Case
Executive Secretary vs. Southwing Heavy
Industries
John Hay People's Alternative Coalition vs. Victor Sec. 3 of Presidential Proclamation No. 420,
Lim, President of the Bases Conversion
Development Authority
Delpher Trades Corp. vs. IAC
Doctrine/ Ruling
EO 156 prohibiting the import of used motor
vehicles, with some exceptions, is declared void,
but only with respect to the Subic Freeport Zone.
To be valid, an administrative order must fulfill
the following requisites:
1) Its promulgation must be authorized by the
legislature
2) It must be promulgated in accordance with
the required procedure
3) It must be within the scope of authority
given by the legislature
4) It must be reasonable
The SC agreed with petitioner that the EO is
constitutional, because it is based on constitutional
and statutory requirements, but upheld
respondents' contention that it does not apply to
Subic. The EO does not fulfill the 3rd requisite,
because the scope of the President's authority
does not cover the Subic Freeport Zone.
exempting the Special Economic Zone (SEZ) of
Camp John Hay, is unconstitutional. RA 7227, or
the Bases Conversion Act, only mentions Subic
Freeport Zone as tax exempted. Future converted
bases not mentioned are not exempted. Tax
exemption must be strictly construed. Tax
exemption must be provided in a language too
clear to be mistaken. It cannot be implied. The
grant of tax exemption by the executive also
circumvents the legislature's power to grant tax
exemption.
The sale of property between the Pacheco Family
and Delpher Trades (of which the Pacheco Family
owns 55%) is ruled as not a valid sale, because
there was no transfer of interest (as the Pachecos
technically own the company which bought their
property).
For taxation purposes, however, this “estate
planning” scheme was valid. The Pachecos
validly avoided estate taxes through this
method. “The legal right of a taxpayer to
decrease the amount of what otherwise could
be his taxes or altogether avoid them, by means

Commisioner of Internal Revenue vs. Lincoln
Philippine Life Insurance
CIR vs. The Estate of Benigno Toda, Jr.
City of Iloilo vs. Smart Communications
which the law permits, cannot be doubted.”
The Junior Estate Builder Policy increased
respondent's insurance coverage to its insured
upon the attainment of a certain age. The SC
ruled that this increased amount, and not the
original amount, falls under the ambit of Sec.
173 of the NIRC imposing a documentary
stamp tax on insurance policies, because the
exact amount was determinable at the
beginning, even before the suspensive condition
was fulfilled.
It should be emphasized that while tax
avoidance schemes are not prohibited, tax laws
cannot be circumvented in order to evade the
payment of just taxes.
Toda's sale of the Cibeles Building to Altonaga
was clearly a case of tax evasion. Tax evasion
requires the concurrence of three factors: (1)
the end to be achieved, i.e., the payment of less
than that known by the taxpayer to be legally
due, or the non-payment of tax when it is
shown that a tax is due; (2) an accompanying
state of mind which is described as being evil,
in bad faith, willfull,or deliberate and not
accidental; and (3) a course of action or failure
of action which is unlawful.
In this case, all 3 factors were present. It is
obvious that the objective of the sale to Altonaga
was to reduce the amount of tax to be paid
especially that the transfer from him to RMI
would then subject the income to only 5%
individual capital gains tax, and not the 35%
corporate income tax. Altonagas sole purpose of
acquiring and transferring title of the subject
properties on the same day was to create a tax
shelter. Altonaga never controlled the property
and did not enjoy the normal benefits and
burdens of ownership. The sale to him was
merely a tax ploy, a sham, and without business
purpose and economic substance. Doubtless, the
execution of the two sales was calculated to
mislead the BIR with the end in view of reducing
the consequent income tax liability.
Sec. 9 of Smart's legislative franchise, and Sec. 23
of the Public Telecommunications Act do not

National Power Corp. vs. Central Board of
Assessment Appeals
exempt Smart from paying local franchise and
business taxes to the City of Iloilo.
Sec. 9 of the franchise is unclear on whether
exemption applies to national or to local taxes,
and even if it does apply, the “in lieu of” clause
actually means that Smart still has to pay
franchise taxes.
Sec. 23 of the Public Telecoms Act means
exmeption from regulatory or reporting
requirements by the NTC and other agencies. The
language of Section 23 and the proceedings of
both Houses of Congress are bereft of anything
that would signify the grant of tax exemptions
to all telecommunications entities. Intent to
grant tax exemption cannot therefore be
discerned from the law; the term exemption is
too general to include tax exemption and runs
counter to the requirement that the grant of tax
exemption should be stated in clear and
unequivocal language too plain to be beyond
doubt or mistake.
NPC, a tax-exempt GOCC, which is in a Build-
Operate-Transfer agreement with First Private
Power Corp. (FPPC), is not exempt from real
property taxes assessed by Bauang, La Union,
and the Provincial Government of La Union.
Under the BOT concept, the private entity owns
the project for 50 years before it is transferred to
the public entity. Since the prioject is still in its
early stage, the property is considered private
property, and thus, subject to taxes. Under the
contract, NPC undertook to pay the taxes on
behalf of FPPC.
Consistent with the BOT concept and as
implemented, BPPC the owner-manager-operator
of the project is the actual user of its machineries
and equipment. BPPCs ownership and use of
the machineries and equipment are actual,
direct, and immediate, while NAPOCORs is
contingent and, at this stage of the BOT
Agreement, not sufficient to support its claim
for tax exemption. Thus, the CTA committed no
reversible error in denying NAPOCORs claim
for tax exemption.