
be divested of the same. The tax court denied the motion to suspend
proceedings on the ground that the case had already been submitted for
decision. Said court rendered its decision in the case, which entitles
petitioner to a refund but only for the overpaid taxes incurred in 1984 and
1985.

ISSUE: Is the respondent bank entitled to a tax refund considering that the
latter also have deficiencies?
HELD: No,
It is a long and firmly settled rule of law that the Government is not bound
by the errors committed by its agents. In the performance of its
governmental functions, the State cannot be estopped by the neglect of its
agent and officers. Although the Government may generally be estopped
through the affirmative acts of public officers acting within their authority,
their neglect or omission of public duties as exemplified in this case will not
and should not produce that effect. It is axiomatic that the Government
cannot and must not be estopped particularly in matters involving taxes.
Taxes are the lifeblood of the nation through which the government
agencies continue to operate and with which the State effects its functions
for the welfare of its constituents. Holds true in the case at bar as
exemplified by bureaucratic lethargy.
The CTA erred in denying petitioner's supplemental motion for
reconsideration showing the existence of the deficiency income and
business tax assessment against Citytrust. The fact of such deficiency
assessment is intimately related to and inextricably intertwined with the
right of respondent bank to claim for a tax refund for the same year. To
award such refund despite the existence of that deficiency assessment is
an absurdity and a polarity in conceptual effects.
Moreover, to grant the refund without determination of the proper
assessment and the tax due would inevitably result in multiplicity of
proceedings or suits. Thus, to avoid multiplicity of suits and unnecessary
difficulties or expenses, it is both logically necessary and legally
appropriate that the issue of the deficiency tax assessment against
Citytrust be resolved jointly with its claim for tax refund, to determine once
and for all in a single proceeding the true and correct amount of tax due or
refundable. [Judgment of respondent Court of Appeals is SET ASIDE and the
case is REMANDED to the Court of Tax Appeals for further proceedings and
appropriate action.]
COMMISSIONER OF INTERNAL REVENUE, vs. ALGUE, INC
G.R. No. L-28896 February 17, 1988, 1st Division
FACTS:
Algue Inc. is a domestic corp engaged in engineering, construction. corp
received a letter from the CIR regarding its delinquency income taxes from
1958-1959 in the amount of P83,183.85. A letter of protest or

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reconsideration was filed by Algue Inc and on March 12, a warrant of

distraint and levy was presented to Algue Inc. thru counsel, Atty. Guevara,
who only accepted the same after Guevara was informed that the BIR was
not taking any action on the protest. On April 23, Algue filed a petition for
review of the decision of the CIR with the CTA.
CIR contends that the claimed deduction of P75,000.00 was properly
disallowed because it was not an ordinary reasonable or necessary
business expense, payments are fictitious because most of the payees are
members of the same family in control of Algue and that there is not
enough substantiation of such payments
The CTA ruled that it had been legitimately paid by Algue Inc. for actual
services rendered in the form of promotional fees. These were collected by
the Payees for their work in the creation of the Vegetable Oil Investment
Corporation of the Philippines and its subsequent purchase of the
properties of the Philippine Sugar Estate Development Company.
ISSUE: W/N the Collector of Internal Revenue correctly disallowed the
P75,000.00 deduction claimed by Algue as legitimate business expenses in
its income tax returns
HELD: No,
RA 1125: the appeal may be made within thirty days after receipt of the
decision or ruling challenged. During the intervening period, the warrant
was premature and could therefore not be served.
Algue Inc. was a family corporation where strict business procedures were
not applied and immediate issuance of receipts was not required. At the
end of the year, when the books were to be closed, each payee made an
accounting of all of the fees received by him or her, to make up the total of
P75,000.00. This arrangement was understandable in view of the close
relationship among the persons in the family corporation

Sec. 30 of the Tax Code: allowed deductions in the net income

Expenses - All the ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business, including a
reasonable allowance for salaries or other compensation for personal
services actually rendered xxx
The burden is on the taxpayer to prove the validity of the claimed
deduction. In this case, Algue Inc. has proved that the payment of the fees
was necessary and reasonable in the light of the efforts exerted by the
payees in inducing investors and prominent businessmen to venture in an
experimental enterprise and involve themselves in a new business
requiring millions of pesos.
Taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate

and operate it. Hence, despite the natural reluctance to surrender part of
one's hard earned income to the taxing authorities, every person who 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. Taxation must be exercised
reasonably and in accordance with the prescribed procedure. If it is not,
then the taxpayer has a right to complain and the courts will then come to
his succor
Algue Inc.s appeal from the decision of the CIR was filed on time with the
CTA in accordance with Rep. Act No. 1125. And we also find that the
claimed deduction by Algue Inc. was permitted under the Internal Revenue
Code and should therefore not have been disallowed by the CIR.
COMMISSIONER OF INTERNAL REVENUE vs. CA, CTA and YOUNG
MEN'S CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC.
G.R. No. 124043 October 14, 1998, 1st Division
FACTS:
YMCA, a non-stock, non-profit and charitable institution earned an income
of P676,829.80 from leasing out a portion of its premises to small shop
owners, like restaurants and canteen operators, and P44,259.00 from
parking fees collected from non-members. (CIR) issued an assessment to
private respondent, in the total amount of P415,615.01 including surcharge
and interest, for deficiency income tax, deficiency expanded withholding
taxes on rentals and professional fees and deficiency withholding tax on
wages. CIR denied protest of YMCA. The latter filed a petition for review
with CTA where it ruled in favor of YMCA stating that the income derived
from said charges was reasonably necessary to make the most out of its
existing facilities to earn some income and was only incidental to attain its
charitable objectives.
Dissatisfied the CIR elevated the case to the CA. and the decision was
REVERSED. Aggrieved, the YMCA asked for reconsideration where CA
granted the same and affirmed the decision of CTA in toto. Hence, the
appeal.
ISSUE: Is the Rental Income of the YMCA Taxable?
HELD: YES,
Because taxes are the lifeblood of the nation, the Court has always applied
the doctrine of strict in interpretation in construing tax exemptions. A claim
of statutory exemption from taxation should be manifest. and

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unmistakable from the language of the law on which it is based. Thus, the
claimed exemption "must expressly be granted in a statute stated in a
language too clear to be mistaken."
In the instant case, the exemption claimed by the YMCA is expressly
disallowed by the very wording of the last paragraph of then Section 27 of
the NIRC which mandates that the income of exempt organizations (such
as the YMCA) from any of their properties, real or personal, be subject to
the tax imposed by the same Code. Because the last paragraph of said
section unequivocally subjects to tax the rent income of the YMCA from its
real property, the Court is duty-bound to abide strictly by its literal
meaning and to refrain from resorting to any convoluted attempt at
construction.
The last paragraph of Section 27, the YMCA argues, should be "subject to
the qualification that the income from the properties must arise from
activities 'conducted for profit' before it may be considered taxable." This
argument is erroneous. As previously stated, a reading of said paragraph
ineludibly shows that the income from any property of exempt
organizations, as well as that arising from any activity it conducts for profit,
is taxable. The phrase "any of their activities conducted for profit" does not
qualify the word "properties." This makes from the property of the
organization taxable, regardless of how that income is used whether for
profit or for lofty non-profit purposes.
DAVAO GULF LUMBER CORPORATION
INTERNAL REVENUE
G.R. No. 117359 July 23, 1998, EN BANC

vs.

COMMISSIONER

OF

FACTS: Petitioner is a licensed forest concessionaire possessing a Timber

License. From July 1, 1980 to January 31, 1982 petitioner purchased, from
various oil companies, refined and manufactured mineral oils as well as
motor and diesel fuels, which it used exclusively for the exploitation and
operation of its forest concession. Said oil companies paid the specific
taxes imposed, under Sections 153 and 156 7 of the 1977 NIRC
Petitioner filed with CIR a claim for refund in the amount of P120,825.11,
representing 25% of the specific taxes actually paid on the abovementioned fuels and oils that were used by petitioner in its operations.
On January 20, 1983, petitioner filed at the CTA a petition for review
docketed as CTA Case No. 3574. On June 21, 1994, the CTA rendered its
decision finding petitioner entitled to a partial refund of specific taxes CTA
computed the refund based on rates deemed paid under RA 1435, and not

on the higher rates actually paid by petitioner under the NIRC. Insisting
that the basis for computing the refund should be the increased rates
prescribed by Sections 153 and 156 of the NIRC, petitioner elevated the
matter to the Court of Appeals. As noted earlier, the Court of Appeals
affirmed the CTA Decision. Hence, this petition for review.
ISSUE: Is petitioner entitled to refund based on rates under RA 1435 and
not on higher rates?
HELD: Yes, It must be stressed that petitioner is entitled to a partial refund
under Section 5 of RA 1435, which was enacted to provide means for
increasing the Highway Special Fund. The rationale for this grant of partial
refund of specific taxes paid on purchases of manufactured diesel and fuel
oils rests on the character of the Highway Special Fund. The specific taxes
collected on gasoline and fuel accrue to the Fund, which is to be used for
the construction and maintenance of the highway system. But because the
gasoline and fuel purchased by mining and lumber concessionaires are
used within their own compounds and roads, and their vehicles seldom use
the national highways, they do not directly benefit from the Fund and its
use. Hence, the tax refund gives the mining and the logging companies a
measure of relief in light of their peculiar situation. Tax Refund strictly
construed against the Grantee
FERDINAND R. MARCOS II vs. COURT OF APPEALS
G.R. No. 120880. June 5, 1997, 2nd Division
FACTS:
Special Tax Audit Team was created to conduct investigations and
examinations of the tax liabilities and obligations of the late president, as
well as that of his family, associates and "cronies". Said audit team
concluded its investigation with a Memorandum dated July 26, 1991. The
investigation disclosed that the Marcoses failed to file a written notice of
the death of the decedent, an estate tax returns [sic], as well as several
income tax returns covering the years 1982 to 1986, -all in violation of the
National Internal Revenue Code
On February 22, 1993, the BIR Commissioner issued twenty-two notices of
levy on real property against certain parcels of land owned by the
Marcoses - to satisfy the alleged estate tax and deficiency income taxes of
Spouses Marcos, four more Notices of Levy on real property were issued for
the purpose of satisfying the deficiency income taxes. On May 26, 1993,
additional four (4) notices of Levy on real property were again issued. The
foregoing tax remedies were resorted to pursuant to Sections 205 and 213
of the National Internal Revenue Code (NIRC).

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Petitioner posits that notices of levy, notices of sale, and subsequent sale
of properties of the late President Marcos effected by the BIR are null and
void for disregarding the established procedure for the enforcement of
taxes due upon the estate of the deceased. The case of Domingo vs.
Garlitos[4] is specifically cited "the ordinary procedure by which to settle
claims of indebtedness against the estate of a deceased, person, as in an
inheritance (estate) tax, is for the claimant to present a claim before the
probate court so that said court may order the administrator to pay the
amount therefor."
Petitioner goes further, submitting that the probate court is not precluded
from denying a request by the government for the immediate payment of
taxes, and should order the payment of the same only within the period
fixed by the probate court for the payment of all the debts of the decedent.
ISSUE: Does the pendency of probate proceedings over the estate of the
preclude the assessment and collection, of estate taxes?

amount of the inheritance tax a part of the final decree of distribution of

the estate. It is not against the property of decedent, nor is it a claim
against the estate as such, but it is against the interest or property right
which the heir, legatee, devisee, etc., has in the property formerly held by
decedent.
for no justifiable reason, the party claiming oppression then becomes the
oppressor of the orderly functions of government. He who comes to court
must come with clean hands. Otherwise, he not only taints his name, but
ridicules the very structure of established authority.
IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition

LAKTAW INI (ika 14 dayon)

HELD: NO, it is argued by the BIR, that the state's authority to collect
internal revenue taxes is paramount. Thus, the pendency of probate
proceedings over the estate of the deceased does not preclude the
assessment and collection, through summary remedies, of estate taxes
over the same. According to the respondent, claims for payment of estate
and income taxes due and assessed after the death of the decedent need
not be presented in the form of a claim against the estate. These can and
should be paid immediately. The probate court is not the government
agency to decide whether an estate is liable for payment of estate of
income taxes. Well-settled is the rule that the probate court is a court with
special and limited jurisdiction.
"In view of all the foregoing, we rule that the deficiency income tax
assessments and estate tax assessment, are already final and
(u)nappealable -and- the subsequent levy of real properties is a tax
remedy resorted to by the government, sanctioned by Section 213 and 218
of the National Internal Revenue Code. This summary tax remedy is
distinct and separate from the other tax remedies (such as Judicial Civil
actions and Criminal actions), and is not affected or precluded by the
pendency of any other tax remedies instituted by the government.
"Strictly speaking, the assessment of an inheritance tax does not directly
involve the administration of a decedent's estate, although it may be
viewed as an incident to the complete settlement of an estate, and, under
some statutes, it is made the duty of the probate court to make the

WALTER LUTZ, vs. J ANTONIO ARANETA, as the Collector of

Internal Revenue G.R. No. L-7859, December 22, 1955, 1st Division
FACTS:
This case was initiated in the CFI of Negros Occidental to test the legality of
the taxes imposed by Commonwealth Act No. 567, otherwise known as the
Sugar Adjustment Act.
SEC. 6. All collections made under this Act shall accrue to a special fund in
the Philippine Treasury, to be known as the Sugar Adjustment and
Stabilization Fund, and shall be paid out only for any or all of the following
purposes or to attain any or all of the following objectives, as may be
provided by law.
First, to place the sugar industry in a position to maintain itself despite the
gradual loss of the preferential position of the Philippine sugar in the United
States market, and ultimately to insure its continued existence
notwithstanding the loss of that market and the consequent necessity of
meeting competition in the free markets of the world;
Second, to readjust the benefits derived from the sugar industry by all of
the component elements thereof the mill, the landowner, the planter of
the sugar cane, and the laborers in the factory and in the field so that all
might continue profitably to engage therein;

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Third, to limit the production of sugar to areas more economically suited to
the production thereof; and

discretion must be allowed full play, subject only to the test of

reasonableness.

Fourth, to afford labor employed in the industry a living wage and to

improve their living and working conditions: Provided, That the President of
the Philippines may, until the adjournment of the next regular session of
the National Assembly, make the necessary disbursements from the fund
herein created (1) for the establishment and operation of sugar experiment
station or stations and the undertaking of researchers (a)to increase the
recoveries of the centrifugal sugar factories with the view of reducing
manufacturing costs, (b) to produce and propagate higher yielding varieties
of sugar cane more adaptable to different distinct conditions in the
Philippines, (c) to lower the costs of raising sugar cane, (d) to improve the
buying quality of denatured alcohol from molasses for motor fuel, (e) to
determine the possibility of utilizing the other by-products of the industry,
(f) to determine what crop or crops are suitable for rotation and for the
utilization of excess cane lands, and (g) on other problems the solution of
which would help rehabilitated and stabilize the industry, and (2) for the
improvement of living and working conditions in sugar mills and sugar
plantations, authorizing him to organize the necessary agency or agencies
to take charge of the expenditure and allocation of said funds to carry out
the purpose hereinbefore enumerated, and, likewise, authorizing the
disbursement from the fund herein created of the necessary amount of
amounts needed for salaries, wages, travelling expenses, equipment, and
other sundry expenses or said agency or agencies."cralaw virtua1aw library

That the tax to be levied should burden the sugar producers themselves
can hardly be a ground of complaint; indeed, it appears rational that the
tax be obtained precisely from those who are to be benefited from the
expenditure of the funds derived from it. At any rate, it is inherent in the
power to tax that a state be free to select the subjects of taxation, and it
has been repeatedly held that "inequalities which result from a singling out
of one particular class for taxation, or exemption infringe no constitutional
limitation"

Plaintiff, Walter Lutz, as Judicial Administrator of the Intestate Estate of

Antonio Jayme Ledesma, seeks to recover from the CIR the sum of
P14,666.40 paid by the estate as taxes, for the crop years 1948-1949 and
1949-1950; alleging that such tax is unconstitutional and void, being levied
for the aid and support of the sugar industry exclusively, which in plaintiffs
opinion is not a public purpose for which a tax may be constitutionally
levied. The action having been dismissed by the Court of First Instance, the
plaintiffs appealed the case directly to this Court.

In view of this development, the petitioner brought suit for declaratory

relief in the Court of First Instance of Pampanga, to test the
constitutionality of the statute, as well as the implementing administrative
orders issued, contending that it violates the equal protection clause of the
Constitution as well as the rule of uniformity and equality of taxation. The
lower court declared the statute and the orders unconstitutional; hence
this appeal by the respondent postal authorities.

ISSUE: Is the tax law unconstitutional?

HELD: No,
Analysis of the Act, and particularly of section 6 (heretofore quoted in full),
will show that the tax is levied with a regulatory purpose, to provide means
for the rehabilitation and stabilization of the threatened sugar industry. In
other words, the act is primarily an exercise of the police power.
Legislature may determine within reasonable bounds what is necessary for
its protection and expedient for its promotion. Here, the legislative

BENJAMIN P. GOMEZ vs. ENRICO PALOMAR, in his capacity as

Postmaster General, HON. BRIGIDO R. VALENCIA, Secretary of
Public Works and Communications
G.R. No. L-23645 October 29, 1968, EN BANC
FACTS:
On September l5, 1963 petitioner mailed a letter at the post office in San
Fernando, Pampanga. The letter, addressed to a certain Agustin Aquino of
1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB
stamp required by the statute, hence, it was returned to the petitioner.

ISSUE: Is the tax law unconstitutional?

HELD: No,
Tax law based on ability to pay, let alone the enjoyment of a privilege, and
on administrative convenience. In the allocation of the tax burden,
Congress must have concluded that the contribution to the anti-TB fund
can be assured by those whose who can afford the use of the mails. In the
case of the anti-TB stamps, undoubtedly, the single most important and
influential consideration that led the legislature to select mail users as
subjects of the tax is the relative ease and convenience of collecting the
tax through the post offices. The small amount of five centavos does not

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justify the great expense and inconvenience of collecting through the

regular means of collection.
And then of course it is not accurate to say that the statute constituted
mail users into a class. Mail users were already a class by themselves even
before the enactment of the statue and all that the legislature did was
merely to select their class.
It is thus erroneous for the trial court to hold that because certain mail
users are exempted from the levy the law and administrative officials have
sanctioned an invidious discrimination offensive to the Constitution. The
application of the lower courts theory would require all mail users to be
taxed, a conclusion that is hardly tenable in the light of differences in
status of mail users. The Constitution does not require this kind of equality.
As for the Government and its instrumentalities, their exemption rests on
the State's sovereign immunity from taxation. The State cannot be taxed
without its consent and such consent, being in derogation of its
sovereignty, is to be strictly construed. Administrative Order 9 of the
respondent Postmaster General, which lists the various offices and
instrumentalities of the Government exempt from the payment of the antiTB stamp, is but a restatement of this well-known principle of constitutional
law. Government is exempt from tax.
SILVESTER M. PUNSALAN, ET AL., vs. THE MUNICIPAL BOARD OF
THE CITY OF MANILA, ET AL.
G.R. No. L-4817 May 26, 1954, EN BANC
FACTS:
This suit was commenced in CFI Manila by two lawyers, a medical
practitioner, a public accountant, a dental surgeon and a pharmacist. They
sought annulment of Ordinance No. 3398 of the City of Manila together
with the provision of the Manila charter authorizing the same.
The ordinance in question, imposes a municipal occupation tax on persons
exercising various professions in the city and penalizes non-payment of the
tax "by a fine of not more than two hundred pesos or by imprisonment of
not more than six months, or by both such fine and imprisonment in the
discretion of the court. Having already paid their occupation tax under
section 201 of the NIRC, plaintiffs, upon being required to pay the
additional tax prescribed in the ordinance, paid the same under protest
and then brought the present suit for the purpose already stated. The
lower court upheld the validity of the provision of law authorizing the

enactment of the ordinance but declared the ordinance itself illegal and
void on the ground that the penalty there in provided for non-payment of
the tax was not legally authorized. From this decision both parties
appealed to this Court, and the only question they have presented for our
determination is whether this ruling is correct or not, for though the
decision is silent on the refund of taxes paid plaintiffs make no assignment
of error on this point.
ISSUE: Whether or not the ordinance imposing additional tax should remain
enforceable?
HELD: YES,
We do not think it is for the courts to judge what particular cities or
municipalities should be empowered to impose occupation taxes in
addition to those imposed by the National Government. That matter is
peculiarly within the domain of the political departments and the courts
would do well not to encroach upon it. Moreover, as the seat of the
National Government and with a population and volume of trade many
times that of any other Philippine city or municipality, Manila, no doubt,
offers a more lucrative field for the practice of the professions, so that it is
but fair that the professionals in Manila be made to pay a higher
occupation tax than their brethren in the provinces.
Plaintiffs brand the ordinance unjust and oppressive because they say that
it creates discrimination within a class in that while professionals with
offices in Manila have to pay the tax, outsiders who have no offices in the
city but practice their profession therein are not subject to the tax.
Plaintiffs make a distinction that is not found in the ordinance. The
ordinance imposes the tax upon every person "exercising" or "pursuing"
in the City of Manila naturally any one of the occupations named, but
does not say that such person must have his office in Manila. What
constitutes exercise or pursuit of a profession in the city is a matter of
judicial determination. The argument against double taxation may not be
invoked where one tax is imposed by the state and the other is imposed by
the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized
that there is nothing inherently obnoxious in the requirement that license
fees or taxes be exacted with respect to the same occupation, calling or
activity by both the state and the political subdivisions thereof.

ENGRACIO FRANCIA vs. INTERMEDIATE APPELLATE COURT and HO

FERNANDEZ
G.R. No. L-67649 June 28, 1988, 3rd Division

Page 9 of 10

FACTS:
Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes.
Thus, on December 5, 1977, his property was sold at public auction by the
City Treasurer of Pasay City (Real Property Tax Code). Ho Fernandez was
the highest bidder for the property. Francia was not present during the
auction sale since he was in Iligan City at that time helping his uncle ship
bananas.
On March 3, 1979, Francia received a notice of hearing for cancellation of
his title and new one in favor of Ho. Francia discovered that a Final Bill of
Sale had been issued. The auction sale and the final bill of sale were both
annotated at the back of TCT No. 4739 (37795) by the Register of Deeds.
Francia filed a complaint to annul the auction sale.
Judgment was rendered dismissing the amended complaint and ordering.
The Intermediate Appellate Court affirmed the decision of the lower court
in toto. Hence, this petition for review.
ISSUE: Is the contention of Francia correct that his obligation to pay taxes
had been set-off when a portion of his land was expropriated?
HELD: NO, We have consistently ruled that there can be no off-setting of
taxes against the claims that the taxpayer may have against the
government. A person cannot refuse to pay a tax on the ground that the
government owes him an amount equal to or greater than the tax being
collected. The collection of a tax cannot await the results of a lawsuit
against the government. The reason on which the general rule is based, is
that 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
making and enforcing of which, the personal consent of individual
taxpayers is not required.
BURDEN TO PROVE/PRESUMPTION OF REGULARITY
There is no presumption of the regularity of any administrative action
which results in depriving a taxpayer of his property through a tax sale.
(Camo v. Riosa Boyco, 29 Phil. 437); Denoga v. Insular Government, 19
Phil. 261). This is actually an exception to the rule that administrative
proceedings are presumed to be regular. But even if the burden of proof
lies with the purchaser to show that all legal prerequisites have been
complied with, the petitioner can not, however, deny that he did receive
the notice for the auction sale.

MELECIO R. DOMINGO, Commissioner of Internal Revenue vs.

HON. LORENZO C. GARLITOS, Judge of the CFI of Leyte, and
SIMEONA K. PRICE as Administratrix
G.R. No. L-18994 June 29, 1963, EN BANC
FACTS:
In Domingo vs. Moscoso (106 PHIL 1138), the Supreme Court declared as
final and executory the order of the Court of First Instance of Leyte for the
payment of estate and inheritance taxes, charges and penalties amounting
to P40,058.55 by the Estate of the late Walter Scott Price. The petition for
execution filed by the fiscal, however, was denied by the lower court. The
Court held that the execution is unjustified as the Government itself is
indebted to the Estate for 262,200; and ordered the amount of inheritance
taxes be deducted from the Governments indebtedness to the Estate.
ISSUE:
1. Whether a tax and a debt may be compensated.
2. Whether petition for certiorari and mandamus is the proper remedy
for the petitioner or not.
HELD:
1. The court having jurisdiction of the Estate had found that the claim
of the Estate against the Government has been recognized and an
amount of P262,200 has already been appropriated by a
corresponding law (RA 2700). Under the circumstances, both the
claim of the Government for inheritance taxes and the claim of the
intestate for services rendered have already become overdue and
demandable as well as fully liquidated. Compensation, therefore,
takes place by operation of law, in accordance with Article 1279
and 1290 of the Civil Code, and both debts are extinguished to the
concurrent amount.
2. The petition to set aside the above orders of the court below and
for the execution of the claim of the Government against the estate
must be denied for lack of merit. The ordinary procedure by which
to settle claims of indebtedness against the estate of a deceased
person, as an inheritance tax, is for the claimant to present a claim
before the probate court so that said court may order the
administrator to pay the amount thereof. To such effect is the
decision of this Court in Aldamiz vs. Judge of the Court of First
Instance of Mindoro, G.R. No. L-2360, Dec. 29, 1949, thus: a writ of
execution is not the proper procedure allowed by the Rules of Court
for the payment of debts and expenses of administration. The
proper procedure is for the court to order the sale of personal

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estate or the sale or mortgage of real property of the deceased and

all debts or expenses of administrator and with the written notice
to all the heirs legatees and devisees residing in the Philippines,
according to Rule 89, section 3, and Rule 90, section 2. And when

sale or mortgage of real estate is to be made, the regulations

contained in Rule 90, section 7, should be complied with.