1. Pimentel v.

Aguirre
Facts:

In 1997, President Ramos issued AO 372 which: (1) required all government departments and agencies, including SUCs,
GOCCs and LGUs to identify and implement measures in FY 1998 that will reduce total expenditures for the year by at
least 25% of authorized regular appropriations for non-personal services items (Section 1) and (2) ordered the
withholding of 10% of the IRA to LGUs (Section 4) . On 10 December 1998, President Estrada issued AO 43, reducing to
5% the amount of IRA to be withheld from LGU.

Issues: 

1. Whether or not the president committed grave abuse of discretion in ordering all LGUS to adopt a 25% cost reduction
program in violation of the LGU'S fiscal autonomy

2. Whether Section 4 of the same issuance, which withholds 10 percent of their internal revenue allotments, are valid
exercises of the President's power of general supervision over local governments

Held:

1. Section 1 of AO 372 does not violate local fiscal autonomy. Local fiscal autonomy does not rule out any manner of
national government intervention by way of supervision, in order to ensure that local programs, fiscal and otherwise, are
consistent with national goals. Significantly, the President, by constitutional fiat, is the head of the economic and
planning agency of the government, primarily responsible for formulating and implementing continuing, coordinated
and integrated social and economic policies, plans and programs for the entire country. However, under the
Constitution, the formulation and the implementation of such policies and programs are subject to "consultations with
the appropriate public agencies, various private sectors, and local government units." The President cannot do so
unilaterally.

Consequently, the Local Government Code provides:

"x x x [I]n the event the national government incurs an unmanaged public sector deficit, the President of the Philippines
is hereby authorized, upon the recommendation of [the] Secretary of Finance, Secretary of the Interior and Local
Government and Secretary of Budget and Management, and subject to consultation with the presiding officers of both
Houses of Congress and the presidents of the liga, to make the necessary adjustments in the internal revenue allotment
of local government units but in no case shall the allotment be less than thirty percent (30%) of the collection of national
internal revenue taxes of the third fiscal year preceding the current fiscal year x x x."

There are therefore several requisites before the President may interfere in local fiscal matters: (1) an unmanaged public
sector deficit of the national government; (2) consultations with the presiding officers of the Senate and the House of
Representatives and the presidents of the various local leagues; and (3) the corresponding recommendation of the
secretaries of the Department of Finance, Interior and Local Government, and Budget and Management. Furthermore,
any adjustment in the allotment shall in no case be less than thirty percent (30%) of the collection of national internal
revenue taxes of the third fiscal year preceding the current one.

Petitioner points out that respondents failed to comply with these requisites before the issuance and the
implementation of AO 372. At the very least, they did not even try to show that the national government was suffering
from an unmanageable public sector deficit. Neither did they claim having conducted consultations with the different
leagues of local governments. Without these requisites, the President has no authority to adjust, much less to reduce,
unilaterally the LGU's internal revenue allotment.

AO 372, however, is merely directory and has been issued by the President consistent with his power of supervision over
local governments. It is intended only to advise all government agencies and instrumentalities to undertake cost-
reduction measures that will help maintain economic stability in the country, which is facing economic difficulties.
Besides, it does not contain any sanction in case of noncompliance. Being merely an advisory, therefore, Section 1 of AO
372 is well within the powers of the President. Since it is not a mandatory imposition, the directive cannot be
characterized as an exercise of the power of control.

2. Section 4 of AO 372 cannot be upheld. A basic feature of local fiscal autonomy is the automatic release of the shares
of LGUs in the national internal revenue. This is mandated by no less than the Constitution. The Local Government Code
specifies further that the release shall be made directly to the LGU concerned within five (5) days after every quarter of
the year and "shall not be subject to any lien or holdback that may be imposed by the national government for whatever
purpose." As a rule, the term "shall" is a word of command that must be given a compulsory meaning. The provision is,
therefore, imperative. (Pimentel vs. Aguirre, G.R. No. 132988, July 19, 2000)
 2. Manila Electric Company v. Province of Laguna
FACTS:

MERALCO was granted a franchise by several municipal councils and the National Electrification Administration to
operate an electric light and power service in the Laguna. Upon enactment of Local Government Code, the provincial
government issued ordinance imposing franchise tax. MERALCO paid under protest and later claims for refund because
of the duplicity with Section 1 of P.D. No. 551. This was denied by the governor (Joey Lina) relying on a more recent law
(LGC). MERALCO filed with the RTC a complaint for refund, but was dismissed. Hence, this petition.

ISSUE: 

Whether or not the imposition of franchise tax under the provincial ordinance is violative of the non-impairment clause
of the Constitution and of P.D. 551.

HELD:

No. There is no violation of the non-impairment clause for the same must yield to the inherent power of the state
(taxation). The provincial ordinance is valid and constitutional.

RATIO:

The Local Government Code of 1991 has incorporated and adopted, by and large, the provisions of the now repealed
Local Tax Code. The 1991 Code explicitly authorizes provincial governments, notwithstanding “any exemption granted
by any law or other special law, . . . (to) impose a tax on businesses enjoying a franchise.” A franchise partakes the
nature of a grant which is beyond the purview of the non-impairment clause of the Constitution.   Article XII, Section 11,
of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973 Constitutions, is explicit that no franchise
for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to
amendment, alteration or repeal by Congress as and when the common good so requires.
 3. Petron Corporation v. Tiangco, GR No. 158881
FACTS: 

Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. Through that depot, it has engaged
in the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay. On 1 March 2002, Petron
received a letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the corporation was assessed
taxes “relative to the figures covering sale of diesel declared by your Navotas Terminal from 1997 to 2001.” The stated
total amount due was P6,259,087.62, a figure derived from the gross sales of the depot during the years in question. The
computation sheets that were attached to the letter made reference to Ordinance 92-03, or the New Navotas Revenue
Code (Navotas Revenue Code), though such enactment was not cited in the letter itself. 

Petron duly filed with Navotas a letter-protest to the notice of assessment pursuant to Section 195 of the Code. It
argued that it was exempt from local business taxes in view of Art. 232 (h) of the Implementing Rules (IRR) of the LGC, as
well as a ruling of the Bureau of Local Government Finance of the Department of Finance dated 31 July 1995, the latter
stating that sales of petroleum fuels are not subject to local taxation. The letter-protest was denied by the Navotas
Municipal Treasurer, respondent Manuel T. Enriquez, in a letter dated 8 May 2002. This was followed by a letter from
the Mayor dated 15 May 2002, captioned “Final Demand to Pay”, requiring that Petron pay the assessed amount within
five (5) days from receipt thereof, with a threat of closure of Petron’s operations within Navotas should there be no
payment. Petron, through counsel, replied to the Mayor by another letter posing objections to the threat of closure.

ISSUE: 

WON PETROLEUM PRODUCTS MAY BE SUBJECTED TO BUSINESS TAX

HELD:

NO. The language of Section 133 (h) makes plain that the prohibition with respect to petroleum products extends not
only to excise taxes thereon, but all “taxes, fees and charges.” The earlier reference in paragraph (h) to excise taxes
comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such
as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods
made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later
reference to “taxes, fees and charges” pertains only to one class of articles of the many subjects of excise taxes,
specifically, “petroleum products”.While local government units are authorized to burden all such other class of goods
with “taxes, fees and charges”,excepting excise taxes, a specific prohibition is imposed barring the levying of any other
type of taxes with respect to petroleum products.While Section 133 (h) does not generally bar the imposition of business
taxes on articles burdened by excise taxes under the NIRC, it specifically prohibits local government units from extending
the levy of any kind of “taxes, fees or charges on petroleum products.” Accordingly, the subject tax assessment is ultra
vires and void.
 4. Manila International Airport Authority v. Court of Appeals, GR No. 155650
Facts:

MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to
2001. MIAA’s real estate tax delinquency was estimated at P624 million.

The City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and
Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should
MIAA fail to pay the real estate tax delinquency.

MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary
injunction or temporary restraining order. The petition sought to restrain the City of Parañaque from imposing real
estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings.

Paranaque’s Contention: Section 193 of the Local Government Code expressly withdrew the tax exemption privileges of
“government-owned and-controlled corporations” upon the effectivity of the Local Government Code. Respondents also
argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all
others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code.
Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

MIAA’s contention: Airport Lands and Buildings are owned by the Republic. The government cannot tax itself. The
reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a
case the tax debtor is also the tax creditor.

Issue:

WON Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws?

Yes. Ergo, the real estate tax assessments issued by the City of Parañaque, and all proceedings taken pursuant to such
assessments, are void.

Held:

1. MIAA is Not a Government-Owned or Controlled Corporation

MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus
exempt from local taxation.

MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting
shares.

MIAA is also not a non-stock corporation because it has no members. A non-stock corporation must have members.

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions.
MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers.

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA
exercises “all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with
the provisions of this Executive Order.”
2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the
Republic of the Philippines.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like “roads, canals,
rivers, torrents, ports and bridges constructed by the State,” are owned by the State. The term “ports” includes seaports
and airports. The MIAA Airport Lands and Buildings constitute a “port” constructed by the State. Under Article 420 of the
Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the
Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for international and
domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does
not remove the character of the Airport Lands and Buildings as properties for public use.

The charging of fees to the public does not determine the character of the property whether it is of public dominion or
not. Article 420 of the Civil Code defines property of public dominion as one “intended for public use.” The terminal fees
MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that
maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for
public use. Such fees are often termed user’s tax. This means taxing those among the public who actually use a public
facility instead of taxing all the public including those who never use the particular public facility.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of
an auction sale.

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public
or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being
contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances,
foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the
600-hectare runway of the MIAA for non-payment of real estate tax.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of
the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. n
MIAA’s case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head
cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of
conveyance.

d. Transfer to MIAA was Meant to Implement a Reorganization

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to MIAA. The purpose was merely toreorganize a division in the
Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the
Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over
MIAA’s assets adverse to the Republic.

e. Real Property Owned by the Republic is Not Taxable

Sec 234 of the LGC provides that real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person following are exempted from payment of the real property tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real
estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real
estate tax.
 5. CIR vs Transitions Optical Philippines, Inc.
TAXATION LAW CIR V. TRANSITIONS OPTICAL PHILIPPINES, INC. (G.R. No. 227544, November 22, 2017) On Tax Remedies
under the NIRC

FACTS:

On April 28, 2006, Transitions Optical received a Letter of Authority from BIR authorizing Revenue Officers to examine its
books of accounts for internal revenue tax purposes for taxable year 2004. On October 9, 2007, the parties executed a
Waiver of the Defense of Prescription (First Waiver). In this waiver, the prescriptive period for the assessment was
extended to June 20, 2008. This was followed by another Waiver of the Defense of Prescription (Second Waiver)
extending the prescriptive period to November 30, 2008. Thereafter, the CIR issued a Preliminary Assessment Notice
(PAN) assessing Transitions Optical for its deficiency taxes, to which the latter protested. Subsequently, a Final
Assessment Notice (FAN) was issued. In its Protest Letter against the FAN, Transitions Optical alleged that the demand
for deficiency taxes had already prescribed at the time the FAN was mailed. The CIR issued a Final Decision on the
Disputed Assessment holding Transitions Optical liable for deficiency taxes of P19,701,849.69. Transitions Optical filed a
Petition for Review before the CTA. The CTA held that the waivers were defective and therefore void.

ISSUE(S):

1. W/N the two (2) Waivers entered into by the parties was valid.

2. W/N the assessment of deficiency taxes against respondent had prescribed.

RULING:

1. YES, as a general rule, petitioner has three (3) years to assess taxpayers from the filing of the return. An exception to
the rule of prescription is found in Section 222 (b) and (d) of the NIRC.

2. YES, the assessment was served beyond the supposedly extended period.

RATIO:

1. Section 222 (b) and (d) of the NIRC provides: xxx b)

d) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the Commissioner
and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period
agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the
expiration of the period previously agreed upon. xxx Any internal revenue tax, which has been assessed within the
period agreed upon as provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in
court within the period agreed upon in writing before the expiration of the five (5)-year period. The period so agreed
upon may be extended by subsequent written agreements made before the expiration of the period previously agreed
upon.

TAXATION LAW Thus, the period to assess and collect taxes may be extended upon the Commissioner of Internal
Revenue and the taxpayer's written agreement, executed before the expiration of the three (3)-year period. The CTA
declared as defective and void the Waivers for non-compliance with requirements for the proper execution of a waiver.
It held that the Waivers were not accompanied by a notarized written authority. However, the respondent is estopped
from questioning the validity of its waivers. It never raised the invalidity of the waivers at the earliest opportunity, either
in its Protest to the PAN, FAN or Supplemental Protest to the FAN. Respondent only raised this issue to in its Petition for
Review with the CTA. 2. The First Division of the CTA found that the date indicated in the envelope/mail matter
containing the FAN and the FLD is December 4, 2008, which is considered as the date of their mailing. Since the validity
period of the second Waiver is only until November 30, 2008, prescription had already set in at the time the FAN and the
FLD were actually mailed on December 4, 2008. Considering the functions and effects of a PAN vis à vis a FAN, it is clear
that the assessment contemplated in Sections 203 and 222 of the NIRC refers to the service of the FAN upon the
taxpayer. A PAN merely informs the taxpayer of the initial findings of the Bureau of Internal Revenue. It contains the
proposed assessment, and the facts, law, rules, and regulations or jurisprudence on which the proposed assessment is
based. It does not contain a demand for payment but usually requires the taxpayer to reply within 15 days from receipt.
Otherwise, the CIR will finalize an assessment and issue a FAN. On the other hand, a FAN contains not only a
computation of tax liabilities but also a demand for payment within a prescribed period. As soon as it is served, an
obligation arises on the part of the taxpayer concerned to pay the amount assessed and demanded. It also signals the
time when penalties and interests begin to accrue against the taxpayer.
 6. CIR vs Standard Chartered Bank
G.R. No. 192173, July 29, 2015
FACTS:

SCB received a Formal Letter of Demand dated June 24, 2004 for deficiency taxes and increments for the taxable year
1998, amounting to P33.3M. On August 12, 2004, SCB protested against said assessment and requested the CIR that it
be withdrawn and cancelled. CIR had not rendered a decision, prompting SCB to file a Petition for Review before the CTA
in division.

The CTA in division granted the petition of SCB, canceled and set aside the FLD and Assessment Notices on the ground
that CIR’s right to assess was already barred by prescription. CIR presented copies of Waivers of Statute of Limitations
executed by both parties. CTA in division, however, noted that these waivers did not strictly comply with Revenue
Memorandum Order No. 20-90. CIR filed for MRecon, but it was denied.

CIR appealed with the CTA En Banc, but if affirmed in toto the decision of CTA in division. Upon denial of CIR’s Motion for
Reconsideration, it filed the instant Petition for Review on Certiorari.

ISSUE: W/N petitioner’s right to assess respondent for deficiency taxes for 1998 has already prescribed

RULING: YES.

The period for petitioner to assess and collect an internal revenue tax is limited only to three years by Section
203 of the NIRC of 1997. This mandate is primarily to safeguard the interests of taxpayers from unreasonable
investigation by not indefinitely extending the period of assessment and depriving the taxpayer of the assurance that it
will no longer be subjected to further investigation for taxes after the expiration of reasonable period of time.

As an exception, Section 222 authorizes the extension of the original three-year prescriptive period by the
execution of a valid waiver. RMO No. 20-90 outlines the procedure for the proper execution of a waiver and failure to
comply with any of the requisites renders a waiver defective and ineffectual. The waivers executed by CIR and SCB were
in violation of RMO 20-90:

1. the CIR did not sign (assessment was more than P1M)

2. date of acceptance and the amount and kind of tax due were not indicated

3. the waiver speaks of request to extend the period to file additional documents, not the request for recon or
reinvestigation as required by RMO 20-90.

The period to assess the tax liabilities of respondent for taxable year 1998 was never extended. Consequently,
when the succeeding waivers of Statute of Limitations were subsequently executed covering the same tax liabilities of
respondent, and there being no assessment having been issued as of that time, prescription has already set in.

[Although respondent paid the deficiency WTC and FWT assessments, it did not waive the defense of
prescription as regards the remaining tax deficiencies, it being on record that respondent continued to raise the issue of
prescription. Doctrine of estoppel not applicable.]

The Formal Letter of Demand and Assessment Notices are void. Petition is denied.