1. TRIDHARMA MARKETING CORPORATION, Petitioner, vs.
COURT OF the methods, employed by the CIR in its assessment, jeopardized the interests of a
TAX APPEALS and the COMMISSIONER OF INTERNAL REVENUE,
Respondents. (G.R. No. 215950; June 20, 2016)
FACTS:
BIR assessed T with various tax deficiencies amounting to more than 4.640 billion
pesos. Protest was filed. T paid 5.8 million pesos for its assessment on WTC, DST
and EWT and reiterated its interest to compromise alleged IT and VAT deficiencies.
FDDA was issued at 4.473 billion pesos.
T appealed the CIR's decision to the CTA 2D and moved for the suspension of tax
collection against it. However, the CTA 2D required T to post bond equivalent to
150% of the assessment within 15 days from notice. Hence, T was ordered to post
6.701 billion pesos as bond.
T petitioned for certiorari.
ISSUES:
[1] Did the CTA abuse its discretion in requiring bond that T is legally and
physically incapable of procuring?
[2] Was the bond requirement properly issued considering T's allegation of illegal
collection?
HELD:
[1] Yes, the CTA abused its discretion. Although the Tax Code empowers the CTA
to suspend tax collection by requiring either the (1) deposit of the tax claimed or
(2) surety bond for not more than double the amount, T was able to show that it is
not capable of producing the amount of 6.701 billion pesos as its net worth is only
almost 1 billion pesos. Plus, it is legally impossible to procure the bond from
bonding companies that are limited in their risk assumptions.
What the CTA should have done is to conduct a preliminary hearing on T's ability to
deposit or procure bond. While there is legal justification for the bond requirement,
the power to tax is not the power to destroy. For the bond to equal the deficiency
assessment would practically deny to the petitioner the meaningful opportunity to
contest the validity of the assessments, and would likely even impoverish it as to
force it out of business.
[2] The bond requirement was not properly issued. Section 11 of R.A. 1125, as
amended, indicates that the requirement of the bond as a condition precedent to
suspension of the collection applies only in cases where the processes by which the
collection sought to be made by means thereof are carried out in consonance with the
law, not when the processes are in plain violation of the law that they have to be
suspended for jeopardizing the interests of the taxpayer.
The Court is not in the position to rule on the correctness of the deficiency
assessment, which is a matter still pending in the CTA. The determination of whether
taxpayer for being patently in violation of the law is a question of fact that calls for
the reception of evidence.
2. ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA
vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance. et. al.
[G.R. No. L-39086; June 15, 1988] Constitutional Law| Power of Taxation
FACTS:
Abra Valley College is an educational corporation and institution of higher learning
in Bangued, Abra. In 1974, the CFI ordered for the seizure and sale of the subject
school property for non-payment of real estate taxes and penalties. Private
respondents stated that the college lot and building in question are not only used for
educational purposes of the college, but also as the permanent residence of the
President and Director, Mr. Pedro V. Borgonia, and his family including his in-laws
and grandchildren; while the ground floor of the college building is being used and
rented by a commercial establishment.
ISSUE:
Whether or not the lot and building in question are used exclusively for educational
purposes and thus exempted from paying taxes.
HELD:
The 1935 Philippine Constitution, Art. VI, par. 3 Sec. 22, expressly grants
exemption from realty taxes for “Cemeteries, churches and parsonages or convents
appurtenant thereto, and all lands, buildings, and improvements used exclusively
for religious, charitable or educational purposes….
Relative thereto, CA No. 470 as amended by RA No. 409, Sec. 54, paragraph c
otherwise known as the Assessment Law, provides:
The following are exempted from real property tax under the Assessment Law:
(c) churches and parsonages or convents appurtenant thereto, and all lands,
buildings, and improvements used exclusively for religious, charitable, scientific
or educational purposes.
Thus, the use of the second floor of the main building for residential purposes of the
Director and his family, may find justification under the concept of incidental use,
which is complimentary to the main or primary purpose–educational. The lease of
the first floor, however, by a commercial establishment cannot be considered
incidental to the purpose of education.
Under the 1935 Constitution, the trial court correctly arrived at the conclusion that
the school building as well as the lot where it is built, should be taxed, not because
the second floor of the same is being used by the Director and his family for
 residential purposes, but because the first floor thereof is being used for commercial
purposes.
3. Tan v Del Rosario
Facts:
1. Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income
Taxation Scheme ("SNIT"), which amended certain provisions of the NIRC, as well
as the Rules and Regulations promulgated by public respondents pursuant to said
law.
2. Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the following
provisions of the Constitution:
-Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only
one subject which shall be expressed in the title thereof.
- Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable.
The Congress shall evolve a progressive system of taxation.
- Article III, Section 1 — No person shall be deprived of . . . property without due
process of law, nor shall any person be denied the equal protection of the laws.
3. Petitioners contended that public respondents exceeded their rule-making authority in
applying SNIT to general professional partnerships. Petitioner contends that the title
of HB 34314, progenitor of RA 7496, is deficient for being merely entitled,
"Simplified Net Income Taxation Scheme for the Self-Employed and Professionals
Engaged in the Practice of their Profession" (Petition in G.R. No. 109289) when the
full text of the title actually reads,
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and
Professionals Engaged In The Practice of Their Profession, Amending Sections 21
and 29 of the National Internal Revenue Code,' as amended. Petitioners also contend
it violated due process.
5. The Solicitor General espouses the position taken by public respondents.
6. The Court has given due course to both petitions.
ISSUE: Whether or not the tax law is unconstitutional for violating due process
NO. The due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of the tax
power. No such transgression is so evident in herein case.
1. Uniformity of taxation, like the concept of equal protection, merely requires that all
subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities. Uniformity does not violate classification as long as: (1) the
standards that are used therefor are substantial and not arbitrary, (2) the
categorization is germane to achieve the legislative purpose, (3) the law applies, all
things being equal, to both present and future conditions, and (4) the classification
applies equally well to all those belonging to the same class.
2. What is apparent from the amendatory law is the legislative intent to increasingly shift
the income tax system towards the schedular approach in the income taxation of
individual taxpayers and to maintain, by and large, the present global treatment on
taxable corporations. The Court does not view this classification to be arbitrary and
inappropriate.
ISSUE 2: Whether or not public respondents exceeded their authority in
promulgating the RR
No. There is no evident intention of the law, either before or after the amendatory
legislation, to place in an unequal footing or in significant variance the income tax
treatment of professionals who practice their respective professions individually and
of those who do it through a general professional partnership.
4. Obillos v. CIR
Facts:
In 1973, Jose Obillos completed payment on two lots located in Greenhills, San
Juan. The next day, he transferred his rights to his four children for them to build
their own residences. The Torrens title would show that they were co-owners of the
two lots. However, the petitioners resold them to Walled City Securities Corporation
and Olga Cruz Canda for P313k or P33k for each of them. They treated the profit
as capital gains and paid an income tax of P16,792.00
The CIR requested the petitioners to pay the corporate income tax of their shares, as
this entire assessment is based on the alleged partnership under Article 1767 of the
Civil Code; simply because they contributed each to buy the lots, resold them and
divided the profits among them.
But as testified by Obillos, they have no intention to form the partnership and that it
was merely incidental since they sold the said lots due to high demand of
construction. Naturally, when they sell them as co-partners, it will result to the share
of profits. Further, their intention was to divide the lots for residential purposes.
Issue:
Was there a partnership, hence, they are subject to corporate income taxes?
Court Ruling:

Not necessarily. As Article 1769 (3) of the Civil Code provides: the sharing of gross
returns does not in itself establish a partnership, whether or not the persons sharing
them have a joint or common right or interest in any property from which the returns
are derived. There must be an unmistakeable intention to form a partnership or
joint venture.
In this case, the Commissioner should have investigated if the father paid
donor's tax to establish the fact that there was really no partnership.
5. CIR v CA & YMCA
GR No 124043, October 14, 1998
FACTS:
In 1980, YMCA earned an income of 676,829.80 from leasing out a portion of its
premises to small shop owners, like restaurants and canteen operators and 44,259
from parking fees collected from non-members. On July 2, 1984, the CIR issued an
assessment to YMCA for deficiency taxes which included the income from lease of
YMCA’s real property. YMCA formally protested the assessment but the CIR
denied the claims of YMCA. On appeal, the CTA ruled in favor of YMCA and
excluded income from lease to small shop owners and parking fees. However, the
CA reversed the CTA but affirmed the CTA upon motion for reconsideration.
ISSUE:
Whether the rental income of YMCA is taxable
RULING:
Yes. The exemption claimed by YMCA is expressly disallowed by the very wording
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. While the income received by the
organizations enumerated in Section 26 of the NIRC is, as a rule, exempted from the
payment of tax in respect to income received by them as such, the exemption does
not apply to income derived from any of their properties, real or personal or from
any of their activities conducted for profit, regardless of the disposition made of such
income.
6. Sison vs Ancheta (1984)
Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its
provision (Section 1) unduly discriminated against him by the imposition of higher
rates upon his income as a professional, that it amounts to class legislation, and that
it transgresses against the equal protection and due process clauses of the
Constitution as well as the rule requiring uniformity in taxation.
Issue: Whether BP 135 violates the due process and equal protection clauses, and the
rule on uniformity in taxation.
Held: There is a need for proof of such persuasive character as would lead to a
conclusion that there was a violation of the due process and equal protection clauses.
Absent such showing, the presumption of validity must prevail. Equality and
uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation. Where the
differentitation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the
clause and is therefore uniform. Taxpayers may be classified into different
categories, such as recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make deductions for income
tax purposes as there is no practically no overhead expense, while professionals and
businessmen have no uniform costs or expenses necessaryh to produce their income.
There is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income taxation as regards
professional and business income.
7. CITY GOVERNMENT OF QUEZON CITY v. BAYAN
TELECOMMUNICATIONS, GR NO. 162015, 2006-03-06
Facts:
Respondent Bayan Telecommunications, Inc.
(Bayantel) is a legislative franchise holder under Republic Act (Rep. Act) No. 3259...
to establish and operate radio stations for domestic telecommunications, radiophone,
broadcasting and... telecasting.
Rep. Act No. 7160, otherwise known as the "Local Government Code of 1991"
(LGC), took effect. Section 232 of the Code grants local government units within the
Metro Manila Area the power to levy tax on real properties... the same Code...
withdrew any exemption from realty tax heretofore granted to or enjoyed by all
persons, natural or juridica... barely few months after the LGC took effect, Congress
enacted Rep. Act No. 7633, amending Bayantel's original franchise.
contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to pay the same taxes
on their real estate, buildings and personal property, exclusive of this franchise, as
other persons or corporations are now or hereafter may be required by law to pay.
In addition thereto, the grantee, its successors or assigns shall pay a franchise tax
equivalent to three percent (3%) of all gross receipts of the telephone or other
telecommunications businesses transacted under this franchise by the grantee, its
successors or assigns and the... said percentage shall be in lieu of all taxes on this
franchise or earnings thereof. Provided, That the grantee, its successors or assigns
shall continue to be liable for income taxes payable under Title II of the National
Internal Revenue Code .... xxx. [Emphasis... supplied]
It is undisputed that within the territorial boundary of Quezon City, Bayantel owned
several real properties on which it maintained various telecommunications facilities.
government of Quezon City,... enacted City Ordinance... imposing... a real property
tax on all real properties in Quezon City, and, reiterating in its Section 6, the
withdrawal of exemption from real... property tax under Section 234 of the LGC
Bayantel wrote the office of the City Assessor seeking the exclusion of its real
properties in the city from the roll of taxable real properties. With its request having
been denied, Bayantel interposed an appeal with the Local Board of Assessment
Appeals
(LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay
the real property taxes assessed against it by the Quezon City government.
Quezon City Treasurer sent out notices of delinquency... followed by the issuance of
several warrants of levy against Bayantel's properties preparatory to their sale at a
public auction
Bayantel... filed with the RTC of Quezon City a petition for prohibition with an
urgent application for a temporary restraining order (TRO)
Issues:
[I]n declaring the real properties of respondent exempt from real property taxes
notwithstanding the fact that the tax exemption granted to Bayantel in its original
franchise had been withdrawn by the [LGC]
Whether or not Bayantel's real properties in Quezon City are exempt from real
property taxes under its legislative f... ranchise;
Bayantel's franchise being national in character, the "exemption" thus granted under
Section 14 of Rep. Act No. 3259 applies to all its real or personal properties found
anywhere within the Philippine archipelago.
Ruling:
real properties of Bayantel, save those exclusive of its franchise, are subject to realty
taxes. Ultimately, therefore, the inevitable result was that all realties which are
actually,... directly and exclusively used in the operation of its franchise are
"exempted" from any property tax.
Bayantel's franchise being national in character, the "exemption" thus granted under
Section 14 of Rep. Act No. 3259 applies to all its real or personal properties found
anywhere within the Philippine archipelago.
However, with the LGC's taking effect... the realty tax exemption... heretofore
enjoyed by Bayantel under its original franchise, but subsequently withdrawn by
force of Section 234 of the LGC, has been restored by Section 14 of Rep. Act No.
7633.
Bayantel... is only "liable to pay the same taxes, as any other persons or corporations
on all its real or personal properties, exclusive of its franchise."... there can really be
no dispute that the power of the Quezon City Government to tax is limited by
Section 232 of the LGC which expressly provides that "a province or city or
municipality within the Metropolitan Manila Area may levy an annual... ad valorem
tax on real property such as land, building, machinery, and other improvement not
hereinafter specifically exempted." Under this law, the Legislature highlighted its
power to thereafter exempt certain realties from the taxing power of local...
government units. An interpretation denying Congress such power to exempt would
reduce the phrase "not hereinafter specifically exempted" as a pure jargon, without
meaning whatsoever. Needless to state, such absurd situation is unacceptable.
dmittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware
that the LGC has already withdrawn Bayantel's former exemption from realty taxes,
Congress opted to pass Rep. Act No. 7633 using... exactly the same defining phrase
"exclusive of this franchise" which was the basis for Bayantel's exemption from
realty taxes prior to the LGC.
In plain language, Section 11 of Rep. Act No. 7633 states that "the grantee, its
successors or assigns shall be liable to pay the same taxes on their real... estate,
buildings and personal property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay." The Court views
this subsequent piece of legislation as an express and real intention on the part of
Congress to once... again remove from the LGC's delegated taxing power, all of the
franchisee's (Bayantel's) properties that are actually, directly and exclusively used in
the pursuit of its franchise.
8. Tolentino vs. Secretary of Finance G.R. No. 115455 October 30, 1995
FACTS:
These are motions seeking reconsideration of our decision dismissing the petitions
filed in these cases for the declaration of unconstitutionality of R.A. No. 7716,
otherwise known as the Expanded Value-Added Tax Law. Now it is contended by
the Philippine Press Institute (PPI) that by removing the exemption of the press from
the VAT while maintaining those granted to others, the law discriminates against the
press. At any rate, it is averred, “even nondiscriminatory taxation of constitutionally
guaranteed freedom is unconstitutional.”
ISSUE:
Does sales tax on bible sales violative of religious and press freedom?
RULING:
No. The Court was speaking in that case of a license tax, which, unlike an ordinary
tax, is mainly for regulation. Its imposition on the press is unconstitutional because it
lays a prior restraint on the exercise of its right. Hence, although its application to
others, such those selling goods, is valid, its application to the press or to religious
groups, such as the Jehovah’s Witnesses, in connection with the latter’s sale of
religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put it,
“it is one thing to impose a tax on income or property of a preacher. It is quite
another thing to exact a tax on him for delivering a sermon.”
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise
of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease
or exchange of goods or properties or the sale or exchange of services and the lease
of properties purely for revenue purposes. To subject the press to its payment is not
to burden the exercise of its right any more than to make the press pay income tax or
subject it to general regulation is not to violate its freedom under the Constitution.
9. ABAKADA Guro Party List vs. Ermita
G.R. No. 168056 September 1, 2005
Facts:
ABAKADA GURO Party List, et al., filed a petition for prohibition o questioning
the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106,
107 and 108, respectively, of the National Internal Revenue Code (NIRC).
Section 4 imposes a 10% VAT on sale of goods and properties;
Section 5 imposes a 10% VAT on importation of goods; and
Section 6 imposes a 10% VAT on sale of services and use or lease of properties;
These provisions contain a provision which authorizing the President, upon
recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective
January 1, 2006, after specified conditions have been satisfied.
Issues:
Whether or not there is a violation of Article VI, Section 24 of the Constitution.
Whether or not there is undue delegation of legislative power in violation of Article
VI Sec 28(2) of the Constitution.
Whether or not there is a violation of the due process and equal protection of the
Constitution.
Ruling:
No, the revenue bill exclusively originated in the House of Representatives, the
Senate was acting within its constitutional power to introduce amendments to the
House bill when it included provisions in Senate Bill No. 1950 amending corporate
income taxes, percentage, and excise and franchise taxes.
No, there is no undue delegation of legislative power but only of the discretion as to
the execution of a law. This is constitutionally permissible. Congress does not
abdicate its functions or unduly delegate power when it describes what job must be
done, who must do it, and what is the scope of his authority; in our complex
economy that is frequently the only way in which the legislative process can go
forward. In this case, it is not a delegation of legislative power but a delegation of
ascertainment of facts upon which enforcement and administration of the increased
rate under the law is contingent.
No, the power of the State to make reasonable and natural classifications for the
purposes of taxation has long been established. Whether it relates to the subject of
taxation, the kind of property, the rates to be levied, or the amounts to be raised, the
methods of assessment, valuation and collection, the State’s power is entitled to
presumption of validity. As a rule, the judiciary will not interfere with such power
absent a clear showing of unreasonableness, discrimination, or arbitrariness.
10. ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and
ENVIRONMENTALIST CONSUMERS NETWORK, INC. (ECN), petitioners
vs
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY
COMMISSION (ERC), NATIONAL POWER CORPORATION (NPC),
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT GROUP
(PSALM Corp.), STRATEGIC POWER UTILITIES GROUP (SPUG), and
PANAY ELECTRIC COMPANY INC. (PECO), respondents.
FACTS:
On June 8, 2001 Congress enacted RA 9136 or the Electric Power Industry Act of
2001. Petitioners Romeo P. Gerochi and company assail the validity of Section 34 of
the EPIRA Law for being an undue delegation of the power of taxation. Section 34
provides for the imposition of a “Universal Charge” to all electricity end users after a
period of (1) one year after the effectively of the EPIRA Law. The universal charge
to be collected would serve as payment for government debts, missionary
electrification, equalization of taxes and royalties applied to renewable energy and
imported energy, environmental charge and for a charge to account for all forms of
cross subsidies for a period not exceeding three years. The universal charge shall be
collected by the ERC on a monthly basis from all end users and will then be
managed by the PSALM Corp. through the creation of a special trust fund.
ISSUE:
Whether or not there is an undue delegation of the power to tax on the part of the
ERC

HELD:
No, the universal charge as provided for in section 34 is not a tax but an exaction of
the regulatory power (police power) of the state. The universal charge under section
34 is incidental to the regulatory duties of the ERC, hence the provision assailed is
not for generation of revenue and therefore it cannot be considered as tax, but an
execution of the states police power thru regulation.

Moreover, the amount collected is not made certain by the ERC, but by the
legislative parameters provided for in the law (RA 9136) itself, it therefore cannot be
understood as a rule solely coming from the ERC. The ERC in this case is only a
specialized administrative agency which is tasked of executing a subordinate
legislation issued by congress; which before execution must pass both the
completeness test and the sufficiency of standard test. The court in appreciating
Section 34 of RA 9136 in its entirety finds the said law and the assailed portions free
from any constitutional defect and thus deemed complete and sufficient in form.