CITY ASSESSOR OF CEBU VS. ASSOCIATION OF BENEVOLA DE
Petitioner, City Assessor assessed the CHHMAC
CEBU
G.R 152904
JUNE 28, 2007
DOCTRINE:
Under the Local Government Code, Sec. 26: All lands, buildings and
other improvements thereon actually, directly and exclusively used for
hospitals, cultural or scientific purposes and those owned and used by
local water districts… shall be classified as special.
EMERGENCY RECIT:
Benevola de Cebu is a non-stock non-profit organization which in 1990,
a medical arts building was constructed and in 1998 was issued with a
certification classifying the building as commercial. City assessor of
Cebu assessed the building with a market value of Php 28,060,520 and
on assessed value of Php 9,821,180 at the assessment level of 35%
and not 10% which is currently imposed on private respondent herein.
Petitioner claimed that the building is used as commercial clinic/spaces
for renting out to physicians and thus classified as commercial. Benevola
de Cebu contended that the building is used actually, directly and
exclusively part of hospital and should have an assessment level of
10%. The new building should not be assessed as commercial,
thus – should have an assessment value of 10% since it is an
integral part of the hospital. Being a tertiary hospital, it is mandated to
fully departmentalized and be equipped with the service capabilities
needed to support certified medical specialist and other licensed
physicians. The fact that they are holding office is a separate building
does not take away the essence and nature of their services vis-a-vis
the overall operation of the hospital and to its patients.
FACTS:
1. Respondent, City Association of Benevola de Cebu, Inc. is a
non-stock, non-profit organization organized under the laws of
the Republic of the Philippines and is the owner of Chong Hua
Hospital (CHH) in Cebu City.
2. Petitioner, City Assessor of Cebu
a. In the late 1990s respondent constructed the CHH
Medical Arts Center (CHHMAC). Thereafter, a
Certificate of Occupancy was issued to the center with
a classification of Commercial Clinic
b.
building under Tax Declaration No. 97 GR-04-024-
02529 as commercial with a market value of
P28,060,520 and an assessed value of P9,821,180 at
the assessment level of 35% for commercial buildings,
and not at the 10% special assessment currently
imposed for CHH and its other separate buildings.
3. Respondent filed a letter petition with Cebu City Local Board of
Assessment (LBAA) for reconsideration, asserting that
CHHMAC is part of CHH and ought to be imposed the same
assessment level of 10%. Eventually, respondent pursues the
case in the court.
4. Petitioner asserts that CHHMAC is 100 meters away from CHH
and based on actual inspection, it was ascertained NOT part of
the CHH building but a separate building which is actually used
as commercial clinic/ room spaces for renting out to physicians
— and thus, classified as commercial.
5. CITY ASSESSOR
35% assessment rate
6. LOCAL BOARD ASSESSMENT Petitioner is entitled to a
10% assessment
It is public knowledge that hospitals have plenty of spaces
leased out to medical practicioners, which is both an accepted
and desirable fact.
7. CENTRAL BOARD ASSESSMENT THE COURT OF
APPEALS
Petitioner is entitled to a 10% assessment
The fact that the subject building is detached from the hospital
is of no consequence in favor of property used exclusively for
charitable and educational purposes is not only limited to
property indispensable to the hospital—but also extends to
facilities which are incidental and reasonably necessary for the
accomplishment of such purpose.
6. COURT OF APPEALS:
Petitioner is entitled to a 10% assessment
CHHMAC is part of CHH in line with ruling in Herrera on what
the term appurtenant thereto means.
ISSUE: Whether or not the new building is liable to pay the 35%
assessment level? NO
RULING:
Chong Hua Hospital Medical Arts Center is part of Chong Hua Hospital.

The new building is an integral part of the hospital and should not be
assessed as commercial. Being a tertiary hospital, it is mandated to fully
departmentalized and be equipped with the service capabilities needed
to support certified medical specialist and other licensed physicians. The
fact that they are holding office is a separate building does not take
away the essence and nature of their services vis-a-vis the overall
operation of the hospital and to its patients.

The CHHMAC facility is definitely incidental to and reasonably

necessary for the operations of Chong Hua Hospital. So the assessment
rate for purposes of realty tax should be 10%

It is undisputed that the doctors and medical specialists holding clinics in

the CHHMAC are those duly accredited by CHH—that is, they are
consultants of the hospital and the ones who can treat CHH patients
confined in it.

The fact that they are holding office in a separate building does not take
away the essence and nature of their services in the overall operation of
the hospital.

Sec. 6.3 Administrative Order No. 68 s. 1989—Revised Rules and

Regulations in Governing the Registration, Licensure and Operation of
Hospitals in the Philippines Legal Basis: Sec. 216 Local Government
Code— All lands, buildings and other improvements thereon actually,
directly and exclusively used for hospitals, cultural or scientific purposes
and those owned and used by local water districts; and GOCC rendering
special public service x x x shall be classified as special.

Thus, applying these legal provisions in line with the City Tax Ordinance
of Cebu City, the 10% special assessment rate should be imposed for
the CHHMAC building for being classified as special

OSMEÑA V ORBOS
GR NO 99886
MARCH 31, 1993
DOCTRINE:
To avoid the taint of unlawful delegation of the power to tax, there must
be a standard which implies that the legislature determines matter of
principle and lays down fundamental policy
For a valid delegation of power, it is essential that the law delegating the
power must be (1) complete in itself, that is it must set forth the policy to
be executed by the delegate and (2) it must fix a standard — limits of
which
are sufficiently determinate or determinable — to which the delegate
must conform.  amounts belong to the State, although the use thereof is limited
EMERGENCY RECIT:
President Marcos created a special account in the General Fund
designated as the Oil Price Stabilization Fund (OPSF). The OPSF was
designated to reimburse oil companies for cost increases in crude oil.
Subsequently, EO 137 expanded the grounds for reimbursement to oil
companies for cost underrecovery. Now, the petition avers that the
creation of the trust fund violates the Constitution that if a special tax is
collected for a specific purpose, the revenue generated as a special fund
to be used only for the purpose indicated. The petitioner avers that the
collection on oil products establishments is an undue and invalid
delegation of legislative power to tax. OPSF is Constitutional. The tax
collected is not in pure exercise of the taxing power. It is levied with a
regulatory purpose, to provide a means for the stabilization of the
ISSUE:
petroleum products industry. The levy is primarily in the exercise of the
Whether or not the funds collected under PD 1956 is an exercise of
police power of the State. 
the power of taxation? NO
FACTS:
1. 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).
2. 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,".
3. 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.
4. The petitioner (Sen. John Osmena) 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."
5. Petitioner further points out that since "a 'special fund' consists
of monies collected through the taxing power of a State, such
to the special purpose/objective for which it was created."
6. Issues raised by Petition:
a. the invalidity of the "TRUST ACCOUNT" in the books of
account of the Ministry of Energy
b. the unconstitutionality of § 8, paragraph 1 (c) of
P.D. No. 1956 as amended by Executive Order No.
137 for "being an undue and invalid delegation of
legislative power to the Energy Regulatory Board;
c. the illegality of the reimbursements to oil companies,
paid out of the Oil Price Stabilization Fund, and
d. the consequent nullity of the Order dated December 10,
1990 and the necessity of a rollback of the pump prices
and petroleum products to the levels prevailing prior to
the said Order.
Whether or not there is undue and invalid delegation of legislative
powers to tax? NO
RULING:
(1) 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.
The OPSF is a buffer mechanism through which the domestic consumer
prices of oil and petroleum products are stabilized. To the extent that
some tax revenues are also put into it, the OPSF is in effect a device
through which the domestic prices of petroleum products are subsidized
in part. Hence, it seems clear that while the funds collected may be
referred to as taxes; they are exacted in the exercise of the police power
of the State.
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.
(2) NO UNDUE DELEGATION OF LEGISLATIVE POWER
The Court finds that the provision conferring the authority upon the ERB
to impose additional amounts on petroleum products provides a
sufficient standard by which the authority must be exercised. In addition
to the general policy of the law to protect the local consumer by
stabilizing and subsidizing domestic pump rates, § 8(c) of P.D. 1956 18
expressly authorizes the ERB to impose additional amounts to augment
the resources of the Fund.
The overriding consideration in the provision authorizing the ERB to
impose additional amounts 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.
THE PD SATISFIES THE REQUIREMENTS FOR VALID
DELEGATION OF POWER
For a valid delegation of power, it is essential that the law delegating the
power must he
(1) complete in itself, that is it must set forth the policy to be executed by
the delegate and
(2) it must x a standard — limits of which are sufficiently determinate or
determinable —to which the delegate must conform
The express purpose for which the imposts are permitted and the
general objectives and purposes of the fund are readily discernible, and
they constitute a sufficient standard upon which the delegation of power
may be justified. Thus, there is no undue delegation of power in this
case
DISPOSITIVE
WHEREFORE, the petition is GRANTED insofar as it prays for the
nullification of the reimbursement of financing charges, paid pursuant to
E.O. 137, and DISMISSED in all other respects.
SO ORDERED.
NOTES:
REIMBURSEMENT OF FINANCING CHARGES NOT AUTHORIZED
BY PD 1956
The Court finds for the petitioner and thus holds, that the reimbursement
of financing charges is not authorized by paragraph 2 of § 5 of P.D.
1956, for the reason that they were not incurred as a result of the
reduction of domestic prices of petroleum products. Under the same
provision, however, the payment of inventory losses is upheld as valid,
being clearly a result of domestic price reduction, when oil companies
incur a cost under recovery for yet unsold stocks of oil in inventory
acquired at a higher price.
Finally, the Court finds no necessity to rule on the remaining issue, the
same having been rendered moot and academic. As of date hereof, the
pump rates of gasoline have been reduced to levels below even those
prayed for in the petition.

PHILEX MINING CORPORATION V CIR
GR NO 125704
AUGUST 28, 1998
DOCTRINE:
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.
EMERGENCY RECIT:
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. There can be no
legal compensation. The government and the taxpayer are not
creditors and debtors of each other. BIR has violated the NIRC since it
took 5 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. However, the violation of the BIR cannot
justify non payment by Philex. 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.
FACTS:
1. On August 5, 1992, the BIR sent a letter to Philex asking it to
settle its excise tax liabilities amounting to 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 for
the taxes it paid for the years 1989 to 1991 in the amount of
P119,977,037.02 plus interest. Therefore, these claims for tax
credit/refund should be applied against the tax liabilities.
2. In reply, the BIR held that since these pending claims have not
yet been established or determined with certainty, it follows that
no legal compensation can take place. Hence, the BIR
reiterated its demand that Philex settle the amount plus interest
within 30 days from the receipt of the letter.
3. Philex raised the issue to the Court of Tax Appeals and in the
course of the proceedings, the BIR issued a Tax Credit
Certificate SN 001795 in the amount of P13,144,313.88 which,
applied to the total tax liabilities of Philex of P123,821,982.52;
effectively lowered the latter’s tax obligation of
P110,677,688.52.
4. Despite the reduction of its tax liabilities, the CTA still ordered
Philex to pay the remaining balance of P110,677,688.52 plus
interest, elucidating its reason that “taxes cannot be subject to
set-off on compensation since claim for taxes is not a debt or
contract.
5. Philex appealed the case before the Court of Appeals.
Nonetheless, the Court of Appeals affirmed the Court of Tax
Appeals observation. Philex filed a motion for reconsideration
which was again denied. However, a few days after the denial
of its motion for reconsideration, Philex was able to obtain its
VAT input credit/refund not only for the taxable year 1989 to
1991 but also for 1992 and 1994, computed amounting to
205,595,289.20.
6. In view of the grant of its VAT input credit/refund, Philex now
contends that the same should, ipso jure, off-set its excise tax
liabilities since both had already become “due and demandable,
as well as fully liquidated;” hence, legal compensation can
properly take place.
ISSUE: Whether or not the petitioner is correct in its contention
that tax liability and VAT input credit/refund can be subjected to
legal compensation? NO
RULING:
The Supreme Court has already made the pronouncement that taxes
cannot be subject to compensation for the simple reason that the
government and the taxpayer are not creditors and debtors of each WHEREFORE, the instant petition is hereby DENIED, and the assailed
other. There is a material distinction between a tax and debt. Debts are decision of the Court of Appeals is hereby AFFIRMED.
due to the Government in its corporate capacity, while taxes are due to
the Government in its sovereign capacity.

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.

Philex is not 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
distinguishing feature of a tax is that it is compulsory rather than a matter
of bargain.

Hence, a tax does not depend upon the consent of the taxpayer. If any
payer 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.

Moreover, Philex's theory that would automatically apply its VAT input
credit/refund against its tax liabilities can easily give rise to confusion
and abuse, depriving the government of authority over the manner by
which taxpayers credit and offset their tax liabilities.

"The power of taxation is sometimes called also the power to destroy.

Therefore it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer.

It must be exercised fairly, equally and uniformly, lest the tax collector kill
the 'hen that lays the golden egg.' And, in the order to maintain the
general public's trust and confidence in the Government this power must
be used justly and not treacherously."

DISPOSITIVE: