WALTER LUTZ, as Judicial Administrator of the Intestate of the deceased Antonio Jayme Ledesma,

plaintiff-appellant v. J. ANTONIO ARANETA, as collector of Internal Revenue, defendant-

apppelle
G.R No. L-7856. December 22, 1955

FACTS:
Appelant in this case Walter Lutz in his capacity as the Judicial Administrator of the intestate of
the deceased Antonio Jayme Ledesma, seeks to recover from the Collector of the Internal
Revenue the total sum of fourteen thousand six hundred sixty six and forty cents (P 14, 666.40)
paid by the estate as taxes, under section 3 of Commonwealth Act No. 567, also known as the
Sugar Adjustment Act, for the crop years 1948-1949 and 1949-1950. Commonwealth Act. 567
Section 2 provides for an increase of the existing tax on the manufacture of sugar on a graduated
basis, on each picul of sugar manufacturer; while section 3 levies on the owners or persons in
control of the land devoted tot he cultivation of sugarcane and ceded to others for consideration,
on lease or otherwise - "a tax equivalent to the difference between the money value of the rental
or consideration collected and the amount representing 12 per centum of the assessed value of
such land. It was alleged that such tax is unconstitutional and void, being levied for the aid and
support of the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for
which a tax may be constitutionally levied. The action was dismissed by the CFI thus the plaintiff
appealed directly to the Supreme Court.

ISSUE:
Whether or not the tax imposition in the Commonwealth Act No. 567 are unconstitutional.

RULING:
Yes, the Supreme Court held that the fact that sugar production is one of the greatest industry of
our nation, sugar occupying a leading position among its export products; that it gives
employment to thousands of laborers in the fields and factories; that it is a great source of the
state's wealth, is one of the important source of foreign exchange needed by our government
and is thus pivotal in the plans of a regime committed to a policy of currency stability. Its
promotion, protection and advancement, therefore redounds greatly to the general welfare.
Hence it was competent for the legislature to find that the general welfare demanded that the
sugar industry be stabilized in turn; and in the wide field of its police power, the law-making body
could provide that the distribution of benefits therefrom be readjusted among its components
to enable it to resist the added strain of the increase in taxes that it had to sustain.

The subject tax is levied with a regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the act is primarily a valid exercise
of police power.
GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827

FACTS:
Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando, Pampanga. It did
not bearthe 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:
Is the Anti-TB Stamp Law 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.
PUNSALAN VS. MUNICIPAL BOARD OF MANILA [95 PHIL 46; NO.L-4817; 26 MAY 1954]

Facts:
Petitioners, who are professionals in the city, assail Ordinance No. 3398 together with the law
authorizing it (Section 18 of the Revised Charter of the City of Manila). The ordinance imposes a
municipal occupation tax on persons exercising various professions in the city and penalizes non-
payment of the same. The law authorizing said ordinance empowers the Municipal Board of the
city to impose a municipal occupation tax on persons engaged in various professions. Petitioners,
having already paid their occupation tax under section 201 of the National Internal Revenue
Code, paid the tax under protest as imposed by Ordinance No. 3398. The lower court declared
the ordinance invalid and affirmed the validity of the law authorizing it.

Issue:
Whether or Not the ordinance and law authorizing it constitute class legislation, and authorize
what amounts to double taxation.

Held:
The Legislature may, in its discretion, select what occupations shall be taxed, and in its discretion
may tax all, or select classes of occupation for taxation, and leave others untaxed. It is not for the
courts to judge which cities or municipalities should be empowered to impose occupation taxes
aside from that imposed by the National Government. That matter is within the domain of
political departments. The argument against double taxation may not be invoked if one tax is
imposed by the state and the other is imposed by the city. It is widely recognized that there is
nothing inherently terrible in the requirement that taxes be exacted with respect to the same
occupation by both the state and the political subdivisions thereof. Judgment of the lower court
is reversed with regards to the ordinance and affirmed as to the law authorizing it.

RP v. ERICTA G.R. No. L-35238 April 21, 1989

DOCTRINE: Legal compensation cannot take place against the Republic with respect to taxes,
fees, duties and similar forced contributions due to it, there could be no gainsaying the
proposition that, under the facts, Sampaguita was entitled to judgment upon its counterclaim for
the payment by the Republic of its indebtedness in virtue of the back pay certificates in question,
with the ultimate result that the claim and counter-claim of the parties, respectively will offset
each other.
FACTS:
The Philippine Government pursuant to R.A. No. 304, as amended by R.A. No. 800 issued "back
pay certificates". The Treasurer of the Philippines was empowered to receive applications for
back pay and to issue in favor of the applicants certificates of indebtedness redeemable by the
Government within 10 years for the amounts determined to be justly due them. Sampaguita
Pictures came to incur an obligation for percentage, withholding and amusement taxes in the
amount of P10,268.41 in favor of the Republic of the Philippines. In satisfaction thereof (together
with another obligation of the same nature due from Vera-Perez Corporation, Pictures, Inc.),
Sampaguita tendered and delivered to the Office of the Municipal Treasurer of Bocaue, Bulacan
sixteen back pay negotiable certificates of indebtedness in the aggregate sum of P16,763.60.
However, the Assistant Regional Director of the BIR wrote to Vera-Perez Corporation advising
that the acceptance of the Negotiable Certificates of Indebtedness was erroneous and the
payment was invalid because said certificates were not acceptable as payments in accordance
with the provisions of General Circular No. V-289. No one acted on the said letter so the Solicitor
General brought suit in behalf of the Republic of the Philippines. The trial court dismissed both
the complaint and the counterclaim. Hence, this appeal filed by the Solicitor General.
ISSUE:
WON payment is void since Sampaguita is only a mere assignee of the certificates.
HELD:
No. Payment is not void. Sampaguita, as assignee of the certificates of indebtedness, had
"succeeded to the original rights of the holders thereof," and was therefore authorized to
demand payment by the Republic of the indebtedness thereby represented.Even if as the
Solicitor General points out, "there is no certainty when the certificates are actually redeemable"
because the law say "that they are redeemable .. within ten years from the date of issuance ",
there can be no question that after the lapse of ten (10) years from the declared date of
redeemability, payment of the indebtedness was already eligible. The Trial Court was saying in
effect that while judgment should be rendered in favor of the Republic against Sampaguita for
unpaid taxes in the amount of P10,268.41, judgment ought at the same time to issue for
Sampaguita commanding payment to it by the Republic of the same sum, representing the face
value of the certificates of indebtedness assigned to it and for recovery of which it had specifically
prayed in its counterclaim.

DISPOSITIVE: Petition is DENIED.

CIR vs ESSO Standard Eastern (G.R. No. L-28502-03. April 18, 1989)
Ponente: NARVASA
FACTS:
Respondent overpaid its 1959 income tax by P221,033.00. It was granted a tax credit by the
Commissioner accordingly on 1964. However, ESSOs payment of its income tax for 1960 was
found to be short by P367,994.00. The Commissioner (of Internal Revenue) wrote to ESSO
demanding payment of the deficiency tax, together with interest thereon for the period from
1961 to 1964. ESSO paid under protest the amount alleged to be due, including the interest as
reckoned by the Commissioner. It protested the computation of interest, contending it was more
than that properly due. It claimed that it should not have been required to pay interest on the
total amount of the deficiency tax, P367,994.00, but only on the amount of P146,961.00—
representing the difference between said deficiency, P367,994.00, and ESSOs earlier
overpayment of P221,033.00 (for which it had been granted a tax credit). ESSO thus asked for a
refund. The Internal Revenue Commissioner denied the claim for refund. ESSO appealed to the
Court of Tax Appeals which ordered payment to ESSO of its refund-claim representing overpaid
interest.
The Commissioner argued the tax credit of P221,033.00 was approved only on year 1964, it could
not be availed of in reduction of ESSOs earlier tax deficiency for the year 1960; as of that year,
1960, there was as yet no tax credit to speak of, which would reduce the deficiency tax liability
for 1960. In support of his position, the Commissioner invokes the provisions of Section 51 of the
Tax Code.
ISSUE:
Whether or not the interest on delinquency should be applied on the full tax deficiency of
P367,994.00 despite the existence of overpayment in the amount of P221,033.00.
HELD:
NO. Petition was denied. Decision of CTA was affirmed.
The fact is that, as respondent Court of Tax Appeals has stressed, as early as 1960, the
Government already had in its hands the sum of P221,033.00 representing excess payment.
Having been paid and received by mistake, as petitioner Commissioner subsequently
acknowledged, that sum unquestionably belonged to ESSO, and the Government had the
obligation to return it to ESSO That acknowledgment of the erroneous payment came some four
(4) years afterwards in nowise negates or detracts from its actuality. The obligation to return
money mistakenly paid arises from the moment that payment is made, and not from the time
that the payee admits the obligation to reimburse.The obligation to return money mistakenly
paid arises from the moment that payment is made, and not from the time that the payee admits
the obligation to reimburse. The obligation of the payee to reimburse an amount paid to him
results from the mistake, not from the payee’s confession of the mistake or recognition of the
obligation to reimburse.

A literal interpretation is to be rejected if it would be unjust or lead to absurd results. Statutes

should receive a sensible construction, such as will give effect to the legislative intention and so
as to avoid an unjust or absurd conclusion.
ENGRACIO FRANCIA VS. INTERMEDIATE APPELLATE COURT and HO FERNANDEZ
G.R. No. L-67649 June 28, 1988 162 SCRA 753
FACTS:
Engracio Francia is the registered owner of a residential lot, 328 square meters, and a two-story
house built upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro
Manila. On October 15, 1977, a 125 square meter portion of Francia's property was expropriated
by the Republic of the Philippines for the sum of P4,116.00 representing the estimated amount
equivalent to the assessed value of the aforesaid portion. Since 1963 up to 1977 inclusive, Francia
failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public
auction pursuant to Section 73 of Presidential Decree No. 464 known as the Real Property Tax
Code in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for
the property. On March 20, 1979, Francia filed a complaint to annul the auction sale. He later
amended his complaint on January 24, 1980. The petitioner seeks to set aside the auction sale of
his property which took place on December 5, 1977, and to allow him to recover a 203 square
meter lot which was sold at public auction to Ho Fernandez and ordered titled in the latter's
name. He further averred that his tax delinquency of P2,400.00 has been extinguished by legal
compensation since the government owed him P4, 116.00 when a portion of his land was
expropriated. The lower court rendered a decision in favor Fernandez which was affirmed by the
Intermediate Appellate Court . Hence, this petition for review.
ISSUE:
Whether or not the tax delinquency of Francia has been extinguished by legal compensation.
RULING:
There is no legal basis for the contention. By legal compensation, obligations of persons, who in
their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278,
Civil Code). The circumstances of the case do not satisfy the requirements provided by Article
1279, to wit: (1) that each one of the obligors be bound principally and that he be at the same
time a principal creditor of the other; (2) that the two debts be due. The Court had consistently
ruled 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. In addition, a taxpayer cannot
refuse to pay his tax when called upon by the collector because he has a claim against the
governmental body not included in the tax levy. There are also other factors which compelled
the Court to rule against the petitioner. The tax was due to the city government while the
expropriation was effected by the national government. Moreover, the amount of P4,116.00 paid
by the national government for the 125 square meter portion of his lot was deposited with the
Philippine National Bank long before the sale at public auction of his remaining property. Notice
of the deposit dated September 28, 1977 was received by the petitioner on September 30, 1977.
The petitioner admitted in his testimony that he knew about the P4,116.00 deposited with the
bank but he did not withdraw it. It would have been an easy matter to withdraw P2,400.00 from
the deposit so that he could pay the tax obligation thus aborting the sale at public auction.

The petition for review was dismissed.

Domingo v. Garlitos Labrador, J (June 29, 1963)
Petitioner: Melecio Domingo as Commissioner of Internal Revenue
Respondent: Hon. Lorenzo Garlitos, CFI Leyte
Facts:
In Melecio Domingo v. Judge Moscoso – SC declared as final and executor the order of payment
by the estate of Walter Scott Price of estate & inheritance taxes, charges, and penalties of P40K.
Petition for execution of this judgment was sought – Atty Benedicto submitted:
a. Note by the then Pres. Carlos Garcia directing the Dir. Of Lands to pay Mrs. Price
(administratix of Walter Price’s estate) @P369,140
b. RA 2700, page 765: appropriating P262,200 for payment to Mrs. Price.
3. CFI: Petition DENIED, execution is not justifiable since the Govt is indebted to the estate.
The payment of the claim of CIR deferred until the Govt has paid this debt.
Hence this petition to Set Aside the above order.

Issue:
WON the set-off/deferment of the claim of CIR is proper.

Held:
It is proper. Compensation/set-off of taxes may happen by operation of law when both debts
are due and demandable.
1. The ordinary procedure to settle claims before an estate is not a petition for execution,
but by presenting a claim before the probate court.
a. Aldamiz vs. Judge of CFI Mindoro- Execution may issue only where the devisees, legatees
or heirs have entered into possession of their respective portions in the estate prior to settlement
and payment of the debts and expenses of administration and it is later ascertained that there
are such debts and expenses to be paid, in which case "the court having jurisdiction of the estate
may, by order for that purpose, after hearing, settle the amount of their several liabilities, and
order how much and in what manner each person shall contribute, and may issue execution if
circumstances require" (Rule 89, section 6; see also Rule 74, Section 4; Emphasis supplied.)
b. Legal basis is the fact that the properties belonging to the state are under custodia legis,
which continues until said properties have been distributed among the heirs.
2. Court having jurisdiction also found that the claim of the estate has been recognized by
the gov’t and has already appropriated the corresponding amount.
3. Claim of the Gov’t for inheritance taxes against the estate is due and demandable. The
claim of the estate against the Gov’t is also due, demandable and is 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.
Philex Mining Corporation v CIR GR No 125704, August 28, 1998

FACTS:
BIR sent a letter to Philex asking it to settle its tax liabilities amounting to P124 million. Philex
protested the demand for payment stating that it has pending claims for VAT input credit/refund
amounting to P120 million. Therefore, these claims for tax credit/refund should be applied
against the tax liabilities.
In reply the BIR found no merit in Philex’s position. On appeal, the CTA reduced the tax liability
of Philex.
ISSUES:
1. Whether legal compensation can properly take place between the VAT input credit/refund and
the excise tax liabilities of Philex Mining Corp;
2. Whether the BIR has violated the NIRC which requires the refund of input taxes within 60 days
3. Whether the violation by BIR is sufficient to justify non-payment by Philex
RULING:
1. No, legal compensation cannot take place. The government and the taxpayer are not creditors
and debtors of each other.
2. Yes, the BIR has violated the NIRC. It took five years for the BIR to grant its claim for VAT input
credit. Obviously, had the BIR been more diligent and judicious with their duty, it could have
granted the refund
3. No, despite the lethargic manner by which the BIR handled Philex’s tax claim, it is a settled rule
that in the performance of government function, the State is not bound by the neglect of its
agents and officers. It must be stressed that the same is not a valid reason for the non-payment
of its tax liabilities.
Benjamin Gomez vs Enrico Palomar et al., G.R. No. L-23645
Facts:
“To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order for
the period from August nineteen to September thirty every year the printing and issue of semi-
postal stamps of different denominations with face value showing the regular postage charge
plus the additional amount of five centavos for the said purpose, and during the said period, no
mail matter shall be accepted in the mails unless it bears such semi-postal stamps.”(RA 1635 as
amended by RA 2631) On September 15, 1963, Benjamin P. Gomez mailed a letter at the post
office in San Fernando Pampanga and the letter was addressed to Agustin Aquino but the letter
mailed by Benjamin Gomez was returned to him because the mailed letter did not have a special
anti TB stamp which is required by the statute . Benjamin Gomez then went to the Court of First
Instance in Pampanga for declaratory relief in order to test the constitutionality of the statute
and the administrative orders being issued but the lower court rendered that the statute and the
administrative orders unconstitutional because it violates the equal protection clause of
Constitution and taxation. The respondents then file an appeal.
Issue:
Whether or not the decision of the lower court appealed by the respondents may be reversed
Ruling:
The ruling of the court is that, the declaratory relief by the petitioner cannot be avail because
petitioner already committed the violation of the statute when the letter he mailed did not have
a anti- TB stamp as required by the statute and since the statute declared that no mail shall be
accepted unless it bears a semi postal stamp, it is indeed enough to say that the mail of the
petitioner is not accepted and cannot be mailed upon. Wherefore, the judgement a quo is
reversed and the complaint is dismissed.
WALTER LUTZ vs. J. ANTONIO ARANETA
G.R. No. L-7859 December 22, 1955
“The protection of a large industry constituting one of the great sources of the state's wealth and
therefore directly or indirectly affecting the welfare of so great a portion of the population of the
State is affected to such an extent by public interests as to be within the police power of the
sovereign.”
FACTS:
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio
Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of P14,666.40
paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-
1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of
the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax
may be constitutionally levied. The action having been dismissed by the Court of First Instance,
the plaintiffs appealed the case directly to this Court
ISSUE:
Whether or not Commonwealth Act No. 567, otherwise known as the “Sugar Adjustment Act”
constitutional? Despite its being allegedly violative of the equal protection clause, the purpose
of which is not for the benefit of the general public but for the rehabilitation only of the sugar
industry?

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 to fully play,
subject only to the test of reasonableness; and it is not contended that the means provided in
the law 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.
This Court can take judicial notice of the fact that sugar production is one of the great industries
of our nation, sugar occupying a leading position among its export products; that it gives
employment to thousands of laborers in fields and factories; that it is a great source of the state's
wealth, is one of the important sources of foreign exchange needed by our government, and is
thus pivotal in the plans of a regime committed to a policy of currency stability. Its promotion,
protection and advancement, therefore redounds greatly to the general welfare.
Valentino Tio vs. Videogram Regulatory Board 151 SCRA 208

Facts:
On September 1, 1986, Valentino Tio (Tio for brevity), on his own behalf and purportedly on
behalf of other videogram operators adversely affected, filed a petition assailing the
constitutionality of Presidential Decree (P.D.) No. 1987 entitled “An Act Creating the Videogram
Regulatory Board” with broad powers to regulate and supervise the videogram industry. The
rationale behind the enactment of the aforesaid Decree may be summarized in its eighth (8 th)
whereas clause stating that grave emergencies corroding the moral values of the people and
betraying the national economic recovery program necessitate the adoption of bold measures
with dispatch. On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie
Producers, Importers and Distributors Association of the Philippines, and Philippine Motion
Pictures Producers Association were permitted by the Supreme Court (SC) to intervene in the
case over Tio’s opposition upon the allegations that intervention was necessary for the complete
protection of their rights and that their “survival and very existence is threatened by the
unregulated proliferation of film piracy.”

Issues:
(1) Whether or not Section 10 of P.D. No. 1987, which imposes a tax of thirty percent (30%)
on the gross receipts payable to the local government is a rider and the same is not
germane to the subject thereof;
(2) Whether or not the tax imposed is harsh, confiscatory, oppressive and/or in unlawful
restraint of trade in violation of the due process of the Constitution; and
(3) Whether or not there is undue delegation of power and authority;

Ruling:
As to the first issue, the SC held that Tio’s contention that the tax provision of the Decree is a
rider is bereft and devoid of merit because the title of the Decree, which is the creation of the
Videogram Regulatory Board (VRB) aimed at regulating and controlling the video industry, is
comprehensive enough to include the purposes expressed in its Preamble and reasonably covers
all its provisions. Moreover, it is unnecessary to express all those objectives in the title or that
the latter be an index to the body of the decree. As to the second issue, the SC held that it is
axiomatic that a tax does not cease to be valid merely because it regulates, discourages, or even
definitely deters the activities taxed. The legislature acts upon its constituents in imposing a tax;
thus, in general, a sufficient security against erroneous and oppressive taxation is afforded the
taxpayer. More importantly, the tax imposed by the Decree is also a revenue measure. The tax
of 30% is exacted for a public purpose, i.e. 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. As to the third issue, the SC held that
the grant in Section 11 of the Decree of authority to the VRB to “solicit the direct assistance of
other agencies and units of the government and deputize, for a fixed and limited period, the
heads or personnel of such agencies and units to perform enforcement functions for the Board”
is not a delegation of the power to legislate but merely a conferment of authority or discretion
as to its execution, enforcement, and implementation.
CITY OF BAGUIO v. DE LEON
Facts:

 Fortunato de Leon appealed to the SC questioning the validity of an ordinance enacted by the
Baguio City Council to collect taxes from real estate dealers. The source of council’s power to
create such ordinance is the amending act (RA 329) of the Baguio Charter empowering the
city to fix the license fee and regulate “business, trades, and occupations as may be
established or practiced in the City.”

 He was held liable as a real estate dealer with a property worth more than P10,000 but not
in excess of P50,000. He was obligated to pay a P50 annual fee. He was further “engaged in
the rental of his property in Baguio” deriving income therefrom during the period in 1958-
1962.

 The complaint was thereafter filed by the City Attorney of Baguio for his failure to pay P300
as license fee covering the period aforementioned.
Issues:
1) WON RA 329 is broad enough to justify the enactment of the ordinance
2) WON there was a violation of the rule of uniformity established by the Constitution
Held:
1) YES. Even a cursory reading of the above amendment readily discloses that the enactment
of the ordinance in question finds support in the power thus conferred. In our opinion,
the amendment above adverted to empowers the city council not only to impose a license
fee but also to levy a tax for purposes of revenue, more so when in amending section
2553 (b), the phrase 'as provided by law' has been removed by section 2 of Republic Act
No. 329. 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."

2) NO. According to the challenged ordinance, a real estate dealer who leases property
worth P50,000 or above must pay an annual fee of P100. If the property is worth P10,000
but not over P50,000, then he pays P50 and P24 if the value is less than P10,000. On its
face, therefore, the above ordinance cannot be assailed as violative of the constitutional
requirement of uniformity. In Philippine Trust Company v. Yatco, Justice Laurel, speaking
for the Court, stated: "A tax is considered uniform when it operates with the same force
and effect in every place where the subject may be found."

There was no occasion in that case to consider the possible effect on such a constitutional
requirement where there is a classification. The opportunity came in Eastern Theatrical Co. v.
Alfonso. Thus: "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;”
Bagatsing v. Ramirez
G.R. No. L-41631 (December 17, 1976)

FACTS:
The Municipal Board of Manila enacted Ordinance No. 7522, “An Ordinance Regulating the
Operation of Public Markets and Prescribing Fees for the Rentals of Stalls and Providing Penalties
for Violation thereof and for other Purposes.” Respondent were seeking the declaration of nullity
of the Ordinance for the reason that a) the publication requirement under the Revised Charter
of the City of Manila has not been complied with, b) the Market Committee was not given
any participation in the enactment, c) Sec. 3(e) of the Anti-Graft and Corrupt Practices Act has
been violated, and d) the ordinance would violate P.D. 7 prescribing the collection of fees and
charges on livestock and animal products.

ISSUE:
What law shall govern the publication of tax ordinance enacted by the Municipal Board
of Manila, the Revised City Charter or the Local Tax Code.

HELD:
The fact that one is a special law and the other a general law creates the presumption that the
special law is to be considered an exception to the general. The Revised Charter of Manila speaks
of “ordinance” in general whereas the Local Tax Code relates to “ordinances levying or imposing
taxes, fees or other charges” in particular. In regard therefore, the Local Tax Code controls.
Pascual v. Secretary of Public Works G.R. No. L-10405 December 29, 1960
Ponente: Concepcion, J.

Facts:
1. Petitioner was the governor of Rizal, filed a petition assailing the validity of R.A. 920 which
contains an item providing for an appropriation of P85,000.00 for the construction and repair of
a feeder road in Pasig. The said law was passed in Congress and approved by the President.
2. The property over which the feeder road will be constructed is however owned by Sen. Zulueta.
The property was to be donated to the local government, though the donation was made a few
months after the appropriation was included in RA 920. The petition alleged that the said planned
feeder road would relieve Zulueta the responsibility of improving the road which is inside a
private subdivision.
3. The lower court (RTC) ruled that the petitioner has standing to assail the validity of RA 920,
due to the public interest involved in the appropriation. However, he does not have a standing
with respect to the donation since he does not have an interest that will be injured by said
donation, hence it dismissed the petition.

Issue: Whether or not the petitioner has the standing to file the petition

Held:
YES.
1. Petitioner has standing. He is not merely a taxpayer but the governor of the province of Rizal
which is considered one of the most populated biggest provinces during that time, its taxpayers
bear a substantial portion of the burden of taxation in the country.
2. Public funds can only be appropriated for a public purpose. The test of the constitutionality of
a statute requiring the use of public funds is whether it is used to promote public interest.
Moreover, the validity of a stature depends on the powers of the Congress at the time of its
passage or approval, not upon events occurring, or acts performed subsequent thereto, unless it
is an amendment of the organic law.
CIR vs. BOAC
149 SCRA 395 GR No. L-65773-74 April 30, 1987

"The source of an income is the property, activity or service that produced the income. For such
source to be considered as coming from the Philippines, it is sufficient that the income is derived
from activity within the Philippines."
FACTS:
Petitioner CIR seeks a review of the CTA's decision setting aside petitioner's assessment of
deficiency income taxes against respondent British Overseas Airways Corporation (BOAC) for the
fiscal years 1959 to 1971. BOAC is a 100% British Government-owned corporation organized and
existing under the laws of the United Kingdom, and is engaged in the international airline
business. During the periods covered by the disputed assessments, it is admitted that BOAC had
no landing rights for traffic purposes in the Philippines. Consequently, it did not carry passengers
and/or cargo to or from the Philippines, although during the period covered by the assessments,
it maintained a general sales agent in the Philippines — Wamer Barnes and Company, Ltd., and
later Qantas Airways — which was responsible for selling BOAC tickets covering passengers and
cargoes. The CTA sided with BOAC citing that the proceeds of sales of BOAC tickets do not
constitute BOAC income from Philippine sources since no service of carriage of passengers or
freight was performed by BOAC within the Philippines and, therefore, said income is not subject
to Philippine income tax. The CTA position was that income from transportation is income from
services so that the place where services are rendered determines the source.
ISSUE:
Are the revenues derived by BOAC from sales of ticket for air transportation, while having no
landing rights here, constitute income of BOAC from Philippine sources, and accordingly, taxable?

HELD:
Yes. The source of an income is the property, activity or service that produced the income. For
the source of income to be considered as coming from the Philippines, it is sufficient that the
income is derived from activity within the Philippines. In BOAC's case, the sale of tickets in the
Philippines is the activity that produces the income. The tickets exchanged hands here and
payments for fares were also made here in Philippine currency. The site of the source of
payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine
territory, enjoying the protection accorded by the Philippine government. In consideration of
such protection, the flow of wealth should share the burden of supporting the government.
ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR
524 SCRA 73, 103 GR Nos. 141104 & 148763, June 8, 2007

"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organic
or statute law and should not be permitted to stand on vague implications."
"Export processing zones (EPZA) are effectively considered as foreign territory for tax purposes."
FACTS:
Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of
various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases
of capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992.
BIR did not immediately act on the matter prompting the petitioner to file a petition for review
before the CTA. The latter denied the claims on the grounds that for zero-rating to apply, 70% of
the company's sales must consists of exports, that the same were not filed within the 2-year
prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20,
1994), and that petitioner failed to submit substantial evidence to support its claim for
refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following: sales to
PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period
should be counted from the date of filing of the last adjustment return which was April 15, 1993,
and not on every end of the applicable quarters; and that the certification of the independent
CPA attesting to the correctness of the contents of the summary of suppliers’ invoices or receipts
examined, evaluated and audited by said CPA should substantiate its claims.

ISSUE:
Did the petitioner corporation sufficiently establish the factual bases for its applications for
refund/credit of input VAT?
HELD:
No. Although the Court agreed with the petitioner corporation that the two-year prescriptive
period for the filing of claims for refund/credit of input VAT must be counted from the date of
filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed
as exports because these export processing zones are to be managed as a separate customs
territory from the rest of the Philippines, and thus, for tax purposes, are effectively considered
as foreign territory, it still denies the claims of petitioner corporation for refund of its input VAT
on its purchases of capital goods and effectively zero-rated sales during the period claimed for
not being established and substantiated by appropriate and sufficient evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign
authority, and should be construed in strict juris against the person or entity claiming the
exemption. The taxpayer who claims for exemption must justify his claim by the clearest grant
of organic or statute law and should not be permitted to stand on vague implications.
BOARD OF ASSESSMENT APPEALS OF LAGUNA vs. CTA, NWSA
8 SCRA 224 GR No. L-18125, May 31, 1963
"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."
FACTS:
National Waterworks and Sewerage Authority (NWSA), a public corporation owned by the
Government of the Philippines as well as all property comprising waterworks and sewerage
systems placed under it, took over the Cabuyao-Sta. Rosa-Biñan Waterworks System in 1956. It
was assessed by the Provincial Assessor of Laguna, for purposes of real estate taxes, on the real
properties owned by Cabuyao Waterworks. The respondent protested claiming it is exempted
from the payment of real estate taxes in view of the nature and kind of said property and
functions and activities of petitioner. The petitioner denied the protest arguing that such real
properties are subject to real estate tax because although said properties belong to the Republic
of the Philippines, the same holds it, not in its governmental, political or sovereign capacity, but
in a private, proprietary or patrimonial character, which, allegedly, is not covered by the
exemption contained in section 3(a) of Republic Act No. 470.

ISSUE:
Are the real properties owned by the respondent public corporation subject to real estate tax?

HELD:
No. 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 we, unless there are facts and
circumstances clearly showing that the lawmaker intended the contrary, but no such facts and
circumstances have been brought to our attention. Indeed, the noun "property" and the verb
"owned" used in said section 3(a) strongly suggest that the object of exemption is considered
more from the view point of dominion, than from that of domain.
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.
PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN
24 SCRA 789 GR No. L-22814, August 28, 1968

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

ISSUE:
Does the tax ordinance violate the uniformity requirement of taxation?

HELD:
Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on
the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the
uniformity required by the Constitution and the law therefor, since only sales by "agents or
consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for
or on behalf of other merchants, regardless of the volume of their sales, and even if the same
exceeded those made by said agents or consignees of producers or merchants established
outside the City of Butuan, would be exempt from the disputed tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not
require identity or equality under all circumstances, or negate the authority to classify the objects
of taxation. The classification made in the exercise of this authority, to be valid, must, however,
be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon
substantial distinctions which make real differences; (2) these are germane to the purpose of the
legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to
future conditions substantially identical to those of the present; and (4) the classification applies
equally to all those who belong to the same class.
PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN
69 SCRA 460 GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local self-government carries
with it the power to confer on such local governmental agencies the power to tax.
FACTS:
Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare
Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional
as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27
denominated as "municipal production tax" of the Municipality of Tanauan, Leyte, null and void.
Ordinance 23 levies and collects from soft drinks producers and manufacturers a tax of one-
sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27 levies and
collects on soft drinks produced or manufactured within the territorial jurisdiction of this
municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. Aside from the undue delegation of authority, appellant contends that it allows double
taxation, and that the subject ordinances are void for they impose percentage or specific tax.

ISSUE:
Are the contentions of the appellant tenable?
HELD:
No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is
an essential and inherent attribute of sovereignty, belonging as a matter of right to every
independent government, without being expressly conferred by the people. It is a power that is
purely legislative and which the central legislative body cannot delegate either to the executive
or judicial department of the government without infringing upon the theory of separation of
powers. The exception, however, lies in the case of municipal corporations, to which, said theory
does not apply. Legislative powers may be delegated to local governments in respect of matters
of local concern. By necessary implication, the legislative power to create political corporations
for purposes of local self-government carries with it the power to confer on such local
governmental agencies the power to tax.
Also, there is no validity to the assertion that the delegated authority can be declared
unconstitutional on the theory of double taxation. It must be observed that the delegating
authority specifies the limitations and enumerates the taxes over which local taxation may not
be exercised. The reason is that the State has exclusively reserved the same for its own
prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, so
that double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit
of the same governmental entity or by the same jurisdiction for the same purpose, but not in a
case where one tax is imposed by the State and the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage tax on
sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold
or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on the products, but there is not set
ratio between the volume of sales and the amount of the tax.
JOHN H. OSMEÑA vs. OSCAR ORBOS et al
G.R. No. 99886 March 31, 1993
FACTS:
October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the
General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to
reimburse oil companies for cost increases in crude oil and imported petroleum products
resulting from exchange rate adjustments and from increases in the world market prices of crude
oil. Subsequently, the OPSF was reclassified into a "trust liability account,". President Corazon C.
Aquino promulgated E. O. 137 expanding the grounds for reimbursement to oil companies for
possible cost under recovery incurred as a result of the reduction of domestic prices of petroleum
products.
The petitioner argues inter alia that "the monies collected pursuant to . . P.D. 1956, as amended,
must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special
tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a
special fund' to be used only for the purpose indicated, and not channeled to another
government objective." Petitioner further points out that since "a 'special fund' consists of
monies collected through the taxing power of a State, such amounts belong to the State, although
the use thereof is limited to the special purpose/objective for which it was created."
ISSUE:
Whether or not the funds collected under PD 1956 is an exercise of the power of taxation
RULING:
The levy is primarily in the exercise of the police power of the State. While the funds collected
may be referred to as taxes, they are exacted in the exercise of the police power of the State.
What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific
limit on how much to tax." The Court is cited to this requirement by the petitioner on the premise
that what is involved here is the power of taxation; but as already discussed, this is not the case.
What is here involved is not so much the power of taxation as police power. Although the
provision authorizing the ERB to impose additional amounts could be construed to refer to the
power of taxation, it cannot be overlooked that the overriding consideration is to enable the
delegate to act with expediency in carrying out the objectives of the law which are embraced by
the police power of the State.
It would seem that from the above-quoted ruling, the petition for prohibition should fail.