Double Taxation and Tax Exemp

GLORILYN M.
MONTEJO
CASES ON DOUBLE OR TAX EXEMPTION
Nursery Care Corporation vs Acevedo GR 180651 July 30, 2014
FACTS:
The City of Manila assessed and collected taxes from the individual petitioners pursuant to Section
15 (Tax on Wholesalers, Distributors, or Dealers) and Section 17 (Tax on Retailers) of the Revenue Code
of Manila.3 At the same time, the City of Manila imposed additional taxes upon the petitioners pursuant to
Section 21 ofthe Revenue Code of Manila, 4 as amended, as a condition for the renewal of their respective
business licenses for the year 1999.
To comply with the City of Manila’s assessmentof taxes under Section 21, supra, the petitioners paid
under protest the following amounts corresponding to the first quarter of 1999, 5 to wit:(a) Nursery Care
Corporation ₱595,190.25;(b) Shoemart Incorporated ₱3,283,520.14; (c) Star Appliance Center
₱236,084.03; (d) H & B, Inc. ₱1,271,118.74; (e) Supplies Station, Inc. ₱239,501.25; (f) Hardware Work
Shop, Inc. ₱609,953.24. Petitioners formally requested the Office of the City Treasurer for the tax credit or
refund of the local business taxes paid under protest. 6 However, then City Treasurer Anthony Acevedo
(Acevedo) denied the request.
ISSUE: Whether or not the collection of taxes under Section 21 of Ordinance No. 7794, as amended,
constitutes double taxation.
HELD:
YES. Collection of taxes pursuant to Section 21 of the Revenue Code of Manila constituted double
taxation. The issue of double taxation is not novel, as it has already been settled by this Court in The City
of Manila v. Coca-Cola Bottlers Philippines, Inc.,in this wise:Petitioners obstinately ignore the exempting
proviso in Section 21 of Tax Ordinance No. 7794, to their own detriment.1âwphi1 Said exempting proviso
was precisely included in said section so as to avoid double taxation.
Double taxation means taxing the same property twice when it should be taxed only once; that is,
"taxing the same person twice by the same jurisdictionfor the same thing." It is obnoxious when the
taxpayer is taxed twice, when it should be but once. Otherwise described as "direct duplicate taxation,"
the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing
authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same
kind or character.
Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is
subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being
imposed: (1) on the same subject matter – the privilege of doing business in the City of Manila; (2) for the
same purpose – to make persons conducting business within the City of Manila contribute tocity
revenues; (3) by the same taxing authority – petitioner Cityof Manila; (4) within the same taxing
jurisdiction – within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods – per
calendar year; and (6) of the same kind or character – a local business tax imposed on gross sales or
receipts of the business.
Based on the foregoing reasons, petitioner should not have been subjected to taxes under Section
21 of the ManilaRevenue Code for the fourth quarter of 2001, considering thatit had already been paying
local business tax under Section 14 of the same ordinance.Hence, payments made under Section 21
must be refunded in favor of petitioner.
City of Manila vs Coca-cola 595 SCRA 299
FACTS:
Respondent paid the local business tax only as a manufacturers as it was expressly exempted from
the business tax under a different section and which applied to businesses subject to excise, VAT or
percentage tax under the Tax Code. The City of Manila subsequently amended the ordinance by deleting
the provision exempting businesses under the latter section if they have already paid taxes under a
different section in the ordinance. This amending ordinance was later declared by the Supreme Court null
and void. Respondent then filed a protest on the ground of double taxation. RTC decided in favor of
Respondent and the decision was received by Petitioner on April 20, 2007. On May 4, 2007, Petitioner
filed with the CTA a Motion for Extension of Time to File Petition for Review asking for a 15-day extension
or until May 20, 2007 within which to file its Petition. A second Motion for Extension was filed on May 18,
2007, this time asking for a 10-day extension to file the Petition. Petitioner finally filed the Petition on May
30, 2007 even if the CTA had earlier issued a resolution dismissing the case for failure to timely file the
Petition.
ISSUE:
Does the enforcement of the latter section of the tax ordinance constitute double taxation?
HELD:
(2) YES. There is indeed double taxation if respondent is subjected to the taxes under both Sections 14
and 21 of the tax ordinance since these are being imposed: (1) on the same subject matter — the
privilege of doing business in the City of Manila; (2) for the same purpose — to make persons conducting
business within the City of Manila contribute to city revenues; (3) by the same taxing authority —
petitioner City of Manila; (4) within the same taxing jurisdiction — within the territorial jurisdiction of the
City of Manila; (5) for the same taxing periods — per calendar year; and (6) of the same kind or character
— a local business tax imposed on gross sales or receipts of the business.
The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance
No. 7794 is specious. The Court revisits Section 143 of the LGC, the very source of the power of
municipalities and cities to impose a local business tax, and to which any local business tax imposed by
petitioner City of Manila must conform. It is apparent from a perusal thereof that when a municipality or
city has already imposed a business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any
other article of commerce, pursuant to Section 143(a) of the LGC, said municipality or city may no longer
subject the same manufacturers, etc. to a business tax under Section 143(h) of the same Code. Section
143(h) may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under
the NIRC, and that are "not otherwise specified in preceding paragraphs." In the same way, businesses
such as respondent’s, already subject to a local business tax under Section 14 of Tax Ordinance No.
7794 [which is based on Section 143(a) of the LGC], can no longer be made liable for local business tax
under Section 21 of the same Tax Ordinance [which is based on Section 143(h) of the LGC].
Swedish Match vs City of Manila GR 181277 July 3, 2013
FACTS:
Petitioner paid business taxes in the total amount of P470,932.21.4 The assessed amount was based on
Sections 145 and 216 of Ordinance No. 7794, otherwise known as the Manila Revenue Code, as
amended by Ordinance Nos. 7988 and 8011. Out of that amount, P164,552.04 corresponded to the
payment under Section 21.7
Assenting that it was not liable to pay taxes under Section 21, petitioner wrote a letter to herein
respondent. Petitioner maintains that the enforcement of Section 21 of the Manila Revenue Code
constitutes double taxation in view of the taxes collected under Section 14 of the same code. Petitioner
points out that Section 21 is not in itself invalid, but the enforcement of this provision would constitute
double taxation if business taxes have already been paid under Section 14 of the same revenue code.
Petitioner further argues that since Ordinance Nos. 7988 and 8011 have already been declared null and
void in Coca-Cola Bottlers Philippines, Inc. v. City of Manila,26 all taxes collected and paid on the basis of
these ordinances should be refunded.
ISSUE:
Whether the imposition of tax under Section 21 of the Manila Revenue Code constitutes double
taxation in view of the tax collected and paid under Section 14 of the same code..
HELD:
YES. as it has already been settled by this Court in The City of Manila v. Coca-Cola Bottlers
Philippines, Inc.Using the aforementioned test, the Court finds that there is indeed double taxation. Based
on the foregoing reasons, petitioner should not have been subjected to taxes under Section 21 of the
Manila Revenue Code for the fourth quarter of 2001, considering that it had already been paying local
business tax under Section 14 of the same ordinance.
Further, we agree with petitioner that Ordinance Nos. 7988 and 8011 cannot be the basis for the
collection of business taxes. In Coca-Cola,29 this Court had the occasion to rule that Ordinance Nos.
7988 and 8011 were null and void for failure to comply with the required publication for three (3)
consecutive days
The passage of the assailed ordinance did not have the effect of curing the defects of Ordinance No.
7988 which, any way, does not legally exist.”
It is undisputed that petitioner paid business taxes based on Sections 14 and 21 for the fourth quarter of
2001 in the total amount of P470,932.21.31 Therefore, it is entitled to a refund of
P164,552.0432 corresponding to the payment under Section 21 of the Manila Revenue Code.
Ericson vs City of Pasig 538 SCRA 99 GR 176667
FACTS:
Ericsson Telecommunications, Inc. (petitioner), a corporation with principal office in Pasig City
(respondent), is engaged in the design, engineering, and marketing of telecommunication
facilities/system. In an Assessment Notice dated October 25, 2000 issued by the City Treasurer of Pasig
City, petitioner was assessed a business tax deficiency for the years 1998 and 1999 amounting
to P9,466,885.00 and P4,993,682.00, respectively, based on its gross revenues as reported in its audited
financial statements for the years 1997 and 1998. Petitioner filed a Protest claiming that the computation
of the local business tax should be based on gross receipts and not on gross revenue.
Respondent issued another Notice of Assessment to petitioner on November 19, 2001, this time based on
business tax deficiencies for the years 2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93,
respectively, based on its gross revenues for the years 1999 and 2000. Again, petitioner filed a Protest,
reiterating its position that the local business tax should be based on gross receipts and not gross
revenue. Respondent denied petitioner’s protest and gave the latter 30 days within which to appeal the
denial.
ISSUE:
Whether the local business tax on contractors should be based on gross receipts or gross revenue?
HELD: Gross Receipts
The applicable provision is subsection (e), Section 143 of the same Code covering contractors and
other independent contractors. The above provision specifically refers to gross receipts which is defined
under Section 131 of the Local Government Code. Gross receipts include money or its equivalent actually
or constructively received in consideration of services rendered or articles sold, exchanged or leased,
whether actual or constructive.
There is, constructive receipt, when the consideration for the articles sold, exchanged or leased, or
the services rendered has already been placed under the control of the person who sold the goods or
rendered the services without any restriction by the payor.
In contrast, gross revenue covers money or its equivalent actually or constructively received, including the

value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be
received.
In petitioner's case, its audited financial statements reflect income or revenue which accrued to it
during the taxable period although not yet actually or constructively received or paid. This is because
petitioner uses the accrual method of accounting, where income is reportable when all the events have
occurred that fix the taxpayer's right to receive the income, and the amount can be determined with
reasonable accuracy; the right to receive income, and not the actual receipt, determines when to include
the amount in gross income.
The imposition of local business tax based on petitioner's gross revenue will inevitably result in the
constitutionally proscribed double taxation - taxing of the same person twice by the same jurisdiction for
the same thing26 - inasmuch as petitioner's revenue or income for a taxable year will definitely include its
gross receipts already reported during the previous year and for which local business tax has already
been paid.
Thus, respondent committed a palpable error when it assessed petitioner's local business tax based
on its gross revenue as reported in its audited financial statements, as Section 143 of the Local
Government Code and Section 22(e) of the Pasig Revenue Code clearly provide that the tax should be
computed based on gross receipts.
CIR vs BPI GR 147375 June 26, 2006
FACTS:
As a domestic corporation, the interest earned by respondent Bank of the Philippine Islands (BPI)
from deposits and similar arrangements are subjected to a final withholding tax of 20%. Consequently, the
interest income it receives on amounts that it lends out are always net of the 20% withheld tax. As a bank,
BPI is furthermore liable for a 5% gross receipts tax on all its income.5% gross receipts tax payments by
including in its tax base the 20% final tax on interest income that had been withheld and remitted directly
to the Bureau of Internal Revenue (BIR). BPI argues that to include the 20% final tax withheld in its gross
receipts tax base would be to tax twice its passive income and would constitute double taxation. On 30
January 1996, the CTA rendered a decision in Asian Bank Corporation v.Commissioner of Internal
Revenue, holding that the 20% final tax withheld on a bank’s interest income did not form part of its
taxable gross receipts for the purpose of computing gross receipts tax. BPI wrote the BIR a letter dated
15 July 1998 citing the CTA Decision in Asian Bank and requesting a refund of alleged over payment of
taxes representing 5% gross receipts taxes paid on the 20% final tax withheld at source. Inaction by the
BIR on this request prompted BPI to file a Petition for Review against the Commissioner of Internal
Revenue (Commissioner) with the CTA on 19 January 1999. Conceding its claim for the first three
quarters of the year as having been barred by prescription, BPI only claimed alleged overpaid taxes for
the final quarter of 1996.
ISSUE:
Whether there is double taxation. NO
Whether the 20% final tax on a bank’s passive income, withheld from the bank at source, still forms
part of the bank’s gross income for the purpose of computing its gross receipts tax liability. YES
HELD:
NO. Granted that interest income is being taxed twice, this, however, does not amount to double
taxation. There is no double taxation if the law imposes two different taxes on the same income, business
or property.
First the taxes herein are imposed on two different subject matters. The subject matter of the
FWT [Final Withholding Tax] is the passive income generated in the form of interest on deposits and
yield on deposit substitutes, while the subject matter of the GRT [Gross Receipts Tax] is the privilege
of engaging in the business of banking.A tax based on receipts is a tax on business rather than on
the property; hence, it is an excise rather than a property tax. It is not an income tax, unlike the FWT.
In fact, we have already held that one can be taxed for engaging in business and further taxed
differently for the income derived therefrom.these two taxes are entirely distinct and are assessed
under different provisions.
Second, although both taxes are national in scope because they are imposed by the same
taxing authority—the national government under the Tax Code—and operate within the same
Philippine jurisdiction for the same purpose of raising revenues, the taxing periods they affect are
different. The FWT is deducted and withheld as soon as the income is earned, and is paid after
every calendar quarter in which it is earned. On the other hand, the GRT is neither deducted nor
withheld, but is paid only after every taxable quarter in which it is earned.
Third, these two taxes are of different kinds or characters. The FWT is an income tax subject to
withholding, while the GRT is a percentage tax not subject to withholding.
In short, there is no double taxation, because there is no taxing twice, by the same taxing authority,
within the same jurisdiction, for the same purpose, in different taxing periods, some of the property in the
territory. Subjecting interest income to a 20% FWT and including it in the computation of the 5% GRT is
clearly not double taxation.Clearly, therefore, despite the fact that that interest income is taxed twice,
there is no double taxation present in this case.
YES. An interpretation of the tax laws and relevant jurisprudence shows that the tax on interest
income of banks withheld at source is included in the computation of their gross receipts tax base.
CIR vs SC JohnSon GR 127105
FACTS:
JOHNSON AND SON, INC a domestic corporation organized and operating under the Philippine
laws, JOHNSON AND SON, INC was obliged to pay SC Johnson and Son, USA royalties based on a
percentage of net sales and subjected the same to 25% withholding tax on royaltypayments which
respondent paid for the period covering July 1992 to May 1993.00 On October 29,1993, SC
JOHNSON AND SON, USA filed with the International Tax Affairs Division (ITAD) of the BIR a claim for
refund of overpaid withholding tax on royalties arguing that, since the agreement was approved by the
Technology Transfer Board, the preferential tax rate of 10% should apply to the respondent. Respondent
submits that royalties paid to SC Johnson and Son, USA is only subject to 10%withholding tax pursuant
to the most-favored nation clause of the RP-US Tax Treaty in relation to the RP-West Germany Tax
Treaty. The Internal Tax Affairs Division of the BIR ruled against SC Johnson and Son, Inc. and an appeal
was filed by the former to the Court of tax appeals.The CTA ruled against CIR and ordered that a tax
credit be issued in favor of SC Johnson and Son, Inc. Unpleased with the decision, the CIR filed an
appeal to the CA which subsequently affirmed in toto the decision of the CTA. Hence, an appeal on
certiorari was filed to the SC.
ISSUE:
Whether THE COURT OF APPEALS ERRED IN RULING THAT SC JOHNSON AND SON, USA IS
ENTITLED TO THE "MOST FAVORED NATION" TAX RATE OF 10% ON ROYALTIES AS PROVIDED
IN THE RP-US TAX TREATY IN RELATION TO THE RP-WEST GERMANY TAX TREATY.
HELD:
NO. the concessional tax rate of 10 percent provided for in the RP-Germany Tax Treaty should
apply only if the taxes imposed upon royalties in the RP-US Tax Treaty and in the RP-Germany Tax
Treaty are paid under similar circumstances.
The United States is the state of residence since the taxpayer, S. C. Johnson and Son, U. S. A., is based
there. Under the RP-US Tax Treaty, the state of residence and the state of source are both permitted to
tax the royalties, with a restraint on the tax that may be collected by the state of source. 18 Furthermore,
the method employed to give relief from double taxation is the allowance of a tax credit to citizens or
residents of the United States (in an appropriate amount based upon the taxes paid or accrued to the
Philippines) against the United States tax, but such amount shall not exceed the limitations provided by
United States law for the taxable year. 19 Under Article 13 thereof, the Philippines may impose one of
three rates — 25 percent of the gross amount of the royalties; 15 percent when the royalties are paid by a
corporation registered with the Philippine Board of Investments and engaged in preferred areas of
activities; or the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid
under similar circumstances to a resident of a third state.
At the same time, the intention behind the adoption of the provision on "relief from double taxation" in the
two tax treaties in question should be considered in light of the purpose behind the most favored nation
clause.
The purpose of a most favored nation clause is to grant to the contracting party treatment not less
favorable than that which has been or may be granted to the "most favored" among other countries. 2
We accordingly agree with petitioner that since the RP-US Tax Treaty does not give a matching tax credit
of 20 percent for the taxes paid to the Philippines on royalties as allowed under the RP-West Germany
Tax Treaty, private respondent cannot be deemed entitled to the 10 percent rate granted under the latter
treaty for the reason that there is no payment of taxes on royalties under similar circumstances.
It bears stress that tax refunds are in the nature of tax exemptions. As such they are regarded as in
derogation of sovereign authority and to be construed strictissimi juris against the person or entity
claiming the exemption. 27 The burden of proof is upon him who claims the exemption in his favor and he
must be able to justify his claim by the clearest grant of organic or statute law. 28 Private respondent is
claiming for a refund of the alleged overpayment of tax on royalties; however, there is nothing on record
to support a claim that the tax on royalties under the RP-US Tax Treaty is paid under similar
circumstances as the tax on royalties under the RP-West Germany Tax Treaty.
Film Development Council v. Colon Heritage, G.R. No. 203754 , 16 Jun 2015
FACTS:
Sometime in 1993, respondent City of Cebu, in its exercise of its power to impose amusement taxes
under Section 140 of the Local Government Code[2] (LGC)anchored on the constitutional policy on local
autonomy,[3] passed City Ordinance known as the “Revised Omnibus Tax Ordinance of the City of Cebu
(tax ordinance).” Central to the case at bar are Sections 42 and 43, Chapter XI thereof which require
proprietors, lessees or operators of theatres, cinemas, concert halls, circuses, boxing... stadia, and other
places of amusement, to pay an amusement tax equivalent to thirty percent (30%) of the gross receipts of
admission fees to the Office of the City Treasurer of Cebu City.
The proprietors and cinema operators, including private respondent Colon Heritage Realty Corp. (Colon
Heritage), operator of the Oriente theater, were given ten (10) days from receipt thereof to pay the
aforestated amounts to FDCP... the city finally filed on May 18, 2009 before the RTC, Branch 14 a petition
for... declaratory relief with application for a writ of preliminary injunction, docketed as Civil Case No.
CEB-35529 (City of Cebu v. FDCP). In said petition, Cebu City sought the declaration of Secs. 13 and 14
of RA 9167 as invalid and unconstitutional.
ISSUE:
Whether RA 9167 in the segregation of the amusement taxes raised and collected by Cebu City and
its subsequent transfer to FDCP is an exemption from payment of tax.
And whether it violates local Fiscal autonomy
HELD:
NO. It is a grant of amusement tax reward incentive: not a tax exemption
It was argued that subject Sec. 13 is a grant by Congress of an exemption from amusement taxes in favor
of producers of graded films. Without question, this Court has previously upheld the power of Congress to
grant exemptions over the power of LGUs to impose taxes. 39 This amusement tax reward, however, is
not, as the lower court posited, a tax exemption. Exempting a person or entity from tax is to relieve or to
excuse that person or entity from the burden of the imposition. Here, however, it cannot be said that an
exemption from amusement taxes was granted by Congress to the producers of graded films. Take note
that the burden of paying the amusement tax in question is on the proprietors, lessors, and operators of
the theaters and cinemas that showed the graded films.
Simply put, both the burden and incidence of the amusement tax are borne by the proprietors, lessors,
and operators, not by the producers of the graded films. The transfer of the amount to the film producers
is actually a monetary reward given to them for having produced a graded film, the funding for which was
taken by the national government from the coffers of the covered LGUs. Without a doubt, this is not an
exemption from payment of tax.
Yes. RA 9167 violates local fiscal autonomy
Principles:
Material to the case at bar is the concept and scope of local fiscal autonomy. In Pimentel v. Aguirre,[23]
fiscal autonomy was defined as “the power [of LGUs] to create their own sources of revenue in addition to
their equitable share in the national... taxes released by the national government, as well as the power to
allocate their resources in accordance with their own priorities. It extends to the preparation of their
budgets, and local officials in turn have to work within the constraints thereof.”
RA 9167, Sec. 14 states:
Section 14. Amusement Tax Deduction and Remittance. - All revenue from the amusement tax on the
graded film which may otherwise accrue to the cities and municipalities in Metropolitan Manila and highly
urbanized and independent component cities... in the Philippines pursuant to Section 140 of Republic Act.
No. 7160 during the period the graded film is exhibited, shall be deducted and withheld by the proprietors,
operators or lessees of theaters or cinemas and remitted within thirty (30) days from the... termination of
the exhibition to the Council which shall reward the corresponding amusement tax to the producers of the
graded film within fifteen (15) days from receipt thereof.
A reading of the challenged provision reveals that the power to impose amusement taxes was NOT
removed from the covered LGUs, unlike what Congress did for the taxes enumerated in Sec. 133, Article
X of the LGC,[35] which lays down the common... limitations on the taxing powers of LGUs.
Thus the provision under RA 9167 which requires cinema operators to turn over to the film development
council of the Philippines or FDCP amusement taxes which previously they were turned over to the local
government units, the supreme court invalidated such provision. some cinema operators have still in their
position withheld amusement taxes.
However the cinema operators must still turn over the money collected when said provision of law was
still valid to FDCP and not to the local governments. Likewise, FDCP is not obliged to turn over the money
it already collected to the local government units. the reason is the doctrine of operative fact which states
that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may
have consequences that must not be ignored.
CIR vs. CA G.R. No. 95022 207 March 23, 1992 SCRA 487 Tax Exemption
FACTS:
Petitioner, seeks a reversal of the Decision of respondent CA, dated Aug. 27, 1990, in CA-G.R. SP No.
20426, entitled “Commissioner of Internal Revenue vs. GCL Retirement Plan, represented by its Trustee-
Director and the Court of Tax Appeals,” which affirmed the Decision of the latter Court, dated 15
December 1986, in Case No. 3888, ordering a refund, in the sum of P11,302.19, to the GCL Retirement
Plan representing the withholding tax on income from money market placements and purchase of
treasury bills, imposed pursuant to Presidential Decree No. 1959.
There is no dispute with respect to the facts. Private Respondent, GCL Retirement Plan (GCL, for brevity)
is an employees’ trust maintained by the employer, GCL Inc., to provide retirement, pension, disability
and death benefits to its employees. The Plan as submitted was approved and qualified as exempt from
income tax by Petitioner Commissioner of Internal Revenue in accordance with Rep. Act No. 4917.
ISSUE: Are school’s retained earnings tax-exempt?
RULING:
Yes. GCL Plan was qualified as exempt from income tax by the CIR in accordance with Rep. Act.
4917. The tax-exemption privilege of employees’ trusts, as distinguished from any other kind of property
held in trust, springs from Section 56(b) (now 53[b]) of the Tax Code, “The tax imposed by this Title shall
not apply to employee’s trust which forms part of a pension, stock bonus or profit-sharing plan of an
employer for the benefit of some or all of his employees . . .” And rightly so, by virtue of the raison
de’etre behind the creation of employees’ trusts. Employees’ trusts or benefit plans normally provide
economic assistance to employees upon the occurrence of certain contingencies, particularly, old age
retirement, death, sickness, or disability. It provides security against certain hazards to which members of
the Plan may be exposed. It is an independent and additional source of protection for the working group.
What is more, it is established for their exclusive benefit and for no other purpose.
It is evident that tax-exemption is likewise to be enjoyed by the income of the pension trust. Otherwise,
taxation of those earnings would result in a diminution accumulated income and reduce whatever the trust
beneficiaries would receive out of the trust fund. This would run afoul of the very intendment of the law.
There can be no denying either that the final withholding tax is collected from income in respect of which
employees’ trusts are declared exempt (Sec. 56 [b], now 53 [b], Tax Code). The application of the
withholdings system to interest on bank deposits or yield from deposit substitutes is essentially to
maximize and expedite the collection of income taxes by requiring its payment at the source. If an
employees’ trust like the GCL enjoys a tax-exempt status from income, we see no logic in withholding a
certain percentage of that income which it is not supposed to pay in the first place.
PLDT VS CITY OF DAVAO
Facts:
PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid “in
lieu of all taxes on this franchise or earnings thereof” pursuant to RA 7082. The exemption from “all taxes
on this franchise or earnings thereof” was subsequently withdrawn by RA 7160 (LGC), which at the same
time gave local government units the power to tax businesses enjoying a franchise on the basis of income
received or earned by them within their territorial jurisdiction. The LGC took effect on January 1, 1992.
The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides:
Notwithstanding any exemption granted by law or other special laws, there is hereby imposed a tax
on businesses enjoying a franchise, a rate of seventy-five percent (75%) of one percent (1%) of the gross
annual receipts for the preceding calendar year based on the income receipts realized within the territorial
jurisdiction of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation (Globe) and
Smart Information Technologies, Inc. (Smart) franchises which contained “in leiu of all taxes” provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which
provides that any advantage, favor, privilege, exemption, or immunity granted under existing franchises,
or may hereafter be granted, shall ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to the grantees of such franchises. The
law took effect on March 16, 1995.
In January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro exchange, it was
required to pay the local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the
power of the city government to collect the local franchise tax and demanded a refund of what had been
paid as a local franchise tax for the year 1997 and for the first to the third quarters of 1998.
Issue:
Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of
the local franchise tax in view of the grant of tax exemption to Globe and Smart.
Held:
Petitioner contends that because their existing franchises contain “in lieu of all taxes” clauses, the same
grant of tax exemption must be deemed to have become ipso facto part of its previously granted
telecommunications franchise. But the rule is that tax exemptions should be granted only by a clear and
unequivocal provision of law “expressed in a language too plain to be mistaken” and assuming for the
nonce that the charters of Globe and of Smart grant tax exemptions, then this runabout way of granting
tax exemption to PLDT is not a direct, “clear and unequivocal” way of communicating the legislative
intent.
Nor does the term “exemption” in Sec. 23 of RA 7925 mean tax exemption. The term refers
to exemption from regulations and requirements imposed by the National Telecommunications
Commission (NTC). For instance, RA 7925, Sec. 17 provides: The Commission shall exempt any specific
telecommunications service from its rate or tariff regulations if the service has sufficient competition to
ensure fair and reasonable rates of tariffs. Another exemption granted by the law in line with its policy of
deregulation is the exemption from the requirement of securing permits from the NTC every time a
telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of
language too plain to be mistaken.
Maceda v Macaraig (1991)
Facts:
The petition seeks to nullify certain decisions, orders, ruling, and resolutions of the respondents (Macaraig
et. al) for exempting the National Power Corporation (NPC) from indirect tax and duties. Commonwealth
Act 120 created NPC as a public corporation. RA 6395 revised the charter of NPC and provided in detail
the exemption of NPC from all taxes, duties and other charges by the government. There were many
resolutions and decisions that followed after RA 6395 which talked about the exemption and non-
exemption from taxes of NPC.
Issue:
Whether or not NPC is really exempt from indirect taxes
Held:
Yes. NPC is a non-profit public corporation created for the general good and welfare of the people. From
the very beginning of its corporate existence, NPC enjoyed preferential tax treatment to enable it to pay
its debts and obligations. From the changes made in the NPC charter, the intention to strengthen its
preferential tax treatment is obvious. The tax exemption is intended not only to insure that the NPC shall
continue to generate electricity for the country but more importantly, to assure cheaper rates to be paid by
consumers.
African Airways v. CIR

G.R. No. 180356 February 16, 2010
VELASCO, JR., J.
Lessons Applicable: Taxes can be offset if intimately related, unless exempted assumed within the
purview of general rule, liabilities and tax credit must first be determined before offset can take place
Facts:
 South African Airways, a foreign corporation with no license to do business in the Philippines,
sells passage documents for off-line flights through Aerotel Limited, general sales agent in the
Philippines
 Feb 5, 2003: Petitioner filed a claim for refund erroneously paid tax on Gross Philippine Billing
(GPB) for the year 2010.
 CTA: denied - petitioner is a resident foreign corp. engaged in trade or business in the Philippines
and therefore is NOT liable to pay tax on GPB under the Sec. 28 (A) (3) (a) of the 1997 NIRC but
cannot be allowed refund because liable for the 32% income tax from its sales of passage documents.
 This is upheld by the CTA and CTA En Banc
Issue:
1. W/N petitioner is engaged in trade or business in the Philippines is subject to 32% income tax.
2. W/N petitioner is entitled to refund
HELD: CTA En Banc decision is set side
1. Yes. Since it does not maintain flights to or from the Philippines, it is not taxable under Sec. 28(A)(3)
(a) of the 1997 NIRC. This much was also found by the CTA. But petitioner further posits the view that
due to the non-applicability of Sec. 28(A)(3)(a) to it, it is precluded from paying any other income tax for
its sale of passage documents in the Philippines. But, Sec. 28 (A)(1) of the 1997 NIRC does not exempt
all international air carriers from the coverage of Sec. 28 (A) (1) of the 1997 NIRC being a general rule.
Petitioner, being an international carrier with no flights originating from the Philippines, does not fall under
the exception. As such, petitioner must fall under the general rule. This principle is embodied in the Latin
maxim, exception firmat regulam in casibus non exceptis, which means, a thing not being excepted must
be regarded as coming within the purview of the general rule.
2. Underterminable. Although offsetting of tax refund with tax deficiency is unavailing under Art. 1279 of
the Civil Code, in CIR v. CTA it granted when deficiency assessment is intimately related and inextricably
intertwined with the right to claim for a tax refund. Sec. 72 Chapter XI of 1997 NIRC is not applicable
where petitioner's tax refund claim assumes that the tax return that it filed were correct because petitioner
is liable under Sec. 28 (A)(1), the correctness is now put in doubt and refund cannot be granted. It cannot
be assumed that the liabilities for two different provisions would be the same. There is a necessity for the
CTA to receive evidence and establish the correct amount before a refund can be granted.
CIR vs ESSO Standard Eastern (G.R. No. L-28502-03. April 18, 1989)
FACTS:
Respondent overpaid its 1959 income tax by P221,033.00. It was granted a tax credit by the
Commissioner accordingly on 1964. However, ESSOs payment of its income tax for 1960 was found to
be short by P367,994.00. The Commissioner (of Internal Revenue) wrote to ESSO demanding payment
of the deficiency tax, together with interest thereon for the period from 1961 to 1964. ESSO paid under
protest the amount alleged to be due, including the interest as reckoned by the Commissioner. It
protested the computation of interest, contending it was more than that properly due. It claimed that it
should not have been required to pay interest on the total amount of the deficiency tax, P367,994.00, but
only on the amount of P146,961.00—representing the difference between said deficiency, P367,994.00,
and ESSOs earlier overpayment of P221,033.00 (for which it had been granted a tax credit). ESSO thus
asked for a refund. The Internal Revenue Commissioner denied the claim for refund. ESSO appealed to
the Court of Tax Appeals which ordered payment to ESSO of its refund-claim representing overpaid
interest.
The Commissioner argued the tax credit of P221,033.00 was approved only on year 1964, it could not be
availed of in reduction of ESSOs earlier tax deficiency for the year 1960; as of that year, 1960, there was
as yet no tax credit to speak of, which would reduce the deficiency tax liability for 1960. In support of his
position, the Commissioner invokes the provisions of Section 51 of the Tax Code.
ISSUE:
Whether or not the interest on delinquency should be applied on the full tax deficiency of P367,994.00
despite the existence of overpayment in the amount of P221,033.00.
HELD:
NO. Petition was denied. Decision of CTA was affirmed.
RATIO:
The fact is that, as respondent Court of Tax Appeals has stressed, as early as 1960, the Government
already had in its hands the sum of P221,033.00 representing excess payment. Having been paid and
received by mistake, as petitioner Commissioner subsequently acknowledged, that sum unquestionably
belonged to ESSO, and the Government had the obligation to return it to ESSO That acknowledgment of
the erroneous payment came some four (4) years afterwards in nowise negates or detracts from its
actuality. The obligation to return money mistakenly paid arises from the moment that payment is made,
and not from the time that the payee admits the obligation to reimburse.The obligation to return money
mistakenly paid arises from the moment that payment is made, and not from the time that the payee
admits the obligation to reimburse. The obligation of the payee to reimburse an amount paid to him
results from the mistake, not from the payee’s confession of the mistake or recognition of the obligation to
reimburse.
Esso Standard Eastern, Inc. v CIR GR Nos L-28508-9, July 7, 1989
FACTS:
Esso deducted from its gross income, as part of its ordinary and necessary business expenses, margin
fees it had paid to the Central Bank on its profit remittances to its New York Office. The CIR disallowed
the claimed deduction. ESSO appealed to the CTA but was denied. Hence, this petition.
ISSUE:
Whether the margin fees were deductible from gross income either as a
1. (1) tax or
2. (2) ordinary and necessary business expense
RULING:
1. (1) No, it is not a tax. A tax is levied to provide revenue for government operations, while the
proceeds of the margin fee are applied to strengthen our country’s international reserves. Thus
the margin fee was imposed by the State in the exercise of its police power ant not the power of
taxation.
2. (2) No. ESSO has not shown that the remittance to the head office of part of its profits was made
in furtherance of its own trade or business. The petitioner merely presumed that all corporate
expenses are necessary and appropriate in the absence of a showing that they are illegal or ultra
vires. This is error. The public respondent is correct when it asserts that the paramount rule is
that claims for deductions are a matter of legislative grace and do not turn on mere equitable
considerations... The taxpayer in every instance has the burden of justifying the allowance of any
deduction claimed.
ASIA INTERNATIONAL AUCTIONEERS, INC., Petitioner, -versus- COMMISSIONER OF INTERNAL

REVENUE, Respondent.
G.R. No. 179115, SECOND DIVISION, September 26, 2012
PERLAS-BERNABE, J.
RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude taxpayers within its
coverage from availing of other tax amnesty programs available or enacted in the future like RA 9480. RA
9480, on the other hand, does not exclude from its coverage taxpayers operating within special economic
zones. As long as it is within the bounds of the law, a taxpayer has the liberty to choose which tax
amnesty program it wants to avail.
FACTS:
Petitioner is a duly organized corporation operating within the Subic Special Economic Zone (SSEZ). It is
engaged in the importation of used motor vehicles and heavy equipment which it sells to the public
through auction. BIR assessed it with deficiency VAT and excise taxes. During the pendency of the case,
petitioner availed of the amnesty program under Republic Act No. 9480. The BIR argues that petitioner is
disqualified under Section 8(a) of RA 9480 from availing the Tax Amnesty Program because it is
“deemed” a withholding agent for the deficiency taxes. The BIR likewise argues that petitioner, as an
accredited investor/taxpayer situated at the SSEZ, should have availed of the tax amnesty granted under
RA 9399 and not under RA 9480.
ISSUE:
Whether or not the petitioner is entitled to the tax amnesty program.
RULING:
YES. VAT and excise taxes are not withholding taxes. The CIR did not assess the petitioner as a
withholding agent that failed to withhold or remit the deficiency VAT and excise tax to the BIR under the
relevant provisions of the Tax Code. Hence, the argument that AIA is "deemed" a withholding agent for
the said deficiency taxes is fallacious. Indirect taxes, like VAT and excise tax, are different from
withholding taxes. To distinguish, in indirect taxes, the incidence of taxation falls on one person but the
burden thereof can be shifted or passed on to another person such as when the tax is imposed upon
goods before reaching the consumer who ultimately pays for it. On the other hand, in case of withholding
taxes, the incidence and burden of taxation fall on the same entity, the statutory taxpayer. The burden of
taxation is not shifted to the withholding agent who merely collects, by withholding, the tax due from
income payments to entities arising from certain transactions and remits the same to the government.
Due to this difference, the deficiency VAT and excise tax cannot be "deemed" as withholding taxes
merely because they constitute indirect taxes. Moreover, records support the conclusion that AIA was
assessed not as a withholding agent but as the one directly liable for the said deficiency taxes. Petitioner
is not prohibited from availing tax amnesty under RA 9399. RA 9399 was passed prior to the passage of
RA 9480. RA 9399 does not preclude taxpayers within its coverage from availing of other tax amnesty
programs available or enacted in the future like RA 9480. RA 9480, on the other hand, does not exclude
from its coverage taxpayers operating within special economic zones. As long as it is within the bounds of
the law, a taxpayer has the liberty to choose which tax amnesty program it wants to avail. The Court also
took judicial notice of the "Certification of Qualification" issued by Eduardo A. Baluyut, BIR Revenue
District Officer, stating that AlA has availed and is qualified for Tax Amnesty for the Taxable Year 2005
and Prior Years pursuant to RA 9480. In the absence of sufficient evidence proving that the certification
was issued in excess of authority, the presumption that it was issued in the regular performance of the
revenue district officer's official duty stands.
PHILIPPINE BANKING CORPORATION (NOW: GLOBAL BUSINESS BANK, INC.), Petitioner,vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS: Petitioner is a domestic corporation duly licensed as a banking institution. For the taxable years
1996 and1997, petitioner offered its Special/Super Savings Deposit Account (SSDA) to its depositors. On
10 January 2000,the Commissioner of Internal Revenue (respondent) sent petitioner a Final Assessment
Notice assessing deficiencyDST based on the outstanding balances of its SSDA, including increments, in
the total sum of P17,595,488.75 for1996 and P47,767,756.24 for 1997.Petitioner claims that the SSDA is
in the nature of a regular savings account. Petitioner maintains that the taxassessments are erroneous
because Section 180 of the 1977 NIRC does not include deposits evidenced by apassbook among the
enumeration of instruments subject to DST. Petitioner also argues that even on theassumption that a
passbook evidencing the SSDA is a certificate of deposit, no DST will be imposed because
onlynegotiable certificates of deposits are subject to tax under Section 180 of the 1977 NIRC.
Respondent avers that under Section 180 of the 1977 NIRC, certificates of deposits deriving interest are
subject to
the payment of DST. Petitioner’s passbook evidencing its SSDA is considered a certificate of deposit, and
being very similar to a time deposit account, it should be subject to the payment of DST. Respondent
further argues thatSection 180 of the 1977 NIRC categorically states that certificates of deposit deriving
interest are subject to DSTwithout limiting the enumeration to negotiable certificates of deposit.The CTA
held that a passbook representing an interest-earning deposit account issued by a bank qualifies as
acertificate of deposit drawing interest.On 14 December 2005, petitioner appealed to this Court the CTA
decision.
ISSUE: whether petitioner’s product called Special/Super Savings Account is subject to DST under
Section 180 ofthe 1977 NIRC.
RULING: Yes. Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers
evidencingthe acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.
A DST is actuallyan excise tax because it is imposed on the transaction rather than on the document. A
DST is also levied on theexercise by persons of certain privileges conferred by law for the creation,
revision, or termination of specific legalrelationships through the execution of specific instruments. Hence,
in imposing the DST, the Court considers notonly the document but also the nature and character of the
transaction.Section 180 of the 1977 NIRC imposes a DST of P0.30 on each P200 of the face value of any
certificate of depositdrawing interest. As correctly observed by the CTA, a certificate of deposit is a written
acknowledgment by a bankof the receipt of a sum of money on deposit which the bank promises to pay to
the depositor, to the order of thedepositor, or to some other person or his order, whereby the relation of
debtor or creditor between the bank andthe depositor is created.
Petitioner’s SSDA has the following features:
1. Although the money placed in the SSDA can be withdrawn anytime, the money is subject to a holding
period inorder to earn a higher interest rate. Otherwise, in case of premature withdrawal, the depositor will
not earn thepreferred interest ranging from 8% or higher but only the normal interest rate on regular
savings deposit.
2. In order to qualify for an SSDA, the depositor must place a substantial amount of money of not less
thanP50,000. This amount is even larger than what is needed to open a time deposit which is P20,000.
Aside from thesubstantial amount of money required, this amount must be maintained within a certain
period just like a timedeposit.
3. On the issue of penalty, in an SSDA, if the depositor withdraws the money and the balance falls below
the"minimum balance" of P50,000, the interest is reduced. This condition is identical to that imposed on a
timedeposit that is withdrawn before maturity.Based on these features, it is clear that the SSDA is a
certificate of deposit drawing interest subject to DST even if itis evidenced by a passbook and non-
negotiable in character.
InInternational Exchange Bank v. Commissioner ofInternal Revenue

, we held that: A document to be deemed a certificate of deposit requires no specific form as longas there
is some written memorandum that the bank accepted a deposit of a sum of money from a depositor.What
is important and controlling is the nature or meaning conveyed by the passbook and not the particular
labelor nomenclature attached to it, inasmuch as substance, not form, is paramount.
TAX AMNESTY:
On 24 May 2007, during the pendency of this case before this Court, RA. 9480 or "An Act Enhancing
RevenueAdministration and Collection by Granting an Amnesty on All Unpaid Internal Revenue Taxes
Imposed by theNational Government for Taxable Year 2005 and Prior Years", lapsed into law.On 21
September 2007, Metrobank, the surviving entity that absorbed petitioner’s banking business, filed a Tax
Amnesty Return, paid the amnesty tax and fully complied with all the requirements. Petitioner contends
that theavailment includes all deficiency tax assessments of the BIR subject of this petition.The DST is
one of the taxes covered by the Tax Amnesty Program under RA 9480. As discussed above, petitioner
isclearly liable to pay the DST on its SSDA for the years 1996 and 1997. However, petitioner, as the
absorbedcorporation, can avail of the tax amnesty benefits granted to Metrobank.
Wherefore, we GRANT the petition, and SET ASIDE the Court of Tax Appeals’ Decision dated 23
November 2005 in CTA EB No. 63 solely in view of petitioner’s availment of the Tax Amnesty Program
15. Bañas Jr. v. Court of Appeals [G.R. No. 102967. February 10, 2000]
FACTS
Petitioner entered into a deed of sale purportedly on installment. He discounted the promissory note
covering the future installments for purposes of taxation.
ISSUE
Whether or not the promissory note should be declared cash transaction for purposes of taxation.
RULING
YES. A negotiable instrument is deemed a substitute for money and for value. According to Sec. 25 of
NIL: “value is any consideration sufficient to support a simple contract. An antecedent or pre-existing
debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future
time”. Although the proceed of a discounted promissory note is not considered part of the initial
payment, it is still taxable income for the year it was converted into cash.
16. Commissioner of Internal Revenue vs. Fortune Tobacco Corporation
G.R. Nos. 167274-75, July 21, 2008
FACTS:
Fortune Tobacco is a manufacturer and producer of some cigarette brands. Prior to January 1, 1997, its
cigarette brands were subject to ad valorem tax but on January 1, 1997, R.A. No. 8240 took effect
whereby a shift from the ad valorem tax (AVT) system to the specific tax system was made and
subjecting its cigarette brands to specific tax. For the period covering January 1-31, 2000, Fortune
Tobacco paid specific taxes on all brands manufactured so it filed a claim for refund or tax credit of its
overpaid excise tax for the month of January 2000. The Court of Tax Appeals (CTA) and the Court of
Appeals, granted the tax refund or tax credit representing specific taxes erroneously collected from its
tobacco products. However, the Commissioner of Internal Revenue reclaims the grant of tax refund.
Hence, this petition.
ISSUE:
Whether or not Fortune Tobacco is entitled to tax refund.
RULING:
Yes. Although tax refund partakes the nature of a tax exemption, this rule does not apply to Fortune
Tobacco’s claim. The parity between tax refund and tax exemption exists only when the former is based
either on a tax exemption statute or a tax refund statute. In the present case, Fortune Tobacco’s claim
for refund is premised on its erroneous payment of the tax, or the government’s exaction in the absence
of a law.
Tax exemption is granted by the legislature thus, the one who claims an exemption from the burden of
taxation must justify his claim by showing that the legislature intended to exempt him by words too
plain to be mistaken. In the same manner, a claim for tax refund may also be based on statutes granting
tax exemption or tax refund. In this case, the rule of strict interpretation against the taxpayer is
applicable as the claim for refund partakes of the nature of an exemption.
However, tax refunds (or tax credits) are not founded principally on legislative grant but on the legal
principle of solutioindebiti, the government cannot unjustly enrich itself at the expense of the taxpayers.
Under the Tax Code, in recognition of the pervasive quasi-contract principle, a claim for tax refund may
be based on the following:
(a) erroneously or illegally assessed or collected internal revenue taxes;
(b) penalties imposed without authority; and
(c) any sum alleged to have been excessive or in any manner wrongfully collected.
17. CIR VS. PHILIPPINE AIRLINES, INC. - MINIMUM CORPORATE INCOME TAX
FACTS:
PHILIPPINE AIRLINES, INC. had zero taxable income for 2000 but would have been liable for Minimum
Corporate Income Tax based on its gross income. However, PHILIPPINE AIRLINES, INC. did not pay the
Minimum Corporate Income Tax using as basis its franchise which exempts it from “all other taxes” upon
payment of whichever is lower of either (a) the basic corporate income tax based on the net taxable
income or (b) a franchise tax of 2%.
ISSUE:
Is PAL liable for Minimum Corporate Income Tax?
HELD:
NO. PHILIPPINE AIRLINES, INC.’s franchise clearly refers to "basic corporate income tax" which refers to
the general rate of 35% (now 30%). In addition, there is an apparent distinction under the Tax Code
between taxable income, which is the basis for basic corporate income tax under Sec. 27 (A) and gross
income, which is the basis for the Minimum Corporate Income Tax under Section 27 (E). The two terms
have their respective technical meanings and cannot be used interchangeably. Not being covered by the
Charter which makes PAL liable only for basic corporate income tax, then Minimum Corporate Income
Tax is included in "all other taxes" from which PHILIPPINE AIRLINES, INC. is exempted.
The CIR also can not point to the “Substitution Theory” which states that Respondent may not invoke
the “in lieu of all other taxes” provision if it did not pay anything at all as basic corporate income tax or
franchise tax. The Court ruled that it is not the fact tax payment that exempts Respondent but the
exercise of its option. The Court even pointed out the fallacy of the argument in that a measly sum of
one peso would suffice to exempt PAL from other taxes while a zero liability would not and said that
there is really no substantial distinction between a zero tax and a one-peso tax liability. Lastly, the
Revenue Memorandum Circular stating the applicability of the MCIT to PAL does more than just clarify a
previous regulation and goes beyond mere internal administration and thus cannot be given effect
without previous notice or publication to those who will be affected thereby.
18.
19. SMART vs. CITY OF DAVAO G.R. No. 155491 September 16, 2008 Franchise Tax, Tax Exemption, “in
lieu of all taxes” Clause
FACTS: On February 18, 2002, Smart filed a special civil action for declaratory relief for the
ascertainment of its rights and obligations under the Tax Code of the City of Davao, which imposes a
franchise tax on businesses enjoying a franchise within the territorial jurisdiction of Davao. Smart avers
that its telecenter in Davao City is exempt from payment of franchise tax to the City on the following
grounds: (a) the issuance of its franchise under Republic Act (R.A.) No. 7294 subsequent to R.A. No. 7160
shows the clear legislative intent to exempt it from the provisions of R.A. 7160; (b) Section 137 of R.A.
No. 7160 can only apply to exemptions already existing at the time of its effectivity and not to future
exemptions; (c) the power of the City of Davao to impose a franchise tax is subject to statutory
limitations such as the in lieu of all taxes clause found in Section 9 of R.A. No. 7294; and (d) the
imposition of franchise tax by the City of Davao would amount to a violation of the constitutional
provision against impairment of contracts. Respondents contested the tax exemption claimed by Smart.
They invoked the power granted by the Constitution to local government units to create their own
sources of revenue.
ISSUE: Is the Contract Clause, a limitation on the State’s power to tax?
RULING:
NO. Jurisprudence suggests that aside from the national franchise tax, the franchisee is still liable to pay
the local franchise tax, unless it is expressly and unequivocally exempted from the payment thereof
under its legislative franchise. The “in lieu of all taxes” clause in a legislative franchise should
categorically state that the exemption applies to both local and national taxes; otherwise, the
exemption claimed should be strictly construed against the taxpayer and liberally in favor of the taxing
authority. Republic Act No. 7716, otherwise known as the “Expanded VAT Law,” did not remove or
abolish the payment of local franchise tax. It merely replaced the national franchise tax that was
previously paid by telecommunications franchise holders and in its stead imposed a ten percent (10%)
VAT in accordance with Section 108 of the Tax Code. VAT replaced the national franchise tax, but it did
not prohibit nor abolish the imposition of local franchise tax by cities or municipalities.
20.
21. GULF AIR COMPANY, PHILIPPINE BRANCH (GF), Petitioner, v. COMMISSIONER OF INTERNAL REVENUE,
Respondent.
G.R. No. 182045 : September 19, 2012
Facts: Petitioner Gulf Air Company Philippine Branch (GF) is a branch of Gulf Air Company, a foreign corporation
duly organized in accordance with the laws of the Kingdom of Bahrain.
In 2001, GF availed of the Voluntary Assessment Program of the Bureau of Internal Revenue (BIR) under Revenue
Regulations 8-2001 for its 1999 and 2000 Income Tax and Documentary Stamp Tax and its Percentage Tax for the
third quarter of 2000, paying a total of P 11,964,648.00.
GF also made a claim for refund of percentage taxes for the first, second and fourth quarters of 2000. In
connection with this, a letter of authority was issued by the BIR authorizing its revenue officers to examine GFs
books of accounts and other records to verify its claim.
After its submission of several documents and an informal conference with BIR representatives, GF received its
Preliminary Assessment Notice on November 4, 2003 for deficiency percentage tax amounting to P 32,745,141.93.
On the same day, GF also received a letter denying its claim for tax credit or refund of excess percentage tax
remittance for the first, second and fourth quarters of 2000, and requesting the immediate settlement of the
deficiency tax assessment.
GF then received the Formal Letter of Demand, for the payment of the total amount of P 33,864,186.62. In
response, it filed a letter to protest the assessment and to reiterate its request for reconsideration on the denial of
its claim for refund.
On June 30, 2004, the Deputy Commissioner, Officer-in-Charge of the Large Taxpayers Service of the BIR, denied
GFs written protest for lack of factual and legal basis and requested the immediate payment of the P
33,864,186.62 deficiency percentage tax assessment.
Aggrieved, GF filed a petition for review with the CTA. The CTA affirmed the decision of the BIR and ordered the
payment of P 41,117,734.01 plus 20% delinquency interest.
GF elevated the case to the CTA En Banc which promulgated its Decision on January 30, 2008 dismissing the
petition and affirming the decision of the CTA in Division. It found that Revenue Regulations No. 6-66 was the
applicable rule because the period involved in the assessment covered the first, second and fourth quarters of
2000 and the amended percentage tax returns were filed on October 25, 2001. Revenue Regulations No. 15-2002,
which took effect on October 26, 2002, could not be given retroactive effect because it was declarative of a new
right as it provided a different rule in determining gross receipts.
GF subsequently filed a motion for reconsideration but the same was denied by the CTA En Banc in its March 12,
2008 Resolution. Hence, this petition.
Issue: W/N the definition of "gross receipts," for purposes of computing the 3% Percentage Tax under Section
118(A) of the 1997 National Internal Revenue Code (NIRC), should include special commissions on passengers and
special commissions on cargo based on the rates approved by the Civil Aeronautics Board.
Ruling: Affirmative.
Section 118(A) of the NIRC states that: Sec. 118. Percentage Tax on International Carriers.
(A) International air carriers doing business in the Philippines shall pay a tax of three percent (3%) of their quarterly
gross receipts.
Pursuant to this, the Secretary of Finance promulgated Revenue Regulations No. 15-2002, which prescribes that
"gross receipts" for the purpose of determining Common Carriers Tax shall be the same as the tax base for
calculating Gross Philippine Billings Tax. Section 5 of the same provides for the computation of "Gross Philippine
Billings":
Sec. 5.Determination of Gross Philippine Billings.
(a) In computing for "Gross Philippine Billings," there shall be included the total amount of gross revenue derived
from passage of persons, excess baggage, cargo and/or mail, originating from the Philippines in a continuous and
uninterrupted flight, irrespective of the place of sale or issue and the place of payment of the passage documents.
This expressly repealed Revenue Regulations No. 6-66 that stipulates a different manner of calculating the gross
receipts:
There is no doubt that prior to the issuance of Revenue Regulations No. 15-2002 which became effective on
October 26, 2002, the prevailing rule then for the purpose of computing common carriers tax was Revenue
Regulations No. 6-66. While the petitioners interpretation has been vindicated by the new rules which compute
gross revenues based on the actual amount received by the airline company as reflected on the plane ticket, this
does not change the fact that during the relevant taxable period involved in this case, it was Revenue Regulations
No. 6-66 that was in effect.
As such, absent any showing that Revenue Regulations No. 6-66 is inconsistent with the provisions of the NIRC, its
stipulations shall be upheld and applied accordingly. This is in keeping with our primary duty of interpreting and
applying the law. Regardless of our reservations as to the wisdom or the perceived ill-effects of a particular
legislative enactment, the court is without authority to modify the same as it is the exclusive province of the law-
making body to do so.
Moreover, the validity of the questioned rules can be sustained by the application of the principle of legislative
approval by re-enactment. Under the aforementioned legal concept, "where a statute is susceptible of the
meaning placed upon it by a ruling of the government agency charged with its enforcement and the Legislature
thereafter re-enacts the provisions without substantial change, such action is to some extent confirmatory that the
ruling carries out the legislative purpose." Thus, there is tacit approval of a prior executive construction of a statute
which was re-enacted with no substantial changes.
In this case, Revenue Regulations No. 6-66 was promulgated to enforce the provisions of Title V, Chapter I (Tax on
Business) of Commonwealth Act No. 466 (National Internal Revenue Code of 1939), under which Section 192,
pertaining to the common carriers tax, can be found:
The legislature is presumed to have full knowledge of the existing revenue regulations interpreting the
aforequoted provision of law and, with its subsequent substantial re-enactment, there is a presumption that the
lawmakers have approved and confirmed the rules in question as carrying out the legislative purpose.Hence, it can
be concluded that with the continued duplication of the NIRC provision on common carriers tax, the law-making
body was aware of the existence of Revenue Regulations No. 6-66 and impliedly endorsed its interpretation of the
NIRC and its definition of gross receipts.
San Pablo Vs CIR
Facts:
SPMC is a domestic corporation engaged in the business of milling,
manufacturing and exporting of coconut oil and other allied products. It was assessed
and ordered to pay by the Commissioner of Internal Revenue the total amount of
P8,182,182.85 representing deficiency miller’s tax and manufacturer’s sales tax, among
other deficiency taxes, for taxable year 1987. The deficiency miller’s tax was imposed
on SPMC’s sales of crude oil to United Coconut Chemicals, Inc. (UNICHEM) while the
deficiency sales tax was applied on its sales of corn and edible oil as manufactured
products.SPMC opposed the assessments but the Commissioner denied its protest.
SPMC appealed the denial of its protest to the Court of Tax Appeals (CTA) by way of a
petition for review docketed as CTA Case No. 5423.In its March 10, 2000 decision, the
CTA cancelled SPMC’s liability for deficiency manufacturer’s tax on the sales of corn
and edible oils but upheld the Commissioner’s assessment for the deficiency miller’s
tax. SPMC moved for the partial reconsideration of the CTA affirmation of the miller’s
tax assessment but it was denied.
SPMC contend they are not liable for the 3% miller’s tax. It maintains that the crude oil
which it sold to UNICHEM was actually exported by UNICHEM as an ingredient of fatty
acid and glycerine, hence, not subject to miller’s tax pursuant to Section 168 of the 1987
Tax Code,the milled products in their original state were actually exported by the miller
himself or by another person, and (b) the milled products sold by the miller were actually
exported as an ingredient or part of any manufactured article by the buyer or
manufacturer of the milled products. The exportation may be effected by the miller
himself or by the buyer or manufacturer of the milled products. Since UNICHEM, the
buyer of SPMC’s milled products, subsequently exported said products, SPMC should
be exempted from the miller’s tax.
Issue:whether SPMC should be expemted from miller’s tax
Rulings: No.As the CTA correctly ruled, SPMC’s sale of crude coconut oil to UNICHEM
was subject to the 3% miller’s tax. Section 168 of the 1987 Tax Code provided:
Sec. 168. Percentage tax upon proprietors or operators of rope factories, sugar central
mills, coconut oil mills, palm oil mills, cassava mills and desiccated coconut factories.
Proprietors or operators of rope factories, sugar central and mills, coconut oil mills, palm
oil mills, cassava mills and desiccated coconut factories, shall pay a tax equivalent to
three percent (3%) of the gross value in money of all the rope, sugar, coconut oil, palm
oil, cassava flour or starch, dessicated coconut, manufactured, processed or milled by
them, including the by-product of the raw materials from which said articles are
produced, processed or manufactured, such tax to be based on the actual selling price
or market value of these articles at the time they leave the factory or mill warehouse:
Provided, however, That this tax shall not apply to rope, coconut oil, palm oil and the by-
product of copra from which it is produced or manufactured and dessicated coconut, if
such rope, coconut oil, palm oil, copra by-products and dessicated coconuts, shall be
removed for exportation by the proprietor or operator of the factory or the miller himself,
and are actually exported without returning to the Philippines, whether in their original
state or as an ingredient or part of any manufactured article or products: Provided
further, That where the planter or the owner of the raw materials is the exporter of the
aforementioned milled or manufactured products, he shall be entitled to a tax credit of
the miller's taxes withheld by the proprietor or operator of the factory or mill,
corresponding to the quantity exported, which may be used against any internal
revenue tax directly due from him: and Provided, finally, That credit for any sales,
miller's or excise taxes paid on raw materials or supplies used in the milling process
shall not be allowed against the miller's tax due, except in the case of a proprietor or
operator of a refined sugar factory as provided hereunder. (emphasis supplied)
The language of the exempting clause of Section 168 of the 1987 Tax Code was clear.
The tax exemption applied only to the exportation of rope, coconut oil, palm oil, copra
by-products and dessicated coconuts, whether in their original state or as an ingredient
or part of any manufactured article or products, by the proprietor or operator of the
factory or by the miller himself.
The language of the exemption proviso did not warrant the interpretation advanced by
SPMC. Nowhere did it provide that the exportation made by the purchaser of the
materials enumerated in the exempting clause or the manufacturer of products utilizing
the said materials was covered by the exemption. Since SPMC’s situation was not
within the ambit of the exemption, it was subject to the 3% miller’s tax imposed under
Section 168 of the 1987 Tax Code.
SPMC’s proposed interpretation unduly enlarged the scope of the exemption clause.
The rule is that the exemption must not be so enlarged by construction since the
reasonable presumption is that the State has granted in express terms all it intended to
grant and that, unless the privilege is limited to the very terms of the statute, the favor
would be intended beyond what was meant.
Where the law enumerates the subject or condition upon which it applies, it is to be
construed as excluding from its effects all those not expressly mentioned. Expressio
unius est exclusio alterius. Anything that is not included in the enumeration is excluded
therefrom and a meaning that does not appear nor is intended or reflected in the very
language of the statute cannot be placed therein. 2The rule proceeds from the premise
that the legislature would not have made specific enumerations in a statute if it had the
intention not to restrict its meaning and confine its terms to those expressly mentioned.
PELIZLOY REALTY CORPORATION, represented herein by its President, GREGORY

K. LOY, Petitioner, vs. THE PROVINCE OF BENGUET, Respondent.
Facts:
Petitioner Pelizloy Realty Corporation owns Palm Grove Resort in Tuba, Benguet, which
has facilities like swimming pools, a spa and function halls.In 2005, the Provincial Board
of Benguet approved its Revenue Code of 2005. Section 59, the tax ordinance levied a
10% amusement tax on gross receipts from admissions to "resorts, swimming pools,
bath houses, hot springs and tourist spots."Pelizloy's posits that amusement tax is an
ultra vires act. Thus, it filed an appeal/petition before the Secretary of Justice. Upon the
Secretary’s failure to decide on the appeal within sixty days, Pelizloy filed a Petition for
Declaratory Relief and Injunction before the RTC.Pelizloy argued that the imposition
was in violation of the limitation on the taxing powers of local government units under
Section 133 (i) of the Local Government Code, which provides that the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not extend to the
levy of percentage or value-added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided.
The Province of Benguet assailed the that the phrase ‘other places of amusement’ in
Section 140 (a) of the LGC encompasses resorts, swimming pools, bath houses, hot
springs, and tourist spots since Article 131 (b) of the LGC defines "amusement" as
"pleasurable diversion and entertainment synonymous to relaxation, avocation, pastime,
or fun."
RTC rendered a Decision assailed Decision dismissing the Petition for Declaratory
Relief and Injunction for lack of merit. Procedurally, the RTC ruled that Declaratory
Relief was a proper remedy. However, it gave credence to the Province of Benguet's
assertion that resorts, swimming pools, bath houses, hot springs, and tourist spots are
encompassed by the phrase ‘other places of amusement’ in Section 140 of the LGC.
ISSUE: W/N provinces are authorized to impose amusement taxes on admission fees
to resorts, swimming pools, bath houses, hot springs, and tourist spots for being
"amusement places" under the LGC.
RULING: NO.Amusement taxes are percentage taxes. However, provinces are not
barred from levying amusement taxes even if amusement taxes are a form of
percentage taxes. The levying of percentage taxes is prohibited "except as otherwise
provided" by the LGC. Section 140 provides such exception.
Section 140 expressly allows for the imposition by provinces of amusement taxes on
"the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement."
However, resorts, swimming pools, bath houses, hot springs, and tourist spots are not
among those places expressly mentioned by Section 140 of the LGC as being subject
to amusement taxes. Thus, the determination of whether amusement taxes may be
levied on admissions to these places hinges on whether the phrase ‘other places of
amusement’ encompasses resorts, swimming pools, bath houses, hot springs, and
tourist spots.
Under the principle of ejusdem generis, "where a general word or phrase follows an
enumeration of particular and specific words of the same class or where the latter follow
the former, the general word or phrase is to be construed to include, or to be restricted
to persons, things or cases akin to, resembling, or of the same kind or class as those
specifically mentioned."
Section 131 (c) of the LGC already provides a clear definition: "Amusement Places"
include theaters, cinemas, concert halls, circuses and other places of amusement
where one seeks admission to entertain oneself by seeing or viewing the show or
performances.
As defined in The New Oxford American Dictionary, ‘show’ means "a spectacle or
display of something, typically an impressive one"; while ‘performance’ means "an act of
staging or presenting a play, a concert, or other form of entertainment." As such, the
ordinary definitions of the words ‘show’ and ‘performance’ denote not only visual
engagement (i.e., the seeing or viewing of things) but also active doing (e.g., displaying,
staging or presenting) such that actions are manifested to, and (correspondingly)
perceived by an audience.
Considering these, it is clear that resorts, swimming pools, bath houses, hot springs and
tourist spots cannot be considered venues primarily "where one seeks admission to
entertain oneself by seeing or viewing the show or performances". While it is true that
they may be venues where people are visually engaged, they are not primarily venues
for their proprietors or operators to actively display, stage or present shows and/or
performances.
Altta vista golf vs city of cebu
Facts:
Petitioner is a non-stock and non-profit corporation operating a golf course in Cebu City.
Sometime in 1993, the Sanggunian Panlungsod of Cebu City enacted the Revised
Omnibus Tax: Ordinance of the City of Cebu, It stated therein that an amusement tax at
the rate of thirty percent (30%), golf courses and polo grounds at the rate of twenty
percent (20%), of their gross receipts on entrance, playing green, and/or
admission fees.ugust 6, 1998, prepared by Cebu City Assessor Sandra I. Po,
petitioner was originally assessed deficiency business taxes, fees, and other
charges for the year 1998, in the total amount of P3,820,095.68, which included
amusement tax on its golf course amounting to P2,612,961.24 based on gross
receipts of P13,064,806.20.8chanroblesvirtuallawlibrary
Through the succeeding years, respondent Cebu City repeatedly attempted to

collect from petitioner its deficiency business taxes, fees, and charges for 1998, a
substantial portion of which consisted of the amusement tax on the golf course.
Petitioner steadfastly refused to pay the amusement tax arguing that the
imposition of said tax by Section 42 of the Revised Omnibus Tax Ordinance, as
amended, was irregular, improper, and illegal.Petitioner reasoned that under the
Local Government Code, amusement tax can only be imposed on operators of
theaters, cinemas, concert halls, or places where one seeks to entertain himself
by seeing or viewing a show or performance.
A closure order was sent by Cebu City Mayor which states that the latter
committed violation of the laws and ordinance of the city.The foregoing
developments prompted petitioner to file with the RTC on January 13, 2006 a
Petition for Injunction, Prohibition, Mandamus, Declaration of Nullity of Closure
Order, Declaration of Nullity of Assessment, and Declaration of Nullity of Section
42 of Cebu City Tax Ordinance, with Prayer for Temporary Restraining Order and
Writ of Preliminary Injunction, against respondents,
Issue: whether Section 42 of the Revised Omnibus Tax Ordinance, as amended,

imposingamusement tax on golf courses is null
and void as it is beyond the authority ofrespondent Cebu City to enact under
theLocal Government Code.
Rulings: Yes
The Local Government Code authorizes the imposition by local government units
of amusement tax under Section 140, which provides:
Sec. 140. Amusement Tax. - (a) The province may levy an amusement
tax to be collected from the proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadia, and other
places of amusement at a rate of not more than thirty percent (30%) of
the gross receipts from admission fees.
"Amusement places," as defined in Section 131 (c) of the Local

Government Code, "include theaters, cinemas, concert halls, circuses
and other places of amusement where one seeks admission to
entertain oneself by seeing or viewing the show or performance
Applying the principle of ejusdem generis, as well as the ruling in the
PBA case, the Court expounded on the authority of local government
units to impose amusement tax under Section 140, in relation to
Section 131(c), of the Local Government Code, as follows:
Under the principle of ejusdem generis, "where a general word or

phrase follows an enumeration of particular and specific words of the
same class or where the latter follow the former, the general word or
phrase is to be construed to include, or to be restricted to
persons, things or cases akin to, resembling, or of the same kind or
class as those specifically mentioned."
statutory construction. Section 131 (c) of the LGC already provides a

clear definition of 'amusement places':
xxxx
Indeed, theaters, cinemas, concert halls, circuses, and boxing stadia

are bound by a common typifying characteristic in that they are all
venues primarily for the staging of spectacles or the holding of public
shows, exhibitions, performances, and other events meant to be
viewed by an audience. Accordingly, 'other places of amusement' must
be interpreted in light of the typifying characteristic of being venues
"where one seeks admission to entertain oneself by seeing or viewing
the show or performances" or being venues primarily used to stage
spectacles or hold public shows, exhibitions, performances, and other
events meant to be viewed by an audience.
under the 1987 Constitution, "where there is neither a grant nor a

prohibition by statute, the tax power [of local government units] must
be deemed to exist although Congress may provide statutory
limitations and guidelines." Section 186 of the Local Government Code
also expressly grants local government units the following residual
power to tax:
Sec. 186. Power to Levy Other Taxes, Fees, or Charges. - Local

government units may exercise the power to levy taxes, fees, or
charges on any base or subject not otherwise specifically enumerated
herein or taxed under the provisions of the National Internal Revenue
Code, as amended, or other applicable laws:
Respondents, cannot claim that Section 42 of the Revised Omnibus Tax
Ordinance, as amended, imposing amusement tax on golf courses, was enacted
pursuant to the residual power to tax of respondent Cebu City. A local
government unit may exercise its residual power to tax when there is neither a
grant nor a prohibition by statute; or when such taxes, fees, or charges are not
otherwise specifically enumerated in the Local Government Code, National
Internal Revenue Code, as amended, or other applicable laws. In the present
case, Section 140, in relation to Section 131(c), of the Local Government Code
already explicitly and clearly cover amusement tax and respondent Cebu City
must exercise its authority to impose amusement tax within the limitations and
guidelines as set forth in said statutory provisions.
Republic v Mambulao Lumber Company (1962)
Republic v Mambulao Lumber Company, et al GR No L-17725, February 28, 1962
FACTS:
Mambulao Lumber Company paid the Government a total of P 9,127.50 as
reforestation charges for the years 1947 to
1956. It is the company’s contention that said sum of 9,127.50, not having been
used in the reforestation of the area covered by its license, the same is
refundable to it or may be applied in compensation of P 4,802.37 due from it as
forest charges.
Court of First Instance of Manila ordered the company to pay the government the
sum of P 4,802.37 with 6% interest thereon from date of the filing of the complaint
until fully paid, plus costs. Thus, the present appeal.
ISSUE: Whether the set-off or compensation is proper
RULING:
No. There is nothing in the law which requires that the amount collected as
reforestation charges should be used exclusively for the reforestation of the area
covered by the license of a licensee or concessionaire, and that if not so used,
the same shall be refunded to him.
The conclusion seems to be that the amount paid by a licensee as reforestation
charges is in the nature of a tax which forms part of the Forestation Fund,
payable by him irrespective of whether the area covered by his license is
reforested or not.
Said fund, as the law expressly provides, shall be expended in carrying out the
purposes provided for thereunder, namely, the reforestation or afforestation,
among others, of denuded areas needing reforestation or afforestation.
The weight of authority is to the effect that internal revenue taxes, such as the
forest charges in question is not subject to set-off or compensation. Taxes are
not in the nature of contracts between the parties but grow out of a duty to, and
are positive acts of the government, to the making and enforcing of which, the
personal consent of the individual taxpayers is not required.
With respect to the forest charges which the company has paid to the
government, they are in the coffers of the government as tax collected, and the
government does not owe anything. It is crystal clear that the Republic of the
Philippines and the Mambulao Lumber Company are not creditors and debtors of
each other, because compensation refers to mutual debts.
Domingo v Garlitos
GR No L-18994, June 29, 1963
FACTS:
In the 1960 case of Domingo v Moscoso, the Supreme Court declared as final and
executory the order for the payment by the estate of the late Walter Scott Price of
estate and inheritance taxes, charges and penalties, amounting to P40,058.55
issued by the Court of First Instance – Leyte. The fiscal then presented a petition
for the execution of the judgment before the Court of First Instance – Leyte.
The petition was denied as the execution is not justifiable as the government is
indebted to the estate under administration in the amount of P 262,200. Hence,
the present petition for certiorari and mandamus.
ISSUE:
Is execution proper?
RULING:
No. The tax and the debt are compensated. The court having jurisdiction of the
estate had found that the claim of the estate against the government has been
recognized and an amount of P262,200 has already been appropriated by a
corresponding law (RA 2700). Under the circumstances, both the claim of the
Government for the inheritance taxes and the claim of the intestate for services
rendered have already become overdue and demandable as well as fully
liquidated.
Compensation, therefore, takes place by operation of law, in accordance with
Article 1279 and 1290 of the Civil Code, and both debts are extinguished to their
concurrent amounts. If the obligation to pay taxes and the taxpayer’s claim
against the government are both overdue, demandable, as well as fully liquidated,
compensation takes place by operation of law and both obligations are
extinguished to their concurrent amounts.
PROGRESSIVE DEVELOPMENT CORPORATION, petitioner , vs.

QUEZON CITY, respondent
Facts:
City Council of respondent Quezon City passed an ordinance known as Market
Code of QC, which imposed a 5% supervision fee on gross receipts on rentals or
lease of privately-owned market space in QC.
In case of failure of the owners of the market spaces to pay the taxfor three
consecutive months, the City shall revoke the permit of the privately-owned
market to operate.
Petitioner Progressive Development Corporation, owner and operator of a public
market known as the "Farmers Market & Shopping Center" filed a Petition for
Prohibition with Preliminary Injunction against respondent before the CFI of Rizal
on the ground that the supervision fee or license tax imposed by the above-
mentioned ordinances is in reality a tax on income which respondent may not
impose, the same being expressly prohibited by Republic Act No. 2264, as
amended.
Respondent contended that it had authority to enact the questioned ordinance.
Petitioner alleged having paid under protest the five percent (5%) tax under
Ordinance No. 9236.
RTC dismissed the petition. Hence this petition.
Issue: WON the supervision fee is income tax.
Held: NEGATIVE
Although license fee is a legal concept distinguishable from tax: the former is
imposed in the exercise of police power primarily for purposes of regulation,
while the latter is imposed under the taxing power primarily for purposes of
raising revenues.
The SC held that the five percent (5%) tax imposed in Ordinance No. 9236
constitutes, not a tax on income, not a city income tax (as distinguished from the
national income tax imposed by the National Internal Revenue Code) within the
meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or
fee for the regulation of the business in which the petitioner is engaged.
To be considered a license fee, the imposition must relate to an occupation or
activity that so engages the public interest in health, morals, safety, and
development as to require regulation for the protection and promotion of such
public interest; the imposition must also bear a reasonable relation to the
probable expenses of regulation, taking into account not only the costs of direct
regulation but also its incidental consequences.
In this case, the Farmers’ Market is a privately-owned market established for the
rendition of service to the general public. It warrants close supervision and
control by the City for the protection of the health of the public by insuring the
maintenance of sanitary conditions, prevention of fraud upon the buying public,
etc.
Since the purpose of the ordinance is primarily regulation and not revenue
generation, the tax is a license fee. The use of the gross amount of stall rentals as
basis for determining the collectible amount of license tax does not, by itself,
convert the license tax into a prohibited tax on income.
Such basis actually has a reasonable relationship to the probable costs of
regulation and supervision of Progressive’s kind of business, since ordinarily,
the higher the amount of rentals, the higher the volume of items sold.
The gross receipts from stall rentals have been used only as a basis for
computing the fees or taxes due respondent to cover the latter's administrative
expenses, i.e., for regulation and supervision of the sale of foodstuffs to the
public.
The use of the gross amount of stall rentals as basis for determining the
collectible amount of license tax, does not by itself, upon the one hand, convert
or render the license tax into a prohibited city tax on income.
The higher the volume of goods sold, the greater the extent and frequency of
supervision and inspection may be required in the interest of the buying public.
ACCORDINGLY, the Decision of the then Court of First Instance of Rizal, Quezon
City, Branch 18, is hereby AFFIRMED and the Court Resolved to DENY the
Petition for lack of merit

Double Taxation and Tax Exemp

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Double Taxation and Tax Exemp

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GLORILYN M.

CASES ON DOUBLE OR TAX EXEMPTION

Nursery Care Corporation vs Acevedo GR 180651 July 30, 2014

City of Manila vs Coca-cola 595 SCRA 299

HELD: Gross Receipts

In contrast, gross revenue covers money or its equivalent actually or constructively received, including the

CIR vs BPI GR 147375 June 26, 2006

Whether there is double taxation. NO

CIR vs SC JohnSon GR 127105

And whether it violates local Fiscal autonomy

NO. It is a grant of amusement tax reward incentive: not a tax exemption

Yes. RA 9167 violates local fiscal autonomy

RA 9167, Sec. 14 states:

ISSUE: Are school’s retained earnings tax-exempt?

PLDT VS CITY OF DAVAO

Maceda v Macaraig (1991)

Whether or not NPC is really exempt from indirect taxes

African Airways v. CIR

CIR vs ESSO Standard Eastern (G.R. No. L-28502-03. April 18, 1989)

Esso Standard Eastern, Inc. v CIR GR Nos L-28508-9, July 7, 1989

ASIA INTERNATIONAL AUCTIONEERS, INC., Petitioner, -versus- COMMISSIONER OF INTERNAL

G.R. No. 179115, SECOND DIVISION, September 26, 2012

Whether or not the petitioner is entitled to the tax amnesty program.

PHILIPPINE BANKING CORPORATION (NOW: GLOBAL BUSINESS BANK, INC.), Petitioner,vs.

InInternational Exchange Bank v. Commissioner ofInternal Revenue

G.R. Nos. 167274-75, July 21, 2008

Whether or not Fortune Tobacco is entitled to tax refund.

(a) erroneously or illegally assessed or collected internal revenue taxes;

(b) penalties imposed without authority; and

Is PAL liable for Minimum Corporate Income Tax?

ISSUE: Is the Contract Clause, a limitation on the State’s power to tax?

G.R. No. 182045 : September 19, 2012

Sec. 5.Determination of Gross Philippine Billings.

San Pablo Vs CIR

PELIZLOY REALTY CORPORATION, represented herein by its President, GREGORY

Altta vista golf vs city of cebu

Through the succeeding years, respondent Cebu City repeatedly attempted to

Issue: whether Section 42 of the Revised Omnibus Tax Ordinance, as amended,

"Amusement places," as defined in Section 131 (c) of the Local

Under the principle of ejusdem generis, "where a general word or

statutory construction. Section 131 (c) of the LGC already provides a

Indeed, theaters, cinemas, concert halls, circuses, and boxing stadia

under the 1987 Constitution, "where there is neither a grant nor a

Sec. 186. Power to Levy Other Taxes, Fees, or Charges. - Local

Republic v Mambulao Lumber Company, et al GR No L-17725, February 28, 1962

ISSUE: Whether the set-off or compensation is proper

PROGRESSIVE DEVELOPMENT CORPORATION, petitioner , vs.

Issue: WON the supervision fee is income tax.

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