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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

L-28896 February 17, 1988 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ALGUE, INC., and THE COURT OF TAX APPEALS, respondents. CRUZ, J.: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns. The corollary issue is whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law. We deal first with the procedural question. The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959. 1 On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp received on the same day in the office of the petitioner. 2 On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. 3 A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served. 5 Sixteen days later, on April 23, 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals. 6 The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged. 7 It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" 8 and renders hopeless a request for reconsideration," 9 being "tantamount to an outright denial thereof and makes the said request deemed rejected." 10 But there is a special circumstance in the case at bar that prevents application of this accepted doctrine. The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening period, the warrant was premature and could therefore not be served.

As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was not pro forma and was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the reglementary period had been consumed. Now for the substantive question. The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company. Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees to be personal holding company income 12 but later conformed to the decision of the respondent court rejecting this assertion. 13 In fact, as the said court found, the amount was earned through the joint efforts of the persons among whom it was distributed It has been established that the Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it. 14 Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the PSEDC properties. 15 For this sale, Algue received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. 16 There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon. 17 The Court of Tax Appeals also found, after examining the evidence, that no distribution of dividends was involved. 18 The petitioner claims that these payments are fictitious because most of the payees are members of the same family in control of Algue. It is argued that no indication was made as to how such payments were made, whether by check or in cash, and there is not enough substantiation of such payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction. We find that these suspicions were adequately met by the private respondent when its President, Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made in one lump sum but periodically and in different amounts as each payee's need arose. 19 It should be remembered that this was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not required. Even so, at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of P75,000.00. 20 Admittedly, everything seemed to be informal. This arrangement was understandable, however, in view of the close relationship among the persons in the family corporation. We agree with the respondent court that the amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was P125,000.00. 21 After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the

Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. This finding of the respondent court is in accord with the following provision of the Tax Code: SEC. 30. Deductions from gross income.--In computing net income there shall be allowed as deductions — (a) Expenses: (1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; ... 22 and Revenue Regulations No. 2, Section 70 (1), reading as follows: SEC. 70. Compensation for personal services.--Among the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and its practical application may be further stated and illustrated as follows: Any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend on stock. This is likely to occur in the case of a corporation having few stockholders, Practically all of whom draw salaries. If in such a case the salaries are in excess of those ordinarily paid for similar services, and the excessive payment correspond or bear a close relationship to the stockholdings of the officers of employees, it would seem likely that the salaries are not paid wholly for services rendered, but the excessive payments are a distribution of earnings upon the stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.) It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its controlling stockholders. 23 The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of the claimed deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed. It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the

awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed. We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the petitioner. ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without costs. SO ORDERED. Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.

Footnotes 1 Rollo, pp. 28-29. 2 Ibid., pp. 29; 42. 3 Id., p. 29. 4 Respondent's Brief, p. 11. 5 Id., p. 29. 6 Id, 7 Sec. 11. 8 Phil. Planters Investment Co. Inc. v. Comm. of Internal Revenue, CTA Case No. 1266, Nov. 11, 1962; Rollo, p. 30. 9 Vicente Hilado v. Comm. of Internal Revenue, CTA Case No. 1266, Oct. 22,1962; Rollo, p. 30. 10 Ibid. 11 Penned by Associate Judge Estanislao R. Alvarez, concurred by Presiding Judge Ramon M. Umali and Associate Judge Ramon L. Avanceña. 12 Rollo, p. 33. 13 Ibid., pp. 7-8; Petition, pp. 2-3. 11 Id., p. 37. 15 Id. 16 Id.

17 Id. 18 Id. 19 Respondents Brief, pp. 25-32. 20 Ibid., pp. 30-32. 21 Rollo, p. 37. 22 Now Sec. 30, (a)(1)-(A.), National Internal Revenue Code. 23 Respondent's Brief, p. 35.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-67649 June 28, 1988 ENGRACIO FRANCIA, petitioner, vs. INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.

GUTIERREZ, JR., J.: The petitioner invokes legal and equitable grounds to reverse the questioned decision of the Intermediate Appellate Court, to set aside the auction sale of his property which took place on December 5, 1977, and to allow him to recover a 203 square meter lot which was, sold at public auction to Ho Fernandez and ordered titled in the latter's name. The antecedent facts are as follows: Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. The lot, with an area of about 328 square meters, is described and covered by Transfer Certificate of Title No. 4739 (37795) of the Registry of Deeds of Pasay City. On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to the assessed value of the aforesaid portion. Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property.

Francia was not present during the auction sale since he was in Iligan City at that time helping his uncle ship bananas. On March 3, 1979, Francia received a notice of hearing of LRC Case No. 1593-P "In re: Petition for Entry of New Certificate of Title" filed by Ho Fernandez, seeking the cancellation of TCT No. 4739 (37795) and the issuance in his name of a new certificate of title. Upon verification through his lawyer, Francia discovered that a Final Bill of Sale had been issued in favor of Ho Fernandez by the City Treasurer on December 11, 1978. The auction sale and the final bill of sale were both annotated at the back of TCT No. 4739 (37795) by the Register of Deeds. On March 20, 1979, Francia filed a complaint to annul the auction sale. He later amended his complaint on January 24, 1980. On April 23, 1981, the lower court rendered a decision, the dispositive portion of which reads: WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing the amended complaint and ordering: (a) The Register of Deeds of Pasay City to issue a new Transfer Certificate of Title in favor of the defendant Ho Fernandez over the parcel of land including the improvements thereon, subject to whatever encumbrances appearing at the back of TCT No. 4739 (37795) and ordering the same TCT No. 4739 (37795) cancelled. (b) The plaintiff to pay defendant Ho Fernandez the sum of P1,000.00 as attorney's fees. (p. 30, Record on Appeal) The Intermediate Appellate Court affirmed the decision of the lower court in toto. Hence, this petition for review. Francia prefaced his arguments with the following assignments of grave errors of law: I RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A GRAVE ERROR OF LAW IN NOT HOLDING PETITIONER'S OBLIGATION TO PAY P2,400.00 FOR SUPPOSED TAX DELINQUENCY WAS SET-OFF BY THE AMOUNT OF P4,116.00 WHICH THE GOVERNMENT IS INDEBTED TO THE FORMER. II RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A GRAVE AND SERIOUS ERROR IN NOT HOLDING THAT PETITIONER WAS NOT PROPERLY AND DULY NOTIFIED THAT AN AUCTION SALE OF HIS PROPERTY WAS TO TAKE PLACE ON DECEMBER 5, 1977 TO SATISFY AN ALLEGED TAX DELINQUENCY OF P2,400.00. III RESPONDENT INTERMEDIATE APPELLATE COURT FURTHER COMMITTED A SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN NOT HOLDING THAT THE PRICE OF P2,400.00 PAID BY RESPONTDENT HO FERNANDEZ WAS GROSSLY INADEQUATE AS TO SHOCK ONE'S CONSCIENCE AMOUNTING TO FRAUD AND A DEPRIVATION OF PROPERTY WITHOUT DUE

PROCESS OF LAW, AND CONSEQUENTLY, THE AUCTION SALE MADE THEREOF IS VOID. (pp. 10, 17, 20-21, Rollo) We gave due course to the petition for a more thorough inquiry into the petitioner's allegations that his property was sold at public auction without notice to him and that the price paid for the property was shockingly inadequate, amounting to fraud and deprivation without due process of law. A careful review of the case, however, discloses that Mr. Francia brought the problems raised in his petition upon himself. While we commiserate with him at the loss of his property, the law and the facts militate against the grant of his petition. We are constrained to dismiss it. Francia contends that his tax delinquency of P2,400.00 has been extinguished by legal compensation. He claims that the government owed him P4,116.00 when a portion of his land was expropriated on October 15, 1977. Hence, his tax obligation had been set-off by operation of law as of October 15, 1977. There is no legal basis for the contention. By legal compensation, obligations of persons, who in their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy the requirements provided by Article 1279, to wit: (1) that each one of the obligors be bound principally and that he be at the same time a principal creditor of the other; xxx xxx xxx (3) that the two debts be due. xxx xxx xxx This principal contention of the petitioner has no merit. We have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. In the case of Republic v. Mambulao Lumber Co. (4 SCRA 622), this Court ruled that Internal Revenue Taxes can not be the subject of set-off or compensation. We stated that: A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out of the contract or transaction sued on. ... (80 C.J.S., 7374). "The general rule based on grounds of public policy is wellsettled that no set-off admissible against demands for taxes levied for general or local governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature of contracts between the party and party but grow out of duty to, and are the positive acts of the government to the making and enforcing of which, the personal consent of individual taxpayers is not required. ..." We stated that a taxpayer cannot refuse to pay his tax when called upon by the collector because he has a claim against the governmental body not included in the tax levy.

the amount of P4.. 1977 was received by the petitioner on September 30. We quote the following testimony of the petitioner on cross-examination. No evidence. 1977 (Exhibit "I") as shown by his signature (Exhibit "I-A") thereof. internal revenue taxes can not be the subject of compensation: Reason: government and taxpayer are not mutually creditors and debtors of each other' under Article 1278 of the Civil Code and a "claim for taxes is not such a debt. The tax was due to the city government while the expropriation was effected by the national government. (emphasis supplied) There is no presumption of the regularity of any administrative action which results in depriving a taxpayer of his property through a tax sale.116. Surprisingly. 1977 the date of the auction sale because he went to Iligan City.. 18.00 deposited with the bank but he did not withdraw it.. . 261). 29 Phil. the petitioner can not... however. Notice of the deposit dated September 28. As long as there was substantial compliance with the requirements of the notice. oral or otherwise.. Insular Government. . Denoga v. he claimed that he pocketed the notice of the auction sale without reading it. 492) laid down the doctrine that: xxx xxx xxx . the burden of proof therefore rests upon him to show that plaintiff was duly and properly notified . [D]ue process of law to be followed in tax proceedings must be established by proof and the general rule is that the purchaser of a tax title is bound to take upon himself the burden of showing the regularity of all proceedings leading up to the sale. 19 Phil. Riosa Boyco.This rule was reiterated in the case of Corders v.(Petition for Review. as well be shown later. deny that he did receive the notice for the auction sale. demand. contract or judgment as is allowed to be set-off. however. 437). Rollo p. It would have been an easy matter to withdraw P2. 1977. Petitioner had one year within which to redeem his property although. the purchaser at the auction sale. This is actually an exception to the rule that administrative proceedings are presumed to be regular.. the validity of the auction sale can not be assailed . He insisted that he was not properly notified of the auction sale.. The petitioner admitted in his testimony that he knew about the P4.400. He claimed further that he was not present on December 5. he admitted in his testimony that he received the letter dated November 21. (Camo v.00 paid by the national government for the 125 square meter portion of his lot was deposited with the Philippine National Bank long before the sale at public auction of his remaining property.. Jimenez (11 Phil.00 from the deposit so that he could pay the tax obligation thus aborting the sale at public auction. Petitioner contends that "the auction sale in question was made without complying with the mandatory provisions of the statute governing tax sale. The case of Valencia v. But even if the burden of proof lies with the purchaser to show that all legal prerequisites have been complied with. has the burden of proof to show that there was compliance with all the prescribed requisites for a tax sale. Moreover..116. Gonda (18 SCRA 331) where we stated that: ". emphasis supplied) We agree with the petitioner's claim that Ho Fernandez. was presented that the procedure outlined by law on sales of property for tax delinquency was followed. The records sustain the lower court's finding that: [T]he plaintiff claimed that it was illegal and irregular." There are other factors which compel us to rule against the petitioner. Since defendant Ho Fernandez has the affirmative of this issue. . to wit: .

1290): If mere inadequacy of price is held to be a valid objection to a sale for taxes. for. if a fair price for the land were essential to the sale. v. the inadequacy of the price given is not a valid objection to the sale. Tolentino v. therefore. such does not follow when the law gives to the owner the right to redeem. 367. And so it was aptly said: "When there is the right to redeem. gross inadequacy of price is not material (De Leon v.. 91 Phil. ux. Yes. while in ordinary sales for reasons of equity a transaction may be invalidated on the ground of inadequacy of price. My question to you is this letter marked as Exhibit I for Ho Fernandez notified you that the property in question shall be sold at public auction to the highest bidder on December 5. the collection of taxes in this manner would be greatly embarrassed. 74 of PD 464. By his very own admission that he received the notice. 36 SCRA 289. 2d. 307. However. 73 P. or when such inadequacy shocks one's conscience as to justify the courts to interfere." The reason behind the above rulings is well enunciated in the case of Hilton et. Indeed. Court of Appeals (109 SCRA 388) we held that "alleged gross inadequacy of price is not material when the law gives the owner the right to redeem as when a sale is made at public auction. de Gordon v. et al. upon the theory that the lesser the price. was notified about the auction sale. it would be useless to offer the property. v. Will you tell the Court whether you received the original of this letter? A." In Velasquez v. Q. 61 P. Salvador. the correct rule is stated as follows: "where land is sold for taxes. Agcaoili.). 917 Unrep. 1977 pursuant to Sec. 36 SCRA 567. Rehabilitation Finance Corporation. After you received that original where did you place it? A. (Rothchild Bros. [R]espondent treasurer now claims that the prices for which the lands were sold are unconscionable considering the wide divergence between their assessed values and the amounts for which they had been actually sold. 32 Wash. 369). Q. . upon the theory that the lesser the price the easier it is for the owner to effect the redemption. this Court held: . sir. Petitioner's third assignment of grave error likewise lacks merit. De Long. it is notorious that the prices habitually paid by purchasers at tax sales are grossly out of proportion to the value of the land. inadequacy of price should not be material. as I was in a hurry. See also Barrozo Vda. Petitioner. (188 Wash. his now coming to court assailing the validity of the auction sale loses its force. Ponce de Leon v. I placed it in the usual place where I place my mails. 162. if not rendered altogether impracticable. It was just sent by mail carrier. I just signed it because I was not able to read the same.Q. because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale.) 238. In Black on Tax Titles (2nd Ed. As a general rule. Coronel (5 SCRA 985). So you admit that you received the original of Exhibit I and you signed upon receipt thereof but you did not read the contents of it? A.. the easier it is for the owner to effect redemption." This rule arises from necessity. Rollinger. as when a sale is made at public auction. It was negligence on his part when he ignored such notice.

vs. real estate values have gone up in the area. Mr. J. SO ORDERED. 1978. Fernandez. petitioner. LORENZO C. GARLITOS. Francia failed to pay his taxes for 14 years from 1963 up to the date of the auction sale. presiding. which necessitated the expropriation of adjoining areas. LABRADOR.. Republic of the Philippines SUPREME COURT Manila EN BANC G. No. Fernan (Chairman). PRICE. Bidin and Cortes. G. Lorenzo C. Precisely because of the widening of Buendia Avenue in Pasay City. the petition for review is DISMISSED. 555): Like most cases of this character there is here a certain element of hardship from which we would be glad to relieve. DOMINGO. Garlitos. even if we are inclined to give relief to the petitioner on equitable grounds. The decision of the respondent court is affirmed. HON.: This is a petition for certiorari and mandamus against the Judge of the Court of First Instance of Leyte. we can aptly use the language of McGuire. At any rate. Bean. seeking to annul certain orders of the court and for an order in this . et al. but do so would unsettle long-established rules and lead to uncertainty and difficulty in the collection of taxes which are the life blood of the state. WHEREFORE. and that they bring hardship only to those who have invited it by their own neglect. in his capacity as Judge of the Court of First Instance of Leyte. there are no strong considerations of substantial justice in his favor.R. However. the price quoted by the petitioner for a 203 square meter lot appears quite exaggerated. The petitioner did not pay attention to another notice sent by the City Treasurer on November 3. et al. Ron. if true. as Administratrix of the Intestate Estate of the late Walter Scott Price. respondents. the foregoing reasons which answer the petitioner's claims lead us to deny the petition. Mantolino for petitioner. He claims to have pocketed the notice of sale without reading it which. There is furthermore no showing of bad faith or collusion in the purchase of the property by Mr. Benedicto and Martinez for respondents. JJ. L-18994 June 29. as Commissioner of Internal Revenue. The petitioner has no standing to invoke equity in his attempt to regain the property by belatedly asking for the annulment of the sale. (267 P. regarding his tax delinquency. and SIMEONA K. is still an act of inexplicable negligence. H.In this case now before us. during the period of redemption. IN VIEW OF THE FOREGOING. Feliciano. v. And finally. 1963 MELECIO R. Office of the Solicitor General and Atty. We are convinced that the present rules are just. concur. We are inclined to believe the petitioner's claim that the value of the lot has greatly appreciated in value. He did not withdraw from the expropriation payment deposited with the Philippine National Bank an amount sufficient to pay for the back taxes.

(Order of August 20. L-14674.058.200. represented by the administratrix Simeona K. 14 entitled "In the matter of the Intestate Estate of the Late Walter Scott Price. to its accounts to its citizens-creditors before it can insist in the prompt payment of the latter's account to it. No. Inc. in which case "the court having jurisdiction of the estate may.R. Price. however. charges and penalties. The ordinary procedure by which to settle claims of indebtedness against the estate of a deceased person. And when sale or mortgage of real estate is to be made. Benedicto submitted a copy of the contract between Mrs.Court directing the respondent court below to execute the judgment in favor of the Government against the estate of Walter Scott Price for internal revenue taxes. 2700 appropriating the sum of P262. It appears that in Melecio R. and Rule 90. after .200. according to Rule 89. is for the claimant to present a claim before the probate court so that said court may order the administrator to pay the amount thereof. 1961.R. Judge S. specially taking into consideration that the amount due to the Government draws interests while the credit due to the present state does not accrue any interest. 1956. Price the sum ofP368. legatees or heirs have entered into possession of their respective portions in the estate prior to settlement and payment of the debts and expenses of administration and it is later ascertained that there are such debts and expenses to be paid. (Order of September 28. Judge of the Court of First Instance of Mindoro.058. 1956 and acknowledged before Notary Public Salvador V. Dec. special proceedings No. Moscoso. 1960 in accordance with the order of the Supreme Court promulgated July 30. . 1960) The Court has nothing further to add to its order dated August 20. the note of His Excellency. G. 1958. 29.200. G. respectively. to Director Castrillo dated August 2. C.140. a writ of execution is not the proper procedure allowed by the Rules of Court for the payment of debts and expenses of administration. It may not be amiss to repeat that it is only fair for the Government. The orders of the court below dated August 20. and an extract of page 765 of Republic Act No. To such effect is the decision of this Court in Aldamiz vs. Price.1äwphï1.00 due and payable to the Administratrix Simeona K. Hon. 1960) The petition to set aside the above orders of the court below and for the execution of the claim of the Government against the estate must be denied for lack of merit. Administratrix of the estate of her late husband Walter Scott Price and Director Zoilo Castrillo of the Bureau of Lands dated September 19. as directed in the above note of the President." In order to enforce the claims against the estate the fiscal presented a petition dated June 21. be deducted from the amount of P262. 1960 and September 28. in this estate. section 2. 1949. section 7. amounting to P40. issued by the Court of First Instance of Leyte in. the balance to be paid by the Government to her without further delay.00. . legal adviser in Malacañang to Executive Secretary De Leon dated December 14. the Court orders that the payment of inheritance taxes in the sum of P40. Price. by order for that purpose. Pres. should be complied with.R. January 30. The petition was. as a debtor. Domingo vs.55 due the Collector of Internal Revenue as ordered paid by this Court on July 5. Garcia. Considering these facts. section 3.00. L-14674. Simeona K. The proper procedure is for the court to order the sale of personal estate or the sale or mortgage of real property of the deceased and all debts or expenses of administrator and with the written notice to all the heirs legatees and devisees residing in the Philippines.ñët Execution may issue only where the devisees.55. denied by the court which held that the execution is not justifiable as the Government is indebted to the estate under administration in the amount of P262. 1960. Esguerra. this Court declared as final and executory the order for the payment by the estate of the estate and inheritance taxes. 1960. 1960 in G. directing the latter to pay to Mrs. Carlos P. the regulations contained in Rule 90.200. are as follows: Atty. No.00 for the payment to the Leyte Cadastral Survey. 1960 and it orders that the payment of the claim of the Collector of Internal Revenue be deferred until the Government shall have paid its accounts to the administratrix herein amounting to P262. to the court below for the execution of the judgment. L-2360.. No. thus: . as an inheritance tax.

petitioners. in accordance with the provisions of Articles 1279 and 1290 of the Civil Code. Dizon. therefore. 1991 JOSE B. ROMULO M. Another ground for denying the petition of the provincial fiscal is the fact that the court having jurisdiction of the estate had found that the claim of the estate against the Government has been recognized and an amount of P262.. and order how much and in what manner each person shall contribute.200 has already been appropriated for the purpose by a corresponding law (Rep. NOBLEJAS.) And this is not the instant case. both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Regala and Makalintal. It is clear. During the pendency of the proceedings all the estate is in custodia legis and the proper procedure is not to allow the sheriff. 1200. and both debts are extinguished to the concurrent amount. DEL ROSARIO.. section 6.J. Concepcion. Republic of the Philippines SUPREME COURT Manila EN BANC G. in their capacities as appointed and Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS. JOSE ROÑO.R. The petition is. Bautista Angelo. therefore. Emphasis supplied. Padilla. VICENTE ABAD SANTOS. The legal basis for such a procedure is the fact that in the testate or intestate proceedings to settle the estate of a deceased person. concur. and NICOLAS CATIIL in his capacity as City Assessor of Manila. eventhough the creditors and debtors are not aware of the compensation. that the petitioner has no clear right to execute the judgment for taxes against the estate of the deceased Walter Scott Price. TERESITA H. PEDRO ALMANZOR. Appeal is the remedy. . dismissed. 2700). vs. the petition for certiorari and mandamus is not the proper remedy for the petitioner.hearing. Barcelona. Compensation. Joven & Academia Law Offices for petitioners. settle the amount of their several liabilities. thus: ART. Paredes. the properties belonging to the estate are under the jurisdiction of the court and such jurisdiction continues until said properties have been distributed among the heirs entitled thereto. Section 4. and extinguished both debts to the concurrent amount. in their capacities as appointed and Acting Members of the BOARD OF ASSESSMENT APPEALS of Manila. Barrera. REYES and EDMUNDO A. L. without costs. When all the requisites mentioned in article 1279 are present. Nos. C. see also Rule 74. to seize the properties but to ask the court for an order to require the administrator to pay the amount due from the estate and required to be paid. therefore. Act No. Bengzon. JJ. and may issue execution if circumstances require" (Rule 89. Under the above circumstances. takes place by operation of law. Perlas. Furthermore. REYES. took no part. L-49839-46 April 26. compensation takes effect by operation of law. RAUL C. FLORES. respondents. in case of the court judgment.

pp. as expected. On July 14. 22). v. J. City Assessor of Manila" upholding the classification and assessments made by the City Assessor of Manila. were precluded from raising the rentals and from ejecting the tenants. It was found that certain parcels of land were below street level and were affected by the tides (Rollo. considered the assessments valid. Neither the owners nor their authorized representatives were present during the said ocular inspection despite proper notices served them.B. and considering that the appellants have failed to submit concrete evidence which could overcome the presumptive regularity of the classification and assessments appear to be in accordance with the base schedule of market values and of the base schedule of building unit values. Edmundo Reyes. 20 amended R. Consequently. Board of Assessment Appeals of Manila and City Assessor of Manila" which affirmed the March 29. They argued that the income approach should have been used in determining the land values instead of the comparable sales approach which the City Assessor adopted (Rollo. 6359 prohibiting for one year from its effectivity. excepting leases with a definite period.:p This is a petition for review on certiorari to reverse the June 10. entailed an increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. 1972. The revision. 24-25). 1977 decision of the Central Board of Assessment Appeals 1 in CBAA Cases Nos. unwarranted.00) in July.A. E. 615-A.PARAS. The facts of the case are as follows: Petitioners J.L. inequitable. Rollo. among others. where such rentals do not exceed three hundred pesos (P300. Cruz Districts. et al. City Assessor of Manila" and "Edmundo Reyes and Milagros Reyes v. 1971. 6359 by making absolute the prohibition to increase monthly rentals below P300. et al. In 1973. v. petitioners herein. holding thus: WHEREFORE. Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta.00 and by indefinitely suspending the aforementioned provision of the Civil Code.00) a month but allowing an increase in rent by not more than 10% thereafter. On October 12. Said tenants were paying monthly rentals not exceeding three hundred pesos (P300. . the Reyeses. (Decision of the Board of Tax Assessment Appeals. The said Act also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease. "Jose Reyes. The Reyeses appealed to the Central Board of Assessment Appeals. Reyes. an increase in monthly rentals of dwelling units or of lands on which another's dwelling is located. which are leased and entirely occupied as dwelling sites by tenants. the Board of Hearing Commissioners conducted an ocular inspection with the presence of two representatives of the City Assessor prior to the healing of the case. SO ORDERED. submitted three (3) deeds of sale showing the different market values of the real property situated in the same vicinity where the subject properties of petitioners are located. 1976 decision of the Board of Tax Assessment Appeals 2 in BTAA Cases Nos. 1971. 72-79 entitled "J. No. the cases should be. 614-A-J. To better appreciate the locational and physical features of the land. 615. upheld. on the other hand. B. The Board of Tax Assessment Appeals. the summary of the yearly rentals to show the income derived from the properties. the National Legislature enacted Republic Act No. Reyes.B. pp. confiscatory and unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income derived from their properties. Presidential Decree No. They averred that the reassessments made were "excessive. 9-10-A). City of Manila. as approved by the Secretary of Finance. as they are hereby. however. They submitted.L. respondent City Assessor of Manila re-classified and reassessed the value of the subject properties based on the schedule of market values duly reviewed by the Secretary of Finance. Respondent City Assessor. 614. p.

(5831) PD-5844 and PD-3824 is affirmed.R. Petitioners maintain that the "Income Approach" method would have been more realistic for in disregarding the effect of the restrictions imposed by P. (5839). it is unquestionable that both the "Comparable Sales Approach" and the "Income Approach" are generally acceptable methods of appraisal for taxation purposes (The Law on Transfer and Business Taxation by Hector S. this petition. No. the rule of taxation must not only be uniform. 146 and (1) PD266. inequitable. petitioners protested against the levels of the values assigned to their properties as revised and increased on the ground that they were arbitrarily excessive.On June 10. the appealed decision insofar as the valuation and assessment of the lots covered by Tax Declaration Nos. respondents opted instead for the "Comparable Sales Approach" on the ground that the value estimate of the properties predicated upon prices paid in actual. public respondents would have this Court completely ignore the effects of the restrictions of P. in finding the value of the property. Otherwise stated. it is conceded that the propriety of one as against the other would of course depend on several factors. 383). (5835) PD-5847. as early as 1923 in the case of Army & Navy Club. Sec. Hence. it maintains that when income is affected by some sort of price control. Rollo. the dispositive portion of which reads: WHEREFORE. the appealed Decision is modified by allowing a 20% reduction in their respective market values and applying therein the assessment level of 30% to arrive at the corresponding assessed value. The petition is impressed with merit. unwarranted. In any event. while respondent Board of Tax Assessment Appeals admits in its decision that the income approach is used in determining land values in some vicinities. SO ORDERED. Manila v. Hence. then enforced. G. 20 on the market value of properties within its coverage. respondent Assessor of the City of Manila unlawfully and unjustifiably set increased new assessed values at levels so high and successive that the resulting annual real estate taxes would admittedly exceed the sum total of the yearly rentals paid or payable by the dweller tenants under P. 1977. 20. market transactions would be a uniform and a more credible standards to use especially in case of mass appraisal of properties (Ibid. it has been stressed that the assessors. (Decision of the Central Board of Assessment Appeals. the same is rejected in the consideration and study of land values as in the case of properties affected by the Rent Control Law for they do not project the true market value in the open market (Rollo. but must also be equitable and progressive. (1430) PD-1432. the Central Board of Assessment Appeals rendered its decision.D. Under Art. However. The Reyeses assigned the following error: THE HONORABLE BOARD ERRED IN ADOPTING THE "COMPARABLE SALES APPROACH" METHOD IN FIXING THE ASSESSED VALUE OF APPELLANTS' PROPERTIES. 27) Petitioner's subsequent motion for reconsideration was denied. 1988 Edition). 19297 (44 Phil. p.D. p. Wenceslao Trinidad. For the lots covered by Tax Declaration Nos. 21). have to consider all the circumstances and elements of value and must exercise a prudent discretion in reaching conclusions. 20 on the market value of the properties affected. hence. No. confiscatory and unconstitutional (Rollo. VIII. p. 10-A). On the other hand. The crux of the controversy is in the method used in tax assessment of the properties in question.D.). PD-1509. Thus. De Leon. . 17 (1) of the 1973 Constitution.

139 SCRA 439 [1985]). No. If it were otherwise. the conditions not being different both in the privileges conferred and the liabilities imposed (Ibid. such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxations. supra).D.. there were no takers so that there can be no reasonable basis for the conclusion that these properties were comparable with other residential properties not burdened by P. Second Edition). Verily. the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution.D." The web or unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Adversely effecting as it does property rights. which is the . p. in the case at bar. the need to examine closely and determine the specific mandate of the Constitution. Justice Holmes pen. Nothing can justify or support their view as it is of judicial notice that for properties covered by P. it is declared that the first Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes is that the property must be "appraised at its current and fair market value. So it is in the Philippines " (Sison. At this point in time. However. Neither can the given circumstances be nonchalantly dismissed by public respondents as imposed under distressed conditions clearly implying that the same were merely temporary in character. it is the strongest of all the powers of government. 20. v. Notably in the 1935 Constitution. Ironically. or at the very least discrimination that finds no support in reason. v. Taxation is said to be equitable when its burden falls on those better able to pay. Thus. 662). Jr. 27). namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property must be comparable property (Rollo. there were hardly any willing buyers.D. Taxation is progressive when its rate goes up depending on the resources of the person affected (Ibid. Finally under the Real Property Tax Code (P. Ancheta. 464 as amended). there would be truth to the 1903 dictum of Chief Justice Marshall that "the power to tax involves the power to destroy. 20 be equated with the market value of properties not so covered.D. not even the factors determinant of the assessed value of subject properties under the "comparable sales approach" were presented by the public respondents. The power to tax "is an attribute of sovereignty". there was no mention of the equitable or progressive aspects of taxation required in the 1973 Charter (Fernando "The Constitution of the Philippines". p.Uniformity has been defined as that principle by which all taxable articles or kinds of property of the same class shall be taxed at the same rate (Churchill v.). Commissioner of Internal Revenue. taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Jr. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner. That would be a clear abuse of power (Sison v. The former has naturally a much lesser market value in view of the rental restrictions. 20 especially during the time in question. But for all its plenitude the power to tax is not unconfined as there are restrictions. In fact. the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has existed for around twenty (20) years with no end to it in sight. The taxing power has the authority to make a reasonable and natural classification for purposes of taxation but the government's act must not be prompted by a spirit of hostility. 221. Concepcion. Obillos. 969 [1916]). 130 SCRA 655 [1984]. In the same vein. As a general rule. An obvious example is where it can be shown to amount to confiscation of property. both the due process and equal protection clauses of the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. p. 34 Phil." By no strength of the imagination can the market value of properties covered by P. Ancheta. thus: "The power to tax is not the power to destroy while this Court sits.

INC. plaintiff-appellant.promotion of the common good. (a) the petition is GRANTED. meter at the time in question.A.. Feliciano. and (e) the respondent Board of Assessment Appeals of Manila and the City Assessor of Manila are ordered to make a new assessment by the income approach method to guarantee a fairer and more realistic basis of computation (Rollo. Bidin.. Jr. SO ORDERED. Jr. Fernan. Algue Inc. PREMISES CONSIDERED. Gancayco. C. Noblejas and concurred in by former City Engineer of Manila Romulo M. vs. Ricardo V. et al. in his capacity as National Treasurer. J. 6359 and P. Gutierrez.. No. Consequently. 2 Rendered by then Acting Register of Deeds of Manila Teresita H. Cruz. 158 SCRA 9 [1988]).. may be achieved (Commissioner of Internal Revenue v. Narvasa. No. By the public respondents' own computation the assessment by income approach would amount to only P10.41383 August 15.: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees? .. defendants-appellants. Boro for plaintiff-appellant. Sarmiento. Padilla. p..J. Footnotes 1 Penned by former Chairman and Acting Minister Pedro Almanzor and concurred in by the then Minister of Justice Vicente Abad Santos and Minister of Local Government and Community Development Jose Rono. EDU in his capacity as Land Transportation Commissioner. Republic of the Philippines SUPREME COURT Manila EN BANC G. JJ. concur.. it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties. ROMEO F. Melencio-Herrera.. L. JR. 71). and Conrado A. and UBALDO CARBONELL. Flores.R.D. Puno. del Rosario and OIC of the Office of the City of Auditor Raul C. 1988 PHILIPPINE AIRLINES. Jr. Regalado and Davide. GUTIERREZ. (b) the assailed decisions of public respondents are REVERSED and SET ASIDE.00 per sq. Griño-Aquino. Medialdea.

provincial or national automobiles. the deficiency tax shall be payable within the ten days from the receipt of the assessment. This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case where the then Court of First Instance of Rizal dismissed the portion-about complaint for refund of registration fees paid under protest. Elevate pursuant to Section 8. PAL filed the complaint against Land Transportation Commissioner Romeo F. (supra) that registration fees of motor vehicles are not taxes. March 30. in effect. 25). the grantee shall pay to the National Government during the life of this franchise a tax of two per cent of the gross revenue or gross earning derived by the grantee from its operations under this franchise. Elevate in his capacity as LTC Commissioner. Appellee Romeo F.529. defendants repatriation the ruling in Republic v. not been paying motor vehicle registration fees. appellee Commissioner Romeo F. among them PAL to pay motor vehicle registration fees. Philippine Rabbit Bus Lines. No. The grantee shall pay the tax on its real property in conformity with existing law. Elevate issued a regulation requiring all tax exempt entities. The disputed registration fees were imposed by the appellee. under protest. and LOI Carbonell in his capacity as National Treasurer.This question has been brought before this Court in the past. a deficiency tax is shown to be due. Branch 18 where it was docketed as Civil Case No. Edu and National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise. 1970) to the effect that motor vehicle registration fees are regulatory exceptional. established or collected by any municipal. asking for a reexamination of the latest decision on this issue. The parties are.. invoking the ruling in Calalang v. Provided. Despite PAL's protestations. the amount of P19. In support of the motion to dismiss. Q-15862. The appellant thus paid.1971. levied.1 Under its franchise. They contended that while Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or earnings. Philippine Rabbit Bus Lines. Such tax shall be due and payable quarterly and shall be in lieu of all taxes of any kind. wrote a letter dated May 19. PAL through counsel. however. therefore. do not come within the exemption granted to PAL under its franchise. and not revenue measures and. (32 SCRA 211. that if. series of 1956) PAL has.. and 269. the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. but regulatory fees imposed as an incident of the exercise of the police power of the state. Act No. In consideration of the franchise and rights hereby granted. The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and engaged in the air transportation business under a legislative franchise. Commissioner Romeo F. Appellee Edu denied the request for refund basing his action on the decision in Republic v. The pertinent provision of the franchise provides as follows: Section 13. to Commissioner Edu demanding a refund of the amounts paid. after the audit of the accounts of the grantee by the Commissioner of Internal Revenue. nature or description. Republic Act No. Sometime in 1971. otherwise known as the Land Transportation and Traffic Code. 4136. it does not exempt . as amended by Republic Act Nos.75 as registration fees of its motor vehicles. Hence. filed a motion to dismiss alleging that the complaint states no cause of action. 42739. On the strength of an opinion of the Secretary of Justice (Op. 307. Inc. After paying under protest. PAL is exempt from the payment of taxes. since 1956. Inc. Lorenzo (97 Phil.

the plaintiff from paying regulatory fees. where the charge has no relation to the value of the services performed and where the amount collected eventually finds its way into the treasury of the branch of the government whose officer or officers collected the chauffeur." The term is repeated four times in the body thereof.1969 In direct refutation is the ruling in Calalang v. whereas fees are exceptional. Geveia speaking. Its heading speaks of "registration fees. the trial court rendered a decision dismissing the appellant's complaint "moved by the later ruling laid down by the Supreme Court in the case or Republic v. p.) A special science fund was thereby created and its title expressly sets forth that a tax on privatelyowned passenger automobiles.. and where it is enacting a regulatory measure. on the other hand.. And as proof that the money collected is not intended for .."(Cooley to be paid as distinguished from the registration fee under the Motor Vehicle Act. of the section relied upon by defendant-appellee under the Back Pay Law. Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic Act No. this Court held: "The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor Vehicle Law (Republic Act No. motorcycles and scooters was amended by Republic Act No." (lbid. The rates thereof were provided for in its Section 3 which clearly specifies the" Philippine tax." (Ibid. Edu respectively.. it appears that the expenditures of the Motor Vehicle Office are but a small portion—about 5 per centum—of the total collections from motor vehicle registration fees. Philippine Rabbit Bus Lines. Inc. Subsection H) The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a tax but of a registration fee under the police power. 587 [1950]). 22. There cannot be any clearer expression therefore of the legislative will. Hence. Lorenzo (supra). Vol. It therefore cannot make use of a backpay certificate to meet such an obligation. Section 3 thereof as to the imposition of additional tax on privately-owned passenger automobiles. 1973. What is thus most apparent is that where the legislative body relies on its authority to tax it expressly so states. for purposes of regulation and inspection and are for that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. It is not held liable for a tax but for a registration fee. (supra). 5470 which is (sic) approved on May 30. Hence the incipient. 5448. held: The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are in section 8 of that law called "fees". discuss the main points of contention in the case at bar. The resolution of the motion to dismiss was deferred by the Court until after trial on the merits. For not the name but the object of the charge determines whether it is a tax or a fee. taxes are for revenue."(Cooley on Taxation. is not a fee but a tax. Calalang v. mention is made of the "fee for registration. motorcycles and scooters was imposed. a charge fixed by statute for the service to be person. Lorenzo (supra) and Republic v. (supra) cited by PAL and Commissioner Romeo F. even on the assumption that the earlier legislation could by subdivision the point be susceptible of the interpretation that a tax rather than a fee was levied. 4th ed. Inc.) From the data submitted in the court below. such as motor vehicle registration fees. Equally so.-When by an officer. 1969. where the Court. But the appellation is no impediment to their being considered taxes if taxes they really are. 110. Resolving the issue in the Philippine Rabbit case. it is equally exploded (at p. ([1968]. Subsection G) A subsection starts with a categorical statement "No fees shall be charged. On April 24. 1. Philippine Rabbit Bus Lines." From this judgment. PAL appealed to the Court of Appeals which certified the case to us.

" be charged or collected until and unless the approved schedule of tolls shall have been posted levied. by Rep. Act 4136 [1968]). Nos." thus implying that the charges therein imposed—though called fees—are of the category of taxes. city or municipal council or board. as well as the streets and bridges in the chartered cities to be alloted by the Secretary of Public Works and Communications for projects recommended by the Director of Public Works in the different provinces and chartered cities. 843. in a conspicuous place at such toll station. P. 61. Collected—Monies collected under the provisions of this Act shall be deposited in a special trust account in the National Treasury to constitute the . The provision is contained in section 70. as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways. 73 of Act 3992 and remained unsegregated. (as amended by Rep. They are veritable taxes. the matter is governed by Rep. 110. which reads: Sec.. As a matter of fact.D. Disposal of Mortgage. Today. Sec.) and BP Blg. Presently. as may be authorized and approved by the Secretary of Public Works and Communications. 382. not merely fees. for it provides that "no other taxes or fees than those prescribed in this Act shall be imposed. or for the exercise of the profession of chauffeur. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration or operation or on the ownership of any motor vehicle. for their express object is to provide revenue with which the Government is to discharge one of its principal functions—the construction and maintenance of public highways for everybody's use. (at pp. Section 73 of Commonwealth Act 123 (which amended Sec. 74 and 398). 213-214) Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992 [19511) as amended by Commonwealth Act 123 and Republic Acts Nos. 896. . 587 and 1621. streets and bridges. shall any toll fee. as may be authorized by the President of the Philippines upon the recommendation of the Secretary of Public Works and Communications. Disposal of moneys collected. however. 61 of the Land Transportation and Traffic Code provides: Sec. within their respective jurisdiction. It is thus obvious that the fees are not collected for regulatory purposes. otherwise known as the Land Transportation Code. or other competent authority may exact and collect such reasonable and equitable toll fees for the use of such bridges and ferries. 43. That any provincial board.. by any municipal corporation.the expenditures of that office. that is to say. the provisions of any city charter to the contrary notwithstanding: Provided.. as amended by section 17 of Republic Act 587. and also for the use of such public roads. 5715 and 64-67. 587 and 1603) states: Section 73. but in none of these cases.—Twenty per centum of the money collected under the provisions of this Act shall accrue to the road and bridge funds of the different provinces and chartered cities in proportion to the centum shall during the next previous year and the remaining eighty per centum shall be deposited in the Philippine Treasury to create a special fund for the construction and maintenance of national and provincial roads and bridges. of subsection (b). Act Nos. of the law. the law itself provides that all such money shall accrue to the funds for the construction and maintenance of public roads. the Revised Motor Vehicle Law itself now regards those fees as taxes. Acts Nos.

then the exaction is properly called a tax. looked to as a source of revenue as well as a means of regulation (Sonzinky v. 4851. 98 Phil. even Rep.. If the purpose is primarily revenue. Act 4136. one of the real and substantial purposes. 3101. 593. operation or ownership of a motor vehicle as a "tax or fee. tax Course.S. citing Cooley on Taxation (2nd Ed. Indeed. (See Secs. of automobile license fees. 148). customs s duties or other charges shall be accepted unless proof of payment of the taxes due thereon has been presented to the Commission. speak of an "additional" tax. Act 587 quoted in the Calalang case. Araneta. Simply put. or if revenue is at least one of the real and substantial purposes. Act 4136 which reads: Sec." or fees .S. That the amount necessary to maintain and equip the Land Transportation Commission but not to exceed twenty per cent of the total collection during one year. for example. for the registration or operation or on the ownership of any motor vehicle. then the exaction is properly called a tax (Umali. the imposition in Rep. 11). at least. Fees may be properly regarded as taxes even though they also serve as an instrument of regulation. pay for the operating expenses of the administering agency. Rep.) Such is the case of motor vehicle registration fees. Act 4136 were merely a regulatory fee.. citing Cooley on Taxation. or if revenue is. 4801. U." making the intent to impose a tax more apparent. Act 41383.. Lorenzo. if the exaction under Rep. License fees are changes. which shall be apportioned and expended in accordance with the provisions of the" Philippine Highway Act of 1935.) 592. 1971). they are not mentioned by Sec. and 4881. The conclusions become inescapable in view of Section 70(b) of Rep. Act 4136 does the law specifically state that the imposition is a tax. Act 5448 cited by the respondents. Payment of taxes upon registration. shall be set aside for the purpose. Reviewer in Taxation. Rep. 1980.S. Thus. operation or ownership of a motor vehicle (Sec." where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration. 4811. 198. b. Thus. 4741.. Act 4136 also speaks of other "fees. 300 U. It is patent therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration. 13. On the other hand. taxation may be made the implement of the state's police power (Lutz v. Calalang v. Isabela such case. referring to taxes other than those imposed on the registration. of the Code as taxes like . 97 Phil. Internal Revenue Code of 1954. 213-214) Lutz v." Though nowhere in Rep. 591-593). regulation. 506) This is true. 59. Araneta 98 Phil.) (Umali. If the purpose is primarily revenue.Highway Special Fund. Section 591-593). Par. It appears clear from the above provisions that the legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a much lesser degree. 12-13." such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. in the Land Transportation code. as amended). Act 5448 need not be an "additional" tax. or ownership of a motor vehicle under Rep. The same provision appears as Section 591-593).—No original registration of motor vehicles subject to payment of taxes. however. (As amended by RA 64-67. pp." which appears to have been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of Rep. 4701.) These exactions are sometimes called regulatory taxes. the Philippine Rabbit case mentions a presumption arising from the use of the term "fees. These are not to be understood as taxes because such fees are very minimal to be revenue-raising. U. operation. Id. or for the exercise of the profession of chauffeur . 591-593). approved August 6. (1955 CCH Fed.. 4711. which classify taxes on tobacco and alcohol as regulatory taxes. speaks of "taxes. As stated by a former presiding judge of the Court of Tax Appeals and writer on various aspects of taxpayers It is possible for an exaction to be both tax arose. 2nd Edition. the fees may properly be regarded as taxes even though they also serve as an instrument of regulation. "Provided.

It is not clear from the records as to what payments were made in succeeding years. provincial. petitioner's franchise was amended by Republic Act No. Section 5 of the Constitution as amended in 1973 expressly provide that no franchise shall be granted to . Section 8 of the 1935 Constitution and Article XIV." their nature has become that of "taxes. of registration payments as "fees. established. Without changing the earlier deputy. The claim for refund is made for payments given in 1971. shall pay such rate of tax upon their taxable net income as are imposed by this section upon associations or corporations engaged in a similar business or industry. aforequoted. It is quite apparent that vehicle registration fees were originally simple exceptional. to the effect that its franchise tax of one and one-half percentum (1-1/2%) of all gross receipts was provided as "in lieu of any and all taxes of any kind. 5448 dated June 27. or national from which taxes the grantee is hereby expressly exempted. May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL? The answer is NO. We have ruled that Section 24 of Rep. et al. 1968 which reads: "(d) The provisions of existing special or general laws to the contrary notwithstanding. There can be no doubt as to the power of Congress to repeal the earlier exemption it granted. 41-42).R. Inc. all corporate taxpayers not specifically exempt under Sections 24 (c) (1) of this Code shall pay the rates provided in this section. 61. enacted in 1957. 615). however.the motor vehicle registration fee and chauffers' license fee. this Court ruled: Under its original franchise. of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of see. nature. Article XIV. No. or description levied. (G. 1968. 21). 5448 dated June 27. however." The issue raised to this Court now is the validity of the respondent court's decision which ruled that the exemption under Republic Act No. or instrumentalities owned or controlled by the government." July 11. repealed all earlier tax exemptions Of corporate taxpayers found in legislative franchises similar to that invoked by PAL in this case. 41-42). 1985). including the Government Service Insurance System and the Social Security System but excluding educational institutions. " An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all corporate taxpayers to pay income tax as provided by the statute. Over the years. v. Republic Act No. Act No. as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as we know it would stand still. petitioner Radio Communications of the Philippines. we rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues. Congress found the registration of vehicles a very convenient way of raising much needed revenues. was repealed by Section 24 of Republic Act No. In Radio Communications of the Philippines. In 1964. agencies." In view of the foregoing. intended only for rigidly purposes in the exercise of the State's police powers. Court of Tax Appeals.. was subject to both the franchise tax and income tax. Inc. All corporations. municipal. or collected by any authority whatsoever.

duties. agency. The prayed for refund of registration fees paid in 1971 is DENIED. JJ. and transfer of airtransport equipment. Considering the foregoing. Section 13 of Presidential Decree No. were correctly imposed because the tax exemption in the franchise of PAL was repealed during the period. The Land Transportation Franchising and Regulatory Board (LTFRB) is enjoined functions-the collecting any tax. without distinction as to transport or nontransport corporations. derived by the grantees from all specific. 75 OG No. the Court Resolved to DENY the petition for lack of merit. license. However.D. or national authority or government. levied. Padilla. There is a listing of entities entitled to tax exemption. 1590. PAL is now exempt from the payment of any tax. Melencio-Herrera. It has removed the ambiguity found in the earlier law. There is no question as to the public interest involved. Such payments are already included in the basic tax or franchise tax provided in Subsections (a) and (b) of Section 13. The country needs increased revenues. PAL's current franchise is clear and specific. The petitioner is not covered by the provision. mail. the petition is hereby partially GRANTED. royalties.. fees and other charges on the registration. Narvasa. nature or description imposed. city. P. 1968 and April 9.any individual. the grantee shall pay to the Philippine Government during the lifetime of this franchise whichever of subsections (a) and (b) hereunder will result in a lower taxes. and freight revenues. provincial. 15. 1979 as provided in Presidential Decree No. Bidin. and all other personal or real property of the gravitates (Pres. . WHEREFORE. now or in the future.) (a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the Internal Revenue Code. The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes. license and other fees and charges of any kind. or other charge on the registration and licensing of the petitioner's motor vehicles from April 9. fee. an amended franchise was given to PAL in 1979. 1979). and may no longer be exacted. motor vehicles. 1590. alteration. Cruz. or repeal by the legislature when the public interest so requires. only the gross passengers. assessed. Gancayco. Paras. from its outgoing flights shall be subject to this law. 1590. acquisition. or corporation except under the condition that it shall be subject to amendment. fee. including but not limited to the following: xxx xxx xxx (5) All taxes.J. firm. 3259. Fernan.. Decree 1590. April 9. Griño Aquino and Medialdea. C. Any registration fees collected between June 27. or (b) A franchise tax of two per cent (2%) of the gross revenues. Sarmiento. or collected by any municipal. Cortes. Feliciano. registration. now provides: In consideration of the franchise and rights hereby granted. concur. or other charge on the registration and licensing of motor vehicles. The decision of the respondent court is affirmed. 1979. established. SO ORDERED. provided that with respect to international airtransport service. The repealing clause is clear and unambiguous.

among others. regardless of length. METRO MANILA COMMISSION. Presidential Decree No. vs. and have caused a sharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection of sales. 1985. upon the allegations that intervention was necessary for the complete protection of their rights and that their "survival and very existence is threatened by the unregulated proliferation of film piracy. Provided. No. MINISTER OF FINANCE. — There shall be collected on each processed video-tape cassette. 1986. have greatly prejudiced the operations of moviehouses and theaters.Republic of the Philippines SUPREME COURT Manila EN BANC G. The City Legal Officer for respondents City Mayor and City Treasurer. contractor's specific. WHEREAS. discs. videotapes. On November 5. a month after the promulgation of the abovementioned decree. the proliferation and unregulated circulation of videograms including. The rationale behind the enactment of the DECREE. thereby resulting in substantial losses estimated at P450 Million annually in government revenues." The Intervenors were thereafter allowed to file their Comment in Intervention. fifteen (15) days after completion of its publication in the Official Gazette. hereinafter collectively referred to as the Intervenors. 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). Integrated Movie Producers. L-75697 June 18. On October 23. 1985 and took effect on April 10. inter alia: SEC. 134. 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. is set out in its preambular clauses as follows: 1. VIDEOGRAM REGULATORY BOARD. .: This petition was filed on September 1. The Decree was promulgated on October 5. 1986. 1987 VALENTIN TIO doing business under the name and style of OMI ENTERPRISES. ready for playback. J. the Greater Manila Theaters Association. were permitted by the Court to intervene in the case. 1994 amended the National Internal Revenue Code providing. MELENCIO-HERRERA. petitioner. over petitioner's opposition. Video Tapes. amusement and other taxes.R. That locally manufactured or imported blank video tapes shall be subject to sales tax. Nelson Y. Importers and Distributors Association of the Philippines. CITY MAYOR and CITY TREASURER OF MANILA. respondents. and Philippine Motion Pictures Producers Association. cassettes or any technical improvement or variation thereof. an annual tax of five pesos. Ng for petitioner.

and occasioned industry-wide displacement and unemployment due to the shutdown of numerous moviehouses and theaters. which imposes a tax of 30% on the gross receipts payable to the local government is a RIDER and the same is not germane to the subject matter thereof.000 families and 500. 8. 5. "WHEREAS. (Numbering of paragraphs supplied). and such earnings have not been subjected to tax. Section 10 thereof. which it is not. . proper taxation of the activities of videogram establishments will not only alleviate the dire financial condition of the movie industry upon which more than 75. 3. 3.. the unregulated activities of videogram establishments have also affected the viability of the movie industry. thereby depriving the Government of approximately P180 Million in taxes each year. and impairs the mandate of the Constitution for the State to support the rearing of the youth for civic efficiency and the development of moral character and promote their physical. and 6. 6. 7. The Decree is an ex-post facto law. but also provide an additional source of revenue for the Government. . There is undue delegation of power and authority. The tax imposed is harsh. including the movie industry which has an accumulated investment of about P3 Billion. 4.. confiscatory. 6. intellectual. oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution.2. There is over regulation of the video industry as if it were a nuisance. videogram(s) establishments collectively earn around P600 Million per annum from rentals. in the face of these grave emergencies corroding the moral values of the people and betraying the national economic recovery program. 4. WHEREAS. civic-minded citizens and groups have called for remedial measures to curb these blatant malpractices which have flaunted our censorship and copyright laws. We shall consider the foregoing objections in seriatim. the rampant and unregulated showing of obscene videogram features constitutes a clear and present danger to the moral and spiritual well-being of the youth. WHEREAS. WHEREAS. and social well-being. Petitioner's attack on the constitutionality of the DECREE rests on the following grounds: 1.000 workers depend for their livelihood. WHEREAS. 2.200 movie houses and theaters throughout the country. bold emergency measures must be adopted with dispatch. in order to ensure national economic recovery. sales and disposition of videograms. and at the same time rationalize the heretofore uncontrolled distribution of videograms. it is imperative for the Government to create an environment conducive to growth and development of all business industries. There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by Amendment No. particularly the more than 1. 5. WHEREAS. WHEREAS.

It is an end-user tax. confiscatory. may contain any number of provisions. It is a tax that is imposed uniformly on all videogram operators. It is unnecessary to express all those objectives in the title or that the latter be an index to the body of the DECREE. and may be considered in furtherance of such subject by providing for the method and means of carrying out the general object. and are germane to the subject matter expressed in the title. which is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title. supra. xxx xxx xxx The foregoing provision is allied and germane to. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive. or as long as they are not inconsistent with or foreign to the general subject and title. as the case may be. indicated in the title. 9 In imposing a tax. Tax on Sale. 5 Tested by the foregoing criteria. for every sale. lease or disposition of a videogram containing a reproduction of any motion picture or audiovisual program. the general object of the DECREE. that the courts scarcely venture to declare that it is subject to any restrictions whatever. and the other fifty percent (50%) shall acrrue to the municipality where the tax is collected. thus shifting the tax burden on the buying or the viewing public. thereby depriving the Government of an additional source of revenue. imposed on retailers for every videogram they make available for public viewing. petitioner's contention that the tax provision of the DECREE is a rider is without merit. no matter how diverse they may be. PROVIDED. The title of the DECREE. the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate. Lease or Disposition of Videograms. 8 The power to impose taxes is one so unlimited in force and so searching in extent. That in Metropolitan Manila. 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. However. and in restraint of trade. . 10 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. Those preambles explain the motives of the lawmaker in presenting the measure. The tax provision is not inconsistent with. it is beyond serious question that a tax does not cease to be valid merely because it regulates.1. 2 An act having a single general subject. the legislature acts upon its constituents. — Notwithstanding any provision of law to the contrary. 4 It should be given practical rather than technical construction. so long as they are not inconsistent with or foreign to the general subject. The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. That section reads. 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. This is. except such as rest in the discretion of the authority which exercises it. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province. or even definitely deters the activities taxed. discourages. It is not necessary that the title express each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts of the statute are related. a sufficient security against erroneous and oppressive taxation. nor foreign to that general subject and title. but which is passed on to the entire cost of the admission ticket. inter alia: Section 10. It is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-owners pay to the government. and is reasonably necessary for the accomplishment of. As a tool for regulation 6 it is simply one of the regulatory and control mechanisms scattered throughout the DECREE." 3 The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly construed as to cripple or impede the power of legislation. the tax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission. 7 2. in general.

12 Taxation has been made the implement of the state's police power. the rate of tax is a matter better addressed to the taxing legislature." That the grant of such authority might be the source of graft and corruption would not stigmatize the DECREE as unconstitutional. orders. 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". And while it was also an objective of the DECREE to protect the movie industry. before they could be sold. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative power. among other categories. we reserve resolution of the question raised at the proper time. or letters of instructions. no valid objection can be made. and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense. in the very language of the decree. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former President under Amendment No. including videotapes. or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that in his judgment requires immediate action. to the latter. or . the flagrant violation of intellectual property rights. and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law. the authority of the BOARD to solicit such assistance is for a "fixed and limited period" with the deputized agencies concerned being "subject to the direction and control of the BOARD." In refutation. he may." 14 Besides. for a fixed and limited period. 5. It was imposed primarily to answer the need for regulating the video industry. leased. which shall form part of the law of the land. there exists a grave emergency or a threat or imminence thereof. 3. and the proliferation of pornographic video tapes. in order to meet the exigency. one which "alters the legal rules of evidence. issue the necessary decrees. the tax remains a valid imposition. An ex post facto law is." It is petitioner's position that Section 15 of the DECREE in providing that: All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the effectivity of this Decree within which to register with and secure a permit from the BOARD to engage in the videogram business and to register with the BOARD all their inventories of videograms. 13 At bottom. The first cannot be done. discs. 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. "The true distinction is between the delegation of power to make the law. the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently summarizes the justification in that grave emergencies corroding the moral values of the people and betraying the national economic recovery program necessitated bold emergency measures to be adopted with dispatch.. enforcement. Should the eventuality occur. considering that the issue of the validity of the exercise of legislative power under the said Amendment still pends resolution in several other cases. 11 It is inherent in the power to tax that a state be free to select the subjects of taxation. particularly because of the rampant film piracy. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance of other agencies and units of the government and deputize. The DECREE is not violative of the ex post facto principle. Whatever the reasons "in the judgment" of the then President. cassettes or other technical improvements or variations thereof. . and implementation. 4. the aggrieved parties will not be without adequate remedy in law. the heads or personnel of such agencies and units to perform enforcement functions for the Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion as to its execution. which necessarily involves a discretion as to what it shall be.The levy of the 30% tax is for a public purpose. 6 of the 1973 Constitution providing that "whenever in the judgment of the President ..

raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of any videogram cannot be presented and thus partakes of the nature of an ex post facto law. there is no question that there is a rational connection between the fact proved. neither retrospective in character. besides the fact that the prima facie presumption of violation of the DECREE attaches only after a fortyfive-day period counted from its effectivity and is. may be the basis for declaring a statute invalid. there is no question that public welfare is at bottom of its enactment. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere. And the "legislature may enact that when certain facts have been proved that they shall be prima facie evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate facts presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience". video establishments are seen to have proliferated in many places notwithstanding the 30% tax imposed. shall be prima facie evidence of violation of the Decree. Mingoa 92 Phil. On the contrary. There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch. whether the possession of such videogram be for private showing and/or public exhibition. which is non-registration. are primarily and exclusively a matter of legislative concern. 6. et al. A TREATISE ON THE CONSTITUTIONAL LIMITATIONS. 16 Applied to the challenged provision. it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be overcome by a contrary presumption founded upon the experience of human conduct.otherwise disposed of. the need for its regulation was apparent. The attack on the validity of the challenged provision likewise insofar . not the wisdom of the action taken.. however. 856 [1953] at 858-59. as there ought to be. While the underlying objective of the DECREE is to protect the moribund movie industry. Court of Appeals. and the ultimate fact presumed which is violation of the DECREE. 15 . Only congressional power or competence. what petitioner basically questions is the necessity. As this Court held in the recent case of Vallarta vs. This is as it ought to be. and losses in government revenues due to the drop in theatrical attendance.. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of existence as if it were a nuisance. considering "the unfair competition posed by rampant film piracy. 17 The enactment of the Decree since April 10. not to mention the fact that the activities of video establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in business. These considerations. The argument is untenable. If there be adherence to the rule of law. Thereafter any videogram found in the possession of any person engaged in the videogram business without the required proof of registration by the BOARD. Being a relatively new industry. to which rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of legal norms and prescriptions. the last offender should be courts of justice. therefore. citing 1 COOLEY. wisdom and expediency of the DECREE. In the last analysis. and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People vs. 1986 has not brought about the "demise" of the video industry. 639-641). the erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed video tapes containing pornographic films and films with brutally violent sequences. the judiciary would substitute its own.

. Bidin. Commission on Elections. 1. November 22. supra. 10 ibid. JJ. 1962. Cordero vs. cited in Bernas. 340 U. vs. Article VIII. COMELEC. 7 People vs. Oct. Ed. Ed. 495. Ed. Yap. concur.S.4 L. Araneta. Butler. Grosjean. 301 U. 18 In fine.). 535. 292. petitioner has not overcome the presumption of validity which attaches to a challenged statute. p.S. Sanchez. 73 Phil. Hongkong & Shanghai Banking Corporation. 48609. No costs. vs. Sarmiento and Cortes.. et al. Jr. 44. supra. 44257. Recktenwald. 1987 as unconstitutional and void. citing Great Atl. U. Section 26[l] Article VI. Gutierrez. p. Southern Coal and Coke Co. 594. 301 U. L-239. 13 ibid. citing Carmichael vs.as there may be objections.. 1193. Feliciano. December 22. Philippines Constitutional Law.S. Cruz. SO ORDERED. Maryland. Jose Cabatuando. Ed. 78 Phil. A Treatise on the Constitutional Limitations. U. 2 Sumulong vs. 314.. 81 L. 470. 8 ALR 466. L-7859. We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. Footnotes 1 Section 19[1]. June 30. 42. Fernan. 80 L. 316.S. the instant Petition is hereby dismissed. WHEREFORE. 66 Phil.. 290 III. 98 Phil. vs. 4 Government vs. supra.S. Cabatuando. 987. Cordero vs. M'Culloch vs.S. 412. (C. No. Carlos. Hamilton. .S. Teehankee.. p. 148. 40. even if valid and cogent on its wisdom cannot be sustained. 5 Sumulong vs. L-14542. 8 U. 3 Public Service Co. 579. October 10. Gancayco. Sanchez. 9 II Cooley. 1941. 1245. 1973 Constitution. 1955. 288. No. and Pacific Tea Co.6 SCRA 418. 477. 4 Wheat. 81 L.. 31. 483. Padilla. et al. 6 United States vs. Hon. Paras. vs. 1938. 1987 Constitution.J. 12 Lutz vs.. 1947. 11 Magnano Co. 986. 297 U. Narvasa. 1950.

(b) To improve existing methods of raising sugar cane and of sugar manufacturing. sister companies under one controlling ownership and management. a semi-public corporation created for the following purposes and objectives: (a) To conduct research work for the sugar industry in all its phases. See also U. vs. vs. 102. Nos. for plaintiff-appellee. August 12. supra. Ma-ao Sugar Central Co. either agricultural or industrial. Enrique M. 1987. 1916. Co. Assistant Solicitor General Antonio Torres and Solicitor Ceferino Padua.. vs.R. May 29.: This is a joint appeal by three sugar centrals. Mingoa. L-19825 and 19826 July 9. 22 SCRA 424.. Rollo. increase and improve the industrialization of the by-products of sugar cane. Barredo. INC. Inc. 450-451. 17 Solicitor General's Comments. Mutuc. for the purpose of introducing into the sugar industry such practices or processes that will reduce the cost of production. 632 is the charter of the Philippine Sugar Institute. Meer. W & Z. as well insure stabilized prices at a level sufficient to cover the cost of production plus a reasonable profit. Republic of the Philippines SUPREME COURT Manila EN BANC G. Fernando and Emma Quisumbing-Fernando for defendants-appellants. REGALA. 632. BACOLOD-MURCIA MILLING CO. 725.14 Cincinnati. defendants-appellants..S. MA-AO SUGAR CENTRAL CO. and Talisay-Silay Milling Co. J. 16 ibid. Philsugin for short. (c) To insure a permanent. 15 G. Clinton County Comrs (1852) 1 Ohio St. (d) To establish and maintain such balanced relation between production and consumption of sugar and its by-products. and achieve greater efficiency in the industry.. p.. 1968. 1966 REPUBLIC OF THE PHILIPPINES. 18 Morfe vs. Bacolod Murcia Milling Co. 88.. from a decision of the Court of First Instance of Manila finding them liable for special assessments under Section 15 of Republic Act No.... Republic Act No. Luling No. INC. R. Inc.34 Phil. Meer and Meer. 11162. L-40195. and TALISAY-SILAY MILLING COMPANY. citing People vs. . L-19824. No.R. sufficient and balanced production of sugar and its by-products for local consumption and exportation. L-20387. January 31. plaintiff-appellee. Office of the Solicitor General Antonio P.. and such marketing conditions therefor.

the control and eradication of pests. All the income and receipts derived from the special fund herein created shall accrue to. Act 632) To realize and achieve these ends. Rep. the selected and propagation of high-yielding varieties of sugar cane suited to Philippine climatic conditions. Sections 15 and 16 of the aforementioned law provide: Sec. warehouses. keep. (e) To grant loans. The amount shall be borne by the sugar cane planters and the sugar centrals in the proportion of their corresponding milling share. assign. and to promote and maintain a sufficient general production of sugar and its by-products by an efficient coordination of the component elements of the sugar industry of the country. materials. and (f) To improve the living and economic conditions of laborers engaged in the sugar industry by the gradual and effective correction of the inequalities existing in the industry. 3.10] per picul of sugar to be collected for a period of five (5) years beginning the crop year 1951-1952. transportation and warehousing of sugar and its by-products. (c) To explore and expand the domestic and foreign markets for sugar and its by-products to assure mutual benefits to consumers and producers. machineries. the PHILSUGIN shall have the following powers: (a) To establish. manufacture. equipment and supplies as may be necessary to prosecute successfully such researches and experimental work. and operate one central experiment station and such number of regional experiment stations in any part of the Philippines as may be necessary to undertake extensive research in sugar cane culture and manufacture. buildings. maintain. Special Fund. merchant vessels. and form part of the said fund to be available solely for the use of the corporation. — To raise the necessary funds to carry out the provisions of this Act and the purposes of the corporation. maintain and operate. 16. or help establish. on reasonable terms.(e) To promote the effective merchandising of sugar and its by-products in the domestic and foreign markets so that those engaged in the sugar industry will be placed on a basis of economic security. Capitalization. and such other pertinent studies as will be useful in adjusting the sugar industry to a position independent of existing trade preference in the American market. to planters when it deems such loans advisable. to wit: Sec. Specific and General Powers. and said levy shall constitute a lien on their sugar quedans and/or warehouse receipts. — The proceeds of the foregoing levy shall be set aside to constitute a special fund to be known as the "Sugar Research and Stabilization Fund. (d) To buy. operate. and any other equipment and material to the production. equipment. (b) To purchase such machinery. Sec. keep. subject to existing laws. including studies as to the feasibility of merchandising sugar cane farms. — For carrying out the purposes mentioned in the preceding section. and any other means of transportation. handling. . The specific and general powers of the Philsugin are set forth in Section 8 of the same law. sell. there shall be levied on the annual sugar production a tax of TEN CENTAVOS [P0. 15. railroad lines. rails. (Section 2." which shall be available exclusively for the use of the corporation. materials. own. rent or lease.

the purposes of the corporation. 1956 and 1957 was disastrous in the sense that PHILSUGIN incurred tremendous losses as shown by an examination of the statements of income and expenses marked Exhibits 5. Inc. are the following: x x x during the 5 crop years mentioned in the law. defendant Talisay-Silay Milling Company has paid P251.44 but left unpaid balance of P235.909. Contending that the purchase of the Insular Sugar Refinery with money from the Philsugin Fund was not authorized by Republic Act 632 and that the continued operation of the said refinery was inimical to their interests. to do everything directly or indirectly necessary or incidental to.468. or any state. 1954. Through the testimony of Mr. under Republic Act 632.78 but left unpaid balance of P48. namely 1951-1952.77. 6.00 but left an unpaid balance of P216.070. The appellants' thesis is simply to the effect that the "10 centavos per picul of sugar" authorized to be collected under Sec. x x x . Consequently. in 3 installments from the process of the sugar tax to be collected. has paid P267.74. They maintained that their obligation to contribute or pay to the said Fund subsists only to the limit and extent that they are benefited by such contributions since Republic Act 632 is not a revenue measure but an Act which establishes a "Special assessments.60 payable. besides. 1953-1954. incidental or conducive to the attainment of the purposes of the corporation.. make and execute contracts of any kind as may be necessary or incidental to the attainment of its purposes with any person.. and (h) Generally. of all that they might have previously paid thereunder. There is no question regarding the correctness of the amounts paid and the amounts that remain unpaid.070. It is not a tax measure intended to raise revenues for the Government. territory. The evidence further discloses that the operation of the Insular Sugar Refinery for the years. it has been shown that the operation of the Insular Sugar Refinery has consumed 70% of the thinking time and effort of the PHILSUGIN management. firm. has paid P117.812. known as the PHILSUGIN for short.613. on which there is no controversy. The facts of this case bearing relevance to the issue under consideration. to exercise all the powers of a Corporation under the Corporation Law insofar as they are not inconsistent with the provisions of this Act. defendant Bacolod-Murcia Milling Co.. with the Government of the Philippines or of the United States. once it has been determined that no benefit accrues or inures to the property . or persons therefor. (g) To do all such other things. the appellants refused to continue with their contributions to the said fund. 1951. or public or private corporation. acquired the Insular Sugar Refinery for a total consideration of P3. and defendant Central Azucarera del Danao made a payment of P49.. or in furtherance of.800. the Philippine Sugar Institute. 1954-1955 and 1955-1956. in accordance with the deed of sale Exhibit A. 15 of Republic 632 is a special assessment. the proceeds thereof may be devoted only to the specific purpose for which the assessment was authorized." Adverting to the finding of the lower court that proceeds of the said Fund had been used or applied to absorb the "tremendous losses" incurred by Philsugin in its "disastrous operation" of the said refinery. as recited by the lower court and accepted by the appellants. As such. 7 and 8. 1952-1953. the appellants herein argue that they should not only be released from their obligation to pay the said assessment but be refunded. defendant Ma-ao Sugar Central Co.50. From the evidence presented. it was disclosed that on September 3. presented by the defendants as witnesses. transact all such business and perform such functions directly or indirectly necessary. former acting general manager of PHILSUGIN and at present technical consultant of said entity. a special assessment being a levy upon property predicated on the doctrine that the property against which it is levied derives some special benefit from the improvement. in general.43 but left unpaid balance of P208.193. Cenon Flor Cruz. 1955.897. or with any foreign government and.20. Inc.(f) To enter.059.

merchant vessels. Republic Act 632. Rep. equipment. 3 of whom shall be appointed upon recommendation of the National Federation of Sugar Cane Planters and 2 upon recommendation of the Philippine Sugar Association. the Administrator of Economic Coordination and the Presiding Officers of the two chambers of Congress. Act 632) For this distinction. With all these safeguards against any imprudent or unauthorized expenditure of Philsugin Funds. all financial transactions of the Philsugin are audited by the General Auditing Office. even sugar mills run by animal power . 1959. Among those offices are the Office of the President of the Philippines. and any other equipment and material for the production. the acquisition of the Insular Sugar Refinery must be upheld in its legality and propriety. the appellants cite the case of Collector vs." or a sugar mill which manufactures sugar for a number of plantations. the corporate powers of the Philsugin are vested in and exercised by a board of directors composed of 5 members. Against the above ruling of the trial court. It is fallacious to argue that no mismanagement or abuse of corporate power could have been committed by Philsugin solely because its charter incorporates so many devices or safeguards to preclude such abuse. Rep. etc. Ledesma. Additionally. the appellants herein may not rightly claim that there had been a misapplication of the Philsugin funds when the same was used to procure the Insular Sugar Refinery because the decision to purchase the said refinery was made by a board in which the applicants were fully and duly represented. other offices of the Government review such transactions as reflected in the annual report obliged of the Philsugin to prepare. Fourthly. Thirdly. applies to "a large mill that makes sugar out of the cane brought from a wide surrounding territory. If respondent's interpretation is to be followed. the appellants contend: First. (Sec. The appellants deny that Philsugin is possessed of any such authority because what it is empowered to purchase is not a "sugar refinery but a central experiment station or perhaps at the most a sugar central to be used for that purpose. the lower court adjudged the appellants herein liable under the aforementioned law. Act 632)." as that term is used in Section 189. The term "sugar central" could not have been intended by Congress to refer to all sugar mills or sugar factories as contended by respondent. or that the proceeds from the said assessment are being misapplied to the prejudice of those against whom it has been levied. It has not been shown that this particular provision was not observed in this case. 4. handling. upon the following considerations: First. in which this Court ruled that — We are of the opinion that a "sugar central. On the other hand.R. Besides." This is taking the law into their own hands.owners paying the assessment. the appellants being members of the Philippine Sugar Association. May 27. L-12158.. It was." (Sec. therefore. Secondly. This reasoning of the lower court does not reconcile with that actually happened in this case. rather. No. The issue. is whether Philsugin had any power or authority at all to acquire the said refinery. the appellants contend that the issue on hand is not whether Philsugin abused or not its powers when it purchased the Insular Sugar Refinery. manufacture. which must be presumed to have passed upon the legality and prudence of the disbursements of the Fund. Therefore. it would be dangerous to sanction the unilateral refusal of the appellants herein to continue with their contribution to the Fund for that conduct is no different "from the case of an ordinary taxpayer who refuses to pay his taxes on the ground that the money is being misappropriated by Government officials. 3[a]. transportation and warehousing of sugar and its by-products. G. Subsection d) of Section 3 of Republic Act 632 authorizes Philsugin to buy and operate machineries. then the authority to insist on the payment of the said assessment ceases. authorized to purchase and operate a sugar refinery.

3). 148. Thus. mills. We do not think Congress ever intended to place owners of (trapiches) in the same category as operators of sugar centrals. The appellants' refusal to continue paying the assessment under Republic Act 632 may not rightly be equated with a taxpayer's refusal to pay his ordinary taxes precisely because there is a substantial distinction between a "special assessment" and an ordinary tax. with the benefits of the improvement accruing or inuring to the owners thereof who.S. 351) and "palpably arbitrary or plain abuse" (Gast Realty Investment Co. Kelleher 195 U. Araneta. Section 4 of said Act provides — "Machinery permanently used or in stalled in sugar centrals. Pace. We find for the appellee. the assessment is violative of the due process guarantee of the constitution (Memphis vs. Baer. Under Section 6 of the said law. to be known as the 'Sugar Adjustment and Stabilization Fund. Charleston Ry v. levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration. in fact. the same would not hold true in the case of a refusal to comply with a special assessment. Upon a host of decisions of the United States Supreme Court." This clearly indicates that "Sugar centrals" are not the same as "sugar mills" or "sugar refineries." It then proceeds to enumerate the said purposes. (Sec. the imposition or collection of a special assessment upon property owners who receive no benefit from such assessment amounts to a denial of due process. Third. Commonwealth Act 567. For in this Lutz case. 57). The purpose of an ordinary tax. Commonwealth Act 567. in the case of Norwood vs.. as may be provided by law.S. 172 US 269. and therefore. 241). 98 Phil. pay anything in excess of what they received by reason of such improvement. all collections made thereunder "shall accrue to a special fund in the Philippine Treasury. Schneider Granite Co.' and shall be paid out only for any or all of the following purposes or to attain any or all of the following objectives. the exaction of a special assessment would be "manifestly unfair" (Seattle vs. after all. The nature of a "special assessment" similar to the case at bar has already been discussed and explained by this Court in the case of Lutz vs. 282 U. is to provide the Government with revenues needed for the financing of state affairs. pay the assessment. or refineries shall be assessed. the ruling was laid down that — As already indicated. on lease or otherwise — a tax equivalent to the difference between the money value of the rental or consideration collected and the amount representing 12 per centum of the assessed value of such land. the principle underlying special assessments to meet the cost of public improvements is that the property upon which they are imposed is peculiarly benefited. That sugar mills are not the same as sugar centrals may also be gleaned from Commonwealth Act No. vs. the panels do not. among which . The purpose of the former is to finance the improvement of particular properties. otherwise known as the Sugar Adjustment Act. In prescribing the principle governing valuation and assessment of real property. Thus. 240 U. on the other hand. unless a corresponding benefit is realized by the property owner." Second. In other words. while the refusal of a citizen to pay his ordinary taxes may not indeed be sanctioned because it would impair government functions.S.(trapiche) would be considered sugar central. 470 (Assessment Law).

1311. therefore. & Pac. 4 L. Ed. Walter Lutz. and is thus pivotal in the plans of a regime committed to a policy of currency stability.. so that all might continue profitably to engage therein. no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. vs. 857). State ex rel. 552. 128 So. to provide means for the rehabilitation and stabilization of the threatened sugar industry. On the authority of the above case. the exercise of the police power for the general welfare of the entire country. to readjust the benefits derived from the sugar industry . Ed. In other words. 59 L. Maryland. Grosjean. Taxation may be made the implement of the state's police power. Ed. Hence. The plaintiff in the above case. 1193." (128 So. Mayo. therefore redounds greatly to the general welfare. and to afford laborers employed in the industry a living wage and to improve their living and working conditions. that it gives employment to thousands of laborers in fields and factories." and therefore. it follows that the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. the act is primarily an exercise of the police power. contended that the aforementioned tax or special assessment was unconstitutional because it was being "levied for the aid and support of the sugar industry exclusively. 4 Wheat. Johnson vs. Once it is conceded. vs. 477. the law-making body could provide that the distribution of benefits therefrom be readjusted among its components. vs.S. it was competent for the Legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn. Marcy Inc. 316. We hold that the special assessment at bar may be considered as similarly as the above.are "to place the sugar industry in a position to maintain itself. and particularly Section 6. this Court said: The basic defect in the plaintiff's position in his assumption that the tax provided for in Commonwealth Act No. 835. Tea Co. to limit the production of sugar to areas more economically suited to the production thereof.S. Here. Marey. then. Marcy. This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation. (Great Atl.. 412.S. that is. subject only to the test of reasonableness. Butler. 103 Fla. but. and in the wide field of its police power. 121) As stated in Johnson vs. Its promotion. not for a public purpose. 99 Fla. the legislative discretion must be allowed full play. of the important sources to foreign exchange needed by our government. 579). It is. Analysis of the Act. Kirkwood. to enable it to resist the added strain of the increase in taxes that it had to sustain (Sligh vs. 1. . as it must that the protection and promotion of the sugar industry is a matter of public concern. U.. M'cullock vs. In rejecting the theory advanced by the said plaintiff. 237 U. and it is not contended that the means provided in Section 6 of the law (above quoted) bear no relation to the objective pursued or are oppressive in character. is one. nor the imposition of a special assessment. sugar occupying a leading position among its export products. . 80 L. State ex rel. 853. 567 is a pure exercise of the taxing power. 139 So. will show that the tax is levied with a regulatory purpose. 52. 301 U. protection and advancement. that the levy for the Philsugin Fund is not so much an exercise of the power of taxation.. that it is a great source of the state's wealth. Ed.S. 81 L. an exercise of a sovereign power which no private citizen may lawfully resist. If objective and methods are alike constitutionally valid. with reference to the citrus industry in Florida — "The protection of a large industry constituting one of the great source 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. 297 U.

B.. vs. otherwise known as the Sugar Adjustment Act. Rosete for appellee. first of all. under Section 2(a) of the charter." This provision. defendant-appellee. Bengzon. The case dispute that the operation of a sugar refinery is a phase of sugar production and that from such operation may be learned methods of reducing the cost of sugar manufactured no less than it may afford the opportunity to discover the more effective means of achieving progress in the industry. concur. Furthermore. Dizon. for the purpose of introducing into the sugar industry such practices or processes that will reduce the cost of production. the law in question opens (section 1) with a declaration of emergency. REYES... C. the Philsugin is authorized "to conduct research work for the sugar industry in all its phases. Quite obviously. First Assistant Solicitor General Guillermo E. therefore. from its financially unsuccessful venture. Thus. plaintiff-appellant. would be difficult to carry out save through the actual operation of a refinery. Gonzaga for appellant. Reyes. It could have known with better intimacy the precise area of the industry in need of the more help from the government. due to the threat to our industry by the imminent imposition of export taxes upon sugar as provided in the Tydings- . Office of the Solicitor General Ambrosio Padilla. J.: This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed by Commonwealth Act No. how can such an experiment be carried out without the tools. Barrera. and achieve greater efficiency in the industry. J. J. 567. No. Section 2(a) specifies a field of research which. the Philsugin could very well have advanced in its appreciation of the problems of management faced by sugar centrals. That the operation resulted in a financial loss is by no means an index that the industry did not profit therefrom. Promulgated in 1940.R. 1955 WALTER LUTZ. Torres and Solicitor Felicisimo R. Zaldivar and Sanchez... which is all that a refinery is? In view of all the foregoing.P. ANTONIO ARANETA. either agricultural or industrial. that they were not benefited by the unsuccessful operation of the refinery in question is not entirely accurate.. Ernesto J.L. The view of the appellants herein. J. Republic of the Philippines SUPREME COURT Manila EN BANC G. more than justifies the acquisition of the refinery in question. J. as other farms of a different nature may have been realized. And yet. Concepcion. as the Collector of Internal Revenue. with costs.. J. Makalintal.J. as Judicial Administrator of the Intestate Estate of the deceased Antonio Jayme Ledesma.B L. Philsugin's experience alone of running a refinery is a gain to the entire industry. L-7859 December 22. JJ.. It could have understood more clearly the difficulties of marketing sugar products. indeed. . the most practical or realistic approach to the problem of what "practices or processes" might most effectively cut the cost of production is to experiment on production itself. the decision appealed from is hereby affirmed. took no part..Besides.

authorizing the disbursement from the fund herein created of the necessary amount or amounts needed for salaries. and Fourth. (e) to determine the possibility of utilizing the other by-products of the industry. Second. to afford labor employed in the industry a living wage and to improve their living and working conditions: Provided. and the "eventual loss of its preferential position in the United States market". and. while section 3 levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration. and (g) on other problems the solution of which would help rehabilitate and stabilize the industry. That the President of the Philippines may.40 paid by the estate as taxes. (b) to produce and propagate higher yielding varieties of sugar cane more adaptable to different district conditions in the Philippines. equipment. the planter of the sugar cane.lawphi1. to limit the production of sugar to areas more economically suited to the production thereof.666. on lease or otherwise — a tax equivalent to the difference between the money value of the rental or consideration collected and the amount representing 12 per centum of the assessed value of such land. seeks to recover from the Collector of Internal Revenue the sum of P14. the national policy was expressed "to obtain a readjustment of the benefits derived from the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to prepare it for the eventuality of the loss of its preferential position in the United States market and the imposition of the export taxes.' and shall be paid out only for any or all of the following purposes or to attain any or all of the following objectives. to place the sugar industry in a position to maintain itself. Walter Lutz. and ultimately to insure its continued existence notwithstanding the loss of that market and the consequent necessity of meeting competition in the free markets of the world. likewise. First. (c) to lower the costs of raising sugar cane. make the necessary disbursements from the fund herein created (1) for the establishment and operation of sugar experiment station or stations and the undertaking of researchers (a) to increase the recoveries of the centrifugal sugar factories with the view of reducing manufacturing costs. on each picul of sugar manufactured. to be known as the 'Sugar Adjustment and Stabilization Fund. and (2) for the improvement of living and working conditions in sugar mills and sugar plantations. travelling expenses. in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma. to readjust the benefits derived from the sugar industry by all of the component elements thereof — the mill. under section 3 of the Act. the landowner. Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar. despite the gradual loss of the preferntial position of the Philippine sugar in the United States market. Plaintiff. wages. and other sundry expenses of said agency or agencies. wherefore. According to section 6 of the law — SEC. until the adjourment of the next regular session of the National Assembly. as may be provided by law. 6. and the laborers in the factory and in the field — so that all might continue profitably to engage therein. (f) to determine what crop or crops are suitable for rotation and for the utilization of excess cane lands. on a graduated basis. All collections made under this Act shall accrue to a special fund in the Philippine Treasury.net Third. for the crop years 1948-1949 and 1949-1950. alleging that . authorizing him to organize the necessary agency or agencies to take charge of the expenditure and allocation of said funds to carry out the purpose hereinbefore enumerated. (d) to improve the buying quality of denatured alcohol from molasses for motor fuel." In section 2.McDuffe Act.

4 Wheat. 270. as it must. the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain (Sligh vs. 744. Ed. should be exclusively spent in aid of the sugar industry. 4 L. to provide means for the rehabilitation and stabilization of the threatened sugar industry. will show that the tax is levied with a regulatory purpose. being levied for the aid and support of the sugar industry exclusively. The basic defect in the plaintiff's position is his assumption that the tax provided for in Commonwealth Act No. 301 U. S. "if the law presumably hits the evil where it is most felt.such tax is unconstitutional and void. Kirkwood. Taxation may be made the implement of the state's police power (Great Atl. the act is primarily an exercise of the police power. Ed. 567 is a pure exercise of the taxing power. Ed. State ex rel. sugar occupying a leading position among its export products. (128 Sp. Marey. with reference to the citrus industry in Florida — 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. the legislative discretion must be allowed fully play. 301 U." As ruled in Minnesota ex rel. and it has been repeatedly held that "inequalities which result from a singling out of one particular class for taxation. 237 U. Southern Coal & Coke Co. As stated in Johnson vs. That the tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint. 52. If objective and methods are alike constitutionally valid. Analysis of the Act. 1193. U. 59 L. or exemption infringe no constitutional limitation" (Carmichael vs. Once it is conceded. at p. S. subject only to the test of reasonableness. and it is not contended that the means provided in section 6 of the law (above quoted) bear no relation to the objective pursued or are oppressive in character. that it is a great source of the state's wealth. At any rate. Here. 297 U. 857). Maxcy Inc. Johnson vs. 1245. S. Mayo. 121). and particularly of section 6 (heretofore quoted in full). section 17). State ex rel. 309 U. Hence it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn. 139 So. Probate Court. citing numerous authorities. it follows that the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Ed. and is thus pivotal in the plans of a regime committed to a policy of currency stability. This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation. vs. protection and advancement. vs. M'Culloch vs. 84 L. it is not to be overthrown because there are other instances to which it . since it is that very enterprise that is being protected. it is inherent in the power to tax that a state be free to select the subjects of taxation. Maryland. The action having been dismissed by the Court of First Instance. Ed. it appears rational that the tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. vs. is one of the important sources of foreign exchange needed by our government. now in question. indeed. Grosjean. 1. 495. 99 Fla.. From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization Act. S. 412. S. 1311. 128 So. S. 81 L. It may be that other industries are also in need of similar protection. In other words. 81 L. 579). no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Butler. that the protection and promotion of the sugar industry is a matter of public concern. Marey. Ed. 477. 552. Tea Co. that it gives employment to thousands of laborers in fields and factories. 835. the plaintifs appealed the case directly to this Court (Judiciary Act. 1251). 80 L. and in the wide field of its police power. that the legislature is not required by the Constitution to adhere to a policy of "all or none. which in plaintiff's opinion is not a public purpose for which a tax may be constitutioally levied. 103 Fla. 316. Its promotion. Pearson vs. 853. therefore redounds greatly to the general welfare. & Pac.

EDUARDO SUATENGCO. AURELIO GAMBOA. So ordered. the Bank) is a commercial banking corporation. The decision appealed from is affirmed. REPUBLIC PLANTERS BANK. A. for short) was formerly the government office tasked with the function of regulating and supervising the sugar industry until it was superseded by its corespondent Sugar Regulatory Administration (SRA. REMO RAMOS. GLORIA P. without any part of such money being channeled directly to private persons. Bengzon. ROMEO GUANZON. whether parties in this action or not. Ed. J.might have been applied. for brevity) under Executive Order No.. (compare Everson vs. MANUEL LACSON. 91 L. C. PHILIPPINE SUGAR COMMISSION. Republic of the Philippines SUPREME COURT Manila EN BANC G. No.. Ed. exerted within its proper field. Jugo. CAROLINA LOPEZ. OSCAR VILLANUEVA. JR. utilization of byproducts and solution of allied problems. L. AUGUSTO LLAMAS.R. 1400). JAVIER LACSON. Jones & Laughlin Steel Corp." and that "the legislative authority. Board of Education. Padilla. 472.. JJ.. JOSE ABELLO. . 1. 168 ALR 1392. intervenors. it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production. MELENCIO-HERRERA. need not embrace all the evils within its reach" (N. respondents. 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. Reyes. 1988 VIRGILIO GASTON. SEVERINO. L-77194 March 15. JESUS ISASI. with costs against appellant. vs. vs. ET AL. B. ANGEL H. to dispose of and convey its property and to distribute its assets. DE LA PAZ. 893).: Petitioners are sugar producers.. ET AL. TITO TAGARAO. planters and millers. HORTENCIA STARKE. as well as to the improvements of living and working conditions in sugar mills or plantations. petitioners. constitutes expenditure of tax money for private purposes. and SUGAR REGULATORY ADMINISTRATION. Paras. JR.. Even from the standpoint that the Act is a pure tax measure. DE LA PAZ. and NATIONAL FEDERATION OF SUGARCANE PLANTERS. who have come to this Court in their individual capacities and in representation of other sugar producers. Labrador. S. 18 on May 28. 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. sugarcane planters and millers.. Although said Executive Order abolished the PHILSUCOM. PACIFICO MAGHARI. 1986. RODOLFO SIASON. J. Bautista Angelo. 81 L. JOEY P. Respondent Philippine Sugar Commission (PHILSUCOM. and Concepcion." Respondent Republic Planters Bank (briefly. GLICERIO JAVELLANA. R. 301 U. JOSE JAMANDRE. concur.

005.1974. which created the PHILSUCOM. that the stabilization fees collected are considered government funds under the Government Auditing Code. were allowed to intervene by the Court. Subsequently.72. squarely traverse the petition arguing that no trust results from Section 7 of P. No.000. OR A TOTAL INVESTMENT OF P290... 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. Respondents PHILSUCOM and SRA. — There is hereby established a fund for the commission for the purpose of financing the growth and development of the sugar industry and all its components. or public funds. Stabilization fund shall be collected as provided for in the various provisions of this Decree. b. D. et al.1988. Special Fund of the Commission. Severino.D. stabilization of the domestic market including the foreign market to be administered in trust by the Commission and deposited in the Philippine National Bank derived in the manner herein below cited from the following sources: a.224. Petitioners and Intervenors have come to this Court praying for a Writ of mandamus commanding respondents: TO IMPLEMENT AND ACCOMPLISH THE PRIVATIZATION OF REPUBLIC PLANTERS BANK BY THE TRANSFER AND DISTRIBUTION OF THE SHARES OF STOCK IN THE SAID BANK. Jr. . # 388. WHO ARE THE TRUE BENEFICIAL OWNERS OF THE 761.00. THE SAID INVESTMENT HAVING BEEN FUNDED BY THE DEDUCTION OF Pl.224.424. 388. 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.72. provided for the collection of a Stabilization Fund as follows: SEC. the National Federation of Sugar Planters (NFSP) also moved to intervene. but welcomes the filing of the Petition since it will settle finally the issue of legal ownership of the questioned shares of stock. NOW HELD BY AND STILL CARRIED IN THE NAME OF THE PHILIPPINE SUGAR COMMISSION. who are sugarcane planters planting and milling their sugarcane in different mill districts of Negros Occidental. 388. that the transfer of shares of stock from PHILSUCOM to the sugar producers would be irregular. TO THE SUGAR PRODUCERS.D.972. since they have common cause with petitioners and respondents having interposed no objection to their intervention. for their part. and that this suit is barred by laches. 388 are funds in trust for them.D.Angel H. B & C) WITH A TOTAL PAR VALUE OF P254. on January 14. if not illegal.00 PER PICUL FROM SUGAR PROCEEDS OF THE SUGAR PRODUCERS COMMENCING THE YEAR 1978-79 UNTIL THE PRESENT AS STABILIZATION FUND PURSUANT TO P. Stabilization fees shall be collected from planters and millers in the amount of Two (P2. 7.00) Peso for every picul produced and milled every year thereafter. No.416 COMMON SHARES VALUED AT P36. PLANTERS AND MILLERS.1988.045 PREFERRED SHARES (A. which the Court allowed on February 16. Development and Stabilization Fund. promulgated on February 2. Capitalization.548. P. Respondent Bank does not take issue with either petitioners or its correspondents as it has no beneficial or equitable interest that may be affected by the ruling in this Petition.00) Pesos for every picul produced and milled for a period of five years from the approval of this Decree and One (Pl. AND 53. No.

J. "The essential Idea of an implied trust involves a certain antagonism between the cestui que trust and the trustee even when the trust has not arisen out of fraud nor out of any transaction of a fraudulent or immoral character (65 CJ 222). Benedicto. dated May 28. further: That said amount shall constitute a lien on the sugar quedan and/or warehouse receipts and shall be paid immediately by the planters and mill companies. Neither can petitioners place reliance on the history of respondents Bank. Because it underwent difficulties early in the year 1978. Central Bank of the Philippines. did not get off the ground because it failed to receive the approval of the PHILSUCOM Board of Commissioners as required in the Agreement itself. sugar centrals and refineries to the Commission. dated June 25. The SRA. Resident Auditor. Section 7 of P. millers and traders under Section 4(c) of this Decree will be used for the payment of salaries and wages of personnel. citing People v. entered into between PHILSUCOM. Elizalde as Officer-in-Charge.1986. neither approved the Agreement because of the adverse opinion of the SRA. Fred J. Benedicto. which was aimed by the Chairman of the Commission on Audit. It must be categorically demonstrated that the very administrative agency which is the source of such regulation would place a burden on itself (Batchelder v. it arises where. and as a general rule. and only where such may be reasonably presumed to be the intention of the parties. The Central Bank acted favorably on the proposal at the meeting of the Monetary Board on March 31. while the element of an intent to create a trust is present. as determined from the facts and circumstances existing at the time of the transaction out of which it is sought to be established (89 C. the Bank was owned by the Roman-Rojas Group. which succeeded PHILSUCOM.50) centavos per picul of the amount levied on planters. not by any capital investment by Mr. The doctrine of resulting trusts is founded on the presumed intention of the parties. Provided. millers and planters cannot be said to have ensued because the presumptive intention of the parties is not reasonably ascertainable from the language of the statute itself. 640 [1954]). however. They recite that at the beginning. No implied trust in favor of the sugar producers either can be deduced from the imposition of the levy. (paragraphing and bold supplied).46 SCRA 102.1972. which set aside the proceeds of the P1.S. Que Po Lay. No. a resulting trust in favor of the sugar producers. Roberto S." The Agreement.00 per picul stabilization fund to pay for its subscription in shares of stock of respondent Bank.1987." acknowledging that PHILSUCOM holds said shares for and in behalf of the sugar producers." the latter "being the true and beneficial owners thereof. Petitioners maintain that this infusion of fresh capital was accomplished. 1978 subject to the infusion of fresh capital by the Benedicto Group. on January 26. It is petitioners' submission that all shares were placed in PHILSUCOM's name only out of convenience and necessity and that they are the true and beneficial owners thereof. fringe benefits and allowances of officers and employees for the purpose of accomplishing and employees for the purpose of accomplishing the efficient performance of the duties of the Commission." However. That could have been clarified by the Trust Agreement. submitted a proposal to the Central Bank for the rehabilitation of the Bank. as "Trustor" acting through Mr.D. then Chairman of the PHILSUCOM. 1986. Mr. 94 Phil.Provided: That fifty (P0. and respondent RPB. but by PHILSUCOM.Trust Department' as "Trustee. we cannot see our way clear to upholding petitioners' position that the investment of the proceeds from the stabilization fund in subscriptions to the capital stock of the Bank were being made for and on their behalf. L-25071. July 29. . In point of fact. 947). It is not clearly shown from the statute itself that the PHILSUCOM imposed on itself the obligation of holding the stabilization fund for the benefit of the sugar producers. 388 does provide that the stabilization fees collected "shall be administered in trust by the Commission.

resolved to revoke the Trust Agreement "in the light of the ruling of the Commission on Audit that the aforementioned Agreement is of doubtful validity. supra). Sec. the revenues collected are to be treated as a special fund.D. the balance. PHILSUCOM or its successor-in-interest. Araneta. the SRA. to be. 98 Phil. 718). 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. cited in Lutz vs. we find basis for the opinion of the Commission on Audit reading: That the government. it did not collect said fees for the account of the sugar producers. No. if any. That stabilization fees are charges/levies on sugar produced and milled which accrued to PHILSUCOM under PD 338. 18[l]). The stabilization fees collected are in the nature of a tax. 1987." a "Development and Stabilization Fund. (Johnson vs. "administered in trust' for the purpose intended. cited in 42 Am. supra. producers. Araneta. Sugar Regulatory Administration. The collections made accrue to a "Special Fund. The levy is primarily in the exercise of the police power of the State (Lutz vs.On February 19. planters and millers." almost Identical to the "Sugar Adjustment and Stabilization Fund" created under Section 6 of Commonwealth Act 567. Sec. It is levied with a regulatory purpose. lifted from the 1935 Constitution. 29[1]. 2. Jur. 388). 148). No. Sec. 263 Mich 586. 2 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. American Surety Co.. Sec. Article VI. 128 So.50 per picul.. . 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. Article VIII. 23(l]). .). Furthermore. 7[b].. which is within the power of the State to impose for the promotion of the sugar industry (Lutz vs. as amended. While it is true that the collected stabilization fees were set aside by PHILSUCOM to pay its subscription to RPB. 1 The tax collected is not in a pure exercise of the taxing power. 388 is to be utilized for the "payment of salaries and wages of personnel. planters and millers. in the language of the statute. 249 ALR 535. moneys from which may be paid out only in pursuance of an appropriation made by law (1987) Constitution. to provide means for the stabilization of the sugar industry. 857. Sec. Marey. Having been levied for a special purpose. 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." From the legal standpoint. That is the essence of the trust intended (See 1987 Constitution. Araneta. (1/2) or PO. P. They constitute sugar liens (Sec. even though they are held for a special purpose (Lawrence vs. State ex rel. of note is the fact that one-half. Once the purpose has been fulfilled or abandoned. is to be transferred to the general funds of the Government. 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. Article VI. owns and stocks. 29(3). The stabilization fees in question are levied by the State upon sugar millers. p.1973 Constitution. Article VI. 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. That the fees were collected from sugar producers. 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. of the amount levied under P. planters and producers for a special purpose — that of "financing the growth and development of the sugar industry and all its components. in particular.D.

. the Writ of mandamus is denied and the Petition hereby dismissed.R. Fernan. respondent. concur. vs. Padilla. . Paras. petitioners. WHEREFORE.. Bidin. if any. Republic of the Philippines SUPREME COURT Manila EN BANC G." including the foreign market the industry being of vital importance to the country's economy and to national interest. HERMINIGILDO C. GERONIMO Q. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry. HON. VI. 6. as may be provided by law. SO ORDERED. 28[3]).. "and all its components. DUMLAO.. 1988 KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS. All collections made under this Act shall accrue to a special fund in the Philippine Treasury. No. 81311 June 30. J. Gancayco. Gutierrez. Jr. shall be transferred to the general funds of the Government.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. stabilization of the domestic market. 1988 KILUSANG MAYO UNO LABOR CENTER (KMU). Sec. Footnotes 1 Sec. If the purpose for which a special fund was created has been fulfilled or abandoned. Feliciano.J. to be known as the 'Sugar Adjustment and Stabilization Fund and shall be paid out only for any or all of the following purposes or to attain any or all of the following objectives. G. No costs. QUADRA. and MARIO C. This Decision is immediately executory. INC. xxx xxx xxx 2 (5) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. as Commissioner of Internal Revenue. its officers and affiliated labor federations and alliances.. Cortes and Griño-Aquino. Sarmiento. C. Narvasa. petitioners." (1987 Constitution. No. 81820 June 30. Art. Teehankee. the balance. took no part. VILLANUEVA.R. Cruz. Yap. BIENVENIDO TAN. vs. JJ.

Jose C. 1988 INTEGRATED CUSTOMS BROKERS ASSOCIATION OF THE PHILIPPINES and JESUS B. SECRETARY OF FINANCE. petitioners. Taquio and Associates for petitioners in G. respondent. to take effect on 1 January 1988. Farolan for petitioner Kapatiran in G. are merely asking for an advisory opinion from the Court. G. however. in the main procedural matters. that the VAT is oppressive.THE EXECUTIVE SECRETARY. Objections to taxpayers' suit for lack of sufficient personality standing. No. No 81820. for short). respondent. regressive. No. and violates the due process and equal protection clauses and other provisions of the 1987 Constitution. he contends. THE COMMISSIONER OF INTERNAL REVENUE. J. (2) an interest. VALMONTE. Flores. Union of Lawyers and Advocates for Peoples Right collaborating counsel for petitioners in G. respondents. for short). COMMISSIONER. and which amended certain sections of the National Internal Revenue Code and adopted the value-added tax (VAT. vs. No. The HON. BANAL. for being unconstitutional in that its enactment is not alledgedly within the powers of the President. 82152 June 30. No 81820. Franklin S. SECRETARY OF FINANCE. of the party raising the constitutional questions. issued by the President of the Philippines on 25 July 1987. 1988 RICARDO C. seek to nullify Executive Order No. The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners have failed to show justification for the exercise of its judicial powers. there being no justiciable controversy for resolution. G. Jaime C. Miralles. According to the Solicitor General. Rañeses. 81311. 81311.R. No. petitioner. Opinion for individual petitioners in G. and in keeping with the Court's duty. 81921.R. Sy.: These four (4) petitions.R. personal and substantial. and (4) the question of constitutionality is directly and necessarily involved in a justiciable controversy and its resolution is essential to the protection of the rights of the parties.R. vs. No. discriminatory. PADILLA. He also questions the legal standing of the petitioners who. Leabres and Joselito R. Banzuela. only the third requisite — that the constitutional question should be raised at the earliest opportunity — has been complied with. (3) the constitutional question should be raised at the earliest opportunity.R. or interest are. 81921 June 30. 273 (EO 273. viz. (1) the existence of an appropriate case.R. Enriquez for petitioners in G. to determine wether or not the other branches of . and SECRETARY OF BUDGET. COMMISSIONER OF INTERNAL REVENUE and SECRETARY OF BUDGET. BUREAU OF INTERNAL REVENUE. Considering the importance to the public of the cases at bar. THE EXECUTIVE SECRETARY. which have been consolidated because of the similarity of the main issues involved therein. under the 1987 Constitution.R.

He contends that the word "convene" is synonymous with "the date when the elected members of Congress assumed office. Subsequent sales of such articles were not subject to sales tax." . a brief look into the tax law in question is in order. under both the Provisional and the 1987 Constitutions. On 15 October 1986. Art. The incumbent President shall continue to exercise legislative powers until the first Congress is convened. was essentially a single stage value added tax system computed under the "cost subtraction method" or "cost deduction method" and was imposed only on original sale. with aggregate gross annual sales of articles and/or services. that Congress was really convened on 30 June 1987 (not 27 July 1987). Reduced sales taxes were imposed not only on the second sale. unless exempt. 1. EO 273 merely increased the VAT on every sale to 10%. advance sales tax. before EO 273 was issued. Petitioner Valmonte claims. Hence. The VAT is a tax levied on a wide range of goods and services. the President shall continue to exercise legislative powers. 6. to take effect 1 January 1986. unless zero-rated or exempt. which was reduced to 1. 3. 1 of the Provisional Constitution states: Sec. sec. VAT is computed at the rate of 0% or 10% of the gross selling price of goods or gross receipts realized from the sale of services. with the issuance of PD 1991 on 31 October 1985. The framers of EO 273 that it is principally aimed to rationalize the system of taxing goods and services. sole legislative authority was vested upon the President. created and elected under the 1987 Constitution. But. The VAT is said to have eliminated privilege taxes. in a modified form.00. which decreed a Provisional Constitution. the President is vested with legislative powers until a legislature under a new Constitution is convened. hereafter referred to as the 1987 Constitution. However. It is a tax on the value. as well. the Philippine sales tax system. multiple rated sales tax on manufacturers and producers. prior to the issuance of EO 273. simplify tax administration. barter or exchange of articles by manufacturers. to his purchase of goods and services. the Constitutional Commission of 1986 adopted a new Constitution for the Republic of the Philippines which was ratified in a plebiscite conducted on 2 February 1987.5% upon the issuance of PD 2006 on 31 December 1985. was within the President's constitutional power and authority to legislate. As pointed out by the Solicitor General. sec. two (2) days before Congress convened on 27 July 1987. The VAT is not entirely new. Until a legislature is elected and convened under a new Constitution. and make the tax system more equitable. before resolving the issues raised. It was already in force. The contention is without merit. exceeding P200. but on every subsequent sale.00. a 3% tax was imposed on a second sale. was convened on 27 July 1987. to enable the country to attain economic recovery. Article XVIII. and compensating tax on importations. It should be noted that. Petitioners first contend that EO 273 is unconstitutional on the Ground that the President had no authority to issue EO 273 on 25 July 1987. provides: Sec. or importers. producers. added by every seller. 6 of said Constitution. II. the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions. It should be recalled that under Proclamation No. The first Congress.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 enactment of EO 273 on 25 July 1987. additionally.

It would also defeat the purpose of the framers of the 1987 Constitutional and render meaningless some other provisions of said Constitution. VI. Certainly. on the Congress. sec. cause to assemble. revised and finalized. which states: Sec. would also be a surplusage." 1 is clearly different from assumption of office by the individual members of Congress or their taking the oath of office. 28(1) of the 1987 Constitution. Gaz. The word "convene" which has been interpreted to mean "to call together. VII. 15. 273 was merely the last stage in the exercise of her legislative powers. 11. VII. The portion of Art. so to speak.The contention is without merit. The Court also finds no merit in the petitioners' claim that EO 273 was issued by the President in grave abuse of discretion amounting to lack or excess of jurisdiction. where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility. If the framers of said Constitution had intended to terminate the exercise of legislative powers by the President at the beginning of the term of office of the members of Congress. requiring Congress to convene. sec. even under the past administration. would also be redundant. Inc. The legislative process started long before the signing when the data were gathered. sec. since Congress would already be deemed to be in session after the individual members have taken their oath of office. which had not been "convened" but some members of the body. discriminatory. requiring Congress to convene once every year on the fourth Monday of July for its regular session would be a contrariety. vs. VII. 2 Petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic manner by reason of passion or personal hostility. 62). 38 Off. 10. The Congress shall evolve a progressive system of taxation. For example. As an example. two days before it convened. in violation of the provisions of Art. The Court has not power to re-write the Constitution and give it a meaning different from that intended. The same is true with the portion of Art. It appears that a comprehensive study of the VAT had been extensively discussed by this framers and other government agencies involved in its implementation. which requires Congress to convene within twenty-four (24) hours following the declaration of martial law or the suspension of the privilage of the writ of habeas corpus. more particularly the delegates to the 1971 Constitutional Convention who had opted to serve therein by voting affirmatively for the approval of said Constitution. we call to mind the interim National Assembly created under the 1973 Constitution. proposals were weighed and the final wordings of the measure were drafted.O. (Tavera-Luna. As the Solicitor General correctly sated. VI. as follows: Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction (Abad Santos vs. Province of Tarlac. . sec. 38 Off. third paragraph. had taken their oath of office. Nable. if not in session. sec. "Grave abuse of discretion" has been defined. 18. The 1987 Constitution mentions a specific date when the President loses her power to legislate. or. unjust and regressive. the provisions of Art. it cannot be said that the President made a jump. A portion of the provisions of Art. 834)." 3 Next. requiring Congress to convene for the purpose of enacting a law calling for a special election to elect a President and Vice-President in case a vacancy occurs in said offices. in other words. the petitioners claim that EO 273 is oppressive. they should have so stated (but did not) in clear and unequivocal terms. To uphold the submission of petitioner Valmonte would stretch the definition of the word "convene" a bit too far. Gaz. to decide a conflict between the President and the Cabinet as to whether or not the President and the Cabinet as to whether or not the President can re-assume the powers and duties of his office. or convoke. 28 (1) The rule of taxation shall be uniform and equitable. "The signing of E. and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.

6 The Court likewise finds no merit in the contention of the petitioner Integrated Customs Brokers Association of the Philippines that EO 273. 98 Phil. Yatco (69 Phil. are expected to be relatively lower and within the reach of the general public. Alfonso (83 Phil. . 60." To satisfy this requirement then. 420). It is uniform. Small corner sari-sari stores are consequently exempt from its application." There was no occasion in that case to consider the possible effect on such a constitutional requirement where there is a classification.. In Philippine Trust Company v. . (Uy Matias v. . — The following shall be exempt from the value-added tax: xxx xxx xxx (r) Service performed in the exercise of profession or calling (except customs brokers) subject to the occupation tax under the Local Tax Code. EO 273 satisfies all the requirements of a valid tax. unduly discriminates against customs brokers. not a doubtful and argumentative implication. De Leon. Justice Laurel. 153). The disputed sales tax is also equitable. there must be a clear and unequivocal breach of the Constitution. The court. 4 As the Court sees it. and professional services performed by registered general professional partnerships. 148. v. "Taking everything into account.. Likewise exempt from the tax are sales of farm and marine products. Araneta. 862). Exempt transactions. Justice Tuason. the differentiation against which the plaintiffs complain conforms to the practical dictates of justice and equity and is not discriminatory within the meaning of the Constitution." About two years later. stated: "A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found. City of Cebu. 300) is that the statute or ordinance in question "applies equally to all persons. firms and corporations placed in similar situation. 65) incorporated the above excerpt in his opinion and continued. Southern Coal and Coke Co. Petitioners merely rely upon newspaper articles which are actually hearsay and have evidentiary value.00. in City of Baguio vs. v.The petitioners" assertions in this regard are not supported by facts and circumstances to warrant their conclusions. de la Fuente (88 Phil. spared as they are from the incidence of the VAT.000." (Lutz v. 5 said: . The contested provision states: Sec. which are not exempt. more particularly the new Sec. at the constant rate of 0% or 10%. . They have failed to adequately show that the VAT is oppressive. Thus: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. 103 (r) of the National Internal Revenue Code. 93 Phil. The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public." This Court is on record as accepting the view in a leading American case (Carmichael v. 103. all that is needed as held in another case decided two years later. It is imposed only on sales of goods or services by persons engage in business with an aggregate gross annual sales exceeding P200. 301 US 495) that "inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. speaking for the Court. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. speaking for this Court in Manila Race Horses Trainers Assn.. The opportunity came in Eastern Theatrical Co. 852. discriminatory or unjust. To justify the nullification of a law.

It would seem that the VAT is not as bad as we are made to believe. Narvasa. and similar services regardless of whether or not the performance thereof call for the exercise or use of the physical or mental faculties: . Gutierrez. The phrase sale of services" means the performance of all kinds of services for others for a fee. is averted... real estate. C. 103(r). At any rate. Yap. Fernan. and to make sure that it was not issued in grave abuse of discretion amounting to lack or excess of jurisdiction. and. Melencio-Herrera. Paras. concur. If the petitioner Association did not protest the classification of customs brokers then. as well as mass actions and demonstrations against the VAT should by now be evident. commercial. the petitions are DISMISSED. Pertinent provisions of Sec. stock. in the manner required by. (Secs. Jr. assessed and collected. The Court can only look into and determine whether or not EO 273 was enacted and made effective as law. EO 273 abolished the percentage tax and replaced it with the VAT. It was inserted in Sec. Gancayco. the Constitution. insofar as customs brokers are concerned. Value-added tax on sale of services. real estate and immigration brokers) partake more of a business. the distinction of the customs brokers from the other professionals who are subject to occupation tax under the Local Tax Code is based upon material differences.. they should seek recourse and relief from the political branches of the government. persons engaged in milling. JJ. so that the fears expressed by the petitioners that the adoption of the VAT will trigger skyrocketing of prices of basic commodities and services. 102 of the Code. SO ORDERED. cannot substitute its judgment for that of the President as to the wisdom. Bidin. manufacturing or repacking goods for others. .J. 102 read: Sec. in this regard. processing. in that the activities of customs brokers (like those of stock. including those performed or rendered by construction and service contractors. which makes the services of customs brokers subject to the payment of the VAT and to distinguish customs brokers from other professionals who are subject to the payment of an occupation tax under the Local Tax Code. the Court finds no reason to impede its application or continued implementation. JJ. 102. if petitioners seriously believe that the adoption and continued application of the VAT are prejudicial to the general welfare or the interests of the majority of the people. 102 and 103). and Medialdea. 174 of the National Internal Revenue Code prior to its amendment by EO 273. In any event. customs and immigration brokers. and consistent with. the Court sees no reason why it should protest now. lessors of personal property. remuneration or consideration. following the time-honored doctrine of separation of powers. WHEREFORE.. 103(r) to complement the provisions of Sec. rather than a profession and were thus subjected to the percentage tax under Sec. a value-added tax equivalent to 10% percent of gross receipts derived by any person engaged in the sale of services. justice and advisability of the adoption of the VAT. The fact that nothing of the sort has happened shows that the fears and apprehensions of the petitioners appear to be more imagined than real. lessors or distributors of cinematographic films. Feliciano. Without pronouncement as to costs. Sarmiento.The phrase "except customs brokers" is not meant to discriminate against customs brokers. The Court. are on leave.. Cortes and Griño-Aquino. — There shall be levied. With the insertion of the clarificatory phrase "except customs brokers" in Sec. The Court takes note that EO 273 has been in effect for more than five (5) months now. Cruz. a potential conflict between the two sections.

Footnotes 1 Application of Lamb, 169 A2d 822, 830, 67 N.J. Super. 29, affd. 170 A2d 34, 34 n.J. 448, citing 18 C.J.S. Convene p. 37. 2 Alafriz vs. Nable, 72 Phil. 278, 280. 3 Comment on petition, G.R. No. 82152, p. 18. 4 Peralta vs. Comelec, L-47771 and others, March 11, 1978, 82 SCRA 30, 55. 5 134 Phil. 912, 919-920. 6 EO 273 enumerates in its sec. 102 zero-rated sales and in its sec. 103 transactions exempt from the VAT. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-25043 April 26, 1968

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial co-guardians of JOSE ROXAS, petitioners, vs. COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents. Leido, Andrada, Perez and Associates for petitioners. Office of the Solicitor General for respondents. BENGZON, J.P., J.: Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession the following properties: (1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu, Batangas province; (2) A residential house and lot located at Wright St., Malate, Manila; and (3) Shares of stocks in different corporations. To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called Roxas y Compania. AGRICULTURAL LANDS

At the conclusion of the Second World War, the tenants who have all been tilling the lands in Nasugbu for generations expressed 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 and apportion them among landless tenants-farmers, persuaded the Roxas brothers to part with their 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 price of P2,079,048.47 plus P300,000.00 for survey and subdivision expenses. It turned out however that the Government 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, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment, and contracted with the Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly amortizations paid by the farmers. In 1953 and 1955 Roxas y Cia. derived from said installment payments a net gain of P42,480.83 and P29,500.71. Fifty percent of said net gain was reported for income tax purposes as gain on the sale of capital asset held for more than one year pursuant to Section 34 of the Tax Code. RESIDENTIAL HOUSE During their bachelor days the Roxas brothers lived in the residential house at Wright St., Malate, Manila, which they inherited from their grandparents. After Antonio and Eduardo got married, they resided somewhere else leaving only Jose in the old house. In fairness to his brothers, Jose paid to Roxas y Cia. rentals for the house in the sum of P8,000.00 a year. ASSESSMENTS On June 17, 1958, the Commissioner of Internal Revenue demanded from Roxas y Cia the payment of real estate dealer's tax for 1952 in the amount of P150.00 plus P10.00 compromise penalty for late payment, and P150.00 tax for dealers of securities for 1952 plus P10.00 compromise penalty for late payment. The assessment for real estate dealer's tax was based on the fact that Roxas y Cia. received house rentals from Jose Roxas in the amount of P8,000.00. Pursuant to Sec. 194 of the Tax Code, an owner of a real estate who derives a yearly rental income therefrom in the amount of P3,000.00 or more is considered a real estate dealer and is liable to pay the corresponding fixed tax. The Commissioner of Internal Revenue justified his demand for the fixed tax on dealers of securities against Roxas y Cia., on the fact that said partnership made profits from the purchase and sale of securities.

In the same assessment, the Commissioner assessed deficiency income taxes against the Roxas Brothers for the years 1953 and 1955, as follows:
1953 P7,010.00 7,281.00 6,323.00 1955 P5,813.00 5,828.00 5,588.00

Antonio Roxas Eduardo Roxas Jose Roxas

The deficiency income taxes resulted from the inclusion as income of Roxas y Cia. of the unreported 50% of the net profits for 1953 and 1955 derived from 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 following deductions were disallowed: ROXAS Y CIA.: 1953 Tickets for Banquet in honor of S. Osmeña Gifts of San Miguel beer Contributions to — Philippine Air Force Chapel Manila Police Trust Fund Philippines Herald's fund for Manila's neediest families 1955 Contributions to Contribution to Our Lady of Fatima Chapel, FEU ANTONIO ROXAS: 1953 Contributions to — Pasay City Firemen Christmas Fund Pasay City Police Dept. X'mas fund 1955 Contributions to — Baguio City Police Christmas fund Pasay City Firemen Christmas fund Pasay City Police Christmas fund EDUARDO ROXAS: 1953 Contributions to — Hijas de Jesus' Retiro de Manresa Philippines Herald's fund for Manila's neediest families 1955 Contributions to Philippines Herald's fund for Manila's neediest families 450.00 100.00 25.00 25.00 50.00 25.00 50.00 50.00 100.00 150.00 100.00 P 40.00 28.00

120.00

JOSE ROXAS: 1955 Contributions to Philippines Herald's fund for Manila's neediest families

120.00

The Roxas brothers protested the assessment but inasmuch as said protest was denied, they instituted an appeal in the Court of Tax Appeals on January 9, 1961. The Tax Court heard the appeal and rendered judgment on July 31, 1965 sustaining the assessment except the demand for the payment of the fixed tax on dealer of securities and the disallowance of the deductions for contributions to the Philippine Air Force Chapel and Hijas de Jesus' Retiro de Manresa. The Tax Court's judgment reads: WHEREFORE, the decision appealed from is hereby affirmed with respect to petitioners Antonio Roxas, Eduardo Roxas, and Jose Roxas who are hereby ordered to pay the respondent Commissioner of Internal Revenue the amounts of P12,808.00, P12,887.00 and P11,857.00, respectively, as deficiency income taxes for the years 1953 and 1955, plus 5% surcharge and 1% monthly interest as provided for in Sec. 51(a) of the Revenue Code; and modified with respect to the partnership Roxas y Cia. in the sense that it should pay only P150.00, as real estate dealer's tax. With costs against petitioners. Not satisfied, Roxas y Cia. and the Roxas brothers appealed to this Court. The Commissioner of Internal Revenue did not appeal. The issues: (1) Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable? (2) Are the deductions for business expenses and contributions deductible? (3) Is Roxas y Cia. liable for the payment of the fixed tax on real estate dealers? The Commissioner of Internal Revenue contends that Roxas y Cia. could be considered a real estate dealer because it engaged in the business of selling real estate. The business activity alluded to was the act of subdividing the Nasugbu farm lands and selling them to the farmers-occupants on installment. To bolster his stand on the point, he cites one of the purposes of Roxas y Cia. as contained in its articles of partnership, quoted below: 4. (a) La explotacion de fincas urbanes pertenecientes a la misma o que pueden pertenecer a ella en el futuro, alquilandoles por los plazos y demas condiciones, estime convenientes y vendiendo aquellas que a juicio de sus gerentes no deben conservarse; The above-quoted purpose notwithstanding, the proposition of the Commissioner of Internal Revenue cannot be favorably accepted by Us 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 ten years, it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the ten-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 in consonance 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 a resolution expressing the people's gratitude. The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg". And, in order to maintain the general public's trust and confidence in the Government this power must be used justly and not treacherously. It does not conform with Our sense of justice in the instant case for the Government to persuade the taxpayer to lend it a helping hand and later on to penalize him for duly answering the urgent call. 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%. DISALLOWED DEDUCTIONS Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet given in honor of Sergio Osmena and P28.00 for San Miguel beer given as gifts to various persons. The deduction were claimed as representation expenses. Representation expenses are deductible from gross income as expenditures incurred in carrying on a trade or business under Section 30(a) of the Tax Code provided the taxpayer proves that they are reasonable in amount, ordinary and necessary, and incurred in connection with his business. In the case at bar, the evidence does not show such link between the expenses and the business of Roxas y Cia. The findings of the Court of Tax Appeals must therefore be sustained. The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City Firemen, and Baguio City Police Christmas funds, Manila Police Trust Fund, Philippines Herald's fund for Manila's neediest families and Our Lady of Fatima chapel at Far Eastern University. The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and Baguio City Police are not deductible for the reason that the Christmas funds were not spent for public purposes but as Christmas gifts to the families of the members of said entities. Under Section 39(h), a contribution to a government entity is deductible when used exclusively for public purposes. For this reason, the disallowance must be sustained. On the other hand, the contribution to the Manila Police trust fund is an allowable deduction for said trust fund belongs to the Manila Police, a government entity, intended to be used exclusively for its public functions. The contributions to the Philippines Herald's fund for Manila's neediest families were disallowed on the ground that the Philippines Herald is not a corporation or an association contemplated in Section 30 (h) of the Tax Code. It should be noted however that the contributions were not made to the Philippines Herald but to a group of civic spirited citizens organized by the Philippines Herald solely for charitable purposes. There is no question that the members of this group of citizens do not receive profits, for all the funds they raised were for Manila's neediest families. Such a group of citizens may be classified as an association organized exclusively for charitable purposes mentioned in Section 30(h) of the Tax Code. Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of Fatima chapel at the Far Eastern University on the ground that the said university gives dividends to its stockholders. Located within the premises of the university, the chapel in question has not been shown to belong to the Catholic Church or any religious organization. On the other hand, the lower court found that it belongs to

the Far Eastern University, contributions to which are not deductible under Section 30(h) of the Tax Code for the reason that the net income of said university injures to the benefit of its stockholders. The disallowance should be sustained. Lastly, Roxas y Cia. questions the imposition of the real estate dealer's fixed tax upon it, because although it earned a rental income of P8,000.00 per annum in 1952, said rental income came from Jose Roxas, one of the partners. Section 194 of the Tax Code, in considering as real estate dealers owners of real estate receiving rentals of at least P3,000.00 a year, does not provide any qualification as to the persons paying the rentals. The law, which states: . . . "Real estate dealer" includes any person engaged in the business of buying, selling, exchanging, leasing or renting property on his own account as principal and holding himself out as a full or part-time dealer in real estate or as an owner of rental property or properties rented or offered to rent for an aggregate amount of three thousand pesos or more a year: . . . (Emphasis supplied) . is too clear and explicit to admit construction. The findings of the Court of Tax Appeals or, this point is sustained. To Summarize, no deficiency income tax is due for 1953 from Antonio Roxas, Eduardo Roxas and Jose Roxas. For 1955 they are liable to pay deficiency income tax in the sum of P109.00, P91.00 and P49.00, respectively, computed as follows: * ANTONIO ROXAS Net income per return Add: 1/3 share, profits in Roxas y Cia. Less amount declared Amount understated Contributions disallowed P 153,249.15 146,135.46 P 7,113.69 115.00 P 7,228.69 Less 1/3 share of contributions amounting to P21,126.06 disallowed from partnership but allowed to partners Net income per review Less: Exemptions Net taxable income Tax due Tax paid Deficiency 154,169.00 154,060.00 P 109.00 ========== EDUARDO ROXAS Net income per return P 304,166.92 P315,476.59

7,042.02

186.67 P315,663.26 4,200.00 P311,463.26

Add: 1/3 share, profits in Roxas y Cia Less profits declared Amount understated Less 1/3 share in contributions amounting to P21,126.06 disallowed from partnership but allowed to partners Net income per review Less: Exemptions Net taxable income Tax Due Tax paid Deficiency

P 153,249.15 146,052.58 P 7,196.57

7,042.02

155.55 P304,322.47 4,800.00 P299,592.47

P147,250.00 147,159.00 P91.00 =========== JOSE ROXAS

Net income per return Add: 1/3 share, profits in Roxas y Cia. Less amount reported Amount understated Less 1/3 share of contributions disallowed from partnership but allowed as deductions to partners Net income per review Less: Exemption Net income subject to tax Tax due Tax paid Deficiency P102,763.00 102,714.00 P 49.00 =========== P153,429.15 146,135.46 7,113.69

P222,681.76

7,042.02

71.67 P222,753.43 1,800.00 P220,953.43

WHEREFORE, the decision appealed from is modified. Roxas y Cia. is hereby ordered to pay the sum of P150.00 as real estate dealer's fixed tax for 1952, and Antonio Roxas, Eduardo Roxas and Jose Roxas are ordered to pay the respective sums of P109.00, P91.00 and P49.00 as their individual deficiency income tax all corresponding for the year 1955. No costs. So ordered. Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Angeles and Fernando, JJ., concur. Zaldivar, J., took no part. Concepcion, C.J., is on leave. Footnotes

The assailed provision further amends Section 21 of the National Internal Revenue Code of 1977.* See BIR Records. was filed on May 28. therefore. Republic of the Philippines SUPREME COURT Manila EN BANC G. A. 135 depends upon a showing of its constitutional infirmity. Bureau of Internal Revenue. and only 'because it was better equipped to administer for the public welfare than is any private individual or group of .R. vs. MANUEL ALBA. TOMAS TOLEDO Deputy Commissioner. FERNANDO. JR. Minister of Budget. Minister of Finance. ANCHETA. 387. 1984 ANTERO M. p. 4 He characterizes the above sction as arbitrary amounting to class legislation." 9 The answer then affirmed: "Batas Pambansa Big. It is manifest that the field of state activity has assumed a much wider scope. 1. 7 The Court. The petition must be dismissed. L-59431 July 25. opinions or conclusions on the part of the petitioner. SISON. Bureau of Internal Revenue. (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements. The reason was so clearly set forth by retired Chief Justice Makalintal thus: "The areas which used to be left to private enterprise and initiative and which the government was called upon to enter optionally. oppressive and capricious in character 5 For petitioner. which provides for rates of tax on citizens or residents on (a) taxable compensation income. (e) dividends and share of individual partner in the net profits of taxable partnership. and CESAR E. required respondents to file an answer within 10 days from notice. Acting Commissioner. ROMULO VILLA.. (f) adjusted gross income. the truth [for them] being those stated [in their] Special and Affirmative Defenses. FRANCISCO TANTUICO. This Court finds such a plea more than justified. (b) taxable net income. Bureau of Internal Revenue. Chairman. after two extensions were granted the Office of the Solicitor General. in a resolution of January 26. 135 is a valid exercise of the State's power to tax. respondents. prizes. The Solicitor General for respondents. and other winnings. "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. C. 1982. 8 The facts as alleged were admitted but not the allegations which to their mind are "mere arguments. petitioner. Antero Sison for petitioner and for his own behalf. No. Deputy Commissioner. 2 Petitioner 3 as taxpayer alleges that by virtue thereof. The authorities and cases cited while correctly quoted or paraghraph do not support petitioner's stand. RUBEN B.: The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1 on the validity of Section I of Batas Pambansa Blg. 1982." 10 The prayer is for the dismissal of the petition for lack of merit. there is a transgression of both the equal protection and due process clauses 6 of the Constitution as well as of the rule requiring uniformity in taxation.J. VIRATA. (c) royalties. Commissioner on Audit. Such an answer.

as here." 13 It is. discrimination that finds no support in reason. The Constitution sets forth such limits . both the due process and equal protection clauses inay properly be invoked. New York. those that fall within a class should be treated in the same fashion. there is a need for of such persuasive character as would lead to such a conclusion. both in the privileges conferred and the liabilities imposed. A mere allegation. For the principle is that equal protection and security shall be given to every person under circumtances which if not Identical are analogous. act that runs counter to it. Now for equal protection. or is not for a public purpose. Absent such a showing. Justice Frankfurter could rightfully conclude: "The web of unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. The Constitution as the fundamental law overrides any legislative or executive. their prompt and certain availability is of the essence. 3. does not suffice. In any case therefore where it can be demonstrated that the challenged statutory provision — as petitioner here alleges — fails to abide by its command. Justice Holmess pen: 'The power to tax is not the power to destroy while this Court sits. "is an attribute of sovereignty. to invalidate in appropriate cases a revenue measure. to be admitted that for all its plenitude 'the power to tax is not unconfined. That would be a clear abuse of power. has to be availed of to assure the performance of vital state functions." 20 That same formulation applies as . This is merely to adhere to the authoritative doctrine that were the due process and equal protection clauses are invoked. The power to tax. That properly calls for the application of the Holmes dictum. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner. 12 2. the conditions not being different. in case of a retroactive statute is so harsh and unreasonable. It is the source of the bulk of public funds.' continue to lose their well-defined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the times. whatever restrictions cast on some in the group equally binding on the rest. the presumption of validity must prevail. there would -be truth to the 1803 dictum of Chief Justice Marshall that "the power to tax involves the power to destroy." 16 This is merely to emphasize that it is riot and there cannot be such a constitutional mandate. unfortunate remark characterized it as "a flourish of rhetoric [attributable to] the intellectual fashion of the times following] a free use of absolutes. There must be a factual foundation of such unconstitutional taint. then this Court must so declare and adjudge it null. of course. It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property. if it were otherwise. The applicable standard to avoid the charge that there is a denial of this constitutional mandate whether the assailed act is in the exercise of the police power or the power of eminent domain is to demonstrated that the governmental act assailed." 17 So it is in the Philippines." 11 Hence the need for more revenues. The power to tax moreover. or at the very least. If law be looked upon in terms of burden or charges. 4. Favoritism and undue preference cannot be allowed. He alleges arbitrariness. There are restrictions. 18 5.individuals. Adversely affecting as it does properly rights. all petitioner does. or. It has also been held that where the assailed tax measure is beyond the jurisdiction of the state. it is subject to attack on due process grounds." 14 In a separate opinion in Graves v. To praphrase a recent decision. 15 Justice Frankfurter. to borrow from Justice Malcolm. 19 6. This Court then is left with no choice. The difficulty confronting petitioner is thus apparent. an inherent prerogative. The injury thus is centered on the question of whether the imposition of a higher tax rate on taxable net income derived from business or profession than on compensation is constitutionally infirm. It is the strongest of all the powers of of government. he has not made out a case. It then becomes the duty of this Court to say that such an arbitrary act amounted to the exercise of an authority not conferred. after referring to it as an 1. far from being inspired by the attainment of the common weal was prompted by the spirit of hostility. Considering that petitioner here would condemn such a provision as void or its face. taxes being the lifeblood of the government. considering that they are not fixed rules but rather broad standards.

is enough that the classification must rest upon substantial distinctions that make real differences. in a leading case of Lutz V. . 135. it. It did not arise until nine years later. 9. Taxpayers may be classified into different categories." 27 The problem of classification did not present itself in that case. therefore. in the case of professionals in the practice of their calling and businessmen. inspired by the noble concept of approximating the Ideal of the laws benefits being available to all and the affairs of men being governed by that serene and impartial uniformity. Nothing can be clearer. where "the differentiation" complained of "conforms to the practical dictates of justice and equity" it "is not discriminatory within the meaning of this clause and is therefore uniform. Reyes. what misled petitioner is his failure to take into consideration the distinction between a tax rate and a tax base. According to the Constitution: "The rule of taxation shall be uniform and equitable. went so far as to hold "at any rate. To repeat. which is of the very essence of the Idea of law. There is ample justification then for the Batasang Pambansa to adopt the gross system of income taxation to compensation income. there is no uniformity in the costs or expenses necessary to produce their income. 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 a set of reduced tax rates to be applied to all of them. The Fourteenth Amendment enjoins 'the equal protection of the laws.'" 23 7. . Araneta. however. it is inherent in the power to tax that a state be free to select the subjects of taxation. or exemption infringe no constitutional limitation. There is. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. As there is practically no overhead expense." 24 This requirement is met according to Justice Laurel in Philippine Trust Company v. " 26 He likewise added: "The rule of uniformity does not call for perfect uniformity or perfect equality. as well as realism in these words of Justice Frankfurter: "The equality at which the 'equal protection' clause aims is not a disembodied equality." 29 There is quite a similarity then to the standard of equal protection for all that is required is that the tax "applies equally to all persons. than that the petition is without merit. . Taxpayers who are recipients of compensation income are set apart as a class.B. The Constitution does not require things which are different in fact or opinion to be treated in law as though they were the same. while continuing the system of net income taxation as regards professional and business income. 25 decided in 1940." 21 Hence the constant reiteration of the view that classification if rational in character is allowable. Costs against petitioner. considering the (1) lack of factual foundation to show the arbitrary character of the assailed provision. It would not be just then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income. but are expressions of policy arising out of specific difficulties. firms and corporations placed in similar situation. the petition is dismissed. Petitioner likewise invoked the kindred concept of uniformity. Further on this point. B and C. The equal protection clause is. through Justice J. 28 As clarified by Justice Tuason. because this is hardly attainable. Apparently.L. the. equal protection. On the other hand. these taxpayers are e not entitled to make deductions for income tax purposes because they are in the same situation more or less. when the Supreme Court held: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. when the tax "operates with the same force and effect in every place where the subject may be found. of course. and uniformity in taxation and (3) the reasonableness of the distinction between compensation and taxable net income of professionals and businessman certainly not a suspect classification. wisdom. As a matter of fact. and it has been repeatedly held that 'inequalities which result from a singling out of one particular class for taxation. WHEREFORE. 31 (2) the force of controlling doctrines on due process.' and laws are not abstract propositions.well to taxation measures. 22 this Court. They do not relate to abstract units A. In the case of the gross income taxation embodied in Batas Pambansa Blg. address to the attainment of specific ends by the use of specific remedies.." 30 8. There is no legal objection to a broader tax base or taxable income by eliminating all deductible items and at the same time reducing the applicable tax rate. Yatco..

. Relova. Melencio-Herrera.. J. concurring: I concur in the result.. dissenting: This is a frivolous suit.. Concepcion. the reverse will most likely be the case. While the tax rates for compensation income are lower than those for net income such circumtance does not necessarily result in lower tax payments for those receiving compensation income. those who file returns on the basis of net income will pay less taxes because they claim all sort of deduction justified or not I vote for dismissal. concurring: I concur in the result. those who file returns on the basis of net income will pay less taxes because they claim all sort of deduction justified or not I vote for dismissal. dissenting: This is a frivolous suit. concur. the reverse will most likely be the case.Makasiar. ABAD SANTOS. Footnotes 1 Petitioner must have realized that a suit for declaratory relief must be filed with Regional Trial Courts. Jr. Plana. 135. The petitioner has no cause of action for prohibition. Separate Opinions AQUINO. Jr. 2 Batas Pambansa Blg. J. J. The petitioner has no cause of action for prohibition.. Teehankee. Guerero.. In fact. Separate Opinions AQUINO. De la Fuente and Cuevas. While the tax rates for compensation income are lower than those for net income such circumtance does not necessarily result in lower tax payments for these receiving compensation income. Section 21 (1981).. J. ABAD SANTOS... concurs in the result. Gutierrez. J. took no part. J. . JJ. Escolin. In fact.

000 .000 Over P 10.075 + I 15% of excess over P 40.000 P 122. Romulo Villa. Par. Deputy Commissioner. Francisco Tantuico. Tomas Toledo. par. Minister of Finance.000 P 13.675 + 29% of excess over P250.000 Over P100.000 Over P250. Manuel Alba. whether a citizen of the Philippines. determined in accordance with the following schedule: Not over P2.3 The respondents are Ruben B.000 but not over P500. A.000 but not over P 60. Acting Commissioner.075 + 19% of excess over P 60.000 P 875 + 11%. Bureau of Internal Revenue. (a) reads: "(a) On taxable compensation income. Virata.500 but not over P 5.000 Over P 20.000 but not over 10.000 Over P 40. of excess over P 20. and Cesar E. 4 Petition. Bureau of Internal Revenue. Commissioner on Audit. Chairman. Bureau of Internal Revenue.000 P 6. Minister of Budget.000 P 49.000 Over P500.000 Over P 5.500 Over P 2. Deputy Commissioner. 1. Ancheta. The challenge is thus aimed at paragraphs (a) and (b) of Section 1 further Amending Section 21 of the National Internal Revenue Code of 1977.000 but not over P 40.000 0% 1% P 25 + 3% of excess over P 5.675 + 24% excess over P100.000 Over P 60. Parties.000 but not over P100.000 but not over P250.000 P 3.175 + 35% of excess over P500.000 P 175 + 7 % of excess over P 10.000 but not over P 20. — A tax is hereby imposed upon the taxable compensation income as determined in Section 28 (a) received during each taxable year from all sources by every individual.

per Castro. 89 SCRA 199. 1979. Fernandez. Consideration of Unions in Government Corporation and Offices. 10 Ibid. par. 11 Agricultural Credit and Cooperative Financing Administration v.000 P 39. 252. Vera v.500 + 30% of excess over P 30. — A tax is hereby imposed upon the taxable net income as determined in Section 29 (a) received during each taxable year from all sources by every individual. Masakayan.000 Over P 10. November 29. 12 Cf. L-21484. 4.000 5 Ibid Statement. 1-6. or an alien residing in the Philippines determined in accordance with the following schedule: Not over P10. 13 Sarasola v. par.000 Over P150. Maryland 4 Wheaton 316. Montenegro and Solicitor Erlinda B.000 Over P 30. 6. 662.Par. Trinidad. He was assisted by Assistant Solicitor General Eduardo D. 14 McColloch v.000 P 3. Section 1 of the Constitution reads: "No person shall be deprived of life. pars. (b) reads: "(b) On taxable net income. 9 Answer. 40 Phil. 30 SCRA 649. Section 7.000 but not over P 30. 262 (1919). The Batasang Pambansa shall evolve a progressive system of taxation. nor shall any person be denied the equal protection of the laws. Mendoza." 8 It was filed by Solicitor General Estelito P. par.000 but not over P500. liberty or property without due process of law. . 6 Article IV.500 + 45% of excess over P150.000 but not over P150. whether a citizen of the Philippines. March 30.000 Over P500. 15 306 US 466 ( 938). 1969.000 5% P 500 + 15% of excess over P 10.000 P197.000 + 601% of excess over P500. L-31364. J. (1) of the Constitution reads: "The rule of taxation shall be uniform and equitable." 7 Article VII.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION. L-21064. Ermita-Malate Hotel and Motel Operator S Association v. 39 Phil. City Mayor. 306. 23 Ibid. 26 Ibid. 29 Manila Race Horse Trainers Asso. 21 Tigner v. 20 The excerpt is from the opinion in J. 369 (1950). Hartford Fire Insurance Co 282 US 251. 62 Phil. Likewise referred to is O'Gorman and Young v. Tuason and Co. G.R. first sentence of the Constitution 25 69 Phil. 1984. 50908. 127 SCRA 329. 102. 70 Phil. Salaveria. 83 Phil. Republic v. 148 (1955). 310 US 141. . 490. One reason for requiring declaratory relief proceedings to start in regional trial courts is precisely to enable petitioner to prove his allegation.S. 22 98 Phil. 1. 325 (1940). 147 (1940). Wells Fargo Bank and Union Trust Co. Collector. 862 (1949). 435 and reiterated in Bautista v. January 31. City of Cebu. 426. v. 328 (1931). February 18. 300 (1953).111 (1918) and Ebona v. De la Fuente. 934 (1956). 315 ( 1967). Alfonso. Hon. 852. The former deals with an eminent domain proceeding and the latter with a suit contesting the validity of a police power measure. v. 30 Uy Matias v. v. Texas. v. 31 While petitioner cited figures to sustain in his assertion. 1970. 88 Phil. absent an admission in the answer. 99 Phil.16 Ibid. 420 (1940). Juinio. 31 SCRA 413. 127 Phil. 18 Cf. The Land Tenure Administration. 93 Phil. No. par. 153. Manila Gas Co.M. de Fernandez. Section 17. 424. 60. Oasan Vda.65 (1951). Collector of Internal Revenue. 895 (1936). 24 Article VIII. 85 Phil. U. 28 Eastern Theatrical Co. v. v. Daet. 27 Ibid. public respondents refuted with other figures that argue against his submission. 19 Cf. 489 17 Ibid. 339.

and that therefore their bids "must take this into account and should not include items for such taxes. When the WHO decided to construct a building to house its own offices. paragraph 2): The Organization may import into the country materials and fixtures required for the construction free from all duties and taxes and agrees not to utilize any portion of the international reserves of the Government. inter alia. but a tax that is primarily due from the contractor." On January 2. income and other properties shall be: (a) exempt from all direct and indirect taxes. the WHO received an opinion from the Commissioner of the Bureau of Internal Revenue stating that "as the 3% contractor's tax is an indirect tax on the assets and income of the Organization. JOHN GOTAMCO & SONS. licenses. the Host Agreement. It is understood. the same is not covered by . should pay the 3% contractor's tax under Section 191 of the National Internal Revenue Code on the gross receipts it realized from the construction of the World Health Organization office building in Manila. vs. 1987 COMMISSIONER OF INTERNAL REVENUE. but when the building was completed the price reached a total of P452. This agreement contained the following provision (Article III." The construction contract was awarded to respondent John Gotamco & Sons. that the Organization will not claim exemption from taxes which are. it entered into a further agreement with the Govermment of the Republic of the Philippines on November 26.00. Section 11 of that Agreement provides. the Host Agreement.: The question involved in this petition is whether respondent John Gotamco & Sons. petitioner. . in fact. 1951 which granted the Organization exemption from all direct and indirect taxes. Article VIII of the above-mentioned agreement referred to the Host Agreement concluded on July 22. Inc.G. Sometime in May 1958. the WHO informed the bidders that the building to be constructed belonged to an international organization with diplomatic status and thus exempt from the payment of all fees. In inviting bids for the construction of the building.R. and taxes.: . (Gotamco for short) on February 10. Inc. . the gross receipts derived by contractors from their contracts with the WHO for the construction of its new building. 1958. No. its assets. respondents. J.00.544. however. . . The World Health Organization (WHO for short) is an international organization which has a regional office in Manila. licenses and other payments to Government agencies. 1958 for the stipulated price of P370. the Commissioner of Internal Revenue reversed his opinion and stated that "as the 3% contractor's tax is not a direct nor an indirect tax on the WHO. 1957. on June 3. . L-31092 February 27. YAP. and THE COURT OF TAX APPEALS. as well as the other United Nations offices stationed in Manila. it enjoys privileges and immunities which are defined more specifically in the Host Agreement entered into between the Republic of the Philippines and the said Organization on July 22. As an international organization. the WHO issued a certification state 91 inter alia. 1951.000. no more than charges for public utility services. 1960. that "the Organization. however. INC. ." Subsequently. . are exempt from tax in accordance with .

The Court of Tax Appeals. which after trial rendered a decision. . petitioner questions the entitlement of the WHO to tax exemption. . should be exempted from any taxes in connection with the construction of the World Health Organization office building. the fact that the manufacturer or producer might have added the amount of the tax to the price of the goods did not make the sales tax "a tax on the purchaser. The privileges and immunities granted to the WHO under the Host Agreement have been recognized by this Court as legally binding on Philippine authorities. The undersigned. since the Host Agreement specifically exempts the WHO from "indirect taxes. Petitioner's position is that the contractor's tax "is in the nature of an excise tax which is a charge imposed upon the performance of an act. it cannot be deemed an indirect taxation upon it. contending that the Host Agreement is null and void." We agree with the Court of Tax Appeals in rejecting this contention of the petitioner. 3 the 3% contractor's tax fans directly on Gotamco and cannot be shifted to the WHO. On January 17. not having been ratified by the Philippine Senate as required by the Constitution. It is a tax due primarily and directly on the contractor. an agency of the United States Government..40. the enjoyment of a privilege or the engaging in an occupation. Since this tax has no bearing upon the WHO. We find no merit in this contention. it is a valid and binding international agreement even without the concurrence of the Philippine Senate. . While treaties are required to be ratified by the Senate under the Constitution. Said the respondent court: Petitioner claims that under the authority of the Philippine Acetylene Company versus Commissioner of Internal Revenue. et al." We agree. The Philippine Acetylene case involved a tax on sales of goods which under the law had to be paid by the manufacturer or producer. an agency of the Philippine Government. less formal types of international agreements may be entered into by the Chief Executive and become binding without the concurrence of the legislative body. the 3% contractor's tax assessed on Gotamco is not an "indirect tax" within its purview. made under the condition stated above. This was upheld by the Bureau of Internal Revenue and it can be stated that the contractors submitted their bids in good faith with the exemption in mind. not on the owner of the building. however. The Court of Tax Appeal's decision is now before us for review on certiorari. held that the said case is not controlling in this case. contractors were informed that there would be no taxes or fees levied upon them for their work in connection with the construction of the building as this will be considered an indirect tax to the Organization caused by the increase of the contractor's bid in order to cover these taxes. In his first assignment of error. representing the 3% contractor's tax plus surcharges on the gross receipts it received from the WHO in the construction of the latter's building. in favor of Gotamco and reversed the Commissioner's decision. Respondent Gotamco appealed the Commissioner's decision to the Court of Tax Appeals. 1 The Host Agreement comes within the latter category. the Commissioner of Internal Revenue sent a letter of demand to Gotamco demanding payment of P 16. 2 Petitioner maintains that even assuming that the Host Agreement granting tax exemption to the WHO is valid and enforceable. certifies that the bid of John Gotamco & Sons.970. therefore.When the request for bids for the construction of the World Health Organization office building was called for. and to the Voice of America. 1961." The Court held that the sales tax must be paid by the manufacturer or producer even if the sale is made to tax-exempt entities like the National Power Corporation.

et al. The above-quoted provision. Benjamin Aquino. dated January 20. when the Organization is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable the Government of the Republic of the Philippines shall make appropriate administrative arrangements for the remission or return of the amount of duty or tax. 1968 EUSEBIO VILLANUEVA. SO ORDERED. etc. No.. CITY OF ILOILO. 1960. elucidates the clear intention of the Agreement to exempt the WHO from "indirect" taxation. claim exemption from excise duties.. This is made clear in Section 12 of the Host Agreement which provides: While the Organization will not. in specifically exempting the WHO from "indirect taxes. 105 Phil. 3 127 Phil.R. from any taxes in connection with the construction of the WHO office building. finding no reversible error committed by the respondent Court of Tax Appeals. Gotamco. 461 Republic of the Philippines SUPREME COURT Manila EN BANC G. the appealed decision is hereby affirmed. L-26521 December 28. et. in the case of minor purchases. 1030. as a general rule. The certification issued by the WHO. although not imposed upon or paid by the Organization directly. and from taxes on the sale of movable and immovable property which form part of the price to be paid. Hon. 48 SCRA 242. vs. form part of the price paid or to be paid by it. plaintiff-appellee. Gancayco and Sarmiento.." contemplates taxes which. 2 World Health Organization and Dr. Footnotes 1 Usaffe Veterans Association. as the payment thereof or its inclusion in the bid price would have meant an increase in the construction cost of the building. (Emphasis supplied). Leonce Verstuyft v. Cruz. Inc. Treasurer of the Philippines. Narvasa. ET AL. . although referring only to purchases made by the WHO. Feliciano. sought exemption of the contractor.. Accordingly. al. The 3% contractor's tax would be within this category and should be viewed as a form of an "indirect tax" On the Organization. Melencio-Herrera. defendants-appellants. vs.. nevertheless. concur.The Host Agreement. JJ.

— Tenement house as contemplated in this ordinance shall mean any building or dwelling for renting space divided into separate apartments or accessorias. Jalandoni and Jamir for plaintiff-appellees. This Court. . declared the ordinance ultra vires. Remedios Sian Villanueva and Eusebio Villanueva. P10. Gengos for defendant-appellant. that: Section 1. partly or wholly engaged in business in any other streets. CASTRO. Iznart and Aldeguer.a. believing. obviously.00 per apartment. Basa. owners of four tenement houses containing 34 apartments. March 23.00 annually. The validity and constitutionality of this ordinance were challenged by the spouses Eusebio Villanueva and Remedies Sian Villanueva. entitled.Pelaez. pursuant to the provisions of Republic Act No. Tenement houses: (a) Apartment house made of strong materials (b) Apartment house made of mixed materials II Rooming house of strong materials P20.a. (3) tenement house. P10. imposing license tax fees as follows: (1) tenement house (casa de vecindad). 1959. series of 1960. otherwise known as the Autonomy Law of Local Government. it had acquired the authority or power to enact an ordinance similar to that previously declared by this Court as ultra vires. — A municipal license tax is hereby imposed on tenement houses in accordance with the schedule of payment herein provided. that with the passage of Republic Act 2264." On January 15. J. Section 2. enacted Ordinance 11. series of 1960. partly or wholly engaged in or dedicated to business in the streets of J.00 per door p. P24. "it not appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to the City of Iloilo by its Charter. Section 3. 1960 the municipal board of Iloilo City.00 per apartment.: Appeal by the defendant City of Iloilo from the decision of the Court of First Instance of Iloilo declaring illegal Ordinance 11. hereunder quoted in full: AN ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS ENGAGED IN THE BUSINESS OF OPERATING TENEMENT HOUSES Be it ordained by the Municipal Board of the City of Iloilo.a." and ordering the City to refund to the plaintiffs-appellees the sums of collected from them under the said ordinance. (2) tenement house. otherwise known as the Local Autonomy Act. P12. — The municipal license tax provided in Section 1 hereof shall be as follows: I.00 per door p. P25. in City of Iloilo vs. On September 30. L-12695. Assistant City Fiscal Vicente P.00 per door p. "An Ordinance Imposing Municipal License Tax On Persons Engaged In The Business Of Operating Tenement Houses. 1946 the municipal board of Iloilo City enacted Ordinance 86.M. 2264.

00 per door p. the sum of P1. Each of the appellees' apartments has a door leading to a street and is rented by either a Filipino or Chinese merchant.a. the appellees Eusebio Villanueva and Remedios S. St. On March 30. By virtue of the ordinance in question. and Remedios S. which cities. do not impose tenement or apartment taxes. 1960. Tenement house partly or wholly engaged in or dedicated to business in the following streets: J. for the years 1960-1964." (b) the same is "oppressive and unreasonable." and that the City be ordered to refund the amounts collected from them under the said ordinance. Villanueva are owners of five tenement houses. — Any person found violating this ordinance shall be punished with a fine note exceeding Two Hundred Pesos (P200. Tenement houses at the streets surrounding the super market as soon as said place is declared commercial P5. ENACTED. Tenement house partly or wholly engaged in or dedicated to business in any other street V. according to him. against the City of Iloilo. Section 4. Villanueva.00 per door p. 1964. Dumaguete City. Section 6 — This ordinance shall take effect upon approval. and an amended complaint. Eusebio Villanueva owns.00. Basa.a. 1966. 1962 and April 24. P24.M. while the second floor is used as a dwelling of the owner of the store. the sum of P5. for the years 1960-1964. Villanueva are owners of ten apartments. likewise. Teresita S. the appellant City collected from spouses Eusebio Villanueva and Remedios S. series of 1960. Topacio. the plaintiffs-appellees filed a complaint. and from the appellees Pio Sian Melliza. Eusebio Villanueva has likewise been paying real estate taxes on his property. Section 5. Villanueva. Aldeguer.a. while the other appellees and the same Remedios S. January 15.a. P30. but treble at that and (d) it violates the rule of uniformity of taxation. praying that Ordinance 11. The issues posed in this appeal are: .1 the lower court rendered judgment declaring the ordinance illegal on the grounds that (a) "Republic Act 2264 does not empower cities to impose apartment taxes.00 per door p. Guanco and Ledesma from Plazoleto Gay to Valeria. aggregately containing 43 apartments. The first floor is utilized as a store. Iznart. and unconstitutional for being violative of the rule as to uniformity of taxation and for depriving said plaintiffs of the equal protection clause of the Constitution. in the aforementioned court. apartment buildings for rent in Bacolod.Rooming house of mixed materials III. Baguio City and Quezon City. On July 11. In Iloilo City.00) or an imprisonment of not more than six (6) months or both at the discretion of the Court.00 per door p. be declared "invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact. IV. — All ordinances or parts thereof inconsistent herewith are hereby amended. P12." for the reason that it penalizes owners of tenement houses who fail to pay the tax. respectively.30.317.824. (c) it constitutes not only double taxation.

impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax. series of 1960. and other acquisitions mortis causa. to collect fees and charges for services rendered by the city. in no case. series of 1960. of the City of Iloilo. all chartered cities. review or bulletin appearing at regular intervals and having fixed prices for for subscription and sale. Provided. municipality or municipal district may levy or impose any of the following: (a) Residence tax. (d) Taxes on persons operating waterworks. illegal because it imposes double taxation? 2. or exercising privileges in chartered cities. municipality or municipal district and otherwise to levy for public purposes. and . or the municipal district council of the municipal district. (c) Taxes on the business of persons engaged in the printing and publication of any newspaper. Any provision of law to the contrary notwithstanding. just and uniform taxes. Is Ordinance 11. (j) Taxes of any kind on banks. (e) Taxes on forest products and forest concessions. and all other kinds of customs fees. municipality or municipal district. the municipal council of the municipality. irrigation and other public utilities except electric light. That municipalities and municipal districts shall. tonnage. series of 1960. however. (f) Taxes on estates. charges and duties. magazine. Is the City of Iloilo empowered by the Local Autonomy Act to impose tenement taxes? 3. except gasoline. Does Ordinance 11. municipalities or municipal districts by requiring them to secure licences at rates fixed by the municipal board or city council of the city. and which is not published primarily for the purpose of publishing advertisements. to regulate and impose reasonable fees for services rendered in connection with any business. violate the rule of uniformity of taxation? 1. oppressive and unreasonable because it carries a penal clause? 4. gifts. The pertinent provisions of the Local Autonomy Act are hereunder quoted: SEC. 2. Is Ordinance 11. (i) Customs duties registration. legacies. (h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof. (g) Taxes on income of any kind whatsoever.1. Provided. profession or occupation being conducted within the city. heat and power. inheritance. That no city. municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. and persons paying franchise tax. under the provisions of the National Internal Revenue Code. wharfage dues on wharves owned by the national government. (b) Documentary stamp tax. licenses or fees. insurance companies.

is not within the exceptions and limitations aforementioned. if. in his opinion.(k) Taxes on premiums paid by owners of property who obtain insurance directly with foreign insurance companies." 3 and not a "tax on persons engaged in any occupation or business or exercising privileges. that the tax in question is not a real estate tax.4 Indeed. A tax ordinance shall go into effect on the fifteenth day after its passage. just and uniform. according to them. however." It is the phraseology of section 1 on which the appellees base their contention that the tax involved is a real estate tax which." while section 1 thereof states that a "municipal license tax is hereby imposed on tenement houses." and does not transgress any constitutional provision or is not repugnant to a controlling statute. 10 It is a fixed proportion11 of the assessed value of the property taxed. Act 158. has counterpart provisions in the Iloilo City Charter. not specially exempted. The appellees strongly maintain that it is a "property tax" or "real estate tax." provided that the tax so levied is "for public purposes. therefore. oppressive. levied under the authority of a city or municipal ordinance. 2 Thus. Obviously. or a privilege tax. unless the ordinance shall provide otherwise: Provided. the intervention of assessors. pursuant to the rules of expressio unius est exclusio alterius. except when the land and building or improvements belong to separate owners. The tax is not a fixed proportion of the assessed value of the tenement houses. makes the ordinance ultra vires as it imposes a levy "in excess of the one per centum real estate tax allowable under Sec. and is not enforceable against the tenement houses either by sale or distraint. In such event.13 and it constitutes a superior lien on and is enforceable against the property14 subject to such taxation.6 which.8 and is payable regardless of whether the property is used or not. although not applicable to the City of Iloilo. It is not a tax on the land on which the tenement houses are erected." or a license tax. 12 It is collected or payable at appointed times. although the value may vary in accordance with such factor. the title of the ordinance designates it as a "municipal license tax on persons engaged in the business of operating tenement houses. That the Secretary of Finance shall have authority to suspend the effectivity of any ordinance within one hundred and twenty days after its passage. 38 of the Iloilo City Charter. contrary to the appellees' contention. Clearly. and when the said Secretary exercises this authority the effectivity of such ordinance shall be suspended. when a tax. Com. although the land and building or improvements erected thereon are assessed separately. 9 The tax is usually single or indivisible. the municipal board or city council in the case of cities and the municipal council or municipal district council in the case of municipalities or municipal districts may appeal the decision of the Secretary of Finance to the court during the pendency of which case the tax levied shall be considered as paid under protest. The tax imposed by the ordinance in question does not possess the aforestated attributes. therefore. excepting those which are mentioned therein. and does not require the intervention of assessors or appraisers.7 A real estate tax is a direct tax on the ownership of lands and buildings or other improvements thereon. It is not payable at a designated time or date. the appellees confuse the tax with the real estate tax within the meaning of the Assessment Law. excessive. Does the tax imposed by the ordinance in question fall within any of the exceptions provided for in section 2 of the Local Autonomy Act? For this purpose. it is necessary to determine the true nature of the tax. It is our view. or confiscatory. and exceptio firmat regulum in casibus non excepti. the tax or fee therein levied or imposed is unjust." 5. It is now settled that the aforequoted provisions of Republic Act 2264 confer on local governments broad taxing authority which extends to almost "everything. and not by imprisonment of the owner. although both land and tenement houses may belong to the same owner. the same comes within the ambit of the general rule. . and requires. or an excise tax. the tax in question is not a real estate tax.

Remedios Sian Villanueva.." Tenement houses. et al. whether on their account as principals or as owners of rental property or properties. Accordingly. is not within the ordinance. restaurants." tenement houses."The spirit. and "otherwise to levy for public purposes. in the aforesaid case. what is within the spirit is within the ordinance although it is not within the letter thereof. similar to the hotel or motel business. On the contrary. lodging houses. "And it not appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to the City of Iloilo by its Charter. public warehouses." The Supreme Court. adopted the definition of a tenement house 18 as "any house or building. but such words must be taken in the connection in which they are used and the true character is to be deduced from the nature and essence of the subject. or the operation of lodging houses or boarding houses. water-closets. to pursue a business. j of its Charter." . which constitute a different business enterprise. or to exercise a privilege. besides the tenement tax under the said ordinance. 21. 182 (A) (3) (s) of the National Internal Revenue Code. but having a common right in the halls. declared Ordinance 86 ultra vires.20. et al. in both its title and body. 2. theaters." 15 It is within neither the letter nor the spirit of the ordinance that an additional real estate tax is being imposed. boarding houses." are considered "real estate dealers" and are taxed according to the amount of their annual income. as the home or residence of three families or more living independently of each other and doing their cooking in the premises or by more than two families upon any floor. being necessarily offered for rent or lease by their very nature and essence. 1959. rather than the letter." . it is plain from the context of the ordinance that the intention is to impose a license tax on the operation of tenement houses. which is a form of business or calling. cinematographs. although the municipal board of Iloilo City is empowered. or fees. Title V. and the court looks less to its words and more to the context. and regulate hotels. This is precisely one of the reasons why this Court. fix the license fee for." 16. otherwise the subject-matter would have been not merely tenement houses. or some of them. On the other hand. pawnshops.19 are not mentioned in the aforestated section of the City Charter of Iloilo. of the National Internal Revenue Code. L-12695. yards. this Court explicitly said:. The ordinance. "The character of a tax is not to be fixed by any isolated words that may beemployed in the statute creating it. while that which is in the letter. Thus. consequence and effect. refreshment parlors. under sec. or is occupied. it is not among the exceptions listed in section 2 of the Local Autonomy Act." Obviously. cafes. in the said case of City of Iloilo vs. so living and cooking. Remedios Sian Villanueva. The trial court condemned the ordinance as constituting "not only double taxation but treble at that. stairways. designates the tax imposed as a "municipal license tax" which. or exercising privileges within their respective territories. or calling. occupation. supra. particularly sections 1 and 3 thereof. in City of Iloilo vs. livery garages. subject-matter. "to tax. just and uniform taxes. because. . licenses. the imposition by the ordinance of a license tax on persons engaged in the business of operating tenement houses finds authority in section 2 of the Local Autonomy Act which provides that chartered cities have the authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. the exercise of such power cannot be assumed and hence the ordinance in question is ultra vires insofar as it taxes a tenement house such as those belonging to defendants. what the trial court refers to as "income taxes" are the fixed taxes on business and occupation provided for in section 182. by itself. or hired out to be occupied." 17 The subject-matter of the ordinance is tenement houses whose nature and essence are expressly set forth in section 2 which defines a tenement house as "any building or dwelling for renting space divided into separate apartments or accessorias. or privies. by virtue of which persons engaged in "leasing or renting property. March 23. although not within the spirit." because "buildings pay real estate taxes and also income taxes as provided for in Sec. which is rented. par. Called by either name. or an ordinance determines the construction thereof. therefore constitute a distinct form of business or calling. or portion thereof. The lower court has interchangeably denominated the tax in question as a tenement tax or an apartment tax. leased.. means an "imposition or exaction on the right to use or dispose of property.

or both such fine and imprisonment for each offense. and therefore is not within the meaning of constitutional or statutory provisions abolishing or prohibiting imprisonment for debt. although imposed by the sametaxing authority. calling or activity by both the State and a political subdivision thereof. this Court overruled the pronouncement of the lower court declaring illegal and void an ordinance imposing an occupation tax on persons exercising various professions in the City of Manilabecause it imposed a penalty of fine and imprisonment for its violation." In Punsalan. that "a tax is not a debt in the sense of an obligation incurred by contract. provided some other constitutional requirement is not thereby violated. On the other hand. the argument against double taxation may not be invoked. both taxes must be imposed on the same property or subject-matter. and still taxable under the ordinance in question. At all events." The lower court apparently had in mind." 26 It is elementary. the tax in question is not oppressive in the manner the lower court puts it. vs.". for the same purpose. but is permissible. . It is a wellsettled rule that a license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax. is also devoid of merit.00 or imprisonment of 6 months or both. during the same taxing period. the provision of the Constitution that "no person shall be imprisoned for a debt or non-payment of a poll tax."23 It has been shown that a real estate tax and the tenement tax imposed by the ordinance. without regard to their property or the occupations in which they may be engaged. 28 Therefore.. for the latter is a tax of a fixed amount upon all persons. because while the owners of the other buildings only pay real estate tax and income taxes the ordinance imposes aside from these two taxes an apartment or tenement tax. or taxing authority. 3. The contention that the plaintiffs-appellees are doubly taxed because they are paying the real estate taxes and the tenement tax imposed by the ordinance in question." but also unconstitutional as it subjects the owners of tenement houses to criminal prosecution for non-payment of an obligation which is purely sum of money. or upon all persons of a certain class. however."27 Nor is the tax in question a poll tax. et al.22.30. It should be noted that in the assessment of real estate tax all parts of the building or buildings are included so that the corresponding real estate tax could be properly imposed. The appellant City takes exception to the conclusion of the lower court that the ordinance is not only oppressive because it "carries a penal clause of a fine of P200.While it is true that the plaintiffs-appellees are taxable under the aforesaid provisions of the National Internal Revenue Code as real estate dealers. ". The trial court brands the ordinance as violative of the rule of uniformity of taxation. the charter of Iloilo City29 empowers its municipal board to "fix penalties for violations of ordinances."25. supra. There is nothing inherently obnoxious in the exaction of license fees or taxes with respect to the same occupation. Mun.21. in conflict with that prohibition. If aside from the real estate tax the owner or owners of the tenement buildings should pay apartment taxes as required in the ordinance then it will violate the rule of uniformity of taxation.. and they must be the same kind or character of tax. by the same State. the imposition of the latter kind of tax being in no sensea double tax. if the owner or owners of the tenement buildings divided into apartments do not pay the tenement or apartment tax fixed in said ordinance. and a statute or ordinance which punishes the non-payment thereof by fine or imprisonment is not. The State may collect an ad valorem tax on property used in a calling. Government. 24 It is something not favored. "In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed twice when it should be taxed but once. are not of the same kind or character. The same tax may be imposed by the national government as well as by the local government. such as the requirement that taxes must be uniform. when it made the above ruling. there is no constitutional prohibition against double taxation in the Philippines. resident within a specified territory. which shall not exceed a fine of two hundred pesos or six months' imprisonment. 4. and at the same time impose a license tax on that calling. Board of Manila. express or implied. within the same jurisdiction or taxing district.

Mun. equality and uniformity of taxation is accomplished. vs.B. under the Local Autonomy Act which took effect on June 19. 32 So long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses similarly classified or situated. 5. The record was later reconstituted under Judge Ramon Blanco. J. of Roxas. 1959.L.33 The plaintiffs-appellees. while the ordinance in the case at bar was enacted pursuant to the provisions of the Local Autonomy Act. JJ. to overthrow the presumption that tax statutes are intended to operate uniformly and equally. and therefore was not available for consideration in the decision in L-12695 which was promulgated on March 23." . the ordinance in questionbeing valid. Dizon. are permitted to escape such imposition. 35." 31 The fact. Prov. therefore. of Palawan. The last important issue posed by the appellees is that since the ordinance in the case at bar is a mere reproduction of Ordinance 86 of the City of Iloilo which was declared by this Court in L-12695. for the same rule does not require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time." because "only the taxpayers of the City of Iloilo are singled out to pay taxes on their tenement houses. the appellees argue that there is "lack of uniformity" and "relative inequality. July 20. 1959. No pronouncement as to costs. and. This Court has already ruled that tenement houses constitute a distinct class of property.. under the provisions of section 2 of the Local Autonomy Act. Reyes. per Concepcion. 2 Nin Bay Mining Co. the complaint is hereby dismissed. local governments may now tax any taxable subject-matter or object not included in the enumeration of matters removed from the taxing power of local governments. It has likewise ruled that "taxes are uniform and equal when imposed upon all property of the same class or character within the taxing authority.Fernando and Capistrano.34. Footnotes 1 The record discloses that the delay caused in the lower court was due to the loss of the original record while the same was in the possession of the late Judge Perfecto Querubin. the decision in that case should be accorded the effect of res judicata in the present case or should constitute estoppel by judgment. as ultra vires. Concepcion. series of 1960. while citizens of other cities. Sanchez.: . It is our view that both assertions are undeserving of extended attention. that the owners of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in question is no argument at all against uniformity and equality of the tax imposition. and the said ordinance was enacted pursuant to the provisions of the City charter. To dispose of this contention.. and their power to tax was construed in strictissimi juris. J. 1965. as owners of tenement houses in the City of Iloilo. Makalintal. have not shown that the tax burden is not equally or uniformly distributed among them.Complementing the above ruling of the lower court.J... ACCORDINGLY. the judgment a quo is reversed.Prior to the enactment of the Local Autonomy Act the taxes that could be legally levied by local governments were only those specifically authorized by law. Neither is the rule of equality and uniformity violated by the fact that tenement taxesare not imposed in other cities. There is likewise no identity of cause of action in the two cases because the main issue in L-12695 was whether the City of Iloilo had the power under its charter to impose the tax levied by Ordinance 11. concur. supra. it suffices to say that there is no identity of subject-matter in that case andthis case because the subject-matter in L-12695 was an ordinance which dealt not only with tenement houses but also warehouses. . C.. Zaldivar. Moreover. L-20125.. where their councils do not enact a similar tax ordinance.

the ordinance should be deemed to come within the purview of the general rule. 1965). justness and uniformity of application are not disputed. Board. occassionally. Mun. under its provisions. Jan. C. 12. L-20125. etc... called by any name percentage tax or sales tax . Considering the indubitable policy expressly set forth in the Local Autonomy Act.N.comes under any of the specific exceptions listed in Section 2 of the Local Autonomy Act. by imprisonment of the person assessed. the sphere of autonomy of a chartered city in the enactment of taxing measures has been considerably enlarged. 57) . Not being excepted.. A property tax is ordinarily measured by the amount of property owned by the taxpayer on a given day. et al. and not on the total amount owned by him during the year.. 1967. it must be regarded as coming within the purview of the general rule. ". Board of the City of Iloilo. July 20. Jan. or in accordance with some other reasonable method of apportionment. Gruet. explicitly informed the House of Representatives when he urged the same to approve it. No. of Palawan. that the tax levied.. excepting those which are mentioned therein. an objection of such a generalized character deserves but scant sympathy from this Court.]. L-18290. et al. July 21. that.: .). Mun. ". .. 12. 31.. of Roxas. In the absence of a clear and specific showing that there was a transgression of a constitutional provision or repugnancy to a controlling statute."Neither the plaintiff nor the lower court maintains that the subject matter of the ordinance in question comes under any of the foregoing exceptions. Hence. Indeed. "Exceptio firmat regulum in casibus non excepti. The Mun. the tax so levied must be sustained as valid. 3 "Taxes on property are taxes assessed on all property or on all property of a certain class located within a certain territory on a specified date in proportion to its value. we have announced the doctrine that the grant of the power to tax to chartered cities under section 2 of the Local Autonomy Act is sufficiently plenary to cover "everything. vs. when the Local Autonomy Act was enacted. There is no showing.. Inc. and collected at appointed times. Mun." (51 Am. The question before this Court is one of power. the invocation of such a talismanic formula as "restraint of trade" without more no longer suffices. Jur.. J. 1963. 2264. It is ordinarily assessed at stated periods determined in advance.20 per picul. ".R. and." Since its public purpose. vs. the obligation to pay which is absolute and unavoidable and it is not based upon any voluntary action of the person assessed. such broad taxing authority has been implemented and vitalized by this Court. Hodges vs. Heretofore. per Castro." [Re: Ordinance imposing tax on all productions of centrifugal sugar (B-sugar) locally sold or sold within the Phil. Ormoc Sugar Co.. L-24322. to nullify a taxing ordinance. From and after June 19. under the rule "expressio unius est exclusio alterius". excepting those things which are mentioned therein. "In a number of decisions starting from City of Bacolod v." . Prov. which upon its passage became Republic Act No. L-18276. 1967. and we do not believe it is possible to show. per Fernando. J. assuming it ever did. local governments would be "able to do everything. 1959.. and its payment is usually enforced by sale of the property taxed. otherwise valid. Board of Ormoc City. 1967. L-18276. the sponsor of the bill.: ." subject only to the limitation that the tax so levied is for "public purposes.. As the maxim goes. G." (Re: Ordinance imposing a tax on sales or real estate property situated in the City of Iloilo. to Hodges vs. just and uniform" (Nin Bay Mining Co. Jan. of 1/2% of 1% of the contract price or consideration. at P." .

325-v26) . . Title of this Act. assessed."SECTION 1. 569. vs. Act 158. even though as between the landlord and the tenant they are the property of the tenant and may be removed by him at the termination of the lease. machinery and other improvements not hereinafter specially exempted. Jur. 149 Tenn. 13 Sec. it is said that an excise tax is a charge imposed upon the performance of an act. 11 Sec. 6 Commonwealth Act No." (33 Am. and all buildings and other structures affixed to the land. including land. and a judgment recovered in proceedings for enforcement of real estate tax is one in rem against the realty without personal liability against the owner. . 2d. Wadena County." . or to exercise a privilege. 12 Secs. Jur. Jur. 38. 31 of Com. Act 158 provides: "An annual tax of one per centum on the assessed value of all real estate in the city subject to taxation shall be levied by the city treasurer. citing Bank of Commerce & T. W. 229 Minn. 7 Com. Extension and remission of the tax. Incidence of real property tax. `SEC. Act 158. for an excise tax is a privilege tax. a separate assessment of the property of each shall be made. "The term "excise tax" is synonymous with "privilege tax".Except in chartered cities. vs. to pursue a business. Act 158 provides: "When it shall appear that there are separate owners of the land and the improvements thereon. 62. or calling. "Thus. 28 to 34. 38 of Com." . citing Land O'Lakes Dairy Co. 5 "SEC. sec. there shall be levied."A "real estate tax" is a tax in rem against realty without personal liability therefor on part of owner thereof. Act 158. Jur. 39 N. 286. 10 "Real estate. 438) Sec. and the two are often used interchangeably. and all rights and interests in such land.This Act shall be known as the Assessment Law. 263). and whether a tax is characterized in the statute imposing it as a privilege tax or an excise tax is merely a choice of synonymous words.. Com. Jur." . or the engaging in an occupation. 2. Senter. -. Act 158 provides: "All taxes on real estate for any year shall be due and payable on the first day of January and from this date such taxes together with all penalties accruing thereto shall constitute a lien on the property subject to such taxation. Co." (51 Am..". Com. 4 "The term "license tax" or "license fee" implies an imposition or exaction on the right to use or dispose of a property. and collected an annual ad valorem tax on real property. occupation." (36 Words and Phrases. 29. 53: "An ad valorem property tax is invariably based upon ownership of property. Annual tax and penalties. sections 28 to 53. for purposes of taxation. `. -. 8 9 51 Am. 164." . 38 of Com. 171." (51 Am." . 470 -. buildings. although of course the value may vary in accordance with such factor." (51 Am.An annual tax of one per centum on the assessed value of all real estate in the city subject to taxation shall be levied by the city treasurer. and is payable regardless of whether the property is used or not. includes all land within the district by which the tax is levied. 61) . 260 SW 144) . the enjoyment of a privilege.

Dec. 33 Am. or renting property (whether on their own account as principals or as owners of rental property or properties) is four thousand pesos or more but not exceeding ten thousand pesos. or by both such fine and imprisonment in the discretion of the court. and immigration brokers. a tenement house is different from hotel.: In this case the Supreme Court upheld the validity of Ordinance 3398 of the City of Manila.). commercial brokers. exchanging. 17 18 19 City of Iloilo vs. They have been established for different purposes. per Reyes.14 Sec. L-2947. 20 National Internal Revenue Code: . et al.. leasing. Fixed taxes. -. 88 Phil." 21 Punsalan. Jur. 845. medical practitioners. (3) Other fixed taxes. 2nd Ed. 1954.The following fixed taxes shall be collected as follows. Manila Race Horse Trainers Assn. 59-60. 11. 182(B)] of the National Internal Revenue Code requires the payment of taxes on occupation or professional taxes. and can only be removed by the payment of the tax and penalty. real estate brokers. the annual fixed tax to be collected shall be as follows: . 60. customs brokers. Webster's New International Dictionary. 14 Gratt (Va.. real estate dealers.00 or by imprisonment of not more than 6 months.On business . approved on July 25. if such annual income exceeds ten thousand pesos but does not exceed thirty thousand pesos. These are different business enterprises. "One hundred and fifty pesos. "Five hundred pesos.S. citing Eyre v. XXX XXX XXX "(s) Stockbrokers. selling. in the city and penalizes non-payment of the tax by a fine of not more than P200. 16 51 Am. 1959: "As may be seen from the definition of each establishment hereunder quoted. or boarding house. dental surgeons. 182. J. if the annual income from buying. 4th ed. Jur. L-12695. 2601. 492). Jacob. however. Jan.) 422.". although section 201 [now sec. Said Justice Reyes: "The argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city (1 Cooley on Taxation.. et al. vs. one hundred and fifty pesos: Provided. That in the case of real estate dealers. 1950. -. vs. . 73 Am. 56. 38 of Com. p. Mun. 367. De la Fuente. 46. if such annual income exceeds thirty thousand pesos. Remedios Sian Villanueva. Board of the City of Manila. imposing a municipal occupation tax on persons exercising various professions (lawyers.. 325-326. p. May 26. 51 Am. Act 158 provides: "Such lien shall be superior to all other liens. 1951. it being widely recognized that there is nothing obnoxious in the requirement thatlicense fees or taxes be . dealers in securities. March 23. et al.. 15 62 C. the amount stated being for the whole year. public accountants. etc. 95 Phil. when not otherwise specified: .. mortgages or incumbrances of any kind whatsoever..J. and . lodging house. pharmacists. Jur. "Three hundred pesos.. and shall be enforceable against the property whether in the possession of the delinquent or any subsequent owner. "SEC. L-4817.

J. city charters and ordinances. or parts thereof.S. City of Manila vs. 1956. L-6975.B. Oct. "Considering that appellant constructed her four-door "accessoria" purposely for rent or profit. that she manages her property herself. Com." ". Hawaiian- . Veronica Sanchez vs. Provided. 22 People vs. L-8799. wherein we held that it is a well-settled rule that license tax may be levied upon a business or occupation although the land or property used therein is subject to property tax. in sustaining the validity of the ordinance. who has paid the corresponding annual privilege tax on professions required by Sec. Act No. 131-132. 182 of the NIRC." The imposition of this kind of tax is in no sense called a double tax. Interisland Gas Service. promulgated May 27. held:. This view is erroneous because it is a well-settled rule that a license tax may be levied upon a business or occupation although the land or property used therein is subject to property tax.exacted with respect to the same occupation. 18. she is engaged in the leasing of real estate. Mendaros et al. so that to further subject its rentals to the "real estate dealers" tax amounts to double taxation." . per Bautista Angelo.shall be entitled to practice the profession for which he has been duly qualified under the law." .. 958-959. Act 1166. 97 Phil. Santiago Mendaros. approved on June 18. executive orders and regulations. per Reyes.. June 29. providing as follows: "Any provisions of existing laws. Congress passed Rep. Appeal from the decision of the CFI of Zambales. 1955. that she has been continuously leasing the same to third persons since its construction in 1947.)" . et al. 466. Jur. J. as well as income tax on the income derived therefrom.J. calling or activity by both the state and the political subdivision thereof. and that"the state may collect an ad valorem tax on property used in a calling. (51 Am. Act No. "Appellant argues that she is already paying real estate taxes on her property. in all parts of the Philippines without being subject to any other tax. it would be unfair and discriminatory to levy another tax on the owner of the fishpond because that would amount to double taxation.. Aug 31. to the contrary notwithstanding. for failure to pay the occupation tax imposed by a municipal ordinance on owners of fishponds on lands of private ownership. L-2910. 182(A)(3)(s)] of the Internal Revenue Code. as amended by Rep. 1954. every professional legally authorized to practice his profession. charge. 42. Sec. and that said leased holding appears to be her main source of livelihood. Meer. vs. since the land on which the fishpond is situated is already subject to land tax. the imposition of the latter kind of tax being in no sense a double tax. however. L-6975. Defendants-appellees were convicted by the JP Court of Palauig. 1955. Commissioner of Internal Revenue vs. 97 Phil. 341.00. J. and at the same time impose a license tax on the pursuit of that calling.. 1955. May 27. "The ground on which the trial court declared the municipal ordinance invalid would seem to be that.L. and is a real estate dealer as defined in section 194(s) [now. The Supreme Court. 24 Manufacturers' Life Insurance Co. 23 84 C. 687. That they have paid to the office concerned the registration fees required in their respective professions. It was also held that "the state may collect an ad valorem tax on property used in a calling. 1951. and at the same time impose a license tax on the pursuit of that calling". The Collector of Internal Revenue. L-7521. Zambales. and sentenced to pay a fine of P5. license or fee for the practice of such profession. This argument has already been rejected by this Court in the case of People vs. A month after the promulgation of the above decision.

"Double taxation should not be permitted unless the legislature has authority to impose it. 290. or mesne or final process"). except as it is limited or restrained by constitutional provisions. Rep. 57 LRA 922. 491. 961. Taxes. 1964. express or implied. Ex parte Mann. and in no way dependent upon the will or contract. do not rest upon contract. 39 Tex. it is generally held that there is nothing. it is held that double taxation is permissible. in general. 50 Ala. and that the municipality to which the tax is payable is not a creditor of the person assessed. "In some states where double taxation is not expressly prohibited. in the abscence of any express or implied constitutional prohibition against double taxation. . 27 51 Am. 40 ALR 73 (holding the provisions of an ordinance making the non-payment of an excise tax levied in pursuance of such ordinance a misdemeanor punishable by fine not in violation of the constitutional prohibition against the imprisonment of any person for "debt in a civil action. However." . sec. is permissible in the absence of express or implied constitutional prohibition. of the persons taxed. and since. Rep. 112 Ohio St.independently of whether or not the tax in question. City of Butuan. The Constitution of the Philippines. or necessarily unlawful. and is founded upon. In such case whether or not there should be double taxation is a matter within the discretion of the legislature. Constitution. on the other hand. St. They are obligations imposed upon citizens to pay the expenses of government. Cincinnati. on which we need not and do not express any opinion -. when considered in relation to the sales tax prescribed by Acts of Congress.C. express or implied. State. contract express or implied. since the taxing power is exclusively a legislative function. Then. City of Butuan.L. State. Voelkel v. "The second and last objections are manifestly devoid of merit. L-16315." . 374. A debt is a sum of money due by certain and express agreement. sec. et al. as part thereof. the general principle against delegation of legislative powers. 342. 133-134. it is absolute and unlimited. Rep. 147 NE 754. namely. Aug. VI." . 113. to prevent the imposition of more than one tax on property within the jurisdiction. supra: . 26 R. 12. citing Cousins v.Philippine Co. May 30.S. III. 25-26: "It is generally considered that a tax is not a debt. again.to which said theory does not apply . 64 Neb. 860-861. Indeed -.. vs. It originates in. "Double taxation. We have not adopted. the injunction against double taxation found in the Constitution of the United States and some States of the Union. Crim. par. L-22814.73 Am. 1968. legislative powers may be delegated to local governments . amounts to double taxation.in respect of matters of local concern." . Rosenbloom v.double taxation. 46 SW 828. Pepsi-Cola Bottling Co. 20 Am. is not forbidden by our fundamental law. 89 NW 1053. 22 (1) provides: "The rule of taxation shall be uniform. or not invalid or unconstitutional. in consequence of the theory of separation of powers is subject to one well-established exception.. 28. provided some other constitutional requirement is not thereby violated. 25 84 C. They are forced contributions. although not favored. of the Philippines vs. Pepsi-Cola Bottling Co. 1. Jur. as a requirement that taxes must be equal and uniform. as the power to tax twice is as ample as the power to tax once.J. 26 Art. Art.

or township. or township purpose must be uniform and equal throughout the city. for a single offense.. vs. Nichols. Jur. for example.G. 30 "To begin with the defendants' appeal. L-2947. we find that the lower court was in error in saying that the imposition of the penalty provided for in the ordinance was without the authority of law. Thus. vaudeville companies. poll taxes." . without regard to their property or the occupations in which they may be engaged. such as cinematographs. anda tax for a city. and boxing exhibitions and other kinds of amusements or places of amusement are taxed. 265 N.W. and only demands uniformity within the particular class.." Tan Kim Kee vs. section 21: "Except as otherwise provided by law.: "The rule of uniform taxation does not deprive Congress of the power to classify subjects of taxation. that "the fact that some places of amusement are not taxed while others. L-18080. resident within a specified territory. The last paragraph (kk) of the very section that authorizes the enactment of the ordinance (section 18 of the Manila Charter) in express terms also empowers the Municipal Board to "fix penalties for the violation of ordinances which not exceed to [sic] two hundred pesos fine or six months' imprisonment. "(aa) . It has also been said in this connection that the omission to tax any particular individual who may be liable does not render the whole tax illegal or void. 11. village. 47 LRA 68: "Taxes are uniform and equal when imposed upon all property of the same character within the taxing authority. 303. the pronouncement below that the ordinance in question is illegal and void because it imposes a penalty not authorized by law is clearly without legal basis. 32 Am. however. It does not mean." . This means. Jur. or upon all the persons of a certain class. village. vs." Applying this criterion to the present case. 29 Com. and subject to the conditions and limitations thereof." 33 84 C. and to fix penalties for the violation of ordinances which shall not exceed a fine of two hundred pesos or six months' imprisonment. April 22. or both such fine and imprisonment. May 31. . J. 1949]." Hence. as one court has graphically put it. Supp. 1963. to No. a tax for a county purpose must be uniform and equal throughout the county. citing Re Page.. [L-1104. however. et al. 88 Phil. Inc. it was said that there is equality and uniformity in taxation if all articles or kinds of property of the same class are taxed at the same rate.L.". 203. Uniformity of Operation Throughout Tax Unit. 31 51 Am. De la Fuente. — One requirement with respect to taxation imposed by provisions relating to equality and uniformity. 60 Kan. 59 P 478. 60: "In the case of Eastern Theatrical Co..S. theaters. 46 O. or. 203: "153. that a tax for a state purpose must be uniform and equal throughout the state. J. 842. Haggart v. that the taxes levied by or with respect to the various political subdivisions or taxing districts of the state must be at the same rate. or both such fine and imprisonment. Jan.." . p. the Municipal Board shall have the following legislative powers: . Nor does the rule require that taxes for the same purposes shall be imposed in different territorial subdivisions at the same time. 11. Alfonso..B. 158 (An Act Establishing a Form of Government for the City of Iloilo). Jur. per Reyes. Taxes of a specified amount upon each person performing a certain act or engaging in a certain business or profession are not. is no argument at all against equality and uniformity of the tax imposition.28 51 Am. which has been introduced into some state constitutions in express language. there would be discrimination if some boarding stables of the class used for the same number of horses were not taxed or were made to pay less or more than others. Act No. it was held in that case. Inc. 1951." Manila Race Horse Trainers Assn. theatrical shows. is that taxation must be uniform throughout the political unit by or with respect to which the tax is levied.J. for each offense. Court of Tax Appeals. that a man in one county shall pay the same rate of taxation for all purposes that is paid by a man in an adjoining county. 66-67. "Capitation or poll taxes are taxes of a fixed amount upon all persons. 77: "Equality in taxation is accomplished when the burden of the tax falls equally and impartially on all the persons and property subject to it [State ex rel.

C. City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. 10267. 27.. City of Baguio. 355]. City of Iloilo. and (3) it constitutes double taxation. .J. 66 N. L-4060. respondents-appellees. Manlapit. and G. The respondents. Inc. No. challenge the validity of said ordinance on the ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila. similarly situated. and G.G.A. species or items of property are selected to bear the whole burden of the tax. Teotimo A. 1952. Territory of Alaska. which should be equally subjected to it. while others. represented by the city fiscal. INC. Canneries v. Aug. The Association of Customs Brokers. (2) said ordinance offends against the rule of uniformity of taxation. 3379 passed by the Municipal Board of the City of Manila on March 24. Sept. so that no higher rate or greater levy in proportion to value is imposed on one person or species of property than on others similarly situated or of like character. INC. So the requirement is complied with when the tax is levied equally and uniformly on all subjects of the same class and kind and is violated if particular kinds.S.: This is a petition for declaratory relief to test the validity of Ordinance No. THE MUNICIPALITY BOARD. 2d. must operate alike on all persons. contend on their part that the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of Republic Act No. BAUTISTA ANGELO.C. or property. THE CITY ASSESSOR and THE CITY MAYOR. things.J." 34 84 C. also a public service operator of the trucks in said City. which is composed of all brokers and public service operators of motor vehicles in the City of Manila. nor does it constitute double taxation. and a liberal construction will be indulged in order to accomplish fair and equal taxation of all property within the state. 29. Republic of the Philippines SUPREME COURT Manila EN BANC G. and a tax. L-4376 May 22. 55 O. City of Lipa. Saldana vs. petitioners-appellants." 84 C." 35 Medina vs. vs. Serrano for appellees.R. are left untaxed. in order to be uniform.D. J. Alaska.S. MANLAPIT.. all of the City of Manila. 81: "There is a presumption the at tax statutes are intended to operate uniformly and equally [Alaska Consol. Wa Wa Yu vs. a member of said association. 409]. 1956.859. 16 F.. THE CITY TREASURER. 256]. and the cases cited therein. 79: "The rule of uniformity in taxation applies to property of like kind and character and similarly situated. L-9167. Roja for appellants. 1953 ASSOCIATION OF CUSTOMS BROKERS. Inc. 1950. and that the tax in question does not violate the rule of uniformity of taxation.

the Court of First Instance of Manila sustained the validity of the ordinance and dismissed the petition. The pertinent provisions are contained in section 70 (b) which provide in part: No further fees than those fixed in this Act shall be exacted or demanded by any public highway. and this rule is supported by some authorities." Considering the wording used in the ordinance in the light in the purpose for which the tax is created. and not by the name by which it is described. That nothing in this Act shall be construed to exempt any motor vehicle from the payment of any lawful and equitable insular. even though it is graduated . bridge or ferry. 409.. This provision is all-inclusive in that sense that it applies to all motor vehicles." (26 R. it has been held that "If a tax is in its nature an excise. it will be considered an excise. If it is clearly a property tax. even though nominally and in form it is a license or occupation tax. or by the mode adopted in fixing its amount. enjoyment of a privilege. local or municipal property tax imposed thereupon. as claimed by respondents? While as a rule an ad valorem tax is a property tax. or for the exercise of the profession of chauffeur. . and from the natural and legal effect of the language employed in the act or ordinance. maintenance and improvement of its streets and bridges. The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority conferred by section 18 (p) of Republic Act No. or for the operation of any motor vehicle by the owner thereof: Provided. if the tax is levied upon persons on account of their business. it will be so regarded. on the other hand. In this sense. . can we consider the tax thus imposed as property tax. and. Hence this appeal. (Act No. . Note that under the above section no fees may be exacted or demanded for the operation of any motor vehicle other than those therein provided." It is contended that this power is broad enough to confer upon the City of Manila the power to enact an ordinance imposing the property tax on motor vehicles operating within the city limits. Coming now to the ordinance in question. it will be construed as a license or occupation tax.The issues having been joined. Thus. 3992) which has a bearing on the power of the municipal corporation to impose tax on motor vehicles operating in any highway in the Philippines. the only exception being that which refers to the property tax which may be imposed by a municipal corporation. It also provides that the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be expended exclusively for the repair. Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a tax upon property. or the engaging in an occupation. L. the rule should not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. this provision should be construed as limiting the broad grant of power conferred upon the City of Manila by its Charter to impose taxes. C. privilege or act which is taxed. we find that its title refers to it as "An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila". 35-36. it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation. and that in its section 1 it provides that the tax should be 1 per cent ad valorem per annum. In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the Motor Vehicles Law. as amended.) It has also been held that The character of the tax as a property tax or a license or occupation tax must be determined by its incidents. but if it is really imposed upon the performance of an act. When section 18 of said Charter provides that the City of Manila can impose a tax on motor vehicles operating within its limit. however. Said section confers upon the municipal board the power "to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding. it can only refers to property tax as a different interpretation would make it repugnant to the Motor Vehicle Law.

we hereby declare the ordinance null and void. or on the gross receipts of the business. and which renders it offensive to the Constitution. There is no pretense that the ordinance equally applies to motor vehicles which come to Manila for a temporary stay or for short errands. Defendant-Appellant. for the reason that. concurring: I concur on the ground that it is a license tax. CITY OF LIPA. Plaintiff-Appellee. concur in the result. 3992) intends to prevent. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the word "operating" used therein. Bengzon and Tuason. vs. . L-9167. **** Republic of the Philippines SUPREME COURT Manila EN BANC [G. It does not distinguish between a motor vehicle for hire and one which is purely for private use. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to. This is precisely what the Motor Vehicle Law (Act No. Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. Neither does it distinguish between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to Manila and uses its streets and public highways. J.J.R. 1956. It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. This is an inequality which we find in the ordinance. municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing. (37 C. Reyes. maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). under said Act. concur. The fact that they are benefited by their use they should also be made to share the corresponding burden. Paras.J.] WE WA YU. And yet such is not the case. maintenance and improvement of the streets and bridges in said city... The word "operating" denotes a connotation which is akin to a registration. for under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees. While it refers to property tax and it is fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair.. This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. No. reversing the decision appealed from.according to the property used in such business. JJ. Separate Opinions FERIA. Jugo and Labrador. JJ. 172) The ordinance in question falls under the foregoing rules. C... Montemayor. September 27. and it cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. Wherefore.

resin. To recover the amount pain on the ground that the two ordinances are ultra vires. petroleum. In other words. foundries. 462. 462. (3) to regulate the business. which reads: chanroblesvirtuallawlibrary “SEC. nitroglycerine. Republic Act No. 457-A. imposing one-tenth (1/10) centavo per liter on the sale of gasoline and one-half (1/2) centavo per liter on the sale of alcohol.84 and such other fees as Plaintiff may have paid after the filing of the complaint. gasoline and the like. hemp. 1954. fix the license fee for. and on May 27. subject to the rules and regulations issued by the Director of Health in accordance with law. gasoline.” The above ordinances were enacted pursuant to section 15. and (4) to fix the location of the storage and sale of oil. and scrap factories. tanneries. renderies. or regulate the business affecting match factories. The City of Lipa put up the defense that the ordinances are valid because they were enacted pursuant to the power granted to it by its Charter. lumber yards. or all of any kindered type of combustible liquid made in any store or establishment by any person or entity within the City of Lipa. It does not possess the power to impose a tax on specific articles which may take the form of cralaw . as amended by Ordinance No. blacksmith shops. The parties submitted a joint motion for judgment on the pleadings.” It is clear from the above that the City of Lipa is given the power and authority (1) to tax. and other establishments likely to endanger the public safety or give rise to conflagrations or explosions. lumber yards. 162.84 as taxes levied under Ordinance No. turpentine. or any of the products thereof. 1953 the aggregate sum P733. embalmers. J. cotton. steam boilers. steam boilers. He paid under protest to the city treasurer during the period from October 24. and. regulate the business and fix the location of. gas. (2) to fix the license fee for. provides in section 1 as follows: chanroblesvirtuallawlibrary “SECTION 1. 15. otherwise known as Charter of the City of Lipa. it is given the power to tax.: Plaintiff is the owner and manager of a gasoline station located in the City of Lipa where gasoline. gas. — There is hereby imposed a tax of one tenth (1/10) centavo per liter on the sale of gasoline and one-half (1/2) centavo per liter on the sale of alcohol. gasoline. foundries. or petroleum that may be made in any store or establishment within the city. he brought the present action in the Court of First Instance of Batangas. as amended by Ordinance No. 1952 to September 30. blacksmith shops. benzine. of Republic Act No. fix the license fee for. kerosene. and of all other highly combustible or explosive materials. of the City of Lipa. tallow chandleries. oil. 162. Ordinance No. shipyards. the storage and the sale of oil. coal. the Municipal Board shall have the following legislative powers: chanroblesvirtuallawlibrary (p) To tax. the storage and sale of gunpowder. tar.DECISION BAUTISTA ANGELO. petroleum. General powers and duties of the Board. — Except as otherwise provided by law. petroleum and the like. Defendant took the case directly to this Court. shipyards. the court rendered judgment declaring the ordinances ultra vires and ordering Defendant to reimburse to Plaintiff the amount of P733. oil and the like are sold. 457-A. and subject to the conditions and limitations thereof. pitch. paragraph (p). match factories.

will reveal that the power given to the City of Baguio to tax. Republic Act No. the City of Baguio gets a share of 20 per cent of the amount of specific tax collected. 11. And the power when granted is to be construed strictissimi juris. the tax imposed is 1/10 centavo per liter on the sale of gasoline and 1/2 centavo per liter on the sale of alcohol. 74). There is a marked parallelism between the case of Medina. gas. It is the sense that the tax on manufactured oils and other fuels is imposed by the National Internal Revenue Code (section 142. Any doubt or ambiguity arising out of the term used in granting that power must be resolved against the municipality. most of the products mentioned in the charter. unlike a sovereign state. particularly gasoline and oil. ‘and such other businesses. (Supp. City of Baguio. Medina.specific tax. or a specific tax on the article therein enumerated? chanroblesvirtuallawlibrary We are inclined to uphold the latter view for the reason that the tax which they seek to collect is imposed by “some standard of weight or measurement” and not regardless of it. Gaz. to wit. 56). City of Baguio. Thus. wherein it was specifically provided that the general authority so conferred shall not include ‘percentage taxes and taxes on specified articles. 466. 472 which confers general authority upon municipal councils to levy taxes. An indication of the legislative intent on this matter is Commonwealth Act No. implications. subject to certain limitations. 48 Off. And it has been held that “A tax which imposes ‘a specific sum by the head or number. Gaz. trades and occupations as may be established or practised in the City. 11) 320. is a specific tax (61 C. supra and the present case.’ One reason for this undoubtedly is the fact that under section 142 of the Internal Revenue Code (Commonwealth Act No. 466. gasoline. Commonwealth Act No. of the Revised Administration Code.” . At any rate. Inferences. as amended by section 11. This is clearly inferred from a reading of said section and from the concluding sentence appearing therein. In order that such power may be exercised. It is. our considered opinion that Ordinance No. or petroleum.. No. or petroleum. and under section 361 of said code. and which requires no assessment beyond a listing and classification of the objects to be taxed”. It is settled that a municipal corporation. et al. following the rule already adverted to. It cannot be implied for the reason that a municipal corporation. or some standard of weight or measurement.’ In other words. are already specifically taxed.J.” It is therefore plain that the enactment of the ordinances in question is ultra vires. The tax is considered a specific tax if the amount is imposed per liter of volume capacity. the charter of the City of Baguio does not show plainly an intent to confer that power upon the City of Baguio and. the power to levy a percentage tax or a specified tax has been expressly withheld. deductions — all these — have no place in the interpretation of the taxing power of a municipal cooperations. 100 is ultra vires and has no force and effect. to license and to regulate only refers to the business of the taxpayer and not to the articles used in said business.. [Icard vs. 4769]. this doubt or ambiguity must be resolved against the city. as amended. et al. is clothed with no statute must plainly show an intent to confer that power or the municipality cannot assume it. vs. therefore. chan roblesvirtualawlibrary The question now to be determined is: Do the ordinances impose merely a tax on the business of selling and storing oil. 39). as amended by the Republic Act No. does not possess inherent power of taxation.. unlike a sovereign state. the grant must be clear. City Council of Baguio and the City of Baguio. In the Medina case we said: chanroblesvirtuallawlibrary “An examination of section 2553 (c). vs. 48 Off.

Endencia. concur... 1956 is hereby modified by reversing the decision appealed from and dismissing the case..Wherefore. JJ. Paras. are not open to the objection that they infringe upon the due process of law clause of the Constitution (Republic of the Philippines vs. The decision of this Court dated September 27. 934). 1435 providing in section 4 that Municipal boards of councils may. Considering that the tax imposed by the ordinances in question does not go beyond the limit of twenty-five per cent of the rates prescribed in section 142 and 145 of the National Internal Revenue Code. on manufactured oils sold or distributed within the limits of the city of municipality”. retroactively applied. Considering that revenue acts. supra. L-36081 April 24.J. without pronouncement as to costs. We Wa Yu vs. acting in the motion for reconsideration filed by Appellant. the Court adopted the following resolution: chanroblesvirtuallawlibrary Considering that on June 14. Montemayor. p. Padilla. notwithstanding the provisions of sections one hundred and forty-two and one hundred and forty-five of the National Internal Revenue Code. Concepcion. 1957 In G. levy an additional tax of not exceeding twenty-five per cent of the rates fixed in said sections. No. et al. as hereinabove amended. without costs. Angelina Oasan.B. and Felix. L-9167. C. 1956 Congress enacted Republic Act No. No. Labrador. Reyes.R. 1989 . J. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. the decision appealed from is affirmed.L.R. RESOLUTION February 25. City of Lipa.

monthly or yearly basis. . Failure to submit said list and to pay the corresponding amount within the period herein prescribed shall subject the operator to the penalties provided in this Code . period of lease.. In case of consistent failure to pay the percentage tax for the (3) consecutive months. FELICIANO. QUEZON CITY. .PROGRESSIVE DEVELOPMENT CORPORATION. . J. There is hereby imposed a five percent (5 %) tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon City. otherwise known as the Market Code of Quezon City. which reads: SECTION 1. respondent.. xxx xxx xxx SECTION 3.. xxx xxx xxx SECTION 4. Series of 1969. name of stallholder or lessee. as supervision fee. . Jalandoni. a certified list of stallholders showing the amount of stall fees or rentals paid daily by each stallholder. c. Herrera.. including revocation of permit to operate.. vs. Supervision Fee. 9236. petitioner .. indicating therein whether the same is on a daily...Privately owned and operated public markets shall submit monthly to the Treasurer's Office. the City Council of respondent Quezon City adopted Ordinance No.. 3. amount of rental. . owner and operator of a public market known as the "Farmers Market & Shopping Center" filed a Petition for Prohibition with Preliminary Injunction against respondent before the then Court of First Instance of Rizal on the ground that the . For the effective implementation of this Ordinance. a monthly certified list of stallholders of lessees of space in their markets showing . on 23 March 1972. b. xxx xxx xxx 2 On 15 July 1972. Section 3 of which provided: Sec.. Del Castillo & Associates for petitioner. Series of 1972.. petitioner Progressive Development Corporation. . and shall pay 10% of the gross receipts from stall rentals to the City.. : a. 7997..1 The Market Code was thereafter amended by Ordinance No. owners of privately owned public markets shall submit .: On 24 December 1969. the City shall revoke the permit of the privately-owned market to operate and/or take any other appropriate action or remedy allowed by law for the collection of the overdue percentage tax and surcharge...

but rather a privilege tax or license fee which local governments. on 25 September 1972. through the City Fiscal. had no personality to question. game. contended that it had authority to enact the questioned ordinances. are empowered to impose and collect. The Solicitor General also filed an Answer arguing that petitioner. authorizes the City Council: xxx xxx xxx (b) To provide for the levy and collection of taxes and other city revenues and apply the same to the payment of city expenses in accordance with appropriations. as amended. as amended. Two (2) days later. poultry. 2264. Having failed to obtain reconsideration of said decision. otherwise known as the Revised Charter of Quezon City. 537. is comprehensive: the grant of authority is not only" [to] regulate" and "fix the license fee. preparation and sale of meat. municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. petitioner came to us on the present Petition for Review. 9236 for the months of June to September 1972. and was estopped from questioning. alleging that the material facts had been admitted by the parties. provides that: Any provision of law to the contrary notwithstanding.. like respondent. the lower court dismissed the petition. lard vegetables. petitioner alleged having paid under protest the five percent (5%) tax under Ordinance No. butter. or exercising privileges in chartered cities.. We begin with the fact that Section 12. all chartered cities. municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city. maintaining that the tax on gross receipts imposed therein is not a tax on income. not having paid the ten percent (10%) supervision fee prescribed by Ordinance No. On 21 October 1972. cheese. fix the license fee. the municipal council of the . (c) To tax. 4 The scope of legislative authority conferred upon the Quezon City Council in respect of businesses like that of the petitioner. fish. In its Supplemental Petition of 23 September 1972. the same being expressly prohibited by Republic Act No. that the tax on gross receipts was not a tax on income but one imposed for the enjoyment of the privilege to engage in a particular trade or business which was within the power of respondent to impose. otherwise known as the Local Autonomy Act. In its Answer. Section 2 of Republic Act No. 7997. ruling 3 that the questioned imposition is not a tax on income. Article III of Republic Act No. its validity. petitioner moved for judgment on the pleadings. 2264. bread and other provisions." but also " to tax" 5 Moreover. and regulate the business of the following: . of a license fee. The only issue to be resolved here is whether the tax imposed by respondent on gross receipts of stall rentals is properly characterized as partaking of the nature of an income tax or. respondent.supervision fee or license tax imposed by the above-mentioned ordinances is in reality a tax on income which respondent may not impose. alternatively.

but if regulation is the primary purpose. profession or occupation being conducted within the city. fish. 2264 confers upon local governments broad taxing authority extending to almost "everything. municipality or municipal district may levy or impose any of the following: xxx xxx xxx (g) Taxes on income of any kind whatsoever. however. or the municipal district council of the municipal district. a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power." 15 . 11 When an activity.municipality. Provided. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation. morals. the imposition questioned must relate to an occupation or activity that so engages the public interest in health. That no city. occupation or profession is of such a character that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health. the legislature may provide that such inspection or supervision or other form of regulation shall be carried out at the expense of the persons engaged in such occupation or performing such activity. or the general welfare. 7350 passed on 30 January 1967 by respondents's local legislative body authorizing petitioner to establish and operate a market with a permit to sell fresh meat. operation and maintenance of markets in Quezon City. morals and safety. The term "tax" frequently applies to all kinds of exactions of monies which become public funds. if the generating of revenue is the primary purpose and regulation is merely incidental. municipality or municipal district and otherwise to levy for public purposes just and uniform taxes licenses or fees: . Petitioner... municipality or municipal district. being a return from capital invested in the construction of the Farmers Market. the fact that incidentally revenue is also obtained does not make the imposition a tax.. safety and development as to require regulation for the protection and promotion of such public interest. poultry and other foodstuffs. rules and regulations prescribed for the establishment. 14 The same resolution imposed upon petitioner. 10 To be considered a license fee. the "Farmers Market & Shopping Center" was built by virtue of Resolution No. 13 In the case at bar. insist that the "supervision fee" collected from rentals. the imposition is a tax. as a condition for continuous operation.. however. 12 Accordingly. and that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision has been paid. 7 Both the Local Autonomy Act and the Charter of respondent clearly show that respondent is authorized to fix the license fee collectible from and regulate the business of petitioner as operator of a privately-owned public market. taking into account not only the costs of direct regulation but also its incidental consequences as well. and thus beyond the latter's competence. one of those expressly excepted from respondent's taxing authority." does not transgress any constitutional provision and is not repugnant to a controlling statute. while the latter is imposed under the taxing power primarily for purposes of raising revenues. practically operates as a tax on income. excepting those which are mentioned therein. Petitioner cites the same Section 2 of the Local Autonomy Act which goes on to state: 8 . 6 It is now settled that Republic Act No. 9 Thus. to regulate and impose reasonable fees for services rendered in connection with any business. to collect fees and charges for service rendered by the city. just and uniform. the imposition must also bear a reasonable relation to the probable expenses of regulation." provided that the tax levied is "for public purposes. the obligation to "abide by and comply with the ordinances.

Local' governments are allowed wide discretion in determining the rates of imposable license fees even in cases of purely police power measures. or confiscatory. The question of reasonableness though is open to judicial inquiry.The "Farmers' Market and Shopping Center" being a public market in the' sense of a market open to and inviting the patronage of the general public. the maintenance of sanitary and hygienic conditions in the market.. petitioner argues that respondent is without power to impose a gross receipts tax for revenue purposes absent an express grant from the national government. even though privately owned. compliance of all food stuffs sold therein with applicable food and drug and related standards. applying the standards set forth above. it has not been suggested that such basis has no reasonable relationship to the probable costs of regulation and supervision of the petitioner's kind of business. which warrants close supervision and control by the respondent City. 18 it nevertheless will be presumed to be reasonable. The use of the gross amount of stall rentals as basis for determining the collectible amount of license tax. equivalent to or quite the same as the operation of a government-owned market. there must be a statutory grant for a local government unit to impose lawfully a gross receipts tax. as correctly noted by the Solicitor General. instead of one of regulation under the police power. however. Courts will go slow in writing off an ordinance as unreasonable unless the amount is so excessive as to be prohibitory. . that unit not having the inherent power of taxation. 16 The operation of a privately owned market is. principally. Moreover. the regulatory power of the respondent City and where that regulatory power is expressly accompanied by the taxing power. not a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act. for the prevention of fraud and imposition upon the buying public.g. Finally. what we started with should be recalled here: the authority conferred upon the respondent's City Council is not merely "to regulate" but also embraces the power "to tax" the petitioner's business. and so forth. in the absence of proof as to particular municipal conditions and the nature of the business being taxed as well as other detailed factors relevant to the issue of arbitrariness or unreasonableness of the questioned rates. upon the one hand. oppressive. petitioner's operation thereof required a license issued by the respondent City. i..e. but rather a license tax or fee for the regulation of the business in which the petitioner is engaged. The lower court correctly held that the gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due respondent to cover the latter's administrative expenses. 17 for the protection of the health of the public by insuring. both are established for the rendition of service to the general public. Much should be left thus to the discretion of municipal authorities. We believe and so hold that the five percent (5%) tax imposed in Ordinance No. the higher the amount of stall rentals. While it is true that the amount imposed by the questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition. For. and the higher the volume of goods sold in such private market. 21 The rule. Upon the other hand. ordinarily. 9236 constitutes. A rule which has gained acceptance is that factors relevant to such an inquiry are the municipal conditions as a whole and the nature of the business made subject to imposition. for regulation and supervision of the sale of foodstuffs to the public. unreasonable. arbitrary. 20 Petitioner has not shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly disproportionate to the costs of the regulatory service being performed by the respondent as to compel the Court to characterize the imposition as a revenue measure exclusively. the greater the extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public. not a tax on income. the higher the aggregate volume of foodstuffs and related items sold in petitioner's privately owned market. 19 Thus: [A]n ordinance carries with it the presumption of validity. was done principally in the exercise of the respondent's police power. As a general rule. convert or render the license tax into a prohibited city tax on income. finds no application in the instant case where what is involved is an exercise of. does not by itself. the issuance of which. e.

4 46 Official Gazette 4732 (1950). Certain portions of the Charter had been amended by R. p 2418 (1973). supra. Pacific Commercial Co. R. 145. 49 Phil. No. 14-15. 917 (1927)..A. SO ORDERED.D.. did not introduce any change to the portion quoted above. 104 Phil. 2264 has been amended by R. 6 Section 2 of R. 2264 was further amended by P. 14 SCRA 660 (1965). v. at 134-135. Footnotes 1 Rollo. note 6. Republic v... 73 Phil. Municipal Board of the City of Iloilo. 26 SCRA 578 (1968). v. 10 Manila Electric Company v. 9 Compania General de Tabacos de Filipinas v. concur. in this connection. 11 City of Iloilo v. 133 (1941). 8 SCRA 370 (1963). 917 (1927). Quezon City. et. 13 Serafin Saldana v. 62 Official Gazette. C. 32 SCRA 215 (1970). p. . The amendatory law. See also C. Philippine Rabbit Bus Lines. El Auditor General y La Comision de Servicios Publicos. 7126 (1968). 10. 7 Nin Bay Mining Co.A. City of Manila. et al. 337 (1959). p. 5 See. 8616 (1966).ACCORDINGLY. 65 Official Gazette. Italics supplied. JJ. City of Iloilo. v. Hodges v. Bidin and Cortes. pp. 2 Records on Appeal. 4497. 3 Ibid. Gutierrez. (1958). 15 Ibid. 49 Phil. Fernan. 12 Manila Electric Company vs. 118 Phil. 14 Record on Appeal. underscoring supplied. and Villanueva v. 383. Underscoring supplied. pp.A. 19 SCRA 28 (1967).N. Municipality of Roxas.. Romualdez. which however did not affect the abovequoted portion. Italics supplied. is hereby AFFIRMED and the Court Resolved to DENY the Petition for lack of merit. 102. 105 Phil. 69 Official Gazette. p. Pacific Commercial Co. Romualdez. al. Villanueva. p. the Decision of the then Court of First Instance of Rizal. 58-68.A. Jr. El Auditor General y la Comision de Servicios Publicos. however. Branch 18. Underscoring supplied. 8 supra. City of Iloilo. 28.J. 5541.

16 In City of Jacksonville, et al. v. Ledwith 7 So. at 892 [1890]; 26 Fla. 163, it was held that a permit to establish a market was: "from the nature of a market, a license. It is a permit to do something which could not be done before without such permit, and hence is the grant of a license. x x x [T]he power to establish markets is within the police power, and [thus is] x x x the power to charge, as a police regulation, a fee for the permit or license for selling meats or vegetables therein, x x x. The fee, however, is not a tax for revenue, but a charge under the police power, and its amount is to be controlled by the principles governing in such cases." 17 Brief for the Respondent, pp. 6-7; Rollo, p. 172. 18 E.g., Calalang v. Lorenzo and Villar, 97 Phil. 212 (1955). 19 Procter & Gamble PMC v. Municipality of Jagna 94 SCRA 894 (1979); Northern Phil. Tobacco Co. v. Municipality of Agoo, 31 SCRA 304 (1970); and San Miguel Brewery, Inc. v. City of Cebu, 43 SCRA 275 (1972). 20 Victorias Milling Co., Inc. v. Municipality of Victorias, Negros Occidental, 25 SCRA 192 at 205 (1968), citing 9 McQuillin Municipal Corporations, 3rd ed., at 65. In Atkins v. Philips, 8 So. at 431 (1890); 26 Fla. 281, the Supreme Court of Florida held: 21 City of Ozamis v. Lumapas, 65 SCRA 33 (1975). Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-16619 June 29, 1963

COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee, vs. CITY OF MANILA, ET AL., defendants-appellants. Ponce Enrile, Siguion Reyna, Montecillo and Belo for plaintiff-appellee. City Fiscal Hermogenes Concepcion, Jr. and Assistant City Fiscal M. T. Reyes for defendants-appellants. DIZON, J.: Appeal from the decision of the Court of First Instance of Manila ordering the City Treasurer of Manila to refund the sum of P15,280.00 to Compania General de Tabacos de Filipinas. Appellee Compania General de Tabacos de Filipinas — hereinafter referred to simply as Tabacalera — filed this action in the Court of First Instance of Manila to recover from appellants, City of Manila and its Treasurer, Marcelino Sarmiento — also hereinafter referred to as the City — the sum of P15,280.00 allegedly overpaid by it as taxes on its wholesale and retail sales of liquor for the period from the third quarter of 1954 to the second quarter of 1957, inclusive, under Ordinances Nos. 3634, 3301, and 3816.

Tabacalera, as a duly licensed first class wholesale and retail liquor dealer paid the City the fixed license fees prescribed by Ordinance No. 3358 for the years 1954 to 1957, inclusive, and, as a wholesale and retail dealer of general merchandise, it also paid the sales taxes required by Ordinances Nos. 3634, 3301, and 3816.1äwphï1.ñët In its sworn statements of wholesale, retail, and grocery sales of general merchandise from the third quarter of 1954 to the second quarter of 1957, inclusive, Tabacalera included its liquor sales of the same period, and it is not denied that of the taxes it paid on all its sales of general merchandise, the sum of P15,280.00 subject to the action represents the tax corresponding to the liquor sales aforesaid. Tabacalera's action for refund is based on the theory that, in connection with its liquor sales, it should pay the license fees prescribed by Ordinance No. 3358 but not the municipal sales taxes imposed by Ordinances Nos. 3634, 3301, and 3816; and since it already paid the license fees aforesaid, the sales taxes paid by it — amounting to the sum of P15,208.00 — under the three ordinances mentioned heretofore is an overpayment made by mistake, and therefore refundable. The City, on the other hand, contends that, for the permit issued to it granting proper authority to "conduct or engage in the sale of alcoholic beverages, or liquors" Tabacalera is subject to pay the license fees prescribed by Ordinance No. 3358, aside from the sales taxes imposed by Ordinances Nos. 3634, 3301, and 3816; that, even assuming that Tabacalera is not subject to the payment of the sales taxes prescribed by the said three ordinances as regards its liquor sales, it is not entitled to the refund demanded for the following reasons:. (a) The said amount was paid by the plaintiff voluntarily and without protest; (b) If at all the alleged overpayment was made by mistake, such mistake was one of law and arose from the plaintiff's neglect of duty; . (c) The said amount had been added by the plaintiff to the selling price of the liquor sold by it and passed to the consumers; and (d) The said amount had been already expended by the defendant City for public improvements and essential services of the City government, the benefits of which are enjoyed, and being enjoyed by the plaintiff. It is admitted that as liquor dealer, Tabacalera paid annually the wholesale and retail liquor license fees under Ordinance No. 3358. In 1954, City Ordinance No. 3634, amending City Ordinance No. 3420, and City Ordinance No. 3816, amending City Ordinance No. 3301 were passed. By reason thereof, the City Treasurer issued the regulations marked Exhibit A, according to which, the term "general merchandise as used in said ordinances, includes all articles referred to in Chapter 1, Sections 123 to 148 of the National Internal Revenue Code. Of these, Sections 133-135 included liquor among the taxable articles. Pursuant to said regulations, Tabacalera included its sales of liquor in its sworn quarterly declaration submitted to the City Treasurer beginning from the third quarter of 1954 to the second quarter of 1957, with a total value of P722,501.09 and correspondingly paid a wholesaler's tax amounting to P13,688.00 and a retailer's tax amounting to P1,520.00, or a total of P15,208.00 — the amount sought to be recovered. It appears that in the year 1954, the City, through its treasurer, addressed a letter to Messrs. Sycip, Gorres, Velayo and Co., an accounting firm, expressing the view that liquor dealers paying the annual wholesale and retail fixed tax under City Ordinance No. 3358 are not subject to the wholesale and retail dealers' taxes prescribed by City Ordinances Nos. 3634, 3301, and 3816. Upon learning of said opinion, appellee stopped including its sales of liquor in its quarterly sworn declarations submitted in accordance with the aforesaid City Ordinances Nos. 3634, 3301, and 3816, and on December 3, 1957, it addressed a letter to the City Treasurer demanding refund of the alleged overpayment. As the claim was disallowed, the present action was instituted.

The term "tax" applies — generally speaking — to all kinds of exactions which become public funds. The term is often loosely used to include levies for revenue as well as levies for regulatory purposes. Thus license fees are commonly called taxes. Legally speaking, however, license fee is a legal concept quite distinct from tax; the former is imposed in the exercise of police power for purposes of regulation, while the latter is imposed under the taxing power for the purpose of raising revenues (MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 26). Ordinance No. 3358 is clearly one that prescribes municipal license fees for the privilege to engage in the business of selling liquor or alcoholic beverages, having been enacted by the Municipal Board of Manila pursuant to its charter power to fix license fees on, and regulate, the sale of intoxicating liquors, whether imported or locally manufactured. (Section 18 [p], Republic Act 409, as amended). The license fees imposed by it are essentially for purposes of regulation, and are justified, considering that the sale of intoxicating liquor is, potentially at least, harmful to public health and morals, and must be subject to supervision or regulation by the state and by cities and municipalities authorized to act in the premises. (MacQuillin, supra, p. 445.) On the other hand, it is clear that Ordinances Nos. 3634, 3301, and 3816 impose taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila by virtue of its power to tax dealers for the sale of such merchandise. (Section 10 [o], Republic Act No. 409, as amended.). Under Ordinance No. 3634 the word "merchandise" as employed therein clearly includes liquor. Aside from this, we have held in City of Manila vs. Inter-Island Gas Service, Inc., G.R. No. L-8799, August 31, 1956, that the word "merchandise" refers to all subjects of commerce and traffic; whatever is usually bought and sold in trade or market; goods or wares bought and sold for gain; commodities or goods to trade; and commercial commodities in general. That Tabacalera is being subjected to double taxation is more apparent than real. As already stated what is collected under Ordinance No. 3358 is a license fee for the privilege of engaging in the sale of liquor, a calling in which — it is obvious — not anyone or anybody may freely engage, considering that the sale of liquor indiscriminately may endanger public health and morals. On the other hand, what the three ordinances mentioned heretofore impose is a tax for revenue purposes based on the sales made of the same article or merchandise. It is already settled in this connection that both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation (Bentley Gray Dry Goods Co. vs. City of Tampa, 137 Fla. 641, 188 So. 758; MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 83). This is precisely the case with the ordinances involved in the case at bar. Appellee's contention that the City is repudiating its previous view — expressed by its Treasurer in a letter addressed to Messrs. Sycip, Gorres, Velayo & Co. in 1954 — that a liquor dealer who pays the annual license fee under Ordinance No. 3358 is exempted from the wholesalers and retailers taxes under the other three ordinances mentioned heretofore is of no consequence. The government is not bound by the errors or mistakes committed by its officers, specially on matters of law. Having arrived at the above conclusion, we deem it unnecessary to consider the other legal points raised by the City. WHEREFORE, the decision appealed from is reversed, with the result that this case should be, as it is hereby dismissed, with costs. Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes, Regala and Makalintal, JJ., concur. Bengzon, C.J. and Concepcion, J., took no part.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-15351 January 28, 1961

MORCOIN CO., LTD. and SUTER, INC., plaintiffs-appellees, vs. THE CITY OF MANILA, THE MAYOR OF MANILA, THE CITY TREASURER and THE CHIEF OF POLICE OF MANILA, defendants-appellants. Celestino Sabate and Valentin A. Francisco for plaintiff-appellees. City Fiscal Hermogenes Concepcion, Jr. and Assistant Fiscal Artemio Cusi for defendants-appellants. GUTIERREZ DAVID, J.: Direct appeal from a decision of the Court of First Instance of Manila, Branch IV, declaring Ordinance No. 3628 of the City of Manila null and void. Morcoin Co., Ltd., and Suter, Inc., are owners and operators of automatic phonograph machines, more popularly known as juke boxes, in the City of Manila. As such owners and operators, they paid an annual permit fee of P5 for each machine, and a similar amount whenever a juke box is transferred to a different location. In compliance with Sections 773 and 774 of Ordinance No. 3347, they also paid an additional sum of P50 per annum as license fee for the installation and use of each juke box machine. On February 2, 1954, the Mayor of the City of Manila, in order to curb the use of pinball machines which "have conduced to promote idleness among an increasing number of city residents", recommended to the Municipal Board the further amendment of Sections 773 and 774 of Ordinance No. 1600 by restricting the operation or maintenance of said machines within a specified radius from certain designated places and "by making the rate of license fees more prohibitive." Emphasizing that "pinball machines contribute to moral delinquency", the City Mayor, on February 19, 1954, sent a " 1st TRACER" to the Municipal Board urging the prompt enactment of the proposed amendment to said sections 773 and 774. Five days thereafter, the Board's Committee on Laws sharing the same views of the City Mayor about the deleterious effects" which pinball machines produce, recommended, on second indorse 312 ment,the approval of the proposed amendment. Acting upon that recommendation, the Municipal Board of the City of Manila, on March 19, 1954, enacted Ordinance No.. 3628, containing the proposed amendment, which was approved by the City Mayor on the following day. See. 773 and 774 of Ordinance No. 1600 as amended by ordinance No. 3628 read as follows: SEC. 773. Licenses. — No person, entity or corporation shall install or cause to be installed for the use of the public for compensation any mechanical contrivance or automatic apparatus which functions through the introduction of money not otherwise prohibited by the law of weights and measures and not a gambling device, for purposes of amusement or of confronting the weight of persons or things, or printing letters or numbers, or displaying features inside the apparatus or reproducing recorded music, including other kinds of machines or apparatus without having first obtained a license therefor from the City Treasurer. Such license must be posted on the apparatus concerned; Provided, that the operation or maintenance of pinball machines, not otherwise falling under the category of gambling device shall not be allowed within a radius of two hundred (200) meters from any church, hospital, institution of learning, public market, plaza, and government buildings.

Sec 774. Fees. — There shall be paid for every license granted for the installation and use of an apparatus provided in his chapter, an annual fee of P300.00 which is payable in advance; Provided, that person-coin operated weighing or scale machines shall pay only an annual fee of P12.00, payable in advance." The validity of the above ordinance was contested by a group of owners and operators of pinball machines who Call themselves "Recreation and Amusement Association of the Philippines" before the Court of First Instance of Manila, but that court dismissed the action, it being of the opinion that the said ordinance was valid. On September 24, 1957, Morcoin Co., Ltd., and Suter, Inc., the owners and operators, as already stated, of juke box machines in the City of Manila brought an action in the Court of First Instance of Manila, its Mayor, Treasurer and Chief of Police, assailing the validity of Ordinance No. 628 on the ground that the license fee of P300 imposed by the said ordinance upon juke box machines is exorbitant, excessive, confiscatory and substantially disproportionate to the reasonable expenses of issuing the license for and regulating the said machines. The defendants, thru the City Fiscal, filed their answer denying the material allegations of the complaint and interposed a counter-claim for plaintiffs' failure to pay their outstanding obligations arising under Ordinance No. 3628. By way of special defenses, defendants alleged that the complaint states no cause of action, because the validity of Ordinance No. 3628 has already been upheld in the case of Recreation and Amusement Association of the Philippines vs. City of Manila, et al., (G.R. No. L.7922, February 22, 1957), and that the operation of automatic phonograph machines is a non-useful business upon which a large license fee may be imposed. After trial, the lower court rendered judgment declaring Ordinance No. 3628 null and void and enjoining the enforcement of the same in connection with plaintiffs' business. Hence this appeal. The appeal is without merit. There can be no question that Sections 773 and 774 of Ordinance No. 1600, as amended by Ordinance No. 3628, was enacted pursuant to section 18 [1] of the Revised Charter of the City of Manila (Republic Act No. 409 as amended), which provides that the Municipal Board has the legislative power "to regulate and fix the license fees for . . . slot machines . . .". The power to regulate and impose license fee for the operations of slot machines — which include juke box machines, pinball machines and other coinoperated contrivances-should not, however, be construed as including the power to impose license taxes for revenue purposes. Indeed, a cursory reading of the legislative powers of the Municipal Board enumerated in section 18 of the City's Revised Charter shows that the power to tax is given where it was intended to be exercised and is not given where it was not so designed. As the authority was withheld, it must logically result that the power granted under the above-quoted provision of the City's Charter is purely regulatory for police purposes. (Pacific Commercial Co. vs. Romualdez and Alfonso, 49 Phil. 917; Hercules Lumber vs. Municipality of Zamboanga, 55 Phil. 653.) Such being the case, the amount of license fees that may be imposed upon juke box machines and other coin-operated contrivances cannot be prohibitive, extortionate, confiscatory or in an unlawful restraint of trade, but should be approximately commensurate with and sufficient to cover all the necessary or probable expenses of issuing the license and of such inspection, regulation and supervision as may be lawful. (Cu Unjieng vs. Patstone, 42 Phil. 818; City of Iloilo vs. Villanueva, G.R. No. L.12695, March 23, 1959; 33 Am. Jur. 367; 53 C.J.S. 517; See also the cases cited therein.) Any ordinance which imposes a license fee which is substantially in excess of the reasonable expense of issuing the license and regulating the occupation to which it pertains, is invalid. (25 Am. Law and Proc. 611; 28 id. 749, 750.) In the present case, we are inclined to agree with the trial court that the amount of P300 imposed by Ordinance No. 3628 as license fee for the installation and use of juke box machines is unreasonable and far exceeds the expenses of issuing the license and of regulating their operation. It will be observed that the ordinance in question does not even provide for inspection and supervision of each machine installed. And the Committees on Laws and Finance of the Municipal Board of the City of Manila themselves.which conducted a public hearing in connection with the petition filed during the pendency of this, case by some juke box operators found that juke box operators would not make any profit by paying the license fee of P300, and that the 'said amount of P300 is prohibitory and suppressive. 1 This finding is supported by the

record, for it was shown that two of plaintiffs' juke box machines, after deducting depreciation and operating expenses, but before the payment of permit and license fees, had an annual income of only about P211. In view of these circumstances, it is obvious that the amount of P300 charged as license fee is excessive and cannot be justified. In this connection, it should be stated that although the presumption is always in favor of the validity or reasonableness of the ordinance, such presumption must nevertheless be set aside when the invalidity or unreasonableness appears on the face of the ordinance itself or is established by proper evidence. It is argued that the business of operating juke box machines is a non-useful occupation and consequently the amount of license fee that may be imposed thereon may be very large without necessarily being considered unreasonable. We do not think it is correct to say that the operation of juke box machines is a non-useful occupation. The Committees on Laws and Finance of the Municipal Board of Manila themselves, in their joint report submitted to the Board, after public hearing, stated that the operation of juke boxes is "legitimate, harmless and of some cultural value." It is gratuitous and unfair to brand juke boxes as not contributing to the economic or moral wealth of the individual or of the nation, simply because the said contrivance may be found in nightclubs and bars where dancing is indulged in. Defendants cite the case of Recreation and Amusement Association of the Philippines vs. City of Manila, et al., G. R. No. L.7922, February 22, 1957), where this Court upheld the dismissal of the complaint, contesting the validity of Ordinance 3628. The main issue in that case, however, was the legal capacity of the plaintiff to sue, which was not registered in accordance with law. Besides, the said case involved the restriction of the use of pinball machines, which admittedly produce deleterious effects among city residents. Such machines have in fact been declared by this Court to be gambling devices which may be suppressed by ordinance. (Uy Ha vs. City of Manila, G.R. Nos. L-14149 and L-14069, May 30, 1960.) Defendants likewise cite the case of the Universal Picture Corporation vs. Romualdez (52 Phil. 576), wherein an ordinance of the City of Manila imposing the license fee of Pl,800 for first class cinematographs was held reasonable. The case cited is not in point. The ordinance there in question provided for police and fire protection as well is the inspection and supervision of wires in electrical installations, and the license fees fixed were charged only with a view of covering the expenses therefor. IN VIEW OF THE FOREGOING, the decision appealed from declaring Ordinance No. 2628 of the City of Manila invalid is hereby affirmed, with costs against appellants. Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes and Dizon, JJ., concur. Barrera, J., reserves his vote.

Footnotes
1

In view of this finding, the matter was referred to the City Treasurer for comment and recommendation as to what would be reasonable and commensurate with the necessary expenses of licensing and supervision. On the basis of the ocular inspection conducted by the deputies of the City Treasurer, the latter official recommended that the amount of P100 per annum would be reasonable for juke boxes in nightclubs.and other places 'where dancing is allowed and P15 for juke boxes in restaurants or places where food and drinks are served. Agreeing with the City Treasurer, the Committee on Ways and Means of the Municipal Board of the City of Manila recommended the approval of a proposed ordinance imposing a license fee of P100 on juke box machines. The proposed ordinance was enacted by the Municipal Board on September 11, 1959, but it was never approved by the City Mayor.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-29646 November 10, 1978 MAYOR ANTONIO J. VILLEGAS, petitioner, vs. HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO ARCA, respondents. Angel C. Cruz, Gregorio A. Ejercito, Felix C. Chaves & Jose Laureta for petitioner. Sotero H. Laurel for respondents.

FERNANDEZ, J.: This is a petition for certiorari to review tile decision dated September 17, 1968 of respondent Judge Francisco Arca of the Court of First Instance of Manila, Branch I, in Civil Case No. 72797, the dispositive portion of winch reads. Wherefore, judgment is hereby rendered in favor of the petitioner and against the respondents, declaring Ordinance No. 6 37 of the City of Manila null and void. The preliminary injunction is made permanent. No pronouncement as to cost. SO ORDERED. Manila, Philippines, September 17, 1968. (SGD.) FRANC ISCO ARCA Judge 1 The controverted Ordinance No. 6537 was passed by the Municipal Board of Manila on February 22, 1968 and signed by the herein petitioner Mayor Antonio J. Villegas of Manila on March 27, 1968. 2 City Ordinance No. 6537 is entitled: AN ORDINANCE MAKING IT UNLAWFUL FOR ANY PERSON NOT A CITIZEN OF THE PHILIPPINES TO BE EMPLOYED IN ANY PLACE OF EMPLOYMENT OR TO BE ENGAGED IN ANY KIND OF TRADE, BUSINESS OR OCCUPATION WITHIN THE CITY OF MANILA WITHOUT FIRST SECURING AN EMPLOYMENT PERMIT FROM THE MAYOR OF MANILA; AND FOR OTHER PURPOSES. 3 Section 1 of said Ordinance No. 6537 4 prohibits aliens from being employed or to engage or participate in any position or occupation or business enumerated therein, whether permanent, temporary or casual,

praying for the issuance of the writ of preliminary injunction and restraining order to stop the enforcement of Ordinance No. 1968. 2) As a police power measure. which is out of proportion to the cost of registration and that it fails to prescribe any standard to guide and/or limit the action of the Mayor. Villegas filed the present petition on March 27.without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50. filed a petition with the Court of First Instance of Manila. then Mayor Antonio J. 6537 is discriminatory and violative of the rule of the uniformity in taxation. upon conviction. or in the technical assistance programs of both the Philippine Government and any foreign government. and members of religious orders or congregations. thus. Branch I. 6537 VIOLATED THE PRINCIPLE AGAINST UNDUE DESIGNATION OF LEGISLATIVE POWER.00 except persons employed in the diplomatic or consular missions of foreign countries. violates the due process and equal protection clauses of the Constitution. private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila. II RESPONDENT JUDGE LIKEWISE COMMITTED A GRAVE AND PATENT ERROR OF LAW IN RULING THAT ORDINANCE NO. deprived of their rights to life. III . 1968 rendered judgment declaring Ordinance No.00 or both such fine and imprisonment.00 but not more than P200. it makes no distinction between useful and non-useful occupations. violating the fundamental principle on illegal delegation of legislative powers: 3) It is arbitrary. liberty and property and therefore.1968: 9 I THE RESPONDENT JUDGE COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN RULING THAT ORDINANCE NO. 5 On May 4. oppressive and unreasonable. being applied only to aliens who are thus. 6 In this petition. denominated as Civil Case No. Violations of this ordinance is punishable by an imprisonment of not less than three (3) months to six (6) months or fine of not less than P100. 8 Contesting the aforecited decision of respondent Judge. Ordinance No. 1968. respondent Judge issued the writ of preliminary injunction and on September 17. 6537 null and void. 6537 as well as for a judgment declaring said Ordinance No. 7 On May 24. who are not paid monetarily or in kind. Petitioner assigned the following as errors allegedly committed by respondent Judge in the latter's decision of September 17. 6537 null and void and making permanent the writ of preliminary injunction. Hiu Chiong Tsai Pao Ho assigned the following as his grounds for wanting the ordinance declared null and void: 1) As a revenue measure imposed on aliens employed in the City of Manila. imposing a fixed P50. 72797. 6537 VIOLATED THE CARDINAL RULE OF UNIFORMITY OF TAXATION. 1969. and those working in their respective households. sect or denomination.00 employment permit.

thus conferring upon the Mayor arbitrary and unrestricted power to grant or deny the issuance of building permits. expresses no purpose to be attained by requiring a permit. and entirely lacks standard.RESPONDENT JUDGE FURTHER COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN RULING THAT ORDINANCE NO. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the exercise of the power which has been granted to him by the ordinance.00 is being collected from every employed alien whether he is casual or permanent. It has been held that where an ordinance of a municipality fails to state any policy or to set up any standard to guide or limit the mayor's action. It is obvious that the purpose of the ordinance is to raise money under the guise of regulation. 10 In Chinese Flour Importers Association vs. enumerates no conditions for its grant or refusal. Fugoso 12 that the authority and discretion to grant and refuse permits of all classes conferred upon the Mayor of Manila by the Revised Charter of Manila is not uncontrolled discretion but legal discretion to be exercised within the limits of the law. Price Stabilization Board.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. 6537 is not a tax or revenue measure but is an exercise of the police power of the state. There is no logic or justification in exacting P50. The P50. Ordinance No. The ordinance in question violates the due process of law and equal protection rule of the Constitution. or standard from which it can be measured or controlled. Although the equal protection clause of the Constitution does not forbid classification. part time or full time or whether he is a lowly employee or a highly paid executive Ordinance No. Requiring a person before he can be employed to get a permit from the City Mayor of Manila who may withhold or refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a means of livelihood. 6537 does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion. being an undefined and unlimited delegation of power to allow or prevent an activity per se lawful. 11 where a law granted a government agency power to determine the allocation of wheat flour among importers. once an alien is admitted. While it is true that the Philippines as a State is not obliged to admit aliens within its territory. Petitioner Mayor Villegas argues that Ordinance No. the Supreme Court ruled against the interpretation of uncontrolled power as it vested in the administrative officer an arbitrary discretion to be exercised without a policy. The same amount of P50. It was also held in Primicias vs. it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. 6537 is not a purely tax or revenue measure because its principal purpose is regulatory in nature has no merit. rule. While it is true that the first part which requires that the alien shall secure an employment permit from the Mayor involves the exercise of discretion and judgment in the processing and approval or disapproval of applications for employment permits and therefore is regulatory in character the second part which requires the payment of P50. 6537 VIOLATED THE DUE PROCESS AND EQUAL PROTECTION CLAUSES OF THE CONSTITUTION. he cannot be deprived of life without due process of .00 as employee's fee is not regulatory but a revenue measure. it being principally a regulatory measure in nature. 6537 cannot be declared null and void on the ground that it violated the rule on uniformity of taxation because the rule on uniformity of taxation applies only to purely tax or revenue measures and that Ordinance No.00 from aliens who have been cleared for employment. such ordinance is invalid. The contention that Ordinance No.

SO ORDERED.. the decision appealed from is hereby affirmed. As stated by the Court in the early case of Phil. Earnshaw. but they must be consistent with the general law and public policy of the particular state .J. With more reason are such national policies binding on local governments when they involve our foreign relations with other countries and their nationals who have been lawfully admitted here. Fernando." Indeed. since in such matters the views and decisions of the Chief of State and of the legislature must prevail over those of subordinate and local governments and officials who have no authority whatever to take official acts to the contrary. J. Castro. "not only must all municipal powers be exercised within the limits of the organic laws.. J. viz. WHEREFORE. Concepcion. Antonio and Aquino." (I McQuillin.). Justice Fernandez which affirms the lower court's judgment declaring Ordinance No. When the Insular (National) Government adopts a policy. 129: "The City of Manila is a subordinate body to the Insular (National Government . 2nd sec. concurring: I concur in the decision penned by Mr. The national policy on the matter has been determined in the statutes enacted by the legislature. Jr. Separate Opinions TEEHANKEE.. a municipality is without legal authority to nullify and set at naught the action of the superior authority. Santos and Guerrero. Coop. Muñoz Palma.. Municipal Corporations. concur in the result.. thwarted or in any manner negated by any local government or its officials since they are not separate from and independent of the national government. Makasiar. took no part. both aliens and citizens. The shelter of protection under the due process and equal protection clause is given to all persons. the various Philippine nationalization laws which on the whole recognize the right of aliens to obtain gainful employment in the country with the exception of certain specific fields and areas. vs. This guarantee includes the means of livelihood. Such national policies may not be interfered with. 13 The trial court did not commit the errors assigned.. 1011). without pronouncement as to costs. Livestock Ass'n. concur. such as the City of Manila. . Barredo. P. C. which properly pertain to the national government officials and agencies concerned and not to local governments. JJ.. JJ...law.. 367. 6537 of the City of Manila null and void for the reason that the employment of aliens within the country is a matter of national policy and regulation. which after all are mere creations of the national government. 59 Phil.

concurring: I concur in the decision penned by Mr. factory. and paying the necessary fee therefor to the City the City Treasurer: PROVIDED.. Footnotes 1 Annex "F". Rollo. cook. 64. Such national policies may not be interfered with. corporation. J. The national policy on the matter has been determined in the statutes enacted by the legislature. Justice Fernandez which affirms the lower court's judgment declaring Ordinance No. store. Livestock Ass'n.). Petition. It shall he unlawful for any person not a citizen of the Philippines to be employed in any kind of position or occupation or allowed directly or indirectly to participate in the functions. which after all are mere creations of the national government. adviser. which properly pertain to the national government officials and agencies concerned and not to local governments. Rollo. "not only must all municipal powers be exercised within the limits of the organic laws. and those working in their respective households. business firm. store. factory. of Petition. Earnshaw. the various Philippine nationalization laws which on the whole recognize the right of aliens to obtain gainful employment in the country with the exception of certain specific fields and areas. such as the City of Manila. P. When the Insular (National) Government adopts a policy." (I McQuillin. teacher." Indeed. p. or any other place of employment either as consultant. p. 2 Petition. permanent or otherwise and irrespective of the source or origin of his compensation or number of hours spent in said office.Separate Opinions TEEHANKEE.. 2nd sec. thwarted or in any manner negated by any local government or its officials since they are not separate from and independent of the national government. whether temporary. or to engage in any kind of business and trade within the City of Manila. 37-38. Rollo. a municipality is without legal authority to nullify and set at naught the action of the superior authority. without first securing an employment permit from the Mayor of Manila. 4 Section 1. Coop. employee. 6537 of the City of Manila null and void for the reason that the employment of aliens within the country is a matter of national policy and regulation. but they must be consistent with the general law and public policy of the particular state . 129: "The City of Manila is a subordinate body to the Insular (National Government . corporation or any other place of employment. 1011). viz. p. That persons employed in diplomatic and consular missions of foreign countries and in technical assistance programs agreed upon by the Philippine Government and any foreign government. restaurant. 3 Annex "A". restaurant. actor. laborer. Municipal Corporations.. etc. singer or other theatrical performer.. As stated by the Court in the early case of Phil. HOWEVER. actress. acrobat. since in such matters the views and decisions of the Chief of State and of the legislature must prevail over those of subordinate and local governments and officials who have no authority whatever to take official acts to the contrary. vs. 367. 28. With more reason are such national policies binding on local governments when they involve our foreign relations with other countries and their nationals who have been lawfully admitted here.. technician. 59 Phil. clerk. and members of . casual. administration or management in any office..

J. 1947. plaintiffs-appellants. 6 Annex "B". 39. L-2947 January 11.. who are not paid either monetarily or in kind shag be exempted from the provisions of this Ordinance. vs. 13 Kwong Sing vs. Rollo.R. 9 Petition. Fajardo. p. That in case of juridical persons. p. 75-83. MANUEL DE LA FUENTE. Any violation of this Ordinance shall upon conviction. 446. in the discretion of the Court: PROVIDED.00) but not more than two hundred pesos (P200. sect or denomination.different congregations or religious orders of any religion. and JUAN T.. TUASON. 41 Phil.00). 1951 MANILA RACE HORSE TRAINERS ASSOCIATION. the VicePresident or the person in charge shall be liable. Petition. who allege that they are owners of boarding stables for race horses and that their rights as such are affected by Ordinance No. the President. 11 89 Phil. Rollo. Inc. 103. 439. defendant-appellee. 10 People vs. No. Republic of the Philippines SUPREME COURT Manila EN BANC G. Petition. . Garde and Cervania for appellants. be punished by imprisonment of not less than three (3) months but not more than six (6) months or by a fine of not less than one hundred pesos (P100. Rollo. pp. 459-460. City Fiscal Eugenio Angeles and Assistant Fiscal Arsenio Nañawa for appellee. 3065 of the City of Manila approved on July 1. 12 80 Phil. City of Manila. HOWEVER.: This action was instituted for a declaratory relief by the Manila Race Horses Trainers Association. 1 They made the Mayor of Manila defendant and prayed that said ordinance be declared invalid as violative of the Philippine Constitution. a non-stock corporation duly organized and existing under and by virtue of the laws of the Philippines. 86. 5 Section 4. 7 Ibid 8 Annex "F". 104 Phil. or by both such fine and imprisonment. SORDAN. 31. 443. INC. Soriano.

It is argued that by section 2 the basis of the license fees "is the number of race horses kept or maintained in the boarding stables to be paid by the maintainers at the rate of P10. Far from being obnoxious. there would be discrimination if some boarding stables of the same class used for the same number of horses were not taxed or were made to pay less or more than others. Taking everything into account. rather than the letter.) From the context of Ordinance No. are a class by themselves and appropriately taxed where owners of other kinds of horses are taxed less or not at all. the method is fair and just.The case was submitted on the pleadings. is not argument at all against the equality and uniformity of tax imposition. apropos the second proposition. First. the plaintiffs as appellants make three assignments of error. In the case of Eastern Theatrical Co. for that matter. 11. J. 845. considering that equity in taxation is generally conceived in terms of ability to pay in relation to the benefits received by the taxpayer and by the public from the business or property taxed. vs." that "the fee is increased correspondingly P10 for each additional race horse maintained or fed in the stable. The owners of boarding stables for race horses and. of course. Gaz. We do not share plaintiff's opinion. subject matter. and boxing exhibitions and other kinds of amusements or places of amusement are taxed. (62 C. we do not believe that the ordinance. and the court looks less to its words and more to the context. what is within the spirit is within the ordinance although it is not within the letter thereof.* it was said there is equality and uniformity in taxation if all articles or kinds of property of the same class are taxed at the same rate." On appeal. From the viewpoint of economics and public policy the taxing of boarding stables for race horses to the exclusion of boarding stables for horses dedicated to other purposes is not indefensible. it is maintained that the ordinance under consideration is a tax on race horses as distinct from boarding stables. which is generally the case. that "the fact that some places of amusement are not taxed while others. of an ordinance determines the construction thereof. consequence and effect. vaudeville companies." The spirit. the intent to tax or license stables and not horses is clearly manifest. theatrical shows. who in the scheme of shifting may carry the taxation burden. although there is nothing. such as cinematographs. Inc. and this business demands relatively heavy police supervision. . 3065.00 a year for each race horse. 46 Off. is not within the ordinance. p. Race horses are devoted to gambling if legalized. an empty stable for race horse pays no license fee at all. as counsel admit in their brief.. and the decision was that the ordinance in question "is constitutional and valid and has been enacted in accordance with the powers of the Municipal Board granted by the Charter of the City of Manila. that the ordinance in question is discriminatory and savors of class legislation. It is also plain from the text of the whole ordinance that the number of horses is used in the assessment purely as a method of fixing an equitable and practical distribution of the burden imposed by the measure. the first two of which are discussed jointly in their brief under two separate topics. to stop stable owners from shifting the tax to the horse owners in the form of increased rents or fees. although not within the spirit. 303. the race horse owners themselves. Accordingly.. Supp. The tax is assessed not on the owners of the horses but on the owners of the stables. Thus. while that which is in the letter. Alfonso. S. In taxing only boarding stables for race horses. It is but fair and just that for a boarding stable where only one horse is maintained proportionately less amount should be exacted than for a stable where more horses are kept and from which greater income is derived. their owners derive fat income and the public hardly any profit from horse racing. it was held in that case." and that "by the same token." Applying this criterion to the present case. makes arbitrary classification. the differentiation against which the plaintiffs complain conforms to the practical dictates of justice and equity and is not discrimatory within the meaning of the Constitution. to No. theaters.

. This assignment of error has reference to Class B or the second sub-paragraph of section 1 of the ordinance. or place where race horse are kept. and/or for race horse stable privately owned not for hire. — No person shall own.. Bengzon.. OR PLACES WHERE HORSE ARE KEPT. FOR COMPENSATION OR HIRE. Reyes. fed or boarded in boarding stables. not to say that even it had been raised it would not have been available as basis for a declaration of nullity of the ordinance.. SEC. he may not complain that a licensing ordinance is invalid as against a class other than that to which he belongs.. there shall be paid an annual license fee... Paras.One ground of attack in the court below on the constitutionality of the ordinance — variance between the title and the subject matter — apparently has been abandoned..." and that the lower court erred in not so declaring...) By analogy. P10. FED.... fed.. Be it ordained by the Municipal Board of the City of Manila.. Moran.. where a municipal ordinance is valid in some of its parts and invalid as to others and the valid parts are separable from the invalid ones — in which latter case the valid provisions stand as operative — the plaintiff may contest the validity of the provisions that injure his interest but not those that do not. It is now contended. AND FOR OTHER PURPOSES. 2.. Feria. Padilla... J... which may be paid either annually. Montemayor. that "the Municipal Board of Manila (is) without power to enact ordinance taxing private stables for race horses. this question was properly ignored.. without first having obtained a permit from the Mayor and license therefor from the City Treasurer.. or boarded for others. for compensation or hire. License. that: SECTION 1... or conduct any boarding stable..... concur. keep. 831... We are of the opinion that the trial court committed no error and the judgment is affirmed with costs against the plaintiff-appellants. The clause of the ordinance taxing or licensing boarding stables for race horses does not prejudice the plaintiffs in any material way.830. C.. JJ. AND/OR FOR PRIVATE.. S.. OR BOARDED FOR OTHERS.. maintained. Fees....J.... maintain.. kept. to wit: Boarding stable for race horses: Class A — For each race horse... Jugo and Bautista Angelo. semestrally or quarterly at the option of the taxpayer. and it is well settled that a person who is not adversely affected by a licensing ordinance may not attack its validity.. Pablo... (62 C. Footnotes 1 AN ORDINANCE PROVIDING FOR LICENSE FEES ON PERSONS MAINTAINING OR CONDUCTING ANY BOARDING STABLE FOR HORSE RACES AND/OR HORSE STABLES... — For every license granted under the provisions of this ordinance... for the first time.00 .... In its place a new question is brought up on the appeal in the third and last assignment of error. Not having been raised in the pleading.. Stated differently..

1 otherwise known as the Local Autonomy Act... plaintiff-appellant. the parties entered into a Stipulation of Facts... Sabido. Sabido & Associates for appellant.. as amended. June 19... 23 and 27... series of 1962..... 2264. Contents of application.: This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. kept. 1963.. 3. 3294... — Every application for the license in this ordinance required. shall be accompanied by a sworn statement of the greatest number of animals to be kept by the applicant. ET AL. the acting Municipal Treasurer of Tanauan..... Inc. sought to enforce compliance by the latter of the provisions of said Ordinance No. MARTIN... which statement shall be the basis for computing the amount of fees to be paid for such license.. 1969.. or fed in private race horse stables. and second. maintained. .... null and void. LEYTE.Class B — For each race horse. INC. both Ordinances Nos. 4.. Leyte. Reyes for appellees.. 1959). that on January 17. Provincial Fiscal Zoila M. Leyte. On July 23.. 23 and 27 embrace or cover the same subject matter and the production tax rates imposed therein are practically the same. L-31156 February 27.... MUNICIPALITY OF TANAUAN.. 852. P5. of the municipality of Tanauan..R..... Limcaoco & Solicitor Enrique M.. * 83 Phil. vs. THE MUNICIPAL MAYOR... series of 1962.... challenging the power of taxation delegated to municipalities under the Local Autonomy Act (Republic Act No.. the plaintiff-appellant.. J. On February 14. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant Solicitor General Conrado T. 1963. the material portions of which state that.. as involving only pure questions of law.. as per his letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality... Pepsi-Cola Bottling Company of the Philippines. defendant appellees. SEC... 27. first.. 1976 PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES. 1963.. 2264. commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2 of Republic Act No. unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. which was certified to Us by the Court of Appeals on October 6. Effectivity.. No. Republic of the Philippines SUPREME COURT Manila EN BANC G.. — This ordinance shall take effect upon its approval.00 SEC...

which was approved on October 28. 6 It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. lies in the case of municipal corporations. There are three capital questions raised in this appeal: 1. the Court of First Instance of Leyte rendered judgment "dismissing the complaint and upholding the constitutionality of [Section 2. Article XI provides: "Each local government unit shall have the power to create its sources of revenue and to levy taxes. confiscatory and oppressive? 2. as amended. of the total number of bottles produced and corked during the month. 2264 an undue delegation of power. ordering the plaintiff to pay the taxes due under the oft the said Ordinances. belonging as a matter of right to every independent government. 1962. 23. Republic Act No. When it is said that the taxing power may be delegated to municipalities and the like. of Tanauan. 23 and 27 legal and constitutional. 27. In delegating the authority. 2264] declaring Ordinance Nos. it is meant that there may be delegated such measure of power to impose and collect taxes as the legislature may deem expedient. 7 This is sanctioned by immemorial practice. U. The power of taxation is an essential and inherent attribute of sovereignty. 9 Under the New Constitution. elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948. and to pay the costs.01) on each gallon (128 fluid ounces. Section 5. 23 and 27 constitute double taxation and impose percentage or specific taxes? 3." 2 For the purpose of computing the taxes due. Legislative powers may be delegated to local governments in respect of matters of local concern. — Are Ordinances Nos. local governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. to which. Republic Act No. the State is not limited 6 the exact measure of that which is exercised by itself. the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals. 5 The tax imposed in both Ordinances Nos. the legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax. Municipal Ordinance No. Leyte. levies and collects "on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0. without being expressly conferred by the people." 4 For the purpose of computing the taxes due. company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly report. contrary to plaintiff-appellant's pretense.Municipal Ordinance No. firm. 23 and 27 unjust and unfair? 1." From this judgment. corporation or plant producing soft drinks shall submit to the Municipal Treasurer a monthly report of the total number of gallons produced or manufactured during the month. 23 and 27 is denominated as "municipal production tax. subject to such limitations as may be provided by law. — Do Ordinances Nos. 3 On the other hand. fun company. the person. which. which was approved on September 25. said theory does not apply. levies and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked.' On October 7. however. municipalities may be permitted to tax subjects which for reasons of public policy the State has not deemed wise to tax for more . Thus. 1963. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation.) of volume capacity.S. The exception. the person. would not suffice to invalidate the said law as confiscatory and oppressive. 8 By necessary implication. — Is Section 2. in turn." Withal. 1962. partnership. it cannot be said that Section 2 of Republic Act No. The plenary nature of the taxing power thus delegated.

01) on each gallon (128 fluid ounces." For purposes of this particular . Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan. 27. extraterritorial taxation. a tax is imposed on property outside the State.S. because these two ordinances cover the same subject matter and impose practically the same tax rate. except when the taking of the property is in the lawful exercise of the taxing power. and arbitrary or oppressive methods are used in assessing and collecting taxes.01) on each gallon (128 fluid ounces. even without words to that effect. 27.e.general purposes. 27. But. 27 imposes a percentage or a specific tax.every bottle corked. 11 Due process is usually violated where the tax imposed is for a private as distinguished from a public purpose. and (4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are provided. series of 1962. and a notice and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally not necessary to due process of law. 27. 23. and operates as a repeal of the latter. is broad enough as to extend to almost "everything. (3) either the person or property taxed is within the jurisdiction of the government levying the tax. This is not so.S. 27." As long as the text levied under the authority of a city or municipal ordinance is not within the exceptions and limitations in the law. 10 This is not to say though that the constitutional injunction against deprivation of property without due process of law may be passed over under the guise of the taxing power. which was approved on September 25. double taxation. Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of said Ordinance No. 1962. 14 Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity 15 or by the same jurisdiction for the same purpose. a tax does not violate the due process clause. 23 and 27 constitute double taxation. As earlier quoted. 2264. 17 2. U.. is not forbidden by our fundamental law. Ordinance No. 23. particularly. The plaintiff-appellant submits that Ordinance No. it is one centavo (P0. Moreover. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. series of 1962 is being enforced by defendants-appellees. accepting those which are mentioned therein.) of volume capacity. series of 1962 clearly repeals Ordinance No. under the provisions of the National Internal Revenue Code. U. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. Even the Provincial Fiscal. irrespective of the volume contents of the bottle used. The aforementioned admission shows that only Ordinance No. i. pursuant to the rules of exclucion attehus and exceptio firmat regulum in cabisus non excepti 19 The limitation applies. 27. 23. 1962. series of 1962. 12 There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. to the prohibition against municipalities and municipal districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on articles subject to specific tax except gasoline. as applied to a particular taxpayer. Due process does not require that the property subject to the tax or the amount of tax to be raised should be determined by judicial inquiry. in Ordinance No. The thesis proceeds from its assumption that both ordinances are valid and legally enforceable. 13 The reason is that the State has exclusively reserved the same for its own prerogative. as when (1) the tax is for a public purpose. imposing a tax of one centavo (P0. 16 but not in a case where one tax is imposed by the State and the other by the city or municipality. although the purpose of the tax will result in an injury rather than a benefit to such taxpayer. Republic Act No. levies or collects from soft drinks producers or manufacturers a tax of one-sixteen (1/16) of a centavo for . approved on October 28. the taxing authority conferred on local governments under Section 2. Undoubtedly. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to enforce Ordinance No. When it was discovered that the producer or manufacturer could increase the volume contents of the bottle and still pay the same tax rate. 23 as the provisions of the latter are inconsistent with the provisions of the former." That brings Us to the question of whether the remaining Ordinance No. the Municipality of Tanauan enacted Ordinance No. it was 1/16 of a centavo for every bottle corked. in general.) of volume capacity. (2) the rule on uniformity of taxation is observed. the same comes within the ambit of the general rule. since We have not adopted as part thereof the injunction against double taxation found in the Constitution of the United States and some states of the Union. counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance No.

The tax of one (P0. 23. Leyte. 27. fermented liquors. manufactured oils and other fuels. series of 1968. 231. same series. Antonio. unjust and confiscatory. 29 appears not to affect the resolution of the validity of Ordinance No. diesel fuel oil. Jr. Makasiar. series of 1964. products of tobacco other than cigars and cigarettes. 27 of the Municipality of Tanauan. 41. Specific taxes are those imposed on specified articles. U. Separate Opinions . Municipal corporations are allowed much discretion in determining the reates of imposable taxes. or an equivalent of 1-½ centavos per case. JJ. the municipal license tax of P1. The ordinance in question (Ordinance No. ACCORDINGLY. 25 This is in line with the constutional policy of according the widest possible autonomy to local governments in matters of local taxation. Muñoz Palma. saccharine. C. not only municipal license taxes upon persons engaged in any business or occupation but also to levy for public purposes.01) on each gallon (128 fluid ounces. playing cards. Aquino and Concepcion. as amended. Municipalities are empowered to impose. 27 if the purpose of the law to further strengthen local autonomy were to be realized. concur. coal. Costs against petitioner-appellant. Teehankee. a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume of sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to enact..00 per corking machine with five but not more than ten crowners or P2..01) on each gallon (128 fluid ounces. matches firecrackers. 27 does not partake of the nature of a percentage tax on sales. but there is not set ratio between the volume of sales and the amount of the tax. 2264. an aspect that is given expression in the Local Tax Code (PD No.000. Castro.S. wines. produced or manufactured. the imposition of "a tax of one centavo (P0. SO ORDERED. cinematographic films.000. 54. 27 Reluctance should not deter compliance with an ordinance such as Ordinance No. bunker fuel oil. U. July 1.00 with ten but not more than twenty crowners imposed on manufacturers. as amended by Ordinance No. 28 Finally. 22 Soft drink is not one of those specified. is hereby upheld and Municipal Ordinance No. is hereby declared of valid and legal effect.limitation.J. 27) comes within the second power of a municipality. or other taxes in any form based thereon. just and uniform taxes. producers. 20 But. 23 cannot be considered unjust and unfair. the constitutionality of Section 2 of Republic Act No.S. 26 Unless the amount is so excessive as to be prohibitive. series of 1962.) of volume capacity on all softdrinks. 3. 21 Nor can the tax levied be treated as a specific tax. The tax is levied on the produce (whether sold or not) and not on the sales. Esguerra. re-pealing Municipal Ordinance No. opium and other habit-forming drugs. 1973). of defendant Municipality. importers and dealers of soft drinks and/or mineral waters under Ordinance No..) of volume capacity" on all soft drinks produced or manufactured under Ordinance No. otherwise known as the Local Autonomy Act. such as distilled spirits. 24 an increase in the tax alone would not support the claim that the tax is oppressive. courts will go slow in writing off an ordinance as unreasonable. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products. Barredo.

I would prefer to rely on the doctrine announced by this Court in City of Baguio v.. that its charter or a statute must clearly show an intent to confer that power or the municipal corporation cannot assume and exercise it. unlike sovereign states. City of Butuan. however. It would appear therefore that the extent of the taxing power was solely for the legislative body to decide. any doubt or ambiguity arising from the terms of the grant to be resolved against the municipality.." 10 As the conclusion reached by the Court finds support in such grant of the municipal taxing power. J. as here. 3 As far as legislative power over local government was concerned. 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal corporations. and that any such power granted must be construed strictly.. through Justice Dizon. As to any possible infirmity based on an alleged double taxation. the statute must be sustained even though double taxation results. 8 "is an attribute of sovereignty which municipal corporations do not enjoy. in Golden Ribbon Lumber Co. it possesses more than just a persuasive effect. Nonetheless it is well-nigh unavoidable that I do so as I am unable to share fully what for me are the nuances and implications that could arise from the approach taken by my brethren. Likewise as to the constitutional aspect of the thorny question of double taxation. 5 Nevertheless. I would limit myself to what has been set forth in City of Baguio v. it delivered the coup justice to the bogey of double taxation as a constitutional bar to the exercise of the taxing power. there was a statute that enlarged the scope of the municipal taxing power. It is true that in 1939. Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation." 7 Taxation. according to Justice Parades in the earlier case of Tan v. as with us. we quoted with approval this excerpt from a leading American decision: 'Where. I am only in agreement. De Leon.FERNANDO. five years after its enactment of the Local Autonomy Act. as noted by an eminent critic. bureaus. v. 12 So I would view the issues in this suit and accordingly concur in the result. he could only . The present Constitution is quite explicit as to the power of taxation vested in local and municipal corporations.. 2 That was not the case under the 1935 Charter. The 14th Amendment [the due process clause) no more forbids double taxation than it does doubling the amount of a tax. this Court. 4 Thereafter. If I limit myself to concurrence in the result. after clothed with no power of taxation. Municipality of Pagbilao. De Leon. no restriction whatsoever was placed on the Congress of the Philippines. concurring: The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive character. as late as December of 1964. in 1959 such competence was further expanded in the Local Autonomy Act. still stalks the juridical stage. Justice Holmes made clear in this language: 'The objection to the taxation as double may be laid down on one side. 1 1. 11 Thus: "As to why double taxation is not violative of due process. . The only limitation then on the authority. or offices. was that while the President of the Philippines was vested with the power of control over all executive departments. Congress has clearly expressed its intention. To some." 9 That case left no doubt either as to weakness of a claim "based merely by inferences. short of (confiscation or proceedings unconstitutional on other grouse With that decision rendered at a time when American sovereignty in the Philippines was recognized. It is therein specifically provided: "Each local government unit shall have the power to create its own sources of revenue and to levy taxes subject to such limitations as may be provided by law. . 2. It would seem though that in the United States.. implications and deductions. plenary in character of the national government. it is primarily because with the article on Local Autonomy found in the present Constitution. I concur in the result. [as they have no place in the interpretation of the power to tax of a municipal corporation. It exercise general supervision over all local governments as may be provided by law . I feel a sense of reluctance in restating doctrines that arose from a different basic premise as to the scope of such power in accordance with the 1935 Charter. its ghost. 'In a 1947 decision.

as with us. I am only in agreement. plenary in character of the national government. J. 2 That was not the case under the 1935 Charter. As to any possible infirmity based on an alleged double taxation. The present Constitution is quite explicit as to the power of taxation vested in local and municipal corporations. in 1959 such competence was further expanded in the Local Autonomy Act. City of Butuan. it is primarily because with the article on Local Autonomy found in the present Constitution.. as noted by an eminent critic. there was a statute that enlarged the scope of the municipal taxing power. short of (confiscation or proceedings unconstitutional on other grouse With that decision rendered at a time when American sovereignty in the Philippines was recognized. It would seem though that in the United States.. and that any such power granted must be construed strictly. De Leon. 11 Thus: "As to why double taxation is not violative of due process. I would limit myself to what has been set forth in City of Baguio v. 3 As far as legislative power over local government was concerned. any doubt or ambiguity arising from the terms of the grant to be resolved against the municipality. however. Footnotes . It would appear therefore that the extent of the taxing power was solely for the legislative body to decide. v. implications and deductions.. 1 1. It exercise general supervision over all local governments as may be provided by law . bureaus. To some." 9 That case left no doubt either as to weakness of a claim "based merely by inferences. that its charter or a statute must clearly show an intent to confer that power or the municipal corporation cannot assume and exercise it. Justice Holmes made clear in this language: 'The objection to the taxation as double may be laid down on one side. as late as December of 1964. . it delivered the coup justice to the bogey of double taxation as a constitutional bar to the exercise of the taxing power. concurring: The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive character. as here. no restriction whatsoever was placed on the Congress of the Philippines." 7 Taxation. I would prefer to rely on the doctrine announced by this Court in City of Baguio v. 'In a 1947 decision. or offices." 10 As the conclusion reached by the Court finds support in such grant of the municipal taxing power. its ghost. If I limit myself to concurrence in the result.. Municipality of Pagbilao. Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation. 8 "is an attribute of sovereignty which municipal corporations do not enjoy. it possesses more than just a persuasive effect. Likewise as to the constitutional aspect of the thorny question of double taxation. this Court. It is true that in 1939. It is therein specifically provided: "Each local government unit shall have the power to create its own sources of revenue and to levy taxes subject to such limitations as may be provided by law. he could only . 12 So I would view the issues in this suit and accordingly concur in the result.. Congress has clearly expressed its intention. after clothed with no power of taxation. I concur in the result. the statute must be sustained even though double taxation results. Nonetheless it is well-nigh unavoidable that I do so as I am unable to share fully what for me are the nuances and implications that could arise from the approach taken by my brethren. I feel a sense of reluctance in restating doctrines that arose from a different basic premise as to the scope of such power in accordance with the 1935 Charter. The only limitation then on the authority. five years after its enactment of the Local Autonomy Act. according to Justice Parades in the earlier case of Tan v. still stalks the juridical stage. De Leon. 5 Nevertheless. was that while the President of the Philippines was vested with the power of control over all executive departments. 2. through Justice Dizon.Separate Opinions FERNANDO. [as they have no place in the interpretation of the power to tax of a municipal corporation. 4 Thereafter. 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal corporations. unlike sovereign states. we quoted with approval this excerpt from a leading American decision: 'Where. in Golden Ribbon Lumber Co. The 14th Amendment [the due process clause) no more forbids double taxation than it does doubling the amount of a tax.

legacies and other acquisitions mortis causa (g) Taxes on income of any kind whatsoever. (f) Taxes on estates.1 "Sec. That no city. or the municipal district council of the municipal district to collect fees and charges for service rendered by the city. and which is not published primarily for the purpose of publishing advertisements. fees or levies. 3 Section 3. municipalities and municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city. irrigation and other public utilities except electric light. (c) Taxes on the business of any newspaper engaged in the printing and publication of any newspaper. heat and power. charges and dues. licenses or fees: Provided. That municipalities and municipal districts shall. (b) Documentary stamp tax. . and persons paying franchise tax: (k) Taxes on premiums paid by owners of property who obtain insurance directly with foreign insurance companies. except gasoline. magazine. (e) Taxes on forest products and forest concessions. — Any provision of law to the contrary notwithstanding. profession occupation being conducted within the city. municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. tonnage and all other kinds of customs fees. 2. under the provisions of the National Internal Revenue Code: Provided. review or bulletin appearing at regular interval and having fixed prices for subscription and sale. (i) Customs duties registration. and (i) Taxes. 2 Section 2. impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax. however. municipality or municipal district and otherwise to levy for public purposes. municipality or municipal district. gifts. the municipal council of the municipality. all chartered cities. municipality or municipal district may levy or impose any of the following: (a) Residence tax. wharfage on wharves owned by the national government. just and uniform taxes. which in effect impose a burden on exports of Philippine finished. (j) Taxes of any kind on banks. manufactured or processed products and products of Philippine cottage industries. insurance companies. Taxation. (d) Taxes on persons operating waterworks. to regulate and impose reasonable for services rendered in connection with any business. or exercising private in chartered cities. of any kind. (h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof. inheritance. in no case.

6. Narcotic Drugs Law. of Roxas.. 24 SCRA 793-96. 20 Arabay. Palawan. et al. 6 Cooley. See Sec. NIRC. 2485. Inc. 15 Commissioner of Internal Revenue v.18169. December 28. August 28. CFI of Zamboanga del Norte. of the Phil. 24 SCRA 793-96.G. ante. City of Iloilo. 1964. VIII. at 206. February 26. Inc. Vaño. 1965. 9 Cooley.. 1935 Constitution and Sec. 1975. Bd of City of Manila. 1. September 10. per case of 24 bottles. Vol. Co. defendants-appellees. Ed. L-22814. v.. Brd. Lednicky L.I. 351 (1951). 3rd. Prov. 1973 Constitution. The Law of Taxation. 21 SMB. Inc. 953. ante at 190. 94 Phil. Inc. VI. Inc. 50 O. 14 Pepsi-Cola Bottling Co. Mun. Municipal Corporations. 39 Phil.. July 31. June 20. vs. 23 Brief. 17 (1). 26 SCRA 585-86. 1968. Meer. v. Fourth Edition. 513-14. 19 Villanueva v. 1968. 1972. Mun. 14 SCRA 663-64. vs. 149-150. 43 SCRA 280. 1953.-210. 1968. 22. 11 SCRA 609. v. L-20312. Ltd. Philippine Constitutional Law. Sections 123-148. 22 Shell Co. v. 13 See footnote 1. City of Cebu. 394-95 (1954). August 28. July 20. of P. 16 SMB. Vol. 10 Idem at 198-200. 18 McQuillin. 1. manufacturers Life Ins. Art. 702 (1919).. . a family-size contains 26 oz. or 312 oz. City of Butuan. 5 Section 3. 2S 1 4. 11 Malcolm. Art. of Mindoro. Footnote 16. RA No. or 192 oz. City of Cebu. 12 Cooley ante at 334. v. v. L-26521. per case of 12 bottles. A regular bottle of Pepsi-Cola soft drinks contains 8 oz. 89 Phil.4 Section 2. City of Butuan. of the Phil. L-20125. L-27684. 17 Punzalan v. Nin Bay Mining Co. at 14. 7 Pepsi-Cola Bottling Co. 8 Rubi v.

28 Procter & Gamble Trading Co. 91 Phil. 1971." 5 Republic Act No. De Linan v. 68 Phil. October 31. Municipal Government of Pagsanjan v. where the tax rate is P. 588 (1939). Eastern Theatrical Co. 25 SCRA 938. 1968. September 27. Misamis Oriental. L-29125. We Wa Yu v. v. Cuunjieng v. 852 (1949). Standard-Vacuum Oil Co. January 30. 25 Northern Philippines Tobacco Corp. Phil. Yeo Loby v. where the tax is P. Inc. Cf. Zamboanga. 1974. FERNANDO. L-21183. v. 11 L-24756. of Victorias. December 24. City of Lipa. 892. Alfonso 83 Phil. . J. 105 Phil. per Fernando. City of Ozamis. L-18290. 1963. 748 (1927. City of Butuan. J. Section 5 of the present Constitution. Mun. 25 SCRA 938. City of Baguio. January 31. v. 29 Subject of plaintiff-appellant's Motion for Admission and consideration of Essential Newly Dissevered Evidence.10 per case of 24 bottles. 654 (1956). 4 Commonwealth Act 472 entitled: "An Act Revising the General Authority of Municipal Councils and Municipal District Councils to Levy Taxes. Section 10 of the 1935 Constitution. 9 Ibid. Municipal Board. of Medina. 55 Phil. Municipal Council of Daet. 975 (1956). 818 (1922). October 31. La Union. 7 SCRA 168-69.1964. 8 L-14264.. of Agoo. 656 (1931). 1 L-24756. of the Phil. Zamboanga. 963 (1959). L-26447. January 31. v. 31 SCRA 308. 792 (1923). 1973. L-350048. 2264. 26 William Lines. Inc. Subject to Certain Limitations. 43 SCRA 133-34. Potspone. 25 SCRa 205. v. Mun. 720 (I!)52). 96 Phil. Municipality of Zamboanga. v. April 23. 3 Article VII. Santos. 7 Ibid. 7 SCRA 887. v. 2 Article XI. Hercules Lumber Co. 56 SCRA 593. De la Rosa v. 42 Phil. 1969.12 SCRA 611. Carreon. dated April 30. 98 Phil. Mun. 909 (1955). 511 (1939). City of Bacolod v. 27 Victorias Milling Co. 1968. Yap Tak Wing v. City of Baguio. 653 (1931). Municipality of Cotabato v. Reyes.24 See Pepsi-Cola Bottling Co. v. 619. Antigua.03 on every case of bottled CocaCoal. Gruet. 10 Ibid. Footnote 14. 854 (1952). 65 Phil. 55 Phil. ante. 50 Phil. 1968. Medina v. 91 Phil. People v. April 30. Second Division. 1963. 44 Phil. Arquiza Luta v. 6 L-18534.

defendants-appellees. SEC. Assistant Solicitor General Carmelino G.99 b. 1949 EASTERN THEATRICAL CO.12 Ibid. City Fiscal Jose P. 1946 said ordinance reading as follows: AN ORDINANCE IMPOSING A FEE ON THE PRICE OF EVERY ADMISSION TICKET SOLD BY CINEMATOGRAPHS. No. and JUAN NOLASCO.10 0. 1600.. ALFONSO as City Treasurer of Manila. INC.99 e. known as the Revised Ordinance of the City of Manila.. Francisco Zulueta and Poblador Jr. Alvendia. Bengzon and Assistant City Fiscal Julio Villamor for appellees. For every ticket sold the price of which is from P0. VICTOR. vaudeville companies.Torres and Manuel D. Baldeo as amicus curiae. Republic of the Philippines SUPREME COURT Manila EN BANC G.25 to P0. In addition to the fees paid by cinematographers. for every ticket sold the price of which is from P3 to P4. or every ticket sold the price of which is from P5 to P5. as amended.. THE MUNICIPAL BOARD OF THE CITY OF MANILA. THEATERS VAUDEVILLE COMPANIES THEATRICAL SHOWS AND BOXING EXHIBITION AND PROVIDING FOR OTHER PURPOSES. 2958 of the City of Manila which was enacted by the municipalBoard of said city on April 25 1946 approved by the Mayor on April 27.99 c. J.R.25 . For every ticket sold the price of which is from P2 to P2. ET AL. PERFECTO.05 0. plaintiffs-appellants. theatrical shows and boxing exhibitions.99 d.: Twelve corporation engaged in motion picture business have initiated these proceeding through a complaint dated May 5. 1946 and took effect on May 1. to impugn the validity of Ordinance No. 1946. theaters. 1.15 0. as provided for in sections 633 and 778 of Ordinance No.99 P0. for appellants. For every ticket sold the price of which is from P1 to P1. L-1104 May 31.20 0. Solicitor Guillermo E. vs. 943-944. there shall be collected from the place of amusement which are specifically mentioned above the following fees on the price of every admission ticket sold by such enterprises: a. as Mayor of the City of Manila.

cinematographs and further to fix the location of and to tax. All place of amusement which are operate by U. It shall also be the duty of said proprietor lessee promoter or operator to deliver to the Office of the City Treasurer the fees corresponding to the number of ticket old by him within two days after the performances or exhibition has taken place. operator of theaters in Manila And distributor of local or imported films allege that they are interested in the provision of section 1. 466) is collected by and for the purposes of the National Government. whereas.2 and 4 of said ordinance which they impugn as null and void upon the following grounds: (a) For violation the Constitution more particular the provision regarding the uniformity and equality of taxation and thee equal protection of the laws. theater. vaudeville companies. 1946. Defendants allege as affirmative defenses the following: (a) That the ordinance was passed by the Municipal Board of Manila by virtue of its express legislative power to tax fix the license fee and regulate the business of theaters.2958 imposes and requires the collection of a similar tax by and for the purposes of the Government of the City of Manila. theaters.S. SEC. For ticket sold thee price of which is from P15 or more 0. 3. arbitrary capricious unreasonable oppressive and is contrary to and violation our basic and recognizes principles of taxation and licensing laws. Government are hereby exempted from fees herein imposed.f.99 g.S. For every ticket sold the price of which is from P0 to P14. (b) that the graduated tax required by said ordinance being applied to all cinematographs. or operatorof such cinematographs. 5. existing nationallegislation more particularly revenue and tax laws and (d) because it is unfair.35 0. (c) because it contravenes violates and is inconsistent with. vaudeville companies theatricalshow and boxing exhibitions similarly situated and as a class without distinction or exception the same does not violate the prohibition against uniformity and equality of taxation. Plaintiffs. SEC. Any person violation any of the provision of this ordinance shall upon conviction thereof be punished by a fine of not more than P200 or by imprisonment for not more than six months or by both such fine and imprisonment in the discretion of the court. 4. the first half to be returned to the customer and the other half to be retained by the gate keeper.50 SEC. (b) because the Municipal Board of Manila exceeded and over-stepped the power granted it the Charter of the City of Manila. SEC. Army and Navy with fund belonging to the U. 2 It shall be the duty of every proprietor lessee. fix the license fee for and regulate the business of theatrical performances public exhibition circus and other performances and places of amusement. The fees herein prescribed shall not be paid where the admission fees or charge are collection for and in behalf of any charitable education or religion institution or association. If the violation is committed by the club firm or corporation the manager the managing director or person charged with the management of the business of such club firm or corporation shall be criminally responsible therefor. Tickets once issued and presented at the gate of entrance shall be cut by the gatekeeper into halves. unjust. This Ordinance shall take effect on the May 1. promoter. (c) that the graduated tax onadmission tickets to theaters and other places of amusement imposed by the National Internal Revenue Code (Commonwealth Act No. Before such ticket are sold he same shall be presented to the office of the city Treasurer for registration. theatrical show and boxing exhibition to provide himself with tickets which shall be serially numbered. indication therein the name of amusement place and the fee charge for admission. and there is no . Ordinance No.

(b) Estate inheritance and gift taxes. cinematographs. boarding stables. (d) that said ordinance having been enacted under the express power of the Municipal Board to tax for revenue as distinguishedfrom its power to license for purely police purposes. 1940 the National Assembly enacted Commonwealth Act No. 260 and 261 of which read as follows: SEC. We will consider them separately. horse races. circus andother performances and places of amusements. 2958. (e) that consideration the nature of the business of the plaintiffs and the enormous volume of business they handle the graduated tax fixed by the ordinance is not unreasonable. tar. oil. known as the National Internal Revenue Code section 18. circusand other similar parades.benzene. 1946.case of double taxation. bowling alleys. lodging houses. resin. thestorage and sale of gunpowder. . turpentine. public billiard table public pool tables. coal.Junk dealers. On September 5. 2958. the license fee for and regulate the business of livery stable. lumber yards. On August 7. shipyards. match factories. cafes. Appellants line of argument runs as follows: By virtue of the specific power granted in the above quoted provision of the Revised Administration Code Ordinance No. Defendants allege also that since May 1. when the ordinance in question took effect plaintiffs have been charging the theater-going public increased prices for admission to the cinematographs owned and operated to the graduated tax imposed by said ordinance and as a result while refusing to pay said tax but at the same time collecting an amount equal to said tax plaintiffs have taken undue advantage of said ordinance to realized more profits. petroleum or any Ofthe products thereof and of all other highly combustible or explosivematerials and other establishment likely to endanger the public safety or give rise to conflagration or explosion and subject to the provision of ordinance issue by the (Philippines Health Service) Bureau of Health in accordance with law tanneries. (c) Specific taxes on certain articles. Plaintiffs appellants assign in the their brief three errors committed by the trial court. the fact that the amount collected thereunder are higher than what are needed for police regulation and supervision does not render said ordinance unfair unjust capricious unreasonable and oppressive. public vehicles. theatrical performances. and further to fix the location of and to tax fix the license fee for and regulate the businessof lively stables. steam boilers. nitroglycerin. gasoline. 'hemp. 466. public dancing halls. embalmers. boarding houses livery garages warehouses. cabarets. renders tallow chandlers bone factories and soap factories. 18. cotton. public exhibitions. foundries. — The following taxes fees and charges are deemed to be national internal revenue taxes: (a) Income tax. dance halls. 2958 was enacted. blacksmith shops. 1946. Sources of revenue. Appellants contend that the lower court erred in holding that under section 2444 (m) of the Revised administrative Code the Municipal Board of the City ofManila had the power to enact Ordinance No. pawnshops theaters. race tracks. pitch. Judge Emilio Pena of the court of first Instance of Manila rendered a decision upholding the validity of Ordinance No. Section 2444 (m) of the Revised Administrative code reads as follows: To tax fix the license fee and regulate the business of hotels restaurants refreshment places.

lessees. In the case of cockpits. (i) When the amount paid for admission exceeds ninety-nine centavos. 39. or operator a tax equivalent to ten per centum of the gross receipts. or other articles subject to specific tax. or operator of the amusement place. or operators of the theaters of cinematographs and the distributors of the cinematographic films. or from any business subject to tax under this Code. taxes on banks and insurance companies franchise taxes on amusements charges on forest product fees for sealing weights and measures firearms license fees radio registration fees and water rentals. beverages. Republic Act No. circuses. lessee. irrespective of whether or not any amount is charged or paid for admission: Provided. race tracks. the term "gross receipts" embraces all the receipts of the proprietor. Amusement taxes. — There shall be collected from the proprietor. for the purpose of the amusement tax. (c) When the amount paid for admission exceeds thirty-nine centavos but does not exceed fortynine centavos four centavos on each admission. this tax is in addition to the privilege tax prescribed in seciton 193. or operation of theater cinematographs. two centavos on each admission. or operators of such theaters or cinematogrphs and paid to the Collector of Internal Revenue before the gross receipts are divided between the proprietros. concert halls. (g) Miscellaneous taxes fees and charges. nine centavos on each admission. lessees. In the case of theaters or cinematographs. (g) When the amount paid for admission exceeds seventy nine centavos but does not exceed eighty-nine centavos eight centavos on each admission. SEC. (f) When the amount paid for admission exceeds sixty-nine centavos but does not exceed seventy nine centavos seven centavos on each admission. (f) Mining taxes. ten centavos on each admission. (This section was amended by section 8. boxing exhibition and other places of amusement the following taxes: (a) When the amount paid for admission exceeds twenty-nine centavos. three centavos on each admission. That in the case of race tracks. (h) When the amount paid for admission exceeds eighty-nine centavos but does not exceed ninty-nine centavos. (b) When the amount paid for admission exceeds twenty-nine but does not exceed thirty-nine centavos. namely. (d) When the amount paid for admission exceeds forty-nine centavos but does not exceed fiftynine centavos five admission. 260. excluding the receipts derived by him from the sale of liquors. and cabarets. lessee. (e) Documentary stamp taxes. effective October . lessee.(d) Privilege taxes on business or occupation. however. there shall be collected from the proprietor. the taxes herein prescribed shall first be decuted and withheld by the proprietros. (e) When the amount paid for admission exceeds fifty-nine centavos but does not exceed sixtynine centavos six centavos on each admission.

was enacted on December 8. bowling alleys. circus and other performances and places of amusements. plaintiffs argue. The whole argument of plaintiffs hinges. on the assumption that the power granted to the City of Manila by section 2444(m) of the Revised Administrative Code is limited to the authority to impose a tax on business. Plaintiffs-appellants contend that the lower court erred in not holding that section 2444 (m) of the Revised Administrative Code was repealed or the power therein contained was withdrawn by the National Assembly by the enactment of Commonwealth Act No.1. Both provisions of law may stand together and be enforced at the same time without any incompatibility among themselves.) SEC. scientific. 1940. 2958 violated the principle of equality and uniformity of taxation enjoined by the Constitution (sec. Ordinance No. 466 known as the National Internal Revenue Code. Art. 466. will show conclusively that the power to tax amusement is expressly included within the power granted by section 2444(m) of the Revised Administrative Code. public billiard tables. that section 2444(m) of the Revised Administrative Code confers upon the City of Manila the power to impose a tax on business but not on amusement and. 1. as later amended by Republic Act No. public exhibition. theatrical performances. race tracks. Constitution of the philippines). 466. 1946. covering the whole field on taxation and provided for more than what the ordinance in question has provided. VI. — The tax herein imposed shall not be paid where the admission fee or charges are collected by or for and in behalf of any religious. The very fact that section 2444 (m) of the Revised Administrative Code includes theaters. 2958 does not specify the kind of the tax sought to be imposed but the seven schedules and other details of said ordinance are. and so the apparent conflict must be resolved with the conclusion that. the National Assembly enacted Commonwealth Act No. the assumption is based on an arbitrary labeling of the kind of tax authorized by said section 2444(m). public dancing halls. with the enactment of Commonwealth Act No. Exemption. in every respect. 261. On April 25. . charitable. sub-sec. cinematographs. plaintiffs aver that the Charter of the City of Manila. In support of this contention. As a result. identical with the amusement tax provided by section 260 of Commonwealth Act No. with exclusion of the power to impose a tax amusement. plaintiffs contend that the trial court erred in not holding that Ordinance No. horse races. The distinction made by plaintiffs as to the power to tax on business and the power to tax on amusement has no ground under the provisions of section 2444(m) of the Revised Administrative Code. consequently. dance halls. We are quoting the original provision to show the status of the law when the Ordinance was passed. Finally. The tax therein authorized cannot be defined as tax on business and cannot be restricted within a smaller scope than what is authorized by the words used. containing section 2444(m) of the Revised Administrative Code. 39. 1929. public pool tables. section 2444(m) of the Revised Administrative Code has been impliedly repealed and the power therein delegated to the City of Manila withdrawn. to the extent of excluding what plaintiffs describe as tax on amusement. But. or educational institution or association. We see absolutely no force in plaintiffs' contention. The conflict pointed out by them is imaginary. 22. 466. including provisions on amusement tax. therefore. Ordinance No. but. there are two taxing powers seeking to occupy exactly the same field of legislation. 2958 was enacted beyond the charter powers of the City of Manila. and where no part of the net proceeds of such admission fees or charges inures to the benefit of any private stockholder or individual. circuses and other similar places. cabarets.

07 paid under protest and such other sum paid after 20 December 1948 (1949). as City Treasurer and JESUS E. L-4887 May 30. arbitrary and confiscatory. as amended by Ordinance No. constitutes a specific tax prohibited by commonwealth Act No. We certify that the Chief Justice voted to affirm the appealed judgment. defendants-appellants. deprives the plaintiff of its property without due process of law. PADILLA. 38.authorized. without costs. 46. City Fiscal Jose L. null and void. Equality and uniformity of the tax imposition. the plaintiff seeks to recover in this action after a demands for refund had been refused by the corresponding City authorities. circuses. series of 1946. theatrical shows.019. Perfecto. MIGUEL RAFFIÑAN. as Assistant City Treasurer of Cebu City. which accept and approved the Executive Agreement entered into by the President of the United States and the President of the Philippines. Paras. of the City of Cebu. 733. theaters. 38.. J. Uy Calderon for appellee. vaudeville companies. vs. oppressive. Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. Pedro B. THE CITY OF CEBU. contravenes the national policy and Commonwealth Act No.To support this contenttion. . denies equal protection of the laws. a domestic corporation. 1953 UY MATIAO & CO.. J. is no argument at all against the equality and uniformity of the tax imposition. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation." the argument has absolutely no merit. discrimatory. 472.. concert halls. Bengzon. the City has appealed. series of 1947. concur. is unjust. appellantts point out to the fact that the ordinance in question does not tax "many more kinds of amusements" than those therein specified. which. directing the City of Cebu to refund to the plaintiff the sum of P4. together with the fees paid prior to December 1948 and those that may be paid under by virtue of said ordinances. paid under protest the fees for the storage in its warehouse in the City of Cebu of copra and/or hemp and/or for engaging in buying and/or selling copra and/or hemp in the said City provided for in said ordinance from 20 December 1948 to 18 November 1949 amounting to P4.019. series of 1947.: Under the pursuant to the provisions of Ordinance No.. and other places of amusement. cabarets. The fact that some places of amusement are not taxed while others. and boxing exhibitions and other kinds of amusements or places of amusement are taxed. where it is provided that no export tax shall be imposed or collected by the Philippines on article exported to the United States.07. the plaintiff appellee. JJ. Upon the stipulation of facts and evidence presented the Court of First Instance of Cebu rendered judgment holding Ordinance No. Montemayor and Reyes.R. plaintiff-appellee. series of 1948. The judgment of the trial court is affirmed with costs against appellants. and the appellants cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be confused with those not included in the ordinance. INC. No. and No. Abad and First Assistant City Fiscal Honorato Garciano for appellants. unfair. as MAYOR. ZABATE. such as cinematographs. Tuason. Pablo. ANATOLIO YNCLINO. Republic of the Philippines SUPREME COURT Manila EN BANC G. on the ground that the fee imposed by said ordinance is un. such as "race tracks. 46. cockpits.

. firm or corporation engaged in the business of buying and selling the storing copra in a warehouse located in the city. to wit: that the ordinances are unjust confiscatory. tallow chandelries. violate the rule or uniformity of taxes. The tax or license fee in question is not specific because it does not subject directly the produce or goods to tax but indirectly as an incident to. copra is not highly combustible or explosive material.. and (3) the warehouse where copra is stored is not an establishment likely to endanger the public safety or give rise to configlations or explosions. oil. the storage of sale of gunpowder . . petrolium. . fix the license free for. but once ignited. oil being the main component ingredient of copra. and other establishments likely to endanger the public safety or give rise to conflagration or explotions . . renderies. and subject to the condition and limitation thereof.. gasoline. under the pursuant to the prevision of the charter hereinbefore quoted. hemp and cotton cannot be considered or classified as "all other highly combustible or explosive materials" like gunpowder. For that reason such a warehouse is likely to endanger the public safety or likely to give rise to configlations. for coal. It is a tax on the business of buying and selling or storing copra. oil. the storage and sale of gunpowder. Section 4 of Ordinance No. and soap factories. coal. the Municipal Board shall have the following legislative powers: xxx xxx xxx (m) To tax. regulate the business and fix the location of match factories . There is no question that under its charter the City of Cebu May Tax or impose a license fee on any person. fix the license fee for regulate the business and fix the location of match factories. benzine. 58. the business to be taxed. . The trial court is of the opinion that the charter of the City of Cebu does not authorize it to impose the tax on or fix the license free for anyone engaged in the business of buying and selling and storing copra. regulate the business. regulate the business and fix the location of other establishments likely to endanger the public safety or give rise to conflagrations or explosions. which is the dried meat of the coconut. oil. cotton. Com. turpentine. oil. tar. nitroglycerine. provides: Except as otherwise provided by law. and subject to the provisions of ordinances issued by the Philippine Health Service in accordance with law. 58) to impose the collect the tax or license free provided in the ordinances in question.. and other establishment likely to endanger the public safety or give rise to conflagrations or explotions. . and having arrived at the conclusion the trial court deemed it unnecessary to pass upon the other points raised by the plaintiff. . house used for keeping or storing copra is an establishment likely to endanger the public safety or likely to give rise to conflagrations or explosions or explosions. . Section 17. the storage and sale of gun powder. hemp.. is difficult to put under control by water and to extinguish it the use of chemicals would be necessary. regulate the business and fix the location for fix the license fee for. Act No. or in connection with.. etc. etc. steam boilers lumberyars. . or any of the products thereof and of all other highly combustible or explosive materials. tenneries. foundries. True. the fire resulting therefrom. Commonwealth Act No. because oil is in the enumeration and the main component ingredient or constituent part of copra. . bone factories. does not mean the copra is excluded. blacksmith shops. resin. . firm or corporation engaged in the business of buying or selling copra and at the same time of keeping." There is then an express authority of the city of Cebu Tax. pitch. the City of City is Authorized "to tax. fix the license fee for. is oil. and fix the location of match factories. because (1) copra is not mentioned in the section above-quoted. Act No. (2) it is not a highly combustible or explosive material.The first and main question to determine is whether the City of Cebu is authorized under its charter (Com. gasoline and nitroglycerine. The fact that copra is not mentioned in section 17 (m). and other establishments likely to endanger the public safety or give rise to the conflagrations or explosions. 38 provides that a person. Not only has the city of Cebu the power to tax. 58. The substances mentioned in the section hereinbefore quoted are haphazardly classified in the enumeration. because of oil it contains. and deprive persons subject to the tax or license free therein of their property without due process of law. fix the license fee for.

JASAAN. Pantaleon Z. MISAMIS ORIENTAL. If the copra dealer does not want to pay the city tax or fee. Jugo. the judgment appealed from is reversed. Pablo. if stored in any warehouse in the City of Cebu and the weight thereof is 100 kilos or more.R. 38 and 46 in question are unfair. petitioner.holding or storing it at his place of business. For the foregoing reasons. . **** Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. It. vs. The tax or license fee in question is not among those prohibited or beyond the power of the municipal councils and municipal districts council to impose. arbitrary and violate the principle on uniformity of taxation. 472. 472 applies only to municipal council and municipal district council and not to cities Like the City of Cebu which has it own charter. The tax or license fee provided for in the ordinance in question is imposed on every person. the tax or license fee provided for in the ordinances in question based on the weight regardless of value is what makes the tax or fee uniform. Besides Commonwealth Act No. 72477 October 16.. or good subject to tax or license fee does not make ununiform the rate of such tax or license fee. respondents. Commonwealth Act No. It is unnecessary to determine whether it is a tax for revenue purposes or a license free reinburst the city for expenses incurred by it for service of supervision and issuance of the permit and license because the City of Cebu is authorized not only to impose a license fee but also to tax for revenue purposes. HON.05 tax or license fee for 100 kilos of fraction thereof per month is not arbitrary but reasonable.. shall pay only the license for enganging in the business of buying and selling it. No. concur. It is contended that the ordinance Nos. article. he may buy and sell the store the copra elsewhere. The fact that the price of copra has been steadily going down. PRESIDING JUDGE. firm. the amount of tax or license free to be collected not being based on the value but on the weight of the product. the complaint of the plaintiff is dismissed without costs. MISAMIS ORIENTAL AND BARANGAY APLAYA. firm and corporations place in similar situation. unjust. REGIONAL TRIAL COURT. 1990 NATIONAL POWER CORPORATION. Precisely. MUNICIPALITY OF JASAAN.J. JJ. Reyes. Market fluctuation in the value of price of the merchandise. Paras C. bodega or elsewhere before disposing of it. CAGAYAN DE ORO CITY. PROVINCE OF MISAMIS ORIENTAL. Feria. Tuason. as provided for in section 3. whereas that of going up. Salcedo for respondent Barangay Aplaya. 10TH JUDICIAL REGION BRANCH XXV. does not render the tax arbitrary. The tax or license fee does not deprive the owner of the copra and of the warehouse of this property without due process of law. Such tax or license fee becomes uniform by making the weight the basis thereof as provided for in the ordinances in question. A P0. because it is reasonable tax or fee and it does not deprive the dealer of his copra and the owner of the warehouse where it is kept of his property. It is not a tax on export because it is imposed not only upon copra to exorted but also upon copra sold and to used for domestic purposes. as well as the exemption. Bautista Angelo and Labrador.1 applies equally to all persons. Bengzon. The Provincial Attorney for respondent Misamis Oriental and Municipality of Jasaan. or corporation engage in the City of Cebu in business of buying and selling and storing copra in his or its warehouse located within the city.

AGENCIES AND INSTRUMENTALITIES. 9901 filed by respondents Province of Misamis Oriental and Municipality of Jasaan for the collection of real property tax and special education fund tax from petitioner covering the years 1978 to 1984. 1985.J. NAPOCOR filed its answer to the complaint with counterclaim. 1985 and August 20. Branch XXV to hear Civil Case No. AND FOR OTHER PURPOSES" dated on July 9. 10-85 effective January 11. denying the second motion to dismiss and requiring both parties to appear before the court for the purpose of submitting a stipulation of facts. petitioner National Power Corporation (NAPOCOR for brevity) questions the jurisdiction of the Regional Trial Court of Cagayan de Oro City. the court a quo issued an order on June 27. Thereafter. 1985.008. 1985. NAPOCOR filed a supplemental motion to dismiss 4 on February 22.104. The antecedent facts are as follows: On October 10. entitled "PRESCRIBING THE PROCEDURE FOR ADMINISTRATIVE SETTLEMENT OR ADJUDICATION OF DISPUTES. 6 On October 30. 2) Petitioner is exempt from payment of real property taxes. Treating the same as a second motion to dismiss and finding the affirmative defenses therein stated to be unmeritorious. Sections 2 and 3 of this Decree provide: . C. 1985. the case was set for trial pursuant to the court's order dated August 20. Pielago issued an order 3 dated January 28. 1984. 1985. 1984. No. ten percent (10%) of the real property tax collected on properties within its jurisdiction shall accrue to the general fund of the barangay. In support of this motion NAPOCOR cited Presidential Decree No. June 27. Barangay Aplaya. INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS. 1985 denying the motion to dismiss. filed a motion to dismiss 2 dated January 12. the Province of Misamis Oriental filed a complaint 1 with the Regional Trial Court of Cagayan de Oro City. Municipality of Jasaan. CLAIMS AND CONTROVERSIES BETWEEN OR AMONG GOVERNMENT OFFICES. Petitioner NAPOCOR then defendant therein. Branch XXV against NAPOCOR for the collection of real property tax and special education fund tax in the amounts of P11.658. 1973 which provides that disputes between agencies of the government including govemment-owned or controlled corporations shall be administratively settled or adjudicated by the Secretary of Justice. 242. 1985 citing a resolution of the Fiscal Incentive Review Board. 1985 on the grounds that the court has no jurisdiction over the action or suit and that it is not the proper forum for the adjudication of the case. 242 dated July 9.10 and P11. On March 27. restoring the tax and duty exemption privileges of petitioner. petitioner NAPOCOR filed before this Court the present special civil action for certiorari 7 setting forth the following issues. The court through Judge Pablito C. 9901 dismissed on the grounds of lack of jurisdiction and/or improper venue. respectively. Relied upon by NAPOCOR in assailing the jurisdiction of the lower court and/or the venue of the action are Sections 2 and 3 of Presidential Decree No.105. to wit: 1) Respondent Court acted without or in excess of jurisdiction and with grave abuse of discretion when it issued the orders dated January 28.10.FERNAN. denying petitioner's motions to have Civil Case No.: In this Special Civil Action for Certiorari. 1985. 1973. 1985. On July 23. covering the period 1978 to 1984. Misamis Oriental filed a complaint in intervention 5 contending that non-payment by NAPOCOR of real property taxes would adversely affect its interest since under the law.

as Attorney General and ex officio legal adviser of all government-owned or controlled corporations and entities. offices and other agencies of the National Government. a partial repeal of the latter win be implied to the extent of the repugnancy or an exception grafted upon the general law. our consideration of the legal provisions involved leads us to a different conclusion. It is a basic tenet in statutory construction that between a general law and a special law. agencies and instrumentalities. This remedy shall be in addition to all other remedies provided by law. claims and controversies. in consonance with section 83 of the Revised Administrative Code. claims and controversies between or among government offices. 464 on the matter of jurisdiction. the same shall be submitted to and settled or adjudicated by the Secretary of Justice. It is indeed desirable and beneficial to the Judiciary's ongoing program of decongesting court dockets that intra-governmental disputes such as this be settled administratively. with respect to disputes or claims or controversies between or among the government-owned or controlled corporations or entities being served by the office of the Government Corporate Counsel and (c) The Secretary of Justice. on the other hand. Section 3. It is a special law which deals specifically with real property taxes. the special law prevails. rely on Presidential Decree No. Cases involving mixed questions of law and of fact or only factual issues shall be submitted to and settled or adjudicated by: (a) The Solicitor General. a prior general law on the same subject. His ruling or determination of the question in each case shall be conclusive and binding upon all the parties concerned. 464 on the other hand. (b) The Govermnent Corporate Counsel. bureaus. 8 Where a later special law on a particular subject is repugnant to. collection and administration of real property tax. .Section 2. including government-owned or controlled corporations. or inconsistent with. Unfortunately. respondent municipal corporations. Collection of real property tax through the courts. 464. 242 and P. 1974. with respect to disputes or claims or controversies between or among the departments. GENERALIA SPECIALIBUS NON DEROGANT. we are guided by the basic rules on statutory construction. as wen as the levy.D.D. In reconciling these two conflicting provisions of P. The coverage is broad and sweeping. encompassing all disputes. entitled "THE REAL PROPERTY TAX CODE" enacted on July 1. with respect to all other disputes or claims or controversies which do not fall under the categories mentioned in paragraphs (a) and (b). P.D. governs the appraisal and assessment of real property for purposes of taxation by provinces.D. (Emphasis supplied) In upholding the lower court's jurisdiction. 242 is a general law which deals with administrative settlement or adjudication of disputes. The civil action shall be filed by the Provincial or City Fiscal within fifteen days after receipt of the statement of delinquency certified to by the provincial or city treasurer. In all cases involving only questions of law. cities and municipalities. — The delinquent real property tax shall constitute a lawful indebtedness of the taxpayer to the province or city and collection of the tax may be enforced by civil action in any court of competent jurisdiction. An examination of these two decrees shows that P. specifically Section 82 thereof which provides: Section 82.

1931 entitled "DIRECTING THE RATIONALIZATION OF DUTY AND TAX EXEMPTION PRIVILEGES GRANTED TO GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS AND ALL OTHER UNITS OF GOVERNMENT" which was passed on June 11. and fees which are payable to the national government while its exemption from taxes. It must be noted that Resolution 10-85 was the same resolution cited by petitioner in its supplemental motion to dismiss 11 inCivil Case No. including government-owned or controlled corporations their exemptions from all kinds of taxes. The Province of Albay.D. Section 23 thereof provides: Section 23. al. 10-85.D. agencies and instrumentalities remains unaffected. 1-86 and 17-87 of the Fiscal Incentives Review Board (FIRB). et. Had it been otherwise. On the question of whether or not NAPOCOR is liable to pay real property taxes and special education fund taxes for the years 1978 to 1984. then the law would have said so. The Province of Albay) to restore petitioner's tax exemptions began only in 1985 with the issuance of FIRB Resolution No. duties and fees should be considered unequivocably resolved by the above provision. 1177 has already expressly repealed the grunt of tax privileges to any government-owned or controlled corporation and all other units of government. We find the above argument untenable. customs duties and other taxes and fees as are imposed under revenue laws.D. 10 herein petitioner was held liable for real property taxes to the provincial government of Albay for the period June 11. whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund.A special law must be intended to constitute an exception to the general law in the absence of special circumstances forcing a contrary conclusion. (Emphasis supplied ) Thus. 464 on the matter of who or which tribunal or agency has jurisdiction over the enforcement and collection of real property taxes. 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. we rule in the affirmative. when it claims to have been enjoying tax exemptions under Resolutions Nos. (Emphasis supplied) Petitioner alleges that what has been withdrawn is its exemption from taxes. It reads into the law a distinction that is not there. since it is a special law and of later enactment. NAPOCOR maintains that it is exempt therefrom. shall pay income taxes. 10-85. — All units of govemment. 242 and P.. There the law does not distinguish.D. categorically states: WHEREAS. 242 must yield to P. that a procedure shag be established by the Secretary of Finance and the Commissioner of the Budget. 464 should be resolved in favor of the latter law. entitled "REVISING THE BUDGET PROCESS IN ORDER TO INSTITUTIONALIZE THE BUDGETARY INNOVATIONS OF THE NEW SOCIETY" was passed on July 30. provided. 9901. 9901. neither must we. including governmentowned or controlled corporations. 9 The conflict in the provisions on jurisdiction between P. If the attempt (found ineffective for lack of authority in the above-cited case of NPC vs. 1177. 1977. Not having distinguished as to the kinds of tax exemptions withdrawn. further. 1984. the plain meaning is that all tax exemptions are covered. 1984 to March 10. duties and fees payable to government branches. respondent court has jurisdiction to hear and decide Civil Case No. 1987. P. it . Presidential Decree No. Therefore. Moreover. It is contrary to the clear intent of the law to withdraw from all units of government. Considering that real property taxes are payable to the local government. provided. any dubiety on NAPOCOR'S liability to pay taxes. duties. Presidential Decree No. Presidential Decree No. In the case of National Power Corporation vs. Tax and Duty Exemptions.

pp. xxx xxx xxx To all intents and purposes. 72-73. city and municipalities where the property is situated. 9901. pp.e..D. 4 Rollo. Footnotes 1 Rollo. 22-24. particularly in the local government level. pp. from 1977 when P. . 2 Rollo. 28-30. the entire proceeds of the additional one per cent (1%) real property tax levied for the Special Education Fund created under R. pp. Real property taxes. SO ORDERED. The Province of Albay. Even the barrio where the property is situated shares in the real property tax collections. 5 Rollo. petitioner did not enjoy any tax privilege as would exempt it from the payment of the taxes under consideration. 1177 was promulgated up to 1984. Jr. after all.stands to reason that prior thereto. i.. the petition is DISMISSED. real property taxes are funds taken by the State with one hand and given to the other.A. Likewise. pp. as and by way of real property taxes. The proceeds of the real property tax are divided among the province. 12 this Court had occasion to state: Actually. 6 Rollo. JJ. city or municipality where the property subject to the tax is situated and shall be applied by the respective local government unit for its own use and benefit. concur. Bidin and Cortes. form part and parcel of the financing apparatus of the Government in development and nation-building. 65-66. is on leave. 25-26. J. Petitioner having been found liable for the taxes being collected in Civil Case No.. 5447. In no measure can the Government be said to have lost anything. the respondent court is hereby directed to proceed with deliberate dispatch in hearing the case for the purpose of determining the exact liability of petitioner.. the State has no reason to decry the taxation of NAPOCOR's properties. Feliciano. pp. Gutierrez. pp. 31-33. 2-16. 18-21. are divided among the province. 7 Rollo. 3 Rollo. WHEREFORE. No Costs. In the same case of NPC vs.

17 SCRA 579.R. 9 Baga vs. Inc.The said grantee in consideration of the franchise hereby granted. 99 Phil.616.A. LINGAYEN GULF ELECTRIC POWER CO. and fixed taxes and surcharge assessed against it in the sums of P19. 31-33.41 and P3. On February 24. et al. 14 and 25 of June 29 and July 2.T. 1954 as prescribed in Section 259 of the National Internal Revenue Code.86 for the years 1946 to 1954 and 1959 to 1961. 889. 581 and 1302. 1990. 1948. June 30. cited in Butuan Sawmill. Republic of the Philippines SUPREME COURT Manila EN BANC G. pursuant to the municipal franchise granted it by their respective municipal councils.293. under Resolution Nos. 87479. PNB. shall pay quarterly into the Provincial Treasury of Pangasinan. franchise. L-21516. vs.T. SARMIENTO. City of Butuan. vs.R. 1955. City of Manila. On September 29..8 Lagman vs. No. L-23771 August 4. Lingayen Gulf Electric Power Co. 1966. pp. 1964 in C. INC.A. 1988 THE COMMISSIONER OF INTERNAL REVENUE. Cases Nos.. 12 Ibid. 23305. Inc.. 10 G. No.293. absolving the respondent taxpayer from liability for the deficiency percentage. for brevity) dated September 15. respondents. both in the province of Pangasinan. the private . June 4. respectively.. and THE COURT OF TAX APPEALS. 1946. Section 10 of these franchises provide that: . 1956. 11 Rollo. instead of the lower rates as provided in the municipal franchises. petitioner. 1948 to December 31. operates an electric power plant serving the adjoining municipalities of Lingayen and Binmaley.. J. No. which were jointly heard upon agreement of the parties. the President of the Philippines approved the franchises granted to the private respondent. Angel Sanchez for Lingayen Electric Power Co.. April 29. Inc. The respondent taxpayer. 16 SCRA 755. 1966.. respectively..R. the Bureau of Internal Revenue (BIR) assessed against and demanded from the private respondent the total amount of P19. No. G.: This is an appeal from the decision * of the Court of Tax Appeals (C.41 representing deficiency franchise taxes and surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts from March 1. one per centum of the gross earnings obtained thru this privilege during the first twenty years and two per centum during the remaining fifteen years of the life of said franchise. On November 21.

3.025. heat. In its letters dated July 2. On September 15. whether or not it could be given retroactive effect so as to render uncollectible the taxes in question which were assessed before its enactment. 3843 was passed on June 22.A. privileges. In a letter dated August 21. nature or description levied.A.T. the respondent court ruled that the provisions of R. 1958. 1962. 1948.. Case No. 1962. Pending the hearing of the said cases.86 representing deficiency franchise tax and surcharges for the years 1959 to 1961 again applying the franchise tax rate of 5% on gross receipts as prescribed in Section 259 of the National Internal Revenue Code. and power system in the same municipalities of Pangasinan. the BIR through its regional director. revenues and profits. 1962. Section 4 thereof provides that: In consideration of the franchise and rights hereby granted. 1957. the appeal to the respondent Court of Tax Appeals on September 19. the appeal to the respondent Court of Appeals on November 29. provincial or national.A. Whether or not the respondent taxpayer is liable for the fixed and deficiency percentage taxes in the amount of P3. the Commissioner demanded from the private respondent the payment of P3.T.A.A. The said ruling is now the subject of the petition at bar. the private respondent protested the said assessment and requested for a conference with a view to settling the liability amicably.96 for the period from January 1.) No. on its poles. 3843 should apply and accordingly dismissed the claim of the Commissioner of Internal Revenue. receipts. No. 1946 to February 29. no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts as provided for in the original franchise shall be collected. granting to the private respondent a legislative franchise for the operation of the electric light. 39) assessed against the private respondent on its gross receipts realized before . the period before the approval of its municipal franchises. the grantee shall pay into the Internal Revenue office of each Municipality in which it is supplying electric current to the public under this franchise. 1302. the grantee is hereby expressly exempted and effective further upon the date the original franchise was granted. the private respondent protested the assessment and requested reconsideration thereof The same was denied on November 9.A. 1964. 1 963. 1958 to the petitioner Commissioner.A. Thus. No. it made an overpayment of the franchise tax. rights. The issues raised for resolution are: 1. 3843 is valid. The first issue raised by the petitioner before us is whether or not the five percent (5%) franchise tax prescribed in Section 259 of the National Internal Revenue Code (Commonwealth Act No. If the abovementioned Section 4 of R. and on its franchise. established. and August 9. the Commissioner denied the request of the private respondent. On April 30. Republic Act (R.. denied the private respondent's request for reinvestigation and reiterated the demand for payment of the same. 581. Whether or not Section 4 of R. docketed as C. 3843 is unconstitutional for being violative of the "uniformity and equality of taxation" clause of the Constitution. 3843 is collectible. wires. 2. 4. No. from which taxes and/or licenses. In his letters dated July 25 and August 28. Said tax shall be due and payable quarterly and shall be in lieu of any and all taxes and/or licenses of any kind. docketed as C. No.616.respondent requested for a reinvestigation of the case on the ground that instead of incurring a deficiency liability. No. 1962. any provision of law to the contrary notwithstanding.No. Whether or not the 5% franchise tax prescribed in Section 259 of the National Internal Revenue Code assessed against the private respondent on its gross receipts realized before the effectivity of R. insulator . 1958. now or in the future. Thus. 466 as amended by R. In a letter dated October 5. a tax equal to two per centum of the gross receipts from electric current sold or supplied under this franchise.A. or collected by any authority whatsoever. municipal.

the effectivity of R. but even in the absence of such cause. leaving no room for doubt regarding the legislative intent. They are usually adopted after careful . established. 3843 is unconstitutional for being violative of the "uniformity and equality of taxation" clause of the Constitution. No. the 5% franchise tax rate provided in Section 259 of the Tax Code was never intended to have a universal application. precludes the imposition of a higher tax. 39 of October 1. 1963. We find no merit in petitioner's contention. On the question as to whether or not Section 4 of R. 3843 granted the private respondent a legislative franchise in June. 3843. 3843 did not only fix and specify a franchise tax of 2% on its gross receipts. As correctly held by the respondent court. as amended. The benefits of the tax reduction provided by law (Act No. effective from the date the original municipal franchise was granted." moreover. or repeal.. 3636. Furthermore. 132 and R. or national. and placed it within the class falling under Act No. 3636 as amended by C. instead of the lower franchise tax rates provided in the municipal franchises (1% of gross earnings for the first twenty years and 2% for the remaining fifteen years of the life of the franchises) because Section 259 of the Tax Code.A. the private respondent was liable to pay only the 2% franchise tax. 3 as amended by C. i.No. No.A.A. 3843) apply to the respondent's power plant and others circumscribed within this class. or collected by any authority whatsoever. municipal. any provision of law to the contrary notwithstanding. No. 667.A. no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts . The franchise of the private respondent have been modified or amended by Section 259 of the Tax Code.. the latter was granted subject to the terms and conditions established in Act No. provincial. No. 667 2 of the Philippine Commission. and.A.A. all laws to the contrary notwithstanding. since the franchises were accepted on March 1. the power of the Legislature to alter." Thus. 1 It is true that the private respondents municipal franchises were obtained under Act No. alteration. while other taxpayers similarly situated were subject to the 5% franchise tax imposed in Section 259 of the Tax Code. it only effected the transfer of a taxable property from one class to another. 3843. 1948. R. Thus. 3843. the petitioner submits. No.A. and providing that the private respondent should pay only a 2% franchise tax on its gross receipts.e. 132. 3843 is collectible. thereby discriminatory and violative of the rule on uniformity and equality of taxation. No. 3843 merely transferred the petitioner's power plant from that class provided for in Act No. applied to existing and future franchises.No. They do not constitute a part of the machinery of the general government. by virtue of R. or even repealing the original municipal franchises. It is the contention of the petitioner Commissioner of Internal Revenue that the private respondent should have been held liable for the 5% franchise tax on gross receipts prescribed in Section 259 of the Tax Code. The franchises of the private respondent were already in existence at the time of the adoption of the said amendment..No. or repeal any franchise is always deemed reserved. amending. 1948 after approval by the President of the Philippines on February 24. 3636. 1946. A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. but made it "in lieu of any and all taxes. amend. R. like the one granted to the private respondent under Section 4 of R. the petitioner submits that the said law is unconstitutional insofar as it provides for the payment by the private respondent of a franchise tax of 2% of its gross receipts. nature or description levied. No. Tax exemptions have never been deemed violative of the equal protection clause.A. We do not have the authority to inquire into the wisdom of such act. shall be collected. as amended.A. "Charters or special laws granted and enacted by the Legislature are in the nature of private contracts. as amended.A-No. The private respondent's original franchises did not contain the proviso that the tax provided therein "shall be in lieu of all taxes. 4 We note that the said Section 259 of the Tax Code expressly allows the payment of taxes at rates lower than 5% when the charter granting the franchise of a grantee. the franchises contained a reservation clause that they shag be subject to amendment. to which it belonged until the approval of R. but these original franchises have been replaced by a new legislative franchise. 3843." thus. These conditions Identify the private respondent's power plant as falling within that class of power plants created by Act No. whether or not it should be given retroactive effect. now or in the future . R. "in lieu of any and all taxes and/or licenses of any kind. and effective further upon the date the original franchise was granted. as amended by RA No. 3636. R.A. if adjudged valid.. altering.A. No.

969. 1948) before the approval of its municipal franchises. Cortes. Footnotes * Penned by Hon.consideration of the private rights in relation with resultant benefits to the State .98 for the period from January 1. should the said law be applied retroactively so as to render uncollectible the taxes in question which were assessed before its enactment? The question of whether a statute operates retrospectively or only prospectively depends on the legislative intent. Given its validity. Roman M. However. JJ. and of provinces for franchises to construct and operate street railway. The legislative franchise (R. in passing a special charter the attention of the Legislature is directed to the facts and circumstances which the act or charter is intended to meet.. SO ORDERED. no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts . 91 Phil.. Gancayco. Griño-Aquino and Medialdea. did not cover the period before the franchise was granted. the private respondent was liable for the payment of percentage and fixed taxes as seller of light.A. 1 Gomez v. Railway Co. Umali. the private respondent should no longer be made to pay for the deficiency tax in the amount of P3..36." Republic Act No. Associate Judge. No. therefore. Section 1 0 thereof provides for the payment of a franchise tax of 2% of the gross earnings . Act No. the appealed decision of the respondent Court of Tax Appeals is hereby AFFIRMED.) 3 An Act prescribing the form for bills for the granting of electric light and power franchises.96 (i.184. 25 SCRA 827. . Padilla. amounted to P3. Hence. Mariano Nable..e. Gutierrez.025. the franchises were approved by the President only on February 24. v.. for the period from January 1. The exemption.. any provision to the contrary notwithstanding. Bidin. 1946 to February 29. Narvasa. upon the date the original franchise was granted.025... In the instant case. 2 An Act prescribing the method of applying to governments of municipalities. 1946 to February 29. WHEREFORE.. 1961. as pointed out by the respondent court in its findings. Palomar.J. No pronouncement as to costs.96. Therefore. Hon. David 92 Phil. (The model franchise for municipal franchises or the basic authority for granting municipal franchises. that is from January 1. v.025. during the period covered by the instant case. Fernan. 3843 therefore specifically provided for the retroactive effect of the law.e. i. before February 24. and power — which as the petitioner claims. 3843 provides that "effective . Paras. and for other purposes. 1948. we find no reason to disturb the respondent court's ruling upholding the constitutionality of the law in question.. Melencio-Herrera. electric light and power and telephone lines. Cruz. As aforestated. The Legislature consider (sic) and make (sic) provision for all the circumstances of a particular case. Collector of Internal Revenue. 35. which was very much more than the amount rightfully due from it. 3843) exempted the grantee from all kinds of taxes other than the 2% tax from the date the original franchise was granted. Presiding Judge. C. 1948. in lieu of any and all taxes x x x (Model Franchise for legislative franchises)." 5 In view of the foregoing. 1948. concur. shall be collected. 4 See Phil.. concurring. before the said date. Feliciano. 1946 to December 31. Visayan Electric Co. Jr. the private respondent paid the amount of P34. The last issue to be resolved is whether or not the private respondent is liable for the fixed and deficiency percentage taxes in the amount of P3... heat...

40 from January 1 to July 30. CONCEPCION. vs. with costs. 110 as amended of the City of Butuan is illegal. the City of Butuan enacted Ordinance No. 1960.10 per case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of P4. 110 which was subsequently amended by Ordinance No. and to prevent the enforcement thereof.250. 122. Sabido and Associates for plaintiff-appellant. imposes a tax on any person.63 from August 16 to December 31. Plaintiff — seeks to recover the sums paid by it to the City of Butuan — hereinafter referred to as the City and collected by the latter.03 paid under protest and those that if may later on pay until the termination of this case on the ground that Ordinance No. C. THE CITY MAYOR and THE CITY TREASURER. v. INC. OF THE PHILIPPINES. A copy of Ordinance No. all of the CITY OF BUTUAN. etc. 1960 and the amount of P9. of P0. That on August 16. MEMBERS OF THE MUNICIPAL BOARD.926. that the tax imposed is excessive and that it is unconstitutional. both series of 1960. That the plaintiff filed the foregoing complaint for the recovery of the total amount of P14. plaintiff-appellant. respectively. 122 are incorporated herein as Exhibits "A" and "B". 110. Pepsi-Cola Bottling Company of the Philippines. defendants-appellees. 40 Phil.R. Plaintiff.177. The City Attorney of Butuan City for defendants-appellees.. That Ordinance No. 110 as amended.: Direct appeal to this Court. 122 and effective November 28. CITY OF BUTUAN. That plaintiff's warehouse in the City of Butuan serves as a storage for its products the "PepsiCola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of Agusan. is a domestic corporation with offices and principal place of business in Quezon City. 224. 2.5 Manila Railroad Co. These "Pepsi-Cola 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. No. . Both parties submitted the case for decision in the lower court upon a stipulation to the effect: 1. 3. The defendants are the City of Butuan. Republic of the Philippines SUPREME COURT Manila EN BANC G. its City Mayor. 4.J. dismissing plaintiff's complaint. association. pursuant to its Municipal Ordinance No. L-22814 August 28. as amended by Municipal Ordinance No. which plaintiff assails as null and void.. the members of its municipal board and its City Treasurer. Sabido. 1961. from a decision of the Court of First Instance of Agusan. . David. 110. 1960. Series of 1960 and Ordinance No. 1968 PEPSI-COLA BOTTLING CO.

2264. when considered in relation to the sales tax prescribed by Acts of Congress. 6. states what products are "liquors". the injunction against double taxation found in the Constitution of the United States and of some States of the Union. A copy of the form is enclosed herewith as Exhibit "C"." Section 3-A. (3) it is excessive.63 but only P1. upon the authority of which it was enacted. and (5) section 2 of Republic Act No. 110." Sections 6.92 which price is uniform throughout the Philippines." of taxes at specified rates. again. The plaintiff differs only on the claim of depreciation which the company claims to be P3. in general. imported or local. That the parties reserve the right to submit arguments on the constitutionality and illegality of Ordinance No. the City Treasurer of Butuan City. the price of Pepsi-Cola per case of 24 bottles was increased to P1. 7. Indeed — independently of whether or not the tax in question. That the Profit and Loss Statement of the plaintiff for the period from January 1.52. . defines the meaning of the term "consignee or agent" for purposes of the ordinance. 1 Then. as amended of the City of Butuan in their respective memoranda. We have not adopted. xxx xxx x x x1äwphï1. as amended.104. liquors or carbonated drinks for sale in the City. (2) it amounts to double taxation.62. amounts to double taxation. (4) it is highly unjust and discriminatory. In this Profit and Loss Statement. That pursuant to Ordinance No. liquors or all other soft drinks or carbonated drinks received within the month. Section 4 provides that said taxes "shall be paid at the end of every calendar month. and "all other soft drinks or carbonated drinks.ñët Section 1 of said Ordinance No." Pursuant to Section 5. liquors or carbonated drinks "received outside" but "sold within" the City. 40% for the General Fund and 20% for the School Fund.052. as part thereof. is an unconstitutional delegation of legislative powers. is not forbidden by our fundamental law.202. 110. Section 2 provides for the payment by "any agent and/or consignee" of any dealer "engaged in selling liquors. oppressive and confiscatory. That beginning November 21. in consequence of the theory of separation of powers2 is subject to one well-established exception. the general principle against delegation of legislative powers.55 in which case the profit of plaintiff will be increased from P1. 7 and 8 specify the surcharge to be added for failure to pay the taxes within the period prescribed and the penalties imposable for "deliberate and willful refusal to pay the tax mentioned in Sections 2 and 3" or for failure "to furnish the office of the City Treasurer a copy of the bill of lading or cargo manifest or record of soft drinks. 1961 to July 30. in the City. the taxes "shall be based and computed from the cargo manifest or bill of lading or any other record showing the number of cases of soft drinks. on which we need not and do not express any opinion . The second and last objections are manifestly devoid of merit.5. 1961 of its warehouse in Butuan City is incorporated herein as Exhibits "D" to "D-1" to "D-5".double taxation.254.44 to P3.10 per case of 24 bottles of the soft drinks and carbonated beverages therein named. has prepared a form to be accomplished by the plaintiff for the computation of the tax. 1960. 110 as amended.052. namely: legislative powers may be delegated to local governments — to which said theory does not apply3 — in respect of matters of local concern. 8. the defendants claim that the plaintiff is not entitled to a depreciation of P3. Section 10 of the ordinance provides that the revenue derived therefrom "shall be alloted as follows: 40% for Roads and Bridges Fund. This is in accordance with the findings of the representative of the undersigned City Attorney who verified the records of the plaintiff." Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature of an import tax. within the purview thereof." Section 9 makes the ordinance applicable to soft drinks. Section 3 prescribes a tax of P0. Said increase was made due to the increase in the production cost of its manufacture.

000 cases of hard liquors or soft drinks every month for resale. 4 Even however. the tax is. which is beyond defendant's authority to impose by express provision of law. and defendants herein are. accordingly. . and (4) the classification applies equally all those who belong to the same class." And.. the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent.0042 per bottle.. partnership. likewise. The first and the fourth objections merit. and another one shall be entered annulling Ordinance No. imposed only upon "any agent and/or consignee of any person. Thus. would be exempt from the disputed tax. (2) these are germane to the purpose of the legislation or ordinance. is manifestly too small to be excessive. 110. since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers.. 122: . also. also. 122. the tax would not be applicable to such agent and/or consignee. the tax partakes of the nature of an import duty. company or corporation engaged in selling . that the tax "shall be based and computed from the cargo manifest or bill of lading . was imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. the decision appealed from is hereby reversed. unless they are agents and/or consignees of another dealer. It is so ordered. — For purposes of this Ordinance. as amended. to be valid. however. It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances. or negate the authority to classify the objects of taxation.10 per case of 24 bottles. it would seem that the intent was then to levy a tax upon the sale of said merchandise. soft drinks or carbonated drinks. if its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages." of soft drinks or carbonated drinks — in the production and sale of which plaintiff is engaged — or less than P0. there is no reason why sales thereof by sealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. 8 Indeed. partnership.. however. 5 The classification made in the exercise of this authority. The tax of "P0. 122. association. restrained and prohibited permanently from enforcing said Ordinance. and sentencing the City of Butuan to refund to plaintiff herein the amounts collected from and paid under protest by the latter. When we consider. and hence. As a consequence. who. company or corporation who acts in the place of another by authority from him or one entrusted with the business of another or to whom is consigned or shipped no less than 1.. untenable. In this connection. WHEREFORE. with interest thereon at the legal rate from the date of the promulgation of this decision. 110. in the very nature of things. which was inserted by said Ordinance No. if less than 1. Besides. but. a consignee of agent shall mean any person. (3) the classification applies. association. must be one engaged in business outside the City. — Definition of the Term Consignee or Agent.The third objection is. are not subject to the tax. serious consideration. and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan. not acting for or on behalf of other merchants. must. however. either retail or wholesale. as originally approved. it is noteworthy that the tax prescribed in section 3 of Ordinance No. be reasonable 6 and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences. as amended by Ordinance No. or confiscatory. in addition to the costs. regardless of the volume of their sales. merchants engaged in the sale of soft drink or carbonated drinks.. not only to present conditions. it would still be invalid. 7 These conditions are not fully met by the ordinance in question.000 cases of soft drinks are consigned or shipped to him every month. if the burden in question were regarded as a tax on the sale of said beverages. As amended by Ordinance No. violative of the uniformity required by the Constitution and the law therefor. oppressive. pursuant to section 3-A. Viewed from this angle. showing the number of cases" — not sold — but "received" by the taxpayer. as discriminatory. to future conditions substantially identical to those of the present.

ñët Footnotes 1 De Villata v. 1967. City of Tacloban. FELIX.L. 1957. concur. PHILCONSA v. J. November 23. **** Republic of the Philippines SUPREME COURT Manila EN BANC G. City Fiscal Eugenio Angeles and Juan Nabong for appellant. June 29. Municipality of Parañaque. Bull. Rafael v. 136 N. 99 Phil.S. 42 O. ed. Castro. Makalintal. L-24693. . vs. CITY OF MANILA. April 22. 1966. 56. Republic Act No. 409. Public Utilities Employee Ass'n. Nov. City of Bacolod v. v. 377. L-26511. City Mayor.9319. 2264.: . Municipality of Roxas. defendant-appellee. 6 Felwa v. Laurel v. . 1963. 12. 264. Hennick 129 U. 1967. East Asiatic Co. July 26. 847. 103 U. 1962. Zaldivar.S. Misa. L-18080. City of Davao. Sanchez. v. v. L-9637 April 30.W.G. Cayat. Panaligan v. v. L-11265. 65 Phil. 31. J. 79 Phil. 8 Viray v. People v. JJ. L-19978. Jan. Thompson. No. 27.B. . L-20125. February 26. 7. People v. v. 34 Cal. 26 L. Inter-Island Gas Service. 141. Dizon. Salas. 1965. September 29. 4 Section 2(i). Court of Tax Appeals. GSIS.S. 2 U. L-18290. 1959. Nin Bay Mining Co. 68 Phil. ed.. 854. L-18529. L. City of Caloocan. Ermita-Malate Hotel & Motel Operators Ass'n. Kilbourn v. 32 L. 27. 1963. 1äwphï1. 520. July 20. L-14864. Rev. Meralco v. 1957 AMERICAN BIBLE SOCIETY. 27.. 15 Phil. 5 Tan Tim Kee v. People v. L-21633-34. 1967. October 23. 1967. Angeles and Fernando. August 21. 1965.. Provinces. L-23118. Syjuco v. 32 Phil. City of Mankato. Gruet. Solon. Vera. L-23326. February 17. Gimenez.. 7 Commissioner of Int. v. 102 Phil. Stanley. Sept. 1162-1163. 1960. L-16253. 637. 1968. 1965. Botelho Shipping Corp. City of Manila v. Treasurer of Ormoc City. L-23794. Assistant City Fiscal Arsenio Nañawa for appellee. 168.R. Embroidery & Apparel Control & Inspection Board. plaintiff-appellant. Aleja v. Stoutenburgh v. 3 State v. Ormoc Sugar Co. People v. December 18.Reyes. 2847. 541. October 29.

bible portions and bible concordance in English and other foreign languages imported by it from the United States as well as Bibles. without providing itself with the necessary Mayor's permit and municipal license. superseded on June 18. non-stock. 3000. 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. and the costs. as amended. within three days. 2529. and required plaintiff to secure. In the course of its ministry.244. 2529. religious. 409. This answer was replied by the plaintiff reiterating the unconstitutionality of the often-repeated ordinances. which was done on the same date by filing the complaint that gave rise to this action. and Ordinances Nos. In its complaint plaintiff prays that judgment be rendered declaring the said Municipal Ordinance No. 409. missionary corporation duly registered and doing business in the Philippines through its Philippine agency established in Manila in November.891. in violation of Ordinance No. subsection (m2) of the Revised Administrative Code. To avoid the closing of its business as well as further fines and penalties in the premises on October 24. 3000. together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953. plaintiff further praying for such other relief and remedy as the court may deem just equitable. that from the fourth quarter of 1945 to the first quarter of 1953 inclusive the sales made by the plaintiff were as follows: Quarter 4th quarter 1945 Amount of Sales P1. 3028 and 3364 illegal and unconstitutional. known as the Revised Charter of the City of Manila. On May 29 1953. New Testaments and bible portions in the local dialects imported and/or purchased locally. the corresponding permit and license fees. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral.Plaintiff-appellant is a foreign. 1949. The defendant appellee is a municipal corporation with powers that are to be exercised in conformity with the provisions of Republic Act No. plaintiff paid to the defendant under protest the said permit and license fees in the aforementioned amount.21 . with costs against plaintiff. and that the defendant be ordered to refund to the plaintiff the sum of P5. in the total sum of P5. together with legal interest thereon.45 paid under protest. the said fees were being collected (Annex C).891.45 (Annex A). maintaining in turn that said ordinances were enacted by the Municipal Board of the City of Manila by virtue of the power granted to it by section 2444. Bibles. if suit was to be taken in court regarding the same (Annex B). the acting City Treasurer of the City of Manila informed plaintiff that it was conducting the business of general merchandise since November. but the City Treasurer demanded that plaintiff deposit and pay under protest the sum of P5. 1953. and Ordinances Nos. Before trial the parties submitted the following stipulation of facts: COME NOW the parties in the above-entitled case. non-profit. with its principal office at 636 Isaac Peral in said City. 3028 and 3364. known as the Revised Charter of the City of Manila. Defendant answered the complaint. by section 18. subsection (1) of Republic Act No. as amended. 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. Manila.821. New Testaments. 1898. thru their undersigned attorneys and respectfully submit the following stipulation of facts: 1.45. Plaintiff protested against this requirement. and praying that the complaint be dismissed. 1945.

715.79 15.241.07 15.143.94 11.1st quarter 1946 2nd quarter 1946 3rd quarter 1946 4th quarter 1946 1st quarter 1947 2nd quarter 1947 3rd quarter 1947 4th quarter 1947 1st quarter 1948 2nd quarter 1948 3rd quarter 1948 4th quarter 1948 1st quarter 1949 2nd quarter 1949 3rd quarter 1949 4th quarter 1949 1st quarter 1950 2nd quarter 1950 2.55 14.99 3.08 16.333.04 13.206.26 38.32 .85 1.256.90 23.10 17.816.235.83 16.46 21.774.38 18.802.13 12.179.90 14.950.961.590.640.654.38 2.562.975.

pp. That the parties hereby reserve the right to present evidence of other facts not herein stipulated.01 24.98 20.968.72 29. that its.921.50 each are sold here at P10 each. that it has been in existence in the Philippines since 1899.180. Regarding plaintiff's contention of lack of profit in the sale of bibles. 15-16).181.91 23. Plaintiff further tried to establish that it never made any profit from the sale of its bibles. (Record on Appeal.841.516. plaintiff proved.287. United States of America.30 each. and that its parent society is in New York. it is respectfully prayed that this case be set for hearing so that the parties may present further evidence on their behalf. which are disposed of for as low as one third of the cost. and that it was never required to pay any municipal license fee or tax before the war.21 29. which are interested in its missionary work. nor does the American Bible Society in the United States pay any license fee or sales tax for the sale of bible therein.626. both in the United States and in the Philippines.21 2.10 22. among other things. When the case was set for hearing.55 45.103. those bearing the price of $4.96 17.65 17. contiguous real properties located at Isaac Peral are exempt from real estate taxes.004. defendant retorts that the admissions of plaintiff-appellant's lone witness who testified on cross-examination that bibles bearing the price of 70 cents each from plaintiff-appellant's New York office are sold here by plaintiff-appellant at P1. and that in order to maintain its operating cost it obtains substantial remittances from its New York office and voluntary contributions and gifts from certain churches.92 37. WHEREFORE.002. and those bearing .3rd quarter 1950 4th quarter 1950 1st quarter 1951 2nd quarter 1951 3rd quarter 1951 4th quarter 1951 1st quarter 1952 2nd quarter 1952 3rd quarter 1952 4th quarter 1952 1st quarter 1953 25. those bearing the price of $7 each are sold here at P15 each.

must first be approved by the President of the Philippines. was not repealed by Section 18 of Republic Act No. with costs against the plaintiff. Appellant contends that the lower Court erred: 1. of Ordinance No. is evidently untenable. 3000. and Sec. — As may be seen from the proceeding statement of the case. and the free exercise and enjoyment of religious profession and worship. and (2) whether the provisions of said ordinances are applicable or not to the case at bar. Predicated on this constitutional mandate. 409. and 4. the issues involved in the present controversy may be reduced to the following: (1) whether or not the ordinances of the City of Manila. and that the taxes to be levied by said ordinances is in the nature of percentage graduated taxes (Sec. as amended by Ordinance No. as it is hereby dismissed. 3. IN VIEW OF THE FOREGOING CONSIDERATIONS. or prohibiting the free exercise thereof. Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified the case to Us for the reason that the errors assigned to the lower Court involved only questions of law. plaintiff-appellant contends that Ordinances Nos. for lack of merits. In holding that Ordinances Nos. 3 of Ordinance No. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code under which Ordinances Nos. Nos. 2529 and 3000. In not holding that an ordinance providing for taxes based on gross sales or receipts. 3364). The issues. Group 2. clearly show that plaintiff's contention that it never makes any profit from the sale of its bible. shall forever be allowed. as respectively amended. After hearing the Court rendered judgment. yet their meaning is practically the same for the purpose of taxing the merchandise mentioned in said legal provisions. 2592 and 3000 were promulgated. in order to be valid under the new Charter of the City of Manila.the price of $11 each are sold here at P22 each. and 2529. as amended. 3000. are not unconstitutional. 1. without discrimination or preference. 2529. . are constitutional and valid. the last part of which is as follows: As may be seen from the repealed section (m-2) of the Revised Administrative Code and the repealing portions (o) of section 18 of Republic Act No. as the sales made by the plaintiff-appellant have assumed commercial proportions. it cannot escape from the operation of said municipal ordinances under the cloak of religious privilege. as respectively amended. No religion test shall be required for the exercise of civil or political rights. because they provide for religious censorship and restrain the free exercise and enjoyment of its religious profession. as amended. provides that: (7) No law shall be made respecting an establishment of religion. 409. Section 1. 3028 and 3364. although they seemingly differ in the way the legislative intent is expressed. to wit: the distribution and sale of bibles and other religious literature to the people of the Philippines. In holding that. 2. 2529 and 3000. this Court is of the opinion and so holds that this case should be dismissed. subsection (7) of Article III of the Constitution of the Republic of the Philippines. are unconstitutional and illegal in so far as its society is concerned.

The business. trades. etc. Ordinance No. and it does not contain any provisions whatever prescribing religious censorship nor restraining the free exercise and enjoyment of any religious profession. Section 1 of Ordinance No.Before entering into a discussion of the constitutional aspect of the case. trades or occupations not mentioned in this Ordinance. etc. trade or occupation of the plaintiff involved in this case is not particularly mentioned in Section 3 of the Ordinance. — Subject to the provisions of section 578 of the Revised Ordinances of the City of Manila. quarterly. security.821.45. such as (1) retail dealers in general merchandise. show that by letter of May 29. the City Treasurer required plaintiff to secure a Mayor's permit in connection with the society's alleged business of distributing and selling bibles. The records. or occupations for which a permit is required for the proper supervision and enforcement of existing laws and ordinances governing the sanitation. license fees based on gross sales or receipts realized during the preceding quarter in accordance with the rates herein prescribed: PROVIDED. there shall be paid to the City Treasurer for engaging in any of the businesses or occupations below enumerated. as amended. and the record does not show that a permit is required therefor under existing laws and ordinances for the proper supervision and enforcement of their provisions governing the sanitation. 3000 reads as follows: SEC. (2) retail dealers exclusively engaged in the sale of . 2779. trade or occupation. and to pay permit dues in the sum of P35 for the period covered in this litigation. by appellant. 3000 of the City of Manila. . plus the sum of P35 for compromise on account of plaintiff's failure to secure the permit required by Ordinance No. xxx xxx xxx GROUP 2. That a person engaged in any businesses or occupation for the first time shall pay the initial license fee based on the probable gross sales or receipts for the first quarter beginning from the date of the opening of the business as indicated herein for the corresponding business or occupation. security and welfare of the public and the health of the employees engaged in the business of the plaintiff. — It shall be unlawful for any person or entity to conduct or engage in any of the businesses. as amended. We shall first consider the provisions of the questioned ordinances in relation to their application to the sale of bibles. 2529.00 Therefore. except those upon which the City is not empowered to license or to tax P5. which reads as follows: 79. including the sum of P50 as compromise. PERMITS NECESSARY. the necessity of the permit is made to depend upon the power of the City to license or tax said business. 79. As to the license fees that the Treasurer of the City of Manila required the society to pay from the 4th quarter of 1945 to the 1st quarter of 1953 in the sum of P5. as amended by Ordinances Nos. 1. xxx xxx xxx . . and welfare of the public and the health of the employees engaged in the business specified in said section 3 hereof. FEES. — Retail dealers in new (not yet used) merchandise. trades. HOWEVER. books. which dealers are not yet subject to the payment of any municipal tax. This Ordinance is of general application and not particularly directed against institutions like the plaintiff. 2821 and 3028 prescribes the following: SEC. 1953 (Annex A). including stationery. All other businesses. WITHOUT FIRST HAVING OBTAINED A PERMIT THEREFOR FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE CITY TREASURER. sections 3 of Ordinance 3000 contains item No. 1. or occupations enumerated in Section 3 of this Ordinance or other businesses. However.

were enacted in virtue of the power that said Act No. these retail dealers shall be classified as (1) retail dealers in general merchandise. the problem created by this sort of legislative action involves mainly the effect of the repeal upon rights and liabilities which accrued under the original statute. . . yet their meaning is practically the same for the purpose of taxing the merchandise mentioned in both legal provisions and. Some adhere to the view that the rights and liabilities accrued under the repealed act are destroyed. . 409 expressly repealed the provisions of Chapter 60 of the Revised Administrative Code but in the opinion of the trial Judge. 3659. therefore. 2529 and 3000. and (b) retail dealers in new (not yet used) merchandise. as amended. are to be considered as still in full force and effect uninterruptedly up to the present. and they seem to be in the majority. 3669 conferred upon the City of Manila. books. . as amended. paper and office supplies. Appellant's counsel states that section 18 (o) of Republic Act No. We have quoted above the provisions of section 2444(m-2) of the Revised Administrative Code and We shall now copy hereunder the provisions of Section 18.: PROVIDED. etc. and appellee's counsel maintains that City Ordinances Nos. 409. Passing upon this point the lower Court categorically stated that Republic Act No. enumerated under these subsections (m-1) and (m-2). 2529. subdivision (o) of Republic Act No. empowers the Municipal Board of the City of Manila: (M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both. however. Chapter 60 of the Revised Administrative Code which includes section 2444. as amended by Act No. which dealers are not yet subject to the payment of any municipal tax. continuing the law in force without interruption. even though for only a very short period of time. consequently. For the purpose of taxation. Often the legislature. Others. SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS PER ANNUM. although Section 2444 (m-2) of the former Manila Charter and section 18 (o) of the new seemingly differ in the way the legislative intent was expressed. . 1949. and consequently maintain that all rights an liabilities which have accrued under the original statute are preserved and may be enforced. subsection (m-2) of said legal body. Ordinances Nos. including stationery. (e) books. Appellant. contends that said ordinances are longer in force and effect as the law under which they were promulgated has been expressly repealed by Section 102 of Republic Act No. approved on December 8.As may be seen. Are those rights and liabilities destroyed or preserved? The authorities are divided as to the effect of simultaneous repeals and re-enactments. it is alleged. cover the business or occupation of selling bibles. and (2) retail dealers exclusively engaged in the sale of (a) textiles . or both. 1929. Of course. HOWEVER. instead of simply amending the pre-existing statute. 322). Sec. are not imposed directly upon any religious institution but upon those engaged in any of the business or occupations therein enumerated. as amended. 409 introduces a new and wider concept of taxation and is different from the provisions of Section 2444(m-2) that the former cannot be considered as a substantial re-enactment of the provisions of the latter. 409 passed on June 18. refuse to accept this view of the situation. 2529 and 3000. which reads as follows: . since the statutes from which they sprang are actually terminated. That the combined total tax of any debtor or manufacturer. (Crawford-Statutory Construction. whether dealing in one or all of the articles mentioned herein. will repeal the old statute in its entirety and by the same enactment re-enact all or certain portions of the preexisting law. the license fees required to be paid quarterly in Section 1 of said Ordinance No. since the reenactment neutralizes the repeal. known as the Revised Manila Charter. such as retail "dealers in general merchandise" which.

shall not be in excess of P500 per annum. and (4) miscellaneous articles. to be valid. general merchandise shall be classified into four main classes: namely (1) luxury articles.(o) To tax and fix the license fee on dealers in general merchandise. 2821 and 3028. must first be approved by the President of the Philippines as per section 18. as may be provided by ordinance. clause (7) of the Constitution of the Philippines aforequoted. therefore continuing the law in force without interruption". whether dealing in one or all of the articles mentioned therein. Hence. (3) essential commodities. 409. it shall not be compulsory for the owner to secure more than one license if he pays the higher or highest rate of tax prescribed by ordinance. trade or occupation being conducted within the City of Manila. For purposes of this section. plaintiff herein. subsection (o) of Republic Act No. license and regulate any business. an ordinance prescribing a municipal tax on said business does not have to be approved by the President to be effective. except amusement taxes. subject to the approval of the PRESIDENT. hence. 2529 was promulgated. 2529. not otherwise enumerated in the preceding subsections. however. fish and other allied products. The only essential difference that We find between these two provisions that may have any bearing on the case at bar. (2) semi-luxury articles. while subsection (m-2) prescribes that the combined total tax of any dealer or manufacturer. Plaintiff. is that. A separate license shall be prescribed for each class but where commodities of different classes are sold in the same establishment. Wholesale dealers shall pay the license tax as such. Anyway. as amended by Ordinances Nos. Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. enumerated under subsections (m-1) and (m-2). "Religion has been spoken of as a profession of faith to an active . appellant contends that it is unconstitutional and illegal because it restrains the free exercise and enjoyment of the religious profession and worship of appellant. guarantees the freedom of religious profession and worship. invalid or unconstitutional if applied to the alleged business of distribution and sale of bibles to the people of the Philippines by a religious corporation like the American Bible Society. does not contain any limitation as to the amount of tax or license fee that the retail dealer has to pay per annum. Article III. but this requirement of the President's approval was not contained in section 2444 of the former Charter of the City of Manila under which Ordinance No. 2779. With regard to Ordinance No. since the reenactment neutralizes the repeal. section 18 of Republic Act No. as it is not among those referred to in said subsection (ii). having been promulgated by the Municipal Board of the City of Manila under the authority granted to it by law. section 1. For purposes of the tax on retail dealers. agricultural products. subsection (ii) of Republic Act No. including percentage taxes based on gross sales or receipts. which reads as follows: (ii) To tax. the term "General merchandise" shall include poultry and livestock. Moreover. the business of "retail dealers in general merchandise" is expressly enumerated in subsection (o). 409. The question that now remains to be determined is whether said ordinances are inapplicable. 409. or both. argues that the questioned ordinances. including importers and indentors. and in accordance with the weight of the authorities above referred to that maintain that "all rights and liabilities which have accrued under the original statute are preserved and may be enforced. as stated by appellee's counsel. except those dealers who may be expressly subject to the payment of some other municipal tax under the provisions of this section. the questioned ordinances are still in force. We hold that the questioned ordinances of the City of Manila are still in force and effect. the corresponding section 18.

That is almost uniformly recognized as the inherent vice and evil of this flat license tax. 4th ed. Spreading religious beliefs in this ancient and honorable manner would thus be denied the needy. Then the Court continued: "We do not mean to say that religious groups and the press are free from all financial burdens of government. The tax imposed by the City of Jeannette is a flat license tax. 660. 342). The "price" of the books was twenty-five cents each." Nor could dissemination of religious information be conditioned upon the approval of an official or manager even if the town were owned by a corporation as held in the case of Marsh vs. wares or merchandise cannot be made to apply to members of Jehovah's Witnesses who went about from door to door distributing literature and soliciting people to "purchase" certain religious books and pamphlets. for example. . But that is to disregard the nature of this tax. 517). Texas (326 U. It is quite another to exact a tax from him for the privilege of delivering a sermon. from a tax on the income of one who engages in religious activities or a tax on property used or employed in connection with activities. 56 S. Their activities could not be described as embraced in the occupation of selling books and pamphlets.It has reference to one's views of his relations to His Creator and to the obligations they impose of reverence to His being and character. The power to impose a license tax on the exercise of these freedom is indeed as potent as the power of censorship which this Court has repeatedly struck down. 233. . . Ruiz. The power to tax the exercise of a privilege is the power to control or suppress its enjoyment.. Ct. 250. Pennsylvania. It is one thing to impose a tax on the income or property of a preacher.. . 201). pictures. . . See Grosjean vs. It is a license tax — a flat tax imposed on the exercise of a privilege granted by the Bill of Rights . however. On the above facts the Supreme Court held that it could not be said that petitioners were engaged in commercial rather than a religious venture. 64 Phil. American Press Co. 444. State of Alabama (326 U. . Any restraints of such right can only be justified like other restraints of freedom of expression on the grounds that there is a clear and present danger of any substantive evil which the State has the right to prevent". and obedience to His Will (Davis vs.S. Lesser sum were accepted. It is contended however that the fact that the license tax can suppress or control this activity is unimportant if it does not do so. 668. Vol.S..S. . the "price" of the pamphlets five cents each. . payment of which is a condition of the exercise of these constitutional privileges. In the former case the Supreme Court expressed the opinion that the right to enjoy freedom of the press and religion occupies a preferred position as against the constitutional right of property owners.power that binds and elevates man to its Creator" (Aglipay vs. It is in no way apportioned. . It was shown that in making the solicitations there was a request for additional "contribution" of twenty-five cents each for the books and five cents each for the pamphlets. In the case at bar the license fee herein involved is imposed upon appellant for its distribution and sale of bibles and other religious literature: In the case of Murdock vs. 297 U. 1. 297). p. It is flat license tax levied and collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their exercise. all published by the Watch Tower Bible & Tract Society. ed. 133 U. paintings.. (Tañada and Fernando on the Constitution of the Philippines. 501). We have here something quite different. The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right to disseminate religious information. Beason. 80 L. Those who can tax the privilege of engaging in this form of missionary evangelism can close all its doors to all those who do not have a full purse. or by the United States itself as held in the case of Tucker vs. it was held that an ordinance requiring that a license be obtained before a person could canvass or solicit orders for goods. . It is not a nominal fee imposed as a regulatory measure to defray the expenses of policing the activities in question. and books were even donated in case interested persons were without funds. Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance.S.. .

trade or occupation of the plaintiff. 1. does not deprive defendant of his constitutional right of the free exercise and enjoyment of religious profession and worship. . shall be liable to the tax imposed under this Code. Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from this tax and says that such exemption clearly indicates that the act of distributing and selling bibles. this point was elucidated as follows: An ordinance by the City of Griffin. as amended is also inapplicable to said business. etc. . It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business or occupation of selling said "merchandise" for profit. . Section 27 of Commonwealth Act No.: Provided. . — The following organizations shall not be taxed under this Title in respect to income received by them as such — (e) Corporations or associations organized and operated exclusively for religious. or whether same are being sold within the city limits of the City of Griffin. . is not applicable to plaintiff-appellant and defendant-appellee is powerless to license or tax the business of plaintiff Society involved herein for. With respect to Ordinance No. is purely religious and does not fall under the above legal provisions. that Ordinance No. charitable. . 2529. City of Griffin. 3000. 304-306).. trades or occupations enumerated therein. as stated before. . as we must here. handbooks. 3000. 466. whether said articles are being delivered free. 2529 of the City of Manila. 4th ed." (Tañada and Fernando on the Constitution of the Philippines. . EXEMPTIONS FROM TAX ON CORPORATIONS. cannot be applied to appellant. shall be deemed a nuisance and punishable as an offense against the City of Griffin. were held by others than the public. for in doing so it would impair its free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs. even though it prohibits him from introducing and carrying out a scheme or purpose which he sees fit to claim as a part of his religious system. . That the income of whatever kind and character from any of its properties. advertising. or from any activity conducted for profit. . without first obtaining written permission from the city manager of the City of Griffin. We find that Ordinance No. as amended. In our view the circumstance that the property rights to the premises where the deprivation of property here involved. regardless of the disposition made of such income. declaring that the practice of distributing either by hand or otherwise. Vol. even if applied to plaintiff Society.E. or literature of any kind. real or personal. p. took place. or educational purposes. it would impair plaintiff's right to the free exercise and enjoyment of its religious profession and worship. however. we remain mindful of the fact that the latter occupy a preferred position. We do not find that it imposes any charge upon the enjoyment of a right granted by the Constitution. 27. provides: SEC. 3000 cannot be considered unconstitutional. as amended. In the case of Coleman vs. circulars. nor tax the exercise of religious practices. as amended. therefore. For this reason We believe that the provisions of City of Manila Ordinance No. It seems clear. which requires the obtention the Mayor's permit before any person can engage in any of the businesses."When we balance the constitutional rights of owners of property against those of the people to enjoy freedom of press and religion. But as Ordinance No. 189 S. otherwise known as the National Internal Revenue Code. 427. as well as its rights of dissemination of religious beliefs. is not sufficient to justify the State's permitting a corporation to govern a community of citizens so as to restrict their fundamental liberties and the enforcement of such restraint by the application of a State statute.

rendered in Civil Case No. Abra. Provincial Treasurer. ARMIN M. pp. J. be confiscated to apply for the payment of the back taxes and for the redemption of the property in question. Inc. BORGONIA. Abra. That the deposit of the Municipal Treasurer in the amount of P6. Abra. PARAS. 22-23) .891. sentencing defendant return to plaintiff the sum of P5. JUAN P. Borgonia. 1974.. Bangued.. Bosque as Municipal Treasurer of Bangued. entitled "Abra Valley Junior College. JJ. It is so ordered. plaintiff vs. We hereby reverse the decision appealed from.00 before the trial. CARIAGA. 656. (Rollo. Cariaga as Provincial Treasurer of Abra. Concepcion and Endencia.31 and back taxes and penalties from the promulgation of this decision.: This is a petition for review on certiorari of the decision * of the defunct Court of First Instance of Abra. defendants. concur. HEIRS OF PATERNO MILLARE. Bautista Angelo. Gaspar V. Without pronouncement as to costs. dated June 14. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. the Court hereby declares: That the distraint seizure and sale by the Municipal Treasurer of Bangued. Montemayor. Padilla. Bengzon. BOSQUE. INC.R. who represents the plaintiff herein. the Provincial Treasurer of said province against the lot and building of the Abra Valley Junior College. Judge. Abra. respondents.00.000.000. is valid. vs. Court of First Instance. And finally the case is hereby ordered dismissed with costs against the plaintiff. petitioner. SO ORDERED. Armin M. L-39086 June 15." the decretal portion of which reads: IN VIEW OF ALL THE FOREGOING. Abra and Paterno Millare. the remainder must be returned to the Director of Pedro Borgonia. That since the school is not exempt from paying taxes. represented by Director Pedro Borgonia located at Bangued. Municipal Treasurer. Labrador. 1988 ABRA VALLEY COLLEGE. represented by Pedro V. That the amount deposited by the plaintaff him the sum of P60.00 also before the trial must be returned to said Municipal Treasurer of Bangued. Abra.000. if the amount is less than P6.45 unduly collected from it. and on the strength of the foregoing considerations.Wherefore. represented by PEDRO V. AQUINO.. GASPAR V. Inc. No. it should therefore pay all back taxes in the amount of P5. HON..140. Branch I. Abra.

" ibid.31. ordered (Annex "6. Rollo. Said "Notice of Seizure" of the college lot and building covered by Original Certificate of Title No. Abra. with the aforesaid sale of the school premises at public auction.Petitioner. pp. 1972 the respondent Paterno Millare filed his answer (Annex "5. plaintiff below.140. Rollo. On August 10. 1972. offered the highest bid of P6. Armin M. through then Provincial Fiscal Loreto C. pp. The "Notice of Sale" was caused to be served upon the petitioner by the respondent treasurers on July 8. Abra under Original Certificate of Title No. defendants below. Rollo. 106108). Dr. On August 23. and to this Honorable Court respectfully enter into the following agreed stipulation of facts: 1. That the plaintiff Abra Valley Junior College. Bosque. 1972. 2. Q-83 duly registered in the name of petitioner. an educational corporation and institution of higher learning duly incorporated with the Securities and Exchange Commission in 1948. the respondent Judge. Hon. 101-103) on August 31.00 evidenced by PNB Check No. Aquino of the Court of First Instance of Abra. as Municipal treasurer of Bangued. through Director Borgonia. assisted by counsels. On October 12. a Notice of Seizure on the property of said school under Original Certificate of Title No. Paterno Millare. Cariaga is to be substituted.31. 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. The certificate of sale was correspondingly issued to him. the Notice of Seizure being the one attached to the complaint as Exhibit A. On April 12.140. however. That the personal circumstances of the parties as stated in paragraph 1 of the complaint is admitted. pp. pp. Rollo. Branch I. Said Stipulations reads: STIPULATION OF FACTS COME NOW the parties. the parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. by respondents Municipal Treasurer and Provincial Treasurer. 0-83. Hence. Inc. 98-100) to the complaint. 1972. then Municipal Mayor of Bangued. Abra. 0-83 for the satisfaction of real property taxes thereon." ibid. the respondent Provincial Treasurer and Municipal Treasurer. is the owner of the lot and buildings thereon located in Bangued. That the defendant Gaspar V. deposited with the trial court the sum of P6. for nonpayment of real estate taxes and penalties amounting to P5. which sale was held on the same date. 3. . pp. 109-110) the respondents provincial and municipal treasurers to deliver to the Clerk of Court the proceeds of the auction sale. 1972. the respondent Paterno Millare (now deceased) filed through counstel a motion to dismiss the complaint. filed their answer (Annex "2" of Answer by the respondents Heirs of Patemo Millare. Juan P. Abra caused to be served upon the Abra Valley Junior College. 1973. 1972.000. on December 14. Inc. Roldan. on July 6.00 which was duly accepted. Rollo. amounting to P5. 1972. This was followed by an amended answer (Annex "3." ibid. filed a complaint (Annex "1" of Answer by the respondents Heirs of Paterno Millare. was issued for the satisfaction of the said taxes thereon.000. petitioner. On September 1. but the particular person of Mr. 904369. 95-97) on July 10. 1972 for the sale at public auction of said college lot and building. by anyone who is actually holding the position of Provincial Treasurer of the Province of Abra.

4. it is respectfully prayed of the Honorable Court to consider and admit this stipulation of facts on the point agreed upon by the parties. Inc. was sold at public auction for the satisfaction of the unpaid real property taxes thereon and the same was sold to defendant Paterno Millare who offered the highest bid of P6. 5. 1972 the above properties of the Abra Valley Junior College.00 and a Certificate of Sale in his favor was issued by the defendant Municipal Treasurer. 1973. Loreto Roldan Typ LORET O ROLDA N Provinci al Fiscal Counse l for Defend ants Provinci al Treasur er of Abra and the Municip al Treasur er of Bangue d. Abra . Bangued. WHEREFORE. That all other matters not particularly and specially covered by this stipulation of facts will be the subject of evidence by the parties.000. April 12. Sgd. That on June 8. Agripin o Brillant es Typ AGRIPI NO BRILLA NTES Attorne y for Plaintiff Sgd. Abra.

wherein they opined "that based on the evidence. Solomon and his Assistant. (Rollo. Eustaquio Z. 58). p. p. Hon. 1974 (Rollo. (c) that the elementary pupils are housed in a two-storey building across the street. 1974 within which to perfect its appeal (Per Order dated August 6. In the resolution dated August 16.. DEMET RIO V. is whether or not the lot and building in question are used exclusively for educational purposes." (Annexes "B. 1974. pp. 1974. (d) that the high school and college students are housed in the main building. and has a school population of more than one thousand students all in all." "B-1" of Petition. the trial court disagreed because of the use of the second floor by the Director of petitioner school for residential purposes. Pre Typ. 44 and 49). 1718) Aside from the Stipulation of Facts. Demetri o V. pp. filed a Memorandum for the Government on March 25. He thus ruled for the government and rendered the assailed decision. p. which petition was filed on August 17. the school building and school lot used for educational purposes of the Abra Valley College. 74). After having been granted by the trial court ten (10) days from August 6. Hon. Montero. Rollo. (e) that the Director with his family is in the second floor of the main building.2). a few meters from the plaza and about 120 meters from the Court of First Instance building. 24-49. 20) The succeeding Provincial Fiscal. 57) petitioner instead availed of the instant petition for review on certiorari with prayer for preliminary injunction before this Court. the laws applicable. 1974. and a Supplemental Memorandum on May 7. found the following: (a) that the school is recognized by the government and is offering Primary. (b) that it is located right in the heart of the town of Bangued. 1974. p. p. Inc. From all the foregoing. the trial court among others. Annex "G" of Petition. and (f) that the annual gross income of the school reaches more than one hundred thousand pesos. Nonetheless. this Court resolved to give DUE COURSE to the petition (Rollo.Sgd. High School and College Courses. Jose A. court decisions and jurisprudence. Respondents were required to answer said petition (Rollo. the only issue left for the Court to determine and as agreed by the parties. are exempted from the payment of taxes. PRE Attorne y for Defend ant Paterno Millare (Rollo. Rollo. Petitioner raised the following assignments of error: I .

which expressly grants exemption from realty taxes for "Cemeteries.140.. provides: The following are exempted from real property tax under the Assessment Law: xxx xxx xxx (c) churches and parsonages or convents appurtenant thereto. which are contrary thereto as well as to the provision of Commonwealth Act No. (See Brief for the Petitioner. of the then 1935 Philippine Constitution. II THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING OF THE PETITIONER ARE NOT USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES MERELY BECAUSE THE COLLEGE PRESIDENT RESIDES IN ONE ROOM OF THE COLLEGE BUILDING. and not the incidental use thereof. churches and parsonages or convents appurtenant thereto.140. Relative thereto. 470 as amended by Republic Act No. and all lands. are without legal basis and therefore void. charitable.. charitable or educational purposes .000. paragraph 3. and (3) for commercial purposes because the ground floor of the college building is being used and rented by a commercial establishment. Commonwealth Act No. and all lands. Borgonia. p.31 AS REALTY TAXES. 470. Section 54. Hence. IV THE COURT A QUO ERRED IN ORDERING THE CONFISCATION OF THE P6. III THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING OF THE PETITIONER ARE NOT EXEMPT FROM PROPERTY TAXES AND IN ORDERING PETITIONER TO PAY P5." Petitioner contends that the primary use of the lot and building for educational purposes. otherwise known as the Assessment Law. Article VI. On the other hand. scientific or educational purposes. the constitutional provision which finds application in the case at bar is Section 22.00 DEPOSIT MADE IN THE COURT BY PETITIONER AS PAYMENT OF THE P5. determines and exemption from property taxes under Section 22 (3). and his family including the in-laws and grandchildren. and improvements used exclusively for religious. and improvements used exclusively for religious. . 409. paragraph c. buildings. the seizure and sale of subject college lot and building. buildings. otherwise known as the Assessment Law.THE COURT A QUO ERRED IN SUSTAINING AS VALID THE SEIZURE AND SALE OF THE COLLEGE LOT AND BUILDING USED FOR EDUCATIONAL PURPOSES OF THE PETITIONER. 1-2) The main issue in this case is the proper interpretation of the phrase "used exclusively for educational purposes. pp. Due to its time frame. private respondents maintain that the college lot and building in question which were subjected to seizure and sale to answer for the unpaid tax are used: (1) for the educational purposes of the college. 90]). Article VI of the 1935 Constitution. (2) as the permanent residence of the President and Director thereof. the Northern Marketing Corporation (See photograph attached as Annex "8" (Comment. Mr.31 REALTY TAXES. Rollo. Pedro V.

a nurses' home. 17-23). and other members of the hospital staff. this Court ruled that while it may be true that the YMCA keeps a lodging and a boarding house and maintains a restaurant for its members. p. it is noteworthy that such fact was not disputed even after it was raised in this Court. the exemption from payment of land tax in favor of the convent includes. 3 SCRA 186 [1961] and Commissioner of Internal Revenue vs. As early as 1916 in YMCA of Manila vs. resident doctors. The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution (Apostolic Prefect v. this Court included in the exemption a vegetable garden in an adjacent lot and another lot formerly used as a cemetery. It must be stressed however. Thus. The phrase "exclusively used for educational purposes" was further clarified by this Court in the cases of Herrera vs. and residents' (84 CJS 6621). pp. 33 Phil. It will be noted however that the aforementioned lease appears to have been raised for the first time in this Court. and as such. 352 [1972]. but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes. City Treasurer of Baguio. both embodied in the decision nor as one of the issues to resolve in order to determine whether or not said properly may be exempted from payment of real estate taxes (Rollo. 217 [1916]. and not the mere incidental use thereof. charitable and educational purposes. also qualifies for exemption because this constitutes incidental use in religious functions. the use of the school building or lot for commercial purposes is neither contemplated by law. Provincial Board of Ilocos Norte. still these do not constitute business in the ordinary acceptance of the word. property use to provide housing facilities for interns. 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. Vol. "a school for training nurses. That the matter was not taken up in the to court is really apparent in the decision of respondent Judge. 71 Phil. and recreational facilities for student nurses. p. interns. norm and standard to determine tax exemption. may find justification under the concept of incidental use.xxx xxx xxx In this regard petitioner argues that the primary use of the school lot and building is the basic and controlling guide. such as in the case of hospitals. 1430). 14 SCRA 991 [1965]. Otherwise stated. nor by jurisprudence. The lot which is not used for commercial purposes but serves solely as a sort of lodging place. On the other hand. No mention thereof was made in the stipulation of facts. Collector of lnternal Revenue. thus — Moreover. the exemption in favor of property used exclusively for charitable or educational purposes is 'not limited to property actually indispensable' therefor (Cooley on Taxation. superintendents. Vol. Thus. 2. 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. (Cooley on Taxation. 51 Phil. Section 22. 2. it is entitled to be exempted from taxation. In the case of Bishop of Nueva Segovia v. paragraph 3 of the 1935 Philippine Constitution. Quezon City Board of assessment Appeals. 547 [1941]). 1430). which is complimentary to the main or primary purpose—educational. not only the land actually occupied by the building but also the adjacent garden devoted to the incidental use of the parish priest. not even in the description of the school building by the trial judge. such as "Athletic fields" including "a firm used for the inmates of the institution. 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. 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. It was clarified that the term "used exclusively" considers incidental use also. . but an institution used exclusively for religious. Bishop of the Missionary District.

1960 WENCESLAO PASCUAL. is hereby AFFIRMED subject to the modification that half of the assessed tax be returned to the petitioner. JJ. should be taxed." (Perez vs. Nonetheless. Padilla and Sarmiento. as Provincial Governor of Rizal. Fiscal Noli M. Footnotes * Penned by the respondent Judge. THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS. vs. this Court is not prevented from considering a pivotal factual matter. approved on June 20. However.. this Court has held that although a factual issue is not squarely raised below. without costs. still in the interest of substantial justice. Republic of the Philippines SUPREME COURT Manila EN BANC G. 1953. Judge P. as an exception to the rule. not because the second floor of the same is being used by the Director and his family for residential purposes. Torres for appellee. Melencio-Herrera. in section 1-C (a) thereof. CONCEPCION. L-10405 December 29.Indeed. SO ORDERED. entitled "An Act Appropriating Funds for Public Works". A. J. by petitioner Wenceslao Pascual. 127 SCRA 645 [1984]). Solicitor General Jose G. Under the 1935 Constitution.: Appeal. it is only fair that half of the assessed tax be returned to the school involved. Aquino. Santos for appellant. the trial court correctly arrived at the conclusion that the school building as well as the lot where it is built. with injunction. Branch I. in his official capacity as Provincial Governor of Rizal. Office of the Asst. . "The Supreme Court is clothed with ample authority to review palpable errors not assigned as such if it finds that their consideration is necessary in arriving at a just decision. On August 31. since only a portion is used for purposes of commerce. 920.J. No. respondents-appellees. contained. petitioner-appellant.R. Bautista and Solicitor A. Yap. upon the ground that Republic Act No.. dismissing the above entitled case and dissolving the writ of preliminary injunction therein issued. concur.. 1954. C. Court of Appeals. Hon. petitioner Wenceslao Pascual. instituted this action for declaratory relief. ET AL. Asst. the decision of the Court of First Instance of Abra. but because the first floor thereof is being used for commercial purposes. PREMISES CONSIDERED. it is axiomatic that facts not raised in the lower court cannot be taken up for the first time on appeal. Cortes and Jose P. from a decision of the Court of First Instance of Rizal.

on the same date. extension and improvement" of Pasig feeder road terminals (Gen. 1953. 920 and from making any further payments out of said illegally appropriated funds. and the disbursing officers of the Department of Public Works and Highways from making any further payments out of said funds provided for in Republic Act No. subject to the condition "that the donor would submit a plan of the said roads and agree to change the names of two of them". and that pending final hearing on the merits. not far away from the intersection between the latter and Highway 54). comply with. was illegal and. a writ of preliminary injunction be issued enjoining the aforementioned parties respondent from making and securing any new and further releases on the aforesaid item of Republic Act No.000. Rizal. . that. in favor of the Government of the Republic of the Philippines. Araneta — Gen. the aforementioned feeder roads were "nothing but projected and planned subdivision roads.000. said donation violated the provision of our fundamental law prohibiting members of Congress from being directly or indirectly financially interested in any contract with the Government. Lucban — Gen.00 "for the construction. 920. void ab initio". that being subject to an onerous condition. extension and improvement of said projected feeder roads. that on July 10. that said alleged deed of donation was. that. an alleged deed of donation — copy of which is annexed to the petition — of the four (4) parcels of land constituting said projected feeder roads. was a member of the Senate of the Philippines. is unconstitutional. near Shaw Boulevard. therefore.000. Rizal" (according to the tracings attached to the petition as Annexes A and B. ." Petitioner prayed. that said appropriation of P85. Zulueta. not yet constructed. as well as null and void ab initio. who. for the construction. "aside from relieving him from the burden of constructing his subdivision streets or roads at his own expense". the Director of the Bureau of Public Works and Highways and Jose C. therefor. that the contested item of Republic Act No. calling attention to the approval of Republic Act.an item (43[h]) of P85. the offer was accepted by the council. Delgado — Gen. said donation partook of the nature of a contract. . therefore. repair. and. Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to sue". illegal". "in order to give a semblance of legality. Zulueta from ordering or allowing the continuance of the above-mentioned feeder roads project. . addressed a letter to the Municipal Council of Pasig. repair. that a writ of injunction be issued enjoining the Secretary of Public Works and Communications. follow and implement the aforementioned illegal provision of law. detriment and prejudice not only to the petitioner but to the Filipino nation. the respondents would continue to execute. respondents Zulueta executed on December 12. 920. In support to this motion. hence. that the municipal council of Pasig endorsed said letter of respondent Zulueta to the District Engineer of Rizal. "to the irreparable damage. 1953. executed. however. reconstruction.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"'. 920 be declared null and void. 920. 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. and from making and securing any new and further releases on the aforementioned item of Republic Act No. that. that on May.00 therein made. respondent Zulueta . . Capinpin — Gen. Lim)". unless restrained by the court. such. the appropriation of P85.00 appropriated therein for the construction of the projected feeder roads in question. at the time of the passage and approval of said Act. accepted by the then Executive Secretary. and that. that no deed of donation in favor of the municipality of Pasig was. when there is absolutely none. to the aforementioned appropriation". 1953. Rizal. that the alleged deed of donation of the feeder roads in question be "declared unconstitutional and. No. . Segundo — Gen. respondent Zulueta. and the sum of P85. who. which projected feeder roads "do not connect any government property or any important premises to the main highway". that. within the Antonio Subdivision . 920. up to the present "has not made any endorsement thereon" that inasmuch as the projected feeder roads in question were private property at the time of the passage and approval of Republic Act No. offering to donate said projected feeder roads to the municipality of Pasig. that the construction of said projected feeder roads was then being undertaken by the Bureau of Public Highways. . situated at . reconstruction.000. on June 13. 1953. while he was a member of the Senate of the Philippines. Roxas — Gen. for the construction of the projected feeder roads in question with public funds would greatly enhance or increase the value of the aforementioned subdivision of respondent Zulueta. and that the petition did "not state a cause of action". Malvar — Gen. Pasig. respondent Zulueta wrote another letter to said council. at the time of the passage and approval of said Act.

The lower court held that under these circumstances. ipso facto revert to the DONOR.00. 2However. that said respondent is " not aware of any law which makes illegal the appropriation of public funds for the improvements of . dated October 29. by petitioner herein. p. . . the title to the land hereby donated shall. 1953. as well as when it was approved by the President on June 20. respondent Zulueta contended. and that. would have the effect of relieving respondent Zulueta of the burden of constructing his subdivision streets or roads at his own expenses. (Emphasis supplied. are deemed to have admitted hypothetically the allegations of fact made in the petition of appellant herein. JOSE C. . since public interest is involved in this case.000. . in his motion to dismiss that: A law passed by Congress and approved by the President can never be illegal because Congress is the source of all laws . repair. not a public purpose. the same being a pure act of liberality. not its provincial governor. it should be noted that we are concerned with a decision granting the aforementioned motions to dismiss. that the legality of said donation may not be contested. . which is self-evident. being subject to the following condition: The within donation is hereby made upon the condition that the Government of the Republic of the Philippines will use the parcels of land hereby donated for street purposes only and for no other purposes whatsoever.) which is onerous. (Record on Appeal. in which the validity of Republic Act No. in turn. 33. 1953. to be undertaken with the aforementioned appropriation of P85. because his "interest are not directly affected" thereby. that. Rizal. appropriating P85. The other respondents. 920. admittedly.000. the constitutional provision invoked by petitioner is inapplicable to the donation in question. At the outset. the Provincial Governor of Rizal and the provincial fiscal thereof who represents him therein.) . were private property of said respondent when Republic Act No. reconstruction. that the instructions and improvement of the feeder roads in question. respondent Zulueta is the owner of several parcels of residential land situated in Pasig.00 for the "construction. Aside from the fact that movant is not aware of any law which makes illegal the appropriation of public funds for the improvement of what we. . morals . which. upon such violation. however. not a contract. 920 is necessarily involved" and petitioner "has not shown that he has a personal and substantial interest" in said Act "and that its enforcement has caused or will cause him a direct injury. According to said petition. which as much. extension and improvement" of said roads. 920. The petition further alleges that the construction of said roads. the lower court rendered the aforementioned decision. pursuant to section 1683 of the Revised Administrative Code. 1and would "greatly enhance or increase the value of the subdivision" of said respondent. . . the donation in question is a contract. or public policy". the appropriation in question was "clearly for a private. would not be a public purpose. accordingly." Acting upon said motions to dismiss. that "the legislature is without power appropriate public revenues for anything but a public purpose". certain portions of which had been reserved for the projected feeder roads aforementioned. . objector purpose is contrary to law. it being expressly understood that should the Government of the Republic of the Philippines violate the condition hereby imposed upon it. holding that. . "have the requisite personalities" to question the constitutionality of the disputed item of Republic Act No. if such roads where private property. in the meantime. was passed by Congress. that said donation or contract is "absolutely forbidden by the Constitution" and consequently "illegal". should represent the Province of Rizal.alleged that the Provincial Fiscal of Rizal. for Article 1409 of the Civil Code of the Philippines. private property"." Respondents do not deny the accuracy of this conclusion. and that. and known as the Antonio Subdivision. the appropriation in question "should be upheld" and the case dismissed. may assume as private property . ZULUETA. declares in existence and void from the very beginning contracts "whose cause. maintained that petitioner could not assail the appropriation in question because "there is no actual bona fide case .

) 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. reflecting as they do. said views and jurisprudence are.The first proposition must be rejected most emphatically.L. part and parcel of our own constitutional law. 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. based upon the following premises. (25 R. which results from the promotion of private interest and the prosperity of private enterprises or business.) Needless to say. (85 C. no appropriation of state funds can be made for other than for a public purpose. money raised by taxation can be expended only for public purposes and not for the advantage of private individuals. namely: (1) that. does not justify their aid by the use public money. . upon the ground that petitioner may not contest the legality of the donation above referred to because the same does not affect him directly.C. the principle according to Ruling Case Law. the lower court felt constrained to uphold the appropriation in question. Incidental to the public or to the state.S. under constitutional provisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose. the constitutional limitation . which. It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax. removing. is this: It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose.) Explaining the reason underlying said rule. Moreover.lawphil. 398-400. although each advantage to individuals might incidentally serve the public. (2) that the latter may not be annulled without a previous declaration of unconstitutionality of the said donation. if valid.S. the established jurisprudence in the United States. public funds may be used only for public purpose.J. The right of the legislature to appropriate funds is correlative with its right to tax. 1147. . presumably. apart from being patently sound. and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community. under the express or implied provisions of the constitution. not upon events occurring. subsequently thereto. pp. . The validity of a statute depends upon the powers of Congress at the time of its passage or approval. pp. as opposed to the furtherance of the advantage of individuals. are a necessary corollary to our democratic system of government. it is refuted by the decisions of this Court invalidating legislative enactments deemed violative of the Constitution or organic laws. exists primarily for the promotion of the general welfare. and (3) that the rule set forth in Article 1421 of the Civil Code is absolute. may be ultimately benefited by their promotion. it being inconsistent with the nature of the Government established under the Constitution of the Republic of the Philippines and the system of checks and balances underlying our political structure. Corpus Juris Secundum states: Generally. this Court is fully in accord with the foregoing views which. or acts performed. pp. as such. Besides. after whose constitutional system ours has been patterned. discussed supra sec. (81 C. with retrospective operation. unless the latter consists of an amendment of the organic law. emphasis supplied. and. 14.net This notwithstanding. 3 As regards the legal feasibility of appropriating public funds for a public purpose. Emphasis supplied. and admits of no exception. 645-646.J. and thus the public welfare. We do not agree with these premises. likewise. emphasis supplied. This conclusion is. said donation cured the constitutional infirmity of the aforementioned appropriation.

his right to the annulment of said contract. Mellon (262 U. 761. according to the petition. Again. and hence. under the conditions set forth in Article 1177 of said Code. or on June 20.S. or. each state enjoys internally a substantial measure of sovereignty. the legality thereof depended upon whether said roads were public or private property when the bill. the Federal Constitution and the Federal statutes have become binding upon the people of the U. is reflected in the election of its President.. not by the people of the U. 6Although there are some decisions to the contrary.S. the same was made by representatives of each state of the Union. is subject to exceptions. in the manner indicated in said legal provision. independently of that of the others. at the instance of taxpayers. 4 The donation to the Government. including therefore. but by electors chosen by each State. the states of the Union are integral part of the Federation from an international viewpoint.S. but also taxpayers. 7the prevailing view in the United States is stated in the American Jurisprudence as follows: In the determination of the degree of interest essential to give the requisite standing to attack the constitutionality of a statute. and its Federal Government. 1953 (see section 13 of said Act). from a domestic viewpoint. laws providing for the disbursement of public funds. it is well-stated that the validity of a statute may be contested only by one who will sustain a direct injury in consequence of its enforcement. The peculiar nature of the relation between said people and the Federal Government of the U. Yet.. ratified said Constitution. a judicial nullification of said donation need not precede the declaration of unconstitutionality of said appropriation. except only those which are inherent in his person. and the people of each State has. the appropriation in question. over five (5) months after the approval and effectivity of said Act.) However. the creditors of a party to an illegal contract may. or legalizing. on the other hand. Jur.infringed by said statute. subject to the limitations imposed by the Federal Constitution. In other words.S. except indirectly. Article 1421 of our Civil Code. in this sense. did not cure its aforementioned basic defect. made.S. under the composite system of government existing in the U. in such manner as the legislature thereof may direct (Article II. who is chosen directly. It is closer. like many other statutory enactments. Consequently. this view was not favored by the Supreme Court of the U.S. the general rule is that not only persons individually affected. even though such creditors are not affected by the same. exercise the rights and actions of the latter.00 appropriation for the projected feeder roads in question.S. when said bill was approved by the President and the disbursement of said sum became effective. is not identical to that obtaining between the people and taxpayers of the U. and. latter on. except that the authority of the Republic of the Philippines over the people of the Philippines is more fully direct than that of the states of the Union.lawphi1. Referring to the P85. which.S. there are many decisions nullifying. through the respective states of the Union of which they are citizens. Indeed. (11 Am. section 2. except insofar as the former represented the people of the respective States. not of the people of the U." which may be enjoined at the request of a taxpayer. to that existing between the people and taxpayers of each state and the government thereof.S. in consequence of an act of. Again. Inasmuch as the land on which the projected feeder roads were to be constructed belonged then to respondent Zulueta. have sufficient interest in preventing the illegal expenditure of moneys raised by taxation and may therefore question the constitutionality of statutes requiring expenditure of public moneys.000. the result is that said appropriation sought a private purpose. on the other. and those imposed . emphasis supplied. upon the ground that the relationship of a taxpayer of the U. for the purpose of giving a "semblance of legality". in Frothingham vs. insofar as federal laws are concerned. but. In fact. 447). was passed by Congress. was null and void. 5upon the theory that "the expenditure of public funds by an officer of the State for the purpose of administering an unconstitutional act constitutes a misapplication of such funds. to its Federal Government is different from that of a taxpayer of a municipal corporation to its government. For instance. and the Republic of the Philippines.. insofar as the simple and unitary type of our national government is not subject to limitations analogous to those imposed by the Federal Constitution upon the states of the Union. of the Federal Constitution).net The relation between the people of the Philippines and its taxpayers. became Republic Act 920.

. Road District No. Perez (56 Phil. Hence. 2d. Smith. 883. Central Capiz vs. Zulueta.. 40 Phil. concur.W.I. Manila Electric Co.. vs.. and the records are remanded to the lower court for further proceedings not inconsistent with this decision.. 6. 1243). in the Philippines. 601) — has greater application in the Philippines than that adopted with respect to acts of Congress of the United States appropriating federal funds. 241 Wis. we entertained the action of taxpayers impugning the validity of certain appropriations of public funds. involving the expropriation of a land by the Province of Tayabas. The Province of Rizal. Ang Tang Ho. with the costs of this instance against respondent Jose C. 676. 726. State. Again.E. Auditor General. Compania General de Tabacos vs. People vs. a taxpayer and employee of the Government was not permitted to question the constitutionality of an appropriation for backpay of members of Congress. Labrador. the taxpayers therein bear a substantial portion of the burden of taxation. repair and maintain all streets. 368. State vs. Bautista Angelo. 395. 50 Phil. the reason that impelled this Court to take such position in said two (2) cases — the importance of the issues therein raised — is present in the case at bar. Ramirez. the owner of a subdivision is under obligation "to improve. 36 S. President of the Senate (42 Off. Smith vs...W. Allred. 248. McGirr vs. the decision appealed from is hereby reversed. 563. Webb. 2d. which he represents officially as its Provincial Governor. 45 Off.. 30 Phil. 2d. Hord.. vs. Attorney General vs. Board of Public Utility. 4411). 8 Phil. 83 N. pursuant to section 19(h) of the existing rules and regulation of the Urban Planning Commission. Dammann 280 N. 79 P. Paras. McDaniel vs. Suguitan. However. in the Province of Tayabas vs.. it is our considered opinion that the circumstances surrounding this case sufficiently justify petitioners action in contesting the appropriation and donation in question. 161.W.upon the Federal Government in the interest of the Union. like the petitioners in the Rodriguez and Barredo cases. 440. 136.W.C.S. 53-N. J. Government of P. 400... 57 Phil. highways and other ways in his subdivision until their dedication to public use is accepted by the government. Bengzon. that this action should not have been dismissed by the lower court. 43 Phil.. Michigan Sugar Co. Pasay Transp. 37 Wis. in Rodriguez vs. For this reason. and invalidated the same. C. Apacible. petitioner herein is not merely a taxpayer. Oxnard Beet Sugar Co. vs. Giessel. 126 N. vs.L. Treasurer of the Philippines and Barredo vs. 101 U. 48 Phil. Agcaoili vs. Padilla. Reyes. as unduly exorbitant. is our most populated political subdivision. People vs.W. Gaz. Sjostrum vs. 4 Shelby County vs. 6 N. Zabriskie. 698. 897. 46 Phil. JJ.. 599. 341.B. Indeed." 2 Ex parte Bagwell. 716. Wherefore. 257). 293 N. 68 S.. Thomson vs. Footnotes 1 For. Paredes. 625. and Dizon. Barrera. 124 Mich. 8and. U. It is so ordered. 105 N. Annuity Pension Board. State Highway Commission 228 P. Gutierrez David. 2d. Co. 44 Phil. Hamilton. 42 Phil.. 625.J.. 600. Commission on Elections (84 Phil.W. Springer. two (2) taxpayers thereof were allowed to intervene for the purpose of contesting the price being paid to the owner thereof. Moreover. State ex rel. 674. State ex rel. State vs. City of Eau Claire. Concepcion vs. Gaz.. 3 Casanovas vs. It is true that in Custodio vs..W 2d 164.S. the rule recognizing the right of taxpayers to assail the constitutionality of a legislation appropriating local or state public funds — which has been upheld by the Federal Supreme Court (Crampton vs.. Paredes. Hutton vs. 34 Phil. 676. 238. and that the writ of preliminary injunction should have been maintained. vs. 259. Pomar.

Burke vs.E. Frear. Rutter vs. Martin vs. either legal or equitable.Linsangan. People vs. Jones vs.Y. vs. Carlos. 14. 761. vs. Johnson. 756. Burke vs. Littler vs. Treasurer. Steel. 18 Pac.R.W. Gaz. Hooker.D. Sears vs. CITY OF ILOILO. Canal Fund Comps. 53 N. 56. 520. Tacoma vs. Pennsylvania R. No. 374. 1958 SERAFIN SALDAÑA.. 227. 41. 21 Misc. 54 Pac. City Fiscal Filemon R. 78 Phil. 35.Y. Cranmer vs. 2d. 123. State ex rel. Nawasa. 270 Ill. 908. 38 Kan. 375 Ill. 163. Smith. Jayne. Komfort. Consolacion for appellee. 64 Fla. 664. Maguerich. McCullough vs.. Snively. Gaz. 62 Phil.A. 464." (Oxnard Beet Sugar Co. 16 N.Y. Snively. Cheetham. Supp.. 30 Pa. 123. Fergus vs. 963. 52 N. Gilchrist. Lamb vs. 220. 65 Pac. Supp. In re Cunanan. Shieffelin vs. Giddings vs. 16 Haw. 833. 951. 5 Haw. Crawford vs. 1602. 106 N. 4 S. Capena. 7 Thompson vs. 133 N. Supp. 731. St. 72 Am. 544. Saldaña for appellant. Woodruf. Blacker. Hilger vs. 6 Rubs vs. Off.. 573. 93 Mich. Bradly vs. 567. 1112. 428. 102 Cal. 56 N. 19 Wash. 99 N. 25 L. Rosenhian vs. Castle vs. vs. 4 In the language of the Supreme Court of Nebraska. 144. 82 Pac. Rep.R. State. 178 Ind. 37. 536. Co. 17 Pac.W.W. plaintiff-appellant. 70 Misc. 102 N. 312. 336. 1. defendant-appellee.E. "An unconstitutional statute is a legal still birth.C. Rippe vs. 93 Phil. 47 Or. E. Esteban. and. Livermore. 328. among others. Serafin B. 19. Thompson. 26 Colo. Christmas vs. Reid vs. Mott vs.. 44 Ga. 100. Becker. which neither moves. 729. Reed.36 P. 56 Minn. 130. 331. 10 Or. 44 Off. 675.. Bridges. Thorson. 535. Hutchison vs. Lucas vs. 248. State ex rel. Auditor vs. Dudick vs. Power County. 124 Ill. 3 Wash. 690. 266.E. 37 Pac. 443. 63 Wash. 113. 3. 657. Sears vs. 906. 221. Skinmer.E. 641. Martin vs.E. 149.W. 27 Pac. Frost vs. Co. 894. American Hawaiian Engineering and Constr. 458. 5 See. Elrod. 8 It has 1. 181 N. 37 Am. Jose O. 259. Baumann. 107 N. Watson. arises from such inanimate thing. 162. 94 Phil. 703. MacKinley vs.E. 80. 2d. 424. 68. 49N. nor holds out any sign of life. nor breathes.E.W. 50. Thomas. 402. 208 Ill. James. 57.). 107 Pac. City of Baguio vs. 30N.530 inhabitants.. 25 Wash. People and Hongkong & Shanghai Banking Corp. Pennover. 534.. Davenport vs. 57 N. Whiteback vs.R.E. 107 Phil. State ex rel. Connell. Ingham. Cummingham. 304. 311. 360. 106 Phil. 9. 105 Md. Birmingham vs. 328. 19 S. 107 N. 16 L. [5]1807. 55 Or. 46. 147. 212 N.463.. 73 Misc. 31 S. Smith vs.W. 186. 26 Or. 202.D.C. Taylor vs. State. Republic of the Philippines SUPREME COURT Manila EN BANC G. Long vs. 9 S. 145 Pac.W. 1. Pr. 563. 534. L-10470 June 26. 138 Wis. 944. Waite. 2 Abb. 308. 899. 65 Phil. Dec. Ellingham vs. 372.A. . 116 Pac. 39 Kan. 77 Am. 1067. City of Cebu vs. State ex rel. 90. 205. 20 S. Brown. 127 N. Gaz. 266 Ill. 68 N. Warfield. 119 N. 208 I11.. Lacy. 110 N. 83 Wis. 457. 56 Pac. Indiana Jones vs. no right. 50 Off. It is wholly dead from the time of conception. 70 N. Dye. Russel. Dec.. 59 So. Carman vs. Vera.. 27. Nawasa. It is a form without one vital spark. 349 [PEPSI] Ill. 173. 80. vs.E. Y.

for issuance of license permit required in article one hereof. without first obtaining the necessary license permit from the Mayor. melon. per hundred bunches or P0. P2.02 per bunch. 30. salted or dried. prawn or the like. dried or salted. eggs from P2 to P1 per hundred. . Fish. . Crabs. papayas or the like. P0. Series of 1946. — It shall be unlawful for any carrier whether land. to load any of the articles mentioned herein which is not provided with the corresponding permit as required by this ordinance. dismissing his complaint against the City of Iloilo. Be it ordained by the Municipal Board of the City of Iloilo.20. pigs. whether alive or slaughtered. as amended by Ordinance No. bagoon (guinamos. whether alive or slaughtered. Art. Other fruits not mentioned herein — P0. Chicken and other domestic fowls.02 each. . 28 by reducing the fees for each chicken from P. sheep or the like. collect a fee as follows: Large cattle. the defendant City of Iloilo promulgated Ordinance No. 28. Pigs. whether fresh. whether fresh. P5 each. or air. Art.20 per kilo. prawn or the like). imprisonment of not less than ten (10) days but not exceeding six (6) months and to suffer subsidiary imprisonment in case of insolvency to pay the fine. 1946. same series of the defendant City. goats. which for purposes of reference we reproduce below: ORDINANCE No. — For the purpose of regulating during this state of emergency. Fruits. 30.00 per hundred or P0. Bagoon (guinamos) P0. crabs. . 3. P2 per pot. Milkfish (semilla). 1946. Domestic fowls. Milkfish (semilla). for the refund of taxes paid by him under protest.02 per kilo. the following: Large cattle. P0.50 each. Banana. 28 AN ORDINANCE REGULATING THE EXIT OF FOOD SUPPLY AND LABOR ANIMALS AND IMPOSING PERMIT FEE THEREFOR. goats. or more than Two Hundred (P200) Pesos. 2236. such as bananas. that: ARTICLE 1.MONTEMAYOR. ART. series of 1946. and sheep. P10 per head. water. On May 25. eggs.20 to P. Ordinance No.: Serafin Saldaña is appealing the decision of the Court of First Instance of Iloilo in Civil Case No. Eggs. whether alive or dressed — P0. — Violation of this ordinance shall be punished with a fine of not less than One Hundred (P100) Pesos. it is strictly prohibited to send outside of the City of Iloilo. passed on June 4. the exit of food supply and labor animals in order to avert shortage of the same in the City of Iloilo. J. P2. 28.10 per kilo.50 to P.20 per kilo. 4. and for fish from P. amended Ordinance No. Fish. — The City Treasurer shall.10 per kilo. and upholding the legality of Ordinance No. 2.

Estos dos terminos "derechos" e "impuesto" no entranan el mismo concepto. Saldaña had sent fish out of Iloilo City to Manila. and that the payment of said amount was made under protest. . Saldaña had been paying. Taxation. we do not hesitate to find and to hold that the so-called fees were in reality taxes for city revenue. and falls squarely within the provisions of paragraph (aa). which is. Vol. Auditor General. The differences between the license and the property tax are well established. (Manila Electric Co. But a charge of a fixed sum which bears no relation to the cost of inspection and which is payable into the general revenue of the state is a tax rather than an exercise of the police power.80 under the two ordinances in question.. cannot possibly be considered as mere expense incurred for. the sum prescribed by law as for services rendered by public officers" (25 C. is a tax in the ordinary sense. On the basis of the agreed statement of facts. strictly speaking. is a fee imposed for the purpose of regulation. assessed according to the value of property.359.00 fee for every head of large cattle. goat. . L. So-called license taxes are of two kinds. One question involved in the appeal is whether the licensed fees imposed and collected were in reality taxes. J. Section 21 of the Charter of the City. A property tax. y Derechos o Fees. during the period from September 16. . The parties submitted an agreed statement of facts to the effect that during the period above-mentioned. "an enforced contribution of money or other property assessed in accordance with some reasonable rule of apportionment by authority of a sovereign state. . Tanquintic. namely. and is in the main for police purposes.bananas from P2 to P1 per hundred bunches etc. burdens or charges imposed by the legislative power upon persons or property to raise money for public purposes" (61 C. . . Commonwealth Act No. 300). . 1946 to December 6. I. . holding that Ordinance No. Under said ordinances. (Cooley. 297. though under protest. Judging from the amount of the fees fixed in the ordinances in question. with the purpose of averting the scarcity of foodstuffs. "a reward or compensation allowed by law to an officer for specific services performed by him in the discharge of his official duties.. porque Impuestos o Taxes son. The license represents the permission conceded to do an act. . . par. the defendant contended that the imposition and collection of the municipal licenses were within the power and duties of the Municipal Board in the exercise of its police power. for the sending of which. that the purpose of the said ordinances was to regulate the exit of food supply and labor animals from the city of Iloilo and their sale beyond city limits. vs. J. . 58 Phil. 65). 97-98).00 fee for every pig. null and void. a sum certain given for a particular service.359. the City collected P1. pp. The following authorities are illuminating: . 158. that the ordinance does not restrict trade but only regulates the business of purchase of foodstuffs for the purpose of taking them outside. 133). 128. for the purpose of defraying the public expenses" (26 R. 2. 1009). the lower court rendered the decision now appealed to us. not a tax at all but merely an exercise of the police power. . the P10. on persons or property within its jurisdiction. or the . on the other hand. having been enacted beyond the powers of the Municipal Board of the City. 28 as amended was valid. so-called fees on fish bought in the City of Iloilo and sent by him to Manila by plane. 1951. and the P5. (City of Manila vs. on the ground that the ordinances in question were illegal. is not supposed to be imposed for revenue. 73 Phil.80. totalling P1. son por otra parte. plaintiff commenced the present proceedings by complaint for the reimbursement to him of the said amount with interest. The other. On September 17. 4th ed. et al. The one is a tax for the purpose of revenue. In its answer. whether alive or slaughtered. For instance. . segun todas las autoridades conocidas. C. necessary to cover the expenses in the issuance of the licenses and the cost of the necessary inspection or police surveillance. page 13). or "a rate or sum of money assessed on the person or property of a citizen by government for the use of the nation or state. . whether alive or slaughtered. 1946.. or sheep.. that the imposition and collection of the license fees provided in the said ordinance was included within the police power and that said fees were reasonable amounts.

entitled "General Rules for Municipal Taxation and Licenses. 422). On the other hand. then the P5. and consequently null and void. use of bridges or otherwise. eggs. that: It shall not be in the power of the municipal council to impose a tax in any form whatever upon goods and merchandise into the municipality. is clothed with no inherent power of taxation. but for export to other places. like Manila. or sheep costs. See also Arong vs. even from other provinces adjacent. to load any of said animals or articles without the corresponding permit.. vs. City of Cebu. With merely telling the applicant and prospective licensee that said animals and articles are needed in the City of Iloilo. Its charter must plainly show an intent to confer that power or the corporation cannot assume it. of the animals and articles enumerated therein. we find that the ordinance in question as amended. that the prohibition against taking animals and articles . the mayor could refuse to grant the permit. (Emphasis supplied). A municipal corporation. But once inside the city limits." In conclusion. unlike a sovereign state. To realize the danger of the grant of said absolute power is not difficult. taxes are imposed thereon under the guise of license fees. 102 Phil. and are taken to the City of Iloilo only for the purpose of transportation to other places. nowhere in the charter of the defendant City is it authors to regulate and collect fees or taxes for. say.. (Santos Lumber Co. etc. and if the animals and articles listed in the ordinances were sent out from the City of Iloilo in large quantities and numbers. the City must find in its charter the power to do so.. and this is very important. and it further provides. As to the reasonableness of the prohibition of selling and taking out of the City of Iloilo of any of the animals and articles enumerated in the ordinance. the mayor has absolute power to refuse to issue any permit. there would be no doubt that the fees collected would amount to a sizable sum and augment greatly the revenues of the municipal corporation. of the same Revised Administrative Code. pigs. but come from other towns of the province. Any doubt or ambiguity arising out of the term used must be resolved against the corporation. et al. If a pig.cost of the inspection of each animal and the issuance of the corresponding permit. In other words. And the power when granted is to be construed strictissimi juris. 98 Phil. under the ordinance. goat. enacted beyond the general powers of a municipal corporation and not authorized by the defendant-appellee's charter. This last provision is reproduced in Section 2629. and Article 3 declares it unlawful for any carrier whether land water or air. and in case he issues the permit for their being taken away. they are not brought into the City of Iloilo for the consumption of the residents thereof. a municipal corporation like the defendant City has no inherent power of taxation. fish. To enact a valid ordinance. Raffiñan. The ordinance fails to provide for any regulations or conditions under which the permit can be granted or denied. As correctly argued by the appellant. of animals and articles listed in the ordinance. In other words.00 fee would constitute quite a considerable slice or portion of said cost. without first obtaining the necessary license permit from the mayor. Section 2287 of the Revised Administrative Code provides that municipal revenue obtainable by taxation shall be derived from such sources only as are expressly authorized by law. appellant asks us to consider or take judicial notice of the fact that those animals and articles are not all produced in the City of Iloilo. fowl. fruits. is ultra vires. the taking out of the city. the mayor takes absolute control and has jurisdiction to allow or disallow their being taken out of the city. or out of the same. like large cattle. practically making him absolute dictator over the subject matter. way in excess of the cost of inspections and the issuance of the permits.. P15 or even P20. Another important question is that Article 1 of the ordinance also strictly prohibits the sending out of the City of Iloilo. for said power cannot be assumed. 870. Aside from this lack of inherent power of taxation by a municipal corporation. shall be void. and any attempt to impose an import or export tax upon such goods in the guise of an unreasonable charge for wharfage.

No. on 23 March 1972.. J. which prohibit municipal corporations from imposing any tax in any form upon goods and merchandise carried into or out of the town or City.R. . J. A.80.: On 24 December 1969. Paras. . including revocation of permit to operate. FELICIANO. which reads: SECTION 1. xxx xxx xxx . as supervision fee.. . Series of 1969.. petitioner . but also in contravention of the provisions of Sections 2287 and 2629 of the Revised Administrative Code. **** Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. Bautista Angelo. . 9236. Series of 1972. Reyes.out of the City of Iloilo without permit of the mayor is in restraint of trade and a curtailment of the rights of the owners of the said animals and articles to freely sell and of prospective purchasers to buy and dispose of them without the city limits in the ordinary course of commerce and trade. .. the appealed decision is hereby reversed and the City of Iloilo is hereby ordered to reimburse plaintiff the amount of P1. vs.Privately owned and operated public markets shall submit monthly to the Treasurer's Office. and shall pay 10% of the gross receipts from stall rentals to the City.. 3. B. Endencia. L-36081 April 24.1 The Market Code was thereafter amended by Ordinance No.359. There is hereby imposed a five percent (5 %) tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon City. Bengzon. Supervision Fee. Del Castillo & Associates for petitioner. Reyes. with legal interest and costs.... the City Council of respondent Quezon City adopted Ordinance No. Concepcion.. In view of the foregoing. respondent. Section 3 of which provided: Sec. 1989 PROGRESSIVE DEVELOPMENT CORPORATION. Jalandoni.. JJ. that the fees imposed in the said ordinances are in fact taxes not only unauthorized by the law or the charter of defendant City.. 7997. Herrera. concur. C. a certified list of stallholders showing the amount of stall fees or rentals paid daily by each stallholder. J.. otherwise known as the Market Code of Quezon City. and Felix. Failure to submit said list and to pay the corresponding amount within the period herein prescribed shall subject the operator to the penalties provided in this Code . QUEZON CITY.. L.

Having failed to obtain reconsideration of said decision. c. alternatively. the City shall revoke the permit of the privately-owned market to operate and/or take any other appropriate action or remedy allowed by law for the collection of the overdue percentage tax and surcharge. For the effective implementation of this Ordinance. xxx xxx xxx SECTION 4. alleging that the material facts had been admitted by the parties. In its Answer. are empowered to impose and collect. not having paid the ten percent (10%) supervision fee prescribed by Ordinance No.. contended that it had authority to enact the questioned ordinances. maintaining that the tax on gross receipts imposed therein is not a tax on income. 2264. otherwise known as the Revised Charter of Quezon City. xxx xxx xxx 2 On 15 July 1972. owner and operator of a public market known as the "Farmers Market & Shopping Center" filed a Petition for Prohibition with Preliminary Injunction against respondent before the then Court of First Instance of Rizal on the ground that the supervision fee or license tax imposed by the above-mentioned ordinances is in reality a tax on income which respondent may not impose. 537. period of lease. but rather a privilege tax or license fee which local governments. ruling 3 that the questioned imposition is not a tax on income. the lower court dismissed the petition. its validity. . the same being expressly prohibited by Republic Act No.. respondent. petitioner moved for judgment on the pleadings. The only issue to be resolved here is whether the tax imposed by respondent on gross receipts of stall rentals is properly characterized as partaking of the nature of an income tax or. petitioner came to us on the present Petition for Review. amount of rental. Two (2) days later. We begin with the fact that Section 12.. and was estopped from questioning.SECTION 3. had no personality to question.. The Solicitor General also filed an Answer arguing that petitioner. 7997. authorizes the City Council: . 9236 for the months of June to September 1972. on 25 September 1972. like respondent. name of stallholder or lessee. : a. petitioner alleged having paid under protest the five percent (5%) tax under Ordinance No. b. In its Supplemental Petition of 23 September 1972. of a license fee. monthly or yearly basis. petitioner Progressive Development Corporation.. a monthly certified list of stallholders of lessees of space in their markets showing . that the tax on gross receipts was not a tax on income but one imposed for the enjoyment of the privilege to engage in a particular trade or business which was within the power of respondent to impose. owners of privately owned public markets shall submit .. In case of consistent failure to pay the percentage tax for the (3) consecutive months. Article III of Republic Act No. indicating therein whether the same is on a daily. through the City Fiscal. as amended. On 21 October 1972.

9 Thus. 6 It is now settled that Republic Act No. The term "tax" frequently applies to all kinds of exactions of monies which become public funds. (c) To tax. municipality or municipal district may levy or impose any of the following: xxx xxx xxx (g) Taxes on income of any kind whatsoever. provides that: Any provision of law to the contrary notwithstanding. bread and other provisions. Provided.xxx xxx xxx (b) To provide for the levy and collection of taxes and other city revenues and apply the same to the payment of city expenses in accordance with appropriations. fix the license fee. is comprehensive: the grant of authority is not only" [to] regulate" and "fix the license fee. municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city. 2264 confers upon local governments broad taxing authority extending to almost "everything. to collect fees and charges for service rendered by the city. game. 7 Both the Local Autonomy Act and the Charter of respondent clearly show that respondent is authorized to fix the license fee collectible from and regulate the business of petitioner as operator of a privately-owned public market. or the municipal district council of the municipal district. That no city. to regulate and impose reasonable fees for services rendered in connection with any business. if the generating of revenue is .." provided that the tax levied is "for public purposes. poultry. 2264. as amended. butter. 4 The scope of legislative authority conferred upon the Quezon City Council in respect of businesses like that of the petitioner. and thus beyond the latter's competence. cheese.. one of those expressly excepted from respondent's taxing authority.. municipality or municipal district. municipality or municipal district and otherwise to levy for public purposes just and uniform taxes licenses or fees: .." but also " to tax" 5 Moreover. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation.. however. excepting those which are mentioned therein. however. lard vegetables. otherwise known as the Local Autonomy Act. being a return from capital invested in the construction of the Farmers Market.. while the latter is imposed under the taxing power primarily for purposes of raising revenues. Petitioner cites the same Section 2 of the Local Autonomy Act which goes on to state: 8 . practically operates as a tax on income. municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. the municipal council of the municipality. just and uniform. fish. all chartered cities. Petitioner." does not transgress any constitutional provision and is not repugnant to a controlling statute. or exercising privileges in chartered cities. profession or occupation being conducted within the city. insist that the "supervision fee" collected from rentals. Section 2 of Republic Act No. preparation and sale of meat. and regulate the business of the following: .

safety and development as to require regulation for the protection and promotion of such public interest. unreasonable. 20 . 10 To be considered a license fee. even though privately owned. We believe and so hold that the five percent (5%) tax imposed in Ordinance No. fish. e. both are established for the rendition of service to the general public. as correctly noted by the Solicitor General. and so forth. the obligation to "abide by and comply with the ordinances. rules and regulations prescribed for the establishment. 12 Accordingly. poultry and other foodstuffs. 17 for the protection of the health of the public by insuring. equivalent to or quite the same as the operation of a government-owned market.the primary purpose and regulation is merely incidental. or confiscatory. 11 When an activity. was done principally in the exercise of the respondent's police power. but if regulation is the primary purpose. applying the standards set forth above. the imposition is a tax. as a condition for continuous operation. operation and maintenance of markets in Quezon City." 15 The "Farmers' Market and Shopping Center" being a public market in the' sense of a market open to and inviting the patronage of the general public. a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. Local' governments are allowed wide discretion in determining the rates of imposable license fees even in cases of purely police power measures. 14 The same resolution imposed upon petitioner. 19 Thus: [A]n ordinance carries with it the presumption of validity. in the absence of proof as to particular municipal conditions and the nature of the business being taxed as well as other detailed factors relevant to the issue of arbitrariness or unreasonableness of the questioned rates. the fact that incidentally revenue is also obtained does not make the imposition a tax. which warrants close supervision and control by the respondent City. for the prevention of fraud and imposition upon the buying public. instead of one of regulation under the police power. taking into account not only the costs of direct regulation but also its incidental consequences as well. the imposition questioned must relate to an occupation or activity that so engages the public interest in health. 16 The operation of a privately owned market is. morals and safety. not a tax on income.. Much should be left thus to the discretion of municipal authorities. 9236 constitutes. Courts will go slow in writing off an ordinance as unreasonable unless the amount is so excessive as to be prohibitory. 13 In the case at bar. arbitrary. the imposition must also bear a reasonable relation to the probable expenses of regulation.g. 7350 passed on 30 January 1967 by respondents's local legislative body authorizing petitioner to establish and operate a market with a permit to sell fresh meat. not a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act. compliance of all food stuffs sold therein with applicable food and drug and related standards. The question of reasonableness though is open to judicial inquiry. oppressive. A rule which has gained acceptance is that factors relevant to such an inquiry are the municipal conditions as a whole and the nature of the business made subject to imposition. morals. While it is true that the amount imposed by the questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition. or the general welfare. occupation or profession is of such a character that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health. the legislature may provide that such inspection or supervision or other form of regulation shall be carried out at the expense of the persons engaged in such occupation or performing such activity. petitioner's operation thereof required a license issued by the respondent City. the maintenance of sanitary and hygienic conditions in the market. and that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision has been paid. but rather a license tax or fee for the regulation of the business in which the petitioner is engaged. 18 it nevertheless will be presumed to be reasonable. the "Farmers Market & Shopping Center" was built by virtue of Resolution No. the issuance of which.

Underscoring supplied. Branch 18. principally. Gutierrez. there must be a statutory grant for a local government unit to impose lawfully a gross receipts tax.A. 62 Official Gazette. C. upon the one hand. . did not introduce any change to the portion quoted above. Underscoring supplied. Romualdez. The lower court correctly held that the gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due respondent to cover the latter's administrative expenses. The use of the gross amount of stall rentals as basis for determining the collectible amount of license tax.. 8616 (1966). The amendatory law. Footnotes 1 Rollo. finds no application in the instant case where what is involved is an exercise of. 5 See. Pacific Commercial Co. petitioner argues that respondent is without power to impose a gross receipts tax for revenue purposes absent an express grant from the national government. convert or render the license tax into a prohibited city tax on income. 4497.. Bidin and Cortes. Italics supplied.D. the Decision of the then Court of First Instance of Rizal. 4 46 Official Gazette 4732 (1950). 49 Phil. concur. however. and the higher the volume of goods sold in such private market. 145. Upon the other hand. the higher the amount of stall rentals. the regulatory power of the respondent City and where that regulatory power is expressly accompanied by the taxing power..Petitioner has not shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly disproportionate to the costs of the regulatory service being performed by the respondent as to compel the Court to characterize the imposition as a revenue measure exclusively. p. 102. that unit not having the inherent power of taxation. Finally. 2264 has been amended by R. v. For.J. in this connection. ACCORDINGLY. p. 65 Official Gazette. p. Italics supplied. the greater the extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public. Certain portions of the Charter had been amended by R. 6 Section 2 of R. which however did not affect the abovequoted portion. is hereby AFFIRMED and the Court Resolved to DENY the Petition for lack of merit. however. SO ORDERED. Quezon City. 3 Ibid..A. Fernan. 2264 was further amended by P. i. p 2418 (1973). 5541. JJ. 917 (1927). Moreover. No. what we started with should be recalled here: the authority conferred upon the respondent's City Council is not merely "to regulate" but also embraces the power "to tax" the petitioner's business. Jr. it has not been suggested that such basis has no reasonable relationship to the probable costs of regulation and supervision of the petitioner's kind of business. does not by itself. the higher the aggregate volume of foodstuffs and related items sold in petitioner's privately owned market.A. 58-68. for regulation and supervision of the sale of foodstuffs to the public. As a general rule. et al.. 7126 (1968). 2 Records on Appeal. ordinarily.e. 14-15. 21 The rule. R.A. pp. 69 Official Gazette. pp.

Lorenzo and Villar. 12 Manila Electric Company vs. 133 (1941). 11 City of Iloilo v.. 25 SCRA 192 at 205 (1968). Hodges v. (1958). 20 Victorias Milling Co. Municipality of Victorias. 19 SCRA 28 (1967). El Auditor General y La Comision de Servicios Publicos. v. Villanueva. a license. Municipality of Roxas. v.N. Romualdez. et. 15 Ibid. underscoring supplied. Republic v. 8 SCRA 370 (1963). Ledwith 7 So. 26 Fla. note 6. City of Iloilo. and hence is the grant of a license. 163. The fee. 28. 3rd ed. Tobacco Co. 8 So. 383. x x x [T]he power to establish markets is within the police power. 18 E. however. El Auditor General y la Comision de Servicios Publicos. 13 Serafin Saldana v. 31 SCRA 304 (1970). x x x. 337 (1959). 16 In City of Jacksonville. supra. et al. 26 Fla. 6-7. Inc. 105 Phil. 104 Phil. 14 SCRA 660 (1965). p. Rollo. v. 172. and its amount is to be controlled by the principles governing in such cases. 73 Phil. 118 Phil. City of Cebu. pp. See also C. Municipality of Agoo. Pacific Commercial Co. 917 (1927). 8 supra. and San Miguel Brewery. City of Manila. Northern Phil. and Villanueva v. is not a tax for revenue. Inc. v. at 134-135. v. at 892 [1890]. Philips. It is a permit to do something which could not be done before without such permit. 281. 49 Phil. 43 SCRA 275 (1972). Lumapas. 212 (1955). 65 SCRA 33 (1975). at 65.. Calalang v. 19 Procter & Gamble PMC v." 17 Brief for the Respondent. Municipality of Jagna 94 SCRA 894 (1979). 32 SCRA 215 (1970). the Supreme Court of Florida held: 21 City of Ozamis v. 26 SCRA 578 (1968). and [thus is] x x x the power to charge. as a police regulation.7 Nin Bay Mining Co. a fee for the permit or license for selling meats or vegetables therein. Municipal Board of the City of Iloilo. p. at 431 (1890). it was held that a permit to establish a market was: "from the nature of a market. 14 Record on Appeal. but a charge under the police power. al. 9 Compania General de Tabacos de Filipinas v. . Philippine Rabbit Bus Lines. Negros Occidental. citing 9 McQuillin Municipal Corporations.g. 10. 97 Phil.. City of Iloilo.. 10 Manila Electric Company v. v. In Atkins v.

BOAC filed a claim for refund of the amount of P858. when it was granted a temporary landing permit by the CAB.R.: Petitioner Commissioner of Internal Revenue (CIR) seeks a review on certiorari of the joint Decision of the Court of Tax Appeals (CTA) in CTA Cases Nos. No. although during the period covered by the assessments. and later Qantas Airways — which was responsible for selling BOAC tickets covering passengers and cargoes. On 7 October 1970.R. which claim was denied by the CIR on 16 February 1972. except for a nine-month period.307. respondents.498. assailing the assessment and praying for the refund of the amount paid.R. 1968-69 to 1970-71. BOAC is a 100% British Government-owned corporation organized and existing under the laws of the United Kingdom It is engaged in the international airline business and is a member-signatory of the Interline Air Transport Association (IATA). vs.79. No. 2373 and 2561. Peña. it maintained a general sales agent in the Philippines — Wamer Barnes and Company. BRITISH OVERSEAS AIRWAYS CORPORATION and COURT OF TAX APPEALS. and was not granted a Certificate of public convenience and necessity to operate in the Philippines by the Civil Aeronautics Board (CAB). Asperilla.79. This was protested by BOAC. petitioner. During the periods covered by the disputed assessments. as well as its Resolution of 18 November. partly in 1961 and partly in 1962. Ltd. 1 G. BOAC had already filed a petition for review with the Tax Court on 27 January 1972. BOAC paid this new assessment under protest. L-65773-74 April 30. 1983 denying reconsideration.56 for deficiency income taxes covering the years 1959 to 1963. dated 16 January 1970 for the years 1959 to 1967 in the amount of P858. Quasha. it is admitted that BOAC had no landing rights for traffic purposes in the Philippines. 2561.358. for brevity) assessed BOAC the aggregate amount of P2. As such it operates air transportation service and sells transportation tickets over the routes of the other airline members. 65774 (CTA Case No.Republic of the Philippines SUPREME COURT Manila EN BANC G. 2373.307. petitioner Commissioner of Internal Revenue (CIR. Valmonte & Marcos for respondent British Airways. the First Case) On 7 May 1968. Subsequent investigation resulted in the issuance of a new assessment. dated 26 January 1983. Ancheta. which set aside petitioner's assessment of deficiency income taxes against respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959 to 1967. But before said denial. it did not carry passengers and/or cargo to or from the Philippines. respectively. 65773 (CTA Case No. G. the Second Case) .. J. MELENCIO-HERRERA. No. 1987 COMMISSIONER OF INTERNAL REVENUE. Consequently.

the CIR not only denied the BOAC request for refund in the First Case but also re-issued in the Second Case the deficiency income tax assessment for P534.08 for the years 1969 to 1970-71 plus P1.On 17 November 1971. Whether or not the revenue derived by private respondent British Overseas Airways Corporation (BOAC) from sales of tickets in the Philippines for air transportation. and the additional amounts of P1. In the alternative that private respondent may not be considered a resident foreign corporation but a non-resident foreign corporation.43. and to cancel the deficiency income tax assessments against BOAC in the amount of P534. the Tax Court rendered the assailed joint Decision reversing the CIR. in the dispositive portion of its Decision.00 as compromise penalty under Section 74 of the Tax Code. BOAC's request for reconsideration was denied by the CIR on 24 August 1973. in representation of the CIR. The Tax Court held that the proceeds of sales of BOAC passage tickets in the Philippines by Warner Barnes and Company.800. The CTA position was that income from transportation is income from services so that the place where services are rendered determines the source. On 25 November 1971. said income is not subject to Philippine income tax. 3. This prompted BOAC to file the Second Case before the Tax Court praying that it be absolved of liability for deficiency income tax for the years 1969 to 1971.00 as compromise penalties for violation of Section 46 (requiring the filing of corporation returns) penalized under Section 74 of the National Internal Revenue Code (NIRC). during the period in question. while having no landing rights here.00 and P1.327. Thus.000. Under Section 20 of the 1977 Tax Code: (h) the term resident foreign corporation engaged in trade or business within the Philippines or having an office or place of business therein. this Petition for Review on certiorari of the Decision of the Tax Court. constitute income of BOAC from Philippine sources. Whether or not during the fiscal years in question BOAC s a resident foreign corporation doing business in the Philippines or has an office or place of business in the Philippines. BOAC was assessed deficiency income taxes. On 26 January 1983. (i) The term "non-resident foreign corporation" applies to a foreign corporation not engaged in trade or business within the Philippines and not having any office or place of business therein . therefore. taxable. dated 16 February 1972.000. 2. thus: 1.132. then it is liable to Philippine income tax at the rate of thirty-five per cent (35%) of its gross income received from all sources within the Philippines. and. accordingly.79.. BOAC requested that the assessment be countermanded and set aside. interests. Ltd. do not constitute BOAC income from Philippine sources "since no service of carriage of passengers or freight was performed by BOAC within the Philippines" and. In a letter. This case was subsequently tried jointly with the First Case.132.08 for the fiscal years 1968-69 to 1970-71. has aptly defined the issues. however. the Tax Court ordered petitioner to credit BOAC with the sum of P858. The Solicitor General. Hence.307. and later by Qantas Airways. and penalty for the fiscal years 1968-1969 to 1970-1971 in the aggregate amount of P549.

Each case must be judged in the light of its peculiar environmental circumstances. authorized. we address ourselves to the issue of whether or not the revenue from sales of tickets by BOAC in the Philippines constitutes income from Philippine sources and. — . — .. securities. whether real or personal. profits. business.. its main activity. — A corporation organized. and are in progressive pursuit of. That general sales agent. the generation of sales being the paramount objective. The Tax Code defines "gross income" thus: "Gross income" includes gains. or from profession. profits. vocations. (b) Tax on foreign corporations.. 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. the regular sale of tickets. For. "income" refers to the flow of wealth. (Emphasis supplied) Next. In fact. There should be no doubt then that BOAC was "engaged in" business in the Philippines through a local agent during the period covered by the assessments. or gains.. engaged in trade or business within the Philippines. The term implies a continuity of commercial dealings and arrangements. it means something distinct from principal or capital. sales. "The words 'income from any source whatever' disclose a legislative policy to include all income not expressly exempted within the class of taxable income under our laws. (3) receiving the fare from the whole trip. taxable under our income tax laws. There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. 2 "In order that a foreign corporation may be regarded as doing business within a State. except a foreign life insurance company. the performance of acts or works or the exercise of some of the functions normally incident to. (2) breaking down the whole trip into series of trips — each trip in the series corresponding to a different airline company. Emphasis supplied) The definition is broad and comprehensive to include proceeds from sales of transport documents. and income derived from any source whatever (Sec. rents. or the transactions of any business carried on for gain or profile. or dealings in property. while capital is a fund. from 1959 to 1971. Rates of tax on corporations.It is our considered opinion that BOAC is a resident foreign corporation. such as the appointment of a local agent. 5 Sec. Accordingly. the purpose and object of its organization as an international air carrier. As used in our income tax law. is the very lifeblood of the airline business. also from interests.assessments. it is the amount of money coming to a person within a specific time . and not one of a temporary character. commerce. wages or compensation for personal service of whatever kind and in whatever form paid. "was engaged in (1) selling and issuing tickets. accordingly. and income derived from salaries. to that extent. 3 BOAC." Income means "cash received or its equivalent".. income is a flow. (2) Resident corporations.. trades. 29[3]. and contemplates." 4 Those activities were in exercise of the functions which are normally incident to. 6 . 850 of the IATA Agreement. there must be continuity of conduct and intention to establish a continuous business. 24. maintained a general sales agent in the Philippines. dividends. and (4) consequently allocating to the various airline companies on the basis of their participation in the services rendered through the mode of interline settlement as prescribed by Article VI of the Resolution No. growing out of the ownership or use of or interest in such property. or existing under the laws of any foreign country. during the periods covered by the subject .. and in progressive prosecution of commercial gain or for the purpose and object of the business organization. shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceding taxable year from all sources within the Philippines.

The tickets exchanged hands here and payments for fares were also made here in Philippine currency. and occurred within. from 1959 to 1967.428. Tax Code). which produced the income. . The absence of flight operations to and from the Philippines is not determinative of the source of income or the site of income taxation. the passage documentations in these cases were sold in the Philippines and the revenue therefrom was derived from a activity regularly pursued within the Philippines. which enumerates items of gross income from sources within the Philippines. 1968-69 to 1970-71. activity or service that produced the income. the income derived is from sources without the Philippines and. The test of taxability is the "source". In BOAC's case. binding upon the parties entering into the relationship. and (6) sale of personal property. promulgated on 24 November. business a And even if the BOAC tickets sold covered the "transport of passengers and cargo to and from foreign cities". (Sec. When issued by a common carrier. would impress upon this Court that income derived from transportation is income for services..00. and since BOAC's service of transportation is performed outside the Philippines. (21) dividends. That international carriers shall pay a tax of 2-½ per cent on their gross Philippine billings. the sale of tickets in the Philippines is the activity that produces the income. (4) rentals and royalties.. The flow of wealth proceeded from.368 . it constitutes the contract between the ticket-holder and the carrier. does not intend the enumeration to be exclusive. however. enjoying the protection accorded by the Philippine government. by its language. pursuant to Presidential Decree No. 12 it cannot alter the fact that income from the sale of tickets was derived from the Philippines. 8 For the source of income to be considered as coming from the Philippines. A cursory reading of the section will show that it does not state that it is an all-inclusive enumeration. international carriers are now taxed as follows: . it is sufficient that the income is derived from activity within the Philippines. 7 Did such "flow of wealth" come from "sources within the Philippines". and that no other kind of income may be so considered. or. Provided. Admittedly. The site of the source of payments is the Philippines. the flow of wealth should share the burden of supporting the government. It merely directs that the types of income listed therein be treated as income from sources within the Philippines. (5) sale of real property. It gives rise to the obligation of the purchaser of the ticket to pay the fare and the corresponding obligation of the carrier to transport the passenger upon the terms and conditions set forth thereon. not taxable under our income tax laws.The records show that the Philippine gross income of BOAC for the fiscal years 1968-69 to 1970-71 amounted to P10. " 10 BOAC. and the source of an income is that activity . BOAC was an off-line international airline at the time pertinent to this case. A transportation ticket is not a mere piece of paper.. 1972.. Section 37. with the result that the place where the services are rendered determines the source. The source of an income is the property. however. (3) service. 13 It should be pointed out. 24[b] [21. For. that of origin. The Tax Court upholds that stand in the joint Decision under review. and the origin of the income herein is the Philippines. The word "source" conveys one essential idea. does not mention income from the sale of tickets for international transportation. Section 37(a) of the Tax Code. 9 True. 11 Unquestionably. The ordinary ticket issued to members of the traveling public in general embraces within its terms all the elements to constitute it a valid contract. In consideration of such protection. Philippine territory. that the assessments upheld herein apply only to the fiscal years covered by the questioned deficiency income tax assessments in these cases. 69. that does not render it less an income from sources within the Philippines. However. namely: (1) interest. however. therefore.

. however. 1978. Separate Opinions TEEHANKEE. is hereby ordered to pay the amount of P534.132. Commissioner of Internal Revenue (G. the appealed joint Decision of the Court of Tax Appeals is hereby SET ASIDE.79 is hereby denied. Padilla.. the British Overseas Airways Corporation (BOAC)." thus: .. The ruling by the Tax Court in that case was to the effect that the mere sale of tickets. SO ORDERED. 14 Being an excise tax. is res judicata to the present case. provided a statutory definition of the term "gross Philippine billings. whether for passenger. the common carrier's tax is an excise tax. being a tax on the activity of transporting. Sarmiento and Cortes. the same can be levied by the State only when the acts. concurring: I concur with the Court's majority judgment upholding the assessments of deficiency income taxes against respondent BOAC for the fiscal years 1959-1969 to 1970-1971 and therefore setting aside the appealed joint decision of respondent Court of Tax Appeals. and 1% monthly interest from April 16. If it had been intended as an excise or percentage tax it would have been place under Title V of the Tax Code covering Taxes on Business. Bidin. took no part. Paras.307. The subject matter of the case under consideration is income tax.. privileges or businesses are done or performed within the jurisdiction of the Philippines. J.. Private respondent. Without costs. excess baggage or mail provided the cargo or mail originates from the Philippines. the decision in one cannot be res judicata to the other. Booth opinions state . JJ. 1969. conveying or removing passengers and cargo from one place to another. 1972. does not render the taxpayer therein subject to the common carrier's tax. It purports to tax the business of transportation. 1972 for a period not to exceed three (3) years in accordance with the Tax Code. As elucidated by the Tax Court. WHEREFORE.. . L-30041) on February 3. I just wish to point out that the conflict between the majority opinion penned by Mr. a direct tax on the income of persons and other entities "of whatever kind and in whatever form derived from any source." Since the two cases treat of a different subject matter. unaccompanied by the physical act of carriage of transportation. "Gross Philippine billings" includes gross revenue realized from uplifts anywhere in the world by any international carrier doing business in the Philippines of passage documents sold therein. The BOAC claim for refund in the amount of P858. 1355.J.08 as deficiency income tax for the fiscal years 1968-69 to 1970-71 plus 5% surcharge. concur. Fernan. Gancayco. No. we find as untenable the BOAC argument that the dismissal for lack of merit by this Court of the appeal in JAL vs. The 2-½ % tax on gross Philippine billings is an income tax.R. C. promulgated on 21 April.Presidential Decree No. Justice Feliciano as to the proper characterization of the taxable income derived by respondent BOAC from the sales in the Philippines of tickets foe BOAC form the issued by its general sales agent in the Philippines gas become moot after November 24. The foregoing provision ensures that international airlines are taxed on their income from Philippine sources.. Lastly.

J. In my opinion. as a "non-resident foreign corporation. promulgated on November 24. no longer ant source of substantial conflict between the two opinions as to the present 2-½% tax on their gross Philippine billings charged against such international carriers as herein respondent foreign corporation. The Solicitor General has defined as one of the issue in this case the question of: 2. is liable for Philippine income taxation in respect of "sales of air tickets" in the Philippines through a general sales agent. No.A. collected. FELICIANO. (Emphasis supplied) Republic Act No. and a like tax shall be livied.." but rather on whether or not such income is derived from "source within the Philippines. 1972. Justice A. made this even clearer when it amended once more Section 24 (b) (2) of the Tax Code so as to read as follows: . Section 24 (a) of the Tax Code in turn provides: Rate of tax on corporations... .69. not on BOAC's status as a "resident foreign corporation" or alternatively. — A foreign corporation engaged in trade or business with in the Philippines (expect foreign life insurance companies) shall be taxable as provided in subsection (a) of this section. MelencioHerrera speaking for the majority . therefore. dated 26 January 1983.D. Whether or not during the fiscal years in question 1 BOAC [was] a resident foreign corporation doing business in the Philippines or [had] an office or place of business in the Philippines.that by amendment through P. of section 24(b) (2) of the Tax Code providing dor the rate of income tax on foreign corporations. 2373 and 2561. a foreign airline company which does not maintain any flight operations to and from the Philippines. i record my dissent from the opinion of Mme." A "resident foreign corporation" or foreign corporation engaged in trade or business in the Philippines or having an office or place of business in the Philippines is subject to Philippine income taxation only in respect of income derived from sources within the Philippines. Section 24 (b) (2) of the National Internal Revenue CODE ("Tax Code"). the joint decision of the Court of Tax Appeals in CTA Cases Nos. read as follows: (2) Resident corporations. 2343. and paid annually upon the total net income received in the preceeding taxable year from all sources within the Philippines by every corporation organized. international carriers such as respondent BOAC. approved 20 June 1959.. 1. — . or existing under the laws of any foreign country: . — (a) Tax on domestic corporations. have since then been taxed at a reduced rate of 2-½% on their gross Philippine billings. There is. as it existed up to 3 August 1969. The fundamental issue raised in this petition for review is whether the British Overseas Airways Corporation (BOAC). The liability of BOAC to Philippine income taxation in respect of such income depends. dissenting: With great respect and reluctance.. is correct and should be affirmed. It is important to note at the outset that the answer to the above-quoted issue is not determinative of the lialibity of the BOAC to Philippine income taxation in respect of the income here involved. which took effect on 4 August 1969. 6110. as amended by Republic Act No. relating to the carriage of passengers and cargo between two points both outside the Philippines. authorized.

however. against liability. collected and paid for each taxable year. profits and income a tax equal to thirty per centum of such amount: provided. 2 Clearly. For purposes of income taxation. activity or service which produced the income. rents. in lieu of the tax imposed by the preceding paragraph upon the amount received by every foreign corporation not engaged in trade or business within the Philippines. The Court said: The source of an income is the property. wages. were all situated in the Philippines. engaged in trade or business within the Philippines. had for their source the undertaking to indemnify Commonwealth Insurance Co. emoluments. —4 The Court may be seen to be saying that it is the underlying prestation which is properly regarded as the activity giving rise to the income that is sought to be taxed.S. In the Howden case. The phrase "sources within the United States" was first introduced into the U. or other fixed or determinative annual or periodical gains. remunerations. compensations. premium. Conversely. Such indemnification could take place only in the Philippines where the risks were located and where payment from the foreign reinsurance (in case the casualty insured against occurs) would be received in Philippine pesos under the reinsurance premiums paid by the local insurance companies constituted Philippine source income of the foreign reinsurances. from all sources within the Philippines. Similarly. the receipt of Philippine source income creates no presumption that the recipient foreign corporation is a resident of the Philippines. annuities. The concept of "source of income" for purposes of income taxation originated in the United States income tax system. accordingly. read as follows: (b) Tax on foreign corporations. vs. The reinsurance premiums remitted to appellants by virtue of the reinsurance contract. whether the foreign corporate taxpayer is doing business in the Philippines and therefore a resident foreign corporation. shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceding taxable year from all sources within the Philippines. 3 the court dealt with the issue of the applicable source rule relating to reinsurance premiums paid by a local insurance company to a foreign reinsurance company in respect of risks located in the Philippines. except foreign life insurance company. Collector of Internal Revenue. for present purposes. upon which the reinsurance premiums and indemnity were based. (Emphasis supplied) Exactly the same rule is provided by Section 24 (b) (1) of the Tax Code upon non-resident foreign corporations. salaries. tax system in . 2. authorized or existing under the laws of any foreign counrty. that premiums shall not include reinsurance premiums. it is liable to income tax only to the extent that it derives income from sources within the Philippines. 3825 approved 22 June 1963.(2) Resident Corporations. and the same took place in the Philippines. dividends. is therefore whether of not BOAC is deriving income from sources within the Philippines. Ltd. — A corporation. it is well to bear in mind that the "source of income" relates not to the physical sourcing of a flow of money or the physical situs of payment but rather to the "property. Said undertaking is the activity that produced the reinsurance premiums. activity or services that produced the income. Section 24 (b) (1) as amended by Republic Act No. The circumtances that a foreign corporation is resident in the Philippines yields no inference that all or any part of its income is Philippine source income. the liabilities insured and the risk originally underwritten by Commonwealth Insurance Co. as interest. or not doing business in the Philippines and therefore a non-resident foreign corporation. The critical issue." In Howden and Co.. that underlying prestation was the indemnification of the local insurance company.. — [T]he reinsurance. the non-resident status of a foreign corporation does not imply that it has no Philippine source income. — (1) Non-resident corporations. — There shall be levied. organized.

it has a situs or location. — The following items of gross income shall be treated as gross income from sources within the Philippines: xxx xxx xxx (3) Services. We turn now to the question what is the source of income rule applicable in the instant case. the place where the sale is made should be likewise decisive. Much confusion will be avoided by regarding the term "source" in this fundamental light. There are two possibly relevant source of income rules that must be confronted. and (b) the source rule applicable in respect of sales of personal property." If the income is from capital. Income for sources within the Philippines. and was subsequently embodied in the 1939 U. 5 3. While the three elements of this attempt at definition need not be accepted as all-inclusive. . it is an activity or property. if income is to taxed. If the income is from the sale of capital assets. The intention of Congress in the 1916 and subsequent statutes was to discard the 1909 and 1913 basis of taxing nonresident aliens and foreign corporations and to make the test of taxability the "source". the place where the capital is employed should be decisive. on the other hand. Section 37 (a) (3) of our Tax Code reads as follows: Section 37. — The following items of gross income shall be treated as income from sources without the Philippines: . Tax Code. (a) the source rule applicable in respect of contracts of service. . if it is done in this counrty. they serve as useful guides in any inquiry into whether a particular item is from "source within the United States" and suggest an investigation into the nature and location of the activities or property which produce the income.S.1916. It therefore seems useful to refer to a standard U. our Tax Code (Commonwealth Act 466. and if that situs or location is within the United States the resulting income is taxable to nonresident aliens and foreign corporations.S. the recipient thereof must be resident within the jurisdiction. As such. or situs of the activities or property which produce the income . the income should be from "source within the United States".S. text on federal income taxation: The Supreme Court has said.. in a definition much quoted but often debated. the applicable source rule may be simply stated as follows: the income is sourced in the place where the service contracted for is rendered. . the income should be from "source within the United States.. It is not a place. (a) Gross income from sources within the Philippines. Where a contract for the rendition of service is involved. if it is employed in this country.. as amended) was patterned after the 1939 U. If the income is from labor (services) the place where the labor is done should be decisive. Tax Code. The underlying theory is that the consideration for taxation is protection of life and property and that the income rightly to be levied upon to defray the burdens of the United States Government is that income which is created by activities and property protected by this Government or obtained by persons enjoying that protection. deals with income from sources without the Philippines in the following manner: (c) Gross income from sources without the Philippines. that income may be derived from three possible sources only: (1) capital and/or (2) labor and/or (3) the sale of capital assets. As is commonly known. Thus. — Compensation for labor or personal services performed in the Philippines. (Emphasis supplied) Section 37 (c) (3) of the Tax Code. or the property or activities out of which the income issue or is derived must be situated within the jurisdiction so that the source of the income may be said to have a situs in this country.

other than those specified in subsections (a) and (c) of this section shall be allocated or apportioned to sources within or without the Philippines.S. 6 Further. losses and deductions. both within and without the Philippines of all vessels. and income from (1) transportation or other services rendered partly within and partly without the Philippines. 2 (again implementing Section 37 of the Tax Code) with provides as follows: Section 164. — . under the rules and regulations prescribed by the Secretary of Finance. foreign steamship companies deriving income from sources partly within and partly without the Philippines: Section 163 Foreign steamship companies. whether touching of the Philippines or not. Telegraph and cable services.(3) Compensation for labor or personal services performed without the Philippines.. shall be treated as derived partly from sources within and partly from sources without the Philippines. or of the place of payment — (Emphasis supplied) Section 163 of Revenue Regulations No.. . (Emphasis supplied) It should not be supposed that Section 37 (a) (3) and (c) (3) of the Tax Code apply only in respect of services rendered by individual natural persons. Gains. Section 155 of Revenue Regulations No. Tax Code which "was based upon a recognition that transportation was a service and that the source of the income derived therefrom was to be treated as being the place where the service of transportation was rendered. a contract of carriage or of transportation is assimilated in our Tax Code and Revenue Regulations to a contract for services. With the gross income thus ascertained. . — A foreign corporation carrying on the business of transmission of telegraph or cable messages between points in the . expenses. Compensation for labor or personnel services. the total receipts of all out-going business whether freight or passengers. 2 entitled "Income Tax Regulations" as amended. — Items of gross income. (Emphasis supplied) It should be noted that the above underscored portion of Section 37 (e) was derived from the 1939 U.e. implication that income derived from transportation or other services rendered entirely outside the Philippines must be treated as derived entirely from sources without the Philippines.. first promulgated by the Department of Finance on 10 February 1940. of the place in which the contract for services was made. This implication is reinforced by a consideration of certain provisions of Revenue Regulations No. — Gross income from sources within the Philippines includes compensation for labor or personal services within the Philippines regardless of the residence of the payer. the ratio existing between it and the gross income from all ports. (Emphasis supplied) Another type of utility or service enterprise is dealt with in Section 164 of Revenue Regulations No.. should be determined as the basis upon which allowable deductions may be computed. . profits.. 2 (still relating to Section 37 of the Tax Code) deals with a particular species of foreign transportation companies — i.. or (2) from the sale of personnel property produced (in whole or in part) by the taxpayer within and sold without the Philippines. — The return of foreign steamship companies whose vessels touch parts of the Philippines should include as gross income. Section 37 (e) of the Tax Code provides as follows: (e) Income form sources partly within and partly without the Philippines. they also apply to services rendered by or through the medium of a juridical person. Thus. 2 (implementing Section 37 of the Tax Code) provides in part as follows: Section 155. or produced (in whole or in part) by the taxpayer without and sold within the Philippines.. 7 Section 37 (e) of the Tax Code quoted above carries a strong well-nigh irresistible.

2 that steamship and telegraph and cable services rendered between points both outside the Philippines give rise to income wholly from sources outside the Philippines. Gains. and to the purchase and sale of personal property. Section 37 (e) of the Tax Code. then. (Emphasis supplied) ." The "country" in which "sold" ordinarily means the place where the property is marketed. or produced (in whole or in part) by the taxpayer without and sold within the Philippines. In other words.. We turn to the "source of income" rules relating to the sale of personal property. If the personal property involved was both produced or manufactured and sold outside the Philippines.. upon the other hand.. under the Tax Code. or (2) from the sale of personal property produced (in whole or in part) by the taxpayer within and sold without the Philippines. the income (and the related expenses. This Section does not apply to income from the sale personal property produced (in whole or in part) by the taxpayer within and sold without the Philippines or produced (in whole or in part) by the taxpayer without and sold within the Philippines. income derived from the purchase and sale of personal property — i. (See Section 162 of these regulations). . and therefore not subject to Philippine income taxation. (Emphasis supplied) Once more. the income derived from the sale will be deemed partly as income sourced without the Philippines. . the income derived therefrom will be regarded as sourced entirely outside the Philippines. may be usefully quoted again: (e) Income from sources partly within and partly without the Philippines. (Emphasis supplied) Section 159 of Revenue Regulations No. trading — is... Sale of personal property. Gains.. although the personal property had been produced outside the Philippines. losses and deductions) will be allocated between sources within and sources without the Philippines. a very strong inference arises under Sections 163 and 164 of Revenue Regulations No. although already quoted above. The word "sold" includes "exchange. shall be treated as derived partly from sources within and partly from sources without the Philippines. shall be treated as derived entirely from sources within the country in which sold.... 2 puts the applicable rule succinctly: Section 159. . Income derived from the purchase and sale of personal property shall be treated as derived entirely from the country in which sold. Income from the sale of personal property by the producer or manufacturer of such personal property will be regarded as sourced entirely within or entirely without the Philippines or as sourced partly within and partly without the Philippines. We consider first sales of personal property. upon the one hand. or if the sale of the property takes place outside the Philippines and the personal was produced in the Philippines. depending upon two factors: (a) the place where the sale of such personal property occurs. regarded as sourced wholly in the place where the personal property is sold. Section 37 (e) of the Tax Code provides in part as follows: (e) Income from sources partly within and partly without the Philippines .Philippines and points outside the Philippines derives income partly form source within and partly from sources without the Philippines. e. and (b) the place where such personal property was produced or manufactured. (Emphasis supplied) In contrast. profits and income from (1) transportation or other services rendered partly within and partly without the Philippines. Thus. profits and income derived from the purchase of personal property within and its sale without the Philippines or from the purchase of personal property without and its sale within the Philippines.

for the technical purposes of the law on income taxation. For purposes of determining the taxability to revenues from chartered flights. The airline ticket in and of itself has no monetary value. The very existance of "source rules" specifically and precisely applicable to the rendition of services must preclude the application here of "source rules" applying generally to sales. Consider first purchases and sales: is BOAC properly regarded as engaged in trading — in the purchase and sale of personal property? Certainly. i. whether for passenger. of personal property which can be invoked only by the grace of popular language. But the passenger does not receive undertaken to be delivered by BOAC. BOAC is in fact entering into contracts of service or carriage.. it is really the compensation paid for the undertaking of BOAC to transport the passenger or cargo outside the Philippines.e. Gross revenues from chartered flights originating from the Philippines shall likewise form part of "gross Philippine billings" regardless of the place of sale or payment of the passage documents. does not appear to be correct as a matter of tax law. 5. engaged in trade or business within the Philippines. carriage of passengers or cargo between points located outside the Philippines. However. authorized. The ticket is really the evidence of the contract of carriage entered into between BOAC and the passenger. 1355. 69. That international carriers shall pay a tax of two and one-half per cent on their gross Philippine billings. provide the cargo or mail originates from the Philippines. The value of the ticket lies wholly in the right acquired by the "purchaser" — the passenger — to demand a prestation from BOAC. even as scrap paper. appear entirely inappropriate from other viewpoint. The taxation of international carriers is today effected under Section 24 (b) (2) of the Tax Code. promulgated on 21 April 1978. "Gross Philippines of passage documents sold therein. The applicable "source of income" rules differ depending upon which characterization is given to the BOAC transactions. On a slighty more abstract level. The characterization of the BOAC transactions either as sales of personal property or as purchases and sales of personal property. in my opinion. The gross revenue realized from the said cargo or mail shall include the gross freight charge up to final destination." while widely used in popular parlance. Consider next sales: can BOAC be regarded as "selling" personal property produced or manufactured by it? In a popular or journalistic sense. (Emphasis supplied) . "sales of airline tickets") or as entering into a lease of services or a contract of service or carriage. shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceeding taxable year from all sources within the Philippines: Provided. The money paid by the passenger changes hands in the Philippines. and not a sales tax or an excise or privilege tax. BOAC was not purchasing tickets outside the Philippines and selling them in the Philippines. however. which prestation consists of the carriage of the "purchaser" or passenger from the one point to another outside the Philippines. Those transactions may be characterized either as sales of personal property (i. BOAC might be described as "selling" "a product" — its service.. e. The appropriate characterization. and purchases and sales. in the following manner: (2) Resident corporations. BOAC's income is more appropriately characterized as derived from a "service". It will be seen that the basic problem is one of characterization of the transactions entered into by BOAC in the Philippines. The "purchase price of the airline ticket" is quite different from the purchase price of a physical good or commodity such as a pair of shoes of a refrigerator or an automobile. of the BOAC transactions is that of entering into contracts of service. The phrase "sale of airline tickets. excess baggege or mail. as amended by Presidential Decree No. promulgated on 24 November 1972 and by Presidential Decree No. — A corporation organized.4. or existing under the laws of any foreign country. the term "originating from the Philippines" shall include flight of passsengers who stay in the Philippines for more than forty-eight (48) hours prior to embarkation. rather than from an "activity" (a broader term than service and including the activity of selling) or from the here involved is income taxation.

losses and deductions. therefore.Under the above-quoted proviso international carriers issuing for compensation passage documentation in the Philippines for uplifts from any point in the world to any other point in the world. J. as above discussed. the source of income rule applicable. of section 24(b) (2) of the Tax Code providing dor the rate of income tax on foreign corporations.A. in place of Philippine income taxation.D. MelencioHerrera speaking for the majority . no longer ant source of substantial conflict between the two opinions as to the present 2-½% tax on their gross Philippine billings charged against such international carriers as herein respondent foreign corporation. a foreign airline company which does not maintain any flight operations to and from . Under this new approach. dissenting: With great respect and reluctance. dated 26 January 1983.69. international carriers who service port or points in the Philippines are treated in exactly the same way as international carriers not serving any port or point in the Philippines. are not charged any Philippine income tax on their Philippine billings (i. FELICIANO. Justice A. is correct and should be affirmed. In my opinion. with varying degrees of consciousness. 1972. I just wish to point out that the conflict between the majority opinion penned by Mr. I would vote to affirm the decision of the Court of Tax Appeals.e. have since then been taxed at a reduced rate of 2-½% on their gross Philippine billings.. the Tax Code now imposes this 2½ per cent tax computed on the basis of billings in respect of passengers and cargo originating from the Philippines regardless of where embarkation and debarkation would be taking place. Because taxes are the very lifeblood of government. considered in choosing from among competing possible characterizations under or interpretation of tax statutes. In lieu thereof. the resulting potential "loss" or "gain" in the amount of taxes collectible by the state is sometimes. The fundamental issue raised in this petition for review is whether the British Overseas Airways Corporation (BOAC). Thereby. Separate Opinions TEEHANKEE. concurring: I concur with the Court's majority judgment upholding the assessments of deficiency income taxes against respondent BOAC for the fiscal years 1959-1969 to 1970-1971 and therefore setting aside the appealed joint decision of respondent Court of Tax Appeals. the Government has done away with the difficulties attending the allocation of income and related expenses. C. to transportation or other services rendered partly within and partly without the Philippines. There is. the joint decision of the Court of Tax Appeals in CTA Cases Nos. international carriers such as respondent BOAC. has been set aside. It is hence perhaps useful to point out that the determination of the appropriate characterization here — that of contracts of air carriage rather than sales of airline tickets — entails no down-the-road loss of income tax revenues to the Government. billings in respect of passenger or cargo originating from the Philippines). or wholly without the Philippines. No. promulgated on November 24. the Government takes in revenues generated by the 2-½ per cent tax on the gross Philippine billings or receipts of international carriers. Booth opinions state that by amendment through P. 2373 and 2561..J.. 1972. Justice Feliciano as to the proper characterization of the taxable income derived by respondent BOAC from the sales in the Philippines of tickets foe BOAC form the issued by its general sales agent in the Philippines gas become moot after November 24. This 2-½ per cent tax is effectively a tax on gross receipts or an excise or privilege tax and not a tax on income. Thus. i record my dissent from the opinion of Mme.

3825 approved 22 June 1963. It is important to note at the outset that the answer to the above-quoted issue is not determinative of the lialibity of the BOAC to Philippine income taxation in respect of the income here involved. read as follows: (2) Resident corporations. relating to the carriage of passengers and cargo between two points both outside the Philippines. as it existed up to 3 August 1969. or other fixed or determinative annual or periodical gains. — (1) Non-resident corporations.. engaged in trade or business within the Philippines. — A corporation. collected. salaries. wages. is liable for Philippine income taxation in respect of "sales of air tickets" in the Philippines through a general sales agent. 2343. shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceding taxable year from all sources within the Philippines. Section 24 (b) (2) of the National Internal Revenue CODE ("Tax Code"). annuities. authorized. — (a) Tax on domestic corporations. not on BOAC's status as a "resident foreign corporation" or alternatively. organized. — There shall be levied. . as amended by Republic Act No. collected and paid for each taxable year. from all sources within the Philippines. emoluments. as interest.the Philippines. and a like tax shall be livied... or existing under the laws of any foreign country: . dividends. (Emphasis supplied) Exactly the same rule is provided by Section 24 (b) (1) of the Tax Code upon non-resident foreign corporations. 6110. rents. Section 24 (a) of the Tax Code in turn provides: Rate of tax on corporations. and paid annually upon the total net income received in the preceeding taxable year from all sources within the Philippines by every corporation organized." A "resident foreign corporation" or foreign corporation engaged in trade or business in the Philippines or having an office or place of business in the Philippines is subject to Philippine income taxation only in respect of income derived from sources within the Philippines. remunerations. as a "non-resident foreign corporation. . in lieu of the tax imposed by the preceding paragraph upon the amount received by every foreign corporation not engaged in trade or business within the Philippines. except foreign life insurance company. Whether or not during the fiscal years in question 1 BOAC [was] a resident foreign corporation doing business in the Philippines or [had] an office or place of business in the Philippines." but rather on whether or not such income is derived from "source within the Philippines. authorized or existing under the laws of any foreign counrty. made this even clearer when it amended once more Section 24 (b) (2) of the Tax Code so as to read as follows: (2) Resident Corporations. compensations. read as follows: (b) Tax on foreign corporations. which took effect on 4 August 1969. (Emphasis supplied) Republic Act No. 1. The liability of BOAC to Philippine income taxation in respect of such income depends. approved 20 June 1959. — A foreign corporation engaged in trade or business with in the Philippines (expect foreign life insurance companies) shall be taxable as provided in subsection (a) of this section. premium. Section 24 (b) (1) as amended by Republic Act No. The Solicitor General has defined as one of the issue in this case the question of: 2. — ..

The concept of "source of income" for purposes of income taxation originated in the United States income tax system. As such. It is not a place. the receipt of Philippine source income creates no presumption that the recipient foreign corporation is a resident of the Philippines. If the income is from the sale of capital assets. Collector of Internal Revenue. if it is done in this counrty. The reinsurance premiums remitted to appellants by virtue of the reinsurance contract. and was subsequently embodied in the 1939 U.S. accordingly. For purposes of income taxation. the income should be from "source within the United States. it is liable to income tax only to the extent that it derives income from sources within the Philippines. it is well to bear in mind that the "source of income" relates not to the physical sourcing of a flow of money or the physical situs of payment but rather to the "property. Tax Code. Tax Code. activity or service which produced the income. in a definition much quoted but often debated." In Howden and Co. While the three elements of this attempt at definition need not be accepted as all-inclusive. — [T]he reinsurance. In the Howden case. the liabilities insured and the risk originally underwritten by Commonwealth Insurance Co. As is commonly known. against liability. 3 the court dealt with the issue of the applicable source rule relating to reinsurance premiums paid by a local insurance company to a foreign reinsurance company in respect of risks located in the Philippines. it is an activity or property. tax system in 1916. upon which the reinsurance premiums and indemnity were based. text on federal income taxation: The Supreme Court has said. as amended) was patterned after the 1939 U. for present purposes. or not doing business in the Philippines and therefore a non-resident foreign corporation. Said undertaking is the activity that produced the reinsurance premiums. is therefore whether of not BOAC is deriving income from sources within the Philippines.S. and the same took place in the Philippines.profits and income a tax equal to thirty per centum of such amount: provided. our Tax Code (Commonwealth Act 466. the place where the capital is employed should be decisive. the non-resident status of a foreign corporation does not imply that it has no Philippine source income. the income should be from "source within the United States". The phrase "sources within the United States" was first introduced into the U. Similarly. The circumtances that a foreign corporation is resident in the Philippines yields no inference that all or any part of its income is Philippine source income. if it is employed in this country. it has a situs or . had for their source the undertaking to indemnify Commonwealth Insurance Co.S. whether the foreign corporate taxpayer is doing business in the Philippines and therefore a resident foreign corporation. Such indemnification could take place only in the Philippines where the risks were located and where payment from the foreign reinsurance (in case the casualty insured against occurs) would be received in Philippine pesos under the reinsurance premiums paid by the local insurance companies constituted Philippine source income of the foreign reinsurances. vs. they serve as useful guides in any inquiry into whether a particular item is from "source within the United States" and suggest an investigation into the nature and location of the activities or property which produce the income. the place where the sale is made should be likewise decisive. that underlying prestation was the indemnification of the local insurance company.. were all situated in the Philippines. however. The Court said: The source of an income is the property. Ltd. that income may be derived from three possible sources only: (1) capital and/or (2) labor and/or (3) the sale of capital assets. The critical issue. It therefore seems useful to refer to a standard U.. 2. If the income is from labor (services) the place where the labor is done should be decisive." If the income is from capital. Conversely. —4 The Court may be seen to be saying that it is the underlying prestation which is properly regarded as the activity giving rise to the income that is sought to be taxed. that premiums shall not include reinsurance premiums.S. 2 Clearly. Much confusion will be avoided by regarding the term "source" in this fundamental light. activity or services that produced the income.

. the applicable source rule may be simply stated as follows: the income is sourced in the place where the service contracted for is rendered. deals with income from sources without the Philippines in the following manner: (c) Gross income from sources without the Philippines. or the property or activities out of which the income issue or is derived must be situated within the jurisdiction so that the source of the income may be said to have a situs in this country... — Items of gross income. Gains. — The following items of gross income shall be treated as income from sources without the Philippines: (3) Compensation for labor or personal services performed without the Philippines. if income is to taxed. (a) the source rule applicable in respect of contracts of service... We turn now to the question what is the source of income rule applicable in the instant case. 6 Further. profits. expenses. — The following items of gross income shall be treated as gross income from sources within the Philippines: xxx xxx xxx (3) Services. . There are two possibly relevant source of income rules that must be confronted. The intention of Congress in the 1916 and subsequent statutes was to discard the 1909 and 1913 basis of taxing nonresident aliens and foreign corporations and to make the test of taxability the "source". and if that situs or location is within the United States the resulting income is taxable to nonresident aliens and foreign corporations. and (b) the source rule applicable in respect of sales of personal property. Section 37 (a) (3) of our Tax Code reads as follows: Section 37.. Thus.. and income from (1) transportation or other services rendered partly within and partly without the Philippines. or (2) from the sale of personnel property produced (in whole or in part) by the taxpayer within and sold without the Philippines. — Compensation for labor or personal services performed in the Philippines. or situs of the activities or property which produce the income . . Section 37 (e) of the Tax Code provides as follows: (e) Income form sources partly within and partly without the Philippines. The underlying theory is that the consideration for taxation is protection of life and property and that the income rightly to be levied upon to defray the burdens of the United States Government is that income which is created by activities and property protected by this Government or obtained by persons enjoying that protection. . Where a contract for the rendition of service is involved. the recipient thereof must be resident within the jurisdiction. on the other hand. . a contract of carriage or of transportation is assimilated in our Tax Code and Revenue Regulations to a contract for services. Income for sources within the Philippines. or produced (in . (Emphasis supplied) It should not be supposed that Section 37 (a) (3) and (c) (3) of the Tax Code apply only in respect of services rendered by individual natural persons. Thus.. under the rules and regulations prescribed by the Secretary of Finance.location. they also apply to services rendered by or through the medium of a juridical person. other than those specified in subsections (a) and (c) of this section shall be allocated or apportioned to sources within or without the Philippines. (Emphasis supplied) Section 37 (c) (3) of the Tax Code. 5 3. (a) Gross income from sources within the Philippines. losses and deductions.

whole or in part) by the taxpayer without and sold within the Philippines. 2 that steamship and telegraph and cable services rendered between points both outside the Philippines give rise to income wholly from sources outside the Philippines. the total receipts of all out-going business whether freight or passengers. This implication is reinforced by a consideration of certain provisions of Revenue Regulations No. whether touching of the Philippines or not. Section 155 of Revenue Regulations No. Tax Code which "was based upon a recognition that transportation was a service and that the source of the income derived therefrom was to be treated as being the place where the service of transportation was rendered. and therefore not subject to Philippine income taxation. — The return of foreign steamship companies whose vessels touch parts of the Philippines should include as gross income. both within and without the Philippines of all vessels. (Emphasis supplied) Once more. 2 (again implementing Section 37 of the Tax Code) with provides as follows: Section 164. and to the purchase and sale of personal property. Telegraph and cable services.. first promulgated by the Department of Finance on 10 February 1940. We turn to the "source of income" rules relating to the sale of personal property. 7 Section 37 (e) of the Tax Code quoted above carries a strong well-nigh irresistible. (Emphasis supplied) It should be noted that the above underscored portion of Section 37 (e) was derived from the 1939 U. . implication that income derived from transportation or other services rendered entirely outside the Philippines must be treated as derived entirely from sources without the Philippines. — A foreign corporation carrying on the business of transmission of telegraph or cable messages between points in the Philippines and points outside the Philippines derives income partly form source within and partly from sources without the Philippines. (Emphasis supplied) Another type of utility or service enterprise is dealt with in Section 164 of Revenue Regulations No..S. or of the place of payment — (Emphasis supplied) Section 163 of Revenue Regulations No.. — . shall be treated as derived partly from sources within and partly from sources without the Philippines. With the gross income thus ascertained. of the place in which the contract for services was made. 2 (implementing Section 37 of the Tax Code) provides in part as follows: Section 155. — Gross income from sources within the Philippines includes compensation for labor or personal services within the Philippines regardless of the residence of the payer.e. upon the one hand. 2 (still relating to Section 37 of the Tax Code) deals with a particular species of foreign transportation companies — i. 2 entitled "Income Tax Regulations" as amended. We consider first sales of personal property.. Income from the sale of personal property by the producer or manufacturer of such personal property will be regarded as sourced entirely within or entirely without the . should be determined as the basis upon which allowable deductions may be computed. foreign steamship companies deriving income from sources partly within and partly without the Philippines: Section 163 Foreign steamship companies. Compensation for labor or personnel services.. . upon the other hand. a very strong inference arises under Sections 163 and 164 of Revenue Regulations No. the ratio existing between it and the gross income from all ports.

e. then. income derived from the purchase and sale of personal property — i. Section 37 (e) of the Tax Code provides in part as follows: (e) Income from sources partly within and partly without the Philippines . . Sale of personal property. may be usefully quoted again: (e) Income from sources partly within and partly without the Philippines. carriage of passengers or cargo between points located outside the Philippines. and (b) the place where such personal property was produced or manufactured. trading — is.. "sales of airline tickets") or as entering into a lease of services or a contract of service or carriage. the income derived from the sale will be deemed partly as income sourced without the Philippines. The airline ticket in and of itself has no monetary value.. even as scrap paper.. does not appear to be correct as a matter of tax law. in my opinion. losses and deductions) will be allocated between sources within and sources without the Philippines. under the Tax Code. The applicable "source of income" rules differ depending upon which characterization is given to the BOAC transactions. (Emphasis supplied) 4. This Section does not apply to income from the sale personal property produced (in whole or in part) by the taxpayer within and sold without the Philippines or produced (in whole or in part) by the taxpayer without and sold within the Philippines. The money paid by the passenger changes hands in the . e. (See Section 162 of these regulations).. (Emphasis supplied) Section 159 of Revenue Regulations No. although already quoted above. or (2) from the sale of personal property produced (in whole or in part) by the taxpayer within and sold without the Philippines. although the personal property had been produced outside the Philippines. the income derived therefrom will be regarded as sourced entirely outside the Philippines. shall be treated as derived entirely from sources within the country in which sold. which prestation consists of the carriage of the "purchaser" or passenger from the one point to another outside the Philippines. The phrase "sale of airline tickets. Thus. or if the sale of the property takes place outside the Philippines and the personal was produced in the Philippines." The "country" in which "sold" ordinarily means the place where the property is marketed.. regarded as sourced wholly in the place where the personal property is sold. Those transactions may be characterized either as sales of personal property (i.. Gains.. . If the personal property involved was both produced or manufactured and sold outside the Philippines. Gains. or produced (in whole or in part) by the taxpayer without and sold within the Philippines. profits and income from (1) transportation or other services rendered partly within and partly without the Philippines. The word "sold" includes "exchange." while widely used in popular parlance. In other words.. i. profits and income derived from the purchase of personal property within and its sale without the Philippines or from the purchase of personal property without and its sale within the Philippines. the income (and the related expenses.Philippines or as sourced partly within and partly without the Philippines. The value of the ticket lies wholly in the right acquired by the "purchaser" — the passenger — to demand a prestation from BOAC. Section 37 (e) of the Tax Code. shall be treated as derived partly from sources within and partly from sources without the Philippines. It will be seen that the basic problem is one of characterization of the transactions entered into by BOAC in the Philippines. Income derived from the purchase and sale of personal property shall be treated as derived entirely from the country in which sold. The appropriate characterization. The ticket is really the evidence of the contract of carriage entered into between BOAC and the passenger.e. of the BOAC transactions is that of entering into contracts of service.. depending upon two factors: (a) the place where the sale of such personal property occurs. (Emphasis supplied) In contrast. 2 puts the applicable rule succinctly: Section 159.

69. BOAC's income is more appropriately characterized as derived from a "service". appear entirely inappropriate from other viewpoint. Thus. with varying degrees of consciousness. But the passenger does not receive undertaken to be delivered by BOAC. Under this new approach.Philippines. Thereby. has been set aside. the term "originating from the Philippines" shall include flight of passsengers who stay in the Philippines for more than forty-eight (48) hours prior to embarkation. 1355. BOAC might be described as "selling" "a product" — its service. On a slighty more abstract level. in place of Philippine income taxation. for the technical purposes of the law on income taxation. The taxation of international carriers is today effected under Section 24 (b) (2) of the Tax Code. and not a sales tax or an excise or privilege tax. excess baggege or mail. the Government has done away with the difficulties attending the allocation of income and related expenses. it is really the compensation paid for the undertaking of BOAC to transport the passenger or cargo outside the Philippines. Gross revenues from chartered flights originating from the Philippines shall likewise form part of "gross Philippine billings" regardless of the place of sale or payment of the passage documents. It is hence perhaps useful to point out that the determination of the . shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceeding taxable year from all sources within the Philippines: Provided. — A corporation organized. engaged in trade or business within the Philippines. promulgated on 21 April 1978. The characterization of the BOAC transactions either as sales of personal property or as purchases and sales of personal property. and purchases and sales. "Gross Philippines of passage documents sold therein. BOAC is in fact entering into contracts of service or carriage. whether for passenger. rather than from an "activity" (a broader term than service and including the activity of selling) or from the here involved is income taxation. The very existance of "source rules" specifically and precisely applicable to the rendition of services must preclude the application here of "source rules" applying generally to sales.e. That international carriers shall pay a tax of two and one-half per cent on their gross Philippine billings. the resulting potential "loss" or "gain" in the amount of taxes collectible by the state is sometimes. authorized. The "purchase price of the airline ticket" is quite different from the purchase price of a physical good or commodity such as a pair of shoes of a refrigerator or an automobile. However. to transportation or other services rendered partly within and partly without the Philippines. Consider first purchases and sales: is BOAC properly regarded as engaged in trading — in the purchase and sale of personal property? Certainly. The gross revenue realized from the said cargo or mail shall include the gross freight charge up to final destination.. billings in respect of passenger or cargo originating from the Philippines). losses and deductions. Consider next sales: can BOAC be regarded as "selling" personal property produced or manufactured by it? In a popular or journalistic sense. or wholly without the Philippines. the Tax Code now imposes this 2½ per cent tax computed on the basis of billings in respect of passengers and cargo originating from the Philippines regardless of where embarkation and debarkation would be taking place. 5. however. provide the cargo or mail originates from the Philippines. the source of income rule applicable. as above discussed. Because taxes are the very lifeblood of government. international carriers who service port or points in the Philippines are treated in exactly the same way as international carriers not serving any port or point in the Philippines. considered in choosing from among competing possible characterizations under or interpretation of tax statutes. are not charged any Philippine income tax on their Philippine billings (i. as amended by Presidential Decree No. or existing under the laws of any foreign country. promulgated on 24 November 1972 and by Presidential Decree No. This 2-½ per cent tax is effectively a tax on gross receipts or an excise or privilege tax and not a tax on income. in the following manner: (2) Resident corporations. (Emphasis supplied) Under the above-quoted proviso international carriers issuing for compensation passage documentation in the Philippines for uplifts from any point in the world to any other point in the world. BOAC was not purchasing tickets outside the Philippines and selling them in the Philippines. of personal property which can be invoked only by the grace of popular language. For purposes of determining the taxability to revenues from chartered flights.

23. 62 Phil. 6110. .S. 22. 7 Memorandum for Petitioner. et al. Co. 10 British Trader's Insurance Co.. 13 SCRA 719 (1965). pp. p. 2 The Mentholatum Co. 5455. 261.. Del Rosario and Peligon. Law on Federal Income Taxation. pp. vs. Gutierrez. vs.27.. 74-77 and 87-90. 9 14 Am Jur 2d 813. Ltd. Lines.A. 415. 96 Phil... 11 Howden & Co. Jacob. Anacleto Mangaliman.. Inc. dissent. 14 Commissioner of Internal Revenue vs. 5 Section 24(b). Rollo. U. BOAC Memorandum. J. 1959-1969 and 1971. Vol. 8 Mertens. et al. Narvasa. Collector of Internal Revenue... 11. 8. JJ. (2).. Rollo. 13 Manila Gas Corporation vs. Vol. vs. I would vote to affirm the decision of the Court of Tax Appeals. paragraph 5. vs. Jr. 4 P. p. 414 (1918). Ltd.. p. Commissioner of Internal Revenue. 12 Partial Stipulation of Facts. 1 I. 72 Phil.A. 38 Phil. approved on 4 August 1969. and Cruz. Rollo. 5 SCRA 175 (1962). 844-847 and Fisher's Philippine Law of Stock Corporation.e. cited in Howden & Co.appropriate characterization here — that of contracts of air carriage rather than sales of airline tickets — entails no down-the-road loss of income tax revenues to the Government. 895 (1935).. 13 SCRA 601 (1965). R. 524 (1941). Feliciano. Collector of Internal Revenue. p. vs. 3rd ed. 8. In lieu thereof. No. Section 1. Footnotes 1 Partial Stipulation of Facts. 6 Madrigal and Paternol vs. 3 Pacific Micronesian Line. citing Thompson on Corporations. 13 SCRA 601 (1965). Rollo. as amended by R. Section 45.. p. Annex "E" and Annex "4". 299. Tax Code. Ltd. 89. Collector of Internal Revenue. Inc. 30. Jr. the Government takes in revenues generated by the 2-½ per cent tax on the gross Philippine billings or receipts of international carriers. Rafferty and Concepcion.

43. which goes on the state that: "It was the intention of Congress under the 1921 law to place the taxation of transportation companies upon a sounder and more scientific basis(rather than the species of franchise tax previously imposed upon non-residents in general).20. at 604.27 (1957). 991 (9th Cir. Id. Law of Federal Income Taxation. with the result that the place where the services were rendered determined the source. plaintiff-appellee." Id. Inc. filed a complaint docketed as Civil Case No. Trenas for plaintiff-appellee. series of 1960. in part. or because of the magnitude of the taxpayers operations. underscoring supplied. Iloilo Bottlers. defendant-appellant. which amount allegedly . except that it raised the tax rate from 30% to 30% 3 13 SCRA 601 (1965). where the Court also observed that the sugar milling services rendered by the respondent were not any less in the nature of "personal" services merely because "they were performed." (Id) (Emphasis supplied) Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. footnotes omitted. Hawaiian Philippine Co. 5. Section 45.R. 1988 ILOILO BOTTLERS. which had its bottling plant in Pavia. 7 8 Mertens.. as amended. vs. CITY OF ILOILO. 2d 988. 1939). J.. Iloilo. CORTES. 4 13 SCRA. Section 45. Diosdado Garingalao for defendant-appellant. No. The result was income from sources partly within and partly without the United States. which imposes a municipal license tax on distributors of soft-drinks..329. through the use of machinery.1972. On July 12. but which sold softdrinks in Iloilo City. 6110 continued the above-quoted subparagraph. 9046 with the Court of First Instance of Iloilo praying for the recovery of the sum of P3. 100 F. L-52019 August 19. INC. Republic Act No. is liable under Iloilo City tax Ordinance No. underscoring supplied. and so the principle was adopted of considering income derived from transportation to be income for services. Inc. Efrain B.: The fundamental issue in this appeal is whether the Iloilo Bottlers. 6 Commissioner v.2 Underscoring supplied. 5 8 Mertens.

a xerox copy . Santiago Syjuco Inc. 3. 1960 known as Ordinance No. 7. however sometime on September 14.constituted payments of municipal license taxes under Ordinance No. but the plaintiff stopped paying the municipal license tax (after) October 21. Iloilo City. That defendant enacted an ordinance on January 11. 5. Inc. which was doing business under the name of Seven-up Bottling Company of the Philippines and bottled the soft-drinks Pepsi-Cola and 7-up. That thereafter. PROVIDED. the material portions of which state xxx xxx xxx 2. That plaintiff is engaged in the business of bottling softdrinks under the trade name of Pepsi Cola And 7-up and selling the same to its customers. as amended.1972.1966. Iloilo City. Santiago Syjuco. sale or exchange irrespective (of) where it would take place shall be covered by the operation of this Ordinance. all deliveries and/or dispatches emanating or made at the plant and all goods or stocks taken out of the plant for distribution. On November 15. 4.mentioned municipal license tax due therefrom for bottler because its bottling plant was then still situated at Muelle Loney St. Municipality of Pavia. the Seven Up Bottling Company of the Philippines under Santiago Syjuco Inc. That sometime on July 31. Series of 1960. owned and operated a bottling plant at Muelle Loney Street. sometime in July 1968. plaintiff operated the said plant by bottling the soft drinks Pepsi-Cola and 7-up. 1968 (when) it transferred its plant to Barrio Ungca Municipality of Pavia. Province of Iloilo. 5. That prior to September. Series of 1964. Philippines and which is outside the jurisdiction of defendant. 28. Series of 1960 which ordinance was successively amended by Ordinance No.05) centavos per bottle shall pay a tax of one and one half (P0..015) (centavos) per case of twenty four bottles.. manufacture or bottling of coca-cola. that the company paid under protest. and which is outside the jurisdiction of the City of Iloilo. Iloilo City. — Any person. informed all its employees that it (was) closing its Iloilo Plant due to financial losses and in fact closed the same and later sold the plant to the plaintiff Iloilo Bottlers. the parties submitted a partial stipulation of facts. 1969. 6. seven-up and other soft drinks within the jurisdiction of the City of Iloilo. Iloilo which is outside the jurisdiction of the City of Iloilo. and Ordinance No. HOWEVER. Section 1-A—For purposes of this Ordinance. 45. however. tru-orange. had been religiously paying the defendant City of Iloilo the above. that softdrinks sold to the public at not more than five (P0. Inc. pepsi cola. Ordinance No. That from the time of (the) enactment (of the ordinance). Series of 1964. and transferred its bottling operations to its new plant in Barrio Ungca. which provides as follows: Section l. 15.10) centavos for every case of twenty-four bottles. the defendant demanded from the plaintiff the payment of the municipal license tax under the above-mentioned ordinance. 5 series of 1960. Iloilo. 1966. with a bottling plant situated at Barrio Ungca Municipality of Pavia. plaintiff closed said bottling plant at Muelle Loney. firm or corporation engaged in the distribution. shall pay a municipal license tax of ten (P0...

12. G. it could not be considered as a distributor in line with the doctrines enunciated by the Supreme Court in the cases of City of Manila vs. July 11. As a result of the said letter of the plaintiff. 10. which was acceded to by the defendant. 1959. vs. in line with the jurisprudence enunciated by the Supreme Court but due to insistence of the defendant. the plaintiff under protest agreed to the payment of the back taxes. Iloilo.. L-1 4229. That plaintiff explained in a letter to the defendant that it could not anymore be liable to pay the municipal license fee because its bottling plant (was) not anymore inside the City of Iloilo. That as computed by the plaintiff the following are its softdrinks sold in Iloilo City since it transferred its bottling plant from the City of Iloilo to Barrio Ungca Pavia. 8. and so as not to occasion disruption of its business operation. and it further demanded from the plaintiff payment of back taxes from the time it transferred its bottling plant to the Municipality of Pavia.329. Central Azucarera de Don Pedro vs. the plaintiff paid on April 20.1960. Manila Trading & Supply Co. the defendant demanded from the plaintiff compliance with the said ordinance for 1972 in view of the fact that it was engaged in distribution of the softdrinks in the City of Iloilo. 1957.060 TOTAL TAX DUE P8.. under protest. City of Manila et al.400 . 1972. 1968 up to the last quarter of 1971. That sometime on January 25. A xerox copy of the said letter is attached as Annex "B" to the complaint and made an integral part hereof by reference. the defendant did not anymore press the plaintiff to pay the said municipal license tax. and because of this threat. since it itself (sold) its own products to its (customers) directly. Bugsuk Lumber Co.the defendant informed the plaintiff that it must pay all the taxes due since July. No..1955. Iloilo in July 1968. 1972. of Cases sold SEVEN-UP PEPSICOLA 49. and thereafter has been paying defendant every quarter under protest. That on June l5. the first quarter payment of the municipal licence tax in the sum of P3. City of Manila L-1 2156.20. and that moreover. on staggered basis. 9.8255. City of Manila and City Treasurer of Manila. otherwise it shall be constrained to cancel the operation of the business of the plaintiff.of the said letter is attached to the complaint as Annex "A" and made an integral part hereof by reference.340 88. Inc. September 29. 11. That the plaintiff demurred to the said demand of the defendant raising as its jurisdiction the reason that its bottling plant is situated outside the City of Iloilo and as bottler could not be considered as distributor under the said ordinance although it sells its product directly to the consumer. Cebu Portland Cement vs. 1972. L. April 29.84 0 Jul to Dec 39.R. L7679. to wit: No.July 26.

R. No.R. No.R.March " " 17.150 16. . plaintiff distributes its products from its bottling plant at Barrio Ungca Municipality of Pavia.159. 5614897 . 5614935 . No.16 O.R.99 O. No.R.77 O.660 168.024.60 0 80.710.726.5614870 . TOT AL 81.20 O.R.January.480 169. 1972 Sales P17. 5614967 .June " " 14. to Dec. as manufacturer's sales tax on all the softdrinks it manufactures as follows: O.900 16.81 O.July " " 13. 14.May " " 16.240 87. No.Jan.726.90 O.R. That the plaintiff does not maintain any store or commercial establishment in the City of Iloilo from which it distributes its products.952.211 168.89 0 79.411 595. to Dec.February " " 17.91 5 280.R.050 P 59. No.R.389 89. No.54 . Jan.50 5 13. 5614973 .April " " 18. directly to its customers in the different towns of the Province of Iloilo as well as the City of Iloilo. No. 5614891 . 5614767 .589. That the plaintiff is already paying the National Government a percentage Tax of 71/t.19 O.00 O. but by means of a fleet of delivery trucks.670 88.September " " 19. No.600 16. Iloilo. to Dec.August " " 15.791. 4683995 . 56'L4999 . Jan.639 314.222.

000.and is also paying the municipal license tax to the municipality of Pavia. v. it claims that only manufacturers or bottlers having their plants inside the territorial jurisdiction of the city are covered by the ordinance. 1973. even after it had transferred its bottling plant to Pavia. L-22764. G. 1973 a decision in favor of Iloilo Bottlers. The resolution of this case therefore hinges on whether the company may be considered engaged in the distribution of softdrinks in Iloilo City. The decision was amended in an Order dated March 15. Second. pp. however. 627 (1955). a manufacturer does not necessarily become engaged in the separate business of selling simply because it sells the products it manufactures. or is a necessary consequence of its main or principal business of bottling. To determine whether an entity engaged in the principal business of manufacturing. . Inc. (2) manufacture and (3) bottling of softdrinks.R. distribution of soft-drinks 2. July 28. P. disclaims liability on two grounds: First. is likewise engaged in the separate business of selling. so as to include the amounts paid by the company after the filing of the complaint. Inc. it cannot be taxed as one falling under the second or the third type of business. Iloilo Bottlers. 10 (Record on Appeal. bottling of softdrinks within the territorial jurisdiction of the City of Iloilo. Iloilo Bottlers. The tax ordinance imposes a tax on persons.00 every year. Inc. City of Manila and Cudiamat. plus a municipal license tax for engaging in its business to the municipality of Pavia in its amount of P2. City of Manila and Sarmiento. Thus. merits serious consideration. it contends that since it is not engaged in the independent business of distributing soft-drinks.329. so as to be within the purview of the ordinance. Inc. In certain cases. This Court has always recognized that the right to manufacture implies the right to sell/distribute the manufactured products [See Central Azucarera de Don Pedro v. The second ground is manifestly devoid of merit. declaring the Corporation not liable under the ordinance and directing the City of Iloilo to pay the sum of' P3.000.00 every year. 25-31)] On the basis of the above stipulations. 843. The City of Iloilo appealed to the Court of Appeals which certified the case to this Court. then it is NOT liable under the city tax ordinance. however. and 3. 1969. manufacture of soft-drinks. 28 SCRA 840. no longer manufactured/bottled its softdrinks within Iloilo City. The first ground. a manufacturer may also be considered as engaged in the separate business of selling its products.] Hence. It is clear from the ordinance that three types of activities are covered: (1) distribution. and corporations engaged in the business of: 1. for tax purposes. No. There is no question that after it transferred its plant to Pavia. but that its activity of selling is merely an incident to. Caltex (Philippines). its marketing system or sales operations must be looked into. A person engaged in any or all of these activities is subject to the tax. Iloilo province. Iloilo in the amount of P l0. firms. xxx xxx xxx [Rollo. the court a quo rendered on January 26. 97 Phil.20.

In several cases [See Central Azucarera de Don Pedro v. concur. before an entity engaged in any of the activities may be taxed in Iloilo City. City of Manila and Sarmiento. 9046 is ordered DISMISSED.R. v. independently of its business of bottling them. With the foregoing discussion. Feliciano and Bidin. As stated above. Caltex (Philippines). "rolling stores". the situs of the act of distributing. Jr. Inc.. . sales were made by Iloilo Bottlers. The delivery trucks were therefore much the same as the stores and warehouses under the second marketing system. in Iloilo City.] Specifically. City of Manila and Cudiamat. Sales transactions with customers were entered into and sales were perfected and consummated by route salesmen. 108 Phil. Cebu Portland Cement Co. nor are separate stores maintained where products may be sold independently from the main office. J. Being an excise tax. this Court had occasion to distinguish two marketing systems: Under the first system. It is a tax on the privilege of distributing. manufacturing or bottling softdrinks. C. Thus. No warehouse sales are made. supra.. 1063 (1960). The complaint in Civil Case No. where in turn actual deliveries are made. privileges or businesses are done or performed within the jurisdiction of said authority [Commissioner of Internal Revenue v. the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to customers in the different places in lloilo province. Truck sales were made independently of transactions in the main office. In the case at bar. the appealed decision is hereby REVERSED. supra]. The tax imposed under Ordinance No. The warehouses only serve as storage sites and delivery points of the products earlier sold at the main office. SO ORDERED. British Overseas Airways Corp. Entities operating under the second system are considered engaged in the separate business of selling.. the manufacturer enters into sales transactions and invoices the sales at its main office where purchase orders are received and approved before delivery orders are sent to the company's warehouses. it becomes unnecessary to discuss the other issues raised by the parties. 149 SCRA 395. Gutierrez. Under the second system. it can be levied by the taxing authority only when the acts. G.J. Entities operating under the first system are NOT considered engaged in the separate business of selling or dealing in their products. The delivery trucks were not used solely for the purpose of delivering softdrinks previously sold at Pavia. v. took no part. Any one who desires to purchase the product may go to the store or warehouse and there purchase the merchandise. Inc. bottling or manufacturing softdrinks must be within city limits. 1987. The stores and warehouses serve as selling centers. and Court of Appeals. Iloilo Bottlers. 5 is an excise tax. 65773-74. We have no option but to declare the company liable under the tax ordinance.. 410. thus falls under the second category above. Fernan. City of Manila and the City Treasurer. JJ. April 30. That is. independent of their manufacturing business. They served as selling units. Nos. sales transactions are entered into and perfected at stores or warehouses maintained by the company. the corporation was engaged in the separate business of selling or distributing soft-drinks. until recently. No Costs. Inc. WHEREFORE. They were what were called.

443." 4 Then came the following: "On July 11. as the American armed forces being exempt could not be taxed as such under the National Internal Revenue Code. military bases in the Philippines. 1 petitioner ignoring that such utterance was made purely as a flourish of rhetoric and by way of emphasizing the decision reached. 1969 WILLIAM C. L-26379 December 27. petitioner.: A question novel in character. which provides technical assistance to the United States Air Force. on its face betraying no kinship with reality. it is manifest that such a view amounts at most to a legal fiction and is moreover obiter. for a permit to sell the car. seriously and earnestly expressed. No. a citizen of the United States and an employee of Bendix Radio. more than two (2) months after the 1960 Cadillac car was imported into the Philippines.. far-fetched and implausible. petitioner imported on April 22.3 coupled with the reminder however. he would justify by invoking. Blanco. to render the truth unmistakable. Gal-lang and Special Attorney Gamaliel H. petitioner's liability for the income tax due as a result thereof was unavoidable. Solicitor Lolita O. Philippines. Barredo. we sustain its decision now before us on appeal.83. 2 Such an assumption. that the trading firm as purchaser of army goods must respond for the sales taxes due from an importer. respondent. It certainly cannot control the resolution of the specific question that confronts us. On the . Assistant Solicitor General Felicisimo R. that in legal contemplation the sale was made outside Philippine territory and therefore beyond our jurisdictional power to tax. Reagan. that "the areas covered by the United States Military Bases are not foreign territories both in the political and geographical sense. As the Court of Tax Appeals reached a similar conclusion." As thus clarified. We declare our stand in an unequivocal manner. insurance and other charges. Mantolino for respondent. Rosete. He would dispute the payment of the income tax assessed on him by respondent Commissioner of Internal Revenue on an amount realized by him on a sale of his automobile to a member of the United States Marine Corps.. Zafra and Tayag for petitioner. Office of the Solicitor General Antonio P. COMMISSIONER OF INTERNAL REVENUE. Nine (9) months thereafter and before his tour of duty expired. vs.Republic of the Philippines SUPREME COURT Manila EN BANC G. was assigned at Clark Air Base. at one time a civilian employee of an American corporation providing technical assistance to the United States Air Force in the Philippines. . on or about July 7. which was granted provided that the sale was made to a member of the United States Armed Forces or a citizen of the United States employed in the U. petitioner requested the Base Commander. after stating the nature of the case. Clark Air Base. started the recital of facts thus: "It appears that petitioner. found expression anew in a 1962 decision.R. FERNANDO. The sale having taken place on what indisputably is Philippine territory. Division of Bendix Aviation Corporation.S. the answer to which has far-reaching implications. 1959 . inspired by the commendable aim to render unavailing any attempt at tax evasion on the part of such vendee.. In the decision appealed from. Asperilla. mistakenly as will hereafter be more fully shown an observation to that effect in a 1951 opinion. Quasha. is raised by petitioner William C. ETC. the transaction having taken place at the Clark Field Air Base at Pampanga. J. Such a plea. 1960 a tax-free 1960 Cadillac car with accessories valued at $6. It is his contention. REAGAN. including freight. 1960. the Court of Tax Appeals.

1960. both territorial and personal. therefore. as shown by a Bill of Sale . . On the same date. would imply a diminution of its sovereignty to the extent of the restriction." 6 After discussing the legal issues raised. he sought a refund from respondent claiming that he was exempt. There is no portion thereof that is beyond its power. July 11.00 was legally collected by respondent for petitioner.same date. Nothing is better settled than that the Philippines being independent and sovereign. if at all is to be derived from such an obiter dictum. respondent Commissioner of Internal Revenue. and an investment of that sovereignty to the same extent in that power which could impose such restriction. and everyone to whom it applies must submit to its terms. fixed as his net taxable income arising from such transaction the amount of P17. Its laws govern therein. After paying the sum. Jr. if it chooses to. Nor does the matter end there. 1." After which came this paragraph: "All exceptions.912. there is a diminution of its sovereignty. They are not and cannot be foreign territory.979.00 as evidenced by a deed of sale executed in Manila. "is the property of a state-force due to which it has the exclusive capacity of legal self-determination and selfrestriction.00 as income tax and denied the refund on the same. M'Faddon. They are still subject to its authority. sold the car to Fred Meneses for P32. It is not precluded from allowing another power to participate in the exercise of jurisdictional right over certain portions of its territory. Necessarily.8 an 1812 decision: "The jurisdiction of the nation within its own territory is necessarily exclusive and absolute. to the full and . Any restriction upon it."7 A state then. he filed the case with the Court of Tax Appeals seeking recovery of the sum of P2. Pfc. They retain their status as native soil.979. deriving validity from an external source.979. announced in the leading case of Schooner Exchange v. submit to a restriction of its sovereign rights. speak to that effect with impressive unanimity. If it does so. may refrain from the exercise of what otherwise is illimitable competence.34. Decisions coming from petitioner's native land. . Hence. this appeal predicated on a legal theory we cannot accept. penned by jurists of repute. petitioner sold his car for $6.600. If it were not thus.00 plus the legal rate of interest. We start with the citation from Chief Justice Marshall. its decrees are supreme. primarily the contention that the Clark Air Base "in legal contemplation. executed at Clark Air Base. Its laws may as to some persons found within its territory no longer control. There may thus be a curtailment of what otherwise is a power plenary in character.00. That is the concept of sovereignty as auto-limitation. Philippines. by its consent. express or implied. That is the extent of its jurisdiction. after deducting the landed cost of the car as well as the personal exemption to which petitioner was entitled. it by no means follows that such areas become impressed with an alien character. Cavite.979. Willie (William) Johnson. likewise. Resort to fundamentals is unavoidable to place things in their proper perspective. it has to be exclusive. Within its limits. is a base outside the Philippines" the sale therefore having taken place on "foreign soil". the Court of Tax Appeals found nothing objectionable in the assessment and thereafter the payment of P2. which. As noted in the appealed decision: "The only issue submitted for our resolution is whether or not the said income tax of P2. induced no doubt by the weight he would accord to the observation made by this Court in the two opinions earlier referred to. Sangley Point. its commands paramount. rendering him liable for income tax in the sum of P2. To repeat.000. petitioner apparently feeling justified in his refusal to defer to basic postulates of constitutional and international law. It is susceptible of no limitation not imposed by itself. but pending action on his request for refund. Petitioner cannot make out a case for reversal.00 to a certain Willie Johnson. Its jurisdiction may be diminished." 5 As a result of the transaction thus made. It is to be admitted that any state may. but it does not disappear. one which is likewise far from reflecting the fact as it is. scant comfort. in the succinct language of Jellinek. (Private first class). its authority may be exercised over its entire domain. United States Marine Corps. So it is with the bases under lease to the American armed forces by virtue of the military bases agreement of 1947. Jr.

is more apparent than real for as noted at the outset of this opinion. the eminent commentator Hyde in his three-volume work on International Law. Thus: "It now is settled in the United States and recognized elsewhere that the territory subject to its jurisdiction includes the land areas under its dominion and control the ports. which would be made to yield such an unwarranted interpretation at war with the controlling constitutional and international law principles." 11 He could cite moreover. to repeat. similarly commits a crime therein. contrary to the will of the State of his sojourn. maintenance. As a matter of fact." Chief Justice Taney. an appropriate exemption was provided for. Nor is there apparent at the present time any tendency on the part of States to acquiesce in his exercise of it. made clear that not even the embassy premises of a foreign power are to be considered outside the territorial domain of the host state. petitioner places more faith not on the language of the provision on exemption but on a sentiment given expression in a 1951 opinion of this Court. in an 1857 decision. the first and crucial error imputed to the Court of Tax Appeals to the effect that it should have held that the Clark Air Force is foreign soil or territory for purposes of income tax legislation is clearly without support in law. must be traced up to the consent of the nation itself. If a person not so exempt. In the light of the above. If an attache commits an offense within the precincts of an embassy. This country's jurisdictional rights therein. as interpreted and applied by the United States. . is bound by its laws. . that an ambassador himself possesses the right to exercise jurisdiction. It is not believed. there was a reiteration of such a view. . At any rate. Moore. Wheaton and Oppenheim. Wilson. and a marginal belt of the sea extending from the coast line outward a marine league. harbors. and acting directly upon each [individual found therein]. bays. he would seek to impart plausibility to his claim by the ostensible invocation of the exemption clause in the Agreement by virtue of which a "national of the United States serving in or employed in the Philippines in connection with the construction. While his first assigned error is thus worded. and other in closed arms of the sea along its coast. such eminent treatise-writers as Kent." 12 2. even if such a contention were more adequately pressed and insisted upon." It is no exaggeration then for Justice Brewer to stress that the United States government "is one having jurisdiction over every foot of soil within its territory. It has not become foreign soil or territory. There is nothing in the Military Bases Agreement that lends support to such an assertion. in addition to many American decisions. his immunity from prosecution is not because he has not violated the local law. Petitioner could not have been unaware that to maintain the contrary would be to defy reality and would be an affront to the law. As thus correctly viewed. operation or defense of the bases and residing in the Philippines only by reason of such employment" is not to be taxed on his income unless "derived from Philippine source or sources other than the United States sources. ."10 Not too long ago. The lawfulness or unlawfulness of acts there committed is determined by the territorial sovereign. whether the temporary purposes or as a resident. As to certain tax matters. therefore. certainly not excluding the power to tax. or whose immunity is waived." 13 The reliance. petitioner's hope for the reversal of the decision completely fades away. may subject him to prosecution. have been preserved. the territorial sovereign. but rather for the reason that the individual is exempt from prosecution. if it secures custody of the offender. Hyde. Westlake.9 affirmed the fundamental principle of everyone within the territorial domain of a state being subject to its commands: "For undoubtedly every person who is found within the limits of a government. They can flow from no other legitimate source. or 3 geographic miles. it is on its face devoid of merit as the source clearly was Philippine. Thus: "The ground occupied by an embassy is not in fact the territory of the foreign State to which the premises belong through possession or ownership.complete power of a nation within its own territories. even within his embassy with respect to acts there committed. this time from the pen of Justice Van Devanter. even though its criminal code normally does not contemplate the punishment of one who commits an offense outside of the national domain.

that general expressions. but ought not to control the judgment in a subsequent suit when the very point is presented for decision. Chief Justice Marshall could again be listened to with profit. what was said by him was in the way of a legal fiction. a legal fiction. What is more. while far . In the course of such a dissertion. and thereafter the controlling. not to be disregarded. was beyond the reach of our tax statutes.18 On this point. the statement on its face is. are to be taken in connection with the case in which those expressions are used. tax evasion is precluded. tax evasion would have been facilitated. it was by way of pure embellishment. Note his stress on "in contemplation of law. could have been reached without any need for such expression as that given utterance by Justice Tuason. If they go beyond the case. drawing on his well-known gift for rhetoric and cognizant that he was making an as if statement. This is not to say that it should have been ignored altogether afterwards. The United States forces that brought in such equipment later disposed of as surplus. He chose not to do so. in every opinion. within the contemplation of the National Internal Revenue Code provision. how far divorced from the truth was such statement was emphasized by Justice Barrera. the liability of the petitioner for income tax which. Collector of Internal Revenue. when no longer needed for military purposes. especially so for the purpose intended.16 It was an opinion "uttered by the way." To lend further support to a conclusion already announced. this time from military bases. It is easily understandable why." It is thus evident that the first. v. namely to stigmatize as without support in law any attempt on the part of a taxpayer to escape an obligation incumbent upon him. who spoke for the Court. What is more. thus: "It is true that the areas covered by the United States Military Bases are not foreign territories both in the political and geographical sense. decision as to the liability for sales taxes as an importer by the purchaser."17 It could not then be controlling on the question before us now. Meer. So it was quoted with that end in view in the Co Po case. adhered to such a rationale. as it undoubtedly was. an observation certainly not to be taken literally was thus given utterance. It certainly does not justify any effort to render futile the collection of a tax legally due. It was clearly obiter not being necessary for the resolution of the issue before this Court. being at that a confirmation of what had been arrived at in the earlier case. Again. as announced at the opening of this opinion. the trading firm that purchased army goods from a United States government agency in the Philippines. Justice Tuason. they may be respected. he did say: "While in army bases or installations within the Philippines those goods were in contemplation of law on foreign soil. he proceeded to discuss the role of the American military contingent in the Philippines as a belligerent occupant. then. It was Cardozo who pointed out its value as a device "to advance the ends of justice" although at times it could be "clumsy" and even "offensive". This is not to discount the uses of a fictio juris in the science of the law."21 Justice Tuason moreover made explicit that rather than corresponding with reality. If it were not thus.15 holding liable as an importer. not so long after the liberation of the Philippines. put a different complexion on the matter. who penned the Co Po opinion. Its value then as an authoritative doctrine cannot be as much as petitioner would mistakenly attach to it. distinguished by its sound appreciation of the issue then before this Court and to preclude any tax evasion. is squarely raised for the first time. this Court affirmed a decision rendered about seven months previously. That was farthest from the thought of Justice Tuason. that must respond for the advance sales taxes as importer. quoting extensively from the earlier opinion. to repeat. the purpose that animated the reiteration of such a view was clearly to emphasize that through the employment of such a fiction. He could have stopped there.In Saura Import and Export Co. there being no need to repeat it." 19 Nor did the fact that such utterance of Justice Tuason was cited in Co Po v.14 the case above referred to. The transaction having occurred in 1946. Thus: "It is a maxim. to reach the conclusion that it was the purchaser of army goods.20 a 1962 decision relied upon by petitioner. as here. 22 Certainly. It could be utilized again. Again.

Thus: "This provision is not and can not on principle or authority be construed as a limitation upon the rights of the Philippine Government. whether by design or inadvertence. is utterly without merit. petitioner himself being fully aware that if the Clark Air Force Base is to be considered. Makalintal. properly used. The conclusion is thus irresistible that the crucial error assigned. not as an obiter but as the rationale of the decision. 4. . or expediency over the bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed therein. in People v. 23 Petitioner then would be well-advised to take to heart such counsel of care and circumspection before invoking not a legal fiction that would avoid a mockery of the law by avoiding tax evasion but what clearly is a misinterpretation thereof. to be guilty of succumbing to the vice of literalness. to misread it. With the mist thus lifted from the situation as it truly presents itself. it should be noted. as announced at the outset. a legal fiction could be relied upon by the law. concur.J. 3.26 Petitioner had not done so. He did stress further the full extent of our territorial jurisdiction in words that do not admit of doubt. 1966 denying the refund of P2. Zaldivar. that petitioner was liable for the income tax arising from a sale of his automobile in the Clark Field Air Base. the only one that calls for discussion to the effect that for income tax purposes the Clark Air Force Base is outside Philippine territory. There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for reversal. With costs against petitioner. No useful purpose would be served by discussing the other assigned errors. the Philippine Government merely consents that the United States exercise jurisdiction in certain cases. We thus manifest fealty to a pronouncement made time and time again that 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. WHEREFORE. as it ought to be and as it is. as Frankfurter noted. To repeat. We hold. That it would be fraught with such peril to the enforcement of our tax statutes on the military bases under lease to the American armed forces could not have been within the contemplation of Justice Tuason.979. To so attribute such a bizarre consequence is to be guilty of a grave disservice to the memory of a great jurist. it is an emphatic recognition and reaffirmation of Philippine sovereignty over the bases and of the truth that all jurisdictional rights granted to the United States and not exercised by the latter are reserved by the Philippines for itself. Concepcion. in the pursuit of legitimate ends. leading to results that would have shocked its originator." 25 It is in the same spirit that we approach the specific question confronting us in this litigation. Castro and Teehankee. within our territorial jurisdiction to tax. which clearly is and cannot otherwise be other than. To impute then to the statement of Justice Tuason the meaning that petitioner would fasten on it is. there is nothing that stands in the way of an affirmance of the Court of Tax Appeals decision. The consent was given purely as a matter of comity.. this observation of Justice Tuason could be misused or misconstrued in a clumsy manner to reach an offensive result." Nor did he stop there.. C. It certainly is not susceptible of the mischievous consequences now sought to be fastened on it by petitioner. Acierto24 thus: "By the [Military Bases] Agreement. Petitioner cannot do so. Sanchez. his claim for exemption from the income tax due was distinguished only by its futility. courtesy. So we have said earlier. Philippine soil or territory. For his real and genuine sentiment on the matter in consonance with the imperative mandate of controlling constitutional and international law concepts was categorically set forth by him.from objectionable as thus enunciated. the decision of the Court of Tax Appeals of May 12. If anything. to paraphrase Frankfurter. Dizon. JJ. To so conclude is.00 as the income tax paid by petitioner is affirmed.

Barredo. Footnotes 1 Saura Import and Export Co. J. pp. 565 (1930).. 20-21. 87 Phil. 15 16 Uy Po v. 51 (1954). 87 Phil. shall be liable to pay income tax in the Philippines except in respect of income derived from Philippine source or sources other than the United States sources. 12851286 (1947).B. p. 183. 2. Carganillo Vda. v. pp. 14 88 Phil. 18 (1950). 158 US 564 (1894). p. In re Debs. 7 Cranch 116. 199. Jellinek as quoted in Cohen. 136. 21. 227 (1925). International Law Chiefly as Interpreted and Applied by the United States. 410 (1952). Collector of Customs. 18 .. Duchesne. 19 How. Paredes. v. National Internal Revenue Code. Mellon. de los Reyes v. 88 Phil. Cunard Steamship Co. 357. 262 US 100 (1922). 5 SCRA 1057. 186. 2 Sec. Brown v." (1 Philippine Treaty Series. Decision.. Meer. maintenance. Recent Theories of Sovereignty. 55 Phil. or his spouse and minor children and dependent parents of either spouse. concurs in the result. p. Meer. 48 Phil. 362 [1968]). Brief for Petitioner-Appellant. 153 (1916). Macadaeg. Abad v. 17 People v.L. Annex 4. par. operation or defense of the bases and residing in the Philippines by reason only of such employment.. reads: "No national of the United States serving in or employed in the Philippines in connection with the construction. Collector of Internal Revenue. 23. took no part. 199 (1951). 3 4 5 6 7 8 9 10 11 12 2 Hyde. de Yance. de Villa. 13 Act XII of the Military Bases Agreement. Morales v. 34 Phil.Reyes. 18 (1950). 35 (1937). Meer. J. 95 Phil. Go Cheng Tee v. 202 affirming Go Cheng Tee v. Ibid. 194. Cf. Co Po v.. 91 Phil. Ibid. J.

De Witt. Ross. 302 US 583 (1938). 264. 219 US 380 (1911). p.. See also E. Republic of the Philippines SUPREME COURT Manila EN BANC G. 534. 399 (1821) reiterated in Myers v. an anonymous partnership (sociedad anonima). Louis Ry v. Commissioner of Internal Revenue v.R. (1926). James Madison Ross and Federico Agrava as amici curiæ. Among the properties she left her one-half conjugal share in 70.: An appeal from a declaratory judgment rendered by the Court of First Instance of Manila. organized and existing under the laws of the Philippines. Perkins and Ponce Enrile for appellant. Hoyt. St. L-46720 June 28. with the statement that. MORAN. 21 SCRA 180 (1967) and the cases therein cited. Nashville C. vs. Bank. United States. The Paradoxes of Legal Science. a petition for a declaratory judgment was filed in the lower court. She left a will which was duly admitted to probate in California where her estate was administered and settled. 1932. United States. Ibid. 21 22 23 24 25 26 Cf. 92 Phil. the petitioner will pay such tax. Cardozo. Guerrero. petitioner-appellant. Petitioner-appellant. to which petitionerappellant objected. Wells Fargo Bank & Union Trust Company. The Federal and State of California's inheritance taxes due on said shares have been duly paid. 1059. died on September 16. California. 1940 WELLS FARGO BANK & UNION TRUST COMPANY. Wright v. Wherefore. J. Inc. Collector of Internal Revenue. Ibid.000 shares of stock in the Benguet Consolidated Mining Company. 110 US 608 (1884). 20 25 SCRA 1057. THE COLLECTOR OF INTERNAL REVENUE. United States. with is principal office in the City of Manila. Porter Township. Weyerhaeuser v. Osaka Shosen Kaisha Line v. United States. v. 355 US 184 (1957). 310 US 362 (1940). Cf. 300 US 98. Northern Nat.. p. and the . Selph and Carrascoso. interest and penalties (saving error in computation) without protest and will not file to recover the same. the place of her alleged last residence and domicile. 272 US 52. wife of Clyde Milton Eye. No. Birdie Lillian Eye. at Los Angeles. Lawrence. Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee. 34 (1928). 534. Respondent Collector of Internal Revenue sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax. Browning. Rodriguez. respondent-appellee. 542 (1953). "if it should be held by a final declaratory judgment that the transfer of the aforesaid shares of stock is legally subject to the Philippine inheritance tax. Green v.19 6 Wheat. v. was duly appointed trustee of the created by the said will. 28 SCRA 1119 (1969).

.) Petitioner... and that. R. being a property situated in this country. 281 U. South Carolina Tax Commission 282 U. though a part of the United States in the international sense. for the self-evident reason that. No. G. ed. for its effectiveness.. Missouri. 83 Law. S. 313. (Knowles vs. 1339. L. nevertheless. 844). R. 77 A. (Downes vs. this appeal by the petitioner. ed. and (2) that as to real and tangible personal property of a non-resident decedent.. And these considerations do not apply to the Philippines. 312. First National Bank of Boston vs. 182 U. which requires that property should be taxed in only one state and that jurisdiction to tax is restricted accordingly. the application to the states of the due-process rule springs from a proper distribution of their powers and spheres of activity as ordained by the United States Constitution. by death of a non-resident. ed. provides that every transmission by virtue of inheritance of any share issued by any corporation of sociedad anonima organized or constituted in the Philippines. however remote.. S. 35694. Petitioner concedes (1) that the Philippine inheritance tax is not a tax property. 341. on considerations repugnant to such guaranty of due process of that of the equal protection of the laws. but upon transmission by inheritance (Lorenzo vs. Section 1536 of the Administrative Code. foreign thereto in a domestic sense. in some way. therefore. ed. of stock in a domestic (America) corporation. G. Beidler vs. however. the Philippine inheritance tax may be imposed upon their transmission by death.S. Hence. It is to be observed. its transfer is. S. Brooks. and such distribution is enforced and protected by not allowing one state to reach out and tax property in another. 284 U. 74 Law. 76 Law. unless the law involved is challenged.S. the rule laid down in the four cases relied upon by the appellant was predicated on a proper regard for the relation of the states of the American Union. however. is subject to the tax therein provided. 1349." The Court of First Instance of Manila rendered judgment. 42967. 280 U. their situs is in the domicile of the owner thereof. In other words. 77 Law. ed. Ct. Minnesota. the United States Supreme Court upheld the authority of the Federal Government to impose an inheritance tax on the transmission. the truth is that the due-process clause is "directed at the protection of the individual and he is entitled to its immunity as much against the state as against the national government. 586. which is not. Yatco. No. 1401). 1.) At any rate. the State in which a corporation has been incorporated has no power to impose such tax if the shares of stock in such corporation are owned by a non-resident decedent. 370. the guaranty of due process cannot certainly be invoked to frustrate it. cam be suggested in the relation of one state of the Union with another or with the United States. 35 Off. 2395). defendant. 75 Law. 1056. Maine. See also Gibbs vs.. The status of the Philippines has been aptly defined as one which. 288 U. 371. The question here involved is essentially not one of due-process.. This provision has already been applied to shares of stock in a domestic corporation which were owned by a British subject residing and domiciled in Great Britain. S. 52 S. is. 2393. as to intangibles.. but of the power of the Philippine Government to tax. .) Indeed.. Bidwell. 378. upon Philippine laws. But it is contended that the doctrine in the foregoing case is not applicable. If that power be conceded. McCanless. 74 Law.000 shares of stock is subject to Philippine inheritance tax. holding that the transmission by will of the said 35. 357. as. R. to the effect that an inheritance tax can be imposed with respect to intangibles only by the State where the decedent was domiciled at the time of his death. as amended. Gaz. when the law is alleged to be arbitrary. 244. because the due-process clause is directed at the State and not at the Federal Government. and.petitioner believes and t herefore alleges that it should be held that such transfer is not subject to said tax. 204. Be that as it may. 131.. 307 U.." (Curry vs. irrespective of the situs of the corresponding certificates of stock. located in the Philippines.. ed. like the shares of stock in question. Our status rests upon a wholly distinct basis and no analogy.. I. oppressive or discriminatory. under the due-process clause. It is contended. 174. Government of P. invokes the rule laid down by the United States Supreme Court in four cases (Farmers Loan & Trust Company vs. Posadas. their transmission by death necessarily takes place under his domiciliary laws. that in a later case (Burnet vs. the respondent will not proceed to assess and collect the same. we see nothing of consequence in drawing any distinct between the operation and effect of the due-process clause as it applies to the individual states and to the national government of the United States.. S. and that the federal or national power of the United States is to be determined in relation to other countries and their subjects by applying the principles of jurisdiction recognized in international relations.. that. however. Baldwin vs.

.. S. United States. Nicholas vs.S. Ann. United States. 342. 542.) . 504. of the sovereign taxing power as exerted by governments in the exercise of jurisdiction upon any one of these grounds. to the actualities of each case.Originally. the protection of its laws. 27.. been relaxed. 61. Moore. and must "yield to established fact of legal ownership. 60 Law. 41 S. 1. actual presence and control elsewhere. Coolidge. 389. Ct. 47 S. and cannot be applied to limit or control the right of the state to tax property within its jurisdiction" (State Board of Assessors vs.. properties and rights within its jurisdiction and enjoying. It is on the basis of the first consideration that the case of Burnet vs. ed. the case of Cury vs. Ct. 9192) There is thus a marked shift from artificial postulates of law. 1081.. . There does not appear. in disposing of the argument that the imposition of the federal estate tax is precluded by the due-process clause of the Fifth Amendment. 404)... But this rule has. 414.S. An examination of the adjudged cases will disclose that 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. 280 U. 52 S. Union p.. ed.. 93. jurisdiction based on distinct grounds — the citizenship of the owner. 439.. the court ruled: . Heiner vs. 481. L. 769. has been described as a mere "fiction of law having its origin in consideration of general convenience and public policy. in sustaining the power of the Federal Government to tax properties within its borders. Brooks. 489. the court. 1 Ann. by death of a non-resident. supra. and (2) upon the principle that as o intangibles. In Burnet vs. the source of income. 274 U. 496. 282 U. S. 154.. Comptoir National D'Escompte. R. the settled law in the United States is that intangibles have only one situs for the purpose of inheritance tax. 326. 49 Law. 312. 107. ed.. 97. Ct. 969. . . 195 U. Cas.. Cas. (Emphasis ours. 86. 63 Law. 713. 249 U. If in the instant case the Federal Government had jurisdiction to impose the tax. 1192.. 52 A. R. 403. R. 191 U. vs. 76 Law ed. 31 S. 229.S. 358. A. 399. of late. formulated for reasons of convenience. 220 U. Ct. Knowlton vs. supra.. in a State's taxing property physically situated within its borders. 75 Law ed. 24... 44 Law. 476. 1184. 388. 473. 71 Law ed. S. 178 U. however.. held: The point. or hurtful to the polity of nations. .. thus. of shares of stock in a domestic (America) corporation. Ct.. Russian Volunteer Fleet vs. Co. ed. and that such situs is in the domicile of the decedent at the time of his death. distinct relationships which may be entered into with respect thereto. the situs of the property — efforts have been made to preclude multiple taxation through the negotiation of appropriate international conventions. These endeavors. 779. 285 U. 747. liberty. 1917B. was decided by the Federal Supreme Court. 20 S. S. to be anything contrary to the principles of international law. Donnon.." (Safe Deposit & Trust Co. Brushaber vs.. a priori. Ct. 996. being solely one of jurisdiction to tax. Ct. MaGray vs. L. considering the multiple. 78. ed.. 493. there is manifestly no ground for assailing it. Ct.. Flint vs.S. wherever its owner may have been domiciled at the time of his death. Virginia. Doremus. and not in denial. McCanless. and property of all persons — citizens and friendly aliens alike.. and cannot be applied if to do so result in inescapable and patent injustice. 415. . S. 36 S.. 83. wherever its owner may have been domiciled at the time of his death. 1912B. Brooks. 1917 D. 39 S. 214. 710. (See pages 396397. upon which the rule rests. 41. Cas.S. The maxim mobilia sequuntur personam. United States vs.. involves none of the other consideration raised by confiscatory or arbitrary legislation inconsistent with the fundamental conceptions of justice which are embodied in the due-process clause for the protection of life.. that is... Stone Tracy Co. . As jurisdiction may exist in more than one government.. and on the basis of the second consideration.) And. 55 Law. 531. his domicile. 414. . 772. 236. have proceeded upon express or implied recognition. a single location in space is hardly possible. 240 U. 153. sustaining the power of the Government to impose an inheritance tax upon transmission. 24 S. regardless of the situs of their corresponding certificates. 109. Ann.. 561. 1312..

as declared by Chief Justice Marshall in McCulloch vs. which means only that it is the identify owner at his domicile which gives jurisdiction to tax.. 677. 277 U.. 281 U. 1056. so as to avail himself of the protection and benefit of the laws of another state. supra. 670. 316. with costs against petitioner-appellant.. 301 U. by the taxpayer's activities elsewhere. For all practical purposes. and the rule even workable substitute for the reasons may exist in any particular case to support the constitutional power of each state concerned to tax.In Curry vs. In the instant case. Blodgett vs.. McCanless. 81 Law.. 749. 72 Law. it is undeniable that the state of domicile is not deprived.. . 4 Law. through dominion over tangibles or over persons whose relationships are source of intangibles rights. 108 A. S. L. the jurisdiction of the Philippine Government to tax must be upheld. protection. supra. the owner residing in California has extended here her activities with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Maryland. 308. Ct. 1061. ed. then. 81 Law. 74 Law. 1351. In other words. to whom they have been delivered and indorsed in blank. S. 241. Missouri. L.. First Bank Stock Corp. L. benefit. the reason for a single place of taxation no longer obtains. . S. ed. Judgment is affirmed.. supra. 436. Whether we regard the right of a state to tax as founded on power over the object taxed. sustained the power of each State to impose the tax. in deciding the question of whether the States of Alabama and Tennessee may each constitutionally impose death taxes upon the transfer of an interest in intangibles held in trust by an Alabama trustee but passing under the will of a beneficiary decedent domiciles in Tennessee. Shares or corporate stock be taxed at the domicile of the shareholder and also at that of the corporation which the taxing state has created and controls... 300 U. 228. 1347-1349. and income may be taxed both by the state where it is earned and by the state of the recipient's domicile. But when the taxpayer extends his activities with respect to his intangibles. every legal interest growing out of all the complex legal relationships which may be entered into between persons. and they were in possession of one Syrena McKee. . without prejudice to her liability to the owner for violation of instructions. and there taxing. This indorsement gave Syrena McKee the right to vote the certificates at the general meetings of the stockholders. Minnesota. In arriving at this conclusion. Accordingly. the court. and still recognized by this Court as valid. 72 A. (P. to collect dividends. 579.. the certificates of stock have remained in this country up to the time when the deceased died in California. ed. This is the case because in point of actuality those interests may be too diverse in their relationships to various taxing jurisdictions to admit of unitary treatment without discarding modes of taxation long accepted and applied before the Fourteen Amendment was adopted. 410. and power over the subject matter are not confined to either state.. 50 S. 1065. or both. and dispose of the shares in the manner she may deem fit. and so hold. New York ex rel. Ct.. Ct. the actual situs of the shares of stock is in the Philippines. Graves. 4 Wheat. 466. Syrena McKee had the legal title to the certificates of stock held in trust for the true owner thereof. 568. 666.. 57 S.. supra.S. cf. vs. that the issue here involved is controlled by those doctrines..(p. We find it impossible to say that taxation of intangibles can be reduced in every case to the mere mechanical operation of locating at a single place. 234. the corporation being domiciled therein. . ed. 1303. 313. by saying that his intangibles are taxed at their situs and not elsewhere. of its constitutional jurisdiction to tax.. R. in such a way as to bring his person or properly within the reach of the tax gatherer there. R.. 1. the court made the following observations: In cases where the owner of intangibles confines his activity to the place of his domicile it has been found convenient to substitute a rule for a reason. ed. 113 A. And besides. secretary of the Benguet Consolidated Mining Company. Cohn vs. Baldwin vs. by invoking the maxim mobilia sequuntur personam. and consequently that there are many circumstances in which more than one state may have jurisdiction to impose a tax and measure it by some or all of the taxpayer's intangibles.) . R. We believe. Ct. .S. or on the benefit and protection conferred by the taxing sovereignty. or perhaps less artificially.) We need not belabor the doctrines of the foregoing cases. . 57 S. Silberman. 721.

Miller.047.. In 1905. After his retirement. he came to the Philippines.: These are two separate appeals. Nos. Miller owned the following properties: . California. Assistant Solicitor General Ramon L. and Miller joined the Board of Censors of the United States Navy. and the other by Domingo de Lara as Ancilliary Administrator of the estate of Hugo H. MONTEMAYOR.. C. JJ. California.J. vs. book publishers with principal offices in New York and Boston. Kierulf for the Collector of Internal Revenue. Miller. covering not only the Philippines. Miller is hereby modified in accordance with the computation attached as Annex "A" of this decision. from the decision of the Court of Tax Appeals of June 25. respondent's assessment for estate and inheritance taxes upon the estate of the decedent Hugo H. Petitioner is hereby ordered to pay the amount of P2. His principal work was selling books specially written for Philippine schools. he was transferred to Catbalogan. and since then. up to the outbreak of the Pacific War.A. in 1883. de Lara. Republic of the Philippines SUPREME COURT Manila EN BANC G.. U. staying three or four months. was closed.22 within thirty (30) days from the time this decision has become final. but also China and Japan. 1944. concur. respondents. was born in Santa Cruz. California". On January 17. Diaz and Concepcion. Imperial.S.. De Leon and Veneracion for Domingo E. later on referred to as the Collector. Santa Cruz. one by the Collector of Internal Revenue.R. 1958 THE COLLECTOR OF INTERNAL REVENUE. From 1922 up to December 7. Miller accepted an executive position in the local branch of Ginn & Co. After the death of his wife in 1931. MILLER (Deceased). he was stationed in the Philippines as Oriental representative of Ginn & Co. Allison J. The facts in the case gathered from the record and as found by the Court of Tax Appeals may be briefly stated as follows: Hugo H. Samar. 1941. On December 7. he was taken prisoner by the Japanese forces in Leyte. with the following dispositive part: WHEREFORE. 1941. first as a teacher and later as a division superintendent of schools. U. he was connected with the public school system. where he was reported to have been executed by said forces on March 11. From 1906 to 1917. the office of Ginn & Co. Miller lived at the Manila Hotel. an American citizen. In case of failure to pay the amount of P2. 1944. nothing has been heard from him. 1941.047. because of the Pacific War. He never lived in any residential house in the Philippines. but she used to come to the Philippines for brief visits with Miller. and the COURT OF TAX APPEALS. Gibbs. Miller also used to visit his wife in California. Miller executed his last will and testament in Santa Cruz. At the time of his death in 1944. His wife remained at their home in Ben-Lomond. the 5 per cent surcharge and the corresponding interest due thereon shall be paid as a part of the tax. as ancilliary administrator of the estate of HUGO H.A.. In or about the year 1922. later retiring under the Osmeiia Retirement Act. and in January. petitioner.S. where he was staying at the outbreak of the Pacific War. 1955. DOMINGO DE LARA. he transferred from the Manila Hotel to the Army and Navy Club. Zafra. in which he declared that he was "of Santa Cruz. L-9456 and L-9481 January 6. Avancena and Cezar L.. J. During the war.22 representing estate taxes due. California. together with the interests and other increments.Avanceña.

............. reporting a liability of P269....S...... California valued at ....... 51.. at the time of his death...S.... it is first necessary to decide whether the decedent was a resident or a non-resident of the Philippines at the time of his death. . valued at ... 1949.... State of California" at the time of his death in 1944.......... filed an estate and inheritance tax return with the Collector.00 16............637........906. The estate of Miller protested the assessment of the liability for estate and inheritance taxes.............00 2. which court by order of November 21.. as of January 16....... which was received by the said executor on April 3......200.92....... ....178. Savings Bonds........... Said court subsequently issued an order and decree of settlement of final account and final distribution..... Accounts Receivable from various persons in the United States including notes ............ co-executor named in Miller's will.. This assessment was appealed by De Lara as Ancilliary Administrator before the Board of Tax Appeals.16 Shares of stock in Philippine Corporations........... Corporations and U.................. that Miller during his long stay in the Philippines had required a "residence" in this country....... 1950.. valued at .... Thereafter ancilliary proceedings were filed by the executors of the will before the Court of First Instance of Manila............20 36........300......000. 1946.... 1946.................... worth.......... also found that Miller was a resident of Santa Cruz... In determining the "gross estate" of a decedent...... Tangible Personal property. in the course of which Miller's will of January 17.......... California valued at ... 123....... Real property situated in Burlingame.... National Trust and Savings Association of San Francisco California......27 for inheritance taxes........ under Section 122 in relation to section 88 of our Tax Code........062......00 21......74 Stocks in U. After due investigation.....Real Property situated in Ben-Lomond..... the Collector assessed estate and inheritance taxes. the Bank of America............. admitted to probate the will of Miller was probated in the California court. residence and domicile have different meanings........ California........ which appeal was later heard and decided by the Court of Tax Appeals..43 for taxes and P230...................45 Testate proceedings were instituted before the Court of California in Santa Cruz County....... wherein it found that Miller was a "resident of the County of Santa Cruz....... including penalties and other increments at P77. Santa Cruz.... San Mateo......... and was a ............140. P 5........... On July 29....... Cash in the banks in the United States..... 1941 was admitted to probate on May 10... that tax laws on estate and inheritance taxes only mention resident and non-resident. covering only the shares of stock issued by Philippines corporations...... The Collector maintains that under the tax laws. and no reference whatsoever is made to domicile except in Section 93 (d) of the Tax Code.... 1954....

California. During his country. From the foregoing. 325). and power over the subject matter are no longer confined to California. The Ancilliary Administrator. vs. . there is reason to believe that the Legislature adopted the American (Federal and State) estate and inheritance tax system (see e. In the instant case. 62 ALR 1008). and that— The incidence of estate and succession has historically been determined by domicile and situs and not by the fact of actual residence. Brooks.906. II.S. 469-470). (1928) 24 F 2d 918. but also to the Philippines (Wells Fargo Bank & Union Trust Co. benefit.S. the right to vote the certificates at stockholders' meetings. for purposes of estate and taxation. cert. (Bowring vs. extended his activities with respect to his intangibles." (Brief for the Petitioner. Miller took out a property insurance policy and indicated therein his address as Santa Cruz. California". the case involving the application of the term residence employed in the inheritance tax law at the time (section 1536. To his home in California. as stated by the Tax Court. pages 122-124. Posadas. in such a way as to bring his person or property within the reach of the Philippines. as already stated. 1940. Miller had his residence or domicile in Santa Cruz. 624. is taxable at the domicile of the owner (Miller) under the doctrine of mobilia secuuntur persona. and consequently. for estate tax purposes. and that the two were used intercnangeabiy. In the United States. Report to the Tax Commision of the Philippines. Moreover. and that consequently. paricularly that of Velilla vs. curios and other similar collections from the Philippines and the Far East. 1358. The bulk of his savings and properties were in the United States. 86 L. when he during his life time. equally maintains that for estate and inheritance tax purposes. 378. Cases were cited in support of this view. his intangible personal properties situated here as well as in the United States were subject to said taxes. so that the right to collect the estate and inheritance taxes cannot be questioned (Wells Fargo Bank & Union Trust Co. and in American jurisprudence. like shares of stock in the Philippines. the actual situs of the shares of stock is in the Philippines. the term "residence" is synonymous with the term domicile. 70 Phil. 288 U. 62 Phil. all enjoy the protection of the Philippines. however. which provides as follows: . such as carvings.1548 of the Revised Administrative Code). Aldrich. the only properties of his estate subject to estate and inheritance taxes are those shares of stock issued by Philippines corporations. It is true. In November. We also agree with the Court of Tax Appeals that at the time of his death. Except this wife never stayed in the Philippines. a resident is considered one who at the time of his death had his domicile in the United States. consistently with due process. (1942) 316 U. impose a tax upon transfer by death of shares of stock in a domestic corporation owned by a decedent whose domicile was outside of the state (Burnett vs.resident thereof at the time of his death. vs.608). nevertheless. so as to avail himself of the protection and benefits of the laws of the Philippines.S. Ed. California. the prevailing construction given by the courts to the "residence" was synonymous with domicile.45. this aside from the fact that Miller. and the right to dispose of the shares including the transmission and acquisition thereof by succession. the reason for a single place of taxation no longer obtainsprotection. at 921. the corporation being domiciled herein: and besides. p. California. that while it may be the general rule that personal property. 174. executed his will in Santa Cruz. Vol. wherein this Tribunal used the terms "residence" and "domicile" interchangeably and without distinction. it is clear that as a non-resident of the Philippines. the right to collect dividends. It is recognized that the state may. p. "residence" is interpreted as synonymous with domicile. National Internal Revenue Code Annotated. State Commission vs. cited in I Dalupan. wherein he stated that he was "of Santa Cruz. valued at P51. Miller never acquired a house for residential purposes for he stayed at the Manila Hotel and later on at the Army and Navy Club.g. Collector (1940). 6 AFTR 7498. 79-80). he had been sending souvenirs. Collector supra). . The Ancilliary Administrator for purposes of exemption invokes the proviso in Section 122 of the Tax Code. Bowers. it will be presumed that in using the term residence or resident in the meaning as construed and interpreted by the Court. We agree with the Court of Tax Appeals that at the time that The National Internal Revenue Code was promulgated in 1939. den (1928) 272 U. .

California Revenue and Taxation Code. because this exemption is allowed on all gross estates of non-residents irrespective of whether it involves tangible or intangible. that the Ancilliary Administrator is entitled to exemption from the tax on the intangible personal property found in the Philippines. who are not citizens thereof. Rates of estate tax. . there is already a reduction on gross estate tax in the amount of P3. 85. Considering the State of California as a foreign country in relation to section 122 of Our Tax Code we beleive and hold. now reenacted as Section 13851. Territory or foreign state or country of residence of such decedent.. which in part provides as follows: SEC. As regards the exemption or reduction of P4. was to reduce the burden of multiple taxation. The following exemption from the tax are hereby allowed: xxx xxx xxx. a tax equal to the sum of the following percentages of the value of the net estate determined as provided in sections 88 and 89: . however. collected.000 from the estates of non-residents. assessed. Section 6 of the California Inheritance Tax Act of 1935. reads as follows: SEC. . of the Philippine not residing in that foreign country. before it was amended. The Ancilliary Administrator bases his claim of exemption on (a) the exemption of non-residents from the California inheritance taxes with respect to intangibles. (7) The tax imposed by this act in respect of intangible personal property shall not be payable if decedent is a resident of a State or Territory of the United States or a foreign state or country which at the time of his death imposed a legacy. and thirdly.000 allowed under the Federal Estate Tax Law is in the nature of deduction and not of an exemption. or (b) if the laws of the foreign country of which the decedent was resident at the tune of his death allow a similar exemption from transfer taxes or death taxes of every character in respect of intangible personal property owned by citizen. Incidentally. whether a resident or non-resident of the Philippines. Furthermore. we agree with the Tax Court that the amount of $2. . . irrespective of whether there is a corresponding or similar exemption from transfer or death taxes of non-residents of the Philippines. both in his place of residence and domicile and the place where those properties are found. 6. this exemption granted to non-residents under the provision of Section 122 of our Tax Code. and paid upon the transfer of the net estate of every decedent. . under the United States Federal Estate Tax Law. succession of death tax in respect of intangible personal property within the State or Territory or foreign state or country of residents of the States or Territory or foreign state or country of residence of the decedent at the time of his death contained a reciprocal provision under which non-residents were exempted from legacy or succession taxes or death taxes of every character in respect of intangible personal property providing the State or Territory or foreign state or country of residence of such non-residents allowed a similar exemption to residents of the State. That no tax shall be collected under this Title in respect of intangible personal property (a) if the decedent at the time of his death was a resident of a foreign country which at the time of his death did not impose a transfer tax or death tax of any character in respect of intangible personal property of citizens of the Philippines not residing in that country. in the Philippines. . real or personal property."And Provided. as the Tax Court observes--. so that for these reasons petitioner cannot claim a reciprocity. and (b) the exemption by way of reduction of P4.000 under section 85 of the Tax Code.000.000 based on the reduction under the Federal Tax Law in the amount of $2. this exemption is allowed on all gross estate of non-residents of the United States.—There shall be levied. who are citizens of the United States. . as did the Tax Court. which otherwise would subject a decedent's intangible personal property to the inheritance tax. Besides.

which was passed for the benefit of veterans. ET AL. It will be noticed from the dispositive part of the appealed decision of the Tax Court that the Ancilliary Administrator was ordered to pay the amount of P2. No costs. Padilla. 1946 the municipal board of Iloilo City enacted Ordinance 86. CITY OF ILOILO. Concepcion. Gengos for defendant-appellant. We are satisfied that inasmuch as Miller.One per centrum of the amount by which the net estate exceeds three thousand pesos and does not exceed ten thousand pesos. partly or wholly engaged in or dedicated to business in the streets of J. Iznart and Aldeguer.B.00 per apartment.047. the appealed decision of the Court of Tax Appeals is hereby affirmed. 1968 EUSEBIO VILLANUEVA. P25. P24.. 1959. 1955. his estate is entitled to the benefits of this Act. but was killed by the Japanese military forces..M.. March 23. representing estate taxes due. that with the passage of Republic Act 2264. "it not appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to the City of Iloilo by its Charter. 1960 the municipal board of Iloilo City.L. Remedios Sian Villanueva and Eusebio Villanueva. L-12695. Jalandoni and Jamir for plaintiff-appellees. (SUPRA) Pelaez. Republic of the Philippines SUPREME COURT Manila EN BANC G. guerrillas or victims of Japanese atrocities who died during the Japanese occupation. believing.22. obviously. vs. On September 30. not only suffered deprivation of the war. Bautista Angelo. concur. (2) tenement house. series of 1960.: Appeal by the defendant City of Iloilo from the decision of the Court of First Instance of Iloilo declaring illegal Ordinance 11. A. owners of four tenement houses containing 34 apartments. L-26521 December 28. Paras. Bengzon. (3) tenement house. P12.J. "An Ordinance Imposing Municipal License Tax On Persons Engaged In The Business Of Operating Tenement Houses. With the above modification. Labrador. We deem it unnecessary to pass upon the other points raised in the appeal." On January 15. entitled. in City of Iloilo vs.00 annually. The validity and constitutionality of this ordinance were challenged by the spouses Eusebio Villanueva and Remedies Sian Villanueva.00 per apartment. defendants-appellants.. imposing license tax fees as follows: (1) tenement house (casa de vecindad). No. Consequently. . Assistant City Fiscal Vicente P. Reyes. J. Reyes. Basa. plaintiff-appellee. CASTRO. and Felix. C. together with interest and other increments.. the interests and other increments provided in the appealed judgment should not be paid by his estate. . JJ. it had acquired the authority or power to .R. The provisions of this Act could not be invoked during the hearing before the Tax Court for the reason that said Republic Act was approved only on June 10. partly or wholly engaged in business in any other streets. 1253. declared the ordinance ultra vires. This Court." and ordering the City to refund to the plaintiffs-appellees the sums of collected from them under the said ordinance. otherwise known as the Local Autonomy Act. Said Ancilliary Administrator invokes the provisions of Republic Act No.. J. Endencia.

Tenement houses: (a) Apartment house made of strong materials (b) Apartment house made of mixed materials II Rooming house of strong materials Rooming house of mixed materials III. series of 1960.a. pursuant to the provisions of Republic Act No. Iznart. Tenement houses at the streets surrounding the super market as soon as said place is declared commercial P20. Guanco and Ledesma from Plazoleto Gay to Valeria.00 per door p.a. P5.M. — A municipal license tax is hereby imposed on tenement houses in accordance with the schedule of payment herein provided.a. Section 3. — Any person found violating this ordinance shall be punished with a fine note exceeding Two Hundred Pesos (P200.a.00) or an imprisonment of not more than six (6) months or both at the discretion of the Court.a. otherwise known as the Autonomy Law of Local Government. Tenement house partly or wholly engaged in or dedicated to business in any other street V. that: Section 1. P30. P10. Section 5. IV. 2264.a. Section 2. St. — All ordinances or parts thereof inconsistent herewith are hereby amended.00 per door p. P24. Aldeguer. Section 4. Basa. P10. enacted Ordinance 11.00 per door p. Tenement house partly or wholly engaged in or dedicated to business in the following streets: J. — Tenement house as contemplated in this ordinance shall mean any building or dwelling for renting space divided into separate apartments or accessorias.enact an ordinance similar to that previously declared by this Court as ultra vires. — The municipal license tax provided in Section 1 hereof shall be as follows: I. P12. hereunder quoted in full: AN ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS ENGAGED IN THE BUSINESS OF OPERATING TENEMENT HOUSES Be it ordained by the Municipal Board of the City of Iloilo.00 per door p.00 per door p.00 per door p. .a.00 per door p.

By virtue of the ordinance in question. for the years 1960-1964.Section 6 — This ordinance shall take effect upon approval. The first floor is utilized as a store. Is the City of Iloilo empowered by the Local Autonomy Act to impose tenement taxes? 3. violate the rule of uniformity of taxation? 1. aggregately containing 43 apartments. municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. in the aforementioned court. apartment buildings for rent in Bacolod. 2. licenses or fees. In Iloilo City. Eusebio Villanueva has likewise been paying real estate taxes on his property. Eusebio Villanueva owns. and from the appellees Pio Sian Melliza. to regulate and impose reasonable fees for services rendered in connection with any business. Any provision of law to the contrary notwithstanding. while the other appellees and the same Remedios S. series of 1960. praying that Ordinance 11. municipality or municipal district. municipality or municipal district and otherwise to levy for public purposes. be declared "invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact. 1966. On July 11. Topacio. The issues posed in this appeal are: 1. 1964. do not impose tenement or apartment taxes. Each of the appellees' apartments has a door leading to a street and is rented by either a Filipino or Chinese merchant.30. Baguio City and Quezon City. and an amended complaint. On March 30. Villanueva. and Remedios S. the appellees Eusebio Villanueva and Remedios S. Is Ordinance 11." for the reason that it penalizes owners of tenement houses who fail to pay the tax.00. oppressive and unreasonable because it carries a penal clause? 4. the municipal council of the municipality. The pertinent provisions of the Local Autonomy Act are hereunder quoted: SEC.824. Is Ordinance 11. impose any percentage tax on sales or other taxes in any form based thereon nor impose . (c) it constitutes not only double taxation. the sum of P1. Provided. That municipalities and municipal districts shall. January 15. likewise. Villanueva. or the municipal district council of the municipal district. the appellant City collected from spouses Eusebio Villanueva and Remedios S. Villanueva are owners of ten apartments. 1962 and April 24. profession or occupation being conducted within the city. ENACTED. all chartered cities. but treble at that and (d) it violates the rule of uniformity of taxation. series of 1960.1 the lower court rendered judgment declaring the ordinance illegal on the grounds that (a) "Republic Act 2264 does not empower cities to impose apartment taxes. series of 1960. against the City of Iloilo. in no case. and unconstitutional for being violative of the rule as to uniformity of taxation and for depriving said plaintiffs of the equal protection clause of the Constitution. to collect fees and charges for services rendered by the city. respectively. just and uniform taxes." and that the City be ordered to refund the amounts collected from them under the said ordinance. Villanueva are owners of five tenement houses." (b) the same is "oppressive and unreasonable. municipalities or municipal districts by requiring them to secure licences at rates fixed by the municipal board or city council of the city. which cities. while the second floor is used as a dwelling of the owner of the store. of the City of Iloilo. illegal because it imposes double taxation? 2. the plaintiffs-appellees filed a complaint. Dumaguete City. the sum of P5. Does Ordinance 11. according to him.317. series of 1960. 1960. for the years 1960-1964. or exercising privileges in chartered cities. Teresita S.

(b) Documentary stamp tax. under the provisions of the National Internal Revenue Code. inheritance. unless the ordinance shall provide otherwise: Provided. in his opinion. and which is not published primarily for the purpose of publishing advertisements. 2 Thus. Provided. oppressive." and does not transgress any constitutional provision or is not repugnant to a controlling statute. however." provided that the tax so levied is "for public purposes. when a tax. In such event. however. (d) Taxes on persons operating waterworks. the municipal board or city council in the case of cities and the municipal council or municipal district council in the case of municipalities or municipal districts may appeal the decision of the Secretary of Finance to the court during the pendency of which case the tax levied shall be considered as paid under protest. (e) Taxes on forest products and forest concessions. That the Secretary of Finance shall have authority to suspend the effectivity of any ordinance within one hundred and twenty days after its passage. levied under the authority of a city or municipal ordinance. That no city. wharfage dues on wharves owned by the national government. and exceptio firmat regulum in casibus non excepti. or confiscatory. gifts. (j) Taxes of any kind on banks. irrigation and other public utilities except electric light. excessive. the same comes within the ambit of the general rule. magazine.taxes on articles subject to specific tax. except gasoline. and persons paying franchise tax. legacies. and (k) Taxes on premiums paid by owners of property who obtain insurance directly with foreign insurance companies. tonnage. A tax ordinance shall go into effect on the fifteenth day after its passage. is not within the exceptions and limitations aforementioned. (i) Customs duties registration. (g) Taxes on income of any kind whatsoever. (h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof. . and other acquisitions mortis causa. pursuant to the rules of expressio unius est exclusio alterius. It is now settled that the aforequoted provisions of Republic Act 2264 confer on local governments broad taxing authority which extends to almost "everything. and all other kinds of customs fees. and when the said Secretary exercises this authority the effectivity of such ordinance shall be suspended. charges and duties. review or bulletin appearing at regular intervals and having fixed prices for for subscription and sale. if. municipality or municipal district may levy or impose any of the following: (a) Residence tax. (c) Taxes on the business of persons engaged in the printing and publication of any newspaper. heat and power. excepting those which are mentioned therein. insurance companies. the tax or fee therein levied or imposed is unjust. just and uniform. (f) Taxes on estates.

Com.. "The spirit. therefore. Remedios Sian Villanueva. is not within the ordinance. The tax is not a fixed proportion of the assessed value of the tenement houses. It is not payable at a designated time or date. rather than the letter. or a privilege tax. although not applicable to the City of Iloilo. which is a form of business or calling.Does the tax imposed by the ordinance in question fall within any of the exceptions provided for in section 2 of the Local Autonomy Act? For this purpose." 16. similar to the hotel or motel business. Act 158. 10 It is a fixed proportion11 of the assessed value of the property taxed. that the tax in question is not a real estate tax. water-closets. adopted the definition of a tenement house 18 as "any house or building. 9 The tax is usually single or indivisible. although both land and tenement houses may belong to the same owner." It is the phraseology of section 1 on which the appellees base their contention that the tax involved is a real estate tax which." The Supreme Court. and requires. On the contrary. has counterpart provisions in the Iloilo City Charter. while that which is in the letter. yards. particularly sections 1 and 3 thereof. the tax in question is not a real estate tax. contrary to the appellees' contention. It is our view. the intervention of assessors. the appellees confuse the tax with the real estate tax within the meaning of the Assessment Law. but such words must be taken in the connection in which they are used and the true character is to be deduced from the nature and essence of the subject. or to exercise a privilege. March 23. This is precisely one of . by itself. except when the land and building or improvements belong to separate owners. according to them. or an excise tax. occupation. or an ordinance determines the construction thereof. it is necessary to determine the true nature of the tax. what is within the spirit is within the ordinance although it is not within the letter thereof. Obviously.6 which." 17 The subject-matter of the ordinance is tenement houses whose nature and essence are expressly set forth in section 2 which defines a tenement house as "any building or dwelling for renting space divided into separate apartments or accessorias. or calling. although not within the spirit. but having a common right in the halls. et al. and does not require the intervention of assessors or appraisers. stairways.4 Indeed. being necessarily offered for rent or lease by their very nature and essence. The appellees strongly maintain that it is a "property tax" or "real estate tax. designates the tax imposed as a "municipal license tax" which. although the value may vary in accordance with such factor. or hired out to be occupied. although the land and building or improvements erected thereon are assessed separately. means an "imposition or exaction on the right to use or dispose of property. subject-matter. or the operation of lodging houses or boarding houses. or portion thereof.13 and it constitutes a superior lien on and is enforceable against the property14 subject to such taxation. "The character of a tax is not to be fixed by any isolated words that may beemployed in the statute creating it. and is not enforceable against the tenement houses either by sale or distraint. not specially exempted. the title of the ordinance designates it as a "municipal license tax on persons engaged in the business of operating tenement houses. 38 of the Iloilo City Charter. makes the ordinance ultra vires as it imposes a levy "in excess of the one per centum real estate tax allowable under Sec." or a license tax. otherwise the subject-matter would have been not merely tenement houses. or some of them." 15 It is within neither the letter nor the spirit of the ordinance that an additional real estate tax is being imposed. therefore constitute a distinct form of business or calling. consequence and effect.7 A real estate tax is a direct tax on the ownership of lands and buildings or other improvements thereon. it is plain from the context of the ordinance that the intention is to impose a license tax on the operation of tenement houses. and not by imprisonment of the owner. or privies. and the court looks less to its words and more to the context. It is not a tax on the land on which the tenement houses are erected." while section 1 thereof states that a "municipal license tax is hereby imposed on tenement houses. so living and cooking. in both its title and body." 3 and not a "tax on persons engaged in any occupation or business or exercising privileges. therefore. 12 It is collected or payable at appointed times." Tenement houses. The ordinance. L-12695. The tax imposed by the ordinance in question does not possess the aforestated attributes. 1959." 5. Accordingly. Clearly. in City of Iloilo vs. leased.8 and is payable regardless of whether the property is used or not. which is rented. or is occupied. to pursue a business. as the home or residence of three families or more living independently of each other and doing their cooking in the premises or by more than two families upon any floor.

par. fix the license fee for. besides the tenement tax under the said ordinance. There is nothing inherently obnoxious in the exaction of license fees or taxes with respect to the same occupation. the argument against double taxation may not be invoked. whether on their account as principals or as owners of rental property or properties. theaters. cafes. the imposition by the ordinance of a license tax on persons engaged in the business of operating tenement houses finds authority in section 2 of the Local Autonomy Act which provides that chartered cities have the authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. calling or activity by both the State and a political subdivision thereof. in the said case of City of Iloilo vs. The contention that the plaintiffs-appellees are doubly taxed because they are paying the real estate taxes and the tenement tax imposed by the ordinance in question. "And it not appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to the City of Iloilo by its Charter. although the municipal board of Iloilo City is empowered. the imposition of the latter kind of tax being in no sensea double tax. Thus. Title V. Government. is also devoid of merit.20." because "buildings pay real estate taxes and also income taxes as provided for in Sec. and "otherwise to levy for public purposes. within the same jurisdiction or taxing district. both taxes must be imposed on the same property or subject-matter." are considered "real estate dealers" and are taxed according to the amount of their annual income. livery garages. public warehouses.21. or taxing authority. for the same purpose. "to tax." tenement houses. supra. declared Ordinance 86 ultra vires. under sec. just and uniform taxes. Remedios Sian Villanueva. lodging houses. It is a wellsettled rule that a license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax."23 It has been shown that a real estate tax and the tenement tax imposed by the ordinance. are not of the same kind or character. in the aforesaid case.19 are not mentioned in the aforestated section of the City Charter of Iloilo. or fees. and they must be the same kind or character of tax. and regulate hotels. and at the same time impose a license tax on that calling. because. restaurants.. cinematographs. Called by either name. The lower court has interchangeably denominated the tax in question as a tenement tax or an apartment tax. or exercising privileges within their respective territories. pawnshops. . during the same taxing period." Obviously. The trial court condemned the ordinance as constituting "not only double taxation but treble at that. refreshment parlors. boarding houses. by the same State. The same tax may be imposed by the national government as well as by the local government. j of its Charter. of the National Internal Revenue Code." . et al. 182 (A) (3) (s) of the National Internal Revenue Code. and still taxable under the ordinance in question. licenses. 2. While it is true that the plaintiffs-appellees are taxable under the aforesaid provisions of the National Internal Revenue Code as real estate dealers. which constitute a different business enterprise. 21.22. The State may collect an ad valorem tax on property used in a calling. this Court explicitly said:.the reasons why this Court. it is not among the exceptions listed in section 2 of the Local Autonomy Act. what the trial court refers to as "income taxes" are the fixed taxes on business and occupation provided for in section 182." . the exercise of such power cannot be assumed and hence the ordinance in question is ultra vires insofar as it taxes a tenement house such as those belonging to defendants. On the other hand. "In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed twice when it should be taxed but once. by virtue of which persons engaged in "leasing or renting property. although imposed by the sametaxing authority.

It has likewise ruled that "taxes are uniform and equal when imposed upon all property of the same class or character within the taxing authority. 24 It is something not favored. which shall not exceed a fine of two hundred pesos or six months' imprisonment. supra." In Punsalan."25." but also unconstitutional as it subjects the owners of tenement houses to criminal prosecution for non-payment of an obligation which is purely sum of money.00 or imprisonment of 6 months or both. ". however. or upon all persons of a certain class.30. Neither is the rule of equality and uniformity violated by the fact that tenement taxesare not imposed in other cities. Mun.. without regard to their property or the occupations in which they may be engaged." 31 The fact. It is our view that both assertions are undeserving of extended attention. The trial court brands the ordinance as violative of the rule of uniformity of taxation. to overthrow the presumption that tax statutes are intended to operate uniformly and equally. because while the owners of the other buildings only pay real estate tax and income taxes the ordinance imposes aside from these two taxes an apartment or tenement tax. that the owners of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in question is no argument at all against uniformity and equality of the tax imposition. when it made the above ruling. 3. supra." The lower court apparently had in mind. equality and uniformity of taxation is accomplished. are permitted to escape such imposition. the charter of Iloilo City29 empowers its municipal board to "fix penalties for violations of ordinances. for the latter is a tax of a fixed amount upon all persons."27 Nor is the tax in question a poll tax. or both such fine and imprisonment for each offense." because "only the taxpayers of the City of Iloilo are singled out to pay taxes on their tenement houses. 4. while citizens of other cities.At all events. that "a tax is not a debt in the sense of an obligation incurred by contract. as owners of tenement houses in the City of Iloilo. this Court overruled the pronouncement of the lower court declaring illegal and void an ordinance imposing an occupation tax on persons exercising various professions in the City of Manilabecause it imposed a penalty of fine and imprisonment for its violation. for the same rule does not require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time." . et al.33 The plaintiffs-appellees.". as . the tax in question is not oppressive in the manner the lower court puts it. and therefore is not within the meaning of constitutional or statutory provisions abolishing or prohibiting imprisonment for debt. This Court has already ruled that tenement houses constitute a distinct class of property. It should be noted that in the assessment of real estate tax all parts of the building or buildings are included so that the corresponding real estate tax could be properly imposed. where their councils do not enact a similar tax ordinance. if the owner or owners of the tenement buildings divided into apartments do not pay the tenement or apartment tax fixed in said ordinance. provided some other constitutional requirement is not thereby violated." 26 It is elementary. have not shown that the tax burden is not equally or uniformly distributed among them. 32 So long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses similarly classified or situated. in conflict with that prohibition.. express or implied. On the other hand. such as the requirement that taxes must be uniform. The last important issue posed by the appellees is that since the ordinance in the case at bar is a mere reproduction of Ordinance 86 of the City of Iloilo which was declared by this Court in L-12695. 5. The appellant City takes exception to the conclusion of the lower court that the ordinance is not only oppressive because it "carries a penal clause of a fine of P200. therefore. Complementing the above ruling of the lower court. there is no constitutional prohibition against double taxation in the Philippines. If aside from the real estate tax the owner or owners of the tenement buildings should pay apartment taxes as required in the ordinance then it will violate the rule of uniformity of taxation. vs.34. 28 Therefore. the provision of the Constitution that "no person shall be imprisoned for a debt or non-payment of a poll tax. resident within a specified territory. the appellees argue that there is "lack of uniformity" and "relative inequality. and a statute or ordinance which punishes the non-payment thereof by fine or imprisonment is not. but is permissible. Board of Manila.

Concepcion. Board of the City of Iloilo. 1965. Mun. that. which upon its passage became Republic Act No. of Palawan. "Neither the plaintiff nor the lower court maintains that the subject matter of the ordinance in question comes under any of the foregoing exceptions. To dispose of this contention. The record was later reconstituted under Judge Ramon Blanco. the tax so levied must be sustained as valid. Hodges vs. per Concepcion.. called by any name percentage tax or sales tax . No pronouncement as to costs.B. and. the decision in that case should be accorded the effect of res judicata in the present case or should constitute estoppel by judgment. JJ. 2264. concur.L." . "Exceptio firmat regulum in casibus non excepti. under its provisions. it must be regarded as coming within the purview of the general rule.: . C. Hence. and the said ordinance was enacted pursuant to the provisions of the City charter. 1967. Mun. Sanchez. that the tax levied. Makalintal. Dizon.. 1959. Heretofore. while the ordinance in the case at bar was enacted pursuant to the provisions of the Local Autonomy Act. There is likewise no identity of cause of action in the two cases because the main issue in L-12695 was whether the City of Iloilo had the power under its charter to impose the tax levied by Ordinance 11.. J.N. G. vs. excepting those which are mentioned therein.comes under any of the specific exceptions listed in Section 2 of the Local Autonomy Act..R. Moreover.Prior to the enactment of the Local Autonomy Act the taxes that could be legally levied by local governments were only those specifically authorized by law. Reyes.. just and uniform" (Nin Bay Mining Co. No.. of Palawan. Footnotes 1 The record discloses that the delay caused in the lower court was due to the loss of the original record while the same was in the possession of the late Judge Perfecto Querubin.. the complaint is hereby dismissed. under the provisions of section 2 of the Local Autonomy Act. L-20125. the judgment a quo is reversed. J. under the Local Autonomy Act which took effect on June 19. 1959. ACCORDINGLY. local governments may now tax any taxable subject-matter or object not included in the enumeration of matters removed from the taxing power of local governments. 1965)." Since its public purpose. The Mun.Fernando and Capistrano.. 12.. the ordinance should be deemed to come within the purview of the general rule. As the maxim goes. 2 Nin Bay Mining Co.. excepting those things which are mentioned therein.. local governments would be "able to do everything. and therefore was not available for consideration in the decision in L-12695 which was promulgated on March 23. and their power to tax was construed in strictissimi juris. C. and we do not believe it is possible to show. the ordinance in questionbeing valid. July 20. L-20125. Indeed. ". explicitly informed the House of Representatives when he urged the same to approve it. Prov. series of 1960.: .ultra vires. 35. J. July 20." . et al. we have announced the doctrine that the grant of the power to tax to chartered cities under section 2 of the Local Autonomy Act is sufficiently plenary to cover "everything. There is no showing. of Roxas. it suffices to say that there is no identity of subject-matter in that case andthis case because the subject-matter in L-12695 was an ordinance which dealt not only with tenement houses but also warehouses. per Castro. justness and uniformity of application are not disputed. under the rule "expressio unius est exclusio alterius". Zaldivar. vs.J." subject only to the limitation that the tax so levied is for "public purposes. of Roxas. the sponsor of the bill. Prov." (Re: Ordinance imposing a tax on . Not being excepted. L-18276. Jan.

July 21. and collected at appointed times. Mun... or calling. to nullify a taxing ordinance.]. Co. 4 "The term "license tax" or "license fee" implies an imposition or exaction on the right to use or dispose of a property. Ormoc Sugar Co. 12. otherwise valid. and." (36 Words and Phrases.. "A "real estate tax" is a tax in rem against realty without personal liability therefor on part of owner thereof. Jan." [Re: Ordinance imposing tax on all productions of centrifugal sugar (B-sugar) locally sold or sold within the Phil. Wadena County." (51 Am. Gruet... From and after June 19. 149 Tenn." (51 Am. and a judgment recovered in proceedings for enforcement of real estate tax is one in rem against the realty without personal liability against the owner. it is said that an excise tax is a charge imposed upon the performance of an act. the enjoyment of a privilege. ". It is ordinarily assessed at stated periods determined in advance. Board. W. and the two are often used interchangeably. L-24322. the sphere of autonomy of a chartered city in the enactment of taxing measures has been considerably enlarged. vs. 2d. Considering the indubitable policy expressly set forth in the Local Autonomy Act. "The term "excise tax" is synonymous with "privilege tax". the obligation to pay which is absolute and unavoidable and it is not based upon any voluntary action of the person assessed. vs.). or to exercise a privilege. when the Local Autonomy Act was enacted. and its payment is usually enforced by sale of the property taxed. 263). 61) . occupation. The question before this Court is one of power. and whether a tax is characterized in the statute imposing it as a privilege tax or an excise tax is merely a choice of synonymous words. to pursue a business. Mun. 31. Senter. etc. at P.. 1959. Jur. Jur. citing Bank of Commerce & T. 569. 325-v26) . of 1/2% of 1% of the contract price or consideration. J. L-18290. Jur. A property tax is ordinarily measured by the amount of property owned by the taxpayer on a given day. and not on the total amount owned by him during the year. 1967. or the engaging in an occupation. 39 N. an objection of such a generalized character deserves but scant sympathy from this Court. 229 Minn. Jur. 164. by imprisonment of the person assessed. 1967. such broad taxing authority has been implemented and vitalized by this Court. Inc." (33 Am. 1963.. 286. the invocation of such a talismanic formula as "restraint of trade" without more no longer suffices. In the absence of a clear and specific showing that there was a transgression of a constitutional provision or repugnancy to a controlling statute. 260 SW 144) . 171. per Fernando. L-18276. 3 "Taxes on property are taxes assessed on all property or on all property of a certain class located within a certain territory on a specified date in proportion to its value.20 per picul. occassionally. "Thus." (51 Am. for an excise tax is a privilege tax. Jan. . ". vs. 57) .sales or real estate property situated in the City of Iloilo. et al. or in accordance with some other reasonable method of apportionment. citing Land O'Lakes Dairy Co. assuming it ever did. "In a number of decisions starting from City of Bacolod v. Board of Ormoc City. 62. to Hodges vs.: .

Jur. 51 Am. 16 51 Am. Act 158. 1959: "As may be seen from the definition of each establishment hereunder quoted. 38 of Com. includes all land within the district by which the tax is levied. and can only be removed by the payment of the tax and penalty. 38. Act 158 provides: "An annual tax of one per centum on the assessed value of all real estate in the city subject to taxation shall be levied by the city treasurer.". De la Fuente." . a separate assessment of the property of each shall be made." (51 Am. L-12695."SECTION 1. et al. 325-326. Act 158 provides: "All taxes on real estate for any year shall be due and payable on the first day of January and from this date such taxes together with all penalties accruing thereto shall constitute a lien on the property subject to such taxation. Act 158 provides: "When it shall appear that there are separate owners of the land and the improvements thereon. Annual tax and penalties.. Act 158 provides: "Such lien shall be superior to all other liens. or boarding house. although of course the value may vary in accordance with such factor. 12 Secs.This Act shall be known as the Assessment Law. Webster's New International Dictionary. 29. Jan. even though as between the landlord and the tenant they are the property of the tenant and may be removed by him at the termination of the lease. 470 -. 2601. lodging house. 1951. Remedios Sian Villanueva. -. and is payable regardless of whether the property is used or not.An annual tax of one per centum on the assessed value of all real estate in the city subject to taxation shall be levied by the city treasurer.".. `SEC. sec. Extension and remission of the tax. Act 158. 10 "Real estate. and all buildings and other structures affixed to the land. 33 Am.Except in chartered cities. 73 Am. Jur. buildings. 8 9 51 Am. 56. 38 of Com. for purposes of taxation. L-2947. 28 to 34.5 "SEC. Incidence of real property tax. Manila Race Horse Trainers Assn. Jur. Jacob. and all rights and interests in such land. Jur. -. .. March 23.S. 7 Com. 15 62 C. 11. 2. 11 Sec. vs.." . p. mortgages or incumbrances of any kind whatsoever. 88 Phil. 53: "An ad valorem property tax is invariably based upon ownership of property. They have been established for different purposes. 13 Sec. These are different business enterprises. Com. `.) 422. Dec. a tenement house is different from hotel. 17 18 19 City of Iloilo vs. Com. 60. 38 of Com. and shall be enforceable against the property whether in the possession of the delinquent or any subsequent owner.J. machinery and other improvements not hereinafter specially exempted." . Act 158. assessed." .. 367. including land. 14 Gratt (Va. 438) Sec. Jur. 6 Commonwealth Act No. there shall be levied. 14 Sec. sections 28 to 53. . 59-60. 31 of Com. and collected an annual ad valorem tax on real property. 845. 2nd Ed. Title of this Act." . citing Eyre v.

approved on June 18. who has paid the corresponding annual privilege tax on professions required by Sec. Appeal from the decision of the CFI of Zambales.00 or by imprisonment of not more than 6 months. or parts thereof. 466. public accountants.. J. in the city and penalizes non-payment of the tax by a fine of not more than P200.)" . 492). The Supreme Court. . for failure to pay the occupation tax imposed by a municipal ordinance on owners of fishponds on lands of private ownership. That they have paid to the office concerned the registration fees required in their respective professions. dental surgeons.). Zambales. L-6975. Defendants-appellees were convicted by the JP Court of Palauig. Board of the City of Manila. and immigration brokers. Act No. XXX XXX XXX "(s) Stockbrokers. 341. although section 201 [now sec. 1950. or by both such fine and imprisonment in the discretion of the court. executive orders and regulations. "Three hundred pesos. held:. "Five hundred pesos. Mun. real estate brokers.. if such annual income exceeds thirty thousand pesos. selling. city charters and ordinances. Santiago Mendaros.: In this case the Supreme Court upheld the validity of Ordinance 3398 of the City of Manila. 95 Phil. 182. . May 27.." . exchanging. 1954. "SEC. et al. per Reyes.The following fixed taxes shall be collected as follows. -. May 26. imposing a municipal occupation tax on persons exercising various professions (lawyers.00.shall be entitled to practice the profession for which he has been duly qualified under the law.. 46. and sentenced to pay a fine of P5. 1955. That in the case of real estate dealers. et al. Act 1166. Jur. Said Justice Reyes: "The argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city (1 Cooley on Taxation.. if such annual income exceeds ten thousand pesos but does not exceed thirty thousand pesos. (51 Am. 97 Phil. however. Fixed taxes. in all parts of the Philippines without being subject to any other tax.20 National Internal Revenue Code: . per Bautista Angelo. vs. real estate dealers. J. calling or activity by both the state and the political subdivision thereof. leasing. (3) Other fixed taxes. every professional legally authorized to practice his profession. commercial brokers. 4th ed. medical practitioners. if the annual income from buying. approved on July 25. L-4817. the amount stated being for the whole year. in sustaining the validity of the ordinance. or renting property (whether on their own account as principals or as owners of rental property or properties) is four thousand pesos or more but not exceeding ten thousand pesos. to the contrary notwithstanding. A month after the promulgation of the above decision. the annual fixed tax to be collected shall be as follows: . license or fee for the practice of such profession. -... however. 1954. one hundred and fifty pesos: Provided. "One hundred and fifty pesos. p. 182 of the NIRC. charge. pharmacists. and . 182(B)] of the National Internal Revenue Code requires the payment of taxes on occupation or professional taxes." 21 Punsalan. Congress passed Rep. etc. customs brokers. 22 People vs. dealers in securities. 958-959. Com. it being widely recognized that there is nothing obnoxious in the requirement thatlicense fees or taxes be exacted with respect to the same occupation.On business . et al. Provided. when not otherwise specified: . providing as follows: "Any provisions of existing laws.

42. per Reyes. is permissible in the absence of express or implied constitutional prohibition. L-7521. promulgated May 27." . May 30. Interisland Gas Service. since the land on which the fishpond is situated is already subject to land tax. We have not adopted. 1955.S. Meer. Veronica Sanchez vs. Pepsi-Cola Bottling Co.. amounts to double taxation. .L. City of Butuan. L-8799." The imposition of this kind of tax is in no sense called a double tax. et al. vs. This argument has already been rejected by this Court in the case of People vs. HawaiianPhilippine Co. and that"the state may collect an ad valorem tax on property used in a calling.to which said theory does not apply .. again. 28. Aug. J. The Collector of Internal Revenue. she is engaged in the leasing of real estate. that she has been continuously leasing the same to third persons since its construction in 1947. City of Butuan. 131-132. as part thereof. 97 Phil. L-6975. and that said leased holding appears to be her main source of livelihood. "Double taxation. the general principle against delegation of legislative powers. 1951. Mendaros et al. 1955. Act No.double taxation. and at the same time impose a license tax on the pursuit of that calling. "The second and last objections are manifestly devoid of merit. Pepsi-Cola Bottling Co." . as amended by Rep. vs. "Considering that appellant constructed her four-door "accessoria" purposely for rent or profit. 1968. This view is erroneous because it is a well-settled rule that a license tax may be levied upon a business or occupation although the land or property used therein is subject to property tax. that she manages her property herself.J. "Appellant argues that she is already paying real estate taxes on her property. Then. It was also held that "the state may collect an ad valorem tax on property used in a calling. wherein we held that it is a well-settled rule that license tax may be levied upon a business or occupation although the land or property used therein is subject to property tax. the injunction against double taxation found in the Constitution of the United States and some States of the Union." ". so that to further subject its rentals to the "real estate dealers" tax amounts to double taxation. Commissioner of Internal Revenue vs.in respect of matters of local concern. of the Philippines vs. 182(A)(3)(s)] of the Internal Revenue Code.. Indeed -. and at the same time impose a license tax on the pursuit of that calling". 687. 133-134. June 29. City of Manila vs. L-22814. 24 Manufacturers' Life Insurance Co.independently of whether or not the tax in question.B. it would be unfair and discriminatory to levy another tax on the owner of the fishpond because that would amount to double taxation. 18. and is a real estate dealer as defined in section 194(s) [now. 1956. in consequence of the theory of separation of powers is subject to one well-established exception. L-16315. namely. although not favored. on which we need not and do not express any opinion -. Aug 31.S. 23 84 C.J. J. Sec. in general. 25 84 C. legislative powers may be delegated to local governments . when considered in relation to the sales tax prescribed by Acts of Congress. as well as income tax on the income derived therefrom. the imposition of the latter kind of tax being in no sense a double tax. L-2910. Oct. supra: . 1964."The ground on which the trial court declared the municipal ordinance invalid would seem to be that.. is not forbidden by our fundamental law.

"(aa) . Rosenbloom v. 374.C. 158 (An Act Establishing a Form of Government for the City of Iloilo). Taxes of a specified amount upon each person performing a certain act or engaging in a certain business or profession are not. Taxes. They are obligations imposed upon citizens to pay the expenses of government. express or implied. it is generally held that there is nothing. 113. poll taxes. State. Cincinnati. express or implied. St. VI. 112 Ohio St. Crim. section 21: "Except as otherwise provided by law. "Capitation or poll taxes are taxes of a fixed amount upon all persons. contract express or implied. 40 ALR 73 (holding the provisions of an ordinance making the non-payment of an excise tax levied in pursuance of such ordinance a misdemeanor punishable by fine not in violation of the constitutional prohibition against the imprisonment of any person for "debt in a civil action. sec. 290. The last paragraph (kk) of the very section that authorizes the enactment of the ordinance (section 18 of the Manila Charter) in express terms also empowers the Municipal Board to "fix penalties for the violation of ordinances which not exceed to [sic] two hundred pesos fine or six months' . Rep. 491. Voelkel v. Jur. 12. and subject to the conditions and limitations thereof. since the taxing power is exclusively a legislative function. III. State. However. as a requirement that taxes must be equal and uniform.L. 46 SW 828. and that the municipality to which the tax is payable is not a creditor of the person assessed. the Municipal Board shall have the following legislative powers: . 22 (1) provides: "The rule of taxation shall be uniform. to prevent the imposition of more than one tax on property within the jurisdiction. except as it is limited or restrained by constitutional provisions. 39 Tex. The Constitution of the Philippines.. Act No. 1. 20 Am." . Constitution. and to fix penalties for the violation of ordinances which shall not exceed a fine of two hundred pesos or six months' imprisonment. and is founded upon. 26 Art. 25-26: "It is generally considered that a tax is not a debt. 57 LRA 922. "In some states where double taxation is not expressly prohibited. Jur. sec. 28 51 Am. or not invalid or unconstitutional. 26 R. Art. 29 Com." . A debt is a sum of money due by certain and express agreement. in the abscence of any express or implied constitutional prohibition against double taxation. it is absolute and unlimited. provided some other constitutional requirement is not thereby violated. or necessarily unlawful. and since. resident within a specified territory.73 Am." . 147 NE 754. They are forced contributions." .. 64 Neb. 30 "To begin with the defendants' appeal. and in no way dependent upon the will or contract. however. 66-67. citing Cousins v." . of the persons taxed. it is held that double taxation is permissible. we find that the lower court was in error in saying that the imposition of the penalty provided for in the ordinance was without the authority of law. do not rest upon contract. In such case whether or not there should be double taxation is a matter within the discretion of the legislature. Rep. 342. without regard to their property or the occupations in which they may be engaged. Rep. for each offense. 50 Ala. Ex parte Mann. 89 NW 1053. or both such fine and imprisonment. 860-861. as the power to tax twice is as ample as the power to tax once. par. or mesne or final process"). or upon all the persons of a certain class. 961."Double taxation should not be permitted unless the legislature has authority to impose it. 27 51 Am. on the other hand. It originates in.

. and a liberal construction will be indulged in order to accomplish fair and equal taxation of all property within the state. 77: "Equality in taxation is accomplished when the burden of the tax falls equally and impartially on all the persons and property subject to it [State ex rel. that the taxes levied by or with respect to the various political subdivisions or taxing districts of the state must be at the same rate.J. Jan. 88 Phil. for a single offense. 11. theatrical shows. while others. and only demands uniformity within the particular class.L. City of Baguio. 1952." 34 84 C.C.: "The rule of uniform taxation does not deprive Congress of the power to classify subjects of taxation. it was said that there is equality and uniformity in taxation if all articles or kinds of property of the same class are taxed at the same rate. Thus. or property. L-18080. Court of Tax Appeals. it was held in that case. Alaska. 55 O. 10267. It does not mean. 859. 59 P 478. 2d. It has also been said in this connection that the omission to tax any particular individual who may be liable does not render the whole tax illegal or void. — One requirement with respect to taxation imposed by provisions relating to equality and uniformity.imprisonment. So the requirement is complied with when the tax is levied equally and uniformly on all subjects of the same class and kind and is violated if particular kinds. are left untaxed.B. Inc. 16 F. 203. Territory of Alaska. village. 1963.J.G. 303. 81: "There is a presumption the at tax statutes are intended to operate uniformly and equally [Alaska Consol. City of Iloilo.S. Nichols.S. Jur.. L-4060. 1956. 203: "153. Canneries v. for example. 256]." Manila Race Horse Trainers Assn. as one court has graphically put it. De la Fuente. a tax for a county purpose must be uniform and equal throughout the county. City of Lipa. 47 LRA 68: "Taxes are uniform and equal when imposed upon all property of the same character within the taxing authority. Jur. J. May 31.D. L-9167. in order to be uniform. citing Re Page. vaudeville companies. et al. or. or township purpose must be uniform and equal throughout the city. 31 51 Am." 84 C. similarly situated. there would be discrimination if some boarding stables of the class used for the same number of horses were not taxed or were made to pay less or more than others. so that no higher rate or greater levy in proportion to value is imposed on one person or species of property than on others similarly situated or of like character.". 1951." Tan Kim Kee vs. and the cases cited therein. 46 O. [L-1104. such as cinematographs. 29. Supp. that a man in one county shall pay the same rate of taxation for all purposes that is paid by a man in an adjoining county.S. to No. Saldana vs. L-2947. Inc. the pronouncement below that the ordinance in question is illegal and void because it imposes a penalty not authorized by law is clearly without legal basis.A. or both such fine and imprisonment.J. must operate alike on all persons.. p. per Reyes. vs. 27." 35 Medina vs. which should be equally subjected to it. C. or township. April 22. Sept. is that taxation must be uniform throughout the political unit by or with respect to which the tax is levied. which has been introduced into some state constitutions in express language. 60 Kan. 355]. species or items of property are selected to bear the whole burden of the tax. that "the fact that some places of amusement are not taxed while others. Aug.W. 11. 842. that a tax for a state purpose must be uniform and equal throughout the state. J. Uniformity of Operation Throughout Tax Unit. Wa Wa Yu vs. Nor does the rule require that taxes for the same purposes shall be imposed in different territorial subdivisions at the same time. 79: "The rule of uniformity in taxation applies to property of like kind and character and similarly situated. and boxing exhibitions and other kinds of amusements or places of amusement are taxed." . is no argument at all against equality and uniformity of the tax imposition. 1949]. and a tax. theaters.G. anda tax for a city. 60: "In the case of Eastern Theatrical Co. Haggart v." Applying this criterion to the present case. village. 66 N." Hence." 33 84 C. things.. vs. This means. however. 265 N. Alfonso.. 32 Am.

3 the effect of the amendatory section insofar as it would expand the previous power vested by the city charter was clarified in these terms: "Appellants apparently have in mind section 2553. trades and occupations as may be established or practiced in the City. amending the city charter of Baguio2 empowering it to fix the license fee and regulate "businesses. In Medina v. FORTUNATO DE LEON. it being shown in the partial stipulation of facts. allegedly.000. The power as thus conferred is . Hence." Unless it can be shown then that such a grant of authority is not broad enough to justify the enactment of the ordinance now assailed. Nor is the question raised by him as to the validity thereof novel in character.R. and there would be no question about the liability of defendant-appellant for the above license fee. and therefore obligated to pay under such ordinance the P50 annual fee. which empowers the City of Baguio merely to impose a license fee for the purpose of rating the business that may be established in the city. was far from easy. therefore. entity or corporation doing business in the City of Baguio is assailed by defendant-appellant Fortunato de Leon. where the suit originated. City of Baguio.Republic of the Philippines SUPREME COURT Manila EN BANC G. vs. 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 period from the first quarter of 1958 to the fourth quarter of 1962.000. which for him was indispensable. Nor was defendant-appellant agreeable to such a suit being instituted by the City Treasurer without the consent of the Mayor. 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. That is the principal question. Assume the validity of such ordinance. paragraph (c) of the Revised Administrative Code. No. considering that even a cursory reading of the above amendment readily discloses that the enactment of the ordinance in question finds support in the power thus conferred.: In this appeal. 1964. 1968 CITY OF BAGUIO. Fortunato de Leon for and in his own behalf as defendant-appellant. it declared the above ordinance as amended. the decision appealed from must be affirmed. The task confronting defendant-appellant. inspite of repeated demands. The source of authority for the challenged ordinance is supplied by Republic Act No. FERNANDO. In its decision of December 19. and held defendant-appellant liable for the fees therein prescribed as a real estate dealer. J. The lower court was of a different mind. Why he failed is understandable. He was held liable as a real estate dealer with a property therein worth more than P10. a lower court decision upholding the validity of an ordinance 1 of the City of Baguio imposing a license fee on any person. plaintiff-appellee. valid and subsisting. there has been a firm and unyielding insistence by defendant-appellant of the lack of jurisdiction of the City Court of Baguio. defendant-appellant. but not in excess of P50. L-24756 October 31. 329. The City Attorney for plaintiff-appellee. firm. this appeal. In addition.

But on July 15. that while the amount of P300 sought was within the jurisdiction of the City Court of Baguio where this action originated. The thought that the municipal court lacked jurisdiction apparently was not even in the minds of the parties and did not receive any consideration by this Court. however.5 a suit to collect from a defendant this license fee corresponding to the years 1951 and 1952 was filed with the Municipal Court of Manila. In the exercise of such . defendant-appellant likewise alleged procedural missteps and asserted that the challenged ordinance suffered from certain constitutional infirmities. 1948. The city council of Baguio. since the principal issue was the legality and constitutionality of the challenged ordinance. 329. it is the Court of First Instance that should have original jurisdiction on the matter. we shall now turn. He contended before the lower court. to license and to regulate provided that the subjects affected be one of those included in the charter.. And it is precisely having in view this amendment that Ordinance No. Moreover. the ordinance under consideration cannot be considered ultra vires whether its purpose be to levy a tax or impose a license fee. the fear is entertained by defendant-appellant that whenever a constitutional question is raised. therefore. the phrase 'as provided by law' has been removed by section 2 of Republic Act No.4 The plaintiff in that case filed a claim for the payment of his salary before the Justice of the Peace Court of Pagadian. considering the amount involved. 329 was enacted amending the charter of said city and adding to its power to license the power to tax and to regulate. Evidently. the lack of validity being only a defense to such an attempt at recovery. the defendant Mayor asserted that what was in issue was the enforcement of the decision of the Commission of Civil Service. in view of the amount involved." It would be an undue and unwarranted emasculation of the above power thus granted if defendantappellant were to be sustained in his contention that no such statutory authority for the enactment of the challenged ordinance could be discerned from the language used in the amendatory act. considering that the City of Baguio was not devoid of authority in enacting this particular ordinance. As mentioned at the outset. The terminology used is of no consequence. the Constitution as the highest law superseding any statute or ordinance in conflict therewith. In our opinion. The City Court has jurisdiction. as it does not include the power to levy a tax. more so when in amending section 2553 (b). that in the answer to such a complaint a constitutional question was raised did not suffice to oust the City Court of its jurisdiction. has now the power to tax. the Justice of the Peace Court was thus without jurisdiction to try the case. 1. In this sense. Since the City Court is possessed of judicial power and it is likewise axiomatic that the judicial power embraces the ascertainment of facts and the application of the law. Nor could it be plausibly maintained that the validity of such ordinance being open to question as a defense against its enforcement from one adversely affected. 1968 to be exact. Only recently. and it is his contention now. the matter should be elevated to the Court of First Instance. The question of jurisdiction was raised. There is here a misapprehension of the Judiciary Act. Bugsuk Lumber Co. in City of Manila v. The above plea was curtly dismissed by Us. however. we rejected a contention similar in character in Nemenzo v. the sum sought to be recovered was clearly within the jurisdiction of the City Court of Baguio.indeed limited. Republic Act No. it is not such City Court but the Court of First Instance that has original jurisdiction. 6 and the mere fact." Such is likewise the situation here. It does not admit of doubt. The suit remains one for collection. Defendant-appellant makes much of the alleged lack of jurisdiction of the City Court of Baguio in the suit for the collection of the real estate dealer's fee from him in the amount of P300. 99 was approved in order to increase the revenues of the city. Sabillano. To such points raised by him. Here. as what was involved was "an ordinary money claim" and therefore "within the original jurisdiction of the Justice of the Peace Court where it was filed. on September 7. the amendment above adverted to empowers the city council not only to impose a license fee but also to levy a tax for purposes of revenue. Zamboanga del Sur. that what confers jurisdiction is the amount set forth in the complaint. however. it cannot be said that a City Court is bereft of competence to proceed on the matter. For the City Court could rely on the presumption of the validity of such ordinance. That is about all that needs to be said in upholding the lower court.

then he pays P50 and P24 if the value is less than P10. a real estate dealer who leases property worth P50. Now." 8With that decision rendered at a time when American sovereignty in the Philippines was recognized. conscious of the fallibility of the human judgment.000. it delivered the coup de grace to the bogey of double taxation as a constitutional bar to the exercise of the taxing power. still stalks the juridical state. To repeat the challenged ordinance cannot be considered ultra vires as there is more than ample statutory authority for the enactment thereof. as to the claim that there was a violation of the rule of uniformity established by the constitution. the differentiation against which the plaintiffs complain conforms to the practical dictates of justice and equity and is not discriminatory within the meaning of the Constitution. 15 is that the statute or ordinance in question "applies equally to all persons. short of confiscation or proceedings unconstitutional on other grounds.. In a 1947 decision. however. v." About two years later.."11 The above would clearly indicate how lacking in merit is this argument based on double taxation. Thus: "It must be evident to any one that the power to declare a legislative enactment void is one which the judge.delicate power." This Court is on record as accepting the view in a leading American case 16 that . therefore. As to why double taxation is not violative of due process. The 14th Amendment [the due process clause] no more forbids double taxation than it does doubling the amount of a tax. stated: "A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found.13 Thus: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. Nonetheless. 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 . speaking for the Court.. which is repugnant to the due process clause." At any rate. On its face. 2. however. v." 7 While it remains undoubted that such a power to pass on the validity of an ordinance alleged to infringe certain constitutional rights of a litigant exists. the statute must be sustained even though double taxation results. It would seem though that in the United States. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation.000 or above must pay an annual fee of P100. and that it violated the requirement of uniformity. its validity on constitutional grounds is challenged because of the allegation that it imposed double taxation. the above ordinance cannot be assailed as violative of the constitutional requirement of uniformity. as here. calling or activity by both the state and the political subdivisions thereof. To some. In Philippine Trust Company v." To satisfy this requirement then. Justice Holmes made clear in this language: "The objection to the taxation as double may be laid down on one side. 9 we quoted with approval this excerpt from a leading American decision: 10 "Where. The opportunity came in Eastern Theatrical Co. its ghost as noted by an eminent critic.000. Yatco. If the property is worth P10..12 Justice Laurel. it possesses more than just a persuasive effect. Justice Tuason. speaking for this Court in Manila Race Horses Trainers Assn. 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. According to the challenged ordinance.. .. the admonition of Cooley on inferior tribunals is well worth remembering.. Alfonso. as with us. De la Fuente14 incorporated the above excerpt in his opinion and continued: "Taking everything into account.000 but not over P50. firms and corporations placed in similar situation. We do not view the matter thus. . will shrink from exercising in any case where he can conscientiously and with due regard to duty and official oath decline the responsibility. Congress has clearly expressed its intention. all that is needed as held in another case decided two years later. considering not only the presumption of validity but also the relatively modest rank of a city court in the judicial hierarchy. still it should be exercised with due care and circumspection." There was no occasion in that case to consider the possible effect on such a constitutional requirement where there is a classification.

There is no need to pass upon the other allegations to assail the validity of the above ordinance. Revised Administrative Code. 218. 3. much for the analytical approach. J. the lower court decision of December 19. Reyes. When administrative steps are futile and unavailing. as was the case with the others assigned. Zaldivar. then opportunity exists for favoritism and undue discrimination to come into play. Dizon. L-20977.. Angeles and Capistrano. 856-857 (1952). which would predicate a grievance on the complaint having been started by the City Treasurer rather than the City Mayor of Baguio. lack merit. Footnotes 1 Ordinance No. given the stubbornness and obduracy of a taxpayer. Concepcion. CJ. on the assumption that a choice exists. In much the same way that an act of a department head of the national government. 91 Phil. performed within the limits of his authority. the allegation that there was a violation of the principle of uniformity is inherently lacking in persuasiveness... Whatever valid reason may exist as to why one taxpayer is to be accorded a treatment denied another.L."17 It is thus apparent from the above that in much the same way that the plea of double taxation is unavailing. If a city treasurer has to await the nod from the city mayor before a municipal ordinance is enforced. Sanchez. is presumptively the act of the President unless reprobated or disapproved. whose position is roughly analogous. The more desirable legal doctrine therefore. J. 854. 2 3 4 . A reading of the ordinance will readily disclose their inherent lack of plausibility."inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. So. is on leave. convinced in good faith that no tax was due. is one that would do away with such temptation on the part of both taxpayer and public official alike. The conclusion thus reached has a reinforcement that comes to it from the functional and pragmatic test. 1964. Makalintal. Costs against defendant-appellant. unreasonable and oppressive" and that there is a failure to observe the mandate of equal protection. may be assumed to carry the seal of approval of the City Mayor unless repudiated or set aside. Castro. Section 2553.. WHEREFORE. 18 similarly the act of the City Treasurer. judicial remedy may be resorted to by him. concur. This should be the case considering that such city official is called upon to see to it that revenues due the City are collected. It would not be going too far to assert that even defendantappellant would find no satisfaction in such a sad state of affairs. it being maintained that the license fees therein imposed "is excessive. That would dispose of all the errors assigned. It would be a reflection on the state of the law if such fidelity to duty would be met by condemnation rather than commendation. is hereby affirmed. except the last two. the suspicion is unavoidable that such a manifestation of official favor could have been induced by unnamed but not unknown consideration.B. These alleged errors. JJ. paragraph (c).

Araneta. 65 (1951). 420 (1940). CITY OF BUTUAN. Helmich v. 862 (1949). Sabido and Associates for plaintiff-appellant. . 39 Phil. 148. Republic of the Philippines SUPREME COURT Manila EN BANC 8 9 10 11 12 13 14 15 16 17 18 G. v.5 101 Phil. Meer. Wise & Co. Fort Smith Lumber Co. 1967. Mayor of Manila. Arkansas. Punsalan v. July 31. with costs. 276 US 233 (1928).. Lutz v. Sec. Southern Coal and Coke Co. 49 (1954). 859 (1957). MEMBERS OF THE MUNICIPAL BOARD. 83 Phil.S. vs. Vol. dismissing plaintiff's complaint. all of the CITY OF BUTUAN. 46. L-24693. 332 (1927). Carmichael v. 67 Phil. 69 Phil. 8th ed. INC. 451 (1939). 98 Phil. defendants-appellees. CONCEPCION. v. 78 Phil. 300 (1953). plaintiff-appellant. 655. 1968 PEPSI-COLA BOTTLING CO. 95 Phil. Sabido. 88 Phil.: Direct appeal to this Court. 102 (1918) and Ermita-Malate Hotel Association v. Villena v. 301 US 495 (1937). Salaveria. Uy Matias v. The City Attorney of Butuan City for defendants-appellees. 533 (1920).. Municipal Board of Manila.R. THE CITY MAYOR and THE CITY TREASURER. from a decision of the Court of First Instance of Agusan. v. of the Interior. Hellman. City of Cebu. 153 (1955). 93 Phil. No. C. 6 U. 7 Cooley on Constitutional Limitations.J. OF THE PHILIPPINES. 852. 251 US 523. I. 60. L-22814 August 28.

1961. 1961 of its warehouse in Butuan City is incorporated herein as Exhibits "D" to "D-1" to "D-5". That on August 16. the defendants claim that the plaintiff is not entitled to a depreciation of P3.254.40 from January 1 to July 30. and to prevent the enforcement thereof. 122 and effective November 28.052. 1960.10 per case of 24 bottles of the soft drinks and carbonated beverages therein named. 8. imposes a tax on any person.63 from August 16 to December 31. That Ordinance No. These "Pepsi-Cola 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. the City of Butuan enacted Ordinance No. A copy of Ordinance No. 110.250. its City Mayor. in the City." of taxes at specified rates. 1960.44 to P3. xxx xxx x x x1äwphï1. The plaintiff differs only on the claim of depreciation which the company claims to be P3. Series of 1960 and Ordinance No.104.ñët Section 1 of said Ordinance No. 110. that the tax imposed is excessive and that it is unconstitutional.202. A copy of the form is enclosed herewith as Exhibit "C". That beginning November 21. 110. has prepared a form to be accomplished by the plaintiff for the computation of the tax. the City Treasurer of Butuan City. respectively. That pursuant to Ordinance No.63 but only P1. 3. 2. as amended by Municipal Ordinance No. is a domestic corporation with offices and principal place of business in Quezon City. Plaintiff — seeks to recover the sums paid by it to the City of Butuan — hereinafter referred to as the City and collected by the latter. both series of 1960. 6.. 7. 122. the price of Pepsi-Cola per case of 24 bottles was increased to P1.55 in which case the profit of plaintiff will be increased from P1. 1960 and the amount of P9.926. That plaintiff's warehouse in the City of Butuan serves as a storage for its products the "PepsiCola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of Agusan. pursuant to its Municipal Ordinance No. as amended of the City of Butuan in their respective memoranda.10 per case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of P4. 110 as amended of the City of Butuan is illegal. imported or local.Plaintiff. Both parties submitted the case for decision in the lower court upon a stipulation to the effect: 1.52. within the purview thereof. 110 which was subsequently amended by Ordinance No. association. etc.03 paid under protest and those that if may later on pay until the termination of this case on the ground that Ordinance No.62. In this Profit and Loss Statement. Section 3 prescribes a tax of P0. 5. the members of its municipal board and its City Treasurer. as amended. 110 as amended. Pepsi-Cola Bottling Company of the Philippines. and "all other . of P0. 110 as amended. 122 are incorporated herein as Exhibits "A" and "B". . Section 2 provides for the payment by "any agent and/or consignee" of any dealer "engaged in selling liquors. This is in accordance with the findings of the representative of the undersigned City Attorney who verified the records of the plaintiff. states what products are "liquors". That the plaintiff filed the foregoing complaint for the recovery of the total amount of P14.92 which price is uniform throughout the Philippines. The defendants are the City of Butuan. That the Profit and Loss Statement of the plaintiff for the period from January 1. Said increase was made due to the increase in the production cost of its manufacture. which plaintiff assails as null and void. 1961 to July 30. 4. That the parties reserve the right to submit arguments on the constitutionality and illegality of Ordinance No. 1960. 110.052.177.

As a consequence. The first and the fourth objections merit.000 cases of hard liquors or soft drinks every month for resale. Viewed from this angle. defines the meaning of the term "consignee or agent" for purposes of the ordinance. 110. 7 and 8 specify the surcharge to be added for failure to pay the taxes within the period prescribed and the penalties imposable for "deliberate and willful refusal to pay the tax mentioned in Sections 2 and 3" or for failure "to furnish the office of the City Treasurer a copy of the bill of lading or cargo manifest or record of soft drinks." And.." of soft drinks or carbonated drinks — in the production and sale of which plaintiff is engaged — or less than P0. must be one engaged in business outside the City. pursuant to section 3-A. Section 10 of the ordinance provides that the revenue derived therefrom "shall be alloted as follows: 40% for Roads and Bridges Fund. When we consider. it is noteworthy that the tax prescribed in section 3 of Ordinance No. partnership. 2264. in the very nature of things.double taxation. when considered in relation to the sales tax prescribed by Acts of Congress. We have not adopted. namely: legislative powers may be delegated to local governments — to which said theory does not apply3 — in respect of matters of local concern.soft drinks or carbonated drinks. company or corporation engaged in selling . As amended by Ordinance No. either retail or wholesale.. however. 122: . In this connection. the taxes "shall be based and computed from the cargo manifest or bill of lading or any other record showing the number of cases of soft drinks. who. the tax would not be applicable to such agent and/or consignee.. is an unconstitutional delegation of legislative powers.. 1 Then. Indeed — independently of whether or not the tax in question. as part thereof. liquors or all other soft drinks or carbonated drinks received within the month." Pursuant to Section 5. serious consideration." Section 9 makes the ordinance applicable to soft drinks." Sections 6. which was inserted by said Ordinance No. merchants engaged in the sale of soft drink or carbonated drinks. which is beyond defendant's authority to impose by express provision of law. The tax of "P0. is not forbidden by our fundamental law.000 cases of soft drinks are consigned or shipped to him every month. the injunction against double taxation found in the Constitution of the United States and of some States of the Union.10 per case of 24 bottles. if less than 1. soft drinks or carbonated drinks. showing the number of cases" — not sold — but "received" by the taxpayer." Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature of an import tax. again. are not subject to the tax. amounts to double taxation. however. unless they are agents and/or consignees of another dealer. association. the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent. in general. the general principle against delegation of legislative powers." Section 3-A. Thus. 122. or confiscatory. is manifestly too small to be excessive.. it would seem that the intent was then to levy a tax upon the sale of said merchandise. (3) it is excessive. Section 4 provides that said taxes "shall be paid at the end of every calendar month. liquors or carbonated drinks for sale in the City. imposed only upon "any agent and/or consignee of any person. The third objection is.. oppressive. in consequence of the theory of separation of powers2 is subject to one well-established exception.0042 per bottle. a consignee of agent shall mean any person. also. partnership. (4) it is highly unjust and discriminatory. — For purposes of this Ordinance. association. (2) it amounts to double taxation. was imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. upon the authority of which it was enacted. untenable. that the tax "shall be based and computed from the cargo manifest or bill of lading . the tax is. and (5) section 2 of Republic Act No. liquors or carbonated drinks "received outside" but "sold within" the City. The second and last objections are manifestly devoid of merit. on which we need not and do not express any opinion . oppressive and confiscatory. 4 . the tax partakes of the nature of an import duty. company or corporation who acts in the place of another by authority from him or one entrusted with the business of another or to whom is consigned or shipped no less than 1. Besides. 40% for the General Fund and 20% for the School Fund. — Definition of the Term Consignee or Agent. as originally approved. likewise.

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. 637. to future conditions substantially identical to those of the present. 854. JJ. . Stoutenburgh v. 4 Section 2(i). 1äwphï1. L-21633-34. Makalintal. L-18080. in addition to the costs. not only to present conditions. 2264. Aleja v. 2 U. the decision appealed from is hereby reversed. 26 L. 1957. City of Manila v. accordingly. City of Mankato. L. Botelho Shipping Corp. 1962. 847. 32 Phil. 1967. 6 Felwa v...S. Hennick 129 U. Salas. July 20. if the burden in question were regarded as a tax on the sale of said beverages. 15 Phil. and hence. City of Tacloban.G. 1162-1163. regardless of the volume of their sales. Rafael v. as amended by Ordinance No. it would still be invalid. 7. not acting for or on behalf of other merchants. 1960. People v. November 23. and defendants herein are. Cayat. Ermita-Malate Hotel & Motel Operators Ass'n. 65 Phil. 7 These conditions are not fully met by the ordinance in question. 110. however.L. Sept. 103 U. and sentencing the City of Butuan to refund to plaintiff herein the amounts collected from and paid under protest by the latter. Reyes. violative of the uniformity required by the Constitution and the law therefor. with interest thereon at the legal rate from the date of the promulgation of this decision. Laurel v. and (4) the classification applies equally all those who belong to the same class. City Mayor. It is so ordered.W. Angeles and Fernando. Castro. there is no reason why sales thereof by sealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. GSIS.9319. L-24693. 34 Cal. Kilbourn v. ed. since only sales by "agents or consignees" of outside dealers would be subject to the tax.ñët Footnotes 1 De Villata v. 56. 27. 102 Phil. L-18529. . February 26. L-20125. 136 N. Misa. and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan. concur. 541. 264. Bull. as amended. 7 Commissioner of Int. L-26511. L-11265. City of Davao. June 29. be reasonable 6 and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences. Nov. 32 L. Zaldivar. 122. Sales by local dealers. v. Sanchez. Court of Tax Appeals. City of Bacolod v. 3 State v. Solon. ed. 8 Indeed. April 22. as discriminatory. Panaligan v. Inter-Island Gas Service. 377. 168. 1963. 1967. Rev. Municipality of Roxas. or negate the authority to classify the objects of taxation. 31. (2) these are germane to the purpose of the legislation or ordinance. restrained and prohibited permanently from enforcing said Ordinance. 68 Phil. August 21. Provinces. 12. 99 Phil.Even however. WHEREFORE. also. Thompson. Jan. L-16253. Embroidery & . October 29. L-18290. but. and another one shall be entered annulling Ordinance No. to be valid.S. East Asiatic Co. 1966. People v. Syjuco v.S. Municipality of Parañaque. People v. 27. Vera. 42 O. must. Gruet. v. 1965. Republic Act No. October 23. v. People v. 141. Nin Bay Mining Co. 1963.B. 2847. v. L-14864. 5 Tan Tim Kee v. 27. 5 The classification made in the exercise of this authority. 1965. Dizon. J. (3) the classification applies. 1959. Stanley. if its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages. v. would be exempt from the disputed tax.. 520.

42) . as defined by section 194 (s) of the National Internal Revenue Code. defendant-appellee. While appellant lives in one of the apartments. plaintiff-appellant. she derived an income therefrom of P7. REYES. and P637 as real estate dealer's tax for the year 1946 to 1950. it appears that the sum of P163. A. which she constructed in 1947. Wherefore. Yatco for appellant. Appellant paid the taxes demanded under protest. In the early part of 1951. (R.R. she is renting the rest to other persons. for appellee. which defines real estate dealers as follows: "Real estate dealers" includes all persons who for their own account are engaged in the sale of lands.540 (Exhibit 1). No. At the outset. L-23118. and declared the collection of the taxes in question legal and in accordance with said provision. J. No. claiming that she is not a real estate dealer.Apparel Control & Inspection Board. L-23794.. 1955 VERONICA SANCHEZ. J. 1967. 79 Phil. 14957) against the Collector of Internal Revenue for the refund of the taxes paid. Veronica Sanchez appealed to this Court. The lower Court. 588.: Appellant Veronica Sanchez is the owner of a two-story. or a total value of P29. Meralco v. Republic Act No. Treasurer of Ormoc City. applied the definition of "real estate dealer" in section 194 (s) of the National Internal Revenue Code.. No. 1965. the Collector of Internal Revenue made demand upon appellant for the payment of P163.B. City of Caloocan. December 18. and on October 16. L-23326. from which she derives an annual income of about P1. 588 took effect only on September 22. four-door "accessoria" building at 181 Libertad Street. buildings or interests therein or in leasing real estate. so that the amount of tax actually involved herein is only P687. 1950. as amended by Republic Act Nos. PHILCONSA v. plus the sum of P50 as compromise (Exhibit 4). 1951 filed action in the Court of First Instance of Manila (C. 42 and 588. July 26. the law applicable to this case is section 194 (s) of the Tax Code before it was amended by Republic Act No. after trial. found appellant to be such a dealer. Public Utilities Employee Ass'n. Pasay City. in deciding this case. Office of the Solicitor General Ambrocio Padilla and Solicitors Esmeraldo Umali and Roman Cansino. Gimenez.980. The building has an assessed value of P21. 42 and 588. 409. We notice also that the lower Court. Ormoc Sugar Co.540 and the land is assessed at P7. 8 Viray v. . Jr. 1967. paid by appellant as real estate dealer's tax for the year 1946 to 1950. while the tax in question was paid by appellant for the year 1946 to 1950. February 17. 1968. L-19978.31 thereof corresponds to her income tax for the year 1949 (Exhibit 4). as amended by Republic Acts Nos. Benjamin C. it should be noted that while appellant claims the refund of the amount of P825 allegedly paid by her to the Collector of Internal Revenue as real estate dealer's tax. September 29. Hence. L-7521 October 18. vs.L.300 (also Exhibit 1).51 as income tax for the year 1950. THE COLLECTOR OF INTERNAL REVENUE. C. Republic of the Philippines SUPREME COURT Manila EN BANC G. In 1949. v.540 (Exhibit 2). Appellant also runs a small dry goods store in the Pasay market.

that appellant constructed her four-door "accesoria" purposely for rent or profit. R. . that she manages her property herself. We held that Argellies could not be considered as engaged in business of letting real estate. that she devotes all her personal time and labor to such store. while the real estate dealer's tax demanded of and paid by appellant was for the year 1946 to 1950 (see Exhibit 4). considering its size and the fact that she derives little income therefrom. Footnotes * 91 Phil.50.. and while appellant resides in one of the apartments. Acting C. amounting to P37. Meer* G. The kind of nature of the building constructed by her—which is a four-door "accessoria"—shows that it was from the beginning intended for lease as a source of income or profit to the owner. appellant is entitled to a refund of the tax paid for the year 1946. Bautista Angelo. however. the work of attending to her leased property and her tenants would not take much of her time and attention. promulgated on April 25. and that said leased holding appears to be her main source of livelihood. as amended by Republic Act No. that she has been continuously leasing the same to third persons since its construction in 1947. wherein we held that "it is a well settled rule that license tax may be levied upon a business or occupation although the land or property used there in is subject to property tax". is not in point. A. cited by appellant in support of her appeal. therefore. While she runs a small store in Pasay market. because he did not appear to have reinvested the rents received by him from this country. and that "the state may collect an ad valorem tax on property used in a calling. This argument has already been rejected by this Court in the case of People vs. it appears that she always rented the other apartments to other persons from the time the building was constructed up to the time of the filing of this case. that the apartment house in question was constructed only in 1947. Jugo. 1955. Reyes. And the leasing of her apartment appears to be her principal means of livelihood. and is a real estate dealer as defined by section 194 (s) of the Internal Revenue Code. et al.. 42. Bengzon. So ordered. and Concepcion. L-3730. J. promulgated May 27. Wherefore. 147. and his properties in Manila were administered and managed by a local real estate company. for the income she derives therefrom amounts to more than five times that which she makes from her store. as well as income tax on the income derive therefrom. the imposition of the latter kind of tax being in no sense a double tax. JJ. With the modification that the appellee Collector of Internal Revenue is ordered to refund to appellant Veronica Sanchez the amount of P37. L-6975. however. Considering. in all other respects.. Montemayor. In the case at bar. 1952. No.Does appellant fall within the above definition? We are of the opinion that she does. In that case. and at the same time impose a license tax on the pursuit of that calling". and she manages the property herself. Argellies had always resid d outside the Philippines. The case of Argellies vs. Appellant argues that she is already paying real estate taxes on her property.50 paid as real estate dealer's tax for the year 1946. it was appellant who had the apartment in question constructed. affirmed.. so that to further subject its rentals to the "real estate dealers' tax" amounts to double taxation. On the other hand. the decision appealed from is. concur. Costs against appellants.. especially since she lives in the premises herself. we conclude that appellant is engaged in the leasing of real estate. it is unlikely and the evidence does not show. Padilla. Mendaros. nor to have taken part in the management of his local holdings. purposely for lease or profit. The evidence shows.

J. of Ordinance No.R. Inc. L-8799 August 31. sporting goods. inclusive. xxx xxx xxx Group 2. 1925 of the City of Manila. The main issue is whether liquified flammable gas comes within the purview of section 1. That the plaintiff is a municipal corporation created and existing under the laws of the Philippines and that the defendant is a corporation likewise created by any existing under the laws of the Philippines. That the defendant sold at retail in the City of Manila from the 4th quarter of 1949 to the a 4th quarter of 1951. such as:(1) Retail dealers in general merchandise and (2) retail dealers exclusively engaged in the sale of electrical supplies. cooking appliances and liquified petroleum gas in cylinders in the following amounts: Period of sales Amount of sales P207. hardware. in accordance with the rates herein prescribed: Provided. .53 4th quarter 1949 . which provides that: .. "2. including. as amended by Ordinance No.: The City of Manila instituted this action for the collection of a sum of money allegedly due from the defendant Inter-Island Gas Service. CONCEPCION. cooking utensils and construction materials. 3364 thereof. plaintiff-appellee. INC. THE INTER-ISLAND GAS SERVICE. Group 2. quarterly license fees based on gross sales or receipts realized during the preceding quarter. Pedro Lopez for appellant. office equipment and materials. No. books. including stationary. defendant-appellant. papers. rice.Republic of the Philippines SUPREME COURT Manila EN BANC G. glassware. 1956 THE CITY OF MANILA. That a person engaging in any business or occupation for the first time shall pay the initial license fee based on the probable gross sales of receipts for the first quarter beginning from the date of the opening of the business as indicated herein for the corresponding business or occupation. which dealers are not yet subject to the payment of any municipal tax. by way of deficiency municipal tax. City Fiscal Eugenio Angeles and Assistant Fiscal Arsenio Nañawa for appellee. vs. there shall be paid to the City Treasurer for engaging in any of the business or occupations below enumerated. textile including knitted wares.651. however.. — Retail dealers in new (not yet used) merchandise. Both parties stipulated: "1. .

That the total claim of the plaintiff against the defendant under section 1. And for this reason.283.92 188. as amended reads as follows: Therefore.85 191.696.45 184. Group 2. second. .79 212.542. installations. 1925 as amended (imposing a tax for purposes of revenue).1st quarter 1950 2nd quarter 1950 3rd quarter 1950 4th quarter 1950 1st quarter 1951 2nd quarter 1951 3rd quarter 1951 4th quarter 1951 190.00. The lower court erred in not holding and declaring that the No.290. and "5. as last amended by Ordinance No. based on the defendant's sales alleged in paragraph 2 of the complaint computed at the rate of P1. Group 2. inflammable gases other than acetylene.00 quarterly corresponding to the first.796. of Ordinance No. 1925. 3364. 1925. as amended by Ordinance No. That the defendant has paid the prescribed fees under Ordinance No. this Court is of opinion and so holds.250. 3364.. Then the case was submitted for decision. as amended by Ordinance No. 925.53 206. does not clearly provided that it applies to the sale of liquified flammable gas.69 219. of Ordinance No. 3259 of the City of Manila. the dispositive part of which. Inc. 'An Ordinance prescribing regulations for storage. That the defendant paid the different amount alleged in paragraph 4 of the complaint corresponding to the quarters therein stated based on its sales of cooking appliances only. covering the same quarters mentioned in paragraph 4 of the complaint. 1. and the payment of the costs .936. whereupon the Court of First Instance of Manila rendered judgment for the plaintiff.361 as deficiency tax due from the year 1952. that the City Government of Manila has the right to impose tax on liquefied flammable gas under Ordinance No. The defendant has appealed from this decision and now in maintains that: .346. 2. The lower court erred in not holding and declaring that the provisions of section 1. . including the amount of P50 as surcharge thereon. are and clearly within the legislative .62 "3.138. and providing fees therefor". 3364 is P11.250. is hereby sentenced to pay to the City of Manila the sum of P8. use and transportation of compressed and liquefied. "4. and the first quarter of 1952. inclusive. third and fourth quarterly of 1951. the defendant Inter-Island Gas Service.26 216.

Referring to the meaning of said word. This argument at first impressed the court. as amended. it should be noted that the authority of the City of Manila to tax dealers in liquefied flammable gas under its Revised Charter." as used in paragraph (o). anything movable. In this connection. 3364. fix the license fee and regulate the . goods. or wares bought and sold for gain. Accordingly. . still the lower court erred in not finding and declaring that said Ordinance No. . 5. 1925. anything customarily bought and sold for profit. the Municipal Board of Manila intended to convey thereto the restricted meaning allegedly given to the term "merchandise" in paragraph (o) of Section 18 of its Revised Charter. . if said Ordinance is applied to the sale of liquefied flammable gas. is a percentage tax. hence.861. In support of the first two assignments of error appellant cites paragraphs (m) and (o) of section 18 of the Revised Charter of Manila (Republic Act No. is conceded. . storage and sale of . as amended. 1925. Further assuming arguendo that Ordinance No. excluded from the connotation of the word "merchandise. . unconstitutional and void. Indeed. although the clause "petroleum or any of the products thereof and all other said paragraph (m) may indicate the intent of Congress of the Philippines to include liquefied flammable gas within the purview of said paragraph. . 1925.powers granted to the Municipal Board of Manila. liquefied flammable gas in included. . is defined as meaning the objects of commerce. a commercial commodity or commercial commodities in general. in Municipal Ordinance No. That assuming arguendo that under the provision of section 1. or market. ware. The term is also defined as meaning things which are ordinarily bought and sold. is immaterial to the exercise of said authority. 4." employed as a noun. 409) authorizing said city: "(m) To tax. the question whether the grant of power appears in paragraph (m) or in paragraph (o) of the aforementioned Section 18. . 1925. we are persuaded that it is not decisive on the issue before us. As already adverted to. commodities or goods to trade with. upon further reflection. yet the lower court erred in not finding that to apply it to the liquefied gas business of the defendant will constitute double taxation. 3364. . any movable object of trade or traffic. of Ordinance No. the case hinges on the connotation of the term "merchandise" as used in said ordinance. as amended. hence. or to exclude liquefied flammable gas from the operation of said ordinance. or by merchants. . it does not follow necessarily that in using the word "merchandise". and to pay the costs. hence. the complaint does not state a cause of action because no allegation has been made that the ordinance in question had previously been approved by the President of the Philippines. Corpus Juris Secundum has the following to say: The word "merchandise. commodities. 3. as last amended by Ordinance No. or the interest of the Municipal Board in connection therewith.00 as deficiency tax due under Ordinance No. whatever is usually bought and sold in trade. goods. but. as amended by Ordinance No. the subjects of commerce and traffic. is valid. The lower court erred in ordering the defendant to pay the City of Manila the sum of P8. Then appellant argues that liquefied flammable gas is included in said paragraph (m) and. petroleum or any of the products thereof and of all other highly combustible or explosive materials xxx xxx xxx "(o) To tax and fix the license fee on dealers in general merchandise. 1925. Group 2.

.....999.. not only because the former is more in accord with the simple and usual connotation of said term.. also.....000. which are found in paragraph (n) of said Article 18..999. 9.00 90..00 500.... textiles..250.000. the enumeration made in said Group 2 is not all inclusive...00 to 79... . in effect.00 ...00 3.. or which may be bought or sold in trade....000. Quarterly gross sales Over to P125.125.. because it appears that said ordinance has not followed the classification made in Section 18 of Republic Act No.. .. bought and sold in trade. 1925..... 1056-1057. It merely illustrates some of the objects the dealers in which are taxed under its provision. together with electrical supplies. and. liquefied gas may be..... hardware..... . .. ... for instance...any article which is the object of commerce.. and hence.. it is claimed that the tax imposed under the ordinance in question is in the nature of a percentage tax. the first and second assignments of error are untenable.....000.99 40. as. the staple of a mercantile business. but......... as amended... held by the lower court or did the Municipal Board intend to convey therewith the meaning allegedly given thereto in paragraph (o) of Section 18 of Republic Act No. 5.. dealers therein were not.. 109... (Vol....00 700.99 45. . 1. 4.... 57 pp..... merchandise.000. ..." Obviously. 409. it is included in Group 2 of said ordinance. admittedly.. and comes within the purview of the ordinary import of this world...999..00 to 59. and cooking utensils.. .00 450........000... which dealers are not yet subject to the payment of any municipal tax. as yet. Was it used in this sense in Ordinance No.. 6. In short......00 P1..99 50..... including glassware.999. as contended by defendant-appellant? We find ourselves unable to accept the latter view.00 to 99...000..............00 900. Under the third assignment of error.. . it clearly is a merchandise. and is being. although the word "merchandise" appears in paragraph (o) of said Section 18. such as: (1) Retail dealers in general merchandise . Thus.000..00 to 89.00 P100..... Said group taxes dealers in all "new (not yet used) merchandise.. 8. . The schedule of taxes under the aforementioned Group 2 is a follows: Class 1.....00 to 44..... .. 7. which dealers are not yet subject to the payment of any municipal tax..999...99 Quarterly license fee P1..) Inasmuch as.999. at the time of the passage of said ordinance.... ... sporting goods....00 to 125..99 70..... 2.000.99 60. Moreover..00 to 69.....000.999.00 600.. subject to the payment of any municipal tax....000. The word "merchandise" as used therein has not restrictive meaning..... said Group 2 refers to "retail dealers in new (not yet used) merchandise.00 800..." Liquefied flammable gas is a "new" object of commerce...99 80. that which is passed from hand to hand by purchase and sale..00 to 49..

..99 14.999......00 72....00 87.00 to 32... 25.99 9..99 11.... 30.....99 27..00 127.....99 15..........00 to 29... 15.300.. .......00 to 24..99 18. 11.....499............99 7... 14.00 to 17...00 ... ..000......500. 24. 22......00 to 11.......00 to 9..499... 31.. .00 to 4.... 21.....700.....99 22...00 330..00 63....000.......99 8..00 205.000..99 12. .99 400......00 275........99 8...99 25.000......00 105...00 250.00 55....499.......00 to 20.700... ..99 6..000..00 to 22.....00 80.00 to 5..00 to 14..99 17..00 to 15....00 360.. . ........ 28....099.. 29... 36.00 172......500.699...00 to 7..999.99 20..... ........... ...........00 115..... 18....199....999. 17... .000...699.499..00 187..999..00 95.100..... ..00 155.. 13........00 to 39.999........00 to 6...000.....10...999. .... .. ............. .00 to 35.. .....500.000...00 to 8......00 225..499.......99 10..... 26... 20.......99 4...700.....499....500....... 19....00 to 10..500. ...00 to 12..199. . 23... ... .....00 50.........99 5.......00 to 27......99 33...500. 16.. .99 5. .....99 30......000.... 12..499..699...200..00 300....00 141.999........200.00 to 18.299..499.... 27.00 to 7..

defendant-appellants.. vs. whose quarterly sales do not exceed two thousand pesos (P2.99 3. 1369 by Maria C.00 to 3..B. not under its inherent power of taxation..500.00 PROVIDED. That retail dealers only rice.... Torres for plaintiff-appellant.32. 1371 by Francisco Felipe Gonzalez. The fourth assignment of error is even more devoid of merit because: (1) the fees paid by the defendant under Ordinance No. It is a graduated tax. Gonzalez. and 1374 by Jose Leon Gonzalez et al. pp..00 45.. (Appellee's Brief. Almazan and Fortunato de Leon for defendants-appellants. not based on a given ratio between the gross income and the burden imposed upon the taxpayer. 2-3...) This is not a percentage tax. Office of the Solicitor General Pompeyo Diaz and Solicitor Antonio A... installation. J..... . ...... It is so ordered. 34. Guillermo B.. Alberto V.00 to 4.. the decision appealed from is hereby affirmed. 539 for the purpose of expropriating an extensive tract of land — over 87 hectares — for resale to the tenants thereof....00 35.. .999.. 1368 by Juan F. the last one needs no discussion. Cruz.: In January 1947. 4.. Padilla... Gonzalez Virata... and Felix. numbered and owned respectively: 1373 by Jose Leon Gonzalez... Ilagan..00 40.. JOSE LEON GONZALES.. Being a mere consequence of the previous assignments of error. 3259 — for the storage... Labrador.999. and (2) double taxation is not prohibited in our Constitution.. J. Angelo M.. Tesoro.. C... J. with cost against defendant-appellant. 1954 REPUBLIC OF THE PHILIPPINES. 33. use and transportation of compressed inflammable gases — was charged by way of license fees.L. . plaintiff-appellant.99 Less than to 3.. Bengzon. Reyes.. concur Republic of the Philippines SUPREME COURT Manila EN BANC G. in the exercise of the police power of the State. 35486 the property is now represented by seven Transfer Certificates of Title. Ramirez and Ortigas. 1370 by Consuelo Gonzalez-Precilla.. 1372 by Concepcion A.. Filemon I.000) shall only pay a quarterly license fee of eighteen pesos (P18)..400... L-4918 May 14. BENGZON. Caloocan. the Republic started this proceeding under Commonwealth Act No. and originally covered by Transfer Certificate of Title No.. Bautista Angelo.R. Wherefore. Gonzalez-Hilario.. No. Paras.. Montemayor. ET AL.. JJ. in the Court of First Instance of Rizal.. Situated within the Maysilo Estate.500..

the Seventh Day Adventists' land. 1950. The two reports provoked objections from both sides. whose oppositions were seasonably filed in writing. the revised assessment in 1948 valued the entire property at P366. recognizing the social-justice aims of the Government. It lies within the sites of the University of the Philippines and the Capitol and within the field of expansion of the City of Manila. On May 6. After twenty years the prices should be much higher. . plus one thereafter submitted one majority report. Aguinaldo." Such position is clearly untenable. made inquiries. is Exhibit M showing the Seventh day Adventists purchased in 1927. at the rate of P0. obeying orders of the trial judge. the court appointed the following commissioners: Atty. a big lot adjoining the land to be expropriated.75 per square meter as the average compensation for the entire estate. The first divided the property into two parts: one portion previously occupied by the U.42 per square meter — which is more than ten times the 1927 assessment. in June 1948. but subsequently they waived the object. selected by the judge.655. Denial thereof motivated this appeal both by the plaintiff and by the defendants. It should be explained. Although they took the view — in the court below — that the land's value could be reasonably fixed at P1. the estate is bounded by the Araneta Institute property. as "index of value" of the land. and this Court can take judicial notice of the upward trend of values. Yet the Government insists in compensating herein defendants at the rate of P0. Cruz.7 kilometers east of Rizal Avenue.850 or P8. . Erasmo R. Wherefore.e. and 2 kilometers above Highway 54. (there were about two hundred tenants) and agreed to the designation of commissioners to determine the reasonable market value of the property to be taken. and another consisting of rolling lands and rice fields priced at fifteen centavos per square meter. and reported afterwards that the realty was fairly worth P1. All the defendants at first opposed the compulsory sale. the defendants should be given a additional 30 per cent of P28. Army with roads. rendered his decision appraising the estate at P1. indicative of prices in the vicinity. plaintiff invoked.. inspected the premises. in a series of assignments reaches the conclusion. Then on March 29. the sale made to Francisco R. And in its motion for reconsideration submitted to the lower court. On the other hand Sugeco's minority opinion rated the whole parcel at ten centavos per square meter only. Now as to defendants' appeal. As a matter of fact. that all defendants agreed the entire property should be evaluated as a whole for the purpose of facilitating the award. water and sewerage system. In the performance of their duties the Commissioners received oral and documentary evidence. plus one minority report by Commissioner Sugeco. 1949.850. and the Piedad Estate.Eight kilometers north of Plaza Santa Cruz. The declaration was made in 1927. . playground. recommended by plaintiff and Deputy Clerk Benito Macrohon. one month before the expropriation at one peso per square meter — thus giving the lot in question a total value of P871. Judge.S. Obviously unmeritorious contention. that the assessed value is usually lower by 1/3 of ½ of the real market value. particularly of lands in or near manila.75 per square meter1 the defendants here maintain they should be . and valued at 5 pesos per square meter. i. . and submits the proposition. the Honorable Gavino Abaya. Clerk of Court Severo Abellera repaired to the premises.25 per square meter.50 per square meter. in this connection.90 per square meter. The plaintiff. that "there is no reliable standard for determining the reasonable worth of the defendants' land except the tax declaration Exhibit B which puts its value at P28. 1. The parties petitioned for reconsideration.04 per square meter. Taking into account however. 0. and thereafter submitted one majority report.150. The report thereby fixed P1. Another piece of evidence.982.

Reyes a parcel of land at the rate of P2. Ambrosio Pablo and Sons sold to Cromwell Cosmetic Export Company 20. Consider that unlike other eminent domain proceedings.817 square meters at the rate of P1. Now having found plaintiff's proposition as unreasonable. this does not directly benefit him as a part of the "public. that such value represents the price which the property will bring when offered for sale by one who desires.764 square meters at the rate of P2. The majority commissioners. Hence defendants-appellants' demand for P2. we may proceed to examine whether the trial court's determination of the market value should be modified. Julian Encarnacion. 1945. Tuason & Company the property described in Exhibit "3-P" at the rate of P2. and defendants' claim for P2. aided by personal knowledge they gained thru inspection. Quitoria (Exhibit "2"). not directly benefiting the public — it might be interesting to inquire whether a more liberal interpretation of "just compensation" should be adopted in favor of the owner who is compelled to part with his private property for the exclusive benefit of a few. sufficient elements of decision to make a just and equitable award. curbs.730) square meters at the rate of P1 and P1. that on November 13. In Exhibit 3-K. in expropriations like this — for the benefit of other individuals. Concepcion Andrea Gonzalez sold to Francisco R. that on November 14.84 per square meter (Exhibit "3-K"). 1948. subdivision. evidence is competent of bona fide sales of other nearby parcels at times sufficiently near to the proceedings to exclude general changes of values due to new conditions in the vicinity. that on May 14.08 per square meter (Exhibit "3-P"). because of improvements therein. but is not obliged.. . And they rely principally on the prices in Exhibits 3-K. the parcel was purchased from the Balintawak Estate Inc. Ayala and Company sold to J.compensated at the rate of P2.75 per square meter. They quote with approval His Honor's summary of their own evidence as follows: On November 28.50 as unfounded. to sell and is bought by one who is under no imperative necessity of having it 2 and that in determining such value. declared that the lots of said subdivision are sold from P6 to P12 per square meter in cash and from P9 to P15 per square meter by installment. Lorenzo Buenaventura bought and paid at P2 per square meter a lot which is almost adjoining the lands in question — it being separated only by a street called Sta. The sale in Exhibit 3-0. 1947. etc.M.. for the record yields. Rato sold to the Araneta Institute of Agriculture 373.50 per square meter. that on July 29.50 per square meter may not be upheld.4 rejecting the plaintiff's evidence. 1947. 3-O and 3-Q because they "were sufficiently near in point of time with the date of condemnation proceedings" to reflect true land values in the locality. 3 Parenthetically. though exhibiting a higher valuation. Jose M. arrived at the conclusion that the reasonable market value of the entire property was P1. took into account the bona fide sales of nearby parcels and. this is unnecessary." However. which adjoins the property in question. in eminent domain proceedings.50 per square meter (Exhibit "3-O"). The dissenting commissioner's report based mainly on the 1927 assessment values proved too conservative to be of any help. The prices in 3-Q of the Manila Golf Club. a real estate subdivision corporation. 1948.60 per square meter (Exhibit "3-N"). that on December 29. the Balintawak Estate Inc. Prices in realty subdivisions are necessarily higher.50 per square meter. It is needless to repeat that the Government. 1946. cannot be literally followed because it refers to a much smaller lot on the provincial highway. the Manila Golf Club sold to the Ayala and Company 367. bridges. that on April 26. sold to Narciso T. secretary of the Balintawak Estate Inc. However such Exhibits cannot be taken as conclusive valuation. refer to a lot nearer Manila by a kilometer. Aguinaldo a portion of the property in question at P1 (Exhibit "3-L"). on the basis of the evidence of record. must pay just compensation or the fair market value. 1949. such as roads.377 (3.

in his discretion. at least. consisting of good paved roads.850 and entered the premises by virtue of a court order. Rato sold to Victoneta Inc.50 is excessive.85 per square meter (Exhibit 3-M). 274 Record on Appeal). we do not feel justified to declare that the price of P1. Defendants lost the control and use of their property as of that date. playgrounds. After hearing the parties.60 per square meter. Wherefore. the defendants' hacienda is mostly high ground. would command higher prices. markets. 1947. In July 1947 Jose Ma.50 paid for the Manila Golf Club by J. (p.. Neither is it too low. 581. Army. It is unimportant that the sales were consummated several months after these proceedings had for public use — roads. the Victoneta Inc. as it has to. on the question of just compensation. Another thing: whereas defendants' land is served by Reparo Street. These two parcels. Considering the above circumstances. the trial judge's assessment has to be proved. water system.M. 34 we held that in condemnation proceedings "the owner of the land is entitled to interest. — these do not tend to inflate prices of adjoining properties. These two sales were made by Spaniard residing in Madrid. 214 Record on Appeal) together with electric installations and buildings (p. sewerage and general leveling of the land suitable for residential lots (p. Yet there is one point on which defendants' appeal should be heeded. 13 Phil. and the plaintiff agrees. Their counsel now claim legal interest on the amount of compensation. In Philippines Railway vs.872 square meters of adjoining land at P0. 206 Record on Appeal). It probably is agricultural — sold to an agricultural institute. as shown by the circumstance that in two months he disposed of two sizable parcels of real estate. This officer after conducting an ocular inspection of the place and gathering information from people residing in the vicinity recommended P1. The Rural Program Administration took possession on or about January 25. The Government deposited P28. canals. 206 Record on Appeal) which. Solon. 2826. bridges. subdivided into residential lots. No improvements were included in both sales.The Clerk of Court was specifically instructed to make a new assessment. so that a discount of 10 or 20 per cent was not improbable. Two defendants. Tuason & Co.90 per square meter. rolling hills (p.S. On the other hand. in relation to the price of P2. on the amount awarded. Such disposition and such absence must have given him a natural disadvantage in the bargaining. being sufficiently large and located within the vicinity afford some adequate bases of comparison. about neighboring realty may shed favorable light upon His Honor's valuation." . In August 1947 Jose Ma.. made by the U. Rato sold to Araneta Institute of Agriculture four parcels of land totalling 373. the trial judge. He was obviously anxious to liquidate his affairs here. from the time the plaintiff takes possession of the property. estimated that under the circumstances one peso and fifty centavos per square meter was reasonable compensation for the hacienda. The topographical features of Rato's land do not appear. etc. But most significant is the admitted fact that one-third of defendants' land has permanent improvements.377 square meters adjoining the land sold by Exhibit 3-M at prices ranging from P1 to P1. We have not been shown wherein the trial judge abused his discretion in reducing the prices recommended by the court's referees. in view of conflicting reports and the objections of the parties. admitted it was just and reasonable. Two purchases-and-sale transactions in 1947. under Act No. thru a local agent. lot dos not enjoy that advantage (Exhibit 3).

in the . 286. in view of section 13 Rule 69. Costs will be chargeable to the plaintiff.75 per square meter. L-69259 January 26. So ordered. GUTIERREZ. INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES. 1095. will be modified by awarding interest to the defendant at six per cent from January 25. Wherefore the decision of the court a quo will be affirmed as to the value to be paid by the plaintiff for the expropriated land. the facts of the case are summarized as follows: In 1974. Footnotes 1 They said: "Wherefore. 32 Phil. however. concur. 36 Phil. and Concepcion. 500. . Velasquez. Malinta Estate.169 square meters of real estate Identified as Lot. vs. Said decision. 1947 until the date of payment.: The petitioners question the decision of the Intermediate Appellate Court which sustained the private respondent's contention that the deed of exchange whereby Delfin Pacheco and Pelagia Pacheco conveyed a parcel of land to Delpher Trades Corporation in exchange for 2. vs. Alan... vs. Jugo. 326. The plaintiff appellee acknowledges this. Delfin Pacheco and his sister. Montemayor.500 shares of stock was actually a deed of sale which violated a right of first refusal under a lease contract. petitioners. the herein defendants respectfully pray that the decision in question be reconsidered and amended by fixing the value for the purpose of compensation at a amount ranging from P1.. vs. JJ.75 to P2. and DELPHIN PACHECO..Another assignment of error of the defendant is that the lower court failed to make the plaintiff pay the costs. because the plaintiff appealed and lost. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION 3 4 G. One of them appointed by the court. respondents. The last part of the section is not applicable. INC. . were the owners of 27. 40 Phil. Labrador. It is of course understood that the money already deposited and taken by defendants should be discounted.. Manila Railroad Co.. Manila Railroad Co. C. Caligrihan. Pelagia Pacheco. Reyes. No.R. Pablo. " Such language means the property could be bought at P1.J. J. JR.50 per square meter . 2 Manila Railroad Co. No. Paras. and therefore presumably impartial.. Some of defendants asserted P2 was just payment. 1988 DELPHER TRADES CORPORATION. Briefly. Bautista Angelo.

in that: . the Court of First Instance of Bulacan ruled in favor of the plaintiff. After trial.247). Rollo) On the ground that it was not given the first option to buy the leased property pursuant to the proviso in the lease agreement.000. Province of Bulacan (now Metro Manila) which is covered by Transfer Certificate of Title No. filed a petition for certiorari to review the appellate court's decision. C to C-5. 1-2. the judgment is hereby rendered declaring the valid existence of the plaintiffs preferential right to acquire the subject property (right of first refusal) and ordering the defendants and all persons deriving rights therefrom to convey the said property to plaintiff who may offer to acquire the same at the rate of P14..169 square meters only. pp. a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property (TCT No. Metro Manila (TCT No.500. inclusive) (pp. more or less.00 per square meter. No. lessee Construction Components International. the same property and providing that during the existence or after the term of this lease the lessor should he decide to sell the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar conditions (Exhibits A to A5) On August 3. The dispositive portion of the decision reads: ACCORDINGLY. p. T-4240 of the Bulacan land registry. We initially denied the petition but upon motion for reconsideration. Valenzuela. for Lot 1095 whose area is 27. The defendants-appellants. (Appellant's Brief. 44-45. as well as the assignment of lease were annotated at he back of the title. Without pronouncement as to attorney's fees and costs. as per stipulation of the parties (Exhs. 4273) for 2. Inc. 1974.T-4240) together with another parcel of land also located in Malinta Estate. respondent Hydro Pipes Philippines. 246. now the petitioners. with the signed conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco (Exhs.00 (Exhs. 1095 in its favor under conditions similar to those whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco and Delphin Pacheco. assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines. The petitioners allege that: The denial of the petition will work great injustice to the petitioners.. Rec. On April 3. 134.500 shares of stock of defendant corporation with a total value of P1. Inc. the said co-owners leased to Construction Components International Inc. 1976. we set aside the resolution denying the petition and gave it due course. B to B-6 inclusive) The contract of lease. A to D-3 inclusive) On January 3. Rollo) The lower court's decision was affirmed on appeal by the Intermediate Appellate Court. Inc. pp. (Appendix I.Municipality of Polo (now Valenzuela). filed an amended complaint for reconveyance of Lot. 1974.

1095 to Hydro Pipes Philippines. 251-252. the petitioners allege: "Considering that the beneficial ownership and control of petitioner corporation remained in the hands of the original co-owners." Eduardo Neria. Civil Code). There is a sale when ownership is transferred for a price certain in money or its equivalent (Art. meter. 1095 which had been leased to Hydro Pipes Philippines.1 Million. Thus.169 square meters or 2. that the corporation was organized by the children of the two spouses (spouses Pelagia Pacheco and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles) who owned in common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their control over the property through the corporation and to avoid taxes. the petitioners contend that there was actually no transfer of ownership of the subject parcel of land since the Pachecos remained in control of the property. ("private respondent") will acquire from petitioners a parcel of industrial land consisting of 27. and that at the time of incorporation. Private respondent is allowed to exercise its right of first refusal even if there is no "sale" or transfer of actual ownership interests by petitioners to third parties.366. In the petitioners' motion for reconsideration. there being in substance and in effect an Identity of interest. Rollo) The petitioners maintain that the Pachecos did not sell the property. or a total of P380. although the prevailing value thereof is approximately P300/sq. Bulacan exit of the toll expressway) for only P14/sq. In reality. Rollo) Under this factual backdrop. It maintains that there was actual . the private respondent argues that Delpher Trades Corporation is a corporate entity separate and distinct from the Pachecos. that in exchange for these properties." (p. (pp. meter or P8. The transfer of ownership. They argue that there was no sale and that they exchanged the land for shares of stocks in their own corporation. Inc. was merely in form but not in substance. including Lot No. prejudiced the private respondent's right of first refusal over the leased property included in the "deed of exchange. or even spirit of the contract. "Hence. he knew all about the contract of lease of Lot. there was no transfer of actual ownership interests over the land when the same was transferred to petitioner corporation in exchange for the latter's shares of stock. and 3. were transferred to the corporation. is not a party who may allege that this separate corporate existence should be disregarded. as provided in the same contractual provision invoked by private respondent. such transfer is not within the letter. Pelagia and Delfin acquired 2.500 unissued no par value shares of stock which are equivalent to a 55% majority in the corporation because the other owners only owned 2. that petitioner Delfin Pacheco. that the leased property was transferred to the corporation by virtue of a deed of exchange of property. that in order to accomplish this end. hence the corporation and the coowners should be deemed to be the same." (pp. 254-255. in effect.1. No. 252. Respondent Hydro Pipes Philippines. 254. Assuming arguendo that there has been a transfer of actual ownership interests. a certified public accountant and son-in-law of the late Pelagia Pacheco testified that Delpher Trades Corporation is a family corporation. they refer to this scheme as "estate planning." (p. 2. if anything.000 shares. 1638.7 hectares (located right after the Valenzuela. Civil Code) while there is a barter or exchange when one thing is given in consideration of another thing (Art. petitioner corporation is a mere alter ego or conduit of the Pacheco co-owners. two pieces of real estate. Rollo) The resolution of the case hinges on 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. Thus. having treated Delpher Trades Corporation as such a separate and distinct corporate entity. Rollo) On the other hand. 1468. private respondent will acquire the land not under "similar conditions" by which it was transferred to petitioner Delpher Trades Corporation. it contends that it cannot be said that Delpher Trades Corporation is the Pacheco's same alter ego or conduit.

the Pachecos have control of the corporation. Land valued at P300.. p. Vol. It is to be stressed that by their ownership of the 2.00 a square meter was turned over to the family's corporation for only P14. to the extent of 100/1.500 original unissued no par value shares of stocks of the Delpher Trades Corporation. (Agbayani. But this character of proportionate interest is not hidden beneath a false appearance of a given sum in money.500 no par shares of stock. Commentaries and Jurisprudence on the Commercial Laws of the Philippines. cited in Agbayani. the attention of persons interested in the financial condition of a corporation is focused upon the value of assets and the amount of its debts. Moreover. one becomes a stockholder of a corporation by subscription or by purchasing stock directly from the corporation or from individual owners thereof (Salmon." (Rohrlich 243. The holder of no-par shares may see from the certificate itself that he is only an aliquot sharer in the assets of the corporation. 47 Phil. no matter what value they may have. The capital stock of a corporation issuing only no-par value shares is not set forth by a stated amount of money. LINSANGAN: Q Mr. Unson. 649. Neria. v. as in the case of par value shares. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher Trades Corporation to take control of their properties and at the same time save on inheritance taxes. After incorporation. from the point of view of taxation. Dexter & Co. by removing the par value of shares. Thus. 107). A no-par value share does not purport to represent any stated proportionate interest in the capital stock measured by value. Consequently. III. 1980 Edition. is there any benefit to the spouses Hernandez and Pacheco in connection with their execution of a deed of exchange on the properties for no par value shares of the defendant corporation? . but instead is expressed to be divided into a stated number of shares. the Pachecos acquired 2. Their equity capital is 55% as against 45% of the other stockholders. citing Bole v. As explained by Eduardo Neria: xxx xxx xxx ATTY. III. 430) It is significant that the Pachecos took no par value shares in exchange for their properties. in exchange for their properties.000 shares.00 a square meter. 1980 Edition. 233 Pa. there was no attempt to state the true or current market value of the real estate. Fulton [1912]. 1. We rule for the petitioners.000 or 1/10. who also belong to the same family group. p. Vol. the Pachecos became stockholders of the corporation by subscription "The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation. the Delpher Trades Corporation is a business conduit of the Pachecos. In effect. 609). In the case at bar. This indicates that a shareholder of 100 such shares is an aliquot sharer in the assets of the corporation. formed or to be formed. Commentaries and Jurisprudence on the Commercial Laws of the Philippines.transfer of ownership interests over the leased property when the same was transferred to Delpher Trades Corporation in exchange for the latter's shares of stock. but only an aliquot part of the whole number of such shares of the issuing corporation. such as.

The board can fix the value of the shares equivalent to the capital requirements of the corporation. C-sub-par. tax exemption benefits. is there any flexibility in the holding by the corporation of the property in question? . providing for tax free exchange of property. testified during the last hearing that the decision to have no par value share in the defendant corporation was for the purpose of flexibility. Q What are these advantages to the said spouses from the point of view of taxation in entering in the deed of exchange? A Having fulfilled the conditions in the income tax law." Q Did you explain to the spouses this benefit at the time you executed the deed of exchange? A Yes. Can you explain flexibility in connection with the ownership of the property in question? A There is flexibility in using no par value shares as the value is determined by the board of directors in increasing capitalization. sir Q You also. LINSANGAN: Q (What do you mean by "point of view"?) What are these benefits to the spouses of this deed of exchange? A Continuous control of the property. sir. and other inherent benefits in a corporation. COURT: Q What do you mean by "point of view"? A To take advantage for both spouses and corporation in entering in the deed of exchange. ATTY.A Yes. Q What provision in the income tax law are you referring to? A I refer to Section 35 of the National Internal Revenue Code under par. Q Now also from the point of taxation. they were able to execute the deed of exchange free from income tax and acquire a corporation. (2) Exceptions regarding the provision which I quote: "No gain or loss shall also be recognized if a person exchanges his property for stock in a corporation of which as a result of such exchange said person alone or together with others not exceeding four persons gains control of said corporation.

A Yes, since a corporation does not die it can continue to hold on to the property indefinitely for a period of at least 50 years. On the other hand, if the property is held by the spouse the property will be tied up in succession proceedings and the consequential payments of estate and inheritance taxes when an owner dies. Q Now what advantage is this continuity in relation to ownership by a particular person of certain properties in respect to taxation? A The property is not subjected to taxes on succession as the corporation does not die. Q So the benefit you are talking about are inheritance taxes? A Yes, sir. (pp. 3-5, tsn., December 15, 1981) The records do not point to anything wrong or objectionable about this "estate planning" scheme resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted." (Liddell & Co., Inc. v. The collector of Internal Revenue, 2 SCRA 632 citing Gregory v. Helvering, 293 U.S. 465, 7 L. ed. 596). 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. WHEREFORE, the instant petition is hereby GRANTED, The questioned decision and resolution of the then Intermediate Appellate Court are REVERSED and SET ASIDE. The amended complaint in Civil Case No. 885-V-79 of the then Court of First Instance of Bulacan is DISMISSED. No costs. SO ORDERED. Fernan (Chairman), Bidin and Cortes, JJ., concur. Feliciano, J., took no part. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-20960-61 October 31, 1968

COMMlSSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS, petitionersappellants, vs. PHILIPPINE ACE LINES, INC., respondent-appellee. Office of the Solicitor General Antonio Barredo, Assistant Solicitor General Felicisimo R. Rosete and Special Attorney Francisco J. Malate, Jr. for petitioners-appellants. Dakila F. Castro & Associates for respondent-appellee.

ANGELES, J.: On appeal by the Government from the decision — rendered jointly in Tax Cases Nos. 964 & 984 — of the Court of Tax Appeals, reversing the rulings of the Commissioner of Internal Revenue holding the Philippine Ace Lines, Inc. liable to pay the aggregate amount of P1,407,724.57 as compensating taxes on four (4) ocean-going cargo vessels acquired by said company from the Reparations Commission of the Philippines, and of the Commissioner of Customs to place the four vessels under customs custody until the aforementioned amount claimed by the Government was first paid. The antecedent facts of the case are not in dispute and may be summarized briefly as follows: Under date of January 23, 1959, the Reparations Commission agreed to sell to the Philippine Ace Lines the cargo vessel M/S YAKAL and M/S MOLAVE which were procured by the former from Japan for the end-use of the latter under the Philippine- Japanese Reparations Agreement of May 9, 1956, at the agreed prices of P4,283,241.48 and P4,292,457.48, respectively. Similar agreements involving two (2) other ocean-going cargo vessels were subsequently entered into by and between the same parties: one, dated November 11, 1959, referring to the purchase and sale of M/S TINDALO for the price of P7,054.177.78 and, the other, concerning the purchase and sale of M/S NARRA under date of December 14, 1959, for the price of P3,599,995.44. All these agreements — invariably denominated as "Contract of Conditional Purchase and Sale of Reparations Goods" — stipulated, among others, that the Reparations Commission retains title and ownership of the above-described vessels until they were fully paid for and that the purchase prices of the vessels were to be paid by Philippine Ace Lines to the Reparations Commission under deferred payment plans in ten (10) equal annual installments. The four (4) vessels referred to were thereafter delivered to Philippine Ace Lines in Japan; they were taken to the Philippines where they were registered in the Bureau of Customs in the name of the Reparations Commission; and thereafter, the vessels were operated and utilized by Philippine Ace Lines in its shipping business, plying between ports of foreign countries and the Philippines. Sometime later, however, the Commissioner of Internal Revenue assessed against the Philippine Ace lines the amounts of P304,428.00, P256,275.00, P499,948.10 and P305.073.47 as compensating taxes on the M/S YAKAL, M/S NARRA, M/S TINDALO and M/S MOLAVE, respectively, and demanded payment of the said amounts. The Commisioner of Customs, joining the Commissioner of Internal Revenue, then placed the vessels under customs custody at the different ports of the Philippines where they were found at the time, and refused to give due course to the "clearance" of said vessels as requested by their respective owner and operator — Reparations Commission and Philippine Ace Lines — unless the compensating taxes assessed against the latter were first paid to the Commissioner of Internal Revenue. Philippine Ace Lines protested said actions of the Commissioners of Internal Revenue and of Customs, alleging that the legal title and ownership of the vessels operated by it were still vested with the Reparations Commission which, under Section 14 of the Reparations Act, 1 was exempt from payment of all duties, fees and taxes on all reparations goods obtained by it; but the said officials rejected the protest and ruled that the compensating taxes should first be paid, per directive to that effect by the Secretary of Finance. Subsequent protests — calling the attention of the Commissioner of Internal Revenue and the Commissioner of Customs to the substantial loss and irreparable injury it has suffered by the tying up of the four ships in port — also proved futile. Offshoots of the controversy, Philippine Ace Lines interposed two (2) separate appeals (petitions for review) from the above rulings or decisions of the Commissioner of Internal Revenue and the Commissioner of Customs, to the Court of Tax Appeals where they were docketed as C.T.A. Case No. 964, involving M/S YAKAL and M/S NARRA, and C.T.A. Case No. 984, concerning M/S TINDALO and M/S MOLAVE. While the cases were pending trial, Philippine Ace Lines petitioned the court a quo to enjoin the collection of the compensating tax assessed against it and after hearing, writs of preliminary injunction were issued upon the filing of surety bonds to guarantee payment of the amounts claimed.

In the meantime, Congress enacted Republic Act No. 3079 (effective June 17, 1961) which amended Republic Act No. 1789, otherwise known as the Reparations Act, and provided as follows: SEC. 14. Exemption from tax. — All reparations goods obtained by the Government shall be exempt from the payment of all duties, fees and taxes. Reparations goods obtained by private parties shall be exempt from the payment of customs duties, compensating tax, consular fees and the special import tax. xxx xxx xxx

SEC. 20. This Act shall take effect upon its approval, except that the amendment contained in section seven hereof relating to the requirements for procurement orders including the requirement of downpayment by private applicant end-users shall not apply to procurement orders already duly issued and verified at the time of the passage of this amendatory Act, and except further that the amendment contained in section ten relating to the insurance of the reparations goods by the end-users upon delivery shall apply also to goods covered by contracts already entered into by the Commission and the end-user prior to the approval of this amendatory Act as well as goods already delivered to the end-user, and except further that the amendments contained in sections eleven and twelve hereof relating to the terms of the installment payments on capital goods disposed of to private parties, and the execution of a performance bond before delivery of reparations goods, shall not apply to contract for the utilization of reparations goods already entered into by the Commission and the end-users prior to the approval of thisamendatory Act: Provided, That any end-user may apply the renovation of his utilization contract with the commission in order to avail of any provision of this amendatory Act which is more favorable to an applicant end-user than has heretofore been granted in like manner and to the same extent as an end-user filing his application after the approval of this amendatory Act, and the Commission may agree to such renovation on condition that the end-user shall voluntarily assume all the new obligations provided for in this amendatory Act. [Emphasis supplied] Invoking the favorable provisions of the new law (Republic Act No. 3079, above quote Philippine Ace Lines then entered into "Renovated Contract(s) of Conditional Purchase and Sale of Reparations Goods" with the Reparations Commission, covering the four (4) cargo vessels. It had previously acquired from the latter under the Reparations Act. Thereafter, the said company filed a "Supplement to the Petition for Review" in each of the above entitled cases before the Court of Tax Appeals, submitting therewith copies of the said renovated contracts it had entered with the Reparations Commission regarding the purchase and sale of M/S MOLAVE, M/S TINDALO, M/S YAKAL and M/S NARRA, with the allegation that "expressly implementing section 14 of Republic Act No. 3079 in the aforesaid renovated contracts," the Reparations Commission and the Philippine Ace Lines have agreed as follows: NOW THEREFORE, for and in consideration of the premises above stated and of the payments to be made by the herein Conditional Vendee as stipulated in Annex "B" hereof which is made an integral part of this contract, the parties herein agree to execute this renovation of contract of Conditional Purchase and Sale and the Conditional Vendor hereby transfers and conveys unto the herein Conditional Vendee the ocean-going vessels above-described ...; subject further to the pertinent provisions of Republic Act No. 1789 as amended, including particularly the exempting provisions of Section 14 thereof relative to the exemption from payment of compensating tax which the herein Conditional Vendee, as an implemented machinery, do hereby, by these presents, implement. ... In their "Answer to Supplement to Petition for Review" filed with the court below by counsel for the Commissioner of Internal Revenue and the Commissioner of Customs, the foregoing allegation was admitted. They claimed, however, that even if Philippine Ace Lines and the Reparations Commission have agreed to implement the provisions of Section 14 of Republic Act No. 1789, as amended by Republic Act No. 3079, in the "Renovated Contract of Conditional Purchase and Sale of Reparations Goods" entered into between them, such implementation did not relieve the Philippine Ace Lines from the

payment of the compensating taxes in question. The parties thereafter submitted the cases for decision upon a stipulation of facts containing, substantially, the facts as above set forth. On January 25, 1963, the Court of Tax Appeals rendered a joint decision in the two cases, reversing the rulings of the Commissioner of Internal Revenue and the Commissioner of Customs, in the following rationale: The sole issue presented for our consideration is whether or not petitioner is liable for the compensating tax on the four ocean-going vessels in question. Petitioner claims that it is not liable on the grounds that said vessels are still owned by the Reparations Commission and that, assuming that it was liable therefor under Section 190 of the National Internal Revenue Code, in relation to Section 14 of Republic Act 1789 before its amendment, it is now exempt from said tax by virtue of Section 20 of Republic Act No. 3079 in relation to Section 14 of Republic Act No. 1789, as amended. On the other hand, respondent claims that petitioner is liable and that the latter's liability is not affected by the exemption provision of the new law. xxx xxx xxx

The Government does not deny the fact that petitioner has complied with all the requirements of law in order that it may avail itself of all the favorable provisions granted in Republic Act No. 3079. It is, however, contended that the favorable provisions mentioned in Section 20 of said Act which may be availed of by an applicant for renovation of his utilization contract with the Reparations Commission do not include exemption from compensating tax because such exemption is not expressly stated in the law. In providing that the favorable provisions of Republic Act No. 3079 shall be available to applicants for renovation of their utilization contracts, on condition that said applicants shall voluntarily assume all the new obligations provided in the new law, the law intends to place persons who acquired reparations goods before the enactment of the amendatory Act on the same footing as those who acquire reparations goods after its enactment. This is so because of the provision that once an application for renovation of a utilization contract has been approved, the favorable provisions of said Act shall be available to the applicant "in like manner and to the same extent as an end-user filing his application after the approval of this amendatory Act." To deny exemption from compensating tax to one whose utilization contract has been renovated, while granting the exemption to one who files an application for acquisition of reparations goods after the approval of the new law, would be contrary to the express mandate of the law that they both be subject to the same obligations and they both enjoy the same privileges in like manner and to the same extent. It would be a manifest distortion of the literal meaning and purpose of the law. FOR THE FOREGOING CONSIDERATIONS, the decisions appealed from in both cases are hereby reversed. Accordingly, the surety bonds filed by petitioner to guarantee payment of the tax in question are thereby cancelled. No pronouncement as to costs. Not satisfied with the foregoing decision of the Court of Tax Appeals, the Government has interposed the instant appeal therefrom to this Court. Appellant now charges that the lower court had erred in holding that the renovation of the contracts of purchase and sale of the vessels involved in these cases, after the approval of Republic Act No. 3079, entitled Philippine Ace Lines to the exemption from payment of compensating tax under the provisions of the said law, notwithstanding the fact that the vessels referred to were acquired from the Reparations Commission long before the approval of said amendatory Act which, by the way, did not expressly authorize such exemption. It is argued that the favorable provisions of Republic Act No. 3079 invoked by Philippine Ace Lines and relied upon by the decision of the court below cannot include exemption from compensating tax, otherwise, had Congress intended so, it would have provided for such exemption in clear and explicit terms; that the tax exemption contained in Section 14 of the amendatory Act cannot

have retroactive application in the absence of any provision for retroactivity; and that to grant such exemption to end-users who have acquired reparations goods before the approval of Republic Act No. 3079 would be prejudicial to the Government. Appellant's position calls to mind Commissioner of Internal Revenue vs. Bothelo Shipping Corporation,2 the factual setting of which is on all fours with the case at bar, and where this Court, speaking through Chief Justice Roberto Concepcion, disposed of the same charge and contentions in clear and unequivocal terms, in the following wise: The inherent weakness of the last ground becomes manifest when we consider that, if true, there could be no tax exemption of any kind whatsoever, even if Congress should wish to create one, because every such exemption implies a waiver of the right to collect what otherwise would be due to the Government, and, in this sense, is prejudicial thereto. In fact, however, tax exemptions may and do exist, such as the one prescribed in section 14 of Republic Act No. 1789, as amended by Republic Act No. 3079, which, by the way, is "clear and explicit," thus, meeting the first ground of appellant's contention. It may not be amiss to add that no tax exemption — like any other legal exemption or exception — is given without any reason therefor. In much the same way as other statutory commands, its avowed purpose is some public benefit or interest, which the law-making body considers sufficient to offset the monetary loss entailed in the grant of the exemption. Indeed, section 20 of Republic Act No. 3079 exacts a valuable consideration for the retroactivity of its favorable provision, namely, the voluntary assumption, by the end-user, who bought reparations goods prior to June 17, 1961, of "all the new obligations provided for in" said Act. The argument adduced in support of the third ground is that the view adopted by the Tax Court would operate to grant exemption to particular persons, the Buyers therein. It should be noted, however, that there is no constitutional injunction against granting tax exemptions to particular persons. In fact, it is not unusual to grant legislative franchises to specific individuals or entities, conferring tax exemptions thereto. What the fundamental law forbids is the denial of equal protection such as through unreasonable discrimination or classification. Furthermore, Section 14 of the Law on Reparations, as amended, exempts from the compensating tax, not particular persons but persons belonging to a particular class. Indeed, appellants do not assail the Constitutionality of said section 14, insofar as it grants exemptions to end-users who, after the approval of Republic Act No. 3079, on June 17, 1961, purchased reparations goods procured by the Commission. From the view point of Constitutional Law, especially the equal protection clause, there is no difference between the grant of exemption to said end-users, and the extension of the grant to those whose contracts of purchase and sale were made before said date, under Republic Act No. 1789. It is true that Republic Act No. 3079 does not explicitly declare that those who purchased reparations goods prior to June 17, 1961, are exempt from the compensating tax. It does not say so, because they do not really enjoy such exemption, unless they comply with the proviso in Section 20 of said Act, by applying for the renovation of their respective utilization contracts, "in order to avail of any provision of the Amendatory Act which is more favorable" to the applicant. In other words, it is manifest, from the language of said section 20, that the same intended to give such buyers the opportunity to be treated "in like manner and to the same extent as an end-user filing his application after the approval of this Amendatory Act." Like the "most favored nation clause" in international agreements, the aforementioned section 20 thus seeks, not to discriminate or to create an exemption or exceptions, but to abolish the discrimination, exemption or exception that would otherwise result, in favor of the end-user who bought after June 17, 1961 and against one who bought prior thereto. Indeed, it is difficult to find substantial justification for the distinction between the one and the other. ...

We find no cogent reason to modify, much less depart from the conclusion reached in Bothelo, as expressed in the above-quoted opinion of the Court there, and the same should resolve the identical problem now brought before Us in this proceeding. WHEREFORE, the decision of the Court of Tax Appeals appealed from in these cases is affirmed; no pronouncement as to costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Fernando and Capistrano, JJ., concur. Zaldivar, J., is on leave.

Footnotes
1

Sec. 14, R.A. 1789. Exemption from tax.- All reparations goods obtained by the Government shall be exempt from the payment of all duties, fees and taxes. Reparations goods obtained by private parties shall be exempt only from the payment of customs duties, consular fees and special import tax.
2

L-21633, June 29, 1967. Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-14878

December 26, 1963

SURIGAO CONSOLIDATED MINING CO., INC., petitioner, vs. COLLECTOR OF INTERNAL REVENUE and COURT OF APPEALS, respondents. Leido, Angeles and Valladolid for petitioner. Office of the Solicitor General for respondents. REGALA, J.: This is a petition to review the decision of the Court of Tax Appeals in Manila Civil Case No. 4770 dismissing for lack of merit the action of the Surigao Consolidated Mining Company for the refund of the total amount of P17,051.14 allegedly representing overpayment of ad valorem tax for the fourth quarter of 1941. The record shows that before the outbreak of World War II, the Surigao Consolidated Mining Company (called SURIGAO CONSOLIDATED, for short), a domestic corporation which then had its principal office in the City of Iloilo, was operating its mining concessions in Mainit, Surigao. Pursuant to section 246 of the Internal Revenue Code, which prescribes the time and manner of payment of royalties or ad valorem taxes, it filed a bond and had been regularly filing its returns for minerals removed from its mines during each calendar quarter and paying ad valorem tax thereon within 20 days after the close of every quarter. In each case, computation of the ad valorem tax was based on the market value of the minerals set forth in the returns, subject to adjustment upon the receipt of the smelter showing the actual market value of the minerals to the United States.

Due to the interruption, of the communications outbreak of the war, the principal office of Surigao Consolidated lost contact with its mines and never received the production reports for the fourth quarter of 1941. In order to avoid incurring any tax penalty, said company, on January 19, 1942, deposited a check amount of P27,000.00 payable to and "indorsed in favor of the City Treasurer (of Iloilo) in payment of the ad valorem taxes (approximate adjustment to be made when circumstances allow it) for the fourth quarter of 1941." After the termination of the war, Commonwealth Act No. 722 was enacted, which provided for the filing of returns for minerals removed during the last quarter of 1941 up to December 31, 1945 and the payment of ad valorem tax on said minerals to February 28, 1946. Availing of the provisions of the aforementioned Act, the Surigao Consolidated, on December 28, 1945, ad valorem tax returns for the fourth quarter declaring as its tax liability the amount of P43,486.54. Applying the amount of P27,000.00 previously deposited with the City Treasurer of Iloilo, the returns indicated an unpaid balance of P16,486.54 as the " tax subject to revision." However, on February 26, 1946, the Surigao Consolidated filed an amended ad valorem tax returns under which amendment it declared a reduced ad valorem tax in the amount of P37,189.00. And crediting itself with the amount of P27,000.00 previously deposited with the City Treasurer of Iloilo, it paid the remaining balance of P10,189.00. On September 24, 1946, the Surigao Consolidated again filed a statement of adjustment allegedly containing figures and data of the complete smelter returns for minerals shipped to the United States. In the accompanying letter, a request was made, this time not only for the reduction of tax, but for the refund of the amount of P18,107.87. On October 19, 1946, another statement of adjustment was filed reducing the claim for refund to P17,158.01. Finally, on March 15, 1947, a third statement of adjustment was submitted further reducing the claim for refund to the amount of P 17,051.14. As the Collector of Internal Revenue denied the request for the refund of the said P17,051.14 on the ground that the money already paid as ad valorem tax was legally due to the Government, the Surigao Consolidated instituted with the Court of First Instance of Manila civil action for its recovery. However, upon the enactment of Republic Act No. 1125 creating the Court of Tax Appeals, the case was remanded to the latter court for proper disposition. After hearing, the Court of Tax Appeals, on July 16, 1958, finding that the amount sought to be refunded been lawfully collected, rendered its decision denying the claim for refund. The Surigao Consolidated in due time filed a motion for new trial on the ground that the decision was "not justified by the overwhelming weight of evidence" and that it was contrary to law. The tax court, however, denied the motion. Hence, this petition for review.lawphil.net The question to be resolved is whether or not Surigao Consolidated, petitioner herein, is entitled to the refund of ad valorem tax in the total amount of P17,051.14, itemized as follows: 1. Ad valorem tax on minerals removed from the mines but allegedly lost in transit on account of war 2. Ad valorem tax on minerals extracted from the mines but allegedly looted during the Japanese occupation 3. Alleged overpayment of ad valorem tax on minerals shipped to the United States P1,191.46

15,609.73

249.95

which provides as follows: SECTION 1. That if said minerals had been or shall be recovered by the miner or producer. failed to present adequate evidence to prove such loss. 81 authorizes the refund of taxes already paid by petitioner. is merely limited to the general and . Even assuming arguendo that the provisions of Republic Act No. We are constrained to hold that the benefits of said provision does not extend to it. merely of testimony of witnesses who did not have personal knowledge of the circumstances which gave rise to the loss. p. nineteen hundred and forty-two. Such a statute has no retrospective operation.191. Hamilton. the Tax Court has this to say: We are again confronted with the case where plaintiff has. to our mind.. it should be sustained only when expressed in explicit terms.46 represents the amount of ad valorem tax paid on minerals removed from the mines but alleged to have been lost in transit on account of the war. It is to be noted that petitioner's evidence of the alleged loss in transit as observed by the Court of Tax Appeals. citing Government of P. Any provision of existing law to the contrary notwithstanding: (d) All unpaid royalties. The refund is sought under section 1 (d) of Republic Act No. as a statute which releases a person or corporation from a burden common to the whole community should be strictly (Louisville Water Co. Under the second item. But the aforequoted section clearly refers to the condonation of unpaid taxes only. unless by the terms thereof it clearly appears to be the intention of the legislature that the exemption shall relate back to taxes which have already become fixed. Monte de Piedad. the latter would not still be entitled to the refund sought for under the first item.) The application of a statute creating an exemption for taxation to taxes already assessed depends upon whether it is retrospective in its operation. ad valorem or specific taxes on the same shall be immediately due and demandable. of course be considered sufficient to establish that the minerals were in fact lost. It is the universal rule that he who claims an exemption from his share of the common burden of taxation must justify his claim by showing that the Legislature intended to exempt him by words too plain to be mistaken.609. .14 The first. petitioner seeks to recover the amount of P15. I. item in petitioner's claim for refund in the amount of P1.73 representing the ad valorem tax paid on minerals extracted from its mines but alleged to have been looted during the enemy occupation. if at all. would be to create a dangerous precendent. 25 Phil. such royalties. are hereby condoned: Provided.P17.051. v. Judge Luciano of the Court of Tax Appeals during the trial. it would be unfair to deny this benefit to those taxpayers who had been prompt in paying theirs. In connection with the alleged looting of the minerals. 438). (Statutory Construction by Francisco. The evidence. Petitioner having failed to point to Us any portion of the law that explicitly provides for a refund of those taxpayers who had paid their taxes on the items and under circumstances mentioned in the abovequoted provision. 81. 81 Ky. At first it would seem to be sound and logical. Cases. Petitioner argues that since the law condones the taxes due from taxpayers who failed to pay their taxes. cited 6 American and English Ann. ad valorem or specific taxes on all minerals mined from mining claims or concessions existing and in force on January first.. 517. 42. v. The argument merits careful consideration. Such evidence cannot. and which minerals were lost by reason of the war or circumstances arising therefrom. and it can not be extended beyond the plain meaning of those terms. The condonation of a tax liability is equivalent and is in the nature of a tax exemption. Being so.

828. petitioner failed to show that the amount of taxes sought to be refunded have been erroneously collected. 1934 . we can not make the finding that the minerals were in fact lost. in refusing to give any probative value statements of adjustment. As there is no credible and satisfactory explanation for the non-production of said returns. there arises the presumption that if produced they would be adverse to petitioner.28. concur. It is that an ad valorem tax in the amount of P20. the Court of Tax Appeals cannot be said to have committed error. In this case.uncorroborated statements of plaintiff's officers that the same were lost in the mines. No. With this observation. much less abused its discretion.299. Going over the record.895. that the smelter returns from the United States show that the actual market value of the minerals shipped to the States was P416. the decision appealed from is hereby affirmed. Concepcion. C. J.J. Dizon and Makalintal.86 is an overpayment.86.34. Paredes..81 and P20. Much less had these officers have personal knowledge of the loss. Under the circumstances. Bautista Angelo. Labrador. Reyes. petitioner failed to produce them during the trial. Bengzon.. especially because they had no direct supervision over the handling of such minerals at the time of the alleged loss. therefore. Costs against petitioner. We find no reason to disturb the above findings of the Court of Tax Appeals. Republic of the Philippines SUPREME COURT Manila EN BANC G. Conformably to the above.387.137.95 on the minerals shipped to the United States. It is not disputed that. but for unknown reasons. the amount of ad valorem tax on the minerals shipped to the United States is subject to adjustment upon the receipt of the smelter returns showing their actual market value Petitioner contends that the statements of adjustment alleged to contain the figures and data set forth in the smelter returns are adequate evidence of the actual market value of the minerals shipped to the United States. The best evidence of the actual market value minerals shipped to the United States are the smelter returns themselves. Barrera. there being no showing that they are not substantiated by the evidence. These returns are admittedly petitioner's possession.81 was originally paid on the minerals shipped to the United States with a gross value of P410. claims difference between the amount of P20. One more item in petitioner's claim is the alleged overpayment of ad valorem tax in the amount of P249. JJ..49. and that after deducting all allowable deductions amounting in all to P1. It is a settled doctrine that in a suit for the recovery of the payment of taxes or any portion thereof as having been illegally or erroneously collected.387.L. as indicated above. Petitioner. We are of the opinion that the Court of Tax Appeals did not commit any error in denying petitioner's claim. Under the circumstances. the true and correct amount of ad valorem tax on said minerals was P20. the burden is upon the taxpayer to establish the facts which show the illegality of the tax or that the determination thereof is erroneous. Padilla. These testimonies cannot be taken on their full face value.R. WHEREFORE. it would be useless ceremony to delve into the issue of whether ad valorem tax should be or should not be paid on minerals extracted from the mines but not removed therefrom.B.137. 41085 September 14.

. each of the defendants should be held liable only for the acts committed by him. and kept quiet about the matter. The other accused. Under these facts. One night in June. in their house. Neither has the prosecution shown that the fist blow that landed on the left eye of the deceased has contributed in any manner to the death of the deceased. causing his death a few hours thereafter. vs. his son. the defendant Felixberto. 26 Phil. Because of their fear on account of the threats made by the accused. the persons in the barrio who had known what really happened. according to the prosecution evidence. and the prosecution has not established. Severino Castañeda then said that he would kill anybody who would tell what had happened. . had nothing in his hand. which was made of hard wood. picked inches in diameter. The skull of the deceased was found still intact. enormous blow on the head which resulted irresistibly in his death. . the trial place of the deceased was found and his mortal remains were exhumed. 1929. . defendants. struck and hit the piece of wood he was carrying the deceased on the left side of the head of the tempoparietal region. 1933. ET AL. 27. appellant.. Dr. on September 25. S. met him and gave him a fist blow on the left eye. . San Narciso. but with a big perforation on the tempo-parietal region. It is clear that the defendants acted independently of each other. for the last four years. (U. which fracture resulted in cerebral hemorrhage. . The information does not allege. situated in the barrio of Siminublan. however. vs. Zambales. which made the deceased somewhat groggy and to incline his head towards the right side. plaintiff-appellee. Eladio Castañeda and his wife Maria Fontillas were living together with their son. if there was any. that is. The other accused. The wife ran away from the house. was the direct cause of the death of the deceased. SEVERINO CASTAÑEDA. 14 Phil. Macuti. was still intact. The corresponding information charging the two defendants with the crime of parricide was filed before the justice of the peace of San Narciso. She was followed and chased by the deceased who. who had already reached that part of the kitchen. 85. the neighbors who had gone to the place in response to the screams for help and who had witnessed the incident. any conspiracy between the two defendants. especially Lieuts. HULL. . . Reyes and Javier.THE PEOPLE OF THE PHILIPPINE ISLANDS. Right at that moment. SEVERINO CASTAÑEDA. Severino Castañeda. Most of the witnesses to the tragic incident helped not only in making the coffin of the deceased but also burying him in the cemetery in San Narciso. Zosimo Rivas for appellant. . was then living in a separate house nearby. proves that the deceased had received a strong. For this reason. .. vs. The coffin of the deceased. The facts of the case are well set forth in the decision of the trial court. Felixberto Fontillas alias Castañeda giving a fist blow on the left eye. and defendant Severino Castañeda giving a blow on the left temple with a piece of wood which. J. S. Thanks to the activity of the Constabulary. Without a previous plan or agreement to assault or kill their father. Martinez. Canuto and Arambulo. which fact. his other son Severino Castañeda. Office of the Solicitor General Hilado for appellee. Anicio Pascual. Just as the deceased was entering the kitchen.: Defendant-appellant was convicted of the crime of parricide in the Court of First instance of Zambales. 170. the accused Severino Castañeda. evidently to take refuge in the house of accused Felixberto.) The prosecution evidence has not shown the nature of the injury. also their son. Eladio Castañeda. In June. immediately left the place. according to the District Health Officer. Maria Fontillas went up the house of defendant Felixberto and the deceased followed her. 42 Phil.. inflicted upon the left eye of the deceased as a result of the act performed by the defendant Felixberto. the following morning. while drunk. which had caused a fracture on the skull of said deceased. . the two defendants performed two different acts directed against their father. was scolding and threatening his wife who then shouted for help.. 1929. followed his parents and as he was coming down their house. People vs. U. .

the following mitigating circumstances concurred and should. The court.When the other accused. and U. . the lesser penalty shall be applied. His uncorroborated testimony that his deceased father was carrying a bolo when he was chasing Maria Fontillas with intent of stabbing her. the court hereby sentences the accused Severino Castañeda to suffer the penalty of reclusion perpetua. The defense would want the court to believe that the application of the penalty should be in accordance with article 69 of the Revised Penal Code and not in accordance with the rules established by article 63 of the said Code. Severino Castañeda. . (2) that there was an incomplete defense of a relative. 38 Phil. and to pay one-half of the costs. and (3) that he had acted with passion and obfuscation. Wherefore. This accused knew that at the time in question his aged father was drunk. . (Article 63[3]. The court finds that the deceased was not carrying a bolo on the occasion in question. The penalty prescribed for the crime of parricide under article 246 of the Revised Penal Code is composed of two indivisible penalties. The claim of incomplete selfdefense cannot be allowed. counsel for the defense put on the witness-stand the accused Severino Castañeda who admitted having killed his father. and after he had fully understood all the contents of the information which was read to him in his own native dialect. The court finds that Severino's plea of incomplete defense of his mother is without merit.) In the opinion of the court. he voluntarily and spontaneously pleaded guilty. as the condition prescribed therein does not exist. vs. but tried to prove the existence of the following mitigating circumstances: (1) that he had no intention to commit so grave a wrong as that committed. nevertheless. There was. as there was no reasonable necessity for the means employed to prevent or repel the unlawful aggression. (2) lack of intent to commit so grave a wrong as that committed. There was also no reasonable necessity of the means employed by defendant Severino to prevent his father from chasing his mother. however. which is essential under subsection 2 of article 11 of the Revised Penal Code. the deceased Eladio Castañeda. Messers. S. Alejo Labrador and Vicente Aquino. be considered in favor of defendant Severino: (1) his plea of guilty. . The court is of the opinion that article 69 is not applicable to the instant case. Revised Penal Code. The court finds the accused Severino Castañeda guilty beyond reasonable doubt of the crime of parricide charge against him with the attendance of the mitigating circumstances as aforesaid and without the concurrence of any aggravating circumstance. therefore. the proper rule to be applied in the instant case against Severino Castañeda is that prescribed under article 63 (3). The prosecution offered no objection to this petition. Neither was there evidence proving that the life of Maria Fontillas at the time she was being chased was in imminent danger. When the commission of the act is attended by some mitigating circumstance or more than one mitigating circumstance and there is no aggravating circumstance. should give way to the clear and positive testimony of the disinterested eye-witnesses for the prosecution who testified that at the time the deceased was chasing his wife. the prosecution to present its evidence in order that the proper penalty to be imposed may be determined. he was not carrying a bolo or anything in his hand. accused Severino Castañeda was present throughout the trial and that the attorneys who assisted Felixberto Fontillas alias Castañeda and cross-examined the witnesses for the prosecution are the same attorneys that now represent said Severino Castañeda. Whereupon. assisted by his attorneys of record. This appeal raises virtually the same questions a presented to the trial court. Ortencio. reclusion perpetua to death. The court finds no aggravating circumstance against him. was duly arraigned in open court. no unlawful aggression on the part of the deceased. finds that in committing the offense. and (3) lack of instruction. therefore. the evidence in said former trial against Felixberto Castañeda be deemed reproduced as evidence in the trial against Severino Castañeda. and rested its case. the accessories of the law. 341. The court ordered. Counsel for the defense prayed that in view of the fact that at the previous separate trial against Felixberto Fontillas alias Castañedas.. He was just chasing his wife and quarreling with her just because at the time he was intoxicated. to wit.

No expression as to costs. INC. Republic of the Philippines SUPREME COURT Manila EN BANC G. respondents-appellees.. concur. petitioner-appellant. 269 and 278) and denied its claim for refund of the taxes and duties paid on the imported articles. Abad Santos. Bernardo for respondents-appellees.L. The Davao Light & Power Co. As the Collector of Customs later ruled unfavorably on the protests (Nos. hereafter referred to as Davao Light. 268. it imported electrical supplies.. We are convinced by a careful review of the record that the trial court properly appreciated the facts and the law. paragraph 3 of article 63 is specific and must be applied.. we respectfully invite the attention of the Chief Executive to the case with a view to executive clemency after appellant has served an appreciable amount of confinement. So ordered. is the grantee of a legislative franchise to install. operate and maintain an electric light. for refund of the amount paid by said company as customs duties. denying the claim of Davao Light & Power Co. J. for a period of 50 years. The judgment appealed from is therefore affirmed. . Cecilio for petitioner-appellant.B. compensating taxes and wharfage fees on the importations of electrical supplies and materials for installation and use at its power plant. We are likewise convinced that appellant did not have that malice nor has exhibited such moral turpitude as requires life imprisonment. Vickers and Diaz. Davao Light went to the Court of Tax Appeals.. vs. Inc. materials and equipment for installation in its power plant.. THE COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS. to wit. maintaining its claim to exemption from the taxes and duties imposable on the aforementioned motions. special import taxes.. And when said official sued the action of the Collector... REYES. and therefore under the provisions of article 5 of the Revised Penal Code. Borromeo and Solicitor Sumilang V. on which the Collector of Customs imposed. JJ. L-28739 and L-28902 March 29. Davao Light appealed to the Commissioner of Customs. Notwithstanding the numerous mitigating circumstances found to exist by the trial court.. heat and power plant in the city (then Municipality) of Davao.00. and Davao light paid under protest. customs duties and taxes in the total amount of P9. Avanceña. 1337 and 1551. Office of the Solicitor General Antonio P.J.928. Barredo. 1972 DAVAO LIGHT and POWER CO. Inc. The importations arrived in the port of Cebu City. On two different occasions in 1962. reclusion perpetua to death. J. Assistant Solicitor General Isidro C.R. 267.The penalty prescribed for the crime of parricide under article 246 of the Revised Penal Code is composed of two indivisible penalties. Abelardo P. No.:p These are appeals from the decision of the Court of Tax Appeals in CTA Cases Nos. C.

oil or steam engines and/or other prime movers. transmission lines. the parties entered into a stipulation of facts. except real property tax. 7. — That the petitioner (Davao Light) is a grantee of a legislative franchise under Philippine Legislature Act No. dams. heat and power and distributing the same for sale within the municipality (now City) of Davao. — That Section 17 of (pre-Commonwealth) Act No. heat and power for the inhabitants of Davao City and its surrounding areas and that it is presently operating and maintaining said power plant. it established and constructed a power plant. develop. construct. 358. power stations and transmission lines in Davao City. to establish. fees. then such term or terms shall ipso facto become a part of the terms hereof and shall operate equally in favor of the grantee as in the case of said competing individual asssociation of persons or corporations. maintain and operate and improve gas. or from any province. par." . the National Power Corporation shall exempt from all taxes. pipes. 3760. that the rates of charges shall not be subject to revision by the Public Service Commission. imposts." xxx xxx xxx 12 — That under Section 2 of Republic Act No. association of persons or corporation receiving either a franchise or permission from the Government of the Philippine Islands. as amended by Republic Act No. to conduct a similar business in all or any substantial portion of the territory covered by this franchise to that of the grantee. its provinces. . operate and maintain and administer power and lighting systems for the use of the Government and the general public. and under Section 2. 3636 (Standard Electric Power & Light Franchises Law) provides: "In the event of any competing individual. for the purpose of developing hydraulic power from any river. 937. operate and maintain power plants. for the purpose of generating electric light. — That the National Power Corporation was created by virtue of Commonwealth Act No. to sell electric power and to fix the rates and provide for the collection of the charges for any service rendered: Provided. heat and light in the City of Davao. auxiliary plants. 8. the pertinent provisions of which read as follows: 6. 10. cities and municipalities. — That the petitioner was granted by the Public Service Commission its Certificate of Public Convenience and Necessity in 1931 and by virtue of said franchise has established and has been maintaining and operating a power plant generating electric light. (g) it was empowered and granted authority: "To construct.In the Court of Tax Appeals. it is provided that "to facilitate payment of its indebtedness. power stations and substations and other works. mains.." 9. generators and other machinery in plants and/or auxiliary plants for the production of electric power. and from all duties. charges and restrictions of the Republic of the Philippines. 120. in which franchise or permission there shall be any term or terms more favorable than those herein granted or tending to place the herein grantee at any disadvantage. to acquire. reservoirs. power station and transmission lines and selling electric power. lake. — That by virtue of this authority given the National Power Corporation. city or municipality thereof. spring and waterfalls in the Philippines and supplying such power to the inhabitants thereof.. creek.. install.

Davao Light thus brought the present petition for review in this Court. municipality or other political subdivision shall be compelled to secure from the Corporation as soon as practicable . raising the same issue of the correctness of the imposition of taxes and customs duties on its importations of electrical supplies and materials for use in its electric plant. association. 1 As envisioned by the law creating it. provides that any favorable terms granted to any "competing individual. it is argued that such tax exemption benefits ipso facto became part of its franchise and are not available to petitioner. There is no merit in petitioner's contention. was specifically created to undertake the development of hydraulic power throughout the country and the production of power from other sources. associations or corporations. duties. or establishment operated and/or owned or controlled by the National Government or by any city. by express provision of law favorable terms contained in a subsequent franchise issued to an individual. In its decision of 15 December 1967. shop. it is aiding petitioner in its business operations. association. on the other hand. The idea is to place both competing groups or entities on equal footing and not to give one an advantage over the other. etc. fees. the Court of Tax Appeals affirmed the ruling of the Customs Commissioner. In short. the Court holding that the tax exemption privileges granted to the National Power Corporation were intended to benefit only said government corporation and did not extend to other bodies or entities. heat and light in said locality. the aforecited provision of Section 17 of Act 3636 makes mention of franchise or permit issued to "competing" individuals. it did sell lower to petitioner for resale to the latter's customers. which is the basic idea behind the provision. hence. the NPC is even the source of petitioner's merchandise. does not find operation in the present case.It was therein petitioner's contention that pursuant to Section 17 of Act 3636. In fact. in its Section 17. province. engaged in the same business. power stations and transmission lines in Davao City. 10. shall automatically be considered incorporated in the franchise or permit earlier issued to another individual. province. maintain and operate an electric light. 2 In other words. Nor would the fact that the NPC supplies electric power to the National Development Company (NDC) plant in Davao justify the claim that the NPC is a competitor to petitioner's business. and said corporation is enjoying exemption from all taxes. etc. It is undeniable that petitioner's purpose in securing a franchise to establish and operate an electric plant and power stations was to engage in a business or profit-making venture. municipality or other political subdivision of the Commonwealth of the Philippines. not competing with it. its claim to exemption from taxes and customs duties on the importations in question. This principle of fair play. because Section 10 of Commonwealth Act 120 (NPC charter) made it NPC's duty to supply power to the NDC. for use of the government and the general public. the NPC can not be considered as posing competition to petitioner's business. heat and power system (granted by Act 3760) was specifically made subject to Act 3636. The NPC. As the National Power Corporation (NPC) is actually operating a power plant. there is evidence on record that the NPC does not sell electric lower directly to the general public. the provision of Republic Act 987 granting tax exemption privileges to the National Power Corporation ipso facto became part of its franchise. association of persons or corporation" shall ipso facto become part of a franchise earlier issued. power stations and transmission lines in Davao City and selling electric power. At any time that the Board certifies that the Corporation is able to furnish electric power for lighting an other purposes to any office. instead. which Act. imposts and charges collectible by the government. Petitioner in this instance reiterates the contention that is legislative franchise to construct. as duly authorized in its charter. Firstly. Sec. the activity to be pursued by the NPC can hardly be motivated by profit or income. the National Government and the government of said city. In operating and maintaining a power plant.

To facilitate payment of its indebtedness. which authorized the NPC to "contract indebtedness and issue bonds subject to the approval of the President of the Philippines. must be construed as intended to benefit only the NPC. and to guarantee.J. with costs against the petitioner. Makalintal. and municipalities. the payment of loans therefore contracted. the lawmakers expecting (as so unequivocally expressed in the law) that by relieving said corporation of tax obligations. imposts. charges. amended Section 2 (k) of Commonwealth Act 120. and restrictions of the Republic of the Philippines. the National Power Corporation shall be exempt from all taxes. 4 The provisions of Section 2 of Republic Act 358 granting tax exemption to the NPC. the absolute lack of basis for awarding of equal privileges (granted to the NPC) to said petitioner. JJ. cities. to support its claim for tax exemption. upon recommendation of the Secretary of Finance" in an amount not to exceed one hundred seventy million five hundred pesos. C. on behalf of the NPC. province. The legal principle on the matter is firmly established and well-observed: exemption from taxation is never presumed. Zaldivar. fees. it cannot be made to rest on vague implications. the NPC would be enabled to pay easily its indebtedness or whatever indebtedness it is certain to incur. On the same day.. petitioner can not lay claim to the enjoyment of the tax exemption benefits given to NPC because said corporation happened to be operating a power plant in the same locality where petitioner has a franchise. the grant must be clear and expressed. 6 The possession by petitioner of a permit to operate an electric plant in Davao City does not entitle it to the same exemption privileges enjoyed by another operator without an express provision of the law to that effect. Republic Act 357 was approved. Be that as it may. the decision of the Court of Tax Appeals is hereby affirmed. approved on 4 June 1949. as amended by Republic Act 987 3 . concur. notably Republic Act 357. Villamor and Makasiar. taken in the light of the existing legislation affecting the NPC. as primary obligator and not merely as surety. Concepcion. absolutely and unconditionally. authorizing the President of the Philippines to negotiate and contract loans from time to time from the International Bank for Reconstruction and Development. peculiar only to the NPC. Teehankee. Fernando. which must be assumed to be catering to the general public to which the NPC has no dealing. petitioner can not rely on the provisions of Republic Act 358. FOR THE FOREGOING CONSIDERATIONS. Similarly. municipality or other political subdivisions. hence.. shops or establishments or for any work undertaken by it. Such condition. the same law provided: SEC 2. and the consequential release by the government itself from its obligation (as principal obligor) in the transactions entered into by the President on behalf of the NPC. its provinces. 5 for tax exemption to be recognized.such electric power as it may need for lighting and the operation of its offices. In granting such tax exemption. 4 June 1949. cannot be said to exist in petitioner's case. Barredo. Section 1 of Republic Act 358. the government actually waived its right to collect taxes from the NPC in order to facilitate the liquidation by said corporation of its liabilities. . The provisions of this section shall also apply to firms or business owned or controlled by the National Government or by the government of any city. Secondly. Then in its Section 2." (emphasis supplied). Castro. such an isolated case of sale of electric power to one government-owned plant would not be enough to classify the NPC as a "competing" concern to petitioner's enterprise. duties.

L-19337. COURT OF TAX APPEALS and THE BUREAU OF INTERNAL REVENUE BEING REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE. Commissioner. Barredo. 6 Borja vs. 2 Page 135. vs. L-21841. Inc. 30 September 1969. Cid for respondents. Assistant Solicitor General Felicisimo R. 22 Sept. and cases cited therein. Visayan Electric Co.. 21 SCRA 180. Esso Standard Eastern. Commissioner of Internal Revenue vs. Afurong and Special Attorney Augusto A. Acting Commissioner. Solicitor Lolita O. 1966. L-22611. respondents. Asturias Sugar Central. Nos. 4 Section 3. L-22805 Sarte and Espinosa for petitioner. Inc.R. vs. Office of the Solicitor General Antonio P. Alafriz. 3 Section 2 of Republic Act 358 was amended so as to exclude from the exemption taxes due on real properties. 27 May 1968. 1968. Office of the Solicitor General Arturo A. 30 November 1961. vs. Collector. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. L-17888. CTA Record. petitioner. L-22805 & L-27858 June 30. 23 SCRA 715. 25 SCRA 754. Auditor General. Solicitor Alejandro B. 1967. LUCIO QUIJANO.Footnotes 1 Section 1. Rosete. vs. 28 Oct. 25 SCRA 617. Commonwealth Act 120. 29 Oct. . Guerrero. THE HON. Inc. L-27858 Jose Sarte for petitioner. Commissioner vs. 18 SCRA 488. L-12134. 1975 WONDER MECHANICAL ENGINEERING CORPORATION represented by Mr. L-20812. 5 Resins. and cases cited therein. 3 SCRA 590. Gal-lang and Special Attorney Elpidio C. Lim for respondents. Republic Act 357. President & General Manager.

I. 25.". Based on the foregoing. The first decision (L-22805) dismissed the appeal of petitioner Wonder Mechanical Engineering Corporation in C. lead washers. On September 14. The tax exemption expired on May 30. In G. chairs.). 1951." Petitioner is a corporation which was granted tax exemption privilege under Republic Act 35 in respect to the "manufacture of machines for making cigarette paper. petitioner applied with the Secretary of Finance for reinstatement of the exemption privilege under the provisions of R. rivets. pails. inclusive of the 25% surcharge. J. flourescent lamp shades. Nos.R.A. caused the investigation of petitioner for the purpose of ascertaining whether or not it had any tax liability. Camillo on September 30. rice threshers. 1960.00 as penalties in extrajudicial settlement of petitioner's violations of Sections 182.T. 1955. stated "that during the years 1953 and 1954 the petitioner was engaged in the business of manufacturing various articles. respondent Commissioner of Internal Revenue. 186 and 191 of the Tax Code and of the Bookkeeping Regulations (p.56 as fixed taxes and sales and percentage taxes. inclusive of the 25% surcharge.56 Respondent also suggested the payment of the amount of P3. 1036. No. that it also engaged in business of electroplating and in repair of machines. The second decision (L-27858) ordered the same petitioner to pay. Case No. 1954. The findings of Revenue Examiner Alfonso B.00 C-4 (27) fixed tax (1954) 10. rec. washers. the total amount of P69. 1953. the date Republic Act 901 took effect. respondent Commissioner of Internal Revenue assessed against petitioner on November 29. radio screws. sometime in 1955. the reinstatement to commence on June 20. 1953. L-22805 and L-27858.699. nails. kerosene stoves and other articles. electric irons. that although it was engaged in said business.00 C-4 (37) fixed tax (1953-1954) 20. as follows: Sales and percentage taxes for 1953 and 1954 P55. respondent Commissioner of Internal Revenue the amount of "P25. the same having been filed beyond the 30 day period prescribed in Section 11 of Republic Act No.56 as fixed taxes and sales and percentage taxes. etc.R. jeepney parts and other articles which are not machines for making other products.300.91 as deficiency sales and percentage taxes from 1957 to June 30.00 TOTAL P69.080.A. 183.65 25% surcharge 13. B. 185. "for lack of jurisdiction.699. candies. plus costs".R. and confirmed the decision of respondent Commissioner of Internal Revenue which "assessed against petitioner the total amount of P69. and job orders done by petitioner come within the purview of the tax exemption granted it under Republic Act Nos. based on the common principal issue of "whether or not the manufacture and sale of steel chairs. inclusive of the 25% surcharge for the years 1953-54".929. L-22805. it did not provide itself with the proper privilege tax receipts as required by Section 182 of the Tax Code and did not pay the sales tax on its gross sales of articles manufactured by it and the percentage tax due on the gross receipts of its electroplating and repair business pursuant to Sections 183. 1955. namely. 901 approved July 7.91 C-14 fixed tax (1953-1954) 20. . 1125". 35 and 901. 185. 186 and 191 of the same Code".: Two petitions for review of the decisions of the respondent Court of Tax Appeals in G. post clips.699. auto spare parts.719.ESGUERRA.

as follows: Be it known that upon application filed by Wonder Mechanical Engineering Corporation. pails.In G. the Philippines International Fair.R.1äwphï1. 17-18 B.1954. 1958. rivets. manufactured and sold other articles subject to 7% sales tax under Section 186 of the same Code but not covered by the tax exemption privilege.91 as deficiency sales and percentage taxes from 1957 to June 30. No. University of Santo Tomas. nails. the respondent Commissioner of Internal Revenue on October 6. it does not appear that petitioner accepted the imposition of the compromise amounts. it is now a well settled doctrine that compromise penalty cannot be imposed or collected without the agreement or conformity of the tax payer (Collector of Internal Revenue vs. 1961. G. March 31. We turn Our attention on the vital issue of tax exemption claimed by petitioner as basis for questioning the tax assessments made by respondent Bureau of Internal Revenue in both cases (G.080. et al. 901 (or of Republic Act No. the same having been filed beyond the 30day period prescribed in Section 11 of Republic Act 1126. candies.020.080. There is no doubt that petitioner was given a Certificate of Tax Exemption By the Secretary of Finance on July 7. Based on the foregoing. 1310 M. in respect to the manufacture of machines for making cigarette paper.. L-22805 and 27858). et al. Manila.)".A. We find it no longer necessary to make a definite stand on the question raised in L22805 as to the alleged error committed by respondent Court of Tax Appeals in dismissing the appeal in C.R. L22805 and L-27858.R.020.I. May 27.R. G. 1036 (subject matter of L-22805) for lack of jurisdiction.). in view of which this Certificate of . failed to register with the Bureau of Internal Revenue books of accounts and sales invoices as required by the Bookkeeping Regulations. 1960" must be paid by petitioner as the sale of other manufactured items did not come within the purview. assessed against the petitioner "the payment of P25. L-27858. and failed to produce its books of accounts and business records for inspection and examination when required to do so by the revenue examiner in violation of the Bookkeeping Regulations (pp.R. of the tax exemption granted petitioner. G. Revenue Examiner Pedro Cabigao reported that "petitioner had manufactured and sold steel chairs without paying the 30% sales tax imposed by Section 185(c) of the Tax Code. November 28.00 or over.R. failed to indicate in the sales invoices the Residence Certificate number of customers who purchased articles worth P50. otherwise said Court acquires no jurisdiction. Hence We find no compelling reasons to alter the decision of respondent Court of Tax Appeals in L-27858 that — With respect to the compromise penalty in the total amount of P5. 1960. Bautista. 1962).. L-12250 & 12259. 28-29 B.00 suggested by respondent to be paid by petitioner. 1960.R. the Collector of Internal Revenue v. the said industry/industries have been determined to be new and necessary under the provisions of Republic Act No. L-12928 & L-12932. (Emphasis for emphasis) Inasmuch as the figures appearing in the Bureau of Internal Revenue's tax delinquency assessments in both cases (L-22805 and L-27858) are not in dispute. Nos. 1959. rec. rec. Cruz. Inc.R.T. L-27858 on the lone issue presented in both cases that the tax assessment of "P25. Suffice it to say on that issue that appellants must perfect their appeal from the decision of the Commissioner of Internal Revenue to the Court of Tax Appeals within the statutory period of 30 days.00 as total compromise penalty in extrajudicial settlement of the various violations of the Tax Code and Bookkeeping Regulation (pp. and the respondent Court of Tax Appeals ruled in its decision in G. as a result of which on December 7.I. L11274 & L-11280.. Nos. 35). respondent Commissioner of Internal Revenue caused the investigation of petitioner for the purpose of ascertaining its tax liability on August 10. accepted job orders without paying the 3% tax in gross receipts imposed by Section 191 of the same Code. Collector of Internal Revenue. lead washers. Hizon. v.R. No.ñët " Regarding the compromise penalty suggested by respondent Bureau of Internal Revenue in both G. etc. in violation of the Bookkeeping Regulation.91 as deficiency percentage taxes and 25% surcharge for 1957 to 1960 and suggested the payment of P5. Nos. Sta.

as provided in section 1 of Republic Act No. (2) Where the industry will operate on a commercial scale in conformity with up-to-date practices and will make its products available to the general public in quantities and at prices which justify its operation with a reasonable degree of permanency. an industry that "will make its products available to the general public in quantities and at prices which will justify its operation. as explicitly stated in the Certificate of Exemption (Annex A of the petition in G. Where several applications for exemption are filed in connection with the same kind of industry. 1946. a "new industry is one not existing or operating on a commercial scale prior to January first. pails. the Secretary of Finance shall approve them in the order in which they have been filed until the total output or production of those already granted exemption for that particular kind of industry is sufficient to meet local demand or consumption: Provided. for a period of four years from the date of the organization of such industry.. lead washers. growth. rivets.R. etc. approved on June 20. 1953. approved on September 30.Tax Exemption has been issued entitling the abovenamed firm/person to tax exemption from the payment of taxes directly payable by it/him in respect to the said industry/industries until December 31. grants to persons "who or which shall engage in a new and necessary industry".I. We are firmly convinced that petitioner was granted tax exemption in the manufacture and sale "of machines for making cigarette paper." Viewed in the light of the foregoing reasons for the State grant of tax exemption. 2. That a grantee of tax exemption shall use materials of domestic origin. L-22805). (Emphasis for emphasis) Sec. except the exemption from the income tax which will wholly terminate on June 20. or manufacture wherever the same are available or could be made available in reasonable quantity and quality and at reasonable prices.. No. (Emphasis for emphasis) Republic Act 35. and thereafter to a diminishing exemption until June 20. That the limitation shall not apply to products intended for export. From the above-quoted provisions of the law. nails.. exemption "from the payment of all internal revenue taxes directly payable by such person". page 13). 1955 (B. (Emphasis for emphasis) . 901. candies. 3. a production "sufficient to meet local demand or consumption".". but certainly not for the manufacture and sale of the articles produced by those machines. For the purposes of this Act. Republic Act 901. rec. nineteen hundred and forty-five. 1959. . . which amended Republic Act 35 by extending the period of tax exemption. For the purposes of this Act. a "necessary" industry is one complying with the following requirements: (1) Where the establishment of the industry will contribute to the attainment of a stable and balanced national economy. (3) Where the imported raw materials represent a value not exceeding sixty percentum of the manufacturing cost plus reasonable selling price and administrative expenses: Provided. it is clear that an industry to be entitled to tax exemption must be "new and necessary" and that the tax exemption was granted to new and necessary industries as an incentive to greater and adequate production of products made scarce by the second world war which wrought havoc on our national economy. that will contribute "to the attainment of a stable and balanced national economy".R. elaborated on the meaning of "new and necessary industry" as follows: Sec. 1958.

jeep parts. Very respectfully. Respectfully submitted: (SGD. 35. 35.. upon recommendation of the Honorable. (SGD. the Secretary of Finance. candies. a loud speaker for the Manila Supply.) TEODORO EVANGELISTA Executive Secretary" (Emphasis for emphasis) Aside from the clarity of the State's intention in granting tax exemption to petitioner in so far as it manufactures machines for making certain products. approved your application for exemption from the payment of internal revenue taxes on your business of manufacturing machines for making a number of products. and other articles not constituting machines for making certain products would fall under the classification of "new and necessary" industries envisioned in Republic Acts 35 and 901 as to entitle the petitioner to tax exemption. lead washers. .. etc. If (petitioner) turns out machines whenever orders therefore are received. rivets. 1949. it is quite difficult for Us to believe that the manufacture of steel chairs. has today. photographs of which are attached. There is no way to dispute the "cardinal rule in taxation that exemptions therefrom are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right thereto by the dearest grant . pails. reads as follows: "Sirs: I have the honor to advise you that His Excellency. and a "Lompia wrapping" machine for a certain Chinese. under the provisions of Section 2 of Republic Act No. dated March 3. the then Secretary of Finance submitted a memorandum to the Cabinet.That such was the intention of the State when it granted tax exemption to the petitioner in the manufacture of machines for making certain products could be deduced from the following: Before the approval of the original grant of tax exemption to Petitioner for engaging in a new and necessary industry under Republic Act No. 35. Agustin Liboro. as manifested in the acts of its duly authorized representatives in the Executive branch of the government. nails.. chairs. 1949. It is recommended that the benefits of said Act be extended to this corporation in respect to said industry..) PIO PEDROSA Secretary" The letter of the Executive Secretary to the petitioner dated May 30. the President. such as cigarette paper. The manufacture of the above-mentioned machines can be considered a new and necessary industry for the purpose of Republic Act No. Among its products are a medicine tablet wrapping machine for Dr. the pertinent portions of which read as follows: "..

petitioner. Inc. 1962. CASTRO. on the advice of counsel. Mantolino for respondent. JJ. G. J. vs. .. 1 In the manufacture of fertilizer. AFC did not deduct the cost of the pyrite it purchased locally in computing the 7% sales tax due on its sales under Section 186 of the National Internal Revenue Code until May 1964 when. some of which it imported and some it purchased from ACMDC. 1956. 676). No. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. Castro. Torres. 466. With the approval of the Department of Finance. (Asiatic Petroleum Co. Solicitor Lolita O.J.. 1975 ATLAS FERTILIZER CORPORATION. it started to do so. Assistant Solicitor General Antonio A. Office of the Solicitor General Antonio P. vs.ñët Tax exemption must be clearly expressed and cannot be established by implication. concur. Posadas. March 23.R. the decisions of respondent Court of Tax Appeals in these two cases are affirmed. 49 Phil. 338. 1265 (L-27858). Exemption from a common burden cannot be permitted to exist upon vague implication. Barredo. Gadioma & Josue for petitioner. No. Costs against the petitioner in both cases.R. a new and necessary industry under Republic Act 901. Collector of Internal Revenue vs. 53 Phil. Sometime in 1957 the fertilizer department of the Atlas Consolidated Mining and Development Corporation (hereinafter referred to as ACMDC) was incorporated as the Atlas Fertilizer Corporation. Gal-lang and Special Attorney Gamaliel H. AFC used a mineral ingredient known as pyrite. L-8755. Manila Jockey Club.: This is a petition for review of the decision of the Court of Tax Appeals in case 1521 finding no merit in the claim of the Atlas Fertilizer Corporation (hereinafter referred to as AFC) for refund of or tax credit for alleged overpayment of sales taxes. COMMISSIONER OF INTERNAL REVENUE. House vs.T.of organic or statute law" as succinctly stated in the decision of the respondent Court of Tax Appeals in C.1äwphï1. C.A.. ACMDC transferred to AFC its tax exemption privileges for fertilizer manufacture. Makasiar and Martin. WHEREFORE. No. Makalintal. respondent. 98 Phil. Llanes. L-27813 August 15. AFC enjoyed this privilege until December 31.

the articles not enumerated in sections one hundred and eighty-four and one hundred and eighty-five a tax equivalent to seven per centum of the gross selling price or gross value in money of the articles so sold. it may still deduct the cost of its pyrite purchases from ACMDC under the authority of Section 186 (supra) of the Tax Code which provides that when an article which is subject to the payment of the sales tax under that section is used as a raw material in a manufactured article subject to tax under the same section. exchanged. According to AFC. the value of such taxfree product shall be deducted. exchange. the total cost of such raw material is deductible from the gross selling price of the finished product for purposes of computing the sales tax on the latter. 1962 to April 1964. That where the articles subject to tax under this section are manufactured out of materials likewise subject to tax under this section and section one hundred and eighty-nine. Sec. On March 15. Section 186-A grants to a manufacturer of an article subject to the sales tax. the right to deduct the value of a tax-free product used as raw material in the manufacture of the finished item from the gross selling price of the latter. 186-A. bartered. while Section 188(c) exempts the sale of minerals. after due hearing. in the determination of the value of such finished article. or title to. intended to transfer ownership of. the total cost of such materials. AFC argues that these two provisions of the Tax Code are applicable to its fertilizer sales because pyrite is a mineral the sale of which the Code expressly exempts from the sales tax.. transactions in the following commodities shall be excluded: xxx xxx xxx (c) Minerals and mineral products when sold. such tax to be paid by the manufacturer or producer: Provided. or transferred. barter.310. . Whenever a tax-free product is utilized in the manufacture or production of any article. .. based on BIR data. or exchanged by the lessee. 188. Transactions and persons not subject to percentage tax. Hence. assessed and collected once only on every original sale. — In computing the tax imposed in sections one hundred eighty-four. 1964 AFC filed the present action against the Commissioner of Internal Revenue for refund of or tax credit for overpayments in sales taxes on fertilizer sales made by it from June 20. bartered. and one hundred eighty-six. one hundred eighty-five. The cited Sections 186-A and 188(c) read as follows: Sec. the present recourse. shall be deductible from the gross selling price or gross value in money of such manufactured articles..76. assuming that its pyrite purchases from ACMDC do not come within the purview of the provisions of these two sections of the Tax Code. . 186. the tax court rendered its decision denying AFC's claim. The basic issue is whether the cost of the pyrite AFC purchased from ACMDC and used in the manufacture of fertilizer may be deducted for purposes of computing the sales tax imposed by Section 186 of the Tax Code. and similar transaction either for nominal or valuable considerations. This section pertinently reads: Sec. concessionaire. from the sales tax. amounts to P77. Percentage tax on sales of other articles. 1967.. thereby making it a tax free product whose value it may therefore deduct from the gross selling price of its fertilizer by virtue of Section 186-A. At all events. like pyrite. such as fertilizer. AFC maintains that it is entitled to deduct the cost of the pyrite it purchased from ACMDC. under the authority of Section 186-A in relation to Section 188(c) of the Tax Code. — There shall be levied.On June 18. as duly established. or owner of the mineral land from which removed. The alleged overpayment.

does not show that ACMDC is a lessee.A.A. The placement of Section 186-A in the Tax Code is quite striking. A close analysis of R. would have proclaimed the deductibility of the value of 'products of a tax exempt industry . In Republic Flour Mills.A. No mention at all of R. As to the applicability of Section 188(c) (supra). concessionaire or owner of the mineral land from which [the mineral or mineral product was] removed. as contended by the Commissioner and correctly sustained by the tax court. that is. 901 is made in Section 186-A.'" 2. Inc. instead of referring to 'a tax fine product' utilized in the manufacture of other articles. sections 183. concessionaire or owner of the mineral land from which the mineral or mineral product is removed. 2025 on June 22. AFC is misled in invoking Section 188(c) and Section 186-A of the Tax Code.A. 184. in particular. 901. V-252 dated July 15. however. 185 and 189.I. and have failed to find any indication that the policy and intent of R. contends that the term "tax-free product"