COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON.

COURT OF APPEALS,
HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION, respondents.

VITUG, J.:

FACTS:

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC.,

HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA,
petitioners,
vs.
HON. BIENVENIDO TAN, as Commissioner of Internal Revenue, respondent.

PADILLA, J.:

FACTS:

Four (4) petitions have been consolidated because of the similarity of the main issues involved
therein, seek to nullify Executive Order No. 273 (EO 273, for short), issued by the President of the
Philippines on 25 July 1987, to take effect on 1 January 1988, and which amended certain sections of the
National Internal Revenue Code and adopted the value-added tax (VAT, for short), for being
unconstitutional in that its enactment is not allegedly within the powers of the President; that the VAT is
oppressive, discriminatory, regressive, and violates the due process and equal protection clauses and other
provisions of the 1987 Constitution.

The Solicitor General, on the other hand, prays for the dismissal of the petitions on the ground that
the petitioners have failed to show justification for the exercise of its judicial powers, viz. (1) the existence
of an appropriate case; (2) an interest, personal and substantial, of the party raising the constitutional
questions; (3) the constitutional question should be raised at the earliest opportunity; and (4) the question
of constitutionality is directly and necessarily involved in a justiciable controversy and its resolution is
essential to the protection of the rights of the parties. According to the Solicitor General, only the third
requisite — that the constitutional question should be raised at the earliest opportunity — has been complied
with. He also questions the legal standing of the petitioners who, he contends, are merely asking for an
advisory opinion from the Court, there being no justiciable controversy for resolution.

ISSUE:

Whether or not EO 273 is unconstitutional on the Ground that the President had no authority to
issue EO 273 on 25 July 1987.

RULING:

The Supreme Court ruled in the negative. It held that it should be recalled that under Proclamation
No. 3, which decreed a Provisional Constitution, sole legislative authority was vested upon the President.
Art. II, sec. 1 of the Provisional Constitution states:
 Sec. 1. Until a legislature is elected and convened under a new Constitution, the President
shall continue to exercise legislative powers.

On 15 October 1986, the Constitutional Commission of 1986 adopted a new Constitution for the
Republic of the Philippines which was ratified in a plebiscite conducted on 2 February 1987. Article XVIII,
sec. 6 of said Constitution, hereafter referred to as the 1987 Constitution, provides:

Sec. 6. The incumbent President shall continue to exercise legislative powers until the first
Congress is convened.

It should be noted that, under both the Provisional and the 1987 Constitutions, the President is
vested with legislative powers until a legislature under a new Constitution is convened. The first Congress,
created and elected under the 1987 Constitution, was convened on 27 July 1987. Hence, the enactment of
EO 273 on 25 July 1987, two (2) days before Congress convened on 27 July 1987, was within the President's
constitutional power and authority to legislate.

Lastly, the petitioner’s contention that Congress was really convened on 30 June 1987 (not 27 July
1987). He contends that the word "convene" is synonymous with "the date when the elected members of
Congress assumed office" and thus at the time EO 273 was enacted the President already lost its power to
legislate. However, the 1987 Constitution mentions a specific date when the President loses her power to
legislate. If the framers of said Constitution had intended to terminate the exercise of legislative powers by
the President at the beginning of the term of office of the members of Congress, they should have so stated
(but did not) in clear and unequivocal terms. The Court has not power to re-write the Constitution and give
it a meaning different from that intended.
 JOSE J. FERRER, JR., Petitioner,
vs.
CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY
TREASURER OF QUEZON CITY, AND CITY ASSESSOR OF QUEZON CITY, Respondents.

PERALTA, J.:
FACTS:
On October 17, 2011, respondent Quezon City Council enacted Ordinance No. SP-2095, S-2011,
or the Socialized Housing Tax of Quezon City, Section 3 of which provides:
SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on the
assessed value of land in excess of One Hundred Thousand Pesos (Php100,000.00) shall be collected by
the City Treasurer which shall accrue to the Socialized Housing Programs of the Quezon City Government.
The special assessment shall accrue to the General Fund under a special account to be established for the
purpose.
Effective for five (5) years, the Socialized Housing Tax (SHT) shall be utilized by the Quezon City
Government for the following projects: (a) land purchase/land banking; (b) improvement of current/existing
socialized housing facilities; (c) land development; (d) construction of core houses, sanitary cores, medium-
rise buildings and other similar structures; and (e) financing of public-private partnership agreement of the
Quezon City Government and National Housing Authority (NHA) with the private sector. Under certain
conditions, a tax credit shall be enjoyed by taxpayers regularly paying the special assessment:
Furthermore, only the registered owners may avail of the tax credit and may not be continued by
the subsequent property owners even if they are buyers in good faith, heirs or possessor of a right in
whatever legal capacity over the subject property.
The petitioner assailed that the city has no power to impose the tax. He likewise averred that SHT
violates the rule on equality because it burdens real property owners with expenses to provide funds for the
housing of informal settlers. And that the SHT is confiscatory or oppressive.
On the other hand, Ordinance No. SP-2235, S-20135 was enacted on December 16, 2013 and took
effect ten days after when it was approved by respondent City Mayor.6 The proceeds collected from the
garbage fees on residential properties shall be deposited solely and exclusively in an earmarked special
account under the general fund to be utilized for garbage collections.7 Section 1 of the Ordinance set forth
the schedule and manner for the collection of garbage fees:
SECTION 1. The City Government of Quezon City in conformity with and in relation to Republic
Act No. 7160, otherwise known as the Local Government Code of 1991 HEREBY IMPOSES THE
FOLLOWING SCHEDULE AND MANNER FOR THE ANNUAL COLLECTION OF GARBAGE
FEES, AS FOLLOWS:
On all domestic households in Quezon City; on all condominium unit and socialized housing
projects/units in Quezon City; and On High-rise Condominium Units and Apartments.
Petitioner alleges that he is a registered co-owner of a 371-square-meter residential property in
Quezon City which is covered by Transfer Certificate of Title (TCT) No. 216288, and that, on January 7,
2014, he paid his realty tax which already included the garbage fee in the sum of Php100.00. He also alleged
that it violates the rule on double taxation. And that it violates the rule on equality because the fees are
collected from only domestic households and not from restaurants, food courts, fast food chains, and other
commercial dining places that spew garbage much more than residential property owners.
ISSUES:
Whether or not both ordinances are valid.
RULING:
The Supreme Court ruled in the negative.
In upholding the validity of Socialized Housing Tax, the Court held that it must be noted that local
government units such as cities has the power to tax. The collection for the socialized housing tax is valid.
It must be noted that the collections were made to accrue to the socialized housing programs and projects
of the city.
In this case, there was both an exercise of the power to tax and police power. Removing slum areas
in Quezon City is not only beneficial to the underprivileged and homeless constituents but advantageous to
the real property owners as well. The situation will improve the value of their property investments, fully
enjoying the same in view of an orderly, secure, and safe community, and will enhance the quality of life
of the poor, making them law-abiding constituents and better consumers of business products.
There is a substantial distinction between: real property owner and an informal settler. In fact, the
Supreme Court said that the disparity is so obvious. It is inherent in the power to tax that a State is free to
select the subjects of taxation. Inequities which result from a singling out of one particular class for taxation
or exemption infringe no constitutional limitation.

All these requisites are complied with: An ordinance based on reasonable classification does not
violate the constitutional guaranty of the equal protection of the law. The requirements for a valid and
reasonable classification are: (1) it must rest on substantial distinctions; (2) it must be germane to the
purpose of the law; (3) it must not be limited to existing conditions only; and (4) it must apply equally to
all members of the same class.

The ordinance is also not oppressive since the tax rate being imposed is consistent with the UDHA
(Urban Development and Housing Act of 1992). While the law authorizes LGUs to collect SHT on
properties with an assessed value of more than P50,000.00, the questioned ordinance only covers properties
with an assessed value exceeding P100,000.00. As well, the ordinance provides for a tax credit equivalent
to the total amount of the special assessment paid by the property owner beginning in the sixth (6th) year
of the effectivity of the ordinance.

With regards to the ordinance which imposed the collection of garbage fees, the Court held that the
imposition of garbage fee is invalid.

There is no violation of double taxation the garbage fees are not taxes in Progressive Development
Corporation v. Quezon City, the Court declared 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."

In order to constitute double taxation in the objectionable or prohibited sense the same property
must be taxed twice when it should be taxed but once; both taxes must be imposed on the same property or
subject-matter, for the same purpose, by the same State, Government, or taxing authority, within the same
jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character
of tax.

There is, however, a violation of the rule on equality. No substantial distinction between an
occupant of a lot, on one hand, and an occupant of a unit in a condominium, socialized housing project or
apartment, on the other hand. Most likely, garbage output produced by these types of occupants is uniform
and does not vary to a large degree; thus, a similar schedule of fee is both just and equitable.

The garbage fees or rates are unjust and inequitable. A resident of a 200 sq. m. unit in a
condominium or socialized housing project has to pay twice the amount than a resident of a lot similar in
size; unlike unit occupants, all occupants of a lot with an area of 200 sq. m. and less have to pay a fixed
rate of Php100.00; and the same amount of garbage fee is imposed regardless of whether the resident is
from a condominium or from a socialized housing project.

Lastly, the classifications are not germane to the purpose of the ordinance. The declared purpose
is: "promoting shared responsibility with the residents to attack their common mindless attitude in over-
consuming the present resources and in generating waste."

Instead of simplistically categorizing the payee into land or floor occupant of a lot or unit of a
condominium, socialized housing project or apartment, respondent City Council should have considered
factors that could truly measure the amount of wastes generated and the appropriate fee for its collection.
Factors include, among others, household age and size, accessibility to waste collection, population density
of the barangay or district, capacity to pay, and actual occupancy of the property.
 RE: LETTER OF TONY Q. V ALENCIANO, HOLDING OF RELIGIOUS RITUALS AT THE
HALL OF JUSTICE BUILDING IN QUEZON CITY

MENDOZA, J.:

FACTS:

This controversy originated from a series of letters, written by Tony Q. Valenciano and addressed
to then Chief Justice Reynato S. Puno.

In his first Letter, dated January 6, 2009, Valenciano reported that the basement of the Hall of
Justice of Quezon City (QC) had been converted into a Roman Catholic Chapel, complete with offertory
table, images of Catholic religious’ icons, a canopy, an electric organ, and a projector. He believed that
such practice violated the constitutional provision on the separation of Church and State and the
constitutional prohibition against the appropriation of public money or property for the benefit of a sect,
church, denomination, or any other system of religion.

Valenciano further averred that the holding of masses at the basement of the QC Hall of Justice
showed that it tended to favor Catholic litigants; that the rehearsals of the choir caused great disturbance to
other employees; that the public could no longer use the basement as resting place; that the employees and
litigants of the Public Attorney's Office (PAO), Branches 82 and 83 of the Regional Trial Court (RTC),
Legal Library, Philippine Mediation Center, and Records Section of the Office of the Clerk of Court (OCC)
could not attend to their personal necessities such as going to the lavatories because they could not traverse
the basement between 12:00 o'clock noontime and 1: 15 o'clock in the afternoon; that the court employees
became hostile toward each other as they vied for the right to read the epistle; and that the water supply in
the entire building was cut off during the mass because the generator was turned off to ensure silence.

ISSUES:

Whether or not the holding of religious rituals in the halls of justice does not amount to a union of
church and state.

Whether or not there was an appropriation of public money or property for the benefit of any
church.

RULING:

The Supreme Court, in both issues, ruled in the negative. It held that The present controversy did
not involve a national or local law in conflict with the Free Exercise Clause. Valenciano was merely
questioning the propriety of holding religious masses at the basement of the QC Hall of Justice.

By allowing the holding of masses, the Court could not be said to have established Roman
Catholicism as an official religion or to have endorsed the same. It also allowed other religious
denominations to practice their religion within the courthouses.

Thus, the holding of religious rituals at the Halls of Justice does not amount to a union of Church
and State. While the Church and State are separate, the latter still recognizes the inherent right of the people
to have some form of belief system. Such is enshrined in our Constitution.
 Besides, allowing religion to flourish is not contrary to the principle of separation of Church and
State. In order to give life to the constitutional right of freedom of religion, the State adopts a policy of
accommodation - a recognition of the reality that some governmental measures may not be imposed on a
certain portion of the population for the reason that these measures are contrary to their religious beliefs.
As long as it can be shown that the exercise of the right does not impair the public welfare, the attempt of
the State to regulate or prohibit such right would be an unconstitutional encroachment.

There is in this case, merely an accommodation. First, there is no law, ordinance or circular issued
by any duly constitutive authorities expressly mandating that judicial employees attend the mass. Second,
when judiciary employees attend the masses to profess their faith, it is at their own initiative and on their
own free will. Third, no government funds are being spent because the lighting and air conditioning
continue to be operational even if there are no religious rituals being observed. Fourth, the basement has
neither been converted into a Roman Catholic Chapel not has it been permanently appropriated for the
exclusive use of the faithful. Fifth, the allowance of religious masses has not prejudiced other religions.

On the second issue, it has also been held that the constitutional provision in Section 29 (2), Article
VI of the 1987 Constitution provides that said prohibition does not inhibit the use of public property for
religious purposes when the religious character of such use is merely incidental to a temporary use which
is available indiscriminately to the public in general. Hence, a public street may be used for a religious
procession even as it is available for a civic parade, in the same way that a public plaza is not barred to a
religious rally if it may also be used for a political assemblage.

The Constitution even grants tax exemption to properties actually, directly and exclusively devoted
to religious purposes. Certainly, this benefits the religious sects for a portion of what could have been
collected for the benefit of the public is surrendered in their favor.

Here, the basement of the QC Hall of Justice is not appropriated, applied or employed for the sole
purpose of supporting the Roman Catholics.

Further, it has not been converted into a Roman Catholic chapel for the exclusive use of its faithful contrary
to the claim of Valenciana. Judge Maceren reported that the basement is also being used as a public waiting
area for most of the day and a meeting place for different employee organizations. The use of the area for
holding masses is limited to lunch break period from twelve (12) o'clock to one (1) o'clock in the afternoon.
Further, Judge Sagun, Jr. related that masses run for just a little over thirty (30) minutes. It is, therefore,
clear that no undue religious bias is being committed when the subject basement is allowed to be
temporarily used by the Catholics to celebrate mass, as the same area can be used by other groups of people
and for other purposes.49 Thus, the basement of the QC Hall of Justice has remained to be a public property
devoted for public use because the holding of Catholic masses therein is a mere incidental consequence of
its primary purpose.
 J. CASANOVAS, plaintiff-appellant,
vs.
JNO. S. HORD, defendant-appellee.

WILLARD, J.:

FACTS:

In January, 1897, the Spanish Government, in accordance with the provisions of the royal decree
of the 14th of May, 1867, granted to the plaintiff certain mines in the said Province of Ambos Camarines,
of which mines the plaintiff is now the owner.

That there were valid perfected mining concessions granted prior to the 11th of April, 1899, is
conceded. They were so considered by the Collector of Internal Revenue and were by him said to fall within
the provisions of section 134 of Act No. 1189, known as the Internal Revenue Act. That section is as
follows:

SEC. 134. On all valid perfected mining concessions granted prior to April eleventh, eighteen
hundred and ninety-nine, there shall be levied and collected on the after January first, nineteen hundred and
five, the following taxes:

2. (a) On each claim containing an area of sixty thousand square meters, an annual
tax of one hundred pesos; (b) and at the same rate proportionately on each claim containing an area
in excess of, or less than, sixty thousand square meters.

3. On the gross output of each an ad valorem tax equal to three per centum of the
actual market value of such output.

The defendant accordingly imposed upon these properties the tax mentioned in section 134, which
tax, as has before been stated, plaintiff paid under protest.

ISSUE:

Whether or not Section 134 of Act No. 1189 is void or valid.

RULING:

The Supreme Court ruled that Section 134 of Act No. 1189 is valid. The Court ruled that the said
section is not valid as to the parties because the concessions granted by the Government of Spain to the
plaintiff, constitute contracts between the parties and thus section 134 of the Internal Revenue Law impairs
the obligation of these contract. The deed constituted a contract between the Spanish Government and
Casanovas.

Furthermore, the section conflicts with Section 60 of the Act of Congress of July 1, 1902, which
indicate that concessions can be cancelled only by reason of illegality in the procedure by which they were
obtained, or for failure to comply with the conditions prescribed as requisites for their retention in the laws
under which they were granted. The grounds were not shown nor claimed in the case.

Moreover, the Court ruled that this section is also void because in conflict with section 60 of the
act of Congress of July 1, 1902 which provides that “That nothing in this Act shall be construed to effect
the rights of any person, partnership, or corporation, having a valid, perfected mining concession granted
prior to April eleventh, eighteen hundred and ninety-nine, but all such concessions shall be conducted under
the provisions of the law in force at the time they were granted, subject at all times to cancellation by reason
of illegality in the procedure by which they were obtained, or for failure to comply with the conditions
prescribed as requisite to their retention in the laws under which they were granted: Provided, That the
owner or owners of every such concession shall cause the corners made by its boundaries to be distinctly
marked with permanent monuments within six months after this act has been promulgated in the Philippine
Islands, and that any concessions, the boundaries of which are not so marked within this period shall be
free and open to explorations and purchase under the provisions of this act.”

This section seems to indicate that concessions, like those in question, can be canceled only by
reason of illegality in the procedure by which they were obtained, or for failure to comply with the
conditions prescribed as requisite for their retention in the laws under which they were granted. There is
nothing in the section which indicates that they can be canceled for failure to comply with the conditions
prescribed by subsequent legislation. In fact, the real intention of the act seems to be that such concession
should be subject to the former legislation and not to any subsequent legislation. There is no claim in this
case that there was any illegality in the procedure by which these concessions were obtained, nor is there
any claim that the plaintiff has not complied with the conditions prescribed in the said royal decree of 1867.