1.

LUTZ



2. VALENTIN TIO vs. VIDEOGRAM REGULATORY BOARD etal
G.R. No. L-75697 June 18, 1987

Facts:
The case is a petition filed by petitioner on behalf of videogram operators adversely affected by
Presidential Decree No. 1987, An Act Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry.

A month after the promulgation of the said Presidential Decree, the amended the National Internal
Revenue Code provided that:

SEC. 134. Video Tapes. an annual tax of five pesos; Provided, That locally manufactured or imported
blank video tapes shall be subject to sales tax.

Section 10. Tax on Sale, Lease or Disposition of Videograms. thirty percent (30%) of the purchase price
or rental rate, as the case may be, for every sale, lease or disposition of a videogram

Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty
percent (50%) shall accrue to the municipality

The rationale behind the tax provision is to curb the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes or any technical improvement or
variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such
unregulated circulation have caused a sharp decline in theatrical attendance and a tremendous drop in
the collection of sales, contractor's specific, amusement and other taxes.

The unregulated activities of videogram establishments have also affected the viability of the movie
industry.


Issues:
WON the the decree is constitutional.

Held:
The power to impose taxes is one so unlimited in force and so searching in extent, that the courts
scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the
discretion of the authority which exercises it. In imposing a tax, the legislature acts upon its
constituents. The tax imposed by the DECREE is not only a regulatory but also a revenue measure
prompted by the realization that earnings of videogram establishments of around P600 million per
annum have not been subjected to tax, thereby depriving the Government of an additional source of
revenue. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes.

3. PAL V. EDU
164 SCRA 320
FACTS:
Commissioner Edu imposed motor vehicle registration fees in pursuant of the Land Transportation and
Traffic Code. Under the franchise given to PAL, it shall be exempted from payment of taxes. In relation
to this, it was found out that it hasnt been paying its motor vehicle registration fees. By virtue of this, a
resolution was issued ordering tax-exempted entities to pay the corresponding registration fees.

ISSUE:
May the respondent administrative agency be required to refund the amounts stated in the complaint
of PAL?

HELD:
No. The purpose for the motor vehicle registration fee is mainly to raise funds for the construction and
maintenance of highways and to a much lesser degree, pay for the operating expenses of the
administrative agency.

If the primary purpose is revenue, or if revenue, at least is one of the real and substantial purposes, then
the exaction of property is called a tax. Such is the case of motor vehicle registration fees. In the
beginning, the intent for the registration fees was regulatory in purpose. Over the years however, a
vehicular traffic exploded in number and motor vehicles became absolute necessities without which
modern life as we know it would stand still, Congress found the registration of vehicles a very
convenient way of raising must needed revenues. Without changing their denomination, their nature
has become that of taxes.

4. CALTEX PHILIPPINES, INC., vs. COMMISSION ON AUDIT
G.R. No. 92585 May 8, 1992

Facts:
The Oil Price Stabilization Fund (OPSF) was created by PD1958, amended by EO 137, for the purpose of
minimizing frequent price changes brought about by exchange rate adjustments and/or changes in
world market prices of crude oil and imported petroleum products. It was to be sourced from tax
collections.

COA sent a letter to Caltex, directing it to remit its collection to the OPSF, excluding that unremitted for
1986 and 1988 of the additional tax on petroleum products authorized under Section 8 of PD 1956; and
that pending such remittance, all its claims for reimbursement from the OPSF shall be held in abeyance.

Caltex requested COA for an early release of its reimbursement certificates from the OPSF. It invoked in
support of such COA Circular No. 89-299 on the lifting of pre-audit of government transactions of
national government agencies and GOCCs. However, COA denied this, and repeated its earlier directive
to Caltex to forward payment of its unremitted collections to the OPSF.

Caltex ten submitted a proposal to COA for the payment and the recovery of claims. COA approved the
proposal but prohibited Caltex from further offseting remittances and reimbursements for the current
and ensuing years. Caltex moved for reconsideration.

Issues:
a. W/n Caltex can claim for reimbursement of under recovery arising from sales to NAPOCOR Y
b. W/n Caltex could be reimbursed on its sales to ATLAS and MARCOPPER-N
c. W/n the amounts due from Caltex to the OPSF may be offsetted against Caltex outstanding
claims from said funds-NO
Held:
a. The COA admits in their Comment that under recovery arising from sales to NPC are
reimbursable because NPC was granted full exemption from the payment of taxes; to prove this,
COA traces the laws providing for such exemption. The last law cited is the Fiscal Incentives
Regulatory Board's Resolution No. 17-87 of 24 June 1987 which provides, in part, "that the tax
and duty exemption privileges of the National Power Corporation, including those pertaining to
its domestic purchases of petroleum and petroleum products . . . are restored effective March
10, 1987." In a Memorandum issued on 5 October 1987 by the Office of the President, NPC's tax
exemption was confirmed and approved. Hence, Caltex can recover its claim arising from sales
of petroleum products to the National Power Corporation.

b. With respect to its claim for reimbursement on sales to ATLAS and MARCOPPER, Caltex relies on
Letter of Instruction (LOI) 1416 w/c ordered the suspension of payments of all taxes, duties, fees
and other charges, whether direct or indirect, due and payable by the copper mining companies
in distress to the national government. Pursuant to this LOI, Minister of Energy Velasco issued a
Memorandum Circular w/c advised oil companies that ATLAS and MARCOPPER mining corps are
among those declared to be in distress. COA denied such claim based on the fact that Caltex has
no authority to claim reimbursement for the uncollected impost because LOI-1416 was issued
when the OPSF was not yet existing and could not have contemplated OPSF imposts at the time
of its formulation. The LOI was also never published in the Official Gazette so it has no force and
effect. The SC said that even granting arguendo that the LOI has force and effect, Caltexs claim
must still fail. Tax exemptions as a general rule are construed strictly against the grantee and
liberally in favor of the taxing authority. The burden of proof rests upon the party claiming
exemption to prove that it is in fact covered by the exemption so claimed. The party claiming
exemption must therefore be expressly mentioned in the exempting law or at least be within its
purview by clear legislative intent.

In this case, CALTEX failed to prove that it is entitled, as a consequence of its sales to ATLAS and
MARCOPPER, to claim reimbursement from the OPSF under LOI 1416. Though LOI 1416 may
suspend the payment of taxes by copper mining companies, it does not give petitioner the same
privilege with respect to the payment of OPSF

c. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence
of government; taxes may be levied with a regulatory purpose to provide means for the
rehabilitation and stabilization of a threatened industry which is affected with public interest as
to be within the police power of the state. PD 1956, as amended by EO 137, explicitly provides
that the source of OPSF is taxation. A taxpayer may not offset taxes due from the claims that he
may have against the government. Taxes cannot be the subject of compensation because the
government and taxpayer are not mutually creditors and debtors of each other and a claim for
taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

Petitioner may not offset whatever claims it may have against the government in its payment of taxes.
A taxpayer may not offset taxes due from the claims that he may have against the government. Taxes
cannot be the subject of compensation because the government and taxpayers are not mutually
creditors and debtors of each other and a claim for taxes is not such a debt, demand or contract or
judgment as is allowed to be set-off.


5. Commissioner of Internal Revenue v. Algue

Facts:
The Phil. Sugar Estate Development Company (PSEDC) appointed Algue, Inc., a family corporation, as its
agent, authorizing it to sell its land, factories, and oil manufacturing process. Pursuant to this authority,
five members of the family corporation formed the Vegetable Oil Investment Corp. and induced other
persons to invest in it. The newly formed corporation then purchased the PSEDC properties. For this
sale, PSEDC gave Algue, Inc. a commission of P125,000. From this amount, Algue Inc. paid the five
family members P75,000 as promotional fees.

Algue, Inc. declared this P75,000 as a deduction from its income tax as a legitimate business expense.
The CIR questioned the deduction, claiming that it was not an ordinary, reasonable, or necessary
expense and was merely an attempt to evade payment of taxes.

Issue:
WON the P75,000 is tax-deductible as a legitimate business expense of Algue, Inc.

Held:
Yes, the P75,000 promotional fee is tax-deductible. Sec. 30 of the Tax Code provides that ordinary and
necessary expenses incurred during the taxable year in carrying on any trade or business, including a
reasonable allowance for salaries or other compensation for personal services actually rendered are tax-
deductible. However, the burden in proving the validity of a claimed deduction belongs to the taxpayer.
In this case, the burden has been satisfactorily discharged by the taxpayer Algue, Inc.

Algue, Inc. was able to prove that the promotional fees were not fictitious and were in fact paid
periodically to the five family members. Moreover, the amount of the promotional fees was reasonable,
considering that the five payees actually performed a service for Algue, Inc. by making the sale of the
properties of PSEDC possible. As a result of this sale, Algue, Inc. earned a net commission of P50,000.
Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack
of the motive power to activate and operate it.

Hence, despite the natural reluctance to surrender part of ones hard-earned income, every person who
is able to must contribute his share in running the government. The government, for its part, is expected
to respond in the form of BENEFITS for general welfare. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that it is an arbitrary exaction by those in the seat of
power. However, it should also be exercised reasonably and in accordance with the prescribed
procedure. If it is not, the taxpayer has a right to complain to the courts.

6. MARCOS II v. CA
GR No. 120880, June 5, 1997

FACTS:
Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to
levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the
period of his exile in the US. The Marcos family was assessed by the BIR, and notices were constructively
served to the Marcoses, however the assessment were not protested administratively by Mrs. Marcos
and the heirs of the late president so that they became final and unappealable after the period for filing
of opposition has prescribed. Marcos contends that the properties could not be levied to cover the tax
dues because they are still pending probate with the court, and settlement of tax deficiencies could not
be had, unless there is an order by the probate court or until the probate proceedings are terminated.

ISSUE:
Is the contention of Bongbong Marcos correct?


HELD:
No. The deficiency income tax assessments and estate tax assessment are already final and
unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by the
government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary
tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions and
Criminal actions), and is not affected or precluded by the pendency of any other tax remedies instituted
by the government.

The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a
mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax
Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late
President, on the ground that it was required to seek first the probate court's sanction. There is nothing
in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate
settlement court's approval of the state's claim for estate taxes, before the same can be enforced and
collected.

On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not
to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive
share to any party interested in the estate, unless it is shown a Certification by the Commissioner of
Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's
contention that it is the probate court which approves the assessment and collection of the estate tax.


7. PHIL. GUARANTY CO., INC. v. CIR
GR No. L-22074, April 30, 1965

FACTS:
The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts with foreign insurance companies not doing business in the country, thereby ceding to foreign
reinsurers a portion of the premiums on insurance it has originally underwritten in the Philippines. The
premiums paid by such companies were excluded by the petitioner from its gross income when it file its
income tax returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them.
Consequently, the CIR assessed against the petitioner withholding taxes on the ceded reinsurance
premiums to which the latter protested the assessment on the ground that the premiums are not
subject to tax for the premiums did not constitute income from sources within the Philippines because
the foreign reinsurers did not engage in business in the Philippines, and CIR's previous rulings did not
require insurance companies to withhold income tax due from foreign compan
ISSUE:
Are insurance companies not required to withhold tax on reinsurance premiums ceded to foreign
insurance companies, which deprives the government from collecting the tax due from them?

HELD:
No. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a
necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to resist
an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public
improvement designed for the enjoyment of the citizenry and those which come within the State's
territory, and facilities and protection which a government is supposed to provide. Considering that the
reinsurance premiums in question were afforded protection by the government and the recipient
foreign reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums
and reinsurers should share the burden of maintaining the state. The petitioner's defense of reliance of
good faith on rulings of the CIR requiring no withholding of tax due on reinsurance premiums may free
the taxpayer from the payment of surcharges or penalties imposed for failure to pay the corresponding
withholding tax, but it certainly would not exculpate it from liability to pay such withholding tax. The
Government is not estopped from collecting taxes by the mistakes or errors of its agents.

8. Villanueva v. City of Iloilo: Uniformity

Facts:
The municipal board of Iloilo enacted ORDINANCE 11 (series of 1980) imposing 86 license tax fees on
persons engaged in the business of operating tenement houses ((tenement house any building or
dwelling for renting space divided into separate apartments or accessories).

The Villanuevas, owners of 4 tenement houses containing 34 apartments, challenged the validity of such
ordinance because only the taxpayers of the City of Iloilo are singled out to pay taxes on their tenement
houses, while citizens of other cities, where their councils do not enact a similar tax ordinance are
permitted to escape such imposition. Lower court rendered the ordinance illegal as it is oppressive and
unreasonable, constitutes double taxation and violates uniformity.

Issue:
W/n the ordinance violates the rule on equality and uniformity in taxation.

Held:
NO. The rule on equality and uniformity does not require that taxes for the same purpose should be
imposed in different territorial subdivisions at the same time. Taxes are uniform and equal when
imposed upon all property of the same class or character within the taxing authority.

In this case, tenement buildings constitute a distinct class of property. Contrary to petitioners' assertion
that the tax in question is a REAL ESTATE tax, this argument cannot be sustained. The tax is not a fixed
proportion of the assessed value of the tenement houses, and does not require the intervention of
assessors or appraisers. It is not payable at a designated time or date, and is not enforceable against the
tenement houses either by sale or distraint. RATHER, it is seen from the context of the ordinance that
the intention is to impose a license tax on the operation of tenement houses, which is a form of business
or calling.

Also, the petitioners' contention that they are doubly taxed because they are paying the real estate
taxes and the tenement tax imposed by the ordinance in question is devoid of merit. A license tax may
be levied upon a business or occupation although the land or property used in connection therewith is
subject to property tax. This would not constitute double taxation because there is only double taxation
when the SAME PROPERTY / SUBECT MATTER is taxed twice for the same purpose, w/in the same
jurisdiction and period, and of the same kind of character of tax. Real estate and tenement tax aer NOT
of the same kind / character.

At all events, there is no constitutional prohibition against double taxation in the Philippines. It is
something not favored, but is permissible, provided some other constitutional requirement is not
thereby violated, such as the requirement that taxes must be uniform.

9. Francia v IAC

Facts:
Engracio Francia was the registered owner of a residential lot and a 2-story house in Pasay City.
Subsequently, a 125-sqm portion of Francias property was expropriated by the Republic of the
Philippines for the sum of P4k+ representing the estimated amount equivalent to the assessed value of
the aforesaid portion. This was because of Francias failure to pay taxes for 14 years. The property was
then sold at public auction pursuant to Section 73 of PD 464 known as the Real Property Tax Code.
Fernandez was the highest bidder for the property.

Francia was not present during the auction sale since he was in Iligan City at that time helping his uncle
ship bananas. Francia then received a notice of hearing of an LRC Case, where Fernandez sought to
cancel Francias TCT and issue a new one in his name. Francia thus filed a complaint to annul the auction
sale, alleging that: a)his tax liability should have been offset with the money paid to him by the
government when they expropriated his other property; b)He was not duly notified of the auction sale;
c) the price at which his property was sold was grossly inadequate with that of the propertys actual
value (shocking to the senses)

Lower court and IAC dismissed the complaint.

Issue:
W/n the auction was valid

Held:
YES, it was valid. By legal compensation, obligations of persons, who in their own right are reciprocally
debtors and creditors of each other, are extinguished (Art. 1278, Civil Code). The circumstances of the
case do not satisfy the requirements provided by Article 1279
(1) that each one of the obligors be bound principally and that he be at the same time a principal
creditor of the other..xxx
(3) that the two debts be due.

There can be no off-setting of taxes against the claims that the taxpayer may have against the
government. A person cannot refuse to pay a tax on the ground that the government owes him an
amount equal to or greater than the tax being collected. The collection of a tax cannot await the results
of a lawsuit against the government. The government and taxpayer are NOT mutually creditors and
debtors of each other.
In this case, the tax was due to the city government while the expropriation was effected by the national
government. Moreover, the amount of P4k+ paid by the national government for the lot was deposited
w/ the PNB LONG BEFORE the auction of the remaining property.

OTHERS: Francia cannot deny receiving notice of the sale because he IN FACT admitted in his testimony
that he received a letter regarding the sale, and it was negligence on his part when he ignored such
notice; As a general rule, gross inadequacy of price is not material when the law gives the owner the
right to redeem as when a sale is made at public auction, upon the theory that the lesser the price, the
easier it is for the owner to effect redemption.


10. PUNSALAN v. MUN. BOARD OF CITY OF MANILA
GR No. L-23645, October 29, 1968
95 PHIL 46

FACTS:
The plaintiffs--two lawyers, medical practitioner, a dental surgeon, a CPA, and a pharmacist--sought the
annulment of Ordinance No.3398 of the City of Manila which imposes a municipal occupation tax on
persons exercising various professions in the city and penalizes non-payment of the tax, contending in
substance that this ordinance and the law authorizing it constitute class legislation, are unjust and
oppressive, and authorize what amounts to double taxation. The burden of plaintiffs' complaint is not
that the professions to which they respectively belong have been singled out for the imposition of this
municipal occupation tax, but that while the law has authorized the City of Manila to impose the said
tax, it has withheld that authority from other chartered cities, not to mention municipalities.

ISSUE:
Does the law constitute a class legislation? Is it for the Court to determine which political unit should
impose taxes and which should not?

HELD:
No. It is not for the courts to judge what particular cities or municipalities should be empowered to
impose occupation taxes in addition to those imposed by the National Government. That matter is
peculiarly within the domain of the political departments and the courts would do well not to encroach
upon it. Moreover, as the seat of the National Government and with a population and volume of trade
many times that of any other Philippine city or municipality, Manila, no doubt, offers a more lucrative
field for the practice of the professions, so that it is but fair that the professionals in Manila be made to
pay a higher occupation tax than their brethren in the provinces.