1. Paseo Realty & Development Corporation vs. Court of Appeals G.R. No. 119286.

October 13, 2004

Facts: Paseo Realty and Development Corporation, a domestic corporation engaged in the lease of two parcels
of land at Paseo de Roxas in Makati City. On April 16, 1990, petitioner filed its Income Tax Return for the
calendaryear1989 declaring a gross income of P1,855,000.00, deductions of P1,775,991.00, net income of
P79,009.00, anincome tax due thereon in the amount of P27,653.00, prior year‘s excess credit of P146,026.00,
and creditable taxes withheld in 1989 of P54,104.00 or a total tax credit of P200,130.00 and credit balance of
P172,477.00.In a resolution dated October 21, 1993 Respondent Courtreconsidered its decision of July 29,
1993 and dismissed the petition for review, stating that it has overlooked the fact that the petitioner‘s 1989
Corporate Income Tax Return indicated that the amount of P54,104.00 subject of petitioner‘s claim for refund
has already been included as part and parcel of the P172,477.00 which the petitioner automatically applied as
tax credit for the succeeding taxable year 1990. Petitioner filed a Motion for Reconsideration which was
denied by respondent Court on March 10,1994.Petitioner filed a Petition for Review dated April 3, 1994with
the Courtof Appeals. Resolving the twin issues of whether petitioner is entitled to a refund of P54,104.00
representing creditable taxes withheld in 1989 and whether petitioner applied such creditable taxes withheld
to its 1990income tax liability, the appellate court held that petitioner is not entitled to a refund because it
had already elected to apply the total amount of P172,447.00, which includes the P54,104.00 refund claimed,
against its income tax liability for 1990. The appellate court elucidated on the reason for its dismissal of
petitioner‘s claim for refund.
Issue: Won excess taxes paid during a taxable year should be credited against its tax liabilities for the
succeeding year
Held: No. It is not advisable for this Court to set aside the conclusion reached by an agency such as the CTA
which is dedicated exclusively to the study and consideration of tax problems and has necessarily developed
an expertise on the subject, unless there has been an abuse or improvident exercise of its authority.
Commissioner of Internal Revenue‘s reconsidered its earlier decision which ordered the latter to refund the
amount of P54,104.00 to petitioner. The carrying forward of any excess or overpaid income tax for a given
taxable year is limited to the succeeding taxable year only. Taxation is a destructive power which interferes
with the personal and property rights of the people and takes from them a portion of their property for the
support of the government. And since taxes are what we pay for civilized society, or are the lifeblood of the
nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of
refund or exemption from tax payments must be clearly shown and be based on language in the law too
plain to be mistaken. Else wise stated, taxation is the rule,exemption therefrom is the exception.
2. MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY vs. HON. FERDINAND J. MARCOS, Presiding Judge
of the Regional Trial Court, Br. 20, Cebu City, THE CITY OF CEBU, represented by its Mayor HON. TOMAS R.
OSMEÑA, and EUSTAQUIO B. CESA
G.R. No. 120082 September 11, 1996

Facts: MCIAA was created by virtue of RA 6958. Under Section 14, it was granted exemption from realty taxes
that may be imposed by the National Government or any of its political subdivisions, agencies and
instrumentalities. However, on October 11, 1994, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the
Treasurer of the City of Cebu, demanded payment for realty taxes on several parcels of land belonging to
MCIAA. The latter objected the demand, but when faced with warrant of levy against its properties, it paid the
taxes “under protest.” It later filed a petition for declaratory relief with the trial court which was dismissed.
The motion for reconsideration was also denied. MCIAA asserts that it is an instrumentality of the government
performing governmental functions, which is, according to Sec.133 of the Local Government Code, may not be
taxed. The City claims that MCIAA’s tax exemption has been withdrawn by Sections 193 and 234 of the same
LGC.

Issues:

1. WON MCIAA’s tax exemptions had been withdrawn by the LGC?

2. What is the power of taxation? May a legislative body enact laws to raise revenues in the absence of a
constitutional provision granting said body the power to tax? (Book)

Rulings:

1. Yes. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC,
exemptions from real property taxes granted to natural or juridical persons, including government-
owned or controlled corporations, except as provided in the said section, and the petitioner is,
undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax
granted it in Section 14 of its charter, R.A. No. 6958, has been withdrawn. Petitioner can seek refuge
under any of the exceptions provided in Section 234, but not under Section 133, as the said section is
qualified by Section 232 and 234.
2. The power of taxation is inherent in the State, being an attribute of sovereignty. As an incident of
sovereignty, the power to tax has been described as unlimited in its range, acknowledging in its very nature
no limits, so that security against its abuse is to be found only in the responsibility of the legislature which
imposes the tax on the constituency who are to pay it. (Book)
3. Pepsi-Cola Bottling Company of PH [Pepsi] v. Municipality of Tanauan, Leyte [69 SCRA 460, Feb. 27, 1976]

FACTS: Pepsi sought to declare Sec. 2 of the Local Autonomy Act [RA 2264] as unconstitutional and Ordinances
23 and 27 of the Municipality of Tanauan, Leyte as null and void for constituting undue delegation of taxing
authority. The Ordinance 23 levies and collects 1/16th of a centavo for every bottle of soft drink corked by soft
drink producers and manufacturers. And for the purpose of computing the taxes due, such manufacturers are
to submit a monthly report to the Mun. Treasurer of the total number of bottles produced and corked during
the month.

While Ordinance 27 levies and collects 1 centavo on each gallon [128 fluid ounces] of volume capacity on soft
drinks produced or manufactured within the territorial jurisdiction of the mun. [Monthly report to Mun.
Treasurer of total gallons produced.] Taxes from both ordinances are referred to as Municipal Production Tax.

CFI Leyte dismissed the complaint. Pepsi appealed to the CA, which elevated the case to the SC.

ISSUE: WON RA 2264 and Ordinances 23 and 27 constitute undue delegation of taxing authority.

HELD: No. The power of taxation is purely legislative and which the central legislative body cannot delegate
either to the executive or judicial department of the government without infringing upon the theory of
separation of powers. The exception, however, lies in the case of municipal corporations, to which, said
theory does not apply. Legislative powers may be delegated to local governments in respect of matters of
local concern.

By necessary implication, the legislative power to create political corporations for purposes of local self-
government carries with it the power to confer on such local governmental agencies the power to tax. Under
the New Constitution, local governments are granted the autonomous authority to create their own sources
of revenue and to levy taxes.

Note: In case Sir asks—the case mentions Double Taxation. Sabi ng Pepsi meron daw Double Taxation din to
support their complaint. Pero Double Taxation is generally not forbidden in our fundamental law kasi hindi
natin ni adopt yun injunction against double taxation sa US Constitution. And that double taxation doesn’t not
occur if one tax is imposed by the State and the other by the city or municipality.

4. Petron v. Pililla
Facts: Under Section 142 of the National Internal Revenue Code of 1939, manufactured oils and other fuels
are subject to specific tax. Respondent Municipality of Pililla, Rizal, enacted Municipal Tax Ordinance No. 1, S-
1974 otherwise known as “The Pililla Tax Code of 1974”. Sections 9 and 10 of the said ordinance imposed a tax
on business, except for those for which fixed taxes are provided in the Local Tax Code. Petron refused to pay
the local tax because their oil products are subject to specific tax under the NIRC. The respondents then filed a
complaint for the collection.

Issue: W/N Petron whose oil products are subject to specific tax under the NIRC, is still liable to pay tax on
business unto the respondent Municipality of Pililla, Rizal

Ruling: YES, a tax on business is distinct from a tax on the article itself. While Section 2 of P.D. 436 prohibits
the imposition of local taxes on petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D.
231 as amended by P.D. 426, wherein the municipality is granted the right to levy taxes on business of
manufacturers, importers, producers of any article of commerce of whatever kind or nature.

Book: The power of taxation is essentially a legislative function. The power to tax-includes the authörity to: (1)
determine the (a) nature (kind); (b) object (purpose); (c) extent (amount or rate); (d) coverage (subjects and
objects); (e) apportionment of the tax (general or limited application); (f) situs (place) of the imposition; and
(g) method of collection; (2) grant tax exemptions or condonations; and (3) specify or provide for the
administrative as well as judicial remedies that either the government or the taxpayers may avail themselves
in the proper implementation of the tax measure.

5. Camarines Norte Electric Cooperative v Torres

Facts:

Petitioner CANORECO is an electric cooperative. on 11 March 1995, the Board of Directors of

CANORECO approved Resolution No. 22 appointing its officials. However, on 28 May 1995, Antonio Obias et al
called a special meeting of the Board of Directors of CANORECO and conducted an election through secret
balloting and declared new officers.

The petitioners challenged the above resolutions and the election of officers by filing with the CDA a
Petition for Declaration of Nullity of Board Resolutions and Election of Officers, CDA ruled in favor of the
petitioners. On 3 December 1996, the President of the Philippines issued Memorandum Order No.
409 constituting an Ad Hoc Committee to temporarily take over and manage the affairs of CANORECO.

The petitioners assert that there is no provision in the Constitution or in a statute expressly, or even
impliedly, authorizing the President or his representatives to take over or order the take-over of electric
cooperatives. That the exercise thereof is generally limited to the regulation of the business or commerce and
that the power to regulate does not include the power to take over, control, manage, or direct the operation
of the business. Accordingly, the creation of the Ad Hoc Committee for the purpose of take-over was illegal
and void.

Issue:

Whether or not the Office of the President validly constitute an ad hoc committee to take over and
manage the affairs of an electric cooperative

Ruling:

No. Generally, Delegation of legislative powers to the President is permitted in sections 23(2) and 28(2)
of article VI of the constitution. By virtue of a valid delegation of legislative power, it may also be exercised by
the President and administrative boards, as well as lawmaking bodies of all municipal levels, including the
barangay. Such delegation confers upon the President quasi legislative power which may be defined as the
authority delegated by the lawmaking body to the administrative body to adopt rules and regulations
intended to carry out the provision of the law and implement legislative policy. However, the pertinent laws
on cooperatives, namely, R.A. No. 6938, R.A. No. 6939, and P.D. No. 269 as amended by P.D. No. 1645 do not
provide for the President or any other administrative body to take over the internal management of a
cooperative.

6. HONORABLE EXEC. SEC. v. SOUTHWING HEAVY INDUSTRIES

Facts:

President Gloria Macapagal Arroyo issued Executive Order 156 which prohibits the importation of all types of
used motor vehicles in the country including the Subic Bay Freeport, or the Freeport Zone,subject to a few
exceptions.

Consequently, three separate actions for declaratory relief were filed by the respondents praying that
judgment be rendered declaring Article 2, Section3.1 of the EO 156 unconstitutional and illegal.

The RTC rendered a summary judgment declaring that Article 2, Section 3.1 of EO 156 constitutes an unlawful
usurpation of legislative power vested by the Constitution with Congress. It held that the prohibition on the
importation of use motor vehicles is an exercise of police power vested on the legislature and absent any
enabling law, the exercise thereof by the President through an executive issuance is void.

Issue:

Whether or not Article2, Section 3.1 of EO 156 is a valid exercise of the President’s quasi-legislative power.

Ruling:

NO.

The fourth requisite, which is, it must be reasonable was not complied with. The Court finds that the issuance
of EO is unreasonable. Since the nature of EO 156 is to protect the domestic industry from the deterioration of
the local motor manufacturing firms, the Court however, finds no logic in all the encompassing application of
the assailed provision to the Freeport Zone which is outside the customs territory of the Philippines. As long as
the used motor vehicles do not enter the customs territory, the injury or harm sought to be prevented or
remedied will not arise.

7. Cervantes vs. Auditor General

Facts:

Petitioner was general manager in 1949 of NAFCO with annual salary of P15,000. NAFCO Board of
Directors granted P400/month.

This allowance was disapproved by the Central Committee of the Government Enterprise Council under
Executive Order No. 93 upon recommendation by NAFCO auditor and concurred in by the Auditor
General.

The petitioner challenged the action of the Council contending that EO 93 constitutes an undue
delegation of power.

Issue: Whether the power to tax may be delegated to executive department.

Ruling:

Yes. When the delegation relates merely to administrative implementation that may call for some
degree of discretionary powers under a set of sufficient standards expressed by law.

8. Maceda vs. Macaraig, 197 SCRA 771

FACTS: The petition seeks to nullify certain decisions, orders, ruling, and resolutions of the respondent for
exempting National Power Corporation (NPC) from indirect tax and duties. Commonwealth Act No. 120
created NPC as a public corporation to undertake the development of hydraulic power and the production of
power from other sources. The main source of funds for the NPC was the flotation of bonds in the capital
markets and such bonds were exempt from payment of all taxes in order for the corporation to facilitate
payment of its indebtedness RA 358 granted NAPOCOR tax and duty exemption privileges. RA 6395 revised
the charter of the NPC, tasking it to carry out the policy of the national electrification and provided in detail
NPC’s tax exceptions. PD 380 specified that NPC’s exemption includes all taxes, etc. imposed “directly or
indirectly.” PD 938 dated May 27, 1976 further amended the aforesaid provision by integrating the tax
exemption in general terms.
ISSUE:
Whether or not NPC is exempt from indirect tax.
RULING: Yes, it is still exempt. 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. NPC enjoyed preferential tax
treatment “to enable the corporation to pay the indebtedness and obligation” and effective implementation
of the policy enunciated. Income tax, estate tax and donor’s tax are considered as direct taxes. On the other
hand, value added tax, excise tax, percentage tax, and documentary stamp tax are indirect taxes. A direct
tax is demanded from the very person who, as intended should pay the tax which he cannot shift to
another, while an indirect tax is demanded in the first instance from one person with the expectation that
he can shift the burden to someone else, not as a tax but as part of the purchase price.
9. NPC vs Albay

Facts: On March 14 and 15, 1989, the respondents caused the publication of a notice of auction sale involving
the properties of NAPOCOR and the Philippine Geothermal Inc. consisting of buildings, machines, and similar
improvements standing on their offices at Tiwi, Albay. The amounts to be realized from this advertised auction
sale are supposed to be applied to the tax delinquencies claimed, as and for real property taxes. The back
taxes NAPOCOR has supposedly accumulated were computed at P214,845,184.76. NAPOCOR opposed the
sale, interposing in support of its non-liability Resolution No. 17-87, of the Fiscal Incentives Review Board
(FIRB) which granted the tax and duty exemption privileges of the National Power Corporation, including those
pertaining to its domestic purchases of petroleum and petroleum products, and Memorandum of Executive
Secretary Catalino Macaraig, which restores, subject to certain conditions prescribed therein, the tax and duty
exemption privileges of NPC as provided under Commonwealth Act No. 120 (the act creating NAPOCOR). the
Court resolved to issue a temporary restraining order directing the Albay provincial government "to CEASE
AND DESIST from selling and disposing of the NAPOCOR properties subject matter of this petition...” But Albay
continued the bidding process.

The provincial government of Albay now defends the auction sale in question on the theory that the various
FIRB issuances constitute an undue delegation of the taxing Power and hence, null and void, under the
Constitution. It is also contended that, insofar as Executive Order No. 93 authorizes the FIRB to grant tax
exemptions, the same is of no force and effect under the constitutional provision allowing the legislature
alone to accord tax exemption privileges.

Issue: WON the various FIRB issuances and the Executive Orders authorizing FIRB to grant tax exemptions
constitute an undue delegation of the taxing Power and hence, null and void, under the Constitution.

Ruling: Yes. Under Presidential Decree No. 776, the power of the FIRB was merely to "recommend to the
President of the Philippines and for reasons of compatibility with the declared economic policy, the
withdrawal, modification, revocation or suspension of the enforceability of any of the above-cited statutory
subsidies or tax exemption grants, except those granted by the Constitution." It has no authority to impose
taxes or revoke existing ones, which, after all, under the Constitution, only the legislature may accomplish. The
FIRB, under its charter, Presidential Decree No. 776, had been empowered merely to "recommend" tax
exemptions. By itself, it could not have validly prescribed exemptions or restore taxability. It is erroneous to
say that taxes are levied by the executive branch of the government. “Levy” refers to the act of imposition
by the legislature which is don’t through the enactment of a tax law. Levy is an exercise of the power to tax,
which is exclusively legislative in nature and character. Clearly, taxes are not levied by the executive branch
of the government.
10. VALLEY TRADING CO. VS CFI (the mayor and the municipal treasurer are also defendants)

FACTS:

Petitioner sought a declaration of the supposed nullity of a section in an ordinance of the Revenue Code of,
which imposed a graduated tax on retailers, independent wholesalers and distributors. Petitioner likewise
prayed for the issuance of a writ of preliminary prohibitory injunction to enjoin the collection of said tax.

Petitioner contends that said ordinance imposes a "graduated fixed tax based on Sales" that "in effect imposes
a sales tax in contravention of the Local Tax Code " which prohibits a municipality from imposing a percentage
tax on sales. Respondents, claim that the tax is an annual fixed business tax, not a percentage tax on sales.

The court terminated the pre-trial and reset the hearing on the merits. In its’ order, the court also denied the
prayer for a writ of preliminary injunction on the ground that "the collection of taxes cannot be enjoined".

Petitioner moved for the reconsideration of the order, contending that a hearing is mandatory before action
may be taken on the motion for the issuance of a writ of preliminary injunction.

ISSUE: Whether or not an injuction may be obtained

RULING: NO

The issuance of a writ of preliminary injunction in the present case, is addressed to the sound discretion of the
court, conditioned on the existence of a clear and positive right of the movant which should be protected. It is
an extraordinary peremptory remedy available only on the grounds expressly provided by law, specifically
Section 3 of Rule 58 of the Rules of Court.

The circumstances required for the writ to issue do not obtain in the case at bar. The damage that may be
caused to the petitioner will not, of course, be irrepairable; where so indicated by subsequent events
favorable to it, whatever it shall have paid is easily refundable. Besides, the damage to its property rights
must perforce take a back seat to the paramount need of the State for funds to sustain governmental
functions. Compared to the damage to the State which may be caused by reduced financial resources, the
damage to petitioner is negligible. The policy of the law is to discountenance any delay in the collection of
taxes because of the oft-repeated but unassailable consideration that taxes are the lifeblood of the
Government and their prompt and certain availability is an imperious need.
11. Commissioner of Internal Revenue vs Algue Inc., and Court of Tax Appeals
GR No. L-28896 February 17, 1988

Facts: The Philippine Sugar Estate Development Company had earlier appointed Algue Inc., as its agent,
authorizing it to sell its land, factories and oil manufacturing process. As such, the corporation worked for the
formation of the Vegetable Oil Investment Corporation, until they were able to purchase the PSEDC
properties. For this sale, Algue Inc., received as agent a commission of P126, 000.00, and it was from this
commission that the P75, 000.00 promotional fees were paid to Alberto Guevara, Jr., Eduardo Guevara, Isabel
Guevara, Edith, O'Farell, and Pablo Sanchez.

Commissioner of Internal Revenue contends that the claimed deduction is not allowed because it was not an
ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing
with Algue Inc., it held that the said amount had been legitimately paid by the private respondent for actual
services rendered. The payment was in the form of promotional fees.

Issue: Whether or not the Collector of Internal Revenue correctly disallowed the P75, 000.00 deduction
claimed by private respondent Algue Inc., as legitimate business expenses in its income tax returns.

Ruling: No, The Supreme Court agrees with the respondent court that the amount of the promotional fees
was not excessive. The 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.

The claimed deduction by the private respondent was permitted under the Internal Revenue Code and should
therefore not have been disallowed by the petitioner.

12. McCulloch v. Maryland 17 U.S. (4 Wheat.) 316 (1819)

Facts: Congress passed an act in 1816, which incorporated the Bank of the U.S. A branch was opened in
Maryland, in 1817 and in 1818, the state legislature passed an act imposing a tax on all out of state banks
doing business in Maryland. The act, general in nature, only affected the U.S. Bank because it was the only
bank operating in Maryland. The head of the Maryland branch, James McCulloch, refused to pay the tax
resulting in a lawsuit later appealed to Maryland’s Court of Appeals. The court upheld Maryland’s claim that
since the Constitution was silent on whether the U.S. could charter a bank, establishing such a bank was
unconstitutional. McCulloch then appealed to the United States Supreme Court.
McCulloch brought suit against the state of Maryland. The state of Maryland prevailed and McCulloch
appealed to the Maryland Court of Appeals. The court affirmed the lower court’s decision. McCulloch then
appealed to the United States Supreme Court.
Issue: Whether or not the individual state tax the federal bank?

Ruling: No. Since the Bank was created by federal statute, Maryland may not tax the Bank because federal
laws have supremacy over state laws. As it follows, a federally created institution may not be inhibited by an
inferior state law. Since the Bank of the U.S. serves the entire nation, it is inappropriate for it to be controlled
by a single part of the nation, through a state tax.
Chief Marshall also determined that Maryland could not tax the bank without violating the constitution since,
as Marshall commented, "the power to tax is the power to destroy". The Court thus struck down the tax as an
unconstitutional attempt by a state to interfere with a federal institution, in violation of the Supremacy
Clause.
13. Roxas y Cia v. CTA, 23 SCRA 276 (Definition of Taxation)
FACTS:
Antonio, Eduardo and Jose Roxas, brothers and at the same time partners of the Roxas y Compania, inherited
from their grandparents several properties which included farmlands. The tenants expressed their desire to
purchase the farmland. The tenants, however, did not have enough funds, so the Roxases agreed to a
purchase by installment. Subsequently, the CIR demanded from the brothers the payment of deficiency
income taxes resulting from the sale, 100% of the profits derived therefrom was taxed. The brothers protested
the assessment but the same was denied. On appeal, the Court of Tax Appeals sustained the assessment.
Hence, this petition.

ISSUE: Is Roxas liable?

RULING:
No. It should be borne in mind that the sale of the farmlands to the very farmers who tilled them for
generations was not only in consonance with, but more in obedience to the request and pursuant to the policy
of our Government to allocate lands to the landless.
In order to maintain the general public’s trust and confidence in the Government this power must be used
justly and not treacherously. It does not conform with the sense of justice for the Government to persuade the
taxpayer to lend it a helping hand and later on penalize him for duly answering the urgent call.
In fine, Roxas cannot be considered a real estate dealer and is not liable for 100% of the sale. Pursuant to
Section 34 of the Tax Code, the lands sold to the farmers are capital assets and the gain derived from the sale
thereof is capital gain, taxable only to the extent of 50%.
Taxation; Power of taxation to be exercised with caution.—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”.

14. REPUBLIC v. PHILIPPINE RABBIT BUS

FACTS: Plaintiff alleged that defendant, as registered owner of 238 motor vehicles, paid P78,636.17,
corresponding to the 2nd installment of registration fees for 1959, not in cash but in the form of negotiable
certificate of indebtedness, the defendant being merely an assignee and not the backpay holder itself. The
complaint sought the payment of such amount with surcharges plus the legal rate of interest from the filing thereof and
a declaration of the nullity of the use of such negotiable certificate of indebtedness to satisfy its obligation. The
defendant alleged that what it did was in accordance with law. It sought the dismissal of the complaint. The lower court
decided in favor of defendant & upheld the validity of such payment made and dismissed the complaint holding that the
National Treasurer upon whom devolves the function of administering the Back Pay Law had approved the acceptance
of negotiable certificates of indebtedness in payment of registration fees of motor vehicles with the view that such
certificates 'should be accorded with the same confidence by other governmental instrumentalities as other evidences
of public debt, such as bonds and treasury certificates. The Republic of the Philippines appealed.

Issue: Is the registration fee a tax, and as such, its payment by backpay certificates valid?

Ruling: No. BOOK: TAXES are the enforced proportional contributions from persons and property levied by
the lawmaking body of the State by virtue of its sovereignty for the support of government and for all public
needs. A tax refers to a financial obligation imposed by a state on persons, whether natural or juridical,
within its jurisdiction, for property owned, income earned, business or profession engaged in, or any such
activity analogous in character for raising the necessary revenues to take care of the responsibilities of
government.

A tax then is neither a penalty that must be satisfied nor a liability arising from contract. Much less can it be
confused or identified with a license or a fee as a manifestation of an exercise of the police power.
The registration fee which defendant had to pay was imposed by Section 8 of the Revised Motor Vehicle Law.
Its heading speaks of "registration fees." The term is repeated four times in the body thereof. Equally so,
mention is made of the "fee for registration." A subsection starts with a categorical statement "No fees shall
be charged." The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment
not of a tax but of a registration fee under the police power. Hence the inapplicability of the section relied
upon by defendant under the Back Pay Law. It is not held liable for a tax but for a registration fee. It
therefore cannot make use of a backpay certificate to meet such an obligation

15. PANAY ELECTRIC CO. VS. THE COLLECTOR OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS
FACTS:
Petitioner Panay Electric Company Inc. is a grantee of a legislative franchise under ACT No. 2893 to
install, operate, and maintain an electric light, heat and power system in certain municipalities of Iloilo, for a
period of 50 years from the approval of its franchise on 1921. Under the franchise, it was required to pay a
franchise tax equal to 1 1/2 per cent of its gross earnings, during the first twenty years, and 2 per cent during
the remaining thirty years. Upon the promulgation of Republic Act No. 39, amending Section 259 of the
National Internal Revenue Code, respondent Collector of Internal Revenue required petitioner to pay a
franchise tax of 5 per cent instead of 2 per cent of its gross earnings. Petitioner paid the franchise tax of 5
percent, as provided for in Section 259 of the Revenue Code as amended, beginning January 19, 1947 and up
to January 18, 1952, in the total sum of P135,872.67, at the same time protesting the imposition and
collection of the 5 per cent tax.
Petitioner appealed the decision of the Court of Tax Appeals, denying the refund to it of the amount
of P85,355.72, balance of P135,872.67, representing overpayment of franchise taxes from January 19, 1947 to
January 18, 1952.

ISSUE:
Whether or not tax is a forced charge
RULING:
YES. A tax is a forced charge, imposition or contribution; it operates in invitum, and is in no way
dependent upon the will or contractual assent, express or implied, of the person taxed. It is not contractual,
either express or implied, but positive acts of government.
*CASE 16 MISSING*

17. VERA v. FERNANDEZ

FACTS: The BIR filed on July 29, 1969 a motion for allowance of claim and for payment of taxes representing
the estate's tax deficiencies in 1963 to 1964 in the intestate proceedings of Luis Tongoy. The administrator
opposed arguing that the claim was already barred by the statute of limitation, Section 2 and Section 5 of 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.

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

RULING: NO. A perusal of the aforequoted provisions, shows that it makes no mention of claims for monetary
obligations of the decedent created by law, such as taxes which is entirely of different character from the
claims expressly enumerated therein. It is levied by the legislative body of the State. Taxes are obligations
created by law.

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. Taxes are the lifeblood of the
Government and their prompt and certain availability are imperious need.

18. REPUBLIC v PATANAO

FACTS: A complaint was files against the defendant alleging that the latter failed to file income tax returns for
1953 and 1954. He filed false and fraudulent returns for 1951, 1952, and 1955. The lower court dismissed the
complaint holding that the action is barred by prior judgment, defendant having been acquitted in criminal
cases of the same court, which were prosecutions for failure to file income tax returns and for non-payment of
income taxes.

ISSUE: Whether or not the action is barred by prior judgment.

RULING: NO. Since the taxpayer's civil liability is not included in the criminal action, his acquittal in the criminal
proceeding does not necessarily entail exoneration from his liability to pay the taxes. His legal duty to pay
taxes cannot be affected by his attempt to evade payment, Said obligation is not a consequence of the
felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from a crime that could
be wiped out by the judicial declaration of nonexistence of the criminal acts charged.
19. Sunio vs NLRC
note: Ruling in the book cannot be found in the case. The case has nothing to do with tax. There is only a slight
connection about liability of a stockholder

EM Ramos & Co., Inc (EMRACO) and Cabugao Ice Plant, Inc. (CIPI), sister corporations, sold an ice plant to Rizal
Development and Finance, Corp. (RDFC). To secure RDFC’s payment of the purchase price, the ice plant was
mortgaged toEMRACO-CIPI. Because of the sale,EMRACO-CIPI terminated all of their employees, including
private respondents.Later, RDFC sold the ice plant, subject to the mortgage in favor of EMRACO-CIPI, to
petitioner Ilocos Commercial Corp. (ICC).When RDFC and ICC defaulted on the payment of the balance of the
purchase price, EMRACO-CIPI extrajudicially foreclosed the ice plant. It then sold it to Nilo Villanueva, subject
to RDFC’s right of redemption. Nilo Villanueva rehired private respondents.

When RDFC redeemend the ice plant, private respondents were again dismissed. Thus, the latter filed
complaints against the petitioner corporation, and its President and General manager, Alberto Sunio, for
illegal dismissal. The Assistance Regional Director of theMinistry of Labor and Employment ordered petitioners
to reinstate privaterespondents. NLRC affirmed. Petitioner Sunio, who owned ½ of ICC, was made jointly and
severally liable with ICC and CIPIf or the payment of backwages.

Issue: W/N Sunio should be made jointly and severally liable.

Ruling: No. A corporation is invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it maybe related. Mere ownership by a
single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not itself
sufficient ground for disregarding the separate corporate personality.
BOOK!!!!!!
It (taxes) is personal to the taxpayer. A corporation’s tax delinquency cannot be enforced against its
stockholders. A corporation is vested by law with a personality that is separate and distinct from those of
the persons composing it as well as that of any other legal entity to which it may be related. Stockholders
may be held liable for unpaid taxes of a dissolved corporation, if it appears that the corporate assets have
passed into their hands without the payment of taxes. The creditor of a dissolved corporation may follow its
assets once they passed into the hands of the stockholders. The legal death of a corporation does not prevent
such action that would the physical death of an individual prevent the government from assessing and
collecting taxes from his administrator who holds the property which the decedent had formerly possessed.
20. Republic vs COCOFED

Facts:

The PCGG 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) registered in the names of the alleged "one million coconut farmers," the so-called
Coconut Industry Investment Fund companies (CIIF companies) and Private Respondent Eduardo Cojuangco Jr.
Upon Motion of Private Respondent COCOFED, the Sandiganbayan issued a Resolution lifting the
sequestration of the subject UCPB shares on the ground that herein private respondents – in particular,
COCOFED and the so-called CIIF companies – had not been impleaded by the PCGG as parties-defendants in its
1987 Complaint for reconveyance, reversion, accounting, restitution and damages

On January 23, 1995, the trial court rendered its final Decision nullifying and setting aside the
Resolution of the Sandiganbayan which lifted the sequestration of the subject UCPB shares.

ISSUE:
W/N the Coconut Levy Funds raised through the State’s police and taxing powers

RULING:
Yes. Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced
proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for
the support of government and for all public needs.
Based on this definition, a tax has three elements, namely: a) it is an enforced proportional
contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is
levied for the support of the government. The coconut levy funds fall squarely into these elements.
Taxation is done not merely to raise revenues to support the government, but also to provide means
for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as
to be within the police power of the State.

22. Maceda vs. Macaraeg (Characteristics of Taxes)

Facts: Commonwealth Act 120 created National Power Corporation (NAPOCOR ) as a public corporation to
undertake the development of hydraulic power and the production of power from other sources. RA 358
granted NAPOCOR tax and duty exemption privileges. RA 6395 revised the charter of the NAPOCOR, tasking it
to carry out the policy of the national electrification and provided in detail NAPOCOR’s tax exceptions. PD 380
specified that NAPOCOR’s exemption includes all taxes, etc. imposed “directly or indirectly.” PD 938 dated
May 27, 1976 further amended the aforesaid provision by integrating the tax exemption in general terms
under one paragraph.

Issue: Whether or not the NAPOCOR still possessed indirect tax exemption after the repeal made in PD 938.

Ruling: Yes, NPC still possess the exemption to indirect taxes.

 NPC laws 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.

One common theme in all these laws is that the NPC must be able to pay its indebtedness which, as of P.D. No.
938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at
any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved. In
addition to this, the then President Marcos mandated that 200 Million pesos be appropriated annually to NPC,
such amount should be taken from the general fund of the government. It does not stand to reason that the
then President would order 200 million pesos to be taken partially or totally from the tax money to be used to
pay the government subscription in the NPC on one hand and order NPC to pay its indirect tax.

Furthermore, section 10 of PD 938 was intended to be in its general form, President Marcos must have
considered all the NPC statutes from C.A 120 up to its latest amendments, PD 380, PD 395 and PD 758 and
came up with a very simple Section 13, RA 6395, as amended by PD 938. When construing a series of statutes,
they shall be taken and construed together, as in statutes in pari materia. And in addition, repeal by
implication is not favoured unless it is manifest that the legislature so intended.

23. CALTEX PHILIPPINES vs COA G.R. No. 92585 May 8, 1992

FACTS:
COA sent a letter to Caltex Philippines directing the latter to remit to the Oil Price Stabilization Fund
(OPSF) its collection of the additional tax on petroleum products authorized under the aforesaid Section 8 of
P.D. No. 1956 and informing it that, pending such remittance, all of its claims for reimbursement from the
OPSF shall be held in abeyance. COA sent another letter to petitioner informing it that its unremitted
collections of the above tax is P1,287,668,820.00. Petitioner requested the COA for an early release of its
reimbursement certificates from the OPSF covering claims with the Office of Energy Affairs since June 1987 up
to March 1989, invoking in support thereof COA Circular No. 89-299 on the lifting of pre-audit of government
transactions of national government agencies and GOCCs to which COA denied. Petitioner sent a proposal for
payment and recovery of claims since the outright payment of the sum of P1.287 billion to the OEA as a
prerequisite for the processing of said claims against the OPSF will cause a very serious impairment of its cash
position to which COA accepted but prohibiting petitioner from further offsetting remittances and
reimbursements for the current and ensuing years. Caltex filed for reconsideration but the decision for
disallowance for recovery of financing charges, inventory losses, and sales to MARCOPPER and ATLAS, while
allowing the recovery of product sales or those arising from export sales was affirmed. Hence this petition
under Rule 44 of the Rules of Court questioning the authority of the COA in disallowing petitioner's claims for
reimbursement from the OPSF and seeking the reversal of said Commission's decision denying its claims for
recovery of financing charges from the Fund and reimbursement of underrecovery arising from sales to the
NPC, ATLAS and MAR-COPPER, preventing it from exercising the right to offset its remittances against its
reimbursement vis-a-vis the OPSF and disallowing its claims which are still pending resolution before the OEA
and DOF.

ISSUE: WON the OPSF contributions are not for a public purpose because they go to a special fund of the
government?

HELD:
 No. We find no merit in petitioner's contention that the OPSF contributions are not for a public
purpose because they go to a special fund of the government. Taxation is no longer envisioned as a measure
merely to raise revenue to support the existence of the government; taxes may be levied with a regulatory
purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected
with public interest as to be within the police power of the state. 57 There can be no doubt that the oil industry
is greatly imbued with public interest as it vitally affects the general welfare. Any unregulated increase in oil
prices could hurt the lives of a majority of the people and cause economic crisis of untold proportions. It
would have a chain reaction in terms of, among others, demands for wage increases and upward spiralling of
the cost of basic commodities. The stabilization then of oil prices is of prime concern which the state, via its
police power, may properly address. Also, P.D. No. 1956, as amended by E.O. No. 137, explicitly provides that
the source of OPSF is taxation. No amount of semantical juggleries could dim this fact. It is settled that a
taxpayer may not offset taxes due from the claims that he may have against the government. 58Taxes cannot
be the subject of compensation because the government and taxpayer are not mutually creditors and
debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed
to be set-off. We may even further state that technically, in respect to the taxes for the OPSF, the oil
companies merely act as agents for the Government in the latter's collection since the taxes are, in reality,
passed unto the end-users –– the consuming public. That compensation had been the practice in the past can
set no valid precedent. Such a practice has no legal basis. Lastly, R.A. No. 6952 does not authorize oil
companies to offset their claims against their OPSF contributions. Instead, it prohibits the government from
paying any amount from the Petroleum Price Standby Fund to oil companies which have outstanding
obligations with the government, without said obligation being offset first subject to the rules on
compensation in the Civil Code.

24. BALACUIT vs. COURT OF FIRST INSTANCE OF AGUSAN DEL NORTE AND BUTUAN CITY
G.R. No. L-38429; June 30, 1988

FACTS: This involves a Petition for Review questioning the validity and constitutionality of Ordinance No. 640
passed by the Municipal Board of the City of Butuan on April 21, 1969, penalizing any person, group of persons,
entity or corporation engaged in the business of selling admission tickets to any movie or other public exhibitions,
games, contests or other performances to require children between 7 and 12 years of age to pay full payment for
tickets intended for adults but should charge only one-half of the said ticket.

Petitioners who are managers of theaters, affected by the ordinance, filed a Complaint before the Court of First
Instance of Agusan del Norte and Butuan City docketed as Special Civil No. 237 on June 30, 1969, praying that the
subject ordinance be declared unconstitutional and, therefore, void and unenforceable. The Court rendered
judgment declaring Ordinance No. 640 of the City of Butuan constitutional and valid.

ISSUE: Whether or not Ordinance No. 640 passed by the Municipal Board of the City of Butuan is valid and
constitutional; and was the Ordinance a valid exercise of police power.
HELD: No. The City of Butuan tries to justify the challenged ordinance by invoking police power. The invocation is
improper. The definitions of police power, including its exercise based on the general welfare clause, are
emphasized to show that the respondents' arguments have no merit— "Police power is inherent in the State but
not in municipal corporations. For a municipal corporation to exercise police power, there must be a legislative
grant which necessarily also sets the limits for the exercise of the power.
"In the Philippines, the grant of authority to the municipality to exercise police power is embodied in Section 2238
of the Revised Administrative Code, otherwise known as the General Welfare Clause. Chartered cities are granted
similar authority in their respective charters. "The general welfare clause has two branches. The first authorizes the
municipal council to enact such ordinances and make such regulations not repugnant to law, as may be necessary
to carry into effect and discharge the powers and duties conferred upon the municipal council by law. The second
branch authorizes the municipality to enact such ordinances as may be necessary and proper for the health and
safety, promote the prosperity, improve the morals, peace, good order, comfort, and convenience of the
municipality and inhabitants therjeof, and for the protection of property therein. (U.S. v. Salaveria, 39 Phil. 103)."
This Court has generally been liberal in sustaining municipal action based on the general welfare clause. In the case
before us, however, there appears to be no basis for sustaining the ordinance even on a generous interpretation of
the general .

25. Phil Airlines Inc, vs. Edu

Facts:

The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and
engaged in the air transportation business under a legislative franchise, Act No. 4271, as amended by Republic
Act Nos. 2360 and 2667. Under its franchise, PAL is exempt from the payment of taxes.

Sometime in 1971, however, appellee Commissioner Romeo F. Edu, issued a regulation requiring all tax
exempt entities, among them PAL to pay motor vehicle registration fees.

Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the
amounts imposed under Republic Act 4136 were paid.

After paying under protest, PAL through counsel, wrote a letter dated May 19, 1971, to Commissioner Edu
demanding a refund of the amounts paid, invoking the ruling in Calalang v. where it was held that motor
vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative
franchise.

Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit
Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory
exactions and not revenue measures and, therefore, do not come within the exemption granted to PAL under
its franchise.

Issue: Whether or not the motor vehicle registration fees are taxes

Ruling:

YES.

Section 73 of Commonwealth Act 123 andSec. 61 of the Land Transportation and Traffic Code requires
owners of vehicles to pay registration fee in the registration of their vehicle.

It appears clear from the above provisions that the legislative intent and purpose behind the law requiring
owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance
of highways and to a much lesser degree, pay for the operating expenses of the administering agency.

It is quite apparent that vehicle registration fees were originally simple exactions intended only for regulatory
purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in
number and motor vehicles became absolute necessities without which modern life as we know it would
stand still, Congress found the registration of vehicles a very convenient way of raising much needed
revenues. Without changing the earlier denomination of registration payments as "fees," their nature has
become that of "taxes."

26. Morcoin co ltd vs. City of Manila

Facts: Morcoin Co., Ltd., and Suter, Inc., are owners and operators of automatic phonograph machines, more
popularly known as juke boxes, in the City of Manila. As such owners and operators, they paid an annual
permit fee of P5 for each machine, and a similar amount whenever a juke box is transferred to a different
location. In compliance with Sections 773 and 774 of Ordinance No. 3347, they also paid an additional sum of
P50 per annum as license fee for the installation and use of each juke box machine.

On February 2, 1954, the Mayor of the City of Manila, in order to curb the use of pinball machines which "have
conduced to promote idleness among an increasing number of city residents", recommended to the Municipal
Board the further amendment of Sections 773 and 774 of Ordinance No. 1600 by restricting the operation or
maintenance of said machines within a specified radius from certain designated places and "by making the
rate of license fees more prohibitive." Emphasizing that "pinball machines contribute to moral delinquency".

The validity of the above ordinance was contested by a group of owners and operators of pinball machines
who call themselves "Recreation and Amusement Association of the Philippines" before the Court of First
Instance of Manila n the ground that the license fee of P300 imposed by the said ordinance upon juke box
machines is exorbitant, excessive, confiscatory and substantially disproportionate to the reasonable expenses
of issuing the license for and regulating the said machines.

Issue:

Whether or not the amount of license fees imposed is unreasonable.

Ruling: Yes. The amount of license fees that may be imposed upon the operation of slot machines, which
includes juke box, pinball and other coin-operated contrivances, based on an ordinance passed by the
Municipal Board of Manila for regulatory purposes, cannot be prohibitive, extortionate, confiscatory or in an
unlawful restraint of trade, but should be approximately commensurate with and sufficient to cover all the
necessary or portable expenses for issuing the license and of such inspection, regulation and supervision as
may be lawful.

It will be observed that the ordinance in question does not even provide for inspection and supervision of each
machine installed. And the Committees on Laws and Finance of the Municipal Board of the City of Manila
themselves — which conducted a public hearing in connection with the petition filed during the pendency of
this case by some juke box operators — found that juke box operators would not make any profit by paying
the license fee of P300, and that the said amount of P300 is "prohibitory and suppressive."

27 Lutz vs Araneta, GR No. L-7859. December 22, 1955

FACTS: Walter Lutz in his capacity as the Judicial Administrator of the intestate of the deceased Antonio Jayme
Ledesma, seeks to recover from the Collector of the Internal Revenue the total sum of P 14, 666.40 paid by the
estate as taxes, under section 3 of Commonwealth Act No. 567, also known as the Sugar Adjustment Act, for
the crop years 1948-1949 and 1949-1950. Commonwealth Act. 567 Section 2 provides for an increase of the
existing tax on the manufacture of sugar on a graduated basis, on each picul of sugar manufacturer; while
section 3 levies on the owners or persons in control of the land devoted tot he cultivation of sugarcane and
ceded to others for consideration, on lease or otherwise - "a tax equivalent to the difference between the
money value of the rental or consideration collected and the amount representing 12 per centum of the
assessed value of such land. It was alleged that such tax is unconstitutional and void, being levied for the aid
and support of the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a
tax may be constitutionally levied. The action was dismissed by the CFI thus the plaintiff appealed directly to
the Supreme Court.
Issue: Whether or not the CA 567 is unconstitutional
Held: No. As the protection and promotion of the sugar industry is a matter of public concern, 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 full play, subject only to the test of reasonableness; and it is
not contended that the means provided in section 6 of Commonwealth Act No. 567 bear no relation to the
objective pursued or are oppressive in character. If objective and methods arealike 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
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 constitutional limitation.

28. Quezon City v Ericta 122 SCRA 759

Facts:
The City Council of Quezon City enacted Ordinance No. 6118, S-64, regulating private memorial type
cemetery or burial ground within the jurisdiction of Quezon City. Section 9 thereof reads: “At least six (6)
percent of the total area of the memorial park cemetery shall be set aside for charity burial of deceased
persons who are paupers and have been residents of Quezon City for at least 5 years prior to their death, to be
determined by competent City Authorities. The area so designated shall immediately be developed and should
be open for operation not later than six months from the date of approval of the application.”
Seven years later, the same council passed a resolution requesting the the City Engineer, to stop any
further selling and/or transaction of memorial park lots in Quezon City whose owners have failed to donate
the required 6% space intended for paupers burial.
Himlayang Pilipino reacted by filing with the Court of First Instance of Rizal Branch XVIII at Quezon City,
a petition for declaratory relief, prohibition and mandamus with preliminary injunction. The trial court
declared Section 9 of the Ordinance Null and Void. Following denial of the motion for reconsideration,
petitioners filed this petition for review, arguing that the taking of Himlayang’s property is a valid a reasonable
exercise of police power.

Issue:
What is police power and is Sec. 9 of the ordinance is a valid exercise of the police power?

Ruling:
 No. It seems to the court that Section 9 of Ordinance No. 6118, Series of 1964 of Quezon City is not a
mere police regulation but an outright confiscation. It deprives a person of his private property without due
process of law, nay, even without compensation. It was an exercise of eminent domain. (Book)
Police power is usually exercised in the form of mere regulation or restriction in the use of liberty or
property for the promotion of the general welfare. It does not involve the taking or confiscation of property
with the exception of a few cases where there is a necessity to confiscate private property in order to destroy
it for the purpose of protecting the peace and order and of promoting the general welfare as for instance, the
confiscation of an illegally possessed article, such as opium and firearms. In police power, the owner does not
recover from the government for injury sustained in consequence thereof.

29. Tomas Velasco, et al. v. Hon. Antonio J. Villegas [City Mayor of Manila] (120 SCRA 568, Feb. 14, 1983)

FACTS: This is an appeal from an order of the lower court dismissing their suit Velasco challenged the
constitutionality of Ordinance 4964 of Manila, alleging that it amounted to a deprivation of petitioners of their
means of livelihood. The assailed ordinance states: "It shall be prohibited for any operator of any barber shop
to conduct the business of massaging customers or other persons in any adjacent room or rooms of said
barber shop, or in any room or rooms within the same building where the barber shop is located as long as the
operator of the barber shop and the room where massaging is conducted is the same person."

ISSUE: WON Ordinance 4964 is unconstitutional for depriving petitioners of their means of livelihood.

HELD: No. The ordinance is a police power measure. The objectives behind its enactment are: "(1) To be able
to impose payment of the license fee for engaging in the business of massage clinic under Ordinance No. 3659
as amended by Ordinance 4767, an entirely different measure than the ordinance regulating the business of
barbershops and, (2) in order to forestall possible immorality which might grow out of the construction of
separate rooms for massage of customers." The ordinance was passed for the protection of public morals.

30. Ortigas & Co. vs Feati Bank

Facts: Ortigas sold Lot 5 and 6, to Augusto Padilla y Angeles and Natividad Angeles. The latter transferred their
rights in favour of Emma Chavez, with the stipulation that the use of the lots are to be exclusive for residential
purposes only. Feati then acquired the lots. Feati started construction of a building on both lots to be devoted
for banking purposes but could also be for residential use. Ortigas sent a written demand to stop construction
but Feati continued contending that the building was being constructed according to the zoning regulations as
stated in Municipal Resolution 27 declaring the area along the West part of EDSA to be a commercial and
industrial zone.

Issue: Whether or not Resolution number 27 declaring Lot 5 and 6 to be part of an industrial and commercial
zone is valid.

Ruling: Yes. A zoning ordinance, reclassifying residential into commercial or light industrial area, is a valid
exercise of the police power.

Resolution No. 27 prevails over the contract stipulations. Section 3 of RA 2264 of the Local Autonomy Act
empowers a Municipal Council to adopt zoning and subdivision ordinances or regulations for the Municipality.
Although non-impairment of contracts is constitutionally guaranteed, it is not absolute since it has to be
reconciled with the legitimate exercise of police power.

31. Sangalang v Gaston

Facts:

Bel-Air Village was owned and developed into a residential subdivision in the 1950s by Makati
Development Corporation (hereinafter referred to as MDC), which in 1968 was merged with appellant Ayala
Corporation. On April 4, 1975, the municipal council of Makati enacted its ordinance No. 81, providing for the
zonification of Makati. Under this Ordinance, Bel-Air Village was classified as a Class A Residential Zone. On
January 17, 1977, the Office of the Mayor of Makati wrote Bel-Air Village Association (BAVA) directing that, in
the interest of public welfare and for the purpose of easing traffic congestion, some of the streets in Bel-Air
Village should be opened for public use:

Later, on June 17,1977, the Barangay Captain of Bel-Air Village was advised by the Office of the on
August 12, 1977, the municipal officials of Makati concerned allegedly opened, destroyed and removed the
gates constructed/located at the corner of Reposo Street and Jupiter Street.

Subsequently, the plaintiffs-appellees Jose D. Sangalang and Lutgarda D. Sangalang et al who are
residents of Jupiter street contended that said resolution cannot nullify the contractual obligations assumed
by Ayala referring to the restrictions incorporated in the deeds of sale i.e. the latter will build a wall for the
residents. Hence, invoking the non-impairment of contracts.

Issue:

Whether or not the said resolution is a valid exercise of police power and does not violate the non-
impairment of contracts

Ruling:
 Yes. A zoning ordinance, reclassifying residential into commercial or light industrial area, is a valid
exercise of police power. Undoubtedly, the Ordinance represents a legitimate exercise of police power. The
petitioners have not shown why we should hold otherwise other than for the supposed "non-impairment"
guaranty of the Constitution, which, as we have declared, is secondary to the more compelling interests of
general welfare. The Ordinance has not been shown to be capricious or arbitrary or unreasonable to warrant
the reversal of the judgments so appealed.

32. BALACUIT v. CFI of AGUSAN DEL NORTE

Facts:

This involves a Petition for Review questioning the validity and constitutionality of Ordinance No.640 passed
by the Municipal Board of the City of Butuan penalizing any person, group of persons, entity or corporation
engaged in the business of selling admission tickets to any movie or other public exhibitions, games, contests
or other performances to require children between 7 and 12years of age to pay full payment for tickets
intended for adults but should charge only one-half of the said ticket. Petitioners who are managers of
theaters, affected by the ordinance, filed a Complaint before the Court of First Instance of Agusan del Norte
and Butuan City praying that the subject ordinance be declared unconstitutional and, therefore, void and
unenforceable.

Issue:

Whether Ordinance No. 640 passed by the Municipal Board of the City of Butuan is valid andconstitutional and
was the Ordinance a valid exercise of police power.

Ruling:

NO.

The “lawful subjects” and “lawful means” tests are used to determine the validity of a law enacted under
the police power. While police power is inherent in the state, it is not in municipal corporations.

The exercise of police power by the local government is valid unless it contravenes the fundamental law of the
land, or an act of the legislature, or unless it is against public policy or is unreasonable, oppressive, partial,
discriminating or in derogation of a common right. For being unreasonable and an undue restraint of trade, it
cannot, under the guise of exercising police power, be upheld as valid.

While it is true that a business may be regulated, it is equally true that such regulation must be within the
bounds of reason, that is, the regulatory ordinance must be reasonable, and its provisions cannot be
oppressive amounting to an arbitrary interference with the business or calling subject of regulation. The
proprietors of a theater have a right to manage their property in their own way, to fix what prices of admission
they think most for their own advantage, and that any person who did not approve could stay away.
33. Sangalang vs. IAC

Facts:

the municipal officials of Makati, destroyed and removed the gates constructed/located at the corner of
Reposo Street and Jupiter Street as well as the gates/fences located/constructed at Jupiter Street and Makati
Avenue forcibly, and then opened the entire length of Jupiter Street to public traffic. Subsequently, Petitioners
brought the present action for damages against the defendant-appellant Ayala Corporation predicated on
both breach of contract and on tort or quasi-delict. A supplemental complaint was later filed by said
Petitioners seeking to augment the reliefs prayed for in the original complaint because of alleged supervening
events which occurred during the trial of the case. That the exclusivity of the said village was adversely
affected and diminished due to the opening of the said streets to the public. That the exclusivity of the said
village was guaranteed in the restrictions of TCT.

Issue:

Whether or not such act was a valid exercise of police power

Ruling:

Yes. The act of the Municipal Mayor in opening Jupiter and Orbit Streets, Bel-Air Subdivision, to the public was
deemed a valid exercise of police power. While non-impairment of contracts is constitutionally guaranteed,
the rule is not absolute, since it has to be reconciled with the legitimate exercise of police power, i.e., “the
power to prescribe regulations to promote the health, morals, peace, education, good order or safety and
general welfare of the people.’

34. Francia vs. IAC

Facts:

Engracio Francia was the registered owner of a house and lot located in Pasay City. A portion of such property
was expropriated by the Republic of the Philippines in 1977. It appeared that Francia did not pay his real
estate taxes from 1963 to 1977. Thus, his property was sold in a public auction by the City Treasurer of Pasay
City. Francia filed a complaint to annual the auction sale. The lower court dismissed the complaint and the
Intermediate Appellate Court affirmed the decision of the lower court in toto. Hence, this petition for review.
Francia contends that his tax delinquency of P 2,400 has been extinguished by legal compensation. He claims
that the government owed him P 4,116 when a portion of his land was expropriated on October 15, 1977.

Issue: Whether the expropriation payment compensate for the real estate taxes due?

Ruling:
No. The income tax liability cannot be compensated with the amount owed by the government as
compensation for his expropriated property. Taxes are of distinct kind, essence and nature than ordinary
obligations. Taxes and debts cannot be the subject of compensation because the government and “X” are
not mutually creditors and debtors of each other and a claim for taxes is not a debt, demand contract or
judgment as is allowable to be set off.

35. Victorias Milling Co. vs. Municipality of Victorias, Province of Negros Occidental
FACTS: This case questioned the validity of Ordinance No., 1, series of 1956 of the Municipality of Victorias,
Province of Negros Occidental. The Ordinance was approved by the municipal Council of Victorias by way of an
amendment to two municipal ordinances separately imposing license taxes on operators of sugar centrals and
sugar refineries. The changes were: with respect to sugar centrals, by increasing the rates of license taxes; and
as to sugar refineries, by increasing the rates of license taxes as well as the range of graduated schedule of
annual output capacity.
Plaintiff Victorias Milling Co. filed a suit to ask for judgment declaring the said ordinance null and void as it is
discriminatory since it singles out plaintiff which is the only operator of a sugar central and a sugar refinery
within the jurisdiction of defendant municipality; and that it constitutes double taxation.
ISSUES:
Whether license tax refer solely to a license for regulation.
RULING:
1. No. The term "license tax" has not acquired a fixed meaning. It is often "used indiscriminately to
designate impositions exacted for the exercise of various privileges." It does not refer solely to a license for
regulation. In many instances, it refers to "revenue-raising exactions on privileges or activities." On the other
hand, license fees are commonly called taxes but in contrast to the former which are imposed “in the exercise
of police power for purposes of regulation.” Accordingly, the designation given by the municipal authorities
does not decide whether the imposition is properly a license tax or a license fee. The determining factors are
the purpose and effect of the imposition as may be apparent from the provisions of the ordinance.
36. Progressive Development Corporation vs Quezon City

Facts: The City Council of Quezon City passed an ordinance known as the Market Code of QC, which imposed a
5% supervision fee on gross receipts on rentals or lease of privately-owned market spaces in QC. In case of
failure of the owners of the market spaces to pay the tax for three consecutive months, the City shall revoke
the permit of the privately-owned market to operate. Progressive Development Corp (PDC), owner and
operator of Farmer’s Market, filed a petition for prohibition against QC on the ground that the tax imposed by
the Market Code was in reality a tax on income, which the municipal corporation was prohibited by law to
impose, the same being expressly prohibited by Republic Act No. 2264, as amended.
Respondent QC contended that it had authority to enact the questioned ordinances, maintaining that the tax
on gross receipts imposed therein is not a tax on income. It argued that petitioner, not having paid the 10%
supervision fee prescribed by Ordinance No. 7997, had no personality to question, and was estopped from
questioning, its validity; that the tax on gross receipts was not a tax on income but one imposed for the
enjoyment of the privilege to engage in a particular trade or business which was within the power of
respondent to impose.

Issue: WON the supervision fee is considered as a license fee.

Ruling: Yes. It is a license fee. A License fee is imposed in the exercise of the police power primarily for
purposes of regulation, while Tax is imposed under the taxing power primarily for purposes of raising
revenues.

Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition
is a tax; but if regulation is the primary purpose, the fact that incidental revenue is also obtained does not
make the imposition a tax. To be considered a license fee, the imposition questioned must relate to an
occupation or activity that so engages the public interest in health, morals, safety and development as to
require regulation for the protection and promotion of such public interest; the imposition must also bear a
reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct
regulation but also its incidental consequences as well. When an activity, occupation or profession is of such
a character that inspection or supervision by public officials is reasonably necessary for the safeguarding
and furtherance of public health, morals and safety, or the general welfare, the legislature may provide that
such inspection or supervision or other form of regulation shall be carried out at the expense of the persons
engaged in such occupation or performing such activity, and that no one shall engage in the occupation or
carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision has
been paid. Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and
regulation may be held to be a tax rather than an exercise of the police power.

37. LTO VS CITY OF BUTUAN

FACTS:
Respondent City of Butuan asserts that one of the salient provisions introduced by the Local Government
Code is in the area of local taxation which allows LGUs to collect registration fees or charges along with, in its
view, the corresponding issuance of all kinds of licenses or permits for the driving of tricycles.

Relying on the foregoing provisions of the law, the Sangguniang Panglungsod(“SP”) of Butuan, passed an
ordinance which provided for, among other things, the payment of franchise fees for the grant of the
franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a permit for
the driving thereof.
Petitioner LTO explains that one of the functions of the national government that, indeed, has been
transferred to local government units is the franchising authority over tricyclesfor-hire of the Land
Transportation Franchising and Regulatory Board (“LTFRB”) but not, it asseverates, the authority of LTO to
register all motor vehicles and to issue to qualified persons of licenses to drive such vehicles.

ISSUE: Whether LTO has the power issue license and permit and collect fees for the operation of tricycle.

RULING: YES

The registration and issuing of licenses are within the LTO’s exclusive power.

The reliance made by the respondents on the broad taxing power of local government units, specifically under
section 133 of the local government code, is tangential. Police power and taxation, along with eminent
domain, are inherent powers of sovereignty which the state might share with local government units by
delegation or given under a constitutional or a statutory fiat. Taxation, in its case, focuses on the power of
government to raise revenue in order to support its existence and carry out its legitimate objectives.

If the purpose is primarily revenue or if revenue is at least one of the real and substantial purposes, then the
exaction is called a tax.

38. Product v. Fertiphil Corp. G.R. No. 166006 March 14, 2008

Facts: President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided,
among others, for the imposition of a capital recovery component (CRC) on the domestic sale of all grades of
fertilizers which resulted in having Fertiphil paying P 10/bag sold to the Fertilizer and Perticide Authority (FPA).
FPA remits its collection to Far East Bank and Trust Company who applies to the payment of corporate debts
of Planters Products Inc. (PPI) After the EDSA Revolution, FPA voluntarily stopped the imposition of the P10
levy. Upon return of democracy, Fertiphil demanded a refund but PPI refused. Fertiphil filed a complaint for
collection and damages against FPA and PPI with the RTC on the ground that LOI No. 1465 is unjust,
unreaonable oppressive, invalid and unlawful resulting to denial of due process of law. FPA answered that it
is a valid exercise of the police power of the state in ensuring the stability of the fertilizing industry in the
country and that Fertiphil did NOT sustain damages since the burden imposed fell on the ultimate consumers.
RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as such because it is
NOT for public purpose as PPI is a private corporation.

Issue: Whether or not LOI No. 1465 is an invalid exercise of the power of taxation rather the police power
Ruling: Yes. Police power and the power of taxation are inherent powers of the state but distinct and have
different tests for validity. Police power is the power of the state to enact the legislation that may interfere
with personal liberty on property in order to promote general welfare, while the power of taxation is the
power to levy taxes as to be used for public purpose. The main purpose of police power is the regulation of a
behavior or conduct, while taxation is revenue generation. The lawful subjects and lawful means tests are
used to determine the validity of a law enacted under the police power. The power of taxation, on the other
hand, is circumscribed by inherent and constitutional limitations.

In this case, it is for purpose of revenue. But it is a robbery for the State to tax the citizen and use the funds
generation for a private purpose. Public purpose does NOT only pertain to those purpose which are
traditionally viewed as essentially governmental function such as building roads and delivery of basic services,
but also includes those purposes designed to promote social justice. Thus, public money may now be used for
the relocation of illegal settlers, low-cost housing and urban or agrarian reform.

39. Villanueva vs city of iloilo

FACTS:

Relying on the passage of RA 2264 or the Local Autonomy Act, Iloilo enacted Ordinance 11 Series of 1960,
imposing a municipal license tax on tenement houses in accordance with the schedule of payment provided by
therein. Villanueva and the other appellees are apartment owners from whom the city collected license taxes
by virtue of Ordinance 11. Appellees aver that the said ordinance is unconstitutional for RA 2264 does not
empower cities to impose apartment taxes; that the same is oppressive and unreasonable for it penalizes
those who fail to pay the apartment taxes; that it constitutes not only double taxation but treble taxation;
and, that it violates uniformity of taxation.

Issue: Does the ordinance impose double taxation?

Ruling: No. While it is true that appellees are taxable under the NIRC as real estate dealers, and taxable under
Ordinance 11, double taxation may not be invoked. This is because the same tax may be imposed by the
national government as well as by the local government. The contention that appellees are doubly taxed
because they are paying real estate taxes and the tenement tax is also devoid of merit. A license tax may be
levied upon a business or occupation although the land or property used in connection therewith is subject to
property tax. In order to constitute double taxation, both taxes must be the same kind or character. Real
estate taxes and tenement taxes are not of the same character.
40. Serafica v. City Treasurer of Ormoc, L-24813 (1969) Double Taxation
FACTS:
Serafica seeks to nullify Ordinance 13 imposing a tax on every 1,000 board feet of lumber. He contends that
the charter of Ormoc authorizes it to regulate and not tax. He alleges that the tax on the lumber constitutes
double taxation, because the business of lumber yard is already regulated under said Charter and the sale of
lumber is “a mere incident to the business of lumber yard”.

ISSUE: Is the city authorized to tax?

RULING:
Yes. Under the Local Autonomy Act, the power is broad and sufficiently plenary to cover everything, except
those mentioned. Regulation and taxation are two different things, the first being an exercise of police power
and the latter is not. Double taxation is not prohibited in the Philippines.
Altho lumber is a forest product, this limitation has no application to the case at bar, the tax in question being
imposed, not upon lumber, but upon its sale. Said tax is not levied upon the lumber in plaintiff’s sawmill and
does not become due until after the lumber has been sold.

41. Commissioner vs. Hawaiian-Philippine Co. (1964)

Facts: A petition was filed by the Commissioner of Internal Revenue for the review of the decision of the Court
of Tax Appeals ordering him to refund to respondent for taxes assessed against it and which the latter had
deposited with the City Treasurer of Silay, Occidental Negros.

HPC is operating a sugar central. It produces centrifugal sugar from sugarcane supplied by planters. The
processed sugar is divided between the planters and the petitioner in the proportion stipulated in the milling
contracts and thereafter is deposited in the warehouses of the latter.

For the sugar deposited by the planters, the petitioner issues the corresponding warehouse receipts of
"quedans". It does not collect storage charges on the sugar deposited in its warehouse during the first 90-day
period counted from the time it is extracted from the sugarcane. Upon the lapse of the first 90 days and up to
the beginning of the next milling season, it collects a fee of P0.30 per picul a month.
Upon investigation conducted by the Bureau, it was found that during the years 1949 to 1957, the petitioner
realized from collected storage fees a total gross receipts of P212,853.00, on the basis of which the
respondent determined the petitioner's liability for fixed and percentage taxes, 25% surcharge, and
administrative penalty in the aggregate amount of P8,411.99.The petitioner deposited the amount of
P8,411.99 with the Office of the City Treasurer of Silay. After due hearing, the CTA ordered the refund to HPC.

Issue: Whether it amounts to double taxation which will exempt HPC from paying the assessed tax of the BIR?

Ruling: NO. Book: A warehouseman is one who receives and stores goods of another for compensation. The
fact that Hawaiian-Philippine Co. (HPC) stores the planters’ sugar for free for the first 90 days does not exempt
it from liability. If this were the case, the law imposing the tax would be rendered ineffectual. Neither is the
fact that HPC’s warehousing business is carried on in addition to or in relation to the operation of its sugar
central sufficient to exempt it. Under Section 178 of the old Tax Code, the tax on business is payable for every
separate or distinct establishment or place where the business subject to the tax is conducted, and one line of
business or occupation does not become exempt by being conducted with some other business or occupation
for which such tax has been paid. There can be no double taxation where the State merely imposes a tax on
every separate and distinct business in which a party is engaged in.

42. COMPANIA DE GENERAL DE TABACOS de FILIPINAS vs. CITY OF MANILA

FACTS:
Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed license fees
prescribed by Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance 3634 and 3816 were
passed; where the term “general merchandise” found therein included all articles in Sections 123 to 148 of the
Tax Code (thus, also liquor under Sections 133 to 135). The Tabacalera paid its wholesaler’s and retailer’s
taxes. In 1954, the City Treasurer addressed a letter to an accounting firm, expressing the view that liquor
dealers paying the annual wholesale and retail fixed tax under Ordinance 3358 are not subject to the
wholesale and retail dealers’ taxes prescribed by City Ordinances 3634, 3301, and 3816. The Tabacalera, upon
learning of said stopped including quarterly sworn declaratons required by the latter ordinances, and in 1957,
demanded refund of the alleged overpayment. The claim was disallowed.
ISSUE:
Whether or not there is a violation of the rule against double taxation.
Ruling:
 No. That Tabacalera is being subjected to double taxation is more apparent than real. What is collected
under Ordinance 3358 is a license fee for the privilege of engaging in the sale of liquor, a calling in which not
anyone or anybody may freely engage, considering that the sale of liquor indiscriminately may endanger
public health and morals. On the other hand, what the three ordinances impose is a tax for revenue purposes
based on the sales made of the same article or merchandise. Both a license fee and a tax may be imposed on
the same business or occupation, or for selling the same article, this not being in violation of the rule against
double taxation.

*CASE 43 MISSING*

44. Commissioner v Bank of Commerce

FACTS: Bank of Commerce derived passive income in the form of interests or discounts from its investments in
government securities and private commercial papers, it paid 5% gross receipts tax on its income, as reflected
in its quarterly percentage tax returns. Included therein were the respondent bank’s passive income from the
said investments amounting to P85,384,254.51, which had already been subjected to a final tax of 20%.

Meanwhile, the CTA rendered judgment in Asia Bank Corporation v. Commissioner of Internal Revenue,
holding that the 20% final withholding tax on interest income from banks does not form part of taxable gross
receipts for Gross Receipts Tax (GRT) purposes. The CTA relied on Section 4(e) of Revenue Regulations (Rev.
Reg.) No. 12-80.

The respondent bank then filed an administrative claim for refund, claimed that it had overpaid its gross
receipts tax for 1994 to 1995 by P853,842.54. Granted.

ISSUE: Is there double taxation?

RULING: NONE. Subjecting the Final Withholding Tax (FWT) to the 5% of gross receipts tax would NOT result
in double taxation. The taxes herein are imposed on two different subject matters. The subject matter of
the FWT is the passive income generated in the form of interest on deposits and yield on deposit
substitutes, while the subject matter of the GRT is the privilege of engaging in the business of banking. A tax
based on receipts is a tax on business rather than on the property; hence, it is an excise rather than a
property tax.

These two taxes are of different kinds or characters. The FWT is an income tax subject to withholding, while
the GRT is a percentage tax not subject to withholding. The FWT is deducted and withheld as soon as the
income is earned, and is paid after every calendar quarter in which it is earned. On the other hand, the GRT
is neither deducted nor withheld, but is paid only after every taxable quarter in which it is earned. The bare
fact that the final withholding tax is a special trust fund belonging to the government and that the
respondent bank did not benefit from it while in custody of the borrower does not justify its exclusion from
the computation of interest income.
In short, there is no double taxation, because there is no taxing twice, by the same taxing authority, within the
same jurisdiction, for the same purpose, in different taxing periods, some of the property in the territory.

46. PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN
69 SCRA 460
GR No. L-31156, February 27, 1976

FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2
of Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue
delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as "municipal
production tax" of the Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft
drinks producers and manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink
corked, and Ordinance 27 levies and collects on soft drinks produced or manufactured within the territorial
jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity. Aside from the undue delegation of authority, appellant contends that it allows double
taxation, and that the subject ordinances are void for they impose percentage or specific tax.

ISSUE: Whether or not the delegation of taxing power to local governments may be assailed on the ground of
double taxation.

RULING: NO. There is no validity to the assertion that the delegated authority can be declared
unconstitutional on the theory of double taxation. It must be observed that the delegating authority specifies
the limitations and enumerates the taxes over which local taxation may not be exercised. Moreover, double
taxation, in general, is not forbidden by our fundamental law, since We have not adopted as part thereof the
injunction against double taxation found in the Constitution of the United States and some states of the
Union. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is
imposed by the State and the other by the city of municipality.

47. Villanueva vs City of Iloilo

Facts:

Relying on the passage of RA 2264 or the Local Autonomy Act, Iloilo enacted Ordinance 11 Series of
1960, imposing a municipal license tax on tenement houses in accordance with the schedule of payment
provided by therein. Villanueva and the other appellees are apartment owners from whom the city
collected license taxes by virtue of Ordinance. Appellees aver that the said ordinance is unconstitutional
for RA 2264 does not empower cities to impose apartment taxes; that the same is oppressive and
unreasonable for it penalizes those who fail to pay the apartment taxes; that it constitutes not only double
taxation but treble taxation; and, that it violates uniformity of taxation.

Issue: W/N the ordinance impose double taxation

Ruling:

No. While it is true that appellees are taxable under the NIRC as real estate dealers and taxable
under Ordinance 11, double taxation may not be invoked. This is because the same tax may be imposed by the
national government as well as by the local government. The contention that appellees are doubly taxed
because they are paying real estate taxes and the tenement tax is also devoid of merit. A license tax may be
levied upon a business or occupation although the land or property used in connection therewith is subject to
property tax. In order to constitute double taxation, both taxes must be the same kind or character. Real
estate taxes and tenement taxes are not of the same character.

Book: There is no double taxation. Double taxation means taxing for the same tax period the same thing or
activity twice, when it should be taxed but once, by the same taxing authority for the same purpose and with
the same kind or character of tax. The real estate tax is a tax on property; the real estate dealer’s tax is a tax
on the privilege to engage in business; while the income tax is a tax on the privilege to earn an income. These
taxes are imposed by different taxing authorities and are essentially of different kind and character.
48. Greenfield v. Meer (Exemption from Taxation)

Facts:

Since the year 1933, the plaintiff has been continuously engaged in the embroidery business. In 1935,
the plaintiff began engaging in buying and selling mining stocks and securities for his own exclusive account
and not for the account of others. The plaintiff has not been a dealer in securities as defined in section 84 (t)
of Commonwealth Act No. 466; he has no established place of business for the purchase and sale of mining
stocks and securities; and he was never a member of any stock exchange. The plaintiff filed an income tax
return where he claims a deduction of P67,307.80 representing the net loss sustained by him in mining stocks
securities during the year 1939. The defendant disallowed said item of deduction on the ground that said
losses were sustained by the plaintiff from the sale of mining stocks and securities which are capital assets,
and that the loss arising from the sale of the same should be allowed only to the extent of the gains from such
sales, which gains were already taken into consideration in the computation of the alleged net loss of
P67,307.80.

Issue:
 Whether or not the personal and additional exemptions granted by section 23 of Commonwealth Act
No. 466 should be considered as a credit against or be deducted from the net income.

Held:

Yes.

Personal and additional exemptions claimed by appellant should be credited against or deducted
from the net income. "Exception is an immunity or privilege; it is freedom from a charge or burden to which
others are subjected." (If the amounts of personal and additional exemptions fixed in section 23 are exempt
from taxation, they should not be included as part of the net income, which is taxable. There is nothing in said
section 23 to justify the contention that the tax on personal exemptions (which are exempt from taxation)
should first be fixed, and then deducted from the tax on the net income.

49. Philippine Petroleum Corporation vs. Pililla (Exemption from Taxation)

Facts: PPC is a business enterprise engaged in the manufacture of petroleum product, with its refinery plant at
Malaya, Pililla, Rizal, conducting its business activities w/in the territorial jurisdiction of the Municipality of
Pililla, Rizal.

Under Section 142 of the NIRC of 1939, manufactured oils and other fuels are subject to specific tax.

Respondent Municipality of Pililla, Rizal, through Municipal Council Res No. 25 S-1974 enacted Municipal Tax
Ordinance NO. 1 known as “The Pililla Tax Code of 1974”. Sections 9 and 10 imposed tax on businesses, except
those for which fixed taxes are provided in the local tax code.

Respondents then filed a compliant for the collection of business tax, storage permit fees, mayor’s permit and
sanitary inspection fees.

Issues:

1. W/N PPC whose oil products are subject to specific tax under the NIRC, is still liable to pay TAX on
BUSINESS unto the respondent Municipality? – YES
2. W/N PPC is still liable to pay the STORAGE FEE? – NO
3. W/N PPC is still liable to pay the PERMIT FEES? – YES
4. W/N the Mayor has the authority to waive payment of the mayor’s permit and sanitary inspection
fees? NO.
Rulings:

1. Yes, a tax on business is distinct from tax on the article itself. While Section 2 of PD 436 prohibits the
imposition of local taxes in petroleum products, said decree did not amend Sections 19 and 10 (a) of
PD 231 as amended by PD 426, wherein the municipality is granted the right to levy taxes on
businesses of manufacturers, importers, producers of any article of commerce of whatever kind or
nature.
The exercise of by local govts of the power to tax is ordained by the present Constitution. To allow the
continuous effectivity of the prohibition set forth in PC No 26-73(1) would be tantamount to restricting
their power to tax by mere administrative issuances. Under Section 5, Art. X of the Consti, only
 guidelines and limitations that may be established by Congress can define and limit such power of local
gvt.
2. No, Provincial Circular No. 6-77 enjoining all city and municipal treasurers to refrain from collecting the
so called storage fee on flammable or combustible materials imposed in the local tax ordinance of their
respective locality frees petitioner PPC from the payment of the storage fee. The storage permit fee
being imposed by Pililla’s tax ordinance is a fee for the installation and keeping in storage of any
flammable, combustible or explosive substances. Inasmuch as said storage make use of tanks owned
not by the Municipality but by the petitioner PPC, same is obviously not charged for any service
rendered by the municipality as what is envisioned in Sec 37 of the same code.
3. Yes, Section 10(z) (13) of Pililla’s Municipal Tax Ordinance No. 1 prescribing a permit fee is a permit fee
allowed under Sec 36 of the amended code.
4. No, He does not. It is the law making body, and not the executive like the mayor, who can make an
exemption. Since the power to tax includes the power to exempy thereof which is essentially a
legislative prerogative, it follows that a municipal mayor may not unilaterally withdraw such an
expression of a policy thru the enactment of a tax.
50. FLORO CEMENT CORPORATION vs HON. BENJAMIN K. GOROSPE G.R. No. L-46787 August 12, 1991
FACTS:
The municipality of Lugait province of Misamis Oriental filed a verified complaint for collection of taxes
against the defendant Floro Cement Corporation. The taxes sought to be collected by the plaintiff specifically
refers to "manufacturers" and' exporter's "taxes for the period from January 1, 1974 to September 30, 1975.
Plaintiff alleged that the imposition and collection of these taxes" is based on its Municipal Ordinance No. 5,
otherwise known as the Municipal Revenue Code of 1974, which was passed pursuant to Presidential Decree
No. 231 and also Municipal Ordinance No. 10 pursuant to Presidential Decree No. 426 dated March 30,1974,
amending Presidential Decree No. 231. The defendant, in its answer, sets up the defense it is not liable to pay
manufacturer's and exporter's taxes alleging among others that the plaintiffs power to levy and collect taxes,
fees, rentals, royalties or charges of any kind whatsoever on defendant has been limited or withdrawn by
Section 52 of Presidential Decree No. 463. Also, defendant was granted by the Secretary of Agriculture and
Natural Resources a Certificate of Qualification for Tax Exemption entitling defendant to exemption for a
period of five (5) years from April 30,1969 to April 29, 1974 from payment of all taxes, except income tax, and
which Certificate was amended on November 5, 1974 CQTE P.D. 463-22), entitling defendant to exemption
from all taxes, duties and fees except income tax, for five (5) years from the first date of actual commercial
production of saleable mineral products that is from May 17, 1974 to January 1, 1978; and that Republic Act
No. 3823, as implemented by Mines Administrative Order No. V-25, and P.D. No. 463 which are the basis for
the exemption granted to defendant are special laws whereas, the municipal ordinance mentioned in the
complaint which are based on P.D. No. 231 and P.D No. 426, respectively, are general laws; and that it is
axiomatic that a special law cannot be amended and/or repealed by a general law unless there is an express
intent to repeal or abrogate the provisions of the special law.

ISSUE: WON Floro Cement should be exempt from paying the taxes sought by the Municipality of Lugait?

HELD:
No. On the exemption claimed by petitioner, this Court has laid down the rule that as the power of
taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or
diminution thereof with respect to its mode or its rate, must be strictly construed, and the same must be
coached in clear and unmistakable terms in order that it may be applied. More specifically stated, the general
rule is that any claim for exemption from the tax statute should be strictly construed against the taxpayer
(Luzon Stevedoring Corporation vs. Court of Appeals, 163 SCRA 647 [1988]). He who claims an exemption must
be able to point out some provision of law creating the right; it cannot be allowed to exist upon a mere vague
implication or inference. It must be shown indubitably to exist, for every presumption is against it, and a well-
founded doubt is fatal to the claim (Manila Electric Company vs. Ver, 67 SCRA 351 [1975]). The petitioner
failed to meet this requirement. As held by the lower court, the exemption mentioned in Sec. 52 of P.D. No.
463 refers only to machineries, equipment, tools for production, etc., as provided in Sec. 53 of the same
decree. The manufacture and the export of cement does not fall under the said provision for it is not a mineral
product (CFI Decision, Rollo, p. 62). It is not cement that is mined only the mineral products composing the
finished product (Commissioner of Internal Revenue vs. Republic Cement Corporation, supra). Furthermore,
by the parties' own stipulation of facts submitted before the court a quo, it is admitted that Floro Cement
Corporation is engaged in the manufacturing and selling, including exporting of cement (CFI Decision, Rollo, p.
57). As such, and since the taxes sought to be collected were levied on these activities pursuant to Sec. 19 of
P.D. No. 231, Ordinances Nos. 5 and 10, which were enacted pursuant to P.D. No. 231 and P.D. No. 426,
respectively, properly apply to petitioner Floro Cement Corporation.

51. MERALCO vs VERA (BIR Commissioner)

G.R. No. L-23847; October 22, 1975

FACTS: This is a petition for review of the decision of the Court of Tax Appeals which upheld the decision of
the BIR to deny the claim of refund of MERALCO over the collected compensating tax on imported goods, namely:
poles, wires, transformers, and insulators by it for the use in the operation of its electric light, heat and power
system. In deciding against petitioner, the Court of Tax Appeals held that following the ruling of the Supreme Court
in the cases of Panay Electric Co. vs. Collector of Internal Revenue, Manila Gas Corp. vs. Collector of Internal
Revenue, and Borja vs. Collector of Internal Revenue, MERALCO is not exempt from paying the compensating tax
provided for in Section 190 of the National Internal Revenue Code, the purpose of which is to “place casual
importers, who are not merchants on equal putting with established merchants who pay sales tax on articles
imported by them.” The court further stated that MERALCO’s claim for exemption from the payment of the
compensating tax is not clear or expressed, contrary to the cardinal rule in taxation that “exemptions from taxation
are highly disfavored in law, and he who claims exemption must be able to justify his claim by the clearest grant of
organic or statute law.” (pp. 10-11, L-23847, rollo)

MERALCO argues that the claim for refund and tax exemption is based on Sec. 9 of its municipal franchise. Thus,
“PARAGRAPH 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators), machinery, and personal property as other persons are or
may be hereafter required by law to pay.
ISSUE: Whether or not MERALCO is exempt from payment of a compensating tax.

RULING: NO. We find no merit in petitioner’s cause. One who claims to be exempt from the payment of a particular
tax must do so under clear and unmistakable terms found in the statute. Tax exemptions are strictly construed
against the taxpayer, they being highly disfavored and may almost be said “to be odious to the law.” He who
claims an exemption must be able to point to some positive provision of law creating the right; it cannot be allowed
to exist upon a mere vague implication or inference.3 The right of taxation will not be held to have been
surrendered unless the intention to surrender is manifested by words too plain to be mistaken, for the state cannot
strip itself of the most essential power of taxation by doubtful words; it cannot, by ambiguous language, be
deprived of this highest attribute of sovereignty. So, when exemption is claimed, it must be shown indubitably to
exist, for every presumption is against it, and a well-founded doubt is fatal to the claim.

52. Commissioner vs. Guererro

(Doctrine: Tax exemptions are strictly construed against the one claiming the exemption)

Facts:

Antonio G. Guerrero was, during the years 1949 and 1950, a dealer in logs, which he used to sell to the Aparri
Lumber Company, hereinafter referred to as the company.

On April 2, 1954, the then Collector of Internal Revenue made an assessment and demand requiring Guerrero
to pay the sum of P4,014.91, representing fixed and percentage taxes and forest charges, as well as surcharges
and penalties, in connection with his aforementioned business transactions with the company.

Guerrero maintains that he is not liable therefor because he bought the logs in question for the company, as
agent thereof and with money belonging thereto.

However according to the Commissioner these charges "are liens on the products and collectible from
whomsoever is in possession" thereof, "unless he can show that he has the required auxiliary and official
invoice and discharge permit" — which Guerrero has not shown — it follows that he is bound to pay the
aforementioned forest charges and surcharges, in the sum of P3,775.66.

Issue: Whether Guererro is exempted from paying taxes?

Ruling:

No.

No exemption shall be allowed against the internal revenue taxes in any case." In other words, the National
Internal Revenue Code makes a distinction between taxes, on the other hand, and fees or charges, on the
other; but as used in Title IX of said Code, the term "tax" includes "any national internal revenue tax, fee or
charge imposed by" the Code. And it is in this sense only that we sustained the view taken in the
aforementioned concurring-dissenting opinion in Collector of Internal Revenue vs. Lacson (supra). As a
consequence, the original sale, as contemplated in Section 189 of the Internal Revenue Code, is made by the
concessionaire or whoever cuts or removes forest products from public forests or forest reserves — in the
case at bar, Guerrero, who is accordingly, bound to pay said sum of P1,192.51.

(and also given the fact that when he claimed the exemption he wasn’t able to show the necessary
documents which are the discharge permit and official invoice)

53 Meralco vs Vera, No. L-29987. October 22, 1975

Facts: Meralco is the holder of a franchise to construct, maintain, and operate an electric light, heat, and
power system in the City of Manila and its suburbs. In 1962 and 1963, Meralco imported and received from
abroad copper wires, transformers, and insulators for use in the operation of its business. The Collector of
Customs, as deputy of the Commissioner of Internal Revenue, levied and collected a compensating
tax. Meralco claimed for refund for the said years, but such claims were either not acted upon or denied by
the Commissioner.

Issue: Whether or not Meralco is exempt from payment of a compensating tax on poles, wires, transformers
and insulators imported by it for use in the operation of its electric light, heat, and power system.

Held: No. One who claims to be exempt from the payment of a particular tax must do so under clear and
unmistakable terms found in the statute. Tax exemptions are strictly construed against the taxpayer, they
being highly disfavored and may almost be said “to be odious to the law.” He who claims an exemption
must be able to point to some positive provision of law creating the right; it cannot be allowed to exist upon
a mere vague implication or inference. Meralco is not exempt from paying the compensation tax provided for
in Section 190 of the Tax Code, the purpose of which is to “place casual importers, who are not merchants on
equal footing with established merchants who pay sales tax on articles imported by them.” Meralco’s claim for
exemption from payment of the compensating tax is not clear or expressed, contrary to the rule that
“exemptions from taxation are highly disfavored in law, and he who claims exemption must be able to justify
his claim by the clearest grant of organic or statute law.” Tax exemption are strictly construed against the
taxpayer, they being highly disfavored and may almost be said to be “odious to the law.” When exemption is
claimed, it must be shown indubitably to exist, for every presumption is against it, and a well-founded doubt is
fatal to the claim.
54. Marli Plywood and Veneer Corporation v Aranas 109 Phil. 664
Facts:
Marli Plywood and Veneer corporation, holder of a certificate of exemption as a new and necessary
industry (plywood manufacturing business), seeks the review of the decision of the Court of Tax Appeals
denying its petition for refund of the sum of P4,774.58 paid by it to the respondent Collector of Internal
Revenue as compensating tax in connection with its importation of a "Yanmar" marine diesel engine and air
compressor. The machinery used exclusively to transport its manufactured products from its factory in
Bayawan, Negros Oriental, which is not a port of call, to Cebu or Manila, and to bring, in its return trips, fuels
and stocks for use in the factory.
Having been declared a new and necessary industry, it was exempted from payment of certain internal
revenue taxes. The tax-exemption certificate issued by the Secretary of Finance in favor of petitioner, among
others, provides: "3. The compensating tax on machinery and equipment to be used exclusively in the new
and necessary industry.”
Issue:
WON the importation of the Yanmar machinery should have been exempted from tax
Ruling:
No. The petitioner cannot avail of the privilege with respect to the imported machinery since it was
found to be not directly necessary, but merely incidental, to the operation industry itself. With or without
petitioner’s owning any transportation facility, the tax-exempt industry could be operated. As a matter of fact,
the transportation activity was commenced only in 1956 although petitioner was already in the business since
1953. In other words, the operations of the transportation, while it may bring convenience and economy to
petitioner, is not indispensable to, or form a part of the business of, manufacturing plywood. For the
privilege to be availed of, it must be shown that the imported machinery or equipment is directly necessary,
not merely incidental, to the operation of the industry itself.
55. E. Rodriguez, Inc. v. Collector of Internal Revenue (GR. L-23041, July 31, 1969)

FACTS: Congress enacted RA 333, pursuant to which, the Republic of PH sued petitioner for the expropriation
of 1.36m sqm of land owned by it. Petitioner was to receive just compensation of P1.4m. Petitioner then
entered into a compromise agreement with the government, where the government will only pay petitioner
P1.2m, 625k of which were in government bonds. In 1951, when filing its income tax return for 1950,
petitioner did not include the 625k it received from the government in the belief that it was exempt from
taxation. The BIR examined the return and assessed against petitioner a deficiency income tax [DIT] of P63.8k.
Petitioner then sought the cancellation of the DIT, the Collector maintained the accuracy of the assessment
and demanded payment. In June 8, 1960, petitioner offered to pay P30k to settle its DIT which was rejected by
the Collector. On June 24, petitioner filed for the review of the tax assessment with the Court of Tax Appeals
[CTA]. CTA affirmed the assessment. Petitioner appealed.

ISSUE: WON the purchase price paid in the form of tax-exempt bonds should be included in determining the
profit realized from the payment of the expropriated property for income tax purposes.

HELD: Yes. The fact that a portion of the purchase price of the property was paid by the Government in the
form of tax-exempt bonds does not operate to exempt said income from income tax. The income from the
sale of the land in question and the bond are two different and distinct taxable items so that the exemption of
one does not operate to exempt the other, unless the law expressly so provides.

It is argued that since RA 1400 and RA 333 are in pari materia, it should be construed together. However, RA
1400 exempts income derived from the sale of agricultural land to the Government under said Act because RA
1400 contains an exemption from taxation. But in RA 333, there is no provision expressing such exemption,
which indicates that the Congress did not intend to grant such exemption to landowners under RA 333.

Therefore the government bonds issued are taxable.

56. City Gov't of San Pablo v. Reyes

Facts: Act No. 3648 granted the Escudero Electric Services Company, a legislative franchise to maintain and

operate an electric light and power system in the City of San Pablo.

Presidential Decree No. 551 was enacted imposing two percent (2%) franchise tax in lieu of all taxes and
assessments. The local government code took effect on January 1, 1992. Subsequently, the Sangguniang
Panglunsod of San Pablo City enacted Ordinance No. 56, imposing a tax on business enjoying franchise, at a
rate of fifty percent (50%) of one percent (1%) of the gross annual receipts. The private respondent
subsequently filed this action before the Regional Trial Court to declare Ordinance No. 56 null and void insofar
as it imposes the franchise tax upon private respondent MERALCO

Issue: Whether the City of San Pablo may impose a local franchise tax pursuant to the LGC upon the Manila

Electric Company which pays a tax equal to two percent of its gross receipts in lieu of all taxes.

Ruling: Yes. Section 193 of the Code prescribes the general rule: tax exemptions or incentives granted to or
presently enjoyed by natural or juridical persons are withdrawn upon the effectivity of the Code, except
with respect to those entities expressly enumerated in this code. By stating that unless otherwise provided in
this Code, tax exemptions or incentives granted are withdrawn upon the effectivity of this code. in the
absence of any provision of the Code to the contrary. private respondents tax exemption privileges under
existing law was clearly intended to be withdrawn.

57. Manila Electric Company v Province of Laguna

Facts:

On 12 September 1991, Republic Act No. 7160, otherwise known as the "Local Government Code of
1991," was enacted enjoining local government units to create their own sources of revenue and to levy taxes,
fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local
autonomy.

Pursuant to the provisions of the Code, respondent province enacted Laguna Provincial Ordinance No.
01-92 which imposed a tax on businesses enjoying a franchise, at a rate of fifty percent (50%) of one percent
(1%) of the gross annual receipts. On the basis of the above ordinance, respondent Provincial Treasurer sent a
demand letter to MERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which then
amounted to P19,520,628.42 under protest. A formal claim for refund was thereafter sent by MERALCO to the
Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to the National
Government pursuant to P.D. 551 already included the franchise tax imposed by the Provincial Tax
Ordinance. However, it was denied which prompted the petitioner to file with the RTC of Laguna a complaint
for refund premise on the argument that imposition of a franchise tax as per Provincial Ordinance No. 01-92,
insofar as petitioner is concerned, is violative of the non-impairment clause of the Constitution and Section 1
of Presidential Decree No. 551

Issue:

Whether or not the tax exemption invoked by MERALCO is contractual in nature, hence non-
impairment clause can be used

Ruling:

No. While the Court has, not too infrequently, referred to tax exemptions contained in special
franchises as being in the nature of contracts and a part of the inducement for carrying on the franchise, these
exemptions, nevertheless are far from being strictly contractual in nature. Contractual tax exemptions, in the
real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked, are
those agreed to by the taxing authority in contracts, such as those contained in government bonds or
debentures, lawfully entered into by them under enabling laws in which the government, acting in its private
capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind
may not be revoked without impairing the obligations of contracts. These contractual tax exemptions,
however, are not to be confused with tax exemptions granted under franchises. A franchise partakes the
nature of a grant which is beyond the purview of the non-impairment clause of the Constitution. Indeed,
Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973
Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the
condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the
common good so requires.

58. ASIATIC PETROLEUM CO. v. LLANES

Facts:

Asiatec Petroleum appealed at the Supreme Court against Llanes for the purpose of recovering the sum of
P3,523.02 it paid for local tax on improvements from the Provincial Treasurers of Cebu. Accordingly, the
improvements it made on the reclaimed land it leased from the Government is tax exempt in pursuant to
Section 344 of Administrative Code. Under section 344 of the Administrative Code especially exempts from
local taxation property owned by the United States of America or by the Government of the Philippine Islands.

Issue:

Whether the plaintiff was liable for the tax assessed against it upon the value of the improvements which it
placed upon Shell Island

Ruling:

YES.

Upon examining the provisions of Act No. 1654 relative to the leasing of lands reclaimed by the Government,
it will be noted that, by section 4, all lands leased under the preceding sections of the Act, "and all
improvements thereon" shall be subject to the local taxation.

A tax exemption is construed in strictissimi juris and it cannot be permitted to exist upon vague
implications. Exemptions from taxation are highly disfavored, so much so that they may almost be said to be
odious to the law. He who claims an exemption must be able to point to some positive provision of law
creating the right. It cannot be allowed to exist upon a vague implication.

Further, the said improvements are not public improvements, but are, of a private nature, constructed for the
use of the lessee in conducting its business as a purveyor of coal oil. Said improvements belong to the lessee
and will remain its property until the termination of the lease, when, under subsection (c) of section 6 of Act
No. 1654, the title to the same will vest in the Government of the Philippine Islands. The fact that the
improvements will thus ultimately belong to the Government in no wise alters the liability of the lessee of
taxes thereon, so long as the property belongs to it. Under section 343 of the Administrative Code the tax on
improvements on real property is assessable against the owner of such improvements whether he is also the
owner of the land, on which they are placed or not. The case not infrequently happens that the land is
assessed to one person and the improvements to another; and as it should be, when the titles to the two
different sorts of property are vested in different persons.
59. Collector vs. Fireman

Facts:

This is an appeal from the decision of the respondent Court of Tax Appeals which reversed the decision of
petitioner Commissioner of Internal Revenue holding private respondent liable for the payment of the amount
of P81,406.87 as documentary stamp taxes and compromise penalties for the years 1952 to 1958. Private
respondent is a resident foreign insurance corporation organized under the laws of the United States,
authorized and duly licensed to do business in the Philippines. It is a member of the American Foreign
Insurance Association, through which its business is cleared. It entered into various insurance contracts
involving casualty, fire and marine risks, for which the corresponding insurance policies were issued. From
January, 1952 to 1956, documentary stamps were bought and affixed to the monthly statements of policies
issues; and from 1957 to 1958 documentary stamps were bought and affixed to the corresponding pages of
the policy register, instead of on the insurance policies issued.

Issue:

Whether or not respondent company may be required to pay again the documentary stamps it has actually
purchased, affixed and cancelled.

Ruling:

No. It is the general rule in the interpretation of statues levying taxes or duties, that in case of doubt, such
statutes are to be construed most strongly against the government and in favor of the subjects or citizens,
because burdens are not to be imposed, nor presumed to be imposed beyond what the statues expressly and
clearly import. The purpose of imposing documentary stamp taxes is to raise revenue and the corresponding
amount has already been paid and has become part of the revenue of the government. There is no
justification for the government which has already realized the revenue to require the payment of the same
tax for the same documents.

60. Hilado vs. Collector

Facts:

Petitioner filed his income tax return with the treasurer of Bacolod City wherein he claimed, among other
things, a deductible item from his gross income pursuant to General Circular No. V-123 issued by the
Collector of Internal Revenue. Meanwhile, the Secretary of Finance, through the Collector of Internal
Revenue, issued General Circular No. V-139 which not only revoked and declared void his general
Circular No. V- 123 but laid down the rule that losses of property which occurred during the period of
World War II from fires, storms, shipwreck or other casualty, or from robbery, theft, or embezzlement are
deductible in the year of actual loss or destruction of said property. As a consequence, the amount of
claimed was disallowed as a deduction from the gross income of Petitioner for 1951 and the Collector of
Internal Revenue demanded from him the payment for deficiency income tax for said year.

Issue: Whether Petitioner can claim compensation for destruction of his property during the war under
the laws in effect at that time.

Ruling:

No. The power to pass upon the validity of General Circular No. V-123 is vested exclusively in our
courts in view of the principle of separation of powers and, therefore, the Secretary of Finance
acted without valid authority in revoking it and approving in lieu thereof General Circular No. V-
139. It cannot be denied, however, that the Secretary of Finance is vested with authority to
revoke, repeal or abrogate the acts or previous rulings of his predecessor in office because the
construction of a statute by those administering it is not binding on their successors if thereafter
the latter become satisfied that a different construction should be given.

61. TAÑADA VS TUVERA

FACTS: Due process was invoked by the petitioners in demanding the disclosure of a number of presidential
decrees which they claimed had not been published as required by law. Invoking the right of the people to be
informed on matters of public concern as well as the principle that laws to be valid and enforceable must be
published in the Official Gazette, petitioners filed for writ of mandamus to compel respondent public officials
to publish and/or cause to publish various presidential decrees, letters of instructions, general orders,
proclamations, executive orders, letters of implementations and administrative orders. The Solicitor General,
representing the respondents, moved for the dismissal of the case, contending that petitioners have no legal
personality to bring the instant petition.
ISSUE: Whether or not a tax law that is retroactive is invalid.
HELD: No. As a rule, taxing statutes must be applied prospectively, except by express provision of the law. The
mere fact that a tax law is retroactive does not make it invalid or against due process because retroactivity
must be so harsh and oppressive in its application in order to invalidate the law. The above situation created
some significant tax issues for lawyers who became exempt from the value added tax beginning January 1,
2004, pursuant to the express provision of the amendatory law, which was published in a newspaper of
general circulation only on February 16, 2004. Some tax practitioners believe that said law became effective
only after its publication on February 16, 2004. This legal issue if when R.A. 9238 became effective became
moot and academic when the Secretary of Finance, upon the recommendation of the Commissioner of
Internal Revenue, promulgated Revenue Regulations No. 7-2004 on May 7, 2004, specifically providing that
lawyers became exempt form value added tax on January 1, 2004, confirming what has been previously
declared by the Commissioner of Internal Revenue in RMC 9-04 and 10-04 dated February 2004. This position
finds support from the provision of Article 2 of the New Civil Code (R.A.386), which states “that laws shall take
effect after 15 days following the completion of their publication in the Official Gazette or newspaper of
general circulation, unless it is otherwise provided.” Since the law itself expressly provides for its date of
effectivity, it shall take effect on January 1, 2004.

62. Accenture vs Commissioner of Internal Revenue (CIR)

Facts: Petitioner Accenture, a VAT registered entity, is a corporation engaged in the business of providing
management consulting, business strategies development, and selling and/or licensing of software. The
monthly and quarterly VAT returns of Accenture show that, notwithstanding its application of the input VAT
credits earned from its zero-rated transactions against its output VAT liabilities, it still had excess or unutilized
input VAT credits in the amount of P37,038,269.18. Thus, Accenture filed with the Department of Finance
(DoF) an administrative claim for the refund or the issuance of a Tax Credit Certificate (TCC). When the DoF did
not act on the claim, Accenture filed a Petition for Review with CTA praying for the issuance of a TCC in its
favour.

The CIR answered that the sale by Accenture of goods and services to its clients are not zero-rated
transactions and that Accenture has failed to prove that it is entitled to a refund, because its claim has not
been fully substantiated or documented. Ruling that Accenture’s services would qualify for zero-rating under
the 1997 National Internal Revenue Code of the Philippines (Tax Code) only if the recipient of the services was
doing business outside of the Philippines, the Division of the CTA against Accenture, ruling that since
Accenture had failed to present evidence to prove that the foreign clients to which the former rendered
services did business outside the Philippines, it was not entitled to refund. Accenture’s services would qualify
for zero-rating under the Tax Code (1997) only if the recipient of the services was doing business outside of
the Philippines. Accenture questions the Division’s application to this case of the pronouncements made in
Burmeister. According to petitioner, the provision applied to the present case was Section 102(b) of the 1977
Tax Code, and not Section 108(B) of the 1997 Tax Code, which was the law effective when the subject
transactions were entered into and a refund was applied for. On appeal before the CTA en banc, Accenture
argued that because the case pertained to the third and the fourth quarters of taxable year 2002, the
applicable law was the 1997 Tax Code, and not R.A. 9337 and that prior to the amendment introduced by
(R.A.) 9337, there was no requirement that the services must be rendered to a person engaged in business
conducted outside the Philippines to qualify for zero-rating. The CTA en banc affirmed the decision of the
division, stating that Accenture cannot invoke the non-retroactivity of the rulings of the Supreme Court,
whose interpretation of the law is part of that law as of the date of its enactment.

Issue: WON the application of the Supreme Court decision is proper.

Ruling: Yes. The recipient of the service must be doing business outside the Philippines for the transaction to
qualify for zero-rating under Section 108(B) of the Tax Code. When the supreme court decides a case, it does
not pass a new law, but merely interprets an existing one. – Even though the taxpayer’s petition was filed
before the decision in case of CIR v. BWSC (Burmeister case) Mindanao was promulgated, the
pronouncement made in that case may be applied to the present case without violating the rule against
retroactive application. When the court interpreted Sec. 102(b) of the 1977 Tax Code in the Burmeister case,
this interpretation became part of the law from the moment it became effective. It is elementary that the
interpretation of a law by the Court constitutes part of that law from the date it was originally passed, since
the Court’s construction merely establishes the contemporaneous legislative intent that the interpreted law
carried into effect.

63. SAGUIGUIT VS PEOPLE as used in Gulf Air Co., Philippine Branch vs CIR

FACTS:
Petitioner (GF) is a foreign corporation which availed of the Voluntary Assessment Program on 3
quarters of 2000. Thereafter, GF received its Preliminary Assessment Notice for deficiency percentage tax and
a letter denying its claim for tax credit or refund of excess percentage tax remittance.
GF filed a petition for review with the CTA who dismissed the petition based on revenue regulation no.
6-66 and noted that GF failed to include in its gross receipts the special commissions on passengers and cargo.
Finally, it ruled that revenue regulation no. 6-66 allowing the use of the net rate in determining the gross
receipts, could not be given any or a retroactive effect.
GF elevated the case to the CTA En Banc which affirmed the decision of the CTA Division. It found that
Revenue Regulations No. 6-66 was the applicable rule because the period involved in the assessment covered
the quarters of 2000. Revenue Regulations No. 15-2002, which took effect on October 26, 2002, could not be
given retroactive effect since it was declarative of a new right for providing a different rule in determining
gross receipts.
ISSUE: Whether the use of Revenue Regulation NO. 6-66 is proper

RULING: YES

As such, absent any showing of inconsistency of Revenue Regulations No. 6-66 with the provisions of the NIRC,
its stipulations shall be upheld and applied accordingly regardless of our reservations as to the wisdom or the
perceived ill-effects of a particular legislative enactment. As aptly stated in Saguiguit v. People:
xxx Even with the best of motives, the Court can only interpret and apply the law and cannot, despite doubts
about its wisdom, amend or repeal it. Courts of justice have no right to encroach on the prerogatives of
lawmakers, as long as it has not been shown that they have acted with grave abuse of discretion. And while
the judiciary may interpret laws and evaluate them for constitutional soundness and to strike them down if
they are proven to be infirm, this solemn power and duty does not include the discretion to correct by reading
into the law what is not written therein.
The validity of the questioned rules can be sustained by the application of the principle of legislative approval
by re-enactment. Under the aforementioned legal concept, “where a statute is susceptible of the meaning
placed upon it by a ruling of the government agency charged with its enforcement and the Legislature
thereafter re-enacts the provisions without substantial change, such action is to some extent confirmatory
that the ruling carries out the legislative purpose.” Thus, there is tacit approval of a prior executive
construction of a statute which was re-enacted with no substantial changes.

64. CIR vs. Burroughs G.R. No. L-66653 June 19, 1986

Facts: Burroughs Limited is a foreign corporation authorized to engage in trade or business in the Philippines
through a branch office located at De la Rosa corner Esteban Streets, Legaspi Village, Makati, Metro Manila.
March 1979: The branch office of Burroughs Limited, a foreign corporation, applied with the Central Bank for
authority to remit to its parent company abroad, branch profit. Amount Applied for: Php 7,647,058.00 15%
Branch Profit Remittance Tax: Php 1,147,048.70 Amount Actually Remitted: Php 6,499,999.30, 24 December
1980: Burroughs claims a tax refund/credit of Php 172,058.90. Claiming that the 15% profit remittance tax
should have been computed on the basis of the amount actually remitted (P6,499,999.30) and not on the
amount before profit remittance tax (P7,647,058.00), private respondent filed on December 24, 1980, a
written claim for the refund or tax credit of the amount of P172,058.90 representing alleged overpaid branch
profit remittance tax.

Private respondent filed with respondent court, a petition for review, docketed as C.T.A. Case No. 3204 for the
recovery of the above-mentioned amount of P172,058.81. CTA granted the tax credit. However CIR stated
Burroughs is no longer entitled to refund because MemorandumCircular No. 8-82 dated 17 March 1982 had
revoked and/or repealed the BIR ruling of 21 Jan 1980.

Issue: WON Memorandum Circular No. 8-82 (MC 8-82) dated 17 March 1982 can be given retroactive effect?

Ruling: NO. Petitioner's aforesaid contention is without merit. What is applicable in the case at bar is still the
Revenue Ruling of January 21, 1980 because private respondent Burroughs Limited paid the branch profit
remittance tax in question on March 14, 1979. Memorandum Circular No. 8-82 dated March 17, 1982 cannot
be given retroactive effect in the light of Section 327 of the National Internal Revenue Code which provides
Sec. 327. Non-retroactivity of rulings. Any revocation, modification, or reversal of any of the rules and
regulations promulgated in accordance with the preceding section or any of the rulings or circulars
promulgated by the Commissioner shall not be given retroactive application if the revocation, modification,
or reversal will be prejudicial to the taxpayer except in the following cases (a) where the taxpayer
deliberately misstates or omits material facts from his return or in any document required of him by the
Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are
materially different from the facts on which the ruling is based, or (c) where the taxpayer acted in bad faith.
(ABS-CBN Broadcasting Corp. v. CTA, 108 SCRA 151-152)

The prejudice that would result to private respondent Burroughs Limited by a retroactive application of
Memorandum Circular No. 8-82 is beyond question for it would be deprived of the substantial amount of
P172,058.90. And, insofar as the enumerated exceptions are concerned, admittedly, Burroughs Limited does
not fall under any of them.

65. Walter E. Olsen vs. Vicente Aldanese, as Insular Collector of Customs of the Philippine Islands, and W.
Trinidad, as Collector of Internal Revenue

43 Phil 64 / GR No. L-18740, 28 April 28, 1922, J. Johns

FACTS: The Philippine Legislature passed on February 4, 1916, Act No. 2613 entitled "an act to improve the
methods of production and the quality of tobacco in the Philippine and to develop the export trade therein."
They empower the Collector of Internal Revenue to establish certain general and local rules respecting the
classification, marking, and parking of tobacco for domestic sale or for exportation to the United States. Under
the provisions of Act No. 2613, the Collector of Internal Revenue of the Philippine Islands promulgated
Administrative Order No. 35, known as "Tobacco Inspections Regulations."

The petitioner applied to the Collector of Internal Revenue for a certificate of origin covering a consignment of
10,000 machine-made cigars to San Francisco, and represented that the cigars were made from short-filler
tobacco which was not the product of Cagayan, Isabela, and Nueva Vizcaya. The Collector of Internal Revenue
did not deem it necessary to make an actual examination and inspection of said cigars, and stated to the
petitioner that he did not see his way clear to the granting of petitioner's request, in view of the fact that the
cigars which the petitioner was seeking to export were not made with long-filler nor were they made from
tobacco exclusively the product of any of the three provinces, as provided in Administrative Order No. 35,
known as "Tobacco Inspection Regulations," and the said cigars were neither inspected nor examined by the
said officer.

Respondents allege that under section 11 of Act No. 2613 and section 5 of the Administrative Code of 1917,
the Collector of Internal Revenue has discretionary power to decide whether the manufactured tobacco that
the petitioner seeks to export to the United States fulfills the requisites prescribed by Administrative Order
No. 35. That it is not within the jurisdiction of this court to order the Collector of Internal Revenue to issue a
certificate to the petitioner to the effect that the manufactured tobacco that the petitioner seeks to export is
a product of the Philippine Islands, but it is for the Collector of Internal Revenue to exercise the power of
issuing said certificate if after an inspection of said tobacco, he should find that "it conforms to the conditions
required by Administrative order No. 35 with the exclusion of those conditions which, according to the said
decision of the Supreme Courts, the Collector of Internal Revenue is not authorized to require under Act No.
2613."
ISSUES: 1.Whether the decision of the Collector of Internal Revenue is wrong

RULING: YES. It appears from the whole purport and tenor of the answer that, in their refusal, the defendants
were acting under, and relying upon, those portions of Administrative Order No. 35, known as "Tobacco
Inspection Regulations," which this court has held in a former opinion to be null and void.

By the express terms and provisions of such rules and regulations promulgated by the Collector of Internal
Revenue, it was his duty to refuse petitioner's request, and decline the certificate or origin, because the cigars
tendered were not of the specified kind, and we have a right to assume that he performed his official duty as
the understood it. After such refusal and upon such grounds, it would indeed, have been a vain and useless
thing for the Collector of Internal Revenue to his examined or inspected the cigars.

Having refused to issue the certificate of origin for the reason above assigned, it is very apparent that a
request thereafter made examine or inspect the cigars would also have been refused.

66. Public School District Supervisors Association v. Hon. Edilberto de Jesus G.R. 157286 (2006) Regulations
FACTS: RA 9155, otherwise known as the “Governance of Basic Education Act of 2001” became a law on
August 11, 2001 in accordance with Sec. 27 (1), Art. VI of the Constitution. Under the law the office of the
schools district supervisor shall have no administrative, management, control or supervisory functions over
the schools and learning centers within their respective districts but shall be limited to (1) providing
professional and instructional advice and support to the school heads and teachers/facilitators of schools and
learning centers in the district or cluster; (2) curricula supervision; and (3) performing such other functions as
may be assigned by proper authorities.
Before DepEd could issue the appropriate implementing rules and regulations, petitioner PSDSA sought the
legal assistance of the Integrated Bar of the Philippines National Committee on Legal Aid to make
representations for the resolution of the following administrative issues: (1) restoration of the functions,
duties, responsibilities, benefits, prerogatives and position level of Public School District Supervisor; and (2)
upgrading of Salary Grade Level of Public School District Supervisors from Salary Grade Level 19 to Salary
Grade Level 24.
DepEd Sec. Edilberto C. De Jesus issued DECS Office Order No. 1 which constitutes the IRR of R.A. 9155. PSDSA
filed a petition for prohibition and mandamus alleging that the act of the DepEd in removing petitioner’s
administrative supervision over elementary schools and its principals within his/her district and converting
his/her administrative function to that of performing staff for the division is a gross violation of R.A. 9155.
Petitioners also allege that the IRR of R.A. 9155 expanded and included provisions which are diametrically
opposed to the letter and spirit of the subject law. They argue that the said law should be read in harmony
with the existing educational laws.
ISSUE: W/N DECS Office Order No. 1 issued by DepEd expanded R.A. 9155.
HELD: No. It must be stressed that the power of administrative officials to promulgate rules in the
implementation of a statute is necessarily limited to what is provided for in the legislative enactment. The
implementing rules and regulations of a law cannot extend the law or expand its coverage, as the power to
amend or repeal a statute is vested in the legislature. It bears stressing, however, that administrative bodies
are allowed under their power of subordinate legislation to implement the broad policies laid down in a
statute by “filling in” the details. All that is required is that the regulation be germane to the objectives and
purposes of the law; that the regulation does not contradict but conforms with the standards prescribed by
law. Moreover, as a matter of policy, this Court accords great respect to the decisions and/or actions of
administrative authorities not only because of the doctrine of separation of powers but also for their
presumed knowledgeability and expertise in the enforcement of laws and regulations entrusted to their
jurisdiction.
67. Commissioner of Customs vs. Hypermix Feeds

Facts: Petitioner Commissioner of Customs issued CMO 27-2003, which for tariff purposes, wheat was
classified according to: (1) importer or consignee; (2) country of origin (3) port of discharge. The regulation
provided an exclusive list of corporations, ports of discharge, commodity descriptions, and countries of origin.
Depending on these factors, wheat would be classified as either as food grade or feed grade. The
corresponding tariff for food grade wheat was 3%, for feed grade 7%

Issue: Whether CMO 27-2003 met the requirements of equal protection clause?

Ruling: No. CMO 27-2003 is unconstitutional for being violative of the equal protection clause.

Rules and regulations, which are the product of a delegated power to create new and additional legal
provisions that have the effect of law, should be within the scope of the stature authority granted by the
legislature to the administrative agency. It is required that the regulation be germane to the objects and
purposes of the law, and that it be not in contravention to, but in conformity with, the standards prescribed by
law.

In this case, the Commissioner of Customs went beyond his powers when the regulation (CMO 23-2007)
limited the customs officer’s duties mandated by Section 1403 of the tariff and customs law, as amended.
The provision mandates the customs officer must first assess and determine the classification of the
imported article before tariff may be imposed. Unfortunately, CMO 23-2007 has already classified the
article, even before the customs officer had the chance to examine it.

68. NEGROS CONSOLIDATED FARMERS ASSOCIATION MULTI PURPOSE COOP VS. CIR (2012)
FACTS:
Petitioner is a multi-purpose agricultural cooperative duly organized and existing under Philippine laws.
Petitioner was issued a Certificate of Good Standing by the Cooperative Development Authority. It was
granted a tax exemption under Article 61 of R.A 6938 and from VAT pursuant to Section 109 of RA 8424.
Petitioner seeks a tax refund in the amount of 7M, allegedly representing advance value added tax
(VAT) on 71,480 LKG bags of refined sugar, erroneously or illegally collected during the period covering May
12, 2009 to July 22, 2009.
ISSUE: Whether or not petitioner is exempted from the payment of VAT.
RULING: YES
Section 109 (L) of RA 9337 as well as in the documentary evidence presented that petitioners’ sale of
sugar produce made by petitioner to its members as well as non-members is exempt from the payment of
VAT. In declaring that in order to be exempt from VAT, a cooperative must be the agricultural producer of its
sugar produce, the Commissioner has not engaged in mere interpretation, but has gone into unauthorized
modification or amendment of the law. Only Congress can do this. Sections 3 and 4 of Revenue Regulations
No. 13 -2018 insofar as it imposes this requirement is, therefore, ultra vires and invalid.
*CASE 69 MISSING*
70. Tañada vs. Tuvera

FACTS: In procuring the enforcement of public duty, a petition was sought by Tañada, Sarmiento, and
Movement of Attorneys for Brotherhood Integrity and Nationalism, Inc. (MABINI) seeking a writ of mandamus
to compel respondent public officials to publish, and or cause the publication in the Official Gazette of various
presidential decrees, letters of instructions, general orders, proclamations, executive orders, letter of
implementation and administrative orders. There is a need for Publication of Laws to strengthen its binding
force and effect: giving access to legislative records, giving awareness to the public of the law promulgated.
The Official Gazette, however, does not contain publications of administrative and executive orders that affect
only a particular class of persons. The Official Gazette, as mandated by law, presents all presidential issuances
“of a public nature” or “of general applicability.” Also, Article 2 of the Civil Code expressly recognized that the
rule as to laws takes effect after 15 days unless it is otherwise (for some do specify the date of effectivity)
following the completion of the publication in the Official Gazette. However, the decree has been misread by
many; for it has no juridical force, but a mere legislative enactment of RA 386.

ISSUE: Whether or not all laws shall be published in the official gazette

RULING: YES. It must be published in the Official Gazette or in a newspaper of general circulation, as
provided in EO 200. However, Interpretative regulations and those merely internal in nature, that is,
regulating only the personnel of the administrative agency and not the public, need not be published.
Neither is publication required of the so-called letters of instructions issued by administrative superiors
concerning the rules or guidelines to be followed by their subordinates in the performance of their duties.
These may be posted in conspicuous places in the agency itself. Such posting already requires the
publication requirement.

Publication must be in full, or it is no publication at all.

71. People vs Maceren

On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and Carlito del
Rosario were charged by a Constabulary investigator in the municipal court of Sta. Cruz, Laguna with having
violated Fisheries Administrative Order No. 84-1.

It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted to electro
fishing in the waters of Barrio San Pablo Norte, Sta. Cruz. The lower court held that electro fishing cannot be
penalized because electric current is not an obnoxious or poisonous substance as contemplated in Section 11
of the Fisheries Law and that it is not a substance at all but a form of energy conducted or transmitted by
substances. The lower court further held that, since the law does not clearly prohibit electro fishing, the
executive and judicial departments cannot consider it unlawful. It is noteworthy that the Fisheries Law does
not expressly punish electro fishing. Notwithstanding the silence of the law, the Secretary of Agriculture and
Natural Resources, upon the recommendation of the Commissioner of Fisheries, promulgated Fisheries
Administrative Order No. 84, prohibiting electro fishing in all Philippine waters. On June 28, 1967 the Secretary
of Agriculture and Natural Resources, upon the recommendation of the Fisheries Commission, issued Fisheries
Administrative Order No. 84-1, amending section 2 of Administrative Order No. 84, by restricting the ban
against electro fishing to fresh water fisheries.

Issue: W/N regulations can impose penal sanctions

Ruling: Yes.

Where the regulations impose penal sanctions, the law itself must declare as punishable the violation of the
administrative rule or regulation, and the law should fix or define the penalty for the violation of the rule of
regulation

72. Commissioner of lnternal Revenue vs. Court of Appeals

FACTS: ‘Champion,’ ‘Hope,’ and ‘More’ were classified as foreign brands since they were listed in the World
Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of
‘Hope’ to ‘Hope Luxury’ and ‘More’ to ‘Premium More,’ thereby removing the said brands from the foreign
brand category and registered as a local brand.” Ad Valorem taxes were imposed on these brands.

RMC 37-93, Reclassification of Cigarettes Subject to Excise Tax, was issued by the BIR which aims to collect
deficiencies on ad valorem taxes against Fortune Tobacco following their reclassification as foreign branded
cigarettes.

“HOPE,” “MORE” and “CHAMPION” being manufactured by Fortune Tobacco Corporation were considered
locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes under
RA 7654.

Fortune Tobacco filed a petition for review with the CTA. RMC 37-93 is found to be defective, invalid and
unenforceable. The CA sustained the decision of the CTA. Hence, this appeal.

ISSUE: RMC 37–93 can be viewed simply as a corrective measure or merely as construing Section 142(c)(1) of
the NIRC.

RULING: NO. A reading of RMC 37–93, particularly considering the circumstances under which it has been
issued, convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process
the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as
amended, but has, in fact and most importantly, been made in order to place “Hope Luxury,” “Premium More”
and “Champion” within the classification of locally manufactured cigarettes bearing foreign brands and to
thereby have them covered by RA 7654. Specifically, the new law would have its amendatory provisions
applied to locally manufactured cigarettes which at the time of its effectivity were not so classified as bearing
foreign brands. Prior to the issuance of the questioned circular, “Hope Luxury,” “Premium More,” and
“Champion” cigarettes were in the category of locally manufactured cigarettes not bearing foreign brand
subject to 45% ad valorem tax. Hence, without RMC 37–93, the enactment of RA 7654, would have had no
new tax rate consequence on private respondent’s products.

73. Gonzales vs Land Bank

Facts:

A deed of assignment was executed by Ramos Plantation Company, Inc. (referred as the corporation)
through its President, Zulueta, assigning its rights under Land Transfer Claim unto petitioner Gonzales
(plaintiff). The latter filed an action before the RTC entitled "Ramon A. Gonzales, plaintiff vs. Land Bank of the
Philippines and Ramos Plantation Company, Inc., defendants" to compel public respondent Land Bank of the
Philippines to issue Land Bank Bonds in the name of petitioner instead of in the name of the aforesaid
corporation as the original and registered owner of the property.

Defendant corporation was declared in default for failure to file its answer within the reglementary
period while defendant Land Bank filed an answer alleging that the complaint states no cause of action since
there is no privity of contract between plaintiff and itself and that it deals only with the landowner whose land
was subjected to operation land transfer of the government.

Issue: W/N Land Bank may be compelled to honor the subject deed of assignment

Ruling: No.

Petitioner stepped into the shoes of his assignor, the defendant corporation. But petitioner overlooked
the fact that when the corporation assigned its rights to him under Land Transfer Claim, the same was subject
to the rules and restrictions imposed by respondent Land Bank on the matter of assignment of rights.

Thus, when Ramos Plantation Company, Inc. assigned its lights, title and interest in Land Transfer
Claim in favor of petitioner Ramon A. Gonzales, the latter acquired the same subject to the restrictions on
assignment of rights embodied in Resolution No. 75-68 assed by the Board of respondent Land Bank of the
Philippines, the pertinent provision of which reads:

In Assignment of Rights entered into by landowners vesting upon the Assignee the right to receive full
or partial payment from the Land Bank pursuant to land transfer, the same, if found valid in form and
substance, shall be recognized by the Land Bank. Whenever practicable, Land Bank bonds issued therefor must
be made payable to the Assignor-Landowner who shall be required to make the necessary indorsement of said
bonds to the Assignee. In case the cash portion is the one assigned, the check in payment thereof shall be
issued to the original landowner who shall be required to make the indorsement to the Assignee. Thus, for
record purposes, it will appear that payment was directly to the landowner concerned and who, by reason of
the Assignment, has caused the necessary indorsement of the bonds and/or check, as the case may be, to the
Assignee.

The rules and regulations construing or interpreting the provisions of a statute to be enforced are
binding on all concerned until they are changed. They have the effect of law and are entitled to a great
respect.

74. Manila Jockey Club vs CA

Facts:
Petitioners Manila Jockey Club, Inc. and Philippine Racing Club, Inc. were granted franchises to operate
and maintain race tracks for horse racing in the City of Manila and Province of Rizal by virtue of RA Nos. 6631
and 6632 and were allowed to hold races, with bets.

Subsequently, Philippine Racing Commission (PHILRACOM) was created by virtue of PD 420, giving it
exclusive jurisdiction and control over every aspect of the conduct of horse racing, including the framing and
scheduling of races. By virtue of this power, the PHILRACOM authorized the holding of races on Wednesdays.

Petitioners made a joint query regarding the ownership of breakages accumulated during Wednesday
races. In response, PHILRACOM declared that the breakages belonged to the racing clubs concerned.

President Corazon Aquino amended certain provisions Sec. 4 of R.A. 8631 and Sec. 6 of R.A. 6632
through Executive Orders No. 88 and 89.
PHILRACOM itself addressed a query to the Office of the President asking which agency is entitled to
dispose of the proceeds of the "breakages" derived from the Tuesday and Wednesday races. The Office of the
President replied that "the disposition of the breakages rightfully belongs to PHILRACOM, not only those
derived from the Saturday, Sunday and holiday races, but also from the Tuesday and Wednesday races in
accordance with the distribution scheme prescribed in said Executive Orders".
PHILRACOM sent a letter of demand to petitioners MJCI and PRCI asking them to remit PHILRACOM's share in
the "breakages" derived from midweek races.

Issue:
Whether or not petitioners are the rightful beneficiaries of the breakages derived from mid-week races.
Held:
NO.

Petitioners should therefore remit the proceeds of breakages to those benefactors designated by the
aforesaid laws.

While herein petitioners might have relied on a prior opinion issued by an administrative body, the
well-entrenched principle is that the State could not be estopped by a mistake committed by its officials or
agents. Well-settled also is the rule that the erroneous application of the law by public officers does not
prevent a subsequent correct application of the law. Although there was an initial interpretation of the law
by PHILRACOM, a court of law could not be precluded from setting that interpretation aside if later on it is
shown to be inappropriate.

75. Corona vs. United Harbor Pilots Assoc. of the Phil. (Necessity of a Hearing)

Facts: PPA-AO No. 04-92 provides that all appointments to harbor pilot positions in all pilotage districts shall,
henceforth, be only for a term of one year from date of effectivity subject to yearly renewal or cancellation by the
Authority after conduct of a rigid evaluation of performance.

PPA General Manager Rogelio Dayan issued PPA-AO No. 04-92 whose avowed policy was to instill effective discipline
and thereby afford better protection to the port users through the improvement of pilotage services.

On Aug 12, 1992, respondent, through Capt. Alberto C. Compas, questioned PPA-AO No. 04-92 before the Dept of
Transportation and Communication.

On December 23, 1992, the Office of the President (OP) issued an order directing the PPA to hold abeyance the
implementation of the said administrative order. PPA countered that the said order was issued in the exercise of its
administrative control and supervision over harbor pilots under Section 6, Article I of P.D. 857.

On March 17, 1993, the OP, through Assistant Executive Secretary Renato Corona, dismissed the appeal and lifted the
restraining order issued. He concluded that the said order applied to all harbor pilots and, for all intents and purposes,
was not an act of Dayan, but of the PPA, which was merely implementing P.D. 857, mandating it to control, regulate and
supervise pilotage and conduct of pilots in any port district.

Respondents filed a petition for certiorari, prohibition and injunction with prayer for the issuance of a temporary
restraining order and damages before the Regional Trial Court.

Issue: W/N Administrative Order No.04-92 is constitutional

Ruling: NO.
The Court is convinced that PPA No. 04-92 was issued in stark disregard of respondents’ right against deprivation of
property without due process law. The Supreme Court said that in order to fall within the aegis of the provision, two
conditions must concur, namely, that there is a deprivation and that such deprivation is done without proper
observance of due process.

Neither does that the pilots themselves were not consulted in any way taint the validity of the administrative order. As
general rule, notice and hearing, as the fundamental requirement of procedural due process, are essential only when
administrative body exercises its quasi-judicial function. In the performance of its executive or legislative functions, such
as issuing rules and regulations, an Administrative body needs to comply with the requirement of notice and hearing.

There is no dispute that pilotage as a profession has taken on the nature of a property right. It is readily apparent that
the said administrative order unduly restricts the right of harbour pilots to enjoy their profession before their right of
harbor pilots to enjoy their respective profession before their compulsory retirement.
76. REVIEW CENTER ASSOCIATION OF THE PHILIPPINES vs EXECUTIVE SECRETARY EDUARDO ERMITA G.R.
No. 180046 April 2, 2009
FACTS:
The Professional Regulation Commission conducted the Nursing Board Examinations on June 11, and
12 2006. After the results were released, it was confirmed by the PRC that there was a leakage from two
board members. Hence, the oath-taking by the successful examinees were cancelled. President Arroyo
replaced all the members of the PRC’s Board of Nursing, and also ordered the examinees to retake the board
exam. President Arroyo issued EO 566 which authorized the CHED to supervise the establishment and
operation of all review centers and similar entities in the Philippines. The CHED through its then Chairman
Carlito S. Puno approved its IRR. The Review Center Association of the Philippines (petitioner), an organization
of independent review centers, asked the CHED to "amend, if not withdraw" the IRR arguing, among other
things, that giving permits to operate a review center to Higher Education Institutions (HEIs) or consortia of
HEIs and professional organizations will effectively abolish independent review centers. Chairman Puno wrote
petitioner, through its President Jose Antonio Fudolig (Fudolig), that to suspend the implementation of the IRR
would be inconsistent with the mandate of EO 566. Chairman Puno wrote that the IRR was presented to the
stakeholders during a consultation process prior to its finalization and publication on 13 November 2006.
Chairman Puno also wrote that petitioner’s comments and suggestions would be considered in the event of
revisions to the IRR.

ISSUE: WON EO 566 is an unconstitutional exercise by the Executive of legislative power as it expands the
CHED’s jurisdiction?

HELD:
Yes. There was undue exercise of legislative power by President Arroyo. The OSG argues that President
Arroyo was exercising her residual powers under Executive Order No. 292. However, Section 20, Title I of Book
III of EO 292 speaks of other powers vested in the President under the law. The exercise of the President’s
residual powers under this provision requires legislation, as the provision clearly states that the exercise of the
President’s other powers and functions has to be "provided for under the law." There is no law granting the
President the power to amend the functions of the CHED. The President may not amend RA 7722 through an
Executive Order without a prior legislation granting her such power. The President has no inherent or
delegated legislative power to amend the functions of the CHED under RA 7722. Legislative power is the
authority to make laws and to alter or repeal them and this power is vested with the Congress under Section
1, Article VI of the 1987 Constitution. While Congress is vested with the power to enact laws, the President
executes the laws. The executive power is vested in the President. It is generally defined as the power to
enforce and administer laws. It is the power of carrying the laws into practical operation and enforcing their
due observance. Just like AO 308 in Ople v. Torres, EO 566 in this case is not supported by any enabling law.
The Court further stated in Ople: “Many regulations however, bear directly on the public. It is here that
administrative legislation must be restricted in its scope and application. Regulations are not supposed to be a
substitute for the general policy-making that Congress enacts in the form of a public law. Although
administrative regulations are entitled to respect, the authority to prescribe rules and regulations is not an
independent source of power to make laws." Since EO 566 is an invalid exercise of legislative power, the RIRR
is also an invalid exercise of the CHED’s quasi-legislative power.
77. LA SUERTE CIGAR & CIGARETTE FACTORY vs COMMISSIONER
G. R. L-36131; January 17, 1985

FACTS: This is a petition for certiorari on the decision of the Court of Tax Appeals on the denial claim for
refund on inspection fees on cigars and cigarettes manufactured for domestic sale and/or consumption.

The Commissioner of the Internal Revenue issued MC 30-67 requiring the inspection of all locally produced leaf
tobacco and partially manufactured tobacco intended for domestic sale, for factory use or for export. Pursuant to
the MC 30-67, BIR collected from the petitioners, over the latter’s vehement objection inpection fees. The basis of
the issuance of MC 30-67 was so stated in the MC of which it was based on General Cicular V-27. The Petitioners
assailed the validity and efficacy of Revenue MC 30-67 since the BIR failed to publish the said MC in the official
gazette as required by the Civil Code and the Revised Administrative Code.

ISSUE: Whether or not the publication of Revenue Memorandum Circular 30-67 in the official gazette is necessary
in order for MC to be valid and enforceable.

RULING: NO. When an administrative agency renders an opinion by means of a circular or Memorandum, it
merely interprets a preexisting law, and no publication is necessary for its validity. 4 Construction by an executive
branch of government of a particular law although not binding upon courts must be given weight as the
construction come from the branch of the government called upon to implement the law.

The promulgation of Revenue Memorandum Circular No. 30-67 being in accordance with the Revised
Administrative Code, having been issued by the Commissioner of Internal Revenue with the approval of the
Secretary (now Minister) of Finance for the implementation of the Tobacco Inspection Law, has therefore the force
and effect of law.

78.Tanada vs. Tuvera

Facts:

Invoking the people's right to be informed on matters of public concern, a right recognized in Section 6, Article
IV of the 1973 Philippine Constitution, 1 as well as the principle that laws to be valid and enforceable must be
published in the Official Gazette or otherwise effectively promulgated, petitioners seek a writ of mandamus to
compel respondent public officials to publish, and or cause the publication in the Official Gazette of various
presidential decrees, letters of instructions, general orders, proclamations, executive orders, letter of
implementation and administrative orders.

Respondents further contend that publication in the Official Gazette is not a sine qua non requirement for the
effectivity of laws where the laws themselves provide for their own effectivity dates. It is thus submitted that
since the presidential issuances in question contain special provisions as to the date they are to take effect,
publication in the Official Gazette is not indispensable for their effectivity

Issue: Whether or not publication is necessary to make the laws effective for implementation

Ruling:

Yes.

The publication of all presidential issuances "of a public nature" or "of general applicability" is mandated by
law. Obviously, presidential decrees that provide for fines, forfeitures or penalties for their violation or
otherwise impose a burden on the people, such as tax and revenue measures, fall within this category. Other
presidential issuances which apply only to particular persons or class of persons such as administrative and
executive orders need not be published on the assumption that they have been circularized to all concerned. 6

It is needless to add that the publication of presidential issuances "of a public nature" or "of general
applicability" is a requirement of due process. It is a rule of law that before a person may be bound by law, he
must first be officially and specifically informed of its contents

79 Guagua Electric Light Co., Inc. vs. Collector of Internal Revenue No. L-23611. April 24, 1967.
Facts: Petitioner filed for a tax refund in the Commission of Internal Revenue as it paid the 5% rate as imposed
in the Tax Code, instead of paying a lower rate as provided in its franchise. The CIR denied such prayer
claiming that it had already refunded P16,593.87, and that the period to claim refunds has already prescribed.
Consequently, respondent sought to recover the amount refunded due to re-assessment of their tax due.
Petitioner now claims that the government is precluded f rom recovering the sum of P16,593.87 representing
the amount refunded to it on grounds of prescription.
Issue: Whether or not the Civil Code shall prevail
Held: No. Where the Commissioner of Internal Revenue seeks to recover from the taxpayer an amount which
was erroneously ref unded to the latter as excess f ranchise tax, said amount is in effect an assessment for
deficiency franchise tax. And being so, the right to assess or collect it is governed by Section 331 of the Tax
Code rather than by Article 1145 of the New Civil Code. A special law (Tax Code) prevails over a general law
(New Civil Code).
80. Pascual v Secretary of Public works 110 Phil 331
Facts: Wenceslao Pascual as Provincial Governor of Rizal, instituted an action for declaratory relief,
with injunction, praying for the nullification of an item in Republic Act No. 920 (An Act Appropriating Funds for
Public Works), approved on June 20, 1953. An item containing P85,000.00 "for the construction,
reconstruction, repair, extension and improvement" of Pasig feeder road terminals which were, at the time of
its passage, were nothing but projected and planned subdivision roads, not yet constructed, within the
Antonio Subdivision situated at Pasig, Rizal." Moreover, the projected feeder roads "do not connect any
government property or any important premises to the main highway."

The said subdivision and the lands on which the feeder roads were to be constructed were properties
of Jose C. Zulueta, then a senator. On December 1953, Zulueta executed an alleged Deed of Donation of the
said lands in favour of the Republic of the Philippines. It was accepted by the Executive Secretary subject to an
onerous condition: “to be used for street purposes only.”

The appropriation is being questioned because the properties where the feeder roads would be
constructed are private property. As such, it is Mr. Zulueta, and not the public who will be benefited by the
85,000php appropriation.

Issues:

1. May a law be nullified at the instance of the taxpayer?

2. When may a taxpayer’s suit be allowed? (From book)

Ruling:

1. Yes. Again, it is well-stated that the validity of a statute may be contested only by one who will sustain
a direct injury in consequence of its enforcement. Yet, there are many decisions nullifying, at the
instance of taxpayers, laws providing for the disbursement of public funds, upon the theory that "the
expenditure of public funds by an officer of the State for the purpose of administering an
unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the request
of a taxpayer. Petitioner herein is not merely a taxpayer. The Province of Rizal, which he represents
officially as its Provincial Governor, is our most populated political subdivision, and, the taxpayers
therein bear a substantial portion of the burden of taxation, in the Philippines. Hence, it is our
considered opinion that the circumstances surrounding this case sufficiently justify petitioner’s action
in contesting the appropriation and donation in question.
 2. A taxpayer’s suit may only be allowed when an act complained of, which may include a legislative
enactment, directly involves the illegal disbursement of public funds derived from taxation. (From
Book)

81. RP v. Mambulao Lumber Company, et al. (GR. L-17725, Feb. 28, 1962)

FACTS: Mambulao owed RP P4.8k for forest charges. And on July 31, 1948-Dec. 29, 1956, Mambulao paid RP
P8.2k for 'reforestation charges'; and for the period commencing from April 30, 1947-June 24, 1948, said
defendant paid RP P927.08. These reforestation charges were paid to RP pursuant to Sec. 1 of RA 115, which
provides that there shall be collected, in addition to the regular forest charges provided under Sec. 264 of the
National Internal Revenue Code, the amount of P0.50 on each cubic meter of timber... cut out and removed
from any public forest for commercial purposes. The amount collected shall be expended by the director of
forestry, with the approval of the secretary of agriculture and commerce, for reforestation and afforestation
of watersheds, denuded areas ... and other public forest lands, which upon investigation, are found needing
reforestation or afforestation .... The total amount of the reforestation charges paid by Mambulao is P9.1k.
Mambulao contended that since the sum of P9.1k, not having been used in the reforestation of the area
covered by its license, the same is refundable to it or may be applied in compensation of said sum of
P4,802.37 due from it as forest charges. In line with this thought, Mambulao wrote the director of forestry,
requesting "that our account with your bureau be credited with all the reforestation charges that you have
imposed on us from July 1, 1947 - June 14, 1956, amounting to around P2.9k". This letter was answered by the
director of forestry in which the director of forestry quoted an opinion of the secretary of justice, to the effect
that he has no discretion to extend the time for paying the reforestation charges and also explained why not
all denuded areas are being reforested.

ISSUE: WON the sum of P9.1k paid by Mambulao as forest charges may be applied to the sum of P4.8k
Mambulao owed RP.

HELD: No. Taxes cannot be the subject of set-off or compensation for the following reasons: 1.) taxes are of
distinct kind, essence and nature, and these impositions cannot be classed in merely the same category as
ordinary obligations; 2.) the applicable laws and principles governing each are peculiar, not necessarily
common, to each; and 3.) public policy is better subserved, if the integrity and independence of taxes are
maintained. [ Book]

If the taxpayer can properly refuse to pay his tax when called upon by the Collector, because he has a claim
against the governmental body which is not included in the tax levy, it is plain that some legitimate and
necessary expenditure must be curtailed. If the taxpayer's claim is disputed, the collection of the tax must
await and abide the result of a lawsuit, and meanwhile the financial affairs of the government will be thrown
into great confusion. [Case]

82. Domingo v Garlitos

Facts: In the 1960 case of Domingo v Moscoso, the Supreme Court declared as final and executory the order
for the payment by the estate of the late Walter Scott Price of estate and inheritance taxes, charges and
penalties, amounting to P40,058.55 issued by the CFI Instance – Leyte. The fiscal then presented a petition for
the execution of the judgment before the CFI Instance – Leyte.

The petition was denied as the execution is not justifiable as the government is indebted to the estate under
administration in the amount of P 262,200. Hence, the present petition for certiorari and mandamus.

Issue: Whether or not tax and debt may be compensated

Ruling: Yes. if the obligation to pay taxes and taxpayer's claim against the government are both overdue,
demandable, as well as fully liquidated, compensation takes place by operation of law and both obligations
are extinguished to their concurrent amounts.

83. Francia v IAC

Facts:

Engcio Francia is the registered owner of a residential lot and a two-story house built upon it situated
at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. The lot, with an area of about 328
square meters. On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by
the Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to the
assessed value of the aforesaid portion.

Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977,
his property was sold at public auction by the City Treasurer of Pasay City to satisfy a tax delinquency of
P2,400.00. On March 20, 1979, Francia filed a complaint to annul the auction sale. Lower court did not favor
Francia which decision was affirmed as well by Intermediate appellate Court (IAC). Hence this present petition
for review stating that IAC committed grave error of law in not holding petitioner’s obligation to pay 2,400 for
supposed tax delinquency was set off by the amount of P 4,116 which the government indebted to the former.

Issue:

Whether or not the assessment for a local tax be the subject of set-off or compensation against a final
judgement for a sum of money obtained by the taxpayer against the local Govt which made the assessment
Ruling:

No. Taxes and debts are of different nature and character; hence, no set-off or compensation between
the 2 different classes of obligation is allowed. The taxes assessed are the obligations of the taxpayer arising
from law, while the money judgement against the Govt is an obligation arising from contract, whether
expressed or implied. Inasmuch as taxes are not debts, it follows that the 2 obligations are not susceptible to
set-off or legal compensation

84. HONGKONG AND SHANGHAI BANKING CORP. v. COMMISSIONER

Facts:

Petitioner HSBC is the owner of 2,000 railroad ties it had acquired from the firm of Pujalte & Co. which the
latter assigned to it after it was unable to pay a large sum of money it then owed to HSBC. The firm of Pujalte
& Co. is engaged in the business of timber, and it was shown that prior to the assignment of the railroad ties
to HSBC it owed to the BIR forest charges, one of the taxes enumerated in the NIRC, amounting toP8328.93. It
executed a bond of P2000 to secure the payment of the forest charges and was allowed to remove the timber
from the public forests. More than a year later, when some of the timber were already made into railroad ties
and transferred to third parties like HSBC, the Collector instituted collection proceedings agains Pujalte. To
enforce collection, the CIR wenta fter thee property of Pujalte & Co. including that which were already in the
possession of HSBC, who at the time it acquired the property had no notice of the lien nor of the delinquent
tax due from Pujalte.

Issue:

WON the lien follow the property subject to the tax even though transferred to a third party who had no
notice of the existence of the lien so as to make this property respond for the specific unpaid internal revenue
taxes due on it.

Ruling:

NO.

Taxation is an attribute of sovereignty. The power to tax is the strongest of all the powers of government. If
approximate equality in taxation is to be attained, all property subject to a tax must respond, or there is
resultant inequality.

Under the law of taxation however, the tax lien does not establish itself upon property which has been
transferred to an innocent purchaser prior to demand. A demand is necessary to create and bring the lien into
operation. Furthermore, in order that the lien may follow the property into the hands of a third party, it is
essential that the latter should have notice, either actual or constructive. The reason behind this is the
benevolence of our Constitution which prohibits the taking of property without due process of law. The policy
of the law is against upholding secret liens and charges against property of innocent purchasers or
encumbrances for value. At the time HSBC acquired the property there was nothing to show that Pujalte & Co.
were deliquent taxpayers nor were there any public records that may be consulted to protect itfrom loss by
reason of the existence of a secret lien.

85. Roxas vs. CTA

FACTS:

In consonance with the constitutional mandate to acquire big landed estates and apportion them among
landless tenant farmers, the government succeeded in persuading Roxas y Compana to sell 13,500 hectares to
the government for distribution to actual occupants. However, as it turned out, the government did not have
sufficient funds to pay for the purchase price. Roxas Y Compania obligingly sold the lands directly to the
farmers with the purchase price payable in installments in the course of ten (10) years.

On 1958, CIR demanded from Roxas y Cia the payment of real estate dealer's tax for 1952 amtg to P150.00
plus P10.00 compromise penalty for late payment, and P150.00 tax for dealers of securities plus P10.00
compromise penalty for late payment.

Basis: house rentals received from Jose, pursuant to Art. 194 of the Tax Code stating that an owner of a real
estate who derives a yearly rental income therefrom in the amount of P3,000.00 or more is considered a real
estate dealer and is liable to pay the corresponding fixed tax

The Commissioner further assessed deficiency income taxes against the brothers for 1953 and 1955, resulting
from the inclusion as income of Roxas y Cia of the unreported 50% of the net profits derived from the sale of
the Nasugbu farm lands to the tenants, and the disallowance of deductions from gross income of various
business expenses and contributions claimed by Roxas y Cia and the Roxas brothers.

ISSUE: whether the direct sale of real property made by Roxas y compania to the tenant farmers shall be
subject to tax

RULING:

No. The SC held that although the buyers paid for their respective holdings in installment for a period of ten
(10 ) years, it would not make the seller, Roxas Y Compania, a real estate dealer in this isolated transaction
with its peculiar circumstance

The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no
limits, so that security against its abuse is to be found only in the responsibility of the legislature which
imposes the tax on the constituency who are to pay it. Nevertheless, effective limitations thereon may be
imposed by the people through their constitution.

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 does not conform with our sense of justice
in the instant case for the Government to persuade the taxpayer to lend it a helping hand and later on to
penalize him for duly answering the urgent call.

86. Loan Association vs. Topeka

Facts:

The Citizens' Savings and Loan Association of Cleveland brought their action in the court below, against the
City of Topeka, on coupons for interest attached to bonds of the City of Topeka.

The bonds on their face purported to be payable to the King Wrought-Iron Bridge Manufacturing and Iron-
Works Company, of Topeka, to aid and encourage that company in establishing and operating bridge shops in
said City of Topeka.

The city issued one hundred of these bonds for $1,000 each, as a donation (and so it was stated in the
declaration), to encourage that company in its design of establishing a manufactory of iron bridges in that city.

The declaration also alleged that the interest coupons first due were paid out of a fund raised by taxation for
that purpose, and that after this payment the plaintiff became the purchaser of the bonds and the coupons on
which suit was brought, for value.

Issue: Whether the statute were not of a public character; that this was a perversion of the right of taxation,
which could only be exercised for a public use, to the aid of individual interests and personal purposes of
profit and gain?

Ruling:

Yes. A statute which authorizes a town to issue its bonds in aid of the manufacturing enterprise of
individuals is void, because the taxes necessary to pay the bonds would, if collected, be a transfer of the
property of individuals to aid in the projects of gain and profit of others, and not for a public use, in the
proper sense of that term.

87. Lutz vs Araneta

FACTS: Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate
of Antonio Ledesma, sought to recover from the CIR the sum of P14,666.40 paid by the estate as taxes, under
section 3 of the Commonwealth Act of 567 or the Sugar Adjustment Act there by 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. The action having
been dismissed by the Court of First Instance, the plaintiffs appealed the case directly to this Court
ISSUE: Whether CA No. 567 was constitutional and a valid exercise of police power of the State.
RULING: Yes. CA No. 567 was constitutional and a valid exercise of police power of the State. Since 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.
Thus, the increase in the existing tax of the manufacture of sugar and the levying of tax on lands devoted to
the production of sugar is considered as a public purpose.

88. Bagatsing v. Ramirez

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.

The Private respondent bewails that the market stall fees imposed in the disputed ordinance are diverted to
the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by
the City of Manila to the said corporation in a "Management and Operating Contract."

Issue: WON the provisions on market stall fees imposed in the disputed ordinance is void for being diverted
for the exclusive use of private corporations.

Ruling: No, the fees collected do not go direct to the private coffers of the corporation. Ordinance No. 7522
was not made for the corporation but for the purpose of raising revenues for the city. That is the object it
serves. The entrusting of collection fees does not destroy the public purpose of the ordinance. So long as the
purpose is public, it does not matter whether the agency through which the money is dispensed is public or
private. The right to tax depends upon the ultimate use, purpose and object for which the fund is raised. It
does not depend on the nature and character of the person or corporation whose intermediate agency is to
be used in applying it. The people may be taxed for public purpose although it is under the direction of an
individual or private corporation.
89. TOLENTINO VS COMELEC (this case does not mention taxpayers’ suit specifically)

FACTS

The 1971 Constitutional Convention came into being by virtue of two resolutions of the Congress approved in
its capacity as a constituent assembly convened for the purpose of calling a convention to propose
amendments to the Constitution. After election of delegates, the Convention held its inaugural session. The
Convention approved Organic Resolution No. 1 which amended Section 1 Of Article V Of The Constitution so
as to lower The Voting Age To 18." On September 30, 1971, the COMELEC "resolved" to follow the mandate of
the Convention, that it will hold the said plebiscite together with the senatorial elections on November 8, 1971
.

Petitioner, Arturo Tolentino, filed a petition for prohibition, its main thrust being that Organic Resolution No. 1
and the necessary implementing resolutions subsequently approved have no force and effect as laws in so far
as they provide for the holding of a plebiscite co-incident with the senatorial elections, on the ground that the
calling and holding of such a plebiscite is, by the Constitution, a power lodged exclusively in Congress as a
legislative body and may not be exercised by the Convention, and that, under Article XV Section 1 of the 1935
Constitution, the proposed amendment in question cannot be presented to the people for ratification
separately from each and all other amendments to be drafted and proposed by the Constitution.

ISSUE: Whether or not a taxpayer has locus standing in the said case.

RULING: NO

BOOK: A taxpayer or group of taxpayers is proper to question the validity of a law appropriating public funds.

90. Sanidad vs. Comelec G.R. No. L-44640 October 12, 1976

FACTS: On September 2, 1976, President Ferdinand E. Marcos issued Presidential Decree No. 991 to call for a
national referendum on October 16, 1976 through the so-called Citizens Assemblies (“barangays”). Its primary
purpose is to resolve the issues of martial law (as to its existence and length of effectivity). The president
issued another proclamation (P.D. 1033) to specify the questions that are to be asked during the referendum
on October 16. The first question is whether or not the citizen wants martial law to continue, and the second
one asks for the approval on several proposed amendments to the existing Constitution.

Father and son, Pablo and Pablito Sanidad filed for prohibition with preliminary injunction to enjoin the
COMELEC from holding and conducting the Referendum Plebiscite on October 16, and to declare without
force and effect Presidential Decree Nos. 991 and 1033, insofar as they propose amendments to the
Constitution.
The Solicitor General contends that petitioners have no standing to sue, and that the issue raised is political in
nature – and thus it cannot be reviewed by the court. The Solicitor General also asserts that at this state of the
transition period, only the incumbent President has the authority to exercise constituent power; the
referendum-plebiscite is a step towards normalization.

Issue: Whether or not petitioners have legal standing to question proposed amendments to be declared by
the President Marcos.

Ruling: Yes. As a preliminary resolution, We rule that the petitioners in L-44640 (Pablo C. Sanidad and Pablito
V. Sanidad) possess locus standi to challenge the constitutional premise of Presidential Decree Nos. 991, 1031,
and 1033. It is now an ancient rule that the valid source of a stature Presidential Decrees are of such nature-
may be contested by one who will sustain a direct injuries as a in result of its enforcement. At the instance of
taxpayers, laws providing for the disbursement of public funds may be enjoined, upon the theory that the
expenditure of public funds by an officer of the State for the purpose of executing an unconstitutional act
constitutes a misapplication of such funds. 4 The breadth of Presidential Decree No. 991 carries all
appropriation of Five Million Pesos for the effective implementation of its purposes. 5 Presidential Decree No.
1031 appropriates the sum of Eight Million Pesos to carry out its provisions. 6 The interest of the aforenamed
petitioners as taxpayers in the lawful expenditure of these amounts of public money sufficiently clothes them
with that personality to litigate the validity of the Decrees appropriating said funds. Moreover, as regards
taxpayer's suits, this Court enjoys that open discretion to entertain the same or not. 7 For the present case,
We deem it sound to exercise that discretion affirmatively so that the authority upon which the disputed
Decrees are predicated may be inquired into.

91. Chavez v PEA and AMARI G.R. No. 133250. July 9, 2002.
FACTS: President Marcos through a presidential decree created PEA, which was tasked with the development,
improvement, and acquisition, lease, and sale of all kinds of lands. The then president also transferred to PEA the
foreshore and offshore lands of Manila Bay under the Manila-Cavite Coastal Road and Reclamation Project.

Thereafter, PEA was granted patent to the reclaimed areas of land and then, years later, PEA entered into a JVA
with AMARI for the development of the Freedom Islands. These two entered into a joint venture in the absence
of any public bidding.

Later, a privilege speech was given by Senator President Maceda denouncing the JVA as the grandmother of all
scams. An investigation was conducted and it was concluded that the lands that PEA was conveying to AMARI were
lands of the public domain; the certificates of title over the
Freedom Islands were void; and the JVA itself was illegal. This prompted Ramos to form an investigatory committee on
the legality of the JVA.
Petitioner now comes and contends that the government stands to lose billions by the conveyance or sale of
the reclaimed areas to AMARI. He also asked for the full disclosure of the renegotiations happening between the
parties.
Issue: Whether petitioner has locus standi;
Ruling: Yes. Ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or orders of
government agencies or instrumentalities, if the issues raised are of 'paramount public interest,' and if they
'immediately affect the social, economic and moral wellbeing of the people.'

We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional rights — to
information and to the equitable diffusion of natural resources — matters of transcendental public importance, the
petitioner has the requisite locus standi.
92. Tatad v. Garcia, 243 SCRA 436 (Taxpayer’s suit)
FACTS: In 1989, the government planned to build a railway transit line along EDSA. No bidding was made but
certain corporations were invited to prequalify. The only corporation to qualify was the EDSA LRT Consortium
which was obviously formed for this particular undertaking. An agreement was then made between the
government, through the Department of Transportation and Communication (DOTC), and EDSA LRT
Consortium. The agreement was based on the Build-Operate-Transfer scheme provided for by law (RA 6957,
amended by RA 7718). Under the agreement, EDSA LRT Consortium shall build the facilities, i.e., railways, and
shall supply the train cabs. Every phase that is completed shall be turned over to the DOTC and the latter shall
pay rent for the same for 25 years. By the end of 25 years, it was projected that the government shall have
fully paid EDSA LRT Consortium. Thereafter, EDSA LRT Consortium shall sell the facilities to the government for
$1.00.
However, Senators Francisco Tatad, John Osmeña, and Rodolfo Biazon opposed the implementation of said
agreement as they averred that EDSA LRT Consortium is a foreign corporation as it was organized under
Hongkong laws; that as such, it cannot own a public utility such as the EDSA railway transit because this falls
under the nationalized areas of activities. The petition was filed against Jesus Garcia, Jr. in his capacity as
DOTC Secretary.
ISSUE: W/N the petitioners had standing to bring the suit as citizens.
HELD: No, Petitioners have no standing to bring the suit as citizens. In the cases in which citizens were
authorized to sue, this Court found standing because it thought the constitutional claims pressed for decision
to be of “transcendental importance,” as in fact it subsequently granted relief to petitioners by invalidating
the challenged statutes or governmental actions. In the case at bar, the Court precisely finds the opposite by
finding petitioners’ substantive contentions to be without merit. To the extent therefore that a party’s
standing is affected by a determination of the substantive merit of the case or a preliminary estimate thereof,
petitioners in the case at bar must be held to be without standing. This is in line with our ruling in Lawyers
League for a Better Philippines v. Aquino and In re Bermudez where we dismissed citizens’ actions on the
ground that petitioners had no personality to sue and their petitions did not state a cause of action. The
holding that petitioners did not have standing followed from the finding that they did not have a cause of
action.
In order that citizens’ actions may be allowed a party must show that he personally has suffered some
actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly
traceable to the challenged action; and the injury is likely to be redressed by a favorable action.
93. INFORMATION TECHNOLOGY FOUNDATION V COMELEC

Facts: President Arroyo issued EO No. 172, which allocated P2.5 billion to fund the Automated Election
System. Upon the request of Comelec, she authorized the release of an additional P500 million. The
Commission issued an "Invitation to Apply for Eligibility and to Bid".5 individuals and entities (including the
herein Petitioners Information Technology Foundation of the Philippines, represented by its president, Alfredo
M. Torres; and Ma. Corazon Akol) wrote a letter to Comelec and protested the award of the Contract to
Respondent MPC "due to irregularities in the manner the bidding process had been conducted." Citing
noncompliance with eligibility and procedural requirements (many of which have been discussed at length in
the Petition), they sought a re-bidding.

Issue: Whether the petitioner has standing?

Ruling: YES. Petitioners — suing in their capacities as taxpayers, registered voters and concerned citizens —
respond that the issues central to this case are "of transcendental importance and of national interest."
Allegedly, Comelec's flawed bidding and questionable award of the Contract to an unqualified entity would
impact directly on the success or the failure of the electoral process. Thus, any taint on the sanctity of the
ballot as the expression of the will of the people would inevitably affect their faith in the democratic system of
government. Petitioners further argue that the award of any contract for automation involves disbursement of
public funds in gargantuan amounts; therefore, public interest requires that the laws governing the
transaction must be followed strictly.

Moreover, this Court has held that taxpayers are allowed to sue when there is a claim of "illegal
disbursement of public funds," or if public money is being "deflected to any improper purpose"; or when
petitioners seek to restrain respondent from "wasting public funds through the enforcement of an invalid or
unconstitutional law."
BOOK: TAX PAYER’S SUIT – A taxpayer, or group of tax payers, is proper to question the validity of a law
appropriating public funds.

94. Jumamil vs. Café, et al.

FACTS:
Vivencio V. Jumamil filed before the RTC of Panabo, Davao Del Norte a petition for declaratory relief
with prayer for preliminary injunction and writ of restraining order against Mayor Jose J. Cafe and the
members of the SB. He questioned the constitutionality of Municipal Resolution 7, Series of 1989, enacting
Appropriation Ordinance 111, provided for an initial appropriation of P765,000 for the construction of stalls
around a proposed terminal fronting the Panabo Public Market which was destroyed by fire. Subsequently,
the petition was amended due to the passage of Resolution 49, series of 1989, denominated as Ordinance 10,
appropriating a further amount of P1,515,000 for the construction of additional stalls in the same public
market. Prior to the passage of these resolutions, Mayor Cafe had already entered into contracts with those
who advanced and deposited (with the municipal treasurer) from their personal funds the sum of P40,000
each. Some of the parties were close friends and/or relatives of Cafe. The RTC dismissed Jumamil’s petition
and ordered Jumamil to pay attorney’s fees in the amount of P1,000 to each of the 57 private respondents. On
appeal, the CA affirmed the decision of the trial court. Jumamil filed the petition for review on certiorari.
ISSUE: Whether Jumamil had the legal standing to bring the petition for declaratory relief.
RULING: NO. Legal standing or locus standi is a party’s personal and substantial interest in a case such that he
has sustained or will sustain direct injury as a result of the governmental act being challenged. It calls for more
than just a generalized grievance. The term “interest” means a material interest, an interest in issue affected
by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest.
Unless a person’s constitutional rights are adversely affected by the statute or ordinance, he has no legal
standing.. Jumamil did not seasonably allege his interest in preventing the illegal expenditure of public funds
or the specific injury to him as a result of the enforcement of the questioned resolutions and contracts. It was
only in the “Remark to Comment” he filed in the Supreme Court did he first assert that “he (was) willing to
engage in business and (was) interested to occupy a market stall.” Such claim was obviously an afterthought.
*CASE 95 MISSING*
96. White Plains Association v. CA
FACTS: Respondent Quezon City Development & Financing Corporation (QCDFC) was the owner and developer
of White Plains Subdivision in Quezon City prior to the sale of the lots therein to the residents of the
subdivision who comprised the petitioner White Plains Association, Inc. (Association). The disputed area of the
land was set aside and dedicated to the proposed Highway 38 of Quezon City. As subdivision owner and
developer, respondent QCDFC represented to the lot buyers that there would be a thoroughfare known as
Katipunan Avenue and that the width of the land allotted to said road was 38 meters. Of the 38 meters,
respondent QCDFC developed only 20 meters. The undeveloped strip of land, 18 meters in width, of the
proposed Katipunan Avenue has been and still is the subject of court litigation.

As early as April 14, 1970, QCDFC filed a petition with the then Court of First Instance of Rizal for the
conversion into residential lots of this undeveloped strip of land. The controversy reached this Court. On
November 14, 1985, this Court en banc dismissed the petition. In the said decision this Court ruled that “Road
Lot 1 is withdrawn from the commerce of man and should be developed for the use of the general public.”

ISSUE: Who owns the Road Lot 1?

RULING: QCDFC. Even assuming that in spite of its dimensions, the 18-meter wide and 1 kilometer long
undeveloped area may be used for public purpose other than C-5, QCDFC contends in this petition that just
compensation will have to be paid for it. As stated by QCDFC, this is because the area has never been donated;
title remains with the developer; the purpose for which the reservation was made can no longer be
implemented; and under the law, even indisputably, subdivision streets belong to the owner until donated to
the government or until expropriated upon payment of just compensation.

97. Abon vs Fernando

In May 1999, the City of Marikina undertook a public works project to widen,clear andrepair the existing
sidewalks of Marikina Greenheights Subdivision. It was undertaken by the city government pursuant to
Ordinance No. 59. Subsequently, petitioner Albon filed a taxpayer’s suit for certiorari, prohibition and
injunction with damages against respondents City Engineer Alfonso Espirito, Assistant City Engineer Anaki
Maderal and City Treasurer Natividad Cabalquinto. According to the petitioner it was unconstitutional and
unlawful for respondents to use government equipment and property, and to disburse public funds, of the
City of Marikina for the grading, widening, clearing,repair and maintenance of the existing sidewalks of
Marikina Greenheights Subdivision. He alleged that the sidewalks were private property because Marikina
Greenheights Subdivision was owned by V.V. Soliven, Inc.Hence, the city government could not use public
resources on them.

In undertaking the project, therefore, respondents allegedly violated the constitutional proscription against
the use of public funds for private purposesas well as Sections 335 and 336 of RA 7160 and the Anti-Graft and
CorruptPractices Act.The trial court ruled in favor of the respondents. Ordinance No. 59is a valid
enactment.The court recognized the inherent police power of the municipality and with this it is allowed to
carry out the contested works. TheCourt of Appeals sustained the decision of the trial court stating that
sidewalks of Marikina Greenheights Subdivision were public in nature and ownership thereof belonged to the
City of Marikina or the Republic of the Philippines following the 1991White Plains Association decision. Thus,
the improvement and widening of the sidewalks pursuant to Ordinance No. 59 of 1993 was well within the
LGU’s powers

Issue: W/N the use of LGU funds for the widening and improvement of privately-owned sidewalks is unlawful
Ruling: Yes.

The use of LGU funds for the widening and improvement of privately-owned sidewalks is unlawful as it directly
contravenes Section 335 of RA 7160. This conclusion finds further support from the language of Section 17 of
RA 7160 which mandates LGUs to efficiently and effectively provide basic services and facilities

98. Gaston vs. Republic Planters Bank

FACTS: To provide means for rehabilitation and stabilization of the sugar industry so as to prepare it for the
eventuality of the loss of the quota allocated to the Philippines resulting from the lifting of U.S. sanctions
against an African country, Congress passes a law increasing the existing tax on the manufacture of sugar on a
graduated basis. All collections made under the law are to accrue to a special fund to be spent only for the
purposes enumerated therein, among which are to place the sugar industry in a position to maintain itself and
ultimately to insure its continued existence despite the loss of that quota, and to afford labourers employed in
the industry a living wage and to improve their working conditions.

A sugar planter files a suit questioning the constitutionality of the law alleging that the tax is not for a public
purpose as the same is being levied exclusively for the aid and support of the sugar industry.

ISSUE: Whether or not the suit filed by the sugar planter will prosper.

RULING: NO. Taxation is no longer merely for raising revenue to support the existence of the government; the
power may also be exercised to carry out legitimate objects of the government. It is a legitimate object of
government to protect its local industries on which the national economy largely depends. Where the aim of
the tax measure is to achieve such a governmental objective, the tax imposition can be said to be for a public
purpose.
99. Manila Electric Company vs Yatco

Facts:

Plaintiff Manila Electric Company, a corporation organized and existing under the laws of the
Philippines, with its principal office and place of business in the City of Manila, insured with the city of New
York Insurance Company and the United States Guaranty Company, certain real and personal properties
situated in the Philippines. The insurance was entered into in behalf of said plaintiff by its broker in New York
City. The insurance companies are foreign corporations not licensed to do business in the Philippines and
having no agents therein. The policies contained provisions for the settlement and payment of losses upon the
occurence of any risk insured against, a sample of which is policy No. 20 of the New York insurance Company
attached to and made an integral part of the agreed statement of facts.

Plaintiff through its broker paid, in New York, to said insurance company premiums in the sum of
P91,696. The Collector of Internal Revenue, under the authority of section 192 of act No. 2427, as amended,
assessed and levied a tax of one per centum on said premiums, which plaintiff paid under protest. The protest
having been overruled, plaintiff instituted the present action to recover the tax. The trial court dismissed the
complaint, and from the judgment thus rendered, plaintiff took the instant appeal.

Issue: W/N the disputed tax is one imposed by the Commonwealth of the Philippines upon a contract beyond
its jurisdiction

Ruling:

Yes. Where the insured against also within the Philippines, the risk insured against also within the
Philippines, and certain incidents of the contract are to be attended to in the Philippines, such as, payment of
dividends when received in cash, sending of an unjuster into the Philippines in case of dispute, or making of
proof of loss, the Commonwealth of the Philippines has the power to impose the tax upon the insured,
regardless of whether the contract is executed in a foreign country and with a foreign corporation. Under such
circumstances, substantial elements of the contract may be said to be so situated in the Philippines as to give
its government the power to tax.

And, even if it be assumed that the tax imposed upon the insured will ultimately be passed on the
insurer, thus constituting an indirect tax upon the foreign corporation, it would still be valid, because the
foreign corporation, by the stipulations of its contract, has subjected itself to the taxing jurisdiction of the
Philippines. After all, Commonwealth of the Philippines, by protecting the properties insured, benefits the
foreign corporation, and it is but reasonable that the latter should pay a just contribution therefor. It would
certainly be a discrimination against domestic corporations to hold the tax valid when the policy is given by
them and invalid when issued by foreign corporations]
100. Philippine Guaranty Co. vs Commissioner of Internal Revenue

Facts:

The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts,
on various dates, with foreign insurance companies not doing business in the Philippines. Petitioner thereby
agreed to cede to the foreign reinsurers a portion of the premiums on insurance it has originally underwritten
in the Philippines, in consideration for the assumption by the latter of liability on an equivalent portion of the
risks insured.

Said reinsurrance contracts were signed by Philippine Guaranty Co., Inc. in Manila and by the foreign
reinsurers outside the Philippines.

Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it filed its
income tax returns. It did not withhold or pay tax on them. Consequently, the CIR assessed against petitioner.
withholding tax on the ceded reinsurance premiums.

Petitioner protested the assessment on the ground that reinsurance premiums ceded to foreign
reinsurers not doing business in the Philippines are not subject to withholding tax.

Issue:

Whether or not the reinsurance premiums ceded to foreign reinsurers not doing business in the
Philippines are subject to tax

Held:

Yes.

Reinsurance premiums are taxable in the Philippines. Foreign corporations are taxable on their income from
sources within the Philippines. "Sources" has been interpreted as the activity, property or service giving rise
to the income.

The foreign insurers' place of business should not be confused with their place of activity. Business implies
continuity and progression of transactions, while activity may consist of only a single transaction. An activity
may occur outside the place of business. Section 24 of the Tax Code does not require a foreign corporation to
engage in the Philippines subjecting its income to tax. It suffices that the activity creating the income is
performed or done in the Philippines. What is controlling, therefore is not the place of business but the
place of activity.
101. Commissioner vs. British Overseas Airways Corp (Territorial Jurisdiction)

Facts: BOAC is a British Government-owned corporation organized and existing under the laws of the United
Kingdom.It is engaged in the international airline business. It did not carry passengers or cargo to or from the
Philippines, although during the period covered by the assessments, it maintained a general sales agent in the
Philip. — Wamer Barnes and Company, Ltd., and later Qantas Airways — which was responsible for selling
BOAC tickets covering passengers and cargoes.

It is admitted that BOAC had no landing rights for traffic purposes in the Philippines, and was not granted a
Certificate of public convenience, except for a nine-month period, partly in 1961 and partly in 1962, when it
was granted a temporary landing permit.

Petitioner assessed BOAC for deficiency income taxes covering the years 1959 to 1963. BOAC paid the
assessment under protest.

CTA Decision: The Tax Court held that the proceeds of sales of BOAC passage tickets in the Philippines do not
constitute BOAC income from Philippine sources "since no service of carriage of passengers or freight was
performed by BOAC within the Philippines" and, therefore, said income is not subject to Philippine income tax.

Respondent’s Main Argument: BOAC's service of transportation is performed outside the Philippines, the
income derived is from sources without the Philippines and, therefore, not taxable under our income tax laws.

Issue: Whether the revenue derived by BOAC from sales of tickets in the Philippines for air transportation,
while having no landing rights here, constitute income of BOAC from Philippine sources, and, accordingly,
taxable.

Ruling: YES. Sales of tickets in the Philippines is taxable.

The source of an income is the property, activity or service that produced the income. For the source of
income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity
within the Philippines. The absence of flight operations to and from the Philippines is not determinative of the
source of income or the site of income taxation.
In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income:
1. The tickets exchanged hands and payments for fares were also made in Philippine currency.
2. The site of the source of payments is the Philippines.
3. The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection
accorded by the Philippine government.
4. In consideration of such protection, the flow of wealth should share the burden of supporting the
government.

The definition of gross income under section 32 of tax code is broad and comprehensive to include proceeds
from sales of transport documents.

Pursuant to Presidential Decree No. 69, international carriers are now taxed of 2-½ per cent on their cross
Philippine billings.
102. ANTERO M. SISON vs RUBEN B. ANCHETA G.R. No. L-59431 July 25, 1984
FACTS:
The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1 on the
validity of Section I of Batas Pambansa Blg. 135 depends upon a showing of its constitutional infirmity. The
assailed provision further amends 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 alleges that
by virtue thereof, "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-à-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 facts as alleged were admitted but not the allegations which to their mind are "mere arguments, opinions
or conclusions on the part of the petitioner, the truth [for them] being those stated [in their] Special and
Affirmative Defenses." The answer then affirmed: "Batas Pambansa Big. 135 is a valid exercise of the State's
power to tax. The authorities and cases cited while correctly quoted or paragraph do not support petitioner's
stand."

ISSUE: WON the above section cited by petitioner is a transgression of both the equal protection and due
process clauses of the Constitution?

HELD:
No. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is
the strongest of all the powers of of government." 13 It is, of course, to be admitted that for all its plenitude
'the power to tax is not unconfined. There are restrictions. The Constitution sets forth such limits . Adversely
affecting as it does properly rights, both the due process and equal protection clauses inay properly be
invoked, all petitioner does, to invalidate in appropriate cases a revenue measure. The difficulty confronting
petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here. does not suffice. There must
be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a
provision as void or its face, he has not made out a case. This is merely to adhere to the authoritative doctrine
that were the due process and equal protection clauses are invoked, considering that they arc not fixed rules
but rather broad standards, there is a need for of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail.

103. PROVINCE OF ABRA vs. HERNANDO, THE ROMAN CATHOLIC BISHOP OF BANGUED, INC.
107 SCRA 104

FACTS: The Province of Abra sought to tax the properties of The Roman Catholic Bishop of Bangued, Inc.
Desirous of being exempted from a real estate tax, the latter filed a petition for declaratory relief on the
ground that other than being exempted from payment of real estate taxes, its properties are also “being
actually, directly and exclusively used for religious or charitable purposes as sources of support for the
bishop, the parish priest and his helpers.” After conducting a summary hearing, respondent Judge
Hernando granted the exemption without hearing the side of petitioner. The petitioner then filed a
motion to dismiss but the same was denied. Hence, this present petition for certiorari and mandamus
alleging denial of procedural due process.

ISSUE: Whether or not the properties of the church in this case is exempt from taxes.

HELD: No, they are not tax exempt. It is true that the Constitution provides that “charitable institutions,
mosques, and non-profit cemeteries” are required that for the exemption of “lands, buildings, and
improvements,” they should not only be “exclusively” but also “actually” and “directly” used for religious
or charitable purposes. There must be proof therefore of the actual and direct use of the lands, buildings,
and improvements for religious or charitable purposes to be exempt from taxation. It has been the
constant and uniform holding that the exemption from taxation is not favored and is never presumed, so
that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on
exemption from taxation, hence, an exempting provision should be construed strictissimijuris.
However, in this case, there is no showing that the said properties are actually and directly used for
religious or charitable uses. Respondent Judge would not have erred so grievously had he merely
compared the provisions of the present Constitution with that appearing in the 1935 Charter on the tax
exemption of “lands, buildings, and improvements.” There is a marked difference. Under the 1935
Constitution: “Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands,
buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be
exempt from taxation.” The present Constitution added “charitable institutions, mosques, and non-profit
cemeteries” and required that for the exemption of “lands, buildings, and improvements,” they should not
only be “exclusively” but also “actually” and “directly” used for religious or charitable purposes. The
Constitution is worded differently. The change should not be ignored. It must be duly taken into
consideration. Reliance on past decisions would have sufficed were the words “actually” as well as
“directly” not added. There must be proof therefore of the actual and direct use of the lands, buildings,
and improvements for religious or charitable purposes to be exempt from taxation.
104. Commissioner of Customs vs. Hypermix Feeds Corporation

Facts:

On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under this regulation the
corresponding tariff for food grade wheat was 3%, for feed grade, 7%.

A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed a Petition for
Declaratory Relief with the Regional Trial Court (RTC) of Las Piñas City.

Respondent also alleged that the regulation summarily adjudged it to be a feed grade supplier without the
benefit of prior assessment and examination; thus, despite having imported food grade wheat, it would be
subjected to the 7% tariff upon the arrival of the shipment, forcing them to pay 133% more than was proper.

Furthermore, respondent claimed that the equal protection clause of the Constitution was violated when the
regulation treated non-flour millers differently from flour millers for no reason at all.

The trial court ruled in favor of respondent.

Issue: Whether or not the regulation was in violation of equal protection clause of the Constitution

Ruling:

Yes.

The equal protection clause means that no person or class of persons shall be deprived of the same
protection of laws enjoyed by other persons or other classes in the same place in like circumstances. Thus,
the guarantee of the equal protection of laws is not violated if there is a reasonable classification. For a
classification to be reasonable, it must be shown that (1) it rests on substantial distinctions; (2) it is germane
to the purpose of the law; (3) it is not limited to existing conditions only; and (4) it applies equally to all
members of the same class.[22]

Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality of wheat is
affected by who imports it, where it is discharged, or which country it came from.

Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food grade wheat,
the product would still be declared as feed grade wheat, a classification subjecting them to 7% tariff. On the
other hand, even if the importers listed under CMO 27-2003 have imported feed grade wheat, they would
only be made to pay 3% tariff, thus depriving the state of the taxes due. The regulation, therefore, does not
become disadvantageous to respondent only, but even to the state.

105 Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan No. L-81311. June 30,1988
FACTS:The four consolidated cases questions the validity of the VAT (Executive Order 273) for being
unconstitutional in that its enactment is not allegedly within the powers of the President; that the VAT is
oppressive, discriminatory, regressive, and violates the due process and equal protection clauses and other
provisions of the 1987 Constitution.The Solicitor General prays for the dismissal of the petitions on the ground
that the petitioners have failed to show justification for the exercise of its judicial powers. He also questions
the legal standing of the petitioners who, he contends, are merely asking for an advisory opinion from the
Court, there being no justiciable controversy for resolution.
Issue: Whether or not the imposition of VAT is unconstitutional
Held: No. It should be recalled that under Proclamation No. 3, which decreed a Provisional Constitution sole
legislative authority was vested upon the President. Art. II, sec. 1 of the Provisional Constitution states: "Sec. 1
Until a legislature is elected and convened under a new Constitution, the President shall continue to exercise
legislative powers." On 15 October 1986, the Constitutional Commission of 1986 adopted a new Constitution
for the Republic of the Philippines which was ratified in a plebiscite conducted on 2 February 1987. Article
XVIII, sec. 6 of said Constitution, hereafter referred to as the 1987 Constitution, provides: "Sec. 6. The
incumbent President shall continue to exercise legislative powers until the first Congress is convened." The
framers of EO 273 claim that it is principally aimed to rationalize the system of taxing goods and services;
simplify tax administration; and make the tax system more equitable, to enable the country to attain
economic recovery. Lastly, petitioners also failed to prove that EO 273 is oppressive, discriminatory, unjust
and regressive, in violation of the equal protection clause. Petitioners merely rely upon newspaper articles
which are actually hearsay and have evidentiary value. To justify the nullification of a law. there must be a
clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication. As the Court
sees it, EO 273 satisfies all the requirements of a valid tax.
In any event, if petitioners seriously believe that the adoption and continued application of the VAT are
prejudicial to the general welfare or the interests of the majority of the people, they should seek recourse and
relief from the political branches of the government. The Court, following the time-honored doctrine of
separation of powers, cannot substitute its judgment for that of the President as to the wisdom, justice and
advisability of the adoption of the VAT. The Court can only look into and determine whether or not EO 273
was enacted and made effective as law, in the manner required by, and consistent with, the Constitution, and
to make sure that it was not issued in grave abuse of discretion amounting to lack or excess of jurisdiction;
and, in this regard, the Court finds no reason to impede its application or continued implementation.
106. Uy Matiao & Co., Inc., v City of Cebu 93 Phil 100

Facts: Plaintiff is a domestic corporation who paid under protest storage fees to the City of Cebu for
storing copra/hemp in its warehouse in Cebu and for buying and/or selling copra/hemp in the said city. This is
pursuant to the provisions of Ordinance No. 38, series of 1948, as amended by Ordinance No. 46, series of
1947, of the City of Cebu. Plaintiff seeks for a refund of the P4,019.07 it paid from Dec. 1948 to Nov. 1949 as
well as other fees that may be paid by virtue of the said ordinances. The grounds relied upon are: that the fee
imposed by said ordinance is unauthorized; constitutes a specific tax prohibited by commonwealth Act No.
472; and is unjust and unfair.

Issue: WON the tax imposed by the ordinances are prohibited and unfair.

Ruling: No. The tax or license fee in question is not specific because it does not subject directly the
produce or goods to tax but indirectly as an incident to, or in connection with, the business to be taxed.
Section 4 of Ordinance No. 38 provides that a person, firm or corporation engaged in the business of buying or
selling copra and at the same time of keeping, holding or storing it at his place of business, bodega or
elsewhere before disposing of it, shall pay only the license for engaging in the business of buying and selling it.
Such tax or license fee becomes uniform by making the weight the basis thereof as provided for in the
ordinances in question. A P0.05 tax or license fee for 100 kilos of fraction thereof per month is not arbitrary
but reasonable. The tax or license fee provided for in the ordinance in question is imposed on every person,
firm, or corporation engage in the City of Cebu in business of buying and selling and storing copra in his or its
warehouse located within the city. It, as well as the exemption, applies equally to all persons, firm and
corporations place in similar situation. Market fluctuation in the value of price of the merchandise, article, or
good subject to tax or license fee does not make ununiform the rate of such tax or license fee. The fact that
the price of copra has been steadily going down, whereas that of going up, does not render the tax arbitrary.
107. Conrado L. Tiu v. CA [301 SCRA 278, Jan. 20, 1999]

FACTS: Congress, with approval of the president passed into law RA 7227—purpose of which is to accelerate
the conversion of military reservations into other productive uses. Sec. 12 thereof created the Subic Special
Economic Zone [SSEZ]. Pres. Fidel V. Ramos executed EO 97 which granted tax and duty incentives. It states
that tax and duty-free importations shall apply only to raw materials, capital goods and equipment brought
in by business enterprises into the SSEZ. Importation of other goods into the SSEZ, whether by business
enterprises or resident individuals, are subject to taxes and duties under relevant Philippine laws. The
exportation or removal of tax and duty-free goods from the territory of the SSEZ to other parts of the
Philippine territory shall be subject to duties and taxes under relevant Philippine laws. Later on EO 97-A was
executed specifying the area w/in w/c the tax and duty free privilege shall be operative. “The Secured Area
consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free
area in the SSEFPZ [Subic Special Economic and Free Port Zone]. Business enterprises and individuals
(Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods,
equipment, and consumer items tax and duty-free. Consumption items, however, must be consumed within
the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured
Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may
be provided herein.” Petitioners alleged that the EO 97-A violated their right to equal protection of the laws.

ISSUE: WON EO 97-A violates the equal protection clause of the Constitution for confining the application of
RA 7227 w/in the secure area and excluding the residents of the zone outside of the secured area.

HELD: No. The fundamental right of equal protection of the laws is not absolute but is subject to reasonable
classification. Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the
purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the
same class. It does not demand absolute equality among residents; it merely requires that all persons shall be
treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced.

Certainly, there are substantial differences between the big investors who are being enticed to establish and
operate their industries in the so-called "secured area" and the present business operators outside that are in
accord with the equal protection clause that does not require territorial uniformity of the laws. The
classification applies equally to all the resident individuals and businesses within the "secured area." The
residents, being in like circumstances or contributing directly to the achievement of the end purpose of the
law, are not categorized further. Instead, they are all similarly treated, both in privileges granted and in
obligations required.

108. Concepcion Parayno vs. Jose Jovellanos

Facts: Petitioner was the owner of a gasoline filling station in Calasiao, Pangasinan. In Resolution No. 50, it
declared that the existing gasoline station is a blatant violation and disregard of existing law.

According to the Resolution, 1) the gasoline filling station is in violation of The Official Zoning Code of Calasiao,
Art. 6, Section 44, it is less than 100 meters from the nearest public school and church. the nearest school
building which is San Miguel Elementary School and church, the distances are less than 100 meters.

Petitioner moved for the reconsideration of the resolution but was denied by the SB. Hence she filed a case
before the RTC claiming that the gasoline filling station was not covered under Sec 44 of the mentioned law.

Issue: Whether or not the closure/transfer of her gasoline filling station by respondent municipality was an
invalid exercise of the latter’s police powers
Ruling: Yes. The Sangguniang Bayan resolution ordering the closure or the transfer of petitioner's gasoline
station was not a valid exercise of the police power. The Court found that there was a failure by the
municipal officials to comply with the due process clause. Respondent municipality failed to comply with
the due process clause when it passed Resolution No. 50. While it maintained that the gasoline filling
station of petitioner was less than 100 meters from the nearest public school and church, the records do not
show that it even attempted to measure the distance, notwithstanding that such distance was crucial in
determining whether there was an actual violation of Section 44

109. Churchill v Concepcion

Facts:

Section 100 of Act No. 2339, imposed an annual tax of P4 per square meter upon "electric signs,
billboards, and spaces used for posting or displaying temporary signs, and all signs displayed on premises not
occupied by buildings." This section was subsequently amended by Act No. 2432, effective January 1, 1915, by
reducing the tax to P2 per square meter or fraction thereof.

Francis A. Churchill and Stewart Tait, copartners doing business under the firm name and style of the
Mercantile Advertising Agency, owners of a sign or billboard containing an area of 52 square meters
constructed on private property in the city of Manila and exposed to public view, were taxes thereon P104.
The tax was paid under protest and they instituted the present action under section 140 of Act No. 2339
against the Collector of Internal Revenue to recover back the amount thus paid. Lower court dismissed the
complaint upon the merits, with costs, the plaintiffs appealed.

In their appeal they said that the trial court erred in not holding that the said tax is void for lack of
uniformity, because it is not graded according to value; because the classification on which it is based on any
reasonable ground.

Issue:

Whether or not the tax imposed is void for lack of uniformity or because it is not graded according to
value

Ruling:

No. A tax is uniform, within the constitutional requirement, when it operates with the same force and
effect in every place where the subject of it is found. "Uniformity," as applied to the constitutional provision
that all taxes shall be uniform, means that all property belonging to the same class shall be taxed alike. It does
not signify an intrinsic, but simply a geographic, uniformity. Uniformity does not require the same treatment;
it simply requires reasonable basis for classification. The only limitation, in so far as these questions are
concerned, placed upon the Philippine Legislature in the exercise of its taxing power is that found in section 5
of the Philippine Bill, wherein it is declared "that the rule of taxation in said Islands shall be uniform."
 In the case, the statute under consideration imposes a tax of P2 per square meter or fraction thereof
upon every electric sign, bill-board, etc., wherever found in the Philippine Islands. Or in other words, "the rule
of taxation" upon such signs is uniform throughout the Islands. The rule, which we have just quoted from the
Philippine Bill, does not require taxes to be graded according to the value of the subject or subjects upon
which they are imposed, especially those levied as privilege or occupation taxes.

110. SHELL CO. OF PHIL. ISLAND v. MUN. OF CORDOVA

Facts:

The Municipal Council of Cordova, Cebu adopted Ordinance 10 which imposes an annual tax on occupation or
the exercise of the privilege of installation manager and Ordinance 11 imposing an annual tax on tin can
factories having a maximum output capacity of 30,000 tin cans. Shell, a foreign corporation, disputed the
ordinances and contended that: first, “installation manager” is a designation made by the company and such
designation cannot be deemed to be a “calling” as defined in Sec 178 of NIRC and that the installation
manager employed by Shell is a salaried employee which may not be taxed by the municipal council under the
provisions of NIRC; second, the ordinance is discriminatory and hostile because there is no other person in the
locality who exercises such designation or calling; and third, the imposition of tax on tin can factories having a
30,000 maximum output capacity is unlawful because it is a percentage tax and falls under the exceptions
provided in the Tax Code.

Issue:

W/N the ordinance is unconstitutional because it is hostile and discriminatory

Ruling:

NO.

Shell’s installation manager is still classified as an occupation, even if he is a salaried employee. The mere fact
that there is no other person who exercises the privilege of an installation manager does not make the
ordinance discriminatory inasmuch as it is and will be applicable to any person or firm who exercises such
occupation.

111. Punzalan vs. Municipal Board

FACTS:

The Municipal Board of Manila passed Ordinance no. 3398 pursuant to its city charter, imposing occupation
tax on persons exercising various professions in Manila and penalizes non-payment thereof. Punzalan filed a
suit, in behalf of other professionals for the annulment of the ordinance, claiming the ordinance is class
legislation, because the legislature withheld this power to tax from other chartered cities and it is unjust and
oppressive because it creates discrimination within the class (i.e professionals in Manila have to pay the tax;
non-Manila professional do not).
ISSUE:

Whether or not the ordinance is invalid and violative of the rule of uniformity and equality in taxation.

Ruling:

No. Punzalan makes a distinction that is unfounded. It should be noted that the ordinance impose tax upon
every person ‘exercising’ or ‘pursuing’ in Manila any one the occupations named, but does not say that such
person must have his office in Manila. What constitutes exercise or pursuit of profession in the city is a matter
of judicial determination.

112. Association of Customs Brokers vs. City of Manila

Facts:

The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of
motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service
operator of the trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies
a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the
City of Manila; (2) said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes
double taxation.

Issue: Whether the ordinance violates the rule of uniformity.

Ruling:

Yes. The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. Note that
the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not
distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it
distinguish between a motor vehicle registered in the City of Manila and one registered in another place but
occasionally comes to Manila and uses its streets and public highways. The distinction is important if we
note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be
inferred from the word "operating" used therein. The word "operating" denotes a connotation which is akin
to a registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous
payment of the registration fees. There is no pretense that the ordinance equally applies to motor vehicles
who come to Manila for a temporary stay or for short errands, and it cannot be denied that they contribute
in no small degree to the deterioration of the streets and public highway. The fact that they are benefited
by their use they should also be made to share the corresponding burden. And yet such is not the case. This
is an inequality which we find in the ordinance, and which renders it offensive to the Constitution.

113. Mactan Cebu International Airport Authority vs Marcos

FACTS: Mactan Cebu International Airport Authority (MCIAA) was created by virtue of RA 6958. MCIAA
enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter.
However, the Office of the Treasurer of Cebu demanded for the payment of realty taxes on several parcels of
land belonging to the petitioner. Petitioner objected to such demand for payment as baseless and unjustified.
The City refused to cancel and set aside petitioner’s realty tax account, insisting that the MCIAA is a
government controlled corporation whose tax exemption privilege has been withdrawn by virtue of Section
193 and 234 of the Local Government Code (LGC), and not an instrumentality of the government but merely a
government owned corporation performing proprietary functions. MCIAA paid its tax account “under protest”
when City is about to issue a warrant of levy against the MCIAA’s properties.
MCIAA contended that the taxing power of LGUs do not extend to the levy of taxes or fees on an
instrumentality of the national government and that by the nature of its powers and functions, it has the
footing of an agency or instrumentality of the national government which claim the City rejects. The trial court
dismissed the petition, citing that close reading of the LGC provides the express cancellation and withdrawal
of tax exemptions of Government Owned and Controlled Corporations.
ISSUE: Whether or not petitioner is exempt from taxation under its charter?
HELD: NO. There can be no question that under Section 14 of R.A. No. 6958, the petitioner is exempt from the
payment of realty taxes imposed by the National Government of any of its political subdivisions, agencies, and
instrumentalities. Nevertheless, since taxation is the rule and exemption therefrom the exception, the
exemption may thus be withdrawn at the pleasure of the taxing authority. The exempting statutes are both
granted unilaterally by Congress in the exercise of taxing powers. Since taxation is the rule and tax
exemption, the exception, any tax exemption unilaterally granted can be withdrawn at the pleasure of the
taxing authority without violating the Constitution.

114. Cagayan Electric Power & Light Co. vs Commissioner of Internal Revenue (CIR)

Facts: This is about the liability of petitioner for income tax amounting to P75,149.73 for the more than seven-
month period of the year 1969 in addition to franchise tax. Petitioner is the holder of a legislative franchise,
Republic Act No. 3247, under which its payment of 3% tax on its gross earnings from the sale of electric
current is "in lieu of all taxes and assessments of whatever authority upon privileges, earnings, income,
franchise, and poles, wires, transformers, and insulators of the grantee, from which taxes and assessments the
grantee is hereby expressly exempted" (Sec. 3, RA 3247). Later, Republic Act No. 5431 amended section 24 of
the Tax Code by making liable for income tax all corporate taxpayers not specifically exempt under paragraph
(c) (1) of said section and section 27 of the Tax Code notwithstanding the "provisions of existing special or
general laws to the contrary". Thus, franchise companies were subjected to income tax in addition to franchise
tax.

However, in petitioner's case, its franchise was amended by Republic Act No. 6020, effective August 4,
1969, by authorizing the petitioner to furnish electricity to the municipalities of Villanueva and Jasaan,
Misamis Oriental in addition to Cagayan de Oro City and the municipalities of Tagoloan and Opol. The
amendment reenacted the tax exemption in its original charter or neutralized the modification made by
Republic Act No. 5431 more than a year before. By reason of the amendment, the CIR required the petitioner
to pay deficiency income taxes for 1968-to 1971. The petitioner contested the assessments and filed a petition
for review with the Tax court, stating it is exempted from paying income tax under Sec 3, RA 3247.

Issue: WON Congress could impair petitioner’s legislative franchise by making it liable for income tax.

Ruling: Yes. We hold that Congress could impair petitioner's legislative franchise by making it liable for
income tax from which heretofore it was exempted by virtue of the exemption provided for in section 3 of
its franchise. The Constitution provides that franchise is subject to amendment, alteration, or repeal by the
Congress when the public interest so requires. Section 1 of petitioner's franchise, Republic Act No. 3247,
provides that it is subject to the provisions of the Constitution and to the terms and conditions established in
Act No. 3636 whose section 12 provides that the franchise is subject to amendment, alteration or repeal by
Congress. Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting to income tax all
corporate taxpayers not expressly exempted therein and in section 27 of the Code, had the effect
of withdrawing petitioner's exemption from income tax.

115. PHILIPPINE POWER & DEVELOPMENT CO. VS COMMISSIONER

FACTS:

Petitioner, a corporation duly organized and existing under the laws of the Philippines, is engaged in
the business of supplying electric light, heat and power in municipalities pursuant to the municipal franchises
granted under Act No. 667 of the Philippine Commission.
The field corporation auditor of the General Auditing Office made a recomputation of the franchise tax
liability of petitioner based on the gross earnings of its operation.
Auditor General furnished a letter to respondent stating ''Pursuant to the provisions of Section 259 of
the Tax Code, as amended, the utility ·had been paying its franchise tax at the rate of 5% on its gross receipts
up to March 31, 1955. The utility' s franchise tax rate was declared to be 2% and not 5% in conformity with its
franchise authorized under Act 667. Accordingly, the utility requested the refund of its tax payment for the
and the Collector of Internal Revenue in its letter dated June 15 and July 12, 1955, granted a tax Credit for the
said periods. Since April 1. 1955, therefore, the utility had been paying franchise tax at the rate of 2%. 11
This assessment was received by petitioner then protested and requested the cancellation and
withdrawal thereof. Petitioner Claims that it is only liable for 2% (now 3%) of the franchise tax rate.

ISSUE: Whether the correct rate of franchise tax payable by petitioner is the 2% prescribed in its municipal
franchises

RULING: NO
Petitioner Claims that it is only liable for 2% (now 3%) of the franchise tax rate is without merit. Nowhere in
the franchise of the petitioner can a provision that the franchise tax prescribed therein “shall be in lieu of all
other taxes” be found. It is thus subject to the 5% (now 3%) as provided in the Tax Code. Having accepted said
franchise subject to the condition that it may be amended, altered or repealed by the Congres, petitioner
cannot now assert that the imposition and collection of the higher rate of % is in violation of the impairment
clause of our Consitution.

In as much as said franchises do not preclude the imposition of a higher franchise tax, petitioner- grantee is
subject to 5% franchise tax provided in Section 259 of the Tax Code, as amended, and not to the lower rate of
franchise tax prescribed in the franchises in question. This doctrine has been consistently upheld in previous
cases involving similar franchises.
116. Christ Church vs. Philadelphia 24 How. 300

Facts: In 1833, the Legislature of Pennsylvania enacted that "the real property, including ground rents, now
belonging and payable to Christ Church Hospital, in the City of Philadelphia, so long as the same shall continue
to belong to the said hospital, shall be and remain free from taxes."

In 1851, they enacted that all property, real or personal, belonging to any association or incorporated
company which is now by law exempt from taxation, other than that which is in the actual use and occupation
of such association or incorporated company, and from which an income or revenue is derived by the owners
thereof, shall hereafter be subject to taxation in the same manner and for the same purposes as other
property is now by law taxable, and so much of any law as is hereby altered and supplied be and the same is
hereby repealed. The plaintiffs claim that the exemption conceded by the act of 1833 is perpetual, and that
the act itself is in effect a contract. This concession of the legislature was spontaneous, and no service or duty,
or other remunerative condition, was imposed on the corporation. It belongs to the class of laws denominated
privilegia favorabilia. It attached only to such real property as belonged to the corporation, and while it
remained as its property; but it is not a necessary implication from these facts that the concession is
perpetual, or was designed to continue during the corporate existence.

Issue: Whether or not their contention was correct

Ruling: No. The exemption granted is in the nature of a unilateral tax exemption. Since the exemption given is
spontaneous on the part of the legislature and no service or duty or other remunerative conditions have been
imposed on the taxpayers receiving the exemption, it may be revoked at will by the legislature.

117. CASANOVAS VS HORD GR No. 3473, March 22, 1907

FACTS:
In January 1897, the Spanish Government, in accordance with the provisions of the royal decree of May
14, 1867, granted J. Casanovas certain mines in the Province of Ambos Camarines. They were so
considered by the Collector of Internal Revenue and were by him said to fall within the provisions of
Section 134 of Act 1189 which imposes an annual tax and an ad valorem tax on all valid perfected mining
concessions granted prior to April 11th, 1899. The Commissioner, JNO S. Hord, imposed upon these
properties the tax mentioned in Section 134, which Casanovas paid under protest.

ISSUE: Whether or not Section 134 is valid?

RULING:
No, the concessions granted by the Government of Spain to the plaintiff, constitute contracts between the
parties; that section 134 of the Internal Revenue Law impairs the obligation of these contracts, and is
therefore void as to them.
The deed constituted a contract between the Spanish Government and Casanovas. Furthermore, the
section conflicts with Section 60 of the Act of Congress of July 1, 1902, which indicate that concessions
can be cancelled only by reason of illegality in the procedure by which they were obtained, or for failure
to comply with the conditions prescribed as requisites for their retention in the laws under which they
were granted. The grounds were not shown nor claimed in the case.
118. Manila Railroad Company v. Insular Collector of Customs, 32 Phil 146 (1915) Constitutional limitations
*Act No. 1510, the charter of the railway company, in its section 10 provides for the admission free of duty of
all materials necessary for the construction and equipment of the railroad lines covered by the charter.
*Section 12 of the Tariff Act of 1909 provides for the free entry of all articles, except rice, the growth, product,
or manufacture of the United States or its possessions to which the customs in force in the United States is
applied and upon which no drawback has been allowed.

FACTS: The plaintiff Manila Road Company imported into the Philippine Islands ten locomotive engines, to be
used upon its railroad. The said locomotives were admitted into the Philippine Islands free of duty by virtue of
the provisions of section 10 of Act No. 1510. Later the Collector of Customs canceled said free entry of said
parts which had been manufactured in England and admitted the same free of duty under section 12 of the
Philippine Tariff Law of 1909, instead of section 10 of Act No. 1510.
Against the order of cancellation the plaintiff protested, which protest was overruled by the Collector of
Customs on the 23rd of December, 1913. From that decision of the Collector of Customs the plaintiff appealed
to the Court of First Instance. The CFI Ruled in favor of the plaintiff, thereby reversing the decision of the
Insular Collector of Customs. The defendant appealed to this Court.

ISSUE: Was the Collector of customs correct in cancelling the free entry of the imported materials?
HELD: No. The Court affirmed the ruling of the CFI and ruled that the railroad company had a perfect right to
stand upon its charter and to demand that the entry of materials for construction and equipment should be
allowed thereunder; the Collector of Customs had no authority, over the railroad company's protest, to
compel the entry under another law. The Collector of Customs, in his amended order, admitted the same
under section 12 of the Tariff Law of 1909. Said section of said law provides for the free entry of all articles,
except rice, the growth, product, or manufacture of the United States, or its possessions, to which the customs
in force in the United States is applied and upon which no drawback has been allowed. Clearly, therefore, the
material in question could not have been admitted under section 12 of the Philippine Tariff Law of 1909. The
Collector of Customs properly admitted said material, which had been admittedly manufactured in England,
under section 10 of Act No. 1510. He committed an error when he cancelled said entry and admitted said
articles under section 12 of Tariff Act of 1909.

119. American Bible Society v City of Manila

Facts: American Bible Society is a foreign, non-stock, non-profit, religious, missionary corporation duly
registered and doing business in the Philippines, with its principal office in Manila. They distribute and sell
bibles throughout the country. The City Treasurer of Manila informed American Bible Society that it violated
Ordinance No. 3000 and 2529 as it was conducting business of general merchandise since November 1945, without
the necessary Mayor’s permit and municipal license and required them to secure the permit and license within three
days together with compromise in the sum of P5,821.45. To avoid the closure of their business, they paid
under protest. They filed a complaint and prayed that the ordinance be declared illegal and unconstitutional
as it infringes religious freedom.

Issue: Whether Ordinance No. 3000 and 2529 are unconstitutional because it provides for religious censorship and the
free exercise of its religious profession through the distribution and sale of bibles and other religious literature
in the Philippines.

Ruling: (BOOK)
Ordinance 2529, imposing a tax on sale of Bibles and other religious literature, CANNOT be applied to the
plaintiff, for in doing so it would impair its Constitutional right to free exercise and enjoyment of its religious
profession and worship as well as its right of dissemination of religious beliefs. Such ordinance if applied,
would provide for religious censorship by restraining the free distribution and sale of Bibles and other religious
literature.
But with respect to Ordinance 3000, requiring a person to secure a Mayor’s permit before he can engage in
business, trade or occupation, the Court held that it does not impair the plaintiff’s Constitutional right.

120. PHILIPPINE PRESS INSTITUTE VS. CHATO (1994)

FACTS:
Various suits for certiorari and prohibition were filed challenging the constitutionality of Republic Act
No. 7716 (E-Vat Law) on various grounds. Petitioners contended that Congress violated the Constitution
because, although H. No. 11197 had originated in the House of Representatives, it was not passed by the
Senate but was simply consolidated with the Senate version [S. No. 1630] in the Conference Committee to
produce the bill which the President signed into law.

ISSUE:
DOES R.A 7716 violate Article VI, Section 24 of the Constitution?
(Art. VI, Section 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives, but the Senate
may propose or concur with amendments.)
RULING: NO
To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate
exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the
House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. At
this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To
insist that a revenue statute and not only the bill which initiated the legislative process culminating in the
enactment of the law must substantially be the same as the House bill would be to deny the Senate's power
not only to "concur with amendments" but also to "propose amendments." It would be to violate the
coequality of legislative power of the two houses of Congress and in fact make the House superior to the
Senate.
*CASE 121 MISSING*
122. Prairie Du Chien Sanitarium Co. v. City of Prairie Du Chien

FACTS: Action begun September 18, 1941, by the Prairie du Chien Sanitarium Company, Inc., against the city of Prairie
du Chien to recover taxes paid under protest.

The plaintiff, successor to a private corporation, was reorganized and incorporated in 1940 under ch. 180, Stats., to
maintain a hospital and sanitarium. The property was acquired from its predecessor by purchase. The doctors receive no
salaries from the hospital but they are provided with heated, unfurnished offices in the hospital rent free and one meal a
day. They use all the facilities of the hospital without paying. In return they supervise the hospital and its personnel
without compensation. The hospital cares for county and municipal patients for a contract price which is less than cost.
These patients comprise about thirty per cent of the total and are treated by Dr. Sattot and Dr. Dessloch without charge.
The other patients in the hospital are the private patients of these two doctors and other doctors. They are charged at
regular rates, though about ten per cent of the total number of all accounts are not collected. The patients of Dr. Satter
and Dr. Dessloch pay the hospital a fee for the use of the operating room, and they are billed by the doctors for their
services. The hospital allegedly takes all patients applying for admittance except mental cases and people suffering from
contagious diseases. Except for the two medical directors, all of the employees of the hospital are paid regular wages.

Appellant paid the personal property and real-estate taxes under protest and sues to recover them, alleging that it is
exempt under sec. 70.11(4), Stats., as a "benevolent association."

ISSUE: W/N the hospital, in this case, is a benevolent association

RULING: NO. The admission of pay patients does not detract from the charitable character of a hospital if all its funds
are devoted exclusively to the maintenance of the institution as a public charity. Where rendering charity is its
primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent
purposes of the institution, the mere fact that profit has been made will not deprive the hospital of its benevolent
character.

However, in this case, an association or corporation claiming to be benevolent, in order to qualify its property for
exemption from taxation, must use it so free from connection with profits accruing to those owning it as clearly to be a
charitable institution. Hence the personal property, grounds, and buildings of a hospital are not exempt when members
of the owner association are using the hospital as an adjunct to their private business in such a way that it becomes a
source of substantial help in the matter of earnings to be derived from the practice of their profession. Even if we
assume that the hospital is a benevolent association, the property is used as much to advance the individual fortunes of
the surgeons who manage it as it is for charitable purposes. There can be little doubt that the hospital is maintained
primarily for the greater convenience and profit of the managing doctors in the practice of their profession. The doctors
may, and under their management and control of the hospital did, give without recovering pay therefor of their time
and skill in caring for people who did not pay for such care, but by reason of the use of the hospital in relation to their
private practice the benefits extended were those of the doctors and not a contribution to public welfare by a
benevolent association.

123. Herrera vs QC Board of Assessment Appeals

The Director of Bureau of Hospitals authorized the petitioners to establish and operate the St. Catherine’s
Hospital. Petitioners sent a letter to the QC Assessor requesting exemption from payment of real estate tax on
the lot, building and other improvement comprising the hospital on the ground that it was established for
charitable and humanitarian purposes, not for commercial gain. Exemption was granted for the years 1953 to
1955.

Subsequently, the QC Assessor notified the petitioners that the said properties were reclassified from exempt
to taxable as it was ascertained that out 32 beds in the hospital, 12 of which are for pay-patients. A school of
midwifery is also operated within the premises of the hospital. QC Assessor assessed them for real property
taxes. Petitioner appealed the assessment to the respondent, which affirmed the decision of the Assessor.

Issue: W/N St. Catherine’s Hospital should be exempt from realty tax.
Ruling: Yes.

The exemption extends to facilities which are "incidental to and reasonably necessary for" the
accomplishment of said purposes, such as, in the case of hospitals, "a school for training nurses, a nurses'
home, property use to provide housing facilities for interns, resident doctors, superintendents, and other
members of the hospital staff, and recreational facilities for student nurses, interns and residents

124. Commissioner of Internal Revenue vs. Court of Appeals

FACTS: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and
activities that are beneficial to the public, especially the young people, pursuant to its religious, educational
and charitable objectives.

In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of its
premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees
collected from non-members. On July 2, 1984, the commissioner of internal revenue (CIR) issued an
assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for
deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency
withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its
basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of YMCA.

Private respondent claims that the YMCA “is a non-stock, non-profit educational institution whose revenues
and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its
properties and income.”

ISSUE: Whether or not PR’s claim is tenable.

RULING: NO. The Court reiterated that private respondent is exempt from the payment of property tax, but
not income tax on the rentals from its property. The bare allegation alone that it is a non-stock, non-profit
educational institution is insufficient to justify its exemption from the payment of income tax.

Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict interpretation
in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation should be manifest
and unmistakable from the language of the law on which it is based. Thus, the claimed exemption “must
expressly be granted in a statute stated in a language too clear to be mistaken.”

125. Lung Center of the PH vs Quezon City

Facts:

The petitioner Lung Center is a non-stock and non-profit entity. It is the registered owner of a parcel of
land. Erected in the middle lot is a hospital known as the Lung Center of the Philippines. A big space at the
ground floor is being leased to private parties, for canteen and small store spaces, and to medical or
professional practitioners who use the same as their private clinics for their patients whom they charge for
their professional services.

Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and
idle, while a big portion on the right side, at the corner, is being leased for commercial purposes to a private
enterprise known as the Elliptical Orchids and Garden Center.

The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients,
both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual
subsidies from the government.Both the land and the hospital building of the petitioner were assessed for real
property taxes in the amount of P4,554,860 by the City Assessor of Quezon City.

The petitioner filed a Claim for Exemption from real property taxes with the City Assessor, predicated on its
claim that it is a charitable institution. The petitioner’s request was denied,

Issue: W/N the property is tax exempt under the 1987 Constitution.

Ruling: Only the hospital is exempt from property tax.

The test whether an enterprise is charitable or not is whether it exists to carry out a purpose
reorganized in law as charitable or whether it is maintained for gain, profit, or private advantage. As a general
principle, a charitable institution does not lose its character as such and its exemption from taxes simply
because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives
subsidies from the government, so long as the money received is devoted or used altogether to the charitable
object which it is intended to achieve; and no money inures to the private benefit of the persons managing or
operating the institution.

However, under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable
institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes.
Accordingly, only those portions of the hospital used for patients whether paying or non-paying are exempt
from real property taxes. Those portions of its real property that are leased to private entities are not exempt
from real property taxes as these are not actually, directly and exclusively used for charitable purposes.

126. Lladoc vs Commissioner of Internal Revenue

Facts:
In 1957, the M.B. Estate, Inc. in Bacolod City donated P10,000 in case to Rev. Fr. Crispin Ruiz, the then
parish priest of Victorias, Negros Occidental and the predecessor of Rev. Fr. Casimiro Lladoc, for the
construction of a new Catholic Church. The total amount was actually spent for the purpose intended.

On March 1958, M.B. Estate filed a donor’s gift tax return. Subsequently, on April 1960, the CIR issued
an assessment for donee’s gift tax in the amount of P1,370 including surcharges, interest of 1% monthly from
May 1958 to June 1960 and the compromise for the late filing of the return against the Catholic Parish of
Victorias, Negros Occidental of which Lladoc was a priest.

Lladoc protested and moved to reconsider but it was denied. He then appealed to the CTA, in his
petition for review, he claimed that at the time of the donation, he was not the parish priest, thus, he is not
liable. Moreover, he asserted that the assessment of the gift tax, even against the Roman Catholic Church,
would not be valid, for such would be a clear violation of the Constitution. The CTA ruled in favor of the CIR.
Hence, the present petition.

Issue: Whether or not the donee’s gift tax should be paid.

Held: Yes.
Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation
cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious purposes. The exemption is only from the payment of taxes
assessed on such properties enumerated, as property taxes, as contra distinguished from excise taxes.

In the present case, what the Collector assessed was a donee's gift tax; the assessment was not on the
properties themselves. It did not rest upon general ownership; it was an excise upon the use made of the
properties, upon the exercise of the privilege of receiving the properties. Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A gift tax is not a property tax, but an excise tax imposed
on the transfer of property by way of gift inter vivos, the imposition of which on property used exclusively for
religious purposes, does not constitute an impairment of the Constitution.
 As well observed by the learned respondent Court, the phrase "exempt from taxation," as employed in
the Constitution should not be interpreted to mean exemption from all kinds of taxes. And there being no
clear, positive or express grant of such privilege by law, in favor of Lladoc, the exemption herein must be
denied.

However, the Court noted the merit of Lladoc’s claim, and held as liable the Head of Deocese for being
the real party in interest instead of Lladoc who was held to be not personally liable; the former manifested
that it was submitting himself to the jurisdiction and orders of the Court and he presented Lladoc’s brief, by
reference, as his own and for all purposes.

127. Arturo Tolentino vs. Secretary of Finance and Commissioner (Tax Exemption of Properties for Religious,
Charitable and Educational Purposes)

Facts: The present case involves motions seeking reconsideration of the Court’s decision dismissing the
petitions for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-
Added Tax Law. The motions, of which there are 10 in all, have been filed by the several petitioners.

The Philippine Press Institute, Inc. (PPI) contends that by removing the exemption of the press from the VAT
while maintaining those granted to others, the law discriminates against the press. At any rate, it is averred,
“even nondiscriminatory taxation of constitutionally guaranteed freedom is unconstitutional”, citing in
support of the case of Murdock v. Pennsylvania.

Chamber of Real Estate and Builders Associations, Invc., (CREBA), on the other hand, asserts that R.A. No. 7716
(1) impairs the obligations of contracts, (2) classifies transactions as covered or exempt without reasonable
basis and (3) violates the rule that taxes should be uniform and equitable and that Congress shall “evolve a
progressive system of taxation”.

Further, the Cooperative Union of the Philippines (CUP), argues that legislature was to adopt a definite policy
of granting tax exemption to cooperatives that the present Constitution embodies provisions on cooperatives.
To subject cooperatives to the VAT would, therefore, be to infringe a constitutional policy.

Issue: W/N sales tax on bible sales violative of religious freedom?

Ruling: No

The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its
imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence,
although its application to others, such those selling goods, is valid, its application to the press or to religious
groups, such as the Jehovah's Witnesses, in connection with the latter's sale of religious books and pamphlets,
is unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income or property of
a preacher. It is quite another thing to exact a tax on him for delivering a sermon. "The VAT is, however,
different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is
imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and
the lease of properties purely for revenue purposes. To subject the press to its payment is not to burden the
exercise of its right any more than to make the press pay income tax or subject it to general regulation is not
to violate its freedom under the Constitution

128. THE PHILIPPINE JUDGES ASSOCIATION vs HON. PETE PRADO G.R. No. 105371 November 11, 1993
FACTS:
Petitioners assailed the validity of Sec 35 R.A. No. 7354 which withdraw the franking privilege from the
Supreme Court, the Court of Appeals, the Regional Trial Courts, the Metropolitan Trial Courts, the Municipal
Trial Courts, and the Land Registration Commission and its Registers of Deeds, along with certain other
government offices. The petition assails the constitutionality of R.A. No. 7354 on the grounds that: (1) its title
embraces more than one subject and does not express its purposes; (2) it did not pass the required readings in
both Houses of Congress and printed copies of the bill in its final form were not distributed among the
members before its passage; and (3) it is discriminatory and encroaches on the independence of the Judiciary.

ISSUE: WON the assailed provision is constitutional?

HELD:
No. Article VI, Sec. 26(l), of the Constitution providing that "Every bill passed by the Congress shall
embrace only one subject which shall be expressed in the title thereof." The title of the bill is not required to
be an index to the body of the act, or to be as comprehensive as to cover every single detail of the measure. It
has been held that if the title fairly indicates the general subject, and reasonably covers all the provisions of
the act, and is not calculated to mislead the legislature or the people, there is sufficient compliance with the
constitutional requirement. We are convinced that the withdrawal of the franking privilege from some
agencies is germane to the accomplishment of the principal objective of R.A. No. 7354, which is the creation of
a more efficient and effective postal service system. Our ruling is that, by virtue of its nature as a repealing
clause, Section 35 did not have to be expressly included in the title of the said law.

The petitioners maintain that the second paragraph of Sec. 35 covering the repeal of the franking
privilege from the petitioners and this Court under E.O. 207, PD 1882 and PD 26 was not included in the
original version of Senate Bill No. 720 or House Bill No. 4200. As this paragraph appeared only in the
Conference Committee Report, its addition, violates Article VI, Sec. 26(2) of the Constitution. The petitioners
also invoke Sec. 74 of the Rules of the House of Representatives, requiring that amendment to any bill when
the House and the Senate shall have differences thereon may be settled by a conference committee of both
chambers. Casco Philippine Chemical Co. v. Gimenez laid down the rule that the enrolled bill, is conclusive
upon the Judiciary (except in matters that have to be entered in the journals like the yeas and nays on the final
reading of the bill). The journals are themselves also binding on the Supreme Court. Applying these principles,
we shall decline to look into the petitioners' charges that an amendment was made upon the last reading of
the bill that eventually became R.A. No. 7354 and that copies thereof in its final form were not distributed
among the members of each House. Both the enrolled bill and the legislative journals certify that the measure
was duly enacted i.e., in accordance with Article VI, Sec. 26(2) of the Constitution. We are bound by such
official assurances from a coordinate department of the government, to which we owe, at the very least, a
becoming courtesy. SC annuls Section 35 of the law as violative of Article 3, Sec. 1, of the Constitution
providing that no person shall "be deprived of the equal protection of laws." It is worth observing that the
Philippine Postal Corporation, as a government-controlled corporation, was created and is expected to
operate for the purpose of promoting the public service. While it may have been established primarily for
private gain, it cannot excuse itself from performing certain functions for the benefit of the public in exchange
for the franchise extended to it by the government and the many advantages it enjoys under its charter. 14
Among the services it should be prepared to extend is free carriage of mail for certain offices of the
government that need the franking privilege in the discharge of their own public functions.

129. JOHN HAY PEOPLES ALTERNATIVE COALITION vs. LIM (BCDA President)
G. R. No. 119775, October 24, 2003
FACTS: R.A. No. 7227 otherwise known as the "Bases Conversion and Development Act of 1992," which was
enacted setting out the policy of the government to accelerate the sound and balanced conversion into alternative
productive uses of the former military bases under the 1947 Philippines-United States of America Military Bases
Agreement, namely, the Clark and Subic military reservations as well as their extensions including the Camp John
Hay Station in the City of Baguio. The Baguio City government passed a number of resolutions, one of which is
Resolution No. 255, seeking and supporting the issuance by then President Ramos of a presidential proclamation
declaring an area of 288.1 hectares of the camp as a SEZ in accordance with the provisions of R.A. No. 7227. On
July 5, 1994 then President Ramos issued Proclamation No. 420 which established a SEZ on a portion of Camp John
Hay, and in effect, granted tax exemptions pursuant to R.A. No. 7227 to Subic SEZ extends to other SEZs. The
petitioners now allege that nowhere in R. A. No. 7227 is there a grant of tax exemption to SEZs yet to be
established in base areas, unlike the grant under Section 12 thereof of tax exemption and investment incentives to
the therein established Subic SEZ. The grant of tax exemption to the John Hay SEZ, petitioners conclude, thus
contravenes Article VI, Section 28 (4) of the Constitution which provides that "No law granting any tax exemption
shall be passed without the concurrence of a majority of all the members of Congress." On the other hand,
respondents contend that by extending to the John Hay SEZ economic incentives similar to those enjoyed by the
Subic SEZ which was established under R.A. No. 7227, the proclamation is merely implementing the legislative
intent of said law to turn the US military bases into hubs of business activity or investment. They underscore the
point that the government's policy of bases conversion can not be achieved without extending the same tax
exemptions granted by R.A. No. 7227 to Subic SEZ to other SEZs.

ISSUE: Whether or not Proclamation No. 420 (particularly Sec. 3) is UNCONSTITUTIONAL since it provides for
national and local tax exemption and grants other economic incentives to the John Hay SEZ

RULING: Yes. The SC ruled in favor of the Petitioners. It is clear that under Section 12 of R.A. No. 7227 it is only the
Subic SEZ which was granted by Congress with tax exemption, investment incentives and the like. There is no
express extension of the aforesaid benefits to other SEZs still to be created at the time via presidential
proclamation. While the grant of economic incentives may be essential to the creation and success of SEZs, free
trade zones and the like, the grant thereof to the John Hay SEZ cannot be sustained. The incentives under R.A. No.
7227 are exclusive only to the Subic SEZ, hence, the extension of the same to the John Hay SEZ finds no support
therein. Neither does the same grant of privileges to the John Hay SEZ find support in the other laws specified
under Section 3 of Proclamation No. 420, which laws were already extant before the issuance of the proclamation
or the enactment of R.A. No. 7227. More importantly, the nature of most of the assailed privileges is one of tax
exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt
any person or corporation or class of property from taxation, its power to exempt being as broad as its power to
tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local governments may
pass ordinances on exemption only from local taxes. The challenged grant of tax exemption would circumvent the
Constitution's imposition that a law granting any tax exemption must have the concurrence of a majority of all the
members of Congress. In the same vein, the other kinds of privileges extended to the John Hay SEZ are by tradition
and usage for Congress to legislate upon. If it were the intent of the legislature to grant to the John Hay SEZ the
same tax exemption and incentives given to the Subic SEZ, it would have so expressly provided in the R.A. No.
7227. Thus, the second sentence of Section 3 of Proclamation No. 420 is hereby declared NULL AND VOID and is
accordingly declared of no legal force and effect.

130. Philippine Airlines vs. Secretary of Finance

Facts:

Philippine Airlines, Inc., petitioner in G.R. No. 11582, . Republic Act No. 7716 namely, that it violates Art. IV, §
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.

Issue: Whether or not Republic Act No. 7716 is unconstitutional for violating Art. IV, § 26(1)

Ruling:

NO. The question is whether this amendment of § 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 as among those which the statute
amends. We think it is, since 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 § 103 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 its content.

The constitutional requirement that every bill passed by Congress shall embrace only one subject which
shall be expressed 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. Indeed, the title of Republic Act No. 7716 is not any more
general than the title of PAL's own franchise under P.D. No. 1590, and yet no mention is made of its tax
exemption.

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, § 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.

131 MIAA vs CA G.R. No. 155650. July 20, 2006

FACTS: MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable
years 1992 to 2001. MIAA’s real estate tax delinquency was estimated at P624 million. The City of Parañaque
issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor threatened to sell at
public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA
filed with the Court of Appeals an original petition sought to restrain the City of Parañaque from imposing real
estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. Paranaque’s
Contention: Section 193 of the Local Government Code expressly withdrew the tax exemption privileges of
“government-owned and-controlled corporations” upon the effectivity of the Local Government Code.
Respondents also argue that a basic rule of statutory construction is that the express mention of one person,
thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section
193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands
and Buildings are exempt from real estate tax. MIAA’s contention: Airport Lands and Buildings are owned by
the Republic. The government cannot tax itself. The reason for tax exemption of public property is that its
taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor.
Issue: Whether or not MIAA should be taxed by the Local Government of Paranaque
Held: No. MIAA is not a government-owned or controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax. There is no dispute that a government-
owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-
owned or controlled corporation. When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock
or non-stock corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and
the levying of fees andcorporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly,
or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its
capital stockMIAA is not organized as a stock or non-stock corporation. There is also no reason for local
governments to tax national government instrumentalities for rendering essential public services to
inhabitants of local governments. The only exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential public services for sound and compelling policy
considerations. There must be express language in the law empowering local governments to tax national
government instrumentalities. Any doubt whether such power exists is resolved against local governments.

132. Basco v PAGCOR 197 SCRA 52

Facts: Petitioners seek to annul the Philippine Amusement and Gaming Corporation Charter-PD 1869 on the
following grounds:
A. It waived the Manila City government's right to impose taxes and license fees, which is recognized by law;
B. Said charter has intruded into the local government's right to impose local taxes and license fees. This, in
contravention of the constitutionally enshrined principle of local autonomy;

Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any "tax
of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether
National or Local."

Issues:
1. WON the City of Manila had an inherent right to impose taxes, particularly license fees on gambling
2. WON Local Governments may tax instrumentalities of the National Government such as PAGCOR

Ruling:
1. No. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. The
Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal
corporations are mere creatures of Congress, which has the power of control over Local governments. And if
Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or
even take back the power.
 The City of Manila cannot impose license fees on gambling. As early as 1975, the power of local
governments to regulate gambling was withdrawn by P.D. No. 771 and was vested exclusively on the National
Government. Therefore, only the National Government has the power to issue "licenses or permits" for the
operation of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the
issuance of "licenses or permits" is no longer vested in the City of Manila.

2. No. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local
taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local
government. This doctrine emanates from the "supremacy" of the National Government over local
governments. Otherwise, mere creatures of the State can defeat National policies thru extermination of what
local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for
regulation."

Note: This case was decided before the LGC of 1991 took effect.