Tax Digests by Ron

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National Power Corporation vs City of Cabanatuan
G.R. No. 149110 April 9, 2003
NATIONAL POWER CORPORATION, petitioner,

vs.
CITY OF CABANATUAN, respondent.
FACTS: Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended.
For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income of P107,814,187.96 in 1992.7 Pursuant to section 37
of Ordinance No. 165-92,8 the respondent assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter’s gross receipts for
the preceding year.
Petitioner refused to pay the tax assessment arguing that the respondent has no authority to impose tax on government entities. Petitioner also contended that as a
non-profit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in accordance with sec. 13 of Rep. Act No. 6395, as amended.
The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due, plus surcharge. Respondent alleged that petitioner’s exemption
from local taxes has been repealed by section 193 of the LGC, which reads as follows:
“Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government owned or controlled corporations, except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.”
RTC upheld NPC’s tax exemption. On appeal the CA reversed the trial court’s Order on the ground that section 193, in relation to sections 137 and 151 of the LGC,
expressly withdrew the exemptions granted to the petitioner.
ISSUE: W/N the respondent city government has the authority to issue Ordinance No. 165-92 and impose an annual tax on “businesses enjoying a franchise
HELD: YES. 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;32 without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people.
Section 137 of the LGC clearly states that the LGUs can impose franchise tax “notwithstanding any exemption granted by any law or other special law.” This particular
provision of the LGC does not admit any exception. In City Government of San Pablo, Laguna v. Reyes,74 MERALCO’s exemption from the payment of franchise taxes
was brought as an issue before this Court. The same issue was involved in the subsequent case of Manila Electric Company v. Province of Laguna.75 Ruling in favor of
the local government in both instances, we ruled that the franchise tax in question is imposable despite any exemption enjoyed by MERALCO under special laws, viz:
“It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support their position that MERALCO’s tax exemption has been
withdrawn. The explicit language of section 137 which authorizes the province to impose franchise tax ‘notwithstanding any exemption granted by any law or other
special law’ is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws.
Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this Code, tax exemptions or incentives
granted to or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations except (1) local water districts,
(2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code,
the obvious import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory construction that the express mention of one person,
thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. In the absence of any provision of the Code to
the contrary, and we find no other provision in point, any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be
withdrawn.
Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit may now impose a local tax at a rate not exceeding
50% of 1% of the gross annual receipts for the preceding calendar based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to
withdraw tax privileges enjoyed under existing law or charter is clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing such
exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical to attempt to enumerate all the existing statutes providing
for special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more unequivocal language
could have been used.”76 (emphases supplied)
Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the local government units for the
delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court
observed in the Mactan case, “the original reasons for the withdrawal of tax exemption privileges granted to government-owned or controlled corporations and all
other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises.” With
the added burden of devolution, it is even more imperative for government entities to share in the requirements of development, fiscal or otherwise, by paying taxes
or other charges due from them.
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CIR vs. Algue Inc.
Commissioner of Internal Revenue vs. Algue Inc.
GR No. L-28896 | Feb. 17, 1988
Facts:
Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities
On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes from 1958-1959, amtg to P83,183.85
A letter of protest or reconsideration was filed by Algue Inc on Jan 18
On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty. Guevara, who refused to receive it on the ground of the pending
protest
Since the protest was not found on the records, a file copy from the corp was produced and given to BIR Agent Reyes, who deferred service of the warrant
On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and
levy earlier sought to be served
On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals
CIR contentions:
- 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
CTA: 75K 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
Ruling:
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance, made in accordance with law.
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.
Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but later on conformed to the decision of CTA
There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon. CTA
also found, after examining the evidence, that no distribution of dividends was involved
CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction
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
The amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K.
After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission.
This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation
to the actual purchase by it of the Sugar Estate properties.
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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
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CIR vs BPI
GR 134062, 17 April 2007
FACTS: On 28 October 1988 petitioner Commissioner of Internal Revenue (CIR) assessed respondent Bank of the Philippine Islands’ (BPI) deficiency percentage and
documentary stamp taxes in the total amount of P129,488,656.63.
In a letter dated 10 December 1988, BPI requested for the CIR to state or to inform the taxpayer why he is being assessed a deficiency, and as to what particular
percentage tax the assessment refers to.
Subsequently, BPI received a letter on 27 June 1991 dated May 8, 1991 from CIR stating that it constitutes the final decision on the matter, and the basis of the
assessments.
BPI filed a petition for review in the CTA but the latter dismissed the case for lack of jurisdiction since the subject assessments had become final and unappealable.
The CTA ruled that BPI failed to protest on time under Section 270 of the National Internal Revenue Code (NIRC) and Section 7 in relation to Section 11 of RA 1125.
On appeal, the CA reversed the tax court’s decision and resolution and remanded the case to the CTA for a decision on the merits. It ruled that the October 28, 1988
notices were not valid assessments because they did not inform the taxpayer of the legal and factual bases. 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 CTA on time.
Hence, CIR filed this case.
ISSUES:
1) Were the October 28, 1988 notices valid assessments?
RULING: Yes the notices sufficiently met the requirements of a valid assessment under the old law and jurisprudence. The CIR merely relied on the provisions of the
former Section 270 prior to its amendment by RA 8424 (Tax Reform Act of 1997). Accordingly, when the assessments were made pursuant to the former Section 270,
the only requirement was for the CIR to “notify” or inform the taxpayer of his “findings.” Nothing in the old law required a written statement to the taxpayer of the
law and facts on which the assessments were based.
Jurisprudence, on the other hand, simply required that the assessments contain a computation of tax liabilities, the amount the taxpayer was to pay and a demand
for payment within a prescribed period.
The sentence “The taxpayers shall be informed in writing of the law and the facts on which the assessments is made; otherwise, the assessments shall be void” was
not in the old Section of 270 but was later on inserted in the renumbered Section 228 in 1997. Evidently, the legislature saw the need to modify the former Section
270 by inserting the aforequoted sentence. The fact that the amendment was necessary showed that, prior to the introduction of the amendment, the statute had an
entirely different meaning. The amendment introduced by RA 8424 was an innovation and could not be reasonably inferred from the old law. Clearly, the legislature
intended to insert a new provision regarding the form and substance of assessments issued by the CIR.
Under the former Section 270, there were two instances when an assessment became final and unappealable: 1) when it was not protested within 30 days and 2)
when the adverse decision on the protest was not appealed to the CTA within 30 days from receipt of the final decision.
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2) Whether or not the assessments made by the CIR were valid, final, and unappealable?
Failure to protest within the 30-day period: 1)final and unappealable; 2) presumption of correctness
RULING: Yes, BPI should have protested within 30 days from receipt of the notices dated October 28, 1988. BPI’s failure to protest meant that the assessments made
are final and unappealable. The December 10, 1988 reply it sent to the CIR did not qualify as a protest since BPI did not even consider the October 28, 1988 notices as
valid or proper assessments.
Moreover, BPI was from then on barred from disputing the correctness of the assessments or invoking any defense that would reopen the question of its liability on
the merits.
Presumption of Correctness. There arose a presumption of correctness when BPI failed to protest the assessments: Tax assessments by tax examiners are presumed
correct and made in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities … an assessment duly made by a Bureau of
Internal Revenue examiner and approved by his superior officers will not be disturbed. All presumptions are in favor of the correctness of tax assessments.
Even if we consider the December 10, 1988 letter as a protest, BPI must nevertheless be deemed to have failed to appeal the CIR’s final decision within the 30-day
period. The CIR, in his May 8, 1991 response, stated that it was his “final decision on the matter.” BPI therefore had 30 days from the time it received the decision on
June 27, 1991 to appeal but it did not. Instead, it filed a request for reconsideration and lodged its appeal in the CTA.
BPI is still liable under the subject tax assessments: That 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 general welfare and well-being of the people.
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CIR vs. Fortune Tobacco
September 28, 2011 G.R. No. 180006
Facts: Prior to January 1, 1997, the excises taxes on cigarettes were in the form of ad valorem taxes, pursuant to Section 142 of the 1977 National Internal Revenue
Code (1977 Tax Code). Beginning January 1, 1997, RA 8240 took effect and a shift from ad valorem to specific taxes was made. A portion of Section 142(c) of the 1977
Tax Code, as amended by RA 8240, reads in part:
“The specific tax from any brand of cigarettes within the next three (3) years of effectivity of this Act shall not be lower than the tax [which] is due from each brand on
October 1, 1996.
xxx
The rates of specific tax on cigars and cigarettes under paragraphs (1), (2), (3) and (4) hereof, shall be increased by twelve percent (12%) on January 1, 2000.”
To implement the 12% increase in specific taxes mandated under Section 145 of the 1997 Tax Code and again pursuant to its rule-making powers, the CIR issued RR
17-99, which reads partly:
“Provided, however, that the new specific tax rate for any existing brand of cigars [and] cigarettes packed by machine, distilled spirits, wines and fermented liquors
shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.”
Pursuant to these laws, respondent Fortune Tobacco Corporation paid in advance excise taxes and filed an administrative claim for tax refund with the CIR for
erroneously and/or illegally collected taxes in the amount of P491 million.
In its decision, the CTA First Division ruled in favor of Fortune Tobacco and granted its claim for refund. The CTA First Divisions ruling was upheld on appeal by the CTA
en banc. The CIR’s motion for reconsideration of the CTA en banc’s decision was denied in a resolution.
Issue: Whether or not Section 1 of RR 17-99 is an unauthorized administrative legislation on the part of the CIR.
Ruling: Yes. The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the law it was supposed to implement, and therefore entitles Fortune Tobacco to
claim a refund of the overpaid excise taxes collected pursuant to this provision.
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The rule on uniformity of taxation is violated by the proviso in Section 1, RR 17-99. Uniformity in taxation requires that all subjects or objects of taxation, similarly
situated, are to be treated alike both in privileges and liabilities. Although the brands all belong to the same category, the proviso in Section 1, RR 17-99 authorized
the imposition of different (and grossly disproportionate) tax rates. It effectively extended the qualification stated in the third paragraph of Section 145(c) of the 1997
Tax Code that was supposed to apply only during the transition period. In the process, the CIR also perpetuated the unequal tax treatment of similar goods that was
supposed to be cured by the shift from ad valorem to specific taxes.
The Court further said that the omission in the law in fact reveals the legislative intent not to adopt the higher tax rule. It appears that despite its awareness of the
need to protect the increase of excise taxes to increase government revenue, Congress ultimately decided against adopting the higher tax rule. 
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G.R. No. 158540. August 3, 2005]
SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, THE SECRETARY OF THE DEPARTMENT OF
TRADE AND INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE and THE COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents.
Facts:
Republic Act No. 8800, the Safeguard Measures Act (SMA), which was one of the laws enacted by Congress soon after the Philippines ratified the General Agreement
on Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement.[3] The SMA provides the structure and mechanics for the imposition of emergency
measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them.
Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation engaged in the business of cement manufacturing, production, importation
and exportation. Its principal stockholders are Taiheiyo Cement Corporation and Tokuyama Corporation, purportedly the largest cement manufacturers in Japan.[5]
Private respondent Philippine Cement Manufacturers Corporation[6] (Philcemcor) is an association of domestic cement manufacturers. It has eighteen (18)
members,[7] per Record. While Philcemcor heralds itself to be an association of domestic cement manufacturers, it appears that considerable equity holdings, if not
controlling interests in at least twelve (12) of its member-corporations, were acquired by the three largest cement manufacturers in the world, namely Financiere
Lafarge S.A. of France, Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank Financiere Glaris, Ltd., then Holderfin B.V.).
the DTIs disagreement with the conclusions of the Tariff Commission, but at the same time, ultimately denying Philcemcors application for safeguard measures on the
ground that the he was bound to do so in light of the Tariff Commissions negative findings.
Philcemcor challenged this Decision of the DTI Secretary by filing with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus[11] seeking to set
aside the DTI Decision, as well as the Tariff Commissions Report. The Court of Appeals Twelfth Division, in a Decision[13] penned by Court of Appeals Associate Justice
Elvi John Asuncion,[14] partially granted Philcemcors petition.
On 23 June 2003, Southern Cross filed the present petition, arguing that the Court of Appeals has no jurisdiction over Philcemcors petition, as the proper remedy is a
petition for review with the CTA conformably with the SMA, and; that the factual findings of the Tariff Commission on the existence or non-existence of conditions
warranting the imposition of general safeguard measures are binding upon the DTI Secretary.
Despite the fact that the Court of Appeals Decision had not yet become final, its binding force was cited by the DTI Secretary when he issued a new Decision on 25
June 2003, wherein he ruled that that in light of the appellate courts Decision, there was no longer any legal impediment to his deciding Philcemcors application for
definitive safeguard measures.
The Court of Appeals had held that based on the foregoing premises, petitioner’s prayer to set aside the findings of the Tariff Commission in its assailed Report dated
March 13, 2002 is DENIED. On the other hand, the assailed April 5, 2002 Decision of the Secretary of the Department of Trade and Industry is hereby SET ASIDE.
Consequently, the case is REMANDED to the public respondent Secretary of Department of Trade and Industry for a final decision in accordance with RA 8800 and its
Implementing Rules and Regulations. Hence, the appeal.
Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time that that in light of the appellate courts Decision there was no longer any legal
impediment to his deciding Philcemcors application for definitive safeguard measures.[41] He made a determination that, contrary to the findings of the Tariff
Commission, the local cement industry had suffered serious injury as a result of the import surges.[42] Accordingly, he imposed a definitive safeguard measure on the
importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for three years on imported gray Portland
Cement. Hence, the appeal.
Issue:
Whether or not the decision of DTI Secretary, to impose safeguard measures is valid.
Held:
NO, due to the nature of this case, the Court found that the DTI should follow the regulations prescribed by SMA. The Court held that he assailed Decision of the
Court of Appeals is DECLARED NULL AND VOID and SET ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED NULL AND VOID and SET
ASIDE. No Costs.
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Cement.
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G.R. No. 92585 May 8, 1992
CALTEX PHILIPPINES, INC., petitioner,

vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLE COMMISSIONER ALBERTO P.
CRUZ, respondents.
Topic: (1) tax vs. ordinary debt, (2) purpose/objective of taxation: non-revenue / special / regulatory
Ponente: Davide, Jr. J.
DOCTRINE:
A taxpayer may not offset taxes due from the claims that he may have against the government.
QUICK FACTS: Caltex Philippines questions the decisions of COA for disallowing the offsetting of its claims for reimbursement with its due OPSF remittance
FACTS:
The Oil Price Stabilization Fund (OPSF) was created under Sec. 8, PD 1956, as amended by EO 137 for the purpose of minimizing frequent price changes brought about
by exchange rate adjustments. It will be used to reimburse the oil companies for cost increase and possible cost underrecovery incurred due to reduction of domestic
prices.
COA sent a letter to Caltex directing the latter to remit to the OPSF its collection. Caltex requested COA for an early release of its reimbursement certificates which
the latter denied.
COA disallowed recover of financing charges, inventory losses and sales to marcopper and atlas but allowed the recovery of product sale or those arising from export
sales.
Petitioner’s Contention:
Department of Finance issued Circular No. 4-88 allowing reimbursement. Denial of claim for reimbursement would be inequitable. NCC (compensation) and Sec. 21,
Book V, Title I-B of the Revised Administrative Code (Retention of Money for Satisfaction of Indebtedness to Government) allows offsetting.
Amounts due do not arise as a result of taxation since PD 1956 did not create a source of taxation, it instead established a special fund. This lack of public purpose
behind OPSF exactions distinguishes it from tax.
Respondent’s Contention:
Based on Francia v. IAC, there’s no offsetting of taxes against the the claims that a taxpayer may have against the government, as taxes do not arise from contracts or
depend upon the will of the taxpayer, but are imposed by law.
ISSUE: WON Caltex is entitled to offsetting
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DECISION: NO. COA AFFIRMED
HELD:
It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be subject of compensation because the
government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed
to be set-off.
Technically, the oil companies merely act as agents for the Government in the latter’s collection since the taxes are, in reality, passed unto the end-users – the
consuming public. Their primary obligation is to account for and remit the taxes collection to the administrator of the OPSF.
There is not merit in Caltex’s contention that the OPSF contributions are not for a public purpose because they go to a special fund of the government. Taxation is no
longer envisioned as a measure merely to raise revenue to support the existence of the government; taxes may be levied with a regulatory purpose to provide means
for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within the police power of the State.
The oil industry is greatly imbued with public interest as it vitally affects the general welfare.
PD 1956, as amended by EO No. 137 explicitly provides that the source of OPSF is taxation.
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TERMINAL FACILITIES AND SERVICES CORPORATION vs. PHILIPPINE PORTS AUTHORITY and PORT MANAGER, and PORT DISTRICT OFFICER OF DAVAO CITY,
FACTS:
Sometime in 1975 TEFASCO, a domestic corporation engaged in the business of providing port and terminal facilities as well as arrastre, stevedoring and
other port-related services submitted to PPA a proposal for the construction of a specialized terminal complex with port facilities and a provision for port services
in Davao City. To ease the acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPA welcomed the proposal and organized an inter-agency
committee to study the plan. The specialized matters intended to be captured are: (a) bananas in consideration of the rate of spoilage; (b) sugar; (c) fertilizers; (d)
specialized movement of beer in pallets containerized handling lumber and plywood.
On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving TEFASCO's project proposal. Subsequently, the PPA Board
passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking for one, was compelled to submit an application for construction
permit. Without the consent of TEFASCO, the application imposed additional significant conditions. The conditions provide that the construction permit will entitle
the applicant to operate the facility for a period of fifteen (15) years, without jeopardy to negotiation for a renewal for a period not exceeding ten (10) years, In the
event that the Foreshore Lease Application expires or is disapproved/canceled, this permit shall also be rendered null and void, no general cargo shall be handled
through the facility, among others. TEFASCO heeded to this additional conditions. Two (2) years after the completion of the port facilities and the commencement of
TEFASCO's port operations, or on June 10, 1978, PPA again issued to TEFASCO another permit, designated as Special Permit No. CO/CO-1-067802, under which more
onerous conditions were foisted on TEFASCO’s port operations. It contained provisions for ten percent (10%) government share out of arrastre and stevedoring gross
income and one hundred percent (100%) wharfage and berthing charges. Subsequently, TEFASCO received a cease and desist order in a letter dated June 1, 1983.
On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement (MOA) providing among others for (a) acknowledgment of TEFASCO's arrears in
government share at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three Pesos and Seventy-Five Centavos (P3,807,563.75) payable monthly, with
default penalized by automatic withdrawal of its commercial private port permit and permit to operate cargo handling services; (b) reduction of government share
from ten percent (10%) to six percent (6%) on all cargo handling and related revenue (or arrastre and stevedoring gross income); (c) opening of its pier facilities to all
commercial and third-party cargoes and vessels for a period coterminous with its foreshore lease contract with the National Government; and, (d) tenure of five (5)
years extendible by five (5) more years for TEFASCO's permit to operate cargo handling in its private port facilities. In return PPA promised to issue the necessary
permits for TEFASCO’s port activities. TEFASCO complied with the MOA and paid the accrued and current government share. On August 30, 1988 TEFASCO sued PPA
and PPA Port Manager, and Port Officer in Davao City for refund of government share it had paid and for damages as a result of alleged illegal exaction from its clients
of one hundred percent (100%) berthing and wharfage fees.
The TC ruled in favor of TEFACSO. The CA reversed this decision. Hence this petition.
ISSUES/HELD:
Whether the authority given to TEFASCO to construct port facilities was only a privilege granted by PPA.
NO. With such considerable amount of money spent in reliance upon the promises of PPA under Resolution No. 7 and the terms and conditions thereof, the
authorization for TEFASCO to build and operate the specialized terminal complex with port facilities assumed the character of a truly binding contract between the
grantor and the grantee. It was a two-way advantage for both TEFASCO and PPA, that is, the business opportunities for the former and the decongestion of port
traffic in Davao City for the latter, which is also the cause of consideration for the existence of the contract. It has also been held that “where the licensee has acted
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under the license in good faith, and has incurred expense in the execution of it, by making valuable improvements or otherwise, it is regarded in equity as an
executed contract and substantially an easement, the revocation of which would be a fraud on the licensee, and therefore the licensor is estopped to revoke it xxx It
has also been held that the license cannot be revoked without reimbursing the licensee for his expenditures or otherwise placing him in status quo.”
For a regulatory permit to be impressed with contractual character we held in Batchelder v. Central Bank that the administrative agency in issuing the permit must
have assumed such obligation on itself. The facts certainly bear out the conclusion that PPA passed Resolution No. 7 and the terms and conditions thereof with a
view to decongesting port traffic in government ports in Davao City and engaging TEFASCO to infuse its own funds and skills to operate another port therein. As
acceptance of these considerations and execution thereof immediately followed, it is too late for PPA to change the rules of engagement with TEFASCO as expressed
in the said Resolution and other relevant documents.
Whether the imposition of 10% wharfage fees and berthing charges is void.
YES. It is very clear from P.D. No. 857 as amended that wharfage and berthing rates collectible by PPA "upon the coming into operation of this Decree shall be those
now provided under Parts 1, 2, 3 and 6 of Title VII of Book II of The Tariff and Customs Code, until such time that the President upon recommendation of the Board
may order that the adjusted schedule of dues are in effect." PPA cannot unilaterally peg such rates but must rely on either The Tariff and Customs Code or the quasi-
legislative issuances of the President in view of the legislative prerogative of rate-fixing.
Accordingly, P.D. No. 441 (1974) amending The Tariff and Customs Code fixed wharfage dues at fixed amounts per specified quantity brought into or
involving national ports or at fifty percent (50%) of the rates provided for herein in case the articles imported or exported from or transported within the Philippines
are loaded or unloaded offshore, in midstream, or in private wharves where no loading or unloading facilities are owned and maintained by the
government. Inasmuch as the TEFASCO port is privately owned and maintained, we rule that the applicable rate for imported or exported articles loaded or unloaded
thereat is not one hundred percent (100%) but only fifty percent (50%) of the rates specified in P.D. No. 441.
Whether the award of fifty percent (50%) and thirty percent (30%) of the wharfage dues and berthing charges to TEFASCO as actual damages representing private
port usage fees from 1977 to 1991. was proper.
YES. The cause of action of TEFASCO is the injury it suffered as a result of the illegal imposition on its clientele of such dues and charges that should have otherwise
gone to it as private port usage fee. TEFASCO is asserting injury to its right to collect valuable consideration for the use of its facilities and wrongdoing on the part of
PPA prejudicing such right. This is especially true in the light of PPA’s practice of collecting one hundred percent (100%) of the wharfage and berthing dues by
cornering the cargoes and vessels, as it were, even before they were landed and berthed at TEFASCO’s privately owned port. It is aggravated by the fact that these
unlawful rates were collected by PPA long after the port facilities of TEFASCO had been completed and functioning. Considering these pleaded facts, TEFASCO’s
cause of action has been sufficiently alleged and proven.
Whether the imposition of 10% and later reduced to 6% government share was proper.
NO. PPA is bereft of any authority to impose whatever amount it pleases as government share in the gross income of TEFASCO from its arrastre and stevedoring
operations. As an elementary principle of law, license taxation must not be "so unreasonable to show a purpose to prohibit a business which is not itself injurious to
public health or morals." In the case at bar, the absurd and confiscatory character of government share is convincingly proved by PPA's decision itself to abandon the
disadvantageous scheme through Administrative Order No. 06-95 dated 4 December 1995,Liberalized Regulation on Private Ports Construction, Development, and
Operation The PPA issuance scrapped government share in the income of private ports where no government facilities had been installed and in place thereof
imposed a one-time privilege fee of P20,000.00 per annum for commercial ports and P10,000.00 yearly for non-commercial ports. In passing, this impost is more in
consonance with the description of government share as consideration for the "supervision inherent in the upgrading and improvement of port operations, of which
said services are an integral part."
I_E5
Physical Therapy Organization vs Municpal Board GR 10448 30 August 1957
Facts: Municipal Board of Manila enacted Ordinance 3659 regulating the operations of massage clinics in Manila penalizing and enforcing permit fee for its operation.
Petitioner appealed for the dismissal of the ordinance. They contend that City of Manila is without authority to regulate the operation of massagists and the
operation of massage clinics and that the fee is unreasonable and unconscionable. Trial court dismissed the petition.
Issue: Whether or not license fee enforced by the Municipal Board is valid?
Decision: Decision affirmed. The end sought to be attained in the Ordinance is to prevent the commission of immorality and the practice of prostitution in an
establishment masquerading as a massage clinic where the operators thereof offer to massage or manipulate superficial parts of the bodies of customers for hygienic
and aesthetic purposes. The permit fee is made payable by the operator of a massage clinic who may not be a massagist himself. Compared to permit fees required in
other operations, P100.00 may appear to be too large and rather unreasonable. Manila Municipal Board considered the practice of hygienic and aesthetic massage
not as a useful and beneficial occupation which will promote and is conducive to public morals, and consequently, imposed the said permit fee for its regulation.
8
I_E6
PHILIPPINE AIRLINES, INC. vs. ROMEO F. EDU and UBALDO CARBONELL
No. L-41383. August 15, 1988.
Nature: PETITION to review the decision of the Court of First Instance
Ponente: GUTIERREZ, JR., J.
Facts:
Under its franchise, PAL is exempt from the payment of taxes.
Sometime in 1971, however, appellee Commissioner Romeo F. Edu, issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle
registration fees.
Despite PAL’s protestations, the appellee refused to register the appellant’s motor vehicles unless the amounts imposed under Republic Act 4136 were paid.
After paying under protest, PAL through counsel, wrote a letter dated May 19, 1971, to Commissioner Edu demanding a refund of the amounts paid, invoking the
ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt
by virtue of its legislative franchise.
Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc.
the trial court rendered a decision dismissing the appellant’s complaint “guided by the later ruling laid down by the Supreme Court in the case of Republic v.
Philippine Rabbit Bus Lines, Inc. (supra).” From this judgment, PAL appealed to the Court of Appeals.
Issue:
What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL?
Ratio:
TAX. 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 (Umali, ed.) Such
is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same
provision appears as Section 59(b) in the Land Transportation Code. It is patent therefrom that the legislators had in mind a regulatory tax as the law refers to the
imposition on the registration, operation or ownership of a motor vehicle as a “tax or fee.” Though nowhere in Rep. Act 4136 does the law specifically state that the
imposition is a tax, Section 59(b) speaks of “taxes or fees x x x for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the
profession of chauffeur x x x” making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speaks of an “additional tax,”
where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor
vehicle under Rep. Act 4136. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an
“additional” tax. x x x In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code
are actually taxes intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the operating expenses of the
agency administering the program.
NO. Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed because the tax exemption in the franchise of PAL was repealed
during the period. However, an amended franchise was given to PAL in 1979.
I_E7
Commissioner of Internal Revenue vs. Central Luzon Drug Corporation
GR No. 159647, April 15, 2005
9
Facts:
Respondent is a domestic corporation engaged in the retailing of medicines and other pharmaceutical products. In 1996 it operated six (6) drugstores under the
business name and style “Mercury Drug.” From January to December 1996 respondent granted 20% sales discount to qualified senior citizens on their purchases of
medicines pursuant to RA 7432. For said period respondent granted a total of ₱ 904,769.
On April 15, 1997, respondent filed its annual ITR for taxable year 1996 declaring therein net losses. On Jan. 16, 1998 respondent filed with petitioner a claim for tax
refund/credit of ₱ 904,769.00 alledgedly arising from the 20% sales discount. Unable to obtain affirmative response from petitioner, respondent elevated its claim to
the CTA via Petition for Review. CTA dismissed the same but on MR, CTA reversed its earlier ruling and ordered petitioner to issue a Tax Credit Certificate in favor of
respondent citing CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or
erroneously paid taxes but that there are other situations which may warrant a tax credit/refund.
CA affirmed CTA decision reasoning that RA 7432 required neither a tax liability nor a payment of taxes by private establishments prior to the availment of a tax
credit. Moreover, such credit is not tantamount to an unintended benefit from the law, but rather a just compensation for the taking of private property for public
use.
ISSUE: W/N respondent, despite incurring a net loss, may still claim the 20% sales discount as a tax credit.
RULING:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount on their purchase of medicine from any private establishment
in the country. The latter may then claim the cost of the discount as a tax credit. Such credit can be claimed even if the establishment operates at a loss.
A tax credit generally refers to an amount that is “subtracted directly from one’s total tax liability.” It is an “allowance against the tax itself” or “a deduction from
what is owed” by a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts. One of these is tax deduction – which is subtraction “from income for tax purposes,” or an
amount that is “allowed by law to reduce income prior to the application of the tax rate to compute the amount of tax which is due.” In other words, whereas a tax
credit reduces the tax due, tax deduction reduces the income subject to tax in order to arrive at the taxable income.
Since a tax credit is used to reduce directly the tax that is due, there ought to be a tax liability before the tax credit can be applied. Without that liability, any tax
credit application will be useless. There will be no reason for deducting the latter when there is, to begin with, no existing obligation to the government. However, as
will be presented shortly, the existence of a tax credit or its grant by law is not the same as the availment or use of such credit. While the grant is mandatory, the
availment or use is not.
If a net loss is reported by, and no other taxes are currently due from, a business establishment, there will obviously be no tax liability against which any tax credit can
be applied. For the establishment to choose the immediate availment of a tax credit will be premature and impracticable. Nevertheless, the irrefutable fact remains
that, under RA 7432, Congress has granted without conditions a tax credit benefit to all covered establishments. However, for the losing establishment to
immediately apply such credit, where no tax is due, will be an improvident usance.
In addition, while a tax liability is essential to the availment or use of any tax credit, prior tax payments are not. On the contrary, for the existence or grant solely of
such credit, neither a tax liability nor a prior tax payment is needed. The Tax Code is in fact replete with provisions granting or allowing tax credits, even though no
taxes have been previously paid.
Petition is denied.
I_F3
10
Roxas v. CTA, 23 SCRA 276 (1968)
G.R. No. L-25043 April 26, 1968
ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial co-guardians of JOSE ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.
Leido, Andrada, Perez and Associates for petitioners.

Office of the Solicitor General for respondents.
BENGZON, J.P., J.:
Facts:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession several properties. To manage the above-
mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called Roxas y Compania. At the conclusion of the
WW2, the tenants who have all been tilling the lands in Nasugbu for generations expressed their desire to purchase from Roxas y Cia. the parcels which they actually
occupied. For its part, the Government, in consonance with the constitutional mandate to acquire big landed estates and apportion them among landless tenant-
farmers, persuaded the Roxas brothers to part with their landholdings. Conferences were held with the farmers in the early part of 1948 and finally the Roxas
brothers agree to sell 13,500 hectares to the Government for distribution to actual occupants for a price of P2,079,048.47 plus P300,000 for survey and distribution
expenses. It turned out however that the Government did not have funds to cover the purchase price, and so a special arrangement was made for the Rehabilitation
Finance Corporation to advance to Roxas y Cia. the amount of P1,500,000.00 as loan. Collateral for such loan were the lands proposed to be sold to the farmers.
Under the arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment, and contracted with the Rehabilitation Finance
Corporation to pay its loan from the proceeds of the yearly amortizations paid by the farmers.
The CIR demanded from Roxas y Cia. the payment of deficiency income taxes resulting from the inclusion as income of Roxas y Cia. of the unreported 50% of the net
profits for 1953 and 1955 derived from the sale of the Nasugbu farmlands to the tenants, and the disallowance of deductions from gross income of various business
expenses and contributions claimed by Roxas y Cia. and the Roxas brothers. For the reason that Roxas y CIa. subdivided its Nasugbu farmlands and sold them to the
farmers on installment, the Commissioner considered the partnership as engaged in the business of real estate, hence, 100% of the profits derived there from was
taxed. The Roxas brothers protested the assessment but inasmuch as said protest was denied, they instituted an appeal in the CTA which sustained the assessment.
Hence, this appeal.
Issue:
I. Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable? And is
Roxas y Cia liable for the payment of deficiency income for the sale of Nasugbu farmlands?
II. Are the deductions for business expenses and contributions deductible?
Ruling:
I. NO. The proposition of the CIR cannot be favorably accepted in this isolated transaction with its peculiar circumstances inspite of the fact that there were
hundreds of vendees. Although they paid for their respective holdings in installment for the period of 10 years, it would nevertheless make the vendor Roxas y Cia. a
real estate dealer during the 10-year amortization period. It should be borne in mind that the sale of the Nasugbu farmlands to the very farmers who tilled them for
generations was not only in consonance with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless. It
was the bounden duty of the Government to pay the agreed compensation after it had persuaded Roxas y Cia. to sell its haciendas, and to subsequently subdivide
them among the farmers at very reasonable terms and prices. However, the Government could not comply with its duty for lack of funds. Obligingly, Roxas y Cia.
shouldered the Government’s burden, went out of its way and sold lands directly to the farmers in the same way and under the same terms as would have been the
case had the Government done it itself. For this magnanimous act, the municipal council of Nasugbu passed a resolution expressing the people’s gratitude.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to section 34 of the Tax Code, the land sold to the farmers are
capital assets, and the gain derived from the sale thereof is capital gain, taxable only to the extent of 50%.
II. DISALLOWED DEDUCTIONS
Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet given in honor of Sergio Osmena and P28.00 for San Miguel beer given as
gifts to various persons. The deduction were claimed as representation expenses. Representation expenses are deductible from gross income as expenditures
incurred in carrying on a trade or business under Section 30(a) of the Tax Code provided the taxpayer proves that they are reasonable in amount, ordinary and
11
necessary, and incurred in connection with his business. In the case at bar, the evidence does not show such link between the expenses and the business of Roxas y
Cia. The findings of the Court of Tax Appeals must therefore be sustained (disallowed deduction).
The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City Firemen, and Baguio City Police Christmas funds, Manila Police Trust Fund,
Philippines Herald's fund for Manila's neediest families and Our Lady of Fatima chapel at Far Eastern University.
The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and Baguio City Police are not deductible for the reason that the Christmas funds
were not spent for public purposes but as Christmas gifts to the families of the members of said entities. Under Section 39(h), a contribution to a government entity is
deductible when used exclusively for public purposes. For this reason, the disallowance must be sustained. On the other hand, the contribution to the Manila Police
trust fund is an allowable deduction for said trust fund belongs to the Manila Police, a government entity, intended to be used exclusively for its public functions.
The contributions to the Philippines Herald's fund for Manila's neediest families were disallowed on the ground that the Philippines Herald is not a corporation or an
association contemplated in Section 30 (h) of the Tax Code. It should be noted however that the contributions were not made to the Philippines Herald but to a group
of civic spirited citizens organized by the Philippines Herald solely for charitable purposes. There is no question that the members of this group of citizens do not
receive profits, for all the funds they raised were for Manila's neediest families. Such a group of citizens may be classified as an association organized exclusively for
charitable purposes mentioned in Section 30(h) of the Tax Code.
Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of Fatima chapel at the Far Eastern University on the ground that the said
university gives dividends to its stockholders (it should be non-profit institution. Located within the premises of the university, the chapel in question has not been
shown to belong to the Catholic Church or any religious organization. On the other hand, the lower court found that it belongs to the Far Eastern University,
contributions to which are not deductible under Section 30(h) of the Tax Code for the reason that the net income of said university injures to the benefit of its
stockholders. The disallowance should be sustained.
Doctrines:
I. Sale of property by landowners to tenants under government policy to allocate lands to the landless subject not subject to real estate dealer’s tax.
II. The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary
rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg”.
I_H1
Abakada Guro Party List, et al vs Exec. Sec. Ermita
Facts: On May 24, 2005, the President signed into law Republic Act 9337 or the VAT Reform Act. Before the law took effect on July 1, 2005, the Court issued a TRO
enjoining government from implementing the law in response to a slew of petitions for certiorari and prohibition questioning the constitutionality of the new law.
The challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6: “That the President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to 12%, after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%);
or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1½%)”
Petitioners allege that the grant of stand-by authority to the President to increase the VAT rate is an abdication by Congress of its exclusive power to tax because such
delegation is not covered by Section 28 (2), Article VI Consti. They argue that VAT is a tax levied on the sale or exchange of goods and services which can’t be included
within the purview of tariffs under the exemption delegation since this refers to customs duties, tolls or tribute payable upon merchandise to the government and
usually imposed on imported/exported goods. They also said that the President has powers to cause, influence or create the conditions provided by law to bring
about the conditions precedent. Moreover, they allege that no guiding standards are made by law as to how the Secretary of Finance will make the recommendation.
Issue: Whether or not the RA 9337's stand-by authority to the Executive to increase the VAT rate, especially on account of the recommendatory power granted to the
Secretary of Finance, constitutes undue delegation of legislative power? NO
12
Held: The powers which Congress is prohibited from delegating are those which are strictly, or inherently and exclusively, legislative. Purely legislative power which
can never be delegated is the authority to make a complete law- complete as to the time when it shall take effect and as to whom it shall be applicable, and to
determine the expediency of its enactment. It is the nature of the power and not the liability of its use or the manner of its exercise which determines the validity of
its delegation.
The exceptions are:
(a) delegation of tariff powers to President under Constitution
(b) delegation of emergency powers to President under Constitution
(c) delegation to the people at large
(d) delegation to local governments
(e) delegation to administrative bodies
For the delegation to be valid, it must be complete and it must fix a standard. A sufficient standard is one which defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it.
In this case, it is not a delegation of legislative power BUT a delegation of ascertainment of facts upon which enforcement and administration of the increased rate
under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves
the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. No discretion would be exercised by the
President. Highlighting the absence of discretion is the fact that the word SHALL is used in the common proviso. The use of the word SHALL connotes a mandatory
order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty,
which cannot be evaded by the President. It is a clear directive to impose the 12% VAT rate when the specified conditions are present.
Congress just granted the Secretary of Finance the authority to ascertain the existence of a fact--- whether by December 31, 2005, the VAT collection as a percentage
of GDP of the previous year exceeds 2 4/5 % or the national government deficit as a percentage of GDP of the previous year exceeds one and 1½%. If either of these
two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President.
In making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the
President or even her subordinate. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take
effect. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities
to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other
pertinent information and verify if any of the two conditions laid out by Congress is present.
Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority;
in our complex economy that is frequently the only way in which the legislative process can go forward.
There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible. Congress did not delegate
the power to tax but the mere implementation of the law.
13
3 important keys ( in relation to Tolentino case)
It is not the law but the bill that should originate from the House of Representatives
Not allowing senate to amend, violates co-equality between two houses
Senate can propose, concur or amend
I_H2
Chavez v Ongpin
GR No 76778, June 6, 1990
FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar year 1978, there shall be a provincial or city general revision of real property
assessments. The general revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning January 1, 1987, the 1984 assessments shall be the basis of real property taxes.
Francisco Chavez, a taxpayer and landowner, questioned the constitutionality of EO 74. He alleges that it will bring unreasonable increase in real property taxes.
ISSUE:
Is EO 73 constitutional?
RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978 revision of property values. Certainly, to continue collecting real property taxes
based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then is not in consonance with a
sound tax system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenue must be adequate to meet government expenditures and
their variations.
I_K-c8
Randolf David vs President Gloria Macapagal-Arroyo
489 SCRA 160 – Political Law – The Executive Branch – Presidential Proclamation 1017 – Take Care Clause – Take Over Power – Calling Out Power
Bill of Rights – Freedom of Speech – Overbreadth
In February 2006, due to the escape of some Magdalo members and the discovery of a plan (Oplan Hackle I) to assassinate the president, then president Gloria
Macapagal-Arroyo (GMA) issued Presidential Proclamation 1017 (PP1017) and is to be implemented by General Order No. 5 (GO 5). The said law was aimed to
suppress lawlessness and the connivance of extremists to bring down the government.
Pursuant to such PP, GMA cancelled all plans to celebrate EDSA I and at the same time revoked all permits issued for rallies and other public organization/meeting.
Notwithstanding the cancellation of their rally permit, Kilusang Mayo Uno (KMU) head Randolf David proceeded to rally which led to his arrest.
Later that day, the Daily Tribune, which Cacho-Olivares is the editor, was raided by the CIDG and they seized and confiscated anti-GMA articles and write ups. Later
still, another known anti-GMA news agency (Malaya) was raided and seized. On the same day, Beltran of Anakpawis, was also arrested. His arrest was however
grounded on a warrant of arrest issued way back in 1985 for his actions against Marcos. His supporters cannot visit him in jail because of the current imposition of PP
1017 and GO 5.
In March, GMA issued PP 1021 which declared that the state of national emergency ceased to exist. David and some opposition Congressmen averred that PP1017 is
unconstitutional for it has no factual basis and it cannot be validly declared by the president for such power is reposed in Congress. Also such declaration is actually a
declaration of martial law. Olivares-Cacho also averred that the emergency contemplated in the Constitution are those of natural calamities and that such is an
overbreadth. Petitioners claim that PP 1017 is an overbreadth because it encroaches upon protected and unprotected rights. The Sol-Gen argued that the issue has
become moot and academic by reason of the lifting of PP 1017 by virtue of the declaration of PP 1021. The Sol-Gen averred that PP 1017 is within the president’s
calling out power, take care power and take over power.
ISSUE: Whether or not PP 1017 and GO 5 is constitutional.
HELD: PP 1017 and its implementing GO are partly constitutional and partly unconstitutional.
The issue cannot be considered as moot and academic by reason of the lifting of the questioned PP. It is still in fact operative because there are parties still affected
due to the alleged violation of the said PP. Hence, the SC can take cognition of the case at bar. The SC ruled that PP 1017 is constitutional in part and at the same time
some provisions of which are unconstitutional. The SC ruled in the following way;
Resolution by the SC on the Factual Basis of its declaration
14
The petitioners were not able to prove that GMA has no factual basis in issuing PP 1017 and GO 5. A reading of the Solicitor General’s Consolidated Comment and
Memorandum shows a detailed narration of the events leading to the issuance of PP 1017, with supporting reports forming part of the records. Mentioned are the
escape of the Magdalo Group, their audacious threat of the Magdalo D-Day, the defections in the military, particularly in the Philippine Marines, and the reproving
statements from the communist leaders. There was also the Minutes of the Intelligence Report and Security Group of the Philippine Army showing the growing
alliance between the NPA and the military. Petitioners presented nothing to refute such events. Thus, absent any contrary allegations, the Court is convinced that
the President was justified in issuing PP 1017 calling for military aid. Indeed, judging the seriousness of the incidents, GMA was not expected to simply fold her arms
and do nothing to prevent or suppress what she believed was lawless violence, invasion or rebellion. However, the exercise of such power or duty must not stifle
liberty.
Resolution by the SC on the Overbreadth Theory
First and foremost, the overbreadth doctrine is an analytical tool developed for testing ‘on their faces’ statutes in free speech cases. The 7 consolidated cases at bar
are not primarily ‘freedom of speech’ cases. Also, a plain reading of PP 1017 shows that it is not primarily directed to speech or even speech-related conduct. It is
actually a call upon the AFP to prevent or suppress all forms of lawless violence. Moreover, the overbreadth doctrine is not intended for testing the validity of a law
that ‘reflects legitimate state interest in maintaining comprehensive control over harmful, constitutionally unprotected conduct.’ Undoubtedly, lawless violence,
insurrection and rebellion are considered ‘harmful’ and ‘constitutionally unprotected conduct.’ Thus, claims of facial overbreadth are entertained in cases involving
statutes which, by their terms, seek to regulate only ‘spoken words’ and again, that ‘overbreadth claims, if entertained at all, have been curtailed when invoked
against ordinary criminal laws that are sought to be applied to protected conduct.’ Here, the incontrovertible fact remains that PP 1017 pertains to a spectrum of
conduct, not free speech, which is manifestly subject to state regulation.
Resolution by the SC on the Calling Out Power Doctrine
On the basis of Sec 17, Art 7 of the Constitution, GMA declared PP 1017. The SC considered the President’s ‘calling-out’ power as a discretionary power solely vested
in his wisdom, it stressed that ‘this does not prevent an examination of whether such power was exercised within permissible constitutional limits or whether it was
exercised in a manner constituting grave abuse of discretion. The SC ruled that GMA has validly declared PP 1017 for the Constitution grants the President, as
Commander-in-Chief, a ‘sequence’ of graduated powers. From the most to the least benign, these are: the calling-out power, the power to suspend the privilege of
the writ of habeas corpus, and the power to declare Martial Law. The only criterion for the exercise of the calling-out power is that ‘whenever it becomes necessary,’
the President may call the armed forces ‘to prevent or suppress lawless violence, invasion or rebellion.’ And such criterion has been met.
Resolution by the SC on the Take Care Doctrine
Pursuant to the 2nd sentence of Sec 17, Art 7 of the Constitution (He shall ensure that the laws be faithfully executed.) the president declared PP 1017. David et al
averred that PP 1017 however violated Sec 1, Art 6 of the Constitution for it arrogated legislative power to the President. Such power is vested in Congress. They
assail the clause ‘to enforce obedience to all the laws and to all decrees, orders and regulations promulgated by me personally or upon my direction.’ The SC noted
that such provision is similar to the power that granted former President Marcos legislative powers (as provided in PP 1081). The SC ruled that the assailed PP 1017 is
unconstitutional insofar as it grants GMA the authority to promulgate ‘decrees.’ Legislative power is peculiarly within the province of the Legislature. Sec 1, Article 6
categorically states that ‘[t]he legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives.’ To
be sure, neither Martial Law nor a state of rebellion nor a state of emergency can justify GMA’[s exercise of legislative power by issuing decrees. The president can
only “take care” of the carrying out of laws but cannot create or enact laws.
Resolution by the SC on the Take Over Power Doctrine
The president cannot validly order the taking over of private corporations or institutions such as the Daily Tribune without any authority from Congress. On the other
hand, the word emergency contemplated in the constitution is not limited to natural calamities but rather it also includes rebellion. The SC made a distinction; the
president can declare the state of national emergency but her exercise of emergency powers does not come automatically after it for such exercise needs authority
from Congress. The authority from Congress must be based on the following:
(1) There must be a war or other emergency.
(2) The delegation must be for a limited period only.
(3) The delegation must be subject to such restrictions as the Congress may prescribe.
(4) The emergency powers must be exercised to carry out a national policy declared by Congress.
Resolution by the SC on the Issue that PP 1017 is a Martial Law Declaration
The SC ruled that PP 1017 is not a Martial Law declaration and is not tantamount to it. It is a valid exercise of the calling out power of the president by the president.
I_k-c9
Jumamil vs. Café, et al.
Jumamil vs. Café, et al.

[GR 144570, 21 September 2005]
Third Division, Corona (J): 4 concur
Facts: In 1989, Vivencio V. Jumamil filed before the Regional Trial Court (RTC) of Panabo, Davao del Norte a petition for declaratory relief with prayer for preliminary
injunction and writ of restraining order against Mayor Jose J. Cafe and the members of the Sangguniang Bayan of Panabo, Davao del Norte. He questioned the
15
constitutionality of Municipal Resolution 7, Series of 1989 (Resolution 7). Resolution 7, enacting Appropriation Ordinance 111, provided for an initial appropriation of
P765,000 for the construction of stalls around a proposed terminal fronting the Panabo Public Market which was destroyed by fire. Subsequently, the petition was
amended due to the passage of Resolution 49, series of 1989 (Resolution 49), denominated as Ordinance 10, appropriating a further amount of P1,515,000 for the
construction of additional stalls in the same public market. Prior to the passage of these resolutions, Mayor Cafe had already entered into contracts with those who
advanced and deposited (with the municipal treasurer) from their personal funds the sum of P40,000 each. Some of the parties were close friends and/or relatives of
Cafe, et al. The construction of the stalls which Jumamil sought to stop through the preliminary injunction in the RTC was nevertheless finished, rendering the prayer
therefor moot and academic. The leases of the stalls were then awarded by public raffle which, however, was limited to those who had deposited P40,000 each. Thus,
the petition was amended anew to include the 57 awardees of the stalls as private respondents. Jumamil alleges that Resolution Nos. 7 and 49 were unconstitutional
because they were passed for the business, occupation, enjoyment and benefit of private respondents, some of which were close friends and/or relative of the mayor
and the sanggunian, who deposited the amount of P40,000.00 for each stall, and with whom also the mayor had a prior contract to award the would be constructed
stalls to all private respondents; that resolutions and ordinances did not provide for any notice of publication that the special privilege and unwarranted benefits
conferred on the private respondents may be availed of by anybody who can deposit the amount of P40,000; and that nor there were any prior notice or publication
pertaining to contracts entered into by public and private respondents for the construction of stalls to be awarded to private respondents that the same can be
availed of by anybody willing to deposit P40,000.00. The Regional Trial Court dismissed Jumamil’s petition for declaratory relief with prayer for preliminary injunction
and writ of restraining order, and ordered Jumamil to pay attorney’s fees in the amount of P1,000 to each of the 57 private respondents. On appeal, and on 24 July
2000 (CA GR CV 35082), the Court of Appeals affirmed the decision of the trial court. Jumamil filed the petition for review on certiorari.
Issue [1]: Whether Jumamil had the legal standing to bring the petition for declaratory relief
Held [1]: Legal standing or locus standi is a party’s personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the
governmental act being challenged. It calls for more than just a generalized grievance. The term “interest” means a material interest, an interest in issue affected by
the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Unless a person’s constitutional rights are adversely affected
by the statute or ordinance, he has no legal standing. Jumamil brought the petition in his capacity as taxpayer of the Municipality of Panabo, Davao del Norte and not
in his personal capacity. He was questioning the official acts of the the mayor and the members of the Sanggunian in passing the ordinances and entering into the
lease contracts with private respondents. A taxpayer need not be a party to the contract to challenge its validity. Parties suing as taxpayers must specifically prove
sufficient interest in preventing the illegal expenditure of money raised by taxation. The expenditure of public funds by an officer of the State for the purpose of
executing an unconstitutional act constitutes a misapplication of such funds. The resolutions being assailed were appropriations ordinances. Jumamil alleged that
these ordinances were “passed for the business, occupation, enjoyment and benefit of private respondents” (that is, allegedly for the private benefit of respondents)
because even before they were passed, Mayor Cafe and private respondents had already entered into lease contracts for the construction and award of the market
stalls. Private respondents admitted they deposited P40,000 each with the municipal treasurer, which amounts were made available to the municipality during the
construction of the stalls. The deposits, however, were needed to ensure the speedy completion of the stalls after the public market was gutted by a series of fires.
Thus, the award of the stalls was necessarily limited only to those who advanced their personal funds for their construction. Jumamil did not seasonably allege his
interest in preventing the illegal expenditure of public funds or the specific injury to him as a result of the enforcement of the questioned resolutions and contracts. It
was only in the “Remark to Comment” he filed in the Supreme Court did he first assert that “he (was) willing to engage in business and (was) interested to occupy a
market stall.” Such claim was obviously an afterthought.
Issue [2]: Whether the rule on locus standi should be relaxed.
Held [2]: Objections to a taxpayer's suit for lack of sufficient personality, standing or interest are procedural matters. Considering the importance to the public of a
suit assailing the constitutionality of a tax law, and in keeping with the Court's duty, specially explicated in the 1987 Constitution, to determine whether or not the
other branches of the Government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to
them, the Supreme Court may brush aside technicalities of procedure and take cognizance of the suit. There being no doctrinal definition of transcendental
importance, the following determinants formulated by former Supreme Court Justice Florentino P. Feliciano are instructive: (1) the character of the funds or other
assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality
of the government; and (3) the lack of any other party with a more direct and specific interest in raising the questions being raised. But, even if the Court disregards
Jumamil’s lack of legal standing, this petition must still fail. The subject resolutions/ordinances appropriated a total of P2,280,000 for the construction of the public
market stalls. Jumamil alleged that these ordinances were discriminatory because, even prior to their enactment, a decision had already been made to award the
market stalls to the private respondents who deposited P40,000 each and who were either friends or relatives of the mayor or members of the Sanggunian. Jumamil
asserted that “there (was) no publication or invitation to the public that this contract (was) available to all who (were) interested to own a stall and (were) willing to
deposit P40,000.” Respondents, however, counter that the “public respondents’ act of entering into this agreement was authorized by the Sangguniang Bayan of
Panabo per Resolution 180 dated 10 October 1988” and that “all the people interested were invited to participate in investing their savings.” Jumamil failed to prove
the subject ordinances and agreements to be discriminatory. Considering that he was asking the Court to nullify the acts of the local political department of Panabo,
Davao del Norte, he should have clearly established that such ordinances operated unfairly against those who were not notified and who were thus not given the
opportunity to make their deposits. His unsubstantiated allegation that the public was not notified did not suffice. Furthermore, there was the time-honored
presumption of regularity of official duty, absent any showing to the contrary.
I_K-C10
ABAYA vs. EBDANE, JR.

515 SCRA 720
GR No. 167919, February 14, 2007
"A taxpayer need not be a party to the contract to challenge its validity."
FACTS: The petitioners, Plaridel M. Abaya who claims that he filed the instant petition as a taxpayer, former lawmaker, and a Filipino citizen, and Plaridel C. Garcia
likewise claiming that he filed the suit as a taxpayer, former military officer, and a Filipino citizen, mainly seek to nullify a DPWH resolution which recommended the
award to private respondent China Road & Bridge Corporation of the contract for the implementation of the civil works known as Contract Package No. I (CP I). They
also seek to annul the contract of agreement subsequently entered into by and between the DPWH and private respondent China Road & Bridge Corporation
pursuant to the said resolution.
16
ISSUE: Has petitioners the legal standing to file the instant case against the government?
HELD: Petitioners, as taxpayers, possess locus standi to file the present suit. Briefly stated, locus standi is a right of appearance in a court of justice on a given
question. More particularly, it is a party’s personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the
governmental act being challenged. Locus standi, however, is merely a matter of procedure and it has been recognized that in some cases, suits are not brought by
parties who have been personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in
the public interest. Consequently, the Court, in a catena of cases, has invariably adopted a liberal stance on locus standi, including those cases involving taxpayers.
The prevailing doctrine in taxpayer’s suits is to allow taxpayers to question contracts entered into by the national government or government- owned or controlled
corporations allegedly in contravention of law. A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that public money is
being deflected to any improper purpose, or that there is a wastage of public funds through the enforcement of an invalid or unconstitutional law. Significantly, a
taxpayer need not be a party to the contract to challenge its validity.
I_K-C11
III. Limitations on the Power of Taxation
16. Pascual v. Secretary of Public Works and Communications
The right of the legislature to appropriate funds is correlative with its right to tax, under the constitutional provision against taxation except for public purposes and
prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose as appropriation for state funds can be made for other than a public
purpose.
I_K-c12
40. Lutz v. Araneta
If objectives and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment.
Taxation may be made with the implement of the state’s police power. Inequalities which result from a singling out of one particular class for taxation, or exemption
infringe no constitutional limitation.
I_K-c13
Product v. Fertiphil Corp.

G.R. No. 166006 March 14, 2008
REYES, R.T., J.
Lessons Applicable: Bet. private and public suit, easier to file public suit, Apply real party in interest test for private suit and direct injury test for public suit, Validity
test varies depending on which inherent power
Laws Applicable:
FACTS:
President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among others, for the imposition of a capital recovery component
(CRC) on the domestic sale of all grades of fertilizers which resulted in having Fertiphil paying P 10/bag sold to the Fertilizer and Perticide Authority (FPA).
FPA remits its collection to Far East Bank and Trust Company who applies to the payment of corporate debts of Planters Products Inc. (PPI)
After the Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Upon return of democracy, Fertiphil demanded a refund but PPI refused. Fertiphil
filed a complaint for collection and damages against FPA and PPI with the RTC on the ground that LOI No. 1465 is unjust, unreaonable oppressive, invalid and unlawful
resulting to denial of due process of law.
FPA answered that it is a valid exercise of the police power of the state in ensuring the stability of the fertilizing industry in the country and that Fertiphil did NOT
sustain damages since the burden imposed fell on the ultimate consumers.
RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as such because it is NOT for public purpose as PPI is a private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police power
Held:
1. Yes. In private suits, locus standi requires a litigant to be a "real party in interest" or party who stands to be benefited or injured by the judgment in the suit. In
17
public suits, there is the right of the ordinary citizen to petition the courts to be freed from unlawful government intrusion and illegal official action subject to
the direct injury test or where there must be personal and substantial interest in the case such that he has sustained or will sustain direct injury as a result. Being a
mere procedural technicality, it has also been held that locus standi may be waived in the public interest such as cases of transcendental importance or with far-
reaching implications whether private or public suit, Fertiphil has locus standi.
2. As a seller, it bore the ultimate burden of paying the levy which made its products more expensive and harm its business. It is also of paramount public importance
since it involves the constitutionality of a tax law and use of taxes for public purpose.
3. Yes. Police power and the power of taxation are inherent powers of the state but distinct and have different tests for validity. Police power is the power of the
state to enact the legislation that may interfere with personal liberty on property in order to promote general welfare. While, the power of taxation is the power to
levy taxes as to be used for public purpose. The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue generation. The
lawful subjects and lawful means tests are used to determine the validity of a law enacted under the police power. The power of taxation, on the other hand, is
circumscribed by inherent and constitutional limitations.
In this case, it is for purpose of revenue. But it is a robbery for the State to tax the citizen and use the funds generation for a private purpose. Public purpose does
NOT only pertain to those purpose which are traditionally viewed as essentially governmental function such as building roads and delivery of basic services, but also
includes those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, low-cost housing and urban or
agrarian reform.
I_K-c15
GONZALES VS HECHANOVA
Posted by kaye lee on 12:36 PM
G.R. No. L-21897 October 22 1963 [Executive Agreements]
FACTS:
Exec. Secretary Hechanova authorised the importation of foreign rice to be purchased from private sources. Gonzales filed a petition opposing the said
implementation because RA No. 3542 which allegedly repeals or amends RA No. 2207, prohibits the importation of rice and corn "by the Rice and Corn
Administration or any other government agency."
Respondents alleged that the importation permitted in RA 2207 is to be authorized by the President of the Philippines, and by or on behalf of the Government of the
Philippines. They add that after enjoining the Rice and Corn administration and any other government agency from importing rice and corn, S. 10 of RA 3542 indicates
that only private parties may import rice under its provisions. They contended that the government has already constitute valid executive agreements with Vietnam
and Burma, that in case of conflict between RA 2207 and 3542, the latter should prevail and the conflict be resolved under the American jurisprudence.
ISSUE:
W/N the executive agreements may be validated in our courts.
RULING:
No. The Court is not satisfied that the status of said tracts as alleged executive agreements has been sufficiently established. Even assuming that said contracts may
properly considered as executive agreements, the same are unlawful, as well as null and void, from a constitutional viewpoint, said agreements being inconsistent
with the provisions of Republic Acts Nos. 2207 and 3452. Although the President may, under the American constitutional system enter into executive agreements
without previous legislative authority, he may not, by executive agreement, enter into a transaction which is prohibited by statutes enacted prior thereto.
Under the Constitution, the main function of the Executive is to enforce laws enacted by Congress. He may not interfere in the performance of the legislative powers
of the latter, except in the exercise of his veto power. He may not defeat legislative enactments that have acquired the status of law, by indirectly repealing the same
through an executive agreement providing for the performance of the very act prohibited by said laws.
#31
18
Maceda v Macaraig
GR No 88291, May 31, 1991
FACTS:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the development of hydraulic power and the production of power from other
sources. RA 358 granted NAPOCOR tax and duty exemption privileges. RA 6395 revised the charter of the NAPOCOR, tasking it to carry out the policy of the national
electrification and provided in detail NAPOCOR’s tax exceptions. PD 380 specified that NAPOCOR’s exemption includes all taxes, etc. imposed “directly or indirectly.”
PD 938 dated May 27, 1976 further amended the aforesaid provision by integrating the tax exemption in general terms under one paragraph.
ISSUE:
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the enactment of PD 938 on May 27, 1976 which amended PD 380 issued on January
11, 1974
RULING:
No, it is still exempt.
NAPOCOR is a non-profit public corporation created for the general good and welfare, and wholly owned by the government of the Republic of the Philippines. From
the very beginning of the corporation’s existence, NAPOCOR enjoyed preferential tax treatment “to enable the corporation to pay the indebtedness and obligation”
and effective implementation of the policy enunciated in Section 1 of RA 6395.
From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be interpreted liberally so as to enhance the tax exempt status of
NAPOCOR.
It is recognized that the rule on strict interpretation does not apply in the case of exemptions in favor of government political subdivision or instrumentality. In the
case of property owned by the state or a city or other public corporations, the express exception should not be construed with the same degree of strictness that
applies to exemptions contrary to the policy of the state, since as to such property “exception is the rule and taxation the exception.”
#33
CIR vs. MARUBENI
11FEB
GR No. 137377| J. Puno
Facts:
CIR assails the CA decision which affirmed CTA, ordering CIR to desist from collecting the 1985 deficiency income, branch profit remittance and contractor’s taxes
from Marubeni Corp after finding the latter to have properly availed of the tax amnesty under EO 41 & 64, as amended.
Marubeni, a Japanese corporation, engaged in general import and export trading, financing and construction, is duly registered in the Philippines with Manila branch
office. CIR examined the Manila branch’s books of accounts for fiscal year ending March 1985, and found that respondent had undeclared income from contracts with
NDC and Philphos for construction of a wharf/port complex and ammonia storage complex respectively.
On August 27, 1986, Marubeni received a letter from CIR assessing it for several deficiency taxes. CIR claims that the income respondent derived were income from
Philippine sources, hence subject to internal revenue taxes. On Sept 1986, respondent filed 2 petitions for review with CTA: the first, questioned the deficiency
income, branch profit remittance and contractor’s tax assessments and second questioned the deficiency commercial broker’s assessment.
On Aug 2, 1986, EO 41 declared a tax amnesty for unpaid income taxes for 1981-85, and that taxpayers who wished to avail this should on or before Oct 31, 1986.
Marubeni filed its tax amnesty return on Oct 30, 1986.
On Nov 17, 1986, EO 64 expanded EO 41’s scope to include estate and donor’s taxes under Title 3 and business tax under Chap 2, Title 5 of NIRC, extended the period
of availment to Dec 15, 1986 and stated those who already availed amnesty under EO 41 should file an amended return to avail of the new benefits. Marubeni filed a
supplemental tax amnesty return on Dec 15, 1986.
CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled the deficiency taxes. CA affirmed on appeal.
Issue:
W/N Marubeni is exempted from paying tax
Held:
19
Yes.
1. On date of effectivity
CIR claims Marubeni is disqualified from the tax amnesty because it falls under the exception in Sec 4b of EO 41:
“Sec. 4. Exceptions.—The following taxpayers may not avail themselves of the amnesty herein granted: xxx b) Those with income tax cases already filed in Court as of
the effectivity hereof;”
Petitioner argues that at the time respondent filed for income tax amnesty on Oct 30, 1986, a case had already been filed and was pending before the CTA and
Marubeni therefore fell under the exception. However, the point of reference is the date of effectivity of EO 41 and that the filing of income tax cases must have been
made before and as of its effectivity.
EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was filed with CTA on Sept 26, 1986. When EO 41 became effective, the case had not yet
been filed. Marubeni does not fall in the exception and is thus, not disqualified from availing of the amnesty under EO 41 for taxes on income and branch profit
remittance.
The difficulty herein is with respect to the contractor’s tax assessment (business tax) and respondent’s availment of the amnesty under EO 64, which expanded EO
41’s coverage. When EO 64 took effect on Nov 17, 1986, it did not provide for exceptions to the coverage of the amnesty for business, estate and donor’s taxes.
Instead, Section 8 said EO provided that:
“Section 8. The provisions of Executive Orders Nos. 41 and 54 which are not contrary to or inconsistent with this amendatory Executive Order shall remain in full force
and effect.”
Due to the EO 64 amendment, Sec 4b cannot be construed to refer to EO 41 and its date of effectivity. The general rule is that an amendatory act operates
prospectively. It may not be given a retroactive effect unless it is so provided expressly or by necessary implication and no vested right or obligations of contract are
thereby impaired.
2. On situs of taxation
Marubeni contends that assuming it did not validly avail of the amnesty, it is still not liable for the deficiency tax because the income from the projects came from the
“Offshore Portion” as opposed to “Onshore Portion”. It claims all materials and equipment in the contract under the “Offshore Portion” were manufactured and
completed in Japan, not in the Philippines, and are therefore not subject to Philippine taxes.
(BG: Marubeni won in the public bidding for projects with government corporations NDC and Philphos. In the contracts, the prices were broken down into a Japanese
Yen Portion (I and II) and Philippine Pesos Portion and financed either by OECF or by supplier’s credit. The Japanese Yen Portion I corresponds to the Foreign Offshore
Portion, while Japanese Yen Portion II and the Philippine Pesos Portion correspond to the Philippine Onshore Portion. Marubeni has already paid the Onshore
Portion, a fact that CIR does not deny.)
CIR argues that since the two agreements are turn-key, they call for the supply of both materials and services to the client, they are contracts for a piece of work and
are indivisible. The situs of the two projects is in the Philippines, and the materials provided and services rendered were all done and completed within the territorial
jurisdiction of the Philippines. Accordingly, respondent’s entire receipts from the contracts, including its receipts from the Offshore Portion, constitute income from
Philippine sources. The total gross receipts covering both labor and materials should be subjected to contractor’s tax (a tax on the exercise of a privilege of selling
services or labor rather than a sale on products).
Marubeni, however, was able to sufficiently prove in trial that not all its work was performed in the Philippines because some of them were completed in Japan (and
in fact subcontracted) in accordance with the provisions of the contracts. All services for the design, fabrication, engineering and manufacture of the materials and
equipment under Japanese Yen Portion I were made and completed in Japan. These services were rendered outside Philippines’ taxing jurisdiction and are therefore
not subject to contractor’s tax.Petition denied.
#34
CIR vs. BAIER-NICKEL
11FEB
GR No. 153793 | August 29, 2006 | J. Ynares-Santiago
Facts:
CIR appeals the CA decision, which granted the tax refund of respondent and reversed that of the CTA. Juliane Baier-Nickel, a non-resident German, is the president
of Jubanitex, a domestic corporation engaged in the manufacturing, marketing and selling of embroidered textile products. Through Jubanitex’s general manager,
Marina Guzman, the company appointed respondent as commission agent with 10% sales commission on all sales actually concluded and collected through her
efforts.
20
In 1995, respondent received P1, 707, 772. 64 as sales commission from w/c Jubanitex deducted the 10% withholding tax of P170, 777.26 and remitted to BIR.
Respondent filed her income tax return but then claimed a refund from BIR for the P170K, alleging this was mistakenly withheld by Jubanitex and that her sales
commission income was compensation for services rendered in Germany not Philippines and thus not taxable here.
She filed a petition for review with CTA for alleged non-action by BIR. CTA denied her claim but decision was reversed by CA on appeal, holding that the commission
was received as sales agent not as President and that the “source” of income arose from marketing activities in Germany.
Issue: W/N respondent is entitled to refund
Held:
No. Pursuant to Sec 25 of NIRC, non-resident aliens, whether or not engaged in trade or business, are subject to the Philippine income taxation on their income
received from all sources in the Philippines. In determining the meaning of “source”, the Court resorted to origin of Act 2833 (the first Philippine income tax law), the
US Revenue Law of 1916, as amended in 1917.
US SC has said that income may be derived from three possible sources only: (1) capital and/or (2) labor; and/or (3) the sale of capital assets. If the income is from
labor, the place where the labor is done should be decisive; if it is done in this country, the income should be from “sources within the United States.” If the income is
from capital, the place where the capital is employed should be decisive; if it is employed in this country, the income should be from “sources within the United
States.” If the income is from the sale of capital assets, the place where the sale is made should be likewise decisive. “Source” is not a place, it is an activity or
property. As such, it has a situs or location, and if that situs or location is within the United States the resulting income is taxable to nonresident aliens and foreign
corporations.
The source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippines, it is
sufficient that the income is derived from activity within the Philippines.
The settled rule is that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris against the taxpayer. To those therefore, who claim a
refund rest the burden of proving that the transaction subjected to tax is actually exempt from taxation.
In the instant case, respondent failed to give substantial evidence to prove that she performed the incoming producing service in Germany, which would have entitled
her to a tax exemption for income from sources outside the Philippines. Petition granted.
#37
G.R. No. 152609 June 29, 2005
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), Respondent.
FACTS: Respondent] is a Philippine branch of American Express International, Inc., a corporation duly organized and existing under and by virtue of the laws of the
State of Delaware, U.S.A. It is a servicing unit of American Express International, Inc. – Hongkong Branch (Amex-HK) and is engaged primarily to facilitate the
collections of Amex-HK receivables from card members situated in the Philippines and payment to service establishments in the Philippines.
Amex Philippines registered itself with the Bureau of Internal Revenue (BIR), as a value-added tax (VAT) taxpayer effective March 1988.
On April 1999 respondent filed with the BIR a letter-request for the refund of its 1997 excess input taxes citing as basis therefor, Section 110 (B) of the 1997 Tax Code
to wit:
‘Section 110. Tax Credits. –
xxxxxxxxx
‘(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If
the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase of capital
goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of
Section 112.’
21
There being no immediate action on the part of the [petitioner], [respondent’s] petition was filed on April 15, 1999.
In addition, [respondent] relied on VAT Ruling No. 080-89, dated April 3, 1989, the pertinent portion of which reads as follows:
‘In Reply, please be informed that, as a VAT registered entity whose service is paid for in acceptable foreign currency which is remitted inwardly to the Philippines and
accounted for in accordance with the rules and regulations of the Central [B]ank of the Philippines, your service income is automatically zero rated effective January
1, 1998. [Section 102(a)(2) of the Tax Code as amended]
B. Input taxes on domestic purchases of taxable goods and services related to zero-rated revenues are available as tax refund in accordance with Section 106 (now
Section 112) of the [Tax Code] and Section 8(a) of [Revenue] Regulations [(RR)] No. 5-87, to state:
‘Section 106. Refunds or tax credits of input tax. –
(A) Zero-rated or effectively Zero-rated Sales. – Any VAT-registered person, except those covered by paragraph (a) above, whose sales are zero-rated or are
effectively zero-rated, may, within two (2) years after the close of the taxable quarter when such sales were made, apply for the issuance of tax credit certificate or
refund of the input taxes due or attributable to such sales, to the extent that such input tax has not been applied against output tax. x x x. [Section 106(a) of the Tax
Code]’
ISSUE: W/N petitioner is entitled to a refund
HELD: YES. Section 102 of the Tax Code provides:
“(b) Transactions subject to zero percent (0%) rate. — The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent
(0%) rate[:]
‘(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the
services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
‘(2) Services other than those mentioned in the preceding subparagraph, the consideration for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the [BSP];’”
xxxxxxxxx
Under the last paragraph quoted above, services performed by VAT-registered persons in the Philippines (other than the processing, manufacturing or repacking of
goods for persons doing business outside the Philippines), when paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of
the BSP, are zero-rated.
Respondent is a VAT-registered person that facilitates the collection and payment of receivables belonging to its non-resident foreign client, for which it gets paid in
acceptable foreign currency inwardly remitted and accounted for in conformity with BSP rules and regulations. Certainly, the service it renders in the Philippines is
not in the same category as “processing, manufacturing or repacking of goods” and should, therefore, be zero-rated. In reply to a query of respondent, the BIR opined
in VAT Ruling No. 080-89 that the income respondent earned from its parent company’s regional operating centers (ROCs) was automatically zero-rated effective
January 1, 1988.
In sum, having resolved that transactions of respondent are zero-rated, the Court upholds the former’s entitlement to the refund as determined by the appellate
court. Moreover, there is no conflict between the decisions of the CTA and CA. This Court respects the findings and conclusions of a specialized court like the CTA
“which, by the nature of its functions, is dedicated exclusively to the study and consideration of tax cases and has necessarily developed an expertise on the
subject.”93
Furthermore, under a zero-rating scheme, the sale or exchange of a particular service is completely freed from the VAT, because the seller is entitled to recover, by
way of a refund or as an input tax credit, the tax that is included in the cost of purchases attributable to the sale or exchange.94“[T]he tax paid or withheld is not
deducted from the tax base.” Having been applied for within the reglementary period,96 respondent’s refund is in order.
#41
OSMEÑA vs. ORBOS

220 SCRA 703
GR No. 99886, March 31, 1993
" To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that the legislature determines matter of principle and lays
down fundamental policy."
FACTS: Senator John Osmeña assails the constitutionality of paragraph 1c of PD 1956, as amended by EO 137, empowering the Energy Regulatory Board (ERB) to
approve the increase of fuel prices or impose additional amounts on petroleum products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF)
established for the reimbursement to ailing oil companies in the event of sudden price increases. The petitioner avers that the collection on oil products
establishments is an undue and invalid delegation of legislative power to tax. Further, the petitioner points out that since a 'special fund' consists of monies collected
22
through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created.
It thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the ERB under P.D. 1956, as amended,
partake of the nature of the taxation power of the State.
ISSUE: Is there an undue delegation of the legislative power of taxation?
HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover,
that the OPSF as a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law
refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply
with the constitutional description of a "special fund." With regard to the alleged undue delegation of legislative power, the Court finds that the provision
conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised.
In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB
to impose additional amounts to augment the resources of the Fund.
#42
KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA v. HON.
BIENVENIDO TAN G.R. No. 81311. June 30, 1988
FACTS:
The four consolidated cases questions the validity of the VAT (Executive Order 273) for being unconstitutional in that its enactment is not allegedly within the powers
of the President; that the VAT is oppressive, discriminatory, regressive, and violates the due process and equal protection clauses and other provisions of the 1987
Constitution.
The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners have failed to show justification for the exercise of its judicial powers.
He also questions the legal standing of the petitioners who, he contends, are merely asking for an advisory opinion from the Court, there being no justiciable
controversy for resolution.
ISSUE: Whether VAT is unconstitutional.
RULING:
No. First, the Court held that the President had authority to issue EO 273 as it was provided in the Provisional constitution that the President shall have legislative
powers.
Second, petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic manner by reason of passion or personal
hostility. It appears that a comprehensive study of the VAT had been extensively discussed by this framers and other government agencies involved in its
implementation, even under the past administration.
Lastly, petitioners also failed to prove that EO 273 is oppressive, discriminatory, unjust and regressive, in violation of the equal protection clause. Petitioners merely
rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification of a law. there must be a clear and unequivocal breach
of the Constitution, not a doubtful and argumentative implication. As the Court sees it, EO 273 satisfies all the requirements of a valid tax.
In any event, if petitioners seriously believe that the adoption and continued application of the VAT are prejudicial to the general welfare or the interests of the
majority of the people, they should seek recourse and relief from the political branches of the government. The Court, following the time-honored doctrine of
separation of powers, cannot substitute its judgment for that of the President as to the wisdom, justice and advisability of the adoption of the VAT. The Court can
only look into and determine whether or not EO 273 was enacted and made effective as law, in the manner required by, and consistent with, the Constitution, and to
make sure that it was not issued in grave abuse of discretion amounting to lack or excess of jurisdiction; and, in this regard, the Court finds no reason to impede its
application or continued implementation.
#44
23
Sison v Ancheta G.R. No. L-59431. July 25, 1984.
C. J. Fernando
Declaratory Relief
Facts:
Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg. 135. It amended
Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net
income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund
and similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted gross income.
Petitioner as taxpayer alleged that "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his
profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers." He characterizes the above section as arbitrary amounting to class
legislation, oppressive and capricious in character.
For petitioner, therefore, there is a transgression of both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity
in taxation.
The OSG prayed for dismissal of the petition due to lack of merit.
Issue: Whether the imposition of a higher tax rate on taxable net income derived from business or profession than on compensation is constitutionally infirm.
(WON there is a transgression of both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity in taxation)
Held: No. Petition dismissed
Ratio:
The need for more revenues is rationalized by the government's role to fill the gap not done by public enterprise in order to meet the needs of the times. It is better
equipped to administer for the public welfare.
The power to tax, an inherent prerogative, has to be availed of to assure the performance of vital state functions. It is the source of the bulk of public funds.
The power to tax is an attribute of sovereignty and the strongest power of the government. There are restrictions, however, diversely affecting as it does property
rights, both the due process and equal protection clauses may properly be invoked, as petitioner does, to invalidate in appropriate cases a revenue measure. If it
were otherwise, taxation would be a destructive power.
The petitioner failed to prove that the statute ran counter to the Constitution. He used arbitrariness as basis without a factual foundation. This is merely to adhere to
the authoritative doctrine that where the due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad standards,
there is a need for proof of such persuasive character as would lead to such a conclusion.
It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is
where it can be shown to amount to the confiscation of property. That would be a clear abuse of power.
24
It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive statute is so
harsh and unreasonable, it is subject to attack on due process grounds.
For equal protection, the applicable standard to determine whether this was denied in the exercise of police power or eminent domain was the presence of the
purpose of hostility or unreasonable discrimination.
It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the
conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is
that equal protection and security shall be given to every person under circumstances, which if not identical are analogous. If law be looks upon in terms of burden or
charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest.
The equal protection clause is, of course, inspired by the noble concept of approximating the ideal of the laws's benefits being available to all and the affairs of men
being governed by that serene and impartial uniformity, which is of the very essence of the idea of law.
The equality at which the 'equal protection' clause aims is not a disembodied equality. The Fourteenth Amendment enjoins 'the equal protection of the laws,' and
laws are not abstract propositions. They do not relate to abstract units A, B and C, but are expressions of policy arising out of specific difficulties, addressed to the
attainment of specific ends by the use of specific remedies. The Constitution does not require things which are different in fact or opinion to be treated in law as
though they were the same.
Lutz v Araneta- 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.
Petitioner- kindred concept of uniformity- Court- Philippine Trust Company- The rule of uniformity does not call for perfect uniformity or perfect equality, because
this is hardly attainable
Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the
authority to make reasonable and natural classifications for purposes of taxation
There is quite a similarity then to the standard of equal protection for all that is required is that the tax "applies equally to all persons, firms and corporations placed
in similar situation"
There was a difference between a tax rate and a tax base. There is no legal objection to a broader tax base or taxable income by eliminating all deductible items and
at the same time reducing the applicable tax rate.
The discernible basis of classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all taxpayers within
the class and fixing a set of reduced tax rates to be applied to all of them. As there is practically no overhead expense, these taxpayers are not entitled to make
deductions for income tax purposes because they are in the same situation more or less.
Taxpayers who are recipients of compensation income are set apart as a class.
On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or expenses necessary to produce
their income. It would not be just then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on
the basis of gross income.
25
There was a lack of a factual foundation, the forcer of doctrines on due process and equal protection, and he reasonableness of the distinction between
compensation and taxable net income of professionals and businessmen not being a dubious classification.
#46
Villegas vs Hiu Chiong Tsai Pao Ho (1978)
Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those employed in the diplomatic and consular missions of foreign countries, in
technical assistance programs of the government and another country, and members of religious orders or congregations) to procure the requisite mayor’s permit so
as to be employed or engage in trade in the City of Manila. The permit fee is P50, and the penalty for the violation of the ordinance is 3 to 6 months imprisonment or
a fine of P100 to P200, or both.
Issue: Whether the ordinance imposes a regulatory fee or a tax.
Held: The ordinance’s purpose is clearly to raise money under the guise of regulation by exacting P50 from aliens who have been cleared for employment. The
amount is unreasonable and excessive because it fails to consider difference in situation among aliens required to pay it, i.e. being casual, permanent, part-time,
rank-and-file or executive.
[ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus deprived of their rights to life, liberty
and property and therefore violates the due process and equal protection clauses of the Constitution. Further, the ordinance does not lay down any criterion or
standard to guide the Mayor in the exercise of his discretion, thus conferring upon the mayor arbitrary and unrestricted powers. ]
#47
Province of Abra vs Harold Hernando
107 SCRA 104 – Political Law – Exemption From Taxes – The Church
The Province of Abra sought to tax the properties of the Roman Catholic Bishop, Inc. of Bangued. Judge Harold Hernando dismissed the petition of Abra without
hearing its side. Hernando ruled that there “is no question that the real properties sought to be taxed by the Province of Abra are properties of the respondent
Roman Catholic Bishop of Bangued, Inc.” Likewise, there is no dispute that the properties including their produce are actually, directly and exclusively used by the
Roman Catholic Bishop of Bangued, Inc. for religious or charitable purposes.”
ISSUE: Whether or not the properties of the church (in this case) is exempt from taxes.
HELD: No, they are not tax exempt. It is true that the Constitution provides that “charitable institutions, mosques, and non-profit cemeteries” are required that for
the exemption of “lands, buildings, and improvements,” they should not only be “exclusively” but also “actually” and “directly” used for religious or charitable
purposes. The exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. However, in this
case, there is no showing that the said properties are actually and directly used for religious or charitable uses.
#48
COMMISSIONER OF CUSTOMS V CAMPOS RUEDA & CTA
11FEB
L – 55020 | August 20, 1990 | J. Medialdea
Facts:
Campos Rueda imported 46 cartons or 27,000 pieces of Tungsol flashers. Before the goods arrived at the port of Manila, Campos Rueda filed with the Collector of
Customs of Manila a request for value information for the declaration of the imported flashers under Tariff Heading No. 85.09 of the Tariff and Customs Code at 30%
ad valorem duty, for classification purpose. The Customs appraiser however, re-classified the goods under Tariff Heading No. 85.19 of the Tariff and Customs Code
at 50% ad valorem.
26
When the goods arrived at the port of Manila, Campos Rueda immediately filed a Customs Import Entry and Internal Revenue Declaration under Tariff Heading No.
85.19 of the Tariff and Customs Code at 50% ad valorem but, under protest and paid duties and taxes on the goods, also under protest. It then filed a timely protest
against the re-classification resulting in the payment of additional customs duty and advance sales tax and prayed for the refund of the said.
The Collector of Customs dismissed the protest. Campos Rueda appealed to the Commissioner but was denied, and then appealed to CTA which modified the
Commissioner’s decision by ordering the refund to Campos Rueda of the sum of the additional customs duty but not the advance sales tax. The Commissioner now
appeals via petition for review the said decision.
Issue: W/N Campos Rueda should pay 30% or 50% ad valorem duty
Held:
30%. TH No 85.09 of the Tariff and Customs Code provides:
85.09. Electrical lighting and signalling equipment and electrical windscreen wipers, defrosters and demisters, for cycles or motor vehicles ad val. 30%.
On the other hand, the same Code provides under TH No. 85.19:
85.19. Electrical apparatus for making and breaking electrical circuits, for the protection of electrical circuits, or for making connections to or in electric circuits (for
example, switches, relays, fuses, lighting arresters, surge suppressors, plugs, lamp-holders and junction boxes); resistors, fixed or variable (including potentiometers),
other than heating resistors, printed circuits, switch boards (other than telephone switchboards) and control panels:
In finding for Campos Rueda, CTA found that it has adduced sufficient evidence to establish the general purpose or predominating use to which flashers are applied,
and for which petitioner imported them, is precisely as electrical equipment for signalling purposes for motor vehicles; that is, to signal or indicate a right or left hand
turn by means of electrical flashes in front and at the rear of motor vehicles and not merely as electrical apparatus as the Commissioner claims.
It is the predominating use to which articles are generally applied or used that determines their character for the purpose of fixing the duty, and not the specific or
special use which any particular importer may make of the articles imported.
Parts of machines, apparatus of appliances which are suitable for use solely or principally with a particular kind of machine or with a number of machines falling
within a specific heading, as a rule, are to be classified with the machines in the same heading. Also, the law does not provide that an article imported for electrical
lighting and signalling equipment for motor vehicles falling under Tariff Heading No. 85.09, if imported alone, shall be classified under Tariff Heading No. 85.19 as
‘electrical apparatus for making and breaking electrical circuits that provision should not be read into the law per the circular of the former Acting Customs
Collector. Petition denied. CTA decision affirmed.
#49
PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN

69 SCRA 460
GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the
power to tax.
FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of Republic Act No. 2264, otherwise known as the Local
Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as "municipal production
tax" of the Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft drinks producers and manufacturers a tax of one-sixteenth (1/16)
of a centavo for every bottle of soft drink corked, and Ordinance 27 levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of
this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. Aside from the undue delegation of authority, appellant
contends that it allows double taxation, and that the subject ordinances are void for they impose percentage or specific tax.
ISSUE: Are the contentions of the appellant tenable?
HELD: No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is an essential and inherent attribute of sovereignty, belonging as
a matter of right to every independent government, without being expressly conferred by the people. It is a power that is purely legislative and which the central
legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. The
exception, however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in
27
respect of matters of local concern. By necessary implication, the legislative power to create political corporations for purposes of local self-government carries with
it the power to confer on such local governmental agencies the power to tax.
Also, there is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be observed that
the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. The reason is that the State has
exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, so that double taxation
becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not
in a case where one tax is imposed by the State and the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the
produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining
the tax rate on the products, but there is not set ratio between the volume of sales and the amount of the tax.
#54
The remission or condonation of taxes due and payable to the exclusion of taxes already collected does not constitute unfair discrimination. Each set of taxes is a
class by itself and the law would be open to attack as a class legislation only if all taxpayers belonging to one class were not treated alike. [Juan Luna Subdivision, Inc.
vs. Sarmiento. GR No. L–3538. May 28, 1952]
#55
A tax on "installation manager" is not discriminatory just because at the time said tax was imposed, there was no other person in the locality who exercised such
occupation. The tax is and will be applicable to any person or firm who exercises such calling or occupation designated as installation manager. [Shell Co. of the
Philippines vs. Vano. GR No. L–6093. February 24, 1954]
#56
THE COMMISSIONER OF INTERNAL REVENUE vs. LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX APPEALS
A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the
same class shall be taxed alike. The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never
been deemed violative of the equal protection clause.
#57
Victorias Milling Co., Inc. v. Municipality of Victorias
[G.R. No. L-21183. September 27, 1968]
Digest by: AUMENTADO, Adrian F. PONENTE: Sanchez J.
FACTS:
This case calls into question the validity of Ordinance No. 1, series of 1956, of the Municipality of Victorias, Negros Occidental. The disputed ordinance imposed
license taxes on operators of sugar centrals and sugar refineries.
Such changes were: with respect to sugar centrals, by increasing the rates of municipal license taxes; and as to sugar refineries, by increasing the rates of municipal
license taxes as well as the range of graduated schedule of annual output capacity. The production of plaintiff Victorias Milling Co., Inc. in both its sugar central and its
sugar refinery located in the Municipality of Victorias comes within these items. Plaintiff filed suit below to ask for judgment declaring Ordinance No. 1, series of
1956, null and void. The plaintiff contends that the ordinance is discriminatory since it singles out plaintiff, which is the only operator of a sugar central and a sugar
refinery within the jurisdiction of defendant municipality. The trial court rendered its judgment declaring that the ordinance in question refers to license taxes or fees.
Both plaintiff and defendant directly appealed to the Supreme Court.
ISSUE:
Was Ordinance No. 1, series of 1956, passed as a regulatory enactment or as a revenue measure?
HELD:
A municipality is authorized to impose three kinds of licenses: (1) license for regulation of useful occupations or enterprises; (2) license for restriction or regulation of
non-useful occupations or enterprises; and (3) license for revenue. 12 The first two easily fall within the broad police power granted under the general welfare clause.
13 The third class, however, is for revenue purposes. It is not a license fee, properly speaking, and yet it is generally so termed. It rests on the taxing power. That
taxing power must be expressly conferred by statute upon the municipality.
28
Because of the purpose of solving the financial difficulty of the low rates imposed by the municipality which deprives the barrios, sitios and rural areas of the essential
and necessary services and facilities, the present imposition must be treated as a levy for revenue purposes. A quick glance at the big amount of maximum annual tax
set forth in the ordinance, P40,000.00 for sugar centrals, and P40,000.00 for sugar refineries, will readily convince one that the tax is really a revenue tax. And then,
we read in the ordinance nothing which would as much as indicate that the tax imposed is merely for police inspection, supervision or regulation.
We should not hang so heavy a meaning on the use of the term “municipal license tax”. This does not necessarily connote the idea that the tax is imposed — as the
lower court would want it — to mean a revenue measure in the guise of a license tax. For really, this runs counter to the declared purpose to make money. Besides,
the term “license tax” has not acquired a fixed meaning. It is often “used indiscriminately to designate impositions exacted for the exercise of various privileges.” It
does not refer solely to a license for regulation. In many instances, it refers to “revenue-raising exactions on privileges or activities.” On the other hand, license fees
are commonly called taxes. But, legally speaking, the latter are “for the purpose of raising revenues,” in contrast to the former which are imposed “in the exercise of
police power for purposes of regulation.”
We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The
determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Thus, “when no police inspection,
supervision, or regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all persons engaged in
the business designated, without qualification or hindrance, may come, and a license on payment of the stipulated sum will issue, to do business, subject to no
prescribed rule of conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is strong
that the power of taxation, and not the police power, is being exercised.”
#58
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. [Punsalan vs. Municipal Board of the City of Manila. GR No. L–4817. May 26, 1954]
#61Ormoc Sugar Co. v. Treasurer of Ormoc City
[G.R. No. L-23794. February 17, 1968]
Digest by: DE GUZMAN, Pristine B.
PONENTE: BENGZON, J.P., J.
FACTS:
Ormoc city passed an ordinance which provides: “There shall be paid to the City Treasurer on any and all productions of centrifugal sugar milled at the Ormoc Sugar
Company, Incorporated, in Ormoc City, a municipal tax equivalent to one per centum (1%) per export sale to the United States of America and other foreign
countries.”
Though referred to as a “production tax”, the imposition actually amounts to a tax on the export of centrifugal sugar produced at Ormoc Sugar Company, Inc. For
production of sugar alone is not taxable; the only time the tax applies is when the sugar produced is exported. Ormoc Sugar paid the tax (P7,087.50) in protest
averring that the same is violative of Section 2287 of the Revised Administrative Code which provides: “It shall not be in the power of the municipal council to impose
a tax in any form whatever, upon goods and merchandise carried into the municipality, or out of the same, and any attempt to impose an import or export tax upon
such goods in the guise of an unreasonable charge for wharfage, use of bridges or otherwise, shall be void.” And that the ordinance is violative to equal protection as
it singled out Ormoc Sugar as being liable for such tax impost for no other sugar mill is found in the city.
ISSUE:
Whether or not the ordinance violates the equal protection clause and the uniformity of taxation.
HELD:
YES. The equal protection clause applies only to persons or things identically situated and does not bar a reasonable classification of the subject of legislation, and a
classification is reasonable where (1) it is based on substantial distinctions which make real differences;
(2) these are germane to the purpose of the law; (3) the classification applies not only to present conditions but also to future conditions which are substantially
identical to those of the present; (4) the classification applies only to those who belong to the same class.
29
A perusal of the requisites instantly shows that the questioned ordinance does not meet them, for it taxes only centrifugal sugar produced and exported by the
Ormoc Sugar Company, Inc. and none other. At the time of the taxing ordinance’s enactment, Ormoc Sugar Company, Inc., it is true, was the only sugar central in the
city of Ormoc. Still, the classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance should not be singular and
exclusive as to exclude any subsequently established sugar central, of the same class as plaintiff, for the coverage of the tax. As it is now, even if later a similar
company is set up, it cannot be subject to the tax because the ordinance expressly points only to Ormoc City Sugar Company, Inc. as the entity to be levied upon.
#65
FRANCIS A. CHURCHILL and STEWART TAIT, ET AL, vs. VENANCIO CONCEPCION, as Acting Collector of Internal
Revenue,
[G.R. No. 11572, September 22, 1916]
Digest by: DESTURA, Kristina Bianca D.
PONENTE: TRENT, J.:
FACTS:
Section 100 of Act No. 2339, passed February 27, 1914, effective July 1, 1914, imposed an annual tax of P4 per square meter upon “electric signs, billboards, and
spaces used for posting or displaying temporary signs, and all signs displayed on premises not occupied by buildings.” This section was subsequently amended by Act
No. 2432, effective January 1, 1915, by reducing the tax on such signs, billboards, etc., to P2 per square meter or fraction thereof. Section 26 of Act No. 2432 was in
turn amended by Act No. 2445, but this amendment does not in any way affect the questions involved in the case under consideration. The taxes imposed by Act No.
2432, as amended, were ratified by the Congress of the United States on March 4, 1915.
Francis A. Churchill and Stewart Tait, copartners doing business under the firm name and style of the Mercantile Advertising Agency, owners of a sign or billboard
containing an area of 52 square meters constructed on private property in the city of Manila and exposed to public view, were taxes thereon P104. The tax was paid
under protest and the plaintiffs having exhausted all their administrative remedies instituted the present action under section 140 of Act No. 2339 against the
Collector of Internal Revenue to recover back the amount thus paid. From a judgment dismissing the complaint upon the merits.
ISSUE:
Whether the statute or tax is void for lack of uniformity.
HELD:
A tax is uniform when it operates with the same force and effect in every place where the subject of it is found (State Railroad Tax Cases, 92 U.S., 575.) The words
“uniform throughout the United States,” as required of a tax by the Constitution, do not signify an intrinsic, but simply a geographical, uniformity, and such uniformity
is therefore the only uniformity which is prescribed by the Constitution. (Patton vs. Brady, 184 U.S., 608; 46 L. Ed., 713.) A tax is uniform, within the constitutional
requirement, when it operates with the same force and effect in every place where the subject of it is found. (Edye vs. Robertson, 112 U.S., 580; 28 L. Ed., 798.)
“Uniformity,” as applied to the constitutional provision that all taxes shall be uniform, means that all property belonging to the same class shall be taxed alike.
(Adams vs. Mississippi State Bank, 23 South, 395, citing Mississippi Mills vs Cook, 56 Miss., 40.) The statute under consideration imposes a tax of P2 per square meter
or fraction thereof upon every electric sign, bill-board, etc., wherever found in the Philippine Islands. Or in other words, “the rule of taxation” upon such signs is
uniform throughout the Islands. The rule, which we have just quoted from the Philippine Bill, does not require taxes to be graded according to the value of the
subject or subjects upon which they are imposed, especially those levied as privilege or occupation taxes. We can hardly see wherein the tax in question constitutes
double taxation. The fact that the land upon which the billboards are located is taxed at so much per unit and the billboards at so much per square meter does not
constitute “double taxation.” Double taxation, within the true meaning of that expression, does not necessarily affect its validity. (1 Cooley on Taxation, 3d ed., 389.)
And again, it is not for the judiciary to say that the classification upon which the tax is based “is mere arbitrary selection and not based upon any reasonable
grounds.” The Legislature selected signs and billboards as a subject for taxation and it must be presumed that it, in so doing, acted with a full knowledge of the
situation.
#87 American Bible Society vs. City of Manila
[G.R. No. L-9637, April 30, 1957]
Digest by: ESCANER, Michael Joseph
PONENTE: Felix, J.
FACTS:
30
Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines. The defendant appellee is
a municipal corporation with powers that are to be exercised in conformity with the provisions of the Revised Charter of the City of Manila. In the course of its
ministry, the Philippine agency of the American Bible Society has been distributing and selling bibles and/or gospel portions thereof throughout the Philippines and
translating the same into several Philippine dialects. The acting City Treasurer of Manila required the society to secure the corresponding Mayor’s permit and
municipal license fees, together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953. The society paid such under protest,
and filed suit questioning the legality of the ordinances under which the fees are being collected.
ISSUE:
Whether or not the respondent can tax the petitioner with respect to its act of selling
bibles.
HELD:
A tax on the income of one who engages in religious activities is different from a tax on property used or employed in connection with those activities. It is one thing
to impose a tax on the income or property of a preacher, and another to exact a tax for him for the privilege of delivering a sermon. The power to tax the exercise of a
privilege is the power to control or suppress its enjoyment. Even if religious groups and the press are not altogether free from the burdens of the government, the act
of distributing and selling bibles is purely religious and does not fall under Section 27(e) of the Tax Code (CA 466). The fact that the price of bibles petitioner are
selling is a little higher than actual cost of the same does not necessarily mean it is already engaged in business for profit. Ordinance 2529 and 3000 are not applicable
to the petitioner for in doing so it would impair its free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious
beliefs.
#89
Abra Valley College v. Aquino
[G.R. NO. 39086 June 15, 1988]
PONENTE: Paras
FACTS:
Petitioner filed a complaint to annul and declare void the “Notice of Seizure’ and the “Notice of Sale” of its lot and building located at Bangued, Abra, for non-
payment of real estate taxes and penalties amounting toP5,140.31. Said “Notice of Seizure” by respondents Municipal Treasurer and Provincial Treasurer was issued
for the satisfaction of the said taxes thereon. The trial court ruled for the government, holding that the second floor of the building is being used by the director for
residential purposes and that the ground floor is being used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not
being used exclusively for educational purposes.
ISSUE:
Whether or not the lot and building are used exclusively for educational purposes and is thus tax exempt.
HELD:
Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from realty taxes for cemeteries, churches and parsonages or
convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable or educational purposes. In the case at bar, the
lease of the first floor of the building to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of
education. The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. The decision of the CFI Abra (Branch I) is
affirmed subject to the modification that half of the assessed tax be returned to the petitioner. The modification is derived from the fact that the ground floor is being
used for commercial purposes and the second floor being used as incidental to education.
#90
Bishop of Nueva Segovia vs. Provincial Board of Ilocos Norte
[GR 27588, 31 December 1927]
Digest by: GARCIA, Vianne Marie O.
31
PONENTE: AVANCEÑA, J
FACTS:
The Roman Catholic Apostolic Church is the owner of a parcel of land in San Nicolas, Ilocos Norte. On the south side is a part of the Church yard, the convent and an
adjacent lots used for a vegetable garden in which there is a stable and a well for the use of the convent. In the center is the remainder of the church yard and the
Church. On the north side is an old cemetery with its two walls still standing, and a portion where formerly stood a tower. The provincial board assessed land tax on
lots comprising the north and south side, which the church paid under protest. It filed suit to recover the amount, alleging that the collection of this tax is illegal.
ISSUE:
Whether the lots are covered by the Church’s tax exemption?
HELD:
The exemption in favor of the convent in the payment of land tax refers to the home of the priest who presides over the church and who has to take care of himself in
order to discharge his duties. The exemption includes not only the land actually occupied by the Church but also the adjacent ground destined to the ordinary
incidental uses of man. A vegetable garden, thus, which belongs to a convent, where its use is limited to the necessity of the priest, comes under the exemption.
In regard to the lot which formerly was the cemetery was neither used for any commercial purpose. The land was used as a lodging house by the people who
participate in religious festivities, which constitute an incidental use in religious functions. Likewise it comes within the exemption.
#91
Jose V. Herrera and Ester Herrera vs. The Quezon City Board
Of Assessment Appeals
[L-15270 ,September 30, 1961]
Digest by: GARCIA, Vianne Marie O. PONENTE: Concepcion, J.
FACTS:
Petitioners Jose and Ester Herrera were authorized by the Director of the Bureau of Hospitals to establish and operate the St. Catherine’s Hospital. In 1953, the
petitioners sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the lot, building and other improvements comprising
the hospital stating that the same was established for charitable and humanitarian purposes and not for commercial gain which was granted effective the years 1953
to 1955. Subsequently, however, in a letter dated August 10, 1955 the Quezon City Assessor notified the petitioners that the aforesaid properties were reclassified
from exempt to “taxable” and thus assessed for real property taxes effective 1956. The petitioners appealed the assessment to the Quezon City Board of Assessment
Appeals, which, affirmed the decision of the City Assessor. A motion for reconsideration thereof was denied. From this decision, the petitioners instituted the instant
appeal.
The building involved in this case is principally used as a hospital. From the evidence presented by petitioners, it is made to appear that there are two kinds of charity
patients (a) those who come for consultation only (“out-charity patients”); and (b) those who remain in the hospital for treatment (“lying-in-patients”). Petitioners
also operate within the premises of the hospital the “St. Catherine’s School of Midwifery” which was granted government recognition by the Secretary of Education.
The students practice in the St. Catherine’s Hospital, as well as in the St. Mary’s Hospital, which is also owned by the petitioners. A separate set of accounting books is
maintained by the school for midwifery distinct from that kept by the hospital. However, the petitioners have refused to submit a separate statement of accounts of
the school.
ISSUE:
Whether or not the said properties are used exclusively for charitable or educational purposes which are exempt from real property tax
HELD:
The Supreme Court ruled in the affirmative. The Court of Tax Appeals decided the issue in the negative, upon the ground that the St. Catherine’s Hospital has a pay
ward for ... pay-patients, who are charged for the use of the private rooms, operating room, laboratory room, delivery room, etc., like other hospitals operated for
profit and that petitioners and their family occupy a portion of the building for their residence.
It should be noted, however, that, according to the very statement of facts made in the decision appealed from, of the thirty-two (32) beds in the hospital, twenty
(20) are for charity-patients; that the income realized from pay-patients is spent for improvement of the charity wards; and that petitioners, Dr. Ester Ochangco
Herrera, as directress of said hospital,
PAGE
96
32
does not receive any salary, although its resident physician gets a monthly salary of P170.00. It is well settled, in this connection, that the admission of pay-patients
does not detract from the charitable character of a hospital, if all its funds are devoted exclusively to the maintenance of the institution as a public charity. In other
words, where rendering charity is its primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent purposes of
the institution, the mere fact that a profit has been made will not deprive the hospital of its benevolent character.
Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor but
extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as, in the case of hospitals, a school for training
nurses, a nurses’ home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and
recreational facilities for student nurses, interns and residents.
Within the purview of the Constitutional exemption from taxation, the St. Catherine’s Hospital is, therefore, a charitable institution, and the fact that it admits pay-
patients does not bar it from claiming that it is devoted exclusively to benevolent purposes, it being admitted that the income derived from pay-patients is devoted to
the improvement of the charity wards, which represent almost two-thirds (2/3) of the bed capacity of the hospital, aside from “outcharity patients” who come only
for consultation.
#92
Commissioner of Internal Revenue vs. Bishop of the
Missionary District of the Philippines
[G.R. No. L-19445, August 31, 1965]
PONENTE: Regala, J.
FACTS:
In 1957 to 1959, the Missionary District received various shipments of materials, supplies, equipment and other articles intended for use in the construction and
operation of the new St. Luke’s Hospital. On these shipments, the Commissioner collected compensation tax. The Missionary District filed claims for refund, but which
was denied by the Commissioner on the ground that St. Luke’s Hospital was not a charitable institution and therefore was not exempt from taxes because it admits
pay patients.
ISSUE:
Whether or not the shipments for St. Luke’s Hospital are tax-exempt.
HELD:
The following requisites must concur in order that a taxpayer may claim exemption under the law:(1) the imported articles must have been donated; (2) the done
must be duly incorporated or established international civic organization, religious or charitable society, or institution for civic religious or charitable purposes; and (3)
the articles so imported must have been donated for the use of the organization, society or institution or for free distribution and not for barter, sale or hire. As the
law does not distinguish or qualify the enjoyment or the exemption (as the Secretary of Finance did in Department Order 18, series of 1958), the admission of pay
patients does not detract from the charitable character of a hospital, if its funds are devoted exclusively to the maintenance of the institution. Thus, the shipments
are tax exempt.
#93
CIR v CA & YMCA

GR No 124043, October 14, 1998
FACTS:
In 1980, YMCA earned an income of 676,829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators and 44,259
from parking fees collected from non-members. On July 2, 1984, the CIR issued an assessment to YMCA for deficiency taxes which included the income from lease of
YMCA’s real property. YMCA formally protested the assessment but the CIR denied the claims of YMCA. On appeal, the CTA ruled in favor of YMCA and excluded
income from lease to small shop owners and parking fees. However, the CA reversed the CTA but affirmed the CTA upon motion for reconsideration.
ISSUE:
Whether the rental income of YMCA is taxable
RULING:
33
Yes. The exemption claimed by YMCA is expressly disallowed by the very wording 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. While the income received by the
organizations enumerated in Section 26 of the NIRC is, as a rule, exempted from the payment of tax in respect to income received by them as such, the exemption
does not apply to income derived from any of their properties, real or personal or from any of their activities conducted for profit, regardless of the disposition made
of such income.
Digest #2
Facts:
The main question in this case is: “is the income derived from rentals of real property owned by Young Men’s Christian Association of the Philippines (YMCA) –
established as “a welfare, educational and charitable non-profit corporation” – subject to income tax under the NIRC and the Constitution? In 1980, YMCA earned an
income of P676,829 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators and P44k form parking fees.
Issue:
Whether or not the rental income of the YMCA taxable
Ruling:
Yes. The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Sec. 27 of the NIRC; court is duty-bound to abide
strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction. The said provision mandates that the income of exempt
organizations (such as YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Private respondent is exempt from the
payment of property tax, but nit income tax on rentals from its property.
#95
[G.R. No. 158540. August 3, 2005]
SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, THE SECRETARY OF THE DEPARTMENT OF
TRADE AND INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE and THE COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents.
Facts:
Republic Act No. 8800, the Safeguard Measures Act (SMA), which was one of the laws enacted by Congress soon after the Philippines ratified the General Agreement
on Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement.[3] The SMA provides the structure and mechanics for the imposition of emergency
measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them.
Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation engaged in the business of cement manufacturing, production, importation
and exportation. Its principal stockholders are Taiheiyo Cement Corporation and Tokuyama Corporation, purportedly the largest cement manufacturers in Japan.[5]
Private respondent Philippine Cement Manufacturers Corporation[6] (Philcemcor) is an association of domestic cement manufacturers. It has eighteen (18)
members,[7] per Record. While Philcemcor heralds itself to be an association of domestic cement manufacturers, it appears that considerable equity holdings, if not
controlling interests in at least twelve (12) of its member-corporations, were acquired by the three largest cement manufacturers in the world, namely Financiere
Lafarge S.A. of France, Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank Financiere Glaris, Ltd., then Holderfin B.V.).
the DTIs disagreement with the conclusions of the Tariff Commission, but at the same time, ultimately denying Philcemcors application for safeguard measures on the
ground that the he was bound to do so in light of the Tariff Commissions negative findings.
Philcemcor challenged this Decision of the DTI Secretary by filing with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus[11] seeking to set
aside the DTI Decision, as well as the Tariff Commissions Report. The Court of Appeals Twelfth Division, in a Decision[13] penned by Court of Appeals Associate Justice
Elvi John Asuncion,[14] partially granted Philcemcors petition.
On 23 June 2003, Southern Cross filed the present petition, arguing that the Court of Appeals has no jurisdiction over Philcemcors petition, as the proper remedy is a
petition for review with the CTA conformably with the SMA, and; that the factual findings of the Tariff Commission on the existence or non-existence of conditions
warranting the imposition of general safeguard measures are binding upon the DTI Secretary.
Despite the fact that the Court of Appeals Decision had not yet become final, its binding force was cited by the DTI Secretary when he issued a new Decision on 25
June 2003, wherein he ruled that that in light of the appellate courts Decision, there was no longer any legal impediment to his deciding Philcemcors application for
definitive safeguard measures.
The Court of Appeals had held that based on the foregoing premises, petitioner’s prayer to set aside the findings of the Tariff Commission in its assailed Report dated
March 13, 2002 is DENIED. On the other hand, the assailed April 5, 2002 Decision of the Secretary of the Department of Trade and Industry is hereby SET ASIDE.
34
Consequently, the case is REMANDED to the public respondent Secretary of Department of Trade and Industry for a final decision in accordance with RA 8800 and its
Implementing Rules and Regulations. Hence, the appeal.
Cement. Hence, the appeal.
Issue:
Whether or not the decision of DTI Secretary, to impose safeguard measures is valid.
Held:
NO, due to the nature of this case, the Court found that the DTI should follow the regulations prescribed by SMA. The Court held that he assailed Decision of the
Court of Appeals is DECLARED NULL AND VOID and SET ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED NULL AND VOID and SET
ASIDE. No Costs.
Cement.
#104
Misamis Oriental Assoc. of CoCo Traders, Inc. vs. Department
of Finance Secretary
[G.R. No. 108524 November 10, 1994]
Digest by: : NIEVA, Aubin Arn R.
PONENTE: Mendoza
FACTS:
Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose members, individually or collectively, are engaged in the buying and
selling of copra in Misamis Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum Circular 47-91 on June 11, 1991, which implemented
VAT Ruling 190-90, copra was classified as agricultural food product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all
stages of production or distribution.
Under §103(a), as above quoted, the sale of agricultural non-food products in their original state is exempt from VAT only if the sale is made by the primary producer
or owner of the land from which the same are produced. The sale made by any other person or entity, like a trader or dealer, is not exempt from the tax. On the
other hand, under §103(b) the sale of agricultural food products in their original state is exempt from VAT at all stages of production or distribution regardless of who
the seller is.
Petitioner contends that the Bureau of Food and Drug of the Department of Health and not the BIR is the competent government agency to determine the proper
classification of food products.
On the other hand, the respondents argue that the opinion of the BIR, as the government agency charged with the implementation and interpretation of the tax laws,
is entitled to great respect.
ISSUE:
Whether or not the contention of the Commissioner is correct.
HELD:
It is correct. we find no reason for holding that respondent Commissioner erred in not considering copra as an “agricultural food product” within the meaning of §
103(b) of the NIRC. As the Solicitor General contends, “copra per se is not food, that is, it is not intended for human consumption. Simply stated, nobody eats copra
for food.” That previous Commissioners considered it so, is not reason for holding that the present interpretation is wrong. The Commissioner of Internal Revenue is
not bound by the ruling of his predecessors. To the contrary, the overruling of decisions is inherent in the interpretation of laws.
35
Petitioner likewise claims that RMC No. 47-91 is discriminatory and violative of the equal protection clause of the Constitution because while coconut farmers and
copra producers are exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add that oil millers do not enjoy tax credit out of the
VAT payment of traders and dealers.
The argument has no merit. There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and
dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long
as there is a reasonable basis for classifying them differently.
is finally argued that RMC No. 47-91 is counterproductive because traders and dealers would be forced to buy copra from coconut farmers who are exempt from the
VAT and that to the extent that prices are reduced the government would lose revenues as the 10% tax base is correspondingly diminished.
This is not so. The sale of agricultural non-food products is exempt from VAT only when made by the primary producer or owner of the land from which the same is
produced, but in the case of agricultural food products their sale in their original state is exempt at all stages of production or distribution. At any rate, the argument
that the classification of copra as agricultural non-food product is counterproductive is a question of wisdom or policy which should be addressed to respondent
officials and to Congress.
#106
CIR vs Seagate Technology (Philippines) G.R. No. 153866, 11 February 2005
Facts:
Seagate Technology was claiming a refund for the input tax it paid on the unutilized capital goods purchased. It asserted that it is exempt from all internal revenue tax
es including VAT since it is registered in and operating from the Special Economic Zone in Naga, Cebu.
Issue:
Whether or not an entity registered and operating within an ecozone is exempt from all revenue taxes including VAT.
Ruling:
Yes. Ecozone is considered by law as a separate customs authority. It means that in such zone is created the legal fiction of foreign authority although it is a geographi
cal territory of the Philippines.
Under the cross-

border principle of the VAT system, no VAT shall be imposed to form part of the cost of the goods destined for consumption outside of the territorial border of the tax
ing authority. If exports of goods and services from the Philippines to a foreign authority are free of VAT, then the same rule holds for such exports from the national t
erritory to an ecozone.
This is to encourage foreign investments in order to win international markets and to promote sustainable economic growth.
#109
Philippine Acetylene Co., Inc. v. Commissioner of Internal
Revenue and Court of Tax Appeals
[L-19707. August 17, 1967]
Digest by: MAGAT, Kristianne Santiago
PONENTE: Castro
FACTS:
The petitioner is a corporation engaged in the manufacture and sale of oxygen and acetylene gases, who made various sales of its products to the National Power
Corporation (Phil. Gov. Agency), and to the Voice of America (US Gov. Agency). The sales to the NPC amounted to P145,866.70, while those to the VOA amounted to
36
P1,683, on account of which the respondent Commission of Internal Revenue assessed against, and demanded from, the petitioner the payment of P12,910.60 as
deficiency sales tax and surcharge, pursuant to the provisions of Secs. 183 and 186 of the National Internal Revenue Code.
The petitioner denied liability for the payment of the tax on the ground that both the NPC and the VOA are exempt from taxation. It asked for a reconsideration of
the assessment and, failing to secure one, appealed to the Court of Tax Appeals.
The court ruled that the tax on the sale of articles or goods in section 186 of the Code is a tax on the manufacturer and not on the buyer with the result that
petitioner cannot claim exemption from the payment of sales tax simply because NPC is exempt from the payment of all taxes. With respect to the sales made to the
VOA, the court held that goods purchased by the American Government or its agencies are exempt from the payment of the sales tax under the agreement between
the Philippines and that of the United States, provided the purchases are supported by certificates of exemption.
ISSUE:
Whether petitioner is liable for the payment of tax on the sales it made to the NPC and the VOA because both entities are exempt from taxation.
HELD:
Yes. The tax imposed by section 186 of the National Internal Revenue Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably
in a very remote and inconsequential sense. It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax becomes a part
of the price which the purchaser must pay. It does not matter that an additional amount is billed as tax to the purchaser. The method of listing the price and the tax
separately and defining taxable gross receipts as the amount received less the amount of the tax added, merely avoids payment by the seller of a tax on the amount
of the tax. The effect is still the same, namely, that the purchaser does not pay the tax. He pays or may pay the seller more for the goods because of the seller’s
obligation, but that is all and the amount added because of the tax is paid to get the goods and for nothing else. Even if the NPC enjoys tax exemption by virtue of an
act of Congress, petitioner still has to pay the tax on the sales made.
With regard to petitioner’s sales to the Voice of America, the provisions of the agreement between the Government of the Philippines and the Government of the
United States, provide that goods purchased locally by U.S. civilian agencies directly from manufacturers, producers or importers shall be exempt from the sales tax,
provided such purchases are supported by serially umbered Certificates of Tax Exemption issued by the vendee-agency.
However, we find nothing in the language of the Agreement to warrant the general exemption granted by that circular. The agreement provides that only sales made
“for exclusive use in the construction, maintenance, operation or defense of the bases,” in a word, only sales to the quartermaster, are exempt under article V from
taxation. Sales of goods to any other party even if it be an agency of the United States, such as the VOA, or even to the quartermaster but for a different purpose, are
not free from the payment of the tax. We hold, therefore, that sales to the VOA are subject to the payment of percentage taxes under section 186 of the Code.
#114
TIO VS. VIDEOGRAM REGULATORY BOARD [151 SCRA 208; G.R. No. L-75697; 18 Jun 1987]
Facts: The case is a petition filed by petitioner on behalf of videogram operators adversely affected by Presidential Decree No. 1987, “An Act Creating the Videogram
Regulatory Board" with broad powers to regulate and supervise the videogram industry.
A month after the promulgation of the said Presidential Decree, the amended the National Internal Revenue Code provided that:
"SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, That locally manufactured or imported blank video tapes shall be subject to sales tax."
"Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any provision of law to the contrary, the province shall collect a tax of thirty percent
(30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion picture or
audiovisual program.”
“Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall accrue to the municipality where the tax
is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission.”
The rationale behind the tax provision is to curb the proliferation and unregulated circulation of videograms including, among others, videotapes, discs, cassettes or
any technical improvement or variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such unregulated circulation have caused a
sharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection of sales, contractor's specific, amusement and other
taxes, thereby resulting in substantial losses estimated at P450 Million annually in government revenues.
Videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of videograms, and these earnings have not been
subjected to tax, thereby depriving the Government of approximately P180 Million in taxes each year.
The unregulated activities of videogram establishments have also affected the viability of the movie industry.
37
Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.
Held: Taxation has been made the implement of the state's police power. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need
for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition.
We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. 1987 as unconstitutional and void. While the underlying
objective of the DECREE is to protect the moribund movie industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed video
tapes containing pornographic films and films with brutally violent sequences; and losses in government revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to
engage in business."
WHEREFORE, the instant Petition is hereby dismissed. No costs.
#116
PHILIPPINE AIRLINES, INC. v. EDU
G.R. No. L- 41383, August 15, 1988
FACTS:
The Philippine Airlines (PAL) is a corporation engaged in the air transportation business under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt
from the payment of taxes.
Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate (Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise
known as the Land and Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. PAL thus paid, under
protest, registration fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Land Transportation
Commissioner Romeo Edu (Edu) demanding a refund of the amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu and National
Treasurer Ubaldo Carbonell (Carbonell).
The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which in turn certified the case to the Supreme Court.
ISSUE:
Whether or not motor vehicle registration fees are considered as taxes.
RULING:
Yes. 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. Such is the case
of motor vehicle registration fees. The motor vehicle registration fees are actually taxes intended for additional revenues of the government even if one fifth or less of
the amount collected is set aside for the operating expenses of the agency administering the program.
38
#118
A city ordinance imposing a tax on the sale of lumber cannot be declared null and void on the ground that the ordinance in question imposes in effect double taxation
because the business of lumber yard is already regulated under the Charter and the sale of lumber is a ‘mere incident of the business of lumber yard.’ Suffice it to say
that regulation and taxation are two different things; the first being an exercise of police power, whereas the latter is not, apart from the fact that double taxation is
not prohibited in the Philippines. [Serafica vs. Treasurer of Ormoc City. GR No. L-24813. April 28, 1969]
#119
Philex Mining Corp. vs. Commissioner of Internal Revenue
[G.R. No. 125704. August 28, 1998]
Digest by: : ONG, Ruth Ann
PONENTE: Romero
FACTS:
Petitioner Philex Mining Corp. assails the decision of the Court of Appeals promulgated on April 8, 1996 in CA-G.R. SP No. 36975 affirming the Court of Tax Appeals
decision in CTA Case No. 4872 dated March 16, 1995 ordering it to pay the amount of P110,677,668.52 as excise tax liability for the period from the 2nd quarter of
1991 to the 2nd quarter of 1992 plus 20% annual interest from August 6, 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977.
The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the 2nd, 3rd and 4th quarter of 1991 as well as the 1st and
2nd quarter of 1992 in the total amount of P123,821,982.52.
In a letter dated August 20, 1992, Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the
taxes it paid for the years 1989 to 1991 in the amount of P119,977,037.02 plus interest. Therefore, these claims for tax credit/refund should be applied against the
tax liabilities.
In reply, the BIR, in a letter dated September 7, 1992, found no merit in Philex’s position. Since these pending claims have not yet been established or determined
with certainty, it follows that no legal compensation can take place. Hence, he BIR reiterated its demand that Philex settle the amount plus interest within 30 days
from the receipt of the letter.
In view of the BIR’s denial of the offsetting of Philex’s claim for VAT input credit/ refund against its exercise tax obligation, Philex raised the issue to the Court of Tax
Appeals on November 6, 1992. In the course of the proceedings, the BIR issued a Tax Credit Certificate SN 001795 in the amount of P13,144,313.88 which, applied to
the total tax liabilities of Philex of P123,821,982.52; effectively lowered the latter’s tax obligation of P110,677,688.52.
Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay the remaining balance of P110,677,688.52 plus interest. The Court of Tax Appeals ruled
that taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract.
ISSUE:
Can taxes be subject to set-off?
HELD:
Taxes cannot be the subject for compensation for simple reason that the government and the tax payer are not mutual creditors and debtors of each other. Debts are
due in the government in its’ corporate capacity while taxes are due to the government in its’ sovereign capacity. A tax payer cannot refuse to pay his taxes when
they fall due simply because he has a claim against the government that the collection of the tax is contingent on the result of the law suit it filed against the
government.
#120 Domingo v. Garlitos
[G.R. No. L-18994. June 29, 1963]
Digest by: : OSOTEO, Maureen Kascha L.
PONENTE: Labrador
FACTS:
39
In Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674 this Court declared as final and executory the order for the payment by the estate of the estate
and inheritance taxes, charges and penalties, amounting to P40,058.55 issued by the Court of First Instance of Leyte in, special proceedings No. 14 entitled “In the
matter of the Intestate Estate of the Late Walter Scott Price.” In order to enforce the claims against the estate the fiscal presented a petition for the execution of the
judgment. The petition was, however, denied by the respondent which held that the execution is not justifiable as the Government is indebted to the estate under
administration in the amount of P262,200.
Respondent ordered that the payment of inheritance taxes in the sum of P40,058.55 due the Collector of Internal Revenue be deducted from the amount of
P262,200.00 due and payable to the Administratrix Simeona K. Price, in this estate, the balance to be paid by the Government to her without further delay.
ISSUE:
Whether the claim by the Government against the estate may be deducted from its debt to the estate and whether compensation may take place
HELD:
Yes. 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 for the purpose by a corresponding law (Rep. Act No. 2700). Under the above 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 is well as fully liquidated. Compensation,
therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the
concurrent amount, thus:
ART. 1200. When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguished both debts to the
concurrent amount, eventhough the creditors and debtors are not aware of the compensation.
#121
Margin fees are not expenses in connection with the business of the petitioners. Since the margin fees were incurred for the remittance of funds to petitioner’s Head
Office in New York, which is a separate and distinct income taxpayer from the branch in the Philippines, for its disposal abroad, it can never be said therefore that the
margin fees were appropriate and helpful in the development of petitioner’s business in the Philippines exclusively or for the purpose of realizing a profit or of
minimizing a loss in the Philippines exclusively. [Esso Standard Eastern, Inc. vs. CIR. GR Nos. 28508-9. July 7, 1989]
Esso Standard Eastern, Inc. (formerly, Standard-Vacuum Oil Company) v The Commissioner of Internal Revenue
A margin fee is imposed by the State in the exercise of its police power and not the power of taxation. A margin fee is not a tax but an exaction designed to curb the
excessive demands upon our international reserve.
A tax is a levy for the purpose of providing revenue for government operations.
#122
Francia v. Intermediate Appellate Court
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.
Francia v. Intermediate Appellate Court
[G.R. No. L-67649. June 28, 1988]
Digest by: : OSOTEO, Maureen Kascha L.
PONENTE: Gutierrez, Jr.
FACTS:
40
On October 15, 1977, a 125 square meter portion of Francia’s property was expropriated by the Republic of the Philippines for the sum of P4,116.00 representing the
estimated amount equivalent to the assessed value of the aforesaid portion.
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 pursuant to Section 73 of Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00.
In this petition, Francia contends that his tax delinquency of P2,400.00 has been extinguished by legal compensation. He claims that the government owed him
P4,116.00 when a portion of his land was expropriated on October 15, 1977. Hence, his tax obligation had been set-off by operation of law as of October 15, 1977.
ISSUE:
Whether Francia’s tax obligation may be subject to compensation by operation of law.
HELD:
No. By legal compensation, obligations of persons, who in their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil Code).
The circumstances of the case do not satisfy the requirements provided by Article 1279, to wit:
(1) that each one of the obligors be bound principally and that he be at the same time a principal creditor of the other;
xxx xxx xxx
(3) that the two debts be due.
xxx xxx xxx
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.
A taxpayer cannot refuse to pay his tax when called upon by the collector because he has a claim against the governmental body not included in the tax levy.
Government and taxpayer are not mutually creditors and debtors of each other’ under Article 1278 of the Civil Code and a “claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off.
There are other factors which compel us to rule against the petitioner. The tax was due to the city government while the expropriation was effected by the national
government. Moreover, the amount of P4,116.00 paid by the national government for the 125 square meter portion of his lot was deposited with the Philippine
National Bank long before the sale at public auction of his remaining property. Notice of the deposit dated September 28, 1977 was received by the petitioner on
September 30, 1977. The petitioner admitted in his testimony that he knew about the P4,116.00 deposited with the bank but he did not withdraw it. It would have
been an easy matter to withdraw P2,400.00 from the deposit so that he could pay the tax obligation thus aborting the sale at public auction.
#124
Although taxes already due have not, strictly speaking, the same concept as debts, they are, however obligations that may be considered as such. In Commissioner
vs. Prieto, it was held that while the distinction between taxes and debts was recognized in this jurisdiction, the variance in their legal conception does not extend to
the interests paid on them. Thus, it follows that the interest paid on the estate and inheritance tax is deductible from gross income. [CIR vs. Palanca. GR No. L–16626.
October 29, 1966]
#131
REPUBLIC OF THE PHIL. vs. INTERMEDIATE APPELLATE COURT, ET AL. G.R. No. 69138 May 19, 1992
FACTS:
1. The OIC of Buhol reforestation project project of the bureau of forest development, occupied a two parcel of lands which he believes to be a forest land and
planted mulberry and other trees.
2. Respondent filed a complaint for recovery of possession, ownership and damages alleging that he is the absolute owner and possessor of the two parcels of land
occupied by Logronio.
3. Forester in Charge of the Bohol Reforestation Project, Dagohoy, Bohol, addressed a letter to the Administrator, Reforestation Administration, Diliman, Quezon City,
41
thru the Regional Officer, Cebu City, stating that the two parcels of land were forest land and recommend the cancellation of title of the respondent which was
granted.
4. The CFI rendered a decision ordering the respondent to vacate the land upon reimbursement of the necessary expenses with right of retention on Lot A and the
necessary expenses on Lot B but without right of retention.
5. Petitioner appealed the decision of the lower court to the IAC who modified the decision of the lower court and ruled that with regards to Lt B, respondent has
alsow a right of retention until the necessary expenses are paid.
6. Petitioner appealed the decision of the IAC to the Supreme Court.
ISSUE.
WHETHER OR NOT, RESPONDENT IS ENTITLED TO RIGHT OF RETENTION UNTIL THE NECESSARY EXPENSES ARE PAID TO HIM.
According to the Supreme Court, while it is True that government officials caused the issuance of the patent title and the original torrens title covering the land in
Respondent’s name, However, the well-entrenched principle is that the State cannot be put in estoppel by the mistakes or errors of its officials or agents.
Considering that the subject parcel of land is forest land, the patent and original certificate of title covering the subject parcel issued to Rama did
not confer any validity to his possession or claim of ownership.
In effect, Rama's possession of the parcel from the beginning was fraudulent and illegal. He was merely a squatter
on the parcel so he is not a possessor in good faith therefore.
So the decision of the IAC is set aside.
#134
The condonation of a tax liability is equivalent and is in the nature of a tax exemption. Being so, it should be sustained only when expressed in explicit terms, and it
cannot be extended beyond the plain meaning of those terms. [Surigao Consolidated Mining Co., Inc. vs. Collector. GR No. L-14878. December 26, 1963]
#136
48. Lealda v. CIR
It seems clear, therefore, that the intention of the legislature was to impose upon the grantee and his successors in interest, the obligation to pay the same franchise
tax imposed upon other grantees or franchise holders at the time Act 2475 was enacted.
#137
). Furthermore, a claim of statutory exemption from taxation should be manifest and 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” (Davao Gulf Lumber Corporation v. Commissioner of
Internal Revenue and Court of Appeals, G.R. No. 117359, p. 15 July 23, 1998).
Davao Gulf Lumber Corporation v. CIR
[G.R. No. 117359. July 23, 1998]
Digest by: JULIAN, Nicole Alora G.
PONENTE: Panganiban
42
FACTS:
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. Said
oil companies paid the specific taxes imposed on the sale of said products. Being included in the purchase price of the oil products, the specific taxes paid by the oil
companies were eventually passed on to the petitioner in this case.
Petitioner filed before Respondent CIR a claim for refund in the amount of P120, 825.11, representing 25% of the specific taxes actually paid on the above-mentioned
fuels and oils that were used by petitioner in its operations as forest concessionaire.
On January 20, 1983, petitioner filed at the CTA a petition for review. The CTA rendered its decision finding petitioner entitled to a partial refund of specific taxes in
the reduced amount of P2, 923.15. In regard to the other purchases, the CTA granted the claim, but it computed the refund based on rates deemed paid under RA
1435, and not on the higher rates actually paid by petitioner under the NIRC.
ISSUE:
Whether or not petitioner is entitled to the refund of 25% of the amount of specific taxes it actually paid on various refined and manufactured mineral oils.
HELD:
Yes, partially. At the outset, 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.
A tax cannot be imposed unless it is supported by the clear and express language of a statute; on the other hand, once the tax is unquestionably imposed, “[a] claim
of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken.” Since the partial refund authorized under Section
5, RA 1435, is in the nature of a tax exemption, it must be construed strictissimi juris against the grantee. Hence, petitioner’s claim of refund on the basis of the
specific taxes it actually paid must expressly be granted in a statute stated in a language too clear to be mistaken.
#138
CIR V CA January 20, 1999
Facts: Sometime in the 1930’s, Don Andres Soriano, a citizen and resident of the United States, formed the corporation “A. Soriano Y Cia”, predecessor of ANSCOR
with a 1,000,000.00 capitalization divided into 10,000 common shares at a par value of P100/share. ANSCOR is wholly owned and controlled by the family of Don
Andres, who are all non-resident aliens. In 1937, Don Andres subscribed to 4,963 shares of the 5,000 shares originally issued.
On September 12, 1945, ANSCOR’s authorized capital stock was increased to P2,500,000.00 divided into 25,000 common shares with the same par value. Of the
additional 15,000 shares, only 10,000 was issued which were all subscribed by Don Andres, after the other stockholders waived in favor of the former their pre-
emptive rights to subscribe to the new issues. This increased his subscription to 14,963 common shares. A month later, Don Andres transferred 1,250 shares each to
his two sons, Jose and Andres Jr., as their initial investments in ANSCOR. Both sons are foreigners.
By 1947, ANSCOR declared stock dividends. Other stock dividend declarations were made between 1949 and December 20, 1963. On December 30, 1964 Don Andres
died. As of that date, the records revealed that he has a total shareholdings of 185,154 shares. 50,495 of which are original issues and the balance of 134,659 shares
as stock dividend declarations. Correspondingly, one-half of that shareholdings or 92,577 shares were transferred to his wife, Doña Carmen Soriano, as
herconjugal share. The offer half formed part of his estate.
A day after Don Andres died, ANSCOR increased its capital stock to P20M and in 1966 further increased it to P30M. In the same year (December 1966), stock
dividends worth 46,290 and 46,287 shares were respectively received by the Don Andres estate and Doña Carmen from ANSCOR. Hence, increasing their accumulated
shareholdings to 138,867 and 138,864 common shares each.
On December 28, 1967, Doña Carmen requested a ruling from the United States Internal Revenue Service (IRS), inquiring if an exchange of common with preferred
shares may be considered as a tax avoidancescheme. By January 2, 1968, ANSCOR reclassified its existing 300,000 common shares into 150,000 common and 150,000
preferred shares.
In a letter-reply dated February 1968, the IRS opined that the exchange is only a recapitalization scheme and not tax avoidance. Consequently, on March 31, 1968
Doña Carmen exchanged her whole 138,864 common shares for 138,860 of the preferred shares. The estate of Don Andres in turn exchanged 11,140 of its common
shares for the remaining 11,140 preferred shares.
In 1973, after examining ANSCOR’s books of account and record Revenue examiners issued a report proposing that ANSCOR be assessed fordeficiency withholding
tax-at-source, for the year 1968 and the 2nd quarter of 1969 based on the transaction of exchange and redemption of stocks. BIR made the
corresponding assessments. ANSCOR’s subsequent protest on the assessments was denied in 1983 by petitioner. ANSCOR filed a petition for review with the CTA, the
Tax Court reversed petitioners ruling. CA affirmed the ruling of the CTA. Hence this position.
43
Issue: Whether or not a person assessed for deficiency withholding tax under Sec. 53 and 54 of the Tax Code is being held liable in its capacity as a withholding agent.
Held: An income taxpayer covers all persons who derive taxable income. ANSCOR was assessed by petitioner for deficiency withholding tax, as such, it is being held
liable in its capacity as a withholding agent and not in its personality as taxpayer. A withholding agent, A. SorianoCorp. in this case, cannot be deemed a taxpayer for it
to avail of a tax amnesty under a Presidential decree that condones “the collection of all internal revenue taxes including the increments or penalties on account of
non-payment as well as all civil, criminal, or administrative liabilities arising from or incident to voluntary disclosures under the NIRC of previously untaxed income
and/or wealth realized here or abroad by any taxpayer, natural or juridical.” The Court explains: “The withholding agent is not a taxpayer, he is a mere tax collector.
Under the withholding system, however, the agent-payer becomes a payee by fiction of law. His liability is direct and independent from the taxpayer, because the
income tax is still imposed and due from the latter. The agent is not liable for the tax as no wealth flowed into him, he earned no income.”
#140
If two meanings of a stipulation are admissible, that which is least to the advantage of the party for whose benefit the stipulation was inserted in the treaty should be
preferred. Thus, an ambiguity in the tax exemption provision in the Military Bases Agreement cannot be interpreted in favor of the American Government or the
party claiming under it, like a taxpayer. It is well-settled that the exception contained in tax statutes must be strictly construed against the one claiming exemption
and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. [CIR vs. P.J. Kiener
Company, Ltd. GR No. L-24754. July 18, 1975]
#141
Luzon Stevedoring Corp. v. Court of Tax Appeals, Commissioner of Internal Revenue
In order that the importations of tugboats may be declared exempt from the compensating tax, the following requirements must be complied with: (1) the engines
and spare parts must be used by the importer himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise
or oceangoing navigation. The amendatory provisions of R.A. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer
himself as operator of passenger and/or cargo vessel.
Luzon Stevedoring Corp. v. Court of Tax Appeals,
Commissioner of Internal Revenue
[L-30232. July 29, 1988]
Digest by: MAGAT, Kristianne Santiago
PONENTE: Paras
FACTS:
Petitioner-appellant, in 1961 and 1962, for the repair and maintenance of its tugboats, imported various engine parts and other equipment for which it paid, under
protest, the assessed compensating tax. Unable to secure a tax refund from the Commissioner of Internal Revenue, on January 2, 1964, it filed a Petition for Review
with the Court of Tax Appeals, praying that it be granted the refund of the amount of P33,442.13. The Court of Tax Appeals denied the various claims for tax refund.
The Motion for Reconsideration was denied, hence, the instant petition.
ISSUE:
Whether petitioner’s “tugboats” can be interpreted to be included in the term “cargo vessels” for purposes of the tax exemption provided for in Sec. 190 of the NIRC.
HELD:
No. This Court has laid down the rule that as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or
dimunition thereof with respect to its mode or its rate, must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it
may be applied. The general rule is that any claim for exemption from the tax statute should be strictly construed against the taxpayer.
44
In order that the importations in question may be declared exempt from the compensating tax, the following requirements must be complied with: (1) the engines
and spare parts must be used by the importer himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise
or oceangoing navigation. The amendatory provisions of R.A. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer
himself as operator of passenger and/or cargo vessel.
From the decision of the CTA, a tugboat is defined as a strongly built, powerful steam or power vessel, used for towing and, now, also used for attendance on vessel.
A tugboat is a diesel or steam power vessel designed primarily for moving large ships to and from piers for towing barges and lighters in harbors, rivers and canals. A
tug is a steam vessel built for towing, synonymous with tugboat. Hence, petitioner’s tugboats clearly do not fall under the categories of passenger and/or cargo
vessels.
The Court of Tax Appeals found that no evidence was adduced by petitioner-appellant that tugboats are passenger and/or cargo vessels used in the shipping industry
as an independent business. On the contrary, petitioner-appellant’s own evidence supports the view that it is engaged as a stevedore, that is, the work of unloading
and loading of a vessel in port; and towing of barges containing cargoes is a part of petitioner’s undertaking as a stevedore. In fact, even its trade name is indicative
that its sole and principal business is stevedoring and lighterage, taxed under Section 191 of the National Internal Revenue Code as a contractor, and not an entity
which transports passengers or freight for hire which is taxed under Section 192 of the same Code as a common carrier by water.
#142
. Hilado v. Collector of Internal Revenue
It is a legal maxim, that excepting that of a political nature, ‘Law once established continues until changed by some competent legislative power. It is not changed
merely by change of sovereignty.’
“It seems too clear for serious argument that an administrative officer cannot change a law enacted by Congress. A regulation that is merely an interpretation of the
statute when once determined to have been erroneous becomes nullity. An erroneous construction of the law by the Treasury Department or the collector of internal
revenue does not preclude or estop the government from collecting a tax which is legally due.”
Hilado v. Commissioner of Internal Revenue
[G.R. No. L-9408. October 31, 1956.]
Digest by: : NIEVA, Aubin Arn R.
PONENTE: Bautista
FACTS:
On March 31, 1952, Petitioner filed his income tax return for 1951 with the treasurer of Bacolod City wherein he claimed, among other things, the amount of
P12,837.65 as a deductible item from his gross income pursuant to General Circular No. V-123 issued by the Collector of Internal Revenue.
Through the collector, the secretary of finance issued general circular V-139 which revoked and declared void circular V123. It provided that losses of property which
occurred in world war II from fire, storms and shipwreck or from other casualty like robbery of theft or embezzlement in the year of actual loss or destruction of
property. The deductions were later on disallowed.
ISSUE:
Can Hilado claim compensation for destruction of his property during the war under the laws in effect at that time?
HELD:
Petitioner’s contention that during the last war and as a consequence of enemy occupation in the Philippines “there was no taxable year” within the meaning of our
internal revenue laws because during that period they were unenforceable, is without merit.
Philippine Internal Revenue laws are not political in nature and as such were continued in force during enemy occupation and in effect were actually enforced by the
occupying government. Such tax laws are deemed to be laws of the occupied territory and not of the occupying enemy. As of the end of 1945, there was no law
which Hilado could claim for the destruction of his properties during the liberation of our country. Under the Philippine rehabilitation act of 1948, the payment of
claims by the War damage Commission depended upon its discretion. Non-payment of which does not give rise to any enforceable right.
“Furthermore, it is a legal maxim, that excepting that of a political nature, ‘Law once established continues until changed by some competent legislative power. It is
not changed merely by change of sovereignty.’
45
“It seems too clear for serious argument that an administrative officer cannot change a law enacted by Congress. A regulation that is merely an interpretation of the
statute when once determined to have been erroneous becomes nullity. An erroneous construction of the law by the Treasury Department or the collector of internal
revenue does not preclude or estop the government from collecting a tax which is legally due.”
#143
It is well settled that inheritance taxation is governed by the statute in force at the time of the death of the decedent. Of course, a tax statute may be made
retroactive in its operation. Liability for taxes under retroactive legislation has been "one of the incidents of social life." But legislative intent that a tax statute should
operate retroactively should be perfectly clear.
Revenue laws, generally, which impose taxes collected by the means ordinarily resorted to for the collection of taxes are not classed as penal laws, although there are
authorities to the contrary. Thus, Article 22 of the Revised Penal Code is not applicable to the case of bar, and in the absence of clear legislative intent, we cannot give
Act No. 3606 a retroactive effect. [Lorenzo vs. Posadas, Jr. GR No. 43082. June 18, 1937]
#144
The prohibition against ex post facto laws applies only to criminal or penal matters, and not to laws which concern civil matters or proceedings generally, or which
affect or regulate civil or private rights. Hence, tax laws not being penal in character, the rule against passage of ex post facto laws cannot be invoked. [Republic vs.
Vda. De Fernandez. GR No. L-9141. September 25, 1956]
#146
The extra-judicial demands made, if any, did not serve to suspend or toll the period of prescription, the provisions of the Civil Code notwithstanding. It should be
noted, in this connection, that the Internal Revenue Code, being a special law, prevails over a general law. [Republic vs. Gancayco. GR No. L-18307. June 30, 1964]
#147
Since an action to recover an erroneously refunded tax is in effect an assessment of such tax, and considering that a special law like the Tax Code prevails over the
Civil Code, a general law, then it is the three-year period under the Tax Code that should apply. [Guagua Electric Light Co., Inc. vs. Collector of Internal Revenue. GR
No. L-23611. April 24, 1967]
#149
PBCom. vs. CIR(GR 112024. Jan. 28, 1999)
Labels: 2-year, administrative issuance, reglementary period, tax credit, tax refund
FACTS:
Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax
returns for the first and second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00 by applying PBCom's tax credit memos for
46
P3,401,701.00 and P1,615,253.00, respectively. Subsequently, however, PBCom suffered net loss of P25,317,228.00, thereby showing no income tax liability in its
Annual Income Tax Returns for the year-ended December 31, 1985. For the succeeding year, ending December 31, 1986, the petitioner likewise reported a net loss of
P14,129,602.00, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes of
P282,795.50 in 1985 and P234,077.69 in 1986. On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit of
P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985.
Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986
for P234,077.69.
Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Review on November 18, 1988 before the Court of
Tax Appeals (CTA). The petition was docketed as CTA Case No. 4309 entitled: "Philippine Bank of Communications vs. Commissioner of Internal Revenue."
The CTA decided in favor of the BIR on the ground that the Petition was filed out of time as the same was filed beyond the two-year reglementary period. A motion
for Reconsideration was denied and the appeal to Court of Appeals was likewise denied. Thus, this appeal to Supreme Court.
Issues:
a) Whether or not Revenue Regulations No. 7-85 which alters the reglementary period from two (2) years to ten (10) years is valid.
b) Whether or not the petition for tax refund had already prescribed.
Ruling:
RR 7-85 altering the 2-year prescriptive period imposed by law to 10-year prescriptive period is invalid.
Administrative issuances are merely interpretations and not expansions of the provisions of law, thus, in case of inconsistency, the law prevails over them.
Administrative agencies have no legislative power.
“When the Acting Commissioner of Internal Revenue issued RMC 7-85,
changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the
provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.”
“It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax
laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the
executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if
judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the
law they seek to apply and implement.”
“Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. As pointed out by the respondent courts,
the nullification of RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is not in harmony with Sec. 230 of
1977 NIRC, for being contrary to the express provision of a statute. Hence, his interpretation could not be given weight for to do so would, in effect, amend the
statute.”
By implication of the above, claim for refund had already prescribed.
47
Since the petition had been filed beyond the prescriptive period, the same has already prescribed. The fact that the final adjusted return show an excess tax credit
does not automatically entitle taxpayer claim for refund without any express intent.
WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals appealed from is AFFIRMED, with COSTS against the petitioner.
#150
To be deductible as a business expense, three conditions are imposed, namely: (1) the expense must be ordinary and necessary, (2) it must be paid or incurred within
the taxable year, and (3) it must be paid or incurred in carrying in a trade or business. In addition, not only must the taxpayer meet the business test, he must
substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will be disallowed.
Ordinarily, an expense will be considered "necessary" where the expenditure is appropriate and helpful in the development of the taxpayer's business. It is
"ordinary" when it connotes a payment which is normal in relation to the business of the taxpayer and the surrounding circumstances. The term "ordinary" does not
require that the payments be habitual or normal in the sense that the same taxpayer will have to make them often; the payment may be unique or non-recurring to
the particular taxpayer affected.
That the expense in question was incurred to create a favorable image of the corporation in order to gain or maintain the public’s and stockholders’
patronage, does not make it deductible as business expense. [Atlas Consolidated Mining & Development Corp. vs. CIR. GR No. L–26911. January 21, 1981]
#153
G.R. No. L-23623 June 30,1977
ACTING COMMISSIONER OF CUSTOMS, petitioner Vs.
MANILA ELECTRIC COMPANY and COURT OF TAX APPEALS, respondents
FACTS:
The late Norberto Romualdez is the acting commissioner of customs filed a petition against Meralco Electric Company for the reversal of respondents Court of
Appeals decision to Exempt Meralco from paying Special Import Tax under the Republic Act 1394.
The appealed decision set forth that the petitioner Manila Electric Co. nor private respondent in appealing from a determination by the Acting Commissioner of
Customs , now petitioner , claim that it is exempt from the special import tax.
ISSUES:
Is Manila Electric Co. Exempted in paying Special Import Tax for the shipping of Insulating Oil.
HELD:
The Court REVERSED, the decision and ordered a refund to the
There is no question that insulating oils of the type imported by the petitioners are used for cooling as well as insulating and when used in oil circuit breakers, they
are required to maintain insulation between the contact inside the tank and the tank itself.
#157
LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMG LIFE INSURANCE CO. INC.) v. COURT OF APPEALS and COMMISSIONER OF INTERNAL
REVENUE. G.R. No. 118043. July 23, 1998. 249 SCRA 92
FACTS:
48
Jardine-CMG Life Insurance Company, Inc., is a domestic corporation engaged in the life insurance business. It issued 50,000 shares of stock as stock dividends, with a
par value of P100 or a total of P5 million. Petitioner paid documentary stamp taxes on each certificate on the basis of its par value.
The CIR decided that the book value of the shares should be used as a basis for determining the amount of the documentary stamp tax. The CIR issued a deficiency
documentary stamp tax assessment of P78,991.25 in excess of the par value of the stock dividends.
Petitioner appealed to the CTA which held that the amount of the documentary stamp tax should be based on the par value stated on each certificate of stock
reversing the CIR's decision. The CIR appealed with the CA and again held in favor of the CIR.
ISSUE: Whether the amount to be paid for stock dividends as documentary stamp tax, is the par value or the book value of the shares.
RULING:
The par value. The Court reaffirmed the CTA's decision.
Petitioner is correct in basing the assessment on the book value thereof rejecting the principles enunciated in Commissioner of Internal Revenue vs. Heald Lumber Co.
as the said case refers to purchases of no-par certificates of stocks and not to stock dividends.
The documentary stamp tax is not levied upon the shares of stock per se but rather on the privilege of issuing certificates of stock.
It is clear that stock dividends are shares of stock and not certificates of stock which merely represent them. There is no reason for determining the actual value of
such dividends for purposes of the documentary stamp tax if the certificates representing them indicate a par value.
#158
QUEZON CITY vs. ABS-CBN BROADCASTING CORPORATION - Local Franchise Tax
FACTS:
ABS-CBN was granted a franchise which provides that it “shall pay a 3% franchise tax and the said percentage tax shall be “in lieu of all taxes on this franchise or
earnings thereof”. It thus filed a complaint against the imposition of local franchise tax.
ISSUE:
Does the “in lieu of all taxes” provision in ABS-CBN’s franchise exempt it from payment of the local franchise tax?
HELD:
NO. The right to exemption from local franchise tax must be clearly established beyond reasonable doubt and cannot be made out of inference or implications.
The uncertainty over whether the “in lieu of all taxes” provision pertains to exemption from local or national taxes, or both, should be construed against Respondent
who has the burden to prove that it is in fact covered by the exemption claimed. Furthermore, the “in lieu of all taxes” clause in Respondent’s franchise has become
ineffective with the abolition of the franchise tax on broadcasting companies with yearly gross receipts exceeding P10 million as they are now subject to the VAT.
49
50

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I-C1

National Power Corporation vs City of Cabanatuan

G.R. No. 149110 April 9, 2003

NATIONAL POWER CORPORATION, petitioner,

CIR vs. Algue Inc.

Commissioner of Internal Revenue vs. Algue Inc.

GR No. L-28896 | Feb. 17, 1988

A letter of protest or reconsideration was filed by Algue Inc on Jan 18

GR 134062, 17 April 2007

Hence, CIR filed this case.

1) Were the October 28, 1988 notices valid assessments?

CIR vs. Fortune Tobacco

September 28, 2011 G.R. No. 180006

G.R. No. 158540. August 3, 2005]

G.R. No. 92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner,

Ponente: Davide, Jr. J.

ISSUE: WON Caltex is entitled to offsetting

Physical Therapy Organization vs Municpal Board GR 10448 30 August 1957

PHILIPPINE AIRLINES, INC. vs. ROMEO F. EDU and UBALDO CARBONELL

No. L-41383. August 15, 1988.

Nature: PETITION to review the decision of the Court of First Instance

Ponente: GUTIERREZ, JR., J.

Under its franchise, PAL is exempt from the payment of taxes.

Commissioner of Internal Revenue vs. Central Luzon Drug Corporation

GR No. 159647, April 15, 2005

G.R. No. L-25043 April 26, 1968

Leido, Andrada, Perez and Associates for petitioners.

BENGZON, J.P., J.:

II. DISALLOWED DEDUCTIONS

Abakada Guro Party List, et al vs Exec. Sec. Ermita

The exceptions are:

(a) delegation of tariff powers to President under Constitution

(b) delegation of emergency powers to President under Constitution

(c) delegation to the people at large

(d) delegation to local governments

(e) delegation to administrative bodies

Not allowing senate to amend, violates co-equality between two houses

Senate can propose, concur or amend

Randolf David vs President Gloria Macapagal-Arroyo

Bill of Rights – Freedom of Speech – Overbreadth

ISSUE: Whether or not PP 1017 and GO 5 is constitutional.

Resolution by the SC on the Factual Basis of its declaration

Resolution by the SC on the Overbreadth Theory

Resolution by the SC on the Calling Out Power Doctrine

Resolution by the SC on the Take Care Doctrine

Resolution by the SC on the Take Over Power Doctrine

(1) There must be a war or other emergency.

(2) The delegation must be for a limited period only.

Resolution by the SC on the Issue that PP 1017 is a Martial Law Declaration

Jumamil vs. Café, et al.

Jumamil vs. Café, et al.

ABAYA vs. EBDANE, JR.

III. Limitations on the Power of Taxation

16. Pascual v. Secretary of Public Works and Communications

40. Lutz v. Araneta

Product v. Fertiphil Corp.

Posted by kaye lee on 12:36 PM

G.R. No. L-21897 October 22 1963 [Executive Agreements]

W/N the executive agreements may be validated in our courts.

CIR vs. MARUBENI

GR No. 137377| J. Puno

W/N Marubeni is exempted from paying tax

CIR vs. BAIER-NICKEL