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Angeles University Foundation vs.

City of Angeles
FACTS: Petitioner is a non-stock, non-profit educational foundation. It received a building permit fee
assessment for the construction of the AUF Medical Center but claimed exemption from the same as well
as from other permits and fees by virtue of Republic Act No. 6055. Respondent disputed the claimed
exemption by stating that the impositions are regulatory in nature and not taxes from which petitioner is
exempt under the said law.

ISSUE: Is the building permit fee a tax from which petitioner is exempt?

RULING: No. It is a regulatory fee. The DPWH has in fact issued implementing rules which provide the
bases for assessment of fees and petitioner has failed to show that they were arbitrarily determined or
unrelated to the activity being regulated. Neither has there been proof that the fee was unreasonable or
in excess of the cost of regulation or inspection. The Court added that even if there was incidental
revenue, the same is deemed not to change the nature of the charge. Thus, the City of Angeles was
justified in its assessment.
46; NO.L-4817; 26 MAY 1954]
Facts: Petitioners, who are professionals in the city, assail Ordinance No.
3398 together with the law authorizing it (Section 18 of the Revised Charterof
the City of Manila). The ordinance imposes a municipal occupation tax on
persons exercising various professions in the city and penalizes non-payment of
the same. The law authorizing said ordinance empowers the Municipal Board of
the city to impose a municipal occupation tax on persons engaged in various
professions. Petitioners, having already paid their occupation tax under section
201 of the National Internal Revenue Code, paid the tax under protest as
imposed by Ordinance No. 3398. The lower court declared the ordinance invalid
and affirmed the validity of the law authorizing it.

Issue: Whether or Not the ordinance and law authorizing it constitute

class legislation, and authorize what amounts to double taxation.

Held: The Legislature may, in its discretion, select what occupations shall be
taxed, and in its discretion may tax all, or select classes of occupation for
taxation, and leave others untaxed. It is not for the courts to judge which cities
or municipalities should be empowered to impose occupation taxes aside from
that imposed by the National Government. That matter is within the domain of
political departments. The argument against double taxation may not be
invoked if one tax is imposed by the state and the other is imposed by the city.
It is widely recognized that there is nothing inherently terrible in the
requirement that taxes be exacted with respect to the same occupation by both
the state and the political subdivisions thereof.Judgment of the lower court is
reversed with regards to the ordinance and affirmed as to the law authorizing it.
Swedish Match v The Treasurer of the City of Manila GR No.
181277 Date: July 3, 2013
Ponente: Sereno, CJ.
petitioner: Swedish Match Philippines, Inc. respondent: The
Treasurer of the City of Manila

This is a Petition for Refund of Taxes with the RTC of Manila in
accordance with Section 196 of the Local Government Code
(LGC) of 1991. The petitioner says that it had been religiously
paying its taxes based on Section 14 of Ordinance No. 7794 or
the Manila Revenue Code (as amended by Ordinance Nos. 7988
and 8011). However, it was still taxed based on Section 21 of the
same code.
RTC denied the petition because of the failure of the petitioner
to plead the latters capacity to sue and to state the authority of
Ms. Beleno, who had executed the Verification and Certification
of Non-Forum Shopping. It also denied it on the ground that
Section 14 and 21 pertained to taxes of a different nature and,
thus the elements of double taxation were wanting in this case.
CTA affirmed the decision. Petitioner points out that Section 21
is not in itself invalid, but the enforcement of this provision
would constitute double taxation if business taxes have already
been paid under Section 14 of the same revenue code. Petitioner
further argues that since Ordinance Nos. 7988 and 8011 have
already been declared null and void in Coca-Cola Bottlers
Philippines, Inc. v. City of Manila, all taxes collected and paid
on the basis of these ordinances should be refunded. The
respondent also argues that Sections 14 and 21 pertain to two
different objects of tax; thus, they are not of the same kind and
character so as to constitute double taxation. Section 14 is a tax
on manufacturers, assemblers and other processors, while
Section 21 applies to business subject to excise, value-added, or
percentage tax. Respondent posits that under Section 21,
petitioner is merely a withholding tax agent of the City of
WON the imposition of tax under Section 21 of the Manila
Revenue Code constitutes double taxation in view of the tax
collected and paid under Section 14 of the same code-
Ratio: YES

The Court used the holding in The City of Manila v. Coca-Cola

Bottlers Philippines, Inc to justify that taxation under Sections
14 and 21 would result to double taxation. Here, it was
elaborated that Section 143(a) of the LGC: said municipality or
city may no longer subject the same manufacturers, etc, to a
business tax under Section 143(h) of the same Code. SECTION
143(h) may be imposed only on businesses that are subject to
excise tax, VAT or percentage tax under the NIRC, and that are
not otherwise specified in preceding paragraphs. In the same
way, businesses such as respondents, already subject to a local
business Tax under Section 14 of Tax Ordinance No. 7794
[which is based on Section 143(a) of the LGC], can no longer be
made liable for local business tax under Section 21 of the same
Tax Ordinance [which is based on Section 143(h) of the LGC.]
Thus, since petitioner has already been paying under Section 14,
it should not be subjected to the payment of taxes under Section
21. Further, the Court agreed with petitioner that Ordinance
Nos. 7988 and 8011 cannot be the basis for the collection of
business taxes because Coca-Cola already ruled that these
ordinances were null and void. Hence, payments made under
Section 21 must be refunded in favor of petitioner. Petition is
Gaston vs. Republic Planters Bank

Facts: Petitioners are sugar producers and planters and

millers filed a MANDAMUS to implement the privatization
of Republic Planters Bank, and for the transfer of the
shares in the government bank to sugar producers and
planters. (because they are allegedly the true beneficial
owners of the bank since they pay P1.00 per picul of sugar
from the proceeds of sugar producers as STABILIZATION
The shares are currently held by Philsucom / Sugar
Regulatory Admin.
The Solgen countered that the stabilization fees are
considered government funds and that the transfer of
shares to from Philsucom to the sugar producers would be
Issue: What is the nature of the P1.00 stabilization fees
collected from sugar producers? Are they funds held in
trust for them, or are they public funds? Are the shares in
the bank (paid using these fees) owned by the
government Philsucom or privately by the different sugar
planters from whom such fees were collected?
Held: PUBLIC FUNDS. While it is true that the collected
fees were used to buy shares in RPB, it did not collect
said fees for the account of sugar producers. The
stabilization fees were charged on sugar produced and
milled which ACCRUED TO PHILSUCOM, under PD 338.
The fees collected ARE IN THE NATURE OF A TAX.,
which is within the power of the state to impose FOR THE
constitute sugar liens. The collectionsaccrue to a
SPECIAL FUNDS. It is levied not purely for taxation, but
for regulation, to provide means TO STABILIZE THE
SUGAR INDUSTRY. The levy is primarily an exercise of
police powers.
The fact that the State has taken money pursuant to law is
sufficient to constitute them as STATE FUNDS, even
though held for a special purpose. Having been levied for
a special purpose, the revenues are treated as a special
fund, administered in trust for the purpose intended. Once
the purpose has been fulfilled or abandoned, the balance
will be transferred to the general funds of govt.
It is a special fund since the funds are deposited in PNB,
not in the National Treasury.
The sugar planters are NOT BENEFICIAL OWNERS. The
money is collected from them only because they it is also
they who are to be benefited from the expenditure of funds
derived from it. The investing of the funds in RPB is not
alien to the purpose since the Bank is a commodity bank
for sugar, conceived for the sugar industry growth and
Revenues derived from taxes cannot be used purely for
private purposes or for the exclusive benefit of private
persons. The Stabilization Fund is to be utilized for the
benefit of the ENTIRE SUGAR INDUSTRY, and all its
components, stabilization of domestic and foreign
markets, since the sugar industry is of vital importance to
the countrys economy and national interest.
Cocofed vs Republic
Case Digest GR 177857-58 Jan 24 2012


In 1971, RA 6260 created the Coconut Investment Company (CIC) to administer the Coconut
Investment Fund, a fund to be sourced from levy on the sale of copra. The copra seller was, or ought
to be, issued COCOFUND receipts. The fund was placed at the disposition of COCOFED, the
national association of coconut producers having the largest membership.

When martial law started in 1972, several presidential decrees were issued to improve the coconut
industry through the collection and use of the coconut levy fund:

PD 276 established the Coconut Consumers Stabilization Fund (CCSF) and declared the proceeds
of the CCSF levy as trust fund, to be utilized to subsidize the sale of coconut-based products, thus
stabilizing the price of edible oil.

PD 582 created the Coconut Industry Development Fund (CIDF) to finance the operation of a hybrid
coconut seed farm.
In 1973, PD 232 created the Philippine Coconut Authority (PCA) to accelerate the growth and
development of the coconut and palm oil industry.

Then came P.D. No. 755 in July 1975, providing under its Section 1 the policy to provide readily
available credit facilities to the coconut farmers at preferential rates. Towards achieving this, Section
2 of PD 755 authorized PCA to utilize the CCSF and the CIDF collections to acquire a commercial
bank and deposit the CCSF levy collections in said bank, interest free, the deposit withdrawable only
when the bank has attained a certain level of sufficiency in its equity capital. It also decreed that all
levies PCA is authorized to collect shall not be considered as special and/or
fiduciary funds or form part of the general funds of the government.

Both P.D. Nos. 961 and 1468 also provide that the CCSF shall not be construed by any law as a
special and/or trust fund, the stated intention being that actual ownership of the said fund
shall pertain to coconut farmers in their private capacities.

Shortly before the issuance of PD 755 however, PCA had already bought from Peping Cojuangco
72.2% of the outstanding capital stock of FUB / UCPB. In that contract, it was also stipulated that
Danding Cojuanco shall receive equity in FUB amounting to 10%, or 7.22 % of the 72.2%, as
consideration for PCAs buy-out of what Danding Conjuanco claim as his exclusive and personal
option to buy the FUB shares.

The PCA appropriated, out of its own fund, an amount for the purchase of the said 72.2% equity. It
later reimbursed itself from the coconut levy fund.

While the 64.98% (72.2 % 7.22%) portion of the option shares ostensibly pertained to the farmers,
the corresponding stock certificates supposedly representing the farmers equity were in the name of
and delivered to PCA. There were, however, shares forming part of the 64.98% portion, which ended
up in the hands of non-farmers. The remaining 27.8% of the FUB capital stock were not covered by
any of the agreements.

Through the years, a part of the coconut levy funds went directly or indirectly to various projects
and/or was converted into different assets or investments. Of particular relevance to this was their
use to acquire the FUB / UCPB, and the acquisition by UCPB, through the CIIF and holding
companies, of a large block of San Miguel Corporation (SMC) shares.

Issue 1: W/N the mandate provided under PD 755, 961 and 1468 that the CCSF shall not be
construed by any law as a special and/or trust fund is valid

No. The coconut levy funds can only be used for the special purpose and the balance thereof should
revert back to the general fund.
Article VI, Section 29 (3) of the Constitution provides that all money collected
on any tax levied for a special purpose shall be treated as a special fund
and paid out for such purpose only, and if the purpose for which a special fund was
created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds
of the Government. Here, the CCSF were sourced from forced exactions with the end-goal of
developing the entire coconut industry. Therefore, the subsequent reclassification of the CCSF as a
private fund to be owned by private individuals in their private capacities under P.D. Nos. 755, 961
and 1468 is unconstitutional.

Not only is it unconstitutional, but the mandate is contrary to the purpose or policy for which the coco
levy fund was created.

Issue 2:

W/N the coco levy fund may be owned by the coconut farmers in their private capacities

No. The coconut levy funds are in the nature of taxes and can only be used for public purpose. They
cannot be used to purchase shares of stocks to be given for free to private individuals. Even if the
money is allocated for a special purpose and raised by special means, it is still public in character.

Accordingly, the presidential issuances which authorized the PCA to distribute, for free, the shares of
stock of the bank it acquired to the coconut farmers under such rules and regulations the PCA may
promulgate is unconstitutional.

It is unconstitutional because first, it have unduly delegated legislative power to the PCA, and
second, it allowed the use of the CCSF to benefit directly private interest by the outright and
unconditional grant of absolute ownership of the FUB/UCPB shares paid for by PCA entirely with the
CCSF to the undefined coconut farmers, which negated or circumvented the national policy or
public purpose declared by P.D. No. 755.

Hence, the so-called Farmers shares do not belong to the coconut farmers in their private
capacities, but to the Government. The coconut levy funds are special public funds and any property
purchased by means of the coconut levy funds should likewise be treated as public funds or public
property, subject to burdens and restrictions attached by law to such property.
A complaint was filed against the defendants Eduardo Cojuangco Jr., the ACCRA lawyers, Danilo Ursua
and 71 corporations by the Presidential Commission on Good Government (PCGG) referred here as
Republic of the Philippines with regard to a block of San Miguel Corporation (SMC) stock which were
allegedly bought through the CIIF Holding Companies and funded by the coconut levy fund passing
through the Unicom Oil Mills and directly from UCPB. The coconut levy funds were considered as
government funds since this came from contributions from the coconut farmers with the purpose of
improving and stabilizing the coconut farming industry, however these were said to be privatized under
presidential directives of then Pres. Marcos. Defendant Cojuangco Jr., being close with the Marcoses is
said to have taken undue advantage of his association, influence and connection, embarked upon
different devices and schemes including the use of the ACCRA Lawyers as nominee shareholders and
the defendant corporations as fronts to unjustly enrich themselves at the expense of the Filipino people
when he misused the coconut levy fund, amounting to $150 million, to purchase 33 million shares of the
SMC through the holding companies. Hence with the allegations mentioned and with different cases and
issues which remain unresolved, the block of shares representing 20% of the outstanding capital stock of
SMC remained sequestered by the government.
During the pre-trial brief, the Sandiganbayan sought clarification from the parties, particularly the
Republic, on their respective positions, but at the end it found the clarifications "inadequately"
enlightening. To resolve various pending motions and pleadings, Sandiganbayan lifted and declared the
Writs of Sequestration null and void.
Despite the lifting of the writs of sequestration, since the Republic continues to hold a claim on the shares
which is yet to be resolved, it is hereby ordered that the following shall be annotated in the relevant
corporate books of San Miguel Corporation:
(1) any sale, pledge, mortgage or other disposition of any of the shares of the Defendants Eduardo
Cojuangco, et al. shall be subject to the outcome of this case;

(2) the Republic through the PCGG shall be given twenty (20) days written notice by Defendants
Eduardo Cojuangco, et al. prior to any sale, pledge, mortgage or other disposition of the shares;

(3) in the event of sale, mortgage or other disposition of the shares, by the Defendants Cojuangco, et al.,
the consideration therefore, whether in cash or in kind, shall be placed in escrow with Land Bank of the
Philippines, subject to disposition only upon further orders of this Court; and

(4) any cash dividends that are declared on the shares shall be placed in escrow with the Land Bank of
the Philippines, subject to disposition only upon further orders of this Court. If in case stock dividends are
declared, the conditions on the sale, pledge, mortgage and other disposition of any of the shares as
above-mentioned in conditions 1, 2 and 3, shall likewise apply.
Sandiganbayan denied both Motion for Reconsideration and Motion for Modification but eventually
reduced its resolution deleting the last 2 provisions. Cojuangco, et al. filed a Motion for Authority to Sell
San Miguel Corporation (SMC) shares, praying for leave to allow the sale of SMC shares and
Sandiganbayan granted the motion. Cojuangco, et al. later rendered a complete accounting of the
proceeds from the sale of the Cojuangco block of shares of SMC stock, informing that a total amount of P
4,786,107,428.34 had been paid to the UCPB as loan repayment.

Whether or not Sandiganbayan has committed grave abuse of dicretion in:
(a) in lifting the Writ of Sequestrations on the sequestered SMC shares.
(c) in deleting the last two conditions the Sandiganbayan had earlier imposed on the subject shares of

Among the WOS issued, only one writ WOS 87-0218 complied with PCGG Rules and Regulations
requirement that the issuance be made by at least two Commissioners. However, even if Writ of
Sequestration No. 87-0218 complied with the requirement that the same be issued by at least two
Commissioners, the records fail to show that it was issued with factual basis or with factual foundation. It
is the absence of a prima facie basis for the issuance of a writ of sequestration and not the lack of
authority of two (2) Commissioners which renders the said writ void ab initio. Thus, being the case, Writ
of Sequestration No. 87-0218 must be automatically lifted. Consequently, the writs of sequestration nos.
86-0062, 86-0069, 86-0085, 86-0095, 86-0096, 86-0097 and 86-0098 must be lifted for not having
complied with the pertinent provisions of the PCGG Rules and Regulations, all of which were issued by
only one Commissioner.
Nor did the Sandiganbayan gravely abuse its discretion in reducing from four to only two the conditions
imposed for the lifting of the WOS. The Sandiganbayan thereby acted with the best of intentions, being all
too aware that the claim of the Republic to the sequestered assets and properties might be prejudiced or
harmed pendente lite unless the protective conditions were annotated in the corporate books of SMC.
Moreover, the issue became academic following the Sandiganbayans promulgation of its decision
dismissing the Republic's Amended Complaint, which thereby removed the stated reason - "the Republic
continues to hold a claim on the shares which is yet to be resolved" - underlying the need for the
annotation of the conditions (whether four or two).


These are consolidated petitions to declare unconstitutional certain presidential

decrees and executive orders of the martial law era and under the incumbency of
Pres. Estrada relating to the raising and use of coco-levy funds, particularly: Section
2 of P.D. 755, (b)Article III, Section 5 of P.D.s 961 and 1468, (c) E.O. 312, and (d)
E.O. 313.

On June 19, 1971 Congress enacted R.A. 6260 that established a Coconut
Investment Fund (CI Fund) for the development of the coconut industry through
capital financing. Coconut farmers were to capitalize and administer the Fund
through the Coconut Investment Company (CIC) whose objective was, among
others, to advance the coconut farmers interests.For this purpose, the law imposed
a levy ofP0.55on the coconut farmers first domestic sale of every 100 kilograms of
copra, or its equivalent, for which levy he was to get a receipt convertible into CIC
shares of stock.

In 1975 President Marcos enacted P.D. 755 which approved the acquisition of a
commercial bank for the benefit of the coconut farmersto enable such bank to
promptly and efficiently realize the industry's credit policy.Thus, the PCA bought
72.2% of the shares of stock of First United Bank, headed by Pedro
Cojuangco.Dueto changes in its corporate identity and purpose, the banks articles of
incorporation were amended in July 1975, resulting in a change in the banks name
from First United Bank United Coconut Planters Bank (UCPB).

In November 2000 then President Joseph Estrada issued Executive Order (E.O.)
312, establishing a Sagip Niyugan Program which sought to provide immediate
income supplement to coconut farmers and encourage the creation of a sustainable
local market demand for coconut oil and other coconut products.The Executive
Order sought to establish aP1-billion fund by disposing of assets acquired using
coco-levy funds or assets of entities supported by those funds.A committee was
created to manage the fund under this program.A majority vote of its members could
engage the services of a reputable auditing firm to conduct periodic audits.

At about the same time, President Estrada issued E.O. 313, which created an
irrevocable trust fund known as the Coconut Trust Fund (the Trust Fund).This aimed
to provide financial assistance to coconut farmers, to the coconut industry, and to
other agri-related programs.The shares of stock of SMC were to serve as the Trust
Funds initial capital.These shares were acquired with CII Funds and constituted
approximately 27% of the outstanding capital stock of SMC.E.O. 313 designated
UCPB, through its Trust Department, as the Trust Funds trustee bank.The Trust
Fund Committee would administer, manage, and supervise the operations of the
Trust Fund. The Committee would designate an external auditor to do an annual
audit or as often as needed but it may also request the Commission on Audit (COA)
to intervene.

To implement its mandate, E.O. 313 directed the Presidential Commission on Good
Government, the Office of the Solicitor General, and other government agencies to
exclude the 27% CIIF SMC shares from Civil Case 0033, entitled Republic of the
Philippines v. Eduardo Cojuangco, Jr., et al.,which was then pending before the
Sandiganbayan and to lift the sequestration over those shares.
On January 26, 2001, however, former President Gloria Macapagal-Arroyo ordered
the suspension of E.O.s 312 and 313. This notwithstanding, on March 1, 2001
petitioner organizations and individuals brought the present action in G.R. 147036-
37 to declare E.O.s 312 and 313 as well as Article III, Section 5 of P.D. 1468
unconstitutional.On April 24, 2001 the other sets of petitioner organizations and
individuals instituted G.R. 147811 to nullify Section 2 of P.D. 755 and Article III,
Section 5 of P.D.s 961 and 1468 also for being unconstitutional.


Whether or not the coco-levy funds are public funds?

Whether or not(a) Section 2 of P.D. 755, (b)Article III, Section 5 of P.D.s 961 and
1468, (c) E.O. 312, and (d) E.O. 313 are unconstitutional?

Whether or not petitioners have legal standing to bring the same to court?


POLITICAL LAW: coco levy as public funds

The Court was satisfied that the coco-levy funds were raised pursuant to law to
support a proper governmental purpose.They were raised with the use of the police
and taxing powers of the State for the benefit of the coconut industry and its farmers
in general.The COA reviewed the use of the funds.The BIR treated them as public
funds and the very laws governing coconut levies recognize their public character.

The Court has also recently declared that the coco-levy funds are in the nature of
taxes and can only be used for public purpose.Taxes are enforced proportional
contributions from persons and property, levied by the State by virtue of its
sovereignty for the support of the government and for all itspublic needs. Here, the
coco-levy funds were imposed pursuant to law, namely, R.A. 6260 and P.D. 276.The
funds were collected and managed by the PCA,an independent government
corporation directly under the President.And, as the respondent public officials
pointed out, thepertinent laws used the termlevy, which meansto tax, in describing
the exaction.

R.A. 6260 and P.D. 276 did not raise money to boost the governments general funds
butto provide means for the rehabilitation and stabilization of a threatened industry,
the coconut industry, which is so affected with public interest as to be within the
police power of the State. The funds sought to support the coconut industry,one of
the main economic backbones of the country, and to secure economic benefits for
the coconut farmers and farm workers.

Lastly, the coco-levy funds are evidently special funds. Its character as such fund
was made clear by the fact that they were deposited in the PNB (then a wholly
owned government bank) and not in the Philippine Treasury.

POLITICAL LAW: constitutionality of the assailed p.d.s and e.o.s

The Court has already passed upon this question in Philippine Coconut Producers
Federation, Inc. (COCOFED) v. Republic of the Philippines. It held as
unconstitutional Section 2 of P.D. 755 for effectively authorizing the PCA to utilize
portions of theCCS Fundto pay the financial commitment of the farmers to acquire
UCPB and to deposit portions of the CCS Fund levies with UCPB interest free. And
as there also provided, the CCS Fund, CID Fund and like levies that PCA is
authorized to collect shall be considered as non-special or fiduciary funds to be
transferred to the general fund of the Government, meaning they shall be deemed
private funds.

In any event, such declaration is void.There is ownership when a thing pertaining to

a person is completely subjected to his will in everything that is not prohibited by law
or the concurrence with the rights of another. An owner is free to exercise all
attributes ofownership: the right, among others, to possess, use and enjoy, abuse or
consume, and dispose or alienate the thing owned. The owner is free to waive all or
some of these rights in favor of others.But in the case of the coconut farmers, they
could not, individually or collectively, waive what have not been and could not be
legally imparted to them.

Section 2 of P.D. 755, Article III,Section 5of P.D. 961, and Article III, Section 5 of P.D.
1468 completely ignore the fact that coco-levy funds are public funds raised through
taxation.And since taxes could be exacted only for a public purpose, they cannot be
declared private properties of individuals although such individuals fall within a
distinct group of persons.

These assailed provisions,which removed the coco-levy funds from the general
funds of the government and declared them private properties of coconut farmers,do
not appear to have a color of social justice for their purpose.The levy on copra that
farmers produce appears, in the first place, to be a business tax judging by its tax
base.The concept of farmers-businessmen is incompatible with the idea that
coconut farmers are victims of social injustice and so should be beneficiaries of the
taxes raised from their earnings.

On another point, in stating that the coco-levy fund shall not be construed or
interpreted, under any law or regulation, as special and/or fiduciary funds, or as part
of the general funds of the national government,P.D.s 961 and 1468 seek to remove
such fund from COA scrutiny.

This is also the fault of President Estradas E.O. 312 which deals with P1 billion to be
generated out of the sale of coco-fund acquired assets.E.O. 313 has a substantially
identical provision governing the management and disposition of the Coconut Trust
Fund capitalized with the substantial SMC shares of stock that the coco-fund

But, since coco-levy funds are taxes, the provisions of P.D.s755,961 and 1468 as
well as those of E.O.s 312 and 313 that remove such funds and the assets acquired
through them from the jurisdiction of the COA violate Article IX-D, Section 2(1) of the
1987 Constitution.Section 2(1) vests in the COA the power and authority to examine
uses of government money and property.The cited P.D.s and E.O.s also contravene
Section 2 of P.D. 898 (Providing for the Restructuring of the Commission on Audit),
which has the force of a statute.And there is no legitimate reason why such funds
should be shielded from COA review and audit.The PCA, which implements the
coco-levy laws and collects the coco-levy funds, is a government-owned and
controlled corporation subject to COA review and audit.

E.O. 313 suffers from an additional infirmity.Apparently, it intends to create a trust

fund out of the coco-levy funds to provide economic assistance to the coconut
farmers and, ultimately, benefit the coconut industry.But on closer look, E.O. 313
strays from the special purpose for which the law raises coco-levy funds in that it
permits the use of coco-levy funds for improving productivity in other food areas.

Clearly, E.O.313 above runs counter to the constitutional provision which directs
thatall money collected on any tax levied for a special purpose shall be treated as a
special fund and paid out for such purpose only.Assisting other agriculturally-related
programs is way off the coco-funds objective of promoting the general interests of
the coconut industry and its farmers.
A final point,the E.O.s also transgress P.D. 1445,Section 84(2),the first part by the
previously mentioned sections of E.O. 313 and the second part by Section 4 of E.O.
312 and Sections 6 and 7 of E.O. 313.E.O. 313 vests the power to administer,
manage, and supervise the operations and disbursements of the Trust Fund it
established (capitalized with SMC shares bought out of coco-levy funds) in a
Coconut Trust Fund Committee.

Section 4 ofE.O. 312 does essentially the same thing.It vests the management and
disposition of the assistance fund generated from the sale of coco-levy fund-
acquired assets into a Committee of five members.

In effect, the provision transfers the power to allocate, use, and disburse coco-levy
funds that P.D. 232 vested in the PCA and transferred the same, without legislative
authorization and in violation of P.D. 232, to the Committees mentioned above.An
executive order cannot repeal a presidential decree which has the same standing as
a statute enacted by Congress.

Lladoc vs Commisioner of Internal Revenue (1965)

Facts: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in

cash to the parish priest of Victorias, Negros Occidental; the amount
spent for the construction of a new Catholic Church in the locality,m
as intended. In1958, MB Estate filed the donors gift tax return. In
1960, the Commissioner issued an assessment for donees gift tax
against the parish. The priest lodged a protest to the assessment and
requested the withdrawal thereof.

Issue: Whether the Catholic Parish is tax exempt.

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

The tax exemption of the parish, thus, does not extend to excise taxes.

Lung Center of the Philippines vs. Quezon City and Constantino Rosas


The Petitioner is a non-stock, non-profit entity which owns a parcel of land in

Quezon City. Erected in the middle of the aforesaid lot is a hospital known as the
Lung Center of the Philippines. The ground floor is being leased to a canteen,
medical professionals whom use the same as their private clinics, as well as to other
private parties. The right portion of the lot is being leased for commercial purposes
to the Elliptical Orchids and Garden Center. The petitioner accepts paying and non-
paying patients. It also renders medical services to out-patients, both paying and
non-paying. Aside from its income from paying patients, the petitioner receives
annual subsidies from the government.

Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5
million, predicating its claim as a charitable institution. The city assessor denied the
Claim. When appealed to the QC-Local Board of Assessment, the same was
dismissed. The decision of the QC-LBAA was affirmed by the Central Board of
Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are
used exclusively for charity.


Whether or not the Petitioner is entitled to exemption from realty taxes

notwithstanding the fact that it admits paying clients and leases out a portion of its
property for commercial purposes.


The Court held that the petitioner is indeed a charitable institution based on its
charter and articles of incorporation. As a general principle, a charitable institution
does not lose its character as such and its exemption from taxes simply because it
derives income from paying patients, whether out-patient or confined in the hospital,
or receives subsidies from the government, so long as the money received is
devoted or used altogether to the charitable object which it is intended to achieve;
and no money inures to the private benefit of the persons managing or operating the

Despite this, the Court held that the portions of real property that are leased to
private entities are not exempt from real property taxes as these are not actually,
directly and exclusively used for charitable purposes. (strictissimi juris) Moreover,
P.D. No. 1823 only speaks of tax exemptions as regards to:

income and gift taxes for all donations, contributions, endowments and
equipment and supplies to be imported by authorized entities or persons and
by the Board of Trustees of the Lung Center of the Philippines for the actual
use and benefit of the Lung Center; and

taxes, charges and fees imposed by the Government or any political

subdivision or instrumentality thereof with respect to equipment purchases
(expression unius est exclusion alterius/expressium facit cessare tacitum).
Philippine Amusement and
Gaming Corporation vs The
Bureau of Internal Revenue
The Philippine Amusement and Gaming Corporation (PAGCOR) was created by P.D. No.
1067-A in 1977. Obviously, it is a government owned and controlled corporation (GOCC).

In 1998, R.A. 8424 or the National Internal Revenue Code of 1997 (NIRC) became
effective. Section 27 thereof provides that GOCCs are NOT EXEMPT from paying income
taxation but it exempted the following GOCCs:


2. SSS




But in May 2005, R.A. 9337, a law amending certain provisions of R.A. 8424, was passed.
Section 1 thereof excluded PAGCOR from the exempt GOCCs hence PAGCOR was
subjected to pay income taxation. In September 2005, the Bureau of Internal Revenue
issued the implementing rules and regulations (IRR) for R.A. 9337. In the said IRR, it
identified PAGCOR as subject to a 10% value added tax (VAT) upon items covered by
Section 108 of the NIRC (Sale of Services and Use or Lease of Properties).

PAGCOR questions the constitutionality of Section 1 of R.A. 9337 as well as the IRR.
PAGCOR avers that the said provision violates the equal protection clause. PAGCOR
argues that it is similarly situated with SSS, GSIS, PCSO, and PHILHEALTH, hence it
should not be excluded from the exemption.

ISSUE: Whether or not PAGCOR should be subjected to income taxation.

HELD: Yes. Section 1 of R.A. 9337 is constitutional. It was the express intent of Congress
to exclude PAGCOR from the exempt GOCCs hence PAGCOR is now subject to income

PAGCORs contention that the law violated the constitution is not tenable. The equal
protection clause provides that all persons or things similarly situated should be treated
alike, both as to rights conferred and responsibilities imposed.

The general rule is, ALL GOCCs are subject to income taxation. However, certain classes
of GOCCs may be exempt from income taxation based on the following requisites for a
valid classification under the principle of equal protection:
1) It must be based on substantial distinctions.

2) It must be germane to the purposes of the law.

3) It must not be limited to existing conditions only.

4) It must apply equally to all members of the class.

When the Supreme Court looked into the records of the deliberations of the lawmakers
when R.A. 8424 was being drafted, the SC found out that PAGCORs exemption was not
really based on substantial distinctions. In fact, the lawmakers merely exempted PAGCOR
from income taxation upon the request of PAGCOR itself. This was changed however
when R.A. 9337 was passed and now PAGCOR is already subject to income taxation.

Anent the issue of the imposition of the 10% VAT against PAGCOR, the BIR had
overstepped its authority. Nowhere in R.A. 9337 does it state that PAGCOR is subject to
VAT. Therefore, that portion of the IRR issued by the BIR is void. In fact, Section 109 of R.A.
9337 expressly exempts PAGCOR from VAT. Further, PAGCORs charter exempts it from

To recapitulate, PAGCOR is subject to income taxation but not to VAT.