Planters Product v. Fertiphil Corp.

G.R. No. 166006 March 14, 2008

REYES, R.T., J.

Lessons Applicable: Bet. private and public suit, easier to file public
suit, Apply real party in interest test for private suit and direct injury
test for public suit, Validity test varies depending on which inherent
power

Laws Applicable:

FACTS:

 President Ferdinand Marcos, exercising his legislative powers,

issued LOI No. 1465 which provided, among others, for the
imposition of a capital recovery component (CRC) on the domestic
sale of all grades of fertilizers which resulted in having Fertiphil
paying P 10/bag sold to the Fertilizer and Perticide Authority (FPA).
 FPA remits its collection to Far East Bank and Trust Company who
applies to the payment of corporate debts of Planters Products Inc.
(PPI)
 After the Edsa Revolution, FPA voluntarily stopped the imposition of
the P10 levy. Upon return of democracy, Fertiphil demanded a
refund but PPI refused. Fertiphil filed a complaint for collection and
damages against FPA and PPI with the RTC on the ground that LOI
No. 1465 is unjust, unreaonable oppressive, invalid and unlawful
resulting to denial of due process of law.
 FPA answered that it is a valid exercise of the police power of the
state in ensuring the stability of the fertilizing industry in the
country and that Fertiphil did NOT sustain damages since the
burden imposed fell on the ultimate consumers.
 RTC and CA favored Fertiphil holding that it is an exercise of the
power of taxation ad is as such because it is NOT for public
purpose as PPI is a private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation
rather the police power

Held:
1. Yes. In private suits, locus standi requires a litigant to be a "real
party in interest" or party who stands to be benefited or injured by the
judgment in the suit. In public suits, there is the right of the ordinary
citizen to petition the courts to be freed from unlawful government
intrusion and illegal official action subject to the direct injury test or
where there must be personal and substantial interest in the case
such that he has sustained or will sustain direct injury as a
result. Being a mere procedural technicality, it has also been held
that locus standi may be waived in the public interest such as cases of
transcendental importance or with far-reaching implications
whether private or public suit, Fertiphil has locus standi.

2. As a seller, it bore the ultimate burden of paying the levy which

made its products more expensive and harm its business. It is also of
paramount public importance since it involves the constitutionality of
a tax law and use of taxes for public purpose.

3. Yes. Police power and the power of taxation are inherent powers of
the state but distinct and have different tests for validity. Police
power is the power of the state to enact the legislation that may
interfere with personal liberty on property in order to promote general
welfare. While, the power of taxation is the power to levy taxes as to
be used for public purpose. The main purpose of police power is the
regulation of a behavior or conduct, while taxation is revenue
generation. The lawful subjects and lawful means tests are used to
determine the validity of a law enacted under the police power. The
power of taxation, on the other hand, is circumscribed by inherent and
constitutional limitations.

In this case, it is for purpose of revenue. But it is a robbery for the

State to tax the citizen and use the funds generation for a private
purpose. Public purpose does NOT only pertain to those purpose
which are traditionally viewed as essentially governmental function
such as building roads and delivery of basic services, but also
includes those purposes designed to promote social justice. Thus,
public money may now be used for the relocation of illegal settlers,
low-cost housing and urban or agrarian reform.

WENCESLAO PASCUAL VS SECRETARY OF PUBLIC WORKS

FACTS: In 1953, Republic Act No. 920 was passed. This law
appropriated P85,000.00 “for the construction, reconstruction, repair,
extension and improvement Pasig feeder road terminals”. Wenceslao
Pascual, then governor of Rizal, assailed the validity of the law. He
claimed that the appropriation was actually going to be used for
private use for the terminals sought to be improved were part of the
Antonio Subdivision. The said Subdivision is owned by Senator Jose
Zulueta who was a member of the same Senate that passed and
approved the same RA. Pascual claimed that Zulueta misrepresented
in Congress the fact that he owns those terminals and that his
property would be unlawfully enriched at the expense of the taxpayers
if the said RA would be upheld. Pascual then prayed that the
Secretary of Public Works and Communications be restrained from
releasing funds for such purpose. Zulueta, on the other hand, perhaps
as an afterthought, donated the said property to the City of Pasig.
ISSUE: Whether or not the appropriation is valid.
HELD: No, the appropriation is void for being an appropriation for a
private purpose. The subsequent donation of the property to the
government to make the property public does not cure the
constitutional defect. The fact that the law was passed when the said
property was still a private property cannot be ignored. “In accordance
with the rule that the taxing power must be exercised for public
purposes only, money raised by taxation can be expanded only for
public purposes and not for the advantage of private
individuals.” Inasmuch as the land on which the projected feeder
roads were to be constructed belonged then to Zulueta, the result is
that said appropriation sought a private purpose, and, hence, was null
and void.

GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827

FACTS: Petitioner Benjamin Gomez mailed a letter at the post office in

San Fernando, Pampanga. It did not bear
the special anti-TB stamp required by the RA 1635. It was returned to
the petitioner. Petitioner now assails the
constitutionality of the statute claiming that RA 1635 otherwise known
as the Anti-TB Stamp law is violative of
the equal protection clause because it constitutes mail users into a
class for the purpose of the tax while leaving
untaxed the rest of the population and that even among postal patrons
the statute discriminatorily grants
exemptions. The law in question requires an additional 5 centavo
stamp for every mail being posted, and no mail
shall be delivered unless bearing the said stamp.

ISSUE: Is the Anti-TB Stamp Law unconstitutional, for being allegedly

violative of the equal protection clause?

HELD: No. It is settled that the legislature has the inherent power to
select the subjects of taxation and to grant
exemptions. This power has aptly been described as "of wide range
and flexibility." Indeed, it is said that in the
field of taxation, more than in other areas, the legislature possesses
the greatest freedom in classification. The
reason for this is that traditionally, classification has been a device for
fitting tax programs to local needs and
usages in order to achieve an equitable distribution of the tax burden.
The classification of mail users is based on the ability to pay, the
enjoyment of a privilege and on administrative
convenience. Tax exemptions have never been thought of as raising
revenues under the equal protection clause.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF

TANAUAN
69 SCRA 460
GR No. L-31156, February 27, 1976

"Legislative power to create political corporations for purposes of

local self-government carries with it the power to confer on such local
governmental agencies the power to tax.

FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with

preliminary injunction to declare Section 2 of Republic Act No. 2264,
otherwise known as the Local Autonomy Act, unconstitutional as an
undue delegation of taxing authority as well as to declare Ordinances
Nos. 23 and 27 denominated as "municipal production tax" of the
Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and
collects from soft drinks producers and manufacturers a tax of one-
sixteenth (1/16) of a centavo for every bottle of soft drink corked, and
Ordinance 27 levies and collects on soft drinks produced or
manufactured within the territorial jurisdiction of this municipality a
tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity. Aside from the undue delegation of authority,
appellant contends that it allows double taxation, and that the subject
ordinances are void for they impose percentage or specific tax.

ISSUE: Are the contentions of the appellant tenable?

HELD: No. On the issue of undue delegation of taxing power, it is

settled that the power of taxation is an essential and inherent
attribute of sovereignty, belonging as a matter of right to every
independent government, without being expressly conferred by the
people. It is a power that is purely legislative and which the central
legislative body cannot delegate either to the executive or judicial
department of the government without infringing upon the theory of
separation of powers. The exception, however, lies in the case of
municipal corporations, to which, said theory does not apply.
Legislative powers may be delegated to local governments in respect
of matters of local concern. By necessary implication, the legislative
power to create political corporations for purposes of local self-
government carries with it the power to confer on such local
governmental agencies the power to tax.
Also, there is no validity to the assertion that the delegated authority
can be declared unconstitutional on the theory of double taxation. It
must be observed that the delegating authority specifies the
limitations and enumerates the taxes over which local taxation may
not be exercised. The reason is that the State has exclusively
reserved the same for its own prerogative. Moreover, double taxation,
in general, is not forbidden by our fundamental law, so that double
taxation becomes obnoxious only where the taxpayer is taxed twice
for the benefit of the same governmental entity or by the same
jurisdiction for the same purpose, but not in a case where one tax is
imposed by the State and the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature
of a percentage tax on sales, or other taxes in any form based thereon.
The tax is levied on the produce (whether sold or not) and not on the
sales. The volume capacity of the taxpayer's production of soft drinks
is considered solely for purposes of determining the tax rate on the
products, but there is not set ratio between the volume of sales and
the amount of the tax.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN

24 SCRA 789
GR No. L-22814, August 28, 1968

"The classification made in the exercise of power to tax, to be valid,

must be reasonable ."

FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid

by it under protest, to the City of Butuan, and collected by the latter,
pursuant to its Municipal Ordinance No. 110 which plaintiff assails as
null and void because it partakes of the nature of an import tax,
amounts to double taxation, highly unjust and discriminatory,
excessive, oppressive and confiscatory, and constitutes an invlaid
delegation of the power to tax. The ordinance imposes taxes for every
case of softdrinks, liquors and other carbonated beverages, regardless
of the volume of sales, shipped to the agents and/or consignees by
outside dealers or any person or company having its actual business
outside the City.

ISSUE: Does the tax ordinance violate the uniformity requirement of

taxation?

HELD: Yes. The tax levied is discriminatory. Even if the burden in

question were regarded as a tax on the sale of said beverages, it
would still be invalid, as discriminatory, and hence, violative of the
uniformity required by the Constitution and the law therefor, since only
sales by "agents or consignees" of outside dealers would be subject to
the tax. Sales by local dealers, not acting for or on behalf of other
merchants, regardless of the volume of their sales, and even if the
same exceeded those made by said agents or consignees of producers
or merchants established outside the City of Butuan, would be exempt
from the disputed tax.
It is true that the uniformity essential to the valid exercise of the
power of taxation does not require identity or equality under all
circumstances, or negate the authority to classify the objects of
taxation. The classification made in the exercise of this authority, to
be valid, must, however, be reasonable and this requirement is not
deemed satisfied unless: (1) it is based upon substantial distinctions
which make real differences; (2) these are germane to the purpose of
the legislation or ordinance; (3) the classification applies, not only to
present conditions, but, also, to future conditions substantially
identical to those of the present; and (4) the classification applies
equally to all those who belong to the same class.
LRTA v. CBAA
G.R. No. 127316. October 12, 2000
FACTS: LRTA is a GOCC engaged in public transportation. By virtue of
its charter, it acquired real properties. It entered into a contract of
management with Metro wherein Metro undertook to manage, operate,
and maintain the LRT system owned by LRTA.The City Assessor
assessed LRTA for realty tax. LRTA paid the realty tax, except the
assessment made on its carriageways and passenger terminal
stations including the land on which they were constructed on the
ground that the same were not real properties under the Real Property
Tax Code, and that even if the same were real property, it is still
exempt from paying the realty tax because said properties are for
public use.
ISSUE: WON a profit-oriented GOCC is exempt from paying realty tax
under the RealProperty Tax Code.
HELD: No. A profit-oriented GOCC is not exempt from paying realty tax
under the RealProperty Tax Code.Though the creation of the LRTA was
impelled by public service -- to provide mass transportation to alleviate
the traffic and transportation situation in Metro Manila -- its operation
undeniably partakes of ordinary business. Petitioner is clothed with
corporate status and corporate powers in the furtherance of its
proprietary objectives.Indeed, it operates much like any private
corporation engaged in the mass transport industry. Given that it is
engaged in a service-oriented commercial endeavor, its carriageways
and terminal stations are patrimonial property subject to
tax,notwithstanding its claim of being a government-owned or
controlled corporation.True, petitioner's carriageways and terminal
stations are anchored, at certain points,on public roads. However, it
must be emphasized that these structures do not form part of such
roads, since the former have been constructed over the latter in such
away that the flow of vehicular traffic would not be impeded. These
carriageways and terminal stations serve a function different from that
of the public roads. The former are part and parcel of the light rail
transit (LRT) system which, unlike the latter, are not open to use by
the general public. The carriageways are accessible only to the LRT
trains, while the terminal stations have been built for the convenience
of LRTA itself and its customers who pay the required fare.Unlike
public roads which are open for use by everyone, the LRT is accessible
only to those who pay the required fare. It is thus apparent that
petitioner does not exist solely for public service, and that the LRT
carriageways and terminal stations are not exclusively for public use.
Although petitioner is a public utility, it is nonetheless profit-earning. It
actually uses those carriageways and terminal stations in its public
utility business and earns money therefrom. Other grounds: The
charter of LRTA does not provide for any real estate tax
exemption.Executive Order No. 603, the charter of petitioner, does not
provide for any real estate tax exemption in its favor. Its exemption is
limited to direct and indirect taxes, duties or fees in connection with
the importation of equipment not locally available, as the following
provision shows:2. The beneficial use of the properties have been
transferred to a taxable entity.Even granting that the national
government indeed owns the carriageways and terminal stations, the
exemption would not apply because their beneficial use has been
granted to petitioner, a taxable entity.

Mactan Cebu (MCIAA) vs. Marcos

GR 120082 September 11, 1996 261 SCRA 667

Davide Jr., .: (CJ)

FACTS:

Mactan Cebu International Airport Authority (MCIAA) was created to

“principally undertake to economical, efficient and effective control,
management and supervision of the Mactan International Airport… and
such other airports as may be established in the province of Cebu…”
Section 14 of its charter excempts the Authority from payment of
realty taxes but in 1994, the City Treasurer demanded payment for
realty taxes on several parcels of land belonging to the other. MCIAA
filed a petition in RTC contending that, by nature of its powers and
functions, it has the same footing of an agency or instrumentality of
the national government. The RTC dismissed the petition based on
Section 193 & 234 of the local Government Code or R.A. 7160. Thus
this petition.

ISSUE:

Whether or not the MCIAA is excempted from realty taxes?

RULING:

With the repealing clause of RA 7160 the tax exemption provided. “All
general and special in the charter of the MCIAA has been expressly
repeated. It state laws, acts, City Charters, decrees, executive orders,
proclamations and administrative regulations, or part of parts thereof
which are inconsistent with any of the provisions of the Code
are hereby repeated or modified accordingly.” Therefore the SC
affirmed the decision and order of the RTC and herein petitioner has to
pay the assessed realty tax of its properties effective January 1, 1992
up to the present.

MIAA VS PARANAQUE

the Officers of Paranaque City sent notices to MIAA due to real estate
tax delinquency. MIAA then settled some of the amount.

Now when MIAA failed to settle the entire amount, the officers of
Paranaque city threatened to levy and subject to auction the land and
buildings of MIAA, which they did.

MIAA then sought for a Temporary Restraining Order (TRO) from the
CA but failed to do so within the 60 days reglementary period, so the
petition was dismissed.

MIAA then sought for the TRO with the Supreme Court a day before the
public auction, MIAA was granted with the TRO but unfortunately
the TRO was received by the Paranaque City officers 3 hours after the
public auction. See what I told you? See how original this case
was? I mean what on earth was MIAA doing?? Talk about all the right
moves.

MIAA claims that although the charter provides that the title of the
land and building are with MIAA still the ownership is with the
Republic of the Philippines. MIAA also contends that it is an
instrumentality of the government and as such exempted from real
estate tax. So in other words, MIAA's bone of contention and defense
lie solely on the principle that the land and buildings of MIAA are
of public dominion and therefore cannot be subjected
to levy and auction sale.

Let's see if it will hold.

On the other hand, the officers of Paranaque City claim that MIAA is a
GOCC (government owned and controlled corporation) therefore not
exempted to real estate tax.

ISSUE:

Whether or not:

1. MIAA is an instrumentality of the government and not a government

owned and controlled corporation and as such exempted from tax.

2. The land and buildings of MIAA are part of the public dominion and
thus cannot be the subject of levy and auction sale.

RULING:

1. Under the Local government code, (GOCCs) government owned and

controlled corporation are NOT exempted from real estate tax.

MIAA is not a government owned and controlled corporation, for to

become one MIAA should either be a stock or non stock corporation.
MIAA is not a stock corporation for its capital is not divided into
shares. It is not a non stock corporation since it has no members.
MIAA is an instrumentality of the government vested with corporate
powers and government functions. Under the civil code, property may
either be under public dominion or private ownership. Those
under public dominion are owned by the State and are utilized for
public use, public service and for the development of national
wealth. When properties under public dominion cease to be for public
use and service, they form part of the patrimonial property of the
State.

2. The court held that the land and buildings of MIAA are part of the
public dominion. Since the airport is devoted for public use, for the
domestic and international travel and transportation. Even if MIAA
charge fees, this is for support of its operation and for regulation and
does not change the character of the land and buildings of MIAA as
part of the public dominion.

As part of the public dominion the land and buildings of MIAA

are outside the commerce of man. To subject them to levy and public
auction is contrary to public policy. Unless the President issues a
proclamation withdrawing the airport land and buildings from public
use, these properties remain to be of public dominion and are
inalienable. As long as the land and buildings are for public use the
ownership is with the Republic of the Philippines

MIAA wins this case.

MIAA VS. CITY OF PASAY

April 02, 2009
G.R. No. 163072
FACTS:

Petitioner Manila International Airport Authority (MIAA) operates and

administers the Ninoy Aquino International Airport (NAIA) Complex
under Executive Order No. 903 (EO 903),3otherwise known as the
Revised Charter of the Manila International Airport Authority, issued by
then President Ferdinand E. Marcos. The NAIA Complex is located
along the border between Pasay City and Parañaque City. MIAA
received Final Notices of Real Property Tax Delinquency from the City
of Pasay for the taxable years 1992 to 2001. The Court of
Appeals upheld the power of the City of Pasay to impose and collect
realty taxes on the NAIA Pasay properties. MIAA filed a motion for
reconsideration, which the Court of Appeals denied.

ISSUE:

The issue raised in this petition is whether the NAIA Pasay properties
of MIAA are exempt from real property tax.

RULING:

The Supreme Court held that the Airport Lands and Buildings of MIAA
are properties devoted to public use and thus are properties of public
dominion. Properties of public dominion are owned by the State or the
Republic. Article 420 of the Civil Code provides:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and
are intended for some public service or for the development of the
national wealth.

The term "ports x x x constructed by the State" includes airports and

seaports. The Airport Lands and Buildings of MIAA are intended for
public use, and at the very least intended for public service. Whether
intended for public use or public service, the Airport Lands and
Buildings are properties of public dominion. As properties of public
dominion, the Airport Lands and Buildings are owned by the Republic
and thus exempt from real estate tax under Section 234(a) of the Local
Government Code.
CHAMBER OF REAL ESTATE AND BUILDERS’ ASSOCIATION, INC. vs.
EXECUTIVE SECRETARY- Minimum Corporate Income Tax

FACTS:

CREBA assails the imposition of the minimum corporate income tax

(MCIT) as being violative of the due process clause as it levies income
tax even if there is no realized gain. They also question the creditable
withholding tax (CWT) on sales of real properties classified as ordinary
assets stating that (1) they ignore the different treatment of ordinary
assets and capital assets; (2) the use of gross selling price or fair
market value as basis for the CWT and the collection of tax on a per
transaction basis (and not on the net income at the end of the year)
are inconsistent with the tax on ordinary real properties; (3) the
government collects income tax even when the net income has not yet
been determined; and (4) the CWT is being levied upon real estate
enterprises but not on other enterprises, more particularly those in the
manufacturing sector.

ISSUE:

Are the impositions of the MCIT on domestic corporations and CWT

on income from sales of real properties classified as ordinary assets
unconstitutional?

HELD:

NO. MCIT does not tax capital but only taxes income as shown by the
fact that the MCIT is arrived at by deducting the capital spent by a
corporation in the sale of its goods, i.e., the cost of goods and other
direct expenses from gross sales. Besides, there are sufficient
safeguards that exist for the MCIT: (1) it is only imposed on the 4th
year of operations; (2) the law allows the carry forward of any excess
MCIT paid over the normal income tax; and (3) the Secretary of
Finance can suspend the imposition of MCIT in justifiable instances.
The regulations on CWT did not shift the tax base of a real estate
business’ income tax from net income to GSP or FMV of the property
sold since the taxes withheld are in the nature of advance tax
payments and they are thus just installments on the annual tax which
may be due at the end of the taxable year. As such the tax base for the
sale of real property classified as ordinary assets remains to be the
net taxable income and the use of the GSP or FMV is because these
are the only factors reasonably known to the buyer in connection with
the performance of the duties as a withholding agent.
Neither is there violation of equal protection even if the CWT is levied
only on the real industry as the real estate industry is, by itself, a class
on its own and can be validly treated different from other businesses.

CITY OF MANILA vs. COCA-COLA BOTTLERS PHILIPPINES, INC.- CTA,

Double Taxation

FACTS:

Respondent paid the local business tax only as a manufacturers as it

was expressly exempted from the business tax under a different
section and which applied to businesses subject to excise, VAT or
percentage tax under the Tax Code. The City of Manila subsequently
amended the ordinance by deleting the provision exempting
businesses under the latter section if they have already paid taxes
under a different section in the ordinance. This amending ordinance
was later declared by the Supreme Court null and void. Respondent
then filed a protest on the ground of double taxation. RTC decided in
favor of Respondent and the decision was received by Petitioner on
April 20, 2007. On May 4, 2007, Petitioner filed with the CTA a Motion
for Extension of Time to File Petition for Review asking for a 15-day
extension or until May 20, 2007 within which to file its Petition. A
second Motion for Extension was filed on May 18, 2007, this time
asking for a 10-day extension to file the Petition. Petitioner finally filed
the Petition on May 30, 2007 even if the CTA had earlier issued a
resolution dismissing the case for failure to timely file the Petition.
ISSUES:

(1) Has Petitioner’s the right to appeal with the CTA lapsed?
(2) Does the enforcement of the latter section of the tax ordinance
constitute double taxation?

HELD:

(1) NO. Petitioner complied with the reglementary period for filing the
petition. From April 20, 2007, Petitioner had 30 days, or until May 20,
2007, within which to file their Petition for Review with the CTA. The
Motion for Extension filed by the petitioners on May 18, 2007, prior to
the lapse of the 30-day period on 20 May 2007, in which they prayed
for another extended period of 10 days, or until 30 May 2007, to file
their Petition for Review was, in reality, only the first Motion for
Extension of petitioners. Thus, when Petitioner filed their Petition via
registered mail their Petition for Review on 30 May 2007, they were
able to comply with the period for filing such a petition.

(2) YES. There is indeed double taxation if respondent is subjected to

the taxes under both Sections 14 and 21 of the tax ordinance since
these are being imposed: (1) on the same subject matter — the
privilege of doing business in the City of Manila; (2) for the same
purpose — to make persons conducting business within the City of
Manila contribute to city revenues; (3) by the same taxing authority —
petitioner City of Manila; (4) within the same taxing jurisdiction —
within the territorial jurisdiction of the City of Manila; (5) for the same
taxing periods — per calendar year; and (6) of the same kind or
character — a local business tax imposed on gross sales or receipts of
the business.

Villegas vs. Hui Chiong Tsai Pao Ho

FACTS: This case involves an ordinance prohibiting aliens from being

employed or engage or participate in any position or occupation or
business enumerated therein, whether permanent, temporary or
casual, without first securing an employment permit from the Mayor of
Manila and paying the permit fee of P50.00. 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: WON said Ordinance violates due process of law and equal
protection rule of the Constitution.

HELD: Yes. The Ordinance The ordinance in question violates the due
process of law and equal protection rule of the Constitution. Requiring
a person before he can be employed to get a permit from the City
Mayor who may withhold or refuse it at his will is tantamount to
denying him the basic right of the people in the Philippines to engage
in a means of livelihood. While it is true that the Philippines as a State
is not obliged to admit aliens within its territory, once an alien is
admitted, he cannot be deprived of life without due process of law.
This guarantee includes the means of livelihood. The shelter of
protection under the due process and equal protection clause is given
to all persons, both aliens and citizens.

CITY OF BAGUIO vs. DE LEON

25 SCRA 938
GR No. L-24756, October 31, 1968

"There is no double taxation where one tax is imposed by the state

and the other is imposed by the city."

FACTS: The City of Baguio passed an ordinance imposing a license fee

on any person, entity or corporation doing business in the City. The
ordinance sourced its authority from RA No. 329, thereby amending
the city charter empowering it to fix the license fee and regulate
businesses, trades and occupations as may be established or
practiced in the City. De Leon was assessed for P50 annual fee it
being shown that he was engaged in property rental and deriving
income therefrom. The latter assailed the validity of the ordinance
arguing that it is ultra vires for there is no statury authority which
expressly grants the City of Baguio to levy such tax, and that there it
imposed double taxation, and violates the requirement of uniformity.

ISSUE: Are the contentions of the defendant-appellant tenable?

HELD: No. First, RA 329 was enacted amending Section 2553 of the
Revised Administrative Code empowering the City Council not only to
impose a license fee but to levy a tax for purposes of revenue, thus the
ordinance cannot be considered ultra vires for there is more than
ample statury authority for the enactment thereof.
Second, an argument against double taxation may not be invoked
where one tax is imposed by the state and the other is imposed by the
city, so that where, as here, Congress has clearly expressed its
intention, the statute must be sustained even though double taxation
results.
And third, violation of uniformity is out of place it being widely
recognized that there is nothing inherently obnoxious in the
requirement that license fees or taxes be exacted with respect to the
same occupation, calling or activity by both the state and the political
subdivisions thereof.

Sison vs Ancheta (1984)

Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged

that its provision (Section 1) unduly discriminated against him by the
imposition of higher rates upon his income as a professional, that it
amounts to class legislation, and that it transgresses against the
equal protection and due process clauses of the Constitution as well
as the rule requiring uniformity in taxation.
Issue: Whether BP 135 violates the due process and equal protection
clauses, and the rule on uniformity in taxation.

Held: There is a need for proof of such persuasive character as would

lead to a conclusion that there was a violation of the due process and
equal protection clauses. Absent such showing, the presumption of
validity must prevail. Equality and uniformity in taxation means that all
taxable articles or kinds of property of the same class shall be taxed
at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation. Where
the differentitation conforms to the practical dictates of justice and
equity, similar to the standards of equal protection, it is not
discriminatory within the meaning of the clause and is therefore
uniform. Taxpayers may be classified into different categories, such
as recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make
deductions for income tax purposes as there is no practically no
overhead expense, while professionals and businessmen have no
uniform costs or expenses necessaryh to produce their income. There
is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income
taxation as regards professional and business income.

CIR vs. CA
257 SCRA 200
GR No. 119322 June 4, 1996
"Before one is prosecuted for willful attempt to evade or defeat any
tax, the fact that a tax is due must first be proved."

FACTS: The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos
representing deficiency income, ad valorem and value-added taxes for
the year 1992 to which Fortune moved for reconsideration of the
assessments. Later, the CIR filed a complaint with the Department of
Justice against the respondent Fortune, its corporate officers, nine (9)
other corporations and their respective corporate officers for alleged
fraudulent tax evasion for supposed non-payment by Fortune of the
correct amount of taxes, alleging among others the fraudulent scheme
of making simulated sales to fictitious buyers declaring lower
wholesale prices, as allegedly shown by the great disparity on the
declared wholesale prices registered in the "Daily Manufacturer's
Sworn Statements" submitted by the respondents to the BIR. Such
documents when requested by the court were not however presented
by the BIR, prompting the trial court to grant the prayer for preliminary
injuction sought by the respondent upon the reason that tax liabiliity
must be duly proven before any criminal prosecution be had. The
petitioner relying on the Ungab Doctrine sought the lifting of the writ
of preliminary mandatory injuction issued by the trial court.

ISSUE: Whose contention is correct?

HELD: In view of the foregoing reasons, misplaced is the petitioners'

thesis citing Ungab v. Cusi, that the lack of a final determination of
Fortune's exact or correct tax liability is not a bar to criminal
prosecution, and that while a precise computation and assessment is
required for a civil action to collect tax deficiencies, the Tax Code
does not require such computation and assessment prior to criminal
prosecution.
Reading Ungab carefully, the pronouncement therein that
deficiency assessment is not necessary prior to prosecution is
pointedly and deliberately qualified by the Court with following
statement quoted from Guzik v. U.S.: "The crime is complete when the
violator has knowingly and wilfully filed a fraudulent return with intent
to evade and defeat a part or all of the tax." In plain words, for
criminal prosecution to proceed before assessment, there must be a
prima facie showing of a wilful attempt to evade taxes. There was a
wilful attempt to evade tax in Ungab because of the taxpayer's failure
to declare in his income tax return "his income derived from banana
sapplings." In the mind of the trial court and the Court of Appeals,
Fortune's situation is quite apart factually since the registered
wholesale price of the goods, approved by the BIR, is presumed to be
the actual wholesale price, therefore, not fraudulent and unless and
until the BIR has made a final determination of what is supposed to be
the correct taxes, the taxpayer should not be placed in the crucible of
criminal prosecution. Herein lies a whale of difference between Ungab
and the case at bar.
COMMISSIONER OF INTERNAL REVENUE v. MICHEL J. LHUILLIER
PAWNSHOP, INC. G.R. No. 150947. July 15, 2003
FACTS:

On 1991, the CIR issued Revenue Memorandum Order (RMO) No. 15-91,
which was clarified by RMO No. 43-91 imposing a 5% lending
investors tax on pawnshops. It held that the principal activity of
pawnshops is lending money at interest and incidentally accepting
personal property as security for the loan. Since pawnshops are
considered as lending investors effective, they also become subject
to documentary stamp taxes.

On 1997, the Bureau of Internal Revenue (BIR) issued an Assessment

Notice against Lhuillier demanding payment of deficiency percentage.

Lhuillier filed an administrative protest with the Office of the Revenue

Regional Director contending that neither the Tax Code nor the VAT
Law expressly imposes 5% percentage tax on the gross income of
pawnshops; that pawnshops are different from lending investors,
which are subject to the 5% percentage tax under the specific
provision of the Tax Code; that RMO No. 15-91 is not implementing any
provision of the Internal Revenue laws but is a new and additional tax
measure on pawnshops, which only Congress could enact, and that it
impliedly amends the Tax Code, and that it is a class legislation as it
singles out pawnshops.

On 1998, the BIR issued Warrant of Distraint and/or Levy against

Lhuilliers property for the enforcement and payment of the assessed
percentage tax.
When Lhuiller's protest was not acted upon, they elevated it to the CIR
which was also not acted upon. Lhuiller filed a Notice and Memo on
Appeal with the CTA.

On 2000, the CTA held the the RMOs were void and that the
Assessment Notice should be cancelled.

The CIR filed a motion for review with the CA which only affirmed the
CTA's decision thus this case in bar.

ISSUE: Whether pawnshops included in the term lending investors for

the purpose of imposing the 5% percentage tax under the NIRC.

RULING:

No.

The held that even though the RMOs No were issued in accordance
with the power of the CIR, they cannot issue administrative rulings or
circulars not consistent with the law sought to be applied. It should
remain consistent with the law they intend to carry out. Only Congress
can repeal or amend the law.

In the NIRC, the term lending investor includes all persons who make a
practice of lending money for themselves or others at
interest. A pawnshop, on the other hand, is defined under Section 3 of
P.D. No. 114 as a person or entity engaged in the business of lending
money on personal property delivered as security for loans.

While it is true that pawnshops are engaged in the business of lending

money, they are not considered lending investors for the purpose of
imposing the 5% percentage taxes citing the following reasons:
1. Pawnshops and lending investors were subjected to different tax
treatments as per the NIRC.

2. Congress never intended pawnshops to be treated in the same way

as lending investors.

3. Section 116 of the NIRC of 1977, as amended by E.O. No. 273,

subjects to percentage tax dealers in securities and lending investors
only. There is no mention of pawnshops.

4. The BIR had ruled several times prior to the issuance of the RMOs
that pawnshops were not subject to the 5% percentage tax imposed
by Section 116 of the NIRC of 1977. As Section 116 of the NIRC of
1977 was practically lifted from Section 175 of the NIRC of 1986, and
there being no change in the law, the interpretation thereof should not
have been altered.

ABAKADA GURO PARTY LIST VS PURISIMA

G.R. No. 166715 August 14, 2008

Facts:

Petitioners seeks to prevent respondents from implementing and

enforcing Republic Act (RA) 9335. R.A. 9335 was enacted to optimize
the revenue-generation capability and collection of the Bureau of
Internal Revenue (BIR) and the Bureau of Customs (BOC). The law
intends to encourage BIR and BOC officials and employees to exceed
their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a
Revenue Performance Evaluation Board (Board). It covers all officials
and employees of the BIR and the BOC with at least six months of
service, regardless of employment status.

Petitioners, invoking their right as taxpayers filed this petition

challenging the constitutionality of RA 9335, a tax reform legislation.
They contend that, by establishing a system of rewards and
incentives, the law “transforms the officials and employees of the BIR
and the BOC into mercenaries and bounty hunters” as they will do
their best only in consideration of such rewards. Thus, the system of
rewards and incentives invites corruption and undermines the
constitutionally mandated duty of these officials and employees to
serve the people with utmost responsibility, integrity, loyalty and
efficiency.

Petitioners also claim that limiting the scope of the system of rewards
and incentives only to officials and employees of the BIR and the BOC
violates the constitutional guarantee of equal protection. There is no
valid basis for classification or distinction as to why such a system
should not apply to officials and employees of all other government
agencies.

In addition, petitioners assert that the law unduly delegates the power
to fix revenue targets to the President as it lacks a sufficient standard
on that matter. While Section 7(b) and (c) of RA 9335 provides that BIR
and BOC officials may be dismissed from the service if their revenue
collections fall short of the target by at least 7.5%, the law does not,
however, fix the revenue targets to be achieved. Instead, the fixing of
revenue targets has been delegated to the President without sufficient
standards. It will therefore be easy for the President to fix an
unrealistic and unattainable target in order to dismiss BIR or BOC
personnel.

Finally, petitioners assail the creation of a congressional oversight

committee on the ground that it violates the doctrine of separation of
powers. While the legislative function is deemed accomplished and
completed upon the enactment and approval of the law, the creation
of the congressional oversight committee permits legislative
participation in the implementation and enforcement of the law.

Issues:

1. Whether or not the scope of the system of rewards and incentives

limitation to officials and employees of the BIR and the BOC
violates the constitutional guarantee of equal protection.
2. Whether or not there was an unduly delegation of power to fix
revenue targets to the President.
3. Whether or not the doctrine of separation of powers has been
violated in the creation of a congressional oversight committee.

Discussions:

1. The Court referred to the ruling of Victoriano v. Elizalde Rope

Workers’ Union, which states that “the guaranty of equal protection
of the laws is not a guaranty of equality in the application of the
laws upon all citizens of the State.

The equal protection of the laws clause of the Constitution allows

classification. Classification in law, as in the other departments of
knowledge or practice, is the grouping of things in speculation or
practice because they agree with one another in certain particulars. A
law is not invalid because of simple inequality. The very idea of
classification is that of inequality, so that it goes without saying that
the mere fact of inequality in no manner determines the matter of
constitutionality.

The Court has held that the standard is satisfied if the classification or
distinction is based on a reasonable foundation or rational basis and is
not palpably arbitrary. “

2. To determine the validity of delegation of legislative power, it needs

the following: (1) the completeness test and (2) the sufficient
standard test. A law is complete when it sets forth therein the
policy to be executed, carried out or implemented by the delegate.
It lays down a sufficient standard when it provides adequate
guidelines or limitations in the law to map out the boundaries of the
delegate’s authority and prevent the delegation from running riot.
To be sufficient, the standard must specify the limits of the
delegate’s authority, announce the legislative policy and identify
the conditions under which it is to be implemented.
3. Based from the ruling under Macalintal v. Commission on
Elections, it is clear that congressional oversight is not
unconstitutional per se, meaning, it neither necessarily constitutes
an encroachment on the executive power to implement laws nor
undermines the constitutional separation of powers. Rather, it is
 integral to the checks and balances inherent in a democratic
system of government. It may in fact even enhance the separation
of powers as it prevents the over-accumulation of power in the
executive branch.

Rulings:

1. The equal protection clause recognizes a valid classification, that

is, a classification that has a reasonable foundation or rational
basis and not arbitrary.22 With respect to RA 9335, its expressed
public policy is the optimization of the revenue-generation
capability and collection of the BIR and the BOC.23 Since the
subject of the law is the revenue- generation capability and
collection of the BIR and the BOC, the incentives and/or sanctions
provided in the law should logically pertain to the said agencies.
Moreover, the law concerns only the BIR and the BOC because they
have the common distinct primary function of generating revenues
for the national government through the collection of taxes,
customs duties, fees and charges.

Both the BIR and the BOC principally perform the special function of
being the instrumentalities through which the State exercises one of
its great inherent functions – taxation. Indubitably, such substantial
distinction is germane and intimately related to the purpose of the
law. Hence, the classification and treatment accorded to the BIR and
the BOC under R.A. 9335 fully satisfy the demands of equal protection.

2. R.A. 9335 adequately states the policy and standards to guide the
President in fixing revenue targets and the implementing agencies
in carrying out the provisions of the law under Sec 2 and 4 of the
said Act. Moreover, the Court has recognized the following as
sufficient standards: “public interest,” “justice and equity,” “public
convenience and welfare” and “simplicity, economy and
 welfare.”33 In this case, the declared policy of optimization of the
revenue-generation capability and collection of the BIR and the BOC
is infused with public interest.
3. The court declined jurisdiction on this case. The Joint
Congressional Oversight Committee in RA 9335 was created for the
purpose of approving the implementing rules and regulations (IRR)
formulated by the DOF, DBM, NEDA, BIR, BOC and CSC. On May 22,
2006, it approved the said IRR. From then on, it became functus
officio and ceased to exist. Hence, the issue of its alleged
encroachment on the executive function of implementing and
enforcing the law may be considered moot and academic.

Associaiton of Customs Brokers vs Manila

GRN L-4376 May 22, 1953
En Banc
FACTS:
The Municipal Board of Manila passed ordinance No. 3379 which
imposes a property tax that is within the power of the City under its
revised charter. The ordinance was passed by the Municipal Board
under the authority conferred by section 18 of RA 409

ISSUE:
Whether or not the ordinance infringes on the uniformity of taxes as
ordained by the Constitution.
RULING:
The Ordinance exacts the tax upon all motor vehicles operating within
Manila and does not distinguish between a motor vehicle registered in
the City and one registered in another place nor does it distinguish
private of vehicle for hire. The distinction is important if we note that
the ordinance intends to burden with the tax only those registered in
Manila. There is no pretense that the Ordinance equally applies to
vehicles who come to Manila for a temporary purpose.
Shell Corporation v. Vano (As Municipal Treasurer)
GR L-6093, 94 Phil 387, February 24, 1954
Facts:
The Municipal Council of Cordova, Cebu adopted Ordinance 10 which
imposes an annual tax on occupation or the exercise of the privilege
of installation manager and Ordinance 11 imposing an annual tax on
tin can factories having a maximum output capacity of 30,000 tin
cans. Shell, a foreign corporation, disputed the ordinances and
contended that: first, “installation manager” is a designation made by
the company and such designation cannot be deemed to be a “calling”
as defined in Sec 178 of NIRC and that the installation manager
employed by Shell is a salaried employee which may not be taxed by
the municipal council under the provisions of NIRC; second, the
ordinance is discriminatory and hostile because there is no other
person in the locality who exercises such designation or calling; and
third, the imposition of tax on tin can factories having a 30,000
maximum output capacity is unlawful because it is a percentage tax
and falls under the exceptions provided in the Tax Code.

Issue: W/N an installation manager, although a salaried employee, is

liable for occupation tax
Ruling:
Yes. Even if the installation manager is a salaried employee of the
corporation, still it is an occupation. Further, one occupation or line of
business does not become exempt by being conducted with some
other occupation or business for which such tax has been paid. The
occupation tax must be paid by each individual engaged in a calling
subject to it.

Issue 2: W/N the ordinance is unconstitutional because it is hostile

and discriminatory
Ruling:
No. The fact that there is no other person in the locality who
exercises such a “designation” or calling does not make the ordinance
discriminatory and hostile, inasmuch as it is and will be applicable to
any person or firm who exercises such calling or occupation named or
designated as “installation manager.
Issue 3: W/N the annual tax imposition on tin can factories having an
annual output capacity of 30,000 is valid
Ruling:
Yes. It is not a percentage tax because the maximum annual output
capacity is not a percentage. It is not a share or a tax based on the
amount of the proceeds realized out of the sale of the tin cans
manufactured therein but on the business of manufacturing tin cans
having a maximum annual output capacity of 30,000 tin cans.
Issue 4: W/N the Municipal Treasurer should have been impleaded in
this case
Ruling:
No. In an action for refund of municipal taxes claimed to have been
paid and collected under an illegal ordinance, it is not the municipal
treasuer who is the real party-in-interest but the municipality
concerned that is empowered to sue and be sued.

Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan GR No 81311

June 30, 1988

FACTS:
EO 372 was issued by the President of the Philippines which amended
the Revenue Code, adopting the value-added tax (VAT) effective
January 1, 1988. Four petitions assailed the validity of the VAT Law
from being beyond the President to enact; for being oppressive,
discriminatory, regressive and violative of the due process and equal
protection clauses, among others, of the Constitution. The Integrated
Customs Brokers Association particularly contend that it unduly
discriminate against customs brokers (Section 103r) as the amended
provision of the Tax Code provides that “service performed in the
exercise of profession or calling (except custom brokers) subject to
occupational tax under the Local Tax Code and professional services
performed by registered general professional partnerships are exempt
from VAT.

ISSUE:
Whether the E-VAT law is void for being discriminatory against
customs brokers
RULING:
No. The phrase “except custom brokers” is not meant to discriminate
against custom brokers but to avert a potential conflict between
Sections 102 and 103 of the Tax Code, as amended. The distinction of
the customs brokers from the other professionals who are subject to
occupation tax under the Local Tax Code is based on material
differences, in that the activities of customs partake more of a
business, rather than a profession and were thus subjected to the
percentage tax under Section 174 of the Tax Code prior to its
amendment by EO 273. EO 273 abolished the percentage tax and
replaced it with the VAT. If the Association did not protest the
classification of customs brokers then, there is no reason why it
should protest now.

Tan vs. Del Rosario

237 SCRA 324

Facts:

Petitioners challenge the constitutionality of RA 7496 or the

simplified income taxation scheme (SNIT) under Arts (26) and (28) and
III (1). The SNIT contained changes in the tax schedules and different
treatment in the professionals which petitioners assail as
unconstitutional for being isolative of the equal protection clause in
the constitution.

Issue:
Is the contention meritorious?

Ruling:

No. uniformity of taxation, like the hindered concept of equal

protection, merely require that all subjects or objects of taxation
similarly situated are to be treated alike both privileges and liabilities.
Uniformity, does not offend classification as long as it rest on
substantial distinctions, it is germane to the purpose of the law. It is
not limited to existing only and must apply equally to all members of
the same class.

The legislative intent is to increasingly shift the income tax

system towards the scheduled approach in taxation of individual
taxpayers and maintain the present global treatment on taxable
corporations. This classification is neither arbitrary nor inappropriate.
Ormoc Sugar vs Treasurer of Ormoc City (1968)

February 15, 2013 markerwins Tax Law

Facts: In 1964, the Municipal Board of Ormoc City passed Ordinance 4,

imposing on any and all productions of centrifuga sugar milled at the
Ormoc Sugar Co. Inc. in Ormoc City a municpal tax equivalent to 1%
per export sale to the United States and other foreign countries. The
company paid the said tax under protest. It subsequently filed a case
seeking to invalidate the ordinance for being unconstitutional.

Issue: Whether the ordinance violates the equal protection clause.

Held: The Ordinance taxes only centrifugal sugar produced and

exported by the Ormoc Sugar Co. Inc. and none other. At the time of
the taxing ordinance’s enacted, the company was the only sugar
central in Ormoc City. The classification, to be reasonable, should be
in terms applicable to future conditions as well. The taxing ordinance
should not be singular and exclusive as to exclude any subsequently
established sugar central, of the same class as the present company,
from the coverage of the tax. As it is now, even if later a similar
company is set up, it cannot be subject to the tax because the
ordinance expressly points only to the company as the entity to be
levied upon.

PHILRECA v. Secretary of Interior and Local Government

12/5/2016

0 Comments
Taxation Law. Tax 1. Local Taxation. Local Autonomy.

Philippine Rural Electric Cooperatives Association, Inc. v. Secretary of

Interior and Local Government
G.R. No. 143076, June 10, 2003
Puno, J.:

FACTS:
This is a petition for Prohibition under Rule 65 of the Rules of Court
with prayer for the issuance of a temporary restraining order seeking
to annul as unconstitutional sections 193 and 234 of R.A. No. 7160
otherwise known as the Local Government Code. A class suit was filed
by petitioners in their own behalf and in behalf of other electric
cooperatives organized and existing under P.D. No. 269 who are
members of petitioner Philippine Rural Electric Cooperatives
Association, Inc. (PHILRECA). Petitioners contend that pursuant to the
provisions of P.D. No. 269, as amended, and the provision in the loan
agreements of the government of the Philippines with the government
of the United State of America, they are exempt from payment of local
taxes, including payment of real property tax. With the passage of the
Local Government Code, however, they allege that their tax
exemptions have been invalidly withdrawn. In particular, petitioners
assail Sections 193 and 234 of the Local Government Code on the
ground that the said provisions discriminate against them, in violation
of the equal protection clause. Further, they submit that the said
provisions are unconstitutional because they impair the obligation of
contracts between the Philippine Government and the United States
Government.

ISSUE:
Did Sections 193 and 234 of the Local Government Code violate the
equal protection clause?

HELD:
NO. The pertinent parts of Sections 193 and 234 of the Local
Government Code provide:

Section 193. Withdrawal of Tax Exemption Privileges. Unless

otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned and controlled corporations, except local
water districts, cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.

Section 234. Exemptions from real property tax. The following are
exempted from payment of the real property tax:

(d) All real property owned by duly registered cooperatives as provided

for under R.A. No. 6938; and

Except as provided herein, any exemption from payment of real

property tax previously granted to, or presently enjoyed by, all persons
whether natural or juridical, including all government-owned and
controlled corporations are hereby withdrawn upon effectivity of this
Code.

Petitioners argue that the above provisions of the Local Government

Code are unconstitutional for violating the equal protection clause.
Allegedly, said provisions unduly discriminate against petitioners who
are duly registered cooperatives under P.D. No. 269, as amended, and
not under R.A. No. 6938 or the Cooperative Code of the Philippines.
The Court holds taht there is reasonable classification under the Local
Government Code to justify the different tax treatment between
electric cooperatives covered by P.D. No. 269, as amended, and
electric cooperatives under R.A. No. 6938. First, substantial
distinctions exist between cooperatives under P.D. No. 269, as
amended, and cooperatives under R.A. No. 6938 on two material
points, to wit – 1) the capital contributions of the members, and 2) the
extent of government control over cooperatives. Second, the
classification of tax-exempt entities in the Local Government Code is
germane to the purpose of the law. The Constitutional mandate that
every local government unit shall enjoy local autonomy, does not mean
that the exercise of power by local governments is beyond regulation
by Congress. Thus, while each government unit is granted the power
to create its own sources of revenue, Congress, in light of its broad
power to tax, has the discretion to determine the extent of the taxing
powers of local government units consistent with the policy of local
autonomy. Section 193 of the Local Government Code is indicative of
the legislative intent to vest broad taxing powers upon local
government units and to limit exemptions from local taxation to
entities specifically provided therein. Section 193 provides:

Section 193. Withdrawal of Tax Exemption Privileges. Unless

otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned and controlled corporations, except local
water districts, cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.

The above provision effectively withdraws exemptions from local

taxation enjoyed by various entities and organizations upon effectivity
of the Local Government Code except for a) local water districts; b)
cooperatives duly registered under R.A. No. 6938; and c) non-stock and
non-profit hospitals and educational institutions.

Further, petitioners argue that as beneficiaries of the loan proceeds all

the assets of petitioners, such as lands, buildings, distribution lines
acquired through the proceeds of the Loan Agreements are tax
exempt. The Court holds otherwise. A plain reading of the provision
readily shows that it does not grant any tax exemption in favor of the
borrower or the beneficiary either on the proceeds of the loan itself or
the properties acquired through the said loan. It simply states that the
loan proceeds and the principal and interest of the loan, upon
repayment by the borrower, shall be without deduction of any tax or
fee that may be payable under Philippine law as such tax or fee will be
absorbed by the borrower with funds other than the loan proceeds.

People of the Philippines vs. Judy Anne Santos, CTA CRIM. CASE
NO. O-012, January 16, 2013
Bautista, J.

Facts:

The accused, Judy Anne Santos is charged for filing a false and
fraudulent Income Tax Return (“ITR”) for the taxable year 2002 by
indicating therein a gross income of P 8, 003,332.70, when in truth
and in fact her correct income for taxable year 2002 is P 16, 396,
234.70. She is prosecuted for violation Section 255 of the 1997
NIRC as amended for her failure to supply correct and accurate
information, which resulted to an income tax deficiency in the
amount of P 1, 395,116.24, excluded interest and penalties thereon
in the amount of P 1, 319, 500. 94, or in the aggregate income tax
deficiency of P 2, 714,617.18.

Issue:

Whether or not the accused may be held liable for violation of

Section 255 of the National Internal Revenue Code, as amended.

Held:

Section 255 enumerates the following offenses:

a. Willful failure to pay tax;

b. Willful failure to make a return;
c. Willful failure to keep any record;
d. Willful failure to supply correct and accurate information;
e. Willful failure to withhold or remit taxes withheld; or
f. Willful failure to refund excess taxes withheld on
compensation.

One of the offenses above-enumerated is willful failure to supply

correct and accurate information, which is being attributed to the
accused. The elements of the said offense are as follows:

1. That a person is required to supply correct and accurate

information;
 2. That there is failure to supply correct and accurate
information at the time or times required by law or rules and
regulations; and
3. That such failure to supply correct and accurate information is
done wilfully.

Require to supply Correct and Accurate Information

Based on the records of the case, the accused unequivocally

admitted that as early as eight (8) years old, she entered the
entertainment industry, and that at present is an established movie
actress, celebrity endorser and showbiz personality. Further, for the
subject taxable year 2002, she admitted that she entered into
contracts for her engagement as a professional entertainer, movie
actress, and product endorser. With this, accused is required to file
an income tax return for all her income from all sources.

The prosecution was able to prove that the accused, earning her
professional income as an entertainer is required to file an income
tax return, as she did, and that accused apparently supplied correct
and accurate information thereof.

Failure to Supply Correct and Accurate Information at the Time

Required by Law

The prosecution was able to prove the element of failure to supply

correct and accurate information at the time required by law.

The prosecution presented that there were:

a. Undeclared income form ABS-CBN Broadcasting Corporation

b. Undeclared income from Viva Productions, Inc.
c. Undeclared income from Star Cinema Productions, Inc.
d. Undeclared income from Regal Entertainment, Inc.
e. Undeclared income from Century Canning Corporation

From the foregoing, the prosecution was able to show that from the
declared Gross Taxable Professional Income of the accused in the
amount of P 8, 003, 332.70, in her ITR for the taxable year 2002,
accused has an aggregate amount of P16, 396, 234.70, or a gross
underdeclaration of P 8, 362, 902.00.

Willful Failure to Supply Correct and Accurate Information

As early discussed, the prosecution was able to prove that the

accused failed to supply correct and accurate information in her ITR
for the year2002 for her failure declare her other income payments
received from other sources.

However, it is well settled that mere understatement of a tax is not

itself proof of fraud for the purpose of tax evasion.

Based on the records of the case, the accused denied the signature
appearing on top of the name “Judy Anne Santos” in the ITR for
taxable year 2002, presented by the prosecution, and that the
Certified Public Accountant, who’s participation is limited to the
preparation of the Financial Statements attached to the return,
likewise, denied signing the return on behalf of the accused.
Further, the working papers were all provided by the manager of the
accused.

The Court, therefore, finds the records bereft of any evidence to

establish the element of wilfulness on the part of the accused to
supply the correct and accurate information on her subject return.

The Court, however, only finds the accused negligent; and such is
not enough to convict her in the case at bench.

Negligence, whether slight or gross, is not equivalent to the fraud

with intent to evade the tax contemplated by law. Fraud must
amount to intentional wrong-doing with the sole object of avoiding
the tax.
The Court also notes the intention of the accused to settle the case
were it not for the opposition of her Manager and then counsel,
which negated any motive of the accused to commit fraud.

In sum, the Court finds the failure of the prosecution to establish

the guilt of the accused beyond the required reasonable doubt.

American Bible Society v City of Manila GR No. L-9637, April 30, 1957

FACTS:
In the course of its ministry, the Philippine agency of American Bible
Society (a foreign, non-stock, non-profit, religious,
missionary corporation) has been distributing and selling bibles and/or
gospel portions thereof throughout the Philippines. The acting City
Treasurer of Manila informed plaintiff that it was conducting the
business of general merchandise since November 1945, without
providing itself with the necessary Mayor’s permit and municipal
license, in violation of Ordinance No. 3000, as amended, and
Ordinances Nos. 2529, 3028 and 3364. The society paid such under
protest and filed suit questioning the legality of the ordinances under
which the fees are being collected.

ISSUES:

1. Whether or not the ordinances of the City of Manila are

constitutional and valid
2. Whether the provisions of said ordinances are applicable or not
to the case at bar

RULING:
1. Yes, they are constitutional. The ordinances do not deprive
defendant of his constitutional right of the free exercise
and enjoyment of religious profession and worship, even though it
prohibits him from introducing and carrying out a scheme or purpose
which he sees fit to claim as part of his religious system. It seems
clear, therefore, that Ordinance No. 3000 cannot be considered
unconstitutional, even if applied to plaintiff society.

2. The ordinance is inapplicable to said business, trade or occupation

of the plaintiff. Even if religious groups and the press are not
altogether free from the burdens of the government, the act of
distributing and selling bibles is purely religious and does not fall
under Section 27e of the Tax Code (CA 466). The fact that the price of
bibles, etc. are a little higher than actual cost of the same does not
necessarily mean it is already engaged in business for profit. Thus, the
Ordinances are not applicable to the Society.

olentino v. Secretary of Finance

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.
RA 7716 seeks to widen the tax base of the existing VAT system and
enhance its administration by amending the National Internal Revenue
Code. There are various suits challenging the constitutionality of RA
7716 on various grounds.

One contention is that RA 7716 did not originate exclusively in the

House of Representatives as required by Art. VI, Sec. 24 of the
Constitution, because it is in fact the result of the consolidation of 2
distinct bills, H. No. 11197 and S. No. 1630. There is also a contention
that S. No. 1630 did not pass 3 readings as required by the
Constitution.

Issue:

Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) ofthe
Constitution
Held:

The argument that RA 7716 did not originate exclusively in the House
of Representatives as required by Art. VI, Sec. 24 of the Constitution
will not bear analysis. To begin with, it is not the law but the revenue
bill which is required by the Constitution to originate exclusively in the
House of Representatives. To insist that a revenue statute and not
only the bill which initiated the legislative process culminating in the
enactment of the law must substantially be the same as the House bill
would be to deny the Senate’s power not only to concur with
amendments but also to propose amendments. Indeed, what the
Constitution simply means is that the initiative for filing revenue, tariff
or tax bills, bills authorizing an increase of the public debt, private
bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the
districts, the members of the House can be expected to be more
sensitive to the local needs and problems. Nor does the
Constitutionprohibit the filing in the Senate of a substitute bill in
anticipation of its receipt of the bill from the House, so long as action
by the Senate as a body is withheld pending receipt of the House bill.

The next argument of the petitioners was that S. No. 1630 did not pass
3 readings on separate days as required by the Constitution because
the second and third readings were done on the same day. But this
was because the President had certified S. No. 1630 as urgent. The
presidential certification dispensed with the requirement not only of
printing but also that of reading the bill on separate days. That upon
the certification of a billby the President the requirement of 3 readings
on separate days and of printing and distribution can be dispensed
with is supported by the weightof legislative practice.

Casanovas v Hord
GR No. 3473, March 22, 1907
FACTS:
In January 1897, the Spanish Government, in accordance with the
provisions of the royal decree of May 14, 1867,
granted J. Casanovas certain mines in the Province of Ambos
Camarines. 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 1189 which imposes an annual tax and an ad valorem tax
on all valid perfected mining concessions granted prior to April 11 th,
1899. The Commissioner, JNO S. Hord, imposed upon these properties
the tax mentioned in Section 134, which Casanovas paid under
protest.

ISSUE:
Is Section 134 valid?

RULING:
No, the concessions granted by the Government of Spain to the
plaintiff, constitute contracts between the parties; that
section 134 of the Internal Revenue Law impairs the obligation of
these contracts, and is therefore void as to them.
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.

Cagayan Electric Power & Light Co. Inc. v CIR GR No. L-60126,
September 25, 1985
FACTS:
Cagayan Electric is a holder of a legislative franchise under RA 3247
where payment of 3% tax on gross earning is in lieu of all taxes and
assessments upon privileges. In 1968, RA 5431 amended the franchise
by making all corporate taxpayers liable for income tax. In 1969,
through RA 6020, its franchise was extended to two other towns and
the tax exemption was reenacted. The commissioner required the
company to pay deficiency income taxes for the intervening period
(1968-1969).

ISSUE:
Is CEPALCO liable for the tax?

RULING:
Yes. Congress could impair the company’s legislative franchise by
making it liable for income tax. The Constitution
provides that a franchise is subject to amendment, alteration or repeal
by the Congress when the public interest so requires. However, it
cannot be denied that the said 1969 assessment appears to be highly
controversial. It had reason not to pay income tax because of the tax
exemption its franchise. For this reason, it should be liable only for tax
proper and should not be held liable for surcharge and interest.

Manila Electric Company v. Province of Laguna (G.R. No. 131359. May

5, 1999)

18AUG

FACTS:
MERALCO was granted a franchise by several municipal councils and
the National Electrification Administration to operate an electric light
and power service in the Laguna. Upon enactment of Local
Government Code, the provincial government issued ordinance
imposing franchise tax. MERALCO paid under protest and later claims
for refund because of the duplicity with Section 1 of P.D. No. 551. This
was denied by the governor (Joey Lina) relying on a more recent law
(LGC). MERALCO filed with the RTC a complaint for refund, but was
dismissed. Hence, this petition.

ISSUE:
Whether or not the imposition of franchise tax under the provincial
ordinance is violative of the non-impairment clause of the Constitution
and of P.D. 551.

HELD:
No. There is no violation of the non-impairment clause for the same
must yield to the inherent power of the state (taxation). The provincial
ordinance is valid and constitutional.

RATIO:
The Local Government Code of 1991 has incorporated and adopted, by
and large, the provisions of the now repealed Local Tax Code. The
1991 Code explicitly authorizes provincial governments,
notwithstanding “any exemption granted by any law or other special
law, . . . (to) impose a tax on businesses enjoying a franchise.” A
franchise partakes the nature of a grant which is beyond the purview
of the non-impairment clause of the Constitution. Article XII, Section
11, of the 1987 Constitution, like its precursor provisions in the 1935
and the 1973 Constitutions, is explicit that no franchise for the
operation of a public utility shall be granted except under the
condition that such privilege shall be subject to amendment, alteration
or repeal by Congress as and when the common good so requires.

G.R. No. 144486. April 13, 2005

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI),

Petitioner,
vs.
PROVINCIAL ASSESOR OF SOUTH COTABATO, PROVINCIAL
TREASURER OF SOUTH COTABATO, MUNICIPAL ASSESSOR OF TUPI,
SOUTH COTABATO, and MUNICIPAL TREASURER OF TUPI, SOUTH
COTABATO, Respondents.

Facts:

R.A. No. 2036 of 1957, as amended by R.A. No. 4054, granted RCPI a
50-year franchise. Thus, Sec. 14 of the amended law, in gist, provides
that the grantee shall pay the same taxes as may be required by law.
Said tax shall be in lieu of any and all taxes of any kind, nature or
description levied, established or collected by any authority
whatsoever, municipal, provincial or national, from which taxes the
grantee is hereby expressly exempted.

On 10 June 1985, the municipal treasurer of Tupi, South Cotabato

assessed RCPI real property taxes from 1981 to 1985. The municipal
treasurer demanded that RCPI pay P166,810 as real property tax on its
radio station building in Barangay Kablon, as well as on its machinery
shed, radio relay station tower and its accessories, and generating
sets, based on the following tax declarations.

RCPI protested the assessment before the Local Board of Assessment

Appeals (LBAA') and claimed that all its assessed properties are
personal properties and thus exempt from the real property tax. It also
pointed out that its franchise exempts RCPI from 'paying any and all
taxes of any kind, nature or description in exchange for its payment of
tax equal to one and one-half per cent on all gross receipts from the
business conducted under its franchise. It further claimed that any
deviation from its franchise would violate the non-impairment of
contract clause of the Constitution. Finally, RCPI stated that the value
of the properties assessed has depreciated since their acquisition in
the 1960s.

The Provincial Assessor of South Cotabato opposed RCPI's claims on

all points.
The Local Board of Assessment Appeals ruled that appellant is
ordered to pay the real property taxes, inclusive of all penalties,
surcharges and interest accruing as of the date of actual payment, on
the properties covered; in which the Central Board of Assessment
Appeals affirmed.

The Appelate Court ruled that decision of the Central Board of

Assessment Appeals is hereby MODIFIED. Petitioner is declared
exempt from paying the real property taxes assessed upon its
machinery and radio equipment mounted as accessories to its relay
tower. The decision assessing taxes upon petitioner's radio station
building, machinery shed, and relay station tower is, however,
affirmed.

Issues:

1. Whether the appellate court erred when it excluded RCPI's tower,

relay station building, and machinery shed from tax exemption; and

2. Whether the appellate court erred when it did not resolve the issue
of nullity of the tax declarations and assessments due to non-inclusion
of depreciation allowance.

Held:

Exemption from Real Property Tax

First, Congress passed the Local Government Code that withdrew all
the tax exemptions existing at the time of its passage including that of
RCPI's. Second, Congress enacted the franchise of
telecommunications companies, such as Islacom, Bell, Island Country,
IslaTel, TeleTech, Major Telecoms, and Smart, with the 'in lieu of all
taxes' proviso. Third, Congress passed RA 7925 entitled 'An Act to
Promote and Govern the Development of Philippine
Telecommunications and the Delivery of Public Telecommunications
Services' which, through Section 23, mandated the equality of
treatment of service providers in the telecommunications industry.

The existing legislative policy is clearly against the revival of the 'in
lieu of all taxes' clause in franchises of telecommunications
companies. After the VAT on telecommunications companies took
effect on January 1, 1996, Congress never again included the 'in lieu of
all taxes' clause in any telecommunications franchise it subsequently
approved. RCPI cannot also invoke the equality of treatment clause
under Section 23 of Republic Act No. 7925. The franchises of the
petitioners all expressly declare that the franchisee shall pay the real
estate tax, using words similar to Section 14 of RA 2036, as amended.

It is an elementary rule in taxation that exemptions are strictly

construed against the taxpayer and liberally in favor of the taxing
authority. It is the taxpayer's duty to justify the exemption by words
too plain to be mistaken and too categorical to be misinterpreted.

Exclusion of Depreciation Allowance

RCPI contends that the tax declarations and assessments covering its
radio relay station tower, radio station building, and machinery shed
are void because the assessors did not consider depreciation
allowance in their assessments. The Court have examined the records
of this case and found that RCPI raised before the LBAA and the CBAA
the nullity of the assessments due to the non-inclusion of depreciation
allowance. Therefore, RCPI did not raise this issue for the first time.
However, even if the court considers this issue, under the Real
Property Tax Code depreciation allowance applies only to machinery
and not to real property.
The petition is denied and affirmed the decision of the Court of
Appeals.

City Government of Quezon City v. Bayan Telecommunications, Inc.

[G.R. No.162015. March 6, 2006]

23NOV

FACTS
Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative
franchise holder under Republic Act (R.A.) No. 3259 (1961) to establish
and operate radio stations for domestic telecommunications,
radiophone, broadcasting and telecasting. Section 14 (a) of R.A. No.
3259 states: “The grantee shall be liable to pay the same taxes on its
real estate, buildings and personal property, exclusive of the
franchise, xxx”. In 1992, R.A. No. 7160, otherwise known as the “Local
Government Code of 1991” (LGC) took effect. Section 232 of the Code
grants local government units within the Metro Manila Area the power
to levy tax on real properties. Barely few months after the LGC took
effect, Congress enacted R.A. No. 7633, amending Bayantel’s original
franchise. The Section 11 of the amendatory contained the following
tax provision: “The grantee, its successors or assigns shall be liable to
pay the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, xxx“. In 1993, the government
of Quezon City enacted an ordinance otherwise known as the Quezon
City Revenue Code withdrawing tax exemption privileges.
ISSUE
Whether or not Bayantel’s real properties in Quezon City are exempt
from real property taxes under its franchise.

RULING
YES. A clash between the inherent taxing power of the legislature,
which necessarily includes the power to exempt, and the local
government’s delegated power to tax under the aegis of the 1987
Constitution must be ruled in favor of the former. The grant of taxing
powers to LGUs under the Constitution and the LGC does not affect
the power of Congress to grant exemptions to certain persons,
pursuant to a declared national policy. The legal effect of the
constitutional grant to local governments simply means that in
interpreting statutory provisions on municipal taxing powers, doubts
must be resolved in favor of municipal corporations.

The legislative intent expressed in the phrase “exclusive of this

franchise” cannot be construed other than distinguishing between two
(2) sets of properties, be they real or personal, owned by the
franchisee, namely, (a) those actually, directly and exclusively used in
its radio or telecommunications business, and (b) those properties
which are not so used. It is worthy to note that the properties subject
of the present controversy are only those which are admittedly falling
under the first category.
Since R. A. No. 7633 was enacted subsequent to the LGC, perfectly
aware that the LGC has already withdrawn Bayantel’s former
exemption from realty taxes, the Congress using, Section 11 thereof
with exactly the same defining phrase “exclusive of this franchise” is
the basis for Bayantel’s exemption from realty taxes prior to the LGC.
In plain language, the Court views this subsequent piece of legislation
as an express and real intention on the part of Congress to once again
remove from the LGC’s delegated taxing power, all of the franchisee’s
(Bayantel’s) properties that are actually, directly and exclusively used
in the pursuit of its franchise.

SMART vs. City of Davao

Facts: On February 18, 2002, Smart filed a special civil action for
declaratory relief, for the ascertainment of its rights and obligations
under the Tax Code of the City of Davao. Smart contends that its
telecenter in Davao City is exempt from payment of franchise tax to
the City because the power of the City of Davao to impose a franchise
tax is subject to statutory limitations such as the “in lieu of all taxes”
clause found in Section 9 of R.A. No. 7294 (Smart’s
franchise). Respondents contested the tax exemption claimed by
Smart. They invoked the power granted by the Constitution to local
government units to create their own sources of revenue. On July 19,
2002, the RTC rendered its Decision denying the petition. The trial
court noted that the ambiguity of the in “lieu of all taxes” provision in
R.A. No. 7294, on whether it covers both national and local taxes,
must be resolved against the taxpayer.

Issue: Whether or not Smart is liable to pay the franchise tax imposed
by the City of Davao.

Held: Petition is denied. It is not clear whether the in lieu of all taxes
provision in the franchise of Smart would include exemption from local
or national taxation. What is clear is that Smart shall pay franchise tax
equivalent to three percent (3%) of all gross receipts of the business
transacted under its franchise. But whether the franchise tax
exemption would include exemption from exactions by both the local
and the national government is not unequivocal. The uncertainty in the
“in lieu of all taxes” clause in R.A. No. 7294 on whether Smart is
exempted from both local and national franchise tax must be
construed strictly against Smart which claims the exemption. Smart
has the burden of proving that, aside from the imposed 3% franchise
tax; Congress intended it to be exempt from all kinds of franchise
taxes whether local or national. Tax exemptions are never presumed
and are strictly construed against the taxpayer and liberally in favor of
the taxing authority. They can only be given force when the grant is
clear and categorical. In this case, the doubt must be resolved in favor
of the City of Davao. The “in lieu” of all taxes clause applies only to
national internal revenue taxes and not to local taxes.

QUEZON CITY vs. ABS-CBN BROADCASTING CORPORATION - Local

Franchise Tax

FACTS:

ABS-CBN was granted a franchise which provides that it “shall pay a

3% franchise tax and the said percentage tax shall be “in lieu of all
taxes on this franchise or earnings thereof”. It thus filed a complaint
against the imposition of local franchise tax.
ISSUE:

Does the “in lieu of all taxes” provision in ABS-CBN’s franchise exempt
it from payment of the local franchise tax?

HELD:

NO. The right to exemption from local franchise tax must be clearly
established beyond reasonable doubt and cannot be made out of
inference or implications.

The uncertainty over whether the “in lieu of all taxes” provision
pertains to exemption from local or national taxes, or both, should be
construed against Respondent who has the burden to prove that it is in
fact covered by the exemption claimed. Furthermore, the “in lieu of all
taxes” clause in Respondent’s franchise has become ineffective with
the abolition of the franchise tax on broadcasting companies with
yearly gross receipts exceeding P10 million as they are now subject to
the VAT.

Lladoc vs Commisioner of Internal Revenue (1965)

February 15, 2013 markerwins Tax Law

Facts: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in

cash to the parish priest of Victorias, Negros Occidental; the amount
spent for the construction of a new Catholic Church in the locality,m
as intended. In1958, MB Estate filed the donor’s gift tax return. In
1960, the Commissioner issued an assessment for donee’s gift tax
against the parish. The priest lodged a protest to the assessment and
requested the withdrawal thereof.

Issue: Whether the Catholic Parish is tax exempt.

Held: The phrase “exempt from taxation” should not be interpreted to

mean exemption from all kinds of taxes. The exemption is only from
the payment of taxes assessed on such properties as property taxes
as contradistinguished from excise taxes. A donee’s gift tax is not a
property tax but an excise tax imposed on the transfer of property by
way of gift inter vivos. It does not rest upon general ownership, but an
excise upon the use made of the properties, upon the exercise of the
privilege of receiving the properties. The imposition of such excise tax
on property used for religious purpose do not constitute an impairment
of the Constitution.

The tax exemption of the parish, thus, does not extend to excise
taxes.

REV. FR. CASIMIRO LLADOC v. The COMMISSIONER OF INTERNAL

REVENUE and The COURT of TAX APPEALS. G.R. No. L-19201. June 16,
1965
FACTS:

M.B. Estate, Inc. donated P10,000.00 in cash to the parish priest of

Victorias, Negros Occidental, for the construction of a new Catholic
Church in the locality. The total amount was actually spent for the
purpose intended.

A year later, M.B. Estate, Inc., filed the donor's gift tax return. CIR
issued an assessment for donee's gift tax against the parish, of which
petitioner was the priest.

Petitioner filed a protest which was denied by the CIR. He then filed an
appeal with the CTA citing that he was not the parish priest at the
time of donation, that there is no legal entity or juridical person known
as the "Catholic Parish Priest of Victorias," and, therefore, he should
not be liable for the donee's gift tax and that assessment of the gift
tax is unconstitutional.

The CTA denied the appeal thus this case.

ISSUE: Whether petitioner and the parish are liable for the donee's gift
tax.

RULING:

Yes for the parish. The Constitution only made mention of property tax
and not of excise tax as stated in Section 22, par 3. The assessment of
the CIR did not rest upon general ownership; it was an excise upon the
use made of the properties, upon the exercise of the privilege of
receiving the properties. A gift tax is not a property tax, but an excise
tax imposed on the transfer of property by way of gift inter vivos, the
imposition of which on property used exclusively for religious
purposes, does not constitute an impairment of the Constitution.

No for the petitioner. The Court ordered petitioner to be substituted by

the Head of Diocese to pay the said gift tax after the CIR and Solicitor
General did not object to such substitution.

REV. FR. CASIMIRO LLADOC v. The COMMISSIONER OF INTERNAL

REVENUE and The COURT of TAX APPEALS. G.R. No. L-19201. June 16,
1965
FACTS:

M.B. Estate, Inc. donated P10,000.00 in cash to the parish priest of

Victorias, Negros Occidental, for the construction of a new Catholic
Church in the locality. The total amount was actually spent for the
purpose intended.

A year later, M.B. Estate, Inc., filed the donor's gift tax return. CIR
issued an assessment for donee's gift tax against the parish, of which
petitioner was the priest.

Petitioner filed a protest which was denied by the CIR. He then filed an
appeal with the CTA citing that he was not the parish priest at the
time of donation, that there is no legal entity or juridical person known
as the "Catholic Parish Priest of Victorias," and, therefore, he should
not be liable for the donee's gift tax and that assessment of the gift
tax is unconstitutional.

The CTA denied the appeal thus this case.

ISSUE: Whether petitioner and the parish are liable for the donee's gift
tax.

RULING:

Yes for the parish. The Constitution only made mention of property tax
and not of excise tax as stated in Section 22, par 3. The assessment of
the CIR did not rest upon general ownership; it was an excise upon the
use made of the properties, upon the exercise of the privilege of
receiving the properties. A gift tax is not a property tax, but an excise
tax imposed on the transfer of property by way of gift inter vivos, the
imposition of which on property used exclusively for religious
purposes, does not constitute an impairment of the Constitution.

No for the petitioner. The Court ordered petitioner to be substituted by

the Head of Diocese to pay the said gift tax after the CIR and Solicitor
General did not object to such substitution.

REV. FR. CASIMIRO LLADOC v. The COMMISSIONER OF INTERNAL

REVENUE and The COURT of TAX APPEALS. G.R. No. L-19201. June 16,
1965
FACTS:

M.B. Estate, Inc. donated P10,000.00 in cash to the parish priest of

Victorias, Negros Occidental, for the construction of a new Catholic
Church in the locality. The total amount was actually spent for the
purpose intended.

A year later, M.B. Estate, Inc., filed the donor's gift tax return. CIR
issued an assessment for donee's gift tax against the parish, of which
petitioner was the priest.

Petitioner filed a protest which was denied by the CIR. He then filed an
appeal with the CTA citing that he was not the parish priest at the
time of donation, that there is no legal entity or juridical person known
as the "Catholic Parish Priest of Victorias," and, therefore, he should
not be liable for the donee's gift tax and that assessment of the gift
tax is unconstitutional.
The CTA denied the appeal thus this case.

ISSUE: Whether petitioner and the parish are liable for the donee's gift
tax.

RULING:

Yes for the parish. The Constitution only made mention of property tax
and not of excise tax as stated in Section 22, par 3. The assessment of
the CIR did not rest upon general ownership; it was an excise upon the
use made of the properties, upon the exercise of the privilege of
receiving the properties. A gift tax is not a property tax, but an excise
tax imposed on the transfer of property by way of gift inter vivos, the
imposition of which on property used exclusively for religious
purposes, does not constitute an impairment of the Constitution.

No for the petitioner. The Court ordered petitioner to be substituted by

the Head of Diocese to pay the said gift tax after the CIR and Solicitor
General did not object to such substitution.

Abra Valley College vs Aquino (G.R. No. L-39086)

Posted: July 25, 2011 in Case Digests

FACTS: Petitioner, an educational corporation and institution of higher

learning duly incorporated with the Securities and Exchange
Commission in 1948, filed a complaint to annul and declare void the
“Notice of Seizure’ and the “Notice of Sale” of its lot and building
located at Bangued, Abra, for non-payment of real estate taxes and
penalties amounting to P5,140.31. Said “Notice of Seizure” by
respondents Municipal Treasurer and Provincial Treasurer, defendants
below, was issued for the satisfaction of the said taxes thereon.

The parties entered into a stipulation of facts adopted and embodied

by the trial court in its questioned decision. The trial court ruled for
the government, holding that the second floor of the building is being
used by the director for residential purposes and that the ground floor
used and rented by Northern Marketing Corporation, a commercial
establishment, and thus the property is not being used exclusively for
educational purposes. Instead of perfecting an appeal, petitioner
availed of the instant petition for review on certiorari with prayer for
preliminary injunction before the Supreme Court, by filing said petition
on 17 August 1974.

ISSUE: Whether or not the lot and building are used exclusively for
educational purposes.

HELD: Section 22, paragraph 3, Article VI, of the then 1935 Philippine
Constitution, expressly grants exemption from realty taxes for
cemeteries, churches and parsonages or convents appurtenant
thereto, and all lands, buildings, and improvements used exclusively
for religious, charitable or educational purposes.ﾝ Reasonable
emphasis has always been made that the exemption extends to
facilities which are incidental to and reasonably necessary for the
accomplishment of the main purposes. The use of the school building
or lot for commercial purposes is neither contemplated by law, nor by
jurisprudence. In the case at bar, the lease of the first floor of the
building to the Northern Marketing Corporation cannot by any stretch
of the imagination be considered incidental to the purpose of
education. The test of exemption from taxation is the use of the
property for purposes mentioned in the Constitution.

The decision of the CFI Abra (Branch I) is affirmed subject to the

modification that half of the assessed tax be returned to the
petitioner. The modification is derived from the fact that the ground
floor is being used for commercial purposes (leased) and the second
floor being used as incidental to education (residence of the director).

Herrera vs. Quezon City Board of Assessment Appeals

GR L-15270, 30 September 1961
First Division, Concepcion (J): 6 concur

Facts: In 1952, the Director of the Bureau of Hospitals authorized Jose

V. Herrera and Ester Ochangco Herrera to establish and operate the
St. Catherine’s Hospital. In 1953, the Herreras sent a letter to the
Quezon City Assessor requesting exemption from payment of real
estate tax on the hospital, stating that the same was established for
charitable and humanitarian purposes and not for commercial gain.
The exemption was granted effective years 1953 to 1955. In 1955,
however, the Assessor reclassified the properties from “exempt” to
“taxable” effective 1956, as it was ascertained that out 32 beds in the
hospital, 12 of which are for pay-patients. A school of midwifery is also
operated within the premises of the hospital.

Issue: Whether St. Catherine’s Hospital is exempt from reallty tax.

Held: The admission of pay-patients does not detract from the
charitable character of a hospital, if all its funds are devoted
exclusively to the maintenance of the institution as a public charity.
The exemption in favor of property used exclusively for charitable or
educational purpose is not limited to property actually indispensable
therefore, but extends to facilities which are incidental to and
reasonably necessary for the accomplishment of said purpose, such as
in the case of hospitals — a school for training nurses; a nurses’ home;
property used to provide housing facilities for interns, resident
doctors, superintendents and other members of the hospital staff; and
recreational facilities for student nurses, interns and residents. Within
the purview of the Constitution, St. Catherine’s Hospital is a charitable
institution exempt from taxation.

Bishop of Nueva Segovia vs. Provincial Board of Ilocos Norte

FACTS:

The Roman Catholic Apostolic Church represented by the Bishop of

Nueva Segovia, possessed and owned a parcel of land in the
municipality of San Nicolas, Ilocos Norte, 4 sides of which face the
public streets. On south side is the church yard, the convent and an
adjacent lot used as vegetable garden. At the center is the rest of the
yard and the church on the north is an old cemetery with two of its
walls still standing, and a portion were formally stood a tower.

As required by the Provincial Board, plaintiff paid under protest on July

3, 1925 the land tax on the lot adjoining the convent which formerly
was the cemetery. Plaintiff filed action for recovery of sum paid by to
the Provincial Board by way of land tax, alleging that the collection of
tax is illegal. The Lower Court absolved the Provincial Board and
declared that the tax collected on the lot was legal. Both parties
appealed from this judgment.

ISSUE: WON Plaintiff is exempted in the payment of land tax?

HELD: YES.

The exemption from payment of land tax of a convent refers to the

home of the party who resides over the church and who has to take
care of himself in order to discharge his duties. It is therefore include
not only the land actually occupied by the church, but also the
adjacent ground destined for the ordinary and incidental uses of the
occupant. Except in large cities where density of the population and
the development of commerce require the use of larger tracts of land
for buildings, a vegetable garden belongs to a house and in the present
case, its use is limited to the necessities of the priest, which comes
under exemption.

As regards to the lot which formerly was the cemetery, while it is no

longer used as such, neither is it used for commercial purposes and
according to the evidence, is now being used as a lodging house by
the people who participate in religion festivities, which constitutes an
incidental use in religious functions, which also comes within the
exemption.
The judgment appealed from is reversed in all its part and it is held
that both lots are exempt from land tax and the defendants are
ordered to refund to plaintiff whatever was paid as such tax, without
any special pronouncement as to cost. So Ordered.

LUNG CENTER OF THE PHILIPPINES VS QUEZON CITY

Posted by kaye lee on 5:15 PM

G.R. No. 144104, June 29, 2004 [Constitutional Law - Article VI:
Legislative Department; Taxation ]

FACTS:
Petitioner is a non-stock, non-profit entity established by virtue of PD
No. 1823, seeks exemption from real property taxes when the City
Assessor issued Tax Declarations for the land and the hospital
building. Petitioner predicted on its claim that it is a charitable
institution. The request was denied, and a petition hereafter filed
before the Local Board of Assessment Appeals of Quezon City (QC-
LBAA) for reversal of the resolution of the City Assessor. Petitioner
alleged that as a charitable institution, is exempted from real property
taxes under Sec 28(3) Art VI of the Constitution. QC-LBAA dismissed
the petition and the decision was likewise affirmed on appeal by the
Central Board of Assessment Appeals of Quezon City. The Court of
Appeals affirmed the judgment of the CBAA.

ISSUE:
1. Whether or not petitioner is a charitable institution within the
context of PD 1823 and the 1973 and 1987 Constitution and Section
234(b) of RA 7160.

2. Whether or not petitioner is exempted from real property taxes.

RULING:
1. Yes. The Court hold that the petitioner is a charitable institution
within the context of the 1973 and 1987 Constitution. Under PD 1823,
the petitioner is a non-profit and non-stock corporation which, subject
to the provisions of the decree, is to be administered by the Office of
the President with the Ministry of Health and the Ministry of Human
Settlements. The purpose for which it was created was to render
medical services to the public in general including those who are poor
and also the rich, and become a subject of charity. Under PD 1823,
petitioner is entitled to receive donations, even if the gift or donation
is in the form of subsidies granted by the government.

2. Partly No. Under PD 1823, the lung center does not enjoy any
property tax exemption privileges for its real properties as well as the
building constructed thereon.
The property tax exemption under Sec. 28(3), Art. VI of the
Constitution of the property taxes only. This provision was implanted
by Sec.243 (b) of RA 7160.which provides that in order to be entitled to
the exemption, the lung center must be able to prove that: it is a
charitable institution and; its real properties are actually, directly and
exclusively used for charitable purpose. Accordingly, the portions
occupied by the hospital used for its patients are exempt from real
property taxes while those leased to private entities are not exempt
from such taxes.

CIR vs. St. Luke's Medical Center, Inc.

Post under case digests, Political Law, Taxation at Thursday, January
28, 2016 Posted by Schizophrenic Mind

FACTS: St. Luke's is a non-stock non-profit hospital. The BIR assessed

St. Luke's based on the argument that Section 27(B) of the Tax Code
should apply to it and hence all of St. Luke's income should be subject
to the 10% tax therein as it is a more specific provision and should
prevail over Section 30 which is a general provision. St. Luke's
countered by saying that its free services to patients was 65% of its
operating income and that no part of its income inures to the benefit of
any individual.

ISSUE: Does Section 27(B) have the effect of taking proprietary non-
profit hospitals out of the income tax exemption under Section 30 of
the Tax Code and should instead be subject to a preferential rate of
10% on its entire income?

RULING: No. The enactment of Section 27(B) does not remove the
possible income tax exemption of proprietary non-profit hospitals. The
only thing that Section 27(B) captures (at 10% tax) in the case of
qualified hospitals is in the instance where the income realized by the
hospital falls under the last paragraph of Section 30 such as when the
entity conducts any activity for profit. The revenues derived by St.
Luke's from pay patients are clearly income from activities conducted
for profit.

Angeles University Foundation vs. City of Angeles

Post under case digests, Political Law, Taxation at Thursday, January
28, 2016 Posted by Schizophrenic Mind

FACTS: Petitioner is a non-stock, non-profit educational foundation. It

received a building permit fee assessment for the construction of the
AUF Medical Center but claimed exemption from the same as well as
from other permits and fees by virtue of Republic Act No. 6055.
Respondent disputed the claimed exemption by stating that the
impositions are regulatory in nature and not taxes from which
petitioner is exempt under the said law.

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

exempt?

RULING: No. It is a regulatory fee. The DPWH has in fact issued

implementing rules which provide the bases for assessment of fees
and petitioner has failed to show that they were arbitrarily determined
or unrelated to the activity being regulated. Neither has there been
proof that the fee was unreasonable or in excess of the cost of
regulation or inspection. The Court added that even if there was
incidental revenue, the same is deemed not to change the nature of
the charge. Thus, the City of Angeles was justified in its assessment.

CIR v CA & YMCA

GR No 124043, October 14, 1998

FACTS:
In 1980, YMCA earned an income of 676,829.80 from leasing out a
portion of its premises to small shop owners, like restaurants and
canteen operators and 44,259 from parking fees collected from non-
members. On July 2, 1984, the CIR issued an assessment to YMCA for
deficiency taxes which included the income from lease of YMCA’s real
property. YMCA formally protested the assessment but the CIR denied
the claims of YMCA. On appeal, the CTA ruled in favor of YMCA and
excluded income from lease to small shop owners and parking fees.
However, the CA reversed the CTA but affirmed the CTA upon motion
for reconsideration.

ISSUE:
Whether the rental income of YMCA is taxable
RULING:
Yes. The exemption claimed by YMCA is expressly disallowed by the
very wording of then Section 27 of the NIRC which mandates that the
income of exempt organizations (such as the YMCA) from any of their
properties, real or personal, be subject to the tax imposed by the same
Code. While the income received by the organizations enumerated in
Section 26 of the NIRC is, as a rule, exempted from the payment of tax
in respect to income received by them as such, the exemption does
not apply to income derived from any of their properties, real or
personal or from any of their activities conducted for profit, regardless
of the disposition made of such income.

CIR V SC JOHNSON INC. June 25, 1999

Monday, January 26, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Taxation

Facts: Respondent is a domestic corporation organized and operating

under the Philippine Laws, entered into a licensed agreement with the
SC Johnson and Son, USA, a non-resident foreign corporation based in
the USA pursuant to which the respondent was granted the right to
use the trademark, patents and technology owned by the later
including the right to manufacture, package and distribute the
products covered by the Agreement and secure assistance in
management, marketing and production from SC Johnson and Son
USA.

For the use of trademark or technology, respondent was obliged to pay

SC Johnson and Son, USA royalties based on a percentage of net sales
and subjected the same to 25% withholding tax on royalty payments
which respondent paid for the period covering July 1992 to May 1993
in the total amount of P1,603,443.00.
On October 29, 1993, respondent filed with the International Tax
Affairs Division (ITAD) of the BIR a claim for refund of overpaid
withholding tax on royalties arguing that, the antecedent facts
attending respondents case fall squarely within the same
circumstances under which said MacGeorge and Gillette rulings were
issued. Since the agreement was approved by the Technology Transfer
Board, the preferential tax rate of 10% should apply to the respondent.
So, royalties paid by the respondent to SC Johnson and Son, USA is
only subject to 10% withholding tax.

The Commissioner did not act on said claim for refund. Private
respondent SC Johnson & Son, Inc. then filed a petition for review
before the CTA, to claim a refund of the overpaid withholding tax on
royalty payments from July 1992 to May 1993.

On May 7, 1996, the CTA rendered its decision in favor of SC Johnson

and ordered the CIR to issue a tax credit certificate in the amount of
P163,266.00 representing overpaid withholding tax on royalty
payments beginning July 1992 to May 1993.

The CIR thus filed a petition for review with the CA which rendered the
decision subject of this appeal on November 7, 1996 finding no merit in
the petition and affirming in toto the CTA ruling.

Issue: Whether or not tax refunds are considered as tax exemptions.

Held: It bears stress that tax refunds are in the nature of tax
exemptions. As such they are registered as in derogation of sovereign
authority and to be construed strictissimi juris against the person or
entity claiming the exemption. The burden of proof is upon him who
claims the exemption in his favor and he must be able to justify his
claim by the clearest grant of organic or statute law. Private
respondent is claiming for a refund of the alleged overpayment of tax
on royalties; however there is nothing on record to support a claim
that the tax on royalties under the RP-US Treaty is paid under similar
circumstances as the tax on royalties under the RP-West Germany Tax
Treaty.