Tax 1 Digest.pdf

7/27/2019 Tax 1 Digest.pdf

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COMMISSIONER OF INTERNAL REVENUE vs.CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS

G.R. No. L-29059 December 15, 1987

FACTS:By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as modified on appeal by the

Supreme Court on February 27, 1965, the Commissioner of Internal Revenue was ordered to refund to the Cebu PortlandCement Company the amount of P359,408.98, representing overpayments of ad valorem taxes on cement produced andsold by it after October 1957.

On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and the privaterespondent, the latter moved for a writ of execution to enforce the said judgment.

The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales taxliability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing onthe sales taxes in the amount of P 4,789,279.85 plus 28% surcharge.

On April 22, 1968, the Court of Tax Appeals granted the motion, holding that the alleged sales tax liability of theprivate respondent was still being questioned and therefore could not be set-off against the refund.

ISSUE:Whether or not the judgment debt can be enforced aga inst private respondents sales tax liability, the latter still

being questioned.

RULING:The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the

urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed bysimply questioning their validity, the machinery of the state would grind to a halt and all government functions would beparalyzed.

The Tax Code provides: Sec. 291. Injunction not available to restrain collection of tax. - No court shall haveauthority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by thisCode.

It goes without saying that this injunction is available not only when the assessment is already being questioned ina court of justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on theadministrative level. There is all the more reason to apply the rule here because it appears that even after crediting of therefund against the tax deficiency, a balance of more than P 4 million is still due from the private respondent.

COMMISSIONER OF INTERNAL REVENUE vs.ALGUE and THE COURT OF TAX APPEALS

G.R. No. L-28896 February 17, 1988

FACTS:The Philippine Sugar Estate Development Company had earlier appointed Algue 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 InvestmentCorporation, inducing other persons to invest in it. Ultimately, after its incorporation largely through the promotion of thesaid persons, this new corporation purchased the PSEDC properties. For this sale, Algue received as agent a commissionof P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamedindividuals.

The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not anordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. Thepayment was in the form of promotional fees.

ISSUE:Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by

private respondent Algue as legitimate business expenses in its income tax returns.

RULING:The Supreme Court agrees with the respondent court that the amount of the promotional fees was not excessive.

The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was


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of Manila and one registered in another place but occasionally comes to Manila and uses its streets and publichighways. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution.

ESSO STANDARD EASTERN, INC v. COMMISSIONER OF INTERNAL REVENUEG.R. Nos. L-28508-9, July 7, 1989

FACTS:In CTA Case No. 1251, Esso Standard Eastern Inc. (Esso) deducted from its gross income for 1959, as part of its

ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its petroleumconcessions. This claim was disallowed by the Commissioner of Internal Revenue (CIR) on the ground that the expensesshould be capitalized and might be written off as a loss only when a "dry hole" should result. Esso then filed an amendedreturn where it asked for the refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells.

Also claimed as ordinary and necessary expenses in the same return was the amount of P340,822.04, representingmargin fees it had paid to the Central Bank on its profit remittances to its New York head office.

On August 5, 1964, the CIR granted a tax credit of P221,033.00 only, disallowing the claimed deduction for themargin fees paid on the ground that the margin fees paid to the Central Bank could not be considered taxes or allowed asdeductible business expenses.

Esso appealed to the Court of Tax Appeals (CTA) for the refund of the margin fees it had earlier paid contendingthat the margin fees were deductible from gross income either as a tax or as an ordinary and necessary businessexpense. However, Essos appeal was denied.

ISSUE:(1) Whether or not the margin fees are taxes.(2) Whether or not the margin fees are necessary and ordinary business expenses.

RULING:(1) No. A tax is levied to provide revenue for government operations, while the proceeds of the margin fee are

applied to strengthen our country's international reserves. The margin fee was imposed by the State in the exercise of itspolice power and not the power of taxation.

(2) No. Ordinarily, an expense will be considered 'necessary' where the expenditure is appropriate and helpful inthe development of the taxpayer's business. It is 'ordinary' when it connotes a payment which is normal in relation to thebusiness of the taxpayer and the surrounding circumstances. Since the margin fees in question were incurred for theremittance of funds to Esso'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 helpfulin the development of Esso's business in the Philippines exclusively or were incurred for purposes proper to the conductof the affairs of Esso's branch in the Philippines exclusively or for the purpose of realizing a profit or of minimizing a loss inthe Philippines exclusively.

PROGRESSIVE DEVELOPMENT CORPORATION v. QUEZON CITYG.R. No. L-36081, April 24, 1989

FACTS:On December 24, 1969, the City Council of Quezon City adopted Ordinance No. 7997, otherwise known as the

Market Code of Quezon City. Section 3 of said ordinance provides that privately owned and operated public marketsshall submit monthly to the Treasurer's Office, a certified list of stallholders showing the amount of stall fees or rentals

paid daily by each stallholder, ... and shall pay 10% of the gross receipts from stall rentals to the City, ... , as supervisionfee.On July 15, 1972, Progressive Development Corporation (Progressive), owner and operator of a public market

known as the "Farmers Market & Shopping Center" filed a Petition for Prohibition with Preliminary Injunction againstQuezon City on the ground that the supervision fee or license tax imposed by the above-mentioned ordinance is in realitya tax on income which Quezon City may not impose, the same being expressly prohibited by Republic Act No. 2264, asamended, otherwise known as the Local Autonomy Act.

In its Answer, Quezon City, through the City Fiscal, contended that it had authority to enact the questionedordinances, maintaining that the tax on gross receipts imposed therein is not a tax on income.

The lower court ruled that the questioned imposition is not a tax on income, but rather a privilege tax or licensefee which local governments, like Quezon City, are empowered to impose and collect.

ISSUE:


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Whether the tax imposed by Quezon City on gross receipts of stall rentals is properly characterized as partakingof the nature of an income tax.

RULING:No. The tax imposed in the controverted ordinance constitutes, not a tax on income, not a city income tax (as

distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of the business in which Progressive isengaged. While it is true that the amount imposed by the questioned ordinances may be considered in determiningwhether the exaction is really one for revenue or prohibition, instead of one of regulation under the police power, itnevertheless will be presumed to be reasonable.

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 alltax 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 Eduand National Treasurer Ubaldo Carbonell (Carbonell).

The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which in turn certified the caseto 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 registrationfees are actually taxes intended for additional revenues of the government even if one fifth or less of the amount collectedis set aside for the operating expenses of the agency administering the program.

VILLEGAS v. HIU CHIONG TSAI PAO HOG.R. No. L-29646, November 10, 1978

FACTS:On February 22, 1968, the Municipal Board of Manila passed City Ordinance No. 6537. The said city ordinance

was also signed by then Manila Mayor Antonio J. Villegas (Villegas).

Section 1 of the said city ordinance prohibits aliens from being employed or to engage or participate in anyposition or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing anemployment permit from the Mayor of Manila and paying the permit fee of P50.00 except persons employed in thediplomatic or consular missions of foreign countries, or in the technical assistance programs of both the PhilippineGovernment and any foreign government, and those working in their respective households, and members of religiousorders or congregations, sect or denomination, who are not paid monetarily or in kind.

Hiu Chiong Tsai Pao Ho (Tsai Pao Ho) who was employed in Manila, filed a petition with the CFI of Manila todeclare City Ordinance No. 6537 as null and void for being discriminatory and violative of the rule of the uniformity intaxation.

The trial court declared City Ordinance No. 6537 null and void. Villegas filed the present petition.

ISSUE:Whether or not City Ordinance No. 6537 is a tax or revenue measure.


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RULING:Under paragraph (a) sec. 14, R.A. 288, it is clear that the City of Basilan may only levy and collect taxes for

general and special purposes in accordance with or as provided by law; in other words, the city of Basilan was not granteda blanket power of taxation. The use of the phrase "in accordance with law" which, in our opinion, means the same as"provided by law" clearly discloses the legislative intent to limit the taxing power of the City.

It has been held that the power to regulate as an exercise of police power does not include the power to imposefees for revenue purposes . Appellant city's own contention that the questioned ordinance was enacted in the exercise of its power of taxation, makes it obvious that the fees imposed are not merely regulatory.

JOHN H. OSMEAvs. OSCAR ORBOS et al G.R. No. 99886 March 31, 1993

FACTS:October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund,

designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for costincreases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases inthe world market prices of crude oil. Subsequently, the OPSF was reclassified into a "trust liability account,". PresidentCorazon C. Aquino promulgated E. O. 137 expanding the grounds for reimbursement to oil companies for possible costunder recovery incurred as a result of the reduction of domestic prices of petroleum products.

The petitioner argues inter alia that "the monies collected pursuant to . . P.D. 1956, as amended, must be treatedas 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 notchanneled to another government objective." Petitioner further points out that since "a 'special fund' consists of moniescollected through the taxing power of a State, such amounts belong to the State , although the use thereof is limited to thespecial purpose/objective for which it was created."

ISSUE:Whether or not the funds collected under PD 1956 is an exercise of the power of taxation

RULING:

The levy is primarily in the exercise of the police power of the State. While the funds collected may be referred toas taxes, they are exacted in the exercise of the police power of the State.

What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit on how much

to tax." The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation aspolice power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to thepower of taxation, it cannot be overlooked that the overriding consideration is to enable the delegate to act withexpediency in carrying out the objectives of the law which are embraced by the police power of the State.

It would seem that from the above-quoted ruling, the petition for prohibition should fail.

REPUBLIC OF THE PHILIPPINES,vs. BACOLOD-MURCIA MILLING CO., INC., MA-AO SUGAR CENTRAL CO., Iand TALISAY-SILAY MILLING COMPANY

G.R. Nos. L-19824, L-19825 and 19826 July 9, 1966

FACTS:Joint appeal by three sugar centrals, respondents herein. from a decision of the Court of First Instance of Manilafinding them liable for special assessments under Section 15 of Republic Act No. 632.

The appellants' thesis is simply to the effect that the "10 centavos per picul of sugar" authorized to be collectedunder Sec. 15 of Republic 632 is a special assessment. As such, the proceeds thereof may be devoted only to thespecific purpose for which the assessment was authorized, a special assessment being a levy upon property predicatedon the doctrine that the property against which it is levied derives some special benefit from the improvement. It is not atax measure intended to raise revenues for the Government.

ISSUE: Is the imposition of special assessment an exercise of the taxing power

RULING:


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The Court deemed it relevant to discuss its holding in Lutz v. Araneta. For in this Lutz case, Commonwealth Act567, otherwise known as the Sugar Adjustment Act, all collections made thereunder "shall accrue to a special fund in thePhilippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid out only for any or allof the following purposes or to attain any or all of the following objectives, as may be provided by law." Analysis of the Act,and particularly Section 6, will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitationand stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power .

On the authority of the above case, then, We hold that the special assessment at bar may be considered assimilarly as the above, that is, that the levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but, the exercise of the police power for the general welfare of the entire country.It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist.

VICTORIAS MILLING CO., INC. vs. THE MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS OCCIDENTG.R. No. L-21183 September 27, 1968

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. The changes

were: with respect to sugar centrals, by increasing the rates of license taxes; and as to sugar refineries, by increasing therates of license taxes as well as the range of graduated schedule of annual output capacity.

For, the production of plaintiff Victorias Milling Co., Inc. in both its sugar central and its sugar refinery located inthe 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 anda 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. Bothplaintiff and defendant directly appealed to the Supreme Court.

ISSUE:Was Ordinance No. 1, series of 1956, passed by defendant's municipal council as a regulatory enactment or as a

revenue measure?

RULING: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, willreadily convince one that the tax is really a revenue tax. And then, we read in the ordinance nothing which would as muchas indicate that the tax imposed is merely for police inspection, supervision or regulation. Given the purposes justmentioned, we find no warrant in logic to give our assent to the view that the ordinance in question is solely for regulatorypurpose. Plain is the meaning conveyed. The ordinance is for raising money. To say otherwise is to misread the purposeof the ordinance.

WALTER LUTZ vs. J. ANTONIO ARANETAG.R. No. L-7859 December 22, 1955

FACTS:This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed

by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act.Plaintiff, Walter Lutz seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the

estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax isunconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinionis not a public purpose for which a tax may be constitutioally levied. The action having been dismissed by the Court of First Instance, the plaintifs appealed the case directly to the Supreme Court.

ISSUE:Is the tax provided for in Commonwealth Act No. 567 a pure exercise of the taxing power?


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RULING: Analysis of the Act, and particularly of section 6 will show that the tax is levied with a regulatory purpose, to

provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarilyan exercise of the police power.

The protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislaturemay determine within reasonable bounds what is necessary for its protection and expedient for its promotion. If objectiveand 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 the implement of the state's police power.

REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT(PCGG) vs. COCOFED, ET AL. and BALLARES, ET AL., EDUARDO M. COJUANGCO JR. and the

SANDIGANBAYAN (First Division)G.R. No. 147062-64 December 14, 2001

FACTS:The PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of

allegedly ill-gotten companies, assets and properties, real or personal. Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank

(UCPB) registered in the names of the alleged "one million coconut farmers," the so-called Coconut Industry InvestmentFund companies (CIIF companies) and Private Respondent Eduardo Cojuangco Jr.

On January 23, 1995, the trial court rendered its final Decision nullifying and setting aside the Resolution of theSandiganbayan which lifted the sequestration of the subject UCPB shares.

ISSUE: Are the Coconut Levy Funds raised through the States police and taxing powers?

RULING:Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced proportional

contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of governmentand for all public needs.

Based on this definition, a tax has three elements, namely: a) it is an enforced proportional contribution frompersons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of thegovernment.

Taxation is done not merely to raise revenues to support the government, but also to provide means for therehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within thepolice power of the State.

WENCESLAO PASCUALvs. THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL. G.R. No. L-10405 December 29, 1960

FACTS:On August 31, 1954, petitioner Wenceslao Pascual instituted this action for declaratory relief, with injunction,

upon the ground that Republic Act No. 920, entitled "An Act Appropriating Funds for Public Works", approved on June 20,1953, contained, in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair,

extension and improvement" of Pasig feeder road terminals; that, at the time of the passage and approval of said Act, theaforementioned feeder roads were "nothing but projected and planned subdivision roads, not yet constructed, . . . withinthe Antonio Subdivision . . . situated at . . . Pasig, Rizal" which projected feeder roads "do not connect any governmentproperty or any important premises to the main highway";

Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to sue", andthat the petition did "not state a cause of action".

ISSUE:Should appropriation using public funds be made for public purposes only?

RULING:


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The right of the legislature to appropriate funds is correlative with its right to tax, and, under constitutionalprovisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and thedevotion thereof to another purpose, no appropriation of state funds can be made for other than for a public purpose .

The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed topromote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage toindividuals might incidentally serve the public.

OSMEA VS. ORBOSG.R. No. 99886 March 31, 1993

FACTS:October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund,

designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for costincreases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases inthe world market prices of crude oil. Subsequently, the OPSF was reclassified into a "trust liability account,". PresidentCorazon C. Aquino promulgated E. O. 137 expanding the grounds for reimbursement to oil companies for possible costunder recovery incurred as a result of the reduction of domestic prices of petroleum products.

The petitioner argues inter alia that "the monies collected pursuant to . . P.D. 1956, as amended, must be treatedas 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 notchanneled to another government objective." Petitioner further points out that since "a 'special fund' consists of moniescollected through the taxing power of a State, such amounts belong to the State , although the use thereof is limited to thespecial purpose/objective for which it was created."

ISSUE:Do the powers granted to the ERB under P.D. 1956 partake of the nature of the taxation power of the State?

RULING:NO. The OPSF was established "for the purpose of minimizing the frequent price changes brought about by

exchange rate adjustment and/or changes in world market prices of crude oil and imported petroleum products. While thefunds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State.

PEPSI-COLA BOTTLING COMPANY OF THE PHIILIPPINES, INC. VS. MUNICIPALITY OF TANAUANG.R. No. L-31156 February 27, 1976

FACTS:In February 1963, plaintiff commenced a complaint seeking to declare Section 2 of R.A. 2264 (Local Autonomy

Act) unconstitutional as an undue delegation of taxing power and to declare Ordinance Nos. 23 and 27 issued by theMunicipality of Tanauan, Leyte as null and void.

Municipal Ordinance No. 23 levies and collects from soft drinks producers and manufacturers one-sixteenth (1/16)of a centavo for every bottle of soft drink corked. On the other hand, Municipal Ordinance No. 27 levies and collects onsoft drinks produced or manufactured within the territorial jurisdiction of the municipality a tax of one centavo (P0.01) oneach gallon of volume capacity. The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipalproduction tax.

ISSUES:1. Is Section 2 of R.A. 2264 an undue delegation of the power of taxation?2. Do Ordinance Nos. 23 and 24 constitute double taxation and impose percentage or specific taxes?

RULING: 1. NO. The power of taxation is purely legislative and cannot be delegated to the executive or judicial

department of the government without infringing upon the theory of separation of powers. But as anexception, the theory does not apply to municipal corporations. Legislative powers may be delegated to localgovernments in respect of matters of local concern.

2. NO. The Municipality of Tanauan discovered that manufacturers could increase the volume contents of eachbottle and still pay the same tax rate since tax is imposed on every bottle corked. To combat this scheme,Municipal Ordinance No. 27 was enacted. As such, it was a repeal of Municipal Ordinance No. 23. In the


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stipulation of facts, the parties admitted that the Municipal Treasurer was enforcing Municipal OrdinanceNo. 27 only. Hence, there was no case of double taxation.

SOCIAL SECURITY SYSTEM VS. CITY OF BACOLODG.R. No. L-35726 July 21, 1982

FACTS:Petitioner Social Security System, for operation purposes, maintains a five-storey building in Bacolod Cityoccupying four parcels of land. Said lands and buildings were assessed for taxation. Petitioner failed to pay the realtytaxes for the years 1968, 1969 and 1970. Consequently, the City of Bacolod levied upon said lands and buildings anddeclared them forfeited in its favor. In protest, petitioner wrote the city mayor through the city treasurer seekingreconsideration of the forfeiture proceeding on the ground that it is a government-owned and controlled corporation andas such, should be exempt from payment of real estate taxes. No action was however taken. Thereafter, petitioner filed anaction in court for the nullification of the court proceedings. The court ruled that the properties of petitioner are not exemptfrom the payment of real property tax because these are not one of the exemptions under Section 29 of the Charter of Bacolod City and there is no other law providing for its exemption.

ISSUE:Should the subject properties maintained by petitioner SSS be exempt from payment of real property tax?

RULING:YES. Whether a government owned and controlled corporation is performing governmental or proprietary function

is immaterial. Section 29 of the Charter of Bacolod City does not contain any qualification whatsoever in providing for theexemption from real estate taxes of "lands and buildings owned by the Commonwealth or Republic of Philippines." Hence,when the legislature exempted lands and buildings owned by the government from payment of said taxes, what itintended was a broad and comprehensive application of such mandate, regardless of whether such property is devoted togovernmental or proprietary purpose.

Further, P.D. 24 has amended the Social Security Act of 1954 expressly exempting the SSS from payment of anytax thereby removing all doubts as to its exemption.

SEA-LAND SERVICE, INC. VS. COURT OF APPEALSG.R. No. 122605 April 30, 2001

FACTS:Petitioner Sea-Land Service Incorporated, an American international shipping company licensed by the Securities

and Exchange Commission to do business in the Philippines entered into a contract with the United States Government totransport military household goods and effects of U.S. military personnel assigned to the Subic Naval Base. Sea-Landpaid its corresponding corporate income tax for the taxable year 1984 at the rate of 1.5% in accordance with Section25(a)(2) of the National Internal Revenue Code in relation to Article 9 of the RP-US Tax Treaty. Subsequently, Sea-Landfiled a claim for refund alleging that the taxes it paid were made in mistake because under the RP-US Military Base

Agreement, it is exempt from the payment of taxes.

ISSUE:Does the income that petitioner derived from services in transporting the household goods and effects of U.S.

military personnel fall within the tax exemption provided in the RP-US Military Bases Agreement?

RULING:NO. Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of

the taxing power. The transport or shipment of household goods and effects of U.S. military personnel is not included inthe term "construction, maintenance, operation and defense of the bases. Neither could the perf ormance of this serviceto the U.S. government be interpreted as directly related to the defense and security of the Philippine territories

COMMISSIONER OF INTERNAL REVENUE vs.MITSUBISHI METAL CORPORATIONG.R. No. L-54908. January 22, 1990


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FACTS: On April 17, 1970, Atlas Consolidated Mining and Development Corporation entered into a Loan and Sales

Contract with Mitsubishi Metal Corporation for purposes of the projected expansion of the productive capacity of theformer's mines in Toledo, Cebu. Under said contract, Mitsubishi agreed to extend a loan to Atlas 'in the amount of $20,000,000.00, United States currency. Atlas, in turn undertook to sell to Mitsubishi all the copper concentrates producedfor a period of fifteen (15) years. Mitsubishi thereafter applied for a loan with the Export-Import Bank of Japan (Eximbank)for purposes of its obligation under said contract. Its loan application was approved on May 26, 1970 in the equivalentsum of $20,000,000.00 in United States currency at the then prevailing exchange rate.

Pursuant to the contract between Atlas and Mitsubishi, interest payments were made by the former to the latter totaling P13,143,966.79 for the years 1974 and 1975. The corresponding 15% tax thereon in the amount of P1,971,595.01 was withheld pursuant to Section 24 (b) (1) and Section 53 (b) (2) of the National Internal Revenue Code,as amended by Presidential Decree No. 131, and duly remitted to the Government.

ISSUE: Whether or not the interest income from the loans extended to Atlas by Mitsubishi is excludible from gross income

taxation pursuant to Section 29 of the tax code and, therefore, exempt from withholding tax.

RULING: The court ruled in the negative. Eximbank had nothing to do with the sale of the copper concentrates since all that

Mitsubishi stated in its loan application with the former was that the amount being procured would be used as a loan toand in consideration for importing copper concentrates from Atlas. Such an innocuous statement of purpose could nothave been intended for, nor could it legally constitute, a contract of agency. The conclusion is indubitable; MITSUBISHI,and NOT EXIMBANK, is the sole creditor of ATLAS, the former being the owner of the $20 million upon completion of itsloan contract with EXIMBANK of Japan.

It is settled a rule in this jurisdiction that laws granting exemption from tax are construed strictissimi juris againstthe taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception.

31st INFANTRY POST EXCHANGE vs. POSADASG.R. No. 33403. September 4, 1930

FACTS: The 31st Infantry Post Exchange is a post exchange constituted in accordance with Army regulations and the

laws of the United States. in the course of its duly authorized business transactions, the Exchange made many purchasesof various and diverse commodities, goods, wares and merchandise from various merchants in the Philippines. TheCommissioner collected a sales tax of 1 1/2 % of the gross value of the commodities, etc. from the merchants who soldsaid commodities to the Exchange. A formal protest was lodged by the Exchange.

ISSUE:Whether or not the petitioner is exempt from the sales tax imposed against its suppliers.

RULING:The court ruled in the negative. Taxes have been collected from merchants who made sales to Army Post

Exchanges since 1904 (Act 1189, Section 139). Similar taxes are paid by those who sell merchandise to the PhilippineGovernment, and by those who do business with the US Army and Navy in the Philippines. Herein, the merchants whoeffected the sales to the Post Exchange are the ones who paid the tax; and it is the officers, soldiers, and civilian

employees and their families who are benefited by the post exchange to whom the tax is ultimately shifted. An Army Post Exchange, although an agency within the US Army, cannot secure exemption from taxation for merchants who make sales to the Post Exchange.

COMMISSIONER OF INTERNAL REVENUE vs. MARUBENI CORPORATIONG.R. No. 137377. December 18, 2001

FACTS: Respondent Marubeni Corporation is a foreign corporation and is duly registered to engage in business in the

Philippines. Sometime in November 1985, petitioner Commissioner of Internal Revenue issued a letter of authority toexamine the books of accounts of the Manila branch office of respondent corporation.


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In the course of the examination, petitioner found respondent to have undeclared income from two (2)contracts in the Philippines. Petitioner's revenue examiners recommended an assessment for deficiency income, branchprofit remittance, contractor's and commercial broker's taxes. Respondent questioned this assessment. Respondent thenreceived a letter form petitioner assessing respondent several deficiency taxes. On September 26, 1986, respondent filedtwo (2) petitions for review with the Court of Tax Appeals.

Earlier, on August 2, 1986, Executive Order (E.O.) No. 41 declaring a one-time amnesty covering unpaid incometaxes for the years 1981 to 1985 was issued. Under this E.O., a taxpayer who wished to avail of the income tax amnestyshould comply with certain requirements. In accordance with the terms of E.O. No. 41, respondent filed its tax amnestyreturn dated October 30, 1986. On November 17, 1986, the scope and coverage of E.O. No. 41 was expanded byExecutive Order (E.O.) No. 64.

ISSUE: Whether or not herein respondent's deficiency tax liabilities were extinguished upon respondent's availment of tax

amnesty under Executive Orders Nos. 41 and 64.

RULING: Section 4 (b) of E.O. No. 41 is very clear and unambiguous. It excepts from income tax amnesty those taxpayers

"with income tax cases already filed in court as of the effectivity hereof." The point of reference is the date of effectivity of E.O. No. 41. The difficulty lies with respect to the contractor's tax assessment and respondent's availment of the amnestyunder E.O. No. 64 including estate and donor's taxes and tax on business.

In the instant case, the vagueness in Section 4 (b) brought about by E.O. No. 64 should be construed strictlyagainst the taxpayer. The term "income tax cases" should be read as to refer to estate and donor's taxes and taxes onbusiness while the word "hereof," to E.O. No. 64. Since Executive Order No. 64 took effect on November 17, 1986,consequently, insofar as the taxes in E.O. No. 64 are concerned, the date of effectivity referred to in Section 4 (b) of E.O.No. 41 should be November 17, 1986. There is nothing in E.O. No. 64 that provides that it should retroact to the date of effectivity of E.O. No. 41, the original issuance. Neither is it necessarily implied from E.O. No. 64 that it or any of itsprovisions should apply retroactively.

REAGAN vs. COMMISSIONER OF INTERNAL REVENUEG.R. No. L-26379, 27. December 27, 1969

FACTS: William Reagan imported a tax-free 1960 Cadillac car with accessories valued at US $ 6,443.83, including freight,

insurance and other charges. After acquiring a permit to sell the car from the base commander of Clark Air Base, Reagan

sold the car to a certain Willie Johnson Jr. of the US Marine Corps stationed in Sangley Point, Cavite for US$ 6,600.Johnson sold the same, on the same day to Fred Meneses, a Filipino. As a result of the transaction, the Commissioner rendered Reagan liable for income tax in the sum of P2,970. Reagan claimed that he was exempt as the transactionoccurred in Clark Air Base, which as he contends is a base outside the Philippines.

ISSUE: Whether or not petitioner Reagan was covered by the tax exemption.

RULING: The court ruled in the negative. The Philippines, as an independent and sovereign country, exercises its authority

over its entire domain. Any state may, however, by its consent, express or implied, submit to a restriction of its sovereignrights. It may allow another power to participate in the exercise of jurisdictional right over certain portions of its territory. Bydoing so, it by no means follows that such areas become impressed with an alien character. The areas retain their status

as native soil. Clark Air Base is within Philippine territorial jurisdiction to tax, and thus, Reagan was liable for the incometax arising from the sale of his automobile in Clark. The law does not look with favor on tax exemptions and that he whowould seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted.Reagan has not done so, and cannot do so.

TIU vs. COURT OF APPEALSGR. No. 127410 January 20, 1999

FACTS:Congress, with the approval of the President, passed into law RA 7227 entitled "An Act Accelerating the

Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development


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Authority for this Purpose, Providing Funds Therefor and for Other Purposes." Section 12 thereof created the SubicSpecial Economic Zone and granted there to special privileges. President Ramos issued Executive Order No. 97,clarifying the application of the tax and duty incentives. The President issued Executive Order No. 97-A, specifying thearea within which the tax-and-duty-free privilege was operative. The petitioners challenged before this Court theconstitutionality of EO 97-A for allegedly being violative of their right to equal protection of the laws. This Court referredthe matter to the Court of Appeals. Proclamation No. 532 was issued by President Ramos. It delineated the exact metesand bounds of the Subic Special Economic and Free Port Zone, pursuant to Section 12 of RA 7227. Respondent Courtheld that "there is no substantial difference between the provisions of EO 97-A and Section 12 of RA 7227. In both, the'Secured Area' is precise and well-defined as '. . . the lands occupied by the Subic Naval Base and its contiguousextensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and theUnited States of America, as amended . . .'"

ISSUE:Whether or not Executive Order No. 97-A violates the equal protection clause of the Constitution

RULING:No. The Court found real and substantive distinctions between the circumstances obtaining inside and those

outside the Subic Naval Base, thereby justifying a valid and reasonable classification. The fundamental right of equalprotection of the laws is not absolute, but is subject to reasonable classification. If the groupings are characterized bysubstantial distinctions that make real differences, one class may be treated and regulated differently from another. Theclassification must also be germane to the purpose of the law and must apply to all those belonging to the same class.

JOHN PEOPLES ALTERNATIVE COALITION vs. BCDAGR. No. 119775 October 24, 2003

FACTS:Republic Act No. 7227 set out the policy of the government to accelerate the sound and balanced conversion into

alternative productive uses of the former military bases. It created Bases Conversion and Development Authority. It alsocreated the Subic Special Economic and Free Port Zone. It granted the Subic SEZ incentives. It expressly gave authorityto the President to create through executive proclamation, subject to the concurrence of the local government unitsdirectly affected, other Special Economic Zones in the areas covered. BCDA entered into a Memorandum of Agreementand Escrow Agreement with Tuntex and Asiaworld. BCDA, Tuntex and Asiaworld executed a Joint Venture Agreement.The Sangguniang Panlungsod of Baguio City asked BCDA to exclude all the barangays partly or totally located withinCamp John Hay from the reach or coverage of any plan or program for its development. The sanggunian adopted and

submitted a 15-point concept for the development of Camp John Hay. BCDA, Tuntex and AsiaWorld agreed to some, butrejected or modified the other proposals. They stressed the need to declare Camp John Hay a SEZ as a conditionprecedent in accordance R.A. No. 7227. The sanggunian requested the Mayor to order the determination of realty taxeswhich may be collected from real properties of Camp John Hay. It was intended to intelligently guide the sanggunian indetermining its position on whether Camp John Hay be declared a SEZ, it being of the view that such declaration wouldexempt the camps property and the economic activity therein from local or national taxation. The sanggunian passed aresolution seeking the issuance by President Ramos of a presidential proclamation declaring an area of 288.1 hectares of the camp as a SEZ. President Ramos issued Proclamation No. 420 which established a SEZ on a portion of Camp JohnHay.

ISSUE:Whether Proclamation No. 420 is constitutional

RULING:While the grant of economic incentives may be essential to the creation and success of SEZs, free trade zonesand the like, the grant thereof to the John Hay SEZ cannot be sustained. The incentives under R.A. No. 7227 areexclusive only to the Subic SEZ, hence, the extension of the same to the John Hay SEZ finds no support therein. Neither does the same grant of privileges to the John Hay SEZ find support in the other laws specified under Section 3 of Proclamation No. 420, which laws were already extant before the issuance of the proclamation or the enactment of R.A.No. 7227. More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the legislature,unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. The challenged grant of tax exemptionwould circumvent the Constitutions imposition that a law granting any tax exemption must have the concurrence of amajority of all the members of Congress.


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shall be exempt from taxation." The present Constitution added "charitable institutions, mosques, and non-profitcemeteries" and 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 Constitution is wordeddifferently. The change should not be ignored. It must be duly taken into consideration.

TOLENTINO vs. SECRETARY OF FINANCEG.R. No. 115455 October 30, 1995

FACTS:Motions were filed seeking reconsideration of the Supreme Court decision dismissing the petitions for the

declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. Themotions, of which there are 10 in all, have been filed by the several petitioners in these cases.

ISSUES:1. Whether or not R.A. No. 7716 did not "originate exclusively" in the House of Representatives as required by Art.

VI Sec. 24 of the Constitution.2. Whether or not R.A. No. 7716 is violative of press freedom and religious freedom under Art. III Secs. 4 and 5 of

the Constitution.3. Whether or not there is violation of the rule on taxation under Art. VI Sec. 28 (1) of the Constitution.4. Whether or not there is an impairment of obligation of contracts under Art. III Sec. 10 of the Constitution.5. Whether or not there is violation of the due process clause under Art. III Sec. 1 of the Constitution.

RULING:1. While Art. VI Sec. 24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the

public debt, bills of local application, and private bills must "originate exclusively in the House of Representatives," it alsoadds, " but the Senate may propose or concur with amendments ." In the exercise of this power, the Senate may proposean entirely new bill as a substitute measure.

2. Since the law granted the press a privilege, the law could take back the privilege anytime without offense to theConstitution. The VAT is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It isimposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the leaseof properties purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any

more than to make the press pay income tax or subject it to general regulation is not to violate its freedom under theConstitution.

3. The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive.What it simply provides is that Congress shall " evolve a progressive system of taxation."

4. Contracts must be understood as having been made in reference to the possible exercise of the rightfulauthority of the government and no obligation of contract can extend to the defeat of that authority.

5. On the alleged violation of due process, hardship to taxpayers alone is not an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no different from the giving of advisory opinion that doesnot really settle legal issues. We are told that it is our duty under Art. VIII, Sec. 1 (2) to decide whenever a claim is madethat "there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or

instrumentality of the government." This duty can only arise if an actual case or controversy is before us.

ABAKADA Guro Party List vs. ErmitaG.R. No. 168056 September 1, 2005

FACTS:Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List , et al. , filed a petition for prohibition on

May 27, 2005 questioning the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods andproperties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of servicesand use or lease of properties. These questioned provisions contain a uniform proviso authorizing the President, upon


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recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after specifiedconditions have been satisfied. Petitioners argue that the law is unconstitutional.

ISSUES:1. Whether or not there is a violation of Article VI, Section 24 of the Constitution.2. Whether or not there is undue delegation of legislative power in violation of Article VI Sec 28(2) of the

Constitution.3. Whether or not there is a violation of the due process and equal protection under Article III Sec. 1 of the

Constitution.

RULING:1. Since there is no question that the revenue bill exclusively originated in the

House of Representatives, the Senate was acting within its constitutional power to introduce amendments to the Housebill when it included provisions in Senate Bill No. 1950 amending corporate income taxes, percentage, and excise andfranchise taxes.

2. There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This isconstitutionally permissible. 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 theonly way in which the legislative process can go forward.

3. The power of the State to make reasonable and natural classifications for the purposes of taxation has longbeen established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amountsto be raised, the methods of assessment, valuation and collection, the States power is entitled to presumption of validity.

As a rule, the judiciary will not interfere with such power absent a clear showing of unreasonableness, discrimination, or arbitrariness.

MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC. vs.DEPARTMENT OF FINANCE SECRETARY

G.R. No. 108524 November 10, 1994

FACTS:Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation engaged in the buying

and selling of copra in Misamis Oriental. The petitioner alleges that prior to the issuance of Revenue MemorandumCircular 47-91 on June 11, 1991, which implemented VAT Ruling 190-90, copra was classified as agricultural food productunder Sec. 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution.

Petitioner sought to nullify Revenue Memorandum Circular No. 47-91 and enjoin the collection by respondentrevenue officials of the Value Added Tax (VAT) on the sale of copra by members of petitioner organization as theclassification had the effect of denying to the petitioner the exemption it previously enjoyed when copra was classified asan agricultural food product under Sec. 103(b) of the NIRC

ISSUE:Whether there is violation of equal protection clause because while coconut farmers and copra producers areexempt, traders and dealers are not, although both sell copra in its original state.

RULING: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 Constitutiondoes not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently.

COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALSG.R. No. 119761 August 29, 1996

FACTS:


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Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes. The Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. The initial position of the CIR was to classify 'Champion,' 'Hope,' and 'More'as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However,Fortune Tobacco changed the names of 'Hope' to 'Hope Luxury' and 'More' to ' Premium More,' thereby removing the saidbrands from the foreign brand category.

RA No. 7654, was enacted and became effective on 03 July 1993. It amended Section 142(c)(1) of the NIRC. About a month after the enactment and two (2) days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93") Reclassification of Cigarettes Subject to Excise Tax, was issued by the BIR. Fortune Tobaccorequested for a review, reconsideration and recall of RMC 37-93. The request was denied on 29 July 1993. The followingday, or on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.

On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. The CTA upheld the position of Fortune Tobacco and adjudged RMC No. 37-93 as defective.

ISSUE:Whether or not there is a violation of the due process of law.

RULING: A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us

that the circular cannot be viewed simply as a corrective measure or merely as construing Section 142(c)(1) of the NIRC,as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and"Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have themcovered by RA 7654.

In so doing, the BIR not simply intrepreted the law; verily, it legislated under its quasi-legislative authority. The dueobservance of the requirements of notice, of hearing, and of publication should not have been then ignored. The Court isconvinced that the hastily promulgated RMC 37-93 has fallen short of a valid and effective administrative issuance.

COMMISSIONER OF INTERNAL REVENUE vs.LINGAYEN GULF OF ELECTRIC POWER

G.R. No. L-23771 August 4, 1988

FACTS:The respondent taxpayer, Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the

adjoining municipalities of Lingayen and Binmaley, Pangasinan, pursuant to the municipal franchise granted it by their respective municipal councils, under Resolution Nos. 14 and 25 of June 29 and July 2, 1946, respectively. Section 10 of these franchises provides that said grantee shall pay 2% of their gross earnings obtained thru this privilege. On November 21, 1955, the Bureau of Internal Revenue (BIR) assessed against and demanded from the private respondent the totalamount of P19,293.41 representing deficiency franchise taxes and surcharges for the years 1946 to 1954 applying thefranchise tax rate of 5% on gross receipts from March 1, 1948 to December 31, 1954 as prescribed in Section 259 of theNational Internal Revenue Code, instead of the lower rates as provided in the municipal franchises.Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963, granting to the private respondent alegislative franchise for the operation of the electric light, heat, and power system in the same municipalities of Pangasinan. Section 4 thereof provides that: In consideration of the franchise and rights hereby granted, the grantee shallpay into the Internal Revenue office of each Municipality in which it is supplying electric current to the public under thisfranchise, a tax equal to two per centum of the gross receipts from electric current sold or supplied under this franchise.The petitioner submits that the said law is unconstitutional insofar as it provides for the payment by the private respondent

of a franchise tax of 2% of its gross receipts, while other taxpayers similarly situated were subject to the 5% franchise taximposed in Section 259 of the Tax Code, thereby discriminatory and violative of the rule on uniformity and equality of taxation.

ISSUE:Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the "uniformity and equality of

taxation" clause of the Constitution.

RULING: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 beendeemed violative of the equal protection clause. Charters or special laws granted and enacted by the Legislature are inthe nature of private contracts. They do not constitute a part of the machinery of the general government.


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KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN vs. TANG.R. No. 81311 June 30, 1988

FACTS:This petition seeks to nullify Executive Order No. 273 (EO 273, for short), issued by the President of the

Philippines on 25 July 1987, to take effect on 1 January 1988, and which amended certain sections of the NationalInternal Revenue Code and adopted the value-added tax (VAT, for short), for being unconstitutional in that its enactmentis not alledgedly within the powers of the President; that the VAT is oppressive, discriminatory, regressive, and violatesthe due process and equal protection clauses and other provisions of the 1987 Constitution.

ISSUE:Whether or not EO 273 was enacted by the president with grave abuse of discretion and whether or not such law isunconstitutional.

RULING: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 extensivelydiscussed by this framers and other government agencies involved in its implementation, even under the pastadministration. The petitioners have failed to adequately show that the VAT is oppressive, discriminatory or unjust.Petitioners merely rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify thenullification of a law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentativeimplication. The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engagein business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are consequentlyexempt from its application.

SISON vs. ANCHETAG.R. No. L-59431 July 25, 1984

FACTS:Petitioner assailed the validity of Section 1 of Batas Pambansa Blg. 135 which further amends 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 depositsand 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 alleges that by virtue thereof, "he would be unduly discriminated against by the impositionof higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed uponfixed income or salaried individual taxpayers. He characterizes the above section as arbitrary amounting to classlegislation, oppressive and capricious in character.

ISSUE:Whether or not BP 135 Sec 1 is violative of due procee and equal protection clause.

RULING:

The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here. does notsuffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemnsuch a provision as void or its face, he has not made out a case. This is merely to adhere to the authoritative doctrine thatwere the due process and equal protection clauses are invoked, considering that they arc not fixed rules but rather broadstandards, there is a need for of such persuasive character as would lead to such a conclusion. Absent such a showing,the presumption of validity must prevail. Due process was not violated.

VILLEGAS vs. HUI CHIONG TSAI PAOG.R. No. L-29646 November 10, 1978

FACTS:


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On February 22, 1968, the Municipal Board of Manila passed City Ordinance No. 6537. The said city ordinancewas also signed by then Manila Mayor Antonio J. Villegas (Villegas).

Section 1 of the said city ordinance prohibits aliens from being employed or to engage or participate in anyposition or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing anemployment permit from the Mayor of Manila and paying the permit fee of P50.00 except persons employed in thediplomatic or consular missions of foreign countries, or in the technical assistance programs of both the PhilippineGovernment and any foreign government, and those working in their respective households, and members of religiousorders or congregations, sect or denomination, who are not paid monetarily or in kind.

Hiu Chiong Tsai Pao Ho (Tsai Pao Ho) who was employed in Manila, filed a petition with the CFI of Manila todeclare City Ordinance No. 6537 as null and void for being discriminatory and violative of the rule of the uniformity intaxation.

The trial court declared City Ordinance No. 6537 null and void. Villegas filed the present petition.

ISSUE:Whether or not the 50.00 employment permit fee imposed by virtue of Ordinance No. 6537 is a violation of the

equal protection clause.

RULING:The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial

differences in situation among individual aliens who are required to pay it. Although the equal protection clause of theConstitution does not forbid classification, it is imperative that the classification should be based on real and substantialdifferences having a reasonable relation to the subject of the particular legislation. The same amount of P50.00 is beingcollected from every employed alien whether he is casual or permanent, part time or full time or whether he is a lowlyemployee or a highly paid executive. Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the exercise of the power which has been granted to him by theordinance.

VILLANUEVA v. CITY OF ILOILOG.R. No. 26521 December 28, 1968

FACTS:The municipal board of Iloilo City enacted Ordinance 86, imposing license tax fees as follows: 1) tenement house,

P25.00anually; 2) tenement house, partly or wholly engaged in or dedicated to business in the streets of J.M. Basa, Iznart

Aldequer, P24.00 per apartment; 3) tenement house, partly or wholly engaged in business in any other streets, P12.00per apartment.

The validity and constitutionality of this ordinance were challenged by the spouses Villanueva, owners of 4tenement houses containing 34 apartments.

ISSUE:Does Ordinance 11 violate the rules of uniformity of taxation?

RULING:No. This court has ruled that tenement houses constitute a distinct class of property. It has likewise ruled that

taxes are uniform and equal when imposed upon all properties of the same class or character within the taxing authority.The fact, therefore, that the owners of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the

ordinance in question is no argument at all against uniformity and equality of the tax imposition.

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC. v. CITY OF BUTUANG.R. No. 22814 August 28, 1968

FACTS:The City of Butuan enacted Ordinance No. 110 which was subsequently amended by Ordinance No. 122.

Ordinance No. 110 as amended, imposes a tax on any person, association, etc. of P0.10 per case of 24 bottles of Pepsi-Cola and the plaintiff Pepsi-Cola paid under protest. The plaintiff filed a complaint for the recovery of the amount paidunder protest on the ground that Ordinance No. 110 is illegal, that the tax imposed is excessive and that it isunconstitutional. Plaintiff maintains that the ordinance is null and void because it is unjust and discriminatory.


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ISSUE:Whether or not the ordinance in question is violative of the uniformity required by the Constitution?

RULING:Yes. Only sales by agents or consignees of outside dealers would be subject to the tax. Sales by local dealers,

not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceededthose made by said agents or consignees of producers or merchants established outside the City of Butuan, would beexempt from the disputed tax. The classification to be valid and reasonable must be: 1) based upon substantialdistinctions; 2)germane to the purpose of the ordinance; 3) applicable, not only to present conditions, but also to futureconditions substantially identical to those present; and 4) applicable equally to all those who belong to the same class.These conditions are not fully met by the ordinance in question.

ORMOC SUGAR COMPANY, INC. v. TREASURER OF ORMOC CITYG.R. No. 23794 February 17, 1968

FACTS:The Municipal Boa rd of Ormoc City passed Ordinance No. 4 imposing on any and all productions of centrifugal

sugar milled at the Ormoc Sugar Company, Inc., in Ormoc City a municipal tax equivalent to one per centum (1%) per export sale to USA and other foreign countries. Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc. Ormoc Sugar Company, Inc. filed before the Court of First Instance of Leyte a complaint against the City of Ormoc as well as its Treasurer, Municipal Board and Mayor alleging that the ordinance is unconstitutional for beingviolative of the equal protection clause and the rule of uniformity of taxation. The court rendered a decision that upheld theconstitutionality of the ordinance. Hence, this appeal.

ISSUE:Whether or not constitutional limits on the power of taxation, specifically the equal protection clause and rule of

uniformity of taxation, were infringed?

RULING:Yes. 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 upon substantialdistinctions; 2) these are germane to the purpose of the law; 3) the classification applies not only to present conditions,

but also to future conditions substantially identical to those present; and 4) the classification applies only to those whobelong to the same class.

A perusal of the requisites shows that the questioned ordinance does not meet them, for it taxes only centrifugalsugar produced and exported by the Ormoc Sugar Company, Inc. and none other. The taxing ordinance should not besingular and exclusive as to exclude any subsequently established sugar central for the coverage of the tax.

LUTZ v. ARANETAG.R. No. 7859 December 22, 1955

FACTS:This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposedby Commonwealth Act No. 567 (Sugar Adjustment Act). Section 3 of the said law levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise a taxequivalent to the difference between the money value of the rental or consideration collected and the amount representing12 per centum of the assessed value of such land. Plaintiff Lutz, in his capacity as Judicial Administrator of the IntestateEstate of Ledesma, seeks to recover from the Collector of Internal Revenue the sum paid by him as taxes alleging thatsuch tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which inplaintiffs opinion is not a public purpose for which a tax may be constitutionally levied. The action having been dismissedby the Court of First Instance, the plaintiffs appealed the case.

ISSUE:Whether or not the law in question is constitutional?


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RULING:Yes. The tax levied is with a regulatory purpose, to provide means for the rehabilitation and stabilization of the

threatened sugar industry. The act is primarily an exercise of the police power. That the tax to be levied should burden thesugar producers themselves can hardly be a ground of complaint. It appears rational that the tax be obtained preciselyfrom those who are to be benefited from the expenditure of the funds derived from it. At any rate, it is inherent in thepower to tax that a state be free to select the subjects of taxation, and it has been repeatedly ruled that inequalities whi chresult from a singling out of one particular for tax ation or exemption infringe no constitutional limitation. It appears of nomoment that the funds raised under the Sugar Stabilization Act, now in question, should be exclusively spent in aid of thesugar industry, since it is that very enterprise that is being protected.

ASSOCIATION OF CUSTOMS BROKERS et al. vs. THE MUNICIPALITY BOARD of Manila et al.

G.R. No. L-4376, May 22, 1953

FACTS:This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal Board of

the City of Manila on March 24, 1950.The petitioners which is composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies a so-called property taxit is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila.

ISSUE:Whether or not Ordinance No. 3379 is valid as held by the CFI of Manila.

RULING:

No. The ordinance in question while it refers to property tax and it is fixed ad valorem yet we cannot reject theidea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds tobe expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This isprecisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipalcorporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing,maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended

to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinancein question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibitionabove adverted to.

EASTERN THEATRICAL CO., INC., ET AL.vs. VICTOR, ALFONSOG.R. No. L-1104 May 31, 1949

FACTS:Twelve corporation engaged in motion picture business filed a complaint to impugn the validity of Ordinance No.

2958 of the City of Manila- AN ORDINANCE IMPOSING A FEE ON THE PRICE OF EVERY ADMISSION TICKET SOLDBY CINEMATOGRAPHS, THEATERS VAUDEVILLE COMPANIES THEATRICAL SHOWS AND BOXING EXHIBITION.

Plaintiffs, operator of theaters in Manila And distributor of local or imported films impugns Sections 1, 2 and 4 of said ordinance as null and void upon the following grounds: ( a ) For violation the Constitution more particular the provisionregarding the uniformity and equality of taxation and the equal protection of the laws; ( b) because it contravenes, violatesand is inconsistent with, existing national legislation more particularly revenue and tax laws and ( c ) because it is unfair,unjust, arbitrary capricious unreasonable oppressive and is contrary to and violation our basic and recognizes principles of taxation and licensing laws.

ISSUE: Whether or not Ordinance No. 2958 violated the principle of equality and uniformity of taxation enjoined by the

Constitution.

RULING:


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No, the said Ordinance does not violate the principle of equality and uniformity of taxation. The fact that someplaces of amusement are not taxed while others, such as cinematographs, theaters, vaudeville companies, theatricalshows, and boxing exhibitions and other kinds of amusements or places of amusement are taxed, is no argument at allagainst the equality and uniformity of the tax imposition. Equality and uniformity of the tax imposition. Equality anduniformity 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; and theappellants cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselvesand which can be confused with those not included in the ordinance.

PHILIPPINE TRUST COMPANY vs. YATCOG.R. Nos. L-46255, 46256, 46259 and 46277 January 23, 1940

FACTS:Prior to the filing of these suits, and for a number of years, the plaintiffs-appellants had been paying capital and

deposit taxes without protest, formerly under section 111 of Act No. 1189, and later under section 1499 of the Revised Administrative Code of 1917, as amended.

Appellants challenge the constitutionality of the aforesaid section of the Revised Administrative Code, principallyon the grounds that it violates the rule regarding uniformity of taxation, and that it is discriminatory, and therefore violativeof the equal protection clause of the Constitution. Appellants stoutly maintain that although the foregoing provision is of general application and operates on all banks of the same kind doing business in the Philippines, the exemption of theNational City Bank of New York from the impositions therein specifically provided (National City Bank of New York v.Posadas [296 U.S. 497, 80 Law ed. 351], makes the law discriminatory and violates the rule of uniformity in taxation

ISSUE:Whether or not the said section of the Revised Administrative Code violates the rule on uniformity of taxation.

RULING:No. A tax is considered uniform when it operates with the same force and effect in every place where the subject

may be found. Section 1499 of the Revised Administrative Code, as amended, applies uniformly to, and operates on, allbanks in the Philippines without distinction and discrimination, and if the National City Bank of New York is exempted fromits operation because it is a federal instrumentality subject only to the authority of Congress, that alone could have theeffect of rendering it violative of the rule of uniformity. In every well-regulated and enlightened state or government, certaindescriptions of property and also certain institutions are exempt from taxation, but these exemptions have never beenregarded as disturbing the rules of taxation, even where the fundamental law had ordained that it should be uniform.

CHURCHILL vs. CONCEPCIONG.R. No. 11572 September 22, 1916

FACTS:Section 100 of Act No. 2339 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 by reducing the tax on such signs, billboards, etc., toP2 per square meter or fraction thereof. Francis A. Churchill and Stewart Tait, owners of a sign or billboard containing anarea 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.Plaintiffs assailed that they were gaining lesser profit than what they ought to receive because of the tax imposedby the said law. However, it was proven that there was no attempt on the part of the plaintiffs to raise the advertising ratesin order to cope up with the said tax rates. It will thus be seen that the contention that the rates charged for advertisingcannot be raised is purely hypothetical, based entirely upon the opinion of the plaintiffs, unsupported by actual test, andthat the plaintiffs themselves admit that a number of other persons have voluntarily and without protest paid the tax hereincomplained of.

ISSUE:Is the tax void for lack of uniformity?

RULING:


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A tax is uniform, within the constitutional requirement, when it operates with the same force and effect in everyplace where the subject of it is found. "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. 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 Legislature selected signsand billboards as a subject for taxation and it must be presumed that it, in so doing, acted with a full knowledge of thesituation.

MANILA ELECTRIC COMPANY v. PROVINCE OF LAGUNA and BENITO BALAZO in his capacity as ProvincialTreasurer of Laguna

G.R. No. 131359. May 5, 1999.

FACTS Manila Electric Company (MERALCO) was granted a franchise from certain municipalities of Laguna. On

September 13, 1991, Republic Act 7160, otherwise known as the Local Government Code of 1991 was enacted, enjoiningloval government units to create their own sources of revenue and to levy taxes, fees and charges, subject to thelimitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to this Code, respondentprovince enacted a Provincial Ordinance providing that a tax on business enjoying franchise, at a rate of 50% of 1% of the gross annual receipts... On the basis of such ordinance, the Provincial Treasurer sent a demand letter to MERALCOfor the tax payment. MERALCO paid under protest. Thereafter, a formal claim for refund was sent by MERALCO to theProvincial Treasurer claiming that the franchise tax it had paid and continue to pay to the National Government alreadyincludes the franchise tax as provided under Presidential Decree 551. The claim was denied. MERALCO filed anappeal with the trial court but was dismissed. Thus the petition.

ISSUE Whether the imposition of a franchise tax under section 2.09 of the Laguna Provincial Ordinance No. 01-92

violates the non-impairment clause of the Constitution.

RULING No. Although local governments do not have the inherent power to tax, such power may be delegated to them

either by basic law or by statute. This is provided under Article X of the 1987 Constitution. The rationale for the currentrule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broadtax powers.

The Local Government Code of 1991 repealed the Tax Code. It explicitly authorizes provincial governments,

notwithstanding any exemption granted by any law, or other special laws, xxx (to) impose a tax on business enjoying afranchise. The phrase, in lieu of all taxes have to give way to the peremptory language of the Local Gove rnmentCode.

THE PROVINCE OF MISAMIS ORIENTAL represented by its PROVINCIAL TREASURER v. CAGAYAN ELECTRICPOWER AND LIGHT COMPANY

G.R. No. L-45355. January 12, 1990

FACTS Cagayan Electric Power and Light Company, Inc. (CEPALCO) was granted a franchise on June 17, 1961 under

Republic Act 3247. It was amended by Republic Act 3570 and Republic Act 6020. On June 28, 1973, the Local Tax Code

was promulgated which provides that the province may impose a tax on businesses enjoying franchise. Pursuant thereto,the Province of Misamis enacted Provincial Revenue Ordinance No. 19. It demanded payment. CEPALCO refused to pay,alleging that it is exempt from all taxes except the franchise tax required by Republic Act 6020. The provincial fiscalupheld the ordinance. CEPALCO paid under protest. On appeal to the Secretary of Justice, ruled in favor of CEPALCO.The province filed a petition with the trial court but was dismissed. Thus, the petition.

ISSUE Whether CEPALCO is exempt from paying the provincial franchise tax.

RULING Yes. First off, there is no provision in PD No. 231 expressly or impliedly amending or repealing sec. 3 of RA 6020

which exempts CEPALCO. The rule is that a special and local statute applicable to a particular case is not repealed by a


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later statute which is general in its terms, provisions and application even if the terms of the general act are broadenough to include the cases in the special law unless there is manifest intent to repeal or alter the special law.

The franchise of CEPALCO expressly exempts it from payment of all taxes of whatever authority except 3% taxon its gross earnings. Such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the grantee.

Local Tax Regulation No. 3-75 issued by the Secretary of Finance on June 26, 1976, has made it crystal clear that the franchise tax provided in the Local Tax Code (P.D. No. 231, Sec. 9) may only be imposed on companies withfranchises that do not contain the exempting c lause i n-lieu-of-all-taxes .

CAGAYAN ELECTRIC POWER AND LIGHT CO., INC v. COMMISSIONER OF INTERNAL REVENUE and COURT TAX APPEALS

G.R. No. L-60126. September 25, 1985

FACTS: Petitioner Cagayan Electric Power and Light Co., Inc (CEPALCO) is the holder of a legislative franchise, Republic

Act 3247 under which, it is exempted from taxes, and assessments of whatever authority upon privileges, earnings,income, franchise, and poles, wires transformers, and insulators.

On June 27, 1968, Republic Act 5431 amended Section 24 of the Tax Code, making the petitioner liable for income tax in addition to franchise tax. On August 4, 1969, Republic Act 6020 was enacted under which, the petitioner was again tax exempted.

The Commissioner of Internal Revenue (CIR) sent a demand letter on February 15, 1973, requiring petitioner topay the deficiency for income taxes for 1968-1971. Upon petitioner's contention, the CIR cancelled the assessments for 1970 but insisted those for 1968 and 1969.

Petitioner filed a petition for review with the tax court which held petitioner responsible only for the period fromJanuary 1 to August 3, 1969, or before the passage of Republic Act 6420 which reiterated its tax exemption. Thus, theappeal.

ISSUE: Whether petitioner's franchise is a contract which can be impaired by an implied appeal.

RULING: Yes. Congress could impair petitioner's franchise by making it liable for income tax from which heretofore it was

exempted by virtue of the exemption provided in its franchise. The Constitution provides that a franchise is subject to

amendment, alteration, or repeal by Congress when public interest so requires. Petitioner's franchise, under Republic Act3247 also provide it is subject to the Constitution.

Republic Act 5431 withdrew petitioner's exemption but was restored by subsequent enactment. Thus, it is onlyliable for the period of January 1 to August 3, 1969 when its tax exemption was modified.

LEALDA ELECTRIC CO., INC v. COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALSG.R. No. L-16428. April 30, 1963

FACTS:On June 11, 1949, Alfredo, Mario and Benjamin Benito formed a partnership to operate an electric plant. Such

electric plant was granted a franchise in the year 1915 to supply electric current to the municipalities of Albay. Thefranchise, the Certificate of public convenience and the electric plant was transferred to the said partnership. Under its

franchise, the original grantee and successors-in-interest paid a franchise tax of 2% on the gross earnings, until October 1, 1946, when section 259 of the National Internal Revenue Code was amended by Republic Act 39, which increased thefranchise tax to 5%.

On a date undisclosed, petitioner filed a petition for refund contending that on its charter, it was liable to pay afranchise tax of 2% and not 5% of its earnings and receipts.

As several petitions were not given definite action, thus petitioner filed with the Court of Tax Appeals (CTA) apetition, praying for refund from the period of January 20, 1947 to October 14, 1958. The CTA dismissed the petition.

Thus, the petition, on the ground that Act No.2475, as amended by Act 2620, granting its franchise constitute aprivate contract between the petitioner and the Government and such cannot be amended, altered or repealed by Section259 of the Tax Code.

ISSUE Whether petitioner should pay 5% of his

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