ANGELES UNIVERSITY vs. CITY OF ANGELES.

(2012)

Facts: Angeles University was converted into a non-stock, non-profit education foundation under the
provisions of Republic Act (R.A.) No. 6055. Petitioner filed with the Office of the City Building Official an
application for a building permit for the construction of an 11-storey building of the Angeles University
Foundation Medical Center in its main campus the said office issue a Building permit fee and Locational
Clearance Fee. Petitioner make a letter to respondent City Treasurer Juliet G. Quinssat and City Building
Official Donato Z. Dizon alleging that it is exempt from payment of the building permit and locational
clearance fee. Petitioner also reminded the respondent that they have previously issued building permit
acknowledging such exemption from payment of building permit fees. The DOJ and trial court render decision
in favor to petitioner for exempting in payment. But the CA reversed the decision of court in favor to
respondent. Petitioner filed a MR but it was denied by CA.

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

RULING: No. It is a regulatory fee. The Supreme Court affirmed the ruling of the Court of Appeals (CA) that
Angeles University Foundation is not entitled to a refund for the payment of its building permit and locational
clearance fees as well as real property taxes amounting to P 826,662.99, which it had paid under protest.

Earlier, the CA had reversed the decision of the Regional Trial Court of Angeles City, Branch 57 declaring
Angeles University Foundation exempt from payment of building permit and other fees and ordering the City
of Angeles to refund the same with interest at the legal rate. Angeles University Foundation sought for a
refund on the ground that the building permit and other fees are really taxes considering they are used to
generate revenue; and Sec. 193 of the Local Government Code of 1991 which provides that non-stock and non-
profit educational institutions, such as itself, are exempt from payment of these types of taxes.

The Court's First Division unanimously held that CA committed no reversible error in finding Angeles
University Foundation liable to pay the protested permit and fees since the exemption from payment of
regulatory fees was not among the incentives granted it under RA 6055 (An Act To Provide For The
Conversion Of Educational Institutions From Stock Corporations To Non-Profit Foundations, Directing
The Government Service Insurance System, The Social Security System And The Development Bank Of
The Philippines To Assist In Such Conversion, And For Other Purposes) when it was promulgated in August 4,
1969 and the Local Government Code of 1991.

The Court stressed that exemption of other charges to include the payment of building permits
and locational clearance fees as claimed by the Angeles University Foundation is improper because Sec. 8 of
RA 6055 is qualified by the words imposed by the Government on all property used exclusively for
the educational activities of the foundation. In effect, building fees are not impositions on property but
instead are regulatory impositions on the activity the government regulates. A charge of a fixed sum is an
exercise of police power if the purpose is primarily to regulate, even though revenue is generated
incidentally.

The Court also ruled that for exemption from real property tax under Sec. 234(b) of the Local Government
Code of 1991 to apply, the real property must actually, directly, and exclusively used for... educational
purposes.

As clarified in Lung Center of the Philippines v. Quezon City, what is meant by actual, direct, and exclusive use
of the property is direct and immediate and actual application of the property itself to the purpose of
which the charitable institution is organized. The use of the income from the real property is not
determinative for tax exempt purposes. The Court found Angeles University Foundation was not entitled to a
refund for its payment of real property tax because it was not able to prove that its real property is actually,
directly, and exclusively used for educational purposes. It held that the land of Angeles University
Foundation was correctly assessed for real property taxes for the taxable period during which the land is not
being devoted soly for the latter's educational activities.

VILLEGAS VS HIU CHIONG TSAI PAO HO (1978)

Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those employed in the
diplomatic and consular missions of foreign countries, in technical assistance programs of the government
and another country, and members of religious orders or congregations) to procure the requisite mayors
permit so as to be employed or engage in trade in the City of Manila. The permit fee is P50, and the penalty for
the violation of the ordinance is 3 to 6 months imprisonment or a fine of P100 to P200, or both. Private
respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a petition to stop the enforcement of
such ordinance as well as to declare the same null and void. Trial court rendered judgment in favor of the
petitioner, hence this case.

ISSUE: (1) Is the ordinance violative of the cardinal rule of uniformity of taxation?
(2) Whether or Not Ordinance no.6537 violates the due process and equal protection clauses of the
Constitution

Held: (1) Yes. The P50 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. The same
amount of P50 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.

(2) It is a revenue measure. The city ordinance which imposes a fee of 50.00 pesos to enable aliens generally
to be employed in the city of Manila is not only for the purpose of regulation. While it is true that the first part
which requires the alien to secure an employment permit from the Mayor involves the exercise of discretion
and judgment in processing and approval or disapproval of application is regulatory in character, the second
part which requires the payment of a sum of 50.00 pesos is not a regulatory but a revenue measure.
Ordinance no. 6537 is void and unconstitutional. This is tantamount to denial of the basic human right of the
people in the Philippines to engaged in a means of livelihood. While it is true that the Philippines as a state is
not obliged to admit aliens within it's territory, once an alien is admitted he cannot be deprived of life without
due process of law. This guarantee includes the means of livelihood. Also it does not lay down any standard to
guide the City Mayor in the issuance or denial of an alien employment permit fee.

SMART COMMUNICATIONS INC. VS. MUNICIPALITY OF MALVAR 2014

FACTS: Petitioner Smart is a domestic corporation engaged in the business of providing telecommunications
services to the general public. THE PARTIES Municipality of Malvar is a local government unit created by law.
Smart constructed a telecommunications tower within the jurisdiction of Malvar. Malvar passed Ordinance
18 s. 2003 entitled: An Ordinance Regulating Establishment of Special Projects. SMART received from the
Malvar Mayors Office an assessment letter with scheduled payment of P398,000 for SMARTs telecom tower.
Due to the arrears (balance due to failure of payment) in the payment of assessment, Municipality of Malvar
caused the posting of the closure notice of the telecom tower against Smart. Smart filed a protest for lack of
due process in the issuance of assessment and closure notice. It also challenged the validity of Ordinance 18 s.
2003. Smart challenged the validity of said ordinance upon which the assessment was based, arguing that the
fees imposed under the ordinance are actually taxes since they are not regulatory, but revenue-raising.

LOWER COURTS DECISION RTC Batangas Partly granted SMARTs appeal/ decision. Did not rule on the
validity of the Ordinance / but declared the assessment of Malvar valid. Dismissed the petition for lack of
jurisdiction. because it is not given the powers to resolve cases where constitutionality of a law is challenged.
CTA En Banc

ISSUE: Is Ordinance 18 s. 2003 tax or police power? (Since SMART contends that these are taxes)

RULING: Police power. The Supreme Court explained that consistent with the constitutional mandate, the
Local Government Code (LGC) grants municipalities the power to levy taxes, fees and charges not otherwise
levied by provinces. Section 147 of the same law, allows municipalities to impose and collect such reasonable
fees and charges on business and occupation and on the practice of any profession or calling, commensurate
with the cost of regulation, inspection and licensing before any person may engage in such business or
occupation, or practice such profession or calling.

Under the LGC, the term charges refer to pecuniary liability, as rents or fees against persons or property,
while the term fee means a charge fixed by law or ordinance for the regulation or inspection of a business
or activity.
The High Tribunal pointed out that in the whereas clauses of the assailed ordinance, the primary purpose is
to regulate the placing, stringing, attaching, installing, repair and construction of all gas mains, electric,
telegraph and telephone wires, conduits, meters and other apparatus listed therein, which included
telecommunications tower.
Evidently, the purpose of the ordinance is to regulate the enumerated activities particularly related to the
construction and maintenance of various structures. Thus, the fees in the ordinance are not impositions on
the building or structure itself but on the activity subject of government regulation, such as the installation
and construction of the structures.

The Court ruled that since the main purpose of the ordinance is to regulate certain construction activities of
the identified special projects, which included cell sites or telecommunications towers, the fees imposed in
the Ordinance are primarily regulatory in nature, and not primarily revenue-raising. While the fees may
contribute to the revenues of the Municipality, this effect is merely incidental.

The Supreme Court reiterated its ruling that the purpose and effect of the imposition determine whether it is
a tax or a fee, and that the lack of any standards for such imposition gives the presumption that the same is a
tax. Further, the High Court said that, if the generating of revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally
revenue is also obtained does not make the imposition a tax.

HILADO VS. THE COLLECTOR OF INTERNAL REVENUE 1956

Facts: On March 31, 1952, petitioner filed his income tax return for 1951 with the treasurer of Bacolod City
wherein he claimed, among other things, the amount of P12,837.65 as a deductible item from his gross
income pursuant to General Circular No. V-123 issued by the Collector of Internal Revenue. On the basis of
said return, an assessment notice demanding the payment of P9,419 was sent to petitioner, who paid the tax
in monthly installments, the last payment having been made on January 2, 1953.

Meanwhile, on August 30, 1952, the Secretary of Finance, through the Collector of Internal Revenue, issued
General Circular No. V-139 which not only revoked and declared void his general Circular No. V-123 but laid
down the rule that losses of property which occurred during the period of World War II from fires, storms,
shipwreck or other casualty, or from robbery, theft, or embezzlement are deductible in the year of actual loss
or destruction of said property. The deduction was disallowed and the CIR demanded from him P3,546 as
deficiency income tax for said year. The petition for reconsideration filed by petitioner was denied so he filed
a petition for review with the CTA. The SC affirmed the assessment made by the CIR. Hence, this appeal.

ISSUE:
1. Whether or not claim for losses of property during the war period for the year 1950 may be deducted
from the income tax of the petitioner for 1951 as declared in the circular issued by the Secretary of
Finance.
2. Whether the internal revenue laws can been enforced during the war.

Ruling:

1. No. First, assuming that said amount represents a portion of the 75% of his war damage claim which
was not paid, the same would not be deductible as a loss in 1951 because the last installment he
received from the War Damage Commission, together with the notice that no further payment would
be made on his claim, was in 1950. In the circumstance, said amount would at most be a proper
deduction from his 1950 gross income.

2. Yes. It is well known that our internal revenue laws are not political in nature and as such were
continued in force during the period of enemy occupation and in effect were actually enforced by the
occupation government. As a matter of fact, income tax returns were filed during that period and
income tax payment were effected and considered valid and legal. Such tax laws are deemed to be the
laws of the occupied territory and not of the occupying enemy.
MISAMIS ORIENTAL ASSOCIATION VS. DEPT. OF FINANCE SECRETARY 1994

FACTS: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose
members, are engaged in the buying and selling of copra. The petitioner alleges that prior to the issuance of
Revenue Memorandum Circular 47-91, which implemented VAT Ruling 190-90, copra was classified as
agricultural food product under 103(b) of the National Internal Revenue Code and, therefore, exempt
from VAT at all stages of production or distribution. Said circular classified copra as an agricultural nonfood
product and declared it "exempt from VAT only if the sale is made by the primary producer pursuant to
Section 103(a) of the Tax Code, as amended." The reclassification had the effect of denying to the petitioner
the exemption it previously enjoyed when copra was classified as an agricultural food product under 103(b)
of the NIRC.

ISSUE: WON the petitioner is exempt from the tax.

RULING: NO. In interpreting 103(a) and (b) of the NIRC, the Commissioner of Internal Revenue gave it a
strict construction consistent with the rule that tax exemptions must be strictly construed against the
taxpayer and liberally in favor of the state. As the government agency charged with the enforcement of the
law, the opinion of the Commissioner of Internal Revenue, in the absence of any showing that it is plainly
wrong, is entitled to great weight. Indeed, the ruling was made by the Commissioner of Internal Revenue in
the exercise of his power under 245 of the NIRC to "make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including rulings on the classification of articles
for sales tax and similar purposes." The Court also stated that the Circular is not discriminatory and in
violation of the equal protection clause. Petitioner likened copra farmers / producers, who are exempted
from VAT and copra traders, which the Court disagreed.

CIR VS. CA AND ALHAMBRA (1997)

FACTS: The present case arose from the discrepancy in the taxable base on which the excise tax is to apply on
account of two incongruous BIR Rulings: (1) BIR Ruling 473-88 dated 4 October 1988 which excluded the
VAT from the tax base in computing the fifteen percent (15%) excise tax due; and, (2) BIR Ruling 017-
91dated 11 February 1991 which included back the VAT in computing the tax base for purposes of the fifteen
percent (15%) ad valorem tax. Alhambra industries, Inc. (Alhambra) is a domestic corporation engaged in the
manufacture and sale of cigar and cigarette products. On May 7, 1991 private respondent received a letter
dated April 26, 1991from the Commissioner of Internal Revenue assessing its deficiency Ad Valorem Tax
(AVT) in the total amount of P488,396.62, inclusive of increments, on the removals of cigarette products from
their place of production during the period Nov. 2, 1990 to January 22, 1991. Alhambra filed protest
against amount assessed by the CIR, however, it was denied by the latter at the same time increasing the
amount assessed to P520,835.29. Alhambra filed a petition for review with the CTA, despite payment under
protest the amount of P520,835.29. On December 1, 1993, CTA ordered petitioner to refund said amount to
Alhambra.

ISSUE: Whether the new ruling should be given retroactive effect thus, in effect revoking the tax exemption
given to the petitioner in the first BIR ruling.

RULING: Well-entrenched is the rule that rulings and circulars, rules and regulations promulgated by the
Commissioner of Internal Revenue would have no retroactive application if to so apply them would be
prejudicial to the taxpayers. The applicable law is Sec. 246 of the Tax Code which provides: Sec. 246. Non-
retroactivity of rulings.- Any revocation, modification, or reversal of any rules and regulations promulgated in
accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner of
Internal Revenue shall not be given retroactive application if the revocation, modification, or reversal will be
prejudicial to the taxpayers except in the following cases: a) where the taxpayer deliberately misstates or
omits material facts from his return or in any document required of him by the Bureau of Internal Revenue;
b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the
facts on which the ruling is based; or c) where the taxpayer acted in bad faith. Without doubt, private
respondent would be prejudiced by the retroactive application of the revocation as it would be assessed
deficiency excise tax. The Court finds no convincing evidence on petitioners claim that private respondent
falls under the third exception in Sec. 246, i.e., that the taxpayer has acted in bad faith. To the contrary, as a
sign of good faith, private respondent immediately reverted to the computation mandated by BIR Ruling 017-
91 upon knowledge of its issuance on 11 February 1991.

The government is not stopped from collecting taxes legally due because of mistake/errors of its agents, this
admits of exceptions in the interest of justice and fair play, as where injustice will result to the taxpayer. As
regards, petitioners argument the private respondent should have made consultations with it before private
respondent used the computation mandated by BIR ruling 473-88 suffice it to state that the BIR ruling was
clear and categorical, there leaving no room for interpretation. The failure of private respondent to consult
petitioner does not imply bad faith on the part of the former.

CIR v. LINGAYEN GULF ELECTRIC POWER CO., INC 1988

DOCTRINE: The question of whether a statute operates retrospectively or only prospectively depends on the
legislative intent.

FACTS: Lingayen Electric, operates an electric power plant serving both Lingayen and Binmaley, Pangasinan,
pursuant to the municipal franchise granted it by their respective municipal councils, under Resolutions Nos.
14 and 25 of 1946, respectively. Section 10 of these franchises provide that:x x x The said grantee in
consideration of the franchise hereby granted, shall pay quarterly into the Provincial Treasury of Pangasinan,
one per centum of the gross earnings obtained thru this privilege during the first twenty years and two per
centum during the remaining fifteen years of the life of said franchise. BIR assessed against and demanded
from the Lingayen Electric the total amount of P19,293.41 representing deficiency franchise taxes and
surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts as prescribed in
Section 259 of the National Internal Revenue Code, instead of the lower rates as provided in the municipal
franchises. Lingayen Electric requested for a reinvestigation of the case on the ground that instead of
incurring a deficiency liability, it made an overpayment of the franchise tax. BIR denied the request reiterated
the demand for payment. Lingayen Electric appealed to the CTA. CIR demanded from Lingayen Electric the
payment of P3,616.86 representing deficiency franchise tax and surcharges for the years 1959 to 1961 again
applying the franchise tax rate of 5% on gross receipts as prescribed in Section 259 of the National Internal
Revenue Code. Lingayen Electric protested but its request for reconsideration was denied so it appealed to
the CTA. Pending the hearing of the said cases, RA 3843 was passed on 1963, granting to the private
respondent a legislative franchise for the operation of the electric light, heat, and power system in the same
municipalities of Pangasinan. Section 4 thereof provides that: In consideration of the franchise and rights
hereby granted, the grantee shall pay into the Internal Revenue office of each Municipality in which it is
supplying electric current to the public under this franchise, a tax equal to two per centum of the gross
receipts from electric current sold or supplied under this franchise. Said tax shall be due and payable
quarterly and shall be in lieu of any and all taxes and/or licenses of any kind, nature or description levied,
established, or collected by any authority whatsoever, municipal, provincial or national, now or in the future,
on its poles, wires, insulator x x x and on its franchise, rights, privileges, receipts, revenues and profits, from
which taxes and/or licenses, the grantee is hereby expressly exempted and effective further upon the date the
original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on
the gross receipts as provided for in the original franchise shall be collected, any provision of law to the
contrary notwithstanding. CTA held that RA 3843 should apply and accordingly dismissed the cases.

ISSUES 1) WON Section 4 of RA 3843 is unconstitutional. NO

2) WON Section 4 of RA 3843 could be given retroactive effect so as to render uncollectible the taxes in
question which were assessed before its enactment YES

RATIO 1) The 5% franchise tax rate provided in Section 259 of the Tax Code was never intended to have a
universal application. The said Section 259 of the Tax Code expressly allows the payment of taxes at rates
lower than 5% when the charter granting the franchise of a grantee, like the one granted to the private
respondent under Section 4 of RA 3843, precludes the imposition of a higher tax. RA 3843 did not only fix and
specify a franchise tax of 2% on its gross receipts, but made it in lieu of any and all taxes, all laws to the
contrary notwithstanding, thus, leaving no room for doubt regarding the legislative intent. Charters or special
laws granted and enacted by the Legislature are in the nature of private contracts. They do not constitute a
part of the machinery of the general government. They are usually adopted after careful consideration of the
private rights in relation with resultant benefits to the State x x x in passing a special charter the attention of
the Legislature is directed to the facts and circumstances which the act or charter is intended to meet. The
Legislature considers (sic) and make (sic) provision for all the circumstances of a particular case. In view of
the foregoing, The Court finds no reason to disturb CTAs ruling upholding the constitutionality of the law in
question.

2) The question of whether a statute operates retrospectively or only prospectively depends on the legislative
intent. In the instant case, Act No. 3843 provides that effective . . . upon the date the original franchise
was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross
receipts . . . shall be collected, any provision to the contrary notwithstanding. RA 3843 therefore specifically
provided for the retroactive effect of the law. RULING Decision affirmed.

ABS-CBN v. CTA 1981

FACTS: ABS-CBN is engaged in the business of telecasting local as well as foreign films acquired from foreign
corporations not engaged in trade or business within the Philippines. The applicable law wrt the income tax
of non-resident corporations is section 24 (b) of the National Internal Revenue Code, as amended by Republic
Act No. 2343 dated June 20, 19598.
On April 12, 1961, in implementation of said provision, the CIR issued General Circular No. V-3349.Pursuant
to the foregoing, ABS-CBN dutifully withheld and turned over to the BIR the amount of 30% of one-half of the
film rentals paid by it to foreign corporations not engaged in trade or business within the Philippines. The last
year that ABS-CBN withheld taxes pursuant to the foregoing Circular was in 1968.
On June 27, 1968, RA 5431 amended Section 24 (b) 10 of the Tax Code increasing the tax rate from 30 % to
35 % and revising the tax basis from "such amount" referring to rents, etc. to "gross income."
On February 8, 1971, the CIR issued Revenue Memorandum Circular No. 4-71, revoking General Circular No.
V-334, and holding that the latter was "erroneous for lack of legal basis," because "the tax therein prescribed
should be based on gross income without deduction whatever.

On the basis of this new Circular, CIR issued against ABS- CBN a letter of assessment and demand requiring
them to pay deficiency withholding income tax on the remitted film rentals for the years 1965 through 1968
and film royalty as of the end of 1968 in the total amount of P525,897.06.

ISSUE:
Whether or not respondent can apply General Circular No. 4-71 retroactively.

Held: Rulings or circulars promulgated by the Commissioner have no retroactive application where to so
apply them would be prejudicial to taxpayers. Herein, the prejudice the company of the
retroactive application of Memorandum Circular 4-71 is beyond question. It was issued only in 1971, or three
years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The
assessment and demand on petitioner to pay deficiency withholding income tax was also made three years
after 1968 for a period of time commencing in 1965. The company was no longer in a position to withhold
taxes due from foreign corporations because it had already remitted all film rentals and had no longer control
over them when the new circular was issued. Insofar as the enumerated exceptions are concerned, the
company does not fall under any of them.