GENERAL PRINCIPLES as the investigation report thereon, to the SolGen.

•
• The said Court rendered a decision in favor of
Concept, Nature and
Citytrust granting him a refund in the amount of

Characteristics of P13,314,506.14 • A motion for reconsideration

Taxation and Taxes was filed by the SolGen, in addition a

supplemental motion was also filed contending
1.COMMISSIONER OF INTERNAL REVENUE for the first time that Citytrust had outstanding
vs. COURT OF TAX APPEALS G.R. No.
deficiency taxes. It was alleged that through an
106611, July 21, 1994 "The Government
cannot be estopped in matters of taxes" inter-office memorandum dated August 8, 1991,

he came to know only lately that Citytrust had

Facts: • On August 26, 1986, Citytrust Banking outstanding tax liabilities for 1984 in the amount
of 56,588,740.91 representing deficiency
Corporation filed for a claim of refund with the
income and business taxes. • The CTA issued a
BIR for the amount of P19,971,745. • On August
resolution denying the motion, consequently,
28, 1986, in order to interrupt the prescription,
petitioner filed a petition for review with the CA,
Citytrust
which the latter affirmed the judgment of the
filed a petition with the CTA, claiming the refund
of its overpayment for the years 1983, 1984 and former.

1985 in the total amount of 19,971,745. • The Issue: • Whether or not Citytrust is indeed entitled

Solicitor General, in behalf of the Commissioner, to a tax refund.

opposed
such claims arguing that the mer averment of Held: • No, the case is remanded back to the
Citytrust suffering a net loss in 1985 does not
ipso facto merit a refund; and that the amounts Court of Tax Appeals for further proceedings. •
claimed by Citytrust on the 1983 overpayment
The BIR, represented by the Commissioner, was
are not properly documented; and that
denied a day in court by reason of mistakes
assuming that petitioner is entitled to refund, the
and/or negligence of its employees. • The
same has prescribed with respect to income
unavailability of the necessary records which were
payments prior to August 28, 1984. • On
not
February 20, 1991, the case was submitted for
transmitted by the Refund Audit Division of the
decision. The BIR to said counsel, as well as the investigation
Commissioner of Internal Revenue could not report despite repeated requests, constrained
present any evidence by reason of repeated
failure of the Tax Credit/Refund Division of the the petitioner's counsel to subkit the case for
BIR To transmit the record of the case, as well
decision on Feb. 20, 1991. • It is a long and
 to refund to the Cebu Portland Cement
firmly established rule that the Government is
not bound by the errors committed by its Company the amount of P359,408.98,
agents. Nowhere is the aforestated rule more
true than in the field of taxation. It is representing overpayments of ad valorem taxes
axiomatic that the Government cannot and on cement produced and sold by it after October

must not be estopped particularly in matters 1957. • On March 28, 1968, following denial of

involving taxes. • Taxes are the lifeblood of the motions for reconsideration filed by both the
petitioner and the private respondent, the latter
nation through which the
moved for a writ of execution to enforce the said
government agencies continue to operate
and with which the State effects its functions judgment. • The motion was opposed by the
for the welfare of its constituents. (Lifeblood
petitioner on the ground that the private
Doctrine) • Further, it also worth noting that the respondent had an outstanding sales tax liability
to which the judgment debt had already been
CTA erred in denying petitioner's supplemental
credited. In fact, it was stressed, there was still
motion alleging the deficiency income and a balance owing on the sales taxes in the
amount of P 4,789,279.85 plus 28% surcharge.
business tax assessment against Citytrust . •
• On April 22, 1968, the Court of Tax Appeals
The fact of such deficiency is intimately related
granted the motion, holding that the alleged
with the right if the respondent bank to claim a sales tax liability of the private respondent was
still being questioned and therefore could not be
refund for the same year. • Private Respondent
set-off against the refund.
cannot be entitled to refund and at the same time
ISSUE: Whether or not the judgment debt can
be liable for a tax deficiency. • The grant of
be enforced against private respondent’s sales
refund is founded on the assumption that the tax
tax liability, the latter still being questioned.
return is valid - the facts stated therein are true

and correct. • The deficiency assessment, RULING: • The argument that the assessment
although not yet final, created a doubt and
cannot as yet be enforced because it is still being
constitutes a challenge against the truth and
accuracy of the facts stated in the return which contested loses sight of the urgency of the need
cannot be the basis for the grant of refund.
2. COMMISSIONER OF INTERNAL REVENUE to collect taxes as "the lifeblood of the
vs. CEBU PORTLAND CEMENT COMPANY government." If the payment of taxes could be
and COURT OF TAX APPEALS G.R. No. L- postponed by simply questioning their validity,
the machinery of the state would grind to a halt
29059 December 15, 1987 FACTS: • By virtue and all government functions would be

of a decision of the Court of Tax Appeals rendered paralyzed. • The Tax Code provides: Sec. 291.

on June 21, 1961, as modified on appeal by the Injunction not available to restrain collection of
Supreme Court on February 27, 1965, the
tax. - No court shall have authority to grant an
Commissioner of Internal Revenue was ordered
 1972, Presidential Decree No. 20 amended R.A.
injunction to restrain the collection of any national
No. 6359 by making absolute the prohibition to
internal revenue tax, fee or charge imposed by
increase monthly rentals below P300.00 and by
this Code. • It goes without saying that this
indefinitely suspending the aforementioned
injunction is available not only provision of the Civil Code, excepting leases
when the assessment is already being with a definite period. • Consequently, the
questioned in a court of justice but more so if,
as in the instant case, the challenge to the Reyeses, petitioners herein, were precluded from
assessment is still-and only-on the raising the rentals and from ejecting the tenants.

administrative level. There is all the more reason • In 1973, respondent City Assessor of Manila re-
to apply the rule here because it appears that classified and reassessed the value of the subject
even after crediting of the refund against the tax
deficiency, a balance of more than P 4 million is properties based on the schedule of market
still due from the private respondent. values duly reviewed by the Secretary of
Finance. The revision, as expected, entailed an
increase in the corresponding tax rates
3. REYES vs. ALMANZOR G.R. Nos. L-49839- prompting petitioners to file a Memorandum of
46, April 26, 1991 "The power to tax is Disagreement with the Board of Tax
restricted by the provisions of the Constitution." Assessment Appeals.
• They averred that the reassessments made
were "excessive, unwarranted, inequitable,
Facts: • Petitioners J.B.L. Reyes, Edmundo and
confiscatory and unconstitutional" considering
Milagros Reyes are that the taxes imposed upon them greatly
owners of parcels of land situated in Tondo and exceeded the annual income derived from their
Sta. Cruz Districts, City of Manila, which are properties. They argued that the income
leased and entirely occupied as dwelling sites approach should have been used in determining
by tenants. Said tenants were paying monthly the land values instead of the comparable sales

rentals not exceeding three hundred pesos approach which the City Assessor adopted. • The

(P300.00) in July, 1971. • On July 14, 1971, the Board of Tax Assessment Appeals, however,

National Legislature enacted Republic Act considered the assessments valid. • The
No. 6359 prohibiting for one year from its Reyeses appealed to the Central Board of
effectivity, an increase in monthly rentals of
dwelling units or of lands on which another's Assessment Appeals. • The Board of Hearing
dwelling is located, where such rentals do not
exceed three hundred pesos (P300.00) a month Commissioners conducted an ocular inspection

but allowing an increase in rent by not more than with the presence of two representatives of the

10% thereafter. • The said Act also suspended City

Assessor prior to the hearing of the case.
paragraph (1) of Article 1673 of the Civil Code for Neither the owners nor their authorized
two years from its effectivity thereby disallowing representatives were present during the said
the ejectment of lessees upon the expiration of ocular inspection despite proper notices served
the usual legal period of lease. On October 12, them. It was found that certain parcels of land
were below street level and were affected by the
strongest of all the powers of government. •
tides. • On June 10, 1977, the Central Board of
But for all its plenitude the power to tax is not
Assessment Appeals
unconfined as there are restrictions. Adversely
rendered its decision, modifying the Board and
allowed a 20% reduction of the market values effecting as it does property rights, both the
for the lots covered by Tax Declaration Nos. due process and equal protection clauses of
(1430) PD-1432, PD-1509, 146 and (1) PD-266. the Constitution may properly be invoked to
invalidate in appropriate cases a revenue
• The Reyeses filed a motion for reconsideration
measure. • In the same vein, the due process
which was
subsequently denied, hence the instant petition. clause may be invoked where a taxing statute

is so arbitrary that it finds no support in the

Issue: • Whether or not the adoption of the
Constitution. • The taxing power has the
"comparable sales method" by
the board in fixing the assessed value of the authority to make a reasonable and
appellants was proper natural classification for purposes of
taxation but the government's act must not
be prompted by a spirit of hostility, or at the
Held: • NO. It is unquestionable that both the very least discrimination that finds no
support in reason. It suffices then that the
"Comparable Sales
Approach" and the "Income Approach" are laws operate equally and uniformly on all
generally acceptable methods of appraisal for
taxation purposes. However, it is conceded that persons under similar circumstances or that
the propriety of one as against the other would all persons must be treated in the same
manner, the conditions not being different
of course depend on several factors. • Under both in the privileges conferred and the

Art. VIII, Sec. 17 (1) of the 1973 Constitution, liabilities imposed. • Finally under the Real

then enforced, the rule of taxation must not Property Tax Code (P.D. 464 as amended), it is
declared that the first Fundamental Principle to
only be uniform, but must also be equitable
guide the appraisal and assessment of real
and progressive. • Uniformity has been
property for taxation purposes is that the property
defined as that principle by which all must be "appraised at its current and fair market
taxable articles or kinds of property of the
same class shall be taxed at the same rate. value." • By no strength of the imagination can the
• Taxation is said to be equitable when its
market value of
burden falls on those better able to pay.
properties covered by P.D. No. 20 be equated
Taxation is progressive when its rate goes
with the market value of properties not so
up depending on the resources of the
covered. The former has naturally a much lesser
person affected. • The power to tax "is an
market value in view of the rental restrictions. •
attribute of sovereignty". In fact, it is the
Ironically, in the case at bar, not even the factors
determinant of the assessed value of subject reinsurers the premiums for 1953 and 1954. Said
properties under the "comparable sales premiums were excluded by Phil. Guaranty from
approach" were presented by the public its gross income when it filed its income tax
respondents, namely: (1) that the sale must returns for 1953 and 1951. Furthermore, it did
represent a bonafide arm's length transaction
not withhold or pay tax on them. •
between a willing seller and a willing buyer and
Consequently, the Commissioner of Internal
(2) the property must be comparable property. •
Revenue (respondent) assessed Phil. Guaranty
Nothing can justify or support their view as it is of
against withholding tax on the ceded reinsurance
judicial notice
that for properties covered by P.D. 20 especially premiums. • Phil. Guaranty protested the
during the time in question, there were hardly
any willing buyers. As a general rule, there were assessment on the ground that the premiums are
no takers so that there can be no reasonable not subject to tax for the premiums did not
basis for constitute income from sources within the
the conclusion that these properties were Philippines because the foreign reinsurers did
comparable with other residential properties not not engage in business in the Philippines and
CIR's previous rulings did not require insurance
burdened by P.D. 20. • Taxes are the lifeblood of
companies to withhold income tax due from
the government and so should be
foreign companies.
collected without unnecessary hindrance.
However, such collection should be made in ISSUE: W/N insurance companies required to
accordance with law as any arbitrariness will withhold tax on reinsurance premiums ceded to
negate the very reason for government itself It is foreign insurance companies
therefore necessary to reconcile the apparently
RULING: • YES. The reinsurance contracts
conflicting interests of the authorities and the
taxpayers so that the real purpose of taxations, however show that the transactions or activities
which is the promotion of the common good, that constituted the undertaking to reinsure
may be achieved. Philippine Guaranty Co., Inc. against losses
arising from
the original insurances in the Philippines were
4. PHIL. GUARANTY CO. INC. VS COMM. OF performed in the Philippines. The reinsurance
INTERNAL REVENUE (CIR) GR NO. L-22074 premiums were income created from the
April 30, 1965 undertaking of the foreign reinsurance

companies to reinsure Philippine Guaranty Co.,

FACTS: • The Phil. Guaranty (petitioners), a
Inc. against liability for loss under original
domestic insurance company, entered into
insurances. Such undertaking, as explained
reinsurance contracts with foreign insurance
above, took place in the Philippines. These
companies not doing business in the
insurance premiums therefore came from
Philippines, thereby ceding to the foreign
sources within the Philippines and, hence, are
reinsurers a portion of the premiums on
insurances it has originally underwritten in the subject to corporate income tax. • The power to

Philippines. • Phi. Guaranty ceded to the foreign lax is an attribute of sovereignty. It is a power
 The Court
emanating from necessity. It is a necessary
of Tax Appeals had seen it differently. Agreeing
burden to preserve the State's sovereignty and a with Algue, it held that the said amount had
means to give the citizenry an army to resist an been legitimately paid by the private respondent
aggression, a navy to defend its shores from for actual services rendered. The payment was
invasion, a corps of civil servants to serve, in the form of promotional fees.
public improvements designed for the
enjoyment of the citizenry and those which
ISSUE: Whether or not the Collector of Internal
come within the State's territory, and facilities
Revenue correctly disallowed the P75,000.00
and protection which a government is supposed deduction claimed by private respondent Algue
as legitimate business expenses in its income
to provide. Considering that the reinsurance tax returns.
premiums in question were afforded
protection by the government and the
RULING: • The Supreme Court agrees with the
recipient foreign reinsurers exercised rights
and privileges guaranteed by our laws, such respondent court that the amount of the
reinsurance premiums and reinsurers promotional fees was not excessive. The
should share the burden of maintaining the amount of P75,000.00 was 60% of the total
state. commission. This was a reasonable proportion,
considering that it was the payees who did
practically everything, from the formation of the
5. COMMISSIONER OF INTERNAL REVENUE
vs. ALGUE and THE COURT OF TAX Vegetable Oil Investment Corporation to the
APPEALS G.R. No. L-28896 February 17,
actual purchase by it of the Sugar Estate
1988 FACTS: • The Philippine Sugar Estate
properties. • It is said that taxes are what we pay
Development Company had earlier appointed
Algue as its agent, authorizing it to sell its land, for civilization society. Without taxes, the
factories and oil manufacturing process. government would be paralyzed for lack of the
Pursuant to such authority, Alberto Guevara, Jr., motive power to activate and operate it. Hence,
Eduardo Guevara, Isabel Guevara, Edith, despite the natural reluctance to surrender part
O'Farell, and Pablo Sanchez, worked for the
of one's hard earned income to the taxing
formation of the Vegetable Oil Investment

Corporation, inducing other persons to invest in authorities, every person who is able to must
contribute his share in the running of the
it. Ultimately, after its incorporation largely government.
through the promotion of the said persons, this
new corporation purchased the PSEDC
properties. For this sale, Algue received as 6. LUTZ vs. ARANETA G.R. No. L-7859
agent a commission of P126,000.00, and it was December 22, 1955
from this commission that the P75,000.00
promotional fees were paid to the aforenamed FACTS: • Promulgated in 1940, the law in

individuals. • The petitioner contends that the question opens (section 1) with a declaration of
emergency, due to the threat to our industry by
claimed deduction of P75,000.00 was properly
the imminent imposition of export taxes upon
disallowed because it was not an ordinary
sugar as provided in the Tydings-McDuffie Act,
reasonable or necessary business expense.
 purpose for which a tax may be constitutionally
and the "eventual loss of its preferential position
levied. The action having been dismissed by the
in the United States market"; wherefore, the Court of First Instance, the plaintiffs appealed
national policy was expressed "to obtain a the case directly to this Court
readjustment of the benefits derived from the
sugar industry by the component elements ISSUE: Whether or not taxes imposed by
thereof" and "to stabilize the sugar industry so Commonwealth Act No. 567, otherwise known
as to prepare it for the eventuality of the loss of as the Sugar Adjustment Act is legal?
its preferential position in the United States
RULING: • As the protection and promotion of
market and the imposition of the export taxes." •
the sugar industry is a matter of public concern the
In section 2, Commonwealth Act 567 provides for
Legislature may determine within reasonable
an increase of the existing tax on the
bounds what is necessary for its protection and
manufacture of sugar, on a graduated
expedient for its promotion. Here, the legislative
basis, on each picul of sugar manufactures;
must be allowed full play, subject only to the test
while section 3 levies on owners or persons in
of reasonableness; and it is not contended that
control of lands devoted to the cultivation of
the means provided in section 6 of
sugar cane and ceded to others for a
Commonwealth Act No. 567 bear no relation to
consideration, on lease or otherwise. • Plaintiff,
the objective pursued or are oppressive in
Walter Lutz, in his capacity as Judicial character. If objective and methods are alike
Administrator of the Intestate Estate of Antonio constitutionally valid, no reason is seen why the
Jayme Ledesma, seeks to recover from the state may not levy taxes to raise funds for their
Collector of Internal Revenue the sum of prosecution and attainment. Taxation may be
P14,666.40 paid by the estate as taxes, under made the implement of the state's police power.
section 3 of the Act, for the crop years 1948-
• It is inherent in the power to tax that a state be
1949 and 1949-1950; alleging that such tax is
free to select the subjects of taxation, and it has
unconstitutional and void, being levied for the aid
been repeatedly held that "inequalities which
and support of the sugar industry exclusively, result from a singling out of one particular class
which in plaintiff's opinion is not a public for taxation or exemption infringe no
constitutional limitation
7. GOMEZ vs. PALOMAR G.R. No. L-23645, October 29, 1968 FACTS: • Republic Act 1635 as

amended by Republic Act 2631 provides o To help raise funds for the Philippine Tuberculosis Society, the
Director of Posts shall order for the period from August nineteen to September thirty every year the
printing and issue of semi-postal stamps of different denominations with face value showing the regular

postage charge plus the additional amount of five centavos for the said purpose o During the said period,

no mail matter shall be accepted in the mails unless it bears such semi-postal stamps o Provided, That no

such additional charge of five centavos shall be imposed on newspapers. o The additional proceeds

realized from the sale of the semi-postal stamps shall constitute a special fund and be deposited with the
National Treasury to be expended by the Philippine Tuberculosis Society in carrying out its noble work to
prevent and eradicate tuberculosis. • The Postmaster issued 4 Administrative Orders. One Order stated

that no mail matter of whatever class and whether domestic or foreign, posted at any Philippine Post Office

and addressed for delivery domestically or abroad will be accepted unless it bears the semi-postal
stamp showing the additional value of five centavos for the Philippine Tuberculosis Society. •

Admin Order 3, exempts “Government and its Agencies and Instrumentalities Performing Governmental

Functions.” From the 5 centavo stamp. Admin Order. 10 also exempts copies of periodical publications
received for mailing under any class of mail matter, including newspapers and magazines admitted as

second-class mail. • On September l5, 1963 the petitioner Benjamin P. Gomez mailed a letter at the post

office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of 1014
Dagohoy Street, Singalong, Manila did not bear the special anti- TB stamp required by the statute, it was

returned to the petitioner. • In view of this development, the petitioner brough suit for declaratory relief in

the Court of First Instance of Pampanga, to test the constitutionality of the statute, as well as the
implementing administrative orders issued, contending that it violates the equal protection clause of the

Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the statute

and the orders unconstitutional; hence this appeal by the respondent postal authorities. • Petitioner argues

that the statute is violative of the equal protection clause of the Constitution. More specifically the claim is
made that it constitutes mail users into a class for the purpose of the tax while leaving untaxed the rest of

the population and that even among postal patrons the statute discriminatorily grants exemption to
newspapers while Administrative Order 9 of the respondent Postmaster General grants a similar

exemption to offices performing governmental functions. . • He further argues that the Tax is not for public

purpose since no special benefits accrue to mail users as taxpayers, and, it violates the rule of uniformity of

taxation
ISSUE: (1) Whether or not the implementing administrative orders issued violates the equal protection
clause of the Constitution as well as the rule of uniformity and equality of taxation? (2) Whether or not the

tax is not for public purpose? (3) Whether or not it violates the rule of uniformity of taxation?

RULING: • (1) NO. It is inherent in the power of legislature to select subjects of taxation and to grant

exemptions. They may also create classes of individuals to be taxed. • Indeed, it is said that in the field of
6
taxation, more than in other areas, the legislature possesses the greatest freedom in classification. The
reason for this is that traditionally, classification has been a device for fitting tax programs to local needs
and usages in order to achieve an equitable distribution of the tax burden. 7
• the classification of mail users is not without any reason. It is based on ability to pay, let alone the

enjoyment of a privilege, and on administrative convinience. In the allocation of the tax burden, Congress
must have concluded that the contribution to the anti-TB fund can be assured by those whose who can
afford the use of the mails. • The classification is likewise based on considerations of administrative

convenience. For it is now a settled principle of law that "consideration of practical administrative
convenience
and cost in the administration of tax laws afford adequate ground for imposing a tax on a well recognized

and defined class." In the case of the anti-TB stamps, undoubtedly, the single most important and

influential consideration that led the legislature to select mail users as subjects of the tax is the relative ease
and convenience of collecting the tax through the post offices. The small amount of five centavos does
not justify the great expense and inconvenience of collecting through the regular means of collection. On

the other hand, by placing the duty of collection on postal authorities the tax was made almost self-

enforcing, with as little cost and as little inconvenience as possible. • As for the Government and its

instrumentalities, their exemption rests on the State's sovereign immunity from taxation. The State cannot
be taxed without its consent and such consent, being in derogation of its sovereignty, is to be strictly

construed. Administrative Order 9 of the respondent Postmaster General, which lists the various offices and
instrumentalities of the Government exempt from the payment of the anti-TB stamp, is a restatement of

this well-known principle of constitutional law. • (2) NO. The eradication of a dreaded disease is a public

purpose, but if by public purpose the petitioner means benefit to a taxpayer as a return for what he pays,

then it is sufficient answer to say that the only benefit to which the taxpayer is constitutionally entitled is
that derived from his enjoyment of the privileges of living in an organized society, established and
safeguarded by the devotion of taxes to public purposes. Nor is the money taxed to be given to a private

organization (Philippine Tuberculosis Society) as claimed by the Trial Courtthe Society is merely an agency
by the State to carry out a public function. The money is a special fund that does not need appropriation

by law • (3) NO. the rule of uniformity and equality of taxation infringed by the imposition of a flat rate rather

than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the service

rendered. We have said that considerations of administrative convenience and cost afford an adequate
ground for classification. The same considerations may induce the legislature to impose a flat tax which in
effect is a charge for the transaction, operating equally on all persons within the class regardless of the
amount involved.
8. CHAVEZ vs. ONGPIN G.R. No. 76778 June 6, 1990

FACTS: • For purposes of real property taxation, a general revision of assessment was completed in 1984

based on Sec. 21 of PD 464 which provides for a continuing process of revising assessments once every 5
years. Previously, Real Property Tax (RPT) is based on 1978 values.

SEC. 21. General Revision of Assessments. — Beginning with the calendar year 1978,, the provincial or

city assessor shall make a general revision of real property assessments in the province or city to take
effect January 1, 1979, and once every five years thereafter: Provided; however, That if property values
in a province or city, or in any municipality, have greatly changed since the last general revision, the

provincial or city assessor may, with the approval of the Secretary of Finance or upon his direction,
undertake a general revision of assessments in the province or city, or in any municipality before the fifth
year from the effectivity of the last general revision.

• EO 1019 was issued in 1985, deferring the implementation of the increase in RPT resulting from the

revised assessments, from Jan. 1, 1985 to Jan. 1, 1988. This is due to government’s recognition of the
financial burden to the taxpayers that will result from an increase in real property taxes (increase in

values = increase in taxes). • EO 73, the subject of this case, was subsequently issued in 1986 changing

the date of implementation of the 1984 values from Jan. 1, 1988 to Jan. 1, 1987 (thus repealing EO 1019

by shortening the period of suspension). This finds justification in its whereas clause which states that the
local government units were deprived of an additional revenue as a result of the suspension brought

about by EO 1019. • Petitioner Chavez assails the constitutionality of EO 73 alleging that said order

accelerated the implementation of the 1984 values, mandating an excessive increase in real property taxes
by 100% to 400% on improvements, and up to 100% on land which results to oppression at a period of
time when harsh economic conditions prevail.
• The intervenor Realty Owners Association of the Philippines, Inc. (ROAP), which is the national
association of owners-lessors, joins Chavez in his petition to declare unconstitutional EO 73, but

additionally alleges that PD 464 is unconstitutional.

ISSUE: Whether or not EO 73 is unconstitutional

RULING: NO

• RATIO RELATED TO TOPIC: Without EO 73, the basis for collection of real property taxes will
still be the 1978 revision of property values. Certainly, to continue collecting real property taxes
based on valuations arrived at several years ago, in disregard of the increases in the value of real

properties that have occurred since then, is not in consonance with a sound tax system. Fiscal

adequacy, which is one of the characteristics of a sound tax system, requires that sources of
revenues must be adequate to meet government expenditures and their variations.

• The attack on EO 73 has no legal basis as the general revision of assessments is a continuing process

mandated by Section 21 of PD 464. If at all, it is PD 464 which should be challenged as constitutionally

infirm. However, Chavez failed to raise any objection against said decree. It was ROAP which questioned

the constitutionality thereof. Unfortunately for ROAP, its allegation that PD 464 is unconstitutional is not

proper to be resolved in the present petition. As a general rule, an intervention is limited to the field of

litigation open to the original parties. • Furthermore, PD 464 furnishes the procedure by which a tax

assessment may be questioned: Within 60 days from the date of receipt of the, written notice of
assessment, any owner who doubts the assessment of his property, may appeal to the Local Board of
Assessment Appeals. In case the, owner or administrator of the property or the assessor is not satisfied
with the decision of the Local Board of Assessment Appeals, he may, within 30 days from the receipt of

the decision, appeal to the Central Board of Assessment Appeals. The decision of the Central Board of
Assessment Appeals shall become final and executory after
the lapse of fifteen days from the date of receipt of the decision. • Chavez argues further that the

unreasonable increase in real property taxes brought about by Executive Order No. 73 amounts to a
confiscation of property repugnant to the constitutional guarantee of due process, invoking the cases of
Ermita-Malate Hotel, et al. v. Mayor of Manila and Sison v. Ancheta, et al.

SC: The reliance on these two cases is certainly misplaced because the due process requirement called for

therein applies to the "power to tax." EO 73 does not impose new taxes nor increase taxes.

(Aubbrey)

9. RENATO V. DIAZ and AURORA MA. F. TIMBOL V. THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE G.R. No. 193007, July 19, 2011

FACTS:

• Petitioners claim that they have an interest as regular users of tollways in stopping the BIR action. •

Diaz – sponsored the approval of Republic Act 7716 (EVAT Law) and Republic Act 8424 (NIRC) at the

House of Representatives. • Timbol – served as Assistant Secretary of the DTI and consultant of the Toll

Regulatory Board (TRB) in the past administration. • Petitioners allege that BIR attempted during the

administration of President GMA to impose VAT on toll fees. • The imposition was deferred. • Upon

President Noynoy’s assumption of office in 2010, the BIR revived the idea and would impose the challenged

tax on toll fees beginning August 16, 2010 unless judicially enjoined. • Petitioners hold the view that— o

Congress did not intend to include toll fees within the meaning of “sale of services” that are subject to VAT o

Toll fee is a “user’s tax,” not a sale of services; o To impose VAT on toll fees would amount to a tax on
public service;
o Since VAT was never factored into the formula for computing toll fees, its imposition would violate the
non-

• • • impairment clause of the constitution Court issued a TRO, enjoining the implementation of the VAT.

OSG filed the government’s comment. The government avers— o that the NIRC imposes VAT on all kinds of

services of franchise grantees, including tollway operations, except where the law provides otherwise; o

that the Court should seek the meaning and intent of the law from the words used in the statute; and o that
the imposition of VAT on tollway operations has been the subject as early as 2003 of several BIR rulings

• and circulars. Petitioners point out that tollway operators cannot be regarded as franchise grantees under

the NIRC since they do not hold legislative franchises.

ISSUE:

Whether or not toll fees collected by tollway operators may be subjected to value-added tax.

RULING:

YES. Toll fees collected by tollway operators may be subjected to • value-added tax. Section 1081

of the NIRC imposes VAT on “all kinds of services” rendered in the Philippines for a fee, including those

specified in the list. o Every activity that can be imagined as a form of “service” rendered for a fee should be

deemed included unless some provision of law especially excludes it. o VAT is imposed on “all kinds of

services” and tollway operators who are engaged in constructing, maintaining, and operating expressways

are no different from lessors of property, transportation contractors, etc. o Not only do tollway operators

come under the broad term “all kinds of services,” they also come under the
specific class described in Section 108 as “all other franchise grantees” who are subject to VAT, “except

• those under Section 119 of this Code.” VAT on tollway operations cannot be deemed a tax on tax due to

the nature of VAT as an indirect tax. o VAT is assessed against the tollway operator’s gross receipts and
not necessarily on the toll fees. Although the tollway operator may shift the VAT burden to the tollway

user, it will not make the latter directly liable for the VAT. The shifted VAT burden simply becomes part of the

toll fees that one has to pay in order to use the tollways. o MIAA v. Court of Appeals does not apply. Also,

the Court emphasized that toll fees are not taxes since they are not assessed by the BIR and do not go

the general coffers of the government. o Toll fees are collected by private operators as reimbursement for
their costs and expenses with a view to a profit while taxes are imposed by the government as an
attribute of its sovereignty. Even if the toll fees were treated as user’s tax, the VAT can not be deemed as

a ‘tax on tax’ since the VAT is imposed on the tollway operator and the fact that it might pass-on the same
to the tollway user, it will not make the latter directly liable for VAT since the shifted VAT simply becomes
part of the

• cost to use the tollways. Administrative feasibility is one of the canons of a sound tax system. It simply

means that the tax system should be capable of being effectively administered and enforced with the least
inconvenience to the taxpayer. Non-observance of the canon, however, will not render a tax imposition

invalid “except to the extent that specific constitutional or statutory limitations are impaired.“ o Even if the
imposition of VAT on tollway operations may seem burdensome to implement, it is not necessarily invalid
unless some aspect of it is shown to violate any law or the Constitution.

1 “...services of franchise grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all

other franchise grantees except those under Section 119 of this Code...”

• Classifications and motor vehicle for hire and one which is purely
for private use. Neither does it distinguish
Distinctions between a motor vehicle registered in the City of
Manila and one registered in another place but
10. ASSOCIATION OF CUSTOM BROKERS,
INC. vs. MUNICIPAL BOARD G.R. No. L-4376 occasionally comes to Manila and uses its
May 22, 1953
streets and public highways. This is an inequality

FACTS: • The Association of Customs Brokers, which we find in the ordinance, and which
renders it offensive to the Constitution.
Inc., which is composed of all brokers and public 11. ESSO STANDARD EASTERN, INC v.
COMMISSIONER OF INTERNAL REVENUE
service operators of motor vehicles in the City of G.R. Nos. L-28508-9, July 7, 1989
Manila challenge the validity Ordinance No.
3379 on the ground that (1) while it levies a so-
FACTS: • In CTA Case No. 1251, Esso
called property tax it is in reality a license tax
which is beyond the power of the Municipal
Standard Eastern Inc. (Esso) deducted from its
Board of the City of Manila; (2) said ordinance
gross income for 1959, as part of its ordinary
offends against the rule of uniformity of taxation;
and necessary business expenses, the amount
and (3) it constitutes double taxation. • The it had spent for drilling and exploration of its

petroleum concessions. This claim was

respondents contend on their part that the
disallowed by the Commissioner of Internal
challenged ordinance imposes a property tax
which is within the power of the City of Manila to Revenue (CIR) on the ground that the expenses
impose under its Revised Charter [Section 18 should be capitalized and might be written off as
(p) of Republic Act No. 409], and that the tax in a loss only when a "dry hole" should result.
question does not violate the rule of uniformity Esso then filed an amended return where it
of taxation, nor does it constitute double taxation. asked for the refund of P323,279.00 by reason
of its abandonment as dry holes of several of its
ISSUE: Whether or not the ordinance is null and oil wells. Also claimed as ordinary and
void necessary expenses in the same return was the

amount of P340,822.04, representing margin

RULING: • The ordinance infringes the rule of
fees it had paid to the Central Bank on its profit
the uniformity of taxation ordained by our remittances to its New York head office. • On
Constitution. Note that the ordinance exacts the
August 5, 1964, the CIR granted a tax credit of
tax upon all motor vehicles operating within the
City of Manila. It does not distinguish between a
 profit or of minimizing a loss in the Philippines
P221,033.00 only, disallowing the claimed
exclusively.
deduction for the margin fees paid on the
ground that the margin fees paid to the Central
12. PROGRESSIVE DEVELOPMENT
Bank could not be considered taxes or allowed as
CORPORATION v. QUEZON CITY G.R. No. L-
deductible business expenses. • Esso appealed
36081, April 24, 1989
to the Court of Tax Appeals (CTA) for the refund
of the margin fees it had earlier paid contending FACTS: • On December 24, 1969, the City
that the margin fees were deductible from gross
income either as a tax or as an ordinary and Council of Quezon City adopted Ordinance No.
necessary business expense. However, Esso’s 7997, otherwise known as the Market Code of

appeal was denied. Quezon City. Section 3 of said ordinance provides

ISSUE: (1)Whether or not the margin fees are that “privately owned and operated public
taxes. (2)Whether or not the margin fees are markets shall submit monthly to the Treasurer's
necessary and ordinary business expenses. Office, a certified list of stallholders showing the
amount of stall fees or rentals paid daily by each
RULING: (1)No. A tax is levied to provide stallholder, ... and shall pay 10% of the gross
revenue for government operations, while the receipts from stall rentals to the City, ... , as
proceeds of the margin fee are applied to supervision fee”. • On July 15, 1972,
strengthen our country's international reserves.
The margin fee was imposed by the State in the Progressive Development Corporation
exercise of its police power and not the power of (Progressive), owner and operator of a public
market known as the "Farmers Market &
taxation.
Shopping Center" filed a Petition for Prohibition
with Preliminary Injunction against Quezon City
(2)No. Ordinarily, an expense will be considered
on the ground that the supervision fee or license
'necessary' where
tax imposed by the above-mentioned ordinance
the expenditure is appropriate and helpful in the
development of the taxpayer's business. It is is in reality a tax on income which Quezon City
'ordinary' when it connotes a payment which is
normal in relation to the business of the may not impose, the same being expressly
prohibited by Republic Act No. 2264, as
taxpayer and the surrounding circumstances. amended, otherwise known as the Local
Since the margin fees in question were incurred Autonomy Act. • In its Answer, Quezon City,
for the remittance of funds to Esso's Head
Office in New York, which is a separate and through the City Fiscal, contended that it had
distinct income taxpayer from the branch in the authority to enact the questioned ordinances,
Philippines, for its disposal abroad, it can never maintaining that the tax on gross receipts
be said therefore that the margin fees were
imposed therein is not a tax on income. • The
appropriate and helpful in the development of
Esso's business in the Philippines exclusively or
lower court ruled that the questioned imposition is
were incurred for purposes proper to the conduct
not a tax on income, but rather a privilege tax or
of the affairs of Esso's branch in the Philippines license fee which local
exclusively or for the purpose of realizing a governments, like Quezon City, are empowered
to impose and collect. motor vehicles unless the amounts imposed
under Republic Act 4136 were paid. PAL thus
ISSUE: Whether the tax imposed by Quezon paid, under protest, registration fees of its motor
City on gross receipts of stall rentals is properly vehicles. After paying under protest, PAL
characterized as partaking of the nature of an through counsel, wrote a letter dated May
income tax. 19,1971, to Land Transportation Commissioner

Romeo Edu (Edu) demanding a refund of the

RULING: • No. The tax imposed in the
amounts paid. Edu denied the request for refund.
controverted ordinance constitutes, not a tax on Hence, PAL filed a complaint against Edu and
National Treasurer Ubaldo Carbonell
income, not a city income tax (as distinguished
(Carbonell).
from the national income tax imposed by the • The trial court dismissed PAL's complaint.
National Internal Revenue Code) within the PAL appealed to the Court of Appeals which in
meaning of Section 2 (g) of the Local Autonomy turn certified the case to the Supreme Court.
Act, but rather a license tax or fee for the
regulation of the business in which Progressive ISSUE: Whether or not motor vehicle
is engaged. While it is true that the amount registration fees are considered as taxes.
imposed by the questioned ordinances may be
RULING: • Yes. If the purpose is primarily
considered in determining whether the exaction is

really one for revenue or prohibition, instead of revenue, or if revenue is, at least, one of the real
one of regulation under the police power, it
and substantial purposes, then the exaction is
nevertheless will be presumed to be
properly called a tax. Such is the case of motor
reasonable.
vehicle registration fees. The motor vehicle
registration fees are actually taxes intended for
additional revenues of the government even if
13. PHILIPPINE AIRLINES, INC. v. EDU G.R. one fifth or less of the amount collected is set
aside for the operating expenses of the agency
No. L- 41383, August 15, 1988
administering the program.

FACTS: • The Philippine Airlines (PAL) is a

14. VILLEGAS v. HIU CHIONG TSAI PAO HO
corporation engaged in the air transportation G.R. No. L-29646, November 10, 1978
business under a legislative franchise, Act No.
42739. Under its franchise, PAL is exempt from FACTS: • On February 22, 1968, the Municipal
the payment of taxes. • Sometime in 1971,
Board of Manila passed City Ordinance No.
however, Land Transportation Commissioner 6537. The said city ordinance was also signed
Romeo F. Elevate (Elevate) issued a regulation by then Manila Mayor Antonio J. Villegas
pursuant to Section 8, Republic Act 4136, (Villegas). • Section 1 of the said city ordinance
otherwise known as the Land and
Transportation and Traffic Code, requiring all prohibits aliens from being employed or to
tax exempt entities, among them PAL to pay engage or participate in any position or
occupation or business enumerated therein,
motor vehicle registration fees. • Despite PAL's
whether permanent, temporary or casual, without
protestations, Elevate refused to register PAL's
 15. COMPAÑIA GENERAL DE TABACOS DE
first securing an employment permit from the
Mayor of Manila and paying the permit fee of FILIPINAS vs. CITY OF MANILA, ET AL G.R.
P50.00 except persons employed in the
diplomatic or consular missions of foreign No. L-16619 June 29, 1963
countries, or in the technical assistance
programs of both the Philippine Government FACTS: • Petitioner filed an action in the CFI
and any foreign government, and those working
Manila to recover from City of Manila(City ) the
in their respective households, and members of
sum of P15,280.00 allegedly overpaid by it as
religious orders or congregations, sect or taxes on its wholesale and retail sales of liquor

denomination, who are not paid monetarily or in for the period from the third quarter of 1954 to the

kind. • Hiu Chiong Tsai Pao Ho (Tsai Pao Ho) second quarter of 1957, inclusive, under

Ordinances Nos. 3634, 3301, and 3816. •

who was employed in Manila, filed a petition with
the CFI of Manila to declare City Ordinance No. Tabacalera's action for refund is based on the
6537 as null and void for being discriminatory
and violative of the rule of the uniformity in theory that, in connection with its liquor sales, it
should pay the license fees but not the
taxation. • The trial court declared City municipal sales taxes; and since it already paid
the license fees aforesaid, the sales taxes paid
Ordinance No. 6537 null and void.
Villegas filed the present petition. by it — amounting to the sum of P15,208.00 —
ISSUE: Whether or not City Ordinance No.
6537 is a tax or revenue measure. under the three ordinances is an overpayment
made by mistake, and therefore refundable. •
RULING: • Yes. The contention that City
The City contends that for the permit issued to it
Ordinance No. 6537 is not a purely tax or Tabacalera is subject to pay the license fees
revenue measure because its principal purpose prescribed by Ordinance No. 3358, aside from
is regulatory in nature has no merit. While it is the sales taxes imposed by Ordinances Nos.
true that the first part which requires that the 3634, 3301, and 3816.
alien shall secure an employment permit from
ISSUE: Whether or not the taxes imposed are
the Mayor involves the exercise of discretion and valid

judgment in the processing and approval or

RULING: • Ordinance No. 3358 is clearly one
disapproval of applications for employment
permits and therefore is regulatory in character that prescribes municipal license fees for the
the second part which requires the payment of
P50.00 as employee's fee is not regulatory but a privilege to engage in the business of selling
revenue measure. There is no logic or liquor or alcoholic beverages. On the other
justification in exacting P50.00 from aliens who hand, it is clear that Ordinances Nos. 3634,
3301, and 3816 impose taxes on the sales of
have been cleared for employment. It is obvious
general merchandise, wholesale or retail, and
that the purpose of the ordinance is to raise are revenue measures enacted by the Municipal
money under the guise of regulation. Board of Manila by virtue of its power to tax
 fees prescribed therein.
dealers for the sale of such merchandise. • That
ISSUE: Is the ordinance valid exercise of taxing
Tabacalera is being subjected to double taxation power of the City of Basilan.

is more apparent than real. As already stated RULING: • Under paragraph (a) sec. 14, R.A.
what is collected under Ordinance No. 3358 is a
license fee for the privilege of engaging in the 288, it is clear that the City of Basilan may only
sale of liquor. On the other hand, what the three levy and collect taxes for general and special
ordinances mentioned heretofore impose is a purposes in accordance with or as provided by
tax for revenue purposes based on the sales law; in other words, the city of Basilan was not

granted a blanket power of taxation. The use of

made of the same article or merchandise. It is
already settled in this connection that both a the phrase "in accordance with law" — which, in
license fee and a tax may be imposed on the our opinion, means the same as "provided by
same business or occupation, or for selling the law" — clearly discloses the legislative intent to
same article, this not being in violation of the
rule against double taxation. limit the taxing power of the City. • It has been

held that the power to regulate as an exercise of

16. AMERICAN MAIL LINE, ET AL vs. CITY police power does not include the power to
OF BASILAN, ET AL G.R. No. L-12647 May
impose fees for revenue purposes. Appellant
31, 1961
city's own contention that the questioned
FACTS: • Appellees are foreign shipping ordinance was enacted in the exercise of its
power of taxation, makes it obvious that the fees
companies licensed to do business in the imposed are not merely regulatory.

Philippines, with offices in Manila. Their vessels

call at Basilan City and anchor in the bay or 17. JOHN H. OSMEÑA vs. OSCAR ORBOS et
channel within its territorial waters. As the city al G.R. No. 99886 March 31, 1993
treasurer assessed and attempted to collect
from them the anchorage fees prescribed in the
FACTS: • October 10, 1984, President
aforesaid amendatory ordinance, they filed the
present action for Declaratory Relief to have the Ferdinand Marcos issued P.D. 1956 creating a
courts determine its validity. Upon their petition Special Account in the General Fund,

designated as the Oil Price Stabilization Fund

the lower court issued a writ of preliminary
injunction restraining appellants from collecting (OPSF). The OPSF was designed to reimburse
or attempting to collect from them the fees oil companies for cost increases in crude oil and
prescribed therein. • Appellant contended that, imported petroleum products resulting from
exchange rate adjustments and from increases
through its city council, it had authority to enact in the world market prices of crude oil.
the questioned ordinance in the exercise of Subsequently, the OPSF was reclassified into a
either its revenue-raising power or of its police "trust liability account,". President Corazon C.

power. The question to be resolved is whether Aquino promulgated E. O. 137 expanding the

the City of Basilan has the authority to enact grounds for reimbursement to oil companies for
Ordinance 180 and to collect the anchorage possible cost under recovery incurred as a
result of the reduction of domestic prices of
the police power of the State. • It would seem
petroleum products. • The petitioner argues
that from the above-quoted ruling, the petition for
inter alia that "the monies collected pursuant to . . prohibition should fail.
P.D. 1956, as amended, must be treated as a

'SPECIAL FUND,' not as a 'trust account' or a 18. REPUBLIC OF THE PHILIPPINES, vs.
BACOLOD-MURCIA MILLING CO., INC., MA-
'trust fund,' and that "if a special tax is collected
AO SUGAR CENTRAL CO., INC., and
for a specific purpose, the revenue generated
TALISAY-SILAY MILLING COMPANY G.R.
therefrom shall 'be treated as a special fund'
Nos. L-19824, L-19825 and 19826 July 9,
to be used only for the purpose indicated, and
1966
not channeled to another government
objective." Petitioner further points out that
since "a 'special fund' consists of monies FACTS: • Joint appeal by three sugar centrals,

collected through the taxing power of a State, respondents herein. from a decision of the Court
of First Instance of Manila finding them liable for
such amounts belong to the State, although the
special assessments under Section 15 of
use thereof is limited to the special purpose/
objective for which it was created." Republic Act No. 632. • The appellants' thesis is

ISSUE: Whether or not the funds collected simply to the effect that the "10 centavos per picul
under PD 1956 is an exercise of the power of of sugar" authorized to be collected under Sec.
taxation 15 of Republic 632 is a special assessment. As
such, the
proceeds thereof may be devoted only to the
RULING: • The levy is primarily in the exercise
specific purpose for which the assessment was
of the police power of the State. While the funds authorized, a special assessment being a levy
collected may be referred to as taxes, they are upon property predicated on the doctrine that
exacted in the exercise of the police power of the property against which it is levied derives
the State. • What petitioner would wish is the
some special benefit from the improvement. It is
not a tax measure intended to raise revenues
fixing of some definite, quantitative restriction, or
for the Government.
"a specific limit on how much to tax." The Court is
cited to this requirement by the petitioner on the ISSUE: Is the imposition of special assessment
premise that what is involved here is the power an exercise of the taxing power
of taxation; but as already discussed, this is not
the case. What is here involved is not so much RULING: • The Court deemed it relevant to
the power of taxation as police power. Although
the provision authorizing the ERB to impose discuss its holding in Lutz v. Araneta. For in this
Lutz case, Commonwealth Act 567, otherwise
additional amounts could be construed to refer to
known as the Sugar Adjustment Act, all
the power of taxation, it cannot be overlooked collections made thereunder "shall accrue to a
that the overriding consideration is to enable the special fund in the Philippine Treasury, to be
delegate to act with expediency in carrying out
the objectives of the law which are embraced by known as the 'Sugar Adjustment and Stabilization
Fund,' and shall be paid out only for any or all of
the following purposes or to attain any or all of located in the Municipality of Victorias comes
the following objectives, as may be provided by
within these items. • Plaintiff filed suit below to
law." Analysis of the Act, and particularly
Section 6, will show that the tax is levied with a
ask for judgment declaring Ordinance No. 1,
regulatory purpose, to provide means for the
series of 1956, null and void. The plaintiff
rehabilitation and stabilization of the threatened
contends that the ordinance is discriminatory
sugar industry. In other words, the act is primarily
since it singles out plaintiff which is the only
an exercise of the police power. • On the operator of a sugar central and a sugar refinery
within the jurisdiction of defendant municipality.
authority of the above case, then, We hold that the
special assessment at bar may be considered • The trial court rendered its judgment declaring
as similarly as the above, that is, that the levy
that the ordinance in question refers to license
for the Philsugin Fund is not so much an
taxes or fees. Both plaintiff and defendant
exercise of the power of taxation, nor the
directly appealed to the Supreme Court.
imposition of a special assessment, but, the
ISSUE: Was Ordinance No. 1, series of 1956,
exercise of the police power for the general passed by defendant's municipal council as a
welfare of the entire country. It is, therefore, an regulatory enactment or as a revenue measure?
exercise of a sovereign power which no private
citizen may lawfully resist.
RULING: • The present imposition must be

treated as a levy for revenue purposes. A quick

19. VICTORIAS MILLING CO., INC. vs. THE
glance at the big amount of maximum annual
MUNICIPALITY OF VICTORIAS, PROVINCE OF tax set forth in the ordinance, P40,000.00 for
sugar centrals, and P40,000.00 for sugar
NEGROS OCCIDENTAL G.R. No. L-21183 refineries, will readily convince one that the tax
September 27, 1968 is really a revenue tax. And then, we read in the
ordinance nothing which would as much as
FACTS: • This case calls into question the indicate that the tax imposed is merely for police
validity of Ordinance No. 1, series of 1956, of the inspection, supervision or regulation. Given the
Municipality of Victorias, Negros Occidental. • purposes just mentioned, we find no warrant in
logic to give our assent to the view that the
The disputed ordinance imposed license taxes on ordinance in question is solely for regulatory
purpose. Plain is the meaning conveyed. The
operators of sugar centrals and sugar refineries. ordinance is for raising money. To say
The changes were: with otherwise is to misread the purpose of the
respect to sugar centrals, by increasing the ordinance.
rates of license taxes; and as to sugar 20. REPUBLIC OF THE PHILIPPINES,
refineries, by increasing the rates of license represented by the PRESIDENTIAL
taxes as well as the range of graduated COMMISSION ON GOOD GOVERNMENT
schedule of annual output capacity. • For, the (PCGG) vs. COCOFED, ET AL. and

production of plaintiff Victorias Milling Co., Inc. in BALLARES, ET AL., EDUARDO M.

COJUANGCO JR. and the SANDIGANBAYAN
both its sugar central and its sugar refinery
(First Division) G.R. No. 147062-64 December
14, 2001 is so affected with public interest as to be within
the police power of the State.
FACTS: • The PCGG issued and implemented 21. GEROCHI v. DEPARTMENT OF ENERGY
G.R. No. 159796, July 17, 2007
numerous sequestrations, freeze orders and
FACTS: • This petition challenges the
provisional takeovers of allegedly ill-gotten
companies, assets and properties, real or constitutionality of Sec. 34 of the Electric Power
personal. • Among the properties sequestered Industry Reform Act of 2001 (EPIRA) and Rule

18 of its corresponding IRR. • Respondent

by the Commission were shares of stock in the
United Coconut Planters Bank (UCPB) National Power Corporation- Strategic Power
registered in the names of the alleged "one Utilities Group (NPC-SPUG) filed with
million coconut farmers," the so-called Coconut
respondent Energy Regulatory Commission
Industry Investment Fund companies (CIIF
(ERC) a petition for the availment from the
companies) and Private Respondent Eduardo Universal Charge of its share for Missionary
Cojuangco Jr. • On January 23, 1995, the trial Electrification. • NPC filed another petition with

court rendered its final Decision nullifying and ERC praying that the proposed share from the
setting aside the Resolution of the Universal Charge for the Environmental charge
Sandiganbayan which lifted the sequestration of be approved for withdrawal from the Special
the subject UCPB shares. Trust Fund (STF) managed by respondent

ISSUE: Are the Coconut Levy Funds raised Power Sector Assets and Liabilities Management
through the State’s police and taxing powers?
Group (PSALM). • ERC issued an Order

RULING: • Indeed, coconut levy funds partake provisionally approving the first petition of NPC
and authorizing the National Transmission
of the nature of taxes which, in general, are Corporation (TRANSCO) and Distribution
enforced proportional contributions from Utilities to collect the same from its end-users
persons and properties, exacted by the State by on a monthly basis. • Likewise, ERC approved
virtue of its sovereignty for the support of
the second petition authorizing the NPC to draw
government and for all public needs. • Based up to P70,000,000.00 from PSALM for its 2003

Watershed Rehabilitation Budget subject to the

on this definition, a tax has three elements,
availability of funds for the Environmental Fund
namely: a) it is an enforced proportional
contribution from persons and properties; b) it is component of the Universal Charge. • On the
imposed by the State by virtue of its
sovereignty; and c) it is levied for the support of basis of the said ERC decisions, respondent

the government. • Taxation is done not merely Panay Electric Company, Inc. (PECO) charged
petitioner Romeo P. Gerochi and all other end-
to raise revenues to support the government, but
also to provide means for the rehabilitation and users with the Universal Charge as reflected in
the stabilization of a threatened industry, which
their respective electric bills starting from the is NOT a tax, but an
exaction in the exercise of the State’s police
month of July 2003.
power. o Power of Taxation vs. Police Power
Contentions
The main distinction rests in the PURPOSE
FOR WHICH THE CHARGE IS MADE. If
Petitioner: EPIRA is unconstitutional because: o generation of revenue is the primary purpose

Universal Charge has the characteristics of a tax and regulation is merely incidental, the imposition

and is collected to fund the operations of the is a tax; but if regulation is the primary purpose,
NPC. The power to tax is strictly legislative in the fact that revenue is incidentally raised does
function and the delegation of said power to any not make the imposition a tax.
executive or administrative agency like the ERC ▪ Taxation
✓ The power to tax is an incident of sovereignty and
is unconstitutional. o The Universal Charge is
is unlimited in its range, acknowledging in its very
not the same as the other cases cited where
nature no limits. ✓ It is based on the principle that
respective funds were created in order to balance taxes are the lifeblood of the government, and their
and stabilize the prices of oil and sugar, prompt and certain availability is an imperious need.
and to act as buffer to counteract the changes
and adjustments in prices, peso devaluation, Thus, the theory behind the exercise of the power
and other variables which cannot be adequately
to tax emanates from necessity; without taxes,
and timely monitored by the legislature. government cannot fulfill its mandate of
promoting the general welfare and well- being of
Respondents: PSALM, DOE, ERC and NPC o the people. ▪ Police Power

The imposition of the Universal Charge is in the ✓ Power of the state to promote public welfare by
restraining and regulating the use of liberty and
exercise of the State’s police power, not property. It is the most pervasive, the least limitable,
taxation. o Universal Charge does not possess and the most demanding of the three fundamental

the essential characteristics of a tax, that its powers of the State. ✓ The justification is found in
the Latin maxims salus populi est suprema lex
imposition would redound to the benefit of the
electric power industry and not to the public, (the welfare of the people is the supreme law). o
and that its rate is uniformly levied on electricity
Moreover, it is a well-established doctrine that the
end-users, unlike a tax, which is imposed,
based on the individual taxpayer's ability to pay. taxing power may be used as an implement of

ISSUES: (1) Whether or not the Universal police power. o The STF reasonably serves and
Charge imposed under Sec. 34 of the EPIRA is
a tax. (2) Whether or not there is undue assures the attainment and perpetuity of the
delegation of legislative power to tax on the part purposes for which the Universal Charge is
of the ERC. imposed, i.e., to ensure the viability of the
country's electric power industry.

2) NO. There is no undue delegation of the

RULING: 1) NO. The assailed Universal Charge
power to tax on the part of ERC. (Consti Issue) against
FPA & FPI arguing that the LOI is
o Completeness Test
unconstitutional.
▪ The law must be complete in all its terms and
conditions when it leaves the legislature such ISSUES:
that when it reaches the delegate, the only thing
1. Whether the imposition of the levy was an
he will have to do is to enforce it. o Sufficient
exercise by the
Standard Test
State of its taxation power? 2. Whether LOI
1465 constitutes a valid legislation pursuant to
▪ Mandates adequate guidelines or limitations in
the law to determine the boundaries of the the exercise of taxation? 3. Whether LOI 1465
delegate's authority and prevent the delegation
constitutes a valid legislation pursuant to
from running riot. o The Court finds that the
the exercise of police power?
EPIRA passed both tests. Miranda
RULING:
22. PLANTERS PRODUCTS, INC. vs.
FERTIPHIL CORPORATION G.R. No. 166006, 1. YES. The imposition of the levy was an
March 14, 2008 exercise by the State of its taxation power.

FACTS: While it is true that the power of taxation can be

• President Marcos issued a Letter of used as an implement of police power, the

Instruction (LOI No. 1465), which imposed a primary purpose of the levy is revenue
capital recovery component on the domestic generation. If the purpose is primarily revenue,
or if revenue is, at least, one of the real and
sales of fertilizers. • The capital contribution (at substantial purposes, then the exaction is
properly called a tax.
least P10.00 per bag of fertilizer the company sold
2. NO. The P10 levy is unconstitutional because
in the domestic market) shall be collected until it was not for a public purpose. The levy was
adequate capital is raised to make petitioner imposed to give undue benefit to PPI (a private
Planters Products, Inc. (PPI) financially viable. company).
NOTE: PPI is a domestic private corporate
doing business in the domestic sale of
3. NO. Even if We consider LOI No. 1695
fertilizers. Arguably, the LOI intended to
enacted under the police power of the State, it
safeguard the domestic fertilizer industry by
would still be invalid for failing to comply with
infusing a revenue generation vehicle for PPI. • the test of "lawful subjects" and "lawful means."
It it did not promote public interest.
Pursuant to the LOI, respondent Fertiphil paid the

required sum to Fertilizer & Pesticide Authority

(FPA), which remitted to Far East Bank 23. CHEVRON PHILIPPINES, INC. vs. BASES
CONVERSION DEVELOPMENT AUTHORITY
(depositary of PPI). • After the EDSA
and CLARK DEVELOPMENT CORPORATION
Revolution, FPA stopped collecting. • Fertiphil
G.R. No. 173863 September 15, 2010
filed a complaint for collection and damages
FACTS:
• Clark Development Corporation (CDC) • In distinguishing tax and regulation as a form
issued Policy Guidelines on the Movement of of police power, the determining factor is the
Petroleum Fuel to and from the Clark Special purpose of the implemented measure. If the
purpose is:
Economic Zone (CSEZ) which provided, among
o Primarily to raise revenue, then it will be
others, for royalty fees from suppliers
deemed a tax even though the measure results
delivering fuel from outside sources. in some form of regulation. (Revenue = Tax)
• Claiming that nothing in the law authorizes
o Primarily to regulate, then it is deemed a
CDC to impose royalty fees or any fees based
regulation and an exercise of the police power
on a per unit measurement of any commodity
of the state, even though incidentally, revenue is
sold within the special economic zone, petitioner
generated. (Regulate = Police Power)
protested the assessment for royalty fees.
• Petitioner elevated its protest before Bases • The Policy Guidelines was mainly issued to
ensure the safety, security, and good condition
Conversion Development Authority (BCDA)
of the petroleum fuel industry within the CSEZ.
arguing that the royalty fees imposed had no
reasonable relation to the probable • The questioned royalty fees form part of the
expenses of regulation and that the imposition regulatory framework to ensure “free flow or
on a per unit measurement of fuel sales was for movement” of petroleum fuel to and from the
a revenue generating purpose, thus, akin to CSEZ.
a “tax”. The protest was denied by BCDA. • In relation to the regulatory purpose of the
• On appeal, the CA held that in imposing the imposed fees, this Court in Progressive
Development Corporation v. Quezon City,
challenged royalty fees, CDC was exercising its
stated that:
right to regulate the flow of fuel into CSEZ
considering that it possesses exclusive o “x x x the imposition questioned must relate
right to distribute fuel within CSEZ pursuant to to an occupation or activity that so engages the
its Joint Venture Agreement (JVA) with Subic public interest in health, morals, safety and
Bay Metropolitan Authority (SBMA) and Coastal development as to require regulation for the
Subic Bay Terminal, Inc. (CSBTI). Also, the fact protection and promotion of such public interest;
that revenue is incidentally obtained does not the imposition must also bear a reasonable
make the imposition a tax as long as the relation to the probable expenses of regulation,
primary purpose of such imposition is taking into account not only the costs of direct
regulation. regulation but also its incidental consequences
as well.”
ISSUE:
• In the case at bar, there can be no doubt that
• W/N CA erred when it ruled that: (i) the
the oil industry is greatly imbued with public
questioned “royalty fee” is primarily for
interest as it vitally affects the general welfare.
regulation; and (ii) any revenue earned
In addition, fuel is a highly combustible product
therefrom is merely incidental to the purpose of
which, if left unchecked, poses a serious threat
regulation.
to life and property.
HELD:
• NO, it was held that the subject royalty fee 24. ANGELES UNIVERSITY FOUNDATION v.
was imposed primarily for regulatory CITY OF ANGELES GR NO. 189999, 27 June
purposes, and not for the generation of income 2012
or profits as petitioner claims.
 income tax derived from its educational
FACTS: • Petitioner ANGELES UNIVERSITY
activities and real property used exclusively for
FOUNDATION (AUF) is an educational institution educational purposes. o Regardless of the
which was converted into a non- stock, non-profit
repealing clause in the National Building Code,
education foundation under RA No. 6055. • AUF petitioner is still not exempt because a building
permit cannot be considered as the other
filed with the Office of the City Building Official an “charges” mentioned in Sec. 8 of RA No. 6055
application for a building permit for the which refers to impositions in the nature of tax,
construction of the Angeles University import duties, assessments and other
Foundation Medical Center (Medical Center). • collections for revenue purposes, following the

Said office issued a Building Permit Fee ejusdem generis rule. o [Ejusdem generis rule:

Assessment. • However, petitioner claimed that it where general words follow an enumeration of
persons or things, by words of a particular and
is exempt from the payment of the building
specific meaning, such general words are not to
permit citing: o DOJ legal opinions o Said office be construed in their widest extent, but are to be

previously acknowledged such exemption • held as applying only to persons or things of the
same general kind or class as those specifically
Respondents refused to issue the building
mentioned.] o Thus, petitioner is not entitled to
permits. • Petitioner appealed the matter to the
the refund of building permit and related fees, as
City Mayor, but the latter did not respond. •
well as real property tax it paid under protest. •
Petitioner paid under protest the building permit
CA denied petitioner’s MR.
fee and was
issued the corresponding Building Permit.
ISSUE: • Whether petitioner is exempt from the
• Petitioner requested respondents to refund

the fees it paid under protest. • Respondent payment of building permit and related fees
imposed under the National Building Code (RA
City Treasurer denied the claim for refund. • No. 6541)

Petitioner filed a Complaint before the trial court RULING: • RA No. 6055 granted tax exemptions

seeking the refund. • Trial court rendered to education institutions like petitioner which

judgment in favor of the petitioner and against the converted to non-stock, non-profit educational

respondents. • Respondents appealed to the CA foundation. o Sec. 8. The Foundation shall be

which reversed the trial court:o Holding that while exempt from the payment of all taxes, import
duties, assessments, and other charges
petitioner is a tax-free entity, it is not exempt from imposed by the Government on all income
derived from or property, real or personal, used
the payment of regulatory fees. o Under RA No.
exclusively for the educational activities of the
6055, petitioner was granted exemption only from Foundation. • National Building Code of the
Philippines (RA No. 6541) requires every person, FACTS: • PLDT is a grantee of a franchise
firm or corporation, including any agency or
instrumentality of the government to obtain a under RA 7082 to install, operate and maintain a
building permit for any construction, alteration or telecommunications system throughout the

repair of any building or structure. o Building Philippines. • For equipment, machineries and

permit refers to a document issued by the Building spare parts it imported for its business in 1992 to

Official to an owner/applicant to proceed with the 1994, PLDT paid the BIR 164,520,953.00 which
construction, installation, addition, alteration,
includes the compensating tax, advance sales tax
renovation, conversion, repair, moving,
and other internal revenue taxes. For similar
demolition, etc. o Exempted from the payment of
transactions made between March 1994 to May
building permit fees 1994, PLDT paid 116,041,333.00 as VAT. •

are:▪ (1) public buildings and PLDT sought a confirmatory ruling on its tax
▪ (2) traditional indigenous family dwelling. o exemption privileges under Sec. 12 of RA 7082,

Not being expressly included in the enumeration the pertinent part of which reads: “the grantee

of structures to which the building permit fees xxx shall pay a franchise tax equivalent to 3% of
do not apply, petitioner’s claim for exemption
rests solely on its interpretation of the term all gross receipts of the telephone or other
telecommunications businesses transacted
“other charges” imposed by the National under this franchise xxx and the said
percentage shall be in lieu of all taxes on
Government in the tax exemption clause of RA
this franchise or earnings thereof.” • BIR
No. 6055. • Note that the “other charges”
issued a ruling that clarifies the taxes PLDT must
mentioned in Sec. 8 of RA No. 6055 is qualified
by the words “imposed by the Government on pay to it: the “in lieu of all taxes” phrase clearly
all xxx property used exclusively for the
exempts PLDT from all taxes including the 10%
educational activities of the foundation.” •
VAT, except the taxes expressly mentioned PLDT
Building permit fees are not impositions on
should pay. • Armed with the said ruling, PLDT
property but on the activity subject of
government regulation. (Activities such as to filed for a claim for tax credit/ refund of VAT,
compensating tax, advance sales taxes and
repair, alter, renovate or demolish) • Since
other taxes it had been paying in connection
with its importation of various equipment,
building permit fees are not charges on property,
machineries and spare parts needed for its
they are
operations. Since BIR did not act upon it, PLDT
not impositions from which petitioner is exempt.
25. COMMISSIONER OF INTERNAL filed the case with the Court of Tax Appeals. •
REVENUE v. PLDT G.R. No. 140230,
December 15, 2005 CTA granted PLDT’s petition to refund the amount
of 223,265,276.00 representing compensating on importation of goods is not a tax on the
taxes, advance sales taxes, VAT and other
internal revenue taxes alleged to have been franchise of a business enterprise or on its
erroneously paid on its importations from 1992 earnings. It is imposed on all taxpayers who
to 1994. • BIR initially contested the judgment, import goods, regardless of whether the goods

will be sold. o Advance sales tax is an indirect

but later on decided not to pursue the case
because of the doctrine of stare decisis wherein,
tax because the tax- paying importer of the
it was found out, that the issue had been
goods for sale can shift the burden on the
resolved by the Court of Appeals in a previous
case which essentially states that PLDT is purchaser. Same goes with compensating tax. •
exempted from all taxes collectible under the
It is important to determine if the tax exemption
NIRC, save those specifically mentioned in
granted to a taxpayer specifically includes the
PLDT’s franchise, such as income and real
indirect tax. It is presumed that the tax
property taxes.
exemption embraces only those taxes for
• Since the case involves revenue issues
which the taxpayer is directly liable. It is also
which hit the core of governmental functions,
in the burden of the taxpayer to prove that he is
the Supreme Court decided to settle the matter
and interpret Sec. 12 of RA 7082 despite BIR covered by a tax exemption, and what exactly

backing out of the case. • In its initial argument, that exemption entails. • The clause “in lieu of all
BIR posits that the “in lieu of all taxes” taxes” in Sec. 12 of RA 7082 is immediately
clause covers direct taxes only. followed by the qualifying clause “on this
franchise or earnings thereof” suggesting that
ISSUE: Whether or not PLDT is exempt from the exemption is limited to taxes imposed
paying VAT, compensating taxes, advance directly on PLDT since taxes pertaining to
sales taxes and other internal revenue taxes on PLDT’s franchise or earnings are its direct

liability. In other words, indirect taxes are outside

its importations
the purview of the “in lieu” provision.
RULING: • No, PLDT is not exempted from • BUT the Supreme Court considers the fact
that Executive Order No. 273 implemented in
paying said taxes. o Backgrounder: direct taxes 1988 excludes compensating taxes and
advances sales taxes as collectible revenue
are those that are exacted from the very person
taxes under the NIRC. Because of this, PLDT
who should pay them; they are impositions for
which a taxpayer is directly liable on the was no longer under legal obligation to pay
compensating tax and advance sales tax on its
transaction or business he is engaged in. Indirect
importation from 1992 to 1994 (BIR was ordered
taxes, on the other hand, are those that are to refund said taxes).
demanded, in the first instance, from (or are
paid by) one person in the intention that he can
shift the burden to someone else (e.g. VAT, 26. ASIA INTERNATIONAL AUCTIONEERS
vs. CIR G.R. 179115 September 26, 2012
advance sales tax, compensating tax). o VAT
FACTS: • Asia International Auctioneers, Inc. for Taxable Year 2005 and Prior Years” pursuant
to RA 9480.
(AIA), a corporation operating within the Subic ISSUE: Is AIA disqualified from availing itself of
Special Economic Zone and engaged in the the Tax Amnesty under Section 8 (a) of RA
9480?
importation and selling of used motor vehicles and

heavy equipment, was assessed by the

RULING: • No. Under Section 8 (a) of the RA
Commissioner of Internal Revenue (CIR) for
deficiency Value Added Tax and Excise Tax in 9480 withholding agents with respect to their
the amounts of P102,535,520.00 and
P4,334,715.00, respectively, or a total amount withholding tax liabilities shall be disqualified to
of P106,870,235.00, inclusive of penalties and avail of the tax amnesty. In this case, AIA was
not being assessed as withholding agent that
interest, for a series of auction sales. • AIA
failed to withhold or remit the deficiency VAT
and excise tax but as a taxpayer who is directly
claimed that it filed a timely protest letter through
liable for the said taxes. • Indirect taxes, like
registered mail and submitted additional
supporting documents. CIR’s failure to act on VAT and excise tax, are different from withholding
the protest prompted AIA to file a petition for
taxes. • To distinguish, in indirect taxes, the
review before the Court of Tax Appeals. •
incidence of taxation falls on one person but the
However, the CIR filed a motion to dismiss on the
burden thereof can be shifted or passed on to
ground of lack of jurisdiction since AIA’s failure another person, such as when the tax is
imposed upon goods before reaching the
to file its protest within the 30- day reglamentary
consumer who ultimately pays for it. • On the
period rendered the assessment final and
other hand, in case of withholding taxes, the
executory. • After trial, the Court of Tax Appeals
incidence and burden of taxation fall on the same
First Division ruled that there was no sufficient
evidence to prove the receipt of the protest entity, the statutory taxpayer. The burden of
letter by the CIR. AIA filed a motion for taxation is not shifted to the withholding agent
reconsideration but was denied; hence, this who merely collects, by withholding, the tax due
from income payments to entities arising from
petition for review. • On January 30, 2008, AIA certain transactions and remits the same to the

filed a Manifestation and Motion with Leave of the government. • Due to this difference, the
Honorable Court to Defer or Suspend Further
Proceedings since it availed of the Tax deficiency VAT and excise tax cannot be
Amnesty Program under Republic Act 9480,
"deemed" as withholding taxes merely because
known as the Tax Amnesty Act of 2007. • On
they constitute indirect taxes. Moreover, records
February 5, 2008, the Bureau of Internal Revenue support the conclusion that AIA was assessed
not as a withholding agent but, as the one
issued a Certification of Qualification stating that
directly liable for the said deficiency taxes. •
AIA “has availed and qualified for Tax Amnesty
Moreover, RA 9480 does not exclude from its
coverage taxpayers operating within special and, under constitutional provisions against
taxation except for public purposes and
economic zones. Hence, AIA is qualified to avail
prohibiting the collection of a tax for one
of the Tax Amnesty under RA 9480. purpose and the devotion thereof to another
purpose, no appropriation of state funds can be
• Limitations on the Power of
made for other than for a public purpose. • The
Taxation A. Inherent Limitations
test of the constitutionality of a statute requiring
27. WENCESLAO PASCUAL vs. THE
the use of public funds is whether the statute is
SECRETARY OF PUBLIC WORKS AND
COMMUNICATIONS, ET AL. G.R. No. L-10405 designed to promote the public interest, as
December 29, 1960 opposed to the furtherance of the advantage of
individuals, although each advantage to
FACTS: • individuals might incidentally serve the public.
On August 31, 1954, petitioner
28. PEPSI-COLA BOTTLING COMPANY OF
Wenceslao Pascual instituted this action for THE PHIILIPPINES, INC. VS. MUNICIPALITY
declaratory relief, with injunction, upon the OF TANAUAN G.R. No. L-31156 February 27,
ground that Republic Act No. 920, entitled "An 1976
Act Appropriating Funds for Public Works",
approved on June 20, 1953, contained, in FACTS: • In February 1963, plaintiff commenced
section 1-C (a) thereof, an item (43[h]) of
a complaint seeking to declare Section 2 of R.A.
P85,000.00 "for the construction, reconstruction, 2264 (Local Autonomy Act) unconstitutional as
repair, extension and improvement" of Pasig an undue delegation of taxing power and to
feeder road terminals; that, at the time of the declare Ordinance Nos. 23 and 27 issued by the
passage and approval of said Act, the Municipality of Tanauan, Leyte as null and void. •
aforementioned feeder roads were "nothing but
projected and planned subdivision roads, not Municipal Ordinance No. 23 levies and collects
yet constructed, . . . within the Antonio
from soft drinks producers and manufacturers
Subdivision . . . situated at . . . Pasig, Rizal" one-sixteenth (1/16) of a centavo for every
bottle of soft drink corked. On the other hand,
which projected feeder roads "do not connect any
Municipal Ordinance No. 27 levies and collects
government property or any important premises
on soft drinks produced or manufactured within
to the main highway"; • Respondents moved to
the territorial jurisdiction of the municipality a tax
dismiss the petition upon the ground that
of one centavo (P0.01) on each gallon of volume
petitioner had "no legal capacity to sue", and
that the petition did "not state a cause of action". capacity. The tax imposed in both Ordinances
Nos. 23 and 27 is denominated as "municipal
ISSUE: Should appropriation using public funds production tax.”
be made for public purposes only?
ISSUES: (1) Is Section 2 of R.A. 2264 an undue
RULING: • The right of the legislature to delegation of the power of taxation? (2) Do
Ordinance Nos. 23 and 24 constitute double
appropriate funds is correlative with its right to tax,
taxation and impose percentage or specific
taxes?
RULING: 1) NO. • The power of taxation is MIAA. • The Mayor of the City of Parañaque

purely legislative and cannot be delegated to the threatened to sell at public auction the Airport
executive or judicial department of the Lands and Buildings should MIAA fail to pay the
government without infringing upon the theory of
said real estate tax delinquency. • MIAA failed
separation of powers. But as an exception, the
theory does not apply to municipal corporations.
to pay said delinquency. So, Airport Lands and
• Legislative powers may be delegated to local Buildings were ordered for public auction. •

governments in respect of matters of local Thus, MIAA sought for a Temporary Restraining
concern. Order from the Court of Appeals but failed to do
so within the 60-day reglementary period, so the
2) NO. • The Municipality of Tanauan discovered
petition was dismissed. • MIAA then sought for
that manufacturers could increase the volume
the TRO with the Supreme Court a day before the
contents of each bottle and still pay the same
public auction, MIAA was granted with the TRO
tax rate since tax is imposed on every bottle
but unfortunately the TRO was received by the
corked. • To combat this scheme, Municipal Paranaque City officers 3 hours after the public
Ordinance No. 27 was enacted. As such, it was a auction. • MIAA argued that the charter provides
repeal of Municipal Ordinance No. 23. In the
stipulation of facts, the parties admitted that the that the title of the land and building are with
Municipal MIAA and the ownership is still with the
Treasurer was enforcing Municipal Ordinance Republic of the Philippines. MIAA also contends
that it is an instrumentality of the government
No. 27 only. • Hence, there was no case of
and as such exempted from real estate tax.
double taxation. That the land and buildingsof MIAA are of public

dominion therefore cannot be subjected to levy

29. MANILA INTERNATIONAL AIRPORT
AUTHORITY v. CITY OF PARANAQUE G.R. and auction sale. • On the other hand, the City
No. 155650, July 20, 2006
of Paranaque argued that MIAA is a government
owned and controlled corporation (GOCC),
FACTS: • Petitioner Manila International Airport therefore not exempted to real estate tax. (Note
that GOCCs before are exempted from real
Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in estate tax but such exemption was later on
Parañaque City under Executive Order No. 903,
withdrawn upon the effectivity of the Local
otherwise known as the Revised Charter of the
Government Code.)
Manila International Airport Authority ("MIAA

Charter"). • The City of Parañaque, through its ISSUES:

(1) Whether or not MIAA is a GOCC. (2)

City Treasurer, issued notices of levy and
warrants of levy on the Airport Lands and Whether or not the Airport Lands and Buildings
Buildings due to real estate tax delinquency of are part of the public dominion, hence MIAA is
not subject to real estate tax. of the national wealth.
As part of the public dominion, the land and
RULING: (1) NO. MIAA is not a government- buildings of MIAA are outside the commerce of
man. To subject them to levy and public auction
owned or controlled corporation but an
is contrary to public policy. Unless the President
instrumentality of the National Government and
issues a proclamation withdrawing the airport land
thus exempt from local taxation. The real
and buildings from public use, these properties
properties of MIAA are owned by the Republic
remain to be of public dominion and are
of the Philippines and thus exempt from real
inalienable.
estate tax.
Section 234(a) of the Local Government Code
A government-owned or controlled corporation exempts from real estate tax any "real property
must be "organized as a stock or non-stock
owned by the Republic of the Philippines."
corporation." MIAA is not organized as a stock
Section 234(a) provides:
or non-stock corporation. MIAA is not a stock
corporation because it has no capital stock SEC. 234. Exemptions from Real Property Tax.
divided into shares. MIAA has no stockholders — The following are exempted from
or voting shares. payment of the real property tax: (a) Real
property owned by the Republic of the
(2) YES. The court held that the land and
buildings of MIAA are part Philippines or any of its political subdivisions
of the public dominion.
except when the beneficial use thereof has
been granted, for consideration or
An airport is devoted for public use, for the
otherwise, to a taxable person.
domestic and international travel and

transportation. It is therefore part of public

30. SEA-LAND SERVICES, INC. v. COURT OF
dominion. Even if MIAA charges fees, it is for APPEALS GR No. 122605, April 30, 2011
support of its operation and for regulation. It
does not therefore change or alter the character FACTS: • Petitioner Sea-Land is an American
of the land and buildings of MIAA as part of the
public dominion. international shipping company licensed by SEC
to do business in the Philippines entered into a
contract with the U.S. Government to transport
military household goods and effects of U.S.
The Civil Code provides: ARTICLE 420. The
military personnel assigned to the Subic Naval
following things are property of public
dominion: (1) Those intended for public use, Base.
such as roads, canals, rivers, torrents, ports
• From the aforesaid contract, petitioner

and bridges constructed by the State, banks, derived an income for the taxable year 1984

shores, roadsteads, and others of similar amounting to P58,006,207.54. • During the

character; (2) Those which belong to the State, taxable year 1984, petitioner filed with the BIR the
without being for public use, and are intended corresponding corporate Income Tax Return
for some public service or for the development (ITR) and paid the income tax due thereon of
1.5% as required in Section 25 (a) (2) of the
NIRC in relation to Art. 9 of the RP-US Tax the BIR on 15 April 1987. • However, before

Treaty, amounting to P870,093.12. • Claiming the said claim for refund could be acted upon by
public respondent Commissioner of Internal
that it paid the aforementioned income tax by Revenue, petitioner filed a petition for review
with the CTA to judicially pursue its claim
mistake, a written claim for refund was filed with
for refund and to stop the running of the two-year prescriptive period under the then Section 243 of the

NIRC. • February 21, 1995: CTA rendered its decision denying petitioner's claim for refund of the income

tax it paid in 1984. • March 30, 1995: Petitioner appealed the CTA's decision to the CA. • October 26,

1995: CA promulgated its decision dismissing the appeal and affirming in toto CTA's decision.
ISSUE: Whether or not the income that petitioner derived from services in transporting the household
goods and effects of U. S. military personnel falls within the tax exemption provided in Article XII,
paragraph 4 of the RP-US Military Bases Agreement.

RATIO: • No, the petition lacks merit. • The RP-US Military Bases Agreement provides:
“No national of the United States, or corporation organized under the laws of the United States, resident

in the United States, shall be liable to pay income tax in the Philippines in respect of any profits derived
under a contract made in the United States with the government of the United States in connection with
the construction, maintenance, operation and defense of the bases, or any tax in the nature of a license in

respect of any service or work for the United States in connection with the construction, maintenance,

operation and defense of the bases.” • Laws granting exemption from tax are construed strictissimi juris
against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the

exception. • The law does not look with favor on tax exemptions and that he who would seek to be thus

privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. •
Under Article XII (4) of the RP–US Military Bases Agreement, the Philippine Government agreed to exempt
from payment of Philippine income tax nationals of the United States, or corporations organized under the

laws of the United States, residents in the United States in respect of any profit derived under a contract
made in the United States with the Government of the United States in connection with the construction,

maintenance, operation and defense of the bases. • It is obvious that the transport or shipment of

household goods and effects of U. S. military personnel is not included in the term
“construction, maintenance, operation and defense of the bases. Neither could the performance of this
service to the U. S. government be interpreted as directly related to the defense and security of the

Philippine territories. • When the law speaks in clear and categorical language, there is no reason for

interpretation or construction, but only for application. • The avowed purpose of tax exemption “is some
public benefit or interest, which the lawmaking body considers sufficient to offset the monetary loss
entailed in the grant of the exemption. The hauling or transport of household goods and personal effects

of U. S. military personnel would not directly contribute to the defense and security of the Philippines.
31. 31st INFANTRY POST EXCHANGE vs. POSADAS G.R. No. 33403. September 4, 1930
FACTS:
• The 31st Infantry Post Exchange is a post exchange constituted in accordance with Army regulations

and the laws of the United States. In the course of its duly authorized business transactions, the Exchange
made many purchases of various and diverse commodities, goods, wares and merchandise from various
merchants in the Philippines.
• The Commissioner collected a sales tax of 1 1/2 % of the gross value of the commodities, etc. from the

merchants who sold said commodities to the Exchange. A formal protest was lodged by the Exchange.
ISSUE: Whether or not the petitioner is exempt from the sales tax imposed against its suppliers.
RULING:
• The court ruled in the negative. Taxes have been collected from merchants who made sales to Army
Post Exchanges since 1904 (Act 1189, Section 139). Similar taxes are paid by those who sell
merchandise to the Philippine Government, and by those who do business with the US Army and Navy in
the Philippines.
• Herein, the merchants who effected the sales to the Post Exchange are the ones who paid the tax; and
it is the officers, soldiers, and civilian employees and their families who are
benefited by the post exchange to whom the tax is ultimately shifted.

• An Army Post Exchange, although an agency within the US Army, cannot secure exemption from

taxation for merchants who make sales to the Post Exchange.

32. REAGAN vs. COMMISSIONER OF INTERNAL REVENUE G.R. No. L-26379, 27. December 27,
1969

FACTS:
• William Reagan imported a tax-free 1960 Cadillac car with accessories valued at US $ 6,443.83,
including freight, insurance and other charges. After acquiring a permit to sell the car from the base
commander of Clark Air Base, Reagan sold the car to a certain Willie Johnson Jr. of the US Marine Corps

stationed in Sangley Point, Cavite for US$ 6,600. Johnson sold the same, on the same day to Fred
Meneses, a Filipino. As a result of the transaction, the Commissioner rendered Reagan liable for income
tax in the sum of P2,970. Reagan claimed that he was exempt as the transaction occurred in Clark Air
Base, which as he contends is “a base outside the Philippines.”

ISSUE: Whether or not petitioner Reagan was covered by the tax exemption.

RULING:

• The court ruled in the negative. The Philippines, as an independent and sovereign country, exercises its

authority over its entire domain. Any state may, however, by its consent, express or implied, submit to a
restriction of its sovereign rights.
• It may allow another power to participate in the exercise of jurisdictional right over certain portions of its
territory. By doing so, it by no means follows that such areas become impressed with an alien

character.The areas retain their status as native soil.

• Clark Air Base is within Philippine territorial jurisdiction to tax, and thus, Reagan was liable for the
income tax arising from the sale of his automobile in Clark. The law does not look with favor on tax
exemptions and that he who would seek to be thus privileged must justify it by words too plain to be

mistaken and too categorical to be misinterpreted. Reagan has not done so, and cannot do so.
33. Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation G.R. No. 54908 and G.R.
No. 80041, January 22, 1990

FACTS:
• Mitsubishi Metal Corporation, a Japanese corporation licensed to do business in the Philippines,
entered into a Loan and Sale Contract with Atlas Consolidated Mining and Development Coporation

whereby Mitsubishi lent $20,000,000 for the expansion of the latter’s mines, particularly the installation of a

new concentrator for copper production. Atlas, in turn, undertook to sell to Mitsubishi all of the copper
concentrates produced by said machine for 15 years.
• For this purpose, Mitsubishi applied for and was granted a loan by the Export- Import Bank of Japan

(Eximbank) and a consortium of Japanese banks. As agreed upon between Mitsubishi and Atlas, the latter
gave interest payments for 1974 and 1975 amounting to P13,143,966.79, with the corresponding 15% tax
thereon withheld and remitted to the Government as required by the Tax Code.
• On March 5, 1976, Mitsubishi filed a claim for tax credit of the sum of P1,972,595.01 representing the

tax withheld on the interest payment. That claim, not having been acted upon by the BIR, Mitsubishi then
filed a petition contending that Mitsubishi was a mere agent of Eximbank, a Japanese Government
financing institution which financed the loan.
• Such governmental status of Eximbank was the basis of Mitsubishi’s claim for exemption from paying

tax on the interest payments pursuant to Section 29 (b) (8) (A) (now, Section 32 [B][7] [a], 1997 NIRC). The
CTA granted the tax credit in favor of Mitsubishi, which later executed a waiver in favor of Atlas.

ISSUE: Whether or not the interest income from the loans extended to Atlas by Mitsubishi is excludible

from gross income taxation and thus exempt from withholding tax.

RULING:
• It is settled that laws granting exemption from tax are construed strictissimi juris against the taxpayer

and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden

of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so
claimed, which onus private respondents have failed to discharge.
• The taxability of a party cannot be blandly glossed over on the basis of a supposed “broad, pragmatic

analysis” alone without substantial supportive evidence, lest governmental operations suffer due to

diminution of much needed funds.

34. COMMISSIONER OF INTERNAL REVENUE vs. MARUBENI CORPORATION G.R. No. 137377.
December 18, 2001

FACTS: Respondent Marubeni Corporation is a foreign corporation and is duly registered to engage in
business in the Philippines. Sometime in November 1985, petitioner Commissioner of Internal Revenue

issued a letter of authority to examine the books of accounts of the Manila branch office of respondent
corporation. 11 In the course of the examination, petitioner found respondent to have undeclared income
from two (2) contracts in the Philippines. Petitioner's revenue examiners recommended an assessment

for deficiency income, branch profit remittance, contractor's and commercial broker's taxes. Respondent
questioned this assessment. Respondent then received a letter form petitioner assessing respondent
several deficiency taxes. On September 26, 1986, respondent filed two (2) petitions for review with the

Court of Tax Appeals. Earlier, on August 2, 1986, Executive Order (E.O.) No. 41 declaring a one-time

amnesty covering unpaid income taxes for the years 1981 to 1985 was issued. Under this E.O., a taxpayer
who wished to avail of the income tax amnesty should comply with certain requirements. In accordance
with the terms of E.O. No. 41, respondent filed its tax amnesty return dated October 30, 1986. On

November 17, 1986, the scope and coverage of E.O. No. 41 was expanded by Executive Order (E.O.) No.
64. ISSUE: Whether or not herein respondent's deficiency tax liabilities were extinguished upon

respondent's availment of tax amnesty under Executive Orders Nos. 41 and 64. RULING: Section 4 (b) of
E.O. No. 41 is very clear and unambiguous. It excepts from income tax amnesty those taxpayers
"with income tax cases already filed in court as of the effectivity hereof." The point of reference is the date

of effectivity of E.O. No. 41. The difficulty lies with respect to the contractor's tax assessment and

respondent's availment of the amnesty under E.O. No. 64 including estate and donor's taxes and tax on
business. In the instant case, the vagueness in Section 4 (b) brought about by E.O. No. 64 should be

construed strictly against the taxpayer. The term "income tax cases" should be read as to refer to estate

and donor's taxes and taxes on business while the word "hereof," to E.O. No. 64. Since Executive Order
No. 64 took effect on November 17, 1986, consequently, insofar as the taxes in E.O. No. 64 are
concerned, the date of effectivity referred to in Section 4 (b) of E.O. No. 41 should be November 17,

1986. There is nothing in E.O. No. 64 that provides that it should retroact to the date of effectivity of E.O.
No. 41, the original issuance. Neither is it necessarily implied from E.O. No. 64 that it or any of its
provisions should apply retroactively.