Académique Documents
Professionnel Documents
Culture Documents
ALMANZOR
GR Nos. L-49839-46, April 26, 1991
196 SCRA 322
FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased
and occupied as dwelling
units by tenants who were paying monthly rentals of not exceeding P300. Sometimes
in 1971 the Rental
Freezing Law was passed prohibiting for one year from its effectivity, an increase in
monthly rentals of dwelling
units where rentals do not exceed three hundred pesos (P300.00), so that the Reyes
were precluded from
raising the rents and from ejecting the tenants. In 1973, respondent City Assessor of
Manila re-classified and
reassessed the value of the subject properties based on the schedule of market
values, which entailed an
increase in the corresponding tax rates prompting petitioners to file a Memorandum
of Disagreement averring
that the reassessments made were "excessive, unwarranted, inequitable,
confiscatory and unconstitutional"
considering that the taxes imposed upon them greatly exceeded the annual income
derived from their
properties. They argued that the income approach should have been used in
determining the land values instead
of the comparable sales approach which the City Assessor adopted.
ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?
HELD: No. The taxing power has the authority to make a reasonable and natural
classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at
the very least discrimination
that finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under
similar circumstances or that all persons must be treated in the same manner, the
conditions not being different
both in the privileges conferred and the liabilities imposed.
Consequently, it stands to reason that petitioners who are burdened by the
government by its Rental Freezing
Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not
now be penalized by the
same government by the imposition of excessive taxes petitioners can ill afford and
eventually result in the
forfeiture of their properties.
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
differentiation 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 necessary 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.
On Jan. 14, 1965, the corp received a letter from the CIR regarding its
delinquency income taxes from 1958-1959, amtg to P83,183.85
On March 12, a warrant of distraint and levy was presented to Algue Inc. thru
its counsel, Atty. Guevara, who refused to receive it on the ground of the pending
protest
Since the protest was not found on the records, a file copy from the corp was
produced and given to BIR Agent Reyes, who deferred service of the warrant
On April 7, Atty. Guevara was informed that the BIR was not taking any action
on the protest and it was only then that he accepted the warrant of distraint and
levy earlier sought to be served
On April 23, Algue filed a petition for review of the decision of the CIR with the
Court of Tax Appeals
CIR contentions:
-
payments are fictitious because most of the payees are members of the
same family in control of Algue and that there is not enough substantiation of
such payments
CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered
in the form of promotional fees. These were collected by the Payees for their work
in the creation of the Vegetable Oil Investment Corporation of the Philippines and
its subsequent purchase of the properties of the Philippine Sugar Estate
Development Company.
Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by Algue as legitimate business expenses in its income tax returns
Ruling:
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance, made in accordance with law.
RA 1125: the appeal may be made within thirty days after receipt of the
decision or ruling challenged
During the intervening period, the warrant was premature and could therefore
not be served.
Originally, CIR claimed that the 75K promotional fees to be personal holding
There is no dispute that the payees duly reported their respective shares of the
fees in their income tax returns and paid the corresponding taxes thereon. CTA
also found, after examining the evidence, that no distribution of dividends was
involved
Algue Inc. was a family corporation where strict business procedures were not
applied and immediate issuance of receipts was not required. at the end of the
year, when the books were to be closed, each payee made an accounting of all of
the fees received by him or her, to make up the total of P75,000.00. This
arrangement was understandable in view of the close relationship among the
persons in the family corporation
The amount of the promotional fees was not excessive. The total commission
paid by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K.
After deducting the said fees, Algue still had a balance of P50,000.00 as clear
profit from the transaction. The amount of P75,000.00 was 60% of the total
commission. This was a reasonable proportion, considering that it was the payees
who did practically everything, from the formation of the Vegetable Oil
Investment Corporation to the actual purchase by it of the Sugar Estate
properties.
Sec. 30 of the Tax Code: allowed deductions in the net income Expenses - All
the ordinary and necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a reasonable allowance for salaries
or other compensation for personal services actually rendered xxx
the burden is on the taxpayer to prove the validity of the claimed deduction
In this case, Algue Inc. has proved that the payment of the fees was necessary
and reasonable in the light of the efforts exerted by the payees in inducing
investors and prominent businessmen to venture in an experimental enterprise
and involve themselves in a new business requiring millions of pesos.
Taxes are what we pay for civilization society. Without taxes, the government
would be paralyzed for lack of the motive power to activate and operate it. Hence,
despite the natural reluctance to surrender part of one's hard earned income to
the taxing authorities, every person who is able to must contribute his share in
the running of the government. The government for its part, is expected to
respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values
Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in
accordance with Rep. Act No. 1125. And we also find that the claimed deduction by
Algue Inc. was permitted under the Internal Revenue Code and should therefore not
YES.
(1) 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.
(2) Not only do they fall under the broad term under (1) but also come under those
described as all other franchise grantees which is not confined only to legislative
franchise grantees since the law does not distinguish. They are also not a franchise
grantee under Section 119 which would have made them subject to percentage tax
and not VAT.
(3) Neither are the services part of the enumeration under Section 109 on VATexempt transactions.
(4) The toll fee is not a users tax and thus it is permissible to impose a VAT on the
said fee. The MIAA case does not apply and 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. 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
users 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.
(5) The assertion that the VAT imposed is not administratively feasible given the
manner by which the BIR intends to implement the VAT (i.e., rounding off the toll
rates and putting any excess collection in an escrow account) is not enough to
invalidate the law. Non-observance of the canon of administrative feasibility will not
render a tax imposition invalid except to the extent that specific constitutional or
statutory limitations are impaired.
Rodriguez v Gella
G.R. No. L-6266 February 2, 1953
Paras, C.J.:
Facts:
1. Petitioners sought to invalidate Executive Orders (EO) 545 and 546 issued on
November 10, 1952. EO 545 appropriated the sum of P37,850,500 for urgent
and essential public works, while EO 546 set aside the sum of P11,367,600 for
relief in the provinces and cities visited by typhoons, floods, droughts,
earthquakes, volcanic action and other calamities.
2.
3.
House Bill No. 727 sought to repeal all Emergency Powers Acts but was
vetoed by the President. HB 727 may at least be considered as a concurrent
resolution of the Congress to formally declare the termination of the
emergency powers.
EOs 545 and 546 must be declared as having no legal anchorage. The
Congress has since liberation repeatedly been approving acts appropriating
funds for the operation of the Government, public works, and many others
purposes, with the result that as to such legislative task the Congress must be
deemed to have long decided to assume the corresponding power itself and to
withdraw the same from the President.
2.
3.
4.
The specific power "to continue in force laws and appropriations which
would lapse or otherwise become inoperative" is a limitation on the general
power "to exercise such other powers as he may deem necessary to enable the
Government to fulfil its responsibilities and to maintain and enforce its
authority." Indeed, to hold that although the Congress has, for about seven
years since liberation, been normally functioning and legislating on every
conceivable field, the President still has any residuary powers under the Act,
would necessarily lead to confusion and overlapping, if not conflict.
5. The framers of the Constitution, however, had the vision of and were careful
in allowing delegation of legislative powers to the President for a limited
period "in times of war or other national emergency." They had thus entrusted
to the good judgment of the Congress the duty of coping with any national
emergency by a more efficient procedure; but it alone must decide because
emergency in itself cannot and should not create power. In our democracy the
hope and survival of the nation lie in the wisdom and unselfish patriotism of
all officials and in their faithful adherence to the Constitution.
Mactan Cebu (MCIAA) vs. Marcos
GR 120082 September 11, 1996 261 SCRA 667
Davide Jr., .: (CJ)
FACTS:
Mactan Cebu International Airport Authority (MCIAA) was created to principally
undertake to economical, efficient and effective control, management and
supervision of the Mactan International Airport and such other airports as may be
established in the province of Cebu Section 14 of its charter excempts the
Authority from payment of realty taxes but in 1994, the City Treasurer demanded
payment for realty taxes on several parcels of land belonging to the other. MCIAA
filed a petition in RTC contending that, by nature of its powers and functions, it has
the same footing of an agency or instrumentality of the national government. The
RTC dismissed the petition based on Section 193 & 234 of the local Government Code
or R.A. 7160. Thus this petition.
ISSUE:
Whether or not the MCIAA is excempted from realty taxes?
RULING:
With the repealing clause of RA 7160 the tax exemption provided. All general and
special in the charter of the MCIAA has been expressly repeated. It state laws, acts,
City Charters, decrees, executive orders, proclamations and administrative
regulations, or part of parts thereof which are inconsistent with any of the provisions
of the Code are hereby repeated or modified accordingly. Therefore the SC affirmed
the decision and order of the RTC and herein petitioner has to pay the assessed realty
tax of its properties effective January 1, 1992 up to the present.
exemption
from local taxes has already been withdrawn by the Local Government Code.
NAPOCOR submitted that it is not liable to pay an annual franchise because the citys
taxing power is limited to private entities that are engaged in trade or occupation for
franchise tax due, plus surcharge and interest. It alleged that NAPOCORs
profit, and that the NAPOCOR Charter, being a valid exercise of police power, should
prevail over the LGC.
Issue: Whether NAPOCOR is liable to pay annual franchise tax to the City of
Cabanatuan
Held: Yes. The power to tax is no longer vested exclusively on Congress; local
legislative bodies are now given direct authority to levy taxes, fees and other charges.
Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on
the National Government, its
an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose
taxes, fees or charges on the aforementioned entities. Nothing prevents Congress
from decreeing that even instrumentalities or agencies of the government performing
governmental functions may be subject to tax.
A franchise is a privilege conferred by government authority, which does not belong
to citizens of the country generally as a matter of common right. It may be construed
in two senses: the right vested inthe
right and privileges conferred upon the corporation. A franchise tax is understood in
the
tax
of
P5,016,954.00
by
applying
PBCom's
tax
credit
memos
for
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.
Ruling:
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.
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.
Lung Center of the Philippines vs. Quezon City [GR No. 144104 June 29, 2004]
Facts: Lung Center of the Philippines is a non-stock and non-profit entity established
Center of the Philippines Hospital is erected. A big space in the ground floor of the
hospital is being leased to
medical or
professional practitioners who use the same as their private clinics. Also, a
big portion on the right side of the hospital is being leased for commercial purposes
to a private
When the City Assessor of Quezon City assessed both its land and hospital building
for real property taxes, the Lung Center of the Philippines filed a claim for exemption
on its averment that it is a charitable institution with a minimum of 60% of its
hospital beds exclusively used
hospital operation is to serve charity patients. The claim for exemption was denied,
prompting a petition for the reversal of the resolution of the City Assessor with
the
Local Board of Assessment Appeals of Quezon City, which denied the same. On
appeal, the Central Board of Assessment Appeals of Quezon City affirmed the local
boards decision, finding that Lung Center of the Philippines is not a charitable
institution and that its properties were not actually, directly and exclusively used for
charitable purposes. Hence, the present petition for review with averments that the
Lung Center ofthe Philippines is a charitable institution under Section 28(3), Article VI
of the
paying, other portions thereof are being leased to private individuals and enterprises.
Held: No. In approving Section 23 of R.A. No. 7925, Congress intended it to operate
as a blanket tax exemption to all telecommunications entities. Applying the rule of
strict construction of laws granting tax exemptions and the rule that doubts should be
resolved in favor of municipal corporations in interpreting statutory provisions on
municipal taxing powers, we hold that section 23 of R.A. No. 7925 cannot be
considered as having amended petitioners franchise so as to entitle it to exemption
from the imposition of local franchise taxes.
The tax exemption must be expressed in the statute in clear language that leaves no
doubt of the intention of the legislature to grant such exemption. And, even if it is
granted, the exemption must be interpreted in strictissimi juris against the taxpayer
and liberally in favor of the taxing authority.
Mutatis mutandis also applies to this case: When exemption is claimed, it must be
shown indubitably to exist. At the outset, every presumption is against it. A wellfounded doubt is fatal to the claim. It is only when the terms of the concession are
too explicit to admit fairly of any other construction that the proposition can be
supported.
Issue:
Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption
from payment of the local franchise tax in view of the grant of tax exemption to
Globe and Smart.
Held:
Petitioner contends that because their existing franchises contain in lieu of all taxes
clauses, the same grant of tax exemption must be deemed to have become ipso
facto part of its previously granted telecommunications franchise. But the rule is that
tax exemptions should be granted only by a clear and unequivocal provision of law
expressed in a language too plain to be mistaken and assuming for the nonce that
the charters of Globe and of Smart grant tax exemptions, then this runabout way of
granting tax exemption to PLDT is not a direct, clear and unequivocal way of
communicating the legislative intent.
Nor does the term exemption in Sec. 23 of RA 7925 mean tax exemption. The term
refers to exemption from regulations and requirements imposed by the National
Telecommunications Commission (NTC). For instance, RA 7925, Sec. 17 provides: The
Commission shall exempt any specific telecommunications service from its rate or
tariff regulations if the service has sufficient competition to ensure fair and
reasonable rates of tariffs. Another exemption granted by the law in line with its
policy of deregulation is the exemption from the requirement of securing permits
from the NTC every time a telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision of law on
the basis of language too plain to be mistaken.
taxable year.
It is subject to withholding.
In a withholding tax system, the payee is the taxpayer, the person on whom tax is
reposed, the payer, a separate entity, acts as no more than an agent of the
government for the collection of taxes Possession is acquired by the payer as the
withholding agent of the government because the taxpayer ratifies the very act of
possession for the government. There is constructive receipt, of such income and is
included as part of the tax base.
Ordinance
86. The Supreme Court, however, declared theordinance ultra vires. On January 15,
1960 the municipal board ofIloilo City, believing that with the passage of Republic
Act
2264, otherwise known as the Local Autonomy Act, it had acquired the authority or
power to enact an ordinance similar to that previously declared by the Supreme Court
as ultra vires, enacted Ordinance 11 (eleven), series of 1960, imposing municipal
collected from them under the saidordinance. The lower court rendered judgment
declaring theordinance illegal.
Issues:
(1) Whether or not the City of Iloilo is empowered by the Local Autonomy Act to
impose tenement taxes.
(2) Whether or not Ordinance 11, series of 1960, does violate the rule of uniformity of
taxation.
Held:
(1) Yes. The lower court has interchangeably denominated the tax in question as a
tenement tax or an apartment tax. Called by either name, it is not among the
exceptions listed in Section 2 of the Local Autonomy Act. The
imposition by the
Bagatsing v. Ramirez
G.R. No. L-41631 (December 17, 1976)
FACTS:
The Municipal Board of Manila enacted Ordinance No. 7522, An Ordinance Regulating
the Operation of Public Markets and Prescribing Fees for the Rentals of Stalls and
Providing Penalties for Violation thereof and for other Purposes. Respondent were
seeking the declaration of nullity of the Ordinance for the reason that a) the
publication requirement under the Revised Charter of the City of Manila has not been
complied with, b) the Market Committee was not given any participation in the
enactment, c) Sec. 3(e) of the Anti-Graft and Corrupt Practices Act has been violated,
and d) the ordinance would violate P.D. 7 prescribing the collection of fees and
charges on livestock and animal products.
ISSUE:
What law shall govern the publication of tax ordinance enacted by the Municipal
Board of Manila, the Revised City Charter or the Local Tax Code.
HELD:
The fact that one is a special law and the other a general law creates the
presumption that the special law is to be considered an exception to the general. The
Revised Charter of Manila speaks of ordinance in general whereas the Local Tax
Code relates to ordinances levying or imposing taxes, fees or other charges in
particular. In regard therefore, the Local Tax Code controls.
Sandoval-Guiterrez, J.:
FACTS:
Petitioner filed income tax return for 1997 having an accumulated tax credits
of P23,632,959.05 from which 1997 tax was deducted, leaving P13,929,793.51
unutilized. Petitioner opted to apply this amount as tax credit to the succeeding
taxable year 1998. For 1998, petitioner still had an unutilized tax credit after
deducting 1998 tax, thus filed for a refund. CTA ruled that failure of petitioner to
present its 1999 corporate annual income tax return shows that it incurred a net loss
thus no tax liability.
ISSUE:
Whether or not petitioner is entitles to the refund representing the excess
creditable withholding tax for 1997.
RULING:
A corporation entitled to a refund of excess creditable withholding tax may
either obtain the refund or credit the amount to the succeeding taxable year. Sec 76
states In case the corporation is entitled to a refund of the excess estimated
quarterly taxes paid, the refundable amount shown on its final adjustment return may
be credited against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years.
Petitioner filed with BIR its claim for the refund within the two-year statutory
limitation. Both CTA and CA failed to consider that petitioners intention was to apply
the tax credit to 1997 to its income tax due for 1998. It was not necessary for
petitioner to file it ITR for 1999, thus requiring ITR of the succeeding year be
presented has no basis in law.
This Court held that if a tax payer suffered a net loss in the succeeding year,
incurring no tax liability to which a previous years tax credit could be applied there is
no reason for BIR to withhold the refund that rightfully belongs to the tax payer.
last part of section 1 of Act No. 2549 as last amended by Act No. 3958, which
considers as an offense the facts alleged in the information, for the reason that it
violates the constitutional prohibition against imprisonment for debt, and dismissed
the case, with costs de oficio.
In this appeal the Solicitor-General contends that the court erred in declaring Act No.
3958 unconstitutional.
ISSUE: Whether the said constitutional provision is unconstitutional.
HELD:
No. The last part of section 1 considers as illegal the refusal of an employer to pay,
when he can do so, the salaries of his employees or laborers on the fifteenth or last
day of every month or on Saturday of every week, with only two days extension, and
the nonpayment of the salary within the periods specified is considered as a violation
of the law.
The same Act exempts from criminal responsibility the employer who, having failed
to pay the salary, should prove satisfactorily that it was impossible to make such
payment.
The court held that this provision is null because it violates the provision of section 1
(12), Article III, of the Constitution, which provides that no person shall be imprisoned
for debt.
We do not believe that this constitutional provision has been correctly applied in this
case. A close perusal of the last part of section 1 of Act No. 2549, as amended by
section 1 of Act No. 3958, will show that its language refers only to the employer
who, being able to make payment, shall abstain or refuse to do so, without
justification and to the prejudice of the laborer or employee. An employer so
circumstanced is not unlike a person who defrauds another, by refusing to pay his
just debt. In both cases the deceit or fraud is the essential element constituting the
offense. The first case is a violation of Act No. 3958, and the second isestafa
punished by the Revised Penal Code. In either case the offender cannot certainly
invoke the constitutional prohibition against imprisonment for debt.
Facts:
The Government of Japan and the Government of the Philippines, through their
respective representatives, namely, Mr. Yoshihisa Ara, Ambassador Extraordinary and
Plenipotentiary of Japan to the Republic of the Philippines, and then Secretary of
Foreign Affairs Domingo L. Siazon, have reached an understanding concerning
Issue :
Whether or not the the loan agreement violates RA 9184.
Ruling:
The court ruled in favor of the respondents.
Significantly, an exchange of notes is considered a form of an executive agreement,
which becomes binding through executive action without the need of a vote by the
Senate or Congress. executive agreements, They sometimes take the form of
exchange of notes and at other times that of more formal documents denominated
agreements or protocols.
The fundamental principle of international law of pacta sunt servanda, which is, in
fact, embodied in Section 4 of RA 9184 as it provides that [a]ny treaty or
international or executive agreement affecting the subject matter of this Act to which
the Philippine government is a signatory shall be observed, the DPWH, as the
executing agency of the projects financed by Loan Agreement No. PH-P204, rightfully
awarded the contract for the implementation of civil works for the CP I project to
private respondent China Road & Bridge Corporation.
On March 1, 1988, then-President Cory Aquino issued Memorandum order No. (MO)
161 approving and directing implementation of the Comprehensive and Integrated
Metropolitan Manila Waste Management Plan. During this time, Smokey Mountain, a
wasteland in Tondo, Manila, are being made residence of many Filipinos living in a
subhuman state.
As presented in MO 161, NHA prepared feasibility studies to turn the dumpsite into
low-cost housing project, thus, Smokey Mountain Development and Reclamation
Project (SMDRP), came into place. RA 6957 (Build-Operate-Transfer Law) was passed
on July 1990 declaring the importance of private sectors as contractors in
government projects. Thereafter, Aquino proclaimed MO 415 applying RA 6957 to
SMDRP, among others. The same MO also established EXECOM and TECHCOM in the
execution and evaluation of the plan, respectively, to be assisted by the Public
Estates Authority (PEA).
Notices of public bidding to become NHAs venture partner for SMDRP were published
in newspapers in 1992, from which R-II Builders, Inc. (RBI) won the bidding process.
Then-President Ramos authorized NHA to enter into a Joint Venture Agreement with
RBI.
Under the JVA, the project involves the clearing of Smokey Mountain for eventual
development into a low cost housing complex and industrial/commercial site. RBI is
expected to fully finance the development of Smokey Mountain and reclaim 40
hectares of the land at the Manila Bay Area. The latter together with the commercial
area to be built on Smokey Mountain will be owned by RBI as enabling components.
If the project is revoked or terminated by the Government through no fault of RBI or
by mutual agreement, the Government shall compensate RBI for its actual expenses
incurred in the Project plus a reasonable rate of return not exceeding that stated in
the feasibility study and in the contract as of the date of such revocation,
cancellation, or termination on a schedule to be agreed upon by both parties.
To summarize, the SMDRP shall consist of Phase I and Phase II. Phase I of the project
involves clearing, levelling-off the dumpsite, and construction of temporary housing
units for the current residents on the cleared and levelled site. Phase II involves the
construction of a fenced incineration area for the on-site disposal of the garbage at
the dumpsite.
Due to the recommendations done by the DENR after evaluations done, the JVA was
amended and restated (now ARJVA) to accommodate the design changes and
additional work to be done to successfully implement the project. The original 3,500
units of temporary housing were decreased to 2,992. The reclaimed land as enabling
component was increased from 40 hectares to 79 hectares, which was supported by
the issuance of Proclamation No. 465 by President Ramos. The revision also provided
for the 119-hectare land as an enabling component for Phase II of the project.
Subsequently, the Clean Air Act was passed by the legislature which made the
establishment of an incinerator illegal, making the off-site dumpsite at Smokey
Mountain necessary.
On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement
whereby both parties agreed to terminate the JVA and subsequent agreements.
During this time, NHA reported that 34 temporary housing structures and 21
permanent housing structures had been turned over by RBI.
ISSUES:
Whether respondents NHA and RBI have been granted the power and
authority to reclaim lands of the public domain as this power is vested exclusively
in PEA as claimed by petitioner
Whether respondents NHA and RBI were given the power and authority by
Whether respondent RBI can acquire reclaimed lands when there was no
declaration that said lands are no longer needed for public use
Whether the transfer of reclaimed lands to RBI was done by public bidding
the SMDRP
HELD:
Executive Order 525 reads that the PEA shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf
of the National Government. This does not mean that it shall be responsible for
all. The requisites for a valid and legal reclamation project are approval by the
President (which were provided for by MOs), favourable recommendation of PEA
(which were seen as a part of its recommendations to the EXECOM), and
undertaken either by PEA or entity under contract of PEA or by the National
Government Agency (NHA is a government agency whose authority to reclaim
lands under consultation with PEA is derived under PD 727 and RA 7279).
Notwithstanding the need for DENR permission, the DENR is deemed to have
granted the authority to reclaim in the Smokey Mountain Project for the DENR is
one of the members of the EXECOM which provides reviews for the project. ECCs
and Special Patent Orders were given by the DENR which are exercises of its
power of supervision over the project. Furthermore, it was the President via the
abovementioned MOs that originally authorized the reclamation. It must be noted
that the reclamation of lands of public domain is reposed first in the Philippine
President.
The reclaimed lands were classified alienable and disposable via MO 415
Despite not having an explicit declaration, the lands have been deemed to be
no longer needed for public use as stated in Proclamation No. 39 that these are to
be disposed to qualified beneficiaries. Furthermore, these lands have already
been necessarily reclassified as alienable and disposable lands under the BOT law.
Letter I of Sec. 6 of PD 757 clearly states that the NHA can acquire property
rights and interests and encumber or otherwise dispose of them as it may deem
appropriate.
There is no doubt that respondent NHA conducted a public bidding of the right
to become its joint venture partner in the Smokey Mountain Project. It was noted
that notices were published in national newspapers. The bidding proper was done
by the Bids and Awards Committee on May 18, 1992.
This relief must be granted. It is the right of the Filipino people to information
on matters of public concerned as stated in Article II, Sec. 28, and Article III, Sec.
7 of the 1987 Constitution.
When the petitioner filed the case, the JVA had already been terminated by
virtue of MOA between RBI and NHA. The properties and rights in question after
the passage of around 10 years from the start of the projects implementation
11FEB
GR No. 137377| J. Puno
Facts:
CIR assails the CA decision which affirmed CTA, ordering CIR to desist from collecting
the 1985 deficiency income, branch profit remittance and contractors taxes from
Marubeni Corp after finding the latter to have properly availed of the tax amnesty
under EO 41 & 64, as amended.
Marubeni, a Japanese corporation, engaged in general import and export trading,
financing and construction, is duly registered in the Philippines with Manila branch
office. CIR examined the Manila branchs books of accounts for fiscal year ending
March 1985, and found that respondent had undeclared income from contracts with
NDC and Philphos for construction of a wharf/port complex and ammonia storage
complex respectively.
On August 27, 1986, Marubeni received a letter from CIR assessing it for several
deficiency taxes. CIR claims that the income respondent derived were income from
Philippine sources, hence subject to internal revenue taxes. On Sept 1986,
respondent filed 2 petitions for review with CTA: the first, questioned the deficiency
income, branch profit remittance and contractors tax assessments and second
questioned the deficiency commercial brokers assessment.
On Aug 2, 1986, EO 41 declared a tax amnesty for unpaid income taxes for 1981-85,
and that taxpayers who wished to avail this should on or before Oct 31, 1986.
Marubeni filed its tax amnesty return on Oct 30, 1986.
On Nov 17, 1986, EO 64 expanded EO 41s scope to include estate and donors taxes
under Title 3 and business tax under Chap 2, Title 5 of NIRC, extended the period of
availment to Dec 15, 1986 and stated those who already availed amnesty under EO
41 should file an amended return to avail of the new benefits. Marubeni filed a
supplemental tax amnesty return on Dec 15, 1986.
CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled
the deficiency taxes. CA affirmed on appeal.
Issue:
Held:
Yes.
1. On date of effectivity
CIR claims Marubeni is disqualified from the tax amnesty because it falls under the
exception in Sec 4b of EO 41:
Sec. 4. Exceptions.The following taxpayers may not avail themselves of the amnesty
herein granted: xxx b) Those with income tax cases already filed in Court as of the
effectivity hereof;
Petitioner argues that at the time respondent filed for income tax amnesty on Oct 30,
1986, a case had already been filed and was pending before the CTA and Marubeni
therefore fell under the exception. However, the point of reference is the date of
effectivity of EO 41 and that the filing of income tax cases must have been made
before and as of its effectivity.
EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was
filed with CTA on Sept 26, 1986. When EO 41 became effective, the case had not yet
been filed. Marubeni does not fall in the exception and is thus, not disqualified from
availing of the amnesty under EO 41 for taxes on income and branch profit
remittance.
The difficulty herein is with respect to the contractors tax assessment (business tax)
and respondents availment of the amnesty under EO 64, which expanded EO 41s
coverage. When EO 64 took effect on Nov 17, 1986, it did not provide for exceptions
to the coverage of the amnesty for business, estate and donors taxes. Instead,
Section 8 said EO provided that:
Section 8. The provisions of Executive Orders Nos. 41 and 54 which are not contrary to
or inconsistent with this amendatory Executive Order shall remain in full force and
effect.
Due to the EO 64 amendment, Sec 4b cannot be construed to refer to EO 41 and its
date of effectivity. The general rule is that an amendatory act operates prospectively.
It may not be given a retroactive effect unless it is so provided expressly or by
necessary implication and no vested right or obligations of contract are thereby
impaired.
2. On situs of taxation
Marubeni contends that assuming it did not validly avail of the amnesty, it is still not
liable for the deficiency tax because the income from the projects came from the
Offshore Portion as opposed to Onshore Portion. It claims all materials and
equipment in the contract under the Offshore Portion were manufactured
and completed in Japan, not in the Philippines, and are therefore not
subject to Philippine taxes.
(BG: Marubeni won in the public bidding for projects with government corporations
NDC and Philphos. In the contracts, the prices were broken down into a Japanese Yen
Portion (I and II) and Philippine Pesos Portion and financed either by OECF or by
suppliers credit. The Japanese Yen Portion I corresponds to the Foreign Offshore
Portion, while Japanese Yen Portion II and the Philippine Pesos Portion correspond to
the Philippine Onshore Portion. Marubeni has already paid the Onshore Portion, a fact
that CIR does not deny.)
CIR argues that since the two agreements are turn-key, they call for the supply of
both materials and services to the client, they are contracts for a piece of work and
are indivisible. The situs of the two projects is in the Philippines, and the materials
provided and services rendered were all done and completed within the territorial
jurisdiction of the Philippines. Accordingly, respondents entire receipts from the
contracts, including its receipts from the Offshore Portion, constitute income from
Philippine sources. The total gross receipts covering both labor and materials should
be subjected to contractors tax (a tax on the exercise of a privilege of selling
services or labor rather than a sale on products).
Marubeni, however, was able to sufficiently prove in trial that not all its work was
performed in the Philippines because some of them were completed in Japan (and in
fact subcontracted) in accordance with the provisions of the contracts. All services for
the design, fabrication, engineering and manufacture of the materials and equipment
under Japanese Yen Portion I were made and completed in Japan. These services
were rendered outside Philippines taxing jurisdiction and are therefore not
subject to contractors tax.Petition denied.