30.

CIR v Santos (1997)

CIR v Santos
GR No 119252, August 18, 1997

Nature of the case: In this petition, the Commissioner of Internal Revenue and the
Commissioner of Customs jointly seek the reversal of the Decision,[1] dated February
16, 1995, of herein public respondent, Hon. Apolinario B. Santos, Presiding Judge of
Branch 67 of the Regional Trial Court of Pasig City.

FACTS:

Guild of Phil. Jewellers questions the constitutionality of certain provisions of t h e N I R C

a n d T a r i f f a n d C u s t o m s C o d e o f t h e P h i l i p p i n e s . I t i s t h e i r contention that
present Tariff and tax structure increases manufacturing costs a n d r e n d e r l o c a l j e w e l r y
m a n u f a c t u r e r s u n c o m p e t i t i v e a g a i n s t o t h e r countries., in support of their position,
they submitted what they purported to be an exhaustive study of the tax rates on jewelry
prevailing in other Asian countries, in comparison to tax rates levied in the country.
Judge Santos of RTC Pasig, ruled that the laws in question are confiscatory and
oppressive a n d d e c l a re d t h e m i n o p e r a t i v e a n d w i t h ou t f o r c e an d e f f e c t i n s o f a r
a s petitioners are concerned. Petitioner CIR assailed decision rendered by
respondent judge contending that the latter has no authority to pass judgment upon the
taxation policy of the government. Petitioners also impugn the decision by asserting
that there was no showing that the tax laws on jewelry are confiscatory.

ISSUE: Whether or not the Regional Trial Court has authority to pass judgment upon
taxation policy of the government.

HELD:

The policy of the courts is to avoid ruling on constitutional questions and to presume that
the acts of the political departments are valid in the absence of.va clear and unmistakable
showing to the contrary. This is not to say that RTC has no power whatsoever to declare a law
unconstitutional. But this authority does not extend to deciding questions which pertain to
legislative policy. RTC have the power to declare the law unconstitutional but this authority
does not extend to deciding questions which pertain to legislative policy. RTC can only look
into the validity of a provision, that is whether or not it has been passed according to the
provisions laid down by law, and thus cannot inquire as to the reasons for its existence.
31. Sison vs Ancheta
GR No. L-59431, 25 July 1984

Nature of the Case: The success of the challenge posed in this suit for declaratory relief or
prohibition proceeding 1 on the validity of Section I of Batas Pambansa Blg. 135 depends upon
a showing of its constitutional infirmity. The assailed provision further amends Section 21 of the
National Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents
on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other
winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit
substitutes and from trust fund and similar arrangements, (e) dividends and share of individual
partner in the net profits of taxable partnership, (f) adjusted gross income. 2 Petitioner 3 as
taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his profession vis-
a-visthose which are imposed upon fixed income or salaried individual taxpayers. 4 He
characterizes the above sction as arbitrary amounting to class legislation, oppressive and
capricious in character 5 For petitioner, therefore, there is a transgression of both the equal
protection and due process clauses 6 of the Constitution as well as of the rule requiring
uniformity in taxation. 7

Facts: Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero
M. Sison, as taxpayer, alleges that "he would be unduly discriminated
against by the imposition of higher rates of tax upon his income arising from
the exercise of his profession vis-a-vis those which are imposed upon fixed
income or salaried individual taxpayers. He characterizes said provision as
arbitrary amounting to class legislation, oppressive and capricious in
character. It therefore violates both the equal protection and due process
clauses of the Constitution as well asof the rule requiring uniformity in
taxation.

Issue: Whether or not the assailed provision violates the equal protection
and due process clauses of the Constitution while also violating the rule that
taxes must be uniform and equitable.
Held: The petition is without merit.
On due process - it is undoubted that it may be invoked where a taxing
statute is so arbitrary that it finds no support in the Constitution. An obvious
example is where it can be shown to amount to the confiscation of property
from abuse of power. Petitioner alleges arbitrariness but his mere allegation
does not suffice and there must be a factual foundation of such
unconsitutional taint.
On equal protection - it suffices that the laws operate equally and uniformly
on all persons under similar circumstances, both in the privileges conferred
and the liabilities imposed.
On the matter that the rule of taxation shall be uniform and equitable - this
requirement is met when the tax operates with the same force and effect in
every place where the subject may be found." Also, :the rule of uniformity
does not call for perfect uniformity or perfect equality, because this is hardly
unattainable." When the problem of classification became of issue, the Court
said: "Equality and uniformity in taxation means that all taxable articles or
kinds of property of the same class shall be taxed the same rate. The taxing
power has the authority to make reasonable and natural classifications for
purposes of taxation..." As provided by this Court, where "the differentation"
complained of "conforms to the practical dictates of justice and equity" it "is
not discriminatory within the meaning of this clause and is therefore
uniform."
32. Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan
(1988)

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

FACTS:

The four consolidated cases questions the validity of the VAT (Executive Order 273) for being
unconstitutional in that its enactment is not allegedly within the powers of the President; that the
VAT is oppressive, discriminatory, regressive, and violates the due process and equal protection
clauses and other provisions of the 1987 Constitution.

The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners have
failed to show justification for the exercise of its judicial powers. He also questions the legal standing
of the petitioners who, he contends, are merely asking for an advisory opinion from the Court, there
being no justiciable controversy for resolution.

ISSUE: Whether VAT is unconstitutional.

RULING:
No. First, the Court held that the President had authority to issue EO 273 as it was provided in the
Provisional constitution that the President shall have legislative powers.

Second, petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an
arbitrary or despotic manner by reason of passion or personal hostility. It appears that a
comprehensive study of the VAT had been extensively discussed by this framers and other
government agencies involved in its implementation, even under the past administration.

Lastly, petitioners also failed to prove that EO 273 is oppressive, discriminatory, unjust and
regressive, in violation of the equal protection clause. Petitioners merely rely upon newspaper
articles which are actually hearsay and have evidentiary value. To justify the nullification of a law.
there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative
implication. As the Court sees it, EO 273 satisfies all the requirements of a valid tax.

In any event, if petitioners seriously believe that the adoption and continued application of the VAT
are prejudicial to the general welfare or the interests of the majority of the people, they should seek
recourse and relief from the political branches of the government. The Court, following the time-
honored doctrine of separation of powers, cannot substitute its judgment for that of the President as
to the wisdom, justice and advisability of the adoption of the VAT. The Court can only look into and
determine whether or not EO 273 was enacted and made effective as law, in the manner required by,
and consistent with, the Constitution, and to make sure that it was not issued in grave abuse of
discretion amounting to lack or excess of jurisdiction; and, in this regard, the Court finds no reason
to impede its application or continued implementation.
33. REYES VS. ALMANZOR
GR 43839-46 April 26, 1991 196 SCRA 322
Paras, J.:

Nature of the Case:

This is a petition for review on certiorari to reverse the June 10, 1977 decision of the Central
Board of Assessment Appeals1 in CBAA Cases Nos. 72-79 entitled "J.B.L. Reyes, Edmundo
Reyes, et al. v. Board of Assessment Appeals of Manila and City Assessor of Manila" which
affirmed the March 29, 1976 decision of the Board of Tax Assessment Appeals2 in BTAA Cases
Nos. 614, 614-A-J, 615, 615-A, B, E, "Jose Reyes, et al. v. City Assessor of Manila" and
"Edmundo Reyes and Milagros Reyes v. City Assessor of Manila" upholding the classification
and assessments made by the City Assessor of Manila

FACTS:
Petitioner are owners of parcels of land leased to tenants. RA 6359 was enacted prohibiting for
one year an increase in monthly rentals of dwelling units and said Act also disallowed ejectment
of lessees upon the expiration of the usual period of lease. City assessor of Manila assessed
the value of petitioner’s property based on the schedule of market values duly reviewed by the
Secretary of Finance. The revision entailed an increase to the tax rates and petitioners averred
that the reassessment imposed upon them greatly exceeded the annual income derived from
their properties.
ISSUE:
Whether or not income approach is the method to be used in the tax assessment and not the
comparable sales approach.
RULING:
By no stretch of the imagination can the market value of properties covered by PD 20 be
equated with the market value of properties not so covered. In the case at bar, not even factors
determinant of the assessed value of subject properties under the comparable sales approach
were presented by respondent namely:
1. That the sale must represent a bonafide arm’s length transaction between a willing seller and
a willing buyer
2. The property must be comparable property.
As a general rule, there were no takers so that there can be no reasonable basis for the
conclusion that these properties are comparable.
Taxes are lifeblood of government, however, such collection should be made in accordance with
the law and therefore necessary to reconcile conflicting interests of the authorities so that the
real purpose of taxation, promotion of the welfare of common good can be achieved.
34. Ernesto M. Maceda vs. Energy Regulatory Board, et al.
18 July 1991 :: G.R. No. 96266
Medialdea, J.

Nature of the case:

In G.R. No. 96266, petitioner Maceda seeks nullification of the Energy Regulatory Board (ERB)
Orders dated December 5 and 6, 1990 on the ground that the hearings conducted on the second
provisional increase in oil prices did not allow him substantial cross-examination, in effect, allegedly,
a denial of due process

FACTS:

Upon the outbreak of the Persian Gulf conflict on August 1990, private respondents oil companies filed
with the ERB their respective applications on oil price increases. ERB then issued an order granting a
provisional increase of P1.42 per liter. Petitioner Maceda filed a petition for Prohibition seeking to
nullify said increase.

ISSUE:

Whether or not the decisions of the Energy Regulatory Board should be subject to presidential review.

HELD:

Pursuant to Section 8 of E.O. No. 172, while hearing is indispensable, it does not preclude the Board
from ordering a provisional increase subject to final disposition of whether or not to make it permanent
or to reduce or increase it further or to deny the application. The provisional increase is akin to a
temporary restraining order, which are given ex-parte.
The Court further noted the Solicitor General’s comments that “the ERB is not averse to the idea of a
presidential review of its decision,” except that there is no law at present authorizing the same. The
Court suggested that it will be under the scope of the legislative to allow the presidential review of the
decisions of the ERB since, despite its being a quasi-judicial body, it is still “ an administrative body under
the Office of the President whose decisions should be appealed to the President under the established
principle of exhaustion of administrative remedies,” especially on a matter as transcendental as oil price
increases which affect the lives of almost all Filipinos.
35 Basco v. PAGCOR
GRN 91649, 14 May 1991)
PARAS, J.:

Nature of the case:

A TV ad proudly announces:

"The new PAGCOR — responding through responsible gaming."

But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the
Philippine Amusement and Gaming Corporation (PAGCOR) Charter — PD 1869, because it is
allegedly contrary to morals, public policy and order

FACTS:
On July 11, 1983, PAGCOR was created under Presidential Decree 1869,
pursuant to the policy of the government, “ to regulate and centralize
through an appropriate institution all games of chance authorized by
existing franchise or permitted by law.” This was subsequently proven to be
beneficial not just to the government but also to the society in general. It is
a reliable source of much needed revenue for the cash-strapped
Government.

Petitioners filed an instant petition seeking to annul the PAGCOR because

it is allegedly contrary to morals, public policy and public order, among
others.

ISSUES:
Whether PD 1869 is unconstitutional because:
1.) it is contrary to morals, public policy and public order;

2.) it constitutes a waiver of the right of the City of Manila to improve taxes
and legal fees; and that the exemption clause in PD 1869 is violative of
constitutional principle of Local Autonomy;

3.) it violates the equal protection clause of the Constitution in that it

legalizes gambling thru PAGCOR while most other forms are outlawed
together with prostitution, drug trafficking and other vices; and

4.) it is contrary to the avowed trend of the Cory Government, away from
monopolistic and crony economy and toward free enterprise and
privatization.

HELD:
1.) Gambling, in all its forms, is generally prohibited, unless allowed by law.
But the prohibition of gambling does not mean that the government can not
regulate it in the exercise of its police power, wherein the state has the
authority to enact legislation that may interfere with personal liberty or
property in order to promote the general welfare.

2.) The City of Manila, being a mere Municipal Corporation has no inherent
right to impose taxes. Its charter was created by Congress, therefore
subject to its control. Also, local governments have no power to tax
instrumentalities of the National Government.

3.) Equal protection clause of the Constitution does not preclude

classification of individuals who may be accorded different treatment under
the law, provided it is not unreasonable or arbitrary. The clause does not
prohibit the legislature from establishing classes of individuals or objects
upon which different rules shall operate.

4.) The Judiciary does not settle policy issues which are within the domain
of the political branches of government and the people themselves as the
repository of all state power.

Every law has in its favor the presumption of constitutionality, thus, to be

nullified, it must be shown that there is a clear and unequivocal breach of
the Constitution. In this case, the grounds raised by petitioners have failed
to overcome the presumption. Therefore, it is hereby dismissed for lack of
merit.
36. 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 ."
CONCEPCION, C.J.:

Nature of the case: Direct appeal to this Court, from a decision of the Court of First Instance of
Agusan, dismissing plaintiff's complaint, with costs

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.
37. Jose Mari Eulalio Lozada vs Commission on Elections
120 SCRA 337 – Political Law – Vacancy in the Legislature
DE CASTRO, J.:
Nature of the case:
This is a petition for mandamus filed by Jose Mari Eulalio C. Lozada and Romeo B. Igot as a
representative suit for and in behalf of those who wish to participate in the election irrespective of
party affiliation, to compel the respondent COMELEC to call a special election to fill up existing
vacancies numbering twelve (12) in the Interim Batasan Pambansa. The petition is based on Section
5(2), Article VIII of the 1973 Constitution
Facts
Jose Mari Eulalio Lozada together with Romeo Igot filed a petition for mandamus compelling the Commission
on Elections (COMELEC) to hold an election to fill the vacancies in the Interim Batasang Pambansa (IBP). They
anchor their contention on Section 5 (2), Art. VIII of the 1973 Constitution which provides:

In case a vacancy arises in the Batasang Pambansa eighteen months or more before a regular election, the
Commission on Election shall call a special election to be held within sixty (60) days after the vacancy occurs
to elect the Member to serve the unexpired term.

COMELEC opposed the petition alleging that 1) petitioners lack standing to file the instant petition
for they are not the proper parties to institute the action; 2) the Supreme Court has no jurisdiction to
entertain the petition; and 3) Section 5(2), Article VIII of the 1973 Constitution does not apply to the
Interim Batasan Pambansa.
ISSUE: Whether or not the SC can compel COMELEC to hold a special election to fill vacancies in
the legislature.
HELD: No. The SC’s jurisdiction over the COMELEC is only to review by certiorari the latter’s
decision, orders or rulings. This is as clearly provided in Article XII-C, Section 11 of the New
Constitution which reads:
Any decision, order, or ruling of the Commission may be brought to the Supreme Court on certiorari by the
aggrieved party within thirty days from his receipt of a copy thereof.

There is in this case no decision, order or ruling of the COMELEC which is sought to be reviewed by
this Court under its certiorari jurisdiction as provided for in the aforequoted provision, which is the
only known provision conferring jurisdiction or authority on the Supreme Court over the COMELEC.
It is obvious that the holding of special elections in several regional districts where vacancies exist,
would entail huge expenditure of money. Only the Batasang Pambansa (BP) can make the
necessary appropriation for the purpose, and this power of the BP may neither be subject to
mandamus by the courts much less may COMELEC compel the BP to exercise its power of
appropriation. From the role BP has to play in the holding of special elections, which is to
appropriate the funds for the expenses thereof, it would seem that the initiative on the matter must
come from the BP, not the COMELEC, even when the vacancies would occur in the regular not IBP.
The power to appropriate is the sole and exclusive prerogative of the legislative body, the exercise of
which may not be compelled through a petition for mandamus. What is more, the provision of
Section 5(2), Article VIII of the Constitution was intended to apply to vacancies in the regular
National Assembly, now BP, not to the IBP.
38. GONZALES vs. MARCOS
65 SCRA 624
GR No. L-31685 July 31, 1975
"With the absence of any pecuniary or monetary interest owing from the public, a taxpayer may not have the
right to question the legality of an issuance creating a trust for the benefit of the people but purely funded by
charity."

Nature of the case:

It was the novelty of the constitutional question raised, there being an imputation by petitioner
Ramon A. Gonzales of an impermissible encroachment by the President of the Philippines on the
legislative prerogative, that led this Tribunal to give due course to an appeal by certiorari from an
order of dismissal by the Court of First Instance of Manila.1

FACTS: The petitioner questioned the validity of EO No. 30 creating the Cultural Center of the Philippines,
having as its estate the real and personal property vested in it as well as donations received, financial
commitments that could thereafter be collected, and gifts that may be forthcoming in the future. It was likewise
alleged that the Board of Trustees did accept donations from the private sector and did secure from the
Chemical Bank of New York a loan of $5 million guaranteed by the National Investment & Development
Corporation as well as $3.5 million received from President Johnson of the United States in the concept of war
damage funds, all intended for the construction of the Cultural Center building estimated to cost P48 million.
The petition was denied by the trial court arguing that with not a single centavo raised by taxation, and the
absence of any pecuniary or monetary interest of petitioner that could in any wise be prejudiced distinct from
those of the general public.

ISSUE: Has a taxpayer the capacity to question the validity of the issuance in this case?

HELD: No. It was therein pointed out as "one more valid reason" why such an outcome was unavoidable that
"the funds administered by the President of the Philippines came from donations [and] contributions [not] by
taxation." Accordingly, there was that absence of the "requisite pecuniary or monetary interest." The stand of
the lower court finds support in judicial precedents. This is not to retreat from the liberal approach followed in
Pascual v. Secretary of Public Works, foreshadowed by People v. Vera, where the doctrine of standing was
first fully discussed. It is only to make clear that petitioner, judged by orthodox legal learning, has not satisfied
the elemental requisite for a taxpayer's suit. Moreover, even on the assumption that public funds raised by
taxation were involved, it does not necessarily follow that such kind of an action to assail the validity of a
legislative or executive act has to be passed upon. This Court, as held in the recent case of Tan v. Macapagal,
"is not devoid of discretion as to whether or not it should be entertained." The lower court thus did not err in so
viewing the situation.
39. Francisco Chavez vs Presidential Commission on Good Government
[G.R. No. 130716.� December 9, 1998

Nature of the case:

Petitioner asks this Court to define the nature and the extent of the people�s constitutional
right to information on matters of public concern.� Does this right include access to the terms of
government negotiations prior to their consummation or conclusion?� May the government,
through the Presidential Commission on Good Government (PCGG), be required to reveal the
proposed terms of a compromise agreement with the Marcos heirs as regards their alleged ill-
gotten wealth?� More specifically, are the �General Agreement� and �Supplemental
Agreement,� both dated December 28, 1993 and executed between the PCGG and the Marcos
heirs, valid and binding?
FACTS: Petitioner Francisco I. Chavez, as taxpayer, citizen and former government official who initiated
the prosecution of the Marcoses and their cronies who committed unmitigated plunder of the public
treasury and the systematic subjugation of the countrys economy, alleges that what impelled him to
bring this action were several news reports[2] bannered in a number of broadsheets sometime in
September 1997. These news items referred to (1) the alleged discovery of billions of dollars of Marcos
assets deposited in various coded accounts in Swiss banks; and (2) the reported execution of a
compromise, between the government (through PCGG) and the Marcos heirs, on how to split or share
these assets.

A provision in the compromise agreement provides:

xxx the FIRST PARTY shall determine which shall be ceded to the FIRST PARTY, and which shall be
assigned to/retained by the PRIVATE PARTY. The assets of the PRIVATE PARTY shall be net of, and
exempt from, any form of taxes due the Republic of the Philippines. Xxx

ISSUE: Whether or not such provision in the compromise agreement exempting the Marcoses from the
taxes due to the government in valid

RULING: The PCGG has a limited life in carrying out its tasks and time is running short. It is thus
imperative that the Court must hold even now, and remind PCGG, that it has indeed exceeded its
bounds in entering into the General and Supplemental Agreements. The agreements clearly suffer from
Constitutional and statutory infirmities,to wit: 1) The agreements contravene the statute in granting
criminal immunity to the Marcos heirs; 2) PCGG’s commitment to exempt from all forms of taxes the
property to be retained the Marcos’ heirs controverts the Constitution; and 3)the government’s
undertaking to cause the dismissal of all cases filed against the Marcoses pending before the
Sandiganbayan and other courts encroaches upon judicial powers.
40. PASCUAL vs. SECRETARY OF PUBLIC WORKS
110 PHIL 331
GR No. L-10405, December 29, 1960

"A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such
expenditure, is merely incidental in the promotion of a particular enterprise."

CONCEPCION, J.:

Nature of the case:

Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal,
dismissing the above entitled case and dissolving the writ of preliminary injunction therein issued,
without costs

FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction,
upon the ground that RA No. 920, which apropriates funds for public works particularly for the construction
and improvement of Pasig feeder road terminals. Some of the feeder roads, however, as alleged and as
contained in the tracings attached to the petition, were nothing but projected and planned subdivision roads,
not yet constructed within the Antonio Subdivision, belonging to private respondent Zulueta, situated at Pasig,
Rizal; and which projected feeder roads do not connect any government property or any important premises to
the main highway. The respondents' contention is that there is public purpose because people living in the
subdivision will directly be benefitted from the construction of the roads, and the government also gains from
the donation of the land supposed to be occupied by the streets, made by its owner to the government.

ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of justifying an
expenditure of the government?

HELD: No. It is a general rule that the legislature is without power to appropriate public revenue for anything
but a public purpose. It is the essential character of the direct object of the expenditure which must determine
its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the
general advantage of the community, and thus the public welfare, may be ultimately benefited by their
promotion. Incidental to the public or to the state, which results from the promotion of private interest and the
prosperity of private enterprises or business, does not justify their aid by the use public money.
The test of the constitutionality of a statute requiring the use of public funds is whether the statute is
designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although
each advantage to individuals might incidentally serve the public.
41. Gaston vs Republic Planter’s Bank 158 SCRA 622

MELENCIO-HERRERA, J.:

Nature of the case:

Petitioners are sugar producers, sugarcane planters and millers, who have come to this Court in
their individual capacities and in representation of other sugar producers, planters and millers,
said to be so numerous that it is impracticable to bring them all before the Court although the
subject matter of the present controversy is of common interest to all sugar producers, whether
parties in this action or not.
Facts:
Petitioners are sugar producers and planters and millers filed a MANDAMUS to implement the
privatization of Republic Planters Bank, and for the transfer of the shares in the government bank to sugar
producers and planters. (because they are allegedly the true beneficial owners of the bank since they pay
P1.00 per picul of sugar from the proceeds of sugar producers as STABILIZATION FEES)

The shares are currently held by Philsucom / Sugar Regulatory Admin.

The Solgen countered that the stabilization fees are considered government funds and that the transfer of
shares to from Philsucom to the sugar producers would be irregular.

Issue:

1. What is the nature of the P1.00 stabilization fees collected from sugar producers?
2. Are they funds held in trust for them, or are they public funds?
3. Are the shares in the bank (paid using these fees) owned by the government Philsucom or
privately by the different sugar
planters from whom such fees were collected?

Ruling:
PUBLIC FUNDS. While it is true that the collected fees were used to buy shares in RPB, it did not collect
said fees for the account of sugar producers. The stabilization fees were charged on sugar produced and
milled which ACCRUED TO PHILSUCOM, under PD 338.

The fees collected ARE IN THE NATURE OF A TAX., which is within the power of the state to impose
FOR THE PROMOTION OF THE SUGAR INDUSTRY. They constitute sugar liens. The collections
accrue to a SPECIAL FUNDS. It is levied not purely for taxation, but for regulation, to provide means
TO STABILIZE THE SUGAR INDUSTRY. The levy is primarily an exercise of police powers.

The fact that the State has taken money pursuant to law is sufficient to constitute them as STATE
FUNDS, even though held for a special purpose. Having been levied for a special purpose, the revenues
are treated as a special fund, administered in trust for the purpose intended. Once the purpose has been
fulfilled or abandoned, the balance will be transferred to the general funds of gov’t.

It is a special fund since the funds are deposited in PNB, not in the National Treasury.

The sugar planters are NOT BENEFICIAL OWNERS. The money is collected from them only because
they it is also they who are to be benefited from the expenditure of funds derived from it. The investing of
the funds in RPB is not alien to the purpose since the Bank is a commodity bank for sugar, conceived for
the sugar industry’ growth and development.
Revenues derived from taxes cannot be used purely for private purposes or for the exclusive benefit of
private persons. The Stabilization Fund is to be utilized for the benefit of the ENTIRE SUGAR
INDUSTRY, and all its components, stabilization of domestic and foreign markets, since the sugar
industry is of vital importance to the country’s economy and national interest.

42. COMMISSIONER vs. BOAC

149 SCRA 395
GR No. L-65773-74 April 30, 1987

"The source of an income is the property, activity or service that produced the income. For such source to be
considered as coming from the Philippines, it is sufficient that the income is derived from activity within the
Philippines."

GANCAYCO, J.:

Nature of the case:

This is a Petition which seeks the review of a Decision of the Court of Tax Appeals

FACTS: Petitioner CIR seeks a review of the CTA's decision setting aside petitioner's assessment of deficiency
income taxes against respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959 to
1971. BOAC is a 100% British Government-owned corporation organized and existing under the laws of the
United Kingdom, and is engaged in the international airline business. During the periods covered by the
disputed assessments, it is admitted that BOAC had no landing rights for traffic purposes in the Philippines.
Consequently, it did not carry passengers and/or cargo to or from the Philippines, although during the period
covered by the assessments, it maintained a general sales agent in the Philippines — Wamer Barnes and
Company, Ltd., and later Qantas Airways — which was responsible for selling BOAC tickets covering
passengers and cargoes. The CTA sided with BOAC citing that the proceeds of sales of BOAC tickets do not
constitute BOAC income from Philippine sources since no service of carriage of passengers or freight was
performed by BOAC within the Philippines and, therefore, said income is not subject to Philippine income tax.
The CTA position was that income from transportation is income from services so that the place where
services are rendered determines the source.

ISSUE: Are the revenues derived by BOAC from sales of ticket for air transportation, while having no landing
rights here, constitute income of BOAC from Philippine sources, and accordingly, taxable?

HELD: Yes. The source of an income is the property, activity or service that produced the income. For the
source of income to be considered as coming from the Philippines, it is sufficient that the income is derived
from activity within the Philippines. In BOAC's case, the sale of tickets in the Philippines is the activity that
produces the income. The tickets exchanged hands here and payments for fares were also made here in
Philippine currency. The site of the source of payments is the Philippines. The flow of wealth proceeded from,
and occurred within, Philippine territory, enjoying the protection accorded by the Philippine government. In
consideration of such protection, the flow of wealth should share the burden of supporting the government.
43.

44. AIR CANADA, PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT, G.R. No.
169507

Nature of the case

This is a Petition for Review1 appealing the August 26, 2005 Decision2 of the Court
of Tax Appeals En Banc, which in turn affirmed the December 22, 2004
Decision3 and April 8, 2005 Resolution4 of the Court of Tax Appeals First Division
denying Air Canada's claim for refund.

Facts:
Petitioner is a corporation existing under the laws of Canada, which was granted authority to operate in
the Philippines as an off-line carrier, i. e., not having flights originating from, or coming to the
Philippines and does not operate any airplane in the Philippines. Petitioner engaged the services of
Aerotel Ltd. Corp. (Aerotel) as its general sales agent in the Philippines. For the period material to this
case, petitioner, through Aerotel, filed and paid income tax on Gross Philippine Billings the total amount
of P5,185,676.77. Later, petitioner filed a claim for refund of the above amount allegedly erroneously
paid with the Bureau of Internal Revenue (BIR), invoking the revised definition of Gross Philippine
Billings of the National Internal Revenue Code (NIRC). To avoid prescription, Petitioner filed a petition
for Review with the CTA which denied the petition finding that petitioner should be taxed as a resident
foreign corporation at the regular rate of 32%, and the amount paid is even short of the 32%. Motion for
Reconsideration was denied. Petitioner appealed to the CTA en banc which denied due course and
affirmed the CTA. Hence, this Petition.
HELD: Petition Denied There is no substantial difference of meaning of successive iterations of 'Gross
Philippine Billings'. The CTA properly denied petitioner's claim for refund of allegedly erroneously paid
tax on Gross Philippine Billings, on the ground that it was liable instead for the regular 32% on its taxable
income from sources within the Philippines (on the finding that it was 'doing business' through its
dependent contractor, Aerotel). The determination of petitioner's liability for the 32% regular income tax
was made merely for the purpose of ascertaining petitioner's entitlement to a tax refund and not for
imposing any deficiency tax.
45. Iloilo Bottlers v City of Iloilo 164 SCRA 607

Topic: Situs of Taxation and Double Taxation Part III of the outline
Digest by: Andrew Velasco Seat number: 31

CORTES, J.:

Nature of the case:

The fundamental issue in this appeal is whether the Iloilo Bottlers, Inc. which had its bottling
plant in Pavia, Iloilo, but which sold softdrinks in Iloilo City, is liable under Iloilo City tax
Ordinance No. 5, series of 1960, as amended, which imposes a municipal license tax on
distributors of soft-drinks.

FACTS: Iloilo Bottlers Inc., a company in the business of bottling and selling soft drinks, was
demanded by the City of Iloilo to pay an amount of 59,505 in the form of an license tax the city
claims were due to it under an ordinance which was enacted on January 11, 1960 known as
Ordinance No. 5, Series of 1960; which provides that manufacturers, bottlers, and distributers of
soft drinks in Iloilo are subject to a municipal license tax of 10 centavos per case of 24 bottles.
Iloilo Bottling Inc asserted however that since their plant base has moved to municipality of
Pavia shortly after the aforementioned ordinance was enacted, they are not liable for any taxes.
The city however, still demanded taxes and also demanded back taxes under the claim that Iloilo
Bottlers is still distributing in the city of Iloilo since its transfer. Iloilo Bottlers paid the
demanded license tax and back taxes under protest. After bringing the case to court, the courts
ruled in favor of Iloilo Bottlers and declared that Iloilo Bottlers is free from liability. The city of
Iloilo then appealed this ruling, hence this case.

ISSUE: Whether or not the courts were correct in their initial ruling that Iloilo Bottlers Inc. is
free from liability and directing the city of Iloilo to refund the tax money.

HELD: No, the courts were not correct. The ruling was reversed in favor of the City of Iloilo
and Iloilo Bottlers is deemed liable for the aforementioned taxes.

RATIO: Situs of taxation (place of taxation) depends on various factors including the nature of
the tax and subject matter thereof both of which must be scrutinized to reach a fair decision. The
tax ordinance enacted by the City of Iloilo imposes a tax on persons, firms, and corporations
engaged in the business of distribution of soft-drinks, manufacture of soft-drinks, and bottling of
soft drinks within the territorial jurisdiction of the City of Iloilo. There is no question that Iloilo
Bottlers has moved out of Iloilo City’s jurisdiction and into the municipality of Pavia where its
plant now stands therefore, the latter two conditions for taxation are no longer applicable. The
ruling now depends upon whether or not Iloilo Bottlers can be considered as distributing its
products within Iloilo city. Iloilo Bottlers disclaims liability, saying that it does not
independently distribute but rather actively sells directly to its consumers. Distribution is
therefore only incidental to its business. However, the courts find that Iloilo Bottlers is indeed
considered as distributing since while the manufacturing and bottling occurs outside of Iloilo
city, the drinks are sold in Iloilo city to consumers in a “moving store” fashion. The transactions
are considered to occur within the city. The tax imposed under Ordinance No. 5 is an excise tax.
By its nature, the power to levy an excise tax depends upon the place where the business is done,
or the occupation is engaged in, or where the transaction took place. In this case, it is a tax on the
privilege of distributing, manufacturing or bottling soft drinks. Even though the base of
operations is at Pavia, the areas of transactions where it conducts its business are within Iloilo
city limits. The Situs for excise tax is the area of transaction, not necessarily base of operation.

Since Iloilo Bottlers does distribute within city limits, it is therefore subject to the ordinance and
therefore should pay the pertinent amounts to the city of Iloilo.

46. Villegas vs Hiu Chiong Tsai Pao Ho

G.R. No. L-29646 November 10, 1978

FERNANDEZ, J.:

Nature of the case:

This is a petition for certiorari to review tile decision dated September 17, 1968 of respondent Judge
Francisco Arca of the Court of First Instance of Manila, Branch I, in Civil Case No. 72797, the
dispositive portion of winch reads.

Wherefore, judgment is hereby rendered in favor of the petitioner and against the respondents,
declaring Ordinance No. 6 37 of the City of Manila null and void. The preliminary injunction is made
permanent. No pronouncement as to cost.

SO ORDERED.

Manila, Philippines, September 17, 1968.

Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those employed
in the diplomatic and consular missions of foreign countries, in technical assistance programs of the
government and another country, and members of religious orders or congregations) to procure the
requisite mayor’s permit so as to be employed or engage in trade in the City of Manila. The permit fee is
P50, and the penalty for the violation of the ordinance is 3 to 6 months imprisonment or a fine of P100 to
P200, or both.

Issue: Whether the ordinance imposes a regulatory fee or a tax.

Held: The ordinance’s purpose is clearly to raise money under the guise of regulation by exacting P50
from aliens who have been cleared for employment. The amount is unreasonable and excessive because it
fails to consider difference in situation among aliens required to pay it, i.e. being casual, permanent, part-
time, rank-and-file or executive.

[ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being applied only to
aliens who are thus deprived of their rights to life, liberty and property and therefore violates the due
process and equal protection clauses of the Constitution. Further, the ordinance does not lay down any
criterion or standard to guide the Mayor in the exercise of his discretion, thus conferring upon the mayor
arbitrary and unrestricted powers. ]
47. CIR VS. CA AND ALHAMBRA 267 SCRA 557 (1997)

[G.R. No. 117982. February 6, 1997]

BELLOSILLO, J.:

Nature of the case:

Petitioner imputes error to the Court of Appeals: (1) in failing to consider that private
respondents reliance on BIR Ruling 473-88 being contrary to Sec. 142 of the Tax Code does not confer
vested rights to private respondent in the computation of its ad valorem tax; (2) in failing to consider
that good faith and prejudice to the taxpayer in cases of reliance on a void BIR Ruling is immaterial and
irrelevant and does not place the government in estoppel in collecting taxes legally due; (3) in holding
that private respondent acted in good faith in applying BIR Ruling 473-88; and, (4) in failing to consider
that the assessment of petitioner is presumed to be regular and the claim for tax refund must be strictly
construed against private respondent for being in derogation of sovereign authority

Facts:

Alhambra industries, Inc. (Alhambra) is a domestic corporation engaged in the

manufacture and sale of cigar and cigarette products. On May 7, 1991 private
respondent received a letter dated April 26, 1991 from the Commissioner of Internal
Revenue assessing its deficiency Ad Valorem Tax (AVT) in the total amount of
P488,396.62, inclusive of increments, on the removals of cigarette products from their
place of production during the period Nov. 2, 1990 to January 22, 1991. Alhambra filed
protest against amount assessed by the CIR, however, it was denied by the latter at the
same time increasing the amount assessed to P520,835.29. Alhambra filed a petition
for review with the CTA, despite payment under protest the amount of P520,835.29. On
December 1, 1993, CTA ordered petitioner to refund said amount to Alhambra. CA
affirming such decision, hence, this appeal.

ISSUE:

whether private respondent's reliance on a void BIR ruling conferred upon the latter a
vested right to apply the same in the computation of its ad valorem tax and claim for
tax refund

RULING ON EQUAL PROTECTION OF THE LAWS The government is not stopped from
collecting taxes legally due because of mistake/errors of its agents, this admits of
exceptions in the interest of justice and fair play, as where injustice will result to the
taxpayer. As regards, petitioner s argument the private respondent should have made
consultations with it before private respondent used the computation mandated by BIR
ruling 473-88 suffice it to state that the BIR ruling was clear and categorical, there
leaving no room for interpretation. The failure of private respondent to consult
petitioner does not imply bad faith on the part of the former.
 Tiu v Ca
48.
G.R. No. 127410. January 20, 1999
PANGANIBAN, J.:

Nature of the case:

A petition for review under Rule 45 of the Rules of Court, seeking the reversal of the Court of
Appeals' Decision1 promulgated on August 29, 1996, and Resolution2 dated November 13, 1996, in
CA-GR SP No. 37788. 3The challenged Decision upheld the constitutionality and validity of Executive
Order No. 97-A (EO 97-A), according to which the grant and enjoyment of the tax and duty
incentives authorized under Republic Act No. 7227 (RA 7227) were limited to the business
enterprises and residents within the fenced-in area of the Subic Special Economic Zone (SSEZ).

The assailed Resolution denied the petitioners' motion for reconsideration.

Facts:

On March 13, 1992, Congress, with the approval of the President, passed into law RA 7227. This
was for the conversion of former military bases into industrial and commercial uses. Subic was one
of these areas. It was made into a special economic zone.

In the zone, there were no exchange controls. Such were liberalized. There was also tax incentives
and duty free importation policies under this law.

On June 10, 1993, then President Fidel V. Ramos issued Executive Order No. 97 (EO 97), clarifying
the application of the tax and duty incentives. It said that
On Import Taxes and Duties. — Tax and duty-free importations shall apply only to raw materials,
capital goods and equipment brought in by business enterprises into the SSEZ

On All Other Taxes. — In lieu of all local and national taxes (except import taxes and duties), all
business enterprises in the SSEZ shall be required to pay the tax specified in Section 12(c) of R.A.
No. 7227.

Nine days after, on June 19, 1993, the President issued Executive Order No. 97-A (EO 97-A),
specifying the area within which the tax-and-duty-free privilege was operative.

Section 1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base
shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and
individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw
materials, capital goods, equipment, and consumer items tax and duty-free.

Petitioners challenged the constitutionality of EO 97-A for allegedly being violative of their right to
equal protection of the laws. This was due to the limitation of tax incentives to Subic and not to the
entire area of Olongapo. The case was referred to the Court of Appeals.

The appellate court concluded that such being the case, petitioners could not claim that EO 97-A is
unconstitutional, while at the same time maintaining the validity of RA 7227.
The court a quo also explained that the intention of Congress was to confine the coverage of the
SSEZ to the "secured area" and not to include the "entire Olongapo City and other areas mentioned
in Section 12 of the law.

Hence, this was a petition for review under Rule 45 of the Rules of Court.

Issue:
Whether the provisions of Executive Order No. 97-A confining the application of R.A. 7227 within the
secured area and excluding the residents of the zone outside of the secured area is discriminatory or
not owing to a violation of the equal protection clause.

Held. No. Petition dismissed.

Ratio:

Citing Section 12 of RA 7227, petitioners contend that the SSEZ encompasses (1) the City of
Olongapo, (2) the Municipality of Subic in Zambales, and (3) the area formerly occupied by the Subic
Naval Base. However, they claimed that the E.O. narrowed the application to the naval base only.

OSG- The E.O. Was a valid classification.

Court- The fundamental right of equal protection of the laws is not absolute, but is subject to
reasonable classification. If the groupings are characterized by substantial distinctions that make
real differences, one class may be treated and regulated differently from another. The classification
must also be germane to the purpose of the law and must apply to all those belonging to the same
class.

Inchong v Hernandez- Equal protection does not demand absolute equality among residents; it
merely requires that all persons shall be treated alike, under like circumstances and conditions both
as to privileges conferred and liabilities enforced.

Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of
the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the
same class.

RA 7227 aims primarily to accelerate the conversion of military reservations into productive uses.
This was really limited to the military bases as the law's intent provides. Moreover, the law tasked
the BCDA to specifically develop the areas the bases occupied.

Among such enticements are: (1) a separate customs territory within the zone, (2) tax-and-duty-free
importations, (3) restructured income tax rates on business enterprises within the zone, (4) no
foreign exchange control, (5) liberalized regulations on banking and finance, and (6) the grant of
resident status to certain investors and of working visas to certain foreign executives and workers.
The target of the law was the big investor who can pour in capital.

Even more important, at this time the business activities outside the "secured area" are not likely to
have any impact in achieving the purpose of the law, which is to turn the former military base to
productive use for the benefit of the Philippine economy. Hence, there was no reasonable basis to
extend the tax incentives in RA 7227.

It is well-settled that the equal-protection guarantee does not require territorial uniformity of
laws. As long as there are actual and material differences between territories, there is no
violation of the constitutional clause.
Besides, the businessmen outside the zone can always channel their capital into it.

RA 7227, the objective is to establish a "self-sustaining, industrial, commercial, financial and

investment center”. There will really be differences between it and the outside zone of Olongapo.

The classification of the law also applies equally to the residents and businesses in the zone. They
are similarly treated to contribute to the end gaol of the law.
49. Manila Race Horse Trainers Assoc& Juan Sordan vs Manuel DelaFuente

G.R. No. L-2947 January 11, 1951

TUASON, J.:

Nature of the Case:

This action was instituted for a declaratory relief by the Manila Race Horses Trainers Association,
Inc., a non-stock corporation duly organized and existing under and by virtue of the laws of the
Philippines, who allege that they are owners of boarding stables for race horses and that their rights
as such are affected by Ordinance No. 3065 of the City of Manila approved on July 1, 1947.1 They
made the Mayor of Manila defendant and prayed that said ordinance be declared invalid as violative
of the Philippine Constitution.

The case was submitted on the pleadings, and the decision was that the ordinance in question "is
constitutional and valid and has been enacted in accordance with the powers of the Municipal Board
granted by the Charter of the City of Manila."

FACTS:

- On July 1947, the Manila Mayor approved Ordinance 30651

- Manila Race Horse Trainers Association (MRHTA), a non-stock corporation duly organized under Phil laws,
allege that they’re owners of boarding stables for race horses and that their rights as such are affected by such
ordinance. They instituted this action for declaratory relief and made the Manila Mayor defendant, praying that
said ordinance be declared invalid for being unconstitutional.
- CFI declared the ordinance constitutional & enacted in accordance with the powers of Municipal Board granted
by the Manila Charter.
- On appeal, MRHTA make 2 main arguments:
o ARGUMENT 1: Ordinance is a tax on race horses as distinct from boarding stables. In Sec 22 of the
ordinance, the basis of license fees “is the number of race horses kept in the stables to be paid by the
maintainers at the rate of P10 a year xxx fee increases correspondingly for each race horse xxx”. Thus,
if you have an empty stable, you pay no license fee.
o ARGUMENT 2: The ordinance is discriminatory and savors of class legislation.
o ARGUMENT 3 (not so relevant): Contended for the first time in the SC that the Municipal Board of
Manila is without power to enact ordinance taxing private stables for race horses. (Note: Ignored by
the court.)
ISSUES:

1. Is the tax discriminatory? NO

2. Is it a tax on race horses or stables?

1
“An ordinance providing for license fees on persons maintaining or conducting any boarding stable for horse races and/or race horse stables, or places where horse are kept,
fed, or boarded for others, for compensation or hire, and/or for private, and for other purposes”

2
SEC. 2. Fees. — For every license granted under the provisions of this ordinance, there shall be paid an annual license fee, which may be paid either annually, semestrally or
quarterly at the option of the taxpayer, to wit:

Boarding stable for race horses:

Class A — For each race horse, kept, maintained, fed or boarded in boarding stables - P10.00

Class B — For each race horse, kept, maintained, or fed in private race horse stables - P5.00
RULLING:

1. NO.
- There is equality and uniformity in taxation when: all articles or kinds of property of the same class are taxed at
the same rate.
- From the viewpoint of economics and public policy, the taxing of boarding stables for race horses to the
exclusion of boarding stables for horses dedicated to other purposes is not indefensible. WHY?
o Owners of boarding stables + owners of race horses are a CLASS BY THEMSELVES
o Equity in taxation is conceived in terms of ABILITY TO PAY in relation to BENEFITS RECEIVED by the
taxpayer & the public from the business taxed.
o Race horses are devoted to GAMBLING if legalized, and their owners derive fat incomes. But the public
hardly profits from race horsing. This business also demands heavy police supervision.
o Taking all into account, the differentiation against which MRHTA complains of actually conforms to
justice and equity.

2. No. It’s a tax assessed on owners of stables.

- Spirit of the ordinance determines construction, thus court looks at the context, subject matter consequence and
effect.
- Thus, from the context of the ordinance, the intent to tax or license STABLES and NOT HORSES is clearly
manifest. The tax assessed is not on the owners of the horses but on the owners of the stables. (Of course, there’s
also nothing stopping stable owners from shifting the tax to the horse owners in the form of increased rents or
fees, which is generally the case)
- The number of horses used in the assessment is purely a method of fixing an equitable & practical distribution of
the burden imposed by the measure. This method is FAIR AND JUST. Why? Because it’s fair that for a stable
where only one horse is maintained, less amount should be taken than for a stable with many horses.
50. EASTERN THEATRICAL CO., INC. ET AL vs VICTOR ALFONSO
No. L-1104 May 31, 1949
Perpecto, J.:

Nature of the case :

Twelve corporation engaged in motion picture business have initiated these proceeding through
a complaint dated May 5, 1946, to impugn the validity of Ordinance No. 2958 of the City of
Manila which was enacted by the municipalBoard of said city on April 25 1946 approved by the
Mayor on April 27, 1946 and took effect on May 1, 1946

FACTS
Twelve corporations engaged in the motion picture business filed a complaint to impugn the
validity of Ord No.2958 of the City of Manila entitiled “"AN ORDINANCE IMPOSING A FEE ON THE PRICE
OF EVERY ADMISSION TICKET SOLD BY CINEMATOGRAPHS THEATERS, VAUDEVILLE COMPANIES,
THEATRICAL SHOWS AND BOXING EXHIBITIONS; AND PROVIDING FOR OTHER PURPOSES.”

Plaintiffs, impugn as null and void, Sections 1, 2, and 4 upon the following grounds; (a) For
violating the Constitution, more particularly the provisions regarding the uniformity and equality of
taxation and the equal protection of the laws; (b) because the Municipal Board of Manila exceeded and
overstepped the powers granted it by the Charter of the City of Manila ; (c) because it contravenes,
violates, and is inconsistent with, existing national legislation, more particularly revenue and tax laws;
and, (d) because it is unfair, unjust, arbitrary, capricious, unreasonable, oppressive, and is contrary to
and violates our basic and recognized principles of taxation and licensing laws.

Defendants allege as affirmative defenses that; (a) the ordinance was passed by the Municipal
Board by virtue of its express legislative power to tax, fix license fee and regulate the business of
theatres, (b) that the graduated tax required by said ordinance being applied to all as a class without
distinction or exception and does not violate the constitutional prohibition against uniformity and
equality of taxation, (c) that the tax imposed by NIRC is collected for the National Government whereas
Ord No. 2958 is for the City of Manila and that there is no case of double taxation, (d) that said
ordinance having been enacted under the express power of the Municipal Board to tax for revenue, as
distinguished from its power to license for purely police purposes, the fact that the amounts collected
thereunder are higher than what are needed for police regulation and supervision does not render said
ordinance unfair, unjust,
capricious, unreasonable and oppressive; (e) that, considering the nature of the business of the plaintiffs
and the enormous volume of business they handle, the graduated tax fixed by the ordinance is not
unreasonable.

Defendants also allege that since the ordinance in question took effect, plaintiffs have been
charging the theatre-going public increased rates of prices of admissions equal and corresponding to the
graduated tax imposed by the ordinance, an as a result while refusing to pay said tax but at the same
time collecting the said tax, plaintiffs have taken undue advantage of said ordinance to realize more
profits.

September 5, 1946, CFI upheld the validity of Ord. No 2958.

ISSUE
Whether Ordinance No. 2958 is valid? YES

RULING
PROVISIONS OF SECTION 2444 (M) OF THE REVISED ADMINISTRATIVE CODE, CONSTRUED.—The
whole argument of plaintiffs hinges on the assumption that the power granted to the City of Manila by
section 2444 (ra) of the Revised Administrative Code is limited to the authority to impose a tax on
business, with exclusion of the power to impose a tax on amusement; but, the assumption is based on
an arbitrary labelling of the kind of tax authorized by said section 2444 (m). The distinction as to the
power to tax business and the power to tax amusement has no ground under the provisions of section
2444 (m) of the Revised Administrative Code. The tax therein authorized cannot be defined as tax on
business and cannot be restricted within a smaller scope than what is authorized by the words used, to
the extent of excluding what plaintiffs describe as tax on amusement.

The very fact that section 2444(m) of the Revised Administrative Code includes theatres,
cinematographs, public billiard tables, public pool tables, bowling alleys, dance halls, public dancing
halls, cabarets, circuses and other similar places, race tracks, horse races, theatrical performances,
public exhibition, circus and other performances and places of amusements, will show conclusively that
the power to tax amusement is expressly included within the power granted by section 2444 (m) of
the Revised Administrative Code.

In support of the contention that section 2444 (m) of the Revised Administrative Code was
repealed, plaintiffs aver that the Charter of the City of Manila, containing section 2444 (m) of the
Revised Administrative Code, was enacted on. December 8, 1929. On April 25, 1940, the National
Assembly enacted Commonwealth Act No. 466, including provisions on amusement tax, covering the
whole field on taxation and provided for more than what the ordinance in question has provided. As a
result, there are two taxing powers seeking to occupy exactly the same field of legislation, and so the
apparent conflict must be resolved with the conclusion that, with the enactment of Commonwealth Act
No. 466, as later amended by Republic Act No. 39, section 2444 (m) of the Revised Administrative Code
has been impliedly repealed and the power therein delegated to the City of Manila withdrawn. Held:
That the conflict pointed out is imaginary. Both provisions of law may stand together and be enforced
at the same time without any incompatibility.

EQUALITY AND UNIFORMITY OF TAXATION; VALIDITY OF ORDINANCE NO. 2958.—Appellants

point out to the fact that the ordinance in question does not tax "many more kinds of amusements"
than those therein specified, such as "race tracks, cockpits, cabarets, concert halls, circuses, and other
places of amusement." The argument has absolutely no merit. The fact that some places of amusement
are not taxed while others, such as cinematographs, theaters, vaudeville companies, theatrical shows,
and boxing exhibitions and other kinds of amusements or places of amusement are taxed, is no
argument at all against the equality and uniformity of the tax imposition. 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 reason able and natural classifications for
purposes of taxation; and the appellants cannot point out what places of amusement taxed by the
ordinance do not constitute a class by themselves and which can be confused with those not included
in the ordinance.
51. Shell Company vs E.E. Vaño
G.R. No. L-6093 February 24, 1954

PADILLA, J.:

Nature of the Case:

In an action for refund of municipal taxes claimed to have been paid and collected under an illegal
ordinance, the real party in interest is not the municipal treasurer but the municipality concerned that
is empowered to sue and be sued.4

The judgment appealed from is hereby affirmed, with costs against the appellant.

Facts:
In 1946, the municipal council of Cordova, Cebu issued an ordinance which imposed,
among others, an annual tax of P150.00 upon the occupation or the exercise of the privilege
of an “installation manager”.
Shell Company assailed the validity of the said ordinance on the ground that it violates the
equal protection clause. It appears that only Shell had, at that time, an installation manager.
In short, there is only one installation manager in Cordova, Cebu. So Shell felt like the tax
ordinance was merely targeting Shell. Shell now wants the Treasurer of Cordova, E.E. Vaño
to be enjoined from implementing the law.
ISSUE: Whether or not the tax ordinance is not valid for being violative of the equal
protection clause.
HELD: No. The fact that there is no other person or company with a position for an
installation manager does not make the ordinance discriminatory. The law is and will be
applicable to any person or firm who exercises such calling or occupation named or
designated as “installation manager”. In short, the law is applicable to present and future
conditions.
Note again the requisites for a valid classification (not mentioned in this particular case but
mentioned in other relevant cases):
1. must rest on substantial distinctions;
2. must be germane to the purposes of the law;
3. must not be limited to existing conditions only; and
4. must apply equally to all members of the same class.
52. 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."

NATURE OF THE CASE:

In this appeal, a lower court decision upholding the validity of an ordinance1 of the City of Baguio
imposing a license fee on any person, firm, entity or corporation doing business in the City of Baguio
is assailed by defendant-appellant Fortunato de Leon.

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.
 53. American Bible Society vs. City of Manila

GR No. L-9637 | April 30, 1957

FELIX, J.:

Nature of the Case:

This a petition for Certiorari with the verdict of the plaintiff took up the matter to the Court of Appeals
which certified the case to Us for the reason that the errors assigned to the lower Court involved only
questions of law.

Facts:
 American Bible Society is a foreign, non-stock, non-profit, religious, missionary corporation duly
registered and doing business in the Philippines through its Philippine agency established in Manila in
November, 1898
 City of Manila is a municipal corporation with powers that are to be exercised in conformity with the
provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila
 American Bible Society has been distributing and selling bibles and/or gospel portions throughout the
Philippines and translating the same into several Philippine dialect
 City Treasurer of Manila informed American Bible Society that it was violating several Ordinances for
operating without the necessary permit and license, thereby requiring the corporation to secure the
permit and license fees covering the period from 4Q 1945-2Q 1953
 To avoid closing of its business, American Bible Society paid the City of Manila its permit and license
fees under protest
 American Bible filed a complaint, questioning the constitutionality and legality of the Ordinances 2529
and 3000, and prayed for a refund of the payment made to the City of Manila. They contended:
a. They had been in the Philippines since 1899 and were not required to pay any license fee or sales tax
b. it never made any profit from the sale of its bibles
 City of Manila prayed that the complaint be dismissed, reiterating the constitutionality of the
Ordinances in question
 Trial Court dismissed the complaint
 American Bible Society appealed to the Court of Appeals

Issue: WON American Bible Society liable to pay sales tax for the distribution and sale of bibles

Ruling: NO
 Under Sec. 1 of Ordinance 3000, one of the ordinance in question, person or entity engaged in any of
the business, trades or occupation enumerated under Sec. 3 must obtain a Mayor’s permit and license
from the City Treasurer. American Bible Society’s business is not among those enumerated
 However, item 79 of Sec. 3 of the Ordinance provides that all other businesses, trade or occupation
not mentioned, except those upon which the City is not empowered to license or to tax P5.00
 Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax
said business, trade or occupation.
 2 provisions of law that may have bearing on this case:
a. Chapter 60 of the Revised Administrative Code, the Municipal Board of the City of Manila is
empowered to tax and fix the license fees on retail dealers engaged in the sale of books
b. Sec. 18(o) of RA 409: to tax and fix the license fee on dealers in general merchandise, including
importers and indentors, except those dealers who may be expressly subject to the payment of some
other municipal tax. Further, Dealers in general merchandise shall be classified as (a) wholesale
dealers and (b) retail dealers. For purposes of the tax on retail dealers, general merchandise shall be
classified into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential
commodities, and (4) miscellaneous articles. A separate license shall be prescribed for each class but
 where commodities of different classes are sold in the same establishment, it shall not be compulsory
for the owner to secure more than one license if he pays the higher or highest rate of tax prescribed by
ordinance. Wholesale dealers shall pay the license tax as such, as may be provided by ordinance
 The only difference between the 2 provisions is the limitation as to the amount of tax or license fee
that a retail dealer has to pay per annum
 As held in Murdock vs. Pennsylvania, The power to impose a license tax on the exercise of these
freedoms provided for in the Bill of Rights, is indeed as potent as the power of censorship which this
Court has repeatedly struck down. It is not a nominal fee imposed as a regulatory measure to defray
the expenses of policing the activities in question. It is in no way apportioned. It is flat license tax
levied and collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the
constitutional liberties of press and religion and inevitably tends to suppress their exercise. That is
almost uniformly recognized as the inherent vice and evil of this flat license tax.
 Further, the case also mentioned that the power to tax the exercise of a privilege is the power to
control or suppress its enjoyment. Those who can tax the exercise of this religious practice can make
its exercise so costly as to deprive it of the resources necessary for its maintenance. Those who can tax
the privilege of engaging in this form of missionary evangelism can close all its doors to all those who
do not have a full purse
 Under Sec. 27(e) of Commonwealth Act No. 466 or the National Internal Revenue
Code,Corporations or associations organized and operated exclusively for religious, charitable, . . . or
educational purposes, . . .: Provided, however, That the income of whatever kind and character from
any of its properties, real or personal, or from any activity conducted for profit, regardless of the
disposition made of such income, shall be liable to the tax imposed under this Code shall not be taxed
 The price asked for the bibles and other religious pamphlets was in some instances a little bit higher
than the actual cost of the same but this cannot mean that American Bible Society was engaged in the
business or occupation of selling said "merchandise" for profit
 Therefore, the Ordinance cannot be applied for in doing so it would impair American Bible Society’s
free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination
of religious beliefs.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision
appealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected
from it
54. ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner,
vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA, Provincial
Treasurer, Abra; GASPAR V. BOSQUE, Municipal Treasurer, Bangued, Abra; HEIRS OF
PATERNO MILLARE,

G.R. No. L-39086 June 15, 1988

Nature of the Case:

This is a petition for review on certiorari of the decision * of the defunct Court of First Instance of Abra,
Branch I, dated June 14, 1974, rendered in Civil Case No. 656, entitled "Abra Valley Junior College, Inc.,
represented by Pedro V. Borgonia, plaintiff vs. Armin M. Cariaga as Provincial Treasurer of Abra, Gaspar
V. Bosque as Municipal Treasurer of Bangued, Abra and Paterno Millare, defendants,

55.CIR v CA & YMCA (1998)

CIR v CA & YMCA

GR No 124043, October 14, 1998

PANGANIBAN, J.:

Nature of the Case:

This is the main question raised before us in this petition for review on certiorari challenging two
Resolutions issued by the Court of Appeals[1] on September 28, 1995[2] and February 29, 1996[3] in CA-GR
SP No. 32007. Both Resolutions affirmed the Decision of the Court of Tax Appeals (CTA) allowing the
YMCA to claim tax exemption on the latters income from the lease of its real property.

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.
56, G.R. No. 115349 April 18, 1997
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
THE COURT OF APPEALS, THE COURT OF TAX APPEALS and ATENEO DE MANILA UNIVERSITY, respondents.

FACTS:
Private respondent is a non-stock, non-profit educational institution with auxiliary units and branches all over the
Philippines. One such auxiliary unit is the Institute of Philippine Culture (IPC), which has no legal personality
separate and distinct from that of private respondent. The IPC is a Philippine unit engaged in social science studies
of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international
organizations, private foundations and government agencies.

On July 8, 1983, private respondent received from petitioner Commissioner of Internal Revenue a demand letter
dated June 3, 1983, assessing private respondent the sum of P174,043.97 for alleged deficiency contractor's tax,
and an assessment dated June 27, 1983 in the sum of P1,141,837 for alleged deficiency income tax, both for the
fiscal year ended March 31, 1978. Denying said tax liabilities, private respondent sent petitioner a letter-protest
and subsequently filed with the latter a memorandum contesting the validity of the assessments.

On March 17, 1988, petitioner rendered a letter-decision canceling the assessment for deficiency income tax but
modifying the assessment for deficiency contractor's tax by increasing the amount due to P193,475.55. Unsatisfied,
private respondent requested for a reconsideration or reinvestigation of the modified assessment. At the same
time, it filed in the respondent court a petition for review of the said letter-decision of the petitioner.

ISSUE: In fine, these may be reduced to a single issue: Is Ateneo de Manila University, through its auxiliary unit or
branch — the Institute of Philippine Culture — performing the work of an independent contractor and, thus,
subject to the three percent contractor's tax levied by then Section 205 of the National Internal Revenue Code?

HELD:

The petition is unmeritorious.

The parts of then Section 205 of the National Internal Revenue Code germane to the case before us read:

Sec. 205. Contractors, proprietors or operators of dockyards, and others. — A contractor's tax of three per
centum of the gross receipts is hereby imposed on the following:
xxx xxx xxx
(16) Business agents and other independent contractors, except persons, associations and corporations
under contract for embroidery and apparel for export, as well as their agents and contractors, and except
gross receipts of or from a pioneer industry registered with the Board of Investments under the provisions
of Republic Act No. 5186;
xxx xxx xxx
The term "independent contractors" include persons (juridical or natural) not enumerated above (but not
including individuals subject to the occupation tax under Section 12 of the Local Tax Code) whose activity
consists essentially of the sale of all kinds of services for a fee regardless of whether or not the
performance of the service calls for the exercise or use of the physical or mental faculties of such
contractors or their employees.

The term "independent contractor" shall not include regional or area headquarters established in the
Philippines by multinational corporations, including their alien executives, and which headquarters do not
earn or derive income from the Philippines and which act as supervisory, communications and
coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region.
 The term "gross receipts" means all amounts received by the prime or principal contractor as the total
contract price, undiminished by amount paid to the subcontractor, shall be excluded from the taxable
gross receipts of the subcontractor.

Petitioner Commissioner of Internal Revenue contends that Private Respondent Ateneo de Manila University "falls
within the definition" of an independent contractor and "is not one of those mentioned as excepted"; hence, it is
properly a subject of the three percent contractor's tax levied by the foregoing provision of law. 6 Petitioner states
that the "term 'independent contractor' is not specifically defined so as to delimit the scope thereof, so much so
that any person who . . . renders physical and mental service for a fee, is now indubitably considered an
independent contractor liable to 3% contractor's tax." 7 According to petitioner, Ateneo has the burden of proof to
show its exemption from the coverage of the law.

We disagree. Petitioner Commissioner of Internal Revenue erred in applying the principles of tax exemption
without first applying the well-settled doctrine of strict interpretation in the imposition of taxes. It is obviously both
illogical and impractical to determine who are exempted without first determining who are covered by the
aforesaid provision. The Commissioner should have determined first if private respondent was covered by Section
205, applying the rule of strict interpretation of laws imposing taxes and other burdens on the populace, before
asking Ateneo to prove its exemption therefrom. The Court takes this occasion to reiterate the hornbook doctrine
in the interpretation of tax laws that "(a) statute will not be construed as imposing a tax unless it does so clearly,
expressly, and unambiguously . . . (A) tax cannot be imposed without clear and express words for that purpose.
Accordingly, the general rule of requiring adherence to the letter in construing statutes applies with peculiar
strictness to tax laws and the provisions of a taxing act are not to be extended by implication." 8

After reviewing the records of this case, we find no evidence that Ateneo's Institute of Philippine Culture ever sold
its services for a fee to anyone or was ever engaged in a business apart from and independently of the academic
purposes of the university.

The records do not show that Ateneo's IPC in fact contracted to sell its research services for a fee. Funds received
by the Ateneo de Manila University are technically not a fee. They may however fall as gifts or donations which are
tax-exempt" as shown by private respondent's compliance with the requirement of Section 123 of the National
Internal Revenue Code providing for the exemption of such gifts to an educational institution.

It is clear that the funds received by Ateneo's Institute of Philippine Culture are not given in the concept of a fee or
price in exchange for the performance of a service or delivery of an object. Rather, the amounts are in the nature of
an endowment or donation given by IPC's benefactors solely for the purpose of sponsoring or funding the
research with no strings attached. As found by the two courts below, such sponsorships are subject to IPC's terms
and conditions. No proprietary or commercial research is done, and IPC retains the ownership of the results of the
research, including the absolute right to publish the same. The copyrights over the results of the research are
owned by Ateneo and, consequently, no portion thereof may be reproduced without its permission. 15 The
amounts given to IPC, therefore, may not be deemed, it bears stressing as fees or gross receipts that can be
subjected to the three percent contractor's tax.

In the case at bench, it is clear from the evidence on record that there was no sale either of objects or services
because, as adverted to earlier, there was no transfer of ownership over the research data obtained or the results
of research projects undertaken by the Institute of Philippine Culture.

Furthermore, it is clear that the research activity of the Institute of Philippine Culture is done in pursuance of
maintaining Ateneo's university status and not in the course of an independent business of selling such research
with profit in mind.

The records show that the Institute of Philippine Culture conducted its research activities at a huge deficit of
P1,624,014.00 as shown in its statements of fund and disbursements for the period 1972 to 1985. 23 In fact, it was
Ateneo de Manila University itself that had funded the research projects of the institute, and it was only when
Ateneo could no longer produce the needed funds that the institute sought funding from outside.

So, why is it that Ateneo continues to operate and conduct researches through its Institute of Philippine Culture
when it undisputedly loses not an insignificant amount in the process? The plain and simple answer is that private
respondent is not a contractor selling its services for a fee but an academic institution conducting these researches
pursuant to its commitments to education and, ultimately, to public service. For the institute to have tenaciously
continued operating for so long despite its accumulation of significant losses, we can only agree with both the
Court of Tax Appeals and the Court of Appeals that "education and not profit is [IPC's] motive for undertaking the
research
projects." 25