CIR v Gotamco GR No L-31092, February 27, 1987

FACTS:
The Republic of the Philippines and the World Health Organization(WHO) entered
into a Host Agreement, which gives the International Organization privileges and
immunities. Under the Host Agreement, it provides that, the Organization, its assets,
income and other properties shall be exempt from all direct and indirect taxes,
However, the Organization will not claim exemption from taxes which are for public
utility services.WHO constructed a building for its offices, as well as other United
Nations offices in Manila. WHO informed the bidders that the building to be
constructed belonged to an international organization with diplomatic status and thus
exempt from the payment of all fees, licenses, and taxes, and that therefore their bids.
John Gotamco & Sons, Inc. won the bid and was awarded the construction contract.
In 1958, WHO received an opinion from the Commissioner of the BIR, saying that
the 3% contractor’s tax is an indirect tax on the assets and income of the WHO. The
gross receipts derived by the contractor is exempt from tax in accordance with the
Host Agreement. Subsequently, the CIR reversed his opinion and said that the 3%
contractor’s tax is neither a direct nor an indirect tax on the WHO, but a tax primarily
due from the contractor.WHO then issued a certification, stating that, contractors were
informed that no tax or fees will be levied upon them for their work in connection
with the construction of the building, as this will be considered as an indirect tax to
the WHO. In 1961, CIR demanded the 3% contractor’s tax from Gotamco, plus
surcharges on the gross receipts. Gotamco appealed to the CTA where it reversed the
Commissioner’s decision.

ISSUE: Is Gotamco liable for the tax?

HELD: No.
RULING:
The SC agrees with the CTA that, contractor’s tax is an indirect tax. Though it is
payable by the contractor, it is the owner of the building that shoulders the burden of
the tax because the same is shifted by the contractor to the owner as a matter of
self-preservation. In the last analysis,it is the WHO that will pay the tax indirectly
through the contractor and it certainly cannot be said that this tax has no bearing upon
the WHO.The certification issued by the WHO, sought exemption of the contractor
Gotamco from any taxes in connection with the construction of the WHO office
building. The 3% contractor’s tax would be within this category and should be viewed
as a form of an “indirect tax” on the Organization, as the payment thereof or its
inclusion in the bid price would have meant an increase in the construction cost of the
building.
 Direct taxes are those that are demanded from the very person who, it is intended
or desired, should pay them; while indirect taxes are those that are demanded in the
first instance from one person in the expectation and intention that he can shift the
burden to someone else. Herein, the contractor’s tax is payable by the contractor but it
is the owner of the building that shoulders the burden of the tax because the same is
shifted by the contractor to the owner as a matter of self-preservation. Such tax is an
“indirect tax” on the organization, as the payment thereof or its inclusion in the bid
price would have meant an increase in the construction cost of the building. Hence,
WHO’s exemption from “indirect taxes” implies that Gotamco is exempt from
contractor’s tax.

SILKAIR (SINGAPORE) PTE, LTD vs. COMMISSIONER OF INTERNAL

REVENUEG.R. No. 173594, February 6, 2008

FACTS:
Silkair, a corporation organizedunder the laws of Singapore which has a
Philippine representative office, is an online international air carrier operating the
Singapore-Cebu-Davao-Singapore, Singapore-Davao-Cebu-Singapore,
andSingapore-Cebu-Singapore routes.
On December 19, 2001, Silkair filed with the Bureau of Internal Revenue (BIR) a
written application for the refund of P4,567,450.79 excise taxes it claimed to have
paid on its purchases of jet fuel from Petron Corporation from January to June 2000.
The BIR denied the application.
On appeal, the CTA denied Silkair’s petition on the ground that as the excise tax
was imposed on Petron Corporation as the manufacturer of petroleum products, any
claim for refund should be filed by the latter; and where the burden of tax is shifted to
the purchaser, the amount passed on to it is no longer a tax but becomes an added cost
of the goodspurchased.
The liability for excise tax on petroleum products that are beingremoved from its
refinery is imposed on the manufacturer/producer (Section 130 of the NIRC of 1997.0
The right to claim for the refund of excise taxes paid on petroleum products lies
with Petron Corporation who paid and remitted the excise tax to the BIR. Respondent,
on the other hand, may only claim from Petron Corporation the reimbursement of the
tax burden shifted to theformer by the latter. The excise tax partaking the nature of an
indirec ttax, is clearly the liability of the manufacturer or seller who has theoption
whether or not to shift the burden of the tax to the purchaser.Where the burden of the
tax is shifted to the [purchaser], the amountpassed on to it is no longer a tax but
becomes an added cost on thegoods purchased which constitutes a part of the
purchase price.

ISSUE: Whether Silkair is the proper party to claim for refund or tax credit.
HELD: No.
RULING:
The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even
if he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides
that "unless otherwise specifically allowed, the return shall be filed and the excise tax
paid by the manufacturer or producer before removal of domestic products from place
of production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which
is entitled toclaim a refund based on Section 135 of the NIRC of 1997 and Article4(2)
of the Air Transport Agreement between RP and Singapore. Silkair bases its claim for
refund or tax credit on Section 135 (b) of the NIRC of 1997 which reads
Sec. 135. Petroleum Products sold to International Carriers and Exempt Entities
of Agencies. – Petroleum products sold to the following are exempt from excise tax:
(b) Exempt entities or agencies covered by tax treaties,conventions, and other
international agreements for their use and consumption: Provided, however, That the
country of said foreign international carrier or exempt entities or agencies exempts
from similar taxes petroleum products sold to Philippine carriers, entities or
agencies;and Article 4(2) of the Air Transport Agreement between the Government of
the Republic of the Philippines and the Government of the Republic of Singapore (Air
Transport Agreement between R P and Singapore). The exemption granted under
Section 135 (b) of the NIRC of 1997and Article 4(2) of the Air Transport Agreement
between RP and Singapore cannot, without a clear showing of legislative intent, be
construed as including indirect taxes. Statutes granting tax exemptions must be
construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority, and if an exemption is found to exist, it must not be enlarged by
construction.

CIR vs. CA, Atlas Consolidated GR No. 104151 March 10, 1995

FACTS: The Commissioner of Internal Revenue served two notices and demand for
payment of the respective deficiency ad valorem and business taxes for taxable years
1975 and 1976 against the respondent Atlas Consolidated Mining and Development
Corporation (ACMDC). The latter protested both assessments but the same were
denied, hence it filed two separate petitions for review in the Court of Tax Appeals.
The CTA rendered a consolidated decision holding, inter alia, that ACMDC was not
liable for deficiency ad valorem taxes on copper and silver for 1975 and 1976 thereby
effectively sustaining the theory of ACMDC that in computing the ad valorem tax on
copper mineral, the refining and smelting charges should be deducted, in addition to
freight and insurance charges. However, the tax court held ACMDC liable for the
amount consisting of 25% surcharge for late payment of the ad valorem tax and late
filing of notice of removal of copper, silver, gold and pyrite extracted during certain
periods, and for alleged deficiency manufacturer's sales tax and such contractor's tax
for leasing out of its personal properties. The Court of Appeals affirmed the tax
court’s decision but reduced the tax liability of ACMDC.
The Commissioner of Internal Revenue claims that the Court of Appeals and the
tax court erred in allowing the deduction of refining and smelting charges from the
price of copper concentrates. It is the contention of the Commissioner that the
actual market value of the mineral products should be the gross sales realized
from copper concentrates, deducting therefrom mining, milling, refining,
transporting, handling, marketing or any other expenses. He submits that the
phrase "or any other expenses" includes smelting and refining charges and that the
law allows deductions for actual cost of ocean freight and insurance only in instances
where the minerals or mineral products are sold or consigned abroad by the lessees or
owner of the mine under C.I.F. terms, hence it is error to allow smelting and refining
charges as deductions.

ISSUE: Whether or not, in computing the ad valorem tax on copper, charges for
smelting and refining should also be deducted, in addition to freight and insurance
costs, from the price of copper concentrates.

HELD: No.
RULING:
Under the Tax Code, the ad valorem tax of 2% is imposed on the actual market
value of the annual gross output of the minerals or mineral products extracted or
produced from all mineral lands not covered by lease. In computing the tax, the term
"gross output" shall be the actual market value of minerals or mineral products, or of
bullion from each mine or mineral lands operated as a separate entity, without any
deduction for mining, milling, refining, transporting, handling, marketing or any other
expenses. If the minerals or mineral products are sold or consigned abroad by the
lessee or owner of the mine under C.I.F. terms, the actual cost of ocean freight and
insurance shall be deducted. In other words, the assessment shall be based, not upon
the cost of production or extraction of said minerals or mineral products, but on the
price which the same — before or without undergoing a process of manufacture —
would command in the ordinary course of business.
Hence, the charges for smelting and refining were assessed not on the basis of the
price of the copper extracted at the mine site which is prohibited by law, but on the
basis of the actual market value of the manufactured copper. The issue of whether the
ad valorem tax should be based upon the value of the finished product, or the value
upon extraction of the raw materials or minerals used in the manufacture of said
finished products, has been passed upon by us in several cases wherein we held that
the ad valorem tax is to be computed on the basis of the market value of the
mineral in its condition at the time of such removal and before it undergoes a
chemical change through manufacturing process, as distinguished from a purely
physical process which does not necessarily involve the change or transformation of
the raw material into a composite distinct product.

Villanueva vs. City of Iloilo

FACTS:
On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86,
imposing license tax fees as follows: (1) tenement house (casa de vecindad), P25.00
annually; (2) tenement house, partly or wholly engaged in or dedicated to business in
the streets of J.M. Basa, Iznart and Aldeguer, P24.00 per apartment; (3) tenement
house, partly or wholly engaged in business in any other streets, P12.00 per apartment.
The validity and constitutionality of this ordinance were challenged by the spouses
Eusebio Villanueva and Remedios Sian Villanueva, owners of four tenement houses
containing 34 apartments. The Supreme Court held the ordinance to be ultra vires.
On January 15, 1960 the municipal board of Iloilo City, believing, obviously, that
with the passage of Republic Act 2264, otherwise known as the Local Autonomy Act,
it had acquired the authority or power to enact an ordinance similar to that previously
declared by this Court as ultra vires, thus enacted an “Ordinance Imposing Municipal
License Tax on Persons Engaged in the Business of Operating Tenement Houses”.
For this reason, the petitioners filed a complaint against the City of Iloilo praying
the Ordinance declared invalid for being beyond the powers of the Municipal Council
of Iloilo to enact and unconstitutional for being violative of the rule as to uniformity
and taxation and for depriving said plaintiffs of the equal protection clause of the
Constitution.
The petitioners maintain that it is a "property tax" or "real estate tax," and not a
"tax on persons engaged in any occupation or business or exercising privileges," or a
license tax, or a privilege tax, or an excise tax. Indeed, the title of the ordinance
designates it as a "municipal license tax on persons engaged in the business of
operating tenement houses," while section 1 thereof states that a "municipal license
tax is hereby imposed on tenement houses." It is the phraseology of section 1 on
which the appellees base their contention that the tax involved is a real estate tax
which, according to them, makes the ordinance ultra vires as it imposes a levy "in
excess of the one per centum real estate tax allowable under … the Iloilo City
Charter, ..."
The trial court agreed with the petitioners. Hence, this appeal.

ISSUE:
Whether the tax is a property tax.
HELD: No.
RULING:
The tax in question is not a real estate tax. A real estate tax is a direct tax on
the ownership of lands and buildings or other improvements thereon, not
specially exempted,8 and is payable regardless of whether the property is used or
not, although the value may vary in accordance with such factor. The tax is
usually single or indivisible, although the land and building or improvements erected
thereon are assessed separately, except when the land and building or improvements
belong to separate owners.
The tax imposed by the ordinance in question does not possess the aforestated
attributes. It is not a tax on the land on which the tenement houses are erected,
although both land and tenement houses may belong to the same owner. The tax is not
a fixed proportion of the assessed value of the tenement houses, and does not require
the intervention of assessors or appraisers. It is not payable at a designated time or
date, and is not enforceable against the tenement houses either by sale or distraint.
Clearly, therefore, the tax in question is not a real estate tax.
On the contrary, it is plain from the context of the ordinance that the intention is
to impose a license tax on the operation of tenement houses, which is a form of
business or calling. The ordinance, in both its title and body, particularly sections 1
and 3 thereof, designates the tax imposed as a "municipal license tax" which, by
itself, means an "imposition or exaction on the right to use or dispose of property,
to pursue a business, occupation, or calling, or to exercise a privilege."

ALLIED BANKING VS THE QUEZON CITY GOVERNMENT, ET AL. (G.R.

NO.154126, OCTOBER 11, 2005)
FACTS: On December 1995, the Quezon City government enacted Ordinance No.357.
The second sentence of Section 3 of the ordinance for a general revision of real
property assessments. It also provided that parcels of land conveyed for remuneratory
consideration after the effectivity of said revision shall be subject to real estate tax
based on the actual amount reflected in the deed of conveyance or the current
approved zonal valuation of the BIR prevailing at the time of conveyance, whichever
is higher. On 1998, Allied Bank purchased from Natividad et al. a parcel of land on
Quezon City worth P38,000,000.00. Prior to the sale, Natividad et al. had been
payingt he annual real property tax based on the property’s fair market value of
P4,500,000.00. Allied Bank was then later required to pay P102,600.00 as quarterly
real estate tax which pegged the market value of the property at P38,000,000.00. It
paid the quarterly real estate tax for the property from the 1st quarter of 1999 up to the
3rd quarter of 2000 with some payments made under protest. It then sent a demand
letter to the Quezon City Treasurer’s Office seeking a refund of the real estate taxes
which was denied. Allied Bank then filed a petition for prohibition and declaratory
relief before the RTC for the declaration of nullity of Section 3 of the ordinance as it
is an invalid classification of real properties which are conveyed and those which are
not, the latter remaining to be valued and assessed in accordance with the general
revisions of assessments of real properties. Quezon City later enacted Ordinance
No.SP-1032 which repealed the assailed proviso in Section 3 of the 1995 Ordinance
as it violated the uniformity rule of taxation which is guaranteed by the Constitution.
Petitioner subsequently moved to declare respondents in default but respondents
moved to dismiss the petition, averring that the passage of the repealing ordinancehad
rendered the petition moot and academic. Petitioner opposed the motion claiming its
claim for refund and attorney’s fees had not been mooted, and the trial court still had
to determine if Section 3 of the ordinance is null and void ab initio. The trial court
granted respondents’ motion to dismiss saying that there is no need to resolve whether
the ordinance is null and void as the same was already declared violative of the
“uniformity rule” on taxation by the Quezon City Council itself and as for the claim
for refund, the RTC did not take cognizance of the case as an administrative remedy
was still available. Allied Bank filed a Motion for Reconsideration which was denied
so it went to the Supreme Court on appeal by certiorari under Rule 45.

Issue: WHETHER OR NOT SECTION 3, QUEZON CITY ORDINANCE NO. 357,

SERIES OF 1995, WHETHER OR NOT IT WAS ABROGATED, IS VALID.

Held: NO.
Ruling:
The second sentence of Section 3 of the Ordinance is null and void ab initio for
being ultra vires and for contravening the provisions of the Local Government Code. I
tacquired no legal effect and conferred no rights from its inception. Under the Local
Government Code, real properties shall be appraised at the current and fair market
value prevailing in the locality where the property is situated and classified for
assessment purposes on the basis of its actual use. Fair market value is the price at
which a property may be sold by a seller who is not compelled to sell and bought by a
buyer who is not compelled to buy, taking into consideration all uses to which the
property is adapted and might in reason be applied. The criterion established by the
statute contemplates a hypothetical sale. Hence, the buyers need not be actual and
existing purchasers.
It further held that the proviso directing that the real property tax be based on the
actual amount reflected in the deed of conveyance or the prevailing BIR zonal value is
invalid not only because it mandates an exclusive rule in determining the fair market
value but more so because it departs from the established procedures stated in the
Local Assessment Regulations No. 1-92 and unduly interferes with the duties
statutorily placed upon the local assessor by completely dispensing with his analysis
and discretion which the Code and the regulations require to be exercised. An
ordinance that contravenes any statute is ultra vires and void.
 Using the consideration appearing in the deed of conveyance to assess or appraise
real properties is not only illegal since the appraisal, assessment, levy and
collection of real property tax shall not be let to any private person, but it will
completely destroy the fundamental principle in real property taxation that real
property shall be classified, valued and assessed on the basis of its actual use
regardless of where located, whoever owns it, and whoever uses it. Necessarily,
allowing the parties to a private sale to dictate the fair market value of the property
will dispense with the distinctions of actual use stated in the Code and in the
regulations.

CHEVRON vs. CA
FACTS:
Facts: On June 28, 2002, the Board of Directors of respondent Clark
Development Corporation (CDC) issued and approved Policy Guidelines on the
Movement of Petroleum Fuel to and from the Clark Special Economic Zone. In one of
its provisions, it levied royalty fees to suppliers delivering Coastal fuel from outside
sources for Php0.50 per liter for those delivering fuel to CSEZ locators not sanctioned
by CDC and Php1.00 per litter for those bringing-in petroleum fuel from outside
sources. The policy guidelines were implemented effective July 27, 2002. The
petitioner Chevron Philippines Inc (formerly Caltex Philippines Inc) who is a fuel
supplier to Nanox Philippines, a locator inside the CSEZ, received a Statement of
Account from CDC billing them to pay the royalty fees amounting to Php115,000 for
its fuel sales from Coastal depot to Nanox Philippines from August 1 to September 21,
2002.
Petitioner, contending that nothing in the law authorizes CDC to impose royalty
fees based on a per unit measurement of any commodity sold within the special
economic zone, protested against the CDC and Bases Conversion Development
Authority (BCDA). They alleged that the royalty fees imposed had no reasonable
relation to the probably expenses of regulation and that the imposition on a per unit
measurement of fuel sales was for a revenue generating purpose, thus, akin to a “tax”.
BCDA denied the protest. The Office of the President dismissed the appeal as well for
lack of merit. Upon appeal, CA dismissed the case. CA held that in imposing the
royalty fees, CDC was exercising its right to regulate the flow of fuel into CSEZ
under the vested exclusive right to distribute fuel within CSEZ pursuant to its Joint
Venture Agreement (JVA) with Subic Bay Metropolitan Authority (SBMA) and
Coastal Subic Bay Terminal, Inc. (CSBTI) dated April 11, 1996.
The appellate court also found that royalty fees were assessed on fuel delivered,
not on the sale, by petitioner and that the basis of such imposition was petitioner’s
delivery receipts to Nanox Philippines. The fact that revenue is incidentally also
obtained does not make the imposition a tax as long as the primary purpose of such
imposition is regulation.
When elevated to the SC, petitioner argued that:
1) CDC has no power to impose fees on sale of fuel inside CSEZ on the basis of
income generating functions and its right to market and distribute goods inside
the CSEZ as this would amount to tax which they have no power to impose, and
that the imposed fee is not regulatory in nature but rather a revenue generating
measure;
2) even if the fees are regulatory in nature, it is unreasonable and are grossly in
excess of regulation costs. Respondents contended that the purpose of royalty
fees is to regulate the flow of fuel to and from the CSEZ and revenue (if any) is
just an incidental product. They viewed it as a valid exercise of police power
since it is aimed at promoting the general welfare of public; that being the CSEZ
administrator, they are responsible for the safe distribution of fuel products
inside the CSEZ.

Issue: Whether the act of CDC in imposing royalty fees can be considered as valid
exercise of the police power.

Held: Yes.
Ruling:
The SC said that CDC was within the limits of the police power of the State when
it imposed royalty fees. In distinguishing tax and regulation as a form of police power,
the determining factor is the purpose of the implemented measure. If the purpose is
primarily to raise revenue, then it will be deemed a tax even though the measure
results in some form of regulation. On the other hand, if the purpose is primarily to
regulate, then it is deemed a regulation and an exercise of the police power of the state,
even though incidentally, revenue is generated.
In this case, SC held that the subject royalty fee was imposed for regulatory
purposes and not for generation of income or profits. The Policy Guidelines was
issued to ensure the safety, security, and good condition of the petroleum fuel industry
within the CSEZ. The questioned royalty fees form part of the regulatory framework
to ensure “free flow or movement” of petroleum fuel to and from the CSEZ. The fact
that respondents have the exclusive right to distribute and market petroleum products
within CSEZ pursuant to its JVA with SBMA and CSBTI does not diminish the
regulatory purpose of the royalty fee for fuel products supplied by petitioner to its
client at the CSEZ.
 However, it was erroneous for petitioner to argue that such exclusive right of
respondent CDC to market and distribute fuel inside CSEZ is the sole basis of the
royalty fees imposed under the Policy Guidelines. Being the administrator of CSEZ,
the responsibility of ensuring the safe, efficient and orderly distribution of fuel
products within the Zone falls on CDC. Addressing specific concerns demanded by
the nature of goods or products involved is encompassed in the range of services
which respondent CDC is expected to provide under Sec. 2 of E.O. No. 80, in
pursuance of its general power of supervision and control over the movement of all
supplies and equipment into the CSEZ.
There can be no doubt that the oil industry is greatly imbued with public interest
as it vitally affects the general welfare. Fuel is a highly combustible product which, if
left unchecked, poses a serious threat to life and property. Also, the reasonable
relation between the royalty fees imposed on a “per liter” basis and the regulation
sought to be attained is that the higher the volume of fuel entering CSEZ, the greater
the extent and frequency of supervision and inspection required to ensure safety,
security, and order within the Zone.
Respondents submit that the increased administrative costs were triggered by
security risks that have recently emerged, such as terrorist strikes. The need for
regulation is more evident in the light of 9/11 tragedy considering that what is being
moved from one location to another are highly combustible fuel products that could
cause loss of lives and damage to properties.
As to the issue of reasonableness of the amount of the fees, SC held that no
evidence was adduced by the petitioner to show that the fees imposed are
unreasonable. Administrative issuances have the force and effect of law. They benefit
from the same presumption of validity and constitutionality enjoyed by statutes. These
two precepts place a heavy burden upon any party assailing governmental regulations.
Petitioner’s plain allegations are simply not enough to overcome the presumption of
validity and reasonableness of the subject imposition.

G. R. No. 178087 : May 5, 2010

H. COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. KUDOS METAL
CORPORATION, Respondent
Facts: Kudos Metal Corporation filed its Annual Income Tax Return (ITR) for the
taxable year 1998. (BIR) served upon respondent three Notices of Presentation of
Records. Respondent failed to comply with these notices, hence, the BIR issued a
Subpeona Duces Tecum dated September 21, 2006, receipt of which was
acknowledged by respondents President, Mr. Chan Ching Bio, in a letter dated
October 20, 2000. Respondent accountant, executed two Waiver of the Defense of
Prescription. BIR issued a Preliminary Assessment Notice for the taxable year 1998
against the respondent. This was followed by a Formal Letter of Demand with
Assessment Notices for taxable year 1998. Respondent challenged the assessments by
filing its “Protest on Various Tax Assessments” on December 3, 2003 and its “Legal
Arguments and Documents in Support of Protests against Various Assessments” on
February 2, 2004. BIR rendered a final Decision on the matter, requesting the
immediate payment of the Respondent’s tax liabilities. Respondent filed a Petition for
Review with the CTA. CTA cancelled the assessment notices issued against
respondent for having been issued beyond the prescriptive period. Petitioner moved
for reconsideration but the CTA Second Division denied the motion. On appeal, the
CTA En Banc affirmed the cancellation of the assessment notices. Petitioner sought
reconsideration but the same was unavailing.

Issue:WHETHER THE CTA ERRED IN RULING THAT THE GOV’T’. RIGHT TO

ASSESS UNPAID TAXES OF RESPONDENT PRESCRIBED.

Held: Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates
the government to assess internal revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the actual date of filing of such
return, whichever comes later. Hence, an assessment notice issued after the three-year
prescriptive period is no longer valid and effective. Exceptions however are provided
under Section 222 of the NIRC.
The waivers executed by respondents accountant did not extend the period within
which the assessment can be made. Petitioner does not deny that the assessment
notices were issued beyond the three-year prescriptive period, but claims that the
period was extended by the two waivers executed by respondents accountant. Section
222 (b) of the NIRC provides that the period to assess and collect taxes may only be
extended upon a written agreement between the CIR and the taxpayer executed before
the expiration of the three-year period.
Conversely, in this case, the assessments were issued beyond the prescribed
period. Also, there is no showing that respondent made any request to persuade the
BIR to postpone the issuance of the assessments. The doctrine of estoppel cannot be
applied in this case as an exception to the statute of limitations on the assessment of
taxes considering that there is a detailed procedure for the proper execution of the
waiver, which the BIR must strictly follow. As we have often said, the doctrine of
estoppel is predicated on, and has its origin in, equity which, broadly defined, is
justice according to natural law and right. As such, the doctrine of estoppel cannot
give validity to an act that is prohibited by law or one that is against public policy. It
should be resorted to solely as a means of preventing injustice and should not be
permitted to defeat the administration of the law, or to accomplish a wrong or secure
an undue advantage, or to extend beyond them requirements of the transactions in
which they originate. Simply put, the doctrine of estoppel must be sparingly applied.
TOLENTINO vs. SECRETARY OF FINANCE (235 SCRA 630, 249 SCRA 628)
FACTS:
The value-added tax (VAT) is levied on the sale, barter or exchange of goods and
properties as well as on the sale or exchange of services. It is equivalent to 10% of the
gross selling price or gross value in money of goods or properties sold, bartered or
exchanged or of the gross receipts from the sale or exchange of services. Republic Act
No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code.

Petitioner’s contention: Arturo Tolentino et al are questioning the constitutionality

of RA 7716 contending that it violates the progressive system of taxation. They quote
from a paper, entitled "VAT Policy Issues: Structure, Regressivity, Inflation and
Exports" by Alan A. Tait of the International Monetary Fund, that "VAT payment by
low-income households will be a higher proportion of their incomes (and
expenditures) than payments by higher-income households. That is, the VAT will be
regressive." Petitioners contend that as a result of the uniform 10% VAT, the tax on
consumption goods of those who are in the higher-income bracket, which before were
taxed at a rate higher than 10%, has been reduced, while basic commodities, which
before were taxed at rates ranging from 3% to 5%, are now taxed at a higher rate.
Respondent’s contention: Respondents that in fact it distributes the tax burden to as
many goods and services as possible particularly to those which are within the reach
of higher-income groups, even as the law exempts basic goods and services. It is thus
equitable. The goods and properties subject to the VAT are those used or consumed
by higher-income groups. These include real properties held primarily for sale to
customers or held for lease in the ordinary course of business, the right or privilege to
use industrial, commercial or scientific equipment, hotels, restaurants and similar
places, tourist buses, and the like. On the other hand, small business establishments,
with annual gross sales of less than P500,000, are exempted. This, according to
respondents, removes from the coverage of the law some 30,000 business
establishments. On the other hand, an occasional paper of the Center for Research and
Communication cities a NEDA study that the VAT has minimal impact on inflation
and income distribution and that while additional expenditure for the lowest income
class is only P301 or 1.49% a year, that for a family earning P500,000 a year or more
is P8,340 or 2.2%.

ISSUE: Whether the tax law is regressive.

HELD: No.
RULING:
Equality and uniformity of taxation means that all taxable articles or kinds of
property of the same class be taxed at the same rate. The taxing power has the
authority to make reasonable and natural classifications for purposes of taxation. To
satisfy this requirement it is enough that the statute or ordinance applies equally to all
persons, forms and corporations placed in similar situation.
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No.
7716 was enacted. R.A. No. 7716 merely expands the base of the tax. The validity of
the original VAT Law was questioned in Kapatiran ng Naglilingkod sa Pamahalaan
ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to those made in
these cases, namely, that the law was "oppressive, discriminatory, unjust and
regressive in violation of Art. VI, §28(1) of the Constitution." (At 382) Rejecting the
challenge to the law, this Court held:
“As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is
uniform. . . . The sales tax adopted in EO 273 is applied similarly on all goods and
services sold to the public, which are not exempt, at the constant rate of 0% or 10%.
The disputed sales tax is also equitable. It is imposed only on sales of goods or
services by persons engaged in business with an aggregate gross annual sales
exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from
its application. Likewise exempt from the tax are sales of farm and marine products,
so that the costs of basic food and other necessities, spared as they are from the
incidence of the VAT, are expected to be relatively lower and within the reach of the
general public.”
The Constitution does not really prohibit the imposition of indirect taxes which,
like the VAT, are regressive. What it simply provides is that Congress shall "evolve a
progressive system of taxation." The constitutional provision has been interpreted to
mean simply that "direct taxes are . . . to be preferred [and] as much as possible,
indirect taxes should be minimized." (E. FERNANDO, THE CONSTITUTION OF
THE PHILIPPINES 221 (Second ed. (1977)). Indeed, the mandate to Congress is not
to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which
perhaps are the oldest form of indirect taxes, would have been prohibited with the
proclamation of Art. VIII, §17(1) of the 1973 Constitution from which the present Art.
VI, §28(1) was taken. Sales taxes are also regressive. Resort to indirect taxes should
be minimized but not avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the taxpayers' ability to pay. In the
case of the VAT, the law minimizes the regressive effects of this imposition by
providing for zero rating of certain transactions (R.A. No. 7716, §3, amending §102
(b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, §4,
amending §103 of the NIRC).
Regressivity is not a negative standard for courts to enforce. What Congress
is required by the Constitution to do is to "evolve a progressive system of taxation."
This is a directive to Congress, just like the directive to it to give priority to the
enactment of laws for the enhancement of human dignity and the reduction of social,
economic and political inequalities (Art. XIII, § 1), or for the promotion of the right to
"quality education" (Art. XIV, § 1). These provisions are put in the Constitution as
moral incentives to legislation, not as judicially enforceable rights. At all events, our
1988 decision in Kapatiran 45 should have laid to rest the questions now raised
against the VAT. There similar arguments made against the original VAT Law
(Executive Order No. 273) were held to be hypothetical, with no more basis than
newspaper articles which this Court found to be "hearsay and [without] evidentiary
value." As Republic Act No. 7716 merely expands the base of the VAT system and its
coverage as provided in the original VAT Law, further debate on the desirability and
wisdom of the law should have shifted to Congress.

CHAVEZ vs. ONGPIN

FACTS:
The petition seeks to declare unconstitutional Executive Order No. 73 dated
November 25, 1986. Frank Chavez, as taxpayer, and intervenor Realty Owners
Association of the Philippines,Inc. (ROAP), allege that E.O.73 providing for the
collection of Real Property taxes as provided for under Section 21 of the P.D.464
(Real Property Tax Code) is unconstitutional because it accelerated the application of
the general revision of assessments to January 1,1 987 thereby increasing in real
property taxes by 100% to 400% on improvements, and up to 100% on land which
would necessarily lead to an increase in real property taxes amounting to confiscation
of property. Additionally, they argue that P.D.464 is unconstitutional insofar as it
imposes an additional1% tax on all property owners to raise funds for education, as
real property tax is admittedly a local tax for local governments.
However, the Solicitor General argues that there urgent need for local
governments to augment their financial resources to meet the rising cost of rendering
effective services to the people

ISSUE:
Whether E.O. No. 73 is unconstitutional.

HELD: No.
RULING:
We agree with the observation of the Office of the Solicitor General that without
Executive Order No. 73, the basis for collection of real property taxes win still be the
1978 revision of property values. Certainly, to continue collecting real property taxes
based on valuations arrived at several years ago, in disregard of the increases in the
value of real properties that have occurred since then, is not in consonance with a
sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax
system, requires that sources of revenues must be adequate to meet government
expenditures and their variations.

TAGANITO MINING CORP. Vs. COMMISIONER

FACTS:
Petitioner has been expressly granted a permit by the government via an
operating contract to explore, develop and utilize mineral deposits found in Surigao
del Norte with the obligation to pay taxes and other royalties.
These metallic minerals are then shipped to Japanese buyers where these minerals
are analyzed allegedly by independent surveyors upon unloading at its port of
destination. The procedure seems simple enough, except for the fact that analysis
abroad would oftentimes reveal a different value for the metallic minerals from that
indicated in the temporary or provisional invoice submitted by seller Taganito Mining
Corporation. There is almost always a variance in "market values" between that
shown in the provisional invoice and that indicated in the final calculation sheet
presented by the buyers.
Be that as it may, it is always the price indicated in the final invoice that is
determinative of the amount that the buyers will eventually pay Taganito Mining
Corporation. Petitioner on its part has no quarrel with the price that they will receive
from the clients for the metallic minerals sold, it however claims that there has been
overpayment of excise taxes already paid to the government declaring that the 5%
excise taxes were based on the amount indicated in the provisional invoice and final
computation show that if it based its excise taxes on the amount shown in the final
invoice, which they assert is the actual market value, they would have been required
to pay a lesser amount.
The Commissioner argues that in the case of excise taxes on mineral products, the
law requires that these should be paid upon removal of the minerals.They cited
Section 151(3) of the Tax Code:
“On all metallic minerals, a tax based on the actual market value of the gross
output thereof at the time of removal, in the case of those locally extracted or
produced…”

ISSUE:
Whether Taganito Mining should pay the tax based on the final invoice.

HELD: No.
RULING:
The Court takes notice of the phrase "at the time of removal". The law refers to
the minerals at the time these minerals were moved away from the position it
occupied, obviously referring to the Philippine valuation and analysis because it is in
this country where these minerals were extracted, removed and eventually shipped
abroad. To reckon the actual market value at the time of removal is also consistent
with the essence of an excise. It is a charge upon the privilege of severing or
extracting minerals from the earth, and is due and payable upon removal of the
mineral products from its bed or mines.
Furthermore it would be impossible for payment of excise taxes if one has to wait
for the final analysis to be done in the country where it is to be shipped and certainly
impractical as what the petitioner has done, to base the excise tax on the valuation
done here in the Philippines and then later on claim for a refund if it appears that the
final analysis accomplished abroad reveal a much lower price.
This set-up established by the petitioner is contrary to the principle of
administrative feasibility which is one of the basic principles of sound tax system.
Tax laws should be capable of convenient, just and effective administration
which is why it fixes a standard or a uniform tax base upon which taxes should
be paid. In the case of excise taxes on minerals and mineral products, the basis
provided by law is the actual market value of these minerals at the time of removal.
ROXAS vs. CTA
FACTS:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their
grandchildren by hereditary succession several properties. To manage the
above mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas
and Jose Roxas, formed a partnership called Roxas y Compania. At the conclusion of
World War II, the tenants who have all been tilling the lands in Nasugbu for
generations expressed their desire to purchase from Roxas y Cia the parcels which
they actually occupied. For its part, the government, in consonance with the
constitutional mandate to acquire big landed estates and apportion them among
landless tenant farmers,persuaded the Roxas brothers to part with their landholdings.
Conferences were held with the farmers in the early part 1948 and finally the Roxas
brothers agree to sell 13,500 hectares to the government for distribution to actual
occupants or a price of P2,079,048.47 plus P300,000.00 for survey and subdivision
expenses.
It turned out however that the Government did not have funds to cover the
purchase price, and so a special arrangement was made for the Rehabilitation Finance
Corporation to advance to Roxas y Cia the amount of P1,500,000.00 as loan.
Collateral for such loan were the lands proposed to be sold to the farmers. Under the
arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but
by installment, and contracted with the Rehabilitation Finance Corporation to pay its
loan from the proceeds of the yearly amortizations paid by the farmers.

The CIR demanded from the brothers the deficiency income taxes resulted from
the inclusion as income of Roxas y Cia. of the unreported 50% of the net profits for
1953 and 1955 derived from the sale of the Nasugbu farm lands to the tenants, and the
disallowance of deductions from gross income of various business expenses and
contributions claimed by Roxas y Cia. and the Roxas brothers. For the reason that
Roxas y Cia. subdivided its Nasugbu farm lands and sold them to the farmers on
installment, the Commissioner considered the partnership as engaged in the business
of real estate, hence, 100% of the profits derived therefrom was taxed. The Roxas
brothers protested the assessment but inasmuch as said protest was denied, they
instituted an appeal in the CTA which sustained the assessment. Hence, this appeal.

ISSUE:
Whether Roxas y Cia is engaged in a real estate business.

HELD: No.
RULING:
 The proposition of the Commissioner of Internal Revenue was not favorably
accepted by the Court in this isolated transaction with its peculiar circumstances in
spite of the fact that there were hundreds of vendees. Although they paid for their
respective holdings in installment for a period of ten years, it would nevertheless not
make the vendor Roxas y Cia. a real estate dealer during the ten-year amortization
period. It should be borne in mind that the sale of the Nasugbu farm lands to the very
farmers who tilled them for generations was not only in consonance with, but more in
obedience to the request and pursuant to the policy of our Government to allocate
lands to the landless. It was the bounden duty of the Government to pay the agreed
compensation after it had persuaded Roxas y Cia. to sell its haciendas, and to
subsequently subdivide them among the farmers at very reasonable terms and prices.
However, the Government could not comply with its duty for lack of funds.
Obligingly, Roxas y Cia. shouldered the Government's burden, went out of its way
and sold lands directly to the farmers in the same way and under the same terms as
would have been the case had the Government done it itself. For this magnanimous
act, the municipal council of Nasugbu passed a resolution expressing the people's
gratitude.
The power of taxation is sometimes called also the power to destroy.
Therefore it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly, lest the tax collector kill the "hen that lays the golden egg". And, in
order to maintain the general public's trust and confidence in the Government this
power must be used justly and not treacherously. It does not conform with Our sense
of justice in the instant case for the Government to persuade the taxpayer to lend it a
helping hand and later on to penalize him for duly answering the urgent call. In fine,
Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence,
pursuant to Section 34 of the Tax Code the lands sold to the farmers are capital assets,
and the gain derived from the sale thereof is capital gain, taxable only to the extent of
50%.

Tanada vs. Angara

FACTS:
This is a case petition by Sen. Wigberto Tanada, together with other lawmakers,
taxpayers, and various NGO’s to nullify the Philippine ratification of the World Trade
Organization (WTO) Agreement. Petitioners believe that this will be detrimental to
the growth of our National Economy and against to the “Filipino First” policy. The
WTO opens access to foreign markets, especially its major trading partners, through
the reduction of tariffs on its exports, particularly agricultural and industrial products.
Thus, provides new opportunities for the service sector cost and uncertainty
associated with exporting and more investment in the country. These are the predicted
benefits as reflected in the agreement and as viewed by the signatory Senators, a “free
market” espoused by WTO. Petitioners also contends that it is in conflict with the
provisions of our constitution, since the said Agreement is an assault on the sovereign
powers of the Philippines because it meant that Congress could not pass legislation
that would be good for national interest and general welfare if such legislation would
not conform to the WTO Agreement.

ISSUE:
Whether the agreement goes against the sovereign powers of government.

HELD: No.
RULING:
While sovereignty has traditionally been deemed absolute and all-encompassing
on the domestic level, it is however subject to restrictions and limitations voluntarily
agreed to by the Philippines, expressly or impliedly, as a member of the family of
nations. Unquestionably, the Constitution did not envision a hermit-type isolation of
the country from the rest of the world.
Thus, when the Philippines joined the United Nations as one of its 51 charter
members, it consented to restrict its sovereign rights under the concept of sovereignty
as auto-limitation. Apart from the UN Treaty, the Philippines has entered into many
other international pacts -- both bilateral and multilateral -- that involve limitations on
Philippine sovereignty.
Under these treaties, the Philippines has effectively agreed to limit the
exercise of its sovereign powers of taxation, eminent domain and police power.
The underlying consideration in this partial surrender of sovereignty is the
reciprocal commitment of the other contracting states in granting the same
privilege and immunities to the Philippines, its officials and its citizens. The same
reciprocity characterizes the Philippine commitments under WTO-GATT.
International treaties, whether relating to nuclear disarmament, human rights, the
environment, the law of the sea, or trade, constrain domestic political sovereignty
through the assumption of external obligations. But unless anarchy in international
relations is preferred as an alternative, in most cases we accept that the benefits of the
reciprocal obligations involved outweigh the costs associated with any loss of
political sovereignty. Trade treaties that structure relations by reference to durable,
well-defined substantive norms and objective dispute resolution procedures reduce the
risks of larger countries exploiting raw economic power to bully smaller countries, by
subjecting power relations to some form of legal ordering. In addition, smaller
countries typically stand to gain disproportionately from trade liberalization. This is
due to the simple fact that liberalization will provide access to a larger set of potential
new trading relationship than in case of the larger country gaining enhanced success
to the smaller countrys market.[
 The point is that, as shown by the foregoing treaties, a portion of sovereignty
may be waived without violating the Constitution, based on the rationale that the
Philippines adopts the generally accepted principles of international law as part
of the law of the land and adheres to the policy of cooperation and amity with all
nations.

Land Transportation Office vs. City of Butuan

FACTS:
Respondent city of Butuan asserts that one of the salient provisions introduced by the
local government code is in the area of local taxation which allows LGUs to collect
registration fees or charges along with, its view, the corresponding issuance of all
kinds of licenses or permits for the driving of tricycles. Relying on the provisions of
the local government code, the sangguniang panlungsod of Butuan, on August 16,
1992 passed SP Ordinance no. 916-42 entitled “An Ordinance Regulating The
Operation Of Tricycles-For-Hire, Providing Mechanism For The Issuance of
Franchise, Registration and Permit and Imposing Penalties For Violations Thereof
and for Other Purposes.” The ordinance provided for among other things, the payment
of franchise fees for the grant of the franchise of tricyles-for-hire, fees for the
registration of the vehicle, and fees for the issuance of a permit for the driving thereof.
Petitioner LTO explains that one of the functions of the national government that,
indeed, has been transferred to local government units is the franchising authority
over tricycles-for-hire of the land transportation franchising and regulatory board but
not, it asseverates, the authority of LTO to register all motor vehicles and to issue
qualified persons of licenses to drive such vehicles.

Issue: Whether or the City of Butuan may issue license and permit and collect fees for
the operation of tricycle.

Held: No.
Ruling:
LGUs indubitably now have the power to regulate the operation of tricycles-for-hire
and to grant franchises for the operation thereof. “To regulate” means to fix, establish
or control; to adjust by rule, method or established made; to direct by rule or
restriction; or to subject to governing principles of law. A franchise is defined to be a
special privilege to do certain things conferred by government on an individual or
corporation and which does not belong to citizens generally of common right. On the
other hand, to register means to record formally and exactly, to enroll, or to enter
precisely in a list or the like, and a driver’s license is the certificate or license issued
by the government which authorizes a person to operate a motor vehicle. The
devolution of the functions of the DOTC, performed by the LTFRB, to the LGUs, as
so aptly observed by the solicitor general is aimed at curbing the alarming in on case
of accidents in national highways involving tricycles.
It has been the perception that local governments are in good position to achieve the
end desired by the law making body because of their proximity to the situation that
can enable them to address that serious concern better than the national government. It
may not be amiss to state nevertheless, that under local government code, the power
of the LGUs to regulate the operation of tricycles and to grant franchises for the
operation thereof is still subject to the guidelines prescribed by the DOTC. In
compliance therewith, the Department of Transportation and Communications
(DOTC) issued guidelines to implement the devolution of LTFRBs franchising
authority over tricycles-for-hire to local government units pursuant to the local
government code.
The reliance made by the respondents on the broad taxing power of local
government units, specifically under section 133 of the local government code, is
tangential. Police power and taxation, along with eminent domain, are inherent
powers of sovereignty which the state might share with local government units
by delegation or given under a constitutional or a statutory fiat. All these
inherent powers are for a public purpose and legislative in nature but the
similarities just about end there. The basic aim of police power is public good
and welfare. Taxation, in its case, focuses on the power of government to raise
revenue in order to support its existence and carry out its legitimate objectives.
Although correlative to each other in many respects, the grant of one does not
necessarily carry with it the grant of the other. The two powers are by tradition
and jurisprudence separate and distinct powers, varying in their respecting
concepts, character, scopes, and limitations. To construe the tax provisions of
section 133 (1) indistinctively would result in the repeal to that extent of LTOs
regulatory power which evidently has not been intended. If it were otherwise, the law
could have just said so in section 447 and 458 of Book III of the local government
code in the same manner that the specific devolution of LTFRBs power on
franchising of tricycles has been provided. Repeal by implication is not favored. The
power over tricycles granted under section 458 (8) (3) (VI) of the local government
code to LGUs is the power to regulate their operation and to grant franchises for the
operation thereof. The government’s exclusionary clause contained in the tax
provisions of section 133 (1) of the local government code must be held to have had
the effect of withdrawing the express powers of LTO to cause the registration of all
motor vehicles and the issuance of license for the driving thereof. These functions of
the LTO are essentially regulatory in nature, exercised pursuant to the police power of
the state, whose basic objectives are to achieve road safety by insuring the road
worthiness of these motor vehicles and the competence of drivers prescribed by RA
4136. Not insignificant is the rule that a statute must not be construed in isolation but
must be taken in harmony with the extent body of laws.
TAN vs. DEL ROSARIO
FACTS:
Two consolidated cases assail the validity of RA 7496 or the Simplified Net
Income Taxation Scheme ("SNIT"), which amended certain provisions of the NIRC,
as well as the Rules and Regulations promulgated by public respondents pursuant to
said law.
Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the
following provisions of the Constitution:
-Article VI, Section 26(1) — Every bill passed by the Congress shall embrace
only one subject which shall be expressed in the title thereof.
- Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable.
The Congress shall evolve a progressive system of taxation. -
Article III, Section 1 — No person shall be deprived of . . . property without due
process of law, nor shall any person be denied the equal protection of the laws.
Petitioners contended that public respondents exceeded their rule-making
authority in applying SNIT to general professional partnerships. Petitioner contends
that the title of HB 34314, progenitor of RA 7496, is deficient for being merely
entitled, "Simplified Net Income Taxation Scheme for the Self-Employed and
Professionals Engaged in the Practice of their Profession" (Petition in G.R. No.
109289) when the full text of the title actually reads, 'An Act Adopting the Simplified
Net Income Taxation Scheme For The Self-Employed and Professionals Engaged In
The Practice of Their Profession, Amending Sections 21 and 29 of the National
Internal Revenue Code,' as amended. Petitioners also contend it violated due process.

ISSUE: Whether or not the tax law is unconstitutional for violating due process .
HELD: NO.
RULING:
The due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of the tax power.
No such transgression is so evident in herein case.
Uniformity of taxation, like the concept of equal protection, merely requires that
all subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities.
Uniformity does not violate classification as long as: (1) the standards that are
used therefor are substantial and not arbitrary, (2) the categorization is germane to
achieve the legislative purpose, (3) the law applies, all things being equal, to both
present and future conditions, and (4) the classification applies equally well to all
those belonging to the same class.
What is apparent from the amendatory law is the legislative intent to increasingly
shift the income tax system towards the schedular approach in the income taxation of
individual taxpayers and to maintain, by and large, the present global treatment on
taxable corporations. The Court does not view this classification to be arbitrary and
inappropriate.
With the legislature primarily lies the discretion to determine the nature (kind),
object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This
court cannot freely delve into those matters which, by constitutional fiat, rightly rest
on legislative judgment. Of course, where a tax measure becomes so unconscionable
and unjust as to amount to confiscation of property, courts will not hesitate to strike it
down, for, despite all its plenitude, the power to tax cannot override constitutional
proscriptions. This stage, however, has not been demonstrated to have been reached
within any appreciable distance in this controversy before us.