Tolentino v.

Secretary of Finance - 249 SCRA 635

FACTS:
Petitioners (Tolentino, Kilosbayan, Inc., Philippine Airlines, Roco, and Chamber of Real
Estate and Builders Association) seek reconsideration of the Courts previous ruling
dismissing the petitions filed for the declaration of unconstitutionality of R.A. No. 7716, the
Expanded Value-Added Tax Law. Petitioners contend that the R.A. did not originate
exclusively in the HoR as required by Article 6, Section 24 of the Constitution. The Senate
allegedly did not pass it on second and third readings, instead passing its own version.
Petitioners contend that it should have amended the House bill by striking out the text of
the bill and substituting it with the text of its own bill, so as to conform with the
Constitution.
ISSUE:
W/N the R.A. is unconstitutional for having originated from the Senate, and not the HoR.
HELD:
Petition is unmeritorious. The enactment of the Senate bill has not been the first instance
where the Senate, in the exercise of its power to propose amendments to bills (required to
originate in the House), passed its own version. An amendment by substitution (striking
out the text and substituting it), as urged by petitioners, concerns a mere matter of form,
and considering the petitioner has not shown what substantial difference it would make if
Senate applied such substitution in the case, it cannot be applied to the case at bar. While
the aforementioned Constitutional provision states that bills must originate exclusively in
the HoR, it also adds, but the Senate may propose or concur with amendments. The
Senate may then propose an entirely new bill as a substitute measure. Petitioners erred in
assuming the Senate version to be an independent and distinct bill. Without the House bill,
Senate could not have enacted the Senate bill, as the latter was a mere amendment of the
former. As such, it did not have to pass the Senate on second and third readings.
Petitioners question the signing of the President on both bills, to support their contention
that such are separate and distinct. The President certified the bills separately only
because the certification had to be made of the version of the same revenue bill which AT
THE MOMENT was being considered.
Petitioners question the power of the Conference Committee to insert new provisions. The
jurisdiction of the conference committee is not limited to resolving differences between
the Senate and the House. It may propose an entirely new provision, given that such are
germane to the subject of the conference, and that the respective houses of Congress
subsequently approve its report.
Petitioner PAL contends that the amendment of its franchise by the withdrawal of its
exemption from VAT is not expressed in the title of the law, thereby violating the
Constitution. The Court believes that the title of the R.A. satisfies the Constitutional
Requirement.
Petitioners claim that the R.A. violates their press freedom and religious liberty, having
removed them from the exemption to pay VAT. Suffice it to say that since the law granted
the press a privilege, the law could take back the privilege anytime without offense to the

Constitution. By granting exemptions, the State does not forever waive the exercise of its
sovereign prerogative.

Lastly, petitioners contend that the R.A. violates due process, equal protection and
contract clauses and the rule on taxation. Petitioners fail to take into consideration the fact
that the VAT was already provided for in E.O. No. 273 long before the R.A. was enacted.
The latter merely EXPANDS the base of the tax. Equality and uniformity in taxation means
that all taxable articles or kinds of property of the same class be taxed at the same rate,
the taxing power having authority to make reasonable and natural classifications for
purposes of taxation. It is enough that the statute applies equally to all persons, forms and
corporations placed in s similar situation.
Tolentino v Sec. of Finance
Facts:
House of Rep. filed House Bill 11197 (An Act Restructuring the VAT System to Widen
its Tax Base and Enhance its Admin., Amending for these Purposes)
Upon receipt of Senate, Senate filed another bill completely different from that of
the House Bill
Senate finished debates on the bill and had the 2 nd and 3rd reading of the Bill on the
same day
Bill was deliberated upon in the Conference Committee and become enrolled bill
which eventually became the EVAT law.
Procedural Issue:
(1) WoN RA 7716 originated exclusively from the House of Rep. in accordance with sec
24, art 6 of Consti
(2) WoN the Senate bill violated the three readings on separate days requirement of
the Consti
(3)

WoN RA 7716 violated sec 26(1), art 6 - one subject, one title rule.

NOTE: This case was filed by PAL because before the EVAT Law, they were exempt from
taxes. After the passage of EVAT, they were already included. PAL contended that neither
the House or Senate bill provided for the removal of the exemption from taxes of PAL and
that it was inly made after the meeting of the Conference Committee w/c was not
expressed in the title of RA 7166
Held:
(1) YES! Court said that it is not the law which should originate from the House of
Rep, but the revenue bill which was required to originate from the House of Rep. The
inititiative must ocme from the Lower House because they are elected in the district level
meaning they are expected to be more sensitive to the needs of the locality.

Also, a bill originating from the Lower House may undergo extensive changes while in the
Senate. Senate can introduce a separate and distinct bill other than the one the Lower
House proposed. The Constitution does not prohibit the filing in the Senate of a substitute
bill in anticipation of its receipt of the House bill, so long as action by Senate is withheld
pending the receipt of the House bill.
(2) NO. The Pres. certified that the Senate bill was urgent. Presidential certification
dispensed the requirement not only of printing but also reading the bill in 3 separate
days. In fact, the Senate accepted the Pres. certification
(3) No. Court said that the title states that the purpose of the statute is to expand the
VAT system and one way of doing this is to widen its base by withdrawing some of the
exemptions granted before. It is also in the power of Congress to amend, alter, repeal
grant of franchises for operation of public utility when the common good so requires.
One subject rule is intended to prevent surprise upon Congress members and inform
people of pending legislation. In the case of PAL, they did not know of their situation not
because of any defect in title but because they might have not noticed its publication until
some event calls attention to its existence.

TOLENTINO VS. THE SECRETARY OF FINANCE Case Digest

ARTURO M. TOLENTINO VS. THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE
1994 Aug 25
G.R. No. 115455
235 SCRA 630
FACTS: The valued-added tax (VAT) is levied on the sale, barter or exchange of goods and
properties as well as on the sale or exchange of services. It is equivalent to 10% of the
gross selling price or gross value in money of goods or properties sold, bartered or
exchanged or of the gross receipts from the sale or exchange of services. Republic Act No.
7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code.
The Chamber of Real Estate and Builders Association (CREBA) contends that the
imposition of VAT on sales and leases by virtue of contracts entered into prior to the
effectivity of the law would violate the constitutional provision of non-impairment of
contracts.
ISSUE: Whether R.A. No. 7716 is unconstitutional on ground that it violates the contract
clause under Art. III, sec 10 of the Bill of Rights.
RULING: No. The Supreme Court the contention of CREBA, that the imposition of the VAT
on the sales and leases of real estate by virtue of contracts entered into prior to the
effectivity of the law would violate the constitutional provision of non-impairment of
contracts, is only slightly less abstract but nonetheless hypothetical. It is enough to say
that the parties to a contract cannot, through the exercise of prophetic discernment, fetter
the exercise of the taxing power of the State. For not only are existing laws read into
contracts in order to fix obligations as between parties, but the reservation of essential

attributes of sovereign power is also read into contracts as a basic postulate of the legal
order. The policy of protecting contracts against impairment presupposes the maintenance
of a government which retains adequate authority to secure the peace and good order of
society. In truth, the Contract Clause has never been thought as a limitation on the
exercise of the State's power of taxation save only where a tax exemption has been
granted for a valid consideration.
Such is not the case of PAL in G.R. No. 115852, and the Court does not understand it to
make this claim. Rather, its position, as discussed above, is that the removal of its tax
exemption cannot be made by a general, but only by a specific, law.
Further, the Supreme Court held the validity of Republic Act No. 7716 in its formal and
substantive aspects as this has been raised in the various cases before it. To sum up, the
Court holds:
(1) That the procedural requirements of the Constitution have been complied with by
Congress in the enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the enactment of statutes beyond those prescribed by the Constitution - have been observed is precluded by the
principle of separation of powers;
(3) That the law does not abridge freedom of speech, expression or the press, nor interfere
with the free exercise of religion, nor deny to any of the parties the right to an education;
and
(4) That, in view of the absence of a factual foundation of record, claims that the law is
regressive, oppressive and confiscatory and that it violates vested rights protected under
the Contract Clause are prematurely raised and do not justify the grant of prospective
relief by writ of prohibition.
WHEREFORE, the petitions are DISMISSED.
Tolentino vs. Secretary of Finance G.R. No. 115455, August 25, 1994
Sunday, January 25, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Political Law
Facts: The value-added tax (VAT) is levied on the sale, barter or exchange of goods and
properties as well as on the sale or exchange of services. RA 7716 seeks to widen the tax
base of the existing VAT system and enhance its administration by amending the National
Internal Revenue Code. There are various suits challenging the constitutionality of RA 7716
on various grounds.
One contention is that RA 7716 did not originate exclusively in the House of
Representatives as required by Art. VI, Sec. 24 of the Constitution, because it is in fact the
result of the consolidation of 2 distinct bills, H. No. 11197 and S. No. 1630. There is also a
contention that S. No. 1630 did not pass 3 readings as required by the Constitution.

Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of the Constitution
Held: The argument that RA 7716 did not originate exclusively in the House of
Representatives as required by Art. VI, Sec. 24 of the Constitution will not bear analysis. To
begin with, it is not the law but the revenue bill which is required by the Constitution to
originate exclusively in the House of Representatives. To insist that a revenue statute and
not only the bill which initiated the legislative process culminating in the enactment of the
law must substantially be the same as the House bill would be to deny the Senates power
not only to concur with amendments but also to propose amendments. Indeed, what the
Constitution simply means is that the initiative for filing revenue, tariff or tax bills, bills
authorizing an increase of the public debt, private bills and bills of local application must
come from the House of Representatives on the theory that, elected as they are from the
districts, the members of the House can be expected to be more sensitive to the local
needs and problems. Nor does the Constitution prohibit the filing in the Senate of a
substitute bill in anticipation of its receipt of the bill from the House, so long as action by
the Senate as a body is withheld pending receipt of the House bill.
The next argument of the petitioners was that S. No. 1630 did not pass 3 readings on
separate days as required by the Constitution because the second and third readings were
done on the same day. But this was because the President had certified S. No. 1630 as
urgent. The presidential certification dispensed with the requirement not only of printing
but also that of reading the bill on separate days. That upon the certification of a bill by
the President the requirement of 3 readings on separate days and of printing and
distribution can be dispensed with is supported by the weight of legislative practice.
*****
Tolentino vs. Secretary of Finance
Facts: These are motions seeking reconsideration of our decision dismissing the petitions
filed in these cases for the declaration of unconstitutionality of R.A. No. 7716, otherwise
known as the Expanded Value-Added Tax Law. Now it is contended by the PPI that by
removing the exemption of the press from the VAT while maintaining those granted to
others, the law discriminates against the press. At any rate, it is averred, "even
nondiscriminatory taxation of constitutionally guaranteed freedom is unconstitutional."
Issue: Does sales tax on bible sales violative of religious freedom?
Held: No. The Court was speaking in that case of a license tax, which, unlike an ordinary
tax, is mainly for regulation. Its imposition on the press is unconstitutional because it lays
a prior restraint on the exercise of its right. Hence, although its application to others, such
those selling goods, is valid, its application to the press or to religious groups, such as the
Jehovah's Witnesses, in connection with the latter's sale of religious books and pamphlets,
is unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on
income or property of a preacher. It is quite another thing to exact a tax on him for
delivering a sermon."
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a
privilege, much less a constitutional right. It is imposed on the sale, barter, lease or
exchange of goods or properties or the sale or exchange of services and the lease of

properties purely for revenue purposes. To subject the press to its payment is not to
burden the exercise of its right any more than to make the press pay income tax or subject
it to general regulation is not to violate its freedom under the Constitution

Herrera vs. Quezon City Board of Assessment Appeals

G.R. L-15270
Facts:
In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester
Ochangco Herrera to establish and operate the St. Catherines Hospital. In 1953, the
Herreras sent a letter to the Quezon City Assessor requesting exemption from payment of
real estate tax on the hospital, stating that the same was established for charitable and
humanitarian purposes and not for commercial gain. The exemption was granted effective
years 1953 to 1955. In 1955, however, the Assessor reclassified the properties from
exempt to taxable effective 1956, as it was ascertained that out 32 beds in the
hospital, 12 of which are for pay-patients. A school of midwifery is also operated within the
premises of the hospital.
Issue: Whether St. Catherines Hospital is exempt from reallty tax.
Ruling:
The admission of pay-patients does not detract from the charitable character of a hospital,
if all its funds are devoted exclusively to the maintenance of the institution as a public
charity. The exemption in favour of property used exclusively for charitable or educational
purpose is not limited to property actually indispensable therefore, but extends to facilities
which are incidental to and reasonably necessary for the accomplishment of said purpose,
such as in the case of hospitals a school for training nurses; a nurses home; property
used to provide housing facilities for interns, resident doctors, superintendents and other
members of the hospital staff; and recreational facilities for student nurses, interns and
residents. Within the purview of the Constitution, St. Catherines Hospital is a charitable
institution exempt from taxation.
LUNG CENTER VS. QUEZON CITY
GR 144104 June29, 2004
En Banc, Callejo J:
Facts:
The lung center is a charitable institution within the context of 1973 and 1987
constitutions. The elements considered in determining a charitable institution are: the
statue creating the enterprise; its corporate purposes; constitution and by-laws, methods
of administration, nature of actual work performed, character of the services rendered,
indefiniteness of the beneficiaries, and the use occupation of properties. As a gen.
principle, a charitable institution doe not lose its character as such and its exemption form
taxes simply because it derives income from paying patients, or receives subsidies from
government; and no money insures to the private benefit of the persons managing or

operating the institution.

Issue:
Whether or not the real properties of the lung center are exempt from real property taxes.
Ruling.
Partly No. Those portions of its real property that are leased to private entities are not
exempt from actually, direct and exclusively used for charitable purpose. Under PD 1823,
the lung center does not enjoy any property tax exemption privileges for its real properties
as well as the building constructed thereon.
The property tax exemption under Sec. 28(3), Art. Vi of the property taxes only. This
provision was implanted by Sec.243 (b) of RA 7160.which provides that in order to be
entitled to the exemption, the lung center must be able to prove that: it is a charitable
institution and; its real properties are actually, directly and exclusively used for charitable
purpose. Accordingly, the portions occupied by the hospital used for its patients are
exempt from real property taxes while those leased to private entities are not exempt from
such taxes.
Abra Valley College v. Aquino (162 SCRA 106 [1988])
FACTS:
Petitioner, an educational corporation and institution of higher learning duly
incorporated with the Securities and Exchange Commission in 1948, filed a complaint
to annul and declare void
the Notice of Seizure and the Notice of Sale of its lot and building located at Bangued,
Abra, fornon-payment of real estate taxes and penalties amounting to P5,140.31. Said
Notice of Seizure by respondents Municipal Treasurer and Provincial Treasurer,
defendants below, was issued for the satisfaction of the said taxes there on. The parties
entered into a stipulation of facts adopted and embodied by the trial court in its
questioned decision. The trial court ruled for the government, holding that the second floor
of
the building is being used by the director for residential purposes and that the ground floor
used andrented by Northern Marketing Corporation, a commercial establishment, and thus
the property isnot being used exclusively for educational purposes. Instead of perfecting
an appeal, petitioneravailed of the instant petition for review on certiorari with prayer for
preliminary injunction beforethe Supreme Court, by filing said petition on 17 August 1974.
ISSUE:
Whether or not the lot and building are used exclusively for educational purposes.
HELD:
Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution,
expressly grants exemption from realty taxes for cemeteries, churches and parsonages or
convent sappurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious, charitable or educational purposes.

Reasonable emphasis has always been made that the exemption extends to facilities
which are incidental to and reasonably necessary for the accomplishment of the main
purposes. The use of the school building or lot for commercial purposes is neither
contemplated by law, nor by jurisprudence. In the case at bar, the lease of the first floor of
the building to the Northern Marketing Corporation cannot by any stretch of the imaginatio
n beconsidered incidental to the purpose of education. The test of exemption from
taxation is the use of the property for purposes mentioned in the Constitution. The
decision of the CFI Abra (Branch I) is affirmed subject to the modification that half of the
assessed tax be returned to the petitioner. The modification is derived from the fact that
the ground floor is being used for commercial purposes (leased) and the second floor
being used as incidental to education (residence of the director).

Commissioner of Internal Revenue v. Court of Appeals and YMCA

G.R.No.L-124043 October 14, 1998
FACTS: Private Respondent YMCA is a non-stock, non-profit institution, which conducts
various programs and activities that are beneficial to the public, especially the young
people, pursuant to its religious, educational and charitable objectives.
In 1980, private respondent earned, among others, an income of P676, 829.80 from
leasing out a portion of its premises to small shop owners, like restaurants and canteen
operators, and P44,259.00 from parking fees collected from non-members. On July 2,
1984, the commissioner of internal revenue (CIR) issued an assessment to private
respondent, in the total amount of P415,615.01 including surcharge and interest, for
deficiency income tax, deficiency expanded withholding taxes on rentals and professional
fees and deficiency withholding tax on wages. Private respondent formally protested the
assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985.
In reply, the CIR denied the claims of YMCA.
Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax
Appeals (CTA) on
March 14, 1989. In due course, the CTA issued this ruling in favor of the YMCA:
ISSUE:
Whether or not the YMCA is exempted from rental income derived from the lease of its
properties
RULING
Petitioner argues that while the income received by the organizations enumerated in
Section 27 (now Section 26)
of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received
by them as such," the exemption does not apply to income derived "xxx from any of their
properties, real or personal, or from any of their activities conducted for profit, regardless

of the disposition made of such income xxx" We agree with the commissioner.
In the instant case, the exemption claimed by the YMCA is expressly disallowed by the
very wording of the last paragraph of then Section 27 of the NIRC which mandates that the
income of exempt organizations (such as the YMCA) from any of their properties, real or
personal, be subject to the tax imposed by the same Code.