PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION, Plaintiff-Appellant, v.

THE MUNICIPALITY OF
JAGNA, PROVINCE OF BOHOL, Defendant-Appellee. G.R. No. L-24265 December 28, 1979
Facts of the Case: Plaintiff-appellant is a domestic corporation is engaged in the manufacture of soap, edible oil,
margarine and other similar products, and for this purpose maintains a "bodega" in defendant Municipality where
it stores copra purchased in the municipality and therefrom ships the same for its manufacturing and other
operations.
On December 13, 1957, the Municipal Council of Jagna enacted Municipal Ordinance No. 4, Series of 1957AN
ORDINANCE IMPOSING STORAGE FEES OF ALL EXPORTABLE COPRA DEPOSITED IN THE BODEGA WITHIN THE
JURISDlCTI0N OF THE MUNICIPALITY OF JAGNA BOHOL.
For a period of six years, from 1958 to 1963, plaintiff paid defendant Municipality, allegedly under protest, storage
fees in the total sum of 1142,265.13.
Plaintiff filed this suit at CFI Manila and prayed that 1) Ordinance No. 4 be declared inapplicable to it, or in the
alternative, that it be pronounced ultra-vires and void for being beyond the power of the Municipality to enact;
and 2) that defendant Municipality be ordered to refund to it the amount of P42,265.13 which it had paid under
protest; and costs.
For its part, defendant Municipality upheld its power to enact the Ordinance in question; questioned the
jurisdiction of the trial Court to take cognizance of the action under section 44(h) of the Judiciary Act in that it
seeks to enjoin the enforcement of a Municipal Ordinance; and pleaded prescription and laches for plaintiff's
failure to timely question the validity of the said Ordinance.
TC rendered judgment in favor of defendant Municipality and upheld its jurisdiction. Hence this appeal.
Issue: Was defendant Municipality authorized to impose and collect the storage fee provided for in the challenged
Ordinance under the laws then prevailing?
Held and Ratio: YES. The validity of the Ordinance must be upheld pursuant to the broad authority conferred
upon municipalities by Commonwealth Act No. 472 which was the prevailing law when the Ordinance was
enacted.
Under Section 1 CA No. 472, a municipality is authorized to impose three kinds of licenses: (1) a license for
regulation of useful occupation or enterprises; (2) license for restriction or regulation of non-useful occupations or
enterprises; and (3) license for revenue. It is thus unnecessary, as plaintiff would have us do, to determine whether
the subject storage fee is a tax for revenue purposes or a license fee to reimburse defendant Municipality for
service of supervision because defendant Municipality is authorized not only to impose a license fee but also to tax
for revenue purposes.
The storage fee imposed under the question Ordinance is actually a municipal license tax or fee on persons, firms
and corporations, like plaintiff, exercising the privilege of storing copra in a bodega within the Municipality's
territorial jurisdiction. License tax, in many instances, refers to revenue-raising exactions on privileges or
activities.
For it has been held that a warehouse used for keeping or storing copra is an establishment likely to endanger the
public safety or likely to give rise to conflagration because the oil content of the copra when ignited is difficult to
put under control by water and the use of chemicals is necessary to put out the fire. And as the Ordinance itself
states, all exportable copra deposited within the municipality is "part of the surveillance and lookout of municipal
authorities.

Municipal corporations are allowed wide discretion in determining the rates of imposable license fees even in
cases of purely police power measures. In the absence of proof as to municipal conditions and the nature of the
business being taxed as well as other factors relevant to the issue of arbitrariness or unreasonableness of the
questioned rates, Courts will go slow in writing off an Ordinance. In the case at bar, appellant has not sufficiently
shown that the rate imposed by the questioned Ordinance is oppressive, excessive and prohibitive.
Plaintiff's averment that the Ordinance, even if presumed valid, is inapplicable to it because it is not engaged in the
business or occupation of buying or selling of copra but is only storing copra in connection with its main business
of manufacturing soap and other similar products, and that to be compelled to pay the storage fees would amount
to double taxation, does not inspire assent. The question of whether appellant is engaged in that business or not is
irrelevant because the storage fee, as previously mentioned, is an imposition on the privilege of storing copra in a
bodega within defendant municipality by persons, firms or corporations. Section 1 of the Ordinance in question
does not state that said persons, firms or corporations should be engaged in the business or occupation of buying
or selling copra. Moreover, by plaintiff's own admission that it is a consolidated corporation with its trading
company, it will be hard to segregate the copra it uses for trading from that it utilizes for manufacturing.
Thus, it can be said that plaintiff's payment of storage fees imposed by the Ordinance in question does not amount
to double taxation. For double taxation to exist, the same property must be taxed twice, when it should be taxed
but once. Double taxation has also been defined as taxing the same person twice by the same jurisdiction for the
same thing. Surely, a tax on plaintiff's products is different from a tax on the privilege of storing copra in a bodega
situated within the territorial boundary of defendant municipality.
Additional issue and ruling: Plaintiff's action brought within six years from the time the right of action first accrued
in 1958 has not yet prescribed.

VERONICA SANCHEZ, Plaintiff-Appellant, v. THE COLLECTOR OF INTERNAL REVENUE,Defendant-Appellee. [G.R.

No. L-7521. October 18, 1955.]
DOCTRINES:
1. TAXATION; REAL ESTATE DEALERS TAX; PERSONS SUBJECT THERETO. Considering that appellants constructed
her four-door "accessoria purposely for rent or profit; that she has been continuously leasing the same to third
persons since its construction in 1947; that she manages her property herself; and that said leased holding appears
to her main source of livelihood, she is engaged in the leasing of real estate, and is a real estate dealer as defined
by section 194(s) of the Internal Revenue Code, as amended by Republic Act No. 42.
2. ID.; TAXATION; SEPARATED TAX LEVIED UPON A BUSINESS OR OCCUPATION AND THE PROPERTY USED THEREIN
DOES NOT AMOUNT TO DOUBLE TAXATION. A license tax may be levied upon a business or occupation although
the land or property used therein is subject to property tax; and the state may collect an ad valorem tax on
property used in a calling, and at the same time impose a license tax on the pursuit of that calling, the imposition
of the latter kind of tax being in no sense a double tax.

Facts of the Case: Appellant Sanchez is the owner of a two-story, four-door "accessoria" building which she
constructed in 1947. The building has an assessed value of P21,540 and the land is assessed at P7,980, or a total
value of P29,540. Appellant lives in one of the apartments and she is renting the rest to other persons. In 1949. She
derived an income therefrom of P7,540.
The Collector of Internal Revenue made demand for the payment of P163.51 as income tax for the year 1950, and
P637 as real estate dealers tax for the years 1946 to 1950, plus the sum of P50 as compromise. Appellant paid the

taxes demanded under protest, and filed an action in CFI Manila against the CIR for the refund of the taxes paid,
claiming that she is not a real estate dealer.
The lower Court, after trial, found appellant to be such a dealer, as defined by section 194(s) of the National
Internal Revenue Code, as amended by Republic Act Nos. 42 and 588, and declared the collection of the taxes in
question legal and in accordance with said provision. Hence this appeal.
Issues: (1) Does appellant fall within the given definition [Sec. 194(s) of the Tax Code before it was amended by
Republic Act No. 588] of real estate dealers?
(2) Is the collection of the taxes in question legal?
Held and Ratio: (1) YES. Section 194(s) of the Tax Code before it was amended by Republic Act No. 588, defines
real estate dealers as follows: "Real estate dealers includes all persons who for their own account are engaged in
the sale of lands, buildings or interests therein or in leasing real estate." (R. A. No. 42)
The kind and nature of the building constructed by her which is a four-door "accessoria" shows that it was
from the beginning intended for lease as a source of income or profit to the owner; and while appellant resides in
one of the apartments, it appears that she always rented the other apartments to other persons from the time the
building was constructed up to the time of the filing of this case.
The case of Argellies v. Meer * G. R. No. L-3730 cited by appellant in support of her appeal is not in point.
Considering that appellant constructed her four-door "accessoria" purposely for rent or profit; that she has been
continuously leasing the same to third persons since its construction in 1947; that she manages her property
herself; and that said leased holding appears to be her main source of livelihood, we conclude that appellant is
engaged in the leasing of real estate, and is a real estate dealer as defined by section 194(s) of the Internal
Revenue Code, as amended by Republic Act No. 42.
(2)YES. Appellant argues that she is already paying real estate taxes on her property, as well as income tax on the
income derive therefrom, so that to further subject its rentals to the "real estate dealers tax" amounts to double
taxation. "it is a well settled rule that license tax may be levied upon a business or occupation although the land or
property used therein is subject to property tax", and that "the state may collect an ad valorem tax on property
used in a calling, and at the same time impose a license tax on the pursuit of that calling", the imposition of the
latter kind of tax being in no sense a double tax. (People v. Mendaros, Et Al., L-6975, promulgated May 27, 1955)
With the modification that the appellee Collector of Internal Revenue is ordered to refund to appellant Veronica
Sanchez the amount of P37.50 paid as real estate dealers tax for the year 1946, the decision appealed from is, in
all other respects, affirmed.

SILVESTRE M. PUNSALAN, ET AL., Plaintiffs-Appellants, v. THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET
AL., Defendants-Appellants. [G.R. No. L-4817. May 26, 1954.]
DOCTRINES:
1. TAXATION; LEGISLATIVE DEPARTMENT DETERMINES WHAT ENTITIES SHOULD BE EMPOWERED TO IMPOSE
OCCUPATION TAX. It is not for the courts to judge what particular cities or municipalities should be empowered
to impose occupation taxes in addition to those imposed by the national Government. That matter is peculiarly
within the domain of the political departments and the courts would do well not to encroach upon it.
2. ID.; DOUBLE TAXATION. There is double taxation where one tax is imposed by the state and the other is
imposed by the city, it being widely recognized that there is nothing inherently obnoxious in the requirement that
license fees or taxes be enacted with respect to the same occupation, calling or activity by both the state and the
political subdivisions thereof. (Citing 1 Cooley on Taxation, 4th ed., p. 492 and 51 Am. Jur., 341.)

Facts of the Case: The ordinance in question imposes a municipal occupation tax on persons exercising various
professions in the city and penalizes non-payment of the tax "by a fine of not more than two hundred pesos or by
imprisonment of not more than six months, or by both such fine and imprisonment in the discretion of the court."
Among the professions taxed were those to which plaintiffs belong.
Having already paid their occupation tax under section 201 of the National Internal Revenue Code, plaintiffs, upon
being required to pay the additional tax prescribed in the ordinance, paid the same under protest and then
brought the present suit.
The lower court upheld the validity of the provision of law authorizing the enactment of the ordinance but
declared the ordinance itself illegal and void on the ground that the penalty therein provided for non-payment of
the tax was not legally authorized. From this decision both parties appealed to this Court.
Issue: Is the lower courts ruling correct?
Held and Ratio: No. Judgment appealed from is reversed, declaring Ordinance No. 3398 legal and valid and
upholding the validity of the provision of the Manila charter authorizing it.
We find that the lower court was in error in saying that the imposition of the penalty provided for in the ordinance
was without the authority of law. The last paragraph (kk) of the very section that authorizes the enactment of this
tax ordinance (section 18 of the Manila Charter) in express terms also empowers the Municipal Board "to fix
penalties for the violation of ordinances which shall not exceed to (sic) two hundred pesos fine or six months
imprisonment, or both such fine and imprisonment, for a single offense." Hence, the pronouncement below that
the ordinance in question is illegal and void because it imposes a penalty not authorized by law is clearly without
basis.
As to plaintiffs contention of "class legislation", the Legislature may, in its discretion, select what occupations shall
be taxed, and in the exercise of that discretion it may tax all, or it may select for taxation certain classes and leave
the others untaxed. (Cooley on Taxation, Vol. 4, 4th ed., pp. 3393-3395.)
We do not think it is for the courts to judge what particular cities or municipalities should be empowered to
impose occupation taxes in addition to those imposed by the National Government. That matter is peculiarly
within the domain of the political departments and the courts would do well not to encroach upon it. Moreover, as
the seat of the National Government and with a population and volume of trade many times that of any other
Philippine city or municipality, Manila, no doubt, offers a more lucrative field for the practice of the professions, so
that it is but fair that the professionals in Manila be made to pay a higher occupation tax than their brethren in the
provinces.
Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination within a class
in that while professionals with offices in Manila have to pay the tax, outsiders who have no offices in the city but
practice their profession therein are not subject to the tax. The ordinance imposes the tax upon every person
"exercising" or "pursuing" in the City of Manila naturally any one of the occupations named, but does not say
that such person must have his office in Manila. What constitutes exercise or pursuit of a profession in the city is a
matter of judicial determination.
The argument against double taxation may not be invoked where one tax is imposed by the state and the other is
imposed by the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same
occupation, calling or activity by both the state and the political subdivisions thereof. (51 Am. Jur., 341.)
Separate Opinion: PARAS, C.J., dissenting

This is a glaring example of contradiction the license granted by the National Government is in effect withdrawn
by the City in case of non-payment of the tax under the ordinance.
My position is that a professional who has paid the occupation tax under the National Internal Revenue Code
should be allowed to practice in Manila even without paying the similar tax imposed by Ordinance No. 3398. The
City cannot give what said professional already has. I would not say that this Ordinance, enacted by the Municipal
Board pursuant to paragraph 1 of section 18 of the Revised Charter of Manila, as amended by Republic Act No.
409, empowering the Board to impose a municipal occupation tax not to exceed P50 per annum, is invalid; but that
only one tax, either under the Internal Revenue Code or under Ordinance No. 3398, should be imposed upon a
practitioner in Manila.

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. S.C. JOHNSON AND SON, INC., and COURT OF
APPEALS, Respondents. [G.R. No. 127105. June 25, 1999.]
Facts of the Case: [Respondent], a domestic corporation organized and operating under the Philippine laws,
entered into a license agreement with SC Johnson and Son, United States of America (USA), a non-resident foreign
corporation based in the U.S.A. pursuant to which the [respondent] was granted the right to use the trademark,
patents and technology owned by the latter including the right to manufacture, package and distribute the
products covered by the Agreement and secure assistance in management, marketing and production from SC
Johnson and Son, U.S.A.
For the use of the trademark or technology, [respondent] was obliged to pay SC Johnson and Son, USA royalties
based on a percentage of net sales and subjected the same to 25% withholding tax on royalty payments which
[respondent] paid for the period covering July 1992 to May 1993 in the total amount of P1,603,443.00.
On October 29, 1993, [respondent] filed with the International Tax Affairs Division (ITAD) of the BIR a claim for
refund of overpaid withholding tax on royalties. Since the agreement was approved by the Technology Transfer
Board, the preferential tax rate of 10% should apply to the [respondent]. We therefore submit that royalties paid
by the [respondent] to SC Johnson and Son, USA is only subject to 10% withholding tax pursuant to the mostfavored nation clause of the RP-US Tax Treaty [Article 13 Paragraph 2 (b) (iii)] in relation to the RP-West Germany
Tax Treaty *Article 12 (2) (b)+ (Petition for Review *filed with the Court of Appeals], par. 12)
The Commissioner did not act on said claim for refund. Private respondent S.C. Johnson & Son, Inc. (S.C. Johnson)
then filed a petition for review before CTA.
CTA rendered its decision in favor of S.C. Johnson and ordered the CIR to issue a tax credit certificate in the
amount of P963,266.00 representing overpaid withholding tax on royalty payments, beginning July, 1992 to May,
1993. A petition for review with the CA was filed by the CIR who affirmed in toto the decision of the CTA. Hence
this petition for review.
Issue: Did the CA erred in ruling that SC Johnson and Son, USA is entitled to the "most favored nation" tax rate of
10% on royalties as provided in the RP-US tax treaty in relation to the RP-West Germany tax treaty?
Held and Ratio: Yes. Petitioner contends that the "most favored nation" clause cannot be invoked for the reason
that when a tax treaty contemplates circumstances attendant to the payment of a tax, or royalty remittances for
that matter, these must necessarily refer to circumstances that are tax-related. Furthermore, since S.C. Johnsons
invocation of the "most favored nation" clause is in the nature of a claim for exemption from the application of the
regular tax rate of 25% for royalties, the provisions of the treaty must be construed strictly against it.
According to petitioner, the taxes upon royalties under the RP-US Tax Treaty are not paid under circumstances
similar to those in the RP-West Germany Tax Treaty since there is no provision for a 20 percent matching credit in

the former convention and private respondent cannot invoke the concessional tax rate on the strength of the most
favored nation clause in the RP-US Tax Treaty. Petitioners position is explained thus:
"Under the foregoing provision of the RP-West Germany Tax Treaty, the Philippine tax paid on income from
sources within the Philippines is allowed as a credit against German income and corporation tax on the same
income. In the case of royalties for which the tax is reduced to 10 or 15 percent according to paragraph 2 of Article
12 of the RP-West Germany Tax Treaty, the credit shall be 20% of the gross amount of such royalty. To illustrate,
the royalty income of a German resident from sources within the Philippines arising from the use of, or the right to
use, any patent, trade mark, design or model, plan, secret formula or process, is taxed at 10% of the gross amount
of said royalty under certain conditions. The rate of 10% is imposed if credit against the German income and
corporation tax on said royalty is allowed in favor of the German resident. That means the rate of 10% is granted
to the German taxpayer if he is similarly granted a credit against the income and corporation tax of West Germany.
The clear intent of the matching credit is to soften the impact of double taxation by different jurisdictions.
The RP-US Tax Treaty contains no similar matching credit as that provided under the RP-West Germany Tax
Treaty. Hence, the tax on royalties under the RP-US Tax Treaty is not paid under similar circumstances as those
obtaining in the RP-West Germany Tax Treaty. Therefore, the most favored nation clause in the RP-West
Germany Tax Treaty cannot be availed of in interpreting the provisions of the RP-US Tax Treaty."
We are unable to sustain the position of the Court of Tax Appeals, which was upheld by the Court of Appeals, that
the phrase "paid under similar circumstances" in Article 13 (2) (b), (iii) of the RP-US Tax Treaty should be
interpreted to refer to payment of royalty, and not to the payment of the tax, for the reason that the phrase "paid
under similar circumstances" is followed by the phrase "to a resident of a third state."
The RP-US Tax Treaty is just one of a number of bilateral treaties which the Philippines has entered into for the
avoidance of double taxation. The purpose of these international agreements is to reconcile the national fiscal
legislations of the contracting parties in order to help the taxpayer avoid simultaneous taxation in two different
jurisdictions.
Double taxation usually takes place when a person is resident of a contracting state and derives income from, or
owns capital in, the other contracting state and both states impose tax on that income or capital. In order to
eliminate double taxation, a tax treaty resorts to several methods. First, it sets out the respective rights to tax of
the state of source or situs and of the state of residence with regard to certain classes of income or capital. In
some cases, an exclusive right to tax is conferred on one of the contracting states; however, for other items of
income or capital, both states are given the right to tax, although the amount of tax that may be imposed by the
state of source is limited.
The second method for the elimination of double taxation applies whenever the state of source is given a full or
limited right to tax together with the state of residence. In this case, the treaties make it incumbent upon the state
of residence to allow relief in order to avoid double taxation. There are two methods of relief the exemption
method and the credit method. In the exemption method, the income or capital which is taxable in the state of
source or situs is exempted in the state of residence, although in some instances it may be taken into account in
determining the rate of tax applicable to the taxpayers remaining income or capital. On the other hand, in the
credit method, although the income or capital which is taxed in the state of source is still taxable in the state of
residence, the tax paid in the former is credited against the tax levied in the latter. The basic difference between
the two methods is that in the exemption method, the focus is on the income or capital itself, whereas the credit
method focuses upon the tax.
The petitioner correctly opined that the phrase "royalties paid under similar circumstances" in the most favored
nation clause of the US-RP Tax Treaty necessarily contemplated "circumstances that are tax-related."
In the case at bar, the state of source is the Philippines because the royalties are paid for the right to use property
or rights, i.e. trademarks, patents and technology, located within the Philippines. The United States is the state of

residence since the taxpayer, S. C. Johnson and Son, U.S.A., is based there. Under the RP-US Tax Treaty, the state
of residence and the state of source are both permitted to tax the royalties, with a restraint on the tax that may be
collected by the state of source. Furthermore, the method employed to give relief from double taxation is the
allowance of a tax credit to citizens or residents of the United States (in an appropriate amount based upon the
taxes paid or accrued to the Philippines) against the United States tax, but such amount shall not exceed the
limitations provided by United States law for the taxable year. Under Article 13 thereof, the Philippines may
impose one of three rates 25 percent of the gross amount of the royalties; 15 percent when the royalties are
paid by a corporation registered with the Philippine Board of Investments and engaged in preferred areas of
activities; or the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar
circumstances to a resident of a third state.
Given the purpose underlying tax treaties and the rationale for the most favored nation clause, the concessional
tax rate of 10 percent provided for in the RP-Germany Tax Treaty should apply only if the taxes imposed upon
royalties in the RP-US Tax Treaty and in the RP-Germany Tax Treaty are paid under similar circumstances. This
would mean that private respondent must prove that the RP-US Tax Treaty grants similar tax reliefs to residents
of the United States in respect of the taxes imposable upon royalties earned from sources within the Philippines
as those allowed to their German counterparts under the RP-Germany Tax Treaty.
The RP-US and the RP-West Germany Tax Treaties do not contain similar provisions on tax crediting.
As stated earlier, the ultimate reason for avoiding double taxation is to encourage foreign investors to invest in the
Philippines a crucial economic goal for developing countries. If the state of residence does not grant some form
of tax relief to the investor, no benefit would redound to the Philippines, i.e., increased investment resulting from
a favorable tax regime, should it impose a lower tax rate on the royalty earnings of the investor, and it would be
better to impose the regular rate rather than lose much-needed revenues to another country.
The most favored nation clause is intended to establish the principle of equality of international treatment by
providing that the citizens or subjects of the contracting nations may enjoy the privileges accorded by either party
to those of the most favored nation.
The entitlement of the 10% rate by U.S. firms despite the absence of a matching credit (20% for royalties) would
derogate from the design behind the most favored nation clause to grant equality of international treatment since
the tax burden laid upon the income of the investor is not the same in the two countries. The similarity in the
circumstances of payment of taxes is a condition for the enjoyment of most favored nation treatment precisely to
underscore the need for equality of treatment.
We accordingly agree with petitioner that since the RP-US Tax Treaty does not give a matching tax credit of 20
percent for the taxes paid to the Philippines on royalties as allowed under the RP-West Germany Tax Treaty,
private respondent cannot be deemed entitled to the 10 percent rate granted under the latter treaty for the
reason that there is no payment of taxes on royalties under similar circumstances.
Private respondent is claiming for a refund of the alleged overpayment of tax on royalties; however, there is
nothing on record to support a claim that the tax on royalties under the RP-US Tax Treaty is paid under similar
circumstances as the tax on royalties under the RP-West Germany Tax Treaty.

EUSEBIO VILLANUEVA, ET AL., Plaintiffs-Appellees, v. CITY OF ILOILO, Defendant-Appellant. [G.R. No. L-26521.
December 28, 1968.]
DOCTRINES:
2. TAXATION; NATIONAL INTERNAL REVENUE CODE; REAL ESTATE TAX, NATURE. A real estate tax is a direct tax
on the ownership of lands and buildings or other improvements thereon, not especially exempted, and is payable
regardless of whether the property is used or not, although the value may vary in accordance with such factor. The
tax is usually single or indivisible, although the land and building or improvements erected thereon are assessed
separately, except when the land and building or improvement belong to separate owners. It is a fixed proportion
of the assessed value of the property taxed, and required, therefore, the intervention of assessors. It is collected or
payable at appointed times, and it constitutes a superior lien on and is enforceable against the property subject to
such taxation, and not by imprisonment of the owner.
3. ID.; ID.; ID.; TAX IMPOSED BY THE ORDINANCE IN QUESTION ON TENEMENT HOUSES IS NOT A REAL ESTATE TAX.
The tax imposed by the ordinance in question does not possess the attributes of a real estate tax. It is not tax on
the land on which the tenement houses are erected altho both land and tenement houses may belong to the same
owner. The tax is not a fixed proportion of the assessed value of the tenement houses, and does not require the
intervention of assessors or appraisers. It is not payable at a designated time or date, and is not enforceable
against the tenement houses either by sale or distraint. Clearly, therefore, the tax in question is not a real estate
tax. Furthermore, the subject matter of the ordinance is tenement houses whose nature and essence are expressly
set forth in Section 2 which defines a tenement house as "any building or dwelling for renting space divided into
separate apartments or accessories."cralaw virtua1aw library
4. ID.; ID.; ID.; IMPOSITION OF TAX BY THE ORDINANCE IN QUESTION IS WITHIN SECTION 2 OF LOCAL AUTONOMY
ACT. The imposition by the ordinance of a license tax on persons engaged in the business of operating tenement
houses finds authority in Section 2 of the Local Autonomy Act which provides that chartered cities have the
authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or
exercising privileges within their respective territories, and "otherwise to levy for public purposes, just and uniform
taxes, licenses, or fees."cralaw virtua1aw library
5. ID.; ID.; ID.; ID.; THE SAME TAX MAY BE IMPOSED BY THE NATIONAL GOVERNMENT AS WELL AS LOCAL
GOVERNMENT. While it is true that the plaintiffs-appellees are taxable under the provisions of the National
Internal Revenue Code as a real estate dealers, and still taxable under the ordinance in question, the argument
against double taxation may not be invoked. The same tax may be imposed by the national government as well as
by the local government. There is nothing inherently obnoxious in the exaction of license fees or taxes with respect
to the same occupation, calling or activity by both the State and a political subdivision thereof.
6. ID.; ID.; TAX MAY BE LEVIED UPON A BUSINESS ALTHOUGH THE LAND OR PROPERTY USED THEREWITH IS
SUBJECT TO PROPERTY TAX. It is a well-settled rule that a license tax may be levied upon business or occupation
although the land or property used in connection therewith is subject to property tax. The State may collect an ad
valorem tax on property used in a calling, and at the same time impose a license tax on that calling. The imposition
of the latter kind of tax being in no sense a double tax.
7. ID.; ID.; NO CONSTITUTIONAL PROHIBITION AGAINST DOUBLE TAXATION IN THE PHILIPPINES. There is no
constitutional prohibition against double taxation in the Philippines. It is something not favored, but is permissible,
provided some other constitutional requirement is not thereby violated, such as the requirement that taxes must
be uniform.
8. ID.; ID.; PROVISION OF PENAL CLAUSE AND CRIMINAL PROSECUTION FOR NON-PAYMENT OF TENEMENT TAX DO
NOT RENDER ORDINANCE OPPRESSIVE AND UNCONSTITUTIONAL. Appellant City takes exception to the
conclusion of the lower court that the ordinance is not only oppressive because it "carries a penal clause of a fine
of P200 or imprisonment of 6 months or both, if the owner or owners of the tenement buildings divided into

apartments do not pay the tenement or apartment tax fixed in said ordinance," but also unconstitutional as it
subjects the owners of tenement houses to criminal prosecution for "non-payment of an obligation which is purely
sum of money." The lower court apparently had in mind, when it made the above ruling, the provision of the
Constitution that "no person shall be imprisoned for a debt or non-payment of a poll tax." It is elementary,
however, that "a tax is not a debt in the sense of an obligation incurred by contract, express or implied, and
therefore is not within the meaning of constitutional or statutory provisions abolishing or prohibiting
imprisonment for debt, and a statute or ordinance which punishes the non-payment thereof by fine or
imprisonment is not in conflict with that prohibition." Nor is the tax in question a poll tax, for the latter is a tax of a
fixed amount upon all persons, or upon all persons of a certain class, resident within a specified territory, without
regard to their property or the occupations in which they may be entered. Therefore, the tax in question is not
oppressive in the manner the lower court puts it. On the other hand, the charter of Iloilo City empowers its
municipal board to "fix penalties for violations of ordinance, which shall not exceed a fine of two hundred persons
or six months imprisonment, or both such fine and imprisonment for each offense."
Facts of the Case: In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five
tenement houses, aggregately containing 43 apartments, while the other appellees and the same Remedios S.
Villanueva are owners of ten apartments. Each of the appellees apartments has a door leading to a street and is
rented by either a Filipino or Chinese merchant. The first floor is utilized as a store, while the second floor is used
as a dwelling of the owner of the store. Eusebio Villanueva owns, likewise, apartment buildings for rent in Bacolod,
Dumaguete City, Baguio City and Quezon City, which cities, according to him, do not impose tenement or
apartment taxes.
On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86, imposing license tax fees. The
validity and constitutionality of this ordinance were challenged by the spouses Eusebio Villanueva and Remedios
Sian Villanueva, owners of four tenement houses containing 34 apartments. This Court declared the ordinance
ultra vires, "it not appearing that the power to tax owners of tenement houses is one among those clearly and
expressly granted to the City of Iloilo by its Charter."
On January 15, 1960 the municipal board of Iloilo City, believing, obviously, 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 this Court as ultra vires, enacted Ordinance 11 (eleven), series of 1960, "AN
ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS ENGAGED IN THE BUSINESS OF OPERATING
TENEMENT HOUSES.
By virtue of the ordinance in question, the appellant City collected from spouses Eusebio Villanueva and Remedios
S. Villanueva, for the years 1960-1964, the sum of P5,824.30, and from the appellees Pio Sian Melliza, Teresita S.
Topacio, and Remedios S. Villanueva, for the years 1960-1964, the sum of P1,317.00. Eusebio Villanueva has
likewise been paying real estate taxes on his property.
On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an amended complaint,
respectively, against the City of Iloilo, in the aforementioned court, praying that Ordinance 11, series of 1960, be
declared "invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact, and
unconstitutional for being violative of the rule as to uniformity of taxation and for depriving said plaintiffs of the
equal protection clause of the Constitution," and that the City be ordered to refund the amounts collected from
them under the said ordinance.
On March 30, 1966, 1 the lower court rendered judgment declaring the ordinance illegal on the grounds that (a)
"Republic Act 2264 does not empower cities to impose apartment taxes," (b) the same is "oppressive and
unreasonable," for the reason that it penalizes owners of tenement houses who fail to pay the tax, (c) it
constitutes "not only double taxation, but treble at that," and (d) it violates the rule of uniformity of taxation.
Issues: (1) Is Ordinance 11, series of 1960, of the City of Iloilo, illegal because it imposes double taxation?

(2) Is the City of Iloilo empowered by the Local Autonomy Act to impose tenement taxes?
(3) Does Ordinance 11, series of 1960, violate the rule of uniformity of taxation?
Held and Ratio: (1) NO. While it is true that appellees are taxable under the NIRC as real estate dealers, and
taxable under Ordinance 11, double taxation may not be invoked. This is because the same tax may be imposed by
the national government as well as by the local government. The contention that appellees are doubly taxed
because they are paying real estate taxes and the tenement tax is also devoid of merit. A license tax may be levied
upon a business or occupation although the land or property used in connection therewith is subject to property
tax. In order to constitute double taxation, both taxes must be the same kind or character. Real estate taxes and
tenement taxes are not of the same character.
(2) YES. RA 2264 confers local governments broad taxing powers. The imposition of the tenement taxes does not
fall within the exceptions mentioned by the same law. It is argued however that the said taxes are real estate taxes
and thus, the imposition of more than 1 per centum real estate tax which is the limit provided by CA 158, makes
the said ordinance ultra vires. The court ruled that the tax in question is not a real estate tax. It does not have the
attributes of a real estate tax. By the title and the terms of the ordinance, the tax is a municipal tax which means
an imposition or exaction on the right to use or dispose of property, to pursue a business, occupation or calling, or
to exercise a privilege. Tenement houses being offered for rent or lease constitute a distinct form of business or
calling and as such, the imposition of municipal tax finds support in Section 2 of RA 2264.
(3) NO. The ordinance is not violative of the rule of uniformity in taxation. The Supreme Court has already ruled
that tenement houses constitute a distinct class of property. It has likewise ruled that "taxes are uniform and equal
when imposed upon all property of the same class or character within the taxing authority." The fact, therefore,
that the owners of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in
question is no argument at all against uniformity and equality of the tax imposition. Neither is the rule of equality
and uniformity violated by the fact that tenement taxes are not imposed in other cities, for the same rule does not
require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time. So
long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses similarly
classified or situated, equality and uniformity of taxation is accomplished.
Hence, the judgment of the lower court is reversed. The ordinance in question is valid.