PHILEX MINING CORPORATION v.

COMMISSIONER OF INTERNAL REVENUE,

COURT OF APPEALS, and THE COURT OF TAX APPEALS
G.R. No. 125704 | August 28, 1998

Facts:

The Bureau of Internal Revenue demanded Philex Mining Corporation to settle its tax
liabilities for the 2nd, 3rd, and 4th quarters of 1991, as well as for the 1st and 2nd quarters of
1992, totaling P123, 821, 982.52.

Philex protested and stated 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, it asserted that these claims for tax credit/refund should be applied against
the tax liabilities.

However, the BIR argued that these pending claims have not yet been established or
determined with certainty; thus, there can be no legal compensation between the
amounts stated.

Issue:

Can there be legal compensation or set-off of tax liabilities and VAT input credit/refund?

Held:

No.

There cannot be set-off or legal compensation in taxation between the taxpayer and the
State because the government and the taxpayer are not mutual creditors and debtors of
each other.

Debts are due to the Government in its corporate capacity, while taxes are due to the
Government in its sovereign capacity. A tax does not depend upon the consent of the
taxpayer. If any taxpayer can defer the payment of taxes by raising the defense that it
still has a pending claim for refund or credit, this would adversely affect the government
revenue system.

ATLAS CONSOLIDATED MINING DEVELOPMENT CORPORATION v.

THE COURT OF TAX APPEALS
G.R. Nos. 141104 & 148763 | June 8, 2007

Facts:

Claims for input VAT refund/credit for purchases of capital goods and zero-rated sales
were filed with the Bureau of Internal Revenue (BIR) by Atlas Consolidated (Atlas), a
company engaged in mining, production, and sale of various mineral products.

However, the BIR took a while to respond on the matter. As such, the petitioner filed a
petition for review before the Court of Tax Appeals (CTA). The latter denied the claims
on the grounds that for zero-rating to apply, 70% of the company’s sales must consist of
exports. It added that the same were not filed within the 2-year prescriptive period since
the claim for 1992 quarterly returns were judicially filed only in 1994. It also pointed out
that the petitioner failed to submit substantial evidence to support its claim for refund or
credit.

Atlas asserted that the CTA failed to consider the sales to PASAR and PHILPOS within
the EPZA as zero-rated export sales. The two-year prescriptive period should have been
counted from the date of filing of the last adjustment return, which was April 15, 1993
and not on every end of the applicable quarters. Further, the certification of the
independent CPA attesting to the correctness of the contents of the summary of
suppliers’ invoices or receipts examined, evaluated, and audited by the said CPA should
substantiate its claims.

Issue:

Does the petitioner have a right to its claims for input VAT refund/credit?

Held:

No.

While the court agreed with Atlas that the two-year prescriptive period for the filing of the
claims for refund or credit of input VAT must be counted from the date of filing of the
quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed
as exports because these export processing zones are to be managed as a separate
customs territory from the rest of the Philippines and, thus, for tax purposes, are
effectively considered as foreign territory, it still denied the claims of the petitioner for
refund of its input VAT on its purchases of capital goods and effectively zero-rated sales
during the period claimed for not being established and substantiated by appropriate and
sufficient evidence.

Tax refunds are in the nature of tax exemptions. It is regarded as derogation of the
sovereign authority and should be construed strictly against the person or entity claiming
the exemption. The taxpayer who claims for exemption must justify his claim by the
clearest grant of law and should not be permitted to stand on vague implications.

MELECIO R. DOMINGO v.
HON. LORENZO C. GARLITOS and SIMEONA K. PRICE
G.R. No. L-18994 | June 29, 1963

Facts:

The estate of the late Walter Scott Price was ordered to pay estate and inheritance
taxes, charges and penalties, amounting to P40,058.55, which was declared final and
executor by the Supreme Court in 1960. As such, the fiscal filed a petition for the
execution of the judgment.

However, the petition was denied as the execution was allegedly not justifiable because
the government was indebted to the estate under administration in the amount of
P262,200. Hence, the present petition for certiorari and mandamus.

Issue:

Should the petition for execution be granted?

Held:

No.

There has been compensation of the taxes due and the government’s debt. The court
having jurisdiction of the estate had found that the claim of the estate against the
government has been recognized and an amount of P262,200 has already been
appropriated by a corresponding law (R.A. 2700). Under the circumstances, both the
claim of the Government for the inheritance taxes and the claim of the intestate for
services rendered have already become overdue and demandable, as well as fully
liquidated.

Given the case, compensation shall take place by operation of law, in accordance with
Article 1279 and 1290 of the Civil Code, and both debts are extinguished to their
concurrent amounts. If the obligation to pay taxes and the taxpayer’s claim against the
government are both overdue, demandable, as well as fully liquidated, compensation
takes place by operation of law and both obligations are extinguished to their concurrent
amounts.

PABLO LORENZO v. JUAN POSADAS, JR.

G.R. No. L-43082 | June 18, 1937

Facts:

Petitioner Pablo Lorenzo, in his capacity as trustee of the estate of a certain Thomas
Hanley, deceased, brought an action against respondent Juan Posadas, Jr., Collector of
Internal Revenue, for allegedly collecting more than what was due to the aforementioned
estate. Lorenzo contended that the assessed value should only have been P1,434.24,
instead of P2,052.74.

Ignoring the petitioner’s assertion, Posadas filed a motion praying that the trustee be
made to pay the assessed tax. Subsequently, the motion was granted. As such, Lorenzo
paid the amount in protest, likewise notifying Posadas that until a refund was prompted,
a suit would be brought for its recovery. The latter overruled the protest; hence, this
case.

Issue:

Should Act No. 3606 (New Tax Law) be given retroactive effect, given it is favorable to
the taxpayer?

Held:

No.

Lorenzo levied and assessed the inheritance tax collected from the petitioner under the
provisions of section 1544 of the Revised Administrative Code as amended by Act No.
3606. However, the latter was only enacted in 1930, not the law in force when the
testator died in 1922. Laws cannot be applied retroactively. The Court stated that it is a
well-settled principle that inheritance taxation is governed by the statue in force at the
time of the death of the decedent. The Court also emphasized that “a statute should be
considered as prospective in its operation, unless the language of the statute clearly
demands or expresses that it shall have retroactive effect…” Act No. 3606 does not
contain any provisions indicating a legislative intent to give it a retroactive effect.
Therefore, the provisions of Act No. 3606 cannot be applied to the case at bar.

COMMISSIONER OF INTERNAL REVENUE v.

ALGUE, INC., and THE COURT OF TAX APPEALS
G.R. No. L-28896 | February 17, 1988

Facts:

Algue Inc., a domestic corporation engaged in engineering, construction and other allied
activities, was appointed by the Philippine Sugar Estate Development Company
(PSEDC) as its agent, authorizing it to sell its land, factories, and oil manufacturing
process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel
Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable
Oil Investment Corporation, inducing other persons to invest in it. Ultimately, after its
incorporation largely through the promotion of the said persons, this new corporation
purchased the PSEDC properties. For this sale, Algue received as agent a commission
of P126, 000.00, and it was from this commission that the P75, 000.00 promotional fees
were paid to the aforenamed individuals.

On the other hand, the Commisioner of Internal Revenue contended that the claimed
deduction of P75, 000.00 was properly disallowed because it was not an ordinary
reasonable or necessary business expense.
However, The Court of Tax Appeals took an opposing stand. Agreeing with Algue, it held
that the said amount had been legitimately paid by the private respondent for actual
services rendered. The payment was in the form of promotional fees.

Issue:

Was the assessment proper?

Held:

No.

Tax collection should be made in accordance with law as any arbitrariness will negate
the very reason for government itself. Herein, the claimed deduction (pursuant to Section
30 [a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation 2: as to
compensation for personal services) had been legitimately paid by Algue Inc. It has
further proven that the payment of fees was reasonable and necessary in light of the
efforts exerted by the payees in inducing investors (in VOICP) to involve themselves in
an experimental enterprise or a business requiring millions of pesos.

NATIONAL POWER CORPORATION v. CITY OF CABANATUAN

G.R. No. 149110 | April 9, 2003

Facts:

National Power Corporation (NCP), a government-owned and controlled corporation, has

been selling electric power to the residents of Cabanatuan City for many years, posting a
gross income of P107, 814, 187.96 in 1992. Pursuant to section 37 of Ordinance No.
165-92, 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.

NCP 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 exempt 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 to 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.”

The RTC upheld NPC’s tax exemption. On appeal the, 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:

Is the City of Cabanatuan authorized to impose the aforementioned tax?

Held:

Yes.
Section 137 of the LGC clearly states that 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. The explicit language of section 137
which authorizes LGUs 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.”

JOHN H. OSMEÑA v. OSCAR ORBOS, WENCESLAO DELA PAZ, REX V.

TANTIONGCO, and the ENERGY REGULATORY BOARD
G.R. No. 99886 | March 31, 1993

Facts:

P.D. 1956, or the Oil Price Stabilization Fund (OPSF), was passed in 1984 to reimburse
oil companies for cost increases in crude oil and imported petroleum products because
of the always changing world market prices of crude oil.

Later on, the OPSF was reclassified into a "trust liability account," in virtue of E.O. 1024,
and ordered released from the National Treasury to the Ministry of Energy. The same
Executive Order also authorized the investment of the fund in government securities,
with the earnings from such placements accruing to the fund.

Osmeña assailed the trust fund arguing that "the monies collected pursuant to P.D.
1956, as amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a
'trust fund,' and that "if a special tax is collected for a specific purpose, the revenue
generated therefrom shall 'be treated as a special fund' to be used only for the purpose
indicated, and not channeled to another government objective."

The petitioner asserted that a "trust account" is not illegal per se, but maintained that the
monies collected, which form part of the OPSF, should be maintained in a special
account of the general fund because the Constitution so provides, and because they are,
supposedly, taxes levied for a special purpose. He assumed that the Fund is formed
from a tax undoubtedly because a portion thereof is taken from collections of ad valorem
taxes and the increases thereon.

Issue:
Is the collection and formation of the tax liability account considered taxation?

Held:

No.

While the funds collected may be referred to as taxes, they are exacted in the exercise
of the police power of the State.The fact that the world market prices of oil, measured by
the spot market in Rotterdam, vary from day to day is acknowledged by the court. The
OPSF was established precisely to protect local consumers from the adverse
consequences that such frequent oil price adjustments may have upon the economy.
The OPSF is a "Trust Account," which was established to minimize the frequent price
changes brought about by exchange rate adjustment and/or changes in world market
prices of crude oil and imported petroleum products. The money in the trust would be
used to pay oil companies for any under recovery due to the fluctuating price of oil
products.

The OPSF is thus a buffer mechanism through which the domestic consumer prices of
oil and petroleum products are stabilized, instead of fluctuating every so often, and oil
companies are allowed to recover those portions of their costs which they would not
otherwise recover given the level of domestic prices existing at any given time.

ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE AND THE

COMMISSIONER OF INTERNAL REVENUE
G.R. No. 115255 and G.R. No. 115525 | August 15, 1994 and October 30, 1995

Facts:

Arturo Tolentino et al. assailed the constitutionality of R.A. 7716 otherwise known as “the
Expanded Value Added Tax (EVAT) Law”. The petitioners averred that this revenue bill
did not exclusively originate from the House of Representatives as required by Section
24, Article 6, of the Constitution. Even though R.A. 7716 originated as HB 11197 and
that it passed the three readings in the Lower House, the same did not complete the
three readings in the Senate, for after the 1st reading it was referred to the Senate Ways
& Means Committee; thereafter, the Senate passed its own version known as Senate Bill
1630. Tolentino contended that what the Senate could have done was to amend HB
11197 by striking out its text and substituting it with the text of SB 1630. In that way “the
bill remains a House Bill and the Senate version just becomes the text (only the text) of
the HB”.

Issue:

Is the EVAT unconstitutional for allegedly originating from the Senate?

Held:

No.

The consolidation was consistent with the power of the Senate to propose or concur with
amendments to the version originated in the House of Representatives. What the
Constitution simply means is that the initiative must come from the Lower House. Note
also that there were several instances before where the Senate passed its own version
rather than having the Lower House version as far as revenue and other such bills are
concerned. This practice of amendment by substitution has always been accepted. The
proposition of Tolentino concerned a mere matter of form. There was no showing that it
would make a significant difference if the Senate were to adopt this over what has been
done.

CALTEX (PHILIPPINES), INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. L-20462 | June 30, 1965
Facts:

Caltex received from the Commission on Audit (COA) a letter directing it to remit its
collection to the Oil Price Stabilization Fund (OPSF), excluding that unremitted, for the
years 1986 and 1988, of the additional tax on petroleum products authorized under the
PD 1956. Pending such remittance, all of its claims for reimbursement from the OPSF
shall be held in abeyance. The grand total of its unremitted collections of the above tax is
P1, 287, 668, 820.

Caltex submitted a proposal to COA for the payment and the recovery of claims. COA
approved the proposal but prohibited Caltex from further offsetting remittances and
reimbursements for the current and ensuing years. Caltex moved for reconsideration but
was denied. Hence, the present petition.

Issue:

May the amounts due to Caltex from the OPSF be offset against its outstanding claims
from said funds?

Held:

No.

Taxation is no longer envisioned as a measure merely to raise revenue to support the

existence of 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.

PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is

taxation. A taxpayer may not offset taxes due from the claims 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 a debt, demand, contract, or judgment to be allowed to be set-off.

ESSO STANDARD EASTERN v. COMMISSIONER OF INTERNAL REVENUE

G.R. Nos. L-28508-09 | July 07, 1989

Facts:

Esso Standard Eastern overpaid its 1959 income tax by P221, 033.00. As such, the
Commissioner of Internal Revenue (CIR) granted it tax credit in 1964. However, ESSO’s
payment of its income tax for 1960 was found to be short by P367, 994.00. The CIR then
wrote to ESSO demanding payment of the deficiency tax, together with interest thereon
for the period 1961 to 1964. ESSO paid the amount alleged to be due under protest,
including the interest as reckoned by the Commissioner. It protested the computation of
interest, contending it was more than that properly due. It claimed that it should not have
been required to pay interest on the total amount of the deficiency tax, P367, 994.00, but
only on the amount of P146, 961.00, representing the difference between said
deficiency, P367,994.00, and ESSO’s earlier overpayment of P221, 033.00 (for which it
had been granted a tax credit). ESSO thus asked for a refund.

However, the CIR denied the claim for refund. ESSO appealed to the Court of Tax
Appeals, which ordered payment to ESSO of its refund-claim representing overpaid
interest.

Still, the CIR argued that since the tax credit of P221, 033.00 was approved only in 1964,
it could not be availed of in reduction of ESSO’s earlier tax deficiency for the year 1960;
as of that year, there was as yet no tax credit to speak of, which would reduce the
deficiency tax liability for 1960. In support of his position, the CIR invoked the provisions
of Section 51 of the Tax Code.
Issue:

May the interest on the delinquency be applied on the full tax deficiency of P367, 994.00
despite the existence of an overpayment in the amount of P221, 033.00?

Held:

No.

The fact is that, as respondent Court of Tax Appeals has stressed, as early as 1960, the
Government already had in its hands the sum of P221, 033.00 representing excess
payment. Having been paid and received by mistake, as petitioner Commissioner
subsequently acknowledged, that sum unquestionably belonged to ESSO, and the
Government had the obligation to return it to ESSO That acknowledgment of the
erroneous payment came some four (4) years afterwards in nowise negates or detracts
from its actuality. The obligation to return money mistakenly paid arises from the moment
that payment is made, and not from the time that the payee admits the obligation to
reimburse. The obligation to return money mistakenly paid arises from the moment that
payment is made, and not from the time that the payee admits the obligation to
reimburse. The obligation of the payee to reimburse an amount paid to him results from
the mistake, not from the payee’s confession of the mistake or recognition of the
obligation to reimburse.

ERNESTO M. MACEDA v. HON. CATALINO MACARAIG, JR.

G.R. No. 88291 | May 31, 1991 and June 8, 1993

Facts:

The National Power Corporation (NAPOCOR), a government owned and controlled

corporation, was given tax exemption by Republic Act No. 358. In 1984, Presidential
Decree No. 1931 was passed, removing the tax exemption of NAPOCOR and other
government owned and controlled corporations (GOCCs). There was a reservation,
however, that the president or the Minister of Finance, upon recommendation by the
Fiscal Incentives Review Board (FIRB), may restore or modify the exemption.

In 1985, the tax exemption was revived. It was again removed in 1987 by virtue of
Executive Order 93, which again provided that upon FIRB recommendation, it can again
be restored. In the same year, FIRB resolved to restore the exemption. The same was
approved by President Corazon Aquino through Executive Secretary Catalino Macaraig,
Jr. acting as her alter ego.

Subsequently, Ernesto Maceda assailed the FIRB resolution averring that the power
granted to the FIRB is an undue delegation of legislative power. Maceda’s claim was
strengthened by Opinion 77 issued by then DOJ Secretary Sedfrey Ordoñez. Macaraig
however did not give credence to the opinion issued by the DOJ secretary.

Issue:

Was there an undue delegation of legislative power?

Held:

No.

Since the NAPOCOR is a GOCC and is non-profit, it can be exempt from taxation. Also,
Opinion 77 issued by DOJ Secretary Ordoñez was validly overruled by Macaraig. This
action by Macaraig is valid because the Executive Secretary, by authority of the
President, has the power to modify, alter or reverse the construction of a statute given by
a department secretary, pursuant to the president’s control power.
 COMMISSIONER OF INTERNAL REVENUE v.
JOHN GOTAMCO & SONS, INC. and THE COURT OF TAX APPEALS
G.R. No. L-31092 | February 27, 1987

Facts:

The World Health Organization (WHO) is an international organization that has a

regional office in Manila. It enjoys privileges and immunities defined in the Host
Agreement. Section 11 of that Agreement provides that "the Organization, its assets,
income and other properties shall be: (a) exempt from all direct and indirect taxes. It is
understood, however, that the Organization will not claim exemption from taxes which
are, in fact, no more than charges for public utility services; . . .

WHO decided to construct a building to house its own offices and invited bids. WHO
informed the bidders that the building to be constructed belonged to an international
organization with diplomatic status and thus exempt from the payment of all fees,
licenses, and taxes, and that therefore their bids "must take this into account and should
not include items for such taxes, licenses and other payments to Government agencies."

The construction contract was awarded to John Gotamco & Sons, Inc. for the stipulated
price of P370, 000.00, but when the building was completed the price reached a total of
P452, 544.00.

The Commissioner of Internal Revenue sent a letter of demand to Gotamco demanding

payment of P 16, 970.40, representing the 3% contractor's tax plus surcharges on the
gross receipts it received from the WHO in the construction of its building.
Gotamco appealed the Commissioner's decision to the Court of Tax Appeals, which
rendered a decision in favor of Gotamco.

Issue:

Should Gotamco pay the 3% contractor’s tax?

Held:

No.

The contractor's tax is of course payable by the contractor but in the last analysis it is the
owner of the building that shoulders the burden of the tax because the same is shifted by
the contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax.
And it is an indirect tax on the WHO because, although it is payable by the petitioner, the
latter can shift its burden on the WHO. In the last analysis it is the WHO that will pay the
tax indirectly through the contractor and it certainly cannot be said that 'this tax has no
bearing upon the World Health Organization.

The Host Agreement, in specifically exempting the WHO from "indirect taxes,"
contemplates taxes which, although not imposed upon or paid by the Organization
directly, form part of the price paid or to be paid by it. There is clear intention in the
Agreement to exempt the WHO from "indirect" taxation. The 3% contractor's tax would
be within this category and should be viewed as a form of an "indirect tax" on the
Organization, as the payment thereof or its inclusion in the bid price would have meant
an increase in the construction cost of the building.

SILKAIR (SINGAPORE) PTE, LTD. v.

COMMISSIONER OF INTERNAL REVENUE
G.R. No. 173594 | February 6, 2008

Facts:
Silkair (Singapore) Pte. Ltd. (Silkair) is a corporation organized under the laws of
Singapore that has a Philippine representative office. It is an online international air
carrier operating the Singapore-Cebu-Davao-Singapore, Singapore-Davao-Cebu-
Singapore, and Singapore-Cebu-Singapore routes. Silkair filed with the Bureau of
Internal Revenue (BIR) a written application for the refund of P4, 567,450.79 excise
taxes it claimed to have paid on its purchases of jet fuel from Petron Corporation from
January to June 2000, but it was not acted upon. As such, Silkair filed a Petition for
Review before the CTA.

Opposing the petition, the Commissioner on Internal Revenue (CIR) alleged that, “the
excise tax on petroleum products is the direct liability of the manufacturer/producer, and
when added to the cost of the goods sold to the buyer, it is no longer a tax but part of the
price which the buyer has to pay to obtain the article.”

The CTA denied Silkair’s petition on the ground that as the excise tax was imposed on
Petron Corporation as the manufacturer of petroleum products, any claim for refund
should be filed by the latter; and where the burden of tax is shifted to the purchaser, the
amount passed on to it is no longer a tax but becomes an added cost of the goods
purchased. Silkair filed a Motion for Reconsideration but was denied. CTA Associate
Justice Juanito C. Castañeda, Jr. posited that Silkair is not the proper party to claim the
tax refund. Silkair then filed a Motion for Reconsideration, which the CTA En Banc also
denied. Hence, the present Petition for Review.

Issue:

Is Silkair the proper party to file the claim for tax refund?

Held:

No.

The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if
he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides that
"[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid
by the manufacturer or producer before removal of domestic products from place of
production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is
entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of
the Air Transport Agreement between RP and Singapore.

Even if Petron Corporation passed on to Silkair the burden of the tax, the
additional amount billed to Silkair for jet fuel is not a tax but part of the price, which
Silkair had to pay as a purchaser.

COMMISSIONER OF INTERNAL REVENUE v.

COURT OF APPEALS, ATLAS CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION and COURT OF TAX APPEALS
G.R. No. 104151 | March 10, 1995

Facts:

On April 9, 1980, the Commissioner of Internal Revenue caused the service of an

assessment notice and demand for payment of the amount P12, 391.070.51,
representing deficiency and ad valorem percentage and fixed taxes, including
increments, for the taxable year 1975 against Atlas Consolidated Mining and
Development Corporation (ACMDC). Likewise, on the basis of the BIR examiner’s report
in another investigation separately conducted, the Commissioner had another
assessment notice, with a demand for payment of the amount of P13, 531, 466.80
representing the 1976 deficiency ad valorem and business taxes with P5, 000.00
compromise penalty, served on ACMDC on September 23, 1980.
ACMDC protested both assessments but the same were denied. Assailing the tax
liability imposed by BIR, ACMDC elevated the matter to the Supreme Court, where one
of the issues raised was the assessed contractor’s tax. ACMDC claimed that the leasing
out of its personal properties was a mere isolated transaction, hence should not be
subjected to contractor’s tax.

Issue:

Should the leasing out of ACMDC’s personal properties be subject to contractor’s tax?

Held:

Yes.

ACMDC cannot validly claim that the leasing out of its personal properties was merely an
isolated transaction. Its book of accounts shows that several distinct payments were
made for the use of its personal properties such as its plane, motorboat, and dump truck.
The series of transactions engaged in by ACMDC for the lease of its aforesaid properties
could also be deduced from the fact that for the tax years 1975 and 1976, there were
profits earned and reported therefor. It received rental income of P630, 171.56 for the
year 1975 and P2, 450, 218.62 for tax year 1976.

The allegation of ACMDC that it did not realize and profit from the leasing out of its
personal properties, since its income therefrom covered only the costs of operation such
as salaries and fuel, is not supported by any documentary or substantial evidence.
Assessments are prima facie presumed correct and made in good faith. Contrary to the
theory of ACMDC, it is the taxpayer not the BIR who has the duty of proving otherwise.

EUSEBIO VILLANUEVA, ET AL. v. CITY OF ILOILO

G.R. No. L-26521 | December 28, 1968

Facts:

The Municipal Board of Iloilo City enacted Ordinance 86, imposing license tax fees as
follows: (1) tenement house (casa de vecindad), P25.00 annually; (2) tenement house,
partly or wholly engaged in or dedicated to business in the streets of J.M. Basa, Iznart
and Aldeguer, P24.00 per apartment; and (3) tenement house, partly or wholly engaged
in business in any other streets, P12.00 per apartment. The validity and constitutionality
of this ordinance were challenged by the spouses Eusebio Villanueva and Remedies
Sian Villanueva, owners of four tenement houses containing 34 apartments. The court
declared the ordinance ultra vires, "it not appearing that the power to tax owners of
tenement houses is one among those clearly and expressly granted to the City of Iloilo
by its Charter."

On January 15, 1960 the municipal board of Iloilo City, believing that with the passage of
Republic Act 2264 (Local Autonomy Act), it had acquired the authority or power to enact
an ordinance similar to that previously declared by this Court as ultra vires, enacted
Ordinance 11, series of 1960, an ordinance imposing municipal license tax on persons
engaged in the business of operating tenements houses. Eusebio Villanueva and
Remedios S. Villanueva filed a complaint to declare the ordinance invalid for being
beyond the powers of the Municipal Council of the City of Iloilo to enact, and
unconstitutional for being violative of the rule as to uniformity of taxation and for
depriving said plaintiffs of the equal protection clause of the Constitution.

Issue:

Is the City of Iloilo empowered to impose tenement taxes?

Held:

Yes.
Republic Act 2264 confer on local governments broad taxing authority which extends to
almost "everything, excepting those which are mentioned therein," provided that the tax
so levied is "for public purposes, just and uniform," and does not transgress any
constitutional provision or is not repugnant to a controlling statute.

ALLIED BANKING v. THE QUEZON CITY GOVERNMENT, ET AL.

G.R. No. 154126 | October 11, 2005

Facts:

The Quezon City government enacted City Ordinance No. 357. The proviso on Section 3
of the ordinance provides that the City Assessor should undertake a general revision of
real property assessment. It also stated that parcels of land conveyed for remuneratory
consideration shall be subject to real estate tax based on the actual amount reflected in
the deed of conveyance or the current approved zonal valuation of the Bureau of Internal
Revenue prevailing at the time of the conveyance, whichever is higher.

On July 1, 1998, Allied Banking Corporation (ABC) purchased from Liwanag Natividad et
al. a 1,000 sqm parcel of land located along Aurora Boulevard, Quezon City in the
amount of P 38 000 000. In accordance with the ordinance, ABC was required to pay P
102, 600 as quarterly real estate tax. ABC never failed to quarterly real estate tax
despite its submission of a written protest with the City Treasurer. The protest assails the
constitutionality of Section 3 of the ordinance for being violative of the equal protection
and uniformity of taxation clauses of the Constitution. Moreover, ABC also contended
that the proviso is oppressive and is contrary to Section 130 of the Local Government
Code. As such, ABC demanded for a refund of the real estate taxes which the
government erroneously collected from it.

The City Assessor denied the refund so ABC filed a petition for prohibition and
declaratory relief before the RTC of Quezon City for declaration of nullity of the assailed
proviso of the ordinance. Before the government could file any response, an ordinance
repealing the assailed proviso was enacted. After this, the respondents filed a motion to
dismiss on the ground that the issue in the case already became moot and academic.
The court granted the motion to dismiss. A motion for reconsideration was latter filed by
ABC but was denied. Hence, this appeal by certiorari under Rule 45.

Issue:

May Section 3 of Quezon City Ordinance No. 357 be the basis of collecting real estate
taxes prior to its repeal?

Held:

No.

The court holds that the proviso in question is invalid as it adopts a method of
assessment or appraisal of property contrary to the Local Government Code. Under this
code, real properties shall be appraised at the current and fair market value prevailing in
the locality where the property is situated and classified for assessment purposes on the
basis of its actual use. Moreover, the proviso also departs from established procedures
in Local Assessment Regulations No. 1-92 and unduly interferes with the duties
statutorily placed upon local assessors. An ordinance contravening a statute is ultravires
and void.

CHEVRON PHILIPPINES, INC. ET AL v.

BASES CONVERSION DEVELOPMENT AUTHORITY, ET AL.
G.R. No. 173863 | September 15, 2010
Facts:

Chevron Philippines, Inc. (Chevron) filed a case against Bases Conversion Development
Authority to question its imposition of fees and charges on the petroleum fuel it supplies
to Nanox Philippines. Nanox Philippines is a locator within the Clark Special Economic
Zone (CSEZ).

Chevron was assessed to pay P115,000 based on a royalty fee of P0.50 per liter on its
deliveries to Nanox Philippines effective August 1, 2002. Chevron paid under protest. In
its protest, Chevron claimed that CDC does not have any power to impose royalty fees
on sale of fuel inside the CSEZ on the basis of purely income generating functions and
its exclusive right to market and distribute goods inside the CSEZ. Such imposition of
royalty fees for revenue generating purposes would amount to a tax, which the
respondents have no power to impose. Petitioner stresses that the royalty fee imposed
by CDC is not regulatory in nature but a revenue generating measure to increase its
profits and to further enhance its exclusive right to market and distribute fuel in CSEZ.
And even assuming that the fees imposed where regulatory on nature, the same were
unreasonable and are grossly in excess of regulation costs.

Chevron asked for the revocation of the fees imposed. CDC denied the request of
Chevron. Chevron appealed the matter to Bases Conversion Development Authority but
the protest was again denied. The protest was appealed in the Office of the President
and subsequently to the Court of Appeals, where it was successively denied.

CDC contends that the purpose of the royalty fees is to regulate the flow of fuel to and
from the CSEZ. Such being its main purpose, and revenue (if any) just an incidental
product, the imposition cannot be considered a tax. The regulation is a valid exercise of
police power since it is aimed at promoting the general welfare of the public. They claim
that being the administrator of the CSEZ, CDC is responsible for the safe distribution of
fuel products inside the CSEZ.

Issue:

Are the royalty fees considered taxes?

Held:

No.

As articulated by the Supreme Court through Justice Villarama, the subject royalty fee
was imposed primarily for regulatory purposes, and not for the generation of income or
profits. Distinguishing tax and regulation as a form of police power, the determining
factor is the purpose of the implemented measure. If the purpose is primarily to raise
revenue, then it will be deemed a tax even though the measure results in some form of
regulation. On the other hand, if the purpose is primarily to regulate, then it is deemed a
regulation and an exercise of the police power of the state, even though incidentally,
revenue is generated.

In relation to the regulatory purpose of the imposed fees, the imposition questioned must
relate to an occupation or activity that so engages the public interest in health, morals,
safety and development as to require regulation for the protection and promotion of such
public interest; the imposition must also bear a reasonable relation to the probable
expenses of regulation, taking into account not only the costs of direct regulation but also
its incidental consequences as well. There can be no doubt that the oil industry is greatly
imbued with public interest as it vitally affects the general welfare. In addition, fuel is a
highly combustible product which, if left unchecked, poses a serious threat to life and
property. Also, the reasonable relation between the royalty fees imposed on a per liter
basis and the regulation sought to be attained is that the higher the volume of fuel
entering CSEZ, the greater the extent and frequency of supervision and inspection
required to ensure safety, security, and order within the Zone.
 COMMISSIONER OF INTERNAL REVENUE v.
KUDOS METAL CORPORATION
G.R. No. 178087 | May 5, 2010

Facts:

Kudos Metal filed its Annual ITR for the taxable year 1998 in 1999. The BIR served upon
Kudos three Notices of Presentation of Records which the latter all failed to comply with.
As a result of such failure, the BIR issued a subpoena duces tecum and a review and
audit of Kudos’ records ensued. In 2001 and 2003, Kudos’ accountant executed Waivers
of the Defense of Prescription, which were both received by the BIR. In 2003, the BIR
issued a PAN for the taxable year 1998 followed by a Formal Letter of Demand with
Assessment Notices. The BIR assessed Kudos a total tax liability of P25,624,048.76.
Kudos filed a Petition for Review with the CTA on the ground that the BIR’s right to
assess said taxes had already prescribed.

Issue:

Has the government’s right to assess the unpaid taxes of Kudos already prescribed?

Held:

Yes.

The NIRC mandates the government to assess internal revenue taxes within three years
from the last day prescribed by law for the filing of the tax return of the actual date of
filing such return, whichever comes later. Hence, an assessment notice issued after the
three-year prescriptive period is no longer valid and effective except upon a written
agreement between the BIR and the taxpayer executed before the expiration of the
three-year period.

A perusal of the waivers executed by Kudos’ accountant, however, reveal several

infirmities which resulted in their failure to extend the period to assess or collect taxes.
The assessments issued by the BIR beyond the three-year period are therefore void.

BAYAN v. EXECUTIVE SECRETARY RONALDO ZAMORA

G.R. Nos. 138570, 138572, 138587, 138680, & 138698 | October 10, 2000

Facts:

On March 14, 1947, the Philippines and the USA entered into an agreement called
Military Bases Agreement (MBA). This formalized the use of installations in the
Philippine territory by the US military personnel. On August 30, 1951, both countries
again entered into a Mutual Defense Treaty (MDT) strengthening their defense and
security relationships.

In 1991, in view of the impending expiration of the MBA, both countries negotiated again
to extend the agreement in the form of a treaty (RP-US Treaty of Friendship,
Cooperation, and Security). However, the Philippine Senate rejected the proposed treaty
and so the agreement was not extended.

Upon expiration of the MBA, the military relationship between the two countries were
terminated. Yet, their defense and security relationship continued pursuant to the MDT,
and a new agreement, which is the VFA, was entered into by the two states. It was
approved by former President Ramos, ratified by former President Estrada, and entered
into force on June 1, 1999.

The VFA defines the treatment of US military troops and personnel visiting the
Philippines. It lays down all the guidelines that would govern such visits, and further
defines all the rights of both countries in the matter of criminal jurisdiction, aircraft and
vessel movement, and the importation and exportation of equipment, materials, and
supplies.

The petitioners are now assailing the constitutionality of the VFA. They claim that as
citizens and taxpayers of the Philippines, they have the right to question the validity of
the ratification.

The respondents, on the other hand, are questioning the locus standi of the petitioners
on the ground that they do not have any interest in the case, and that they failed to
substantiate that they have sustained, or will sustain direct injury as a result of the
operation of the VFA.

Issue:

Do the petitioners have locus standi in the case, considering they are citizens and
taxpayers of the Philippines?

Held:

No.

The Supreme Court held that the petitioners failed to show that they have sustained or
are in danger of sustaining any direct injury as a result of the enforcement of the VFA.
According to the Court, petitioners were not able to justify that the VFA involves the
exercise by Congress of its taxing or spending powers. They also emphasized that a
“taxpayer’s suit” refers to a case where the act complained of directly involves the illegal
disbursement of public funds derived in taxation.

Since there are no public funds raised by taxation involved in this case (VFA), and in the
absence of any allegation by the petitioners that public funds are being misspent or
illegally expended, petitioners, as taxpayers, have no legal standing to assail the legality
of the VFA.

RAOUL B. DEL MAR v. PHILIPPINE AMUSEMENT AND GAMING CORPORATION

G.R. Nos. 138298 & 138982, | June 19, 2001

Facts:

The Philippine Amusement and Gaming Corporation (PAGCOR) sought the legal opinion
of the Secretary of Justice on whether it can push through with jai-alai operations. The
Secretary of Justice opined that PAGCOR’s authority to operate and maintain games of
chance and gambling extends to Jai-alai. Guided by the said advice, PAGCOR started
its jai-alai operations. Subsequently, it would enter into a contract with Belle Jai-alai to
further this cause.

Petitioners Raoul B. Del Mar, Congressman Federico S. Sandoval, Congressman

Michael T. Defensor, and Congressman Juan Miguel Zubiri, filed a petition for
prohibition, and subsequently, a petition for certiorari to challenge the Jai Alai operations
validity. Del Mar, in particular, filed an action as a taxpayer of the Philippines.

PAGCOR and Belle assail Del Mar’s legal standing, theorizing that he is not a real party-
in-interest. The same argument was pushed by the respondents pertaining to the other
petitioners who were legislators.

Issue:

Does Del Mar have legal standing to sue in the present case?

Held:

No.
In essence, taxpayers are allowed to sue where there is a claim of illegal disbursement
of public funds, or that public money is being deflected to any improper purpose, or
where petitioners seek to restrain respondent from wasting public funds through the
enforcement of an invalid or unconstitutional law. But, before this may happen, a party
suing as a taxpayer must specifically prove that he has sufficient interest in preventing
the illegal expenditure of money raised by taxation, and that there is an illegal
expenditure of public money to begin with, in order for the taxpayer suit to be validly
filed.

In the petitions at bar, the Agreement entered into between PAGCOR and private
respondents BELLE and FILGAME will show that all financial outlay or capital
expenditure for the operation of jai-alai games shall be provided for by the latter. Thus,
the Agreement provides, among others, that: PAGCOR shall manage, operate and
control the jai-alai operation at no cost or financial risk to it. The record is barren of
evidence that the operation and management of jai-alai by the PAGCOR involves
expenditure of public money. Thus, the taxpayer suit cannot be maintained.

JOEL G. MIRANDA v. ANTONIO C. CARREON

G.R. No. 143540 | April 11, 2003

Facts:

Vice Mayor Amelita Navarro, while serving as Acting Mayor of the City of
Santiago because of the suspension of Mayor Jose Miranda, appointed the
respondents to various positions in the city government. Their appointments were
with permanent status and based on the evaluation made by the City Personnel
Selection and Promotion Board (PSPB).

When Mayor Jose Miranda reassumed his post after his suspension, he formed a
three-man special performance audit team to conduct a personnel evaluation
audit of those who were previously screened by the PSPB and those on
probation. After conducting the evaluation, the audit team submitted to him a
report stating that the respondents were found wanting in their performance.

As such, Mayor Miranda issued an order terminating respondents’ services.

Respondents appealed to the CSC, contending that they can be dismissed from
the service on the ground of poor performance only after their probationary
period of six months, not after three months.

Meanwhile, COMELEC disqualified Mayor Jose Miranda as a mayoralty

candidate in the 1998 May elections. His son, Joel G. Miranda, herein petitioner,
substituted for him and was proclaimed Mayor of Santiago City. He then filed a
motion for reconsideration of the CSC Resolution, but it was denied.

The proclamation of petitioner as Mayor of Santiago City was set aside for lack of
a certificate of candidacy and declared Vice Mayor Amelita Navarro as City
Mayor by operation of law.

In this petition, petitioner Joel G. Miranda contends that the Court of Appeals
erred in affirming the CSC Resolution declaring that the termination of
respondents services is illegal and ordering their reinstatement to their former
positions with payment of backwages.

Respondents claim that since petitioner ceased to be Mayor of Santiago City, he

has no legal personality to file the instant petition and, therefore, the same should
be dismissed. In his reply, petitioner contends that as a taxpayer, he has a legal
interest in the case at bar, hence, can lawfully file this petition.
Issue:

Does Miranda have locus standi to file the case?

Held:

No.

Section 2, Rule 3 of the same Rules provides: Parties in interest. – A real party in
interest is the party who stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit. Unless otherwise authorized by law or these
Rules, every action must be prosecuted or defended in the name of the real party in
interest.

Even as a taxpayer, petitioner does not stand to be benefited or injured by the judgment
of the suit. Not every action filed by a taxpayer can qualify to challenge the legality of
official acts done by the government. It bears stressing that a taxpayer’s suit refers to a
case where the act complained of directly involves the illegal disbursement of public
funds from taxation. The issue in this case is whether respondents’ services were
illegally terminated. Clearly, it does not involve the illegal disbursement of public funds,
hence, petitioner’s action cannot be considered a taxpayer’s suit.

RUFINO R. TAN v. RAMON R. DEL ROSARIO, JR.

G.R. No. 109289 | October 3, 1994

Facts:

Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income
Taxation Scheme, which amended certain provisions of the NIRC, as well as the Rules
and Regulations promulgated by public respondents pursuant to said law.

Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the following

provisions of the Constitution:

Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof.
Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
Article III, Section 1 — No person shall be deprived of…property without due process
of law, nor shall any person be denied the equal protection of the laws.

Petitioners contended that public respondents exceeded their rule-making authority in

applying SNIT to general professional partnerships. Petitioner contends that the title of
HB 34314, progenitor of RA 7496, is deficient for being merely entitled, "Simplified Net
Income Taxation Scheme for the Self-Employed and Professionals Engaged in the
Practice of their Profession" (Petition in G.R. No. 109289) when the full text of the title
actually reads, 'An Act Adopting the Simplified Net Income Taxation Scheme For The
Self-Employed and Professionals Engaged In The Practice of Their Profession,
Amending Sections 21 and 29 of the National Internal Revenue Code,' as amended.
Petitioners also contend it violated due process.

The Solicitor General espouses the position taken by public respondents. The Court has
given due course to both petitions.

Issue:

Does the tax law violate due process?

Held:

No.
The due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of the tax power. No
such transgression is so evident in herein case.

Uniformity of taxation, like the concept of equal protection, merely requires that all
subjects or objects of taxation, similarly situated, are to be treated alike both in privileges
and liabilities. Uniformity does not violate classification as long as: (1) the standards that
are used therefor are substantial and not arbitrary, (2) the categorization is germane to
achieve the legislative purpose, (3) the law applies, all things being equal, to both
present and future conditions, and (4) the classification applies equally well to all those
belonging to the same class.

What is apparent from the amendatory law is the legislative intent to increasingly shift
the income tax system towards the schedular approach in the income taxation of
individual taxpayers and to maintain, by and large, the present global treatment on
taxable corporations. The Court does not view this classification to be arbitrary and
inappropriate.

COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS v.

HON. APOLINARIO B. SANTOS
G.R. No. 119252 | August 18, 1997

Facts:

The Guild of Philippines Jewelers, Inc. questions the constitutionality of certain

provisions of the NIRC and Tariff and Customs Code of the Philippines. It is their
contention that the present Tariff and tax structure increases manufacturing costs
and render local jewelry manufacturers uncompetitive against other countries, in
support of their position, they submitted what they purported to be an exhaustive
study of the tax rates on jewelry prevailing in other Asian countries, in
comparison to tax rates levied in the country.

Judge Santos of RTC Pasig, ruled that the laws in question are confiscatory and
oppressive and declared them INOPERATIVE and WITHOUT FORCE AND
EFFECT insofar as petitioners are concerned.

Petitioner CIR assailed decision rendered by respondent judge contending that

the latter has no authority to pass judgment upon the taxation policy of the
Government. Petitioners also impugn the decision by asserting that there was no
showing that the tax laws on jewelry are confiscatory.

Issue:

Does the State have the power to select the subjects of taxation?

Held:

Yes.

The respondents presented an exhaustive study on the tax rates on jewelry levied by
different Asian countries. This is meant to convince us that compared to other countries;
the tax rates imposed on said industry in the Philippines is oppressive and confiscatory.
This Court, however, cannot subscribe to the theory that the tax rates of other countries
should be used as a yardstick in determining what may be the proper subjects of
taxation in our own country. It should be pointed out that in imposing the aforementioned
taxes and duties, the State, acting through the legislative and executive branches, is
exercising its sovereign prerogative. It is inherent in the power to tax that the State be
free to select the subjects of taxation, and it has been repeatedly held that "inequalities
which result from a singling out or one particular class for taxation, or exemption, infringe
no constitutional limitation.
 FRANCISCO I. CHAVEZ v. JAIME B. ONGPIN
G.R. 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 the law in question unconstitutional?

Held:

No.

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.

TAGANITO MINING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

CTA Case 4702 | April 28, 1995

Facts:

Taganito Mining Corporation (TMC) is a domestic corporation expressly granted a permit

by the government to explore, develop and utilize mineral deposits found in a specified
portion of a mineral reservation area located in Surigao del Norte and owned by the
government. In exchange, TMC is obliged to pay royalty to the government over and
above other taxes. The 5% excise tax was based on the amount and weight shown in
the provisional invoice issued by TMC. TMC claims that there has been overpayment of
excise taxes already paid to the government declaring that the 5% excise tax were
based on the amount indicated in the provisional invoice, and if the excise tax would be
based on the final invoice, they would be paying less, in addition to the royalties paid to
the government.

TMC’s contends that: (a) TMC is entitled to a refund because the actual market value
that should be made the basis of the taxes is the amount specified in the independent
surveyor abroad; and (b) the government in receiving the royalties due it from amount
indicated in the final invoice

The Commissioner, on the other hand, asserts that: (a) the claim for refund is subject
pending administrative investigation; (b) the tax was collected in accordance with law; (c)
the burden of proof is upon the taxpayer to establish the right to refund; (d) mere
allegations of refundability do not ipso facto merit refund claimed; (e) claims for refund of
taxes are construed strictly against claimant, it being in the nature of an exemption; and
(f) TMC’s right to claim for refund is already barred after failing to file it within the 2 year
prescriptive period, which should be counted from the time specified by law for payment
and not on the date of actual payment.
Issue:

Is TMC entitled to refund?

Held:

No.

There cannot be a tax refund because excise tax is different from royalties. Excise tax is
a tax on the privilege of extracting minerals from the earth, while royalty as the term is
used and understood in mining and oil operations means a share in the product or profit
paid to the owner of the property. Royalty paid to the government is rightfully based on
the amount indicated in the final invoice because it is the amount which will be received
by the seller from the buyer as consideration for the sale of mineral products

JOSE MARI EULALIO C. LOZADA and ROMEO B. IGOT

v. THE COMMISSION ON ELECTIONS
G.R. No. L-59068 | January 27, 1983

Facts:

Jose Mari Eulalio C. Lozada and Romeo B. Igot, by reason of the vacancy in the interim
Batasan Pambansa during the Marcos regime, filed a petition to compel the Commission
on Elections to hold a special election for the said vacancies. They argue that Sec.5,
Par.2 of Art. VIII of the 1973 Constitution mandates the COMELEC to call a special
election in case a vacancy arises in the Batasang Pambansa eighteen months or more
before a regular election. They filed the suit as taxpayers of the Philippines in Cebu City.

COMELEC filed its opposition arguing that the petitioners do not have standing to
maintain the current suit.

Issue:

Do Lozada and Igot have legal standing to file the case?

Held:

No.

As taxpayers, petitioners may not file the instant petition, for none of the allegations
mention that tax money is being illegally spent. The act complained of is the inaction of
the COMELEC to call a special election, as is allegedly its ministerial duty under the
constitutional provision abovecited. So, it involves no expenditure of public funds. It is
only when an act complained of, which may include a legislative enactment or statute,
involves the illegal expenditure of public money that the so-called taxpayer suit may be
allowed. What the case at bar seeks is one that entails expenditure of public funds
which may be illegal because it would be spent for a purpose — that of calling a special
election — which, as will be shown, has no authority either in the Constitution or a
statute.

FRANCISCO I. CHAVEZ v. PRESIDENTIAL COMMISSION ON GOOD GOVERNANCE

G.R. No. 130716 | December 9, 1998

Facts:

Petitioner Francisco I. Chavez, as taxpayer, citizen and former government official who
initiated the prosecution of the Marcoses and their cronies who committed unmitigated
plunder of the public treasury and the systematic subjugation of the country’s economy,
alleges that what impelled him to bring this action were several news reports bannered in
a number of broadsheets sometime in September 1997. These news items referred to
(a) the alleged discovery of billions of dollars of Marcos assets deposited in various
coded accounts in Swiss banks; and (b) the reported execution of a compromise,
between the government (through PCGG) and the Marcos heirs, on how to split or share
these assets.

A provision in the compromise agreement provides:

“The FIRST PARTY shall determine which shall be ceded to the FIRST PARTY,
and which shall be assigned to/retained by the PRIVATE PARTY. The assets of
the PRIVATE PARTY shall be net of, and exempt from, any form of taxes due the
Republic of the Philippines.”

Issue:

Is the provision in the compromise agreement exempting the Marcoses from the taxes
due to the government valid?

Held:

No.

The PCGG has a limited life in carrying out its tasks and time is running short. It is thus
imperative that the Court must hold even now, and remind PCGG, that it has indeed
exceeded its bounds in entering into the General and Supplemental Agreements. The
agreements clearly suffer from Constitutional and statutory infirmities, to wit: (a) The
agreements contravene the statute in granting criminal immunity to the Marcos heirs; (b)
PCGG’s commitment to exempt from all forms of taxes the property to be retained the
Marcos’ heirs controverts the Constitution; and (c) the government’s undertaking to
cause the dismissal of all cases filed against the Marcoses pending before the
Sandiganbayan and other courts encroaches upon judicial powers.

RAMON A. GONZALES v. HON. ANDRES R. NARVASA

G.R. No. 140835 | August 14, 2000

Facts:

Petitioner Ramon A. Gonzales, in his capacity as a citizen and taxpayer, assails the
constitutionality of the creation of the Preparatory Commission on Constitutional Reform
(PCCR) and of the positions of presidential consultants, advisers and assistants.

The Preparatory Commission on Constitutional Reform (PCCR) was created by

President Estrada on November 26, 1998 by virtue of Executive Order No. 43 (E.O. No.
43) in order to study and recommend proposed amendments and/or revisions to the
1987 Constitution, and the manner of implementing the same. Petitioner disputes the
constitutionality of the PCCR on two grounds. First, he contends that it is a public office,
which only the legislature can create by way of a law. Secondly, petitioner asserts that
by creating such a body the President is intervening in a process from which he is totally
excluded by the Constitution the amendment of the fundamental charter. It is alleged by
respondents that, with respect to the PCCR, this case has become moot and academic.
In addition to the mootness of the issue, petitioner’s lack of standing constitutes another
obstacle to the successful invocation of judicial power insofar as the PCCR is concerned.

Issue:

Does the petitioner have locus standi to file the case?

Held:

No.
Petitioner has not shown that he has sustained or is in danger of sustaining any personal
injury attributable to the creation of the PCCR. If at all, it is only Congress, not petitioner,
which can claim any injury in this case since, according to petitioner, the President has
encroached upon the legislature powers to create a public office and to propose
amendments to the Charter by forming the PCCR. Petitioner has sustained no direct, or
even any indirect, injury. Neither does he claim that his rights or privileges have been or
are in danger of being violated, nor that he shall be subjected to any penalties or
burdens as a result of the PCCRs activities. Clearly, petitioner has failed to establish his
locus standi so as to enable him to seek judicial redress as a citizen.

A taxpayer is deemed to have the standing to raise a constitutional issue when it is

established that public funds have been disbursed in alleged contravention of the law or
the Constitution, Thus payers action is properly brought only when there is an exercise
by Congress of its taxing or spending power. This was our ruling in a recent case
wherein petitioners Telecommunications and Broadcast Attorneys of the Philippines
(TELEBAP) and GMA Network, Inc. questioned the validity of section 92 of B.P. No. 881
(otherwise knows as the Omnibus Election Code) requiring radio and television stations
to give free air time to the Commission on Elections during the campaign period. The
Court held that petitioner TELEBAP did not have any interest as a taxpayer since the
assailed law did not involve the taxing or spending power of Congress.

SENATOR ERNESTO MACEDA v. ENERGY REGULATORY BOARD

G.R. Nos. 95203-05 | December 18, 1990

Facts:

Upon the outbreak of the Persian Gulf conflict on August 2, 1990, private respondents oil
companies filed with the ERB their respective applications on oil price increases
(docketed as ERB Case Nos. 90-106, 90-382 and 90-384, respectively).

Petitioner Maceda filed a petition for Prohibition seeking to nullify this provisional
increase he claims that the increase in prices has to undergo the requirements of notice
and hearing, however in this case the requirements were not complied with, and
therefore Maceda claims he was deprived of due process.

In reaffirming the increase, the lower court ruled that Executive Order 172 does not
preclude the board from ordering ex-parte, a provisional increase. These provisional
increases, however, will be subject to final disposition of whether or not it should be
made permanent, to reduce or increase it, or to deny the application. In fact, in the same
order which authorized the provision increase, the ERB set the applications for hearing
with due notice to all interested parties. Petitioners Maceda failed to appear at said
hearing and at the second hearing.

The notice of hearing was also published in newspapers of general circulation. Hearing
for presentation of the evidence commences and the ERB outlined the procedure to be
observed in the reception of evidence; that the oppositors and the board must have all
the evidence-in-chief to be placed on record first, then the examination and the cross-
examination will come later. Maceda claims that this order of relaxed procedure for
presentation of proof resulted in a denial of due process because it deprived him of
finishing his cross-examination of the witnesses.

Issue:

Are the decisions of the ERB subject to presidential review?

Held:

No.

Pursuant to Section 8 of E.O. No. 172, while hearing is indispensable, it does not
preclude the Board from ordering a provisional increase subject to final disposition of
whether or not to make it permanent or to reduce or increase it further or to deny the
application. The provisional increase is akin to a temporary restraining order, which are
given ex-parte.

SC lamented helplessness over this second provisional increase in oil price. They have
stated that this "is a question best judged by the political leadership" (G.R. Nos. 95203-
05, G.R. Nos. 95119-21, supra). They wish to reiterate Our previous pronouncements
therein that while the government is able to justify a provisional increase, these findings
"are not final, and it is up to petitioners to demonstrate that the present economic picture
does not warrant a permanent increase.

The Court further noted the Solicitor General’s comments that “the ERB is not averse to
the idea of a presidential review of its decision,” except that there is no law at present
authorizing the same. The Court suggested that it will be under the scope of the
legislative to allow the presidential review of the decisions of the ERB since, despite its
being a quasi-judicial body, it is still “ an administrative body under the Office of the
President whose decisions should be appealed to the President under the established
principle of exhaustion of administrative remedies,” especially on a matter as
transcendental as oil price increases which affect the lives of almost all Filipinos.

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN

AND LORENZO SANCHEZ v. PHILIPPINE AMUSEMENTS AND GAMING
CORPORATION (PAGCOR)
G.R. No. 91649 May 14, 1991
Facts:

The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue
of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B
also dated January 1, 1977 "to establish, operate and maintain gambling casinos on land
or water within the territorial jurisdiction of the Philippines."

Its operation was originally conducted in the well-known floating casino "Philippine
Tourist." The operation was considered a success for it proved to be a potential source
of revenue to fund infrastructure and socio-economic projects, thus, P.D. 1399 was
passed on June 2, 1978 for PAGCOR to fully attain this objective.

Petitioners, in their capacity as tax payers, assailed the creation of PAGCOR. In their
petition, among others, they argued that the charter is contrary to morals, public policy
and order because it waived the Manila City government's right to impose taxes and
license fees, which is recognized by law. Section 13 par. (2) of P.D. 1869 exempts
PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or
otherwise, as well as fees, charges or levies of whatever nature, whether National or
Local." Thus, petitioners argued that law has intruded into the local government's right to
impose local taxes and license fees which is in contravention of the constitutionally
enshrined principle of local autonomy.

Issue:

Does PAGCOR’s exemption from violate the local government’s right to impose local
taxes and license fees?

Held:

No.

The City of Manila, being a mere Municipal corporation has no inherent right to impose
taxes. Thus, "the Charter or statute must plainly show an intent to confer that power or
the municipality cannot assume it”. Its "power to tax" therefore must always yield to a
legislative act which is superior having been passed upon by the state itself which has
the "inherent power to tax".
Furthermore, the Charter of the City of Manila is subject to control by Congress. It should
be stressed that "municipal corporations are mere creatures of Congress" which has the
power to "create and abolish municipal corporations" due to its "general legislative
powers". Congress, therefore, has the power of control over Local governments And if
Congress can grant the City of Manila the power to tax certain matters, it can also
provide for exemptions or even take back the power.

Moreover, local governments have no power to tax instrumentalities of the National

Government. PAGCOR is a government owned or controlled corporation with an original
charter, PD 1869. All of its shares of stocks are owned by the National Government.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is
governmental, which places it in the category of an agency or instrumentality of the
Government. Being an instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded
or subjected to control by a mere Local government.

Lastly, the power of local governments to "impose taxes and fees" is always subject to
"limitations" which Congress may provide by law. Since PD 1869 remains an "operative"
law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its
"exemption clause" remains as an exception to the exercise of the power of local
governments to impose taxes and fees. It cannot therefore be violative but rather is
consistent with the principle of local autonomy.

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA v.

COURT OF TAX APPEALS and COMMISSIONE ROF INTERNAL REVENUE
G.R. No. L-25043 | April 26, 1968

Facts:

Antonio, Eduardo, and Jose Roxas, brothers and at the same time partners of the Roxas
y Compania, inherited from their grandparents several properties which included
farmlands. The tenants expressed their desire to purchase the farmland. The tenants,
however, did not have enough funds, so the Roxas brothers agreed to allow the tenants
to purchase by installments. Subsequently, the CIR demanded from the brothers the
payment of deficiency income taxes resulting from the sale, 100% of the profits derived
therefrom was taxed. The brothers protested the assessment but the same was denied.
On appeal, the Court of Tax Appeals sustained the assessment. Hence, this petition.

Issue:

Are the Roxas brothers liable to pay taxes on the profits derived from the sale of the
land?

Held:

No.

The Roxas brothers cannot be considered a real estate dealer and is not liable for 100%
of the sale. Pursuant to Section 34 of the Tax Code, the lands 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%. It should be borne in mind that the sale of the 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.

In order to maintain the general public’s trust and confidence in the Government this
power must be used justly and not treacherously. It does not conform with the sense of
justice for the Government to persuade the taxpayer to lend it a helping hand and later
on penalize him for duly answering the urgent call.
 WIGBERTO E. TAÑADA and ANNA DOMINIQUE COSETENG v.
EDGARDO ANGARA
G.R. No. 118295 | May 2, 1997

Facts:

The Philippines joined the World Trade Organization (WTO) as a founding member with
the goal of improving Philippine access to foreign markets, especially its major trading
partners, through the reduction of tariffs on its exports. The President also saw in the
WTO the opening of new opportunities for the services sector, the reduction of costs and
uncertainty associated with exporting and the attraction of more investments into the
country. On April 15, 1994, respondent Navarro, then DTI Secretary, signed in
Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round of
Multilateral Negotiations. On December 14, 1994, the Senate concurred in the ratification
of the President of the Philippines of the Agreement Establishing the WTO which
includes various agreements and associated legal instruments. On December 16,
1994,the President signed the Instrument of Ratification.

Issue:

Do the provisions of the WTO Agreement restrict and impair Philippine sovereignty,
specifically the legislative power vested in the Congress?

Held:

No.

While sovereignty has traditionally been deemed absolute and all-encompassing on the
domestic level, it is however subject to restrictions and limitations voluntarily agreed to
by the Philippines, expressly or impliedly, as a member of the family of nations.
Unquestionably, the Constitution did not envision a hermit-type isolation of the country
from the rest of the world. By the doctrine of incorporation, the country is bound by
generally accepted principles of international law, which are considered to be
automatically part of our laws. A treaty engagement is not a mere moral obligation on the
parties. By their inherent nature, treaties really limit or restrict the absoluteness of
sovereignty. The Philippines has effectively agreed to limit the exercise of its sovereign
powers of taxation, eminent domain and police power.

The underlying consideration in this partial sovereignty is the reciprocal commitment of

the other contracting states in granting the same privilege and immunities to the
Philippines, its officials and its citizens. The same reciprocity characterizes the same
commitments under WTO-GATT. The point is that a portion of sovereignty may be
waived without violating the Constitution, based on the rationale that the Philippines
adopts the generally accepted principles of international law as part of the law of the land
and adheres to the policy of cooperation and amity with all nations.

LAND TRANSPORTATION OFFICE v. CITY OF BUTUAN

G.R. No. 131512 | January 20, 2000

Facts:

The 1987 Constitution enunciates the policy that the territorial and political subdivisions
shall enjoy local autonomy. In obedience to that, mandate of the fundamental law,
Republic Act ("R.A.") No.7160, otherwise known as the Local Government Code,
expresses that the territorial and political subdivisions of the State shall enjoy genuine
and meaningful local autonomy in order to enable them to attain their fullest
development as self-reliant communities and make them more effective partners in the
attainment of national goals, and that it is a basic aim of the State to provide for a more
responsive and accountable local government structure instituted through a system of
decentralization whereby local government units shall be given more powers, authority,
responsibilities and resources.
While the Constitution seeks to strengthen local units and ensure their viability, clearly,
however, it has never been the intention of that organic law to create an imperium in
imperio and install an intra sovereign political subdivision independent of a single
sovereign state.

The Regional Trial Court (Branch 2) of Butuan City held that the authority to register
tricycles, the grant of the corresponding franchise, the issuance of tricycle drivers’
license, and the collection of fees therefor had all been vested in the Local Government
Units ("LGUs"). Accordingly, it decreed the issuance of a permanent writ of injunction
against LTO, prohibiting and enjoining LTO, as well as its employees and other persons
acting in its behalf, from (a) registering tricycles and (b) issuing licenses to drivers of
tricycles. The Court of Appeals, on appeal to it, sustained the trial court.

Respondent City of Butuan asserts that one of the salient provisions introduced by the
Local Government Code is in the area of local taxation which allows LGUs to collect
registration fees or charges along with, in its view, the corresponding issuance of all
kinds of licenses or permits for the driving of tricycles.

As such, the Sangguniang Panlungsod ("SP") of Butuan, on 16 August 1992, passed SP

Ordinance No.916-92 entitled "An Ordinance Regulating the Operation of Tricycles-for-
Hire, providing mechanism for the issuance of Franchise, Registration and Permit, and
Imposing Penalties for Violations thereof and for other Purposes." The ordinance
provided for, among other things, the payment of franchise fees for the grant of the
franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees for the
issuance of a permit for the driving thereof.

Registration and licensing functions were vested in the LTO while franchising and
regulatory responsibilities had been vested in the LTFRB.

Issue:

Has the power of the LTO to register, tricycles in particular, as well as to issue
licenses for the driving thereof, devolve to the LGUs?

Held:

No.

The reliance made by respondents on the broad taxing power of local government units,
specifically under Section 133 of the Local Government Code, is tangential. Police power
and taxation, along with eminent domain, are inherent powers of sovereignty which the
State might share with local government units by delegation given under a constitutional
or a statutory fiat. All these inherent powers are for a public purpose and legislative in
nature but the similarities just about end there. The basic aim of police power is public
good and welfare. Taxation, in its case, focuses on the power of government to raise
revenue in order to support its existence and carry out its legitimate objectives. Although
correlative to each other in many respects, the grant of one does not necessarily carry
with it the grant of the other. The two powers are, by tradition and jurisprudence,
separate and distinct powers, varying in their respective concepts, character, scopes and
limitations. To construe the tax provisions of Section 133(1) indistinctively would result in
the repeal to that extent of LTO’s regulatory power which evidently has not been
intended. If it were otherwise, the law could have just said so in Section 447 and 458 of
Book III of the Local Government Code in the same manner that the specific devolution
of LTFRB’s power on franchising of tricycles has been provided. Repeal by implication is
not favored. 20 The power over tricycles granted under Section 458(a)(3)(VI) of the
Local Government Code to LGUs is the power to regulate their operation and to grant
franchises for the operation thereof. The exclusionary clause contained in the tax
provisions of Section 133(1) of the Local Government Code must not be held to have
had the effect of withdrawing the express power of LTO to cause the registration of all
motor vehicles and the issuance of licenses for the driving thereof.
 University of the Cordilleras
College of Law
Baguio City







TAXATION LAW CASE DIGESTS
(Part I)



In partial fulfillment of the requirements for
Taxation Law I






Submitted by:

Elisha Randee G. Vargas
3-JD



Submitted to:

Atty. Cleo D. Sabado-Andrada, CPA, MBA, LLM
Professor