1.

PCGG vs COJUANGCO
GR No. 147062 December 14, 2001

FACTS

Presidential Commission on Good Governance (PCGG) was created and issued and implemented
numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten
companies, assets and properties, real or personal. Among the properties sequestered by the
Commission were shares of stock in the United Coconut Planters Bank (UCPB).

ISSUE

Who may vote the sequestered UCPB shares while the main case for their reversion to the State
is pending in the Sandiganbayan?

RULING

The government should be allowed to continue voting those shares inasmuch as they were
purchased with coconut levy funds – that are prima facie public in character or, at the very least,
are "clearly affected with public interest."

Coconut Levy Funds Are Prima Facie Public Funds

Public funds are those moneys belonging to the State or to any political subdivision of the State;
more specifically, taxes, customs duties and moneys raised by operation of law for the support of
the government or for the discharge of its obligations. Undeniably, coconut levy funds satisfy
this general definition of public funds, because of the following reasons:

1. Coconut levy funds are raised with the use of the police and taxing powers of the State.

2. They are levies imposed by the State for the benefit of the coconut industry and its
farmers.

3. Respondents have judicially admitted that the sequestered shares were purchased with
public funds.

4. The Commission on Audit (COA) reviews the use of coconut levy funds.

5. The Bureau of Internal Revenue (BIR), with the acquiescence of private respondents,
has treated them as public funds.

6. The very laws governing coconut levies recognize their public character.

Coconut Levy Funds Are Affected With Public Interest

It is not disputed that the money used to purchase the sequestered UCPB shares came from the
Coconut Consumer Stabilization Fund (CCSF), otherwise known as the coconut levy funds.

Having conclusively shown that the sequestered UCPB shares were purchased with coconut
levies, we hold that these funds and shares are, at the very least, "affected with public interest."
 2. LUTZ vs ARANETA
GR No. L-7859 December 22, 1955

FACTS

Section 2 of the Sugar Adjustment Act provides for an increase of the existing tax on the
manufacture of sugar while section 3 of the same levies on owners or persons in control of lands
devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or
otherwise, a tax. Lutz sought to recover from the CIR the sum paid by the estate as taxes alleging
that such tax is unconstitutional and void, being levied for the aid and support of the sugar
industry exclusively, which is not a public purpose for which a tax may be constitutionally levied.

ISSUE

Are Sections 2 and 3 of the Sugar Adjustment Act unconstitutional for they levy tax not for a
public purpose?

RULING

No.

This Court can take judicial notice of the fact that sugar production is one of the greatest industries
of our nation, sugar occupying a leading position among its export products; that it gives
employment to thousands of laborers in fields and factories; that it is a great source of the state’s
wealth, is one of the important sources of foreign exchange needed by our government, and is
thus pivotal in the plans of a regime committed to a policy of currency stability. Its promotion,
protection and advancement, therefore, redounds greatly to the general welfare.

Once it is conceded, as it must, that 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.
 3. GOMEZ v PALOMAR
GR No. L-23645

FACTS

RA 1635, as amended by RA 2631 provides, To help raise funds for the Philippine Tuberculosis
Society, the Director of Posts shall order for the period from August nineteen to September thirty
every year the printing and issue of semi-postal stamps of different denominations with face
value showing the regular postage charge plus the additional amount of five centavos for the said
purpose, and during the said period, no mail matter shall be accepted in the mails unless it bears
such semi-postal stamps.

Gomez mailed a letter. Because the letter did not bear the special anti-TB stamp required by the
statute, it was returned to him.

ISSUES

(1) Is statute violative of the equal protection clause of the Constitution because it constitutes
mail users into a class for the purpose of the tax while leaving untaxed the rest of the
population?
(2) Is tax invalid since it is not levied for a public purpose as no special benefits accrue to mail
users as taxpayers?
(3) Is the tax invalid because it violates the rule of uniformity in taxation?

RULINGS

(1) The statute is not violative of the equal protection clause of the Constitution.

It is not accurate to say that the statute constituted mail users into a class. Mail users were
already a class by themselves even before the enactment of the statue and all that the
legislature did was merely to select their class. Legislation is essentially empiric and
Republic Act 1635, as amended, no more than reflects a distinction that exists in fact.

(2) The tax is valid.

The eradication of a dreaded disease is a public purpose, but if by public purpose the
petitioner means benefit to a taxpayer as a return for what he pays, then it is sufficient
answer to say that the only benefit to which the taxpayer is constitutionally entitled is that
derived from his enjoyment of the privileges of living in an organized society, established
and safeguarded by the devotion of taxes to public purposes.

(3) The tax is valid.

Nor is the rule of uniformity and equality of taxation infringed by the imposition of a flat
rate rather than a graduated tax. A tax need not be measured by the weight of the mail or
the extent of the service rendered. We have said that considerations of administrative
convenience and cost afford an adequate ground for classification. The same
considerations may induce the legislature to impose a flat tax which in effect is a charge
for the transaction, operating equally on all persons within the class regardless of the
amount involved.
 4. CIR v CA
GR No. 106611 July 21, 1994

FACTS

Citytrust filed a claim for refund with the BIR of the excess of its carried-over total quarterly
payments over the actual income tax due plus carried-over withholding tax payments on
government securities and rental income. The BIR was denied its day in court by reason of the
mistakes and/or negligence of its officials and employees. BIR officials and/or employees
concerned also failed to heed the order of the CTA to remand the records to it, thus, an impasse.
Further, the CTA denied CIR’s supplemental MR alleging the existence of the deficiency income
and business tax assessment against Citytrust.

ISSUES

(1) Can the State be estopped by the neglect of its agent and officers?
(2) Can the issue of the deficiency tax assessment against Citytrust be resolved jointly with
its claim for tax refund?

RULINGS

(1) The State cannot be estopped by the neglect of its agent and officers.

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

Nowhere is the aforestated rule more true than in the field of taxation.20 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.21 The errors of certain administrative officers should never be allowed to
jeopardize the Government's financial position,22 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.

(2) The issue of the deficiency tax assessment can be resolved together with the claim for tax
refund.

The fact of deficiency assessment is intimately related to and inextricably intertwined with
the right of respondent bank to claim for a tax refund for the same year. To award such
refund despite the existence of that deficiency assessment is an absurdity and a polarity
in conceptual effects. Herein private respondent cannot be entitled to refund and at the
same time be liable for a tax deficiency assessment for the same year.
Moreover, to grant the refund without determination of the proper assessment and the
tax due would inevitably result in multiplicity of proceedings or suits.
 5. CIR v ALGUE
GR No. L-28896

FACT

CIR contended that the claimed deduction of P75,000 by Algue was properly disallowed because
it was not an ordinary reasonable or necessary business expense.

ISSUE

Was the Collector of Internal Revenue correct in disallowing the P75,000 deduction claimed by
Algue as legitimate business expenses in its income tax returns?

RULING

The Collector erroneously disallowed the deduction.

The Tax Code provides:

SEC. 30. Deductions from gross income.--In computing net income there shall be
allowed as deductions —

(a) Expenses:

(1) In general.--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;

The 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.