FIRST DIVISION

[G.R. No. L-7859. December 22, 1955.]

WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio
Jayme Ledesma, Plaintiff-Appellant, v. J. ANTONIO ARANETA, as the Collector of Internal
Revenue, Defendant-Appellee.

Ernesto J. Gonzaga for Appellant.

Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres
and Solicitor Felicisimo R. Rosete for Appellee.

SYLLABUS

1. CONSTITUTIONAL LAW; TAXATION; POWER OF STATE TO LEVY TAX IN AND SUPPORT

OF SUGAR INDUSTRY. As the protection and promotion of the sugar industry is a matter of
public concern the Legislature may determine within reasonable bounds what is necessary for
its protection and expedient for its promotion. Here, the legislative must be allowed full play,
subject only to the test of reasonableness; and it is not contended that the means provided in
section 6 of Commonwealth Act No. 567 bear no relation to the objective pursued or are
oppressive in character. If objective an methods are alike constitutionally valid, no reason is
seen why the state may not levy taxes to raise funds for their prosecution and attainment.
Taxation may be made the implement. Taxation may be made the implement of the states
police power (Great Atl. & Pac. Tea Co. v. Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S. v.
Butler, 297 U.S. 1, 80 L. Ed. 477; MCulloch v. Maryland, 4 Wheat, 316, 4 L. Ed. 579).

2. ID.; ID.; POWER OF STATE TO SELECT SUBJECT OF TAXATION. It is inherent in the

power to tax that a state be free to select the subjects of taxation, and it has been repeatedly
held that "inequalities which result from a singling out of one particular class for taxation or
exemption infringe no constitutional limitation (Carmicheal v. Southern Coal & Coke Co., 301
U.S. 495, 81 L. Ed. 1245, citing numerous authorities, at 1251).

DECISION

REYES, J. B. L., J.:

This case was initiated in the Court of First Instance of Negros Occidental to test the legality of
the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment
Act.

Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency,
due to the threat to our industry by the imminent imposition of export taxes upon sugar as
provided in the Tydings-McDuffie Act, and the "eventual loss of its preferential position in the
United States market" ; wherefore, the national policy was expressed "to obtain a readjustment
of the benefits derived from the sugar industry by the component elements thereof" and "to
stabilize the sugar industry so as to prepare it for the eventuality of the loss of its preferential
position in the United States market and the imposition of the export taxes."cralaw virtua1aw
library

In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the
manufacture of sugar, on a graduated basis, on each picul of sugar manufactures; while section
3 levies on owners or persons in control of lands devoted to the cultivation of sugar cane and
ceded to others for a consideration, on lease or otherwise

"a tax equivalent to the difference between the money value of the rental or consideration
collected and the amount representing 12 per centum of the assessed value of such
land."cralaw virtua1aw library

According to section 6 of the law

SEC. 6. All collections made under this Act shall accrue to a special fund in the Philippine
Treasury, to be known as the Sugar Adjustment and Stabilization Fund, and shall be paid out
only for any or all of the following purposes or to attain any or all of the following objectives, as
may be provided by law.

First, to place the sugar industry in a position to maintain itself despite the gradual loss of the
preferential position of the Philippine sugar in the United States market, and ultimately to insure
its continued existence notwithstanding the loss of that market and the consequent necessity of
meeting competition in the free markets of the world;

Second, to readjust the benefits derived from the sugar industry by all of the component
elements thereof the mill, the landowner, the planter of the sugar cane, and the laborers in
the factory and in the field so that all might continue profitably to engage therein;

Third, to limit the production of sugar to areas more economically suited to the production
thereof; and

Fourth, to afford labor employed in the industry a living wage and to improve their living and
working conditions: Provided, That the President of the Philippines may, until the adjournment of
the next regular session of the National Assembly, make the necessary disbursements from the
fund herein created (1) for the establishment and operation of sugar experiment station or
stations and the undertaking of researchers (a)to increase the recoveries of the centrifugal
sugar factories with the view of reducing manufacturing costs, (b) to produce and propagate
higher yielding varieties of sugar cane more adaptable to different distinct conditions in the
Philippines, (c) to lower the costs of raising sugar cane, (d) to improve the buying quality of
denatured alcohol from molasses for motor fuel, (e) to determine the possibility of utilizing the
other by-products of the industry, (f) to determine what crop or crops are suitable for rotation
and for the utilization of excess cane lands, and (g) on other problems the solution of which
would help rehabilitated and stabilize the industry, and (2) for the improvement of living and
working conditions in sugar mills and sugar plantations, authorizing him to organize the
necessary agency or agencies to take charge of the expenditure and allocation of said funds to
carry out the purpose hereinbefore enumerated, and, likewise, authorizing the disbursement
from the fund herein created of the necessary amount of amounts needed for salaries, wages,
travelling expenses, equipment, and other sundry expenses or said agency or agencies."cralaw
virtua1aw library
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio
Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of
P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949
and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and
support of the sugar industry exclusively, which in plaintiffs opinion is not a public purpose for
which a tax may be constitutionally levied. The action having been dismissed by the Court of
First Instance, the plaintiffs appealed the case directly to this Court (Judiciary Act, section 17).

The basic defect in the plaintiffs position is his assumption that the tax provided for in
Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and
particularly of section 6 (heretofore quoted in full), will show that the tax is levied with a
regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened
sugar industry. In other words, the act is primarily an exercise of the police power.

This Court can take judicial notice of the fact that sugar production in one of the great industries
of our nation, sugar occupying a leading position among its export products; that it gives
employment to thousands of laborers in fields and factories; that it is a great source of the
states wealth, is one of the important sources of foreign exchange needed by our government,
and is thus pivotal in the plans of a regime committed to a policy of currency stability. Its
promotion, protection and advancement, therefore redounds greatly to the general welfare.
Hence it was competent for the legislature to find that the general welfare demanded that the
sugar industry should be stabilized in turn; and in the wide field of its police power, the law-
making body could provide that the distribution of benefits therefrom be readjusted among its
components to enable it to resist the added strain of the increase in taxes that it had to sustain
(Sligh v. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson v. State ex rel. Marey, 99 Fla. 1311,
128 So 853; Maxcy Inc. v. Mayo, 103 Fla. 552, 139 So. 121).

As stated in Johnson v. State ex rel. Marey, with reference to the citrus industry in Florida

"The protection of a large industry constituting one of the great sources of the states wealth and
therefore directly or indirectly affecting the welfare of so great a portion of the population of the
State is affected to such an extent by public interests as to be within the police power of the
sovereign." (128 So. 857)

Once it is conceded, as it must, that the protection and promotion of the sugar industry is a
matter of public concern, it follows that the Legislature may determine within reasonable bounds
what is necessary for its protection and expedient for its promotion. Here, the legislative
discretion must be allowed full play, subject only to the test of reasonableness; and it is not
contended that the means provided in section 6 of the law (above quoted) bear no relation to
the objective pursued or are oppressive in character. If objective and methods are alike
constitutionally valid, no reason is seen why the state may not be levy taxes to raise funds for
their prosecution and attainment. Taxation may be made the implement of the states police
power (Great Atl. & Pac. Tea Co. v. Grosjean, 301 U. S. 412, 81 L. Ed. 1193; U. S. v. Butler, 297
U. S. 1, 80 L. Ed. 477; MCulloch v. Maryland, 4 Wheat. 318, 4 L. Ed. 579).

That the tax to be levied should burden the sugar producers themselves can hardly be a ground
of complaint; indeed, it appears rational that the tax be obtained precisely from those who are to
be benefited from the expenditure of the funds derived from it. At any rate, it is inherent in the
power to tax that a state be free to select the subjects of taxation, and it has been repeatedly
held that "inequalities which result from a singling out of one particular class for taxation, or
exemption infringe no constitutional limitation" (Carmichael v. Southern Coal & Coke Co., 301 U.
S. 495, 81 L. Ed. 1245, citing numerous authorities, at p. 1251).

From the point of view we have taken it appears of no moment that the funds raised under the
Sugar Stabilization Act, now in question, should be exclusively spent in aid of the sugar industry,
since it is that very enterprise that is being protected. It may be that other industries are also in
need of similar protection; but the legislature is not required by the Constitution to adhere to a
policy of "all or none." As ruled in Minnesota ex rel. Pearson v. Probate Court, 309 U. S. 270, 84
L. Ed. 744, "if the law presumably hits the evil where it is most felt, it is not to be overthrown
because there are other instances to which it might have been applied;" and that the legislative
authority, exerted within its proper field, need not embrace all the evils within its reach" (N. L. R.
B. v. Jones & Laughlin Steel Corp. 301 U. S. 1, 81 L. Ed. 893).

Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion
of tax money to experimental stations to seek increase of efficiency in sugar production,
utilization of by- products and solution of allied problems, as well as to the improvement of living
and working conditions in sugar mills or plantations, without any part of such money being
channeled directly to private persons, constitutes expenditure of tax money for private purposes,
(compare Everson v. Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).

The decision appealed from is affirmed, with costs against appellant. So ordered.

Paras, C.J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Labrador and Concepcion, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-31156 February 27, 1976
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,
vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant
appellees.
Sabido, Sabido & Associates for appellant.
Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant
Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.

MARTIN, J.:
This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No.
3294, which was certified to Us by the Court of Appeals on October 6, 1969, as involving only
pure questions of law, challenging the power of taxation delegated to municipalities under the
Local Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959).
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines,
Inc., commenced a complaint with preliminary injunction before the Court of First Instance of
Leyte for that court to declare Section 2 of Republic Act No. 2264. 1 otherwise known as the
Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to
declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null
and void.
On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which
state that, first, both Ordinances Nos. 23 and 27 embrace or cover the same subject matter and
the production tax rates imposed therein are practically the same, and second, that on January
17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the
Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by
the latter of the provisions of said Ordinance No. 27, series of 1962.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962,
levies and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of
a centavo for every bottle of soft drink corked." 2 For the purpose of computing the taxes due,
the person, firm, company or corporation producing soft drinks shall submit to the Municipal
Treasurer a monthly report, of the total number of bottles produced and corked during the
month. 3
On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962,
levies and collects "on soft drinks produced or manufactured within the territorial jurisdiction of
this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity." 4 For the purpose of computing the taxes due, the person, fun company,
partnership, corporation or plant producing soft drinks shall submit to the Municipal Treasurer a
monthly report of the total number of gallons produced or manufactured during the month. 5
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production
tax.'
On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the
complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring
Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due
under the oft the said Ordinances; and to pay the costs."
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals,
which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as
amended.
There are three capital questions raised in this appeal:
1. Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and
oppressive?
2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or
specific taxes?
3. Are Ordinances Nos. 23 and 27 unjust and unfair?
1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a
matter of right to every independent government, without being expressly conferred by the
people. 6 It is a power that is purely legislative and which the central legislative body cannot
delegate either to the executive or judicial department of the government without infringing upon
the theory of separation of powers. The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply. Legislative powers may be delegated to local
governments in respect of matters of local concern. 7 This is sanctioned by immemorial practice.
8
By necessary implication, the legislative power to create political corporations for purposes of
local self-government carries with it the power to confer on such local governmental agencies
the power to tax. 9 Under the New Constitution, local governments are granted the autonomous
authority to create their own sources of revenue and to levy taxes. Section 5, Article XI provides:
"Each local government unit shall have the power to create its sources of revenue and to levy
taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that
Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power
to enact and vest in local governments the power of local taxation.
The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense,
would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the
authority, the State is not limited 6 the exact measure of that which is exercised by itself. When
it is said that the taxing power may be delegated to municipalities and the like, it is meant that
there may be delegated such measure of power to impose and collect taxes as the legislature
may deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of
public policy the State has not deemed wise to tax for more general purposes. 10 This is not to
say though that the constitutional injunction against deprivation of property without due process
of law may be passed over under the guise of the taxing power, except when the taking of the
property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose;
(2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is within
the jurisdiction of the government levying the tax; and (4) in the assessment and collection of
certain kinds of taxes notice and opportunity for hearing are provided. 11 Due process is usually
violated where the tax imposed is for a private as distinguished from a public purpose; a tax is
imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive
methods are used in assessing and collecting taxes. But, a tax does not violate the due process
clause, as applied to a particular taxpayer, although the purpose of the tax will result in an injury
rather than a benefit to such taxpayer. Due process does not require that the property subject to
the tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice
and hearing as to the amount of the tax and the manner in which it shall be apportioned are
generally not necessary to due process of law. 12
There is no validity to the assertion that the delegated authority can be declared unconstitutional
on the theory of double taxation. It must be observed that the delegating authority specifies the
limitations and enumerates the taxes over which local taxation may not be exercised. 13 The
reason is that the State has exclusively reserved the same for its own prerogative. Moreover,
double taxation, in general, is not forbidden by our fundamental law, since We have not adopted
as part thereof the injunction against double taxation found in the Constitution of the United
States and some states of the Union. 14 Double taxation becomes obnoxious only where the
taxpayer is taxed twice for the benefit of the same governmental entity 15 or by the same
jurisdiction for the same purpose, 16 but not in a case where one tax is imposed by the State and
the other by the city or municipality. 17
2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation,
because these two ordinances cover the same subject matter and impose practically the same
tax rate. The thesis proceeds from its assumption that both ordinances are valid and legally
enforceable. This is not so. As earlier quoted, Ordinance No. 23, which was approved on
September 25, 1962, levies or collects from soft drinks producers or manufacturers a tax of one-
sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the
bottle used. When it was discovered that the producer or manufacturer could increase the
volume contents of the bottle and still pay the same tax rate, the Municipality of Tanauan
enacted Ordinance No. 27, approved on October 28, 1962, imposing a tax of one centavo
(P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference between the
two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it
was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on
each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council
of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for
the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that
effect. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to
enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the
Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-
appellant of the pr ovisions of said Ordinance No. 27, series of 1962. The aforementioned
admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-
appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that
Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the
provisions of the latter are inconsistent with the provisions of the former."
That brings Us to the question of whether the remaining Ordinance No. 27 imposes a
percentage or a specific tax. Undoubtedly, the taxing authority conferred on local governments
under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything,
accepting those which are mentioned therein." As long as the text levied under the authority of a
city or municipal ordinance is not within the exceptions and limitations in the law, the same
comes within the ambit of the general rule, pursuant to the rules of exclucion attehus and
exceptio firmat regulum in cabisus non excepti 19 The limitation applies, particularly, to the
prohibition against municipalities and municipal districts to impose "any percentage tax 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." For purposes of this
particular limitation, a municipal ordinance which prescribes a set ratio between the amount of
the tax and the volume of sale of the taxpayer imposes a sales tax and is null and void for being
outside the power of the municipality to enact. 20 But, the imposition of "a tax of one centavo
(P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks produced
or manufactured under Ordinance No. 27 does not partake of the nature of a percentage tax on
sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold
or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on the products, but there is not set
ratio between the volume of sales and the amount of the tax. 21
Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on
specified articles, such as distilled spirits, wines, fermented liquors, products of tobacco other
than cigars and cigarettes, matches firecrackers, manufactured oils and other fuels, coal,
bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine, opium and other
habit-forming drugs. 22 Soft drink is not one of those specified.
3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all
softdrinks, produced or manufactured, or an equivalent of 1- centavos per case, 23 cannot be
considered unjust and unfair. 24 an increase in the tax alone would not support the claim that
the tax is oppressive, unjust and confiscatory. Municipal corporations are allowed much
discretion in determining the reates of imposable taxes. 25 This is in line with the constutional
policy of according the widest possible autonomy to local governments in matters of local
taxation, an aspect that is given expression in the Local Tax Code (PD No. 231, July 1, 1973).
26 Unless the amount is so excessive as to be prohibitive, courts will go slow in writing off an
ordinance as unreasonable. 27 Reluctance should not deter compliance with an ordinance such
as Ordinance No. 27 if the purpose of the law to further strengthen local autonomy were to be
realized. 28
Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than
ten crowners or P2,000.00 with ten but not more than twenty crowners imposed on
manufacturers, producers, importers and dealers of soft drinks and/or mineral waters under
Ordinance No. 54, series of 1964, as amended by Ordinance No. 41, series of 1968, of
defendant Municipality, 29 appears not to affect the resolution of the validity of Ordinance No. 27.
Municipalities are empowered to impose, not only municipal license taxes upon persons
engaged in any business or occupation but also to levy for public purposes, just and uniform
taxes. The ordinance in question (Ordinance No. 27) comes within the second power of a
municipality.
ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as
the Local Autonomy Act, as amended, is hereby upheld and Municipal Ordinance No. 27 of the
Municipality of Tanauan, Leyte, series of 1962, re-pealing Municipal Ordinance No. 23, same
series, is hereby declared of valid and legal effect. Costs against petitioner-appellant.
SO ORDERED.
Castro, C.J., Teehankee, Barredo, Makasiar, Antonio, Esguerra, Muoz Palma, Aquino and
Concepcion, Jr., JJ., concur.
G.R. No. L-28271 July 25, 1975
SMITH, BELL AND CO. (PHIL.), INC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Hildawa and Gomez for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio A. Torres,
Solicitor Lolita O. Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.

CASTRO, J.:
This is a petition for review of the decision of the court of Tax Appeals in case 1733 which
affirms the deficiency assessment made by the Commissioner of Internal Revenue against the
petitioner Smith, Bell & Co. in the amount of P11,713.90.
We affirm the decision of the Court of Tax Appeals.
From August 1963 to August 1965 the petitioner imported 119 cases of "Chatteau Gay" wine
which it declared as "still wine" under Section 134(b)of the Tax Code and paid thereon the
specific tax of P1.00 per liter of volume capacity. To determine the correct amount of the specific
tax due on the petitioner's importation, the Commissioner of Internal Revenue (hereinafter
referred to as the Commissioner) ordered it tested and analyzed in the Bureau of Internal
Revenue Laboratory Center. The analyst who conducted the laboratory test reported that
Chatteau Gay "is a delicate table wine, with an alcohol content of 9.5% by volume (volume 745
cc @ 290C), characterized with explosion upon opening and effervescence due to CO2
(residual)," and concluded that it should be classified as "sparkling wine." The analyst's
conclusion is supported by Herstein and Jacobs who, in their book entitled "Chemistry &
Technology of Wines and Liquors," wrote:
(f) Sparkling wines are bottled before the fermentation has ceased so that they contain carbon
dioxide gas in solution at greater than atmospheric pressure. When they are served, the carbon
dioxide is liberated with effervescence. These gas and alcoholic contents vary according to the
market for which they are intended. They may be dry or sweet, light or strong. Champagne,
sparkling Burgundy, and Asti-Spumante are examples of sparkling wines.
On the basis of the analyst's report and recommendation, the Commissioner, on October 11,
1965, assessed the petitioner a deficiency specific tax on the 119 cases of imported Chatteau
Gay in the sum of P11,713.90 under Section 134(a) of the Tax Code which imposes a specific
tax of P12.00 per liter of volume capacity on sparkling wines.
The petitioner does not dispute the mathematical correctness of the Commissioner's
assessment, but contends that the assessment is unconstitutional because Section 134(a) of
the Tax Code under which it was issued lays down an insufficient and hazy standard by which
the policy and purpose of the law may be ascertained and as well gives the Commissioner
blanket authority to decide what is or is not the meaning of "sparkling wines." The argument is
thus advanced that there is here an abdication of legislative power violative of the established
doctrine, delegata potestas non potest delegate, and the due process clause of the Constitution.
The Commissioner disagrees on the ground that Chapter I, Title IV of the Tax Code in no
uncertain terms specifies the articles subject to specific taxes, among which are wines, and
Section 134 does no more than classify wines in several categories and prescribe the
corresponding amounts of tax to be paid. The Commissioner's position was sustained by the
Court of Tax Appeals in its decision dated October 5, 1967.
The contention that in regard to Section 134(a) of the Tax Code there is an unconstitutional
surrender of legislative powers and a failure of due process, need not give us more than a
momentary pause.
Section 134 of the Tax Code provides: 1
Specific tax on wines. On wines and imitation wines there shall be collected, per liter of
volume capacity, the following taxes:
(a) Sparkling wines, regardless of proof, twelve pesos.
(b) Still wines containing fourteen per centum of alcohol or less, except those produced from
casuy and duhat, one peso.
(c) Still wines containing more than fourteen per centum of alcohol, two pesos.
Imitation wines containing more than twenty-five per centum of alcohol shall be taxed as distilled
spirits.
There can be no uncertainty that the purpose of the abovequoted provision is to impose a
specific tax on wines and imitation wines. The first clause of Section 134 states so in plain
language. The sole object of the sub-enumeration that follows is in turn unmistakably to
prescribe the amount of the tax specifically to be paid for each type of wine and/or imitation wine
so classified and described. The section therefore clearly and indubitably discloses the
legislative will, leaving to the officers charged with implementation and execution thereof no
more than the administrative function of determining whether a particular kind of wine or
imitation wine falls in one class or another. In the performance of this function, the internal
revenue officers are demonstrably guided by the sound established practices and technology of
the wine industry, an industry as aged and widely dispersed as one can care to know.
In the case at bar, the Commissioner had the petitioner's wine examined and analyzed. The
petitioner, on the other hand, does not appear to have made a similar effort. On the bases of the
test thus made and the authoritative and published work on the subject of wines, the
Commissioner ordered the corresponding deficiency assessment to be issued. Having chosen
to engage in the wine trading business, the petitioner is duty bound to know the kinds of wine it
deals in, particularly insofar as such knowledge may be relevant to the proper appreciation of its
tax liabilities, and cannot take comfort in its pretended ignorance of what sparkling wine is.
ACCORDINGLY, the decision of the Court of Tax Appeals is affirmed, at petitioner's cost.

G.R. No. L-46720 June 28, 1940

WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
De Witt, Perkins and Ponce Enrile for appellant.Office of the Solicitor-General Ozaeta and
Assistant Solicitor-General Concepcion for appellee.Ross, Lawrence, Selph and Carrascoso,
James Madison Ross and Federico Agrava as amici curi.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles,
California, the place of her alleged last residence and domicile. Among the properties she left
her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated Mining
Company, an anonymous partnership (sociedad anonima), organized and existing under the
laws of the Philippines, with is principal office in the City of Manila. She left a will which was duly
admitted to probate in California where her estate was administered and settled. Petitioner-
appellant, Wells Fargo Bank & Union Trust Company, was duly appointed trustee of the created
by the said will. The Federal and State of California's inheritance taxes due on said shares have
been duly paid. Respondent Collector of Internal Revenue sought to subject anew the aforesaid
shares of stock to the Philippine inheritance tax, to which petitioner-appellant objected.
Wherefore, a petition for a declaratory judgment was filed in the lower court, with the statement
that, "if it should be held by a final declaratory judgment that the transfer of the aforesaid shares
of stock is legally subject to the Philippine inheritance tax, the petitioner will pay such tax,
interest and penalties (saving error in computation) without protest and will not file to recover the
same; and the petitioner believes and t herefore alleges that it should be held that such transfer
is not subject to said tax, the respondent will not proceed to assess and collect the same." The
Court of First Instance of Manila rendered judgment, holding that the transmission by will of the
said 35,000 shares of stock is subject to Philippine inheritance tax. Hence, this appeal by the
petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon
transmission by inheritance (Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as to
real and tangible personal property of a non-resident decedent, located in the Philippines, the
Philippine inheritance tax may be imposed upon their transmission by death, for the self-evident
reason that, being a property situated in this country, its transfer is, in some way, defendant, for
its effectiveness, upon Philippine laws. It is contended, however, that, as to intangibles, like the
shares of stock in question, their situs is in the domicile of the owner thereof, and, therefore,
their transmission by death necessarily takes place under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every transmission by
virtue of inheritance of any share issued by any corporation of sociedad anonima organized or
constituted in the Philippines, is subject to the tax therein provided. This provision has already
been applied to shares of stock in a domestic corporation which were owned by a British subject
residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See also Gibbs
vs. Government of P. I., G. R. No. 35694.) Petitioner, however, invokes the rule laid down by the
United States Supreme Court in four cases (Farmers Loan & Trust Company vs. Minnesota, 280
U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S., 586; 74 Law. ed., 1056, Beidler vs.
South Carolina Tax Commission 282 U. S., 1; 75 Law. ed., 131; First National Bank of Boston
vs. Maine, 284 U. S., 312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A. L. R., 1401), to the effect that
an inheritance tax can be imposed with respect to intangibles only by the State where the
decedent was domiciled at the time of his death, and that, under the due-process clause, the
State in which a corporation has been incorporated has no power to impose such tax if the
shares of stock in such corporation are owned by a non-resident decedent. It is to be observed,
however, that in a later case (Burnet vs. Brooks, 288 U. S., 378; 77 Law. ed., 844), the United
States Supreme Court upheld the authority of the Federal Government to impose an inheritance
tax on the transmission, by death of a non-resident, of stock in a domestic (America)
corporation, irrespective of the situs of the corresponding certificates of stock. But it is
contended that the doctrine in the foregoing case is not applicable, because the due-process
clause is directed at the State and not at the Federal Government, and that the federal or
national power of the United States is to be determined in relation to other countries and their
subjects by applying the principles of jurisdiction recognized in international relations. Be that as
it may, the truth is that the due-process clause is "directed at the protection of the individual and
he is entitled to its immunity as much against the state as against the national government."
(Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed, the rule laid down
in the four cases relied upon by the appellant was predicated on a proper regard for the relation
of the states of the American Union, which requires that property should be taxed in only one
state and that jurisdiction to tax is restricted accordingly. In other words, the application to the
states of the due-process rule springs from a proper distribution of their powers and spheres of
activity as ordained by the United States Constitution, and such distribution is enforced and
protected by not allowing one state to reach out and tax property in another. And these
considerations do not apply to the Philippines. Our status rests upon a wholly distinct basis and
no analogy, however remote, cam be suggested in the relation of one state of the Union with
another or with the United States. The status of the Philippines has been aptly defined as one
which, though a part of the United States in the international sense, is, nevertheless, foreign
thereto in a domestic sense. (Downes vs. Bidwell, 182 U. S., 244, 341.)
At any rate, we see nothing of consequence in drawing any distinct between the operation and
effect of the due-process clause as it applies to the individual states and to the national
government of the United States. The question here involved is essentially not one of due-
process, but of the power of the Philippine Government to tax. If that power be conceded, the
guaranty of due process cannot certainly be invoked to frustrate it, unless the law involved is
challenged, which is not, on considerations repugnant to such guaranty of due process of that of
the equal protection of the laws, as, when the law is alleged to be arbitrary, oppressive or
discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs for the
purpose of inheritance tax, and that such situs is in the domicile of the decedent at the time of
his death. But this rule has, of late, been relaxed. The maxim mobilia sequuntur personam,
upon which the rule rests, has been described as a mere "fiction of law having its origin in
consideration of general convenience and public policy, and cannot be applied to limit or control
the right of the state to tax property within its jurisdiction" (State Board of Assessors vs.
Comptoir National D'Escompte, 191 U. S., 388, 403, 404), and must "yield to established fact of
legal ownership, actual presence and control elsewhere, and cannot be applied if to do so result
in inescapable and patent injustice." (Safe Deposit & Trust Co. vs. Virginia, 280 U. S., 83, 91-92)
There is thus a marked shift from artificial postulates of law, formulated for reasons of
convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original rule rests
on either of two fundamental considerations: (1) upon the recognition of the inherent power of
each government to tax persons, properties and rights within its jurisdiction and enjoying, thus,
the protection of its laws; and (2) upon the principle that as o intangibles, a single location in
space is hardly possible, considering the multiple, distinct relationships which may be entered
into with respect thereto. It is on the basis of the first consideration that the case of Burnet vs.
Brooks, supra, was decided by the Federal Supreme Court, sustaining the power of the
Government to impose an inheritance tax upon transmission, by death of a non-resident, of
shares of stock in a domestic (America) corporation, regardless of the situs of their
corresponding certificates; and on the basis of the second consideration, the case of Cury vs.
McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the federal
estate tax is precluded by the due-process clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other consideration raised
by confiscatory or arbitrary legislation inconsistent with the fundamental conceptions of justice
which are embodied in the due-process clause for the protection of life, liberty, and property of
all persons citizens and friendly aliens alike. Russian Volunteer Fleet vs. United States, 282
U. S., 481, 489; 75 Law ed., 473, 476; 41 S. Ct., 229; Nicholas vs. Coolidge, 274 U. S., 531;
542, 71 Law ed., 1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S.,
312, 326; 76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal Government
had jurisdiction to impose the tax, there is manifestly no ground for assailing it. Knowlton vs.
Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct., 747; MaGray vs. United States, 195
U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1 Ann. Cas., 561; Flint vs. Stone Tracy Co.,
220 U.S., 107, 153, 154; 55 Law. ed., 389, 414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312;
Brushaber vs. Union p. R. Co., 240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A.,
1917 D; 414, Ann. Cas, 1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed.,
439, 496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its borders,
wherever its owner may have been domiciled at the time of his death, the court ruled:
. . . There does not appear, a priori, to be anything contrary to the principles of international law,
or hurtful to the polity of nations, in a State's taxing property physically situated within its
borders, wherever its owner may have been domiciled at the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based on distinct
grounds the citizenship of the owner, his domicile, the source of income, the situs of the
property efforts have been made to preclude multiple taxation through the negotiation of
appropriate international conventions. These endeavors, however, have proceeded upon
express or implied recognition, and not in denial, of the sovereign taxing power as exerted by
governments in the exercise of jurisdiction upon any one of these grounds. . . . (See pages 396-
397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of
Alabama and Tennessee may each constitutionally impose death taxes upon the transfer of an
interest in intangibles held in trust by an Alabama trustee but passing under the will of a
beneficiary decedent domiciles in Tennessee, sustained the power of each State to impose the
tax. In arriving at this conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his domicile it has
been found convenient to substitute a rule for a reason, cf. New York ex rel., Cohn vs. Graves,
300 U.S., 308, 313; 81 Law. ed., 666, 670; 57 S. Ct., 466; 108 A. L. R., 721; First Bank Stock
Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law. ed., 1061, 1065; 57 S. Ct., 677; 113 A. L. R.,
228, by saying that his intangibles are taxed at their situs and not elsewhere, or perhaps less
artificially, by invoking the maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277
U.S., 1; 72 Law. ed., 749; S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed.,
1056; 50 S. Ct., 436; 72 A. L. R., 1303, supra, which means only that it is the identify owner at
his domicile which gives jurisdiction to tax. But when the taxpayer extends his activities with
respect to his intangibles, so as to avail himself of the protection and benefit of the laws of
another state, in such a way as to bring his person or properly within the reach of the tax
gatherer there, the reason for a single place of taxation no longer obtains, and the rule even
workable substitute for the reasons may exist in any particular case to support the constitutional
power of each state concerned to tax. Whether we regard the right of a state to tax as founded
on power over the object taxed, as declared by Chief Justice Marshall in McCulloch vs.
Maryland, 4 Wheat., 316; 4 Law. ed., 579, supra, through dominion over tangibles or over
persons whose relationships are source of intangibles rights, or on the benefit and protection
conferred by the taxing sovereignty, or both, it is undeniable that the state of domicile is not
deprived, by the taxpayer's activities elsewhere, of its constitutional jurisdiction to tax, and
consequently that there are many circumstances in which more than one state may have
jurisdiction to impose a tax and measure it by some or all of the taxpayer's intangibles. Shares
or corporate stock be taxed at the domicile of the shareholder and also at that of the corporation
which the taxing state has created and controls; and income may be taxed both by the state
where it is earned and by the state of the recipient's domicile. protection, benefit, and power
over the subject matter are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in every case to the
mere mechanical operation of locating at a single place, and there taxing, every legal interest
growing out of all the complex legal relationships which may be entered into between persons.
This is the case because in point of actuality those interests may be too diverse in their
relationships to various taxing jurisdictions to admit of unitary treatment without discarding
modes of taxation long accepted and applied before the Fourteen Amendment was adopted,
and still recognized by this Court as valid. (P. 1351.)
We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the
issue here involved is controlled by those doctrines. In the instant case, the actual situs of the
shares of stock is in the Philippines, the corporation being domiciled therein. And besides, the
certificates of stock have remained in this country up to the time when the deceased died in
California, and they were in possession of one Syrena McKee, secretary of the Benguet
Consolidated Mining Company, to whom they have been delivered and indorsed in blank. This
indorsement gave Syrena McKee the right to vote the certificates at the general meetings of the
stockholders, to collect dividends, and dispose of the shares in the manner she may deem fit,
without prejudice to her liability to the owner for violation of instructions. For all practical
purposes, then, Syrena McKee had the legal title to the certificates of stock held in trust for the
true owner thereof. In other words, the owner residing in California has extended here her
activities with respect to her intangibles so as to avail herself of the protection and benefit of the
Philippine laws. Accordingly, the jurisdiction of the Philippine Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
Avancea, C.J., Imperial, Diaz and Concepcion, JJ., concur.

G.R. No. L-65773-74 April 30, 1987

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
BRITISH OVERSEAS AIRWAYS CORPORATION and COURT OF TAX APPEALS,
respondents.
Quasha, Asperilla, Ancheta, Pea, Valmonte & Marcos for respondent British Airways.

MELENCIO-HERRERA, J.:
Petitioner Commissioner of Internal Revenue (CIR) seeks a review on certiorari of the joint
Decision of the Court of Tax Appeals (CTA) in CTA Cases Nos. 2373 and 2561, dated 26
January 1983, which set aside petitioner's assessment of deficiency income taxes against
respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959 to 1967,
1968-69 to 1970-71, respectively, as well as its Resolution of 18 November, 1983 denying
reconsideration.
BOAC is a 100% British Government-owned corporation organized and existing under the laws
of the United Kingdom It is engaged in the international airline business and is a member-
signatory of the Interline Air Transport Association (IATA). As such it operates air transportation
service and sells transportation tickets over the routes of the other airline members. During the
periods covered by the disputed assessments, it is admitted that BOAC had no landing rights for
traffic purposes in the Philippines, and was not granted a Certificate of public convenience and
necessity to operate in the Philippines by the Civil Aeronautics Board (CAB), except for a nine-
month period, partly in 1961 and partly in 1962, when it was granted a temporary landing permit
by the CAB. Consequently, it did not carry passengers and/or cargo to or from the Philippines,
although during the period covered by the assessments, it maintained a general sales agent in
the Philippines Wamer Barnes and Company, Ltd., and later Qantas Airways which was
responsible for selling BOAC tickets covering passengers and cargoes. 1
G.R. No. 65773 (CTA Case No. 2373, the First Case)
On 7 May 1968, petitioner Commissioner of Internal Revenue (CIR, for brevity) assessed BOAC
the aggregate amount of P2,498,358.56 for deficiency income taxes covering the years 1959 to
1963. This was protested by BOAC. Subsequent investigation resulted in the issuance of a new
assessment, dated 16 January 1970 for the years 1959 to 1967 in the amount of P858,307.79.
BOAC paid this new assessment under protest.
On 7 October 1970, BOAC filed a claim for refund of the amount of P858,307.79, which claim
was denied by the CIR on 16 February 1972. But before said denial, BOAC had already filed a
petition for review with the Tax Court on 27 January 1972, assailing the assessment and praying
for the refund of the amount paid.
G.R. No. 65774 (CTA Case No. 2561, the Second Case)
On 17 November 1971, BOAC was assessed deficiency income taxes, interests, and penalty for
the fiscal years 1968-1969 to 1970-1971 in the aggregate amount of P549,327.43, and the
additional amounts of P1,000.00 and P1,800.00 as compromise penalties for violation of
Section 46 (requiring the filing of corporation returns) penalized under Section 74 of the National
Internal Revenue Code (NIRC).
On 25 November 1971, BOAC requested that the assessment be countermanded and set
aside. In a letter, dated 16 February 1972, however, the CIR not only denied the BOAC request
for refund in the First Case but also re-issued in the Second Case the deficiency income tax
assessment for P534,132.08 for the years 1969 to 1970-71 plus P1,000.00 as compromise
penalty under Section 74 of the Tax Code. BOAC's request for reconsideration was denied by
the CIR on 24 August 1973. This prompted BOAC to file the Second Case before the Tax Court
praying that it be absolved of liability for deficiency income tax for the years 1969 to 1971.
This case was subsequently tried jointly with the First Case.
On 26 January 1983, the Tax Court rendered the assailed joint Decision reversing the CIR. The
Tax Court held that the proceeds of sales of BOAC passage tickets in the Philippines by Warner
Barnes and Company, Ltd., and later by Qantas Airways, during the period in question, do not
constitute BOAC income from Philippine sources "since no service of carriage of passengers or
freight was performed by BOAC within the Philippines" and, therefore, said income is not
subject to Philippine income tax. The CTA position was that income from transportation is
income from services so that the place where services are rendered determines the source.
Thus, in the dispositive portion of its Decision, the Tax Court ordered petitioner to credit BOAC
with the sum of P858,307.79, and to cancel the deficiency income tax assessments against
BOAC in the amount of P534,132.08 for the fiscal years 1968-69 to 1970-71.
Hence, this Petition for Review on certiorari of the Decision of the Tax Court.
The Solicitor General, in representation of the CIR, has aptly defined the issues, thus:
1. Whether or not the revenue derived by private respondent British Overseas Airways
Corporation (BOAC) from sales of tickets in the Philippines for air transportation, while having
no landing rights here, constitute income of BOAC from Philippine sources, and, accordingly,
taxable.
2. Whether or not during the fiscal years in question BOAC s a resident foreign corporation
doing business in the Philippines or has an office or place of business in the Philippines.
3. In the alternative that private respondent may not be considered a resident foreign
corporation but a non-resident foreign corporation, then it is liable to Philippine income tax at the
rate of thirty-five per cent (35%) of its gross income received from all sources within the
Philippines.
Under Section 20 of the 1977 Tax Code:
(h) the term resident foreign corporation engaged in trade or business within the Philippines or
having an office or place of business therein.
(i) The term "non-resident foreign corporation" applies to a foreign corporation not engaged in
trade or business within the Philippines and not having any office or place of business therein
It is our considered opinion that BOAC is a resident foreign corporation. There is no specific
criterion as to what constitutes "doing" or "engaging in" or "transacting" business. Each case
must be judged in the light of its peculiar environmental circumstances. The term implies a
continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to, and
in progressive prosecution of commercial gain or for the purpose and object of the business
organization. 2 "In order that a foreign corporation may be regarded as doing business within a
State, there must be continuity of conduct and intention to establish a continuous business,
such as the appointment of a local agent, and not one of a temporary character. 3
BOAC, during the periods covered by the subject - assessments, maintained a general sales
agent in the Philippines, That general sales agent, from 1959 to 1971, "was engaged in (1)
selling and issuing tickets; (2) breaking down the whole trip into series of trips each trip in the
series corresponding to a different airline company; (3) receiving the fare from the whole trip;
and (4) consequently allocating to the various airline companies on the basis of their
participation in the services rendered through the mode of interline settlement as prescribed by
Article VI of the Resolution No. 850 of the IATA Agreement." 4 Those activities were in exercise
of the functions which are normally incident to, and are in progressive pursuit of, the purpose
and object of its organization as an international air carrier. In fact, the regular sale of tickets, its
main activity, is the very lifeblood of the airline business, the generation of sales being the
paramount objective. There should be no doubt then that BOAC was "engaged in" business in
the Philippines through a local agent during the period covered by the assessments.
Accordingly, it is a resident foreign corporation subject to tax upon its total net income received
in the preceding taxable year from all sources within the Philippines. 5
Sec. 24. Rates of tax on corporations. ...
(b) Tax on foreign corporations. ...
(2) Resident corporations. A corporation organized, authorized, or existing under the laws of
any foreign country, except a foreign fife insurance company, engaged in trade or business
within the Philippines, shall be taxable as provided in subsection (a) of this section upon the
total net income received in the preceding taxable year from all sources within the Philippines.
(Emphasis supplied)
Next, we address ourselves to the issue of whether or not the revenue from sales of tickets by
BOAC in the Philippines constitutes income from Philippine sources and, accordingly, taxable
under our income tax laws.
The Tax Code defines "gross income" thus:
"Gross income" includes gains, profits, and income derived from salaries, wages or
compensation for personal service of whatever kind and in whatever form paid, or from
profession, vocations, trades, business, commerce, sales, or dealings in property, whether real
or personal, growing out of the ownership or use of or interest in such property; also from
interests, rents, dividends, securities, or the transactions of any business carried on for gain or
profile, or gains, profits, and income derived from any source whatever (Sec. 29[3]; Emphasis
supplied)
The definition is broad and comprehensive to include proceeds from sales of transport
documents. "The words 'income from any source whatever' disclose a legislative policy to
include all income not expressly exempted within the class of taxable income under our laws."
Income means "cash received or its equivalent"; it is the amount of money coming to a person
within a specific time ...; it means something distinct from principal or capital. For, while capital is
a fund, income is a flow. As used in our income tax law, "income" refers to the flow of wealth. 6
The records show that the Philippine gross income of BOAC for the fiscal years 1968-69 to
1970-71 amounted to P10,428,368 .00. 7
Did such "flow of wealth" come from "sources within the Philippines",
The source of an income is the property, activity or service that produced the income. 8 For the
source of income to be considered as coming from the Philippines, it is sufficient that the
income is derived from activity within the Philippines. In BOAC's case, the sale of tickets in the
Philippines is the activity that produces the income. The tickets exchanged hands here and
payments for fares were also made here in Philippine currency. The site of the source of
payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine
territory, enjoying the protection accorded by the Philippine government. In consideration of
such protection, the flow of wealth should share the burden of supporting the government.
A transportation ticket is not a mere piece of paper. When issued by a common carrier, it
constitutes the contract between the ticket-holder and the carrier. It gives rise to the obligation of
the purchaser of the ticket to pay the fare and the corresponding obligation of the carrier to
transport the passenger upon the terms and conditions set forth thereon. The ordinary ticket
issued to members of the traveling public in general embraces within its terms all the elements
to constitute it a valid contract, binding upon the parties entering into the relationship. 9
True, Section 37(a) of the Tax Code, which enumerates items of gross income from sources
within the Philippines, namely: (1) interest, (21) dividends, (3) service, (4) rentals and royalties,
(5) sale of real property, and (6) sale of personal property, does not mention income from the
sale of tickets for international transportation. However, that does not render it less an income
from sources within the Philippines. Section 37, by its language, does not intend the
enumeration to be exclusive. It merely directs that the types of income listed therein be treated
as income from sources within the Philippines. A cursory reading of the section will show that it
does not state that it is an all-inclusive enumeration, and that no other kind of income may be so
considered. " 10
BOAC, however, would impress upon this Court that income derived from transportation is
income for services, with the result that the place where the services are rendered determines
the source; and since BOAC's service of transportation is performed outside the Philippines, the
income derived is from sources without the Philippines and, therefore, not taxable under our
income tax laws. The Tax Court upholds that stand in the joint Decision under review.
The absence of flight operations to and from the Philippines is not determinative of the source of
income or the site of income taxation. Admittedly, BOAC was an off-line international airline at
the time pertinent to this case. The test of taxability is the "source"; and the source of an income
is that activity ... which produced the income. 11 Unquestionably, the passage documentations
in these cases were sold in the Philippines and the revenue therefrom was derived from a
activity regularly pursued within the Philippines. business a And even if the BOAC tickets sold
covered the "transport of passengers and cargo to and from foreign cities", 12 it cannot alter the
fact that income from the sale of tickets was derived from the Philippines. The word "source"
conveys one essential idea, that of origin, and the origin of the income herein is the Philippines.
13
It should be pointed out, however, that the assessments upheld herein apply only to the fiscal
years covered by the questioned deficiency income tax assessments in these cases, or, from
1959 to 1967, 1968-69 to 1970-71. For, pursuant to Presidential Decree No. 69, promulgated on
24 November, 1972, international carriers are now taxed as follows:
... Provided, however, That international carriers shall pay a tax of 2- per cent on their cross
Philippine billings. (Sec. 24[b] [21, Tax Code).
Presidential Decree No. 1355, promulgated on 21 April, 1978, provided a statutory definition of
the term "gross Philippine billings," thus:
... "Gross Philippine billings" includes gross revenue realized from uplifts anywhere in the world
by any international carrier doing business in the Philippines of passage documents sold
therein, whether for passenger, excess baggage or mail provided the cargo or mail originates
from the Philippines. ...
The foregoing provision ensures that international airlines are taxed on their income from
Philippine sources. The 2- % tax on gross Philippine billings is an income tax. If it had been
intended as an excise or percentage tax it would have been place under Title V of the Tax Code
covering Taxes on Business.
Lastly, we find as untenable the BOAC argument that the dismissal for lack of merit by this
Court of the appeal in JAL vs. Commissioner of Internal Revenue (G.R. No. L-30041) on
February 3, 1969, is res judicata to the present case. The ruling by the Tax Court in that case
was to the effect that the mere sale of tickets, unaccompanied by the physical act of carriage of
transportation, does not render the taxpayer therein subject to the common carrier's tax. As
elucidated by the Tax Court, however, the common carrier's tax is an excise tax, being a tax on
the activity of transporting, conveying or removing passengers and cargo from one place to
another. It purports to tax the business of transportation. 14 Being an excise tax, the same can
be levied by the State only when the acts, privileges or businesses are done or performed within
the jurisdiction of the Philippines. The subject matter of the case under consideration is income
tax, a direct tax on the income of persons and other entities "of whatever kind and in whatever
form derived from any source." Since the two cases treat of a different subject matter, the
decision in one cannot be res judicata to the other.
WHEREFORE, the appealed joint Decision of the Court of Tax Appeals is hereby SET ASIDE.
Private respondent, the British Overseas Airways Corporation (BOAC), is hereby ordered to pay
the amount of P534,132.08 as deficiency income tax for the fiscal years 1968-69 to 1970-71
plus 5% surcharge, and 1% monthly interest from April 16, 1972 for a period not to exceed three
(3) years in accordance with the Tax Code. The BOAC claim for refund in the amount of
P858,307.79 is hereby denied. Without costs.
SO ORDERED.
Paras, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.
Fernan, J., took no part.

G.R. No. L-22074 April 30, 1965

THE PHILIPPINE GUARANTY CO., INC., petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS,
respondents.
Josue H. Gustilo and Ramirez and Ortigas for petitioner.Office of the Solicitor General and
Attorney V.G. Saldajena for respondents.
BENGZON, J.P., J.:
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts, on various dates, with foreign insurance companies not doing business in the
Philippines namely: Imperio Compaia de Seguros, La Union y El Fenix Espaol, Overseas
Assurance Corp., Ltd., Socieded Anonima de Reaseguros Alianza, Tokio Marino & Fire
Insurance Co., Ltd., Union Assurance Society Ltd., Swiss Reinsurance Company and Tariff
Reinsurance Limited. Philippine Guaranty Co., Inc., thereby agreed to cede to the foreign
reinsurers a portion of the premiums on insurance it has originally underwritten in the
Philippines, in consideration for the assumption by the latter of liability on an equivalent portion
of the risks insured. Said reinsurrance contracts were signed by Philippine Guaranty Co., Inc. in
Manila and by the foreign reinsurers outside the Philippines, except the contract with Swiss
Reinsurance Company, which was signed by both parties in Switzerland.
The reinsurance contracts made the commencement of the reinsurers' liability simultaneous
with that of Philippine Guaranty Co., Inc. under the original insurance. Philippine Guaranty Co.,
Inc. was required to keep a register in Manila where the risks ceded to the foreign reinsurers
where entered, and entry therein was binding upon the reinsurers. A proportionate amount of
taxes on insurance premiums not recovered from the original assured were to be paid for by the
foreign reinsurers. The foreign reinsurers further agreed, in consideration for managing or
administering their affairs in the Philippines, to compensate the Philippine Guaranty Co., Inc., in
an amount equal to 5% of the reinsurance premiums. Conflicts and/or differences between the
parties under the reinsurance contracts were to be arbitrated in Manila. Philippine Guaranty Co.,
Inc. and Swiss Reinsurance Company stipulated that their contract shall be construed by the
laws of the Philippines.
Pursuant to the aforesaid reinsurance contracts, Philippine Guaranty Co., Inc. ceded to the
foreign reinsurers the following premiums:
1953 . . . . . . . . . . . . . . . . . . . . . P842,466.71

1954 . . . . . . . . . . . . . . . . . . . . . 721,471.85
Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it file
its income tax returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them.
Consequently, per letter dated April 13, 1959, the Commissioner of Internal Revenue assessed
against Philippine Guaranty Co., Inc. withholding tax on the ceded reinsurance premiums, thus:
1953

Gross premium per investigation . . . . . . . . . . P768,580.00

Withholding tax due thereon at 24% . . . . . . . . P184,459.00

25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . 46,114.00

Compromise for non-filing of withholding

100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL AMOUNT DUE & COLLECTIBLE . . . . P230,673.00

==========

1954

Gross premium per investigation . . . . . . . . . . P780.880.68

Withholding tax due thereon at 24% . . . . . . . . P184,411.00

25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . P184,411.00

Compromise for non-filing of withholding

100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL AMOUNT DUE & COLLECTIBLE . . . . P234,364.00

==========
Philippine Guaranty Co., Inc., protested the assessment on the ground that reinsurance
premiums ceded to foreign reinsurers not doing business in the Philippines are not subject to
withholding tax. Its protest was denied and it appealed to the Court of Tax Appeals.
On July 6, 1963, the Court of Tax Appeals rendered judgment with this dispositive portion:
IN VIEW OF THE FOREGOING CONSIDERATIONS, petitioner Philippine Guaranty Co., Inc. is
hereby ordered to pay to the Commissioner of Internal Revenue the respective sums of
P202,192.00 and P173,153.00 or the total sum of P375,345.00 as withholding income taxes for
the years 1953 and 1954, plus the statutory delinquency penalties thereon. With costs against
petitioner.
Philippine Guaranty Co, Inc. has appealed, questioning the legality of the Commissioner of
Internal Revenue's assessment for withholding tax on the reinsurance premiums ceded in 1953
and 1954 to the foreign reinsurers.
Petitioner maintain that the reinsurance premiums in question did not constitute income from
sources within the Philippines because the foreign reinsurers did not engage in business in the
Philippines, nor did they have office here.
The reinsurance contracts, however, show that the transactions or activities that constituted the
undertaking to reinsure Philippine Guaranty Co., Inc. against loses arising from the original
insurances in the Philippines were performed in the Philippines. The liability of the foreign
reinsurers commenced simultaneously with the liability of Philippine Guaranty Co., Inc. under
the original insurances. Philippine Guaranty Co., Inc. kept in Manila a register of the risks ceded
to the foreign reinsurers. Entries made in such register bound the foreign resinsurers, localizing
in the Philippines the actual cession of the risks and premiums and assumption of the
reinsurance undertaking by the foreign reinsurers. Taxes on premiums imposed by Section 259
of the Tax Code for the privilege of doing insurance business in the Philippines were payable by
the foreign reinsurers when the same were not recoverable from the original assured. The
foreign reinsurers paid Philippine Guaranty Co., Inc. an amount equivalent to 5% of the ceded
premiums, in consideration for administration and management by the latter of the affairs of the
former in the Philippines in regard to their reinsurance activities here. Disputes and differences
between the parties were subject to arbitration in the City of Manila. All the reinsurance
contracts, except that with Swiss Reinsurance Company, were signed by Philippine Guaranty
Co., Inc. in the Philippines and later signed by the foreign reinsurers abroad. Although the
contract between Philippine Guaranty Co., Inc. and Swiss Reinsurance Company was signed by
both parties in Switzerland, the same specifically provided that its provision shall be construed
according to the laws of the Philippines, thereby manifesting a clear intention of the parties to
subject themselves to Philippine law.
Section 24 of the Tax Code subjects foreign corporations to tax on their income from sources
within the Philippines. The word "sources" has been interpreted as the activity, property or
service giving rise to the income. 1 The reinsurance premiums were income created from the
undertaking of the foreign reinsurance companies to reinsure Philippine Guaranty Co., Inc.,
against liability for loss under original insurances. Such undertaking, as explained above, took
place in the Philippines. These insurance premiums, therefore, came from sources within the
Philippines and, hence, are subject to corporate income tax.
The foreign insurers' place of business should not be confused with their place of activity.
Business should not be continuity and progression of transactions 2 while activity may consist of
only a single transaction. An activity may occur outside the place of business. Section 24 of the
Tax Code does not require a foreign corporation to engage in business in the Philippines in
subjecting its income to tax. It suffices that the activity creating the income is performed or done
in the Philippines. What is controlling, therefore, is not the place of business but the place of
activity that created an income.
Petitioner further contends that the reinsurance premiums are not income from sources within
the Philippines because they are not specifically mentioned in Section 37 of the Tax Code.
Section 37 is not an all-inclusive enumeration, for it merely directs that the kinds of income
mentioned therein should be treated as income from sources within the Philippines but it does
not require that other kinds of income should not be considered likewise.1wph1.t
The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a
necessary burden to preserve the State's sovereignty and a means to give the citizenry an army
to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to
serve, public improvement designed for the enjoyment of the citizenry and those which come
within the State's territory, and facilities and protection which a government is supposed to
provide. Considering that the reinsurance premiums in question were afforded protection by the
government and the recipient foreign reinsurers exercised rights and privileges guaranteed by
our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the
state.
Petitioner would wish to stress that its reliance in good faith on the rulings of the Commissioner
of Internal Revenue requiring no withholding of the tax due on the reinsurance premiums in
question relieved it of the duty to pay the corresponding withholding tax thereon. This defense of
petitioner may free if from the payment of surcharges or penalties imposed for failure to pay the
corresponding withholding tax, but it certainly would not exculpate if from liability to pay such
withholding tax The Government is not estopped from collecting taxes by the mistakes or errors
of its agents.3
In respect to the question of whether or not reinsurance premiums ceded to foreign reinsurers
not doing business in the Philippines are subject to withholding tax under Section 53 and 54 of
the Tax Code, suffice it to state that this question has already been answered in the affirmative
in Alexander Howden & Co., Ltd. vs. Collector of Internal Revenue, L-19393, April 14, 1965.
Finally, petitioner contends that the withholding tax should be computed from the amount
actually remitted to the foreign reinsurers instead of from the total amount ceded. And since it
did not remit any amount to its foreign insurers in 1953 and 1954, no withholding tax was due.
The pertinent section of the Tax Code States:
Sec. 54. Payment of corporation income tax at source. In the case of foreign corporations
subject to taxation under this Title not engaged in trade or business within the Philippines and
not having any office or place of business therein, there shall be deducted and withheld at the
source in the same manner and upon the same items as is provided in Section fifty-three a tax
equal to twenty-four per centum thereof, and such tax shall be returned and paid in the same
manner and subject to the same conditions as provided in that section.
The applicable portion of Section 53 provides:
(b) Nonresident aliens. All persons, corporations and general copartnerships (compaias
colectivas), in what ever capacity acting, including lessees or mortgagors of real or personal
property, trustees acting in any trust capacity, executors, administrators, receivers,
conservators, fiduciaries, employers, and all officers and employees of the Government of the
Philippines having the control, receipt, custody, disposal, or payment of interest, dividends,
rents, salaries, wages, premiums, annuities, compensation, remunerations, emoluments, or
other fixed or determinable annual or periodical gains, profits, and income of any nonresident
alien individual, not engaged in trade or business within the Philippines and not having any
office or place of business therein, shall (except in the case provided for in subsection [a] of this
section) deduct and withhold from such annual or periodical gains, profits, and income a tax
equal to twelve per centum thereof: Provided That no deductions or withholding shall be
required in the case of dividends paid by a foreign corporation unless (1) such corporation is
engaged in trade or business within the Philippines or has an office or place of business therein,
and (2) more than eighty-five per centum of the gross income of such corporation for the three-
year period ending with the close of its taxable year preceding the declaration of such dividends
(or for such part of such period as the corporation has been in existence)was derived from
sources within the Philippines as determined under the provisions of section thirty-seven:
Provided, further, That the Collector of Internal Revenue may authorize such tax to be deducted
and withheld from the interest upon any securities the owners of which are not known to the
withholding agent.
The above-quoted provisions allow no deduction from the income therein enumerated in
determining the amount to be withheld. According, in computing the withholding tax due on the
reinsurance premium in question, no deduction shall be recognized.
WHEREFORE, in affirming the decision appealed from, the Philippine Guaranty Co., Inc. is
hereby ordered to pay to the Commissioner of Internal Revenue the sums of P202,192.00 and
P173,153.00, or a total amount of P375,345.00, as withholding tax for the years 1953 and 1954,
respectively. If the amount of P375,345.00 is not paid within 30 days from the date this
judgement becomes final, there shall be collected a surcharged of 5% on the amount unpaid,
plus interest at the rate of 1% a month from the date of delinquency to the date of payment,
provided that the maximum amount that may be collected as interest shall not exceed the
amount corresponding to a period of three (3) years. With costs againsts petitioner.

G.R. No. L-10405 December 29, 1960

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal,
petitioner-appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-
appellees.
Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.Office of the Asst. Solicitor General
Jose G. Bautista and Solicitor A. A. Torres for appellee.

CONCEPCION, J.:
Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal,
dismissing the above entitled case and dissolving the writ of preliminary injunction therein
issued, without costs.
On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted
this action for declaratory relief, with injunction, upon the ground that Republic Act No. 920,
entitled "An Act Appropriating Funds for Public Works", approved on June 20, 1953, contained,
in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction,
repair, extension and improvement" of Pasig feeder road terminals (Gen. Roxas Gen.
Araneta Gen. Lucban Gen. Capinpin Gen. Segundo Gen. Delgado Gen. Malvar
Gen. Lim)"; that, at the time of the passage and approval of said Act, the aforementioned
feeder roads were "nothing but projected and planned subdivision roads, not yet
constructed, . . . within the Antonio Subdivision . . . situated at . . . Pasig, Rizal" (according to the
tracings attached to the petition as Annexes A and B, near Shaw Boulevard, not far away from
the intersection between the latter and Highway 54), which projected feeder roads "do not
connect any government property or any important premises to the main highway"; that the
aforementioned Antonio Subdivision (as well as the lands on which said feeder roads were to be
construed) were private properties of respondent Jose C. Zulueta, who, at the time of the
passage and approval of said Act, was a member of the Senate of the Philippines; that on May,
1953, respondent Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offering to
donate said projected feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953,
the offer was accepted by the council, subject to the condition "that the donor would submit a
plan of the said roads and agree to change the names of two of them"; that no deed of donation
in favor of the municipality of Pasig was, however, executed; that on July 10, 1953, respondent
Zulueta wrote another letter to said council, calling attention to the approval of Republic Act. No.
920, and the sum of P85,000.00 appropriated therein for the construction of the projected feeder
roads in question; that the municipal council of Pasig endorsed said letter of respondent Zulueta
to the District Engineer of Rizal, who, up to the present "has not made any endorsement
thereon" that inasmuch as the projected feeder roads in question were private property at the
time of the passage and approval of Republic Act No. 920, the appropriation of P85,000.00
therein made, for the construction, reconstruction, repair, extension and improvement of said
projected feeder roads, was illegal and, therefore, void ab initio"; that said appropriation of
P85,000.00 was made by Congress because its members were made to believe that the
projected feeder roads in question were "public roads and not private streets of a private
subdivision"'; that, "in order to give a semblance of legality, when there is absolutely none, to the
aforementioned appropriation", respondents Zulueta executed on December 12, 1953, while he
was a member of the Senate of the Philippines, an alleged deed of donation copy of which is
annexed to the petition of the four (4) parcels of land constituting said projected feeder roads,
in favor of the Government of the Republic of the Philippines; that said alleged deed of donation
was, on the same date, accepted by the then Executive Secretary; that being subject to an
onerous condition, said donation partook of the nature of a contract; that, such, said donation
violated the provision of our fundamental law prohibiting members of Congress from being
directly or indirectly financially interested in any contract with the Government, and, hence, is
unconstitutional, as well as null and void ab initio, for the construction of the projected feeder
roads in question with public funds would greatly enhance or increase the value of the
aforementioned subdivision of respondent Zulueta, "aside from relieving him from the burden of
constructing his subdivision streets or roads at his own expense"; that the construction of said
projected feeder roads was then being undertaken by the Bureau of Public Highways; and that,
unless restrained by the court, the respondents would continue to execute, comply with, follow
and implement the aforementioned illegal provision of law, "to the irreparable damage, detriment
and prejudice not only to the petitioner but to the Filipino nation."
Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null
and void; that the alleged deed of donation of the feeder roads in question be "declared
unconstitutional and, therefor, illegal"; that a writ of injunction be issued enjoining the Secretary
of Public Works and Communications, the Director of the Bureau of Public Works and Highways
and Jose C. Zulueta from ordering or allowing the continuance of the above-mentioned feeder
roads project, and from making and securing any new and further releases on the
aforementioned item of Republic Act No. 920, and the disbursing officers of the Department of
Public Works and Highways from making any further payments out of said funds provided for in
Republic Act No. 920; and that pending final hearing on the merits, a writ of preliminary
injunction be issued enjoining the aforementioned parties respondent from making and securing
any new and further releases on the aforesaid item of Republic Act No. 920 and from making
any further payments out of said illegally appropriated funds.
Respondents moved to dismiss the petition upon the ground that petitioner had "no legal
capacity to sue", and that the petition did "not state a cause of action". In support to this motion,
respondent Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial governor, should
represent the Province of Rizal, pursuant to section 1683 of the Revised Administrative Code;
that said respondent is " not aware of any law which makes illegal the appropriation of public
funds for the improvements of . . . private property"; and that, the constitutional provision
invoked by petitioner is inapplicable to the donation in question, the same being a pure act of
liberality, not a contract. The other respondents, in turn, maintained that petitioner could not
assail the appropriation in question because "there is no actual bona fide case . . . in which the
validity of Republic Act No. 920 is necessarily involved" and petitioner "has not shown that he
has a personal and substantial interest" in said Act "and that its enforcement has caused or will
cause him a direct injury."
Acting upon said motions to dismiss, the lower court rendered the aforementioned decision,
dated October 29, 1953, holding that, since public interest is involved in this case, the Provincial
Governor of Rizal and the provincial fiscal thereof who represents him therein, "have the
requisite personalities" to question the constitutionality of the disputed item of Republic Act No.
920; that "the legislature is without power appropriate public revenues for anything but a public
purpose", that the instructions and improvement of the feeder roads in question, if such roads
where private property, would not be a public purpose; that, being subject to the following
condition:
The within donation is hereby made upon the condition that the Government of the Republic of
the Philippines will use the parcels of land hereby donated for street purposes only and for no
other purposes whatsoever; it being expressly understood that should the Government of the
Republic of the Philippines violate the condition hereby imposed upon it, the title to the land
hereby donated shall, upon such violation, ipso facto revert to the DONOR, JOSE C. ZULUETA.
(Emphasis supplied.)
which is onerous, the donation in question is a contract; that said donation or contract is
"absolutely forbidden by the Constitution" and consequently "illegal", for Article 1409 of the Civil
Code of the Philippines, declares in existence and void from the very beginning contracts
"whose cause, objector purpose is contrary to law, morals . . . or public policy"; that the legality
of said donation may not be contested, however, by petitioner herein, because his "interest are
not directly affected" thereby; and that, accordingly, the appropriation in question "should be
upheld" and the case dismissed.
At the outset, it should be noted that we are concerned with a decision granting the
aforementioned motions to dismiss, which as much, are deemed to have admitted hypothetically
the allegations of fact made in the petition of appellant herein. According to said petition,
respondent Zulueta is the owner of several parcels of residential land situated in Pasig, Rizal,
and known as the Antonio Subdivision, certain portions of which had been reserved for the
projected feeder roads aforementioned, which, admittedly, were private property of said
respondent when Republic Act No. 920, appropriating P85,000.00 for the "construction,
reconstruction, repair, extension and improvement" of said roads, was passed by Congress, as
well as when it was approved by the President on June 20, 1953. The petition further alleges
that the construction of said roads, to be undertaken with the aforementioned appropriation of
P85,000.00, would have the effect of relieving respondent Zulueta of the burden of constructing
his subdivision streets or roads at his own expenses, 1and would "greatly enhance or increase
the value of the subdivision" of said respondent. The lower court held that under these
circumstances, the appropriation in question was "clearly for a private, not a public purpose."
Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However,
respondent Zulueta contended, in his motion to dismiss that:
A law passed by Congress and approved by the President can never be illegal because
Congress is the source of all laws . . . Aside from the fact that movant is not aware of any law
which makes illegal the appropriation of public funds for the improvement of what we, in the
meantime, may assume as private property . . . (Record on Appeal, p. 33.)
The first proposition must be rejected most emphatically, it being inconsistent with the nature of
the Government established under the Constitution of the Republic of the Philippines and the
system of checks and balances underlying our political structure. Moreover, it is refuted by the
decisions of this Court invalidating legislative enactments deemed violative of the Constitution or
organic laws. 3
As regards the legal feasibility of appropriating public funds for a public purpose, the principle
according to Ruling Case Law, is this:
It is a general rule that the legislature is without power to appropriate public revenue for
anything but a public purpose. . . . It is the essential character of the direct object of the
expenditure which must determine its validity as justifying a tax, and not the magnitude of the
interest to be affected nor the degree to which the general advantage of the community, and
thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public
or to the state, which results from the promotion of private interest and the prosperity of private
enterprises or business, does not justify their aid by the use public money. (25 R.L.C. pp. 398-
400; Emphasis supplied.)
The rule is set forth in Corpus Juris Secundum in the following language:
In accordance with the rule that the taxing power must be exercised for public purposes only,
discussed supra sec. 14, money raised by taxation can be expended only for public purposes
and not for the advantage of private individuals. (85 C.J.S. pp. 645-646; emphasis supplied.)
Explaining the reason underlying said rule, Corpus Juris Secundum states:
Generally, under the express or implied provisions of the constitution, public funds may be used
only for public purpose. The right of the legislature to appropriate funds is correlative with its
right to tax, and, under constitutional provisions against taxation except for public purposes and
prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose,
no appropriation of state funds can be made for other than for a public purpose.
xxx xxx xxx
The test of the constitutionality of a statute requiring the use of public funds is whether the
statute is designed to promote the public interest, as opposed to the furtherance of the
advantage of individuals, although each advantage to individuals might incidentally serve the
public. (81 C.J.S. pp. 1147; emphasis supplied.)
Needless to say, this Court is fully in accord with the foregoing views which, apart from being
patently sound, are a necessary corollary to our democratic system of government, which, as
such, exists primarily for the promotion of the general welfare. Besides, reflecting as they do,
the established jurisprudence in the United States, after whose constitutional system ours has
been patterned, said views and jurisprudence are, likewise, part and parcel of our own
constitutional law.lawphil.net
This notwithstanding, the lower court felt constrained to uphold the appropriation in question,
upon the ground that petitioner may not contest the legality of the donation above referred to
because the same does not affect him directly. This conclusion is, presumably, based upon the
following premises, namely: (1) that, if valid, said donation cured the constitutional infirmity of
the aforementioned appropriation; (2) that the latter may not be annulled without a previous
declaration of unconstitutionality of the said donation; and (3) that the rule set forth in Article
1421 of the Civil Code is absolute, and admits of no exception. We do not agree with these
premises.
The validity of a statute depends upon the powers of Congress at the time of its passage or
approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter
consists of an amendment of the organic law, removing, with retrospective operation, the
constitutional limitation infringed by said statute. Referring to the P85,000.00 appropriation for
the projected feeder roads in question, the legality thereof depended upon whether said roads
were public or private property when the bill, which, latter on, became Republic Act 920, was
passed by Congress, or, when said bill was approved by the President and the disbursement of
said sum became effective, or on June 20, 1953 (see section 13 of said Act). Inasmuch as the
land on which the projected feeder roads were to be constructed belonged then to respondent
Zulueta, the result is that said appropriation sought a private purpose, and hence, was null and
void. 4 The donation to the Government, over five (5) months after the approval and effectivity of
said Act, made, according to the petition, for the purpose of giving a "semblance of legality", or
legalizing, the appropriation in question, did not cure its aforementioned basic defect.
Consequently, a judicial nullification of said donation need not precede the declaration of
unconstitutionality of said appropriation.
Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to
exceptions. For instance, the creditors of a party to an illegal contract may, under the conditions
set forth in Article 1177 of said Code, exercise the rights and actions of the latter, except only
those which are inherent in his person, including therefore, his right to the annulment of said
contract, even though such creditors are not affected by the same, except indirectly, in the
manner indicated in said legal provision.
Again, it is well-stated that the validity of a statute may be contested only by one who will
sustain a direct injury in consequence of its enforcement. Yet, there are many decisions
nullifying, at the instance of taxpayers, laws providing for the disbursement of public funds,
5
upon the theory that "the expenditure of public funds by an officer of the State for the purpose
of administering an unconstitutional act constitutes a misapplication of such funds," which may
be enjoined at the request of a taxpayer. 6Although there are some decisions to the contrary,
7
the prevailing view in the United States is stated in the American Jurisprudence as follows:
In the determination of the degree of interest essential to give the requisite standing to attack
the constitutionality of a statute, the general rule is that not only persons individually affected,
but also taxpayers, have sufficient interest in preventing the illegal expenditure of moneys
raised by taxation and may therefore question the constitutionality of statutes requiring
expenditure of public moneys. (11 Am. Jur. 761; emphasis supplied.)
However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs. Mellon
(262 U.S. 447), insofar as federal laws are concerned, upon the ground that the relationship of a
taxpayer of the U.S. to its Federal Government is different from that of a taxpayer of a municipal
corporation to its government. Indeed, under the composite system of government existing in
the U.S., the states of the Union are integral part of the Federation from an international
viewpoint, but, each state enjoys internally a substantial measure of sovereignty, subject to the
limitations imposed by the Federal Constitution. In fact, the same was made by representatives
of each state of the Union, not of the people of the U.S., except insofar as the former
represented the people of the respective States, and the people of each State has,
independently of that of the others, ratified said Constitution. In other words, the Federal
Constitution and the Federal statutes have become binding upon the people of the U.S. in
consequence of an act of, and, in this sense, through the respective states of the Union of which
they are citizens. The peculiar nature of the relation between said people and the Federal
Government of the U.S. is reflected in the election of its President, who is chosen directly, not by
the people of the U.S., but by electors chosen by each State, in such manner as the legislature
thereof may direct (Article II, section 2, of the Federal Constitution).lawphi1.net
The relation between the people of the Philippines and its taxpayers, on the other hand, and the
Republic of the Philippines, on the other, is not identical to that obtaining between the people
and taxpayers of the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to
that existing between the people and taxpayers of each state and the government thereof,
except that the authority of the Republic of the Philippines over the people of the Philippines is
more fully direct than that of the states of the Union, insofar as the simple and unitary type of
our national government is not subject to limitations analogous to those imposed by the Federal
Constitution upon the states of the Union, and those imposed upon the Federal Government in
the interest of the Union. For this reason, the rule recognizing the right of taxpayers to assail the
constitutionality of a legislation appropriating local or state public funds which has been
upheld by the Federal Supreme Court (Crampton vs. Zabriskie, 101 U.S. 601) has greater
application in the Philippines than that adopted with respect to acts of Congress of the United
States appropriating federal funds.
Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a
land by the Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the
purpose of contesting the price being paid to the owner thereof, as unduly exorbitant. It is true
that in Custodio vs. President of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of
the Government was not permitted to question the constitutionality of an appropriation for
backpay of members of Congress. However, in Rodriguez vs. Treasurer of the Philippines and
Barredo vs. Commission on Elections (84 Phil., 368; 45 Off. Gaz., 4411), we entertained the
action of taxpayers impugning the validity of certain appropriations of public funds, and
invalidated the same. Moreover, the reason that impelled this Court to take such position in said
two (2) cases the importance of the issues therein raised is present in the case at bar.
Again, like the petitioners in the Rodriguez and Barredo cases, petitioner herein is not merely a
taxpayer. The Province of Rizal, which he represents officially as its Provincial Governor, is our
most populated political subdivision, 8and, the taxpayers therein bear a substantial portion of the
burden of taxation, in the Philippines.
Hence, it is our considered opinion that the circumstances surrounding this case sufficiently
justify petitioners action in contesting the appropriation and donation in question; that this action
should not have been dismissed by the lower court; and that the writ of preliminary injunction
should have been maintained.
Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the
lower court for further proceedings not inconsistent with this decision, with the costs of this
instance against respondent Jose C. Zulueta. It is so ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez
David, Paredes, and Dizon, JJ., concur.

G.R. No. L-29646 November 10, 1978

MAYOR ANTONIO J. VILLEGAS, petitioner,
vs.
HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO ARCA, respondents.
Angel C. Cruz, Gregorio A. Ejercito, Felix C. Chaves & Jose Laureta for petitioner.
Sotero H. Laurel for respondents.

FERNANDEZ, J.:
This is a petition for certiorari to review tile decision dated September 17, 1968 of respondent
Judge Francisco Arca of the Court of First Instance of Manila, Branch I, in Civil Case No. 72797,
the dispositive portion of winch reads.
Wherefore, judgment is hereby rendered in favor of the petitioner and against the respondents,
declaring Ordinance No. 6 37 of the City of Manila null and void. The preliminary injunction is
made permanent. No pronouncement as to cost.
SO ORDERED.
Manila, Philippines, September 17, 1968.
(SGD.) FRANCISCO ARCA
Judge 1
The controverted Ordinance No. 6537 was passed by the Municipal Board of Manila on
February 22, 1968 and signed by the herein petitioner Mayor Antonio J. Villegas of Manila on
March 27, 1968. 2
City Ordinance No. 6537 is entitled:
AN ORDINANCE MAKING IT UNLAWFUL FOR ANY PERSON NOT A CITIZEN OF THE
PHILIPPINES TO BE EMPLOYED IN ANY PLACE OF EMPLOYMENT OR TO BE ENGAGED
IN ANY KIND OF TRADE, BUSINESS OR OCCUPATION WITHIN THE CITY OF MANILA
WITHOUT FIRST SECURING AN EMPLOYMENT PERMIT FROM THE MAYOR OF MANILA;
AND FOR OTHER PURPOSES. 3
Section 1 of said Ordinance No. 6537 4 prohibits aliens from being employed or to engage or
participate in any position or occupation or business enumerated therein, whether permanent,
temporary or casual, without first securing an employment permit from the Mayor of Manila and
paying the permit fee of P50.00 except persons employed in the diplomatic or consular missions
of foreign countries, or in the technical assistance programs of both the Philippine Government
and any foreign government, and those working in their respective households, and members of
religious orders or congregations, sect or denomination, who are not paid monetarily or in kind.
Violations of this ordinance is punishable by an imprisonment of not less than three (3) months
to six (6) months or fine of not less than P100.00 but not more than P200.00 or both such fine
and imprisonment, upon conviction. 5
On May 4, 1968, private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed
a petition with the Court of First Instance of Manila, Branch I, denominated as Civil Case No.
72797, praying for the issuance of the writ of preliminary injunction and restraining order to stop
the enforcement of Ordinance No. 6537 as well as for a judgment declaring said Ordinance No.
6537 null and void. 6
In this petition, Hiu Chiong Tsai Pao Ho assigned the following as his grounds for wanting the
ordinance declared null and void:
1) As a revenue measure imposed on aliens employed in the City of Manila, Ordinance No.
6537 is discriminatory and violative of the rule of the uniformity in taxation;
2) As a police power measure, it makes no distinction between useful and non-useful
occupations, imposing a fixed P50.00 employment permit, which is out of proportion to the cost
of registration and that it fails to prescribe any standard to guide and/or limit the action of the
Mayor, thus, violating the fundamental principle on illegal delegation of legislative powers:
3) It is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus,
deprived of their rights to life, liberty and property and therefore, violates the due process and
equal protection clauses of the Constitution. 7
On May 24, 1968, respondent Judge issued the writ of preliminary injunction and on September
17, 1968 rendered judgment declaring Ordinance No. 6537 null and void and making permanent
the writ of preliminary injunction. 8
Contesting the aforecited decision of respondent Judge, then Mayor Antonio J. Villegas filed the
present petition on March 27, 1969. Petitioner assigned the following as errors allegedly
committed by respondent Judge in the latter's decision of September 17,1968: 9
I
THE RESPONDENT JUDGE COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN
RULING THAT ORDINANCE NO. 6537 VIOLATED THE CARDINAL RULE OF UNIFORMITY
OF TAXATION.
II
RESPONDENT JUDGE LIKEWISE COMMITTED A GRAVE AND PATENT ERROR OF LAW IN
RULING THAT ORDINANCE NO. 6537 VIOLATED THE PRINCIPLE AGAINST UNDUE
DESIGNATION OF LEGISLATIVE POWER.
III
RESPONDENT JUDGE FURTHER COMMITTED A SERIOUS AND PATENT ERROR OF LAW
IN RULING THAT ORDINANCE NO. 6537 VIOLATED THE DUE PROCESS AND EQUAL
PROTECTION CLAUSES OF THE CONSTITUTION.
Petitioner Mayor Villegas argues that Ordinance No. 6537 cannot be declared null and void on
the ground that it violated the rule on uniformity of taxation because the rule on uniformity of
taxation applies only to purely tax or revenue measures and that Ordinance No. 6537 is not a
tax or revenue measure but is an exercise of the police power of the state, it being principally a
regulatory measure in nature.
The contention that Ordinance No. 6537 is not a purely tax or revenue measure because its
principal purpose is regulatory in nature has no merit. While it is true that the first part which
requires that the alien shall secure an employment permit from the Mayor involves the exercise
of discretion and judgment in the processing and approval or disapproval of applications for
employment permits and therefore is regulatory in character the second part which requires the
payment of P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic
or justification in exacting P50.00 from aliens who have been cleared for employment. It is
obvious that the purpose of the ordinance is to raise money under the guise of regulation.
The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider
valid substantial differences in situation among individual aliens who are required to pay it.
Although the equal protection clause of the Constitution does not forbid classification, it is
imperative that the classification should be based on real and substantial differences having a
reasonable relation to the subject of the particular legislation. The same amount of P50.00 is
being collected from every employed alien whether he is casual or permanent, part time or full
time or whether he is a lowly employee or a highly paid executive
Ordinance No. 6537 does not lay down any criterion or standard to guide the Mayor in the
exercise of his discretion. It has been held that where an ordinance of a municipality fails to
state any policy or to set up any standard to guide or limit the mayor's action, expresses no
purpose to be attained by requiring a permit, enumerates no conditions for its grant or refusal,
and entirely lacks standard, thus conferring upon the Mayor arbitrary and unrestricted power to
grant or deny the issuance of building permits, such ordinance is invalid, being an undefined
and unlimited delegation of power to allow or prevent an activity per se lawful. 10
In Chinese Flour Importers Association vs. Price Stabilization Board, 11 where a law granted a
government agency power to determine the allocation of wheat flour among importers, the
Supreme Court ruled against the interpretation of uncontrolled power as it vested in the
administrative officer an arbitrary discretion to be exercised without a policy, rule, or standard
from which it can be measured or controlled.
It was also held in Primicias vs. Fugoso 12 that the authority and discretion to grant and refuse
permits of all classes conferred upon the Mayor of Manila by the Revised Charter of Manila is
not uncontrolled discretion but legal discretion to be exercised within the limits of the law.
Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to
guide the mayor in the exercise of the power which has been granted to him by the ordinance.
The ordinance in question violates the due process of law and equal protection rule of the
Constitution.
Requiring a person before he can be employed to get a permit from the City Mayor of Manila
who may withhold or refuse it at will is tantamount to denying him the basic right of the people in
the Philippines to engage in a means of livelihood. While it is true that the Philippines as a State
is not obliged to admit aliens within its territory, once an alien is admitted, he cannot be deprived
of life without due process of law. This guarantee includes the means of livelihood. The shelter
of protection under the due process and equal protection clause is given to all persons, both
aliens and citizens. 13
The trial court did not commit the errors assigned.
WHEREFORE, the decision appealed from is hereby affirmed, without pronouncement as to
costs.
SO ORDERED.
Barredo, Makasiar, Muoz Palma, Santos and Guerrero, JJ., concur.
Castro, C.J., Antonio and Aquino, Fernando, JJ., concur in the result.
Concepcion, Jr., J., took no part.

EN BANC
[G.R. No. L-9141. September 25, 1956.]
Testate Estate of OLIMPIO FERNANDEZ, deceased. REPUBLIC OF THE PHILIPPINES,
claimant-Appellee, vs. ANGELINA OASAN VDA DE FERNANDEZ, PRISCILLA O.
FERNANDEZ, and ESTELA O. FERNANDEZ, Oppositors-Appellants.

DECISION
LABRADOR, J.:
Appeal from a decision of the Court of Tax Appeals sustaining the validity of a tax amounting to
P7,614.60 against the estate of Olimpio Fernandez under the War Profits Tax Law (Republic Act
No. 55).
Olimpio Fernandez and his wife Angelina Oasan had a net worth of P8,600 on December 8,
1941. During the Japanese occupation the spouses acquired several real properties, and at the
time of his death on February 11, 1945 he had a net worth of P31,489. The Collector of Internal
Revenue assessed a war profits tax on the estate of the deceased at P7,614.60, which his
administratrix refused to pay. The case was brought to the Court of Tax Appeals which sustained
the validity and legality of the assessment. The administratrix has appealed this decision to this
Court.
The most important questions raised by the Appellant are:chanroblesvirtuallawlibrary (a) the
unconstitutionality of the war profits tax law for the reason that it is retroactive; chan
roblesvirtualawlibrary(b) the inapplicability of said law to the estate of the deceased Olimpio
Fernandez, because the law taxes individuals; chan roblesvirtualawlibraryand (c) the separate
taxation of the estate of the deceased Olimpio Fernandez from that of his wifes, because
Olimpio Fernandez died before the law was passed.
Appellants contention that the law is invalid or unconstitutional because it acts retroactively,
thus violating the due process of law clause, is not supported by reason or authority. The tax,
insofar as applicable to the estate of the deceased Olimpio Fernandez, is both a property tax
and a tax on income. It is a property tax in relation to the properties that Fernandez had in
December, 1941; chan roblesvirtualawlibraryand it is an income tax in relation to the properties
which he purchased during the Japanese occupation. In both cases, however, the war profits
tax may not be considered as unconstitutional.
The doctrine of unconstitutionality raised by Appellant is based on the prohibition against ex
post facto laws. But this prohibition applies only to criminal or penal matters, and not to laws
which concern civil matters or proceedings generally, or which affect or regulate civil or private
rights (Ex parte Garland, 18 Law Ed., 366; chan roblesvirtualawlibrary16 C.J. S., 889-891).
At an early day it was settled by authoritative decisions, in opposition to what might seem the
more natural and obvious meaning of the term ex post facto, that in their scope and purpose
these provisions were confined to laws respecting criminal punishments, and had no relation
whatever to retrospective legislation of any other description. And it has, therefore, been
repeatedly held, that retrospective laws, when not of a criminal nature, do not come in conflict
with the national Constitution, unless obnoxious to its provisions on other grounds than their
respective character. (1 Cooley, Constitutional Limitations, 544-545.)
We have applied the above principle in the cases of Mekin vs. Wolf, 2 Phil. 74 and Ongsiako vs.
Gamboa, 47 Off. Gaz., No. 11, 5613, 5616.
It has also been held that property taxes and benefit assessments on real estate, retroactively
applied, are not open to the objection that they infringe upon the due process of law clause of
the Constitution (Wagner vs. Baltimore, 239 U. S. 207, 60 L. Ed. 230); chan
roblesvirtualawlibrarythat taxes on income are not subject to the constitutional objection
because of their retroactivity. The universal practice has been to increase taxes on incomes
already earned; chan roblesvirtualawlibraryyet notwithstanding this retroactive operation,
income taxes have not been successfully assailed as invalid. The uniform ruling of the courts in
the United States has been to reject the contention that the retroactive application of revenue
acts is a denial of the due process guaranteed by the Fifth Amendment (Welch vs. Henry, 305
U. S. 134, 83 L. Ed. 87).
It has also been held that in order to declare a tax as transgressing the constitutional limitation,
it must be so harsh and oppressive in its retroactive application (Idem.). But we hold that far
from being unjust or harsh and oppressive our war profits tax is both wise and just. The last
Pacific war and the Japanese occupation of the Islands have wrought divergent effects upon the
different sectors of the population. The quiet and the timid, who were afraid to go out of their
homes or who refused to have any dealings with the enemy, stopped from exercising their
callings or professions, losing their incomes; chan roblesvirtualawlibraryand they supported
themselves with properties they already owned, selling these from time to time to raise funds
with which to purchase their daily needs. These were reduced to penury and want. But the bold
and the daring, as well as those who were callous to the criticism of being collaborators,
engaged in trading in all forms or sorts of commodities, from foodstuffs to war materials, earning
fabulous incomes and acquiring properties with their earnings. Those who were able to retain
their properties found themselves possessed of increased wealth because inflation set in, the
currency dropped in value and properties soared in prices. It would have been unrealistic for the
legislature to have ignored all these facts and circumstances. After the war it could not, with
justice to all concerned, apportion the expenses of government equally on all the people
irrespective of the vicissitudes of war, equally on those who had their properties decimated as
on those who had become fabulously rich after the war. Those who were fortunate to increase
their wealth during the troubulous period of the war were made to contribute a portion of their
newly-acquired wealth for the maintenance of the government and defray its expenses. Those
who in turn were reduced to penury or whose incomes suffered reductions could not be
compelled to share in the expenses to the same extent as those who grew rich. This in effect is
what the legislature did when it enacted the War Profits Tax Law. The law may not be
considered harsh and oppressive because the force of its impact fell on those who had
amassed wealth or increased their wealth during the war, but did not touch the less fortunate.
The policy followed is the same as that which underlies the Income Tax Law, imposing the
burden upon those who have and relieving those who have not. No one can dare challenge the
law as harsh and oppressive. We declare it to be just and sound and overrule the objection
thereto on the ground of unconstitutionality.
The contention that the deceased Olimpio Fernandez or his estate should not be responsible
because he died in 1945 and was no longer living when the law was enacted at a later date, in
1946, is absolutely without merit. Fernandez died immediately before the liberation and the
actual cessation of hostilities. He profited by the war; chan roblesvirtualawlibrarythere is no
reason why the incident of his death should relieve his estate from the tax. On this matter we
agree with the Court of Tax Appeals that the provisions of section 18 of the Internal Revenue
Code have been incorporated in Republic Act No. 55 by virtue of Section 9 thereof, which
provides:chanroblesvirtuallawlibrary
SEC. 9. Administrative remedies. All administrative, special and general provisions of law,
including the laws in relation to the assessment, remission, collection and refund of national
internal revenue taxes, not inconsistent with the provisions of the Act, are hereby extended and
made applicable to all the provisions of this law, and to the tax herein imposed.
Under section 84 of the National Internal Revenue Code, the term person means an individual,
a trust, estate, corporation, or a duly registered general co-partnership. If the individual is
already dead, property or estate left by him should be subject to the tax in the same manner as
if he were alive.
The last contention is also without merit. The property which Olimpio Fernandez was possessed
of in December, 1941 is presumed to be conjugal property and so are the properties which were
acquired by him during the war, because at that time he was married. There is no claim or
evidence to support the claim that any of the properties were paraphernal properties of the wife;
chan roblesvirtualawlibraryso the presumption stands that they were conjugal properties of the
husband and wife. Under these circumstances they cannot be considered as properties
belonging to two individuals, each of which shall be subject to the tax independently of the other.
For the foregoing considerations, the judgment appealed from is hereby affirmed, with costs
against the Appellants.
Paras, C.J., Padilla, Montemayor, Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia,
and Felix, JJ., concur.