#1 COMMISSIONER OF INTERNAL

REVENUE, Petitioner,
vs.
JULIANE BAIER-NICKEL, as
represented by Marina Q. Guzman
(Attorney-in-fact) Respondent.
G.R. No. 153793 August 29, 2006

Facts:
CIR appeals the CA decision, which granted the tax refund of respondent and
reversed that of the CTA. Juliane Baier-Nickel, a non-resident German, is the
president of Jubanitex, a domestic corporation engaged in the manufacturing,
marketing and selling of embroidered textile products. Through Jubanitex’s general
manager, Marina Guzman, the company appointed respondent as commission agent
with 10% sales commission on all sales actually concluded and collected through
her efforts.

In 1995, respondent received P1, 707, 772. 64 as sales commission from w/c
Jubanitex deducted the 10% withholding tax of P170, 777.26 and remitted to BIR.
Respondent filed her income tax return but then claimed a refund from BIR for the
P170K, alleging this was mistakenly withheld by Jubanitex and that her sales
commission income was compensation for services rendered in Germany not
Philippines and thus not taxable here.
She filed a petition for review with CTA for alleged non-action by BIR. CTA denied
her claim but decision was reversed by CA on appeal, holding that the commission
was received as sales agent not as President and that the “source” of income arose
from marketing activities in Germany.

Issue:
W/N respondent is entitled to refund

Held:
No. Pursuant to Sec 25 of NIRC, non-resident aliens, whether or not engaged
in trade or business, are subject to the Philippine income taxation on their income
received from all sources in the Philippines. In determining the meaning of
“source”, the Court resorted to origin of Act 2833 (the first Philippine income tax
law), the US Revenue Law of 1916, as amended in 1917.
 US SC has said that income may be derived from three possible sources only:
(1) capital and/or (2) labor; and/or (3) the sale of capital assets. If the income is
from labor, the place where the labor is done should be decisive; if it is done in this
country, the income should be from “sources within the United States.” If the
income is from capital, the place where the capital is employed should be decisive;
if it is employed in this country, the income should be from “sources within the
United States.” If the income is from the sale of capital assets, the place where the
sale is made should be likewise decisive. “Source” is not a place, it is an activity or
property. As such, it has a situs or location, and if that situs or location is within the
United States the resulting income is taxable to nonresident aliens and foreign
corporations.

The source of an income is the property, activity or service that produced the
income. For the source of income to be considered as coming from the Philippines,
it is sufficient that the income is derived from activity within the Philippines.
The settled rule is that tax refunds are in the nature of tax exemptions and are to be
construed strictissimi juris against the taxpayer. To those therefore, who claim a
refund rest the burden of proving that the transaction subjected to tax is actually
exempt from taxation.

In the instant case, respondent failed to give substantial evidence to prove

that she performed the incoming producing service in Germany, which would have
entitled her to a tax exemption for income from sources outside the
Philippines. Petition granted.
 #2 PHILIPPINE BANK OF
COMMUNICATIONS, petitioner, vs.
COMMISSIONER OF INTERNAL
REVENUE, COURT OF TAX APPEALS
and COURT OF APPEALS, respondents.
G.R. No. 112024. January 28, 1999

Facts:
Petitioner, Philippine Bank of Communications (PBCom), a commercial
banking corporation duly organized under Philippine laws, filed its quarterly
income tax returns for the first and second quarters of 1985, reported profits, and
paid the total income tax of P5,016,954.00 by applying PBCom’s tax credit memos
for P3,401,701.00 and P1,615,253.00, respectively. Subsequently, however, PBCom
suffered net loss of P25,317,228.00, thereby showing no income tax liability in its
Annual Income Tax Returns for the year-ended December 31, 1985. For the
succeeding year, ending December 31, 1986, the petitioner likewise reported a net
loss of P14,129,602.00, and thus declared no tax payable for the year.

But during these two years, PBCom earned rental income from leased
properties. The lessees withheld and remitted to the BIR withholding creditable
taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On August 7, 1987,
petitioner requested the Commissioner of Internal Revenue, among others, for a tax
credit of P5,016,954.00 representing the overpayment of taxes in the first and
second quarters of 1985.
 Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable
taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in
1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal

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

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

Held:
1. RR 7-85 altering the 2-year prescriptive period imposed by law to
10-year prescriptive period is invalid.
Administrative issuances are merely interpretations and not expansions of the
provisions of law, thus, in case of inconsistency, the law prevails over them.
Administrative agencies have no legislative power.

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

changing the prescriptive period of two years to ten years on claims of excess
quarterly income tax payments, such circular created a clear inconsistency with the
provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret
the law; rather it legislated guidelines contrary to the statute passed by Congress.”
“It bears repeating that Revenue memorandum-circulars are considered
administrative rulings (in the sense of more specific and less general interpretations
of tax laws) which are issued from time to time by the Commissioner of Internal
Revenue. It is widely accepted that the interpretation placed upon a statute by the
executive officers, whose duty is to enforce it, is entitled to great respect by the
courts. Nevertheless, such interpretation is not conclusive and will be ignored if
judicially found to be erroneous. Thus, courts will not countenance administrative
issuances that override, instead of remaining consistent and in harmony with, the
law they seek to apply and implement.”

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

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

prescribed.
Since the petition had been filed beyond the prescriptive period, the same has
already prescribed. The fact that the final adjusted return show an excess tax credit
does not automatically entitle taxpayer claim for refund without any express intent.
WHEREFORE, the petition is hereby DENIED. The decision of the Court of
Appeals appealed from is AFFIRMED, with COSTS against the petitioner.

#3 QUIRICO P. UNGAB, petitioner,

vs.HON. VICENTE N. CUSI, JR., in his
capacity as Judge of the Court of First
Instance, Branch 1, 16TH Judicial
District, Davao City, THE
COMMISSIONER OF INTERNAL
REVENUE, and JESUS N. ACEBES, in
 his capacity as State Prosecutor,
respondents.
G.R. No. L-41919-24 May 30, 1980
Taxation – Tax Evasion – Protest – Criminal Case Against Taxpayer May Be Filed
Sans A Final Assessment

Facts:
In July 1974, Quirico Ungab filed his income tax return. He was subjected to
a tax audit and the tax examiner was convinced that Ungab filed a fraudulent return.
He was issued an assessment demanding payment of P104k in taxes. At the same
time, the tax examiner recommended the filing of criminal cases of tax evasion
against Ungab. Meanwhile, Ungab filed a protest with the Commissioner
of Internal Revenue (CIR).
Acting on the recommendation of the tax examiner, a state prosecutor filed 6
informations against Ungab for various violations of the National Internal Revenue
Code. The informations were filed with Court of First Instance of Davao presided
by Judge Vicente Cusi, Jr. Ungab filed a motion to quash the informations on the
ground that his pending protest with the CIR has not yet been acted upon hence the
assessment is not yet final and executory and therefore the trial court has no
jurisdiction yet over the criminal cases.

Issue:
Whether or not Ungab is correct.

Held:
No. What is involved here is not the collection of taxes where the assessment
of the Commissioner of Internal Revenue may be reviewed by the Court of Tax
Appeals, but a criminal prosecution for violations of the National Internal Revenue
Code (NIRC) which is within the cognizance of courts of first instance (regional
trial courts). While there can be no civil action to enforce collection before the
assessment procedures provided in the NIRC have been followed, there is no
requirement for the precise computation and assessment of the tax before there can
be a criminal prosecution under the Code. In fact, there is not even a requirement
that an assessment first be issued before a criminal case for violation of the NIRC
be filed.

#4 Adamson vs. Court of Appeals (2009)

G.R. No. 120935 | 2009-05-21

Facts:
 A deficiency tax assessment was issued against Petitioners relating to their
payment of capital gains tax and VAT on their sale of shares of stock and parcels of
land. Subsequent to the preliminary conference, the CIR filed with the Department
of Justice her Affidavit of Complaint against Petitioners. The Court of Appeals
ultimately ruled that, in a criminal prosecution for tax evasion, assessment of tax
deficiency is not required because the offense of tax evasion is complete or
consummated when the offender has knowingly and willfully filed a fraudulent
return with intent to evade the tax.

 Lucas Adamson and AMC sold 131,897 common shares of stock in

Adamson and Adamson, Inc. (AAI) to APAC Holding Limited (APAC). The
shares were valued at P7,789,995.00.[1] On June 22, 1990, P159,363.21 was
paid as capital gains tax for the transaction.
 AMC sold to APAC Philippines, Inc. another 229,870 common shares
of stock in AAI for P17,718,360.00. AMC paid the capital gains tax of
P352,242.96.
 The Commissioner issued a “Notice of Taxpayer” to AMC, Lucas G.
Adamson, Therese June D. Adamson and Sara S. de los Reyes, informing
them of deficiencies on their payment of capital gains tax and Value Added
Tax (VAT). The notice contained a schedule for preliminary conference.

G.R. No. 120935

 Lucas G. Adamson, Therese June D. Adamson and Sara S. de los
Reyes were charged before the Regional Trial Court (RTC) of Makati, Branch
150 in Criminal Case Nos. 94-1842 to 94-1846. They filed a Motion to
Dismiss or Suspend the Proceedings. They invoked the grounds that there
was yet no final assessment of their tax liability, and there were still pending
relevant Supreme Court and CTA cases.
 Initially, the trial court denied the motion. A Motion for
Reconsideration was however filed, this time assailing the trial court’s lack of
jurisdiction over the nature of the subject cases.
 On August 8, 1994, the trial court granted the Motion. It ruled that the
complaints for tax evasion filed by the Commissioner should be regarded as a
decision of the Commissioner regarding the tax liabilities of Lucas G.
Adamson, Therese June D. Adamson and Sara S. de los Reyes, and
appealable to the CTA. It further held that the said cases cannot proceed
independently of the assessment case pending before the CTA, which has
jurisdiction to determine the civil and criminal tax liability of the respondents
therein.
 Court of Appeals reversed the trial court’s decision and reinstated the
criminal complaints.
o The appellate court held that, in a criminal prosecution for tax
evasion, assessment of tax deficiency is not required because the
offense of tax evasion is complete or consummated when the offender
has knowingly and willfully filed a fraudulent return with intent to
evade the tax.
 o It ruled that private respondents filed false and fraudulent returns
with intent to evade taxes, and acting thereupon, petitioner filed an
Affidavit of Complaint with the Department of Justice, without an
accompanying assessment of the tax deficiency of private respondents,
in order to commence criminal action against the latter for tax evasion.

G.R. No. 124557

 AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de
los Reyes filed a letter request for re-investigation with the Commissioner of
the “Examiner’s Findings” earlier issued by the Bureau of Internal Revenue
(BIR), which pointed out the tax deficiencies.

 On March 15, 1994 before the Commissioner could act on their letter-
request, AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de
los Reyes filed a Petition for Review with the CTA. They assailed the
Commissioner’s finding of tax evasion against them.

 The Commissioner moved to dismiss the petition, on the ground that it

was premature, as she had not yet issued a formal assessment of the tax
liability of therein petitioners.

 On September 19, 1994, the CTA denied the Motion to Dismiss. It

considered the criminal complaint filed by the Commissioner with the DOJ as
an implied formal assessment, and the filing of the criminal informations with
the RTC as a denial of petitioners’ protest regarding the tax deficiency.

 The Commissioner repaired to the Court of Appeals on the ground that

the CTA acted with grave abuse of discretion. She contended that, with
regard to the protest provided under Section 229 of the NIRC, there must first
be a formal assessment issued by the Commissioner, and it must be in accord
with Section 6 of Revenue Regulation No. 12-85. She maintained that she
had not yet issued a formal assessment of tax liability, and the tax deficiency
amounts mentioned in her criminal complaint with the DOJ were given only
to show the difference between the tax returns filed and the audit findings of
the revenue examiner.

 The Court of Appeals sustained the CTA’s denial of the

Commissioner’s Motion to Dismiss. Hence, this petition.

Issues:
(1) Dis the CIR issue an assessment?
(2) Must a criminal prosecution for tax evasion be preceded by a deficiency tax
assessment?
(3) Does the CTA have jurisdiction on the case?

Held:
(1) NO. The recommendation letter of the Commissioner cannot be considered a
formal assessment as (a) it was not addressed to the taxpayers; (b) there was no
demand made on the taxpayers to pay the tax liability, nor a period for payment set
therein; (c) the letter was never mailed or sent to the taxpayers by the
Commissioner. It was only an affidavit of the computation of the alleged liabilities
and thus merely served as prima facie basis for filing criminal informations.

(2) YES. When fraudulent tax returns are involved as in the cases at bar, a
proceeding in court after the collection of such tax may be begun without
assessment considering that upon investigation of the examiners of the BIR, there
was a preliminary finding of gross discrepancy in the computation of the capital
gains taxes due from the transactions. The Tax Code is clear that the remedies may
proceed simultaneously.

(3) NO. While the laws governing the CTA have expanded the jurisdiction of the
Court, they did not change the jurisdiction of the CTA to entertain an appeal only
from a final decision of the Commissioner, or in cases of inaction within the
prescribed period. Since in the cases at bar, the Commissioner has not issued an
assessment of the tax liability of the Petitioners, the CTA has no jurisdiction.
 #5 CIR v. Estate of Benigno Toda Jr.
G.R. No. 147188. September 14, 2004
Facts:
 March 2, 1989: Cibeles Insurance Corp. (CIC) authorized Benigno P.
Toda Jr., President and Owner of 99.991% of outstanding capital stock, to sell
the Cibeles Building and 2 parcels of land which he sold to Rafael A.
Altonaga on August 30, 1987 for P 100M who then sold it on the same day to
Royal Match Inc. for P 200M.
 CIC included gains from sale of real property of P 75,728.021 in its
annual income tax return while Altonaga paid a 5% capital gains tax of P
10M
 July 12, 1990: Toda sold his shares to Le Hun T. Choa for P 12.5M
evidenced by a deed of ale of shares of stock which provides that the buyer is
free from all income tax liabilities for 1987, 1988 and 1989.
 Toda Jr. died 3 years later.
 March 29, 1994: BIR sent an assessment notice and demand letter to
CIC for deficiency of income tax of P 79,099, 999.22
 January 27, 1995: BIR sent the same to the estate of Toda Jr.
 Estate filed a protest which was dismissed - fraudulent sale to evade
the 35% corporate income tax for the additional gain of P 100M and that
there is in fact only 1 sale.
o Since it is falsity or fraud, the prescription period is 10 years
from the discovery of the falsity or fraud as prescribed under Sec. 223
(a) of the NIRC
 CTA: No proof of fraudulent transaction so the applicable period is 3
years after the last day prescribed by law for filing the return
 CA: affirmed
 CIR appealed

Issue:
Whether or not there is falsity or fraud resulting to tax evasion rather than tax
avoidance so the period for assessment has not prescribed.
Held:
YES. Estate shall be liable since NOT yet prescribed.
 Tax avoidance and tax evasion are the two most common ways used by
taxpayers in escaping from taxation. ax avoidance is the tax saving device
within the means sanctioned by law. This method should be used by the
taxpayer in good faith and at arms length. Tax evasion, on the other hand, is a
scheme used outside of those lawful means and when availed of, it usually
subjects the taxpayer to further or additional civil or criminal liabilities.
 Tax evasion connotes the integration of three factors:
o (1) the end to be achieved, i.e., the payment of less than that
known by the taxpayer to be legally due, or the non-payment of tax
when it is shown that a tax is due
o (2) an accompanying state of mind which is described as being
evil, in bad faith, willfull,or deliberate and not accidental; and
o (3) a course of action or failure of action which is unlawful.
o All are present in this case. The trial balance showed that RMI
debited P 40M as "other-inv. Cibeles Building" that indicates RMI Paid
CIC (NOT Altonaga)
 Fraud in its general sense, is deemed to comprise anything calculated
to deceive, including all acts, omissions, and concealment involving a breach
of legal or equitable duty, trust or confidence justly reposed, resulting in the
damage to another, or by which an undue and unconscionable advantage is
taken of another.
o Here, it is obvious that the objective of the sale to Altonaga was
to reduce the amount of tax to be paid especially that the transfer from
him to RMI would then subject the income to only 5% individual
capital gains tax, and not the 35% corporate income tax.
o Generally, a sale of or exchange of assets will have an income
tax incidence only when it is consummated but such tax incidence
depends upon the substance of the transaction rather them mere
formalities.
#6 JUDY ANNE L. SANTOS v. PEOPLE
G.R. No. 173176
Date: August 26, 2008

Petitioner: Judy Anne L. Santos

Respondent: People of the Philippines, Bureau of Internal Revenue (BIR)

Facts:
On 19 May 2005, then BIR Commissioner Guillermo L. Parayno, Jr. wrote to
the Department of Justice (DOJ) Secretary Raul M. Gonzales a letter regarding
the possible filing of criminal charges against petitioner. In said letter, BIR
Commissioner Parayno summarized the findings of the investigating BIR officers
that petitioner, in her Annual Income Tax Return for taxable year 2002 filed with
the BIR, declared an income of P8,033,332.70 derived from her talent fees solely
from ABS-CBN; initial documents gathered from the BIR offices and those given
by petitioner's accountant and third parties, however, confirmed that petitioner
received in 2002 income in the amount of at least P14,796,234.70, not only from
ABS-CBN, but also from other sources, such as movies and product
endorsements; the estimated tax liability arising from petitioner's underdeclaration
amounted to P1,718,925.52, including incremental penalties; the non-declaration
by petitioner of an amount equivalent to at least 84.18% of the income declared in
her return was considered a substantial underdeclaration of income, which
constituted prima facie evidence of false or fraudulent return under Section 248(B)
of the NIRC, as amended; and petitioner's failure to account as part of her income
the professional fees she received from sources other than ABS-CBN and her
underdeclaration of the income she received from ABS-CBN amounted to
manifest violations of Sections 254 and 255, as well as Section 248(B) of the
NIRC, as amended.

After an exchange of affidavits and other pleadings by the parties,

Prosecution Attorney Olivia Laroza-Torrevillas issued a Resolution dated 21
October 2005 finding probable cause and recommending the filing of a criminal
information against petitioner for violation of Section 255 in relation to Sections
254 and 248(B) of the NIRC, as amended. The said Resolution was approved by
Chief State Prosecutor Zuno. Pursuant to the 21 October 2005 DOJ Resolution, an
Information for violation of Section 255 in relation to Sections 254 and 248(B) of
the NIRC, as amended, was filed with the CTA on 3 November 2005 and docketed
as C.T.A. Crim. Case No. 0-012. However, the CTA First Division, after noting
several discrepancies in the Information filed, required the State Prosecutor to
clarify and explain the same, and to submit the original copies of the parties'
affidavits, memoranda, and all other evidence on record. Consequently,
Prosecution Attorney Torrevillas, on behalf of respondent People, submitted on 1
December 2005 a Compliance with Ex Parte Motion to Admit Attached
Information Prosecution Attorney Torrevillas moved that the documents submitted
be admitted as part of the record of the case and the first Information be
substituted by the attached second Information. The second Information addressed
the discrepancies noted by the CTA in the first Information.

The CTA First Division then issued on 9 December 2005 a warrant for the
arrest of petitioner. The tax court lifted and recalled the warrant of arrest on 21
December 2005 after petitioner voluntarily appeared and submitted herself to its
jurisdiction and filed the required bail bond in the amount of P20,000.00. On 10
January 2006, petitioner filed with the CTA First Division a Motion to Quash the
Information filed in C.T.A. Crim. Case No. 0-012 on the following grounds: (1)
The facts alleged in the INFORMATION do not constitute an offense; (2) The
officer who filed the information had no authority to do so; (3) The Honorable
Court of Tax Appeals has no jurisdiction over the subject matter of the case; and
(4) The information is void ab initio, being violative of due process, and the equal
protection of the laws.

In 2006, the CTA First Division denied petitioner's Motion to Quash and
accordingly scheduled her arraignment on 2 March 2006 at 9:00 a.m. Petitioner
filed a Motion for Reconsideration and/or Reinvestigation, which was again
denied by the CTA First Division. On 1 June 2006, petitioner filed with the CTA
en banc a Motion for Extension of Time to File Petition for Review, docketed as
C.T.A. EB. CRIM. No. 001. She filed her Petition for Review with the CTA en
banc on 16 June 2006. However, the court ruled that a resolution denying a
motion to quash is not a proper subject of an appeal to the Court En Banc under
Section 11 of R.A. No. 9282 because a ruling denying a motion to quash is only an
interlocutory order, as such, it cannot be made the subject of an appeal pursuant to
said law and the Rules of Court. Petitioner's primary argument is that a resolution
of a CTA Division denying a motion to quash is a proper subject of an appeal to
the CTA en banc under Section 18 of Republic Act No. 1125, as amended, because
the law does not say that only a resolution that constitutes a final disposition of a
case may be appealed to the CTA en banc. If the interpretation of the law by the
CTA en banc prevails, a procedural void is created leaving the parties, such as
petitioner, without any remedy involving erroneous resolutions of a CTA Division.

Issue:
WON a resolution of a CTA division denying a motion to quash is a proper subject
of an appeal to the CTA En Banc of R.A. No. 9282, amending R.A. 1125?

Held:
NO; Petition denied.

Ratio:
1. General rule: The denial of a motion to quash is an interlocutory order which
is not the proper subject of an appeal or a petition for certiorari.

a. According to Section 1, Rule 41 of the Revised Rules of Court,

governing appeals from the Regional Trial Courts (RTCs) to the Court of
Appeals, an appeal may be taken only from a judgment or final order that
completely disposes of the case or of a matter therein when declared by the
Rules to be appealable. Said provision, thus, explicitly states that no appeal
may be taken from an interlocutory order.
b. Section 2, Rule 41 of the Revised Rules of Court provides that "(o)nly
final judgments or orders shall be subject to appeal." Interlocutory or
incidental judgments or orders do not stay the progress of an action nor are
they subject of appeal "until final judgment or order is rendered for one party
or the other." The test to determine whether an order or judgment is
interlocutory or final is this: "Does it leave something to be done in the trial
court with respect to the merits of the case? If it does, it is interlocutory; if it
does not, it is final". A court order is final in character if it puts an end to the
particular matter resolved or settles definitely the matter therein disposed of,
such that no further questions can come before the court except the execution
of the order. The term "final" judgment or order signifies a judgment or an
order which disposes of the cause as to all the parties, reserving no further
questions or directions for future determination. In other words, after a final
order or judgment, the court should have nothing more to do in respect of the
relative rights of the parties to the case. Conversely, "an order that does not
 finally dispose of the case and does not end the Court's task of adjudicating
the parties' contentions in determining their rights and liabilities as regards
each other, but obviously indicates that other things remain to be done by the
Court, is interlocutory."
c. Rationale in Matute v. Court of Appeals: (i) an "interlocutory order or
decree made in the progress of a case is always under the control of the court
until the final decision of the suit, and may be modified or rescinded upon
sufficient grounds shown at any time before final judgment. (ii) to avoid
multiplicity of appeals in a single action, which must necessarily suspend the
hearing and decision on the merits of the case during the pendency of the
appeal. If such appeal were allowed, the trial on the merits of the case would
necessarily be delayed for a considerable length of time, and compel the
adverse party to incur unnecessary expenses, for one of the parties may
interpose as many appeals as incidental questions may be raised by him, and
interlocutory orders rendered or issued by the lower court.
d. There is no dispute that a court order denying a motion to quash is
interlocutory. The denial of the motion to quash means that the criminal
information remains pending with the court, which must proceed with the
trial to determine whether the accused is guilty of the crime charged therein.
Equally settled is the rule that an order denying a motion to quash, being
interlocutory, is not immediately appealable, nor can it be the subject of a
petition for certiorari. Such order may only be reviewed in the ordinary
course of law by an appeal from the judgment after trial.
e. While the general rule proscribes the appeal of an interlocutory order,
there are also recognized exceptions to the same. The general rule is not
absolute. Where special circumstances clearly demonstrate the inadequacy of
an appeal, then the special civil action of certiorari or prohibition may
exceptionally be allowed. This Court recognizes that under certain situations,
recourse to extraordinary legal remedies, such as a petition for certiorari, is
considered proper to question the denial of a motion to quash (or any other
interlocutory order) in the interest of a "more enlightened and substantial
justice"; or to promote public welfare and public policy; or when the cases
"have attracted nationwide attention, making it essential to proceed with
dispatch in the consideration thereof"; or when the order was rendered with
grave abuse of discretion. Certiorari is an appropriate remedy to assail an
interlocutory order (1) when the tribunal issued such order without or in
excess of jurisdiction or with grave abuse of discretion; and (2) when the
assailed interlocutory order is patently erroneous, and the remedy of appeal
would not afford adequate and expeditious relief.

2. The CTA First Division did not commit grave abuse of discretion in denying
petitioner's Motion to Quash.

a. An act of a court or tribunal may only be considered as committed in

grave abuse of discretion when the same was performed in a capricious or
whimsical exercise of judgment, which is equivalent to lack of jurisdiction. In
 this connection, it is only upon showing that the court acted without or in
excess of jurisdiction or with grave abuse of discretion that an interlocutory
order such as that involved in this case may be impugned.
b. Recourse to a petition for certiorari to assail an interlocutory order is
now expressly recognized in the ultimate paragraph of Section 1, Rule 41 of
the Revised Rules of Court on the subject of appeal.
c. Petitioner cannot claim denial of due process when she was given the
opportunity to file her affidavits and other pleadings and submit evidence
before the DOJ during the preliminary investigation of her case and before
the Information was filed against her.

#7 Republic vs Cocofed
GR 147062-64, 14 December 2001

Facts:
 R.A 6260 was enacted creating the Coconut Investment Company (CIC) to
administer the Coconut Investment Fund (CIF) which was to be sourced from a
fund levied based upon every sale of copra. Charged with the collection of the fund
is the PCA. One of the purposes of the law was to acquire a commercial bank in
order to provide readily available credit to coconut farmers at a preferential rate.
Because of this, PCA acquired a commercial bank (which we now know as UCPB)
and deposited the coco-levy funds and collections in the said bank. In addition, it is
also provided in the law that the funds shall not be construed as special and/or
fiduciary funds, or as part of the general funds of the National Government.

Issue:
What are the elements of taxation? Is the coco-levy fund a tax?

Held:
The court ruled that the coconut levy was imposed in the exercise of the
State's power to tax. Coconut levy funds partake of the nature of taxes, which, in
general, are enforced proportional contributions from persons and properties,
exacted by the State for the support of the government and the public.
A tax has three elements:
a) It is an enforced proportional contributions from persons and properties;
b) It is imposed by the State by virtue of its sovereignty; and
c) it is levied for the support of the government. The coconut levy funds fall
squarely into the elements.

The funds were imposed for a public purpose and were collected to advance
the government's policy of protecting the coconut industry. The court further
pointed that taxes are thus imposed only for a public purpose and cannot be used for
purely private purposes.
 #8 CIR vs Lincoln
GR 119176, 19 March 2002

Facts:
Private respondent Lincoln Philippine Life Insurance Co., Inc. is a domestic
corporation engaged in life insurance business. In the years prior to 1984, private
respondent issued a special kind of life insurance policy known as the "Junior Estate
Builder Policy," the distinguishing feature of which is a clause providing for an
automatic increase in the amount of life insurance coverage upon attainment of a
certain age by the insured without the need of issuing a new policy. The clause was
to take effect in the year 1984. Documentary stamp taxes due on the policy were
paid by petitioner only on the initial sum assured.

Sec173 of the National Internal Revenue Code provides that for any
documents, instruments, and papers, there there shall be levied, collected and paid
for the corresponding documentary stamp taxes. Section183 of the same code also
imposes tax on life insurance policies.

Issue 1:
Whether or not the automatic increase clause is distinct and separate from
that of the original agreement, and thus the payment of documentary stamp taxes
should also be imposed.

Held:
No, the SC affirmed the ruling of the Court of Tax Appeals which stated that
there was only one transaction involved, and that the automatic increase clause is an
integral part of the policy.

It is clear from Section 49 and 50, Title VI of the Insurance Code that any
rider, clause, warranty or endorsement pasted or attached to the policy is considered
part of such policy or contract of insurance. Although the clause was to take effect
only in 1984, it was written into the policy at the time of its issuance.
The distinctive feature of the "junior estate builder policy" called the "automatic
increase clause" already formed part and parcel of the insurance contract, hence,
there was no need for an execution of a separate agreement for the increase in the
coverage that took effect in 1984 when the assured reached a certain age.

Issue 2: How should the documentary stamp tax be computed?

Held:
Section 183 states that it is to be computed in the amount fixed in the policy.
However, there was no fixed amount computed on the additional increase based on
the automatic increase clause since it is a suspensive condition. The SC ruled that
Although the automatic increase in the amount of life insurance coverage was to
take effect later on, the date of its effectivity, as well as the amount of the increase,
was already definite at the time of the issuance of the policy. Thus, the amount
insured by the policy at the time of its issuance necessarily included the additional
sum covered by the automatic increase clause because it was already determinable
at the time the transaction was entered into and formed part of the policy.
 #9 Philex Mining vs CIR
GR 125704, 28 August 1998

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

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

Held:
No. Philex's claim is an outright disregard of the basic principle in tax law
that taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. Philex cannot be allowed to refuse the payment of its tax
liabilities on the ground that it has a pending tax claim for refund or credit against
the government which has not yet been granted. Taxes cannot be subject to
compensation for the simple reason that the government and the taxpayer are not
creditors and debtors of each other. There is a material distinction between a tax and
debt.

Debts are due to the Government in its corporate capacity, while taxes are due
to the Government in its sovereign capacity. There can be no off-setting of taxes
against the claims that the taxpayer may have against the government.

A person cannot refuse to pay a tax on the ground that the government owes
him an amount equal to or greater than the tax being collected. The collection of a
tax cannot await the results of a lawsuit against the government.
 #10 Planters Products vsFertiphil
GR 166006, 14 March 2008

Facts:
On June 3, 1985, for the purpose of rehabilitating Philippine Planters, Inc.,
the then President Ferdinand E. Marcos issued Letter of Instruction (LOI) No. 1465
which imposed a charge of P10.00 per bag of fertilizer on all domestic sales of
fertilizer in the Philippines. Respondent Fertiphil Corporation, a domestic entity
engaged in the fertilizer business, questioned the constitutionality of LOI NO. 1465
and brought an action to recover its accumulated payment thereunder in the amount
of P6,698,144.00, the case docketed as Civil Case No. 17835 before Branch 147 of
the Regional Trial Court of Makati.

Issue:
Whether or not, LOI 1465 constitutes valid legislation pursuant to the
exercise of the power of taxation and police power of the state.

Held:
No. Court said, "It is clear from the Letter of Understanding that the levy was
imposed precisely to pay the corporate debts of PPI. We cannot agree with PPI that
the levy was imposed to ensure the stability of the fertilizer industry in the country.
The letter of understanding and the plain text of the LOI clearly indicate that the
levy was exacted for the benefit of a private corporation, therefore not for public
purpose. Also, even if We consider LOI No. 1465 enacted under the police power of
the State, it would still be invalid for failing to comply with the test of “lawful
subjects” and “lawful means.” Jurisprudence states the test as follows: (1) the
interest of the public generally, as distinguished from those of particular class,
requires its exercise; and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals. For the
same reasons as discussed, LOI No. 1465 is invalid because it did not promote
public interest. The law was enacted to give undue advantage to a private
corporation."
 #11 Gerochi vs DOE
GR 159796, 17 July 2007

Facts:
RA 9136, otherwise known as the Electric Power Industry Reform Act of
2001 (EPIRA), which sought to impose a universal charge on all end-users of
electricity for the purpose of funding NAPOCOR’s projects, was enacted and took
effect in 2001.

Petitioners contest the constitutionality of the EPIRA, stating that the

imposition of the universal charge on all end-users is oppressive and confiscatory
and amounts to taxation without representation for not giving the consumers a
chance to be heard and be represented.

Issue:
Whether or not the universal charge is a tax.

Held:
NO. The assailed universal charge is not a tax, but an exaction in the exercise
of the State’s police power. That public welfare is promoted may be gleaned from
Sec. 2 of the EPIRA, which enumerates the policies of the State regarding
electrification. Moreover, the Special Trust Fund feature of the universal charge
reasonably serves and assures the attainment and perpetuity of the purposes for
which the universal charge is imposed (e.g. to ensure the viability of the country’s
electric power industry), further boosting the position that the same is an exaction
primarily in pursuit of the State’s police objectives
If generation of revenue is the primary purpose and regulation is merely incidental,
the imposition is a tax; but if regulation is the primary purpose, the fact that revenue
is incidentally raised does not make the imposition a tax.
The taxing power may be used as an implement of police power. The theory behind
the exercise of the power to tax emanates from necessity; without taxes,
government cannot fulfill its mandate of promoting the general welfare and well-
being of the people.
 #12 Procter & Gamble vs Municipality
of Medina
GR L-29125, 31 January 1972

Facts:
Procter & Gamble Trading Company and Union Import & Export
Corporation, herein appellants, engaged in an occupation or business of copra in the
Municipality of Medina question the decision of the lower court upholding the
validity of Ordinance No. 13 of the Municipality of Medina, which was approved
pursuant to Commonwealth Act No. 472. The subject provision reads: "The
following taxes, charges, and fees are imposed in the Municipality upon the
businesses, occupations, and privileges, specific hereunder, and shall be collected
in accordance with the following schedule of rates: ... ."

Both appellants seek to annul or at least to obtain a judicial declaration of

their being outside the scope of Ordinance No. 13 on the contention that they are
not merchants within the meaning of the ordinance and that what is imposed by the
ordinance is an export tax expressly prohibited by law.

Issues:
1) Whether or not the appellants are not merchants within the meaning of
Ordinance No. 13 of the Municipality of Medina and hence the ordinance is
inapplicable to them?
2) Whether or not Ordinance No. 13 of the Municipality of Medina is an export
tax expressly prohibited by law?

Held:
1) No. Undoubtedly, the plaintiffs are engaged in an occupation or business in
the municipality. This fact is evidenced by the existence in Medina of plaintiffs’
branch offices or buying agencies, manned by their branch managers and clerical
forces; their establishments like bodegas and equipment necessary in the buying,
storing and shipping of copra; actual purchase of millions of kilos of copra in
Medina and its environs in terms of millions of pesos every year and round the
year; and direct exportation and shipment of this commodity by the plaintiffs to
foreign countries thru foreign vessels that periodically and regularly call in
defendant's municipal wharf at the instance of plaintiff. Certainly, these series of
activities of plaintiffs constitute business in every essence of the word for it
could not deny that the same is carried for profit or gain.
 It is explicitly provided in the ordinance in question that defendant Municipality
would collect taxes, charges and fees on businesses conducted therein. The
conferment of such competence under Commonwealth Act No. 472 is in accordance
with the well-settled principle that a public corporation may tax a business or
profession conducted within its territorial jurisdiction. There should be greater
awareness on the part of firms and entities conducting business within a
municipality that the exercise of such a privilege could be subject to the appropriate
exercise of the prerogative to tax. Hence, said ordinance is applicable to appellants
Procter & Gamble Trading Company and Union Import & Export Corporation.
2) No. The appellants were unsuccessful in convincing the Court that what is
imposed by the ordinance is an export tax expressly prohibited by law. The case
of Ormoc Sugarcane Planters Association, Inc. v. Municipal Board of Ormoc
City leaves no doubt that only where there is a clear showing that what is being
taxed is an export to any foreign country would the prohibition come into play.
The ordinance in question is not susceptible to such a reproach.
 #13 CIR vs Wyeth
GR 76281, 30 September 1

Facts:
WYETH is a domestic corporation business engaged in manufacturing and
selling pharmaceutical and nutritional products. CIR conducted several
investigations and allegedly claimed that WYETH failed to remit its withholding
tax during the fourth quarter of 1973. WYETH contended that it was not liable in
paying the withholding tax because they have yet to be remitted or paid abroad.
Also, they insisted that withholding tax on dividends and royalties only becomes
due and payable only upon their actual payment or remittance. A case was filed
against WYETH by CIR but was later on dismissed for the reason that the right of
the petitioner to collect has already prescribed. Hence, this petition.

Issue:
Whether or not petitioner's right to collect deficiency withholding tax is
barred by prescription?

Held:
The right to collect by the petitioner did not prescribe. The period of
prescription was interrupted when a letter sent by SGV & CO in behalf of its client
WYETH to request for a reinvestigation by the BIR of such allege default of
payments by the latter. It was only upon the receipt of WYETH of the final
assessment by the BIR that the five year prescriptive period started to run again.
 #14 Pepsi Cola Bottiling Co. vs City of
Butuan (1968)

Facts:
Ordinance 110 was enacted by the City of Butuan imposing a tax of P0.10 per
case of 24 bottles of softdrinks or carbonated drinks. The tax was imposed upon
dealers engeged in selling softdrinks or carbonated drinks. When Ordinance 110,
the tax was imposed upon an agent or consignee of any person, association,
partnership, company or corporation engaged in selling softdrinks or carbonated
drinks, with “agent or consignee” being particularly defined on the inserted
provision Section 3-A. In effect, merchants engaged in the sale of softdrinks, etc.
are not subject to the tax unless they are agents or consignees of another dealer who
must be one engaged in business outside the City. Pepsi-Cola Bottling Co. filed suit
to recover sums paid by it to the city pursuant to the Ordinance, which it claims to
be null and void.

Issue:
Whether the Ordinance is discriminatory.

Held:
The Ordinance, as amended, is discriminatory since only sales by “agents or
consignees” of outside dealers would be subject to the tax. Sales by local dealers,
not acting for or on behalf of other merchants, regardless of the volume of their
sales , and even if the same exceeded those made by said agents or consignees of
producers or merchants established outside the city, would be exempt from the tax.
The classification made in the exercise of the authority to tax, to be valid must be
reasonable, which would be satisfied if the classification is based upon substantial
distinctions which makes real differences; these are germane to the purpose of
legislation or ordinance; the classification applies not only to present conditions but
also to future conditions substantially identical to those of the present; and the
classification applies equally to all those who belong to the same class. These
conditions are not fully met by the ordinance in question.
 #15 Abra vs Hernando (1981)

Facts:
The provincial assessor made a tax assessment on the properties of the
Roman Catholic Bishop of Bangued. The bishop claims tax exemption from real
estate tax, through an action for declaratory relief. A summary judgment was made
granting the exemption without hearing the side of the Province of Abra.

Issue:
Whether the properties of the Bishop of Bangued are tax-exempt.

Held:
The 1935 and the 1973 Constitutions differ in language as to the exemption
of religious property from taxes as tehy should not only be “exclusively” but also
“actually” and “directly” used for religious purposes. Herein, the judge accepted at
its face the allegation of the Bishop instead of demonstrating that there is
compliance with the constitutional provision that allows an exemption. There was
an allegation of lack of jurisdiction and of lack of cause of action, which should
have compelled the judge to accord a hearing to the province rather than deciding
the case immediately in favor of the Bishop. Exemption from taxation is not favored
and is never presumed, so that if granted, it must be strictly construed against the
taxpayer. There must be proof of the actual and direct use of the lands, buildings,
and improvements for religious (or charitable) purposes to be exempted from
taxation.

The case was remanded to the lower court for a trial on merits.
 #16 Lladoc vs Commisioner of Internal
Revenue (1965)

Facts:
In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in cash to the
parish priest of Victorias, Negros Occidental; the amount spent for the construction
of a new Catholic Church in the locality,m as intended. In1958, MB Estate filed the
donor’s gift tax return. In 1960, the Commissioner issued an assessment for donee’s
gift tax against the parish. The priest lodged a protest to the assessment and
requested the withdrawal thereof.

Issue:
Whether the Catholic Parish is tax exempt.

Held:
The phrase “exempt from taxation” should not be interpreted to mean
exemption from all kinds of taxes. The exemption is only from the payment of taxes
assessed on such properties as property taxes as contradistinguished from excise
taxes. A donee’s gift tax is not a property tax but an excise tax imposed on the
transfer of property by way of gift inter vivos. It does not rest upon general
ownership, but an excise upon the use made of the properties, upon the exercise of
the privilege of receiving the properties. The imposition of such excise tax on
property used for religious purpose do not constitute an impairment of the
Constitution.

The tax exemption of the parish, thus, does not extend to excise taxes.
 #17 Sison vs Ancheta (1984)

Facts:
Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its
provision (Section 1) unduly discriminated against him by the imposition of higher
rates upon his income as a professional, that it amounts to class legislation, and that
it transgresses against the equal protection and due process clauses of the
Constitution as well as the rule requiring uniformity in taxation.

Issue:
Whether BP 135 violates the due process and equal protection clauses, and
the rule on uniformity in taxation.

Held:
There is a need for proof of such persuasive character as would lead to a
conclusion that there was a violation of the due process and equal protection
clauses. Absent such showing, the presumption of validity must prevail. Equality
and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation. Where the
differentitation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the
clause and is therefore uniform. Taxpayers may be classified into different
categories, such as recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make deductions for income
tax purposes as there is no practically no overhead expense, while professionals and
businessmen have no uniform costs or expenses necessaryh to produce their
income. There is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income taxation as
regards professional and business income.

#18 Shell Co. vs Vano (1954)

Facts:
The municipal council of Cordova, Cebu adopted Ordinance 10 (1946)
imposing an annual tax of P150 on occupation or the exercise of the privilege of
installation manager; Ordinance 9 (1947) imposing an annual tax of P40 for local
deposits in drums of combustible and inflammable materials and an annual tax of
P200 for tin can factories; and Ordinance 11 (1948) imposing an annual tax of P150
on tin can factories having a maximum annual output capacity of 30,000 tin cans.
Shell Co., a foreign corporation, filed suit for the refund of the taxes paid by it, on
the ground that the ordinances imposing such taxes are ultra vires.

Issue:
Whether Ordinance 10 is discriminatory and hostile because there is no other
person in the locality who exercise such designation or occupation.

Held:
The fact that there is no other person in the locality who exercises such a
“designation” or calling does not make the ordinance discriminatory and hostile,
inasmuch as it is and will be applicable to any person or firm who exercises such
calling or occupation named or designated as “installation manager.”
 #19 Villegas vs Hiu Chiong Tsai Pao
Ho (1978)

Facts:
The Municipal Board of Manila enacted Ordinance 6537 requiring aliens
(except those employed in the diplomatic and consular missions of foreign
countries, in technical assistance programs of the government and another country,
and members of religious orders or congregations) to procure the requisite mayor’s
permit so as to be employed or engage in trade in the City of Manila. The permit fee
is P50, and the penalty for the violation of the ordinance is 3 to 6 months
imprisonment or a fine of P100 to P200, or both.

Issue:
Whether the ordinance imposes a regulatory fee or a tax.

Held:
 The ordinance’s purpose is clearly to raise money under the guise of
regulation by exacting P50 from aliens who have been cleared for employment. The
amount is unreasonable and excessive because it fails to consider difference in
situation among aliens required to pay it, i.e. being casual, permanent, part-time,
rank-and-file or executive.

The Ordinance was declared invalid as it is arbitrary, oppressive and

unreasonable, being applied only to aliens who are thus deprived of their rights to
life, liberty and property and therefore violates the due process and equal protection
clauses of the Constitution. Further, the ordinance does not lay down any criterion
or standard to guide the Mayor in the exercise of his discretion, thus conferring
upon the mayor arbitrary and unrestricted powers.

#20 Ormoc Sugar vs Treasurer of Ormoc

City (1968)

Facts:
In 1964, the Municipal Board of Ormoc City passed Ordinance 4, imposing
on any and all productions of centrifuga sugar milled at the Ormoc Sugar Co. Inc. in
Ormoc City a municpal tax equivalent to 1% per export sale to the United States
and other foreign countries. The company paid the said tax under protest. It
subsequently filed a case seeking to invalidate the ordinance for being
unconstitutional.
Issue:
Whether the ordinance violates the equal protection clause.

Held:
The Ordinance taxes only centrifugal sugar produced and exported by the
Ormoc Sugar Co. Inc. and none other. At the time of the taxing ordinance’s enacted,
the company was the only sugar central in Ormoc City. The classification, to be
reasonable, should be in terms applicable to future conditions as well. The taxing
ordinance should not be singular and exclusive as to exclude any subsequently
established sugar central, of the same class as the present company, from the
coverage of the tax. As it is now, even if later a similar company is set up, it cannot
be subject to the tax because the ordinance expressly points only to the company as
the entity to be levied upon.

#21 Misamis Oriental vs Cagayan

Electric (1990)

Facts:
Cagayan Electric Power and light Co, Inc. (CEPALCO) was granted a
franchise in 1961 under RA 3247 to install, operate and maintain an electric light,
heat and power system in Cagayan de Oro and its suburbs. In 1973, the Local Tax
Code (PD 231) was promulgated, where Section 9 thereof providing for a franchise
tax. Pursuant thereto, the province of Misamis Oriental enacted Provincial Revenue
Ordinance 19, whose Section 12 also provides for a franchise tax. The Provincial
Treasurer demanded payment of the provincial franchise tax from CEPALCO.
CEPALCO paid under protest.

Issue:
Whether CEPALCO is exempt from the provincial franchise tax.

Held:
Local Tax Regulation 3-75 issued by the Secretary of Finance in 1976 made it
clear that the franchise tax provided in the Local Tax Code may only be imposed on
companies with franchise that do not contain the exempting clause, i.e. “in-lieu-of-
all-taxes-proviso.” CEPALCO’s franchise i.e. RA 3247, 3571 and 6020 (Section 3
thereof), uniformly provides that “in consideration of the franchise and rights
hereby granted, the grantee shall pay a franchise tax equal to 3% of the gross
earnings for electric current sold under the franchise, of which 2% goes to the
national Treasury and 1% goes into the treasury of the municipalities of Tagoloan,
Opol, Villanueva, Jasaan, and Cagayan de Oro, as the case may be: Provided, that
the said franchise tax of 3% of the gross earnings shall be in lieu of all taxes and
assessments of whatever authority upon privileges, earnings, income, franchise and
poles, wires, transformers, and insulators of the grantee from which taxes and
assessments the grantee is hereby expressly exempted.

#22 Comissioner of Internal Revenue vs

Lingayen Gulf Electric (1988)
Facts:
Lingayen Gulf Electric Power operates an electric power plant serving the
municipalities of Lingayen and Binmaley, Pangaisnan, pursuant to municipal
franchise granted it by the respective municipal councils. The franchises provided
that the grantee shall pay quarterly to the Provincial Treasury of Pangasinan 1% of
the gross earnings obtained through the privilege for the first 20 years (from 1946),
and 2% during the remaining 15 years of the life of the franchise. In 1948, the
Philippine President approved the franchise (RA 3843). In 1955, the BIR assessed
and demanded against the company deficiency franchise taxes and surcharges fro
the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts from
1948 to 1954. The company asked for a reinvestigation, which was denied.

Issue [1]:
Whether the Court can inquire into the wisdom of the Act.

Held [1]:
The Court does not have the authority to inquire into the wisdom of the Act.
Charters or special laws granted and enacted by the Legislatur are in the nature of
private contracts. They do not contitute a part of the machinery of the general
government. They are usually adopted after careful consideration of the private
rights in relation with the resultant benefits of the State. In passing a special charter,
the attention of the Legislature is directed to the facts and circumstances which the
act or charter is intended to meet. The Legislature considers and makes provision
for all the circumstance of the particular case. The Court ought not to disturb the
ruling of the Court of Tax Appeals on the constitutionality of the law in question.

Issue [2]:
Whether a rate below 5% on gross income violate the uniformity of tax
clause in the Constitution.

Held [2]:
A tax is uniform when it operates with the same force and effect in every
place where the subject of it is found. Uniformity means that all property belonging
to the same class shall be taxed alike. The legislature has the inherent power not
only to select the subjects of taxation but to grant exemptions. Tax exemptions have
never been deemed violative of the equal protection clause. Herein, the 5%
franchise tax rate provided in Section 259 of the Tax Code was never intended to
have a universal application. Section 259 expressly allows the payment of taxes at
rates lower than 5% when the charter granting the franchise precludes the
imposition of a higher tax. RA 3843 did not only fix and specify a franchise tax of
2% on its gross receipts, but made it
in lieu of any and all taxes, all laws to the contrary notwithstanding. “
The company, hence, is not liable for deficiency taxes.