TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES

I. TAXATION DISTINGUISHED FROM POLICE POWER AND EMMINENT DOMAIN

ISSUE:
Are the milling companies liable?
G.R. NO. 159796 JULY 17, 2007
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) AND ENVIRONMENTALIST CONSUMERS NETWORK, INC. RULING:
(ECN), PETITIONERS Yes. The special assessment or levy for the Philippine Sugar Institute Fund is not so much an exercise of the power of
VS taxation, nor the imposition of a special assessment, but the exercise of police power for the general welfare of the
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL POWER entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist.
CORPORATION (NPC), POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT GROUP (PSALM CORP.), Section 2a of the charter authorizes Philsugin to acquire the refinery in question. The financial loss resulting from the
STRATEGIC POWER UTILITIES GROUP (SPUG), AND PANAY ELECTRIC COMPANY INC. (PECO), operation thereof is no means an index that the industry did profit therefrom, as other gains of a different nature (such
RESPONDENTS. as experience) may have been realized.

FACTS:
G.R. No. 141667 July 17, 2006
On June 8, 2001 Congress enacted RA 9136 or the Electric Power Industry Act of 2001. Petitioners Romeo P. Gerochi
REPUBLIC OF THE PHILIPPINES, represented by NATIONAL ELECOMMUNICATIONS COMMISSION
and company assail the validity of Section 34 of the EPIRA Law for being an undue delegation of the power of taxation.
(NTC), petitioner,
Section 34 provides for the imposition of a “Universal Charge” to all electricity end users after a period of (1) one year
vs.
after the effectively of the EPIRA Law. The universal charge to be collected would serve as payment for government
INTERNATIONAL COMMUNICATIONS CORPORATION (ICC), respondent.
debts, missionary electrification, equalization of taxes and royalties applied to renewable energy and imported energy,
DECISION
environmental charge and for a charge to account for all forms of cross subsidies for a period not exceeding three
GARCIA, J.:
years. The universal charge shall be collected by the ERC on a monthly basis from all end users and will then be
In this petition for review under Rule 45 of the Rules of Court, petitioner Republic, through the National
managed by the PSALM Corp. through the creation of a special trust fund.
Telecommunications Commission (NTC), seeks the annulment and setting aside of the Amended Decision1 dated
September 30, 1999 of the Court of Appeals (CA), setting aside the orders dated June 4, 1996 and June 25, 1997 of
ISSUE:
the NTC insofar as said orders required respondent International Communications Corporation (ICC) to pay the amount
of P1,190,750.50 by way of permit fee as a condition for the grant of a provisional authority to operate an international
Whether or not there is an undue delegation of the power to tax on the part of the ERC
telecommunications leased circuit service, and the Resolution2 dated January 24, 2000, denying NTC's motion for
reconsideration.
HELD:
There is no dispute as to the facts:
On April 4, 1995, respondent ICC, holder of a legislative franchise under Republic Act (RA) No. 7633 to operate domestic
No, the universal charge as provided for in section 34 is not a tax but an exaction of the regulatory power (police power)
telecommunications, filed with the NTC an application for a Certificate of Public Convenience and Necessity to install,
of the state. The universal charge under section 34 is incidental to the regulatory duties of the ERC, hence the provision
operate, and maintain an international telecommunications leased circuit service between the Philippines and other
assailed is not for generation of revenue and therefore it cannot be considered as tax, but an execution of the states
countries, and to charge rates therefor, with provisional authority for the purpose.
police power thru regulation.
In an Order3 dated June 4, 1996, the NTC approved the application for a provisional authority subject, among others,
to the condition:
Moreover, the amount collected is not made certain by the ERC, but by the legislative parameters provided for in the
2. That applicant [ICC] shall pay a permit fee in the amount of P1,190,750.00, in accordance with section 40(g) of the
law (RA 9136) itself, it therefore cannot be understood as a rule solely coming from the ERC. The ERC in this case is
Public Service Act,4 as amended;
only a specialized administrative agency which is tasked of executing a subordinate legislation issued by congress;
Respondent ICC filed a motion for partial reconsideration of the Order insofar as the same required the payment of a
which before execution must pass both the completeness test and the sufficiency of standard test. The court in
permit fee. In a subsequent Order dated June 25, 1997, the NTC denied the motion.
appreciating Section 34 of RA 9136 in its entirety finds the said law and the assailed portions free from any constitutional
Therefrom, ICC went to the CA on a petition for certiorari with prayer for a temporary restraining order and/or writ of
defect and thus deemed complete and sufficient in form.
preliminary injunction, questioning the NTC's imposition against it of a permit fee of P1,190,750.50 as a condition for
the grant of the provisional authority applied for.
REPUBLIC OF THE PHILIPPINES V BACOLOD-MURCIA (1966) In its original decision5 dated January 29, 1999, the CA ruled in favor of the NTC whose challenged orders were
sustained, and accordingly denied ICC's certiorari petition, thus:
Republic of the Philippines v Bacolod-Murcia GR No. L-19824, L-19825, L-19826 WHEREFORE, the instant petition is hereby DENIED. In view thereof, the assailed orders dated 4 June 1996 and 25
July 9, 1966 June 1997, requiring the payment of permit fees in the amount of One Million One Hundred Ninety Thousand Seven
Hundred Fifty and 50/100 Pesos (P1,190,750.50) as a condition for the grant of a Provisional Authority to operate an
FACTS: International Circuit service, are hereby AFFIRMED. ACCORDINGLY, the International Communications Corporation is
RA 632 created the Philippine Sugar Institute, a semi-public corporation. In 1951, the Institute acquired the Insular hereby ordered to pay the amount of One Million One Hundred Ninety Thousand Seven Hundred Fifty and 50/100 Pesos
Sugar Refinery for P3.07 million payable in installments from the proceeds of the Sugar tax to be collected under RA (P1,190,750.50) to the National Telecommunications Commission.
632. The operation of the refinery for 1954 to 1957 was disastrous as the Institute suffered tremendous losses. SO ORDERED.
Contending that the purchase of refinery with money from the Institute’s fund was not authorized under RA 632, and In time, ICC moved for a reconsideration. This time, the CA, in its Amended Decision dated September 30, 1999,
that the continued operation of the refinery is inimical to their interest, Bacolod-Murcia Milling Co., Ma-ao Sugar Central, reversed itself, to wit:
Talisay-Silay Milling Co. and the Central Azucarera del Danao refused to continue with their contribution to said fund. WHEREFORE, the instant Motion for Reconsideration is hereby GRANTED. Accordingly, the Decision dated 29 January
The trial court found them liable under RA 632. Hence, this petition. 1999 including the imposition by the public respondent of permit fees with respect to [ICC’s] international leased circuit
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES
service is hereby REVERSED. Judgment is hereby rendered, setting aside the questioned orders dated 04 June 1996
and 25 June 1997, insofar as they impose upon petitioner ICC the payment of the amount of One Million One Hundred
Ninety Thousand Seven Hundred Fifty and Fifty Centavos (P1,190,750.50) by way of permit fees as a condition for the
grant of a provisional authority to operate an International Leased Circuit Service. No costs.
SO ORDERED. (Word in bracket added).
Petitioner NTC filed a motion for reconsideration, but its motion was denied by the CA in its equally challenged Resolution
dated January 24, 2000. Hence, NTC's present recourse claiming that the CA erred in ruling that:
1. NTC has arrogated upon itself the power to tax an entity;
2. Section 40(g) of the Public Service Act has been amended by Section 5(g) of R.A. 7925; 6
3. The imposition of permit fees is no longer authorized by R.A. 7925; and
4. The imposed permit fee in the amount of P1,190,750.50 for respondent's provisional authority is exorbitant.
Before addressing the issues raised, we shall first dwell on the procedural matter raised by respondent ICC, namely,
that the present petition should be dismissed outright for having been filed out of time. It is respondent's posture that
petitioner's motion for reconsideration filed with the CA vis-a-vis the latter's Amended Decision is a pro forma motion
and, therefore, did not toll the running of the reglementary period to come to this Court via this petition for review.
Under Section 2 of Rule 45 of the Rules of Court, a recourse to this Court by way of a petition for review must be filed
within fifteen (15) days from notice of the judgment or final order or resolution appealed from, or of the denial of the
petitioner's motion for new trial or reconsideration filed in due time after notice of the judgment. While a motion for
reconsideration ordinarily tolls the period for appeal, one that fails to point out the findings or conclusions which were
supposedly contrary to law or the evidence does not have such an effect on the reglementary period as it is merely a
pro forma motion.7
In arguing for the outright dismissal of this petition, respondent ICC claims that the motion for reconsideration filed by
petitioner NTC in connection with the CA’s Amended Decision failed to point out specifically the findings or conclusions
of the CA which were supposedly contrary to law. Respondent contends that the issues raised by the petitioner in its
motion for reconsideration were mere reiterations of the same issues which had already been considered and passed
upon by the CA when it promulgated its Amended Decision. On this premise, respondent maintains that petitioner’s
aforementioned motion for reconsideration is a mere pro forma motion that did not toll the period for filing the present
petition.
Under established jurisprudence, the mere fact that a motion for reconsideration reiterates issues already passed upon
by the court does not, by itself, make it a pro forma motion.8 Among the ends to which a motion for reconsideration is
addressed is precisely to convince the court that its ruling is erroneous and improper, contrary to the law or evidence;
and in so doing, the movant has to dwell of necessity on issues already passed upon. If a motion for reconsideration
may not discuss those issues, the consequence would be that after a decision is rendered, the losing party would be
confined to filing only motions for reopening and new trial.9
Where there is no apparent intent to employ dilatory tactics, courts should be slow in declaring outright a motion for
reconsideration as pro forma. The doctrine relating to pro forma motions has a direct bearing upon the movant's
valuable right to appeal. Hence, if petitioner's motion for reconsideration was indeed pro forma, it would still be in the
interest of justice to review the Amended Decision a quo on the merits, rather than to abort the appeal due to a
technicality, especially where, as here, the industry involved (telecommunications) is vested with public interest. All the
more so given that the instant petition raises some arguments that are well-worth resolving for future reference.
This brings us to the substantive merits of the petition.
In its Amended Decision, the CA ruled that petitioner NTC had arrogated upon itself the power to tax an entity, which
it is not authorized to do. Petitioner disagreed, contending the fee in question is not in the nature of a tax, but is merely
a regulatory measure.
Section 40(g) of the Public Service Act provides:
Sec. 40. The Commission is authorized and ordered to charge and collect from any public service or applicant, as the
case may be, the following fees as reimbursement of its expenses in the authorization, supervision and/or
regulation of the public services:
xxx xxx xxx
g) For each permit, authorizing the increase in equipment, the installation of new units or authorizing the increase of
capacity, or the extension of means or general extensions in the services, twenty centavos for each one hundred pesos
or fraction of the additional capital necessary to carry out the permit. (Emphasis supplied)
Clearly, Section 40(g) of the Public Service Act is not a tax measure but a simple regulatory provision for the collection
of fees imposed pursuant to the exercise of the State’s police power. A tax is imposed under the taxing power of
JENNICA GYRL DELFIN| AMDG+
government principally for the purpose of raising revenues. The law in question, however, merely authorizes and
requires the collection of fees for the reimbursement of the Commission's expenses in the authorization, supervision
and/or regulation of public services. There can be no doubt then that petitioner NTC is authorized to collect such fees.
However, the amount thereof must be reasonably related to the cost of such supervision and/or regulation. 10
Petitioner NTC also assails the CA's ruling that Section 40(g) of the Public Service Act had been amended by Section
5(g) of R.A. No. 7925, which reads:
Sec. 5. Responsibilities of the National Telecommunications Commission. - The National Telecommunications
Commission (Commission) shall be the principal administrator of this Act and as such shall take the necessary measures
to implement the policies and objectives set forth in this Act. Accordingly, in addition to its existing functions, the
Commission shall be responsible for the following:
xxx xxx xxx
g) In the exercise of its regulatory powers, continue to impose such fees and charges as may be necessary to
cover reasonable costs and expenses for the regulation and supervision of the operations of
telecommunications entities. (Emphasis supplied)
The CA ratiocinated that while Section 40(g) of the Public Service Act (CA 146, as amended), supra, allowed NTC to
impose fees as reimbursement of its expenses related to, among other things, the "authorization" of public services,
Section 5(g), above, of R.A. No. 7921 no longer speaks of "authorization" but only of "regulation" and "supervision." To
the CA, the omission by Section 5(g) of R.A. No. 7921 of the word "authorization" found in Section 40(g) of the Public
Service Act, as amended, meant that the fees which NTC may impose are only for reimbursement of its expenses for
regulation and supervision but no longer for authorization purposes.
We find, however, that NTC is correct in saying that there is no showing of legislative intent to repeal, even impliedly,
Section 40(g), supra, of the Public Service Act, as amended. An implied repeal is predicated on a substantial conflict
between the new and prior laws. In the absence of an express repeal, a subsequent law cannot be construed as
repealing a prior one unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and old
laws.11 The two laws must be absolutely incompatible such that they cannot be made to stand together.12
Courts of justice, when confronted with apparently conflicting statutes or provisions, should endeavor to reconcile the
same instead of declaring outright the validity of one as against the other. Such alacrity should be avoided. The wise
policy is for the judge to harmonize such statutes or provisions if this is possible, bearing in mind that they are equally
the handiwork of the same legislature, and so give effect to both while at the same time also according due respect to
a coordinate department of the government. It is this policy the Court will apply in arriving at the interpretation of the
laws and the conclusions that should follow therefrom.13
It is a rule of statutory construction that repeals by implication are not favored. An implied repeal will not be allowed
unless it is convincingly and unambiguously demonstrated that the two laws are so clearly repugnant and patently
inconsistent with each other that they cannot co-exist. This is based on the rationale that the will of the legislature
cannot be overturned by the judicial function of construction and interpretation. Courts cannot take the place of
Congress in repealing statutes. Their function is to try to harmonize, as much as possible, seeming conflicts in the laws
and resolve doubts in favor of their validity and co-existence.14
Here, there does not even appear to be a conflict between Section 40(g) of the Public Service Act, as amended, and
Section 5(g) of R.A. 7925. In fact, the latter provision directs petitioner NTC to "continue to impose such fees and
charges as may be necessary to cover reasonable costs and expenses for the regulation and supervision of
telecommunications entities." The absence alone of the word "authorization" in Section 5(g) of R.A. No. 7921 cannot
be construed to mean that petitioner NTC had thus been deprived of the power to collect such fees. As pointed out by
the petitioner, the words "authorization, supervision and/or regulation" used in Section 40(g) of the Public Service Act
are not distinct and completely separable concepts which may be taken singly or piecemeal. Taken in their entirety,
they are the quintessence of the Commission's regulatory functions, and must go hand-in-hand with one another. In
petitioner's own words, "[t]he Commission authorizes, supervises and regulates telecommunications entities and these
functions... cannot be considered singly without destroying the whole concept of the Commission's regulatory
functions."15 Hence, petitioner NTC is correct in asserting that the passage of R.A. 7925 did not bring with it the abolition
of permit fees.
However, while petitioner had made some valid points of argument, its position must, of necessity, crumble on the
fourth issue raised in its petition. Petitioner itself admits that the fees imposed are precisely regulatory and supervision
fees, and not taxes. This necessarily implies, however, that such fees must be commensurate to the costs and expenses
involved in discharging its supervisory and regulatory functions. In the words of Section 40(g) of the Public Service Act
itself, the fees and charges which petitioner NTC is authorized to collect from any public service or applicant are limited
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES

to the "reimbursement of its expenses in the authorization, supervision and/or regulation of public services." It is difficult operation of motor vehicles on public highways, but to provide revenue with which the Government is to construct and
to comprehend how the cost of licensing, regulating, and surveillance could amount to P1,190,750.50. The CA was maintain public highways for everyone’s use, they are veritable taxes, not merely fees.
correct in finding the amount imposed as permit fee exorbitant and in complete disregard of the basic limitation that PAL is, thus, exempt from paying such fees, except for the period between June 27, 1968 to April 9, 1979, where its
the fee should be at least approximately commensurate to the expense. Petitioner itself admits that it had imposed the tax exception in the franchise was repealed.
maximum amount possible under the Public Service Act, as amended. That is hardly taking into consideration the actual
costs of fulfilling its regulatory and supervisory functions. MANILA MEMORIAL PARK, INC v. SECRETARY OF DSWD
Independent of the above, there is one basic consideration for the dismissal of this petition, about which petitioner NTC 711 SCRA 302
did not bother to comment at all. We refer to the fact that, as respondent ICC aptly observed, the principal ground G.R. No. 175356
given by the CA in striking down the imposition of the P1,190,750.50 fee is that respondent ICC is entitled to the December 3, 2013
benefits of the so-called "parity clause" embodied in Section 23 of R.A. No. 7925, to wit:
Section 23. Equality of Treatment in the Telecommunications Industry. - Any advantage, favor, privilege, exemption, or
immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously TOPIC: Bill of Rights; Eminent Domain v. Police Power
granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such
franchises x x x. FACTS: RA 7432 was passed into law (amended by RA 9257), granting senior citizens 20% discount on certain
In this connection, it is significant to note that the subsequent congressional franchise granted to the Domestic Satellite establishments.
Corporation under Presidential Decree No. 947, states:
Section 6. In consideration of the franchise and rights hereby granted, the grantee shall pay to the Republic of the To implement the tax provisions of RA 9257, the Secretary of Finance and the DSWD issued its own Rules and
Philippines during the life of this franchise a tax of one-half percent of gross earnings derived by the grantee from its Regulations.
operation under this franchise and which originate from the Philippines. Such tax shall be due and payable annually
within ten days after the audit and approval of the accounts by the Commission on Audit as prescribed in Section 11 Hence, this petition.
hereof and shall be in lieu of all taxes, assessments, charges, fees, or levies of any kind, nature, or
description levied, established or collected by any municipal, provincial, or national authority x x x Petitioners are not questioning the 20% discount granted to senior citizens but are only assailing the constitutionality
(Emphasis supplied) of the tax deduction scheme prescribed under RA 9257 and the implementing rules and regulations issued by the DSWD
The CA was correct in ruling that the above-quoted provision is, by law, considered as ipso facto part of ICC's franchise and the DOF.
due to the "parity clause" embodied in Section 23 of R.A. No. 7925. Accordingly, respondent ICC cannot be made
subject to the payment of the subject fees because its payment of the franchise tax is "in lieu" of all other taxes and Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of the Constitution, which provides
fees. that: "private property shall not be taken for public use without just compensation."
WHEREFORE, the petition is hereby DENIED and the assailed Amended Decision and Resolution of the CA
are AFFIRMED. Respondents maintain that the tax deduction scheme is a legitimate exercise of the State’s police power.
SO ORDERED.
ISSUE: Whether the legally mandated 20% senior citizen discount is an exercise of police power or eminent domain.

RULING: The 20% senior citizen discount is an exercise of police power.

PHILIPPINE AIRLINES V EDU
GR NO L-41383, AUGUST 15, 1988 It may not always be easy to determine whether a challenged governmental act is an exercise of police power or
eminent domain. The judicious approach, therefore, is to look at the nature and effects of the challenged governmental
FACTS: act and decide on the basis thereof.
PAL is engaged in the air transportation business under a legislative franchise (Act 4271), wherein it is exempt from the
payment of taxes. On the strength of an opinion of the Secretary of Justice, PAL was determined to have not been The 20% discount is intended to improve the welfare of senior citizens who, at their age, are less likely to be gainfully
paying motor vehicle registration fees since 1956. The Land Transportation Commissioner required all tax-exempt employed, more prone to illnesses and other disabilities, and, thus, in need of subsidy in purchasing basic commodities.
entities, including PAL, to pay motor vehicle registration fees. PAL protested. The trial court dismissed PAL’s complaint. It serves to honor senior citizens who presumably spent their lives on contributing to the development and progress of
Hence, this petition. the nation.

ISSUE: In turn, the subject regulation affects the pricing, and, hence, the profitability of a private establishment.
Are motor vehicle registration fees taxes or regulatory taxes?
The subject regulation may be said to be similar to, but with substantial distinctions from, price control or rate of return
RULING: on investment control laws which are traditionally regarded as police power measures.
They are taxes. Tax are for revenue, whereas fees are exactions for purposes of regulation and inspection, and are for
that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. The subject regulation differs there from in that (1) the discount does not prevent the establishments from adjusting
It is the object of the charge, and not the name, that determines whether a charge is a tax or a fee. The money the level of prices of their goods and services, and (2) the discount does not apply to all customers of a given
collected under the Motor Vehicle Law is not intended for the expenditures of the Motor Vehicle Law is not intended for establishment but only to the class of senior citizens. Nonetheless, to the degree material to the resolution of this case,
the expenditures of the Motor Vehicles Office but accrues to the funds for the construction and maintenance of public the 20% discount may be properly viewed as belonging to the category of price regulatory measures which affect the
roads, streets and bridges. profitability of establishments subjected thereto. On its face, therefore, the subject regulation is a police power measure.
As the fees are not collected for regulatory purposes as an incident to the enforcement of regulations governing the
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES
Commissioner of Internal Revenue vs. Central Luzon Drug Corporation
G.R. No. 159647 April 15, 2005
Facts:
Respondents operated six drugstores under the business name Mercury Drug. From January to December 1996
respondent granted 20% sales discount to qualified senior citizens on their purchases of medicines pursuant to RA 7432
for a total of ₱ 904,769.
On April 15, 1997, respondent filed its annual Income Tax Return for taxable year 1996 declaring therein net losses.
On Jan. 16, 1998 respondent filed with petitioner a claim for tax refund/credit of ₱ 904,769.00 allegedly arising from
the 20% sales discount. Unable to obtain affirmative response from petitioner, respondent elevated its claim to the
Court of Tax Appeals. The court dismissed the same but upon reconsideration, the latter reversed its earlier ruling and
ordered petitioner to issue a Tax Credit Certificate in favor of respondent citing CA GR SP No. 60057 (May 31, 2001,
Central Luzon Drug Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or erroneously
paid taxes but that there are other situations which may warrant a tax credit/refund.
CA affirmed Court of Tax Appeal's decision reasoning that RA 7432 required neither a tax liability nor a payment of
taxes by private establishments prior to the availment of a tax credit. Moreover, such credit is not tantamount to an
unintended benefit from the law, but rather a just compensation for the taking of private property for public use.
Issue:
Whether or not respondent, despite incurring a net loss, may still claim the 20% sales discount as a tax credit.
Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount on their
purchase of medicine from any private establishment in the country. The latter may then claim the cost of the discount
as a tax credit. Such credit can be claimed even if the establishment operates at a loss.
A tax credit generally refers to an amount that is “subtracted directly from one’s total tax liability.” It is an “allowance
against the tax itself” or “a deduction from what is owed” by a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts. One of these is tax deduction – which is subtraction
“from income for tax purposes,” or an amount that is “allowed by law to reduce income prior to the application of the
tax rate to compute the amount of tax which is due.” In other words, whereas a tax credit reduces the tax due, tax
deduction reduces the income subject to tax in order to arrive at the taxable income.
A tax credit is used to reduce directly the tax that is due, there ought to be a tax liability before the tax credit can be
applied. Without that liability, any tax credit application will be useless. There will be no reason for deducting the latter
when there is, to begin with, no existing obligation to the government. However, as will be presented shortly, the
existence of a tax credit or its grant by law is not the same as the availment or use of such credit. While the grant is
mandatory, the availment or use is not. If a net loss is reported by, and no other taxes are currently due from, a
business establishment, there will obviously be no tax liability against which any tax credit can be applied. For the
establishment to choose the immediate availment of a tax credit will be premature and impracticable.
CARLOS SUPERDRUG ET. AL V. DSWD G.R. NO. 166494 JUNE 29, 2007
FACTS:
Petitioners are domestic corporations and proprietors operating drugstores in the Philippines.
Public respondents, on the other hand, include the DSWD, DOH, DOF, DOJ, and the DILG, specifically tasked to monitor
the drugstores’ compliance with the law; promulgate the implementing rules and regulations for the effective
implementation of the law; and prosecute and revoke the licenses of erring drugstore establishments.
President Gloria Macapagal-Arroyo signed into law R.A. No. 9257 otherwise known as the “Expanded Senior Citizens
Act of 2003.”
JENNICA GYRL DELFIN| AMDG+
Sec. 4(a) of the Act states that The senior citizens shall be entitled to the following: (a) the grant of twenty percent
(20%) discount from all establishments relative to the utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment
of senior citizens, including funeral and burial services for the death of senior citizens;
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of private property.
Compelling drugstore owners and establishments to grant the discount will result in a loss of profit and capital
because according to them drugstores impose a mark-up of only 5% to 10% on branded medicines, and the law failed
to provide a scheme whereby drugstores will be justly compensated for the discount.
ISSUE:
WON RA 9257 is constitutional.
HELD:
YES. The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare
for its object. Police power is not capable of an exact definition, but has been purposely veiled in general terms to
underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response
to conditions and circumstances, thus assuring the greatest benefits. Accordingly, it has been described as the most
essential, insistent and the least limitable of powers, extending as it does to all the great public needs. It is [t]he power
vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable
laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge
to be for the good and welfare of the commonwealth, and of the subjects of the same.
For this reason, when the conditions so demand as determined by the legislature, property rights must bow to the
primacy of police power because property rights, though sheltered by due process, must yield to general welfare.
Police power as an attribute to promote the common good would be diluted considerably if on the mere plea of
petitioners that they will suffer loss of earnings and capital, the questioned provision is invalidated. Moreover, in the
absence of evidence demonstrating the alleged confiscatory effect of the provision in question, there is no basis for its
nullification in view of the presumption of validity which every law has in its favor.
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is unduly oppressive to
their business, because petitioners have not taken time to calculate correctly and come up with a financial report, so
that they have not been able to show properly whether or not the tax deduction scheme really works greatly to their
disadvantage.
In treating the discount as a tax deduction, petitioners insist that they will incur losses. However,petitioner’s computation
is clearly flawed.
For purposes of reimbursement, the law states that the cost of the discount shall be deducted from gross income, the
amount of income derived from all sources before deducting allowable expenses, which will result in net income. Here,
petitioners tried to show a loss on a per transaction basis, which should not be the case. An income statement, showing
an accounting of petitioners sales, expenses, and net profit (or loss) for a given period could have accurately reflected
the effect of the discount on their income. Absent any financial statement, petitioners cannot substantiate their claim
that they will be operating at a loss should they give the discount. In addition, the computation was erroneously based
on the assumption that their customers consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed
on income, not on the amount of the discount.
While the Constitution protects property rights, petitioners must accept the realities of business and the State, in the
exercise of police power, can intervene in the operations of a business which may result in an impairment of property
rights in the process.
J. TAXES CLASSIFIED
II. LIMITATION OF THE TAXONG POWER
A. INHERENT LIMITSTIOND OF THE TAXING POWER
G.R. No. 92389 September 11, 1991
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES
HON. JEJOMAR C. BINAY and the MUNICIPALITY OF MAKATI, petitioners,
vs.
HON. EUFEMIO DOMINGO and the COMMISSION ON AUDIT, respondents.
Jejomar C. Binay for himself and for his co-petitioner.
Manuel D. Tamase and Rafael C. Marquez for respondents.
PARAS, J.:
The only pivotal issue before Us is whether or not Resolution No. 60, re-enacted under Resolution No. 243, of the
Municipality of Makati is a valid exercise of police power under the general welfare clause.
The pertinent facts are:
On September 27, 1988, petitioner Municipality, through its Council, approved Resolution No. 60 which reads:
A RESOLUTION TO CONFIRM AND/OR RATIFY THE ONGOING BURIAL ASSISTANCE PROGRAM INITIATED BY THE
OFFICE OF THE MAYOR, OF EXTENDING FINANCIAL ASSISTANCE OF FIVE HUNDRED PESOS (P500.00) TO A
BEREAVED FAMILY, FUNDS TO BE TAKEN OUT OF UNAPPROPRIATED AVAILABLE FUNDS EXISTING IN THE MUNICIPAL
TREASURY. (Rollo, Annnex "A" p. 39)
Qualified beneficiaries, under the Burial Assistance Program, are bereaved families of Makati whose gross family income
does not exceed two thousand pesos (P2,000.00) a month. The beneficiaries, upon fulfillment of other requirements,
would receive the amount of five hundred pesos (P500.00) cash relief from the Municipality of Makati. (Reno, Annex
"13", p. 41)
Metro Manila Commission approved Resolution No. 60. Thereafter, the municipal secretary certified a disbursement
fired of four hundred thousand pesos (P400,000.00) for the implementation of the Burial Assistance Program. (Rollo,
Annex "C", p. 43).
Resolution No. 60 was referred to respondent Commission on Audit (COA) for its expected allowance in audit. Based
on its preliminary findings, respondent COA disapproved Resolution No. 60 and disallowed in audit the disbursement of
finds for the implementation thereof. (Rollo, Annex "D", P. 44)
Two letters for reconsideration (Annexes "E" and "F", Rollo, pp. 45 and 48, respectively) filed by petitioners Mayor
Jejomar Binay, were denied by respondent in its Decision No. 1159, in the following manner:
Your request for reconsideration is predicated on the following grounds, to wit:
1. Subject Resolution No. 60, s. 1988, of the Municipal Council of Makati and the intended disbursements fall within the
twin principles of 'police power and parens patriae and
2. The Metropolitan Manila Commission (MMC), under a Certification, dated June 5, 1989, has already appropriated the
amount of P400,000.00 to implement the Id resolution, and the only function of COA on the matter is to allow the
financial assistance in question.
The first contention is believed untenable. Suffice it to state that:
a statute or ordinance must have a real substantial, or rational relation to the public safety, health, morals, or general
welfare to be sustained as a legitimate exercise of the police power. The mere assertion by the legislature that a statute
relates to the public health, safety, or welfare does not in itself bring the statute within the police power of a state for
there must always be an obvious and real connection between the actual provisions of a police regulations and its
avowed purpose, and the regulation adopted must be reasonably adapted to accomplish the end sought to be attained.
16 Am. Jur 2d, pp. 542-543; emphasis supplied).
Here, we see no perceptible connection or relation between the objective sought to be attained under Resolution No.
60, s. 1988, supra, and the alleged public safety, general welfare, etc. of the inhabitants of Makati.
Anent the second contention, let it be stressed that Resolution No. 60 is still subject to the limitation that the expenditure
covered thereby should be for a public purpose, i.e., that the disbursement of the amount of P500.00 as burial assistance
to a bereaved family of the Municipality of Makati, or a total of P400,000.00 appropriated under the Resolution, should
be for the benefit of the whole, if not the majority, of the inhabitants of the Municipality and not for the benefit of only
a few individuals as in the present case. On this point government funds or property shall be spent or used solely for
public purposes. (Cf. Section 4[2], P.D. 1445). (pp. 50-51, Rollo)
Bent on pursuing the Burial Assistance Program the Municipality of Makati, through its Council, passed Resolution No.
243, re-affirming Resolution No. 60 (Rollo, Annex "H", p. 52).
However, the Burial Assistance Program has been stayed by COA Decision No. 1159. Petitioner, through its Mayor, was
constrained to file this special civil action of certiorari praying that COA Decision No. 1159 be set aside as null and void.
JENNICA GYRL DELFIN| AMDG+
The police power is a governmental function, an inherent attribute of sovereignty, which was born with civilized
government. It is founded largely on the maxims, "Sic utere tuo et ahenum non laedas and "Salus populi est suprema
lex Its fundamental purpose is securing the general welfare, comfort and convenience of the people.
Police power is inherent in the state but not in municipal corporations (Balacuit v. CFI of Agusan del Norte, 163 SCRA
182). Before a municipal corporation may exercise such power, there must be a valid delegation of such power by the
legislature which is the repository of the inherent powers of the State. A valid delegation of police power may arise
from express delegation, or be inferred from the mere fact of the creation of the municipal corporation; and as a general
rule, municipal corporations may exercise police powers within the fair intent and purpose of their creation which are
reasonably proper to give effect to the powers expressly granted, and statutes conferring powers on public corporations
have been construed as empowering them to do the things essential to the enjoyment of life and desirable for the
safety of the people. (62 C.J.S., p. 277). The so-called inferred police powers of such corporations are as much delegated
powers as are those conferred in express terms, the inference of their delegation growing out of the fact of the creation
of the municipal corporation and the additional fact that the corporation can only fully accomplish the objects of its
creation by exercising such powers. (Crawfordsville vs. Braden, 28 N.E. 849). Furthermore, municipal corporations, as
governmental agencies, must have such measures of the power as are necessary to enable them to perform their
governmental functions. The power is a continuing one, founded on public necessity. (62 C.J.S. p. 273) Thus, not only
does the State effectuate its purposes through the exercise of the police power but the municipality does also. (U.S. v.
Salaveria, 39 Phil. 102).
Municipal governments exercise this power under the general welfare clause: pursuant thereto they are clothed with
authority to "enact such ordinances and issue such regulations as may be necessary to carry out and discharge the
responsibilities conferred upon it by law, and such as shall be necessary and proper to provide for the health, safety,
comfort and convenience, maintain peace and order, improve public morals, promote the prosperity and general welfare
of the municipality and the inhabitants thereof, and insure the protection of property therein." (Sections 91, 149, 177
and 208, BP 337). And under Section 7 of BP 337, "every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary and proper for governance such as to
promote health and safety, enhance prosperity, improve morals, and maintain peace and order in the local government
unit, and preserve the comfort and convenience of the inhabitants therein."
Police power is the power to prescribe regulations to promote the health, morals, peace, education, good order or
safety and general welfare of the people. It is the most essential, insistent, and illimitable of powers. In a sense it is
the greatest and most powerful attribute of the government. It is elastic and must be responsive to various social
conditions. (Sangalang, et al. vs. IAC, 176 SCRA 719). On it depends the security of social order, the life and health of
the citizen, the comfort of an existence in a thickly populated community, the enjoyment of private and social life, and
the beneficial use of property, and it has been said to be the very foundation on which our social system rests. (16
C.J.S., P. 896) However, it is not confined within narrow circumstances of precedents resting on past conditions; it must
follow the legal progress of a democratic way of life. (Sangalang, et al. vs. IAC, supra).
In the case at bar, COA is of the position that there is "no perceptible connection or relation between the objective
sought to be attained under Resolution No. 60, s. 1988, supra, and the alleged public safety, general welfare. etc. of
the inhabitants of Makati." (Rollo, Annex "G", p. 51).
Apparently, COA tries to re-define the scope of police power by circumscribing its exercise to "public safety, general
welfare, etc. of the inhabitants of Makati."
In the case of Sangalang vs. IAC, supra, We ruled that police power is not capable of an exact definition but has been,
purposely, veiled in general terms to underscore its all comprehensiveness. Its scope, over-expanding to meet the
exigencies of the times, even to anticipate the future where it could be done, provides enough room for an efficient
and flexible response to conditions and circumstances thus assuring the greatest benefits.
The police power of a municipal corporation is broad, and has been said to be commensurate with, but not to exceed,
the duty to provide for the real needs of the people in their health, safety, comfort, and convenience as consistently as
may be with private rights. It extends to all the great public needs, and, in a broad sense includes all legislation and
almost every function of the municipal government. It covers a wide scope of subjects, and, while it is especially
occupied with whatever affects the peace, security, health, morals, and general welfare of the community, it is not
limited thereto, but is broadened to deal with conditions which exists so as to bring out of them the greatest welfare of
the people by promoting public convenience or general prosperity, and to everything worthwhile for the preservation
of comfort of the inhabitants of the corporation (62 C.J.S. Sec. 128). Thus, it is deemed inadvisable to attempt to frame
any definition which shall absolutely indicate the limits of police power.
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES

COA's additional objection is based on its contention that "Resolution No. 60 is still subject to the limitation that the 2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police power
expenditure covered thereby should be for a public purpose, ... should be for the benefit of the whole, if not the
majority, of the inhabitants of the Municipality and not for the benefit of only a few individuals as in the present case." Held:
(Rollo, Annex "G", p. 51). 1. Yes. In private suits, locus standi requires a litigant to be a "real party in interest" or party who stands to be benefited
COA is not attuned to the changing of the times. Public purpose is not unconstitutional merely because it incidentally or injured by the judgment in the suit. In public suits, there is the right of the ordinary citizen to petition the courts to
benefits a limited number of persons. As correctly pointed out by the Office of the Solicitor General, "the drift is towards be freed from unlawful government intrusion and illegal official action subject to the direct injury test or where there
social welfare legislation geared towards state policies to provide adequate social services (Section 9, Art. II, must be personal and substantial interest in the case such that he has sustained or will sustain direct injury as a
Constitution), the promotion of the general welfare (Section 5, Ibid) social justice (Section 10, Ibid) as well as human result. Being a mere procedural technicality, it has also been held that locus standi may be waived in the public interest
dignity and respect for human rights. (Section 11, Ibid." (Comment, p. 12) such as cases of transcendental importance or with far-reaching implications whether private or public suit, Fertiphil
The care for the poor is generally recognized as a public duty. The support for the poor has long been an accepted has locus standi.
exercise of police power in the promotion of the common good.
There is no violation of the equal protection clause in classifying paupers as subject of legislation. Paupers may be 2. As a seller, it bore the ultimate burden of paying the levy which made its products more expensive and harm its
reasonably classified. Different groups may receive varying treatment. Precious to the hearts of our legislators, down business. It is also of paramount public importance since it involves the constitutionality of a tax law and use of taxes
to our local councilors, is the welfare of the paupers. Thus, statutes have been passed giving rights and benefits to the for public purpose.
disabled, emancipating the tenant-farmer from the bondage of the soil, housing the urban poor, etc.
Resolution No. 60, re-enacted under Resolution No. 243, of the Municipality of Makati is a paragon of the continuing 3. Yes. Police power and the power of taxation are inherent powers of the state but distinct and have different tests for
program of our government towards social justice. The Burial Assistance Program is a relief of pauperism, though not validity. Police power is the power of the state to enact the legislation that may interfere with personal liberty on
complete. The loss of a member of a family is a painful experience, and it is more painful for the poor to be financially property in order to promote general welfare. While, the power of taxation is the power to levy taxes as to be used for
burdened by such death. Resolution No. 60 vivifies the very words of the late President Ramon Magsaysay 'those who public purpose. The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue
have less in life, should have more in law." This decision, however must not be taken as a precedent, or as an official generation. The lawful subjects and lawful means tests are used to determine the validity of a law enacted under the
go-signal for municipal governments to embark on a philanthropic orgy of inordinate dole-outs for motives political or police power. The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations.
otherwise.
PREMISES CONSIDERED, and with the afore-mentioned caveat, this petition is hereby GRANTED and the Commission In this case, it is for purpose of revenue. But it is a robbery for the State to tax the citizen and use the funds generation
on Audit's Decision No. 1159 is hereby SET ASIDE. for a private purpose. Public purpose does NOT only pertain to those purpose which are traditionally viewed as
SO ORDERED. essentially governmental function such as building roads and delivery of basic services, but also includes those purposes
designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, low-cost
PRODUCT V. FERTIPHIL CORP. housing and urban or agrarian reform.
G.R. NO. 166006 MARCH 14, 2008
REYES, R.T., J.

Lessons Applicable: Bet. private and public suit, easier to file public suit, Apply real party in interest test for private suit B. CONSTITUTIONAL LIMITATIN ON THE TAXING POWER
and direct injury test for public suit, Validity test varies depending on which inherent power
CIR V. METRO STAR SUPERAMA INC.
Laws Applicable: GR NO. 185371, 8 DECEMBER 2010

FACTS: FACTS:

 President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among others,  On 26 January 2001, Revenue Regional Director for Legazpi City issued a letter of authority to Revenue Officer
for the imposition of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers which Justiniana to examine petitioner’s books of accounts and other accounting records for income tax and other internal
resulted in having Fertiphil paying P 10/bag sold to the Fertilizer and Perticide Authority (FPA). revenue taxes. For respondent’s failure comply with several requests for records and subpoena duces tecum the
 FPA remits its collection to Far East Bank and Trust Company who applies to the payment of corporate debts of Revenue Officer of Legazpi City proceeded with the investigation based on the best evidence obtainable
Planters Products Inc. (PPI) preparatory to the issuance of an assessment notice.
 After the Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Upon return of democracy,  On 8 November 2001, Revenue District Officer Lafuente issued a preliminary 15-day letter, which stated that a
Fertiphil demanded a refund but PPI refused. Fertiphil filed a complaint for collection and damages against FPA post audit review was held and it was ascertained that there was a deficiency value-added and withholding taxes
and PPI with the RTC on the ground that LOI No. 1465 is unjust, unreaonable oppressive, invalid and unlawful due from respondent in the amount of P292,874.16. Thereafter, respondent received a formal letter of demand
resulting to denial of due process of law. assessing the petitioner with the amount previously stated for the deficiency value-added and withholding taxes
 FPA answered that it is a valid exercise of the police power of the state in ensuring the stability of the fertilizing for the taxable year 1999. Subsequently, the Revenue Office sent a copy of the Final Notice of Seizure giving the
industry in the country and that Fertiphil did NOT sustain damages since the burden imposed fell on the ultimate respondent the last opportunity to settle its deficiency tax liabilities, otherwise respondent BIR shall be constrained
consumers. to serve and execute the Warrants of Distraint and/or Levy and Garnishment to enforce collection.
 Respondent having received the Warrant of Distraint and/or levy filed a motion for reconsideration with the Office,
 RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as such because it is but was denied. Respondent denied that it received a Preliminary Assessment Notice (PAN) and claiming it was
NOT for public purpose as PPI is a private corporation.
not accorded due process, Metro Star filed a petition for review with the CTA. The CTA found merit in their petition
ISSUE:
and ordered petitioner to desist from collecting the subject taxes.
1. W/N Fertiphil has locus standi

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JENNICA GYRL DELFIN| AMDG+
 TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES
 The CTA-Second Division opined that “[w]hile there [is] a disputable presumption that a mailed letter [is] deemed
received by the addressee in the ordinary course of mail, a direct denial of the receipt of mail shifts the burden
upon the party favored by the presumption to prove that the mailed letter was indeed received by the addressee.”
It also found that there was no clear showing that Metro Star actually received the alleged PAN, dated January
16, 2002. It, accordingly, ruled that the Formal Letter of Demand dated April 3, 2002, as well as the Warrant of
Distraint and/or Levy dated May 12, 2003 were void, as Metro Star was denied due process, which was affirmed
by the CTA En-Banc. Hence, this petition.
ISSUE:
Whether Metro Star was denied due process
HELD: YES
RATIO:
 The Court agrees with the CTA that the CIR failed to discharge its duty and present any evidence to show that
Metro Star indeed received the PAN dated January 16, 2002. It could have simply presented the registry receipt
or the certification from the postmaster that it mailed the PAN, but failed. Neither did it offer any explanation on
why it failed to comply with the requirement of service of the PAN. It merely accepted the letter of Metro Star’s
chairman dated April 29, 2002, that stated that he had received the FAN dated April 3, 2002, but not the PAN;
that he was willing to pay the tax as computed by the CIR; and that he just wanted to clarify some matters with
the hope of lessening its tax liability.
 Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that he is liable for deficiency
taxes through the sending of a PAN. He must be informed of the facts and the law upon which the assessment is
made. The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection
without first establishing a valid assessment is evidently violative of the cardinal principle in administrative
investigations- that taxpayers should be able to present their case and adduce supporting evidence.
 It is clear that the sending of a PAN to taxpayer to inform him of the assessment made is but part of the “due
process requirement in the issuance of a deficiency tax assessment,” the absence of which renders nugatory any
assessment made by the tax authorities. The use of the word “shall” in subsection 3.1.2 describes the mandatory
nature of the service of a PAN. The persuasiveness of the right to due process reaches both substantial and
procedural rights and the failure of the CIR to strictly comply with the requirements laid down by law and its own
rules is a denial of Metro Star’s right to due process. Thus, for its failure to send the PAN stating the facts and the
law on which the assessment was made as required by Section 228 of R.A. No. 8424, the assessment made by
the CIR is void.
 It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of property without
due process of law. In balancing the scales between the power of the State to tax and its inherent right to prosecute
perceived transgressors of the law on one side, and the constitutional rights of a citizen to due process of law and
the equal protection of the laws on the other, the scales must tilt in favor of the individual, for a citizen’s right is
amply protected by the Bill of Rights under the Constitution. Thus, while “taxes are the lifeblood of the
government,” the power to tax has its limits, in spite of all its plenitude.
G.R. No. 210551 June 30, 2015
FACTS
Respondent Quezon City Council enacted an ordinance, Socialized Housing Tax of Quezon City, which will collect 0.5%
on the assessed value of land in excess of Php 100,000.00. This shall accrue to the Socialized Housing Programs of the
Quezon City Government. The special assessment shall go to the General Fund under a special account to be established
for the purpose. On the other hand, Ordinance No. SP-2235 and S-2013 was enacted collecting garbage fees on
residential properties which shall be deposited solely and exclusively in an earmarked special account under the general
JENNICA GYRL DELFIN| AMDG+
fund to be utilized for garbage collections. Petitioner, a Quezon City property owner, questions the validity of the said
ordinances.
ISSUES
1. Whether the Socialized Housing Tax is valid.
2. Whether the ordinance on Garbage Fee violates the rule on double taxation.
RULING
1. The SHT is valid. The tax is within the power of Quezon City Government to impose. LGUs may be considered as
having properly exercised their police power only if there is a lawful subject and a lawful method. Herein, the tax is not
a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory purpose. The levy is primarily
in the exercise of the police power for the general welfare of the entire city. It is greatly imbued with public interest.
On the question of inequality, the disparities between a real property owner and an informal settler as two distinct
classes are too obvious and need not be discussed at length. The differentiation conforms to the practical dictates of
justice and equity and is not discriminatory within the meaning of the Constitution. Notably, the public purpose of a tax
may legally exist even if the motive which impelled the legislature to impose the tax was to favor one over another.
Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or oppressive since
the tax being imposed therein is below what the UDHA actually allows. Even better, on certain conditions, the ordinance
grants a tax credit.
2. No. Pursuant to Section 16 of the LGC and in the proper exercise of its corporate powers under Section 22 of the
same, the Sangguniang Panlungsod of Quezon City, like other local legislative bodies, is empowered to enact ordinances,
approve resolutions, and appropriate funds for the general welfare of the city and its inhabitants. In this regard, the
LGUs shall share with the national government the responsibility in the management and maintenance of ecological
balance within their territorial jurisdiction. The Ecological Solid Waste Management Act of 2000, affirms this authority
as it expresses that the LGUs shall be primarily responsible for the implementation and enforcement of its
provisions. Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees and charges for
services rendered. The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed for the
regulation of an activity as provided by the same. As opposed to petitioner’s opinion, the garbage fee is not a tax.
Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235 violates the rule on double
taxation must necessarily fail.
ABRA COLLEGE V AQUINO
FACTS: Petitioner, an educational corporation and institution of higher learning duly incorporated with the Securities
and Exchange Commission in 1948, filed a complaint to annul and declare void the “Notice of Seizure’ and the “Notice
of Sale” of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting
to P5,140.31. Said “Notice of Seizure” by respondents Municipal Treasurer and Provincial Treasurer, defendants below,
was issued for the satisfaction of the said taxes thereon.
The parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The
trial court ruled for the government, holding that the second floor of the building is being used by the director for
residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial
establishment, and thus the property is not being used exclusively for educational purposes. Instead of perfecting an
appeal, petitioner availed of the instant petition for review on certiorari with prayer for preliminary injunction before the
Supreme Court, by filing said petition on 17 August 1974.
ISSUE: Whether or not the lot and building are used exclusively for educational purposes.
HELD: Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, 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.ﾝ Reasonable emphasis has always
been made that the exemption extends to facilities which are incidental to and reasonably necessary for the
accomplishment of the main purposes. The use of the school building or lot for commercial purposes is neither
contemplated by law, nor by jurisprudence. In the case at bar, the lease of the first floor of the building to the Northern
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES

Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education. 6. The petitioner filed a Claim for Exemption from real property taxes with the City Assessor, predicated on its claim
The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. that it is a charitable institution. The petitioner’s request was denied,
The decision of the CFI Abra (Branch I) is affirmed subject to the modification that half of the assessed tax be returned
to the petitioner. The modification is derived from the fact that the ground floor is being used for commercial purposes Issues
(leased) and the second floor being used as incidental to education (residence of the director). 1. Whether the petitioner is a charitable institution
2. Whether the real properties of the petitioner are exempt from real property taxes
THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA vs. THE PROVINCIAL BOARD OF ILOCOS NORTE, ET
AL Ruling
G.R. No. L-27588 December 31, 1927
First issue: petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions.
Facts:
1. The plaintiff possesses and is the owner of a parcel of land in the municipality of San Nicolas, Ilocos Norte, all four To determine whether an enterprise is a charitable institution/entity or not, the elements which should be considered
sides of which face on public streets. include the
2. On the south side is a part of the churchyard, the convent and an adjacent lot used for a vegetable garden, 1. Statute creating the enterprise,
containing an area off 1,624 square meters, in which there is a stable and a well for the use of the convent. In 2. Its corporate purposes,
the center is the remainder of the churchyard and the church. On the north is an old cemetery with two of its walls 3. Its constitution and by-laws,
still standing, and a portion where formerly stood a tower, the base of which still be seen, containing a total area 4. The methods of administration,
of 8,955 square meters. 5. The nature of the actual work performed,
3. the plaintiff paid, under protest, the land tax on the lot adjoining the convent and the lot which formerly was the 6. The character of the services rendered,
cemetery with the portion where the tower stood. 7. The indefiniteness of the beneficiaries, and
8. The use and occupation of the properties.
Ruling:
In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws, for the benefit
The exemption in favor of the convent in the payment of the land tax (sec. 344 [c] Administrative Code) refers to the of an indefinite number of persons, either by bringing their minds and hearts under the influence of education or
home of the parties who presides over the church and who has to take care of himself in order to discharge his duties. religion, by assisting them to establish themselves in life or otherwise lessening the burden of government.
In therefore must, in the sense, include not only the land actually occupied by the church, but also the adjacent ground
destined to the ordinary incidental uses of man. Except in large cities where the density of the population and the The word “charitable” is not restricted to relief of the poor or sick. The test of a charity and a charitable organization
development of commerce require the use of larger tracts of land for buildings, a vegetable garden belongs to a house are in law the same. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose
and, in the case of a convent, it use is limited to the necessities of the priest, which comes under the exemption. reorganized in law as charitable or whether it is maintained for gain, profit, or private advantage.

In regard to the lot which formerly was the cemetery, while it is no longer used as such, neither is it used for commercial Under P.D. No. 1823, the petitioner was organized for the welfare and benefit of the Filipino people principally to help
purposes and, according to the evidence, is now being used as a lodging house by the people who participate in religious combat the high incidence of lung and pulmonary diseases in the Philippines.
festivities, which constitutes an incidental use in religious functions, which also comes within the exemption.
Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks of life
including those who are poor and the needy without discrimination. After all, any person, the rich as well as the poor,
LUNG CENTER OF THE PHILIPPINES vs. QUEZON CITY AND CONSTANTINO P. ROSAS, IN HIS CAPACITY
may fall sick or be injured or wounded and become a subject of charity.
AS CITY ASSESSOR OF QUEZON CITY
G.R. No. 144104, June 29, 2004
As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply
because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies
Facts:
from the government, so long as the money received is devoted or used altogether to the charitable object which it is
1. The petitioner Lung Center is a non-stock and non-profit entity.
intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.
2. It is the registered owner of a parcel of land. Erected in the middle lot is a hospital known as the Lung Center of
the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store
In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the
spaces, and to medical or professional practitioners who use the same as their private clinics for their patients
government for its patients and for the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its
whom they charge for their professional services.
operations.
3. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a
big portion on the right side, at the corner, is being leased for commercial purposes to a private enterprise known
Second Issue: those portions of its real property that are leased to private entities are not exempt from real property
as the Elliptical Orchids and Garden Center.
taxes as these are not actually, directly and exclusively used for charitable purposes.
4. The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both
paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from
The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the
the government.
taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The
5. Both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of
effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be
P4,554,860 by the City Assessor of Quezon City.
clearly shown and based on language in the law too plain to be mistaken.

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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the petitioner shall
enjoy the tax exemptions and privileges: The Lung Center of the Philippines shall be exempt from the payment of taxes,
charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to
equipment purchases made by, or for the Lung Center.
It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption privileges for its real
properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been
among the enumeration of tax exempt privileges under Section 2.
Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus: Charitable institutions, churches and
parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and
improvements, actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt
from taxation.
The tax exemption under this constitutional provision covers property taxes only. What is exempted is not the institution
itself . . .; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively
used for religious, charitable or educational purposes.”
In light of the changes in the Constitution, the petitioner cannot rely on our ruling in Herrera v. Quezon City Board of
Assessment Appeals which was promulgated on September 30, 1961 before the 1973 and 1987 Constitutions took
effect.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner
is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties
are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes.
“Exclusive” is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment;
and “exclusively” is defined, “in a manner to exclude; as enjoying a privilege exclusively.” If real property is used for
one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.
The words “dominant use” or “principal use” cannot be substituted for the words “used exclusively” without doing
violence to the Constitutions and the law. Solely is synonymous with exclusively.
What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate
and actual application of the property itself to the purposes for which the charitable institution is organized. It is not
the use of the income from the real property that is determinative of whether the property is used for tax-exempt
purposes.
Accordingly, the portions of the land leased to private entities as well as those parts of the hospital leased to private
individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.
CIR VS ST. LUKE'S 2012
FACTS: St. Luke’s Medical Center, Inc. is a hospital organized as a non-stock and non-profit corporation. The BIR
assessed St. Luke’s deficiency taxes for 1998, comprised of deficiency income tax, value-added tax, withholding tax on
compensation and expanded withholding tax. St. Luke’s filed an administrative protest with the BIR against the
deficiency tax assessments. The BIR did not act on the protest within the 180-day period under Section 228 of the
NIRC. Thus, St. Luke’s appealed to the CTA.
BIR’s contentions: The BIR argued before the CTA that Section 27(B) of the NIRC, which imposes a 10% preferential
tax rate on the income of proprietary nonprofit hospitals, should be applicable to St. Luke’s. According to the BIR,
Section 27(B), introduced in 1997, “is a new provision intended to amend the exemption on non-profit hospitals that
were previously categorized as non-stock, non-profit corporations under Section 26 of the 1997 Tax Code x x x.” It is a
JENNICA GYRL DELFIN| AMDG+
specific provision which prevails over the general exemption on income tax granted under Section 30(E) and (G) for
non-stock, non-profit charitable institutions and civic organizations promoting social welfare. The BIR claimed that St.
Luke’s was actually operating for profit in 1998 because only 13% of its revenues came from charitable purposes.
Moreover, the hospital’s board of trustees, officers and employees directly benefit from its profits and assets.
St. Luke’s contention: St. Luke’s contended that the BIR should not consider its total revenues, because its free services
to patients was P218,187,498 or 65.20% of its 1998 operating income. St. Luke’s also claimed that its income does not
inure to the benefit of any individual. St. Luke’s maintained that it is a non-stock and non-profit institution for charitable
and social welfare purposes under Section 30(E) and (G) of the NIRC. It argued that the making of profit per se does
not destroy its income tax exemption.
ISSUE/S: Whether St. Luke’s is liable for deficiency income tax in 1998 under Section 27(B) of the NIRC, which imposes
a preferential tax rate of 10% on the income of proprietary non-profit hospitals.
RULING: There is no dispute that St. Luke’s is organized as a non-stock and non-profit charitable institution. However,
this does not automatically exempt St. Luke’s from paying taxes. This only refers to the organization of St. Luke’s. Even
if St. Luke’s meets the test of charity, a charitable institution is not ipso facto tax exempt. To be exempt from real
property taxes, Section 28(3), Article VI of the Constitution requires that a charitable institution use the property
“actually, directly and exclusively” for charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC
requires that a charitable institution must be “organized and operated exclusively” for charitable purposes. Likewise, to
be exempt from income taxes, Section 30(G) of the NIRC requires that the institution be “operated exclusively” for
social welfare.
However, the last paragraph of Section 30 of the NIRC qualifies the words “organized and operated exclusively.”
Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing
organizations 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, shall be subject to tax imposed under this Code
In short, the last paragraph of Section 30 provides that if a tax exempt charitable institution conducts “any” activity
for profit, such activity is not tax exempt even as its not-for-profit activities remain tax exempt. This paragraph qualifies
the requirements in Section 30(E) that the “[n]on-stock corporation or association [must be] organized and operated
exclusively for x x x charitable x x x purposes x x x.” It likewise qualifies the requirement in Section 30(G) that the
civic organization must be “operated exclusively” for the promotion of social welfare.
Thus, even if the charitable institution must be “organized and operated exclusively” for charitable purposes, it is
nevertheless allowed to engage in “activities conducted for profit” without losing its tax exempt status for its not-for-
profit activities. The only consequence is that the “income of whatever kind and character” of a charitable
institution “from any of its activities conducted for profit, regardless of the disposition made of such
income, shall be subject to tax.”
In 1998, St. Luke’s had total revenues of P1,730,367,965 from services to paying patients. It cannot be disputed that
a hospital which receives approximately P1.73 billion from paying patients is not an institution “operated exclusively”
for charitable purposes. Clearly, revenues from paying patients are income received from “activities conducted for
profit.” Services to paying patients are activities conducted for profit. They cannot be considered any other way. There
is a “purpose to make profit over and above the cost” of services.
The Court finds that St. Luke’s is a corporation that is not “operated exclusively” for charitable or social welfare purposes
insofar as its revenues from paying patients are concerned. This ruling is based not only on a strict interpretation of a
provision granting tax exemption, but also on the clear and plain text of Section 30(E) and (G). Section 30(E) and (G)
of the NIRC requires that an institution be “operated exclusively” for charitable or social welfare purposes to be
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES
completely exempt from income tax. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns
income from its for-profit activities. Such income from for-profit activities, under the last paragraph of Section 30, is
merely subject to income tax, previously at the ordinary corporate rate but now at the preferential 10% rate pursuant
to Section 27(B).
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA) V. CITY OF LAPU-LAPU AND PACALDO,
G.R. NO. 181756, [JUNE 15, 2015]
FACTS: Petitioner Mactan-Cebu International Airport Authority (MCIAA) was created by Congress on July 31, 1990
under Republic Act No. 6958 to “undertake the economical, efficient and effective control, management and supervision
of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City . . . and such other
airports as may be established in the Province of Cebu.” It is represented in this case by the Office of the Solicitor
General. Respondent City of Lapu-Lapu is a local government unit and political subdivision, created and existing under
its own charter with capacity to sue and be sued. Respondent Elena T. Pacaldo was impleaded in her capacity as the
City Treasurer of respondent City. aScITE
Upon its creation, petitioner enjoyed exemption from realty taxes under the following provision of Republic Act No.
6958:
Section 14. Tax Exemptions. — The Authority shall be exempt from realty taxes imposed by the National
Government or any of its political subdivisions, agencies and instrumentalities: Provided, That no tax exemption herein
granted shall extend to any subsidiary which may be organized by the Authority.
On September 11, 1996, however, this Court rendered a decision in Mactan-Cebu International Airport Authority v.
Marcos (the 1996 MCIAA case) declaring that upon the effectivity of Republic Act No. 7160 (The Local Government
Code of 1991),petitioner was no longer exempt from real estate taxes. The Court held:
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC,exemptions from
payment of real property taxes granted to natural or juridical persons, including government-owned or controlled
corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned
corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958,
has been withdrawn. . . . .
On January 7, 1997, respondent City issued to petitioner a Statement of Real Estate Tax assessing the lots comprising
the Mactan International Airport in the amount of P162,058,959.52. Petitioner complained that there were discrepancies
in said Statement of Real Estate Tax as follows:
(a) [T]he statement included lots and buildings not found in the inventory of petitioner’s real properties;
(b) [S]ome of the lots were covered by two separate tax declarations which resulted in double assessment;
(c) [There were] double entries pertaining to the same lots; and
(d) [T]he statement included lots utilized exclusively for governmental purposes.
Respondent City amended its billing and sent a new Statement of Real Estate Tax to petitioner in the amount of
P151,376,134.66. Petitioner averred that this amount covered real estate taxes on the lots utilized solely and exclusively
for public or governmental purposes such as the airfield, runway and taxiway, and the lots on which they are situated.
Petitioner paid respondent City the amount of four million pesos (P4,000,000.00) monthly, which was later increased
to six million pesos (P6,000,000.00) monthly. As of December 2003, petitioner had paid respondent City a total of
P275,728,313.36.S
Respondent City Treasurer Elena T. Pacaldo sent petitioner a Statement of Real Property Tax Balances up to the year
2002 reflecting the amount of P246,395,477.20. Petitioner claimed that the statement again included the lots utilized
solely and exclusively for public purpose such as the airfield, runway, and taxiway and the lots on which these are built.
Respondent Pacaldo then issued Notices of Levy on 18 sets of real properties of petitioner.
Petitioner filed a petition for prohibition with the Regional Trial Court (RTC) of Lapu-Lapu City with prayer for the
issuance of a temporary restraining order (TRO) and/or a writ of preliminary injunction, docketed as SCA No. 6056-L.
Branch 53 of RTC Lapu-Lapu City then issued a 72-hour TRO. The petition for prohibition sought to enjoin respondent
City from issuing a warrant of levy against petitioner’s properties and from selling them at public auction for delinquency
in realty tax obligations. The petition likewise prayed for a declaration that the airport terminal building, the airfield,
runway, taxiway and the lots on which they are situated are exempted from real estate taxes after due hearing.
Petitioner based its claim of exemption on DOJ Opinion No. 50.
JENNICA GYRL DELFIN| AMDG+
The RTC issued an Order denying the motion for extension of the TRO. Thus, on December 10, 2003, respondent City
auctioned 27 of petitioner’s properties. As there was no interested bidder who participated in the auction sale,
respondent City forfeited and purchased said properties. The corresponding Certificates of Sale of Delinquent Property
were issued to respondent City.
Petitioner claimed before the RTC that it had discovered that respondent City did not pass any ordinance authorizing
the collection of real property tax, a tax for the special education fund (SEF), and a penalty interest for its nonpayment.
Petitioner argued that without the corresponding tax ordinances, respondent City could not impose and collect real
property tax, an additional tax for the SEF, and penalty interest from petitioner.
ISSUE: WON MCIAA IS SUBJECT TO LOCAL AND REAL PROPERTY TAXATION.
HELD: NO. To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation.
Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the1987
Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality
vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory
Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local
governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a)
does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies
only if the beneficial use of real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public
dominion. Properties of public dominion are owned by the State or the Republic. .
The term “ports . . . constructed by the State” includes airports and seaports. The Airport Lands and Buildings of
MIAA are intended for public use, and at the very least intended for public service. Whether intended for
public use or public service, the Airport Lands and Buildings are properties of public dominion. As
properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus
exempt from real estate tax under Section 234(a) of the Local Government Code.
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation
and status of government units, agencies and offices within the entire government machinery, MIAA is a government
instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government
Code, MIAA as a government instrumentality is not a taxable person because it is not subject to “[t]axes, fees or charges
of any kind” by local governments. The only exception is when MIAA leases its real property to a “taxable person” as
provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes
subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons
like private parties are subject to real estate tax by the City of Parañaque. Under Article 420 of the Civil Code,
the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned
by the State or the Republic of the Philippines. Article 420 specifically mentions “ports . . . constructed by the State,”
which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties
of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are
expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also
repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.
AMERICAN BIBLE SOCIETY V. CITY OF MANILA, GR NO. L-9637, APRIL 30, 1957
Facts: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing
business in the Philippines through its Philippine agency established in Manila in November, 1898. The defendant
appellee is a municipal corporation with powers that are to be exercised in conformity with the provisions of Republic
Act No. 409, known as the Revised Charter of the City of Manila.
During the course of its ministry, plaintiff sold bibles and other religious materials at a very minimal profit.
On May 29 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was conducting the business
of general merchandise since November, 1945, without providing itself with the necessary Mayor's permit and municipal
license, in violation of Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364, and required
plaintiff to secure, within three days, the corresponding permit and license fees, together with compromise covering
the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of P5,821.45 (Annex A).
Plaintiff now questions the imposition of such fees.
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES
Issue: Whether or not the said ordinances are constitutional and valid (contention: it restrains the free exercise and
enjoyment of the religious profession and worship of appellant).
Held: Section 1, subsection (7) of Article III of the Constitution, provides that:
(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free
exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be
allowed. No religion test shall be required for the exercise of civil or political rights. The provision aforequoted is a
constitutional guaranty of the free exercise and enjoyment of religious profession and worship, which carries with it the
right to disseminate religious information.
It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances
a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business or
occupation of selling said "merchandise" for profit. For this reason. The Court believe that the provisions of City of
Manila Ordinance No. 2529, as amended, cannot be applied to appellant, for in doing so it would impair its free exercise
and enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs.
With respect to Ordinance No. 3000, as amended, the Court do not find that it imposes any charge upon the enjoyment
of a right granted by the Constitution, nor tax the exercise of religious practices.
It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, however inapplicable to said
business, trade or occupation of the plaintiff. As to Ordinance No. 2529 of the City of Manila, as amended, is also not
applicable, so defendant is powerless to license or tax the business of plaintiff Society.
ANTI-GRAFT LEAGUE OF THE PHILIPPINES V. SAN JUAN
FACTS:
Marcos issued a decree establishing the Technological Colleges of Rizal. It directed the Board to provide funds for the
purchase of 4 parcels of land which belonged to Ortigas &Co. For 12 yrs, the land was idle and construction did not
materialize so the Board authorized the selling of the lot. This was sold to Valley View Realty. Ortigas filed for rescission
of contract contending that it violated the terms of the contract by selling such lot to Valley View. The Board made a
Resolution providing for the rescission of the deed of sale to Valley View.
Valley View filed a case against the Province of Rizal for specific performance but was dismissed. Thereafter, a
compromise agreement was executed between Province and Ortigas to reconvey the lots to Ortigas. The Anti-Graft
League of the Philippines is a non-government organization, constituted to protect the interest of the Republic and its
instrumentalities and political subdivisions against abuses its public official and employees, claims the instant petition
for certiorari is a taxpayer’s suit because the Provincial Board of Rizal allegedly illegally disbursed public funds in
transactions involving the land.
ISSUE:
W/N this is a case of taxpayer’s suit.
HELD:
To constitute a taxpayer’s suit, two requisites: (1) that public funds are disbursed by a political subdivision or
instrumentality and (2) in doing so, a law is violated or some irregularity is committed, and that the petitioner is directly
affected by the alleged ultra vires act.
In the case at bar, petitioner’s standing should not even be made an issue here since standing is a concept in
constitutional law and here no constitutional question is actually involved. The disbursement of public funds was only
made when the Province bought the lands from Ortigas. Petitioner never referred to such purchase as an illegal
disbursement of public funds but focused on the alleged fraudulent reconveyance of said property to Ortigas because
the price paid was lower than the prevailing market value of neighboring lots.
As a taxpayer, petitioner would somehow be adversely affected by an illegal use of public money. But when no such
unlawful spending has been shown petitioner, even as a taxpayer, cannot question the transaction executed by the
Province and Ortigas for the reason that it is not privy to said contract.
JENNICA GYRL DELFIN| AMDG+
G.R. NO. 191667, PROMULGATED ON 17 APRIL 2013, PERLAS-BERNABE, E.
Facts:
From 2005 to 2006, the Sangguniang Bayan (SB) of Municipality of Agoo, La Union (Municipality) passed certain
resolutions to implement a multi-phased plan (Redevelopment Plan) to redevelop the Agoo Public Plaza (Agoo Plaza)
where the Imelda Garden and Jose Rizal Monument were situated.
To finance phase 1 of the said plan, the SB initially passed Resolution No. 68-2005 authorizing the Mayor to obtain a
loan from Petitioner Land Bank of the Philippines (LBP) and mortgage a lot situated at the southeastern portion of the
Agoo Plaza (Plaza Lot) as collateral. To serve as additional security, it further authorized the assignment of a portion of
its internal revenue allotment (IRA) and the monthly income from the proposed project in favor of LBP.
The SB passed Resolution No. 58-2006, approving the construction of a commercial center on the Plaza Lot as part of
the phase II of the Redevelopment Plan. However, unlike phase 1 of the Redevelopment Plan, the construction of the
commercial center at the Agoo Plaza was vehemently objected to by some residents of the Municipality. Led by
Respondent Eduardo Cacayuran (Cacayuran), these residents claimed that the conversion of the Agoo Plaza into a
commercial center, as funded by the proceeds from LBP loans, were “highly irregular, violative of the law, and
detrimental to public interests, and will result to wanton desecration of the said historical and public park.” The foregoing
was embodied in a Manifesto, launched through a signature campaign conducted by the residents and Cacayuran.
Cacayuran wrote a letter addressed to the Mayor, Vice Mayor, and members of SB expressing the growing public clamor
against the conversion of the Agoo Plaza into a commercial center. He requested the foregoing officers to furnish him
certified copies of various documents related to the aforementioned conversion including, among others, the resolutions
approving the Redevelopment Plan as well as the loan agreements for the sake of public information and transparency.
Unable to get any response, Cacayuran, invoking his rights as a taxpayer, filed a Complaint against the Implicated
Officers and LBP, assailing among others, the validity of the Subject Loans on the ground that the Plaza Lot used as
collateral thereof is property of public dominion and therefore, beyond the commerce of man.
The Regional Trial Court (RTC) ruled in favor of Cacayuran. The Court of Appeals (CA) affirmed with modification the
RTC’s ruling. Hence, the LBP filed this instant petition.
Issues:
Does Cacayuran have a standing to sue as a taxpayer?
Ruling:
Yes, it is hornbook principle that a taxpayer is allowed to sue where there is a claim that public funds are illegally
disbursed, or that public money is being deflected to any improper purpose, or that there is wastage of public funds
through the enforcement of an invalid or unconstitutional law. A person suing as a taxpayer, however, must show that
the act complained of directly involves the illegal disbursement of public funds derived from taxation. In other words,
for a taxpayer’s suit to prosper, two requisites must be met namely, (1) public funds derived from taxation are disbursed
by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed; and (2)
the petitioner is directly affected by the alleged act.
Although the construction of the commercial center would be primarily sourced from the proceeds of the loans, which
LBP insists are not taxpayer’s money, there is no denying that public funds derived from taxation are bound to be
expended as the Municipality assigned a portion of its IRA as a security for the foregoing loans. Needless to state, the
Municipality’s IRA, which serves as the local government unit’s just share in the national taxes, is in the nature of public
funds derived from taxation. The Supreme Court (SC) believes, however, that although these funds may be posted as
a security, its collateralization should only be deemed effective during the incumbency of the public officers who
approved the same, else those who succeed them be effectively deprived of its use. It is observed that the proceeds
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TAXATION 1 CASES: ATTY RAYMUND ONG ABRENTES

from the LBP loans had already been converted into public funds by the Municipality’s receipt thereof. Funds coming official capacity as then Vice-Governor and Presiding Officer of the Sangguniang Panlalawigan of the Province of Cavite.
from private sources become impressed with the characteristics of public funds when they are under official custody. As such, he represents the interests of the province itself which is, undoubtedly, a real party in interest since it stands
Hence, the first requisite is met. to be either benefited or injured by the execution of the compromise judgment.

As a resident-taxpayer of the Municipality, Cacayuran is directly affected by the conversion of the Agoo Plaza which was
funded by the proceeds of the LBP loans. It is well-settled that public plazas are properties for public use and therefore,
belongs to public dominion. As such, it can be used by anybody and no one can exercise over it the rights of a private
owner. In this light, Cacayuran had a direct interest in ensuring that the Agoo Plaza would not be exploited for
commercial purposes through the commercial center’s construction. Moreover, Cacayuran need not be privy to the LBP
loans in order to proffer his objections thereto. In Mamba v. Lara, it has been held that a taxpayer need not be a party
to the contract to challenge its validity; as long as taxes are involved, people have a right to question contracts entered
into by the government. Hence, the second requisite is met.

REMULLA VS. MALIKSI

G.R. NO. 171633

DOCTRINE: Jurisprudence dictates that a taxpayer may be allowed to sue where there is a claim that public funds are
illegally disbursed or that public money is being deflected to any improper purpose, or that public funds are wasted
through the enforcement of an invalid or unconstitutional law or ordinance. ART. 7 paragraph 3 Administrative or
executive acts, orders and regulations shall be valid only when they are not contrary to laws or the Constitution.

FACTS: Marietta de Villa in her personal capacity and as administratrix of the estate of her late husband Guillermo,
ceded, through a deed of donation of their property in favor of the Province of Cavite, on which now stands various
government offices and facilities. Thereafter, the Province of Cavite filed an expropriation case seeking to expropriate
the subject property which the former intends to develop as the Provincial Capitol Site. De Villa opposed the said
expropriation proceedings claiming that there are still areas within the donated portion which the Province of Cavite
failed to develop and she also alleged that the fair market value of subject property should be P45.00 per s/m. While
said expropriation case was still pending, she sold a portion of the subject property to Goldenrod. Respondent Cavite
Governor Erineo Maliksi issued an EO authorizing the creation of a committee which recommend the terms and
conditions for the proper settlement expropriation case. The foregoing recommendations were adopted in a Compromise
Agreement entered into by and between Maliksi and Trece Martires Mayor and the owners of Goldenrod. Said
compromise was approved by the RTC in a decision. In the CA. Remulla, in his personal capacity as taxpayer and Vice-
Governor filed a petition for annulment of judgement of RTC that said compromise is grossly disadvantageous to the
government and that extrinsic fraud tainted the expropriation proceedings considering that there was collusion between
the parties.

ISSUE: WON Remulla’s petition for annulment of judgement be denied

RULING: No. Records bear out that Remulla filed his petition for annulment of judgment in two capacities: first, in his
personal capacity as a taxpayer; and, second, in his official capacity as then presiding officer of the Sangguniang
Panlalawigan of the Province of Cavite. With respect to the first, jurisprudence dictates that a taxpayer may be allowed
to sue where there is a claim that public funds are illegally disbursed or that public money is being deflected to any
improper purpose, or that public funds are wasted through the enforcement of an invalid or unconstitutional law or
ordinance. In this case, public funds of the Province of Cavite stand to be expended to enforce the compromise
judgment. As such, Remulla – being a resident-taxpayer of the Province of Cavite – has the legal standing to file the
petition for annulment of judgment and, therefore, the same should not have been dismissed on said ground. Notably,
the fact that there lies no proof that public funds have already been disbursed should not preclude Remulla from
assailing the validity of the compromise judgment. Lest it be misunderstood, the concept of legal standing is ultimately
a procedural technicality which may be relaxed by the Court if the circumstances so warrant. As observed in Mamba v.
Lara, the Court did not hesitate to give standing to taxpayers in cases where serious legal issues were raised or where
public expenditures of millions of pesos were involved. Likewise, it has also been ruled that a taxpayer need not be a
party to the contract in order to challenge its validity, or to seek the annulment of the same on the ground of extrinsic
fraud. Indeed, for as long as taxes are involved, the people have a right to question contracts entered into by the
government, as in this case. Anent the second, Remulla equally lodged the petition for annulment of judgment in his
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