I. Basic Principles of a Sound System/Meaning of Neutral Tax Chavez v. Ongpin Taganito Mining Corporation v.

Commissioner

Tax

Tanada v. Angara Mitsubishi Corporation v. Commissioner XII. Limitation of Territorial Jurisdiction Iloilo Bottlers v. City of Iloilo Commissione v. BOAC Hopewell Power v. Commissioner Smith v. Commissioner XIII. Constitutional Limitations: Due Process of Law Sison v. Ancheta XIV. Equal Protection of the Laws Tan v. Del Rosario Philippine Rural Electric v. Secretary XV. Uniformity and Equity in Taxation: Classification of Taxpayers/subject or items to be taxed Sison v. Ancheta Tolentino v. Secretary of Finance XVI. Prohibition Against Impairment Obligations of Contracts Philippine Rural Electric v. Secretary XVII. Prohibition Against Infringement Religious Freedom American Bible Society v. City of Manila of

II. Nature of the Power of Taxation: Inherent in Sovereignty/Distinguished from Police Power and Eminent Domain Roxas v. CTA Tanada v. Angara Land Transportation Office v. City of Butuan III. Exclusively Legislative in Nature: Extent of the Legislative Power to Tax Tan v. Del Rosario Commissioner v. Santos IV. Exclusively Legislative in Nature: Power to Tax Cannot be Delegated Maceda v. ERB Maceda v. Macaraig Basco v. PAGCOR V. Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit Lozada v. Commissioner Maceda v. Macaraig Chavez v. PCGG Gonzales v. Narvasa Bayan v. Executive Secretary Del Mar v. PAGCOR Miranda v. Carreon VI. Inherent Limitations: Purpose Must Be Public in Nature Caltex v. Commission on Audit Pascual v. Secretary of Public Works Tio v. Videogram Regulatory Board Gaston v. Republic Planter VII. Prohibition Against Delegation of Taxing Power/Exceptions; Delegation to Local Governments Basco v. PAGCOR Land Transportation Office v. City of Butuan VIII. Prohibition Against Delegation of Taxing Power/Exceptions; Delegation to the President Garcia v. Executive Secretary IX. Prohibition Against Delegation of Taxing Power/Exceptions; Delegation to Administrative Agencies Osmena v. Orbos Commissioner v. CA X. Exemption of Government Entities/Agencies and Instrumentalities Maceda v. Macaraig Mactan Cebu Airport v. Marcos XI. International Comity

of

XVIII. Prohibition Regarding Appropriation of Proceeds of Taxation Osmena v. Orbos Gaston v. Republic Planters Bank XIX. Prohibition Against Taxation of Religious, Charitable Entities and Educational Entities Abra Valley College v. Aquino XX. Prohibition Against Taxation of Nin-Stock, Non-Profit Educational Institutions Commissioner v. CA XXI. Others: Grant of Tax Exemptions Chavez v. PCGG Republic of the Philippines v. City of Kidapawan XXII. Veto of Appropriation, Revenue, Tariff bills by the President Gonzales v. Macaraig XXIII. Non-impairment of the Jurisdiction of the Supreme Court Commissioner v. Santos San Miguel Corp v. Avelino XXIV. Revenue Bills Shall Originate from the House of Representatives Tolentino v. Secretary of Finance XXV. Infringement of Press Freedom Tolentino v. Secretary of Finance

XXVI. Grant of Franchise Tolentino v. Secretary of Finance XXVII. Situs of Taxation and Double Taxation: Situs of Subjects of Taxation Metro Alliance Holdings v. Commissioner Commissioner v. BOAC Wells Fargo v. Collector XXVIII. Multiplicity of Situs Collector v. Lara XXIX. Double Taxation Collector v. Lara XXX. Instances of Double Taxation in its Broad Sense Villanueva v. City of Iloilo XXXI. Constitutionality of Double Taxation City of Baguio v. De Leon Pepsi Cola v. Butuan China Banking v. CA XXXII. Means of Avoiding or Minimizing the Burden of Taxation: Tax Avoidance Delpher Traders Corp v. IAC Commissioner v. Lincoln Philippines Life Insurance XXXIII. Tax Evasion Republic v. Gonzales People of the Philippines v. Lucio Tan XXXIV. Exemption from Taxation Greenfield v. Meer XXXV. Tax Remission / Condonation Surigao Con. Min v. Collector XXXVI. Tax Amnesty Commissioner v. CA Commissioner v. Marubeni XXXVII. Kinds of Tax Exemption: Express and Implied Commissioner v. Mitsubishi Metal Corporation XXXVIII. Nature of the Power to Grant Tax Exemption Basco v. PAGCOR Republic of the Philippines v. City of Kidapawan XXXIX. Rationale: Grounds for Tax Exemption Maceda v. Macaraig Davao Gulf v. CIR XL. Nature of Tax Exemption Tolentino v. Secretary of Finance PLDT v. City of Davao Philippine Acethylene v. Commissioner Republic of the Philippines v. City of Kidapawan

XLI. Laws Granting Tax Exemption: Constitution Abra Valley College v. Aquino XLII. Construction of Statutes Granting Tax Exemptions: General Rule Commissioner v. CA Misamis Oriental Association v. DOF Nestle Philippines v. CA XLIII. Construction of Statutes Granting Tax Exemptions:Exceptions Maceda v. Macaraig XLIV. Sources, Application, Interpretation And Administration of Tax Laws: Tax Treaties/ International Agreements Maceda v. Macaraig XLV. Revenue Rules and Regulation/ Administrative/BIR Rulings and Opinions Commissioner v. CA XLVI. Validity of Revenue Rules and Regulation Tan v. Del Rosario Commissioner v. CA XLVII. Effectivity and Validity of Tax Ordinance Tuzon v. CA Hagonoy Market Vendor Association v. Municipality of Hagonoy Jardine Davies Insurance v. Aliposa XLVIII. Interpretation and Application of Tax Laws: Nature of Internal Revenue Law Hilado v. Collector XLIX. Construction of Tax Laws: Rule when Legislative Intent is Clear Lorenzo v. Posadas Umali v. Estanislao Commissioner v. Solid Bank Corp. L. Rule When There is Doubt Collector v. La Todena LI. Application of Tax Laws Umali v. Estanislao LII. Application of Revenue Regulations/ Rulings and Effects of Repeal Commissioner v. CA Commissioner v. Telefunken Commissioner v. Michel Lhuillier Pawnshop LIII. Mandatory and Directory Provision of Tax Laws Roxas v. Raferty Pecson v. CA LIV. Tax Remedies Angeles City v. Angeles City Electric Corporation Oceanic Wireless Network Inc. v CIR CIR v. Metro Star Superama

Yamane v. BA Lepanto Condominium Corporation

Chavez failed to raise any objection against said decree. It was ROAP which questioned the constitutionality thereof. Presidential Decree No. 464 furnishes the procedure by which a tax assessment may be questioned: Within sixty days from the date of receipt of the, written notice of assessment, any owner who doubts the assessment of his property, may appeal to the Local Board of Assessment Appeals. In case the, owner or administrator of the property or the assessor is not satisfied with the decision of the Local Board of Assessment Appeals, he may, within thirty days from the receipt of the decision, appeal to the Central Board of Assessment Appeals. The decision of the Central Board of Assessment Appeals shall become final and executory after the lapse of fifteen days from the date of receipt of the decision. Chavez argues further that the unreasonable increase in real property taxes brought about by Executive Order No. 73 amounts to a confiscation of property repugnant to the constitutional guarantee of due process, invoking the cases of Ermita-Malate Hotel, et al. v. Mayor of Manila and Sison v. Ancheta, et al. The reliance on these two cases is certainly misplaced because the due process requirement called for therein applies to the "power to tax." Executive Order No. 73 does not impose new taxes nor increase taxes. The government recognized the financial burden to the taxpayers that will result from an increase in real property taxes. Hence, Executive Order No. 1019 was issued on April 18, 1985, deferring the implementation of the increase in real property taxes resulting from the revised real property assessments, from January 1, 1985 to January 1, 1988. The issuance of Executive Order No. 73 which changed the date of implementation of the increase in real property taxes from January 1, 1988 to January 1, 1987 and therefore repealed Executive Order No. 1019. We agree with the observation of the Office of the Solicitor General that without Executive Order No. 73, the basis for collection of real property taxes will still be the 1978 revision of property values. Certainly, to continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet government expenditures and their variations. ACCORDINGLY, the petition and the petition-inintervention are hereby DISMISSED. SO ORDERED.

CHAVEZ v. ONGPIN 186 SCRA 331 Topic: Basic Principles of a Sound Tax System/Meaning of Neutral Tax Facts: The petition seeks to declare unconstitutional Executive Order No. 73 dated November 25, 1986: EXECUTIVE ORDER No. 73 PROVIDING FOR THE COLLECTION OF REAL PROPERTY TAXES BASED ON THE 1984 REAL PROPERTY VALUES, AS PROVIDED FOR UNDER SECTION 21 OF THE REAL PROPERTY TAX CODE, AS AMENDED The petitioner, Francisco I. Chavez, is a taxpayer and an owner of three parcels of land. He alleges the following: that Executive Order No. 73 accelerated the application of the general revision of assessments to January 1, 1987 thereby mandating an excessive increase in real property taxes by 100% to 400% on improvements, and up to 100% on land; that any increase in the value of real property brought about by the revision of real property values and assessments would necessarily lead to a proportionate increase in real property taxes; that sheer oppression is the result of increasing real property taxes at a period of time when harsh economic conditions prevail; and that the increase in the market values of real property as reflected in the schedule of values was brought about only by inflation and economic recession. The intervenor Realty Owners Association of the Philippines, Inc. (ROAP), which is the national association of owners-lessors, joins Chavez in his petition to declare unconstitutional Executive Order No. 73, but additionally alleges the following: that Presidential Decree No. 464 is unconstitutional insofar as it imposes an additional one percent (1%) tax on all property owners to raise funds for education, as real property tax is admittedly a local tax for local governments; that the General Revision of Assessments does not meet the requirements of due process as regards publication, notice of hearing, opportunity to be heard and insofar as it authorizes "replacement cost" of buildings (improvements) which is not provided in Presidential Decree No. 464, but only in an administrative regulation of the Department of Finance; and that the Joint Local Assessment/Treasury Regulations No. 2-86 is even more oppressive and unconstitutional as it imposes successive increase of 150% over the 1986 tax. Issue: Petitioner Chavez and intervenor ROAP question the constitutionality of Executive Order No. 73 insofar as the revision of the assessments and the effectivity thereof are concerned. Held:

TAGANITO MINING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE CTA CASE NO. 7769 APRIL 10, 2010 Facts:

Petitioner is a VAT-registered corporation engaged in the business of exploring, extracting, mining, selling, and exporting precious metals and their byproducts. Petitioner filed its Quarterly VAT Returns for the first to fourth quarters of 2006. On March 26, 2008, Petitioner filed with the Respondent BIRs Excise Taxpayers Assistance Division claims for refund in the amount of P22, 421, 260.26, allegedly representing unutilized input Value-Added Tax (VAT) on importation/domestic purchases of capital goods attributable to zero-rated sales for the year 2006. But while the CIR has not yet issued a final decision for Petitioners administrative claim, Petitioner filed an instant Petition for Review on April 17, 2008 with the Court of Tax Appeals in order to toll the running of the twoyear period to judicially claim a tax refund/credit as provided under Sec. 229 of the NIRC. The reckoning st period was when Petitioner filed its 1 quarterly VAT returns on April 24, 2006. The claimed amount was subsequently reduced to P4, 611,123 after the Excise Taxpayers Assistance Division of the BIR approved the refund application of P17, 810, 137.26 unutilized input VAT. The Respondent contends that taxes paid and collected by the BIR are presumed to have been made in accordance with laws and the rules and regulations, and the burden to prove otherwise is upon the taxpayer-claimant. A claim for refund partakes of the nature of an exemption which cannot be allowed unless granted in the most categorical language. These claims are construed strictly against the taxpayer and liberally in favor of the taxing authority. Such claims for refund is subject to administrative investigation by the BIR; hence, the filing of a judicial claim was prematurely filed since sec. 112 of the NIRC requires the submission of complete documents in support of the application for tax refund before the 120-day audit period by the BIR can apply, and before the taxpayer could avail of judicial remedies provided by law. Moreover, Respondent claims that Petitioner failed to show compliance with the administrative requirements set forth by NIRC prior to the filing of judicial claim. Hence, Petitioners judicial claim for refund must be denied. However, Petitioner claims that it complied with the requirements set forth by law, and that its claim for refund was supported by official receipts. Issue: Whether or not Petitioner is entitled to the refund of excess input VAT of P4.6 M paid on its importation of capital goods for taxable year 2006. (a) Whether or not the judicial claim was prematurely filed. (b) Whether or not substantiation and accounting requirements for filing a tax refund were complied with. Held: In the case at bar, the two-year prescriptive period commenced to run when Petitioner filed its Quarterly VAT Return for the first quarter of 2006. Thus, Petitioner timely filed its Petition for Review. However, Petitioners Schedule of 2006 Import Transactions reveals that input VAT claim of P4.6 M pertains to importation of capital goods for the

months of January and February 2006. However, the supporting official receipts do not prove Petitioners actual payment of the claimed input VAT and there is no year indicated supporting the January 2006 claim. The substantiation requirement under the Revenue Regulations provides that tax claims on imported goods must be substantiated by an import entry or other equivalent document showing actual payment of VAT on imported goods. As to the accounting requirement of maintaining a subsidiary journal, which shall contain the information on the total input tax on importation of capital goods as well as the monthly input tax claimed in VAT declaration or return, Petitioner failed to prove that such importations are in the nature of capital goods or properties. Assuming that the subject importations qualify as capital goods, the related input VAT of P4.6 M shall be spread/amortized over the estimated useful life of the capital goods, which will mean that the same amount would not be entirely refundable. For failure of Petitioner to establish the factual basis of its claim for refund, the Court has to deny the claim. It is a well settled rule that a taxpayer claimant, like herein Petitioner, has the burden of proof to show that it is entitled to the refund of the amount claimed, considering that taxes are presumed to have been collected in accordance with laws and regulations. The burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a refund. NOTE: Administrative feasibility, one of the principles of a sound tax system, provides that tax laws should be capable of convenient, just, and effective administration. This principle represents tax administration.

ROXAS Y CIA v. COURT OF TAX APPEALS 23 SCRA 276 Topic Inherent in Sovereignty/Distinguished from Police Power and Eminent Domain Facts Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren byhereditary succession several properties. To manage the abovementioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called Roxas y Compania.At the conclusion of the WW2, the tenants who have all been tilling the lands in Nasugbu for generationsexpressed their desire to purchase from Roxas y Cia. the parcels which they actually occupied. For its part, the Government, in consonance with the constitutional mandate to acquire big landed estates anda p p o r t i o n t h e m among landless tenants-farmers, persuaded the Roxas brothers to part w i t h t h e i r landholdings. Conferences were held with the farmers in the early part of 1948 and finally the Roxas brothers agreed to sell 13,500 hectares to the Government for distribution to actual occupants for a priceof P2,079,048.47 plus P300,000.00 for survey and subdivision expenses. It turned out however that theGovernment did not have funds to cover the

purchase price, and so a special arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas y Cia. the amount of P1,500,000.00 as loan.Collateral for such loan were the lands proposed to be sold to the farmers. Under the arrangement, Roxasy Cia. allowed the farmers to buy the lands for the same price but by installment, and contracted with theRehabilitation Finance Corporation to pay its loan from the proceeds of the yearly amortizations paid bythe farmers. The CIR demanded from Roxas y Cia the paym ent of def iciency incom e taxes r e s u l t i n g f r o m t h e inclusion as income of Roxas y Cia. of the unreported 50% of the net profits for 1953 and 1955 derivedfrom the sale of the Nasugbu farm lands to the tenants, and the disallowance of deductions from gross income of various business expenses and contributions claimed by Roxas y Cia. and the Roxas brothers.For the reason that Roxas y Cia. subdivided its Nasugbu farm lands and sold them to the farmers on installment, the Commissioner considered the partnership as engaged in the business of real estate, hence,100% of the profits derived therefrom was taxed. The Roxas brothers protested the assessment buti n a s m u c h a s s a i d p r o t e s t was denied, they instituted an appeal in the CTA which sustained t h e assessment. Hence, this appeal. Issue: Is Roxas y Cia liable for the payment of deficiency income for the sale of Nasugbu farmlands? Held: NO. The proposition of the CIR cannot be favorably accepted in this isolated transaction with its peculiar circumstances in spite of the fact that there were hundreds of vendees. Although they paid for their respective holdings in installment for a period of 10 years, it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the 10-year amortization period. It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for generations was not only inconsonance with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless. It was the bounden duty of the Government to pay the agreed compensation after it had persuaded Roxas y Cia to sell its haciendas, and to subsequently subdivide them among the farmers at very reasonable terms and prices. However, the Government could not comply with its duty for lack of funds. Obligingly, Roxas y Cia. shouldered the Government's burden, went out of its way and sold lands directly to the farmers in the same way and under the same terms as would have been the case had the Government done it itself. For this magnanimous act, the municipal council of Nasugbu passed aresolution expressing the people's gratitude. In fine, Roxas y Cia cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from

the sale thereof is capital gain, taxable only to the extent of 50%. The power of taxation includes the power to destroy if it is used validly as an implement of the police power of the state. If it is used solely for the purpose of raising revenue, it does not include the power to destroy.

TAADA v. ANGARA G.R. No. 118295 Topic: Nature of the Power of Taxation: Inherent in Sovereignty/Distinguished from Police Power and Eminent Domain Facts: Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as articulated by President Fidel V. Ramos in two letters to the Senate (infra), of improving "Philippine access to foreign markets, especially its major trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products." The President also saw in the WTO the opening of "new opportunities for the services sector . . . , (the reduction of) costs and uncertainty associated with exporting . . . , and (the attraction of) more investments into the country." Although the Chief Executive did not expressly mention it in his letter, the Philippines and this is of special interest to the legal profession will benefit from the WTO system of dispute settlement by judicial adjudication through the independent WTO settlement bodies called (1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally, weak and underdeveloped countries were at a disadvantage. On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The Department of Trade and Industry (Secretary Navarro, for brevity), representing the Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round of Multilateral Negotiations. By signing the Final Act, Secretary Navarro on behalf of the Republic of the Philippines, agreed: (a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities, with a view to seeking approval of the Agreement in accordance with their procedures; and (b) to adopt the Ministerial Declarations and Decisions. On December 16, 1994, the President of the 7 Philippines signed the Instrument of Ratification, Issue: Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article VI,

1987 Philippine Constitution is "vested in the Congress of the Philippines". Held: The WTO Agreement provides that each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements." Petitioners maintain that this undertaking "unduly limits, restricts and impairs Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in the Congress of the Philippines. It is an assault on the sovereign powers of the Philippines because this means that Congress could not pass legislation that will be good for our national interest and general welfare if such legislation will not conform with the WTO Agreement, which not only relates to the trade in goods . . . but also to the flow of investments and money . . . as well as to a whole slew of agreements on socio-cultural matters. More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in the Congress. And while the Constitution allows Congress to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts, such authority is subject to "specified limits and . . . such limitations and restrictions" as Congress may provide, as in fact it did under Sec. 401 of the Tariff and Customs Code.

which allows LGUs to collect registration fees or charges along with, in its view, the corresponding issuance of all kinds of licenses or permits for the driving of tricycles. Relying on Section 129 and Section 133 of the Local Government Code, which read: Sec. 129. Power to Create Sources of Revenue. Each Local Government Unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subjects to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government units. Sec. 133. Common Limitations on the Taxing Power of Local Government Units. Unless otherwise provided herein, the exercise of taxing powers of provinces, cities, municipalities, and barangays shall NOT extend to the following: xxx..xxx.xxx (l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, EXCEPT tricycles Issue: Whether the power of the LTO to register, tricycles in particular, as well as to issue licenses for the driving thereof, has devolved to Local Government Units? Held: The reliance made by the Respondents on the broad taxing power of LGUs, specifically under Sec. 133 of the Local Government Code, is tangential (a completely different line of thought or action). Police power and Taxation, along with Eminent Domain, are inherent powers of sovereignty which the State might SHARE with the Local Government Units by DELEGATION given under a constitutional or a statutory fiat. All these inherent powers are for Public Purpose and Legislative in Nature but the similarities end there. The basic aim of POLICE POWER is public good and welfare. TAXATION, in its case, focuses on the power of government to raise revenue in order to support its existence and carry out its legitimate objectives. Although correlative to each other in many respects, the grant of one does not necessarily carry with it the grant of the other. The two powers are, by tradition and jurisprudence, separate and distinct powers, varying in their respective concepts, character, scopes and limitations. To construe the tax provisions of Sec. 133 (l) indistinctively would result in the REPEAL to that extent of LTOs REGULATORY POWER which evidently has NOT been INTENDED. The power over tricycles granted under Section 458 (a)(3)(vi) of the Local Government Code to LGUs is the power to regulate their operation and to grant franchises for the operation thereof originally by LTFRB. The EXCLUSIONARY CLAUSE contained in the tax provisions of Sec. 133(l) of the Local Government Code must NOT be held to have had the effect of withdrawing the express power of LTO to cause the registration of all motor vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are essentially

LAND TRANSPORTATION OFFICE v. CITY OF BUNUAN G.R. No. 131512, January 20, 2000 Topic: Nature of the Power of Taxation: Inherent in Sovereignty/Distinguished from Police Power and Eminent Domain Facts: The Sangguniang Panglungsod (SP) of Butuan passed SP Ordinance No. 916-92 entitled An Ordinance Regulating the Operation of Tricycles-forHire, providing mechanism for the issuance of Franchise, Registration and Permit, and Imposing Penalties for Violations thereof and for other Purposes. The ordinance provided for, among other things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a permit for the driving thereof. Petitioner LTO explains that one of the functions of the national government that has been transferred to local government units is the franchising authority over tricycles-for-hire of the Land Transportation Franchising and Regulatory Board (LTFRB) but NOT the authority of the LTO to register all motor vehicles and to issue to qualified persons of licenses to drive such vehicles. Respondent city of Bunuan asserts that one of the salient provisions introduced by the Local Government Code is in the area of Local Taxation

REGULATORY in NATURE, exercised pursuant to the POLICE POWER of the State, whose BASIC OBJCTIVES are to ACHIEVE ROAD SAFETY by insuring the road worthiness of these motor vehicles and competence of drivers.

TAN v. DEL ROSARIO G.R. No. 109289 October 3, 1994 Topic: Exclusively Legislative in Nature: Extent of the Legislative Power to Tax Facts: These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation Scheme ("SNIT"), amending certain provisions of the National Internal Revenue Code and, in G.R. No. 109446, the validity of Section 6, Revenue Regulations No. 2-93, promulgated by public respondents pursuant to said law. Petitioners claim to be taxpayers adversely affected by the continued implementation of the amendatory legislation. In G.R. No. 109289, it is asserted that the enactment of Republic Act No. 7496 violates the following provisions of the Constitution: Article VI, Section 26(1) Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof. Article VI, Section 28(1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. Article III, Section 1 No person shall be deprived of . . . property without due process of law, nor shall any person be denied the equal protection of the laws. In G.R. No. 109446, petitioners, assailing Section 6 of Revenue Regulations No. 2-93, argue that public respondents have exceeded their rule-making authority in applying SNIT to general professional partnerships. Issue: Whether or not the tax law enacted by the Congress is unconstitutional for being violative of due process. Held: Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation "shall be uniform and equitable" in that the law would now attempt to tax single proprietorships and professionals differently from the manner it imposes the tax on corporations and partnerships. The contention clearly forgets, however, that such a system of income taxation has long been the prevailing rule even prior to Republic Act No. 7496. Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or objects of taxation, similarly situated, are to be

treated alike both in privileges and liabilities (Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forefend classification as long as: (1) the standards that are used therefor are substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3) the law applies, all things being equal, to both present and future conditions, and (4) the classification applies equally well to all those belonging to the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52). What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable corporations. We certainly do not view this classification to be arbitrary and inappropriate. Petitioner gives a fairly extensive discussion on the merits of the law, illustrating, in the process, what he believes to be an imbalance between the tax liabilities of those covered by the amendatory law and those who are not. With the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative judgment. Of course, where a tax measure becomes so unconscionable and unjust as to amount to confiscation of property, courts will not hesitate to strike it down, for, despite all its plenitude, the power to tax cannot override constitutional proscriptions. This stage, however, has not been demonstrated to have been reached within any appreciable distance in this controversy before us. The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax power. No such transgression is so evident to us. There is, then and now, no distinction in income tax liability between a person who practices his profession alone or individually and one who does it through partnership (whether registered or not) with others in the exercise of a common profession. Indeed, outside of the gross compensation income tax and the final tax on passive investment income, under the present income tax system all individuals deriving income from any source whatsoever are treated in almost invariably the same manner and under a common set of rules. We can well appreciate the concern taken by petitioners if perhaps we were to consider Republic Act No. 7496 as an entirely independent, not merely as an amendatory, piece of legislation. The view can easily become myopic, however, when the law is understood, as it should be, as only forming part of, and subject to, the whole income tax concept and precepts long obtaining under the National Internal Revenue Code. To elaborate a little, the phrase "income taxpayers" is an all embracing term used in the Tax Code, and it practically covers all persons who derive taxable income.

The law, in levying the tax, adopts the most comprehensive tax situs of nationality and residence of the taxpayer (that renders citizens, regardless of residence, and resident aliens subject to income tax liability on their income from all sources) and of the generally accepted and internationally recognized income taxable base (that can subject non-resident aliens and foreign corporations to income tax on their income from Philippine sources). In the process, the Code classifies taxpayers into four main groups, namely: (1) Individuals, (2) Corporations, (3) Estates under Judicial Settlement and (4) Irrevocable Trusts (irrevocable both as to corpus and as to income).

books of accounts and other accounting records of Hans Brumann, Inc., for "stocktaking investigation for excise tax purposes for the period January 1, 1988 to present". On November 29, 1988, private respondents Antonio M. Marco and Jewelry By Marco & Co., Inc. filed with the Regional Trial Court, National Capital Judicial Region, Pasig City, Metro Manila, a petition for declaratory relief with writ of preliminary injunction and/or temporary restraining order against herein petitioners and Revenue Regional Director Felicidad L. Viray (docketed as Civil Case No. 56736) praying that Sections 126, 127(a) and (b) and 150(a) of the National Internal Revenue Code and Hdg. No. 71.01, 71.02, 71.03, and 71.04, Chapter 71 of the Tariff and Customs Code of the Philippines be declared unconstitutional and void, and that the Commissioner of Internal Revenue and Customs be prevented or enjoined from issuing mission orders and other orders of similar nature. It will be noted that, while under the present law, jewelry is subject to a 20% excise tax in addition to a 10% value-added tax under the old law, it was subjected to 50% percentage tax. It was even subjected to a 70% percentage tax under then Section 184(a) of the Tax Code, as amended by P.D. 69. Section 104, Hdg. Nos. 17.01, 17.02, 17.03 and 17.04, Chapter 71 of the Tariff and Customs Code, as amended by Executive Order No. 470, dated July 20, 1991, imposes import duty on natural or cultured pearls and precious or semi-precious stones at the rate of 3% to 10% to be applied in stages from 1991 to 1994 and 30% in 1995. Prior to the issuance of E.O. 470, the rate of import duty in 1988 was 10% to 50% when the petition was filed in the court a quo. Issue: Whether Section 150, par. (a) of the NIRC and Section 104, Hdg. 71.01, 71.02, 71.03 and 71.04 of the Tariff and Customs Code are unconstitutional. Held: The public respondent, in addressing the third issue, ruled that the laws in question are confiscatory and oppressive. Again, virtually adopting verbatim the reasons presented by the private respondents in their position paper, the lower court stated: The Court finds that indeed government taxation policy trats(sic) hewelry(sic) as non-essential luxury item and therefore, taxed heavily. Aside from the ten (10%) percent value added tax (VAT), local jewelry manufacturers contend with the (manufacturing) excise tax of twenty (20%) percent (to be applied in stages) customs duties on imported raw materials, the highest in the Asia-Pacific region. In contrast, imported gemstones and other precious metals are duty free in Hongkong, Thailand, Malaysia and Singapore. In this connection, the present tariff and tax structure increases manufacturing costs and renders the local jewelry manufacturers uncompetitive against other countries even before they start manufacturing and trading. Because of the prohibitive cast (sic) of taxation, most manufacturers source from black

COMMISSIONER v. SANTOS G.R. NO 119252, AUGUST 18, 1997 Topic: Extent of the Legislative Power Facts: Of grave concern to pronouncement of the provisions of the Tariff National Internal unconstitutional.

this Court is the judicial court a quo that certain & Customs Code and the Revenue Code are

Private respondent Guild of Philippine Jewelers, Inc., is an association of Filipino jewelers engaged in the manufacture of jewelries (sic) and allied undertakings. Among its members are Hans Brumann, Inc., Miladay Jewels, Inc., Mercelles, Inc., Solid Gold International Traders, Inc., Diagem Trading Corporation, and private respondent Jewelry by Marco & Co., Inc. Private respondent Antonio M. Marco is the President of the Guild. On August 5, 1988, Felicidad L. Viray, then Regional Director, Region No. 4-A of the Bureau of Internal Revenue, acting for and in behalf of the Commissioner of Internal Revenue, issued Regional Mission Order No. 109-88 to BIR officers, led by Eliseo Corcega, to conduct surveillance, monitoring, and inventory of all imported articles of Hans Brumann, Inc., and place the same under preventive embargo. The duration of the mission was from August 8 to August 20, 1988. On August 17, 1988, pursuant to the aforementioned Mission Order, the BIR officers proceeded to the establishment of Hans Brumann, Inc., served the Mission Order, and informed the establishment that they were going to make an inventory of the articles involved to see if the proper taxes thereon have been paid. Subsequently, BIR officer Eliseo Corcega submitted to his superiors a report of the inventory conducted and a computation of the value-added tax and ad valorem tax on the articles for evaluation and disposition. Mr. Hans Brumann, the owner of the establishment, never filed a protest with the BIR on the preventive embargo of the articles. On October 17, 1988, Letter of Authority No. 0020596 was issued by Deputy Commissioner Eufracio D. Santos to BIR officers to examine the

market for smuggled goods, and that while manufacturers can avail of tax exemption and/or tax credits from the (manufacturing) excise tax, they have no documents to present when filing this exemption because, or pointed out earlier, most of them source their raw materials from the block market, and since many of them do not legally exist or operate on officially (sic), or underground, again they have no records (receipts) to indicate where and when they will utilize such tax credits. Given these constraints, the local manufacturer has no recourse but to the back door for smuggled goods if only to be able to compete even ineffectively, or cease manufacturing activities and instead engage in the trading (sic) of smuggled finished jewelry. Worthy of note is the fact that indeed no evidence was adduced by respondents to disprove the foregoing allegations of fact. Under the foregoing factual circumstances, the Court finds the questioned statutory provisions confiscatory and destructive of the proprietary right of the petitioners to engage in business in violation of Section 1, Article III of the Constitution which states, as follows: No person shall be deprived of the life, liberty, or property without due process of law

publish the corresponding Notices of Public Hearing in two newspapers of general circulation. Petitioner Maceda maintains that the order of proof deprived him of his right to finish his crossexamination of Petron's witnesses and denied him his right to cross-examine each of the witnesses of Caltex and Shell. He points out that this relaxed procedure resulted in the denial of due process. Issue: Whether or not there was a denial of due process in the hearings conducted by the ERB on the second provisional increase in oil prices. Held: The Solicitor General has pointed out: . . . The order of testimony both with respect to the examination of the particular witness and to the general course of the trial is within the discretion of the court and the exercise of this discretion in permitting to be introduced out of the order prescribed by the rules is not improper (88 C.J.S. 206-207). Such a relaxed procedure is especially true in administrative bodies, such as the ERB which in matters of rate or price fixing is considered as exercising a quasi-legislative, not quasi-judicial, function As such administrative agency; it is not bound by the strict or technical rules of evidence governing court proceedings. In the Maceda case, (G.R. Nos. 95203-05, supra) this Court has already ruled that "the Board Order authorizing the proceeds generated by the increase to be deposited to the OPSF is not an act of taxation but is authorized by Presidential Decree No. 1956, as amended by Executive Order No. 137. We lament Our helplessness over this second provisional increase in oil price. We have stated that this "is a question best judged by the political leadership" (G.R. Nos. 95203-05, G.R. Nos. 9511921, supra). We wish to reiterate Our previous pronouncements therein that while the government is able to justify a provisional increase, these findings "are not final, and it is up to petitioners to demonstrate that the present economic picture does not warrant a permanent increase." In this regard, We also note the Solicitor General's comments that "the ERB is not averse to the idea of a presidential review of its decision," except that there is no law at present authorizing the same. Perhaps, as pointed out by Justice Padilla, our lawmakers may see the wisdom of allowing presidential review of the decisions of the ERB since, despite its being a quasi-judicial body, it is still "an administrative body under the Office of the President whose decisions should be appealed to the President under the established principle of exhaustion of administrative remedies," especially on a matter as transcendental as oil price increases which affect the lives of almost an Filipinos.

MACEDA v. ENERGYREGULATORY BOARD G.R. No. 96266 July 18, 1991 Topic: Power to Tax Cannot be Delegated Facts: Upon the outbreak of the Persian Gulf conflict on August 2, 1990, private respondents oil companies filed with the ERB their respective applications on oil price increases (docketed as ERB Case Nos. 90106, 90-382 and 90-384, respectively). On September 21, 1990, the ERB issued an order granting a provisional increase of P1.42 per liter. Petitioner Maceda filed a petition for Prohibition on September 26, 1990 (E. Maceda v. ERB, et al., G.R. No. 95203), seeking to nullify the provisional increase. We dismissed the petition on December 18, 1990, reaffirming ERB's authority to grant provisional increase even without prior hearing. In the same order of September 21, 1990, authorizing provisional increase, the ERB set the applications for hearing with due notice to all interested parties on October 16, 1990. Petitioner Maceda failed to appear at said hearing as well as on the second hearing on October 17, 1990. To afford registered oppositors the opportunity to cross-examine the witnesses, the ERB set the continuation of the hearing to October 24, 1990. This was postponed to November 5, 1990, on written notice of petitioner Maceda. On November 5, 1990, the three oil companies filed their respective motions for leave to file or admit amended/supplemental applications to further increase the prices of petroleum products. The ERB admitted the respective supplemental/amended petitions on November 6, 1990 at the same time requiring applicants to

MACEDA v. MACARAIG G.R. No. 88291 June 8, 1993 Topic: Power to Tax Cannot be Delegated Facts:

Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines. The sum of P250, 000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work. The main source of funds for the NPC was the flotation of bonds in the capital markets and these bonds . . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face of said bonds. . . . . On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. The tax provision related to the repayment of these loans was not amended or deleted. On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100, 000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government. No tax exemption was incorporated in said Act.

On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250, 000,000.00 with the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300, 000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Issue: Whether or not the power to tax can be delegated. Held: Only the Legislature has the power to grant tax exemptions. The pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and Executive Order No. 93 (S'86): On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC. On July 30, 1977, P.D. 1177 was issued, the law decreed that: All units of government, including governmentowned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees are imposed under revenues laws: provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund. On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino assassination, P.D. No. 1931 was issued to reiterate that: WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to any government-owned or controlled corporation and all other units of government; On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or grant of tax exemption to other government and private entities without benefit of review by the Fiscal Incentives Review Board. A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes direct and indirect. As the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from refunding said amount because of Our ruling that NPC has both direct and indirect tax exemption

privileges. Neither can We order the BIR to refund said amount to NPC as there is no pending petition for review on certiorari of a suit for its collection before Us. At any rate, at this point in time, NPC can no longer file any suit to collect said amount even if it has previously filed a claim with the BIR because it is time-barred under Section 230 of the National Internal Revenue Code of 1977. as amended, which states: In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty REGARDLESS of any supervening cause that may arise after payment. . . . The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for the amount of P410, 580,000.00 had been made on said date. It is clear that more than two (2) years had already elapsed from said date. At the same time, We should note that there is no legal obstacle to the BIR granting, even without a suit by NPC, the tax credit or refund claimed by NPC, assuming that NPC's claim had been made seasonably, and assuming the amounts covered had actually been paid previously by the oil companies to the BIR.

(Educational Values) of Article XIV of the 1987 Constitution. Issue: Whether petitioners, as taxpayers and practicing lawyers (petitioner Basco being also the Chairman of the Committee on Laws of the City Council of Manila), can question and seek the annulment of PD 1869. Held: The respondents are questioning the legal personality of petitioners to file the instant petition. Considering however the importance to the public of the case at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine whether or not the other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of this petition. Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling does not mean that the Government cannot regulate it in the exercise of its police power.

BASCO v. PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR) G.R. No. 91649 May 14, 1991 Topic: Power to Tax Cannot be Delegated Facts: This is an instant petition seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter PD 1869, because it is allegedly contrary to morals, public policy and order. The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines." Its operation was originally conducted in the well-known floating casino "Philippine Tourist." The operation was considered a success for it proved to be a potential source of revenue to fund infrastructure and socioeconomic projects, thus, P.D. 1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective. Petitioners are questioning the validity of P.D. No. 1869. They allege that the same is "null and void" for being "contrary to morals, public policy and public order," monopolistic and tends toward "crony economy", and is violative of the equal protection clause and local autonomy as well as for running counter to the state policies enunciated in Sections 11 (Personal Dignity and Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 2

The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386). What was the reason behind the enactment of P.D. 1869? P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an appropriate institution all games of chance authorized by existing franchise or permitted by law" (1st whereas clause, PD 1869). As was subsequently proved, regulating and centralizing gambling operations in one corporate entity the PAGCOR, was beneficial not just to the Government but to society in general. It is a reliable source of much needed revenue for the cash strapped Government. It provided funds for social impact projects and subjected gambling to "close scrutiny, regulation, supervision and control of the Government" (4th Whereas Clause, PD 1869). With the creation of PAGCOR and the direct intervention of the Government, the evil practices and corruptions that go with gambling will be minimized if not totally eradicated. Public welfare, then, lies at the bottom of the enactment of PD 1896. Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local autonomy.

Their contention stated hereinabove is without merit for the following reasons: (a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes; (b) The Charter of the City of Manila is subject to control by Congress. And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. (c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government. (d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. (e) The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State concern and hence, it is the sole prerogative of the State to retain it or delegate it to local governments. As gambling is usually an offense against the State, legislative grant or express charter power is generally necessary to empower the local corporation to deal with the subject. . . . In the absence of express grant of power to enact, ordinance provisions on this subject which are inconsistent with the state laws are void. Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so when the gambling resorted to is excessive. This excessiveness necessarily depends not only on the financial resources of the gambler and his family but also on his mental, social, and spiritual outlook on life. However, the mere fact that some persons may have lost their material fortunes, mental control, physical health, or even their lives does not necessarily mean that the same are directly attributable to gambling. Gambling may have been the antecedent, but certainly not necessarily the cause. For the same consequences could have been preceded by an overdose of food, drink, exercise, work, and even sex.

the position in the Batasan Pambansa; while petitioner Romeo B. Igot alleges that, as a taxpayer, he has standing to petition by mandamus the calling of a special election as mandated by the 1973 Constitution. As reason for their petition, petitioners allege that they are "... deeply concerned about their duties as citizens and desirous to uphold the constitutional mandate and rule of law ...; that they have filed the instant petition on their own and in behalf of all other Filipinos since the subject matters are of profound and general interest. " The respondent COMELEC, represented by counsel, opposes the petition alleging, substantially, that 1) petitioners lack standing to file the instant petition for they are not the proper parties to institute the action; 2) this Court has no jurisdiction to entertain this petition; and 3) Section 5(2), Article VIII of the 1973 Constitution does not apply to the Interim Batasan Pambansa. Issue: Whether or not petitioners lack standing to file the instant petition for they are not the proper parties to institute the action. Held: As taxpayers, petitioners may not file the instant petition, for nowhere therein is it alleged that tax money is being illegally spent. The act complained of is the inaction of the COMELEC to call a special election, as is allegedly its ministerial duty under the constitutional provision above cited, and therefore, involves no expenditure of public funds. It is only when an act complained of, which may include a legislative enactment or statute, involves the illegal expenditure of public money that the so-called taxpayer suit may be allowed. What the case at bar seeks is one that entails expenditure of public funds which may be illegal because it would be spent for a purpose that of calling a special election which, as will be shown, has no authority either in the Constitution or a statute. As voters, neither have petitioners the requisite interest or personality to qualify them to maintain and prosecute the present petition. The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement. In the case before Us, the alleged inaction of the COMELEC to call a special election to fill-up the existing vacancies in the Batasan Pambansa, standing alone, would adversely affect only the generalized interest of all citizens. Petitioners' standing to sue may not be predicated upon an interest of the kind alleged here, which is held in common by all members of the public because of the necessarily abstract nature of the injury supposedly shared by all citizens. Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution. When the asserted harm is a "generalized grievance" shared in substantially equal measure by all or a large class of citizens, that harm alone normally does not warrant exercise of jurisdiction. As adverted to earlier, petitioners have

LOZADA v. COMMISSIONER 120 SCRA 337 Topic: Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit Facts: Petitioner Lozada claims that he is a taxpayer and a bonafide elector of Cebu City and a transient voter of Quezon City, Metro Manila, who desires to run for

not demonstrated any permissible personal stake, for petitioner Lozadas interest as an alleged candidate and as a voter are not sufficient to confer standing. Petitioner Lozada does not only fail to inform the Court of the region he wants to be a candidate but makes indiscriminate demand that special election be called throughout the country.

restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. The tax provision related to the repayment of these loans was not amended or deleted. On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100, 000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government. No tax exemption was incorporated in said Act. On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250, 000,000.00 with the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300, 000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Issue: Whether or not the petitioner is a proper party to question validity of the tax exemption of the private respondent National Power Corporation Held: Petitioner Ernesto Maceda asks this Court to reconsider said Decision regarding matter of indirect tax exemption of the private respondent National Power Corporation (NPC). Lest We be criticized for denying due process to the petitioner. We have decided to take a second look at the issues. In the process, a hearing was held on July 9, 1992 where all parties presented their respective arguments. Etched in this Court's mind are the paradoxical claims by both petitioner and private respondents that their respective positions are for the benefit of the Filipino people.

MACEDA v. MACARAIG G.R. No. 88291 June 8, 1993 Topic: Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit Facts: Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines. The sum of P250, 000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work. The main source of funds for the NPC was the flotation of bonds in the capital markets and these bonds . . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face of said bonds. . . . . On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and

CHAVEZ v. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) G.R. No. 130716 May 19, 1999 Topic: Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit Facts: Movants Ma. Imelda Marcos-Manotoc, Ferdinand R. Marcos II and Irene Marcos-Araneta allege that they are parties and signatories to the General and

Supplemental Agreements dated December 28, 1993, which this Court, in its Decision promulgated on December 9, 1998, declared "NULL AND VOID for being contrary to law and the Constitution." As such, they claim to "have a legal interest in the matter in litigation, or in the success of either of the parties or an interest against both as to warrant their intervention." They add that their exclusion from the instant case resulted in a denial of their constitutional rights to due process and to equal protection of the laws. They also raise the "principle of hierarchical administration of justice" to impugn the Court's cognizance of petitioner's direct action before it. Issue: Whether or not Movants Ma. Imelda MarcosManotoc, Ferdinand R. Marcos II and Irene MarcosAraneta have a legal interest in the matter in litigation. Held: The assailed Decision has become final and executory; the original parties have not filed any motion for reconsideration, and the period for doing so has long lapsed. Indeed, the movants are now legally barred from seeking leave to participate in this proceeding. Movants claim that their exclusion from the proceeding regarding the Agreements to which they were parties and signatories was a denial of "their property right to contract without due process of law." We rule that the movants are merely incidental, not indispensable, parties to the instant case. Being contractors to the General and Supplemental Agreements involving their supposed properties, they claim that their interests are affected by the petition. However, as exhaustively discussed in the assailed Decision, the Agreements undeniably contain terms an condition that are clearly contrary to the Constitution and the laws and are not subject to compromise. Such terms and conditions cannot be granted by the PCGG to anyone, not just to movants. Being so, no argument of the contractors will make such illegal and unconstitutional stipulations pass the test of validity. The void agreement will not be rendered operative by the parties' alleges performance (partial or full) of their respective prestations. A contract that violates the Constitution and the law is null and void ab intio and vests no rights and creates no obligations. It produces no legal effect at all. In legal terms, the movants have really no interest to protect or right to assert in this proceeding. Contrary to their allegations, no infraction upon their rights has been committed. The original petition of Francisco I. Chavez sought to enforce a constitutional right against the Presidential Commission on Good Government (PCGG) and to determine whether the latter has been acting within the bounds of its authority. In the process of adjudication, there is no need to call on each and every party whom said agency has contracted with. In any event, we are now ruling on the merits of the arguments raised by movants; hence, they can no

longer complain of not having been heard in this proceeding.

GONZALES v. NARVASA G. R. No. 140835. August 14, 2000 Topic: Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit Facts: In this petition for prohibition and mandamus filed on December 9, 1999, petitioner Ramon A. Gonzales, in his capacity as a citizen and taxpayer, assails the constitutionality of the creation of the Preparatory Commission on Constitutional Reform (PCCR) and of the positions of presidential consultants, advisers and assistants. The Preparatory Commission on Constitutional Reform (PCCR) was created by President Estrada on November 26, 1998 by virtue of Executive Order No. 43 (E.O. No. 43) in order to study and recommend proposed amendments and/or revisions to the 1987 Constitution, and the manner of implementing the same. Petitioner disputes the constitutionality of the PCCR on two grounds. First, he contends that it is a public office which only the legislature can create by way of a law. Secondly, petitioner asserts that by creating such a body the President is intervening in a process from which he is totally excluded by the Constitution the amendment of the fundamental charter Issue: Whether a party has alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions. Held: In assailing the constitutionality of E.O. Nos. 43 and 70, petitioner asserts his interest as a citizen and taxpayer. A citizen acquires standing only if he can establish that he has suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and the injury is likely to be redressed by a favorable action. Coming now to the instant case, petitioner has not shown that he has sustained or is in danger of sustaining any personal injury attributable to the creation of the PCCR. If at all, it is only Congress, not petitioner, which can claim any injury in this case since, according to petitioner, the President has encroached upon the legislatures powers to create a public office and to propose amendments to the Charter by forming the PCCR. Petitioner has sustained no direct, or even any indirect, injury. Neither does he claim that his rights or privileges

have been or are in danger of being violated, nor that he shall be subjected to any penalties or burdens as a result of the PCCRs activities. Clearly, petitioner has failed to establish his locus standi so as to enable him to seek judicial redress as a citizen. A taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public funds have been disbursed in alleged contravention of the law or the Constitution. Thus payers action is properly brought only when there is an exercise by Congress of its taxing or spending power. This was our ruling in a recent case wherein petitioners Telecommunications and Broadcast Attorneys of the Philippines (TELEBAP) and GMA Network, Inc. questioned the validity of section 92 of B.P. No. 881 (otherwise knows as the Omnibus Election Code) requiring radio and television stations to give free air time to the Commission on Elections during the campaign period. The Court held that petitioner TELEBAP did not have any interest as a taxpayer since the assailed law did not involve the taxing or spending power of Congress. In the final analysis, it must be stressed that the Court retains the power to decide whether or not it will entertain a taxpayers suit. In the case at bar, there being no exercise by Congress of its taxing or spending power, petitioner cannot be allowed to question the creation of the PCCR in his capacity as a taxpayer, but rather, he must establish that he has a personal and substantial interest in the case and that he has sustained or will sustain direct injury as a result of its enforcement.

On December 28, 2000, the RP, through Charge dAffaires Enrique A. Manalo, signed the Rome Statute which, by its terms, is "subject to ratification, acceptance or approval" by the signatory states.As of the filing of the instant petition, only 92 out of the 139 signatory countries appear to have completed the ratification, approval and concurrence process. The Philippines is not among the 92. On May 9, 2003, then Ambassador Francis J. Ricciardone sent US Embassy Note No. 0470 to the Department of Foreign Affairs (DFA) proposing the terms of the non-surrender bilateral agreement between the USA and the RP. The Agreement pertinently provides as follows: 1. For purposes of this Agreement, "persons" are current or former Government officials, employees (including contractors), or military personnel or nationals of one Party. 2. Persons of one Party present in the territory of the other shall not, absent the express consent of the first Party, a. be surrendered or transferred by any means to any international tribunal for any purpose, unless such tribunal has been established by the UN Security Council, or b. be surrendered or transferred by any means to any other entity or third country, or expelled to a third country, for the purpose of surrender to or transfer to any international tribunal, unless such tribunal has been established by the UN Security Council. 3. When the [US] extradites, surrenders, or otherwise transfers a person of the Philippines to a third country, the [US] will not agree to the surrender or transfer of that person by the third country to any international tribunal, unless such tribunal has been established by the UN Security Council, absent the express consent of the Government of the Republic of the Philippines [GRP]. 4. When the [GRP] extradites, surrenders, or otherwise transfers a person of the [USA] to a third country, the [GRP] will not agree to the surrender or transfer of that person by the third country to any international tribunal, unless such tribunal has been established by the UN Security Council, absent the express consent of the Government of the [US]. 5. This Agreement shall remain in force until one year after the date on which one party notifies the other of its intent to terminate the Agreement. The provisions of this Agreement shall continue to apply with respect to any act occurring, or any allegation arising, before the effective date of termination. In this proceeding, petitioner imputes grave abuse of discretion to respondents in concluding and ratifying the Agreement and prays that it be struck down as unconstitutional, or at least declared as without force and effect. For their part, respondents question petitioners standing to maintain a suit and counter that the Agreement, being in the nature of an executive agreement, does not require Senate concurrence for its efficacy. And for reasons detailed in their

BAYAN MUNA V. EXECUTIVE SECRETARY G.R. No. 159618 February 1, 2011 Topic: Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit Facts: This petition for certiorari, mandamus and prohibition under Rule 65 assails and seeks to nullify the NonSurrender Agreement concluded by and between the Republic of the Philippines (RP) and the United States of America (USA). Petitioner Bayan Muna is a duly registered party-list group established to represent the marginalized sectors of society. Respondent Blas F. Ople, now deceased, was the Secretary of Foreign Affairs during the period material to this case. Respondent Alberto Romulo was impleaded in his capacity as then Executive Secretary. Having a key determinative bearing on this case is the Rome Statute establishing the International Criminal Court (ICC) with "the power to exercise its jurisdiction over persons for the most serious crimes of international concern x x x and shall be complementary to the national criminal jurisdictions." The serious crimes adverted to cover those considered grave under international law, such as genocide, crimes against humanity, war crimes, and crimes of aggression.

comment, respondents assert the constitutionality of the Agreement. Issue: Locus Standi of Petitioner. Held: Petitioner, through its three party-list representatives, contends that the issue of the validity or invalidity of the Agreement carries with it constitutional significance and is of paramount importance that justifies its standing. Cited in this regard is what is usually referred to as the emergency powers cases,in which ordinary citizens and taxpayers were accorded the personality to question the constitutionality of executive issuances. Locus standi is "a right of appearance in a court of justice on a given question."Specifically, it is "a partys personal and substantial interest in a case where he has sustained or will sustain direct injury as a result" of the act being challenged, and "calls for more than just a generalized grievance." The term "interest" refers to material interest, as distinguished from one that is merely incidental. The rationale for requiring a party who challenges the validity of a law or international agreement to allege such a personal stake in the outcome of the controversy is "to assure the concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions." Locus standi, however, is merely a matter of procedure and it has been recognized that, in some cases, suits are not brought by parties who have been personally injured by the operation of a law or any other government act, but by concerned citizens, taxpayers, or voters who actually sue in the public interest.Consequently, in a catena of cases,this Court has invariably adopted a liberal stance on locus standi. Going by the petition, petitioners representatives pursue the instant suit primarily as concerned citizens raising issues of transcendental importance, both for the Republic and the citizenry as a whole. When suing as a citizen to question the validity of a law or other government action, a petitioner needs to meet certain specific requirements before he can be clothed with standing. Francisco, Jr. v. Nagmamalasakit na mga Manananggol ng mga Manggagawang Pilipino, Inc. expounded on this requirement, thus: In a long line of cases, however, concerned citizens, taxpayers and legislators when specific requirements have been met have been given standing by this Court. When suing as a citizen, the interest of the petitioner assailing the constitutionality of a statute must be direct and personal. He must be able to show, not only that the law or any government act is invalid, but also that he sustained or is in imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some

burdens or penalties by reason of the statute or act complained of. In fine, when the proceeding involves the assertion of a public right, the mere fact that he is a citizen satisfies the requirement of personal interest. In the case at bar, petitioners representatives have complied with the qualifying conditions or specific requirements exacted under the locus standi rule. As citizens, their interest in the subject matter of the petition is direct and personal. At the very least, their assertions questioning the Agreement are made of a public right, i.e., to ascertain that the Agreement did not go against established national policies, practices, and obligations bearing on the States obligation to the community of nations. At any event, the primordial importance to Filipino citizens in general of the issue at hand impels the Court to brush aside the procedural barrier posed by the traditional requirement of locus standi, as we have done in a long line of earlier cases, notably in the old but oft-cited emergency powers cases and Kilosbayan v. Guingona, Jr. In cases of transcendental importance, we wrote again in Bayan v. Zamora, "The Court may relax the standing requirements and allow a suit to prosper even where there is no direct injury to the party claiming the right of judicial review." Moreover, bearing in mind what the Court said in Taada v. Angara, "that it will not shirk, digress from or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or department of the government," we cannot but resolve head on the issues raised before us. Indeed, where an action of any branch of government is seriously alleged to have infringed the Constitution or is done with grave abuse of discretion, it becomes not only the right but in fact the duty of the judiciary to settle it. As in this petition, issues are precisely raised putting to the fore the propriety of the Agreement pending the ratification of the Rome Statute.

DEL MAR v. PAGCOR G.R. No. 138298 August 24, 2001 Topic: Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit Facts: In it's decision, dated 29 November 2000, the Court granted petitions filed by Raoul B. Del Mar, Federico S. Sandoval 11 and Michael T. Defensor to enjoin the Philippine Amusement and Gaming Corporation (PAGCOR), Belle Jai-Alai Corporation (BELLE) and Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) from operating, maintaining or managing jai-alai games and from enforcing the th 17 June 1999 Agreement entered into among said respondents for that purpose. Issue:

Whether PAGCOR itself has a valid franchise to conduct jai-alai games? Whether PAGCOR can operate, maintain or manage jai-alai games in association with Belle and Filgame according to their assailed agreement? Held: On the issue of whether PAGCOR itself has a valid franchise to conduct jai-alai games, five members of the Court (Chief Justice Hilario G. Davide, Jr., and Justices Reynato S. Puno, Artemio V. Panganiban, Bernardo P. Pardo, and Minerva P. GonzagaReyes) have voted in the negative and ten members of the Court (Justices Josue N. Bellosillo, Jose A. R. Melo, Jose C. Vitug, Vitug, Vicente V. Mendoza, Santiago M. Kapunan, Leonardo A. Quisumbing, Arturo B. Buena, Consuelo Ynares-Santiago, Sabino R. De Leon, Jr. and Angelina Sandoval-Gutierrez) have voted in the affirmative; and On the issue of whether PAGCOR can operate, maintain or manage jai-alai games in association with Belle and Filgame according to their assailed agreement, only seven members of the Court (Justices Josue N. Bellosillo, Jose A. R. Melo, Santiago M. Kapunan, Leonardo A. Quisumbing, Consuelo Ynares-Santiago, Sabino R. De Leon, Jr., and Angelina Sandoval-Gutierrez) have voted in the affirmative; while eight members of the Court have voted in the negative five justices (Chief Justice Hilario G. Davide, Jr., and Justices Reynato S. Puno, Artemio V. Panganiban, Bernardo P. Pardo, and Minerva P. Gonzaga-Reyes) have voted in the negative on the thesis that PAGCOR has no franchise to operate, maintain, or manage jai-alai, and three justices (Justices Jose C. Vitug, Vicente V. Mendoza, and Arturo B. Buena) have voted in the negative on the ground that only PAGCOR by itself, not with any other person or entity, can operate, maintain, or manage jai-alai games. WHEREFORE, acting on the instant motions for clarification filed by respondents and on the basis of the results of the voting heretofore elucidated, the Court resolves (a) to partially GRANT the motions for clarification insofar as it is prayed that Philippine Amusement and Gaming Corporation (PAGCOR) has a valid franchise to, but only by itself (i.e., not in association with any other person or entity), operate, maintain and/or manage the game of jai-alai, and (b) to DENY the motions insofar as respondents would also seek a reconsideration of the Court's decision of 29 November 2000 that has, since then, (i) enjoined the continued operation, maintenance, and/or management of jai-alai games by PAGCOR in association with its co-respondents Belle Jai-Alai Corporation and/or Filipinas Gaming Entertainment Totalizator Corporation and (ii) held to be without force and effect the agreement of 17 June 1999 among said respondents.

Facts: In the early part of 1988, Vice Mayor Amelita Navarro, while serving as Acting Mayor of the City of Santiago because of the suspension of Mayor Jose Miranda, appointed the above-named respondents to various positions in the city government. Their appointments were with permanent status and based on the evaluation made by the City Personnel Selection and Promotion Board (PSPB) created 3 pursuant to Republic Act No. 7160. The Civil Service Commission (CSC) approved the appointments. When Mayor Jose Miranda reassumed his post on March 5, 1998 after his suspension, he considered the composition of the PSPB irregular since the majority party, to which he belongs, was not properly 4 represented. He then formed a three-man special performance audit team composed of Roberto C. Bayaua, Antonio AL. Martinez and Antonio L. Santos, to conduct a personnel evaluation audit of those who were previously screened by the PSPB and those on probation. After conducting the evaluation, the audit team submitted to him a report dated June 8, 1998 stating that the respondents were found "wanting in (their) performance." On June 10, 1998, or three months after Mayor Miranda reassumed his post, he issued an order terminating respondents services effective June 15, 1998 because they "performed poorly" during the probationary period. Respondents appealed to the CSC, contending that 5 being employees on probation, they can be dismissed from the service on the ground of poor performance only after their probationary period of six months, not after three (3) months. They also denied that an evaluation on their performance was conducted; hence, their dismissal from the service violated their right to due process. On October 19, 1998, the CSC issued Resolution No. 982717 reversing the order of Mayor Miranda and ordering that respondents be reinstated to their former positions with payment of backwages. Meanwhile, the COMELEC disqualified Mayor Jose Miranda as a mayoralty candidate in the 1998 May elections. His son Joel G. Miranda, herein petitioner, substituted for him and was proclaimed Mayor of Santiago City. He then filed a motion for reconsideration of the CSC Resolution No. 982717 (in favor of respondents) but it was denied in the CSC Resolution No. 990557 dated March 3, 1999. Petitioner then filed with the Court of Appeals a petition for review on certiorari. On May 21, 1999, the Court of Appeals rendered a Decision affirming in toto the CSC Resolution No. 982717. Forthwith, petitioner filed a motion for reconsideration, but before it could be resolved by the Court of Appeals, several events supervened. This Court, in G.R. No. 136351, "Joel G. Miranda vs. Antonio M. Abaya and the COMELEC," set aside the proclamation of petitioner as Mayor of Santiago City for lack of a certificate of candidacy and declared Vice Mayor 7 Amelita Navarro as City Mayor by operation of law.

MIRANDA v. CARREON G.R. No. 143540 April 11, 2003 Topic: Who May Question the Validity of a Tax Measure or Expenditure of Taxes? Taxpayer Suit

On December 20, 1999, Mayor Navarro filed with the Court of Appeals a "Motion to Withdraw the Motion for Reconsideration" (previously submitted by former Mayor Joel G. Miranda). On June 5, 2000, the Court of Appeals denied petitioners motion for reconsideration of its Decision. On June 11, 2000, the Court of Appeals granted Mayor Navarros "Motion to Withdraw the Motion for Reconsideration." In effect, the CSC Resolution reinstating respondents to their positions stays. In this petition, petitioner Joel G. Miranda contends that the Court of Appeals erred in affirming the CSC Resolution declaring that the termination of respondents services is illegal and ordering their reinstatement to their former positions with payment of backwages. Respondents claim that since petitioner ceased to be Mayor of Santiago City, he has no legal personality to file the instant petition and, therefore, the same should be dismissed. They insist that they were not actually evaluated on their performance. But assuming there was indeed such an evaluation, it should have been done by their immediate supervisors, not by those appointed by former Mayor Jose Miranda. In his reply, petitioner contends that as a taxpayer, he has a legal interest in the case at bar, hence, can lawfully file this petition. Issue: Locus Standi of the Petitioner Held: Section 17, Rule 3 of the 1997 Rules of Civil Procedure, as amended, provides: "Sec. 17. Death or separation of a party who is a public officer. When a public officer is a party in an action in his official capacity and during its pendency dies, resigns or otherwise ceases to hold office, the action may be continued and maintained by or against his successor if, within thirty (30) days after the successor takes office or such time as may be granted by the Court, it is satisfactorily shown by any party that there is substantial need for continuing or maintaining it and the successor adopts or continues or threatens to adopt or continue the action of his predecessor." It is clear from the above Rule that when petitioner ceased to be mayor of Santiago City, the action may be continued and maintained by his successor, Mayor Amelita Navarro, if there is substantial need to do so. Mayor Navarro, however, found no substantial need to continue and maintain the action of her predecessor in light of the CSC Resolution declaring that respondents services were illegally terminated by former Mayor Jose Miranda. In fact, she filed with the Court of Appeals a"Motion to Withdraw the Motion for Reconsideration" (lodged by petitioner). She likewise reinstated all the respondents to their respective positions and approved the payment of their salaries. Petitioner insists though that as a taxpayer, he is a real party-in-interest and, therefore, should continue

and maintain this suit. Such contention is misplaced. Section 2, Rule 3 of the same Rules provides: "Section 2. Parties in interest. - A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest." Even as a taxpayer, petitioner does not stand "to be benefited or injured by the judgment of the suit." Not every action filed by a taxpayer can qualify to challenge the legality of official acts done by the 8 government. It bears stressing that "a taxpayers suit refers to a case where the act complained of directly involves the illegal disbursement of public funds from taxation." The issue in this case is whether respondents services were illegally terminated. Clearly, it does not involve the illegal disbursement of public funds; hence, petitioners action cannot be considered a taxpayers suit. In fine, we hold that petitioner, not being a real party in interest, has no legal personality to file this petition. Besides, his motion for reconsideration was validly withdrawn by the incumbent Mayor. Even assuming he is a real party in interest, we see no reason to disturb the findings of both the CSC and the Court of Appeals. The reinstatement of respondents who, unfortunately, were victims of political bickering, is in order.

CALTEX v. COMMISSION ON AUDIT G.R. No. 92585 May 8, 1992 Topic: Inherent Limitations: Purpose Must Be Public in Nature Facts: This is a petition erroneously brought under Rule 44 of the Rules of Court questioning the authority of the Commission on Audit (COA) in disallowing petitioner's claims for reimbursement from the Oil Price Stabilization Fund (OPSF) and seeking the reversal of said Commission's decision denying its claims for recovery of financing charges from the Fund and reimbursement of under recovery arising from sales to the National Power Corporation, Atlas Consolidated Mining and Development Corporation (ATLAS) and Marcopper Mining Corporation (MARCOPPER), preventing it from exercising the right to offset its remittances against its reimbursement visa-vis the OPSF and disallowing its claims which are still pending resolution before the Office of Energy Affairs (OEA) and the Department of Finance (DOF). The issues raised revolve around the OPSF created under Section 8 of Presidential Decree (P.D.) No. 1956, as amended by Executive Order (E.O.) No. 137. As amended, said Section 8 reads as follows: Sec. 8 . There is hereby created a Trust Account in the books of accounts of the Ministry of Energy to be designated as Oil Price Stabilization Fund (OPSF)

for the purpose of minimizing frequent price changes brought about by exchange rate adjustments and/or changes in world market prices of crude oil and imported petroleum products. The Oil Price Stabilization Fund may be sourced from any of the following: a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister of Finance in consultation with the Board of Energy; b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy; c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an appropriate Order that may be issued by the Board of Energy requiring payment by persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products; d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. The Fund herein created shall be used for the following: 1) To reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustment and/or increase in world market prices of crude oil; 2) To reimburse the oil companies for possible cost under-recovery incurred as a result of the reduction of domestic prices of petroleum products. The magnitude of the under recovery, if any, shall be determined by the Ministry of Finance. "Cost under recovery" shall include the following: i. Reduction in oil company take as directed by the Board of Energy without the corresponding reduction in the landed cost of oil inventories in the possession of the oil companies at the time of the price change; ii. Reduction in internal ad valorem taxes as a result of foregoing government mandated price reductions; iii. Other factors as may be determined by the Ministry of Finance to result in cost under recovery. The Oil Price Stabilization Fund (OPSF) shall be administered by the Ministry of Energy. Issue: Whether or not OPSF contributions are not for a public purpose. Held: We find no merit in petitioner's contention that the OPSF contributions are not for a public purpose

because they go to a special fund of the government. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to 57 be within the police power of the state. There can be no doubt that the oil industry is greatly imbued with public interest as it vitally affects the general welfare. Any unregulated increase in oil prices could hurt the lives of a majority of the people and cause economic crisis of untold proportions. It would have a chain reaction in terms of, among others, demands for wage increases and upward spiraling of the cost of basic commodities. The stabilization then of oil prices is of prime concern which the state, via its police power, may properly address.

PASCUAL v. SECRETARY OF PUBLIC WORKS G.R. No. L-10405 December 29, 1960 Topic: Inherent Limitations: Purpose Must Be Public in Nature Facts: On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted this action for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An Act Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and improvement" of Pasig feeder road terminals (Gen. Roxas Gen. Araneta Gen. Lucban Gen. Capinpin Gen. Segundo Gen. Delgado Gen. Malvar Gen. Lim)"; that, at the time of the passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . . Pasig, Rizal" (according to the tracings attached to the petition as Annexes A and B, near Shaw Boulevard, not far away from the intersection between the latter and Highway 54), which projected feeder roads "do not connect any government property or any important premises to the main highway"; that the aforementioned Antonio Subdivision (as well as the lands on which said feeder roads were to be construed) were private properties of respondent Jose C. Zulueta, who, at the time of the passage and approval of said Act, was a member of the Senate of the Philippines. The appropriation of P85,000.00 therein made, for the construction, reconstruction, repair, extension and improvement of said projected feeder roads, was illegal and, therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress because its members were made to believe that the projected feeder roads in question were "public roads and not private streets of a private subdivision"'; that, "in order to give a semblance of legality, when there is absolutely none, to the aforementioned appropriation". Issue:

Whether or not the item of Republic Act No. 920: The appropriation of P85,000.00 therein made, for the construction, reconstruction, repair, extension and improvement of said projected feeder roads is for public purpose. Held: According to said petition, respondent Zulueta is the owner of several parcels of residential land situated in Pasig, Rizal, and known as the Antonio Subdivision, certain portions of which had been reserved for the projected feeder roads aforementioned, which, admittedly, were private property of said respondent when Republic Act No. 920, appropriating P85,000.00 for the "construction, reconstruction, repair, extension and improvement" of said roads, was passed by Congress, as well as when it was approved by the President on June 20, 1953. The petition further alleges that the construction of said roads, to be undertaken with the aforementioned appropriation of P85,000.00, would have the effect of relieving respondent Zulueta of the burden of constructing his subdivision streets or 1 roads at his own expenses, and would "greatly enhance or increase the value of the subdivision" of said respondent. The lower court held that under these circumstances, the appropriation in question was "clearly for a private, not a public purpose." As regards the legal feasibility of appropriating public funds for a public purpose, the principle according to Ruling Case Law, is this: It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose. . . . It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of private enterprises or business, does not justify their aid by the use public money. The rule is set forth in Corpus Juris Secundum in the following language: In accordance with the rule that the taxing power must be exercised for public purposes only, discussed supra sec. 14, money raised by taxation can be expended only for public purposes and not for the advantage of private individuals. The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public. The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter consists of an amendment of the organic law, removing, with retrospective operation, the constitutional limitation infringed by said statute.

Referring to the P85,000.00 appropriation for the projected feeder roads in question, the legality thereof depended upon whether said roads were public or private property when the bill, which, latter on, became Republic Act 920, was passed by Congress, or, when said bill was approved by the President and the disbursement of said sum became effective, or on June 20, 1953. Inasmuch as the land on which the projected feeder roads were to be constructed belonged then to respondent Zulueta, the result is that said appropriation sought a private purpose, and hence, was null and void. The donation to the Government, over five (5) months after the approval and effectivity of said Act, made, according to the petition, for the purpose of giving a "semblance of legality", or legalizing, the appropriation in question, did not cure its aforementioned basic defect. Consequently, a judicial nullification of said donation need not precede the declaration of unconstitutionality of said appropriation.

TIO v. VIDEOGRAM REGULATORY BOARD G.R. No. L-75697 June 18, 1987 Topic: Inherent Limitations: Purpose Must Be Public in Nature Facts: This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). Issue: Whether or not the tax provision of the DECREE: Act Creating the Videogram Regulatory Board is constitutional and for public purpose. Held: Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without merit. That section reads, inter alia: Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion picture or audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission.

The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the DECREE, which is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent with, nor foreign to that general subject and title. As a tool for regulation it is simply one of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose of the DECREE to include taxation of the video industry in order to regulate and rationalize the heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5. Those preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE, which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the title or that the latter be an index to the body of the DECREE. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization that earnings of videogram establishments of around P600 million per annum have not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is an end-user tax, imposed on retailers for every videogram they make available for public viewing. It is similar to the 30% amusement tax imposed or borne by the movie industry which the theaterowners pay to the government, but which is passed on to the entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram operators. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition: The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another. It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation".

Taxation has been made the implement of the state's police power. At bottom, the rate of tax is a matter better addressed to the taxing legislature.

GASTON v. REPUBLIC PLANTER G.R. No. L-77194 March 15, 1988 Topic: Inherent Limitations: Purpose Must Be Public in Nature Facts: Petitioners are sugar producers, sugarcane planters and millers, who have come to this Court in their individual capacities and in representation of other sugar producers, planters and millers, said to be so numerous that it is impracticable to bring them all before the Court although the subject matter of the present controversy is of common interest to all sugar producers, whether parties in this action or not. Respondent Philippine Sugar Commission (PHILSUCOM, for short) was formerly the government office tasked with the function of regulating and supervising the sugar industry until it was superseded by its co-respondent Sugar Regulatory Administration (SRA, for brevity) under Executive Order No. 18 on May 28, 1986. Although said Executive Order abolished the PHILSUCOM, its existence as a juridical entity was mandated to continue for three (3) more years "for the purpose of prosecuting and defending suits by or against it and enables it to settle and close its affairs, to dispose of and convey its property and to distribute its assets." Respondent Republic Planters Bank (briefly, the Bank) is a commercial banking corporation. Issue: The Solicitor General aptly summarizes the basic issues thus: (1) whether the stabilization fees collected from sugar planters and millers pursuant to Section 7 of P.D. No. 388 are funds in trust for them, or public funds; and (2) whether shares of stock in respondent Bank paid for with said stabilization fees belong to the PHILSUCOM or to the different sugar planters and millers from whom the fees were collected or levied. Held: From the legal standpoint, we find basis for the opinion of the Commission on Audit reading: That the government, PHILSUCOM or its successorin-interest, Sugar Regulatory Administration, in particular, owns and stocks. While it is true that the collected stabilization fees were set aside by PHILSUCOM to pay its subscription to RPB, it did not collect said fees for the account of the sugar producers. That stabilization fees are charges/levies on sugar produced and milled which accrued to PHILSUCOM under PD 338, as amended. ...

The stabilization fees collected are in the nature of a tax, which is within the power of the State to impose for the promotion of the sugar industry (Lutz vs. Araneta, 98 Phil. 148). They constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made accrue to a "Special Fund," a "Development and Stabilization Fund," almost Identical to the "Sugar Adjustment and Stabilization Fund" created under Section 6 of Commonwealth Act 567. The tax collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State (Lutz vs. Araneta). The protection of a large industry constituting one of the great sources of the state's wealth and therefore directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such an extent by public interests as to be within the police power of the sovereign. (Johnson vs. State ex rel. Marey, 128 So. 857, cited in Lutz vs. Araneta). The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of "financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market the fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose (Lawrence vs. American Surety Co., 263 Mich 586, 249 ALR 535, cited in 42 Am. Jur. Sec. 2, p. 718). Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, "administered in trust' for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be transferred to the general funds of the Government. That is the essence of the trust intended (See 1987 Constitution, Article VI, Sec. 29(3), lifted from the 1935 Constitution, Article VI, Sec. 23(l]). The character of the Stabilization Fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law (1987) Constitution, Article VI, Sec. 29[1],1973 Constitution, Article VIII, Sec. 18[l]). That the fees were collected from sugar producers, planters and millers, and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fired for their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from them since it is also they who are to be benefited from the expenditure of the funds derived from it. The investment in shares of respondent Bank is not alien to the purpose intended because of the Bank's character as a commodity bank for sugar conceived for the industry's growth and development. Furthermore, of note is the fact that one-half, (1/2) or PO.50 per picul, of the amount levied under P.D. No. 388 is to be utilized for the "payment of salaries and wages of personnel, fringe benefits and allowances of officers and employees of PHILSUCOM" thereby

immediately negating the claim that the entire amount levied is in trust for sugar, producers, planters and millers. To rule in petitioners' favor would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, "and all its components, stabilization of the domestic market," including the foreign market the industry being of vital importance to the country's economy and to national interest.

BASCO v. PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR) G.R. No. 91649 May 14, 1991 Topic: Prohibition Against Delegation Power/Exceptions; Delegation Governments

of to

Taxing Local

Facts: This is an instant petition seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter PD 1869, because it is allegedly contrary to morals, public policy and order. The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines." Its operation was originally conducted in the well known floating casino "Philippine Tourist." The operation was considered a success for it proved to be a potential source of revenue to fund infrastructure and socioeconomic projects, thus, P.D. 1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective. Petitioners are questioning the validity of P.D. No. 1869. They allege that the same is "null and void" for being "contrary to morals, public policy and public order," monopolistic and tends toward "crony economy", and is violative of the equal protection clause and local autonomy as well as for running counter to the state policies enunciated in Sections 11 (Personal Dignity and Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution. Issue: Whether or not P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; a power delegated to LGUs under the Local Government Code. Held: The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent

power to tax". Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government. Therefore, only the National Government has the power to issue "licenses or permits" for the operation of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the issuance of "licenses or permits" is no longer vested in the City of Manila. Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.

and to issue to qualified persons of licenses to drive such vehicles. Respondent city of Bunuan asserts that one of the salient provisions introduced by the Local Government Code is in the area of Local Taxation which allows LGUs to collect registration fees or charges along with, in its view, the corresponding issuance of all kinds of licenses or permits for the driving of tricycles. Relying on Section 129 and Section 133 of the Local Government Code, which read: Sec. 129. Power to Create Sources of Revenue. Each Local Government Unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subjects to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government units. Sec. 133. Common Limitations on the Taxing Power of Local Government Units. Unless otherwise provided herein, the exercise of taxing powers of provinces, cities, municipalities, and barangays shall NOT extend to the following: xxx..xxx.xxx (l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, EXCEPT tricycles Issue: Whether or not there is valid delegation to City of Butuan to collect registration fees or charges and issue all kinds of licenses or permits for the driving of tricycles. Held: The reliance made by the Respondents on the broad taxing power of LGUs, specifically under Sec. 133 of the Local Government Code, is tangential (a completely different line of thought or action). Police power and Taxation, along with Eminent Domain, are inherent powers of sovereignty which the State might SHARE with the Local Government Units by DELEGATION given under a constitutional or a statutory fiat. The power over tricycles granted under Section 458 (a)(3)(vi) of the Local Government Code to LGUs is the power to regulate their operation and to grant franchises for the operation thereof originally by LTFRB. The EXCLUSIONARY CLAUSE contained in the tax provisions of Sec. 133(l) of the Local Government Code must NOT be held to have had the effect of withdrawing the express power of LTO to cause the registration of all motor vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are essentially REGULATORY in NATURE, exercised pursuant to the POLICE POWER of the State, whose BASIC OBJCTIVES are to ACHIEVE ROAD SAFETY by insuring the road worthiness of these motor vehicles and competence of drivers.

LAND TRANSPORTATION OFFICE v. CITY OF BUNUAN G.R. No. 131512, January 20, 2000 Topic: Prohibition Against Delegation Power/Exceptions; Delegation Governments

of to

Taxing Local

Facts: The Sangguniang Panglungsod (SP) of Butuan passed SP Ordinance No. 916-92 entitled An Ordinance Regulating the Operation of Tricycles-forHire, providing mechanism for the issuance of Franchise, Registration and Permit, and Imposing Penalties for Violations thereof and for other Purposes. The ordinance provided for, among other things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a permit for the driving thereof. Petitioner LTO explains that one of the functions of the national government that has been transferred to local government units is the franchising authority over tricycles-for-hire of the Land Transportation Franchising and Regulatory Board (LTFRB) but NOT the authority of the LTO to register all motor vehicles

GARCIA V. EXECUTIVE SECRETARY

G.R. NO. L-19748 SEPTEMBER 13, 1962 Topic: Prohibition Against Delegation of Taxing Power/Exceptions; Delegation to the President Facts: On 27 November 1990, Cory issued EO 438 which imposed, in addition to any other duties, taxes and charges imposed by law on all articles imported into the Philippines, an additional duty of 5% ad valorem. This additional duty was imposed across the board on all imported articles, including crude oil and other oil products imported into the Philippines. In 1991, EO 443 increased the additional duty to 9%. In the same year, EO 475 was passed reinstating the previous 5% duty except that crude oil and other oil products continued to be taxed at 9%. Garcia, a representative from Bataan, avers that EO 475 and 478 are unconstitutional for they violate Sec 24 of Art 6 of the Constitution which provides: " All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments." He contends that since the Constitution vests the authority to enact revenue bills in Congress, the President may not assume such power of issuing Executive Orders Nos. 475 and 478 which are in the nature of revenue-generating measures. Issue: Whether or not EO 475 and 478 are constitutional. Held: Under Section 24, Article VI of the Constitution, the enactment of appropriation, revenue and tariff bills, like all other bills is, of course, within the province of the Legislative rather than the Executive Department. It does not follow, however, that therefore Executive Orders Nos. 475 and 478, assuming they may be characterized as revenue measures, are prohibited to the President, that they must be enacted instead by the Congress of the Philippines. Section 28(2) of Article VI of the Constitution provides as follows: "(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government." There is thus explicit constitutional permission to Congress to authorize the President "subject to such limitations and restrictions as [Congress] may impose" to fix "within specific limits" "tariff rates . . . and other duties or imposts . . . ."

On October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O. 1024, and ordered released from the National Treasury to the Ministry of Energy. The same Executive Order also authorized the investment of the fund in government securities, with the earnings from such placements accruing to the fund. President Corazon C. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on February 27, 1987, expanding the grounds for reimbursement to oil companies for possible cost under recovery incurred as a result of the reduction of domestic prices of petroleum products, the amount of the under recovery being left for determination by the Ministry of Finance. He also contends that the "delegation of legislative authority" to the ERB violates Sec. 28 (2). Article VI of the Constitution, viz.: (2) The Congress may, by law, authorize the President to fix, within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government; and, inasmuch as the delegation relates to the exercise of the power of taxation, "the limits, limitations and restrictions must be quantitative, that is, the law must not only specify how to tax, who (shall) be taxed (and) what the tax is for, but also impose a specific limit on how much to tax." Issue: Whether or not there is undue delegation of power. Held: With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund. What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit on how much to tax." The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation as police power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that the overriding consideration is to

OSMENA v. ORBOS G.R. No. 99886 March 31, 1993 Topic: Prohibition Against Delegation of Taxing Power/Exceptions; Delegation to Administrative Agencies Facts:

enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State. The interplay and constant fluctuation of the various factors involved in the determination of the price of oil and petroleum products, and the frequently shifting need to either augment or exhaust the Fund, do not conveniently permit the setting of fixed or rigid parameters in the law as proposed by the petitioner. To do so would render the ERB unable to respond effectively so as to mitigate or avoid the undesirable consequences of such fluidity. As such, the standard as it is expressed suffices to guide the delegate in the exercise of the delegated power, taking account of the circumstances under which it is to be exercised. For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard limits of which are sufficiently determinate or determinable to which the delegate must conform. The standard, as the Court has already stated, may even be implied. In that light, there can be no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a determinable standard which guides the exercise of the power granted to the ERB. By the same token, the proper exercise of the delegated power may be tested with ease. It seems obvious that what the law intended was to permit the additional imposts for as long as there exists a need to protect the general public and the petroleum industry from the adverse consequences of pump rate fluctuations. "Where the standards set up for the guidance of an administrative officer and the action taken are in fact recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the judgment of such officer conform to the legislative standard, there is no failure in the performance of the legislative functions." This Court thus finds no serious impediment to sustaining the validity of the legislation; the express purpose for which the imposts are permitted and the general objectives and purposes of the fund are readily discernible, and they constitute a sufficient standard upon which the delegation of power may be justified.

cigarettes. In a letter, dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government, "the initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco Corporation register and therefore a local brand." Ad Valorem taxes were imposed on these brands. A bill, which later became Republic Act ("RA") No. 7654, was enacted, on 10 June 1993, by the legislature and signed into law, on 14 June 1993, by the President of the Philippines. About a month after the enactment and two (2) days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"): SUBJECT: Reclassification of Cigarettes Subject to Excise Tax was issued by the BIR. On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune Tobacco requested for a review, reconsideration and recall of RMC 37-93. The request was denied on 29 July 1993. The following day, or on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9, 598,334.00. On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for reconsideration. The CIR forthwith filed a petition for review with the Court of Appeals, questioning the CTA's 10th August 1994 decision and 11th October 1994 resolution. On 31 March 1993, the appellate court's Special Thirteenth Division affirmed in all respects the assailed decision and resolution. Issue: Whether or not RMC 37-93 is a ruling or opinion of the Commissioner of Internal Revenue interpreting provisions of the Tax Code. Held: It should be understandable that when an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed. When,

COMMISSIONER v. COURT OF APPEALS G.R. No. 119761 August 29, 1996 Topic: Delegation to Administrative Agencies Facts: Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes. On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion," "Hope," and "More"

upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially adds to or increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654. Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes which at the time of its effectivity were not so classified as bearing foreign brands. Prior to the issuance of the questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax. Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on private respondent's products. Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be uniform and equitable. Uniformity requires that all subjects or objects of taxation, similarly situated, are to be treated alike or put on equal footing both in privileges and liabilities. Thus, all taxable articles or kinds of property of the same class must be taxed at the same rate and the tax must operate with the same force and effect in every place where the subject may be found. Apparently, RMC 37-93 would only apply to "Hope Luxury," "Premium More" and "Champion" cigarettes and, unless petitioner would be willing to concede to the submission of private respondent that the circular should, as in fact my esteemed colleague Mr. Justice Bellosillo so expresses in his separate opinion, be considered adjudicatory in nature and thus violative of due process following the Ang Tibay doctrine, the measure suffers from lack of uniformity of taxation. In its decision, the CTA has keenly noted that other cigarettes bearing foreign brands have not been similarly included within the scope of the circular All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and effective administrative issuance.

MACEDA v. MACARAIG G.R. No. 88291 June 8, 1993 Topic: Exemption of Government Entities/Agencies and Instrumentalities Facts: Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines. The sum of P250, 000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work. The main source of funds for the NPC was the flotation of bonds in the capital markets and these bonds . . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face of said bonds. . . . . On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. The tax provision related to the repayment of these loans was not amended or deleted.

On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100, 000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government. No tax exemption was incorporated in said Act. On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250, 000,000.00 with the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300, 000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Issue: Whether or not NPC is exempted from payment of tax. Held: A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes direct and indirect. As the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from refunding said amount because of Our ruling that NPC has both direct and indirect tax exemption privileges. Neither can We order the BIR to refund said amount to NPC as there is no pending petition for review on certiorari of a suit for its collection before Us. At any rate, at this point in time, NPC can no longer file any suit to collect said amount even if it has previously filed a claim with the BIR because it is time-barred under Section 230 of the National Internal Revenue Code of 1977. as amended, which states: In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty REGARDLESS of any supervening cause that may arise after payment. . . . The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for the amount of P410, 580,000.00 had been made on said date. It is clear that more than two (2) years had already elapsed from said date. At the same time, We should note that there is no legal obstacle to the BIR granting, even without a suit by NPC, the tax credit or refund claimed by NPC, assuming that NPC's claim had been made seasonably, and assuming the amounts covered had actually been paid previously by the oil companies to the BIR.

G. R. No. 120082, September 11, 1996 Topic: Exemption of Instrumentalities

Government

Agencies

and

Facts: Petitioner was created by virtue of RA6958, mandated to "principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City. Under Section 1: The authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities. However, the Officer of the Treasurer of Cebu City demanded payment for realty taxes on parcels of land belonging to petitioner. Petitioner objected invoking its tax exemption. It also asserted that it is an instrumentality of the government performing governmental functions, citing section 133 of the LGC which puts limitations on the taxing powers of LGUs. The city refused insisting that petitioner is a GOCC performing proprietary functions whose tax exemption was withdrawn by Sections 193 and 234 of the LGC. Petitioner filed a declaratory relief before the RTC. The trial court dismissed the petitioner ruling that the LGC withdrew the tax exemption granted the GOCCs. Issue: Whether or not the City of Cebu has the power to impose taxes on petitioner Held: A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. There can be no question that under Section 14 RA 6958 the petitioner is exempt from the payment of realty taxes imposed by the National Government or any of its political subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is the rule and exemption is the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise by LGUs of their power to tax, the scope thereof or its limitations, and the exemption from taxation. Section133 of the LGC prescribes the common limitations on the taxing powers of LGUs: (o) Taxes, fees or charges of any kind on the national government, its agencies and instrumentalities and LGUs. Among the "taxes" enumerated in the LGC is real property tax. Section 234 of LGC provides for the exemptions from payment of GOCCs, except as provided therein. On the other hand, the LGC authorizes LGUs to grant tax exemption privileges. Reading together Section 133, 232 and 234 of the LGC, we conclude that as a general rule, as laid down in Secs 133 the taxing powers of LGUs cannot extend to the levy of inter alia, "taxes, fees, and charges of any kind of the National Government, its agencies and instrumentalities, and LGUs"; however, pursuant to Sec 232, provinces, cities, municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY v. HON. FERDINAND J. MARCOS

alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof has been granted to a taxable person." As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234, which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption in so far as the real property taxes are concerned by limiting the retention only to those enumerated there-in; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the real property is owned by the Republic of the Philippines, or any of its political subdivisions covered by item (a)of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from real property taxes granted to natural or juridical persons, including GOCCs, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Section 232 and 234. In short, the petitioner can no longer invoke the general rule in Section 133.It must show that the parcels of land in question, which are real property, are any one of those enumerated in Section 234, either by virtue of ownership, character, or use of the property. Most likely, it could only be the first, but not under any explicit provision of the said section, for one exists. In light of the petitioner's theory that it is an "instrumentality of the Government", it could only be within be first item of the first paragraph of the section by expanding the scope of the terms Republic of the Philippines" to embrace "instrumentalities" and "agencies." This view does not persuade us. In the first place, the petitioner's claim that it is an instrumentality of the Government is based on Section 133(o), which expressly mentions the word "instrumentalities"; and in the second place it fails to consider the fact that the legislature used the phrase "National Government, its agencies and instrumentalities" "in Section 133(o),but only the phrase "Republic of the Philippines or any of its political subdivision "in Section 234(a). The terms "Republic of the Philippines" and "National

Government" are not interchangeable. The former is boarder and synonymous with "Government of the Republic of the Philippines" which the Administrative Code of the1987 defines as the "corporate governmental entity though which the functions of the government are exercised through at the Philippines, including, saves as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the autonomous reason, the provincial, city, municipal or barangay subdivision or other forms of local government." These autonomous regions, provincial, city, municipal or barangay subdivisions" are the political subdivision. On the other hand, "National Government "refers "to the entire machinery of the central government, as distinguished from the different forms of local Governments." The National Government then is composed of the three great departments the executive, the legislative and the judicial. An "agency" of the Government refers to "any of the various units of the Government, including a department, bureau, office instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein;" while an "instrumentality" refers to "any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy; usually through a charter. This term includes regulatory agencies, chartered institutions and governmentowned and controlled corporations". Hence, the petitioner is now the owner of the land in question and the exception in Sec 234(c) of the LGC is inapplicable. Petitioner cannot claim that it was never a "taxable person" under its Charter. It was only exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax. Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the forgoing disquisitions, it had already become even if it be conceded to be an "agency" or" instrumentality" of the Government, a taxable person for such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner. Accordingly, the position taken by the petitioner is untenable. Reliance on Basco vs. Pagcor is unavailing since it was decided before the effectivity of the LGC. Besides, nothing can prevent Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom.

TAADA v. ANGARA G.R. No.118295, May 2, 1997 Topic: International Comity Facts: Sec. Rizalino Navarro (DTI Secretary) representing the Philippines government, signed the Final Act Embodying the Result of the Uruguay Round

of Multilateral Negotiations, which created the World Trade Organization. By signing such act, the Philippines agreed to adopt the ministerial declarations and decisions of the WTO, and to submit the WTO agreement for the consideration and approval. President Ramos sent two letters to the Philippine Senate, stating that the Uruguay Rounds Final Act is submitted for its concurrence pursuant to sec. 21 Article VII of the constitution. The Senate adopted resolution no. 97, wherein the Senate concurred in the ratification of the President. The petition was filed seeking to nullify the act of the Philippine Senate, arguing inter alia that: It contravenes sec. 10 Art. II and sec. 12 Article XII of the Constitution, The WTO proviso derogates from the power to tax, which is lodged in the Congress. Issue: 1. Whether or not the act of the Phil. Senate contravenes the Constitution? 2. Whether or not it limits, impairs and restricts the exercise of legislative power by congress, specifically the power to tax

Facts: On June 21, 1991, the National Power Corporation (hereinafter, "NPC") and Mitsubishi Corporation, petitioner's head office in Japan, entered into a contract for the engineering, supply, construction, installation, testing and commissioning of one (1) x 300 MW Batangas Coal-Fired Thermal Power Project II at Calaca, Batangas (Calaca II Coal-Fired Thermal Power Project. On July 15, 1998, petitioner filed its Income Tax Return for the fiscal year ended March 31, 1998 with the Bureau of Internal Revenue. In the return, petitioner (being the Manila Branch of Mitsubishi Corporation) reported an income tax due of P90,481,711.00 computed in accordance with the provisions of Revenue Memorandum Order ("RAMO"). Likewise, on July 15, 1998, petitioner filed its Monthly Remittance Return of Income Taxes Withheld and remitted the amount of P8,324,100representing its branch profit remittance tax (BPRT) for branch profits remitted to the Head Office (in Japan) out of its income for the fiscal year ended March 31,1998. The tax rate used was 10% in accordance with the Philippines-Japan Tax Treaty. On September 7, 1998, the respondent issued Bureau of Internal Revenue Ruling No. DA-407-98 where it held that "Mitsubishi has no liability for income tax and other taxes and fiscal levies, including VAT, . . . on the 100% of its foreign currency portion of the Calaca II Project since the said taxes were assumed by the Philippine Government. Of the P1,416,829,241.00 total revenue from the Calaca II Project,P640,907,792 or 45.24% represents that portion which was not OECF-funded considering that this amount represents the Philippine Peso component of the project, while P775,921,449 or 54.76% represents the OECF funded portion Since petitioner paid P82,444,208.00 income tax for its income from the entire Calaca II Project (inclusive of the OECF-funded and non-OECF funded portions) andP8,324,100.00 BPRT for the remittance of its income (inclusive of the income on the OECFfunded portion of the Calaca II Project), petitioner now seeks a tax refund/credit of the P44,288,712 erroneously paid income tax and theP8,324,100.00 erroneously paid BPRT. On June 30, 2000, petitioner filed an administrative claim for refund and/or tax credit with respondent in the amount of P52,612,812.00, representing its erroneously paid income taxes in the amount of P44,288,712 and erroneously paid branch profit remittance tax in the amount of P8,324,100.00 corresponding to the OECF-funded portion of its Calaca II Project Issue: Whether petitioner has erroneously paid income and branch profit remittance taxes for the fiscal year ended March 31, 1998, which is a proper claim for refund pursuant to Section 204 and 229 of the Tax Code.

Held: First, these provisions are not self-executing. These are merely statements of principles and policies. A law should be passed by congress to clearly define and effectuate such principles. The reason for denying this a cause of action are sourced from basic considerations of due process and the lack of judicial authority to wade into uncharted ocean of social and economic policy making the said provisions should be read and understood in relation to the other section, especially sec 1 and sec 13. Hence, the Constitution ordains the ideals of economic nationalism, but it also takes into account the realities of the outside world. It did not intent to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Phil. Economy. In fact, it allow the exchange on the basis of equality and reciprocity, frowning only on foreign competition which is unfair 2. No, it does not limit the power of the congress the WTO agreement provides that each member shall ensure the conformity of its laws, regulations and administrative procedure. By their nature, treaties really limit or restrict the absoluteness of sovereignty. But by their voluntary acts, nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. Certain restrictions include: Limitations imposed by the very nature of membership in the family of nations. And Limitations imposed by treaty stipulations. MITSUBISHI CORPORATION MANILA BRANCH v. COMMISSIONER OF INTERNAL REVENUE C.T.A. CASE NO. 6139 Topic: International Comity

Held: International comity may not be invoked to evade our tax laws. Thus, the Supreme Court held:"It is too settled a rule in this jurisdiction, as to dispense with the need for citations, that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which on us petitioners have failed to discharge. Significantly, private respondents are not even among the entities which, under Section 29(b)(7)(A) of the tax code, are entitled to exemption and which should indispensably be the party in interest in this case. Definitely, the taxability of a party cannot be blandly glossed over on the basis of a supposed "broad, pragmatic analysis" alone without substantial supportive evidence, lest governmental operations suffer due to diminution of much needed funds. Nor can we close this discussion without taking cognizance of petitioner's warning, of pervasive relevance at this time, that while international comity is invoked in this case on the nebulous representation that the funds involved in the loans are those of a foreign government, scrupulous care must be taken to avoid opening the floodgates to the violation of our tax laws. Otherwise, the mere expedient of having a Philippine corporation enters into a contract for loans or other domestic securities with private foreign entities, which in turn will negotiate independently with their governments, could be availed of to take advantage of the tax exemption law under discussion." Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation, G.R. No. 54908, January 22, 1990, 181 SCRA 82. Tax exemptions must be strictly construed such that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention of the parties (Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue, G.R. No. L-19707, Aug. 17, 1967;Manila Electric Company vs. Vera, etc., G.R. No. L-29987, Oct. 22, 1975; Surigao Consolidated Mining Co., Inc. v. Collector of Internal Revenue, et al., G.R. No. L-14878, December 26, 1963, all cited in Aban, Law of Basic Taxation of the Philippines, p. 119). Tax exemptions are not presumed (Lealda Electric Co., Inc. v. Collector of Internal Revenue, G.R. No. L-16428, April 30, 1963). Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person claiming the exemption (Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., 309 SCRA 87 [1999]).In the light of the foregoing, we cannot conclude that the Exchange of Notes grants tax exemption to petitioner. Hence, petitioner's claim for refund should be denied for lack of merit.

Facts: Iloilo Bottlers Inc., a company in the business of bottling and selling soft drinks, was demanded by the City of Iloilo to pay an amount of 59,505 in the form of an license tax the city c l a i m s w e r e d u e t o i t u n d e r a n ordinance which was enacted on J a n u a r y 1 1 , 1 9 6 0 k n o w n a s Ordinance No. 5, Series of 1960; which provides that manufacturers, bottlers, and distributers of soft drinks in Iloilo are subject to a municipal license tax of 10 centavos per case of 24 bottles. Iloilo Bottling Inc asserted however that since their plant base has moved to municipality of Pavia shortly after the aforementioned ordinance was enacted, they are not liable for any taxes. The city however, still demanded taxes and also demanded back taxes under the claim that Iloilo Bottlers is still distributing in the city of Iloilo since its transfer. Iloilo Bottler s p a i d t h e demanded license tax and back taxes under protest. After bringing the case to court, the courts ruled in favor of Iloilo Bottlers and declared that Iloilo Bottlers is free from liability. The city of Iloilo then appealed this ruling, hence this case. Issue: W hether or not the courts were correct in their initial ruling that Iloilo Bottlers Inc. is free from liability and directing the city of Iloilo to refund the tax money. Held: No, the courts were not correct. The ruling was reversed in favor of the City of Iloilo and Iloilo Bottlers is deemed liable for the aforementioned taxes. Situs of taxation (place of taxation) depends on various factors including the nature of the tax and subject matter thereof both of which must be scrutinized to reach a fair decision. The tax ordinance enacted by the City of Iloilo imposes a tax on persons, firms, and corporations engaged in the business of distribution of soft-drinks, manufacture of soft-drinks, and bottling of soft drinks within the territorial jurisdiction of the City of Iloilo. There is no question that Iloilo Bottlers has moved out of Iloilo Citys jurisdiction and into the municipality of Pavia where its plant now stands therefore, the latter two conditions for taxation are no longer applicable. The ruling now depends upon whether or not Iloilo Bottlers can be considered as distributing its products within Iloilo city. Iloilo Bottlers disclaims liability, saying that it does not independently distribute but rather actively sells directly to its consumers. Distribution is therefore only incidental to its business. However, the courts find that Iloilo Bottlers is indeed considered as distributing since while the manufacturing and bottling occurs outside of Iloilo City, the drinks are sold in Iloilo city to consumers in a moving store fashion. The transactions are considered to occur within the city. The tax imposed under Ordinance No. 5 is an excise tax. By its nature, the power to levy an excise tax depends upon the place where the business is done, or the occupation is engaged in, or where the transaction took place. In this case, it is a tax on

ILOILO BOTTLERS, INC., v. CITY OF ILOILO 164 SCRA607 Topic: Territorial Jurisdiction

the privilege of distributing, manufacturing or bottling soft drinks. Even though the base of operations is at Pavia, the areas of transactions where it conducts its business are within Iloilo City limits. The Situs for excise tax is the area of transaction, not necessarily base of operation. Since Iloilo Bottlers does distribute within city limits, it is therefore subject to the ordinance and therefore should pay the pertinent amounts to the city of Iloilo.

the sale of tickets in the Philippines is the activity that produces the income. The tickets exchanged hands here and payments for fares were also made here in the Philippines. The flow of wealth proceeded from and occurred within Philippine territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the government.

COMMISSINER OF INTERNAL REVENURE v. BRITISH OVERSEAS AIRWAYS CORPORATION and COURT OF TAXAPPEALS 149 SCRA 395 Topic: Limitation of Territorial Jurisdiction Facts: British overseas airways corp. (BOAC) a wholly owned British Corporation, is engaged in international airlines business. From 1959 to 1972, it has no loading rights for traffic purposes in the Philippines but maintained a general sales agent in the Philippines which was responsible for selling, BOAC tickets covering passengers and cargoes the Commissioner of Internal Revenue assessed deficiency income taxes against covering 2,498,358.56 for 1959-1963, later assessed on Jan16, 1970 for 858,07.79 as their final liability. BOAC paid such under protest. Issue: Whether or not the revenue derived by private respondent BOAC from sales tickets in the Philippines for air transportation, while having no landing rights here, constitute income of BOAC from Philippine sources and accordingly taxable Held: The tax Code defines gross income thus: Gross income includes gains, profits and income derived from salaries wages or compensation for personal service of whatever kind and in whatever form paid, of from profession, vocations, trades, business, commerce, sales or dealings in property, whether real or personal, growing out of ownership or use of interest in such property; also from interests, rents, dividends, securities, or the transactions of any business carried on for gain or profit, or gains, profits, and income derived from any source whatever The definition is broad and comprehensive to include proceeds from sales of transport documents. The words income from any source whatever discloses a legislative policy to include all income not expressly exempted within the class of taxable income under our laws. Income means cash received or its equivalent; it is the amount of money coming to a person within a specific time; it means something distinct from principal or capital. For, while capital is a fund, income is a flow---flow of wealth, is such flow of wealth come from sources within the Philippines? The source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippine, it is sufficient that the income is derived from activity within the Philippines. In BOACs case,

HOPEWELL POWER (PHILIPPINES) CORPORATION v. COMMISIONER OF INTERNAL REVENUE C.T.A CASE NO.5310 November 18, 1998 Topic: Limitation of Territorial Jurisdiction Facts: This is a judicial claim for the refund of P24,864,781.58 allegedly representing erroneous payment of documentary stamp tax ("DST", for short) over loan and security documents executed in Hong Kong on December 29, 1993.Petitioner is a corporation organized and existing under Philippine laws. On December 29, 1993, petitioner, together with Hopewell Energy International Limited, a company organized under the laws of Hong Kong, entered into a Mortgage Trust Indenture (MTI) for the mortgage of their chattel and real estate assets with the Bank America National Trust Company. The execution of the MTI was done in Hong Kong. On even date, petitioner paid under protest the above said amount of DST with respondent's Bureau in order to facilitate the registration of the MTI with the Register of Deeds of Lucena, Province of Quezon. At bar, petitioner contends, inter alia, that a DST, being an excise tax, does not attach to the execution of the documents in Hong Kong following respondent's previous rulings on the matter 1; that at the time the MTI was executed, the prevailing provisions of Section 173 of the Tax Code did not cover documents executed abroad; and that, the subsequent enactment of Republic Act No. 7660which became effective on January 14, 1994, specifically addressed such perceived loophole in the law 2 by making the execution of loan agreements abroad subject to DST when the obligation or right arises from Philippine sources or the property is situated in the Philippines. Issue Whether or not the MTI document executed in Hong Kong is exempted from DST, being an excise tax. Held: The disquisition of the parties and the provisions of the Tax Code and jurisprudence in point, this Court rules in favor of the petitioner. The position of the respondent in its various rulings afore cited is in conformity with the Honorable Supreme Court's dictum on the issue at bar in the case of Allied Thread Co., Inc. vs. City Mayor of Manila, 133 SCRA 338 at p. 343, to wit: The

power to levy an excise upon the performance of an act or the engaging in an occupation does not depend upon the domicile of the person subject to the excise, nor upon the physical location of the property and in connection with the act or occupation taxed, but depends upon the place in which the act is performed or occupation engaged in. Thus, the gauge for taxability . . . does not depend on the location of the office, but attaches upon the place where the respective . . . transaction(s) is perfected and consummated. (See Koppel (Phil) vs. Yatco, 77 Phil. 496 [1946].) Thus, inasmuch as the MTI was executed and signed in Hong Kong prior to the effectivity of Republic Act No. 7660 on January 14, 1994, no DST is imposable on the same in the Philippines. This conclusion is also in keeping with one of the inherent limitations of taxation, namely, that it may be exercised only within the territorial jurisdiction of the taxing authority (51 Am. Jur. 88 as cited in Compendium of Tax Law and Jurisprudence by Vitug, 1993 ed.) Presiding from the above, this Court sees Section 173 of the Tax Code, as amended by Republic Act No. 7660, as imposing DST, not directly anymore upon the act or privilege of transacting documents, instruments, papers and loan agreements per se, but rather on the act or privilege of simply transacting on any obligation or right arising from Philippine sources, or on any property situated in the Philippines. Unlike before the amendment where the execution of the document, instrument, paper or loan agreement itself automatically gives rise to the imposition of DST, such execution is now deemed to be merely incidental.

government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas. In case of conflict between national and local laws with respect to tax exemption privileges in the Subic Special Economic Zone, the same shall be resolved in favor of the latter. (Emphasis Supplied)Under the foregoing provisions, only business establishments operating within the Subic Special Economic Zone are exempt from national and local taxes. Issue: Whether or not aliens working within the Subic Special Economic Z o n e a r e subject to Philippine income taxes on income earned from such employment Held: The phrase "no taxes, local and national, shall be imposed within the SSEZ" must be read together with the following sentence "In lieu of paying taxes, 3% of the gross income earned by all businesses and enterprises within the SSEZ shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the development of the municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas." This phrase belies petitioner's assertion that SSEZ is indeed a tax-free territory. The term "in lieu of paying taxes" as used in the law does not constitute an absolute exemption from taxation. While spared from national and local taxes, businesses and enterprises within the SSEZ are subjected to the said tax base on gross income. No matter what legal jargon is used, the said taxes are in fact taxes imposed on businesses or enterprises operating within the SSEZ. Thus, it is incorrect to say that SSEZ is actually a tax-free territory. Individual aliens employed within the Subic Special Economic Zone (SSEZ) are not exempt from the awesome power of Philippine taxation especially so that they sourced out their earnings from within the Philippines. The secured area of SSEZ, which is virtually delineated in metes and bounds by Proclamation No. 532, issued by the then President Fidel Ramos on February 1, 1995, is in reality part of the territorial jurisdiction of the Philippines.

DONALD L. SMITH v. COMMISIONER OF INTERNAL REVENUE C.T.A CASE NO.6268 September 12, 2002 Topic: Limitation of Territorial Jurisdiction Facts: Petitioner is a citizen of the United States, of legal age, single, and is an employeeof Coastal Subic Bay Terminal, Inc. He was employed as Controller of Coastal Subic Bay Terminal Inc. in 1998 On April 15, 1999, petitioner, filed hisannual income tax return and paid P1,533,660.70 in compensation income taxes for the income he derived from his employment with Coastal Subic Bay Terminal, Inc. Claiming that the payment of tax on his compensation income was erroneous, petitioner filed a written claim for refund with the Bureau of Internal Revenue(BIR) then after a Petition for Review to CTA. Section 12(c) of RA 7227, otherwise known as the Bases C o n v e r s i o n a n d Development Act of 1992", relied upon by petitioner in claiming the refund provides: Section 12.Subic Special Economic Zones. xxx ( c ) T h e p r o v i s i o n o f e x i s t i n g laws, rules and regulations t o t h e c o n t r a r y notwithstanding, no taxes, local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone shall be remitted to the National Government, one percent (1%)each to the local

SISON v. ANCHETA 130 SCRA 654 July 25, 1984 Topic: Due Process of Law Facts:

Section 1 of BP 135 further amends Sec21 of NIRC of 1977, which provides of rates of tax on citizens or residents on(a)taxable compensation income (b) taxable net income (c) loyalties, prizes and other winnings (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements (e) dividends and share of individual partner in the net profits if taxable partnership (f) adjustable gross income. Sison, as a taxpayer alleged that Sison is thereof unduly discriminated against him by the imposition of higher rate upon his income as a professional, that it amounts to class legislation, and that it transgresses against the equal protection and due process clauses of the 1987 Constitution as well as the rule requiring the uniformity in taxation. Issue: Whether or not Sec1 of BP 135 impairs due process of law. Held: NO. It is manifest that the field of state activity has assumed a much wider scope. The reason was clearly set forth by justice Makalintal, thus: the areas which need to be left with private enterprise and initiative and which the government was called upon to enter optionally, and only because it was better equipped to administer for the public welfare than any individual or groups and individual continue to lose their well-defined boundaries and to be absorbed within the activities that the government must undertake in the sovereign capacity if it is to meet the increasing social challenges of the times. Hence, there is a need for more revenues. The power to tax, on inherent prerogative, has to be reconciled to assure the performance of vital state functions. It is the source of public funds. Taxes, being the lifeblood of the government, their prompt and certain availability is of the essence.

and future conditions, and (4) the classification applies equally well to all those belonging to the same class. Uniformity, does not offend classification as long as it rest on substantial distinctions, It is germane to the purpose of the law. It is not limited to existing only and must apply equally to all members of the same class.The legislative intent is to increasingly shift the income tax system towards the scheduled approach in taxation of individual taxpayers and maintain the present global treatment on taxable corporations. This classification is neither arbitrary nor inappropriate.

PHILIPPINE RURAL ELECTRIC v. SECRETARY 403 SCRA 558 June 10, 2003 Topic: Equal Protection of Laws Facts: On May23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of other electric cooperatives organized and existing under PD269which are members of petitioner Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA). The other petitioners, electric cooperatives of Agusan del Norte (ANECO, Iloilo 1(ILECO1) and Isabela1(ISELCO1) are nonstock ,non-profit electric cooperatives organized and existing under PD269,asamended,and registered with the National Electrification Administration (NEA).Under Sec.39of PD 269electric cooperatives shall be exempt from the payment of all National Governmental and Local government, and municipal taxes and fee, including franchise, flinger cordation ,license or permit fees or taxes and any fees, charges, or costs involved in any court or administrative proceedings in which it may be party. From1971 to1978, in order to finance the electrification projects envisioned by PD 269, as amended, the Philippine Government, acting through the National Economic council (now National Economic Development Authority) and the NEA , entered into six loan agreements with the government of the United States of America, through the United States Agency for International Development (USAID) with electric cooperatives as beneficiaries. The loan agreements contain similarly worded provisions on the tax application of the loan and any property or commodity acquired through the proceeds of the loan. Petitioners allege that with the passage of the Local Government Code their tax exemptions have been validly withdrawn. Particularly, petitioners assail the validity of Sec.193 and234of the said code. Sec.193provides for the withdrawal of tax exemption privileges granted to all persons, whether natural or juridical, except cooperatives duly registered under RA 6938, whileSec.234 exempts the same cooperatives from payment of real property tax. Issue: Whether or not the Local Government Code (under Sec.193and234) violate the equal protection clause since the provisions unduly discriminate against petitioners who are duly registered cooperatives under PD269, as amended, and no under RA6938or the Cooperatives Code of the Philippines.

TAN v. DEL ROSARIO 237 SCRA 324 October 3, 1994 Topic: Equal Protection of Laws Facts: Petitioners challenge the constitutionality of RA 7496or the simplified income taxation scheme (SNIT) under Arts (26) and (28) and III (1). The SNIT contained changes in the tax schedules and different treatment in the professionals which petitioners assail as unconstitutional for being isolative of the equal protection clause in the constitution. Issue: Whether or not RA 7496 is unconstitutional. Held: Uniformity of taxation, like the kindered concept of equal protection, merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities. Uniformity does not forfend classification as long as: (1)the standards that are used therefore are substantial and not arbitrary, (2) the categorization is germane to achieve the legislature purpose, (3) the law applies, all things being equal, to both present

130 SCRA 654 July 25, 1984 Held: The guaranty of the equal protection clause is not violated by a law based on a reasonable classification. Classification, to be reasonable must (a) rest on substantial classifications ;(b) germane to the purpose of the law;(c) not limited to the existing conditions only; and (d) apply equally to all members of the same class. We hold that there is reasonable classification under the Local Government Code to justify the different tax treatment between electric cooperatives covered by PD269 and electric cooperatives under RA6938.First, substantial distinctions exist between cooperatives under PD269and those under RA 6938. In the former, the government is the one that funds those so-called electric cooperatives; while in the latter, the members make equitable contribution as source of funds Capital Contributions by Members Nowhere in PD269 does it require cooperatives to make equitable contributions to capital. Petitioners themselves admit that to qualify as a member of an electric cooperative under PD269,only the payment of a P5.00membership fee is required which is even refundable the moment the member is no longer interested in getting electric service from the cooperative or will transfer to another place outside the area covered by the cooperative. However, under the Cooperative Code, the articles of cooperation of a cooperative applying for registration must be accompanied with the bonds of the accountable officers and a sworn statement of the treasurer elected by the subscribers showing that at least25% of the authorized share capital has been subscribed and at least25%of the total subscription has been paid and in no case shall the paid-up share capital be less than P2,000.00. b. Extent of Government Control over Cooperatives. The extent of government control over electric cooperatives covered by PD269is largely a function of the role of the NEA as a primary source of funds of these electric cooperatives. It is crystal clear that NEA incurred loans from various sources to finance the development and operations of these electric cooperatives. Consequently, amendments were primarily geared to expand the powers of NEA over the electric cooperatives o ensure that loans granted to them would be repaid to the government. In contrast, cooperatives under RA6938are envisioned to be self-sufficient and independent organizations with minimal government intervention or regulation. Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose of the law. The Constitutional mandate that every local government unit shall enjoy local autonomy, does not mean that the exercise of the power by the local governments is beyond the regulation of Congress. Sec.193of the LGC is indicative of the legislative intent to vet broad taxing powers upon the local government units and to limit exemptions from local taxation to entities specifically provided therein. Finally, Sec.193 and234of the LGC permit reasonable classification as these exemptions are not limited to existing conditions and apply equally to all members of the same class Topic: Classification of Taxpayers/Subject or Items to be Taxed Facts: Section 1 of BP 135 further amends Sec21 of NIRC of 1977, which provides of rates of tax on citizens or residents on(a)taxable compensation income (b) taxable net income (c) loyalties, prizes and other winnings (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements (e) dividends and share of individual partner in the net profits if taxable partnership (f) adjustable gross income. Sison, as a taxpayer alleged that Sison is thereof unduly discriminated against him by the imposition of higher rate upon his income as a professional, that it amounts to class legislation, and that it transgresses against the equal protection and due process clauses of the 1987 Constitution as well as the rule requiring the uniformity in taxation. Issue: Whether or not there was no uniformity and equity in taxation as to the classification of taxpayer/ subject or items to be taxed. Held: Taxpayer may be classified into different categories. To repeat, it is enough that the classification must rest upon substantial distinctions that make real differences. In the case of the gross income taxation embodied in BP135, the discernible basis of classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all taxpayers within the class and fixing set of reduced tax rates to be applied to all of them. Taxpayers who are not recipients of compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers are not entitled to make deductions for income tax purposes because they are in the same situation more or less. On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them zero deduction and discriminately impose on all alike the same tax rates on the basis of gross income. There is simple justification then for the BP135 to adopt gross system of income taxation to compensation income, while continuing the system of net income taxation as regards professional and business income

TOLENTINO v. SECRETARY OF FINANCE 235 SCRA 630, August 25, 1994

Topic: Equal Protection of Laws Facts: The VAT is levied on the sale, barter, or exchanged of the goods and properties as well as on the sale of services. RA7116 seeks to wider the tax base of the

SISON v. ANCHETA

existing VAT system and enhance it administration on by amending the NIRC. CRTBA asserts that R.A. 7116 is unconstitutional as it violates the rule that taxes should be uniform and equitable. Issue: Whether or not RA 7116 is unconstitutional. Held: NO. There is basis for passing upon claims that on its face the statue violates the guarantees of freedom of speech, press and religion. The possible chilling effect which it may have on the essential freedom of the mind and conscience and the need to assure that the channels of communication are open and operating importunately demand the exercise of this Courts power of review. There is, however, no justification for passing upon the claims that the law also violates the rule that taxation must be progressive and that it denies petitioners right to due process and the equal protection of the laws. The reason for this different treatment has been cogently stated by an eminent authority on constitutional law thus: When freedom of the mind is imperiled by law, it is freedom that commands a momentum of respect; when property is imperiled it is the lawmakers judgment that commands respect. This dual standard may not be precisely reverse the presumption of constitutionality in civil liberties cases, but obviously it does set up hierarchy of values within the due process clause. Equity and uniformity in taxation means that all the taxable articles or kinds of properties of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement, it is enough that the statute or ordinance applies equally to all persons, firms, and corporations placed in a similar situation

amended, the Philippine Government, acting through the National Economic council (now National Economic Development Authority) and the NEA , entered into six loan agreements with the government of the United States of America, through the United States Agency for International Development (USAID) with electric cooperatives as beneficiaries. The loan agreements contain similarly worded provisions on the tax application of the loan and any property or commodity acquired through the proceeds of the loan. Petitioners allege that with the passage of the Local Government Code their tax exemptions have been validly withdrawn. Particularly, petitioners assail the validity of Sec.193 and234of the said code. Sec.193provides for the withdrawal of tax exemption privileges granted to all persons, whether natural or juridical, except cooperatives duly registered under RA 6938, whileSec.234 exempts the same cooperatives from payment of real property tax. Issue: Whether or not there is an impairment of the obligations of contract. Held: NONE. It is ingrained in jurisprudence that the constitutional prohibition on the impairment of the obligations of contracts does not prohibit every change in existing laws. To fall within the prohibition, the change must not only impair the obligation of the existing contract, but the impairment must be substantial. Moreover, to constitute impairment, the law must affect a change in the rights of the parties with reference to each other and not with respect to nonparties. The quoted provision under the loan agreement does not purport to grant any tax exemption in favor of any party to the contract, including the beneficiaries thereof. The provisions simply shift the tax burden, if any, on the transactions under the loan agreements to the borrower and/or beneficiary of the loan. Thus, the withdrawal by the Local Government Code under Sec.193and234of the tax exemptions previously enjoyed by petitioners does not impair the obligation of the borrower, the lender or the beneficiary under the loan agreements as, in fact, no tax exemption is granted therein.

PHILIPPINE RURAL ELECTRIC v. SECRETARY 403 SCRA 558 June 10, 2003 Topic: Prohibition Against Impairment of Obligations of Contracts Facts: On May23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of other electric cooperatives organized and existing under PD269which are members of petitioner Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA). The other petitioners, electric cooperatives of Agusan del Norte (ANECO, Iloilo 1(ILECO1) and Isabela1(ISELCO1) are nonstock ,non-profit electric cooperatives organized and existing under PD269,asamended,and registered with the National Electrification Administration (NEA).Under Sec.39of PD 269electric cooperatives shall be exempt from the payment of all National Government, local government, and municipal taxes and fee, including franchise, flinger cordation ,license or permit fees or taxes and any fees, charges, or costs involved in any court or administrative proceedings in which it may be party. From1971 to1978, in order to finance the electrification projects envisioned by PD 269, as

AMERICAN BIBLE SOCIETY v. CITY OF MANILA 101 PHIL 386 April 30, 1957 Topic: Prohibition Freedom

Against

Infringement

of

Religious

Facts: Plaintiff-appellant, American Bible Society, is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines through its Philippine agency established in Manila in November 1898. The defendant-appellee, City of Manila, is a municipal corporation with powers that are to be exercised in conformity with the provisions of RA 409, (Revised Charter of the City of Manila). In the course of its ministry, plaintiff s Philippine agency has been distributing and selling bibles and/or gospel portions

thereof (except during the Japanese occupation) throughout the Philippines and translating the same into several Philippine dialects. On 29 May 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was conducting the business of general merchandise since November 1945, without providing itself with the necessary Mayors permit and municipal license, in violation of Ordinance 3000, as amended, and Ordinances2529, 3028 and 3364, and required plaintiff to secure, within 3 days, the corresponding permit and license fees, together with compromise covering the period from the 4th quarter of 1945 to the 2ndquarter of 1953, in the total sum of P5,821.45. On 24 October 1953, plaintiff paid to the defendant under protest the said permit and license fees, giving at the same time notice to the City Treasurer that suit would be taken in court to question the legality of the ordinances under which the said fees were being collected, which was done on the same date by filing the complaint that gave rise to this action. After hearing, the lower court dismissed the complaint for lack of merit. Plaintiff appealed to the CA, which in turn certified the case to the Supreme Court for the reason that the errors assigned involved only questions of law. Issue: Is the American Bible Society Liable? Held: NO. A municipal license tax on the sale of bibles and religious articles by a non-stock, non-profit, missionary organization at a minimal profit constitutes a curtailment of religious freedom and worship which is guaranteed by the constitution. However, the income of such organization from any activity for profit or from any of their property, real or personal, regardless of the disposition made of such income is taxable

NO. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the general fund; and while it is placed in what the law refers to as a trust liability account, the fund nonetheless remains subject to scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a special fund. Indeed, the practice is not without precedent.

GASTON v. REPUBLIC PLANTERS BANK 158 SCRA 626 March 15, 1988 Topic: Prohibition Regarding Appropriation of Proceeds of Taxation Facts: Petitioners who are sugar producers, sugarcane planters and millers, who have come to this Court in their individual capacities and in representation of other sugar producers, planters and millers and intervenors Angel Severino, Jr., et. al., who are sugarcane planters planting and milling their sugarcane in different mill districts of Negros Occidental, were allowed to intervene by the Court, since they have common cause with petitioners and respondents having interposed no objection to their intervention, filed with the Supreme Court a petition praying for a Writ of mandamus to order respondent Philippine Sugar Commission (PHILSUCOM, for short) which was superseded by its co-respondent Sugar Regulatory Administration (SRA, for brevity) and Republic Planters Bank (briefly, the Bank), a commercial banking corporation, implement the privatization of the Bank by the transfer and distribution of the shares of stock of the said Bank which is in the name of PHILSUCOM to the sugar producers, millers and planters, who are the true and beneficial owners thereof. PHILSUCOM and SRA argued that no trust results and that the stabilization fees collected are considered government funds, that the transfer of shares of stock from PHILSUCOM to the sugar producers would be irregular, if not illegal. Issue: Whether the stabilization fees collected from sugar planters and millers pursuant to Section 7 of P.D. No. 388 are funds in trust for them, or public funds Held: The Supreme Court held that the stabilization fees collected are in the nature of a tax which constitutes public funds, which is within the power of the State to impose for the promotion of the sugar industry (Lutz vs. Araneta, 98 Phil. 148). They constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made accrue to a "Special Fund," a "Development and Stabilization Fund," almost Identical to the "Sugar Adjustment and Stabilization Fund" created under Section 6 of Commonwealth Act 567. The tax collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State.

OSMEA v. ORBOS 220 SCRA 703 March 31, 1993 Topic: Prohibition Regarding Appropriation of Proceeds of Taxation Facts: Petitioner seeks to have Sec.8, paragraph 1C of PD1956, as amended by EO 137 declared unconstitutional for being undue and invalid delegation of legislative power to the Energy regulatory Board. Under the assailed law, the ERB is given the authority to impose additional amounts on petroleum products and to impose additional amounts to augment the resources of the fund. He argue that the money collected pursuant to PD 1956 must be treated as a special fund, not as a trust account or a trust fund ,and that if a special tax is collected for a special purpose it shall be treated as a special fund to be used only for the purpose indicated. Issue: Whether or not Sec.8, paragraph 1C of PD1956, as amended by EO 137 is unconstitutional. Held:

The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of "financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market the fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose. Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, "administered in trust' for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be transferred to the general funds of the Government. The character of the Stabilization Fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law. That the fees were collected from sugar producers, planters and millers, and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fired for their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from them since it is also they who are to be benefited from the expenditure of the funds derived from it. To rule in petitioners' favor would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, "and all its components, stabilization of the domestic market," including the foreign market the industry being of vital importance to the country's economy and to national interest.

building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31. On 12 April 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial court ruled for the government, holding that the second floor of the building is being used by the director for residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not being used exclusively for educational purposes. Issue: Whether or not the college lot and building of the petitioner are not exempt from property taxes and ordering petitioner to pay 5, 140.31 as realty taxes. Held: The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. It must be stresses however, that while this Court allows a more liberal and non-restrictive interpretation of the phrase exclusively used for educational purposes as provided for in Article VI, Section 22, paragraph 3 of the Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise stated, the use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of the main building in the case at bar for residential purposes of Director and his family, may find justification under the concept of incidental use, which is complementary to the main or primary purposeeducational, the lease of the first floor thereof to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education. Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school building as well as the lot where it is built, should be taxed, not because the second floor of the same is being used by the Director and his family for residential purposes, but because the first floor thereof is being used for commercial purposes. However, since only apportion is used for purposes of commerce, it is only fair that half of the assessed tax be returned to the school involved.

ABRA VALLEY COLLEGE, INC. v. AQUINO 162 SCRA 113 June 15, 1988 Topic: Prohibition Against Taxation on Religious, Charitable Entities and Educational Entities Facts: Petitioner Abra Valley College is an educational corporation and institution of higher learning duly incorporated with the SEC in 1948. On 6 July 1972, the Municipal and Provincial treasurers (Gaspar Bosque and Armin Cariaga, respectively) and issued a Notice of Seizure upon the petitioner for the college lot and building (OCT Q-83) for the satisfaction of said taxes thereon. The treasurers served upon the petitioner a Notice of Sale on 8 July 1972, the sale being held on the same day. Dr. Paterno Millare, then municipal mayor of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving the sale of the college lot and building. The certificate of sale was correspondingly issued to him. The petitioner filed a complaint on 10 July 1972 in the court a quo to annul and declare void the Notice of Seizure and the Notice of Sale of its lot and

COMMISIONER OF INTERNAL REVENUE v. COURT OFAPPEALS 29 SCRA 83 October 14, 1998 Topic: Prohibition Against Taxation of Non-Stock , NonProfit Educational Institutions Facts: Private Respondent YMCA is a non-stock ,nonprofit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. The Commissioner of Internal Revenue issued an assessment to private respondent, in the total amount of P415,615.01including surcharge and interest, for deficiency income tax, deficiency

expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8,1985. In reply, the Commissioner denied the claims of YMCA.YMCA filed a petition for review at the Court of Tax Appeals. The CTA ruled in favor of the YMCA. The Commissioner elevated the case to the Court of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contract of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contractors and income taxes. However ,finding merit in YMCAs motion for reconsideration, the appellate court reversed itself and promulgated the first assessed resolution dated September 28,1995grantingsaid motion of YMCA by affirming the CTAs decision in toto. On February29, 1996,the Court of Appeals denied the Commissioners motion for reconsideration. Issue: Whether or not the YMCA is exempted from rental income derived from the lease of its properties. Held: Petitioner argues that while the income received by the organizations enumerated in Section27 (now Section26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them as such," the exemption does not apply to income derived "xxx from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income xxx" We agree with the commissioner. In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real property, the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction

PCGG and the Marcos heirs on how to split these assets. Petitioner, instituted a case against public respondent to make public any negotiations and/or agreements pertaining to the latter's task of recovering the Marcoses' ill-gotten wealth. The respondents argued that the action was premature since he has not shown that he had asked the respondents to disclose the negotiations and agreements before filing the case. Issue: Does the petitioner have the personality or legal standing to file the instant petition? Held: The petitioner has the actual interest or legal interest to file the instant petition. As anchored in Tanada vs Tuvera, when the issue concerns a public right and object of mandamus is to obtain the enforcement of public duty, the people are regarded as the real parties in interest and because it is sufficient that petitioner is a citizen and as such is interested in the execution of laws he need not to show that he has any legal or special interest in the result of the action. The instant petition is anchored on the right of the people to information and access to government records, documents and papers- a right guaranteed under section 7, article III of the Philippine Constitution. The petitioner a former solicitor general, is a Filipino citizen, and because of the satisfaction of the two basic requisites laid down by decisional law to sustain petitioner's standing i.e (1) ENFORCEMENT OF A LEGAL RIGHT (2) ESPOUSED BY A FILIPINO CITIZEN

REPUBLIC OF THE PHILIPPINES v. CITY OF KIDAPAWAN G.R. NO. 166651 DECEMBER 9, 2005 Topic: Others: Grant of Tax Exemptions Facts: President Ferdinand E. Marcos issued Presidential Decree (PD) No. 1442 which allowed the government to enter into service contracts for financial, technical, management or other forms of assistance with qualified domestic and foreign entities, for the exploration, development, exploitation, or utilization of the country's geothermal resources. On January 30, 1992, then President Corazon C. Aquino issued Proclamation No. 853 [5] which excluded certain portions of the land embraced in the Mt. Apo National Park and declared the same as geothermal reservation under the administration of the PNOC, now referred to as the MAGRA. On March 24, 1992, the government through the Office of Energy Affairs (now Department of Energy, DOE) entered into a service contract ] with PNOCEDC, a government owned or controlled corporation created and existing under the Corporation Code, to exclusively conduct geothermal operations within the MAGRA. Under the contract, the PNOC-EDC

CHAVEZ v. PCGG G.R. NO. 130716 DECEMBER 9, 1998 Topic: Others: Grant of Tax Exemptions Facts: Chavez a taxpayer was impleed to bring this action for prohibition due to several news reports bannered in a number of broadsheets sometime in September 1997. These news items refeered to are 1) the alleged discovery of billions of dollars of Marcos assets deposited in various coded accounts in Swiss banks; and 2) the reported execution of a compromise between the government through

would furnish the necessary services, technology and financing for the geothermal operations subject to the direct supervision of the DOE. Thereafter, PNOC-EDC built a 104-megawatt power plant within the MAGRA which produces electricity through turbines using steam extracted from the MAGRA as fuel. City Treasurer of Kidapawan, Cotabato notified PNOC-EDC of its tax delinquency after which, he issued a warrant of levy on the 701-hectare MAGRA for failure to pay real property taxes, covering the tax period from 1993-2002. Thereafter, he sent a notice of sale of delinquent real property to PNOC-EDC declaring that delinquent real property will be sold through public auction. The trial court found that PNOC-EDC is not exempt from paying the real property taxes and that the MAGRA is part of the Mt. Apo National Park which has not been re-classified as alienable agricultural land. Thus, it could not be sold at public auction. However, the trial court ordered that the improvements on the subject land, not being in the nature of public dominion, may be validly levied and sold at public auction to satisfy the payment of realty tax delinquencies.PNOC-EDC's motion for reconsideration was denied, hence, this petition. Issue: Whether PNOC-EDC is liable to pay the real property taxes, whether the machineries, equipment, buildings and other infrastructures found in MAGRA may be levied; and whether the assessment has become final and executory. Held: We agree with PNOC-EDC that its machineries, equipment, buildings and other infrastructures found in MAGRA cannot be levied upon and sold at public auction to satisfy the alleged tax delinquency because the warrant of levy shows that MAGRA is the only delinquent real property subject to tax. Respondents have two remedies for the collection of real property tax: (1) by administrative action through levy on real property; and (2) by judicial action. Under Sections 257 and 258 of the LGC, the basic real property tax constitutes as a lien on the property subject to the tax which may be levied upon through the issuance of a warrant. The local government unit concerned may also enforce the collection of the basic real property tax by civil action in any court of competent jurisdiction. Respondents levied on a portion of the MAGRA to satisfy the tax delinquency of PNOC-EDC. However, the land being levied is classified as inalienable. It is owned by the government and thus, cannot be sold at public auction. Likewise, the machineries, equipment and other infrastructures in the MAGRA cannot be levied and sold at public auction because it is not the property that is subject to the tax. The personal liability for the tax delinquency, is generally on whoever is the owner of the real property at the time the tax accrues; where, however, the tax liability is imposed on the beneficial use of the real property such as those owned but leased to private persons or entities by the government, or when the assessment is made on the basis of the actual use thereof, the personal

liability is on any person who has such beneficial or actual use at the time of the accrual of the tax. In the case at bar, PNOC-EDC is the beneficial user, however, since respondents cannot avail of the administrative remedy through levy, they can only enforce the collection of real property tax through civil action. PNOC-EDC liable to pay the real property tax accruing from its use of the MAGRA. Respondents however are DIRECTED to refrain from levying on the buildings, infrastructures and machineries of PNOC-EDC to satisfy the payment of the real property tax delinquency.

GONZALES v. MACARAIG G.R. NO. 87636, 19 NOVEMBER 1990 Topic: Veto of Appropriation, Revenue, Tariff bills by the President Facts: On 16 December 1988, Congress passed House Bill 19186, or the General Appropriations Bill for the Fiscal Year 1989. As passed, it eliminated or decreased certain items included in the proposed budget submitted by the President. Pursuant to the constitutional provision on the passage of bills, Congress presented the said Bill to the President for consideration and approval. On 29 December 1988, the President signed the Bill into law, and declared the same to have become RA 6688. In the process, 7 Special Provisions and Section 55, a "General Provision," were vetoed. On 2 February 1989, the Senate, in Resolution 381 ("Authorizing and Directing the Committee on Finance to Bring in the Name of the Senate of the Philippines the Proper Suit with the Supreme Court of the Philippines contesting the Constitutionality of the Veto by the President of Special and General Provisions, particularly Section 55, of the General Appropriation Bill of 1989 (H.B. No. 19186) and For Other Purposes") was adopted. On 11 April 1989, the Petition for Prohibition/ Mandamus was filed by Neptali A. Gonzales, Ernesto M. Maceda, Alberto G. Romulo, Heherson T. Alvarez, Edgardo J. Angara, Agapito A. Aquino, Teofisto T. Guingona, Jr., Ernesto F. Herrera, Jose D. Lina, Jr., John Osmea, Vicente T. Paterno, Rene A. Saguisag, Leticia Ramos-Shahani, Mamintal Abdul J. Tamano, Wigberto E. Taada, Jovito R. Salonga, Orlando S. Mercado, Juan Ponce Enrile, Joseph Estrada, Sotero Laurel, Aquilino Pimentel, Jr., Santanina Rasul, Victor Ziga, as members and ex-officio members of the Committee on Finance of the Senate and as "substantial taxpayers whose vital interests may be affected by this case," with a prayer for the issuance of a Writ of Preliminary Injunction and Restraining Order, assailing mainly the constitutionality or legality of the Presidential veto of Section 55, and seeking to enjoin Catalino Macaraig, Jr., Vicente Jayme, Carlos Dominguez, Fulgencio Factoran, Fiorello Estuar, Lourdes Quisumbing, Raul Manglapus, Alfredo Bengson, Jose Concepcion, Luis Santos, Mita Pardo De Tavera, Rainerio Reyes, Guillermo Carague, Rosalina Cajucom and Eufemio C. Domingo from implementing RA 6688.

No Restraining Order was issued by the Supreme Court. Gonzales et al.'s cause is anchored on the following grounds: (1) the President's line-veto power as regards appropriation bills is limited to item/s and does not cover provision/s; therefore, she exceeded her authority when she vetoed Section 55 (FY '89) and Section 16 (FY '90) which are provisions; (2) when the President objects to a provision of an appropriation bill, she cannot exercise the item-veto power but should veto the entire bill; (3) the item-veto power does not carry with it the power to strike out conditions or restrictions for that would be legislation, in violation of the doctrine of separation of powers; and (4) the power of augmentation in Article VI, Section 25 [5] of the 1987 Constitution, has to be provided for by law and, therefore, Congress is also vested with the prerogative to impose restrictions on the exercise of that power. The Solicitor General, as counsel for Macaraig et al., counters that the issue in the present case is a political question beyond the power of this Court to determine; that Gonzales et al. had a political remedy, which was to override the veto; that Section 55 is a "rider" because it is extraneous to the Appropriations Act and, therefore, merits the President's veto; that the power of the President to augment items in the appropriations for the executive branches had already been provided for in the Budget Law, specifically Sections 44 and 45 of PD 1177, as amended by RA 6670 (4 August 1988); and that the President is empowered by the Constitution to veto provisions or other "distinct and severable parts" of an Appropriations Bill. Issue Whether the President exceeded the item-veto power accorded by the Constitution (Whether the President has the power to veto "provisions" of an Appropriations Bill) Held: NO. The veto power of the President is expressed in Article VI, Section 27 of the 1987 Constitution. Paragraph (1) refers to the general veto power of the President and if exercised would result in the veto of the entire bill, as a general rule. Paragraph (2) is what is referred to as the item-veto power or the lineveto power. It allows the exercise of the veto over a particular item or items in an appropriation, revenue, or tariff bill. As specified, the President may not veto less than all of an item of an Appropriations Bill. In other words, the power given the executive to disapprove any item or items in an Appropriations Bill does not grant the authority to veto a part of an item and to approve the remaining portion of the same item. Notwithstanding the elimination in Article VI, Section 27 (2) of the 1987 Constitution of any reference to the veto of a provision, the extent of the President's veto power as previously defined by the 1935 Constitution has not changed. This is because the eliminated proviso merely pronounces the basic principle that a distinct and severable part of a bill may be the subject of a separate veto. The restrictive interpretation urged by Gonzales et al. that the President may not veto a provision without vetoing the entire bill not only disregards the basic principle that a distinct and severable part of a bill may be the subject of a separate veto but also overlooks the Constitutional mandate that any provision in the general appropriations bill shall relate specifically to some particular appropriation therein and that any such provision shall be limited

in its operation to the appropriation to which it relates. In other words, in the true sense of the term, a provision in an Appropriations Bill is limited in its operation to some particular appropriation to which it relates, and does not relate to the entire bill. The President promptly vetoed Section 55 (FY '89) and Section 16 (FY '90) because they nullify the authority of the Chief Executive and heads of different branches of government to augment any item in the General Appropriations Law for their respective offices from savings in other items of their respective appropriations, as guaranteed by Article VI, Section 25 (5) of the Constitution. Noteworthy is the fact that the power to augment from savings lies dormant until authorized by law. When Sections 55 (FY '89) and 16 (FY '90) prohibit the restoration or increase by augmentation of appropriations disapproved or reduced by Congress, they impair the constitutional and statutory authority of the President and other key officials to augment any item or any appropriation from savings in the interest of expediency and efficiency. The exercise of such authority in respect of disapproved or reduced items by no means vests in the Executive the power to rewrite the entire budget, the leeway granted being delimited to transfers within the department or branch concerned, the sourcing to come only from savings. More importantly, for such a special power as that of augmentation from savings, the same is merely incorporated in the General Appropriations Bill. An Appropriations Bill is "one the primary and specific aim of which is to make appropriation of money from the public treasury" (Bengzon v. Secretary of Justice, 292 U.S., 410, 57 S.Ct. 252). It is a legislative authorization of receipts and expenditures. The power of augmentation from savings, on the other hand, can by no means be considered a specific appropriation of money. It is a non-appropriation item inserted in an appropriation measure.

COMMISSIONER v. SANTOS G.R. NO. 119252. AUGUST 18, 1997 Topic: Non-impairment of the Jurisdiction of the Supreme Court Facts: Aug 5, 1988 : BIR Director Viray issued Regl. Mission Order No. 109-88 to conduct surveillance, monitoring and inventory of all imported articles of Hans Brumann Inc. After said surveillance,BIR requested the establishment not to sell the articles until it can be proven that the necessarytaxes thereon have been paid. Mr. Hans Brumann agreed and signed said order. He never filed aprotest on the preventive embargo. Letters of Authority were issued to BIR officers to examine the books of accounts and other accounting records of Miladay Jewels, Inc., Mercelles, Inc., Solid Gold International Traders, Inc., . Hans Brumann and Diagem Trading Corporation for stocktaking/investigation for excise tax for the period January 1, 1988 to present. Brumann did not produce the documents. Marco & Co. contended the constitutionality of Sec 150 (a) of NIR Code & prayed that CIR and Customs be enjoined from issuing mission orders. Sec 150 (a)

of NIR Code : Non-essential goodsThere shall be levied, assessed and collected a tax equivalent to 20% based onthe wholesale price or the value of importation used by the Bureau of Customs in determiningtariff & custom duties; net of the excise tax and value added tax (Jewelry is considered non-essential good) RTC finds the questioned statutory provisions confiscatory and destructive of the proprietary right of the petitioners to engage in business in violation of Section 1, Article III of the Constitution which states, as follows: No person shall be deprived of the life, liberty, or property without due process of law . Petitioners assail the decision rendered by the public respondent, contending that the latter has no authority to pass judgment upon the taxation policy of the government. In addition, the petitioners impugn the decision in question by asserting that there was no showing that the tax laws on jewelry are confiscatory and desctructive of private respondents proprietary rights. Issue: Whether or not the judgment rendered by the RTC judge is valid rendering the provisions of the Code in violation of the constitution. Held: NO. The trial court is not the proper forum for the ventilation of the issues raised by the private respondents. Regional Trial Courts can only look into the validity of a provision, that is, whether or not it has been passed according to the procedures laid down by law, and thus cannot inquire as to the reasons for its existence. It is to the legislature that they must resort to for relief, since with the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This Court, however, cannot subscribe to the theory that the tax rates of other countries should be used as a yardstick in determining what may be the proper subjects of taxation in our own country. It should be pointed out that in imposing the aforementioned taxes and duties, the State, acting through the legislative and executive branches, is exercising its sovereign prerogative. It is inherent in the power to tax that the State be free to select the subjects of taxation, and it has been repeatedly held that inequalities which result from singling out of one particular class for taxation, or exemption, infringe no constitutional limitation.

validity of the ordinance was sustained by the City Fiscal. However, when the case appealed to the Secretary Justice, Macaraig, the challenged ordinance was deemed of doubtful validity. Respondent City filed a suit for collection on the issue of the validity of the ordinance which had the effect of questioning the opinion of the Justice Secretary. San Miguel filed a petition for certiorari and prohibition to oppose the suit and have it dismissed. It claimed that under Section 47, which states that "The decision of the Secretary of Justice shall be final and executory unless, within thirty days upon receipt thereof, the aggrieved party contents the same in a court of competent jurisdiction, the suit for collection was not the appeal allowed by the law. Issue: WON the courts are ousted its jurisdiction over questions of law because the mode of appeal by the Respondent city was improper. Held: No. The validity of a statute, an executive order or ordinance is a matter for the judiciary to decide and that whenever in the disposition of a pending case such a question becomes unavoidable, then it is not only the power but the duty of the Court to resolve such a question. To construe Section 47 narrowly would be to raise a serious constitutional question. For it would in effect bar what otherwise would be a proper case cognizable by a court precisely is the exercise of the conceded power of judicial review just because the procedure contended for which is that of an "appeal," under the circumstances a term vague and ambiguous, was not followed.

TOLENTINO v. SECRETARY OF FINANCE G.R. NO. 115455 OCTOBER 30, 1995 Topics: Revenue Bills Shall Originate from the House of Representatives Infringement of Press Freedom Grant of Franchise Facts: Motions were filed seeking reconsideration of the Supreme Court decision dismissing the petitions for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded ValueAdded Tax Law. The motions, of which there are 10 in all, have been filed by the several petitioners in these cases. Issues: Whether or not R.A. No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI Sec. 24 of the Constitution. Whether or not R.A. No. 7716 is violative of press freedom and religious freedom under Art. III Secs. 4 and 5 of the Constitution. Whether or not there is violation of the rule on taxation under Art. VI Sec. 28 (1) of the Constitution. Whether or not there is an impairment of obligation of contracts under Art. III Sec. 10 of the Constitution.

SAN MIGUEL CORP v. AVELINO G.R. NO. L-39699 MARCH 14, 1979 Topic: Non-impairment of the Jurisdiction of the Supreme Court Facts: San Miguel challenged the existing Ordinance of the Tax Code of the City of Mandaue. This was on the ground that Section 12(e) (7) in relation to Section 12(e) (1) and (2), Mandaue City Ordinance No. 97, is illegal and void because it imposed a specific tax beyond its territorial jurisdiction. The

Whether or not there is violation of the due process clause under Art. III Sec. 1 of the Constitution. Held: 1. While Art. VI Sec. 24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills must "originate exclusively in the House of Representatives," it also adds, "but the Senate may propose or concur with amendments." In the exercise of this power, the Senate may propose an entirely new bill as a substitute measure. 2. Since the law granted the press a privilege, the law could take back the privilege anytime without offense to the Constitution. The VAT is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general regulation is not to violate its freedom under the Constitution. 3. The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall "evolve a progressive system of taxation." 4. Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can extend to the defeat of that authority. 5. On the alleged violation of due process, hardship to taxpayers alone is not an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no different from the giving of advisory opinion that does not really settle legal issues. We are told that it is our duty under Art. VIII, Sec. 1 (2) to decide whenever a claim is made that "there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government." This duty can only arise if an actual case or controversy is before us.

granted a certificate of public convenience by the Civil Aeronautics Board. It did not have flight operations in the Philippines; it did not carry passengers or cargo. However, it maintained a general sales agent. (Warner Barnes and Co. at first then Qantas Airways) The agent sold BOAC tickets covering passengers and cargoes. Issues: 1. WON BOAC is a resident foreign corporation. (tax scheme is different for a nonresident foreign corporation) Yes; BOAC is a resident corporation doing business in the Philippines. 2. WON the revenue derived by BOAC from sales of its tickets, while having no flight operations in the Philippines, is taxable. Held: Yes; the revenue constitutes income from Philippine sources so it is taxable. 1. Sec 20 of the 1977 Tax Code defines a resident foreign corporation as a foreign corporation engaged in trade or business within the Philippines or having an office or place of business therein. 2. BOAC was engaged in business in the Philippines through a local agent during the period covered by the CIRs assessments. It is a resident foreign corporation subject to tax upon its total net income received in the preceding taxable year from all sources within the Philippines. (Sec 24(b), (2), Tax Code as amended 3. Tax Code provides that for revenue to be taxable, it must constitute income from Philippine sources (see previous paragraph) 4. Income is broadly and comprehensively defined as cash received or its equivalent or the amount of money comint to a person within a specific time. 5. Source of an income is the property, activity or service that produced the income. For the source to be considered as from the Philippines, it is sufficient that the income is derived from activity within the Philippines. 6. In this case, the sale of the tickets in the Philippines is the source of income. The situs of the source of payments is the Philippines.

COMMISSIONER OF INTERNAL REVENUE v. BRITISH OVERSEAS AIRWAYS CORPORATION G.R. No. L-65773-74 April 30, 1987 Topic: Situs of Taxation and Double Taxation: Situs of Subjects of Taxation Facts: Commissioner of Internal Revenue (CIR) questioned a ruling by the Court of Tax Appeals wherein the CTA set aside the CIRs assessment of deficiency income taxes against respondent British Overseas Airways Corporation (BOAC). BOAC is a UK government-owned corporation engaged in the international airline business. It did not have landing rights in the Philippines nor was it

WELLS FARGO BANK & UNION TRUST COMPANY v. THE COLLECTOR OF INTERNAL REVENUE G.R. No. L-46720 June 28, 1940 Topic: Situs of Taxation and Double Taxation: Situs of Subjects of Taxation Facts: This case involves the collection of inheritance taxes on shares of stock issued by the Benguet Consolidated Mining Corporation and owned by Lillian Eye. Said shares were already subjected to inheritance taxes in California and are now being taxed by Philippine authorities. Originally, the settled law in the United States is that intangibles have only one situs for the purpose of

inheritance tax the domicile of the decedent at the time of death. But this rule has, of late, been relaxed. The maxim mobilia sequuntur personam, upon which the rules rests, has been decried as a mere fiction of law having its origin in considerations of general convenience and public policy and cannot be applied to limit or control the right of the State to tax property within its jurisdiction. It must yield to established fact of legal ownership, actual presence and control elsewhere, and cannot be applied if to do so would result in inescapable and patent injustice. Issue: Situs of subjects of taxation of shares of stocks.

in U.S. Corporations and U.S. Savings Bonds, Shares of stock in Philippine Corporations. Testate proceedings were instituted before the Court of California in Santa Cruz County, in the course of which Miller's will of January 17, 1941 was admitted to probate on May 10, 1946. Said court subsequently issued an order and decree of settlement of final account and final distribution, wherein it found that Miller was a "resident of the County of Santa Cruz, State of California" at the time of his death in 1944. Thereafter ancilliary proceedings were filed by the executors of the will before the Court of First Instance of Manila, which court by order of November 21, 1946, admitted to probate the will of Miller was probated in the California court, also found that Miller was a resident of Santa Cruz, California, at the time of his death. On July 29, 1949, the Bank of America, National Trust and Savings Association of San Francisco California, co-executor named in Miller's will, filed an estate and inheritance tax return with the Collector, covering only the shares of stock issued by Philippines corporations, reporting a liability of P269.43 for taxes and P230.27 for inheritance taxes. After due investigation, the Collector assessed estate and inheritance taxes, which was received by the said executor on April 3, 1950. The estate of Miller protested the assessment of the liability for estate and inheritance taxes, including penalties and other increments at P77,300.92, as of January 16, 1954. This assessment was appealed by De Lara as Ancilliary Administrator before the Board of Tax Appeals, which appeal was later heard and decided by the Court of Tax Appeals. Issue: Whether or not that Miller during his long stay in the Philippines had required a "residence" in this country. Held: The Supreme Court did not subject to estate and inheritance taxes the shares of stock issued by Philippine corporations which were left by a nonresident alien after his death. Considering that he is a resident of a foreign country, his estate is entitled to exemption from inheritance tax on the intangible personal property found in the Philippines. This exemption is granted to non-residents to reduce the burden of multiple taxation, which otherwise would subject a decedents intangible personal property to the inheritance tax both in his place of residence and domicile and the place where those properties are found. This is, therefore, an exception to the decision of the Supreme Court in Wells Fargo v. Collector. This has since been incorporated in Section 104 of the NIRC.

Held: The relaxation of the original rule rests on either of two fundamental considerations: 1. Upon the recognition of the inherent power of each government to tax persons, properties and rights within its jurisdiction and enjoying the protection of its laws; or 2. Upon the principle that as to intangibles, a single location in space is hardly possible, considering the multiple, distinct relationships which may be entered into with respect thereto. The actual situs of the shares of stock is in the Philippines, the corporation being domiciled therein. And besides, the certificates of stock have remained in this country up to the time when the deceased died in California, and they were in the possession of the secretary of the Benguet Corporation. The secretary had the right to vote, collect dividends, among others. For all practical purposes, the secretary had legal title to the certificates of stock held in trust for Eye. Eye extended in the Philippines her activities re: her intangible personal property so as to avail herself of the protection and benefits of the Philippine laws.

COLLECTOR OF INTERNAL REVENUE v. DE LARA G.R. No. L-9456 Topics: Multiplicity of Situs Double Taxation

Facts: Hugo H. Miller, an American citizen, was born in Santa Cruz, California, U.S.A., in 1883. In 1905, he came to the Philippines. From 1906 to 1917, he was connected with the public school system, first as a teacher and later as a division superintendent of schools, later retiring under the Osmeiia Retirement Act. At the time of his death in 1944, Miller owned the following properties: Real Property situated in BenLomond, Santa Cruz, California, Real property situated in Burlingame, San Mateo, California, Tangible Personal property, Cash in the banks in the United States, Accounts Receivable from various persons in the United States including notes, Stocks

VILLANUEVA v. CITY OF ILOILO G.R. No. L-26521 December 28, 1968 Topic: Instances of Double Taxation in its Broad Sense Facts: The municipal board of Iloilo City enacted Ordinance 86, imposing license tax fees as follows: 1) tenement house, P25.00anually; 2) tenement house, partly or wholly engaged in or dedicated to business

in the streets of J.M. Basa, Iznart Aldequer, P24.00 per apartment; 3) tenement house, partly or wholly engaged in business in any other streets, P12.00 per apartment. The validity and constitutionality of this ordinance were challenged by the spouses Villanueva, owners of 4 tenement houses containing 34 apartments. An ordinance imposing a municipal tax on tenement houses was challenged because the owners already pay real estate taxes and also income taxes under the NIRC.

period from the first quarter of 1958 to the fourth quarter of 1962, allegedly, inspite of repeated demands. Nor was defendant-appellant agreeable to such a suit being instituted by the City Treasurer without the consent of the Mayor, which for him was indispensable. The lower court was of a different mind. In its decision of December 19, 1964, it declared the above ordinance as amended, valid and subsisting, and held defendant-appellant liable for the fees therein prescribed as a real estate dealer. Hence, this appeal. Assume the validity of such ordinance, and there would be no question about the liability of defendant-appellant for the above license fee, it being shown in the partial stipulation of facts, that he was "engaged in the rental of his property in Baguio" deriving income therefrom during the period covered by the first quarter of 1958 to the fourth quarter of 1962. The source of authority for the challenged ordinance is supplied by Republic Act No. 329, amending the city charter of Baguio2 empowering it to fix the license fee and regulate "businesses, trades and occupations as may be established or practiced in the City." Issue: Whether or not there is double taxation. Held: To repeat the challenged ordinance cannot be considered ultra vires as there is more than ample statutory authority for the enactment thereof. Nonetheless, its validity on constitutional grounds is challenged because of the allegation that it imposed double taxation, which is repugnant to the due process clause, and that it violated the requirement of uniformity. We do not view the matter thus. As to why double taxation is not violative of due process, Justice Holmes made clear in this language: "The objection to the taxation as double may be laid down on one side. ... The 14th Amendment [the due process clause] no more forbids double taxation than it does doubling the amount of a tax, short of confiscation or proceedings unconstitutional on other grounds."8With that decision rendered at a time when American sovereignty in the Philippines was recognized, it possesses more than just a persuasive effect. To some, it delivered the coup de grace to the bogey of double taxation as a constitutional bar to the exercise of the taxing power. It would seem though that in the United States, as with us, its ghost as noted by an eminent critic, still stalks the juridical state. In a 1947 decision, however,9 we quoted with approval this excerpt from a leading American decision:10 "Where, as here, Congress has clearly expressed its intention, the statute must be sustained even though double taxation results." At any rate, it has been expressly affirmed by us that such an "argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city ..., it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof."11

Issue: Whether or not there is double taxation. Ruling: The Supreme Court held that there was no double taxation. The same tax may be imposed by the National Government as well as the local government. There is nothing inherently obnoxious in the exaction of license fees or taxes with respect to the same occupation, calling, or activity by both the State and a political subdivision thereof. Further, a license tax may be levied upon a business or occupation although the land used in connection therewith is subject to property tax. In order to constitute double taxation in the objectionable or prohibited sense: 1. the same property must be taxed twice when it should be taxed once; 2. both taxes must be imposed on the same property or subject matter; 3. for the same purpose; 4. by the same State, Government, or taxing authority; 5. within the same jurisdiction or taxing district; 6. during the same taxing period; and 7. of the same kind or character of tax. At any rate, there is no constitutional prohibition against double taxation in the Philippines. It is something not favored but is permissible, provided that some other constitutional requirement is not thereby violated.

CITY OF BAGUIO v. DE LEON G.R. No. L-24756 October 31, 1968 Topic: Constitutionality of Double Taxation Facts: City of Baguio imposing a license fee on any person, firm, entity or corporation doing business in the City of Baguio is assailed by defendant-appellant Fortunato de Leon. He was held liable as a real estate dealer with a property therein worth more than P10,000, but not in excess of P50,000, and therefore obligated to pay under such ordinance the P50 annual fee. That is the principal question. In addition, there has been a firm and unyielding insistence by defendant-appellant of the lack of jurisdiction of the City Court of Baguio, where the suit originated, a complaint having been filed against him by the City Attorney of Baguio for his failure to pay the amount of P300 as license fee covering the

The above would clearly indicate how lacking in merit is this argument based on double taxation. It is thus apparent from the above that in much the same way that the plea of double taxation is unavailing, the allegation that there was a violation of the principle of uniformity is inherently lacking in persuasiveness. There is no need to pass upon the other allegations to assail the validity of the above ordinance, it being maintained that the license fees therein imposed "is excessive, unreasonable and oppressive" and that there is a failure to observe the mandate of equal protection. A reading of the ordinance will readily disclose their inherent lack of plausibility.

It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects oftaxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally to all those who belong to the same class. These conditions are not fully met by the ordinance in question. Indeed, if its purpose was merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by dealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. Hence, decision appealed from is reversed. City of Butuan is sentenced to refund plaintiff and is restrained and prohibited permanently from enforcing said Ordinance, as amended.

PEPSI-COLA BOTTLING CO. v. CITY OF BUTUAN G.R. No. L-22814 August 28, 1968 Topic: Constitutionality of Double Taxation Facts: Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and principal place of business in Quezon City. Plaintiff's warehouse in the City of Butuan serves as storage for its products the "Pepsi-Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of Agusan. These "Pepsi-Cola" soft drinks are bottled in Cebu City and shipped to the Butuan City warehouse of plaintiff for distribution and sale in the City of Butuan and all municipalities of Agusan. On August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was subsequently amended by Ordinance No. 122 and effective November 28, 1960. Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola. The plaintiff paid under protest the amount of P4.926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961. The plaintiff filed a complaint for the recovery of the total amount of P14,177.03 paid under protest, on the ground that Ordinance No. 110 as amended of the City of Butuan is illegal, that the tax imposed is excessive and that it is unconstitutional. The Court of First Instance ruled in favor of the defendant. Issue: Whether or not the disputed ordinance is void because it is highly unjust and discriminatory Held: Yes. Even if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax.

CHINA BANKING v. COURT OF APPEALS G.R. No. 146749. June 10, 2003 Topic: Constitutionality of Double Taxation Facts: CBC is a universal banking corporation organized and existing under Philippine law. On 20 July 1994, CBC paid P12,354,933.00 as gross receipts tax on its income from interests on loan investments, commissions, services, collection charges, foreign exchange profits and other operating earnings during the second quarter of 1994. CBC filed with the Commissioner of Internal Revenue (Commissioner) a formal claim for tax refund or credit ofP1,140,623.82 from the P12,354,933.00 gross receipts tax that CBC paid for the second quarter of 1994. To ensure that it filed its claim within the two-year prescriptive period, CBC also filed on the same day a petition for review with the Court of Tax Appeals. Citing Asian Bank,CBC argued that it was not liable for the gross receipts tax - amounting to P1,140,623.82 - on the sums withheld by the Bangko Sentral ng Pilipinas as final withholding tax on CBCs passive interest income in 1994. Disputing CBCs claim, the Commissioner asserted that CBC paid the gross receipts tax pursuant to Section 119 (now Section 121) of the National Internal Revenue Code (Tax Code) and pertinent Bureau of Internal Revenue (BIR) regulations. The Commissioner argued that the final withholding tax on a banks interest income forms part of its gross receipts in computing the gross receipts tax. The Commissioner contended that the term gross receipts means the entire income or receipt, without any deduction.

The Court of Tax Appeals ruled in favor of CBC and held that the 20% final withholding tax on interest income does not form part of CBCs taxable gross receipts. Issues: 1. Whether the 20% final withholding tax on interest income should form part of CBCs gross receipts in computing the gross receipts tax on banks; 2. Whether CBC has established by sufficient evidence its right to claim the full refund of P1, 140,623.82 representing alleged overpayment of the gross receipts tax. Held: There is no double taxation when Section 121 of the Tax Code imposes a gross receipts tax on interest income that is already subjected to the 20% final withholding tax under Section 27 of the Tax Code. The gross receipts tax is a business tax under Title V of the Tax Code, while the final withholding tax is an income tax under Title II of the Code. There is no double taxation if the law imposes two different taxes on the same income, business or property. The second interpretation, of a prohibition on a tax on a tax, is as illusory as the prohibition on double taxation. The gross receipts tax falls not on the final withholding tax, but on the amount of the interest income withheld as the final tax. What is being taxed is still the interest income. The law imposes the gross receipts tax on that portion of the interest income that the depository bank withholds and remits to the government. Consequently, the entire amount of the interest income is taxable and not only the net interest income. There is no constitutional prohibition on subjecting the same income or receipt to an income tax and to some other tax like the gross receipts tax. Similarly, the same income or receipt may be subject to the value-added tax and the excise tax like the specific tax. If the tax law follows the constitutional rule on uniformity, making all income, business or property of the same class taxable at the same rate, there can be no valid objection to taxing the same income, business or property twice. In summary, CBC has failed to point to any specific provision of law allowing the deduction, exemption or exclusion, from its taxable gross receipts, of the amount withheld as final tax. Such amount should therefore form part of CBCs gross receipts in computing the gross receipts tax. There being no legal basis for CBCs claim for a tax refund or credit, the second issue raised in this petition is now moot.

their properties under the corporation. This saved them inheritance taxes. Issue: Whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and the Delpher Trades Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the private respondent's right of first refusal over the leased property included in the "deed of exchange." Held: The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation cannot be considered a contract of sale. There was no transfer of actual ownership interests by the Pachecos to a third party. The Pacheco family merely changed their ownership from one form to another. The ownership remained in the same hands. Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract. The Supreme Court upheld the estate planning scheme resorted to by the Pacheco family in converting their property to shares of stock in a corporation which they themselves owned and controlled. By virtue of the deed of exchange, the Pacheco co-owners saved on inheritance taxes. The Supreme Court said the records do not point to anything wrong and objectionable about this estate planning scheme resorted to. The legal right of the taxpayer to decreased the amount of what otherwise could be his taxes or altogether avoid them by means which the law permits cannot be doubted.

COMMISSIONER v. LINCOLN PHILIPPINE LIFE INSURANCE COMPANY G.R. No. 119176 March 19, 2002 Topic: Means of Avoiding or Minimizing the Burden of Taxation: Tax Avoidance Facts: Private respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) is a domestic corporation registered with the Securities and Exchange Commission and engaged in life insurance business. In the years prior to 1984, private respondent Issued a special kind of life insurance policy known as the "Junior Estate Builder Policy," the distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by petitioner only on the initial sum assured. Section 173 of the National Internal Revenue Code on documentary stamp taxes provides: Sec. 173. Stamp taxes upon documents, instruments and papers. - Upon documents, instruments, loan agreements, and papers, and upon acceptances, assignments, sales, and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for,

DELPHER TRADERS CORP v. IAC G.R. No. L-69259 January 26, 1988 Topic: Means of Avoiding or Minimizing the Burden of Taxation: Tax Avoidance Facts: The Delpher Trades Corp. is a business conduit of the Pachecos. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher and placing the control of

and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following section of this Title, by the person making, signing, issuing, accepting, or transferring the same wherever the document is made, signed, Issued, accepted, or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and at the same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax. (As amended by PD No. 1994) The basis for the value of documentary stamp taxes to be paid on the insurance policy is Section 183 of the National Internal Revenue Code. The basis for the value of documentary stamp taxes to be paid on the insurance policy is Section 183 of the National Internal Revenue Code which states in part: Sec. 183. Stamp tax on life insurance policies. On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives, there shall be collected a documentary stamp tax of thirty (now 50c) centavos on each Two hundred pesos per fractional part thereof, of the amount insured by any such policy. Petitioner claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction; and that, while no new policy was Issued, the original policy was essentially reIssued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984; hence, a deficiency assessment based on the additional insurance not covered in the main policy is in order. Issue: Whether or not the automatic increase clause is a separate agreement, and therefore be excluded or avoided for taxation purposes Held: Yes, the automatic increase clause is not a separate agreement and therefore shall be considered as an integral part of the policy for taxation purposes. The "automatic increase clause" in the policy is in the nature of a conditional obligation under Article 1181, by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation. In the instant case, the additional insurance that took effect in 1984 was an obligation subject to a suspensive obligation, but still a part of the insurance sold to which private respondent was liable for the payment of the documentary stamp tax. It should be emphasized that while tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to evade the payment of just taxes. In the case at bar, to claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into the

policy at the time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the amount insured by the policy. WHEREFORE, the petition is hereby given DUE COURSE. The decision of the Court of Appeals is SET ASIDE insofar as it affirmed the decision of the Court of Tax Appeals nullifying the deficiency stamp tax assessment petitioner imposed on private respondent in the amount of P464, 898.75 corresponding to the increase in 1984 of the sum under the policy Issued by respondent.

REPUBLIC v. GONZALES 13 SCRA 633 Topic: Tax Evasion Facts The defendant-appellant, Blas Gonzales, has been a private concessionaire in the U.S. Military Base at Clark Field, Angeles City: He was engaged in the manufacture of furniture and, per agreement with base authorities, supplied them with his manufactured articles. On March 1, 1947 and March 1, 1948, the appellant filed his income tax returns for the years 1946 and 1947, respectively, with the then Municipal Treasurer of Angeles, Pampanga. In the return for 1946, he declared a net income of P9, 352.84 and income tax liability of P111.17 while for the year 1947, he declared as net income the amount of P16, 829.10 and a tax liability therefor in the sum of P1, 395.95. In the above two returns, he declared the sums of P80,459.75 and P1,707,355.57 as his total sales for the said two years, respectively, or an aggregate sales of P1,787,848.32 for both years. Upon investigation, however, the Bureau of Internal Revenue discovered that for the years 1946 and 1947, the appellant had been paid a total of P2, 199,920.50 for furniture delivered by him to the base authorities. The appellant do not deny the above amount which, for the record, was furnished by the Purchasing Officer of the Clark Field Air Base on the Bureau of Internal Revenue's representation. Compared against the sales figure provided by the base authorities, therefore, the amount of P1,787,848.32 declared by the appellant as his total sales for the two tax years in question was short or under declared by some P412,072.18. Accordingly, the appellee considered this last mentioned amount as unreported item of income of the appellant for 1946. Further investigation into the appellant's 1946 profit and loss statement disclosed "local sales," that is, sales to persons other than the United States Army, in the amount of P124, 510.43. As a result, the appellee likewise considered the said amount as unreported income for the said year. The full amount of P124, 510.43 was considered as taxable income because the appellant could not produce the books of account on the same upon which any deduction could be based. Issue:

Whether or not Gonzales committed tax evasion. Held: This Court, discussing Section 1(d), Rule 57, cautioned as follows To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case.

commission of tax evasion by willfully suppressing the true and accurate sales of FTC and as a consequence of which the FTC, through the abovenamed accused, fraudulently declared and filed with the BIR for ad valorem tax purposes gross sales of P10,581,522,160.00 and paid only the ad valorem tax in the amount of P3,806,272,068.75 instead of the true aggregate ad valorem tax of P6,574,331,124.35 if the true and accurate gross sales subject to ad valorem tax is declared, thereby defrauding and causing damage and prejudice to the government in undeclared ad valorem taxes in the amount of P7,508,360,188.31 inclusive of increments. According to the Memorandum dated February 11, 1999 filed by the Bureau of Internal Revenue in connection with its Manifestation and Motion, the Bureau of Internal Revenue in fact conducted several hearings on the tax liability of the accused relative to the protest filed by Fortune Tobacco Corporation regarding its tax liabilities connected with the filing of the instant cases against Lucio C. Tan et al., and that thereafter the Bureau of Internal Revenue found no fraud committed by the Fortune Tobacco Corporation and, that, therefore, there is no legal justification to further pursue the three tax evasion cases against Lucio C. Tan, et al. This finding of non-fraud was approved by the Commissioner of Internal Revenue. Issue: Whether or not findings of non-fraud by the Commissioner a departure to tax evasion

PEOPLE OF THE PHILIPPINES v. LUCIO C. TAN, G.R. No. 144707. July 13, 2004 Topic: Tax Evasion Facts: On September 7, 1993, the Commissioner of Internal Revenue filed a Complaint with the Department of Justice (DOJ), charging Fortune Tobacco Corporation (hereafter Fortune), its corporate officers, nine (9) other corporations and their respective corporate officers, with fraudulent tax evasion for supposed non-payment of the correct ad valorem, income and value-added taxes for the year 1992. On December 1, 1998, Information for nine (9) counts of tax evasion against the respondents was filed, (Taxable Years 1990, 1991 and 1992) by the New DOJ Panel with the Metropolitan Trial Court (MeTC), Marikina City, Branch 75, docketed as Criminal Cases Nos. 98-38181 to 98-38189. The information filed to the accussed by the respondents for violation of Section 127[b] (now Section 130[b]), in relation to Section 253 (now Section 254) and Section 252[b] (now Section 253[b]) and Section 255 (now Section 256), of the National Internal Revenue Code (NIRC), as amended, committed as follows: That during the taxable year 1990, in Marikina City, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, as the respective officers of Fortune Tobacco Corporation (FTC) and its nine (9) dummy corporations, conspiring with, and mutually helping each other, with willful intent to evade and defeat payment of the tax due the government, did then and there, unlawfully, feloniously, file with the Bureau of Internal Revenue (BIR) a false and fraudulent ad valorem tax returns for the taxable year 1990, by then and there purposely and maliciously creating, organizing and incorporating the said dummy corporations and employing individual ghost buyers to effect/perpetrate fictitious and simulated sales of FTCs cigarette products at a price higher than that of the wholesale price registered with the BIR, thereby facilitating the

Held: While there was in fact an evident departure to what is mandated by law, a substantive law, and the fact that it is evident that the Commissioner of Internal Revenue has not approved the filing of the instant cases, this Court, thus, has no other recourse but to obey the law and dismiss the cases at bar. By merely echoing the findings of the BIR, the MeTC abdicated its duty as a court of law, and subjugated itself to the administrative agency. In failing to make an independent finding of the merits of the case and merely anchoring the dismissal on the position of the BIR, the court relinquished the discretion it was obliged to exercise, in violation of the ruling in Crespo v. Mogul. For this reason, this Court is constrained to annul and set aside the Orders of the MeTC. WHEREFORE, the Petition is GRANTED and the Decision of the Court of Appeals dated August 29, 2000 in CA-G.R. SP No. 56077 and the Orders of the Regional Trial Court of Marikina City dated August 25, 1999 and October 13, 1999 in SCA Case No. 95-340-MK are hereby REVERSED, and the Orders dated March 22, 1999 and May 17, 1999 of the Metropolitan Trial Court (MeTC), Branch 75, Marikina City, dismissing the criminal information filed by the DOJ Panel against herein respondents, and denying the DOJ Panels Motion for Reconsideration, are hereby declared NULL and VOID and SET ASIDE, and the criminal information are reinstated.

GREENFIELD v. MEER G.R. No. 156 September 27, 1946 Topic: Exemption from Taxation Facts: This is an appeal from the decision of the Court of First Instance of Manila which dismisses the complaint of the plaintiff and appellant containing two causes of action; one to recover the sum of P9,008.14 paid as income tax for the year 1939 by plaintiff to defendant under protest, by reason of defendant having disallowed a deduction of P67,307.80 alleged by plaintiff to be losses in his trade or business; and the other to reclaim, in the event the first cause of action is dismissed, the sum of P475 collected by defendant from plaintiff illegally according to the latter, because the former has erroneously computed the tax on personal and additional exemptions. Since the year 1933 up to the present time, the plaintiff has been continuously engaged in the embroidery business," and that "in 1935, the plaintiff began engaging in buying and selling mining stocks and securities for his own exclusive account. Issue: Whether, under the present law, the personal and additional exemptions granted by section 23 of the same Act, should be considered as a credit against or be deducted from the net income, or whether it is the tax on such exemptions that should be deducted from the tax on the total net income. Held: The lower court held that, as the new law does not provide that the personal exemptions shall be allowed in the nature of a deduction from the net income, as prescribed in the old law, and there is a distinction between exemption and deduction, the tax due on said exemptions must be deducted from the tax due on the whole net income, instead of deducting the total amount of the exemptions from the net income. The argument of the appellee in support of the lower court's decision is that the omission in section 23 of Act No. 466 of the phrase "in the nature of a deduction" found in section 7 of the old law, shows that it was the intention of the National Assembly to adopt the innovation proposed by the Tax Commission which prepared the draft of the new law, an innovation based on what is known as the "Wisconsin Plan" now in operation in several American states. Under said plan, the cumulative amount of the tax is fixed on any given amount of net income without regard to the status of the taxpayer, and then this amount is reduced by the tax credit fixed in the law according to the status of the taxpayer and the number of his dependents as follows: for single individuals, there is allowed a tax credit of P10; for married persons or heads of family, P30; and for each dependent below 21 years of age, P10. Section 7 of the old law provided: "For the purpose of the normal tax only, there shall be allowed as an

exemption in the nature of a deduction from the amount of the net income . . ."; while section 23 of the new law provides: "For the purpose of the tax provided for in this Title there shall be allowed the following exemptions." Now, the question to be determined or answered is: Does this change in the phraseology of the law show the intention of the National Assembly to change the theory or policy of the old law so as to deduct now the tax on the personal and additional exemptions from the tax fixed on the amount of the net income, instead of deducting the amount of personal and additional exemptions from that of the net income, before determining the tax due on the latter? It is a well-settled rule of statutory construction that where a statue has been enacted which is susceptible of several interpretations there is no better means for ascertaining the will and intention of the legislature than that which is afforded by the history of the statue. Taking into consideration the history of section 23 of the Commonwealth Act No. 466, the answer to the above-propounded question must obviously be in the negative. Section 22 of the bill entitled "An Act to revise, amend and codify the Internal Revenue Laws of the Philippines," prepared by the Tax Commission and submitted to the National Assembly of the Philippines, in substitution of section 7 of the old Income Tax Law. But the National Assembly, instead of adopting or incorporating said proposed section 22 in the National Internal Revenue Code, C. A. No. 466, copied substantially in section 23 of the latter provision of section 7 of the old law relating to personal and additional exemptions, with the only modification that the amount of personal exemption of single individuals has been reduced from two thousand to one thousand pesos, and that of married persons or heads of family from four thousand to two thousand five hundred pesos. If it were the intention of the National Assembly to adopt the "Wisconsin plan" proposed by the tax Commission, it would have adopted literally, or at least substantially, the provisions of said section 22 as section 23 of Commonwealth Act No. 466, instead of substantially incorporating section 7 of the old Income Tax Law as section 23 of the new, except the first paragraph thereof which reads: "For the purpose of the normal tax only, there shall be allowed as an exemption in the nature of a deduction from the amount of the net income." This was changed in said section 23, which provides: "For the purpose of the tax provided for in this Title, there shall be allowed the following exemptions:" From the fact that the National Assembly discarded completely section 22 of the bill drafted in accordance with the "Wisconsin Plan" and submitted by the Tax Commission, it is to be presumed that the National Assembly of the Philippines did not intend to introduce any substantial change in the old law in so far as the effect of personal and additional exemptions on the income tax is concerned. The mere fact that the phrase "in the nature of a deduction" found in section 7 of the old law was omitted in section 23 of the new or National Internal Revenue Code did not and could not effect any change in the law. It is evident that said phrase was added or inserted in said section 7 only out of extreme caution, because, even without it, the

exemption would have to be deducted from the gross income in order to determine the net income subject to tax. Had the provision in the old law been drafted in exactly the same term as that of said section 23, the same construction should have been adopted. Because "Exception is an immunity or privilege; it is freedom from a charge or burden to which others are subjected." (Florar vs. Sherifan, 137 Ind., 28; 36 N. E., 365, 369.) If the amounts of personal and additional exemptions fixed in section 23 are exempt from taxation, they should not be included as part of the net income, which is taxable. There is nothing in said section 23 to justify the contention that the tax on personal exemptions (which are exempt from taxation) should first be fixed, and then deducted from the tax on the net income. The change of phraseology alone does not lead to the conclusion that it was the intention of the lawmaker to amend or change the constructions of the old law as contended by the appellee. For it is a well-established rule, recognized by the Supreme Court of Ohio in the case of Conger vs. Barker's Adm'r (11 Ohio St., 1); "that in the revision of statutes, neither an alteration in phraseology nor the omission or addition of words in the latter statute, shall be held, necessarily, to alter the construction of the former act. And the court is only warranted in holding the construction of a statute, when revised, to be changed, where the intent of the legislature to make such change is clear, or the language used in the new act plainly requires such change of construction. It should be remembered that condensation is a necessity in the work of compilation or codification. Our Income Tax Law is patterned after the United States Revenue or Income Tax Laws. the United States Revenue Laws of 1916, 1918, 1921, 1924, 1926, 1928 and 1932 considered the personal and additional exemptions as credits against the net income for the purpose of the normal tax; and subsequently, the United States Revenue Acts of 1934, 1936 and 1938 amended the former acts by making said exemptions as credits against the net income for the purpose of both the normal tax and surtax. Section 7 of our old Income Tax Law, instead of providing that the personal and additional exemptions shall be allowed as a credit against the net income, as in the United States Revenue Acts, prescribed that the amounts specified therein shall be allowed as an exemption in a nature of deduction from the amount of the net income. Which has exactly the same effect as the provision regarding personal and additional exemptions in the said United States Revenue Acts. For, as it was explained in the Ways and Means Committee Report No. 764, 73d Congress, 2d Session, pages 6, 23: To carry out the policy of retaining practically the same tax burden on ordinary income, it is necessary in connection with the proposed plan to allow the personal exemption and credits for dependents as an offset against surtax as well as normal tax. The personal exemption and credits for defendants would appear to be in lieu of deductions for necessary living expenses. They may well apply to both taxes as do all other ordinary deductions.

And Paul and Mertens, Law of Federal Taxation, Vol. 3, p. 509, state regarding the change in the United States Revenue Act of 1934: "The practical effect of this statutory change is to convert the personal exemption and credit for dependents into deductions . . ." The lower court, therefore, erred in not declaring that personal and additional exemptions claimed by appellant should be credited against or deducted from the net income, and consequently in not sentencing appellee to refund to appellant the sum of P475. In view of all the foregoing, the decision of the lower court is affirmed in so far as it dismisses appellant's first cause of action, and is reversed in so far as it dismissed his second cause of action. Appellee is sentenced to refund to appellant the sum of P475 claimed in the second cause of action of the complaint. Without pronouncement as to costs. So ordered.

SURIGAO CONSOLIDATED MINING v. COLLECTOR GR L-14878, 26 DECEMBER 1963 Topic: Tax Remission / Condonation Facts: Before the outbreak of the War, the Surigao Consolidated Mining Co. was operating its mining concessions in Mainit, Surigao. Due to the interruption of communications at the outbreak of the war, the company lost contact with its mines and never received the production reports for the 4th quarter of 1941. To avoid incurring any tax liability or penalty, it deposited of check payable to and indorsed in favor of the City Treasurer, in payment of ad valorem taxes for the said period. After the war, the company filed its ad valorem tax for the said period pursuant to Commonwealth Act 772. Its return was revised, until eventually the company claimed a refund of P17, 158.01. The collector of Internal Revenue denied the request for refund. Issue: Whether Surigao Consolidated may recover its tax payment in light of the condonation made under a subsequent law, RA 81. Held: RA 81, Section 1(d) provided that all unpaid royalties, ad valorem or specific taxes on all minerals mined from mining claims or concessions existing an din force on 1 January 1942, and which minerals were lost by reason of war, of circumstance arising therefrom are condoned The provision refers to the condonation of unpaid taxes only. The condonation of a tax liability is equivalent and is in the nature of tax exemption. Being so, it should be sustained only when expressed in explicit terms, and it cannot be extended beyond the plain meaning of those terms. He who claims an exemption from his share of the common burden of taxation must justify his claim by showing t hat the Legislature intended to exempt him. The company failed to show any portion of the law that explicitly provided for a refund

of those taxpayers who had paid their taxes on the items.

On appeal by the Commissioner to the Court of Appeals, the decision of the tax court was affirmed. Issues: Whether or not the position taken by the Commissioner coincides with the meaning and intent of executive Order No. 41. Held: The authority of the Minister of Finance (now the Secretary of Finance), in conjunction with the Commissioner of Internal Revenue, to promulgate all needful rules and regulations for the effective enforcement of internal revenue laws cannot be controverted. Neither can it be disputed that such rules and regulations, as well as administrative opinions and rulings, ordinarily should deserve weight and respect by the courts. Much more fundamental than either of the above, however, is that all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply and implement. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law. If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases specifically excepted by it. It might not be amiss to recall that the taxable periods covered by the amnesty include the years immediately preceding the 1986 revolution during which time there had been persistent calls, all too vivid to be easily forgotten, for civil disobedience, most particularly in the payment of taxes, to the martial law regime. It should be understandable then that those who ultimately took over the reigns of government following the successful revolution would promptly provide for abroad, and not a confined, tax amnesty. Relative to the two other issued raised by the Commissioner, we need only quote from Executive Order No. 41 itself; thus: Sec. 6. Immunities and Privileges. Upon full compliance with the conditions of the tax amnesty and the rules and regulations issued pursuant to this Executive order, the taxpayer shall enjoy the following immunities and privileges: a) The taxpayer shall be relieved of any income tax liability on any untaxed income from January 1, 1981 to December 31, 1985, including increments thereto and penalties on account of the non-payment of the said tax. Civil, criminal or administrative liability arising from the non-payment of the said tax, which are actionable under the National Internal Revenue Code, as amended, are likewise deemed extinguished. b) The taxpayer's tax amnesty declaration shall not be admissible in evidence in all proceedings before judicial, quasi-judicial or administrative bodies, in which he is a

COMMISSIONER v. CA 240 SCRA 368 Topic: Tax Amnesty Facts: On 22 August 1986, during the period when the President of the Republic still wielded legislative powers, Executive Order No. 41 was promulgated declaring a one-time tax amnesty on unpaid income taxes, later amended to include estate and donor's taxes and taxes on business, for the taxable years 1981 to 1985. Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, in October 1986 and November 1986, its Tax Amnesty Return No. 34-F-00146-41 and Supplemental Tax Amnesty Return No. 34-F-00146-64-B, respectively, and paid the corresponding amnesty taxes due. Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication received by private respondent on 13 August 1986, assessed the latter deficiency income and business taxes for its fiscal years ended 30 September 1981 and 30 September 1982 in an aggregate amount of P1,410,157.71. The taxpayer wrote back to state that since it had been able to avail itself of the tax amnesty, the deficiency tax notice should forthwith be cancelled and withdrawn. The request was denied by the Commissioner, in his letter of 22 November 1988, on the ground that Revenue Memorandum Order No. 4-87, dated 09 February 1987, implementing Executive Order No. 41, had construed the amnesty coverage to include only assessments issued by the Bureau of Internal Revenue after the promulgation of the executive order on 22 August 1986 and not to assessments theretofore made: TO: All Internal Revenue Officers and Others Concerned: 1.0. To give effect and substance to the immunity provisions of the tax amnesty under Executive Order No. 41, as expanded by Executive Order No. 64, the following instructions are hereby issued: xxx xxx xxx 1.02. A certification by the Tax Amnesty Implementation Officer of the fact of availment of the said tax amnesty shall be a sufficient basis for: xxx xxx xxx 1.02.3. In appropriate cases, the cancellation/withdrawal of assessment notices and letters of demand issued after August 21, 1986 for the collection of income, business, estate or donor's taxes due during the same taxable years. Private respondent appealed the Commissioner's denial to the Court of Tax Appeals.

defendant or respondent, and the same shall not be examined, inquired or looked into by any person, government official, bureau or office. c) The books of account and other records of the taxpayer for the period from January 1, 1981 to December 31, 1985 shall not be examined for income tax purposes: Provided, That the Commissioner of Internal Revenue may authorize in writing the examination of the said books of accounts and other records to verify the validity or correctness of a claim for grant of any tax refund, tax credit (other than refund on credit of withheld taxes on wages), tax incentives, and/or exemptions under existing laws. There is no pretension that the tax amnesty returns and due payments made by the taxpayer did not conform with the conditions expressed in the amnesty order. COMMISSIONER OF INTERNAL REVENUE v. MARUBENI G.R. No.137377, December 18, 2001 Topic: Tax Amnesty Facts: Respondent Marubeni Corporation is a foreign corporation organized and existing under the laws of Japan. It is engaged in general import and export trading, financing and the construction business. It is duly registered to engage in such business in the Philippines and maintains a branch office in Manila. Sometime in November 1985, petitioner Commissioner of Internal Revenue Issued a letter of authority to examine the books of accounts of the Manila branch office of respondent corporation for the fiscal year ending March 1985. In the course of the examination, petitioner found respondent to have undeclared income from two (2) contracts in the Philippines, both of which were completed in 1984. One of the contracts was with the National Development Company (NDC) in connection with the construction and installation of a wharf/port complex at the Leyte Industrial Development Estate in the municipality of Isabel, province of Leyte. The other contract was with the Philippine Phosphate Fertilizer Corporation (Philphos) for the construction of an ammonia storage complex also at the Leyte Industrial Development Estate. On March 1, 1986, petitioner's revenue examiners recommended an assessment for deficiency income, branch profit remittance, contractor's and commercial broker's taxes. Respondent questioned this assessment in a letter dated June 5, 1986. On August 27, 1986, respondent corporation received a letter dated August 15, 1986 from petitioner assessing respondent several deficiency taxes. The assessed deficiency internal revenue taxes, inclusive of surcharge and interest amounted to P 3, 600,535.68. Earlier, on August 2, 1986, Executive Order (E.O.) No. 41 declaring a one-time amnesty covering unpaid income taxes for the years 1981 to 1985 was issued. Under this E.O., a taxpayer who wished to

avail of the income tax amnesty should, on or before October 31, 1986: (a) file a sworn statement declaring his net worth as of December 31, 1985; (b) file a certified true copy of his statement declaring his net worth as of December 31, 1980 on record with the Bureau of Internal Revenue (BIR), or if no such record exists, file a statement of said net worth subject to verification by the BIR; and (c) file a return and pay a tax equivalent to ten per cent (10%) of the increase in net worth from December 31, 1980 to December 31, 1985. In accordance with the terms of E.O. No. 41, respondent filed its tax amnesty return dated October 30, 1986 and attached thereto its sworn statement of assets and liabilities and net worth as of Fiscal Year (FY) 1981 and FY 1986. The return was received by the BIR on November 3, 1986 and respondent paid the amount of P2,891,273.00 equivalent to ten percent (10%) of its net worth increase between 1981 and 1986. The period of the amnesty in E.O. No. 41 was later extended from October 31, 1986 to December 5, 1986 by E.O. No. 54 dated November 4, 1986. Issue: Whether or not the Court of Appeals erred in affirming the Decision of the Court of Tax Appeals which ruled that herein respondent's deficiency tax liabilities were extinguished upon respondent's availment of tax amnesty under Executive Orders Nos. 41 and 64. Held: Petitioner's claim cannot be sustained. Section 4 (b) of E.O. No. 41 is very clear and unambiguous. It excepts from income tax amnesty those taxpayers "with income tax cases already filed in court as of the effectivity hereof." The point of reference is the date of effectivity of E.O. No. 41. The filing of income tax cases in court must have been made before and as of the date of effectivity of E.O. No. 41. Thus, for a taxpayer not to be disqualified under Section 4 (b) there must have been no income tax cases filed in court against him when E.O. No. 41 took effect. This is regardless of when the taxpayer filed for income tax amnesty, provided of course he files it on or before the deadline for filing. Section 4 of E.O. No. 41 enumerates which taxpayers cannot avail of the amnesty granted there under, viz: "Sec. 4. Exceptions. The following taxpayers may not avail themselves of the amnesty herein granted: a) Those falling under the provisions of Executive Order Nos. 1, 2 and 14; b) Those with income tax cases already filed in Court as of the effectivity hereof; c) Those with criminal cases involving violations of the income tax law already filed in court as of the effectivity hereof; d) Those that have withholding tax liabilities under the National Internal Revenue Code, as amended, insofar as the said liabilities are concerned; e) Those with tax cases pending investigation by the Bureau of Internal Revenue as of the effectivity hereof as a result of information furnished under Section 316 of the National Internal Revenue Code, as amended;

f) Those with pending cases involving unexplained or unlawfully acquired wealth before the Sandiganbayan; g) Those liable under Title Seven, Chapter Three (Frauds, Illegal Exactions and Transactions) and Chapter Four (Malversation of Public Funds and Property) of the Revised Penal Code, as amended.

Whether or not petitioner has made erroneous payments of the subject taxes. Held: The petition is without merit. Section 229.Recovery of Tax Erroneously or Illegally Collected. N o s u i t o r proceeding, shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duty filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless on any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. The above-cited section speaks of taxes erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected. Undeniably, it is not proper for us to allow a claim for refund in favor of petitioner who, by law, is legally mandated to pay the taxes due from it. The allegation of petitioner that the subject taxes it paid comes within the purview of an erroneous payment merely because said taxes, by virtue of a contract, are to be assumed by NPC is unavailing. Petitioner remedy, if any, is to seek a cash refund from NPC for the equivalent amount of the income taxes and branch profit remittance taxes it paid to the BIR. This remedy is recognized by the respondent himself when he issued Revenue Memorandum Circular (RMC) No. 32-99, as amended by Revenue Memorandum Circular 42-99 dated June 2, 1999, which provides that: "In cases where income taxes were previously paid directly by the Japanese contractors or nationals, the corresponding cash refund shall be recovered from the government executing agencies upon the presentation of proof of payment thereof by the Japanese contractors or nationals". International comity may not be invoked to evade our tax laws. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which on us petitioners have failed to discharge. Significantly, private respondents are not even among the entities which, under Section 29(b)(7)(A) of the tax code, are entitled to exemption and which should indispensably be the party in interest in this case. Definitely, the taxability of a party cannot be blandly glossed over on the basis of a supposed "broad,

COMMISSIONER v. MITSUBISHI METAL CORPORATION C.T.A. CASE NO. 6139. December 17, 2003. Topic: Kinds of Tax Exemption: Express and Implied Facts: This case involves a claim for refund of erroneously paid income tax and branch profit remittance tax for the fiscal year ended March 31, 1998 amounting to P44, 288,712 and P8, 324,100, respectively, arising from petitioner's Overseas Economic Cooperation Fund funded Batangas Coal-Fired Thermal Power Plant Project. Petitioner is the Philippine Branch of Mitsubishi Corporation, a corporation duly organized and existing under the laws of Japan and duly licensed to engage in business in the Philippines. Through an Exchange of Notes between the Government of Japan and the Government of the Philippines dated June 11, 1987 (Exhibit "J"), it was agreed that a loan amounting to Forty Billion Four Hundred Million Japanese Yen(Y40,400,000,000) will be extended to the Republic of the Philippines by the then Overseas Economic Cooperation Fund (hereinafter, "OECF"), (now the Japan Bank for International Cooperation or "JIBC" for the implementation of the Calaca II Coal-Fired Thermal Power Plant Project. The Calaca II Project was completed by the petitioner on December 2, 1995 but was only accepted by NPC on January 31, 1998 through a Certificate of Completion and Final Acceptance dated February 4, 1998. On July 15, 1998, petitioner filed its Income Tax Return for the fiscal year ended March 31, 1998 with the Bureau of Internal Revenue. In the return, petitioner (being the Manila Branch of Mitsubishi Corporation) reported an income tax due of P90,481,711.00 computed in accordance with the provisions of Revenue Memorandum Order ("RAMO") No. 1-95. In computing the P90, 481,711.00 income tax due for fiscal year ended March 31, 1998, petitioner included as part of its taxable income, all revenues earned and cost incurred for its Calaca II Project, in accordance with the completed contract method of reporting income. The net income from the Calaca II Project amounted to P151, 997,705. Despite the provision in the Contract that NPC shall assume the tax liabilities of petitioner, the latter still made payments of the subject taxes to respondent. And now, petitioner, believing that it has made erroneous payments of the subject taxes, is before us invoking the provision of Section 229 in relation to Section 204 of the Tax Code. Issue:

pragmatic analysis" alone without substantial supportive evidence, lest governmental operations suffer due to diminution of much needed funds. Nor can we close this discussion without taking cognizance of petitioner's warning, of pervasive relevance at this time, that while international comity is invoked in this case on the nebulous representation that the funds involved in the loans are those of a foreign government, scrupulous care must be taken to avoid opening the floodgates to the violation of our tax laws. Otherwise, the mere expedient of having a Philippine corporation enters into a contract for loans or other domestic securities with private foreign entities, which in turn will negotiate independently with their governments, could be availed of to take advantage of the tax exemption law under discussion." Tax exemptions must be strictly construed such that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention of the parties. Tax exemptions are not presumed. Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person claiming the exemption (Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., 309 SCRA 87 [1999]).In the light of the foregoing; we cannot conclude that the Exchange of Notes grants tax exemption to petitioner. Hence, petitioner's claim for refund should be denied for lack of merit.

The principle of Local autonom y does not make local governments sovereign within the state; the principle of local autonomy within the constitution simply means decentralization. It cannot be an Imperium in imperio it can only act intra sovereign, or as an arm of the National Government. PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the government, PAGCOR should be and actually is exempt from local taxes. The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.

REPUBLIC OF THE PHILIPPINES v. CITY OF KIDAPAWAN G.R. NO. 166651 Topic: Nature of the Power to Grant Tax Exemption Facts: President Ferdinand E. Marcos issued Presidential Decree (PD) No. 1442 which allowed the government to enter into service contracts for financial, technical, management or other forms of assistance with qualified domestic and foreign entities, for the exploration, development, exploitation, or utilization of the country's geothermal resources. On January 30, 1992, then President Corazon C. Aquino issued Proclamation No. 853 [5] which excluded certain portions of the land embraced in the Mt. Apo National Park and declared the same as geothermal reservation under the administration of the PNOC, now referred to as the MAGRA. On March 24, 1992, the government through the Office of Energy Affairs (now Department of Energy, DOE) entered into a service contract ] with PNOCEDC, a government owned or controlled corporation created and existing under the Corporation Code, to exclusively conduct geothermal operations within the MAGRA. Under the contract, the PNOC-EDC would furnish the necessary services, technology and financing for the geothermal operations subject to the direct supervision of the DOE. Thereafter, PNOC-EDC built a 104-megawatt power plant within the MAGRA which produces electricity through turbines using steam extracted from the MAGRA as fuel. City Treasurer of Kidapawan, Cotabato notified PNOC-EDC of its tax delinquency after which, he issued a warrant of levy on the 701-hectare MAGRA for failure to pay real property taxes, covering the tax period from 1993-2002. Thereafter, he sent a notice of sale of delinquent real property to PNOC-EDC

BASCO v. PAGCOR G.R. No. 91649 May 14, 1991 Topic: Nature of the Power to Grant Tax Exemption Facts: The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977"to establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines." Petitioners filed an instant petition seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR). Petitioners claim that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is in violation of the principle of local autonomy. Section 13 par. (2) of P.D. 1869 exempts PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local." Issue: Does the local Government of Manila have the power to impose taxes on PAGCOR?

Held: The City government of Manila has no power to impose taxes on PAGCOR.

declaring that delinquent real property will be sold through public auction. The trial court found that PNOC-EDC is not exempt from paying the real property taxes and that the MAGRA is part of the Mt. Apo National Park which has not been re-classified as alienable agricultural land. Thus, it could not be sold at public auction. However, the trial court ordered that the improvements on the subject land, not being in the nature of public dominion, may be validly levied and sold at public auction to satisfy the payment of realty tax delinquencies.PNOC-EDC's motion for reconsideration was denied, hence, this petition. Issue: Whether PNOC-EDC is liable to pay the real property taxes, whether the machineries, equipment, buildings and other infrastructures found in MAGRA may be levied; and whether the assessment has become final and executory. Held: We agree with PNOC-EDC that its machineries, equipment, buildings and other infrastructures found in MAGRA cannot be levied upon and sold at public auction to satisfy the alleged tax delinquency because the warrant of levy shows that MAGRA is the only delinquent real property subject to tax. Respondents have two remedies for the collection of real property tax: (1) by administrative action through levy on real property; and (2) by judicial action. Under Sections 257 and 258 of the LGC, the basic real property tax constitutes as a lien on the property subject to the tax which may be levied upon through the issuance of a warrant. The local government unit concerned may also enforce the collection of the basic real property tax by civil action in any court of competent jurisdiction. Respondents levied on a portion of the MAGRA to satisfy the tax delinquency of PNOC-EDC. However, the land being levied is classified as inalienable. It is owned by the government and thus, cannot be sold at public auction. Likewise, the machineries, equipment and other infrastructures in the MAGRA cannot be levied and sold at public auction because it is not the property that is subject to the tax. The personal liability for the tax delinquency, is generally on whoever is the owner of the real property at the time the tax accrues; where, however, the tax liability is imposed on the beneficial use of the real property such as those owned but leased to private persons or entities by the government, or when the assessment is made on the basis of the actual use thereof, the personal liability is on any person who has such beneficial or actual use at the time of the accrual of the tax. In the case at bar, PNOC-EDC is the beneficial user, however, since respondents cannot avail of the administrative remedy through levy, they can only enforce the collection of real property tax through civil action. PNOC-EDC liable to pay the real property tax accruing from its use of the MAGRA. Respondents however are DIRECTED to refrain from levying on the buildings, infrastructures and machineries of PNOC-EDC to satisfy the payment of the real property tax delinquency.

MACEDA v. MACARAIG G.R. No. 88291 June 8, 1993 Topic: Grounds for Tax Exemption Facts: Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines. The sum of P250, 000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work. The main source of funds for the NPC was the flotation of bonds in the capital markets and these bonds . . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face of said bonds. . . . . On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. The tax provision related to the repayment of these loans was not amended or deleted.

On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100, 000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government. No tax exemption was incorporated in said Act. On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250, 000,000.00 with the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300, 000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Issue: Whether or not NPC is exempted from payment of tax. Held: All units of government, including governmentowned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees are imposed under revenues laws: provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund. A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes direct and indirect. Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as knowledge that many impositions taxpayers have to pay are in the nature of indirect taxes. To limit the exemption granted the National Power Corporation to direct taxes notwithstanding the general and broad language of the statue will be to thwart the legislative intention in giving exemption from all forms of taxes and impositions without distinguishing between those that are direct and those that are not.

Facts: Petitioner is a licensed forest concessionaire possessing a Timber License Agreement granted by the Ministry of Natural Resources (now Department of Environment and Natural Resources). From July 1, 1980 to January 31, 1982 petitioner purchased, from various oil companies, refined and manufactured mineral oils as well as motor and diesel fuels, which it used exclusively for the exploitation and operation of its forest concession. Said oil companies paid the specific taxes imposed, under Sections 153 and 156 of the 1977 National Internal Revenue Code (NIRC), on the sale of said products. Being included in the purchase price of the oil products, the specific taxes paid by the oil companies were eventually passed on to the user, the petitioner in this case. On December 13, 1982, petitioner filed before Respondent Commissioner of Internal Revenue (CIR) a claim for refund in the amount of P120,825.11, representing 25% of the specific taxes actually paid on the above-mentioned fuels and oils that were used by petitioner in its operations as forest concessionaire. The claim was based on Insular Lumber Co. vs. Court of Tax Appeals and Section 5 of RA 1435 which reads: Sec. 5. The proceeds of the additional tax on manufactured oils shall accrue to the road and bridge funds of the political subdivision for whose benefit the tax is collected: Provided, however, That whenever any oils mentioned above are used by miners or forest concessionaires in their operations, twenty-five per centum of the specific tax paid thereon shall be refunded by the Collector of Internal Revenue upon submission of proof of actual use of oils and under similar conditions enumerated in subparagraphs one and two of section one hereof, amending section one hundred forty-two of the Internal Revenue Code: Provided, further, That no new road shall be constructed unless the routes or location thereof shall have been approved by the Commissioner of Public Highways after a determination that such road can be made part of an integral and articulated route in the Philippine Highway System, as required in section twenty-six of the Philippine Highway Act of 1953. It is an unquestioned fact that petitioner complied with the procedure for refund, including the submission of proof of the actual use of the aforementioned oils in its forest concession as required by the above-quoted law. Petitioner, in support of its claim for refund, submitted to the CIR the affidavits of its general manager, the president of the Philippine Wood Products Association, and three disinterested persons, all attesting that the said manufactured diesel and fuel oils were actually used in the exploitation and operation of its forest concession. . Issues: 1. Whether or not petitioner is entitled under Republic Act No. 1435 to the refund of 25% of the amount of specific taxes it actually paid on various refined and manufactured mineral oils and other oil products taxed under Sec. 153 and Sec. 156 of the 1977 (Sec. 142 and Sec. 145 of the 1939) National Internal Revenue Code.

DAVAO GULF LUMBER CORPORATION v. COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS G.R. No. 117359 July 23, 1998 Topic: Grounds for Tax Exemption

2. May there be a tax exemption solely on the ground of equity?

Held: The Court Held that the claim for refund should indeed be computed on the basis of the amounts deemed paid under Sections 1 and 2 of RA 1435. In so ruling, it cited our pronouncement in Commissioner of Internal Revenue v. Rio Tuba Nickel Mining Corporation and subsequent Resolution dated June 15, 1992 clarifying the said Decision. Respondent Court further ruled that the claims for refund which prescribed and those which were not filed at the administrative level must be excluded. Finally, petitioner asserts that "equity and justice demand that the computation of the tax refunds be based on actual amounts paid under Sections 153 28 and 156 of the NIRC." We disagree. According to an eminent authority on taxation, "there is no tax exemption solely on the, ground of equity."

storing or consuming tangible goods, the press was not. Instead, the press was exempted from both taxes. It was, however, later made to pay a special use tax on the cost of paper and ink which made these items "the only items subject to the use tax that were component of goods to be sold at retail." The U.S. Supreme Court held that the differential treatment of the press "suggests that the goal of regulation is not related to suppression of expression, and such goal is presumptively unconstitutional." It would therefore appear that even a law that favors the press is constitutionally suspected. Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and unqualifiedly" by R.A. No. 7716. Other exemptions from the VAT, such as those previously granted to PAL, petroleum concessionaires, enterprises registered with the Export Processing Zone Authority, and many more are likewise totally withdrawn, in addition to exemptions which are partially withdrawn, in an effort to broaden the base of the tax.

TOLENTINO v. SECRETARY OFFINANCE October 30, 1995 235 SCRA 630 Topic: Nature of Tax Exemption Facts: The VAT is levied on the sale, barter, or exchanged of the goods and properties as well as on the sale of services. RA7116 seeks to wider the tax base of the existing VAT system and enhance it administration on by amending the NIRC. CRTBA asserts that R.A. 7116 is unconstitutional as it violates the rule that taxes should be uniform and equitable. Issue: Whether or not RA 7116 is unconstitutional. Held: It would suffice to say that since the law granted the press a privilege, the law could take back the privilege anytime without offense to the Constitution. The reason is simple: by granting exemptions, the State does not forever waive the exercise of its sovereign prerogative. Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have long ago been subject. It is thus different from the tax involved in the cases invoked by the Philippine Press Institute (PPI). The license tax in Grosjean v. American Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be discriminatory because it was laid on the gross advertising receipts only of newspapers whose weekly circulation was over 20,000, with the result that the tax applied only to 13 out of 124 publishers in Louisiana. These large papers were critical of Senator Huey Long who controlled the state legislature which enacted the license tax. The censorial motivation for the law was thus evident. On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, the tax was found to be discriminatory because although it could have been made liable for the sales tax or, in lieu thereof, for the use tax on the privilege of using,

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. v. CITY OF DAVAO G. R. NO. 143867 AUGUST 22, 2001 Topic: Nature of Tax Exemption Facts: On January 1999, petitioner Philippine Long Distance Telephone Co., Inc. (PLDT) applied for a Mayor's Permit to operate its Davao Metro Exchange. Respondent City of Davao withheld action on the application pending payment by petitioner of the local franchise tax in the amount of P3, 681,985.72 for the first to the fourth quarter of 1999. 2 In a letter dated May 31, 1999, 3 petitioner protested the assessment of the local franchise tax and requested a refund of the franchise tax paid by it for the year 1997 and the first to the third quarters of 1998. Petitioner contended that it was exempt from the payment of franchise tax based on an opinion of the Bureau of Local Government Finance (BLGF) on R.A 7925, dated June 2, 1998. It further it argues that because Smart and Globe are exempt from the franchise tax, it follows that it must likewise be exempt from the tax being collected by the City of Davao because the grant of tax exemption to Smart and Globe ipso facto extended the same exemption to it. Issue: Whether or not PLDT is exempt from tax. Held: The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. In the case of petitioner, the BLGF opined that Sec.23 of R.A. No. 7925 amended the franchise of petitioner and in effect restored its exemptions from local taxes. Petitioner contends that courts should not set aside conclusions reached by the BLGF

because its function is precisely the study of local tax problems and it has necessarily developed an expertise on the subject. To be sure, the BLGF is not an administrative agency whose findings on questions of fact are given weight and deference in the courts. The authorities cited by petitioner pertain to the Court of 26 Tax Appeals, a highly specialized court which performs judicial functions as it was created for the 27 review of tax cases. In contrast, the BLGF was created merely to provide consultative services and technical assistance to local governments and the general public on local taxation, real property assessment, and other related matters, among others. The question raised by petitioner is a legal question, to wit, the interpretation of Sec. 23 of R.A. No. 7925. There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to possess in their respective fields. Petitioner likewise argues that the BLGF enjoys the presumption of regularity in the performance of its duty. It does enjoy this presumption, but this has nothing to do with the question in this case. This case does not concern the regularity of performance of the BLGF in the exercise of its duties, but the correctness of its interpretation of a provision of law. In sum, it does not appear that, in approving Sec.23 of R.A. No. 7925, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, we hold that 23 of R.A. No. 7925 cannot be considered as having amended petitioner's franchise so as to entitle it to exemption from the imposition of local franchise taxes. Consequently, we hold that petitioner is liable to pay local franchise taxes in the amount of P3,681,985.72 for the period covering the first to the fourth quarter of 1999 and that it is not entitled to a refund of taxes paid by it for the period covering the first to the third quarter of 1998.

The petitioner denied liability for the payment of the tax on the ground that both the NPC and the VOA are exempt from taxation. Issue: Whether or not Philippine exempted from tax.

Acetylene

Co.

is

Held: If a claim of exemption from sales tax based on state immunity cannot command assent, much less can a claim resting on statutory grant. It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax becomes a part of the price which the purchaser must pay. It does not matter that an additional amount is billed as tax to the purchaser. The method of listing the price and the tax separately and defining taxable gross receipts as the amount received less the amount of the tax added, merely avoids payment by the seller of a tax on the amount of the tax. The effect is still the same, namely, that the purchaser does not pay the tax. He pays or may pay the seller more for the goods because of the seller's obligation, but that is all and the amount added because of the tax is paid to get the goods and for nothing else. But the tax burden may not even be shifted to the purchaser at all. A decision to absorb the burden of the tax is largely a matter of economics. Then it can no longer be contended that a sales tax is a tax on the purchaser. We therefore hold that the tax imposed by section 186 of the National Internal Revenue Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very remote and inconsequential sense. Accordingly its levy on the sales made to tax-exempt entities like the NPC is permissible. It is a familiar learning in the American law of taxation that tax exemption must be strictly construed and that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention of the parties. Hence, in so far as the circular of the Bureau of Internal Revenue would give the tax exemptions in the Agreement an expansive construction it is void.

PHILIPPINE ACETYLENE CO., INC., v. COMMISSIONER OF INTERNAL REVENUE 20 SCRA 1056 August 17, 1967 Topic: Nature of Tax Exemption Facts: The petitioner is a corporation engaged in the manufacture and sale of oxygen and acetylene gases. During the period from June 2, 1953 to June 30, 1958, it made various sales of its products to the National Power Corporation, an agency of the Philippine Government, and to the Voice of America an agency of the United States Government. The sales to the NPC amounted to P145, 866.70, while those to the VOA amounted to P1,683, on account of which the respondent Commission of Internal Revenue assessed against, and demanded from, the petitioner the payment of P12,910.60 as deficiency sales tax and surcharge, pursuant to the following-provisions of the National Internal Revenue Code.

REPUBLIC OF THE PHILIPPINES vs. CITY OF KIDAPAWAN G.R.NO. 166651 December 9, 2005 Topic: Nature of Tax Exemption Facts On March 24, 1992, the government through the Office of Energy Affairs (now Department of Energy, DOE) entered into a service contract with PNOCEDC, a government owned or controlled corporation created and existing under the Corporation Code, to exclusively conduct geothermal operations within the MAGRA. Under the contract, the PNOC-EDC would furnish the necessary services, technology and financing for the geothermal operations subject to the direct supervision of the DOE. Thereafter,

PNOC-EDC built a 104-megawatt power plant within the MAGRA which produces electricity through turbines using steam extracted from the MAGRA as fuel. Subsequently, the City Treasurer of Kidapawan, Cotabato notified PNOC-EDC of its tax delinquency after which, he issued a warrant of levy on the 701hectare MAGRA for failure to pay real property taxes, covering the tax period from 1993-2002. Thereafter, he sent a notice of sale of delinquent real property to PNOC-EDC declaring that delinquent real property will be sold through public auction. PNOC-EDC avers that the LGC which took effect on January 1, 1992 did not withdraw the exemption provided under Section 6.2, paragraph (a) of the service contract which was executed on March 24, 1992. Thus, the withdrawal of the exemption was only for those previously or presently enjoying the privilege as of January 1, 1992 Issue: Whether or not PNOC-EDC is exempt from tax. Held: The power to tax and to grant tax exemptions is vested in the Congress and, to a certain extent, in the local legislative bodies. Under Section 28(4), Article VI of the Constitution, no law granting any tax exemption shall be passed without the concurrence of a majority of all Members of Congress. Thus the exemption provided in the service contract cannot be given effect because the DOE, representing the government in the execution of the contract, has no authority to grant the same. Moreover, the Local Government Code specifically enumerates the entities exempt from real property taxation and PNOC-EDC is not one of them. Taxes are what we pay for civilized society, or are the lifeblood of the nation. The law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. PNOC-EDC has not proven that it is entitled to exemption from the payment of real property tax.

incorporated with the SEC in 1948. On 6 July 1972, the Municipal and Provincial treasurers (Gaspar Bosque and Armin Cariaga, respectively) and issued a Notice of Seizure upon the petitioner for the college lot and building (OCT Q-83) for the satisfaction of said taxes thereon. The treasurers served upon the petitioner a Notice of Sale on 8 July 1972, the sale being held on the same day. Dr. Paterno Millare, then municipal mayor of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving the sale of the college lot and building. The certificate of sale was correspondingly issued to him. The petitioner filed a complaint on 10 July 1972 in the court a quo to annul and declare void the Notice of Seizure and the Notice of Sale of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5, 140.31. On 12 April 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial court ruled for the government, holding that the second floor of the building is being used by the director for residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not being used exclusively for educational purposes. Issue: Whether or not the college lot and building of the petitioner are not exempt from property taxes and ordering petitioner to pay 5, 140.31 as realty taxes. Held: Due to its time frame, the constitutional provision which finds application in the case at bar is Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, which expressly grants exemption from realty taxes for "Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable or educational purposes . It must be stressed however, that while this Court allows a more liberal and non-restrictive interpretation of the phrase "exclusively used for educational purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise stated, the use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of the main building in the case at bar for residential purposes of the Director and his family, may find justification under the concept of incidental use, which is complimentary to the main or primary purposeeducational, the lease of the first floor thereof to the Northern Marketing Corporation

ABRA VALLEY COLLEGE, INC. v. AQUINO 162 SCRA 113 June 15, 1988 Topic: Laws Granting Tax Exemption: Constitution Facts: Petitioner Abra Valley College is an educational corporation and institution of higher learning duly

cannot by any stretch of the imagination be considered incidental to the purpose of education Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school building as well as the lot where it is built should be taxed, not because the second floor of the same is being used by the Director and his family for residential purposes, but because the first floor thereof is being used for commercial purposes. However, since only a portion is used for purposes of commerce, it is only fair that half of the assessed tax be returned to the school involved.

from resorting to any convoluted attempt at construction. It is axiomatic that where the language of the law is clear and unambiguous, its express terms must be applied. Parenthetically, a consideration of the question of construction must not even begin, particularly when such question is on whether to apply a strict construction or a liberal one on statutes that grant tax exemptions to "religious, charitable and educational properties or institutions." The last paragraph of Section 27, the YMCA argues, should be "subject to the qualification that the income from the properties must arise from activities 'conducted for profit' before it may be considered taxable." This argument is erroneous. As previously stated, a reading of said paragraph ineludibly shows that the income from any property of exempt organizations, as well as that arising from any activity it conducts for profit, is taxable. The phrase "any of their activities conducted for profit" does not qualify the word "properties." This makes from the property of the organization taxable, regardless of how that income is used whether for profit or for lofty non-profit purposes. Verba legis non est recedendum. Hence, Respondent Court of Appeals committed reversible error when it allowed, on reconsideration, the tax exemption claimed by YMCA on income it derived from renting out its real property, on the solitary but unconvincing ground that the said income is not collected for profit but is merely incidental to its operation. The law does not make a distinction. The rental income is taxable regardless of whence such income is derived and how it is used or disposed of. Where the law does not distinguish, neither should we.

COMMISIONER OF INTERNAL REVENUE v. COURT OF APPEALS 29 SCRA 83 October 14, 1998 Topic: Construction of Statutes Granting Tax Exemptions Facts: Private Respondent YMCA is a non-stock ,nonprofit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. The Commissioner of Internal Revenue issued an assessment to private respondent, in the total amount of P415,615.01including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the Commissioner denied the claims of YMCA.YMCA filed a petition for review at the Court of Tax Appeals. The CTA ruled in favor of the YMCA. The Commissioner elevated the case to the Court of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contract of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contractors and income taxes. However, finding merit in YMCAs motion for reconsideration, the appellate court reversed itself and promulgated the first assessed resolution dated September 28,1995grantingsaid motion of YMCA by affirming the CTAs decision in toto. On February29, 1996, the Court of Appeals denied the Commissioners motion for reconsideration. Issue: Whether or not the YMCA is exempted from rental income derived from the lease of its properties. Held: The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real property, the Court is duty-bound to abide strictly by its literal meaning and to refrain

MISAMIS ORIENTAL ASSO v. DEPARTMENT OF FINANCE 238 SCRA 63 November 10, 1994 Topic: Construction of Statutes Granting Tax Exemptions Facts: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose members, individually or collectively, are engaged in the buying and selling of copra in Misamis Oriental. On the other hand, respondents represent departments of the executive branch of government charged with the generation of funds and the assessment, levy and collection of taxes and other imposts. It alleges that prior to the issuance of Revenue Memorandum Circular (RMC) 47-91 on June 11, 1991, which implemented Value Added Tax (VAT) Ruling 190-90, copra was classified as agricultural food product under Section 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution. The petitioner contends that the Bureau of Food and Drug of the Department of Health and not the Bureau of Internal Revenue (BIR) is the competent government agency to determine the proper classification of food products. It cites the opinion of Dr. Quintin Kintanar of the Bureau of Food and Drug

to the effect that copra should be considered "food" because it is produced from coconut which is food and 80% of coconut products are edible. The respondents, on the contrary, argue that the opinion of the BIR, as the government agency charged with the implementation and interpretation of the tax laws, is entitled to great respect. Thus, the present petition for prohibition and injunction seeking to nullify Revenue Memorandum Circular No. 47-91 and enjoin the collection by respondent revenue officials of the Value Added Tax (VAT) on the sale of copra by members of petitioner organization. Issue: Is copra an agricultural food product for purposes of the provisions of the National Internal Revenue Code (NIRC), thus exempting the petitioner from payment of the Value Added Tax (VAT)? Held: In the case at bar, we find no reason for holding that respondent Commissioner erred in not considering copra as an "agricultural food product" within the meaning of Section 103(b) of the NIRC. As the Solicitor General contends, "copra per se is not food, that is, it is not intended for human consumption. Simply stated, nobody eats copra for food." That previous Commissioners considered it so, is not reason for holding that the present interpretation is wrong. The Commissioner of Internal Revenue is not bound by the ruling of his predecessors. To the contrary, the overruling of decisions is inherent in the interpretation of laws. Under Section 103(a) of the National Internal Revenue Code, the sale of agricultural non-food products in their original state is exempt from VAT only if the sale is made by the primary producer or owner of the land from which the same are produced. The sale made by any other person or entity, like a trader or dealer, is not exempt from the tax. On the other hand, under Section 103(b) the sale of agricultural food products in their original state are exempt from VAT at all stages of production or distribution regardless of who the seller is. The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed when copra was classified as an agricultural food product under Section 103(b) of the National Internal Revenue Code. NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO, INC.) v. COURT OF APPEALS G.R. NO. 134114 July 6, 2001 Topic: Construction of Statutes Granting Tax Exemptions Facts: CTA Dismissed petitioners motion to grant refund on allegedly overpaid impost duties, on its various importations of milk and milk products in the amount of 5M. Petitioners were assessed customs duties and advance sales taxes by Collector of Customs for each separate importations on the basis of the published Home Consumption Value. Petitioners

paid the same but under protests. On October 1986, petitioner finally failed a claim for refund of before BIR and the following day, filed the petition for review with CTA which ordered BIR to refund P 4,489 representing the overpaid advance and Sales Taxes. The refund for alleged overpaid customs duties amounting to P 5.008M were left with the collector of customs undecided after almost 6 years. On Aug 22, 1990, petition filed a petition for review with CTA dismissed for what of jurisdiction. Case was filed with CA on certiorari (Rule 45) but dismissed for CTA jurisdiction is not concurrent with the appellate jurisdiction of Commissioner since there was no decision yet from Collector from Customs. Issue: Whether or not petitioner is entitled for alleged overpayment of customs duties on importations thus be remanded to CTA for further review. Held: The recommended remand of this case to the CTA is warranted for the proper verification and determination of the factual basis and merits of this petition and in order that the ends of substantial justice and fair play may be subserved. We are of the view that the said recommendation is in accord with the provisions of the Tariff and Customs Code as hereinafter discussed. The right to claim for refund of customs duties is specifically governed by Section 1708 of the Tariff and Customs Code, which provides that Sec. 1708. Claim for Refund of Duties and Taxes and Mode of Payment. All claims for refund of duties shall be made in writing and forwarded to the Collector to whom such duties are paid, who upon receipt of such claim, shall verify the same by the records of his Office, and if found to be correct and in accordance with law, shall certify the same to the Commissioner with his recommendation together with all necessary papers and documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct. It is clear from the foregoing provision of the Tariff and Customs Code that in all claims for refund of customs duties, the Collector to whom such customs duties are paid and upon receipt of such claim is mandated to verify the same by the records of his Office. If such claim is found correct and in accordance with law, the Collector shall certify the same to the Commissioner with his recommendation together with all the necessary papers and documents. This is precisely one of the reasons why the Court of Appeals upheld the dismissal of the case on the ground that the CTAs jurisdiction under the Tariff and Customs Code is not concurrent with that of the respondent Commissioner of Customs due to the absence of any certification from the Collector of Customs of Manila. Accordingly, petitioners contention that its claims for refund of alleged overpayment of customs duties may be deemed established from the findings of the tax court in C.T.A. Case No. 4114 on the Advance Sales Tax is not necessarily correct in the light of the above-cited provision of the Tariff and Customs Code. Customs duties is the name given to taxes on the importation and exportation of commodities, the tariff

or tax assessed upon merchandise imported from, or exported to, a foreign country. Any claim for refund of customs duties, therefore, takes the nature of tax exemptions that must be construed strictissimi juris against the claimants and liberally in favor of the taxing authority. This power of taxation being a high prerogative of sovereignty, its relinquishment is never presumed. Any reduction or diminution thereof with respect to its mode or its rate must be strictly construed, and the same must be couched in clear and unmistakable terms in order that it may be applied. Thus, any outright award for the refund of allegedly overpaid customs duties in favor of petitioner on its subject sixteen (16) importations is not favored in this jurisdiction unless there is a direct and clear finding thereon. The fact alone that the tax court, in C.T.A. Case No. 4114, has awarded in favor of the petitioner the refund of overpaid Advance Sales Tax involving the same sixteen (16) importations does not in any way excuse the petitioner from proving its claims for refund of alleged overpayment of customs duties. We have scrutinized the decision rendered by the tax court in C.T.A. Case No. 4114 and found no clear indication therein that the tax court has ruled on petitioners claims for alleged overpayment of customs duties.

loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. The tax provision related to the repayment of these loans was not amended or deleted. On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100, 000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government. No tax exemption was incorporated in said Act. On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250, 000,000.00 with the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300, 000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Issue: Whether or not NPC is exempted from payment of tax. Held: A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes direct and indirect. The Court rules and declares that the oil companies which supply bunker fuel oil to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect taxation, the economic burden of such taxation is expected to be passed on through the channels of commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted from both direct and indirect taxation, the NPC must beheld

MACEDA v. MACARAIG G.R. No. 88291 June 8, 1993 Topic: Construction of Statutes Granting Tax Exemptions: Exceptions Facts: Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines. The sum of P250, 000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work. The main source of funds for the NPC was the flotation of bonds in the capital markets and these bonds . . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face of said bonds. . . . . On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC

exempted from absorbing the economic burden of indirect taxation. This means, on the one hand, that the oil companies which wish to sell to NPC absorb all or part of the economic burden of the taxes previously paid to BIR, which they could shift to NPC if NPC did not enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to pay the part of the "normal" purchase price of bunker fuel oil which represents all or part of the taxes previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil from the oil companies because to do so may be more convenient and ultimately less costly for NPC than NPC itself importing and hauling and storing the oil from overseas NPC is entitled to be reimbursed by the BIR for that part of the buying price of NPC which verifiably represents the tax already paid by the oil company-vendor to the BIR.

On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. The tax provision related to the repayment of these loans was not amended or deleted. On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100, 000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government. No tax exemption was incorporated in said Act. On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250, 000,000.00 with the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300, 000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Issue: Whether or not the foreign loans of NPC is exempt from tax. Held: As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as follows: The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials and supplies by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all taxes, fees, imposts, other charges and restrictions, including import restrictions, by the Republic of the Philippines, or any of its agencies and political subdivisions. On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role under aforesaid P.D. No. 40. Its authorized capital stock was raised to P2, 000,000,000.00, its total domestic indebtedness was pegged at a maximum of P3, 000,000,000.00 at any one time, and the NPC was authorized to borrow a total of US$1,000,000,000.00 in foreign loans. The relevant tax exemption provision for these foreign loans states as follows: The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect taxes, fees,

MACEDA v. MACARAIG G.R. No. 88291 June 8, 1993 Topic: Tax Treaties/ International Agreements Facts: Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines. The sum of P250, 000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work. On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities.

imposts, other charges and restrictions, including import restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its agencies and political subdivisions. COMMISSIONER v. CA G.R. No. 117982 February 6, 1997 Topic: Revenue Rules and Regulation/ Administrative/BIR Rulings and Opinions Facts: ALHAMBRA INDUSTRIES, INC., is a domestic corporation engaged in the manufacture and sale of cigar and cigarette products. On 7 May 1991 private respondent received a letter dated 26 April 1991 from the Commissioner of Internal Revenue assessing it deficiency Ad Valorem Tax (AVT) in the total amount of Four Hundred Eighty-Eight Thousand Three Hundred Ninety-Six Pesos and Sixty-Two Centavos (P488, 396.62), inclusive of increments, on the removals of cigarette products from their place of production during the period 2 November 1990 to 22 January 1991. The Court of Tax Appeals explained that the subject deficiency excise tax assessment resulted from private respondent's use of the computation mandated by BIR Ruling 473-88 dated 4 October 1988 as basis for computing the fifteen percent (15%) ad valorem tax due on its removals of cigarettes from 2 November 1990 to 22 January 1991. BIR Circular 473-88 was issued by Deputy Commissioner Eufracio D. Santos to Insular-Yebana Tobacco Corporation allowing the latter to exclude the value-added tax (VAT) in the determination of the gross selling price for purposes of computing the ad valorem tax of its cigar and cigarette products in accordance with Sec. 127 of the Tax Code as amended by Executive Order No. 273. Issue: Whether private respondent's reliance on a void BIR ruling conferred upon the latter a vested right to apply the same in the computation of its ad valorem tax and claim for tax refund. Held: The present dispute arose from the discrepancy in the taxable base on which the excise tax is to apply on account of two incongruous BIR Rulings: (1) BIR Ruling 473-88 dated 4 October 1988 which excluded the VAT from the tax base in computing the fifteen percent (15%) excise tax due; and, (2) BIR Ruling 017-91 dated 11 February 1991 which included back the VAT in computing the tax base for purposes of the fifteen percent (15%) ad valorem tax. The question as to the correct computation of the excise tax on cigarettes in the case at bar has been sufficiently addressed by BIR Ruling 017-91 dated 11 February 1991 which revoked BIR Ruling 473-88 dated 4 October 1988. Private respondent did not question the correctness of the above BIR ruling. In fact, upon knowledge of the effectivity of BIR Ruling No. 017-91, private respondent immediately implemented the method of computation mandated therein by restoring the VAT

in computing the tax base for purposes of the 15% ad valorem tax. However, well-entrenched is the rule that rulings and circulars, rules and regulations promulgated by the Commissioner of Internal Revenue would have no retroactive application if to so apply them would be prejudicial to the taxpayers. Without doubt, private respondent would be prejudiced by the retroactive application of the revocation as it would be assessed deficiency excise tax. Admittedly the government is not estopped from collecting taxes legally due because of mistakes or errors of its agents. But like other principles of law, this admits of exceptions in the interest of justice and fair play, as where injustice will result to the taxpayer.

TAN v. DEL ROSARIO G.R. No. 109289 October 3, 1994 Topic: Validity of Revenue Rules and Regulation Facts: These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation Scheme ("SNIT"), amending certain provisions of the National Internal Revenue Code and, in G.R. No. 109446, the validity of Section 6, Revenue Regulations No. 2-93, promulgated by public respondents pursuant to said law. Petitioners claim to be taxpayers adversely affected by the continued implementation of the amendatory legislation. In G.R. No. 109289, it is asserted that the enactment of Republic Act No. 7496 violates the following provisions of the Constitution: Article VI, Section 26(1) Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof. Article VI, Section 28(1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. Article III, Section 1 No person shall be deprived of . . . property without due process of law, nor shall any person be denied the equal protection of the laws. In G.R. No. 109446, petitioners, assailing Section 6 of Revenue Regulations No. 2-93, argue that public respondents have exceeded their rule-making authority in applying SNIT to general professional partnerships. Issue: Whether or not the tax law enacted by the Congress is unconstitutional for being violative of due process. Held:

Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation "shall be uniform and equitable" in that the law would now attempt to tax single proprietorships and professionals differently from the manner it imposes the tax on corporations and partnerships. The contention clearly forgets, however, that such a system of income taxation has long been the prevailing rule even prior to Republic Act No. 7496. Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forefend classification as long as: (1) the standards that are used therefor are substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3) the law applies, all things being equal, to both present and future conditions, and (4) the classification applies equally well to all those belonging to the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52). What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable corporations. We certainly do not view this classification to be arbitrary and inappropriate.

1987, implementing Executive Order No. 41, had construed the amnesty coverage to include only assessments issued by the Bureau of Internal Revenue after the promulgation of the executive order on 22 August 1986 and not to assessments theretofore made. Issue: Whether or not Revenue Memorandum Order 4-87, promulgated to implement Executive Order No. 41 is valid. Held: The authority of the Minister of Finance (now the Secretary of Finance), in conjunction with the Commissioner of Internal Revenue, to promulgate all needful rules and regulations for the effective enforcement of internal revenue laws cannot be controverted. Neither can it be disputed that such rules and regulations, as well as administrative opinions and rulings, ordinarily should deserve weight and respect by the courts. Much more fundamental than either of the above, however, is that all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply and implement. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law. If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases specifically excepted by it. It might not be amiss to recall that the taxable periods covered by the amnesty include the years immediately preceding the 1986 revolution during which time there had been persistent calls, all too vivid to be easily forgotten, for civil disobedience, most particularly in the payment of taxes, to the martial law regime. It should be understandable then that those who ultimately took over the reigns of government following the successful revolution would promptly provide for abroad, and not a confined, tax amnesty.

COMMISSIONER v. CA G.R. NO. 108358 JANUARY 20, 1995 Topic: Validity of Revenue Rules and Regulation Facts: On 22 August 1986, during the period when the President of the Republic still wielded legislative powers, Executive Order No. 41 was promulgated declaring a one-time tax amnesty on unpaid income taxes, later amended to include estate and donor's taxes and taxes on business, for the taxable years 1981 to 1985. Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, in October 1986 and November 1986, its Tax Amnesty Return No. 34-F-00146-41 and Supplemental Tax Amnesty Return No. 34-F-00146-64-B, respectively, and paid the corresponding amnesty taxes due. Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication received by private respondent on 13 August 1986, assessed the latter deficiency income and business taxes for its fiscal years ended 30 September 1981 and 30 September 1982 in an aggregate amount of P1,410,157.71. The taxpayer wrote back to state that since it had been able to avail itself of the tax amnesty, the deficiency tax notice should forthwith be cancelled and withdrawn. The request was denied by the Commissioner, in his letter of 22 November 1988, on the ground that Revenue Memorandum Order No. 4-87, dated 09 February

TUZON v. CA G.R. No. 156052 March 7, 2007 Topic: Effectivity and Validity of Tax Ordinance Facts: It is a petition for mandamus which seeks to compel respondent Hon. Jose L. Atienza, Jr., mayor of the City of Manila, to enforce Ordinance No. 8027. On November 20, 2001, the Sangguniang Panlungsod of Manila enacted Ordinance No. 8027. Respondent mayor approved the ordinance on November 28, 2001. It became effective on December 28, 2001, after its publication. Ordinance No. 8027 was enacted pursuant to the police power delegated to local government units, a

principle described as the power inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals and general welfare of the society. Ordinance No. 8027 reclassified the area described therein from industrial to commercial and directed the owners and operators of businesses disallowed under Section 1 to cease and desist from operating their businesses within six months from the date of effectivity of the ordinance. Among the businesses situated in the area are the so-called "Pandacan Terminals" of the oil companies Caltex (Philippines), Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation. However, on June 26, 2002, the City of Manila and the Department of Energy (DOE) entered into a memorandum of understanding (MOU) with the oil companies in which they agreed that "the scaling down of the Pandacan Terminals [was] the most viable and practicable option." The Sangguniang Panlungsod ratified the MOU in Resolution No. 97. In the same resolution, the Sanggunian declared that the MOU was effective only for a period of six months starting July 25, 2002. Thereafter, on January 30, 2003, the Sanggunian adopted Resolution No. 13 extending the validity of Resolution No. 97 to April 30, 2003 and authorizing Mayor Atienza to issue special business permits to the oil companies. Resolution No. 13, s. 2003 also called for a reassessment of the ordinance. Meanwhile, petitioners filed this original action for mandamus on December 4, 2002 praying that Mayor Atienza be compelled to enforce Ordinance No. 8027 and order the immediate removal of the terminals of the oil companies Issues: 1. Whether respondent has the mandatory legal duty to enforce Ordinance No. 8027 and order the removal of the Pandacan Terminals, and 2. Whether the June 26, 2002 MOU and the resolutions ratifying it can amend or repeal Ordinance No. 8027. Held: The Local Government Code imposes upon respondent the duty, as city mayor, to "enforce all laws and ordinances relative to the governance of the city." One of these is Ordinance No. 8027. As the chief executive of the city, he has the duty to enforce Ordinance No. 8027 as long as it has not been repealed by the Sanggunian or annulled by the courts. He has no other choice. It is his ministerial duty to do so. The question now is whether the MOU entered into by respondent with the oil companies and the subsequent resolutions passed by the Sanggunian have made the respondents duty to enforce Ordinance No. 8027 doubtful, unclear or uncertain. This is also connected to the second issue raised by petitioners, that is, whether the MOU and Resolution Nos. 97, s. 2002 and 13, s. 2003 of the Sanggunian can amend or repeal Ordinance No. 8027. We need not resolve this issue. Assuming that the terms of the MOU were inconsistent with Ordinance No. 8027, the resolutions which ratified it and made

it binding on the City of Manila expressly gave it full force and effect only until April 30, 2003. Thus, at present, there is nothing that legally hinders respondent from enforcing Ordinance No. 8027. Ordinance No. 8027 was enacted right after the Philippines, along with the rest of the world, witnessed the horror of the September 11, 2001 attack on the Twin Towers of the World Trade Center in New York City. The objective of the ordinance is to protect the residents of Manila from the catastrophic devastation that will surely occur in case of a terrorist attack on the Pandacan Terminals. No reason exists why such a protective measure should be delayed.

HAGONOY MARKET VENDOR ASSOCIATION v. MUNICIPALITY OF HAGONOY, BULACAN G.R. No. 137621 February 6, 2002 Topic: Effectivity and Validity of Tax Ordinance Facts: The Sangguniang Bayan of Hagonoy, Bulacan enacted in October 1, 1996 an ordinance which increased the stall rentals of the market vendors in Hagonoy. Petitioner Hagonoy Market Vendor Association filed an appeal a year later in December 1997. The Secretary of Justice dismissed the appeal on the ground that it was filed out of time. Likewise, the Court of Appeals denied the Motion for Reconsideration. Issue: Whether or not the appeal made by the Petitioner is time-barred. Held: Sec. 187 of the 1991 Local Government Code provides that the prescriptive period for an appeal against a Municipal Tax Ordinance or Revenue measure should be made to the Secretary of Justice within (30) thirty days from the effectivity of the ordinance and even during its pendency, the effectivity of the assailed ordinance shall not be suspended. In the case at bar, Municipal Ordinance No. 28 took effect in October 1996, Petitioner filed its appeal only in December 1996, more than a year after the effectivity of the ordinance in 1996.

JARDINE DAVIES INSURANCE v. ALIPOSA G.R. NO. 118900 FEBRUARY 27, 2003 Topic: Effectivity and Validity of Tax Ordinance Facts:

Sangguniang Bayan of Makati enacted Municipal Ordinance No. 92-072 otherwise known as the Makati Revenue Code which provides among others for the schedule of franchise taxes in the Municipality to be higher than those in the Metro Manila Revenue Code. The Philippine Racing Club, Inc. paid the tax assessed but without indicating any protest therein then appealed to the Department of Justice claiming unconstitutionality of said ordinance also claiming refund. Issue: Whether or not a refund is available to the taxpayer under Sec. 196 of the Local Government Code and if the instant case is time-barred. Held: A municipal tax ordinance empowers a local government unit to impose taxes. 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, progress, and prosperity of the people. Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. In the instant case, it is our view that the failure of petitioners to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause. Moreover, petitioner even paid without any protest the amounts of taxes assessed by respondents Makati and Acting Treasurer as provided for in the ordinance. Evidently, the complaint of petitioner with the Regional Trial Court was merely an afterthought.

are deductible in the year of actual loss or destruction of said property. The deductions were disallowed. Issue: Whether or not the Internal Revenue Laws were enforced during the war and whether Hilado can claim compensation for destruction of his property during the war. Held: Philippine Internal Revenue Laws are not political in nature and as such were continued in force during the period of enemy occupation and in effect were actually enforced by the occupation government. Such tax laws are deemed to be laws of the occupied territory and not of the occupying enemy. As of the end of 1945, there was no law which Hilado could claim for the destruction of his properties during the battle for the liberation of the Philippines. Under the Philippine Rehabilitation Act of 1948, the payment of claims by the War Damage Commission depended upon its discretion. Nonpayment of which does not give rise to any enforceable right. Assuming that the loss (deductible item) represents a portion of the 75% of his war damage claim, the amount would be at most a proper deduction of his 1950 gross income (not on his 1951 gross income) as the last installment and notice of discontinuation of payment by the War Damage Commission was made in 1950.

LORENZO v. POSADAS G.R. No. 43082 June 18, 1937 Topic: Construction of Tax Laws: Rule when Legislative Intent is Clear Facts: Thomas Hanley died in Zamboanga, leaving a will which provided among others that the property given to Matthew Henley will belong to him only after 10 years after Thomas death. Consequently, the CIR assessed inheritance tax against the estate. Lorenzo, the trustee of the estate paid the assessments on protest. He contended that the inheritance tax should have been after 10 years. Issue: Whether or not the contention is meritorious. Held: The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. The interest due should be computed from that date and it is error on the part of the defendant to compute it one month later. The provision of law requiring the payment of interest in appropriate cases is mandatory and neither the Collector of Internal Revenue nor this court may remit or decrease such

HILADO v. COLLECTOR OF INTERNAL REVENUE G.R. No. L-9408 October 31, 1956 Topic: Interpretation and Application of Tax Laws: Nature of Internal Revenue Law Facts: Emilio Hilado filed his income tax return for 1951 with the treasurer of Bacolod City, claiming a deductible item of P12,837.65 from his gross income pursuant to General Circular V-123 issued by the Collector of Internal Revenue. The Secretary of Finance, through the Collector, issued General Circular V-139 which revoked and declared void Circular V-123; and laid down the rule[s] that losses of property which occurred in World War II from fires, storms, shipwreck or other casualty, or from robbery, theft, or embezzlement

interest, no matter how heavily it may burden the taxpayer.

Topic: Construction of Tax Laws: Rule when Legislative Intent is Clear Facts: Two types of taxes are involved in this case: 1. Gross Receipts Tax (GRT) of 5% which is not subject to withholding and is a percentage tax; and 2. Final Withholding Tax (FWT) of 20% which is a tax on passive income, deducted and withheld at source by the payor-corporation and/or person as withholding agent and an income tax. For the calendar year 1995, RESP filed its Quarterly Percentage Tax Returns reflecting gross receipts in the total amount of P1,474,691,693.44 with corresponding gross receipts tax payments in the sum of P73,734,584.60. RESP alleges that the total gross receipts in the amount of P1,474,691,693.44 included the sum of P350,807,875.15 representing gross receipts from passive (interest) income which was already subjected to 20% final withholding tax. In January 1996, the CTA held in Asian Bank Corporation vs. Commissioner of Internal Revenue that the 20% final withholding tax on a banks interest income should not form part of its taxable gross receipts for purposes of computing the gross receipts tax. On the basis of the CTA ruling, RESP sent a letter of request for the refund or issuance of a tax credit certificate in the aggregate amount of P3,508,078.75, representing allegedly overpaid gross receipts tax for the year 1995 in the amount of 3,508,078.75. The CTA ordered PET to refund to RESP the reduced amount of P1,555,749.65 as overpaid gross receipts tax for the year 1995. CA affirmed CTA. Issue: Whether or not there was receipt (constructive or actual) by the RESP of the 20% final withholding tax imposed on the passive income of RESP? Held: The 20% FWT on the passive income of RESP is INCLUDED in the computation for GRT. (In other words, SC cited with PET.) CONTENTIONS There was constructive receipt, applying Section 7(c) of Revenue Regulations(RR) No. 17-84 ("If the recipient of the above-mentioned items of income are financial institutions, the same shall be included as part of the tax base upon which the gross receipt[s] tax is imposed.") Section 4(e) RR No. 1280 states that the tax rates to be imposed on the

UMALI v. ESTANISLAO G.R. NO. 104037 MAY 29, 1992 Topic: Construction of Tax Laws: Rule when Legislative Intent is Clear Facts: Congress enacted Rep. Act 7167, entitled "AN ACT ADJUSTING THE BASIC PERSONAL AND ADDITIONAL EXEMPTIONS ALLOWABLE TO INDIVIDUALS FOR INCOME TAX PURPOSES TO THE POVERTY THRESHOLD LEVEL, AMENDING FOR THE PURPOSE SECTION 29, PARAGRAPH (L), ITEMS (1) AND (2)(A) OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES." The said act was signed and approved by the President on December 19, 1991 and published on January 14, 1992 in "Malaya" a newspaper of general circulation. Two petitions which were consolidated was filed for mandamus to compel respondents to implement RA 7167. Issue: 1. Whether or not Rep. Act 7167 took effect upon its approval by the President on 19 December 1991, or on 30 January 1992, i.e., after fifteen (15) days following its publication on 14 January 1992 in the "Malaya" a newspaper of general circulation; and 2. Assuming that Rep. Act 7167 took effect on 30 January 1992, whether or not the said law nonetheless covers or applies to compensation income earned or received during calendar year 1991. Held: 1. The Court held that Rep. Act 7167 took effect on 30 January 1992, which is after fifteen (15) days following its publication on 14 January 1992 in the "Malaya." 2. The act is a social legislation intended to alleviate in part the present economic plight of the lower income taxpayers. It is intended to remedy the inadequacy of the heretofore existing personal and additional exemptions for individual taxpayers. They should take effect on compensation income earned or received from January 1, 1991.

COMMISSIONER OF INTERNAL REVENUE v. SOLIDBANK CORPORATION G.R. NO. 148191 NOVEMBER 25, 2003

gross receipts of banks, non-bank financial intermediaries, financing companies, and other nonbank financial intermediaries not performing quasibanking activities shall be based on all items of income actually received. Hence the fact that the bank did not actually receive the said amount (as such FWT is withheld by the payor and paid by the latter to government) meant that the 20% should not be included in the base for the determination of the GRT. SC applied to the receipt of income the rules on actual and constructive possession provided in Articles 531 and 532 of our Civil Code. Art. 531: Possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and legal formalities established for acquiring such right. Art. 532: Possession may be acquired by the same person who is to enjoy it, by his legal representative, by his agent, or by any person without any power whatever; but in the last case, the possession shall not be considered as acquired until the person in whose name the act of possession was executed has ratified the same, without prejudice to the juridical consequences of negotiorum gestio in a proper case. Article 531 of the Civil Code clearly provides that the acquisition of the right of possession may be through the proper acts and legal formalities established therefor. The withholding process is one such act. There may not be actual receipt of the income withheld; however, as provided for in Article 532, 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. In our withholding tax system, possession is acquired by the payor as the withholding agent of the government, because the taxpayer ratifies the very act of possession for the government. There is thus 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, receipt or remittance. Besides, respondent itself admits that its income is subjected to a tax burden immediately upon receipt, although it claims that it derives no pecuniary benefit or advantage through the withholding process. There being constructive receipt of such income, part of which is withheld, RR 17-84 applies, and that income is included as part of the tax base upon which the GRT is imposed.

COLLECTOR OF INTERNAL REVENUE v. LA TONDEA INC. G.R. No. L-10431 July 31, 1962 Topic: Rule When There is Doubt Facts: La Tondea is engaged in the business of manufacturing wines and liquor with a distillery in Manila. It purchases alcohol from Negros Occidental and from Batangas and has been removing this alcohol from the centrals to a distillery under joint bonds without prepayment of specific taxes. Quantity of alcohol purchased and received entered into the BIR Official Register Books. In the manufacture of Manila Rum, La Tondea uses as basic materials low test alcohol, purchased in crude form from the suppliers which it subjects to further distillation and from this process, losses through evaporation occur, for which CIR had given allowance of not exceeding 7% for said losses. In May 1954, CIR wrote a demand letter to La Tondea for payment of specific taxes on alcohol lost by evaporation through re-rectification or redistillation from June 1950 to February 1954. La Tondea protested and CIR refused to reconsider the assessment. La Tondea appealed to the Conference Staff of the BIR. It was ordered to comply with DOF 213 to deposit of the amount in cash and the balance by a surety bond and appealed the action to CTA. CTA ordered LT to pay P672.15 by way of specific tax. The amount which corresponds to the period after January 1951 and up to February 1954, pursuant to RA 592, La Tondea is exempt from liability assessed therefor. CIR appealed to the Supreme Court. Issue: Whether or not La Tondea should pay the specific tax. Held: No. Sec. 133 of the Tax code states liability shall attach to the substance as soon as it is in existence as such, whether it be subsequently separated as pure or impure spirits. However RA 592 took effect on Jan. 1, 1951 which amended 133 deleting the allembracing clause which subjects to tax all kinds of alcoholic substances but only distilled spirits as finished products. This is in harmony with Sec. 129 of the Tax code which states that only the finished product is subject. August 1956, RA 1608 was passed restoring the same clause which was eliminated. From January 1951 to August 1956, the tax on alcohol did not

attach as soon as it was in existence as such but on the finished product. In every case of doubt, tax statues are construed most strongly against the government and in favor of the citizens, because burdens are not to be imposed beyond what the statutes expressly and clearly import. The new law should not be given retroactive effect.

UMALI v. ESTANISLAO G.R. NO. 104037 MAY 29, 1992 Topic: Application of Tax Laws Facts: Congress enacted Rep. Act 7167, entitled "AN ACT ADJUSTING THE BASIC PERSONAL AND ADDITIONAL EXEMPTIONS ALLOWABLE TO INDIVIDUALS FOR INCOME TAX PURPOSES TO THE POVERTY THRESHOLD LEVEL, AMENDING FOR THE PURPOSE SECTION 29, PARAGRAPH (L), ITEMS (1) AND (2)(A) OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES." The said act was signed and approved by the President on December 19, 1991 and published on January 14, 1992 in "Malaya" a newspaper of general circulation. Two petitions which were consolidated was filed for mandamus to compel respondents to implement RA 7167. Issue: 1. Whether or not Rep. Act 7167 took effect upon its approval by the President on 19 December 1991, or on 30 January 1992, i.e., after fifteen (15) days following its publication on 14 January 1992 in the "Malaya" a newspaper of general circulation; and 2. Assuming that Rep. Act 7167 took effect on 30 January 1992, whether or not the said law nonetheless covers or applies to compensation income earned or received during calendar year 1991. Held: 1. The Court held that Rep. Act 7167 took effect on 30 January 1992, which is after fifteen (15) days following its publication on 14 January 1992 in the "Malaya." 2. The act is a social legislation intended to alleviate in part the present economic plight of the lower income taxpayers. It is intended to remedy the inadequacy of the heretofore existing personal and additional exemptions for individual taxpayers. They should take effect on compensation income earned or received from January 1, 1991.

COMMISSIONER OF INTERNAL REVENUE v. COURT OF APPEALS G.R. NO. 119761 AUGUST 29, 1996 Topic: Application of Revenue Regulations/ Rulings and Effects of Repeal Facts: Fortune Tobacco Corporation is engaged in the manufacture of different brands of cigarettes. A letter dated January 1987 of the CIR to PCGG with its initial position to classify Champion, Hope, More as foreign brands. On June 10, 1993, RA 7654 was enacted which imposed excise taxes on cigarettes. About a month after the enactment and two days before the effectivity, BIR issued RMC 37-93 which reclassified certain cigarettes subject to excise tax reclassifying Hope, More, Champion as foreign brands for purposes of determining the ad valorem tax. On July 2, 1993, the BIR Deputy Commissioner sent via fax a copy of the RMC but it was not addressed to any in particular. On July 15, 1993, Fortune Tobacco received by ordinary mail a certified Xerox copy of the RMC. Fortune Tobacco appealed to the appellate division of the BIR but was denied. On July 30, it was assessed for ad valorem tax which amounted to Php 9,598,334.00. Fortune Tobacco filed a Petition for Review with the CTA. CTA upheld position of Fortune Tobacco, ad valorem is invalid, defective, and unenforceable. Issue: Whether or not the RMC 37-93 is discriminatory since it applies not to all locally manufactured cigarettes similarly situated. Held: Discriminatory. Petitioner opines that RMC is merely an interpretative ruling of the BIR which can thus become effective without any prior need for notice and hearing nor publication and that its issuance is not discriminatory since it would apply under similar circumstances to all locally manufactured cigarettes. The cigarettes in the case at the time of the effectivity of the law were not classified as foreign brands and were subject to 45% ad valorem tax. Without the RMC, there will be no new tax rate consequence on private respondents products. BIR did not simply interpret the law. It legislated under its quasi-legislative authority. Art. VI, Sec. 28 of the Constitution mandates taxation to be uniform and equitable. Uniformity requires that all subjects or objects of taxation, similarly situated, are to be treated alike or put on equal footing both in privileges and liabilities. All taxable articles or kinds of property of the same class must be taxed at the same rate, and the tax must operate with the same

force and effect in every place where the subject may be found. RMC was hastily promulgated and has fallen short of a valid and effective administrative issuance.

COMMISSIONER OF INTERNAL REVENUE v. TELEFUNKEN G.R. NO. 103915 OCTOBER 23, 1995 Topic: Application of Revenue Regulations/ Rulings and Effects of Repeal Facts: Telefunken is a domestic corporation registered with the Board of Investments (BOI) as an export producer on a preferred pioneer status under RA 6135. From October 1979 to September 1981, Telefunken produced semi-conductor devices amounting to P92,843,774.00 which were entirely sold to foreign markets. BIR denied Telefunkens request for a tax refund/tax credit from the contractors tax which it paid for said amount. Telefunken contended that under the provisions of Section 7 of RA 6135 in relation to Section 8 (a) of RA 5186 (The Investment Act), it was exempted from the payment of all National Internal Revenue Taxes for the period in question, except for Income Tax. On the other hand CIR argues that the law speaks of firms registered under RA 5186 only and thus, the privilege of tax exemption does not apply to firms registered under RA 6135. Issue: Whether or not Telefunken, registered under RA 6135 as a pioneer export producer, is exempted from payment of the 3% contractor's tax from October 1979 to September 1981. Held Yes. The controlling statute is Section 205 (16) of the 1977 National Internal Revenue Code which states: Contractors, proprietors or operators of dockyards and others. A contractor's tax of three percentum of gross receipts is hereby imposed on the following: xxx xxx xxx (16) Business agents and other independent contractors including private detective or watchman agencies, except gross receipts of a pioneer enterprise registered with the Board of Investments under Republic Act 5186. (As amended by P.D. No. 1457, June 11, 1978) There is no difference between the gross receipts of pioneer enterprises registered with the Board of Investments under RA 6135 and the gross receipts of registered pioneer enterprises under RA 5186. In fact the CIR himself had ruled in this vein on February 4, 1974 in the case of Asian Transmission Corporation.

This 1974 ruling was based the same on Section191 (16) of the Tax Code which states: Incentives to registered export producer Registered export producers. Registered export producers unless they already enjoy the same privileges under other laws shall be entitled to the incentives set forth in paragraphs (h), (i) and (j) of Section 7 of Republic Act Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act; and registered export producers that are pioneer enterprises shall be entitled also to the incentives set forth in paragraphs (a), (b) and (c) of Section 8 of the said Act. In addition to the said incentives, and in lieu of other incentives provided in Section 7 and in Section 9 of that Act, registered export producer shall be entitled to benefits and incentives as enumerated hereunder: Pursuant to Section 7 of Republic Act No. 6135, that corporation as a registered export producer on a pioneer status is entitled to the same tax incentives granted to a pioneer industry set forth in section 8(a) of republic Act No. 5186. Under this latter provision, a pioneer industry is exempt from all taxes under the National Internal Revenue Code, except income tax. In other words, both a registered export producer on a pioneer status under Republic Act No. 6135 and pioneer industry under Republic Act No. 5186 are entitled to the same tax exemption benefits under the Tax Code. Sec. 191. Contractors, proprietors or operators of dockyards, and others. A contractor's tax of three percentum of the gross receipts is hereby imposed on the following: xxx xxx xxx (16) Business agents and other independent contractors except persons, associations and corporations under contract for embroidery and apparel for export, as well as their agents and contractors and except gross receipts of or from a pioneer industry registered with the Board of Investments under the provisions of RA 5186. (Emphasis supplied) A comparison of the above with the previously quoted Section205(16) of the 1977 Tax Code reveals that both provisions specifically mention pioneer industries registered with the Board of Investments under Republic Act No. 5186 as exempt from payment of the contractor's tax. Also, this 1974 ruling has not been abrogated with the passage of the 1977 Tax Code, Section 205(16) which expressly mentions only pioneer enterprises registered with the Board of Investments under RA 5186 as exempt from the contractor's tax (though with no reference being made regarding pioneer enterprises registered under RA 6135). Lastly, under Sec. 246 of the National Internal Revenue Code, rulings of the BIR may not be given retroactive effect, if the same is prejudicial to the taxpayer.

Topic: Application of Revenue Regulations/ Rulings and Effects of Repeal Facts: Petitioner Commissioner of Internal Revenue (CIR) filed the instant petition for review to set aside the decision of November 20, 2001 of the Court of Appeals in CA G.R. SP No. 62463, which affirmed the decision of December 13, 2000 of the Court of Tax Appeals (CTA) in CTA Case No. 5690 cancelling the assessment issued against respondent Michel J. Lhuillier Pawnshop, Inc. in the amount of P3,360,335.11 as deficiency percentage tax for 1994, inclusive of interest and surcharges. Issue: Whether or not pawnshops are included in the term lending investors for the purpose of imposing the 5% percentage tax under then Section 116 of the National Internal Revenue Code (NIRC) of 1977, as amended by Executive Order No. 273. Held: When an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance, for it gives no real consequence more than what the law itself has already prescribed. When, on the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as implementing rules or corrective measures revoking in the process the previous rulings of past Commissioners. Specifically, they would have been amendatory provisions applicable to pawnshops. Without these disputed CIR issuances, pawnshops would not be liable to pay the 5% percentage tax, considering that they were not specifically included in Section 116 of the NIRC of 1977, as amended. In so doing, the CIR did not simply interpret the law. The due observance of the requirements of notice, hearing, and publication should not have been ignored. There is no need for us to discuss the ruling in CAG.R. SP No. 59282 entitled Commissioner of Internal Revenue v. Agencia Exquisite of Bohol Inc., which upheld the validity of RMO No. 15-91 and RMC No. 43-91. Suffice it to say that the judgment in that case cannot be binding upon the Supreme Court because it is only a decision of the Court of Appeals. The Supreme Court, by tradition and in our system of judicial administration, has the last word on what the law is; it is the final arbiter of any justifiable controversy. There is only one Supreme

COMMISSIONER OF INTERNAL REVENUE v. LHUILLIER PAWNSHOP G.R. NO. 150947 JULY 15, 2003

Court from whose decisions all other courts should take their bearings.16 In view of the foregoing, RMO No. 15-91 and RMC No. 43-91 are hereby declared null and void. Consequently, Lhuillier is not liable to pay the 5% lending investors tax.

ROXAS v. RAFFERTY G.R. NO. 12182 MARCH 27, 1918 Topic: Mandatory and Directory Provision of Tax Laws Facts: Plaintiffs own a parcel of land in Escolta Manila. In 1913, the improvements on this land were demolished and the construction of a concrete building was begun. No taxes on the improvements were levied or paid in 1914 as adjudged by the CFI since the improvements were not finished. It was finished in all respects on Feb. 15, 1915.City assessor and collector of Manila, on Dec. 1, 1914, sent notice to declare the improvements for assessment for 1915. In Nov 1914, the assessor and collector had the building inspected and assessed for tax at P3,000. Plaintiffs paid under protest on June 30, 1915. Plaintiffs filed in CFI to recover with interest. Issue: Whether or not the improvement is subject to tax. Held: The charter of Manila provides that within a period of sixty days next succeeding the completion of such acquisition, construction or addition, a sworn declaration setting forth the value of the real estate acquired or the improvement constructed and containing a description to enable the city assessor and collector to readily identify the same. Plaintiffs were under obligation to present within 60 days from completion, or before April 15, 1915. Under an attempted assessment in November and December, they could have had no opportunity to comply with the same. Charter provides also that city assessor and collector shall, during the first 15 days of December of each year add to his list of taxable real estate in the city the value of improvements placed upon such property during the preceding year. Between December 1 to December 15, the assessor and collector were under obligation of adding the improvements on the Roxas property and not between December 1 to December 15, 1914. Common sense construction would be that the phrase includes December of the previous year and the current year up to December. The assessor and collector perforce could not in 1914 levy a tax on incomplete improvements made during the current year. Charter provides that notice by publication is to be made. Further, the city has to notify in writing by delivering or mailing such notification to person

sometime in November. When the regulations prescribed are intended for the protection of the citizen and to prevent a sacrifice of his property, and by a disregard of which his right might be, and generally would be injuriously affected, they are not directory but mandatory. Sometimes statues requiring the assessor to notify the taxpayer have been held to be merely directory. But in the majority of the jurisdiction this requirement is held to be mandatory, so that the assessor cannot make a valid assessment unless he has given proper notice.

PECSON v. COURT OF APPEALS G.R. NO. 105360 MAY 25, 1993 Topic: Mandatory and Directory Provision of Tax Laws Facts: Pecson filed complaint to annul sale at a public auction of petitioners property for non-payment of real estate taxes alleging sale was made without prior notice to him. Sale was made without proper notice to him. He further alleged that he was not notified of his right to redeem the property. Issue: Whether or not the validity of public auction of his property for non-payment of taxes on the ground that the notices to him were sent to the wrong postal address. Held: It was a valid sale. Notices were sent to 79 Paquita St. Manila. Final Notice to exercise right of redemption also sent to the same address. He admits he no longer reside in Manila and presently resides in Quezon City but his contention is that the notices should have been sent to 1009 Paquita and not to 79. If the notices were sent to 1009 Paquita, the new owners of the house would send him the letters as they always have. In the records of the Office of the City Treasurer of QC, below 1009 was the number 79. One can deduce that the taxpayer had transferred his residence to 79. Worse, petitioner introduced improvements without reporting the same for tax purposes. Issue on the compliance with the posting of the notices and announcement of the sale, is a question of fact, which this Court will not inquire into and review the evidence relied upon the lower courts to support their finding. ANGELES CITY v. ANGELES CITY ELECTRIC CORPORATION GR No. 166134, June 29, 2010 Topic: Tax Remedies Facts:

Angeles Electric Corporation (AEC) was granted a legislative franchise under RA 4079 to construct, maintain and operate an electric light, heat, and power system for the purpose of generating and distributing electric light, heat and power for sale in Angeles City. Pursuant to Section 3-A thereof. AECs payment of franchise tax gross earnings from electric current sold was in lieu of all taxes, fees and assessments. However PD 551 came bout and reduced the franchise tax of electric franchise holders to 2% of their gross receipts from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current. When RA 7160 (Local Government Code) was passed into law, it imposed tax on business enjoying franchise, and in accordance, the Sangguniang Panlunsod of Angeles City enacted Tax Ordinance No. 33, S-93, otherwise known as the Revised Revenue Code of Angeles City. A petition was then filed with the Sangguniang Panlunsod by Metro Angeles Chamber of Commerce and Industry, Inc. of which AEC is a member, seeking the reduction of the tax rates and review of the provisions of the RRCAC. The Bureau of Local Government Finance issued a First endorsement to the City Treasurer of Angeles City instructing it to make representations with Sangguniang Panlunsod for the appropriate amendment of the RRCAC in order to ensure compliance with the provisions of LGC. Thereafter, AEC paid the local franchise tax to the Office of the City Treasurer on a quarterly basis, in addition to the national franchise tax it pays every quarter to the BIR. The city treasurer denied AECs protest that it was exempt from paying local business tax, the payment of franchise tax on business resulted to double taxation, the assessment period has already prescribed, and the assessment and collection of taxes under RRCAC cannot be made retroactive. The City treasurer then levied on the real properties of AEC prompting AEC to file with RTC an Urgent Motion for Issuance of a TRO and/or Writ of Preliminary Injunction. Issue: Whether or not the Local Government Code prohibits an injunction enjoining the collection of taxes. Held: No, the Local Government Code does not specifically prohibit an injunction enjoining the collection of taxes. The prohibition of a writ of injunction to enjoin the collection of taxes applies only to national internal

revenue taxes, and not to local taxes. Unlike the NIRC, the Local Tax Code does not contain any specific provision prohibiting courts from enjoining the collection of local taxes. Taxes being the lifeblood of the government should be collected promptly, without necessary hindrance or delay. The NIRC expressly provides that no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee, or charge imposed by the code. An exemption to this rule obtains only when n the opinion of the Court of Tax Appeals, the collection thereof may jeopardize the interest of the government or the taxpayer.

OCEANIC WIRELESS NETWORK, INC. v. COMMISSIONER OF INTERNAL REVENUE, THE COURT OF TAX APPEALS, and THE COURT OF APPEALS G.R. No. 148380 December 9, 2005 Topic: Tax Remedies Facts: On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax assessments for the taxable year 1984 in the total amount of P8, 644,998.71. Petitioner filed its protest against the tax assessments and requested reconsideration or cancellation of the same in a letter to the BIR Commissioner dated April 12, 1988. Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying petitioners request for reinvestigation in a letter dated January 24, 1991. Upon petitioners failure to pay the subject tax assessments within the prescribed period, the Assistant Commissioner for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding warrants of distraint and/or levy and garnishment. On November 8, 1991, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance of the warrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of jurisdiction in a decision dated September 16, 1994, declaring that said petition was filed beyond the thirty (30)-day period reckoned from the time when the demand letter of January 24, 1991 by the Chief of the BIR Accounts Receivable and Billing Division was presumably received by petitioner. Petitioner filed a Motion for Reconsideration arguing that the demand letter of January 24, 1991 cannot

be considered as the final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a mere subordinate and not by the Commissioner himself. With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with the Court of Appeals contending that there was no final decision to speak of because the Commissioner had yet to make a personal determination as regards the merits of petitioners case. The Court of Appeals denied the petition for lack of merit in a decision dated October 31, 2000. Issue: Whether or not a demand letter for tax deficiency assessments issued and signed by a subordinate officer who was acting in behalf of the Commissioner of Internal Revenue, is deemed final and executory and subject to an appeal to the Court of Tax Appeals. Held: The demand letter issued and signed by the Chief of the BIR Accounts Receivable and Billing Division who was acting in behalf of the Commissioner of Internal Revenue is deemed final and executory and subject to an appeal to the Court of Tax Appeals. The letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioners request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment: Failure to do so would result in the issuance of a warrant of distraint and levy to enforce its collection without further notice." In addition, the letter contained a notation indicating that petitioners request for reconsideration had been denied for lack of supporting documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a rejection of the request for reconsideration. As correctly held by the Court of Tax Appeals, "while the denial of the protest was in the form of a demand letter, the notation in the said letter making reference to the protest filed by petitioner clearly shows the intention of the respondent to make it as [his] final decision." The act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned under Sec.7 of the National Internal Revenue Code (NIRC) as nondelegable. Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and effect as that issued by the Commissioner himself, if not reviewed or revised by the latter such as in this case. A request for reconsideration must be made within thirty (30) days from the taxpayers receipt of the tax deficiency assessment, otherwise, the decision becomes final, unappealable and therefore, demandable. A tax assessment that has become

final, executory and enforceable for failure of the taxpayer to assail the same as provided in Section 228 can no longer be contested. Petitioner failed to avail of its right to bring the matter before the Court of Tax Appeals within the reglementary period upon the receipt of the demand letter reiterating the assessed delinquent taxes and denying its request for reconsideration which constituted the final determination by the Bureau of Internal Revenue on petitioners protest. Being a final disposition by said agency, the same would have been a proper subject for appeal to the Court of Tax Appeals. The period to appeal has commenced to run from the time the letter of demand was presumably received by petitioner within a reasonable time after January 24, 1991, the period of thirty (30) days to appeal the adverse decision on the request for reconsideration had already lapsed when the petition was filed with the Court of Tax Appeals only on November 8, 1991. Hence, the Court of Tax Appeals properly dismissed the petition as the tax delinquency assessment had long become final and executory.

COMMISSIONER OF INTERNAL REVENUE v. METRO STAR SUPERAMA, INC. G.R. No. 185371 December 8, 2010 Topic: Tax Remedies Facts: METRO STAR SUPERAMA, INC., - is a domestic corporation duly organized and existing by virtue of the laws of the Republic of the Philippines. Commissioner of Internal Revenue (CIR) assessed Metro Star Superama, Inc. (Metro Star) of deficiency value-added tax and withholding tax for the taxable year 1999. According to CIR, they sent the Preliminary Assessment Notice (PAN) through mail. However, Metro Star denied that it received a Preliminary Assessment Notice (PAN) and claimed that it was not accorded due process, so Metro Start filed a petition for review with the CTA. The CTA-Second Division found merit in the petition of Metro Star and, on March 21, 2007, rendered a decision, the decretal portion of which reads: WHEREFORE, premises considered, the Petition for Review is hereby GRANTED. Accordingly, the assailed Decision dated February 8, 2005 is hereby REVERSED and SET ASIDE and respondent is ORDERED TO DESIST from collecting the subject taxes against petitioner. The CTA-Second Division opined that "while there is a disputable presumption that a mailed letter is deemed received by the addressee in the ordinary course of mail, a direct denial of the receipt of mail shifts the burden upon the party favored by the presumption to prove that the mailed letter was indeed received by the addressee." It also found that there was no clear showing that Metro Star actually received the alleged PAN, dated January 16, 2002. It, accordingly, ruled that the Formal Letter of

Demand dated April 3, 2002, as well as the Warrant of Distraint and/or Levy dated May 12, 2003 were void, as Metro Star was denied due process. The CIR sought reconsideration of the decision of the CTA-Second Division, but the motion was denied in the latters July 24, 2007 Resolution. Aggrieved, the CIR filed a petition for review with the CTA-En Banc, but the petition was dismissed after a determination that no new matters were raised. The motion for reconsideration filed by the CIR was likewise denied by the CTA-En Banc in its November 18, 2008 Resolution. The CIR, insisting that Metro Star received the PAN, dated January 16, 2002, and that due process was served nonetheless because the latter received the Final Assessment Notice (FAN), comes now before the Supreme Court for Petition for Review on Certiorari under Rule 45 of the Rules of Court. Issue: IS THE FAILURE TO STRICTLY COMPLY WITH NOTICE REQUIREMENTS PRESCRIBED UNDER SECTION 228 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997 AND REVENUE REGULATIONS (R.R.) No. 12-99 TANTAMOUNT TO A DENIAL OF DUE PROCESS? Held: The Supreme Court said: Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that he is liable for deficiency taxes through the sending of a PAN. He must be informed of the facts and the law upon which the assessment is made. The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations - That taxpayer should be able to present their case and adduce supporting evidence. It is clear that the sending of a PAN to taxpayer to inform him of the assessment made is but part of the "due process requirement in the issuance of a deficiency tax assessment," the absence of which renders nugatory any assessment made by the tax authorities. The use of the word "shall" in subsection 3.1.2 describes the mandatory nature of the service of a PAN. The persuasiveness of the right to due process reaches both substantial and procedural rights and the failure of the CIR to strictly comply with the requirements laid down by law and its own rules is a denial of Metro Stars right to due process. Thus, for its failure to send the PAN stating the facts and the law on which the assessment was made as required by Section 228 of R.A. No. 8424, the assessment made by the CIR is void. It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of property without due process of law. In balancing the scales between the power of the State to tax and its inherent right to prosecute perceived transgressors of the law on one side, and the constitutional rights of a citizen to due process of law and the equal protection of the laws on the other, the scales must tilt in favor of the individual, for a citizens right is amply protected by the Bill of Rights under the

Constitution. Thus, while "taxes are the lifeblood of the government," the power to tax has its limits, in spite of all its plenitude. WHEREFORE, the petition is DENIED.

YAMANE v. BA LEPANTO CONDOMINIUM CORPORATION G.R. 154993, OCTOER 25, 2005 Topic: Tax Remedies Facts: The corporation owns and holds title to the common and limited common areas of the BA-Lepanto Condominium in Makati City. The members comprise the unit owners. The Corporation is authorized under its by-laws to collect regular assessments from its members for operating expenses, capital expenditures on the common areas and other special assessments. On 1998, the Corporation received a Notice of Assessments from the City Treasurer. It stated that the Corporation is liable to pay the correct city business taxes, fees and charges of P1, 601,013.77 for the years 1995 to 1997 but was silent as to the statutory of the assessment. The corporation protested saying that there was no statutory basis for the assessment and that it does not fall under the term business. The City Treasurer rejected it stating that the corporation activity is a profit venture making. Issue: Whether or not the City Treasurer can collect business taxes on condominium corporations. Held: No. First, the power of LGUs to impose taxes has a prohibition on the imposition of income taxes except when levied on banks and other financial institutions. None of the other general limitations under Section 133 find application to the case at bar, even from the Makati Revenue Code. Second, the notice of assessment should state the nature of the tax, the amount deficiency, surcharges, interests and penalties. In this case, it did state that the assessment was for business taxes, as well as the amount of assessment. However, the Revenue Code provides multiple provisions on business taxes and at a varying rates but in this case there was no exact legal basis for the tax. Third, in order that the Corporation may be subjected to business taxes, its activities must fall within the definition of business as provided in the LGC. The Articles of Incorporation and By-Laws of the corporation and none of these stated corporate purposes are geared towards maintaining a livelihood or the intention of profit. Accordingly, and with a significant degree of comfort, we hold that the condominium corporations are generally exempt from local business taxation under the LGC, irrespective of any local ordinance that seeks to declare otherwise.