CIR V. AQUAFRESH GR 170389, OCT.

20, 2010;
2.
ISSUE: Whether or not consultation with competent appraisers from the private and public
sectors in determining the FMV of the lots is mandatory. YES
While the CIR has the authority to prescribe real property values and divide the Philippines into
zones, the law is clear that the same has to be done upon consultation with competent
appraisers both from the public and private sectors. It is undisputed that at the time of the sale of
the subject properties
W/N Ordinance Nos. 23 and 27 constitute double taxation and impose percentage or
specific taxes? NO.
NO. After it enacted Ordinance No. 23, the Municipal Council of Tanauan discovered
that the producer or manufacturer could increase the volume contents of the bottle
and still pay the same tax rate. The Municipal Council of Tanauan intended Ordinance
No. 27 as a plain substitute for the prior Ordinance No. 23, and operates as a repeal
of the latter, even without words to that effect. Pepsi in its brief admitted that
defendants-appellees are only seeking to enforce Ordinance No. 27, series of 1962.

The CIR has the power to divide the Philippines into different zones or areas and determine the
FMV of real properties in each zone or area, upon consultation with component appraisers from
private and public sectors. The first sentence of Sec. 6(E) sets the limitation or condition in the
exercise of such power by requiring respondent to consult with competent appraisers both from
private and public sectors
Moreover, double taxation, in general, is not forbidden by our fundamental law, since
We have not adopted as part thereof the injunction against double taxation found in
the Constitution of the United States and some states of the Union. Double taxation
becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity or by the same jurisdiction for the same purpose, but not in a case
where one tax is imposed by the State and the other by the city or municipality.

CIR, thus, cannot unilaterally change the zonal valuation of such properties to commercial
without first conducting a re-evaluation of the zonal values as mandated under Section 6(E) of
the NIRC.
"zonal valuation was established with the objective of having an 'efficient tax administration by
minimizing the use of discretion in the determination of the tax based on the part of the
administrator on one hand and the taxpayer on the other hand.'" 15 Zonal value is determined
for the purpose of establishing a more realistic basis for real property valuation. Since internal
revenue taxes, such as CGT and DST, are assessed on the basis of valuation, the zonal
valuation existing at the time of the sale should be taken into account.
COCA COLA BOTTLERS V. MANILA GR 156252, JUNE 27, 2006;
ISSUE: Whether or not Tax Ordinance No. 7988 is null and void and of no legal effect.
YES.
Tax Ordinance No. 7988 has already been declared by the DOJ Secretary, as null and void
and without legal effect due to respondents' failure to satisfy the requirement that said ordinance
be published for three consecutive days as required by law. Neither is there quibbling on the fact
that the said Order of the DOJ was never appealed by the City of Manila, thus, it had attained
finality after the lapse of the period to appeal.
Despite the nullity of Tax Ordinance No. 7988, the court a quo, in the assailed Order, went on to
dismiss petitioner's case on the force of the enactment of Tax Ordinance No. 8011, amending
Tax Ordinance No. 7988. Significantly, said amending ordinance was likewise declared null and
void by the DOJ Secretary, elucidating that "[I]nstead of amending Ordinance No. 7988, [herein]
respondent should have enacted another tax measure which strictly complies with the
requirements of law, both procedural and substantive. 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.”
If an order or law sought to be amended is invalid, then it does not legally exist, there should
PEPSI V. TANAUAN 69 S 461;
1. W/N Sec. 2, R.A. No. 2264 is an undue delegation of power, confiscatory and
oppressive? NO.
By necessary implication, the legislative power to create political corporations for
purposes of local self-government carries with it the power to confer on such local
governmental agencies the power to tax. Under the New Constitution, local
governments are granted the autonomous authority to create their own sources of
revenue and to levy taxes (Section 5, Article XI).
The imposition of a tax of one centavo on each gallon of volume capacity on all soft
drinks produced or manufactured under Ordinance No. 27 does not partake of the
nature of a percentage tax on sales, or other taxes in any form based thereon. The tax
is levied on the production (whether sold or not) and not on the sales. The volume
capacity of the taxpayers production of soft drinks is considered solely for purposes of
determining the tax rate on the products, but there is no set ratio between the volume
of sales and the amount of the tax.
Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed
on specified articles, such as distilled spirits, wines, fermented liquors, products of
tobacco other than cigars and cigarettes, matches, firecrackers, manufactured oils and
other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards,
saccharine, opium and other habit-forming drugs. Soft drink is not one of those
specified.
3. W/N the Ordinances are unjust and unfair? NO.
NO. An increase in the tax alone would not support the claim that the tax is
oppressive, unjust and confiscatory. Municipal corporations are allowed much
discretion in determining the rates of imposable taxes. This is in line with the
constitutional policy of according the widest possible autonomy to local governments
in matters of local taxation, an aspect that is given expression in the Local Tax Code
(PD No. 231).
PEPSI V. BUTUAN 24 S 789;
ISSUE: Whether the ordinance in question is valid. NO
The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the
sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the
uniformity required by the Constitution and the law therefor, since only sales by "agents or
consignees" of outside dealers would be subject to the tax. Sales by local dealers, not
acting for or on behalf of other merchants, regardless of the volume of their sales, and even if
the same exceeded those made by said agents or consignees of producers or merchants
established outside the City of Butuan, would be exempt from the disputed tax. 
Double taxation is generally not forbidden by fundamental law provided that 1) it is based upon
substantial distinctions which make real differences; 2) these are germane to the purpose of the
legislation or ordinance; 3) the classification applies, not only to present conditions, but, also, to
future conditions substantially identical to those of the present and 4) the classification applies
equally to all those who belong to the same class
AMERICAN BIBLE V. MANILA 101 P 386;
ISSUE: W/N American is liable to pay sales tax? NO
The constitutional guaranty of the free exercise and enjoyment of religious profession
and worship carries with it the right to disseminate religious information. Any restraint of such
right can only be justified like other restraints of freedom of expression on the grounds that there
is a clear and present danger of any substantive evil which the State has the right to prevent
It is true the price asked for the religious articles was in some instances a little bit
higher than the actual cost of the same, but this cannot mean that plaintiff was engaged in the
business or occupation of selling said "merchandise" for profit. For this reasons, the provisions
of City Ordinance No. 2529, as amended, which requires the payment of license fee for
conducting the business of general merchandise, cannot be applied to plaintiff society, for in
doing so, it would impair its free exercise and enjoyment of its religious profession and worship,
as well as its rights of dissemination of religious beliefs. Upon the other hand, City Ordinance
No. 3000, as amended, which requires the obtention of the Mayor's permit before any person
can engage in any of the businesses, trades or occupations enumerated therein, does not
impose any charge upon the enjoyment of a right granted by the Constitution, nor tax the
exercise of religious practices. Hence, it cannot be considered unconstitutional, even if applied
to plaintiff Society. But as Ordinance No. 2529 is not applicable to plaintiff and the City
of Manila is powerless to license or tax the business of plaintiff society involved herein, for the
reasons above stated, Ordinance No. 3000 is also inapplicable to said business, trade or
occupation of the plaintiff
CITY ASSESSOR V. BENEVOLA GR 152904, JUNE 8, 2007;
ISSUE: Whether or not a medical arts center built by a hospital to house its doctors a separate
commercial establishment
No, it is appurtenant to the hospital
1) Chong Hua Hospital Medical Arts Center is an integral part of Chong Hua Hospital and
2) The CHHMAC facility is definitely incidental to and reasonably necessary for the
operations of Chong Hua Hospital
These physicians holding offices or clinics in CHHMAC, duly appointed or accredited by CHH,
precisely fulfill and carry out their roles in the hospital's services for its patients through the
CHHMAC. The fact that they are holding office in a separate building, like at CHHMAC, does not
take away the essence and nature of their services vis-à-vis the over-all operation of the hospital
and the benefits to the hospital's patients. Given what the law requires, it is clear that CHHMAC
is an integral part of CHH.
These accredited physicians normally hold offices within the premises of the hospital; in which
case there is no question as to the conduct of their business in the ambit of diagnosis, treatment
and/or confinement of patients. This was the case before 1998 and before CHHMAC was built.
Verily, their transfer to a more spacious and, perhaps, convenient place and location for the
benefit of the hospital's patients does not remove them from being an integral part of the overall
operation of the hospital.||| (City Assessor of Cebu City v. Association of Benevola de Cebu,
G.R. No. 152904, [June 8, 2007], 551 PHIL 567-581)
Moreover, the CHHMAC, being hundred meters away from the CHH main building, does not
denigrate from its being an integral part of the latter
CHHMAC facility is primarily used by the hospital's accredited physicians to perform
medical check-up, diagnosis, treatment, and care of patients. For another, it also serves as a
specialized outpatient department of the hospital.  government.
Indubitably, the operation of the hospital is not only for confinement and surgical
operations where hospital beds and operating theaters are required. Generally, confinement is
required in emergency cases and where a patient necessitates close monitoring. The usual
course is that patients have to be diagnosed, and then treatment and follow-up consultations
follow or are required. Other cases may necessitate surgical operations or other medical
intervention and confinement. Thus, the more the patients, the more important task of diagnosis,
treatment, and care that may or may not require eventual confinement or medical operation in
the CHHMAC.
Thus, the importance of CHHMAC in the operation of CHH cannot be over-
emphasized nor disputed. Clearly, it plays a key role and provides critical support to hospital
operations.
Charging rentals for the offices used by its accredited physicians cannot be equated
to a commercial venture
Finally, respondent's charge of rentals for the offices and clinics its accredited
physicians occupy cannot be equated to a commercial venture, which is mainly for profit.
SEC. 216. Special Classes of Real Property. — All lands,
buildings, and other improvements thereon actually, directly and
exclusively used for hospitals, cultural or scientific purposes, and those
owned and used by local water districts, and government-owned or
controlled corporations rendering essential public services in the supply
and distribution of water and/or generation and transmission of electric
power shall be classified as special. (Emphasis supplied.)
Thus, applying the above provisos in line with City Tax Ordinance LXX of Cebu City,
the 10% special assessment should be imposed for the CHHMAC building which should be
classified as "special".
CIR V. ST. LUKE’S GR 195909, SEPT. 26, 2012;
ISSUE: Whether St. Luke’s is liable for deficiency income tax in 1998 under Section 27(B)
of the NIRC, which imposes a preferential tax rate of 10% on the income of proprietary
non-profit hospitals. YES.The only qualifications for hospitals are that they must be proprietary
and non-profit. “Proprietary” means private, following the definition of a “proprietary educational
institution” as “any private school maintained and administered by private individuals or groups”
with a government permit. “Non-profit” means no net income or asset accrues to or benefits any
member or specific person, with all the net income or asset devoted to the institution’s purposes
and all its activities conducted not for profit.
- In other words, charitable institutions provide for free goods and services to the public
which would otherwise fall on the shoulders of government. Thus, as a matter of
efficiency, the government forgoes taxes which should have been spent to address
public needs, because certain private entities already assume a part of the burden.
This is the rationale for the tax exemption of charitable institutions.
- Charitable institutions, however, are not ipso facto entitled to a tax exemption. The
requirements for a tax exemption are specified by the law granting it. The
requirements for a tax exemption are strictly construed against the taxpayer because
an exemption restricts the collection of taxes necessary for the existence of the
 - For real property taxes, the incidental generation of income is permissible because the
test of exemption is the use of the property. The test of exemption is not strictly a
requirement on the intrinsic nature or character of the institution. The test requires that
the institution use the property in a certain way, i.e. for a charitable purpose. Thus, the
Court held that the Lung Center of the Philippines did not lose its charitable character
when it used a portion of its lot for commercial purposes. The effect of failing to meet
the use requirement is simply to remove from the tax exemption that portion of the
property not devoted to charity.
- The Court finds that St. Luke’s is a corporation that is not “operated exclusively” for
charitable or social welfare purposes insofar as its revenues from paying patients are
concerned. This ruling is based not only on a strict interpretation of a provision
granting tax exemption, but also on the clear and plain text of Section 30(E) and (G).
Section 30(E) and (G) of the NIRC requires that an institution be “operated
exclusively” for charitable or social welfare purposes to be completely exempt from
income tax.
LUNG CENTER V. QC GR 144104, JUNE 29, 2004;
ISSUE
1. W/N the petitioner is a charitable institution – YES
As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-
patient, or confined in the hospital, or receives subsidies from the government, so long as
the money received is devoted or used altogether to the charitable object which it is
intended to achieve; and no money inures to the private benefit of the persons
managing or operating the institution.The money received by the petitioner becomes
a part of the trust fund and must be devoted to public trust purposes and cannot be
diverted to private profit or benefit.
2. W/N the petitioner is exempt from payment of real property taxes – ONLY THOSE
THAT ARE ACTUALLY, DIRECTLY, AND EXCLUSIVELY USED FOR CHARITABLE
PURPOSES
What is meant by actual, direct and exclusive use of the property for charitable
purposes is the direct and immediate and actual application of the property
itself to the purposes for which the charitable institution is organized. It is not
the use of the income from the real property that is determinative of whether the
property is used for tax-exempt purposes.
The petitioner failed to discharge its burden to prove that the entirety of its real
property is actually, directly and exclusively used for charitable purposes. While
portions of the hospital are used for the treatment of patients and the dispensation of
medical services to them, whether paying or non-paying, other portions thereof are
being leased to private individuals for their clinics and a canteen. Further, a portion of
the land is being leased to a private individual for her business enterprise under the
business name "Elliptical Orchids and Garden Center." Indeed, the petitioner's
evidence shows that it collected rentals from the lessees.
Accordingly, we hold that the portions of the land leased to private entities as well as
those parts of the hospital leased to private individuals are not exempt from such
taxes. On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are
exempt from real property taxes
ABRA VALLEY COLLEGE V. AQUINO 162 S 106; CIR V. YMCA 298 S 83; ;
ISSUE
W/N the lot and building in question are used exclusively for educational purposes
- The test of exemption from taxation is the use of the property for purposes mentioned
in the Constitution. Otherwise stated, the use of the school building or lot for
commercial purposes is neither contemplated by law, nor by jurisprudence.
- Thus, while the use of the second floor of the main building in the case at bar for
residential purposes of the Director and his family, may find justification under the
concept of incidental use, which is complimentary to the main or primary purpose—
educational, the lease of the first floor thereof to the Northern Marketing Corporation
cannot by any stretch of the imagination be considered incidental to the purpose of
education.
Only half of the assessed tax must be returned for only a portion of the facility is used for
commerce
CIR V. DLSU GR 196596, NOV. 9, 2016
ISSUE: Whether DLSU's income and revenues proved to have been used actually, directly and
exclusively for educational purposes are exempt from duties and taxes (YES)
When a non-stock, nonprofit educational institution proves that it uses its revenues actually,
directly, and exclusively for educational purposes, it shall be exempted from income tax, value-
added tax (VAT), and local business tax. On the other hand, when it also shows that it uses its
assets in the form of real property for educational purposes, it shall be exempted from real
property tax.
A proprietary educational institution is entitled only to the reduced rate of ten percent (10%)
corporate income tax. The reduced rate is applicable only if: (1) the proprietary educational
institution is nonprofit and (2) its gross income from unrelated trade, business or activity does not
exceed fifty percent (50%) of its total gross income.
The requisites for availing the tax exemption under Article XIV, Section 4 (3), namely:
1. the taxpayer falls under the classification non-stock, non-profit educational
institution; and
2. the income it seeks to be exempted from taxation is used actually, directly
and exclusively for educational purposes.
Article XIV, Section 4 (3) does not require that the revenues and income must have also been
sourced from educational activities or activities related to the purposes of an educational
institution. The phrase all revenues is unqualified by any reference to the source of revenues.
Thus, so long as the revenues and income are used actually, directly and exclusively for
educational purposes, then said revenues and income shall be exempt from taxes and duties.
Thus, when a non-stock, non-profit educational institution proves that it uses its
revenues actually, directly, and exclusively for educational purposes, it shall be exempted from
income tax, VAT, and LBT. On the other hand, when it also shows that it uses its assets in the
form of real property for educational purposes, it shall be exempted from RPT.