G.R. No.

L-31364 March 30, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional Director,
Revenue Region No. 14, Bureau of Internal Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and
FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY respondents.

DE CASTRO, J.:
Appeal from two orders of the Court of First Instance of Negros Occidental, Branch V in Special Proceedings No.
7794, entitled: "Intestate Estate of Luis D. Tongoy," the first dated July 29, 1969 dismissing the Motion for
Allowance of Claim and for an Order of Payment of Taxes by the Government of the Republic of the Philippines
against the Estate of the late Luis D. Tongoy, for deficiency income taxes for the years 1963 and 1964 of the
decedent in the total amount of P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise
penalties, and the second, dated October 7, 1969, denying the Motion for reconsideration of the Order of
dismissal.
The Motion for allowance of claim and for payment of taxes dated May 28, 1969 was filed on June 3, 1969 in the
abovementioned special proceedings, (par. 3, Annex A, Petition, pp. 1920, Rollo). The claim represents the
indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in the total sum of
P3,254.80 as above stated, covered by Assessment Notices Nos. 11-50-29-1-11061-21-63 and 11-50-291-1
10875-64, to which motion was attached Proof of Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator
opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of
Court (par. 4, Opposition to Motion for Allowance of Claim, pp. 23-24, Rollo). Finding the opposition well-founded,
the respondent Judge, Jose F. Fernandez, dismissed the motion for allowance of claim filed by herein petitioner,
Regional Director of the Bureau of Internal Revenue, in an order dated July 29, 1969 (Annex D, Petition, p. 26,
Rollo). On September 18, 1969, a motion for reconsideration was filed, of the order of July 29, 1969, but was
denied in an Order dated October 7, 1969.
Hence, this appeal on certiorari, petitioner assigning the following errors:
1. The lower court erred in holding that the claim for taxes by the government against the estate
of Luis D. Tongoy was filed beyond the period provided in Section 2, Rule 86 of the Rules of
Court.
2. The lower court erred in holding that the claim for taxes of the government was already barred
under Section 5, Rule 86 of the Rules of Court.
which raise the sole issue of whether or not the statute of non-claims Section 5, Rule 86 of the New Rule of
Court, bars claim of the government for unpaid taxes, still within the period of limitation prescribed in Section 331
and 332 of the National Internal Revenue Code.
Section 5, Rule 86, as invoked by the respondent Administrator in hid Oppositions to the Motion for Allowance of
Claim, etc. of the petitioners reads as follows:
All claims for money against the decedent, arising from contracts, express or implied, whether the
same be due, not due, or contingent, all claims for funeral expenses and expenses for the last
sickness of the decedent, and judgment for money against the decedent, must be filed within the
time limited in they notice; otherwise they are barred forever, except that they may be set forth as
counter claims in any action that the executor or administrator may bring against the claimants.
Where the executor or administrator commence an action, or prosecutes an action already

commenced by the deceased in his lifetime, the debtor may set forth may answer the claims he
has against the decedents, instead of presenting them independently to the court has herein
provided, and mutual claims may be set off against each other in such action; and in final
judgment is rendered in favored of the decedent, the amount to determined shall be considered
the true balance against the estate, as though the claim has been presented directly before the
court in the administration proceedings. Claims not yet due, or contingent may be approved at
their present value.
A perusal of the aforequoted provisions shows that it makes no mention of claims for monetary obligation of the
decedent created by law, such as taxes which is entirely of different character from the claims expressly
enumerated therein, such as: "all claims for money against the decedent arising from contract, express or
implied, whether the same be due, not due or contingent, all claim for funeral expenses and expenses for the last
sickness of the decedent and judgment for money against the decedent." Under the familiar rule of statutory
construction of expressio unius est exclusio alterius, the mention of one thing implies the exclusion of another
thing not mentioned. Thus, if a statute enumerates the things upon which it is to operate, everything else must
necessarily, and by implication be excluded from its operation and effect (Crawford, Statutory Construction, pp.
334-335).
In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et al., G.R. No. L-23081,
December 30, 1969, it was held that the assessment, collection and recovery of taxes, as well as the matter of
prescription thereof are governed by the provisions of the National Internal revenue Code, particularly Sections
331 and 332 thereof, and not by other provisions of law. (See also Lim Tio, Dy Heng and Dee Jue vs. Court of
Tax Appeals & Collector of Internal Revenue, G.R. No. L-10681, March 29, 1958). Even without being specifically
mentioned, the provisions of Section 2 of Rule 86 of the Rules of Court may reasonably be presumed to have
been also in the mind of the Court as not affecting the aforecited Section of the National Internal Revenue Code.
In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that "taxes assessed
against the estate of a deceased person ... need not be submitted to the committee on claims in the ordinary
course of administration. In the exercise of its control over the administrator, the court may direct the payment of
such taxes upon motion showing that the taxes have been assessed against the estate." The abolition of the
Committee on Claims does not alter the basic ruling laid down giving exception to the claim for taxes from being
filed as the other claims mentioned in the Rule should be filed before the Court. Claims for taxes may be
collected even after the distribution of the decedent's estate among his heirs who shall be liable therefor in
proportion of their share in the inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil. 13).
The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception
from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government
and their prompt and certain availability are imperious need. (Commissioner of Internal Revenue vs. Pineda, G.
R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon taxation depends the Government ability to serve the
people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government
officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in
the same manner as private persons may be made to suffer individually on account of his own negligence, the
presumption being that they take good care of their personal affairs. This should not hold true to government
officials with respect to matters not of their own personal concern. This is the philosophy behind the
government's exception, as a general rule, from the operation of the principle of estoppel. (Republic vs.
Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and Protective
Order of the Elks Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of
the Philippines, L-41480, April 30,1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553;
Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA
553; Republic vs. Philippine Long Distance Telephone Company, L-18841, January 27, 1969, 26 SCRA 620;
Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36 SCRA 77; E. Rodriguez, Inc. vs. Collector of
Internal Revenue, L- 23041, July 31, 1969, 28 SCRA 119.) As already shown, taxes may be collected even after
the distribution of the estate of the decedent among his heirs (Government of the Philippines vs.
Pamintuan, supra; Pineda vs. CFI of Tayabas,supra Clara Diluangco Palanca vs. Commissioner of Internal
Revenue, G. R. No. L-16661, January 31, 1962).

Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing the last paragraph of Section
315 of the Tax Code payment of income tax shall be a lien in favor of the Government of the Philippines from the
time the assessment was made by the Commissioner of Internal Revenue until paid with interests, penalties, etc.
By virtue of such lien, this court held that the property of the estate already in the hands of an heir or transferee
may be subject to the payment of the tax due the estate. A fortiori before the inheritance has passed to the heirs,
the unpaid taxes due the decedent may be collected, even without its having been presented under Section 2 of
Rule 86 of the Rules of Court. It may truly be said that until the property of the estate of the decedent has vested
in the heirs, the decedent, represented by his estate, continues as if he were still alive, subject to the payment of
such taxes as would be collectible from the estate even after his death. Thus in the case above cited, the income
taxes sought to be collected were due from the estate, for the three years 1946, 1947 and 1948 following his
death in May, 1945.
Even assuming arguendo that claims for taxes have to be filed within the time prescribed in Section 2, Rule 86 of
the Rules of Court, the claim in question may be filed even after the expiration of the time originally fixed therein,
as may be gleaned from the italicized portion of the Rule herein cited which reads:
Section 2. Time within which claims shall be filed. - In the notice provided in the preceding
section, the court shall state the time for the filing of claims against the estate, which shall not be
more than twelve (12) nor less than six (6) months after the date of the first publication of the
notice. However, at any time before an order of distribution is entered, on application of a creditor
who has failed to file his claim within the time previously limited the court may, for cause shown
and on such terms as are equitable, allow such claim to be flied within a time not exceeding one
(1) month. (Emphasis supplied)
In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an Order of Payment of
Taxes) which, though filed after the expiration of the time previously limited but before an order of the distribution
is entered, should have been granted by the respondent court, in the absence of any valid ground, as none was
shown, justifying denial of the motion, specially considering that it was for allowance Of claim for taxes due from
the estate, which in effect represents a claim of the people at large, the only reason given for the denial that the
claim was filed out of the previously limited period, sustaining thereby private respondents' contention,
erroneously as has been demonstrated.
WHEREFORE, the order appealed from is reverse. Since the Tax Commissioner's assessment in the total
amount of P3,254.80 with 5 % surcharge and 1 % monthly interest as provided in the Tax Code is a final one and
the respondent estate's sole defense of prescription has been herein overruled, the Motion for Allowance of
Claim is herein granted and respondent estate is ordered to pay and discharge the same, subject only to the
limitation of the interest collectible thereon as provided by the Tax Code. No pronouncement as to costs.
SO ORDERED.

G.R. Nos. L-49839-46

April 26, 1991

JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,

vs.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROO, in their capacities as appointed and Acting
Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H. NOBLEJAS, ROMULO M.
DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed and Acting Members of the BOARD OF
ASSESSMENT APPEALS of Manila; and NICOLAS CATIIL in his capacity as City Assessor of
Manila,respondents.
Barcelona, Perlas, Joven & Academia Law Offices for petitioners.

PARAS, J.:
This is a petition for review on certiorari to reverse the June 10, 1977 decision of the Central Board of
Assessment Appeals in CBAA Cases Nos. 72-79 entitled "J.B.L. Reyes, Edmundo Reyes, et al. v. Board of
Assessment Appeals of Manila and City Assessor of Manila" which affirmed the March 29, 1976 decision of the
Board of Tax Assessment Appeals in BTAA Cases Nos. 614, 614-A-J, 615, 615-A, B, E, "Jose Reyes, et al. v.
City Assessor of Manila" and "Edmundo Reyes and Milagros Reyes v. City Assessor of Manila" upholding the
classification and assessments made by the City Assessor of Manila.
1

The facts of the case are as follows:

Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta.
Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said tenants
were paying monthly rentals not exceeding three hundred pesos (P300.00) in July, 1971. On July 14, 1971, the
National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in
monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not
exceed three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10%
thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its
effectivity thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease. On
October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to
increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil
Code, excepting leases with a definite period. Consequently, the Reyeses, petitioners herein, were precluded
from raising the rentals and from ejecting the tenants. In 1973, respondent City Assessor of Manila re-classified
and reassessed the value of the subject properties based on the schedule of market values duly reviewed by the
Secretary of Finance. The revision, as expected, entailed an increase in the corresponding tax rates prompting
petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They averred that
the reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional"
considering that the taxes imposed upon them greatly exceeded the annual income derived from their properties.
They argued that the income approach should have been used in determining the land values instead of the
comparable sales approach which the City Assessor adopted (Rollo, pp. 9-10-A). The Board of Tax Assessment
Appeals, however, considered the assessments valid, holding thus:
WHEREFORE, and considering that the appellants have failed to submit concrete evidence which could
overcome the presumptive regularity of the classification and assessments appear to be in accordance
with the base schedule of market values and of the base schedule of building unit values, as approved by
the Secretary of Finance, the cases should be, as they are hereby, upheld.
SO ORDERED. (Decision of the Board of Tax Assessment Appeals, Rollo, p. 22).
The Reyeses appealed to the Central Board of Assessment Appeals. They submitted, among others, the
summary of the yearly rentals to show the income derived from the properties. Respondent City Assessor, on the
other hand, submitted three (3) deeds of sale showing the different market values of the real property situated in
the same vicinity where the subject properties of petitioners are located. To better appreciate the locational and
physical features of the land, the Board of Hearing Commissioners conducted an ocular inspection with the
presence of two representatives of the City Assessor prior to the healing of the case. Neither the owners nor their
authorized representatives were present during the said ocular inspection despite proper notices served them. It
was found that certain parcels of land were below street level and were affected by the tides (Rollo, pp. 24-25).
1wphi1

On June 10, 1977, the Central Board of Assessment Appeals rendered its decision, the dispositive portion of
which reads:

WHEREFORE, the appealed decision insofar as the valuation and assessment of the lots covered by Tax
Declaration Nos. (5835) PD-5847, (5839), (5831) PD-5844 and PD-3824 is affirmed.
For the lots covered by Tax Declaration Nos. (1430) PD-1432, PD-1509, 146 and (1) PD-266, the
appealed Decision is modified by allowing a 20% reduction in their respective market values and
applying therein the assessment level of 30% to arrive at the corresponding assessed value.
SO ORDERED. (Decision of the Central Board of Assessment Appeals, Rollo, p. 27)
Petitioner's subsequent motion for reconsideration was denied, hence, this petition.
The Reyeses assigned the following error:
THE HONORABLE BOARD ERRED IN ADOPTING THE "COMPARABLE SALES APPROACH"
METHOD IN FIXING THE ASSESSED VALUE OF APPELLANTS' PROPERTIES.
The petition is impressed with merit.
The crux of the controversy is in the method used in tax assessment of the properties in question. Petitioners
maintain that the "Income Approach" method would have been more realistic for in disregarding the effect of the
restrictions imposed by P.D. 20 on the market value of the properties affected, respondent Assessor of the City of
Manila unlawfully and unjustifiably set increased new assessed values at levels so high and successive that the
resulting annual real estate taxes would admittedly exceed the sum total of the yearly rentals paid or payable by
the dweller tenants under P.D. 20. Hence, petitioners protested against the levels of the values assigned to their
properties as revised and increased on the ground that they were arbitrarily excessive, unwarranted, inequitable,
confiscatory and unconstitutional (Rollo, p. 10-A).
On the other hand, while respondent Board of Tax Assessment Appeals admits in its decision that the income
approach is used in determining land values in some vicinities, it maintains that when income is affected by some
sort of price control, the same is rejected in the consideration and study of land values as in the case of
properties affected by the Rent Control Law for they do not project the true market value in the open market
(Rollo, p. 21). Thus, respondents opted instead for the "Comparable Sales Approach" on the ground that the
value estimate of the properties predicated upon prices paid in actual, market transactions would be a uniform
and a more credible standards to use especially in case of mass appraisal of properties (Ibid.). Otherwise stated,
public respondents would have this Court completely ignore the effects of the restrictions of P.D. No. 20 on the
market value of properties within its coverage. In any event, it is unquestionable that both the "Comparable Sales
Approach" and the "Income Approach" are generally acceptable methods of appraisal for taxation purposes (The
Law on Transfer and Business Taxation by Hector S. De Leon, 1988 Edition). However, it is conceded that the
propriety of one as against the other would of course depend on several factors. Hence, as early as 1923 in the
case of Army & Navy Club, Manila v. Wenceslao Trinidad, G.R. No. 19297 (44 Phil. 383), it has been stressed
that the assessors, in finding the value of the property, have to consider all the circumstances and elements of
value and must exercise a prudent discretion in reaching conclusions.
Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only be uniform,
but must also be equitable and progressive.
Uniformity has been defined as that principle by which all taxable articles or kinds of property of the same class
shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]).
Notably in the 1935 Constitution, there was no mention of the equitable or progressive aspects of taxation
required in the 1973 Charter (Fernando "The Constitution of the Philippines", p. 221, Second Edition). Thus, the
need to examine closely and determine the specific mandate of the Constitution.

Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is progressive when its
rate goes up depending on the resources of the person affected (Ibid.).
The power to tax "is an attribute of sovereignty". In fact, it is the strongest of all the powers of government. But
for all its plenitude the power to tax is not unconfined as there are restrictions. Adversely effecting as it does
property rights, both the due process and equal protection clauses of the Constitution may properly be invoked to
invalidate in appropriate cases a revenue measure. If it were otherwise, there would be truth to the 1903 dictum
of Chief Justice Marshall that "the power to tax involves the power to destroy." The web or unreality spun from
Marshall's famous dictum was brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is
not the power to destroy while this Court sits. So it is in the Philippines " (Sison, Jr. v. Ancheta, 130 SCRA 655
[1984]; Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439 [1985]).
In the same vein, the due process clause may be invoked where a taxing statute is so arbitrary that it finds no
support in the Constitution. An obvious example is where it can be shown to amount to confiscation of property.
That would be a clear abuse of power (Sison v. Ancheta, supra).
The taxing power has the authority to make a reasonable and natural classification for purposes of taxation but
the government's act must not be prompted by a spirit of hostility, or at the very least discrimination that finds no
support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions not being different both in
the privileges conferred and the liabilities imposed (Ibid., p. 662).
Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first Fundamental
Principle to guide the appraisal and assessment of real property for taxation purposes is that the property must
be "appraised at its current and fair market value."
By no strength of the imagination can the market value of properties covered by P.D. No. 20 be equated with the
market value of properties not so covered. The former has naturally a much lesser market value in view of the
rental restrictions.
Ironically, in the case at bar, not even the factors determinant of the assessed value of subject properties under
the "comparable sales approach" were presented by the public respondents, namely: (1) that the sale must
represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property
must be comparable property (Rollo, p. 27). Nothing can justify or support their view as it is of judicial notice that
for properties covered by P.D. 20 especially during the time in question, there were hardly any willing buyers. As
a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these
properties were comparable with other residential properties not burdened by P.D. 20. Neither can the given
circumstances be nonchalantly dismissed by public respondents as imposed under distressed conditions clearly
implying that the same were merely temporary in character. At this point in time, the falsity of such premises
cannot be more convincingly demonstrated by the fact that the law has existed for around twenty (20) years with
no end to it in sight.
Verily, taxes are the lifeblood of the government and so should be collected without unnecessary hindrance.
However, 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 taxations, which is the promotion of the common good, may be
achieved (Commissioner of Internal Revenue v. Algue Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to
reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359
and P.D. 20) under the principle of social justice should not now be penalized by the same government by the
imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.
By the public respondents' own computation the assessment by income approach would amount to only P10.00
per sq. meter at the time in question.

PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed decisions of public respondents are
REVERSED and SET ASIDE; and (e) the respondent Board of Assessment Appeals of Manila and the City
Assessor of Manila are ordered to make a new assessment by the income approach method to guarantee a
fairer and more realistic basis of computation (Rollo, p. 71).
SO ORDERED.

G.R. No. L-7859

December 22, 1955

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
7

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 by-products 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.

G.R. No. L-4817

May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,

vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.
Calanog and Alafriz for plaintiffs-appellants.
City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serreno for defendants-appellants.
REYES, J.:
This suit was commenced in the Court of First Instance of Manila by two lawyers, a medical practitioner, a public
accountant, a dental surgeon and a pharmacist, purportedly "in their own behalf and in behalf of other
professionals practising in the City of Manila who may desire to join it." Object of the suit is the annulment of
Ordinance No. 3398 of the City of Manila together with the provision of the Manila charter authorizing it and the
refund of taxes collected under the ordinance but paid under protest.
The ordinance in question, which was approved by the municipal board of the City of Manila on July 25, 1950,
imposes a municipal occupation tax on persons exercising various professions in the city and penalizes nonpayment of the tax "by a fine of not more than two hundred pesos or by imprisonment of not more than six
months, or by both such fine and imprisonment in the discretion of the court." Among the professions taxed were
those to which plaintiffs belong. The ordinance was enacted pursuant to paragraph (1) of section 18 of the
Revised Charter of the City of Manila (as amended by Republic Act No. 409), which empowers the Municipal
Board of said city to impose a municipal occupation tax, not to exceed P50 per annum, on persons engaged in
the various professions above referred to.

Having already paid their occupation tax under section 201 of the National Internal Revenue Code, plaintiffs,
upon being required to pay the additional tax prescribed in the ordinance, paid the same under protest and then
brought the present suit for the purpose already stated. The lower court upheld the validity of the provision of law
authorizing the enactment of the ordinance but declared the ordinance itself illegal and void on the ground that
the penalty there in provided for non-payment of the tax was not legally authorized. From this decision both
parties appealed to this Court, and the only question they have presented for our determination is whether this
ruling is correct or not, for though the decision is silent on the refund of taxes paid plaintiffs make no assignment
of error on this point.
To begin with defendants' appeal, we find that the lower court was in error in saying that the imposition of the
penalty provided for in the ordinance was without the authority of law. The last paragraph (kk) of the very section
that authorizes the enactment of this tax ordinance (section 18 of the Manila Charter) in express terms also
empowers the Municipal Board "to fix penalties for the violation of ordinances which shall not exceed to(sic) two
hundred pesos fine or six months" imprisonment, or both such fine and imprisonment, for a single
offense."Hence, the pronouncement below that the ordinance in question is illegal and void because it imposes a
penalty not authorized by law is clearly without basis.
As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing it constitute
class legislation, are unjust and oppressive, and authorize what amounts to double taxation.
In raising the hue and cry of "class legislation", the burden of plaintiffs' complaint is not that the professions to
which they respectively belong have been singled out for the imposition of this municipal occupation tax; and in
any event, the Legislature may, in its discretion, select what occupations shall be taxed, and in the exercise of
that discretion it may tax all, or it may select for taxation certain classes and leave the others untaxed. (Cooley
on Taxation, Vol. 4, 4th ed., pp. 3393-3395.) Plaintiffs' complaint is that while the law has authorized the City of
Manila to impose the said tax, it has withheld that authority from other chartered cities, not to mention
municipalities. We do not think it is for the courts to judge what particular cities or municipalities should be
empowered to impose occupation taxes in addition to those imposed by the National Government. That matter is
peculiarly within the domain of the political departments and the courts would do well not to encroach upon it.
Moreover, as the seat of the National Government and with a population and volume of trade many times that of
any other Philippine city or municipality, Manila, no doubt, offers a more lucrative field for the practice of the
professions, so that it is but fair that the professionals in Manila be made to pay a higher occupation tax than
their brethren in the provinces.
Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination within a class
in that while professionals with offices in Manila have to pay the tax, outsiders who have no offices in the city but
practice their profession therein are not subject to the tax. Plaintiffs make a distinction that is not found in the
ordinance. The ordinance imposes the tax upon every person "exercising" or "pursuing" in the City of Manila
naturally any one of the occupations named, but does not say that such person must have his office in Manila.
What constitutes exercise or pursuit of a profession in the city is a matter of judicial determination. The argument
against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by
the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing inherently
obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling
or activity by both the state and the political subdivisions thereof. (51 Am. Jur., 341.)
In view of the foregoing, the judgment appealed from is reversed in so far as it declares Ordinance No. 3398 of
the City of Manila illegal and void and affirmed in so far as it holds the validity of the provision of the Manila
charter authorizing it. With costs against plaintiffs-appellants.
Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.

Separate Opinions

10

PARAS, C.J., dissenting:

I am constrained to dissent from the decision of the majority upon the ground that the Municipal Board of Manila
cannot outlaw what Congress of the Philippines has already authorized. The plaintiffs-appellants two lawyers,
a physician, an accountant, a dentist and a pharmacist had already paid the occupation tax under section 201
of the National Internal Revenue Code and are thereby duly licensed to practice their respective professions
throughout the Philippines; and yet they had been required to pay another occupation tax under Ordinance No.
3398 for practising in the City of Manila. This is a glaring example of contradiction the license granted by the
National Government is in effect withdrawn by the City in case of non-payment of the tax under the ordinance. I
fit be argued that the national occupation tax is collected to allow the professional residing in Manila to pursue his
calling in other places in the Philippines, it should then be exacted only from professionals practising
simultaneously in and outside of Manila. At any rate, we are confronted with the following situation: Whereas the
professionals elsewhere pay only one occupation tax, in the City of Manila they have to pay two, although all are
on equal footing insofar as opportunities for earning money out of their pursuits are concerned. The statement
that practice in Manila is more lucrative than in the provinces, may be true perhaps with reference only to a
limited few, but certainly not to the general mass of practitioners in any field. Again, provincial residents who have
occasional or isolated practice in Manila may have to pay the city tax. This obvious discrimination or lack of
uniformity cannot be brushed aside or justified by any trite pronouncement that double taxation is legitimate or
that legislation may validly affect certain classes.
My position is that a professional who has paid the occupation tax under the National Internal Revenue Code
should be allowed to practice in Manila even without paying the similar tax imposed by Ordinance No. 3398. The
City cannot give what said professional already has. I would not say that this Ordinance, enacted by the
Municipal Board pursuant to paragraph 1 of section 18 of the Revised Charter of Manila, as amended by
Republic Act No. 409, empowering the Board to impose a municipal occupation tax not to exceed P50 per
annum, is invalid; but that only one tax, either under the Internal Revenue Code or under Ordinance No. 3398,
should be imposed upon a practitioner in Manila.

G.R. No. L-18994

June 29, 1963

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner,

vs.
HON. LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of Leyte,
and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of the late Walter Scott
Price,respondents.
Office of the Solicitor General and Atty. G. H. Mantolino for petitioner.
Benedicto and Martinez for respondents.
LABRADOR, J.:
This is a petition for certiorari and mandamus against the Judge of the Court of First Instance of Leyte, Ron.
Lorenzo C. Garlitos, presiding, seeking to annul certain orders of the court and for an order in this Court directing
the respondent court below to execute the judgment in favor of the Government against the estate of Walter
Scott Price for internal revenue taxes.
It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674, January 30, 1960, this
Court declared as final and executory the order for the payment by the estate of the estate and inheritance taxes,
charges and penalties, amounting to P40,058.55, issued by the Court of First Instance of Leyte in, special
proceedings No. 14 entitled "In the matter of the Intestate Estate of the Late Walter Scott Price." In order to
enforce the claims against the estate the fiscal presented a petition dated June 21, 1961, to the court below for
the execution of the judgment. The petition was, however, denied by the court which held that the execution is
not justifiable as the Government is indebted to the estate under administration in the amount of P262,200. The
orders of the court below dated August 20, 1960 and September 28, 1960, respectively, are as follows:

11

Atty. Benedicto submitted a copy of the contract between Mrs. Simeona K. Price, Administratrix of the
estate of her late husband Walter Scott Price and Director Zoilo Castrillo of the Bureau of Lands dated
September 19, 1956 and acknowledged before Notary Public Salvador V. Esguerra, legal adviser in
Malacaang to Executive Secretary De Leon dated December 14, 1956, the note of His Excellency, Pres.
Carlos P. Garcia, to Director Castrillo dated August 2, 1958, directing the latter to pay to Mrs. Price the
sum ofP368,140.00, and an extract of page 765 of Republic Act No. 2700 appropriating the sum of
P262.200.00 for the payment to the Leyte Cadastral Survey, Inc., represented by the administratrix
Simeona K. Price, as directed in the above note of the President. Considering these facts, the Court
orders that the payment of inheritance taxes in the sum of P40,058.55 due the Collector of Internal
Revenue as ordered paid by this Court on July 5, 1960 in accordance with the order of the Supreme
Court promulgated July 30, 1960 in G.R. No. L-14674, be deducted from the amount of P262,200.00 due
and payable to the Administratrix Simeona K. Price, in this estate, the balance to be paid by the
Government to her without further delay. (Order of August 20, 1960)
The Court has nothing further to add to its order dated August 20, 1960 and it orders that the payment of
the claim of the Collector of Internal Revenue be deferred until the Government shall have paid its
accounts to the administratrix herein amounting to P262,200.00. It may not be amiss to repeat that it is
only fair for the Government, as a debtor, to its accounts to its citizens-creditors before it can insist in the
prompt payment of the latter's account to it, specially taking into consideration that the amount due to the
Government draws interests while the credit due to the present state does not accrue any interest. (Order
of September 28, 1960)
The petition to set aside the above orders of the court below and for the execution of the claim of the
Government against the estate must be denied for lack of merit. The ordinary procedure by which to settle claims
of indebtedness against the estate of a deceased person, as an inheritance tax, is for the claimant to present a
claim before the probate court so that said court may order the administrator to pay the amount thereof. To such
effect is the decision of this Court in Aldamiz vs. Judge of the Court of First Instance of Mindoro, G.R. No. L2360, Dec. 29, 1949, thus:
. . . a writ of execution is not the proper procedure allowed by the Rules of Court for the payment of debts
and expenses of administration. The proper procedure is for the court to order the sale of personal estate
or the sale or mortgage of real property of the deceased and all debts or expenses of administrator and
with the written notice to all the heirs legatees and devisees residing in the Philippines, according to Rule
89, section 3, and Rule 90, section 2. And when sale or mortgage of real estate is to be made, the
regulations contained in Rule 90, section 7, should be complied with.
1wph1.t

Execution may issue only where the devisees, legatees or heirs have entered into possession of their
respective portions in the estate prior to settlement and payment of the debts and expenses of
administration and it is later ascertained that there are such debts and expenses to be paid, in which
case "the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the
amount of their several liabilities, and order how much and in what manner each person shall contribute,
and mayissue execution if circumstances require" (Rule 89, section 6; see also Rule 74, Section 4;
Emphasis supplied.) And this is not the instant case.
The legal basis for such a procedure is the fact that in the testate or intestate proceedings to settle the estate of
a deceased person, the properties belonging to the estate are under the jurisdiction of the court and such
jurisdiction continues until said properties have been distributed among the heirs entitled thereto. During the
pendency of the proceedings all the estate is in custodia legis and the proper procedure is not to allow the
sheriff, in case of the court judgment, to seize the properties but to ask the court for an order to require the
administrator to pay the amount due from the estate and required to be paid.
Another ground for denying the petition of the provincial fiscal is the fact that the court having jurisdiction of the
estate had found that the claim of the estate against the Government has been recognized and an amount of
P262,200 has already been appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the
above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for
services rendered have already become overdue and demandable is well as fully liquidated. Compensation,

12

therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the
Civil Code, and both debts are extinguished to the concurrent amount, thus:
ART. 1200. When all the requisites mentioned in article 1279 are present, compensation takes effect by
operation of law, and extinguished both debts to the concurrent amount, eventhough the creditors and
debtors are not aware of the compensation.
It is clear, therefore, that the petitioner has no clear right to execute the judgment for taxes against the estate of
the deceased Walter Scott Price. Furthermore, the petition for certiorari and mandamus is not the proper remedy
for the petitioner. Appeal is the remedy.
The petition is, therefore, dismissed, without costs.

G.R. No. 117359 July 23, 1998

DAVAO GULF LUMBER CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.

PANGANIBAN, J.:
Because taxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly against the
grantee and liberally in favor of the government. Otherwise stated, any exemption from the payment of a tax
must be clearly stated in the language of the law; it cannot be merely implied therefrom.
Statement of the Case
This principium is applied by the Court in resolving this petition for review under Rule 45 of the Rules of Court,
assailing the Decision 1 of Respondent Court of Appeals 2 in CA-GR SP No. 34581 dated September 26, 1994, which
affirmed the June 21, 1994 Decision 3 of the Court of Tax Appeals 4 in CTA Case No. 3574. The dispositive portion of
the CTA Decision affirmed by Respondent Court reads:
WHEREFORE, judgment is hereby rendered ordering the respondent to refund to the petitioner
the amount of P2,923.15 representing the partial refund of specific taxes paid on manufactured
oils and fuels. 5
The Antecedent Facts
The facts are undisputed. 6 Petitioner is a licensed forest concessionaire possessing a Timber License Agreement
granted by the Ministry of Natural Resources (now Department of Environment and Natural Resources). From July 1,
1980 to January 31, 1982 petitioner purchased, from various oil companies, refined and manufactured mineral oils as
well as motor and diesel fuels, which it used exclusively for the exploitation and operation of its forest concession. Said
oil companies paid the specific taxes imposed, under Sections 153 and 156 7 of the 1977 National Internal Revenue
Code (NIRC), on the sale of said products. Being included in the purchase price of the oil products, the specific taxes
paid by the oil companies were eventually passed on to the user, the petitioner in this case.
On December 13, 1982, petitioner filed before Respondent Commissioner of Internal Revenue (CIR) a claim for
refund in the amount of P120,825.11, representing 25% of the specific taxes actually paid on the above-

13

mentioned fuels and oils that were used by petitioner in its operations as forest concessionaire. The claim was
based on Insular Lumber Co. vs. Court of Tax Appeals 8 and Section 5 of RA 1435 which reads:
Sec. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and
bridge funds of the political subdivision for whose benefit the tax is collected: Provided, however,
That whenever any oils mentioned above are used by miners or forest concessionaires in their
operations, twenty-five per centum of the specific tax paid thereon shall be refunded by the
Collector of Internal Revenue upon submission of proof of actual use of oils and under similar
conditions enumerated in subparagraphs one and two of section one hereof, amending section
one hundred forty-two of the Internal Revenue Code: Provided, further, That no new road shall be
constructed unless the routes or location thereof shall have been approved by the Commissioner
of Public Highways after a determination that such road can be made part of an integral and
articulated route in the Philippine Highway System, as required in section twenty-six of the
Philippine Highway Act of 1953.
It is an unquestioned fact that petitioner complied with the procedure for refund, including the submission of proof
of the actual use of the aforementioned oils in its forest concession as required by the above-quoted law.
Petitioner, in support of its claim for refund, submitted to the CIR the affidavits of its general manager, the
president of the Philippine Wood Products Association, and three disinterested persons, all attesting that the said
manufactured diesel and fuel oils were actually used in the exploitation and operation of its forest concession.
On January 20, 1983, petitioner filed at the CTA a petition for review docketed as CTA Case No. 3574. On June
21, 1994, the CTA rendered its decision finding petitioner entitled to a partial refund of specific taxes the latter
had paid in the reduced amount of P2,923.15. The CTA ruled that the claim on purchases of lubricating oil (from
July 1, 1980 to January 19, 1981) and on manufactured oils other than lubricating oils (from July 1, 1980 to
January 4, 1981) had prescribed. Disallowed on the ground that they were not included in the original claim filed
before the CIR were the claims for refund on purchases of manufactured oils from January 1, 1980 to June 30,
1980 and from February 1, 1982 to June 30, 1982. In regard to the other purchases, the CTA granted the claim,
but it computed the refund based on rates deemed paid under RA 1435, and not on the higher rates actualhy
paid by petitioner under the NIRC.
Insisting that the basis for computing the refund should be the increased rates prescribed by Sections 153 and
156 of the NIRC, petitioner elevated the matter to the Court of Appeals. As noted earlier, the Court of Appeals
affirmed the CTA Decision. Hence, this petition for review. 9
Public Respondent's Ruling
In its petition before the Court of Appeals, petitioner raised the following arguments:
I. The respondent Court of Tax Appeals failed to apply the Supreme Court's Decision in Insular
Lumber Co. v. Court of Tax Appeals which granted the claim for partial refund of specific taxes
paid by the claimant, without qualification or limitation.
II. The respondent Court of Tax Appeals ignored the increase in rates imposed by succeeding
amendatory laws,under which the petitioner paid the specific taxes on manufactured and diesel
fuels.
III. In its decision, the respondent Court of Tax Appeals ruled contrary to established tenets of law
when it lent itself to interpreting Section 5 of R.A. 1435, when the construction of said law is not
necessary.
IV. Sections 1 and 2 of R.A. 1435 are not the operative provisions to be applied but rather,
Sections 153 and 156 of the National Internal Revenue Code, as amended.

14

V. To rule that the basis for computation of the refunded taxes should be Sections 1 and 2 of R.A.
1435 rather than Section 153 and 156 of the National Internal Revenue Code is unfair, erroneous,
arbitrary, inequitable and oppressive. 10
The Court of Appeals held that the claim for refund should indeed be computed on the basis of the amounts
deemed paid under Sections 1 and 2 of RA 1435. In so ruling, it cited our pronouncement in Commissioner of
Internal Revenue v. Rio Tuba Nickel Mining Corporation 11 and subsequent Resolution dated June 15, 1992
clarifying the said Decision. Respondent Court further ruled that the claims for refund which prescribed and those
which were not filed at the administrative level must be excluded.
The Issue
In its Memorandum, petitioner raises one critical issue:
Whether or not petitioner is entitled under Republic Act No. 1435 to the refund of 25% of the
amount of specific taxes it actually paid on various refined and manufactured mineral oils and
other oil products taxed under Sec. 153 and Sec. 156 of the 1977 (Sec. 142 and Sec. 145 of the
1939) National Internal Revenue Code. 12
In the main, the question before us pertains only to the computation of the tax refund. Petitioner argues that the
refund should be based on the increased rates of specific taxes which it actually paid, as prescribed in Sections
153 and 156 of the NIRC. Public respondent, on the other hand, contends that it should be based on specific
taxes deemed paid under Sections 1 and 2 of RA 1435.
The Court's Ruling
The petition is not meritorious.
Petitioner Entitled to Refund
Under Sec. 5 of RA 1435
At the outset, it must be stressed that petitioner is entitled to a partial refund under Section 5 of RA 1435, which
was enacted to provide means for increasing the Highway Special Fund.
The rationale for this grant of partial refund of specific taxes paid on purchases of manufactured diesel and fuel
oils rests on the character of the Highway Special Fund. The specific taxes collected on gasoline and fuel accrue
to the Fund, which is to be used for the construction and maintenance of the highway system. But because the
gasoline and fuel purchased by mining and lumber concessionaires are used within their own compounds and
roads, and their vehicles seldom use the national highways, they do not directly benefit from the Fund and its
use. Hence, the tax refund gives the mining and the logging companies a measure of relief in light of their
peculiar situation. 13 When the Highway Special Fund was abolished in 1985, the reason for the refund likewise
ceased to exist. 14Since petitioner purchased the subject manufactured diesel and fuel oils from July 1, 1980 to
January 31, 1982 and submitted the required proof that these were actually used in operating its forest concession, it
is entitled to claim the refund under Section 5 of RA 1435.
Tax Refund Strictly Constrtued
Against the Grantee
Petitioner submits that it is entitled to the refund of 25 percent of the specific taxes it had actually paid for the
petroleum products used in its operations. In other words, it claims a refund based on the increased rates under
Sections 153 and 156 of the NIRC. 15 Petitioner argues that the statutory grant of the refund privilege, specifically the
phrase "twenty-five per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue,"
is "clear and unambiguous" enough to require construction or qualification thereof. 16 In addition, it cites our
pronouncement inInsular Lumber vs. Court of Tax Appeals: 17
15

. . . Sec. 5 [of RA 1435] makes reference to subparagraphs 1 and 2 of Section 1 only for the
purpose of prescribing the procedure for refund. This express reference cannot be expanded in
scope to include the limitation of the period of refund. If the limitation of the period of refund of
specific taxes paid on oils used in aviation and agriculture is intended to cover similar taxes paid
on oil used by miners and forest concessionaires, there would have been no need of dealing with
oil used by miners and forest concessions separately and Section 5 would very well have been
included in Section 1 of Republic Act No. 1435, notwithstanding the different rate of exemption.
Petitioner then reasons that "the express mention of Section 1 of RA 1435 in Section 5 cannot be expanded to
include a limitation on the tax rates to be applied . . . [otherwise,] Section 5 should very well have been included
in Section 1 . . . ." 18
The Court is nor persuaded. The relevant statutory provisions do not clearly support petitioner's claim for refund.
RA 1435 provides:
Sec. 1 Section one hundred and forty-two of the National Internal Revenue Code, as amended, is
further amended to read as follows:
Sec. 142. Specific tax on manufactured oils and other fuels. On refined and manufactured
mineral oils and motor fuels, there shall be collected the following taxes:
(a) Kerosene or petroleum, per liter of volume capacity, two and one-half centavos;
(b) Lubricating oils, per liter of volume capacity, seven centavos;
(c) Naptha, gasoline, and all other similar products of distillation, per liter of volume capacity,
eight centavos; and
(d) On denatured alcohol to be used for motive power, per liter of volume capacity, one
centavo:Provided, That if the denatured alcohol is mixed with gasoline, the specific tax on which
has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For
the purpose of this subsection, the removal of denatured alcohol of not less than one hundred
eighty degrees proof (ninety per centum absolute alcohol) shall be deemed to have been
removed for motive power, unless shown to the contrary.
Whenever any of the oils mentioned above are, during the five years from June eighteen,
nineteen hundred and fifty two, used in agriculture and aviation, fifty per centum of the specific
tax paid thereon shall be refunded by the Collector of Internal Revenue upon the submission of
the following:
(1) A sworn affidavit of the producer and two disinterested persons proving that the said oils were
actually used in agriculture, or in lieu thereof.
(2) Should the producer belong to any producers' association or federation, duly registered with
the Securities and Exchange Commission, the affidavit of the president of the association or
federation, attesting to the fact that the oils were actually used in agriculture.
(3) In the case of aviation oils, a sworn certificate satisfactory to the Collector proving that the
said oils were actually used in aviation: Provided, That no such refunds shall be granted in
respect to the oils used in aviation by citizens and corporations of foreign countries which do not
grant equivalent refunds or exemptions in respect to similar oils used in aviation by citizens and
corporations of the Philippines.
Sec. 2 Section one hundred and forty-five of the National Internal Revenue Code, as amended, is
further amended to read as follows:

16

Sec. 145. Specific Tax on Diesel fuel oil. On fuel oil, commercially known as diesel fuel oil, and
on all similar fuel oils, having more or less the same generating power, there shall be collected,
per metric ton, one peso.
xxx xxx xxx
Sec. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and
bridge funds of the political subdivision for whose benefit the tax is collected: Provided, however,
That whenever any oils mentioned above are used by miners or forest concessionaires in their
operations, twenty-five per centum of the specific tax paid thereon shall be refunded by the
Collector of Internal Revenue upon submission of proof of actual use of oils and under similar
conditions enumerated in subparagraphs one and two of section one hereof, amending section
one hundred forty-two of the Internal Revenue Code: Provided, further, That no new road shall be
constructed unless the route or location thereof shall have been approved by the Commissioner
of Public Highways after a determination that such road can be made part of an integral and
articulated route in the Philippine Highway System, as required in section twenty-six of the
Philippine Highway Act of 1953.
Subsequently the 1977 NIRC, PD 1672 and EO 672 amended the first two provisions, renumbering them and
prescribing higher rates. Accordingly, petitioner paid specific taxes on petroleum products purchased from July 1,
1980 to January 31, 1982 under the following statutory provisions.
From February 8, 1980 to March 20, 1981, Sections 153 and 156 provided as follows:
Sec. 153. Specific tax on manufactured oils and other fuels. On refined and manufactured
mineral oils and motor fuels, there shall be collected the following taxes which shall attach to the
articles hereunder enumerated as soon as they are in existence as such:
(a) Kerosene, per liter of volume capacity, seven centavos;
(b) Lubricating oils, per liter of volume capacity, eighty centavos;
(c) Naphtha, gasoline and all other similar products of distillation, per liter of volume capacity,
ninety-one centavos: Provided, That on premium and aviation gasoline, the tax shall be one peso
per liter of volume capacity;
(d) On denatured alcohol to be used for motive power, per liter of volume capacity, one
centavo:Provided, That unless otherwise provided for by special laws, if the denatured alcohol is
mixed with gasoline, the specific tax on which has already been paid, only the alcohol content
shall be subject to the tax herein prescribed. For the purposes of this subsection, the removal of
denatured alcohol of not less than one hundred eighty degrees proof (ninety per centum absolute
alcohol) shall be deemed to have been removed for motive power, unless shown to the contrary;
(e) Processed gas, per liter of volume capacity, three centavos;
(f) Thinners and solvents, per liter of volume capacity, fifty-seven centavos;
(g) Liquefied petroleum gas, per kilogram, fourteen centavos: Provided, That liquefied petroleum
gas used for motive power shall be taxed at the equivalent rate as the specific tax on diesel fuel
oil;
(h) Asphalts, per kilogram, eight centavos;
(i) Greases, waxes and petrolatum, per kilogram, fifty centavos;

17

(j) Aviation turbo jet fuel, per liter of volume capacity, fifty-five centavos. (As amended by Sec. 1,
P.D. No. 1672.)
xxx xxx xxx
Sec. 156. Specific tax on diesel fuel oil. On fuel oil, commercially known as diesel fuel oil, and
on all similar fuel oils, having more or less the same generating power, per liter of volume
capacity, seventeen and one-half centavos, which tax shall attach to this fuel oil as soon as it is in
existence as such.
Then on March 21, 1981, these provisions were amended by EO 672 to read:
Sec. 153. Specific tax on manufactured oils and other fuels. On refined and manufactured
mineral oils and motor fuels, there shall be collected the following taxes which shall attach to the
articles hereunder enumerated as soon as they are in existence as such:
(a) Kerosene, per liter of volume capacity, nine centavos;
(b) Lubricating oils, per liter of volume capacity, eighty centavos;
(c) Naphtha, gasoline and all other similar products of distillation, per liter of volume capacity, one
peso and six centavos: Provided, That on premium and aviation gasoline, the tax shall be one
peso and ten centavos and one peso, respectively, per liter of volume capacity;
(d) On denatured alcohol to be used for motive power, per liter of volume capacity, one
centavo;Provided, That unless otherwise provided for by special laws, if the denatured alcohol is
mixed with gasoline, the specific tax on which has already been paid, only the alcohol content
shall be subject to the tax herein prescribed. For the purpose of this subsection, the removal of
denatured alcohol of not less than one hundred eighty degrees proof (ninety per centum absolute
alcohol) shall be deemed to have been removed for motive power, unless shown to the contrary;
(e) Processed gas, per liter of volume capacity, three centavos;
(f) Thinners and solvents, per liter of volume capacity, sixty-one centavos;
(g) Liquefied petroleum gas, per kilogram, twenty-one centavos: Provided, That, liquified
petroleum gas used for motive power shall be taxed at the equivalent rate as the specific tax on
diesel fuel oil;
(h) Asphalts, per kilogram, twelve centavos;
(i) Greases, waxes and petrolatum, per kilogram, fifty centavos;
(j) Aviation turbo-jet fuel, per liter of volume capacity, sixty-four centavos.
xxx xxx xxx
Sec. 156. Specific tax on diesel fuel oil. On fuel oil, commercially known as diesel fuel oil, and
all similar fuel oils, having more or less the same generating power, per liter of volume capacity,
twenty-five and one-half centavos, which tax shall attach to this fuel oil as soon as it is in
existence as such.
A tax cannot be imposed unless it is supported by the clear and express language of a statute; 19 on the other
hand, once the tax is unquestionably imposed, "[a] claim of exemption from tax payments must be clearly shown and
based on language in the law too plain to be mistaken." 20 Since the partial refund authorized under Section 5, RA
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1435, is in the nature of a tax exemption, 21 it must be construed strictissimi Juris against the grantee. Hence,
petitioner's claim of refund on the basis of the specific taxes it actually paid must expressly be granted in a statute
stated in a language too clear to be mistaken.

We have carefully scrutinized RA 1435 and the subsequent pertinent statutes and found no expression of a
legislative will authorizing a refund based on the higher rates claimed by petitioner. The mere fact that the
privilege of refund was included in Section 5, and not in Section 1, is insufficient to support petitioner's claim.
When the law itself does not explicitly provide that a refund under RA 1435 may be based on higher rates which
were nonexistent at the time of its enactment, this Coure cannot presume otherwise. A legislative lacuna cannot
be filled by judicial fiat. 22
The issue is not really novel. In Commissioner of Internal Revenue vs. Court of Appeals and Atlas Consolidated
Mining and Development
Corporation 23 (the second Atlas case), the CIR contended that the refund should be based on Sections 1 and 2 of RA
1435, not Sections 153 and 156 of the NIRC of 1977. In categorically ruling that Private Respondent Atlas
Consolidated Mining and Development Corporation was entitled to a refund based on Sections 1 and 2 of RA 1435,
the Court, through Mr. Justice Hilario G. Davide, Jr., reiterated our pronouncement in Commissioner of Internal
Revenue vs. Rio Tuba Nickel and Mining Corporation:
Our Resolution of 25 March 1992 modifying our 30 September 1991 Decision in the Rio
Tuba case sets forth the controlling doctrine. In that Resolution, we stated:
Since the private respondent's claim for refund covers specific taxes paid from 1980 to July 1983
then we find that the private respondent is entitled to a refund. It should be made clear, however,
that Rio Tuba is not entitled to the whole amount it claims as refund.
The specific taxes on oils which Rio Tuba paid for the aforesaid period were no longer based on
the rates specified by Sections 1 and 2 of R.A. No. 1435 but on the increased rates mandated
under Sections 153 and 156 of the National Internal Revenue Code of 1977. We note however,
that the latter law does not specifically provide for a refund to these mining and lumber
companies of specific taxes paid on manufactured and diesel fuel oils.
In Insular Lumber Co. v. Court of Tax Appeals, (104 SCRA 710 [1981]), the Court held that the
authorized partial refund under Section 5 of R.A. No. 1435 partakes of the nature of a tax
exemption and therefore cannot be allowed unless granted in the most explicit and categorical
language. Since the grant of refund privileges must be strictly construed against the taxpayer, the
basis for the refund shall be the amounts deemed paid under Sections 1 and 2 of R.A. No. 1435.
ACCORDINGLY, the decision in G.R. Nos. 83583-84 is hereby MODIFIED. The private
respondent's CLAIM for REFUND is GRANTED, computed on the basis of the amounts deemed
paid under Sections 1 and 2 of R.A. No. 1435, without interest. 24
We rule, therefore, that since Atlas's claims for refund cover specific taxes paid before 1985, it should
be granted the refund based on the rates specified by Sections 1 and 2 of R.A. No. 1435 and not on
the increased rates under Sections 153 and 156 of the Tax Code of 1977, provided the claims are not
yet barred by prescription. (Emphasis supplied.)

Insular Lumber Co. and First Atlas Case

Not Inconsistent With Rio Tuba
and Second Atlas Case
Petitioner argues that the applicable jurisprudence in this case should be Commissioner of Internal Revenue vs.
Atlas Consolidated and Mining Corp. (the first Atlas case), an unsigned resolution, and Insular Lumber Co. vs.
Court of Tax Appeals, an en banc decision. 25 Petitioner also asks the Court to take a "second look" at Rio Tuba and

19

the second Atlas case, both decided by Divisions, in view of Insular which was decided en banc. Petitioner posits that
"[I]n view of the similarity of the situation of herein petitioner with Insular Lumber Company (claimant in Insular
Lumber) and Rio Tuba Nickel Mining Corporation (claimant in Rio Tuba), a dilemma has been created as to whether or
not Insular Lumber, which has been decided by the Honorable Court en banc, or Rio Tuba, which was decided only
[by] the Third Division of the Honorable Court, should
apply." 26

We find no conflict between these two pairs of cases. Neither Insular Lumber Co. nor the first Atlas case ruled on
the issue of whether the refund privilege under Section 5 should be computed based on the specific tax deemed
paid under Sections 1 and 2 of RA 1435, regardless of what was actually paid under the increased rates. Rio
Tuba and the second Atlas case did.
Insular Lumber Co. decided a claim for refund on specific tax paid on petroleum products purchased in the year
1963, when the increased rates under the NIRC of 1977 were nor yet in effect. Thus, the issue now before us did
not exist at the time, since the applicable rates were still those prescribed under Sections 1 and 2 of RA 1435.
On the other hand, the issue raised in the first Atlas case was whether the claimant was entitled to the refund
under Section 5, notwithstanding its failure to pay any additional tax under a municipal or city ordinance.
Although Atlas purchased petroleum products in the years, 1976 to 1978 when the rates had already been
changed, the Court did not decide or make any pronouncement on the issue in that case.
Clearly, it is impossible for these two decisions to clash with our pronouncement in Rio Tuba and second Atlas
case, in which we ruled that the refund granted be computed on the basis of the amounts deemed paid under
Sections 1 and 2 of RA 1435. In this light, we find no basis for petitioner's invocation of the constitutional
proscription that "no doctrine or principle of law laid down by the Court in a decision rendered en banc or in
division may be modified or reversed except by the Court sitting en banc. 27
Finally, petitioner asserts that "equity and justice demand that the computation of the tax refunds be based on
actual amounts paid under Sections 153 and 156 of the NIRC." 28 We disagree. According to an eminent authority
on taxation, "there is no tax exemption solely on the, ground of equity." 29
WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

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