1. Francis A. Churchill vs.
Venancio Concepcion Investment Corporation (VOIC), until they were able to
GR No 11572, September 22, 1916
FACTS:
Section 100 of Act No. 2339, passed February 27, 1914,
effective July 1, 1914, imposed an annual tax of P4 per
square meter upon "electric signs, billboards, and
spaces used for posting or displaying temporary signs,
and all signs displayed on premises not occupied by
buildings." This section was subsequently amended by
Act No. 2432, effective January 1, 1915, by reducing the
tax on such signs, billboards, etc., to P2 per square
meter or fraction thereof. Section 26 of Act No. 2432
was in turn amended by Act No. 2445, but this
amendment does not in any way affect the questions
involved in the case under consideration.
Francis A. Churchill and Stewart Tait, co-partners in
Mercantile Advertising Agency, owned a sign or
billboard containing an area of 52 square meters to
which they were taxed at P104. The tax was paid under
protest. Churchill and Tait instituted the action under
section 140 of Act No. 2339 to recover the amount.
From a judgment dismissing the complaint, the plaintiffs
appealed.
ISSUE:
Whether or not the statute and the tax imposed is void
for lack of uniformity?
RULING:
No, the tax is valid.
Uniformity in taxation means that all taxable articles or
kinds of property, of the same class, shall be taxed at
the same rate. It does not mean that all lands, chattels,
securities, incomes, occupations, franchises, privileges,
necessities, and luxuries shall all be assessed at the
same rate. Different articles may be taxed at different
amounts provided the rate is uniform on the same class
everywhere, with all people, at all times.
Herein, the Act imposes a tax of P2 per square meter or
a fraction thereof upon every electric sign, billboard,
etc. Wherever found in the Philippine Islands. The rule
of taxation upon such signs is uniform throughout the
islands. The rule does not require taxes to be graded
according to the value of the subjects upon which they
are imposed, especially those levied as privilege or
occupation taxes.
2. Commissioner of Internal Revenue vs. Algue, Inc.
GR No. L-28890, 17 February 1988
Facts:
The Philippine Sugar Estate Development Company
(PSEDC) had earlier appointed Algue Inc., as its agent,
authorizing it to sell its land, factories and oil
manufacturing process. As such, the corporation
worked for the formation of the Vegetable Oil
purchase the PSEDC properties. For this sale, Algue Inc.,
received as agent a commission of P126, 000.00, and it
was from this commission that the P75, 000.00
promotional fees were paid to Alberto Guevara, Jr.,
Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and
Pablo Sanchez.
Commissioner of Internal Revenue contends that the
claimed deduction is not allowed because it was not an
ordinary reasonable or necessary business expense. The
Court of Tax Appeals had seen it differently. Agreeing
with Algue Inc., it held that the said amount had been
legitimately paid by the private respondent for actual
services rendered. The payment was in the form of
promotional fees.
Issue:
Whether or not the Collector of Internal Revenue
correctly disallowed the P75, 000.00 deduction claimed
by private respondent Algue Inc., as legitimate business
expenses in its income tax returns.
Ruling:
No, the Supreme Court agrees with the respondent
court that the amount of the promotional fees was not
excessive. The P75,000.00 was 60% of the total
commission. This was a reasonable proportion,
considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil
Investment Corporation to the actual purchase by it of
the Sugar Estate properties.
The claimed deduction by the private respondent was
permitted under the Internal Revenue Code and should
therefore not have been disallowed by the petitioner.
3. PHIL. GUARANTY CO., INC. v. THE COMMISSIONER
OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS
GR No. L-22074, April 30, 1965
FACTS:
The petitioner Philippine Guaranty Co., Inc., a domestic
insurance company, entered into reinsurance contracts
with foreign insurance companies not doing business in
the country, thereby ceding to foreign reinsurers a
portion of the premiums on insurance it has originally
underwritten in the Philippines. The premiums paid by
such companies were excluded by the petitioner from
its gross income when it file its income tax returns for
1953 and 1954. Furthermore, it did not withhold or pay
tax on them. Consequently, the CIR assessed against the
petitioner withholding taxes on the ceded reinsurance
premiums to which the latter protested the assessment
on the ground that the premiums are not subject to tax
for the premiums did not constitute income from
sources within the Philippines because the foreign
reinsurers did not engage in business in the Philippines,
and CIR's previous rulings did not require insurance
companies to withhold income tax due from foreign
companies.
ISSUE:
Are insurance companies not required to withhold tax
on reinsurance premiums ceded to foreign insurance
companies, which deprives the government from
collecting the tax due from them?
HELD:
No. The power to tax is an attribute of sovereignty. It is
a power emanating from necessity. It is a necessary
burden to preserve the State's sovereignty and a means
to give the citizenry an army to resist an aggression, a
navy to defend its shores from invasion, a corps of civil
servants to serve, public improvement designed for the
enjoyment of the citizenry and those which come within
the State's territory, and facilities and protection which
a government is supposed to provide. Considering that
the reinsurance premiums in question were afforded
protection by the government and the recipient foreign
reinsurers exercised rights and privileges guaranteed by
our laws, such reinsurance premiums and reinsurers
should share the burden of maintaining the state.
The petitioner's defense of reliance of good faith on
rulings of the CIR requiring no withholding of tax due on
reinsurance premiums may free the taxpayer from the
payment of surcharges or penalties imposed for failure
to pay the corresponding withholding tax, but it
certainly would not exculpate it from liability to pay
such withholding tax. The Government is not estopped
from collecting taxes by the mistakes or errors of its
agents.
4. PABLO LORENZO vs. JUAN POSADAS JR.
G.R. No. L-43082
June 18, 1937
FACTS:
Thomas Hanley died, leaving a will and a considerable
amount of real and personal properties. Proceedings for
the probate of his will and the settlement and
distribution of his estate were begun in the CFI of
Zamboanga. The will was admitted to probate.
The CFI considered it proper for the best interests of the
estate to appoint a trustee to administer the real
properties which, under the will, were to pass to
nephew Matthew ten years after the two executors
named in the will was appointed trustee. Moore acted
as trustee until he resigned and the plaintiff Lorenzo
herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the
defendant Collector of Internal Revenue (Posadas)
assessed against the estate an inheritance tax, together
with the penalties for delinquency in payment. Lorenzo
paid said amount under protest, notifying Posadas at
the same time that unless the amount was promptly
refunded suit would be brought for its recovery.
Posadas overruled Lorenzo’s protest and refused to
refund the said amount. Plaintiff went to court. The CFI
dismissed Lorenzo’s complaint and Posadas’
counterclaim. Both parties appealed to this court.
ISSUE:
W/N there been delinquency in the payment of the
inheritance tax.
HELD:
(The judgment of the lower court is accordingly
modified, with costs against the plaintiff in both
instances)
YES. The defendant maintains that it was the duty of the
executor to pay the inheritance tax before the delivery
of the decedent’s property to the trustee. Stated
otherwise, the defendant contends that delivery to the
trustee was delivery to the cestui que trust, the
beneficiary in this case, within the meaning of the first
paragraph of subsection (b) of section 1544 of the
Revised Administrative Code. This contention is well
taken and is sustained. A trustee is but an instrument or
agent for the cestui que trust.
The appointment of Moore as trustee was made by the
trial court in conformity with the wishes of the testator
as expressed in his will. It is true that the word “trust” is
not mentioned or used in the will but the intention to
create one is clear. No particular or technical words are
required to create a testamentary trust. The words
“trust” and “trustee”, though apt for the purpose, are
not necessary. In fact, the use of these two words is not
conclusive on the question that a trust is created. ” To
constitute a valid testamentary trust there must be a
concurrence of three circumstances:
(1) Sufficient words to raise a trust;
(2) a definite subject;
(3) a certain or ascertain object; statutes in some
jurisdictions expressly or in effect so providing.”
There is no doubt that the testator intended to create a
trust. He ordered in his will that certain of his properties
be kept together undisposed during a fixed period, for a
stated purpose. The probate court certainly exercised
sound judgment in appointmening a trustee to carry
into effect the provisions of the will
As the existence of the trust was already proven, it
results that the estate which plaintiff represents has
been delinquent in the payment of inheritance tax and,
therefore, liable for the payment of interest and
surcharge provided by law in such cases.
The delinquency in payment occurred on March 10,
1924, the date when Moore became trustee. On that
date trust estate vested in him. The interest due should
be computed from that date.

5. GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827

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

ISSUE:
WON the Anti-TB Stamp Law is unconstitutional for
being allegedly violative of the equal protection clause.

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

The classification of mail users is based on the ability to

pay, the enjoyment of a privilege and on administrative
convenience. Tax exemptions have never been thought
of as raising revenues under the equal protection
clause.

6. CHINA BANKING CORPORATION vs.

COMMISSIONER OF INTERNAL REVENUE
G.R. No. 172509 (February 4, 2015)
 be penalized by the same government by the imposition
of excessive taxes petitioners can ill afford and
eventually result in the forfeiture of their properties

7. JOSE B. L. REYES and EDMUNDO A. REYES v. PEDRO

ALMANZOR, et al.
GR Nos. L-49839-46, April 26, 1991

FACTS:
Petitioners JBL Reyes et al. owned a parcel of land in
Tondo which are leased and occupied as dwelling units
by tenants who were paying monthly rentals of not
exceeding P300.Sometimes in 1971 the Rental Freezing
Law was passed prohibiting for one year from its
effectivity, an increase in monthly rentals of dwelling
units where rentals do not exceed three hundred pesos
(P300.00), so that the Reyeses were precluded from
raising the rents and from ejecting the tenants. In 1973,
respondent City Assessor of Manila re-classified and
reassessed the value of the subject properties based on
the schedule of market values, which entailed an
increase in the corresponding tax rates prompting
petitioners to file a Memorandum of Disagreement
averring that the reassessments made were "excessive,
unwarranted, inequitable, confiscatory and
unconstitutional" considering that the taxes imposed
upon them greatly exceeded the annual income derived
from their properties. They argued that the income
approach should have been used in determining the
land values instead of the comparable sales approach
which the City Assessor adopted.

ISSUE:
WON the approach on tax assessment used by the City
Assessor is reasonable.

HELD:
No. The taxing power has the authority to make a
reasonable and natural classification for purposes of
taxation but the government's act must not be
prompted by a spirit of hostility, or at the very least
discrimination that finds no support in reason. It suffices
then that the laws operate equally and uniformly on all
persons under similar circumstances or that all persons
must be treated in the same manner, the conditions not
being different both in the privileges conferred and the
liabilities imposed. Consequently, it stands to reason
that petitioners who are burdened by the government
by its Rental Freezing Laws (then R.A. No. 6359 and P.D.
20) under the principle of social justice should not now

8. Philippine Health Care Providers, Inc., vs.
Commissioner of Internal Revenue
G.R. No. 1677330, September 18, 2009,
FACTS:
Petitioner is a domestic corporation whose primary
purpose is to establish, maintain, conduct and operate a
prepaid group practice health care delivery system or a
health maintenance organization to take care of the sick
and disabled persons enrolled in the health care plan
and to provide for the administrative, legal, and
financial responsibilities of the organization. On January
27, 2000, respondent CIR sent petitioner a formal
demand letter and the corresponding assessment
notices demanding the payment of deficiency taxes,
including surcharges and interest, for the taxable years
1996 and 1997 in the total amount of P224,702,641.18.
The deficiency assessment was imposed on petitioner’s
health care agreement with the members of its health
care program pursuant to Section 185 of the 1997 Tax
Code. Petitioner protested the assessment in a letter
dated February 23, 2000. As respondent did not act on
the protest, petitioner filed a petition for review in the
Court of Tax Appeals (CTA) seeking the cancellation of
the deficiency VAT and DST assessments. On April 5,
2002, the CTA rendered a decision, ordering the
petitioner to PAY the deficiency VAT amounting to
P22,054,831.75 inclusive of 25% surcharge plus 20%
interest from January 20, 1997 until fully paid for the
1996 VAT deficiency and P31,094,163.87 inclusive of
25% surcharge plus 20% interest from January 20, 1998
until fully paid for the 1997 VAT deficiency. Accordingly,
VAT Ruling No. [231]-88 is declared void and without
force and effect. The 1996 and 1997 deficiency DST
assessment against petitioner is hereby CANCELLED
AND SET ASIDE. Respondent is ORDERED to DESIST from
collecting the said DST deficiency tax. Respondent
appealed the CTA decision to the (CA) insofar as it
cancelled the DST assessment. He claimed that
petitioner’s health care agreement was a contract of
insurance subject to DST under Section 185 of the 1997
Tax Code.
On August 16, 2004, the CA rendered its decision which
held that petitioner’s health care agreement was in the
nature of a non-life insurance contract subject to DST.
Respondent is ordered to pay the deficiency
Documentary Stamp Tax. Petitioner moved for
reconsideration but the CA denied it.
ISSUES:
1. Whether or not a health care agreement is in the
nature of an insurance contract and therefore subject to
the DST imposed under Sec. 185 of R.A. 8424. – NO
2. Whether or not PHCPI is liable to pay DST. – NO
HELD:
1. (Following is not really relevant based on what
GNotes focuses on, but involves the bulk of the case)
PHCPI is an Health Maintenance Organization (HMO)
not engaged in the insurance business. Under RA 7875,
an HMO is "an entity that provides, offers or arranges
for coverage of designated health services needed by
plan members for a fixed prepaid premium. Various
courts in the United States, whose jurisprudence has a
persuasive effect on our decisions, have determined
that HMOs are not in the insurance business. One test
that they have applied is whether the assumption of risk
and indemnification of loss (which are elements of an
insurance business) are
the principal object and purpose of the organization or
whether they are merely incidental to its business. If
these are the principal objectives, the business is that of
insurance. But if they are merely incidental and service
is the principal purpose, then the business is not
insurance.
American courts have pointed out that the main
difference between an HMO and an insurance company
is that HMOs undertake to provide or arrange for the
provision of medical services through participating
physicians while insurance companies simply undertake
to indemnify the insured for medical expenses incurred
up to a pre-agreed limit. Overall, PHCPI appears to
provide insurance-type benefits to its members (with
respect to its curative medical services), but these are
incidental to the principal activity of providing them
medical care. The “insurance-like” aspect of petitioner’s
business is miniscule compared to its noninsurance
activities. Therefore, since it substantially provides
health care services rather than insurance services, it
cannot be considered as being in the insurance
business.
2. (GNotes focus) Regardless of the above discussions,
PHCPI’s liability for DST for the taxable years 1996 and
1997 has been extinguished under RA 9480.
Documentary stamp tax is one of the taxes covered by
the tax amnesty program under RA 9480. When PHCPI
availed of the tax amnesty under RA 9480 on December
10, 2007, it paid P5,127,149.08 representing 5% of its
net worth as of the year ended December 31, 2005 and
complied with all requirements of the tax amnesty.
Under Section 6(a) of RA 9480, it is entitled to immunity
from payment of taxes as well as additions thereto, and
the appurtenant civil, criminal or administrative
penalties under the 1997 NIRC, as amended, arising
from
the failure to pay any and all internal revenue taxes for
taxable year 2005 and prior years.
9. NATIONAL POWER CORPORATION vs. CITY OF
CABANATUAN, respondent.
G.R. No. 149110, April 9, 2003
FACTS:
Petitioner is a government-owned and controlled
corporation created under Commonwealth Act No. 120,
as amended.
For many years now, petitioner sells electric power to
the residents of Cabanatuan City, posting a gross
income of P107,814,187.96 in 1992.7 Pursuant to
section 37 of Ordinance No. 165-92,8 the respondent
assessed the petitioner a franchise tax amounting to
P808,606.41, representing 75% of 1% of the latter’s
gross receipts for the preceding year.
Petitioner refused to pay the tax assessment arguing
that the respondent has no authority to impose tax on
government entities. Petitioner also contended that as a
non-profit organization, it is exempted from the
payment of all forms of taxes, charges, duties or fees in
accordance with sec. 13 of Rep. Act No. 6395, as
amended.
The respondent filed a collection suit in the RTC,
demanding that petitioner pay the assessed tax due,
plus surcharge. Respondent alleged that petitioner’s
exemption from local taxes has been repealed by
section 193 of the LGC, which reads as follows:
“Sec. 193. Withdrawal of Tax Exemption Privileges.-
Unless otherwise provided in this Code, tax exemptions
or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including
government owned or controlled corporations, except
local water districts, cooperatives duly registered under
R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon
the effectivity of this Code.”
RTC upheld NPC’s tax exemption. On appeal the CA
reversed the trial court’s Order on the ground that
section 193, in relation to sections 137 and 151 of the
LGC, expressly withdrew the exemptions granted to the
petitioner.
ISSUE:
W/N the respondent city government has the authority
to issue Ordinance No. 165-92 and impose an annual tax
on “businesses enjoying a franchise
HELD:
YES. Taxes are the lifeblood of the government, for
without taxes, the government can neither exist nor
endure. A principal attribute of sovereignty, the exercise
of taxing power derives its source from the very
existence of the state whose social contract with its
citizens obliges it to promote public interest and
common good. The theory behind the exercise of the
power to tax emanates from necessity; 32 without
taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the
people.
Section 137 of the LGC clearly states that the LGUs can
impose franchise tax “notwithstanding any exemption
granted by any law or other special law.” This particular
provision of the LGC does not admit any exception. In
City Government of San Pablo, Laguna v. Reyes, 74
MERALCO’s exemption from the payment of franchise
taxes was brought as an issue before this Court. The
same issue was involved in the subsequent case of
Manila Electric Company v. Province of Laguna.75
Ruling in favor of the local government in both
instances, we ruled that the franchise tax in question is
imposable despite any exemption enjoyed by MERALCO
under special laws, viz:
“It is our view that petitioners correctly rely on
provisions of Sections 137 and 193 of the LGC to
support their position that MERALCO’s tax exemption
has been withdrawn. The explicit language of section
137 which authorizes the province to impose franchise
tax notwithstanding any exemption granted by any law
or other special law’ is all encompassing and clear. The
franchise tax is imposable despite any exemption
enjoyed under special laws.
10. PHIL. BANK OF COMMUNICATIONS v. CIR
GR No. 112024, January 28, 1999 (302 SCRA 250)
FACTS:
Petitioner PBCom filed its first and second quarter
income tax returns, reported profits, and paid income
taxes amounting to P5.2M in 1985. However, at the end
of the year PBCom suffered losses so that when it filed
its Annual Income Tax Returns for the year-ended
December 31, 1986, the petitioner likewise reported a
net loss of P14.1 M, and thus declared no tax payable
for the year. In 1988, the bank requested from CIR for a
tax credit and tax refunds representing overpayment of
taxes. Pending investigation of the respondent CIR,
petitioner instituted a Petition for Review before the
Court of Tax Appeals (CTA). CTA denied its petition for
tax
credit and refund for failing to file within the
prescriptive period to which the petitioner belies
arguing the Revenue Circular No.7-85 issued by the CIR
itself states that claim for overpaid taxes are not
covered by the two-year prescriptive period mandated
under the Tax Code.
ISSUE:
Is the contention of the petitioner correct? Is the
revenue circular a valid exemption to the NIRC?

HELD:
No. The relaxation of revenue regulations by RMC 7-85
is not warranted as it disregards the two-year
prescriptive period set by law. Basic is the principle that
"taxes are the lifeblood of the nation." The primary
purpose is to generate funds for the State to finance the
needs of the citizenry and to advance the common
weal. Due process of law under the Constitution does
not require judicial proceedings in tax cases. This must
necessarily be so because it is upon taxation that the
government chiefly relies to obtain the means to carry
on its operations and it is of utmost importance that the
modes adopted to enforce the collection of taxes levied
should be summary and interfered with as little as
possible. From the same perspective, claims for refund
or tax credit should be exercised within the time fixed
by law because the BIR being an administrative body
enforced to collect taxes, its functions should not be
unduly delayed or hampered by incidental matters.