Taxation and Tax Defined

COMMISSIONER OF INTERNAL ALGUE, INC., and CTA (1988) REVENUE vs.

everything, from the formation of the VOICP to the actual purchase by it of the PSEDC properties. This finding of the
respondent court is in accord with Sec 30 of the Tax Code:
SEC. 30. Deductions from gross income.--In computing net income there shall be allowed as deductions (a) Expenses:
(1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or
business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; ... 22
Collector of Internal Revenue disallowed the P75K deduction claimed by private respondent Algue as legitimate business
expenses in its income tax returns. CTA agreed with Algue, allowing the deduction of P75K as legit business expenses.
Collector of IR appealed CTAs decision. Commissioner argues: deduction was not allowed bec it was not an ordinary
reasonable or necessary business expense. CTA & Algue: the said amount had been legitimately paid by the Algue for actual
services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work in
the creation of the Vegetable Oil Investment Corporation of the Phils (VOICP) and its subsequent purchase of the properties
of the Philippine Sugar Estate Devt Company (PSEDC). ISSUE: Is the tax deduction proper? YES! HELD: In favor of CTA
& Algue! The amount was earned through the joint efforts of the persons among whom it was distributed. It has been
established that the PSEDC had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil
manufacturing process. Pursuant to such authority, 5 others worked for the formation of the VOICP, inducing other persons
to invest in it. Ultimately, after its incorporation largely through the promotion of said 5persons, this new corporation
purchased the PSEDC properties. For this sale, Algue received as agent a commission of P126k, and it was from this
commission that the P75k promotional fees were paid to the 5persons. There is no dispute that the payees duly reported their
respective shares of the fees in their ITRs and paid the corresponding taxes thereon. CTA also found that no distribution of
dividends was 18 involved. Commissioner accuses Algue of tax dodging (attempt to evade a legitimate assessment by
involving an imaginary deduction). He claimed that these payments are fictitious bec most of the payees are members of the
same family in control of Algue. In fact, no indication was made as to how such payments were made, whether by check or
in cash, and there is not enough substantiation of such payments. However, these suspicions were adequately met by Algue
Inc when its President, Guevara, and the accountant, de Jesus, testified that the payments were not made in 1 lump sum but
periodically and in different amounts as each payee's need arose. It should be remembered that Algue Inc was a family
corporation where strict business procedures were not applied and immediate issuance of receipts was not required. Even so,
at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him
or her, to make up the total of P75,000.00. Admittedly, everything seemed to be informal. This arrangement was
understandable, however, in view of the close relationship among the persons in the family corporation. The CTA was
correct that the amount of the promotional fees was not excessive. The total commission paid by the PSEDC. to Algue Inc
was P125K. After deducting the said fees, Algue still had a balance of P50K as clear profit from the transaction. The amount
of P75K was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did
practically
and Revenue Regulations No. 2, Section 70 (1):
SEC. 70. Compensation for personal services.--Among the ordinary and necessary expenses paid or incurred in carrying on
any trade or business may be included a reasonable allowance for salaries or other compensation for personal services
actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in
fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are
reasonable and are, in fact, payments purely for service. This test and its practical application may be further stated and
illustrated as follows: Any amount paid in the form of compensation, but not in fact as the purchase price of services, is not
deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend on stock. This is likely to
occur in the case of a corporation having few stockholders, Practically all of whom draw salaries. If in such a case the
salaries are in excess of those ordinarily paid for similar services, and the excessive payment correspond or bear a close
relationship to the stockholdings of the officers of employees, it would seem likely that the salaries are not paid wholly for
services rendered, but the excessive payments are a distribution of earnings upon the stock. . . .
It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its controlling
23 stockholders. SolGens correct that the burden is on the taxpayer to prove the validity of the claimed deduction. In
the present case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that
the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors
and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring
millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed. Taxes are what we pay for
civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate
it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person

who is able to must contribute his share in the running of the government. The government for its part, is expected to
respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral
and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is
an arbitrary method of exaction by those in the seat of power. But even as the inevitability and indispensability of taxation is
conceded, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that
the law has not been observed.

PROGRESSIVE DEVT CORP vs.QUEZON CITY 1989 City Council of QC adopted Ordinance No. 7997, Series of 1969,
the Market Code of Quezon City, Section 3 of which provided:
Sec. 3. Supervision Fee.- Privately owned and operated public markets shall submit monthly to the Treasurer's Office, a
certified list of stallholders showing the amount of stall fees or rentals paid daily by each stallholder, ... and shall pay 10%
of the gross receipts from stall rentals to the City, ... , as supervision fee
comprehensive: the grant of authority is not only" [to] regulate" and "fix the license fee," but also " to tax" Also, RA 2264,
the Local Autonomy Act, provides that: Any provision of law to the contrary notwithstanding, all chartered cities,
municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged
in any occupation or business, or exercising privileges in chartered cities, municipalities or municipal districts by requiring
them to secure licenses at rates fixed by the municipal board or city council of the city, the municipal council of the
municipality, or the municipal district council of the municipal district; to collect fees and charges for service rendered by
the city, municipality or municipal district; to regulate and impose reasonable fees for services rendered in connection with
any business, profession or occupation being conducted within the city, municipality or municipal district and otherwise to
levy for public purposes just and uniform taxes licenses or fees: ... Thus, RA 2264 confers upon local governments broad
taxing authority extending to almost "everything, excepting those which are mentioned therein," provided that the tax levied
is "for public purposes, just and uniform," does not transgress any constitutional provision and is not repugnant to a
controlling statute. Both the Local Autonomy Act and the Charter of QC clearly show that respondent is authorized to fix
the license fee collectible from and regulate the business of petitioner as operator of a privatelyowned public market.
Petitioner, insists: "supervision fee" collected from rentals, being a return from capital invested in the construction of the
Farmers Market, practically operates as a tax on income, 1 of those expressly excepted from respondent's taxing authority,
and thus beyond the latter's competence. Petitioner cites the same Section 2 of the Local Autonomy Act : ... Provided,
however, That no city, municipality or municipal district may levy or impose any of the following: xxx xxx xxx (g) Taxes
on income of any kind whatsoever; SC HELD: The term "tax" frequently applies to all kinds of exactions of monies which
become public funds. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that
license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is
imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing
power primarily for purposes of raising revenues. Thus, if the generating of revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also
obtained does not make the imposition a tax. To be considered a license fee, the imposition questioned must relate to an
occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation
for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable
expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as
well. Accordingly, a charge of a fixed sum which bears no relation at all
The Market Code was thereafter amended by Ordinance No. 9236, Series of 1972, which reads:
SECTION 1. There is hereby imposed (5 %) tax on gross receipts on rentals or lease of space in privately-owned public
markets in Quezon City. xxx xxx xxx SECTION 3. For the effective implementation of this Ordinance, owners of privately
owned public markets shall submit ... a monthly certified list of stallholders of lessees of space in their markets xxx
Petitioner Progressive Devt Corp, owner and operator of a public market known as the "Farmers Market & Shopping
Center" filed a Petition for Prohibition with Preliminary Injunction against respondent bec the supervision fee or license tax
imposed by the ordinances is in reality a tax on income which QC may not impose, the same being expressly prohibited by
RA 2264 QC answered: it had authority to enact the ordinances, maintaining that the tax on gross receipts imposed therein is
not a tax on income. SolGen added that the tax on gross receipts was not a tax on income but one imposed for the enjoyment
of the privilege to engage in a particular trade or business which was within the power of QC to impose. LC: dismissed the
petition: the questioned imposition is not a tax on income, but rather a privilege tax or license fee which local governments,
like QC, are empowered to impose and collect. ISSUE: Whether the tax imposed on gross receipts of stall rentals is properly
characterized as partaking of the nature of an income tax or, alternatively, of a license fee. HELD: LICENSE FEE, in favor
of QC! Section 12, Article III RA 537, the Revised Charter of Quezon City, authorizes the City Council: xxx xxx xxx (b) To
provide for the levy and collection of taxes and other city revenues and apply the same to the payment of city expenses in
accordance with appropriations. (c) To tax, fix the license fee, and regulate the business of the following: ... preparation and
sale of meat, poultry, fish, game, butter, cheese, lard vegetables, bread and other provisions. The scope of legislative
authority conferred upon the QC Council in respect of businesses like that of the petitioner, is

to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. ITCAB, the
"Farmers Market & Shopping Center" was built by virtue of Resolution No. 7350.The same resolution imposed upon
petitioner, as a condition for continuous operation, the obligation to "abide by and comply with the ordinances, rules and
regulations prescribed for the establishment, operation and maintenance of markets in Quezon City." The "Farmers' Market
and Shopping Center" being a public market in the' sense of a market open to and inviting the patronage of the general
public, even though privately owned, petitioner's operation thereof required a license issued by the respondent City, the
issuance of which, applying the standards set forth above, was done principally in the exercise of the respondent's police
power. The operation of a privately owned market is, as correctly noted by the Solicitor General, equivalent to or quite the
same as the operation of a government-owned market; both are established for the rendition of service to the general public,
which warrants close supervision and control by the respondent City, for the protection of the health of the public. Thus, the
(5%) tax imposed in Ordinance No. 9236 constitutes, not a tax on income, not a city income tax but rather a license tax or
fee for the regulation of the business in which the petitioner is engaged. While it is true that the amount imposed by the
questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition,
instead of one of regulation under the police power, it nevertheless will be presumed to be reasonable. Local' governments
are allowed wide discretion in determining the rates of imposable license fees even in cases of purely police power
measures, in the absence of proof as to particular municipal conditions and the nature of the business being taxed as well as
other detailed factors relevant to the issue of arbitrariness or unreasonableness of the questioned rates. Petitioner has neither
shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly disproportionate to the
costs of the regulatory service being performed by the respondent as to compel the Court to characterize the imposition as a
revenue measure exclusively. The lower court correctly held that the gross receipts from stall rentals have been used only as
a basis for computing the fees or taxes due respondent to cover the latter's administrative expensesThe use of the gross
amount of stall rentals as basis for determining the collectible amount of license tax, does not by itself, upon the one hand,
convert or render the license tax into a prohibited city tax on income. Upon the other hand, it has not been suggested that
such basis has no reasonable relationship to the probable costs of regulation and supervision of the petitioner's kind of
business. For, ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related
items sold in petitioner's privately owned market; and the higher the volume of goods sold in such private market, the
greater the extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying
public. Moreover, what we started with should be recalled here: the authority conferred upon the respondent's City Council
is not merely "to regulate" but also embraces the power "to tax" the petitioner's business. Petitioner argues: respondent is
without power to impose a gross receipts tax for revenue purposes absent an express grant from the national government. As
a general rule, there must be a statutory grant for a local government unit to impose lawfully a gross receipts tax, that unit
not having the inherent power of taxation. The rule, however, finds no application in the instant case where what is involved
is an exercise of, principally, the regulatory
power of the respondent City and where that regulatory power is expressly accompanied by the taxing power.

COMPAIA GENERAL DE TABACOS DE FILIPINAS, vs. CITY OF MANILA, 1907 Plaintiff sought to recover of the
sum of P134,444.97, which it alleged was illegally collected by the defendant from the plaintiff as taxes for the years 1898,
1899, 1900, 1901, 1902, and 1903. Parties later entered into a stipulation of facts (in Espanol hehe) ISSUE: Can the sum be
recovered? HELD: NO. During the years 1898, 1899, 1900, 1901, 1902, and 1903 the plaintiff paid to the Collector of
Internal Revenue and various provinces, in addition to the contribucion industrial, a contribucion territorial and contribucion
urbana. Plaintiff claims that it was only required, under the laws in force in the Phils, to pay the industrial tax and this to be
based upon the dividends declared by said plaintiff in favor of its stockholders. This contention of the plaintiff is based upon
paragraph 4 of tarifa primera of the Industrial Tax Regulations, dated June 19, 1890. This regulation is as follows: under the regulations for the cutting of timber upon public lands, and all other taxes known as inland-revenue taxes, shall
cease to be levied and collected as revenue for the Central Government of the Archipelago from and after the 30th of June,
1901, and shall thereafter be collected as provincial and municipal taxes by the provincial treasurers. One-half of the taxes
so collected shall be paid into the treasuries of the respective municipalities in which they shall be collected, etc. It is clear,
then, that whatever taxes the plaintiff paid prior to the 30th day of June, 1901, to the Province of Manila, or the other
provinces of the Archipelago, were paid to the agent of the Central Government and certainly the city of Manila should not
be required to refund said taxes, even granting that they were illegally collected. With reference to the taxes paid by the
plaintiff subsequent to the 30th of June, 1901, in Manila and the various provinces, granting that they were illegally
collected, and granting that the city of Manila collected a part of them (which is not shown in the stipulated facts), certainly
the city of Manila should not be called upon to refund more than it actually received. The stipulated facts do not show what
part of the taxes paid to the plaintiff was paid to the city of Manila and what part to the various provinces. For this reason,
granting that the plaintiff has paid more taxes than it should be required to pay under the law, we are unable to say from the
record what portion of such illegal collections, if any, was collected or received by the city of Manila. In the last paragraph
of the stipulated facts of the plaintiff admits that it paid "en concepto de contribucion industrial," corresponding to the years
1901, 1902, and 1903, the sum of 88,698 pesos as taxes imposed upon the dividends declared by the said plaintiff, in
accordance with paragraph 4 of tariff 1 of the Industrial Tax Regulations. This is a part of the amount which the plaintiff
attempts to recover. It seems from the admission of the plaintiff in its stipulated facts that this amount was collected in
accordance with the law of June 19, 1890. If that is so, certainly the plaintiff should not be permitted to recover this
particular amount. From the stipulated facts it appears that the plaintiff has been required to pay taxes which it should not
have been required to pay in accordance with the provisions of the law of June 19, 1890. It does not appear, however, to
whom these illegal taxes have been paid. It does not appear that all, or any part thereof, were paid to the city of Manila.
Banks and commercial corporations shall pay "5 per cent of the profits or dividends which may be distributed to the
stockholders according to their respective balances." Thus, plaintiff argued that when banks and commercial associations
have paid an industrial tax of 5 per cent upon the dividends declared, that they will thereby be relieved from the necessity of
paying a territorial and an urbana tax. Therefore, under this law the plaintiff, being a commercial association, can not be
required to pay more taxes in the form of territorial and urbana taxes after having paid an industrial tax in accordance with
the above provisions of said Industrial Tax Regulations. The case, however, presents another difficulty. This action was
brought to recover an excess of taxes from the city of Manila. By the agreed statement of facts whatever excess was paid, if
any, was paid to the Dept of Internal Revenue. It is not shown that the Dept of Internal Revenue collected this money for the
city of Manila; neither do the stipulated facts show that the city of Manila received all the money so paid. Upon the
contrary, however, the stipulated facts in various parts of the Philippine Islands. Note the during the colonial period fiscal
system in the Insular Government was a highly centralized institution. There was one Government Treasury. All taxes levied
and assessed by the Government were Insular Taxes and all taxes collected throughout the Philippine Archipelago were
covered into the Insular Treasury. When a tax levied by the general law was paid, it was paid once for all. The different
governmental entities, such as provinces, etc., under the Spanish Government were not supported by taxes collected by
themselves, for themselves, but were supported by appropriations out of the general fund so collected for the Central
Government. This method of collecting taxes was somewhat modified later. Section 1 (8) of Act No. 133, provided: SEC.
18. In all provides organized under this act the urbana tax, the industrial tax, the stamp tax, and the sum collected
-

Case remanded to the lower court for a new trial, in order that the plaintiff may have an opportunity to show what part, if
any, of such illegal taxes were actually collected and received by the city of Manila.

PAL vs. ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his
capacity as National Treasurer The disputed registration fees were imposed by Commissioner Elevate pursuant to Section 8,
RA4136, the Land Transportation and Traffic Code. (PAL) is a corporation is engaged in the air transportation business
under a legislative franchise. Under its franchise, PAL is exempt from the payment of taxes. On the strength of an opinion of
the Secretary of Justice PAL has, since 1956, not been paying motor vehicle registration fees. 1971, however, appellee
Commissioner Elevate issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle
registration fees. Despite PAL's protestations, appellee refused to register the appellant's motor vehicles unless the amounts
imposed were paid. PAL thus paid, under protest, P19,529.75 as registration fees of its motor vehicles. After paying under
protest, PAL wrote to Commissioner Edu demanding a refund of the amounts paid, invoking Calalang v. Lorenzo where it
was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its
legislative franchise. Edu denied request for refund based on Republic v. Philippine Rabbit Bus, that motor vehicle
registration fees are regulatory and not revenue measures and, therefore, do not come within the exemption granted to PAL
under its franchise. PAL filed the complaint against LTC Commissioner Edu and National Treasurer Carbonell Respondents
contend: Registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of the
police power of the state. Yes, Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue
or earnings, but it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. TC:
Ruled for LTC, PAL lost. ISSUE: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
TAX!! Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law. Today, the
matter is governed by Rep. Act 4136 [1968]), the Land Transportation Code. Section 73 of Commonwealth Act 123 states:
Section 73. Disposal of moneys collected.Twenty per centum of the money collected under the provisions of this Act
shall accrue to the road and bridge funds of the different provinces and chartered cities in proportion to the centum shall
during the next previous year and the remaining eighty per centum shall be deposited in the Philippine Treasury to create a
special fund for the construction and maintenance of national and provincial roads and bridges. as well as the streets and
bridges in the chartered cities to be alloted by the Secretary of Public Works and Communications for projects
recommended by the Director of Public Works in the different provinces and chartered cities. ....
Presently, Sec. 61 of the Land Transportation and Traffic Code provides:
Sec. 61. Disposal of Mortgage. CollectedMonies collected under the provisions of this Act shall be deposited in a special
trust account in the National Treasury to constitute the Highway Special Fund, which shall be apportioned and expended in
accordance with the provisions of the" Philippine Highway Act of 1935. "Provided, however, That the amount necessary to
maintain and equip the Land Transportation Commission but not to exceed twenty per cent of the total collection during one
year, shall be set aside for the purpose. (As amended by RA 64-67, approved August 6, 1971).
Thus, the legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to
raise funds for the construction and maintenance of highways and to a much lesser degree, pay for the operating expenses of
the administering agency. Fees may be properly regarded as taxes even though they also serve as an instrument of regulation
If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is
properly called a tax. Such is the case of motor vehicle registration fees. Section 591-593 Land Transportation codes shows
that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or
ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the
imposition is a tax, Section 591593). speaks of "taxes." or fees ... for the registration or operation or on the ownership of any
motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more apparent. Thus,
even Rep. Act 5448 cited by the respondents, speak of an "additional" tax," where the law could have referred to an original
tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under
Rep. Act 41383. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act
5448 need not be an "additional" tax. Vehicle registration fees were originally intended only for rigid purposes in the
exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles
became absolute necessities without which modem life as we know it would stand still, Congress found the registration of
vehicles a very convenient way of raising much needed revenues. Without changing the earlier deputy. of registration
payments as "fees," their nature has become that of "taxes." Thus, may the respondent administrative agency be required to
refund the paid in 1971? NO. NB. PAL's current franchise now however is clear and specific. PAL is now exempt from the
payment of any tax, fee, or other charge on the registration and licensing of motor vehicles. Such payments are already
included in the basic tax or franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer be
exacted. DECISION: WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees
paid in 1971 is DENIED. (LTFRB) is enjoined from collecting any tax, fee, or other charge on the registration and licensing
of PALs motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590.

PHILEX V. CIR (tax v. ordinary debt)

FACTS: BIR asked Philex to pay tax for 1991-1992 in the total amount of P123,821,982.52. Philex refused stating that
it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of
P119,977,037.02 plus interest. Therefore asking for an offset. Philex filed a case with the CTA. Philex was able to
obtain its VAT input credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994 In view of the
grant of its VAT input credit/refund, Philex now contends that the same should, ipso jure, off-set its excise tax liabilities,
since both had already become due and demandable, as well as fully liquidated; hence, legal compensation can
properly take place. ISSUE: WON there should be an offset? HELD: NO. Taxes cannot be subject to compensation for
the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material
distinction between a tax and debt. DEBTS are due to the Government in its corporate capacity, while TAXES are due to the
Government in its sovereign capacity. Philexs claim is an outright disregard of the basic principle in tax law that
taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. A distinguishing
feature of a tax is that it is compulsory rather than a matter of bargain. Hence, a tax does not depend upon the consent of the
taxpayer. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government
or that the collection of the tax is contingent on the result of the lawsuit it filed against the government. Moreover, Philex's
theory that would automatically apply its VAT input credit/refund against its tax liabilities can easily give rise to confusion
and abuse, depriving the government of authority over the manner by which taxpayers credit and offset their tax liabilities.
MARCOS II V. CA (necessity theory)
FACTS: Ferdinand R. Marcos II, the eldest son of the decedent, questions the actuation of CIR in assessing, and collecting
through the summary remedy of Levy on Real Properties, estate and income tax delinquencies upon the estate and
properties of his late father, despite the pendency of the proceedings on probate of the will of the late president.
ISSUE:WON BIR may collect on estate and income tax of a deceased pending probate proceedings? HELD: NO. Under
Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial
administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown
a Certification by the Commissioner of Internal Revenue that the estate taxes have been paid. The Government has two
ways of collecting the taxes in question. One, by going after all the heirs and collecting from each one of them the amount
of the tax proportionate to the inheritance received. Another remedy, pursuant to the lien created by Section 315 of the Tax
Code upon all property and rights to property belong to the taxpayer for unpaid income tax, is by subjecting said property of
the estate which is in the hands of an heir or transferee to the payment of the tax due the estate. It has been repeatedly
observed, and not without merit, that the enforcement of tax laws and the collection of taxes, is of paramount importance for
the sustenance of government. Taxes are the lifeblood of the government and should be collected without unnecessary
hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason
for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the
taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. The court
recognized the liberal treatment of claims for taxes charged against the estate of the decedent. Such taxes were exempted
from the application of the statute of non-claims, and this is justified by the necessity of government funding, immortalized
in the maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae taxes are the sinews of the
state.

NPC v. City of Cabanatuan (necessity theory)

FACTS: NAPOCOR sells electric power to the resident Cabanatuan City, posting a gross income of P107,814,187.96 in
1992. City of Cabanatuan assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the
formers gross receipts for the preceding year. NPC refused to pay the tax assessment, which argued that the
respondent has no authority to impose tax on government entities. Petitioner also contend that as a nonprofit organization, it
is exempted from the payment of all forms of taxes, charges, duties or fees. The respondent filed a collection suit in the
RTC of Cabanatuan City, demanding that petitioner pay. Respondent alleged that petitioners exemption from local
taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code). The trial court issued an order dismissing
the case. On appeal, the Court of Appeals reversed the decision of the RTC and ordered the petitioner to pay the city
government the tax assessment. ISSUE: WON NPC is exempted from franchise tax by the local government? HELD: NO.
Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal
attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the state whose social
contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the
power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general
welfare and well-being of the people. In recent years, the increasing social challenges of the times expanded the scope
of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic
progress and the protection of local industries as well as public welfare 33 and similar objectives. Taxation assumes even
greater significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested
exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and 34 other charges
pursuant to Article X, section 5 of the 1987 Constitution. The local government code removed the blanket exclusion of
instrumentalities and agencies of the National Government from the coverage of local taxation. A franchise tax is
imposed based not on the ownership but on the exercise by the corporation of a privilege to do business. The taxable entity
is the corporation which exercises the franchise, and not the individual stockholders. By virtue of its charter, petitioner was
created as a separate and distinct entity from the National Government. It can sue and be sued under its own name, and can
exercise all the powers of a corporation under the Corporation Code. The ownership by the National Government of its
entire capital stock does not necessarily imply that petitioner is not engaged in business.
LORENZO V.POSADAS (benefit-received principle)
FACTS: Thomas Hanley died in Zamboanga, leaving a will and considerable amount of real and personal properties
Proceedings for the probate of his will and the settlement and distribution of his estate were begun in the Court of First
Instance of Zamboanga. The court thought it better to appoint a trustee and 10 years after the death of Hanley, the property
shall pass to Matthew Hanley. Moore was appointed as Trustee, until replaced by Lorenzo. The Collector filed with the CFI
for the collection of P2,052.74 for the inheritance tax against the estate, which was granted. The plaintiff paid under protest,
and since he was not refunded he went to court. ISSUE: WON there is delinquency in payment of the tax? HELD:YES. The
delinquency in payment occurred on the date when Moore became trustee, because delivery of the estate to the trustee was
in esse delivery of the same estate to the cestui que trust, the beneficiary in this case. The interest due should be computed
from that date and it is error on the part of the defendant to compute it one month later. The provision of law requiring the
payment of interest in appropriate cases is mandatory. The tax and interest due were not paid within ten days after the date
of notice and demand thereof by the Collector, a surcharge of 25% should be added. Demand was made by the Deputy
Collector upon Moore in a communication dated October 16, 1931.The date fixed for the payment of the tax and interest
was November 30, 1931. November 30 being an official holiday, the tenth day fell on December 1, 1931. As the tax and
interest due were not paid on that date, the estate became liable for the payment of the surcharge. IN RELATION TO THE
TOPIC: The highest considerations of public policy also justify the conclusion we have reached. Were we to hold that
the payment of the tax could be postponed or delayed by the creation of a trust of the type at hand, the result would be
plainly disastrous. Testators may provide, as Thomas Hanley has provided, that their estates be not delivered to their
beneficiaries until after the lapse of a certain period of time. In the case at bar, the period is ten years. The collection of the
tax would then be left to the will of a private individual, which is detrimental to the State as taxes are essential to the very
existence of government. The obligation to pay taxes rests not upon the privileges enjoyed by, or the protection
afforded to, a citizen by the government, but upon the necessity of money for the support of the state. For this reason, no
one is allowed to object to or resist the payment of taxes solely because no personal benefit to him can be pointed out. They
also will not place upon tax laws so loose a construction as to permit evasions on merely fanciful and insubstantial
distinctions. That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus, no court is
allowed to grant injunction to restrain the collection of any internal revenue tax . Any delay in the proceedings of the
officers, upon whom the duty is devolved of collecting the taxes, may derange the operations of government, and thereby
cause serious detriment to the public."

CALTEX V. COA (non-revenue purpose; public purpose) FACTS: In 1989, COA sent a letter to Caltex, directing it to remit
its collection to the Oil Price Stabilization Fund (OPSF), excluding that unremitted for 1986 and 188 of the additional tax on
petroleum products authorized under Section 8 of PD 1956; and that pending such remittance, all its claims for
reimbursement from the OPSF shall be held in abeyance. Caltex requested COA, notwithstanding an early release of its
reimbursement certificates from the OPSF, which COA denied. On 31 May 1989, Caltex submitted a proposal to COA for
the payment and the recovery of claims. COA approved the proposal but prohibited Caltex from further offsetting
remittances and reimbursements for the current and ensuing years. Caltex moved for reconsideration.
ISSUE: Whether the amounts due from Caltex to the OPSF may be offsetted against Caltex outstanding claims from
said funds. HELD: NO. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of
government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a
threatened industry which is affected with public interest as to be within the police power of the state. PD 1956, as amended
by EO 137, explicitly provides that the source of OPSF is taxation. A taxpayer may not offset taxes due from the claims that
he may have against the government. Taxes cannot be the subject of compensation because the government and taxpayer are
not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is
allowed to be set-off.
PASCUAL V. SEC. OF PUBLIC WORKS
(inherent limitation: public purpose) FACTS: RA 920 (Act appropriating funds for public works) was enacted in 1953
containing an item (Section 1 c[a]) for the construction, reconstruction, repair, extension and improvement of Pasig feeder
road terminals (the projected and planned subdivision roads, which were not yet constructed, within Antonio Subdivision
owned by Senator Jose C. Zulueta). Zulueta donated said parcels of land to the Government 5 months after the
enactment of RA 920, on the condition that if the Government violates such condition the lands would revert to Zulueta. The
provincial governor of Rizal, Wenceslao Pascual, questioned the validity of the donation and the Constitutionality of the
item in RA 920, it being not for a public purpose. ISSUE: Whether the item in the appropriation is valid. HELD: NO. The
right of the legislature to appropriate funds is correlative with its right to tax, under constitutional provisions against
taxation, except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to
another purpose, no appropriation of state funds can be made for other than a public purpose. The validity of a statute
depends upon the powers of Congress at the time of its passage or approval, not upon events occupying, or acts performed,
subsequently thereto, unless the latter consist of an amendment of the organic law, removing, with retrospective operation,
the constitutional limitation infringed by said statute. Herein, inasmuch as the land on which the projected feeder roads were
to be constructed belonged to Senator Zulueta at the time RA 920 was passed by Congress, or approved by the President,
and the disbursement of said sum became effective on 20 June 1953 pursuant to Section 13 of the Act, the result is that the
appropriating sough a private purpose and hence, null and void.

PLANTERS. V. FERTIPHIL CORP (public purpose)

Facts: Marcos issued LOI 1465, imposing a capital recovery component of Php10.00 per bag of fertilizer o Levy to
continue until adequate capital is raised to make PPI financially viable Fertiphil remitted to the Fertilizer and Pesticide
Authority (FPA), which then remitted said amount to Far East Bank and Trust Company, the depository bank of PPI o
Php6,689,144 was remitted from 1985 to 1986 After EDSA, Fertiphil demanded from PPI a refund of the amount it
remitted; PPI refused Fertiphil filed a complaint for collection and damages o Questioned constitutionality of LOI 1465
Claimed it was unjust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of due
process FPA: o Issuance of LOI 1465 was a valid exercise of police power of the state in insuring the fertilizer industry
o Fertiphil did not sustain any damage because the burden imposed by the levy fell on the ultimate consumer, not the seller
Issues: 1. WON the issuance of LOI 1465 was an exercise of the police power of the state 2. WON the levy was for a public
purpose Ratio: 1. The imposition of the levy was a exercise of the taxation power of the state. Both the power of taxation
and police power are inherent powers of the state. But each one is distinct from the other police power is for the
regulation of a behavior or conduct, while taxation is for revenue generation. While it is true that the power to tax can be
used as an implement of police power, the primary purpose of the levy was revenue generation. If the purpose is primarily
revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax In the
present case, the imposition of Php10 per bag is too excessive to serve a mere regulatory purpose. Even if it was an exercise
of the police power of the state, the LOI would still be invalid as it did not comply with the test of lawful subjects
and lawful means. Specifically, that the interest of the public, generally, requires its exercise, and that the means
employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. 2.
An inherent limitation on the power of taxation is public purpose. Taxes are exacted for a purely public purpose, and thus
cannot be used for purely private purposes or for the exclusive benefit of private persons. LOI 1465 is not for a public
purpose. First, it is expressly provided that the levy be imposed to benefit a private company PPI. Second, the levy was
conditional and dependent on PPI becoming financially viable. Third, the levies were directly remitted and deposited in
FEBTC, the bank of PPI, which used said remittances to pay of PPIs debts. All of these show that the purpose for the
issuance of LOI 1465 was to support a private company which clearly did not comply with the public purpose requirement
for the imposition of taxes.
Tan v. Del Rosario (inherently legislative)
Facts: The constitutionality of RA 7496 the Simplified Net Income Taxation Scheme (SNIT) violates the following
provisions of the Constitution: Art6, Sec26(1) Every bill passed in Congress shall embrace only one subject which shall
be expressed in the title thereof Art6, Sec28(1) The rule of taxation shall be uniform and equitable. The congress shall
evolve a progressive system of taxation Art3, Sec1 No person shall be deprived of property without due process of law,
nor shall any person be denied equal protection of the law Issue/s: WON RA 7496 violated the constitutional requirement
that taxation shall be uniform and equitable in that it attempts to tax single proprietorships and professionals differently
from corporations and partnerships Ratio: NO. Uniformity of taxation merely requires that all subjects or objects of
taxation, similarly situated, are to be treated alike both in privileges and liabilities. Such classification is valid as long as: (1)
standards used are substantial and not arbitrary; (2) categorization is germane to achieve the legislative purpose; (3) 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. What may be apparent is simply that the amendatory law reflects he legislative intent
to increasingly shift the income tax system towards the schedular approach. Also, with the legislature primarily lies the
discretion to determine the nature (kind0, object (purpose), extent (rate), coverage (subjects), and situs (place) of taxation.
The court cannot freely delve into these matters, unless the tax becomes so unconscionable and unjust as to amount to
confiscation of property. Only then will the courts able to strike it down.

CIR VS SANTOS (inherently legislative) FACTS: Guild of Phil Jewellers questions the constitutionality of certain
provisions of the National Internal Revenue Code 1 and Tariff and Customs Code of the Philippines . It is their contention
that present tariff and tax structure increases manufacturing costs and render local jewelry manufacturers uncompetitive
against other countries. In support of their position, they submitted what they purported to be an exhaustive study of the tax
rates on jewelry prevailing in other Asian Countries, in comparison to tax rates levied in the country. Judge Santos of RTC
Pasig, public respondent herein, ruled that the laws in question are confiscatory and oppressive and declared them
INOPERATIVE and WITHOUT FORCE and EFFECT insofar as petitioners are concerned. It stated: The Court finds that
indeed government taxation policy trats(sic) hewelry(sic) as non-essential luxury item and therefore, taxed heavily. Aside
from the ten (10%) percent value added tax (VAT), local jewelry manufacturers contend with the (manufacturing) excise tax
of twenty (20%) percent (to be applied in stages) customs duties on imported raw materials, the highest in the Asia-Pacific
region. In contrast, imported gemstones and other precious metals are duty free in Hongkong, Thailand, Malaysia and
Singapore. Petitioner CIR assailed decision rendered by pub resp contending that the latter has no authority to pass
judgment upon the taxation policy of the government. Petitioners also impugn the decision by asserting that there was no
showing that the tax laws on jewelry are confiscatory. Issue: WON RTC has authority to pass judgment upon taxation policy
of government Ratio/Held: NO. The case at bar involves a debate on the WISDOM of the laws in question. This is a matter
on which the RTC is not competent to rule. In Angara vs. Electoral Commission, Justice Laurel made it clear that "the
judiciary does not pass upon questions of wisdom, justice or expediency of legislation." In the exercise of judicial power,
the court is allowed only "to settle actual controversies involving rights which are legally demandable and enforceable", and
may not annul an act of the political departments simply because they feel it is unwise or impractical. The policy of the
courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the
absence of a clear and unmistakable showing to the contrary. This is not to say that RTC have no power whatsoever to
declare a law unconstitutional. But this authority does not extend to deciding questions which pertain to legislative policy.
RTC have the power to declare the law unconstitutional but this authority does not extend to deciding questions which
pertain to legislative POLICY. RTC can only look into the validity of a provision, that is, whether or not it has been passed
according to the procedures laid down by law, and thus cannot inquire as to the reasons for its existence.
LTO VS CITY OF BUTUAN (Delegation to Loc Gov)
Facts: Respondent City of Butuan asserts that the pertinent provisions of the Local Government Code allows LGUs to
collect registration fees or charges along with the corresponding issuance of all kinds of licenses or permits for the driving
of tricycles. Sec. 129. Power to Create Sources or Revenue. Each local government unit shall exercise its power to
create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein, consistent with the
basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government units. Sec.
133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the
following: xxx xxx xxx (l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except tricycles. In accordance therewith, the City passed an ordinance which
provided for the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration of the
vehicle, and fees for the issuance of a permit for the driving thereof. Petitioner LTO, on the other hand, explains that one of
the functions of the national government that has been transferred to LGUs is the franchising authority over tricyclesfor-hire
of the LTFRB, BUT NOT, the authority of LTO to register all motor vehicles and to issue to qualified persons of licenses to
drive such vehicles. ISSUE: WON under the present set up, the power of the LTO to register, tricycles in particular, as well
as to issue licenses for the driving thereof, has likewise devolved to local government units. Held/Ratio: NO. Although
police power and taxation are correlative to each other, that does not mean that the grant of one necessarily carry with it the
grant of the other. The two powers are, by tradition and jurisprudence, separate and distinct powers, varying in their
respective concepts, character, scopes and limitations. To construe the tax provisions of Section 133(1) indistinctively would
result in the repeal to that extent of LTO's regulatory power which evidently has not been intended. If it were otherwise, the
law could have just said so in Section 447 and 458 of Book III of the Local Government Code in the same manner that the
specific devolution of LTFRB's power on franchising of tricycles has been provided. Repeal by implication is not favored.
The power over tricycles granted 2 under Section 458(8)(3)(VI) of the Local Government Code to LGUs is the power to
regulate their operation and to grant franchises for the operation thereof. The exclusionary clause contained in the tax
provisions of Section 133(1) of the Local Government Code must not be held to have had the effect of withdrawing the
express power of LTO to cause the
Under the Local Government Code, certain functions of the DOTC were transferred to the LGUs, thusly: Sec. 458. Powers,
Duties, Functions and Compensation. xxx xxx xxx (3) Subject to the provisions of Book II of this Code, enact
ordinances granting franchises and authorizing the issuance of permits or licenses, upon such conditions and for such
purposes intended to promote the general welfare of the inhabitants of the city and pursuant to this legislative authority
shall: xxx xxx xxx (VI) Subject to the guidelines prescribed by the Department of Transportation and Communications,
regulate the operation of tricycles and grant franchises for the operation thereof within the territorial jurisdiction of the city.
2

It will be noted that, while under the present law (sec 150), jewelry is subject to a 20% excise tax in addition to a 10%
value-added tax under the old law, it was subjected to 50% percentage tax. It was even subjected to a 70% percentage tax
under then Section 184(a) of the Tax Code, as amended by P.D. 69. Section 104, Hdg. Nos. 17.01, 17.02, 17.03 and 17.04,
Chapter 71 of the Tariff and Customs Code, as amended by Executive Order No. 470, dated July 20, 1991, imposes import
duty on natural or cultured pearls and precious or semiprecious stones at the rate of 3% to 10% to be applied in stages from
1991 to 1994 and 30% in 1995. Prior to the issuance of E.O. 470, the rate of import duty in 1988 was 10% to 50% when the
petition was filed in the court a quo.
1

registration of all motor vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are
essentially regulatory in nature, exercised pursuant to the police power of the State, whose basic objectives are to achieve
road safety by insuring the road worthiness of these motor vehicles and the competence of drivers prescribed by law.
(Decentralization of registration system will result into higher incidence of theft and fake licenses.)
"licenses or permits" is no longer vested in the City of Manila. (d) SUPREMACY of NATIONAL GOVT. Local
governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or
controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the
category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should
be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a
mere Local government. (e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by
P.D. 1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides: Sec. 5. Each
local government unit shall have the power to create its own source of revenue and to levy taxes, fees, and other charges
subject to such guidelines and limitation as the congress may provide, consistent with the basic policy on local autonomy.
Such taxes, fees and charges shall accrue exclusively to the local government. (emphasis supplied) The power of local
government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since PD
1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its
"exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees. It
cannot therefore be violative but rather is consistent with the principle of local autonomy.
BASCO VS PAGCOR (1991) (Delegation to Loc Gov)
Facts: Petitioners filed the instant petition seeking to annul PAGCOR Charter (PD 1869) because it is allegedly contrary to
morals, public policy and order, and because a. It constitutes a waiver of a right prejudicial to a third person with a right
recognized by law. It waived the Manila City government's right to impose taxes and license fees, which is recognized by
law; b. For the same reason stated in the immediately preceding paragraph, the law has intruded into the local government's
right to impose local taxes and license fees. This, in contravention of the constitutionally enshrined principle of local
autonomy; c. It violates the equal protection clause of the constitution in that it legalizes PAGCOR conducted gambling,
while most other forms of gambling are outlawed, together with prostitution, drug trafficking and other vices; d. It violates
the avowed trend of the Cory government away from monopolistic and crony economy, and toward free enterprise and
privatization. (p. 2, Amended Petition; p. 7, Rollo) ISSUE (relevant to tax): WON the Charter has intruded into the local
governments right to impose taxes and license fees Held/Ratio: NO Petitioners contend that the exemption clause in
P.D. 1869 is violative of the principle of local autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which
exempts PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees,
charges or levies of whatever nature, whether National or Local." Their contention is without merit for the following
reasons: (a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Thus, "the
Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it. Its "power to
tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has
the "inherent power to tax" (b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that
"municipal corporations are mere creatures of Congress" which has the power to "create and abolish municipal
corporations" due to its "general legislative powers." Congress, therefore, has the power of control over Local governments.
And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even
take back the power. (c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as
1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn
by P.D. No. 771 and was vested exclusively on the National Government. Therefore, only the National Government has the
power to issue "licenses or permits" for the operation of gambling. Necessarily, the power to demand or collect license fees
which is a consequence of the issuance of

GARCIA V. EXEC SEC (Delegation to the President)

FACTS:
ABAKADA v. Ermita (Delegation to the President) Facts: 1. RA 9337: VAT Reform Act enacted on May 24, 2005. 2. Sec. 4
(sales of goods and properties), Sec. 5 (importation of goods) and Sec. 6 (services and lease of property) of RA 9337, in
collective, granted the Secretary of Finance the authority to ascertain: a. whether by 12/31/05, the VAT collection as a
percentage of the 2004 GDP exceeds 2.8% or b. the natl govt deficit as a percentage of the 2004 GDP exceeds
1.5% 3. If either condition is met, the Sec of Finance must inform the President who, in turn, must impose the 12% VAT rate
(from 10%) effective January 1, 2006. 4. ABAKADA maintained that Congress abandoned its exclusive authority to fix
taxes and that RA 9337 contained a uniform proviso authorizing the President upon recommendation by the DOF Secretary
to rasie VAT to 12%. 5. Sen Pimentel maintained that RA 9337 constituted undue delegation of legislative powers and a
violation of due process since the law was ambiguous and arbitrary. Same with Rep. Escudero. 6. Pilipinas Shell dealers
argued that the VAT reform was arbitrary, oppressive and confiscatory. 7. Respondents countered that the law was complete,
that it left no discretion to the President, and that it merely charged the President with carrying out the rate increase once
any of the 2 conditions arise.
Issue: WON there was undue delegation No. Ratio: 1. Constitution allows as under exempted deligation the delegation
of tariffs, customs duties, and other tolls, levies on goods imported and exported. VAT is tax levied on sales of goods and
services which could not fall under this exemption. Hence, its delegation if unqualified is unconstitutional. 2. Legislative
power is authority to make a complete law. Thus, to be valid, a law must be complete in itself, setting forth therein the
policy and it must fix a standard, limits of which are sufficiently determinate and determinable. 3. No undue delegation
when congress describes what job must be done who must do it and the scope of the authority given. (Edu v Ericta) 4. Sec
of Finance was merely tasked to ascertain the existence of facts. All else was laid out. 5. Mainly ministerial for the sec to
ascertain the facts and for the president to carry out the implementation for the vat. They were agents of the legislative dept.
6. No delegation but mere implementation of the law.

Maceda v. Macaraig (Delegation to Admin Agencies) Facts: 1. Senator Maceda, through this taxpayers suit, sought to
prevent the Fiscal Incentives Review Board (FIRB) from processing and granting the tax refunds/credits claimed by the
National Power Corp (NPC). 2. The NPC used to enjoy an absolute and unqualified tax exemption under RA 358 so as to
allow the NPC to accomplish its task of nationwide electrification. Such exemption was withdrawn and reinstated partially
or completely, with provisions qualified or unqualified, several times. 3. Most pertinent was E.O. # 93 which once again
withdrew all tax and duty incentives to all government and private entities including the NPC. Moreover, E.O. # 93 gave the
authority to the FIRB to restore, revise the scope and prescribe the date of effectivity of such tax/duty exemptions. (Sec 2
(a), (b) and (d) of E.O. # 93) 4. FIRB issued Resolution # 17-87 which restored NPCs tax and duty exemption
privileges.
Issue: WON E.O. # 93 was unconstitutional for being an undue delegation of legislative power No; E.O. # 93 was
complete in itself and was valid; the FIRB Resolution restoring NPC tax exemptions was also valid. Ratio: 1. Though the
Secretary of Justice opined that Sec. 2 (a) to (d) of E.O. # 93 constituted undue delegation of legislative power, he was
overruled by the respondent Executive Secretary. The Executive Secretary has the power to modify, alter or reverse the
statutory construction given by a dept secretary. 2. STANDARD: Greater national interest along with the rest of Sec. 3 of
E.O. # 93: effect on relative price levels, contribution of beneficiary to revenue generation and nature of the
beneficiarys activities 3. The maxim delegatus non potest delegare has been relaxed to adapt itself to the complexities
of modern government. (admin law: why is it important? time, orgz aptitute and expertise) 4. HOW THE CASE
WAS DECIDED: The petition itself was dismissed for lack of merit. NPC should be granted the tax refunds it asked for
because the legislative intent was for the NPC to enjoy extensive, if not absolute, tax exemption so as to expedite its task of
nationwide electrification. The allegation that this in effect allowed tax evasion by the 3 oil companies which supplied NPC
with crude oil was refuted.
Osmea v. Orbos (Delegation to Admin Agencies)
Facts: 1. Petitioner, John Osmea, filed R65 certiorari to assail the constitutionality of the provision ( 8, paragraph 1 (c)
of P.D. No. 1956) conferring the authority upon the Energy Regulatory Board (ERB) to impose additional amounts on
petroleum products as an undue delegation of legislative power. PD 1956 created the Oil Price Stabilization Fund (OPSF)
basically a buffer fund which is to reimburse the oil companies from their losses brought about by the governments
artificial maintenance of oil prices. OPSF drew funds through duty collections on petroleum products and additional
amounts imposed on petroleum products
2.
3.
Sub Issue: (baka lang kasi itanong) WON powers granted to the ERB under PD 1956 partake of the nature of the taxation
power of the State No; while the funds collected may be referred to as taxes, they are exacted in the exercise of the
police power of the state. Main Issue: WON there was undue delegation of legislative power No; the delegation was
valid. Ratio: 1. For a valid delegation of power, it is essential that the law delegating the power must be: a. Complete in
itself; it must set forth the policy to be executed by the delegate and b. It must fix a standard limits of which are
sufficiently determinate or determinable to which the delegate must conform 2. The standard indicates the circumstances
under which the legislative comand is to be effected. Thereafter, the administrative agency may in pursuance of the standard
promulgate supplemental rules and regulations. (Edu v. Ericta was cited) Standard may be express or implied from the
policy and purpose of the act considered as a whole. In this case, STANDARD was so long as there exists the need to
protect the general public and the petroleum industry from the adverse consequences of pump rate fluctuations. The assailed
provision expressly authorized the ERB to impose additional amounts to augment the OPSF resources using this standard.
3.
4.

Commissioner v. CA (Delegation to Admin Agency) Facts: 1. RA 7654 was enacted by Congress on June 10, 1993 and took
effect July 3, 1993. It amended partly Sec. 142 (c) 3 of the NIRC 2. Fortune Tobacco manufactured the following cigaretter
brands: Hope, More and Champion. Prior to RA 7654, these 3 brands were considered local brands subjected to an ad
valorem tax of 20 to 45%. Applying the amendment and nothing else, (see footnote below) the 3 brands should fall under
Sec 142 (c) (2) NIRC and be taxed at 20 to 45%. 3. However, on July 1, 1993, petitioner Commissioner of Internal Revenue
issued Revenue Memorandum Circular37-93 which reclassified the 3 brands as locally manufactured cigarettes bearing a
foreign brand subject to the 55% ad valorem tax. The reclassification was before RA 7654 took effect. 4. In effect, the
memo circular subjected the 3 brands to the provisions of Sec 142 (c) (1) NIRC imposing upon these brands a rate of 55%
instead of just 20 to 45% under Sec 142 (c) (2) NIRC. 5. There was no notice and hearing. CIR argued that the memo
circular was merely an interpretative ruling of the BIR which did not require notice and hearing.
Issue: WON RMC 37-93 was valid and enforceable No; lack of notice and hearing violated due process required for
promulgated rules. Moreover, it infringed on uniformity of taxation / equal protection since other local cigarettes bearing
foreign brands had not been included within the scope of the memo circular. Ratio: 1. Contrary to petitioners
contention, the memo was not a mere interpretative rule but a legislative rule in the nature of subordinate legislation,
designed to implement a primary legislation by providing the details thereof. Promulgated legislative rules must be
published. 2. On the other hand, interpretative rules only provide guidelines to the law which the administrative agency is in
charge of enforcing. 3. BIR, in reclassifying the 3 brands and raising their applicable tax rate, did not simply interpret RA
7654 but legislated under its quasi-legislative authority. 4. BELLOSILLO separate opinion: the administrative issuance was
not quasi-legislative but quasi-judicial. Due process should still be observed of course but use Ang Tibay v. CIR.
Iloilo Bottlers v. City of Iloilo (Territorial)
Facts: 1. The City of Iloilo implemented a tax ordinance imposing an excise tax on the privilege of distributing, bottling or
manufacturing softdrinks within its territorial jurisdiction. 2. Iloilo Bottlers formerly complied with this tax ordinance but it
stopped paying when it transferred its plant to Pavia, Iloilo which is outside Iloilo City. 3. The defendant, Iloilo City,
demanded payment from the plaintiff. 4. Plaintiff paid under protest so as not to disrupt its business operations. Issue: WON
Iloilo Bottlers was liable under the tax ordinance Yes; plaintiff bottled and manufactured outside Iloilo City but it
distributed within the citys territory. Ratio: 1. Excise taxes can be levied by the taxing authority only when the acts,
privileges or businesses are done or performed within the jurisdiction of said authority. The situs of the act of distributing,
bottling or manufacturing softdrinks must be within city limits, before an entity engaged in any of the activities may be
taxed in Iloilo City. 2. There is no question that after it transferred its plant to Pavia, Iloilo, Iloilo Bottlers no longer
manufactured and bottled its softdrinks within Iloilo City. Thus it can only be taxed if it could be considered to distribute
softdrinks in Iloilo City. 3. For tax purposes, there are 2 types of marketing systems: a. 1st system all sales are made and
entered into in the main office; no warehouse sales; no separate stores maintained for selling. b. 2nd system sales are
entered into at stores or warehouses maintained by the company. 4. Those following the 1st system are not considered
engaged in the separate business of selling or dealing in their products, the distribution process merely an incident or a
necessary consequence of the primary business. In other words, the Court recognizes that the right to manufacture implies
the right to sell. 5. Plaintiff was found to be under the 2nd system. It must be considered to be engaged in the separate
business of selling. Plaintiffs fleet of delivery trucks did not merely deliver goods already sold but also served as
rolling stores. Route salesmen sold goods independently from the main store.
3
Sec. 142 (c) ... There shall be... collected on cigarettes... a tax at the rates prescribed below... : (1) On locally manufactured
cigarettes which are currently classified and taxed at 55% 55% (2) On other locally manufactured cigarettes (already at 20
to 45%) 20 to 45%

Commissioner v. BOAC (Territorial)

Facts: 1. Commissioner of Internal Revenue (CIR) questioned a ruling by the Court of Tax Appeals wherein the CTA set
aside the CIRs assessment of deficiency income taxes against respondent British Overseas Airways Corporation
(BOAC). 2. BOAC is a UK government-owned corporation engaged in the international airline business. It did not have
landing rights in the Philippines nor was it granted a certificate of public convenience by the Civil Aeronautics Board. It did
not have flight operations in the Philippines; it did not carry passengers or cargo. 3. However, it maintained a general sales
agent. (Warner Barnes and Co. at first then Qantas Airways) The agent sold BOAC tickets covering passengers and cargoes.
Issue: 1. WON BOAC is a resident foreign corporation. (tax scheme is different for a nonresident foreign corporation)
Yes; BOAC is a resident corporation doing business in the Philippines. 2. WON the revenue derived by BOAC from sales of
its tickets, while having no flight operations in the Philippines, is taxable. Yes; the revenue constitutes income from
Philippine sources so it is taxable. Ratio: 1. Sec 20 of the 1977 Tax Code defines a resident foreign corporation as a foreign
corporation engaged in trade or business within the Philippines or having an office or place of business therein. 2. BOAC
was engaged in business in the Philippines through a local agent during the period covered by the CIRs assessments. It
is a resident foreign corporation subject to tax upon its total net income received in the preceding taxable year from all
sources within the Philippines. (Sec 24(b), (2), Tax Code as amended 3. Tax Code provides that for revenue to be taxable, it
must constitute income from Philippine sources (see previous paragraph) 4. Income is broadly and comprehensively defined
as cash received or its equivalent or the amount of money comint to a person within a specific time. 5. Source of an income
is the property, activity or service that produced the income. For the source to be considered as from the Philippines, it is
sufficient that the income is derived from activity within the Philippines. 6. In this case, the sale of the tickets in the
Philippines is the source of income. The situs of the source of payments is the Philippines.
Hopewell Power Corp v. CIR (Territorial) Facts: 1. Petitioner sought for tax credit/refund of input value-added tax (VAT)
paid on capital goods. Hopewell Power Corp. Is a domestic corporation engaged in the business of power generation and
sale.
2. The basis for asking for such refund is Sec 106 (b) of the Tax Code as amended by RA 7716. (petitioner actually relied on
Sec 106 (c) of the 1994 Tax Code which was the law governing at that time; same content anyway) Sec 106 (c) of the 1994
Tax Code requires that an applicant for refund prove that a. It is a VAT registered person b. Input taxes claimed was paid on
capital goods c. Input taxes have not been applied against output tax liability d. Administrative claim was seasonably filed
(2 yr prescriptive period) Of its 6 claims, 4 had prescribed and 2 had been filed seasonably. Court was also convinced that
requisites (a) and (c) had been met.
3.
4.
Issue: WON there should be a refund/WON the input taxes claimed was paid on capital goods Yes; the expenditures
were properly considered as capital goods. The amount was recomputed and reduced though. Ratio: 1. Capital goods refer
to goods with estimated useful life greater than 1 year and which are treated as depreciable assets under Sec 29(f), used
directly or indirectly in the production and sale of taxable goods or services. Statutorily, capital expenditures are specified as
amounts paid out for a new building or for permanent improvements or betterments made to increase the value of any
property or amounts expended in restoring property. Hopewell spent for engineering and structural services for the purpose
of constructing power plant facilities needed in the production of electricity, which is its chief product. Such expenses were
necessary and, as such, should form part of the cost of the power plant facilities.
2.
3.

Smith v. CIR (Territorial)

Tanada v. Angara (International Comity) May 2, 1997 Facts: Sec. Rizalino Navarro (DTI Secretary) representing the
Philippines government, signed the Final Act Embodying the Result of the Uruguay Round of Multilateral Negotiations,
which created the World Trade Organization. By signing such act, the Philippines agreed to adopt the ministerial
declarations and decisions of the WTO, and to submit the WTO agreement for the consideration and approval President
Ramos sent two letters to the Philippine Senate, stating that the Uruguay Rounds Final Act is submitted for its 4 concurrence
pursuant to sec. 21 Article VII of the constitution. The Senate adopted resolution no. 97, wherein the Senate concurred in the
ratification of the President. The petition was filed seeking to nullify the act of the Philippine Senate, arguing inter alia that:
o It contravenes sec. 10 Art. II and sec. 12 Article XII of the Constitution o The WTO proviso derogates from the power to
tax, which is lodged in the Congress Issues WON the act of the Phil. Senate contravenes the Constitution? NO WON it
limits, impairs and restricts the exercise of legislative power by congress (specifically the power to tax)? NO NO, it does not
contravene the constitution The Petitioners cited the WTO agreement place nationals and products of member countries on
the same footing as Filipinos and local products. They argue that this is in contravention with the Filipino First
Policy of the Constitution. See sec. 10 Art. II 5 and sec. 12 Article XII of the Constitution First, these provisions are not
self-executing. These are merely statements of principles and policies. A law should be passed by congress to clearly define
and effectuate such principles. The reason for denying this a cause of action are sourced from basic considerations of due
process and the lack of judicial authority to wade into uncharted ocean of social and economic policy making the said
provisions should be read and understood in relation to the other section, especially sec 1 and 6 sec 13.
1. 2.
1. Art VII Section 21. No treaty or international agreement shall be valid and effective unless concurred in by at least twothirds of all the Members of the Senate.
4
5
Art II Section 10. The State shall promote social justice in all phases of national development.
Article XII Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally
produced goods, and adopt measures that help make them competitive.
Article XII Section 1. The goals of the national economy are a more equitable distribution of opportunities, income, and
wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all, especially the under-privileged.
6

Hence, the Consitution ordains the ideals of economic nationalism, but it also takes into account the realities of the outside
world. It did not intent to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the
development of the Phil. Economy. In fact, it allow the exchange on the basis of equality and reciprocity, frowning only on
foreign competition which is unfair No, it does not limit the power of the congress the WTO agreement provides that each
member shall ensure the conformity of its laws, regulations and administrative procedure. By their nature, treaties really
limit or restrict the absoluteness of sovereignty. But by their voluntary acts, nations may surrender some aspects of their
state power in exchange for greater benefits granted by or derived from a convention or pact. Certain restrictions include: o
Limitations imposed by the very nature of membership in the family of nations. o Limitations imposed by treaty
stipulations. Doctrine of incorporation. The constitution states that it adopts the generally accepted principles of
international law as part of the law of the land and adheres to the policy of peace, equity, justice, freedom, cooperation and
amity.
Manila International Airport Authority vs. CA July 20, 2006 (Exemption of Govt Entities, Agencies, and
Instrumentality) Facts: - MIAA operates the NAIA Complex; it administers the land, improvements, and equipment within
the NAIA Complex. - The Office of the Government Corporate Counsel (OGCC) opined that the Local Gov. Code withdrew
the exemption from real estate tax granted to MIAA by its Charter (sec 21). MIAA negotiated with the City of Paranaque The MIAA failed to pay real estate tax delinquency despite having received final notices of real estate tax delinquency from
the City of Paranaque for the taxable years 1992-2001. Then in July 2001, the City of Paranaque issued notices of levy and
warrants on Airport lands and Buildings, and the mayor threatened to sell at public auction. - MIAA filed petition to restrain
the city from imposing real estate tax on the airport lands and buildings. It argued that: o The real owner is the Republic of
the Phil. o It is for the benefit of the general public; hence it is for public use and public service o Sec 21 of the MIAA
charter exempts them The City of Paranaque argued that Sec 193 of the LGC withdrew the tax exemption privileges of
GOCCs Issue 1. 2. 1. 2. WON MIAA is a GOCC? NO WON exempt from real estate tax? YES No; MIAA is an instrumentality of the National
Government GOCCs are NOT exempt from real estate tax. However, MIAA is not a GOCC A GOCC must be organized as
a stock or non-stock corporation. MIAA is neither. o It is not a stock corporation since even if it has capital, it is not divided
into shares of stocks. It also has no stock holders or voting shares o It is not a non-stock corporation either. It has no
members. Even if we assume that the government is its member, it is still not a non-stock corporations because 20% of its
gross operating income goes to the national treasury. Non-stock corporations are not supposed to disturbute any part of its
income to its member. Furthermore, MIAA is neither organized for charitable, religious, educational, professional etc
purposes. HENCE, MIAA IS A GOVERNMENT INSTRUMENTALITY. The only difference with other instrumentalities is
that it is vested with corporate powers o It remains part of the government machinery although not integrated with
development framework Sec 133 (o) of the LGC recognizes the basic principle that LGUs cannot tax the national
government, which merely delegated to local governments the power to tax. The tax powers of the LGUs s granted by the
constitution, but are subject to such guidelines and limitations as the Congress may provide. General Rule: tax exemption is
construed against the taxpayer claiming exemption
The State shall promote industrialization and full employment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of human and natural resources, and which are competitive in
both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition
and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to
develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged
to broaden the base of their ownership.
-

Article XII Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity.
-

Exemption: The power to tax national government instrumentalities is construed against the local government. Any doubts
whether a person, article, or acitivity is taxable is resolved against taxation Also, there is also no reason for LGUs to tax
instrumentalities rendering essential public services to inhabitants of local governments. The only exemption is when
Congress clearly intended to tax instrumentalities for the delivery of public services for sound and compelling policy
considerations. Yes, it is exempted from real estate tax since MIAA is owned by the republic of the Phil. the Airport
buildings and lands are property of public dominion, according to Article 420 of Civil Code which states which are property
of public dominion. (those intended for public use, like ports) the lands and buildings of MIAA are devoted to public use
because they are used by the public for international and domestic travel. The fact that MIAA collects terminal fees and
other charges does not remove the character as property for public use. Someone must pay for the maintenance. Such fees
are often termed users tax. This means taxing those among the public who actually use a public facility instead of
taxing all the public. Since they are for public use, they are outside the commerce of men. They canot be subject to levy,
encumbrance or dispotition. Unless the president issues a proclamation withdrawing the land and buildings from public use,
they remain public dominion and are inalienable. The minority asserts that MIAA is not exempt from real estate tax because
section 193 of the LGC withdrew tax exemption from all persons. They argue that MIAA is a juridical person. The minority
is flawed. Sec 193 of the LGC withdrew tax exemption of all persons exempt when otherwise provided in the Code. Sec 133
(o) expressly provides otherwise. Hence even if MIAA fails to pay the real property taxes, said portion cannot be sold at
public auction
Philippine Fisheries Development Authority vs. CA July 31, 2007 (Exemption of Govt Entities, Agencies, and
Instrumentality) Facts: 2. the Ministry of Public Works and Highways reclaimed from the sea a 21 hectare parcel of land (termed as the Iloilo Fishing
Port Complex or IFPC). Upon its completion, it turned over the IFPC to the Philippine Fisheries Development Authority, the
petitioner. Thereafter, the petitioner leased portions of IFPC to private firms and individuals engaged in fishing business.
The city of Iloilo assessed the entire IFPC for real property tax. It scheduled the sale at public auction to satisfy its tax
delinquency. The petitioner filed an injunction case. WON petitioner is a GOCC? NO WON public dominion? YES it is not
a GOCC, but rather an instrumentality of the national government. Hence, it is generally exempt from payment of real
property tax. However, said exemption does not apply to portions of the IFPC which was leased to private entities to be
considered a GOCC, it must be organized either as a stock or non-stock corporation. To be a stock corporation: o It has
stock capital divided into shares o Authorized to distribute dividends and allotments of surpluses and profits to its
stockholders To be non-stock o They must have members o Must not distribute any part of income to members Since,
petitioner is neither, it is classified as an national government instrumentality, which is defined as an agency of the national
government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers. o Instrumentalities are exempt from local taxes pursuant to sec 133 (o) of LGC
However, when an instrumentality grants to a taxable person the beneficial use of a real property, then said instrumentality
becomes liable to pay the real property tax. This is pursuant to sec 234(a) of the LGC YES, it is property of public
dominion. Art 420 of the Civil Code says that ports are part of public dominion The Iloilo fishing port is a port constructed
for public use and public service. As such, it cannot be subject to execution and foreclosure sale, even if the petitioner fails
to pay its taxes, if there is no Congressional authorization.
1. 2. 1.
-

HELD: the real property tax assessments and notices of delinquencies issued by the city of pasay to MIAA are voide; except
those pertaining to portions of the aiport which are leased to private properties. This is based on Section 234 (a) Dissent of
Tinga they pretended that Mactan International Airport Case does not exist. Such a case states that airports are taxable. The
majority does not even engage in the Mactan case in anyway. There is really no prohibition against the government taxing
itself, and nothing obscene with allowng government entities exercising propriety functions to be taxed for the purposes of
raising the coffers of the LGU
2. -

FRANCIS A. CHURCHILL and STEWART TAIT, ET AL, vs. VENANCIO CONCEPCION, as Acting Collector of Internal
Revenue, (Uniformity in Taxation) Section 100 of Act 2339 (promulgated 1914) imposed an annual tax of P4 per square
meter upon electric signs, billboards, and spaces used for posting or displaying temporary signs, and all signs displayed on
premises not occupied by buildings. The section was amended by Act 2432, reducing the tax to P2 per square meter. The
taxes imposed by Act 2432 were ratified by the US Congress on 4 March 1915. Francis A. Churchill and Stewart Tait, copartners in Mercantile Advertising Agency, owed a billboard to which they were taxed at P104. The tax was paid under
protest. Churchill and Tait instituted the action to recover the amount. It is now urged that the trial court erred: o (1) In not
holding that the tax as imposed constitutes deprivation of property without compensation or due process of law, because it is
confiscatory and unjustly discriminatory o (2) in not holding that the said tax is void for lack of uniformity, because it is not
graded according to value; because the classification on which it is based on any reasonable ground; and furthermore,
because it constitutes double taxation.
The statute under consideration imposes a tax of P2 per square meter or fraction thereof upon every electric sign, bill-board,
etc., wherever found in the Philippine Islands. Or in other words, "the rule of taxation" upon such signs is uniform
throughout the Islands. The rule, which we have just quoted from the Philippine Bill, does not require taxes to be graded
according to the value of the subject or subjects upon which they are imposed, especially those levied as privilege or
occupation taxes. We can hardly see wherein the tax in question constitutes double taxation.
WON confiscatory as to the business of the plaintiff? NO plaintiffs argued that it is confiscatory because they cannot afford
to raise the rental fees of the billboards since the merchants could not afford to pay more It will thus be seen that the
contention that the rates charged for advertising cannot be raised is purely hypothetical, based entirely upon the opinion of
the plaintiffs, unsupported by actual test, and that the plaintiffs themselves admit that a number of other persons have
voluntarily and without protest paid the tax herein complained of. In Chicago and Grand Trunk Railway Co. vs. Wellman, it
was held that While the protection of vested rights of property is a supreme duty of the courts, it has not come to this, that
the legislative power rests subservient to the discretion of any railroad corporation which may, by exorbitant and
unreasonable salaries, or in some other improper way, transfer its earnings into what it is pleased to call `operating
expenses.' 2. Is the tax void for lack of uniformity? NO Section 5 of the Philippine Bill, wherein it is declared "that the rule
of taxation in said Islands shall be uniform." Uniformity in taxation says Black on Constitutional Law, page 292
means that all taxable articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean that
lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and luxuries, shall all be assessed at the
same rate. Different articles may be taxed at different amounts, provided the rate is uniform on the same class everywhere,
with all people, and at all times. A tax is uniform when it operates with the same force and effect in every place where the
subject of it is found

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC. vs. CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL
BOARD, THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN, (Valid Classification of
taxpayers/subject matter to be taxed) On August 16, 1960, the City of Butuan enacted Ordinance No. 110. Ordinance No.
110 as amended, imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola the plaintiff
paid under protest the amount of P4,926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from
January 1 to July 30, 1961. plaintiff filed the foregoing complaint for the recovery of the total amount of P14,177.03 paid
under protest and those that if may later on pay until the termination of this case on the ground that Ordinance No. 110 as
amended of the City of Butuan is illegal, that the tax imposed is excessive and that it is unconstitutional. Plaintiff maintains
that the disputed ordinance is null and void because: (1) it partakes of the nature of an import tax; (2) it is highly unjust and
discriminatory; YES, it is an important tax, something which cannot be imposed by the city of Butuan Under Ordinance
110, merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax, unless they are agents
and/or consignees of another dealer, who, in the very nature of things, must be one engaged in business outside the City. The
intention of the law was to limit the application of the ordinance to soft drinks brought into the city from outside sources.
Viewed from this angle, the tax partakes of the nature of an import duty, which is beyond defendant's authority to impose by
express provision of law.
Manila Race Horce v. Dela Fuente (valid
classification of taxpayers/subject matter to be taxed) Facts: Ordinance No. 3065 of the City of Manila imposes a tax on
stable owners based on the number of race horses kept or maintained in the stables (P10/year for each race horce). Manila
Race Horce Trainers Association, Inc., a group of owners of boarding stables for race horses wants to declare the Ordinance
invalid for being violative of the Constitution. It is argued that the ordinance taxes race horses and not boarding stables (Sec.
2 of the Ordinance does not impose a license fee on empty stables). Held. Ordinance VALID. The spirit, rather than the
letter, of an ordinance determines the construction thereof, and the court looks less to its words and more to the context,
subject matter, consequence and effect. The tax is assessed not on the owners of the horses but on the owners of the stables,
as counsel admit in their brief, although there is nothing, of course, to stop stable owners from shifting the tax to the horse
owners in the form of increased rents or fees, which is generally the case. It is also plain from the text of the whole
ordinance that the number of horses is used in the assessment purely as a method of fixing an equitable and practical
distribution of the burden imposed by the measure. Far from being obnoxious, the method is fair and just. It is but fair and
just that for a boarding stable where only one horse is maintained proportionately less amount should be exacted than for a
stable where more horses are kept and from which greater income is derived. In taxing only boarding stables for race horses,
we do not believe that the ordinance makes arbitrary classification. it was said there is equality and uniformity in taxation if
all articles or kinds of property of the same class are taxed at the same rate. From the viewpoint of economics and public
policy the taxing of boarding stables for race horses to the exclusion of boarding stables for horses dedicated to other
purposes is not indefensible. The owners of boarding stables for race horses and, for that matter, the race horse owners
themselves, who in the scheme of shifting may carry the taxation burden, are a class by themselves and appropriately taxed
where owners of other kinds of horses are taxed less or not at all, considering that equity in taxation is generally conceived
in terms of ability to pay in relation to the benefits received by the taxpayer and by the public from the business or property
taxed. Race horses are devoted to gambling if legalized, their owners derive fat income and the public hardly any profit
from horse racing, and this business demands relatively heavy police supervision. Taking everything into account, the
differentiation against which the plaintiffs complain conforms to the practical dictates of justice and equity and is not
discrimatory within the meaning of the Constitution.
1. Yes it is unjust and discriminatory 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. The classification made in the exercise of this authority, to be valid, must, however, be
reasonable and this requirement is not deemed satisfied unless: o (1) it is based upon substantial distinctions which make
real differences; o (2) these are germane to the purpose of the legislation or ordinance; o (3) the classification applies, not
only to present conditions, but, also, to future conditions substantially identical to those of the present; and o (4) the

classification applies equally all those who belong to the same class. These conditions are not fully met by the ordinance in
question.
2. -

Eastern Theatrical v. Alfonso(valid classification of taxpayers/subject matter to be taxed) Facts. 12 corporations involved in
the motion picture business are impugning the validity of City of Manila Ordinance 2958 which imposes a fee on the price
of every admission ticket sold by cinemas, theaters, theatrical shows and boxing exhibitions for violative of the consti
provision regarding the uniformity and equality of taxation, and the equal protection of the laws. It is also argued that based
on Sec 2444(m) of the Revised Admin Code, the ordinance was enacted beyond the powers of the City of Manila. Held. The
whole argument of plaintiffs hinges, therefore, on the assumption that the power granted to the City of Manila by section
2444(m) of the Revised Administrative Code is limited to the authority to impose a tax on business, with exclusion of the
power to impose a tax amusement; but, the assumption is based on an arbitrary labeling of the kind of tax authorized by said
section 2444(m). The very fact that section 2444 (m) of the Revised Administrative Code includes theaters, cinematographs,
public billiard tables, public pool tables, bowling alleys, dance halls, public dancing halls, cabarets, circuses and other
similar places, race tracks, horse races, theatrical performances, public exhibition, circus and other performances and places
of amusements, will show conclusively that the power to tax amusement is expressly included within the power granted by
section 2444(m) of the Revised Administrative Code. Appellantts point out to the fact that the ordinance in question does
not tax "many more kinds of amusements" than those therein specified, such as "race tracks, cockpits, cabarets, concert
halls, circuses, and other places of amusement." the argument has absolutely no merit. The fact that some places of
amusement are not taxed while others, such as cinematographs, theaters, vaudeville companies, theatrical shows, and
boxing exhibitions and other kinds of amusements or places of amusement are taxed, is no argument at all against the
equality and uniformity of the tax imposition. Equality and uniformity of the tax imposition. 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; and the appellants cannot
point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be
confused with those not included in the ordinance. --------------------------------------Section 2444 (m) of the Revised
Administrative code reads as follows: To tax fix the license fee and regulate the business of hotels restaurants refreshment
places, cafes, lodging houses, boarding houses livery garages warehouses, pawnshops theaters, cinematographs; and further
to fix the location of and to tax fix the license fee for and regulate the businessof lively stables, the license fee for and
regulate the business of livery stable, boarding stables, embalmers, public billiard table public pool tables, bowling alleys,
dance halls, public dancing halls, cabarets, circusand other similar parades, public vehicles, race tracks, horse races,Junk
dealers, theatrical performances, public exhibitions, circus andother performances and places of amusements, match
factories, blacksmith shops, foundries, steam boilers, lumber yards, shipyards, thestorage and sale of gunpowder, tar, pitch,
resin, coal, oil, gasoline,benzene, turpentine, 'hemp, cotton, nitroglycerin, petroleum or any Ofthe products thereof and of all
other highly combustible or explosivematerials and other establishment likely to endanger the public safety or give rise to
conflagration or explosion and subject to the provision of ordinance issue by the (Philippines Health Service) Bureau of
Health in accordance with law tanneries, renders tallow chandlers bone factories and soap factories.
Shell v. Municipality of Cordova(valid classification of taxpayers/subject matter to be taxed) Facts:The Municipality of
Cordova, Cebu adopted a series of ordinances, one of which is Ordinance 10 which imposes an annual tax of P150 on
occupation or the exercise of the privilege of installation manager. Shell, Co. wants to refund the taxes paid by it on the
ground that the ordinances imposing the taxes are ultra vires. Held. The ordinances are valid. Ordinance No. 10 which
imposes an annual tax of P150 on "installation manager" comes under the provisions of Commonwealth Act No. 472. The
claim that "installation manager" is a designation made by the plaintiff and such designation cannot be deemed to be a
"calling" as defined in section 178 of the National Internal Revenue Code (Com. Act No. 466), and that the installation
manager employed by the plaintiff is a salaried employee which may not be taxed by the municipal council under the
provisions of Commonwealth Act No. 472 is without merit. Even if the installation manager is a salaried employee of the
plaintiff, still it is an occupation "and one occupation or line of business does not become exempt by being conducted with
some other occupation or business for which such tax has been paid'1 and the occupation tax must be paid "by each
individual engaged in a calling subject thereto." And pursuant to section 179 of the National Internal Revenue Code, "The
payment of . . . occupation tax shall not exempt any person from any tax, . . . provided by law or ordinance in places where
such . . . occupation in . . . regulated by municipal law, nor shall the payment of any such tax be held to prohibit any
municipality from placing a tax upon the same . . . occupation, for local purposes, where the imposition of such tax is
authorized by law." The contention that the ordinance is discriminatory and hostile because there is no other person in the
locality who exercises such "designation" or occupation is also without merit, because the fact that there is no other person
in the locality who exercises such a "designation" or calling does not make the ordinance discriminatory and hostile,
inasmuch as it is and will be applicable to any person or firm who exercises such calling or occupation named or designated
as "installation manager."

Abra Valley College v. Aquino (Prohibition Against Taxation of Religious, Charitable Entities and Educational Entities)
Facts: The Municipal Treasurer of Bangued, Abra caused to be seized and sold the lot and building of Abra Valley Junior
College for its failure to pay taxes (P5140.31). Petitioner school wants to declare the notice of sale and notice of seizure
annulled. The lot and the building was sold at public auction to the mayor. Provincial fiscal: building and lot used for
educational purposes are exempted from the payment of taxes. RTC: not exempted since the second floor is used by the
Director of the school for residential purposes; Respondent: (raised for the first time in the SC but still considered in the
interest of substantial justice) for commercial purposes because the ground floor of the college building is being used and
rented by a commercial establishment, the Northern Marketing Corporation Issue: Is the school exclusively used for
educational purposes? Held. NO (leased to commercial establishment) Section 22, paragraph 3, Article VI, of the then 1935
Philippine Constitution, exempts "Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands,
buildings, and improvements used exclusively for religious, charitable or educational purposes ... from real taxes. The
Assessment Law also exempts from real property tax (c) churches and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively for religious, charitable, scientific or educational purposes. It was
clarified that the term "used exclusively" also considers incidental use. The exemption in favor of property used exclusively
for charitable or educational purposes is 'not limited to property actually indispensable' but extends to facilities which are
incidental to and reasonably necessary for the accomplishment of said purposes, The test of exemption from taxation is the
use of the property for purposes mentioned in the Constitution. It must be stressed however, that while this Court allows a
more liberal and non-restrictive interpretation of the phrase "exclusively used for educational purposes" as provided for in
Article VI, 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
purposes. Otherwise stated, the use of the school building or lot for commercial purposes is neither contemplated by law,
nor by jurisprudence. The lease of the first floor thereof to the Northern Marketing Corporation cannot by any stretch of the
imagination be considered incidental to the purpose of education. Under the 1935 Constitution, the trial 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 returned to the school involved.
Lung Center v. QC(Prohibition Against Taxation of Religious, Charitable Entities and Educational Entities) Facts: Lung
Center of the Philippines (both land and hospital) was assessed for tax purposes. In the middle of the lot is the hospital. A
big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or
professional practitioners who use the same as their private clinics for their patients whom they charge for their professional
services. The corner right side of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to Elliptical
Orchids and Garden Center. The petitioner accepts paying and non-paying patients. The petitioner receives annual subsidies
from the government. The institution filed a claim for exemption predicated on its claim that its a charitable institution.
It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its
hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is
exempt from real property taxes. Central Board of Assessment Appeals of Quezon City thinks otherwise: Before a patient is
admitted for treatment in the Center, first impression is that it is pay-patient and required to pay a certain amount as deposit.
That even if a patient is living below the poverty line, he is charged with high hospital bills. Held: Portions of the land
leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes.
Portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or nonpaying, are exempt from real property taxes. Petitioner is a charitable institution within the context of the 1973 and 1987
Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the elements which should be
considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the methods of
administration, the nature of the actual work performed, the character of the services rendered, the indefiniteness of the
beneficiaries, and the use and occupation of the properties. In the legal sense, a charity may be fully defined as a gift, to be
applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds and
hearts under the influence of education or religion, by assisting them to establish themselves in life or otherwise lessening
the burden of government. It may be applied to almost anything that tend to promote the well-doing and well-being of social
man. It embraces the improvement and promotion of the happiness of man. The word "charitable" is not restricted to relief
of the poor or sick. The test of a charity and a charitable organization are in law the same. The test whether an enterprise is
charitable or not is whether it exists to carry out a purpose reorganized in law as charitable or whether it is maintained for
gain, profit, or private advantage. Under P.D. No. 1823, the petitioner is a non-profit and nonstock corporation which,
subject to the provisions of the decree, organized for the welfare and benefit of the Filipino people principally to help
combat the high incidence of lung and pulmonary diseases in the Philippines.

The general purpose of its creation is to ease the burden among the Filipinos from contracting respiratory illnesses which
are considered as among the most prevalent in the country. Hence, the medical services of the petitioner are to be rendered
to the public in general in any and all walks of life including those who are poor and the needy without discrimination. As a
general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it
derives income from paying patients, or receives subsidies from the government, so long as the money received is devoted
or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the
persons managing or operating the institution The fundamental ground upon which all exemptions in favor of charitable
institutions are based is the benefit conferred upon the public by them, and a consequent relief, to some extent, of the burden
upon the state to care for and advance the interests of its citizens.20 Subsidies are like a gift or donation of any other kind
except they come from the government. The crux is the presence or absence of material reciprocity. Therefore, the fact that
subsidization of part of the cost of furnishing such housing is by the government rather than private charitable contributions
does not dictate the denial of a charitable exemption if the facts otherwise support such an exemption, as they do here. In
this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the government
for 1991 and 1992 for its patients and for the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its
operations. Even as we find that the petitioner is a charitable institution, we hold, that those portions of its real property that
are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used
for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax are construed
strictissimi juris against the taxpayer and liberally in favor of the taxing power. Hence, a claim for exemption from tax
payments must be clearly shown and based on language in the law too plain to be mistaken. Section 28(3), Article VI of the
1987 Philippine Constitution provides, thus: (3) Charitable institutions, churches and parsonages or convents appurtenant
thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used
for religious, charitable or educational purposes shall be exempt from taxation.32 The tax exemption under this
constitutional provision covers property taxes only.33 As Chief Justice Hilario G. Davide, Jr., then a member of the 1986
Constitutional Commission, explained: ". . . what is exempted is not the institution itself . . .; those exempted from real
estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or
educational purposes."34 Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is
burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed and
enjoyed to the exclusion of others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to
exclude; as enjoying a privilege exclusively."40 If real property is used for one or more commercial purposes, it is not
exclusively used for the exempted purposes but is subject to taxation.41 The words "dominant use" or "principal use" cannot
be substituted for the words "used exclusively" without doing violence to the Constitutions and the law.42 Solely is
synonymous with exclusively.43 What is meant by actual, direct and exclusive use of the property for charitable purposes is
the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is
organized. It is not the use of the income from the real property that is determinative of whether the property is used for taxexempt purposes.44 The petitioner failed to discharge its burden to prove that the entirety of its real property is actually,
directly and exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients
and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to
private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a private individual for her
business enterprise under the business name "Elliptical Orchids and Garden Center."

Gaston v. Republic Planters Bank (Prohibition on

Use of Tax Levied for Special Purpose) Philippine Sugar Commission (PHILSUCOM) which was tasked with the function
of regulating and supervising the sugar industry was abolished. P. D. No. 388, promulgated on February 2,1974, which
created the PHILSUCOM, provided for the collection of a Stabilization Fund for the purpose of financing the growth and
development of the sugar industry market to be administered in trust by the Commission and deposited in the Philippine
National Bank derived by collecting 2 pesos/picul produced and milled for 5 years, and 1 peso/picul produced and milled
every year thereafter. Petitioners filed a mandamus to compel the distribution of shares of stock in PNB, in the name of
PHILSUCOM to the sugar producers, planters and millers who contributed in the Stabilization fund. Petitioners say that the
fees collected were held in trust for the sugar planters and millers (belonging to them) and not public funds (belonging to
PHILSUCOM) which should be transferred to the general funds of the government upon dissolution of the Commission.
Section 7 of P.D. No. 388 does provide that the stabilization fees collected "shall be administered in trust by the
Commission." However, while the element of an intent to create a trust is present, a resulting trust in favor of the sugar
producers, millers and planters cannot be said to have ensued because the presumptive intention of the parties is not
reasonably ascertainable from the language of the statute itself. No implied trust in favor of the sugar producers either can
be deduced from the imposition of the levy. It is not clearly shown from the statute itself that the PHILSUCOM imposed on
itself the obligation of holding the stabilization fund for the benefit of the sugar producers. Petitioners maintain that this
infusion of fresh capital was accomplished by PHILSUCOM, using the proceeds of the P1.00 per picul stabilization fund to
pay for its subscription in shares of stock of respondent Bank. It is petitioners' submission that all shares were placed in
PHILSUCOM's name only out of convenience and necessity and that they are the true and beneficial owners thereof. But,
while it is true that the collected stabilization fees were set aside by PHILSUCOM to pay its subscription to RPB, it did not
collect said fees for the account of the sugar producers. That stabilization fees are charges/levies on sugar produced and
milled which accrued to PHILSUCOM under PD 338, as amended. ... The stabilization fees collected are in the nature of a
tax, which is within the power of the State to impose for the promotion of the sugar industry (Lutz vs. Araneta, 98 Phil.
148). They constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made accrue to a "Special Fund," a
"Development and Stabilization Fund," almost Identical to the "Sugar Adjustment and Stabilization Fund" created under
Section 6 of Commonwealth Act 567. 1 The tax collected is not in a pure exercise of the taxing power. It is levied with a
regulatory purpose, to provide means for the stabilization of the sugar
industry. The levy is primarily in the exercise of the police power of the State (Lutz vs. Araneta, supra.). The stabilization
fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of
"financing the growth and development of the sugar industry and all its components, stabilization of the domestic market
including the foreign market. the fact that the State has taken possession of moneys pursuant to law is sufficient to constitute
them state funds, even though they are held for a special purpose. Having been levied for a special purpose, the revenues
collected are to be treated as a special fund, to be, in the language of the statute, "administered in trust' for the purpose
intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be transferred to the general funds of
the Government. That is the essence of the trust intended (See 1987 Constitution, Article VI, Sec. 29(3), lifted from the
1935 Constitution, Article VI, Sec. 23(l]). 2 The character of the Stabilization Fund as a special fund is emphasized by the
fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which
may be paid out only in pursuance of an appropriation made by law (1987) Constitution, Article VI, Sec. 29[1],1973
Constitution, Article VIII, Sec. 18[l]). That the fees were collected from sugar producers, planters and millers, and that the
funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fired for
their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from
them since it is also they who are to be benefited from the expenditure of the funds derived from it. The investment in
shares of respondent Bank is not alien to the purpose intended because of the Bank's character as a commodity bank for
sugar conceived for the industry's growth and development. Furthermore, of note is the fact that onehalf, (1/2) or PO.50 per
picul, of the amount levied under P.D. No. 388 is to be utilized for the "payment of salaries and wages of personnel, fringe
benefits and allowances of officers and employees of PHILSUCOM" thereby immediately negating the claim that the entire
amount levied is in trust for sugar, producers, planters and millers. To rule in petitioners' favor would contravene the general
principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private
persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, "and all its components,
stabilization of the domestic market," including the foreign market the industry being of vital importance to the country's
economy and to national interest.

San Miguel Corp. v. Avelino (Non-Impairment of Jurisdiction of the Supreme Court) Facts: San Miguel challenged the
existing Ordinance of the Tax Code of the City of Mandaue. This was on the ground that Section 12(e) (7) in relation to
Section 12(e) (1) and (2), Mandaue City Ordinance No. 97, is illegal and void because it imposed a specific tax beyond its
territorial jurisdiction. The validity of the ordinance was sustained by the City Fiscal. However, when the case appealed to
the Secretary Justice, Macaraig, the challenged ordinance was deemed of doubtful validity. Respondent City filed a
suit for collection on the issue of the validity of the ordinance which had the effect of questioning the opinion of the Justice
Secretary. San Miguel filed a petition for certiorari and prohibition to oppose the suit and have it dismissed. It claimed that
under Section 47, which states that "The decision of the Secretary of Justice shall be final and executory unless, within
thirty days upon receipt thereof, the aggrieved party contents the same in a court of competent jurisdiction , the suit for
collection was not the appeal allowed by the law.
Issue: WON the courts are ousted its jurisdiction over questions of law because the mode of appeal by the Respondent city
was improper. Held: No. The validity of a statute, an executive order or ordinance is a matter for the judiciary to decide and
that whenever in the disposition of a pending case such a question becomes unavoidable, then it is not only the power but
the duty of the Court to resolve such a question. To construe Section 47 narrowly would be to raise a serious constitutional
question. For it would in effect bar what otherwise would be a proper case cognizable by a court precisely is the exercise of
the conceded power of judicial review just because the procedure contended for which is that of an "appeal," under the
circumstances a term vague and ambiguous, was not followed.
Tan v. Del Rosario (Due Process) Sec.1 Art 3 Constitution Facts: Petitioners challenge the constitutionality of RA 7496 aka
Simplified Net Income Taxation Scheme (SNIT) under Arts VI secs. 26 and 28, and III sec. 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.
Essentially, petitioners argue that general professional partnerships and general partnerships/corporations must be uniformly
taxed.
Issue: WON the changes in the tax schedules present in RA 7496 and the different treatment in Professional Partnerships
and Corporations and Partnerships, are unconstitutional. Held: No. Petitioner gives a fairly extensive discussion on the
merits of the law, illustrating, in the process, what he believes to be an imbalance between the tax liabilities of those covered
by the amendatory law and those who are not. With the legislature primarily lies the discretion to determine the nature
(kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This court cannot freely delve into
those matters which, by constitutional fiat, rightly rest on legislative judgment. Of course, where a tax measure becomes so
unconscionable and unjust as to amount to confiscation of property, courts will not hesitate to strike it down, for, despite all
its plenitude, the power to tax cannot override constitutional proscriptions. 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 to us.

Sison v. Ancheta (Due Process) (Sec 1, Art III, Consti) Facts: In a suit for declaratory relief and probation, petitioner alleges
arbitrariness in Sec. 1, BP 135. He reasons that he would be unduly discriminated against by the imposition of higher rates
of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or
salaried individual taxpayers. Issue: Whether the imposition of a higher tax rate on taxable net income derived from
business or profession than on compensation is constitutionally infirm. Held: No. The Constitution as the fundamental law
overrides any legislative or executive act that runs counter to it. In any case therefore where it can be demonstrated that the
challenged statutory provision - as petitioner here alleges - fails to abide by its command, then this Court must so declared
and adjudge it null. It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it
finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property.
That would be a clear abuse of power. It then becomes the duty of this Court to say that such an arbitrary act amounted to
the exercise of an authority not conferred. That properly calls for the application of the Holmes dictum. It has also been held
that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a
retroactive statute is so harsh and unreasonable, it is subject to attack on due process grounds. Now for equal protection. The
applicable standard to avoid the charge that there is a denial of this constitutional mandate whether the assailed act is in the
exercise of the police power or the power of eminent domain is to demonstrate "that the governmental act assailed, far from
being inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the very least,
discrimination that finds to 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. In the case at bar, petitioner failed to make a case that the challenged
law was constitutionally infirm because the classifications were valid for tax purposes, and the it is not arbitrary and
confiscatory.
American Bible Society v. City of Manila (Religious Freedom) (Sec. 5, Art. III, Consti) Facts: Plaintiff Bible Society
challenges the Citys imposition of license fees and refuses to pay taxes on the bible it sold in the region. Plaintiff
further tried to establish that it never made any profit from the sale of its bibles, which are disposed of for as low as one
third of the cost, and that in order to maintain its operating cost it obtains substantial remittances from its New York office
and voluntary contributions and gifts from certain churches, both in the United States and in the Philippines, which are
interested in its missionary work. Defendant retorts, however, that they do obtain profit from selling the bibles. Issue:
Nevertheless, the issue in this case is whether tax imposition and a fee (Ordinances Nos. 2529 and 3000 respectively) on
activities religious in characters and on religious materials are tantamount to religious censorship and abridgment by the
state. Held: Ordinance No. 2529 which taxes the sale of assorted merchandise does not apply to the sale of religious
materials in the exercise of the right to freedom of religion. The right to enjoy freedom of the press and religion occupies a
preferred position as against the constitutional right of property owners. Otherwise, those who can tax the exercise of this
religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance. Those who
can tax the privilege of engaging in this form of missionary evangelism can close all its doors to all 'those who do not have a
full purse. Spreading religious beliefs in this ancient and honorable manner would thus be denied the needy. With respect to
Ordinance No. 3000, as amended, which requires the obtention of the Mayor's permit before any person can engage in any
of the businesses, trades or occupations enumerated therein, We do not find that it imposes any charge upon the enjoyment
of a right granted by the Constitution, nor tax the exercise of religious practices. The fee does not deprive defendant of his
constitutional right of the free exercise and enjoyment of religious profession and worship, even though it prohibits him
from introducing and carrying out a scheme or purpose which he sees fit to claim as a part of his religious system.

Tolentino v. Sec. of Finance (Religious Freedom)

(Sec. 5, Art. III, Consti)
Commissioner v. CA (KINDS OF TAXES:Privilege Tax)
Facts: Atlas Consolidated Mining and Development Corporation (ACMDC) claims exception from the Manufacturers
tax since it uses the steel balls it manufactures for its purpose. Issue: WON ACMDC is liable for Manufacturers tax
Held: No. ACMDC cannot be said to be engaged in the sale, barter or exchange of personal property and as such liable
under the Manufacturers tax. Manufacturers tax: SEC. 186. There shall be levied, assessed and collected once only
on every original sale, barter, exchange, or similar transaction either for nominal or valuable consideration, intended to
transfer ownership of, or title to, the articles Privilege taxes on business" are taxes imposed upon the privilege of
engaging in business. They are essentially excise taxes. To be held liable for the payment of a privilege tax, the person or
entity must be engaged in business. "To engage" is to embark on a business or to employ oneself therein. The word
"engaged" connotes more than a single act or a single transaction; it involves some continuity of action. "To engage in
business" is uniformly construed as signifying an employment or occupation which occupies one's time, attention, and labor
for the purpose of a livelihood or profit. The expressions "engage in business," "carrying on business" or "doing business"
do not have different meanings, but separately or connectedly convey the idea of progression, continuity, or sustained
activity. "Engaged in business" means occupied or employed in business; "carrying on business" does not mean the
performance of a single disconnected act, but means conducting, prosecuting, and continuing business by performing
progressively all the acts normally incident thereto; while "doing business" conveys the idea of business being done, not
from time to time, but all the time. The foregoing notwithstanding, it has likewise been ruled that one act may be sufficient
to constitute carrying on a business according to the intent with which the act is done. A single sale of liquor by one who
intends to continue selling is sufficient to render him liable for "engaging in or carrying on" the business of a liquor dealer.
There may be a business without any sequence of acts, for if an isolated transaction, which if repeated would be a
transaction in a business, is proved to have been undertaken with the intent that it should be the first of several transactions,
that is, with the intent of carrying on a business, then it is a first transaction in an existing business. Under the tax code then
in force, the 7% manufacturer's sales tax is imposed on the manufacturer for every original sale, barter, exchange and other
similar transaction intended to transfer ownership of articles. Thus, a manufacturer, in order to be subjected to the necessity
of paying the percentage tax imposed by Section 186 of the tax code, must be 'engaged' in the sale, barter or exchange of
personal property. Under a statute which imposes a tax on persons engaged in the sale, barter or exchange of merchandise, a
person must be occupied or employed in the sale, barter or exchange of personal property. A person can hardly be
considered as occupied or employed in the sale, barter or exchange of personal property when he has made one purchase
and sale only.

In the case at bar, ACMDC claims exemptions from the payment of manufacturer's tax. It asserts that it is not engaged in the
business of selling grinding steel balls, but it only produces grinding steel balls solely for its own use, or consumption.
However, it admits having lent its grinding steel balls to other entities but only in very isolated cases. After a careful review
of the records and on the basis of the legal concept of "engaging in business" hereinbefore discussed, we are inclined to
agree with ACMDC that it should not and cannot be held liable for the payment of the manufacturer's tax.