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Sison vs Ancheta

Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision (Section 1) ndly
discriminated against him by the imposition o! higher rates pon his income as a pro!essional, that it amonts to
class legislation, and that it transgresses against the e"al protection and de process clases o! the #onstittion
as well as the rle re"iring ni!ormity in taxation.
Issue: $hether BP 135 violates the de process and e"al protection clases, and the rle on ni!ormity in
Held: %here is a need !or proo! o! sch persasive character as wold lead to a conclsion that there was a
violation o! the de process and e"al protection clases. &bsent sch showing, the presmption o! validity mst
prevail. '"ality and ni!ormity in taxation means that all taxable articles or (inds o! property o! the same class
shall be taxed at the same rate. %he taxing power has the athority to ma(e reasonable and natral classi)cations
!or prposes o! taxation. $here the di*erentitation con!orms to the practical dictates o! +stice and e"ity, similar
to the standards o! e"al protection, it is not discriminatory within the meaning o! the clase and is there!ore
ni!orm. %axpayers may be classi)ed into di*erent categories, sch as recipients o! compensation income as
against pro!essionals. ,ecipients o! compensation income are not entitled to ma(e dedctions !or income tax
prposes as there is no practically no overhead expense, while pro!essionals and bsinessmen have no ni!orm
costs or expenses necessaryh to prodce their income. %here is ample +sti)cation to adopt the gross system o!
income taxation to compensation income, while contining the system o! net income taxation as regards
pro!essional and bsiness income.
!""# Au$ %&
'.R. No. !!&#&&
%(& SCRA )(*
FACTS: %he valed-added tax (.&%) is levied on the sale, barter or exchange o! goods and properties as well as on
the sale or exchange o! services. /t is e"ivalent to 101 o! the gross selling price or gross vale in money o! goods
or properties sold, bartered or exchanged or o! the gross receipts !rom the sale or exchange o! services. ,epblic
&ct 2o. 3314 see(s to widen the tax base o! the existing .&% system and enhance its administration by amending
the 2ational /nternal ,evene #ode.
%he #hamber o! ,eal 'state and Bilders &ssociation (#,'B&) contends that the imposition o! .&% on sales and
leases by virte o! contracts entered into prior to the e*ectivity o! the law wold violate the constittional provision
o! 5non-impairment o! contracts.6
ISSUE: $hether ,.&. 2o. 3314 is nconstittional on grond that it violates the contract clase nder &rt. ///, sec 10
o! the Bill o! ,ights.
RULIN': 2o. %he Spreme #ort the contention o! #,'B&, that the imposition o! the .&% on the sales and leases o!
real estate by virte o! contracts entered into prior to the e*ectivity o! the law wold violate the constittional
provision o! non-impairment o! contracts, is only slightly less abstract bt nonetheless hypothetical. /t is enogh to
say that the parties to a contract cannot, throgh the exercise o! prophetic discernment, !etter the exercise o! the
taxing power o! the State. 7or not only are existing laws read into contracts in order to )x obligations as between
parties, bt the reservation o! essential attribtes o! sovereign power is also read into contracts as a basic postlate
o! the legal order. %he policy o! protecting contracts against impairment prespposes the maintenance o! a
government which retains ade"ate athority to secre the peace and good order o! society. /n trth, the #ontract
#lase has never been thoght as a limitation on the exercise o! the State8s power o! taxation save only where a
tax exemption has been granted !or a valid consideration.
Sch is not the case o! P&9 in :.,. 2o. 115;5<, and the #ort does not nderstand it to ma(e this claim. ,ather, its
position, as discssed above, is that the removal o! its tax exemption cannot be made by a general, bt only by a
speci)c, law.
7rther, the Spreme #ort held the validity o! ,epblic &ct 2o. 3314 in its !ormal and sbstantive aspects as this
has been raised in the varios cases be!ore it. %o sm p, the #ort holds=
(1) %hat the procedral re"irements o! the #onstittion have been complied with by #ongress in the enactment o!
the statte>
(<) %hat +dicial in"iry whether the !ormal re"irements !or the enactment o! stattes - beyond those prescribed
by the #onstittion - have been observed is preclded by the principle o! separation o! powers>
(3) %hat the law does not abridge !reedom o! speech, expression or the press, nor inter!ere with the !ree exercise o!
religion, nor deny to any o! the parties the right to an edcation> and
(?) %hat, in view o! the absence o! a !actal !ondation o! record, claims that the law is regressive, oppressive and
con)scatory and that it violates vested rights protected nder the #ontract #lase are prematrely raised and do
not +sti!y the grant o! prospective relie! by writ o! prohibition.
$@','7A,', the petitions are B/SC/SS'B.
TIU vs. Video $+a, Re$ulato+- .oa+d
151 S#,& <0;
:, 2o. 9-354D3, Ene 1;, 1D;3
F%he pblic prpose o! a tax may legally exist even i! the motive which impelled the legislatre to impose the tax
was to !avor one indstry over another.F
7&#%S= %he petitioner assails the validity o! PB 1D;3 entitled an F&ct creating the .ideogram ,eglatory Board,F
citing especially Section 10 thereo!, which imposes a tax o! 301 on the gross receipts payable to the local
government. Petitioner contends that aside !rom its being a rider and not germane to the sb+ect matter thereo!,
and sch imposition was being harsh, con)scatory, oppressive andGor nlaw!lly restraints trade in violation o! the
de process clase o! the #onstittion.
/SSH'= /s PB 1D;3 a valid exercise o! taxing power o! the stateI
@'9B= Jes. /t is beyond serios "estion that a tax does not cease to be valid merely becase it reglates,
discorages, or even de)nitely deters the activities taxed. %he power to impose taxes is one so nlimited in !orce
and so searching in extent, that the corts scarcely ventre to declare that it is sb+ect to any restrictions whatever,
except sch as those rest in the discretion o! the athority which exercises it. /n imposing a tax, the legislatre acts
pon its constitents. %his is, in general, a sKcient secrity against erroneos and oppressive taxation.
%he levy o! the 301 tax is !or a pblic prpose. /t was imposed primarily to answer the need !or reglating the
video indstry, particlarly becase o! the rampant )lm piracy, the Lagrant violation o! intellectal property rights,
and the proli!eration o! pornographic video tapes. &nd while it was also an ob+ective o! the B'#,'' to protect the
movie indstry, the tax remains a valid imposition.
%he pblic prpose o! a tax may legally exist even i! the motive which impelled the legislatre to impose the tax
was to !avor one indstry over another.
:, 2o. 9-<;;D4, 7ebrary 13, 1D;;
15; S#,& D
7&#%S= Private respondent corporation &lge, /nc. )led its income tax retrns !or 1D5; and 1D5D showing
dedctions, !or promotional !ees paid, !rom their gross income, ths lowering their taxable income. %he B/,
assessed &lge based on sch dedctions contending that the claimed dedction is disallowed becase it was not
an ordinary, reasonable and necessary expense.
/SSH'= Shold an ncommon bsiness expense be disallowed as a proper dedction in comptation o! income
taxes, corollary to the doctrine that taxes are the li!eblood o! the governmentI
@'9B= 2o. Private respondent has proved that the payment o! the !ees was necessary and reasonable in the light o!
the e*orts exerted by the payees in indcing investors and prominent bsinessmen to ventre in an xperimental
enterprise and involve themselves in a new bsiness re"iring millions o! pesos. %his was no mean !eat and shold
be, as it was, sKciently recompensed.
/t is well-settled that taxes are the li!eblood o! the government and so shold be collected withot nnecessary
hindrance An the other hand, sch collection shold be made in accordance with law as any arbitrariness will
negate the very reason !or government itsel!. /t is there!ore necessary to reconcile the apparently conLicting
interests o! the athorities and the taxpayers so that the real prpose o! taxation, which is the promotion o! the
common good, may be achieved.
Bt even as we concede the inevitability and indispensability o! taxation, it is a re"irement in all democratic
regimes that it be exercised reasonably and in accordance with the prescribed procedre. /! it is not, then the
taxpayer has a right to complain and the corts will then come to his sccor. 7or all the awesome power o! the tax
collector, he may still be stopped in his trac(s i! the taxpayer can demonstrate, as it has here, that the law has not
been observed.
Philippine Health Care Providers, Inc. vs. Commissioner of Internal Revenue
G.R. No. 167330, September 18, 2009
Corona, J:
Petitioner is a domestic corporation whose primary purpose is to establish, maintain and conduct a health maintenance organization to take care of the sick and disabled
persons enrolled in the health care plan and to provide for the administrative, legal, and fnancial responsibilities of the organization. Individuals enrolled in its health care
programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and
other professional technical staf at a hospital or clinic owned, operated or accredited by it.
In the year 2000, respondent Commissioner of Internal Revenue [CIR] sent petitioner a formal demand letter and the corresponding assessment notices demanding the payment
of defciency [VAT and DST] taxes, including surcharges and interest, for the taxable years 1996 and 1997.
Petitioner protested the assessment but since respondent did not act on the same, petitioner fled a petition for review with the Court of Tax Appeals (CTA) seeking the
cancellation of the defciency VAT and DST assessments. The CTA ordered petitioner to pay the former but cancelled the DST assessments.
Thus, respondent appealed the CTA decision to the Court of Appeals (CA) insofar as it cancelled the DST assessment, and claimed that petitioners health care agreement was
a contract of insurance subject to DST under Section 185 of the 1997 Tax Code. The CA sided favorably with the CIR, holding that petitioners health care agreement was in the
nature of a non-life insurance contract subject to DST. Hence, the case was elevated to the Supreme Court (SC).
The SC initially afrmed the decision of the CA, holding that petitioner is engaged in non-life insurance contract (a contract of indemnity). Likewise, the SC held that the fact that
it is an HMO is IRRELEVANT because contracts between companies like petitioner and the benefciaries under their plans are treated as insurance contracts. Hence, petitioner
fled a motion for reconsideration.
Petitioner reiterated its stance that as an HMO, it is merely a SERVICE PROVIDER and NOT an INSURANCE COMPANY. As such, it is not subject to DST.
Issue: Whether or not petitioner, as an HMO, is engaged in an insurance business, thus, subject to DST.
Held: The Supreme Court ruled in favor of the petitioner and granted the Motion for Reconsideration.
Before an entity could be held liable for DST, two requisites must concur: (1) the document must be apolicy of insurance or an obligation in the nature of
indemnity and (2) the maker should be transacting the business of insurance. The SC exculpated petitioner for want of both requisites, to wit:
1. An HMO is not engaged in an INSURANCE BUSINESS.
The SC based its decisions on the fact that the HMO agreement does not qualify as an insurance business based on the principal object and purpose test.
According to this test, an enterprise is considered engaged in an insurance business when the principal object of the enterprise is the assumption of the risk and
the indemnifcation of loss. But if they are merely incidental and service is the principal purpose, then the business is not insurance.
Thus, the absence or presence of assumption of risk or peril is not the sole test to be applied in determining its status. The question, more broadly, is whether, looking at the plan
of operation as a whole, service rather than indemnity is its principal object and purpose.
The main diference between an HMO and an insurance company is that HMOs undertake to provide or arrange for the provision of the medical services through
participating physicians while insurance companies simply undertake to indemnify the insured for medical expenses incurred up to a pre-agreed limit.
A substantial portion of the petitioners services covers preventive and diagnostic services intended to keep members from developing medical conditions or diseases. As an
HMO, it is its obligation to maintain the good health of its members. Accordingly its health programs are designed to prevent or to minimize the possibility of any assumption of
risks on its part. Thus, its undertaking under its agreements is not to indemnify its members against any loss or damage arising from a medical condition but on the
contrary to provide the health and medical services needed to prevent such loss and damage.
Overall, petitioner appears to provide insurance-type benefts to its members with respect to its curative medical services but these are incidental to the principal activity of
providing them medical care. The insurance-life aspect of petitioners business is miniscule compared to its noninsurance services, it cannot be considered as being in the
insurance business.
Lastly, it is signifcant that the petitioner as an HMO is not a part of the insurance industry. This is evident from the fact that it is not supervised by the insurance
commission but by the department of health. The insurance commissioner confrmed that petitioner is not engaged in the insurance business. This determination of the
Commissioner must be accorded great weight.
2. The SC ruled that the health care agreement between the petitioner and its benefciaries is NOT a contract of insurance.
a. In our jurisdiction, even if a contract contains all the elements of an insurance contract, if its primary purpose is the rendering of service, it is not a contract of
b. Not all the necessary elements of a contract of insurance are present in petitioners agreements. To begin with, there is no loss, damage or liability on the part of
the member that should be indemnifed by petitioner as an HMO. In case of availment by a member of the benefts under the agreement, petitioner does not reimburse
or indemnify the member as the latter does not pay any third party. Instead, it is thepetitioner who pays the participating physicians and other health care providers
for the services rendered at pre-agreed rates.
3. There was no legislative intent to impose DST on HMOs.
4. The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of
a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the hen that lays the golden egg.
5. Petitioners tax liability was extinguished under the provisions of RA 9840. When it availed of the tax amnesty, it efectively became entitled to immunity from payment
of taxes as well as additions thereto, and the appurtenant civil, criminal or administrative penalties under the 1997 NIRC, as amended, arising from the failure to pay any and all
internal revenue taxes for taxable year 2005 and prior years.
San Pablo Manufacturing Corporation vs. CIR [G.R. No. 147749. Jun !!" !##$%
Ponente= #A,A2&, J.
San Pablo Can!actring #orporation (SPC#) is a domestic corporation engaged in the bsiness o! milling,
man!actring and exporting o! cocont oil and other allied prodcts. /t was assessed and ordered to pay by the
#ommissioner o! /nternal ,evene millerMs tax and man!actrerMs sales tax, among other de)ciency taxes, !or
taxable year 1D;3 particlarly on SPC#Ms sales o! crde oil to Hnited #ocont #hemicals, /nc. (H2/#@'C) while the
de)ciency sales tax was applied on its sales o! corn and edible oil as man!actred prodcts. SPC# opposed the
assessments. %he #ommissioner denied its protest. SPC# appealed the denial o! its protest to the #ort o! %ax
&ppeals (#%&) by way o! a petition !or review. doc(eted as #%& #ase 2o. 5?<3. /t insists on the liberal application o!
the rles becase, on the merits o! the petition, SPC# was not liable !or the 31 millerMs tax. /t maintains that the
crde oil which it sold to H2/#@'C was actally exported by H2/#@'C as an ingredient o! !atty acid and glycerine,
hence, not sb+ect to millerMs tax prsant to Section 14; o! the 1D;3 %ax #ode. Since H2/#@'C, the byer o!
SPC#Ms milled prodcts, sbse"ently exported said prodcts, SPC# shold be exempted !rom the millerMs tax.
$hether or not SPC#Ms sale o! crde cocont oil to H2/#@'C was sb+ect to the 31 millerMs tas(.
2A. Petition was denied.
%he langage o! the exempting clase o! Section 14; o! the 1D;3 %ax #ode was clear. %he tax exemption applied
only to the exportation o! rope, cocont oil, palm oil, copra by-prodcts and dessicated coconts, whether in their
original state or as an ingredient or part o! any man!actred article or prodcts, by the proprietor or operator o!
the !actory or by the miller himsel!.
$here the law enmerates the sb+ect or condition pon which it applies, it is to be constred as exclding !rom its
e*ects all those not expressly mentioned. +0prssio unius st 0clusio altrius. &nything that is not inclded in
the enmeration is exclded there!rom and a meaning that does not appear nor is intended or reLected in the very
langage o! the statte cannot be placed therein. %he rle proceeds !rom the premise that the legislatre wold not
have made speci)c enmerations in a statte i! it had the intention not to restrict its meaning and con)ne its terms
to those expressly mentioned.
%he rle o! expressio unius est exclusio alterius is a canon o! restrictive interpretation. /ts application in this case is
consistent with the constrction o! tax exemptions in strictissimi juris against the taxpayer. %o allow SPC#Ms claim
!or tax exemption will violate these established principles and ndly derogate sovereign athority.
Victo+ias Millin$ Co. vs. Munici0alit- o1 Victo+ias
'R L2%!!3(/ %4 Se0te,5e+ !")3
En .anc/ Sanche6 789: " concu+
7acts= Ardinance 1 (1D54) was approved by the mnicipal concil o! .ictorias by way o! an amendment to < mnicipal ordinances
separately imposing license taxes on operators o! sgar centrals and sgar re)neries. %he changes were= (1) with respect to sgar
centrals, by increasing the rates o! license taxes> and (<) as tosgar re)neries, by increasing the rates o! license taxes as well as teh
range o! gradated schedle o! annal otpt capacity. .ictorias Cilling "estioned the validity o! Ardinance 1 as it, among others,
allegedly singled ot .ictorias Cilling #o. since it is the only operator o! a sgar central and a sgar re)nery within the +risdiction o!
the mnicipality.
/sse= $hether Ardinance 1 is discriminatory.
@eld= %he ordinance does not single ot .ictorias as the only ob+ect o! the ordinance bt is made to apply to any sgar central or
sgar re)nery which may happen to operate in the mnicipality. %he !act that .ictorias Cilling is actally the sole operator o! a sgar
central and a sgar re)nery does not ma(e the ordinance discriminatory. %he ordinance is nli(e that in Armoc Sgar #ompany vs.
Cnicipal Board o! Armoc #ity, which speci)cally spelled ot Armoc Sgar as the sb+ect o! the taxation, the name o! the company
herein was never mentioned in the ordinance.
:hili00ine Ai+ Lines V Edu
!)# SCRA (%* 7!"339
7acts o! the case= %he dispted registration !ees were imposed by the commissioner 'levate prsant to Section ;,
,& ?134, the 9and %ransportation and %raKc #ode.P&9 as a corporation is engaged in the air transportation bsiness
nder the legislative !ranchise. Hnder its !ranchise, P&9 is exempt !rom the payment o! taxes. /n 1D31 however, appellee
#ommissioner elevate issed a reglation re"iring all tax exempt entities, among them P&9 to pay motor vehicle
registration !ees. Bespite P&9s protest, appellee re!sed to register the appellantMs motor vehicles nless the
amonts imposed were paid. P&9 ths paid, nder protest, P1D,5<D.35 as registration !ees o! its motor vehicles. &!ter paying
nder protest, P&9 wrote to #ommissioner 'd demanding a re!nd o! the amonts paid, invo(ing #alalang vs.
9orenNo where it was held that motor vehicle registration !ees are in reality taxes !rom the payment o! which P&9 is
exempt by virte o! its legislative !ranchise.'d denied re"est !or re!nd based on ,epblic v. Phil. ,abbit Bs, that
motor vehicle registration !ees are reglatory and not revene measres and, there!ore, do not come within the
exemption granted to P&9 nder its!ranchise.P&9 )led the complaint against 9%# #ommissioner 'd and 2ational
%reasrer #arbonell.
/SSH'= $hat is the natre o! motor vehicle registration !eesI &re they taxes or reglatory !eesI
,H9/2: A2 %&O . 9/#'2S' &2B ,':H9&%A,J 7''
S# rled that motor vehicles registration !ees are %&O'S. 7ees may be regarded as taxes even thogh theyalso
serve as instrments o! reglation becase taxation may be made as an implementation o! the States
policepower. Bt i! the prpose is primarily ,'.'2H', or i! revene is atleast, one o! the real and sbstantial
prposes,then the exaction is properly called a %&O.
,H9/2: A2 PH,PAS'S A7 %&O, ABE'#%/.' A7 %&O&%/A2= :'2',&9, 7/S#&9 ,'.'2H'
%he 9egislative intent and prpose behind the law re"iring owners o! vehicles , to pay !or their registration is
mainly to raise !nds !or the constrction and maintenance o! highways and, to a mch lesser degree, pay !or
the operating expenses o! the administering agency. /t is possible !or an exaction to be both a tax and
a reglation. 9icense !ees are charges, loo(ed to as a sorce o! revene as well as a means o! reglation. %he !ees
may be properly regarded as taxes even thogh they also serve as an instrment o! reglation. /! the prpose is
primarily revene, or i! revene is at least one o! the real and sbstantial prposes, then the exaction is properly
called a %&O.
,H9/2: A2 2A2-B'9':&B/9/%J A7 %@' PA$', %A %&O
/t is clear !rom the provisions o! section 33 o! #ommonwealth &ct 1<3 and section 41 o! the 9and %ransportation and
%raKc #ode that the legislative intent and prpose behind the law re"iring owners o! vehicles
'R no !&"4") 8ul- !4/ %**4
Facts: ,& D134, otherwise (nown as the 'lectric Power /ndstry ,e!orm &ct o! <001 ('P/,&), which soght to
impose a niversal charge on all end-sers o! electricity !or the prpose o! !nding 2&PA#A,Ms pro+ects, was
enacted and too( e*ect in <001.
Petitioners contest the constittionality o! the 'P/,&, stating that the imposition o! the niversal charge on all end-
sers is oppressive and con)scatory and amonts to taxation withot representation !or not giving the consmers a
chance to be heard and be represented.
Issue: $hether or not the niversal charge is a tax.
Held: 2A. %he assailed niversal charge is not a tax, bt an exaction in the exercise o! the StateMs police power.
%hat pblic wel!are is promoted may be gleaned !rom Sec. < o! the 'P/,&, which enmerates the policies o! the
State regarding electri)cation. Coreover, the Special %rst 7nd !eatre o! the niversal charge reasonably serves
and assres the attainment and perpetity o! the prposes !or which the niversal charge is imposed (e.g. to
ensre the viability o! the contryMs electric power indstry), !rther boosting the position that the same is an
exaction primarily in prsit o! the StateMs police ob+ectives
/! generation o! revene is the primary prpose and reglation is merely incidental, the imposition is a tax> bt i!
reglation is the primary prpose, the !act that revene is incidentally raised does not ma(e the imposition a tax.
%he taxing power may be sed as an implement o! police power. %he theory behind the exercise o! the power to tax
emanates !rom necessity> withot taxes, government cannot !l)ll its mandate o! promoting the general wel!are
and well-being o! the people.
:lante+s :+oducts Inc vs Fe+ti0hil Co+0 '.R. No. !))**) Ma+ch !#/ %**3
7&#%S= Petitioner PP/ and respondent 7ertiphil are private corporations incorporated nder Philippine laws, both
engaged in the importation and distribtion o! !ertiliNers, pesticides and agricltral chemicals.
Carcos issed 9etter o! /nstrction (9A/) 1?45, imposing a capital recovery component o! Php10.00 per bag o!
!ertiliNer. %he levy was to contine ntil ade"ate capital was raised to ma(e PP/ )nancially viable. 7ertiphil remitted
to the 7ertiliNer and Pesticide &thority (7P&), which was then remitted the depository ban( o! PP/. 7ertiphil paid
P4,4;D,1?? to 7P& !rom 1D;5 to 1D;4.
&!ter the 1D;4 'dsa ,evoltion, 7P& volntarily stopped the imposition o! the P10 levy. 7ertiphil demanded !rom PP/
a re!nd o! the amont it remitted, however PP/ re!sed. 7ertiphil )led a complaint !or collection and damages,
"estioning the constittionality o! 9A/ 1?45, claiming that it was n+st, nreasonable, oppressive, invalid and an
nlaw!l imposition that amonted to a denial o! de process. PP/ arges that 7ertiphil has no locs standi to
"estion the constittionality o! 9A/ 2o. 1?45 becase it does not have a Fpersonal and sbstantial interest in the
case or will sstain direct in+ry as a reslt o! its en!orcement.F /t asserts that 7ertiphil did not s*er any damage
!rom the imposition becase Fincidence o! the levy !ell on the ltimate consmer or the !armers themselves, not on
the seller !ertiliNer company.
/SSH'= $hether or not 7ertiphil has locs standi to "estion the constittionality o! 9A/ 2o. 1?45.
$hat is the power o! taxationI
,H9/2:= 7ertiphil has locs standi becase it s*ered direct in+ry> doctrine o! standing is a mere procedral
technicality which may be waived.
%he imposition o! the levy was an exercise o! the taxation power o! the state. $hile it is tre that the power to tax
can be sed as an implement o! police power, the primary prpose o! the levy was revene generation. /! the
prpose is primarily revene, or i! revene is, at least, one o! the real and sbstantial prposes, then the exaction is
properly called a tax.
Police power and the power o! taxation are inherent powers o! the State. %hese powers are distinct and have
di*erent tests !or validity. Police power is the power o! the State to enact legislation that may inter!ere with
personal liberty or property in order to promote the general wel!are, while the power o! taxation is the power to levy
taxes to be sed !or pblic prpose. %he main prpose o! police power is the reglation o! a behavior or condct,
while taxation is revene generation. %he Flaw!l sb+ectsF and Flaw!l meansF tests are sed to determine the
validity o! a law enacted nder the police power. %he power o! taxation, on the other hand, is circmscribed by
inherent and constittional limitations.
Re0u5lic vs. Ma,5ulao Lu,5e+
'R L2!44%&/ %3 Fe5+ua+- !")%
En .anc/ .a++e+a 789: !* concu+
7acts= Camblao 9mber #ompany paid the :overnment a total o! PD,1<3.50 as re!orestation charges. @aving
!ond liable !or an aggregate amont o! P?,;0<.33 !or !orest charges, it contended that since the ,epblic
(:overnment) has not made se o! the re!orestation charges !or re!oresting the dended area o! the land covered
by the companyMs license, the ,epblic shold re!nd said amont or, i! it cannot be re!nded, at least the company
shold be compensated with what it owed the ,epblic !or re!orestation charges.
/sse= $hether taxes may be sb+ect o! set-o* or compensation.
@eld= /nternal revene taxes, sch as !orest charges, cannot be the sb+ect o! set-o* or compensation. & claim !or
taxes is not sch a debt, demand, contract or +dgment as is allowed to be set-o* nder the stattes o! seto*,
which are constred ni!ormly, in the light o! pblic policy, to exclde the remedy in an action or any indebtedness
o! the State or mnicipality to one who is liable to the State or mnicipality !or taxes. 2either are they sb+ect o!
recopment since they do not arise ot o! the contract or transaction sed on. %axes are not in the natre o!
contracts between the parties bt grow ot o! a dty to, and are the positive acts o! the government, to the ma(ing
and en!orcing o! which, the personal consent o! individal taxpayers is not re"ired.
;o,in$o v. 'a+litos'R No . L 2 ! 3 " " ( % " 8 u n e ! " ) (
F A C T S:
/n Bomingo vs. Coscoso (104 P@/9 113;), the Spreme #ort declared as )nal and exectory the order
o! the #ort o! 7irst /nstance o! 9eyte !or the payment o! estate and inheritance taxes, charges and
penalties amonting to P?0,05;.55 by the 'state o! the late $alter Scott Price. %he petition !or
exection )led by the )scal, however , was deni ed by t he l ower cor t . %he #or t hel d t hat t he
exection is n+sti)ed as the :overnment itsel! is indebted to the 'state !or <4<,<00> and ordered the
amont o! inheritance taxes be dedcted !rom the :overnmentMs indebtedness to the 'state.
I S S U E:
$hether a tax and a debt may be compensated.
H E L ;:
%he cort having +risdiction o! the 'state had !ond that the claim o! the 'state against the
:overnment has been recogniNed and an amont o! P<4<, <00 has al ready been
appropr i at ed by a corresponding law (,& <300). Hnder the circmstances, both the claim o! the
:overnment !or inheritance taxes and the claim o! the intestate !or services rendered have already
become overde and demandable as well as !lly li"idated. #ompensation, there!ore, ta(es place by operation
o! law, in accordance with &rticle 1<3D and 1<D0 o! the #ivil #ode, and both debts are extingished to the
concrrent amont. /n other words, the estate and inheritance taxes are set o*, by virte o! the governmentMs
indebtedness to the estate.
People Vs. Cayat
68 Phil 12
G.R. No. 45987
May 5,1939
Facts Law prohibits any member of a non-Christian tribe to buy, receive, have in his possession, or drink, any intoxicating liquors of any kind. !he
law, "ct #o. $%&', exempts only the so-called native wines or liquors which the members of such tribes have been accustomed to take.
!ss"e (hether or #ot the law denies equal protection to one prosecuted and sentenced for violation of said law.
#el$ #o. )t satisfies the requirements of a valid classification, one of which is that the classification under the law must rest on real or substantial
!he distinction is reasonable. !he classification between the members of the non- Christian and the members of the Christian tribes is not based upon
accident of birth or parentage but upon the degree of civili*ation and culture. !he term +non-Christian tribes, refers to a geographical area and more
directly to natives of the -hilippines of a low grade civili*ation usually living in tribal relationship apart from settled communities. !he distinction is
reasonable for the "ct was intended to meet the peculiar conditions existing in the non- Christian tribes
!he prohibition is germane to the purposes of the law. )t is designed to insure peace and order in and among the non- Christian tribes has often
resulted in lawlessness and crime thereby hampering the efforts of the government to raise their standards of life and civili*ation. !his law is not limited
in its application to conditions existing at the time of the enactment. )t is intended to apply for all times as long as those conditions exists. !he "ct
applies equally to all members of the class. !hat it may be unfair in its operation against a certain number of non- Christians by reason of their degree
of culture is not an argument against the equality of its operation nor affect the reasonableness of the classification thus established.
:, 2os. 9-?D;3D-?4, &pril <4, 1DD1
1D4 S#,& 3<<
7&#%S= Petitioners EB9 ,eyes et al. owned a parcel o! land in %ondo which are leased and occpied as dwelling nits
by tenants who were paying monthly rentals o! not exceeding P300. Sometimes in 1D31 the ,ental 7reeNing 9aw
was passed prohibiting !or one year !rom its e*ectivity, an increase in monthly rentals o! dwelling nits where
rentals do not exceed three hndred pesos (P300.00), so that the ,eyeses were preclded !rom raising the rents
and !rom e+ecting the tenants. /n 1D33, respondent #ity &ssessor o! Canila re-classi)ed and reassessed the vale o!
the sb+ect properties based on the schedle o! mar(et vales, which entailed an increase in the corresponding tax
rates prompting petitioners to )le a Cemorandm o! Bisagreement averring that the reassessments made were
Fexcessive, nwarranted, ine"itable, con)scatory and nconstittionalF considering that the taxes imposed pon
them greatly exceeded the annal income derived !rom their properties. %hey arged that the income approach
shold have been sed in determining the land vales instead o! the comparable sales approach which the #ity
&ssessor adopted.
/SSH'= /s the approach on tax assessment sed by the #ity &ssessor reasonableI
@'9B= 2o. %he taxing power has the athority to ma(e a reasonable and natral classi)cation !or prposes o!
taxation bt the government8s act mst not be prompted by a spirit o! hostility, or at the very least discrimination
that )nds no spport in reason. /t sKces then that the laws operate e"ally and ni!ormly on all persons nder
similar circmstances or that all persons mst be treated in the same manner, the conditions not being di*erent
both in the privileges con!erred and the liabilities imposed.
#onse"ently, it stands to reason that petitioners who are brdened by the government by its ,ental 7reeNing
9aws (then ,.&. 2o. 435D and P.B. <0) nder the principle o! social +stice shold not now be penaliNed by the same
government by the imposition o! excessive taxes petitioners can ill a*ord and eventally reslt in the !or!eitre o!
their properties.
;4 S#,& <30
:, 2o. 9-<D4?4, 2ovember 10, 1D3;
F& tax law shold be declared invalid i! it !ails to lay down standards to gide or limit the actions o! the taxing
7&#%S= %he Cnicipal Board o! Canila enacted Ardinance 2o. 4533 which prohibits aliens !rom being employed or to
engage or participate in any position or occpation or bsiness, withot )rst secring an employment permit !rom
the Cayor o! Canila and paying the permit !ee o! P50.00. %he respondent challenged the validity o! the ordinance
pon the contention that it does not "ali!y as a valid exercise o! the power to tax !or, as a revene measre
imposed on aliens employed in the #ity o! Canila, the ordinance is discriminatory and violative o! the rle o! the
ni!ormity in taxation, and as a police power measre, it ma(es no distinction between se!l and non-se!l
occpations, imposing a )xed P50.00 employment permit, which is ot o! proportion to the cost o! registration and
that it !ails to prescribe any standard to gide andGor limit the action o! the Cayor, ths, violating the !ndamental
principle on delegation o! legislative powers=
/SSH'= /s there a valid exercise o! the taxing power o! the local governmentI
@'9B= 2one. 7irst, the ordinance is not a reglatory or police power measre> it is bt a revene measre gised in
a police power measre. Second, the P50.00 !ee is nreasonable not only becase it is excessive bt becase it !ails
to consider valid sbstantial di*erences in sitation among individal aliens who are re"ired to pay it. &lthogh the
e"al protection clase o! the #onstittion does not !orbid classi)cation, it is imperative that the classi)cation
shold be based on real and sbstantial di*erences having a reasonable relation to the sb+ect o! the particlar
legislation. %he same amont o! P50.00 is being collected !rom every employed alien whether he is casal or
permanent, part time or !ll time or whether he is a lowly employee or a highly paid exective.
An the illegal delegation part o! the argment, Ardinance 2o. 4533 is void !or it does not lay down any criterion or
standard to gide the Cayor in the exercise o! his discretion. /t has been held that where an ordinance o! a
mnicipality !ails to state any policy or to set p any standard to gide or limit the mayor8s action, expresses no
prpose to be attained by re"iring a permit, enmerates no conditions !or its grant or re!sal, and entirely lac(s
standard, ths con!erring pon the Cayor arbitrary and nrestricted power to grant or deny the issance o! permits,
sch ordinance is invalid, being an nde)ned and nlimited delegation o! power to allow or prevent an activity per
se law!l.
:, 2o. 9-3;5D, Becember <<, 1D55
D; P@/9 1?;
7&#%S= Plainti* $alter 9tN, in his capacity as +dicial administrator o! the intestate estate o! &ntionio 9edesma,
soght to recover !rom the #/, the sm o! P1?,444.?0 paid by the estate as taxes, nder section 3 o! the #& 543 or
the Sgar &d+stment &ct thereby assailing its constittionality, !or it provided !or an increase o! the existing tax on
the man!actre o! sgar, alleging that sch enactment is not being levied !or a pblic prpose bt solely and
exclsively !or the aid and spport o! the sgar indstry ths ma(ing it void and nconstittional. %he sgar
indstry sitation at the time o! the enactment was in an imminent threat o! loss and needed to be stabiliNed by
imposition o! emergency measres.
/SSH'= /s #& 543 constittional, despite its being allegedly violative o! the e"al protection clase, the prpose o!
which is not !or the bene)t o! the general pblic bt !or the rehabilitation only o! the sgar indstryI
@'9B= Jes. %he protection and promotion o! the sgar indstry is a matter o! pblic concern, it !ollows that the
9egislatre may determine within reasonable bonds what is necessary !or its protection and expedient !or its
promotion. @ere, the legislative discretion mst be allowed to !lly play, sb+ect only to the test o! reasonableness>
and it is not contended that the means provided in the law bear no relation to the ob+ective prsed or are
oppressive in character. /! ob+ective and methods are ali(e constittionally valid, no reason is seen why the state
may not levy taxes to raise !nds !or their prosection and attainment. %axation may be made the implement o! the
state8s police power.
COCONUT OIL REFINERS ASSOCIATION/ INC. et al vs. RU.EN TORRES/ as E?ecutive Sec+eta+-/ et al
:.,. 2o. 13<5<3. Ely <D, <005
7acts= An Carch 13, 1DD<, ,& 2o. 3<<3 was enacted, providing !or, among other things, the sond and balanced
conversion o! the #lar( and Sbic military reservations and their extensions into alternative prodctive ses in the
!orm o! special economic Nones in order to promote the economic and social development o! #entral 9Non in
particlar and the contry in general. %he law contains provisions on tax exemptions !or importations o! raw
materials, capital and e"ipment. &!ter which the President issed several 'xective Arders as mandated by the
law !or the implementation o! ,& 3<<3. @erein petitioners contend the validity o! the tax exemption provided !or in
the law.
/sse= $hether or not the 'xective Arders issed by President !or the implementation o! the tax exemptions
constittes exective legislation.
@eld= %o limit the tax-!ree importation privilege o! enterprises located inside the special economic None only to raw
materials, capital and e"ipment clearly rns conter to the intention o! the 9egislatre to create a !ree port where
the 5!ree Low o! goods or capital within, into, and ot o! the Nones6 is insred.
%he phrase 5tax and dty-!ree importations o! raw materials, capital and e"ipment6 was merely cited as an
example o! incentives that may be given to entities operating within the None. Pblic respondent SBC& correctly
arged that the maxim expressio nis est exclsio alteris, on which petitioners impliedly rely to spport their
restrictive interpretation, does not apply when words are mentioned by way o! example. /t is obvios !rom the
wording o! ,& 2o. 3<<3, particlarly the se o! the phrase 5sch as,6 that the enmeration only meant to illstrate
incentives that the SS'P is athoriNed to grant, in line with its being a !ree port None.
%he #ort )nds that the setting p o! sch commercial establishments which are the only ones dly athoriNed to
sell consmer items tax and dty-!ree is still well within the policy ennciated in Section 1< o! ,& 2o. 3<<3 that
5. . .the Sbic Special 'conomic Pone shall be developed into a sel!-sstaining, indstrial, commercial, )nancial and
investment center to generate employment opportnities in and arond the None and to attract and promote
prodctive !oreign investments.6 @owever, the #ort reiterates that the second sentences o! paragraphs 1.< and
1.3 o! 'xective Arder 2o. D3-&, allowing tax and dty-!ree removal o! goods to certain individals, even in a limited
amont, !rom the Secred &rea o! the SS'P, are nll and void !or being contrary to Section 1< o! ,& 2o. 3<<3. Said
Section clearly provides that 5exportation or removal o! goods !rom the territory o! the Sbic Special 'conomic Pone
to the other parts o! the Philippine territory shall be sb+ect to cstoms dties and taxes nder the #stoms and
%ari* #ode and other relevant tax laws o! the Philippines.6
:hili00ine Ai+ Lines v. Sec o1 Finance 'R No. !!&3&%> (* Octo5e+ !""&
F A C T S:
%he .ale-&dded %ax Q.&%R is levied on the sale, barter or exchange o! goods and properties as well as
on the sale or exchange o! services. /t is e"ivalent to 101 o! the gross selling price or gross vale in money
o! goods or properties sold, bartered or exchanged or o! the gross receipts !rom the sale or exchange
o! services. ,epblic &ct 2o. 3314 see(s to widen the tax base o! the existing .&% system and enhance
itsadministration by amending the 2ational /nternal ,evene#ode.% h es e a r e v a r i o s s i t s ! o r c er t
i o r a r i a n d pr o h i bi t i o n challenging the constittionality o! ,& 3314=
/n the case at bar, P&9 attac(s the !ormal validity o! ,epblic &ct 2o. 3314. P&9 contends that it violates &rt.
./, Section <4Q1R which provides that F'very bill passed by #ongress shall embrace only one sb+ect which shall be
expressed in the title thereo!.F /t is contended that neither @. 2o. 111D3 nor S. 2o.1430 provided !or
removal o! exemption o! P&9 transactions !rom the payment o! the .&% and that this was made only in
the #on!erence #ommittee bill which became ,epblic &ct 2o.3314 withot reLecting this !act in its title. %he title o!
,epblic &ct 2o. 3314 is= &2 &#% ,'S%,H#%H,/ 2: %@' .&9H'-&BB'B%&O Q.&%R SJS%'C, $/B'2/2: /%S
%&O B&S'
&2B'2@&2#/ 2: / %S &BC/ 2/ S%,&%/ A2, &2B 7A, %@'S' PH,PAS'S &C'2B/ 2: &2B ,'P'&9/ 2:%
@' ,'9'.&2% P,A./S/A2S A7 %@' 2&%/A2&9/2%',2&9 ,'.'2H' #AB', &S &C'2B'B, &2B7A, A%@',
PH,PAS'S. 7rthermore, section 103 o! ,& 3314 states the !ollowing= Section 103.
Exempt Transactions.-
%he ! ol l owi ng shal l be exempt !rom the vale-added tax= Q"R %ransactions which are exempt nder special
laws, except those granted nder Presidential Becree 2os. 44, 5<D, D3<, 1?D1, 15D0.%he e* ect o! t he
amendment i s t o remove t he exempt i on granted to P&9, as !ar as the .&% is concerned. Philippine
&irlines QP&9R claims that its !ranchise nder P.B. 2o. 15D0 which ma(es it liable !or a !ranchise tax o! only <1
o! gross revenes Fin lie o! all the other !ees and charges
o! any (i nd, nat re or descr i pt i on, i mposed, l evi ed, est abl i shed, assessed or col l ect ed by any
mni ci pal , ci t y, provi nci al , ornat i onal at hor i t y or government agency, now or i n t he !tre,F
cannot be amended by ,ep. &ct 2o. 3314 as to ma(e itQP&9R liable !or a 101 vale-added tax on revenes,
becase Sec. <? o! P.B. 2o. 15D0 provides that P&98s !ranchise can only be amended, modi)ed or repealed by a
special law speci)cally !or that prpose.
I S S U E:
$hether or not this amendment o! Section 103 o! the 2/,# is !airly embraced in the title o! ,epblic
&ct 2o.3314, althogh no mention is made therein o! P. B. 2o. 15D0
H E L ;:
%he cort rled in in the aKrmative. %he title states that the prpose o! the statte is to expand the .&%
system, and one way o! doing this is to widen its base by withdrawing some o! the exemptions granted
be!ore. %o insist that P. B. 2o.15D0 be mentioned in the title o! the law, in addition to Section103 o! the 2/,#, in
which it is speci)cally re!erred to, wold be to insist that the title o! a bill shold be a complete index o!
itscontent.%he const i t t i onal re"i rement t hat ever y bi l l passed by #o ngr es s s h a l l embr a c e o
n l y o n e s b+ ec t wh i c h s h a l l be expressed in its title is intended to prevent srprise pon the
member s o! #ongress and t o i n! orm t he peopl e o! pendi ng legislation so that, i! they wish to, they can
be heard regarding it. /!, in the case at bar, petitioner did not (now be!ore that its exemption had been withdrawn, it
is not becase o! any de!ect in the title bt perhaps !or the same reason other stattes, althogh pblished,
pass nnoticed ntil some event somehow calls attention to their existence.
,epblic &ct 2o. 3314 expressly amends P&98s !ranchise
QP.B.2o . 15D0 R by s p ec i ) c a l l y ex c ep t i ng ! r o m t h e gr a n t o ! exemptions !rom the .&% P&98s
exemption nder P. B. 2o.15D0. %his is within the power o! #ongress to do nder &rt.O//, Section 11 o!
the #onstittion, which provides that thegr ant o! a ! r anchi se ! or t he oper at i on o! a pbl i c t i l i t y
i ssb+ect to amendment, alteration or repeal by #ongress whenthe common good so re"ires
A . A @ A ; A v . E + ,i t a 7 ; e l e $ a t i o n t o t h e :+esident9 #)" SCRA !: Se0te,5e+ !/ %**&
,& D333= .&% ,e!orm &ct enacted on Cay <?, <005.Sec. ? (sales o! goods and properties), Sec. 5
(importation o! goods) and Sec. 4 (services and lease o! property) o! ,& D333, in collective, granted the Secretary
o! 7inance the athority to ascertain= (a) whether by 1<G31G05, the .&% collection as a percentage o! the
<00? :BP exceeds <.;1 or (b) the national government de)cit as a percentage o! the <00? :BP
exceeds1.51. /! either condition is met, the Sec o! 7inance mst in!orm the President who, in trn, mst
impose the 1<1 .&% rate (!rom 101) e*ective Eanary 1, <004. &B&S&B& maintained that #ongress abandoned
its exclsive athority to )x taxes and that ,& D333 contained a ni!orm proviso athoriNing the
President pon recommendation by the BA7 Secretary to raise .&% to
1<1.Sen Pi ment el mai nt ai ned t hat ,& D333 const i t t ed ndedelegation o! legislative powers and a
violation o! de process since the law was ambigos and arbitrary. Same with
,ep.'scdero.Pi l i pi n a s Sh el l dea l er s a r g ed t h a t t h e .&% r e! o r m wa s arbitrary, oppressive and
,espondents contered that the law was complete, that it le!t no discretion to the President, and that it
merely charged the President with carrying ot the rate increase once any o! the two conditions arise.
$A2 there was nde delegation.
2o delegation bt mere implementation o! the
law.#on s t i t t i o n a l l o ws a s nder exempt ed del ega t i o n t h e delegation o! tari*s, cstoms dties,
and other tolls, levies on goods imported and exported. .&% is tax levied on sales o! goods and services
which cold not !all nder this exemption. @ence, its delegation i! n"ali)ed is nconstittional. 9egislative power
is athority to ma(e a complete law. %hs, to be valid, a law mst be complete in itsel!, setting !orth therein t he
pol i cy and i t mst ) x a st andard, l i mi t s o! whi ch are sKciently determinate and determinable. 2o
nde delegation when congress describes what +ob mst be done who mst do it and the scope o! the
athority given.('d v 'ricta)Sec o! 7inance was merely tas(ed to ascertain the existence o! !acts. &ll else was
laid ot. Cainly ministerial !or the Secretary to ascertain the !acts and !or the president to carry ot
thei mpl emen t a t i o n ! o r t h e .&%. % h ey wer e a gen t s o ! t h e legislative department.
CIR v. :L;T
7acts= 7or e"ipment, machineries and spare parts it imported !rom Actober 1, 1DD< to Cay 31,1DD?, P9B% paid
the B/, the amont o! P14?,510,D53.00, bro(en down as !ollows= (a)compensating tax o!
P1<4,313,033.00> (b) advance sales tax o! P1<,?40,<1D.00 and (c)other internal revene taxes
o! P<5,333,4D3.00. 7or similar importations made betweenCarch 1DD? t o Cay 31, 1DD?, P9B% pai d
P114, 0?1, 333. 00 val e- added t ax ( .&%) . (2ote= P9B% did not necessarily pay .&% directly to the B/,.)&!ter
a rling was handed down by the B/, to the e*ect that the P9B% is exempt !rom payi ng al l t axes on
i t s ! r anchi se and earni ngs i ncl di ng t he .&% becase o! t he 31!ranchise tax imposed on it by
Section 1< o! ,& 30;<, the P9B% claimed !rom the B/, atax creditGre!nd o! the .&%, compensating taxes, advance
sales taxes and other taxes ithad been paying. $hen its claim was not acted pon by the B/,, P9B% went to the
#%&. %he #%& rled !or P9B%, bt made dedctions (re!ndable amonts which period toclaim had
already prescribed) !rom the total tax re!nd prayed !or by P9B%. %he #/, appealed to the #&. %he #&
aKrmed the #%&Ms decision. %he #/, appealed to the S#, sayi ng t hat t he #& erred i n rl i ng t hat
becase o! t he 31 ! r anchi se t ax t he P9B% i s exempt !rom paying all taxes, inclding indirect taxes.
%he liability !or the payment o! the indirect taxes lies only with the seller o! the goods or services, not in
the byer thereo!. %hs, one cannot invo(e oneMs exemption privilege to avoid the passing on or the shi!ting o! the
.&% to him by the man!actrersGsppliers o! the goods he prchased.
@ence, it is important to determine i! the
tax exemption granted to a taxpayer speci)cally incldes the indirect tax which is shi!ted to him as part o! the
prchase price, otherwise it is presmed that the tax exemption embraces only those taxes !or which the byer is
directly liable.

%ime and again, the #ort has stated that taxation is the rle, exemption is the exception. &ccordingly,
stattes granting tax exemptions mst be constred in strictissimi juris against the taxpayer and liberally in !avor o!
the taxing athority.
%o him, there!ore, who claims a re!nd or exemption !rom tax payments rests the brden o!
+sti!ying the exemption by words too plain to be mista(en and too categorical to be misinterpreted.
Ca$a-an Elect+ic :oAe+ B Li$ht Co. vs. Co,,issione+'R L2)*!%)/ %& Se0te,5e+ !"3&
Second Bivision, &"ino (E)= 5 concr
#agayan 'lectric is a holder o! a legislative !ranchise nder ,epblic &ct 3<?3 where payment o! 31tax on gross
earnings is in lie o! all taxes and assessments pon privileges, etc. /n 1D4;, ,& 5?31 amendedthe !ranchise by
ma(ing all corporate taxpayers liable !or income tax except those indicated in paragraph (c)(1) o! Section <? o!
the %ax #ode. /n 1D4D, throgh ,& 40<0, its !ranchise was extended to two other townsand the tax exemption was
reenacted. /n 1D33, the #ommissioner re"ired the company to pay de)ciencyincome taxes !or 1D4; to 1D31.
$hether the withdrawal o! the !ranchiseMs tax exemption violates the non-impairment clase o! the#onstittion.
#ongress cold impair the companyMs legislative !ranchise by ma(ing it liable !or income tax.
%he#onstittion provides that a !ranchise is sb+ect to amendment, alteration or repeal by the #ongress when
thepblic interest so re"ires. ,& 3<?3 itsel! provides that the !ranchise is sb+ect to amendment, etc.
by#ongress. %he enactment o! ,& 5?31 had the e*ect o! withdrawing the companyMs exemption !rom income tax.
%he exemption was restored by the enactment o! ,& 40<0. %he company is liable only !or the income tax!pr the
period o! 1 Eanary to 3 &gst 1D4D.
A,e+ican .i5le Societ- vs. Manila'R L2")(4/ (* A0+il !"&4
Second Bivision, 7elix (E)= 3 concr, 1 concr in reslt
/n the corse o! its ministry, the Philippine agency o! the &merican Bible Society has been distribtingand selling
bibles andGor gospel portions thereo! throghot the Philippines and translating the same
intosever al Phi l i ppi ne di al et s. %he act i ng #i t y %reasrer o! Cani l a re"i red t he soci et y t o sec
re t hecorresponding CayorMs permit and mnicipal license !ees, together with compromise covering
the period!rom the ?th "arter o! 1D?5 to the <nd "arter o! 1D53. %he society paid sch nder protest, and )led
sit"estioning the legality o! the ordinances nder which the !ees are being collected.
$hether the mnicipal ordinances violate the !reedom o! religios pro!ession and worship.
& tax on the income o! one who engages in religios activities is di*erent !rom a tax on property sed or employed
in connection with those activities. /t is one thing to impose a tax on the income or property o! a preacher, and
another to exact a tax !or him !or the privilege o! delivering a sermon. %he power to tax the exercise o!
a privilege is the power to control or sppress its en+oyment. 'ven i! religios grops and the press are not
altogether !ree !rom the brdens o! the government, the act o! distribting and selling bibles is prely religios and
does not !all nder Section <3 (e) o! the %ax #ode (#& ?44). %he !act that the price o! bibles, etc. are a little higher
than actal cost o! the same does not necessarily mean it is already engaged in bsiness !or pro)t. Ardinance
<5<D and 3000 are not applicable to the Society.
CIR v. SC 8ohnson B Son

(%ax %reaties)
S. #. Eohnson and Son, /nc. entered into a licenseagreement with S# Eohnson and Son, Hnited States o! &merica
7or the se o! the trademar( or technology, S. #. Eohnsonand Son, /nc. was obliged to pay S# Eohnson and Son,HS&
royalties based on a percentage o! net sales andsb+ected the same to <51 withholding tax on royaltypayments
S. #. Eohnson and Son, /nc. )led with the /nternational%ax &*airs Bivision (/%&B) o! the B/, a claim !or re!nd
o! overpaid withholding tax on royalties arging that thepre!erential tax rate o! 101 shold apply to them
$hether or not S# Eohnson and Son, HS& is entitled to theFmost !avored nationF tax rate o! 101 on royalties as
providedin the ,P-HS %ax %reaty in relation to the ,P-$est :ermany%ax %reaty.
2A. Hnder &rticle 13 o! the ,P-HS %ax %reaty, the Philippinesmay impose one o! three rates U <5 percent o! the
grossamont o! the royalties> 15 percent when the royalties are paidby a corporation registered with the Philippine
Board o! /nvestments and engaged in pre!erred areas o! activities> or the lowest rate o! Philippine tax that may be
imposed onroyalties o! the same (ind paid nder similar circmstances toa resident o! a third state.%he ,P-HS and
the ,P-$est :ermany %ax %reaties do notcontain similar provisions on tax crediting.Since the ,P-HS %ax %reaty does
not give a matching taxcredit o! <0 percent !or the taxes paid to the Philippines onroyalties as allowed nder the
,P-$est :ermany %ax %reaty,private respondent cannot be deemed entitled to the 10percent rate granted nder
the latter treaty !or the reason thatthere is no payment o! taxes on royalties nder similar circmstances.
Tan Tion$ .io/ et al vs CIR> 'R L2!&443
7acts= & corporation #entral Syndicate, allegedly prchased !rom Bee @ong 9e stoc( o! srpls properties !rom the
7oreign 9i"idation #ommission. %hs, it remitted the amont o! P?3,350 as deposit !or the sales tax. 9ater on, it
claimed re!nd !or the excess in the payment o! the sales tax de to the ad+stment and redction o! the prchase
price. @owever, an agent o! the #/, reported that it was the syndicate who was the actal importer and original
seller o! the srpls goods. %hs, the syndicate is liable to pay the whole amont o! the sales tax. %he #%& rendered
a decision holding the incorporators o! the syndicate to be severally liable, the syndicateMs personality having had
/sse= $A2 the petitioners, the sccessors-in-interest o! the de!nct #entral Syndicate, can be hel personally liable
!or the sales taxes.
@eld= &Krmative.
Petitioners are the bene)ciaries o! the de!nct corporation and as sch shold be held liable to pay the taxes.
@owever, there being no express provision re"iring the stoc(holders o! the corporation to be solidarily liable !or its
debts which liability mst be express cannot be presmed, petitioners shold be held liable !or the tax in "estion
only in proportion to their shares in the distribtion o! the assets o! the de!nct corporation.
:, 2o. 9-<<33?, September 15, 1D43
<1 S#,& 105
7&#%S= &tanasio Pineda died, srvived by his wi!e, 7elicisima Bagtas, and 15 children, the eldest o! whom is &tty.
Canel Pineda. 'state proceedings were had in #ort so that the estate was divided among and awarded to the
heirs. &tty Pineda8s share amonted to abot P<,500.00. &!ter the estate proceedings were closed, the B/,
investigated the income tax liability o! the estate !or the years 1D?5, 1D?4, 1D?3 and 1D?; and it !ond that the
corresponding income tax retrns were not )led. %herepon, the representative o! the #ollector o! /nternal ,evene
)led said retrns !or the estate issed an assessment and charged the !ll amont to the inheritance de to &tty.
Pineda who arged that he is liable only to extent o! his proportional share in the inheritance.
/SSH'= #an B/, collect the !ll amont o! estate taxes !rom an heir8s inheritance.
@'9B= Jes. %he :overnment can re"ire &tty. Pineda to pay the !ll amont o! the taxes assessed.
%he reason is that the :overnment has a lien on the P<,500.00 received by him !rom the estate as his share in the
inheritance, !or npaid income taxes !or which said estate is liable. By virte o! sch lien, the :overnment has the
right to sb+ect the property in Pineda8s possession to satis!y the income tax assessment. &!ter sch payment,
Pineda will have a right o! contribtion !rom his co-heirs, to achieve an ad+stment o! the proper share o! each heir
in the distribtable estate.
&ll told, the :overnment has two ways o! collecting the tax in "estion. Ane, by going a!ter all the heirs and
collecting !rom each one o! them the amont o! the tax proportionate to the inheritance received> and second, is by
sb+ecting said property o! the estate which is in the hands o! an heir or trans!eree to the payment o! the tax de.
%his second remedy is the very avene the :overnment too( in this case to collect the tax. %he Brea o! /nternal
,evene shold be given, in instances li(e the case at bar, the necessary discretion to avail itsel! o! the most
expeditios way to collect the tax as may be envisioned in the particlar provision o! the %ax #ode above "oted,
becase taxes are the li!eblood o! government and their prompt and certain availability is an imperios need.
:, 2o. 9-3134? Carch 30, 1D3D
;D S#,& 1DD
7&#%S= %he B/, )led on Ely <D, 1D4D a motion !or allowance o! claim and !or payment o! taxes representing the
estate8s tax de)ciencies in 1D43 to 1D4? in the intestate proceedings o! 9is %ongoy. %he administrator opposed
arging that the claim was already barred by the statte o! limitation, Section < and Section 5 o! ,le ;4 o! the
,les o! #ort which provides that all claims !or money against the decedent, arising !rom contracts, express or
implied, whether the same be de, not de, or contingent, all claims !or !neral expenses and expenses !or the last
sic(ness o! the decedent, and +dgment !or money against the decedent, mst be )led within the time limited in
the notice> otherwise they are barred !orever.
/SSH'= Boes the statte o! non-claims o! the ,les o! #ort bar the claim o! the government !or npaid taxesI
@'9B= 2o. %he reason !or the more liberal treatment o! claims !or taxes against a decedent8s estate in the !orm o!
exception !rom the application o! the statte o! non-claims, is not hard to )nd. %axes are the li!eblood o! the
:overnment and their prompt and certain availability are imperios need. (#/, vs. Pineda, <1 S#,& 105). Hpon
taxation depends the :overnment ability to serve the people !or whose bene)t taxes are collected. %o sa!egard
sch interest, neglect or omission o! government oKcials entrsted with the collection o! taxes shold not be
allowed to bring harm or detriment to the people, in the same manner as private persons may be made to s*er
individally on accont o! his own negligence, the presmption being that they ta(e good care o! their personal
a*airs. %his shold not hold tre to government oKcials with respect to matters not o! their own personal concern.
%his is the philosophy behind the government8s exception, as a general rle, !rom the operation o! the principle o!
:, 2o. ;43;5, 2ovember <1, 1DD1
<3? S#,& 3?;
7&#%S= ,espondent corporation #itytrst )led a re!nd o! overpaid taxes with the B/, by which the latter denied on
the grond o! prescription. #itytrst )led a petition !or review be!ore the #%&. %he case was sbmitted !or decision
based solely on the pleadings and evidence sbmitted by the respondent becase the #/, cold not present any
evidence by reason o! the repeated !ailre o! the %ax #reditG,e!d Bivision o! the B/, to transmit the records o! the
case, as well as the investigation report thereon, to the Solicitor :eneral. #%& rendered the decision ordering B/, to
grant the respondent8s re"est !or tax re!nd amonting to P 13.3 million.
/SSH'= 7ailre o! the #/, to present evidence to spport the case o! the government, shold the respondent8s claim
be grantedI
@'9B= 2ot yet. /t is a long and )rmly settled rle o! law that the :overnment is not bond by the errors committed
by its agents. /n the per!ormance o! its governmental !nctions, the State cannot be estopped by the neglect o! its
agent and oKcers. &lthogh the :overnment may generally be estopped throgh the aKrmative acts o! pblic
oKcers acting within their athority, their neglect or omission o! pblic dties as exempli)ed in this case will not
and shold not prodce that e*ect.
2owhere is the a!orestated rle more tre than in the )eld o! taxation. /t is axiomatic that the :overnment cannot
and mst not be estopped particlarly in matters involving taxes. %axes are the li!eblood o! the nation throgh
which the government agencies contine to operate and with which the State e*ects its !nctions !or the wel!are o!
its constitents. %he errors o! certain administrative oKcers shold never be allowed to +eopardiNe the
:overnment8s )nancial position, especially in the case at bar where the amont involves millions o! pesos the
collection whereo!, i! +sti)ed, stands to be pre+diced +st becase o! breacratic lethargy. %hs, it is proper that
the case be remanded bac( to the #%& !or !rther proceedings and reception o! evidence.
:, 2o. 1<?0?3, Actober 1?, 1DD;
<D; S#,& ;3
7&#%S= Private ,espondent JC#&--a non-stoc(, non-pro)t instittion, which condcts varios programs bene)cial to
the pblic prsant to its religios, edcational and charitable ob+ectives--leases ot a portion o! its premises to
small shop owners, li(e restarants and canteen operators, deriving sbstantial income !or sch. Seeing this, the
commissioner o! internal revene (#/,) issed an assessment to private respondent !or de)ciency income tax,
de)ciency expanded withholding taxes on rentals and pro!essional !ees and de)ciency withholding tax on wages.
JC#& opposed arging that its rental income is not sb+ect to tax, mainly becase o! the provisions o! Section <3 o!
2/,# which provides that civic leage or organiNations not organiNed !or pro)t bt operate exclsively !or promotion
o! social wel!are and those organiNed exclsively !or pleasre, recreation and other non-pro)tble bsinesses shall
not be taxed.
/SSH'= /s the contention o! JC#& tenableI
@'9B= 2o. Becase taxes are the li!eblood o! the nation, the #ort has always applied the doctrine o! strict in
interpretation in constring tax exemptions. 7rthermore, a claim o! stattory exemption !rom taxation shold be
mani!est and nmista(able !rom the langage o! the law on which it is based. %hs, the claimed exemption Fmst
expressly be granted in a statte stated in a langage too clear to be mista(en.F
:, 2o. 11335D, Ely <3, 1DD;
<D3 S#,& 33
7&#%S= ,epblic &ct 2o. 1?35 entitles miners and !orest concessioners to the re!nd o! <51 o! the speci)c taxes
paid by the oil companies, which were eventally passed on to the ser--the petitioner in this case--in the prchase
price o! the oil prodcts. Petitioner )led be!ore respondent #ommissioner o! /nternal ,evene (#/,) a claim !or
re!nd in the amont representing <51 o! the speci)c taxes actally paid on the above-mentioned !els and oils
that were sed by petitioner in its operations. @owever petitioner asserts that e"ity and +stice demands that the
re!nd shold be based on the increased rates o! speci)c taxes which it actally paid, as prescribed in Sections 153
and 154 o! the 2/,#. Pblic respondent, on the other hand, contends that it shold be based on speci)c taxes
deemed paid nder Sections 1 and < o! ,& 1?35.
/SSH'= Shold the petitioner be entitled nder ,epblic &ct 2o. 1?35 to the re!nd o! <51 o! the amont o! speci)c
taxes it actally paid on varios re)ned and man!actred mineral oils and other oil prodcts, and not on the taxes
deemed paid and passed on to them, as end-sers, by the oil companiesI
@'9B= 2o. &ccording to an eminent athority on taxation, Fthere is no tax exemption solely on the grond o! e"ity.F
%hs, the tax re!nd shold be based on the taxes deemed paid. Becase taxes are the li!eblood o! the nation,
stattes that allow exemptions are constred strictly against the grantee and liberally in !avor o! the government.
Atherwise stated, any exemption !rom the payment o! a tax mst be clearly stated in the langage o! the law> it
cannot be merely implied there!rom.
:, 2o. 1<0;;0, Ene 5, 1DD3
<D3 S#,& 33
F%he approval o! the cort sitting in probate is not a mandatory re"irement in the collection o! estate taxes.F
F/n case o! !ailre to )le a retrn, the tax may be assessed at anytime within 10 years a!ter the omission.F
7&#%S= Bongbong Carcos soght !or the reversal o! the rling o! the #ort o! &ppeals to grant #/,8s petition to levy
the properties o! the late Pres. Carcos to cover the payment o! his tax delin"encies dring the period o! his exile in
the HS. %he Carcos !amily was assessed by the B/,, and notices were constrctively served to the Carcoses,
however the assessment were not protested administratively by Crs. Carcos and the heirs o! the late president so
that they became )nal and nappealable a!ter the period !or )ling o! opposition has prescribed. Carcos contends
that the properties cold not be levied to cover the tax des becase they are still pending probate with the cort,
and settlement o! tax de)ciencies cold not be had, nless there is an order by the probate cort or ntil the
probate proceedings are terminated.
Petitioner also pointed ot that applying Cemorandm #irclar 2o. 3;-4;, the B/,8s 2otices o! 9evy on the Carcos
properties were issed beyond the allowed period, and are there!ore nll and void.
/SSH'= /s the contention o! Bongbong Carcos correctI
@'9B= 2o. %he de)ciency income tax assessments and estate tax assessment are already )nal and nappealable
-and-the sbse"ent levy o! real properties is a tax remedy resorted to by the government, sanctioned by Section
<13 and <1; o! the 2ational /nternal ,evene #ode. %his smmary tax remedy is distinct and separate !rom the
other tax remedies (sch as Edicial #ivil actions and #riminal actions), and is not a*ected or preclded by the
pendency o! any other tax remedies institted by the government.
%he approval o! the cort, sitting in probate, or as a settlement tribnal over the deceased is not a mandatory
re"irement in the collection o! estate taxes. /t cannot there!ore be arged that the %ax Brea erred in proceeding
with the levying and sale o! the properties allegedly owned by the late President, on the grond that it was re"ired
to see( )rst the probate cort8s sanction. %here is nothing in the %ax #ode, and in the pertinent remedial laws that
implies the necessity o! the probate or estate settlement cort8s approval o! the state8s claim !or estate taxes,
be!ore the same can be en!orced and collected.
An the contrary, nder Section ;3 o! the 2/,#, it is the probate or settlement cort which is bidden not to
athoriNe the exector or +dicial administrator o! the decedent8s estate to deliver any distribtive share to any
party interested in the estate, nless it is shown a #erti)cation by the #ommissioner o! /nternal ,evene that the
estate taxes have been paid. %his provision disproves the petitioner8s contention that it is the probate cort which
approves the assessment and collection o! the estate tax.
An the isse o! prescription, the omission to )le an estate tax retrn, and the sbse"ent !ailre to contest or
appeal the assessment made by the B/, is !atal to the petitioner8s case, as nder Sec.<<3 o! the 2/,#, in case o!
!ailre to )le a retrn, the tax may be assessed at anytime within 10 years a!ter the omission, and any tax so
assessed may be collected by levy pon real property within 3 years (now 5 years) !ollowing the assessment o! the
tax. Since the estate tax assessment had become )nal and nappealable by the petitioner8s de!alt as regards
protesting the validity o! the said assessment, there is no reason why the B/, cannot contine with the collection o!
the said tax.
:, 2o. 11<0<?, Eanary <;, 1DDD
30< S#,& <50
7&#%S= Petitioner PB#om )led its )rst and second "arter income tax retrns, reported pro)ts, and paid income
taxes amonting to P5.<C in 1D;5. @owever, at the end o! the year PB#om s*ered losses so that when it )led its
&nnal /ncome %ax ,etrns !or the year-ended Becember 31, 1D;4, the petitioner li(ewise reported a net loss o!
P1?.1 C, and ths declared no tax payable !or the year. /n 1D;;, the ban( re"ested !rom #/, !or a tax credit and
tax re!nds representing overpayment o! taxes. Pending investigation o! the respondent #/,, petitioner institted a
Petition !or ,eview be!ore the #ort o! %ax &ppeals (#%&). #%& denied its petition !or tax credit and re!nd !or !ailing
to )le within the prescriptive period to which the petitioner belies arging the ,evene #irclar 2o.3-;5 issed by
the #/, itsel! states that claim !or overpaid taxes are not covered by the two-year prescriptive period mandated
nder the %ax #ode.
/SSH'= /s the contention o! the petitioner correctI /s the revene circlar a valid exemption to the 2/,#I
@'9B= 2o. %he relaxation o! revene reglations by ,C# 3-;5 is not warranted as it disregards the two-year
prescriptive period set by law.
Basic is the principle that Ftaxes are the li!eblood o! the nation.F %he primary prpose is to generate !nds !or the
State to )nance the needs o! the citiNenry and to advance the common weal. Be process o! law nder the
#onstittion does not re"ire +dicial proceedings in tax cases. %his mst necessarily be so becase it is pon
taxation that the government chieLy relies to obtain the means to carry on its operations and it is o! tmost
importance that the modes adopted to en!orce the collection o! taxes levied shold be smmary and inter!ered with
as little as possible.
7rom the same perspective, claims !or re!nd or tax credit shold be exercised within the time )xed by law
becase the B/, being an administrative body en!orced to collect taxes, its !nctions shold not be ndly delayed
or hampered by incidental matters.
:, 2o. 9-<<03?, &pril 30, 1D45
13 S#,& 335
7&#%S= %he petitioner Philippine :aranty #o., /nc., a domestic insrance company, entered into reinsrance
contracts with !oreign insrance companies not doing bsiness in the contry, thereby ceding to !oreign reinsrers
a portion o! the premims on insrance it has originally nderwritten in the Philippines. %he premims paid by sch
companies were exclded by the petitioner !rom its gross income when it )le its income tax retrns !or 1D53 and
1D5?. 7rthermore, it did not withhold or pay tax on them. #onse"ently, the #/, assessed against the petitioner
withholding taxes on the ceded reinsrance premims to which the latter protested the assessment on the grond
that the premims are not sb+ect to tax !or the premims did not constitte income !rom sorces within the
Philippines becase the !oreign reinsrers did not engage in bsiness in the Philippines, and #/,8s previos rlings
did not re"ire insrance companies to withhold income tax de !rom !oreign companies.
/SSH'= &re insrance companies not re"ired to withhold tax on reinsrance premims ceded to !oreign insrance
companies, which deprives the government !rom collecting the tax de !rom themI
@'9B= 2o. %he power to tax is an attribte o! sovereignty. /t is a power emanating !rom necessity. /t is a necessary
brden to preserve the State8s sovereignty and a means to give the citiNenry an army to resist an aggression, a
navy to de!end its shores !rom invasion, a corps o! civil servants to serve, pblic improvement designed !or the
en+oyment o! the citiNenry and those which come within the State8s territory, and !acilities and protection which a
government is spposed to provide. #onsidering that the reinsrance premims in "estion were a*orded
protection by the government and the recipient !oreign reinsrers exercised rights and privileges garanteed by or
laws, sch reinsrance premims and reinsrers shold share the brden o! maintaining the state.
%he petitioner8s de!ense o! reliance o! good !aith on rlings o! the #/, re"iring no withholding o! tax de on
reinsrance premims may !ree the taxpayer !rom the payment o! srcharges or penalties imposed !or !ailre to
pay the corresponding withholding tax, bt it certainly wold not exclpate it !rom liability to pay sch withholding
tax. %he :overnment is not estopped !rom collecting taxes by the mista(es or errors o! its agents.
:, 2o. 1<530?, &gst <;, 1DD;
<D? S#,& 4;3
7&#%S= Petitioner Philex Cining #orp. assails the decision o! the #ort o! &ppeals aKrming the #ort o! %ax &ppeals
decision ordering it to pay the amont o! P110.3 C as excise tax liability !or the period !rom the <nd "arter o! 1DD1
to the <nd "arter o! 1DD< pls <01 annal interest !rom 1DD? ntil !lly paid prsant to Sections <?; and <?D o!
the %ax #ode o! 1D33. Philex protested the demand !or payment o! the tax liabilities stating that it has pending
claims !or .&% inpt creditGre!nd !or the taxes it paid !or the years 1D;D to 1DD1 in the amont o! P1<0 C pls
interest. %here!ore these claims !or tax creditGre!nd shold be applied against the tax liabilities.
/SSH'= #an there be an o*-setting between the tax liabilities vis-a-vis claims o! tax re!nd o! the petitionerI
@'9B= 2o. Philex8s claim is an otright disregard o! the basic principle in tax law that taxes are the li!eblood o! the
government and so shold be collected withot nnecessary hindrance. 'vidently, to contenance Philex8s
whimsical reason wold render ine*ective or tax collection system. %oo simplistic, it )nds no spport in law or in
%o be sre, Philex cannot be allowed to re!se the payment o! its tax liabilities on the grond that it has a pending
tax claim !or re!nd or credit against the government which has not yet been granted.%axes cannot be sb+ect to
compensation !or the simple reason that the government and the taxpayer are not creditors and debtors o! each
other. %here is a material distinction between a tax and debt. Bebts are de to the :overnment in its corporate
capacity, while taxes are de to the :overnment in its sovereign capacity. xxx %here can be no o*-setting o! taxes
against the claims that the taxpayer may have against the government. & person cannot re!se to pay a tax on the
grond that the government owes him an amont e"al to or greater than the tax being collected. %he collection o!
a tax cannot await the reslts o! a lawsit against the government.
:, 2o. 9-1<353, September 30, 1D40
10D P@/9 511
7&#%S= %he petitioner sold more than <C board!eet o! logs to :eneral 9mber #o. with the agreement that the latter
wold pay the sales taxes. %he #/,, pon consltation oKcially advised the parties that the brea interposes no
ob+ection so long as the tax de shall be covered by a srety. :eneral 9mber complied, bt later !ailed, with the
srety, to pay the tax liabilities, and so the respondent collector re"ired the petitioner to pay thr a letter dated
&gst 30, 1D55. %wice did the petitioner )led a re"est !or reconsideration be!ore )nally sbmitting the denied
re"est !or appeal be!ore the #ort o! %ax &ppeals. %he #%& dismissed the appeal as it was clearly )led ot o! time.
%he petitioner had consmed thirty-three days !rom the receipt o! the demand, be!ore )ling the appeal. Petitioner
arged that in compting the 30-day period in per!ecting the appeal the letter o! the respondent #ollector dated
Eanary 30, 1D54, denying the second re"est !or reconsideration, shold be considered as the )nal decision
contemplated in Section 3, and not the letter o! demand dated &gst 30, 1D55.
/SSH'= /s the contention o! the petitioner tenableI
@'9B= 2o. %his contention is ntenable. $e cannot contenance that theory that wold ma(e the commencement
o! the stattory 30-day period solely dependent on the will o! the taxpayer and place the latter in a position to pt
o* inde)nitely and at his convenience the )nality o! a tax assessment. Sch an absrd procedre wold be
detrimental to the interest o! the :overnment, !or Ftaxes are the li!eblood o! the government, and their prompt and
certain availability is an imperios need.F
:, 2o. 9-<34?5, Actober <D, 1D4;
<5 S#,& ;<3
7&#%S= Petitioner Ben+amin :omeN mailed a letter at the post oKce in San 7ernando, Pampanga. /t did not bear the
special anti-%B stamp re"ired by the ,& 1435. /t was retrned to the petitioner. Petitioner now assails the
constittionality o! the statte claiming that ,& 1435 otherwise (nown as the &nti-%B Stamp law is violative o! the
e"al protection clase becase it constittes mail sers into a class !or the prpose o! the tax while leaving
ntaxed the rest o! the poplation and that even among postal patrons the statte discriminatorily grants
exemptions. %he law in "estion re"ires an additional 5 centavo stamp !or every mail being posted, and no mail
shall be delivered nless bearing the said stamp.
/SSH'= /s the &nti-%B Stamp 9aw nconstittional, !or being allegedly violative o! the e"al protection claseI
@'9B= 2o. /t is settled that the legislatre has the inherent power to select the sb+ects o! taxation and to grant
exemptions. %his power has aptly been described as Fo! wide range and Lexibility.F /ndeed, it is said that in the )eld
o! taxation, more than in other areas, the legislatre possesses the greatest !reedom in classi)cation. %he reason
!or this is that traditionally, classi)cation has been a device !or )tting tax programs to local needs and sages in
order to achieve an e"itable distribtion o! the tax brden.
%he classi)cation o! mail sers is based on the ability to pay, the en+oyment o! a privilege and on administrative
convenience. %ax exemptions have never been thoght o! as raising revenes nder the e"al protection clase.
:, 2o. 9-<34?5, Actober <D, 1D4;
D5 P@/9 ?4
7&#%S= %he plainti*s--two lawyers, medical practitioner, a dental srgeon, a #P&, and a pharmacist--soght the
annlment o! Ardinance 2o.33D; o! the #ity o! Canila which imposes a mnicipal occpation tax on persons
exercising varios pro!essions in the city and penaliNes non-payment o! the tax, contending in sbstance that this
ordinance and the law athoriNing it constitte class legislation, are n+st and oppressive, and athoriNe what
amonts to doble taxation. %he brden o! plainti*s8 complaint is not that the pro!essions to which they
respectively belong have been singled ot !or the imposition o! this mnicipal occpation tax, bt that while the law
has athoriNed the #ity o! Canila to impose the said tax, it has withheld that athority !rom other chartered cities,
not to mention mnicipalities.
/SSH'= Boes the law constitte a class legislationI /s it !or the #ort to determine which political nit shold impose
taxes and which shold notI
@'9B= 2o. /t is not !or the corts to +dge what particlar cities or mnicipalities shold be empowered to impose
occpation taxes in addition to those imposed by the 2ational :overnment. %hat matter is pecliarly within the
domain o! the political departments and the corts wold do well not to encroach pon it. Coreover, as the seat o!
the 2ational :overnment and with a poplation and volme o! trade many times that o! any other Philippine city or
mnicipality, Canila, no dobt, o*ers a more lcrative )eld !or the practice o! the pro!essions, so that it is bt !air
that the pro!essionals in Canila be made to pay a higher occpation tax than their brethren in the provinces.
<< S#,& 3
:, 2o. 9-<3D;;, Eanary <, 1D4;
F$hat may be the sb+ect o! a +dicial review is the decision o! the #ommissioner on the protest against
assessment, not the assessment itsel!.F
7&#%S= %he sposes .illa )led +oint income tax retrns !or the years 1D51 to 1D54. %he B/, issed assessments !or
de)ciency o! income tax !or the said years. $ithot contesting the said assessments with the #/,, they )led a
petition !or review with the #%&. %he #%& too( cogniNance o! the o! the appeal and rendered !avorable +dgment to
the sposes. %he #/, appealed to the S# "estioning the +risdiction o! the #%&.
/SSH'= /s an appeal to the #%& proper in this caseI /s the #%& vested with +risdictionI
@'9B= 2o. %he rle is that where a taxpayer "estions an assessment and as(s the #ollector to reconsider or cancel
the same becase he (the taxpayer) believes he is not liable there!or, the assessment becomes a Fdispted
assessmentF that the #ollector mst decide, and the taxpayer can appeal to the #ort o! %ax &ppeals only pon
receipt o! the decision o! the #ollector on the dispted assessment. Since in the instant case the taxpayer
appealed the assessment o! the #ommissioner o! /nternal ,evene withot previosly contesting the same, the
appeal was prematre and the #ort o! %ax &ppeals had no +risdiction to entertain said appeal. 7or, as stated, the
+risdiction o! the %ax #ort is to review by appeal decisions o! /nternal ,evene on dispted assessments. %he %ax
#ort is a cort o! special +risdiction. &s sch, it can ta(e cogniNance only o! sch matters as are clearly within its
3<0 S#,& 53?
:, 2o. 130?30, Becember 13, 1DDD
F& re"est !or reconsideration o! the tax assessment does not e*ectively sspend the rnning o! the precriptive
period i! the same is )led a!ter the assessment had become )nal and nappealable.F
7&#%S= An Ely 1;, 1D;4, the B/, issed to respondent Sald .. @iNon a de)ciency income tax assessment covering
the )scal year 1D;1-1D;<. ,espondent not having contested the assessment, petitioner B/,, on Eanary 1<, 1D;D,
served warrants o! distraint and levy to collect the tax de)ciency. @owever, !or reasons not (nown, it did not
proceed to dispose o! the attached properties.
Core than three years later, the respondent wrote the B/, re"esting a reconsideration o! her tax de)ciency
assessment. %he B/,, in a letter dated &gst 11, 1DD?, denied the re"est. An Eanary 1, 1DD3, it )led a case with
the ,%# to collect the tax de)ciency. @iNon moved to dismiss the case on two gronds= (1) that the complaint was
not )led pon athority o! the B/, #ommissioner as re"ired by Sec. <<1 o! the 2/,#, and (<) that the action had
already prescribed. Aver petitioner8s ob+ection, the trial cort granted the motion and dismissed the complaint.
B/, on the other hand contends that respondent8s re"est !or reinvestigation o! her tax de)ciency assessment on
2ovember 1DD< e*ectively sspended the rnning o! the period o! prescription.
/SSH'= @as the action !or collection o! the tax prescribedI
@'9B= Jes. Sec. <<D o! the 2/,# mandates that a re"est !or reconsideration mst be made within 30 days !rom the
taxpayer8s receipt o! the tax de)ciency assessment, otherwise the assessment becomes )nal, nappealable and,
there!ore, demandable. %he notice o! assessment !or respondent8s tax de)ciency was issed by petitioner on Ely
1;, 1D;4. An the other hand, respondent made her re"est !or reconsideration thereo! only on 2ovember 3, 1DD<,
withot stating when she received the notice o! tax assessment. @ence, her re"est !or reconsideration did not
sspend the rnning o! the prescriptive period provided nder Sec. <<3(c). &lthogh the #ommissioner acted on her
re"est by eventally denying it on &gst 11, 1DD?, this is o! no moment and does not detract !rom the !act that
the assessment had long become demandable.
< S#,& 1??
:, 2o. 9-1?1?<, Cay 30, 1D41
F$here the tax obligation is secred by a bond, the prescriptive period !or the action !or the !or!eitre o! the bond is
governed by the #ivil #ode.F
7&#%S= %he Solicitor :eneral, in behal! o! the ,epblic o! the Philippines, )led be!ore #7/ o! Canila an action against
the de!endant &raneta, as principals, and Canila Srety, as srety, to recover the internal revene taxes inclding
srcharges, the payment o! which was garanteed by a bond exected when the )rst extra+dicial demand !or
payment was made. %he appellant-taxpayers contend that the appellee8s case o! action has prescribed, becase
the action !or recovery o! internal revene taxes and srcharge de broght on << 7ebrary 1D53, was not
commenced within the period o! )ve years a!ter the assessment dated 15 Cay 1D?; had been made, as provided
!or in Section 331 o! the %ax #ode.
/SSH'= @as the action to recover the taxes de !rom the taxpayer and the srety already prescribedI
@'9B= 2o. %he appellant-taxpayers cannot invo(e prescription nder the provisions o! Section 331 o! the 2/,#
becase the government is sing on the bond exected and )led by them to garantee payment in 4 monthly
installments o! the tax liability de !rom 1D?4 to 1D?;, which is a separate and distinct obligation o! the parties
thereto. %he action to en!orce the obligation on the bond exected on Carch 1;, 1D?D, having been )led in cort on
7ebrary <<, 1D53, was within the 10-year prescriptive period to en!orce a written contractal obligation, as set by
the #ivil #ode.
<D S#,& 55<
:, 2o. 2o. 9-<1551, September 30, 1D4D
F%he )ling o! an answer to taxpayer8s petition !or review is considered as instittion o! +dicial action.F
7&#%S= %he #ommissioner o! /nternal ,evene assessed the petitioner investment corporation o! de)ciency income
taxes !or the years 1D50 to 1D5? and !or 1D53. %here were two conLicting dates o! assessment, which are vital to
the compliance with the statte o! limitations, based on each claim o! the petitioner and the respondent> the
#ommisioner8s record o! date o! assesment is 7ebrary <3, 1D54 while the petitioner believes the demand was
made on Becember <3, 1D55 so that, as the petitioner corporation claims, the #ommissioner8s action to recover its
tax liability shold be deemed to have prescribed !or !ailre on the part o! the #ommissioner to )le a complaint !or
collection against it in an appropriate civil action.
/SSH'= @as the action !or collection prescribedI
@'9B= 2o. /t has been held that Fa +dicial action !or the collection o! a tax is begn by the )ling o! a complaint with
the proper cort o! )rst instance, or where the assessment is appealed to the #ort o! %ax &ppeals, by )ling an
answer to the taxpayer8s petition !or review wherein payment o! the tax is prayed !or.F %his is bt logical !or where
the taxpayer avails o! the right to appeal the tax assessment to the #ort o! %ax &ppeals, the said #ort is vested
with the athority to prononce +dgment as to the taxpayer8s liability to the exclsion o! any other cort. /n the
present case, regardless o! whether the assessments were made on 7ebrary <? and <3, 1D54, as claimed by the
#ommissioner, or on Becember <3, 1D55 as claimed by the taxpayer, the government8s right to collect the taxes
de has clearly not prescribed, as the taxpayer8s appeal or petition !or review was )led with the %ax #ort on Cay ?,
1D40, with the #ommissioner )ling on Cay <0, 1D40 his &nswer with a prayer !or payment o! the taxes de, long
be!ore the expiration o! the )ve-year period to e*ect collection by +dicial action conted !rom the date o!
13< S#,& 1
:, 2o. 9-33041, September 5, 1D;?
F7orest charges are internal revene taxes and the B/, has the sole power and dty to collect them. %hs, an
assessment made by the Brea o! 7orestry cannot be considered an assessment made by the B/,.F
7&#%S= %he Brea o! 7orestry sent a demand letter dated Eanary 15, 1D?D to Camblao 9mber #o. demanding
!or the payment o! !orest charges and srcharges. Camblao protested the assessment. An &gst <D,1D5;, the
B/, li(ewise wrote a letter to the company demanding payment, which sbse"ently re"ested reinvestigation. %he
B/, gave the company twenty (<0) days !rom receipt within which to sbmit the reslts o! its veri)cation o!
payments. 7or !ailre to comply and !ailre to pay its tax liability despite demands, #/, )led a complaint !or
collection with #7/-Canila on &gst <5, 1D41. %he #7/-Canila and #ort o! &ppeals decided against Camblao
ordering it to pay the tax liability. Petitioner arged that the collection is barred by the statte o! limitations nder
Sections 33< o! the 2/,#. &s stated, the collection shold be made within the )ve (5) year period. 7rom 1D?D (date
when the Brea o! 7orestry assessed and demand payment as !orestry charges and srcharges) p to 1D41 (date
o! )ling o! complaint), it is already more than )ve years.
/SSH'= @as the period o! )ling o! collection complaint prescribedI
@'9B= 2o. %he action !or collection is not barred by prescription. %he basis o! the complaint )led on &gst 1D41
was the demand letter made by the #/, on &gst <D, 1D5; and not the demand letter o! the Brea o! 7orestry on
Eanary 1D?D. So that the rec(oning date o! the 5-year period shold be !rom the date o! the B/, letter and not that
o! the Brea o! 7orestry. %his mst be so becase !orest charges are internal revene taxes and the B/, has the
sole power and dty to collect them.
:, 2o. 50<, Eanary <D, 1D?4
F%he taxpayer shold at least be apprised o! the exact date o! the proceeding by which she is to lose her property.
7ailre o! the taxpayer to accordingly correct or change name in the assessment record cannot spplant sch
absence o! notice.F
7&#%S= %he Provincial %reasrer o! %ayabas issed a notice !or the sale at pblic action o! the real properties o!
2emesio #abrera !or!eited !or tax delin"ency on Becember 15, 1D?0. %he letter sent to 2emesio #abrera was
retrned mar(ed 5Hnclaimed6 !or the latter was already dead in 1D35. %he land was actally sold in a reschedled
pblic action sale on Cay 1D?1 to #atigbac and was )naliNed in Cay 1D?<. Basilia #abrera, the registered owner o!
the land sb+ect to attachment, )led a complaint with the #7/-%ayabas against the Provincial %reasrer and #atigbac
attac(ing the validity o! the sale on the gronds that she was not noti)ed, even thogh the property had remained
in the assessment boo( in the name o! 2emesio #abrera, becase she became the registered owner thereo! since
1D3? when a %orrens %itle was issed to her by the ,egister o! Beeds o! %ayabas.
/SSH'= /s there a need !or new notices i! the land was not sold on the date speci)ed in the previos noticeI
@'9B= Jes. Hnder the law, even i! the notice state that the sale wold ta(e place on a speci)ed date and every day
therea!ter, it is a general and inde)nite notice. /n order to protect the taxpayerMs rights, the taxpayer shold at least
be apprised o! the exact date o! the proceeding by which she is to lose her property. Besides, the appellee
admittedly being not noti)ed also vitiates the proceeding. She is the registered owner o! the land and had become
liable !or taxes thereon. 7or all prposes, she is the delin"ent taxpayer Fagainst whom the taxes were assessed.F /t
cannot be 2emesio !or the latter8s obligation to pay ended where Basilia8s liability began.
Basilia may be criticiNed !or !ailre to have changed the name in the assessment record. @owever, sch
circmstance, nevertheless, cannot spplant the absence o! notice.
10< P@/9 1145
:, 2o. 9-D435, September <;, 1D53
F%he property levied by a competent cort may, with the consent thereo!, be distrained, sb+ect to the prior lien o!
the attachment creditor.F
7&#%S= %he #ollector o! /nternal ,evene sent a warrant o! distraint and levy against the properties o! ,estitto
#odiVera !or collection o! certain de)ciency speci)c tax. @owever, it cold not be e*ected in view o! the attachment
o! the said properties o! the #7/-Canila o! another case. &!ter seven years, the #ollector o! /nternal ,evene issed
a warrant o! distraint and levy commanding the #ity %reasrer o! #eb #ity to distrain the goods, chattels, or e*ects
and other personal property o! whatever character, and levy pon the real property and interest in or rights to real
property o! the estate o! the deceased. %he heirs o! the deceased )led the action with the #%& barring the
government to collect said de)ciency on the grond o! prescription there!ore praying to declare nll and void, and
o! no legal !orce and e*ect the warrant o! distraint and levy which the respondent issed on Carch 3, 1D55.
/SSH'= Boes the attachment made by a cort in a civil case over certain properties o! a taxpayer bar the
government !rom en!orcing a warrant o! distraint and levy over the a!oresaid properties in order to collect the taxes
@'9B= 2o. %here may be a valid reason !or non-distraint o! the property which was de to the attachment o! the #7/-
Canila in another case. @owever, sch property levied by a competent cort may, with the consent thereo!, be
sbse"ently distrained, sb+ect to the prior lien o! the attachment creditor. %he attachment merely deprives the
#ollector o! /nternal ,evene the power to divest the #ort o! its +risdiction over said property bt it does not
impair sch rights as the :overnment may have !or the collection o! taxes.
1?D S#,& 351
:, 2o. 9-3;5?0 &pril 30, 1D;3
F%he !ollow-p letter reiterating demand !or payment cold be considered a notice o! assessment in itsel! i! dly
received by the taxpayer.F
7&#%S= %he petitioner soght the review on certiorari o! the decision o! the respondent #ort o! &ppeals reversing
the decision o! the then #ort o! 7irst /nstance o! Canila which ordered private respondent 2ielson W #o., /nc. to pay
the :overnment the amont o! P11,?D4.00 as ad valorem tax, occpation !ees, additional residence tax and <51
srcharge !or late payment, !or the years 1D?D to 1D5<. Petitioner claims that the demand letter o! 14 Ely 1D55
showed an imprint indicating that the original thereo! was released and mailed on ? &gst 1D55 by the #hie!,
,ecords Section o! the Brea o! /nternal ,evene, and that the original letter was not retrned to said Brea>
ths, said demand letter mst be considered to have been received by the private respondent. &ccording to
petitioner, i! service is made by ordinary mail, nless the actal date o! receipt is shown, service is deemed
complete and e*ective pon the expiration o! )ve (5) days a!ter mailing. &s the letter o! demand dated 14 Ely
1D55 was actally mailed to private respondent, there arises the presmption that the letter was received by
private respondent in the absence o! evidence to the contrary. Core so, where private respondent did not o*er any
evidence, except the sel!-serving testimony o! its witness, that it had not received the original copy o! the demand
letter dated 14 Ely 1D55.
/SSH'= $as notice o! assessment or demand properly served to the respondentI Shold the receipt by the
respondent o! the scceeding !ollow-p demand notices be constred as receipt o! the original demandI
@'9B= &s to the )rst isse, no. &s correctly observed by the respondent cort in its appealed decision, while the
contention o! petitioner is correct that a mailed letter is deemed received by the addressee in the ordinary corse o!
mail, still this is merely a disptable presmption, sb+ect to controversion, and a direct denial o! the receipt thereo!
shi!ts the brden pon the party !avored by the presmption to prove that the mailed letter was indeed received by
the addressee. Since petitioner has not addced proo! that private respondent had in !act received the demand
letter o! 14 Ely 1D55, it can not be assmed that private respondent received said letter. &s to the second
isse, Jes. ,ecords show that petitioner wrote private respondent a !ollow-p letter dated 1D September 1D54,
reiterating its demand !or the payment o! taxes as originally demanded in petitioner8s letter dated 14 Ely 1D55.
%his !ollow-p letter is considered a notice o! assessment in itsel! which was dly received by private respondent in
accordance with its own admission. &nd conse"ently, nder Section 3 o! ,epblic &ct 2o. 11<5, the assessment is
appealable to the #ort o! %ax &ppeals within thirty (30) days !rom receipt o! the letter. %he taxpayer8s !ailre to
appeal in de time, as in the case at bar, ma(es the assessment in "estion )nal, exectory and demandable. %hs,
private respondent is now barred !rom dispting the correctness o! the assessment or !rom invo(ing any de!ense
that wold reopen the "estion o! its liability on the merits.
<?< S#,& <;D
:, 2o. 10?151 Carch 10, 1DD5
F&ssessments are prima !acie presmed correct and made in good !aith. So that, in the absence o! proo! o! any
irreglarities in the per!ormance o! oKcial dties, an assessment will not be distrbed.F
7&#%S= %he #ommissioner o! /nternal ,evene served two notices and demand !or payment o! the respective
de)ciency ad valorem and biness taxes !or taxable years 1D35 and 1D34 against the respondent &tlas
#onsolidated Cining and Bevelopment #orporation (&#CB#). %he latter protested both assessments bt the same
were denied, hence it )led two separate petitions !or review in the #ort o! %ax &ppeals. %he #%& rendered a
consolidated decision holding, inter alia, that &#CB# was not liable !or de)ciency ad valorem taxes on copper and
silver !or 1D35 and 1D34 thereby e*ectively sstaining the theory o! &#CB# that in compting the ad valorem tax
on copper mineral, the re)ning and smelting charges shold be dedcted, in addition to !reight and insrance
@owever, the tax cort held &#CB# liable !or the amont consisting o! <51 srcharge !or late payment o! the ad
valorem tax and late )ling o! notice o! removal o! silver, gold and pyrite extracted dring certain periods, and !or
alleged de)ciency man!actrer8s sales tax and sch contractor8s tax !or leasing ot o! its personal properties.
&#BC# elevated the matter to the Spreme #ort claiming that the leasing ot was a mere isolated transaction,
hence shold not be sb+ected to contractor8s tax.
/SSH'= /s the claim o! the private respondent, with respect to the contractor8s tax, impressed with meritI
@'9B= 2o. /t is being held that &#CB# was not a man!actrer sb+ect to the percentage tax imposed by Section
1;4 o! the tax code. @owever sch conclsion cannot be made with respect to the contractor8s tax being imposed
on &#CB#. /t cannot validly claim that the leasing ot o! its personal properties was merely an isolated transaction.
/ts boo( o! acconts shows that several distinct payments were made !or the se o! its personal properties sch as
its plane, motor boat and dmp trc(. %he series o! transactions engaged in by &#CB# !or the lease o! its a!oresaid
properties cold also be dedced !rom the !act that dring the period there were pro)ts earned and reported
there!or. %he allegation o! &#CB# that it did not realiNe any pro)t !rom the leasing ot o! its said personal
properties, since its income there!rom covered only the costs o! operation sch as salaries and !el, is not
spported by any docmentary or sbstantial evidence.
&ssessments are prima !acie presmed correct and made in good !aith. #ontrary to the theory o! &#CB#, it is the
taxpayer and not the B/, who has the dty o! proving otherwise. /t is an elementary rle that in the absence o!
proo! o! any irreglarities in the per!ormance o! oKcial dties, an assessment will not be distrbed. &ll
presmptions are in !avor o! tax assessments. .erily, !ailre to present proo! o! error in assessments will +sti!y
+dicial aKrmance o! said assessment.
A.AA vs. E.;ANE/ 8R.
515 S#,& 3<0
:, 2o. 143D1D, 7ebrary 1?, <003
F& taxpayer need not be a party to the contract to challenge its validity.F
7&#%S= %he petitioners, Plaridel C. &baya who claims that he )led the instant petition as a taxpayer, !ormer
lawma(er, and a 7ilipino citiNen, and Plaridel #. :arcia li(ewise claiming that he )led the sit as a taxpayer, !ormer
military oKcer, and a 7ilipino citiNen, mainly see( to nlli!y a BP$@ resoltion which recommended the award to
private respondent #hina ,oad W Bridge #orporation o! the contract !or the implementation o! the civil wor(s (nown
as #ontract Pac(age 2o. / (#P /). %hey also see( to annl the contract o! agreement sbse"ently entered into by
and between the BP$@ and private respondent #hina ,oad W Bridge #orporation prsant to the said resoltion.
/SSH'= @as petitioners the legal standing to )le the instant case against the governmentI
@'9B= Petitioners, as taxpayers, possess locs standi to )le the present sit. BrieLy stated, locs standi is a right o!
appearance in a cort o! +stice on a given "estion. Core particlarly, it is a partyMs personal and sbstantial
interest in a case sch that he has sstained or will sstain direct in+ry as a reslt o! the governmental act being
challenged. 9ocs standi, however, is merely a matter o! procedre and it has been recogniNed that in some cases,
sits are not broght by parties who have been personally in+red by the operation o! a law or any other
government act bt by concerned citiNens, taxpayers or voters who actally se in the pblic interest.
#onse"ently, the #ort, in a catena o! cases, has invariably adopted a liberal stance on locs standi, inclding
those cases involving taxpayers.
%he prevailing doctrine in taxpayerMs sits is to allow taxpayers to "estion contracts entered into by the national
government or government- owned or controlled corporations allegedly in contravention o! law. & taxpayer is
allowed to se where there is a claim that pblic !nds are illegally disbrsed, or that pblic money is being
deLected to any improper prpose, or that there is a wastage o! pblic !nds throgh the en!orcement o! an invalid
or nconstittional law. Signi)cantly, a taxpayer need not be a party to the contract to challenge its validity.
45 S#,& 4<?
:, 2o. 9-314;5 Ely 31, 1D35
F$ith the absence o! any pecniary or monetary interest owing !rom the pblic, a taxpayer may not have the right
to "estion the legality o! an issance creating a trst !or the bene)t o! the people bt prely !nded by charity.F
7&#%S= %he petitioner "estioned the validity o! 'A 2o. 30 creating the #ltral #enter o! the Philippines, having as
its estate the real and personal property vested in it as well as donations received, )nancial commitments that
cold therea!ter be collected, and gi!ts that may be !orthcoming in the !tre. /t was li(ewise alleged that the Board
o! %rstees did accept donations !rom the private sector and did secre !rom the #hemical Ban( o! 2ew Jor( a loan
o! X5 million garanteed by the 2ational /nvestment W Bevelopment #orporation as well as X3.5 million received
!rom President Eohnson o! the Hnited States in the concept o! war damage !nds, all intended !or the constrction o!
the #ltral #enter bilding estimated to cost P?; million. %he petition was denied by the trial cort arging that
with not a single centavo raised by taxation, and the absence o! any pecniary or monetary interest o! petitioner
that cold in any wise be pre+diced distinct !rom those o! the general pblic.
/SSH'= @as a taxpayer the capacity to "estion the validity o! the issance in this caseI
@'9B= 2o. /t was therein pointed ot as Fone more valid reasonF why sch an otcome was navoidable that Fthe
!nds administered by the President o! the Philippines came !rom donations QandR contribtions QnotR by taxation.F
&ccordingly, there was that absence o! the Fre"isite pecniary or monetary interest.F %he stand o! the lower cort
)nds spport in +dicial precedents. %his is not to retreat !rom the liberal approach !ollowed in Pascal v. Secretary
o! Pblic $or(s, !oreshadowed by People v. .era, where the doctrine o! standing was )rst !lly discssed. /t is only
to ma(e clear that petitioner, +dged by orthodox legal learning, has not satis)ed the elemental re"isite !or a
taxpayer8s sit. Coreover, even on the assmption that pblic !nds raised by taxation were involved, it does not
necessarily !ollow that sch (ind o! an action to assail the validity o! a legislative or exective act has to be passed
pon. %his #ort, as held in the recent case o! %an v. Cacapagal, Fis not devoid o! discretion as to whether or not it
shold be entertained.F %he lower cort ths did not err in so viewing the sitation.
1D3 S#,& 331
:, 2o. ;;<D1 Cay 31, 1DD1
F& taxpayer may "estion the legality o! a law or reglation when it involves illegal expenditre o! pblic money.F
7&#%S= Senator 'rnesto Caceda soght to nlli!y certain decisions, orders, rlings, and resoltions o! respondents
'xective Secretary, Secretary o! 7inance, #ommissioner o! /nternal ,evene, #ommissioner o! #stoms and the
7iscal /ncentives ,eview Board 7/,B !or exempting the 2ational Power #orporation (2P#) !rom indirect tax and
dties. ,& 35;, ,& 43D5 and PB 3;0 expressly grant 2P# exemptions !rom all taxes whether direct or indirect. /n
1D;?, however, PB 1D31 and 'A D3 withdrew all tax exemptions granted to all :A##s inclding the 2P# bt
granted the President andGor the Secretary o! 7inance by recommendation o! the 7/,B the power to restore certain
tax exemptions. Prsant to the latter law, 7/,B issed a resoltion restoring the tax and dty exemption privileges
o! the 2P#. %he actions o! the respondents were ths "estioned by the petitioner by this petition !or certiorari,
prohibition and mandams with prayer !or a writ o! preliminary in+nction andGor restraining order. %o which pblic
respondents arged, among others, that petitioner does not have the standing to challenge the "estioned orders
and resoltion becase he was not in any way a*ected by sch grant o! tax exemptions.
/SSH'= @as a taxpayer the capacity to "estion the legality o! the resoltion issed by the 7/,B restoring the tax
@'9B= Jes. /n this petition it is alleged that petitioner is Finstitting this sit in his capacity as a taxpayer and a dly-
elected Senator o! the Philippines.F Pblic respondent arges that petitioner mst show that he has sstained direct
in+ry as a reslt o! the action and that it is not sKcient !or him to have a mere general interest common to all
members o! the pblic. %he #ort however agrees with the petitioner that as a taxpayer he may )le the instant
petition !ollowing the rling in 9oNada when it involves illegal expenditre o! pblic money. %he petition "estions
the legality o! the tax re!nd to 2P# by way o! tax credit certi)cates and the se o! said assigned tax credits by
respondent oil companies to pay !or their tax and dty liabilities to the B/, and Brea o! #stoms.
30D S#,& ?0<
:, 2o. 1<;315 Ene <D, 1DDD
F&n assessment is not necessary be!ore a criminal charge can be )led.F
7&#%S= %he B/, examined the boo(s o! accont o! Pascor ,ealty and Bevt #orp !or years 1D;4, 1D;3 and 1D;;, !rom
which a tax liability o! 10.5 Cillion Pesos was !ond. Based on the recommendations o! the examiners, the #/, )led
an in!ormation with the BAE !or tax evasion against the oKcers o! Pascor. Hpon receipt o! the sbpoena, the latter
)led an rgent re"est !or reconsiderationGreinvestigation with the #/,, which was immediately denied pon the
grond that no !ormal assessment has yet been issed by the #ommisioner. Pascor elevated the #/,8s decision to
the #%& on a petition !or review. %he #/, )led a Cotion to Bismiss on the grond o! lac( o! +risdiction o! #%& as
there was no !ormal assessment made against the respondents. %he #%& dismissed the motion, hence this petition.
/SSH'= /s a !ormal assessment necessary in the )ling o! a criminal complaintI
@'9B= 2o. Section <<< o! the 2/,# states that an assessment is not necessary be!ore a criminal charge can be )led.
%his is the general rle. Private respondents !ailed to show that they are entitled to an exception. Coreover, the
criminal charge need only be spported by a prima !acie showing o! !ailre to )le a re"ired retrn. %his !act need
not be proven by an assessment.
%he issance o! an assessment mst be distingished !rom the )ling o! a complaint. Be!ore an assessment is
issed, there is, by practice, a pre-assessment notice sent to the taxpayer. %he taxpayer is then given a chance to
sbmit position papers and docments to prove that the assessment is nwarranted. /! the commissioner is
nsatis)ed, an assessment signed by him or her is then sent to the taxpayer in!orming the latter speci)cally and
clearly that an assessment has been made against him or her. /n contrast, the criminal charge need not go throgh
all these. %he criminal charge is )led directly with the BAE. %herea!ter, the taxpayer is noti)ed that a criminal case
had been )led against him, not that the commissioner has issed an assessment. /t mst be stressed that a
criminal complaint is institted not to demand payment, bt to penaliNe the taxpayer !or violation o! the %ax #ode.
CIR vs. CA
<53 S#,& <00
:, 2o. 11D3<< Ene ?, 1DD4
FBe!ore one is prosected !or will!l attempt to evade or de!eat any tax, the !act that a tax is de mst )rst be
7&#%S= %he #/, assessed 7ortne %obacco #orp !or 3.4 Billion Pesos representing de)ciency income, ad valorem and
vale-added taxes !or the year 1DD< to which 7ortne moved !or reconsideration o! the assessments. 9ater, the #/,
)led a complaint with the Bepartment o! Estice against the respondent 7ortne, its corporate oKcers, nine (D)
other corporations and their respective corporate oKcers !or alleged !radlent tax evasion !or spposed non-
payment by 7ortne o! the correct amont o! taxes, alleging among others the !radlent scheme o! ma(ing
simlated sales to )ctitios byers declaring lower wholesale prices, as allegedly shown by the great disparity on
the declared wholesale prices registered in the FBaily Can!actrer8s Sworn StatementsF sbmitted by the
respondents to the B/,. Sch docments when re"ested by the cort were not however presented by the B/,,
prompting the trial cort to grant the prayer !or preliminary in+ction soght by the respondent pon the reason
that tax liabiliity mst be dly proven be!ore any criminal prosection be had. %he petitioner relying on the Hngab
Boctrine soght the li!ting o! the writ o! preliminary mandatory in+ction issed by the trial cort.
/SSH'= $hose contention is correctI
@'9B= /n view o! the !oregoing reasons, misplaced is the petitioners8 thesis citing Hngab v. #si, that the lac( o! a
)nal determination o! 7ortne8s exact or correct tax liability is not a bar to criminal prosection, and that while a
precise comptation and assessment is re"ired !or a civil action to collect tax de)ciencies, the %ax #ode does not
re"ire sch comptation and assessment prior to criminal prosection.
,eading Hngab care!lly, the prononcement therein that de)ciency assessment is not necessary prior to
prosection is pointedly and deliberately "ali)ed by the #ort with !ollowing statement "oted !rom :Ni( v. H.S.=
F%he crime is complete when the violator has (nowingly and wil!lly )led a !radlent retrn with intent to evade
and de!eat a part or all o! the tax.F /n plain words, !or criminal prosection to proceed be!ore assessment, there
mst be a prima !acie showing o! a wil!l attempt to evade taxes. %here was a wil!l attempt to evade tax in Hngab
becase o! the taxpayer8s !ailre to declare in his income tax retrn Fhis income derived !rom banana sapplings.F /n
the mind o! the trial cort and the #ort o! &ppeals, 7ortne8s sitation is "ite apart !actally since the registered
wholesale price o! the goods, approved by the B/,, is presmed to be the actal wholesale price, there!ore, not
!radlent and nless and ntil the B/, has made a )nal determination o! what is spposed to be the correct taxes,
the taxpayer shold not be placed in the crcible o! criminal prosection. @erein lies a whale o! di*erence between
Hngab and the case at bar.
UN'A. vs. CUSI
D3 S#,& ;33
:, 2o. 9-?1D1D-<? Cay 30, 1D;0
F&n assessment o! a de)ciency is not necessary to a criminal prosection !or wil!l attempt to de!eat and evade the
income tax.F
7&#%S= %he B/, )led six criminal charges against Yirico Hngab, a banana saplings prodcer, !or allegedly evading
payment o! taxes and other violations o! the 2/,#. Hngab, sbse"ently )led a motion to "ash on the grond that
(1) the in!ormation are nll and void !or want o! athority on the part o! the State Prosector to initiate and
prosecte the said cases> and (<)that the trial cort has no +risdiction to ta(e cogniNance o! the case in view o! his
pending protest against the assessment made by the B/, examiner. %he trial cort denied the motion prompting the
petitioner to )le a petition !or certiorari and prohibition with preliminary in+nction and restraining order to annl
and set aside the in!ormation )led.
/SSH'= /s the contention that the criminal prosection is prematre since the #/, has not yet resolved the protest
against the tax assessment tenableI
@'9B= 2o. %he contention is withot merit. $hat is involved here is not the collection o! taxes where the
assessment o! the #ommissioner o! /nternal ,evene may be reviewed by the #ort o! %ax &ppeals, bt a criminal
prosection !or violations o! the 2ational /nternal ,evene #ode which is within the cogniNance o! corts o! )rst
instance. $hile there can be no civil action to en!orce collection be!ore the assessment procedres provided in the
#ode have been !ollowed, there is no re"irement !or the precise comptation and assessment o! the tax be!ore
there can be a criminal prosection nder the #ode.
&n assessment o! a de)ciency is not necessary to a criminal prosection !or wil!l attempt to de!eat and evade
the income tax. & crime is complete when the violator has (nowingly and wil!lly )led a !radlent retrn with
intent to evade and de!eat the tax. %he perpetration o! the crime is gronded pon (nowledge on the part o! the
taxpayer that he has made an inaccrate retrn, and the government8s !ailre to discover the error and promptly to
assess has no connections with the commission o! the crime.
<5 S#,& D3;
:, 2o. 9-<?354, Actober 31, 1D4;
F%here is no doble taxation where one tax is imposed by the state and the other is imposed by the city.F
7&#%S= %he #ity o! Bagio passed an ordinance imposing a license !ee on any person, entity or corporation doing
bsiness in the #ity. %he ordinance sorced its athority !rom ,& 2o. 3<D, thereby amending the city charter
empowering it to )x the license !ee and reglate bsinesses, trades and occpations as may be established or
practiced in the #ity. Be 9eon was assessed !or P50 annal !ee it being shown that he was engaged in property
rental and deriving income there!rom. %he latter assailed the validity o! the ordinance arging that it is ltra vires
!or there is no statry athority which expressly grants the #ity o! Bagio to levy sch tax, and that there it
imposed doble taxation, and violates the re"irement o! ni!ormity.
/SSH'= &re the contentions o! the de!endant-appellant tenableI
@'9B= 2o. 7irst, ,& 3<D was enacted amending Section <553 o! the ,evised &dministrative #ode empowering the
#ity #oncil not only to impose a license !ee bt to levy a tax !or prposes o! revene, ths the ordinance cannot be
considered ltra vires !or there is more than ample statry athority !or the enactment thereo!.
Second, an argment against doble taxation may not be invo(ed where one tax is imposed by the state and the
other is imposed by the city, so that where, as here, #ongress has clearly expressed its intention, the statte mst
be sstained even thogh doble taxation reslts.
&nd third, violation o! ni!ormity is ot o! place it being widely recogniNed that there is nothing inherently
obnoxios in the re"irement that license !ees or taxes be exacted with respect to the same occpation, calling or
activity by both the state and the political sbdivisions thereo!.
3? S#,& 304
:, 2o. 9-?1431, Becember 13, 1D34
F%he entrsting o! the tax collection to private entities does not destroy the pblic prpose o! a tax ordinance.F
7&#%S= &side !rom the isse on pblication, private respondent bewails that the mar(et stall !ees imposed in the
dispted #ity Ardinance 2o. 35<<, which reglates pblic mar(ets and prescribes !ees !or rentals o! stalls, are
diverted to the exclsive private se o! the &siatic /ntegrated #orporation since the collection o! said !ees had been
let by the #ity o! Canila to the said corporation in a FCanagement and Aperating #ontract.F
/SSH'= Boes the delegation o! the collection o! taxes to a private entity invalidates a tax ordinance and de!eats its
pblic prposeI
@'9B= 2o. %he assmption is o! corse saddled on erroneos premise. %he !ees collected do not go direct to the
private co*ers o! the corporation. Ardinance 2o. 35<< was not made !or the corporation bt !or the prpose o!
raising revenes !or the city. %hat is the ob+ect it serves. %he entrsting o! the collection o! the !ees does not
destroy the pblic prpose o! the ordinance. So long as the prpose is pblic, it does not matter whether the
agency throgh which the money is dispensed is pblic or private. %he right to tax depends pon the ltimate se,
prpose and ob+ect !or which the !nd is raised. /t is not dependent on the natre or character o! the person or
corporation whose intermediate agency is to be sed in applying it. %he people may be taxed !or a pblic prpose,
althogh it be nder the direction o! an individal or private corporation.
110 P@/9 331
:, 2o. 9-10?05, Becember <D, 1D40
F& law appropriating the pblic revene is invalid i! the pblic advantage or bene)t, derived !rom sch expenditre,
is merely incidental in the promotion o! a particlar enterprise.F
7&#%S= :overnor $enceslao Pascal o! ,iNal institted this action !or declaratory relie!, with in+nction, pon the
grond that ,& 2o. D<0, which apropriates !nds !or pblic wor(s particlarly !or the constrction and improvement
o! Pasig !eeder road terminals. Some o! the !eeder roads, however, as alleged and as contained in the tracings
attached to the petition, were nothing bt pro+ected and planned sbdivision roads, not yet constrcted within the
&ntonio Sbdivision, belonging to private respondent Pleta, sitated at Pasig, ,iNal> and which pro+ected !eeder
roads do not connect any government property or any important premises to the main highway. %he respondents8
contention is that there is pblic prpose becase people living in the sbdivision will directly be bene)tted !rom
the constrction o! the roads, and the government also gains !rom the donation o! the land spposed to be
occpied by the streets, made by its owner to the government.
/SSH'= Shold incidental gains by the pblic be considered Fpblic prposeF !or the prpose o! +sti!ying an
expenditre o! the governmentI
@'9B= 2o. /t is a general rle that the legislatre is withot power to appropriate pblic revene !or anything bt a
pblic prpose. /t is the essential character o! the direct ob+ect o! the expenditre which mst determine its validity
as +sti!ying a tax, and not the magnitde o! the interest to be a*ected nor the degree to which the general
advantage o! the commnity, and ths the pblic wel!are, may be ltimately bene)ted by their promotion.
/ncidental to the pblic or to the state, which reslts !rom the promotion o! private interest and the prosperity o!
private enterprises or bsiness, does not +sti!y their aid by the se pblic money.
%he test o! the constittionality o! a statte re"iring the se o! pblic !nds is whether the statte is designed to
promote the pblic interest, as opposed to the !rtherance o! the advantage o! individals, althogh each
advantage to individals might incidentally serve the pblic.
1?D S#,& 3D5
:, 2o. 9-45333-3? &pril 30, 1D;3
F%he sorce o! an income is the property, activity or service that prodced the income. 7or sch sorce to be
considered as coming !rom the Philippines, it is sKcient that the income is derived !rom activity within the
7&#%S= Petitioner #/, see(s a review o! the #%&8s decision setting aside petitioner8s assessment o! de)ciency
income taxes against respondent British Averseas &irways #orporation (BA&#) !or the )scal years 1D5D to 1D31.
BA&# is a 1001 British :overnment-owned corporation organiNed and existing nder the laws o! the Hnited
Singdom, and is engaged in the international airline bsiness. Bring the periods covered by the dispted
assessments, it is admitted that BA&# had no landing rights !or traKc prposes in the Philippines. #onse"ently, it
did not carry passengers andGor cargo to or !rom the Philippines, althogh dring the period covered by the
assessments, it maintained a general sales agent in the Philippines U $amer Barnes and #ompany, 9td., and later
Yantas &irways U which was responsible !or selling BA&# tic(ets covering passengers and cargoes. %he #%& sided
with BA&# citing that the proceeds o! sales o! BA&# tic(ets do not constitte BA&# income !rom Philippine sorces
since no service o! carriage o! passengers or !reight was per!ormed by BA&# within the Philippines and, there!ore,
said income is not sb+ect to Philippine income tax. %he #%& position was that income !rom transportation is income
!rom services so that the place where services are rendered determines the sorce.
/SSH'= &re the revenes derived by BA&# !rom sales o! tic(et !or air transportation, while having no landing rights
here, constitte income o! BA&# !rom Philippine sorces, and accordingly, taxableI
@'9B= Jes. %he sorce o! an income is the property, activity or service that prodced the income. 7or the sorce o!
income to be considered as coming !rom the Philippines, it is sKcient that the income is derived !rom activity
within the Philippines. /n BA&#8s case, the sale o! tic(ets in the Philippines is the activity that prodces the income.
%he tic(ets exchanged hands here and payments !or !ares were also made here in Philippine crrency. %he site o!
the sorce o! payments is the Philippines. %he Low o! wealth proceeded !rom, and occrred within, Philippine
territory, en+oying the protection accorded by the Philippine government. /n consideration o! sch protection, the
Low o! wealth shold share the brden o! spporting the government.
5<? S#,& 33, 103
:, 2os. 1?110? W 1?;343, Ene ;, <003
F%he taxpayer mst +sti!y his claim !or tax exemption or re!nd by the clearest grant o! organic or statte law and
shold not be permitted to stand on vage implications.F
F'xport processing Nones ('PP&) are e*ectively considered as !oreign territory !or tax prposes.F
7&#%S= Petitioner corporation, a .&%-registered taxpayer engaged in mining, prodction, and sale o! varios mineral
prodcts, )led claims with the B/, !or re!ndGcredit o! inpt .&% on its prchases o! capital goods and on its Nero-
rated sales in the taxable "arters o! the years 1DD0 and 1DD<. B/, did not immediately act on the matter
prompting the petitioner to )le a petition !or review be!ore the #%&. %he latter denied the claims on the gronds
that !or Nero-rating to apply, 301 o! the company8s sales mst consists o! exports, that the same were not )led
within the <-year prescriptive period (the claim !or 1DD< "arterly retrns were +dicially )led only on &pril <0,
1DD?), and that petitioner !ailed to sbmit sbstantial evidence to spport its claim !or re!ndGcredit.
%he petitioner, on the other hand, contends that #%& !ailed to consider the !ollowing= sales to P&S&, and P@/9PAS
within the 'PP& as Nero-rated export sales> the <-year prescriptive period shold be conted !rom the date o! )ling
o! the last ad+stment retrn which was &pril 15, 1DD3, and not on every end o! the applicable "arters> and that
the certi)cation o! the independent #P& attesting to the correctness o! the contents o! the smmary o! sppliersM
invoices or receipts examined, evalated and adited by said #P& shold sbstantiate its claims.
/SSH'= Bid the petitioner corporation sKciently establish the !actal bases !or its applications !or re!ndGcredit o!
inpt .&%I
@'9B= 2o. &lthogh the #ort agreed with the petitioner corporation that the two-year prescriptive period !or the
)ling o! claims !or re!ndGcredit o! inpt .&% mst be conted !rom the date o! )ling o! the "arterly .&% retrn, and
that sales to P&S&, and P@/9PAS inside the 'PP& are taxed as exports becase these export processing Nones are
to be managed as a separate cstoms territory !rom the rest o! the Philippines, and ths, !or tax prposes, are
e*ectively considered as !oreign territory, it still denies the claims o! petitioner corporation !or re!nd o! its inpt
.&% on its prchases o! capital goods and e*ectively Nero-rated sales dring the period claimed !or not being
established and sbstantiated by appropriate and sKcient evidence.
%ax re!nds are in the natre o! tax exemptions. /t is regarded as in derogation o! the sovereign athority, and
shold be constred in strictissimi +ris against the person or entity claiming the exemption. %he taxpayer who
claims !or exemption mst +sti!y his claim by the clearest grant o! organic or statte law and shold not be
permitted to stand on vage implications.
; S#,& <<?
:, 2o. 9-1;1<5, Cay 31, 1D43
F& tax on property o! the :overnment, whether national or local, wold merely have the e*ect o! ta(ing money
!rom one poc(et to pt it in another poc(et.F
7&#%S= 2ational $aterwor(s and Sewerage &thority (2$S&), a pblic corporation owned by the :overnment o! the
Philippines as well as all property comprising waterwor(s and sewerage systems placed nder it, too( over the
#abyao-Sta. ,osa-BiVan $aterwor(s System in 1D54. /t was assessed by the Provincial &ssessor o! 9agna, !or
prposes o! real estate taxes, on the real properties owned by #abyao $aterwor(s. %he respondent protested
claiming it is exempted !rom the payment o! real estate taxes in view o! the natre and (ind o! said property and
!nctions and activities o! petitioner. %he petitioner denied the protest arging that sch real properties are sb+ect
to real estate tax becase althogh said properties belong to the ,epblic o! the Philippines, the same holds it, not
in its governmental, political or sovereign capacity, bt in a private, proprietary or patrimonial character, which,
allegedly, is not covered by the exemption contained in section 3(a) o! ,epblic &ct 2o. ?30.
/SSH'= &re the real properties owned by the respondent pblic corporation sb+ect to real estate taxI
@'9B= 2o. ,epblic &ct 2o. ?30 ma(es no distinction between property held in a sovereign, governmental or
political capacity and those possessed in a private, proprietary or patrimonial character. &nd where the law does not
distingish neither may we, nless there are !acts and circmstances clearly showing that the lawma(er intended
the contrary, bt no sch !acts and circmstances have been broght to or attention. /ndeed, the non FpropertyF
and the verb FownedF sed in said section 3(a) strongly sggest that the ob+ect o! exemption is considered more
!rom the view point o! dominion, than !rom that o! domain.
Coreover, taxes are )nancial brdens imposed !or the prpose o! raising revenes with which to de!ray the cost
o! the operation o! the :overnment, and a tax on property o! the :overnment, whether national or local, wold
merely have the e*ect o! ta(ing money !rom one poc(et to pt it in another poc(et. @ence, it wold not serve, in
the )nal analysis, the main prpose o! taxation. $hat is more, it wold tend to de!eat it, on accont o! the paper
wor(, time and conse"ently, expenses it wold entail.
<? S#,& 3;D
:, 2o. 9-<<;1?, &gst <;, 1D4;
F%he classi)cation made in the exercise o! power to tax, to be valid, mst be reasonable .F
7&#%S= Plainti*-appellant Pepsi-#ola soght to recover the sms paid by it nder protest, to the #ity o! Btan, and
collected by the latter, prsant to its Cnicipal Ardinance 2o. 110 which plainti* assails as nll and void becase it
parta(es o! the natre o! an import tax, amonts to doble taxation, highly n+st and discriminatory, excessive,
oppressive and con)scatory, and constittes an invlaid delegation o! the power to tax. %he ordinance imposes taxes
!or every case o! so!tdrin(s, li"ors and other carbonated beverages, regardless o! the volme o! sales, shipped to
the agents andGor consignees by otside dealers or any person or company having its actal bsiness otside the
/SSH'= Boes the tax ordinance violate the ni!ormity re"irement o! taxationI
@'9B= Jes. %he tax levied is discriminatory. 'ven i! the brden in "estion were regarded as a tax on the sale o! said
beverages, it wold still be invalid, as discriminatory, and hence, violative o! the ni!ormity re"ired by the
#onstittion and the law there!or, since only sales by Fagents or consigneesF o! otside dealers wold be sb+ect to
the tax. Sales by local dealers, not acting !or or on behal! o! other merchants, regardless o! the volme o! their
sales, and even i! the same exceeded those made by said agents or consignees o! prodcers or merchants
established otside the #ity o! Btan, wold be exempt !rom the dispted tax.
/t is tre that the ni!ormity essential to the valid exercise o! the power o! taxation does not re"ire identity or
e"ality nder all circmstances, or negate the athority to classi!y the ob+ects o! taxation. %he classi)cation made
in the exercise o! this athority, to be valid, mst, however, be reasonable and this re"irement is not deemed
satis)ed nless= (1) it is based pon sbstantial distinctions which ma(e real di*erences> (<) these are germane to
the prpose o! the legislation or ordinance> (3) the classi)cation applies, not only to present conditions, bt, also, to
!tre conditions sbstantially identical to those o! the present> and (?) the classi)cation applies e"ally to all those
who belong to the same class.
4D S#,& ?40
:, 2o. 9-31154, 7ebrary <3, 1D34
F9egislative power to create political corporations !or prposes o! local sel!-government carries with it the power to
con!er on sch local governmental agencies the power to tax.
7&#%S= Plainti*-appellant Pepsi-#ola commenced a complaint with preliminary in+nction to declare Section < o!
,epblic &ct 2o. <<4?, otherwise (nown as the 9ocal &tonomy &ct, nconstittional as an nde delegation o!
taxing athority as well as to declare Ardinances 2os. <3 and <3 denominated as Fmnicipal prodction taxF o! the
Cnicipality o! %anaan, 9eyte, nll and void. Ardinance <3 levies and collects !rom so!t drin(s prodcers and
man!actrers a tax o! one-sixteenth (1G14) o! a centavo !or every bottle o! so!t drin( cor(ed, and Ardinance <3
levies and collects on so!t drin(s prodced or man!actred within the territorial +risdiction o! this mnicipality a
tax o! A2' #'2%&.A (P0.01) on each gallon (1<; Lid onces, H.S.) o! volme capacity. &side !rom the nde
delegation o! athority, appellant contends that it allows doble taxation, and that the sb+ect ordinances are void
!or they impose percentage or speci)c tax.
/SSH'= &re the contentions o! the appellant tenableI
@'9B= 2o. An the isse o! nde delegation o! taxing power, it is settled that the power o! taxation is an essential
and inherent attribte o! sovereignty, belonging as a matter o! right to every independent government, withot
being expressly con!erred by the people. /t is a power that is prely legislative and which the central legislative
body cannot delegate either to the exective or +dicial department o! the government withot in!ringing pon the
theory o! separation o! powers. %he exception, however, lies in the case o! mnicipal corporations, to which, said
theory does not apply. 9egislative powers may be delegated to local governments in respect o! matters o! local
concern. By necessary implication, the legislative power to create political corporations !or prposes o! local sel!-
government carries with it the power to con!er on sch local governmental agencies the power to tax.
&lso, there is no validity to the assertion that the delegated athority can be declared nconstittional on the
theory o! doble taxation. /t mst be observed that the delegating athority speci)es the limitations and
enmerates the taxes over which local taxation may not be exercised. %he reason is that the State has exclsively
reserved the same !or its own prerogative. Coreover, doble taxation, in general, is not !orbidden by or
!ndamental law, so that doble taxation becomes obnoxios only where the taxpayer is taxed twice !or the bene)t
o! the same governmental entity or by the same +risdiction !or the same prpose, bt not in a case where one tax
is imposed by the State and the other by the city or mnicipality.
An the last isse raised, the ordinances do not parta(e o! the natre o! a percentage tax on sales, or other taxes
in any !orm based thereon. %he tax is levied on the prodce (whether sold or not) and not on the sales. %he volme
capacity o! the taxpayer8s prodction o! so!t drin(s is considered solely !or prposes o! determining the tax rate on
the prodcts, bt there is not set ratio between the volme o! sales and the amont o! the tax.
<<0 S#,& 303
:, 2o. DD;;4, Carch 31, 1DD3
F %o avoid the taint o! nlaw!l delegation o! the power to tax, there mst be a standard which implies that the
legislatre determines matter o! principle and lays down !ndamental policy.F
7&#%S= Senator Eohn AsmeVa assails the constittionality o! paragraph 1c o! PB 1D54, as amended by 'A 133,
empowering the 'nergy ,eglatory Board (',B) to approve the increase o! !el prices or impose additional amonts
on petrolem prodcts which proceeds shall accre to the Ail Price StabiliNation 7nd (APS7) established !or the
reimbrsement to ailing oil companies in the event o! sdden price increases. %he petitioner avers that the
collection on oil prodcts establishments is an nde and invalid delegation o! legislative power to tax. 7rther, the
petitioner points ot that since a 8special !nd8 consists o! monies collected throgh the taxing power o! a State,
sch amonts belong to the State, althogh the se thereo! is limited to the special prposeGob+ective !or which it
was created. /t ths appears that the challenge posed by the petitioner is premised primarily on the view that the
powers granted to the ',B nder P.B. 1D54, as amended, parta(e o! the natre o! the taxation power o! the State.
/SSH'= /s there an nde delegation o! the legislative power o! taxationI
@'9B= 2one. /t seems clear that while the !nds collected may be re!erred to as taxes, they are exacted in the
exercise o! the police power o! the State. Coreover, that the APS7 as a special !nd is plain !rom the special
treatment given it by '.A. 133. /t is segregated !rom the general !nd> and while it is placed in what the law re!ers
to as a Ftrst liability accont,F the !nd nonetheless remains sb+ect to the scrtiny and review o! the #A&. %he
#ort is satis)ed that these measres comply with the constittional description o! a Fspecial !nd.F $ith regard
to the alleged nde delegation o! legislative power, the #ort )nds that the provision con!erring the athority pon
the ',B to impose additional amonts on petrolem prodcts provides a sKcient standard by which the athority
mst be exercised. /n addition to the general policy o! the law to protect the local consmer by stabiliNing and
sbsidiNing domestic pmp rates, P.B. 1D54 expressly athoriNes the ',B to impose additional amonts to agment
the resorces o! the 7nd.
1; S#,& ?;;
:, 2o. 9-<1;?1, Actober <;, 1D44
F'xemptions !rom taxation are constred in strictissimi +ris against the taxpayer and liberally in !avor o! the taxing
7&#%S= Petitioner, engaged in the indstry o! processing gasoline, oils etc., claims !or the re!nd o! special import
taxes paid prsant to the provision o! ,& 13D? which imposed a special import tax Fon all goods, articles or
prodcts imported or broght into the Philippines.F 'xempt !rom this tax, by express mandate o! Section 4 o! the
same law are Fmachinery, e"ipment, accessories, and spare parts, !or the se o! indstries, miners, mining
enterprises, planters and !armersF. Petitioner arged that the importation it made o! gas pmps sed by their
gasoline station operators shold !all nder sch exemptions, being directly sed in its indstry. %he #ollector o!
#stoms o! Canila re+ected the claim, and so as the #ort on %ax &ppeals. %he #%& noted that the pmps imported
were not sed in the processing o! gasoline and other oil prodcts bt by the gasoline stations, owned by the
petitioner, !or pmping ot, !rom ndergrond barrels, gasoline sold on retail to cstomers.
/SSH'= /s the contention o! the petitioner tenableI Boes the sb+ect imports !all into the exemptionsI
@'9B= 2o. %he contention rns smac( against the !amiliar rles that exemption !rom taxation is not !avored, and
that exemptions in tax stattes are never presmed. $hich are bt statements in adherence to the ancient rle
that exemptions !rom taxation are constred in strictissimi +ris against the taxpayer and liberally in !avor o! the
taxing athority. %ested by this precept, we cannot indlge in expansive constrction and write into the law an
exemption not therein set !orth. ,ather, we go by the reasonable assmption that where the State has granted in
express terms certain exemptions, those are the exemptions to be considered, and no more. Since the law states
that, to be tax-exempt, e"ipment and spare parts shold be F!or the se o! indstriesF, the coverage herein shold
not be enlarged to inclde e"ipment and spare parts !or se in dispensing gasoline at retail.
:,. 2o. 1555?1. Eanary <3, <00?
7acts= Bring the li!etime o! the decedent Eliana vda. Be :abriel, her bsiness a*airs were managed by the
Philippine %rst #ompany (Phil%rst). %he decedent died on &pril 3, 1D3D bt two days a!ter her death, Phil%rst )led
her income tax retrn !or 1D3; not indicating that the decedent had died. %he B/, condcted an administrative
investigation o! the decedentMs tax liability and !ond a de)ciency income tax !or the year 1DD3 in the amont o!
P31;,<33.D3. %hs, in 2ovember 1;, 1D;<, the B/, sent by registered mail a demand letter and assessment notice
addressed to the decedent 5cGo Phil%rst, Sta. #rN, Canila, which was the address stated in her 1D3; income tax
retrn. An Ene 1;, 1D;?, respondent #ommissioner o! /nternal ,evene issed warrants o! distraint and levy to
en!orce the collection o! decedentMs de)ciency income tax liability and serve the same pon her heir, 7rancisco
:abriel. An 2ovember <<, 1D;?, #ommissioner )led a motion to allow his claim with probate cort !or the
de)ciency tax. %he #ort denied B/,Ms claim against the estate on the grond that no proper notice o! the tax
assessment was made on the proper party. An appeal, the #& held that B/,Ms service on Phil%rst o! the notice o!
assessment was binding on the estate as Phil%rst !ailed in its legal dty to in!orm the respondent o! antecedentMs
death. #onse"ently, as the estate !ailed to "estion the assessment within the stattory period o! thirty days, the
assessment became )nal, exectory, and incontestable.
/sse= (1) $hether or not the #& erred in holding that the service o! de)ciency tax assessment on Eliana throgh
Phil%rst was a valid service as to bind the estate.
(<) $hether or not the #& erred in holding that the tax assessment had become )nal, exectory, and incontestable.
@eld= (1) Since the relationship between Phil%rst and the decedent was atomatically severed the moment o! the
taxpayerMs death, none o! the Phil%rstMs acts or omissions cold bind the estate o! the taxpayer. &lthogh the
administrator o! the estate may have been remiss in his legal obligation to in!orm respondent o! the decedentMs
death, the conse"ence thereo! merely re!er to the imposition o! certain penal sanction on the administrator. %hese
do not inclde the inde)nite tolling o! the prescriptive period !or ma(ing de)ciency tax assessment or waiver o! the
notice re"irement !or sch assessment.
(<) %he assessment was served not even on an heir or the estate bt on a completely disinterested party. %his
improper service was clearly not binding on the petitioner. %he most crcial point to be remembered is that Phil%st
had absoltely no legal relationship with the deceased or to her 'state. %here was there!ore no assessment served
on the estate as to the alleged nderpayment o! tax. &bsent this assessment, no proceeding cold be initiated in
cort !or collection o! said tax> there!ore, it cold not have become )nal, exectory and incontestable. ,espondentMs
claim !or collection )led with the cort only on 2ovember <<, 1D;? was barred !or having been made beyond the
)ve-year prescriptive period set by law.
:,. 2o. 1?3034. Ene 10, <003
7acts= An Cay <3, <003, a class sit was )led by petitioners in their own behal! and in behal! o! other electric
cooperatives organiNed and existing nder PB <4D which are members o! petitioner Philippine ,ral 'lectric
#ooperatives &ssociation, /nc. (P@/9,'#&). %he other petitioners, electric cooperatives o! &gsan del 2orte
(&2'#A), /loilo 1 (/9'#A 1) and /sabela 1 (/S'9#A 1) are non-stoc(, non-pro)t electric cooperatives organiNed and
existing nder PB <4D, as amended, and registered with the 2ational 'lectri)cation &dministration (2'&).
Hnder Sec. 3D o! PB <4D electric cooperatives shall be exempt !rom the payment o! all 2ational :overnment, local
government, and mnicipal taxes and !ee, inclding !ranchise, Ling recordation, license or permit !ees or taxes and
any !ees, charges, or costs involved in any cort or administrative proceedings in which it may be party.
7rom 1D31to 1D3;, in order to )nance the electri)cation pro+ects envisioned by PB <4D, as amended, the Philippine
:overnment, acting throgh the 2ational 'conomic concil (now 2ational 'conomic Bevelopment &thority) and
the 2'&, entered into six loan agreements with the government o! the Hnited States o! &merica, throgh the Hnited
States &gency !or /nternational Bevelopment (HS&/B) with electric cooperatives as bene)ciaries. %he loan
agreements contain similarly worded provisions on the tax application o! the loan and any property or commodity
ac"ired throgh the proceeds o! the loan.
Petitioners allege that with the passage o! the 9ocal :overnment #ode their tax exemptions have been validly
withdrawn. Particlarly, petitioners assail the validity o! Sec. 1D3 and <3? o! the said code. Sec. 1D3 provides !or the
withdrawal o! tax exemption privileges granted to all persons, whether natral or +ridical, except cooperatives dly
registered nder ,& 4D3;, while Sec. <3? exempts the same cooperatives !rom payment o! real property tax.
/sse= (1) Boes the 9ocal :overnment #ode (nder Sec. 1D3 and <3?) violate the e"al protection clase since the
provisions ndly discriminate against petitioners who are dly registered cooperatives nder PB <4D, as amended,
and no nder ,& 4D3; or the #ooperatives #ode o! the PhilippinesI
(<) /s there an impairment o! the obligations o! contract nder the loan entered into between the Philippine and the
HS :overnmentsI
@eld= (1) 2o. %he garanty o! the e"al protection clase is not violated by a law based on a reasonable
classi)cation. #lassi)cation, to be reasonable mst (a) rest on sbstantial classi)cations> (b) germane to the
prpose o! the law> (c) not limited to the existing conditions only> and (d) apply e"ally to all members o! the same
class. $e hold that there is reasonable classi)cation nder the 9ocal :overnment #ode to +sti!y the di*erent tax
treatment between electric cooperatives covered by PB <4D and electric cooperatives nder ,& 4D3;.
7irst, sbstantial distinctions exist between cooperatives nder PB <4D and those nder ,& 4D3;. /n the !ormer, the
government is the one that !nds those so-called electric cooperatives, while in the latter, the members ma(e
e"itable contribtion as sorce o! !nds.
a. #apital #ontribtions by Cembers Z 2owhere in PB <4D doe sit re"ire cooperatives to ma(e e"itable
contribtions to capital. Petitioners themselves admit that to "ali!y as a member o! an electric cooperative nder
PB <4D, only the payment o! a P5.00 membership !ee is re"ired which is even re!ndable the moment the member
is no longer interested in getting electric service !rom the cooperative or will trans!er to another place otside the
area covered by the cooperative. @owever, nder the #ooperative #ode, the articles o! cooperation o! a cooperative
applying !or registration mst be accompanied with the bonds o! the accontable oKcers and a sworn statement o!
the treasrer elected by the sbscribers showing that at least <51 o! the athoriNed share capital has been
sbscribed and at least <51 o! the total sbscription has been paid and in no case shall the paid-p share capital
be less than P<,000.00.
b. 'xtent o! :overnment #ontrol over #ooperatives Z %he extent o! government control over electric cooperatives
covered by PB <4D is largely a !nction o! the role o! the 2'& as a primary sorce o! !nds o! these electric
cooperatives. /t is crystal clear that 2'& incrred loans !rom varios sorces to )nance the development and
operations o! these electric cooperatives. #onse"ently, amendments were primarily geared to expand the powers
o! 2'& over the electric cooperatives o ensre that loans granted to them wold be repaid to the government. /n
contrast, cooperatives nder ,& 4D3; are envisioned to be sel!-sKcient and independent organiNations with
minimal government intervention or reglation.
Second, the classi)cation o! tax-exempt entities in the 9ocal :overnment #ode is germane to the prpose o! the
law. %he #onstittional mandate that 5every local government nit shall en+oy local atonomy,6 does not mean that
the exercise o! the power by the local governments is beyond the reglation o! #ongress. Sec. 1D3 o! the 9:# is
indicative o! the legislative intent to vet broad taxing powers pon the local government nits and to limit
exemptions !rom local taxation to entities speci)cally provided therein.
7inally, Sec. 1D3 and <3? o! the 9:# permit reasonable classi)cation as these exemptions are not limited to existing
conditions and apply e"ally to all members o! the same class.
(<) 2o. /t is ingrained in +risprdence that the constittional prohibition on the impairment o! the obligations o!
contracts does not prohibit every change in existing laws. %o !all within the prohibition, the change mst not only
impair the obligation o! the existing contract, bt the impairment mst be sbstantial. Coreover, to constitte
impairment, the law mst a*ect a change in the rights o! the parties with re!erence to each other and not with
respect to non-parties.
%he "oted provision nder the loan agreement does not prport to grant any tax exemption in !avor o! any party
to the contract, inclding the bene)ciaries thereo!. %he provisions simply shi!t the tax brden, i! any, on the
transactions nder the loan agreements to the borrower andGor bene)ciary o! the loan. %hs, the withdrawal by the
9ocal :overnment #ode nder Sec. 1D3 and <3? o! the tax exemptions previosly en+oyed by petitioners does not
impair the obligation o! the borrower, the lender or the bene)ciary nder the loan agreements as, in !act, no tax
exemption is granted therein.
Chie1 State :+osecuto+ 8OVENCITO R. <UDO/ ATT. CLEMENTE :. HERAL;O/ Chie1 o1 the Inte+nal InFui+-
and :+osecution ;ivision2custo,s Intelli$ence and Investi$ation Se+vice 7II:;2CIIS9/ and LEONITO A.
SANTIA'O/ S0ecial Investi$ato+ o1 the II:;2CIIS vs. 8U;'E ARNULFO '. CA.RE;O/ Re$ional T+ial Cou+t/
.+anch !&/ Ta5aco Cit-/ Al5a-
&C. 2o. ,%E-03-133D, &pril 30, <003
7acts= &tty. $inston 7lorin, the Bepty #ollector o! #stoms o! the Sb-Port o! %abaco, &lbay, issed on September
3, <001 $arrant o! SeiNre and Betention ($SB) 2o. 04-<001against a shipment o! 35, 000 bags o! rice aboard the
vessel CG. #riston !or violation o! Sec. <530 o! the %ari* and #stoms #ode o! the Philippines (%##P).
& !ew days, a!ter the issance o! the warrant o! seiNre and detention, &ntonio #ha, Er. and #arlos #arillo, claiming
to be consignees o! the sb+ect goods, )led be!ore the ,egional %rial #ort o! %abaco #ity, &lbay a Petition with
Prayer !or the /ssance o! Preliminary /n+nction and %emporary ,estraining Arder (%,A). %he said petition soght to
en+oin the Brea o! #stoms and its oKcials !rom detaining the sb+ect shipment.
By virte o! said %,A, the 35,000 bags o! rice were released !rom cstoms to &ntonio #ha, Er. and #arlos #arillo.
/n his complaint, #hie! State Prosector PVo alleged that respondent Edge violated &dministrative #irclar 2o. 3-
DD, which cations trial cort +dges in their issance o! %,As and writs o! preliminary in+nctions. Said circlar
reminds +dges o! the principle, ennciated in Cison vs. 2atividad, that the #ollector o! #stoms has exclsive
+risdiction over seiNre and !or!eitre proceedings, and reglar corts cannot inter!ere with his exercise thereo! or
stiLe or pt it to naght.
/sse= $hether or not the issance o! the %,A was illegal and beyond the +risdiction o! the ,%#.
@eld= %he collection o! dties and taxes de on the seiNed goods is not the only reason why trial corts are en+oined
!rom issing orders releasing imported articles nder seiNre and !or!eitre proceedings by the Brea o! #stoms.
&dministrative #irclar 2o. 3-DD ta(es into accont the !act that the issance o! %,As and the granting o! writs o!
preliminary in+nction in seiNre and !or!eitre proceedings be!ore the Brea o! #stoms may arose sspicion
that the issance or grant was !ro considerations other than the strict merits o! the case. 7rthermore, respondent
EdgeMs actation goes against settled +risprdence that the #ollector o! #stoms has exclsive +risdiction over
seiNre and !or!eitre proceedings, and reglar corts cannot inter!ere with his exercise thereo! or stiLe and pt it
to naght.
,espondent Edge cannot claim that he issed the "estioned %,A becase he honestly believed tat the Brea o!
#stoms was e*ectively divested o! its +risdiction over the seiNed shipment.
'ven i! it be assmed that in the exercise o! the #ollector o! #stoms o! its exclsive +risdiction over seiNre and
!or!eitre cases, a taint o! illegality is correctly impted, the most that can be said is that nder these circmstance,
grave abse o! discretion may ost it o! its +risdiction. %his does mean, however, that the trial cort is vested with
competence to ac"ire +risdiction over these seiNre and !or!eitre cases. %he proceedings be!ore the #ollector o!
#stoms are not )nal. &n appeal lies to the #ommissioner o! #stoms and, therea!ter, to the #ort o! %ax &ppeals. /t
may even reach this #ort throgh an appropriate petition !or review. #ertainly, the ,%# is not inclded therein.
@ence, it is devoid o! +risdiction.
#learly, there!ore, respondent Edge had no +risdiction to ta(e cogniNance o! the petition and isse the "estioned
/t is a basic principle that the #ollector o! #stoms has exclsive +risdiction over seiNre and !or!eitre proceedings
o! dtiable goods. & stdios and conscientios +dge can easily be conversant with sch an elementary rle.
:,. 2o. 1?D110, &pril D, <003
7acts= 2&PA#A,, the petitioner, is a government-owed and controlled corporation created nder #ommonwealth
&ct 1<0. /t is tas(ed to nderta(e the 5development o! hydroelectric generations o! power and the prodction o!
electricity !rom nclear, geothermal, and other sorces, as well as, the transmission o! electric power on a
nationwide basis.6
7or many years now, 2&PA#A, sells electric power to the resident #abanatan #ity, posting a gross income o!
P103,;1?,1;3.D4 in 1DD<. Prsant to Sec. 33 o! Ardinance 2o. 145-D<, the respondent assessed the petitioner a
!ranchise tax amonting to P;0;,404.?1, representing 351 o! 11 o! the !ormerMs gross receipts !or the preceding
Petitioner, whose capital stoc( was sbscribed and wholly paid by the Philippine :overnment, re!sed to pay the tax
assessment. /t arged that the respondent has no athority to impose tax on government entities. Petitioner also
contend that as a non-pro)t organiNation, it is exempted !rom the payment o! all !orms o! taxes, charges, dties or
!ees in accordance with Sec. 13 o! ,& 43D5, as amended.
%he respondent )led a collection sit in the ,%# o! #abanatan #ity, demanding that petitioner pay the assessed
tax, pls srcharge e"ivalent to <51 o! the amont o! tax and <1 monthly interest. ,espondent alleged that
petitionerMs exemption !rom local taxes has been repealed by Sec. 1D3 o! ,& 3140 (9ocal :overnment #ode). %he
trial cort issed an order dismissing the case. An appeal, the #ort o! &ppeals reversed the decision o! the ,%#
and ordered the petitioner to pay the city government the tax assessment.
/sses= (1) /s the 2&PA#A, exclded !rom the coverage o! the !ranchise tax simply becase its stoc(s are wholly
owned by the 2ational :overnment and its charter characteriNed is as a [non-pro)t organiNationMI
(<) /s the 2&PA#A,Ms exemption !rom all !orms o! taxes repealed by the provisions o! the 9ocal :overnment #ode
@eld= (1) 2A. %o stress, a !ranchise tax is imposed based not on the ownership bt on the exercise by the
corporation o! a privilege to do bsiness. %he taxable entity is the corporation which exercises the !ranchise, and
not the individal stoc(holders. By virte o! its charter, petitioner was created as a separate and distinct entity !rom
the 2ational :overnment. /t can se and be sed nder its own name, and can exercise all the powers o! a
corporation nder the #orporation #ode.
%o be sre, the ownership by the 2ational :overnment o! its entire capital stoc( does not necessarily imply that
petitioner is no engage din bsiness.
(<) J'S. Ane o! the most signi)cant provisions o! the 9:# is the removal o! the blan(et exclsion o!
instrmentalities and agencies o! the 2ational :overnment !rom the coverage o! local taxation. &lthogh as a
general rle, 9:Hs cannot impose taxes, !ees, or charges o! any (ind on the 2ational :overnment, its agencies and
instrmentalities, this rle now admits an exception, i.e. when speci)c provisions o! the 9:# athoriNe the 9:Hs to
impose taxes, !ees, or charges on the a!orementioned entities. %he legislative prpose to withdraw tax privileges
en+oyed nder existing laws or charter is clearly mani!ested by the langage sed on Sec. 133 and 1D3
categorically withdrawing sch exemption sb+ect only to the exceptions enmerated. Since it wold be tedios and
impractical to attempt to enmerate all the existing stattes providing !or special tax exemptions or privileges, the
9:# provided !or an express, albeit general, withdrawal o! sch exemptions or privileges. 2o more ne"ivocal
langage cold have been sed.
.ARCELONA/ in he+ ca0acit- as Cit- T+easu+e+ o1 ;avao
:,. 2o. 1?3;43, Carch <5, <003
7acts= P9B% paid a !ranchise tax e"al to three percent (31) o! its gross receipts. %he !ranchise tax was paid 5in lie
o! all taxes on this !ranchise or earnings thereo!6 prsant to ,& 30;<. %he exemption !rom 5all taxes on this
!ranchise or earnings thereo!6 was sbse"ently withdrawn by ,& 3140 (9:#), which at the same time gave local
government nits the power to tax bsinesses en+oying a !ranchise on the basis o! income received or earned by
them within their territorial +risdiction. %he 9:# too( e*ect on Eanary 1, 1DD<.
%he #ity o! Bavao enacted Ardinance 2o. 51D, Series o! 1DD<, which in pertinent part provides= 2otwithstanding
any exemption granted by law or other special laws, there is hereby imposed a tax on bsinesses en+oying a
!ranchise, a rate o! seventy-)ve percent (351) o! one percent (11) o! the gross annal receipts !or the preceding
calendar year based on the income receipts realiNed within the territorial +risdiction o! Bavao #ity.
Sbse"ently, #ongress granted in !avor o! :lobe Cac(ay #able and ,adio #orporation (:lobe) and Smart
/n!ormation %echnologies, /nc. (Smart) !ranchises which contained 5in lei o! all taxes6 provisos.
/n 1DD5, it enacted ,& 3D<5, or the Pblic %elecommnication Policy o! the Philippines, Sec. <3 o! which provides
that any advantage, !avor, privilege, exemption, or immnity granted nder existing !ranchises, or may herea!ter
be granted, shall ipso !acto become part o! previosly granted telecommnications !ranchises and shall be
accorded immediately and nconditionally to the grantees o! sch !ranchises. %he law too( e*ect on Carch 14,
/n Eanary 1DDD, when P9B% applied !or a mayorMs permit to operate its Bavao Cetro exchange, it was re"ired to
pay the local !ranchise tax which then had amonted to P3,4;1,D;5.3<. P9B% challenged the power o! the city
government to collect the local !ranchise tax and demanded a re!nd o! what had been paid as a local !ranchise tax
!or the year 1DD3 and !or the )rst to the third "arters o! 1DD;.
/sse= $hether or not by virte o! ,& 3D<5, Sec. <3, P9B% is again entitled to the exemption !rom payment o! the
local !ranchise tax in view o! the grant o! tax exemption to :lobe and Smart.
@eld= Petitioner contends that becase their existing !ranchises contain 5in lie o! all taxes6 clases, the same grant
o! tax exemption mst be deemed to have become ipso !acto part o! its previosly granted telecommnications
!ranchise. Bt the rle is that tax exemptions shold be granted only by a clear and ne"ivocal provision o! law
5expressed in a langage too plain to be mista(en6 and assming !or the nonce that the charters o! :lobe and o!
Smart grant tax exemptions, then this rnabot way o! granting tax exemption to P9B% is not a direct, 5clear and
ne"ivocal6 way o! commnicating the legislative intent.
2or does the term 5exemption6 in Sec. <3 o! ,& 3D<5 mean tax exemption. %he term re!ers to exemption !rom
reglations and re"irements imposed by the 2ational %elecommnications #ommission (2%#). 7or instance, ,&
3D<5, Sec. 13 provides= %he #ommission shall exempt any speci)c telecommnications service !rom its rate or tari*
reglations i! the service has sKcient competition to ensre !air and reasonable rates o! tari*s. &nother exemption
granted by the law in line with its policy o! dereglation is the exemption !rom the re"irement o! secring permits
!rom the 2%# every time a telecommnications company imports e"ipment.
%ax exemptions shold be granted only by clear and ne"ivocal provision o! law on the basis o! langage too plain
to be mista(en.
:,. 2o. 113?5D, 2ovember 1;, <00<
7acts= Prsant to Sec. 114 o! the %ax #ode which imposes percentage tax on dealers in secrities and lending
investors, the #ommissioner o! /nternal ,evene issed Cemorandm Arder (,CA) 2o. 15-D1 dated Carch 11,
1DD1, imposing )ve percent (51) lending investorMs tax on pawnshops based on their gross income and re"iring all
investigating nits o! the Brea to investigate and assess the lending investorMs tax de !rom them. %he issance
o! ,CA 2o. 15-D1 was an o*shoot o! petitionerMs evalation that the natre o! pawnshop bsiness is a(in to that o!
lending investors.
Sbse"ently, petitioner issed ,evene Cemorandm #irclar 2o. ?3-D1 dated Cay <3, 1DD<, sb+ecting the pawn
tic(et to the docmentary stamp tax as prescribed in %itle .// o! the %ax #ode.
&dversely a*ected by those revene orders, herein respondent Eose)na 9eal, owner and operator o! Eose)na
Pawnshop in San Cateo, ,iNal, as(ed !or a reconsideration o! both ,CA 2o. 15-D1 and ,C# 2o. ?3-D1 bt the same
was denied with )nality by petitioner in Actober 30, 1DD1.
#onse"ently, on Carch 1;, 1DD<, respondent )led with the ,%# a petition !or prohibition see(ing to prohibit
petitioner !rom implementing the revene orders.
Petitioner, throgh the AKce o! the Solicitor-:eneral, )led a motion to dismiss the petition on the grond that the
,%# has no +risdiction to review the "estioned revene orders and to en+oin their implementation. Petitioner
contends that the sb+ect revene orders were issed prsant to his power 5to ma(e rlings or opinions in
connection with the /mplementation o! the provisions o! internal revene laws.6 %hs, the case !alls within the
exclsive appellate +risdiction o! the #ort o! %ax &ppeals, citing Sec. 3(1) o! ,& 11<5.
%he ,%# issed an order denying the motion to dismiss holding that the revene orders are not assessments to
implement a %ax #ode provision, bt are 5in e*ect new taxes (against pawnshops) which are not provided !or nder
the #ode,6 and which only #ongress is empowered to impose. %he #ort o! &ppeals aKrmed the order issed by the
/sse= $hether or not the #ort o! %ax &ppeals has +risdiction to review rlings o! the #ommissioner implementing
the %ax #ode.
@eld= %he +risdiction to review rlings o! the #ommissioner pertains to the #ort o! %ax &ppeals and 2A% to the
,%#. %he "estioned ,CA and ,C# are actally rlings or opinions o! the #ommissioner implementing the %ax #ode
on the taxability o! the Pawnshops.
Hnder ,& 11<5, &n &ct #reating the #ort o! %ax &ppeals, sch rlings o! the #ommissioner o! /nternal ,evene are
appealable to that cort=
Sec. 3 Erisdiction Z %he #ort o! %ax &ppeals shall exercise exclsive appellate +risdiction to review by appeal, as
herein providedU
1. Becisions o! the #ommissioner o! /nternal ,evene in cases involving dispted assessments, re!nds o! internal
revene taxes, !ees or other charges, penalties imposed in relation thereto, or other matters arising nder the
2ational ,evene #ode or other laws or part o! law administered by the Brea o! /nternal ,evene.
ta? +e,edies> section %%*> Aho should institute a00eal in ta? cases
:,. 2o. 1??D?<, Ely ?, <00<
7acts= /n its resoltion, dated 15 2ovember <000, the Spreme #ort denied the Petition !or ,eview on #ertiorari
sbmitted by the #ommissioner o! /nternal ,evene !or non-compliance with the procedral re"irement o!
veri)cation explicit in Sec. ?, ,le 3 o! the 1DD3 ,les o! #ivil Procedre and, !rthermore, becase the appeal was
not prsed by the Solicitor-:eneral. $hen the motion !or reconsideration )led by the petitioner was li(ewise
denied, petitioner )led the instant motion see(ing an elcidation on the spposed discrepancy between the
prononcement o! this #ort, on the one hand that wold re"ire the participation o! the AKce o! the Solicitor-
:eneral and pertinent provisions o! the %ax #ode, on the other hand, that allow legal oKcers o! the Brea o!
/nternal ,evene (B/,) to institte and condct +dicial action in behal! o! the :overnment nder Sec, <<0 o! the %ax
,e!orm &ct o! 1DD3.
/sse= &re the legal oKcer o! the B/, athoriNed to institte appeal proceedings (as distingished !rom
commencement o! proceeding) withot the participation o! the Solicitor-:eneralI
@eld= 2A. %he instittion or commencement be!ore a proper cort o! civil and criminal actions and proceedings
arising nder the %ax ,e!orm &ct which 5shall be condcted y legal oKcers o! the Brea o! /nternal ,evene6 is not
in dispte. &n appeal !rom sch cort, however, is not a matter o! right. Sec. <<0 o! the %ax ,e!orm &ct mst not be
nderstood as overtrning the long-established procedre be!ore this #ort in re"iring the Solicitor-:eneral to
represent the interest o! the ,epblic. %his cort contines to maintain that it is the Solicitor-:eneral who has the
primary responsibility to appear !or the government in appellate proceedings. %his prononcement )nds
+sti)cation in the varios laws de)ning the AKce o! the Solicitor-:eneral, beginning with &ct 2o. 135, which too(
e*ect on 14 Ene 1D01, p to the present &dministrative #ode o! 1D;3. Sec. 35, #hapter 1<, %itle ///, Boo( /. o! the
said code otlines the powers and !nctions o! the AKce o! the Solicitor :eneral which incldes, bt not limited to,
its dty toU
1. ,epresent the :overnment in the Spreme #ort and the #ort o! &ppeals in all criminal proceedings> represent
the :overnment and its oKcers in the Spreme #ort, the #ort o! &ppeals, and all other corts or tribnals in all
civil actions and special proceedings in which the :overnment or any oKcer thereo! in his oKcial capacity is a
<. &ppear in any cort in any action involving the validity o! any treaty, law, exective order, or proclamation, rle
or reglation when in his +dgment his intervention is necessary or when re"ested by the #ort.
COTA.ATO/ et al.
:.,. 2o. 1???;4. &pril 13, <005
7acts= ,#P/ was granted a !ranchise nder ,& <034, the law provides tax exemption !or several properties o! the
company. Section 1? o! ,& <034 reads= 5/n consideration o! the !ranchise and rights hereby granted and any
provision o! law to the contrary notwithstanding, the grantee shall pay the same taxes as are now or may herea!ter
be re"ired by law !rom other individals, co partnerships, private, pblic or "asi-pblic associations, corporations
or +oint stoc( companies, on real estate, bildings and other personal property except radio e"ipment, machinery
and spare parts needed in connection with the bsiness o! the grantee, which shall be exempt !rom cstoms dties,
tari*s and other taxes, as well as those properties declared exempt in this section. /n consideration o! the !ranchise,
a tax e"al to one and one-hal! per centm o! all gross receipts !rom the bsiness transacted nder this !ranchise
by the grantee shall be paid to the %reasrer o! the Philippines each year, within ten days a!ter the adit and
approval o! the acconts as prescribed in this &ct. Said tax shall be in lie o! any and all taxes o! any (ind, natre or
description levied, established or collected by any athority whatsoever, mnicipal, provincial or national, !rom
which taxes the grantee is hereby expressly exempted.6 %herea!ter, the mnicipal treasrer o! %pi, Soth #otabato
assessed ,#P/ real property taxes !rom 1D;1 to 1D;5. %he mnicipal treasrer demanded that ,#P/ pay P144,;10 as
real property tax on its radio station bilding in Barangay Sablon, as well as on its machinery shed, radio relay
station tower and its accessories, and generating sets. %he 9ocal Board o! &ssessment &ppeals aKrmed the
assessment o! the mnicipal treasrer. $hen the case reach the # &, it rled that, petitioner is exempt !rom paying
the real property taxes assessed pon its machinery and radio e"ipment monted as accessories to its relay
tower. @owever, the decision assessing taxes pon petitionerMs radio station bilding, machinery shed, and relay
station tower is valid.
/sse= (1) $hether or not appellate cort erred when it exclded ,#P/Ms tower, relay station bilding and machinery
shed !rom tax exemption.
(<) $hether or not appellate cort erred when it did not resolve the isse o! nllity o! the tax declarations and
assessments de to non-inclsion o! depreciation allowance.
@eld= (1) ,#P/Ms radio relay station tower, radio station bilding, and machinery shed are real properties and are
ths sb+ect to the real property tax. Section 1? o! ,& <034, as amended by ,& ?05?, states that 5in consideration
o! the !ranchise and rights hereby granted and any provision o! law to the contrary notwithstanding, the grantee
shall pay the same taxes as are now or may herea!ter be re"ired by law !rom other individals, co partnerships,
private, pblic or "asi-pblic associations, corporations or +oint stoc( companies, on real estate, bildings and
other personal property.6 %he clear langage o! Section 1? states that ,#P/ shall pay the real estate tax.
(<) %he cort held the assessment valid. %he cort rled that, records o! the case shows that ,#P/ raised be!ore the
9B&& and the #B&& the nllity o! the assessments de to the non-inclsion o! depreciation allowance. %here!ore,
,#P/ did not raise this isse !or the )rst time. @owever, even i! we consider this isse, nder the ,eal Property %ax
#ode depreciation allowance applies only to machinery and not to real property.
The Hono+a5le Sec+eta+- o1 Finance vs. THE HONORA.LE RICAR;O M. ILAR;E/ :+esidin$ 8ud$e/
Re$ional T+ial Cou+t/ )th 8udicial Re$ion/ .+anch %)/ Iloilo Cit-/ and CI:RIANO :. CA.ALUNA/ 8R
:.,. 2o. 1<13;<. Cay D, <005
7acts= #abalna with his wi!e owns several real property located in /loilo #ity. #abalana is the ,egional Birector o!
,egional AKce 2o. ./ o! the Bepartment o! 7inance in /loilo #ity. &!ter his retirement, there are tax delin"encies on
his properties> he paid the amont nder protest contending that the penalties imposed to him are in excess than
that provided by law. &!ter exhasting all administrative remedies, he )led a sit be!ore the ,%# which !ond that
Section ?(c) o! Eoint &ssessment ,eglation 2o. 1-;5 and 9ocal %reasry ,eglation 2o. <-;5 issed on &gst 1,
1D;5 by respondent Secretary (!ormerly Cinister) o! 7inance is nll and void> (<) declaring that the penalty that
shold be imposed !or delin"ency in the payment o! real property taxes shold be two per centm on the amont
o! the delin"ent tax !or each month o! delin"ency or !raction thereo!, ntil the delin"ent tax is !lly paid bt in
no case shall the total penalty exceed twenty-!or per centm o! the delin"ent tax as provided !or in Section 44 o!
P.B. ?4? otherwise (nown as the ,eal Property %ax #ode.
/sse= $hether or not the then Cinistry o! 7inance cold legally promlgate ,eglations prescribing a rate o!
penalty on delin"ent taxes other than that provided !or nder Presidential Becree (P.B.) 2o. ?4?, also (nown as the
,eal Property %ax #ode.
@eld= %he Cinistry o! 7inance now Secretary o! 7inance cannot promlgate reglations prescribing a rate o! penalty
on delin"ent taxes. %he #ort rled that despite the promlgation o! '.A. 2o. 33, P.B. 2o. ?4? in general and
Section 44 in particlar, remained to be good law. %o accept the SecretaryMs premise that '.A. 2o. 33 had accorded
the Cinistry o! 7inance the athority to alter, increase, or modi!y the tax strctre wold be tantamont to saying
that '.A. 2o. 33 has repealed or amended P.B. 2o. ?4?. ,epeal o! laws shold be made clear and expressed.
,epeals by implication are not !avored as laws are presmed to be passed with deliberation and !ll (nowledge o!
all laws existing on the sb+ect. Sch repeals are not !avored !or a law cannot be deemed repealed nless it is
clearly mani!est that the legislatre so intended it. &ssming argmenti that '.A. 2o. 33 has athoriNed the
petitioner to isse the ob+ected ,eglations, sch con!erment o! powers is void !or being repgnant to the well-
encrsted doctrine in political law that the power o! taxation is generally vested with the legislatre. %hs, !or
prposes o! comptation o! the real property taxes de !rom private respondent !or the years 1D;4 to 1DD1,
inclding the penalties and interests, is still Section 44 o! the ,eal Property %ax #ode o! 1D3? or P.B. 2o. ?4?. %he
penalty that oght to be imposed !or delin"ency in the payment o! real property taxes shold, there!ore, be that
provided !or in Section 44 o! P.B. 2o. ?4?, i.e., two per centm on the amont o! the delin"ent tax !or each month
o! delin"ency or !raction thereo! bt 5in no case shall the total penalty exceed twenty-!or per centm o! the
delin"ent tax.6
:.,. 2o. 134D35. Carch 31, <005
7acts= @antex %rading #o is a company organiNed nder the Philippines. /t is engaged in the sale o! plastic prodcts,
it imports synthetic resin and other chemicals !or the man!actre o! its prodcts. 7or this prpose, it is re"ired to
)le an /mport 'ntry and /nternal ,evene Beclaration (#onsmption 'ntry) with the Brea o! #stoms nder
Section 1301 o! the %ari* and #stoms #ode. Sometime in Actober 1D;D, 9t. .icente &moto, &cting #hie! o!
#onter-/ntelligence Bivision o! the 'conomic /ntelligence and /nvestigation Brea ('//B), received con)dential
in!ormation that the respondent had imported synthetic resin amonting to P115,5DD,01;.00 bt only declared
P?5,53;,4D?.53. %hs, @entex receive a sbpoena to present its boo(s o! accont which it !ailed to do. %he brea
cannot )nd any original copies o! the prodcts @entex imported since the originals were eaten by termites. %hs,
the Brea relied on the certi)ed copies o! the respondentMs Pro)t and 9oss Statement !or 1D;3 and 1D;; on )le
with the S'#, the machine copies o! the #onsmption 'ntries, Series o! 1D;3, sbmitted by the in!ormer, as well as
excerpts !rom the entries certi)ed by %omas and Banganan. %he case was sbmitted to the #%& which rled that
@entex have tax de)ciency and is ordered to pay, per investigation o! the Brea. %he #& rled that the income and
sales tax de)ciency assessments issed by the petitioner were nlaw!l and baseless since the copies o! the import
entries relied pon in compting the de)ciency tax o! the respondent were not dly athenticated by the pblic
oKcer charged with their cstody, nor veri)ed nder oath by the '//B and the B/, investigators.
/sse= $hether or not the )nal assessment o! the petitioner against the respondent !or de)ciency income tax and
sales tax !or the latterMs 1D;3 importation o! resins and calcim bicarbonate is based on competent evidence and
the law.
@eld= #entral to the second isse is Section 14 o! the 2/,# o! 1D33, as amended which provides that the
#ommissioner o! /nternal ,evene has the power to ma(e assessments and prescribe additional re"irements !or
tax administration and en!orcement. &mong sch powers are those provided in paragraph (b), which provides that
57ailre to sbmit re"ired retrns, statements, reports and other docments. Z $hen a report re"ired by law as a
basis !or the assessment o! any national internal revene tax shall not be !orthcoming within the time )xed by law
or reglation or when there is reason to believe that any sch report is !alse, incomplete or erroneos, the
#ommissioner shall assess the proper tax on the best evidence obtainable.6 %his provision applies when the
#ommissioner o! /nternal ,evene nderta(es to per!orm her administrative dty o! assessing the proper tax
against a taxpayer, to ma(e a retrn in case o! a taxpayerMs !ailre to )le one, or to amend a retrn already )led in
the B/,. %he 5best evidence6 envisaged in Section 14 o! the 1D33 2/,#, as amended, incldes the corporate and
acconting records o! the taxpayer who is the sb+ect o! the assessment process, the acconting records o! other
taxpayers engaged in the same line o! bsiness, inclding their gross pro)t and net pro)t sales. Sch evidence also
incldes data, record, paper, docment or any evidence gathered by internal revene oKcers !rom other taxpayers
who had personal transactions or !rom whom the sb+ect taxpayer received any income> and record, data,
docment and in!ormation secred !rom government oKces or agencies, sch as the S'#, the #entral Ban( o! the
Philippines, the Brea o! #stoms, and the %ari* and #stoms #ommission. @owever, the best evidence obtainable
nder Section 14 o! the 1D33 2/,#, as amended, does not inclde mere photocopies o! recordsGdocments. %he
petitioner, in ma(ing a preliminary and )nal tax de)ciency assessment against a taxpayer, cannot anchor the said
assessment on mere machine copies o! recordsGdocments. Cere photocopies o! the #onsmption 'ntries have no
probative weight i! o*ered as proo! o! the contents thereo!. %he reason !or this is that sch copies are mere scraps
o! paper and are o! no probative vale as basis !or any de)ciency income or bsiness taxes against a taxpayer.
Co,0anies e?e,0t 1+o, 6e+o2+ate ta?
:.,.2o. 15<40D. Ene <D, <005
7acts= &merican 'xpress international is a !oreign corporation operating in the Philippines, it is a registered
taxpayer. An &pril 13, 1DDD, QrespondentR )led with the B/, a letter-re"est !or the re!nd o! its 1DD3 excess inpt
taxes in the amont o! P3,351,043.0?, which amont was arrived at a!ter dedcting !rom its total inpt .&% paid o!
P3,343,040.?3 its applied otpt .&% liabilities only !or the third and !orth "arters o! 1DD3 amonting to
P5,1D3.44 and P4,3DD.?3, respectively. %he #%& rled in !avor o! the herein respondent holding that its services are
sb+ect to Nero-rate prsant to Section 10;(b) o! the %ax ,e!orm &ct o! 1DD3 and Section ?.10<-< (b)(<) o! ,evene
,eglations 5-D4. %he #& aKrmed the decision o! the #%&.
/sse= $hether or not the company is sb+ect to Nero-rate tax prsant to the %ax ,e!orm &ct o! 1DD3.
@eld= Services per!ormed by .&%-registered persons in the Philippines (other than the processing, man!actring or
repac(ing o! goods !or persons doing bsiness otside the Philippines), when paid in acceptable !oreign crrency
and acconted !or in accordance with the rles and reglations o! the BSP, are Nero-rated. ,espondent is a .&%-
registered person that !acilitates the collection and payment o! receivables belonging to its non-resident !oreign
client, !or which it gets paid in acceptable !oreign crrency inwardly remitted and acconted !or in con!ormity with
BSP rles and reglations. #ertainly, the service it renders in the Philippines is not in the same category as
5processing, man!actring or repac(ing o! goods6 and shold, there!ore, be Nero-rated. /n reply to a "ery o!
respondent, the B/, opined in .&% ,ling 2o. 0;0-;D that the income respondent earned !rom its parent companyMs
regional operating centers (,A#s) was atomatically Nero-rated e*ective Eanary 1, 1D;;. Service has been de)ned
as 5the art o! doing something se!l !or a person or company !or a !ee6 or 5se!l labor or wor( rendered or to be
rendered by one person to another.6 7or !acilitating in the Philippines the collection and payment o! receivables
belonging to its @ong Song-based !oreign client, and getting paid !or it in dly acconted acceptable !oreign
crrency, respondent renders service !alling nder the category o! Nero rating. Prsant to the %ax #ode, a .&% o!
Nero percent shold, there!ore, be levied pon the spply o! that service.
&s a general rle, the .&% system ses the destination principle as a basis !or the +risdictional reach o! the tax.
:oods and services are taxed only in the contry where they are consmed. %hs, exports are Nero-rated, while
imports are taxed. .&% rate !or services that are per!ormed in the Philippines, 5paid !or in acceptable !oreign
crrency and acconted !or in accordance with the rles and reglations o! the BSP.6 %hs, !or the spply o! service
to be Nero-rated as an exception, the law merely re"ires that )rst, the service be per!ormed in the Philippines>
second, the service !all nder any o! the @owever, the law clearly provides !or an exception to the destination
principle> that is, !or a Nero percent categories in Section 10<(b) o! the %ax #ode> and, third, it be paid in acceptable
!oreign crrency acconted !or in accordance with BSP rles and reglations. /ndeed, these three re"irements !or
exemption !rom the destination principle are met by respondent. /ts !acilitation service is per!ormed in the
Philippines. /t !alls nder the second category !ond in Section 10<(b) o! the %ax #ode, becase it is a service other
than 5processing, man!actring or repac(ing o! goods6 as mentioned in the provision. Hndispted is the !act that
sch service meets the stattory condition that it be paid in acceptable !oreign crrency dly acconted !or in
accordance with BSP rles. %hs, it shold be Nero-rated.
:hili00ine Ai+ Lines VS E;U
@ , 9 - ? 1 3 ; 3 & g s t 1 5 , 1 D ; ; :tierreN, E.=
7&#%S= P&9 is engaged in air transportation bsiness nder a legislative !ranchise wherein it is exempt !rom tax payment. P&9 has
not been paying motor vehicle registration since1D54. %he 9and ,egistration #ommissioner re"ired all tax exempt entities
inclding P&9 to pay motor vehicle registration !ees.
/SSH'= $hether or not registration !ees as to motor vehicles are taxes to which P&9 is exempted.
,H9/2:= %axes are !or revene whereas !ees are exactions !or prposes o! reglation and inspection, and are !or that reason
limited in amont to what is necessary to cover the cost o! the services rendered in that connection. /t is the ob+ect
o! the charge, and not the name, that determines whether a charge is a tax or a !ee. %he money collected nder
Cotor .ehicle 9aw is not intended !or the expenditres o! the C. AKce bt accres to the!nds !or the constrction and
maintenance o! pblic roads, streets and bridges. &s !ees are not collected !or reglatory prposes as an incident
to the en!orcement o! reglations governing the operation o! motor vehicles on pblic highways bt to provide
revene with which the :overnment is to constrct and maintain pblic highways !or everyoneMs se, they are veritable taxes, not
merely !ees. P&9 is ths exempt !rom paying sch !ees, except !or the period between Ene <3, 1D4; to &pril D,
1D3D where its taxexemption in the !ranchise was repealed.
: . , . D < 5 5 ; 5 C & J ; , 1 D D < Bavide, E.=
7&#%S= /n 1D;D, #A& sent a letter to #altex directing it to remit to APS7 its collection o! the additional tax on
petrolem athoriNed nder PB 1D54 and pending sch remittance, all o! its claims !rom the APS7 shall be held
in abeyance. Petitioner re"ested #A& !or the early release o! its reimbrsement certi)cates !rom the APS7 covering
claims with the AKce o! 'nergy &*airs. #A& denied the same.
/SSH'= $hether or not petitioner can avail o! the right to o*set any amont that it may be re"ired nder the law
to remit to the APS7 against any amont that it may receive byway o! reimbrsement.
,H9/2:= /t is a settled rle that a taxpayer may not o*set taxes de !rom the claims that he may have against the
government. %axes cannot be the sb+ect o! compensation becase the government and taxpayer are not mtally debtors
and creditors o! each other and a claim !or taxes is not sch a debt, demand, contract or +dgment as is allowed to be set-
o*. %he oil companies merely acted as agents !or the government in the latterMs collection since taxes are passed nto
the end-sers, the consming pblic.