Tax Rev cases compilation

8/12/2019 Tax Rev cases compilation

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G.R. No. L-30232 July 29, 1988

LUZON STEVEDORING CORPORATION, petitioner-appellant,vs.COURT O TA! APPEALS "#$ %&' (ONORA)LECO**ISSIONER O INTERNALREVENUE, respondents-appellees.

H. San Luis & V.L. Simbulan for petitioner-appellant.

PARAS, J.:

This is a petition for review of the October 21, 1968Decision + of the Court of Ta !ppeals in CT! Case "o.1#8#, $%u&on 'tevedorin( Corporation v. )on. *a+onOben, Co++issioner, ureau of nternal *evenue$,den in( the various clai+s for ta refund/ and the0ebruar 2 , 1969 *esolution of the sa+e court den in(the +otion for reconsideration.

)erein petitioner-appellant, in 1961 and 1962, for therepair and +aintenance of its tu(boats, i+ported variousen(ine parts and other e uip+ent for which it paid,under protest, the assessed co+pensatin( ta . 3nableto secure a ta refund fro+ the Co++issioner of nternal*evenue, on 4anuar 2, 196#, it filed a 5etition for*eview *ollo, pp. 1#-187 with the Court of Ta !ppeals,doc eted therein as CT! Case "o. 1#8#, pra in( a+on(others, that it be (ranted the refund of the a+ount of5 ,##2.1 . The Court of Ta !ppeals, however, in aDecision dated October 21, 1969 Ibid ., pp. 22-2:7,denied the various clai+s for ta refund. The decretalportion of the said decision reads;

svarious clai+s for refund a+ountin( to5 ,##2.1 without sufficient le(al

?ustification, the said clai+s have to be,as the are hereb , denied. s tu(boats$ can be interpreted to be included inthe ter+ $car(o vessels$ for purposes of the tae e+ption provided for in 'ection 19 of the "ational

nternal *evenue Code, as a+ended b *epublic !ct"o. 1:6.

'aid law provides;

'ec. 19 . Compensating tax . B ... !nd5rovided further, That the ta i+posedin this section shall not appl to articlesto be used b the i+porter hi+self in the+anufacture or preparation of articlessub?ect to specific ta or those forconsi(n+ent abroad and are to for+part thereof or to articles to be used bthe i+porter hi+self as passen(erand or car(o vessel, whether coastwiseor ocean(oin(, includin( en(ines andspare parts of said vessel. ....

5etitioner contends that tugboats are e+braced andincluded in the ter+ cargo vessel under the tae e+ption provisions of 'ection 19 of the *evenueCode, as a+ended b *epublic !ct. "o. 1:6. )ear(ues that in le(al conte+plation, the tu(boat and abar(e loaded with car(oes with the for+er towin( thelatter for loadin( and unloadin( of a vessel in part,constitute a sin(le vessel. !ccordin(l , it concludes thatthe en(ines, spare parts and e uip+ent i+ported b itand used in the repair and +aintenance of its tu(boatsare e e+pt fro+ co+pensatin( ta *ollo, p. 2 7.

On the other hand, respondents-appellees counter thatpetitioner-appellant>s $tu(boats$ are not $Car(o vessel$because the are neither desi(ned nor used for carr in(and or transportin( persons or (oods b the+selves butare +ainl e+plo ed for towin( and pullin( purposes. !ssuch, it cannot be clai+ed that the tu(boats in uestionare used in carr in( and transportin( passen(ers orcar(oes as a co++on carrier b water, either coastwiseor ocean(oin( and, therefore, not within the purview of'ection 19 of the Ta Code, as a+ended b *epublic

!ct "o. 1:6 rief for *espondents-!ppellees, pp. #A7.


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This Court has laid down the rule that $as the power ofta ation is a hi(h prero(ative of soverei(nt , therelin uish+ent is never presu+ed and an reduction ordi+unition thereof with respect to its +ode or its rate,+ust be strictl construed, and the sa+e +ust becoached in clear and un+ista able ter+s in order that it+a be applied.$ 8# C.4.'. pp. 6A9-8 7, @orespecificall stated, the (eneral rule is that an clai+ fore e+ption fro+ the ta statute should be strictlconstrued a(ainst the ta pa er !ctin( Co++issioner ofCusto+s v. @anila =lectric Co. et al., 69 'C*! #69

19::E and Co++issioner of nternal *evenue v. 5.4.Fiener Co. %td., et al., 6A 'C*! 1#2 19:AE7.

!s correctl anal &ed b the Court of Ta !ppeals, inorder that the i+portations in uestion +a be declarede e+pt fro+ the co+pensatin( ta , it is indispensablethat the re uire+ents of the a+endator law beco+plied with, na+el ; 17 the en(ines and spare parts+ust be used b the i+porter hi+self as a passen(erand or car(o, vessel/ and 27 the said passen(er and orcar(o vessel +ust be used in coastwise or ocean(oin(navi(ation Decision, CT! Case "o. 1#8#/ *ollo, p. 2#7.

!s pointed out b the Court of Ta !ppeals, thea+endator provisions of *epublic !ct "o. 1:6 li+it tae e+ption fro+ the co+pensatin( ta to i+ported ite+sto be used b the i+porter hi+self as operator ofpassen(er and or car(o vessel Ibid ., p. 2A7.

!s uoted in the decision of the Court of Ta !ppeals, atu(boat is defined as follows;

! tugboat is a stron(l built, powerfulstea+ or power vessel, used for towin(

and, now, also used for attendance onvessel.


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*ANUEL ). PINEDA, "4 o#' o5 %&' &'6 4 o5 $'7'"4'$ATANASIO PINEDA, respondent.

"ffice of t#e Solicitor $eneral for petitioner.Manuel %. ineda for and in #is o n be#alf asrespondent.

)ENGZON, J.P., J.:

On @a 2 , 19#A !tanasio 5ineda died, survived b hiswife, 0elicisi+a a(tas, and 1A children, the eldest ofwho+ is @anuel . 5ineda, a law er. =stateproceedin(s were had in the Court of 0irst nstance of@anila Case "o. :11297 wherein the survivin( widowwas appointed ad+inistratri . The estate was divideda+on( and awarded to the heirs and the proceedin(ster+inated on 4une 8, 19#8. @anuel . 5ineda>s sharea+ounted to about 52,A . .

!fter the estate proceedin(s were closed, the ureau ofnternal *evenue investi(ated the inco+e ta liabilit of

the estate for the ears 19#A, 19#6, 19#: and 19#8 andit found that the correspondin( inco+e ta returns werenot filed. Thereupon, the representative of the Collectorof nternal *evenue filed said returns for the estate onthe basis of infor+ation and data obtained fro+ theaforesaid estate proceedin(s and issued an assess+entfor the followin(;

1. Deficienc inco+e ta19#A 51 A.819#6 # 6.9A

19#: 1,2 6.91 51,::9.69 !dd; AJ surchar(e 88.981J +onthl interest fro+"ove+ber , 19A to

!pril 1A, 19A: :2 .::Co+pro+ise for late filin( 8 .Co+pro+ise for latepa +ent # .

Total a+ount due 52,: :.##KKKKKKKKKKK

2. !dditional residence ta for19#A51#.A

KKKKKKKKKKK. *eal =state dealer>s ta for the

fourth uarter of 19#6 and thewhole ear of 19#:

52 :.AKKKKKKKKKKK

@anuel . 5ineda, who received the assess+ent,contested the sa+e. 'ubse uentl , he appealed to theCourt of Ta !ppeals alle(in( that he was appealin($onl that proportionate part or portion pertainin( to hi+as one of the heirs.$

!fter hearin( the parties, the Court of Ta !ppealsrendered ?ud(+ent reversin( the decision of theCo++issioner on the (round that his ri(ht to assess and

collect the ta has prescribed. The Co++issionerappealed and this Court affir+ed the findin(s of the TaCourt in respect to the assess+ent for inco+e ta for the

ear 19#: but held that the ri(ht to assess and collectthe ta es for 19#A and 19#6 has not prescribed. 0or19#A and 19#6 the returns were filed on !u(ust 2#,19A / assess+ents for both ta able ears were +adewithin five ears therefro+ or on October 19, 19A / andthe action to collect the ta was filed within five earsfro+ the latter date, on !u(ust :, 19A:. 0or ta able ear19#:, however, the return was filed on @arch 1, 19#8/the assess+ent was +ade on October 19, 19A , +orethan five ears fro+ the date the return was filed/ hence,the ri(ht to assess inco+e ta for 19#: had prescribed.

!ccordin(l ,


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received fro+ the inheritance. )is liabilit , however,cannot e ceed the a+ount of his share. #

!s a holder of propert belon(in( to the estate, 5ineda isliable for he ta up to the a+ount of the propert in hispossession. The reason is that the Govern+ent has alien on the 52,A . received b hi+ fro+ the estate ashis share in the inheritance, for unpaid inco+eta es #a for which said estate is liable, pursuant to the last

para(raph of 'ection 1A of the Ta Code, which weuote hereunder;

f an person, corporation, partnership, ?oint-account cuenta en participacion 7, association,or insurance co+pan liable to pa the inco+eta , ne(lects or refuses to pa the sa+e afterde+and, the a+ount shall be a lien in favor ofthe Govern+ent of the 5hilippines fro+ the ti+ewhen the assess+ent was +ade b theCo++issioner of nternal *evenue until paidwith interest, penalties, and costs that +aaccrue in addition thereto upon all propert andri(hts to propert belon(in( to the ta pa er; . . .

virtue of such lien, the Govern+ent has the ri(ht tosub?ect the propert in 5ineda>s possession, i.e., the52,A . , to satisf the inco+e ta assess+ent in thesu+ of 5:6 .28. !fter such pa +ent, 5ineda will have ari(ht of contribution fro+ his co-heirs, A to achieve anad?ust+ent of the proper share of each heir in thedistributable estate.

!ll told, the Govern+ent has two wa s of collectin( theta in uestion. One, b (oin( after all the heirs andcollectin( fro+ each one of the+ the a+ount of the ta

proportionate to the inheritance received. This re+edwas adopted in $overnment of t#e #ilippine Islands v.amintuan , supra . n said case, the Govern+ent filed an

action a(ainst all the heirs for the collection of the ta .This action rests on the concept that hereditar propertconsists onl of that part which re+ains after thesettle+ent of all lawful clai+s a(ainst the estate, for thesettle+ent of which the entire estate is first liable. 6 Thereason wh in case suit is filed a(ainst all the heirs theta due fro+ the estate is levied proportionatel a(ainstthe+ is to achieve thereb two results; first, pa +ent ofthe ta / and second, ad?ust+ent of the shares of eachheir in the distributed estate as lessened b* t#e tax .

!nother re+ed , pursuant to the lien created b 'ection1A of the Ta Code upon all propert and ri(hts to

propert belon(in( to the ta pa er for unpaid inco+eta , is b sub?ectin( said propert of the estate which isin the hands of an heir or transferee to the pa +ent ofthe ta due, the estate. This second re+ed is the veravenue the Govern+ent too in this case to collect theta . The ureau of nternal *evenue should be (iven, ininstances li e the case at bar, the necessar discretionto avail itself of the +ost e peditious wa to collect theta as +a be envisioned in the particular provision ofthe Ta Code above uoted, because ta es are the

lifeblood of (overn+ent and their pro+pt and certainavailabilit is an i+perious need. : !nd as afore-stated inthis case the suit see s to achieve onl one ob?ective;pa +ent of the ta . The ad?ust+ent of the respectiveshares due to the heirs fro+ the inheritance, as lessenedb the ta , is left to await the suit for contribution b theheir fro+ who+ the Govern+ent recovered said ta .

s fi ed ta for the fourth uarter of 19#6and for the whole ear 19#:, without pre?udice to hisri(ht of contribution for his co-heirs. "o costs. 'oordered.

Concepcion, C.!., +e*es, !.%.L., i on, Ma alintal,/aldivar, Sanc#e , Castro, 0ngeles and 1ernando, !!.,concur.

G.*. "o. %-:988, L@C! @anila v. Collector of nternal

*evenue*epublic of the 5hilippinesSUPRE*E COURT@anila=" !"CD=C ' O"T(E OUNG *EN S C(RISTIAN ASSOCIATION O*ANILA , plaintiff-appellant,vs.T(E COLLECTOR O INTERNAL REVENUE ,defendant-appellee.Haussermann, Co#n and 1is#er for appellant. Cit*

0ttorne* 2scaler for appellee.*ORELAND, J. :The uestion at issue in this case is whether or not thebuildin( and (rounds of the Loun( @en>s Christian

!ssociation of @anila are sub?ect to ta ation, undersection #8 of the charter of the cit of @anila uoted inthe footnote s llabusE.The cit of @anila, contendin( that the propert ista able, assessed it and levied a ta thereon. t was paidunder protest and this action be(un to recover it on the(round that the propert was e e+pt fro+ ta ation underthe charter of the cit of @anila. The decision was for thecit and the association appealed.The Loun( @en>s Christian !ssociation ca+e to the5hilippine with the ar+ of occupation in 1898.


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was decided to conduct a ca+pai(n to secure funds foran ade uate and per+anent association. n the na+e ofthe international co++ittee and friends in !+erica @r.@ott (uaranteed 51: , for the construction of abuildin( on condition that friend in the 5hilippines securethe site and ade uatel furnish the buildin(. Theca+pai(n for funds was be(un here on 0ebruar 1A,19 :, and, b the 1Ath of @arch followin(, 58 , wassubscribed, nearl one thousand different personscontributin(. Thereupon the Loun( @en>s Christian

!ssociation of @anila was incorporated under the law ofthe 5hilippine slands and received its character in 4une,19 :.

! site for the new buildin( was selected on CalleConcepcion, =r+ita, and the buildin( contract was let onthe 8th of 4anuar followin(. The cornerstone was laidwith appropriate cere+onies on 4ul 1 , 19 8, and thebuildin( was for+all dedicated on October 2 , 19 9.The buildin( is co+posed of three parts. The +ainstructure, located in the center, is three stories hi(h andincludes a reception hall, social hall and (a+e roo+s,lecture roo+, librar , readin( roo+ and roo+in(apart+ents. The s+all buildin( l in( to the left of theprincipal structure, as one faces the front fro+ CalledConcepcion, is the itchen and servant>s uarters. Thelar(e win( to the ri(ht is nown as the athletic buildin(,where the bowlin( alle s, swi++in( pool, loc er roo+sand ( +nasiu+-auditoriu+ are located. Theconstruction is of reinforced concrete with steel trussedroof covered with interloc in( red tiles.The +ain or central portion of the buildin( is 1A b #Afeet and stands 2 +eters bac fro+ the sidewal . !niron canop , suspended b brac ets, pro?ects over thedrivewa which lies in front and shelters the +ainentrance. ! wide arched doorwa opens into a lar(ereception roo+, on the left of which is the public office

and the secretar >s private office, while on the ri(ht is thereadin( and writin( roo+s, and be ond that the librar ,each about feet s uare. 0ro+ the reception roo+, onthe left, a broad concrete stairwa leads to the secondfloor.5assin( out of the rear of the reception hall one entersupon a veranda so+e 1A feet in width runnin( the fulllen(th of the +ain structure which loo s out on thetennis courts and affords an e cellent place for loun(in(,(a+es and (eneral social purposes. To the left of theentrance hall and also openin( upon the veranda aretwo lar(e roo+s of about the sa+e si&e as those on theri(ht of the reception hall, the first bein( the billiard roo+and the other the restaurant. The athletic buildin( isentered fro+ the rear veranda. t is a two stor win( 68b 8A feet. 5assin( fro+ the veranda into the athletic hallone finds first, on the left, the toilet roo+, and be ondthis, to the rear, the shower baths and loc er roo+s. Theswi++in( pool is in the center of the athletic win( and is6 b 19 feet in si&e, lined with ce+ent. To the ri(ht ofthe swi++in( pool are the bowlin( alle s. ! widestairwa s leads to the second floor. !bove theswi++in(-pool and bowlin( alle is a lar(e roo+ A b8A feet which is the ( +nasiu+ and also the auditoriu+when occasion re uires. !bout one-third of the roofconvertin( the athletic win( is used as a roof (arden.

The second and third floors of the +ain buildin( are(iven over al+ost wholl to roo+in( apart+ents andbaths. On the second floor over the entrance hall is a+e+bers> parlor, fro+ which a s+all balcon pro?ectsover the +ain entrance. The re+ainder of the secondfloor and all to the third are co+posed of the livin(roo+s. These apart+ents, of which there are 1# on thesecond and 2 on the third floor are appro i+atel 18 b1# feet each. The provide acco++odations for 6# +en.The purposes of the association, as set forth in itscharter and constitution, are;To develop the Christian character and usefulness of its+e+bers, to i+prove the spiritual, intellectual, social andph sical condition of oun( +en, and to ac uire, hold,+ort(a(e, and dispose of the necessar lands, buildin(sand personal propert for the use of said corporatione clusivel for reli(ious, charitable and educationalpurposes, and not for invest+ent or profit.The purposes of this association shall be e clusivelreli(ious, charitable and educational, in developin( theChristian character and usefulness of its +e+bers andin i+provin( the spiritual, +ental, social and ph sicalcondition of oun( +en.'pea in( (enerall , the association clai+s e e+ptionfro+ ta ation on the (round that it is a reli(ious,charitable and educational institution co+bined. That ithas an educational depart+ent is not denied. t isundisputed that the ai+ of this depart+ent is to furnish,at +uch less than cost, instruction in sub?ects that will(reatl increase the +ental efficienc and wa(e-earnin(capacit of oun( +en, prepare the+ in special lines ofbusiness and offer the+ special lines of stud . !ttentionis (iven to sub?ects included in civil service and consulare a+inations both here and in the 3nited 'tates. Thecourses offer co++ercial sub?ects, as well as +anothers, and include steno(raph and t pewritin(,

boo eepin(, arith+etic, =n(lish co+position, forei(nlan(ua(es, includin( ele+entar and advanced 'panishand Ta(alo(, special courses in 5hilippine histor , publicspea in(, surve in(, horticulture, tropical dependencies,and the (roup of sub?ects re uired for entrance into theconsular services, such as political econo+ , !+ericanand +odern histor . Courses are also offered in law,social, ethics, political econo+ and other sub?ects.The institution has also its reli(ious depart+ent. n thatdepart+ent there are, (enerall spea in(, three +ainlines of wor - ible stud , reli(ious +eetin(s andspecial classes. Course are offered in the %ife of Christand the Old Testa+ent and in the lar(er socialsi(nificance of the teachin(s of 4esus. @eetin(s are heldon 'unda afternoons and several ti+es durin( thewee and courses are offered in the stud of +issions, inthe +ethod of teachin( the ible and indred sub?ects.The at+osphere of the Loun( @en>s Christian

!ssociation is distinctl reli(ious and there is constanteffort on the part of the officials to create a reli(iousspirit/ and to that end there is continuous pressure toinduce +e+bers to attend not onl the reli(ious servicesof the association but also those of one or another of thechurches of @anila.


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reli(ion. !ll of the officials of the association are devotedChristians, +e+bers of a church, and have dedicatedtheir lives to the spread of the Christian principles andbuildin( of Christian character.The institution also has charitable features. t +a es noprofit on an of its activities. The professors andinstructors in all depart+ents serve without pa andfreel (ive of their ti+e and abilit to further the purposesof the institution. The chief secretar and his assistantreceive no salar fro+ the institution. sChristian !ssociation of @anila in the su+ of 56,221. A.


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*" 7o4 II ;4. CA

2 3 SCRA 199

0acts;

0erdinand @arcos assailed the decision ofthe C! declarin( the deficienc inco+e ta assess+entsupon the estate and the properties of his late father finaldespite the pendenc of the probate proceedin(s of thewill of the late president. On the other hand, the *ar(ued that the state authorit to collect ta es ispara+ount.

ssue; is the approval of the court +andatorre uire+ent in the collection of ta esM

*ulin(;

"o. the enforce+ent of ta laws and collectionof ta es are of para+ount i+portance for the sustenanceof (overn+ent. Ta es are the lifeblood of the(overn+ent and should be collected withoutunnecessar hindrance. )owever, such collection shouldbe +ade in accordance with law as an arbitrariness willne(ate the ver reason for (overn+ent itself. t istherefore necessar to reconcile the apparentlconflictin( interest of the authorities and the ta pa ersso that the real purpose of ta ation, which is thepro+otion of the co++on (ood, +a be achieved.

0erdinand *. @arcos assailed the decision ofthe Court of !ppeals declarin( the deficienc inco+e taassess+ents and estate ta assess+ents upon theestate and properties of his late father despite the

pendenc of the probate proceedin(s of the will of thelate 5resident. On the other hand, the * ar(ued thatthe 'tateNs authorit to collectinternal revenue ta es ispara+ount.

5etitioner further ar(ues that $the nu+erous pendin(court cases uestionin( the late president>s ownership orinterests in several properties both real and personal7+a e the total value of his estate, and the conse uentestate ta due, incapable of e act pecuniardeter+ination at this ti+e. Thus, respondents>assess+ent of the estate ta and their issuance of the"otices of %ev and sale are pre+ature and oppressive.$)e points out the pendenc of 'andi(anba an CivilCase "os. 1- # and 1#1, which were filed b the(overn+ent to uestion the ownership and interests ofthe late 5resident in real and personal properties locatedwithin and outside the 5hilippines. 5etitioner, however,o+its to alle(e whether the properties levied upon b the

* in the collection of estate ta es upon the decedent>sestate were a+on( those involved in the said casespendin( in the 'andi(anba an. ndeed, the court is at aloss as to how these cases are relevant to the +atter atissue. The +ere fact that the decedent has pendin(cases involvin( ill-(otten wealth does not affect theenforce+ent of ta assess+ents over the properties

indubitabl included in his estate.

ssue; s the contention of @arcos correctM

)eld; "o. The approval of the court, sittin( in probate oras a settle+ent tribunal over the deceasedNs estate, isnot a +andator re uire+ent in the collection of estateta es.

There is nothin( in the Ta Code, and in the pertinentre+edial laws that i+plies the necessit of the probate orestate settle+ent court>s approval of the state>s clai+ forestate ta es, before the sa+e can be enforced andcollected.

The enforce+ent of ta laws and the collection of ta esare of para+ount i+portance for the sustenance of(overn+ent. Ta es are the lifeblood of (overn+ent andshould be collected without unnecessar hindrance.)owever, such collection should be +ade in accordancewith law as an arbitrariness will ne(ate the e istence of(overn+ent itself.

t is not the Depart+ent of 4ustice which is the(overn+ent a(enc tas ed to deter+ine the a+ount ofta es due upon the sub?ect estate, but the ureau of

nternal *evenue whose deter+inations andassess+ents are presu+ed correct and +ade in (oodfaith. The ta pa er has the dut of provin( otherwise. nthe absence of proof of an irre(ularities in theperfor+ance of official duties, an assess+ent will not bedisturbed. =ven an assess+ent based on esti+atesis prima facie valid and lawful where it does not appearto have been arrived at arbitraril or capriciousl . Theburden of proof is upon the co+plainin( part to showclearl that the assess+ent is erroneous. 0ailure to

present proof of error in the assess+ent will ?ustif the ?udicial affir+ance of said assess+ent. n this instance,petitioner has not pointed out one sin(le provision in the@e+orandu+ of the 'pecial !udit Tea+ which (ave riseto the uestioned assess+ent, which bears a trace offalsit . ndeed, the petitioner>s attac on the assess+entbears +ainl on the alle(ed i+probable andunconscionable a+ount of the ta es char(ed. ut +ererhetoric cannot suppl the basis for the char(e ofi+propriet of the assess+ents +ade.7

*epublic of the 5hilippines

SUPRE*E COURT@anila

=" !"C

G.R. No. L-182 J"#u" y 12, 19

C. N. (ODGES, petitioner-appellee,vs.T(E *UNICIPAL )OARD O T(E CIT O ILOILO *etiro de @anresa

I44u': 'hould *o as Cia be considered a real estatedealer because it en(a(ed in the business of sellin( realestate

Rul6#>: "O, bein( an isolated transactionU R'"l '4%"%' $'"l' ; an person en(a(ed in thebusiness of bu in(, sellin(, e chan(in(, leasin( orrentin( propert on his own account as principal andholdin( hi+self out as a full or part-ti+e dealer in realestate or as an o ner of rental propert* or propertiesrented or offered to rent for an aggregate amount oft#ree t#ousand pesos or more a *ear ;U 'ection 19# of the Ta Code, in considerin( asreal estate dealers owners of real estate receivin(rentals of at least 5 , . a ear, does not providean ualification as to the persons pa in( the rentalsU The fact that there were hundreds of vendees andthe+ bein( paid for their respective holdin(s ininstall+ent for a period of ten ears, it wouldnevertheless not +a e the vendor *o as Cia. a realestate dealer durin( the 1 - ear a+orti&ation periodU the sale of the "asu(bu far+ lands to the verfar+ers who tilled the+ for (enerations was not onl inconsonance with, but +ore in obedience to the re uestand pursuant to the polic of our Govern+ent to allocatelands to the landlessU t was the dut of the Govern+ent to pa thea(reed co+pensation after it had persuaded *o as

Cia. to sell its haciendas, and to subse uentl subdividethe+ a+on( the far+ers at ver reasonable ter+s andprices. ut due to the lac of funds, *o as Cia.shouldered the Govern+ent>s burden, went out of itswa and sold lands directl to the far+ers in the sa+ewa and under the sa+e ter+s as would have been thecase had the Govern+ent done it itself U The power of ta ation is so+eti+es called also thepower to destro . Therefore it should be e ercised withcaution to +ini+i&e in?ur to the proprietar ri(hts of ata pa er. t +ust be e ercised fairl , e uall andunifor+lU Therefore, *o as Cia. cannot be considered areal estate dealer for the sale in uestion. )ence,pursuant to 'ection # of the Ta Code the lands sold tothe far+ers are capital assets, and the (ain derived fro+the sale thereof is capital (ain, ta able onl to the e tentof A J

As to the deductions

a. 5# tic ets to a ban uet (iven in honor of 'er(ioOs+ena and 528 'an @i(uel beer (iven as (ifts tovarious persons V representation e pensesU *epresentation e penses; deductible fro+ (rossinco+e as e penditures incurred in carr in( on a tradeor business

U n this case, the evidence does not show such linbetween the e penses and the business of *o as Ciab. Contributions to the 5asa police and firedepart+ent and other police depart+ents as Christ+asfundsU Contributions to the Christ+as funds are notdeductible for the reason that the Christ+as funds werenot spent for public purposes but as Christ+as (ifts tothe fa+ilies of the +e+bers of said entitiesU 3nder 'ection 9 h7, a contribution to a(overn+ent entit is deductible when used e clusivelfor public purposesU !s to the contribution to the @anila 5olice trustfund, such is an allowable deduction for said trust fundbelon(s to the @anila 5olice, a (overn+ent entit ,intended to be used e clusivel for its public functions.c. Contributions to the 5hilippines )erald>s fund for@anila>s neediest fa+iliesU The contributions were not +ade to the5hilippines )erald but to a (roup of civic spirited citi&ensor(ani&ed b the 5hilippines )erald solel for charitablepurposesU There is no uestion that the +e+bers of this(roup of citi&ens do not receive profits, for all the fundsthe raised were for @anila>s neediest fa+ilies. 'uch a(roup of citi&ens +a be classified as an associationor(ani&ed e clusivel for charitable purposes +entionedin 'ection h7 of the Ta Coded. Contribution to Our %ad of 0ati+a chapel at the0=3U 3niversit (ives dividends to its stoc holdersU %ocated within the pre+ises of the universit , thechapel in uestion has not been shown to belon( to theCatholic Church or an reli(ious or(ani&ationU The contributions belon(s to the 0ar =astern3niversit , contributions to which are not deductible

under 'ection h7 of the Ta Code for the reason thatthe net inco+e of said universit in?ures to the benefit ofits stoc holders

"o deficienc inco+e ta is due for 19A fro+ !ntonio*o as, =duardo *o as and 4ose *o as. 0or 19AA theare liable to pa deficienc inco+e ta in the su+ of51 9. , 591. and 5#9. , respectivel

'ison vs !nchetaGR No. L- 9 31, 2 July 198

"7%4: 'ection 1 of 5 l( 1 A a+ended the Ta Codeand petitioner !ntero @. 'ison, as ta pa er, alle(es that$he would be undul discri+inated a(ainst b thei+position of hi(her rates of ta upon his inco+e arisin(fro+ the e ercise of his profession vis-a-vis those whichare i+posed upon fi ed inco+e or salaried individualta pa ers. )e characteri&es said provision as arbitrara+ountin( to class le(islation, oppressive and capriciousin character. t therefore violates both the e ualprotection and due process clauses of the Constitutionas well asof the rule re uirin( unifor+it in ta ation.

I44u':


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e ual protection and due process clauses of theConstitution while also violatin( the rule that ta es +ustbe unifor+ and e uitable.

('l$: The petition is without +erit.On due process - it is undoubted that it +a be invo edwhere a ta in( statute is so arbitrar that it finds nosupport in the Constitution. !n obvious e a+ple is whereit can be shown to a+ount to the confiscation of propertfro+ abuse of power. 5etitioner alle(es arbitrariness buthis +ere alle(ation does not suffice and there +ust be afactual foundation of such unconsitutional taint.On e ual protection - it suffices that the laws operatee uall and unifor+l on all persons under si+ilarcircu+stances, both in the privile(es conferred and theliabilities i+posed.On the +atter that the rule of ta ation shall be unifor+and e uitable - this re uire+ent is +et when the taoperates with the sa+e force and effect in ever placewhere the sub?ect +a be found.$ !lso, ;the rule ofunifor+it does not call for perfect unifor+it or perfecte ualit , because this is hardl unattainable.$ '4%4

0ACTS: 5ascual, in his official capacit as the 5rovincialGovernor of *i&al, petitioned for a writ of certioraria(ainst the dis+issal of the case and dissolvin( of thepreli+inar in?unction held b the Court of the 0irst

nstance. 5etitioner pra ed for that *! W92 be declarednull and void, that the alle(ed Deed of Donation +ade bSulueta be declared unconstitutional. 5etitioner alsopra ed for an in?unction en?oinin( 'ecretar of 5ublic


15/18

or revo e e istin( ones, which, after all, under theConstitution, onl the le(islature +a acco+plish.

The 0 * +a onl reco++end ta e e+ptions. itself, it could not have validl prescribed e e+ptions orrestore ta abilit . )ence, as of 4une 11, 198#

pro+ul(ation of 5D 19 17, "!5OCO* had ceased toen?o ta e e+ption privile(es. The fact that under =O9 , the 0 * has been (iven the prero(ative to $restoreta and or dut e e+ptions withdrawn hereunder inwhole or in part,$ and $i+pose conditions for ... taand or dut e e+ption$ is of no +o+ent.Theseprovisions are prospective in character and cannot affect the oard>s past acts.

t is to be stressed that the provincial (overn+ent of !lba ad+its that as of @arch 1 , 198: the date*esolution "o. 1:-8: was affir+ed b the @e+orandu+of the Office of the 5resident, dated October A, 198:7,"!5OCO*>s e e+ption had been validl restored. s clai+ for uarters allowanceas +ana(er of the "ational !baca and Other 0ibersCorporation, otherwise nown as the "!0CO.

t appears that petitioner was in 19#9 the +ana(er of the"!0CO with a salar of 51A, a ear. a resolutionof the oard of Directors of this corporation approved on4anuar 19 of that ear, he was (ranted uartersallowance of not e ceedin( 5# a +onth effective thefirst of that +onth. 'ub+itted the Control Co++ittee ofthe Govern+ent =nterprises Council for approval, thesaid resolution was on !u(ust , 19#9, disapproved bthe said Co++ittee on stren(ht of the reco++endationof the "!0CO auditor, concurred in b the !uditorGeneral, 17 that uarters allowance constitutedadditional co+pensation prohibited b the charter of the"!0CO, which fi es the salar of the (eneral +ana(erthereof at the su+ not to e ceed 51A, a ear, and 27that the precarious financial condition of the corporationdid not warrant the (rantin( of such allowance.

On @arch 16, 19#9, the petitioner as ed the ControlCo++ittee to reconsider its action and approve his clai+for allowance for 4anuar to 4une 1A, 19#9, a+ountin(to 51,6A . The clai+ was a(ain referred b the ControlCo++ittee to the auditor General for co++ent. Thelatter, in turn referred it to the "!0CO auditor, whoreaffir+ed his previous reco++endation ande+phasi&ed that the fact that the corporation>s financeshad not i+proved. n view of this, the auditor Generalalso reiterated his previous opinion a(ainst the (rantin(of the petitioner>s clai+ and so infor+ed both the ControlCo++ittee and the petitioner. ut as the petitionerinsisted on his clai+ the !uditor General nfor+ed hi+on 4une 19, 19A , of his refusal to +odif his decision.)ence this petition for review.


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The "!0CO was created b the Co++onwealth !ct "o.2, approved on 4une 18, 19 9, with a capital stoc of

52 , , , A1 per cent of which was to be able to besubscribed b the "ational Govern+ent and there+ainder to be offered to provincial, +unicipal, and thecit (overn+ents and to the (eneral public. The+ana(e+ent the corporation was vested in a board ofdirectors of not +ore than A +e+bers appointed b thepresident of the 5hilippines with the consent of theCo++ission on !ppoint+ents. ut the corporation was+ade sub?ect to the provisions of the corporation law inso far as the were co+patible with the provisions of itscharter and the purposes of which it was created andwas to en?o the (eneral powers +entioned in thecorporation law in addition to those (ranted in its charter.The +e+bers of the board were to receive each a perdiem of not to e ceed 5 for each da of +eetin(actuall attended, e cept the chair+an of the board, whowas to be at the sa+e ti+e the (eneral +ana(er of thecorporation and to receive a salar not to e ceed51A, per annu+.

On October #, 19#6, *epublic !ct "o. A1 was approvedauthori&in( the 5resident of the 5hilippines, a+on( otherthin(s, to effect such refor+s and chan(es in(overn+ent owned and controlled corporations for thepurpose of pro+otin( si+plicit , econo+ and efficiencin their operation 5ursuant to this authorit , the5resident on October #, 19#:, pro+ul(ated = ecutiveOrder "o. 9 creatin( the Govern+ent =nterprisesCouncil to be co+posed of the 5resident of the5hilippines as chair+an, the 'ecretar of Co++erceand ndustr as vice-chair+an, the chair+an of theboard of directors and +ana(in( heads of all suchcorporations as e -officio +e+bers, and such additional+e+bers as the 5resident +i(ht appoint fro+ ti+e to

ti+e with the consent of the Co++ission on !ppoint+ents. The council was to advise the 5residentin the e cercise of his power of supervision and controlover these corporations and to for+ulate and adopt suchpolic and +easures as +i(ht be necessar tocoordinate their functions and activities. The = ecutiveOrder also provided that the council was to have aControl Co++ittee co+posed of the 'ecretar ofCo++erce and ndustr as chair+an, a +e+ber to bedesi(nated b the 5resident fro+ a+on( the +e+bersof the council as vice-chair+an and the secretar as ex-officio +e+ber, and with the power, a+on( others B

17 To supervise, for and under the direction ofthe 5resident, all the corporations owned orcontrolled b the Govern+ent for the purpose ofinsurin( efficienc and econo+ in theiroperations/

27 To pass upon the pro(ra+ of activities andthe earl bud(et of e penditures approved bthe respective oards of Directors of the saidcorporations/ and

7 To carr out the policies and +easuresfor+ulated b the Govern+ent =nterprisesCouncil with the approval of the 5resident. 'ec.

, = ecutive Order "o. 9 .7

s bud(et. That the Control Co++ittee had(ood (rounds for disapprovin( the resolution is alsoclear, for, as pointed out b the !uditor General and the"!0CO auditor, the (rantin( of the allowance a+ountedto an ille(al increase of petitioner>s salar be ond theli+it fi ed in the corporate charter and was further+orenot ?ustified b the precarious financial condition of thecorporation.

t is ar(ued, however, that = ecutive Order "o. 9 is nulland void, not onl because it is based on a law that isunconstitutional as an ille(al dele(ation of le(islaturepower to e ecutive, but also because it was pro+ul(atedbe ond the period of one ear li+ited in said law.

The second (round i(nores the rule that in theco+putation of the ti+e for doin( an act, the first da ise cluded and the last da included 'ection 1 *ev. !d.Code.7 !s the act was approved on October #, 19#6,and the 5resident was (iven a period of one ear withinwhich to pro+ul(ate his e ecutive order and that theorder was in fact pro+ul(ated on October #, 19#:, it isobvious that under the above rule the said e ecutiveorder was pro+ul(ated within the period (iven.

!s to the first (round, the rule is that so lon( as the%e(islature $la s down a polic and a standard isestablished b the statute$ there is no undue dele(ation.

11 !+. 4ur. 9A:7. *epublic !ct "o. A1 in authori&in( the5resident of the 5hilippines, a+on( others, to +a erefor+s and chan(es in (overn+ent-controlledcorporations, la s down a standard and polic that thepurpose shall be to +eet the e i(encies attendant uponthe establish+ent of the free and independent(overn+ent of the 5hilippines and to pro+ote si+plicit ,econo+ and efficienc in their operations. The standardwas set and the polic fi ed. The 5resident had to carr


17/18

the +andate. This he did b pro+ul(atin( the e ecutiveorder in uestion which, tested b the rule above cited,does not constitute an undue dele(ation of le(islativepower.

t is also contended that the uarters allowance is notco+pensation and so the (rantin( of it to the petitionerb the "!0CO board of directors does not contravenethe provisions of the "!0CO charter that the salar of

the chair+an of said board who is also to be (eneral+ana(er shall not e ceed 51A, per anu+. utre(ardless of whether uarters allowance should beconsidered as co+pensation or not, the resolution of theboard of the directors authori&in( pa +ent thereof to thepetitioner cannot be (iven effect since it wasdisapproved b the Control Co++ittee in the e ercise ofpowers (ranted to it b = ecutive Order "o. 9 . !nd inan event, petitioner>s contention that uarters allowanceis not co+pensation, a proposition on which !+ericanauthorities appear divided, cannot be insisted on behalfof officers and e+plo ees wor in( for the Govern+ent ofthe 5hilippines and its nstru+entalities, includin(,naturall , (overn+ent-controlled corporations. This is sobecause = ecutive Order "o. 2 of 19#1, whichprohibits the pa +ent of additional co+pensation tothose wor in( for the Govern+ent and its

nstru+entalities, includin( (overn+ent-controlledcorporations, was in 19#A a+ended b = ecutive Order"o. :: b e pressl e e+ptin( fro+ the prohibition thepa +ent of uarters allowance $in favor of local(overn+ent officials and e+plo ees entitled to thisunder e istin( law.$ The a+end+ent is a clear indicationthat uarters allowance was +eant to be included in theter+ $additional co+pensation$, for otherwise thea+end+ent would not have e pressl e cepted it fro+the prohibition. This bein( so, we hold that, for the

purpose of the e ecutive order ?ust +entioned, uartersallowance is considered additional co+pensation and,therefore, prohibited.

n view of the fore(oin(, the petition for review isdis+issed, with costs.

CO@@ '' O"=* O0 * H' C="T*!% %3SO" D*3GCO*5G* 1#8A12 4une 26, 2 6

!&cuna, 4.;0!CT';This is a petition for review under *ule #A of *ules ofCourt see in( the nullification of C! decision (rantin(respondentNs clai+ for ta e ual to the a+ount of the2 J that it e tended to senior citi&ens on the latterNspurchases pursuant to 'enior Citi&ens !ct. *espondentdeducted the total a+ount of 5hp219,::8 fro+ its (rossinco+e for the ta able ear 199A whereb respondentdid not pa ta for that ear reportin( a net loss of5hp2 ,96 in its corporate inco+e ta . n 1996, clai+in(that the 5hp219,::8 should be applied as a ta credit,respondent clai+ed for refund in the a+ount of 5hp1A ,19 .

''3=;


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as a +atter of ri(ht to ever independent (overn+ent,without bein( e pressl conferred b the people. t is apower that is purel le(islative and which the centralle(islative bod cannot dele(ate either to the e ecutiveor ?udicial depart+ent of the (overn+ent withoutinfrin(in( upon the theor of separation of powers. Thee ception, however, lies in the case of +unicipal

corporations, to which, said theor does not appl .%e(islative powers +a be dele(ated to local(overn+ents in respect of +atters of local concern. necessar i+plication, the le(islative power to createpolitical corporations for purposes of local self-(overn+ent carries with it the power to confer on suchlocal (overn+ental a(encies the power to ta .

!lso, there is no validit to the assertion that thedele(ated authorit can be declared unconstitutional onthe theor of double ta ation. t +ust be observed thatthe dele(atin( authorit specifies the li+itations and

enu+erates the ta es over which local ta ation +a notbe e ercised. The reason is that the 'tate hase clusivel reserved the sa+e for its own prero(ative.@oreover, double ta ation, in (eneral, is not forbiddenb our funda+ental law, so that double ta ationbeco+es obno ious onl where the ta pa er is ta edtwice for the benefit of the sa+e (overn+ental entit or

b the sa+e ?urisdiction for the sa+e purpose, but not ina case where one ta is i+posed b the 'tate and theother b the cit or +unicipalit . On the last issue raised, the ordinances do not parta eof the nature of a percenta(e ta on sales, or other ta esin an for+ based thereon. The ta is levied on theproduce whether sold or not7 and not on the sales. Thevolu+e capacit of the ta pa er>s production of softdrin s is considered solel for purposes of deter+inin(the ta rate on the products, but there is not set ratiobetween the volu+e of sales and the a+ount of the ta .

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