Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-26521

December 28, 1968

EUSEBIO VILLANUEVA, ET AL., plaintiff-appellee,

vs.
CITY OF ILOILO, defendants-appellants.

Pelaez, Jalandoni and Jamir for plaintiff-appellees.

Assistant City Fiscal Vicente P. Gengos for defendant-appellant.
CASTRO, J.:
Appeal by the defendant City of Iloilo from the decision of the Court of First Instance of
Iloilo declaring illegal Ordinance 11, series of 1960, entitled, "An Ordinance Imposing
Municipal License Tax On Persons Engaged In The Business Of Operating Tenement
Houses," and ordering the City to refund to the plaintiffs-appellees the sums of collected
from them under the said ordinance.
On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86, imposing
license tax fees as follows: (1) tenement house (casa de vecindad), P25.00 annually; (2)
tenement house, partly or wholly engaged in or dedicated to business in the streets of
J.M. Basa, Iznart and Aldeguer, P24.00 per apartment; (3) tenement house, partly or
wholly engaged in business in any other streets, P12.00 per apartment. The validity and
constitutionality of this ordinance were challenged by the spouses Eusebio Villanueva and
Remedies Sian Villanueva, owners of four tenement houses containing 34 apartments. This
Court, in City of Iloilo vs. Remedios Sian Villanueva and Eusebio Villanueva , L-12695, March
23, 1959, 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, series of 1960, hereunder quoted in full:
AN ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON
ENGAGED IN THE BUSINESS OF OPERATING TENEMENT HOUSES

PERSONS

Be it ordained by the Municipal Board of the City of Iloilo, pursuant to the

provisions of Republic Act No. 2264, otherwise known as the Autonomy Law of Local
Government, that:

Section 1. A municipal license tax is hereby imposed on tenement houses in

accordance with the schedule of payment herein provided.
Section 2. Tenement house as contemplated in this ordinance shall mean any
building or dwelling for renting space divided into separate apartments or
accessorias.
Section 3. The municipal license tax provided in Section 1 hereof shall be as
follows:

I. Tenement houses:

(a) Apartment house made of strong materials

P20.00
p.a.

(b) Apartment house made of mixed materials

P10.00 per door p.a.

II Rooming house of strong materials

P10.00 per door p.a.

Rooming house of mixed materials

P5.00 per door p.a.

III. Tenement house partly or wholly engaged in or

dedicated to business in the following streets: J.M. Basa,
Iznart, Aldeguer, Guanco and Ledesma from Plazoleto Gay P30.00
to Valeria. St.
p.a.

per

per

door

door

IV. Tenement house partly or wholly engaged in or

dedicated to business in any other street
P12.00 per door p.a.

V. Tenement houses at the streets surrounding the super

market as soon as said place is declared commercial

P24.00
p.a.

per

Section 4. All ordinances or parts thereof inconsistent herewith are hereby

amended.

door

Section 5. Any person found violating this ordinance shall be punished with a fine
note exceeding Two Hundred Pesos (P200.00) or an imprisonment of not more than
six (6) months or both at the discretion of the Court.
Section
6

This
ordinance
ENACTED, January 15, 1960.

shall

take

effect

upon

approval.

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.
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.
The issues posed in this appeal are:
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. Is Ordinance 11, series of 1960, oppressive and unreasonable because it carries a
penal clause?
4. Does Ordinance 11, series of 1960, violate the rule of uniformity of taxation?

1. The pertinent provisions of the Local Autonomy Act are hereunder quoted:
SEC. 2. Any provision of law to the contrary notwithstanding, all chartered cities,
municipalities and municipal districts shall have authority to impose municipal
license taxes or fees upon persons engaged in any occupation or business, or
exercising privileges in chartered cities, municipalities or municipal districts by
requiring them to secure licences at rates fixed by the municipal board or city
council of the city, the municipal council of the municipality, or the municipal
district council of the municipal district; to collect fees and charges for services
rendered by the city, municipality or municipal district; to regulate and impose
reasonable fees for services rendered in connection with any business, profession
or occupation being conducted within the city, municipality or municipal district and
otherwise to levy for public purposes, just and uniform taxes, licenses or fees;
Provided, That municipalities and municipal districts shall, in no case, impose any
percentage tax on sales or other taxes in any form based thereon nor impose taxes
on articles subject to specific tax, except gasoline, under the provisions of the
National Internal Revenue Code; Provided, however, That no city, municipality or
municipal district may levy or impose any of the following:
(a) Residence tax;
(b) Documentary stamp tax;
(c) Taxes on the business of persons engaged in the printing and publication of any
newspaper, magazine, review or bulletin appearing at regular intervals and having
fixed prices for for subscription and sale, and which is not published primarily for
the purpose of publishing advertisements;
(d) Taxes on persons operating waterworks, irrigation and other public utilities
except electric light, heat and power;
(e) Taxes on forest products and forest concessions;
(f) Taxes on estates, inheritance, gifts, legacies, and other acquisitions mortis
causa;
(g) Taxes on income of any kind whatsoever;
(h) Taxes or fees for the registration of motor vehicles and for the issuance of all
kinds of licenses or permits for the driving thereof;
(i) Customs duties registration, wharfage dues on wharves owned by the national
government, tonnage, and all other kinds of customs fees, charges and duties;
(j) Taxes of any kind on banks, insurance companies, and persons paying franchise
tax; and
(k) Taxes on premiums paid by owners of property who obtain insurance directly
with foreign insurance companies.

A tax ordinance shall go into effect on the fifteenth day after its passage, unless
the ordinance shall provide otherwise: Provided, however, That the Secretary of
Finance shall have authority to suspend the effectivity of any ordinance within one
hundred and twenty days after its passage, if, in his opinion, the tax or fee therein
levied or imposed is unjust, excessive, oppressive, or confiscatory, and when the
said Secretary exercises this authority the effectivity of such ordinance shall be
suspended.
In such event, the municipal board or city council in the case of cities and the
municipal council or municipal district council in the case of municipalities or
municipal districts may appeal the decision of the Secretary of Finance to the court
during the pendency of which case the tax levied shall be considered as paid under
protest.
It is now settled that the aforequoted provisions of Republic Act 2264 confer on local
governments broad taxing authority which extends to almost "everything, excepting those
which are mentioned therein," provided that the tax so levied is "for public purposes, just
and uniform," and does not transgress any constitutional provision or is not repugnant to a
controlling statute.2 Thus, when a tax, levied under the authority of a city or municipal
ordinance, is not within the exceptions and limitations aforementioned, the same comes
within the ambit of the general rule, pursuant to the rules of expressio unius est exclusio
alterius, and exceptio firmat regulum in casibus non excepti .
Does the tax imposed by the ordinance in question fall within any of the exceptions
provided for in section 2 of the Local Autonomy Act? For this purpose, it is necessary to
determine the true nature of the tax. The appellees strongly maintain that it is a
"property tax" or "real estate tax," 3 and not a "tax on persons engaged in any occupation
or business or exercising privileges," or a license tax, or a privilege tax, or an excise tax. 4
Indeed, the title of the ordinance designates it as a "municipal license tax on persons
engaged in the business of operating tenement houses," while section 1 thereof states that
a "municipal license tax is hereby imposed on tenement houses." It is the phraseology of
section 1 on which the appellees base their contention that the tax involved is a real
estate tax which, according to them, makes the ordinance ultra vires as it imposes a levy
"in excess of the one per centum real estate tax allowable under Sec. 38 of the Iloilo City
Charter, Com. Act 158."5.
It is our view, contrary to the appellees' contention, that the tax in question is not a real
estate tax. Obviously, the appellees confuse the tax with the real estate tax within the
meaning of the Assessment Law,6 which, although not applicable to the City of Iloilo, has
counterpart provisions in the Iloilo City Charter. 7 A real estate tax is a direct tax on the
ownership of lands and buildings or other improvements thereon, not specially exempted, 8
and is payable regardless of whether the property is used or not, although the value may
vary in accordance with such factor. 9 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 improvements belong to separate owners. 10 It is a fixed
proportion11 of the assessed value of the property taxed, and requires, therefore, the
intervention of assessors.12 It is collected or payable at appointed times, 13 and it

constitutes a superior lien on and is enforceable against the property 14 subject to such
taxation, and not by imprisonment of the owner.
The tax imposed by the ordinance in question does not possess the aforestated attributes.
It is not a tax on the land on which the tenement houses are erected, although 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.
"The spirit, rather than the letter, or an ordinance determines the construction thereof,
and the court looks less to its words and more to the context, subject-matter,
consequence and effect. Accordingly, what is within the spirit is within the ordinance
although it is not within the letter thereof, while that which is in the letter, although not
within the spirit, is not within the ordinance." 15 It is within neither the letter nor the
spirit of the ordinance that an additional real estate tax is being imposed, otherwise the
subject-matter would have been not merely tenement houses. On the contrary, it is plain
from the context of the ordinance that the intention is to impose a license tax on the
operation of tenement houses, which is a form of business or calling. The ordinance, in
both its title and body, particularly sections 1 and 3 thereof, designates the tax imposed
as a "municipal license tax" which, by itself, 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."16.
"The character of a tax is not to be fixed by any isolated words that may
beemployed in the statute creating it, but such words must be taken in the
connection in which they are used and the true character is to be deduced from the
nature and essence of the subject."17 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 accessorias." The Supreme Court, in City of
Iloilo vs. Remedios Sian Villanueva, et al. , L-12695, March 23, 1959, adopted the
definition of a tenement house18 as "any house or building, or portion thereof, which
is rented, leased, or hired out to be occupied, or is occupied, as the home or
residence of three families or more living independently of each other and doing
their cooking in the premises or by more than two families upon any floor, so living
and cooking, but having a common right in the halls, stairways, yards, water-closets,
or privies, or some of them." Tenement houses, being necessarily offered for rent
or lease by their very nature and essence, therefore constitute a distinct form of
business or calling, similar to the hotel or motel business, or the operation of
lodging houses or boarding houses. This is precisely one of the reasons why this
Court, in the said case of City of Iloilo vs. Remedios Sian Villanueva, et al., supra,
declared Ordinance 86 ultra vires, because, although the municipal board of Iloilo
City is empowered, under sec. 21, par. j of its Charter, "to tax, fix the license fee
for, and regulate hotels, restaurants, refreshment parlors, cafes, lodging houses,
boarding houses, livery garages, public warehouses, pawnshops, theaters,
cinematographs," tenement houses, which constitute a different business

enterprise,19 are not mentioned in the aforestated section of the City Charter of
Iloilo. Thus, in the aforesaid case, this Court explicitly said:.
"And 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, the
exercise of such power cannot be assumed and hence the ordinance in question is
ultra vires insofar as it taxes a tenement house such as those belonging to
defendants." .
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. On the other hand, 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." .
2. The trial court condemned the ordinance as constituting "not only double taxation but
treble at that," because "buildings pay real estate taxes and also income taxes as provided
for in Sec. 182 (A) (3) (s) of the National Internal Revenue Code, besides the tenement
tax under the said ordinance." Obviously, what the trial court refers to as "income taxes"
are the fixed taxes on business and occupation provided for in section 182, Title V, of the
National Internal Revenue Code, by virtue of which persons engaged in "leasing or renting
property, whether on their account as principals or as owners of rental property or
properties," are considered "real estate dealers" and are taxed according to the amount of
their annual income.20.
While it is true that the plaintiffs-appellees are taxable under the aforesaid provisions of
the National Internal Revenue Code as 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. 21.
The contention that the plaintiffs-appellees are doubly taxed because they are paying the
real estate taxes and the tenement tax imposed by the ordinance in question, is also
devoid of merit. It is a well-settled rule that 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. 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 sensea double tax.22.
"In order to constitute double taxation in the objectionable or prohibited sense the
same property must be taxed twice when it should be taxed but once; both taxes
must be imposed on the same property or subject-matter, for the same purpose, by
the same State, Government, or taxing authority, within the same jurisdiction or
taxing district, during the same taxing period, and they must be the same kind or

character of tax."23 It has been shown that a real estate tax and the tenement tax
imposed by the ordinance, although imposed by the sametaxing authority, are not of
the same kind or character.
At all events, there is no constitutional prohibition against double taxation in the
Philippines.24 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."25.
3. The 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 P200.00 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." 26
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." 27 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 engaged.28 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 29 empowers its municipal
board to "fix penalties for violations of ordinances, which shall not exceed a fine of two
hundred pesos or six months' imprisonment, or both such fine and imprisonment for each
offense." In Punsalan, et al. vs. Mun. Board of Manila, supra, this Court overruled the
pronouncement of the lower court declaring illegal and void an ordinance imposing an
occupation tax on persons exercising various professions in the City of Manilabecause it
imposed a penalty of fine and imprisonment for its violation. 30.
4. The trial court brands the ordinance as violative of the rule of uniformity of taxation.
"... because while the owners of the other buildings only pay real estate tax and
income taxes the ordinance imposes aside from these two taxes an apartment or
tenement tax. It should be noted that in the assessment of real estate tax all parts
of the building or buildings are included so that the corresponding real estate tax
could be properly imposed. If aside from the real estate tax the owner or owners
of the tenement buildings should pay apartment taxes as required in the ordinance
then it will violate the rule of uniformity of taxation.".
Complementing the above ruling of the lower court, the appellees argue that there is "lack
of uniformity" and "relative inequality," because "only the taxpayers of the City of Iloilo
are singled out to pay taxes on their tenement houses, while citizens of other cities, where
their councils do not enact a similar tax ordinance, are permitted to escape such
imposition." .

It is our view that both assertions are undeserving of extended attention. This 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." 31 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 taxesare
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. 32 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.33 The plaintiffs-appellees, as owners of tenement houses in the City of
Iloilo, have not shown that the tax burden is not equally or uniformly distributed among
them, to overthrow the presumption that tax statutes are intended to operate uniformly
and equally.34.
5. The last important issue posed by the appellees is that since the ordinance in the case
at bar is a mere reproduction of Ordinance 86 of the City of Iloilo which was declared by
this Court in L-12695, supra, as ultra vires, the decision in that case should be accorded
the effect of res judicata in the present case or should constitute estoppel by judgment.
To dispose of this contention, it suffices to say that there is no identity of subjectmatter in that case andthis case because the subject-matter in L-12695 was an ordinance
which dealt not only with tenement houses but also warehouses, and the said ordinance was
enacted pursuant to the provisions of the City charter, while the ordinance in the case at
bar was enacted pursuant to the provisions of the Local Autonomy Act. There is likewise
no identity of cause of action in the two cases because the main issue in L-12695 was
whether the City of Iloilo had the power under its charter to impose the tax levied by
Ordinance 11, series of 1960, under the Local Autonomy Act which took effect on June 19,
1959, and therefore was not available for consideration in the decision in L-12695 which
was promulgated on March 23, 1959. Moreover, under the provisions of section 2 of the
Local Autonomy Act, local governments may now tax any taxable subject-matter or object
not included in the enumeration of matters removed from the taxing power of local
governments.Prior to the enactment of the Local Autonomy Act the taxes that could be
legally levied by local governments were only those specifically authorized by law, and their
power to tax was construed in strictissimi juris. 35.
ACCORDINGLY, the judgment a quo is reversed, and, the ordinance in questionbeing valid,
the complaint is hereby dismissed. No pronouncement as to costs..
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 108358 January 20, 1995

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
THE HON. COURT OF APPEALS, R.O.H. AUTO PRODUCTS PHILIPPINES, INC. and
THE HON. COURT OF TAX APPEALS, respondents.

VITUG, J.:
On 22 August 1986, during the period when the President of the Republic still wielded
legislative powers, Executive Order No. 41 was promulgated declaring a one-time tax
amnesty on unpaid income taxes, later amended to include estate and donor's taxes and
taxes on business, for the taxable years 1981 to 1985.
Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, in
October 1986 and November 1986, its Tax Amnesty Return No. 34-F-00146-41 and
Supplemental Tax Amnesty Return No. 34-F-00146-64-B, respectively, and paid the
corresponding amnesty taxes due.
Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication
received by private respondent on 13 August 1986, assessed the latter deficiency income
and business taxes for its fiscal years ended 30 September 1981 and 30 September 1982
in an aggregate amount of P1,410,157.71. The taxpayer wrote back to state that since it
had been able to avail itself of the tax amnesty, the deficiency tax notice should
forthwith be cancelled and withdrawn. The request was denied by the Commissioner, in his
letter of 22 November 1988, on the ground that Revenue Memorandum Order No. 4-87,
dated 09 February 1987, implementing Executive Order No. 41, had construed the
amnesty coverage to include only assessments issued by the Bureau of Internal Revenue
after the promulgation of the executive order on 22 August 1986 and not to assessments
theretofore made. The invoked provisions of the memorandum order read:
TO: All Internal Revenue Officers and Others Concerned:
1.0. To give effect and substance to the immunity provisions of the tax
amnesty under Executive Order No. 41, as expanded by Executive Order No.
64, the following instructions are hereby issued:
xxx xxx xxx
1.02. A certification by the Tax Amnesty Implementation Officer of the
fact of availment of the said tax amnesty shall be a sufficient basis for:

xxx xxx xxx

1.02.3. In appropriate cases, the cancellation/withdrawal of assessment

notices and letters of demand issued after August 21, 1986 for the
collection of income, business, estate or donor's taxes due during the same
taxable years. 1 (Emphasis supplied)
Private respondent appealed the Commissioner's denial to the Court of Tax Appeals. Ruling
for the taxpayer, the tax court said:
Respondent (herein petitioner Commissioner) failed to present any case or
law which proves that an assessment can withstand or negate the force and
effects of a tax amnesty. This burden of proof on the petitioner (herein
respondent taxpayer) was created by the clear and express terms of the
executive order's intention qualified availers of the amnesty may pay an
amnesty tax in lieu of said unpaid taxes which are forgiven (Section 2,
Section 5, Executive Order No. 41, as amended). More specifically, the plain
provisions in the statute granting tax amnesty for unpaid taxes for the
period January 1, 1981 to December 31, 1985 shifted the burden of proof on
respondent to show how the issuance of an assessment before the date of
the promulgation of the executive order could have a reasonable relation
with the objective periods of the amnesty, so as to make petitioner still
answerable for a tax liability which, through the statute, should have been
erased with the proper availment of the amnesty.
Additionally, the exceptions enumerated in Section 4 of Executive Order
No. 41, as amended, do not indicate any reference to an assessment or
pending investigation aside from one arising from information furnished by
an informer. . . . Thus, we deem that the rule in Revenue Memorandum Order
No. 4-87 promulgating that only assessments issued after August 21, 1986
shall be abated by the amnesty is beyond the contemplation of Executive
Order No. 41, as amended. 2
On appeal by the Commissioner to the Court of Appeals, the decision of the tax court was
affirmed. The appellate court further observed:
In the instant case, examining carefully the words used in Executive Order
No. 41, as amended, we find nothing which justifies petitioner
Commissioner's ground for denying respondent taxpayer's claim to the
benefits of the amnesty law. Section 4 of the subject law enumerates, in no
uncertain terms, taxpayers who may not avail of the amnesty granted,. . . .

Admittedly, respondent taxpayer does not fall under any of the . . .

exceptions. The added exception urged by petitioner Commissioner based on
Revenue Memorandum Order No. 4-87, further restricting the scope of the
amnesty clearly amounts to an act of administrative legislation quite
contrary to the mandate of the law which the regulation ought to implement.
xxx xxx xxx
Lastly, by its very nature, a tax amnesty, being a general pardon or
intentional overlooking by the State of its authority to impose penalties on
persons otherwise guilty of evasion or violation of a revenue or tax law,
partakes of an absolute forgiveness or waiver by the Government of its right
to collect what otherwise would be due it, and in this sense, prejudicial
thereto, particularly to give tax evaders, who wish to relent and are willing
to reform a chance to do so and thereby become a part of the new society
with a clean slate. (Republic vs. Intermediate Appellate Court. 196 SCRA
335, 340 [1991] citing Commissioner of Internal Revenue vs. Botelho
Shipping Corp., 20 SCRA 487) To follow [the restrictive application of
Revenue Memorandum Order No. 4-87 pressed by petitioner Commissioner
would be to work against the raison d'etre of E.O. 41, as amended, i.e., to
raise government revenues by encouraging taxpayers to declare their
untaxed income and pay the tax due thereon. (E.O. 41, first paragraph)] 3
In this petition for review, the Commissioner raises these related issues:
1. WHETHER OR NOT REVENUE MEMORANDUM ORDER NO. 4-87,
PROMULGATED TO IMPLEMENT E.O. NO. 41, IS VALID;
2. WHETHER OR NOT SAID DEFICIENCY ASSESSMENTS IN QUESTION WERE
EXTINGUISHED BY REASON OR PRIVATE RESPONDENT'S AVAILMENT OF
EXECUTIVE ORDER NO. 41 AS AMENDED BY EXECUTIVE ORDER NO. 64;
3. WHETHER OR NOT PRIVATE RESPONDENT HAS OVERCOME THE
PRESUMPTION OF VALIDITY OF ASSESSMENTS. 4
The authority of the Minister of Finance (now the Secretary of Finance), in conjunction
with the Commissioner of Internal Revenue, to promulgate all needful rules and regulations
for the effective enforcement of internal revenue laws cannot be controverted. Neither
can it be disputed that such rules and regulations, as well as administrative opinions and
rulings, ordinarily should deserve weight and respect by the courts. Much more
fundamental than either of the above, however, is that all such issuances must not
override, but must remain consistent and in harmony with, the law they seek to apply and

implement. Administrative rules and regulations are intended to carry out, neither to
supplant nor to modify, the law.
The real and only issue is whether or not the position taken by the Commissioner coincides
with the meaning and intent of executive Order No. 41.
We agree with both the court of Appeals and court of Tax Appeals that Executive Order
No. 41 is quite explicit and requires hardly anything beyond a simple application of its
provisions. It reads:
Sec. 1. Scope of Amnesty. A one-time tax amnesty covering unpaid income
taxes for the years 1981 to 1985 is hereby declared.
Sec. 2. Conditions of the Amnesty. A taxpayer who wishes to avail himself
of the tax amnesty shall, on or before October 31, 1986;
a) file a sworn statement declaring his net worth as of
December 31, 1985;
b) file a certified true copy of his statement declaring his net
worth as of December 31, 1980 on record with the Bureau of
Internal Revenue, or if no such record exists, file a statement
of said net worth therewith, subject to verification by the
Bureau of Internal Revenue;
c) file a return and pay a tax equivalent to ten per cent (10%)
of the increase in net worth from December 31, 1980 to
December 31, 1985: Provided, That in no case shall the tax be
less than P5,000.00 for individuals and P10,000.00 for judicial
persons.
Sec. 3. Computation of Net Worth. In computing the net worths referred
to in Section 2 hereof, the following rules shall govern:
a) Non-cash assets shall be valued at acquisition cost.
b) Foreign currencies shall be valued at the rates of exchange
prevailing as of the date of the net worth statement.
Sec. 4. Exceptions. The following taxpayers may not avail themselves of
the amnesty herein granted:
a) Those falling under the provisions of Executive Order Nos.
1, 2 and 14;

b) Those with income tax cases already filed in Court as of the

effectivity hereof;
c) Those with criminal cases involving violations of the income
tax already filed in court as of the effectivity filed in court as
of the effectivity hereof;
d) Those that have withholding tax liabilities under the
National Internal Revenue Code, as amended, insofar as the
said liabilities are concerned;
e) Those with tax cases pending investigation by the Bureau of
Internal Revenue as of the effectivity hereof as a result of
information furnished under Section 316 of the National
Internal Revenue Code, as amended;
f) Those with pending cases involving unexplained or unlawfully
acquired wealth before the Sandiganbayan;
g) Those liable under Title Seven, Chapter Three (Frauds,
Illegal Exactions and Transactions) and Chapter Four
(Malversation of Public Funds and Property) of the Revised
Penal Code, as amended.
xxx xxx xxx
Sec. 9. The Minister of finance, upon the recommendation of the
Commissioner of Internal Revenue, shall promulgate the necessary rules and
regulations to implement this Executive Order.
xxx xxx xxx
Sec. 11. This Executive Order shall take effect immediately.
DONE in the City of Manila, this 22nd day of August in the year of Our
Lord, nineteen hundred and eighty-six.
The period of the amnesty was later extended to 05 December 1986 from 31 October
1986 by Executive Order No. 54, dated 04 November 1986, and, its coverage expanded,
under Executive Order No. 64, dated 17 November 1986, to include estate and honors
taxes and taxes on business.
If, as the Commissioner argues, Executive Order No. 41 had not been intended to include
1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the

law could have simply so provided in its exclusionary clauses. It did not. The conclusion is
unavoidable, and it is that the executive order has been designed to be in the nature of a
general grant of tax amnesty subject only to the cases specifically excepted by it.
It might not be amiss to recall that the taxable periods covered by the amnesty include
the years immediately preceding the 1986 revolution during which time there had been
persistent calls, all too vivid to be easily forgotten, for civil disobedience, most
particularly in the payment of taxes, to the martial law regime. It should be
understandable then that those who ultimately took over the reigns of government
following the successful revolution would promptly provide for abroad, and not a confined,
tax amnesty.
Relative to the two other issued raised by the Commissioner, we need only quote from
Executive Order No. 41 itself; thus:
Sec. 6. Immunities and Privileges. Upon full compliance with the conditions
of the tax amnesty and the rules and regulations issued pursuant to this
Executive order, the taxpayer shall enjoy the following immunities and
privileges:
a) The taxpayer shall be relieved of any income tax liability on
any untaxed income from January 1, 1981 to December 31,
1985, including increments thereto and penalties on account of
the non-payment of the said tax. Civil, criminal or
administrative liability arising from the non-payment of the
said tax, which are actionable under the National Internal
Revenue Code, as amended, are likewise deemed extinguished.
b) The taxpayer's tax amnesty declaration shall not be
admissible in evidence in all proceedings before judicial, quasi-

judicial or administrative bodies, in which he is a defendant or

respondent, and the same shall not be examined, inquired or
looked into by any person, government official, bureau or
office.
c) The books of account and other records of the taxpayer for
the period from January 1, 1981 to December 31, 1985 shall
not be examined for income tax purposes: Provided, That the
Commissioner of Internal Revenue may authorize in writing the
examination of the said books of accounts and other records
to verify the validity or correctness of a claim for grant of
any tax refund, tax credit (other than refund on credit of

withheld taxes on wages), tax incentives, and/or exemptions

under existing laws.
There is no pretension that the tax amnesty returns and due payments made by the
taxpayer did not conform with the conditions expressed in the amnesty order.
WHEREFORE, the decision of the court of Appeals, sustaining that of the court of Tax
Appeals, is hereby AFFIRMED in toto. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-4376

May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC.,

petitioners-appellants,
vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and
THE CITY MAYOR, all of the City of Manila, respondents-appellees.

Teotimo A. Roja for appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.
BAUTISTA ANGELO, J.:
This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed
by the Municipal Board of the City of Manila on March 24, 1950.
The Association of Customs Brokers, Inc., which is composed of all brokers and public
service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member
of said association, also a public service operator of the trucks in said City, challenge the
validity of said ordinance on the ground that (1) while it levies a so-called property tax it is
in reality a license tax which is beyond the power of the Municipal Board of the City of
Manila; (2) said ordinance offends against the rule of uniformity of taxation; and (3) it
constitutes double taxation.
The respondents, represented by the city fiscal, contend on their part that the challenged
ordinance imposes a property tax which is within the power of the City of Manila to impose
under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in

question does not violate the rule of uniformity of taxation, nor does it constitute double
taxation.
The issues having been joined, the Court of First Instance of Manila sustained the validity
of the ordinance and dismissed the petition. Hence this appeal.
The disputed ordinance was passed by the Municipal Board of the City of Manila under the
authority conferred by section 18 (p) of Republic Act No. 409. Said section confers upon
the municipal board the power "to tax motor and other vehicles operating within the City
of Manila the provisions of any existing law to the contrary notwithstanding." It is
contended that this power is broad enough to confer upon the City of Manila the power to
enact an ordinance imposing the property tax on motor vehicles operating within the city
limits.
In the deciding the issue before us it is necessary to bear in mind the pertinent provisions
of the Motor Vehicles Law, as amended, (Act No. 3992) which has a bearing on the power
of the municipal corporation to impose tax on motor vehicles operating in any highway in
the Philippines. The pertinent provisions are contained in section 70 (b) which provide in
part:
No further fees than those fixed in this Act shall be exacted or demanded by any
public highway, bridge or ferry, or for the exercise of the profession of chauffeur,
or for the operation of any motor vehicle by the owner thereof: Provided, however,
That nothing in this Act shall be construed to exempt any motor vehicle from the
payment of any lawful and equitable insular, local or municipal property tax imposed
thereupon. . . .
Note that under the above section no fees may be exacted or demanded for the operation
of any motor vehicle other than those therein provided, the only exception being that
which refers to the property tax which may be imposed by a municipal corporation. This
provision is all-inclusive in that sense that it applies to all motor vehicles. In this sense,
this provision should be construed as limiting the broad grant of power conferred upon the
City of Manila by its Charter to impose taxes. When section 18 of said Charter provides
that the City of Manila can impose a tax on motor vehicles operating within its limit, it can
only refers to property tax as a different interpretation would make it repugnant to the
Motor Vehicle Law.
Coming now to the ordinance in question, we find that its title refers to it as "An
Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of
Manila", and that in its section 1 it provides that the tax should be 1 per cent ad valorem
per annum. It also provides that the proceeds of the tax "shall accrue to the Streets and
Bridges Funds of the City and shall be expended exclusively for the repair, maintenance
and improvement of its streets and bridges." Considering the wording used in the

ordinance in the light in the purpose for which the tax is created, can we consider the tax
thus imposed as property tax, as claimed by respondents?
While as a rule an ad valorem tax is a property tax, and this rule is supported by some
authorities, the rule should not be taken in its absolute sense if the nature and purpose of
the tax as gathered from the context show that it is in effect an excise or a license tax.
Thus, it has been held that "If a tax is in its nature an excise, it does not become a
property tax because it is proportioned in amount to the value of the property used in
connection with the occupation, privilege or act which is taxed. Every excise necessarily
must finally fall upon and be paid by property and so may be indirectly a tax upon property;
but if it is really imposed upon the performance of an act, enjoyment of a privilege, or the
engaging in an occupation, it will be considered an excise." (26 R. C. L., 35-36.) It has also
been held that
The character of the tax as a property tax or a license or occupation tax must be
determined by its incidents, and from the natural and legal effect of the language
employed in the act or ordinance, and not by the name by which it is described, or
by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so
regarded, even though nominally and in form it is a license or occupation tax; and, on
the other hand, if the tax is levied upon persons on account of their business, it will
be construed as a license or occupation tax, even though it is graduated according
to the property used in such business, or on the gross receipts of the business. (37
C.J., 172)
The ordinance in question falls under the foregoing rules. While it refers to property tax
and it is fixed ad valorem yet we cannot reject the idea that it is merely levied on motor
vehicles operating within the City of Manila with the main purpose of raising funds to be
expended exclusively for the repair, maintenance and improvement of the streets and
bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends
to prevent, for the reason that, under said Act, municipal corporation already participate
in the distribution of the proceeds that are raised for the same purpose of repairing,
maintaining and improving bridges and public highway (section 73 of the Motor Vehicle
Law). This prohibition is intended to prevent duplication in the imposition of fees for the
same purpose. It is for this reason that we believe that the ordinance in question merely
imposes a license fee although under the cloak of an ad valorem tax to circumvent the
prohibition above adverted to.
It is also our opinion that the ordinance infringes the rule of the uniformity of taxation
ordained by our Constitution. Note that the ordinance exacts the tax upon all motor
vehicles operating within the City of Manila. It does not distinguish between a motor
vehicle for hire and one which is purely for private use. Neither does it distinguish
between a motor vehicle registered in the City of Manila and one registered in another

place but occasionally comes to Manila and uses its streets and public highways. The
distinction is important if we note that the ordinance intends to burden with the tax only
those registered in the City of Manila as may be inferred from the word "operating" used
therein. The word "operating" denotes a connotation which is akin to a registration, for
under the Motor Vehicle Law no motor vehicle can be operated without previous payment
of the registration fees. There is no pretense that the ordinance equally applies to motor
vehicles who come to Manila for a temporary stay or for short errands, and it cannot be
denied that they contribute in no small degree to the deterioration of the streets and
public highway. The fact that they are benefited by their use they should also be made to
share the corresponding burden. And yet such is not the case. This is an inequality which
we find in the ordinance, and which renders it offensive to the Constitution.
Wherefore, reversing the decision appealed from, we hereby declare the ordinance null
and void.