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2.

TOPIC: SUMPTUARY PURPOSE

SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. THE PHILIPPINE


CEMENT MANUFACTURERS CORP., THE SECRETARY OF THE DEPARTMENT OF
TRADE & INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE, and
THE COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents.
G.R. No. 158540. July 8, 2004.

FACTS: Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic


corporation engaged in the business of cement manufacturing, production, importation
and exportation. While the Private respondent Philippine Cement Manufacturers
Corporation (Philcemcor) is an association of domestic cement manufacturers.

Respondent Department of Trade and Industry (DTI) accepted an application from


Philcemcor, alleging that the importation of gray Portland cement in
increased quantities has caused declines in domestic production, capacity utilization,
market share, sales and employment; as well as caused depressed local prices.
Accordingly, Philcemcor sought the imposition at first of
provisional, then later, definitive safeguard measures on the import of cement pursuant
to the SMA.

The SMA provides the structure and mechanics for the imposition of emergency
measures, including tariffs, to protect domestic industries and producers from increased
imports which inflict or could inflict serious injury on them.

After preliminary investigation, the Bureau of Import Services of the DTI, determined
that critical circumstances existed justifying the imposition of provisional measures.
However, Southern Cross filed with the Court a Very Urgent Application for a
Temporary Restraining Order and/or A Writ of Preliminary Injunction
(TRO Application), seeking to enjoin the DTI Secretary from enforcing his decision.

ISSUE: Whether or not it is proper to enjoin the collection of taxes imposed for
safeguard measures.

RULING: The Court did not grant the provisional relief for it would be tantamount to
enjoining the collection of taxes, a peremptory judicial act which is traditionally frowned
upon, unless there is a clear statutory basis for it. In that regard, Section 218 of the Tax
Reform Act of 1997 prohibits any court from granting an injunction to restrain the
collection of any national internal revenue tax, fee or charge imposed by the internal
revenue code. A similar philosophy is expressed by Section 29 of the SMA, which
states that the filing of a petition for review before the CTA does not stop, suspend, or
otherwise toll the imposition or collection of the appropriate tariff duties or the adoption
of other appropriate safeguard measures. This evinces a clear legislative intent that the
imposition of safeguard measures, despite the availability of judicial review, should not
be enjoined notwithstanding any timely appeal of the imposition.

Such legislative intent should be given full force and effect, as the executive power to
impose definitive safeguard measures is but a delegated power - the power of taxation,
by nature and by command of the fundamental law, being a preserve of the legislature.
Section 28(2), Article VI of the 1987 Constitution confirms the delegation of legislative
power, yet ensures that the prerogative of Congress to impose limitations and
restrictions on the executive exercise of this power.

This delegation of the taxation power by the legislative to the executive is authorized by
the Constitution itself. At the same time, the Constitution also grants the delegating
authority (Congress) the right to impose restrictions and limitations on the taxation
power delegated to the President. The restrictions and limitations imposed by Congress
take on the mantle of a constitutional command, which the executive branch is obliged
to observe.
3. TOPIC: THEORY AND BASES OF TAXATION

PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-


appellant, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendant-
appellant. G.R. No. L-43082 June 18, 1937

FACTS: Thomas Hanley died leaving a will and considerable amount of real and
personal properties. It was admitted to probate. CFI appointed a trustee. Subsequently,
the Collector of Internal Revenue filed a motion praying the trustee be ordered to pay to
the government the sum composed of an inheritance tax and its penalties for
delinquency. The motion was granted. After payment, the trustee appealed contending
that the estate could not legally pass to the heir before the end of ten years as the will
instructed it to be disposed of for a period of ten (10) years after my death and that
such tax should be paid after ten years as the value should have been computed after
depreciation of ten years has been deducted.

ISSUE: Whether or not payment of tax should be paid.

HELD: Yes.

The obligation to pay taxes rests not upon the privileges enjoyed by, or the protection
afforded to, a citizen by the government but upon the necessity of money for the support
of the stat.For this reason, no one is allowed to object to or resist the payment of taxes
solely because no personal benefit to him can be pointed out.

Any delay in the proceedings of the officers, upon whom the duty is developed of
collecting the taxes, may derange the operations of government, and thereby, cause
serious detriment to the public.

The accrual of the inheritance tax is distinct from the obligation to pay the same. Section
1536 as amended, of the Administrative Code, imposes the tax upon "every
transmission by virtue of inheritance, devise, bequest, gift mortis causa, or advance in
anticipation of inheritance,devise, or bequest." The tax therefore is upon transmission or
the transfer or devolution of property of a decedent, made effective by his death.

The right of the state to an inheritance tax accrues at the moment of death, and hence
is ordinarily measured as to any beneficiary by the value at that time of such property as
passes to him. Subsequent appreciation or depreciation is immaterial.

A transmission by inheritance is taxable at the time of the predecessor's death,


notwithstanding the postponement of the actual possession or enjoyment of the estate
by the beneficiary, and the tax measured by the value of the property transmitted at that
time regardless of its appreciation or depreciation.
4. TOPIC: Principle of a sound tax system

FRANCISCO I. CHAVEZ vs. JAIME B. ONGPIN


G.R. No. 76778. June 6, 1990

FACTS: The collection of real property taxes is still based on the 1978 revision of
property values. Pres. Aquino signed E.O. No. 73 which states that beginning January
1, 1987, the 1984 assessments shall be the basis of the real property tax collection.
Chavez, an owner of three parcels of land is claiming that such order which accelerated
the application of the general revision of assessments mandating an excessive increase
in real property taxes by 100% to 400% on improvements, and up to 100% on land, is
unreasonable amounting to a confiscation of property repugnant to the constitutional
guarantee of due process.

ISSUE: Whether or not E.O. 73 imposes unreasonable increase in real property taxes,
thus, unconstitutional.

RULING: We agree with the observation of the Office of the Solicitor General that
without Executive Order No. 73, the basis for collection of real property taxes will still be
the 1978 revision of property values. Certainly, to continue collecting real property taxes
based on valuations arrived at several years ago, in disregard of the increases in the
value of real properties that have occurred since then, is not in consonance with a
sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax
system, requires that sources of revenues must be adequate to meet government
expenditures and their variations.

Abakada Guro Party List vs Ermita GR No. 168056 September 1, 2005

FACTS:
This is a consolidation of cases filed questioning the constitutionality of pertinent
sections of RA 9337.

On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition


for certiorari assailing the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.

Petitioners also contend that the increase in the VAT rate to 12% contingent on
any of the two conditions being satisfied violates the due process clause embodied in
Article III, Section 1 of the Constitution, as it imposes an unfair and additional tax
burden on the people, in that: (1) the 12% increase is ambiguous because it does not
state if the rate would be returned to the original 10% if the conditions are no longer
satisfied; (2) the rate is unfair and unreasonable, as the people are unsure of the
applicable VAT rate from year to year; and (3) the increase in the VAT rate, which is
supposed to be an incentive to the President to raise the VAT collection to at least
2 4/5 of the GDP of the previous year, should only be based on fiscal adequacy.

Petitioners further claim that the inclusion of a stand-by authority granted to the
President by the Bicameral Conference Committee is a violation of the no-amendment
rule upon last reading of a bill laid down in Article VI, Section 26(2) of the Constitution.

Petitioners also contend that the increase in the VAT rate, which was allegedly
an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of
the previous year, should be based on fiscal adequacy.

ISSUE: Whether or not the increase in VAT imposes an unfair and unnecessary
additional tax burden. And that the authority granted to the President is unconstitutional.

RULING: NO. That the first condition amounts to an incentive to the President to
increase the VAT collection does not render it unconstitutional so long as there is a
public purpose for which the law was passed, which in this case, is mainly to raise
revenue. In fact, fiscal adequacy dictated the need for a raise in revenue. The principle
of fiscal adequacy as a characteristic of a sound tax system was originally stated by
Adam Smith in his Canons of Taxation (1776), as every tax ought to be so contrived as
both to take out and to keep out of the pockets of the people as little as possible over
and above what it brings into the public treasury of the state. It simply means that
sources of revenues must be adequate to meet government expenditures and their
variations. The dire need for revenue cannot be ignored. Congress passed the law
hoping for rescue from an inevitable catastrophe.
5. TOPIC: SCOPE OF LEGISLATIVE POWER OF TAX

PHILIPPINE PETROLEUM CORPORATION vs. MUNICIPALITY OF PILILLA, RIZAL


G.R. No. 90776, June 3, 1991

FACTS: Philippine Petroleum Corporation (PPC), petitioner, was ordered by the court to
pay business tax due under Sec. 9 (A) of the Municipal Tax Ordinance No. 1 which is a
literal reproduction of Section 19 (a) of the Local Tax Code as amended by P.D. No.
426.

PPC contends that this is against Provincial Circular No. 26-73 and PC No. 26 A-73
which suspended the effectivity of local tax ordinances imposing a tax on business
under Section 19 (a) of the Local Tax Code (P.D. No. 231), with regard to
manufacturers, retailers, wholesalers or dealers in petroleum products subject to the
specific tax under the National Internal Revenue Code (NIRC). PPC moved for
reconsideration but was denied. Hence, this petition.

ISSUE: Whether or not PPC may still be made to pay tax on business under such
ordinance.

RULING: P.D. No. 426 amending the Local Tax Code is deemed to have repealed
Provincial Circular Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when
Sections 19 and 19 (a), were carried over into P.D. No. 426 and no exemptions were
given to manufacturers, wholesalers, retailers, or dealers in petroleum products.

Well-settled is the rule that administrative regulations must be in harmony with the
provisions of the law. In case of discrepancy between the basic law and an
implementing rule or regulation, the former prevails.

The exercise by local governments of the power to tax is ordained by the present
Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 26-
73 (1) would be tantamount to restricting their power to tax by mere administrative
issuances. Under Section 5, Article X of the 1987 Constitution, only guidelines and
limitations that may be established by Congress can define and limit such power of local
governments.

Thus, decision was affirmed with some modifications.

CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC.,


PETITIONER, VS. THE HON. EXECUTIVE SECRETARY ALBERTO ROMULO, et. Al.
G.R. No. 160756, March 09, 2010

FACTS:
Petitioner CREBA, an association of real estate developers and builders in the
Philippines assails the validity of Section 27(E) of the Tax Code implemented by RR No.
9-98 which imposes the minimum corporate income tax (MCIT) on corporations.

It also sought to invalidate provisions of RR No. 2- 98, as amended, otherwise known as


the Consolidated Withholding Tax Regulations, which prescribe the rules and
procedures for the collection of CWT on sales of real properties classified as ordinary
assets.

Among others, the petitioner argues that the MCIT violates the due process clause
which amounts to a confiscation of capital because gross income, unlike net income, is
not realized gain.

Petitioner also contends that these revenue regulations are contrary to law for two
reasons: first, they ignore the different treatment by RA 8424 of ordinary assets and
capital assets and second, respondent Secretary of Finance has no authority to collect
CWT, much less, to base the CWT on the gross selling price or fair market value of the
real properties classified as ordinary assets.
It also adds that this contravene the equal protection clause because the CWT is being
charged upon real estate enterprises, but not on other business enterprises, more
particularly, those in the manufacturing sector, which do business similar to that of a
real estate enterprise.

ISSUE: Whether or not the imposition of the MCIT and CWT is beyond the legislative
power to tax, thus, unconstitutional.

RULING:
Taxes are the lifeblood of the government. Without taxes, the government can neither
exist nor endure. The exercise of taxing power derives its source from the very
existence of the State whose social contract with its citizens obliges it to promote public
interest and the common good. Taxation is an inherent attribute of sovereignty. It is a
power that is purely legislative. Essentially, this means that in the legislature primarily
lies the discretion to determine the nature (kind), object (purpose), extent (rate),
coverage (subjects) and situs (place) of taxation. It has the authority to prescribe a
certain tax at a specific rate for a particular public purpose on persons or things within
its jurisdiction. In other words, the legislature wields the power to define what tax shall
be imposed, why it should be imposed, how much tax shall be imposed, against whom
(or what) it shall be imposed and where it shall be imposed.

As a general rule, the power to tax is plenary and unlimited in its range, acknowledging
in its very nature no limits, so that the principal check against its abuse is to be found
only in the responsibility of the legislature (which imposes the tax) to its constituency
who are to pay it. Nevertheless, it is circumscribed by constitutional limitations. At the
same time, like any other statute, tax legislation carries a presumption of
constitutionality.

In Sison, Jr. v. Ancheta, et al., 130 SCRA 654 (1984) we held that the due process
clause may properly be invoked to invalidate, in appropriate cases, a revenue measure
when it amounts to a confiscation of property. But in the same case, we also explained
that we will not strike down a revenue measure as unconstitutional (for being violative of
the due process clause) on the mere allegation of arbitrariness by the taxpayer. There
must be a factual foundation to such an unconstitutional taint. This merely adheres to
the authoritative doctrine that, where the due process clause is invoked, considering
that it is not a fixed rule but rather a broad standard, there is a need for proof of such
persuasive character.

The taxing power has the authority to make reasonable classifications for purposes of
taxation. Inequalities which result from a singling out of one particular class for taxation,
or exemption, infringe no constitutional limitation. The real estate industry is, by itself, a
class and can be validly treated differently from other business enterprises.
6. TOPIC: JUDICIAL REVIEW OF TAXATION

ROXAS vs. CTA, G.R. No. L-25043, April 26, 1986

FACTS:
After World War II, the tenants who have all been tilling the lands in Nasugbu for
generations expressed their desire to purchase from Roxas the parcels which they
actually occupied. For its part, the Government, in consonance with the constitutional
mandate to acquire big landed estates and apportion them among landless tenants-
farmers, persuaded the Roxas brothers to part with their landholdings. Due to lack of
public funds, the government and Roxas entered into a special arrangement which
allowed the farmers to buy the lands for the same price but by installment. Later on, the
Commissioner assessed deficiency income taxes against the Roxas Brothers. The
deficiency income taxes resulted from the inclusion as income of Roxas the profits
derived from the sale of the Nasugbu farm lands to the tenants.

The Roxas brothers protested the assessment but inasmuch as said protest was
denied, they instituted an appeal in the Court of Tax Appeals. The Tax Court sustained
the assessment except the demand for the payment of the fixed tax on dealer of
securities and the disallowance of the deductions.

ISSUE: WON the CIRs assessment is correct.

RULING: The power of taxation is sometimes called also the power to destroy. It
should, therefore, be exercised with caution to minimize injury to the proprietary rights of
a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the "hen that lays the golden egg." And, in order to maintain the general publics trust
and confidence in the Government, this power must be used justly and not
treacherously. It does not conform with Our sense of justice in the instant case for the
Government to persuade the taxpayer to lend it a helping hand and later on to penalize
him for duly answering the urgent call.

Even where there were hundreds of vendees who paid for their respective
holdings in installment for 10 years, such fact did not make the act of subdividing the
Nasugbu farm and selling them to the farmers-occupants thereof on installment basis a
business of selling real estate. This was an isolated transaction: the sale of the farm
was made in obedience to the request of the Government whose policy was to allocate
lands to the landless. The Governments duty was to pay the agreed price of the farm
lands after it had persuaded the petitioner to sell its hacienda. But the Government
lacked funds and Roxas y Cia, obligingly shouldered the governments burden. It does
not conform to ones sense of justice for the Government to persuade the taxpayer to
lend it a helping hand and later to penalize him for doing so. The sale, therefore, made
by Roxas y Cia, to the farmers of its farmlands does not make the company a real
estate dealer, and the lands sold to the farmers are capital assets. The gain derived
therefrom is capital gain, and is taxable only to the extent of 50%, not 100%.
7. TOPIC: EXTENT OF THE TAXING POWER

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. G.R. No. L-75697 JUNE 18, 1989

FACTS: Ng assailed PD 1987 (An Act Creating the Videogram Regulatory Board).
Subsequently, PD 1994 amended NIRC providing an annual tax on each processed
video tape cassette. Intervenors Tio et. Al, alleging that their survival and very existence
is threatened by the unregulated proliferation of film piracy, were permitted by the Court.
Petitioners contended that imposition of a tax of 30% on the gross receipts payable to
the local government is a rider and that the tax imposed is harsh, confiscatory,
oppressive and/or in unlawful restraint of trade in violation of the due process clause of
the Constitution.

ISSUE: WON the decree is harsh, confiscatory, oppressive and/or in unlawful restraint
of trade.

HELD:NO.

A tax does not cease to be valid merely because it regulates, discourages, or even
definitely deters the activities taxed. The power to impose taxes is one so unlimited in
force and so searching in extent, that the courts scarcely venture to declare that it is
subject to any restrictions whatever, except such as rest in the discretion of the authority
which exercises it. In imposing a tax, the legislature acts upon its constituents. This is,
in general, a sufficient security against erroneous and oppressive taxation.

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.
8. TOPIC: POLICE POWER AS AN IMPLEMENT OF THE POWER OF TAXATION

WALTER LUTZ vs. J. ANTONIO ARANETA


G.R. No. L-7859, December 22, 1955

Facts: Lutz, as Judicial Administrator of the Intestate Estate of Antonio Jayme


Ledesma, sought to recover the sum paid by the estate as taxes from the
Commissioner under Section 3 of Commonwealth Act 567 (the Sugar Adjustment Act),
alleging that such tax is unconstitutional as it levied for the aid and support of the sugar
industry exclusively, which is in his opinion is not a public purpose. In other words, the
act is primarily an exercise of the police power and not a pure exercise of the taxing
power.

Issue: Whether or not tax may be levied as an implement of police power.

Held: As the protection and promotion of the sugar industry is a matter of public
concern, 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 full play, subject only to the test of reasonableness; and it is not contended that
the means provided in section 6 of Commonwealth Act No. 567 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 states
police power.
9. Topic: Power of Taxation as an Implement of Power of Eminent Domain

COMMISSIONER OF INTERNAL REVENUE, Petitioners,


vs. CENTRAL LUZON DRUG CORPORATION, Respondent. G.R. No. 159647 April
15, 2005

Facts: A 20% senior citizen discount was required to be given by establishments


pursuant to the act of legislature. The said discount is allowed in favor of said
establishments. One establishment incurred a loss in its operation but claiming tax
credit allegedly arose from the 20% discount. The CIR contended that it cannot claim
tax credit because it the latter may be claim only when there is tax liability. CTA ruled in
favor of the petitioner but upon motion for reconsideration, it reversed its decision which
was affirmed in toto by the CA stating that the legislation neither required tax liability or
payment of taxes to claim tax credit.

Issue: W/O the respondent is entitled to tax credit by virtue of taxation as an imbuement
of eminent domain.

Held: Yes. SC stressed that the privilege enjoyed by senior citizens does not come
directly from the State, but rather from the private establishments concerned.
Accordingly, the tax credit benefit granted to these establishments can be deemed as
their just compensation for private property taken by the State for public use.
Besides, the taxation power can also be used as an implement for the exercise of the
power of eminent domain. Tax measures are but "enforced contributions exacted on
pain of penal sanctions" and "clearly imposed for a public purpose." In recent years, the
power to tax has indeed become a most effective tool to realize social justice, public
welfare, and the equitable distribution of wealth.

CARLOS SUPERDRUG CORP. petitioner vs. DEPARTMENT OF SOCIAL WELFARE


and DEVELOPMENT (DSWD), respondent G.R. No. 166494 June 29, 2007

Facts: The petitioner question the constitutionality of the Expanded Senior Citizens act
of 2003. Said act grants 20% senior citizens discount and said discount may be
claimed by the petitioners as tax deduction which is deducted to net sales together with
other deductions to arrive at the net taxable income. Prior to said act, the 20% discount
is allowed as tax credit which is deducted to the total taxable amount. Petitioner claims
that it is unconstitutional because it is confiscatory because it infringes the Constitution
which provides that private property shall not be taken for public use without just
compensation.

Issue: 1.W/O the said power of taxation is an implement of the power of eminent
domain

Held: 1. No. The Senior Citizens Act was enacted primarily to maximize the contribution
of senior citizens to nation-building, and to grant benefits and privileges to them for their
improvement and well-being as the State considers them an integral part of our society.
The law is a legitimate exercise of police power which, similar to the power of eminent
domain, has general welfare for its object. Police power is not capable of an exact
definition, but has been purposely veiled in general terms to underscore its
comprehensiveness to meet all exigencies and provide enough room for an efficient and
flexible response to conditions and circumstances, thus assuring the greatest benefits.
22 Accordingly, it has been described as "the most essential, insistent and the least

limitable of powers, extending as it does to all the great public needs."23 It is "[t]he
power vested in the legislature by the constitution to make, ordain, and establish all
manner of wholesome and reasonable laws, statutes, and ordinances, either with
penalties or without, not repugnant to the constitution, as they shall judge to be for the
good and welfare of the commonwealth, and of the subjects of the same.
MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC.,
Petitioners, vs. SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND
DEVELOPMENT and THE SECRETARY OF THE DEPARTMENT OF FINANCE,
Respondents. G.R. No. 175356 December 3, 2013

Facts: Petitioners questions the constitutionality of RA 9257 which grants 20%


discounts to senior citizens and thereafter allows the petitioner to claim it as tax
deduction. The petitioner contends that such scheme contravenes the constitution that
private property shall not be taken for public use without just compensation. It
contended that the scheme would not grant the petitioner a peso to peso equivalent
deduction in its tax liability of the total senior citizen discount it would grant. The
respondent maintains that it is an exercise of police power.

ISSUE: W/O said law is an exercise of power of eminent domain.

Held: No. The 20% senior citizen discount is an exercise of police power.

The S said that it may not always be easy to determine whether a challenged
governmental act is an exercise of police power or eminent domain. The judicious
approach, therefore, is to look at the nature and effects of the challenged governmental
act and decide on the basis thereof.

The 20% discount is intended to improve the welfare of senior citizens who, at their age,
are less likely to be gainfully employed, more prone to illnesses and other disabilities,
and, thus, in need of subsidy in purchasing basic commodities. It serves to honor senior
citizens who presumably spent their lives on contributing to the development and
progress of the nation.

In turn, the subject regulation affects the pricing, and, hence, the profitability of a private
establishment.

The subject regulation may be said to be similar to, but with substantial distinctions
from, price control or rate of return on investment control laws which are traditionally
regarded as police power measures.

The subject regulation differs there from in that (1) the discount does not prevent the
establishments from adjusting the level of prices of their goods and services, and (2) the
discount does not apply to all customers of a given establishment but only to the class
of senior citizens. Nonetheless, to the degree material to the resolution of this case, the
20% discount may be properly viewed as belonging to the category of price regulatory
measures which affect the profitability of establishments subjected thereto. On its face,
therefore, the subject regulation is a police power measure.
10. TOPIC: ATTRIBUTES OF ESSENTIAL CHARACTERISTICS

JOSE DE BORJA, petitioner-appellee, vs.VICENTE G. GELLA, ET AL.,


respondents-appellants. G.R. No. L-18330 July 31, 1963

Facts: The petitioner is delinquent in the payment of his real estate taxes, thus he
offered to pay it using two negotiable certificates of indebtedness. However, the City of
Manila and Pasay rejected it on the ground of limited negotiability. Hence, he appealed
to Treasures of the Philippines who contended that those certificates cannot be
accepted as payment. The petitioner brought the case to trial court to compel them to
accept the certificates of indebtedness considering that they were already due and
redeemable so as not to deprive him illegally of his privilege to pay his obligation to the
government thru such means. Trial court ruled in favor of the former. Respondents
appeal to the SC based on pure question of law.

Issue: W/O the certificates can be accepted as payment of the said real estate taxes.

Held: No. The respondents are not duty bound to accept the negotiable certificates of
indebtedness for the simple reason that they were not obligations subsisting at the
approval of RA 304 which took effect on June 18, 1948. Under RA 304, payment
through a certificate of indebtedness may be allowed if the tax is owed by the applicant
himself. Furthermore, the right to use the back pay certificate in settlement of taxes is
given only to the applicant himself. Furthermore, the right to use the back pay certificate
in settlement of taxes is given only to the applicant and not to any holder of any
negotiable certificate to whom the law only gives the right to have it discounted by a
Filipino citizen or corporation under certain limitations. Borja is not himself the applicant
of the certificate in question,he is merely as assignee thereof.

TAN TIONG BIO, ET AL., petitioners, vs. COMMISSIONER OF INTERNAL


REVENUE, respondent. G.R. No. L-15778 April 23, 1962

Facts: Central sydicate paid the respondent a tax liability alleging that it assumed the
sales tax liability of Deng Hong Lue over stocks the latter bought from Foreign
Liquidation Commission because the petitioner subsequently bought said stock from
Dee Hong Lue. However, the respondent found out that Central syndicate was the
original importer and seller of said stocks. The respondent assessed the latter resulting
to tax liability and denied a refund claim by Central syndicate as a result of sales
adjustments. Central syndicate elevated the case to CTA which denied CIR assessment
and the refund claimed on the ground that the former was already non existing due to
the expiration of its corporate existence. Central syndicate appealed on the ground that
the former is to be substituted by its successors-in-interest,

Issue: W/O the sales tax may be enforce against the petitioner.

HELD: Yes. It has been stated, with reference to the effect of dissolution upon taxes
due from a corporation, "that the hands of the government cannot, of course, collect
taxes from a defunct corporation, it loses thereby none of its rights to assess taxes
which had been due from the corporation, and to collect them from persons, who by
reason of transactions with the corporation, hold property against which the tax can be
enforced and that the legal death of the corporation no more prevents such action than
would the physical death of an individual prevent the government from assessing taxes
against him and collecting them from his administrator, who holds the property which
the decedent had formerly possessed.
The dissolution of a corporation does not extinguish the debts due or owing to it because a creditor of
a dissolvedcorporation may follow its assets, as in the nature of a trust fund, into the
hands of its stockholders.
12. Topic: Test determining whether the implementation is a Tax or a License fee

PROGRESSIVE DEVELOPMENT CORPORATION, petitioner , vs. QUEZON CITY,


respondent. G.R. No. L-36081 April 24, 1989

Facts: The petitioner question the 5% tax imposition on gross receipts on rentals or
lease of space in privately owned public markets in Quezon City. It alleges that is in the
form of income tax which is a prohibited imposition against the City. The Trial court
ruled that the questioned imposition partakes in a nature of license fee and not a tax
which the respondent is empowered to impose.

Issue: W/O the said imposition is an income tax o license fee.

Held: License fee. The term "tax" frequently applies to all kinds of exactions of monies
which become public funds. It is often loosely used to include levies for revenue as well
as levies for regulatory purposes such that license fees are frequently called taxes
although license fee is a legal concept distinguishable from tax: the former is imposed in
the exercise of police power primarily for purposes of regulation, while the latter is
imposed under the taxing power primarily for purposes of raising revenues. 9 Thus, if
the generating of revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax; but if regulation is the primary purpose, the fact that incidentally
revenue is also obtained does not make the imposition a tax. To be considered a
license fee, the imposition questioned must relate to an occupation or activity that so
engages the public interest in health, morals, safety and development as to require
regulation for the protection and promotion of such public interest; the imposition must
also bear a reasonable relation to the probable expenses of regulation, taking into
account not only the costs of direct regulation but also its incidental consequences as
well.
We believe and so hold that the five percent (5%) tax imposed is not a tax on income,
not a city income tax (as distinguished from the national income tax imposed by the
National Internal Revenue Code) within the meaning of Section 2 (g) of the Local
Autonomy Act, but rather a license tax or fee for the regulation of the business in which
the petitioner is engaged.

U.S. Supreme Court Sonzinsky v. United States, 300 U.S. 506 (1937) Sonzinsky v.
United States No. 614 Argued March 12, 1937 Decided March 29, 1937 300 U.S.
506

Facts: Petitioner contends that the National Firearms Acts which requires every dealer
in firearms to register with the Collector of Internal Revenue in the district where he
carries on business, and to pay a special excise tax of $200 a year is not a true tax but
a penalty imposed or the purpose of suppressing traffic in a certain noxious type of
firearms, the local regulation of which is reserved to the states because not granted to
the national government. He also contends that several imposition in the said Act
regarding transfer of firearm, the cumulative effect of which is unmistakeably to regulate
rather than to tax. Thus, said act issued by the congress is unconstitutional.

Issue: W/O the said imposition is tax or license fee or regulation.

Held: License fee. The case is not one where the statute contains regulatory provisions
related to a purported tax in such a way as has enabled this Court to say in other cases
that the latter is a penalty resorted to as a means of enforcing the regulations. Inquiry
into the hidden motives which may move Congress to exercise a power constitutionally
conferred upon it is beyond the competency of courts. They will not undertake, by
collateral inquiry as to the measure of the regulatory effect of a tax, to ascribe to
Congress an attempt, under the guise of taxation, to exercise another power denied by
the Federal Constitution.

Here, the annual tax of $200 is productive of some revenue. SC said We are not free to
speculate as to the motives which moved Congress to impose it, or as to the extent to
which it may operate to restrict the activities taxed. As it is not attended by an offensive
regulation, and since it operates as a tax, it is within the national taxing power.
13. Topic: Imprescriptibility of taxes

CIR vs. AYALA SECURITIES CORPORATION G.R. No. L-29485 November 21,
1980

Facts: Ayala failed to file returns of their accumulated surplus so Ayala was charged
with 25% surtax by the Commissioner of internal Revenue. The CTA reversed the
Commissioners decision and held that the assessment made against Ayala was
beyond the 5-yr prescriptive period as provided in section 331 of the National Internal
Revenue Code. Commissioner now files a motion for reconsideration of this decision.
Ayala invokes the defense of prescription against the right of the Commissioner to
assess the surtax.

Issue: Whether or not the right to assess and collect the 25% surtax has prescribed
after five years.

Held: No. The limitations upon the right of the government to assess and collect taxes
will not be presumed in the absence of clear legislation to the contrary and that where
the government has not by express statutory provision provided a limitation upon its
right to assess unpaid taxes, such right is imprescriptible. Hence, there is no such time
limit on the right of the Commissioner of Internal Revenue to assess the 25% tax on
unreasonably accumulated surplus provided in section 25 of the Tax Code, since there
is no express statutory provision limiting such right or providing for its prescription. The
underlying purpose of the surtax is to avoid a situation where the corporation unduly
retains its surplus earnings instead of declaring and paying dividends to its
shareholders. SC reverses the ruling of the CTA.
14. TOPIC: PROSPECTIVITY OF LAWS

PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-


appellant, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendant-
appellant. G.R. No. L-43082 June 18, 1937

FACTS: Thomas Hanley died leaving a will and considerable amount of real and
personal properties. It was admitted to probate. CFI appointed a trustee. Subsequently,
the Collector of Internal Revenue filed a motion praying the trustee be ordered to pay to
the government the sum composed of an inheritance tax and its penalties for
delinquency. The motion was granted. After payment, the trustee appealed. The
defendant levied and assessed the inheritance tax due from the estate of Thomas
Hanley under the provisions of section 1544 of the Revised Administrative Code, as
amended by section 3 of Act No. 3606. But Act No. 3606 went into effect on January 1,
1930. It, therefore, was not the law in force when the testator died on May 27, 1922.
The law at the time was section 1544 above-mentioned, as amended by Act No. 3031,
which took effect on March 9, 1922.

ISSUE: Should the provisions of Act No. 3606 favorable to the tax-payer be given
retroactive effect?

HELD:NO.

The defendant levied and assessed the inheritance tax due from the estate of Thomas
Hanley under the provisions of section 1544 of the Revised Administrative Code, as
amended by section 3 of Act No. 3606. But Act No. 3606 went into effect on January 1,
1930. It, therefore, was not the law in force when the testator died on May 27, 1922.
The law at the time was section 1544 above-mentioned, as amended by Act No. 3031,
which took effect on March 9, 1922.

It is well-settled that inheritance taxation is governed by the statute in force at the time
of the death of the decedent. The taxpayer cannot foresee and ought not to be required
to guess the outcome of pending measures. Of course, a tax statute may be made
retroactive in its operation. Liability for taxes under retroactive legislation has been "one
of the incidents of social life." But legislative intent that a tax statute should operate
retroactively should be perfectly clear.

In the case at bar, there was no clear intent on the retrospectivity of the law.
16. TOPIC: TAX vs DEBT

COMMISSIONER OF INTERNAL REVENUE, petitioner,


vs. MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA,
respondent. G.R. No. L-22734 September 15, 1967

Facts: The respondent is an heir of a deceased. Estate of the latter was divided and
awarded to the heirs including the respondent. After the settlement was closed, the BIR
found out that there were returns which were not filed. Manuel Pineda received the
assessment of said unfiled return. The former alleged that it is only liable proportionately
based on what he inherited.

Issue: W/O the petitioner is liable for the whole amount.

Held: Yes. Pineda is liable for the assessment as an heir and as a holder-transferee of
property belonging to the estate/taxpayer. As an heir he is individually answerable for
the part of the tax proportionate to the share he received from the inheritance.3 His
liability, however, cannot exceed the amount of his share.
As a holder of property belonging to the estate, Pineda is liable for the tax up to the
amount of the property in his possession. The reason is that the Government has a lien
on the property. But after payment of such amount, he will have a right to contribution
from his co-heirs.
17. TOPIC: COMPENSATION OR SET-OFF IN TAXATION

COMMISSIONER OF INTERNAL REVENUE, petitioner,


vs. CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS,
respondents. G.R. No. L-29059 December 15, 1987

Facts: The petitioner was ordered to refund the respondent for overpayment of ad
valorem taxes. The petitioner alleged that it was already credited to the sales tax liability
of the respondent. On the other hand, the respondent alleged that has no sales tax
liability because its products are mineral product and not manufactured.

Issue: W/O the respondent is liable to sales tax liability which could be set off

Held: The nature of cement as a "manufactured product" (rather than a "mineral


product") is well-settled. The issue has repeatedly presented itself as a threshold
question for determining the basis for computing the ad valorem mining tax to be paid
by cement Companies. No pronouncement was made in these cases that as a
"manufactured product" cement is subject to sales tax because this was not at issue.
The decision sought to be reconsidered here referred to the legislative history of
Republic Act No. 1299 which introduced a definition of the terms "mineral" and "mineral
products" in the Tax Code. Given the legislative intent that cement was subject to sales
tax prior to the effectivity of Republic Act No. 1299 cannot be construed to mean that,
after the law took effect, cement ceased to be so subject to the tax. To erase any and all
misconceptions that may have been spawned, the Court has expressly overruled it
insofar as it may conflict with the decision of August 10, 1983, now subject of these
motions for reconsideration.
18. TOPIC: TAXPAYERS SUIT

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


petitioner-appellant, vs.THE SECRETARY OF PUBLIC WORKS AND
COMMUNICATIONS, ET AL., respondents-appellees. G.R. No. L-10405 December
29, 1960

Facts: Petitioner as a taxpayer questions the legality of an act appropriating the


construction and repair of feeder road in a subdivision owned by private respondent on
that said appropriation was for private purpose because it was intended to benefit the
private respondent by construction of road without his expense but by the government.
Private respondent alleged that it donated said feeder road to the government. 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.

Issue. W/O not petitioner has legal capacity to sue as taxpayer.

Held: Yes. 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.

Bagatsing vs San Juan G.R. No. 97787 August 1, 1996

Facts: Petitioner filed an instant petition with application of preliminary injunction


seeking the nullification of a compromise agreement entered into by the province on the
ground that the subject of said agreement which is a lot owned by the province was sold
at lower price than the prevailing market value of the neighboring lots.

Issue: W/O it is a taxpayers suit

Held: No. Petitioner and respondents agree that to constitute a taxpayer's suit, two
requisites must be met, namely, that public funds are disbursed by a political
subdivision or instrumentality and in doing so, a law is violated or some irregularity is
committed, and that the petitioner is directly affected by the alleged ultra vires act.
Undeniably, as a taxpayer, petitioner would somehow be adversely affected by an
illegal use of public money. When, however, no such unlawful spending has been
shown, as in the case at bar, petitioner, even as a taxpayer cannot question the
transaction validly executed by and between the Province and Ortigas for the simple
reason that it is not privy to said contract. In other words, petitioner has absolutely no
cause of action, and consequently no locus standi, in the instant case.
19. TOPIC: RULE OF NO ESTOPPED AGAINST THE GOVERNMENT

CIR vs. CTA, G.R. No. 106611, July 21, 1994

FACTS
Citytrust filed a refund of overpaid taxes with BIR which the latter denied on the ground
of prescription. Citytrust filed a petition for review before the CTA and the case was
submitted for decision based solely on the evidence submitted by the respondent
because the CIR could not present any evidence by reason of the repeated failure of
the Tax Credit/Refund Division of the BIR to transmit the records of the case, as well as
the investigation report thereon, to the Solicitor General. CTA rendered the decision
ordering BIR to grant the respondents request for tax refund amounting to P13.3M.

ISSUE: WON the government can be estopped by the neglect of its agent and officers.

RULING: It is a long and firmly settled rule of law that the Government is not bound by
the errors committed by its agents. 19 In the performance of its governmental functions,
the State cannot be estopped by the neglect of its agent and officers. Although the
Government may generally be estopped through the affirmative acts of public officers
acting within their authority, their neglect or omission of public duties as exemplified in
this case will not and should not produce that effect.

Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that
the Government cannot and must not be estopped particularly in matters involving
taxes. Taxes are the lifeblood of the nation through which the government agencies
continue to operate and with which the State effects its functions for the welfare of its
constituents. The errors of certain administrative officers should never be allowed to
jeopardize the Governments financial position, especially in the case at bar where the
amount involves millions of pesos the collection whereof, if justified, stands to be
prejudiced just because of bureaucratic lethargy.

Further, it is also worth noting that the Court of Tax Appeals erred in denying petitioners
supplemental motion for reconsideration alleging and bringing to said courts attention
the existence of the deficiency income and business tax assessment against Citytrust.
The fact of such deficiency assessment is intimately related to and inextricably
intertwined with the right of respondent bank to claim for a tax refund for the same year.
To award such refund despite the existence of that deficiency assessment is an
absurdity and a polarity in conceptual effects. Herein private respondent cannot be
entitled to refund and at the same time be liable for a tax deficiency assessment for the
same year.

BALMACEDA VS COROMINAS AND CO., INC. GR 21971 SEPT. 5, 1975

FACTS: Corominas is a corporation duly organized and existing under the laws of the
Philippines engaged, along with other purposes, in the export and import business. On
their Japan export and import transaction, a permit was issued. However, the permit for
importation was encumbered by the limitation, more relevantly, that in no case shall
non-essentials be more thatn 10% of the total imports.

Forthwith, Corominas exported the 20,000 metric tons of Rhodesian corn to


Japasn. The Japanese buyer commenced payment in US dollars but before the
Japanese buyer could have completed the payment of the goods, the Japanese
Governement refused him further remittance of the dollars. Instead, the Japanese buyer
was allowed to pay in commodities. Corominas requested the Secretary of Commerce
and Industry too allow the importation of goods in payment of the balance collectible
from the Japanese buyer. The request was granted.
Subsequently, the Coordinator of the Producers Incentive Board, wrote
Corominas that the NEC items you desire to import have already exceeded the 10%
allocated you under the Consolidated Rules and Regulation of the defunt No- Dollar
Import Office.

Both the trial court and the CA have founf Corominas has imported more than
10% of the authorized total imports.

ISSUE: Whether or not the Government is estopped by mistake or error on the part of
its agents.

RULING: No. The defense of estoppel cannot be successfully asserted against the
Government in the exerciseof governmental powers and functions even by an
affirmative undertaking on the part of its officer or agent to whom no administrative
authority has been delegated, to waive or surrender a public right.

In the present case, the letter of the Producers Incentive Board advising respondent-
appellee that all its NEC items

21. TOPIC: KINDS OF TAX EXEMPTION

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY Vs. Marcos G.R. No.


120082. September 11, 1996

Facts: 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.
However, on October 11,1994, Mr. Eustaquio B. Cesa, Officer in Charge, Office of the
Treasurer of the City of Cebu,
demanded payment from realty taxes in the total amount of P2229078.79.Petitioner
objected to such demand for payment as baseless and unjustified claiming in its favor
the aforecited Section 14 of R.A. 6958. 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. Respondent City refused to cancel and set aside petitioners 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 Labor Code that took
effect on January 1, 1992.

Issue: Whether or not MCIAA is exempt from payment of taxes.

Ruling: Tax statutes must be construed strictly against the government and liberally in
favor of the taxpayer. But since taxes are what we pay for civilized society, or are the
lifeblood of the nation, the law frowns against exemptions from taxation and statutes
granting the exemptions are thus construed strictissimi juris against the taxpayer and
liberally in favor of the taxing authority. A claim of exemption from tax payments must be
clearly shown and based on language in the law too plain to be mistaken. Elsewise
stated, taxation is the rule, exemption therefrom is the exception. 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 operation. 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 claim of the Constitution. 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,
(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.

THE PROVINCE OF MISAMIS ORIENTAL vs. CEPALCO G.R. No. 45355. January
12, 1990

Facts:
CEPALCO was granted a franchise to install, operate and maintain an electric light,
heat and power system in Cagayan de Oro and its suburbs. Accordingly, In
consideration of the franchise and rights hereby granted, the grantee shall pay a
franchise tax equal to 3%of the gross earnings, of which 2% goes into the National
Treasury and 1% goes into the treasury of the Municipalities.
The Province of Misamis Oriental enacted an Ordinance No. 19, "Sec. 12. Franchise
Tax. There shall be levied, collected and paid on businesses enjoying franchise tax
of one-half of one per cent of their gross annual receipts for the preceding calendar year
realized within the territorial jurisdiction of the province of Misamis Oriental."
The province demanded payment of the provincial franchise tax from CEPALCO. The
company refused to pay, alleging that it is exempt from all taxes except the franchise
tax. Hence the province filed a complaint for declaratory relief. The Court dismissed the
complaint and ordered the Province to return to CEPALCO the sum of P4,276.28 .

Issue: WON CEPALCO whose "franchise tax of 3% of the gross earnings shall be in
lieu of all taxes and an assessment of whatever authority is exempt from paying a
provincial franchise tax.

Ruling: Yes. The franchise of CEPALCO expressly exempts it from payment of "all
taxes of whatever authority" except the three per centum (3%) tax on its gross earnings.
The franchise tax provided in the Local Tax Code may only be imposed on companies
with franchises that do not contain the exempting clause. The franchise tax imposed
under local tax ordinance pursuant to Section 9 of the Local Tax Code, shall be
collected from businesses holding franchise but not from business establishments
whose franchise contain the "in-lieu-of-all-taxes-proviso". The provision "shall be in lieu
of all taxes of every name and nature" in the franchise, this Court pointed out that such
exemption is part of the inducement for the acceptance of the franchise and the
rendition of public service by the grantee. As a charter is in the nature of a private
contract, the imposition of another franchise tax on the corporation by the local authority
would constitute an impairment of the contract between the government and the
corporation.
22. Topic: Tax Refund

CIR vs. CA, ACMDC G.R. No. 104151 March 10, 1995

Facts: Atlas Consolidated Mining and Development Corporation (ACMDC) is a


domestic corporation which owns and operates a mining concession at Toledo City,
Cebu, the products of which are exported to Japan and other foreign countries. The CIR
acting on the basis of the report of the examiners of the BIR, caused the service of an
assessment notice and demand for payment of ad valorem percentage and business
taxes. ACMDC protested the assessments but it was denied, hence it filed two separate
petitions for review in the CTA. The CTA rendered decision that ACMDC was not liable
for deficiency ad valorem taxes. However, the tax court held ACMDC liable for 25%
surcharge for late payment of the ad valorem tax and late filing of notice of removal of
silver, gold and pyrite extracted during certain periods, and for alleged deficiency
manufacturer's sales tax and contractor's tax. As a consequence, both parties elevated
their respective contentions to CA. The CA dismissed the petition and affirming the tax
court's decision. Hence, a petition for review on certiorari.

Issue: whether or not, in computing the ad valorem tax on copper, charges for smelting
and refining should also be deducted, in addition to freight and insurance costs, from
the price of copper concentrates.

Ruling: The assessment shall be based, not upon the cost of production or extraction of
said minerals or mineral products, but on the price which the same before or without
undergoing a process of manufacture would command in the ordinary course of
business. The allowance by the tax court of smelting and refining charges as
deductions is not contrary to the tax provisions. Hence, the charges for smelting and
refining were assessed not on the basis of the price of the copper extracted at the mine
site which is prohibited by law, but on the basis of the actual market value of the
manufactured copper which in this case is the price quoted for copper wire bar by the
London Metal Exchange. The ad valorem tax is to be computed on the basis of the
market value of the mineral in its condition at the time of such removal and before it
undergoes a chemical change through manufacturing process, as distinguished from a
purely physical process which does not necessarily involve the change or
transformation of the raw material into a composite distinct product. Therefore, the
imposable ad valorem tax should be based on the selling price of the quarried minerals,
which is its actual market value, and not on the price of the manufactured product. If the
market value chosen for the reckoning is the value of the manufactured or finished
product, as in the case at bar, then all expenses of processing or manufacturing should
be deducted in order to approximate as closely as is humanly possible the actual
market value of the raw mineral at the mine site.
23. TOPIC: TAX AMNESTY

Asia International Auctioneers, Inc vs. CIR G.R. No. 179115 September 26, 2012

Facts: AIA is a duly organized corporation engaged in the importation of used motor
vehicles and heavy equipment which it sells to the public through auction. AIA received
from the CIR a Formal Letter of Demand, containing an assessment for the deficiency of
VAT and excise tax. AIA filed a protest letter but the CIR failed to act on the protest,
prompting AIA to file a petition for review before the CTA. However, the CIR filed a
motion to dismiss on the ground of lack of jurisdiction citing the alleged failure of AIA to
timely file its protest .The CIR denied receipt of the protest letter.

After hearing both parties, the CTA rendered decision granting the CIRs motion to
dismiss. The CTA faulted AIA for failing to present the registry return card of the subject
protest letter.

Issue: WON the AIA is disqualified from availing of the Tax Amnesty Program because
it is deemed a withholding agent for the deficiency taxes

Ruling: NO. A tax amnesty is a general pardon or the intentional overlooking by the
State of its authority to impose penalties on persons otherwise guilty of violating a tax
law. It partakes of an absolute waiver by the government of its right to collect what is
due it and to give tax evaders who wish to relent a chance to start with a clean slate. A
tax amnesty, much like a tax exemption, is never favored or presumed in law. The grant
of a tax amnesty, similar to a tax exemption, must be construed strictly against the
taxpayer and liberally in favor of the taxing authority.

Indirect taxes, like VAT and excise tax, are different from withholding taxes. In indirect
taxes, the incidence of taxation falls on one person but the burden thereof can be
shifted or passed on to another person. In case of withholding taxes, the incidence and
burden of taxation fall on the same entity, the statutory taxpayer. The burden of taxation
is not shifted to the withholding agent who merely collects, by withholding; the tax due
from income payments to entities arising from certain transactions and remits the same
to the government. Due to this difference, the deficiency VAT and excise tax cannot be
deemed as withholding taxes merely because they constitute indirect taxes.

LUZON STEVEDORING CORPORATION vs.COURT OF TAX APPEALS, G.R. No. L-


30232 July 29, 1988

Facts: Herein, LUZON STEVEDORING CORPORATION imported various engine parts


and other equipment for the repair and maintenance of its tugboats which it paid, under
protest, the assessed compensating tax. Unable to secure a tax refund from the
Commissioner of Internal Revenue it filed a Petition for Review with the CTA. The Court
of Tax Appeals, however, in a Decision denied the various claims for tax refund. LSC
filed a Motion for Reconsideration but the same was denied. Hence, an instant petition
was filed.

Issue: whether or not petitioner's tugboats" can be interpreted to be included in the term
"cargo vessels" for purposes of the tax exemption

Ruling:
A tugboat is a strongly built, powerful steam or power vessel, used for towing and, now,
also used for attendance on vessel. LSC tugboats clearly do not fall under the
categories of passenger and/or cargo vessels. Thus, it is a cardinal principle of statutory
construction where a provision of law speaks categorically, the need for interpretation is
obviated, no plausible pretense being entertained to justify non-compliance. All that has
to be done is to apply it in every case that falls within its terms
This Court has laid down the rule that "as the power of taxation is a high
prerogative of sovereignty, the relinquishment is never presumed and any reduction or
diminution thereof with respect to its mode or its rate, must be strictly construed, and the
same must be coached in clear and unmistakable terms in order that it may be applied."
the general rule is that any claim for exemption from the tax statute should be strictly
construed against the taxpayer and Commissioner of Internal Revenue.
In order that the importations in question may be declared exempt from the
compensating tax, it is indispensable that the requirements of the amendatory law be
complied with, namely: (1) the engines and spare parts must be used by the importer
himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo
vessel must be used in coastwise or oceangoing navigation.

BIBIANO V. BAAS, JR., vs. COURT OF APPEALS G.R. No. 102967 February
10, 2000

Facts: Bibiano V. Baas Jr. sold to AYALA, a 128,265 square meters of land located at
Bayanan, Muntinlupa. The Deed of Sale provided that upon the signing of the contract
AYALA shall pay P461,754.00. The balance was to be paid in four equal consecutive
annual installments, with twelve (12%) percent interest per annum on the outstanding
balance.
AYALA issued one promissory note covering four equal annual installments
In the succeeding years petitioner reported a uniform income as gain from sale of
capital asset. Then the authorized tax examiners examine the books and records. They
discovered that petitioner had no outstanding receivable from land sale to AYALA and
concluded that the sale was cash and the entire profit should have been taxable.
Tuazon and Talon the tax examiners filed their audit report and declared a discrepancy.
Meantime, Aquilino Larin succeeded Calaguio as Regional Director directed the revision
of the audit report, with instruction to consider the land as capital asset. Thereafter,
Larin sent a letter to petitioner informing of the income tax deficiency that must be
settled him immediately.

On June 17, 1981, Larin filed a criminal complaint for tax evasion against the
petitioner. petitioner filed an Amnesty Tax Return under P.D. 1740 and PD 1840.
Reacting to the complaint for tax evasion and the news reports, petitioner filed with the
RTC of Manila an action6 for damages against respondents Larin, Tuazon and Talon for
extortion and malicious publication of the BIR's tax audit report. He claimed that the
filing of criminal complaints against him for violation of tax laws were improper because
he had already availed of two tax amnesty decrees. The trial court decided in favor of
the respondents and awarded Larin damages, which was affirmed by the CA. Hence, an
instant petition was filed.

Issue: whether P.D. Nos. 1740 and 1840 which granted tax amnesties also granted
immunity from criminal prosecution against tax offenses.

Ruling: No. It will be recalled that petitioner entered into a deed of sale purportedly on
installment. On the same day, he discounted the promissory note covering the future
installments. The discounting seems questionable because ordinarily, when a bill is
discounted, the lender charges or deducts a certain percentage from the principal value
as its compensation. Here, the discounting was done by the buyer.

Two weeks after the filing of the tax evasion complaint against him by Larin, petitioner
availed of the tax amnesty under P.D. No. 1740 & 1840. His disclosure, however, did
not include the income from his sale of land to AYALA on cash basis. Instead he
insisted that such sale was on installment. He did not amend his income tax return. He
did not pay the tax which was considerably increased by the income derived from the
discounting. He did not meet the twin requirements of P.D. 1740 and 1840, declaration
of his untaxed income and full payment of tax due thereon. Clearly, the petitioner is not
entitled to the benefits of P.D. Nos. 1740 and 1840.

The mere filing of tax amnesty return under P.D. 1740 and 1840 does not ipso
facto shield him from immunity against prosecution. Tax amnesty is a general pardon to
taxpayers who want to start a clean tax slate. It also gives the government a chance to
collect uncollected tax from tax evaders without having to go through the tedious
process of a tax case. To avail of a tax amnesty granted by the government, and to be
immune from suit on its delinquencies, the tax payer must have voluntarily disclosed his
previously untaxed income and must have paid the corresponding tax on such
previously untaxed income.10

It also bears noting that a tax amnesty, much like a tax exemption, is never favored nor
presumed in law and if granted by statute, the terms of the amnesty like that of a tax
exemption must be construed strictly against the taxpayer and liberally in favor of the
taxing authority.11 Hence, on this matter, it is our view that petitioner's claim of immunity
from prosecution under the shield of availing tax amnesty is untenable.
24. TOPIC: TAX EXCLUSION

Philippine Long-Distance Telephone Company, Inc., v. City Of Bacolod,


Florentino T. Guanco, In His Capacity As The City Treasurer Of Bacolod City, and
Antonio G. Laczi, In His Capacity As The City Legal Officer Of Bacolod City
G.R. No. 149179 July 15, 2005

Facts: PLDT is a holder of a legislative franchise under Act No. 3436, as amended, to
render local and international telecommunications services. On August 24, 1991, the
terms and conditions of its franchise were consolidated under Republic Act No. 7082,
Section 12 of which embodies the so-called "in-lieu-of-all-taxes" clause, whereunder
PLDT shall pay a franchise tax equivalent to three percent (3%) of all its gross receipts,
which franchise tax shall be "in lieu of all taxes". Part of the conditions of PLDTs
franchise provide that PLDT shall pay a franchise tax equivalent to three per cent of all
its gross receipts "in lieu of all taxes."
However, in January 1992 after the Local Government Code took effect, local
government units were given the power to impose local franchise tax on businesses
enjoying a franchise. This provision in the LG Code effectively dissolved all tax
exemption privileges including those taxes enjoyed by PLDT under the "in-lieu-of-all-
taxes" clause in its charter. When PLDT applied for a mayors permit, Bacolod City
withheld issuance pending payment of PLDTs franchise tax liability that amounted to
P1,782,836.40 as of 1999 excluding surcharges. PLDT filed a protest based on Section
23 of RA 7925 before the lower court. The petition was later dismissed.

Issue: Whether Section 23 of Rep. Act No. 7925, also called the "most-favored-
treatment" clause, operates to exempt petitioner PLDT from the payment of franchise
tax imposed by the respondent City of Bacolod.

Held: Contrary to petitioner's claim, the issue thus posed is not one of "rst impression"
insofar as this Court is concerned. In PLDT vs. City of Davao, this Court interpreted
Section 23 of Rep. Act No. 7925 as not operating to exempt PLDT from the payment of
franchise tax imposed upon it by the City of Davao: In sum, it does not appear that, in
approving Section 23 of R.A. No. 7925, Congress intended it to operate as a blanket tax
exemption to all telecommunications entities. Applying the rule of strict construction of
laws granting tax exemptions and the rule that doubts should be resolved in favor of
municipal corporations in interpreting statutory provisions on municipal taxing powers,
we hold that Section 23 of R.A. No. 7925 cannot be considered as having amended
petitioner's franchise so as to entitle it to exemption from the imposition of local
franchise taxes. Consequently, we hold that petitioner is liable to pay local franchise
taxes in the amount of P3,681,985.72 for the period covering the rst to the fourth
quarter of 1999 and that it is not entitled to a refund of taxes paid by it for the period
covering the first to the third quarter of 199

COMMISSIONER OF INTERNAL REVENUE v. THE COURT OF APPEALS, THE


COURT OF TAX APPEALS and ATENEO DE MANILA UNIVERSITY
G.R. No. 115349 April 18, 1997

Facts: Private respondent is a non-stock, non-profit educational institution with auxiliary


units and branches all over the Philippines. One such auxiliary unit is the Institute of
Philippine Culture (IPC), which has no legal personality separate and distinct from that
of private Respondent. The IPC is a Philippine unit engaged in social science studies of
Philippine society and culture. Occasionally, it accepts sponsorships for its research
activities from international organizations, private foundations and government
agencies.
On July 8, 1983, private respondent received from petitioner Commissioner of
Internal Revenue a demand letter assessing private respondent the sum of
P174,043.97 for alleged deficiency contractors tax, and another assessment in the sum
of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended March
31, 1978. Denying said tax liabilities, private respondent sent petitioner a letter-protest
and subsequently filed with the latter a memorandum contesting the validity of the
assessments.
On March 17, 1988, petitioner rendered a letter-decision canceling the
assessment for deficiency income tax but modifying the assessment for deficiency
contractors tax by increasing the amount due to P193,475.55. Unsatisfied, private
respondent requested for a reconsideration or reinvestigation of the modified
assessment. At the same time, it filed in the respondent court a petition for review of the
said letter-decision of the petitioner. While the petition was pending before the
respondent court, petitioner issued a final decision reducing the assessment for
deficiency contractors tax from P193,475.55 to P46,516.41, exclusive of surcharge and
interest.
On July 12, 1993, the respondent court rendered the questioned decision

Issue: Whether Ateneo de Manila University, through its auxiliary unit or branch the
Institute of Philippine Culture performing the work of an independent contractor and,
thus, subject to the three percent (3%) contractors tax levied by then Section 205 of the
National Internal Revenue Code?

Held: Petition is unmeritorious. The Commissioner should have determined first if


private respondent was covered by Section 205, applying the rule of strict interpretation
of laws imposing taxes and other burdens on the populace, before asking Ateneo to
prove its exemption therefrom. To fall under its coverage, Section 205 of the National
Internal Revenue Code requires that the independent contractor be engaged in the
business of selling its services.

Hence, to impose the three percent contractors tax on Ateneos Institute of Philippine
Culture, it should be sufficiently proven that the private respondent is indeed selling its
services for a fee in pursuit of an independent business. And it is only after private
respondent has been found clearly to be subject to the provisions of Sec. 205 that the
question of exemption therefrom would arise.

Only after such coverage is shown does the rule of construction that tax exemptions
are to be strictly construed against the taxpayer come into play. After reviewing the
records of this case, we find no evidence that Ateneos Institute of Philippine Culture
ever sold its services for a free to anyone or was ever engaged in a business apart from
and independently of the academic purposes of the university. The petitioner has
presented no evidence to prove its bare contention that, indeed, contracts for sale of
services were ever entered into by the private Respondent.
25. TAX AVOIDANCE

DELPHER TRADES CORPORATION, and DELPHIN PACHECO vs. INTERMEDIATE


APPELLATE COURT and HYDRO PIPES PHILIPPINES, INC.
G.R. L-69259 26 January 1988

Facts: Delfin Pacheco and sister Pelagia were the owners of a parcel of land in
Bulacan. On April 3, 1974, they leased the property to Construction Components
International Inc. and provided a right of first refusal should the latter decide to buy the
said property.
Construction Components International, Inc. assigned its rights and obligations
under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed
conformity and consent of Delfin and Pelagia. In 1976, a deed of exchange was
executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades
Corporation whereby the Pachecos conveyed to the latter the leased property together
with another parcel of land also located in Malinta Estate, Valenzuela for 2,500 shares
of stock of defendant corporation with a total value of P1.5M.
On the ground that it was not given the first option to buy the leased property
pursuant to the proviso in the lease agreement, respondent Hydro Pipes Philippines,
Inc., filed an amended complaint for reconveyance of the lot.

Issue: Whether the Deed of Exchange of the properties executed by the Pachecos and
the Delpher Trades Corporation on the other was meant to be a contract of sale which,
in effect, prejudiced the Hydro Phil's right of first refusal over the leased property
included in the "Deed of Exchange."

Ruling: The "Deed of Exchange" of property between the Pachecos and Delpher
Trades Corporation cannot be considered a contract of sale. There was no transfer of
actual ownership interests by the Pachecos to a third party. The Pacheco family merely
changed their ownership from one form to another. The ownership remained in the
same hands. Hence, the private respondent has no basis for its claim of a right of first
refusal under the lease contract.
Eduardo Neria, a certified public accountant and son-in-law of the late Pelagia
Pacheco testified that Delpher Trades Corporation is a family corporation; that the
corporation was organized by the children of the two spouses (spouses Pelagia
Pacheco and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles) who
owned in common the parcel of land leased to Hydro Pipes Philippines in order to
perpetuate their control over the property through the corporation and to avoid taxes;
that in order to accomplish this end, two pieces of real estate, including the lot which
had been leased to Hydro Pipes Philippines, were transferred to the corporation; that
the leased property was transferred to the corporation by virtue of a deed of exchange
of property; that in exchange for these properties, Pelagia and Delfin acquired 2,500
unissued no par value shares of stock which are equivalent to a 55% majority in the
corporation because the other owners only owned 2,000 shares; and that at the time of
incorporation, he knew all about the contract of lease of Lot. No. 1095 to Hydro Pipes
Philippines. In the petitioners motion for reconsideration, they refer to this scheme as
"estate planning."
27. DOUBLE TAXATION

COMMISSIONER OF INTERNAL REVENUE., petitioner vs S.C. JOHNSON


AND SON, INC., respondent G.R. No. 127105, June 25, 1999

FACTS: SC. JOHNSON AND SON, INC., a domestic corporation organized and
operating under the Philippine laws, entered into a license agreement with SC
Johnson and Son, United States of America (USA). License Agreement was duly
registered with the Technology Transfer Board of the Bureau of Patents, Trade
Marks and Technology Transfer under Certificate of Registration No. 8064. SC.
JOHNSON AND SON, INC was obliged to pay SC Johnson and Son, USA
royalties based on a percentage of net sales and subjected the same to 25%
withholding tax on royalty payments. Respondent filed with the International Tax
Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax
on royalties arguing that Since the agreement was approved by the Technology
Transfer Board, the preferential tax rate of 10% should apply hence royalties paid
by the respondent to SC Johnson and Son, USA is only subject to 10%
withholding tax pursuant to the most-favored nation clause of the RP-US Tax
Treaty.

ISSUE: Whether or not there is double taxation and SC Johnson can claim of the
refund.

RULING: No. Double taxation usually takes place when a person is resident of a
contracting state and derives income from, or owns capital in, the other
contracting state and both states impose tax on that income or capital.
The RP-US Tax Treaty is just one of a number of bilateral treaties which the
Philippines has entered into for the avoidance of double taxation. The purpose of
these international agreements is to reconcile the national fiscal legislations of
the contracting parties in order to help the taxpayer avoid simultaneous taxation
in two different jurisdictions. More precisely, the tax conventions are drafted with
a view towards the elimination of international juridical double taxation, which is
defined as the imposition of comparable taxes in two or more states on the same
taxpayer in respect of the same subject matter and for identical periods. The
apparent rationale for doing away with double taxation is of encourage the free
flow of goods and services and the movement of capital, technology and persons
between countries, conditions deemed vital in creating robust and dynamic
economies.

Pepsi Cola Bottling Co. VS Municipality of Tanauan, Leyte


G.R. No. L-31156, February 27, 1976

FACTS: ACTS: Petitioner-appellant claims that Municipal 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" and Municipal Ordinance No. 27
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" constitute double taxation.

ISSUE: Whether the two ordinances constitute double taxation

HELD: 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. 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. 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.

CIR VS Procter and Gamble


G.R.No. L-66838, December 2, 1991
FACTS:
Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax rate will be applied to
dividend remittances to non-resident corporate stockholders of a Philippine corporation.
This rate goes down to 15% ONLY IF the country of domicile of the foreign stockholder
corporation shall allow such foreign corporation a tax credit for taxes deemed paid in
the Philippines, applicable against the tax payable to the domiciliary country by the
foreign stockholder corporation. However, such tax credit for taxes deemed paid in the
Philippines MUST, as a minimum, reach an amount equivalent to 20 percentage points
Procter and Gamble Philippines declared dividends payable to its parent company and
sole stockholder, P&G USA. Such dividends amounted to Php 24.1M. P&G Phil paid a
35% dividend withholding tax to the BIR which amounted to Php 8.3M It subsequently
filed a claim with the Commissioner of Internal Revenue for a refund or tax credit,
claiming that pursuant to Section 24(b)(1) of the National Internal Revenue Code, as
amended by Presidential Decree No. 369, the applicable rate of withholding tax on the
dividends remitted was only 15%.

ISSUE:Whether or not the said NIRC provision eliminates double taxation.

HELD:The parent-corporation P&G-USA is "deemed to have paid" a portion of the


Philippine corporate income tax although that tax was actually paid by its Philippine
subsidiary, P&G-Phil., not by P&G-USA. This "deemed paid" concept merely reflects
economic reality, since the Philippine corporate income tax was in fact paid and
deducted from revenues earned in the Philippines, thus reducing the amount remittable
as dividends to P&G-USA. In other words, US tax law treats the Philippine corporate
income tax as if it came out of the pocket, as it were, of P&G-USA as a part of the
economic cost of carrying on business operations in the Philippines through the medium
of P&G-Phil. and here earning profits. What is, under US law, deemed paid by P&G-
USA are not "phantom taxes" but instead Philippine corporate income taxes actually
paid here by P&G-Phil., which are very real indeed.

More simply put, Section 24 (b) (1), NIRC, seeks to promote the in-flow of foreign equity
investment in the Philippines by reducing the tax cost of earning profits here and
thereby increasing the net dividends remittable to the investor. The foreign investor,
however, would not benefit from the reduction of the Philippine dividend tax rate unless
its home country gives it some relief from double taxation (i.e., second-tier taxation) (the
home country would simply have more "post-R.P. tax" income to subject to its own
taxing power) by allowing the investor additional tax credits which would be applicable
against the tax payable to such home country. Accordingly, Section 24 (b) (1), NIRC,
requires the home or domiciliary country to give the investor corporation a "deemed
paid" tax credit at least equal in amount to the twenty (20) percentage points of dividend
tax foregone by the Philippines, in the assumption that a positive incentive effect would
thereby be felt by the investor.
28. TOPIC: TERRITORIALITY OR SITUS OF TAXATION

MARUBENI CORPORATION (formerly Marubeni- Iida, Co., Ltd.) petitioner vs


Commissioner of Internal Revenue and Court of Tax
Facts: Marubeni Corporation, representing itself as a foreign corporation duly organized
and existing under the laws of Japan and duly licensed to engage in business under
Philippine laws has a branch office at the 4th Floor, FEEMI Building, Aduana Street,
Intramuros, Manila seeks the reversal of the decision of the Court of Tax Appeals
denying its claim for refund or tax credit in the amount of P229,424.40 representing
alleged overpayment of branch profit remittance tax withheld from dividends by Atlantic
Gulf and Pacific Co. of Manila (AG&P).

Petitioner Corporation contended that they should follow the principal-agent


theory, Marubeni Japan is likewise a resident foreign corporation subject only to the 10
% intercorporate final tax on dividends received from a domestic corporation in
accordance with Section 24(c) (1) of the Tax Code of 1977. Public respondents,
however, are of the contrary view that Marubeni, Japan, being a non-resident foreign
corporation and not engaged in trade or business in the Philippines, is subject to tax on
income earned from Philippine sources at the rate of 35 % of its gross income under
Section 24 (b) (1) of the same Code but expressly made subject to the special rate of
25% under Article 10(2) (b) of the Tax Treaty of 1980 concluded between the
Philippines and Japan.

Issue: Whether it is a resident or a non-resident foreign corporation under Philippine


laws.

Held: Under the Tax Code, a resident foreign corporation is one that is "engaged in
trade or business" within the Philippines. Petitioner contends that precisely because it is
engaged in business in the Philippines through its Philippine branch that it must be
considered as a resident foreign corporation. Petitioner reasons that since the Philippine
branch and the Tokyo head office are one and the same entity, whoever made the
investment in AG&P, Manila does not matter at all. A single corporate entity cannot be
both a resident and a non-resident corporation depending on the nature of the particular
transaction involved. Accordingly, whether the dividends are paid directly to the head
office or coursed through its local branch is of no moment for after all, the head office
and the office branch constitute but one corporate entity, the Marubeni Corporation,
which, under both Philippine tax and corporate laws, is a resident foreign corporation
because it is transacting business in the Philippines.

Petitioner, being a non-resident foreign corporation with respect to the


transaction in question, the applicable provision of the Tax Code is Section 24 (b) (1)
(iii) in conjunction with the Philippine-Japan Treaty of 1980. Proceeding to apply the
above section to the case at bar, petitioner, being a non-resident foreign corporation, as
a general rule, is taxed 35 % of its gross income from all sources within the Philippines.
[Section 24 (b) (1)].

However, a discounted rate of 15% is given to petitioner on dividends received


from a domestic corporation (AG&P) on the condition that its domicile state (Japan)
extends in favor of petitioner, a tax credit of not less than 20 % of the dividends
received. This 20 % represents the difference between the regular tax of 35 % on non-
resident foreign corporations which petitioner would have ordinarily paid, and the 15 %
special rate on dividends received from a domestic corporation. And consequently
petitioner is entitled also to a refund on the transaction in question.
29. TOPIC: PUBLIC PURPOSE

PLANTERS PRODUCTS, INC., petitioner Vs FERTIPHIL CORPORATION.,


defendant G.R. No. 166006 March 14, 2008
FACTS: On June 3, 1985, then President Ferdinand Marcos, exercising his legislative
powers, issued LOI No. 1465 which provided for the imposition of a capital recovery
component (CRC) on the domestic sale of all grades of fertilizers in the Philippines.
Pursuant to the LOI, Fertiphil paid P10 for every bag of fertilizer it sold in the domestic
market to the Fertilizer and Pesticide Authority (FPA). FPA then remitted the amount
collected to the Far East Bank and Trust Company, the depositary bank of PPI. Fertiphil
paid P6,689,144 to FPA from July 8, 1985 to January 24, 1986. After the 1986 Edsa
Revolution, FPA voluntarily stopped the imposition of the P10 levy. With the return of
democracy, Fertiphil demanded from PPI a refund of the amounts it paid under LOI No.
1465, but PPI refused to accede to the demand.
Fertiphil filed a complaint for collection and damages against FPA and PPI with
the RTC in Makati. It questioned the constitutionality of LOI No. 1465 for being unjust,
unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial
of due process of law. Fertiphil alleged that the LOI solely favored PPI, a privately
owned corporation, which used the proceeds to maintain its monopoly of the fertilizer
industry. RTC rendered decision in favour of Fertiphil and demanded the return of the
said amount.
ISSUE: Whether or not the imposition of P10 levy under LOI No. 1465 constitutes a
valid legislation pursuant to the exercise of taxation for public purposes
RULING: An inherent limitation on the power of taxation is public purpose. Taxes are
exacted only for a public purpose. They cannot be used for purely private purposes or
for the exclusive benefit of private persons. The reason for this is simple. The power to
tax exists for the general welfare; hence, implicit in its power is the limitation that it
should be used only for a public purpose. It would be a robbery for the State to tax its
citizens and use the funds generated for a private purpose.
While the categories of what may constitute a public purpose are continually
expanding in light of the expansion of government functions, the inherent requirement
that taxes can only be exacted for a public purpose still stands. Public purpose is the
heart of a tax law. When a tax law is only a mask to exact funds from the public but its
true intent is to give undue benefit and advantage to a private enterprise, that law will
not satisfy the requirement of public purpose. Hence, the Supreme Court held that the
P10 levy is unconstitutional because it was not for public purpose.

COMMISSIONER OF INTERNAL REVENUE, Petitioners, vs. CENTRAL LUZON


DRUG CORPORATION, Respondent. G.R. No. 159647 April 15, 2005

Facts: A 20% senior citizen discount was required to be given by establishments


pursuant to the act of legislature. The said discount is allowed in favor of said
establishments. One establishment incurred a loss in its operation but claiming tax
credit allegedly arose from the 20% discount. The CIR contended that it cannot claim
tax credit because it the latter may be claim only when there is tax liability. CTA favored
the petitioner but upon motion for reconsideration, it reversed its decision which was
affirmed in toto by the CA stating that the legislation neither required tax liability or
payment of taxes to claim tax credit.

Issue: W/O the said discount is for public purpose as a purpose of taxation
Held: Yes. The concept of public use is no longer confined to the traditional notion of
use by the public, but held synonymous with public interest, public benefit, public
welfare, and public convenience. The discount privilege to which our senior citizens are
entitled is actually a benefit enjoyed by the general public to which these citizens
belong. The discounts given would have entered the coffers and formed part of the
gross sales of the private establishments concerned, were it not for RA 7432. The
permanent reduction in their total revenues is a forced subsidy corresponding to the
taking of private property for public use or benefit. Besides, the taxation power can also
be used as an implement for the exercise of the power of eminent domain. Tax
measures are but "enforced contributions exacted on pain of penal sanctions" and
"clearly imposed for a public purpose."8 In recent years, the power to tax has indeed
become a most effective tool to realize social justice, public welfare, and the equitable
distribution of wealth.

30. TOPIC: Non-delegation of taxing power

Abakada Guro Partylist vs Ermita GR 168056 September 1, 2005

FACTS:
This is a consolidation of cases filed questioning the constitutionality of RA 9337.

Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and
Escudero, et al. contend in common that Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, of the NIRC giving the President
the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition
is met, constitutes undue delegation of the legislative power to tax.
Section 4 imposes a 10% VAT on sale of goods and properties, Section 5
imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on
sale of services and use or lease of properties. These questioned provisions contain a
uniform proviso authorizing the President, upon recommendation of the Secretary of
Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the
following conditions have been satisfied, to wit:

. . . That the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%),
after any of the following conditions has been satisfied:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or

(ii) National government deficit as a percentage of GDP of the previous year exceeds
one and one-half percent (1 %).

Petitioners argue that the law is unconstitutional, as it constitutes abandonment by


Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2)
of the 1987 Philippine Constitution.

ISSUE: Whether or not there is undue delegation of legislative power.

RULING: NO. There is no undue delegation of legislative power.

In every case of permissible delegation, there must be a showing that the


delegation itself is valid. It is valid only if the law (a) is complete in itself, setting forth
therein the policy to be executed, carried out, or implemented by the delegate; and (b)
fixes a standard the limits of which are sufficiently determinate and determinable to
which the delegate must conform in the performance of his functions.A sufficient
standard is one which defines legislative policy, marks its limits, maps out its boundaries
and specifies the public agency to apply it. It indicates the circumstances under which
the legislative command is to be effected. Both tests are intended to prevent a total
transference of legislative authority to the delegate, who is not allowed to step into the
shoes of the legislature and exercise a power essentially legislative

The case before the Court is not a delegation of legislative power. It is simply a
delegation of ascertainment of facts upon which enforcement and administration of the
increase rate under the law is contingent. The legislature has made the operation of the
12% rate effective January 1, 2006, contingent upon a specified fact or condition. It
leaves the entire operation or non-operation of the 12% rate upon factual matters
outside of the control of the executive.

No discretion would be exercised by the President. Highlighting the absence of


discretion is the fact that the word shall is used in the common proviso. The use of the
word shall connotes a mandatory order. Its use in a statute denotes an imperative
obligation and is inconsistent with the idea of discretion.Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts have no choice
but to see to it that the mandate is obeyed.

Thus, it is the ministerial duty of the President to immediately impose the 12%
rate upon the existence of any of the conditions specified by Congress. This is a duty
which cannot be evaded by the President. Inasmuch as the law specifically uses the
word shall, the exercise of discretion by the President does not come into play. It is a
clear directive to impose the 12% VAT rate when the specified conditions are present.
The time of taking into effect of the 12% VAT rate is based on the happening of a
certain specified contingency, or upon the ascertainment of certain facts or conditions
by a person or body other than the legislature itself.

The Court finds no merit to the contention of petitioners ABAKADA GURO Party
List, et al. that the law effectively nullified the Presidents power of control over the
Secretary of Finance by mandating the fixing of the tax rate by the President upon the
recommendation of the Secretary of Finance. The Court cannot also subscribe to the
position of petitioners
Pimentel, et al. that the word shall should be interpreted to mean may in view of the
phrase upon the recommendation of the Secretary of Finance. Neither does the Court
find persuasive the submission of petitioners Escudero, et al. that any recommendation
by the Secretary of Finance can easily be brushed aside by the President since the
former is a mere alter ego of the latter.

32. TOPIC: Taxability of Government Agencies

Philippine Fisheries Development Authority vs CA GR 150301 October 2, 2007

FACTS:
The controversy arose when respondent Municipality of Navotas assessed the
real estate taxes allegedly due from petitioner Philippine Fisheries Development
Audthority (PFDA) on properties under its jurisdiction, management and operation
located inside the Navotas Fishing Port Complex(NFPC). PFDA refused to pay. Hence,
The Municipality gave notice to petitioner that the NFPC will be sold at public auction.
PFDA said that NFPC is owned by the Republic of the Philippines pursuant to PD 977,
therefore it is not a taxable entity.
The LGU of Navotas further alleged that PFDA has leased its properties to
beneficial users who are taxable persons. RTC and CA ruled in favor of the LGU since
the PFDA failed to present proof that those properties were indeed owned by the
Republic of the Philippines and the exemption does not apply when beneficial use of
government property has been granted to a taxable person.

ISSUE: Whether or not the PFDA is exempt from Real Property taxes on the disputed
properties?

RULING: NO.

As a rule, PFDA, being an instrumentality of the national government, is exempt


from real property tax but the exemption does not extend to the portions of the Fishing
Port Complex that it manages and operates that were leased to taxable or private
persons and entities for their beneficial use.

MIAA vs CA GR 155650 July 20,2006

FACTS:
Petitioner MIAA operates the NAIA Complex in Paranaque City under EO 903,
otherwise known as the Revised Charter of the Manila International Airport Authority. As
the operator, it administers the land, improvements and equipment within the NAIA
Complex.
The Office of the Government Corporate Counsel issued Opinion No 061 which
withdrew the exemption from real estate tax granted to MIAA under Section 21 of the
MIAA Charter. Thus MIAA paid some taxes imposed by Paranaque City.
Petitioner received final notices of Real Estate Delinquency from Paranaque City
for the taxable year 1992-2001. Thereafter, the City issued notice for levy on the airport
buildings and land. MIAA opposed and contended that Sec. 21 of EO 903 specifically
exempts it from the payment of real estate tax. Petitioner invoked that it being a
government instrumentality, it cannot be taxed as such since the government should not
tax itself.

ISSUE: Whether MIAA is liable for taxes.

RULING: NO.

SC ruled that MIAAs Airport Lands and Buildings are exempt from real estate tax
imposed by the local governments. First, MIAA is not a GOCC but an instrumentality of
the National Government and thus exempt from Local taxation. Second, the real
properties of MIAA are owned by the Republic of the Philippines and thus exempt from
real estate tax.

Maceda vs Macaraig GR No 88291 June 8, 1993

FACTS:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake
the development of hydraulic power and the production of power from other sources.
RA 358 (1949) granted NAPOCOR tax and duty exemption privileges. Other laws were
also enacted granting it tax and duty exemptions such as taxes, duties, fees, imposts,
charges and restrictions of the Republic of the Philippines, its provinces, cities, and
municipalities directly or indirectly, on all petroleum products used by NPC in its
operation. But PD 1931 repealed the grant of tax privileges to any GOCC and all other
units of government and empowered the President or the Minister of Finance, upon
recommendation by (Fiscal Incentives Review Board) FIRB to restore, partially or
totally, the exemption withdrawn. Several resolutions by FIRB were passed for the
restorations of such exemptions.
Thereafter, Petitioner, as member of the Philippine Senate, in aid of legislation,
requested to conduct a formal and extensive inquiry into the reported massive tax
manipulations and evasions by oil companies which were brought about by availing of
the non-existing exemption of NAPOCOR from indirect taxes, resulting in tax refunds
amounting to P1.5 Billion from Department of Finance.

ISUUE: Whether NAPOCOR cease to be tax exempt?

RULING: NO.

NAPOCOR is a non-profit public corporation created for the general good and
welfare wholly owned by the government. One common theme in all these laws is that
the NPC must be enable to pay its indebtedness 56 which, as of P.D. No. 938, was P12
Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign
loans at any one time. The NPC must be and has to be exempt from all forms of taxes if
this goal is to be achieved.
By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be
remembered that to pay the government share in its capital stock P.D. No. 758 was
issued mandating that P200 Million would be appropriated annually to cover the said
unpaid subscription of the Government in NPC's authorized capital stock. And
significantly one of the sources of this annual appropriation of P200 million is TAX
MONEY accruing to the General Fund of the Government. It does not stand to reason
then that former President Marcos would order P200 Million to be taken partially or
totally from tax money to be used to pay the Government subscription in the NPC, on
one hand, and then order the NPC to pay all its indirect taxes, on the other.

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY VS. Marcos G.R. No.


120082. September 11, 1996

Facts: 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.
However, on October 11,1994, Mr. Eustaquio B. Cesa, Officer in Charge, Office of the
Treasurer of the City of Cebu,demanded payment from realty taxes in the total amount
of P2229078.79.Petitioner objected to such demand for payment as baseless and
unjustified claiming in its favor the aforecited Section 14 of R.A. 6958. 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. Respondent City
refused to cancel and set aside petitioners 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 Labor Code that took effect on January
1, 1992.
Issue: W/N the petitioner is a taxable person

Ruling: Taxation is the rule and exemption is the exception. MCIAAs exemption from
payment of taxes is withdrawn by virtue of Sections 193 and 234 of Labor Code.
Statutes granting tax exemptions shall be strictly construed against the taxpayer and
liberally construed in favor of the taxing authority. The petitioner cannot claim that it
was never a taxable person under its Charter. It was only exempted from the payment
of realty 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.

31st Infantry Post Exchange vs Posads GR 33403 September 4, 1930

FACTS:
Petitioner has been constituted as a post exchange in accordance with the Army
Regulations and the laws of the US. It is designed for the accommodation, convenience,
and assistance of the personnel of the Army. All of its goods were intended to be sold to
officers, soldiers, and the civilian employees of the Army, which consists of mostly
sundry articles. Proceeds thereof were not remitted to US but instead used for the
betterment of the condition of the enlisted personnel of the Army. The Infantry Post
Exchange bought its goods for sale from various merchants in the Philippines.
Defendant Juan Posadas is the duly qualified and acting Collector of Internal
Revenue of the Philippines. He persists in demanding and collecting sales taxes
amounting to 1 % of gross value of commodities from suppliers/merchants who made
sales to the Post Exchange. Which in effect, would increase the cost of the commodities
to plaintiff post exchange.
Petitioner protested against the imposition of taxes.

ISSUE: Whether or not the petitioner is exempt from sales tax imposed against its
suppliers.

RULING:
NO. A tax may be levied by the Government of the Philippine Islands on sales
made by merchants to Post Exchanges of the US Army in the Philippines. The tax laid
upon Philippine merchants who sell to Army Post Exchanges does not interfere with the
supremacy of the United States Government, or with the operations of its
instrumentality, the US Army, to such an extent or in such a manner as to render the tax
illegal. The tax does not deprive the Army of the power to serve the Government as it
was intended to serve it, or hinder the efficient exercise of its power.

35. TOPIC: Equal Protection Clause

ANTERO SISON, JR. vs Ruben Ancheta, Acting Commissioner, Bureau of


Internal Revenue
GR No. L-59431, 1984

FACTS:
Sec. 1 of BP Blg. 135 provides for rates of tax on citizens or residents. Petitioner as
taxpayer alleges that by virtue thereof, he would be unduly discriminated against the
imposition of higher rates of tax upon his income arising from the exercise of his
profession. He characterizes the above section as arbitrary amounting to class
legislation. Therefore, there is transgression of both the equal protection and due
process clauses of the Constitution.

ISSUE: Is BP Blg. 135 a valid exercise of the States power to tax?


RULING:
Yes. 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. The equality at
which the equal protection clause aims is not a disembodied equality. The Constitution
does not require things which are different in fact and opinion to be treated in law as
though they were the same.

MAYOR ANTONIO VILLEGAS vs HIU CHIONG TSAI PAO HO


GR No. L-29646, 1978

FACTS:
Ordinance No. 6537 was passed by the Municipal Board of Manila on 1968. Said
ordinance prohibits aliens from being employed or to engage or participate in any
position or occupation or business without first securing an employment permit from the
Mayor of Manila and paying a permit fee of P50.

ISSUE: Whether Respondent Judge committed a serious and patent error of law in
ruling that Ordinance No. 6537 violated the due process and equal protection clauses of
the Constitution.

RULING:
No. The P50 fee is unreasonable not only because it is excessive but because it fails to
consider valid substantial differences in situation among individual aliens who are
required to pay it. Although the equal protection clause does not forbid classification, it
is imperative that the classification should be based on real and substantial differences
having a reasonable relation to the subject of the particular legislation.

ORMOC SUGAR COMPANY,INC vs THE TREASURER OF ORMOC CITY


GR No. L-23794, 1968

FACTS:
The Municipal Board of Ormoc City passed Ordinance No. 4 imposing on any and all
productions of centrifugal sugar milled at the Ormoc Sugar Company, Inc. in Ormoc City
a municipal tax equivalent to 1% per export sale to the United States and other foreign
countries.

ISSUE: Whether constitutional limits on the power of taxation, specifically the equal
protection clause and rule of uniformity of taxation, were infringed.

RULING:
Yes. The Court ruled that the equal protection clause applies only to persons or things
identically situated and does not bar a reasonable classification of the subject of
legislation, and a classification is reasonable where 1) it is based on substantial
distinctions; 2) are germane to the purpose of the law; 3) applies not only to present
conditions but also to future conditions; 4) applies to those who belong to the same
class.

A perusal of the requisites instantly shows that the questioned ordinance does not meet
them, for it taxes only centrifugal sugar produced and exported by the Ormoc Sugar
Company and none other.
37. TOPIC: Religious Freedom

AMERICAN BIBLE SOCIETY vs CITY OF MANILA


GR No. L-9637, 1957

FACTS: Plaintiff-appellant is a foreign, non-stock, non-profit, religious missionary


corporation duly registered in the Philippines. Plaintiff has been distributing and selling
bibles and gospel portions thereof throughout the Philippines. The acting Treasurer of
the City of Manila informed plaintiff that it was conducting the business of general
merchandise without providing itself with the necessary mayors permit and municipal
license in violation of Ordinance No. 3000, as amended.

ISSUE: Whether or not the ordinances of the City of Manila, Nos. 3000, as amended,
and 2529, 3028 and 3364 are constitutional and valid.
RULING: No. Article III of the Constitution guarantees the freedom of religious
profession and worship. Religion has been spoken of as a profession of faith to an
active power that binds and elevates man to its Creator. The Constitutional guaranty of
free exercise and enjoyment of religious profession and worship carries with it the right
to disseminate religious information. Any restraints of such right can only be justified on
the grounds that there is a clear and present danger of any substantive evil which the
State has the right to prevent.
38. TOPIC: Non-Impairment Clause

J. CASSANOVA vs JNO. HORD


GR No. 3473, 1907

FACTS:
The Spanish Government, in accordance with the provisions of the royal decree of
1867, granted to plaintiff certain mines in the Province of Ambos Camarines. They were
considered by the Collector of Internal Revenue and were by him said to fall within the
provisions of Sec. 134 of the Internal Revenue Act which imposes an annual tax and an
ad valorem tax on all valid perfected mining concessions granted prior to 11th of April,
1899. The defendant imposed upon these properties the tax mentioned in Sec. 134
which plaintiff paid under protest.

ISSUE: Whether Sec. 134 is void.

RULING:
Yes. It seems very clear to us that this deed [granted by the Government] constituted a
contract between the Spanish Government and the plaintiff, the obligation of which
contract was impaired by the enactment of Sec. 134, thereby infringing the provision
from Sec. 5 of the act of Congress which provides that no law impairing the obligation
and contracts shall be enacted.
39. TOPIC: Taxation Shall be uniform and Equitable

Abakada Guro Partylist vs Ermita GR 168056 September 1, 2005

FACTS: This is a consolidation of cases filed questioning the constitutionality of RA


9337.
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al.,
filed a petition for prohibition on May 27, 2005. They question the constitutionality of
Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108,
respectively, of the National Internal Revenue Code (NIRC). Petitioners argue that the
law is unconstitutional, as it constitutes abandonment by Congress of its exclusive
authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine
Constitution.

Also, several members of the House of Representatives led by Rep. Francis


Joseph G. Escudero filed this petition for certiorari on June 30, 2005. They question the
constitutionality of R.A. No. 9337 on the same grounds.

ISUUE: Whether or not Section 4,5, & 6 of RA 9337 violate Article VI, Section 28(2) of
the Constitution:

RULING: NO.

Article VI, Section 28(1) of the Constitution reads

The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.

Uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. Different articles may be taxed at different
amounts provided that the rate is uniform on the same class everywhere with all people
at all times.

In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%)
on all goods and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale
of goods and properties, importation of goods, and sale of services and use or lease of
properties. These same sections also provide for a 0% rate on certain sales and
transaction.

Neither does the law make any distinction as to the type of industry or trade that will
bear the 70% limitation on the creditable input tax, 5-year amortization of input tax paid
on purchase of capital goods or the 5% final withholding tax by the government. It must
be stressed that the rule of uniform taxation does not deprive Congress of the power to
classify subjects of taxation, and only demands uniformity within the particular class.
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT
rate of 0% or 10% (or 12%) does not apply to sales of goods or services with gross
annual sales or receipts not exceeding P1,500,000.00. Also, basic marine and
agricultural food products in their original state are still not subject to the tax,thus
ensuring that prices at the grassroots level will remain accessible.

It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins,
and unduly favors those with high profit margins. Congress was not oblivious to this.
Thus, to equalize the weighty burden the law entails, the law, under Section 116,
imposed a 3% percentage tax on VAT-exempt persons under Section 109(v), i.e.,
transactions with gross annual sales and/or receipts not exceeding P1.5 Million. This
acts as a equalizer because in effect, bigger businesses that qualify for VAT coverage
and VAT-exempt taxpayers stand on equal-footing.

Moreover, Congress provided mitigating measures to cushion the impact of the


imposition of the tax on those previously exempt. Excise taxes on petroleum products
and natural gas[were reduced. Percentage tax on domestic carriers was
removed. Power producers are now exempt from paying franchise tax.

Aside from these, Congress also increased the income tax rates of corporations, in
order to distribute the burden of taxation. Domestic, foreign, and non-resident
corporations are now subject to a 35% income tax rate, from a previous
32%. Intercorporate dividends of non-resident foreign corporations are still subject to
15% final withholding tax but the tax credit allowed on the corporations domicile was
increased to 20%.The Philippine Amusement and Gaming Corporation (PAGCOR) is
not exempt from income taxes anymore. Even the sale by an artist of his works or
services performed for the production of such works was not spared.

All these were designed to ease, as well as spread out, the burden of taxation, which
would otherwise rest largely on the consumers. It cannot therefore be gainsaid that R.A.
No. 9337 is equitable.
41. TOPIC: Non-imprisonment for nonpayment of a poll tax

Republic vs Patanao GR L-22356 July 21, 1967

FACTS:
Defendant Patanao is a holder of a timber license with concession at Esperanza,
Agusan, and as such was engaged in the business of producing logs and lumber for
sale. He failed to file income tax returns for 1953 and 1954, and filed fraudulent ITR for
1951, 1952 and 1955. Upon examination by BIR, deficiency taxes amounted to
P79,892.75. notwithstanding repeated demands, Patanao refused to pay until the
assessment has become final and executory.
Defendant moved for the dismissal of the complaint because the action is barred
by prior judgement because he was previously acquitted in criminal cases 2089 and
2090 of the same court for failure to file income tax and for non-payment of income
taxes and that the action has prescribed.
CFI ruled in favor of the defendant because the accused once acquitted is
exempt from both criminal and civil responsibility because when a criminal action is
instituted, civil action arising from the same offense is impliedly instituted unless the
offended party expressly waives the civil action or reserves the right to file it separately.

ISSUE: Whether acquittal of the taxpayer in the criminal proceeding entails exoneration
from his liability to pay the taxes?

RULING: NO. It is error to hold, as the lower court has held, that the judgment in the
criminal cases Nos. 2089 and 2090 bars the action in the present case. The acquittal in
the said criminal cases cannot operate to discharge defendant appellee from the duty of
paying the taxes which the law requires to be paid, since that duty is imposed by statute
prior to and independently of any attempts by the taxpayer to evade payment. Said
obligation is not a consequence of the felonious acts charged in the criminal
proceeding, nor is it a mere civil liability arising from crime that could be wiped out by
the judicial declaration of non-existence of the criminal acts charged.
42. TOPIC: Tax Exemption of Religious, Charitable and Educational Entities

Abra Valley College, Inc. represented by Pedro Borgonia vs. Hon. Juan Aquino,
Judge of Court of First Instance, Abra; Armin Cariaga, Provincial Treasurer, Abra;
Gaspar Bosque, Municipal Treasurer, Bangued, Abra; and Heirs of Paterno
Millare.
G.R. No. L-39086 June 15, 1988

Facts: Petitioner filed a complaint in the court a quo to annul and declare void the
Notice of Seizure and Notice of Sale of its lot and building located at Bangued, Abra,
for non-payment of real estate taxes and penalties. The Municipal and Provincial
Treasurers issued the said Notice of Seizure for the satisfaction of said taxes. The
property was sold at a public auction for the satisfaction of unpaid real property tax by
respondent treasurers, with Dr. Paterno Millare as the highest bidder.
Parties entered into a stipulation of facts adopted and embodied by the trial court
in its questioned decision. The trial court ruled for the government, holding that the
second floor of the building is being used by the director for residential purposes and
that the ground floor was used and rented by the Northern Marketing Corporation, a
commercial establishment and thus, the property is not being used exclusively for
educational purposes.
Instead of perfecting an appeal, petitioner availed of the instant petition for review
on certiorari with prayer for preliminary injunction before the Supreme Court.

Issue: Whether the lot and building in question are used exclusively for educational
purposes.

Ruling: No. It must be stressed however, that while this Court allows a more liberal and
non-restrictive interpretation of the phrase "exclusively used for educational purposes"
as provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution,
reasonable emphasis has always been made that exemption extends to facilities which
are incidental to and reasonably necessary for the accomplishment of the main
purposes. Otherwise stated, the use of the school building or lot for commercial
purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of
the second floor of the main building in the case at bar for residential purposes of the
Director and his family, may find justification under the concept of incidental use, which
is complimentary to the main or primary purpose-educational, the lease of the first floor
thereof to the Northern Marketing Corporation cannot by any stretch of the imagination
be considered incidental to the purpose of education.
Under the 1935 Constitution, the trial court correctly arrived at the conclusion that
the school building as well as the lot where it is built, should be taxed, not because the
second floor of the same is being used by the Director and his family for residential
purposes, but because the first floor thereof is being used for commercial purposes.
However, since only a portion is used for purposes of commerce, it is only fair that half
of the assessed tax be returned to the school involved.
National Power Corporation v. Central Board of Assessment Appeals (CBAA),
Local Board of Assessment Appeals (LBAA) of La Union, Provincial Treasurer, La
Union and Municipal Assessor of Bauang, La Union
G.R. NO. 171470 30 January 2009

Facts: On January 11, 1993, First Private Power Corporation (FPPC) entered into a
Build-Operate-Transfer agreement with NAPOCOR for the construction of the 215
Megawatt Bauang Diesel Power Plant in Payocpoc, Bauang, La Union. The BOT
Agreement provided, via an Accession Undertaking, for the creation of the Bauang
Private Power Corporation (BPPC) that will own, manage and operate the power
plant/station, and assume and perform FPPCs obligations under the BOT agreement.
For a fee, BPPC will convert NAPOCORs supplied diesel fuel into electricity and deliver
the product to NAPOCOR.

Among the pertinent provisions of the BOT agreement, as they relate to the submitted
issues in the present case is:

2.03 NAPOCOR shall make available the Site to CONTRACTOR for the
purpose of building and operating the Power Station at no cost to
CONTRACTOR for the period commencing on the Effective Date and ending
on the Transfer Date and NAPOCOR shall be responsible for the payment of
all real estate taxes and assessments, rates, and other charges in respect of
the Site and the buildings and improvements thereon.

The Officer-in-Charge of the Municipal Assessors Office of Bauang, La Union


initially issued Declaration of Real Property declaring BPPCs machineries and
equipment as tax-exempt. The issue was then referred to the Municipal Assessor of
Bauang who then issued a Notice of Assessment and Tax Bill to BPPC
assessing/taxing the machineries and equipment in the total sum of P288,582,848.00
for the 1995-1998 period, sans interest of two percent (2%) on the unpaid amounts.
NAPOCOR filed a petition with the LBAA. The petition asked that, retroactive to 1995,
the machineries covered by the tax declarations be exempt from real property tax under
Section 234(c) of Republic Act No. 7160. Section 234(c) of the LGC provides:

(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;

Issue: Whether NAPOCOR is entitled to tax exemption as to the actual, direct, exclusive
user of the machineries and equipment.

Ruling: The Supreme Court finds the petition devoid of merit. NAPOCORs basis for
its claimed exemption Section 234(c) of the LGC is clear and not at all ambiguous in
its terms. Exempt from real property taxation are: (a) all machineries and equipment; (b)
[that are] actually, directly, and exclusively used by; (c) [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. Consistent with the BOT
concept and as implemented, BPPC the owner-manager-operator of the project is
the actual user of its machineries and equipment. BPPCs ownership and use of the
machineries and equipment are actual, direct, and immediate, while NAPOCORs is
contingent and, at this stage of the BOT Agreement, not sufficient to support its claim
for tax exemption.
For these same reasons, the Supreme Court rejects NAPOCORs argument that
the machineries and equipment must be subjected to a lower assessment level.

LUNG CENTER OF THE PHILIPPINES v. QUEZON CITY and CONSTANTINO P.


ROSAS, in his capacity as City Assessor of Quezon City
G.R. No. 144104 29 June 2004

Facts: The Petitioner is a non-stock, non-profit entity which owns a parcel of land in
Quezon City. Erected in the middle of the aforesaid lot is a hospital known as the Lung
Center of the Philippines. The ground floor is being leased to a canteen, medical
professionals whom use the same as their private clinics, as well as to other private
parties. The right portion of the lot is being leased for commercial purposes to the
Elliptical Orchids and Garden Center. The petitioner accepts paying and non-paying
patients. It also renders medical services to out-patients, both paying and non-paying.
Aside from its income from paying patients, the petitioner receives annual subsidies
from the government.

Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5
million, predicating its claim as a charitable institution. The city assessor denied the
Claim. When appealed to the QC-Local Board of Assessment, the same was
dismissed. The decision of the QC-LBAA was affirmed by the Central Board of
Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are
used exclusively for charity.

Issue/s: (a) Whether the petitioner is a charitable institution within the context of
Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section
234(b) of Republic Act No. 7160; and
(b) Whether the real properties of the petitioner are exempt from real
property taxes.

Rulings:
(a) On the first issue, we hold that the petitioner is a charitable institution within the
context of the 1973 and 1987 Constitutions. To determine whether an enterprise
is a charitable institution/entity or not, the elements which should be considered
include the statute creating the enterprise, its corporate purposes, its constitution
and by-laws, the methods of administration, the nature of the actual work
performed, the character of the services rendered, the indefiniteness of the
beneficiaries, and the use and occupation of the properties.
Under P.D. No. 1823, the petitioner is a non-profit and non-stock
corporation which, subject to the provisions of the decree, is to be administered
by the Office of the President of the Philippines with the Ministry of Health and
the Ministry of Human Settlements. It was organized for the welfare and benefit
of the Filipino people principally to help combat the high incidence of lung and
pulmonary diseases in the Philippines. The raison detre for the creation of the
petitioner is stated in the decree,

(b) Partially granted. The petitioner failed to discharge its burden to prove that the
entirety of its real property is actually, directly and exclusively used for charitable
purposes. While portions of the hospital are used for the treatment of patients
and the dispensation of medical services to them, whether paying or non-paying,
other portions thereof are being leased to private individuals for their clinics and a
canteen. Further, a portion of the land is being leased to a private individual for
her business enterprise under the business name Elliptical Orchids and Garden
Center. Indeed, the petitioners evidence shows that it collected P1,136,483.45 as
rentals in 1991 and P1,679,999.28 for 1992 from the said lessees.
Accordingly, we hold that the portions of the land leased to private entities
as well as those parts of the hospital leased to private individuals are not exempt
from such taxes.45 On the other hand, the portions of the land occupied by the
hospital and portions of the hospital used for its patients, whether paying or non-
paying, are exempt from real property taxes.

JOSE V. HERRERA and ESTER OCHANGCO HERRERA v. THE QUEZON CITY


BOARD OF ASSESSMENT APPEALS
G.R. No. L-15270 30 September 1961

Facts: On July 24, 1952, the Director of the Bureau of Hospitals authorized the
petitioners to establish and operate the 'St. Catherine's Hospital,' located at 58 D.
Tuazon, Sta. Mesa Heights, Quezon City. On or about January 3, 1953, the petitioners
sent a letter to the Quezon City Assessor requesting exemption from payment of real
estate tax on the lot, building and other improvements comprising the hospital stating
that the same was established for charitable and humanitarian purposes and not for
commercial gain. After an inspection of the premises in question and after a careful
study of the case, the exemption from real property taxes was granted effective the
years 1953, 1954 and 1955.
Subsequently, however, in a letter dated August 10, 1955, the Quezon City
Assessor notified the petitioners that the aforesaid properties were re-classified from
'exempt' to 'taxable' and thus assessed for real property taxes effective 1956, enclosing
therewith copies of Tax Declaration Nos. 19321 to 19322 covering the said properties.
The petitioners appealed the assessment to the Quezon City Board of Assessment
Appeals, which, in a decision dated March 31, 1956 and received by the former on May
17, 1956, affirmed the decision of the City Assessor. A motion for reconsideration
thereof was denied on March 8, 1957. From this decision, the petitioners instituted the
instant appeal.

Issue: Whether the said properties are used exclusively for charitable or educational
purposes.

Ruling: Within the purview of the Constitutional exemption from taxation, the St.
Catherine's Hospital is, therefore, a charitable institution, and the fact that it admits pay-
patients does not bar it from claiming that it is devoted exclusively to benevolent
purposes, it being admitted that the income derived from pay-patients is devoted to the
improvement of the charity wards, which represent almost two-thirds (2/3) of the bed
capacity of the hospital, aside from "out-charity patients" who come only for
consultation.
Again, the existence of "St. Catherine's School of Midwifery", with an enrollment
of about 200 students, who practice partly in St. Catherine's Hospital and partly in St.
Mary's Hospital, which, likewise, belongs to petitioners herein, does not, and cannot,
affect the exemption to which St. Catherine's Hospital is entitled under our fundamental
law. On the contrary, it furnishes another ground for exemption. Seemingly, the Court of
Tax Appeals was impressed by the fact that the size of said enrollment and the
matriculation fee charged from the students of midwifery, aside from the amount they
paid for board and lodging, including transportation to St. Mary's Hospital, warrants the
belief that petitioners derive a substantial profit from the operation of the school
aforementioned. Such factor is, however, immaterial to the issue in the case at bar, for
"all lands, buildings and improvements used exclusively for religious, charitable or
educational purposes shall be exempt from taxation," pursuant to the Constitution,
regardless of whether or not material profits are derived from the operation of the
institutions in question. In other words, Congress may, if it deems fit to do so, impose
taxes upon such "profits", but said "lands, buildings and improvements" are beyond its
taxing power.

City Assessor of Cebu v. Association of Benevola de Cebu Inc.


G.R. No. 152904 8 June 2007

Facts: Respondent Association of Benevola de Cebu, Inc. is a non-stock, non-profit


organization organized under the laws of the Republic of the Philippines and is the
owner of Chong Hua Hospital (CHH) in Cebu City. In the late 1990's, respondent
constructed the CHH Medical Arts Center (CHHMAC). Thereafter, an April 17, 1998
Certificate of Occupancy7 was issued to the center with a classification of "Commercial
[Clinic]."
Petitioner City Assessor of Cebu City assessed the CHHMAC building as "commercial"
with a market value of Php 28,060,520 and an assessed value of Php 9,821,180 at the
assessment level of 35% for commercial buildings, and not at the 10% special
assessment currently imposed for CHH and its other separate buildings, the CHH's
Dietary and Records Departments.

Thus, respondent filed its September 15, 1998 letter-petition with the Cebu City LBAA
for reconsideration, asserting that CHHMAC is part of CHH and ought to be imposed
the same special assessment level of 10% with that of CHH.

Issue: Whether the medical arts building is liable to pay the 35% assessment level.

Ruling: Supreme Court failed to see any reason why the CHHMAC building
should be classified as "commercial" and be imposed the commercial level of 35% as it
is not operated primarily for profit but as an integral part of CHH. The CHHMAC, with
operations being devoted for the benefit of the CHH's patients, should be accorded the
10% special assessment. In this regard, we point with approbation the appellate court's
application of Sec. 216 in relation with Sec. 215 of the Local Government Code on the
proper classification of the subject CHHMAC building as "special" and not "commercial."
Secs. 215 and 216 pertinently provide:

SEC. 215. Classes of Real Property for Assessment Purposes. For purposes
of assessment, real property shall be classified as residential, agricultural,
commercial, industrial, mineral, timberland or special.

xxx

SEC. 216. Special Classes of Real Property. All lands, buildings, and
other improvements thereon actually, directly and exclusively used for
hospitals, cultural or scientific purposes, and those owned and used by local
water districts, and government-owned or controlled corporations rendering
essential public services in the supply and distribution of water and/or
generation and transmission of electric power shall be classified as
special. (Emphasis supplied.)

Thus, applying the above provisos in line with City Tax Ordinance LXX of Cebu
City, the 10% special assessment should be imposed for the CHHMAC building which
should be classified as "special."
43. TOPIC: Taxability of Income Derived from the Operation of Dormitories,
Canteens and Bookstores

CIR vs Ateneo de Manila University Inc. CTA Case Nos. 7246 & 7293 March 11,
2010
FACTS:
Respondent is a non-stock non-profit educational institution duly organized under
Philippine laws. On On July 15, 2004, respondent received petitioner's Final
Assessment Notice (FAN) dated July 13, 2004 for alleged deficiency income tax for
fiscal year ending March 31 , 2001 in the amount of P2,334,211 ,.22. Also,on
September 30, 2004, respondent received petitioner's FAN dated September 7, 2004
for alleged deficiency income tax and VAT for fiscal years ending March 31 , 2002 and
2003 and for alleged deficiency VAT for fiscal year ending March 31, 2001 in the
aggregate amount of P6,529 ,831.13. The said income were concession fees from the
operation of the schools canteen.
Respondent filed its protests but remained unacted by the petitioner. The cases
were consolidated and after trial, the first division granted Ateneos petition for review.
Both FAN were cancelled. Petitioner filed for reconsideration but was denied.

ISSUE: Whether ADMU is liable for VAT on concession fees.

RULING: NO.

There are two requirements that the educational institution must prove, that: (I) it
falls under the classification nonstock, non-profit educational institution, and (2) the
income it seeks to be exempted from taxation is used actually, directly, and exclusively
for educational purposes.

As regards the first requisite, the parties already stipulated that petitioner is a
non-stock, non-profit educational institution. Hence, no evidence is necessary to prove
the same. As regards the second requisite, Ateneo's witness, Mr. Jose P. Salvador, Jr.,
testified that the canteen in Grade School is used as a medium for teaching Preparatory
Level and Grade School students since it links the students classroom lessons with
practical applications in real life.

Also, Ms. Leonora P. Wijancho, affirmed that income from cafeteria concession
fees is commingled with the other funds that make up ' other educational income,' and
such income is made available for school operations such as salaries, employee
benefits, faculty development, supplies and expenses, new books, scholarships,
research, new equipment, and major improvements.

From the foregoing, this Court holds that petitioner has proven that the
concession fees it received for the fiscal years ending March 3 I, 200 I, March 31 , 2002,
and March 3 I, 2003 were actually, directly, and exclusively used for educational
purposes
44. NATURE OF TAX LAWS

EMILIO Y. HILADO, Petitioner, vs. THE COLLECTOR OF INTERNAL REVENUE and


THE COURT OF TAX APPEALS, Respondents
G.R. No. L-9408. October 31, 1956

Facts: Petitioner filed his income tax return for 1951 wherein he claimed the amount of
P12,837.65 as a deductible item from his gross income pursuant to General Circular
No. V-123.

Meanwhile, the Secretary of Finance, through the Collector of Internal Revenue


(CIR), issued General Circular No. V-139 which not only revoked and declared void his
General Circular No. V-123 but laid down the rule that losses of property which occurred
during the period of World War II from fires, storms, shipwreck or other casualty or from
robbery, theft, or embezzlement are deductible in the year of actual loss or destruction
of said property. As a consequence, the amount of P12,837.65 was disallowed as a
deduction and the CIR demanded from petitioner the payment of the sum of P3,546 as
deficiency income tax for said year.

It appears that petitioner claimed the deduction as a loss consisting in a portion


of his war damage claim which had been duly approved by the Philippine Was Damage
Commission under the Philippine Rehabilitation Act of 1946 but which was not paid and
never has been paid pursuant to a notice served upon him by said Commission that
said part of his claim will not be paid until the United States Congress should make
further appropriation. He claims that said amount represents a business asset within
the meaning of said Act which he is entitled to deduct as a loss in his return for 1951.

Issues:
Whether petitioners contention that during the last war and as a consequence of enemy
occupation in the Philippines there was no taxable year is meritorious?

Ruling:
The contention is without merit. It is well known that our internal revenue laws are not
political in nature and as such were continued in force during the period of enemy
occupation and in effect were actually enforced by the occupation government. As a
matter of fact, income tax returns were filed during that period and income tax payment
were effected and considered valid and legal. Such tax laws are deemed to be the laws
of the occupied territory and not of the occupying enemy.

Furthermore, it is a legal maxim, that excepting that of a political nature, Law once
established continues until changed by some competent legislative power. It is not
changed by merely change of sovereignty.
45. TOPIC: CONSTRUCTION OF TAX LAWS

COMMISSIONER OF INTERNAL REVENUE v. THE COURT OF APPEALS, THE


COURT OF TAX APPEALS and ATENEO DE MANILA UNIVERSITY
G.R. No. 115349 18 April 1997

Facts: Private respondent is a non-stock, non-profit educational institution with auxiliary


units and branches all over the Philippines. One such auxiliary unit is the Institute of
Philippine Culture (IPC), which has no legal personality separate and distinct from that
of private Respondent. The IPC is a Philippine unit engaged in social science studies of
Philippine society and culture. Occasionally, it accepts sponsorships for its research
activities from international organizations, private foundations and government
agencies.
On July 8, 1983, private respondent received from petitioner Commissioner of
Internal Revenue a demand letter assessing private respondent the sum of
P174,043.97 for alleged deficiency contractors tax, and another assessment in the sum
of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended March
31, 1978. Denying said tax liabilities, private respondent sent petitioner a letter-protest
and subsequently filed with the latter a memorandum contesting the validity of the
assessments.
On March 17, 1988, petitioner rendered a letter-decision canceling the
assessment for deficiency income tax but modifying the assessment for deficiency
contractors tax by increasing the amount due to P193,475.55. Unsatisfied, private
respondent requested for a reconsideration or reinvestigation of the modified
assessment. At the same time, it filed in the respondent court a petition for review of the
said letter-decision of the petitioner. While the petition was pending before the
respondent court, petitioner issued a final decision reducing the assessment for
deficiency contractors tax from P193,475.55 to P46,516.41, exclusive of surcharge and
interest.

Issue: Whether petitioners contention that Private Respondent Ateneo de Manila


University "falls within the definition" of an independent contractor and "is not one of
those mentioned as excepted, hence, it is properly a subject of the three percent (3%)
contractors tax levied by the foregoing provision of law.

Ruling: Supreme Court disagrees. Petitioner Commissioner of Internal Revenue erred


in applying the principles of tax exemption without first applying the well-settled doctrine
of strict interpretation in the imposition of taxes. It is obviously both illogical and
impractical to determine who are exempted without first determining who are covered by
the aforesaid provision. The Commissioner should have determined first if private
respondent was covered by Section 205, applying the rule of strict interpretation of laws
imposing taxes and other burdens on the populace, before asking Ateneo to prove its
exemption therefrom. The Court takes this occasion to reiterate the hornbook doctrine in
the interpretation of tax laws that" (a) statute will not be construed as imposing a tax
unless it does so clearly, expressly, and unambiguously. . . . (A) tax cannot be imposed
without clear and express words for that purpose. Accordingly, the general rule of
requiring adherence to the letter in construing statutes applies with peculiar strictness to
tax laws and the provisions of a taxing act are not to be extended by implication." 8
Parenthetically, in answering the question of who is subject to tax statutes, it is basic
that "in case of doubt, such statutes are to be construed most strongly against the
government and in favor of the subjects or citizens because burdens are not to be
imposed nor presumed to be imposed beyond what statutes expressly and clearly
import."

EMILIO Y. HILADO, Petitioner, vs. THE COLLECTOR OF INTERNAL REVENUE and


THE COURT OF TAX APPEALS, Respondents
G.R. No. L-9408. October 31, 1956

Facts: Petitioner filed his income tax return for 1951 wherein he claimed the amount of
P12,837.65 as a deductible item from his gross income pursuant to General Circular
No. V-123. This circular was issued pursuant to certain rules laid down by the Secretary
of Finance on the basis of said return, an assessment notice demanding the payment of
P9,419 was sent to Petitioner, who paid the tax in monthly installments, the last
payment having been made on January 2, 1953.

Meanwhile, the Secretary of Finance, through the Collector of Internal Revenue


(CIR), issued General Circular No. V-139 which not only revoked and declared void his
General Circular No. V-123 but laid down the rule that losses of property which occurred
during the period of World War II from fires, storms, shipwreck or other casualty or from
robbery, theft, or embezzlement are deductible in the year of actual loss or destruction
of said property.

It appears that petitioner claimed the deduction as a loss consisting in a portion


of his war damage claim which had been duly approved by the Philippine Was Damage
Commission under the Philippine Rehabilitation Act of 1946 but which was not paid and
never has been paid pursuant to a notice served upon him by said Commission that
said part of his claim will not be paid until the United States Congress should make
further appropriation. He claims that said amount represents a business asset within
the meaning of said Act which he is entitled to deduct as a loss in his return for 1951.

Issues: Whether the General Circular No. V-139 cannot be given retroactive effect
because that would affect and obliterate the vested right acquired under it.

Ruling: General Circular No. V-123, having been issued on a wrong construction of the
law, cannot give rise to a vested right that can be invoked by a taxpayer. The reason is
obvious: a vested right cannot spring from a wrong interpretation. This is too clear to
require and elaboration.
It seems too clear for serious argument that an administrative officer cannot
change a law enacted by Congress. A regulation that is merely an interpretation of the
statute when once determined to have been erroneous becomes nullity. An erroneous
construction of the law by the Treasury Department or the collector of internal revenue
does not preclude or estop the government from collecting a tax which is legally due.
(Ben Stocker, et al.)
Art. 2254 No vested or acquired right can arise from acts or omissions which
are against the law or which infringe upon the rights of others.

THE PEOPLE OF THE PHILIPPINES vs RAFAEL LICERA


G.R. No. L-39990 July 22, 1975

Facts: The Chief of Police of Abra de Ilog, filed a complaint with the MTC charging
Rafael Licera for possession of the Winchester rifle without the license or permit
therefor. The MTC rendered judgment finding Licera guilty of the crime charged. Licera
appealed to the CFI. In the Court of First Instance, the parties agreed to joint trial of the
case for illegal possession of firearm and for assault upon an agent of a person in
authority. The court a quo rendered judgment acquitting Licera of the charge of assault
upon an agent of a person in authority, but convicting him of illegal possession of
firearm, Licera's appeal to the CA. Licera invokes as his legal justification for his
possession of the Winschester rifle his appointment as secret agent. He claims that as
secret agent, he was a "peace officer and thus, exempt from the requirements relating
to the issuance of license to possess firearms.

Issue: Whether or not Licera as a secret agent is exempt from license or permit.

Ruling: Yes. The appointment of a civilian as a "secret agent to assist in the


maintenance of peace and order campaigns and detection of crimes sufficiently put him
within the category of a "peace officer" equivalent even to a member of the municipal
police" whom section 879 of the Revised Administrative Code exempts from the
requirements relating to firearm licenses. Article 8 of the Civil Code of the Philippines
decrees that judicial decisions applying or interpreting the laws or the Constitution form
part of this jurisdiction's legal system. These decisions, although in themselves not laws,
constitute evidence of what the laws mean. The application or interpretation placed by
the Court upon a law is part of the law as of the date of the enactment of the said law
since the Court's application or interpretation merely establishes the contemporaneous
legislative intent that the construed law purports to carry into effect.

Banas vs CA GR No. 102967 February 10, 2000

FACTS:
In February 1976, petitioner sold land to AYALA Land to which the latter paid
cash and the remaining balance in 4 equal installments. The former received a
promissory note from AYALA covering the four installments. Petitioner then discounted
the notes with AYALA on the same day.
In the petitioners 1976 tax return he only declared as income from sale of capital
asset the initial payment in cash he received from AYALA. During audit, BIR found out
that there was no outstanding receivable by petitioner from AYALA, hence they
concluded that the sale was cash and that the entire proceeds should have been
declared as income for 1976. Petitioner countered that the sale was installment.
BIR recommended deficiency tax assessment. Still petitioner insisted that the
sale was on installment. Later on, Larin, representing BIR filed criminal action against
petitioner for tax evasion. Two weeks after the filing of the tax evasion complaint,
petitioner availed of the tax amnesty under PD 1740. He again availed of tax amnesty
under PD 1840. His disclosures still excluded the sale to AYALA as he insisted that it
was on installment. He claimed that the filing of criminal complaints against him for
violation of tax laws were improper because he had already availed of two tax amnesty
decrees, Presidential Decree Nos. 1740 and 1840
RTC ruled in favor of respondents as well as the CA. Hence this petition

ISUUE: Whether the petitioner is immune from tax suits under the shield of availing tax
amnesty.

RULING: NO.

The mere filing of tax amnesty return under PD 1740 and 1840 does not ipso
facto shield him from immunity against prosecution. Tax amnesty is a general pardon to
taxpayers who wants to start a clean tax slate. It also gives the government a chance to
collect uncollected tax from tax evaders without having to go through the tedious
process of a tax case. To avail of a tax amnesty granted by the government, and to be
immune from suit on its delinquencies, the taxpayer must have voluntarily disclosed his
previously untaxed income and must have paid the corresponding tax on such
previously untaxed income. Petitioner did not meet this twin requirement.
A tax amnesty, much like a tax exemption, is never favored nor presumed in law
and if granted by statute, the terms of the amnesty like that of a tax exemption must be
construed strictly against the taxpayer and liberally in favor of the taxing authority.
Hence, on this matter, it is our view that petitioners claim of immunity from prosecution
under the shield of availing tax amnesty is untenable