1. G.R. No.

L-28896 February 17, 1988

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

FACTS:

Algue, Inc was assessed by the Bureau of Internal Revenue (BIR) the amount of P83,183.85 as
delinquency income taxes for the years 1958 and 1959. The BIR contends that the deduction of
P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary
business expense.

Algue flied a protest, claiming that the P75,000.00 had been legitimately paid for actual services
rendered. The payment was in the form of promotional fees. Algue was informed that the BIR was
not taking any action on the protest and it was only then that it accepted the warrant of distraint and
levy earlier sought to be served. Algue filed a petition for review with the Court of Tax Appeals which
ruled in favor of Algue.

ISSUE: whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by private respondent Algue as legitimate business expenses in its income tax
returns.

HELD:

No. The burden is on the taxpayer to prove the validity of the claimed deduction. However, the
Supreme Court found that the onus has been discharged satisfactorily. Algue, Inc. 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.

It is said that 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. However, 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.
2. PHILIPPINE AIRLINES, INC., plaintiff-appellant,
vs.
ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO
CARBONELL, in his capacity as National Treasurer, defendants-appellants.

FACTS:

The Philippine Airlines (PAL) is engaged in the air transportation business under a legislative
franchise, which exempts it 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.
However, the Land Transportation Commission (LTC) issued a regulation requiring all tax exempt
entities, among them PAL to pay motor vehicle registration fees.

The LTC refused to register the former’s motor vehicles unless the imposed fees were paid. PAL
paid, under protest, the registration fees. However, it demanded a refund of the amounts paid,
claiming that said fees are in reality taxes, the payment of which PAL is exempt from by virtue of its
legislative franchise. The LTC denied the requests for refund, claiming that the registration fees were
regulatory fees imposed as an incident of the exercise of the police power of the state.

ISSUE: Whether or not the motor vehicle registration fees are taxes.

HELD:

Yes. The Supreme Court held that the 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. Vehicle registration fees were originally simple,
intended only for rigidly 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,
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."

Motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic
Code are actually taxes intended for additional revenues of government even if one fifth or less of
the amount collected is set aside for the operating expenses of the agency administering the
program.
3. G.R. Nos. L-28508-9 July 7, 1989

ESSO STANDARD EASTERN, INC., (formerly, Standard-Vacuum Oil Company), petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS:

ESSO deducted from its gross income, as part of its ordinary and necessary business expenses, the
amount representing margin fees it had paid to the Central Bank on its profit remittances to its New
York head office. However, the Commissioner of Internal Revenue disallowed the claimed deduction
for the margin fees paid.

The ESSO was assessed with deficiency income tax which arose from the disallowance of margin
fees. ESSO paid the deficiency assessment, under protest, and demanded for a refund. The CIR
denied the request, holding that the margin fees paid to the Central Bank could not be considered
taxes or allowed as deductible business expenses.

ISSUE: 1) Whether or not the margin fee is a tax.

2) Whether or not the margin fee is ordinary and necessary business expense.

HELD:

1) No, it is not a tax. The Supreme Court held that the margin fee was imposed by the State in the
exercise of its police power and not the power of taxation. A tax is levied to provide revenue for
government operations, while the proceeds of the margin fee are applied to strengthen the country's
international reserves.

2) No, it is not an ordinary and necessary business expense. ESSO has not shown that the
remittance to the head office of part of its profits was made in furtherance of its own trade or
business. ESSO merely presumed that all corporate expenses are necessary and appropriate in the
absence of a showing that they are illegal or ultra vires. The CIR is correct when it asserts that "the
paramount rule is that claims for deductions are a matter of legislative grace and do not turn on mere
equitable considerations… The taxpayer in every instance has the burden of justifying the allowance
of any deduction claimed."

It is clear that ESSO, having assumed an expense properly attributable to its head office, cannot
now claim this as an ordinary and necessary expense paid or incurred in carrying on its own trade or
business.
4. G.R. No. L-10448 August 30, 1957

IN THE MATTER OF A PETITION FOR DECLARATORY JUDGMENT REGARDING THE

VALIDITY OF MUNICIPAL ORDINANCE NO. 3659 OF THE CITY OF MANILA. PHYSICAL
THERAPY ORGANIZATION OF THE PHILIPPINES, INC., petitioner-appellant,
vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA and ARSENIO H. LACSON, as Mayor of
the City of Manila, respondents-appellees.

FACTS:

The association of registered massagists and licensed operators of massage clinics in the City of
Manila and other parts of the country filed an action for declaratory judgment regarding the validity of
a municipal ordinance promulgated by the Municipal Board and approved by the City Mayor.
However, the petition was dismissed.

The association appealed to the Supreme Court claiming, among other things, that the permit fee of
P100.00 is onerous and unreasonable.

ISSUE: Whether or not the license fee of P100.00 for operators is a fee or a tax

HELD:

The license fee is intended to be a fee and not a tax. The amount of the fee or charge is properly
considered in determining whether it is a tax or an exercise of the police power. The amount may be
so large as to itself show that the purpose was to raise revenue and not to regulate, but in regard to
this matter there is a marked distinction between license fees imposed upon useful and beneficial
occupations which the sovereign wishes to regulate but not restrict, and those which are inimical and
dangerous to public health, morals or safety. In the latter case the fee may be very large without
necessarily being a tax

The Manila Municipal Board considered the practice of hygienic and aesthetic massage not as a
useful and beneficial occupation which will promote and is conducive to public morals, and
consequently, imposed the said permit fee for its regulation.
5. G.R. No. L-17725 February 28, 1962

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

vs.
MAMBULAO LUMBER COMPANY, ET AL., defendants-appellants.

FACTS:

Mambulao Lumber Company has been found liable for the aggregate amount of P4802.37 for forest
charges while already having paid a total amount of P9,127.50 as reforestation charges to the
Republic of the Philippines. Mambulao Lumber contneded that since the Republic had not made use
of those reforestation charges to reforest the denuded area of the land covered by its license, the
amount should be refunded, or, if it cannot be refunded, at least it should be compensated with what
Mambulao Lumber owed the Republic for reforestation charges.

ISSUE: Whether or not the sum paid as reforestation charges may be set off or applied to the
payment of forest charges due.

HELD:

No. The amount paid by a licensee as reforestation charges is in the nature of a tax which forms a
part of the Reforestation Fund, payable by him irrespective of whether the area covered by his
license is reforested or not.

A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under
the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the
remedy in an action or any indebtedness of the state or municipality to one who is liable to the state
or municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out
of the contract or transaction sued on.

The general rule based on grounds of public policy is well-settled that no set-off admissible against
demands for taxes levied for general or local governmental purposes. The reason on which the
general rule is based, is that taxes are not in the nature of contracts between the party and party but
grow out of duty to, and are the positive acts of the government to the making and enforcing of
which, the personal consent of individual taxpayers is not required.
6. G.R. No. L-67649 June 28, 1988

ENGRACIO FRANCIA, petitioner,

vs.
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.

FACTS:

Francia is the owner of a lot in Pasay City, a 125 square meter portion of which was expropriated by
the government for P4,116.00. It appeared that since 1963 up to 1977, Francia failed to pay his real
estate taxes amounting to P2,400.00. On December 5, 1977, his property was sold at public auction
by the City Treasurer of Pasay in order to satisfy the tax delinquency. Francia was not present at the
auction sale.

After being informed of the auction sale through a notice of hearing related to the lot, Francia filed a
complaint to annul the auction sale. The lower court dismissed the complaint. Francia appealed the
case to the Intermediate Appellate Court who affirmed the decision of the lower court in toto.

ISSUE: Whether or not the tax delinquency may be offset against Francia’s claim against the
government.

HELD:

No. The Supreme Court has consistently ruled on prior cases that there can be no off-setting of
taxes against the claims that the taxpayer may have against the government. A person cannot
refuse to pay a tax on the ground that the government owes him an amount equal to or greater than
the tax being collected. The collection of a tax cannot await the results of a lawsuit against the
government.

Internal revenue taxes can not be the subject of compensation: The government and taxpayer are
not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a "claim for
taxes is not such a debt, demand, contract or judgment as is allowed to be set-off."
7. G.R. No. L-18994 June 29, 1963

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner,

vs.
HON. LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of
Leyte,
and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of the late Walter Scott
Price, respondents.

FACTS:

In Domingo vs. Moscoso, the Supreme Court declared as final and executory the order for the
payment by the estate of the Late Walter Scott Price of the estate and inheritance taxes, charges
and penalties, amounting to P40, 058.55, issued by the Court of First Instance of Leyte. In order to
enforce the claims against the estate the fiscal presented a petition for the execution of the
judgment.

The petition was, however, denied by because it was held that the execution is not justifiable as the
Government is indebted to the estate under administration in the amount of P262, 200.

ISSUE: Whether or not the claim of the Government can be compensated from its debt to the estate.

HELD:

Yes. The claim of the estate against the Government has been recognized and an amount of P262,
200.00 has already been appropriated for the purpose by a corresponding law (Rep. Act No. 2700).
Under the above circumstances, both the claim of the Government for inheritance taxes and the
claim of the intestate for services rendered have already become overdue and demandable as well
as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with the
provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the
concurrent amount.
8. G.R. No. 117359 July 23, 1998

DAVAO GULF LUMBER CORPORATION, petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.

FACTS:

Davao Gulf Lumber Corporation, a licensed forest concessionaire possessing a Timber License
Agreement purchased from various oil companies refined and manufactured oils as well as motor
and diesel fuels for its exploitation and operation. As such, it filed before the Commissioner of
Internal Revenue (CIR) a claim for refund for 25% of the specific taxes actually paid by the oil
companies that were used by Davao Gulf in its operations. The claim was based Sec. 5 of Republic
Act 1435 and Insular Lumber v. CTA.

Davao Gulf filed at the CTA a petition for review. The CTA partially granted the claim for refund in
regard to other, but it computed the refund based on rates deemed paid under RA 1435, and not on
the higher rates actually paid by petitioner under the NIRC. Insisting that the basis for computing the
refund should be the increased rates prescribed by Sections 153 and 156 of the NIRC, Davao Gulf
elevated the matter to the Court of Appeals. However, the Court of Appeals affirmed the CTA
Decision.

ISSUE: Whether or not the refund should be based on the rates under RA 1435 or under Sections
153 and 156 of the NIRC.

HELD:

The Tax refund must be based on the rates under RA 1435, not those under Sections 153 and 156
of the NIRC.

A tax cannot be imposed unless it is supported by the clear and express language of a statute; on
the other hand, once the tax is unquestionably imposed, a claim of exemption from tax payments
must be clearly shown and based on language in the law too plain to be mistaken. Since the partial
refund authorized under Section 5, RA 1435, is in the nature of a tax exemption, it must be
construed strictissimi Juris against the grantee.

Because taxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly
against the grantee and liberally in favor of the government. Otherwise stated, any exemption from
the payment of a tax must be clearly stated in the language of the law; it cannot be merely implied
therefrom.
9. G.R. No. 92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner,

vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C.
FERNANDEZ and HONORABLE COMMISSIONER ALBERTO P. CRUZ, respondents.

FACTS:

The Commission on Audit (COA) sent a letter to Caltex, directing the latter to remit to the Oil Price
Stabilization Fund (OPSF) its collection, excluding those that remained unremitted, of the additional
tax on petroleum products authorized under P.D. No. 1956. The COA also informed Caltex that,
pending such remittance, all of its claims for reimbursement from the OPSF shall be held in
abeyance. The COA further directed Caltex to desist from further offsetting the taxes collected
against outstanding claims

Caltex requested the COA for an early release of its reimbursement certificates from the OPSF.
However, the COA denied the request and repeated its earlier directive on Caltex in order to
facilitate the former's audit action on the reimbursement claims.

ISSUE: Whether or not the amounts due to the OPSF from Caltex may be offset against its
outstanding claims from said fund.

HELD:

No. In respect to the taxes for the OPSF, the oil companies merely act as agents for the
Government in the latter's collection since the taxes are, in reality, passed unto the end-users –– the
consuming public. In that capacity, Caltex, as one of such companies, has the primary obligation to
account for and remit the taxes collected to the administrator of the OPSF. This duty stems from the
fiduciary relationship between the two; Caltex cannot be considered merely as a debtor. In respect,
therefore, to its collection for the OPSF vis-a-vis its claims for reimbursement, no compensation is
likewise legally feasible. Firstly, the Government and the petitioner cannot be said to be mutually
debtors and creditors of each other. Secondly, there is no proof that Caltex's claim is already due
and liquidated.

That compensation had been the practice in the past can set no valid precedent. Such a practice
has no legal basis. Lastly, R.A. No. 6952 does not authorize oil companies to offset their claims
against their OPSF contributions. Instead, it prohibits the government from paying any amount from
the Petroleum Price Standby Fund to oil companies which have outstanding obligations with the
government, without said obligation being offset first subject to the rules on compensation in the Civil
Code.
10. G.R. No. 124043 October 14, 1998

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN
ASSOCIATION OF THE PHILIPPINES, INC., respondents.

FACTS:

YMCA earned income from leasing out a portion of its premises to small shop owners and from
collecting parking fees from non-members. The Commissioner of Internal Revenue (CIR) assessed
YMCA for the deficiency of its taxes. YMCA formally protested the assessment and, as a
supplement to its basic protest, filed a letter dated. In reply, the CIR denied the claims of YMCA.

YMCA contested the denial of its protest by filing a petition for review at the Court of Tax Appeals
(CTA). Finding no legal basis for the assessment on taxes, the CTA ruled in favor of YMCA.
However, the CIR appealed the decision with the Court of Appeals (CA) who overturned the CTA’s
ruling.

ISSUE: Whether or not the rental income of the YMCA from its real estate subject to tax.

HELD:

Yes. The exemption claimed by the YMCA is expressly disallowed by the very wording of the last
paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations
(such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by
the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent
income of the YMCA from its real property, the Court is duty-bound to abide strictly by its literal
meaning and to refrain from resorting to any convoluted attempt at construction.

Laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA to be granted the
exemption it claims under the aforecited provision, it must prove with substantial evidence that (1) it
falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks
to be exempted from taxation is used actually, directly, and exclusively for educational purposes.
However, the Court notes that not a scintilla of evidence was submitted YMCA to prove that it met
the said requisites.
11. G.R. No. L-10405 December 29, 1960

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitioner-

appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-
appellees.

FACTS:

Wenceslao Pascual, then Provincial Governor of Rizal, instituted an action for declaratory relief, with
injunction questioning the appropriation of funds under Republic Act 920 for the construction,
reconstruction, repair, extension and improvement of Pasig feeder road terminals. He claimed that
the feeder roads form part of the Antonio Subdivision and do not connect any government property
or any important premises to the main highway. As such, he claimed that appropriation made for the
projected feeder roads, was illegal and, therefore, void ab initio.

The aforementioned subdivision and the lands on which said feeder roads were to be construed
were private properties of Jose C. Zulueta, who, at the time of the passage and approval of said Act,
was a member of the Senate of the Philippines. Zulueta and other respondents moved to dismiss the
petition. The lower court dismissed the petition, upholding the legality of the appropriation.

ISSUE: Whether or not the appropriation is valid.

HELD:

No. The appropriation is void because it was appropriated for a private purpose. It is a general rule
that the legislature is without power to appropriate public revenue for anything but a public purpose.
It is the essential character of the direct object of the expenditure which must determine its validity
as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the
general advantage of the community, and thus the public welfare, may be ultimately benefited by
their promotion. Incidental to the public or to the state, which results from the promotion of private
interest and the prosperity of private enterprises or business, does not justify their aid by the use
public money.

Under the express or implied provisions of the constitution, public funds may be used only for public
purpose. The right of the legislature to appropriate funds is correlative with its right to tax, and, 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 for a public purpose.
12. G.R. No. 120082 September 11, 1996

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
HON. FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial
Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor HON. TOMAS R.
OSMEÑA, and EUSTAQUIO B. CESA, respondents.

FACTS:

The Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No.
6958. Under said Act, it enjoyed the privilege of exemption from payment of realty taxes. However,
the Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on several
parcels of land owned by MCIAA.

MCIAA objected to the demand, citing its exemption under RA 6958. It was also asserted that it is an
instrumentality of the government performing governmental functions, citing section 133 of the Local
Government Code of 1991 which puts limitations on the taxing powers of local government units.
However, the City of Cebu refused to cancel and set aside MCIAA's realty tax account, insisting that
the latter is a government-controlled corporation (GOCC) whose tax exemption privilege has been
withdrawn by virtue of Sections 193 and 234 of the Local Governmental Code (LGC) that took effect
on January 1, 1992

ISSUE: Whether or not the City of Cebu may impose taxes on MCIAA.

HELD:

Yes. The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but
pursuant to direct authority conferred by Section 5, Article X of the Constitution.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons,

including GOCCs, the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity
of the LGC, except upon the effectivity of the LGC, except those granted to local water districts,
cooperatives duly registered under R.A. No. 6938, non stock and non-profit hospitals and
educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to
Section 234, which enumerates the properties exempt from real property tax. But the last paragraph
of Section 234 further qualifies the retention of the exemption in so far as the real property taxes are
concerned by limiting the retention only to those enumerated there-in; all others not included in the
enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the real property is
owned by the Republic of the Philippines, or any of its political subdivisions under the first paragraph
of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to
taxable person for consideration or otherwise.

Since Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from real
property taxes granted to natural or juridical persons, including GOCCs, except as provided in the
said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily
follows that its exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has
been withdrawn.
13. G.R. No. L-41631 December 17, 1976

HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL, as

Secretary to the Mayor; THE MARKET ADMINISTRATOR; and THE MUNICIPAL BOARD OF
MANILA, petitioners,
vs.
HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge of the Court of First Instance of
Manila, Branch XXX and the FEDERATION OF MANILA MARKET VENDORS, INC., respondents.

FACTS:

The Federation of Manila Market Vendors, Inc. assailed the validity of Ordinance No. 7522, which
regulates the operation of public markets and prescribes fees for the rentals of stalls. Among the
grounds for its invalidity is that the ordinance is not a “tax ordinance” but one for raising revenues.

The respondent judge issued an order directing the Federation to exhaust the administrative
remedies outlined in the Local Tax Code. After due hearing on the merits, the respondent Judge
rendered its decision declaring the nullity of Ordinance No. 7522. Petitioners moved for
reconsideration but the same was denied.

ISSUE: whether or not the ordinance is a “tax ordinance.”

HELD:

Yes. The raising of revenues is the principal object of taxation. Under Section 5, Article XI of the
New Constitution, "Each local government unit shall have the power to create its own sources of
revenue and to levy taxes, subject to such provisions as may be provided by law." And one of those
sources of revenue is what the Local Tax Code points to in particular: "Local governments may
collect fees or rentals for the occupancy or use of public markets and premises * * *." They can
provide for and regulate market stands, stalls and privileges, and, also, the sale, lease or occupancy
thereof. They can license, or permit the use of, lease, sell or otherwise dispose of stands, stalls or
marketing privileges.
14. G.R. No. 168056 September 1, 2005

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and
ED VINCENT S. ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY
OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE COMMISSIONER
OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent.

FACTS:

The ABAKADA GURO Party List filed a petition questioning the constitutionality of certain sections of
R.A. No. 9337, amending certain sections of the National Internal Revenue Code (NIRC). The
questioned provisions contain a uniform proviso authorizing the President, upon recommendation of
the Secretary of Finance, to raise the VAT rate to 12% after certain conditions have been met.

Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its
exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine
Constitution.

ISSUE: Whether or not R.A. No. 9337 is constitutional.

HELD:

Yes. In every case of permissible delegation, there must be a showing that the delegation itself is
valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed,
carried out, or implemented by the delegate; and (b) fixes a standard — the limits of which are
sufficiently determinate and determinable — to which the delegate must conform in the performance
of his functions. A sufficient standard is one which defines legislative policy, marks its limits, maps
out its boundaries and specifies the public agency to apply it. It indicates the circumstances under
which the legislative command is to be effected. Both tests are intended to prevent a total
transference of legislative authority to the delegate, who is not allowed to step into the shoes of the
legislature and exercise a power essentially legislative.

Clearly, the legislature may delegate to executive officers or bodies the power to determine certain
facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its
terms, made to depend, but the legislature must prescribe sufficient standards, policies or limitations
on their authority. While the power to tax cannot be delegated to executive agencies, details as to
the enforcement and administration of an exercise of such power may be left to them, including the
power to determine the existence of facts on which its operation depends.
15. G.R. No. L-1104 May 31, 1949

EASTERN THEATRICAL CO., INC., ET AL., plaintiffs-appellants,

vs.
VICTOR, ALFONSO as City Treasurer of Manila, THE MUNICIPAL BOARD OF THE CITY OF
MANILA, and JUAN NOLASCO, as Mayor of the City of Manila, defendants-appellees.

FACTS:

The City of Manila enacted Ordinance No. 2958 which imposed a fee on the price of every
admission ticket sold by cinematographs, theaters vaudeville companies theatrical shows and
boxing exhibition, in addition to the fees imposed under the Revised Ordinance of the City of Manila.

Eastern Theatrical and eleven (11) other affected corporations filed a complaint sought the nullity of
the ordinance, alleging that it violated the Constitution particularly the provision regarding the
uniformity and equality of taxation.

ISSUE: Whether or not Ordinance No. 2958 violated the principle of equality and uniformity of
taxation

HELD:

No. 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 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.
16. G.R. No. 163583 August 20, 2008

BRITISH AMERICAN TOBACCO, petitioner,

vs.
JOSE ISIDRO N. CAMACHO, in his capacity as Secretary of the Department of Finance and
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal
Revenue, respondents.
Philip Morris Philippines Manufacturing, Inc., fortune tobacco, corp., MIGHTY
CORPORATION, and JT InTERNATIONAL, S.A., respondents-in-intervention.

FACTS:

RA 8240 and RA 8424 were both enacted on 1997, amending some of the provisions of the National
Internal Revenue Code (NIRC). Among the amendments is the renumbering of Section 142 as Sec
145. Under Section 145, new brands of cigarettes shall be taxed according to their current net retail
price while existing or "old" brands shall be taxed based on their net retail price as of October 1,
1996. The Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 1-97, which classified
the cigarettes as “Old Brands”, or those duly registered or active brands prior to January 1, 1997 and
“New brands”, or those registered afterwards.

In June 2001, the British American Tobacco (BAT) introduced into the market their Lucky Strike
brand. Subsequently, the BIR issued revenue regulations that revised tax classification of certain
new brands introduced in the market after January 1, 1997, based on the survey of their current net
retail price. Because of this, the Lucky Strike Brand were assessed additional taxes. Thus, BAT filed
a petition with the RTC of Makati to enjoin the implementation of Section 145 of the NIRC, Revenue
Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order No. 6-2003 on the
ground that they discriminate against new brands of cigarettes, in violation of the equal protection
and uniformity provisions of the Constitution.

ISSUE: whether or not the classification freeze provision violates the equal protection and uniformity
of taxation clauses of the Constitution.

HELD:

No. BAT did not clearly demonstrate the exact extent of such impact in the fairness of the playing
field in the industry. It has not been shown that the net retail prices of other older brands previously
classified under this classification system have already pierced their tax brackets, and, if so, how this
has affected the overall competition in the market. Further, it does not necessarily follow that newer
brands cannot compete against older brands because price is not the only factor in the market as
there are other factors like consumer preference, brand loyalty, etc. In other words, even if the newer
brands are priced higher due to the differential tax treatment, it does not mean that they cannot
compete in the market especially since cigarettes contain addictive ingredients so that a consumer
may be willing to pay a higher price for a particular brand solely due to its unique formulation. It may
also be noted that the BIR surveyed 29 new brands that were introduced in the market after the
effectivity of RA 8240, thus negating the sweeping generalization of petitioner that the classification
freeze provision has become an insurmountable barrier to the entry of new brands. Verily, where
there is a claim of breach of the due process and equal protection clauses, considering that they are
not fixed rules but rather broad standards, there is a need for proof of such persuasive character as
would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail.73
17. G.R. No. 164171 February 20, 2006

HON. EXECUTIVE SECRETARY, HON. SECRETARY OF THE DEPARTMENT OF

TRANSPORTATION AND COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS,
ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF
CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE PORT
ZONE, Petitioners,
vs.
SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON,
UNITED AUCTIONEERS, INC., represented by its President DOMINIC SYTIN, and MICROVAN,
INC., represented by its President MARIANO C. SONON, Respondents.

FACTS:

Southwing, United Auctioneers, Inc., and Microvan, Inc., instituted a declaratory relief case assailing
the validity and constitutionality of Article 2, Section 3.1 of Executive Order No. 156 (EO 156)
unconstitutional. Under the aforementioned provision is a prohibition on the importation into the
country, inclusive of the Special Economic and Freeport Zone or the Subic Bay Freeport (SBF or
Freeport), of used motor vehicles, subject to a few exceptions.

Upon filing of petitioners’ answer/comment, respondents Southwing and Microvan filed a motion for
summary judgment which was granted by the trial court. A Summary judgment was rendered
declaring that the assailed provision constitutes an unlawful usurpation of legislative power vested
by the Constitution with Congress.

ISSUE: Whether or not Article 2, Section 3.1 of EO 156 is constitutional.

HELD:

Police power is inherent in a government to enact laws, within constitutional limits, to promote the
order, safety, health, morals, and general welfare of society. It is lodged primarily with the legislature.
By virtue of a valid delegation of legislative power, it may also be exercised by the President and
administrative boards, as well as the lawmaking bodies on all municipal levels, including the
barangay. Such delegation confers upon the President quasi-legislative power which may be
defined as the authority delegated by the law-making body to the administrative body to adopt rules
and regulations intended to carry out the provisions of the law and implement legislative policy. To
be valid, an administrative issuance, such as an executive order, must comply with the following
requisites:

(1) Its promulgation must be authorized by the legislature;

(2) It must be promulgated in accordance with the prescribed procedure;

(3) It must be within the scope of the authority given by the legislature; and

(4) It must be reasonable.

There was a valid delegation of police power to the President when she issued EO 156. However, it
failed to meet the prescribed procedure for its promulgation. While the subject matter of the laws
authorizing the President to regulate or forbid importation of used motor vehicles, is the domestic
industry. EO 156, however, exceeded the scope of its application by extending the prohibition on
the importation of used cars to the Freeport. There is no doubt that the issuance of the ban to protect
the domestic industry is a reasonable exercise of police power. The problem, however, lies with
respect to the application of the importation ban to the Freeport. The Court finds no logic in the all
encompassing application of the assailed provision to the Freeport which is outside the customs
territory. As long as the used motor vehicles do not enter the customs territory, the injury or harm
sought to be prevented or remedied will not arise. The application of the law should be consistent
with the purpose of and reason for the law.

The provision is declared VALID insofar as it applies to the Philippine territory outside the presently
fenced-in former Subic Naval Base area and VOID with respect to its application to the secured
fenced-in former Subic Naval Base area.
18. G. R. No. 119775 October 24, 2003

JOHN HAY PEOPLES ALTERNATIVE COALITION, MATEO CARIÑO FOUNDATION INC.,

CENTER FOR ALTERNATIVE SYSTEMS FOUNDATION INC., REGINA VICTORIA A. BENAFIN
REPRESENTED AND JOINED BY HER MOTHER MRS. ELISA BENAFIN, IZABEL M. LUYK
REPRESENTED AND JOINED BY HER MOTHER MRS. REBECCA MOLINA LUYK, KATHERINE
PE REPRESENTED AND JOINED BY HER MOTHER ROSEMARIE G. PE, SOLEDAD S.
CAMILO, ALICIA C. PACALSO ALIAS "KEVAB," BETTY I. STRASSER, RUBY C. GIRON,
URSULA C. PEREZ ALIAS "BA-YAY," EDILBERTO T. CLARAVALL, CARMEN CAROMINA,
LILIA G. YARANON, DIANE MONDOC, Petitioners,
vs.
VICTOR LIM, PRESIDENT, BASES CONVERSION DEVELOPMENT AUTHORITY; JOHN HAY
PORO POINT DEVELOPMENT CORPORATION, CITY OF BAGUIO, TUNTEX (B.V.I.) CO. LTD.,
ASIAWORLD INTERNATIONALE GROUP, INC., DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES,Respondents.

FACTS:

The enactment of RA 7227 or the Bases Conversion and Development Act of 1992 which created
the Subic Special Economic Zone (SEZ) and granted it incentives ranging from tax and duty-free
importations, exemption of businesses therein from local and national taxes, to other hallmarks of a
liberalized financial and business climate. The Act likewise created the Bases Conversion and
Development Authority (BCDA) to oversee the objective of utilizing the base areas in accordance
with the declared government policy.

With its powers, the BCDA entered into a joint venture with corporations to develop Poro Point in La
Union and Camp John Hay as tourist destinations. This was opposed by the Baguio City
Government. However, after some negotiations, the City Government passed a resolution seeking
and supporting, subject to its concurrence, the issuance by then President Ramos of a presidential
proclamation declaring an area of the camp as a SEZ. Sometime later, the President issued
Proclamation 420.

ISSUE: Whether or not Proclamation No. 420 is constitutional by providing for national and local tax
exemption within and granting other economic incentives to the John Hay Special Economic Zone

HELD:

Section 12 of R.A. No. 7227 made it clear that it is only the Subic SEZ which was granted by
Congress with tax exemption, investment incentives and the like. There is no express extension of
the aforesaid benefits to other SEZs still to be created at the time via presidential proclamation.

The nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless
limited by a provision of the state constitution that has full power to exempt any person or
corporation or class of property from taxation, its power to exempt being as broad as its power to
tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local
governments may pass ordinances on exemption only from local taxes. The challenged grant of tax
exemption would circumvent the Constitution's imposition that a law granting any tax exemption
must have the concurrence of a majority of all the members of Congress.

If it were the intent of the legislature to grant to the John Hay SEZ the same tax exemption and
incentives given to the Subic SEZ, it would have so expressly provided in the R.A. No. 7227. As
such, the Supreme Court then declared that the grant by Proclamation No. 420 of tax exemption and
other privileges to the John Hay SEZ is void for being violative of the Constitution.
19. G.R. No. L-69259 January 26, 1988

DELPHER TRADES CORPORATION, and DELPHIN PACHECO, petitioners,

vs.
INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES, INC., respondents.

FACTS:

Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of a lot in Polo (now Valenzuela).
They leased the property to Construction Components International Inc. (CCII) along with the terms
providing the latter the right of first refusal should the property be sold. Sometime later, CCII
assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines,
Inc. with the signed conformity and consent of Delfin and Pelagia

In 1976, a deed of exchange was executed between Delfin and Pelagia and Delpher Trades
Corporation whereby the former conveyed to the latter the leased property together with another
parcel of land for 2,500 shares of stock of Delpher Trades. On the ground that it was not given the
first option to buy the leased property pursuant to the proviso in the lease agreement, Hydro Pipes,
filed an amended complaint for reconveyance of the property in its favor under conditions similar to
those whereby Delpher Trades Corporation acquired the property from Pelagia and Delphin.

ISSUE: Whether or not the Pachecos committed tax evasion.

HELD:

No. By investing their properties and changing the nature of their ownership from unincorporated to
incorporated form by organizing Delpher Trades Corporation, the Pachecos took the control of their
properties and at the same time saved on inheritance taxes.

The records do not point to anything wrong or objectionable about this "estate planning" scheme
resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what
otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be
doubted.
20. G.R. No. 119176 March 19, 2002

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMA LIFE
INSURANCE COMPANY, INC.) and THE COURT OF APPEALS, respondents.

FACTS:

Lincoln Philippine Life Insurance Co., Inc., is engaged in life insurance business. It issued a life
insurance policy known as the "Junior Estate Builder Policy," that provides for an automatic increase
in the amount of life insurance coverage upon attainment of a certain age by the insured without the
need of issuing a new policy. It also issued shares of stock dividends, the actual value of which is
represented by its book value. Documentary stamp taxes for the policy and the shares were paid by
Lincoln only on the initial sum assured and on the par value respectively.

The CIR issued deficiency documentary stamps tax assessment for both the policy and the stock
dividends. Lincoln questioned the deficiency assessments and sought their cancellation in a petition
filed in the CTA who found no valid basis for the assessment. The CIR appealed the CTA’s decision
to the CA. The CA affirmed the CTA’s decision on the insurance policy, but reversing the same with
regard to the stock dividends.

ISSUE: Whether or not private respondent is liable for additional tax for the automatic increase
clause in the insurance policy.

HELD:

Yes. The subject insurance policy at the time it was issued contained an "automatic increase
clause." Although the clause was to take effect only in 1984, it was written into the policy at the time
of its issuance. The distinctive feature of the "junior estate builder policy" called the "automatic
increase clause" already formed part and parcel of the insurance contract, hence, there was no need
for an execution of a separate agreement for the increase in the coverage that took effect in 1984
when the assured reached a certain age.

It is clear from Section 173 that the payment of documentary stamp taxes is done at the time the act
is done or transaction had and the tax base for the computation of documentary stamp taxes on life
insurance policies under Section 183 is the amount fixed in policy, unless the interest of a person
insured is susceptible of exact pecuniary measurement. The deficiency of documentary stamp tax
imposed on private respondent is definitely not on the amount of the original insurance coverage, but
on the increase of the amount insured upon the effectivity of the "Junior Estate Builder Policy.
21. G.R. No. 147188 September 14, 2004

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
THE ESTATE OF BENIGNO P. TODA, JR., Represented by Special Co-administrators Lorna
Kapunan and Mario Luza Bautista, respondents.

FACTS:

The Cibeles Insurance Corporation (CIC), a corporation wholly owned by Benigno P. Toba, Jr., sold
a building erected on two parcels of land, to Rafael Altonaga who in turn sold it to who, in turn, sold
the same property on the same day to Royal Match Inc. (RMI) for ₱200 million. These two
transactions were evidenced by Deeds of Absolute Sale notarized on the same day by the same
notary public. Capital gains taxes for these sales were paid separately by CIC and Altonaga. Toba
would then sell his entire share in CIC. Three years and half years thereafter, Toba died.

The BIR sent a notice of assessment and a demand letter to CIC for delinquency income taxes. The
new owners of CIC asserted that the assessment should be addressed to its previous stockholders.
Thus, the BIR sent the assessment to the Estate of the Benigno P. Toda, Jr. The estate filed a
protest which was dismissed by the CIR. The CIR claimed that a fraudulent scheme was deliberately
perpetuated by the CIC wholly owned and controlled by Toda by covering up the additional gain of
₱100 million when the property was sold, which resulted in the change in the income structure of the
proceeds of the sale of the two parcels of land and the building thereon to an individual capital gains,
thus evading the higher corporate income tax rate of 35%.

The Estate filed a petition for review with the CTA where it alleged that that the inference of fraud of
the sale of the properties is unreasonable and unsupported. The CIR argued that the two
transactions actually constituted a single sale of the property by CIC to RMI, and that the sale to
Altonaga was mere simulated so that CIC can pay a reduced tax.

ISSUE: Whether or not the tax planning scheme adopted by a corporation constitutes tax evasion.

HELD:

Yes. Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the
payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it
is shown that a tax is due; (2) an accompanying state of mind which is described as being "evil," in
"bad faith," "willfull," or "deliberate and not accidental"; and (3) a course of action or failure of action
which is unlawful.

It is obvious that the objective of the sale to Altonaga was to reduce the amount of tax to be paid
especially that the transfer from him to RMI would then subject the income to only 5% individual
capital gains tax, and not the 35% corporate income tax. Altonaga’s sole purpose of acquiring and
transferring title of the subject properties on the same day was to create a tax shelter. Altonaga
never controlled the property and did not enjoy the normal benefits and burdens of ownership. The
sale to him was merely a tax ploy, a sham, and without business purpose and economic substance.
Doubtless, the execution of the two sales was calculated to mislead the BIR with the end in view of
reducing the consequent income tax liability. lavvphi 1.

In a nutshell, the intermediary transaction, i.e., the sale of Altonaga, which was prompted more on
the mitigation of tax liabilities than for legitimate business purposes constitutes one of tax evasion.
22. G.R. No. 167260 February 27, 2009

The CITY OF ILOILO, Mr. ROMEO V. MANIKAN, in his capacity as the Treasurer of Iloilo
City, Petitioners,
vs.
SMART COMMUNICATIONS, INC. (SMART) Respondent.

FACTS:

SMART received a letter of assessment from the City of Iloilo requiring it to pay deficiency local
franchise and business taxes plus interests and surcharges. SMART protested the assessment. It
claimed exemption from the taxes based on Section 9 of its legislative franchise under R.A. No.
7294. Under SMART’s franchise, it was required to pay a franchise tax in lieu of all taxes, which it
believed covers local franchise and business taxes. It also invoked R.A. No. 7925 whose Section 23
declares that any existing privilege, incentive, advantage, or exemption granted under existing
franchises shall ipso facto become part of previously granted-telecommunications franchise.

The City of Iloilo denied SMART’s protest, citing the failure of SMART to comply with Section 252 of
Local Government Code (LGC) which requires payment of the tax before any protest against the tax
assessment can be made.

ISSUE: Whether or not SMART is exempt from the payment of local franchise and business taxes.

HELD:

No. The right of taxation is inherent in the State. It is a prerogative essential to the perpetuity of the
government; and he who claims an exemption from the common burden, must justify his claim by
the clearest grant of organic or statute law. When exemption is claimed, it must be shown indubitably
to exist.

R.A. No 7294 does not expressly provide what kind of taxes SMART is exempted from. It is not clear
whether the "in lieu of all taxes" provision in the franchise of SMART would include exemption from
local or national taxation. What is clear is that SMART shall pay franchise tax equivalent to three
percent (3%) of all gross receipts of the business transacted under its franchise. But whether the
franchise tax exemption would include exemption from exactions by both the local and the national
government is not unequivocal.

The uncertainty in the "in lieu of all taxes" clause in R.A. No. 7294 on whether SMART is exempted
from both local and national franchise tax must be construed strictly against SMART which claims
the exemption.
23. G.R. No. 171470 January 30, 2009

NATIONAL POWER CORPORATION, Petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA), LOCAL BOARD OF ASSESSMENT
APPEALS (LBAA) OF LA UNION, PROVINCIAL TREASURER, LA UNION and MUNICIPAL
ASSESSOR OF BAUANG, LA UNION, Respondents.

FACTS:

First Private Power Corporation (FPPC) entered into a BOT agreement with NAPOCOR for the
construction of a power plant in Bauang, La Union which also led to the creation of the Bauang
Private Power Corporation (BPPC) that will own, manage and operate the power plant/station, and
assume and perform FPPC’s obligations under the BOT agreement. Included in the BOT agreement
is a provision wherein NAPOCOR shall be responsible for the payment of all real estate taxes and
assessments, rates, and other charges in respect of the Site and the buildings and improvements
thereon.

BPPC’s machineries and equipment were initially classified as tax-exempt. However, the
classification was overturned and BPPC was issued a notice of assessment and tax bill. NAPOCOR
filed a petition claiming that the exemption should stand, citing Section 234 of the Local Government
Code.

ISSUE: whether or not the machineries and equipment are actually, directly, and exclusively used by
NAPOCOR in the generation and transmission of electric power, and are therefore not subject to tax.

HELD:

NAPOCOR’s basis for its claimed exemption – Section 234(c) of the LGC – is clear and not at all
ambiguous in its terms. Exempt from real property taxation are: (a) all machineries and equipment;
(b) [that are] actually, directly, and exclusively used by; (c) [local water districts and] government-
owned or –controlled corporations engaged in the [supply and distribution of water and/or]
generation and transmission of electric power.

As in a previous ruling by the Supreme Court, it could not recognize the tax exemption claimed,
since NAPOCOR was not the actual, direct and exclusive user of the barge as required by Sec. 234
(c). Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception. The law does not look with favor on tax exemptions and the entity that would seek to be
thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.
24. G.R. No. 184145 December 11, 2013

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
DASH ENGINEERING PHILIPPINES, INC., Respondent.

FACTS:

Dash Engineering Philippines, Inc. (DEPI) filed its monthly and quarterly value-added tax (VAT)
returns January 1, 2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund
for unutilized input VAT attributable to its zero-rated sales. Because the CIR failed to act upon the
said claim, DEPI was compelled to file a petition for review with the CTA on May 5, 2005.

The CTA second division partially granted DEPI’s claim for refund or issuance of a tax credit
certificate but for a reduced amount. The CIR moved for reconsideration but the same was denied.
Aggrieved, the CIR elevated the case to the CTA En Banc; however, the latter upheld the decision of
the CTA second division. The CIR’s motion for reconsideration was denied.

ISSUE: Whether or not DEPI is entitled to a tax refund.

HELD:

No. The Court has held time and again that taxes are the lifeblood of the government and,
consequently, tax laws must be faithfully and strictly implemented as they are not intended to be
liberally construed. Hence, We are left with no other recourse but to deny respondent's judicial claim
for refund for non-compliance with the provisions of Section 112 of the NIRC.

Although respondent filed its administrative claim with the BIR before the expiration of the two-year
period in Section l 12(A), it undoubtedly failed to comply with the 120+ 30-day period in Section l l
2(D) (now subparagraph C) which requires that upon the inaction of the CIR for 120 days after the
submission of the documents in support of the claim, the taxpayer has to file its judicial claim within
30 days after the lapse of the said period. The 120 days granted to the CIR to decide the case
ended on December 7, 2004. Thus, DEPI had 30 days therefrom, or until January 6, 2005, to file a
petition for review with the CTA. Unfortunately, DEPI only sought judicial relief on May 5, 2005 when
it belatedly filed its petition to the CT A, despite having had ample time to file the same, almost four
months after the period allowed by law. As a consequence of DEPI's late filing, the CTA did not
properly acquire jurisdiction over the claim.
25. G.R. No. 197117 April 10, 2013

FIRST LEPANTO TAISHO INSURANCE CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS:

After submitting its corporate income tax return for taxable year ending December 31, 1997, First
Lepanto received a Letter of Authority from the CIR to allow it to examine their books of account and
other accounting records. CIR issued internal revenue tax assessments for deficiency income,
withholding, expanded withholding, final withholding, value-added, and documentary stamp taxes for
taxable year 1997.

First Lepanto protested the tax assessments. The CTA Second Division partially granted the petition
by directing First Lepanto to pay CIR a reduced tax liability. First Lepanto’s Motion for Partial
Reconsideration was likewise denied by the CTA Second Division. Unsatisfied, First Lepanto filed a
Petition for Review before the CTA En Banc who affirmed the decision of the CTA Second Division.

ISSUE: Whether or not First Lepanto is liable to pay the deficiency taxes.

HELD:

Yes. It is worthy to note that tax revenue statutes are not generally intended to be liberally
construed. Moreover, the CTA being a highly specialized court particularly created for the purpose of
reviewing tax and customs cases, it is settled that its findings and conclusions are accorded great
respect and are generally upheld by this Court, unless there is a clear showing of a reversible error
or an improvident exercise of authority. Absent such errors, the challenged decision should be
maintained.
26. G.R. No. 134062 April 17, 2007

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS, Respondent.

FACTS:

In two notices dated October 28, 1988, the CIR assessed the Bank of the Philippine Islands’ (BPI’s)
deficiency percentage and documentary stamp taxes for the year 1986. BPI questioned the propriety
of the assessments since it was not informed about them, denying it the opportunity to make an
intelligent decision as to whether to pay or to protest the assessment.

The issue reached the Court of Tax Appeals which dismissed the case for lack of jurisdiction since
the subject assessments had become final and unappealable. The CTA ruled that BPI failed to
protest on time under Section 270 of the National Internal Revenue Code (NIRC) of 1986 and
Section 7 in relation to Section 11 of RA 1125.

ISSUE:

1) whether or not the assessments issued to BPI for deficiency percentage and documentary stamp
taxes for 1986 had already become final and unappealable and

2) whether or not BPI was liable for the said taxes.

HELD:

1. Yes. BPI’s failure to protest the assessments within the 30-day period provided in the former
Section 270 meant that they became final and unappealable. Thus, the CTA correctly dismissed
BPI’s appeal for lack of jurisdiction. BPI was, from then on, barred from disputing the correctness of
the assessments or invoking any defense that would reopen the question of its liability on the
merits.37 Not only that. There arose a presumption of correctness when BPI failed to protest the
assessments

2. Yes. Taxes are the lifeblood of the government, for without taxes, the government can neither
exist nor endure. 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.

The Court realized that these assessments involve a considerable amount of money. The state will
be deprived of the taxes validly due it and the public will suffer if taxpayers will not be held liable for
the proper taxes assessed against them.
27. G.R. No. L-22734 September 15, 1967

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.

FACTS:

After the proceedings for the Estate of Atanasio Pineda were closed, the BIR investigated the
income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the
corresponding income tax returns were not filed. The CIR made an assessment on the deficiency
income tax, residence tax and real estate dealer’s tax. The assessment was received by Manuel
Pineda who contested the same. Subsequently, he appealed to the Court of Tax Appeals alleging
that he was appealing only that proportionate part or portion pertaining to him as one of the heirs.

ISSUE: Whether or not the Government can require Manuel Pineda to pay the full amount of the
taxes assessed.

HELD:

We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes
assessed.

The Government has two ways of collecting the tax 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.
The reason why in case suit is filed against all the heirs the tax due from the estate is levied
proportionately against them is to achieve thereby two results: first, payment of the tax; and second,
adjustment of the shares of each heir in the distributed estate as lessened by the tax.

Another remedy 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. This second remedy is the very avenue the
Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to
collect the tax as may be envisioned in the particular provision of the Tax Code above quoted,
because taxes are the lifeblood of government and their prompt and certain availability is an
imperious need.7 And as afore-stated in this case the suit seeks to achieve only one objective:
payment of the tax. The adjustment of the respective shares due to the heirs from the inheritance, as
lessened by the tax, is left to await the suit for contribution by the heir from whom the Government
recovered said tax.
28. G.R. No. L-31364 March 30, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional

Director, Revenue Region No. 14, Bureau of Internal Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental,
Branch V, and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D.
TONGOY respondents.

FACTS:

A Motion for allowance of claim and for payment of taxes, representing indebtedness to the
Government of the late Luis D. Tongoy for deficiency income taxes, was filed. The Administrator
opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the
Rules of Court. Finding the opposition well-founded, respondent Judge Fernandez, dismissed the
motion for allowance of claim filed by the Regional Director of the BIR.

ISSUE: Whether or not the statute of non-claims bars claim of the government for unpaid taxes

HELD:

No. Section 5, Rule 86 of the Rules of Court makes no mention of claims for monetary obligation of
the decedent created by law, such as taxes which is entirely of different character from the claims
expressly enumerated therein.

The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form
of exception from the application of the statute of non-claims is that Taxes are the lifeblood of the
Government and their prompt and certain availability are imperious need. Upon taxation depends the
Government ability to serve the people for whose benefit taxes are collected. To safeguard such
interest, neglect or omission of government officials entrusted with the collection of taxes should not
be allowed to bring harm or detriment to the people, in the same manner as private persons may be
made to suffer individually on account of his own negligence, the presumption being that they take
good care of their personal affairs. This should not hold true to government officials with respect to
matters not of their own personal concern. This is the philosophy behind the government's
exception, as a general rule, from the operation of the principle of estoppel.
29. G.R. No. 106611 July 21, 1994

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF APPEALS, CITYTRUST BANKING CORPORATION and COURT OF TAX
APPEALS, respondents.

FACTS:

Citytrust filed a petition with the CTA claiming the refund of its income tax overpayments for the
years 1983, 1984 and 1985 in the total amount of P19,971,745.00. The case was submitted for
decision based solely on the pleadings and evidence submitted by Citytrust. The CIR could not
present any evidence by reason of the repeated failure of the Tax Credit/Refund Division of the BIR
to transmit the records of the case, as well as the investigation report thereon, to the Solicitor
General. The CTA granted Citytrust’s petition and ordered the BIR to refund Citytrust the amount of
P13,314,506.14.

ISSUE: Whether or not the claim for tax refund should be granted on the basis of the BIR’s failure to
present evidence.

HELD:

No. It is a long and firmly settled rule of law that the Government is not bound by the errors
committed by its agents. In the performance of its governmental functions, the State cannot be
estopped by the neglect of its agent and officers. Although the Government may generally be
estopped through the affirmative acts of public officers acting within their authority, their neglect or
omission of public duties as exemplified in this case will not and should not produce that effect.

It is axiomatic that the Government cannot and must not be estopped particularly in matters involving
taxes. Taxes are the lifeblood of the nation through which the government agencies continue to
operate and with which the State effects its functions for the welfare of its constituents. The errors of
certain administrative officers should never be allowed to jeopardize the Government's financial
position, especially in the case at bar where the amount involves millions of pesos the collection
whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy.
30. G.R. No. 120880 June 5, 1997

FERDINAND R. MARCOS II, petitioner,

vs.
COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and
HERMINIA D. DE GUZMAN, respondents.

FACTS:

Marcos II filed a petition with the Court of Appeals (CA), questioning the actuations of the 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 father, despite the pendency of the
proceedings on probate of the will of the late president. The CA ruled that the assessments have
already become final and unappealable, and may thus be enforced by the summary remedy of
levying upon the properties of the late President, as was done by the CIR.

ISSUE: Whether or not the BIR has the authority to collect the taxes without the approval of the
court sitting in probate.

HELD:

Yes. The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not
a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax
Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late
President, on the ground that it was required to seek first the probate court's sanction.

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.
31. G.R. Nos. L-49839-46 April 26, 1991

JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,

vs.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in their capacities as appointed
and Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H.
NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed
and Acting Members of the BOARD OF ASSESSMENT APPEALS of Manila; and NICOLAS
CATIIL in his capacity as City Assessor of Manila,respondents.

FACTS:

Jose, Edmundo and Milagros Reyes owned parcels of land which are leased and entirely occupied
as dwelling sites by tenants at P300.00 monthly. Sometime in 1971, the Rental Freezing Law was
passed, which prohibited an increase in monthly rentals of dwelling units or of lands on which
another's dwelling is located, where such rentals do not exceed P300.00 a month one year from its
effectivity. Thus, the Reyeses, were precluded from raising the rentals and from ejecting the tenants.

In 1973, the City Assessor of Manila re-classified and reassessed the value of the subject properties
based on the schedule of market values which entailed an increase in the corresponding tax rates.
This prompted petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment
Appeals claiming that the reassessments made were "excessive, unwarranted, inequitable,
confiscatory and unconstitutional." The Board of Tax Assessment Appeals, however, considered the
assessments valid.

ISSUE: Whether or not the method used in the tax assessment is reasonable.

HELD:

No. The taxing power has the authority to make a reasonable and natural classification for purposes
of taxation but the government's act must not be prompted by a spirit of hostility, or at the very least
discrimination that finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different both in the privileges conferred and the liabilities imposed.

Verily, taxes are the lifeblood of the government and so 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 taxations, which
is the promotion of the common good, may be achieved. Consequently, it stands to reason that
petitioners who are burdened by the government by its Rental Freezing Laws under the principle of
social justice should not now be penalized by the same government by the imposition of excessive
taxes petitioners can ill afford and eventually result in the forfeiture of their properties.
32. G.R. No. 112024 January 28, 1999

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF
APPEALS, respondent.

FACTS:

PBCom filed its first and second quarter income tax returns, reported profits, and paid income taxes
amounting to P5.2M in 1985. However, at the end of the year PBCom suffered losses so that when it
filed its Annual Income Tax Returns for the year-ended December 31, 1986, it likewise reported a
net loss of P14.1 M, and thus declared no tax payable for the year. In 1988, the bank requested from
CIR for a tax credit and tax refunds representing overpayment of taxes. Pending investigation of the
respondent CIR, petitioner instituted a Petition for Review before the CTA. The CTA denied its
petition for tax credit and refund for failing to file within the prescriptive period to which the petitioner
belies arguing the Revenue Circular No.7-85 issued by the CIR itself states that claim for overpaid
taxes are not covered by the two-year prescriptive period mandated under the Tax Code.

ISSUE:

a) Whether or not Revenue Regulations No. 7-85 which alters the reglementary period from two (2)
years to ten (10) years is valid.

b) Whether or not the petition for tax refund had already prescribed.

HELD:

a) No. It bears repeating that Revenue memorandum-circulars are considered administrative rulings
(in the sense of more specific and less general interpretations of tax laws) which are issued from
time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation
placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great
respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if
judicially found to be erroneous. Thus, courts will not countenance administrative issuances that
override, instead of remaining consistent and in harmony with, the law they seek to apply and
implement.

b) Since the petition had been filed beyond the prescriptive period, the same has already prescribed.
The fact that the final adjusted return shows an excess tax credit does not automatically entitle
taxpayer claim for refund without any express intent.
33. G.R. No. L-22074 April 30, 1965

THE PHILIPPINE GUARANTY CO., INC., petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS, respondents.

FACTS:

The Philippine Guaranty Co., Inc. entered into reinsurance contracts with foreign insurance
companies not doing business in the Philippines thereby agreeing to cede to the foreign reinsurers a
portion of the premiums on insurance it has originally underwritten in the Philippines, in
consideration for the assumption by the latter of liability on an equivalent portion of the risks insured.

Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it filed its
income tax returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them.
Consequently, the CIR assessed against Philippine Guaranty Co., Inc. withholding tax on the ceded
reinsurance premiums. Philippine Guaranty Co., Inc., protested the assessment on the ground that
reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines are not
subject to withholding tax.

ISSUE: Whether or not insurance companies are required to withhold tax on reinsurance premiums
ceded to foreign insurance companies, which deprives the government from collecting the tax due
from them.

HELD:

Yes. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a
necessary burden to preserve the State's sovereignty. Considering that the reinsurance premiums in
question were afforded protection by the government and the recipient foreign reinsurers exercised
rights and privileges guaranteed by our laws, such reinsurance premiums and reinsurers should
share the burden of maintaining the state.

The defense of the petitioner in its reliance in good faith on the rulings of the CIR requiring no
withholding of the tax due on the reinsurance premiums the petitioner may free if from the payment
of surcharges or penalties imposed for failure to pay the corresponding withholding tax, but it
certainly would not exculpate if from liability to pay such withholding tax The Government is not
estopped from collecting taxes by the mistakes or errors of its agents.
34. G.R. No. 125704 August 28, 1998

PHILEX MINING CORPORATION, petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, COURT OF APPEALS, and THE COURT OF TAX
APPEALS, respondents.

FACTS:

The BIR sent a letter to Philex asking it to settle its tax liabilities in the total amount of
P123,821.982.52. Philex protested the demand for payment of the tax liabilities stating that it has
pending claims for VAT input credit/refund which should be applied against the tax liabilities. The
BIR reiterated its demand, claiming that no legal compensation can take place.

Philex raised the issue to the CTA which ordered Philex to pay a reduced amount of the obligation
while ruling that a tax obligation cannot be subject to compensation. The ruling was appealed with
the CA which affirmed tha CTA’s decision. Philex’s motion for reconsideration was likewise denied.
However, Philex was able to obtain its VAT input credit/refund which it argued can now be used to
compensate its obligations.

ISSUE: Whether or not Philex may set-off its VAT input credit/refund against its tax obligations.

HELD:

No. Philex's 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. Evidently, to
countenance Philex's whimsical reason would render ineffective our tax collection system. Too
simplistic, it finds no support in law or in jurisprudence.

Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it has a
pending tax claim for refund or credit against the government which has not yet been granted. It
must be noted that a tax does not depend upon the consent of the taxpayer. If any taxpayer can
defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit,
this would adversely affect the government revenue system. 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.
35. G.R. No. L-12353 September 30, 1960

NORTH CAMARINES LUMBER CO., INC., petitioner,

vs.
COLLECTOR OF INTERNAL REVENUE, respondent.

FACTS:

The petitioner sold logs to General Lumber Co. with the agreement that the latter would pay the
sales taxes. The Collector, upon consultation officially advised the parties that the bureau interposes
no objection so long as the tax due shall be covered by a surety. General Lumber complied, but later
failed, with the surety, to pay the tax liabilities, and so the Collector required the petitioner to pay the
aforementioned liabilities. Twice did the petitioner file a request for reconsideration before finally
submitting the denied request for appeal before the Court of Tax Appeals. The CTA dismissed the
appeal as it was clearly filed out of time. Petitioner argued that in computing the 30-day period in
perfecting the appeal the letter of the Collector dated January 30, 1956, denying the second request
for reconsideration, should be considered as the final decision contemplated in Section 7, and not
the letter of demand dated August 30, 1955.

ISSUE: Whether or not the petitioner’s contention is tenable.

HELD:

No. This contention is untenable. We cannot countenance that theory that would make the
commencement of the statutory 30-day period solely dependent on the will of the taxpayer and place
the latter in a position to put off indefinitely and at his convenience the finality of a tax assessment.
Such an absurd procedure would be detrimental to the interest of the Government, for "taxes are the
lifeblood of the government, and their prompt and certain availability an imperious need.
36. G.R. No. L-7859 December 22, 1955

WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio
Jayme Ledesma,plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.

FACTS:

Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme
Ledesma, sought to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by
the estate as taxes, under Commonwealth Act No. 567. He assailed the constitutionality of the tax
which was levied exclusively for the aid and support of the sugar industry and not for a public
purpose.

ISSUE: Whether or not Commonwealth Act No. 567 is constitutional.

HELD:

Yes. The protection and promotion of the sugar industry is a matter of public concern, it follows that
the Legislature may determine within reasonable bounds what is necessary for its protection and
expedient for its promotion. Here, the legislative discretion must be allowed fully play, subject only to
the test of reasonableness; and it is not contended that the means provided in section 6 of CA No.
567 bear no relation to the objective pursued or are oppressive in character. If objective and
methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise
funds for their prosecution and attainment. Taxation may be made the implement of the state's police
power
37. G.R. No. L-23645 October 29, 1968

BENJAMIN P. GOMEZ, petitioner-appellee,

vs.
ENRICO PALOMAR, in his capacity as Postmaster General, HON. BRIGIDO R. VALENCIA, in
his capacity as Secretary of Public Works and Communications, and DOMINGO GOPEZ, in
his capacity as Acting Postmaster of San Fernando, Pampanga, respondent-appellants.

FACTS:

Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando, Pampanga. It did not
bear the special anti-TB stamp required by the RA 1635. It was returned to the petitioner. Petitioner
now assails the constitutionality of the statute claiming that RA 1635 otherwise known as the Anti-TB
Stamp law is violative of the equal protection clause because it constitutes mail users into a class for
the purpose of the tax while leaving untaxed the rest of the population and that even among postal
patrons the statute discriminatorily grants exemptions. The law in question requires an additional 5
centavo stamp for every mail being posted, and no mail shall be delivered unless bearing the said
stamp.

ISSUE: Whether or not RA 1635 is unconstitutional for being allegedly violative of the equal
protection clause.

HELD:

No. It is settled that the legislature has the inherent power to select the subjects of taxation and to
grant exemptions. This power has aptly been described as "of wide range and flexibility." Indeed, it is
said that in the field of taxation, more than in other areas, the legislature possesses the greatest
freedom in classification. The reason for this is that traditionally, classification has been a device for
fitting tax programs to local needs and usages in order to achieve an equitable distribution of the tax
burden.

The classification of mail users is based on the ability to pay, the enjoyment of a privilege and on
administrative convenience. Tax exemptions have never been thought of as raising revenues under
the equal protection clause.
38. G.R. No. L-4817 May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,

vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.

FACTS:

The plaintiffs, all professionals, sought the annulment of Ordinance No.3398 of the City of Manila
which imposed a municipal occupation tax on persons exercising various professions in the city and
penalize non-payment of the tax. The lower court upheld the validity of the provision of law
authorizing the enactment of the ordinance but declared the ordinance itself illegal and void on the
ground that the penalty there in provided for non-payment of the tax was not legally authorized.

Both parties appealed to the Supreme Court where the plaintiffs contend that this ordinance and the
law authorizing it constitute class legislation, are unjust and oppressive, and authorize what amounts
to double taxation. Plaintiffs added that the law withheld that authority from other chartered cities, not
to mention municipalities.

ISSUE: Whether or not Court can determine which political unit should impose taxes and which
should not?

HELD:

No. It is not for the courts to judge what particular cities or municipalities should be empowered to
impose occupation taxes in addition to those imposed by the National Government. That matter is
peculiarly within the domain of the political departments and the courts would do well not to
encroach upon it.
39. G.R. No. L-75697 June 18, 1987

VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION,
CITY MAYOR and CITY TREASURER OF MANILA, respondents.

FACTS:

Tio filed a petition assailing the constitutionality of Presidential Decree No. 1987 (P.D. No. 1987)
which imposed a tax of 30% on the gross receipts. He further claimed that the tax was harsh,
confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of
the Constitution.

ISSUE: Whether or not P.D. No 1987 is unconstitutional.

HELD:

No. The power to impose taxes is one so unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest
in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature acts upon its
constituents. This is, in general, a sufficient security against erroneous and oppressive taxation.

The tax imposed by PD No. 1987 is not only a regulatory but also a revenue measure prompted by
the realization that earnings of videogram establishments have not been subjected to tax, thereby
depriving the Government of an additional source of revenue. It is a tax that is imposed uniformly on
all videogram operators.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes. And while it was also
an objective of the PD No. 1987 to protect the movie industry, the tax remains a valid imposition.
40. G.R. No. L-24756 October 31, 1968

CITY OF BAGUIO, plaintiff-appellee,

vs.
FORTUNATO DE LEON, defendant-appellant.

FACTS:

The City of Baguio passed an ordinance imposing a license fee on any person, firm, entity or
corporation doing business in the City of Baguio. The source of authority for the challenged
ordinance is supplied by Republic Act No. 329, amending the city charter of Baguio 2 empowering it
to fix the license fee and regulate "businesses, trades and occupations as may be established or
practiced in the City. The validity of the ordinance was assailed by de Leon after he was assessed
under the ordinance for the annual fee. He insists on not paying the fee, claiming that the city lacked
the jurisdiction to assess him of the obligation.

ISSUE: Whether or not the City of Baguio has the power to levy taxes.

HELD:

Yes. Republic Act No. 329 was enacted amending the charter of said city and adding to its power to
license the power to tax and to regulate. The amendment adverted to empower the city council not
only to impose a license fee but also to levy a tax for purposes of revenue. The city council of
Baguio, therefore, has now the power to tax, to license and to regulate provided that the subjects
affected be one of those included in the charter. In this sense, the ordinance under consideration
cannot be considered ultra vires whether its purpose be to levy a tax or impose a license fee. The
terminology used is of no consequence.
41. G.R. No. L-18125 May 31, 1963

BOARD OF ASSESSMENT APPEALS, PROVINCE OF LAGUNA, petitioner,

vs.
COURT OF TAX APPEALS and THE NATIONAL WATERWORKS AND SEWERAGE
AUTHORITY (NAWASA),respondents.

FACTS:

The NAWASA took over all the property of the former Metropolitan Water District and all the existing
local government-owned waterworks and sewerage systems all over the Philippines, including the
Cabuyao-Sta. Rosa-Biñan Waterworks System owned by the Province of Laguna, pursuant to
Republic Act No. 1383 which created NAWASA.

In the year 1956 the Provincial Assessor of Laguna assessed, for purposes of real estate taxes, the
property comprising the Cabuyao-Sta. Rosa-Biñan Waterworks System. NWSA protested, claiming
that the property are exempted from the payment of real estate taxes in view of the nature and kind
of said property and functions and activities of petitioner, as provided in Republic Act No. 1383. The
said protest was overruled on appeal before the herein respondent Board of Assessment Appeals.

ISSUE: whether or not the water pipes, reservoir, intake and buildings used NAWASA in the
operation of its waterworks system are subject to real estate tax.

HELD:

Republic Act No. 470 makes no distinction between property held in a sovereign, governmental or
political capacity and those possessed in a private, proprietary or patrimonial character. And where
the law does not distinguish neither may the Court, unless there are facts and circumstances clearly
showing that the lawmaker intended the contrary, but no such facts and circumstances have been
brought to the Court’s attention. Moreover, taxes are financial burdens imposed for the purpose of
raising revenues with which to defray the cost of the operation of the Government, and a tax on
property of the Government, whether national or local, would merely have the effect of taking money
from one pocket to put it in another pocket. Hence, it would not serve, in the final analysis, the main
purpose of taxation. What is more, it would tend to defeat it, on account of the paper work, time and
consequently, expenses it would entail.
42. G.R. No. L-22814 August 28, 1968

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD,
THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN, defendants-
appellees.

FACTS:

Pepsi-Cola sought to recover the sums paid by it under protest, to the City of Butuan, and collected
by the latter, pursuant to its Municipal Ordinance No. 110 which Pepsi-Cola assails as null and void
as it partakes of the nature of an import tax, which amounts to double taxation, highly unjust and
discriminatory, excessive, oppressive and confiscatory, and constitutes an invlaid delegation of the
power to tax. The ordinance imposes taxes for every case of softdrinks, liquors and other
carbonated beverages, regardless of the volume of sales, shipped to the agents and/or consignees
by outside dealers or any person or company having its actual business outside the City.

ISSUE: Whether or not the tax ordinance violate the uniformity requirement of taxation.

HELD:

Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the
sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the
uniformity required by the Constitution and the law therefor, since only sales by "agents or
consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or
on behalf of other merchants, regardless of the volume of their sales, and even if the same
exceeded those made by said agents or consignees of producers or merchants established outside
the City of Butuan, would be exempt from the disputed tax.

It is true that the uniformity essential to the valid exercise of the power of taxation does not require
identity or equality under all circumstances, or negate the authority to classify the objects of taxation.
The classification made in the exercise of this authority, to be valid, must, however, be reasonable
and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions
which make real differences; (2) these are germane to the purpose of the legislation or ordinance;
(3) the classification applies, not only to present conditions, but, also, to future conditions
substantially identical to those of the present; and (4) the classification applies equally to all those
who belong to the same class.
43. G.R. No. 166494 June 29, 2007

CARLOS SUPERDRUG CORP., doing business under the name and style "Carlos Superdrug,"
ELSIE M. CANO, doing business under the name and style "Advance Drug," Dr. SIMPLICIO L.
YAP, JR., doing business under the name and style "City Pharmacy," MELVIN S. DELA
SERNA, doing business under the name and style "Botica dela Serna," and LEYTE SERV-
WELL CORP., doing business under the name and style "Leyte Serv-Well
Drugstore," petitioners,
vs.
DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT (DSWD), DEPARTMENT OF
HEALTH (DOH), DEPARTMENT OF FINANCE (DOF), DEPARTMENT OF JUSTICE (DOJ), and
DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT (DILG), respondents.

FACTS:

Petitioners assail the validity of the tax deduction scheme as a reimbursement mechanism for the
twenty percent (20%) discount that they extend to senior citizens as provided for under the
Expanded Senior Citizens Act. Petitioners assert that Section 4(a) of the law is unconstitutional
because it constitutes deprivation of private property. Compelling drugstore owners and
establishments to grant the discount will result in a loss of profit and capital because 1) drugstores
impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to provide a
scheme whereby drugstores will be justly compensated for the discount.

ISSUE: whether or not the Expanded Senior Citizens Act is constitutional.

HELD:

Yes. The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to
nation-building, and to grant benefits and privileges to them for their improvement and well-being as
the State considers them an integral part of our society.

The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits. Accordingly, it has been described as "the most essential, insistent
and the least limitable of powers, extending as it does to all the great public needs." It is "[t]he power
vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same."

For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process,
must yield to general welfare.
44. G.R. No. L-34029 February 26, 1931

THE STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellant,

vs.
JUAN POSADAS, Jr., Collector of Internal Revenue of the Philippine Islands, defendant-
appellee.

FACTS:

The Standard Oil Company of New York sold and delivered fuel oil in the Philippines to the United
States Army for the use of the Army, and to the United States Navy for the use of the Navy,
respectively. The Collector of Internal Revenue required payment of the sales tax for both deliveries.
The Standard Oil Company paid the taxes assessed under protest and subsequently sued the
Collector for the refund.

ISSUE: whether or not sales of merchandise made in the Philippines to the United States Army and
the United States Navy are subject to the sales tax.

HELD:

No. The assessment and collection by the Philippine Government of the tax on sales of merchandise
made in the Philippines to the United States Army and the United States Navy is illegal. The sales
made in the Philippines to the United States Army and the United States Navy are made to
instrumentalities of the United States Government, and, therefore, are not subject to tax by the
Philippine Government.
45. G.R. No. L-2947 January 11, 1951

MANILA RACE HORSE TRAINERS ASSOCIATION, INC., and JUAN T. SORDAN, plaintiffs-
appellants,
vs.
MANUEL DE LA FUENTE, defendant-appellee.

FACTS:

the Manila Race Horses Trainers Association, Inc., allege that they are owners of boarding stables
for race horses and that their rights as such are affected by Ordinance No. 3065 of the City of
Manila. They assailed the validity of the ordinance on the ground that it is violative of the Philippine
Constitution. The case was submitted on the pleadings, and the decision was that the ordinance in
question is constitutional and valid.

ISSUE: Whether or not the ordinance is unconstitutional.

HELD:

No. 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.
46. G.R. No. L-4376 May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants,

vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY
MAYOR, all of the City of Manila, respondents-appellees.

FACTS:

The Association of Customs Brokers, Inc., which is composed of all brokers and public service
operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said
association, also a public service operator of the trucks in said City, challenge the validity of said
ordinance on the ground that (1) while it levies a so-called property tax it is in reality a license tax
which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance offends
against the rule of uniformity of taxation; and (3) it constitutes double taxation.

ISSUE: Whether the ordinance is null and void.

HELD:

Yes. The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. It
exacts the tax upon all motor vehicles operating within the City of Manila. It does not distinguish
between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish
between a motor vehicle registered in the City of Manila and one registered in another place but
occasionally comes to Manila and uses its streets and public highways. The distinction is important if
we note that the ordinance intends to burden with the tax only those registered in the City of Manila
as may be inferred from the word "operating" used therein. The word "operating" denotes a
connotation which is akin to a registration, for under the Motor Vehicle Law no motor vehicle can be
operated without previous payment of the registration fees. There is no pretense that the ordinance
equally applies to motor vehicles who come to Manila for a temporary stay or for short errands, and
it cannot be denied that they contribute in no small degree to the deterioration of the streets and
public highway. The fact that they are benefited by their use they should also be made to share the
corresponding burden. And yet such is not the case. This is an inequality which we find in the
ordinance, and which renders it offensive to the Constitution.
47. G.R. No. L-29646 November 10, 1978

MAYOR ANTONIO J. VILLEGAS, petitioner,

vs.
HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO ARCA, respondents.

FACTS:

Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a petition assailing the constitutionality
of Ordinance No. 6537 because of the provision prohibiting aliens from being employed or to engage
or participate in any position or occupation or business enumerated therein, whether permanent,
temporary or casual, without first securing an employment permit from the Mayor of Manila and
paying the permit fee of P50.00 which he alleges is discriminatory and violative of the rule of the
uniformity in taxation and violative the due process and equal protection clauses of the Constitution.

ISSUE: Whether or not the assailed ordinance is unconstitutional.

HELD:

Yes. The ordinance in question is unconstitutional.

The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid
substantial differences in situation among individual aliens who are required to pay it. Although the
equal protection clause of the Constitution does not forbid classification, it is imperative that the
classification should be based on real and substantial differences having a reasonable relation to the
subject of the particular legislation.

Requiring a person before he can be employed to get a permit from the City Mayor of Manila who
may withhold or refuse it at will is tantamount to denying him the basic right of the people in the
Philippines to engage in a means of livelihood. While it is true that the Philippines as a State is not
obliged to admit aliens within its territory, once an alien is admitted, he cannot be deprived of life
without due process of law. This guarantee includes the means of livelihood. The shelter of
protection under the due process and equal protection clause is given to all persons, both aliens and
citizens.
48. G.R. No. L-60126 September 25, 1985

CAGAYAN ELECTRIC POWER & LIGHT CO., INC., petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.

FACTS:

Cagayan Electric Power & Light Co. (CEPALCO) is a holder of a legislative franchise under RA 3247
where payment of 3% tax on gross earning is in lieu of all taxes and assessments upon privileges. In
1968, RA 5431 amended the franchise by making all corporate taxpayers liable for income tax. In
1969, through RA 6020, its franchise was extended to two other towns and the tax exemption was
reenacted. The commissioner required the company to pay deficiency income taxes for the
intervening period (1968-1969).

ISSUE: Whether or not CEPALCO is liable for the tax.

HELD:

Yes. Congress could impair the company’s legislative franchise by making it liable for income tax.
The Constitution provides that a franchise is subject to amendment, alteration or repeal by the
Congress when the public interest so requires. However, it cannot be denied that the said 1969
assessment appears to be highly controversial. It had reason not to pay income tax because of the
tax exemption its franchise. For this reason, it should be liable only for tax proper and should not be
held liable for surcharge and interest.
49. G.R. No. L-26521 December 28, 1968

EUSEBIO VILLANUEVA, ET AL., plaintiff-appellee,

vs.
CITY OF ILOILO, defendants-appellants.

FACTS:

On September 30, 1946, the Municipal Board of Iloilo City enacted Ordinance 86 imposing license
tax fees upon tenement houses. The validity of such ordinance was challenged by Eusebio and
Remedios Villanueva, owners of four tenement houses containing 34 apartments. The Supreme
Court held the ordinance to be ultra vires. On January 15, 1960, however, the municipal board,
believing that it acquired authority to enact an ordinance of the same nature pursuant to the Local
Autonomy Act, enacted Ordinance 11, Eusebio and Remedios Villanueva assailed the ordinance
anew.

ISSUE: Whether or not Ordinance 11 violates the rule of uniformity of taxation.

HELD:

No. The Court has already ruled that tenement houses constitute a distinct class of property. It has
likewise ruled that "taxes are uniform and equal when imposed upon all property of the same class
or character within the taxing authority." The fact, therefore, that the owners of other classes of
buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in question is no
argument at all against uniformity and equality of the tax imposition. Neither is the rule of equality
and uniformity violated by the fact that tenement taxes are not imposed in other cities, for the same
rule does not require that taxes for the same purpose should be imposed in different territorial
subdivisions at the same time. So long as the burden of the tax falls equally and impartially on all
owners or operators of tenement houses similarly classified or situated, equality and uniformity of
taxation is accomplished. The plaintiffs-appellees, as owners of tenement houses in the City of Iloilo,
have not shown that the tax burden is not equally or uniformly distributed among them, to overthrow
the presumption that tax statutes are intended to operate uniformly and equally.
50. G.R. No. L-49336 August 31, 1981

THE PROVINCE OF ABRA, represented by LADISLAO ANCHETA, Provincial

Assessor, petitioner,
vs.
HONORABLE HAROLD M. HERNANDO, in his capacity as Presiding Judge of Branch I, Court
of First Instance Abra; THE ROMAN CATHOLIC BISHOP OF BANGUED, INC., represented by
Bishop Odilo etspueler and Reverend Felipe Flores, respondents.

FACTS:

A tax assessment made by the Provincial Assessor on the properties of respondent Roman Catholic
Bishop of Bangued. The bishop claimed tax exemption from real estate tax, through an action for
declaratory relief. A summary judgment was made by respondent Judge Hernando granting the
exemption without hearing the side of the Province of Abra.

ISSUE: Whether or not the properties are exempt from taxes.

HELD:

No. The 1973 Constitution added "charitable institutions, mosques, and non-profit cemeteries" to the
exemptions existing under the 1935 Constitution, and required that for the exemption of ":lands,
buildings, and improvements," they should not only be "exclusively" but also "actually and "directly"
used for religious or charitable purposes. The Constitution is worded differently. The change should
not be ignored. It must be duly taken into consideration. Reliance on past decisions would have
sufficed were the words "actually" as well as "directly" not added. There must be proof therefore of
the actual and direct use of the lands, buildings, and improvements for religious or charitable
purposes to be exempt from taxation.