1. Cebu Portland Cement v.

CTA, L-29059, 15 Dec 1987, 156 SCRA 535 (Lifeblood of the

Government)
Facts: CTA decision ordered the petitioner CIR to refund to the Cebu Portland Cement
Company, respondent, P 359,408.98 representing overpayments of ad valorem taxes on
cement sold by it. Execution of judgement was opposed by the petitioner citing that private
respondent had an outstanding sales tax liability to which the judgment debt had already been
credited. In fact, there was still a P4 M plus balance they owed. The Court of Tax Appeals, in
holding that the alleged sales tax liability of the private respondent was still being questioned
and therefore could not be set-off against the refund, granted private respondent's motion. The
private respondent questioned the assessed tax based on Article 186 of the Tax Code,
contending that cement was adjudged a mineral and not a manufactured product; and thusly
they were not liable for their alleged tax deficiency. Thereby, petitioner filed this petition for
review.

Issue: Whether or not assessment of taxes can be enforced even if there is a case contesting it.

Held: The argument that the assessment cannot as yet be enforced because it is still being
contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the
government." If the payment of taxes could be postponed by simply questioning their validity,
the machinery of the state would grind to a halt and all government functions would be
paralyzed. That is the reason why, save for the exception in RA 1125 , the Tax Code provides
that injunction is not available to restrain collection of tax. Thereby, we hold that the
respondent Court of Tax Appeals erred in its order.

2. Mun. of Makati v. CA, et al, L-89898, 01 Oct 1990, 190 SCRA 206 (Exempt from
execution)
Facts: Petitioner Municipality of Makati expropriated a portion of land owned by private
respondents, Admiral Finance Creditors Consortium, Inc. After proceedings, the RTC of Makati
determined the cost of the said land which the petitioner must pay to the private respondents
amounting to P5,291,666.00 minus the advanced payment of P338,160.00. It issued the
corresponding writ of execution accompanied with a writ of garnishment of funds of the
petitioner which was deposited in PNB. However, such order was opposed by petitioner
through a motion for reconsideration, contending that its funds at the PNB could neither be
garnished nor levied upon execution, for to do so would result in the disbursement of public
funds without the proper appropriation required under the law, citing the case of Republic of
the Philippines v. Palacio.The RTC dismissed such motion, which was appealed to the Court of
Appeals; the latter affirmed said dismissal and petitioner now filed this petition for review.

Issue: Whether or not funds of the Municipality of Makati are exempt from garnishment and
levy upon execution.

Held: It is petitioner's main contention that the orders of respondent RTC judge involved the
net amount of P4,965,506.45, wherein the funds garnished by respondent sheriff are in excess
of P99,743.94, which are public fund and thereby are exempted from execution without the
proper appropriation required under the law. There is merit in this contention. In this
jurisdiction, well-settled is the rule that public funds are not subject to levy and execution,
unless otherwise provided for by statute. Municipal revenues derived from taxes, licenses and
market fees, and which are intended primarily and exclusively for the purpose of financing the
governmental activities and functions of the municipality, are exempt from execution. Absent a
showing that the municipal council of Makati has passed an ordinance appropriating the said
amount from its public funds deposited in their PNB account, no levy under execution may be
validly effected. However, this court orders petitioner to pay for the said land which has been in
their use already. This Court will not condone petitioner's blatant refusal to settle its legal
obligation arising from expropriation of land they are already enjoying. The State's power of
eminent domain should be exercised within the bounds of fair play and justice.

3. CIR v. Algue, Inc. et al, L-28896, 17 Feb 1988, 158 SCRA 9 (Lifeblood Theory; Rationale is
Symbiotic Relationship; timeliness of assessment / collection; effect of warrant of
distraint & levy; deductibility of promotional expense)

FACTS: Private respondent corporation Algue Inc. filed its income tax returns for 1958 and
1959showing deductions, for promotional fees paid, from their gross income, thus lowering
their taxable income. The BIR assessed Algue based on such deductions contending that the
claimed deduction is disallowed because it was not an ordinary, reasonable and necessary
expense.

ISSUE: Should an uncommon business expense be disallowed as a proper deduction in

computation of income taxes, corollary to the doctrine that taxes are the lifeblood of the
government?

HELD: No. Private respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors and prominent
businessmen to venture in an xperimental enterprise and involve themselves in a new business
requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently
recompensed.
It is well-settled that taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for government itself. It is
therefore necessary to reconcile the apparently conflicting interests of the authorities and the
taxpayers so that the real purpose of taxation, which is the promotion of the common good,
may be achieved.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in
all democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come
to his succor. For all the awesome power of the tax collector, he may still be stopped in his
tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.
 4. BPI Family Savings Bank v. CA et al, 330 SCRA 507, 12 Apr 2000 (Mutual Observance of
fairness & honesty; claim for refund due to losses, how to prove entitlement)
FACTS:
The case involves a claim for tax refund on the amount of P112,491 representing BPI’s tax
withheld for 1989. This was initially filed with the CIR alleging that the company did not apply
the 1989 refundable amount to its 1990 Annual Income Tax Return or other tax liabilities due to
the alleged business losses it incurred for the same year. But, without waiting for CIR, it filed a
petition for review with the CTA which dismissed the petition. Hence, this petition.

ISSUE:
Whether BPI is entitled to the refund

RULING:
Yes. In the present case, the return attached to the company’s motion for reconsideration
clearly showed that it suffered a net loss in 1990. Contrary to the holding of the CA and CTA, BPI
could not have applied the amount as a tax credit.
When it is undisputed that a taxpayer is entitled to a refund, the State should not invoke
technicalities to keep money not belonging to it.

5. CIR v Tokyo Shipping Co, 244 SCRA 332, 26 May 1995 [Claim for Refund of tax on GPB
from charter of vessel; claim for refund construed strictississimi juris finding of fact by
CTA that vessel left without sugar laden; 15 years lapsed without refund though at one
point lawyer of BIR said it was approved; kill the goose that lay the golden eggs]
FACTS:
Tokyo Shipping filed a claim for refund from the BIR for erroneous prepayment of income and
common carrier’s taxes amounting to P107,142.75 since no receipt was realized from its charter
agreement. BIR failed to act promptly on the claim and thus it was elevated to the Court of Tax
Appeals which decided in favor of the refund. Hence, this petition for review on certiorari.

ISSUE:
Whether Tokyo Shipping is entitled to a refund or tax credit for the prepayment of taxes

RULING:
Yes. The power of taxation is sometimes called also the power to destroy. Therefore, it should
be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be
exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden
egg”. Fair deal is expected by taxpayers from the BIR and the duty demands that BIR should
refund without unreasonable delay the erroneous collection.

6. CIR v Mitsubishi Metal Corp, 181 SCRA 214, 22 Jan 1990 [Exemption of Japanese govt
owned bank does not extend to Jap corp, who in turn lent the loan to a local company;
exemption construed strictississimi]
FACTS:
 1. Mitsubishi granted a loan in the amount of US$ 20,000,000.00 to Atlas for the installation
of a new concentrator for copper production in consideration of Atlas’ subsequent sale
to Mitsubishi of all copper concentrates produced for a period of fifteen (15) years. It was
said that US$ 9,000,000.00 was used to purchase the equipment from Japan;

2. Mitsubishi thereafter applied for a loan with ExportImport Bank of Japan (ExImBank) for
purposes of its obligation under the aforementioned contract, which was granted under
the condition that Mitsubishi would use the amount as loan to atlas and as consideration
for importing copper concentrates from Atlas, and that Mitsubishi had to pay back the
total amount of the loan by 30 September 1981;

3. Mitsubishi and Atlas filed a claim for tax credits in the amount of PhP 1,971,595.01 which
was later on waived by Mitsubishi in favor of Atlas. But since the BIR did not act on the
same, respondents filed a Petition for Review with the CTA which was grounded on the
claim that Mitsubishi was a mere agent ExImBank, a financing institution owned,
controlled and financed by the Japanese Government and is therefore exempt from
taxation under §29 (b)(7)(A) of the NIRC1. It claims that the interest income from its loans
should be exempted in view of its government status;

4. CTA ruled in favor of respondents, hence the instant petition.

ISSUES:

1. WON the interest income derived from the loans extended to respondents by ExImBank are
excludible from gross income and are therefore exempt from withholding.

PROVISION: R.A. 8242, §32 (B) (7) (a) – Gross Income || Exclusions from Gross Income
(7) Miscellaneous Items. -
(a) Income Derived by Foreign Government. - Income derived from investments in the
Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits
in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned,
controlled, or enjoying refinancing from foreign governments, and (iii) international or
regional financial institutions established by foreign governments.

RULING + RATIO:
1. No, the interest income derived from the loans are not excluded because the contracts do
not contain any direct or inferential reference to ExImBank.
 ExImBank was not directly participating in the contract between respondents and could
not have therefore associated the Japanese Government in the transaction. The Court
ruled that:
 x x x The loan and sales contract between Mitsubishi and Atlas does not
contain any direct or inferential reference to Eximbank whatsoever. The
agreement is strictly between Mitsubishi as creditor in the contract of
loan and Atlas as the seller of the copper concentrates. From the
categorical language used in the document, one prestation was in
consideration of the other. The specific terms and the reciprocal nature of
their obligations make it implausible, if not vacuous, to give credit to the
cavalier assertion that Mitsubishi was a mere agent in said transaction. x x
x

x x x The allegation that the interest paid by Atlas was remitted in full by
Mitsubishi to Eximbank, assuming the truth thereof, is too tenuous and
conjectural to support the proposition that Mitsubishi is a mere conduit.
Furthermore, the remittance of the interest payments may also be
logically viewed as an arrangement in paying Mitsubishi’s obligation to
Eximbank. Whatever arrangement was agreed upon by Eximbank and
Mitsubishi as to the manner or procedure for the payment of the latter’s
obligation is their own concern. It should also be noted that Eximbank’s
loan to Mitsubishi imposes interest at the rate of 75% per annum, while
Mitsubishi’s contract with Atlas merely states that the “interest on the
amount of the loan shall be the actual cost beginning from and including
other dates of releases against loan.” x x x

x x x It is too settled a rule in this jurisdiction, as to dispense with the need

for citations, that laws granting exemption from tax are construed
strictissimi juris against the taxpayer and liberally in favor of the taxing
power. Taxation is the rule and exemption is the exception. 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 petitioners have failed
to discharge. Significantly, private respondents are not even among the
entities which, under Section 29 (b) (7) (A) of the tax code, are entitled to
exemption and which should indispensably be the party in interest in this
case. x x x

7. Phil Bank of Communications v. CIR, et al, 302 SCRA 241, 28 Jan 1999 [Summary
collection does not infringe due process
FACTS:

Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation

duly organized under Philippine laws, filed its quarterly income tax returns for the first and
second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00 by
applying PBCom's tax credit memos for P3,401,701.00 and P1,615,253.00,
respectively. Subsequently, however, PBCom suffered net loss of P25,317,228.00, thereby
showing no income tax liability in its Annual Income Tax Returns for the year-ended December
31, 1985. For the succeeding year, ending December 31, 1986, the petitioner likewise reported
a net loss of P14,129,602.00, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from leased properties. The lessees
withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and
P234,077.69 in 1986. On August 7, 1987, petitioner requested the Commissioner of Internal
Revenue, among others, for a tax credit of P5,016,954.00 representing the overpayment of
taxes in the first and second quarters of 1985.

Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by
their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner

instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA).
The petition was docketed as CTA Case No. 4309 entitled: "Philippine Bank of Communications
vs. Commissioner of Internal Revenue."
The CTA decided in favor of the BIR on the ground that the Petition was filed out of time as the
same was filed beyond the two-year reglementary period. A motion for Reconsideration was
denied and the appeal to Court of Appeals was likewise denied. Thus, this appeal to Supreme
Court.

Issues:

a) Whether or not Revenue Regulations No. 7-85 which alters the reglementary period from
two (2) years to ten (10) years is valid.
b) Whether or not the petition for tax refund had already prescribed.

Ruling:

a. RR 7-85 altering the 2-year prescriptive period imposed by law to 10-year prescriptive
period is invalid.

Administrative issuances are merely interpretations and not expansions of the provisions of
law, thus, in case of inconsistency, the law prevails over them. Administrative agencies have no
legislative power.

“When the Acting Commissioner of Internal Revenue issued RMC 7-85,

changing the prescriptive period of two years to ten years on claims of excess quarterly income
tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977
NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines
contrary to the statute passed by Congress.”

“It bears repeating that Revenue memorandum-circulars are considered administrative rulings
(in the sense of more specific and less general interpretations of tax laws) which are issued
from time to time by the Commissioner of Internal Revenue. It is widely accepted that the
interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is
entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and
will be ignored if judicially found to be erroneous. Thus, courts will not countenance
administrative issuances that override, instead of remaining consistent and in harmony with,
the law they seek to apply and implement.”

“Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or
errors of its officials or agents. As pointed out by the respondent courts, the nullification of
RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is an administrative
interpretation which is not in harmony with Sec. 230 of 1977 NIRC, for being contrary to the
express provision of a statute. Hence, his interpretation could not be given weight for to do so
would, in effect, amend the statute.”

b. By implication of the above, claim for refund had already prescribed.

Since the petition had been filed beyond the prescriptive period, the same has already
prescribed. The fact that the final adjusted return show an excess tax credit does not
automatically entitle taxpayer claim for refund without any express intent.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals appealed
from is AFFIRMED, with COSTS against the petitioner.

8. Sison v. Ancheta, GR 59431, 25 Jul 1984 [Uniformity, Equal Protection and Due Process
Clauses not violated when BP 135 adopted gross income taxation)
Facts:

Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg. 135. It

amended
Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on
citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties,
prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary
benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends
and share of individual partner in the net profits of taxable partnership, (f) adjusted gross
income.
Petitioner as taxpayer alleged that "he would be unduly discriminated against by the imposition
of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those
which are imposed upon fixed income or salaried individual taxpayers." He characterizes the
above section as arbitrary amounting to class legislation, oppressive and capricious in
character.

For petitioner, therefore, there is a transgression of both the equal protection and due process
clauses of the Constitution as well as of the rule requiring uniformity in taxation.

The OSG prayed for dismissal of the petition due to lack of merit.

Issue: Whether the imposition of a higher tax rate on taxable net income derived from business
or profession than on compensation is constitutionally infirm.

(WON there is a transgression of both the equal protection and due process clauses of the
Constitution as well as of the rule requiring uniformity in taxation)

Held: No. Petition dismissed

Ratio:
The need for more revenues is rationalized by the government's role to fill the gap not done by
public enterprise in order to meet the needs of the times. It is better equipped to administer for
the public welfare.

The power to tax, an inherent prerogative, has to be availed of to assure the performance of
vital state functions. It is the source of the bulk of public funds.

The power to tax is an attribute of sovereignty and the strongest power of the government.
There are restrictions, however, diversely affecting as it does property rights, both the due
process and equal protection clauses may properly be invoked, as petitioner does, to invalidate
in appropriate cases a revenue measure. If it were otherwise, taxation would be a destructive
power.

The petitioner failed to prove that the statute ran counter to the Constitution. He used
arbitrariness as basis without a factual foundation. This is merely to adhere to the authoritative
doctrine that where the due process and equal protection clauses are invoked, considering that
they are not fixed rules but rather broad standards, there is a need for proof of such persuasive
character as would lead to such a conclusion.

It is undoubted that the due process clause may be invoked where a taxing statute is so
arbitrary that it finds no support in the Constitution. An obvious example is where it can be
shown to amount to the confiscation of property. That would be a clear abuse of power.
 It has also been held that where the assailed tax measure is beyond the jurisdiction of the
state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and
unreasonable, it is subject to attack on due process grounds.

For equal protection, the applicable standard to determine whether this was denied in the
exercise of police power or eminent domain was the presence of the purpose of hostility or
unreasonable discrimination.

It suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions not being
different, both in the privileges conferred and the liabilities imposed. Favoritism and undue
preference cannot be allowed. For the principle is that equal protection and security shall be
given to every person under circumstances, which if not identical are analogous. If law be looks
upon in terms of burden or charges, those that fall within a class should be treated in the same
fashion, whatever restrictions cast on some in the group equally binding on the rest.

The equal protection clause is, of course, inspired by the noble concept of approximating the
ideal of the laws's benefits being available to all and the affairs of men being governed by that
serene and impartial uniformity, which is of the very essence of the idea of law.

The equality at which the 'equal protection' clause aims is not a disembodied equality. The
Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws are not abstract
propositions. They do not relate to abstract units A, B and C, but are expressions of policy
arising out of specific difficulties, addressed to the attainment of specific ends by the use of
specific remedies. The Constitution does not require things which are different in fact or
opinion to be treated in law as though they were the same.

Lutz v Araneta- it is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that 'inequalities which result from a singling out of
one particular class for taxation, or exemption infringe no constitutional limitation.

Petitioner- kindred concept of uniformity- Court- Philippine Trust Company- The rule of
uniformity does not call for perfect uniformity or perfect equality, because this is hardly
attainable

Equality and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation

There is quite a similarity then to the standard of equal protection for all that is required is that
the tax "applies equally to all persons, firms and corporations placed in similar situation"
There was a difference between a tax rate and a tax base. There is no legal objection to a
broader tax base or taxable income by eliminating all deductible items and at the same time
reducing the applicable tax rate.

The discernible basis of classification is the susceptibility of the income to the application of
generalized rules removing all deductible items for all taxpayers within the class and fixing a set
of reduced tax rates to be applied to all of them. As there is practically no overhead expense,
these taxpayers are not entitled to make deductions for income tax purposes because they are
in the same situation more or less.

Taxpayers who are recipients of compensation income are set apart as a class.

On the other hand, in the case of professionals in the practice of their calling and businessmen,
there is no uniformity in the costs or expenses necessary to produce their income. It would not
be just then to disregard the disparities by giving all of them zero deduction and
indiscriminately impose on all alike the same tax rates on the basis of gross income.

There was a lack of a factual foundation, the forcer of doctrines on due process and equal
protection, and he reasonableness of the distinction between compensation and taxable net
income of professionals and businessmen not being a dubious classification.

9. Reyes v. Almanzor, 196 SCRA 322 (Arbitrary valuation violated Due Process)
FACTS:
Petitioners are owners of parcels of land in Tondo and Sta. Cruz, Manila. These lands are
leased as dwellings sites by tenants who pay a monthly rent not exceeding 300 pesos.
Consequently, R.A. No. 6359 prohibited an increase in monthly rentals of dwelling units or of
lands on which another's dwelling is located, where such rentals do not exceed 300 pesos a
month but allowing an increase in rent by not more than 10% thereafter. The said Act also
suspended paragraph 1 of Article 1673 of the Civil Code for two years from its effectivity
thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of
lease. This prohibition later became absolute through the passing of P.D. 20. As an effect, the
petitioners were not able to increase the monthly rentals and cause ejectment of the tenants.
The respondent City Assessor of Manila re-classified and reassessed the value of the subject
properties based on the schedule of market values duly reviewed by the Secretary of Finance.
The petitioners averred that such reassessments made were excessive and unconstitutional
considering that the taxes imposed upon them greatly exceeded the annual income derived
from their properties. In support thereof, they argued that the income approach should have
been used instead of the comparable sales approach in the valuation of their properties. The
Board of Tax Assessment Appeals, however, considered the assessments valid. The petitioners
appealed to the Central Board of Assessment Appeals but were denied.

ISSUE:
Whether income approach or comparable sales approach should be used in the valuation of
their properties

HELD:
Income approach. As early as 1923 in the case of Army & Navy Club, Manila v.
Wenceslao Trinidad, it has been stressed that the assessors, in finding the value of the
property, have to consider all the circumstances and elements of value and must exercise a
prudent discretion in reaching conclusions.
Ironically, in the case at bar, not even the factors determinant of the assessed value of
subject properties under the "comparable sales approach" were presented by the public
respondents, namely: (1) that the sale must represent a bonafide arm's length transaction
between a willing seller and a willing buyer and (2) the property must be comparable property.
Nothing can justify or support their view as it is of judicial notice that for properties covered by
P.D. 20 especially during the time in question, there were hardly any willing buyers. As a
general rule, there were no takers so that there can be no reasonable basis for the conclusion
that these properties were comparable with other residential properties not burdened by P.D.
20. Neither can the given circumstances be nonchalantly dismissed by public respondents as
imposed under distressed conditions clearly implying that the same were merely temporary in
character. At this point in time, the falsity of such premises cannot be more convincingly
demonstrated by the fact that the law has existed for around twenty (20) years with no end to
it in sight.
Verily, taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. However, such collection should be made in accordance with law as
any arbitrariness will negate the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the
real purpose of taxations, which is the promotion of the common good, may be achieved
(Commissioner of Internal Revenue v. Algue Inc., et al., 158 SCRA 9 [1988]). Consequently, it
stands to reason that petitioners who are burdened by the government by its Rental Freezing
Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be
penalized by the same government by the imposition of excessive taxes petitioners can ill
afford and eventually result in the forfeiture of their properties.
By the public respondents' own computation the assessment by income approach would
amount to only P10.00 per sq. meter at the time in question.

10. Nitafan et al v. CIR, GR 78780, 23 Jul 1987 (Salaries of justices & Judges are not exempt
from income tax)
FACTS:

1. Petitioners, the duly appointed and qualified Judges presiding over Branches 52, 19 and 53,
respectively, of the Regional Trial Court, National Capital Judicial Region, all with stations in
Manila, seek to prohibit and/or perpetually enjoin respondents, the Commissioner of Internal
Revenue and the Financial Officer of the Supreme Court, from making any deduction of
withholding taxes from their salaries.
2. Petitioners argue that "any tax withheld from their emoluments or compensation as judicial
officers constitutes a decrease or diminution of their salaries, contrary to the provision of
Section 10, Article VIII of the 1987 Constitution mandating that "(d)uring their continuance in
office, their salary shall not be decreased," even as it is anathema to the Ideal of an
independent judiciary envisioned in and by said Constitution."

ISSUE: WON Salaries of justices and judges are exempt from income tax.

HELD: NO. Petition for prohibtion is dismissed.

RATIO:

1. The ruling that "the imposition of income tax upon the salary of judges is a dimunition
thereof, and so violates the Constitution" in Perfecto vs. Meer,13 as affirmed in Endencia vs.
David must be declared discarded.

2. The framers of the fundamental law, as the alter ego of the people, have expressed in clear
and unmistakable terms the meaning and import of Section 10, Article VIII, of the 1987
Constitution:

the framers adopted and we accord due respect to the intent of the people, through the
discussions and deliberations of their representatives, in the spirit that all citizens should bear
their aliquot part of the cost of maintaining the government and should share the burden of
general income taxation equitably.

11. PAL v. Sec of Finance, GR 115852, 25 Aug 1994 (Withdrawal of PAL’s exemption from
VAT without being mentioned in title not violative of bill embracing one subject)

F A C T S:
The Value-Added Tax [VAT] is levied on the sale, barter or exchange of goods and properties as
well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or
gross value in money of goods or properties sold, bartered or exchanged or of the gross
receipts from the sale or exchange of services.

Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal RevenueCode.These are various suits for
certiorari and prohibitionchallenging the constitutionality of RA 7716:
In the case at bar, PAL attacks the formal validity of Republic Act No. 7716. PAL contends that it
violates Art. VI, Section 26[1] which provides that "Every bill passed by Congress shall embrace
only one subject which shall be expressed in the title thereof." It is contended that neither H.
No. 11197 nor S. No.1630 provided for removal of exemption of PAL transactions from the
payment of the VAT and that this was made only in the Conference Committee bill which
became Republic Act No.7716 without reflecting this fact in its title.

The title of Republic Act No. 7716 is: AN ACT RESTRUCTURING THE VALUE-ADDED TAX [VAT]
SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE
PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED, ANDFOR OTHER PURPOSES. Furthermore, section
103 of RA 7716 states the following:

Section 103.
Exempt Transactions.-
The following shall be exempt from the value-added tax:[q] Transactions which are exempt
under special laws, except those granted under Presidential Decree Nos. 66, 529, 972,1491,
1590.The effect of the amendment is to remove the exemption granted to PAL, as far as the
VAT is concerned. Philippine Airlines [PAL] claims that its franchise under P.D.No. 1590 which
makes it liable for a franchise tax of only 2% of
gross revenues "in lieu of all the other fees and charges of any kind, nature or description,
imposed, levied, established,assessed or collected by any municipal, city, provincial, ornational
authority or government agency, now or in the future," cannot be amended by Rep. Act No.
7716 as to make it[PAL] liable for a 10% value-added tax on revenues, because Sec. 24 of P.D.
No. 1590 provides that PAL's franchise can only be amended, modified or repealed by a special
law specifically for that purpose.

I S S U E:
Whether or not this amendment of Section 103 of the NIRC is fairly embraced in the title of
Republic Act No.7716, although no mention is made therein of P. D. No. 1590

H E L D:
The court ruled in the affirmative. The title states that the purpose of the statute is to expand
the VAT system, and one way of doing this is to widen its base by withdrawing some of the
exemptions granted before. To insist that P. D. No.1590 be mentioned in the title of the law, in
addition to Section103 of the NIRC, in which it is specifically referred to, would be to insist that
the title of a bill should be a complete index of itscontent.The constitutional requirement that
every bill passed by Congress shall embrace only one subject which shall beexpressed in its title
is intended to prevent surprise upon the members of Congress and to inform the people of
pending legislation so that, if they wish to, they can be heard regarding it. If, in the case at bar,
petitioner did not know before that its exemption had been withdrawn, it is not because of any
defect in the title but perhaps for the same reason other statutes, although published, pass
unnoticed until some event somehow calls attention to their existence.

Republic Act No. 7716 expressly amends PAL's franchise [P.D.No. 1590] by specifically excepting
from the grant of exemptions from the VAT PAL's exemption under P. D. No.1590. This is within
the power of Congress to do under Art.XII, Section 11 of the Constitution, which provides that
the grant of a franchise for the operation of a public utility is subject to amendment, alteration
or repeal by Congress when the common good so requires

12. Tolentino v Sec of Finance & CIR, GR 11545, 64 SCAD 352, 235 SCRA 630 (Does VAT law
violate the “progressivity rule of taxation” given that VAT is regressive?; equality &
uniformity rule?)
13. Arturo Tolentino et al are questioning the constitutionality of RA 7716 otherwise known
as the Expanded Value Added Tax (EVAT) Law. Tolentino averred that this revenue bill did
not exclusively originate from the House of Representatives as required by Section 24,
Article 6 of the Constitution. Even though RA 7716 originated as HB 11197 and that it
passed the 3 readings in the HoR, the same did not complete the 3 readings in Senate for
after the 1st reading it was referred to the Senate Ways & Means Committee thereafter
Senate passed its own version known as Senate Bill 1630. Tolentino averred that what
Senate could have done is amend HB 11197 by striking out its text and substituting it with
the text of SB 1630 in that way “the bill remains a House Bill and the Senate version just
becomes the text (only the text) of the HB”. (It’s ironic however to note that Tolentino
and co-petitioner Raul Roco even signed the said Senate Bill.)
14. ISSUE: Whether or not the EVAT law is procedurally infirm.
15. HELD: No. By a 9-6 vote, the Supreme Court rejected the challenge, holding that such
consolidation was consistent with the power of the Senate to propose or concur with
amendments to the version originated in the HoR. What the Constitution simply means,
according to the 9 justices, is that the initiative must come from the HoR. Note also that
there were several instances before where Senate passed its own version rather than
having the HoR version as far as revenue and other such bills are concerned. This practice
of amendment by substitution has always been accepted. The proposition of Tolentino
concerns a mere matter of form. There is no showing that it would make a significant
difference if Senate were to adopt his over what has been done.

13. ABAKADA Guro v. Exec Secretary, 469 SCRA 1, etc 1 Sep 2005 & 18 Oct 2005
Facts:
Petitioners ABAKADA GURO Party List challenged the constitutionality of R.A. No. 9337
particularly Sections 4, 5 and 6, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). These questioned provisions contain a
uniform proviso authorizing the President, upon recommendation of the Secretary of Finance,
to raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions
have been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of
its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987
Philippine Constitution. They further argue that VAT is a tax levied on the sale or exchange of
goods and services and cannot be included within the purview of tariffs under the exemption
delegation since this refers to customs duties, tolls or tribute payable upon merchandise to the
government and usually imposed on imported/exported goods. They also said that the
President has powers to cause, influence or create the conditions provided by law to bring
about the conditions precedent. Moreover, they allege that no guiding standards are made by
law as to how the Secretary of Finance will make the recommendation. They claim,
nonetheless, that any recommendation of the Secretary of Finance can easily be brushed aside
by the President since the former is a mere alter ego of the latter, such that, ultimately, it is the
President who decides whether to impose the increased tax rate or not.

Issues:
1. Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and
Article VI, Section 26 (2) of the Constitution.
2. Whether or not there was an undue delegation of legislative power in violation of
Article VI Sec 28 Par 1 and 2 of the Constitution.
3. Whether or not there was a violation of the due process and equal protection under
Article III Sec. 1 of the Constitution.

Discussions:
1. Basing from the ruling of Tolentino case, it is not the law, but the revenue bill which is
required by the Constitution to “originate exclusively” in the House of Representatives,
but Senate has the power not only to propose amendments, but also to propose its own
version even with respect to bills which are required by the Constitution to originate in
the House. the Constitution simply means is that the initiative for filing revenue, tariff or
tax bills, bills authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory that, elected as
they are from the districts, the members of the House can be expected to be more
sensitive to the local needs and problems. On the other hand, the senators, who are
elected at large, are expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the enactment of such laws.
 2. In testing whether a statute constitutes an undue delegation of legislative power or not,
it is usual to inquire whether the statute was complete in all its terms and provisions
when it left the hands of the legislature so that nothing was left to the judgment of any
other appointee or delegate of the legislature.
3. The equal protection clause under the Constitution means that “no person or class of
persons shall be deprived of the same protection of laws which is enjoyed by other
persons or other classes in the same place and in like circumstances.”

Rulings:
1. R.A. No. 9337 has not violated the provisions. The revenue bill exclusively originated in
the House of Representatives, the Senate was acting within its constitutional power to
introduce amendments to the House bill when it included provisions in Senate Bill No.
1950 amending corporate income taxes, percentage, excise and franchise taxes. Verily,
Article VI, Section 24 of the Constitution does not contain any prohibition or limitation
on the extent of the amendments that may be introduced by the Senate to the House
revenue bill.
2. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job must be done, who must
do it, and what is the scope of his authority; in our complex economy that is frequently
the only way in which the legislative process can go forward.
3. Supreme Court held no decision on this matter. The power of the State to make
reasonable and natural classifications for the purposes of taxation has long been
established. Whether it relates to the subject of taxation, the kind of property, the rates
to be levied, or the amounts to be raised, the methods of assessment, valuation and
collection, the State’s power is entitled to presumption of validity. As a rule, the
judiciary will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.

14. CIR v. Botelbo Shipping Corp, 20 SCRA 487

Facts: Reparations Commission of the Philippines sold to Botelho the vessel "M/S Maria Rosello"
for the amount of P6,798,888.88. The former sold to General Shipping the vessel "M/S General
Lim" at the price of P6, 951,666.66 upon arrival at he port of Manila, the Bureau of Customs
placed the same under custody and refused to give due course (to application for registration),
unless the aforementioned sums of P483, 433 and P494, 825 be paid as compensating tax. The
buyers subsequently filed with the CTA their respective petitions for review. Pending the case,
R.A. 3079 amended R.A.1789-the Original Reparations Act, under which the aforementioned
contracts with the Buyers had been executed-by exempting buyers of reparations goods acquired
from the Commission, from liability for the compensating tax.
Invoking Section 20 of R.A.3079, the Buyers applied for the renovation of their utilization
contracts with the commission, which granted the application, and them filed with the Tax Court,
their supplemental petitions for review. The CTA ruled in favor of the buyers. On appeal, the CIR
and COC maintain that such provision should not be applied retroactively, upon the ground that
the tax exemption must be clear and explicit, that there is no express provision for the
retroactivity of the exemption established by R.A.3079, from the compensating tax; that the
favorable provisions which are referred in Section 20 thereof, cannot include the exemption from
compensating tax; and, that Congress could not have intended any retroactive exemption,
considering that the result thereof would be prejudicial to the Government.

Issue: Whether or not the tax exemption could be applied retroactively.

Held: Yes, the inherent weakness of the last ground becomes manifest when we consider that,
if true, there could be no tax exemption of any kind whatsoever, even if Congress should wish to
create one, because every such exemption implies a waiver of the right to collect what otherwise
would be due to the Government,and in this case, is prejudicial thereto. . In fact, however, tax
exemptions may and do exist, such as the one prescribed in section 14 of Republic Act No. 1789,
as amended by Republic Act No. 3079, which, by the way, is "clear and explicit," thus, meeting
the first ground of appellant's contention. It may not be amiss to add that no tax exemption-like
any other legal exemption or exception-is given without any reason therefor. In much the same
way as other statutory commands, its avowed purpose is some public benefit or interest, which
the law-making body considers sufficient to offset the monetary loss entitled in the grant of the
exemption. Indeed, section 20 of Republic Act No. 3079 exacts a valuable consideration for the
retroactivity of its favorable provisions, namely, the voluntary assumption, by the end-user who
bought reparations goods prior to June 17, 1961 of "all the new obligations provided for in" said
Act. The argument adduced in support of the third ground is that the view adopted by the Tax
Court would operate to grant exemption to particular persons, the Buyers herein. It should be
noted, however, that there is no constitutional injunction against granting tax exemptions to
particular persons. In fact, it is not unusual to grant legislative franchises to specific individuals
or entities, conferring tax exemptions thereto. What the fundamental law forbids is the denial of
equal protection, such as through unreasonable discrimination or classification.

Furthermore, Section 14 of the Law on Reparations, as amended, exempts from the

compensating tax, not particular persons, but persons belonging to a particular class. Indeed,
appellants do not assail the constitutionality of said section 14, insofar as it grants exemptions to
end-users who, after the approval of Republic Act No. 3079, on June 17, 1961, purchased
reparations goods procured by the Commission. From the viewpoint of Constitutional Law,
especially the equal protection clause, there is no difference between the grant of exemption to
said end-users, and the extension of the grant to those whose contracts of purchase and sale
mere made before said date, under Republic Act No. 1789.

It is true that Republic Act No. 3079 does not explicitly declare that those who purchased
reparations goods prior to June 17, 1961, are exempt from the compensating tax. It does not say
so, because they do not really enjoy such exemption, unless they comply with the proviso in
 Section 20 of said Act, by applying for the renovation of their respective utilization contracts, "in
order to avail of any provision of the Amendatory Act which is more favorable" to the applicant.
In other words, it is manifest, from the language of said section 20, that the same intended to
give such buyers the opportunity to be treated "in like manner and to the same extent as an end-
user filing his application after this approval of this Amendatory Act." Like the "most-favored-
nation-clause" in international agreements, the aforementioned section 20 thus seeks, not to
discriminate or to create an exemption or exception, but to abolish the discrimination,
exemption or exception that would otherwise result, in favor of the end-user who bought after
June 17, 1961 and against one who bought prior thereto.

15. Tan v. Del Rosario, Jr.2 237 SCRA 324(1994) (Legislative discretion to determine nature
(kind), subject (purpose), extent (rate), coverage (subject), land situs (place), SNITS is
valid;
Facts:

1. Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income Taxation
Scheme ("SNIT"), which amended certain provisions of the NIRC, as well as the Rules and
Regulations promulgated by public respondents pursuant to said law.

2. Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the following provisions
of the Constitution:

-Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only one subject
which shall be expressed in the title thereof.
- Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The Congress
shall evolve a progressive system of taxation.
- Article III, Section 1 — No person shall be deprived of . . . property without due process of law,
nor shall any person be denied the equal protection of the laws.

3. Petitioners contended that public respondents exceeded their rule-making authority in applying
SNIT to general professional partnerships. Petitioner contends that the title of HB 34314,
progenitor of RA 7496, is deficient for being merely entitled, "Simplified Net Income Taxation
Scheme for the Self-Employed and Professionals Engaged in the Practice of their
Profession"(Petition in G.R. No. 109289) when the full text of the title actually reads,
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and Professionals
Engaged In The Practice of Their Profession, Amending Sections 21 and 29 of the National Internal
Revenue Code,' as amended. Petitioners also contend it violated due process.

5. The Solicitor General espouses the position taken by public respondents.

6. The Court has given due course to both petitions.

2
Tan v. Del Rosario, 237 SCRA 324 (1994) – This is a challenge to the validity of Simplified Net Income
Taxation applied to general professional partnerships; uniformity of taxation merely requires that all
subjects or objects of taxation similarly are to be treated alike both in privileges and liabilities.
 ISSUE: Whether or not the tax law is unconstitutional for violating due process

NO. The due process clause may correctly be invoked only when there is a clear contravention of
inherent or constitutional limitations in the exercise of the tax power. No such transgression is
so evident in herein case.

1. Uniformity of taxation, like the concept of equal protection, merely requires that all subjects or
objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities.
Uniformity does not violate classification as long as: (1) the standards that are used therefor are
substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose,
(3) the law applies, all things being equal, to both present and future conditions, and (4) the
classification applies equally well to all those belonging to the same class.

2. What is apparent from the amendatory law is the legislative intent to increasingly shift the income
tax system towards the schedular approach in the income taxation of individual taxpayers and to
maintain, by and large, the present global treatment on taxable corporations. The Court does not
view this classification to be arbitrary and inappropriate.

ISSUE 2: Whether or not public respondents exceeded their authority in promulgating the RR

No. There is no evident intention of the law, either before or after the amendatory legislation, to
place in an unequal footing or in significant variance the income tax treatment of professionals
who practice their respective professions individually and of those who do it through a general
professional partnership.

16. Maceda v. Macaraeg 223 SCRA 217

FACTS:

CA No. 120 was enacted creating the NPC, a public corporation, mainly to develop hydraulic
power from all water sources in the Philippines and which provided that “it shall be exempt
from the payment of all taxes.” Subsequently, RA No. 358 was enacted providing a tax provision
which states that “the NPC shall be exempt from all taxes, duties, fees, imposts and charges.”
Thereafter, PD No. 380 was issued which contains that “The loans, credits and indebtedness
contracted x x x shall also be exempt from all direct and indirect taxes, fees, imposts, other
charges.” On May 27, 1976 P.D. No. 938 was issued and which contained that “The Corporation
shall be non-profit and x x x is hereby declared exempt from the payment of all forms of taxes,
duties, fees, imposts.”

ISSUES:
(1) What kind of tax exemption privileges did NPC have?
(2) WON NPC is exempted from payment of such taxes?
HELD:
(1) Direct and Indirect Tax

A chronological review of the NPC laws will show that it has been the lawmaker's intention
that the NPC was to be completely tax exempt from all forms of taxes — direct and indirect.
NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its
operations upon its creation by virtue of C.A. No. 120. When the NPC was authorized to
contract with the IBRD for foreign financing, any loans obtained were to be completely tax
exempt. After the NPC was authorized to borrow from other sources of funds — aside issuance
of bonds — it was again specifically exempted from all types of taxes "to facilitate payment of
its indebtedness." Even when the ceilings for domestic and foreign borrowings were
periodically increased, the tax exemption privileges of the NPC were maintained. NPC's tax
exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as
above stated. The exemption was, however, restored by R.A. No. 6395. P.D. No. 380 added
phrase "directly or indirectly" to said Section 13(d) of R.A. No. 6395. Then came P.D. No. 938
which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment
as well as excess revenues from its operation, for expansion. To enable the Corporation to pay
its indebtedness and obligations and in furtherance and effective implementation of the policy
enunciated in Section one of this Act, the Corporation, including its subsidiaries, is hereby
declared exempt from the payment of ALL FORMS OF taxes, duties, fees, imposts as well as
costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or
administrative proceedings. (Emphasis supplied)

And this "direct and indirect" tax exemption privilege extended to "taxes, fees, imposts,
other charges . . . to be imposed" in the future — surely, an indication that the lawmakers
wanted the NPC to be exempt from ALL FORMS of taxes — direct and indirect. It is crystal clear,
therefore, that NPC had been granted tax exemption privileges for both direct and indirect
taxes under P.D. No. 938.

(2) Yes.

NPC is a non-profit public corporation created for the general good and welfare, and wholly
owned by the government of the Republic of the Philippines. From the very beginning of its
existence, NPC enjoyed preferential tax treatment to enable the corporation to pay the
indebtedness and obligation and effective implementation of the policy enunciated in Sec. 1 of
RA 6395. From the preamble of PD No. 938, it is evident that the provision were not intended
to be interpreted liberally so as to enhance the tax exempt status of NPC.

P.D. No. 938 did not amend the same and so the tax exemption provision in Section 8 (b),
R.A. No. 6395, as amended by P.D. No. 380, still stands. Since the subject matter of this
particular Section 8 (b) had to do only with loans and machinery imported, paid for from the
proceeds of these foreign loans, THERE WAS NO OTHER SUBJECT MATTER TO LUMP IT UP
WITH, and so, the tax exemption stood as is—with the express mention of “direct and indirect”
tax exemptions. And this “direct and indirect” tax exemption privilege extended to “taxes, fees,
imposts, other charges x x x to be imposed” in the future—surely, an indication that the
lawmakers wanted the NPC to be exempt from ALL FORMS of taxes—direct and indirect.

It is recognized that the rule on strict interpretation does not apply in the case of exemptions
in favor of government political subdivision or instrumentality. In the case of property owned
by the State or a city or other public corporations, the express exception should not be
construed with the same degree of strictness that applies to exemptions contrary to the policy
of the state, since as to such property “exception is the rule and taxation the exception.”

17. ABAKADA Guro v. Exec Secretary, GR 168056 1 Sep 2005 & 18 Oct 2005 According to
determination of amount (Ad Valorem, Specific)
Facts:
Petitioners ABAKADA GURO Party List challenged the constitutionality of R.A. No. 9337
particularly Sections 4, 5 and 6, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). These questioned provisions contain a
uniform proviso authorizing the President, upon recommendation of the Secretary of Finance,
to raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions
have been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of
its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987
Philippine Constitution. They further argue that VAT is a tax levied on the sale or exchange of
goods and services and cannot be included within the purview of tariffs under the exemption
delegation since this refers to customs duties, tolls or tribute payable upon merchandise to the
government and usually imposed on imported/exported goods. They also said that the
President has powers to cause, influence or create the conditions provided by law to bring
about the conditions precedent. Moreover, they allege that no guiding standards are made by
law as to how the Secretary of Finance will make the recommendation. They claim,
nonetheless, that any recommendation of the Secretary of Finance can easily be brushed aside
by the President since the former is a mere alter ego of the latter, such that, ultimately, it is the
President who decides whether to impose the increased tax rate or not.

Issues:
4. Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and
Article VI, Section 26 (2) of the Constitution.
 5. Whether or not there was an undue delegation of legislative power in violation of
Article VI Sec 28 Par 1 and 2 of the Constitution.
6. Whether or not there was a violation of the due process and equal protection under
Article III Sec. 1 of the Constitution.

Discussions:
7. Basing from the ruling of Tolentino case, it is not the law, but the revenue bill which is
required by the Constitution to “originate exclusively” in the House of Representatives,
but Senate has the power not only to propose amendments, but also to propose its own
version even with respect to bills which are required by the Constitution to originate in
the House. the Constitution simply means is that the initiative for filing revenue, tariff or
tax bills, bills authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory that, elected as
they are from the districts, the members of the House can be expected to be more
sensitive to the local needs and problems. On the other hand, the senators, who are
elected at large, are expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the enactment of such laws.
8. In testing whether a statute constitutes an undue delegation of legislative power or not,
it is usual to inquire whether the statute was complete in all its terms and provisions
when it left the hands of the legislature so that nothing was left to the judgment of any
other appointee or delegate of the legislature.
9. The equal protection clause under the Constitution means that “no person or class of
persons shall be deprived of the same protection of laws which is enjoyed by other
persons or other classes in the same place and in like circumstances.”

Rulings:
4. R.A. No. 9337 has not violated the provisions. The revenue bill exclusively originated in
the House of Representatives, the Senate was acting within its constitutional power to
introduce amendments to the House bill when it included provisions in Senate Bill No.
1950 amending corporate income taxes, percentage, excise and franchise taxes. Verily,
Article VI, Section 24 of the Constitution does not contain any prohibition or limitation
on the extent of the amendments that may be introduced by the Senate to the House
revenue bill.
5. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job must be done, who must
do it, and what is the scope of his authority; in our complex economy that is frequently
the only way in which the legislative process can go forward.
6. Supreme Court held no decision on this matter. The power of the State to make
reasonable and natural classifications for the purposes of taxation has long been
established. Whether it relates to the subject of taxation, the kind of property, the rates
to be levied, or the amounts to be raised, the methods of assessment, valuation and
 collection, the State’s power is entitled to presumption of validity. As a rule, the
judiciary will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.

18. Tan v Mun of Pagbilao GR 14264, 30 Apr 1963 7 SCRA 887 According to purpose (General,
Special)

FACTS:

This is an action filed by Tan to declare an Ordinance enacted by the Municipality

imposing certain charges and/or fees on articles or merchandises landed upon, or loaded from
the said wharf and on the strip of shoreline adjacent thereto, measuring 300 meters. Tan alleged
that the Ordinance was ultra vires, in that the fees prescribed therein partake of the nature of
import or export taxes, in the guise of wharfage or rental fees

ISSUE:

1. Whether the Municipality can validly enact the ordinance in question; and
2. Whether Tan is entitled to a refund.

RULING:

1. No. The ordinance in question, is ultra vires, and hence, null and void. The ordinance calls
for a specific tax. Being a specific tax, the municipality has no right to impose the same,
for taxation is an attribute of sovereignty which municipal corporation do not enjoy. It
shall not be in the power of the council to impose a tax in any form whatever upon goods
and merchandise carried into the municipality or out of the same, and any attempt to
impose such tax in the guise of wharfage fee or charge is void. And being wharfage fee, it
is likewise beyond the power of the municipal council and municipal district council to
impose; and

2. Yes. Not only were the payments made under protest, but they were also collected under
an invalid ordinance. In a number of cases, the court have ruled that monies collected
under invalid acts or tax laws are refundable, even if the payments were voluntary.

19. PAL v. Romeo Edu, GR 41383, 15 Aug 1998 164 SCRA 320 (exempt from taxes)
FACTS:
The Philippine Airlines (PAL) is a corporation engaged in the air transportation business
under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the payment
of taxes.
Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate
(Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the
Land and Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to
pay motor vehicle registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the
amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration
fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated
May 19,1971, to Land Transportation Commissioner Romeo Edu (Edu) demanding a refund of the
amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu and
National Treasurer 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 Court.

ISSUE:
Whether or not motor vehicle registration fees are considered as taxes.

RULING:
Yes. 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. Such is the case of motor vehicle
registration fees. The motor vehicle registration fees are actually taxes intended for additional
revenues of the government even if one fifth or less of the amount collected is set aside for the
operating expenses of the agency administering the program.

20. ESSO Std Eastern v CIR GR 28508-9, 7 Jul 1989 175 SCRA 149 (Margin Fee a license – police
power, not taxing)
Facts:
In CTA Case No. 1251, Esso Standard Eastern Inc. (Esso) deducted from its gross income for
1959, as part of its ordinary and necessary business expenses, the amount it had spent for
drilling and exploration of its petroleum concessions. This claim was disallowed by the
Commissioner of Internal Revenue (CIR) on the ground that the expenses should be capitalized
and might be written off as a loss only when a "dry hole" should result. Esso then filed an
amended return where it asked for the refund of P323,279.00 by reason of its abandonment as
dry holes of several of its oil wells. Also claimed as ordinary and necessary expenses in the same
return was the amount of P340,822.04, representing margin fees it had paid to the Central
Bank on its profit remittances to its New York head office.
On August 5, 1964, the CIR granted a tax credit of P221,033.00 only, disallowing the claimed
deduction for the margin fees paid on the ground that the margin fees paid to the Central Bank
could not be considered taxes or allowed as deductible business expenses. Esso appealed to the
Court of Tax Appeals (CTA) for the refund of the margin fees it had earlier paid contending that
the margin fees were deductible from gross income either as a tax or as an ordinary and
necessary business expense. However, Esso’s appeal was denied.

Issues:
 1. Whether or not the margin fees are taxes
2. Whether or not the margin fees are necessary and ordinary business expenses
Ruling:

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 taxpayer's business. It is 'ordinary'
when it connotes a payment which is normal in relation to the business of the taxpayer
and the surrounding circumstances. Since the margin fees in question were incurred for
the remittance of funds to Esso's Head Office in New York, which is a separate and
distinct income taxpayer from the branch in the Philippines, for its disposal abroad, it
can never be said therefore that the margin fees were appropriate and helpful in the
development of Esso's business in the Philippines exclusively or were incurred for
purposes proper to the conduct of the affairs of Esso's branch in the Philippines
exclusively or for the purpose of realizing a profit or of minimizing a loss in the
Philippines exclusively. If at all, the margin fees were incurred for purposes proper to
the conduct of the corporate affairs of Esso in New York, but certainly not in the
Philippines.

21. Lozano v. Energy Regulatory Board, GR 95119-21, 18 Dec 1990 192 SCRA 363 (OPSF not a
tax) According to authority imposing the tax (National, Local)

22. Meralco Securities v. Central Board of Assessments Appeals, GR L-47245, 31 May 1982 114
SCRA 260 (Real Property under Real Property Tax Code, a national tax; This is no longer true
under the Local Government Code)

FACTS:

 Meralco Securities Industrial Corporation assails decision of CBAA holding Meralco’s

pipeline subject to realty tax.
 Pipeline concession under Petroleum Act of 1949, Meralco installed pipeline system from
Batangas to Manila where cylindrical steel pipes were joined together and buried not less
than 1m below surface. Pipes are embedded into the soil, welded together. Pipes have to
be coldcut by a rotary hard metal pipe cutter if you want to repair, replace, remove, or
transfer.
 Portion in Laguna is 30 km long and the pipes are permanently attached.
  However, Meralco notes that segments of the pipeline can be moved from one place to
another.
 CBAA confirmed ruling of provincial assessor and provincial board of assessment appeals

ISSUE:

WON pipeline in Laguna is a real property and therefore subject real property tax.

RULING:

Pipes are machinery or improvements, that do not fall within the category of property exempt
from realty tax. Art. 415 and 416 of the Civil Code defining real property and personal property
have no application to this case. Even if applicable, pipes are real property, adhered to soil,
attached to land in fixed manner.

RPTC, Sec. 38 : Ad valorem tax on real property such as land, buildings, machinery and other
improvements, affixed or attached to RP.

RPTC, Sec. 3 : Improvements defined as valuable addition made to property of an amelioration

in its condition, amounting to more than mere repairs or replacement of waste, costing labor
or capital and intended to enhance its value, beauty, or utility or to adapt it for new or further
purposes.

RPTC, Sec. 3 : Machinery as defined, shall embrace machines, mechanical contrivances,

instruments, appliances and apparatus attached to the real estate. It includes the physical
facilities available for production, as well as the installations and appurtenant service facilities,
together with all other equipment designed for or essential to its manufacturing, industrial, or
agricultural purposes.

23. Procter & Gamble v. Mun of Jagna, 94 SCRA 894, (nature and amount of license)
Facts: Procter and Gamble Philippines Manufacturing Corp. is a consolidated corporation of
Procter and Gamble Trading Company. It is engaged in the manufacture of soap, edible oil,
margarine and otehr similar products; and maintains a “bodega” in the municipality of Jagna,
where it stores copra purchased in the municipality and therefrom ships the same for its
manufacturing and other operations. In 1954, the Municipal Council enacted Ordinance 4,
imposing storage fees of all exportable copra deposite in the bodega within the jurisdiction of
the municipality of Jagna, Bohol. From 1958 to 1963, the company paid the municipality,
allegedly under protest, storage fees. In 1964, it filed suit, wherein it prayed that the Ordinance
be declared
inapplicable to it, and if not, that it be declared ultra vires and void.

Issue: Whether the Ordinance i s void, as it amounts to double taxation.

Held: The validity of the Ordinance must be upheld pursuant to the broad authority conferred
upon municipalites by Commonwealth Act 472 (promulgated 1939), which was the prevailing
law when the Ordinance is actually a municipal license tax or fee on persons, firms and
corporations exercising the privilege of storing copra within the municipality’s territorial
jurisdiction. Such fees imposed do not amount to double taxation. For double taxation to exist,
the same property must be taxed twice, when it should be taxed but once. A tax on the
company’s producs is different from the tax on the privilege of storing copra in a bodega
situated within the territorial boundary of the municipality.

24. Golden Ribbon Lumber v City of Butuan, 12 SCRA 611 (non payment is illegal)
25. City of Ozamis v Lumapas, 65 SCRA 33
Special Assessments (Now, Special Levy under the Local Government Code)
26. Apostolic Prefect v Treasurer of Baguio, 71 PHIL 547
Debt or an ordinary obligation

Facts: The Apostolic Prefect is a corporation sole, of religious character, organized under the
Philippine laws, and with residence in Baguio, The City imposed a special assessment against
properties within its territorial jurisdiction, including those of the Apostolic Prefect, which benefits
from its drainage and sewerage system. The Apostolic Prefect contends that its properties
should be free of tax.

Issue: Whether the Apostolic Prefect, as a religious entity, is exempt from the payment of the
special assessment.

Held: In its broad meaning, tax includes both general taxes and special assessment. Yet
actually, there is a recognized distinction between them in that assessment is confined to local
impositions upon property for the payment of the cost of public improvements in its immediate
vicinity and levied with reference to special benefits to the property assessed. A special
assessment is not, strictly speaking, a tax; and neither the decree nor the Constitution exempt
the Apostolic Prefect from payment of said special assessment. Furthermore, arguendo that
exemption may encompass such assessmen, the Apostolic Prefect cannot claim exemption as it
has not proven the property in question is used exclusively for religious purposes; but that it
appears that thesame is being used to other non-religious purposes. Thus, the Apostolic Prefect
is required to pay the special assessment.
27. Victoria Millling v Phil Ports Authority, GR 73705 27 Aug 1987, 153
SCRA 317 (share of govt from earnings of arrastre and stevedoring
from contractual compensation not tax)
FACTS: This is a petition for review on certiorari of the July 27, 1984 Decision of the Office
of the Presidential Assistant For Legal Affairs dismissing the appeal from the adverse ruling of the
Philippine Ports Authority on the sole ground that the same was filed beyond the reglementary
period.

On April 28, 1981, the Iloilo Port Manager of respondent Philippine Ports Authority (PPA for
short) wrote petitioner Victorias Milling Co., requiring it to have its tugboats and barges undergo
harbor formalities and pay entrance/clearance fees as well as berthing fees effective May 1, 1981.
PPA, likewise, requiring petitioner to secure a permit for cargo handling operations at its Da-an
Banua wharf and remit 10% of its gross income for said operations as the government's share.
Victorias Milling Co. maintained that it is except from paying PPA any fee or charge because: 1.
The wharf and its facilities are built and installed on it’s own land; 2. Repairs and maintenance
are solely paid by it; 3. Maintenance and dredging of the channel are done by the Company
personnel; 4. At not time has the government paid any centavo for such activities.

ISSUE: WON the Victorias Milling Co. claim of exception for PPA fees is meritorious.

HELD: No, the petitioners claim that there is no basis for the PPA to assess and impose the dues
and charge is devoid of merit.
As correctly stated by the Solicitor General, the fees and charges PPA collects are not for the use
of the wharf that petitioner owns but for the privilege of navigating in public waters, of entering
and leaving public harbours and berthing on public streams or waters.
As to the requirement to remit 10% of the handling charges, Section 6B-(ix) of the Presidential
Decree No. 857 authorized the PPA "To levy dues, rates, or charges for the use of the premises,
works, appliances, facilities, or for services provided by or belonging to the Authority, or any
organization concerned with port operations." This 10% government share of earnings of arrastre
and stevedoring operators is in the nature of contractual compensation to which a person desiring
to operate arrastre service must agree as a condition to the grant of the permit to operate.

28. CIR v Prieto 109 PHIL 592