Pepsi-Cola vs.

Municipality of Tanauan

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN

69
SCRA
460
GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local self-government
carries with it the power to confer on such local governmental agencies the power to
tax.
FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction
to declare Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy
Act, unconstitutional as an undue delegation of taxing authority as well as to declare
Ordinances Nos. 23 and 27 denominated as "municipal production tax" of the
Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft
drinks producers and manufacturers a tax of one-sixteenth (1/16) of a centavo for every
bottle of soft drink corked, and Ordinance 27 levies and collects on soft drinks produced
or manufactured within the territorial jurisdiction of this municipality a tax of ONE
CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. Aside from
the undue delegation of authority, appellant contends that it allows double taxation,
and that the subject ordinances are void for they impose percentage or specific tax.
ISSUE: Are the contentions of the appellant tenable?
HELD: No. On the issue of undue delegation of taxing power, it is settled that the power
of taxation is an essential and inherent attribute of sovereignty, belonging as a matter
of right to every independent government, without being expressly conferred by the
people. It is a power that is purely legislative and which the central legislative body
cannot delegate either to the executive or judicial department of the government
without infringing upon the theory of separation of powers. The exception, however, lies
in the case of municipal corporations, to which, said theory does not apply. Legislative
powers may be delegated to local governments in respect of matters of local concern.
By necessary implication, the legislative power to create political corporations for
purposes of local self-government carries with it the power to confer on such local
governmental
agencies
the
power
to
tax.
Also, there is no validity to the assertion that the delegated authority can be declared
unconstitutional on the theory of double taxation. It must be observed that the
delegating authority specifies the limitations and enumerates the taxes over which local
taxation may not be exercised. The reason is that the State has exclusively reserved the
same for its own prerogative. Moreover, double taxation, in general, is not forbidden by
our fundamental law, so that double taxation becomes obnoxious only where the
taxpayer is taxed twice for the benefit of the same governmental entity or by the same
jurisdiction for the same purpose, but not in a case where one tax is imposed by the
State
and
the
other
by
the
city
or
municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage
tax on sales, or other taxes in any form based thereon. The tax is levied on the produce
(whether sold or not) and not on the sales. The volume capacity of the taxpayer's
production of soft drinks is considered solely for purposes of determining the tax rate on
the products, but there is not set ratio between the volume of sales and the amount of
the tax.

Pepsi-Cola vs. City of Butuan

PEPSI-COLA BOTTLING CO. OF

24
GR No. L-22814, August 28, 1968

THE PHILS.,
SCRA

INC.

vs.

CITY

OF

BUTUAN
789

"The classification made in the exercise of power to tax, to be valid, must be reasonable
."
FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under
protest, to the City of Butuan, and collected by the latter, pursuant to its Municipal
Ordinance No. 110 which plaintiff assails as null and void because it partakes of the
nature of an import tax, amounts to double taxation, highly unjust and discriminatory,
excessive, oppressive and confiscatory, and constitutes an invlaid delegation of the
power to tax. The ordinance imposes taxes for every case of softdrinks, liquors and
other carbonated beverages, regardless of the volume of sales, shipped to the agents
and/or consignees by outside dealers or any person or company having its actual
business outside the City.
ISSUE: Does the tax ordinance violate the uniformity requirement of taxation?
HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded
as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and
hence, violative of the uniformity required by the Constitution and the law therefor,
since only sales by "agents or consignees" of outside dealers would be subject to the
tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of
the volume of their sales, and even if the same exceeded those made by said agents or
consignees of producers or merchants established outside the City of Butuan, would be
exempt
from
the
disputed
tax.
It is true that the uniformity essential to the valid exercise of the power of taxation
does not require identity or equality under all circumstances, or negate the authority to
classify the objects of taxation. The classification made in the exercise of this authority,
to be valid, must, however, be reasonable and this requirement is not deemed satisfied
unless: (1) it is based upon substantial distinctions which make real differences; (2)
these are germane to the purpose of the legislation or ordinance; (3) the classification
applies, not only to present conditions, but, also, to future conditions substantially
identical to those of the present; and (4) the classification applies equally to all those
who belong to the same class.

CIR
GR
No.
298 SCRA 83

CIR vs. YMCA

v.

124043,

October

14,

YMCA
1998

FACTS: Private Respondent YMCA--a non-stock, non-profit institution, which conducts

various programs beneficial to the public pursuant to its religious, educational and
charitable objectives--leases out a portion of its premises to small shop owners, like
restaurants and canteen operators, deriving substantial income for such. Seeing this,

the Commissioner of Internal Revenue (CIR) issued an assessment to private respondent

for deficiency income tax, deficiency expanded withholding taxes on rentals and
professional fees and deficiency withholding tax on wages. YMCA opposed arguing that
its rental income is not subject to tax, mainly because of the provisions of Section 27 of
NIRC which provides that civic league or organizations not organized for profit but
operate exclusively for promotion of social welfare and those organized exclusively for
pleasure, recreation and other non-profitble businesses shall not be taxed.
ISSUE: Is the contention of YMCA tenable?
HELD: No. Because taxes are the lifeblood of the nation, the Court has always applied
the doctrine of strict in interpretation in construing tax exemptions. Furthermore, a
claim of statutory exemption from taxation should be manifest and unmistakable from
the language of the law on which it is based. Thus, the claimed exemption "must
expressly be granted in a statute stated in a language too clear to be mistaken."

Sison vs Ancheta (1984)

February 15, 2013 markerwins Tax Law

Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged

that its provision (Section 1) unduly discriminated against him by the
imposition of higher rates upon his income as a professional, that it
amounts to class legislation, and that it transgresses against the equal
protection and due process clauses of the Constitution as well as the
rule requiring uniformity in taxation.
Issue: Whether BP 135 violates the due process and equal protection
clauses, and the rule on uniformity in taxation.
Held: There is a need for proof of such persuasive character as would
lead to a conclusion that there was a violation of the due process and
equal protection clauses. Absent such showing, the presumption of
validity must prevail. Equality and uniformity in taxation means that
all taxable articles or kinds of property of the same class shall be taxed
at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation. Where
the differentitation conforms to the practical dictates of justice and
equity, similar to the standards of equal protection, it is not
discriminatory within the meaning of the clause and is therefore

uniform. Taxpayers may be classified into different categories, such as

recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make
deductions for income tax purposes as there is no practically no
overhead expense, while professionals and businessmen have no
uniform costs or expenses necessaryh to produce their income. There
is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income
taxation as regards professional and business income.

Tan v. Del Rosario Digest

Tan v Del Rosario

Facts:

1. Two consolidated cases assail the validity of RA 7496 or the Simplified Net
Income Taxation Scheme ("SNIT"), which amended certain provisions of
the NIRC, as well as the Rules and Regulations promulgated by public
respondents pursuant to said law.

2.

Petitioners posit that RA 7496 is unconstitutional as it allegedly violates

the following provisions of the Constitution:

-Article VI, Section 26(1) Every bill passed by the Congress shall
embrace only one subject which shall be expressed in the title thereof.
- Article VI, Section 28(1) The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system of taxation.

- Article III, Section 1 No person shall be deprived of . . . property

without due process of law, nor shall any person be denied the equal
protection of the laws.

3. Petitioners contended that public respondents exceeded their rulemaking authority in applying SNIT to general professional partnerships.
Petitioner contends that the title of HB 34314, progenitor of RA 7496, is
deficient for being merely entitled, "Simplified Net Income Taxation
Scheme for the Self-Employed and Professionals Engaged in the Practice
of their Profession" (Petition in G.R. No. 109289) when the full text of the
title actually reads,
'An Act Adopting the Simplified Net Income Taxation Scheme For The SelfEmployed and Professionals Engaged In The Practice of Their Profession,
Amending Sections 21 and 29 of the National Internal Revenue Code,' as
amended. Petitioners also contend it violated due process.

5. The Solicitor General espouses the position taken by public respondents.

6. The Court has given due course to both petitions.

ISSUE: Whether or not the tax law is unconstitutional for violating

due process

NO. The due process clause may correctly be invoked only when there is a
clear contravention of inherent or constitutional limitations in the exercise
of the tax power. No such transgression is so evident in herein case.

1. Uniformity of taxation, like the concept of equal protection, merely

requires that all subjects or objects of taxation, similarly situated, are to
be treated alike both in privileges and liabilities. Uniformity does not
violate classification as long as: (1) the standards that are used therefor
are substantial and not arbitrary, (2) the categorization is germane to

achieve the legislative purpose, (3) the law applies, all things being equal,
to both present and future conditions, and (4) the classification applies
equally well to all those belonging to the same class.

2. What is apparent from the amendatory law is the legislative intent to

increasingly shift the income tax system towards the schedular
approach in the income taxation of individual taxpayers and to maintain,
by and large, the present global treatment on taxable corporations. The
Court does not view this classification to be arbitrary and inappropriate.

ISSUE 2: Whether or not public respondents exceeded their

authority in promulgating the RR

No. There is no evident intention of the law, either before or after the
amendatory legislation, to place in an unequal footing or in significant
variance the income tax treatment of professionals who practice their
respective professions individually and of those who do it through a
general professional partnership.

an vs. Del Rosario Case Digest

Tan vs. Del Rosario
237 SCRA 324

Facts:
Petitioners challenge the constitutionality of RA 7496 or the simplified income taxation
scheme (SNIT) under Arts (26) and (28) and III (1). The SNIT contained changes in the tax
schedules and different treatment in the professionals which petitioners assail as unconstitutional
for being isolative of the equal protection clause in the constitution.
Issue:

Is the contention meritorious?

Ruling:
No. uniformity of taxation, like the hindered concept of equal protection, merely require
that all subjects or objects of taxation similarly situated are to be treated alike both privileges
and liabilities. Uniformity, does not offend classification as long as it rest on substantial
distinctions, it is germane to the purpose of the law. It is not limited to existing only and must apply
equally to all members of the same class.
The legislative intent is to increasingly shift the income tax system towards the
scheduled approach in taxation of individual taxpayers and maintain the present global treatment on
taxable corporations. This classification is neither arbitrary nor inappropriate.

PUNSALAN
GR
95 PHIL 46

Punsalan vs. Mun. Board of City of Manila

v.
No.

MUN.
BOARD
L-23645,

OF
October

CITY

OF
29,

MANILA
1968

FACTS: The plaintiffs--two lawyers, medical practitioner, a dental surgeon, a CPA, and a
pharmacist--sought the
annulment of Ordinance No.3398 of the City of Manila which imposes a municipal
occupation tax on persons
exercising various professions in the city and penalizes non-payment of the tax,
contending in substance that this
ordinance and the law authorizing it constitute class legislation, are unjust and
oppressive, and authorize what
amounts to double taxation. The burden of plaintiffs' complaint is not that the
professions to which they
respectively belong have been singled out for the imposition of this municipal
occupation tax, but that while the
law has authorized the City of Manila to impose the said tax, it has withheld that
authority from other chartered
cities, not to mention municipalities.
ISSUE: Does the law constitute a class legislation? Is it for the Court to determine which
political unit should
impose taxes and which should not?
HELD: No. It is not for the courts to judge what particular cities or municipalities should
be empowered to impose
occupation taxes in addition to those imposed by the National Government. That matter
is peculiarly within the
domain of the political departments and the courts would do well not to encroach upon
it. Moreover, as the seat
of the National Government and with a population and volume of trade many times that
of any other Philippine

city or municipality, Manila, no doubt, offers a more lucrative field for the practice of the
professions, so that it is
but fair that the professionals in Manila be made to pay a higher occupation tax than
their brethren in the
provinces.

G.R. No. 115455

235 SCRA 630 (1994)
FACTS
RA 7716, otherwise known as the Expanded Value-Added Tax Law, is an act that seeks to widen
the tax base of the existing VAT system and enhance its administration by amending the National
Internal Revenue Code. There are various suits questioning and challenging the constitutionality
of RA 7716 on various grounds.
Tolentino contends that RA 7716 did not originate exclusively from the House of Representatives
but is a mere consolidation of HB. No. 11197 and SB. No. 1630 and it did not pass three readings
on separate days on the Senate thus violating Article VI, Sections 24 and 26(2) of the
Constitution, respectively.
Art. VI, Section 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public
debt, bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
Art. VI, Section 26(2): No bill passed by either House shall become a law unless it has passed
three readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President certifies to
the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last
reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken
immediately thereafter, and the yeas and nays entered in the Journal.
ISSUE
Whether or not RA 7716 violated Art. VI, Section 24 and Art. VI, Section 26(2) of the Constitution.

HELD
No. The phrase originate exclusively refers to the revenue bill and not to the revenue law. It is
sufficient that the House of Representatives initiated the passage of the bill which may undergo
extensive changes in the Senate.
SB. No. 1630, having been certified as urgent by the President need not meet the requirement
not only of printing but also of reading the bill on separate days.

olentino v Secretary of Finance (1994)

Tolentino v Secretary of Finance GR No. 115455, August 25, 1994
FACTS:
The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale
or
exchange of services. RA 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code (NIRC).
Herein, various petitioners seek to declare RA 7166 as unconstitutional. One of the reasons is that it violates Article
VI, Section 28 (1) which provides that the rule of taxation shall be uniform and equitable. The Congress shall evolve
a progressive system of taxation.
ISSUE:
Whether RA 7166 violates the principle of progressive system of taxation
RULING:
No. Lacking empirical data on which to base any conclusion regarding these arguments, any discussion whether the
VAT is regressive in the sense that it will hit the poor and middle income group in society harder than it will the rich is
largely an academic exercise.
Regressivity is not a negative standard for courts to enforce. Evolve a progressive system of taxation is a directive
to Congress. These provisions are placed in the Constitution as moral incentives to legislation, not as judicially
enforceable rights.

Reyes vs. Almanzor

REYES
GR
Nos.
196 SCRA 322

v.
L-49839-46,

April

26,

ALMANZOR
1991

FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased and
occupied as dwelling
units by tenants who were paying monthly rentals of not exceeding P300. Sometimes in
1971 the Rental

Freezing Law was passed prohibiting for one year from its effectivity, an increase in
monthly rentals of dwelling
units where rentals do not exceed three hundred pesos (P300.00), so that the Reyeses
were precluded from
raising the rents and from ejecting the tenants. In 1973, respondent City Assessor of
Manila re-classified and
reassessed the value of the subject properties based on the schedule of market values,
which entailed an
increase in the corresponding tax rates prompting petitioners to file a Memorandum of
Disagreement averring
that the reassessments made were "excessive, unwarranted, inequitable, confiscatory
and unconstitutional"
considering that the taxes imposed upon them greatly exceeded the annual income
derived from their
properties. They argued that the income approach should have been used in
determining the land values instead
of the comparable sales approach which the City Assessor adopted.
ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?
HELD: No. The taxing power has the authority to make a reasonable and natural
classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at the
very least discrimination
that finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under
similar circumstances or that all persons must be treated in the same manner, the
conditions not being different
both
in
the
privileges
conferred
and
the
liabilities
imposed.
Consequently, it stands to reason that petitioners who are burdened by the
government by its Rental Freezing
Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not
now be penalized by the
same government by the imposition of excessive taxes petitioners can ill afford and
eventually result in the
forfeiture of their properties.

ABRA VALLEY COLLEGE, INC. VS AQUINO

JUNE 15 1988
PARAS, J.

FACTS:
Abra Valley College, an educational corporation and institution of higher
learning duly incorporated with the SEC filed a complaint to annul and declare void

the Notice of Seizure and the Notice of Sale of its lot and building located at
Bangued, Abra, for non-payment of real estate taxes and penalties. Paterno Millare
filed through counsel a motion to dismiss the complaint. The provincial fiscal filed a
memorandum for the government wherein they opined hat based on the evidence,
the laws applicable, court decisions and jurisprudence, the school building and the
school lot used for educational purposes of the Abra Valley College are exempted
from payment of taxes. Nonetheless, the trial court disagreed because of the use of
the second floor by the Director of the said school for residential purpose. He thus
ruled for the government and rendered the assailed decision.

ISSUE:
Whether or not the lot and building in question are used exclusively for
educational purposes?

HELD:
NO. It must be stressed that while the court allows a more liberal and nonrestrictive interpretation of the phrase exclusively used for educational purposes
as provided for in the Article VI, Section 22, Paragraph 3 of the 1935 Philippine
Constitution, reasonable emphasis has always been made that exemption extends
to facilities which are incidental to and reasonably necessary for the
accomplishment of the main purpose. Otherwise stated, the use of the school
building or lot for commercial purposes is neither contemplated by law, nor by
jurisprudence. Thus, while the use of the second floor of the main building in the
case at bar for residential purposes of the Director and his family, may find
justification under the concept of incidental use, which is complimentary to the
main or primary purpose educational, the lease of the first floor thereof to the
Northern Marketing Corporation cannot by any stretch of the imagination be
considered incidental to the purposes of education.
Under the 1935 Constitution, the rial court correctly arrived at the conclusion
that the school building as well as the lot where it is built, should be taxed, not
because the second floor of the same is being used by the director and his family
for residential purposes, but because the first floor thereof is being used for
commercial purposes. However, since only a portion is used for purposes of
commerce, it is only fair that half of the assessed tax be return to the school
involved.