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COURT OF the methods, employed by the CIR in its assessment, jeopardized the interests of a
TAX APPEALS and the COMMISSIONER OF INTERNAL REVENUE, taxpayer for being patently in violation of the law is a question of fact that calls for
Respondents. (G.R. No. 215950; June 20, 2016) the reception of evidence.


BIR assessed T with various tax deficiencies amounting to more than 4.640 billion vs.
pesos. Protest was filed. T paid 5.8 million pesos for its assessment on WTC, DST HON. JUAN P. AQUINO, Judge, Court of First Instance. et. al.
and EWT and reiterated its interest to compromise alleged IT and VAT deficiencies.
FDDA was issued at 4.473 billion pesos.
[G.R. No. L-39086; June 15, 1988] Constitutional Law| Power of Taxation
T appealed the CIR's decision to the CTA 2D and moved for the suspension of tax FACTS:
Abra Valley College is an educational corporation and institution of higher learning
collection against it. However, the CTA 2D required T to post bond equivalent to
in Bangued, Abra. In 1974, the CFI ordered for the seizure and sale of the subject
150% of the assessment within 15 days from notice. Hence, T was ordered to post
school property for non-payment of real estate taxes and penalties. Private
6.701 billion pesos as bond.
respondents stated that the college lot and building in question are not only used for
T petitioned for certiorari. educational purposes of the college, but also as the permanent residence of the
President and Director, Mr. Pedro V. Borgonia, and his family including his in-laws
and grandchildren; while the ground floor of the college building is being used and
rented by a commercial establishment.
[1] Did the CTA abuse its discretion in requiring bond that T is legally and
physically incapable of procuring?
[2] Was the bond requirement properly issued considering T's allegation of illegal ISSUE:
collection? Whether or not the lot and building in question are used exclusively for educational
HELD: purposes and thus exempted from paying taxes.
[1] Yes, the CTA abused its discretion. Although the Tax Code empowers the CTA
to suspend tax collection by requiring either the (1) deposit of the tax claimed or
(2) surety bond for not more than double the amount, T was able to show that it is HELD:
not capable of producing the amount of 6.701 billion pesos as its net worth is only The 1935 Philippine Constitution, Art. VI, par. 3 Sec. 22, expressly grants
almost 1 billion pesos. Plus, it is legally impossible to procure the bond from exemption from realty taxes for “Cemeteries, churches and parsonages or convents
bonding companies that are limited in their risk assumptions. appurtenant thereto, and all lands, buildings, and improvements used exclusively
for religious, charitable or educational purposes….
What the CTA should have done is to conduct a preliminary hearing on T's ability to Relative thereto, CA No. 470 as amended by RA No. 409, Sec. 54, paragraph c
deposit or procure bond. While there is legal justification for the bond requirement, otherwise known as the Assessment Law, provides:
the power to tax is not the power to destroy. For the bond to equal the deficiency The following are exempted from real property tax under the Assessment Law:
assessment would practically deny to the petitioner the meaningful opportunity to (c) churches and parsonages or convents appurtenant thereto, and all lands,
contest the validity of the assessments, and would likely even impoverish it as to buildings, and improvements used exclusively for religious, charitable, scientific
force it out of business. or educational purposes.
Thus, the use of the second floor of the main building for residential purposes of the
[2] The bond requirement was not properly issued. Section 11 of R.A. 1125, as Director and his family, may find justification under the concept of incidental use,
amended, indicates that the requirement of the bond as a condition precedent to which is complimentary to the main or primary purpose–educational. The lease of
suspension of the collection applies only in cases where the processes by which the the first floor, however, by a commercial establishment cannot be considered
collection sought to be made by means thereof are carried out in consonance with the incidental to the purpose of education.
law, not when the processes are in plain violation of the law that they have to be
suspended for jeopardizing the interests of the taxpayer. Under the 1935 Constitution, the trial court correctly arrived at the conclusion that
the school building as well as the lot where it is built, should be taxed, not because
The Court is not in the position to rule on the correctness of the deficiency the second floor of the same is being used by the Director and his family for
assessment, which is a matter still pending in the CTA. The determination of whether
residential purposes, but because the first floor thereof is being used for commercial privileges and liabilities. Uniformity does not violate classification as long as: (1) the
purposes. standards that are used therefor are substantial and not arbitrary, (2) the
categorization is germane to achieve the legislative purpose, (3) the law applies, all
things being equal, to both present and future conditions, and (4) the classification
3. Tan v Del Rosario applies equally well to all those belonging to the same class.

Facts: 2. What is apparent from the amendatory law is the legislative intent to increasingly shift
the income tax system towards the schedular approach in the income taxation of
individual taxpayers and to maintain, by and large, the present global treatment on
taxable corporations. The Court does not view this classification to be arbitrary and
1. Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income inappropriate.
Taxation Scheme ("SNIT"), which amended certain provisions of the NIRC, as well
as the Rules and Regulations promulgated by public respondents pursuant to said ISSUE 2: Whether or not public respondents exceeded their authority in
law. promulgating the RR
2. Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the following No. There is no evident intention of the law, either before or after the amendatory
provisions of the Constitution: legislation, to place in an unequal footing or in significant variance the income tax
treatment of professionals who practice their respective professions individually and
-Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only of those who do it through a general professional partnership.
one subject which shall be expressed in the title thereof.
- Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable.
The Congress shall evolve a progressive system of taxation. 4. Obillos v. CIR
- Article III, Section 1 — No person shall be deprived of . . . property without due
process of law, nor shall any person be denied the equal protection of the laws. Facts:

3. Petitioners contended that public respondents exceeded their rule-making authority in In 1973, Jose Obillos completed payment on two lots located in Greenhills, San
applying SNIT to general professional partnerships. Petitioner contends that the title Juan. The next day, he transferred his rights to his four children for them to build
of HB 34314, progenitor of RA 7496, is deficient for being merely entitled, their own residences. The Torrens title would show that they were co-owners of the
"Simplified Net Income Taxation Scheme for the Self-Employed and Professionals two lots. However, the petitioners resold them to Walled City Securities Corporation
Engaged in the Practice of their Profession" (Petition in G.R. No. 109289) when the and Olga Cruz Canda for P313k or P33k for each of them. They treated the profit
full text of the title actually reads, as capital gains and paid an income tax of P16,792.00
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and
Professionals Engaged In The Practice of Their Profession, Amending Sections 21 The CIR requested the petitioners to pay the corporate income tax of their shares, as
and 29 of the National Internal Revenue Code,' as amended. Petitioners also contend this entire assessment is based on the alleged partnership under Article 1767 of the
it violated due process. Civil Code; simply because they contributed each to buy the lots, resold them and
divided the profits among them.
5. The Solicitor General espouses the position taken by public respondents.
6. The Court has given due course to both petitions. But as testified by Obillos, they have no intention to form the partnership and that it
was merely incidental since they sold the said lots due to high demand of
ISSUE: Whether or not the tax law is unconstitutional for violating due process construction. Naturally, when they sell them as co-partners, it will result to the share
of profits. Further, their intention was to divide the lots for residential purposes.
NO. The due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of the tax Issue:
power. No such transgression is so evident in herein case.
Was there a partnership, hence, they are subject to corporate income taxes?
1. Uniformity of taxation, like the concept of equal protection, merely requires that all
subjects or objects of taxation, similarly situated, are to be treated alike both in Court Ruling:
Issue: Whether BP 135 violates the due process and equal protection clauses, and the
Not necessarily. As Article 1769 (3) of the Civil Code provides: the sharing of gross rule on uniformity in taxation.
returns does not in itself establish a partnership, whether or not the persons sharing
them have a joint or common right or interest in any property from which the returns Held: There is a need for proof of such persuasive character as would lead to a
are derived. There must be an unmistakeable intention to form a partnership or conclusion that there was a violation of the due process and equal protection clauses.
joint venture. 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
In this case, the Commissioner should have investigated if the father paid class shall be taxed at the same rate. The taxing power has the authority to make
donor's tax to establish the fact that there was really no partnership. 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
5. CIR v CA & YMCA clause and is therefore uniform. Taxpayers may be classified into different
GR No 124043, October 14, 1998 categories, such as recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make deductions for income
FACTS: tax purposes as there is no practically no overhead expense, while professionals and
In 1980, YMCA earned an income of 676,829.80 from leasing out a portion of its businessmen have no uniform costs or expenses necessaryh to produce their income.
premises to small shop owners, like restaurants and canteen operators and 44,259 There is ample justification to adopt the gross system of income taxation to
from parking fees collected from non-members. On July 2, 1984, the CIR issued an compensation income, while continuing the system of net income taxation as regards
assessment to YMCA for deficiency taxes which included the income from lease of professional and business income.
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 7. CITY GOVERNMENT OF QUEZON CITY v. BAYAN
excluded income from lease to small shop owners and parking fees. However, the TELECOMMUNICATIONS, GR NO. 162015, 2006-03-06
CA reversed the CTA but affirmed the CTA upon motion for reconsideration.
Respondent Bayan Telecommunications, Inc.
Whether the rental income of YMCA is taxable
(Bayantel) is a legislative franchise holder under Republic Act (Rep. Act) No. 3259...
RULING: to establish and operate radio stations for domestic telecommunications, radiophone,
Yes. The exemption claimed by YMCA is expressly disallowed by the very wording broadcasting and... telecasting.
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 Rep. Act No. 7160, otherwise known as the "Local Government Code of 1991"
subject to the tax imposed by the same Code. While the income received by the (LGC), took effect. Section 232 of the Code grants local government units within the
organizations enumerated in Section 26 of the NIRC is, as a rule, exempted from the Metro Manila Area the power to levy tax on real properties... the same Code...
payment of tax in respect to income received by them as such, the exemption does withdrew any exemption from realty tax heretofore granted to or enjoyed by all
not apply to income derived from any of their properties, real or personal or from persons, natural or juridica... barely few months after the LGC took effect, Congress
any of their activities conducted for profit, regardless of the disposition made of such enacted Rep. Act No. 7633, amending Bayantel's original franchise.
contained the following tax provision:
6. Sison vs Ancheta (1984) SEC. 11. 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, as
Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its other persons or corporations are now or hereafter may be required by law to pay.
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 In addition thereto, the grantee, its successors or assigns shall pay a franchise tax
it transgresses against the equal protection and due process clauses of the equivalent to three percent (3%) of all gross receipts of the telephone or other
Constitution as well as the rule requiring uniformity in taxation. telecommunications businesses transacted under this franchise by the grantee, its
successors or assigns and the... said percentage shall be in lieu of all taxes on this
franchise or earnings thereof. Provided, That the grantee, its successors or assigns
shall continue to be liable for income taxes payable under Title II of the National force of Section 234 of the LGC, has been restored by Section 14 of Rep. Act No.
Internal Revenue Code .... xxx. [Emphasis... supplied] 7633.
It is undisputed that within the territorial boundary of Quezon City, Bayantel owned Bayantel... is only "liable to pay the same taxes, as any other persons or corporations
several real properties on which it maintained various telecommunications facilities. on all its real or personal properties, exclusive of its franchise."... there can really be
no dispute that the power of the Quezon City Government to tax is limited by
government of Quezon City,... enacted City Ordinance... imposing... a real property Section 232 of the LGC which expressly provides that "a province or city or
tax on all real properties in Quezon City, and, reiterating in its Section 6, the municipality within the Metropolitan Manila Area may levy an annual... ad valorem
withdrawal of exemption from real... property tax under Section 234 of the LGC tax on real property such as land, building, machinery, and other improvement not
Bayantel wrote the office of the City Assessor seeking the exclusion of its real hereinafter specifically exempted." Under this law, the Legislature highlighted its
properties in the city from the roll of taxable real properties. With its request having power to thereafter exempt certain realties from the taxing power of local...
been denied, Bayantel interposed an appeal with the Local Board of Assessment government units. An interpretation denying Congress such power to exempt would
Appeals reduce the phrase "not hereinafter specifically exempted" as a pure jargon, without
meaning whatsoever. Needless to state, such absurd situation is unacceptable.
(LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay
the real property taxes assessed against it by the Quezon City government. dmittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware
that the LGC has already withdrawn Bayantel's former exemption from realty taxes,
Quezon City Treasurer sent out notices of delinquency... followed by the issuance of Congress opted to pass Rep. Act No. 7633 using... exactly the same defining phrase
several warrants of levy against Bayantel's properties preparatory to their sale at a
public auction "exclusive of this franchise" which was the basis for Bayantel's exemption from
realty taxes prior to the LGC.
Bayantel... filed with the RTC of Quezon City a petition for prohibition with an
urgent application for a temporary restraining order (TRO) In plain language, Section 11 of Rep. Act No. 7633 states that "the grantee, its
successors or assigns shall be liable to pay the same taxes on their real... estate,
Issues: buildings and personal property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay." The Court views
[I]n declaring the real properties of respondent exempt from real property taxes this subsequent piece of legislation as an express and real intention on the part of
notwithstanding the fact that the tax exemption granted to Bayantel in its original Congress to once... again remove from the LGC's delegated taxing power, all of the
franchise had been withdrawn by the [LGC] franchisee's (Bayantel's) properties that are actually, directly and exclusively used in
the pursuit of its franchise.
Whether or not Bayantel's real properties in Quezon City are exempt from real
property taxes under its legislative f... ranchise;
Bayantel's franchise being national in character, the "exemption" thus granted under 8. Tolentino vs. Secretary of Finance G.R. No. 115455 October 30, 1995
Section 14 of Rep. Act No. 3259 applies to all its real or personal properties found
anywhere within the Philippine archipelago. FACTS:

These are motions seeking reconsideration of our decision dismissing the petitions
real properties of Bayantel, save those exclusive of its franchise, are subject to realty filed in these cases for the declaration of unconstitutionality of R.A. No. 7716,
taxes. Ultimately, therefore, the inevitable result was that all realties which are otherwise known as the Expanded Value-Added Tax Law. Now it is contended by
actually,... directly and exclusively used in the operation of its franchise are the Philippine Press Institute (PPI) that by removing the exemption of the press from
"exempted" from any property tax. the VAT while maintaining those granted to others, the law discriminates against the
press. At any rate, it is averred, “even nondiscriminatory taxation of constitutionally
Bayantel's franchise being national in character, the "exemption" thus granted under guaranteed freedom is unconstitutional.”
Section 14 of Rep. Act No. 3259 applies to all its real or personal properties found
anywhere within the Philippine archipelago.
However, with the LGC's taking effect... the realty tax exemption... heretofore
enjoyed by Bayantel under its original franchise, but subsequently withdrawn by
Does sales tax on bible sales violative of religious and press freedom?
No, the revenue bill exclusively originated in the House of Representatives, the
RULING: Senate was acting within its constitutional power to introduce amendments to the
House bill when it included provisions in Senate Bill No. 1950 amending corporate
No. The Court was speaking in that case of a license tax, which, unlike an ordinary income taxes, percentage, and excise and franchise taxes.
tax, is mainly for regulation. Its imposition on the press is unconstitutional because it
lays a prior restraint on the exercise of its right. Hence, although its application to No, there is no undue delegation of legislative power but only of the discretion as to
others, such those selling goods, is valid, its application to the press or to religious the execution of a law. This is constitutionally permissible. Congress does not
groups, such as the Jehovah’s Witnesses, in connection with the latter’s sale of abdicate its functions or unduly delegate power when it describes what job must be
religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put it, done, who must do it, and what is the scope of his authority; in our complex
“it is one thing to impose a tax on income or property of a preacher. It is quite economy that is frequently the only way in which the legislative process can go
another thing to exact a tax on him for delivering a sermon.” forward. In this case, it is not a delegation of legislative power but a delegation of
ascertainment of facts upon which enforcement and administration of the increased
rate under the law is contingent.
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise
of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease No, the power of the State to make reasonable and natural classifications for the
or exchange of goods or properties or the sale or exchange of services and the lease purposes of taxation has long been established. Whether it relates to the subject of
of properties purely for revenue purposes. To subject the press to its payment is not taxation, the kind of property, the rates to be levied, or the amounts to be raised, the
to burden the exercise of its right any more than to make the press pay income tax or methods of assessment, valuation and collection, the State’s power is entitled to
subject it to general regulation is not to violate its freedom under the Constitution. presumption of validity. As a rule, the judiciary will not interfere with such power
absent a clear showing of unreasonableness, discrimination, or arbitrariness.

9. ABAKADA Guro Party List vs. Ermita

G.R. No. 168056 September 1, 2005 10. ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and
Facts: vs
ABAKADA GURO Party List, et al., filed a petition for prohibition o questioning DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY
the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, COMMISSION (ERC), NATIONAL POWER CORPORATION (NPC),
107 and 108, respectively, of the National Internal Revenue Code (NIRC). POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT GROUP
Section 4 imposes a 10% VAT on sale of goods and properties; (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP (SPUG), and
Section 5 imposes a 10% VAT on importation of goods; and PANAY ELECTRIC COMPANY INC. (PECO), respondents.
Section 6 imposes a 10% VAT on sale of services and use or lease of properties; FACTS:
On June 8, 2001 Congress enacted RA 9136 or the Electric Power Industry Act of
These provisions contain a provision which authorizing the President, upon 2001. Petitioners Romeo P. Gerochi and company assail the validity of Section 34 of
recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective the EPIRA Law for being an undue delegation of the power of taxation. Section 34
January 1, 2006, after specified conditions have been satisfied. provides for the imposition of a “Universal Charge” to all electricity end users after a
period of (1) one year after the effectively of the EPIRA Law. The universal charge
Issues: to be collected would serve as payment for government debts, missionary
Whether or not there is a violation of Article VI, Section 24 of the Constitution. electrification, equalization of taxes and royalties applied to renewable energy and
imported energy, environmental charge and for a charge to account for all forms of
Whether or not there is undue delegation of legislative power in violation of Article cross subsidies for a period not exceeding three years. The universal charge shall be
VI Sec 28(2) of the Constitution. collected by the ERC on a monthly basis from all end users and will then be
managed by the PSALM Corp. through the creation of a special trust fund.
Whether or not there is a violation of the due process and equal protection of the
Whether or not there is an undue delegation of the power to tax on the part of the

No, the universal charge as provided for in section 34 is not a tax but an exaction of
the regulatory power (police power) of the state. The universal charge under section
34 is incidental to the regulatory duties of the ERC, hence the provision assailed is
not for generation of revenue and therefore it cannot be considered as tax, but an
execution of the states police power thru regulation.

Moreover, the amount collected is not made certain by the ERC, but by the
legislative parameters provided for in the law (RA 9136) itself, it therefore cannot be
understood as a rule solely coming from the ERC. The ERC in this case is only a
specialized administrative agency which is tasked of executing a subordinate
legislation issued by congress; which before execution must pass both the
completeness test and the sufficiency of standard test. The court in appreciating
Section 34 of RA 9136 in its entirety finds the said law and the assailed portions free
from any constitutional defect and thus deemed complete and sufficient in form.