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CIR vs. Algue Inc. GR No. L-28896 | Feb.

17, 1988
Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities
On Jan. 14, 1965, the corp received a letter from the CI regarding its delin!uenc" income ta#es from 195$%1959, amtg to
&$',1$'.$5
A letter of protest or reconsideration (as filed )" Algue Inc on Jan 1$
On *arch 1+, a (arrant of distraint and lev" (as presented to Algue Inc. thru its counsel, Att". ,uevara, (ho refused to receive
it on the ground of the pending protest
-ince the protest (as not found on the records, a file cop" from the corp (as produced and given to .I Agent e"es, (ho
deferred service of the (arrant
On April /, Att". ,uevara (as informed that the .I (as not ta0ing an" action on the protest and it (as onl" then that he
accepted the (arrant of distraint and lev" earlier sought to )e served
On April +', Algue filed a petition for revie( of the decision of the CI (ith the Court of 1a# Appeals
CI contentions2
- the claimed deduction of &/5,333.33 (as properl" disallo(ed )ecause it (as not an ordinar" reasona)le or necessar" )usiness
e#pense
- pa"ments are fictitious )ecause most of the pa"ees are mem)ers of the same famil" in control of Algue and that there is not
enough su)stantiation of such pa"ments
C1A2 /54 had )een legitimatel" paid )" Algue Inc. for actual services rendered in the form of promotional fees. 1hese (ere
collected )" the &a"ees for their (or0 in the creation of the 5egeta)le Oil Investment Corporation of the &hilippines and its
su)se!uent purchase of the properties of the &hilippine -ugar 6state 7evelopment Compan".
Issue: 89: the Collector of Internal evenue correctl" disallo(ed the &/5,333.33 deduction claimed )" Algue as legitimate
)usiness e#penses in its income ta# returns
1a#es are the life)lood of the government and so should )e collected (ithout unnecessar" hindrance, in accordance (ith la(.
A 11+52 the appeal ma" )e made (ithin thirt" da"s after receipt of the decision or ruling challenged
7uring the intervening period, the (arrant (as premature and could therefore not )e served.
Originall", CI claimed that the /54 promotional fees to )e personal holding compan" income, )ut later on conformed to the
decision of C1A
1here is no dispute that the pa"ees dul" reported their respective shares of the fees in their income ta# returns and paid the
corresponding ta#es thereon. C1A also found, after e#amining the evidence, that no distri)ution of dividends (as involved
CI suggests a ta# dodge, an attempt to evade a legitimate assessment )" involving an imaginar" deduction
Algue Inc. (as a famil" corporation (here strict )usiness procedures (ere not applied and immediate issuance of receipts (as
not re!uired. at the end of the "ear, (hen the )oo0s (ere to )e closed, each pa"ee made an accounting of all of the fees received
)" him or her, to ma0e up the total of &/5,333.33. 1his arrangement (as understanda)le in vie( of the close relationship among
the persons in the famil" corporation
1he amount of the promotional fees (as not e#cessive. 1he total commission paid )" the &hilippine -ugar 6state 7evelopment
Co. to Algue Inc. (as &1+54. After deducting the said fees, Algue still had a )alance of &53,333.33 as clear profit from the
transaction. 1he amount of &/5,333.33 (as 63; of the total commission. 1his (as a reasona)le proportion, considering that it
(as the pa"ees (ho did practicall" ever"thing, from the formation of the 5egeta)le Oil Investment Corporation to the actual
purchase )" it of the -ugar 6state properties.
-ec. '3 of the 1a# Code2 allo(ed deductions in the net income < Expenses - 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 xxx
the )urden is on the ta#pa"er to prove the validit" of the claimed deduction
In this case, Algue Inc. has proved that the pa"ment of the fees (as necessar" and reasona)le in the light of the efforts e#erted )"
the pa"ees in inducing investors and prominent )usinessmen to venture in an e#perimental enterprise and involve themselves in a
ne( )usiness re!uiring millions of pesos.
1a#es are (hat (e pa" for civili=ation societ". 8ithout ta#es, the government (ould )e paral"=ed for lac0 of the motive po(er
to activate and operate it. >ence, despite the natural reluctance to surrender part of one?s hard earned income to the ta#ing
authorities, ever" person (ho is a)le to must contri)ute his share in the running of the government. 1he government for its part,
is e#pected to respond in the form of tangi)le and intangi)le )enefits intended to improve the lives of the people and enhance
their moral and material values
1a#ation must )e e#ercised reasona)l" and in accordance (ith the prescri)ed procedure. If it is not, then the ta#pa"er has a right
to complain and the courts (ill then come to his succor
Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in accordance with Rep. Act No.
1125. And we also find that the claimed deduction ! Algue Inc. was permitted under the Internal Re"enue Code and
should therefore not ha"e een disallowed ! the CIR
ABAKADA Guro Party List vs. Ermita
G.R. No. 168056 September 1 !005
"A#$S%
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., file a petition
for pro!i"ition on #ay $7, $%%& '(estionin) t!e constit(tionality of *ections +, & an , of R.A. No.
9337, a-enin) *ections .%,, .%7 an .%/, respecti0ely, of t!e National 1nternal Re0en(e 2oe
3N1R24. *ection + i-poses a .%5 6A7 on sale of )oos an properties, *ection & i-poses a .%5
6A7 on i-portation of )oos, an *ection , i-poses a .%5 6A7 on sale of ser0ices an (se or lease
of properties. 7!ese '(estione pro0isions contain a (nifor-p ro 0 is o a(t!ori8in) t!e Presient,
(pon reco--enation of t!e *ecretary of 9inance, to raise t!e 6A7 rate to .$5, effecti0e :an(ary
., $%%,, after specifie conitions !a0e "een satisfie. Petitioners ar)(e t!at t!e la; is
(nconstit(tional.
&SS'ES%
.. <!et!er or not t!ere is a 0iolation of Article 61, *ection $+ of t!e 2onstit(tion.
$. <!et!er or not t!ere is (n(e ele)ation of le)islati0e po;er in 0iolation of Article 61 *ec $/3$4
of t!e 2onstit(tion.
3. <!et!er or not t!ere is a 0iolation of t!e (e process an e'(al protection (ner Article 111
*ec. . of t!e 2onstit(tion.
R'L&NG%
.. *ince t!ere is no '(estion t!at t!e re0en(e "ill e=cl(si0ely ori)inate in t!e >o(se of
Representati0es, t!e *enate ;as actin) ;it!in its constit(tional po;er to intro(ce a-en-ents to
t!e >o(se "ill ;!en it incl(e pro0isions in *enate Bill No. .9&% a-enin) corporate inco-e ta=es,
percenta)e, an e=cise an franc!ise ta=es.
$. 7!ere is no (n(e ele)ation of le)islati0e po;er "(t only of t!e iscretion as to t!e e=ec(tion of
a la;. 7!is is constit(tionally per-issi"le. 2on)ress oes not a"icate its f(nctions or (n(ly
ele)ate po;er ;!en it escri"es ;!at ?o" -(st "e one, ;!o -(st o it, an ;!at is t!e scope of
!is a(t!ority@ in o(r co-ple= econo-y t!at is fre'(ently t!e only ;ay in ;!ic! t!e le)islati0e
process can )o for;ar.
3. 7!e po;er of t!e *tate to -ake reasona"le an nat(ral classifications for t!e p(rposes of
ta=ation !as lon) "een esta"lis!e. <!et!er it relates to t!e s("?ect of ta=ation, t!e kin of
property, t!e rates to "e le0ie, or t!e a-o(nts to "e raise, t!e -et!os of assess-ent, 0al(ation
an collection, t!e *tateAs po;er is entitle to pres(-ption of 0aliity. As a r(le, t!e ?(iciary ;ill
not interfere ;it! s(c! po;er a"sent a clear s!o;in) of (nreasona"leness, iscri-ination, or
ar"itrariness.
Compaia General de Tabacos de #ilipinas vs. City of Manila
Appeal from the decision of the Court of #irst Instance of $anila ordering the Cit! Treasurer of
$anila to refund the sum of %15&2'(.(( to Compania )eneral de Taacos de #ilipinas.
Appellee Compania )eneral de Taacos de #ilipinas * hereinafter referred to simpl! as
Taacalera * filed this action in the Court of #irst Instance of $anila to reco"er from appellants&
Cit! of $anila and its Treasurer& $arcelino +armiento * also hereinafter referred to as the Cit!
* the sum of %15&2'(.(( allegedl! o"erpaid ! it as ta,es on its wholesale and retail sales of
li-uor for the period from the third -uarter of 1.5/ to the second -uarter of 1.50& inclusi"e&
under 1rdinances Nos. 232/& 22(1& and 2'13.
Taacalera& as a dul! licensed first class wholesale and retail li-uor dealer paid the Cit! the
fi,ed license fees prescried ! 1rdinance No. 225' for the !ears 1.5/ to 1.50& inclusi"e& and&
as a wholesale and retail dealer of general merchandise& it also paid the sales taxes re-uired !
1rdinances Nos. 232/& 22(1& and 2'13.
Issue: Whether it is tax or license fee
Ruling: 1he term @ta#@ applies A generall" spea0ing A to all 0inds of e#actions (hich )ecome
pu)lic funds. 1he term is often loosel" used to include levies for revenue as (ell as levies for
regulator" purposes. 1hus license fees are commonl" called ta#es. Begall" spea0ing, ho(ever,
license fee is a legal concept !uite distinct from ta#C the former is imposed in the e#ercise of
police po(er for purposes of regulation, (hile the latter is imposed under the ta#ing po(er for
the purpose of raising revenues D*acEuillin, *unicipal Corporations, 5ol. 9, 'rd 6dition, p. +6F.
Ordinance :o. ''5$ is clearl" one that prescri)es municipal license fees for the privilege to
engage in the )usiness of selling li!uor or alcoholic )everages, having )een enacted )" the
*unicipal .oard of *anila pursuant to its charter po(er to fi# license fees on, and regulate, the
sale of into#icating li!uors, (hether imported or locall" manufactured. D-ection 1$ GpH, epu)lic
Act 439, as amendedF. 1he license fees imposed )" it are essentiall" for purposes of regulation,
and are Iustified, considering that the sale of into#icating li!uor is, potentiall" at least, harmful to
pu)lic health and morals, and must )e su)Iect to supervision or regulation )" the state and )"
cities and municipalities authori=ed to act in the premises. D*acEuillin, supra, p. 445.F
On the other hand, it is clear that Ordinances :os. '6'4, ''31, and '$16 impose ta#es on the
sales of general merchandise, (holesale or retail, and are revenue measures enacted )" the
*unicipal .oard of *anila )" virtue of its po(er to ta# dealers for the sale of such merchandise.
D-ection 13 GoH, epu)lic Act :o. 439, as amended.F.
It is alread" settled in this connection that )oth a license fee and a ta# ma" )e imposed on the
same )usiness or occupation, or for selling the same article, this not )eing in violation of the rule
against dou)le ta#ation.
Osmea Vs. Orbos
220 SCRA 703
G.R. No. 99886
March 31, 1993
Facs! On October 10, 1984, Pres. Marcos issued P.D. 1956 creating a Special
Account in te !eneral "und, designated as te Oil Price Stabili#ation "und $OPS"%.
&e OPS" 'as designed to rei(burse oil co(panies )or cost increases in crude oil and
i(ported petroleu( products resulting )ro( e*cange rate ad+ust(ents and )ro(
increases in te 'orld (ar,et prices o) crude oil.
Subse-uentl., te OPS" 'as reclassi)ied into a /trust liabilit. account,/ in 0irtue o) 1.O.
1024, and ordered released )ro( te 3ational &reasur. to te Ministr. o) 1nerg..
Pres. A-uino, a(ended P.D. 1956. Se pro(ulgated 1*ecuti0e Order 3o. 145 on
"ebruar. 25, 1985, e*panding te grounds )or rei(burse(ent to oil co(panies )or
possible cost underreco0er. incurred as a result o) te reduction o) do(estic prices o)
petroleu( products, te a(ount o) te underreco0er. being le)t )or deter(ination b. te
Ministr. o) "inance.
&e petition a0ers tat te creation o) te trust )und 0iolates 29$4%, Article 67 o) te
8onstitution, reading as )ollo's9
(3) All money collected on any tax levied for a special purpose shall be treated as a
special fund and paid out for such purposes only. If the purpose for which a special fund
was created has been fulfilled or abandoned, the balance, if any, shall be transferred to
the general funds of the Government.
&e petitioner argues tat /te (onies collected pursuant to . . P.D. 1956, as a(ended,
(ust be treated as a :SP187A; "<3D,: not as a :trust account: or a :trust )und,: and tat
/i) a special ta* is collected )or a speci)ic purpose, te re0enue generated tere)ro(
sall :be treated as a special )und: to be used onl. )or te purpose indicated, and not
canneled to anoter go0ern(ent ob+ecti0e./ Petitioner )urter points out tat since /a
:special )und: consists o) (onies collected troug te ta*ing po'er o) a State, suc
a(ounts belong to te State, altoug te use tereo) is li(ited to te special
purpose=ob+ecti0e )or 'ic it 'as created./
>e also contends tat te /delegation o) legislati0e autorit./ to te 1?@ 0iolates 28 $2%.
Article 67 o) te 8onstitution, 0i#.9
() !he "ongress may, by law, authori#e the $resident to fix, within specified limits, and
sub%ect to such limitations and restrictions as it may impose, tariff rates, import and
export &uotas, tonnage and wharfage dues, and other duties or imposts within the
framewor' of the national development program of the Government(
and, inas(uc as te delegation relates to te e*ercise o) te po'er o) ta*ation, /te
li(its, li(itations and restrictions (ust be -uantitati0e, tat is, te la' (ust not onl.
speci). o' to ta*, 'o $sall% be ta*ed $and% 'at te ta* is )or, but also i(pose a
speci)ic li(it on o' (uc to ta*./ 12
"ss#e!
Aeter or 3ot te in0alidit. o) te /&?<S& A88O<3&/ in te boo,s o) account o) te
Ministr. o) 1nerg. $no', te O))ice o) 1nerg. A))airs%, created pursuant to B 8,
paragrap 1, o) P.D. 3o. 1956, as a(ended, /said creation o) a trust )und being contrar.
to Section 29 $4%, Article 67 o) te 8onstitution.
Aeter or 3ot te unconstitutionalit. o) 8, paragrap 1 $c% o) P.D. 3o. 1956, as
a(ended b. 1*ecuti0e Order 3o. 145, )or /being an undue and in0alid delegation o)
legislati0e po'er to te 1nerg. ?egulator. @oard.
$e%&! &e OPS" is a /&rust Account/ 'ic 'as establised /)or te purpose o)
(ini(i#ing te )re-uent price canges brougt about b. e*cange rate ad+ust(ent
and=or canges in 'orld (ar,et prices o) crude oil and i(ported petroleu( products./
<nder P.D. 3o. 1956, as a(ended b. 1*ecuti0e Order 3o. 145 dated 25 "ebruar.
1985, tis &rust Account (a. be )unded )ro( an. o) te )ollo'ing sources9
a) Any increase in the tax collection from ad valorem tax or customs duty imposed on
petroleum products sub%ect to tax under this )ecree arising from exchange rate
ad%ustment, as may be determined by the *inister of +inance in consultation with the
,oard of -nergy(
b) Any increase in the tax collection as a result of the lifting of tax exemptions of
government corporations, as may be determined by the *inister of +inance in
consultation with the ,oard of -nergy(
c) Any additional amount to be imposed on petroleum products to augment the
resources of the +und through an appropriate .rder that may be issued by the ,oard of
-nergy re&uiring payment of persons or companies engaged in the business of
importing, manufacturing and/or mar'eting petroleum products(
d) Any resulting peso cost differentials in case the actual peso costs paid by oil
companies in the importation of crude oil and petroleum products is less than the peso
costs computed using the reference foreign exchange rate as fixed by the ,oard of
-nergy.
>ence, it see(s clear tat 'ile te )unds collected (a. be re)erred to as ta*es, te.
are e*acted in te e*ercise o) te police po'er o) te State. Moreo0er, tat te OPS" is
a special )und is plain )ro( te special treat(ent gi0en it b. 1.O. 145. 7t is segregated
)ro( te general )undC and 'ile it is placed in 'at te la' re)ers to as a /trust liabilit.
account,/ te )und noneteless re(ains sub+ect to te scrutin. and re0ie' o) te 8OA.
&e 8ourt is satis)ied tat tese (easures co(pl. 'it te constitutional description o)
a /special )und./ 7ndeed, te practice is not 'itout precedent.
Ait regard to te alleged undue delegation o) legislati0e po'er, te 8ourt )inds tat te
pro0ision con)erring te autorit. upon te 1?@ to i(pose additional a(ounts on
petroleu( products pro0ides a su))icient standard b. 'ic te autorit. (ust be
e*ercised. 7n addition to te general polic. o) te la' to protect te local consu(er b.
stabili#ing and subsidi#ing do(estic pu(p rates, B 8$c% o) P.D. 1956 e*pressl.
autori#es te 1?@ to i(pose additional a(ounts to aug(ent te resources o) te
"und.
Aat petitioner 'ould 'is is te )i*ing o) so(e de)inite, -uantitati0e restriction, or /a
speci)ic li(it on o' (uc to ta*./ &e 8ourt is cited to tis re-uire(ent b. te
petitioner on te pre(ise tat 'at is in0ol0ed ere is te po'er o) ta*ationC but as
alread. discussed, tis is not te case. Aat is ere in0ol0ed is not so (uc te po'er
o) ta*ation as police po'er. Altoug te pro0ision autori#ing te 1?@ to i(pose
additional a(ounts could be construed to re)er to te po'er o) ta*ation, it cannot be
o0erloo,ed tat te o0erriding consideration is to enable te delegate to act 'it
e*pedienc. in carr.ing out te ob+ecti0es o) te la' 'ic are e(braced b. te police
po'er o) te State.
&e interpla. and constant )luctuation o) te 0arious )actors in0ol0ed in te
deter(ination o) te price o) oil and petroleu( products, and te )re-uentl. si)ting need
to eiter aug(ent or e*aust te "und, do not con0enientl. per(it te setting o) )i*ed or
rigid para(eters in te la' as proposed b. te petitioner. &o do so 'ould render te
1?@ unable to respond e))ecti0el. so as to (itigate or a0oid te undesirable
conse-uences o) suc )luidit.. As suc, te standard as it is e*pressed su))ices to guide
te delegate in te e*ercise o) te delegated po'er, ta,ing account o) te
circu(stances under 'ic it is to be e*ercised.
PILIPPIN! AIRLIN!", INC. v. !#$
G.R. No. L- %1&8&, Augus' 1(, 1988
FAC)":
1he &hilippine Airlines D&ABF is a corporation engaged in the air transportation )usiness
under a legislative franchise, Act :o. 4+/'9. Jnder its franchise, &AB is e#empt from the
pa"ment of ta#es.
-ometime in 19/1, ho(ever, Band 1ransportation Commissioner omeo K. 6levate
D6levateF issued a regulation pursuant to -ection $, epu)lic Act 41'6, other(ise 0no(n as the
Band and 1ransportation and 1raffic Code, re!uiring all ta# e#empt entities, among them &AB to
pa" motor vehicle registration fees.
7espite &AB?s protestations, 6levate refused to register &AB?s motor vehicles unless the
amounts imposed under epu)lic Act 41'6 (ere paid. &AB thus paid, under protest, registration
fees of its motor vehicles. After pa"ing under protest, &AB through counsel, (rote a letter dated
*a" 19,19/1, to Band 1ransportation Commissioner omeo 6du D6duF demanding a refund of
the amounts paid. 6du denied the re!uest for refund. >ence, &AB filed a complaint against 6du
and :ational 1reasurer J)aldo Car)onell DCar)onellF.
1he trial court dismissed &AB?s complaint. &AB appealed to the Court of Appeals (hich
in turn certified the case to the -upreme Court.
I""$!:
8hether or not motor vehicle registration fees are considered as ta#es.
R$LING:
Les. If the purpose is primaril" revenue, or if revenue is, at least, one of the real and
su)stantial purposes, then the e#action is properl" called a ta#. -uch is the case of motor vehicle
registration fees. 1he motor vehicle registration fees are actuall" ta#es intended for additional
revenues of the government even if one fifth or less of the amount collected is set aside for the
operating e#penses of the agenc" administering the program.
&rogressive 7evelopment Corporation vs. Eue=on Cit"
F*c's: 1he Cit" Council of EC passed an ordinance 0no(n as the *ar0et Code of EC, (hich
imposed a 5; supervision fee on gross receipts on rentals or lease of privatel"%o(ned mar0et
spaces in EC.
In case of failure of the o(ners of the mar0et spaces to pa" the ta# for three consecutive months,
the Cit" shall revo0e the permit of the privatel"%o(ned mar0et to operate.
&rogressive 7evelopment Corp, o(ner and operator of KarmerMs *ar0et, filed a petition for
prohi)ition against EC on the ground that the ta# imposed )" the *ar0et Code (as in realit" a
ta# on income, (hich the municipal corporation (as prohi)ited )" la( to impose.
Issue: 8hether or not the supervision fee is an income ta# or a license fee.
el+: It is a license fee. A BIC6:-6 K66 is imposed in the e#ercise of the police po(er
primaril" for purposes of regulation, (hile 1AN is imposed under the ta#ing po(er primaril" for
purposes of raising revenues.
If the generating of revenue is the primar" purpose and regulation is merel" incidental, the
imposition is a ta#C )ut if regulation is the primar" purpose, the fact that incidentall", revenue is
also o)tained does not ma0e the imposition a ta#.
1o )e considered a license fee, the imposition must relate to an occupation or activit" that so
engages the pu)lic interest in health, morals, safet", and development as to re!uire regulation for
the protection and promotion of such pu)lic interestC the imposition must also )ear a reasona)le
relation to the pro)a)le e#penses of regulation, ta0ing into account not onl" the costs of direct
regulation )ut also its incidental conse!uences.
In this case, the KarmersM *ar0et is a privatel"%o(ned mar0et esta)lished for the rendition of
service to the general pu)lic. It (arrants close supervision and control )" the Cit" for the
protection of the health of the pu)lic )" insuring the maintenance of sanitar" conditions,
prevention of fraud upon the )u"ing pu)lic, etc.
-ince the purpose of the ordinance is primaril" regulation and not revenue generation, the ta# is a
license fee. 1he use of the gross amount of stall rentals as )asis for determining the collecti)le
amount of license ta# does not, )" itself, convert the license ta# into a prohi)ited ta# on income.
-uch )asis actuall" has a reasona)le relationship to the pro)a)le costs of regulation and
supervision of &rogressiveMs 0ind of )usiness, since ordinaril", the higher the amount of rentals,
the higher the volume of items sold.
1he higher the volume of goods sold, the greater the e#tent and fre!uenc" of supervision and
inspection ma" )e re!uired in the interest of the )u"ing pu)lic.
1olentino vs -ecretar" of Kinance
Political Law !rigination of Revenue "ills E#A$ Amendment by %ubstitution
1olentino et al is !uestioning the constitutionalit" of A //16 other(ise 0no(n as the 6#panded
5alue Added 1a# D65A1F Ba(. 1olentino averred that this revenue )ill did not e#clusivel"
originate from the >ouse of epresentatives as re!uired )" -ection +4, Article 6 of the
Constitution. 6ven though A //16 originated as >. 1119/ and that it passed the ' readings in
the >o, the same did not complete the ' readings in -enate for after the 1
st
reading it (as
referred to the -enate 8a"s O *eans Committee thereafter -enate passed its o(n version 0no(n
as -enate .ill 16'3. 1olentino averred that (hat -enate could have done is amend >. 1119/ )"
stri0ing out its te#t and su)stituting it (9 the te#t of -. 16'3 in that (a" Pthe )ill remains a
>ouse .ill and the -enate version Iust )ecomes the te#t Donl" the te#tF of the >.Q. 1olentino and
co%petitioner oco Gho(everH even signed the said -enate .ill.
I""$!: 8hether or not 65A1 originated in the >o.
!L#: ." a 9%6 vote, the -C reIected the challenge, holding that such consolidation (as
consistent (ith the po(er of the -enate to propose or concur (ith amendments to the version
originated in the >o. 8hat the Constitution simpl" means, according to the 9 Iustices, is that
the initiative must come from the >o. :ote also that there (ere several instances )efore (here
-enate passed its o(n version rather than having the >o version as far as revenue and other
such )ills are concerned. 1his practice of amendment )" su)stitution has al(a"s )een accepted.
1he proposition of 1olentino concerns a mere matter of form. 1here is no sho(ing that it (ould
ma0e a significant difference if -enate (ere to adopt his over (hat has )een done.
Tolentino vs. Secretary of Finance GR 115455 Oct. 30 1995
#acts4
The 5AT is le"ied on the sale& arter& or e,changed of the goods and
properties as well as on the sale of ser"ices. RA0113 see6s to wider the ta, ase of the
e,isting 5AT s!stem and enhance it administration on ! amending the NIRC. CRT7A
asserts that R.A. 0113 is unconstitutional as it "iolate the rule that ta,es should e
uniform and e-uitale.
Issue4 is it meritorious8
Ruling4
No. 9-uit! and uniformit! in ta,ation means that all the ta,ale articles or
6inds of properties of the same class e ta,ed at the same rate. The ta,ing power has
the authorit! to ma6e reasonale and natural classifications for purposes of ta,ation. To
satisfy this requirement, it is enouh that the statute or ordinance applies equally to all
persons, firms, and corporations placed in a similar situation!
Re,ubl-c o. '/e P/-l-,,-nes v. 0*colo+-1u2c-* 1-ll-ng Co., Inc.
G.R. Nos. L-1982%, L-1982( *n+ 19826 3ul4 9, 1966
R!P$0LIC 5F )! PILIPPIN!" v. 0AC5L5#-1$RCIA 1ILLING C5., INC., 1A-A5 "$GAR
C!N)RAL C5., INC., *n+ )ALI"A6-"ILA6 1ILLING C51PAN6,
R!GALA, 3.:
FAC)":
This is a :oint appeal ! three sugar centrals& 7acolod $urcia $illing Co.& Inc.& $a-ao +ugar Central Co.&
Inc.& and Talisa!-+ila! $illing Co.& sister companies under one controlling ownership and management&
from a decision of the Court of #irst Instance of $anila finding them liale for special assessments under
+ection 15 of Repulic Act No. 322.
Repulic Act No. 322 is the charter of the %hilippine +ugar Institute& %hilsugin for short& a semi-pulic
corporation.
+ections 15 and 13 of the aforementioned law pro"ide4
+ec. 15. Capitali"ation. * To raise the necessar! funds to carr! out the pro"isions of this Act and the
purposes of the corporation& there shall e le"ied on the annual sugar production a ta, of T9N
C9NTA51+ ;%(.1(< per picul of sugar to e collected for a period of fi"e =5> !ears eginning the crop
!ear 1.51-1.52. The amount shall e orne ! the sugar cane planters and the sugar centrals in the
proportion of their corresponding milling share& and said le"! shall constitute a lien on their sugar -uedans
and?or warehouse receipts.
+ec. 13. #pecial $und. * The proceeds of the foregoing le"! shall e set aside to constitute a special
fund to e 6nown as the @"ug*2 Rese*2c/ *n+ "'*b-l-7*'-on Fun+&@ which shall e a"ailale e,clusi"el! for
the use of the corporation. All the income and receipts deri"ed from the special fund herein created shall
accrue to& and form part of the said fund to e a"ailale solel! for the use of the corporation.
The facts of this case earing rele"ance to the issue under consideration& as recited ! the lower court
and accepted ! the appellants& are the following4
, , , during the 5 crop !ears mentioned in the law& namel! 1.51-1.52& 1.52-1.52& 1.52-1.5/& 1.5/-
1.55 and 1.55-1.53& defendant 7acolod-$urcia $illing Co.& Inc.& has paid %230&/3'.(( ut left an unpaid
alance of %213&(0(.5(A defendant $a-ao +ugar Central Co.& Inc.& has paid %110&312.// ut left unpaid
alance of %225&'((.2(A defendant Talisa!-+ila! $illing Compan! has paid %251&'12./2 ut left unpaid
alance of %2('&1.2.0/A and defendant Central ABucarera del Canao made a pa!ment of %/.&'.0.0' ut
left unpaid alance of %/'&(5..00. There is no -uestion regarding the correctness of the amounts paid
and the amounts that remain unpaid.
#rom the e"idence presented& on which there is no contro"ers!& it was disclosed that on +eptemer 2&
1.51& the %hilippine +ugar Institute& 6nown as the %DIE+F)IN for short& ac-uired the Insular +ugar
Refiner! for a total consideration of %2&(0(&.(..3( pa!ale& in accordance with the deed of sale 9,hiit A&
in 2 installments from the process of the sugar ta, to e collected& under Repulic Act 322. The e"idence
further discloses that the operation of the Insular +ugar Refiner! for the !ears& 1.5/& 1.55& 1.53 and
1.50 was disastrous in the sense that %DIE+F)IN incurred tremendous losses as shown ! an
e,amination of the statements of income and e,penses mar6ed 9,hiits 5& 3& 0 and '. Through the
testimon! of $r. Cenon #lor CruB& former acting general manager of %DIE+F)IN and at present technical
consultant of said entit!& presented ! the defendants as witnesses& it has een shown that the operation
of the Insular +ugar Refiner! has consumed 0(G of the thin6ing time and effort of the %DIE+F)IN
management. , , , .
I""$!":
#irst. It is fallacious to argue that no mismanagement or ause of corporate power could ha"e een
committed ! %hilsugin solel! ecause its charter incorporates so man! de"ices or safeguards to
preclude such ause.
+econd. The appellantsH refusal to continue pa!ing the assessment under Repulic Act 322 ma! not
rightl! e e-uated with a ta,pa!erHs refusal to pa! his ordinar! ta,es precisel! ecause there is a
sustantial distinction etween a @special assessment@ and an ordinar! ta,. The purpose of the former is
to finance the impro"ement of particular properties& with the enefits of the impro"ement accruing or
inuring to the owners thereof who& after all& pa! the assessment. The purpose of an ordinar! ta,& on the
other hand& is to pro"ide the )o"ernment with re"enues needed for the financing of state affairs. Thus&
while the refusal of a citiBen to pa! his ordinar! ta,es ma! not indeed e sanctioned ecause it would
impair go"ernment functions& the same would not hold true in the case of a refusal to compl! with a
special assessment.
Third. Fpon a host of decisions of the Fnited +tates +upreme Court& the imposition or collection of a
special assessment upon propert! owners who recei"e no enefit from such assessment amounts to a
denial of due process.
R$LING:
8e .-n+ .o2 '/e *,,ellee.
The nature of a @special assessment@ similar to the case at ar has alread! een discussed and
e,plained ! this Court in the case of %ut" vs! &raneta& .' %hil. 1/'. #or in this EutB case& Commonwealth
Act 530& otherwise 6nown as the +ugar Ad:ustment Act& le"ies on owners or persons in control of lands
de"oted to the culti"ation of sugar cane and ceded to others for a consideration& on lease or otherwise *
a ta, e-ui"alent to the difference etween the mone! "alue of the rental or consideration collected and
the amount representing 12 per centum of the assessed "alue of such land. =+ec. 2>.
Fnder +ection 3 of the said law& Commonwealth Act 530& all collections made thereunder @shall accrue to
a special fund in the %hilippine Treasur!& to e 6nown as the 9"ug*2 A+:us';en' *n+ "'*b-l-7*'-on Fun+,H
and shall e paid out onl! for an! or all of the following purposes or to attain an! or all of the following
o:ecti"es& as ma! e pro"ided ! law.@ It then proceeds to enumerate the said purposes& among which
are @to place the sugar industr! in a position to maintain itselfA ... to read:ust the enefits deri"ed from the
sugar industr! ... so that all might continue profital! to engage thereinA to limit the production of sugar to
areas more economicall! suited to the production thereofA and to afford laorers emplo!ed in the industr!
a li"ing wage and to impro"e their li"ing and wor6ing conditions.
The plaintiff in the ao"e case& Ialter EutB& contended that the aforementioned ta, or special assessment
was unconstitutional ecause it was eing @le"ied for the aid and support of the sugar industr!
e,clusi"el!&@ and therefore& not for a pulic purpose. In re:ecting the theor! ad"anced ! the said plaintiff&
this Court said4
The asic defect in the plaintiffHs position in his assumption that the ta, pro"ided for in Commonwealth Act
No. 530 is a pure e,ercise of the ta,ing power. Anal!sis of the Act& and particularl! +ection 3& will show
that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabili&ation of the
threatened sugar industry' (n other words, the act is primarily an exercise of the police power'
It was competent for the Eegislature to find that the general welfare demanded that the sugar industr!
should e stailiBed in turnA and in the wide field of its police power& the law-ma6ing od! could pro"ide
that the distriution of enefits therefrom e read:usted among its components& to enale it to resist the
added strain of the increase in ta,es that it had to sustain
1nce it is conceded& as it must that the protection and promotion of the sugar industr! is a matter of
pulic concern& it follows that the Legislature may determine within reasonable bounds what is necessary for its
protection and expedient for its promotion' )ere, the legislative discretion must be allowed full play, sub*ect only to
the test of reasonableness+ and it is not contended that the means provided in %ection , of the law -above .uoted/
bear no relation to the ob*ective pursued or are oppressive in character' (f ob*ective and methods are ali0e
constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and
attainment' $axation may be made the implement of the state1s police power'
1n the authorit! of the ao"e case& then& Ie hold that '/e s,ec-*l *ssess;en' *' b*2 ;*4 be cons-+e2e+ *s
s-;-l*2l4 *s '/e *bove, '/*' -s, '/*' '/e lev4 .o2 '/e P/-lsug-n Fun+ -s no' so ;uc/ *n e<e2c-se o. '/e ,o=e2 o.
'*<*'-on, no2 '/e -;,os-'-on o. * s,ec-*l *ssess;en', bu', '/e e<e2c-se o. '/e ,ol-ce ,o=e2 .o2 '/e gene2*l
=el.*2e o. '/e en'-2e coun'24. I' -s, '/e2e.o2e, *n e<e2c-se o. * sove2e-gn ,o=e2 =/-c/ no ,2-v*'e c-'-7en ;*4
l*=.ull4 2es-s'.