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GENERAL PRINCIPLES

Issue:
• Concept, Nature and Characteristics of • Whether or not Citytrust is indeed entitled to a tax refund.
Taxation and Taxes
Held:
1.COMMISSIONER OF INTERNAL REVENUE vs. COURT OF TAX • No, the case is remanded back to the Court of Tax Appeals for
APPEALS further proceedings.
G.R. No. 106611, July 21, 1994 • The BIR, represented by the Commissioner, was denied a day in
"The Government cannot be estopped in matters of taxes" court by reason of mistakes and/or negligence of its employees.
• The unavailability of the necessary records which were not
Facts: transmitted by the Refund Audit Division of the BIR to said counsel,
• On August 26, 1986, Citytrust Banking Corporation filed for a claim as well as the investigation report despite repeated requests,
of refund with the BIR for the amount of P19,971,745. constrained the petitioner's counsel to subkit the case for decision
• On August 28, 1986, in order to interrupt the prescription, Citytrust on Feb. 20, 1991.
filed a petition with the CTA, claiming the refund of its overpayment • It is a long and firmly established rule that the Government is
for the years 1983, 1984 and 1985 in the total amount of not bound by the errors committed by its agents. Nowhere is
19,971,745. the aforestated rule more true than in the field of taxation. It is
• The Solicitor General, in behalf of the Commissioner, opposed axiomatic that the Government cannot and must not be
such claims arguing that the mer averment of Citytrust suffering a estopped particularly in matters involving taxes.
net loss in 1985 does not ipso facto merit a refund; and that the • Taxes are the lifeblood of the nation through which the
amounts claimed by Citytrust on the 1983 overpayment are not government agencies continue to operate and with which the
properly documented; and that assuming that petitioner is entitled State effects its functions for the welfare of its constituents.
to refund, the same has prescribed with respect to income (Lifeblood Doctrine)
payments prior to August 28, 1984. • Further, it also worth noting that the CTA erred in denying
• On February 20, 1991, the case was submitted for decision. The petitioner's supplemental motion alleging the deficiency income
Commissioner of Internal Revenue could not present any evidence and business tax assessment against Citytrust .
by reason of repeated failure of the Tax Credit/Refund Division of • The fact of such deficiency is intimately related with the right if the
the BIR To transmit the record of the case, as well as the respondent bank to claim a refund for the same year.
investigation report thereon, to the SolGen. • Private Respondent cannot be entitled to refund and at the same
• The said Court rendered a decision in favor of Citytrust granting time be liable for a tax deficiency.
him a refund in the amount of P13,314,506.14 • The grant of refund is founded on the assumption that the tax
• A motion for reconsideration was filed by the SolGen, in addition a return is valid - the facts stated therein are true and correct.
supplemental motion was also filed contending for the first time • The deficiency assessment, although not yet final, created a doubt
that Citytrust had outstanding deficiency taxes. It was alleged that and constitutes a challenge against the truth and accuracy of the
through an inter-office memorandum dated August 8, 1991, he facts stated in the return which cannot be the basis for the grant of
came to know only lately that Citytrust had outstanding tax refund.
liabilities for 1984 in the amount of 56,588,740.91 representing
deficiency income and business taxes.
• The CTA issued a resolution denying the motion, consequently,
petitioner filed a petition for review with the CA, which the latter
affirmed the judgment of the former.
2. COMMISSIONER OF INTERNAL REVENUE vs. when the assessment is already being questioned in a court of
CEBU PORTLAND CEMENT COMPANY and COURT OF TAX justice but more so if, as in the instant case, the challenge to the
APPEALS assessment is still-and only-on the administrative level. There is
G.R. No. L-29059 December 15, 1987 all the more reason to apply the rule here because it appears
FACTS: that even after crediting of the refund against the tax deficiency,
• By virtue of a decision of the Court of Tax Appeals rendered on a balance of more than P 4 million is still due from the private
June 21, 1961, as modified on appeal by the Supreme Court on respondent.
February 27, 1965, the Commissioner of Internal Revenue was
ordered to refund to the Cebu Portland Cement Company the
amount of P359,408.98, representing overpayments of ad 3. REYES vs. ALMANZOR
valorem taxes on cement produced and sold by it after October G.R. Nos. L-49839-46, April 26, 1991
1957. "The power to tax is restricted by the provisions of the Constitution."
• On March 28, 1968, following denial of motions for
reconsideration filed by both the petitioner and the private Facts:
respondent, the latter moved for a writ of execution to enforce • Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are
the said judgment. owners of parcels of land situated in Tondo and Sta. Cruz Districts,
• The motion was opposed by the petitioner on the ground that the City of Manila, which are leased and entirely occupied as dwelling
private respondent had an outstanding sales tax liability to which sites by tenants. Said tenants were paying monthly rentals not
the judgment debt had already been credited. In fact, it was exceeding three hundred pesos (P300.00) in July, 1971.
stressed, there was still a balance owing on the sales taxes in • On July 14, 1971, the National Legislature enacted Republic Act
the amount of P 4,789,279.85 plus 28% surcharge. No. 6359 prohibiting for one year from its effectivity, an increase in
• On April 22, 1968, the Court of Tax Appeals granted the motion, monthly rentals of dwelling units or of lands on which another's
holding that the alleged sales tax liability of the private dwelling is located, where such rentals do not exceed three
respondent was still being questioned and therefore could not be hundred pesos (P300.00) a month but allowing an increase in rent
set-off against the refund. by not more than 10% thereafter.
• The said Act also suspended paragraph (1) of Article 1673 of the
ISSUE: Whether or not the judgment debt can be enforced against Civil Code for two years from its effectivity thereby disallowing the
private respondent’s sales tax liability, the latter still being ejectment of lessees upon the expiration of the usual legal period
questioned. of lease. On October 12, 1972, Presidential Decree No. 20
amended R.A. No. 6359 by making absolute the prohibition to
RULING: increase monthly rentals below P300.00 and by indefinitely
• The argument that the assessment cannot as yet be enforced suspending the aforementioned provision of the Civil Code,
because it is still being contested loses sight of the urgency of excepting leases with a definite period.
the need to collect taxes as "the lifeblood of the government." If • Consequently, the Reyeses, petitioners herein, were precluded
the payment of taxes could be postponed by simply questioning from raising the rentals and from ejecting the tenants.
their validity, the machinery of the state would grind to a halt and • In 1973, respondent City Assessor of Manila re-classified and
all government functions would be paralyzed. reassessed the value of the subject properties based on the
• The Tax Code provides: Sec. 291. Injunction not available to schedule of market values duly reviewed by the Secretary of
restrain collection of tax. - No court shall have authority to grant Finance. The revision, as expected, entailed an increase in the
an injunction to restrain the collection of any national internal corresponding tax rates prompting petitioners to file a
revenue tax, fee or charge imposed by this Code. Memorandum of Disagreement with the Board of Tax Assessment
• It goes without saying that this injunction is available not only Appeals.
• They averred that the reassessments made were "excessive, • Taxation is said to be equitable when its burden falls on those
unwarranted, inequitable, confiscatory and unconstitutional" better able to pay. Taxation is progressive when its rate goes
considering that the taxes imposed upon them greatly exceeded up depending on the resources of the person affected.
the annual income derived from their properties. They argued that • The power to tax "is an attribute of sovereignty". In fact, it is
the income approach should have been used in determining the the strongest of all the powers of government.
land values instead of the comparable sales approach which the • But for all its plenitude the power to tax is not unconfined as
City Assessor adopted. there are restrictions. Adversely effecting as it does property
• The Board of Tax Assessment Appeals, however, considered the rights, both the due process and equal protection clauses of
assessments valid. the Constitution may properly be invoked to invalidate in
• The Reyeses appealed to the Central Board of Assessment appropriate cases a revenue measure.
Appeals. • In the same vein, the due process clause may be invoked
• The Board of Hearing Commissioners conducted an ocular where a taxing statute is so arbitrary that it finds no support in
inspection with the presence of two representatives of the City the Constitution.
Assessor prior to the hearing of the case. Neither the owners nor • The taxing power has the authority to make a reasonable and
their authorized representatives were present during the said natural classification for purposes of taxation but the
ocular inspection despite proper notices served them. It was found government's act must not be prompted by a spirit of hostility,
that certain parcels of land were below street level and were or at the very least discrimination that finds no support in
affected by the tides. reason. It suffices then that the laws operate equally and
• On June 10, 1977, the Central Board of Assessment Appeals uniformly on all persons under similar circumstances or that
rendered its decision, modifying the Board and allowed a 20% all persons must be treated in the same manner, the
reduction of the market values for the lots covered by Tax conditions not being different both in the privileges conferred
Declaration Nos. (1430) PD-1432, PD-1509, 146 and (1) PD-266. and the liabilities imposed.
• The Reyeses filed a motion for reconsideration which was • Finally under the Real Property Tax Code (P.D. 464 as amended),
subsequently denied, hence the instant petition. it is declared that the first Fundamental Principle to guide the
appraisal and assessment of real property for taxation purposes is
Issue: that the property must be "appraised at its current and fair market
• Whether or not the adoption of the "comparable sales method" by value."
the board in fixing the assessed value of the appellants was proper • By no strength of the imagination can the market value of
properties covered by P.D. No. 20 be equated with the market
Held: value of properties not so covered. The former has naturally a
• NO. It is unquestionable that both the "Comparable Sales much lesser market value in view of the rental restrictions.
Approach" and the "Income Approach" are generally acceptable • Ironically, in the case at bar, not even the factors determinant of the
methods of appraisal for taxation purposes. However, it is assessed value of subject properties under the "comparable sales
conceded that the propriety of one as against the other would of approach" were presented by the public respondents, namely: (1)
course depend on several factors. that the sale must represent a bonafide arm's length transaction
• Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then between a willing seller and a willing buyer and (2) the property
enforced, the rule of taxation must not only be uniform, but must be comparable property.
must also be equitable and progressive. • Nothing can justify or support their view as it is of judicial notice
• Uniformity has been defined as that principle by which all that for properties covered by P.D. 20 especially during the time in
taxable articles or kinds of property of the same class shall be question, there were hardly any willing buyers. As a general rule,
taxed at the same rate. there were no takers so that there can be no reasonable basis for
the conclusion that these properties were comparable with other the original insurances in the Philippines were performed in the
residential properties not burdened by P.D. 20. Philippines. The reinsurance premiums were income created
• Taxes are the lifeblood of the government and so should be from the undertaking of the foreign reinsurance companies to
collected without unnecessary hindrance. However, such collection reinsure Philippine Guaranty Co., Inc. against liability for loss
should be made in accordance with law as any arbitrariness will under original insurances. Such undertaking, as explained
negate the very reason for government itself It is therefore above, took place in the Philippines. These insurance premiums
necessary to reconcile the apparently conflicting interests of the therefore came from sources within the Philippines and, hence,
authorities and the taxpayers so that the real purpose of taxations, are subject to corporate income tax.
which is the promotion of the common good, may be achieved. • The power to lax is an attribute of sovereignty. It is a power
emanating from necessity. It is a necessary burden to preserve
the State's sovereignty and a means to give the citizenry an
army to resist an aggression, a navy to defend its shores from
4. PHIL. GUARANTY CO. INC. VS COMM. OF INTERNAL invasion, a corps of civil servants to serve, public improvements
REVENUE (CIR) designed for the enjoyment of the citizenry and those which
GR NO. L-22074 April 30, 1965 come within the State's territory, and facilities and protection
which a government is supposed to provide. Considering that
FACTS:
• The Phil. Guaranty (petitioners), a domestic insurance company, the reinsurance premiums in question were afforded
protection by the government and the recipient foreign
entered into reinsurance contracts with foreign insurance reinsurers exercised rights and privileges guaranteed by
companies not doing business in the Philippines, thereby ceding our laws, such reinsurance premiums and reinsurers should
to the foreign reinsurers a portion of the premiums on insurances share the burden of maintaining the state.
it has originally underwritten in the Philippines.
• Phi. Guaranty ceded to the foreign reinsurers the premiums for
1953 and 1954. Said premiums were excluded by Phil. Guaranty 5. COMMISSIONER OF INTERNAL REVENUE vs.
from its gross income when it filed its income tax returns for 1953 ALGUE and THE COURT OF TAX APPEALS
and 1951. Furthermore, it did not withhold or pay tax on them.
• Consequently, the Commissioner of Internal Revenue G.R. No. L-28896 February 17, 1988
FACTS:
(respondent) assessed Phil. Guaranty against withholding tax on • The Philippine Sugar Estate Development Company had earlier
the ceded reinsurance premiums.
• Phil. Guaranty protested the assessment on the ground that the appointed Algue as its agent, authorizing it to sell its land,
factories and oil manufacturing process. Pursuant to such
premiums are not subject to tax for the premiums did not authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel
constitute income from sources within the Philippines because Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the
the foreign reinsurers did not engage in business in the formation of the Vegetable Oil Investment Corporation, inducing
Philippines and CIR's previous rulings did not require insurance other persons to invest in it. Ultimately, after its incorporation
companies to withhold income tax due from foreign companies. largely through the promotion of the said persons, this new
corporation purchased the PSEDC properties. For this sale,
ISSUE: W/N insurance companies required to withhold tax on Algue received as agent a commission of P126,000.00, and it
reinsurance premiums ceded to foreign insurance companies was from this commission that the P75,000.00 promotional fees
were paid to the aforenamed individuals.
RULING: • The petitioner contends that the claimed deduction of
• YES. The reinsurance contracts however show that the
P75,000.00 was properly disallowed because it was not an
transactions or activities that constituted the undertaking to ordinary reasonable or necessary business expense. The Court
reinsure Philippine Guaranty Co., Inc. against losses arising from
of Tax Appeals had seen it differently. Agreeing with Algue, it held basis, on each picul of sugar manufactures; while section 3
that the said amount had been legitimately paid by the private levies on owners or persons in control of lands devoted to the
respondent for actual services rendered. The payment was in the cultivation of sugar cane and ceded to others for a consideration,
form of promotional fees. on lease or otherwise.
• Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of
ISSUE: Whether or not the Collector of Internal Revenue correctly the Intestate Estate of Antonio Jayme Ledesma, seeks to
disallowed the P75,000.00 deduction claimed by private respondent recover from the Collector of Internal Revenue the sum of
Algue as legitimate business expenses in its income tax returns. P14,666.40 paid by the estate as taxes, under section 3 of the
Act, for the crop years 1948-1949 and 1949-1950; alleging that
RULING: such tax is unconstitutional and void, being levied for the aid and
• The Supreme Court agrees with the respondent court that the support of the sugar industry exclusively, which in plaintiff's
amount of the promotional fees was not excessive. The amount opinion is not a public purpose for which a tax may be
of P75,000.00 was 60% of the total commission. This was a constitutionally levied. The action having been dismissed by the
reasonable proportion, considering that it was the payees who Court of First Instance, the plaintiffs appealed the case directly to
did practically everything, from the formation of the Vegetable Oil this Court
Investment Corporation to the actual purchase by it of the Sugar
Estate properties. ISSUE: Whether or not taxes imposed by Commonwealth Act No.
• It is said that taxes are what we pay for civilization society. 567, otherwise known as the Sugar Adjustment Act is legal?
Without taxes, the government would be paralyzed for lack of the
motive power to activate and operate it. Hence, despite the RULING:
natural reluctance to surrender part of one's hard earned income • As the protection and promotion of the sugar industry is a matter
to the taxing authorities, every person who is able to must of public concern the Legislature may determine within
contribute his share in the running of the government. reasonable bounds what is necessary for its protection and
expedient for its promotion. Here, the legislative must be allowed
full play, subject only to the test of reasonableness; and it is not
6. LUTZ vs. ARANETA contended that the means provided in section 6 of
G.R. No. L-7859 December 22, 1955 Commonwealth Act No. 567 bear no relation to the objective
pursued or are oppressive in character. If objective and methods
FACTS: are alike constitutionally valid, no reason is seen why the state
• Promulgated in 1940, the law in question opens (section 1) with may not levy taxes to raise funds for their prosecution and
a declaration of emergency, due to the threat to our industry by attainment. Taxation may be made the implement of the state's
the imminent imposition of export taxes upon sugar as provided police power.
in the Tydings-McDuffie Act, and the "eventual loss of its • It is inherent in the power to tax that a state be free to select the
preferential position in the United States market"; wherefore, the subjects of taxation, and it has been repeatedly held that
national policy was expressed "to obtain a readjustment of the "inequalities which result from a singling out of one particular
benefits derived from the sugar industry by the component class for taxation or exemption infringe no constitutional
elements thereof" and "to stabilize the sugar industry so as to limitation
prepare it for the eventuality of the loss of its preferential position
in the United States market and the imposition of the export
taxes."
• In section 2, Commonwealth Act 567 provides for an increase of
the existing tax on the manufacture of sugar, on a graduated
7. GOMEZ vs. PALOMAR implementing administrative orders issued, contending that it
G.R. No. L-23645, October 29, 1968 violates the equal protection clause of the Constitution as well as
FACTS: the rule of uniformity and equality of taxation. The lower court
• Republic Act 1635 as amended by Republic Act 2631 provides declared the statute and the orders unconstitutional; hence this
o To help raise funds for the Philippine Tuberculosis appeal by the respondent postal authorities.
Society, the Director of Posts shall order for the period • Petitioner argues that the statute is violative of the equal
from August nineteen to September thirty every year the protection clause of the Constitution. More specifically the claim
printing and issue of semi-postal stamps of different is made that it constitutes mail users into a class for the purpose
denominations with face value showing the regular of the tax while leaving untaxed the rest of the population and
postage charge plus the additional amount of five that even among postal patrons the statute discriminatorily
centavos for the said purpose grants exemption to newspapers while Administrative Order 9 of
o During the said period, no mail matter shall be accepted the respondent Postmaster General grants a similar exemption
in the mails unless it bears such semi-postal stamps to offices performing governmental functions. .
o Provided, That no such additional charge of five • He further argues that the Tax is not for public purpose since no
centavos shall be imposed on newspapers. special benefits accrue to mail users as taxpayers, and, it
o The additional proceeds realized from the sale of the violates the rule of uniformity of taxation
semi-postal stamps shall constitute a special fund and
be deposited with the National Treasury to be expended ISSUE: (1) Whether or not the implementing administrative orders
by the Philippine Tuberculosis Society in carrying out its issued violates the equal protection clause of the Constitution as well
noble work to prevent and eradicate tuberculosis. as the rule of uniformity and equality of taxation?
• The Postmaster issued 4 Administrative Orders. One Order (2) Whether or not the tax is not for public purpose?
stated that no mail matter of whatever class and whether (3) Whether or not it violates the rule of uniformity of taxation?
domestic or foreign, posted at any Philippine Post Office and
addressed for delivery domestically or abroad will be accepted RULING:
unless it bears the semi-postal stamp showing the additional • (1) NO. It is inherent in the power of legislature to select subjects
value of five centavos for the Philippine Tuberculosis of taxation and to grant exemptions. They may also create
Society. classes of individuals to be taxed.
• Admin Order 3, exempts “Government and its Agencies and • Indeed, it is said that in the field of taxation, more than in other
Instrumentalities Performing Governmental Functions.” From the areas, the legislature possesses the greatest freedom in
5 centavo stamp. Admin Order. 10 also exempts copies of classification. 6 The reason for this is that traditionally,
periodical publications received for mailing under any class of classification has been a device for fitting tax programs to local
mail matter, including newspapers and magazines admitted as needs and usages in order to achieve an equitable distribution of
second-class mail. the tax burden.7
• On September l5, 1963 the petitioner Benjamin P. Gomez mailed • the classification of mail users is not without any reason. It is
a letter at the post office in San Fernando, Pampanga. Because based on ability to pay, let alone the enjoyment of a privilege,
this letter, addressed to a certain Agustin Aquino of 1014 and on administrative convinience. In the allocation of the tax
Dagohoy Street, Singalong, Manila did not bear the special anti- burden, Congress must have concluded that the contribution to
TB stamp required by the statute, it was returned to the the anti-TB fund can be assured by those whose who can afford
petitioner. the use of the mails.
• In view of this development, the petitioner brough suit for • The classification is likewise based on considerations of
declaratory relief in the Court of First Instance of Pampanga, to administrative convenience. For it is now a settled principle of
test the constitutionality of the statute, as well as the law that "consideration of practical administrative convenience
and cost in the administration of tax laws afford adequate ground 8. CHAVEZ vs. ONGPIN
for imposing a tax on a well recognized and defined class." In the G.R. No. 76778 June 6, 1990
case of the anti-TB stamps, undoubtedly, the single most
important and influential consideration that led the legislature to FACTS:
select mail users as subjects of the tax is the relative ease and • For purposes of real property taxation, a general revision of
convenience of collecting the tax through the post offices. The assessment was completed in 1984 based on Sec. 21 of PD 464
small amount of five centavos does not justify the great expense which provides for a continuing process of revising assessments
and inconvenience of collecting through the regular means of once every 5 years. Previously, Real Property Tax (RPT) is
collection. On the other hand, by placing the duty of collection on based on 1978 values.
postal authorities the tax was made almost self-enforcing, with
as little cost and as little inconvenience as possible. SEC. 21. General Revision of Assessments. — Beginning
• As for the Government and its instrumentalities, their exemption with the calendar year 1978,, the provincial or city assessor shall
rests on the State's sovereign immunity from taxation. The State make a general revision of real property assessments in the
cannot be taxed without its consent and such consent, being in province or city to take effect January 1, 1979, and once every
derogation of its sovereignty, is to be strictly construed. five years thereafter: Provided; however, That if property values
Administrative Order 9 of the respondent Postmaster General, in a province or city, or in any municipality, have greatly changed
which lists the various offices and instrumentalities of the since the last general revision, the provincial or city assessor
Government exempt from the payment of the anti-TB stamp, is a may, with the approval of the Secretary of Finance or upon his
restatement of this well-known principle of constitutional law. direction, undertake a general revision of assessments in the
• (2) NO. The eradication of a dreaded disease is a public province or city, or in any municipality before the fifth year from
purpose, but if by public purpose the petitioner means benefit to the effectivity of the last general revision.
a taxpayer as a return for what he pays, then it is sufficient
answer to say that the only benefit to which the taxpayer is • EO 1019 was issued in 1985, deferring the implementation of the
constitutionally entitled is that derived from his enjoyment of the increase in RPT resulting from the revised assessments, from
privileges of living in an organized society, established and Jan. 1, 1985 to Jan. 1, 1988. This is due to government’s
safeguarded by the devotion of taxes to public purposes. Nor is recognition of the financial burden to the taxpayers that will result
the money taxed to be given to a private organization (Philippine from an increase in real property taxes (increase in values =
Tuberculosis Society) as claimed by the Trial Courtthe Society is increase in taxes).
merely an agency by the State to carry out a public function. The • EO 73, the subject of this case, was subsequently issued in 1986
money is a special fund that does not need appropriation by law changing the date of implementation of the 1984 values from
• (3) NO. the rule of uniformity and equality of taxation infringed Jan. 1, 1988 to Jan. 1, 1987 (thus repealing EO 1019 by
by the imposition of a flat rate rather than a graduated tax. A tax shortening the period of suspension). This finds justification in its
need not be measured by the weight of the mail or the extent of whereas clause which states that the local government units
the service rendered. We have said that considerations of were deprived of an additional revenue as a result of the
administrative convenience and cost afford an adequate ground suspension brought about by EO 1019.
for classification. The same considerations may induce the • Petitioner Chavez assails the constitutionality of EO 73 alleging
legislature to impose a flat tax which in effect is a charge for the that said order accelerated the implementation of the 1984
transaction, operating equally on all persons within the class values, mandating an excessive increase in real property taxes
regardless of the amount involved. by 100% to 400% on improvements, and up to 100% on land
which results to oppression at a period of time when harsh
economic conditions prevail.
• The intervenor Realty Owners Association of the Philippines, Inc. the lapse of fifteen days from the date of receipt of the
(ROAP), which is the national association of owners-lessors, decision.
joins Chavez in his petition to declare unconstitutional EO 73, but • Chavez argues further that the unreasonable increase in real
additionally alleges that PD 464 is unconstitutional. property taxes brought about by Executive Order No. 73
amounts to a confiscation of property repugnant to the
ISSUE: Whether or not EO 73 is unconstitutional constitutional guarantee of due process, invoking the cases
of Ermita-Malate Hotel, et al. v. Mayor of Manila and Sison v.
RULING: NO Ancheta, et al.
SC: The reliance on these two cases is certainly misplaced
• RATIO RELATED TO TOPIC: because the due process requirement called for therein
Without EO 73, the basis for collection of real property applies to the "power to tax." EO 73 does not impose new
taxes will still be the 1978 revision of property values. taxes nor increase taxes.
Certainly, to continue collecting real property taxes
based on valuations arrived at several years ago, in (Aubbrey)
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 9. RENATO V. DIAZ and AURORA MA. F. TIMBOL V. THE
the characteristics of a sound tax system, requires that SECRETARY OF FINANCE and THE COMMISSIONER OF
sources of revenues must be adequate to meet INTERNAL REVENUE
government expenditures and their variations. G.R. No. 193007, July 19, 2011

• The attack on EO 73 has no legal basis as the general FACTS:


revision of assessments is a continuing process mandated
by Section 21 of PD 464. If at all, it is PD 464 which should • Petitioners claim that they have an interest as regular users of
be challenged as constitutionally infirm. However, Chavez tollways in stopping the BIR action.
failed to raise any objection against said decree. It was • Diaz – sponsored the approval of Republic Act 7716 (EVAT Law)
ROAP which questioned the constitutionality thereof. and Republic Act 8424 (NIRC) at the House of Representatives.
Unfortunately for ROAP, its allegation that PD 464 is • Timbol – served as Assistant Secretary of the DTI and
unconstitutional is not proper to be resolved in the present consultant of the Toll Regulatory Board (TRB) in the past
petition. As a general rule, an intervention is limited to the administration.
field of litigation open to the original parties. • Petitioners allege that BIR attempted during the administration of
• Furthermore, PD 464 furnishes the procedure by which a tax President GMA to impose VAT on toll fees.
assessment may be questioned: • The imposition was deferred.
Within 60 days from the date of receipt of the, written notice • Upon President Noynoy’s assumption of office in 2010, the BIR
of assessment, any owner who doubts the assessment of his revived the idea and would impose the challenged tax on toll
property, may appeal to the Local Board of Assessment fees beginning August 16, 2010 unless judicially enjoined.
Appeals. In case the, owner or administrator of the property • Petitioners hold the view that—
or the assessor is not satisfied with the decision of the Local o Congress did not intend to include toll fees within the
Board of Assessment Appeals, he may, within 30 days from meaning of “sale of services” that are subject to VAT
the receipt of the decision, appeal to the Central Board of o Toll fee is a “user’s tax,” not a sale of services;
Assessment Appeals. The decision of the Central Board of o To impose VAT on toll fees would amount to a tax on
Assessment Appeals shall become final and executory after public service;
o Since VAT was never factored into the formula for specific class described in Section 108 as “all other
computing toll fees, its imposition would violate the non- franchise grantees” who are subject to VAT, “except
impairment clause of the constitution those under Section 119 of this Code.”
• Court issued a TRO, enjoining the implementation of the VAT. • VAT on tollway operations cannot be deemed a tax on tax due to
• OSG filed the government’s comment. the nature of VAT as an indirect tax.
• The government avers— o VAT is assessed against the tollway operator’s gross
o that the NIRC imposes VAT on all kinds of services of receipts and not necessarily on the toll fees. Although
franchise grantees, including tollway operations, except the tollway operator may shift the VAT burden to the
where the law provides otherwise; tollway user, it will not make the latter directly liable for
o that the Court should seek the meaning and intent of the the VAT. The shifted VAT burden simply becomes part of
law from the words used in the statute; and the toll fees that one has to pay in order to use the
o that the imposition of VAT on tollway operations has tollways.
been the subject as early as 2003 of several BIR rulings o MIAA v. Court of Appeals does not apply. Also, the Court
and circulars. emphasized that toll fees are not taxes since they are
• Petitioners point out that tollway operators cannot be regarded not assessed by the BIR and do not go the general
as franchise grantees under the NIRC since they do not hold coffers of the government.
legislative franchises. o Toll fees are collected by private operators as
reimbursement for their costs and expenses with a view
ISSUE: to a profit while taxes are imposed by the government as
an attribute of its sovereignty. Even if the toll fees were
Whether or not toll fees collected by tollway operators may be treated as user’s tax, the VAT can not be deemed as a
subjected to value-added tax. ‘tax on tax’ since the VAT is imposed on the tollway
operator and the fact that it might pass-on the same to
RULING: the tollway user, it will not make the latter directly liable
for VAT since the shifted VAT simply becomes part of the
YES. Toll fees collected by tollway operators may be subjected cost to use the tollways.
to value-added tax. • Administrative feasibility is one of the canons of a sound tax
• Section 108 1 of the NIRC imposes VAT on “all kinds of services” system. It simply means that the tax system should be capable
rendered in the Philippines for a fee, including those specified in of being effectively administered and enforced with the least
the list. inconvenience to the taxpayer. Non-observance of the canon,
o Every activity that can be imagined as a form of “service” however, will not render a tax imposition invalid “except to the
rendered for a fee should be deemed included unless extent that specific constitutional or statutory limitations are
some provision of law especially excludes it. impaired.“
o VAT is imposed on “all kinds of services” and tollway o Even if the imposition of VAT on tollway operations may
operators who are engaged in constructing, maintaining, seem burdensome to implement, it is not necessarily
and operating expressways are no different from lessors invalid unless some aspect of it is shown to violate any
of property, transportation contractors, etc. law or the Constitution.
o Not only do tollway operators come under the broad
term “all kinds of services,” they also come under the

1 “…services of franchise grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise grantees except those
under Section 119 of this Code…”
• Classifications and Distinctions 11. ESSO STANDARD EASTERN, INC v. COMMISSIONER OF
INTERNAL REVENUE
G.R. Nos. L-28508-9, July 7, 1989
10. ASSOCIATION OF CUSTOM BROKERS, INC. vs. MUNICIPAL
BOARD
FACTS:
G.R. No. L-4376 May 22, 1953 • In CTA Case No. 1251, Esso Standard Eastern Inc. (Esso)
deducted from its gross income for 1959, as part of its ordinary
FACTS:
• The Association of Customs Brokers, Inc., which is composed of and necessary business expenses, the amount it had spent for
drilling and exploration of its petroleum concessions. This claim
all brokers and public service operators of motor vehicles in the
was disallowed by the Commissioner of Internal Revenue (CIR)
City of Manila challenge the validity Ordinance No. 3379 on the
on the ground that the expenses should be capitalized and might
ground that (1) while it levies a so-called property tax it is in
be written off as a loss only when a "dry hole" should result. Esso
reality a license tax which is beyond the power of the Municipal
then filed an amended return where it asked for the refund of
Board of the City of Manila; (2) said ordinance offends against
P323,279.00 by reason of its abandonment as dry holes of
the rule of uniformity of taxation; and (3) it constitutes double
several of its oil wells. Also claimed as ordinary and necessary
taxation.
• The respondents contend on their part that the challenged expenses in the same return was the amount of P340,822.04,
representing margin fees it had paid to the Central Bank on its
ordinance imposes a property tax which is within the power of
profit remittances to its New York head office.
the City of Manila to impose under its Revised Charter [Section • On August 5, 1964, the CIR granted a tax credit of P221,033.00
18 (p) of Republic Act No. 409], and that the tax in question
only, disallowing the claimed deduction for the margin fees paid
does not violate the rule of uniformity of taxation, nor does it
on the ground that the margin fees paid to the Central Bank
constitute double taxation.
could not be considered taxes or allowed as deductible business
expenses.
ISSUE: Whether or not the ordinance is null and void • Esso appealed to the Court of Tax Appeals (CTA) for the refund
of the margin fees it had earlier paid contending that the margin
RULING:
• The ordinance infringes the rule of the uniformity of taxation fees were deductible from gross income either as a tax or as an
ordinary and necessary business expense. However, Esso’s
ordained by our Constitution. Note that the ordinance exacts the
appeal was denied.
tax upon all motor vehicles operating within the City of Manila. It
does not distinguish between a motor vehicle for hire and one
ISSUE:
which is purely for private use. Neither does it distinguish
(1)Whether or not the margin fees are taxes.
between a motor vehicle registered in the City of Manila and one
(2)Whether or not the margin fees are necessary and ordinary
registered in another place but occasionally comes to Manila and
business expenses.
uses its streets and public highways. This is an inequality which
we find in the ordinance, and which renders it offensive to the
RULING:
Constitution.
(1)No. A tax is levied to provide revenue for government operations,
while the proceeds of the margin fee are applied to strengthen our
country's international reserves. The margin fee was imposed by the
State in the exercise of its police power and not the power of
taxation.

(2)No. Ordinarily, an expense will be considered 'necessary' where


the expenditure is appropriate and helpful in the development of the governments, like Quezon City, are empowered to impose and
taxpayer's business. It is 'ordinary' when it connotes a payment collect.
which is normal in relation to the business of the taxpayer and the
surrounding circumstances. Since the margin fees in question were ISSUE: Whether the tax imposed by Quezon City on gross receipts
incurred for the remittance of funds to Esso's Head Office in New of stall rentals is properly characterized as partaking of the nature of
York, which is a separate and distinct income taxpayer from the an income tax.
branch in the Philippines, for its disposal abroad, it can never be said
therefore that the margin fees were appropriate and helpful in the RULING:
development of Esso's business in the Philippines exclusively or • No. The tax imposed in the controverted ordinance constitutes,
were incurred for purposes proper to the conduct of the affairs of not a tax on income, not a city income tax (as distinguished from
Esso's branch in the Philippines exclusively or for the purpose of the national income tax imposed by the National Internal
realizing a profit or of minimizing a loss in the Philippines exclusively. 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 Progressive is engaged. While it is true
12. PROGRESSIVE DEVELOPMENT CORPORATION v. QUEZON that the amount imposed by the questioned ordinances may be
CITY considered in determining whether the exaction is really one for
G.R. No. L-36081, April 24, 1989 revenue or prohibition, instead of one of regulation under the
police power, it nevertheless will be presumed to be reasonable.
FACTS:
• On December 24, 1969, the City Council of Quezon City adopted
Ordinance No. 7997, otherwise known as the Market Code of 13. PHILIPPINE AIRLINES, INC. v. EDU
Quezon City. Section 3 of said ordinance provides that “privately G.R. No. L- 41383, August 15, 1988
owned and operated public markets shall submit monthly to the
Treasurer's Office, a certified list of stallholders showing the FACTS:
amount of stall fees or rentals paid daily by each stallholder, ... • The Philippine Airlines (PAL) is a corporation engaged in the air
and shall pay 10% of the gross receipts from stall rentals to the transportation business under a legislative franchise, Act No.
City, ... , as supervision fee”. 42739. Under its franchise, PAL is exempt from the payment of
• On July 15, 1972, Progressive Development Corporation taxes.
(Progressive), owner and operator of a public market known as • Sometime in 1971, however, Land Transportation Commissioner
the "Farmers Market & Shopping Center" filed a Petition for Romeo F. Elevate (Elevate) issued a regulation pursuant to
Prohibition with Preliminary Injunction against Quezon City on Section 8, Republic Act 4136, otherwise known as the Land and
the ground that the supervision fee or license tax imposed by the Transportation and Traffic Code, requiring all tax exempt entities,
above-mentioned ordinance is in reality a tax on income which among them PAL to pay motor vehicle registration fees.
Quezon City may not impose, the same being expressly • Despite PAL's protestations, Elevate refused to register PAL's
prohibited by Republic Act No. 2264, as amended, otherwise motor vehicles unless the amounts imposed under Republic Act
known as the Local Autonomy Act. 4136 were paid. PAL thus paid, under protest, registration fees of
• In its Answer, Quezon City, through the City Fiscal, contended its motor vehicles. After paying under protest, PAL through
that it had authority to enact the questioned ordinances, counsel, wrote a letter dated May 19,1971, to Land
maintaining that the tax on gross receipts imposed therein is not Transportation Commissioner Romeo Edu (Edu) demanding a
a tax on income. refund of the amounts paid. Edu denied the request for refund.
• The lower court ruled that the questioned imposition is not a tax Hence, PAL filed a complaint against Edu and National Treasurer
on income, but rather a privilege tax or license fee which local Ubaldo Carbonell (Carbonell).
• The trial court dismissed PAL's complaint. PAL appealed to the
Court of Appeals which in turn certified the case to the Supreme ISSUE: Whether or not City Ordinance No. 6537 is a tax or revenue
Court. measure.

ISSUE: Whether or not motor vehicle registration fees are RULING:


considered as taxes. • Yes. The contention that City Ordinance No. 6537 is not a purely
tax or revenue measure because its principal purpose is
RULING: regulatory in nature has no merit. While it is true that the first part
• Yes. If the purpose is primarily revenue, or if revenue is, at least, which requires that the alien shall secure an employment permit
one of the real and substantial purposes, then the exaction is from the Mayor involves the exercise of discretion and judgment
properly called a tax. Such is the case of motor vehicle in the processing and approval or disapproval of applications for
registration fees. The motor vehicle registration fees are actually employment permits and therefore is regulatory in character the
taxes intended for additional revenues of the government even if second part which requires the payment of P50.00 as
one fifth or less of the amount collected is set aside for the employee's fee is not regulatory but a revenue measure. There is
operating expenses of the agency administering the program. no logic or justification in exacting P50.00 from aliens who have
been cleared for employment. It is obvious that the purpose of
the ordinance is to raise money under the guise of regulation.
14. VILLEGAS v. HIU CHIONG TSAI PAO HO
G.R. No. L-29646, November 10, 1978
15. COMPAÑIA GENERAL DE TABACOS DE FILIPINAS vs.
FACTS: CITY OF MANILA, ET AL
• On February 22, 1968, the Municipal Board of Manila passed G.R. No. L-16619 June 29, 1963
City Ordinance No. 6537. The said city ordinance was also
signed by then Manila Mayor Antonio J. Villegas (Villegas). FACTS:
• Section 1 of the said city ordinance prohibits aliens from being • Petitioner filed an action in the CFI Manila to recover from City of
employed or to engage or participate in any position or Manila(City ) the sum of P15,280.00 allegedly overpaid by it as
occupation or business enumerated therein, whether permanent, taxes on its wholesale and retail sales of liquor for the period
temporary or casual, without first securing an employment permit from the third quarter of 1954 to the second quarter of 1957,
from the Mayor of Manila and paying the permit fee of P50.00 inclusive, under Ordinances Nos. 3634, 3301, and 3816.
except persons employed in the diplomatic or consular missions • Tabacalera's action for refund is based on the theory that, in
of foreign countries, or in the technical assistance programs of connection with its liquor sales, it should pay the license fees but
both the Philippine Government and any foreign government, not the municipal sales taxes; and since it already paid the
and those working in their respective households, and members license fees aforesaid, the sales taxes paid by it — amounting to
of religious orders or congregations, sect or denomination, who the sum of P15,208.00 — under the three ordinances is an
are not paid monetarily or in kind. overpayment made by mistake, and therefore refundable.
• Hiu Chiong Tsai Pao Ho (Tsai Pao Ho) who was employed in • The City contends that for the permit issued to it Tabacalera is
Manila, filed a petition with the CFI of Manila to declare City subject to pay the license fees prescribed by Ordinance No.
Ordinance No. 6537 as null and void for being discriminatory and 3358, aside from the sales taxes imposed by Ordinances Nos.
violative of the rule of the uniformity in taxation. 3634, 3301, and 3816.
• The trial court declared City Ordinance No. 6537 null and void.
Villegas filed the present petition. ISSUE: Whether or not the taxes imposed are valid
RULING: ISSUE: Is the ordinance valid exercise of taxing power of the City of
• Ordinance No. 3358 is clearly one that prescribes municipal Basilan.
license fees for the privilege to engage in the business of selling
liquor or alcoholic beverages. On the other hand, it is clear that RULING:
Ordinances Nos. 3634, 3301, and 3816 impose taxes on the • Under paragraph (a) sec. 14, R.A. 288, it is clear that the City of
sales of general merchandise, wholesale or retail, and are Basilan may only levy and collect taxes for general and special
revenue measures enacted by the Municipal Board of Manila by purposes in accordance with or as provided by law; in other
virtue of its power to tax dealers for the sale of such words, the city of Basilan was not granted a blanket power of
merchandise. taxation. The use of the phrase "in accordance with law" —
• That Tabacalera is being subjected to double taxation is more which, in our opinion, means the same as "provided by law" —
apparent than real. As already stated what is collected under clearly discloses the legislative intent to limit the taxing power of
Ordinance No. 3358 is a license fee for the privilege of engaging the City.
in the sale of liquor. On the other hand, what the three • It has been held that the power to regulate as an exercise of
ordinances mentioned heretofore impose is a tax for revenue police power does not include the power to impose fees for
purposes based on the sales made of the same article or revenue purposes. Appellant city's own contention that the
merchandise. It is already settled in this connection that both a questioned ordinance was enacted in the exercise of its power of
license fee and a tax may be imposed on the same business or taxation, makes it obvious that the fees imposed are not merely
occupation, or for selling the same article, this not being in regulatory.
violation of the rule against double taxation.

17. JOHN H. OSMEÑA vs. OSCAR ORBOS et al


16. AMERICAN MAIL LINE, ET AL vs. CITY OF BASILAN, ET AL G.R. No. 99886 March 31, 1993
G.R. No. L-12647 May 31, 1961
FACTS:
FACTS: • October 10, 1984, President Ferdinand Marcos issued P.D. 1956
• Appellees are foreign shipping companies licensed to do creating a Special Account in the General Fund, designated as
business in the Philippines, with offices in Manila. Their vessels the Oil Price Stabilization Fund (OPSF). The OPSF was
call at Basilan City and anchor in the bay or channel within its designed to reimburse oil companies for cost increases in crude
territorial waters. As the city treasurer assessed and attempted to oil and imported petroleum products resulting from exchange
collect from them the anchorage fees prescribed in the aforesaid rate adjustments and from increases in the world market prices
amendatory ordinance, they filed the present action for of crude oil. Subsequently, the OPSF was reclassified into a
Declaratory Relief to have the courts determine its validity. Upon "trust liability account,". President Corazon C. Aquino
their petition the lower court issued a writ of preliminary promulgated E. O. 137 expanding the grounds for
injunction restraining appellants from collecting or attempting to reimbursement to oil companies for possible cost under recovery
collect from them the fees prescribed therein. incurred as a result of the reduction of domestic prices of
• Appellant contended that, through its city council, it had authority petroleum products.
to enact the questioned ordinance in the exercise of either its • The petitioner argues inter alia that "the monies collected
revenue-raising power or of its police power. The question to be pursuant to . . P.D. 1956, as amended, must be treated as a
resolved is whether the City of Basilan has the authority to enact 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and
Ordinance 180 and to collect the anchorage fees prescribed that "if a special tax is collected for a specific purpose, the
therein. revenue generated therefrom shall 'be treated as a special fund'
to be used only for the purpose indicated, and not channeled to proceeds thereof may be devoted only to the specific purpose for
another government objective." Petitioner further points out that which the assessment was authorized, a special assessment
since "a 'special fund' consists of monies collected through the being a levy upon property predicated on the doctrine that the
taxing power of a State, such amounts belong to the State, property against which it is levied derives some special benefit
although the use thereof is limited to the special purpose/ from the improvement. It is not a tax measure intended to raise
objective for which it was created." revenues for the Government.

ISSUE: Whether or not the funds collected under PD 1956 is an ISSUE: Is the imposition of special assessment an exercise of the
exercise of the power of taxation taxing power

RULING: RULING:
• The levy is primarily in the exercise of the police power of the • The Court deemed it relevant to discuss its holding in Lutz v.
State. While the funds collected may be referred to as taxes, Araneta. For in this Lutz case, Commonwealth Act 567,
they are exacted in the exercise of the police power of the State. otherwise known as the Sugar Adjustment Act, all collections
• What petitioner would wish is the fixing of some definite, made thereunder "shall accrue to a special fund in the Philippine
quantitative restriction, or "a specific limit on how much to tax." Treasury, to be known as the 'Sugar Adjustment and Stabilization
The Court is cited to this requirement by the petitioner on the Fund,' and shall be paid out only for any or all of the following
premise that what is involved here is the power of taxation; but purposes or to attain any or all of the following objectives, as
as already discussed, this is not the case. What is here involved may be provided by law." Analysis of the Act, and particularly
is not so much the power of taxation as police power. Although Section 6, will show that the tax is levied with a regulatory
the provision authorizing the ERB to impose additional amounts purpose, to provide means for the rehabilitation and stabilization
could be construed to refer to the power of taxation, it cannot be of the threatened sugar industry. In other words, the act is
overlooked that the overriding consideration is to enable the primarily an exercise of the police power.
delegate to act with expediency in carrying out the objectives of • On the authority of the above case, then, We hold that the
the law which are embraced by the police power of the State. special assessment at bar may be considered as similarly as the
• It would seem that from the above-quoted ruling, the petition for above, that is, that the levy for the Philsugin Fund is not so much
prohibition should fail. an exercise of the power of taxation, nor the imposition of a
special assessment, but, the exercise of the police power for the
general welfare of the entire country. It is, therefore, an exercise
18. REPUBLIC OF THE PHILIPPINES, vs. BACOLOD-MURCIA of a sovereign power which no private citizen may lawfully resist.
MILLING CO., INC., MA-AO SUGAR CENTRAL CO., INC., and
TALISAY-SILAY MILLING COMPANY
G.R. Nos. L-19824, L-19825 and 19826 July 9, 1966 19. VICTORIAS MILLING CO., INC. vs. THE MUNICIPALITY OF
VICTORIAS, PROVINCE OF NEGROS OCCIDENTAL
FACTS: G.R. No. L-21183 September 27, 1968
• Joint appeal by three sugar centrals, respondents herein. from a
decision of the Court of First Instance of Manila finding them FACTS:
liable for special assessments under Section 15 of Republic Act • This case calls into question the validity of Ordinance No. 1,
No. 632. series of 1956, of the Municipality of Victorias, Negros
• The appellants' thesis is simply to the effect that the "10 Occidental.
centavos per picul of sugar" authorized to be collected under • The disputed ordinance imposed license taxes on operators of
Sec. 15 of Republic 632 is a special assessment. As such, the sugar centrals and sugar refineries. The changes were: with
respect to sugar centrals, by increasing the rates of license
taxes; and as to sugar refineries, by increasing the rates of 20. REPUBLIC OF THE PHILIPPINES, represented by the
license taxes as well as the range of graduated schedule of PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG)
annual output capacity. vs. COCOFED, ET AL. and BALLARES, ET AL., EDUARDO M.
• For, the production of plaintiff Victorias Milling Co., Inc. in both its COJUANGCO JR. and the SANDIGANBAYAN (First Division)
sugar central and its sugar refinery located in the Municipality of G.R. No. 147062-64 December 14, 2001
Victorias comes within these items.
• Plaintiff filed suit below to ask for judgment declaring Ordinance FACTS:
No. 1, series of 1956, null and void. The plaintiff contends that • The PCGG issued and implemented numerous sequestrations,
the ordinance is discriminatory since it singles out plaintiff which freeze orders and provisional takeovers of allegedly ill-gotten
is the only operator of a sugar central and a sugar refinery within companies, assets and properties, real or personal.
the jurisdiction of defendant municipality. • Among the properties sequestered by the Commission were
• The trial court rendered its judgment declaring that the ordinance shares of stock in the United Coconut Planters Bank (UCPB)
in question refers to license taxes or fees. Both plaintiff and registered in the names of the alleged "one million coconut
defendant directly appealed to the Supreme Court. farmers," the so-called Coconut Industry Investment Fund
companies (CIIF companies) and Private Respondent Eduardo
ISSUE: Was Ordinance No. 1, series of 1956, passed by defendant's Cojuangco Jr.
municipal council as a regulatory enactment or as a revenue • On January 23, 1995, the trial court rendered its final Decision
measure? nullifying and setting aside the Resolution of the Sandiganbayan
which lifted the sequestration of the subject UCPB shares.
RULING:
• The present imposition must be treated as a levy for revenue ISSUE: Are the Coconut Levy Funds raised through the State’s
purposes. A quick glance at the big amount of maximum annual police and taxing powers?
tax set forth in the ordinance, P40,000.00 for sugar centrals, and
P40,000.00 for sugar refineries, will readily convince one that the RULING:
tax is really a revenue tax. And then, we read in the ordinance • Indeed, coconut levy funds partake of the nature of taxes which,
nothing which would as much as indicate that the tax imposed is in general, are enforced proportional contributions from persons
merely for police inspection, supervision or regulation. Given the and properties, exacted by the State by virtue of its sovereignty
purposes just mentioned, we find no warrant in logic to give our for the support of government and for all public needs.
assent to the view that the ordinance in question is solely for • Based on this definition, a tax has three elements, namely: a) it
regulatory purpose. Plain is the meaning conveyed. The is an enforced proportional contribution from persons and
ordinance is for raising money. To say otherwise is to misread properties; b) it is imposed by the State by virtue of its
the purpose of the ordinance. sovereignty; and c) it is levied for the support of the government.
• Taxation is done not merely to raise revenues to support the
government, but also to provide means for the rehabilitation and
the stabilization of a threatened industry, which is so affected
with public interest as to be within the police power of the State.
21. GEROCHI v. DEPARTMENT OF ENERGY and to act as buffer to counteract the changes and
G.R. No. 159796, July 17, 2007 adjustments in prices, peso devaluation, and other
variables which cannot be adequately and timely
FACTS: monitored by the legislature.
• This petition challenges the constitutionality of Sec. 34 of the
Electric Power Industry Reform Act of 2001 (EPIRA) and Rule 18 Respondents: PSALM, DOE, ERC and NPC
of its corresponding IRR. o The imposition of the Universal Charge is in the exercise
• Respondent National Power Corporation- Strategic Power of the State’s police power, not taxation.
Utilities Group (NPC-SPUG) filed with respondent Energy o Universal Charge does not possess the essential
Regulatory Commission (ERC) a petition for the availment from characteristics of a tax, that its imposition would redound
the Universal Charge of its share for Missionary Electrification. to the benefit of the electric power industry and not to the
• NPC filed another petition with ERC praying that the proposed public, and that its rate is uniformly levied on electricity
share from the Universal Charge for the Environmental charge end-users, unlike a tax, which is imposed, based on the
be approved for withdrawal from the Special Trust Fund (STF) individual taxpayer's ability to pay.
managed by respondent Power Sector Assets and
Liabilities Management Group (PSALM). ISSUES: (1) Whether or not the Universal Charge imposed under
• ERC issued an Order provisionally approving the first petition of Sec. 34 of the EPIRA is a tax.
NPC and authorizing the National Transmission Corporation (2) Whether or not there is undue delegation of legislative power to
(TRANSCO) and Distribution Utilities to collect the same from its tax on the part of the ERC.
end-users on a monthly basis.
• Likewise, ERC approved the second petition authorizing the
NPC to draw up to P70,000,000.00 from PSALM for its 2003 RULING:
Watershed Rehabilitation Budget subject to the availability of 1) NO. The assailed Universal Charge is NOT a tax, but an
funds for the Environmental Fund component of the Universal exaction in the exercise of the State’s police power.
Charge. o Power of Taxation vs. Police Power
• On the basis of the said ERC decisions, respondent Panay The main distinction rests in the PURPOSE FOR
Electric Company, Inc. (PECO) charged petitioner Romeo P. WHICH THE CHARGE IS MADE. If generation of
Gerochi and all other end-users with the Universal Charge as revenue is the primary purpose and regulation is merely
reflected in their respective electric bills starting from the month incidental, the imposition is a tax; but if regulation is the
of July 2003. primary purpose, the fact that revenue is incidentally
raised does not make the imposition a tax.
Contentions ! Taxation
" The power to tax is an incident of
Petitioner: EPIRA is unconstitutional because: sovereignty and is unlimited in its range,
o Universal Charge has the characteristics of a tax and is acknowledging in its very nature no
collected to fund the operations of the NPC. The power limits.
to tax is strictly legislative in function and the delegation " It is based on the principle that taxes are
of said power to any executive or administrative agency the lifeblood of the government, and
like the ERC is unconstitutional. their prompt and certain availability is an
o The Universal Charge is not the same as the other imperious need. Thus, the theory behind
cases cited where respective funds were created in the exercise of the power to tax
order to balance and stabilize the prices of oil and sugar, emanates from necessity; without taxes,
government cannot fulfill its mandate of 22. PLANTERS PRODUCTS, INC. vs. FERTIPHIL CORPORATION
promoting the general welfare and well- G.R. No. 166006, March 14, 2008
being of the people.
! Police Power FACTS:
" Power of the state to promote public
welfare by restraining and regulating the • President Marcos issued a Letter of Instruction (LOI No. 1465),
use of liberty and property. It is the most which imposed a capital recovery component on the domestic
pervasive, the least limitable, and the sales of fertilizers.
most demanding of the three • The capital contribution (at least P10.00 per bag of fertilizer the
fundamental powers of the State. company sold in the domestic market) shall be collected until
" The justification is found in the Latin adequate capital is raised to make petitioner Planters Products,
maxims salus populi est suprema lex Inc. (PPI) financially viable. NOTE: PPI is a domestic private
(the welfare of the people is the corporate doing business in the domestic sale of fertilizers.
supreme law). Arguably, the LOI intended to safeguard the domestic fertilizer
o Moreover, it is a well-established doctrine that the taxing industry by infusing a revenue generation vehicle for PPI.
power may be used as an implement of police power. • Pursuant to the LOI, respondent Fertiphil paid the required sum
o The STF reasonably serves and assures the attainment to Fertilizer & Pesticide Authority (FPA), which remitted to Far
and perpetuity of the purposes for which the Universal East Bank (depositary of PPI).
Charge is imposed, i.e., to ensure the viability of the • After the EDSA Revolution, FPA stopped collecting.
country's electric power industry. • Fertiphil filed a complaint for collection and damages against
FPA & FPI arguing that the LOI is unconstitutional.
2) NO. There is no undue delegation of the power to tax on the
part of ERC. (Consti Issue) ISSUES:
o Completeness Test
! The law must be complete in all its terms and 1. Whether the imposition of the levy was an exercise by the
conditions when it leaves the legislature such State of its taxation power?
that when it reaches the delegate, the only thing 2. Whether LOI 1465 constitutes a valid legislation pursuant to
he will have to do is to enforce it. the exercise of taxation?
o Sufficient Standard Test 3. Whether LOI 1465 constitutes a valid legislation pursuant to
! Mandates adequate guidelines or limitations in the exercise of police power?
the law to determine the boundaries of the
delegate's authority and prevent the delegation RULING:
from running riot.
o The Court finds that the EPIRA passed both tests. 1. YES. The imposition of the levy was an exercise by the State
Miranda of its taxation power. While it is true that the power of
taxation can be used as an implement of police power, the
primary purpose of the levy is revenue generation. If the
purpose is primarily revenue, or if revenue is, at least, one of
the real and substantial purposes, then the exaction is
properly called a tax.
2. NO. The P10 levy is unconstitutional because it was not for a right to distribute fuel within CSEZ pursuant to its Joint
public purpose. The levy was imposed to give undue benefit Venture Agreement (JVA) with Subic Bay Metropolitan
to PPI (a private company). Authority (SBMA) and Coastal Subic Bay Terminal, Inc.
(CSBTI). Also, the fact that revenue is incidentally obtained
does not make the imposition a tax as long as the primary
3. NO. Even if We consider LOI No. 1695 enacted under the purpose of such imposition is regulation.
police power of the State, it would still be invalid for failing to
comply with the test of "lawful subjects" and "lawful means." ISSUE:
It it did not promote public interest.
• W/N CA erred when it ruled that: (i) the questioned “royalty
fee” is primarily for regulation; and (ii) any revenue earned
therefrom is merely incidental to the purpose of regulation.
23. CHEVRON PHILIPPINES, INC. vs. BASES CONVERSION
HELD:
DEVELOPMENT AUTHORITY and CLARK DEVELOPMENT
CORPORATION • NO, it was held that the subject royalty fee was imposed
G.R. No. 173863 September 15, 2010 primarily for regulatory purposes, and not for the
generation of income or profits as petitioner claims.
FACTS:
• In distinguishing tax and regulation as a form of police
• Clark Development Corporation (CDC) issued Policy power, the determining factor is the purpose of the
Guidelines on the Movement of Petroleum Fuel to and from implemented measure. If the purpose is:
the Clark Special Economic Zone (CSEZ) which provided,
among others, for royalty fees from suppliers delivering o Primarily to raise revenue, then it will be deemed a
fuel from outside sources. tax even though the measure results in some form of
regulation. (Revenue = Tax)
• Claiming that nothing in the law authorizes CDC to impose
royalty fees or any fees based on a per unit measurement of o Primarily to regulate, then it is deemed a regulation
any commodity sold within the special economic zone, and an exercise of the police power of the state,
petitioner protested the assessment for royalty fees. even though incidentally, revenue is generated.
• Petitioner elevated its protest before Bases Conversion (Regulate = Police Power)
Development Authority (BCDA) arguing that the royalty fees • The Policy Guidelines was mainly issued to ensure the
imposed had no reasonable relation to the probable
safety, security, and good condition of the petroleum fuel
expenses of regulation and that the imposition on a per
industry within the CSEZ.
unit measurement of fuel sales was for a revenue
generating purpose, thus, akin to a “tax”. The protest • The questioned royalty fees form part of the regulatory
was denied by BCDA. framework to ensure “free flow or movement” of petroleum
fuel to and from the CSEZ.
• On appeal, the CA held that in imposing the challenged
royalty fees, CDC was exercising its right to regulate the flow
of fuel into CSEZ considering that it possesses exclusive
• In relation to the regulatory purpose of the imposed fees, this • Petitioner requested respondents to refund the fees it paid
Court in Progressive Development Corporation v. Quezon under protest.
City, stated that: • Respondent City Treasurer denied the claim for refund.
• Petitioner filed a Complaint before the trial court seeking the
o “x x x the imposition questioned must relate to an refund.
occupation or activity that so engages the public • Trial court rendered judgment in favor of the petitioner and
interest in health, morals, safety and development as against the respondents.
to require regulation for the protection and promotion • Respondents appealed to the CA which reversed the trial
of such public interest; the imposition must also bear court:
a reasonable relation to the probable expenses of o Holding that while petitioner is a tax-free entity, it is
not exempt from the payment of regulatory fees.
regulation, taking into account not only the costs of
o Under RA No. 6055, petitioner was granted
direct regulation but also its incidental consequences exemption only from income tax derived from its
as well.” educational activities and real property used
• In the case at bar, there can be no doubt that the oil industry exclusively for educational purposes.
o Regardless of the repealing clause in the National
is greatly imbued with public interest as it vitally affects the
Building Code, petitioner is still not exempt because
general welfare. In addition, fuel is a highly combustible a building permit cannot be considered as the other
product which, if left unchecked, poses a serious threat to life “charges” mentioned in Sec. 8 of RA No. 6055 which
and property. refers to impositions in the nature of tax, import
duties, assessments and other collections for
revenue purposes, following the ejusdem generis
24. ANGELES UNIVERSITY FOUNDATION v. CITY OF ANGELES rule.
GR NO. 189999, 27 June 2012 o [Ejusdem generis rule: where general words follow
an enumeration of persons or things, by words of a
FACTS:
• Petitioner ANGELES UNIVERSITY FOUNDATION (AUF) is particular and specific meaning, such general words
are not to be construed in their widest extent, but are
an educational institution which was converted into a non- to be held as applying only to persons or things of
stock, non-profit education foundation under RA No. 6055.
• AUF filed with the Office of the City Building Official an the same general kind or class as those specifically
mentioned.]
application for a building permit for the construction of the o Thus, petitioner is not entitled to the refund of
Angeles University Foundation Medical Center (Medical building permit and related fees, as well as real
Center).
• Said office issued a Building Permit Fee Assessment. property tax it paid under protest.
• However, petitioner claimed that it is exempt from the
• CA denied petitioner’s MR.
payment of the building permit citing: ISSUE:
o DOJ legal opinions • Whether petitioner is exempt from the payment of building permit
o Said office previously acknowledged such exemption
• Respondents refused to issue the building permits. and related fees imposed under the National Building Code (RA
• Petitioner appealed the matter to the City Mayor, but the No. 6541)
latter did not respond.
• Petitioner paid under protest the building permit fee and was
issued the corresponding Building Permit.
RULING: 25. COMMISSIONER OF INTERNAL REVENUE v. PLDT
• RA No. 6055 granted tax exemptions to education institutions G.R. No. 140230, December 15, 2005
like petitioner which converted to non-stock, non-profit
educational foundation. FACTS:
o Sec. 8. The Foundation shall be exempt from the • PLDT is a grantee of a franchise under RA 7082 to install,
payment of all taxes, import duties, assessments, operate and maintain a telecommunications system throughout
and other charges imposed by the Government on the Philippines.
all income derived from or property, real or personal, • For equipment, machineries and spare parts it imported for its
used exclusively for the educational activities of the business in 1992 to 1994, PLDT paid the BIR 164,520,953.00
Foundation. which includes the compensating tax, advance sales tax and
• National Building Code of the Philippines (RA No. 6541) requires other internal revenue taxes. For similar transactions made
every person, firm or corporation, including any agency or between March 1994 to May 1994, PLDT paid 116,041,333.00
instrumentality of the government to obtain a building permit for as VAT.
any construction, alteration or repair of any building or structure. • PLDT sought a confirmatory ruling on its tax exemption privileges
o Building permit refers to a document issued by the under Sec. 12 of RA 7082, the pertinent part of which reads: “the
Building Official to an owner/applicant to proceed grantee xxx shall pay a franchise tax equivalent to 3% of all
with the construction, installation, addition, alteration, gross receipts of the telephone or other telecommunications
renovation, conversion, repair, moving, demolition, businesses transacted under this franchise xxx and the said
etc. percentage shall be in lieu of all taxes on this franchise or
o Exempted from the payment of building permit fees earnings thereof.”
are: • BIR issued a ruling that clarifies the taxes PLDT must pay to it:
! (1) public buildings and the “in lieu of all taxes” phrase clearly exempts PLDT from all
! (2) traditional indigenous family dwelling. taxes including the 10% VAT, except the taxes expressly
o Not being expressly included in the enumeration of mentioned PLDT should pay.
structures to which the building permit fees do not • Armed with the said ruling, PLDT filed for a claim for tax credit/
apply, petitioner’s claim for exemption rests solely on refund of VAT, compensating tax, advance sales taxes and other
its interpretation of the term “other charges” imposed taxes it had been paying in connection with its importation of
by the National Government in the tax exemption various equipment, machineries and spare parts needed for its
clause of RA No. 6055. operations. Since BIR did not act upon it, PLDT filed the case
• Note that the “other charges” mentioned in Sec. 8 of RA No. with the Court of Tax Appeals.
6055 is qualified by the words “imposed by the Government on • CTA granted PLDT’s petition to refund the amount of
all xxx property used exclusively for the educational activities of 223,265,276.00 representing compensating taxes, advance
the foundation.” sales taxes, VAT and other internal revenue taxes alleged to
• Building permit fees are not impositions on property but on the have been erroneously paid on its importations from 1992 to
activity subject of government regulation. (Activities such as to 1994.
repair, alter, renovate or demolish) • BIR initially contested the judgment, but later on decided not to
• Since building permit fees are not charges on property, they are pursue the case because of the doctrine of stare decisis wherein,
not impositions from which petitioner is exempt. it was found out, that the issue had been resolved by the Court
of Appeals in a previous case which essentially states that PLDT
is exempted from all taxes collectible under the NIRC, save
those specifically mentioned in PLDT’s franchise, such as
income and real property taxes.
• Since the case involves revenue issues which hit the core of • BUT the Supreme Court considers the fact that Executive Order
governmental functions, the Supreme Court decided to settle the No. 273 implemented in 1988 excludes compensating taxes and
matter and interpret Sec. 12 of RA 7082 despite BIR backing out advances sales taxes as collectible revenue taxes under the
of the case. NIRC. Because of this, PLDT was no longer under legal
• In its initial argument, BIR posits that the “in lieu of all taxes” obligation to pay compensating tax and advance sales tax on its
clause covers direct taxes only. importation from 1992 to 1994 (BIR was ordered to refund said
taxes).
ISSUE: Whether or not PLDT is exempt from paying VAT,
compensating taxes, advance sales taxes and other internal revenue
taxes on its importations 26. ASIA INTERNATIONAL AUCTIONEERS vs. CIR
G.R. 179115 September 26, 2012
RULING:
• No, PLDT is not exempted from paying said taxes. FACTS:
o Backgrounder: direct taxes are those that are exacted • Asia International Auctioneers, Inc. (AIA), a corporation operating
from the very person who should pay them; they are within the Subic Special Economic Zone and engaged in the
impositions for which a taxpayer is directly liable on the importation and selling of used motor vehicles and heavy
transaction or business he is engaged in. Indirect taxes, equipment, was assessed by the Commissioner of Internal
on the other hand, are those that are demanded, in the Revenue (CIR) for deficiency Value Added Tax and Excise Tax in
first instance, from (or are paid by) one person in the the amounts of P102,535,520.00 and P4,334,715.00,
intention that he can shift the burden to someone else respectively, or a total amount of P106,870,235.00, inclusive of
(e.g. VAT, advance sales tax, compensating tax). penalties and interest, for a series of auction sales.
o VAT on importation of goods is not a tax on the • AIA claimed that it filed a timely protest letter through registered
franchise of a business enterprise or on its earnings. mail and submitted additional supporting documents. CIR’s
It is imposed on all taxpayers who import goods, failure to act on the protest prompted AIA to file a petition for
regardless of whether the goods will be sold. review before the Court of Tax Appeals.
o Advance sales tax is an indirect tax because the tax- • However, the CIR filed a motion to dismiss on the ground of lack
paying importer of the goods for sale can shift the of jurisdiction since AIA’s failure to file its protest within the 30-
burden on the purchaser. Same goes with compensating day reglamentary period rendered the assessment final and
tax. executory.
• It is important to determine if the tax exemption granted to a • After trial, the Court of Tax Appeals First Division ruled that there
taxpayer specifically includes the indirect tax. It is presumed was no sufficient evidence to prove the receipt of the protest
that the tax exemption embraces only those taxes for which letter by the CIR. AIA filed a motion for reconsideration but was
the taxpayer is directly liable. It is also in the burden of the denied; hence, this petition for review.
taxpayer to prove that he is covered by a tax exemption, and • On January 30, 2008, AIA filed a Manifestation and Motion with
what exactly that exemption entails. Leave of the Honorable Court to Defer or Suspend Further
• The clause “in lieu of all taxes” in Sec. 12 of RA 7082 is Proceedings since it availed of the Tax Amnesty Program under
immediately followed by the qualifying clause “on this Republic Act 9480, known as the Tax Amnesty Act of 2007.
franchise or earnings thereof” suggesting that the exemption • On February 5, 2008, the Bureau of Internal Revenue issued a
is limited to taxes imposed directly on PLDT since taxes Certification of Qualification stating that AIA “has availed and
pertaining to PLDT’s franchise or earnings are its direct liability. qualified for Tax Amnesty for Taxable Year 2005 and Prior Years”
In other words, indirect taxes are outside the purview of the “in pursuant to RA 9480.
lieu” provision.
ISSUE: Is AIA disqualified from availing itself of the Tax Amnesty • Limitations on the Power of Taxation
under Section 8 (a) of RA 9480?
A. Inherent Limitations
RULING:
• No. Under Section 8 (a) of the RA 9480 withholding agents with 27. WENCESLAO PASCUAL vs. THE SECRETARY OF PUBLIC
respect to their withholding tax liabilities shall be disqualified to WORKS AND COMMUNICATIONS, ET AL.
avail of the tax amnesty. In this case, AIA was not being G.R. No. L-10405 December 29, 1960
assessed as withholding agent that failed to withhold or remit the
deficiency VAT and excise tax but as a taxpayer who is directly FACTS:
liable for the said taxes. • On August 31, 1954, petitioner Wenceslao Pascual instituted this
• Indirect taxes, like VAT and excise tax, are different from action for declaratory relief, with injunction, upon the ground that
withholding taxes. Republic Act No. 920, entitled "An Act Appropriating Funds for
• To distinguish, in indirect taxes, the incidence of taxation falls on Public Works", approved on June 20, 1953, contained, in section
one person but the burden thereof can be shifted or passed on to 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the
another person, such as when the tax is imposed upon goods construction, reconstruction, repair, extension and improvement"
before reaching the consumer who ultimately pays for it. of Pasig feeder road terminals; that, at the time of the passage
• On the other hand, in case of withholding taxes, the incidence and approval of said Act, the aforementioned feeder roads were
and burden of taxation fall on the same entity, the statutory "nothing but projected and planned subdivision roads, not yet
taxpayer. The burden of taxation is not shifted to the withholding constructed, . . . within the Antonio Subdivision . . . situated
agent who merely collects, by withholding, the tax due from at . . . Pasig, Rizal" which projected feeder roads "do not connect
income payments to entities arising from certain transactions and any government property or any important premises to the main
remits the same to the government. highway";
• Due to this difference, the deficiency VAT and excise tax cannot • Respondents moved to dismiss the petition upon the ground that
be "deemed" as withholding taxes merely because they petitioner had "no legal capacity to sue", and that the petition did
constitute indirect taxes. Moreover, records support the "not state a cause of action".
conclusion that AIA was assessed not as a withholding agent
but, as the one directly liable for the said deficiency taxes. ISSUE: Should appropriation using public funds be made for public
• Moreover, RA 9480 does not exclude from its coverage purposes only?
taxpayers operating within special economic zones. Hence, AIA
is qualified to avail of the Tax Amnesty under RA 9480. RULING:
• The right of the legislature to appropriate funds is correlative with
its right to tax, and, under constitutional provisions against
taxation except for public purposes and prohibiting the collection
of a tax for one purpose and the devotion thereof to another
purpose, no appropriation of state funds can be made for other
than for a public purpose.
• The test of the constitutionality of a statute requiring the use of
public funds is whether the statute is designed to promote the
public interest, as opposed to the furtherance of the advantage
of individuals, although each advantage to individuals might
incidentally serve the public.
28. PEPSI-COLA BOTTLING COMPANY OF THE PHIILIPPINES, Treasurer was enforcing Municipal Ordinance No. 27 only.
INC. VS. MUNICIPALITY OF TANAUAN • Hence, there was no case of double taxation.
G.R. No. L-31156 February 27, 1976

FACTS: 29. MANILA INTERNATIONAL AIRPORT AUTHORITY v. CITY OF


• In February 1963, plaintiff commenced a complaint seeking to PARANAQUE
declare Section 2 of R.A. 2264 (Local Autonomy Act) G.R. No. 155650, July 20, 2006
unconstitutional as an undue delegation of taxing power and to
declare Ordinance Nos. 23 and 27 issued by the Municipality of FACTS:
Tanauan, Leyte as null and void. • Petitioner Manila International Airport Authority (MIAA) operates
• Municipal Ordinance No. 23 levies and collects from soft drinks the Ninoy Aquino International Airport (NAIA) Complex in
producers and manufacturers one-sixteenth (1/16) of a centavo Parañaque City under Executive Order No. 903, otherwise
for every bottle of soft drink corked. On the other hand, Municipal known as the Revised Charter of the Manila International Airport
Ordinance No. 27 levies and collects on soft drinks produced or Authority ("MIAA Charter").
manufactured within the territorial jurisdiction of the municipality • The City of Parañaque, through its City Treasurer, issued notices
a tax of one centavo (P0.01) on each gallon of volume capacity. of levy and warrants of levy on the Airport Lands and Buildings
The tax imposed in both Ordinances Nos. 23 and 27 is due to real estate tax delinquency of MIAA.
denominated as "municipal production tax.” • The Mayor of the City of Parañaque threatened to sell at public
auction the Airport Lands and Buildings should MIAA fail to pay
ISSUES: the said real estate tax delinquency.
(1) Is Section 2 of R.A. 2264 an undue delegation of the power of • MIAA failed to pay said delinquency. So, Airport Lands and
taxation? Buildings were ordered for public auction.
(2) Do Ordinance Nos. 23 and 24 constitute double taxation and • Thus, MIAA sought for a Temporary Restraining Order from the
impose percentage or specific taxes? Court of Appeals but failed to do so within the 60-day
reglementary period, so the petition was dismissed.
RULING: • MIAA then sought for the TRO with the Supreme Court a day
1) NO. before the public auction, MIAA was granted with the TRO but
• The power of taxation is purely legislative and cannot be unfortunately the TRO was received by the Paranaque City
delegated to the executive or judicial department of the officers 3 hours after the public auction.
government without infringing upon the theory of separation of • MIAA argued that the charter provides that the title of the land
powers. But as an exception, the theory does not apply to and building are with MIAA and the ownership is still with the
municipal corporations. Republic of the Philippines. MIAA also contends that it is an
• Legislative powers may be delegated to local governments in instrumentality of the government and as such exempted
respect of matters of local concern. from real estate tax. That the land and buildingsof MIAA are of
public dominion therefore cannot be subjected to levy and
2) NO. auction sale.
• The Municipality of Tanauan discovered that manufacturers • On the other hand, the City of Paranaque argued that MIAA is a
could increase the volume contents of each bottle and still pay government owned and controlled corporation (GOCC),
the same tax rate since tax is imposed on every bottle corked. therefore not exempted to real estate tax. (Note that GOCCs
• To combat this scheme, Municipal Ordinance No. 27 was before are exempted from real estate tax but such exemption
enacted. As such, it was a repeal of Municipal Ordinance No. 23. was later on withdrawn upon the effectivity of the Local
In the stipulation of facts, the parties admitted that the Municipal Government Code.)
As part of the public dominion, the land and buildings of MIAA
ISSUES: are outside the commerce of man. To subject them to levy and
(1) Whether or not MIAA is a GOCC. public auction is contrary to public policy. Unless the President
(2) Whether or not the Airport Lands and Buildings are part of issues a proclamation withdrawing the airport land and buildings
the public dominion, hence MIAA is not subject to real estate from public use, these properties remain to be of public dominion
tax. and are inalienable.

RULING: Section 234(a) of the Local Government Code exempts from real
(1) NO. MIAA is not a government-owned or controlled corporation estate tax any "real property owned by the Republic of the
but an instrumentality of the National Government and thus Philippines." Section 234(a) provides:
exempt from local taxation. The real properties of MIAA
are owned by the Republic of the Philippines and thus exempt SEC. 234. Exemptions from Real Property Tax. — The
from real estate tax. following are exempted from payment of the real property
tax:
A government-owned or controlled corporation must be (a) Real property owned by the Republic of the Philippines
"organized as a stock or non-stock corporation." MIAA is not or any of its political subdivisions except when the
organized as a stock or non-stock corporation. MIAA is not a beneficial use thereof has been granted, for consideration
stock corporation because it has no capital stock divided into or otherwise, to a taxable person.
shares. MIAA has no stockholders or voting shares.

(2) YES. The court held that the land and buildings of MIAA are part 30. SEA-LAND SERVICES, INC. v. COURT OF APPEALS
of the public dominion. GR No. 122605, April 30, 2011

An airport is devoted for public use, for the domestic and FACTS:
international travel and transportation. It is therefore part of • Petitioner Sea-Land is an American international shipping
public dominion. Even if MIAA charges fees, it is for support of its company licensed by SEC to do business in the Philippines
operation and for regulation. It does not therefore change or alter entered into a contract with the U.S. Government to transport
the character of the land and buildings of MIAA as part of military household goods and effects of U.S. military personnel
the public dominion. assigned to the Subic Naval Base.
• From the aforesaid contract, petitioner derived an income for the
taxable year 1984 amounting to P58,006,207.54.
• During the taxable year 1984, petitioner filed with the BIR the
The Civil Code provides: corresponding corporate Income Tax Return (ITR) and paid the
ARTICLE 420. The following things are property of public income tax due thereon of 1.5% as required in Section 25 (a) (2)
dominion: of the NIRC in relation to Art. 9 of the RP-US Tax Treaty,
(1) Those intended for public use, such as roads, canals, amounting to P870,093.12.
rivers, torrents, ports and bridges constructed by the State, • Claiming that it paid the aforementioned income tax by mistake, a
banks, shores, roadsteads, and others of similar character; written claim for refund was filed with the BIR on 15 April 1987.
(2) Those which belong to the State, without being for public use, • However, before the said claim for refund could be acted upon by
and are intended for some public service or for the development public respondent Commissioner of Internal Revenue, petitioner
of the national wealth. filed a petition for review with the CTA to judicially pursue its claim
for refund and to stop the running of the two-year prescriptive “construction, maintenance, operation and defense of the bases.
period under the then Section 243 of the NIRC. Neither could the performance of this service to the U. S.
• February 21, 1995: CTA rendered its decision denying petitioner's government be interpreted as directly related to the defense and
claim for refund of the income tax it paid in 1984. security of the Philippine territories.
• March 30, 1995: Petitioner appealed the CTA's decision to the CA. • When the law speaks in clear and categorical language, there is
• October 26, 1995: CA promulgated its decision dismissing the no reason for interpretation or construction, but only for
appeal and affirming in toto CTA's decision. application.
• The avowed purpose of tax exemption “is some public benefit or
ISSUE: Whether or not the income that petitioner derived from interest, which the lawmaking body considers sufficient to offset
services in transporting the household goods and effects of U. S. the monetary loss entailed in the grant of the exemption. The
military personnel falls within the tax exemption provided in Article hauling or transport of household goods and personal effects of U.
XII, paragraph 4 of the RP-US Military Bases Agreement. S. military personnel would not directly contribute to the defense
and security of the Philippines.
RATIO:
• No, the petition lacks merit. 31. 31st INFANTRY POST EXCHANGE vs. POSADAS
• The RP-US Military Bases Agreement provides: G.R. No. 33403. September 4, 1930
“No national of the United States, or corporation organized
under the laws of the United States, resident in the United
States, shall be liable to pay income tax in the Philippines in FACTS:
respect of any profits derived under a contract made in the • The 31st Infantry Post Exchange is a post exchange constituted in
United States with the government of the United States in accordance with Army regulations and the laws of the United
connection with the construction, maintenance, operation States. In the course of its duly authorized business transactions,
and defense of the bases, or any tax in the nature of a the Exchange made many purchases of various and diverse
license in respect of any service or work for the United commodities, goods, wares and merchandise from various
States in connection with the construction, maintenance, merchants in the Philippines.
operation and defense of the bases.” • The Commissioner collected a sales tax of 1 1/2 % of the gross
• Laws granting exemption from tax are construed strictissimi juris value of the commodities, etc. from the merchants who sold said
against the taxpayer and liberally in favor of the taxing power. commodities to the Exchange. A formal protest was lodged by the
Taxation is the rule and exemption is the exception. Exchange.
• The law does not look with favor on tax exemptions and that he ISSUE: Whether or not the petitioner is exempt from the sales tax
who would seek to be thus privileged must justify it by words too
plain to be mistaken and too categorical to be misinterpreted. imposed against its suppliers.
• Under Article XII (4) of the RP–US Military Bases Agreement, the RULING:
Philippine Government agreed to exempt from payment of
Philippine income tax nationals of the United States, or • The court ruled in the negative. Taxes have been collected from
corporations organized under the laws of the United States, merchants who made sales to Army Post Exchanges since 1904
residents in the United States in respect of any profit derived (Act 1189, Section 139). Similar taxes are paid by those who sell
under a contract made in the United States with the Government merchandise to the Philippine Government, and by those who do
of the United States in connection with the construction, business with the US Army and Navy in the Philippines.
maintenance, operation and defense of the bases. • Herein, the merchants who effected the sales to the Post
• It is obvious that the transport or shipment of household goods Exchange are the ones who paid the tax; and it is the officers,
and effects of U. S. military personnel is not included in the term soldiers, and civilian employees and their families who are
benefited by the post exchange to whom the tax is ultimately 33. Commissioner of Internal Revenue vs. Mitsubishi Metal
shifted. Corporation
• An Army Post Exchange, although an agency within the US Army, G.R. No. 54908 and G.R. No. 80041, January 22, 1990
cannot secure exemption from taxation for merchants who make
sales to the Post Exchange. FACTS:
• Mitsubishi Metal Corporation, a Japanese corporation licensed to
32. REAGAN vs. COMMISSIONER OF INTERNAL REVENUE do business in the Philippines, entered into a Loan and Sale
G.R. No. L-26379, 27. December 27, 1969 Contract with Atlas Consolidated Mining and Development
Coporation whereby Mitsubishi lent $20,000,000 for the expansion
FACTS: of the latter’s mines, particularly the installation of a new
• William Reagan imported a tax-free 1960 Cadillac car with concentrator for copper production. Atlas, in turn, undertook to sell
accessories valued at US $ 6,443.83, including freight, insurance to Mitsubishi all of the copper concentrates produced by said
and other charges. After acquiring a permit to sell the car from the machine for 15 years.
base commander of Clark Air Base, Reagan sold the car to a • For this purpose, Mitsubishi applied for and was granted a loan by
certain Willie Johnson Jr. of the US Marine Corps stationed in the Export- Import Bank of Japan (Eximbank) and a consortium of
Sangley Point, Cavite for US$ 6,600. Johnson sold the same, on Japanese banks. As agreed upon between Mitsubishi and Atlas,
the same day to Fred Meneses, a Filipino. As a result of the the latter gave interest payments for 1974 and 1975 amounting to
transaction, the Commissioner rendered Reagan liable for income P13,143,966.79, with the corresponding 15% tax thereon withheld
tax in the sum of P2,970. Reagan claimed that he was exempt as and remitted to the Government as required by the Tax Code.
the transaction occurred in Clark Air Base, which as he contends is • On March 5, 1976, Mitsubishi filed a claim for tax credit of the sum
“a base outside the Philippines.” of P1,972,595.01 representing the tax withheld on the interest
payment. That claim, not having been acted upon by the BIR,
ISSUE: Whether or not petitioner Reagan was covered by the tax Mitsubishi then filed a petition contending that Mitsubishi was a
exemption. mere agent of Eximbank, a Japanese Government financing
institution which financed the loan.
RULING: • Such governmental status of Eximbank was the basis of
• The court ruled in the negative. The Philippines, as an independent Mitsubishi’s claim for exemption from paying tax on the interest
and sovereign country, exercises its authority over its entire payments pursuant to Section 29 (b) (8) (A) (now, Section 32 [B][7]
domain. Any state may, however, by its consent, express or [a], 1997 NIRC). The CTA granted the tax credit in favor of
implied, submit to a restriction of its sovereign rights. Mitsubishi, which later executed a waiver in favor of Atlas.
• It may allow another power to participate in the exercise of
jurisdictional right over certain portions of its territory. By doing so, ISSUE: Whether or not the interest income from the loans extended
it by no means follows that such areas become impressed with an to Atlas by Mitsubishi is excludible from gross income taxation and
alien character.The areas retain their status as native soil. thus exempt from withholding tax.
• Clark Air Base is within Philippine territorial jurisdiction to tax, and
thus, Reagan was liable for the income tax arising from the sale of RULING:
his automobile in Clark. The law does not look with favor on tax • It is settled that laws granting exemption from tax are construed
exemptions and that he who would seek to be thus privileged must strictissimi juris against the taxpayer and liberally in favor of the
justify it by words too plain to be mistaken and too categorical to be taxing power. Taxation is the rule and exemption is the exception.
misinterpreted. Reagan has not done so, and cannot do so. The burden of proof rests upon the party claiming exemption to
prove that it is in fact covered by the exemption so claimed, which
onus private respondents have failed to discharge.
• The taxability of a party cannot be blandly glossed over on the "with income tax cases already filed in court as of the effectivity
basis of a supposed “broad, pragmatic analysis” alone without hereof." The point of reference is the date of effectivity of
substantial supportive evidence, lest governmental operations E.O. No. 41. The difficulty lies with respect to the contractor's tax
suffer due to diminution of much needed funds. assessment and respondent's availment of the amnesty
under E.O. No. 64 including estate and donor's taxes and tax on
business.
34. COMMISSIONER OF INTERNAL REVENUE vs. MARUBENI In the instant case, the vagueness in Section 4 (b) brought about by
CORPORATION E.O. No. 64 should be construed strictly
G.R. No. 137377. December 18, 2001 against the taxpayer. The term "income tax cases" should be read as
to refer to estate and donor's taxes and taxes on
FACTS: business while the word "hereof," to E.O. No. 64. Since Executive
Respondent Marubeni Corporation is a foreign corporation and is Order No. 64 took effect on November 17, 1986,
duly registered to engage in business in the consequently, insofar as the taxes in E.O. No. 64 are concerned, the
Philippines. Sometime in November 1985, petitioner Commissioner date of effectivity referred to in Section 4 (b) of E.O.
of Internal Revenue issued a letter of authority to No. 41 should be November 17, 1986. There is nothing in E.O. No.
examine the books of accounts of the Manila branch office of 64 that provides that it should retroact to the date of
respondent corporation. effectivity of E.O. No. 41, the original issuance. Neither is it
11 In the course of the examination, petitioner found respondent to necessarily implied from E.O. No. 64 that it or any of its
have undeclared income from two (2) provisions should apply retroactively.
contracts in the Philippines. Petitioner's revenue examiners
recommended an assessment for deficiency income, branch
profit remittance, contractor's and commercial broker's taxes.
Respondent questioned this assessment. Respondent then
received a letter form petitioner assessing respondent several
deficiency taxes. On September 26, 1986, respondent filed
two (2) petitions for review with the Court of Tax Appeals.
Earlier, on August 2, 1986, Executive Order (E.O.) No. 41 declaring a
one-time amnesty covering unpaid income
taxes for the years 1981 to 1985 was issued. Under this E.O., a
taxpayer who wished to avail of the income tax amnesty
should comply with certain requirements. In accordance with the
terms of E.O. No. 41, respondent filed its tax amnesty
return dated October 30, 1986. On November 17, 1986, the scope
and coverage of E.O. No. 41 was expanded by
Executive Order (E.O.) No. 64.
ISSUE:
Whether or not herein respondent's deficiency tax liabilities were
extinguished upon respondent's availment of tax
amnesty under Executive Orders Nos. 41 and 64.
RULING:
Section 4 (b) of E.O. No. 41 is very clear and unambiguous. It
excepts from income tax amnesty those taxpayers

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