HILADO V CIR

FACTS:

 On March 31, 1952, Hilado filed his ITR 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 issued by the
CIR.
 On August 30, 1952, the Secretary of Finance, through the CIR,
issued Gen. 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 are deductible in the year of actual loss or destruction of
said property.
 As a consequence, the amount claimed by Hilado was disallowed
as a deduction from his gross income for 1951 and the CIR
demanded from him the payment of the sum of P3,546 as
deficiency income tax for said year.

ISSUE:

 Whether the Internal Revenue Laws can be enforced during the

war.

RULING:

 YES. 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.

CALTEX PHIL. V. COA

Facts:

 On Feb. 2, 1989, COA sent a letter to Caltex directing them

to remit to the OPSF its collection, excluding the unremitted
for the years 1986 and 1988, of the additional tax on
petroleum products authorized under Sec. 8 of P.D. No.
1956, and informing it that, pending such remittance, all of
its claims for reimbursement from the OPSF shall be held in
abeyance.
 Caltex submitted a proposal to COA for the payment and
recovery of claims. COA approved the proposal but
prohibited Caltex from further offsetting remittances and
reimbursements for the current and ensuing years. Caltex
moved for reconsideration but was denied. Hence, the
present petition.

Issue:

 Whether the amounts due from Caltex to the OPSF may be

offsetted against Caltex’s outstanding claims from said funds.

Ruling:

NO. Taxation is no longer envisioned as a measure merely to raise

revenue to support the existence of government. Taxes may be levied
with a regulatory purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected with public
interest as to be within the police power of the State.

PD 1956, as amended by EO 137, explicitly provides that the source of

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

Hence, COA decision is affirmed except that Caltex’s claim for

reimbursement of underrecovery arising from sales to the National
Power Corporation is allowed.

LUTZ v ARANTEA

Facts:

 Lutz, as Judicial Admin of the Intestate Estate of Ledesma, seeks

to recover from the CIR the sum of P14,666.40 paid by the estate
as taxes; alleging that such tax is unconstitutional and void, being
levied for the aid and support of the sugar industry exclusively
which in his opinion is not a public purpose for which a tax may be
constitutionally levied.

Issue:

Whether the Sugar Adjustment Act is constitutional and for public

purpose.

Ruling:
YES. The protection and promotion of the sugar industry is a matter
of public concern, it follows that the Legislature may determine
within reasonable bounds what is necessary for its protection and
expedient for its promotion.

Here, the legislative discretion must be allowed to fully play, subject

only to the test of reasonableness; and it is not contended that the
means provided in the law bear no relation to the objective pursued
or are oppressive in character. If objective and methods are alike
constitutionally valid, no reason is seen why the state may not levy
taxes to raise funds for their prosecution and attainment. Taxation
may be made the implement of the state's police power.