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CIR vs. Fortune Tobacco Corporation, [G.R. Nos. 167274-75, u!

" 21, 2##$% Post under case digests, Taxation at Tuesday, February 21, 2012 Posted by Schizophrenic Mind Facts& Respondent FTC is a domestic corporation that manu actures cigarettes pac!ed by machine under se"era# brands$ Prior to %anuary 1, 1&&', Section 1(2 o the 1&'' Tax Code sub)ected said cigarette brands to ad "a#orem tax$ *nnex + o R$*$ ,o$ (2-0 prescribed the cigarette brands. tax c#assi ication rates based on their net retai# price$ /n %anuary 1, 1&&', R$*$ ,o$ -2(0 too! e ect$ Sec$ 1(0 thereo no1 sub)ects the cigarette brands to speci ic tax and a#so pro"ides that2 314 the excise tax rom any brand o cigarettes 1ithin the next three 354 years rom the e ecti"ity o R$*$ ,o$ -2(0 sha## not be #o1er than the tax, 1hich is due rom each brand on /ctober 1, 1&&67 324 the rates o excise tax on cigarettes enumerated therein sha## be increased by 128 on %anuary 1, 20007 and 354 the c#assi ication o each brand o cigarettes based on its a"erage retai# price as o /ctober 1, 1&&6, as set orth in *nnex + sha## remain in orce unti# re"ised by Congress$ The Secretary o Finance issued RR ,o$ 1'9&& to imp#ement the pro"ision or the 128 excise tax increase$ RR ,o$ 1'9&& added the :ua#i ication that ;the ne1 speci ic tax rate xxx sha## not be #o1er than the excise tax that is actua##y being paid prior to %anuary 1, 2000$< =n e ect, it pro"ided that the 128 tax increase must be based on the excise tax actua##y being paid prior to %anuary 1, 2000 and not on their actua# net retai# price$ FTC i#ed 2 separate c#aims or re und or tax credit o its purported#y o"erpaid excise taxes or the month o %anuary 2000 and or the period %anuary 19+ecember 51, 2002$ =t assai#ed the "a#idity o RR ,o$ 1'9&& in that it en#arges Section 1(0 by pro"iding the a oresaid :ua#i ication$ =n this petition, petitioner C=R a##eges that the #itera# interpretation gi"en by the CT* and the C* o Section 1(0 1ou#d #ead to a #o1er tax imposab#e on 1 %anuary 2000 than that imposab#e during the transition period, 1hich is contrary to the #egis#ati"e intent to raise re"enue$ Issue& Shou#d the 128 tax increase be based on the net retai# price o the cigarettes in the mar!et as out#ined in Section 1(0 o the 1&&' Tax Code> 'e!(& ?@S$ Section 1(0 is c#ear and une:ui"oca#$ =t states that during the transition period, i$e$, 1ithin the next 5 years rom the e ecti"ity o the 1&&' Tax Code, the excise tax rom any brand o cigarettes sha## not be #o1er than the tax due rom each brand on 1 /ctober 1&&6$ This :ua#i ication, ho1e"er, is conspicuous#y absent as regards the 128 increase 1hich is to be app#ied on cigars and cigarettes pac!ed by machine, among others, e ecti"e on 1 %anuary 2000$ C#ear#y, Section 1(0 mandates a ne1 rate o excise tax or cigarettes pac!ed by machine due to the 128 increase e ecti"e on 1 %anuary 2000 1ithout regard to 1hether the re"enue co##ection starting rom this period may turn out to be #o1er than that co##ected prior to this date$ The :ua#i ication added by RR ,o$ 1'9&& imposes a tax 1hich is the higher amount bet1een the ad "a#orem tax being paid at the end o the 59year transition period and the speci ic tax under Section 1(0, as increased by 128Aa situation not supported by the p#ain 1ording o Section 1(0 o the 1&&' Tax Code$ *dministrati"e issuances must not o"erride, supp#ant or modi y the #a1, but must remain consistent 1ith the #a1 they intend to carry out$ Re"enue generation is not the so#e purpose o the passage o the 1&&' Tax Code$ The shi t rom the ad "a#orem system to the speci ic tax system in the Code is #i!e1ise meant to promote air competition among the p#ayers in the industries concerned and to ensure an e:uitab#e distribution o the tax burden$

)*i!. +an, o- Co..unications vs. CIR PB=C$ D*,E /F C/MMF,=C*T=/,S "$ C=R GR ,o$ 11202(, %anuary 2-, 1&&& 502 SCR* 200 F*CTS2 Petitioner PDCom i#ed its irst and second :uarter income tax returns, reported pro its, and paid income taxes amounting to P0$2M in 1&-0$ Bo1e"er, at the end o the year PDCom su ered #osses so that 1hen it i#ed its *nnua# =ncome Tax Returns or the year9ended +ecember 51, 1&-6, the petitioner #i!e1ise reported a net #oss o P1($1 M, and thus dec#ared no tax payab#e or the year$ =n 1&--, the ban! re:uested rom C=R or a tax credit and tax re unds representing o"erpayment o taxes$ Pending in"estigation o the respondent C=R, petitioner instituted a Petition or Re"ie1 be ore the Court o Tax *ppea#s 3CT*4$ CT* denied its petition or tax credit and re und or ai#ing to i#e 1ithin the prescripti"e period to 1hich the petitioner be#ies arguing the Re"enue Circu#ar ,o$'9-0 issued by the C=R itse# states that c#aim or o"erpaid taxes are not co"ered by the t1o9year prescripti"e period mandated under the Tax Code$ =SSF@2 =s the contention o the petitioner correct> =s the re"enue circu#ar a "a#id exemption to the ,=RC> B@C+2 ,o$ The re#axation o re"enue regu#ations by RMC '9-0 is not 1arranted as it disregards the t1o9year prescripti"e period set by #a1$ Dasic is the princip#e that Htaxes are the #i eb#ood o the nation$H The primary purpose is to generate unds or the State to inance the needs o the citizenry and to ad"ance the common 1ea#$ +ue process o #a1 under the Constitution does not re:uire )udicia# proceedings in tax cases$ This must necessari#y be so because it is upon taxation that the go"ernment chie #y re#ies to obtain the means to carry on its operations and it is o utmost importance that the modes adopted to en orce the co##ection o taxes #e"ied shou#d be summary and inter ered 1ith as #itt#e as possib#e$ From the same perspecti"e, c#aims or re und or tax credit shou#d be exercised 1ithin the time ixed by #a1 because the D=R being an administrati"e body en orced to co##ect taxes, its unctions shou#d not be undu#y de#ayed or hampered by incidenta# matters$ /un0 Center o- t*e )*i!ippines vs. 1ue2on Cit" [GR No. 1441#4 une 23, 2##4% Post under case digests, Taxation at Tuesday, March 20, 2012 Posted by Schizophrenic Mind Facts& Cung Center o the Phi#ippines is a non9stoc! and non9pro it entity estab#ished by "irtue o P+ ,o$ 1-25$ =t is the registered o1ner o the #and on 1hich the Cung Center o the Phi#ippines Bospita# is erected$ * big space in the ground #oor o the hospita# is being #eased to pri"ate parties, or canteen and sma## store spaces, and to medica# or pro essiona# practitioners

1ho use the same as their pri"ate c#inics$ *#so, a big portion on the right side o the hospita# is being #eased or commercia# purposes to a pri"ate enterprise !no1n as the @##iptica# /rchids and Garden Center$ Ihen the City *ssessor o Juezon City assessed both its #and andhospita# bui#ding or rea# property taxes, the Cung Center o the Phi#ippines i#ed a c#aim or exemption on its a"erment that it is a charitab#e institution 1ith a minimum o 608 o its hospita# bedsexc#usi"e#y used or charity patients and that the ma)or thrust o itshospita# operation is to ser"e charity patients$ The c#aim or exemption 1as denied, prompting a petition or the re"ersa# o the reso#ution o the City *ssessor 1ith the Coca# Doard o *ssessment *ppea#s o Juezon City, 1hich denied the same$ /n appea#, the Centra# Doard o *ssessment *ppea#s o Juezon City a irmed the #oca# board.s decision, inding that Cung Center o the Phi#ippines is not a charitab#e institution and that its properties 1ere not actua##y, direct#y and exc#usi"e#y used or charitab#e purposes$ Bence, the present petition or re"ie1 1ith a"erments that the Cung Center o the Phi#ippines is a charitab#e institution under Section 2-354, *rtic#e K= o the Constitution, not1ithstanding that it accepts paying patients and rents out portions o the hospita# bui#ding to pri"ate indi"idua#s and enterprises$ Issue& =s the Cung Center o the Phi#ippines a charitab#e institution 1ithin the context o the Constitution, and there ore, exempt rom rea#property tax> 'e!(& The Cung Center o the Phi#ippines is a charitab#e institution$ To determine 1hether an enterprise is a charitab#e institution or not, the e#ements 1hich shou#d be considered inc#ude the statute creating the enterprise, its corporate purposes, its constitution and by9#a1s, the methods o administration, the nature o the actua# 1or! per ormed, that character o the ser"ices rendered, the inde initeness o the bene iciaries and the use and occupation o the properties$ Bo1e"er, under the Constitution, in order to be entit#ed to exemption rom rea# property tax, there must be c#ear and une:ui"oca# proo that 314 it is a charitab#e institution and 324its rea# properties are *CTF*CC?, +=R@CTC? and @LCCFS=K@C? used or charitab#e purposes$ Ihi#e portions o the hospita# are used or treatment o patients and the dispensation o medica# ser"ices to them, 1hether paying or non9paying, other portions thereo are being #eased to pri"ate indi"idua#s and enterprises$ @xc#usi"e is de ined as possessed and en)oyed to the exc#usion o others, debarred rom participation or en)oyment$ = rea# property is used or one or more commercia# purposes, it is not exc#usi"e#y used or the exempted purposes but is sub)ect to taxation$ ,*T=/,*C P/I@R C/RP/R*T=/, "s$ C=T? /F C*D*,*TF*, GR$ ,o$ 1(&110, *pri# &, 2005 Facts2 ,*P/C/R, the petitioner, is a go"ernment9o1ed and contro##ed corporation created under Common1ea#th *ct 120$ =t is tas!ed to underta!e the ;de"e#opment o hydroe#ectric generations o po1er and the production o e#ectricity rom nuc#ear, geotherma#, and other sources, as 1e## as, the transmission o e#ectric po1er on a nation1ide basis$< For many years no1, ,*P/C/R se##s e#ectric po1er to the resident Cabanatuan City, posting a gross income o P10',-1(,1-'$&6 in 1&&2$ Pursuant to Sec$ 5' o /rdinance ,o$ 1609&2, the respondent assessed the petitioner a ranchise tax amounting to P-0-,606$(1, representing '08 o 18 o the ormer.s gross receipts or the preceding year$ Petitioner, 1hose capita# stoc! 1as subscribed and 1ho##y paid by the Phi#ippine Go"ernment, re used to pay the tax assessment$ =t argued that the respondent has no authority to impose tax on go"ernment entities$ Petitioner a#so contend that as a non9pro it organization, it is exempted rom

the payment o a## orms o taxes, charges, duties or ees in accordance 1ith Sec$ 15 o R* 65&0, as amended$ The respondent i#ed a co##ection suit in the RTC o Cabanatuan City, demanding that petitioner pay the assessed tax, p#us surcharge e:ui"a#ent to 208 o the amount o tax and 28 month#y interest$ Respondent a##eged that petitioner.s exemption rom #oca# taxes has been repea#ed by Sec$ 1&5 o R* '160 3Coca# Go"ernment Code4$ The tria# court issued an order dismissing the case$ /n appea#, the Court o *ppea#s re"ersed the decision o the RTC and ordered the petitioner to pay the city go"ernment the tax assessment$ =ssues2 314 =s the ,*P/C/R exc#uded rom the co"erage o the ranchise tax simp#y because its stoc!s are 1ho##y o1ned by the ,ationa# Go"ernment and its charter characterized is as a Mnon9 pro it organization.> 324 =s the ,*P/C/R.s exemption rom a## orms o taxes repea#ed by the pro"isions o the Coca# Go"ernment Code 3CGC4> Be#d2 314 ,/$ To stress, a ranchise tax is imposed based not on the o1nership but on the exercise by the corporation o a pri"i#ege to do business$ The taxab#e entity is the corporation 1hich exercises the ranchise, and not the indi"idua# stoc!ho#ders$ Dy "irtue o its charter, petitioner 1as created as a separate and distinct entity rom the ,ationa# Go"ernment$ =t can sue and be sued under its o1n name, and can exercise a## the po1ers o a corporation under the Corporation Code$ To be sure, the o1nership by the ,ationa# Go"ernment o its entire capita# stoc! does not necessari#y imp#y that petitioner is no engage din business$ 324 ?@S$ /ne o the most signi icant pro"isions o the CGC is the remo"a# o the b#an!et exc#usion o instrumenta#ities and agencies o the ,ationa# Go"ernment rom the co"erage o #oca# taxation$ *#though as a genera# ru#e, CGFs cannot impose taxes, ees, or charges o any !ind on the ,ationa# Go"ernment, its agencies and instrumenta#ities, this ru#e no1 admits an exception, i$e$ 1hen speci ic pro"isions o the CGC authorize the CGFs to impose taxes, ees, or charges on the a orementioned entities$ The #egis#ati"e purpose to 1ithdra1 tax pri"i#eges en)oyed under existing #a1s or charter is c#ear#y mani ested by the #anguage used on Sec$ 15' and 1&5 categorica##y 1ithdra1ing such exemption sub)ect on#y to the exceptions enumerated$ Since it 1ou#d be tedious and impractica# to attempt to enumerate a## the existing statutes pro"iding or specia# tax exemptions or pri"i#eges, the CGC pro"ided or an express, a#beit genera#, 1ithdra1a# o such exemptions or pri"i#eges$ ,o more une:ui"oca# #anguage cou#d ha"e been used$ )!anters )ro(ucts Inc vs Fertip*i! Corp G.R. No. 166##6 4arc* 14, 2##$ F*CTS2 Petitioner PP= and respondent Fertiphi# are pri"ate corporations incorporated under Phi#ippine #a1s, both engaged in the importation and distribution o erti#izers, pesticides and agricu#tura# chemica#s$ Marcos issued Cetter o =nstruction 3C/=4 1(60, imposing a capita# reco"ery component o Php10$00 per bag o erti#izer$ The #e"y 1as to continue unti# ade:uate capita# 1as raised to ma!e PP= inancia##y "iab#e$ Fertiphi# remitted to the Ferti#izer and Pesticide *uthority 3FP*4, 1hich 1as then remitted the depository ban! o PP=$ Fertiphi# paid P6,6-&,1(( to FP* rom 1&-0 to 1&-6$ * ter the 1&-6 @dsa Re"o#ution, FP* "o#untari#y stopped the imposition o the P10 #e"y$ Fertiphi# demanded rom PP= a re und o the amount it remitted, ho1e"er PP= re used$ Fertiphi# i#ed a comp#aint or co##ection and damages, :uestioning the constitutiona#ity o C/= 1(60, c#aiming that it 1as un)ust, unreasonab#e, oppressi"e, in"a#id and an un#a1 u# imposition that amounted to a denia# o due process$ PP= argues that Fertiphi# has no #ocus standi to :uestion the constitutiona#ity o C/= ,o$ 1(60 because it does not ha"e a Hpersona# and substantia# interest in the case or 1i## sustain direct in)ury as a resu#t o its en orcement$H =t asserts that Fertiphi# did not su er any

damage rom the imposition because Hincidence o the #e"y e## on the u#timate consumer or the armers themse#"es, not on the se##er erti#izer company$ =SSF@2 Ihether or not Fertiphi# has #ocus standi to :uestion the constitutiona#ity o C/= ,o$ 1(60$ Ihat is the po1er o taxation> RFC=,G2 Fertiphi# has #ocus standi because it su ered direct in)ury7 doctrine o standing is a mere procedura# technica#ity 1hich may be 1ai"ed$ The imposition o the #e"y 1as an exercise o the taxation po1er o the state$ Ihi#e it is true that the po1er to tax can be used as an imp#ement o po#ice po1er, the primary purpose o the #e"y 1as re"enue generation$ = the purpose is primari#y re"enue, or i re"enue is, at #east, one o the rea# and substantia# purposes, then the exaction is proper#y ca##ed a tax$ Po#ice po1er and the po1er o taxation are inherent po1ers o the State$ These po1ers are distinct and ha"e di erent tests or "a#idity$ Po#ice po1er is the po1er o the State to enact #egis#ation that may inter ere 1ith persona# #iberty or property in order to promote the genera# 1e# are, 1hi#e the po1er o taxation is the po1er to #e"y taxes to be used or pub#ic purpose$ The main purpose o po#ice po1er is the regu#ation o a beha"ior or conduct, 1hi#e taxation is re"enue generation$ The H#a1 u# sub)ectsH and H#a1 u# meansH tests are used to determine the "a#idity o a #a1 enacted under the po#ice po1er$ The po1er o taxation, on the other hand, is circumscribed by inherent and constitutiona# #imitations$ R@?@S "$ *CM*,N/R GR ,os$ C9(&-5&9(6, *pri# 26, 1&&1 1&6 SCR* 522 F*CTS2 Petitioners %DC Reyes et a#$ o1ned a parce# o #and in Tondo 1hich are #eased and occupied as d1e##ing units by tenants 1ho 1ere paying month#y renta#s o not exceeding P500$ Sometimes in 1&'1 the Renta# Freezing Ca1 1as passed prohibiting or one year rom its e ecti"ity, an increase in month#y renta#s o d1e##ing units 1here renta#s do not exceed three hundred pesos 3P500$004, so that the Reyeses 1ere prec#uded rom raising the rents and rom e)ecting the tenants$ =n 1&'5, respondent City *ssessor o Mani#a re9 c#assi ied and reassessed the "a#ue o the sub)ect properties based on the schedu#e o mar!et "a#ues, 1hich entai#ed an increase in the corresponding tax rates prompting petitioners to i#e a Memorandum o +isagreement a"erring that the reassessments made 1ere Hexcessi"e, un1arranted, ine:uitab#e, con iscatory and unconstitutiona#H considering that the taxes imposed upon them great#y exceeded the annua# income deri"ed rom their properties$ They argued that the income approach shou#d ha"e been used in determining the #and "a#ues instead o the comparab#e sa#es approach 1hich the City *ssessor adopted$ =SSF@2 =s the approach on tax assessment used by the City *ssessor reasonab#e> B@C+2 ,o$ The taxing po1er has the authority to ma!e a reasonab#e and natura# c#assi ication or purposes o

taxation but the go"ernmentOs act must not be prompted by a spirit o hosti#ity, or at the "ery #east discrimination that inds no support in reason$ =t su ices then that the #a1s operate e:ua##y and uni orm#y on a## persons under simi#ar circumstances or that a## persons must be treated in the same manner, the conditions not being di erent both in the pri"i#eges con erred and the #iabi#ities imposed$ Conse:uent#y, it stands to reason that petitioners 1ho are burdened by the go"ernment by its Renta# Freezing Ca1s 3then R$*$ ,o$ 650& and P$+$ 204 under the princip#e o socia# )ustice shou#d not no1 be pena#ized by the same go"ernment by the imposition o excessi"e taxes petitioners can i## a ord and e"entua##y resu#t in the or eiture o their properties$

/bi##os "s$ Commission on =nterna# Re"enue 139 SCRA 436 G.R. No. L-68118 October 29, 1985

Aquino, J.

5octrine& The sharing of gross returns does not of itse f estab ish a !artnershi!, "hether or not the !ersons sharing the# ha$e a %oint or co##on right or interest in an& !ro!ert& fro# "hich the returns are deri$ed. There #ust be an un#ista'ab e intention to for# a !artnershi! or %oint $enture. Facts& For at #east one year a ter their receipt o t1o parce#s o #and rom their ather, petitioners reso#d said #ots to the Ia##ed City Securities Corporation and /#ga Cruz Canda, or 1hich they earned a pro it o P15(,5(1$-- or P55,0-( or each o them$ They treated the pro it as a capita# gain and paid an income tax on one9ha# thereo or o P16,'&2$ /ne day be ore the expiration o the i"e9year prescripti"e period, the Commissioner o =nterna# Re"enue, Commissioner acting on the theory that the our petitioners had ormed an unregistered partnership or )oint "enture, re:uired the our petitioners to pay cor!orate inco#e ta( on the tota# pro it o P15(,556 in addition to indi"idua# income tax on their shares thereo , a 008 raud surcharge and a (28 accumu#ated interest$ Further, the Commissioner considered the share o the pro its o each petitioner in the sum o P55,0-( as a H taxab#e in u## 3not a mere

capita# gain o 1hich is taxab#e4 and re:uired them to pay de iciency income taxes aggregating P06,'0'$20 inc#uding the 008 raud surcharge and the accumu#ated interest$ The petitioners contested the assessments$ T1o %udges o the Tax Court sustained the same$ %udge Roa:uin dissented$ Bence, the instant appea#$ Issue& Ihether or not petitioners ha"e indeed ormed a partnership or )oint "enture and thus, #iab#e or corporate income tax$ 'e!(& Ie ho#d that it is error to consider the petitioners as ha"ing ormed a partnership under artic#e 1'6' o the Ci"i# Code simp#y because they a##eged#y contributed P1'-,'0-$12 to buy the t1o #ots, reso#d the same and di"ided the pro it among themse#"es$ To regard the petitioners as ha"ing ormed a taxab#e unregistered partnership 1ou#d resu#t in oppressi"e taxation and con irm the dictum that the po1er to tax in"o#"es the po1er to destroy$ That e"entua#ity shou#d be ob"iated$ *s testi ied by %ose /bi##os, %r$, they had no such intention$ They 1ere co9o1ners pure and simp#e$ To consider them as partners 1ou#d ob#iterate the distinction bet1een a co9o1nership and a partnership$ The petitioners 1ere not engaged in any )oint "enture by reason o that iso#ated transaction$ *rtic#e 1'6&354 o the Ci"i# Code pro"ides that Hthe sharing o gross returns does not o itse# estab#ish a partnership, 1hether or not the persons sharing them ha"e a )oint or common right or interest in any property rom 1hich the returns are deri"edH$ There must be an unmista!ab#e intention to orm a partnership or )oint "enture$ IB@R@F/R@, the )udgment o the Tax Court is re"ersed and set aside$ The assessments are cance##ed$ ,o costs$ Tiu v Ca G.R. No. 12741#. anuar" 2#, 1333 %$ Panganiban Facts2 /n March 15, 1&&2, Congress, 1ith the appro"a# o the President, passed into #a1 R* '22'$ This 1as or the con"ersion o ormer mi#itary bases into industria# and commercia# uses$ Subic 1as one o these areas$ =t 1as made into a specia# economic zone$ =n the zone, there 1ere no exchange contro#s$ Such 1ere #ibera#ized$ There 1as a#so tax incenti"es and duty ree importation po#icies under this #a1$ /n %une 10, 1&&5, then President Fide# K$ Ramos issued @xecuti"e /rder ,o$ &' 3@/ &'4, c#ari ying the app#ication o the tax and duty incenti"es$ =t said that /n =mport Taxes and +uties$ A Tax and duty9 ree importations sha## app#y on#y to ra1 materia#s, capita# goods and e:uipment brought in by business enterprises into the SS@N /n *## /ther Taxes$ A =n #ieu o a## #oca# and nationa# taxes 3except import taxes and duties4, a## business enterprises in the SS@N sha## be re:uired to pay the tax speci ied in Section 123c4 o R$*$ ,o$ '22'$ ,ine days a ter, on %une 1&, 1&&5, the President issued @xecuti"e /rder ,o$ &'9* 3@/ &'9*4, speci ying the area 1ithin 1hich the tax9and9duty9 ree pri"i#ege 1as operati"e$

Section 1$1$ The Secured *rea consisting o the present#y enced9in ormer Subic ,a"a# Dase sha## be the on#y comp#ete#y tax and duty9 ree area in the SS@FPN$ Dusiness enterprises and indi"idua#s 3Fi#ipinos and oreigners4 residing 1ithin the Secured *rea are ree to import ra1 materia#s, capita# goods, e:uipment, and consumer items tax and duty9 ree$ Petitioners cha##enged the constitutiona#ity o @/ &'9* or a##eged#y being "io#ati"e o their right to e:ua# protection o the #a1s$ This 1as due to the #imitation o tax incenti"es to Subic and not to the entire area o /#ongapo$ The case 1as re erred to the Court o *ppea#s$ The appe##ate court conc#uded that such being the case, petitioners cou#d not c#aim that @/ &'9* is unconstitutiona#, 1hi#e at the same time maintaining the "a#idity o R* '22'$ The court a :uo a#so exp#ained that the intention o Congress 1as to con ine the co"erage o the SS@N to the Hsecured areaH and not to inc#ude the Hentire /#ongapo City and other areas mentioned in Section 12 o the #a1$ Bence, this 1as a petition or re"ie1 under Ru#e (0 o the Ru#es o Court$ =ssue2 Ihether the pro"isions o @xecuti"e /rder ,o$ &'9* con ining the app#ication o R$*$ '22' 1ithin the secured area and exc#uding the residents o the zone outside o the secured area is discriminatory or not o1ing to a "io#ation o the e:ua# protection c#ause$ Be#d$ ,o$ Petition dismissed$ Ratio2 Citing Section 12 o R* '22', petitioners contend that the SS@N encompasses 314 the City o /#ongapo, 324 the Municipa#ity o Subic in Namba#es, and 354 the area ormer#y occupied by the Subic ,a"a# Dase$ Bo1e"er, they c#aimed that the @$/$ narro1ed the app#ication to the na"a# base on#y$ /SG9 The @$/$ Ias a "a#id c#assi ication$ Court9 The undamenta# right o e:ua# protection o the #a1s is not abso#ute, but is sub)ect to reasonab#e c#assi ication$ = the groupings are characterized by substantia# distinctions that ma!e rea# di erences, one c#ass may be treated and regu#ated di erent#y rom another$ The c#assi ication must a#so be germane to the purpose o the #a1 and must app#y to a## those be#onging to the same c#ass$ =nchong " Bernandez9 @:ua# protection does not demand abso#ute e:ua#ity among residents7 it mere#y re:uires that a## persons sha## be treated a#i!e, under #i!e circumstances and conditions both as to pri"i#eges con erred and #iabi#ities en orced$ C#assi ication, to be "a#id, must 314 rest on substantia# distinctions, 324 be germane to the purpose o the #a1, 354 not be #imited to existing conditions on#y, and 3(4 app#y e:ua##y to a## members o the same c#ass$ R* '22' aims primari#y to acce#erate the con"ersion o mi#itary reser"ations into producti"e uses$ This 1as rea##y #imited to the mi#itary bases as the #a1Os intent pro"ides$ Moreo"er, the #a1 tas!ed the DC+* to speci ica##y de"e#op the areas the bases occupied$

*mong such enticements are2 314 a separate customs territory 1ithin the zone, 324 tax9and9duty9 ree importations, 354 restructured income tax rates on business enterprises 1ithin the zone, 3(4 no oreign exchange contro#, 304 #ibera#ized regu#ations on ban!ing and inance, and 364 the grant o resident status to certain in"estors and o 1or!ing "isas to certain oreign executi"es and 1or!ers$ The target o the #a1 1as the big in"estor 1ho can pour in capita#$ @"en more important, at this time the business acti"ities outside the Hsecured areaH are not #i!e#y to ha"e any impact in achie"ing the purpose o the #a1, 1hich is to turn the ormer mi#itary base to producti"e use or the bene it o the Phi#ippine economy$ Bence, there 1as no reasonab#e basis to extend the tax incenti"es in R* '22'$ It is 6e!!-sett!e( t*at t*e e7ua!-protection 0uarantee (oes not re7uire territoria! uni-or.it" o- !a6s. 8s !on0 as t*ere are actua! an( .ateria! (i--erences bet6eenterritories, t*ere is no vio!ation o- t*e constitutiona! c!ause. Desides, the businessmen outside the zone can a#1ays channe# their capita# into it$ R* '22', the ob)ecti"e is to estab#ish a Hse# 9sustaining, industria#, commercia#, inancia# andin"estment center<$ There 1i## rea##y be di erences bet1een it and the outside zone o /#ongapo$ The c#assi ication o the #a1 a#so app#ies e:ua##y to the residents and businesses in the zone$ They are simi#ar#y treated to contribute to the end gao# o the #a1$ Commissioner o =nterna# Re"enue "s$ C* G$R$ ,o$ 12(0(5, /ctober 1(, 1&&Sunday, %anuary 20, 200& Posted by Co eeho#ic Irites Cabe#s2 Case +igests, Po#itica# Ca1 Facts& Pri"ate respondent ?MC* is a non9stoc!, non9pro it institution, 1hich conducts "arious programs and acti"ities that are bene icia# to the pub#ic, especia##y the young peop#e, pursuant to its re#igious, educationa# and charitab#e ob)ecti"es$ ?MC* earned an income rom #easing out a portion o its premises to sma## shop o1ners and rom par!ing ees co##ected rom non9members$ The Commissioner o =nterna# Re"enue 3C=R4 issued an assessment or de iciency income tax, de iciency expanded 1ithho#ding taxes on renta#s and pro essiona# ees and de iciency 1ithho#ding tax on 1ages$ ?MC* protested the assessment$ Issue& Ihether or not the income o pri"ate respondent ?MC* rom renta#s o sma## shops and par!ing ees is exempt rom taxation 'e!(& ?MC* argues that *rt$ K=, Sec$ 2-354 o the Constitution exempts charitab#e institutions rom the payment not on#y o property taxes but a#so o income tax rom any source$ The Court is not persuaded$ The debates, interpe##ations and expressions o opinion o the ramers o the Constitution re"ea# their intent$ %ustice Bi#ario +a"ide %r$, a ormer constitutiona# commissioner, stressed during the Concom debate that 1hat is exempted is not the institution itse# 7 those exempted rom rea# estate taxes are #ands, bui#dings and impro"ements actua##y, direct#y and exc#usi"e#y used or re#igious, charitab#e or educationa# purposes$ Fr$ %oa:uin Dernas, an eminent authority on the Constitution and a#so a member o the Concom, adhered to the same "ie1 that the exemption created by said pro"ision pertained on#y to property taxes$ =n his treatise on taxation, %ustice %ose Kitug concurs, stating that the tax exemption co"ersproperty taxes on#y$ =ndeed, the income tax exemption c#aimed by ?MC* inds no basis in *rt$ K=, Sec$ 2-354 o the Constitution$

?MC* a#so in"o!es *rt$ L=K, Sec$ (354 o the Constitution c#aiming that ?MC* is a non9stoc!, non9pro it educationa# institution 1hose re"enues and assets are used actua##y, direct#y and exc#usi"e#y or educationa# purposes so it is exempt rom taxes on its properties and income$ The Court reiterates that ?MC* is exempt rom the payment o property tax, but not income tax on the renta#s rom its property$ The bare a##egation a#one that it is a non9stoc!, non9pro it educationa# institution is insu icient to )usti y its exemption rom the payment o income tax$ Ca1s a##o1ing tax exemption are construed strictissimi )uris$ Bence, or the ?MC* to be granted the exemption it c#aims under the a orecited pro"ision, it must pro"e 1ith substantia# e"idence that2 1$ it a##s under the c#assi ication non9stoc!, non9pro it educationa# institution7 and 2$ the income it see!s to be exempted rom taxation is used actua##y, direct#y and exc#usi"e#y or educationa# purposes$ Bo1e"er, the Court notes that not a scinti##a o e"idence 1as submitted by ?MC* to pro"e that it met the said re:uisites$ ?MC* is not an educationa# institution 1ithin the pur"ie1 o *rt$ L=K, Sec$ (354 o the Constitution$ The term ;educationa# institution,< 1hen used in #a1s granting tax exemptions, re ers to a schoo#, seminary, co##ege or educationa# estab#ishment$ There ore, ?MC* cannot be deemed one o the educationa# institutions co"ered by the said constitutiona# pro"ision$ Moreo"er, the Court notes that ?MC* did not submit proo o the proportionate amount o the sub)ect income that 1as actua##y, direct#y and exc#usi"e#y used or educationa# purposes$ )esus sacred heart "s cir )ctua rea i*ation of !rofits is i##ateria + "hat is i#!ortant is the !resence of the !ur!ose to #a'e a !rofit o$er and abo$e the cost of instruction. )t an& rate, the #ain e$idence of the !ur!ose of a cor!oration shou d be its artic es of incor!oration and b&- a"s, for such !ur!ose is re,uired b& statute to be stated in the artic es of incor!oration and the b&- a"s out ine the ad#inistrati$e organi*ation of the cor!oration "hich, in turn, is su!!osed to insure or faci itate the acco#! ish#ent of said !ur!ose.

Facts2 This is an appea# ta!en by de endant, Co##ector o =nterna# Re"enue, rom a decision o the Court o First =nstance o Mani#a sentencing him to re und to p#ainti , %esus Sacred Beart Co##ege, the sum o P2,2(1$-6, assessed by the ormer, and paid by the #atter, by 1ay o income tax or the years 1&(', 1&(- and 1&(&$ The parties ha"e stipu#ated2 1$ That the %esus Sacred Beart Co##ege is an educationa# organization authorized to operate and existing in Cucena, Juezon, and o ering to the pub#ic e#ementary, secondary and co##egiate courses7 2$ That according to its income tax returns, p#ainti rea#ized net incomes rom tuition and other ees in carrying on its educationa# acti"ity in the amounts o P0,60&$0'7 P5,'(5$-27 and P5,0'2$'( or the years 1&(', 1&(- and 1&(& respecti"e#y7 5$ That the amount o P2,2(1$-6 31as paid by the p#ainti to the de endant on *ugust 15, 1&01 as its income tax$

($ That a c#aim or re und o said amount o P2,2(1$-6 1as du#y i#ed on *ugust 16, 1&01 by the p#ainti 1ith the de endant but the c#aim 1as denied on *ugust 2(, 1&017

0$ The assessment notices or the de iciency income tax or the years 1&(', 1&(- and 1&(& 1ere or1arded by the de endant to the p#ainti on or about +ecember 10, 1&00, the #etter enc#osing the said notices 1as dated +ecember 12, 1&00, and the notices 1ere dated +ecember 6, 1&00$ P#ainti appe##ee maintains, and the #o1er court he#d, that it is exempt rom taxation under the irst part o said paragraph 3e4, 1hereas de endant9appe##ant asserts that the income in :uestion 1as deri"ed orm an Hacti"ity conducted or pro it,H and that, according#y, it is taxab#e under the pro"iso o the same paragraph$

ranchise tax on businesses en)oying a ranchise$ =n"o!ing its authority, the Pro"ince o Caguna, through its #oca# #egis#ati"e assemb#y, enacted a pro"incia# ordinance imposing a ranchise tax upon a## businesses en)oying a ranchise, 1hich inc#udes PC+T$ =n comp#iance 1ith the ordinance, PC+T paid the Pro"ince o Caguna its #oca# ranchise tax #iabi#ity or the year 1&&- in the amount o P1,0-1,212$10$ Prior thereto, Congress enacted the Pub#ic Te#ecommunications Po#icy *ct o the Phi#ippines$ Then, the +epartment o Finance, thru its Dureau o Coca# Go"ernment Finance 3DCGF4, issued a ru#ing to the e ect that PC+T, among other te#ecommunication companies, became exempt rom #oca# ranchise tax$ *ccording#y, PC+T sha## be exempt rom the payment o ranchise and business taxes imposab#e by CGFs under Sections 15' and 1(5, respecti"e#y o the Coca# Go"ernment Code, upon the e ecti"ity o R* '&20$ Bo1e"er, PC+T sha## be #iab#e to pay the ranchise and business taxes on its gross receipts during the period that PC+T 1as not en)oying the Mmost a"ored c#ause. pro"ision o R* '020$ PC+T then re used to pay the Pro"ince o Caguna its #oca# ranchise tax #iabi#ity or the o##o1ing year and it e"en i#ed 1ith the / ice o the Pro"incia# Treasurer a 1ritten c#aim or re und o the amount it paid as #oca# ranchise tax or the pre"ious year$ Issue& +oes Section 25 o Rep$ *ct ,o$ '&20 operate to exempt PC+T rom payment o ranchise tax> 'e!(& ,o$ =n appro"ing Section 25 o R$*$ ,o$ '&20, Congress intended it to operate as a b#an!et tax exemption to a## te#ecommunications entities$ *pp#ying the ru#e o strict construction o #a1s granting tax exemptions and the ru#e that doubts shou#d be reso#"ed in a"or o municipa# corporations in interpreting statutory pro"isions on municipa# taxing po1ers, 1e ho#d that section 25 o R$*$ ,o$ '&20 cannot be considered as ha"ing amended petitioner.s ranchise so as to entit#e it to exemption rom the imposition o #oca# ranchise taxes$ The tax exemption must be expressed in the statute in c#ear #anguage that #ea"es no doubt o the intention o the #egis#ature to grant such exemption$ *nd, e"en i it is granted, the exemption must be interpreted in strictissimi )uris against the taxpayer and #ibera##y in a"or o the taxing authority$ Mutatis mutandis a#so app#ies to this case2 Ihen exemption is c#aimed, it must be sho1n indubitab#y to exist$ *t the outset, e"ery presumption is against it$ * 1e##9 ounded doubt is ata# to the c#aim$ =t is on#y 1hen the terms o the concession are too exp#icit to admit air#y o any other construction that the proposition can be supported$. PB=C=PP=,@ C/,G +=ST*,C@ T@C@PB/,@ C/MP*,?, =,C$ 3PC+T4 "s$ C=T? /F +*K*/ and *+@C*=+* D$ D*RC@C/,*, in her capacity as City Treasurer o +a"ao GR$ ,o$ 1(5-6', March 20, 2005 Facts2 PC+T paid a ranchise tax e:ua# to three percent 3584 o its gross receipts$ The ranchise tax 1as paid ;in #ieu o a## taxes on this ranchise or earnings thereo < pursuant to R* '0-2$ The exemption rom ;a## taxes on this ranchise or earnings thereo < 1as subse:uent#y 1ithdra1n by R* '160 3CGC4, 1hich at the same time ga"e #oca# go"ernment units the po1er to tax businesses en)oying a ranchise on the basis o income recei"ed or earned by them 1ithin their territoria# )urisdiction$ The CGC too! e ect on %anuary 1, 1&&2$ The City o +a"ao enacted /rdinance ,o$ 01&, Series o 1&&2, 1hich in pertinent part pro"ides2

=ssue2 Ihether or not the net income rom the tuition and other ees co##ected and recei"ed by the p#ainti is sub)ect to income tax under the pro"isions o section 2( o the ,ationa# =nterna# Re"enue Code, not1ithstanding the pro"isions o section 2'3e4$

Be#d2 ,o Section 2'3e4 o the ,ationa# =nterna# Re"enue Code, as amended by Repub#ic *ct ,o$ -2 3section 04, exempts rom taxation the Hnet incomeH o corporations Horganized and operated exc#usi"e#y or $$$ educationa# purposes $$$ no part o the net income o 1hich inures to the bene it o any pri"ate stoc!ho#der or indi"idua#,H and it is conceded that p#ainti corporation be#ongs to this c#ass$ To ho#d that an educationa# =nstitution is sub)ect to income tax 1hene"er it is so administered as to reasonab#y assure that it 1i## not incur in de icit, is to nu##i y and de eat the a orementioned exemption$ =ndeed, the e ect, in genera#, o the interpretation ad"ocate by appe##ant 1ou#d be to deny the exemption 1hene"er there is net income, contrary to the tenor o said section 2'3e4 1hich positi"e#y exempts rom taxation those corporations or associations 1hich, other1ise, 1ou#d be sub)ect thereto, because o the existence o said net income$ ,eed#ess to say, e"ery responsib#e organization must be so run to, at #east insure its existence, by operating 1ithin the #imits o its o1n resources, especia##y its regu#ar income$ =n other 1ords, it shou#d a#1ays stri"e, 1hene"er possib#e, to ha"e a surp#us$ *t any rate, the main e"idence o the purpose o a corporation shou#d be its artic#es o incorporation and by9#a1s, or such purpose is re:uired by statute to be stated in the artic#es o incorporation 3Sec$ 6, *ct ,o$ 1(0&4, and the by9#a1s out#ine the administrati"e organization o the corporation 3Sec$ 20 and 21 o *ct ,o$ 1(0&, as amended4, 1hich, in turn, is supposed to insure or aci#itate the accomp#ishment o said purpose$ )*i!ippine /on0 5istance Te!ep*one Co.pan", Inc. vs. )rovince o- /a0una, et a!. G.R. No. 151$33 8u0ust 16, 2##5 Garcia, -.. Facts2 PC+T is a ho#der o a #egis#ati"e ranchise under *ct ,o$ 5(56, as amended, to render #oca# and internationa# te#ecommunications ser"ices$ The terms and conditions o its ranchise 1ere #ater conso#idated under Repub#ic *ct ,o$ '0-2, Section 12 o 1hich embodies the so9ca##ed ;in9 #ieu9o 9a## taxes< c#ause, 1hereunder PC+T sha## pay a ranchise tax e:ui"a#ent to 58 o a## its gross receipts, 1hich ranchise tax sha## be ;in #ieu o a## taxes<$ Therea ter, the Coca# Go"ernment Code too! e ect$ Section 15' o the Code, in re#ation to Section 101 thereo , grants pro"inces and other #oca# go"ernment units the po1er to impose #oca#

,ot1ithstanding any exemption granted by #a1 or other specia# #a1s, there is hereby imposed a tax on businesses en)oying a ranchise, a rate o se"enty9 i"e percent 3'084 o one percent 3184 o the gross annua# receipts or the preceding ca#endar year based on the income receipts rea#ized 1ithin the territoria# )urisdiction o +a"ao City$ Subse:uent#y, Congress granted in a"or o G#obe Mac!ay Cab#e and Radio Corporation 3G#obe4 and Smart =n ormation Techno#ogies, =nc$ 3Smart4 ranchises 1hich contained ;in #eiu o a## taxes< pro"isos$ =n 1&&0, it enacted R* '&20, or the Pub#ic Te#ecommunication Po#icy o the Phi#ippines, Sec$ 25 o 1hich pro"ides that any ad"antage, a"or, pri"i#ege, exemption, or immunity granted under existing ranchises, or may herea ter be granted, sha## ipso acto become part o pre"ious#y granted te#ecommunications ranchises and sha## be accorded immediate#y and unconditiona##y to the grantees o such ranchises$ The #a1 too! e ect on March 16, 1&&0$ =n %anuary 1&&&, 1hen PC+T app#ied or a mayor.s permit to operate its +a"ao Metro exchange, it 1as re:uired to pay the #oca# ranchise tax 1hich then had amounted to P5,6-1,&-0$'2$ PC+T cha##enged the po1er o the city go"ernment to co##ect the #oca# ranchise tax and demanded a re und o 1hat had been paid as a #oca# ranchise tax or the year 1&&' and or the irst to the third :uarters o 1&&-$ =ssue2 Ihether or not by "irtue o R* '&20, Sec$ 25, PC+T is again entit#ed to the exemption rom payment o the #oca# ranchise tax in "ie1 o the grant o tax exemption to G#obe and Smart$ Be#d2 Petitioner contends that because their existing ranchises contain ;in #ieu o a## taxes< c#auses, the same grant o tax exemption must be deemed to ha"e become ipso acto part o its pre"ious#y granted te#ecommunications ranchise$ Dut the ru#e is that tax exemptions shou#d be granted on#y by a c#ear and une:ui"oca# pro"ision o #a1 ;expressed in a #anguage too p#ain to be mista!en< and assuming or the nonce that the charters o G#obe and o Smart grant tax exemptions, then this runabout 1ay o granting tax exemption to PC+T is not a direct, ;c#ear and une:ui"oca#< 1ay o communicating the #egis#ati"e intent$ ,or does the term ;exemption< in Sec$ 25 o R* '&20 mean tax exemption$ The term re ers to exemption rom regu#ations and re:uirements imposed by the ,ationa# Te#ecommunications Commission 3,TC4$ For instance, R* '&20, Sec$ 1' pro"ides2 The Commission sha## exempt any speci ic te#ecommunications ser"ice rom its rate or tari regu#ations i the ser"ice has su icient competition to ensure air and reasonab#e rates o tari s$ *nother exemption granted by the #a1 in #ine 1ith its po#icy o deregu#ation is the exemption rom the re:uirement o securing permits rom the ,TC e"ery time a te#ecommunications company imports e:uipment$ Tax exemptions shou#d be granted on#y by c#ear and une:ui"oca# pro"ision o #a1 on the basis o #anguage too p#ain to be mista!en$ 9i!!anueva vs. Cit" o- I!oi!o [5ece.ber 2$, 136$, /-26521% Post under case digests, Taxation at Friday, February 2(, 2012 Posted by Schizophrenic Mind Facts& /n September 50, 1&(6 the municipa# board o =#oi#o City enacted /rdinance -6$ The Supreme Court, ho1e"er, dec#ared the ordinance u#tra "ires$ /n %anuary 10, 1&60 the municipa# board o =#oi#o City, be#ie"ing that 1ith the passage o Repub#ic *ct 226(, other1ise !no1n as the Coca# *utonomy *ct, it had ac:uired the authority or po1er to enact an ordinance simi#ar to that pre"ious#y dec#ared by the Supreme Court as u#tra "ires, enacted /rdinance 11 3e#e"en4, series o 1&60, imposing municipa# #icense tax on persons engaged in the business o operating tenement houses$ =n =#oi#o City, the appe##ees @usebio Ki##anue"a and Remedios S$ Ki##anue"a are o1ners o i"e tenement houses, aggregate#y containing (5 apartments, 1hi#e the other appe##ees and the same Remedios S$ Ki##anue"a are o1ners o ten apartments$ Dy "irtue o the ordinance in :uestion, the

appe##ant City co##ected rom spouses @usebio Ki##anue"a and Remedios S$ Ki##anue"a, or the years 1&6091&6(, the sum o P0,-2($50, and rom the appe##ees Pio Sian Me##iza, Teresita S$ Topacio, and Remedios S$ Ki##anue"a, or the years 1&6091&6(, the sum o P1,51'$00$ /n %u#y 11, 1&62 and *pri# 2(, 1&6(, the p#ainti s9appe##ees i#ed acomp#aint, and an amended comp#aint, respecti"e#y, against the City o =#oi#o, praying that /rdinance 11, series o 1&60, be dec#ared Hin"a#id or being beyond the po1ers o the Municipa# Counci# o the City o =#oi#o to enact, and unconstitutiona# or being "io#ati"e o the ru#e as to uni ormity o taxation and or depri"ing said p#ainti s o the e:ua# protection c#ause o the Constitution,H and that the City be ordered to re und the amounts co##ected rom them under the said ordinance$ The #o1er court rendered )udgment dec#aring the ordinance i##ega#$ Issues& 314 Ihether or not the City o =#oi#o is empo1ered by the Coca# *utonomy *ct to impose tenement taxes$ 324 Ihether or not /rdinance 11, series o 1&60, does "io#ate the ru#e o uni ormity o taxation$ 'e!(& 314 ?es$ The #o1er court has interchangeab#y denominated the tax in :uestion as a tenement tax or an apartment tax$ Ca##ed by either name, it is not among the exceptions #isted in Section 2 o the Coca# *utonomy *ct$ The imposition by the ordinance o a #icense tax on persons engaged in the business o operating tenement houses inds authority in Section 2 o the Coca# *utonomy *ct 1hich pro"ides that chartered cities ha"e the authority to impose municipa# #icense taxes or ees upon persons engaged in any occupation or business, or exercising pri"i#eges 1ithin their respecti"e territories, and Hother1ise to #e"y or pub#ic purposes, )ust and uni orm taxes, #icenses, or ees$H 324 ,o$ The ordinance is not "io#ati"e o the ru#e o uni ormity in taxation$ The Supreme Court has a#ready ru#ed that tenement houses constitute a distinct c#ass o property$ =t has #i!e1ise ru#ed that Htaxes are uni orm and e:ua# 1hen imposed upon a## property o the same c#ass or character 1ithin the taxing authority$H The act, there ore, that the o1ners o other c#asses o bui#dings in the City o =#oi#o do not pay the taxes imposed by the ordinance in :uestion is no argument at a## against uni ormity and e:ua#ity o the tax imposition$ ,either is the ru#e o e:ua#ity and uni ormity "io#ated by the act that tenement taxes are not imposed in other cities, or the same ru#e does not re:uire that taxes or the same purpose shou#d be imposed in di erent territoria# subdi"isions at the same time$ So #ong as the burden o the tax a##s e:ua##y and impartia##y on a## o1ners or operators o tenement houses simi#ar#y c#assi ied or situated, e:ua#ity and uni ormity o taxation is accomp#ished$ Bence, the )udgment o the #o1er court is re"ersed$ The ordinance in :uestion is "a#id$ C=R K SC %/B,S/, =,C$ %une 20, 1&&& Monday, %anuary 26, 200& Posted by Co eeho#ic Irites Cabe#s2 Case +igests, Taxation Facts& Respondent is a domestic corporation organized and operating under the Phi#ippine Ca1s, entered into a #icensedagreement 1ith the SC %ohnson and Son, FS*, a non9resident oreign corporation based in the FS* pursuant to 1hich the respondent 1as granted the right to use the trademar!, patents and techno#ogy o1ned by the #ater inc#uding the right to manu acture, pac!age and distribute the products co"ered by the *greement and secure assistance in management, mar!eting and production rom SC %ohnson and Son FS*$ For the use o trademar! or techno#ogy, respondent 1as ob#iged to pay SC %ohnson and Son, FS*

roya#ties based on a percentage o net sa#es and sub)ected the same to 208 1ithho#ding tax on roya#ty payments1hich respondent paid or the period co"ering %u#y 1&&2 to May 1&&5 in the tota# amount o P1,605,((5$00$ /n /ctober 2&, 1&&5, respondent i#ed 1ith the =nternationa# Tax * airs +i"ision 3=T*+4 o the D=R a c#aim or re und o o"erpaid1ithho#ding tax on roya#ties arguing that, the antecedent acts attending respondents case a## s:uare#y 1ithin the same circumstances under 1hich said MacGeorge and Gi##ette ru#ings 1ere issued$ Since the agreement 1as appro"ed by the Techno#ogy Trans er Doard, the pre erentia# tax rate o 108 shou#d app#y to the respondent$ So, roya#ties paid by the respondent to SC %ohnson and Son, FS* is on#y sub)ect to 108 1ithho#ding tax$ The Commissioner did not act on said c#aim or re und$ Pri"ate respondent SC %ohnson P Son, =nc$ then i#ed a petition or re"ie1 be ore the CT*, to c#aim a re und o the o"erpaid 1ithho#ding tax on roya#ty payments rom %u#y 1&&2 to May 1&&5$ /n May ', 1&&6, the CT* rendered its decision in a"or o SC %ohnson and ordered the C=R to issue a tax credit certi icate in the amount o P165,266$00 representing o"erpaid 1ithho#ding tax on roya#typayments beginning %u#y 1&&2 to May 1&&5$ The C=R thus i#ed a petition or re"ie1 1ith the C* 1hich rendered the decision sub)ect o this appea# on ,o"ember ', 1&&6 inding no merit in the petition and a irming in toto the CT* ru#ing$ Issue& Ihether or not tax re unds are considered as tax exemptions$ 'e!(& =t bears stress that tax re unds are in the nature o tax exemptions$ *s such they are registered as in derogation o so"ereign authority and to be construed strictissimi )uris against the person or entity c#aiming the exemption$ The burden o proo is upon him 1ho c#aims the exemption in his a"or and he must be ab#e to )usti y his c#aim by the c#earest grant o organic or statute #a1$ Pri"ate respondent is c#aiming or a re und o the a##eged o"erpayment o tax on roya#ties7 ho1e"er there is nothing on record to support a c#aim that the tax on roya#ties under the RP9FS Treaty is paid under simi#ar circumstances as the tax on roya#ties under the RP9 Iest Germany Tax Treaty$ PB=C@L M=,=,G C/RP K C=R 506 SCR* 126 3*pri# 21, 1&&&4 Monday, %anuary 26, 200& Posted by Co eeho#ic Irites Cabe#s2 Case +igests, Taxation Facts& From %u#y 1, 1&-0 to +ecember 51, 1&-1, Phi#ex Mining Corp$ purchased rom se"era# oi# companies, re ined and manu actured minera#s, motor ue#s, and diese# ue# oi#s$ Speci ic taxes o P2,(&2,6''$22 1ere paid$ /n /ctober 22, 1&-2, the company a"ai#ed o the pro"isions o R* 1(50 granting re und o 208 o the tax paid and pro"ided proo o the use o the oi#s, as re:uired$ Pending such c#aim or re und 3P625,16&$50 representing the 2084 1ith the C=R, the company i#ed another c#aim or re und 1ith the same amount p#us 208 interest thereon 1ith the CT* on ,o"ember 16, 1&-2$ The CT* granted the re und but on#y P16,'('$56 1hich 1as based on the amount deemed paid under Sections 1 P 2 o R* 1(50$ Phi#ex contends the re und shou#d be based on the actua# speci ic taxes paid as per the increased rates pro"ided in Sections 1(2 and 1(0 31hich became Sections 105 and 1064 o the ,=RC$ 'e!(& CT* is incorrect$ =n 1&'', P+ 110- codi ied a## existing #a1s$ Sections 1(2 and 1(0 o the

Tax Code, as amended by Sections 1 and 2 o R* 1(50 1ere re9numbered to Sections 105 and 106$ Cater, these sections 1ere amended by P+ 16'2 and subse:uent#y by @/ 6'2 increasing the tax rates or certain oi# and ue# products$ =n e ect, the reason or the re und ceased to exist$ 3The purpose o the tax 1as or Bigh1ay Specia# Fund 1hich 1as abo#ished in 1&-04$ SC a irmed there ore the decision o the C* P CT* that the basis o tax re undunder R* 1(50 is computed on the basis o the speci ic tax deemed paid under Sections 1 P 2 and not the increased rates actua##y paid under the 1&'' ,=RC, citing se"era# cases in support thereo $ Further, a#though Phi#ex paid the taxes on their oi# and ue# purchases based on the increased rates, the #atter #a1 did not speci ica##y pro"ide or a re und based on the increased rates$ Since the grant o re undpri"i#eges must be strict#y construed against the taxpayer, the basis or the re und remains to be the amounts deemed paid under Sections 1 and 2 o R* 1(50$ *#so, there is no merit to petitioner.s assertion Q that e:uity and )ustice demands that the computation or tax re unds be based on actua# amounts paid under Sections 105 and 106 o the ,=RC, there being no tax exemption so#e#y on the ground o e:uity$ SC ina##y he#d2 ;The ru#e is that no interest on re und o tax can be a1arded un#ess authorized by #a1 o the co##ection o the tax 1as attended by arbitrariness$ *n action is not arbitrary 1hen exercised honest#y and upon due consideration 1here there is room or t1o opinions, ho1e"er much o it may be be#ie"ed that an erroneous conc#usion 1as reached$ *rbitrariness presupposes inexcusab#e or obstinate disregard o #ega# pro"isions$ ,one o the exceptions are presents in this case$ Respondent.s decision 1as based on an honest interpretation o the #a1$ Ie see no reason 1hy there shou#d be payment o interest$< Domingo vs. Garlitos GR L-18993 9 Jun! 1963 F8CT:& =n +omingo "s$ Moscoso 3106 PB=C 115-4, the Supreme Court dec#ared as ina# and executory the order o the Court o First =nstance o Ceyte or the payment o estate and inheritance taxes, charges and pena#ties amounting to P(0,00-$00 by the @state o the #ate Ia#ter Scott Price$ The petition or execution i#ed by the isca#, ho1e"er, 1as denied by the #o1er court$ The Court he#d that the execution is un)usti ied as the Go"ernment itse# is indebted to the @state or 262,2007 and ordered the amount o inheritance taxes be deducted rom the Go"ernment.s indebtedness to the @state$ I::;<& Ihether a tax and a debt may be compensated$ '</5& The court ha"ing )urisdiction o the @state had ound that the c#aim o the @state against the Go"ernment has been recognized and an amount o P262,200 has a#ready been appropriated by a corresponding #a1 3R* 2'004$ Fnder the circumstances, both the c#aim o the Go"ernment or inheritance taxes and the c#aim o the intestate or ser"ices rendered ha"e a#ready become o"erdue and demandab#e as 1e## as u##y #i:uidated$ Compensation, there ore, ta!es p#ace by operation o #a1, in accordance 1ith *rtic#e 12'& and 12&0 o the Ci"i# Code, and both debts are extinguished to the concurrent amount$

*D*?* "s$ @D+*,@, %R$ 010 SCR* '20 GR ,o$ 16'&1&, February 1(, 200'

H* taxpayer need not be a party to the contract to cha##enge its "a#idity$H F*CTS2 The petitioners, P#aride# M$ *baya 1ho c#aims that he i#ed the instant petition as a taxpayer, ormer #a1ma!er, and a Fi#ipino citizen, and P#aride# C$ Garcia #i!e1ise c#aiming that he i#ed the suit as a taxpayer, ormer mi#itary o icer, and a Fi#ipino citizen, main#y see! to nu##i y a +PIB reso#ution 1hich recommended the a1ard to pri"ate respondent China Road P Dridge Corporation o the contract or the imp#ementation o the ci"i# 1or!s !no1n as Contract Pac!age ,o$ = 3CP =4$ They a#so see! to annu# the contract o agreement subse:uent#y entered into by and bet1een the +PIB and pri"ate respondent China Road P Dridge Corporation pursuant to the said reso#ution$ =SSF@2 Bas petitioners the #ega# standing to i#e the instant case against the go"ernment> B@C+2 Petitioners, as taxpayers, possess #ocus standi to i#e the present suit$ Drie #y stated, #ocus standi is a right o appearance in a court o )ustice on a gi"en :uestion$ More particu#ar#y, it is a party.s persona# and substantia# interest in a case such that he has sustained or 1i## sustain direct in)ury as a resu#t o the go"ernmenta# act being cha##enged$ Cocus standi, ho1e"er, is mere#y a matter o procedure and it has been recognized that in some cases, suits are not brought by parties 1ho ha"e been persona##y in)ured by the operation o a #a1 or any other go"ernment act but by concerned citizens, taxpayers or "oters 1ho actua##y sue in the pub#ic interest$ Conse:uent#y, the Court, in a catena o cases, has in"ariab#y adopted a #ibera# stance on #ocus standi, inc#uding those cases in"o#"ing taxpayers$ The pre"ai#ing doctrine in taxpayer.s suits is to a##o1 taxpayers to :uestion contracts entered into by the nationa# go"ernment or go"ernment9 o1ned or contro##ed corporations a##eged#y in contra"ention o #a1$ * taxpayer is a##o1ed to sue 1here there is a c#aim that pub#ic unds are i##ega##y disbursed, or that pub#ic money is being de #ected to any improper purpose, or that there is a 1astage o pub#ic unds through the en orcement o an in"a#id or unconstitutiona# #a1$ Signi icant#y, a taxpayer need not be a party to the contract to cha##enge its "a#idity$ Francisco I. C*ave2 vs. Nationa! 'ousin0 8ut*orit" G.R. No 164527. 8u0ust 15, 2##7. /e asco, -r., -. 5octrine& There must be a #a1 or presidentia# proc#amation o icia##y c#assi ying these rec#aimed #ands as a#ienab#e or disposab#e and open to disposition or concession$ Facts& Petitioner Francisco Cha"ez in his capacity as taxpayer see!s to dec#are nu## and "oid the %oint Kenture *greement 3%K*4 bet1een the ,B* and R9== Dui#der.s =nc 3RD=4 or being unconstitutiona# and in"a#id, and to en)oin respondents A particu#ar#y respondent ,B*Q rom imp#ementing andRor en orcing the said pro)ect and other agreements re#ated thereto$ /n March 1, 1&--, then President Corazon C$ *:uino issued Memorandum /rder ,o$ 161 3M/ 1614 appro"ing and directing the imp#ementation o the Comprehensi"e and =ntegrated Metropo#itan Mani#a Iaste Management P#an$ Speci ica##y, respondent ,B* 1as ordered to ;conduct easibi#ity studies and de"e#op #o19cost housing pro)ects at the dumpsite and absorb sca"engers in ,B* resett#ementR#o19cost housing pro)ects$< Pursuant to M/ 1619*, ,B* prepared the easibi#ity studies 1hich resu#ted in the ormu#ation o the Smo!ey Mountain +e"e#opment P#an and Rec#amation o the *rea *cross R910 or the Smo!ey Mountain +e"e#opment and Rec#amation Pro)ect 3SM+RP4$ SM+RP aimed to con"ert the Smo!ey Mountain dumpsite into a habitab#e housing pro)ect, inc#usi"e o the rec#amation o the area across R910, ad)acent to the Smo!ey Mountain as the enab#ing component o the pro)ect$ /nce ina#ized, the P#an 1as submitted to President *:uino or her appro"a#$

/n %anuary 1', 1&&2, President *:uino proc#aimed M/ (10, appro"ing and directing the imp#ementation o the SM+RP through a pri"ate sector )oint "enture$ Said M/ stipu#ated that the #and area co"ered by the Smo!ey Mountain dumpsite is con"eyed to the ,B* as 1e## as the area to be rec#aimed across R910$ =n the same M/ (10, President *:uino created an @xecuti"e Committee 3@L@C/M4 to o"ersee the imp#ementation o the P#an and an inter9agency technica# committee 3T@CBC/M4 1as created composed o the technica# representati"es o the @L@C/M$ Dased on the e"a#uation o the pre9:ua#i ication documents, the @L@C/M dec#ared the ,e1 San %ose Dui#ders, =nc$ and RD= as top t1o contractors$ Therea ter, T@CBC/M submitted its recommendation to the @L@C/M to appro"e the RD= proposa# 1hich garnered the highest score$ /n /ctober ', 1&&2, President Ramos authorized ,B* to enter into a %K* 1ith RD=$ * ter1ards, President Ramos issued Proc#amation ,o$ (60 increasing the proposed area or rec#amation across R910 rom (0 hectares to '& hectares$ /n September 1, 1&&(, pursuant to Proc#amation ,o$ 5&, the +@,R issued Specia# Patent ,o$ 50&1 con"eying in a"or o ,B* an area o 211,&'0 s:uare meters co"ering the Smo!ey Mountain +umpsite$ The #and rec#amation 1as comp#eted in *ugust 1&&6$ Sometime #ater in 1&&6, pursuant #i!e1ise to Proc#amation ,o$ 5&, the +@,R issued Specia# Patent ,o$ 50&- con"eying in a"or o ,B* an additiona# 5&0,000 s:uare meter area$ * ter some time, the %K* 1as terminated$ RD= demanded the payment o )ust compensation or a## accomp#ishments and costs incurred in de"e#oping the SM+RP p#us a reasonab#e rate o return$ =n a Memorandum o *greement 3M/*4 executed by ,B* and RD=, both parties agreed to terminate the %K* and other subse:uent agreements, 1hich stipu#ated, among others, that unpaid ba#ance may be paid in cash, bonds or through the con"eyance o properties or any combination thereo $ Issues& 1$ Ihether RD= can ac:uire rec#aimed oreshore and submerged #and areas because they are a##eged#y ina#ienab#e #ands o the pub#ic domain 2$ Ihether RD= can ac:uire rec#aimed #ands 1hen there 1as no dec#aration that said #ands are no #onger needed or pub#ic use$ 5$ Ihether RD=, being a pri"ate corporation, is barred rom the Constitution to ac:uire #ands o the pub#ic domain$ 'e!(& 1$ ?es$ The rec#aimed #ands across R910 1ere c#assi ied a#ienab#e and disposab#e #ands o pub#ic domain o the State$ First, there 1ere three presidentia# proc#amations c#assi ying the rec#aimed #ands across R910 as a#ienab#e or disposab#e hence open to disposition or concession$ These 1ere M/ (10 issued by President *:uino, Proc#amation ,o$ 5& and Proc#amation ,o$ (60 both issued by President Ramos$ Second#y, Specia# Patents ,os$ 50&1, 50&2, and 50&- issued by the +@,R c#assi ied the rec#aimed areas as a#ienab#e and disposab#e$ *dmitted#y, it cannot be said that M/ (10, Proc#amations ,os$ 5& and (60 are exp#icit dec#arations that the #ands to be rec#aimed are c#assi ied as a#ienab#e and disposab#e$ Ie ind ho1e"er that such conc#usion is deri"ed and imp#icit rom the authority gi"en to the ,B* to trans er the rec#aimed #ands to :ua#i ied bene iciaries$ =n #ine 1ith the ru#ing in Cha"ez "$ P@*, the court he#d that M/ (10 and Proc#amations ,os$ 5& and (60 cumu#ati"e#y and )oint#y ta!en together 1ith Specia# Patent ,os$ 50&1, 50&2, and 50&- more than satis y the re:uirement in P@* that ;StThere must be a #a1 or presidentia# proc#amation o icia##y c#assi ying these rec#aimed #ands as a#ienab#e or disposab#e and open to disposition or concession$< 2$ ?es$ @"en i it is conceded that there 1as no exp#icit dec#aration that the #ands are no #onger needed or pub#ic use or pub#ic ser"ice, there 1as ho1e"er an imp#icit executi"e dec#aration that the rec#aimed areas R910 are not necessary anymore or pub#ic use or pub#ic ser"ice$ President

*:uino through M/ (10 con"eyed the same to the ,B* part#y or housing pro)ect and re#ated commercia#Rindustria# de"e#opment intended or disposition to and en)oyment o certain bene iciaries and not the pub#ic in genera# and part#y as enab#ing component to inance the pro)ect$ *#so, President Ramos, in issuing Proc#amation ,o$ 5&, dec#ared, though indirect#y, that the rec#aimed #ands o the Smo!ey Mountain pro)ect are no #onger re:uired or pub#ic use or ser"ice$ =n addition, President Ramos issued Proc#amation ,o$ (60 increasing the area to be rec#aimed rom orty 3(04 hectares to se"enty9nine 3'&4 hectares, e#ucidating that said #ands are undoubted#y set aside or the bene iciaries o SM+RP and not the pub#ic$ M/ (10 and Proc#amations ,os$ 5& and (60 are dec#arations that proc#aimed the non9use o the rec#aimed areas or pub#ic use or ser"ice as the SM+RP cannot be success u##y imp#emented 1ithout the 1ithdra1a# o said #ands rom pub#ic use or ser"ice$ 5$ ?es$ Ihen Proc#amations ,os$ 5& and (60 1ere issued, ina#ienab#e #ands co"ered by said proc#amations 1ere con"erted to a#ienab#e and disposab#e #ands o pub#ic domain$ Ihen the tit#es to the rec#aimed #ands 1ere trans erred to the ,B*, said a#ienab#e and disposab#e #ands o pub#ic domain 1ere automatica##y c#assi ied as #ands o the pri"ate domain or patrimonia# properties o the State because the ,B* is an agency ,/T tas!ed to dispose o a#ienab#e or disposab#e #ands o pub#ic domain$ The on#y 1ay it can trans er the rec#aimed #and in con)unction 1ith its pro)ects and to attain its goa#s is 1hen it is automatica##y con"erted to patrimonia# properties o the State$ Deing patrimonia# or pri"ate properties o the State, then it has the po1er to se## the same to any :ua#i ied personAunder the Constitution, Fi#ipino citizens as pri"ate corporations, 608 o 1hich is o1ned by Fi#ipino citizens #i!e RD=$ 4obi! )*i!ippines vs. Cit" Treasure o- 4a,ati GR, 10(0&2 %u#y 1(, 2000 Juisumbing, %$2 F*CTS2 Petitioner.s o ice 1as #ocated in Ma!ati City 1hen it i#ed an app#ication 1ith the City Treasurer or retirement o business 1ithin Ma!ati as it mo"ed its business to Pasig City, on September 1&&-$ * ter e"a#uation, petitioner 1as assessed business tax in the amount o P1,-&-,106$&6$ Petitioner paid the tax under protest and in 1&&&, c#aimed a re und there rom$ RTC denied the petition or re und ratiocinating thatU the payments made by mobi# in 1&&- are payments or business tax or 1&&' 1hich occurred in %anuary o 1&&-$ =SSF@2 Ihether or not the business taxes paid in 1&&-, business taxes or 1&&'$ RFC=,G2 Dusiness taxes imposed in the exercise o po#ice po1er or regu#atory purposes are paid or the pri"i#ege o carrying on a business in the year the tax 1as paid$ =t is paid at the beginning o the year as a ee to a##o1 the business to operate or the rest o the year$ The business taxes paid n the year 1&&- is or the pri"i#ege o engaging in business or the same year$ Thus 1e ind that the respondent erroneous#y treated the assessment and co##ection o business tax as i it 1ere income tax, by rendering an additiona# assessment o P1,551,65-$-( or the re"enue generated or the year 1&&-$

Facts2 The Phi#ippine Sugar @state +e"e#opment Company 3PS@+C4 a p p o i n t e d * # g u e =nc$ as its agent, authorizing it to se## its#and, actories, and oi# manu acturing process$ The Kegetab#e/i# =n " e s t m e n t C o r p o r a t i o n 3 K / = C P 4 p u r c h a s e d P S @ + C p r o p e r t i e s $ For the sa#e, *#gue recei"ed a commission o P120,000 and it 1as rom this commission that it paid Gue"ara, et$ a#$ organizers o the K/=CP, P'0,000 in promotiona# ees$ =n 1&60, *#gue recei"ed a n a s s e s s m e n t r o m t h e C o m m i s s i o n e r o = n t e r n a # Re"enue in theamount o P-5,1-5$-0 as de#in:uency income tax or years 1&0-amd 1&0&$ *#gue i#ed a protest or re:uest or reconsideration1 h i c h 1 a s n o t a c t e d u p o n b y t h e D u r e a u o =nterna# Re"enue3 D =R 4 $ T h e c o u n s e # o r * # gu e h a d t o a c c e p t t h e 1 a r r a n t o distrant and #e"y$ *#gue, ho1e "er, i # e d a p e t i t i o n o r r e " i e 1 1ith the Coourt o Tax *ppea#s$ =ssue2 Ihether the assessment 1as reasonab#e $ Be#d2 Taxes are the #i eb#ood o the go"ernment and so shou#d bec o # # e c t e d 1 i t h o u t u n n e c e s s a r y h i n d r a n c e $ @ " e r y p e r s o n 1 h o isa b # e t o p a y m u s t c o n t r i b u t e h i s s h a r e i n t h e r u n n i n g o t h e go"ernment$ The Go"ernment, or his part, is expected to respondi n t h e o r m o t a n g i b # e a n d i n t a n g i b # e b e n e i t s i n t e n d ed toimpro"e the #i"es o the peop#e and enhance their mora# a n d materia# "a#ues$ This symbiotic re#ationship is the rationa#e o taxation and shou#d dispe# the erroneous notion that i s a n arbitrary method o exaction by those in the seat o po1er$T a x c o # # e c t i o n , h o 1 e " e r , s h o u # d b e m a d e i n a c c o r d a n c e 1 i t h # a 1 as any arbitrariness 1i## negate the "ery reason or go"ernment i t s e # $ F o r a # # t h e a 1 e s o m e p o 1 e r o the tax co##ector, he ma yst i## be stopped in his trac!s i the taxpa ye r can demonstratet h a t t h e # a 1 h a s n o t b e e n o b s e r " e d $ B e r e i n , t h e c # a i m e d deduction 3pursuant to Section 50 SaT S1T o the Tax Code andSection '0 S1T o Re"enue Regu#ation 22 as to compensation orpersona# ser"ices4 had been #egitimate#y by *#gue =nc$ =t has u r t h e r p r o " e n t h a t t h e p a y m e n t o ees 1as reasona b#e andnecessary in #ight o the e orts exerted by the payees ininducing in"estors 3in K/=CP4 to in"o#"e the m s e # " e s i n a n experimenta# enterprise or a business re:uirin g m i # # i o n s o pesos$The assessment 1as not reasonab#e$ Sison "s$ *nchetaGR C90&(51, 20 %u#y 1&-(@n Danc, Fernando 3%42 & concur, 2 concur in resu#t, 1concur in separate opinion, 1 too! no part Facts2 D a t a s P a m b a n s a 1 5 0 1a s e n a c t e d $ S i s o n , a s t a x p a ye r , a# # e g e d t h a t i t s p r o " i s i o n 3 S e c t i o n 1 4 u n d u # y d i s c r i m i n a t e d again st him by the imposition o higher rates upon his income as

Commissioner "s$ *#gueGRC92--&0, 1' February 1&--First +i"ision, Cruz 3%47 ( concur

a pro essiona#, that it amounts to c#ass #egis#ation, and thati t t r a n s g r e s s e s a g a i n s t t h e e : u a # p r o t e c t i o n a n d d u e p r o c e ssc # a u s e s o t h e C o n s t i t u t i o n a s 1e # # a s t h e r u # e r e : u i r i n g uni ormity in taxation$ =ssue2 I h e t h e r D P 1 5 0 " i o # a t e s t h e d u e p r o c e s s a n d e : u a # protection c#auses, and the ru#e on uni ormity in taxation$ Be#d2 There is a need or proo o such persuasi"e character as1ou#d #ead to a conc#usion that there 1as a "io#ation o the duep r o c e s s a n d e : u a # p r o t e c t i o n c # a u s e s $ * b s e n t s u c h s h o 1 i n g , t h e presumption o "a#idity must pre"ai#$ @:ua#ity and uni ormity intaxation means that a## taxab#e artic#es or !inds o property o the same c#ass sha## be taxed at the same rate$ The taxing po1erhas the authority to ma!e reasonab#e and natura# c#assi ications or purposes o taxation$ Ihere the di erentitation con orms tot h e p r a c t i c a # d i c t a t e s o ) u s t i c e a n d e : u i t y , s i m i # a r t o t h e s t andards o e:ua# protection, it is not discriminatory 1ithinthe meaning o the c#ause and is there ore uni orm$ T a x p a y e r s may be c#assi ied into di erent categories, such as recipientso c o m p e n s a t i o n income as against pro essiona#s$ Recipients o c o m p e n s a t i o n i n c o m e are not entit#ed to ma!e deductions ori n c o m e t a x p u r p o s e s a s t h e r e i s n o p r a c t i c a # # y n o o " e r h e a d expense, 1hi#e pro e s s i o n a # s a n d b u s i n e s s m e n h a " e n o u n i o r m costs or expenses n e c e s s a r y h t o p r o d u c e t h e i r i n c o m e $ T h e r e i s amp#e )usti ication to adopt the gross system o income taxationt o c o m p e n s a t i o n i n c o m e , 1 h i # e c o n t i n u i n g t h e s y stem o n e t income taxation as regards pro essiona# and business income$ Dagatsing "s$ RamirezGR C9(1651, 1' +ecember 1&'6@ n D a n c , M a r t i n 3 % 4 2 ' c o n c u r , 1 c o n c u r 1 i t h :ua#i ication, 1 reser"ed "ote Facts2 =n 1&'(, the Municipa# Doard o Mani#a enacted /rdinance'022, regu#ating the operation o pub#ic mar!ets and prescribing e e s or the renta#s o sta##s and pro"iding pen a#ties o r "io#ation thereo $ The Federation o Mani#a Mar!et Kendors =nc$a s s a i # e d t h e "a#idity o the ordinance, a##eging among otherst h e n o n 9 c o m p # i a n c e t o t h e p u b # i c a t i o n r e : u i r e m e n t u n d e r t h e Re"ised Charter o the City o Mani#a$ =ssue2 Ihether the pub#ication re:uirement 1as comp#ied 1ith$ Be#d2 The Re"ised Charter o the City o Mani#a is a specia# act s i n c e i t r e # a t e s o n # y t o t h e C i t y o M a n i # a , 1 h e r e a s t h e C o c a # Tax Code id a genera# #a1 because it app#ies uni"ersa## y to a## # o c a # g o " e r n m e n t s $ S e c t i o n 1 ' o t h e C h a r t e r s p e a ! s o ;ordinance< in genera#$ Ihereas, Section (5 o the Coca# T a x Code re#ates to ;ordinances #e"ying or imposing taxes, ees oro t h e r c h a r g e s < i n p a r t i c u # a r $ I h i # e t h e C h a r t e r r e : u i r e s pub#ication, be ore the enactment o the ordinance and a tera p p r o " a # t h e r e o , i n t 1o d a i # y n e 1s p a p e r s o t h e g e n e r a # circu#at ion in the city, the Coca# Tax Code on#y prescribes

or p u b # i c a t i o n 1 i d e # y c i r c u # a t e d 1 i t h i n t h e ) u r i s d i c t i o n o t h e # o c a # go " e r n m e n t o r b y p o s t i n g t h e o r d i n a n c e i n t h e # o c a # #egis#ati"e ha## or premises and in t1o other conspicuous p#aces1 i t h i n t h e t e r r i t o r i a # ) u r i s d i c t i o n o t h e # o c a # g o " e r n m e n t $ D e i n g a g e n e r a # # a 1 1 i t h a s p e c i a # p r o " i s i o n a p p # i c a b # e i n t h e case, the Coca# Tax Code pre"ai#s$ Maceda "s$ MacaraigGR --2&1, 51 May 1&&1@ n D a n c , G a n c a y c o 3 % 4 2 6 c o n c u r , 2 t o o ! n o p a r t , 1 d issents Facts2 C o m m o n 1 e a # t h * c t 1 2 0 c r e a t e d , * P / C / R a s a p u b # i c corporation to underta!e the de"e#opment o hydrau#ic po1er andt h e p r o d u c t i o n o po1er rom other sources$ R* 503 1 & ( & 4 granted ,*P/C/R tax and duty exemption p r i " i # e g e s $ R * 6 5 & 0 31&'14 re"ised the charter o the ,*P/C/R, t a s ! i n g i t t o c a r r y out the po#icy o the nationa# e#ectri ication, and pro"ided indetai# ,*P/C/R.s tax exceptions$ P+ 5-0 31&'(4 speci ied that,*P/C/R.s exemption inc#udes a## taxes, etc$ imposed ;direct#y o r i n d i r e c t # y $ < P + & 5 integrated the exemptions in a"or o G/CCs inc#uding their subsidiaries7 ho1e"er, empo1ering t h e President or the Minister o Finance, upon recommendation o theF i s c a # =ncenti"es Re"ie1 Doard 3F=RD4 to restore, partia##y or c o m p # e t e # y , t h e e x e m p t i o n s 1 i t h d r a 1 n o r r e " i s e d $ T h e F = R D issued Reso#ution 109-0 3' February 1&-04 restoring the duty andtax exemptions pri"i#eges o ,*P/C/R or period 11 %une 1&-(9 50 % u n e 1 & - 0 $ R e s o # u t i o n 1 9 - 6 3 1 % a n u a r y 1 & - 6 4 r e s t o r e d s u c h exemption inde inite#y e ecti"e 1 %u#y 1&-0$ @/ &5 3 1 & - ' 4 again 1ithdre1 the exemption$ F=RD issued Reso#ution 1'9-' 32(%une 1&-'4 restoring ,*P/C/R.s exemption, 1hich 1as appro"ed bythe President on 0 /ctober 1&-'$S i n c e 1 & ' 6 , o i # irms ne"er paid excise or speci ic and ad"a#orem taxes or petro#eum products so#d and d e # i " e r e d t o ,*P/C/R$ /i# companies started to pay speci ic and ad "a#oremt a x e s o n t h e i r s a # e s o o i # p r o d u c t s t o , * P / C / R o n # y i n 1&-($,*P/C/R c#aimed or a re und 3P(6-$0- mi##ion4$ /n#y portionthereo , corresponding to Ca#tex, 1as appro"ed and re#eased b y 1ay o a tax credit memo$ The c#aim or re und o taxes paid byP e t r o P h i # , S h e # # a n d C a # t e x a m o u n t i n g t o P ( 1 0 $ 0 - m i # # i o n 1 a s denied$ ,*P/C/R mo"ed or reconsideration, starting that a##d e # i " e r i e s o p e t r o # e u m p r o d u c t s t o , * P / C / R a r e t a x e x e m p t , regard#ess o the period o de#i"ery$ =ssue2 Ihether ,*P/C/R cease to en)oy exemption rom indirect tax 1hen P+ &5- stated the exemption in genera# terms$ Be#d2 , * P / C / R i s a n o n 9 p r o i t p u b # i c c o r p o r a t i o n c r e a t e d o r the genera# good and 1e# are, and 1ho##y o1ned by the go"ernmento the Repub#ic o the Phi#ippines$ From the "ery beginning o t h e c o r p o r a t i o n . s e x i s t e n c e , , * P / C / R e n ) o y e d p r e e r e n t i a # taxtreatment ;to enab#e the corporation to pay the indebtness and

o b # i g a t i o n < a n d e e c t i " e i m p # e m e n t a t i o n o t h e p o # i c y enunciated in Section 1 o R* 65&0$ From the preamb#e o P+& 5 - , i t i s e " i d e n t t h a t t h e p r o " i s i o n s o P + & 5 - 1 e r e n o t intended to be strict#y construed against ,*P/C/R$ /n thec o n t r a r y , t h e # a 1 m a n d a t e s t h a t i t s h o u # d b e i n t e r p r e t e d #ibera##y so as to enhance the tax exempt status o ,*P/C/R$ =t i s recognized princip#e that the ru#e on strict i n t e r p r e t a t i o n does not app#y in the case o exemptions in a"or o go"ernment p o # i t i c a # s u b d i " i s i o n o r instrumenta#ity$ =n the case o p r o p e r t y o 1 n e d b y t h e s t a t e o r a c i t y o r o t h e r p u b # i c corporations, the express exception shou#d not be construed 1ith t h e s a m e d e g r e e o s t r i c t n e s s t h a t a p p # i e s t o e x e m p t i o n s contrary to the po#icy o the state, since as to such p r o p e r t y ;exception is the ru#e and taxation the exception$< Mactan Cebu =nternationa# *irport *uthority "s Marcos+ate2 September 11, 1&&6Petitioner2 Mactan Cebu =nternationa# *irport *uthorityRespondents2 Bon$ Ferdinand Marcos, City o Cebu, et a#Ponente2 +a"ide %rFacts2 Petitioner 1as created by "irtue o R*6&0-, mandated to Hprincipa##y underta!e the economica#,e icient and e ecti"e contro#, management and super"ision o the Mactan =nternationa# *irport in thePro"ince o Cebu and the Cahug *irport in Cebu City$ Fnder Section 12 The authority sha## be exempt romrea#ty taxes imposed by the ,ationa# Go"ernment or any o its po#itica# subdi"isions, agencies andinstrumenta#ities$Bo1e"er, the / icer o the Treasurer o Cebu City demanded payment or rea#ty taxes on parce#s o #and be#onging to petitioner$ Petitioner ob)ected in"o!ing its tax exemption$ =t a#so asserted that it is aninstrumenta#ity o the go"ernment per orming go"ernmenta# unctions, citing section 155 o the CGC 1hichputs #imitations on the taxing po1ers o CGFs$ The city re used insisting that petitioner is a G/CCper orming proprietary unctions 1hose tax exemption 1as 1ithdra1n by Sections 1&5 and 25( o the CGC$Petitioner i#ed a dec#aratory re#ie be ore the RTC$ The tria# court dismissed the petitioner ru#ingthat the CGC 1ithdre1 the tax exemption granted the G/CCs$=ssue2I/, the City o Cebu has the po1er to impose taxes on petitionerB e # d 2 ? e s Ratio2 *s a genera# ru#e, the po1er to tax is an incident o so"ereignty and is un#imited in its range,ac!no1#edging in its "ery nature no #imits, so that security against its abuse is to be ound on#y in theresponsibi#ity o the #egis#ature 1hich imposes the tax on the constituency 1ho are to pay it$ Since taxesare 1hat 1e pay or ci"i#ized society, or are the #i eb#ood o the nation, the #a1 ro1ns against exemptions rom taxation and statutes granting tax exemptions are thus construed strictissimi )uris against thetaxpayers and #ibera##y in a"or o the taxing authority$ * c#aim o exemption rom tax payment must bec#ear#y sho1n and based on #anguage in the #a1 too p#ain to be mista!en$ There can be no :uestion that under Section 1( R* 6&0- the petitioner is exempt rom the paymento rea#ty taxes imposed by the ,ationa# Go"ernment or any o its po#itica# subdi"isions, agencies, andinstrumenta#ities$ ,e"erthe#ess, since taxation is the ru#e and exemption is the exception, the exemptionmay thus be 1ithdra1n at the p#easure o the taxing authority$ The CGC, enacted pursuant to Section 5, *rtic#e L o the constitution pro"ides or the exercise byCGFs o their po1er to tax, the scope thereo or its #imitations, and the exemption rom taxation$ Section155 o the CGC prescribes the common #imitations on the taxing po1ers o CGFs2 3o4 Taxes, ees or chargeso any !ind on the nationa# go"ernment, its agencies and instrumenta#ities and CGFs$ *mong the HtaxesHenumerated in the CGC is rea# property tax$ Section 25( o CGC pro"ides or the exemptions rom paymento G/CCs, except as pro"ided therein$ /n the other hand, the CGC authorizes CGFs to grant tax

exemptionpri"i#eges$ Reading together Section 155, 252 and 25( o the CGC, 1e conc#ude that as a genera# ru#e, as#aid do1n in Secs 155 the taxing po1ers o CGFs cannot extend to the #e"y o inter a#ia, Htaxes, ees, andcharges o any !ind o the ,ationa# Go"ernment, its agencies and instrumenta#ties, and CGFsH7 ho1e"er,pursuant to Sec 252, pro"inces, cities, municipa#ities in the Metropo#itan Mani#a *rea may impose the rea#property tax except on, inter a#ia, Hrea# property o1ned by the Repub#ic o the Phi#ippines or any o itspo#itica# subdi"isions except 1hen the bene icia# used thereo has been granted to a taxab#e person$H*s to tax exemptions or incenti"es granted to or present#y en)oyed by natura# or )uridica# persons,inc#uding go"ernment9o1ned and contro##ed corporations, Section 1&5 o the CGC prescribes the genera#ru#e, "iz$, they are 1ithdra1n upon the e ecti"ity o the CGC, except upon the e ecti"ity o the CGC,except those granted to #oca# 1ater districts, cooperati"es du#y registered under R$*$ ,o$ 6&5-, non stoc!and non9pro it hospita#s and educationa# institutions, and un#ess other1ise pro"ided in the CGC$ The #atterpro"iso cou#d re er to Section 25(, 1hich enumerates the properties exempt rom rea# property tax$ Dutthe #ast paragraph o Section 25( urther :ua#i ies the retention o the exemption in so ar as the rea#property taxes are concerned by #imiting the retention on#y to those enumerated there9in7 a## others notinc#uded in the enumeration #ost the pri"i#ege upon the e ecti"ity o the CGC$ Moreo"er, e"en as the rea#property is o1ned by the Repub#ic o the Phi#ippines, or any o its po#itica# subdi"isions co"ered by item 3a4o the irst paragraph o Section 25(, the exemption is 1ithdra1n i the bene icia# use o such property hasbeen granted to taxab#e person or consideration or other1ise$Since the #ast paragraph o Section 25( une:ui"oca##y 1ithdre1, upon the e ecti"ity o the CGC,exemptions rom rea# property taxes granted to natura# or )uridica# persons, inc#uding G/CCs, except as pro"ided in the said section, and the petitioner is, undoubted#y, a go"ernment9o1ned corporation, itnecessari#y o##o1s that its exemption rom such tax granted it in Section 1( o its charter, R$*$ ,o$ 6&0-,has been 1ithdra1n$ *ny c#aim to the contrary can on#y be )usti ied i the petitioner can see! re uge underany o the exceptions pro"ided in Section 25(, but not under Section 155, as it no1 asserts, since, assho1n abo"e, the said section is :ua#i ied by Section 252 and 25($ =n short, the petitioner can no #ongerin"o!e the genera# ru#e in Section 155$=t must sho1 that the parce#s o #and in :uestion, 1hich are rea# property, are any one o thoseenumerated in Section 25(, either by "irtue o o1nership, character, or use o the property$ Most #i!e#y, itcou#d on#y be the irst, but not under any exp#icit pro"ision o the said section, or one exists$ =n #ight o thepetitionerOs theory that it is an Hinstrumenta#ity o the Go"ernmentH, it cou#d on#y be 1ithin be irst item o the irst paragraph o the section by expanding the scope o the terms Repub#ic o the Phi#ippinesH toembrace $Hinstrumenta#itiesH and Hagencies$H This "ie1 does not persuade us$ =n the irst p#ace, the petitionerOs c#aim that it is an instrumenta#ityo the Go"ernment is based on Section 1553o4, 1hich express#y mentions the 1ord Hinstrumenta#itiesH7 andin the second p#ace it ai#s to consider the act that the #egis#ature used the phrase H,ationa# Go"ernment,its agencies and instrumenta#itiesH Hin Section 1553o4,but on#y the phrase HRepub#ic o the Phi#ippines orany o its po#itica# subdi"ision Hin Section 25(3a4$ The terms HRepub#ic o the Phi#ippinesH and H,ationa# Go"ernmentH are not interchangeab#e$ The ormer isboarder and synonymous 1ith HGo"ernment o the Repub#ic o the Phi#ippinesH 1hich the *dministrati"e Code o the1&-' de ines as the Hcorporate go"ernmenta# entity though 1hich the unctions o the go"ernment are exercisedthrough at the Phi#ippines, inc#uding, sa"es as the contrary appears rom the context, the "arious arms through 1hichpo#itica# authority is made e ecti"e in the Phi#ippines, 1hether pertaining to the autonomous reason, the pro"incia#,city, municipa# or barangay subdi"ision or other orms o #oca# go"ernment$H These autonomous regions, pro"incia#,city, municipa# or barangay subdi"isionsH are the po#itica# subdi"ision$ /n the other hand, H,ationa# Go"ernmentHre ers Hto the entire machinery o the centra# go"ernment, as distinguished rom the di erent orms o #oca#Go"ernments$H The ,ationa# Go"ernment then is composed o the three great departments the executi"e, the#egis#ati"e and the )udicia#$ *n HagencyH o the Go"ernment re ers to Hany o the "arious units o the Go"ernment,inc#uding a department, bureau, o ice instrumenta#ity, or go"ernment9o1ned or contro##ed corporation, or a #oca#go"ernment or a distinct unit therein7H 1hi#e an Hinstrumenta#ityH re ers to Hany agency o the ,ationa# Go"ernment,not integrated 1ithin the department rame1or!, "ested 1ith specia# unctions or

)urisdiction by #a1, endo1ed 1ithsome i not a## corporate po1ers, administering specia# unds, and en)oying operationa# autonomy7 usua##y through acharter$ This term inc#udes regu#atory agencies, chartered institutions and go"ernment9o1ned and contro##edcorporationsH$ = Section 25(3a4 intended to extend the exception therein to the 1ithdra1a# o the exemption rompayment o rea# property taxes under the #ast sentence o the said section to the agencies andinstrumenta#ities o the ,ationa# Go"ernment mentioned in Section 1553o4, then it shou#d ha"e restatedthe 1ording o the #atter$ ?et, it did not Moreo"er, that Congress did not 1ish to expand the scope o theexemption in Section 25(3a4 to inc#ude rea# property o1ned by other instrumenta#ities or agencies o thego"ernment inc#uding go"ernment9o1ned and contro##ed corporations is urther borne out by the act thatthe source o this exemption is Section (03a4 o P$+$ ,o$ 6(6, other1ise !no1n as the Rea# Property TaxCode$,ote that as a reproduced in Section 25(3a4, the phrase Hand any go"ernment9o1ned or contro##edcorporation so exempt by its charterH 1as exc#uded$ The )usti ication or this restricted exemption inSection 25(3a4 seems ob"ious2 to #imit urther tax exemption pri"i#eges, specia##y in #ight o the genera#pro"ision on 1ithdra1a# o exemption rom payment o rea# property taxes in the #ast paragraph o property taxes in the #ast paragraph o Section 25($ These po#icy considerations are consistent 1ith theState po#icy to ensure autonomy to #oca# go"ernments 55 and the ob)ecti"e o the CGC that they en)oygenuine and meaning u# #oca# autonomy to enab#e them to attain their u##est de"e#opment as se# 9re#iantcommunities and ma!e them e ecti"e partners in the attainment o nationa# goa#s$ 5( The po1er to tax isthe most e ecti"e instrument to raise needed re"enues to inance and support myriad acti"ities o #oca#go"ernment units or the de#i"ery o basic ser"ices essentia# to the promotion o the genera# 1e# are andthe enhancement o peace, progress, and prosperity o the peop#e$ =t may a#so be re#e"ant to reca## thatthe origina# reasons or the 1ithdra1a# o tax exemption pri"i#eges granted to go"ernment9o1ned andcontro##ed corporations and a## other units o go"ernment 1ere that such pri"i#ege resu#ted in serious taxbase erosion and distortions in the tax treatment o simi#ar#y situated enterprises, and there 1as a need or this entities to share in the re:uirements o the de"e#opment, isca# or other1ise, by paying the taxesand other charges due rom them$ The crucia# issues then to be addressed are2 3a4 1hether the parce#s o #and in :uestion be#ong to theRepub#ic o the Phi#ippines 1hose bene icia# use has been granted to the petitioner, and 3b4 1hether thepetitioner is a Htaxab#e personH$ =t may be reasonab#e to assume that the term H#andsH re er to H#andsH inCebu City then administered by the Cahug *ir Port and inc#udes the parce#s o #and the respondent City o Cebu see!s to #e"y on or rea# property taxes$ This section in"o#"es a Htrans erH o the H#andsH among other things, to the petitioner and not )ust the trans er o the bene icia# use thereo , 1ith the o1nership beingretained by the Repub#ic o the Phi#ippines$ This Htrans erH is actua##y an abso#ute con"eyance o the o1nership thereo because the petitionerOsauthorized capita# stoc! consists o Hthe "a#ue o such rea# estate o1ned andRor administered by theairports$H Bence, the petitioner is no1 the o1ner o the #and in :uestion and the exception in Sec 25(3c4 o the CGC is inapp#icab#e$ Petitioner cannot c#aim that it 1as ne"er a Htaxab#e personH under its Charter$ =t1as on#y exempted rom the payment o rea# property taxes$ The grant o the pri"i#ege on#y in respect o this tax is conc#usi"e proo o the #egis#ati"e intent to ma!e it a taxab#e person sub)ect to a## taxes, except rea# property tax$Fina##y, e"en i the petitioner 1as origina##y not a taxab#e person or purposes o rea# property tax,in #ight o the orgoing dis:uisitions, it had a#ready become e"en i it be conceded to be an HagencyH orHinstrumenta#ityH o the Go"ernment, a taxab#e person or such purpose in "ie1 o the 1ithdra1a# in the#ast paragraph o Section 25( o exemptions rom the payment o rea# property taxes, 1hich, as ear#ierad"erted to, app#ies to the petitioner$ *ccording#y, the position ta!en by the petitioner is untenab#e$Re#iance on Dasco "s$ Pagcor is una"ai#ing since it 1as decided be ore the e ecti"ity o the CGC$ Desides,nothing can pre"ent Congress rom decreeing that e"en instrumenta#ities or agencies o the go"ernmentper orming go"ernmenta# unctions may be sub)ect to tax$ Ihere it is done precise#y to u# i## aconstitutiona# mandate and nationa# po#icy, no one can doubt its 1isdom$