COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
CRUZ, J.:
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance
On the other hand, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is
the promotion of the common good, may be achieved.
The main issue in this case is 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. The corollary issue is whether or not the appeal of the private respondent from
the decision of the Collector of Internal Revenue was made on time and in accordance with law.
We deal first with the procedural question.
The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged
in engineering, construction and other allied activities, received a letter from the petitioner assessing it
in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959. 1 On
January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp
received on the same day in the office of the petitioner. 2 On March 12, 1965, a warrant of distraint
and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who
refused to receive it on the ground of the pending protest. 3 A search of the protest in the dockets of
the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent
Ramon Reyes, who deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally
informed that the BIR was not taking any action on the protest and it was only then that he accepted
the warrant of distraint and levy earlier sought to be served. 5Sixteen days later, on April 23, 1965,
Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the
Court of Tax Appeals. 6
The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125,
the appeal may be made within thirty days after receipt of the decision or ruling challenged. 7 It is true
that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" 8 and renders
hopeless a request for reconsideration," 9 being "tantamount to an outright denial thereof and makes
the said request deemed rejected." 10 But there is a special circumstance in the case at bar that
prevents application of this accepted doctrine.
The proven fact is that four days after the private respondent received the petitioner's notice of
assessment, it filed its letter of protest. This was apparently not taken into account before the warrant
of distraint and levy was issued; indeed, such protest could not be located in the office of the
petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all,
considered by the tax authorities. During the intervening period, the warrant was premature and could
therefore not be served.
As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was not pro
forma and was based on strong legal considerations. It thus had the effect of suspending on January
18, 1965, when it was filed, the reglementary period which started on the date the assessment was
received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the
private respondent was definitely informed of the implied rejection of the said protest and the warrant
was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the
reglementary period had been consumed.

Now for the substantive question.

The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it
was not an ordinary 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. The payment was in the form of promotional fees.
These were collected by the Payees for their work in the creation of the Vegetable Oil Investment
Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar
Estate Development Company.
Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees
to be personal holding company income 12 but later conformed to the decision of the respondent court
rejecting this assertion.13 In fact, as the said court found, the amount was earned through the joint
efforts of the persons among whom it was distributed It has been established that 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 Investment Corporation, inducing other persons to invest in it. 14 Ultimately, after its
incorporation largely through the promotion of the said persons, this new corporation purchased the
PSEDC properties. 15 For this sale, Algue received as agent a commission of P126,000.00, and it was
from this commission that the P75,000.00 promotional fees were paid to the aforenamed
individuals. 16
There is no dispute that the payees duly reported their respective shares of the fees in their income
tax returns and paid the corresponding taxes thereon. 17 The Court of Tax Appeals also found, after
examining the evidence, that no distribution of dividends was involved. 18
The petitioner claims that these payments are fictitious because most of the payees are members of
the same family in control of Algue. It is argued that no indication was made as to how such payments
were made, whether by check or in cash, and there is not enough substantiation of such payments. In
short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving
an imaginary deduction.
We find that these suspicions were adequately met by the private respondent when its President,
Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made
in one lump sum but periodically and in different amounts as each payee's need arose. 19 It should be
remembered that this was a family corporation where strict business procedures were not applied and
immediate issuance of receipts was not required. Even so, at the end of the year, when the books
were to be closed, each payee made an accounting of all of the fees received by him or her, to make
up the total of P75,000.00. 20 Admittedly, everything seemed to be informal. This arrangement was
understandable, however, in view of the close relationship among the persons in the family
corporation.
We agree with the respondent court that the amount of the promotional fees was not excessive. The
total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was
P125,000.00. 21After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit
from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a
reasonable proportion, considering that it was the payees who did practically everything, from the
formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate
properties. This finding of the respondent court is in accord with the following provision of the Tax
Code:
SEC. 30. Deductions from gross income.--In computing net income there shall be
allowed as deductions

(a) Expenses:
(1) In general.--All the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business, including a reasonable allowance for
salaries or other compensation for personal services actually rendered; ... 22
and Revenue Regulations No. 2, Section 70 (1), reading as follows:
SEC. 70. Compensation for personal services.--Among the ordinary and necessary
expenses paid or incurred in carrying on any trade or business may be included a
reasonable allowance for salaries or other compensation for personal services actually
rendered. The test of deductibility in the case of compensation payments is whether
they are reasonable and are, in fact, payments purely for service. This test and
deductibility in the case of compensation payments is whether they are reasonable and
are, in fact, payments purely for service. This test and its practical application may be
further stated and illustrated as follows:
Any amount paid in the form of compensation, but not in fact as the purchase price of
services, is not deductible. (a) An ostensible salary paid by a corporation may be a
distribution of a dividend on stock. This is likely to occur in the case of a corporation
having few stockholders, Practically all of whom draw salaries. If in such a case the
salaries are in excess of those ordinarily paid for similar services, and the excessive
payment correspond or bear a close relationship to the stockholdings of the officers of
employees, it would seem likely that the salaries are not paid wholly for services
rendered, but the excessive payments are a distribution of earnings upon the stock. . . .
(Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)
It is worth noting at this point that most of the payees were not in the regular employ of Algue nor
were they its controlling stockholders. 23
The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity
of the claimed deduction. In the present case, however, we find that the onus has been discharged
satisfactorily. The private respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and involve themselves in a new business
requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed.
It is said that taxes are what we pay for civilization society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hard earned income to the taxing authorities, every person who
is able to must contribute his share in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the lives of
the people and enhance their moral and material values. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in
the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.
If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For
all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed.
We hold that the appeal of the private respondent from the decision of the petitioner was filed on time
with the respondent court in accordance with Rep. Act No. 1125. And we also find that the claimed

deduction by the private respondent was permitted under the Internal Revenue Code and should
therefore not have been disallowed by the petitioner.
ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without
costs.
SO ORDERED.
Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.

Footnotes
1 Rollo, pp. 28-29.
2 Ibid., pp. 29; 42.
3 Id., p. 29.
4 Respondent's Brief, p. 11.
5 Id., p. 29.
6 Id,
7 Sec. 11.
8 Phil. Planters Investment Co. Inc. v. Comm. of Internal Revenue, CTA Case No. 1266,
Nov. 11, 1962; Rollo, p. 30.
9 Vicente Hilado v. Comm. of Internal Revenue, CTA Case No. 1266, Oct. 22,1962;
Rollo, p. 30.
10 Ibid.
11 Penned by Associate Judge Estanislao R. Alvarez, concurred by Presiding Judge
Ramon M. Umali and Associate Judge Ramon L. Avancea.
12 Rollo, p. 33.
13 Ibid., pp. 7-8; Petition, pp. 2-3. 11 Id., p. 37.
15 Id.
16 Id.
17 Id.
18 Id.
19 Respondents Brief, pp. 25-32.
20 Ibid., pp. 30-32.
21 Rollo, p. 37.

22 Now Sec. 30, (a)(1)-(A.), National Internal Revenue Code.

23 Respondent's Brief, p. 35.

PHILIPPINE AIRLINES, INC., Plaintiff-Appellant, v. ROMEO F. EDU in his capacity

as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity
as National Treasurer, Defendants-Appellants.
Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.
GUTIERREZ, JR., J.:
What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
chanrobles virtual law library

This question has been brought before this Court in the past. The parties are, in effect,
asking for a re-examination of the latest decision on this
issue.chanroblesvirtualawlibrary chanrobles virtual law library
This appeal was certified to us as one involving a pure question of law by the Court of
Appeals in a case where the then Court of First Instance of Rizal dismissed the portionabout complaint for refund of registration fees paid under
protest.chanroblesvirtualawlibrary chanrobles virtual law library
The disputed registration fees were imposed by the appellee, Commissioner Romeo F.
Elevate pursuant to Section 8, Republic Act No. 4136, otherwise known as the Land
Transportation and Traffic Code.chanroblesvirtualawlibrary chanrobles virtual law library
The Philippine Airlines (PAL) is a corporation organized and existing under the laws of
the Philippines and engaged in the air transportation business under a legislative
franchise, Act No. 42739, as amended by Republic Act Nos. 25). and 269.1 Under its
franchise, PAL is exempt from the payment of taxes. The pertinent provision of the
franchise provides as follows:
Section 13. In consideration of the franchise and rights hereby granted, the grantee shall
pay to the National Government during the life of this franchise a tax of two per cent of
the gross revenue or gross earning derived by the grantee from its operations under this
franchise. Such tax shall be due and payable quarterly and shall be in lieu of all taxes of
any kind, nature or description, levied, established or collected by any municipal,
provincial or national automobiles, Provided, that if, after the audit of the accounts of the
grantee by the Commissioner of Internal Revenue, a deficiency tax is shown to be due,
the deficiency tax shall be payable within the ten days from the receipt of the
assessment. The grantee shall pay the tax on its real property in conformity with
existing law.
On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956)
PAL has, since 1956, not been paying motor vehicle registration
fees.chanroblesvirtualawlibrary chanrobles virtual law library
Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a
regulation requiring all tax exempt entities, among them PAL to pay motor vehicle
registration fees.chanroblesvirtualawlibrary chanrobles virtual law library
Despite PAL's protestations, the appellee refused to register the appellant's motor
vehicles unless the amounts imposed under Republic Act 4136 were paid. The appellant
thus paid, under protest, the amount of P19,529.75 as registration fees of its motor
vehicles.chanroblesvirtualawlibrary chanrobles virtual law library
After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to
Commissioner Edu demanding a refund of the amounts paid, invoking the ruling
inCalalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle
registration fees are in reality taxes from the payment of which PAL is exempt by virtue
of its legislative franchise.chanroblesvirtualawlibrary chanrobles virtual law library
Appellee Edu denied the request for refund basing his action on the decision in Republic
v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that
motor vehicle registration fees are regulatory exceptional. and not revenue measures
and, therefore, do not come within the exemption granted to PAL? under its franchise.

Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu
and National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch
18 where it was docketed as Civil Case No. Q15862.chanroblesvirtualawlibrarychanrobles virtual law library
Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his
capacity as National Treasurer, filed a motion to dismiss alleging that the complaint
states no cause of action. In support of the motion to dismiss, defendants repatriation
the ruling in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that registration fees
of motor vehicles are not taxes, but regulatory fees imposed as an incident of the
exercise of the police power of the state. They contended that while Act 4271 exempts
PAL from the payment of any tax except two per cent on its gross revenue or earnings,
it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle
registration fees. The resolution of the motion to dismiss was deferred by the Court until
after trial on the merits.chanroblesvirtualawlibrary chanrobles virtual law library
On April 24, 1973, the trial court rendered a decision dismissing the appellant's
complaint "moved by the later ruling laid down by the Supreme Court in the case
orRepublic v. Philippine Rabbit Bus Lines, Inc., (supra)." From this judgment, PAL
appealed to the Court of Appeals which certified the case to us.
Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc.
(supra)cited by PAL and Commissioner Romeo F. Edu respectively, discuss the main
points of contention in the case at bar.chanroblesvirtualawlibrary chanrobles virtual law
library
Resolving the issue in the Philippine Rabbit case, this Court held:
"The registration fee which defendant-appellee had to pay was imposed by Section 8 of
the Revised Motor Vehicle Law (Republic Act No. 587 [1950]). Its heading speaks of
"registration fees." The term is repeated four times in the body thereof. Equally so,
mention is made of the "fee for registration." (Ibid., Subsection G) A subsection starts
with a categorical statement "No fees shall be charged." (lbid., Subsection H) The
conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment
not of a tax but of a registration fee under the police power. Hence the incipient, of the
section relied upon by defendant-appellee under the Back Pay Law, It is not held liable
for a tax but for a registration fee. It therefore cannot make use of a backpay certificate
to meet such an obligation.chanroblesvirtualawlibrary chanrobles virtual law library
Any vestige of any doubt as to the correctness of the above conclusion should be
dissipated by Republic Act No. 5448. ([1968]. Section 3 thereof as to the imposition of
additional tax on privately-owned passenger automobiles, motorcycles and scooters was
amended by Republic Act No. 5470 which is (sic) approved on May 30, 1969.) A special
science fund was thereby created and its title expressly sets forth that a tax on
privately-owned passenger automobiles, motorcycles and scooters was imposed. The
rates thereof were provided for in its Section 3 which clearly specifies the" Philippine
tax."(Cooley to be paid as distinguished from the registration fee under the Motor
Vehicle Act. There cannot be any clearer expression therefore of the legislative will, even
on the assumption that the earlier legislation could by subdivision the point be
susceptible of the interpretation that a tax rather than a fee was levied. What is thus
most apparent is that where the legislative body relies on its authority to tax it expressly

so states, and where it is enacting a regulatory measure, it is equally exploded (at p.

22,1969
In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the
other hand, held:
The charges prescribed by the Revised Motor Vehicle Law for the registration of motor
vehicles are in section 8 of that law called "fees". But the appellation is no impediment
to their being considered taxes if taxes they really are. For not the name but the object
of the charge determines whether it is a tax or a fee. Geveia speaking, taxes are for
revenue, whereas fees are exceptional. for purposes of regulation and inspection and are
for that reason limited in amount to what is necessary to cover the cost of the services
rendered in that connection. Hence, a charge fixed by statute for the service to be
person,-When by an officer, where the charge has no relation to the value of the services
performed and where the amount collected eventually finds its way into the treasury of
the branch of the government whose officer or officers collected the chauffeur, is not a
fee but a tax."(Cooley on Taxation, Vol. 1, 4th ed., p. 110.) chanrobles virtual law library
From the data submitted in the court below, it appears that the expenditures of the
Motor Vehicle Office are but a small portion-about 5 per centum-of the total collections
from motor vehicle registration fees. And as proof that the money collected is not
intended for the expenditures of that office, the law itself provides that all such money
shall accrue to the funds for the construction and maintenance of public roads, streets
and bridges. It is thus obvious that the fees are not collected for regulatory purposes,
that is to say, as an incident to the enforcement of regulations governing the operation
of motor vehicles on public highways, for their express object is to provide revenue with
which the Government is to discharge one of its principal functions-the construction and
maintenance of public highways for everybody's use. They are veritable taxes, not
merely fees.chanroblesvirtualawlibrary chanrobles virtual law library
As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as
taxes, for it provides that "no other taxes or fees than those prescribed in this Act shall
be imposed," thus implying that the charges therein imposed-though called fees-are of
the category of taxes. The provision is contained in section 70, of subsection (b), of the
law, as amended by section 17 of Republic Act 587, which reads:
Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for
the registration or operation or on the ownership of any motor vehicle, or for the
exercise of the profession of chauffeur, by any municipal corporation, the provisions of
any city charter to the contrary notwithstanding: Provided, however, That any provincial
board, city or municipal council or board, or other competent authority may exact and
collect such reasonable and equitable toll fees for the use of such bridges and ferries,
within their respective jurisdiction, as may be authorized and approved by the Secretary
of Public Works and Communications, and also for the use of such public roads, as may
be authorized by the President of the Philippines upon the recommendation of the
Secretary of Public Works and Communications, but in none of these cases, shall any toll
fee." be charged or collected until and unless the approved schedule of tolls shall have
been posted levied, in a conspicuous place at such toll station. (at pp. 213-214)
Motor vehicle registration fees were matters originally governed by the Revised Motor
Vehicle Law (Act 3992 [19511) as amended by Commonwealth Act 123 and Republic
Acts Nos. 587 and 1621.chanroblesvirtualawlibrarychanrobles virtual law library

Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land
Transportation Code, (as amended by Rep. Acts Nos. 5715 and 64-67, P.D. Nos. 382,
843, 896, 110.) and BP Blg. 43, 74 and 398).chanroblesvirtualawlibrarychanrobles
virtual law library
Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and
remained unsegregated, by Rep. Act Nos. 587 and 1603) states:
Section 73. Disposal of moneys collected.-Twenty per centum of the money collected
under the provisions of this Act shall accrue to the road and bridge funds of the different
provinces and chartered cities in proportion to the centum shall during the next previous
year and the remaining eighty per centum shall be deposited in the Philippine Treasury
to create a special fund for the construction and maintenance of national and provincial
roads and bridges. as well as the streets and bridges in the chartered cities to be alloted
by the Secretary of Public Works and Communications for projects recommended by the
Director of Public Works in the different provinces and chartered cities. ....
Presently, Sec. 61 of the Land Transportation and Traffic Code provides:
Sec. 61. Disposal of Mortgage. Collected-Monies collected under the provisions of this
Act shall be deposited in a special trust account in the National Treasury to constitute the
Highway Special Fund, which shall be apportioned and expended in accordance with the
provisions of the" Philippine Highway Act of 1935. "Provided, however, That the amount
necessary to maintain and equip the Land Transportation Commission but not to exceed
twenty per cent of the total collection during one year, shall be set aside for the purpose.
(As amended by RA 64-67, approved August 6, 1971).
It appears clear from the above provisions that the legislative intent and purpose behind
the law requiring owners of vehicles to pay for their registration 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 administering agency. On the other hand, the Philippine
Rabbit case mentions a presumption arising from the use of the term "fees," which
appears to have been favored by the legislature to distinguish fees from other taxes
such as those mentioned in Section 13 of Rep. Act 4136 which reads:
Sec. 13. Payment of taxes upon registration.-No original registration of motor vehicles
subject to payment of taxes, customs s duties or other charges shall be accepted unless
proof of payment of the taxes due thereon has been presented to the Commission.
referring to taxes other than those imposed on the registration, operation or ownership
of a motor vehicle (Sec. 59, b, Rep. Act 4136, as
amended).chanroblesvirtualawlibrary chanrobles virtual law library
Fees may be properly regarded as taxes even though they also serve as an instrument
of regulation, As stated by a former presiding judge of the Court of Tax Appeals and
writer on various aspects of taxpayers
It is possible for an exaction to be both tax arose. regulation. License fees are changes.
looked to as a source of revenue as well as a means of regulation (Sonzinky v. U.S., 300
U.S. 506) This is true, for example, of automobile license fees. Isabela such case, the
fees may properly be regarded as taxes even though they also serve as an instrument of
regulation. 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. (1955 CCH Fed. tax

Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97
Phil. 213-214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes called
regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S.
Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as
regulatory taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on
Taxation, 2nd Edition, 591-593).
Indeed, taxation may be made the implement of the state's police power (Lutz v.
Araneta, 98 Phil. 148).chanroblesvirtualawlibrary chanrobles virtual law library
If the purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax (Umali, Id.) Such is the
case of motor vehicle registration fees. The conclusions become inescapable in view of
Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision appears
as Section 591-593). in the Land Transportation code. It is patent therefrom that the
legislators had in mind a regulatory tax as the law refers to the imposition on the
registration, operation or ownership of a motor vehicle as a "tax or fee." Though
nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax,
Section 591-593). speaks of "taxes." or fees ... for the registration or operation or on
the ownership of any motor vehicle, or for the exercise of the profession of chauffeur ..."
making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the
respondents, speak of an "additional" tax," where the law could have referred to an
original tax and not one in addition to the tax already imposed on the registration,
operation, or ownership of a motor vehicle under Rep. Act 41383. Simply put, if the
exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act
5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees," such as
the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees
for change of registration (Sec. 11). These are not to be understood as taxes because
such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec.
591-593). of the Code as taxes like the motor vehicle registration fee and chauffers'
license fee. Such fees are to go into the expenditures of the Land Transportation
Commission as provided for in the last proviso of see. 61,
aforequoted.chanroblesvirtualawlibrary chanrobles virtual law library
It is quite apparent that vehicle registration fees were originally simple exceptional.
intended only for rigidly purposes in the exercise of the State's police powers. Over the
years, however, as vehicular traffic exploded in number and motor vehicles became
absolute necessities without which modem life as we know it would stand still, Congress
found the registration of vehicles a very convenient way of raising much needed
revenues. Without changing the earlier deputy. of registration payments as "fees," their
nature has become that of "taxes." chanrobles virtual law library
In view of the foregoing, we rule that motor vehicle registration fees as at present
exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended
for additional revenues. of government even if one fifth or less of the amount collected is
set aside for the operating expenses of the agency administering the
program.chanroblesvirtualawlibrary chanrobles virtual law library
May the respondent administrative agency be required to refund the amounts stated in
the complaint of PAL? chanrobles virtual law library
The answer is NO.chanroblesvirtualawlibrary chanrobles virtual law library

The claim for refund is made for payments given in 1971. It is not clear from the records
as to what payments were made in succeeding years. We have ruled that Section 24 of
Rep. Act No. 5448 dated June 27, 1968, repealed all earlier tax exemptions Of corporate
taxpayers found in legislative franchises similar to that invoked by PAL in this
case.chanroblesvirtualawlibrary chanrobles virtual law library
In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R.
No. 615)." July 11, 1985), this Court ruled:
Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio
Communications of the Philippines, Inc., was subject to both the franchise tax and
income tax. In 1964, however, petitioner's franchise was amended by Republic Act No.
41-42). to the effect that its franchise tax of one and one-half percentum (1-1/2%) of all
gross receipts was provided as "in lieu of any and all taxes of any kind, nature, or
description levied, established, or collected by any authority whatsoever, municipal,
provincial, or national from which taxes the grantee is hereby expressly exempted." The
issue raised to this Court now is the validity of the respondent court's decision which
ruled that the exemption under Republic Act No. 41-42). was repealed by Section 24 of
Republic Act No. 5448 dated June 27, 1968 which reads:
"(d) The provisions of existing special or general laws to the contrary notwithstanding,
all corporate taxpayers not specifically exempt under Sections 24 (c) (1) of this Code
shall pay the rates provided in this section. All corporations, agencies, or
instrumentalities owned or controlled by the government, including the Government
Service Insurance System and the Social Security System but excluding educational
institutions, shall pay such rate of tax upon their taxable net income as are imposed by
this section upon associations or corporations engaged in a similar business or industry.
"
An examination of Section 24 of the Tax Code as amended shows clearly that the law
intended all corporate taxpayers to pay income tax as provided by the statute. There can
be no doubt as to the power of Congress to repeal the earlier exemption it granted.
Article XIV, Section 8 of the 1935 Constitution and Article XIV, Section 5 of the
Constitution as amended in 1973 expressly provide that no franchise shall be granted to
any individual, firm, or corporation except under the condition that it shall be subject to
amendment, alteration, or repeal by the legislature when the public interest so requires.
There is no question as to the public interest involved. The country needs increased
revenues. The repealing clause is clear and unambiguous. There is a listing of entities
entitled to tax exemption. The petitioner is not covered by the provision. Considering the
foregoing, the Court Resolved to DENY the petition for lack of merit. The decision of the
respondent court is affirmed.
Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly
imposed because the tax exemption in the franchise of PAL was repealed during the
period. However, an amended franchise was given to PAL in 1979. Section 13 of
Presidential Decree No. 1590, now provides:
In consideration of the franchise and rights hereby granted, the grantee shall pay to the
Philippine Government during the lifetime of this franchise whichever of subsections (a)
and (b) hereunder will result in a lower taxes.)

(a) The basic corporate income tax based on the grantee's annual net taxable income
computed in accordance with the provisions of the Internal Revenue Code; or chanrobles
virtual law library
(b) A franchise tax of two per cent (2%) of the gross revenues. derived by the grantees
from all specific. without distinction as to transport or nontransport corporations;
provided that with respect to international airtransport service, only the gross
passengers, mail, and freight revenues. from its outgoing flights shall be subject to this
law.
The tax paid by the grantee under either of the above alternatives shall be in lieu of all
other taxes, duties, royalties, registration, license and other fees and charges of any
kind, nature or description imposed, levied, established, assessed, or collected by any
municipal, city, provincial, or national authority or government, agency, now or in the
future, including but not limited to the following: chanrobles virtual law library
xxx xxx xxxchanrobles virtual law library
(5) All taxes, fees and other charges on the registration, license, acquisition, and
transfer of airtransport equipment, motor vehicles, and all other personal or real
property of the gravitates (Pres. Decree 1590, 75 OG No. 15, 3259, April 9, 1979).
PAL's current franchise is clear and specific. It has removed the ambiguity found in the
earlier law. PAL is now exempt from the payment of any tax, fee, or other charge on the
registration and licensing of motor vehicles. Such payments are already included in the
basic tax or franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590,
and may no longer be exacted.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of
registration fees paid in 1971 is DENIED. The Land Transportation Franchising and
Regulatory Board (LTFRB) is enjoined functions-the collecting any tax, fee, or other
charge on the registration and licensing of the petitioner's motor vehicles from April 9,
1979 as provided in Presidential Decree No. 1590.chanroblesvirtualawlibrary chanrobles
virtual law library
SO ORDERED.

VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION,
CITY MAYOR and CITY TREASURER OF MANILA, respondents.
Nelson Y. Ng for petitioner.
The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on
behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential
Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The
Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days after
completion of its publication in the Official Gazette.
On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential
Decree No. 1994 amended the National Internal Revenue Code providing, inter alia:
SEC. 134. Video Tapes. There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, That locally manufactured or imported blank video tapes shall be subject to
sales tax.

On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers,
Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers
Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to
intervene in the case, over petitioner's opposition, upon the allegations that intervention was
necessary for the complete protection of their rights and that their "survival and very existence is
threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to
file their Comment in Intervention.
The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:
1. WHEREAS, 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 moviehouses and theaters, and have
caused a sharp decline in theatrical attendance by at least forty percent (40%) and a
tremendous drop in the collection of sales, contractor's specific, amusement and other
taxes, thereby resulting in substantial losses estimated at P450 Million annually in
government revenues;
2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per
annum from rentals, sales and disposition of videograms, and such earnings have not
been subjected to tax, thereby depriving the Government of approximately P180 Million
in taxes each year;
3. WHEREAS, the unregulated activities of videogram establishments have also
affected the viability of the movie industry, particularly the more than 1,200 movie
houses and theaters throughout the country, and occasioned industry-wide
displacement and unemployment due to the shutdown of numerous moviehouses and
theaters;
4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the
Government to create an environment conducive to growth and development of all
business industries, including the movie industry which has an accumulated investment
of about P3 Billion;
5. WHEREAS, proper taxation of the activities of videogram establishments will not only
alleviate the dire financial condition of the movie industry upon which more than 75,000
families and 500,000 workers depend for their livelihood, but also provide an additional
source of revenue for the Government, and at the same time rationalize the heretofore
uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of obscene videogram features
constitutes a clear and present danger to the moral and spiritual well-being of the youth,
and impairs the mandate of the Constitution for the State to support the rearing of the
youth for civic efficiency and the development of moral character and promote their
physical, intellectual, and social well-being;
7. WHEREAS, civic-minded citizens and groups have called for remedial measures to
curb these blatant malpractices which have flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding the moral values of the
people and betraying the national economic recovery program, bold emergency
measures must be adopted with dispatch; ... (Numbering of paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:

1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the
local government is a RIDER and the same is not germane to the subject matter
thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of
trade in violation of the due process clause of the Constitution;
3. There is no factual nor legal basis for the exercise by the President of the vast
powers conferred upon him by Amendment No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a nuisance, which it is not.
We shall consider the foregoing objections in seriatim.
1. The Constitutional requirement that "every bill shall embrace only one subject which shall be
expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to
include the general purpose which a statute seeks to achieve. It is not necessary that the title express
each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts
of the statute are related, and are germane to the subject matter expressed in the title, or as long as
they are not inconsistent with or foreign to the general subject and title. 2 An act having a single
general subject, indicated in the title, may contain any number of provisions, no matter how diverse
they may be, so long as they are not inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the method and means of carrying out the
general object." 3 The rule also is that the constitutional requirement as to the title of a bill should not
be so narrowly construed as to cripple or impede the power of legislation. 4 It should be given
practical rather than technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider
is without merit. That section reads, inter alia:
Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any
provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of
the purchase price or rental rate, as the case may be, for every sale, lease or
disposition of a videogram containing a reproduction of any motion picture or
audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall
accrue to the province, and the other fifty percent (50%) shall acrrue to the municipality
where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be
shared equally by the City/Municipality and the Metropolitan Manila Commission.
xxx xxx xxx
The foregoing provision is allied and germane to, and is reasonably necessary for the
accomplishment of, the general object of the DECREE, which is the regulation of the video industry
through the Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent
with, nor foreign to that general subject and title. As a tool for regulation 6 it is simply one of the
regulatory and control mechanisms scattered throughout the DECREE. The express purpose of the
DECREE to include taxation of the video industry in order to regulate and rationalize the heretofore
uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those preambles
explain the motives of the lawmaker in presenting the measure. The title of the DECREE, which is the
creation of the Videogram Regulatory Board, is comprehensive enough to include the purposes

expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to express all
those objectives in the title or that the latter be an index to the body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not
cease to be valid merely because it regulates, discourages, or even definitely deters the activities
taxed. 8 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. 9 In imposing a tax, the legislature acts upon its
constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10
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. It is an
end-user tax, imposed on retailers for every videogram they make available for public viewing. It is
similar to the 30% amusement tax imposed or borne by the movie industry which the theater-owners
pay to the government, but which is passed on to the entire cost of the admission ticket, thus shifting
the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all
videogram operators.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an
objective of the DECREE to protect the movie industry, the tax remains a valid imposition.
The public purpose of a tax may legally exist even if the motive which impelled the
legislature to impose the tax was to favor one industry over another. 11
It is inherent in the power to tax that a state be free to select the subjects of taxation,
and it has been repeatedly held that "inequities which result from a singling out of one
particular class for taxation or exemption infringe no constitutional
limitation". 12 Taxation has been made the implement of the state's police power.13
At bottom, the rate of tax is a matter better addressed to the taxing legislature.
3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by
the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the
judgment of the President ... , there exists a grave emergency or a threat or imminence thereof, or
whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act
adequately on any matter for any reason that in his judgment requires immediate action, he may, in
order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which shall
form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause
sufficiently summarizes the justification in that grave emergencies corroding the moral values of the
people and betraying the national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then President,
considering that the issue of the validity of the exercise of legislative power under the said
Amendment still pends resolution in several other cases, we reserve resolution of the question raised
at the proper time.
4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative
power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct
assistance of other agencies and units of the government and deputize, for a fixed and limited period,
the heads or personnel of such agencies and units to perform enforcement functions for the Board" is

not a delegation of the power to legislate but merely a conferment of authority or discretion as to its
execution, enforcement, and implementation. "The true distinction is between the delegation of power
to make the law, which necessarily involves a discretion as to what it shall be, and conferring
authority or discretion as to its execution to be exercised under and in pursuance of the law. The first
cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very language of the
decree, the authority of the BOARD to solicit such assistance is for a "fixed and limited period" with
the deputized agencies concerned being "subject to the direction and control of the BOARD." That
the grant of such authority might be the source of graft and corruption would not stigmatize the
DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will not be without
adequate remedy in law.
5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other
categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or
different testimony than the law required at the time of the commission of the offense." It is petitioner's
position that Section 15 of the DECREE in providing that:
All videogram establishments in the Philippines are hereby given a period of forty-five
(45) days after the effectivity of this Decree within which to register with and secure a
permit from the BOARD to engage in the videogram business and to register with the
BOARD all their inventories of videograms, including videotapes, discs, cassettes or
other technical improvements or variations thereof, before they could be sold, leased, or
otherwise disposed of. Thereafter any videogram found in the possession of any person
engaged in the videogram business without the required proof of registration by the
BOARD, shall be prima facie evidence of violation of the Decree, whether the
possession of such videogram be for private showing and/or public exhibition.
raises immediately a prima facie evidence of violation of the DECREE when the required proof of
registration of any videogram cannot be presented and thus partakes of the nature of an ex post
facto law.
The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et
al. 15
... it is now well settled that "there is no constitutional objection to the passage of a law
providing that the presumption of innocence may be overcome by a contrary
presumption founded upon the experience of human conduct, and enacting what
evidence shall be sufficient to overcome such presumption of innocence" (People vs.
Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE
CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when
certain facts have been proved that they shall be prima facie evidence of the existence
of the guilt of the accused and shift the burden of proof provided there be a rational
connection between the facts proved and the ultimate facts presumed so that the
inference of the one from proof of the others is not unreasonable and arbitrary because
of lack of connection between the two in common experience". 16
Applied to the challenged provision, there is no question that there is a rational connection between
the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the
DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches only
after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in
character.
6. We do not share petitioner's fears that the video industry is being over-regulated and being eased
out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation
was apparent. While the underlying objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair

competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought
about by the availability of unclassified and unreviewed video tapes containing pornographic films and
films with brutally violent sequences; and losses in government revenues due to the drop in theatrical
attendance, not to mention the fact that the activities of video establishments are virtually untaxed
since mere payment of Mayor's permit and municipal license fees are required to engage in
business. 17
The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video
industry. On the contrary, video establishments are seen to have proliferated in many places
notwithstanding the 30% tax imposed.
In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of
the DECREE. These considerations, however, are primarily and exclusively a matter of legislative
concern.
Only congressional power or competence, not the wisdom of the action taken, may be
the basis for declaring a statute invalid. This is as it ought to be. The principle of
separation of powers has in the main wisely allocated the respective authority of each
department and confined its jurisdiction to such a sphere. There would then be intrusion
not allowable under the Constitution if on a matter left to the discretion of a coordinate
branch, the judiciary would substitute its own. If there be adherence to the rule of law,
as there ought to be, the last offender should be courts of justice, to which rightly
litigants submit their controversy precisely to maintain unimpaired the supremacy of
legal norms and prescriptions. The attack on the validity of the challenged provision
likewise insofar as there may be objections, even if valid and cogent on its wisdom
cannot be sustained. 18
In fine, petitioner has not overcome the presumption of validity which attaches to a challenged
statute. We find no clear violation of the Constitution which would justify us in pronouncing
Presidential Decree No. 1987 as unconstitutional and void.
WHEREFORE, the instant Petition is hereby dismissed.
No costs.
SO ORDERED.
Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento and Cortes, JJ., concur.

Footnotes
1 Section 19[1], Article VIII, 1973 Constitution; Section 26[l] Article VI, 1987 Constitution.
2 Sumulong vs. COMELEC, No. 48609, October 10, 1941, 73 Phil. 288; Cordero vs.
Hon. Jose Cabatuando, et al., L-14542, Oct. 31, 1962,6 SCRA 418.
3 Public Service Co., Recktenwald, 290 III. 314, 8 ALR 466, 470.
4 Government vs. Hongkong & Shanghai Banking Corporation, No. 44257, November
22, 1938, 66 Phil. 483; Cordero vs. Cabatuando, et al., supra.
5 Sumulong vs. Commission on Elections, supra.

6 United States vs. Sanchez, 340 U.S. 42, 44, 1950, cited in Bernas, Philippines
Constitutional Law, p. 594.
7 People vs. Carlos, L-239, June 30, 1947, 78 Phil. 535.
8 U.S. vs. Sanchez, supra.
9 II Cooley, A Treatise on the Constitutional Limitations, p. 986.
10 ibid., p. 987.
11 Magnano Co. vs. Hamilton, 292, U.S. 40.
12 Lutz vs. Araneta, L-7859, December 22, 1955, 98 Phil. 148, citing Carmichael vs.
Southern Coal and Coke Co., 301 U.S. 495, 81 L. Ed. 1245.
13 ibid., citing Great Atl. and Pacific Tea Co. vs. Grosjean, 301 U.S. 412, 81 L. Ed. 1193;
U.S. vs. Butler, 297 U.S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4 Wheat, 316,4 L.
Ed. 579.
14 Cincinnati, W & Z.R. Co. vs. Clinton County Comrs (1852) 1 Ohio St. 88.
15 G. R. No. L-40195, May 29, 1987.
16 ibid., citing People vs. Mingoa, supra, See also U.S. vs. Luling No. 11162, August 12,
1916,34 Phil. 725.
17 Solicitor General's Comments, p. 102, Rollo.
18 Morfe vs. Mutuc, L-20387, January 31, 1968, 22 SCRA 424, 450-451.

WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio
Jayme Ledesma, plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.
Ernesto J. Gonzaga for appellant.
Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres
and Solicitor Felicisimo R. Rosete for appellee.

REYES, J.B L., J.:

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.
Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to
the threat to our industry by the imminent imposition of export taxes upon sugar as provided in the
Tydings-McDuffe Act, and the "eventual loss of its preferential position in the United States market";
wherefore, the national policy was expressed "to obtain a readjustment of the benefits derived from
the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to
prepare it for the eventuality of the loss of its preferential position in the United States market and the
imposition of the export taxes."
In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture
of sugar, on a graduated basis, on each picul of sugar manufactured; while section 3 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 tax equivalent to the difference between the money value of the rental or consideration
collected and the amount representing 12 per centum of the assessed value of such land.
According to section 6 of the law
SEC. 6. All collections made under this Act shall accrue to a special fund in the Philippine
Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid out
only for any or all of the following purposes or to attain any or all of the following objectives, as
may be provided by law.
First, to place the sugar industry in a position to maintain itself, despite the gradual loss of the
preferntial position of the Philippine sugar in the United States market, and ultimately to insure
its continued existence notwithstanding the loss of that market and the consequent necessity
of meeting competition in the free markets of the world;
Second, to readjust the benefits derived from the sugar industry by all of the component
elements thereof the mill, the landowner, the planter of the sugar cane, and the laborers in
the factory and in the field so that all might continue profitably to engage therein;lawphi1.net
Third, to limit the production of sugar to areas more economically suited to the production
thereof; and
Fourth, to afford labor employed in the industry a living wage and to improve their living and
working conditions: Provided, That the President of the Philippines may, until the adjourment of
the next regular session of the National Assembly, make the necessary disbursements from
the fund herein created (1) for the establishment and operation of sugar experiment station or
stations and the undertaking of researchers (a) to increase the recoveries of the centrifugal
sugar factories with the view of reducing manufacturing costs, (b) to produce and propagate
higher yielding varieties of sugar cane more adaptable to different district conditions in the
Philippines, (c) to lower the costs of raising sugar cane, (d) to improve the buying quality of
denatured alcohol from molasses for motor fuel, (e) to determine the possibility of utilizing the
other by-products of the industry, (f) to determine what crop or crops are suitable for rotation
and for the utilization of excess cane lands, and (g) on other problems the solution of which
would help rehabilitate and stabilize the industry, and (2) for the improvement of living and
working conditions in sugar mills and sugar plantations, authorizing him to organize the
necessary agency or agencies to take charge of the expenditure and allocation of said funds to
carry out the purpose hereinbefore enumerated, and, likewise, authorizing the disbursement
from the fund herein created of the necessary amount or amounts needed for salaries, wages,
travelling expenses, equipment, and other sundry expenses of said agency or agencies.
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme
Ledesma, 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 is unconstitutional and void, being levied for the aid and support of the sugar industry
exclusively, which in plaintiff's opinion is 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 this Court (Judiciary Act, section 17).
The basic defect in the plaintiff's position is his assumption that the tax provided for in Commonwealth
Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6
(heretofore quoted in full), 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
primarily an exercise of the police power.
This Court can take judicial notice of the fact that sugar production is one of the great industries of our
nation, sugar occupying a leading position among its export products; that it gives employment to
thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one of
the important sources of foreign exchange needed by our government, and is thus pivotal in the plans
of a regime committed to a policy of currency stability. Its promotion, protection and advancement,
therefore redounds greatly to the general welfare. Hence it was competent for the legislature to find
that the general welfare demanded that the sugar industry should be stabilized in turn; and in the
wide field of its police power, the lawmaking body could provide that the distribution of benefits
therefrom be readjusted among its components to enable it to resist the added strain of the increase
in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson vs. State ex
rel. Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121).
As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida
The protection of a large industry constituting one of the great sources of the state's wealth
and therefore directly or indirectly affecting the welfare of so great a portion of the population of
the State is affected to such an extent by public interests as to be within the police power of
the sovereign. (128 Sp. 857).
Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of
public concern, it follows that the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative discretion must be
allowed fully play, subject only to the test of reasonableness; and it is not contended that the means
provided in section 6 of the law (above quoted) bear no relation to the objective pursued or are
oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen
why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be
made the implement of the state's police power (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U. S.
412, 81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4 Wheat.
316, 4 L. Ed. 579).
That the tax to be levied should burden the sugar producers themselves can hardly be a ground of
complaint; indeed, it appears rational that the tax be obtained precisely from those who are to be
benefited from the expenditure of the funds derived from it. At any rate, it is inherent in the power to
tax that a state be free to select the subjects of taxation, and it has been repeatedly held that
"inequalities which result from a singling out of one particular class for taxation, or exemption infringe
no constitutional limitation" (Carmichael vs. Southern Coal & Coke Co., 301 U. S. 495, 81 L. Ed.
1245, citing numerous authorities, at p. 1251).
From the point of view we have taken it appears of no moment that the funds raised under the Sugar
Stabilization Act, now in question, should be exclusively spent in aid of the sugar industry, since it is
that very enterprise that is being protected. It may be that other industries are also in need of similar
protection; that the legislature is not required by the Constitution to adhere to a policy of "all or none."
As ruled in Minnesota ex rel. Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law
presumably hits the evil where it is most felt, it is not to be overthrown because there are other
instances to which it might have been applied;" and that "the legislative authority, exerted within its
proper field, need not embrace all the evils within its reach" (N. L. R. B. vs. Jones & Laughlin Steel
Corp. 301 U. S. 1, 81 L. Ed. 893).
Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax
money to experimental stations to seek increase of efficiency in sugar production, utilization of byproducts and solution of allied problems, as well as to the improvements of living and working
conditions in sugar mills or plantations, without any part of such money being channeled directly to

private persons, constitutes expenditure of tax money for private purposes, (compare Everson vs.
Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).
The decision appealed from is affirmed, with costs against appellant. So ordered.
Paras, C. J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Labrador, and Concepcion, JJ.,
concur.

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitionerappellant,

vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-appellees.
Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.
Office of the Asst. Solicitor General Jose G. Bautista and Solicitor A. A. Torres for appellee.

CONCEPCION, J.:
Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal,
dismissing the above entitled case and dissolving the writ of preliminary injunction therein issued,
without costs.
On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, 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 (Gen. Roxas Gen. Araneta Gen. Lucban Gen.
Capinpin Gen. Segundo Gen. Delgado Gen. Malvar Gen. Lim)"; that, at the time of the
passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and
planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . .
Pasig, Rizal" (according to the tracings attached to the petition as Annexes A and B, near Shaw
Boulevard, not far away from the intersection between the latter and Highway 54), which projected
feeder roads "do not connect any government property or any important premises to the main
highway"; that the aforementioned Antonio Subdivision (as well as the lands on which said feeder
roads were to be construed) were private properties of respondent Jose C. Zulueta, who, at the time
of the passage and approval of said Act, was a member of the Senate of the Philippines; that on May,
1953, respondent Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offering to
donate said projected feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the
offer was accepted by the council, subject to the condition "that the donor would submit a plan of the
said roads and agree to change the names of two of them"; that no deed of donation in favor of the
municipality of Pasig was, however, executed; that on July 10, 1953, respondent Zulueta wrote
another letter to said council, calling attention to the approval of Republic Act. No. 920, and the sum
of P85,000.00 appropriated therein for the construction of the projected feeder roads in question; that
the municipal council of Pasig endorsed said letter of respondent Zulueta to the District Engineer of
Rizal, who, up to the present "has not made any endorsement thereon" that inasmuch as the
projected feeder roads in question were private property at the time of the passage and approval of
Republic Act No. 920, the appropriation of P85,000.00 therein made, for the construction,
reconstruction, repair, extension and improvement of said projected feeder roads, was illegal and,
therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress because its
members were made to believe that the projected feeder roads in question were "public roads and
not private streets of a private subdivision"'; that, "in order to give a semblance of legality, when there
is absolutely none, to the aforementioned appropriation", respondents Zulueta executed on
December 12, 1953, while he was a member of the Senate of the Philippines, an alleged deed of
donation copy of which is annexed to the petition of the four (4) parcels of land constituting said
projected feeder roads, in favor of the Government of the Republic of the Philippines; that said
alleged deed of donation was, on the same date, accepted by the then Executive Secretary; that
being subject to an onerous condition, said donation partook of the nature of a contract; that, such,
said donation violated the provision of our fundamental law prohibiting members of Congress from
being directly or indirectly financially interested in any contract with the Government, and, hence, is
unconstitutional, as well as null and voidab initio, for the construction of the projected feeder roads in
question with public funds would greatly enhance or increase the value of the aforementioned
subdivision of respondent Zulueta, "aside from relieving him from the burden of constructing his
subdivision streets or roads at his own expense"; that the construction of said projected feeder roads
was then being undertaken by the Bureau of Public Highways; and that, unless restrained by the
court, the respondents would continue to execute, comply with, follow and implement the
aforementioned illegal provision of law, "to the irreparable damage, detriment and prejudice not only
to the petitioner but to the Filipino nation."
Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null and
void; that the alleged deed of donation of the feeder roads in question be "declared unconstitutional

and, therefor, illegal"; that a writ of injunction be issued enjoining the Secretary of Public Works and
Communications, the Director of the Bureau of Public Works and Highways and Jose C. Zulueta from
ordering or allowing the continuance of the above-mentioned feeder roads project, and from making
and securing any new and further releases on the aforementioned item of Republic Act No. 920, and
the disbursing officers of the Department of Public Works and Highways from making any further
payments out of said funds provided for in Republic Act No. 920; and that pending final hearing on the
merits, a writ of preliminary injunction be issued enjoining the aforementioned parties respondent
from making and securing any new and further releases on the aforesaid item of Republic Act No.
920 and from making any further payments out of said illegally appropriated funds.
Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to
sue", and that the petition did "not state a cause of action". In support to this motion, respondent
Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial governor, should represent the
Province of Rizal, pursuant to section 1683 of the Revised Administrative Code; that said respondent
is " not aware of any law which makes illegal the appropriation of public funds for the improvements of
. . . private property"; and that, the constitutional provision invoked by petitioner is inapplicable to the
donation in question, the same being a pure act of liberality, not a contract. The other respondents, in
turn, maintained that petitioner could not assail the appropriation in question because "there is no
actual bona fide case . . . in which the validity of Republic Act No. 920 is necessarily involved" and
petitioner "has not shown that he has a personal and substantial interest" in said Act "and that its
enforcement has caused or will cause him a direct injury."
Acting upon said motions to dismiss, the lower court rendered the aforementioned decision, dated
October 29, 1953, holding that, since public interest is involved in this case, the Provincial Governor
of Rizal and the provincial fiscal thereof who represents him therein, "have the requisite personalities"
to question the constitutionality of the disputed item of Republic Act No. 920; that "the legislature is
without power appropriate public revenues for anything but a public purpose", that the instructions
and improvement of the feeder roads in question, if such roads where private property, would not be a
public purpose; that, being subject to the following condition:
The within donation is hereby made upon the condition that the Government of the Republic of
the Philippines will use the parcels of land hereby donated for street purposes only and for no
other purposes whatsoever; it being expressly understood that should the Government of the
Republic of the Philippines violate the condition hereby imposed upon it, the title to the land
hereby donated shall, upon such violation, ipso facto revert to the DONOR, JOSE C.
ZULUETA. (Emphasis supplied.)
which is onerous, the donation in question is a contract; that said donation or contract is "absolutely
forbidden by the Constitution" and consequently "illegal", for Article 1409 of the Civil Code of the
Philippines, declares in existence and void from the very beginning contracts "whose cause, objector
purpose is contrary to law, morals . . . or public policy"; that the legality of said donation may not be
contested, however, by petitioner herein, because his "interest are not directly affected" thereby; and
that, accordingly, the appropriation in question "should be upheld" and the case dismissed.
At the outset, it should be noted that we are concerned with a decision granting the aforementioned
motions to dismiss, which as much, are deemed to have admitted hypothetically the allegations of
fact made in the petition of appellant herein. According to said petition, respondent Zulueta is the
owner of several parcels of residential land situated in Pasig, Rizal, and known as the Antonio
Subdivision, certain portions of which had been reserved for the projected feeder roads
aforementioned, which, admittedly, were private property of said respondent when Republic Act No.
920, appropriating P85,000.00 for the "construction, reconstruction, repair, extension and
improvement" of said roads, was passed by Congress, as well as when it was approved by the
President on June 20, 1953. The petition further alleges that the construction of said roads, to be
undertaken with the aforementioned appropriation of P85,000.00, would have the effect of relieving
respondent Zulueta of the burden of constructing his subdivision streets or roads at his own

expenses, 1and would "greatly enhance or increase the value of the subdivision" of said respondent.
The lower court held that under these circumstances, the appropriation in question was "clearly for a
private, not a public purpose."
Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However,
respondent Zulueta contended, in his motion to dismiss that:
A law passed by Congress and approved by the President can never be illegal because
Congress is the source of all laws . . . Aside from the fact that movant is not aware of any law
which makes illegal the appropriation of public funds for the improvement of what we, in the
meantime, may assume as private property . . . (Record on Appeal, p. 33.)
The first proposition must be rejected most emphatically, it being inconsistent with the nature of the
Government established under the Constitution of the Republic of the Philippines and the system of
checks and balances underlying our political structure. Moreover, it is refuted by the decisions of this
Court invalidating legislative enactments deemed violative of the Constitution or organic laws. 3
As regards the legal feasibility of appropriating public funds for a public purpose, the principle
according to Ruling Case Law, is this:
It is a general rule that the legislature is without power to appropriate public revenue for
anything but a public purpose. . . . It is the essential character of the direct object of the
expenditure which must determine its validity as justifying a tax, and not the magnitude of the
interest to be affected nor the degree to which the general advantage of the community, and
thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public
or to the state, which results from the promotion of private interest and the prosperity of private
enterprises or business, does not justify their aid by the use public money. (25 R.L.C. pp. 398400; Emphasis supplied.)
The rule is set forth in Corpus Juris Secundum in the following language:
In accordance with the rule that the taxing power must be exercised for public purposes only,
discussedsupra sec. 14, money raised by taxation can be expended only for public purposes
and not for the advantage of private individuals. (85 C.J.S. pp. 645-646; emphasis supplied.)
Explaining the reason underlying said rule, Corpus Juris Secundum states:
Generally, under the express or implied provisions of the constitution, public funds may be
used only for public purpose. The right of the legislature to appropriate funds is correlative with
its right to tax, and, under constitutional provisions against taxation except for public purposes
and prohibiting the collection of a tax for one purpose and the devotion thereof to another
purpose, no appropriation of state funds can be made for other than for a public purpose.
xxx

xxx

xxx

The test of the constitutionality of a statute requiring the use of public funds is whether the
statute is designed to promote the public interest, as opposed to the furtherance of the
advantage of individuals, although each advantage to individuals might incidentally serve the
public. (81 C.J.S. pp. 1147; emphasis supplied.)
Needless to say, this Court is fully in accord with the foregoing views which, apart from being patently
sound, are a necessary corollary to our democratic system of government, which, as such, exists
primarily for the promotion of the general welfare. Besides, reflecting as they do, the established
jurisprudence in the United States, after whose constitutional system ours has been patterned, said
views and jurisprudence are, likewise, part and parcel of our own constitutional law.lawphil.net

This notwithstanding, the lower court felt constrained to uphold the appropriation in question, upon
the ground that petitioner may not contest the legality of the donation above referred to because the
same does not affect him directly. This conclusion is, presumably, based upon the following premises,
namely: (1) that, if valid, said donation cured the constitutional infirmity of the aforementioned
appropriation; (2) that the latter may not be annulled without a previous declaration of
unconstitutionality of the said donation; and (3) that the rule set forth in Article 1421 of the Civil Code
is absolute, and admits of no exception. We do not agree with these premises.
The validity of a statute depends upon the powers of Congress at the time of its passage or approval,
not upon events occurring, or acts performed, subsequently thereto, unless the latter consists of an
amendment of the organic law, removing, with retrospective operation, the constitutional limitation
infringed by said statute. Referring to the P85,000.00 appropriation for the projected feeder roads in
question, the legality thereof depended upon whether said roads were public or private property when
the bill, which, latter on, became Republic Act 920, was passed by Congress, or, when said bill was
approved by the President and the disbursement of said sum became effective, or on June 20, 1953
(see section 13 of said Act). Inasmuch as the land on which the projected feeder roads were to be
constructed belonged then to respondent Zulueta, the result is that said appropriation sought a
private purpose, and hence, was null and void. 4 The donation to the Government, over five (5)
months after the approval and effectivity of said Act, made, according to the petition, for the purpose
of giving a "semblance of legality", or legalizing, the appropriation in question, did not cure its
aforementioned basic defect. Consequently, a judicial nullification of said donation need not precede
the declaration of unconstitutionality of said appropriation.
Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to exceptions.
For instance, the creditors of a party to an illegal contract may, under the conditions set forth in Article
1177 of said Code, exercise the rights and actions of the latter, except only those which are inherent
in his person, including therefore, his right to the annulment of said contract, even though such
creditors are not affected by the same, except indirectly, in the manner indicated in said legal
provision.
Again, it is well-stated that the validity of a statute may be contested only by one who will sustain a
direct injury in consequence of its enforcement. Yet, there are many decisions nullifying, at the
instance of taxpayers, laws providing for the disbursement of public funds, 5upon the theory that "the
expenditure of public funds by an officer of the State for the purpose of administering
an unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the
request of a taxpayer. 6Although there are some decisions to the contrary, 7the prevailing view in the
United States is stated in the American Jurisprudence as follows:
In the determination of the degree of interest essential to give the requisite standing to attack
the constitutionality of a statute, the general rule is that not only persons individually affected,
but alsotaxpayers, have sufficient interest in preventing the illegal expenditure of moneys
raised by taxation and may therefore question the constitutionality of statutes requiring
expenditure of public moneys. (11 Am. Jur. 761; emphasis supplied.)
However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs. Mellon (262
U.S. 447), insofar as federal laws are concerned, upon the ground that the relationship of a taxpayer
of the U.S. to its Federal Government is different from that of a taxpayer of a municipal corporation to
its government. Indeed, under the composite system of government existing in the U.S., the states of
the Union are integral part of the Federation from an international viewpoint, but, each state enjoys
internally a substantial measure of sovereignty, subject to the limitations imposed by the Federal
Constitution. In fact, the same was made by representatives ofeach state of the Union, not of the
people of the U.S., except insofar as the former represented the people of the respective States, and
the people of each State has, independently of that of the others, ratified said Constitution. In other
words, the Federal Constitution and the Federal statutes have become binding upon the people of the
U.S. in consequence of an act of, and, in this sense, through the respective states of the Union of

which they are citizens. The peculiar nature of the relation between said people and the Federal
Government of the U.S. is reflected in the election of its President, who is chosen directly, not by the
people of the U.S., but by electors chosen by each State, in such manner as the legislature thereof
may direct (Article II, section 2, of the Federal Constitution).lawphi1.net
The relation between the people of the Philippines and its taxpayers, on the other hand, and the
Republic of the Philippines, on the other, is not identical to that obtaining between the people and
taxpayers of the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to that
existing between the people and taxpayers of each state and the government thereof, except that the
authority of the Republic of the Philippines over the people of the Philippines is more fully direct than
that of the states of the Union, insofar as the simple and unitary type of our national government is
not subject to limitations analogous to those imposed by the Federal Constitution upon the states of
the Union, and those imposed upon the Federal Government in the interest of the Union. For this
reason, the rule recognizing the right of taxpayers to assail the constitutionality of a legislation
appropriating local or state public funds which has been upheld by the Federal Supreme Court
(Crampton vs. Zabriskie, 101 U.S. 601) has greater application in the Philippines than that adopted
with respect to acts of Congress of the United States appropriating federal funds.
Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a land by
the Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the purpose of
contesting the price being paid to the owner thereof, as unduly exorbitant. It is true that in
Custodio vs. President of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of the
Government was not permitted to question the constitutionality of an appropriation for backpay of
members of Congress. However, in Rodriguez vs. Treasurer of the Philippines and
Barredo vs. Commission on Elections (84 Phil., 368; 45 Off. Gaz., 4411), we entertained the action of
taxpayers impugning the validity of certain appropriations of public funds, and invalidated the same.
Moreover, the reason that impelled this Court to take such position in said two (2) cases the
importance of the issues therein raised is present in the case at bar. Again, like the petitioners in
the Rodriguez and Barredo cases, petitioner herein is not merely a taxpayer. The Province of Rizal,
which he represents officially as its Provincial Governor, is our most populated political
subdivision, 8and, the taxpayers therein bear a substantial portion of the burden of taxation, in the
Philippines.
Hence, it is our considered opinion that the circumstances surrounding this case sufficiently justify
petitioners action in contesting the appropriation and donation in question; that this action should not
have been dismissed by the lower court; and that the writ of preliminary injunction should have been
maintained.
Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the
lower court for further proceedings not inconsistent with this decision, with the costs of this instance
against respondent Jose C. Zulueta. It is so ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez David,
Paredes, and Dizon, JJ., concur.

Footnotes
1 For, pursuant to section 19(h) of the existing rules and regulation of the Urban Planning
Commission, the owner of a subdivision is under obligation "to improve, repair and maintain all
streets, highways and other ways in his subdivision until their dedication to public use is
accepted by the government."

2 Ex parte Bagwell, 79 P. 2d. 395; Road District No. 4 Shelby County vs. Allred. 68 S.W 2d
164; State ex rel. Thomson vs. Giessel, 53-N.W. 2d. 726, Attorney General vs. City of Eau
Claire, 37 Wis. 400; State ex rel. Smith vs. Annuity Pension Board, 241 Wis. 625, 6 N.W. 2d.
676; State vs. Smith, 293 N.W. 161; State vs.Dammann 280 N.W. 698; Sjostrum vs. State
Highway Commission 228 P. 2d. 238; Hutton vs. Webb, 126 N.C. 897, 36 S.E. 341; Michigan
Sugar Co. vs. Auditor General, 124 Mich. 674, 83 N.W. 625; Oxnard Beet Sugar Co. vs. State,
105 N.W. 716.
3 Casanovas vs. Hord. 8 Phil., McGirr vs. Hamilton, 30 Phil., 563; Compania General de
Tabacos vs. Board of Public Utility, 34 Phil., 136; Central Capiz vs. Ramirez, 40 Phil., 883;
Concepcion vs. Paredes, 42 Phil., 599; U.S. vs. Ang Tang Ho, 43 Phil., 6;
McDaniel vs. Apacible, 44 Phil., 248; People vs. Pomar, 46 Phil., 440; Agcaoili vs. Suguitan, 48
Phil., 676; Government of P.I. vs. Springer, 50 Phil., 259; Manila Electric Co. vs.Pasay Transp.
Co., 57 Phil., 600; People vs. Linsangan, 62 Phil., 464; People and Hongkong & Shanghai
Banking Corp. vs. Jose O. Vera, 65 Phil., 56; People vs. Carlos, 78 Phil., 535; 44 Off. Gaz.
428; In re Cunanan, 94 Phil., 534; 50 Off. Gaz., 1602; City of Baguio vs. Nawasa, 106 Phil.,
144; City of Cebu vs.Nawasa, 107 Phil., 1112; Rutter vs. Esteban, 93 Phil., 68; Off. Gaz.,
[5]1807.
4 In the language of the Supreme Court of Nebraska, "An unconstitutional statute is a legal still
birth, which neither moves, nor breathes, nor holds out any sign of life. It is a form without one
vital spark. It is whollydead from the time of conception, and, no right, either legal or equitable,
arises from such inanimate thing." (Oxnard Beet Sugar Co. vs. State, 102 N.W. 80.).
5 See, among others, Livermore, vs. Waite, 102 Cal. 113, 25 L.R.A. 312,36 P. 424;
Crawford vs. Gilchrist, 64 Fla. 41, 59 So. 963; Lucas vs. American Hawaiian Engineering and
Constr. Co., 16 Haw. 80; Castle vs.Capena, 5 Haw. 27; Littler vs. Jayne, 124 Ill. 123, 16 N.E.
374; Burke vs. Snively, 208 I11. 328, 70 N.E. 372; Ellingham vs. Dye, 178 Ind. 336, 99 N.E. 1;
Christmas vs. Warfield, 105 Md. 536; Sears vs. Steel, 55 Or. 544, 107 Pac. 3; State ex rel.
Taylor vs. Pennover, 26 Or. 205, 37 Pac. 906; Carman vs. Woodruf, 10 Or. 123;
MacKinley vs. Watson, 145 Pac. 266; Sears vs. James, 47 Or. 50, 82 Pac. 14;
Mott vs. Pennsylvania R. Co., 30 Pa. 9, 72 Am. Dec. 664; Bradly vs. Power County, 37 Am.
Dec. 563; Frost vs. Thomas, 26 Colo. 227, 77 Am. St. Rep. 259, 56 Pac. 899;
Martin vs. Ingham, 38 Kan. 641, 17 Pac. 162; Martin vs. Lacy, 39 Kan. 703, 18 Pac. 951;
Smith vs. Maguerich, 44 Ga. 163; Giddings vs. Blacker, 93 Mich. 1, 16 L.R.A. 402, 52 N.W.
944; Rippe vs. Becker, 56 Minn. 100, 57 N.W. 331; Auditor vs. Treasurer, 4 S.C. 311;
McCullough vs.Brown, 31 S.C. 220, 19 S.E. 458; State ex rel. Lamb vs. Cummingham, 83 Wis.
90, 53 N.W. 35; State ex rel. Rosenhian vs. Frear, 138 Wis. 173, 119 N.W. 894.
6 Rubs vs. Thompson, 56 N.E. 2d. 761; Reid vs. Smith, 375 Ill. 147, 30N. E. 2d. 908;
Fergus vs. Russel, 270 Ill. 304, 110 N.E. 130; Burke vs. Snively, 208 Ill. 328;
Jones vs. Connell, 266 Ill. 443, 107 N.E. 731; Dudick vs.Baumann, 349 [PEPSI] Ill. 46, 181
N.E. 690.
7 Thompson vs. Canal Fund Comps., 2 Abb. Pr. 248; Shieffelin vs. Komfort, 212 N.Y. 520, 106
N.E. 675; Hutchison vs. Skinmer, 21 Misc. 729, 49N. Y. Supp. 360; Long vs. Johnson, 70 Misc.
308; 127 N.Y. Supp. 756; Whiteback vs. Hooker, 73 Misc. 573, 133 N.Y. Supp. 534; State ex
rel. Cranmer vs. Thorson, 9 S.D. 149, 68 N.W. 202; Davenport vs. Elrod, 20 S.D. 567, 107
N.W. 833; Indiana Jones vs. Reed, 3 Wash. 57, 27 Pac. 1067; Birmingham vs. Cheetham, 19
Wash. 657, 54 Pac. 37; Tacoma vs. Bridges, 25 Wash. 221, 65 Pac. 186; Hilger vs. State, 63
Wash. 457, 116 Pac. 19.
8 It has 1,463,530 inhabitants.

BENJAMIN P. GOMEZ, petitioner-appellee,

vs.
ENRICO PALOMAR, in his capacity as Postmaster General, HON. BRIGIDO R. VALENCIA, in
his capacity as Secretary of Public Works and Communications, and DOMINGO GOPEZ, in his
capacity as Acting Postmaster of San Fernando, Pampanga, respondent-appellants.
Lorenzo P. Navarro and Narvaro Belar S. Navarro for petitioner-appellee.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Frine C. Zaballero and
Solicitor Dominador L. Quiroz for respondents-appellants.
CASTRO, J.:
This appeal puts in issue the constitutionality of Republic Act 1635, 1 as amended by Republic Act
2631,2 which provides as follows:
To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order for
the period from August nineteen to September thirty every year the printing and issue of semipostal stamps of different denominations with face value showing the regular postage charge
plus the additional amount of five centavos for the said purpose, and during the said period, no
mail matter shall be accepted in the mails unless it bears such semi-postal stamps: Provided,
That no such additional charge of five centavos shall be imposed on newspapers. The
additional proceeds realized from the sale of the semi-postal stamps shall constitute a special
fund and be deposited with the National Treasury to be expended by the Philippine
Tuberculosis Society in carrying out its noble work to prevent and eradicate tuberculosis.
The respondent Postmaster General, in implementation of the law, thereafter issued four (4)
administrative orders numbered 3 (June 20, 1958), 7 (August 9, 1958), 9 (August 28, 1958), and 10
(July 15, 1960). All these administrative orders were issued with the approval of the respondent
Secretary of Public Works and Communications.

The pertinent portions of Adm. Order 3 read as follows:

Such semi-postal stamps could not be made available during the period from August 19 to
September 30, 1957, for lack of time. However, two denominations of such stamps, one at "5 +
5" centavos and another at "10 + 5" centavos, will soon be released for use by the public on
their mails to be posted during the same period starting with the year 1958.
xxx

xxx

xxx

During the period from August 19 to September 30 each year starting in 1958, no mail matter
of whatever class, and whether domestic or foreign, posted at any Philippine Post Office and
addressed for delivery in this country or abroad, shall be accepted for mailing unless it bears at
least one such semi-postal stamp showing the additional value of five centavos intended for
the Philippine Tuberculosis Society.
In the case of second-class mails and mails prepaid by means of mail permits or impressions
of postage meters, each piece of such mail shall bear at least one such semi-postal stamp if
posted during the period above stated starting with the year 1958, in addition to being charged
the usual postage prescribed by existing regulations. In the case of business reply envelopes
and cards mailed during said period, such stamp should be collected from the addressees at
the time of delivery. Mails entitled to franking privilege like those from the office of the
President, members of Congress, and other offices to which such privilege has been granted,
shall each also bear one such semi-postal stamp if posted during the said period.
Mails posted during the said period starting in 1958, which are found in street or post-office
mail boxes without the required semi-postal stamp, shall be returned to the sender, if known,
with a notation calling for the affixing of such stamp. If the sender is unknown, the mail matter
shall be treated as nonmailable and forwarded to the Dead Letter Office for proper disposition.
Adm. Order 7, amending the fifth paragraph of Adm. Order 3, reads as follows:
In the case of the following categories of mail matter and mails entitled to franking privilege
which are not exempted from the payment of the five centavos intended for the Philippine
Tuberculosis Society, such extra charge may be collected in cash, for which official receipt
(General Form No. 13, A) shall be issued, instead of affixing the semi-postal stamp in the
manner hereinafter indicated:
1. Second-class mail. Aside from the postage at the second-class rate, the extra charge of
five centavos for the Philippine Tuberculosis Society shall be collected on each separatelyaddressed piece of second-class mail matter, and the total sum thus collected shall be entered
in the same official receipt to be issued for the postage at the second-class rate. In making
such entry, the total number of pieces of second-class mail posted shall be stated, thus: "Total
charge for TB Fund on 100 pieces . .. P5.00." The extra charge shall be entered separate from
the postage in both of the official receipt and the Record of Collections.
2. First-class and third-class mail permits. Mails to be posted without postage affixed under
permits issued by this Bureau shall each be charged the usual postage, in addition to the fivecentavo extra charge intended for said society. The total extra charge thus received shall be
entered in the same official receipt to be issued for the postage collected, as in subparagraph
1.
3. Metered mail. For each piece of mail matter impressed by postage meter under metered
mail permit issued by this Bureau, the extra charge of five centavos for said society shall be
collected in cash and an official receipt issued for the total sum thus received, in the manner
indicated in subparagraph 1.
4. Business reply cards and envelopes. Upon delivery of business reply cards and
envelopes to holders of business reply permits, the five-centavo charge intended for said
society shall be collected in cash on each reply card or envelope delivered, in addition to the
required postage which may also be paid in cash. An official receipt shall be issued for the total
postage and total extra charge received, in the manner shown in subparagraph 1.

5. Mails entitled to franking privilege. Government agencies, officials, and other persons
entitled to the franking privilege under existing laws may pay in cash such extra charge
intended for said society, instead of affixing the semi-postal stamps to their mails, provided that
such mails are presented at the post-office window, where the five-centavo extra charge for
said society shall be collected on each piece of such mail matter. In such case, an official
receipt shall be issued for the total sum thus collected, in the manner stated in subparagraph
1.
Mail under permits, metered mails and franked mails not presented at the post-office window
shall be affixed with the necessary semi-postal stamps. If found in mail boxes without such
stamps, they shall be treated in the same way as herein provided for other mails.
Adm. Order 9, amending Adm. Order 3, as amended, exempts "Government and its Agencies and
Instrumentalities Performing Governmental Functions." Adm. Order 10, amending Adm. Order 3, as
amended, exempts "copies of periodical publications received for mailing under any class of mail
matter, including newspapers and magazines admitted as second-class mail."
The FACTS. On September l5, 1963 the petitioner Benjamin P. Gomez mailed a letter at the post
office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of
1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB stamp required by the
statute, it was returned to the petitioner.
In view of this development, the petitioner brough suit for declaratory relief in the Court of First
Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing
administrative orders issued, contending that it violates the equal protection clause of the Constitution
as well as the rule of uniformity and equality of taxation. The lower court declared the statute and the
orders unconstitutional; hence this appeal by the respondent postal authorities.
For the reasons set out in this opinion, the judgment appealed from must be reversed.
I.
Before reaching the merits, we deem it necessary to dispose of the respondents' contention that
declaratory relief is unavailing because this suit was filed after the petitioner had committed a breach
of the statute. While conceding that the mailing by the petitioner of a letter without the additional antiTB stamp was a violation of Republic Act 1635, as amended, the trial court nevertheless refused to
dismiss the action on the ground that under section 6 of Rule 64 of the Rules of Court, "If before the
final termination of the case a breach or violation of ... a statute ... should take place, the action may
thereupon be converted into an ordinary action."
The prime specification of an action for declaratory relief is that it must be brought "before breach or
violation" of the statute has been committed. Rule 64, section 1 so provides. Section 6 of the same
rule, which allows the court to treat an action for declaratory relief as an ordinary action, applies only
if the breach or violation occurs after the filing of the action but before the termination thereof. 3
Hence, if, as the trial court itself admitted, there had been a breach of the statute before the firing of
this action, then indeed the remedy of declaratory relief cannot be availed of, much less can the suit
be converted into an ordinary action.
Nor is there merit in the petitioner's argument that the mailing of the letter in question did not
constitute a breach of the statute because the statute appears to be addressed only to postal
authorities. The statute, it is true, in terms provides that "no mail matter shall be accepted in the mails
unless it bears such semi-postal stamps." It does not follow, however, that only postal authorities can
be guilty of violating it by accepting mails without the payment of the anti-TB stamp. It is obvious that
they can be guilty of violating the statute only if there are people who use the mails without paying for
the additional anti-TB stamp. Just as in bribery the mere offer constitutes a breach of the law, so in
the matter of the anti-TB stamp the mere attempt to use the mails without the stamp constitutes a
violation of the statute. It is not required that the mail be accepted by postal authorities. That
requirement is relevant only for the purpose of fixing the liability of postal officials.
Nevertheless, we are of the view that the petitioner's choice of remedy is correct because this suit
was filed not only with respect to the letter which he mailed on September 15, 1963, but also with

regard to any other mail that he might send in the future. Thus, in his complaint, the petitioner prayed
that due course be given to "other mails without the semi-postal stamps which he may deliver for
mailing ... if any, during the period covered by Republic Act 1635, as amended, as well as other mails
hereafter to be sent by or to other mailers which bear the required postage, without collection of
additional charge of five centavos prescribed by the same Republic Act." As one whose mail was
returned, the petitioner is certainly interested in a ruling on the validity of the statute requiring the use
of additional stamps.
II.
We now consider the constitutional objections raised against the statute and the implementing orders.
1. It is said that the statute is violative of the equal protection clause of the Constitution. More
specifically the claim is made that it constitutes mail users into a class for the purpose of the tax while
leaving untaxed the rest of the population and that even among postal patrons the statute
discriminatorily grants exemption to newspapers while Administrative Order 9 of the respondent
Postmaster General grants a similar exemption to offices performing governmental functions. .
The five centavo charge levied by Republic Act 1635, as amended, is in the nature of an excise tax,
laid upon the exercise of a privilege, namely, the privilege of using the mails. As such the objections
levelled against it must be viewed in the light of applicable principles of taxation.
To begin with, it is settled that the legislature has the inherent power to select the subjects of taxation
and to grant exemptions.4 This power has aptly been described as "of wide range and
flexibility."5 Indeed, it is said that in the field of taxation, more than in other areas, the legislature
possesses the greatest freedom in classification.6 The reason for this is that traditionally, classification
has been a device for fitting tax programs to local needs and usages in order to achieve an equitable
distribution of the tax burden.7
That legislative classifications must be reasonable is of course undenied. But what the petitioner
asserts is that statutory classification of mail users must bear some reasonable relationship to the end
sought to be attained, and that absent such relationship the selection of mail users is constitutionally
impermissible. This is altogether a different proposition. As explained in Commonwealth v. Life
Assurance Co.:8
While the principle that there must be a reasonable relationship between classification made
by the legislation and its purpose is undoubtedly true in some contexts, it has no application to
a measure whose sole purpose is to raise revenue ... So long as the classification imposed is
based upon some standard capable of reasonable comprehension, be that standard based
upon ability to produce revenue or some other legitimate distinction, equal protection of the law
has been afforded. See Allied Stores of Ohio, Inc. v. Bowers, supra, 358 U.S. at 527, 79 S. Ct.
at 441; Brown Forman Co. v. Commonwealth of Kentucky, 2d U.S. 56, 573, 80 S. Ct. 578, 580
(1910).
We are not wont to invalidate legislation on equal protection grounds except by the clearest
demonstration that it sanctions invidious discrimination, which is all that the Constitution forbids. The
remedy for unwise legislation must be sought in the legislature. Now, the classification of mail users is
not without any reason. It is based on ability to pay, let alone the enjoyment of a privilege, and on
administrative convinience. In the allocation of the tax burden, Congress must have concluded that
the contribution to the anti-TB fund can be assured by those whose who can afford the use of the
mails.
The classification is likewise based on considerations of administrative convenience. For it is now a
settled principle of law that "consideration of practical administrative convenience and cost in the
administration of tax laws afford adequate ground for imposing a tax on a well recognized and defined
class."9 In the case of the anti-TB stamps, undoubtedly, the single most important and influential
consideration that led the legislature to select mail users as subjects of the tax is the relative ease
and convenienceof collecting the tax through the post offices. The small amount of five centavos does
not justify the great expense and inconvenience of collecting through the regular means of collection.
On the other hand, by placing the duty of collection on postal authorities the tax was made almost
self-enforcing, with as little cost and as little inconvenience as possible.

And then of course it is not accurate to say that the statute constituted mail users into a class. Mail
users were already a class by themselves even before the enactment of the statue and all that the
legislature did was merely to select their class. Legislation is essentially empiric and Republic Act
1635, as amended, no more than reflects a distinction that exists in fact. As Mr. Justice Frankfurter
said, "to recognize differences that exist in fact is living law; to disregard [them] and concentrate on
some abstract identities is lifeless logic."10
Granted the power to select the subject of taxation, the State's power to grant exemption must
likewise be conceded as a necessary corollary. Tax exemptions are too common in the law; they have
never been thought of as raising issues under the equal protection clause.
It is thus erroneous for the trial court to hold that because certain mail users are exempted from the
levy the law and administrative officials have sanctioned an invidious discrimination offensive to the
Constitution. The application of the lower courts theory would require all mail users to be taxed, a
conclusion that is hardly tenable in the light of differences in status of mail users. The Constitution
does not require this kind of equality.
As the United States Supreme Court has said, the legislature may withhold the burden of the tax in
order to foster what it conceives to be a beneficent enterprise. 11 This is the case of newspapers
which, under the amendment introduced by Republic Act 2631, are exempt from the payment of the
additional stamp.
As for the Government and its instrumentalities, their exemption rests on the State's sovereign
immunity from taxation. The State cannot be taxed without its consent and such consent, being in
derogation of its sovereignty, is to be strictly construed. 12 Administrative Order 9 of the respondent
Postmaster General, which lists the various offices and instrumentalities of the Government exempt
from the payment of the anti-TB stamp, is but a restatement of this well-known principle of
constitutional law.
The trial court likewise held the law invalid on the ground that it singles out tuberculosis to the
exclusion of other diseases which, it is said, are equally a menace to public health. But it is never a
requirement of equal protection that all evils of the same genus be eradicated or none at all. 13 As this
Court has had occasion to say, "if the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been applied." 14
2. The petitioner further argues that the tax in question is invalid, first, because it is not levied for a
public purpose as no special benefits accrue to mail users as taxpayers, and second, because it
violates the rule of uniformity in taxation.
The eradication of a dreaded disease is a public purpose, but if by public purpose the petitioner
means benefit to a taxpayer as a return for what he pays, then it is sufficient answer to say that the
only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the
privileges of living in an organized society, established and safeguarded by the devotion of taxes to
public purposes. Any other view would preclude the levying of taxes except as they are used to
compensate for the burden on those who pay them and would involve the abandonment of the most
fundamental principle of government that it exists primarily to provide for the common good. 15
Nor is the rule of uniformity and equality of taxation infringed by the imposition of a flat rate rather
than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the
service rendered. We have said that considerations of administrative convenience and cost afford an
adequate ground for classification. The same considerations may induce the legislature to impose a
flat tax which in effect is a charge for the transaction, operating equally on all persons within the class
regardless of the amount involved.16 As Mr. Justice Holmes said in sustaining the validity of a stamp
act which imposed a flat rate of two cents on every $100 face value of stock transferred:
One of the stocks was worth $30.75 a share of the face value of $100, the other $172. The
inequality of the tax, so far as actual values are concerned, is manifest. But, here again
equality in this sense has to yield to practical considerations and usage. There must be a fixed
and indisputable mode of ascertaining a stamp tax. In another sense, moreover, there is
equality. When the taxes on two sales are equal, the same number of shares is sold in each
case; that is to say, the same privilege is used to the same extent. Valuation is not the only
thing to be considered. As was pointed out by the court of appeals, the familiar stamp tax of 2

cents on checks, irrespective of income or earning capacity, and many others, illustrate the
necessity and practice of sometimes substituting count for weight ... 17
According to the trial court, the money raised from the sales of the anti-TB stamps is spent for the
benefit of the Philippine Tuberculosis Society, a private organization, without appropriation by law. But
as the Solicitor General points out, the Society is not really the beneficiary but only the agency
through which the State acts in carrying out what is essentially a public function. The money is treated
as a special fund and as such need not be appropriated by law.18
3. Finally, the claim is made that the statute is so broadly drawn that to execute it the respondents
had to issue administrative orders far beyond their powers. Indeed, this is one of the grounds on
which the lower court invalidated Republic Act 1631, as amended, namely, that it constitutes an
undue delegation of legislative power.
Administrative Order 3, as amended by Administrative Orders 7 and 10, provides that for certain
classes of mail matters (such as mail permits, metered mails, business reply cards, etc.), the fivecentavo charge may be paid in cash instead of the purchase of the anti-TB stamp. It further states
that mails deposited during the period August 19 to September 30 of each year in mail boxes without
the stamp should be returned to the sender, if known, otherwise they should be treated as
nonmailable.
It is true that the law does not expressly authorize the collection of five centavos except through the
sale of anti-TB stamps, but such authority may be implied in so far as it may be necessary to prevent
a failure of the undertaking. The authority given to the Postmaster General to raise funds through the
mails must be liberally construed, consistent with the principle that where the end is required the
appropriate means are given.19
The anti-TB stamp is a distinctive stamp which shows on its face not only the amount of the additional
charge but also that of the regular postage. In the case of business reply cards, for instance, it is
obvious that to require mailers to affix the anti-TB stamp on their cards would be to make them pay
much more because the cards likewise bear the amount of the regular postage.
It is likewise true that the statute does not provide for the disposition of mails which do not bear the
anti-TB stamp, but a declaration therein that "no mail matter shall be accepted in the mails unless it
bears such semi-postal stamp" is a declaration that such mail matter is nonmailable within the
meaning of section 1952 of the Administrative Code. Administrative Order 7 of the Postmaster
General is but a restatement of the law for the guidance of postal officials and employees. As for
Administrative Order 9, we have already said that in listing the offices and entities of the Government
exempt from the payment of the stamp, the respondent Postmaster General merely observed an
established principle, namely, that the Government is exempt from taxation.
ACCORDINGLY, the judgment a quo is reversed, and the complaint is dismissed, without
pronouncement as to costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Angeles and Capistrano, JJ., concur.
Zaldivar, J., is on leave.

Separate Opinions
FERNANDO, J., concurring:
I join fully the rest of my colleagues in the decision upholding Republic Act No. 1635 as amended by
Republic Act No. 2631 and the majority opinion expounded with Justice Castro's usual vigor and
lucidity subject to one qualification. With all due recognition of its inherently persuasive character, it
would seem to me that the same result could be achieved if reliance be had on police power rather
than the attribute of taxation, as the constitutional basis for the challenged legislation.
1. For me, the state in question is an exercise of the regulatory power connected with the
performance of the public service. I refer of course to the government postal function, one of

respectable and ancient lineage. The United States Constitution of 1787 vests in the federal
government acting through Congress the power to establish post offices. 1 The first act providing for
the organization of government departments in the Philippines, approved Sept. 6, 1901, provided for
the Bureau of Post Offices in the Department of Commerce and Police. 2 Its creation is thus a
manifestation of one of the many services in which the government may engage for public
convenience and public interest. Such being the case, it seems that any legislation that in effect
would require increase cost of postage is well within the discretionary authority of the government.
It may not be acting in a proprietary capacity but in fixing the fees that it collects for the use of the
mails, the broad discretion that it enjoys is undeniable. In that sense, the principle announced
in Esteban v. Cabanatuan City,3 in an opinion by our Chief Justice, while not precisely controlling
furnishes for me more than ample support for the validity of the challenged legislation. Thus: "Certain
exactions, imposable under an authority other than police power, are not subject, however, to
qualification as to the amount chargeable, unless the Constitution or the pertinent laws provide
otherwise. For instance, the rates of taxes, whether national or municipal, need not be reasonable, in
the absence of such constitutional or statutory limitation. Similarly, when a municipal corporation fixes
the fees for the use of its properties, such as public markets, it does not wield the police power, or
even the power of taxation. Neither does it assert governmental authority. It exercises merely a
proprietary function. And, like any private owner, it is in the absence of the aforementioned
limitation, which does not exist in the Charter of Cabanatuan City (Republic Act No. 526) free to
charge such sums as it may deem best, regardless of the reasonableness of the amount fixed, for the
prospective lessees are free to enter into the corresponding contract of lease, if they are agreeable to
the terms thereof or, otherwise, not enter into such contract."
2. It would appear likewise that an expression of one's personal view both as to
the attitude and awareness that must be displayed by inferior tribunals when the "delicate and
awesome" power of passing on the validity of a statute would not be inappropriate. "The Constitution
is the supreme law, and statutes are written and enforced in submission to its commands." 4 It is
likewise common place in constitutional law that a party adversely affected could, again to quote from
Cardozo, "invoke, when constitutional immunities are threatened, the judgment of the courts." 5
Since the power of judicial review flows logically from the judicial function of ascertaining the facts
and applying the law and since obviously the Constitution is the highest law before which statutes
must bend, then inferior tribunals can, in the discharge of their judicial functions, nullify legislative
acts. As a matter of fact, in clear cases, such is not only their power but their duty. In the language of
the present Chief Justice: "In fact, whenever the conflicting claims of the parties to a litigation cannot
properly be settled without inquiring into the validity of an act of Congress or of either House thereof,
the courts have, not only jurisdiction to pass upon said issue but, also, theduty to do so, which cannot
be evaded without violating the fundamental law and paving the way to its eventual destruction." 6
Nonetheless, the admonition of Cooley, specially addressed to inferior tribunals, must ever be kept in
mind. Thus: "It must be evident to any one that the power to declare a legislative enactment void is
one which the judge, conscious of the fallibility of the human judgment, will shrink from exercising in
any case where he can conscientiously and with due regard to duty and official oath decline the
responsibility."7
There must be a caveat however to the above Cooley pronouncement. Such should not be the case,
to paraphrase Freund, when the challenged legislation imperils freedom of the mind and of the
person, for given such an undesirable situation, "it is freedom that commands a momentum of
respect." Here then, fidelity to the great ideal of liberty enshrined in the Constitution may require the
judiciary to take an uncompromising and militant stand. As phrased by us in a recent decision, "if the
liberty involved were freedom of the mind or the person, the standard of its validity of governmental
acts is much more rigorous and exacting." 8
So much for the appropriate judicial attitude. Now on the question of awareness of the controlling
constitutional doctrines.
There is nothing I can add to the enlightening discussion of the equal protection aspect as found in
the majority opinion. It may not be amiss to recall to mind, however, the language of Justice Laurel in
the leading case ofPeople v. Vera,9 to the effect that the basic individual right of equal protection "is a
restraint on all the three grand departments of our government and on the subordinate
instrumentalities and subdivisions thereof, and on many constitutional powers, like the police power,

taxation and eminent domain."10 Nonetheless, no jurist was more careful in avoiding the dire
consequences to what the legislative body might have deemed necessary to promote the ends of
public welfare if the equal protection guaranty were made to constitute an insurmountable obstacle.
A similar sense of realism was invariably displayed by Justice Frankfurter, as is quite evident from the
various citations from his pen found in the majority opinion. For him, it would be a misreading of the
equal protection clause to ignore actual conditions and settled practices. Not for him the at times
academic and sterile approach to constitutional problems of this sort. Thus: "It would be a narrow
conception of jurisprudence to confine the notion of 'laws' to what is found written on the statute
books, and to disregard the gloss which life has written upon it. Settled state practice cannot supplant
constitutional guaranties, but it can establish what is state law. The Equal Protection Clause did not
write an empty formalism into the Constitution. Deeply embedded traditional ways of carrying out
state policy, such as those of which petitioner complains, are often tougher and truer law than the
dead words of the written text."11 This too, from the same distinguished jurist: "The Constitution does
not require things which are different in fact or opinion to be treated in law as though they were the
same."12
Now, as to non-delegation. It is to be admitted that the problem of non-delegation of legislative power
at times occasions difficulties. Its strict view has been announced by Justice Laurel in the aforecited
case of People v. Verain this language. Thus: "In testing whether a statute constitutes an undue
delegation of legislative power or not, it is usual to inquire whether the statute was complete in all its
terms and provisions when it left the hands of the legislature so that nothing was left to the judgment
of any other appointee or delegate of the legislature. .... InUnited States v. Ang Tang Ho ..., this court
adhered to the foregoing rule; it held an act of the legislature void in so far as it undertook to authorize
the Governor-General, in his discretion, to issue a proclamation fixing the price of rice and to make
the sale of it in violation of the proclamation a crime." 13
Only recently, the present Chief Justice reaffirmed the above view in Pelaez v. Auditor
General,14 specially where the delegation deals not with an administrative function but one essentially
and eminently legislative in character. What could properly be stigmatized though to quote Justice
Cardozo, is delegation of authority that is "unconfined and vagrant, one not canalized within banks
which keep it from overflowing."15
This is not the situation as it presents itself to us. What was delegated was power not legislative in
character. Justice Laurel himself, in a later case, People v. Rosenthal,16 admitted that within certain
limits, there being a need for coping with the more intricate problems of society, the principle of
"subordinate legislation" has been accepted, not only in the United States and England, but in
practically all modern governments. This view was reiterated by him in a 1940 decision, Pangasinan
Transportation Co., Inc. v. Public Service Commission.17 Thus: "Accordingly, with the growing
complexity of modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency toward the
delegation of greater powers by the legislature, and toward the approval of the practice by the courts."
In the light of the above views of eminent jurists, authoritative in character, of both the equal
protection clause and the non-delegation principle, it is apparent how far the lower court departed
from the path of constitutional orthodoxy in nullifying Republic Act No. 1635 as amended. Fortunately,
the matter has been set right with the reversal of its decision, the opinion of the Court, manifesting its
fealty to constitutional law precepts, which have been reiterated time and time again and for the
soundest of reasons.

Footnotes
CASTRO, J.:
1
Approved on June 30, 1957.
2
Approved on June 18, 1960.
3
See 3 M. Moran, Comments on the Rules of Court, 138 (6th ed., 1963).
4
Carmichael v. Southern Coal & Coke Co., 301 U.S. 496 (1937) ; Lutz v. Araneta, 98 Phil. 148
(1955).
5
Louisville Gas & E. Co. v. Coleman, 277 U.S. 32 (1928).
6
Madden v. Kentucky, 309 U.S. 83 (1940); Citizens' Telephone Co. v. Fuller, 229 U.S. 322
(1913).

Madden v. Kentucky, supra, note 6.

419 Pa. 370, 214 A. 2d 209, 214-15 (1965), appeal dismissed, Life Assur. Co. v.
Pennsylvania, 348 U.S. (1966).
9
Fernandez v. Wiener, 327 U.S. 340, 360 (1945); accord, Carmichael v. Southern Coal & Coke
Co., supra, note 4; Weber v. City of New York, 195 N.Y.S. 2d 269 (1959).
10
Morey v. Doud, 354 U.S. 457, 472 (1957) (dissent).
11
Carmichael v. Southern Coal & Coke Co., supra, note 4, at 512.
12
Cf. Town of Indian Lake v. State Brd. of E. & A., 45 Misc. 2d 463, 257 N.Y.S. 2d 301 (1905).
13
Railway Express Agency v. New York, 336 U.S. 106 (1949).
14
Lutz v. Araneta, 98 Phil. 148, 153 (1955) ; accord, McLauhlin v. Florida, 379 U.S. 184 (1964).
15
Carmichael v. Southern Coal & Coke Co., supra, note 4 at 522-523.
16
See Weber v. City of New York, supra, note 9; North Am. Co. v. Green, 120 So. 2d 603
(1960).
17
New York ex rel. Hatch v. Reardon, 204 U.S. 152, 159-160 (1907).
18
Const. art. VI, sec. 23 (l).
19
See Lo Cham Ocampo, 77 Phil. 635 (1946); Rev. Adm. Code, sec. 551.
8

FERNANDO, J., concurring:

1
Section 8, par. 7, Article 1.
2
Section 2, Act No. 222.
3
L-13662, May 30, 1960.
4
Cardozo, J., Municipal Gas Co. v. Public Service Commission, 121 NE 772, 774 (1919).
5
Ibid, p. 774.
6
Taada v. Cuenco, 103 Phil. 1051, 1061-1062 (1957).
7
Cooley on Constitutional Limitations, Vol. 1, 8th ed., 332 (1927).
8
Ermita-Malate Hotel Assn. v. Mayor of Manila, L-24693, July 31, 1967.
9
65 Phil. 56 (1937).
10
Ibid, 125.
11
Nashville, C. & St. L. Railmay v. Browning, 84 L ed. 1254, 1258 (1940).
12
Tigner v. Texas, 84 L. ed. 1124, 1128 (1940).
13
65 Phil. 56, 115 (1937).
14
L-23825, December 24, 1965.
15
Cardozo, J., concurring, Schenchter Poultry Corp. v. U.S., 295 U.S. 495 (1935).
16
Citation omitted.
17
Citation omitted.

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees.
Sabido, Sabido & Associates for appellant.
Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant
Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.

MARTIN, J.:
This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294,
which was certified to Us by the Court of Appeals on October 6, 1969, as involving only pure
questions of law, challenging the power of taxation delegated to municipalities under the Local
Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959).
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc.,
commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for that
court to declare Section 2 of Republic Act No. 2264. 1 otherwise known as the Local Autonomy Act,
unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23
and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void.
On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state
that, first, both Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the
production tax rates imposed therein are practically the same, and second, that on January 17, 1963,
the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the Manager of the
Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by the latter of the
provisions of said Ordinance No. 27, series of 1962.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies
and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo

for every bottle of soft drink corked." 2 For the purpose of computing the taxes due, the person, firm,
company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly
report, of the total number of bottles produced and corked during the month. 3
On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies
and collects "on soft drinks produced or manufactured within the territorial jurisdiction of this
municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity." 4 For the purpose of computing the taxes due, the person, fun company, partnership,
corporation or plant producing soft drinks shall submit to the Municipal Treasurer a monthly report of
the total number of gallons produced or manufactured during the month. 5
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'
On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the complaint
and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23
and 27 legal and constitutional; ordering the plaintiff to pay the taxes due under the oft the said
Ordinances; and to pay the costs."
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals,
which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as
amended.
There are three capital questions raised in this appeal:
1. Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory
and oppressive?
2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage
or specific taxes?
3. Are Ordinances Nos. 23 and 27 unjust and unfair?
1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of
right to every independent government, without being expressly conferred by the people. 6 It is a
power that is purely legislative and which the central legislative body cannot delegate either to the
executive or judicial department of the government without infringing upon the theory of separation of
powers. The exception, however, lies in the case of municipal corporations, to which, said theory
does not apply. Legislative powers may be delegated to local governments in respect of matters of
local concern. 7 This is sanctioned by immemorial practice. 8 By necessary implication, the legislative
power to create political corporations for purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax. 9 Under the New Constitution, local
governments are granted the autonomous authority to create their own sources of revenue and to
levy taxes. Section 5, Article XI provides: "Each local government unit shall have the power to create
its sources of revenue and to levy taxes, subject to such limitations as may be provided by law."
Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of
the legislative power to enact and vest in local governments the power of local taxation.
The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense,
would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the authority,
the State is not limited 6 the exact measure of that which is exercised by itself. When it is said that the
taxing power may be delegated to municipalities and the like, it is meant that there may be delegated
such measure of power to impose and collect taxes as the legislature may deem expedient. Thus,
municipalities may be permitted to tax subjects which for reasons of public policy the State has not
deemed wise to tax for more general purposes. 10 This is not to say though that the constitutional
injunction against deprivation of property without due process of law may be passed over under the
guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing
power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within the jurisdiction of the government levying the tax; and
(4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are
provided. 11 Due process is usually violated where the tax imposed is for a private as distinguished
from a public purpose; a tax is imposed on property outside the State, i.e., extraterritorial taxation;
and arbitrary or oppressive methods are used in assessing and collecting taxes. But, a tax does not

violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will
result in an injury rather than a benefit to such taxpayer. Due process does not require that the
property subject to the tax or the amount of tax to be raised should be determined by judicial inquiry,
and a notice and hearing as to the amount of the tax and the manner in which it shall be apportioned
are generally not necessary to due process of law. 12
There is no validity to the assertion that the delegated authority can be declared unconstitutional on
the theory of double taxation. It must be observed that the delegating authority specifies the
limitations and enumerates the taxes over which local taxation may not be exercised. 13 The reason is
that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation,
in general, is not forbidden by our fundamental law, since We have not adopted as part thereof the
injunction against double taxation found in the Constitution of the United States and some states of
the Union. 14 Double taxation becomes obnoxious only where the taxpayer is taxed twice for the
benefit of the same governmental entity 15 or by the same jurisdiction for the same purpose, 16 but not
in a case where one tax is imposed by the State and the other by the city or municipality. 17
2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because
these two ordinances cover the same subject matter and impose practically the same tax rate. The
thesis proceeds from its assumption that both ordinances are valid and legally enforceable. This is
not so. As earlier quoted, Ordinance No. 23, which was approved on September 25, 1962, levies or
collects from soft drinks producers or manufacturers a tax of one-sixteen (1/16) of a centavo for
.every bottle corked, irrespective of the volume contents of the bottle used. When it was discovered
that the producer or manufacturer could increase the volume contents of the bottle and still pay the
same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28,
1962, imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks
produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27,
it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of
the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a
plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without
words to that effect. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only
seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact
that the Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiffappellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission
shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even
the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance
No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent
with the provisions of the former."
That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a
specific tax. Undoubtedly, the taxing authority conferred on local governments under Section 2,
Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting those which
are mentioned therein." As long as the text levied under the authority of a city or municipal ordinance
is not within the exceptions and limitations in the law, the same comes within the ambit of the general
rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in cabisus non
excepti 19 The limitation applies, particularly, to the prohibition against municipalities and municipal
districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on
articles subject to specific tax except gasoline, under the provisions of the National Internal Revenue
Code." For purposes of this particular limitation, a municipal ordinance which prescribes a set ratio
between the amount of the tax and the volume of sale of the taxpayer imposes a sales tax and is null
and void for being outside the power of the municipality to enact. 20 But, the imposition of "a tax of one
centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks
produced or manufactured under Ordinance No. 27 does not partake of the nature of a percentage
tax on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold
or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on the products, but there is not set ratio
between the volume of sales and the amount of the tax. 21
Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified
articles, such as distilled spirits, wines, fermented liquors, products of tobacco other than cigars and
cigarettes, matches firecrackers, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel

oil, cinematographic films, playing cards, saccharine, opium and other habit-forming drugs.
drink is not one of those specified.

22

Soft

3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks,
produced or manufactured, or an equivalent of 1- centavos per case, 23 cannot be considered unjust
and unfair. 24 an increase in the tax alone would not support the claim that the tax is oppressive,
unjust and confiscatory. Municipal corporations are allowed much discretion in determining the reates
of imposable taxes. 25 This is in line with the constutional policy of according the widest possible
autonomy to local governments in matters of local taxation, an aspect that is given expression in the
Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so excessive as to be
prohibitive, courts will go slow in writing off an ordinance as unreasonable. 27 Reluctance should not
deter compliance with an ordinance such as Ordinance No. 27 if the purpose of the law to further
strengthen local autonomy were to be realized. 28
Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than ten
crowners or P2,000.00 with ten but not more than twenty crowners imposed on manufacturers,
producers, importers and dealers of soft drinks and/or mineral waters under Ordinance No. 54, series
of 1964, as amended by Ordinance No. 41, series of 1968, of defendant Municipality, 29 appears not
to affect the resolution of the validity of Ordinance No. 27. Municipalities are empowered to impose,
not only municipal license taxes upon persons engaged in any business or occupation but also to levy
for public purposes, just and uniform taxes. The ordinance in question (Ordinance No. 27) comes
within the second power of a municipality.
ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the
Local Autonomy Act, as amended, is hereby upheld and Municipal Ordinance No. 27 of the
Municipality of Tanauan, Leyte, series of 1962, re-pealing Municipal Ordinance No. 23, same series,
is hereby declared of valid and legal effect. Costs against petitioner-appellant.
SO ORDERED.
Castro, C.J., Teehankee, Barredo, Makasiar, Antonio, Esguerra, Muoz Palma, Aquino and
Concepcion, Jr., JJ., concur.
Separate Opinions
FERNANDO, J., concurring:
The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive
character. Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation,
I am only in agreement. If I limit myself to concurrence in the result, it is primarily because with the
article on Local Autonomy found in the present Constitution, I feel a sense of reluctance in restating
doctrines that arose from a different basic premise as to the scope of such power in accordance with
the 1935 Charter. Nonetheless it is well-nigh unavoidable that I do so as I am unable to share fully
what for me are the nuances and implications that could arise from the approach taken by my
brethren. Likewise as to the constitutional aspect of the thorny question of double taxation, I would
limit myself to what has been set forth in City of Baguio v. De Leon. 1
1. The present Constitution is quite explicit as to the power of taxation vested in local and municipal
corporations. It is therein specifically provided: "Each local government unit shall have the power to
create its own sources of revenue and to levy taxes subject to such limitations as may be provided by
law. 2 That was not the case under the 1935 Charter. The only limitation then on the authority, plenary
in character of the national government, was that while the President of the Philippines was vested
with the power of control over all executive departments, bureaus, or offices, he could only . It
exercise general supervision over all local governments as may be provided by law ... 3 As far as
legislative power over local government was concerned, no restriction whatsoever was placed on the
Congress of the Philippines. It would appear therefore that the extent of the taxing power was solely
for the legislative body to decide. It is true that in 1939, there was a statute that enlarged the scope of
the municipal taxing power. 4 Thereafter, in 1959 such competence was further expanded in the Local
Autonomy Act. 5 Nevertheless, as late as December of 1964, five years after its enactment of the
Local Autonomy Act, this Court, through Justice Dizon, in Golden Ribbon Lumber Co. v. City of
Butuan, 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal
corporations, unlike sovereign states, after clothed with no power of taxation; that its charter or a
statute must clearly show an intent to confer that power or the municipal corporation cannot assume

and exercise it, and that any such power granted must be construed strictly, any doubt or ambiguity
arising from the terms of the grant to be resolved against the municipality." 7
Taxation, according to Justice Parades in the earlier case of Tan v. Municipality of Pagbilao, 8 "is an
attribute of sovereignty which municipal corporations do not enjoy." 9 That case left no doubt either as
to weakness of a claim "based merely by inferences, implications and deductions, [as they have no
place in the interpretation of the power to tax of a municipal corporation." 10 As the conclusion
reached by the Court finds support in such grant of the municipal taxing power, I concur in the result.
2. As to any possible infirmity based on an alleged double taxation, I would prefer to rely on the
doctrine announced by this Court in City of Baguio v. De Leon. 11 Thus: "As to why double taxation is
not violative of due process, Justice Holmes made clear in this language: 'The objection to the
taxation as double may be laid down on one side. ... The 14th Amendment [the due process clause)
no more forbids double taxation than it does doubling the amount of a tax, short of (confiscation or
proceedings unconstitutional on other grouse With that decision rendered at a time when American
sovereignty in the Philippines was recognized, it possesses more than just a persuasive effect. To
some, it delivered the coup justice to the bogey of double taxation as a constitutional bar to the
exercise of the taxing power. It would seem though that in the United States, as with us, its ghost, as
noted by an eminent critic, still stalks the juridical stage. 'In a 1947 decision, however, we quoted with
approval this excerpt from a leading American decision: 'Where, as here, Congress has clearly
expressed its intention, the statute must be sustained even though double taxation results. 12
So I would view the issues in this suit and accordingly concur in the result.
Separate Opinions
FERNANDO, J., concurring:
The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive
character. Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation,
I am only in agreement. If I limit myself to concurrence in the result, it is primarily because with the
article on Local Autonomy found in the present Constitution, I feel a sense of reluctance in restating
doctrines that arose from a different basic premise as to the scope of such power in accordance with
the 1935 Charter. Nonetheless it is well-nigh unavoidable that I do so as I am unable to share fully
what for me are the nuances and implications that could arise from the approach taken by my
brethren. Likewise as to the constitutional aspect of the thorny question of double taxation, I would
limit myself to what has been set forth in City of Baguio v. De Leon. 1
1. The present Constitution is quite explicit as to the power of taxation vested in local and municipal
corporations. It is therein specifically provided: "Each local government unit shall have the power to
create its own sources of revenue and to levy taxes subject to such limitations as may be provided by
law. 2 That was not the case under the 1935 Charter. The only limitation then on the authority, plenary
in character of the national government, was that while the President of the Philippines was vested
with the power of control over all executive departments, bureaus, or offices, he could only . It
exercise general supervision over all local governments as may be provided by law ... 3 As far as
legislative power over local government was concerned, no restriction whatsoever was placed on the
Congress of the Philippines. It would appear therefore that the extent of the taxing power was solely
for the legislative body to decide. It is true that in 1939, there was a statute that enlarged the scope of
the municipal taxing power. 4 Thereafter, in 1959 such competence was further expanded in the Local
Autonomy Act. 5 Nevertheless, as late as December of 1964, five years after its enactment of the
Local Autonomy Act, this Court, through Justice Dizon, in Golden Ribbon Lumber Co. v. City of
Butuan, 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal
corporations, unlike sovereign states, after clothed with no power of taxation; that its charter or a
statute must clearly show an intent to confer that power or the municipal corporation cannot assume
and exercise it, and that any such power granted must be construed strictly, any doubt or ambiguity
arising from the terms of the grant to be resolved against the municipality." 7
Taxation, according to Justice Parades in the earlier case of Tan v. Municipality of Pagbilao, 8 "is an
attribute of sovereignty which municipal corporations do not enjoy." 9 That case left no doubt either as
to weakness of a claim "based merely by inferences, implications and deductions, [as they have no
place in the interpretation of the power to tax of a municipal corporation." 10 As the conclusion
reached by the Court finds support in such grant of the municipal taxing power, I concur in the result.
2. As to any possible infirmity based on an alleged double taxation, I would prefer to rely on the
doctrine announced by this Court in City of Baguio v. De Leon. 11 Thus: "As to why double taxation is
not violative of due process, Justice Holmes made clear in this language: 'The objection to the
taxation as double may be laid down on one side. ... The 14th Amendment [the due process clause)
no more forbids double taxation than it does doubling the amount of a tax, short of (confiscation or
proceedings unconstitutional on other grouse With that decision rendered at a time when American

sovereignty in the Philippines was recognized, it possesses more than just a persuasive effect. To
some, it delivered the coup justice to the bogey of double taxation as a constitutional bar to the
exercise of the taxing power. It would seem though that in the United States, as with us, its ghost, as
noted by an eminent critic, still stalks the juridical stage. 'In a 1947 decision, however, we quoted with
approval this excerpt from a leading American decision: 'Where, as here, Congress has clearly
expressed its intention, the statute must be sustained even though double taxation results. 12
So I would view the issues in this suit and accordingly concur in the result.
Footnotes
1 "Sec. 2. Taxation. Any provision of law to the contrary notwithstanding, all chartered
cities, municipalities and municipal districts shall have authority to impose municipal
license taxes or fees upon persons engaged in any occupation or business, or
exercising private in chartered cities, municipalities and municipal districts by requiring
them to secure licenses at rates fixed by the municipal board or city council of the city,
the municipal council of the municipality, or the municipal district council of the municipal
district to collect fees and charges for service rendered by the city, municipality or
municipal district; to regulate and impose reasonable for services rendered in
connection with any business, profession occupation being conducted within the city,
municipality or municipal district and otherwise to levy for public purposes, just and
uniform taxes, licenses or fees: Provided, That municipalities and municipal districts
shall, in no case, impose any percentage tax on sales or other taxes in any form based
thereon nor impose taxes on articles subject to specific tax, except gasoline, under the
provisions of the National Internal Revenue Code: Provided, however, That no city,
municipality or municipal district may levy or impose any of the following:
(a) Residence tax;
(b) Documentary stamp tax;
(c) Taxes on the business of any newspaper engaged in the printing and publication of
any newspaper, magazine, review or bulletin appearing at regular interval and having
fixed prices for subscription and sale, and which is not published primarily for the
purpose of publishing advertisements;
(d) Taxes on persons operating waterworks, irrigation and other public utilities except
electric light, heat and power;
(e) Taxes on forest products and forest concessions;
(f) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa
(g) Taxes on income of any kind whatsoever;
(h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds
of licenses or permits for the driving thereof;
(i) Customs duties registration, wharfage on wharves owned by the national
government, tonnage and all other kinds of customs fees, charges and dues;
(j) Taxes of any kind on banks, insurance companies, and persons paying franchise tax:
(k) Taxes on premiums paid by owners of property who obtain insurance directly with
foreign insurance companies; and
(i) Taxes, fees or levies, of any kind, which in effect impose a burden on exports of
Philippine finished, manufactured or processed products and products of Philippine
cottage industries.
2 Section 2.
3 Section 3.
4 Section 2.
5 Section 3.
6 Cooley, The Law of Taxation, Vol. 1, Fourth Edition, 149-150.
7 Pepsi-Cola Bottling Co. of the Phil., Inc. vs. City of Butuan, L-22814, August 28, 1968,
24 SCRA 793-96.
8 Rubi v. Prov. Brd. of Mindoro, 39 Phil. 702 (1919).
9 Cooley, ante at 190.
10 Idem at 198-200.
11 Malcolm, Philippine Constitutional Law, 513-14.
12 Cooley ante at 334.
13 See footnote 1.
14 Pepsi-Cola Bottling Co. of the Phil. Inc. vs. City of Butuan, 1, 2S 1 4, August 28,
1968, 24 SCRA 793-96. See Sec. 22, Art. VI, 1935
Constitution and Sec. 17 (1), Art. VIII, 1973 Constitution.
15 Commissioner of Internal Revenue v. Lednicky L- 18169, July 31, 1964, 11 SCRA
609.

16 SMB, Inc. v. City of Cebu, L-20312, February 26, 1972, 43 SCRA 280.
17 Punzalan v. Mun. Bd of City of Manila, 50 O.G. 2485; manufacturers Life Ins. Co. v.
Meer, 89 Phil. 351 (1951).
18 McQuillin. Municipal Corporations, 3rd. Ed., Vol. 6, at 206.-210.
19 Villanueva v. City of Iloilo, L-26521, December 28, 1968, 26 SCRA 585-86; Nin Bay
Mining Co. v. Mun. of Roxas, Palawan, L-20125, July 20, 1965, 14 SCRA 663-64.
20 Arabay, Inc. v. CFI of Zamboanga del Norte, et al., L-27684, September 10, 1975.
21 SMB, Inc. v. City of Cebu, ante, Footnote 16.
22 Shell Co. of P.I. Ltd. v. Vao, 94 Phil. 394-95 (1954); Sections 123-148, NIRC; RA
No. 953, Narcotic Drugs Law, June 20, 1953.
23 Brief, defendants-appellees, at 14. A regular bottle of Pepsi-Cola soft drinks contains
8 oz., or 192 oz. per case of 24 bottles; a family-size contains 26 oz., or 312 oz. per
case of 12 bottles.
24 See Pepsi-Cola Bottling Co. of the Phil., Inc. v. City of Butuan, ante, Footnote 14,
where the tax rate is P.10 per case of 24 bottles; City of Bacolod v. Gruet, L-18290,
January 31, 1963, 7 SCRA 168-69, where the tax is P.03 on every case of bottled CocaCoal.
25 Northern Philippines Tobacco Corp. v. Mun. of Agoo, La Union, L-26447, January 30,
1971, 31 SCRA 308.
26 William Lines, Inc. v. City of Ozamis, L-350048, April 23, 1974, 56 SCRA 593,
Second Division, per Fernando, J.
27 Victorias Milling Co. v. Mun. of Victorias, L-21183, September 27, 1968, 25 SCRa
205.
28 Procter & Gamble Trading Co. v. Mun. of Medina, Misamis Oriental, L-29125,
January 31, 1973, 43 SCRA 133-34.
29 Subject of plaintiff-appellant's Motion for Admission and consideration of Essential
Newly Dissevered Evidence, dated April 30, 1969.
FERNANDO, J.
1 L-24756, October 31, 1968, 25 SCRA 938.
2 Article XI, Section 5 of the present Constitution.
3 Article VII, Section 10 of the 1935 Constitution.
4 Commonwealth Act 472 entitled: "An Act Revising the General Authority of Municipal
Councils and Municipal District Councils to Levy Taxes, Subject to Certain Limitations."
5 Republic Act No. 2264.
6 L-18534, December 24,1964,12 SCRA 611.
7 Ibid, 619. Cf. Cuunjieng v. Potspone, 42 Phil. 818 (1922); De Linan v. Municipal
Council of Daet, 44 Phil. 792 (1923); Arquiza Luta v. Municipality of Zamboanga, 50
Phil. 748 (1927; Hercules Lumber Co. v. Zamboanga, 55 Phil. 653 (1931); Yeo Loby v.
Zamboanga, 55 Phil. 656 (1931); People v. Carreon, 65 Phil. 588 (1939); Yap Tak Wing
v. Municipal Board, 68 Phil. 511 (1939); Eastern Theatrical Co. v. Alfonso 83 Phil. 852
(1949); De la Rosa v. City of Baguio, 91 Phil. 720 (I!)52); Medina v. City of Baguio, 91
Phil. 854 (1952); Standard-Vacuum Oil Co. v. Antigua, 96 Phil. 909 (1955); Municipal
Government of Pagsanjan v. Reyes, 98 Phil. 654 (1956), We Wa Yu v. City of Lipa, Phil.
975 (1956); Municipality of Cotabato v. Santos, 105 Phil. 963 (1959).
8 L-14264, April 30, 1963, 7 SCRA 887.
9 Ibid, 892.
10 Ibid.
11 L-24756, October 31, 1968, 25 SCRA 938.
12 Ibid, 943-944.

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD,
THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN, defendantsappellees.
Sabido, Sabido and Associates for plaintiff-appellant.
The City Attorney of Butuan City for defendants-appellees.
CONCEPCION, C.J.:
Direct appeal to this Court, from a decision of the Court of First Instance of Agusan, dismissing
plaintiff's complaint, with costs.
Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and
principal place of business in Quezon City. The defendants are the City of Butuan, its City Mayor, the
members of its municipal board and its City Treasurer. Plaintiff seeks to recover the sums paid by it
to the City of Butuan hereinafter referred to as the City and collected by the latter, pursuant to its
Municipal Ordinance No. 110, as amended by Municipal Ordinance No. 122, both series of 1960,
which plaintiff assails as null and void, and to prevent the enforcement thereof. Both parties submitted
the case for decision in the lower court upon a stipulation to the effect:
1. That plaintiff's warehouse in the City of Butuan serves as a storage for its products the
"Pepsi-Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities in
the Province of Agusan. These "Pepsi-Cola Cola" soft drinks are bottled in Cebu City and
shipped to the Butuan City warehouse of plaintiff for distribution and sale in the City of Butuan
and all municipalities of Agusan. .
2. That on August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was
subsequently amended by Ordinance No. 122 and effective November 28, 1960. A copy of
Ordinance No. 110, Series of 1960 and Ordinance No. 122 are incorporated herein as Exhibits
"A" and "B", respectively.

3. That 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 paid under protest the amount of
P4,926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1
to July 30, 1961.
4. That the plaintiff filed the foregoing complaint for the recovery of the total amount of
P14,177.03 paid under protest and those that if may later on pay until the termination of this
case on the ground that Ordinance No. 110 as amended of the City of Butuan is illegal, that the
tax imposed is excessive and that it is unconstitutional.
5. That pursuant to Ordinance No. 110 as amended, the City Treasurer of Butuan City, has
prepared a form to be accomplished by the plaintiff for the computation of the tax. A copy of the
form is enclosed herewith as Exhibit "C".
6. That the Profit and Loss Statement of the plaintiff for the period from January 1, 1961 to July
30, 1961 of its warehouse in Butuan City is incorporated herein as Exhibits "D" to "D-1" to "D5". In this Profit and Loss Statement, the defendants claim that the plaintiff is not entitled to a
depreciation of P3,052.63 but only P1,202.55 in which case the profit of plaintiff will be
increased from P1,254.44 to P3,104.52. The plaintiff differs only on the claim of depreciation
which the company claims to be P3,052.62. This is in accordance with the findings of the
representative of the undersigned City Attorney who verified the records of the plaintiff.
7. That beginning November 21, 1960, the price of Pepsi-Cola per case of 24 bottles was
increased to P1.92 which price is uniform throughout the Philippines. Said increase was made
due to the increase in the production cost of its manufacture.
8. That the parties reserve the right to submit arguments on the constitutionality and illegality of
Ordinance No. 110, as amended of the City of Butuan in their respective memoranda.
xxx

xxx

x x x1wph1.t

Section 1 of said Ordinance No. 110, as amended, states what products are "liquors", within the
purview thereof. Section 2 provides for the payment by "any agent and/or consignee" of any dealer
"engaged in selling liquors, imported or local, in the City," of taxes at specified rates. Section 3
prescribes a tax of P0.10 per case of 24 bottles of the soft drinks and carbonated beverages therein
named, and "all other soft drinks or carbonated drinks." Section 3-A, defines the meaning of the term
"consignee or agent" for purposes of the ordinance. Section 4 provides that said taxes "shall be paid
at the end of every calendar month." Pursuant to Section 5, the taxes "shall be based and computed
from the cargo manifest or bill of lading or any other record showing the number of cases of soft
drinks, liquors or all other soft drinks or carbonated drinks received within the month." Sections 6, 7
and 8 specify the surcharge to be added for failure to pay the taxes within the period prescribed and
the penalties imposable for "deliberate and willful refusal to pay the tax mentioned in Sections 2 and
3" or for failure "to furnish the office of the City Treasurer a copy of the bill of lading or cargo manifest
or record of soft drinks, liquors or carbonated drinks for sale in the City." Section 9 makes the
ordinance applicable to soft drinks, liquors or carbonated drinks "received outside" but "sold within"
the City. Section 10 of the ordinance provides that the revenue derived therefrom "shall be alloted as
follows: 40% for Roads and Bridges Fund; 40% for the General Fund and 20% for the School Fund."
Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature of
an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory; (4) it
is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264, upon the authority of
which it was enacted, is an unconstitutional delegation of legislative powers.
The second and last objections are manifestly devoid of merit. Indeed independently of whether or
not the tax in question, when considered in relation to the sales tax prescribed by Acts of Congress,

amounts to double taxation, on which we need not and do not express any opinion - double taxation,
in general, is not forbidden by our fundamental law. We have not adopted, as part thereof, the
injunction against double taxation found in the Constitution of the United States and of some States of
the Union.1 Then, again, the general principle against delegation of legislative powers, in
consequence of the theory of separation of powers 2 is subject to one well-established exception,
namely: legislative powers may be delegated to local governments to which said theory does not
apply3 in respect of matters of local concern.
The third objection is, likewise, untenable. The tax of "P0.10 per case of 24 bottles," of soft drinks or
carbonated drinks in the production and sale of which plaintiff is engaged or less than P0.0042
per bottle, is manifestly too small to be excessive, oppressive, or confiscatory.
The first and the fourth objections merit, however, serious consideration. In this connection, it is
noteworthy that the tax prescribed in section 3 of Ordinance No. 110, as originally approved, was
imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. Thus, it would seem that
the intent was then to levy a tax upon the sale of said merchandise. As amended by Ordinance No.
122, the tax is, however, imposed only upon "any agent and/or consignee of any person, association,
partnership, company or corporation engaged in selling ... soft drinks or carbonated drinks." And,
pursuant to section 3-A, which was inserted by said Ordinance No. 122:
... Definition of the Term Consignee or Agent. For purposes of this Ordinance, a
consignee of agent shall mean any person, association, partnership, company or corporation
who acts in the place of another by authority from him or one entrusted with the business of
another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft
drinks every month for resale, either retail or wholesale.
As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not subject
to the tax,unless they are agents and/or consignees of another dealer, who, in the very nature of
things, must be one engaged in business outside the City. Besides, the tax would not be applicable to
such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to him
every month. When we consider, also, that the tax "shall be based and computed from the cargo
manifest or bill of lading ... showing the number of cases" not sold but "received" by the
taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks
brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax
partakes of the nature of an import duty, which is beyond defendant's authority to impose by express
provision of law.4
Even however, if the burden in question were regarded as a tax on the sale of said beverages, it
would still be invalid, as discriminatory, and hence, violative of the uniformity required by the
Constitution and the law therefor, since 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 exceeded those made by
said agents or consignees of producers or merchants established outside the City of Butuan, would
be exempt from the disputed tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not require
identity or equality under all circumstances, or negate the authority to classify the objects of
taxation.5 The classification made in the exercise of this authority, to be valid, must, however, be
reasonable6 and this requirement is not deemed satisfied unless: (1) it is based upon substantial
distinctions which make real differences; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions
substantially identical to those of the present; and (4) the classification applies equally all those who
belong to the same class.7

These conditions are not fully met by the ordinance in question. 8 Indeed, if its purpose were merely to
levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales
thereof by sealers other than agents or consignees of producers or merchants established outside the
City of Butuan should be exempt from the tax.
WHEREFORE, the decision appealed from is hereby reversed, and another one shall be entered
annulling Ordinance No. 110, as amended by Ordinance No. 122, and sentencing the City of Butuan
to refund to plaintiff herein the amounts collected from and paid under protest by the latter, with
interest thereon at the legal rate from the date of the promulgation of this decision, in addition to the
costs, and defendants herein are, accordingly, restrained and prohibited permanently from enforcing
said Ordinance, as amended. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ.,
concur. 1wph1.t
Footnotes
1

De Villata v. Stanley, 32 Phil. 541; City of Manila v. Inter-Island Gas Service, 99 Phil. 847, 854;
Syjuco v. Municipality of Paraaque, L-11265, Nov. 27, 1959; City of Bacolod v. Gruet, L18290, Jan. 31, 1963.
2

U.S. v. Bull, 15 Phil. 7, 27; Kilbourn v. Thompson, 103 U.S. 168, 26 L. ed. 377.

State v. City of Mankato, 136 N.W. 264; People v. Provinces, 34 Cal. 520; Stoutenburgh v.
Hennick 129 U.S. 141, 32 L. ed. 637.
4

Section 2(i), Republic Act No. 2264; Panaligan v. City of Tacloban, L- 9319, Sept. 27, 1957,
102 Phil. 1162-1163; East Asiatic Co. v. City of Davao, L-16253, August 21, 1962. .
5

Tan Tim Kee v. Court of Tax Appeals, L-18080, April 22, 1963; Nin Bay Mining Co. v.
Municipality of Roxas, L-20125, July 20, 1965. .
6

Felwa v. Salas, L-26511, October 29, 1966; Aleja v. GSIS, L-18529, February 26, 1965;
People v. Solon, L-14864, November 23, 1960; People v. Cayat, 68 Phil. 12; People v. Vera, 65
Phil. 56; Laurel v. Misa, 42 O.G. 2847.
7

Commissioner of Int. Rev. v. Botelho Shipping Corp., L-21633-34, June 29, 1967; ErmitaMalate Hotel & Motel Operators Ass'n. v. City Mayor, L-24693, October 23, 1967; Rafael v.
Embroidery & Apparel Control & Inspection Board, L-19978, September 29, 1967; Meralco v.
Public Utilities Employee Ass'n., 79 Phil. 409. .
8

Viray v. City of Caloocan, L-23118, July 26, 1967; PHILCONSA v. Gimenez, L-23326,
December 18, 1965; Ormoc Sugar Co. v. Treasurer of Ormoc City, L-23794, February 17,
1968.
LIGHT RAIL TRANSIT AUTHORITY, petitioner, vs. CENTRAL BOARD OF ASSESSMENT
APPEALS, BOARD OF ASSESSMENT APPEALS OF MANILA and the CITY ASSESSOR OF
MANILA, respondents.
DECISION
PANGANIBAN, J.:
The Light Rail Transit Authority and the Metro Transit Organization function as serviceoriented business entities, which provide valuable transportation facilities to the paying
public. In the absence, however, of any express grant of exemption in their favor, they
are subject to the payment of real property taxes.

The Case
In the Petition for Review before us, the Light Rail Transit Authority (LRTA) challenges the
November 15, 1996 Decision[1] of the Court of Appeals (CA) in CA-GR SP No. 38137,
which disposed as follows:
"WHEREFORE, premises considered, the appealed decision (dated October 15, 1994) of
the Central Board of Assessment Appeals is hereby AFFIRMED, with costs against the
petitioner."[2]
The affirmed ruling of the Central Board of Assessment Appeals (CBAA) upheld the June
26, 1992 Resolution of the Board of Assessment Appeals of Manila, which had declared
petitioner's carriageways and passenger terminals as improvements subject to real
property taxes.
The Facts
The undisputed facts are quoted by the Court of Appeals (CA) from the CBAA ruling, as
follows:[3]
"1. The LRTA is a government-owned and controlled corporation created and organized
under Executive Order No. 603, dated July 12, 1980 'x x x primarily responsible for the
construction, operation, maintenance and/or lease of light rail transit system in the
Philippines, giving due regard to the [reasonable requirements] of the public
transportation of the country' (LRTA vs. The Hon. Commission on Audit, GR No. No.
88365);
"2. x x x [B]y reason of x x x Executive Order 603, LRTA acquired real properties x x x
constructed structural improvements, such as buildings, carriageways, passenger
terminal stations, and installed various kinds of machinery and equipment and facilities
for the purpose of its operations;
"3. x x x [F]or x x x an effective maintenance, operation and management, it entered
into a Contract of Management with the Meralco Transit Organization (METRO) in which
the latter undertook to manage, operate and maintain the Light Rail Transit System
owned by the LRTA subject to the specific stipulations contained in said agreement,
including payments of a management fee and real property taxes (Add'l Exhibit "I",
Records)
"4. That it commenced its operations in 1984, and that sometime that year, RespondentAppellee City Assessor of Manila assessed the real properties of [petitioner], consisting of
lands, buildings, carriageways and passenger terminal stations, machinery and
equipment which he considered real propert[y] under the Real Property Tax Code, to
commence with the year 1985;
"5. That [petitioner] paid its real property taxes on all its real property holdings, except
the carriageways and passenger terminal stations including the land where it is
constructed on the ground that the same are not real properties under the Real Property
Tax Code, and if the same are real propert[y], these x x x are for public use/purpose,
therefore, exempt from realty taxation, which claim was denied by the RespondentAppellee City Assessor of Manila; and

"6. x x x [Petitioner], aggrieved by the action of the Respondent-Appellee City Assessor,

filed an appeal with the Local Board of Assessment Appeals of Manila x x x. Appellee,
herein, after due hearing, in its resolution dated June 26, 1992, denied [petitioner's]
appeal, and declared that carriageways and passenger terminal stations are
improvements, therefore, are real propert[y] under the Code, and not exempt from the
payment of real property tax.
"A motion for reconsideration filed by [petitioner] was likewise denied."
The CA Ruling
The Court of Appeals held that petitioner's carriageways and passenger terminal stations
constituted real property or improvements thereon and, as such, were taxable under the
Real Property Tax Code. The appellate court emphasized that such pieces of property did
not fall under any of the exemptions listed in Section 40 of the aforementioned law. The
reason was that they were not owned by the government or any government-owned
corporation which, as such, was exempt from the payment of real property taxes. True,
the government owned the real property upon which the carriageways and terminal
stations were built. However, they were still taxable, because beneficial use had been
transferred to petitioner, a taxable entity.
The CA debunked the argument of petitioner that carriageways and terminals were
intended for public use. The former agreed, instead, with the CBAA. The CBAA had
concluded that since petitioner was not engaged in purely governmental or public
service, the latter's endeavors were proprietary. Indeed, petitioner was deemed as a
profit-oriented endeavor, serving as it did, only the paying public.
Hence, this Petition.[4]
The Issues
In its Memorandum,[5] petitioner urges the Court to resolve the following matters:
"I
The Honorable Court of Appeals erred in not holding that the carriageways and terminal
stations of petitioner are not improvements for purposes of the Real Property Tax Code.
"II
The Honorable Court of Appeals erred in not holding that being attached to national
roads owned by the national government, subject carriageways and terminal stations
should be considered property of the national government.
"III
The Honorable Court of Appeals erred in not holding that payment of charges or fares in
the operation of the light rail transit system does not alter the nature of the subject
carriageways and terminal stations as devoted for public use.
"IV

The Honorable Court of Appeals erred in failing to consider the view advanced by the
Department of Finance, which takes charge of the overall collection of taxes, that subject
carriageways and terminal stations are not subject to realty taxes.
"V
The Honorable Court of Appeals erred in failing to consider that payment of the realty
taxes assessed is not warranted and should the legality of the questioned assessment be
upheld, the amount of the realty taxes assessed would far exceed the annual earnings of
petitioner, a government corporation."
The foregoing all point to one main issue: whether petitioner's carriageways and
passenger terminal stations are subject to real property taxes.
The Court's Ruling
The Petition has no merit.
Main Issue:
May Real Property Taxes be Assessed and Collected?
The Real Property Tax Code,[6] the law in force at the time of the assailed assessment in
1984, mandated that "there shall be levied, assessed and collected in all provinces, cities
and municipalities an annual ad valorem tax on real property such as lands, buildings,
machinery and other improvements affixed or attached to real property not hereinafter
specifically exempted."[7]
Petitioner does not dispute that its subject carriageways and stations may be considered
real property under Article 415 of the Civil Code. However, it resolutely argues that the
same are improvements, not of its properties, but of the government-owned national
roads to which they are immovably attached. They are thus not taxable as improvements
under the Real Property Tax Code. In essence, it contends that to impose a tax on the
carriageways and terminal stations would be to impose taxes on public roads.
The argument does not persuade. We quote with approval the solicitor general's astute
comment on this matter:
"There is no point in clarifying the concept of industrial accession to determine the
nature of the property when what is fundamentally important for purposes of tax
classification is to determine the character of the property subject [to] tax. The character
of tax as a property tax must be determined by its incidents, and form the natural and
legal effect thereof. It is irrelevant to associate the carriageways and/or the passenger
terminals as accessory improvements when the view of taxability is focused on the
character of the property. The latter situation is not a novel issue as it has already been
resolved by this Honorable Court in the case of City of Manila vs. IAC (GR No. 71159,
November 15, 1989) wherein it was held:
'The New Civil Code divides the properties into property for public and patrimonial
property (Art. 423), and further enumerates the property for public use as provincial
road, city streets, municipal streets, squares, fountains, public waters, public works for
public service paid for by said [provinces], cities or municipalities; all other property is
patrimonial without prejudice to provisions of special laws. (Art. 424, Province of
Zamboanga v. City of Zamboanga, 22 SCRA 1334 [1968])

xxx
'...while the following are corporate or proprietary property in character, viz: 'municipal
water works, slaughter houses, markets, stables, bathing establishments, wharves,
ferries and fisheries.' Maintenance of parks, golf courses, cemeteries and airports,
among others, are also recognized as municipal or city activities of a proprietary
character (Dept. of Treasury v. City of Evansville; 60 NE 2nd 952)'
"The foregoing enumeration in law does not specify or include carriageway or passenger
terminals as inclusive of properties strictly for public use to exempt petitioner's
properties from taxes. Precisely, the properties of petitioner are not exclusively
considered as public roads being improvements placed upon the public road, and this
separability nature of the structure in itself physically distinguishes it from a public road.
Considering further that carriageways or passenger terminals are elevated structures
which are not freely accessible to the public, viz-a-viz roads which are public
improvements openly utilized by the public, the former are entirely different from the
latter.
"The character of petitioner's property, be it an improvements as otherwise distinguished
by petitioner, needs no further classification when the law already classified it as
patrimonial property that can be subject to tax. This is in line with the old ruling that if
the public works is not for such free public service, it is not within the purview of the first
paragraph of Art. 424 if the New Civil Code."[8]
Though the creation of the LRTA was impelled by public service -- to provide mass
transportation to alleviate the traffic and transportation situation in Metro Manila -- its
operation undeniably partakes of ordinary business. Petitioner is clothed with corporate
status and corporate powers in the furtherance of its proprietary objectives.[9] Indeed, it
operates much like any private corporation engaged in the mass transport industry.
Given that it is engaged in a service-oriented commercial endeavor, its carriageways and
terminal stations are patrimonial property subject to tax, notwithstanding its claim of
being a government-owned or controlled corporation.
True, petitioner's carriageways and terminal stations are anchored, at certain points, on
public roads. However, it must be emphasized that these structures do not form part of
such roads, since the former have been constructed over the latter in such a way that
the flow of vehicular traffic would not be impeded. These carriageways and terminal
stations serve a function different from that of the public roads. The former are part and
parcel of the light rail transit (LRT) system which, unlike the latter, are not open to use by
the general public. The carriageways are accessible only to the LRT trains, while the
terminal stations have been built for the convenience of LRTA itself and its customers
who pay the required fare.
Basis of Assessment Is Actual Use of Real Property
Under the Real Property Tax Code, real property is classified for assessment purposes on
the basis of actual use,[10] which is defined as "the purpose for which the property is
principally or predominantly utilized by the person in possession of the property."[11]
Petitioner argues that it merely operates and maintains the LRT system, and that the
actual users of the carriageways and terminal stations are the commuting public. It adds

that the public-use character of the LRT is not negated by the fact that revenue is
obtained from the latter's operations.
We do not agree. Unlike public roads which are open for use by everyone, the LRT is
accessible only to those who pay the required fare. It is thus apparent that petitioner
does not exist solely for public service, and that the LRT carriageways and terminal
stations are not exclusively for public use. Although petitioner is a public utility, it is
nonetheless profit-earning. It actually uses those carriageways and terminal stations in
its public utility business and earns money therefrom.
Petitioner Not Exempt from Payment of Real Property Taxes
In any event, there is another legal justification for upholding the assailed CA Decision.
Under the Real Property Tax Code, real property "owned by the Republic of the
Philippines or any of its political subdivisions and any government-owned or controlled
corporation so exempt by its charter, provided, however, that this exemption shall not
apply to real property of the abovenamed entities the beneficial use of which has been
granted, for consideration or otherwise, to a taxable person."[12]
Executive Order No. 603, the charter of petitioner, does not provide for any real estate
tax exemption in its favor. Its exemption is limited to direct and indirect taxes, duties or
fees in connection with the importation of equipment not locally available, as the
following provision shows:
"ARTICLE 4
TAX AND DUTY EXEMPTIONS
Sec. 8. Equipment, Machineries, Spare Parts and Other Accessories and Materials. - The
importation of equipment, machineries, spare parts, accessories and other materials,
including supplies and services, used directly in the operations of the Light Rails Transit
System, not obtainable locally on favorable terms, out of any funds of the authority
including, as stated in Section 7 above, proceeds from foreign loans credits or
indebtedness, shall likewise be exempted from all direct and indirect taxes, customs
duties, fees, imposts, tariff duties, compensating taxes, wharfage fees and other charges
and restrictions, the provisions of existing laws to the contrary notwithstanding."
Even granting that the national government indeed owns the carriageways and terminal
stations, the exemption would not apply because their beneficial use has been granted
to petitioner, a taxable entity.
Taxation is the rule and exemption is the exception. Any claim for tax exemption is
strictly construed against the claimant.[13] LRTA has not shown its eligibility for
exemption; hence, it is subject to the tax.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against the petitioner.
SO ORDERED.
Melo, (Chairman), Vitug, and Purisima, JJ., concur.
Gonzaga-Reyes, J., no part.

[1] Penned by Justice Ramon Mabutas Jr., with the concurrence of Justices Minerva P.
Gonzaga-Reyes (Division chairperson and now a member of this Court) and Salvador J.
Valdez (member).
[2] Rollo, p. 43.
[3] CA Decision, pp. 2-3; rollo, pp. 29-30.
[4] This Petition was deemed submitted for decision on October 13, 1999, upon receipt
by the Court of the Explanation filed by Attys. Melchor R. Monsod and Jose A. Perello Jr. of
the Office of the City Legal Officer of Manila, who clarified that they were adopting as
memorandum their February 28, 1998 Comment. Received by the Court on November 3,
1998 was Petitioner LRTA's Memorandum signed by Government Corporate Counsel Jun
Valerio, Assistant Government Corporate Counsel Antonio M. Brillantes, and Government
Corporate Attorney IV Isabelo G. Gumaru. On September 30, 1998, the Office of the
Solicitor General filed a "Manifestation and Motion for Leave to Adopt Comment as
Memorandum for the Central Board of Assessment Appeals." The OSG's May 2, 1997
Comment was signed by Assistant Solicitor General Mariano M. Martinez and Solicitors
Luis F. Simon and Brigido Artemon M. Luna.
[5] Rollo, pp. 151-152; original written entirely in upper case.
[6] Presidential Decree No. 464. See also the Local Government Code of 1991 or Republic
Act No. 7160, which took effect on January 1, 1992.
[7] Ibid., 38. This is identical to 232 of the Local Government Code (LGC), which reads:
"Section 232. Power to Levy Real Property Tax. A province or city or a municipality within
the Metropolitan Manila Area may levy an annual ad valorem tax on real property such
as land, building, machinery, and other improvement not hereinafter specifically
exempted."
[8] Comment of the Office of the Solicitor General, pp. 8-10; rollo, pp. 70-72.
[9] See Section 4 of Executive Order No. 603, the LRTA charter, which provides:
"ARTICLE 2
CORPORATE POWERS
"Sec. 4. General Powers. - The Authority, through the Board of Directors, may undertake
such action as are expedient for or conducive to the attainment of the purposes and
objectives of the Authority, or of any purpose reasonably incidental to or consequential
upon any of these purposes. As such, the Authority shall have the following general
powers:
(1) To have continuous succession under its corporate name, until otherwise provided by
law;
(2) To prescribe, amend, and/or repeal its by-laws;
(3) To adopt and use a seal and alter it at its pleasure;

(4) To sue and be sued;

(5) To contract any obligation or enter into, assign or accept the assignment of, and vary
or rescind any agreement, contract of obligation necessary or incidental to the proper
management of the Authority;
(6) To borrow funds from any source, private or public, foreign or domestic, and to issue
bonds and other evidence of indebtedness, the payment of which shall be guaranteed by
the National Government, subject to pertinent borrowing law;
(7) To acquire, receive, take, and hold by bequest, devise, gift, purchase or lease, either
absolutely or in trust for any of its purposes, from foreign and domestic sources, any
asset, grant or property, real or personal, subject to such limitations as are provided in
existing laws; to convey or dispose of such assets, grants, or properties, movable and
immovable; and invest and/or reinvest such proceeds and deal with and expand its
assets and income in such a manner as will best promote its objectives;
(8) To improve, develop or alter any property held by it;
(9) To carry on any business, either alone or in partnership with any other person or
persons;
(10) To employ an agent or contractor or perform such things as the Authority may
perform;
(11) To exercise the right of eminent domain, whenever the Authority deems it necessary
for the attainment of its objectives;
(12) To prescribe rules and regulations in the conduct of its general business as well as to
fix and implement the terms and conditions of its related activities;
(13) To determine the fares payable by persons traveling on the light rail system, in
consultation with the Board of Transportation;
(14) To establish, operate, and maintain branches or field offices when required by the
exigencies of its business;
(15) To determine its organizational structure and the number, positions and salaries of
its personnel, subject to pertinent organization and compensation law; and
(16) To exercise such powers and perform such duties as may be necessary to carry out
the business and purposes for which the Authority was established or which, from time
to time may be declared by the Board of Directors to be necessary, useful, incidental or
auxiliary to accomplish such purposes; and generally, to exercise all powers of an
Authority under the Corporation Law that are not inconsistent with the provisions of this
Order, or with orders pertaining to government corporate budgeting, organization,
borrowing, or compensation."
[10] 19 of the Real Property Tax Code reads: "Real property shall be classified for
assessment on the basis of its actual use, regardless of where located and whoever uses
it." See also 198 (b) of the LGC, an identical proviso which reads: "Real property shall be
classified for assessment purposes on the basis of its actual use."

[11] See 3 (a) of the Real Property Tax Code and 199 (b) of the LGC.
[12] Section 40 (a) of the Real Property Code and Section 234 (a) of the Local
Government Code. Thus, petitioner will not find solace under the Local Government Code
either, for the reasons discussed above.
[13] Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667, September
11, 1996.

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
HON. FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial
Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor HON. TOMAS R.
OSMEA, and EUSTAQUIO B. CESA, respondents.

DAVIDE, JR., J.:

For review under Rule 45 of the Rules of Court on a pure question of law are the decision of 22
March 19951 of the Regional Trial Court (RTC) of Cebu City, Branch 20, dismissing the petition
for declaratory relief in Civil Case No. CEB-16900 entitled "Mactan Cebu International Airport
Authority vs. City of Cebu", and its order of 4, May 1995 2denying the motion to reconsider the
decision.
We resolved to give due course to this petition for its raises issues dwelling on the scope of the
taxing power of local government-owned and controlled corporations.
The uncontradicted factual antecedents are summarized in the instant petition as follows:
Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of
Republic Act No. 6958, mandated to "principally undertake the economical, efficient and
effective control, management and supervision of the Mactan International Airport in the
Province of Cebu and the Lahug Airport in Cebu City, . . . and such other Airports as
may be established in the Province of Cebu . . . (Sec. 3, RA 6958). It is also mandated
to:

a) encourage, promote and develop international and

domestic air traffic in the Central Visayas and Mindanao
regions as a means of making the regions centers of
international trade and tourism, and accelerating the
development of the means of transportation and
communication in the country; and
b) upgrade the services and facilities of the airports and to
formulate internationally acceptable standards of airport
accommodation and service.
Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from
payment of realty taxes in accordance with Section 14 of its Charter.
Sec. 14. Tax Exemptions. The authority shall be exempt from realty
taxes imposed by the National Government or any of its political
subdivisions, agencies and instrumentalities . . .
On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the
Treasurer of the City of Cebu, demanded payment for realty taxes on several parcels of
land belonging to the petitioner (Lot Nos. 913-G, 743, 88 SWO, 948-A, 989-A, 474,
109(931), I-M, 918, 919, 913-F, 941, 942, 947, 77 Psd., 746 and 991-A), located at
Barrio Apas and Barrio Kasambagan, Lahug, Cebu City, in the total amount of
P2,229,078.79.
Petitioner objected to such demand for payment as baseless and unjustified, claiming in
its favor the aforecited Section 14 of RA 6958 which exempt it from payment of realty
taxes. It was also asserted that it is an instrumentality of the government performing
governmental functions, citing section 133 of the Local Government Code of 1991 which
puts limitations on the taxing powers of local government units:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangay shall
not extend to the levy of the following:
a) . . .
xxx xxx xxx
o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and local
government units. (Emphasis supplied)
Respondent City refused to cancel and set aside petitioner's realty tax account, insisting
that the MCIAA is a government-controlled corporation whose tax exemption privilege
has been withdrawn by virtue of Sections 193 and 234 of the Local Governmental Code
that took effect on January 1, 1992:
Sec. 193. Withdrawal of Tax Exemption Privilege. Unless otherwise provided in this
Code, tax exemptions or incentives granted to, or presently enjoyed by all persons
whether natural or juridical,including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under RA No. 6938, non-stock,
and non-profit hospitals and educational institutions, are hereby withdrawn upon the
effectivity of this Code. (Emphasis supplied)

xxx xxx xxx

Sec. 234. Exemptions from Real Property taxes. . . .
(a) . . .
xxx xxx xxx
(c) . . .
Except as provided herein, any exemption from payment of real property
tax previously granted to, or presently enjoyed by all persons, whether
natural or juridical, including government-owned or controlled corporations
are hereby withdrawn upon the effectivity of this Code.
As the City of Cebu was about to issue a warrant of levy against the properties of
petitioner, the latter was compelled to pay its tax account "under protest" and thereafter
filed a Petition for Declaratory Relief with the Regional Trial Court of Cebu, Branch 20,
on December 29, 1994. MCIAA basically contended that the taxing powers of local
government units do not extend to the levy of taxes or fees of any kind on
an instrumentality of the national government. Petitioner insisted that while it is indeed a
government-owned corporation, it nonetheless stands on the same footing as an
agency or instrumentality of the national government. Petitioner insisted that while it is
indeed a government-owned corporation, it nonetheless stands on the same footing as
an agency or instrumentality of the national government by the very nature of its powers
and functions.
Respondent City, however, asserted that MACIAA is not an instrumentality of the
government but merely a government-owned corporation performing proprietary
functions As such, all exemptions previously granted to it were deemed withdrawn by
operation of law, as provided under Sections 193 and 234 of the Local Government
Code when it took effect on January 1, 1992. 3
The petition for declaratory relief was docketed as Civil Case No. CEB-16900.
In its decision of 22 March 1995, 4 the trial court dismissed the petition in light of its findings, to
wit:
A close reading of the New Local Government Code of 1991 or RA 7160 provides the
express cancellation and withdrawal of exemption of taxes by government owned and
controlled corporation per Sections after the effectivity of said Code on January 1, 1992,
to wit: [proceeds to quote Sections 193 and 234]
Petitioners claimed that its real properties assessed by respondent City Government of
Cebu are exempted from paying realty taxes in view of the exemption granted under RA
6958 to pay the same (citing Section 14 of RA 6958).
However, RA 7160 expressly provides that "All general and special laws, acts, city
charters, decress [sic], executive orders, proclamations and administrative regulations,
or part or parts thereof which are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly." ([f], Section 534, RA 7160).
With that repealing clause in RA 7160, it is safe to infer and state that the tax exemption
provided for in RA 6958 creating petitioner had been expressly repealed by the
provisions of the New Local Government Code of 1991.

So that petitioner in this case has to pay the assessed realty tax of its properties
effective after January 1, 1992 until the present.
This Court's ruling finds expression to give impetus and meaning to the overall
objectives of the New Local Government Code of 1991, RA 7160. "It is hereby declared
the policy of the State that the territorial and political subdivisions of the State shall
enjoy genuine and meaningful local autonomy to enable them to attain their fullest
development as self-reliant communities and make them more effective partners in the
attainment of national goals. Towards this end, the State shall provide for a more
responsive and accountable local government structure instituted through a system of
decentralization whereby local government units shall be given more powers, authority,
responsibilities, and resources. The process of decentralization shall proceed from the
national government to the local government units. . . . 5
Its motion for reconsideration having been denied by the trial court in its 4 May 1995 order, the
petitioner filed the instant petition based on the following assignment of errors:
I RESPONDENT JUDGE ERRED IN FAILING TO RULE THAT THE
PETITIONER IS VESTED WITH GOVERNMENT POWERS AND
FUNCTIONS WHICH PLACE IT IN THE SAME CATEGORY AS AN
INSTRUMENTALITY OR AGENCY OF THE GOVERNMENT.
II RESPONDENT JUDGE ERRED IN RULING THAT PETITIONER IS
LIABLE TO PAY REAL PROPERTY TAXES TO THE CITY OF CEBU.
Anent the first assigned error, the petitioner asserts that although it is a government-owned or
controlled corporation it is mandated to perform functions in the same category as an
instrumentality of Government. An instrumentality of Government is one created to perform
governmental functions primarily to promote certain aspects of the economic life of the
people. 6 Considering its task "not merely to efficiently operate and manage the Mactan-Cebu
International Airport, but more importantly, to carry out the Government policies of promoting
and developing the Central Visayas and Mindanao regions as centers of international trade
and tourism, and accelerating the development of the means of transportation and
communication in the country," 7 and that it is an attached agency of the Department of
Transportation and Communication (DOTC), 8 the petitioner "may stand in [sic] the same
footing as an agency or instrumentality of the national government." Hence, its tax exemption
privilege under Section 14 of its Charter "cannot be considered withdrawn with the passage of
the Local Government Code of 1991 (hereinafter LGC) because Section 133 thereof
specifically states that the taxing powers of local government units shall not extend to the levy
of taxes of fees or charges of any kind on the national government its agencies and
instrumentalities."
As to the second assigned error, the petitioner contends that being an instrumentality of the
National Government, respondent City of Cebu has no power nor authority to impose realty
taxes upon it in accordance with the aforesaid Section 133 of the LGC, as explained in Basco
vs. Philippine Amusement and Gaming Corporation; 9
Local governments have no power to tax instrumentalities of the National Government.
PAGCOR is a government owned or controlled corporation with an original character,
PD 1869. All its shares of stock are owned by the National Government. . . .
PAGCOR has a dual role, to operate and regulate gambling casinos. The latter joke is
governmental, which places it in the category of an agency or instrumentality of the
Government. Being an instrumentality of the Government, PAGCOR should be and

actually is exempt from local taxes. Otherwise, its operation might be burdened,
impeded or subjected to control by a mere Local government.
The states have no power by taxation or otherwise, to retard, impede, burden or in any
manner control the operation of constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government. (McCulloch v. Maryland, 4
Wheat 316, 4 L Ed. 579).
This doctrine emanates from the "supremacy" of the National Government over local
government.
Justice Holmes, speaking for the Supreme Court, make references to the entire
absence of power on the part of the States to touch, in that way (taxation) at least, the
instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be
agreed that no state or political subdivision can regulate a federal instrumentality in
such a way as to prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them. (Antieau Modern Constitutional Law,
Vol. 2, p. 140)
Otherwise mere creature of the State can defeat National policies thru extermination of
what local authorities may perceive to be undesirable activities or enterprise using the
power to tax as "a toll for regulation" (U.S. v. Sanchez, 340 US 42). The power to tax
which was called by Justice Marshall as the "power to destroy" (McCulloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very
entity which has the inherent power to wield it. (Emphasis supplied)
It then concludes that the respondent Judge "cannot therefore correctly say that the
questioned provisions of the Code do not contain any distinction between a governmental
function as against one performing merely proprietary ones such that the exemption privilege
withdrawn under the said Code would apply to allgovernment corporations." For it is clear from
Section 133, in relation to Section 234, of the LGC that the legislature meant to
exclude instrumentalities of the national government from the taxing power of the local
government units.
In its comment respondent City of Cebu alleges that as local a government unit and a political
subdivision, it has the power to impose, levy, assess, and collect taxes within its jurisdiction.
Such power is guaranteed by the Constitution 10 and enhanced further by the LGC. While it
may be true that under its Charter the petitioner was exempt from the payment of realty
taxes, 11 this exemption was withdrawn by Section 234 of the LGC. In response to the
petitioner's claim that such exemption was not repealed because being an instrumentality of
the National Government, Section 133 of the LGC prohibits local government units from
imposing taxes, fees, or charges of any kind on it, respondent City of Cebu points out that the
petitioner is likewise a government-owned corporation, and Section 234 thereof does not
distinguish between government-owned corporation, and Section 234 thereof does not
distinguish between government-owned corporation, and Section 234 thereof does not
distinguish between government-owned or controlled corporations performing governmental
and purely proprietary functions. Respondent city of Cebu urges this the Manila International
Airport Authority is a governmental-owned corporation, 12 and to reject the application of Basco
because it was "promulgated . . . before the enactment and the singing into law of R.A. No.
7160," and was not, therefore, decided "in the light of the spirit and intention of the framers of
the said law.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only
in the responsibility of the legislature which imposes the tax on the constituency who are to pay

it. Nevertheless, effective limitations thereon may be imposed by the people through their
Constitutions. 13 Our Constitution, for instance, provides that the rule of taxation shall be
uniform and equitable and Congress shall evolve a progressive system of taxation. 14So potent
indeed is the power that it was once opined that "the power to tax involves the power to
destroy." 15 Verily, taxation is a destructive power which interferes with the personal and
property for the support of the government. Accordingly, tax statutes must be construed strictly
against the government and liberally in favor of the taxpayer. 16But since taxes are what we pay
for civilized society, 17 or are the lifeblood of the nation, the law frowns against exemptions from
taxation and statutes granting tax exemptions are thus construed strictissimi juris against the
taxpayers and liberally in favor of the taxing authority. 18 A claim of exemption from tax payment
must be clearly shown and based on language in the law too plain to be mistaken. 19 Elsewise
stated, taxation is the rule, exemption therefrom is the exception. 20 However, if the grantee of
the exemption is a political subdivision or instrumentality, the rigid rule of construction does not
apply because the practical effect of the exemption is merely to reduce the amount of money
that has to be handled by the government in the course of its operations. 21
The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before,
but pursuant to direct authority conferred by Section 5, Article X of the Constitution. 22 Under
the latter, the exercise of the power may be subject to such guidelines and limitations as the
Congress may provide which, however, must be consistent with the basic policy of local
autonomy.
There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from
the payment of realty taxes imposed by the National Government or any of its political
subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is the rule and
exemption therefrom the exception, the exemption may thus be withdrawn at the pleasure of
the taxing authority. The only exception to this rule is where the exemption was granted to
private parties based on material consideration of a mutual nature, which then becomes
contractual and is thus covered by the non-impairment clause of the Constitution. 23
The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise
by local government units of their power to tax, the scope thereof or its limitations, and the
exemption from taxation.
Section 133 of the LGC prescribes the common limitations on the taxing powers of local
government units as follows:
Sec. 133. Common Limitations on the Taxing Power of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial
institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, "inheritance, gifts, legacies and other
acquisitions mortis causa, except as otherwise provided herein
(d) Customs duties, registration fees of vessels and wharfage on wharves,
tonnage dues, and all other kinds of customs fees charges and dues
except wharfage on wharves constructed and maintained by the local
government unit concerned:

(e) Taxes, fees and charges and other imposition upon goods carried into
or out of, or passing through, the territorial jurisdictions of local
government units in the guise or charges for wharfages, tolls for bridges or
otherwise, or other taxes, fees or charges in any form whatsoever upon
such goods or merchandise;
(f) Taxes fees or charges on agricultural and aquatic products when sold
by marginal farmers or fishermen;
(g) Taxes on business enterprise certified to be the Board of Investment as
pioneer or non-pioneer for a period of six (6) and four (4) years,
respectively from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or charges on petroleum
products;
(i) Percentage or value added tax (VAT) on sales, barters or exchanges or
similar transactions on goods or services except as otherwise provided
herein;
(j) Taxes on the gross receipts of transportation contractor and person
engage in the transportation of passengers of freight by hire and common
carriers by air, land, or water, except as provided in this code;
(k) Taxes on premiums paid by ways reinsurance or retrocession;
(l) Taxes, fees, or charges for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving of thereof,
except, tricycles;
(m) Taxes, fees, or other charges on Philippine product actually exported,
except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business
Enterprise and Cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty nine hundred thirty-eight (R.A. No. 6938)
otherwise known as the "Cooperative Code of the Philippines; and
(o) TAXES, FEES, OR CHARGES OF ANY KIND ON THE NATIONAL
GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES, AND
LOCAL GOVERNMENT UNITS. (emphasis supplied)
Needless to say the last item (item o) is pertinent in this case. The "taxes, fees or charges"
referred to are "of any kind", hence they include all of these, unless otherwise provided by the
LGC. The term "taxes" is well understood so as to need no further elaboration, especially in the
light of the above enumeration. The term "fees" means charges fixed by law or Ordinance for
the regulation or inspection of business activity, 24 while "charges" are pecuniary liabilities such
as rents or fees against person or property. 25
Among the "taxes" enumerated in the LGC is real property tax, which is governed by Section
232. It reads as follows:
Sec. 232. Power to Levy Real Property Tax. A province or city or a municipality within
the Metropolitan Manila Area may levy on an annual ad valorem tax on real property

such as land, building, machinery and other improvements not hereafter specifically
exempted.
Section 234 of LGC provides for the exemptions from payment of real property taxes and
withdraws previous exemptions therefrom granted to natural and juridical persons, including
government owned and controlled corporations, except as provided therein. It provides:
Sec. 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof had been
granted, for reconsideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents
appurtenants thereto, mosques nonprofits or religious cemeteries and all
lands, building and improvements actually, directly, and exclusively used
for religious charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or
controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and;
(e) Machinery and equipment used for pollution control and environmental
protection.
Except as provided herein, any exemptions from payment of real property
tax previously granted to or presently enjoyed by, all persons whether
natural or juridical, including all government owned or controlled
corporations are hereby withdrawn upon the effectivity of his Code.
These exemptions are based on the ownership, character, and use of the property. Thus;
(a) Ownership Exemptions. Exemptions from real property taxes on the
basis of ownership are real properties owned by: (i) the Republic, (ii) a
province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered
cooperatives.
(b) Character Exemptions. Exempted from real property taxes on the basis
of their character are: (i) charitable institutions, (ii) houses and temples of
prayer like churches, parsonages or convents appurtenant thereto,
mosques, and (iii) non profit or religious cemeteries.
(c) Usage exemptions. Exempted from real property taxes on the basis of
the actual, direct and exclusive use to which they are devoted are: (i) all
lands buildings and improvements which are actually, directed and
exclusively used for religious, charitable or educational purpose; (ii) all
machineries and equipment actually, directly and exclusively used or by
local water districts or by government-owned or controlled corporations
engaged in the supply and distribution of water and/or generation and
transmission of electric power; and (iii) all machinery and equipment used
for pollution control and environmental protection.

To help provide a healthy environment in the midst of the modernization of the country,
all machinery and equipment for pollution control and environmental protection may not
be taxed by local governments.
2. Other Exemptions Withdrawn. All other exemptions previously granted
to natural or juridical persons including government-owned or controlled
corporations are withdrawn upon the effectivity of the Code. 26
Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. It
provides:
Sec. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this
code, tax exemptions or incentives granted to or presently enjoyed by all persons,
whether natural or juridical, including government-owned, or controlled corporations,
except local water districts, cooperatives duly registered under R.A. 6938, non stock
and non profit hospitals and educational constitutions, are hereby withdrawn upon the
effectivity of this Code.
On the other hand, the LGC authorizes local government units to grant tax exemption
privileges. Thus, Section 192 thereof provides:
Sec. 192. Authority to Grant Tax Exemption Privileges. Local government units may,
through ordinances duly approved, grant tax exemptions, incentives or reliefs under
such terms and conditions as they may deem necessary.
The foregoing sections of the LGC speaks of: (a) the limitations on the taxing powers of local
government units and the exceptions to such limitations; and (b) the rule on tax exemptions
and the exceptions thereto. The use of exceptions of provisos in these section, as shown by
the following clauses:
(1) "unless otherwise provided herein" in the opening paragraph of Section
133;
(2) "Unless otherwise provided in this Code" in section 193;
(3) "not hereafter specifically exempted" in Section 232; and
(4) "Except as provided herein" in the last paragraph of Section 234
initially hampers a ready understanding of the sections. Note, too, that the aforementioned
clause in section 133 seems to be inaccurately worded. Instead of the clause "unless
otherwise provided herein," with the "herein" to mean, of course, the section, it should have
used the clause "unless otherwise provided in this Code." The former results in absurdity since
the section itself enumerates what are beyond the taxing powers of local government units
and, where exceptions were intended, the exceptions were explicitly indicated in the text. For
instance, in item (a) which excepts the income taxes "when livied on banks and other financial
institutions", item (d) which excepts "wharfage on wharves constructed and maintained by the
local government until concerned"; and item (1) which excepts taxes, fees, and charges for the
registration and issuance of license or permits for the driving of "tricycles". It may also be
observed that within the body itself of the section, there are exceptions which can be found
only in other parts of the LGC, but the section interchangeably uses therein the clause "except
as otherwise provided herein" as in items (c) and (i), or the clause "except as otherwise
provided herein" as in items (c) and (i), or the clause "excepts as provided in this Code" in item
(j). These clauses would be obviously unnecessary or mere surplus-ages if the opening clause
of the section were" "Unless otherwise provided in this Code" instead of "Unless otherwise

provided herein". In any event, even if the latter is used, since under Section 232 local
government units have the power to levy real property tax, except those exempted therefrom
under Section 234, then Section 232 must be deemed to qualify Section 133.
Thus, reading together Section 133, 232 and 234 of the LGC, we conclude that as a general
rule, as laid down in Section 133 the taxing powers of local government units cannot extend to
the levy of inter alia, "taxes, fees, and charges of any kind of the National Government, its
agencies and instrumentalties, and local government units"; however, pursuant to Section 232,
provinces, cities, municipalities in the Metropolitan Manila Area may impose the real property
tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial used thereof has been granted, for
consideration or otherwise, to a taxable person", as provided in item (a) of the first paragraph
of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical
persons, including government-owned and controlled corporations, Section 193 of the LGC
prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except
upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly
registered under R.A. No. 6938, non stock and non-profit hospitals and educational institutions,
and unless otherwise provided in the LGC. The latter proviso could refer to Section 234, which
enumerates the properties exempt from real property tax. But the last paragraph of Section
234 further qualifies the retention of the exemption in so far as the real property taxes are
concerned by limiting the retention only to those enumerated there-in; all others not included in
the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the real
property is owned by the Republic of the Philippines, or any of its political subdivisions covered
by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial
use of such property has been granted to taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the
LGC, exemptions from real property taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its
exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been
withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge
under any of the exceptions provided in Section 234, but not under Section 133, as it now
asserts, since, as shown above, the said section is qualified by Section 232 and 234.
In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing
powers of the local government units cannot extend to the levy of:
(o) taxes, fees, or charges of any kind on the National Government, its
agencies, or instrumentalities, and local government units.
I must show that the parcels of land in question, which are real property, are any one of those
enumerated in Section 234, either by virtue of ownership, character, or use of the property.
Most likely, it could only be the first, but not under any explicit provision of the said section, for
one exists. In light of the petitioner's theory that it is an "instrumentality of the Government", it
could only be within be first item of the first paragraph of the section by expanding the scope of
the terms Republic of the Philippines" to embrace . . . . . . "instrumentalities" and "agencies" or
expediency we quote:
(a) real property owned by the Republic of the Philippines, or any of the
Philippines, or any of its political subdivisions except when the beneficial
use thereof has been granted, for consideration or otherwise, to a taxable
person.

This view does not persuade us. In the first place, the petitioner's claim that it is an
instrumentality of the Government is based on Section 133(o), which expressly mentions the
word "instrumentalities"; and in the second place it fails to consider the fact that the legislature
used the phrase "National Government, its agencies and instrumentalities" "in Section
133(o),but only the phrase "Republic of the Philippines or any of its political subdivision "in
Section 234(a).
The terms "Republic of the Philippines" and "National Government" are not interchangeable.
The former is boarder and synonymous with "Government of the Republic of the Philippines"
which the Administrative Code of the 1987 defines as the "corporate governmental entity
though which the functions of the government are exercised through at the Philippines,
including, saves as the contrary appears from the context, the various arms through which
political authority is made effective in the Philippines, whether pertaining to the autonomous
reason, the provincial, city, municipal or barangay subdivision or other forms of local
government." 27 These autonomous regions, provincial, city, municipal or barangay
subdivisions" are the political subdivision. 28
On the other hand, "National Government" refers "to the entire machinery of the central
government, as distinguished from the different forms of local Governments." 29 The National
Government then is composed of the three great departments the executive, the legislative
and the judicial. 30
An "agency" of the Government refers to "any of the various units of the Government, including
a department, bureau, office instrumentality, or government-owned or controlled corporation, or
a local government or a distinct unit therein;" 31 while an "instrumentality" refers to "any agency
of the National Government, not integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy; usually through a charter.
This term includes regulatory agencies, chartered institutions and government-owned and
controlled corporations". 32
If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption
from payment of real property taxes under the last sentence of the said section to the agencies
and instrumentalities of the National Government mentioned in Section 133(o), then it should
have restated the wording of the latter. Yet, it did not Moreover, that Congress did not wish to
expand the scope of the exemption in Section 234(a) to include real property owned by other
instrumentalities or agencies of the government including government-owned and controlled
corporations is further borne out by the fact that the source of this exemption is Section 40(a)
of P.D. No. 646, otherwise known as the Real Property Tax Code, which reads:
Sec 40. Exemption from Real Property Tax. The exemption shall be as follows:
(a) Real property owned by the Republic of the Philippines or
any of its political subdivisions and any government-owned
or controlled corporations so exempt by is charter: Provided,
however, that this exemption shall not apply to real property
of the above mentioned entities the beneficial use of which
has been granted, for consideration or otherwise, to a
taxable person.
Note that as a reproduced in Section 234(a), the phrase "and any government-owned or
controlled corporation so exempt by its charter" was excluded. The justification for this
restricted exemption in Section 234(a) seems obvious: to limit further tax exemption privileges,
specially in light of the general provision on withdrawal of exemption from payment of real
property taxes in the last paragraph of property taxes in the last paragraph of Section 234.

These policy considerations are consistent with the State policy to ensure autonomy to local
governments 33 and the objective of the LGC that they enjoy genuine and meaningful local
autonomy to enable them to attain their fullest development as self-reliant communities and
make them effective partners in the attainment of national goals. 34 The power to tax is the
most effective instrument to raise needed revenues to finance and support myriad activities of
local government units for the delivery of basic services essential to the promotion of the
general welfare and the enhancement of peace, progress, and prosperity of the people. It may
also be relevant to recall that the original reasons for the withdrawal of tax exemption
privileges granted to government-owned and controlled corporations and all other units of
government were that such privilege resulted in serious tax base erosion and distortions in the
tax treatment of similarly situated enterprises, and there was a need for this entities to share in
the requirements of the development, fiscal or otherwise, by paying the taxes and other
charges due from them. 35
The crucial issues then to be addressed are: (a) whether the parcels of land in question belong
to the Republic of the Philippines whose beneficial use has been granted to the petitioner, and
(b) whether the petitioner is a "taxable person".
Section 15 of the petitioner's Charter provides:
Sec. 15. Transfer of Existing Facilities and Intangible Assets. All existing public
airport facilities, runways, lands, buildings and other properties, movable or immovable,
belonging to or presently administered by the airports, and all assets, powers, rights,
interests and privileges relating on airport works, or air operations, including all
equipment which are necessary for the operations of air navigation, acrodrome control
towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided
however, that the operations control of all equipment necessary for the operation of
radio aids to air navigation, airways communication, the approach control office, and the
area control center shall be retained by the Air Transportation Office. No equipment,
however, shall be removed by the Air Transportation Office from Mactan without the
concurrence of the authority. The authority may assist in the maintenance of the Air
Transportation Office equipment.
The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International
AirPort in the Province of Cebu", 36 which belonged to the Republic of the Philippines, then
under the Air Transportation Office (ATO). 37
It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then
administered by the Lahug Air Port and includes the parcels of land the respondent City of
Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands"
among other things, to the petitioner and not just the transfer of the beneficial use thereof, with
the ownership being retained by the Republic of the Philippines.
This "transfer" is actually an absolute conveyance of the ownership thereof because the
petitioner's authorized capital stock consists of, inter alia "the value of such real estate owned
and/or administered by the airports." 38 Hence, the petitioner is now the owner of the land in
question and the exception in Section 234(c) of the LGC is inapplicable.
Moreover, the petitioner cannot claim that it was never a "taxable person" under its Charter. It
was only exempted from the payment of real property taxes. The grant of the privilege only in
respect of this tax is conclusive proof of the legislative intent to make it a taxable person
subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes of real property
tax, in light of the forgoing disquisitions, it had already become even if it be conceded to be an

"agency" or "instrumentality" of the Government, a taxable person for such purpose in view of
the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real
property taxes, which, as earlier adverted to, applies to the petitioner.
Accordingly, the position taken by the petitioner is untenable. Reliance on Basco vs. Philippine
Amusement and Gaming Corporation 39 is unavailing since it was decided before the effectivity
of the LGC. Besides, nothing can prevent Congress from decreeing that even instrumentalities
or agencies of the government performing governmental functions may be subject to tax.
Where it is done precisely to fulfill a constitutional mandate and national policy, no one can
doubt its wisdom.
WHEREFORE, the instant petition is DENIED. The challenged decision and order of the
Regional Trial Court of Cebu, Branch 20, in Civil Case No. CEB-16900 are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.
Footnotes
1 Rollo, 27-29. Per Judge Ferdinand J. Marcos.
2 Id., 30-31.
3 Rollo, 10-13.
4 Supra note 1.
5 Rollo, 28-29.
6 Citing Gonzales vs. Hechanova, 118 Phil. 1065 [1963].
7 Citing Section 3, R.A. No. 6958.
8 Citing Section 2, Id.
9 197 SCRA 52 [1991].
10 Section 5, Article X, 1987 Constitution.
11 Section 14, R.A. No. 6958.
12 Manila International Airport Authority (MIAA) vs. Commission on Audit, 238 SCRA 714
[1994].
13 COOLEY on Constitutional Law, 4th ed. [1931], 62.
14 Section 28(1), Article VI, 1987 Constitution.
15 Chief Justice Marshall in McCulloch vs. Maryland, 4 Wheat, 316, 4 L. ed. 579, 607. Later
Justice Holmes brushed this aside by declaring in Panhandle Oil Co. vs. Mississippi (277 U.S.
218) that "the power to tax is not the power to destroy while this Court sits." Justice Frankfurter
in Graves vs. New York (306 U.S. 466) also remarked that Justice Marshall's statement was a
"mere flourish of rhetoric" and a product of the "intellectual fashion of the times to indulge in a
free case of absolutes." (See SINCO, Philippine Political Law [1954], 577-578).

16 AGPALO, RUBEN E., Statutory Construction [1990 ed], 216. See also SANDS, DALLAS C.,
Statutes and Statutory Construction, vol. 3 [1974] 179.
17 Justice Holmes in his dissent in Compania General vs. Collector of Internal Revenue, 275
U.S. 87, 100[1927].
18 AGPALO, op. cit., 217 SANDS, op. cit., 207.
19 SINCO, op. cit., 587.
20 SANDS, op. cit., 207
21 Maceda vs. Macaraig, Jr. 197 SCRA 771, 799 [1991]; citing 2 COOLEY on the Law on
Taxation, 4th ed. [1927], 1414, and SANDS, op. cit., 207.
22 CRUZ, ISAGANI, Constitutional Law [1991], 84.
23 Id., 91-92; SINCO, op. cit., 587.
24 Section 131(l), Local Government Code of 1991.
25 Section 131(g), id.
26 PIMENTEL, AQUILINO JR., The Local Government Code of 1991 The Key to National
Development [1933], 329.
27 Section 2(1), Introductory Provisions, Administrative Code of 1987.
28 Section 1, Article X, 1987 Constitution.
29 Section 2(2), Introductory Provisions, Administrative Code of 1987.
30 Bacani vs. National Coconut Corporation, 100 Phil. 468, 472 [1956].
31 Section 2(4), Introductory Provisions, Administrative Code of 1987.
32 Section 2(10), Id., Id.
33 Section 25, Article II, and Section 2, Article X, Constitution.
34 Section 2(a), Local Government Code of 1991.
35 P.D. No. 1931.
36 Section 3, R.A. No. 6958.
37 Section 18, Id.,
38 Section 9(b), Id.
39 Supra note 9.