General Principles

 Taxation – mode of raising revenue for public purposes

 Taxes
- Enforced proportional contribution from persons and property (based on one’s ability to pay)
- Levied by the State by virtue of its sovereignty (power of taxation)
- For support of the govt and public need.

 Taxes are enforced contribution

- They are obligations created by law, not by virtue of contract or agreement

 Proportional in character
- Same salary rate should be taxed the same
- Thus, the tax is dependent on one’s ability to pay.

 Levied by the authority of law

- Power to impose tax is legislative in character

Basis of Taxation
 Taxation and Lifeblood Doctrine
- The taxpayers are at some point obtaining benefits from the government;
Thus in return those who enjoy benefits, must also bear its burdens
- The ability of the government to serve and protect the people depends largely upon the
taxes of the people.

Theories of Taxation
1. Necessity Theory
o It is a necessary burden to preserve the State’s sovereignty
2. Benefits-Protection Theory
o The citizens supports the State by paying portion of its property
o In return, the citizens enjoy the benefits of organized society.

Cases:
1. CIR vs BPI
- Issue on proper notification on assessment
Facts:
 1988 - petitioner, Commission on Internal Revenue assessed BPI of deficiency percentage and
documentary for tax year 1986 amounting of Php 129M.
 In Response, Respondent BPI alleged that it was not properly informed of the deficiency in the
tax assessment. Thus, CIR violated the rule of National Internal Revenue Code, which states that
the tax payer should be properly informed in writing on law and facts on which the assessment
is made, otherwise the assessment is void.

Issue:
 Whether or not respondent BPI was properly informed of the assessment made by the CIR?

HELD:

 Yes. Petition of CIR was granted.

 The law prior to the enactment of NIRC merely requires for the CIR to “notify” / “inform” the
taxpayers of its findings. Nothing in the old law requires a written statement to the taxpayer,
stating the law and facts of the assessment.
 As to the existing jurisprudence, simply require the assessment to contain computation of tax
liabilities, the amount to be paid, and the demand for payment.
 Thus, BPI was indeed aware of the nature and basis of the assessment, and was given the
opportunity to contest the same, but had ignored despite the notice conspicuously written on the
assessments which states that "this ASSESSMENT becomes final and unappealable if not
protested within 30 days after receipt."

 Taxes are the lifeblood of the government, for without taxes, the government can neither exist
nor endure. A principal attribute of sovereignty, the exercise of taxing power derives its source

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 from the very existence of the state whose social contract with its citizens obliges it to promote
public interest and common good. The theory behind the exercise of the power to tax emanates
from necessity; without taxes, government cannot fulfill its mandate of promoting the general
welfare and well-being of the people.

2. CIR v. PINEDA
- Issue on collecting full amount of assessment from an heir

GR No. L-22734, September 15, 1967

21 SCRA 105
FACTS:
 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of
whom is Atty. Manuel Pineda.
 Estate proceedings were had in Court so that the estate was divided among and awarded to the
heirs. Atty Pineda's share amounted to about P2,500.00.
 After the estate proceedings were closed, the BIR investigated the income tax liability of the
estate for the years 1945 to 1948 and it found that the corresponding income tax returns were
not filed.
 Thereupon, the representative of the Collector of Internal Revenue issued an assessment and
charged the full amount to the inheritance due to Atty. Pineda who argued that he is liable only
to extent of his proportional share in the inheritance.
ISSUE:
 Can BIR collect the full amount of estate taxes from an heir's inheritance.

HELD:
 Yes.
 The Government can require Atty. Pineda to pay the full amount of the taxes assessed.
 The reason is that the Government has a lien on the P2,500.00 received by him from the estate
as his share in the inheritance, for unpaid income taxes for which said estate is liable. By virtue
of such lien, the Government has the right to subject the property in Pineda's possession to
satisfy the income tax assessment.
 After such payment, Pineda will have a right of contribution from his co-heirs, to achieve an
adjustment of the proper share of each heir in the distributable estate.

 All told, the Government has two ways of collecting the tax in question:
1. One, by going after all the heirs and collecting from each one of them the amount of the tax
proportionate to the inheritance received; and
2. second, is by subjecting said property of the estate which is in the hands of an heir or transferee
to the payment of the tax due. This second remedy is the very avenue the Government took in
this case to collect the tax.
 The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary
discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in
the particular provision of the Tax Code above quoted, because taxes are the lifeblood of
government and their prompt and certain availability is an imperious need.

3. VERA (Com of CIR) v. FERNANDEZ

- Exception of the State from being barred by Statute of Limitation (intestate proceeding).

GR No. L-31364 March 30, 1979

89 SCRA 199
FACTS:
 On 1969, petitioner (Commission of CIR) filed a motion before the intestate proceeding of
decedent Tongoy for the payment of estate tax deficiencies for tax year 1963- 1964.
 The administrator opposed arguing that the claim was already barred by the statute of
limitation:
Rule 86 of the Rules of Court which provides that all claims for money against the decedent,
arising from contracts, express or implied, whether the same be due, not due, or contingent, all
claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for
money against the decedent, must be filed within the time limited in the notice; otherwise they
are barred forever.

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ISSUE:

 Does the statute of non-claims of the Rules of Court bar the claim of the government for unpaid
taxes?

HELD:

 No.
 The reason for the more liberal treatment of claims for taxes against a decedent's estate in the
form of exception from the application of the statute of non-claims, is not hard to find.
 Collection of taxes is an exception to the general rule of Statute of Limitation, it does not apply
against the State.
 To safeguard such interest, neglect or omission of government officials entrusted with the
collection of taxes should not be allowed to bring harm or detriment to the people, in the same
manner as private persons may be made to suffer individually on account of his own negligence,
the presumption being that they take good care of their personal affairs. This should not hold
true to government officials with respect to matters not of their own personal concern. This is
the philosophy behind the government's exception, as a general rule, from the operation of the
principle of estoppel.

4. CIR v. CA, CITY TRUST BANKING CORP.

- The government is not bound by the errors committed by its employees / agents (tax
refund).
GR No. 86785, November 21, 1991
234 SCRA 348

FACTS:
 Respondent corporation Citytrust filed a refund of overpaid taxes with the BIR by which the
latter denied on the ground of prescription.
 Citytrust filed a petition for review before the CTA.
The case was submitted for decision based solely on the pleadings and evidence submitted by
the respondent because the CIR could not present any evidence by reason of the repeated
failure of BIR to transmit the records of the case, as well as the investigation report thereon, to
the Solicitor General.
 CTA rendered the decision ordering BIR to grant the respondent's request for tax refund
amounting to P 13.3 million.

ISSUE:
 Failure of the CIR to present evidence to support the case of the government, should the
respondent's claim be granted?
HELD:
 No, the case was remanded back to CTA for further proceeding and reception of evidence.
 As a general rule the Government is not bound by the errors committed by its agents.
In the performance of its governmental functions, the State cannot be estopped by the neglect
of its agent and officers.
 Although the Government may generally be estopped through the affirmative acts of public
officers acting within their authority, their neglect or omission of public duties as exemplified in
this case will not and should not produce that effect.
 Nowhere is the afore stated rule more true than in the field of taxation. It is axiomatic that the
Government cannot and must not be estopped particularly in matters involving taxes.
 Taxes are the lifeblood of the nation through which the government agencies continue to
operate and with which the State effects its functions for the welfare of its constituents. The
errors of certain administrative officers should never be allowed to jeopardize the Government's
financial position, especially in the case at bar where the amount involves millions of pesos the
collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy.
Thus, it is proper that the case be remanded back to the CTA for further proceedings and
reception of evidence

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 5. COMMISSIONER v. ALGUE, INC.
- The proper deduction of business expense on ordinary, necessary, reasonable business
expense – unto the income tax return.

GR No. L-28896, February 17, 1988

158 SCRA 9
FACTS:
 Respondent corporation received a letter from CIR regarding the delinquency of the income
taxes for year 1958 – 1959 (83K)
 Letter of protest was filed by respondent corp.
 CIR issued a warrant of distraint and levy, which the counsel of the Respondent refused to
receive because of pending protest.
 The protest was not acted upon by CIR;
 Respondent filed petition for review before CTA contending that:
The alleged deficiencies were proper deductions from the gross income of the corporation;
those were deduction arising from payment of promotional fees, which the corporation alleged
to be fictitious because the payees are members of same family in control of the corporation.
Thus ordinary, necessary, reasonable business 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.
 Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses - All the ordinary and
necessary expenses paid or incurred during the taxable year in carrying on any trade or business,
including a reasonable allowance for salaries or other compensation for personal services actually
rendered xxx

 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 experimental 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.

The amount of the promotional fees was not excessive. The total commission paid by the
Philippine Sugar Estate Development Co. to Algue Inc. was P125K. After deducting the said fees,
Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of
P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that
it was the payees who did practically everything, from the formation of the Vegetable Oil
Investment Corporation to the actual purchase by it of the Sugar Estate properties.

6. CIR v. YMCA
- Rental income of non-profit organization is taxable; the usage of properties to derive income
must necessarily be taxed.
GR No. 124043, October 14, 1998

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298 SCRA 83

FACTS:
 Private Respondent YMCA--a non-stock, non-profit institution --leases out a portion of its
premises to small shop owners, like restaurants and canteen operators, deriving substantial
income for such.
 Seeing this, the commissioner of internal revenue (CIR) issued an assessment to private
respondent for deficiency income tax, deficiency expanded withholding taxes on rentals and
professional fees and deficiency withholding tax on wages.
 YMCA opposed arguing that its rental income is not subject to tax, mainly because of the
provisions of Section 27 of NIRC which provides that civic league or organizations not organized
for profit but operate exclusively for promotion of social welfare and those organized exclusively
for pleasure, recreation and other non-profitable businesses shall not be taxed.

ISSUE:
 Is the contention of YMCA tenable?

HELD:
 No. Rental income is taxable.
 The exemption claimed by YMCA is expressly disallowed by the very wording of then Section 27
of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from
any of their properties, real or personal, be subject to the tax imposed by the same Code.
 While the income received by the organizations enumerated in Section 26 of the NIRC is, as a
rule, exempted from the payment of tax in respect to income received by them as such, the
exemption does not apply to income derived from any of their properties, real or personal or
from any of their activities conducted for profit, regardless of the disposition made of such
income.

7. DAVAO GULF LUMBER CORP v. CIR

- Tax exemption strictly construed against the person claiming the same – the exception must
be expressly granted by a statute.
GR No. 117359, July 23, 1998
293 SCRA 77

FACTS:
 Republic Act No. 1435 (Act increasing highway special fund) entitles miners and forest
concessioners to the refund of 25% of the specific taxes paid by the oil companies, which were
eventually passed on to the user--the petitioner in this case--in the purchase price of the oil
products.
 Petitioner filed before respondent Commissioner of Internal Revenue (CIR) a claim for refund in
the amount representing 25% of the specific taxes actually paid on the above-mentioned fuels
and oils that were used by petitioner in its operations.
 However petitioner asserts that equity and justice demands that the refund should be based on
the increased rates of specific taxes which it actually paid, as prescribed in Sections 153 and 156
of the NIRC.
 Public respondent, on the other hand, contends that it should be based on specific taxes
deemed paid under Sections 1 and 2 of RA 1435.

ISSUE:
 Should the petitioner be entitled under Republic Act No. 1435 to the refund of 25% of the
amount of specific taxes it actually paid on various refined and manufactured mineral oils and
other oil products, and not on the taxes deemed paid and passed on to them, as end-users, by
the oil companies?
HELD:
 No. According to an eminent authority on taxation, "there is no tax exemption solely on the
ground of equity."
 Thus, the tax refund should be based on the taxes deemed paid. Because taxes are the lifeblood
of the nation, statutes that allow exemptions are construed strictly against the grantee and
liberally in favor of the government. Otherwise stated, any exemption from the payment of a tax
must be clearly stated in the language of the law; it cannot be merely implied therefrom.

 Since the partial refund authorized under Sec. 5, RA 1435, is in the nature of a tax exemption, it
must be construed strictly against the grantee.

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  Hence, petitioner’s claim of refund on the basis of the specific taxes it actually paid
must expressly be granted in a statute stated in a language too clear to be mistaken. After
scrutinizing RA1435, the Court founds no expression of a legislative will authorizing are fund
based on the higher rates claimed by petitioner. Hence, petitioner’s claim of refund on the basis
of the specific taxes it actually paid must expressly be granted in a statute stated in a language
tooclear to be mistaken.

MARCOS II v. CA
- NIRC requires probate court to obtain cert from CIR that all the estate taxes were paid
before distribution to the heirs.
GR No. 120880, June 5, 1997
293 SCRA 77

FACTS:
 Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's
petition to levy the properties of the late Pres. Marcos to cover the payment of his tax
delinquencies during the period of his exile in the US.
 The Marcos family was assessed by the BIR, and notices were constructively served to the
Marcoses, however the assessment were not protested administratively by Mrs. Marcos and the
heirs of the late president so that they became final and unappealable after the period for filing
of opposition has prescribed.
 Marcos contends that the properties could not be levied to cover the tax dues because they are
still pending probate with the court, and settlement of tax deficiencies could not be had, unless
there is an order by the probate court or until the probate proceedings are terminated.

ISSUE:
 Is the contention of Bongbong Marcos correct?

HELD:
 No.
 The deficiency income tax assessments and estate tax assessment are already final and
unappealable - and the subsequent levy of real properties is a tax remedy resorted to by the
government, sanctioned by Section 213 and 218 of the National Internal Revenue Code.
 This summary tax remedy is distinct and separate from the other tax remedies (such as Judicial
Civil actions and Criminal actions), and is not affected or precluded by the pendency of any
other tax remedies instituted by the government
 The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not
a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that
the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned
by the late President, on the ground that it was required to seek first the probate court's
sanction.
 There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of
the probate or estate settlement court's approval of the State's claim for estate taxes, before
the same can be enforced and collected.
 On the contrary, under Section 87 of the NIRC, it is the probate court which is bidden not to
authorize the executor or judicial administrator of the decedent's estate to deliver any
distributive share to any party interested in the estate, unless it is shown a Certification by the
Commissioner of Internal Revenue that the estate taxes have been paid. This provision
disproves the petitioner's contention that it is the probate court which approves the assessment
and collection of the estate tax.

REYES v. ALMANZOR
- Rental freezing law was passed, lessor cannot be burdened of excessive taxes which they
cannot afford since they cannot increase their income from rentals.

GR Nos. L-49839-46, April 26, 199

196 RA 322

FACTS:

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  Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased and occupied as
dwelling units by tenants who were paying monthly rentals of not exceeding P300.
 Sometimes in 1971 the Rental Freezing Law was passed prohibiting for one year from its
effectivity, an increase in monthly rentals of dwelling units where rentals do not exceed three
hundred pesos (P300.00), so that the Reyeses were precluded from raising the rents and from
ejecting the tenants.
 In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the subject
properties based on the schedule of market values, which entailed an increase in the
corresponding tax rates prompting petitioners to file a Memorandum of Disagreement averring
that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and
unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual
income derived from their properties. They argued that the income approach should have been
used in determining the land values instead of the comparable sales approach which the City
Assessor adopted.

ISSUE:
 Is the approach on tax assessment used by the City Assessor reasonable?

HELD:
 No.
 The taxing power has the authority to make a reasonable and natural classification for purposes
of taxation but the government's act must not be prompted by a spirit of hostility, or at the very
least discrimination that finds no support in reason. 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.
 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.

PHIL. BANK OF COMMUNICATIONS v. CIR

- 2-yr prescriptive period for claim for refund.
GR No. 112024, January 28, 1999
302 SCRA 250
FACTS:
 Petitioner PBCom filed its first and second quarter income tax returns, reported profits, and paid
income taxes amounting to P5.2M in 1985. However, at the end of the year PBCom suffered
losses so that when it filed its Annual Income Tax Returns for the year-ended December 31,
1986, the petitioner likewise reported a net loss of P14.1 M, and thus declared no tax payable
for the year.
 In 1988, the bank requested from CIR for a tax credit and tax refunds representing overpayment
of taxes.
 Pending investigation of the respondent CIR, petitioner instituted a Petition for Review before
the Court of Tax Appeals (CTA).
 CTA denied its petition for tax credit and refund for failing to file within the prescriptive period
to which the petitioner belies arguing the Revenue Circular No.7-85 issued by the CIR itself
states that claim for overpaid taxes are not covered by the two-year prescriptive period
mandated under the Tax Code.

ISSUE:
 Is the contention of the petitioner correct?
 Is the revenue circular a valid exemption to the NIRC?
HELD:
 No.
 The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of
Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is
commenced. The two-year prescriptive period provided, should be computed from the time of
filing the Adjustment Return and final payment of the tax for the year.
 The relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-
year prescriptive period set by law.
 Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to
generate funds for the State to finance the needs of the citizenry and to advance the common

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 weal. Due process of law under the Constitution does not require judicial proceedings in tax
cases. This must necessarily be so because it is upon taxation that the government chiefly relies
to obtain the means to carry on its operations and it is of utmost importance that the modes
adopted to enforce the collection of taxes levied should be summary and interfered with as little
as possible.
 From the same perspective, claims for refund or tax credit should be exercised within the time
fixed by law because the BIR being an administrative body enforced to collect taxes, its functions
should not be unduly delayed or hampered by incidental matters.

PHIL. GUARANTY CO., INC. v. CIR

GR No. L-22074, April 30, 1965

FACTS:
 The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered into
reinsurance contracts with foreign insurance companies not doing business in the country,
thereby ceding to foreign reinsurers a portion of the premiums on insurance it has originally
underwritten in the Philippines.
 The premiums paid by such companies were excluded by the petitioner from its gross income
when it filed its income tax returns for 1953 and 1954. Furthermore, it did not withhold or pay
tax on them.
 Consequently, the CIR assessed against the petitioner withholding taxes on the ceded
reinsurance premiums to which the latter protested the assessment on the ground that the
premiums are not subject to tax for the premiums did not constitute income from sources
within the Philippines because the foreign reinsurers did not engage in business in the
Philippines, and CIR's previous rulings did not require insurance companies to withhold income
tax due from foreign companies.

ISSUE:
 Are insurance companies not required to withhold tax on reinsurance premiums ceded to
foreign insurance companies, which deprives the government from collecting the tax due from
them?

HELD:
 No.
 The reinsurance contracts however show that the transactions or activities that constituted the
undertaking to reinsure Philippine Guaranty Co., Inc. against losses arising from the original
insurances in the Philippines were performed in the Philippines.
 The reinsurance premiums were income created from the undertaking of the foreign
reinsurance companies to reinsure Philippine Guaranty Co., Inc. against liability for loss under
original insurances. Such undertaking, as explained above, took place in the Philippines. These
insurance premiums therefore came from sources within the Philippines and, hence, are subject
to corporate income tax.
 The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding
of tax due on reinsurance premiums may free the taxpayer from the payment of surcharges or
penalties imposed for failure to pay the corresponding withholding tax, but it certainly would
not exculpate it from liability to pay such withholding tax. The Government is not estopped from
collecting taxes by the mistakes or errors of its agents.
 The power to tax 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 invasion, a corps of civil servants to
serve, public improvement designed for the enjoyment of the citizenry and those which come
within the State's territory, and facilities and protection which a government is supposed to
provide. Considering that the reinsurance premiums in question were afforded protection by
the government and the recipient foreign reinsurers exercised rights and privileges guaranteed
by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining
the state.

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PHILEX MINING CORP. v. CIR
- There can be not setting-off of taxes due against a claim against the govt for tax refunds.
GR No. 125704, August 28, 1998
294 RA 687

FACTS:
 Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming the Court of
Tax Appeals decision ordering it to pay the amount of P110.7 M as excise tax liability for the
period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from
1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977.
 Philex protested the demand for payment of the tax liabilities stating that it has pending claims
for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of
P120 M plus interest. Therefore these claims for tax credit/refund should be applied against the
tax liabilities.

ISSUE:
 Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the
petitioner?

HELD:
 No.
 Philex's claim is an outright disregard of the basic principle in tax law that taxes are the lifeblood
of the government and so should be collected without unnecessary hindrance. Evidently, to
countenance Philex's whimsical reason would render ineffective our tax collection system. Too
simplistic, it finds no support in law or in jurisprudence.
 To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the ground
that it has a pending tax claim for refund or credit against the government which has not yet
been granted. Taxes cannot be subject to compensation for the simple reason that the
government and the taxpayer are not creditors and debtors of each other. There is a material
distinction between a tax and debt. Debts are due to the Government in its corporate capacity,
while taxes are due to the Government in its sovereign capacity. xxx
 There can be no off-setting of taxes against the claims that the taxpayer may have against the
government. A person cannot refuse to pay a tax on the ground that the government owes him
an amount equal to or greater than the tax being collected. The collection of a tax cannot await
the results of a lawsuit against the government.

NORTH CAMARINES LUMBER CO., INC. v. CIR

GR No. L-12353, September 30, 1960
109 PHIL 511
FACTS:
 The petitioner sold more than 2M boardfeet of logs to General Lumber Co. with the agreement
that the latter would pay the sales taxes.
 The CIR, upon consultation officially advised the parties that the bureau interposes no objection
so long as the tax due shall be covered by a surety.
 General Lumber complied, but later failed, with the surety, to pay the tax liabilities, and so the
respondent collector required the petitioner to pay thru a letter dated August 30, 1955. Twice
did the petitioner filed a request for reconsideration before finally submitting the denied
request for appeal before the Court of Tax Appeals.
 The CTA dismissed the appeal as it was clearly filed out of time. The petitioner had consumed
thirty-three days from the receipt of the demand, before filing the appeal.
 Petitioner argued that in computing the 30-day period in perfecting the appeal the letter of the
respondent Collector dated January 30, 1956, denying the second request for reconsideration,
should be considered as the final decision contemplated in Section 7, and not the letter of
demand dated August 30, 1955.

ISSUE:
 Is the contention of the petitioner tenable?
HELD:
 No. This contention is untenable.
 We cannot countenance that theory that would make the commencement of the statutory 30-
day period solely dependent on the will of the taxpayer and place the latter in a position to put
off indefinitely and at his convenience the finality of a tax assessment. Such an absurd

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 procedure would be detrimental to the interest of the Government, for "taxes are the lifeblood
of the government, and their prompt and certain availability is an imperious need."
 The petitioner has consumed the 30-day period of filing the appeal.

LUTZ v. ARANETA
GR No. L-7859, December 22, 1955
98 PHIL 148
FACTS:
 Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate of Antionio
Ledesma, sought to recover from the CIR the sum of P14,666.40 paid by the estate as taxes,
under section 3 of the CA 567 or the Sugar Adjustment Act thereby assailing its constitutionality,
for it provided for an increase of the existing tax on the manufacture of sugar, alleging that such
enactment is not being levied for a public purpose but solely and exclusively for the aid and
support of the sugar industry thus making it void and unconstitutional. The sugar industry
situation at the time of the enactment was in an imminent threat of loss and needed to be
stabilized by imposition of emergency measures.

ISSUE:
 Is CA 567 constitutional, despite its being allegedly violative of the equal protection clause, the
purpose of which is not for the benefit of the general public but for the rehabilitation only of the
sugar industry?

HELD:
 Yes.
 The protection and promotion of the sugar industry is a matter of public concern, it follows that
the Legislature may determine within reasonable bounds what is necessary for its protection
and expedient for its promotion.
 Here, the legislative discretion must be allowed to fully play, subject only to the test of
reasonableness; and it is not contended that the means provided in the law bear no relation to
the objective pursued or are oppressive in character. If objective and methods are alike
constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their
prosecution and attainment. Taxation may be made the implement of the state's police power.

GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827
FACTS:
 Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando, Pampanga. It did
not bear the special anti-TB stamp required by the RA 1635. It was returned to the petitioner.
Petitioner now assails the constitutionality of the statute claiming that RA 1635 otherwise
known as the Anti-TB Stamp law is violative of the equal protection clause because it constitutes
mail users into a class for the purpose of the tax while leaving untaxed the rest of the population
and that even among postal patrons the statute discriminatorily grants exemptions. The law in
question requires an additional 5 centavo stamp for every mail being posted, and no mail shall
be delivered unless bearing the said stamp.

ISSUE:
 Is the Anti-TB Stamp Law unconstitutional, for being allegedly violative of the equal protection
clause?

HELD:
 No. It is settled that the legislature has the inherent power to select the subjects of taxation and
to grant exemptions. This power has aptly been described as "of wide range and flexibility."
Indeed, it is said that in the field of taxation, more than in other areas, the legislature possesses
the greatest freedom in classification. The reason for this is that traditionally, classification has
been a device for fitting tax programs to local needs and usages in order to achieve an equitable
distribution of the tax burden.
 The classification of mail users is based on the ability to pay, the enjoyment of a privilege and on
convenience. Tax exemptions have never been thought of as raising revenues under the equal
protection clause.

Rojas, RG 10
PUNSALAN VS. MUNICIPAL BOARD OF MANILA [95 PHIL 46; NO.L-4817; 26 MAY 1954]
- No double taxation, one imposed by national govt, one imposed by LGU
Facts:
 Petitioners, who are professionals in the city, assail Ordinance No. 3398 together with the law
authorizing it (Section 18 of the Revised Charter of the City of Manila).
 The ordinance imposes a municipal occupation tax on persons exercising various professions in
the city and penalizes non-payment of the same.
 The law authorizing said ordinance empowers the Municipal Board of the city to impose a
municipal occupation tax on persons engaged in various professions. Petitioners, having already
paid their occupation tax under section 201 of the National Internal Revenue Code, paid the tax
under protest as imposed by Ordinance No. 3398. The lower court declared the ordinance
invalid and affirmed the validity of the law authorizing it.

Issue:

 Whether or Not the ordinance and law authorizing it constitute class legislation, and authorize
what amounts to double taxation.

Held:
 The Legislature may, in its discretion, select what occupations shall be taxed, and in its
discretion may tax all, or select classes of occupation for taxation, and leave others untaxed.
 It is not for the courts to judge which cities or municipalities should be empowered to impose
occupation taxes aside from that imposed by the National Government.
 That matter is within the domain of political departments.
 The argument against double taxation may not be invoked if one tax is imposed by the state and
the other is imposed by the city. It is widely recognized that there is nothing inherently terrible
in the requirement that taxes be exacted with respect to the same occupation by both the state
and the political subdivisions thereof. Judgment of the lower court is reversed with regards to
the ordinance and affirmed as to the law authorizing it.

Tio vs VRB

Delegation of Power – Delegation to Administrative Bodies

 In 1985, Presidential Dedree No. 1987 entitled “An Act Creating the Videogram Regulatory
Board” was enacted which gave broad powers to the VRB to regulate and supervise the
videogram industry. The said law sought to minimize the economic effects of piracy. T
 There was a need to regulate the sale of videograms as it has adverse effects to the movie
industry. The proliferation of videograms has significantly lessened the revenue being acquired
from the movie industry, and that such loss may be recovered if videograms are to be taxed.
Section 10 of the PD imposes a 30% tax on the gross receipts payable to the LGUs.
 In 1986, Valentin Tio assailed the said PD as he averred that it is unconstitutional on the
following grounds:
1. Section 10 thereof, which imposed the 30% tax on gross receipts, is a rider and is not germane
to the subject matter of the law.
2. There is also undue delegation of legislative power to the VRB, an administrative body,
because the law allowed the VRB to deputize, upon its discretion, other government agencies to
assist the VRB in enforcing the said PD.

ISSUE: Whether or not the Valentin Tio’s arguments are correct.

HELD: No.

 1. The Constitutional requirement that “every bill shall embrace only one subject which shall be
expressed in the title thereof” is sufficiently complied with if the title be comprehensive enough
to include the general purpose which a statute seeks to achieve. In the case at bar, the
questioned provision is allied and germane to, and is reasonably necessary for the
accomplishment of, the general object of the PD, which is the regulation of the video industry
through the VRB as expressed in its title. The tax provision is not inconsistent with, nor foreign
to that general subject and title. As a tool for regulation it is simply one of the regulatory and
control mechanisms scattered throughout the PD.

Rojas, RG 11
  2. There is no undue delegation of legislative powers to the VRB. VRB is not being tasked to
legislate. What was conferred to the VRB was the authority or discretion to seek assistance in
the execution, enforcement, and implementation of the law. Besides, in the very language of
the decree, the authority of the BOARD to solicit such assistance is for a “fixed and limited
period” with the deputized agencies concerned being “subject to the direction and control of
the [VRB].”

CITY OF BAGUIO vs. DE LEON

GR No. L-24756, October 31, 1968
25 SCRA 938
"There is no double taxation where one tax is imposed by the state and the other is imposed by the
city."
FACTS:
 The City of Baguio passed an ordinance imposing a license fee on any person, entity or
corporation doing business in the City.
 The ordinance sourced its authority from RA No. 329, thereby amending the city charter
empowering it to fix the license fee and regulate businesses, trades and occupations as may be
established or practiced in the City.
 De Leon was assessed for P50 annual fee it being shown that he was engaged in property rental
and deriving income therefrom. The latter assailed the validity of the ordinance arguing that it is
ultra vires for there is no statutory authority which expressly grants the City of Baguio to levy
such tax, and that there it imposed double taxation, and violates the requirement of uniformity.

ISSUE:
 Are the contentions of the defendant-appellant tenable?

HELD:
 No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code
empowering the City Council not only to impose a license fee but to levy a tax for purposes of
revenue, thus the ordinance cannot be considered ultra vires for there is more than ample
statutory authority for the enactment thereof.
 Second, an argument against double taxation may not be invoked where one tax is imposed by
the state and the other is imposed by the city, so that where, as here, Congress has clearly
expressed its intention, the statute must be sustained even though double taxation results.
 And third, violation of uniformity is out of place it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be exacted with respect to
the same occupation, calling or activity by both the state and the political subdivisions thereof.

Bagatsing v. Ramirez
G.R. No. L-41631, December 17, 1976
25 SCRA 938

FACTS:
 The Municipal Board of Manila enacted Ordinance No. 7522, “An Ordinance Regulating the
Operation of Public Markets and Prescribing Fees for the Rentals of Stalls and Providing
Penalties for Violation thereof and for other Purposes.” Respondent were seeking the
declaration of nullity of the Ordinance for the reason that a) the publication requirement under
the Revised Charter of the City of Manila has not been complied with, b) the Market Committee
was not given any participation in the enactment, c) Sec. 3(e) of the Anti-Graft and Corrupt
Practices Act has been violated, and d) the ordinance would violate P.D. 7 prescribing the
collection of fees and charges on livestock and animal products.

ISSUE:
 What law shall govern the publication of tax ordinance enacted by the Municipal Board of
Manila, the Revised City Charter or the Local Tax Code.

HELD:
 The fact that one is a special law and the other a general law creates the presumption that the
special law is to be considered an exception to the general. The Revised Charter of Manila
speaks of “ordinance” in general whereas the Local Tax Code relates to “ordinances levying or
imposing taxes, fees or other charges” in particular. In regard therefore, the Local Tax Code
controls.

Rojas, RG 12
PASCUAL vs. SECRETARY OF PUBLIC WORKS
GR No. L-10405, December 29, 1960
110 PHIL 331
"A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such
expenditure, is merely incidental in the promotion of a particular enterprise."
FACTS:
 Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction,
upon the ground that RA No. 920, which appropriates funds for public works particularly for the
construction and improvement of Pasig feeder road terminals. Some of the feeder roads,
however, as alleged and as contained in the tracings attached to the petition, were nothing but
projected and planned subdivision roads, not yet constructed within the Antonio Subdivision,
belonging to private respondent Zulueta, situated at Pasig, Rizal; and which projected feeder
roads do not connect any government property or any important premises to the main highway.
The respondents' contention is that there is public purpose because people living in the
subdivision will directly be benefitted from the construction of the roads, and the government
also gains from the donation of the land supposed to be occupied by the streets, made by its
owner to the government.
ISSUE:
 Should incidental gains by the public be considered "public purpose" for the purpose of
justifying an expenditure of the government?

HELD:
 No. It is a general rule that the legislature is without power to appropriate public revenue for
anything but a public purpose. It is the essential character of the direct object of the
expenditure which must determine its validity as justifying a tax, and not the magnitude of the
interest to be affected nor the degree to which the general advantage of the community, and
thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public
or to the state, which results from the promotion of private interest and the prosperity of
private enterprises or business, does not justify their aid by the use public money. 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

Rojas, RG 13