REYES VS.
ALMANZOR
GR 43839-46 April 26, 1991 196 SCRA 322
Paras, J.:
FACTS:
Petitioner are owners of parcels of land
leased to tenants. RA 6359 was enacted
prohibiting for one year an increase in
monthly rentals of dwelling units and said
Act also disallowed ejectment of lessees
upon the expiration of the usual period of
lease. City assessor of Manila assessed the
value of petitioners property based on the
schedule of market values duly reviewed
by the Secretary of Finance. The revision
entailed an increase to the tax rates and
petitioners averred that the reassessment
imposed upon them greatly exceeded the
annual income derived from their
properties.
ISSUE:
Whether or not income approach is the
method to be used in the tax assessment
and not the comparable sales approach.
RULING:
By no stretch of the imagination can the
market value of properties covered by PD
20 be equated with the market value of
properties not so covered. In the case at
bar, not even factors determinant of the
assessed value of subject properties under
the comparable sales approach were
presented by respondent namely:
1. That the sale must represent a bonafide
arms length transaction between a willing
seller and a willing buyer
2. The property must be comparable
property.
As a general rule, there were no takers so
that there can be no reasonable basis for
the conclusion that these properties are
comparable.
Taxes are lifeblood of government,
however, such collection should be made
in accordance with the law and therefore
necessary to reconcile conflicting interests
of the authorities so that the real purpose
of taxation, promotion of the welfare of
common good can be achieved.
CIR vs. Algue Inc.
Commissioner of Internal Revenue vs.
Algue Inc.
GR No. L-28896 | Feb. 17, 1988
Facts:
Algue Inc. is a domestic corp engaged
in engineering, construction and other
allied activities
On Jan. 14, 1965, the corp received a
letter from the CIR regarding its
delinquency income taxes from 1958-
1959, amtg to P83,183.85
A letter of protest or reconsideration
was filed by Algue Inc on Jan 18
On March 12, a warrant of distraint and
levy was presented to Algue Inc. thru its
counsel, Atty. Guevara, who refused to
receive it on the ground of the pending
protest
Since the protest was not found on the
records, a file copy from the corp was
produced and given to BIR Agent Reyes,
who deferred service of the warrant
On April 7, Atty. Guevara was 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
On April 23, Algue filed a petition for
review of the decision of the CIR with the
Court of Tax Appeals
CIR contentions:
- the claimed deduction of P75,000.00
was properly disallowed because it was
not an ordinary reasonable or necessary
business expense
- payments are fictitious because most
of the payees are members of the same
family in control of Algue and that there is
not enough substantiation of such
payments
CTA: 75K had been legitimately paid by
Algue Inc. for actual services rendered 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.
Issue: W/N the Collector of Internal
Revenue correctly disallowed the
P75,000.00 deduction claimed by Algue as
legitimate business expenses in its income
tax returns
Ruling:
Taxes are the lifeblood of the
government and so should be collected
without unnecessary hindrance, made in
accordance with law.
RA 1125: the appeal may be made
within thirty days after receipt of the
decision or ruling challenged
During the intervening period, the
warrant was premature and could
therefore not be served.
Originally, CIR claimed that the 75K
promotional fees to be personal holding
company income, but later on conformed
to the decision of CTA
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. CTA
also found, after examining the evidence,
that no distribution of dividends was
involved
CIR suggests a tax dodge, an attempt
to evade a legitimate assessment by
involving an imaginary deduction
Algue Inc. was a family corporation
where strict business procedures were not
applied and immediate issuance of
receipts was not required. 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. This
arrangement was understandable in view
of the close relationship among the
persons in the family corporation
The amount of the promotional fees
was not excessive. The total commission
paid by the Philippine Sugar Estate
Development Co. to Algue Inc. was P125K.
After 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.
Sec. 30 of the Tax Code: allowed
deductions in the net income Expenses -
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 xxx
the burden is on the taxpayer to prove
the validity of the claimed deduction
In this case, Algue Inc. 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.
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
Taxation must 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
Algue Inc.s appeal from the decision of
the CIR was filed on time with the CTA in
accordance with Rep. Act No. 1125. And
we also find that the claimed deduction by
Algue Inc. was permitted under the
Internal Revenue Code and should
therefore not have been disallowed by the
CIR
Villanueva v City of Iloilo (1968)
Villanueva v City v Iloilo
GR No L-26521, December 28, 1968
FACTS:
On September 30, 1946, the Municipal
Board of Iloilo City enacted Ordinance 86
imposing license tax fees upon
tenement houses. The validity of such
ordinance was challenged by Eusebio and
Remedios Villanueva, owners of four
tenement houses containing 34
apartments. The Supreme Court held the
ordinance to be ultra views. On January
15, 1960, however, the municipal board,
believing that it acquired authority to
enact an ordinance of the same nature
pursuant to the Local Autonomy Act,
enacted Ordinance 11, Eusebio and
Remedios Villanueva assailed the
ordinance anew.
ISSUE:
Does Ordinance 11 violate the rule of
uniformity of taxation?
RULING:
No. The Court has ruled the tenement
houses constitute a distinct class of
property and that taxes are uniform and
equal when imposed upon all property of
the same class or character within the
taxing authority.
The fact that the owners of the other
classes of buildings in Iloilo are not
imposed upon by the ordinance, or that
tenement taxes are imposed in other cities
do not violate the rule of equality and
uniformity. The rule does not require that
taxes for the same purpose should be
imposed in different territorial subdivisions
at the same time. So long as the burden of
tax falls equally and impartially on all
owners or operators of tenement houses
similarly classified or situated, equality
and uniformity is accomplished. The
presumption that tax statutes are
intended to operate uniformly and equally
was not overthrown therein.
Pepsi Cola Bottling Company vs
Municipality of Tanauan
69 SCRA 460 Taxation Delegation to
Local Governments Double Taxation
Pepsi Cola has a bottling plant in the
Municipality of Tanauan, Leyte. In
September 1962, the Municipality
approved Ordinance No. 23 which 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.
In December 1962, the Municipality also
approved Ordinance No. 27 which 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 of
volume capacity.
Pepsi Cola assailed the validity of the
ordinances as it alleged that they
constitute double taxation in two
instances: a) double taxation because
Ordinance No. 27 covers the same subject
matter and impose practically the same
tax rate as with Ordinance No. 23, b)
double taxation because the two
ordinances impose percentage or specific
taxes.
Pepsi Cola also questions the
constitutionality of Republic Act 2264
which allows for the delegation of taxing
powers to local government units; that
allowing local governments to tax
companies like Pepsi Cola is confiscatory
and oppressive.
The Municipality assailed the arguments
presented by Pepsi Cola. It argued, among
others, that only Ordinance No. 27 is being
enforced and that the latter law is an
amendment of Ordinance No. 23, hence
there is no double taxation.
ISSUE: Whether or not there is undue
delegation of taxing powers. Whether or
not there is double taxation.
HELD: No. There is no undue delegation.
The Constitution even allows such
delegation. Legislative powers may be
delegated to local governments in respect
of matters of local concern. 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. 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.
There is no double taxation. The argument
of the Municipality is well taken. Further,
Pepsi Colas assertion that the delegation
of taxing power in itself constitutes double
taxation cannot be merited. It must be
observed that the delegating authority
specifies the limitations and enumerates
the taxes over which local taxation may
not be exercised. 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 unlike in other
jurisdictions. Double taxation becomes
obnoxious only where the taxpayer is
taxed twice for the benefit of the same
governmental entity or by the same
jurisdiction for the same purpose, but not
in a case where one tax is imposed by the
State and the other by the city or
municipality.