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G.R. No. 176667
November 22, 2007
ERICSSON TELECOMMUNICATIONS, INC., petitioner, vs. CITY OF PASIG, represented by its City Mayor, Hon. Vicente P. Eusebio, et al. *, respondents. DECISION AUSTRIA-MARTINEZ, J.: Ericsson Telecommunications, Inc. (petitioner), a corporation with principal office in Pasig City, is engaged in the design, engineering, and marketing of telecommunication facilities/system. In an Assessment Notice dated October 25, 2000 issued by the City Treasurer of Pasig City, petitioner was assessed a business tax deficiency for the years 1998 and 1999 amounting to P9,466,885.00 and P4,993,682.00, respectively, based on its gross revenues as reported in its audited financial statements for the years 1997 and 1998. Petitioner filed a Protest dated December 21, 2000, claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue. The City of Pasig (respondent) issued another Notice of Assessment to petitioner on November 19, 2001, this time based on business tax deficiencies for the years 2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93, respectively, based on its gross revenues for the years 1999 and 2000. Again, petitioner filed a Protest on January 21, 2002, reiterating its position that the local business tax should be based on gross receipts and not gross revenue. Respondent denied petitioner's protest and gave the latter 30 days within which to appeal the denial. This prompted petitioner to file a petition for review1 with the Regional Trial Court (RTC) of Pasig, Branch 168, praying for the annulment and cancellation of petitioner's deficiency local business taxes totaling P17,262,205.66. Respondent and its City Treasurer filed a motion to dismiss on the grounds that the court had no jurisdiction over the subject matter and that petitioner had no legal capacity to sue. The RTC denied the motion in an Order dated December 3, 2002 due to respondents' failure to include a notice of hearing. Thereafter, the RTC declared respondents in default and allowed petitioner to present evidence ex- parte. In a Decision2 dated March 8, 2004, the RTC canceled and set aside the assessments made by respondent and its City Treasurer. The dispositive portion of the RTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and ordering defendants to CANCEL and SET ASIDE Assessment Notice dated October 25, 2000 and Notice of Assessment dated November 19, 2001. SO ORDERED.3 On appeal, the Court of Appeals (CA) rendered its Decision4 dated November 20, 2006, the dispositive portion of which reads: WHEREFORE, the decision appealed from is hereby ordered SET ASIDE and a new one entered DISMISSING the plaintiff/appellee's complaint WITHOUT PREJUDICE. SO ORDERED.5 The CA sustained respondent's claim that the petition filed with the RTC should have been dismissed due to petitioner's failure to show that Atty. Maria Theresa B. Ramos (Atty. Ramos), petitioner's Manager for Tax and Legal Affairs and the person who signed the Verification and Certification of Non-Forum Shopping, was duly authorized by the Board of Directors. Its motion for reconsideration having been denied in a Resolution6 dated February 9, 2007, petitioner now comes before the Court via a Petition for Review on Certiorari under Rule 45 of the Rules of Court, on the following grounds: (1) THE COURT OF APPEALS ERRED IN DISMISSING THE CASE FOR LACK OF SHOWING THAT THE SIGNATORY OF THE VERIFICATION/ CERTIFICATION IS NOT SPECIFICALLY AUTHORIZED FOR AND IN BEHALF OF PETITIONER. (2) THE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO RESPONDENT'S APPEAL, CONSIDERING THAT IT HAS NO JURISDICTION OVER THE SAME, THE MATTERS TO BE RESOLVED BEING PURE QUESTIONS OF LAW, JURISDICTION OVER WHICH IS VESTED ONLY WITH THIS HONORABLE COURT. (3) ASSUMING THE COURT OF APPEALS HAS JURISDICTION OVER RESPONDENT'S APPEAL, SAID COURT ERRED IN NOT DECIDING ON THE MERITS OF THE CASE FOR THE SPEEDY DISPOSITION THEREOF, CONSIDERING THAT THE DEFICIENCY LOCAL BUSINESS TAX ASSESSMENTS ISSUED BY RESPONDENT ARE CLEARLY INVALID AND CONTRARY TO THE PROVISIONS OF THE PASIG REVENUE CODE AND THE LOCAL GOVERNMENT CODE.7 After receipt by the Court of respondent's complaint and petitioner's reply, the petition is given due course and considered ready for decision without the need of memoranda from the parties. The Court grants the petition.
First, the complaint filed by petitioner with the RTC was erroneously dismissed by the CA for failure of petitioner to show that its Manager for Tax and Legal Affairs, Atty. Ramos, was authorized by the Board of Directors to sign the Verification and Certification of Non-Forum Shopping in behalf of the petitioner corporation. Time and again, the Court, under special circumstances and for compelling reasons, sanctioned substantial compliance with the rule on the submission of verification and certification against non-forum shopping.8 In General Milling Corporation v. National Labor Relations Commission,9 the Court deemed as substantial compliance the belated attempt of the petitioner to attach to the motion for reconsideration the board resolution/secretary's certificate, stating that there was no attempt on the part of the petitioner to ignore the prescribed procedural requirements. In Shipside Incorporated v. Court of Appeals,10 the authority of the petitioner's resident manager to sign the certification against forum shopping was submitted to the CA only after the latter dismissed the petition. The Court considered the merits of the case and the fact that the petitioner subsequently submitted a secretary's certificate, as special circumstances or compelling reasons that justify tempering the requirements in regard to the certificate of non-forum shopping.11 There were also cases where there was complete non-compliance with the rule on certification against forum shopping and yet the Court proceeded to decide the case on the merits in order to serve the ends of substantial justice.12 In the present case, petitioner submitted a Secretary's Certificate signed on May 6, 2002, whereby Atty. Ramos was authorized to file a protest at the local government level and to "sign, execute and deliver any and all papers, documents and pleadings relative to the said protest and to do and perform all such acts and things as may be necessary to effect the foregoing."13 Applying the foregoing jurisprudence, the subsequent submission of the Secretary's Certificate and the substantial merits of the petition, which will be shown forthwith, justify a relaxation of the rule. Second, the CA should have dismissed the appeal of respondent as it has no jurisdiction over the case since the appeal involves a pure question of law. The CA seriously erred in ruling that the appeal involves a mixed question of law and fact necessitating an examination and evaluation of the audited financial statements and other documents in order to determine petitioner's tax base. There is a question of law when the doubt or difference is on what the law is on a certain state of facts. On the other hand, there is a question of fact when the doubt or difference is on the truth or falsity of the facts alleged.14 For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the
appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact.15 There is no dispute as to the veracity of the facts involved in the present case. While there is an issue as to the correct amount of local business tax to be paid by petitioner, its determination will not involve a look into petitioner's audited financial statements or documents, as these are not disputed; rather, petitioner's correct tax liability will be ascertained through an interpretation of the pertinent tax laws, i.e., whether the local business tax, as imposed by the Pasig City Revenue Code (Ordinance No. 25-92) and the Local Government Code of 1991, should be based on gross receipts, and not on gross revenue which respondent relied on in computing petitioner's local business tax deficiency. This, clearly, is a question of law, and beyond the jurisdiction of the CA. Section 2(c), Rule 41 of the Rules of Court provides that in all cases where questions of law are raised or involved, the appeal shall be to this Court by petition for review on certiorari under Rule 45. Thus, as correctly pointed out by petitioner, the appeal before the CA should have been dismissed, pursuant to Section 5(f), Rule 56 of the Rules of Court, which provides: Sec. 5. Grounds for dismissal of appeal.- The appeal may be dismissed motu proprio or on motion of the respondent on the following grounds: xxxx (f) Error in the choice or mode of appeal. xxxx Third, the dismissal of the appeal, in effect, would have sustained the RTC Decision ordering respondent to cancel the Assessment Notices issued by respondent, and therefore, would have rendered moot and academic the issue of whether the local business tax on contractors should be based on gross receipts or gross revenues. However, the higher interest of substantial justice dictates that this Court should resolve the same, to evade further repetition of erroneous interpretation of the law,16 for the guidance of the bench and bar. As earlier stated, the substantive issue in this case is whether the local business tax on contractors should be based on gross receipts or gross revenue. Respondent assessed deficiency local business taxes on petitioner based on the latter's gross revenue as reported in its financial statements, arguing that gross receipts is synonymous with gross earnings/revenue, which, in turn, includes uncollected earnings. Petitioner, however, contends that only the portion of the revenues which were actually and constructively received should be considered in determining its tax base.
Respondent is authorized to levy business taxes under Section 143 in relation to Section 151 of the Local Government Code. Insofar as petitioner is concerned, the applicable provision is subsection (e), Section 143 of the same Code covering contractors and other independent contractors, to wit: SEC. 143. Tax on Business. - The municipality may impose taxes on the following businesses: xxxx (e) On contractors and other independent contractors, in accordance with the following schedule: With gross receipts for the preceding calendar year in the amount of: xxxx (Emphasis supplied) The above provision specifically refers to gross receipts which is defined under Section 131 of the Local Government Code, as follows: xxxx (n) "Gross Sales or Receipts" include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and the deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax, and value-added tax (VAT); xxxx The law is clear. Gross receipts include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged or leased, whether actual or constructive. In Commissioner of Internal Revenue v. Bank of Commerce,17 the Court interpreted gross receipts as including those which were actually or constructively received, viz.: Actual receipt of interest income is not limited to physical receipt. Actual receipt may either be physical receipt or constructive receipt. When the depository bank withholds the final tax to pay the tax liability of the lending bank, there is prior to the Amount of Tax Per Annum
the interest income actually received by the lending bank. and thus forms part of his gross receipts. is the net interest plus the amount withheld as final tax. but in the last case." Article 532 states: "Possession may be acquired by the same person who is to enjoy it. The withholding process is one such act.18 in this wise: Receipt of income may be actual or constructive. There may not be actual receipt . or by any person without any power whatever. The amount withheld indubitably comes from income of the taxpayer. by his legal representative. From the amount constructively received by the lending bank. both physically and constructively. Respondent argues that only items of income actually received should be included in its gross receipts. or by the proper acts and legal formalities established for acquiring such right. the depository bank deducts the final withholding tax and remits it to the government for the account of the lending bank. We clarify." The last means of acquiring possession under Article 531 refers to juridical acts— the acquisition of possession by sufficient title—to which the law gives the force of acts of possession. Bank of the Philippine Islands. Because the amount withheld belongs to the taxpayer. he can transfer its ownership to the government in payment of his tax liability. Article 531 of the Civil Code clearly provides that the acquisition of the right of possession is through the proper acts and legal formalities established therefor. (Emphasis supplied) Further elaboration was made by the Court in Commissioner of Internal Revenue v. Thus. Under Article 531: "Possession is acquired by the material occupation of a thing or the exercise of a right. The concept of a withholding tax on income obviously and necessarily implies that the amount of the tax withheld comes from the income earned by the taxpayer.withholding a constructive receipt by the lending bank of the amount withheld. or by the fact that it is subject to the action of our will. It claims that since the amount had already been withheld at source. the possession shall not be considered as acquired until the person in whose name the act of possession was executed has ratified the same. then that amount manifestly forms part of the taxpayer's gross receipts. we apply to the receipt of income the rules on actual and constructive possession provided in Articles 531 and 532 of our Civil Code. Since the amount of the tax withheld constitutes income earned by the taxpayer. without prejudice to the juridical consequences of negotiorum gestio in a proper case. it did not have actual receipt thereof. by his agent. to wit: By analogy. We have held that the withholding process results in the taxpayer's constructive receipt of the income withheld.
" It is "recorded at the amount received or expected to be received. possession is acquired by the payor as the withholding agent of the government.x x x "Constructive receipt" occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor. and dividends).24 . the payment of which is yet to be received. constructive receipt.of the income withheld. sales of services." (Section E  of the Statements of Financial Accounting Standards No. The following are examples of constructive receipts: (1) deposit in banks which are made available to the seller of services without restrictions. however. 200520 defined and gave examples of "constructive receipt". -. The processes of bookkeeping and accounting for interest on deposits and yield on deposit substitutes that are subjected to FWT are indeed—for legal purposes—tantamount to delivery. exchanged or leased. gross revenue covers money or its equivalent actually or constructively received. receipt or remittance. or the services rendered has already been placed under the control of the person who sold the goods or rendered the services without any restriction by the payor. In our withholding tax system. There is. 4. 108-4. therefore.23 As aptly stated by the RTC: "[R]evenue from services rendered is recognized when services have been performed and are billable. and other assets) arising from the ordinary operating activities of an enterprise (such as sales of goods. including the value of services rendered or articles sold.22 which is measured at the fair value of the consideration received or receivable. In contrast. because the taxpayer ratifies the very act of possession for the government. interest. 1). Definition of Gross Receipts. and (3) transfer of the amounts retained by the payor to the account of the contractor. exchanged or leased. as provided for in Article 532. receivables. when the consideration for the articles sold. This is in consonance with the International Financial Reporting Standards. royalties. There is thus constructive receipt. to wit: SEC. 16-2005 dated September 1. possession by any person without any power whatsoever shall be considered as acquired when ratified by the person in whose name the act of possession is executed.21 which defines revenue as the gross inflow of economic benefits (cash.19 Revenue Regulations No. (2) issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered.
Respondent. the other substantive. JJ. Reyes. where income is reportable when all the events have occurred that fix the taxpayer's right to receive the income. BA LEPANTO CONDOMINUM CORPORATION. 154993 October 25. yet both of obvious significance. and not the actual receipt. The second is whether a local government . Luz Yamane (City Treasurer). Chairperson. its audited financial statements reflect income or revenue which accrued to it during the taxable period although not yet actually or constructively received or paid.: Petitioner City Treasurer of Makati. J. G. YAMANE. Petitioner. pursuant to the Local Government Code. The first pertains to the proper mode of judicial review undertaken from decisions of the regional trial courts resolving the denial of tax protests made by local government treasurers. Nachura. and the Decision dated March 8. Thus. No. SO ORDERED. the petition is GRANTED. Chico-Nazario. 2004 rendered by the Regional Trial Court of Pasig. Branch 168 is REINSTATED. and the amount can be determined with reasonable accuracy. 2006 and Resolution dated February 9.25 The imposition of local business tax based on petitioner's gross revenue will inevitably result in the constitutionally proscribed double taxation – taxing of the same person twice by the same jurisdiction for the same thing26 – inasmuch as petitioner's revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid. presents for resolution of this Court two novel questions: one procedural. concur. 2007 issued by the Court of Appeals are SET ASIDE.In petitioner's case. respondent committed a palpable error when it assessed petitioner's local business tax based on its gross revenue as reported in its audited financial statements.. DECISION Tinga. Ynares-Santiago.R. 2005 LUZ R. determines when to include the amount in gross income. This is because petitioner uses the accrual method of accounting. vs. the right to receive income. WHEREFORE. The Decision dated November 20. as Section 143 of the Local Government Code and Section 22(e) of the Pasig Revenue Code clearly provide that the tax should be computed based on gross receipts. in her capacity as the CITY TREASURER OF MAKATI CITY.
capital expenditures on the common areas. The Makati [Revenue] Code and the [Local Government] Code do not contain any provisions on which the Assessment could be based. to collect regular assessments from its members for operating expenses. Makati City. One might argue that Sec. We submit. Respondent BA-Lepanto Condominium Corporation (the "Corporation") is a duly organized condominium corporation constituted in accordance with the Condominium Act. fees and charges.3 The Notice of Assessment was silent as to the statutory basis of the business taxes assessed. that this is not applicable to the Corporation as the Corporation is not an owner or operator of any business in the contemplation of the Makati [Revenue] Code and even the [Local Government] Code. under the Local Government Code.601. Through counsel. and not on law. There are fewer indisputable causes for the exercise of judicial review over the exercise of the taxing power than when the tax is based on whim. Its membership comprises the various unit owners of the Condominium. the Corporation proceeded to argue that under both the Makati Code and the Local Government Code. Considering that the tax imposition now in question has utterly no basis in law. there are disturbing aspects in both procedure and substance that attend the attempts by the City of Makati to flex its taxing muscle. and other special assessments as provided for in the Master Deed with Declaration of Restrictions of the Condominium.4 Proceeding from the premise that its tax liability arose from Section 3A. we submit that the Assessment has no basis as the Corporation is not liable for business taxes and surcharges and interest thereon. the Corporation responded with a written tax protest dated 12 February 1999. the Corporation received a Notice of Assessment dated 14 December 1998 signed by the City Treasurer. however. The facts.77 for the years 1995 to 1997.1 While we agree with the City Treasurer’s position on the first issue. judicial relief is imperative. under the Makati [Revenue] Code or even under the [Local Government] Code. We uphold respondents on the second issue. impel a condominium corporation to pay business taxes. The Corporation is authorized. follow. addressed to the City Treasurer.2 which owns and holds title to the common and limited common areas of the BA-Lepanto Condominium (the "Condominium").02(m) of the Makati Revenue Code. under Article V of its Amended By-Laws. It was evident in the protest that the Corporation was perplexed on the statutory basis of the tax assessment. On 15 December 1998. "business" is defined as "trade or commercial activity regularly . The Notice of Assessment stated that the Corporation is "liable to pay the correct city business taxes. 3A.unit can.02(m) of the Makati [Revenue] Code imposes business tax on owners or operators of any business not specified in the said code. Indeed.013. With due respect. as culled from the record. situated in Paseo de Roxas." computed as totaling P1. there ultimately is sufficient justification for the Court to overlook what is essentially a procedural error.
14 Persuaded by this contention.17 In doing so. the Court of Appeals Special Sixteenth Division rendered the Decision16 now assailed before this Court. She insisted that the collection of dues from the unit owners was effected primarily "to sustain and maintain the expenses of the common areas. to manage the Condominium for the unit owners." It was submitted that the Corporation. in sadly risible language: Herein appellant.13 However. the RTC concluded that the activities of the Corporation fell squarely under the definition of "business" under Section 13(b) of the Local Government Code.6 Thus. and to hold title to the parcels of land on which the Condominium was located. to give an impression to outsides [sic] of the quality of service the condominium offers. so as to allow present owners to command better prices in the event of sale.10 With this.5 The protest was rejected by the City Treasurer in a letter dated 4 March 1999. the remedy of the taxpayer on the denial of the protest filed with the local treasurer is to appeal the denial with the court of competent jurisdiction. and thus subject to local business taxation. The appellate court reversed the RTC and declared that the Corporation was not liable to pay business taxes to the City of Makati. the petition was dismissed outright12 on the ground that only decisions of the RTC brought on appeal from a first level court could be elevated for review under the mode of review prescribed under Rule 42. The assessments it did collect from the unit owners were for capital expenditures and operating expenses. but to hold title over the common areas of the Condominium. Its end view is to get appreciate living rules for the unit owners [sic].11 From this Decision of the RTC. to defray the improvements and beautification of the common areas. it was held that the very statutory concept of a condominium . with the end in view [sic] of getting full appreciative living values [sic] for the individual condominium occupants and to command better marketable [sic] prices for those occupants" who would in the future sell their respective units." the corporation activity "is a profit venture making [sic]".8 On 1 March 2000.18 and concluded that the Corporation was not engaged in profit. Initially. she concluded since the "chances of getting higher prices for well-managed common areas of any condominium are better and more effective that condominiums with poor [sic] managed common areas. the Court of Appeals delved into jurisprudential definitions of profit. the Makati RTC Branch 57 rendered a Decision9 dismissing the appeal for lack of merit. the RTC acknowledged. was organized not for profit. the Corporation filed an Appeal with the Regional Trial Court (RTC) of Makati. Neither was the Corporation authorized. as a condominium corporation. collect [sic] assessments from its members. the Corporation filed a Petition for Review under Rule 42 of the Rules of Civil Procedure with the Court of Appeals. the Corporation pointed out in its Motion for Reconsideration that under Section 195 of the Local Government Code.15 On 7 June 2002. the Court of Appeals reinstated the petition. under its articles of incorporation or by-laws to engage in profit-making activities.7 From the denial of the protest.engaged in as a means of livelihood or with a view to profit. Accepting the premise laid by the City Treasurer. For one.
to its estimation.22 The City Treasurer also claims that the Corporation had filed the wrong mode of appeal before the Court of Appeals when the latter filed its Petition for Review under Rule 42. The City Treasurer likewise avers that the rationale for business taxes is not on the income received or profit earned by the business. the RTC Decision is deemed to have become final and executory.23 There are discernible conflicting views on the issue.19 The Court of Appeals likewise cited provisions from the Corporation’s Amended Articles of Incorporation and Amended By-Laws that. but the privilege to engage in business. for the adoption of the position of the City Treasurer that the mode of review of the decision taken by the RTC is governed by Rule 41 of the Rules of Civil Procedure means that the decision of the RTC would have long become final and executory by reason of the failure of the Corporation to file a notice of appeal. this argument does find jurisprudential mooring in our ruling in Garcia v. The other view. lease. Still. for the dues collected from the different unit owners is utilized towards the beautification and maintenance of the Condominium. operate and maintain. we dispose of the procedural issue. as maintained by the City Treasurer. which essentially boils down to whether the RTC. It is reasoned that the decision of the Makati RTC was rendered in the exercise of original jurisdiction. and to convey sell. exercises appellate jurisdiction. hold. First. De .corporation showed that it was not a juridical entity intended to make profit. the Local Government Code does not elaborate on how such "appeal" should be undertaken. established that the Corporation was not engaged in business and the assessment collected from unit owners limited to those necessary to defray the expenses in the maintenance of the common areas and management the condominium. This position is anchored on the language of Section 195 of the Local Government Code which states that the remedy of the taxpayer whose protest is denied by the local treasurer is "to appeal with the court of competent jurisdiction. holds that the RTC." The question assumes a measure of importance to this petition.21 the City Treasurer elevated the present Petition for Review under Rule 45. The fact that the Corporation is empowered "to acquire. This is the first time that the position has been presented to the court for adjudication. in reviewing denials of protests by local treasurers. Accordingly. it being the first court which took cognizance of the case. as expressed by the Court of Appeals. own. transfer or otherwise dispose of real or personal property" allegedly qualifies "as incident to the fact of [the Corporation’s] act of engaging in business. enjoy."24 Apparently though. resulting in "full appreciative living values" for the condominium units which would command better market prices should they be sold in the future. is that the jurisdiction exercised by the RTC is original in character. The first. It is argued that the Corporation is engaged in business. as its sole purpose was to hold title to the common areas in the condominium and to maintain the condominium.20 Upon denial of her Motion for Reconsideration. exercises "original jurisdiction" or "appellate jurisdiction. with the Corporation having pursued an erroneous mode of appeal. in deciding an appeal taken from a denial of a protest by a local treasurer under Section 195 of the Local Government Code.
P."28 The power to create or characterize jurisdiction of courts belongs to the legislature. B. Batas Pambansa Blg. we make this pronouncement subject to two important qualifications. Section 1 of which lists a slew of administrative agencies and quasijudicial tribunals or their officers whose decisions may be reviewed by the Court of Appeals in the exercise of its appellate jurisdiction. the review is the initial judicial cognizance of the matter. confining as it does said appellate jurisdiction to cases decided by Metropolitan. While the traditional notion of appellate jurisdiction connotes judicial review over lower court decisions. in this particular case there are nonetheless significant reasons for the Court to overlook the procedural error and ultimately uphold the adjudication of the jurisdiction exercised by the Court of Appeals in this case. Appellate jurisdiction is the authority of a Court higher in rank to re-examine the final order or judgment of a lower Court which tried the case now elevated for judicial review. Section 22 of B. the law which expanded the jurisdiction of the Court of Tax Appeals (CTA). labeling the said review as an exercise of appellate jurisdiction is inappropriate. Republic Act No. Yet significantly. the doctrinal weight of the pronouncement is confined to cases and controversies that emerged prior to the enactment of Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the CTA exercises exclusive appellate jurisdiction to review on appeal decisions. but of a local government official. From these premises. However. and Municipal Circuit Trial Courts. instrumentalities. boards or commission. or any other statute for that matter. On the other hand. by explicitly using the phrase "appellate jurisdiction. and that the proper remedy of the Corporation from the RTC judgment is an ordinary appeal under Rule 41 to the Court of Appeals.P.27 ineluctably confers appellate jurisdiction on the Court of Appeals over final rulings of quasi-judicial agencies.P. Second. it has to yield to statutory redefinitions that clearly expand its breadth to encompass even review of decisions of officers in the executive branches of government. the Local Government Code. Unlike in the case of the Court of Appeals. However."26 The quoted definitions were taken from the commentaries of the esteemed Justice Florenz Regalado. since the denial of the protest is not the judgment or order of a lower court. 129 expressly delineates the appellate jurisdiction of the Regional Trial Courts.Jesus. 9282. With the definitions as beacon. 129). orders or resolutions of the Regional Trial Courts in local tax cases original decided or resolved by them in the exercise of their originally .25 where the Court proffered the following distinction between original jurisdiction and appellate jurisdiction: "Original jurisdiction is the power of the Court to take judicial cognizance of a case instituted for judicial action for the first time under conditions provided by law. First. Moreover. Municipal. In short. 129 (B. it is evident that the stance of the City Treasurer is correct as a matter of law. the review taken by the RTC over the denial of the protest by the local treasurer would fall within that court’s original jurisdiction. 129 does not confer appellate jurisdiction on Regional Trial Courts over rulings made by non-judicial entities. The stringent concept of original jurisdiction may seemingly be neutered by Rule 43 of the 1997 Rules of Civil Procedure. does not expressly confer appellate jurisdiction on the part of regional trial courts from the denial of a tax protest by a local treasurer. the basic law of jurisdiction.
by employing the Rule 42 mode of review. To declare otherwise would be to institute a jurisdictional rule derived not from express statutory grant. Be that as it may. We now proceed to the substantive issue.34 There is no similar requirement of a prima facie determination of error in the case of ordinary appeal."36 These guidelines and limitations as provided by Congress are in main contained in the Local Government Code of . We begin with an overview of the power of a local government unit to impose business taxes. Rule 42 provides that in order that the Court of Appeals may allow due course to the petition for review. speedy and inexpensive disposition of every action and proceeding. This was not an error that worked to the prejudice of the City Treasurer. Rule 41. Section 6. Moreover. on whether the City of Makati may collect business taxes on condominium corporations. The jurisdiction of a court to take cognizance of a case should be clearly conferred and should not be deemed to exist on mere implications. and charges subject to such guidelines and limitations as the Congress may provide. Under Section 13. Moreover. the provision also states that the review is triggered "by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure. we have repeatedly upheld—and utilized ourselves—the discretion of courts to nonetheless take cognizance of petitions raised on an erroneous mode of appeal and instead treat these petitions in the manner as they should have appropriately been filed. which is perfected upon the filing of the notice of appeal in due time. it must first make a prima facie finding that the lower court has committed an error that would warrant the reversal or modification of the decision under review. The power of local government units to impose taxes within its territorial jurisdiction derives from the Constitution itself. however. we recognize that the Corporation’s error in elevating the RTC decision for review via Rule 42 actually worked to the benefit of the City Treasurer. which recognizes the power of these units "to create its own sources of revenue and to levy taxes.or appellate jurisdiction.32 The Court of Appeals could very well have treated the Corporation’s petition for review as an ordinary appeal. would not apply to this case simply because it arose prior to the effectivity of that law.30 and this settled rule would be needlessly emasculated should we declare that the Corporation’s position is correct in law. the stated grounds for the dismissal of an ordinary appeal prior to the transmission of the case records are when the appeal was taken out of time or when the docket fees were not paid. 9282. especially if mechanical application would defeat the higher ends that animates our civil procedure—the just. 33 On the other hand. the Corporation faced a greater risk of having its petition rejected by the Court of Appeals as compared to having filed an ordinary appeal under Rule 41.35 Evidently. but from implication. fees."29 Republic Act No.31 Indeed. There is wider latitude on the part of the Court of Appeals to refuse cognizance over a petition for review under Rule 42 than it would have over an ordinary appeal under Rule 41. consistent with the basic policy of local autonomy. characteristic of all procedural rules is adherence to the precept that they should not be enforced blindly.
01(q) of Chapter III of this Code. job placement or recruitment agencies.1991 (the "Code"). rental of bicycles and/or tricycles. typing. janitorial services. The most well-known mode of local government taxation is perhaps the real property tax. booking officers for film exchange. The significant limitations are enumerated primarily in Section 133 of the Code. Book II of the Code. operators of shoe shine stands. contractors and other independent contractors. enacted through Municipal Ordinance No. Moreover. To give a sample of the specified businesses under the Revenue Code which are not enumerated under the Local Government Code. feasibility studies. gold and silversmith shops. and peddlers engaged in the sale of any merchandise or article of commerce. . a prohibition on the imposition of income taxes except when levied on banks and other financial institutions. Xerox. photostatic. animal hospitals. and mimeographing services. breeding of game cocks and other sporting animals belonging to others. wholesalers. which is governed by Title II. Article A. which provides for comprehensive instances when and how local government units may impose taxes. which levies a gross receipt tax : (f) On contractors and other independent contractors defined in Sec.38 Section 143 of the Code specifically enumerates several types of business on which municipalities and cities may impose taxes. A different set of provisions. escort services. garbage disposal contractors. polo players.37 None of the other general limitations under Section 133 find application to the case at bar. and on owners or operators of business establishments rendering or offering services such as: advertising agencies. Book II of the Code. consultancy services. white/blue printing. and which bears no application in this case. governing municipal taxes. mercantile agencies. where the provisions on business taxation relevant to this petition may be found. perma press establishments. booking offices for transportation on commission basis. found under Title I of Book II. landscaping contractors. These include manufacturers. blacksmith shops. banks and financial institutions. painting shops. Under Section 151 of the Code. we cite Section 3A. real estate appraisers. including business taxes. business management services. real estate brokerages. the local sanggunian is also authorized to impose taxes on any other businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax. belt and buckle shops. 3A. The coverage of business taxation particular to the City of Makati is provided by the Makati Revenue Code ("Revenue Code"). dealers of any article of commerce of whatever nature. 92-072. Title II. The Revenue Code remains in effect as of this writing. medical and dental laboratories. bookbinders. distributors. inspection services for incoming and outgoing cargoes. those engaged in the export or commerce of essential commodities. rent-a-plant services. Chapter III of the Revenue Code governs business taxes in Makati. school for and/or horse-back riding academy.02(f) of the Code. garages. messsengerial services. lathe machine shops. and it is quite specific as to the particular businesses which are covered by business taxes. collecting agencies. assaying laboratories. cities such as Makati are authorized to levy the same taxes fees and charges as provinces and municipalities. interior decorating services. governs other taxes imposable by local government units. which include among others. It is in Article II. management consultants not subject to professional tax.
the Court of Appeals. etc. Culture and Sports. There may have been prima facie compliance with the requirement under Section 195. and also the communications by the City Treasurer to the Corporation which form part of the record. the notice of assessment. vaciador shops.39 Other provisions of the Revenue Code likewise subject hotel and restaurant owners and operators40. as to what exactly is the precise statutory basis under the Makati Revenue Code for the levying of the business tax on petitioner. the RTC. as expressed in its protest. or this Court for that matter. vocational and other schools not regulated by the Department of Education. the amount of deficiency. We have examined all of the pleadings submitted by the City Treasurer in all the antecedent judicial proceedings. as well as in this present petition. which stands as the first instance the taxpayer is officially made aware of the pending tax liability.44 What . two and one-half percent (2 ½%) for 1994 and 1995.furniture. watches. and lessors of real estate41 to business taxes. However in this case. there already stands a problem with the City Treasurer’s cause of action. etc. which provides: (m) On owners or operators of any business not specified above shall pay the tax at the rate of two percent (2%) for 1993. shoes. Even at this point. dancing schools/speed reading/EDP. shops for shearing animals. stables. and three percent (3%) for 1996 and the years thereafter of the gross receipts during the preceding year. Section 195 of the Local Government Code does not go as far as to expressly require that the notice of assessment specifically cite the provision of the ordinance involved but it does require that it state the nature of the tax. silkscreen or T-shirt printing shops. we could appreciate the Corporation’s confusion. the Revenue Code provides multiple provisions on business taxes. etc. Hence. travel agencies. veterinary clinics. Our careful examination of the record reveals a highly disconcerting fact. should be sufficiently informative to apprise the taxpayer the legal basis of the tax. household appliances.42 The initial inquiry is what provision of the Makati Revenue Code does the City Treasurer rely on to make the Corporation liable for business taxes.02(m) of the Revenue Code. nursery. In this case. the notice of assessment sent to the Corporation did state that the assessment was for business taxes. and not by the Local Government Code alone. fowls. Nowhere therein is there any citation made by the City Treasurer of any provision of the Revenue Code which would serve as the legal authority for the collection of business taxes from condominiums in Makati. for the power of local government units to impose local taxes is exercised through the appropriate ordinance enacted by the sanggunian. day care centers. and at varying rates. fee or charge. Should the comprehensive listing not prove encompassing enough. boats. as to the exact legal basis for the tax.. (DECS). This is found in Section 3A. shipping agencies. shipyard for repairing ships for others.. there is also a catch-all provision similar to that under the Local Government Code. surcharges. typewriters.43 Reference to the local tax ordinance is vital. as well as the amount of the assessment. interests and penalties. real estate dealers. video rentals and/or coverage services. At no point has the City Treasurer been candid enough to inform the Corporation. roasting of pigs. Ostensibly.
"45 This definition of "business" takes on importance. or "et cetera". This position was sustained by the Court of Appeals. Assuming that the assessment made on the Corporation is on a provision other than Section 3A. if it is based on "et cetera" under Section 3A. we would have to examine whether the Corporation faces analogous comparison with the other businesses listed under that provision. while it does not include condominium-related enterprises. Indeed. We do not know why the Corporation chose not to put this issue into litigation. local tax on businesses is authorized under Section 143 of the Local Government Code. the City Treasurer has not been helpful in that regard. though we can ultimately presume that no injury was sustained because the City Treasurer failed to cite the specific statutory basis of the tax. Section 143(b) authorizes the ." Yet we cannot even say with definiteness whether the tax imposed on the Corporation in this case is based on "et cetera. Section 3A. As stated earlier. the Local Government Code being the enabling law for the local legislative body. For example.02(f) is quite exhaustive in enumerating the class of businesses taxed under the provision. or on any other provision of the Revenue Code. the main legal issue takes on a different complexion. as she has been silent all through out as to the exact basis for the tax imposition which she wishes that this Court uphold. Certainly. ends with the abbreviation "etc. a careful examination of the Revenue Code shows that while Section 3A. Moreover. and now merits our analysis. What is essential though is that the local treasurer be required to explain to the taxpayer with sufficient particularity the basis of the tax. so as to leave no doubt in the mind of the taxpayer as to the specific tax involved. since Section 143 allows local government units to impose local taxes on businesses other than those specified under the provision. which provides for a different tax rate from that of the former provision.02(m) seems designed as a catch-all provision." Certainly. We do note our discomfort with the unlimited breadth and the dangerous uncertainty which are the twin hallmarks of the words "et cetera. While Section 3A. the listing. may be construed to be of similar import. In this case.determines tax liability is the tax ordinance. For example.02(m).02(m).". there is only one thing that prevents this Court from ruling that there has been a due process violation on account of the City Treasurer’s failure to disclose on paper the statutory basis of the tax–that the Corporation itself does not allege injury arising from such failure on the part of the City Treasurer.02(f). Moreover." or on Section 3A. even those business activities specifically named in Section 143 are themselves susceptible to broad interpretation. we cannot be disposed to uphold any tax imposition that derives its authority from enigmatic and uncertain words such as "et cetera. the Corporation seems confident enough in litigating despite the failure of the City Treasurer to admit on what exact provision of the Revenue Code the tax liability ensued. The word "business" itself is defined under Section 131(d) of the Code as "trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit.02(f). This is perhaps because the Corporation has anchored its central argument on the position that the Local Government Code itself does not sanction the imposition of business taxes against it.
the administration of the condominium project. and other acts necessary.52 We can elicit from the Condominium Act that a condominium corporation is precluded by statute from engaging in corporate activities other than the holding of the common areas. It is thus imperative that in order that the Corporation may be subjected to business taxes. its activities must fall within the definition of business as provided in the Local Government Code.49 Nonetheless. in which the holders of separate interests shall automatically be members or shareholders. to the management of the project. And to hold that they do is to ignore the very statutory nature of a condominium corporation. "to make reasonable assessments to meet authorized expenditures. the corporate purposes of a condominium corporation are limited to the holding of the common areas. the condominium corporation has been resorted to by many condominium projects. 4726. Under Section 10 of the law. otherwise known as the Condominium Act. The Condominium Act imposes several limitations on the condominium corporation that prove crucial to the disposition of this case. industrial or commercial building and an undivided interest in common. The creation of the condominium corporation is sanctioned by Republic Act No. nor the . and even is merely permissible under the Condominium Act. Under the law. in the land on which it is located and in other common areas of the building.46 To enable the orderly administration over these common areas which are jointly owned by the various unit owners. the same provision prohibits the articles of incorporation or by-laws of the condominium corporation from containing any provisions which are contrary to the provisions of the Condominium Act. incidental or convenient to the accomplishment of such purposes. in the deed of restrictions. which is specially formed for the purpose of holding title to the common area. either in ownership or any other interest in real property recognized by law. In line with the authority of the condominium corporation to manage the condominium project. the enabling or master deed. it may be authorized. Neither the maintenance of livelihood. or dealers in any article of commerce of whatever kind or nature."50 It is the collection of these assessments from unit owners that form the basis of the City Treasurer’s claim that the Corporation is doing business. distributors. to the exclusion of others. the Condominium Act permits the creation of a condominium corporation.51 Further. or the declaration of restrictions of the condominium project. directly or indirectly. in proportion to the appurtenant interest of their respective units. each condominium unit to be assessed separately for its share of such expenses in proportion (unless otherwise provided) to its owner’s fractional interest in any common areas. incidental or convenient to the accomplishment of such purpose.imposition of business taxes on wholesalers.47 The necessity of a condominium corporation has not gained widespread acceptance48. and to such other purposes as may be necessary. a condominium is an interest in real property consisting of a separate interest in a unit in a residential. such as the Corporation in this case.
and (k) to exercise and perform such other powers reasonably necessary. but to shoulder the multitude of necessary expenses that arise from the maintenance of the Condominium Project.procurement of profit. (e) to provide and contract for public utilities and other services to the common areas. since the repairs or improvements on the car may be deemed oriented towards appreciating the value of the car upon . First. By this rationale. in order to defray the costs. repair. sanitation. These would include the salaries of the employees of the Corporation. and as a result. profit is obtained once these units are sold at higher prices. Per the Articles of Incorporation. enjoyment and occupancy of the units and common areas. including the power to contract for security services and for insurance coverage on the entire project. the owner is already required to pay capital gains tax on the appreciated value of the condominium unit. expenses and losses of the condominium. Article V of the Amended By-Laws. lease operate and maintain. and to convey. every Makati City car owner may be considered as being engaged in business. sell transfer.54 The City Treasurer nonetheless contends that the collection of these assessments and dues are "with the end view of getting full appreciative living values" for the condominium units. these amounts collected are not intended for the incurrence of profit by the Corporation or its members. fall within the scope of permissible corporate purposes of a condominium corporation under the Condominium Act. (b) adopting such necessary measures for the protection and safeguard of the unit owners and their property.55 Moreover. enjoy. (h) to enforce the terms contained in the Master Deed with Declaration of Restrictions of the Project. Second. and the cost of maintenance and ordinary repairs of the common areas. (c) making and adopting needful rules and regulations concerning the use. it accrues not to the corporation but to the unit owner. if any profit is obtained by the sale of the units. The Court has examined the particular Articles of Incorporation and By-Laws of the Corporation. own. and these documents unmistakably hew to the limitations contained in the Condominium Act.53 Obviously. The Court cites with approval the two counterpoints raised by the Court of Appeals in rejecting this contention. and cleanliness of the common and limited common areas. (i) to levy and collect those assessments as provided in the Master Deed. mortgage or otherwise dispose of real or personal property in connection with the purposes and activities of the corporation. (j) to acquire. (f) to contract for the services of persons or firms to assist in the management and operation of the Condominium Project. incidental or convenient to accomplish the foregoing purposes. if the unit owner does obtain profit from the sale of the corporation. the logic on this point of the City Treasurer is baffling. Just as much is confirmed by Section 1. (g) to discharge any lien or encumbrances upon the Condominium Project. (d) to provide for the maintenance. the Corporation’s corporate purposes are limited to: (a) owning and holding title to the common and limited common areas in the Condominium Project. which enumerate the particular expenses to be defrayed by the regular assessments collected from the unit owners. none of these stated corporate purposes are geared towards maintaining a livelihood or the obtention of profit. including the power to fix penalties and assessments for violation of such rules. hold. Even though the Corporation is empowered to levy assessments or dues from the unit owners.
sell. commonsensical meaning. . The exercise of the power of taxation constitutes a deprivation of property under the due process clause. The profit motive in such cases is hardly the driving factor behind such improvements. . lease. is prohibited by law from transacting its properties for the purpose of gainful profit.57 The fact that the Corporation did not fall within the enumerated classes of taxable businesses under either the Local Government Code or the Makati Revenue Code already forewarns that a clear demonstration is essential on the part of the City Treasurer on why the Corporation should be taxed anyway. irrespective of any local ordinance that seeks to declare otherwise. hold. while enjoying such powers of ownership. Again. sell. convey. which specifically empowers the Corporation "to acquire. There is an evident distinction between persons who spend on repairs and improvements on their personal and real property for the purpose of increasing its resale value. own. . lease. as the transaction of the lawful business of the corporation may reasonably and necessarily require . The vast majority of persons fall under the second category. as juridical persons. whatever capacity the Corporation may have pursuant to its power to exercise acts of ownership over personal and real property is limited by its stated corporate purposes. corporations."60 Without this power. a phrase that defies statutory explication.resale. would be deprived of the capacity to engage in most meaningful legal relations.56 and the taxpayer’s right to due process is violated when arbitrary or oppressive methods are used in assessing and collecting taxes. Section 36(7) of the Corporation Code states that every corporation incorporated under the Code has the power and capacity "to purchase. and to impose a tax hinged on that standard is both arbitrary and oppressive. transfer mortgage or otherwise dispose of real or personal property. Besides. and to convey. . receive. which are by themselves further limited by the Condominium Act. take or grant. and with a significant degree of comfort."58 What the City Treasurer fails to add is that every corporation organized under the Corporation Code59 is so specifically empowered. enjoy. hold. The City Treasurer also contends that the fact that the Corporation is engaged in business is evinced by the Articles of Incorporation. operate and maintain. we shudder at the thought of upholding tax liability on the basis of the standard of "full appreciative living values". the English language. or even definition from Google. and those who defray such expenses for the purpose of preserving the property. and it would be highly specious to subject these persons to local business taxes. mortgage and otherwise deal with such real and personal property . . A condominium corporation. Any profit that would be derived under such circumstances would merely be incidental. if not accidental. we hold that condominium corporations are generally exempt from local business taxation under the Local Government Code. pledge. Accordingly. "Full appreciative living values" is nothing but blather in search of meaning. if it were contemplated at all. .
such assessments being utilized to defray the necessary expenses for the Condominium Project and the common areas. DECISION CHICO-NAZARIO.61 Such activity would be prohibited under the Condominium Act. Toledo (Toledo). dismissed the Petition for Review of petitioners in said case for being filed out of time. Hence. the petition is DENIED. 2009 THE CITY OF MANILA. Liberty M. in her capacity as THE TREASURER OF MANILA and JOSEPH SANTIAGO. since they are engaged in beyond the legal capacity of the condominium corporation62. petitioners. which. TOLEDO. In its assailed Decision. Still. in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OF MANILA. INC. Respondent.Still. the CTA en banc denied the Motion for Reconsideration of petitioners.: This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Civil Procedure seeking to review and reverse the Decision1 dated 18 January 2008 and Resolution2 dated 18 February 2008 of the Court of Tax Appeals en banc (CTA en banc) in C. and the insistence of the city in its collection of the void tax constitutes an attempt at deprivation of property without due process of law. no orientation towards profit in this case. and affirmed the Resolutions dated 24 May 2007. but if the fact is established. 31.. vs.4 and 26 July 2007. the principle of estoppel would preclude the corporation or its officers and members from invoking the void nature of its undertakings for profit as a means of acquitting itself of tax liability.R. The assessment appears to be based solely on the Corporation’s collection of assessments from unit owners. the City Treasurer has not posited the claim that the Corporation is engaged in business activities beyond the statutory purposes of a condominium corporation. COCA-COLA BOTTLERS PHILIPPINES. WHEREFORE.T.A.T. No costs. in turn. we can note a possible exception to the rule. SO ORDERED. and Joseph Santiago (Santiago). J.A.3 8 June 2007. In its questioned Resolution. the CTA en banc dismissed the Petition for Review of herein petitioners City of Manila. we see no reason why the condominium corporation may be made liable by the local government unit for business taxes. There is no contemplation of business. 181845 August 4. No. LIBERTY M. Even though such activities would be considered as ultra vires. . It is not unthinkable that the unit owners of a condominium would band together to engage in activities for profit under the shelter of the condominium corporation. AC No. 307. EB No.5 of the CTA First Division in C. the assailed tax assessment has no basis under the Local Government Code or the Makati Revenue Code. G.
. The case stemmed from the following facts: Prior to 25 February 2000. is a corporation engaged in the business of manufacturing and selling beverages.. and compounders of liquors.000.. through its officers. as amended. – Tax on Businesses Subject to the Excise... a tax of FIFTY PERCENT (50%) of ONE PERCENT (1%) per annum on the gross sales or receipts of the preceding calendar year is hereby imposed: (A) On persons who sell goods and services in the course of trade or business..-..Petitioner City of Manila is a public corporation empowered to collect and assess business taxes.500. as provided for in Sections 100 to 103 of the NIRC as administered and determined by the Bureau of Internal Revenue pursuant to the pertinent provisions of the said Code.. value-added or percentage taxes under the National Internal Revenue Code hereinafter referred to as NIRC. 7794 provide: Section 14..... respectively. and those who import goods whether for business or otherwise. assemblers.P36. Pertinent provisions of Tax Ordinance No. – Tax on Manufacturers. Inc. and which maintains a sales office in the City of Manila.000. – On any of the following businesses and articles of commerce subject to excise.00 up to P25. and permit fees. revenue fees. distilled spirits. 7794.6 being expressly exempted from the business tax under Section 21 of the same tax ordinance.. Assemblers and Other Processors.000... On the other hand.. in accordance with any of the following schedule: xxxx over P6. respondent had been paying the City of Manila local business tax only under Section 14 of Tax Ordinance No.000. in their capacities as City Treasurer and Chief of the Licensing Division. respondent Coca-Cola Bottlers Philippines. brewers. Value-Added or Percentage Taxes under the NIRC. distillers. xxxx (D) Excisable goods subject to VAT (1) Distilled spirits (2) Wines .000. rectifiers. repackers..00 . and wines or manufacturers of any article of commerce of whatever kind or nature.500. – There is hereby imposed a graduated tax on manufacturers.00 xxxx Section 21.. petitioners Toledo and Santiago. processors.00 plus 50% of 1% in excess of P6.
7988.932. and (2) Tax Ordinance No. granted the Motion for Reconsideration of respondent. 7988 and Tax Ordinance No. Respondent filed a protest with petitioner Toledo on the ground that the said assessment amounted to double taxation. 7794. On 14 July 2006. 03-107088. by deleting the proviso found therein. for deficiency local business taxes. were not of the same kind or character. penalties. there was no double taxation. the RTC rendered a Decision9 dismissing Civil Case No. that all registered businesses in the City of Manila that are already paying the aforementioned tax shall be exempted from payment thereof." Petitioner City of Manila approved only after a year. Consequently. as respondent was taxed twice. Branch 47. respondent filed with the Regional Trial Court (RTC) of Manila. brewers’ wholesale price. under Sections 14 and 21 of Tax Ordinance No. and barred petitioners from further imposing/assessing local business taxes . though. amending Tax Ordinance No. The RTC. Petitioner Toledo did not respond to the protest of respondent. decreed the cancellation and withdrawal of the assessment against the latter. as amended by the aforementioned tax ordinances. and interest. excluding the ad valorem tax xxxx PROVIDED. 7988. which was docketed as Civil Case No. 7988 was enacted in contravention of the provisions of the Local Government Code (LGC) of 1991 and its implementing rules and regulations. in an Order10 dated 16 November 2006. 7988 and No. which stated "that all registered businesses in the City of Manila that are already paying the aforementioned tax shall be exempted from payment thereof. an action for the cancellation of the assessment against respondent for business taxes.xxxx (8) Coal and coke (9) Fermented liquor. and (2) Section 21. by increasing the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila. before the Court could declare Tax Ordinance No. on 22 February 2001. 8011. for the third and fourth quarters of the year 2000. v. Petitioner City of Manila subsequently approved on 25 February 2000. i. The RTC ruled that the business taxes imposed upon the respondent under Sections 14 and 21 of Tax Ordinance No. 7988 and No. 8011. another tax ordinance. 7794. in the total amount of P18. as amended. City of Manila8 (Coca-Cola case) for the following reasons: (1) Tax Ordinance No.. petitioner City of Manila assessed respondent on the basis of Section 21 of Tax Ordinance No. 8011 could not cure the defects of Tax Ordinance No. 8011 null and void. Inc. particularly: (1) Section 14.583. which did not legally exist.04. However. 7988.7 amending certain sections of Tax Ordinance No. 8011 were later declared by the Court null and void in CocaCola Bottlers Philippines. as amended by Tax Ordinances No. Tax Ordinance No. Tax Ordinance No. therefore.e. 7988. Tax Ordinances No. 03-107088. 7794.
A.T. docketed as C. The 16 November 2006 Decision of the RTC was in conformity with the ruling of this Court in the Coca-Cola case. praying for another 10-day extension. in which Tax Ordinance No. praying for a 15-day extension or until 20 May 2007 within which to file their Petition. and Sections 2 and 3.A. of the Revised Rules of the CTA. the CTA First Division issued another Resolution. within which to file their Petition. but their motion was denied by the CTA First Division in a Resolution dated 26 July 2007. 7988 and Tax Ordinance No. 31 for failure of petitioners to timely file their Petition for Review on 20 May 2007. 307. petitioners filed with the CTA a Motion for Extension of Time to File Petition for Review. AC No.it also failed to comply with the provisions of Section 4. petitioners filed. raffled to the CTA First Division. 7794. denying their Motion for Reconsideration of the 16 November 2006 Order of the same court. 8011 were declared null and void.A. 8 June 2007. AC No. The CTA en banc rendered its Decision on 18 January 2008. 31 for being filed out of time. 31. . reiterating the dismissal of the Petition for Review of petitioners.T. as amended by Tax Ordinance No. the CTA First Division already issued a Resolution dismissing C. on 18 May 2007. AC No. WHETHER OR NOT PETITIONERS SUBSTANTIALLY COMPLIED WITH THE REGLEMENTARY PERIOD TO TIMELY APPEAL THE CASE FOR REVIEW BEFORE THE [CTA DIVISION]. Hence. Petitioners moved for the reconsideration of the foregoing Resolutions dated 24 May 2007 and 8 June 2007. EB No. through registered mail.T. dismissing the Petition for Review of petitioners and affirming the Resolutions dated 24 May 2007. Again. Unaware of the 24 May 2007 Resolution of the CTA First Division.against respondent under Section 21 of Tax Ordinance No. Rule 5. or until 30 May 2007. and 26 July 2007 of the CTA First Division. The Motion for Extension of petitioners was docketed as C. The CTA First Division reasoned that the Petition for Review of petitioners was not only filed out of time -. The Motion for Reconsideration of petitioners was denied by the RTC in an Order11 dated 4 April 2007. On 8 June 2007. On 24 May 2007. arguing that the CTA First Division erred in dismissing their Petition for Review in C. where petitioners raise the following issues: I. Rule 6.A. Petitioners received a copy of the 4 April 2007 Order of the RTC. without considering the merits of their Petition. petitioners filed their Petition for Review therewith on 30 May 2007 via registered mail.T. Petitioners thereafter filed a Petition for Review before the CTA en banc. on 20 April 2007. The CTA en banc similarly denied the Motion for Reconsideration of petitioners in a Resolution dated 18 February 2008. 8011. On 4 May 2007. 7988 and Tax Ordinance No. the present Petition. however. a Second Motion for Extension of Time to File a Petition for Review.
such as Rule 42 of the latter. Rule 8 of the Revised Rules of the CTA. 7988 and Tax Ordinance No. and makes them applicable to the tax court. Rule 42 13 of the Rules of Court as regards the period for filing a Petition for Review with the CTA in division. and not the procedural. within which to file their Petition for Review. The same rule allows an additional 15-day period within which to file such a Petition. Petitioners also contend that the Coca-Cola case is not determinative of the issues in the present case because the issue of nullity of Tax Ordinance No. 8011 is not the lis mota herein. IV. On 4 May 2007. petitioners again moved for a 10-day extension. or until 30 May 2007. is silent as to whether the 30day period for filing a Petition for Review with the CTA in division may be extended or not. Petitioners received on 20 April 2007 a copy of the 4 April 2007 Order of the RTC. Moreover. Rule 712 of the Revised Rules of the CTA refers to certain provisions of the Rules of Court. Rule 42 of the Rules of Court provides for a 15-day period. Petitioners then cannot be faulted in relying on the provisions of Section 1. Section 3(a). Prior to the lapse of their first extension period. or until 20 May 2007. WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21 OF THE [TAX ORDINANCE NO. as the primordial consideration should be the substantive. aspect of the case. 8011. WHETHER OR NOT PETITIONER CITY OF MANILA CAN STILL ASSESS TAXES UNDER [SECTIONS] 14 AND 21 OF [TAX ORDINANCE NO. Rule 814 of the Revised Rules of the CTA governs the period for filing a Petition for Review with the CTA in division. within which to file their Petition. The nullity of Tax Ordinance No. petitioners moved for a 15-day extension. when petitioners filed their Petition for Review with the CTA First Division on 30 May 2007. Rule 8 of the Revised Rules of the CTA. 7988 and Tax Ordinance No. Petitioners claim that there was sufficient justification in equity for the grant of the 10-day extension they requested. Petitioners further insist that notwithstanding the declaration of nullity of Tax Ordinance No. within which to file a Petition for Review with the Court of Appeals. 7794 remains a valid piece of local legislation. or on 18 May 2007. WHETHER OR NOT THE RULING OF THIS COURT IN THE EARLIER [COCACOLA CASE] IS DOCTRINAL AND CONTROLLING IN THE INSTANT CASE. Petitioners call attention to the fact that prior to the lapse of the 30-day period for filing a Petition for Review under Section 3(a).II. they had already moved for a 10-day extension. or until 30 May 2007. another extension period not to exceed 15 days. III. Thus. The Coca-Cola case is not doctrinal and cannot be considered as the law of the case. Section 1. the same was filed well within the reglementary period for doing so. Tax Ordinance No. denying their Motion for Reconsideration of the 16 November 2006 Order of the same court. Petitioners assert that Section 1. 7988 and Tax Ordinance No. AS AMENDED]. only for the most compelling reasons. believing that they only had 15 days to file a Petition for Review with the CTA in division. Petitioners argue in the alternative that even assuming that Section 3(a). 7794. and. 8011 does not . 7794. AS AMENDED] CONSTITUTES DOUBLE TAXATION. their Petition for Review was filed within the reglementary period. still. reckoned from receipt of the adverse decision of the trial court. within which to file said Petition.
brewers. in accordance with the following schedule: xxxx (b) On wholesalers. the power to impose business taxes. 7794. on gross sales or receipts of the preceding calendar year of Fifty thousand pesos (P50. to wit: SECTION 143. distributors.000. and wines or manufacturers of any article of commerce of whatever kind or nature. millers. as provided under Section 152 hereof.effectively bar petitioners from imposing local business taxes upon respondent under Sections 14 and 21 of Tax Ordinance No. insurance premium. (e) On contractors and other independent contractors. repackers. distillers. and on manufacturers. in the case of cities.000) or less. rentals on property and profit from exchange or sale of property. . wholesalers. distilled spirits. income from financial leasing. That barangays shall have the exclusive power to levy taxes. in the case of municipalities. commissions and discounts from lending activities. as they were read prior to their being amended by the foregoing null and void tax ordinances. dividends. dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates prescribed under subsections (a). producers. distributors. Section 143 of the LGC gives municipal. Tax on Business. rectifiers. and compounders of liquors. Petitioners finally maintain that imposing upon respondent local business taxes under both Sections 14 and 21 of Tax Ordinance No. or dealers in any article of commerce of whatever kind or nature in accordance with the following schedule: xxxx (c) On exporters. in accordance with the following schedule: xxxx (f) On banks and other financial institutions. as well as city governments. at a rate not exceeding fifty percent (50%) of one percent (1%) on the gross receipts of the preceding calendar year derived from interest. processors. (b) and (d) of this Section: xxxx Provided. and Thirty thousand pesos (P30. however.00) or less. – The municipality may impose taxes on the following businesses: (a) On manufacturers. 7794 does not constitute direct double taxation. assemblers.
7794. distilled spirits. and any other article of commerce. VAT. 9282. as amended. for under the first. 7794 is imposed upon persons selling goods and services in the course of trade or business. value-added or percentage tax under the National Internal Revenue Code. who. – (a) A party adversely affected by a decision. x x x. or by a decision or ruling of the Commissioner of . That on any business subject to the excise. Effect of Appeal. Mode of Appeal. Section 14 of Tax Ordinance No. (h) On any business. etc.00) per peddler annually. from the expiration of the period fixed by law to act thereon. the local business tax under Section 21 of Tax Ordinance No. period to file petition. wines. 7794 imposes local business tax on manufacturers. the Secretary of Finance. 9282 provides: SEC. there can be no double taxation when respondent is being taxed under both Sections 14 and 21 of Tax Ordinance No. ruling or inaction of the Commissioner of Internal Revenue. it is being taxed as a person selling goods in the course of trade or business subject to excise. the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an Appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein. Rule 8 of the Revised Rules of the CTA states: SEC 3. the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year. of liquors.15 and Section 3(a). (Emphasis supplied. – Any party adversely affected by a decision. or percentage tax under the National Internal Revenue Code (NIRC). The period to appeal the decision or ruling of the RTC to the CTA via a Petition for Review is specifically governed by Section 11 of Republic Act No. Section 11 of Republic Act No. which the sanggunian concerned may deem proper to tax: Provided. while under the second. Who may appeal. or percentage tax. Rule 8 of the Revised Rules of the CTA.(g) On peddlers engaged in the sale of any merchandise or article of commerce. and those importing goods for business or otherwise. the Commissioner of Customs. ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes. Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the case of inaction as herein provided.) Section 3(a). are subject to excise tax. The Court first addresses the issue raised by petitioners concerning the period within which to file with the CTA a Petition for Review from an adverse decision or ruling of the RTC. pursuant to Section 143(a) of the LGC. Thus. 11. it is being taxed as a manufacturer. at a rate not exceeding Fifty pesos (P50. On the other hand. not otherwise specified in the preceding paragraphs. Who May Appeal. pursuant to Section 143(h) of the LGC. value-added tax (VAT).
another extended period not to exceed 15 days from the lapse of the first extended period. (2) an extended period of 15 days from the lapse of the original period. thus: Being suppletory to R. (Emphasis supplied. indeed. the CTA First Division did indeed err in finding that petitioners failed to file their Petition for Review in C. the Secretary of Agriculture. as it was still within the 30-day . denying their Motion for Reconsideration of the 16 November 2006 Order. Rule 8 of the Revised Rules of the CTA. x x x. thus. Following by analogy Section 1.Customs. the Secretary of Finance. petitioners could file their Petition for Review until 20 May 2007. to file said Petition – was unnecessary and superfluous. the date petitioners received a copy of the 4 April 2007 Order of the RTC.17 In this case. in which case the extended period shall not exceed 15 days. as implemented by Section 3(a). However. It is also true that the same provisions are silent as to whether such 30-day period can be extended or not. the Motion for Extension filed by petitioners on 4 May 2007 – grounded on their belief that the reglementary period for filing their Petition for Review with the CTA was to expire on 5 May 2007.A. From 20 April 2007. Rule 4216 of the Revised Rules of Civil Procedure provides that the Petition for Review of an adverse judgment or final order of the RTC must be filed with the Court of Appeals within: (1) the original 15-day period from receipt of the judgment or final order to be appealed. within which to file their Petition for Review with the CTA. AC No.T. 31 within the reglementary period. the Secretary of Trade and Industry.) It is crystal clear from the afore-quoted provisions that to appeal an adverse decision or ruling of the RTC to the CTA. A further extension of fifteen (15) days may be granted on compelling reasons in accordance with the provision of Section 1. or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling. Even without said Motion for Extension. or until 20 May 2007. in its Decision dated 18 January 2008. the 1997 Rules of Civil Procedure allow an additional period of fifteen (15) days for the movant to file a Petition for Review. 9282. may be extended for a period of 15 days. except only for the most compelling reasons. and payment of the full amount of the docket fees. petitioners had 30 days. 9282. the 30-day original period for filing a Petition for Review with the CTA under Section 11 of Republic Act No. upon Motion. or until 20 May 2007. and (3) only for the most compelling reasons. or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. compelling them to seek an extension of 15 days. Section 1. Rule 42 of the 1997 Rules of Civil Procedure x x x. Rule 42 of the Revised Rules of Civil Procedure. Section 11 of Republic Act No. 9282 does state that the Petition for Review shall be filed with the CTA following the procedure analogous to Rule 42 of the Revised Rules of Civil Procedure. Hence. No further extension shall be allowed thereafter.A. Even the CTA en banc. the taxpayer must file a Petition for Review with the CTA within 30 days from receipt of said adverse decision or ruling of the RTC. recognizes that the 30-day period within which to file the Petition for Review with the CTA may. be extended.
A clearly legible duplicate original or certified true copy of the decision appealed from shall be attached to the petition. 2. AC No. a concise statement of the complete facts and a summary statement of the issues involved in the case.T. there were other reasons for which the CTA First Division dismissed the Petition for Review of petitioners in C. and Section 2 of Rule 6 of the Revised Rules of the CTA. 31 on 30 May 2007. Petition for review. (Emphasis supplied. – The petition for review shall contain allegations showing the jurisdiction of the Court. and 46 of the Rules of Court.) The aforesaid provisions should be read in conjunction with Section 1. when petitioners filed via registered mail their Petition for Review in C.) Section 2. Rule 8 of the Revised Rules of the CTA. and implemented by Section 3(a). to file their Petition for Review was. which provides: SECTION 1. (Emphasis supplied. 31.e.) As found by the CTA First Division and affirmed by the CTA en banc. or until 30 May 2007. – The parties shall file eleven signed copies of every paper for cases before the Court en banc and six signed copies for cases before a Division of the Court in addition to the signed original copy. exception.A. The CTA First Division should have granted the same. Applicability of the Rules of Court on procedure in the Court of Appeals. Rule 46 of the Rules of Court. as well as the reasons relied upon for the review of the challenged decision. Rule 7 of the Revised Rules of the CTA.A. as it was sanctioned by the rules of procedure. petitioners were only praying for a 10-day extension. The petition shall be verified and must contain a certification against forum shopping as provided in Section 3. In fact. five days less than the 15-day extended period allowed by the rules. Papers to be filed in more than one case shall include one additional copy for each additional case. 44. prior to the lapse of the 30day reglementary period on 20 May 2007. contents. Number of copies. except as otherwise directed by the Court. Nevertheless. Rule 5 of the Revised Rules of the CTA requires that: SEC. only the first Motion for Extension of petitioners. i.T. they were able to comply with the reglementary period for filing such a petition. 9282. petitioners failed to conform to Section 4 of Rule 5. Section 4. in which they prayed for another extended period of 10 days. The Court sustains the CTA First Division in this regard. 43. Rule 6 of the Revised Rules of the CTA further necessitates that: SEC. the Petition for Review filed by petitioners via registered mail on 30 May 2007 consisted only of one copy and all the .. AC No. (Emphasis supplied. The Motion for Extension filed by the petitioners on 18 May 2007. Thus. – The procedure in the Court en banc or in Divisions in original or in appealed cases shall be the same as those in petitions for review and appeals before the Court of Appeals pursuant to the applicable provisions of Rules 42.reglementary period provided for under Section 11 of Republic Act No. 4. except as otherwise provided for in these Rules. in reality.
Contrary to the assertions of petitioners. Rule 42 of the Rules of Court reads: SEC. 7988 and Tax Ordinance No. it cannot do so in this case for lack of any justification. (Emphasis supplied. 3. and Section 2 of Rule 6 of the Revised Rules of the CTA. 7988 and Tax Ordinance No. Section 3. Evidently. as allowed by Section 1. 8011 are null and void and without any legal effect.) True. Hence. relaxed the application of rules of procedure. petitioners did not comply at all with the requirements set forth under Section 4. but a closer examination of the stamp on said documents reveals that they were prepared and certified only on 14 August 2007. 8011 were null and void. about two months and a half after the filing of the Petition for Review by petitioners. Petitioners never offered an explanation for their non-compliance with Section 4 of Rule 5. Section 3.attachments thereto. Therefore. which this Court resolved in the affirmative. and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof. which. Petitioner City of Manila never appealed said declaration of the DOJ Secretary.A. 7988 and Tax Ordinance No. Effect of failure to comply with requirements. Rule 6 of the Revised Rules of the CTA. proof of service of the petition. the deposit for costs. it attained finality after the lapse of the period for appeal of the same. including the Decision dated 14 July 2006. Petitioners insist that even with the declaration of nullity of Tax Ordinance No. 31 should have been given due course by the CTA First Division. 03-107088 were mere machine copies. it is still dismissible for lack of merit. and that the assailed Orders dated 16 November 2006 and 4 April 2007 of the RTC in Civil Case No. petitioners subsequently submitted certified copies of the Decision dated 14 July 2006 and assailed Orders dated 16 November 2006 and 4 April 2007 of the RTC in Civil Case No. thus. 8011. Although the Revised Rules of the CTA do not provide for the consequence of such non-compliance. 7988 was declared by the Secretary of the Department of Justice (DOJ) as null and void and without legal effect due to the failure of herein petitioner City of Manila to satisfy the requirement under the law that said ordinance be published for three consecutive days. Tax Ordinance No. did not cure the defects of the latter. – The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees. respondent could still be made liable for local business taxes under both . Rule 42 of the Rules of Court may be applied suppletorily. Tax Ordinance No. 7988 and Tax Ordinance No. in any way. or with Section 2. the Coca-Cola case is indeed applicable to the instant case. 03107088. AC No. Rule 5. although the Court had. 8011. The passage of Tax Ordinance No. did not legally exist.T. 8011. Rule 7 of the Revised Rules of the CTA. respondent cannot be taxed and assessed under the amendatory laws--Tax Ordinance No. amending Tax Ordinance No. Even assuming arguendo that the Petition for Review of petitioners in C. The pivotal issue raised therein was whether Tax Ordinance No. 7988. By virtue of the Coca-Cola case. in previous instances.
Section 21 of Tax Ordinance No. Yet. The said proviso. 7988 and No. Hence. however. 8011 were null and void and without legal effect. . 7794. Otherwise described as "direct duplicate taxation. given its exemption therefrom since it was already paying the local business tax under Section 14 of the same ordinance. 7988 and Tax Ordinance No. 7988 and Tax Ordinance No." the two taxes must be imposed on the same subject matter. 7794 for the third and fourth quarters of 2000. 7794. Emphasis must be given to the fact that prior to the passage of Tax Ordinance No. within the same jurisdiction. was deleted from Section 21 of Tax Ordinance No. 7794.18 Using the aforementioned test. 8011. without the amendment by the null and void tax ordinances. 8011 by petitioner City of Manila. as it has been previously worded. "taxing the same person twice by the same jurisdiction for the same thing. petitioners had to wait for the deletion of the exempting proviso in Section 21 of Tax Ordinance No. Double taxation means taxing the same property twice when it should be taxed only once.Sections 14 and 21 of Tax Ordinance No. the Court finds that there is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794 by Tax Ordinances No. 7794. petitioners subjected and assessed respondent only for the local business tax under Section 14 of Tax Ordinance No. Following this deletion. 8011. Stated differently. with its exempting proviso. 7794 by Tax Ordinance No. is back in effect. during the same taxing period. respondent was exempt from the local business tax under Section 21 of Tax Ordinance No. 7794. for the same purpose. This was due to the clear and unambiguous proviso in Section 21 of Tax Ordinance No. 7944 as they were originally read. respondent should not have been subjected to the local business tax under Section 21 of Tax Ordinance No. as amended. petitioners began assessing respondent for the local business tax under Section 21 of Tax Ordinance No. to their own detriment. which stated that "all registered business in the City of Manila that are already paying the aforementioned tax shall be exempted from payment thereof. when it should be but once. 7794. 7988 and Tax Ordinance No. Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. and the taxes must be of the same kind or character." It is obnoxious when the taxpayer is taxed twice. with the pronouncement by this Court in the Coca-Cola case that Tax Ordinance No. (2) for the same purpose – to make persons conducting business within the City of Manila contribute to city revenues. (3) by the same taxing authority – petitioner City of Manila. 8011 before they assessed respondent for the local business tax under said section. but never under Section 21 of the same. 7794 exempts from the payment of the local business tax imposed by said section." The "aforementioned tax" referred to in said proviso refers to local business tax. Accordingly. 7794. then Section 21 of Tax Ordinance No. that is. since these are being imposed: (1) on the same subject matter – the privilege of doing business in the City of Manila.1avvphi1 The Court easily infers from the foregoing circumstances that petitioners themselves believed that prior to Tax Ordinance No. by the same taxing authority. Said exempting proviso was precisely included in said section so as to avoid double taxation. 7988 and Tax Ordinance No. businesses that are already paying such tax under other sections of the same tax ordinance.
. said municipality or city may no longer subject the same manufacturers. G.R. 191761 November 14. The Court revisits Section 143 of the LGC. No." In the same way. and to which any local business tax imposed by petitioner City of Manila must conform. The trial court upheld the validity of the City of Cagayan de Oro’s Ordinance No. 01105-Min. businesses such as respondent’s. No. 7794 is specious. 2005-207. . to a business tax under Section 143(h) of the same Code. etc. distilled spirits.’s (CEPALCO) claim of exemption from the said ordinance. No costs. The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance No. etc..(4) within the same taxing jurisdiction – within the territorial jurisdiction of the City of Manila. SO ORDERED.. J. The appellate court affirmed the 8 January 2007 Decision4 of Branch 18 of the Regional Trial Court of Misamis Oriental (trial court) in Civil Case No.R. can no longer be made liable for local business tax under Section 21 of the same Tax Ordinance [which is based on Section 143(h) of the LGC]. 7794 [which is based on Section 143(a) of the LGC]. the very source of the power of municipalities and cities to impose a local business tax. INC. of liquors. 9503-2005 and denied Cagayan Electric Power and Light Co. CV No. wines.R. and any other article of commerce. and (6) of the same kind or character – a local business tax imposed on gross sales or receipts of the business. Section 143(h) may be imposed only on businesses that are subject to excise tax. Petitioner. CITY OF CAGAYAN DE ORO. and that are "not otherwise specified in preceding paragraphs. 2012 LIGHT CO. WHEREFORE. Respondent. the instant Petition for Review on Certiorari is hereby DENIED. or percentage tax under the NIRC. VAT. CAGAYAN ELECTRIC POWER AND vs. premises considered. It is apparent from a perusal thereof that when a municipality or city has already imposed a business tax on manufacturers. (5) for the same taxing periods – per calendar year. already subject to a local business tax under Section 14 of Tax Ordinance No. 191761 is a petition for review1 assailing the Decision2 promulgated on 28 May 2009 as well as the Resolution3 promulgated on 24 March 2010 by the Court of Appeals (appellate court) in CA-G.: The Case G. pursuant to Section 143(a) of the LGC. Inc. DECISION CARPIO.
POLES OR TOWERS BY POLE OWNERS TO OTHER POLE USERS AT THE RATE OF TEN (10) PERCENT OF THE ANNUAL RENTAL INCOME DERIVED THEREFROM AND FOR OTHER PURPOSES BE IT ORDAINED by the City Council (Sangguniang Panlungsod) of the City of Cagayan de Oro in session assembled that: SECTION 1. through its President and Chief Operation Manager. (e) failure of respondent-appellee to exhaust administrative remedies under the Local Government Code. the following terms shall be construed as: . 9503-2005 reads: ORDINANCE IMPOSING A TAX ON THE LEASE OR RENTAL OF ELECTRIC AND/OR TELECOMMUNICATION POSTS. 9503-2005 before the Regional Trial Court of Cagayan de Oro City. Tion.Whenever used in this Ordinance. purportedly on pure question of law. of the passage of the subject ordinance. informed appellant Cagayan Electric Power and Light Company. on the ground that the tax imposed by the disputed ordinance is in reality a tax on income which appellee City of Cagayan de Oro may not impose. other applicable provisions of law. 2005. 7160 (R. poles or towers by pole owners to other pole users at ten percent (10%) of the annual rental income derived from such lease or rental. Ms. Consuelo G. the Sangguniang Panlungsod of Cagayan de Oro (City Council) passed Ordinance No. 9284 (R. the Local Government Code. CEPALCO argues that. The City Council.5 Ordinance No. On September 30. appellee raised the following affirmative defenses: (a) the enactment and implementation of the subject ordinance was a valid and lawful exercise of its powers pursuant to the 1987 Constitution. filed a petition for declaratory relief assailing the validity of Ordinance No. 9503-2005 imposing a tax on the lease or rental of electric and/or telecommunication posts.The Facts The appellate court narrated the facts as follows: On January 10. Branch 18.00 alleging that the passage of the ordinance manifests malice and bad faith of the respondent-appellee towards it. 7160) otherwise known as the Local Government Code (LGC) of 1991. the same being expressly prohibited by Section 133(a) of Republic Act No. (d) prescription of respondent-appellee’s action pursuant to Section 187 of the LGC. and pertinent jurisprudence. (c) the subject ordinance is legally presumed valid and constitutional. in a letter dated 15 March 2005.A. (CEPALCO).000. (f) CEPALCO’s action for declaratory relief cannot prosper since no breach or violation of the subject ordinance was yet committed by the City. Inc. 9284) providing for its franchise. In its Answer. it is nevertheless exempt from the imposition by virtue of Republic Act No. assuming the City Council can enact the assailed ordinance. appellant CEPALCO. CEPALCO further claims exemplary damages of PhP200. 2005. (b) non-exemption of CEPALCO because of the express withdrawal of the exemption provided by Section 193 of the LGC. .A.
and (3) whether CEPALCO’s action is barred for non-exhaustion of administrative remedies and for prescription. otherwise known as the Cagayan de Oro City Revenue Code of 2003. The Trial Court’s Ruling On 8 January 2007. c. b. . Section 62(a) of Ordinance No. and operate telecommunications. poles and/or towers shall secure a separate business permit therefor as provided under Article (P). UNANIMOUSLY APPROVED.6 Ordinance No.There shall be imposed a tax on the lease or rental of electric and/or telecommunication posts. Electric companies include all public utility companies whether corporation or cooperative engaged in the distribution and sale of electricity. SECTION 4. 8847-2003. . SECTION 2.The tax imposed herein shall not be passed on by pole owners to the bills of pole users in the form of added rental rates.a. SECTION 5. . (b) Pertinent provisions of Ordinance No. SECTION 3. maintain. voice and data services. Telecommunication companies refer to establishments or entities that are holders of franchise through an Act of Congress to engage. d. poles or towers by pole owners to other pole users at the rate of ten (10) percent of the annual rental income derived therefrom. wires.This Ordinance shall take effect after 15 days following its publication in a local newspaper of general circulation for at least three (3) consecutive issues. 8847-2003. Pole User includes any person. (a) Pole owners herein defined engaged in the business of renting their posts. natural or juridical. payment of taxes and administrative provisions shall apply in the imposition of the tax under this Ordinance. The trial court identified three issues for its resolution: (1) whether Ordinance No. under existing Philippine laws. service drops and other attachments. . covering situs of the tax. (2) whether CEPALCO should be exempted from tax. towers and other accessories thereof. 9503-2005 is valid. 9503-2005 was unanimously approved by the City Council of Cagayan de Oro on 10 January 2005. Pole Owner includes electric and telecommunication company or corporation that owns poles. including government agencies and entities that use and rent poles and towers for the installation of any cable. the trial court rendered its Decision7 in favor of the City of Cagayan de Oro. rules and regulations.
8 The trial court reasoned that since CEPALCO’s business of leasing its posts to pole users is what is directly taxed. The lower court gravely erred in finding that Ordinance No. SO ORDERED. the instant petition is DENIED. The dispositive portion of the trial court’s decision reads: WHEREFORE. Moreover. 9503-2005 of the City of Cagayan de Oro is valid. The trial court also rejected CEPALCO’s claim of exemption from tax. D. 9503-2005. in relation to Section 151.12 CEPALCO filed a brief with the appellate court and raised the following errors of the trial court: A.13 The Appellate Court’s Ruling . The lower court manifestly erred in concluding that the instant action is barred for non-exhaustion of administrative remedies and by prescription. 9503-2005 of the City of Cagayan de Oro does not partake of the nature of an income tax. the trial court rejected CEPALCO’s claim that the ordinance is an imposition of income tax prohibited by Section 133(a) of the Local Government Code. The lower court gravely erred in finding that Ordinance No. of the Local Government Code authorizes a city to impose taxes.A. The trial court noted that Republic Act (R. and that [it] is exempted from the imposition of tax. C. However.9 357010 and 6020. Section 143(h). it is crystal clear that Petitioner CEPALCO failed not only in proving its allegations that City Ordinance 9503-2005 is illegal and contrary to law. 3247. but also in convincing the Court that its action is not barred for nonexhaustion of administrative remedy [sic] and by prescription.In ruling for the validity of Ordinance No. Finally.11 which previously granted CEPALCO’s franchise. expressly stated that CEPALCO would pay a three percent franchise tax in lieu of all assessments of whatever authority. The lower court seriously erred in finding that herein appellant is not exempted from payment of said tax. No. fees and charges on any business which is not specified as prohibited under Section 143(a) to (g) and which the city council may deem proper to tax. the tax is not upon the income but upon the privilege to engage in business. B. 9284. Hence.) Nos. there is no similar provision in R. which gave CEPALCO its current franchise.A. the trial court found that CEPALCO’s action is barred by prescription as it failed to raise an appeal to the Secretary of Justice within the thirty-day period provided in Section 187 of the Local Government Code.
the Local Government Code applies.On 28 May 2009. in relation to Sections 137 and 143(h). further. In a case involving pure questions of law. In spite of its patent illegality.A. a City Ordinance passed in violation or in excess of the city’s delegated power to tax was upheld. Recent legislation affirming CEPALCO’s tax exemptions was disregarded. As such. Finally. 9284. In a Resolution15 dated 24 March 2010.17 this Court required both parties to discuss whether the amount of tax imposed by Section 2 of Ordinance No. the limitation set by Section 151. SEC. 2. Mandatory Public Hearings. The appellate court agreed with the trial court’s ruling that the assailed ordinance is valid and declared that the subject tax is a license tax for the regulation of business in which CEPALCO is engaged. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures. That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided. The appellate court stated that CEPALCO failed to file a timely appeal to the Secretary of Justice. 9503-2005 is a local revenue measure. 9503-2005 complies with or violates. No. – The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided. The resolution also denied CEPALCO’s 3 August 2009 supplemental motion for reconsideration for being filed out of time. the appellate court rendered its Decision14 and affirmed the trial court’s decision. That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided. and did not exhaust its administrative remedies. the Court of Appeals still insisted on a useless administrative remedy before resort to the court may be made. the appellate court denied CEPALCO’s motion for reconsideration for lack of merit. The Court’s Ruling Failure to Exhaust Administrative Remedies Ordinance No. The Issues CEPALCO enumerated the following reasons for warranting review: 1. the appellate court found that CEPALCO’s claim of tax exemption rests on a strained interpretation of R. .16 In a Resolution dated 6 July 2011. as the case may be. and 3. CEPALCO filed the present petition for review before this Court on 27 May 2010. of the Local Government Code. 187.
fee. clearly beyond the 30-day period provided in Section 187. 187 of R. Section 5 of said ordinance provided that the "Ordinance shall take effect after 15 days following its publication in a local newspaper of general circulation for at least three (3) consecutive issues. 9503-2005 on 1 to 3 February 2005. 9503-2005 thus took effect on 19 February 2005. finally. however. . and prosperity of the people. SEC." Gold Star Daily published Ordinance No. In case the Secretary decides the appeal. In the instant case. CEPALCO’s failure to appeal to the Secretary of Justice within the statutory period of 30 days from the effectivity of the ordinance should have been fatal to its cause. CEPALCO filed its petition for declaratory relief before the Regional Trial Court on 30 September 2005. 9503-2005 on 10 January 2005. As in Reyes. and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation: Provided. progress. CEPALCO ignored our ruling in Reyes v. 188. However. after the lapse of 60 days. the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice. For this reason the courts construe these provisions of statutes as mandatory. Publication of Tax Ordinances and Revenue Measures. CEPALCO did not file anything before the Secretary of Justice. we relax the application of the rules in view of the more substantive matters. Consequently. the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. or charge levied therein: Provided. cities and municipalities where there are no newspapers of local circulation. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. 7160 is fatal to their cause. Ordinance No. That in provinces. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal. That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax.A. the same may be posted in at least two (2) conspicuous and publicly accessible places. But if the Secretary does not act thereon. a period also of 30 days is allowed for an aggrieved party to go to court. any delay in implementing tax measures would be to the detriment of the public. – Within ten (10) days after their approval. Court of Appeals 18 on the mandatory nature of the statutory periods: Clearly. within 30 days from effectivity thereof. A municipal tax ordinance empowers a local government unit to impose taxes. The Sangguniang Panlungsod of Cagayan de Oro approved Ordinance No. a party could already proceed to seek relief in court. city. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace. certified true copies of all provincial. It is for this reason that protests over tax ordinances are required to be done within certain time frames.however. it is our view that the failure of petitioners to appeal to the Secretary of Justice within 30 days as required by Sec.
That the ordinance levying such taxes. further. fees. and charges subject to such guidelines and limitations as the Congress may provide. fees. however. or charges shall not be enacted without any prior public hearing conducted for the purpose. and charges on any business which is not specified in Section 143(a) to (g)22 and which the sanggunian concerned may deem proper to tax. Unfortunately for CEPALCO." In relation to Section 131(d). we agree with the ruling of the trial and appellate courts that Ordinance No. 9503-2005 is an imposition of an income tax which is prohibited by Section 133(a)19 of the Local Government Code. fees. 186. ‒ Local government units may exercise the power to levy taxes. Such taxes. Scope of Taxing Powers. excessive. as amended. or charges shall not be unjust. the city may levy the taxes. 151.A. fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code." The Local Government Code supplements the Constitution with Sections 151 and 186: SEC. CEPALCO’s claim of tax exemption of the income from its poles relies on a strained interpretation. Fees or Charges. Although CEPALCO does not question the authority of the Sangguniang Panlungsod of Cagayan de Oro to impose a tax or to enact a revenue measure. Business is defined by Section 131(d) of the Local Government Code as "trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit. fees and charges which the province or municipality may impose: Provided. No. Power to Levy Other Taxes.23 Section 1 of R. CEPALCO’s franchise: . 9284 added Section 9 to R. That the taxes. consistent with the basic policy of local autonomy. oppressive.A. fees. ‒ Except as otherwise provided in this Code. confiscatory or contrary to declared national policy: Provided. 3247. poles or towers to other pole users falls under the Local Government Code’s definition of business. CEPALCO insists that Ordinance No. That the taxes. CEPALCO’s act of leasing for a consideration the use of its posts. Article X of the 1987 Constitution provides that "each local government unit shall have the power to create its own sources of revenues and to levy taxes. and charges shall accrue exclusively to the local government. No. In contrast to the express statutory provisions on the City of Cagayan de Oro’s power to tax. 9503-2005 is a tax on business. or other applicable laws: Provided. fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes.20 Section 143(h)21 of the Local Government Code provides that the city may impose taxes. SEC. fees.City of Cagayan de Oro’s Power vis-a-vis CEPALCO’s Claim of Exemption to Create Sources of Revenue Section 5.
Franchise Tax. exemption from a common burden. (f) All general and special laws. The grantee shall file the return with the city or province where its facility is located and pay the taxes due thereon to the Commissioner of Internal Revenue or his duly authorized representative in accordance with the NIRC and the return shall be subject to audit by the Bureau of Internal Revenue. benefits and exemptions accorded to existing and future private electric utilities by their respective franchises shall likewise be extended to the grantee. acts. whether natural or juridical. 137. executive orders. The Local Government Code withdrew tax exemption privileges previously given to natural or juridical persons. Tax Provisions. as amended. Any doubt whether a tax exemption exists is resolved against the taxpayer. privileges.A. tax exemptions or incentives granted to. or presently enjoyed by all persons. It is hornbook doctrine that tax exemptions are strictly construed against the claimant. except local water districts. duties. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer. decrees. City of Davao25 is applicable to the present case. SEC. further. No. or realized. . in clear and plain terms.24 thus: SEC. shall be subject to the payment of all taxes. tax exemptions must be based on clear legal provisions. non-stock and non-profit hospitals and educational institutions. – Notwithstanding any exemption granted by any law or other special law. The separate opinion in PLDT v. proclamations and administrative regulations. much less by an implied reenactment of a repealed tax exemption clause. incentives. including government-owned or controlled corporations. That nothing herein shall be construed as repealing any specific tax exemptions. Withdrawal of Tax Exemption Privileges. its successors or assigns. are hereby withdrawn upon the effectivity of this Code. city charters. or privileges granted under any relevant law: Provided. 193. cooperatives duly registered under R. That all rights. Tax exemptions cannot arise by mere implication. 6938. at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt. and granted local government units the power to impose franchise tax. 534. fees or charges and other impositions applicable to private electric utilities under the National Internal Revenue Code (NIRC) of 1997. For this reason. the Local Government Code and other applicable laws: Provided. ‒ The grantee. – Unless otherwise provided in this Code. the province may impose a tax on businesses enjoying a franchise. – x x x. xxxx SEC. thus: Tax exemptions must be clear and unequivocal. Repealing Clause. within its territorial jurisdiction. 9.SEC. or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly.
within its territorial jurisdiction. the rate of tax which the municipality may impose "shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year. Furthermore. With respect to Section 137.25 or only twenty-five centavos. which is Php10. Therefore. 9503-2005 complies with or violates.26 we asked both parties to discuss whether the amount of tax imposed by Section 2 of Ordinance No. Ordinance No. CEPALCO argued thus: 5. To illustrate: assuming that the gross annual receipt is Php100. There is a whale of a difference between the allowable 50% of 1% and the 10% tax imposed by the respondent." 8. the maximum tax that a province may impose under Section 137 (50% of 1%) shall be Php0. CEPALCO argues that Ordinance No.CEPALCO’s claim of exemption under the "in lieu of all taxes" clause must fail in light of Section 193 of the Local Government Code as well as Section 9 of its own franchise. 7." Again. which is Php0. the taxes imposable under either Section 137 or Section 143(h) are not unbridled but are restricted as to the amount which may be imposed. the Local Government Code 9503-2005’s Compliance with In our Resolution dated 6 July 2011. it is obvious that . 9. Let us now examine Ordinance No. of the Local Government Code. poles or towers by pole owners to other pole users "at the rate of ten (10) percent of the annual rental income derived therefrom. if it is a city which imposes the same. considering that the tax allowed provinces "shall not exceed fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt. This is the first limitation. But the questioned Ordinance imposes a tax amounting to 10% of the gross annual receipt of Php100. it can impose only up to one-half of what the province or municipality may impose. This a whooping [sic] 40 times more than that allowed for the province! The violation made by respondent city of its delegated taxing authority is all too patent. the maximum tax that the City may impose shall only be one-half of this. 9503-2005 "at the rate of ten (10) percent of the annual rental income derived therefrom" is too much." On the other hand. 6. This is the second limitation. With respect to Section 143(h). or realized. 9503-2005 should be invalidated because the City of Cagayan de Oro exceeded its authority in enacting it. the limitation set by Section 151. or Ten Pesos. in relation to Sections 137 and 143(h). as the case may be. Ordinance No. 9503-2005 is "at the rate of ten (10) percent of the annual rental income derived therefrom. 9503-2005 of the respondent City of Cagayan de Oro in the light of the twin limitations mentioned above. 9503-2005 of the respondent City of Cagayan de Oro imposes a tax on the lease or rental of electric and/or telecommunication posts." the tax imposed by Ordinance No. Thus.5 or only fifty centavos. the tax imposed by Ordinance No.
The City of Cagayan de Oro goes on to state: 6. 9503-2005 is Php10. Thus. otherwise it will run counter to the intent and purpose of Section 186 of the LGC. On the same vein. Using the same tax base of Php100 to illustrate. It is [City of Cagayan de Oro’s humble opinion that the allowable rate of increase provided under Section 151 of the LGC applies only to those businesses identified and enumerated under Section 143 thereof. Section 143 of the LGC prescribes the rate of taxes on the identified categories of business enumerated therein which were determined to be existing at the time of its enactment. But the tax under Ordinance No. 9503-2005 is based on a reasonable classification. the maximum tax that a municipality may impose is 2% of Php100. imposes a franchise tax on the gross receipts realized from the preceding year by a business enjoying a franchise. 7. 8847-2003. On the other hand. or Ten Pesos. the violation made by the respondent city of its delegated taxing authority is all too patent. Be it strongly emphasized here that CEPALCO is differently situated vis-á-vis the rest of the businesses identified under Section 143 of the LGC. Thus. The imposition of a tax "xxx on the lease or rental of electric and/or telecommunications posts. Therefore.the respondent City’s questioned tax ordinance is way too much. such as the herein assailed Ordinance No. The increase of 25% over that which is prescribed under Section 137 of the LGC is in accordance with Section 151 thereof prescribing the allowable increase on the rate of tax on the businesses duly identified and enumerated under Section 143 of the LGC or those defined and categorized in the preceding sections thereof. at the rate of 75% of 1%.27 (Boldfacing and underscoring in the original) The interpretation of the City of Cagayan de Oro is diametrically opposed to that of CEPALCO. 9503-2005. fees and charges which the provinces or municipalities may impose. The City of Cagayan de Oro points out that under Section 151 of the Local Government Code. it is respectfully submitted by City of Cagayan de Oro that the 2% limitation prescribed under Section 143(h) applies only to the tax rates on the businesses identified thereunder and does not apply to those that may thereafter be deemed taxable under Section 186 of the LGC. 8. poles or towers by pole owners to other pole users at the rate of ten (10%) of the annual rental income derived therefrom" as provided under Section 2 of the questioned Ordinance No. to wit: (a) It is based on substantial distinctions . the maximum tax that the City may impose shall be one-half of this. Section 151 of the LGC prescribes the allowable rate of increase over the rate of taxes imposed on businesses identified under Section 143 and the preceding sections thereof. which is Php2 or Two Pesos. let us compute: Under Section 143(h). it is the respectful submission of City of Cagayan de Oro that the limitation under Section 151 of the LGC likewise does not apply in our particular instance. Section 30 of City of Cagayan de Oro’s Ordinance No. but the maximum rate of taxes imposable by cities may exceed the maximum rate of taxes imposable by provinces or municipalities by as much as 50%. This is a whooping [sic] 10 times more than that allowed for the municipality! As in the earlier instance discussed above. which is Php1 or One Peso. otherwise known as the Revenue Code of Cagayan de Oro. cities not only have the power to levy taxes.
leasing them out to. 10. in its intended general application in City of Cagayan de Oro (one who rents out real estate properties). as long as they are not unjust. While the herein assailed Ordinance similarly identifies that the base of the tax imposed therein are receipts and/or revenue derived from rentals of poles and posts. a public hearing is required before the Ordinance levying such taxes. Furthermore. categorized and included as one of the existing businesses operating in the city. 9. subject to certain exceptions. and thus falling under the provisions of Ordinance No. because the same refers only to "Real Estate Lessors. categorized as a (Distinct) Lessor where it enjoys not only a tremendous and substantial edge but also an absolute advantage in the rental of poles. 12. telecommunication and cable TV companies operating within the city and suburbs. as it has been. CEPALCO has neither competition in this field nor does it expect one since there are no other persons or entities who are engaged in this particular business activity. therefore. It is respectfully submitted by City of Cagayan de Oro that the tax rate imposed under Section 2 of the herein assailed Ordinance is not unjust. posts and/or towers to other telecommunication and cable TV companies and the like over and above all others in view of its apparent monopoly by allowing the use of their poles. excessive. in any manner. a city may exceed by "not more than 50%" the tax rates allowed to provinces . is not included among those defined as Contractor under Section 131(h) of the LGC. Moreover. excessive. (b) these are germane to the purpose of the law. A reading of Section 143 of the LGC reveals that it has neither identified the operation of a business engaged in leasing nor prescribed its tax rate. x x x x28 CEPALCO is mistaken when it states that a city can impose a tax up to only one-half of what the province or city may impose. Furthermore. oppressive. more particularly Section 143 thereof. (c) the classification applies not only to the present conditions but also to future conditions which are substantially identical to those of the present. and (d) the classification applies only to those belonging to the same class. CEPALCO should be. Moreover. a Lessor. essence and intent of Section 58(h) of the Revenue Code of Cagayan de Oro. A more circumspect reading of the Local Government Code could have prevented this error. 11. However. confiscatory or contrary to a declared national policy. Section 151 of the Local Government Code states that. oppressive. fees or charges can be enacted. CEPALCO cannot be considered under the definition of Lessor under the spirit. or under the provisions of the National Internal Revenue Code. Section 186 of the LGC allow [sic] local government units to exercise their taxing power to levy taxes.which make a real difference. confiscatory or contrary to declared national policy. a Lessor." Thus. was identified. posts and/or towers by. 8847-2003 (the Revenue Code of Cagayan de Oro) and. fees or charges on any base or subject not otherwise specifically enumerated in the preceding sections. imposed only a tax rate of 2% on their gross annual receipts. Real Estate Dealers and Real Estate Developers.
9503-2005 is subject to the limitation set by Section 143(h). 9503-2005. 9503-2005 should. in view of the lack of a separability clause. or realized. Any payment made by reason of the tax imposed by Ordinance No. Ordinance No.0075 (or 0. however.03 (or 3%) of a business’ gross sales or receipts of the preceding calendar year. Finally. although the tax rate of 10% is definitely higher than that imposable by cities as franchise or business tax. we declare void the entirety of Ordinance No. On the contrary. The City of Cagayan de Oro required CEPALCO to apply for a separate business permit. The brewery business is subject to the rates established in Section 143(a) while the distribution business is subject to the rates established in Section 143(b). The City of Cagayan de Oro’s imposition of a tax on the lease of poles falls under Section 143(h). Ordinance No. poles or towers by pole owners to other pole users at the rate of ten (10) percent of the annual rental income derived therefrom. Thus. a city may impose a business tax of up to 0.29 A province may impose a franchise tax at a rate "not exceeding 50% of 1% of the gross annual receipts.75%) of a business’ gross annual receipts for the preceding calendar year based on the incoming receipt. .1âwphi1 More importantly. at the same time. because "any person. poles or towers by pole owners to other pole users" is definitely smaller than that used by cities in the computation of franchise or business tax. Let us suppose that one is a brewer of liquor and. 9503-2005 wants a slice of a smaller pie. 9503-2005 clearly violates Section 143(h) of the Local Government Code. A municipality may impose a business tax at a rate not exceeding "two percent of gross sales or receipts. 9503-2005 imposes "a tax on the lease or rental of electric and/or telecommunication posts. 9503-2005’s "annual rental income. a distributor of articles of commerce. the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year" from the lease of goods or properties. 9503-2005." Section 2 of Ordinance No. However. Section 143 recognizes separate lines of business and imposes different tax rates for different lines of business. Section 143(h) states that "on any business subject to x x x value-added x x x tax under the National Internal Revenue Code. the tax base of annual rental income of "electric and/or telecommunication posts. In effect. Hence."31 Following Section 151."32 the imposable tax rate should not exceed two percent of gross receipts of the lease of poles of the preceding calendar year. who in the course of trade or business x x x leases goods or properties x x x shall be subject to the value-added tax. within its territorial jurisdiction.and municipalities. is made without prejudice to the enactment by the City of Cagayan de Oro of a tax ordinance that complies with the limits set by the Local Government Code. a city may impose a franchise tax of up to 0. 9503 2005 is not subject to the limits imposed by Sections 143 and 151 of the Local Government Code. Our ruling. The treatment of the lease of poles as a separate line of business is evident in Section 4(a) of Ordinance No." and not on CEPALCO’s gross annual receipts. the 10% tax rate imposed by Ordinance No. as amended. CEPALCO also erred when it equates Section 137’s "gross annual receipts" with Ordinance No."30 Following Section 151. we disagree with the City of Cagayan de Oro’s submission that Ordinance No. therefore. as the lease of poles is CEPALCO’s separate line of business which is not covered by paragraphs (a) to (g) of Section 143. be refunded to CEPALCO.
R. Metudio P. L-30745 January 18. plaintiff-appellant. 01105-Min promulgated on 28 May 2009 and the Resolution promulgated on 24 March 2010 are REVERSED and SET ASIDE Ordinance No.. Ltd.: This case is about the legality of the tax collected by the City of Cebu on sales of matches stored by the Philippine Match Co. defendantsappellees. CARPIO Shell vs Municipality of Sipocot 105 Phil. we GRANT the petition. G. Where is the situs of the transaction? Held:The Situs of the sale for tax purposes is not the place where the contract of sale is perfected but the place of its consummation. effected through its delivery trucksoutside the territorial limits of Sipocot. by an ordinance imposed additionalsales tax on the sale of fuels and oils by Shell Co. Nazario Pacquiao. . No.WHEREFORE. Pelaez... Camarines Norte. Pelaez & Pelaez for appellant. J. 1978 PHILIPPINE MATCH CO. Belarmino & Ceferino Jomuad for appellees. Acting City Treasurer. ZABATE. AQUINO. in Cebu City but delivered to customers outside of the City. Shell protested contending that the salesshould not be taxed as the transactions are consummated outside the territory of itslocation Sipocot . SO ORDERED. 1263 The municipality of Sipocot. The additional sales tax on salesof petroleum products can not be applied to deliveries outside the municipality of Sipocot since the consummation of sale is determined by the delivery of the thingswhich are the subject matter of the contract. The Decision of the Court of Appeals in CA-G. LTD.R. vs. CV No. 9503-2005 is declared void. THE CITY OF CEBU and JESUS E. ANTONIO Associate Justice WE CONCUR: T.
Sta. Manila. Thus. Section 9 of the ordinance provides that.61 as one percent sales tax on those three classes of out-of-town deliveries of matches for the second quarter of 1961 to the second quarter of 1963. and the computation of taxes.. Sales of matches booked and paid for in Cebu City but shipped directly to customers outside of the city refer to orders for matches made in the city by the company's customers. for which sales invoices are issued. bartered.Ordinance No. receipts or value of commodities sold. It submitted a statement indicating the four kinds of transactions enumerated above. Ana.town deliveries of matches. The Philippine Match Co. duly covered by bills of lading The matches are used and consumed outside of the city. sale and distribution within the territories and districts under its Cebu branch or the whole VisayasMindanao region. or if not stored are sold" in that city.000 a quarter. to wit: (1) sales of matches booked and paid for in Cebu City but shipped directly to customers outside of the city. names of customers. by means of personal or phone calls. and a summary of the deliveries to the different agencies. importers and manufacturers of any commodity doing business" in Cebu City. The company paid under protest to the city t the sum of P12. is engaged in the manufacture of matches. the transfers of matches to salesmen outside of Cebu City. exchanged or manufactured in the city in excess of P2. it would seem that under the tax ordinance sales of matches consummated outside of the city are taxable as long as the matches sold are taken from the company's stock stored in Cebu City. Cebu City itself is just one of the eleven districts under the company's Cebu City branch office. the value of the sales. 1960 and also approved by the provincial board) is "an ordinance imposing a quarterly tax on gross sales or receipts of merchants. . It ships cases or cartons of matches from Manila to its branch office in Cebu City for storage. meaning matches sold and delivered within the city. Ltd. It assails the legality of the tax which the city treasurer collected on out-of. as well as the invoice numbers. where the matches had been stored..844. "shall be considered as sales" in the city and shall be taxable. In paying the tax the company accomplished the verified forms furnished by the city treasurers office. and then the matches are shipped from the bodega in the city. the total sales. "all deliveries of goods or commodities stored in the City of Cebu. for purposes of the tax. 279 of Cebu City (approved by the mayor on March 10. to the place of business or residences of the customers outside of the city. (2) transfers of matches to newsmen assigned to different agencies outside of the city and (3) shipments of matches to provincial customers pursuant to salesmen's instructions. Its factory is located at Punta. The company does not question the tax on the matches of matches consummated in Cebu City. whose principal office is in Manila. It imposes a sales tax of one percent (1%) on the gross sales. dealers.
105 Phil. and that the city treasurer be ordered to pay damages. beyond the city's taxing power. that the city be ordered to refund to the company the said sum of P12.55 as taxes paid out the said out-of-town deliveries with legal rate of interest from the respective dates of payment. Camarines Sur. 1963 the company filed the complaint herein. praying that the ordinance be d void insofar as it taxed the deliveries of matches outside of Cebu City. Ltd.923. vs. The matches are shipped from the company's bodega in the city to the customers residing outside of the city. They issue cash sales invoices and remit the proceeds of the sales to the company's Cebu branch office. In that case sales of oil and petroleum products effected outside the territorial limits of Sipocot.Transfers of matches to salesmen assigned to different agencies outside of the city embrace equipments of matches from the branch office in the city to the salesmen (provided with panel cars) assigned within the province of Cebu and in the different districts in the Visayas and Mindanao under the jurisdiction or supervision of the Cebu City branch office. As in the first and seconds of transactions above-mentioned. The proceeds of the sale. It assumed that the sales were consummated outside of the city and. The city treasurer denied the request. The salesmen issue the sales invoices. It invoked Shell Company of the Philippines. The salesmen sell the matches within their respective territories. the matches are consumed and used outside of the city. 1961 to the city treasurer sought the refund of the sales tax paid for out-of-town deliveries of matches.844. were held not to be subject to the tax imposed by an ordinance of that municipality. The lower court held that the said sales were consummated in Cebu City because delivery to the carrier in the city is deemed to be a delivery to the customers outside of the city. for which the salesmen are accountable are remitted to the branch office. hence. The shipments are covered by bills of lading. On August 12. The matches received by the salesmen constitute their direct cash accountability to the company. His stand is that under section 9 of the ordinance all out-oftown deliveries of latches stored in the city are subject to the sales tax imposed by the ordinance. The value of the unsold matches constitutes their stock liability. The company in its letter of April 15. No sales invoices whatever are issued. But the trial court invalidated the tax on transfers of matches to salesmen assigned to different agencies outside of the city and on shipments of matches to provincial customers pursuant to the instructions of the newsmen It ordered the defendants to refund to the plaintiff the sum of P8. The trial court characterized the tax on the other two transactions as a "storage tax" and not a sales tax. the trial court sustained the tax on the sales of matches booked and paid for in Cebu City although the matches were shipped directly to customers outside of the city. Shipments of matches to provincial customers pursuant to newsmens instructions embrace orders. The matches are used and consumed outside of the city.61 as excess sales tax paid. 1263. by letter or telegram sent to the branch office by the company's salesmen assigned outside of the city. . Municipality of Sipocot. After hearing.
municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city. as contemplated in the ordinance. all chartered cities. 1959 and which provides: SEC. Behn. impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax. municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. and also from the dismissal of its claim for damages against the city treasurer. The municipal board of Cebu City is empowered "to provide for the levy and collection of taxes for general and purposes in accordance with law" (Sec. 69 SCRA 460). licenses or fees. Civil Code. A different interpretation would defeat the tax ordinance in question or encourage tax evasion through the simple expedient of arranging for the delivery of the matches at the out. except gasoline. The issue is whether the City of Cebu can tax sales of matches which were perfected and paid for in Cebu City but the matches were delivered to customers outside of the City. Those matches can be regarded as sold in the city. Commonwealth Act No. skirts of the city through the purchase were effected and paid for in the company's branch office in the city. vs. of the Philippines. profession or occupation being conducted within the city. February 27. That municipalities and municipal districts shall. Yangco. just and uniform taxes. Taxation. We hold that the appeal is devoid of merit bemuse the city can validly tax the sales of matches to customers outside of the city as long as the orders were booked and paid for in the company's branch office in the city. Sec.The city did not appeal from that decision. to regulate and impose reasonable fees for services rendered in connection with any business. 602). vs. or the municipal district council of the municipal district. under the provisions of the National International Revenue Code. The taxing power validly delegated to cities and municipalities is defined in the Local Autonomy Act. 58. the municipal council of the municipality. Inc. Leyte. Republic Act No. 2264 (Pepsi-Cola Bottling Co. Act No. delivery to the carrier is delivery to the buyer (Art. L-31156.. because the matches were delivered to the carrier in Cebu City. 1976. 2. 31[l]. or exercising privileges in chartered cities. to collect fees and charges for services rendered by the city. Rep. 17[a]. 3857. Provided. municipality or municipal district and otherwise to levy for public purposes. — Any provision of law to the contrary notwithstanding. municipality or municipal district. Generally. Revised Charter of Cebu city). Municipality of Tanauan. in no case. 38 Phil. 1523. which took effect on June 19. The company appealed from that portion of the decision upholding the tax on sales of matches to customers outside of the city but which sales were booked and paid for in Cebu City. . Meyer & Co.
profession or occupation being conducted therein. it cannot be sensibly argued that such sales should be considered as transactions subject to the taxing power of the political subdivisions where the customers resided and accepted delivery of the matches sold. which sales were booked and paid for in the company's branch office in the city. the entity imposing the tax. 1435. vs. 164. Hodges vs. and (3) to levy. 1966. Applying that jurisdictional test to the instant case.Provided. L-18349. Ltd. Municipal Council of Hinabangan Samar. Furthermore. 1968. The company in its second assignment of error contends that the trial court erred in not ordering defendant acting city treasurer to pay exemplary damages of P20. The sales in the instant case were in the city and the matches sold were stored in the city. because the sellers place of business is in Cebu City. On the other hand. licenses or fees (C. (See Local Tax Code. vs. Inc. Republic Act No. 31[251. Marinduque Iron Mines Agents. Revised Charter of Cebu City). The fact that the matches were delivered to customers. the law which enabled the Municipality of Jose Panganiban to levy the sales tax involved in that case. That feature of the Jose Panganiban case distinguished it from this case. meaning the place where the oils were delivered. Note further that the taxing power of cities.D. Municipal Board of the City of Iloilo. for public purposes. Treasurer of Ormoc City. N. Ormoc Sugar Co. 120 Phil. L-23794.. Shell Company of the Philippines. Province of Camarines Norte vs. are subject to the city's taxing power. P. however. municipalities and municipal districts may be used (1) "upon any person engaged in any occupation or business. July 30. 167. Inc. it is at once obvious that sales of matches to customers outside oil Cebu City. 231. 17 SCRA 778 that the place of delivery determines the taxable situs of the property to be taxed cannot properly be invoked in this case. specifies that the tax may be levied upon oils "distributed within the limits of the city or municipality". whose places of business were outside of the city. 413. No. . would not place those sales beyond the city's taxing power. just and uniform taxes. the ruling in Municipality of Jose Panganiban. 117 Phil. See sec. municipality or municipal districts may levy or impose any of the following: (here follows an enumeration of internal revenue taxes) xxx xxx xxx * Note that the prohibition against the imposition of percentage taxes (formerly provided for in section 1 of Commonwealth Act No. or exercising any privilege" therein. (2) for services rendered by those political subdivisions or rendered in connection with any business. In essence. they are the same as sales of matches fully consummated in the city. Those sales formed part of the merchandising business being assigned on by the company in the city. That no city. 472) refers to municipalities and municipal districts but not to chartered cities. February 17. The instant case is easily distinguishable from the Shell Company case where the price of the oil sold was paid outside of the municipality of Sipocot..000 and attorney's fees. 22 SCRA 603).
or otherwise revoked by the council or board from which it originated. provided the acts complained of are done within the scope of the officer's authority and . and in the line of his official duty. however erroneous his judgment may be. that all out-of-town deliveries of matches are not subject to sales tax because such transactions were effected outside of the city's territorial limits. without just cause. whether judicial ." "Where an officer is invested with discretion and is empowered to exercise his judgment in matters brought before him. The city treasurer acted within the scope of his authority and in consonance with his bona fide interpretation of the tax ordinance. The fiscals opinion on the legality of an ordinance is merely advisory and has no binding effect." Article 27 presupposes that the refuse or omission of a public official is attributable to malice or inexcusable negligence. 20. to perform his official duty may file an action for damages and other relief against the latter. he had no choice but to enforce the ordinance because according to section 357 of the Revised Manual of Instruction to Treasurer's "a tax ordinance win be enforced in accordance with its provisions" until d illegal or void by a competent court. it is argued for defendant city treasurer that in enforcing the tax ordinance in question he was simply complying with his duty as collector of taxes (Sec.quasi-judicial or executive. In reply. In this case. It is argued that the city treasurer refused and neglected without just cause to perform his duty and to act with justice and good faith. without prejudice to any disciplinary administrative action that may be taken. Article 27 of the Civil Code provides that "any person suffering material or moral lose because a public servant or employee refuses or neglects. and when so acting he is usually given immunity from liability to persons who may be injured as the result or an erroneous or mistaken decision. as legal adviser of the city. is not y liable to one injured in consequence of an act performed within the scope of his official authority. Furthermore. "As a rule. the Secretary of Finance had reminded the city treasurer that a tax ordinance approved by the provincial board is operative and must be enforced without prejudice to the right of any affected taxpayer to assail its legality in the judicial forum. considering that the company's branch office was located in Cebu City and that all out-of-town purchase order for matches were filled up by the branch office and the sales were duly reported to it. Revised Charter of Cebu City). 21. it cannot be said that the city treasurer acted wilfully or was grossly t in not refunding to the plaintiff the taxes which it paid under protest on out-of-town sales of matches. The record clearly reveals that the city treasurer honestly believed that he was justified under section 9 of the tax ordinance in collecting the sales tax on out-of-town deliveries. 50. he is sometimes called a quasi-judicial officer. The fact that his action was not completely sustained by the courts would not him liable for We have upheld his act of taxing sales of matches booked and paid for in the city. a public officer.The claim for damages is predicated on articles 19. Moreover. The company faults the city treasurer for not following the opinion of the city fiscals. 27 and 2229 of the Civil Code.
Inc.1972. as amended. or corruption. Civil Code). We find that it would not be just and equitable to award attorney's fees in this case against the City of Cebu and its (See Art.. is liable under Iloilo City tax Ordinance No. which imposes a municipal license tax on distributors of soft-drinks. liquidated or compensatory damages (Art. No. 5 series of 1960. as amended.R. which amount allegedly constituted payments of municipal license taxes under Ordinance No. 2208." (63 Am Jur 2nd 798. the parties submitted a partial stipulation of facts. 9046 with the Court of First Instance of Iloilo praying for the recovery of the sum of P3. On November 15. CORTES. Civil Code).1972. but which sold softdrinks in Iloilo City. J. that the company paid under protest. the trial court's judgment is affirmed. CITY OF ILOILO. Diosdado Garingalao for defendant-appellant.without malice. Inc. 233. 572-3). 667. Bonifacio. Inc. 240-241). plaintiff-appellee. Iloilo. 1988 ILOILO BOTTLERS.329.20. L-52019 August 19. That salutary in addition to moral temperate. which had its bottling plant in Pavia. Iloilo Bottlers. 2229. Attorney's fees are being claimed herein as actual damages. It has been held that an erroneous interpretation of an ordinance does not constitute nor does it amount to bad faith that would entitle an aggrieved party to an award for damages (Cabungcal vs. On July 12. SO ORDERED. 5.: The fundamental issue in this appeal is whether the Iloilo Bottlers. Trenas for plaintiff-appellee. WHEREFORE. 109 Phil. 799 cited in Philippine Racing Club. series of 1960. filed a complaint docketed as Civil Case No. G. No costs. defendant-appellant. INC. Efrain B. vs. Cordovan 120 Phil. the material portions of which state xxx xxx xxx . vs.
plaintiff closed said bottling plant at Muelle Loney. Municipality of Pavia. That thereafter. Iloilo City.05) centavos per bottle shall pay a tax of one and one half (P0. sometime in July 1968.. 15.015) (centavos) per case of twenty four bottles.. HOWEVER. . 6. Santiago Syjuco. Series of 1964. Iloilo City. That prior to September. manufacture or bottling of coca-cola. tru-orange. plaintiff operated the said plant by bottling the soft drinks Pepsi-Cola and 7-up.10) centavos for every case of twenty-four bottles. owned and operated a bottling plant at Muelle Loney Street. seven-up and other soft drinks within the jurisdiction of the City of Iloilo.2. 3. Iloilo City. Philippines and which is outside the jurisdiction of defendant. Inc. however sometime on September 14. and Ordinance No. 1960 known as Ordinance No. That from the time of (the) enactment (of the ordinance). 1968 (when) it transferred its plant to Barrio Ungca Municipality of Pavia. That defendant enacted an ordinance on January 11. with a bottling plant situated at Barrio Ungca Municipality of Pavia. Series of 1964. had been religiously paying the defendant City of Iloilo the above. 5. Province of Iloilo. all deliveries and/or dispatches emanating or made at the plant and all goods or stocks taken out of the plant for distribution.. Ordinance No. however. Section 1-A—For purposes of this Ordinance. and which is outside the jurisdiction of the City of Iloilo. PROVIDED.1966. but the plaintiff stopped paying the municipal license tax (after) October 21. firm or corporation engaged in the distribution. Series of 1960 which ordinance was successively amended by Ordinance No. 45.mentioned municipal license tax due therefrom for bottler because its bottling plant was then still situated at Muelle Loney St. Iloilo. 5. that softdrinks sold to the public at not more than five (P0. and transferred its bottling operations to its new plant in Barrio Ungca. sale or exchange irrespective (of) where it would take place shall be covered by the operation of this Ordinance.. That plaintiff is engaged in the business of bottling softdrinks under the trade name of Pepsi Cola And 7-up and selling the same to its customers. Iloilo which is outside the jurisdiction of the City of Iloilo. 1966. shall pay a municipal license tax of ten (P0. the Seven Up Bottling Company of the Philippines under Santiago Syjuco Inc. Series of 1960. which was doing business under the name of Seven-up Bottling Company of the Philippines and bottled the softdrinks Pepsi-Cola and 7-up. 28. — Any person. which provides as follows: Section l. Santiago Syjuco Inc. Inc. pepsi cola. informed all its employees that it (was) closing its Iloilo Plant due to financial losses and in fact closed the same and later sold the plant to the plaintiff Iloilo Bottlers. 4.
on staggered basis.R. and it further demanded from the plaintiff payment of back taxes from the time it transferred its bottling plant to the Municipality of Pavia.. L.the defendant informed the plaintiff that it must pay all the taxes due since July. As a result of the said letter of the plaintiff. 1957. April 29. 1968 up to the last quarter of 1971. 1972. 1972. the first quarter payment of the municipal licence tax in the sum of P3. and that moreover. otherwise it shall be constrained to cancel the operation of the business of the plaintiff. July 11. the plaintiff under protest agreed to the payment of the back taxes. 10. No. That plaintiff explained in a letter to the defendant that it could not anymore be liable to pay the municipal license fee because its bottling plant (was) not anymore inside the City of Iloilo. L-1 4229. City of Manila and City Treasurer of Manila. to wit: No. the defendant did not anymore press the plaintiff to pay the said municipal license tax. vs. and thereafter has been paying defendant every quarter under protest. That as computed by the plaintiff the following are its softdrinks sold in Iloilo City since it transferred its bottling plant from the City of Iloilo to Barrio Ungca Pavia. City of Manila et al. 11. Manila Trading & Supply Co. That on June l5. That sometime on January 25.1955. the defendant demanded from the plaintiff compliance with the said ordinance for 1972 in view of the fact that it was engaged in distribution of the softdrinks in the City of Iloilo. 12. Inc. it could not be considered as a distributor in line with the doctrines enunciated by the Supreme Court in the cases of City of Manila vs.7. the plaintiff paid on April 20. A xerox copy of the said letter is attached as Annex "B" to the complaint and made an integral part hereof by reference.20. 1969. and because of this threat. September 29. That the plaintiff demurred to the said demand of the defendant raising as its jurisdiction the reason that its bottling plant is situated outside the City of Iloilo and as bottler could not be considered as distributor under the said ordinance although it sells its product directly to the consumer. Bugsuk Lumber Co. 9. in line with the jurisprudence enunciated by the Supreme Court but due to insistence of the defendant.329. and so as not to occasion disruption of its business operation. Central Azucarera de Don Pedro vs. Iloilo in July 1968. That sometime on July 31.. G. a xerox copy of the said letter is attached to the complaint as Annex "A" and made an integral part hereof by reference. 1972. since it itself (sold) its own products to its (customers) directly. Cebu Portland Cement vs. of Cases sold .1960. 1959.July 26. which was acceded to by the defendant.8255. the defendant demanded from the plaintiff the payment of the municipal license tax under the above-mentioned ordinance. under protest. City of Manila L-1 2156. L7679. Iloilo. 8..
t o D e c . 0 6 0 T O T A L T A X D U E 8 8 . 6 0 0 1 6 . 6 6 0 1 6 8 . 4 0 0 P 8 . 3 8 9 8 9 . 2 1 1 1 6 8 . t o D e 3 9. 8 9 0 7 9. 9 0 0 1 6 . 6 7 0 8 8 . t o D e c . 3 4 0 P E P S I C O L A 4 9 . 2 4 0 8 7 . 6 0 0 8 0. 9 1 5 . 8 4 0 8 1. 4 8 0 1 6 9 . 1 5 0 1 6 . J a n .S E V E N U P 1 9 6 8 1 9 6 9 1 9 7 0 1 9 7 1 J u l t o D e c J a n . J a n .
March " " 17.August " " 15.00 every year.16 O. 5614967 .R. 1972 Sales P17.000.June " " 14.April " " 18.90 O.R. 4683995 . 5614891 . 5614767 . directly to its customers in the different towns of the Province of Iloilo as well as the City of Iloilo.19 O.952.54 and is also paying the municipal license tax to the municipality of Pavia.159. 5 0 5 13.May " " 16.00 O.R.726. as manufacturer's sales tax on all the softdrinks it manufactures as follows: O.R. 6 3 9 3 1 4 . 0 5 0 P 5 9 .R.R. Iloilo in the amount of P l0.5614870 .99 O. No. No. That the plaintiff does not maintain any store or commercial establishment in the City of Iloilo from which it distributes its products. No. 5614897 .024.September " " 19. but by means of a fleet of delivery trucks. T O T A L 2 8 0. No. 5614973 . .726. plus a municipal license tax for engaging in its business to the municipality of Pavia in its amount of P2. No. plaintiff distributes its products from its bottling plant at Barrio Ungca Municipality of Pavia. 5614935 . 4 1 1 5 9 5 . xxx xxx xxx . No.January.77 O.February " " 17.222.c .R.000. No.R.20 O.710. 14. No. 56'L4999 .R.791. No.00 every year. That the plaintiff is already paying the National Government a percentage Tax of 71/t.589.July " " 13. Iloilo.81 O.
Inc. so as to be within the purview of the ordinance. merits serious consideration. July 28. This Court has always recognized that the right to manufacture implies the right to sell/distribute the manufactured products [See Central Azucarera de Don Pedro v.20. 627 (1955). The second ground is manifestly devoid of merit. No. . disclaims liability on two grounds: First. the court a quo rendered on January 26. City of Manila and Sarmiento. The decision was amended in an Order dated March 15. The first ground. 1969. v. The resolution of this case therefore hinges on whether the company may be considered engaged in the distribution of softdrinks in Iloilo City. manufacture of soft-drinks. City of Manila and Cudiamat. or is a necessary consequence of its main or principal business of bottling. distribution of soft-drinks 2. In certain cases.] Hence. it cannot be taxed as one falling under the second or the third type of business. declaring the Corporation not liable under the ordinance and directing the City of Iloilo to pay the sum of' P3. Thus. it contends that since it is not engaged in the independent business of distributing soft-drinks. G. 10 (Record on Appeal. The tax ordinance imposes a tax on persons. Inc. but that its activity of selling is merely an incident to. bottling of softdrinks within the territorial jurisdiction of the City of Iloilo. L-22764. The City of Iloilo appealed to the Court of Appeals which certified the case to this Court. 28 SCRA 840. even after it had transferred its bottling plant to Pavia. Iloilo province. then it is NOT liable under the city tax ordinance. 843. 1973 a decision in favor of Iloilo Bottlers. 25-31)] On the basis of the above stipulations. so as to include the amounts paid by the company after the filing of the complaint. however. 1973. Caltex (Philippines). Inc. for tax purposes. A person engaged in any or all of these activities is subject to the tax. firms. Iloilo Bottlers. a manufacturer does not necessarily become engaged in the separate business of selling simply because it sells the products it manufactures. and corporations engaged in the business of: 1.R. Inc. (2) manufacture and (3) bottling of softdrinks. 97 Phil. There is no question that after it transferred its plant to Pavia. however. no longer manufactured/bottled its softdrinks within Iloilo City. it claims that only manufacturers or bottlers having their plants inside the territorial jurisdiction of the city are covered by the ordinance. and 3. Iloilo Bottlers. P.329. It is clear from the ordinance that three types of activities are covered: (1) distribution. Second. a manufacturer may also be considered as engaged in the separate business of selling its products.[Rollo. pp.
in Iloilo City. nor are separate stores maintained where products may be sold independently from the main office. As stated above. Thus. Being an excise tax. the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to customers in the different places in lloilo province. It is a tax on the privilege of distributing. No warehouse sales are made. Inc. City of Manila and Sarmiento. 1987.] Specifically. supra. In the case at bar. Cebu Portland Cement Co. The stores and warehouses serve as selling centers. the manufacturer enters into sales transactions and invoices the sales at its main office where purchase orders are received and approved before delivery orders are sent to the company's warehouses.To determine whether an entity engaged in the principal business of manufacturing. Inc.R. 410. British Overseas Airways Corp. Truck sales were made independently of transactions in the main office. Caltex (Philippines). In several cases [See Central Azucarera de Don Pedro v. Any one who desires to purchase the product may go to the store or warehouse and there purchase the merchandise. until recently. Entities operating under the second system are considered engaged in the separate business of selling. where in turn actual deliveries are made. 1063 (1960). Inc. They were what were called. 149 SCRA 395. The tax imposed under Ordinance No. this Court had occasion to distinguish two marketing systems: Under the first system. "rolling stores". before an entity engaged in any of the activities may be taxed in Iloilo City. Nos. April 30. independently of its business of bottling them. its marketing system or sales operations must be looked into. The delivery trucks were not used solely for the purpose of delivering softdrinks previously sold at Pavia. supra]. v. 108 Phil. They served as selling units. The warehouses only serve as storage sites and delivery points of the products earlier sold at the main office. bottling or manufacturing softdrinks must be within city limits. That is. privileges or businesses are done or performed within the jurisdiction of said authority [Commissioner of Internal Revenue v. The delivery trucks were therefore much the same as the stores and warehouses under the second marketing system. and Court of Appeals. Sales transactions with customers were entered into and sales were perfected and consummated by route salesmen. Iloilo Bottlers. thus falls under the second category above. City of Manila and the City Treasurer. 5 is an excise tax. . v. sales were made by Iloilo Bottlers. independent of their manufacturing business. Entities operating under the first system are NOT considered engaged in the separate business of selling or dealing in their products. G. City of Manila and Cudiamat. is likewise engaged in the separate business of selling. sales transactions are entered into and perfected at stores or warehouses maintained by the company. Under the second system. manufacturing or bottling softdrinks. it can be levied by the taxing authority only when the acts. the situs of the act of distributing. 65773-74. We have no option but to declare the company liable under the tax ordinance. the corporation was engaged in the separate business of selling or distributing soft-drinks.
. WHEREFORE. No Costs. it becomes unnecessary to discuss the other issues raised by the parties. The complaint in Civil Case No. 9046 is ordered DISMISSED. the appealed decision is hereby REVERSED.With the foregoing discussion.
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