G.R. No. L-28896 February 17, 1988
 2 On March 12, 1965, a warrant of
COMMISSIONER OF INTERNAL REVENUE, petitioner,  vs.
ALGUE, INC., and THE COURT OF TAX
APPEALS, respondents.
CRUZ, J.:
Taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance On the other hand, such
collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself. It is
therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real
purpose of taxation, which is the promotion of the common good,
may be achieved. 
The main issue in this case is whether or not the Collector of
Internal Revenue correctly disallowed the P75,000.00 deduction
claimed by private respondent Algue as legitimate business
expenses in its income tax returns. The corollary issue is whether
or not the appeal of the private respondent from the decision of the
Collector of Internal Revenue was made on time and in
accordance with law. 
We deal first with the procedural question.  that prevents application of this accepted doctrine.
The record shows that on January 14, 1965, the private
respondent, a domestic corporation engaged in engineering,
construction and other allied activities, received a letter from the
petitioner assessing it in the total amount of P83,183.85 as
delinquency income taxes for the years 1958 and 1959.1 On
January 18, 1965, Algue flied a letter of protest or request for
reconsideration, which letter was stamp received on the same day
in the office of the petitioner.
distraint and levy was presented to the private respondent, through
its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on
the ground of the pending protest. 3 A search of the protest in the
dockets of the case proved fruitless. Atty. Guevara produced his
file copy and gave a photostat to BIR agent Ramon Reyes, who
deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara
was finally informed that the BIR was not taking any action on the
protest and it was only then that he accepted the warrant of
distraint and levy earlier sought to be served.5 Sixteen days later,
on April 23, 1965, Algue filed a petition for review of the decision of
the Commissioner of Internal Revenue with the Court of Tax
Appeals.6
The above chronology shows that the petition was filed
seasonably. According to Rep. Act No. 1125, the appeal may be
made within thirty days after receipt of the decision or ruling
challenged.7 It is true that as a rule the warrant of distraint and levy
is "proof of the finality of the assessment" 8 and renders hopeless
a request for reconsideration," 9being "tantamount to an outright
denial thereof and makes the said request deemed
rejected." 10 But there is a special circumstance in the case at bar
 
The proven fact is that four days after the private respondent
received the petitioner's notice of assessment, it filed its letter of
protest. This was apparently not taken into account before the
warrant of distraint and levy was issued; indeed, such protest
could not be located in the office of the petitioner. It was only after
Atty. Guevara gave the BIR a copy of the protest that it was, if at
all, considered by the tax authorities. During the intervening found, the amount was earned through the joint efforts of the
period, the warrant was premature and could therefore not be persons among whom it was distributed It has been established
served.  that the Philippine Sugar Estate Development Company had
As the Court of Tax Appeals correctly noted," 11 the protest filed by earlier appointed Algue as its agent, authorizing it to sell its land,
private respondent was not pro forma and was based on strong factories and oil manufacturing process. Pursuant to such
legal considerations. It thus had the effect of suspending on authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara,
January 18, 1965, when it was filed, the reglementary period which Edith, O'Farell, and Pablo Sanchez, worked for the formation of
started on the date the assessment was received, viz., January 14, the Vegetable Oil Investment Corporation, inducing other persons
1965. The period started running again only on April 7, 1965, when to invest in it.14 Ultimately, after its incorporation largely through
the private respondent was definitely informed of the implied the promotion of the said persons, this new corporation purchased
rejection of the said protest and the warrant was finally served on the PSEDC properties.15 For this sale, Algue received as agent a
it. Hence, when the appeal was filed on April 23, 1965, only 20 commission of P126,000.00, and it was from this commission that
days of the reglementary period had been consumed.  the P75,000.00 promotional fees were paid to the aforenamed
Now for the substantive question.  individuals.16
The petitioner contends that the claimed deduction of P75,000.00 There is no dispute that the payees duly reported their respective
was properly disallowed because it was not an ordinary shares of the fees in their income tax returns and paid the
reasonable or necessary business expense. The Court of Tax corresponding taxes thereon.17 The Court of Tax Appeals also
Appeals had seen it differently. Agreeing with Algue, it held that found, after examining the evidence, that no distribution of
the said amount had been legitimately paid by the private dividends was involved.18
respondent for actual services rendered. The payment was in the The petitioner claims that these payments are fictitious because
form of promotional fees. These were collected by the Payees for most of the payees are members of the same family in control of
their work in the creation of the Vegetable Oil Investment Algue. It is argued that no indication was made as to how such
Corporation of the Philippines and its subsequent purchase of the payments were made, whether by check or in cash, and there is
properties of the Philippine Sugar Estate Development Company.  not enough substantiation of such payments. In short, the
Parenthetically, it may be observed that the petitioner had petitioner suggests a tax dodge, an attempt to evade a legitimate
Originally claimed these promotional fees to be personal holding assessment by involving an imaginary deduction. 
company income 12 but later conformed to the decision of the We find that these suspicions were adequately met by the private
respondent court rejecting this assertion.13 In fact, as the said court respondent when its President, Alberto Guevara, and the
accountant, Cecilia V. de Jesus, testified that the payments were carrying on any trade or business, including a
not made in one lump sum but periodically and in different reasonable allowance for salaries or other
amounts as each payee's need arose. 19 It should be remembered compensation for personal services actually
22
that this was a family corporation where strict business procedures rendered; ... 
were not applied and immediate issuance of receipts was not and Revenue Regulations No. 2, Section 70 (1), reading as
required. Even so, at the end of the year, when the books were to follows: 
be closed, each payee made an accounting of all of the fees SEC. 70. Compensation for personal services.--Among
received by him or her, to make up the total of the ordinary and necessary expenses paid or incurred
P75,000.00. 20Admittedly, everything seemed to be informal. This in carrying on any trade or business may be included a
arrangement was understandable, however, in view of the close reasonable allowance for salaries or other
relationship among the persons in the family corporation.  compensation for personal services actually rendered.
We agree with the respondent court that the amount of the The test of deductibility in the case of compensation
promotional fees was not excessive. The total commission paid by payments is whether they are reasonable and are, in
the Philippine Sugar Estate Development Co. to the private fact, payments purely for service. This test and
respondent was P125,000.00. 21 After deducting the said fees, deductibility in the case of compensation payments is
Algue still had a balance of P50,000.00 as clear profit from the whether they are reasonable and are, in fact,
transaction. The amount of P75,000.00 was 60% of the total payments purely for service. This test and its practical
commission. This was a reasonable proportion, considering that it application may be further stated and illustrated as
was the payees who did practically everything, from the formation follows:
of the Vegetable Oil Investment Corporation to the actual purchase Any amount paid in the form of compensation,
by it of the Sugar Estate properties. This finding of the respondent but not in fact as the purchase price of services,
court is in accord with the following provision of the Tax Code:  is not deductible. (a) An ostensible salary paid by
SEC. 30. Deductions from gross income.--In a corporation may be a distribution of a dividend
computing net income there shall be allowed as on stock. This is likely to occur in the case of a
deductions —  corporation having few stockholders, Practically
(a) Expenses:  all of whom draw salaries. If in such a case the
(1) In general.--All the ordinary and necessary salaries are in excess of those ordinarily paid for
expenses paid or incurred during the taxable year in similar services, and the excessive payment
 correspond or bear a close relationship to the
stockholdings of the officers of employees, it
would seem likely that the salaries are not paid
wholly for services rendered, but the excessive
payments are a distribution of earnings upon the
stock. . . . (Promulgated Feb. 11, 1931, 30 O.G.
No. 18, 325.)  procedure. If it is not, then the taxpayer has a right to complain
It is worth noting at this point that most of the payees were not in
the regular employ of Algue nor were they its controlling
stockholders. 23
The Solicitor General is correct when he says that the burden is on
the taxpayer to prove the validity of the claimed deduction. In the
present case, however, we find that the onus has been discharged
satisfactorily. The private respondent has proved that the payment
of the fees was necessary and reasonable in the light of the efforts
exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and involve
themselves in a new business requiring millions of pesos. This
was no mean feat and should be, as it was, sufficiently
recompensed.  SO ORDERED.
It is said that taxes are what we pay for civilization society. Without
taxes, the government would be paralyzed for lack of the motive
power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hard earned income to the
taxing authorities, every person who is able to must contribute his
share in the running of the government. The government for its
part, is expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people and enhance
their moral and material values. This symbiotic relationship is the
rationale of taxation and should dispel the erroneous notion that it
is an arbitrary method of exaction by those in the seat of power. 
But even as we concede the inevitability and indispensability of
taxation, it is a requirement in all democratic regimes that it be
exercised reasonably and in accordance with the prescribed
and the courts will then come to his succor. For all the awesome
power of the tax collector, he may still be stopped in his tracks if
the taxpayer can demonstrate, as it has here, that the law has not
been observed. 
We hold that the appeal of the private respondent from the
decision of the petitioner was filed on time with the respondent
court in accordance with Rep. Act No. 1125. And we also find that
the claimed deduction by the private respondent was permitted
under the Internal Revenue Code and should therefore not have
been disallowed by the petitioner. 
ACCORDINGLY, the appealed decision of the Court of Tax
Appeals is AFFIRMED in toto, without costs. 

G.R. No. L-10405           December 29, 1960
WENCESLAO PASCUAL, in his official capacity as Provincial
Governor of Rizal, petitioner-appellant,  approval of said Act, was a member of the Senate of the
vs. THE SECRETARY OF PUBLIC WORKS AND
COMMUNICATIONS, ET AL., respondents-appellees.
CONCEPCION, J.:
Appeal, by petitioner Wenceslao Pascual, from a decision of the
Court of First Instance of Rizal, dismissing the above entitled case
and dissolving the writ of preliminary injunction therein issued,
without costs.
On August 31, 1954, petitioner Wenceslao Pascual, as Provincial
Governor of Rizal, instituted this action for declaratory relief, with
injunction, upon the ground that Republic Act No. 920, entitled "An
Act Appropriating Funds for Public Works", approved on June 20,
1953, contained, in section 1-C (a) thereof, an item (43[h]) of
P85,000.00 "for the construction, reconstruction, repair, extension
and improvement" of Pasig feeder road terminals (Gen. Roxas —
Gen. Araneta — Gen. Lucban — Gen. Capinpin — Gen. Segundo
— Gen. Delgado — Gen. Malvar — Gen. Lim)"; that, at the time of
the passage and approval of said Act, the aforementioned feeder
roads were "nothing but projected and planned subdivision roads,
not yet constructed, . . . within the Antonio Subdivision . . . situated
at . . . Pasig, Rizal" (according to the tracings attached to the
petition as Annexes A and B, near Shaw Boulevard, not far away
from the intersection between the latter and Highway 54), which
projected feeder roads "do not connect any government property
or any important premises to the main highway"; that the
aforementioned Antonio Subdivision (as well as the lands on which
said feeder roads were to be construed) were private properties of
respondent Jose C. Zulueta, who, at the time of the passage and
Philippines; that on May, 1953, respondent Zulueta, addressed a
letter to the Municipal Council of Pasig, Rizal, offering to donate
said projected feeder roads to the municipality of Pasig, Rizal; that,
on June 13, 1953, the offer was accepted by the council, subject to
the condition "that the donor would submit a plan of the said roads
and agree to change the names of two of them"; that no deed of
donation in favor of the municipality of Pasig was, however,
executed; that on July 10, 1953, respondent Zulueta wrote another
letter to said council, calling attention to the approval of Republic
Act. No. 920, and the sum of P85,000.00 appropriated therein for
the construction of the projected feeder roads in question; that the
municipal council of Pasig endorsed said letter of respondent
Zulueta to the District Engineer of Rizal, who, up to the present
"has not made any endorsement thereon" that inasmuch as the
projected feeder roads in question were private property at the
time of the passage and approval of Republic Act No. 920, the
appropriation of P85,000.00 therein made, for the construction,
reconstruction, repair, extension and improvement of said
projected feeder roads, was illegal and, therefore, void ab initio";
that said appropriation of P85,000.00 was made by Congress
because its members were made to believe that the projected
feeder roads in question were "public roads and not private streets
of a private subdivision"'; that, "in order to give a semblance of
legality, when there is absolutely none, to the aforementioned
appropriation", respondents Zulueta executed on December 12,
1953, while he was a member of the Senate of the Philippines, an
alleged deed of donation — copy of which is annexed to the
petition — of the four (4) parcels of land constituting said projected
feeder roads, in favor of the Government of the Republic of the
Philippines; that said alleged deed of donation was, on the same
date, accepted by the then Executive Secretary; that being subject
to an onerous condition, said donation partook of the nature of a
contract; that, such, said donation violated the provision of our
fundamental law prohibiting members of Congress from being
directly or indirectly financially interested in any contract with the
Government, and, hence, is unconstitutional, as well as null and
void ab initio, for the construction of the projected feeder roads in
question with public funds would greatly enhance or increase the
value of the aforementioned subdivision of respondent Zulueta,
"aside from relieving him from the burden of constructing his
subdivision streets or roads at his own expense"; that the
construction of said projected feeder roads was then being
undertaken by the Bureau of Public Highways; and that, unless
restrained by the court, the respondents would continue to
execute, comply with, follow and implement the aforementioned
illegal provision of law, "to the irreparable damage, detriment and
prejudice not only to the petitioner but to the Filipino nation."
Petitioner prayed, therefore, that the contested item of Republic
Act No. 920 be declared null and void; that the alleged deed of
donation of the feeder roads in question be "declared
unconstitutional and, therefor, illegal"; that a writ of injunction be
issued enjoining the Secretary of Public Works and
Communications, the Director of the Bureau of Public Works and
Highways and Jose C. Zulueta from ordering or allowing the
continuance of the above-mentioned feeder roads project, and
from making and securing any new and further releases on the
aforementioned item of Republic Act No. 920, and the disbursing
officers of the Department of Public Works and Highways from
making any further payments out of said funds provided for in
Republic Act No. 920; and that pending final hearing on the merits,
a writ of preliminary injunction be issued enjoining the
aforementioned parties respondent from making and securing any
new and further releases on the aforesaid item of Republic Act No.
920 and from making any further payments out of said illegally
appropriated funds.
Respondents moved to dismiss the petition upon the ground that
petitioner had "no legal capacity to sue", and that the petition did
"not state a cause of action". In support to this motion, respondent
Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial
governor, should represent the Province of Rizal, pursuant to
section 1683 of the Revised Administrative Code; that said
respondent is " not aware of any law which makes illegal the
appropriation of public funds for the improvements of . . . private
property"; and that, the constitutional provision invoked by
petitioner is inapplicable to the donation in question, the same
being a pure act of liberality, not a contract. The other
respondents, in turn, maintained that petitioner could not assail the
appropriation in question because "there is no actual bona
fide case . . . in which the validity of Republic Act No. 920 is
necessarily involved" and petitioner "has not shown that he has a
personal and substantial interest" in said Act "and that its
enforcement has caused or will cause him a direct injury."
Acting upon said motions to dismiss, the lower court rendered the
aforementioned decision, dated October 29, 1953, holding that,
since public interest is involved in this case, the Provincial
Governor of Rizal and the provincial fiscal thereof who represents
him therein, "have the requisite personalities" to question the
constitutionality of the disputed item of Republic Act No. 920; that
"the legislature is without power appropriate public revenues for
anything but a public purpose", that the instructions and
improvement of the feeder roads in question, if such roads where
private property, would not be a public purpose; that, being subject
to the following condition:
The within donation is hereby made upon the condition that
the Government of the Republic of the Philippines will use
the parcels of land hereby donated for street purposes only
and for no other purposes whatsoever; it being expressly
understood that should the Government of the Republic of
the Philippines violate the condition hereby imposed upon it,
the title to the land hereby donated shall, upon such
violation, ipso facto revert to the DONOR, JOSE C.
ZULUETA. (Emphasis supplied.)
which is onerous, the donation in question is a contract; that said
donation or contract is "absolutely forbidden by the Constitution"
and consequently "illegal", for Article 1409 of the Civil Code of the
Philippines, declares in existence and void from the very beginning
contracts "whose cause, objector purpose is contrary to law,
morals . . . or public policy"; that the legality of said donation may
not be contested, however, by petitioner herein, because his
"interest are not directly affected" thereby; and that, accordingly,
the appropriation in question "should be upheld" and the case
dismissed.
At the outset, it should be noted that we are concerned with a
decision granting the aforementioned motions to dismiss, which as
much, are deemed to have admitted hypothetically the allegations
of fact made in the petition of appellant herein. According to said
petition, respondent Zulueta is the owner of several parcels of
residential land situated in Pasig, Rizal, and known as the Antonio
Subdivision, certain portions of which had been reserved for the
projected feeder roads aforementioned, which, admittedly, were
private property of said respondent when Republic Act No. 920,
appropriating P85,000.00 for the "construction, reconstruction,
repair, extension and improvement" of said roads, was passed by
Congress, as well as when it was approved by the President on
June 20, 1953. The petition further alleges that the construction of
said roads, to be undertaken with the aforementioned
appropriation of P85,000.00, would have the effect of relieving
respondent Zulueta of the burden of constructing his subdivision
streets or roads at his own expenses, 1and would "greatly enhance
or increase the value of the subdivision" of said respondent. The
lower court held that under these circumstances, the appropriation
in question was "clearly for a private, not a public purpose."
Respondents do not deny the accuracy of this conclusion, which is
self-evident. 2However, respondent Zulueta contended, in his
motion to dismiss that:
A law passed by Congress and approved by the President
can never be illegal because Congress is the source of all
laws . . . Aside from the fact that movant is not aware of any
law which makes illegal the appropriation of public funds for
the improvement of what we, in the meantime, may assume
as private property . . . (Record on Appeal, p. 33.)
The first proposition must be rejected most emphatically, it being
inconsistent with the nature of the Government established under
the Constitution of the Republic of the Philippines and the system
of checks and balances underlying our political structure.
Moreover, it is refuted by the decisions of this Court invalidating
legislative enactments deemed violative of the Constitution or
organic laws. 3  correlative with its right to tax, and, under constitutional
As regards the legal feasibility of appropriating public funds for a
public purpose, the principle according to Ruling Case Law, is this:
It is a general rule that the legislature is without power to
appropriate public revenue for anything but a public purpose.
. . . It is the essential character of the direct object of the
expenditure which must determine its validity as justifying a
tax, and not the magnitude of the interest to be affected nor
the degree to which the general advantage of the
community, and thus the public welfare, may be ultimately
benefited by their promotion. Incidental to the public or to the
state, which results from the promotion of private interest
and the prosperity of private enterprises or business, does
not justify their aid by the use public money. (25 R.L.C. pp.
398-400; Emphasis supplied.)
The rule is set forth in Corpus Juris Secundum in the following
language:
In accordance with the rule that the taxing power must be
exercised for public purposes only, discussed supra sec. 14,
money raised by taxation can be expended only for public
purposes and not for the advantage of private individuals.
(85 C.J.S. pp. 645-646; emphasis supplied.)
Explaining the reason underlying said rule, Corpus Juris
Secundum states:
Generally, under the express or implied provisions of the
constitution, public funds may be used only for public
purpose. The right of the legislature to appropriate funds is
provisions against taxation except for public purposes and
prohibiting the collection of a tax for one purpose and the
 devotion thereof to another purpose, no appropriation of
state funds can be made for other than for a public purpose.
x x x           x x x          x x x
The test of the constitutionality of a statute requiring the use
of public funds is whether the statute is designed to promote
the public interest, as opposed to the furtherance of the
advantage of individuals, although each advantage to
individuals might incidentally serve the public. (81 C.J.S. pp.
1147; emphasis supplied.)
Needless to say, this Court is fully in accord with the foregoing
views which, apart from being patently sound, are a necessary
corollary to our democratic system of government, which, as such,
exists primarily for the promotion of the general welfare. Besides,
reflecting as they do, the established jurisprudence in the United
States, after whose constitutional system ours has been patterned,
said views and jurisprudence are, likewise, part and parcel of our
own constitutional law.lawphil.net
This notwithstanding, the lower court felt constrained to uphold the
appropriation in question, upon the ground that petitioner may not
contest the legality of the donation above referred to because the
same does not affect him directly. This conclusion is, presumably,
based upon the following premises, namely: (1) that, if valid, said
donation cured the constitutional infirmity of the aforementioned
appropriation; (2) that the latter may not be annulled without a
previous declaration of unconstitutionality of the said donation; and
(3) that the rule set forth in Article 1421 of the Civil Code is
absolute, and admits of no exception. We do not agree with these
premises.
The validity of a statute depends upon the powers of Congress at
the time of its passage or approval, not upon events occurring, or
acts performed, subsequently thereto, unless the latter consists of
an amendment of the organic law, removing, with retrospective
operation, the constitutional limitation infringed by said statute.
Referring to the P85,000.00 appropriation for the projected feeder
roads in question, the legality thereof depended upon whether said
roads were public or private property when the bill, which, latter
on, became Republic Act 920, was passed by Congress, or, when
said bill was approved by the President and the disbursement of
said sum became effective, or on June 20, 1953 (see section 13 of
said Act). Inasmuch as the land on which the projected feeder
roads were to be constructed belonged then to respondent
Zulueta, the result is that said appropriation sought a private
purpose, and hence, was null and void. 4 The donation to the
Government, over five (5) months after the approval and effectivity
of said Act, made, according to the petition, for the purpose of
giving a "semblance of legality", or legalizing, the appropriation in
question, did not cure its aforementioned basic defect.
Consequently, a judicial nullification of said donation need not
precede the declaration of unconstitutionality of said appropriation.
Again, Article 1421 of our Civil Code, like many other statutory
enactments, is subject to exceptions. For instance, the creditors of
a party to an illegal contract may, under the conditions set forth in
Article 1177 of said Code, exercise the rights and actions of the
latter, except only those which are inherent in his person, including
therefore, his right to the annulment of said contract, even though
such creditors are not affected by the same, except indirectly, in
the manner indicated in said legal provision.
Again, it is well-stated that the validity of a statute may be
contested only by one who will sustain a direct injury in
consequence of its enforcement. Yet, there are many decisions
nullifying, at the instance of taxpayers, laws providing for the
disbursement of public funds, 5upon the theory that "the
expenditure of public funds by an officer of the State for the
purpose of administering an unconstitutional act constitutes
amisapplication of such funds," which may be enjoined at the
request of a taxpayer. 6Although there are some decisions to the
contrary, 7the prevailing view in the United States is stated in the
American Jurisprudence as follows:
In the determination of the degree of interest essential to
give the requisite standing to attack the constitutionality of a
statute, the general rule is that not only persons individually
affected, but also taxpayers, have sufficient interest in
preventing the illegal expenditure of moneys raised by
taxation and may therefore question the constitutionality of
statutes requiring expenditure of public moneys. (11 Am. Jur.
761; emphasis supplied.)  from a domestic viewpoint, to that existing between the people and
However, this view was not favored by the Supreme Court of the
U.S. in Frothingham vs. Mellon (262 U.S. 447), insofar
as federal laws are concerned, upon the ground that the
relationship of a taxpayer of the U.S. to its Federal Government is
different from that of a taxpayer of a municipal corporation to its
government. Indeed, under the composite system of government
existing in the U.S., the states of the Union are integral part of the
Federation from an international viewpoint, but, each state enjoys
internally a substantial measure of sovereignty, subject to the
limitations imposed by the Federal Constitution. In fact, the same
was made by representatives of each state of the Union, not of the
people of the U.S., except insofar as the former represented the
people of the respective States, and the people of each State has,
independently of that of the others, ratified said Constitution. In
other words, the Federal Constitution and the Federal statutes
have become binding upon the people of the U.S. in consequence
of an act of, and, in this sense, through the respective states of the
Union of which they are citizens. The peculiar nature of the relation
between said people and the Federal Government of the U.S. is
reflected in the election of its President, who is chosen
directly, not by the people of the U.S., but by electors chosen
by each State, in such manner as the legislature thereof may
direct (Article II, section 2, of the Federal Constitution).lawphi1.net
The relation between the people of the Philippines and its
taxpayers, on the other hand, and the Republic of the Philippines,
on the other, is not identical to that obtaining between the people
and taxpayers of the U.S. and its Federal Government. It is closer,
taxpayers of each state and the government thereof, except that
the authority of the Republic of the Philippines over the people of
the Philippines is more fully direct than that of the states of the
Union, insofar as the simple and unitary type of our national
government is not subject to limitations analogous to those
imposed by the Federal Constitution upon the states of the Union,
and those imposed upon the Federal Government in the interest of
the Union. For this reason, the rule recognizing the right of Hence, it is our considered opinion that the circumstances
taxpayers to assail the constitutionality of a legislation surrounding this case sufficiently justify petitioners action in
appropriating local or state public funds — which has been upheld contesting the appropriation and donation in question; that this
by the Federal Supreme Court (Crampton vs. Zabriskie, 101 U.S. action should not have been dismissed by the lower court; and that
601) — has greater application in the Philippines than that adopted the writ of preliminary injunction should have been maintained.
with respect to acts of Congress of the United States appropriating Wherefore, the decision appealed from is hereby reversed, and
federal funds. the records are remanded to the lower court for further
Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), proceedings not inconsistent with this decision, with the costs of
involving the expropriation of a land by the Province of Tayabas, this instance against respondent Jose C. Zulueta. It is so ordered.
two (2) taxpayers thereof were allowed to intervene for the
purpose of contesting the price being paid to the owner thereof, as
unduly exorbitant. It is true that in Custodio vs. President of the
Senate (42 Off. Gaz., 1243), a taxpayer and employee of the
Government was not permitted to question the constitutionality of
an appropriation for backpay of members of Congress. However,
in Rodriguez vs.Treasurer of the Philippines and
Barredo vs. Commission on Elections (84 Phil., 368; 45 Off. Gaz.,
4411), we entertained the action of taxpayers impugning the
validity of certain appropriations of public funds, and invalidated
the same. Moreover, the reason that impelled this Court to take
such position in said two (2) cases — the importance of the issues
therein raised — is present in the case at bar. Again, like the
petitioners in the Rodriguez and Barredo cases, petitioner herein is
not merely a taxpayer. The Province of Rizal, which he represents
officially as its Provincial Governor, is our most populated political
subdivision, 8and, the taxpayers therein bear a substantial portion
of the burden of taxation, in the Philippines.

G.R. No. L-59431 July 25, 1984
ANTERO M. SISON, JR., petitioner,  process clauses 6 of the Constitution as well as of the rule
vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of
Internal Revenue; ROMULO VILLA, Deputy Commissioner,
Bureau of Internal Revenue; TOMAS TOLEDO Deputy
Commissioner, Bureau of Internal Revenue; MANUEL ALBA,
Minister of Budget, FRANCISCO TANTUICO, Chairman,
Commissioner on Audit, and CESAR E. A. VIRATA, Minister of
Finance, respondents.
FERNANDO, C.J.:
The success of the challenge posed in this suit for declaratory
relief or prohibition proceeding 1 on the validity of Section I of
Batas Pambansa Blg. 135 depends upon a showing of its
constitutional infirmity. The assailed provision further amends
Section 21 of the National Internal Revenue Code of 1977, which
provides for rates of tax on citizens or residents on (a) taxable
compensation income, (b) taxable net income, (c) royalties, prizes,
and other winnings, (d) interest from bank deposits and yield or
any other monetary benefit from deposit substitutes and from trust
fund and similar arrangements, (e) dividends and share of
individual partner in the net profits of taxable partnership, (f)
adjusted gross income. 2Petitioner 3 as taxpayer alleges that by
virtue thereof, "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the
exercise of his profession vis-a-vis those which are imposed upon
fixed income or salaried individual taxpayers. 4 He characterizes
the above sction as arbitrary amounting to class legislation,
oppressive and capricious in character 5 For petitioner, therefore,
there is a transgression of both the equal protection and due
requiring uniformity in taxation. 7
The Court, in a resolution of January 26, 1982, required
respondents to file an answer within 10 days from notice. Such an
answer, after two extensions were granted the Office of the
Solicitor General, was filed on May 28, 1982. 8 The facts as
alleged were admitted but not the allegations which to their mind
are "mere arguments, opinions or conclusions on the part of the
petitioner, the truth [for them] being those stated [in their] Special
and Affirmative Defenses." 9 The answer then affirmed: "Batas
Pambansa Big. 135 is a valid exercise of the State's power to tax.
The authorities and cases cited while correctly quoted or
paraghraph do not support petitioner's stand." 10 The prayer is for
the dismissal of the petition for lack of merit.
This Court finds such a plea more than justified. The petition must
be dismissed.
1. It is manifest that the field of state activity has assumed a much
wider scope, The reason was so clearly set forth by retired Chief
Justice Makalintal thus: "The areas which used to be left to private
enterprise and initiative and which the government was called
upon to enter optionally, and only 'because it was better equipped
to administer for the public welfare than is any private individual or
group of individuals,' continue to lose their well-defined boundaries
and to be absorbed within activities that the government must
undertake in its sovereign capacity if it is to meet the increasing
social challenges of the times." 11 Hence the need for more
revenues. The power to tax, an inherent prerogative, has to be
availed of to assure the performance of vital state functions. It is
the source of the bulk of public funds. To praphrase a recent
decision, taxes being the lifeblood of the government, their prompt
and certain availability is of the essence. 12
2. The power to tax moreover, to borrow from Justice Malcolm, "is
an attribute of sovereignty. It is the strongest of all the powers of of
government." 13 It is, of course, to be admitted that for all its
plenitude 'the power to tax is not unconfined. There are
restrictions. The Constitution sets forth such limits . Adversely
affecting as it does properly rights, both the due process and equal
protection clauses inay properly be invoked, all petitioner does, to
invalidate in appropriate cases a revenue measure. if it were
otherwise, there would -be truth to the 1803 dictum of Chief
Justice Marshall that "the power to tax involves the power to
destroy." 14 In a separate opinion in Graves v. New
York, 15 Justice Frankfurter, after referring to it as an 1,
unfortunate remark characterized it as "a flourish of rhetoric
[attributable to] the intellectual fashion of the times following] a free
use of absolutes." 16 This is merely to emphasize that it is riot and
there cannot be such a constitutional mandate. Justice Frankfurter
could rightfully conclude: "The web of unreality spun from
Marshall's famous dictum was brushed away by one stroke of Mr.
Justice Holmess pen: 'The power to tax is not the power to destroy
while this Court sits." 17 So it is in the Philippines.
3. This Court then is left with no choice. The Constitution as the
fundamental law overrides any legislative or executive, act that
runs counter to it. In any case therefore where it can be
demonstrated that the challenged statutory provision — as
petitioner here alleges — fails to abide by its command, then this
Court must so declare and adjudge it null. The injury thus is
centered on the question of whether the imposition of a higher tax
rate on taxable net income derived from business or profession
than on compensation is constitutionally infirm.
4, The difficulty confronting petitioner is thus apparent. He alleges
arbitrariness. A mere allegation, as here. does not suffice. There
must be a factual foundation of such unconstitutional taint.
Considering that petitioner here would condemn such a provision
as void or its face, he has not made out a case. This is merely to
adhere to the authoritative doctrine that were the due process and
equal protection clauses are invoked, considering that they arc not
fixed rules but rather broad standards, there is a need for of such
persuasive character as would lead to such a conclusion. Absent
such a showing, the presumption of validity must prevail. 18
5. It is undoubted that the due process clause may be invoked
where a taxing statute is so arbitrary that it finds no support in the
Constitution. An obvious example is where it can be shown to
amount to the confiscation of property. That would be a clear
abuse of power. It then becomes the duty of this Court to say that
such an arbitrary act amounted to the exercise of an authority not
conferred. That properly calls for the application of the Holmes
dictum. It has also been held that where the assailed tax measure
is beyond the jurisdiction of the state, or is not for a public
purpose, or, in case of a retroactive statute is so harsh and
unreasonable, it is subject to attack on due process grounds. 19
6. Now for equal protection. The applicable standard to avoid the
charge that there is a denial of this constitutional mandate whether
the assailed act is in the exercise of the lice power or the power of
eminent domain is to demonstrated that the governmental act
assailed, far from being inspired by the attainment of the common
weal was prompted by the spirit of hostility, or at the very least,
discrimination that finds no support in reason. It suffices then that
the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same
manner, the conditions not being different, both in the privileges
conferred and the liabilities imposed. Favoritism and undue
preference cannot be allowed. For the principle is that equal
protection and security shall be given to every person under
circumtances which if not Identical are analogous. If law be looked
upon in terms of burden or charges, those that fall within a class
should be treated in the same fashion, whatever restrictions cast
on some in the group equally binding on the rest." 20 That same
formulation applies as well to taxation measures. The equal
protection clause is, of course, inspired by the noble concept of
approximating the Ideal of the laws benefits being available to all
and the affairs of men being governed by that serene and impartial
uniformity, which is of the very essence of the Idea of law. There
is, however, wisdom, as well as realism in these words of Justice
Frankfurter: "The equality at which the 'equal protection' clause
aims is not a disembodied equality. The Fourteenth Amendment
enjoins 'the equal protection of the laws,' and laws are not abstract
propositions. They do not relate to abstract units A, B and C, but
are expressions of policy arising out of specific difficulties, address
to the attainment of specific ends by the use of specific remedies.
The Constitution does not require things which are different in fact
or opinion to be treated in law as though they were the
same." 21 Hence the constant reiteration of the view that
classification if rational in character is allowable. As a matter of
fact, in a leading case of Lutz V. Araneta, 22 this Court, through
Justice J.B.L. Reyes, went so far as to hold "at any rate, it is
inherent in the power to tax that a state be free to select the
subjects of taxation, and it has been repeatedly held that
'inequalities which result from a singling out of one particular class
for taxation, or exemption infringe no constitutional limitation.'" 23
7. Petitioner likewise invoked the kindred concept of uniformity.
According to the Constitution: "The rule of taxation shag be
uniform and equitable." 24 This requirement is met according to
Justice Laurel in Philippine Trust Company v. Yatco,25 decided in
1940, when the tax "operates with the same force and effect in
every place where the subject may be found. " 26 He likewise
added: "The rule of uniformity does not call for perfect uniformity or
perfect equality, because this is hardly attainable." 27 The problem
of classification did not present itself in that case. It did not arise
until nine years later, when the Supreme Court held: "Equality and
uniformity in taxation means that all taxable articles or kinds of
property of the same class shall be taxed at the same rate. The
taxing power has the authority to make reasonable and natural
classifications for purposes of taxation, ... . 28 As clarified by
Justice Tuason, where "the differentiation" complained of
"conforms to the practical dictates of justice and equity" it "is not
discriminatory within the meaning of this clause and is therefore
uniform." 29 There is quite a similarity then to the standard of equal
protection for all that is required is that the tax "applies equally to
all persons, firms and corporations placed in similar situation."30
8. Further on this point. Apparently, what misled petitioner is his
failure to take into consideration the distinction between a tax rate
and a tax base. There is no legal objection to a broader tax base
or taxable income by eliminating all deductible items and at the
same time reducing the applicable tax rate. Taxpayers may be
classified into different categories. To repeat, it. is enough that the
classification must rest upon substantial distinctions that make real
differences. In the case of the gross income taxation embodied in
Batas Pambansa Blg. 135, the, discernible basis of classification is
the susceptibility of the income to the application of generalized
rules removing all deductible items for all taxpayers within the
class and fixing a set of reduced tax rates to be applied to all of
them. Taxpayers who are recipients of compensation income are
set apart as a class. As there is practically no overhead expense,
these taxpayers are e not entitled to make deductions for income
tax purposes because they are in the same situation more or less.
On the other hand, in the case of professionals in the practice of
their calling and businessmen, there is no uniformity in the costs or
expenses necessary to produce their income. It would not be just
then to disregard the disparities by giving all of them zero
deduction and indiscriminately impose on all alike the same tax
rates on the basis of gross income. There is ample justification
then for the Batasang Pambansa to adopt the gross system of
income taxation to compensation income, while continuing the
system of net income taxation as regards professional and
business income.
9. Nothing can be clearer, therefore, than that the petition is
without merit, considering the (1) lack of factual foundation to show
the arbitrary character of the assailed provision; 31 (2) the force of
controlling doctrines on due process, equal protection, and
uniformity in taxation and (3) the reasonableness of the distinction
between compensation and taxable net income of professionals
and businessman certainly not a suspect classification,
WHEREFORE, the petition is dismissed. Costs against petitioner.
Makasiar, Concepcion, Jr., Guerero, Melencio-Herrera, Escolin,
Relova, Gutierrez, Jr., De la Fuente and Cuevas, JJ., concur.
Teehankee, J., concurs in the result.
Plana, J., took no part.
 
 
Separate Opinions
AQUINO, J., concurring:
I concur in the result. The petitioner has no cause of action for
prohibition.
ABAD SANTOS, J., dissenting:
This is a frivolous suit. While the tax rates for compensation
income are lower than those for net income such circumtance
does not necessarily result in lower tax payments for these
receiving compensation income. In fact, the reverse will most likely
be the case; those who file returns on the basis of net income will
pay less taxes because they claim all sort of deduction justified or
not I vote for dismissal.
 
G.R. No. 109289. October 3, 1994.*
RUFINO R. TAN, petitioner, vs. RAMON R. DEL ROSARIO, JR.,
as SECRETARY OF FINANCE & JOSE U. ONG, as
COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 109446. October 3, 1994.*
CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES,
CARLO A. CARAG, MANUELITO O. CABALLES, ELPIDIO C.
JAMORA, JR. and BENJAMIN A. SOMERA, JR., petitioners,
vs. RAMON R. DEL ROSARIO, in his capacity as SECRETARY
OF FINANCE and JOSE U. ONG, in his capacity as
COMMISSIONER OF INTERNAL REVENUE, respondents.
Taxation; Simplified Net Income Taxation (“SNIT”); Republic Act
No. 7496 did not adopt a gross income, but have retained the net
income, taxation scheme.—On the basis of the above language of
the law, it would be difficult to accept petitioner’s view that the
amendatory law should be considered as having now adopted a
gross income, instead of as having still retained the net income,
taxation scheme. The allowance for deductible items, it is true,
may have significantly been reduced by the questioned law in
comparison with that which has prevailed prior to the amendment;
limiting, however, allowable deductions from gross income is
neither discordant with, nor opposed to, the net income tax
concept. The fact of the matter is still that various deductions,
which are by no means inconsequential, continue to be well
provided under the new law.
Same; Same; Constitutional Law; Titles of Bills; Objectives of the
constitutional provision on titles of bills.—Article VI, Section 26(1),
of the Constitution has been envisioned so as (a) to prevent log-
rolling legislation intended to unite the members of the legislature
who favor any one of unrelated subjects in support of the whole
act, (b) to avoid surprises or even fraud upon the legislature, and
(c) to fairly apprise the people, through such publications of its
proceedings as are usually made, of the subjects of legislation.
The above objectives of the fundamental law appear to us to have
been sufficiently met. Anything else would be to require a virtual
compendium of the law which could not have been the intendment
of the constitutional mandate.
Same; Same; Same; Uniformity of taxation merely requires
that all subjects or objects of taxation, similarly situated, are to be
treated alike both in privileges and liabilities.—Uniformity of
taxation, like the kindred concept of equal protection, merely
requires that all subjects or objects of taxation, similarly situated,
are to be treated alike both in privileges and liabilities (Juan Luna
Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not
forfend classification as long as: (1) the standards that are used
therefor are substantial and not arbitrary, (2) the categorization is
germane to achieve the legislative purpose, (3) the law applies, all
things being equal, to both present and future conditions, and (4)
the classification applies equally well to all those belonging to the
same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs.
PAGCOR, 197 SCRA 52).
Same; Same; Same; The legislative intent is to increasingly
shift the income tax system towards the schedular approach in the
income taxation of individual taxpayers and to maintain, by and
large, the present global treatment on taxable corporations.—What
may instead be perceived to be apparent from the amendatory law
is the legislative intent to increasingly shift the income tax system
towards the schedular approach in the income taxation of
individual taxpayers and to maintain, by and large, the present
global treatment on taxable corporations.
Same; Same; Same; Words and Phrases; Schedular
Approach, Defined.—Schedular approach is a system employed
where the income tax treatment varies and made to depend on the
kind or category of taxable income of the taxpayer.
Same; Same; Same; Same; Global Treatment, Defined.—
Global treatment is a system where the tax treatment views
indifferently the tax base and generally treats in common all
categories of taxable income of the taxpayer.
Same; Same; Same; Separation of Powers; With the
legislature primarily lies the discretion to determine the nature
(kind), object (purpose), extent (rate), coverage (subjects) and
situs (place) of taxation, and the Supreme Court cannot freely
delve into those matters.—Petitioner gives a fairly extensive
discussion on the merits of the law, illustrating, in the process,
what he believes to be an imbalance between the tax liabilities of
those covered by the amendatory law and those who are not. With
the legislature primarily lies the discretion to determine the nature
(kind), object (purpose), extent (rate), coverage (subjects)
and situs (place) of taxation. This court cannot freely delve into
those matters which, by constitutional fiat, rightly rest on legislative
judgment. Of course, where a tax measure becomes so
unconscionable and unjust as to amount to confiscation of
property, courts will not hesitate to strike it down, for, despite all its
plenitude, the power to tax cannot override constitutional
proscriptions. This stage, however, has not been demonstrated to
have been reached within any appreciable distance in this
controversy before us.
Same; Same; Same; Due Process; The due process clause
may correctly be invoked only when there is a clear contravention
of inherent or constitutional limitations in the exercise of the tax
power.—Having arrived at this conclusion, the plea of petitioner to
have the law declared unconstitutional for being violative of due
process must perforce fail. The due process clause may correctly
be invoked only when there is a clear contravention of inherent or
constitutional limitations in the exercise of the tax power. No such
transgression is so evident to us
. and precepts long obtaining under the National Internal Revenue
Same; Same; Same; Partnerships; A general professional
partnership, unlike an ordinary business partnership, is not itself
an income taxpayer, as the income tax is imposed not on the
professional partnership but on the partners themselves in their
individual capacity.—The Court, first of all, should like to correct
the apparent misconception that general professional partnerships
are subject to the payment of income tax or that there is a
difference in the tax treatment between individuals engaged in
business or in the practice of their respective professions and
partners in general professional partnerships. The fact of the
matter is that a general professional partnership, unlike an
ordinary business partnership (which is treated as a corporation for
income tax purposes and so subject to the corporate income tax),
is not itself an income taxpayer. The income tax is imposed not on
the professional partnership, which is tax exempt, but on the
partners themselves in their individual capacity computed on their
distributive shares of partnership profits.
Same; Same; Same; Same; Words and Phrases; “Income
Tax-payers,” Defined; The Tax Code, in levying the tax, adopts the
most comprehensive tax situs of nationality and residence of the
taxpayer and of the generally accepted and internationally
recognized income taxable base.—We can well appreciate the
concern taken by petitioners if perhaps we were to consider
Republic Act No. 7496 as an entirely independent, not merely as
an amendatory, piece of legislation. The view can easily become
myopic, however, when the law is understood, as it should be, as
only forming part of, and subject to, the whole income tax concept
Code. To elaborate a little, the phrase “income taxpayers” is an all
embracing term used in the Tax Code, and it practically covers all
persons who derive taxable income. The law, in levying the tax,
adopts the most comprehensive tax situs of nationality and
residence of the taxpayer (that renders citizens, regardless of
residence, and resident aliens subject to income tax liability on
their income from all sources) and of the generally accepted and
internationally recognized income taxable base (that can subject
non-resident aliens and foreign corporations to income tax on their
income from Philippine sources). In the process, the Code
classifies taxpayers into four main groups, namely: (1) Individuals,
(2) Corporations, (3) Estates under Judicial Settlement and (4)
Irrevocable Trusts (irrevocable both as to corpus and as
to income).
Same; Same; Same; Same; Partnerships under the Tax Code,
Classified; Ordinarily, partnerships are subject to income tax which
are by law assimilated to be within the context of, and so legally
contemplated as, corporations.—Partnerships are, under the
Code, either “taxable partnerships” or “exempt
partnerships.” Ordinarily, partnerships, no matter how created or
organized, are subject to income tax (and thus alluded to as
“taxable partnerships”) which, for purposes of the above
categorization, are by law assimilated to be within the context of,
and so legally contemplated as, corporations. Except for few
variances, such as in the application of the “constructive receipt
rule” in the derivation of income, the income tax approach is alike
to both juridical persons.
Same; Same; Same; Same; SNIT is not intended or
envisioned to cover corporations and partnerships which are
independently subject to the payment of income tax.—Obviously,
SNIT is not intended or envisioned, as so correctly pointed out in
the discussions in Congress during its deliberations on Republic
Act 7496, aforequoted, to cover corporations and partnerships
which are independently subject to the payment of income tax.
Same; Same; Same; Same; “Exempt partnerships” are not
similarly identified as corporations nor even considered as
independent taxable entities for income tax purposes.—“Exempt
partnerships,” upon the other hand, are not similarly identified as
corporations nor even considered as independent taxable entities
for income tax purposes. A general professional partnership is
such an example. Here, the partners themselves, not the
partnership (although it is still obligated to file an income tax return
[mainly for administration and data]), are liable for the payment of
income tax in their individual capacity computed on their
respective and distributive shares of profits. In the determination of
the tax liability, a partner does so as an individual, and there is no
choice on the matter. In fine, under the Tax Code on income
taxation, the general professional partnership is deemed to be no
more than a mere mechanism or a flow-through entity in the
generation of income by, and the ultimate distribution of such
income to, respectively, each of the individual partners.
Same; Same; Same; Same; Section 6 of Revenue Regulation
No. 2-93 consistent with the Tax Code as modified by Republic Act
No. 7496.—Section 6 of Revenue Regulation No. 2-93 did not
alter, but merely confirmed, the above standing rule as now so
modified by Republic Act No. 7496 on basically the extent of
allowable deductions applicable to all individual income taxpayers
on their non-compensation income. There is no evident intention of
the law, either before or after the amendatory legislation, to place
in an unequal footing or in significant variance the income tax
treatment of professionals who practice their respective
professions individually and of those who do it through a general
professional partnership.
SPECIAL CIVIL ACTIONS in the Supreme Court. Prohibition.
The facts are stated in the opinion of the Court.
VITUG, J.:
These two consolidated special civil actions for prohibition
challenge, in G.R. No. 109289, the constitutionality of Republic Act
No. 7496, also commonly known as the Simplified Net Income
Taxation Scheme (“SNIT”), amending certain provisions of the
National Internal Revenue Code and, in G.R. No. 109446, the
validity of Section 6, Revenue Regulations No. 2-93, promulgated
by public respondents pursuant to said law.
Petitioners claim to be taxpayers adversely affected by the
continued implementation of the amendatory legislation.
 In G.R. No. 109289, it is asserted that the enactment of
Republic Act No. 7496 violates the following provisions of the
Constitution:
“Article VI, Section 26(1)—Every bill passed by the Congress shall
embrace only one subject which shall be expressed in the title
thereof.”
“Article VI, Section 28(1)—The rule of taxation shall be uniform
and equitable. The Congress shall evolve a progressive system of
taxation.”
Article III, Section 1—No person shall be deprived of x x x property
without due process of law, nor shall any person be denied the
equal protection of the laws.”
In G.R. No. 109446, petitioners, assailing Section 6 of Revenue
Regulations No. 2-93, argue that public respondents have
exceeded their rule-making authority in applying SNIT to general
professional partnerships.
The Solicitor General espouses the position taken by public
respondents.
The Court has given due course to both petitions. The parties, in
compliance with the Court’s directive, have filed their respective
memoranda.
G.R. No. 109289
Petitioner contends that the title of House Bill No. 34314,
progenitor of Republic Act No. 7496, is a misnomer or, at least,
deficient for being merely entitled, “Simplified Net Income Taxation
Scheme for the Self-Employed and Professionals Engaged in the
Practice of their Profession” (Petition in G.R. No. 109289).
The full text of the title actually reads:
“An Act Adopting the Simplified Net Income Taxation Scheme For
The Self-Employed and Professionals Engaged In The Practice of
Their Profession, Amending Sections 21 and 29 of the National
Internal Revenue Code, as Amended.”
The pertinent provisions of Sections 21 and 29, so referred to, of
the National Internal Revenue Code, as now amended, provide:
“Section 21. Tax on citizens or residents.—
“x x x      x x x
“(f) Simplified Net Income Tax for the Self-Employed and/or
Professionals Engaged in the Practice of Profession.—A tax is
hereby imposed upon the taxable net income as determined in
Section 27 received during each taxable year from all sources,
other than income covered by paragraphs (b), (c), (d) and (e) of
this section by every individual whether a citizen of the Philippines
or an alien residing in the Philippines who is self-employed or
practices his profession herein, determined in accordance with the
following schedule:
Not over P10,000  3% 
Over P 10,000 but P 30,000 P 300 + 9%
not over  of excess over P
10,000 
Over P 30,000 but P120,000 P 2,100 +
not over  15% of excess over P
30,000 
Over P120,000 but P15,600 + 20% of
not over excess over P120,000 
P350,000 
Over P350,000  P61,600 + 30% of
 excess over
P350,000”  to accept petitioner’s view that the amendatory law should be
“SECTION 29. Deductions from gross income.—In computing
taxable income subject to tax under Sections 21(a), 24(a), (b) and
(c); and 25 (a)(1), there shall be allowed as deductions the items
specified in paragraphs (a) to (i) of this section: Provided,
however, That in computing taxable income subject to tax under
Section 21 (f) in the case of individuals engaged in business or
practice of profession, only the following direct costs shall be
allowed as deductions:
1.“(a)Raw materials, supplies and direct labor;
2.“(b)Salaries of employees directly engaged in activities in the
course of or pursuant to the business or practice of their
profession;
3.“(c)Telecommunications, electricity, fuel, light and water;
4.“(d)Business rentals;
5.“(e)Depreciation;
6.“(f)Contributions made to the Government and accredited
relief organizations for the rehabilitation of calamity stricken
areas declared by the President; and
7.“(g)Interest paid or accrued within a taxable year on loans
contracted from accredited financial institutions which must
be proven to have been incurred in connection with the
conduct of a taxpayer’s profession, trade or business.
“For individuals whose cost of goods sold and direct costs are
difficult to determine, a maximum of forty per cent (40%) of their
gross receipts shall be allowed as deductions to answer for
business or professional expenses as the case may be.”
On the basis of the above language of the law, it would be difficult
considered as having now adopted a gross income, instead of as
having still retained the net income, taxation scheme. The
allowance for deductible items, it is true, may have significantly
been reduced by the questioned law in comparison with that which
has prevailed prior to the amendment; limiting, however, allowable
deductions from gross income is neither discordant with, nor
opposed to, the net income tax concept. The fact of the matter is
still that various deductions, which are by no means
inconsequential, continue to be well provided under the new law.
Article VI, Section 26(1), of the Constitution has been
envisioned so as (a) to prevent log-rolling legislation intended to
unite themembers of the legislature who favor any one of
unrelated subjects in support of the whole act, (b) to avoid
surprises or even fraud upon the legislature, and (c) to fairly
apprise the people, through such publications of its proceedings as
are usually made, of the subjects of legislation.1 The above
objectives of the fundamental law appear to us to have been
sufficiently met. Anything else would be to require a virtual
compendium of the law which could not have been the intendment
of the constitutional mandate.
Petitioner intimates that Republic Act No. 7496 desecrates the
constitutional requirement that taxation “shall be uniform and
equitable” in that the law would now attempt to tax single
proprietorships and professionals differently from the manner it
imposes the tax on corporations and partnerships. The contention
clearly forgets, however, that such a system of income taxation
has long been the prevailing rule even prior to Republic Act No.
7496.
Uniformity of taxation, like the kindred concept of equal
protection, merely requires that all subjects or objects of taxation,
similarly situated, are to be treated alike both in privileges and
liabilities (Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371).
Uniformity does not forfend classification as long as: (1) the
standards that are used therefor are substantial and not arbitrary,
(2) the categorization is germane to achieve the legislative
purpose, (3) the law applies, all things being equal, to both present
and future conditions, and (4) the classification applies equally well
to all those belonging to the same class (Pepsi Cola vs. City of
Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52).
What may instead be perceived to be apparent from the
amendatory law is the legislative intent to increasingly shift the
income tax system towards the schedular approach2 in the income
taxation of individual taxpayers and to maintain, by and large, the
present global treatment3 on taxable corporations. We certainly do
not view this classification to be arbitrary and inappropriate.
Petitioner gives a fairly extensive discussion on the merits of the
law, illustrating, in the process, what he believes to be an
imbalance
_______________
1 Justice Isagani A. Cruz on Philippine Political Law 1993
edition, pp. 146-147, citing with approval Cooley on Constitutional
Limitations.
2 A system employed where the income tax treatment varies
and made to depend on the kind or category of taxable income of
the taxpayer.
3 A system where the tax treatment views indifferently the tax
base and generally treats in common all categories of taxable
income of the taxpayer.
1The above objectives of the fundamental law appear to us to have been sufficiently met. Anything else would be to
require a virtual compendium of the law which could not have been the intendment of the constitutional mandate.
Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation “shall be
uniform and equitable” in that the law would now attempt to tax single proprietorships and professionals differently
from the manner it imposes the tax on corporations and partnerships. The contention clearly forgets, however, that
such a system of income taxation has long been the prevailing rule even prior to Republic Act No. 7496.
Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or objects
of taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan Luna Subdivision vs.
Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as: (1) the standards that are used
therefor are substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3)
the law applies, all things being equal, to both present and future conditions, and (4) the classification applies
equally well to all those belonging to the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs.
PAGCOR, 197 SCRA 52).
What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly
shift the income tax system towards the schedular approach2 in the income taxation of individual taxpayers and to
maintain, by and large, the present global treatment3 on taxable corporations. We certainly 
1 Justice Isagani A. Cruz on Philippine Political Law 1993 edition, pp. 146-147, citing with approval Cooley on
Constitutional Limitations.
2 A system employed where the income tax treatment varies and made to depend on the kind or category of
taxable income of the taxpayer.
 3 A system where the tax treatment views indifferently the tax base and generally treats in common all
categories of taxable income of the taxpayer.
between the tax liabilities of those covered by the amendatory
law and those who are not. With the legislature primarily lies the
discretion to determine the nature (kind), object (purpose), extent
(rate), coverage (subjects) and situs(place) of taxation. This court
cannot freely delve into those matters which, by constitutional fiat,
rightly rest on legislative judgment. Of course, where a tax
measure becomes so unconscionable and unjust as to amount to
confiscation of property, courts will not hesitate to strike it down,
for, despite all its plenitude, the power to tax cannot override
constitutional proscriptions. This stage, however, has not been
demonstrated to have been reached within any appreciable
distance in this controversy before us.
Having arrived at this conclusion, the plea of petitioner to have
the law declared unconstitutional for being violative of due process
must perforce fail. The due process clause may correctly be
invoked only when there is a clear contravention of inherent or
constitutional limitations in the exercise of the tax power. No such
transgression is so evident to us.
G.R. No. 109446
The several propositions advanced by petitioners revolve around
the question of whether or not public respondents have exceeded
their authority in promulgating Section 6, Revenue Regulations No.
2-93, to carry out Republic Act No. 7496.
The questioned regulation reads:
“Sec. 6. General Professional Partnership—The general
professional partnership (GPP) and the partners comprising the
GPP are covered by R.A. No. 7496. Thus, in determining the net
profit of the partnership, only the direct costs mentioned in said law
are to be deducted from partnership income. Also, the expenses
paid or incurred by partners in their individual capacities in the
practice of their profession which are not reimbursed or paid by the
partnership but are not considered as direct cost, are not
deductible from his gross income.”
The real objection of petitioners is focused on the administrative
interpretation of public respondents that would apply SNIT to
partners in general professional partnerships. Petitioners cite the
pertinent deliberations in Congress during its enactment of
Republic Act No. 7496, also quoted by the Honorable Hernando B.
Perez, minority floor leader of the House of Representatives, in the
latter’s privilege speech by way of commenting on the questioned
implementing regulation of public respondents following the
effectivity of the law, thusly:
“ ‘MR. ALBANO, Now Mr. Speaker, I would like to get the correct
impression on this bill. Do we speak here of individuals who are
earning, I mean, who earn through business enterprises and
therefore, should file an income tax return? ‘MR. PEREZ. That is
correct, Mr. Speaker. This does not apply to corporations. It
applies only to individuals.’
“(See Deliberations on H.B. No. 34314, August 6, 1991, 6:15 P.M.;
Emphasis ours)
“ ‘Other deliberations support this position, to wit:
‘MR. ABAYA . . . Now, Mr. Speaker, did I hear the Gentleman
from Batangas say that this bill is intended to increase collections
as far as individuals are concerned and to make collection of taxes
equitable?
‘MR. PEREZ. That is correct, Mr. Speaker.’
“(Id. at 6:40 P.M.; Emphasis ours)
“In fact, in the sponsorship speech of Senator Mamintal Tamano
on the Senate version of the SNITS, it is categorically stated, thus:
“ ‘This bill, Mr. President, is not applicable to business corporations
or to partnerships; it is only with respect to individuals and
professionals.’ (Emphasis ours)”
The Court, first of all, should like to correct the apparent
misconception that general professional partnerships are subject
to the payment of income tax or that there is a difference in the tax
treatment between individuals engaged in business or in the
practice of their respective professions and partners in general
professional partnerships. The fact of the matter is that a general
professional partnership, unlike an ordinary business partnership
(which is treated as a corporation for income tax purposes and so
subject to the corporate income tax), is not itself an income
taxpayer. The income tax is imposed not on the professional
partnership, which is tax exempt, but on the partners themselves
in their individual capacity computed on their distributive shares of
partnership profits. Section 23 of the Tax Code, which has not
been amended at all by Republic Act 7496, is explicit:
“SECTION 23. Tax liability of members of general professional
partnerships.—(a) Persons exercising a common profession in
general partnership shall be liable for income tax only in their
individual capacity, and the share in the net profits of the general
professional partnership to which any taxable partner would be
entitled whether distributed or otherwise, shall be returned for
taxation and the tax paid in accordance with the provisions of this
Title.
“(b) In determining his distributive share in the net income of the
partnership, each partner—
1.“(1)Shall take into account separately his distributive share of
the partnership’s income, gain, loss, deduction, or credit to
the extent provided by the pertinent provisions of this Code,
and
2.“(2)Shall be deemed to have elected the itemized
deductions, unless he declares his distributive share of the
gross income undiminished by his share of the deductions.”
There is, then and now, no distinction in income tax liability
between a person who practices his profession alone or
individually and one who does it through partnership (whether
registered or not) with others in the exercise of a common
profession. Indeed, outside of the gross compensation income tax
and the final tax on passive investment income, under the present
income tax system all individuals deriving income from any source
whatsoever are treated in almost invariably the same manner and
under a common set of rules.
We can well appreciate the concern taken by petitioners if
perhaps we were to consider Republic Act No. 7496 as an entirely
independent, not merely as an amendatory, piece of legislation.
The view can easily become myopic, however, when the law is
understood, as it should be, as only forming part of, and subject to,
the whole income tax concept and precepts long obtaining under
the National Internal Revenue Code. To elaborate a little, the
phrase “income taxpayers” is an all embracing term used in the
Tax Code, and it practically covers all persons who derive taxable
income. The law, in levying the tax, adopts the most
comprehensive tax situs of nationality and residence of the
taxpayer (that renders citizens, regardless of residence, and
resident aliens subject to income tax liability on their income from
all sources) and of the generally accepted and internationally
recognized income taxable base (that can subject non-resident
aliens and foreign corporations to income tax on their income from
Philippine sources). In the process, the Code classifies taxpayers
into four main groups, namely: (1) Individuals, (2) Corporations, (3)
Estates under Judicial Settlement and (4) Irrevocable Trusts
(irrevocable both as to corpus and as to income).
Partnerships are, under the Code, either “taxable partnerships”
or “exempt partnerships.” Ordinarily, partnerships, no matter how
created or organized, are subject to income tax (and thus alluded
to as “taxable partnerships”) which, for purposes of the above
categorization, are by law assimilated to be within the context of,
and so legally contemplated as, corporations. Except for few
variances, such as in the application of the “constructive receipt
rule” in the derivation of income, the income tax approach is alike
to both juridical persons. Obviously, SNIT is not intended or
envisioned, as so correctly pointed out in the discussions in
Congress during its deliberations on Republic Act 7496,
aforequoted, to cover corporations and partnerships which are
independently subject to the payment of income tax.
“Exempt partnerships,” upon the other hand, are not similarly
identified as corporations nor even considered as independent
taxable entities for income tax purposes. A general professional
partnership is such an example.4 Here, the partners themselves,
not the partnership (although it is still obligated to file an income
tax return [mainly for administration and data]), are liable for the
payment of income tax in their individualcapacity computed on
their respective and distributive shares of profits. In the
determination of the tax liability, a partner does so as
an individual, and there is no choice on the matter. In fine, under
the Tax Code on income taxation, the general professional
partnership is deemed to be no more than a mere mechanism or a
flow-through entity in the generation of income by, and the ultimate
distribution of such income to, respectively, each of the individual
partners. 
Section 6 of Revenue Regulation No. 2-93 did not alter, but
merely confirmed, the above standing rule as now so modified by
Republic Act No. 7496 on basically the extent of allowable
deductions applicable to all individual income taxpayers on their
noncompensation income. There is no evident intention of the law,
either before or after the amendatory legislation, to place in an
unequal footing or in significant variance the income tax treatment
of professionals who practice their respective professions
individually and of those who do it through a general professional
partnership.
WHEREFORE, the petitions are DISMISSED. No special
pronouncement on costs.
SO ORDERED.
      Narvasa (C.J.), Cruz, Feliciano, Regalado, Davide,
Jr., Romero, Bellosillo, Melo, Quiason, Puno, Kapunan and Mendo
za, JJ.,concur.
     Padilla and Bidin, JJ., On leave.
Petitions dismissed.
Note.—The law does not look with favor on tax exemptions and
he who would seek to be thus privileged must justify it by words
too plain to be mistaken and too categorical to be misinterpreted.
(Reagan vs. Commissioner of Internal Revenue, 30 SCRA
968 [1969])
_______________
4 A general professional partnership, in this context, must be formed for
the sole purpose of exercising a common profession, no part of the income of
which is derived from its engaging in any trade business; otherwise, it is
subject to tax as an ordinary business partnership or, which is to say, as a
corporation and thereby subject to the corporate income tax. The only other
exempt partnership is a joint venture for undertaking construction projects or
engaging in petroleum operations pursuant to an operating agreement under
a service contract with the government (see Sections 20, 23 and 24, National
Internal Revenue Code).
G.R. No. 159796               July 17, 2007
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and
ENVIRONMENTALIST CONSUMERS NETWORK, INC.
(ECN),Petitioners,  assumed by the National Government and stranded contract
vs.
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY
COMMISSION (ERC), NATIONAL POWER CORPORATION
(NPC), POWER SECTOR ASSETS AND LIABILITIES
MANAGEMENT GROUP (PSALM Corp.), STRATEGIC POWER
UTILITIES GROUP (SPUG), and PANAY ELECTRIC COMPANY
INC. (PECO),Respondents.
DECISION
NACHURA, J.:
Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and
Environmentalist Consumers Network, Inc. (ECN) (petitioners),
come before this Court in this original action praying that Section
34 of Republic Act (RA) 9136, otherwise known as the "Electric
Power Industry Reform Act of 2001" (EPIRA), imposing the
Universal Charge,1 and Rule 18 of the Rules and Regulations
(IRR)2 which seeks to implement the said imposition, be declared
unconstitutional. Petitioners also pray that the Universal Charge
imposed upon the consumers be refunded and that a preliminary
injunction and/or temporary restraining order (TRO) be issued
directing the respondents to refrain from implementing, charging,
and collecting the said charge.3 The assailed provision of law
reads:
SECTION 34. Universal Charge. — Within one (1) year from the
effectivity of this Act, a universal charge to be determined, fixed
and approved by the ERC, shall be imposed on all electricity end-
users for the following purposes:
(a) Payment for the stranded debts4 in excess of the amount
costs of NPC5 and as well as qualified stranded contract
 costs of distribution utilities resulting from the restructuring of
the industry;
(b) Missionary electrification;6
(c) The equalization of the taxes and royalties applied to
indigenous or renewable sources of energy vis-à-vis
imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one
centavo per kilowatt-hour (₱0.0025/kWh), which shall accrue
to an environmental fund to be used solely for watershed
rehabilitation and management. Said fund shall be managed
by NPC under existing arrangements; and
(e) A charge to account for all forms of cross-subsidies for a
period not exceeding three (3) years.
The universal charge shall be a non-bypassable charge which
shall be passed on and collected from all end-users on a monthly
basis by the distribution utilities. Collections by the distribution
utilities and the TRANSCO in any given month shall be remitted to
the PSALM Corp. on or before the fifteenth (15th) of the
succeeding month, net of any amount due to the distribution utility.
Any end-user or self-generating entity not connected to a
distribution utility shall remit its corresponding universal charge
directly to the TRANSCO. The PSALM Corp., as administrator of
the fund, shall create a Special Trust Fund which shall be
disbursed only for the purposes specified herein in an open and
transparent manner. All amount collected for the universal charge
shall be distributed to the respective beneficiaries within a
reasonable period to be provided by the ERC.
The Facts
Congress enacted the EPIRA on June 8, 2001; on June 26, 2001,
it took effect.7
On April 5, 2002, respondent National Power Corporation-
Strategic Power Utilities Group8 (NPC-SPUG) filed with
respondent Energy Regulatory Commission (ERC) a petition for
the availment from the Universal Charge of its share for Missionary
Electrification, docketed as ERC Case No. 2002-165.9
On May 7, 2002, NPC filed another petition with ERC, docketed as
ERC Case No. 2002-194, praying that the proposed share from
the Universal Charge for the Environmental charge of ₱0.0025 per
kilowatt-hour (/kWh), or a total of ₱119,488,847.59, be approved
for withdrawal from the Special Trust Fund (STF) managed by
respondent Power Sector Assets and
Liabilities Management Group (PSALM)10 for the rehabilitation and
management of watershed areas.11
On December 20, 2002, the ERC issued an Order12 in ERC Case
No. 2002-165 provisionally approving the computed amount of
₱0.0168/kWh as the share of the NPC-SPUG from the Universal
Charge for Missionary Electrification and authorizing the National
Transmission Corporation (TRANSCO) and Distribution Utilities to
collect the same from its end-users on a monthly basis.
On June 26, 2003, the ERC rendered its Decision13 (for ERC Case
No. 2002-165) modifying its Order of December 20, 2002, thus:
WHEREFORE, the foregoing premises considered, the provisional
authority granted to petitioner National Power Corporation-
Strategic Power Utilities Group (NPC-SPUG) in the Order dated
December 20, 2002 is hereby modified to the effect that an
additional amount of ₱0.0205 per kilowatt-hour should be added to
the ₱0.0168 per kilowatt-hour provisionally authorized by the
Commission in the said Order. Accordingly, a total amount of
₱0.0373 per kilowatt-hour is hereby APPROVED for withdrawal
from the Special Trust Fund managed by PSALM as its share from
the Universal Charge for Missionary Electrification (UC-ME)
effective on the following billing cycles:
(a) June 26-July 25, 2003 for National Transmission
Corporation (TRANSCO); and
(b) July 2003 for Distribution Utilities (Dus).
Relative thereto, TRANSCO and Dus are directed to collect the
UC-ME in the amount of ₱0.0373 per kilowatt-hour and remit the
same to PSALM on or before the 15th day of the succeeding
month.
In the meantime, NPC-SPUG is directed to submit, not later than
April 30, 2004, a detailed report to include Audited Financial
Statements and physical status (percentage of completion) of the
projects using the prescribed format.1avvphi1
Let copies of this Order be furnished petitioner NPC-SPUG and all
distribution utilities (Dus).
SO ORDERED.
On August 13, 2003, NPC-SPUG filed a Motion for
Reconsideration asking the ERC, among others,14 to set aside the
above-mentioned Decision, which the ERC granted in its Order
dated October 7, 2003, disposing:
WHEREFORE, the foregoing premises considered, the "Motion for
Reconsideration" filed by petitioner National Power Corporation-
Small Power Utilities Group (NPC-SPUG) is hereby GRANTED.
Accordingly, the Decision dated June 26, 2003 is hereby modified
accordingly.
Relative thereto, NPC-SPUG is directed to submit a quarterly
report on the following:
1. Projects for CY 2002 undertaken;
2. Location
3. Actual amount utilized to complete the project;
4. Period of completion;
5. Start of Operation; and
6. Explanation of the reallocation of UC-ME funds, if any.
SO ORDERED.15
Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-
194, authorizing the NPC to draw up to ₱70,000,000.00 from
PSALM for its 2003 Watershed Rehabilitation Budget subject to
the availability of funds for the Environmental Fund component of
the Universal Charge.16
On the basis of the said ERC decisions, respondent Panay Electric
Company, Inc. (PECO) charged petitioner Romeo P. Gerochi and
all other end-users with the Universal Charge as reflected in their
respective electric bills starting from the month of July 2003.17
Hence, this original action.
Petitioners submit that the assailed provision of law and its IRR
which sought to implement the same are unconstitutional on the
following grounds:
1) The universal charge provided for under Sec. 34 of the
EPIRA and sought to be implemented under Sec. 2, Rule 18
of the IRR of the said law is a tax which is to be collected
 from all electric end-users and self-generating entities. The
power to tax is strictly a legislative function and as such, the
delegation of said power to any executive or administrative
agency like the ERC is unconstitutional, giving the same
unlimited authority. The assailed provision clearly provides
that the Universal Charge is to be determined, fixed and
approved by the ERC, hence leaving to the latter complete
discretionary legislative authority.
2) The ERC is also empowered to approve and determine
where the funds collected should be used.
3) The imposition of the Universal Charge on all end-users is
oppressive and confiscatory and amounts to taxation without
representation as the consumers were not given a chance to
be heard and represented.18
Petitioners contend that the Universal Charge has the
characteristics of a tax and is collected to fund the operations of
the NPC. They argue that the cases19 invoked by the respondents
clearly show the regulatory purpose of the charges imposed
therein, which is not so in the case at bench. In said cases, the
respective funds20 were created in order to balance and stabilize
the prices of oil and sugar, and to act as buffer to counteract the
changes and adjustments in prices, peso devaluation, and other
variables which cannot be adequately and timely monitored by the
legislature. Thus, there was a need to delegate powers to
administrative bodies.21 Petitioners posit that the Universal Charge
is imposed not for a similar purpose.
On the other hand, respondent PSALM through the Office of the
Government Corporate Counsel (OGCC) contends that unlike a
tax which is imposed to provide income for public purposes, such
as support of the government, administration of the law, or
payment of public expenses, the assailed Universal Charge is
levied for a specific regulatory purpose, which is to ensure the
viability of the country's electric power industry. Thus, it is exacted
by the State in the exercise of its inherent police power. On this
premise, PSALM submits that there is no undue delegation of
legislative power to the ERC since the latter merely exercises a
limited authority or discretion as to the execution and
implementation of the provisions of the EPIRA.22
Respondents Department of Energy (DOE), ERC, and NPC,
through the Office of the Solicitor General (OSG), share the same
view that the Universal Charge is not a tax because it is levied for
a specific regulatory purpose, which is to ensure the viability of the
country's electric power industry, and is, therefore, an exaction in
the exercise of the State's police power. Respondents further
contend that said Universal Charge does not possess the essential
characteristics of a tax, that its imposition would redound to the
benefit of the electric power industry and not to the public, and that
its rate is uniformly levied on electricity end-users, unlike a tax
which is imposed based on the individual taxpayer's ability to pay.
Moreover, respondents deny that there is undue delegation of
legislative power to the ERC since the EPIRA sets forth sufficient
determinable standards which would guide the ERC in the
exercise of the powers granted to it. Lastly, respondents argue that
the imposition of the Universal Charge is not oppressive and
confiscatory since it is an exercise of the police power of the State
and it complies with the requirements of due process.23
On its part, respondent PECO argues that it is duty-bound to
collect and remit the amount pertaining to the Missionary
Electrification and Environmental Fund components of the
Universal Charge, pursuant to Sec. 34 of the EPIRA and the
Decisions in ERC Case Nos. 2002-194 and 2002-165. Otherwise,
PECO could be held liable under Sec. 4624of the EPIRA, which
imposes fines and penalties for any violation of its provisions or its
IRR.25
The Issues
The ultimate issues in the case at bar are:
1) Whether or not, the Universal Charge imposed under Sec.
34 of the EPIRA is a tax; and
2) Whether or not there is undue delegation of legislative
power to tax on the part of the ERC.26
Before we discuss the issues, the Court shall first deal with an
obvious procedural lapse.
Petitioners filed before us an original action particularly
denominated as a Complaint assailing the constitutionality of Sec.
34 of the EPIRA imposing the Universal Charge and Rule 18 of the
EPIRA's IRR. No doubt, petitioners have locus standi. They
impugn the constitutionality of Sec. 34 of the EPIRA because they
sustained a direct injury as a result of the imposition of the
Universal Charge as reflected in their electric bills.
However, petitioners violated the doctrine of hierarchy of courts
when they filed this "Complaint" directly with us. Furthermore, the
Complaint is bereft of any allegation of grave abuse of discretion
on the part of the ERC or any of the public respondents, in order
for the Court to consider it as a petition for certiorari or prohibition.
Article VIII, Section 5(1) and (2) of the 1987
27
Constitution categorically provides that:
SECTION 5. The Supreme Court shall have the following powers:
1. Exercise original jurisdiction over cases affecting
ambassadors, other public ministers and consuls, and
over petitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or
certiorari, as the law or the rules of court may provide, final
judgments and orders of lower courts in:
(a) All cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in
question.
But this Court's jurisdiction to issue writs of certiorari,
prohibition, mandamus, quo warranto, and habeas corpus, while
concurrent with that of the regional trial courts and the Court of
Appeals, does not give litigants unrestrained freedom of choice of
forum from which to seek such relief.28 It has long been
established that this Court will not entertain direct resort to it
unless the redress desired cannot be obtained in the appropriate
courts, or where exceptional and compelling circumstances justify
availment of a remedy within and call for the exercise of our
primary jurisdiction.29 This circumstance alone warrants the
outright dismissal of the present action.
This procedural infirmity notwithstanding, we opt to resolve the
constitutional issue raised herein. We are aware that if the
constitutionality of Sec. 34 of the EPIRA is not resolved now, the
issue will certainly resurface in the near future, resulting in a
repeat of this litigation, and probably involving the same parties. In
the public interest and to avoid unnecessary delay, this Court
renders its ruling now.
The instant complaint is bereft of merit.
The First Issue
To resolve the first issue, it is necessary to distinguish the State’s
power of taxation from the police power.
The power to tax is an incident of sovereignty and is unlimited in
its range, acknowledging in its very nature no limits, so that
security against its abuse is to be found only in the responsibility of
the legislature which imposes the tax on the constituency that is to
pay it.30 It is based on the principle that taxes are the lifeblood of
the government, and their prompt and certain availability is an
imperious need.31 Thus, the theory behind the exercise of the
power to tax emanates from necessity; without taxes, government
cannot fulfill its mandate of promoting the general welfare and
well-being of the people.32
On the other hand, police power is the power of the state to
promote public welfare by restraining and regulating the use of
liberty and property.33 It is the most pervasive, the least limitable,
and the most demanding of the three fundamental powers of the
State. The justification is found in the Latin maxims salus populi
est suprema lex(the welfare of the people is the supreme law)
and sic utere tuo ut alienum non laedas (so use your property as
not to injure the property of others). As an inherent attribute of
sovereignty which virtually extends to all public needs, police
power grants a wide panoply of instruments through which the
State, as parens patriae, gives effect to a host of its regulatory
powers.34 We have held that the power to "regulate" means the
power to protect, foster, promote, preserve, and control, with due
regard for the interests, first and foremost, of the public, then of the
utility and of its patrons.35
The conservative and pivotal distinction between these two powers
rests in the purpose for which the charge is made. If generation of
revenue is the primary purpose and regulation is merely incidental,
the imposition is a tax; but if regulation is the primary purpose, the
fact that revenue is incidentally raised does not make the
imposition a tax.36
In exacting the assailed Universal Charge through Sec. 34 of the
EPIRA, the State's police power, particularly its regulatory
dimension, is invoked. Such can be deduced from Sec. 34 which
enumerates the purposes for which the Universal Charge is
imposed37 and which can be amply discerned as regulatory in
character. The EPIRA resonates such regulatory purposes, thus:
SECTION 2. Declaration of Policy. — It is hereby declared the
policy of the State:
(a) To ensure and accelerate the total electrification of the
country;
(b) To ensure the quality, reliability, security and affordability
of the supply of electric power;
(c) To ensure transparent and reasonable prices of electricity
in a regime of free and fair competition and full public
accountability to achieve greater operational and economic
efficiency and enhance the competitiveness of Philippine
products in the global market;
 (d) To enhance the inflow of private capital and broaden the
ownership base of the power generation, transmission and
distribution sectors;
(e) To ensure fair and non-discriminatory treatment of public
and private sector entities in the process of restructuring the
electric power industry;
(f) To protect the public interest as it is affected by the rates
and services of electric utilities and other providers of electric
power;
(g) To assure socially and environmentally compatible
energy sources and infrastructure;
(h) To promote the utilization of indigenous and new and
renewable energy resources in power generation in order to
reduce dependence on imported energy;
(i) To provide for an orderly and transparent privatization of
the assets and liabilities of the National Power Corporation
(NPC);
(j) To establish a strong and purely independent regulatory
body and system to ensure consumer protection and
enhance the competitive operation of the electricity market;
and
(k) To encourage the efficient use of energy and other
modalities of demand side management.
From the aforementioned purposes, it can be gleaned that the
assailed Universal Charge is not a tax, but an exaction in the
exercise of the State's police power. Public welfare is surely
promoted.
Moreover, it is a well-established doctrine that the taxing power
may be used as an implement of police power.38 In Valmonte v.
Energy Regulatory Board, et al.39 and in Gaston v. Republic
Planters Bank,40this Court held that the Oil Price Stabilization Fund
(OPSF) and the Sugar Stabilization Fund (SSF) were exactions
made in the exercise of the police power. The doctrine was
reiterated in Osmeña v. Orbos41with respect to the OPSF. Thus,
we disagree with petitioners that the instant case is different from
the aforementioned cases. With the Universal Charge, a Special
Trust Fund (STF) is also created under the administration of
PSALM.42 The STF has some notable characteristics similar to the
OPSF and the SSF, viz.:
1) In the implementation of stranded cost recovery, the ERC
shall conduct a review to determine whether there is under-
recovery or over recovery and adjust (true-up) the level of
the stranded cost recovery charge. In case of an over-
recovery, the ERC shall ensure that any excess amount shall
be remitted to the STF. A separate account shall be created
for these amounts which shall be held in trust for any future
claims of distribution utilities for stranded cost recovery. At
the end of the stranded cost recovery period, any remaining
amount in this account shall be used to reduce the electricity
rates to the end-users.43
2) With respect to the assailed Universal Charge, if the total
amount collected for the same is greater than the actual
availments against it, the PSALM shall retain the balance
within the STF to pay for periods where a shortfall occurs.44
 3) Upon expiration of the term of PSALM, the administration
of the STF shall be transferred to the DOF or any of the DOF
attached agencies as designated by the DOF Secretary.45
The OSG is in point when it asseverates:
Evidently, the establishment and maintenance of the Special Trust
Fund, under the last paragraph of Section 34, R.A. No. 9136, is
well within the pervasive and non-waivable power and
responsibility of the government to secure the physical and
economic survival and well-being of the community, that
comprehensive sovereign authority we designate as the police
power of the State.46
This feature of the Universal Charge further boosts the position
that the same is an exaction imposed primarily in pursuit of the
State's police objectives. The STF reasonably serves and assures
the attainment and perpetuity of the purposes for which the
Universal Charge is imposed, i.e., to ensure the viability of the
country's electric power industry.
The Second Issue
The principle of separation of powers ordains that each of the
three branches of government has exclusive cognizance of and is
supreme in matters falling within its own constitutionally allocated
sphere. A logical corollary to the doctrine of separation of powers
is the principle of non-delegation of powers, as expressed in the
Latin maxim potestas delegata non delegari potest (what has been
delegated cannot be delegated). This is based on the ethical
principle that such delegated power constitutes not only a right but
a duty to be performed by the delegate through the instrumentality
of his own judgment and not through the intervening mind of
another. 47
In the face of the increasing complexity of modern life, delegation
of legislative power to various specialized administrative agencies
is allowed as an exception to this principle.48 Given the volume and
variety of interactions in today's society, it is doubtful if the
legislature can promulgate laws that will deal adequately with and
respond promptly to the minutiae of everyday life. Hence, the need
to delegate to administrative bodies - the principal agencies tasked
to execute laws in their specialized fields - the authority to
promulgate rules and regulations to implement a given statute and
effectuate its policies. All that is required for the valid exercise of
this power of subordinate legislation is that the regulation be
germane to the objects and purposes of the law and that the
regulation be not in contradiction to, but in conformity with, the
standards prescribed by the law. These requirements are
denominated as the completeness test and the sufficient standard
test.
Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such that when it reaches
the delegate, the only thing he will have to do is to enforce it. The
second test mandates adequate guidelines or limitations in the law
to determine the boundaries of the delegate's authority and
prevent the delegation from running riot.49
The Court finds that the EPIRA, read and appreciated in its
entirety, in relation to Sec. 34 thereof, is complete in all its
essential terms and conditions, and that it contains sufficient
standards.
Although Sec. 34 of the EPIRA merely provides that "within one (1)
year from the effectivity thereof, a Universal Charge to be
determined, fixed and approved by the ERC, shall be imposed on
all electricity end-users," and therefore, does not state the specific
amount to be paid as Universal Charge, the amount nevertheless
is made certain by the legislative parameters provided in the law
itself. For one, Sec. 43(b)(ii) of the EPIRA provides:
SECTION 43. Functions of the ERC. — The ERC shall promote
competition, encourage market development, ensure customer
choice and penalize abuse of market power in the restructured
electricity industry. In appropriate cases, the ERC is authorized to
issue cease and desist order after due notice and hearing.
Towards this end, it shall be responsible for the following key
functions in the restructured industry:
xxxx
(b) Within six (6) months from the effectivity of this Act, promulgate
and enforce, in accordance with law, a National Grid Code and a
Distribution Code which shall include, but not limited to the
following:
xxxx
(ii) Financial capability standards for the generating companies,
the TRANSCO, distribution utilities and suppliers: Provided, That
in the formulation of the financial capability standards, the nature
and function of the entity shall be considered: Provided, further,
That such standards are set to ensure that the electric power
industry participants meet the minimum financial standards to
protect the public interest. Determine, fix, and approve, after due
notice and public hearings the universal charge, to be imposed on
all electricity end-users pursuant to Section 34 hereof;
Moreover, contrary to the petitioners’ contention, the ERC does
not enjoy a wide latitude of discretion in the determination of the
Universal Charge. Sec. 51(d) and (e) of the EPIRA50 clearly
provides:
SECTION 51. Powers. — The PSALM Corp. shall, in the
performance of its functions and for the attainment of its objective,
have the following powers:
xxxx
(d) To calculate the amount of the stranded debts and
stranded contract costs of NPC which shall form the basis for
ERC in the determination of the universal charge;
(e) To liquidate the NPC stranded contract costs, utilizing the
proceeds from sales and other property contributed to it,
including the proceeds from the universal charge.
Thus, the law is complete and passes the first test for valid
delegation of legislative power.
As to the second test, this Court had, in the past, accepted as
sufficient standards the following: "interest of law and
order;"51"adequate and efficient instruction;"52 "public
interest;"53 "justice and equity;"54 "public convenience and
welfare;"55 "simplicity, economy and efficiency;"56 "standardization
and regulation of medical education;"57 and "fair and equitable
employment practices."58Provisions of the EPIRA such as, among
others, "to ensure the total electrification of the country and the
quality, reliability, security and affordability of the supply of electric
power"59 and "watershed rehabilitation and management"60 meet
the requirements for valid delegation, as they provide the
limitations on the ERC’s power to formulate the IRR. These are
sufficient standards.
It may be noted that this is not the first time that the ERC's
conferred powers were challenged. In Freedom from Debt
Coalition v. Energy Regulatory Commission,61 the Court had
occasion to say:
In determining the extent of powers possessed by the ERC, the
provisions of the EPIRA must not be read in separate parts.
Rather, the law must be read in its entirety, because a statute is
passed as a whole, and is animated by one general purpose and
intent. Its meaning cannot to be extracted from any single part
thereof but from a general consideration of the statute as a whole.
Considering the intent of Congress in enacting the EPIRA and
reading the statute in its entirety, it is plain to see that the law has
expanded the jurisdiction of the regulatory body, the ERC in this
case, to enable the latter to implement the reforms sought to be
accomplished by the EPIRA. When the legislators decided to
broaden the jurisdiction of the ERC, they did not intend to abolish
or reduce the powers already conferred upon ERC's predecessors.
To sustain the view that the ERC possesses only the powers and
functions listed under Section 43 of the EPIRA is to frustrate the
objectives of the law.
In his Concurring and Dissenting Opinion62 in the same case, then
Associate Justice, now Chief Justice, Reynato S. Puno described
the immensity of police power in relation to the delegation of
powers to the ERC and its regulatory functions over electric power
as a vital public utility, to wit:
Over the years, however, the range of police power was no longer
limited to the preservation of public health, safety and morals,
which used to be the primary social interests in earlier
times. Police power now requires the State to "assume an
affirmative duty to eliminate the excesses and injustices that are
the concomitants of an unrestrained industrial economy." Police
power is now exerted "to further the public welfare — a concept as
vast as the good of society itself." Hence, "police power is but
another name for the governmental authority to further the welfare
of society that is the basic end of all government."When police
power is delegated to administrative bodies with regulatory
functions, its exercise should be given a wide latitude. Police
power takes on an even broader dimension in developing
countries such as ours, where the State must take a more active
role in balancing the many conflicting interests in society. The
Questioned Order was issued by the ERC, acting as an agent of
the State in the exercise of police power. We should have
exceptionally good grounds to curtail its exercise. This approach is
more compelling in the field of rate-regulation of electric power
rates. Electric power generation and distribution is a traditional
instrument of economic growth that affects not only a few but the
entire nation. It is an important factor in encouraging investment
and promoting business. The engines of progress may come to a
screeching halt if the delivery of electric power is impaired. Billions
of pesos would be lost as a result of power outages or unreliable
electric power services. The State thru the ERC should be able to
exercise its police power with great flexibility, when the need
arises.
This was reiterated in National Association of Electricity
Consumers for Reforms v. Energy Regulatory
63
Commission  where the Court held that the ERC, as regulator,
should have sufficient power to respond in real time to changes
wrought by multifarious factors affecting public utilities.
From the foregoing disquisitions, we therefore hold that there is no
undue delegation of legislative power to the ERC.
Petitioners failed to pursue in their Memorandum the contention in
the Complaint that the imposition of the Universal Charge on all
end-users is oppressive and confiscatory, and amounts to taxation
without representation. Hence, such contention is deemed waived
or abandoned per Resolution64 of August 3, 2004.65 Moreover, the
determination of whether or not a tax is excessive, oppressive or
confiscatory is an issue which essentially involves questions of
fact, and thus, this Court is precluded from reviewing the same.66
As a penultimate statement, it may be well to recall what this Court
said of EPIRA:
One of the landmark pieces of legislation enacted by Congress in
recent years is the EPIRA. It established a new policy, legal
structure and regulatory framework for the electric power industry.
The new thrust is to tap private capital for the expansion and
improvement of the industry as the large government debt and the
highly capital-intensive character of the industry itself have long
been acknowledged as the critical constraints to the program. To
attract private investment, largely foreign, the jaded structure of
the industry had to be addressed. While the generation and
transmission sectors were centralized and monopolistic, the
distribution side was fragmented with over 130 utilities, mostly
small and uneconomic. The pervasive flaws have caused a low
utilization of existing generation capacity; extremely high and
uncompetitive power rates; poor quality of service to consumers;
dismal to forgettable performance of the government power sector;
high system losses; and an inability to develop a clear strategy for
overcoming these shortcomings.
Thus, the EPIRA provides a framework for the restructuring of the
industry, including the privatization of the assets of the National
Power Corporation (NPC), the transition to a competitive structure,
and the delineation of the roles of various government agencies
and the private entities. The law ordains the division of the industry
into four (4) distinct sectors, namely: generation, transmission,
distribution and supply.
Corollarily, the NPC generating plants have to privatized and its
transmission business spun off and privatized thereafter.67
Finally, every law has in its favor the presumption of
constitutionality, and to justify its nullification, there must be a clear
and unequivocal breach of the Constitution and not one that is
doubtful, speculative, or argumentative.68 Indubitably, petitioners
failed to overcome this presumption in favor of the EPIRA. We find
no clear violation of the Constitution which would warrant a
pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR
are unconstitutional and void.
WHEREFORE, the instant case is hereby DISMISSED for lack of
merit.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice

Tio vs. Videogram Regulatory Board
No. L-75697. June 18, 1987.*
VALENTIN TIO doing business under the name and style of
OMI ENTERPRISES, petitioner, vs. VIDEOGRAM
REGULATORY BOARD, MINISTER OF FINANCE, METRO
MANILA COMMISSION, CITY MAYOR and CITY TREASURER
OF MANILA, respondents.
Constitutional Law; Constitutional requirement that “every bill shall
embrace only one subject which shall be expressed in the title
thereof’ is sufficiently complied with if the title be comprehensive
enough to include the general purpose it seeks to achieve and if all
the parts of the statute are related and germane to the subject
matter expressed in the title or as long as they are not inconsistent
with or foreign to the general subject and title.—The Constitutional
requirement that “every bill shall embrace only one subject which
shall be expressed in the title thereof” is sufficiently complied with
if the title be comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not necessary that
the title express each and every end that the statute wishes to
accomplish.
The requirement is satisfied if all the parts of the statute are
related, and are germane to the subject matter expressed in the
title, or as long as they are not inconsistent with or foreign to the
general subject and title. An act having a single general subject,
indicated in the title, may contain any number of provisions, no
matter how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the
method and means of carrying out the general object.” The rule
also is that the constitutional requirement as to the title of a bill
should not be so narrowly construed as to cripple or impede the
power of legislation. It should be given a practical rather than
technical construction.
Same; Same; Section 10 PD 1987 otherwise known as
Videogram Regulatory Board is not a Rider.—Section 10. Tax on
Sale, Lease or Disposition of Videograms. Notwithstanding any
provision of law to the contrary, the province shall collect a tax of
thirty percent (30%) of the purchase price or rental rate, as the
case may be, for every sale, lease or disposition of a videogram
containing a reproduction of any motion picture or audiovisual
program. Fifty percent (50%) of the proceeds of the tax collected
shall accrue to the province, and the other fifty percent (50%) shall
accrue to the municipality where the tax is collected; PROVIDED,
That in Metropolitan Manila, the tax shall be shared equally by the
City/Municipality and the Metropolitan Manila Commission. x x x x”
The foregoing provision is allied and germane to, and is
reasonably necessary for the accomplishment of, the general
object of the DECREE, which is the regulation of the video industry
through the Videogram Regulatory Board as expressed in its title.
The tax provision is not inconsistent with, nor foreign to that
general subject and title. As a tool for regulation it is simply one of
the regulatory and control mechanisms scattered throughout the
DECREE. The express purpose of the DECREE to include
taxation of the video industry in order to regulate and rationalize
the heretofore uncontrolled distribution of videograms is evident
from Preambles 2 and 5, supra. Those preambles explain the
motives of the lawmaker in presenting the measure. The title of the
DECREE, which is the creation of the Videogram Regulatory
Board, is comprehensive enough to include the purposes
expressed in its Preamble and reasonably covers all its provisions.
It is unnecessary to express all those objectives in the title or that
the latter be an index to the body of the DECREE,
Same; Same; Same; Tax imposed under the Decree is not
harsh; oppressive, confiscatory and in restraint of trade but
regulatory and a revenue measure; The levy is for a public
purpose.—Petitioner also submits that the thirty percent (30%) tax
imposed is harsh and oppressive, confiscatory, and in restraint of
trade. However, it is beyond serious question that a tax does not
cease to be valid merely because it regulates, discourages, or
even definitely deters the activities taxed.
The power to impose taxes is one so unlimited in force and so
searching in extent, that the courts scarcely venture to declare that
it is subject to any restrictions whatever, except such as rest in the
discretion of the authority which exercises it. In imposing a tax, the
legislature acts upon its constituents. This is, in general, a
sufficient security against erroneous and oppressive taxation. The
tax imposed by the DECREE is not only a regulatory but also a
revenue measure prompted by the realization that earnings of
videogram establishments of around P600 million per annum have
not been subjected to tax, thereby depriving the Government of an
additional source of revenue. It is an end-user tax, imposed on
retailers for every videogram they make available for public
viewing, It is similar to the 30% amusement tax imposed or borne
by the movie industry which the theater-owners pay to the
government, but which is passed on to the entire cost of the
admission ticket, thus shifting the tax burden on the buying or the
viewing public. It is a tax that is imposed uniformly on all
videogram operators. The levy of the 30% tax is for a public
purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant
film piracy, the flagrant violation of intellectual property rights, and
the proliferation of pornographic video tapes. And while it was also
an objective of the DECREE to protect the movie industry, the tax
remains a valid imposition.
Same; Same; Same; Same; PD 1987 not an undue delegation
of legislative power.—Neither can it be successfully argued that
the DECREE contains an undue delegation of legislative power.
The grant in Section 11 of the DECREE of authority to the BOARD
to “solicit the direct assistance of other agencies and Units of the
government and deputize, for a fixed and limited period, the heads
or personnel of such agencies and units to perform enforcement
functions for the Board” is not a delegation of the power to
legislate but merely a conferment of authority or discretion as to its
execution, enforcement, and implementation. “The true distinction
is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and
conferring authority or discretion as to its execution to be
exercised under and in pursuance of the law.
The first cannot be done; to the latter, no valid objection can
be made.” Besides, in the very language of the decree, the
authority of the BOARD to solicit such assistance is for a “fixed
and limited period” with the deputized agencies concerned being
“subject to the direction and control of the BOARD.” That the grant
of such authority might be the source of graft and corruption would
not stigmatize the DECREE as unconstitutional. Should the
eventuality occur, the aggrieved parties will not be without
adequate remedy in law.
MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner on his
own behalf and purportedly on behalf of other videogram operators
adversely affected. It assails the constitutionality of Presidential
Decree No. 1987 entitled "An Act Creating the Videogram
Regulatory Board" with broad powers to regulate and supervise
the videogram industry (hereinafter briefly referred to as the
BOARD). The Decree was promulgated on October 5, 1985 and
took effect on April 10, 1986, fifteen (15) days after completion of
its publication in the Official Gazette.
On November 5, 1985, a month after the promulgation of the
abovementioned decree, Presidential Decree No. 1994 amended
the National Internal Revenue Code providing, inter alia:
SEC. 134. Video Tapes. — There shall be collected on each
processed video-tape cassette, ready for playback,
regardless of length, an annual tax of five pesos; Provided,
That locally manufactured or imported blank video tapes
shall be subject to sales tax.
On October 23, 1986, the Greater Manila Theaters Association,
Integrated Movie Producers, Importers and Distributors
Association of the Philippines, and Philippine Motion Pictures
Producers Association, hereinafter collectively referred to as the
Intervenors, were permitted by the Court to intervene in the case,
over petitioner's opposition, upon the allegations that intervention
was necessary for the complete protection of their rights and that
their "survival and very existence is threatened by the unregulated
proliferation of film piracy." The Intervenors were thereafter
allowed to file their Comment in Intervention.
The rationale behind the enactment of the DECREE, is set out in
its preambular clauses as follows:
1. WHEREAS, the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs,
cassettes or any technical improvement or variation thereof,
have greatly prejudiced the operations of moviehouses and
theaters, and have caused a sharp decline in theatrical
attendance by at least forty percent (40%) and a tremendous
drop in the collection of sales, contractor's specific,
amusement and other taxes, thereby resulting in substantial
losses estimated at P450 Million annually in government
revenues;
2. WHEREAS, videogram(s) establishments collectively earn
around P600 Million per annum from rentals, sales and
disposition of videograms, and such earnings have not been
subjected to tax, thereby depriving the Government of
approximately P180 Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram
establishments have also affected the viability of the movie
industry, particularly the more than 1,200 movie houses and
theaters throughout the country, and occasioned industry-
wide displacement and unemployment due to the shutdown
of numerous moviehouses and theaters;
4. "WHEREAS, in order to ensure national economic
recovery, it is imperative for the Government to create an
environment conducive to growth and development of all
business industries, including the movie industry which has
an accumulated investment of about P3 Billion;
5. WHEREAS, proper taxation of the activities of videogram
establishments will not only alleviate the dire financial
condition of the movie industry upon which more than 75,000
families and 500,000 workers depend for their livelihood, but
also provide an additional source of revenue for the
Government, and at the same time rationalize the heretofore
uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of
obscene videogram features constitutes a clear and present
danger to the moral and spiritual well-being of the youth, and
impairs the mandate of the Constitution for the State to
support the rearing of the youth for civic efficiency and the
development of moral character and promote their physical,
intellectual, and social well-being;
7. WHEREAS, civic-minded citizens and groups have called
for remedial measures to curb these blatant malpractices
which have flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies
corroding the moral values of the people and betraying the
national economic recovery program, bold emergency
measures must be adopted with dispatch; ... (Numbering of
paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on
the following grounds:
1. Section 10 thereof, which imposes a tax of 30% on the
gross receipts payable to the local government is a RIDER
and the same is not germane to the subject matter thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or
in unlawful restraint of trade in violation of the due process
clause of the Constitution;
3. There is no factual nor legal basis for the exercise by the
President of the vast powers conferred upon him by
Amendment No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a
nuisance, which it is not.
We shall consider the foregoing objections in seriatim.
1. The Constitutional requirement that "every bill shall embrace
only one subject which shall be expressed in the title thereof" 1 is
sufficiently complied with if the title be comprehensive enough to
include the general purpose which a statute seeks to achieve. It is
not necessary that the title express each and every end that the
statute wishes to accomplish. The requirement is satisfied if all the
parts of the statute are related, and are germane to the subject
matter expressed in the title, or as long as they are not
inconsistent with or foreign to the general subject and title. 2 An act
having a single general subject, indicated in the title, may contain
any number of provisions, no matter how diverse they may be, so
long as they are not inconsistent with or foreign to the general
subject, and may be considered in furtherance of such subject by
providing for the method and means of carrying out the general
object." 3 The rule also is that the constitutional requirement as to
the title of a bill should not be so narrowly construed as to cripple
or impede the power of legislation. 4 It should be given practical
rather than technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax
provision of the DECREE is a rider is without merit. That section
reads, inter alia:
Section 10. Tax on Sale, Lease or Disposition of
Videograms. — Notwithstanding any provision of law to the
contrary, the province shall collect a tax of thirty percent
(30%) of the purchase price or rental rate, as the case may
be, for every sale, lease or disposition of a videogram
containing a reproduction of any motion picture or
audiovisual program. Fifty percent (50%) of the proceeds of
the tax collected shall accrue to the province, and the other
fifty percent (50%) shall acrrue to the municipality where the
tax is collected; PROVIDED, That in Metropolitan Manila, the
tax shall be shared equally by the City/Municipality and the
Metropolitan Manila Commission.
x x x           x x x          x x x
The foregoing provision is allied and germane to, and is
reasonably necessary for the accomplishment of, the general
object of the DECREE, which is the regulation of the video industry
through the Videogram Regulatory Board as expressed in its title.
The tax provision is not inconsistent with, nor foreign to that
general subject and title. As a tool for regulation 6 it is simply one
of the regulatory and control mechanisms scattered throughout the
DECREE. The express purpose of the DECREE to include
taxation of the video industry in order to regulate and rationalize
the heretofore uncontrolled distribution of videograms is evident
from Preambles 2 and 5, supra. Those preambles explain the
motives of the lawmaker in presenting the measure. The title of the
DECREE, which is the creation of the Videogram Regulatory
Board, is comprehensive enough to include the purposes
expressed in its Preamble and reasonably covers all its provisions.
It is unnecessary to express all those objectives in the title or that
the latter be an index to the body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax imposed
is harsh and oppressive, confiscatory, and in restraint of trade.
However, it is beyond serious question that a tax does not cease
to be valid merely because it regulates, discourages, or even
definitely deters the activities taxed. 8 The power to impose taxes
is one so unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the discretion of the
authority which exercises it. 9 In imposing a tax, the legislature acts
upon its constituents. This is, in general, a sufficient security
against erroneous and oppressive taxation. 10
The tax imposed by the DECREE is not only a regulatory but also
a revenue measure prompted by the realization that earnings of
videogram establishments of around P600 million per annum have
not been subjected to tax, thereby depriving the Government of an
additional source of revenue. It is an end-user tax, imposed on
retailers for every videogram they make available for public
viewing. It is similar to the 30% amusement tax imposed or borne
by the movie industry which the theater-owners pay to the
government, but which is passed on to the entire cost of the
admission ticket, thus shifting the tax burden on the buying or the
viewing public. It is a tax that is imposed uniformly on all
videogram operators.
The levy of the 30% tax is for a public purpose. It was imposed
primarily to answer the need for regulating the video industry,
particularly because of the rampant film piracy, the flagrant
violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the
DECREE to protect the movie industry, the tax remains a valid
imposition.
The public purpose of a tax may legally exist even if the
motive which impelled the legislature to impose the tax was
to favor one industry over another. 11
It is inherent in the power to tax that a state be free to select
the subjects of taxation, and it has been repeatedly held that
"inequities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional
limitation". 12Taxation has been made the implement of the
state's police power.13
At bottom, the rate of tax is a matter better addressed to the taxing
legislature.
3. Petitioner argues that there was no legal nor factual basis for
the promulgation of the DECREE by the former President under
Amendment No. 6 of the 1973 Constitution providing that
"whenever in the judgment of the President ... , there exists a
grave emergency or a threat or imminence thereof, or whenever
the interim Batasang Pambansa or the regular National Assembly
fails or is unable to act adequately on any matter for any reason
that in his judgment requires immediate action, he may, in order to
meet the exigency, issue the necessary decrees, orders, or letters
of instructions, which shall form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver
that the 8th "whereas" clause sufficiently summarizes the
justification in that grave emergencies corroding the moral values
of the people and betraying the national economic recovery
program necessitated bold emergency measures to be adopted
with dispatch. Whatever the reasons "in the judgment" of the then
President, considering that the issue of the validity of the exercise
of legislative power under the said Amendment still pends
resolution in several other cases, we reserve resolution of the
question raised at the proper time.
4. Neither can it be successfully argued that the DECREE contains
an undue delegation of legislative power. The grant in Section 11
of the DECREE of authority to the BOARD to "solicit the direct
assistance of other agencies and units of the government and
deputize, for a fixed and limited period, the heads or personnel of
such agencies and units to perform enforcement functions for the
Board" is not a delegation of the power to legislate but merely a
conferment of authority or discretion as to its execution,
enforcement, and implementation. "The true distinction is between
the delegation of power to make the law, which necessarily
involves a discretion as to what it shall be, and conferring authority
or discretion as to its execution to be exercised under and in
pursuance of the law. The first cannot be done; to the latter, no
valid objection can be made." 14 Besides, in the very language of
the decree, the authority of the BOARD to solicit such assistance
is for a "fixed and limited period" with the deputized agencies
concerned being "subject to the direction and control of the
BOARD." That the grant of such authority might be the source of
graft and corruption would not stigmatize the DECREE as
unconstitutional. Should the eventuality occur, the aggrieved
parties will not be without adequate remedy in law.
5. The DECREE is not violative of the ex post facto principle.
An ex post facto law is, among other categories, one which "alters
the legal rules of evidence, and authorizes conviction upon less or
different testimony than the law required at the time of the
commission of the offense." It is petitioner's position that Section
15 of the DECREE in providing that:
All videogram establishments in the Philippines are hereby
given a period of forty-five (45) days after the effectivity of
this Decree within which to register with and secure a permit
from the BOARD to engage in the videogram business and
to register with the BOARD all their inventories of
videograms, including videotapes, discs, cassettes or other
technical improvements or variations thereof, before they
could be sold, leased, or otherwise disposed of. Thereafter
any videogram found in the possession of any person
engaged in the videogram business without the required
proof of registration by the BOARD, shall be prima facie
evidence of violation of the Decree, whether the possession
of such videogram be for private showing and/or public
exhibition.
raises immediately a prima facie evidence of violation of the
DECREE when the required proof of registration of any videogram
cannot be presented and thus partakes of the nature of an ex post
facto law.
The argument is untenable. As this Court held in the recent case
of Vallarta vs. Court of Appeals, et al. 15
... it is now well settled that "there is no constitutional
objection to the passage of a law providing that the
presumption of innocence may be overcome by a contrary
presumption founded upon the experience of human
conduct, and enacting what evidence shall be sufficient to
overcome such presumption of innocence" (People vs.
Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A
TREATISE ON THE CONSTITUTIONAL LIMITATIONS,
 639-641). And the "legislature may enact that when certain
facts have been proved that they shall be prima facie
evidence of the existence of the guilt of the accused and shift
the burden of proof provided there be a rational connection
between the facts proved and the ultimate facts presumed so
that the inference of the one from proof of the others is not
unreasonable and arbitrary because of lack of connection
between the two in common experience". 16
Applied to the challenged provision, there is no question that there
is a rational connection between the fact proved, which is non-
registration, and the ultimate fact presumed which is violation of
the DECREE, besides the fact that the prima facie presumption of
violation of the DECREE attaches only after a forty-five-day period
counted from its effectivity and is, therefore, neither retrospective
in character.
6. We do not share petitioner's fears that the video industry is
being over-regulated and being eased out of existence as if it were
a nuisance. Being a relatively new industry, the need for its
regulation was apparent. While the underlying objective of the
DECREE is to protect the moribund movie industry, there is no
question that public welfare is at bottom of its enactment,
considering "the unfair competition posed by rampant film piracy;
the erosion of the moral fiber of the viewing public brought about
by the availability of unclassified and unreviewed video tapes
containing pornographic films and films with brutally violent
sequences; and losses in government revenues due to the drop in
theatrical attendance, not to mention the fact that the activities of
video establishments are virtually untaxed since mere payment of
Mayor's permit and municipal license fees are required to engage
in business. 17
The enactment of the Decree since April 10, 1986 has not brought
about the "demise" of the video industry. On the contrary, video
establishments are seen to have proliferated in many places
notwithstanding the 30% tax imposed.
In the last analysis, what petitioner basically questions is the
necessity, wisdom and expediency of the DECREE. These
considerations, however, are primarily and exclusively a matter of
legislative concern.
Only congressional power or competence, not the wisdom of
the action taken, may be the basis for declaring a statute
invalid. This is as it ought to be. The principle of separation
of powers has in the main wisely allocated the respective
authority of each department and confined its jurisdiction to
such a sphere. There would then be intrusion not allowable
under the Constitution if on a matter left to the discretion of a
coordinate branch, the judiciary would substitute its own. If
there be adherence to the rule of law, as there ought to be,
the last offender should be courts of justice, to which rightly
litigants submit their controversy precisely to maintain
unimpaired the supremacy of legal norms and prescriptions.
The attack on the validity of the challenged provision likewise
insofar as there may be objections, even if valid and cogent
on its wisdom cannot be sustained. 18
In fine, petitioner has not overcome the presumption of validity
which attaches to a challenged statute. We find no clear violation
of the Constitution which would justify us in pronouncing G.R. No. 115781 October 30, 1995
Presidential Decree No. 1987 as unconstitutional and void. KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA,
EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO
WHEREFORE, the instant Petition is hereby dismissed. SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G.
FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL,
No costs. SO ORDERED. MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND
G.R. No. 115455 October 30, 1995 NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT COALITION, INC., and
ARTURO M. TOLENTINO, petitioner,  PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO TAÑADA, petitioners, 
vs. vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE
REVENUE, respondents. COMMISSIONER OF INTERNAL REVENUE and THE COMMISSIONER OF
G.R. No. 115525 October 30, 1995 CUSTOMS, respondents.
JUAN T. DAVID, petitioner,  G.R. No. 115852 October 30, 1995
vs. PHILIPPINE AIRLINES, INC., petitioner, 
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as vs.
Secretary of Finance; LIWAYWAY VINZONS-CHATO, as Commissioner of Internal THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL
Revenue; and their AUTHORIZED AGENTS OR REPRESENTATIVES, respondents. REVENUE, respondents.
G.R. No. 115543 October 30, 1995 G.R. No. 115873 October 30, 1995
RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,  COOPERATIVE UNION OF THE PHILIPPINES, petitioner, 
vs. vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal
THE BUREAU OF INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents. Revenue, HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive
G.R. No. 115544 October 30, 1995 Secretary, and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of
PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN Finance, respondents.
PUBLISHING CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; G.R. No. 115931 October 30, 1995
and OFELIA L. DIMALANTA, petitioners,  PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION
vs. OF PHILIPPINE BOOK SELLERS, petitioners, 
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; vs.
HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V.
HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of CHATO, as the Commissioner of Internal Revenue; and HON. GUILLERMO
Finance, respondents. PARAYNO, JR., in his capacity as the Commissioner of Customs, respondents.
G.R. No. 115754 October 30, 1995
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC.,
(CREBA), petitioner, 
Constitutional Law; Statutes; Taxation; Origin of revenue bills;
vs. A bill originating in the House of Representatives may undergo
THE COMMISSIONER OF INTERNAL REVENUE, respondent. such extensive changes in the Senate that the result may be a
rewriting of the whole; As a result of the Senate action, a distinct
bill may be produced and to insist that a revenue statute must
substantially be the same as the House bill would be to deny the
Senate’s power not only to “concur with amendments” but also to
“propose amendments.”—Petitioners’ contention is that Republic
Act No. 7716 did not “originate exclusively” in the House of
Representatives as required by Art. VI, § 24 of the Constitution,
because it is in fact the result of the consolidation of two distinct
bills, H. No. 11197 and S. No. 1630. In this connection, petitioners
point out that although Art. VI, § 24 was adopted from the
American Federal Constitution, it is notable in two respects: the
verb “shall originate” is qualified in the Philippine Constitution by
the word “exclusively” and the phrase “as on other bills” in the
American version is omitted.
This means, according to them, that to be considered as
having originated in the House, Republic Act No. 7716 must retain
the essence of H. No. 11197. This argument will not bear analysis.
To begin with, it is not the law—but the revenue bill—which is
required by the Constitution to “originate exclusively” in the House
of Representatives. It is important to emphasize this, because a
bill originating in the House may undergo such extensive changes
in the Senate that the result may be a rewriting of the whole. The
possibility of a third version by the conference committee will be
discussed later. At this point, what is important to note is that, as a
result of the Senate action, a distinct bill may be produced. To
insist that a revenue statute—and not only the bill which initiated
the legislative process culminating in the enactment of the law—
must substantially be the same as the House bill would be to deny
the Senate’s power not only to “concur with amendments” but also
to “propose amendments.” It would be to violate the coequality of
legislative power of the two houses of Congress and in fact make
the House superior to the Senate.
Same; Same; Same; Same; Legislative power is vested in the
Congress of the Philippines, consisting of “a Senate and a House
of Representatives,” not in any particular chamber.—The
contention that the constitutional design is to limit the Senate’s
power in respect of revenue bills in order to compensate for the
grant to the Senate of the treaty-ratifying power and thereby
equalize its powers and those of the House overlooks the fact that
the powers being compared are different. We are dealing here with
the legislative power which under the Constitution is vested not in
any particular chamber but in the Congress of the Philippines,
consisting of “a Senate and a House of Represen-tatives.”
The exercise of the treaty-ratifying power is not the exercise of
legislative power. It is the exercise of a check on the executive
power. There is, therefore, no justification for comparing the
legislative powers of the House and of the Senate on the basis of
the possession of such nonlegislative power by the Senate. The
possession of a similar power by the U.S. Senate has never been
thought of as giving it more legislative powers than the House of
Representatives.
Same; Same; Same; Same; There is really no difference
between the Senate preserving the House Bill up to the enacting
clause and then writing its own version following the enacting
clause and, on the other hand, separately presenting a bill of its
own on the same subject matter.—It is insisted, however, that S.
No. 1630 was passed not in substitution of H. No. 11197 but of
another Senate bill (S. No. 1129) earlier filed and that what the
Senate did was merely to “take [H. No. 11197] into consideration”
in enacting S. No. 1630. There is really no difference between the
Senate preserving H. No. 11197 up to the enacting clause and
then writing its own version following the enacting clause (which, it
would seem, petitioners admit is an amendment by substitution),
and, on the other hand, separately presenting a bill of its own on
the same subject matter. In either case the result are two bills on
the same subject.
Same; Same; Same; Same; The Constitution simply means
that the initiative for filing revenue, tariff, or tax bills, bills
authorizing an increase of the public debt, private bills and bills of
local application must come from the House of Representatives
and that it does not prohibit the filing in the Senate of a substitute
bill in anticipation of its receipt of the bill from the House.—Indeed,
what the Constitution simply means is that the initiative for filing
revenue, tariff, or tax bills, bills authorizing an increase of the
public debt, private bills and bills of local application must come
from the House of Representatives on the theory that, elected as
they are from the districts, the members of the House can be
expected to be more sensitive to the local needs and problems.
On the other hand, the senators, who are elected at large, are
expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the
enactment of such laws. Nor does the Constitution prohibit the
filing in the Senate of a substitute bill in anticipation of its receipt of
the bill from the House, so long as action by the Senate as a body
is withheld pending receipt of the House bill.
Same; Same; Presidential certification on urgency of a bill
dispenses with the requirement not only of printing but also that of
reading the bill on separate days.—The presidential certification
dispensed with the requirement not only of printing but also that of
reading the bill on separate days. The phrase “except when the
President certifies to the necessity of its immediate enactment,
etc.” in Art. VI, § 26(2) qualifies the two stated conditions before a
bill can become a law: (i) the bill has passed three readings on
separate days and (ii) it has been printed in its final form and
distributed three days before it is finally approved. In other words,
the “unless” clause must be read in relation to the “except” clause,
because the two are really coordinate clauses of the same
sentence.
To construe the “except” clause as simply dispensing with the
second requirement in the “unless” clause (i.e.,printing and
distribution three days before final approval) would not only violate
the rules of grammar. It would also negate the very premise of the
“except” clause: the necessity of securing the immediate
enactment of a bill which is certified in order to meet a public
calamity or emergency. For if it is only the printing that is
dispensed with by presidential certification, the time saved would
be so negligible as to be of any use in insuring immediate
enactment. It may well be doubted whether doing away with the
necessity of printing and distributing copies of the bill three days
before the third reading would insure speedy enactment of a law in
the face of an emergency requiring the calling of a special election
for President and Vice-President. Under the Constitution such a
law is required to be made within seven days of the convening of
Congress in emergency session.
Same; Same; Judicial Review; While the sufficiency of the
factual basis of the suspension of the writ of habeas corpus or
declaration of martial law is subject to judicial review because
basic rights of individuals may be at hazard, the factual basis of
presidential certification of bills, which involves doing away with
procedural requirements designed to insure that bills are duly
considered by members of Congress, certainly should elicit a
different standard of review.—It is nonetheless urged that the
certification of the bill in this case was invalid because there was
no emergency, the condition stated in the certification of a
“growing budget deficit” not being an unusual condition in this
country. It is noteworthy that no member of the Senate saw fit to
controvert the reality of the factual basis of the certification. To the
contrary, by passing S. No. 1630 on second and third readings on
March 24, 1994, the Senate accepted the President’s certification.
Should such certifi-cation be now reviewed by this Court,
especially when no evidence has been shown that, because S.
No. 1630 was taken up on second and third readings on the same
day, the members of the Senate were deprived of the time needed
for the study of a vital piece of legislation? The sufficiency of the
factual basis of the suspension of the writ of habeas corpus or
declaration of martial law under Art. VII, § 18, or the existence of a
national emergency justifying the delegation of extraordinary
powers to the President under Art. VI, § 23(2), is subject to judicial
review because basic rights of individuals may be at hazard. But
the factual basis of presidential certification of bills, which involves
doing away with procedural requirements designed to insure that
bills are duly considered by members of Congress, certainly
should elicit a different standard of review.
Same; Same; Bicameral Conference Committee; A third
version of the bill may result from the conference committee, which
is considered an “amendment in the nature of a substitute,” the
only requirement being that the third version be germane to the
subject of the House and Senate bills.—As to the possibility of an
entirely new bill emerging out of a Conference Committee, it has
been explained: Under congressional rules of procedure,
conference committees are not expected to make any material
change in the measure at issue, either by deleting provisions to
which both houses have already agreed or by inserting new
provisions. But this is a difficult provision to enforce.
Note the problem when one house amends a proposal
originating in either house by striking out everything following the
enacting clause and substituting provisions which make it an
entirely new bill. The versions are now altogether different,
permitting a conference committee to draft essentially a new
bill . . . . The result is a third version, which is considered an
“amendment in the nature of a substitute,” the only requirement for
which being that the third version be germane to the subject of the
House and Senate bills.
 Same; Same; Same; The report of the conference committee
needs the approval of both houses of Congress to become valid
as an act of the legislative department.—Indeed, this Court
recently held that it is within the power of a conference committee
to include in its report an entirely new provision that is not found
either in the House bill or in the Senate bill. If the committee can
propose an amendment consisting of one or two provisions, there
is no reason why it cannot propose several provisions, collectively
considered as an “amendment in the nature of a substitute,” so
long as such amendment is germane to the subject of the bills
before the committee. After all, its report was not final but needed
the approval of both houses of Congress to become valid as an
act of the legislative department. The charge that in this case the
Conference Committee acted as a third legislative chamber is thus
without any basis.
Same; Same; Same; Separation of Powers; It is common
place in Congress that conference committee reports include new
matters which, though germane, have not been committed to the
committee, and if a change is desired in the practice, it must be
sought in Congress since this question is not covered by any
constitutional provision but is only an internal rule of each house.
—To be sure, nothing in the Rules limits a conference committee
to a consideration of conflicting provisions. But Rule XLIV, § 112 of
the Rules of the Senate is cited to the effect that “If there is no
Rule applicable to a specific case the precedents of the Legislative
Department of the Philippines shall be resorted to, and as a
supplement of these, the Rules contained in Jefferson’s Manual.”
The following is then quoted from the Jefferson’s Manual: The
managers of a conference must confine themselves to the
differences committed to them . . . and may not include subjects
not within disagreements, even though germane to a question in
issue. Note that, according to Rule XLIX, § 112, in case there is no
specific rule applicable, resort must be to the legislative practice.
The Jefferson’s Manual is resorted to only as supplement. It is
common place in Congress that conference committee reports
include new matters which, though germane, have not been
committed to the committee. This practice was admitted by
Senator Raul S. Roco, petitioner in G.R. No. 115543, during the
oral argument in these cases. Whatever, then, may be provided in
the Jefferson’s Manual must be considered to have been modified
by the legislative practice. If a change is desired in the practice it
must be sought in Congress since this question is not covered by
any constitutional provision but is only an internal rule of each
house. Thus, Art. VI, § 16(3) of the Constitution provides that
“Each House may determine the rules of its proceedings . . . .”
Same; Same; Same; Same; Bill-Drafting; The use of brackets
and capital letters to indicate changes is a standard practice in bill-
drafting; The Supreme Court’s concern is with the procedural
requirements of the Constitution for the enactment of laws, not the
enforcement of internal Rules of Congress since “parliamentary
rules are merely procedural and with their observance the courts
have no concern.”—This observation applies to the other
contention that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference Committee
Report because the Report did not contain a “detailed and
sufficiently explicit statement of changes in, or amendments to, the
subject measure.”
The Report used brackets and capital letters to indicate the
changes. This is a standard practice in bill-drafting. We cannot say
that in using these marks and symbols the Committee violated the
Rules of the Senate and the House. Moreover, this Court is not the
proper forum for the enforcement of these internal Rules. To the
contrary, as we have already ruled, “parliamentary rules are
merely procedural and with their observance the courts have no
concern.” Our concern is with the procedural requirements of the
Constitution for the enactment of laws. As far as these
requirements are concerned, we are satisfied that they have been
faithfully observed in these cases.
Same; Same; Same; Same; The three-reading requirement
refers only to bills introduced for the first time in either house of
Congress, not to the conference committee report.—Art. VI, §
26(2) must, therefore, be construed as referring only to bills
introduced for the first time in either house of Congress, not to the
conference committee report. For if the purpose of requiring three
readings is to give members of Congress time to study bills, it
cannot be gainsaid that H. No. 11197 was passed in the House
after three readings; that in the Senate it was considered on first
reading and then referred to a committee of that body; that
although the Senate committee did not report out the House bill, it
submitted a version (S. No. 1630) which it had prepared by “taking
into consideration” the House bill; that for its part the Conference
Committee consolidated the two bills and prepared a compromise
version; that the Conference Committee Report was thereafter
approved by the House and the Senate, presumably after
appropriate study by their members. We cannot say that, as a
matter of fact, the members of Congress were not fully informed of
the provisions of the bill. The allegation that the Conference
Committee usurped the legislative power of Congress is, in our
view, without warrant in fact and in law.
Same; Same; Same; Same; Enrolled Bill Doctrine; An enrolled
copy of a bill is conclusive not only of its provisions but also of its
due enactment.—Whatever doubts there may be as to the formal
validity of Republic Act No. 7716 must be resolved in its favor. Our
cases manifest firm adherence to the rule that an enrolled copy of
a bill is conclusive not only of its provisions but also of its due
enactment. Not even claims that a proposed constitutional
amendment was invalid because the requisite votes for its
approval had not been obtained or that certain provisions of a
statute had been “smuggled” in the printing of the bill have moved
or persuaded us to look behind the proceedings of a coequal
branch of the government. There is no reason now to depart from
this rule.
Same; Same; Same; Same; Same; While the “enrolled bill”
rule is not absolute, the Supreme Court should decline the
invitation to go behind the enrolled copy of the bill where
allegations that the constitutional procedures for the passage of
bills have not been observed have no more basis than another
allegation that the Conference Committee “surreptitiously” inserted
provisions into a bill which it had prepared.—No claim is here
made that the “enrolled bill” rule is absolute. In fact in one case we
“went behind” an enrolled bill and consulted the Journal to
determine whether certain provisions of a statute had been
approved by the Senate in view of the fact that the President of the
Senate himself, who had signed the enrolled bill, admitted a
mistake and withdrew his signature, so that in effect there was no
longer an enrolled bill to consider.
But where allegations that the constitutional procedures for the
passage of bills have not been observed have no more basis than
another allegation that the Conference Committee “surreptitiously”
inserted provisions into a bill which it had prepared, we should
decline the invitation to go behind the enrolled copy of the bill. To
disregard the “enrolled bill” rule in such cases would be to
disregard the respect due the other two departments of our
government.
Same; Same; Titles of Bills; The constitutional requirement
that every bill passed by Congress shall embrace only one subject
which shall be expressed in its title is intended to prevent surprise
upon the members of Congress and to inform the people of
pending legislation so that, if they wish to, they can be heard
regarding it.—The question is whether this amendment of § 103 of
the NIRC is fairly embraced in the title of Republic Act No. 7716,
although no mention is made therein of P.D. No. 1590 as among
those which the statute amends. We think it is, since the title
states that the purpose of the statute is to expand the VAT system,
and one way of doing this is to widen its base by withdrawing
some of the exemptions granted before. To insist that P.D. No.
1590 be mentioned in the title of the law, in addition to § 103 of the
NIRC, in which it is specifically referred to, would be to insist that
the title of a bill should be a complete index of its content.
The constitutional requirement that every bill passed by
Congress shall embrace only one subject which shall be
expressed in its title is intended to prevent surprise upon the
members of Congress and to inform the people of pending
legislation so that, if they wish to, they can be heard regarding it. If,
in the case at bar, petitioner did not know before that its exemption
had been withdrawn, it is not because of any defect in the title but
perhaps for the same reason other statutes, although published,
pass unnoticed until some event somehow calls attention to their
existence. Indeed, the title of Republic Act No. 7716 is not any
more general than the title of PAL’s own franchise under P.D. No.
1590, and yet no mention is made of its tax exemption.
Same; Same; Same; The trend is to construe the constitutional
requirement in such a manner that courts do not unduly interfere
with the enactment of necessary legislation.—The trend in our
cases is to construe the constitutional requirement in such a
manner that courts do not unduly interfere with the enactment of
necessary legislation and to consider it sufficient if the title
expresses the general subject of the statute and all its provisions
are germane to the general subject thus expressed.
Same; Same; Public Utilities; Franchises; The grant of a
franchise for the operation of a public utility is subject to
amendment, alteration or repeal by Congress when the common
good so requires.—In contrast, in the case at bar, Republic Act
No. 7716 expressly amends PAL’s franchise (P.D. No. 1590) by
specifically excepting from the grant of exemptions from the VAT
PAL’s exemption under P.D. No. 1590. This is within the power of
Congress to do under Art. XII, § 11 of the Constitution, which
provides that the grant of a franchise for the operation of a public
utility is subject to amendment, alteration or repeal by Congress
when the common good so requires.
Same; Taxation; Expanded Value Added Tax Law; Bill of
Rights; Freedom of Expression; Even with due recognition of its
high estate and its importance in a democratic society, the press is
not immune from general regulation by the State.—To be sure, we
are not dealing here with a statute that on its face operates in the
area of press freedom. The PPI’s claim is simply that, as applied to
newspapers, the law abridges press freedom. Even with due
recognition of its high estate and its importance in a democratic
society, however, the press is not immune from general regulation
by the State.
Same; Same; Same; Same; Same; Equal Protection
Clause; The VAT law would perhaps be open to the charge of
discriminatory treatment if the only privilege withdrawn had been
that granted to the press.—What it contends is that by withdrawing
the exemption previously granted to print media transactions
involving printing, publication, importation or sale of newspapers,
Republic Act No. 7716 has singled out the press for discriminatory
treatment and that within the class of mass media the law
discriminates against print media by giving broadcast media
favored treatment. We have carefully examined this argument, but
we are unable to find a differential treatment of the press by the
law, much less any censorial motivation for its enactment. If the
press is now required to pay a value-added tax on its transactions,
it is not because it is being singled out, much less targeted, for
special treatment but only because of the removal of the
exemption previously granted to it by law. The withdrawal of
exemption is all that is involved in these cases. Other transactions,
likewise previously granted exemption, have been delisted as part
of the scheme to expand the base and the scope of the VAT
system. The law would perhaps be open to the charge of
discriminatory treatment if the only privilege withdrawn had been
that granted to the press. But that is not the case.
Same; Same; Same; Same; Same; Same; There is a
reasonable basis for the classification and different treatment
between print media and broadcast media.—Nor is impermissible
motive shown by the fact that print media and broadcast media are
treated differently. The press is taxed on its transactions involving
printing and publication, which are different from the transactions
of broadcast media. There is thus a reasonable basis for the
classification.
Same; Same; Same; Same; Freedom of Religion; The Free
Exercise of Religion Clause does not prohibit imposing a generally
applicable sales and use tax on the sale of religious materials by a
religious organization.—What has been said above also disposes
of the allegations of the PBS that the removal of the exemption of
printing, publication or importation of books and religious articles,
as well as their printing and publication, likewise violates freedom
of thought and of conscience. For as the U.S. Supreme Court
unanimously held in Jimmy Swaggart Ministries v. Board of
Equalization, the Free Exercise of Religion Clause does not
prohibit imposing a generally applicable sales and use tax on the
sale of religious materials by a religious organization.
Same; Same; Same; Same; The VAT registration fee is a
mere administrative fee, one not imposed on the exercise of a
privilege, much less a constitutional right.—In this case, the fee in
§ 107, although a fixed amount (P1,000), is not imposed for the
exercise of a privilege but only for the purpose of defraying part of
the cost of registration. The registration requirement is a central
feature of the VAT system. It is designed to provide a record of tax
credits because any person who is subject to the payment of the
VAT pays an input tax, even as he collects an output tax on sales
made or services rendered. The registration fee is thus a mere
administrative fee, one not imposed on the exercise of a privilege,
much less a constitutional right.
Same; Same; Same; Same; Due Process; Hierarchy of
Values; When freedom of the mind is imperiled by law, it is
freedom that commands a momentum of respect and when
property is imperiled, it is the lawmakers’ judgment that commands
respect.—There is basis for passing upon claims that on its face
the statute violates the guarantees of freedom of speech, press
and religion. The possible “chilling effect” which it may have on the
essential freedom of the mind and conscience and the need to
assure that the channels of communication are open and
operating importunately demand the exercise of this Court’s power
of review. There is, however, no justification for passing upon the
claims that the law also violates the rule that taxation must be
progressive and that it denies petitioners’ right to due process and
the equal protection of the laws. The reason for this different
treatment has been cogently stated by an eminent authority on
constitutional law thus: “[W]hen freedom of the mind is imperiled
by law, it is freedom that commands a momentum of respect;
when property is imperiled it is the lawmakers’ judgment that
commands respect. This dual standard may not precisely reverse
the presumption of constitutionality in civil liberties cases, but
obviously it does set up a hierarchy of values within the due
process clause.”
Same; Same; Same; The legislature is not required to adhere
to a policy of “all or none” in choosing the subject of taxation.—On
the other hand, the CUP’s contention that Congress’ withdrawal of
exemption of producers cooperatives, marketing cooperatives, and
service cooperatives, while maintaining that granted to electric
cooperatives, not only goes against the constitutional policy to
promote cooperatives as instruments of social justice (Art. XII, §
15) but also denies such cooperatives the equal protection of the
law is actually a policy argument. The legislature is not required to
adhere to a policy of “all or none” in choosing the subject of
taxation.
Same; Same; Same; Regressivity is not a negative standard
for courts to enforce since what Congress is required by the
Constitution to do is to “evolve a progressive system of
taxation.”—Indeed, regressivity is not a negative standard for
courts to enforce. What Congress is required by the Constitution to
do is to “evolve a progressive system of taxation.” This is a
directive to Congress, just like the directive to it to give priority to
the enactment of laws for the enhancement of human dignity and
the reduction of social, economic and political inequalities (Art.
XIII, § 1), or for the promotion of the right to “quality education”
(Art. XIV, § 1). These provisions are put in the Constitution as
moral incentives to legislation, not as judicially enforceable rights.
Same; Same; Same; Contract Clause; Contracts; Not only are
existing laws read into contracts in order to fix obligations as
between parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a basic postulate of
the legal order.—Only slightly less abstract but nonetheless
hypothetical is the contention of CREBA that the imposition of the
VAT on the sales and leases of real estate by virtue of contracts
entered into prior to the effectivity of the law would violate the
constitutional provision that “No law impairing the obligation of
contracts shall be passed.” It is enough to say that the parties to a
contract cannot, through the exercise of prophetic discernment,
fetter the exercise of the taxing power of the State. For not only
are existing laws read into contracts in order to fix obligations as
between parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a basic postulate of
the legal order. The policy of protecting contracts against
impairment presupposes the maintenance of a government which
retains adequate authority to secure the peace and good order of
society.
Same; Same; Same; Same; Same; Contract Clause is not a
limitation on the power of taxation save only where a tax
exemption was granted for a valid consideration.—In truth, the
Contract Clause has never been thought as a limitation on the
exercise of the State’s power of taxation save only where a tax
exemption has been granted for a valid consideration. Such is not
the case of PAL in G.R. No. 115852, and we do not understand it
to make this claim. Rather, its position, as discussed above, is that
the removal of its tax exemption cannot be made by a general, but
only by a specific, law.
Same; Judicial Review; Public actions by “non-Hohfeldian” or
ideological plaintiffs are now cognizable provided they meet the
standing requirement of the Constitution; There must be before the
Court a fully developed factual record that alone can impart to its
adjudication the impact of actuality to insure that decision-making
is informed and well-grounded.—The substantive issues raised in
some of the cases are presented in abstract, hypothetical form
because of the lack of a concrete record. We accept that this Court
does not only adjudicate private cases; that public actions by “non-
Hohfeldian” or ideological plaintiffs are now cognizable provided
they meet the standing requirement of the Constitution; that under
Art. VIII, § 1, ¶ 2 the Court has a “special function” of vindicating
constitutional rights.
Nonetheless the feeling cannot be escaped that we do not
have before us in these cases a fully developed factual record that
alone can impart to our adjudication the impact of actuality to
insure that decision-making is informed and well grounded.
Needless to say, we do not have power to render advisory
opinions or even jurisdiction over petitions for declaratory
judgment. In effect we are being asked to do what the Conference
Committee is precisely accused of having done in these cases—to
sit as a third legislative chamber to review legislation.
Same; Same; The duty of the Court to exercise its power of
judicial review must still be performed in the context of a concrete
case or controversy; That the other departments of the
government may have committed a grave abuse of discretion is
not an independent ground for exercising the Court’s power.—It
does not add anything, therefore, to invoke this “duty” to justify this
Court’s intervention in what is essentially a case that at best is not
ripe for adjudication. That duty must still be performed in the
context of a concrete case or controversy, as Art. VIII, § 5(2)
clearly defines our jurisdiction in terms of “cases,” and nothing but
“cases.” That the other departments of the government may have
committed a grave abuse of discretion is not an independent
ground for exercising our power. Disregard of the essential limits
imposed by the case and controversy requirement can in the long
run only result in undermining our authority as a court of law. For,
as judges, what we are called upon to render is judgment
according to law, not according to what may appear to be the
opinion of the day.
CRUZ, J., Separate Opinion:
Constitutional Law; Judicial Review; Where a specific
procedure is fixed by the Constitution itself, it should not suffice for
Congress to simply say that the rules have been observed and
flatly consider the matter closed.—I am persuaded even now that
where a specific procedure is fixed by the Constitution itself, it
should not suffice for Congress to simply say that the rules have
been observed and flatly consider the matter closed. It does not
have to be as final as that. I would imagine that the judiciary, and
particularly this Court, should be able to verify that statement and
determine for itself, through the exercise of its own powers, if the
Constitution has, indeed, been obeyed.
In fact, the Court has already said that the question of whether
certain procedural rules have been followed is justiciable rather
than political because what is involved is the legality and not
the wisdom of the act in question. So we ruled in Sanidad v.
Commission on Elections (73 SCRA 333) on the amendment of
the Constitution; in Daza v. Singson (180 SCRA 496) on the
composition of the Commission on Appointments; and in the
earlier case of Tañada v. Cuenco (100 SCRA 1101) on the
organization of the Senate Electoral Tribunal, among several other
cases. By the same token, the ascertainment of whether a bill
underwent the obligatory three readings in both Houses of
Congres should not be considered an invasion of the territory of
the legislature as this would not involve an inquiry into
its discretion in approving the measure but only the manner in
which the measure was enacted.
 Same; Expanded VAT Law; Bicameral Conference “substitute” means “to take the place of; to put or use in place of
Committee; The resultant enrolled bill did not originate exclusively another.” Senate Bill No. 1630 did not, upon its approval, replace
in the House of Representatives.—The two bills were separately (and thus eliminate) House Bill No. 11197. Both bills retained their
introduced in their respective Chambers. Both retained their separate identities until they were joined or united into what
independent existence until they reached the bicameral became the enrolled bill and ultimately R.A. No. 7716.
conference committee where they were consolidated. It was this
consolidated measure that was finally passed by Congress and
submitted to the President of the Philippines for his approval. PADILLA, J., Separate Opinion:
House Bill No. 11197 originated in the House of Representatives
Constitutional Law; Statutes; Origin of Revenue Bills; The
but this was not the bill that eventually became R.A. No. 7716. The
approval by the Senate of Senate Bill No. 1630, after it had
measure that was signed into law by President Ramos was the
considered House Bill No. 11197, may be taken as an amendment
consolidation of that bill and another bill, viz., Senate Bill No. 1630,
by substitution by the Senate not only of Senate Bill No. 1129 but
which was introduced in the Senate. The resultant enrolled bill
of House Bill No. 11197 as well.—Since the Senate is, under the
thus did not originate exclusivelyin the House of Representatives.
above-quoted constitutional provision, empowered to concur with a
The enrolled bill itself says that part of it (and it does not matter to
revenue measure exclusively originating from the House, or to
what extent) originated in the Senate.
propose amendments thereto, to the extent of proposing
amendments by SUBSTITUTION to the House measure, the
Same; Same; Same; The participation of the Senate was not in
approval by the Senate of Senate Bill No. 1630, after it had
proposing or concurring with amendments but in originating its
considered House Bill No. 11197, may be taken, in my view, as an
own Senate bill which was not embodied in but merged with the
AMENDMENT BY SUBSTITUTION by the Senate not only of
House bill.—It would have been different if the only participation of
Senate Bill No. 1129 but of House Bill No. 11197 as well which, it
the Senate was in the amendment of the measure that was
must be remembered, originated exclusively from the House.
originally proposed in the House of Representatives. But this was
not the case. The participation of the Senate was not in proposing
Same; Same; Separation of Powers; Presidential Certification
or concurring with amendments that would have been incorporated
of Bills; A becoming respect for a co-equal and coordinate
in House Bill No. 11197. Its participation was in originating its own
department of government points that weight and credibility be
Senate Bill No. 1630, which was not embodied in but merged with
given to such Presidential judgment.—We have here then a
House Bill No. 11197. Senate Bill No. 1630 was not even an
situation where the President did certify to the necessity of Senate
amendment by substitution, assuming this was permissible. To
Bill No. 1630’s immediate enactment to meet an emergency and
the Senate responded accordingly. While I would be the last to say
that this Court cannot review the exercise of such power by the
President in appropriate cases ripe for judicial review, I am not
prepared however to say that the President gravely abused his
discretion in the exercise of such power as to require that this
Court overturn his action. We have been shown no fact or
circumstance which would impugn the judgment of the President,
concurred in by the Senate, that there was an emergency that
required the immediate enactment of Senate Bill No. 1630. On the
other hand, a becoming respect for a co-equal and coordinate
department of government points that weight and credibility be
given to such Presidential judgment.
Same; Bill of Rights; Freedom of Expression; R.A. 7716 in
imposing a value-added tax on circulation income of newspapers
and similar publications and on income derived from publishing
advertisements in newspapers violates Sec. 4, Art III of the
Constitution.—Rep. Act No. 7716 in imposing a value-added tax
on circulation income of newspapers and similar publications and
on income derived from publishing advertisements in newspapers,
to my mind, violates Sec. 4, Art. III of the Constitution. Indeed,
even the Executive Department has tried to cure this defect by the
issuance of BIR Regulation No. 11-94 precluding implementation
of the tax in this area. It should be clear, however, that the BIR
regulation cannot amend the law (Rep. Act No. 7716). Only
legislation (as distinguished from administration regulation) can
amend an existing law.
Same; Same; Freedom of Religion; The imposition of the VAT
on the sale and distribution of religious articles must be struck
down for being contrary to Sec. 5, Art. III of the Constitution.—
Similarly, the imposition of the VAT on the sale and distribution of
religious articles must be struck down for being contrary to Sec. 5,
Art. III of the Constitution which provides: “Sec. 5. No law shall be
made respecting an establishment of religion, or prohibiting the
free exercise thereof. The free exercise and enjoyment of religious
profession and worship, without discrimination or preference, shall
forever be allowed. No religious test shall be required for the
exercise of civil or political rights.”
Same; Same; Taxation; The inherent power of the State to tax,
which is vested in the legislature, includes the power to determine
whom or what to tax, as well as how much to tax.—CREBA which
specifically assails the 10% value-added tax on the gross selling
price of real properties, fails to distinguish between a sale of real
properties primarily held for sale to customers or held for lease in
the ordinary course of trade or business and isolated sales by
individual real property owners (Sec. 103[s]). That those engaged
in the business of real estate development realize great profits is
of common knowledge and need not be discussed at length here.
The qualification in the law that the 10% VAT covers only sales of
real property primarily held for sale to customers, i.e. for trade or
business thus takes into consideration a taxpayer’s capacity to
pay.
There is no showing that the consequent distinction in real
estate sales is arbitrary and in violation of the equal protection
clause of the Constitution. The inherent power to tax of the State,
which is vested in the legislature, includes the power to determine
whom or what to tax, as well as how much to tax. In the absence
of a clear showing that the tax violates the due process and equal
protection clauses of the Constitution, this Court, in keeping with
the doctrine of separation of powers, has to defer to the discretion
and judgment of Congress on this point.
Same; Same; Franchises; R.A. 7716 can be considered a special
law amending PAL’s franchise.—There can be no dispute, in my
mind, that the clear intent of Congress was to modify PAL’s
franchise with respect to the taxes it has to pay. To this extent,
Rep. Act No. 7716 can be considered as a special law amending
PAL’s franchise and its tax liability thereunder. That Rep. Act No.
7716 imposes the value-added taxes on other subjects does not
make it a general law which cannot amend PD No. 1590.
VITUG, J., Separate Opinion:
Constitutional Law; Judicial Review; Separation of Powers; It is
not believed that judicial tyranny is envisioned, let alone
institutionalized, by the people in the 1987 Constitution.—I cannot
yet concede to the novel theory, so challengingly provocative as it
might be, that under the 1987 Constitution the Court may now at
good liberty intrude, in the guise of the people’s imprimatur, into
every affair of government. What significance can still then remain,
I ask, of the time honored and widely acclaimed principle of
separation of powers, if at every turn the Court allows itself to pass
upon, at will, the disposition of a co-equal, independent and
coordinate branch in our system of government. I dread to think of
the so varied uncertainties that such an undue interference can
lead to. The respect for long standing doctrines in our
jurisprudence, nourished through time, is one of maturity not
timidity, of stability rather than quiescence. It has never occurred
to me, and neither do I believe it has been intended, that judicial
tyranny is envisioned, let alone institutionalized, by our people in
the 1987 Constitution. The test of tyranny is not solely on how it is
wielded but on how, in the first place, it can be capable of being
exercised. It is time that any such perception of judicial
omnipotence is corrected.
REGALADO, J., Dissenting Opinion:
Constitutional Law; Expanded VAT Law; The Senate clearly
and deliberately violated the requirements of the Constitution not
only in the origination of the bill but in the very enactment of R.A.
7716.—This writer consequently agrees with the clearly tenable
proposition of petitioners that when the Senate passed and
approved S.B. No. 1630, had it certified by the Chief Executive,
and thereafter caused its consideration by the bicameral
conference committee in total substitution of H.B. No. 11197, it
clearly and deliberately violated the requirements of the
Constitution not only in the origination of the bill but in the very
enactment of Republic Act No. 7716. Contrarily, the shifting sands
of inconsistency in the arguments adduced for respondents betray
such lack of intellectual rectitude as to give the impression of being
mere rhetorics in defense of the indefensible.
DAVIDE, JR., J., Dissenting Opinion:
 Constitutional Law; Expanded VAT Law; R.A. 7716 did not
originate exclusively in the House.—Since R.A. No. 7716 is a
revenue measure, it must originate exclusively in the House—not
in the Senate. As correctly asserted by petitioner Tolentino, on the
face of the enrolled copy of R.A. No. 7716, it is a
“CONSOLIDATION OF HOUSE BILL NO. 11197 AND SENATE
BILL NO. 1630.” In short, it is an illicit marriage of a bill which
originated in the House and a bill which originated in the Senate.
Therefore, R.A. No. 7716 did not originate exclusively in the
House.
Same; Same; Origin of Revenue Bills; The Senate cannot
amend by substitution with an entirely new bill of its own any bill
covered by Section 24 of Article VI which the House transmitted to
it because such substitution would indirectly violate Section 24.—
Since the origination is not exclusively vested in the House of
Representatives of the United States, the Senate’s authority to
propose or concur with amendments is necessarily broader. That
broader authority is further confirmed by the phrase “as on other
Bills,” i.e., its power to propose or concur with amendments
thereon is the same as in ordinary bills. The absence of this
phrase in our Constitution was clearly intended to restrict or limit
the Philippine Senate’s power to propose or concur with
amendments. In the light of the exclusivity of origination and the
absence of the phrase “as on other Bills,” the Philippine Senate
cannot amend by substitution with an entirely new bill of its own
any bill covered by Section 24 of Article VI which the House of
Representatives transmitted to it because such substitution would
indirectly violate Section 24.
Same; Same; Same; Presidential Certification of Bills; The
only revenue bill which could be properly certified on permissible
constitutional grounds is the bill that was introduced in the House.
—I submit, however, that the Presidential certification is void ab
initio not necessarily for the reason adduced by petitioner
Kilosbayan, Inc., but because it was addressed to the Senate for a
bill which is prohibited from originating therein. The only bill which
could be properly certified on permissible constitutional grounds
even if it had already been transmitted to the Senate is HB No.
11197. As earlier observed, this was not so certified, although HB
No. 9210 (one of those consolidated into HB No. 11197) was
certified on 1 June 1993. Also, the certification of SB No. 1630
cannot, by any stretch of the imagination, be extended to HB No.
11197 because SB No. 1630 did not substitute HB No. 11197 but
SB No. 1129. Considering that the certification of SB No. 1630 is
void, its approval on second and third readings in one day violated
Section 26(2), Article VI of the Constitution.
Same; Statutes; Bicameral Conference Committee; The duty
of the BCC is limited to the reconciliation of disagreeing provisions
or the resolution of differences or inconsistencies of the bills from
both Houses of Congress.—Even granting arguendo that both HB
No. 11197 and SB No. 1630 had been validly approved by both
chambers of Congress and validly referred to the bicameral
conference committee, the latter had very limited authority
thereon. It was created “in view of the disagreeing provisions of”
the two bills. Its duty was limited to the reconciliation of
disagreeing provisions or the resolution of differences or
inconsistencies. The committee recognized that limited authority in
the opening paragraph of its Report when it said: “The Conference
Committee on the disagreeing provisions of House Bill No. 11197
x x x and Senate Bill No. 1630 x x x.” Under such limited authority,
it could only either (a) restore, wholly or partly, the specific
provisions of HB No. 11197 amended by SB No. 1630, (b) sustain,
wholly or partly, the Senate’s amendments, or (c) by way of a
compromise, to agree that neither provisions in HB No. 11197
amended by the Senate nor the latter’s amendments thereto be
carried into the final form of the former.
Same; Same; Same; Doctrine of Ratification; The doctrine of
ratification may apply to minor procedural flaws or tolerable
breaches of the parameters of the bicameral conference
committee’s limited powers but never to violations of the
Constitution.—I cannot agree with the suggestion that since both
the Senate and the House had approved the bicameral conference
committee report and the bill proposed by it in substitution of HB
No. 11197 and SB No. 1630, whatever infirmities may have been
committed by it were cured by ratification. This doctrine of
ratification may apply to minor procedural flaws or tolerable
breaches of the parameters of the bicameral conference
committee’s limited powers but never to violations of the
Constitution. Congress is not above the Constitution. In the instant
case, since SB No. 1630 was introduced in violation of Section 24,
Article VI of the Constitution, was passed in the Senate in violation
of the “three readings” rule, and was not transmitted to the House
for the completion of the constitutional process of legislation, and
HB No. 11197 was not likewise passed by the Senate on second
and third readings, neither the Senate nor the House could validly
approve the bicameral conference committee report and the
proposed bill.
Same; Same; “Enrolled Bill” Doctrine; Invocation of the
“enrolled bill” doctrine is misplaced.—The majority opinion,
however, invokes the enrolled bill doctrine and wants this Court to
desist from looking behind the copy of the assailed measure as
certified by the Senate President and the Speaker of the House. I
respectfully submit that the invocation is misplaced. First, as to the
issue of origination, the certification in this case explicitly states
that R.A. No. 7716 is a “consolidation of House Bill No. 11197 and
Senate Bill No. 1630.” This is conclusive evidence that the
measure did not originate exclusively in the House. Second, the
enrolled bill doctrine is of American origin, and unquestioned fealty
to it may no longer be justified in view of the expanded jurisdiction
of this Court under Section 1, Article VIII of our Constitution. Third,
even under the regime of the 1935 Constitution which did not
contain the above provision, this Court, through Mr. Chief Justice
Makalintal, in Astorga vs. Villegas, declared that it cannot be truly
said that Mabanag vs. Lopez Vito has laid to rest the question of
whether the enrolled bill doctrine or the journal entry rule should be
adhered to in this jurisdiction. Fourth, even in the United States,
the enrolled bill doctrine has been substantially undercut. This is
shown in the disquisitions of Mr. Justice Reynato S. Puno in his
dissenting opinion, citing Sutherland, Statutory Construction.
RESOLUTION
MENDOZA, J.:
These are motions seeking reconsideration of our decision
dismissing the petitions filed in these cases for the declaration of
unconstitutionality of R.A. No. 7716, otherwise known as the
Expanded Value-Added Tax Law. The motions, of which there are
10 in all, have been filed by the several petitioners in these cases,
with the exception of the Philippine Educational Publishers
Association, Inc. and the Association of Philippine Booksellers,
petitioners in G.R. No. 115931.
The Solicitor General, representing the respondents, filed a
consolidated comment, to which the Philippine Airlines, Inc.,
petitioner in G.R. No. 115852, and the Philippine Press Institute,
Inc., petitioner in G.R. No. 115544, and Juan T. David, petitioner in
G.R. No. 115525, each filed a reply. In turn the Solicitor General
filed on June 1, 1995 a rejoinder to the PPI's reply.
On June 27, 1995 the matter was submitted for resolution.
I. Power of the Senate to propose amendments to revenue bills.
Some of the petitioners (Tolentino, Kilosbayan, Inc., Philippine
Airlines (PAL), Roco, and Chamber of Real Estate and Builders
Association (CREBA)) reiterate previous claims made by them that
R.A. No. 7716 did not "originate exclusively" in the House of
Representatives as required by Art. VI, §24 of the Constitution.
Although they admit that H. No. 11197 was filed in the House of
Representatives where it passed three readings and that afterward
it was sent to the Senate where after first reading it was referred to
the Senate Ways and Means Committee, they complain that the
Senate did not pass it on second and third readings. Instead what
the Senate did was to pass its own version (S. No. 1630) which it
approved on May 24, 1994. Petitioner Tolentino adds that what the
Senate committee should have done was to amend H. No. 11197
by striking out the text of the bill and substituting it with the text of
S. No. 1630. That way, it is said, "the bill remains a House bill and
the Senate version just becomes the text (only the text) of the
House bill."
The contention has no merit.
The enactment of S. No. 1630 is not the only instance in which the
Senate proposed an amendment to a House revenue bill by
enacting its own version of a revenue bill. On at least two
occasions during the Eighth Congress, the Senate passed its own
version of revenue bills, which, in consolidation with House bills
earlier passed, became the enrolled bills. These were:
R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS
INVESTMENTS CODE OF 1987 BY EXTENDING FROM FIVE (5)
YEARS TO TEN YEARS THE PERIOD FOR TAX AND DUTY
EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT)
which was approved by the President on April 10, 1992. This Act is
actually a consolidation of H. No. 34254, which was approved by
the House on January 29, 1992, and S. No. 1920, which was
approved by the Senate on February 3, 1992.
R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO
WHOEVER SHALL GIVE REWARD TO ANY FILIPINO ATHLETE
WINNING A MEDAL IN OLYMPIC GAMES) which was approved
by the President on May 22, 1992. This Act is a consolidation of H.
No. 22232, which was approved by the House of Representatives
on August 2, 1989, and S. No. 807, which was approved by the
Senate on October 21, 1991.
On the other hand, the Ninth Congress passed revenue laws
which were also the result of the consolidation of House and
Senate bills. These are the following, with indications of the dates
on which the laws were approved by the President and dates the
separate bills of the two chambers of Congress were respectively
passed:
1. R.A. NO. 7642
AN ACT INCREASING THE PENALTIES FOR TAX
EVASION, AMENDING FOR THIS PURPOSE THE
PERTINENT SECTIONS OF THE NATIONAL
INTERNAL REVENUE CODE (December 28, 1992).
House Bill No. 2165, October 5, 1992
Senate Bill No. 32, December 7, 1992
2. R.A. NO. 7643
AN ACT TO EMPOWER THE COMMISSIONER OF
INTERNAL REVENUE TO REQUIRE THE PAYMENT
OF THE VALUE-ADDED TAX EVERY MONTH AND
TO ALLOW LOCAL GOVERNMENT UNITS TO
SHARE IN VAT REVENUE, AMENDING FOR THIS
PURPOSE CERTAIN SECTIONS OF THE NATIONAL
INTERNAL REVENUE CODE (December 28, 1992)
House Bill No. 1503, September 3, 1992
Senate Bill No. 968, December 7, 1992
3. R.A. NO. 7646
AN ACT AUTHORIZING THE COMMISSIONER OF
INTERNAL REVENUE TO PRESCRIBE THE PLACE
FOR PAYMENT OF INTERNAL REVENUE TAXES BY
LARGE TAXPAYERS, AMENDING FOR THIS
PURPOSE CERTAIN PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS
AMENDED (February 24, 1993)
House Bill No. 1470, October 20, 1992
Senate Bill No. 35, November 19, 1992
4. R.A. NO. 7649
AN ACT REQUIRING THE GOVERNMENT OR ANY
OF ITS POLITICAL SUBDIVISIONS,
INSTRUMENTALITIES OR AGENCIES INCLUDING
GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS (GOCCS) TO DEDUCT AND
WITHHOLD THE VALUE-ADDED TAX DUE AT THE
RATE OF THREE PERCENT (3%) ON GROSS
PAYMENT FOR THE PURCHASE OF GOODS AND
SIX PERCENT (6%) ON GROSS RECEIPTS FOR
SERVICES RENDERED BY CONTRACTORS (April 6,
1993)
House Bill No. 5260, January 26, 1993
Senate Bill No. 1141, March 30, 1993
5. R.A. NO. 7656
AN ACT REQUIRING GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS TO DECLARE
DIVIDENDS UNDER CERTAIN CONDITIONS TO THE
NATIONAL GOVERNMENT, AND FOR OTHER
PURPOSES (November 9, 1993)
House Bill No. 11024, November 3, 1993
 Senate Bill No. 1168, November 3, 1993
6. R.A. NO. 7660
AN ACT RATIONALIZING FURTHER THE
STRUCTURE AND ADMINISTRATION OF THE
DOCUMENTARY STAMP TAX, AMENDING FOR THE
PURPOSE CERTAIN PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, ALLOCATING FUNDS FOR SPECIFIC
PROGRAMS, AND FOR OTHER PURPOSES
(December 23, 1993)
House Bill No. 7789, May 31, 1993
Senate Bill No. 1330, November 18, 1993
7. R.A. NO. 7717
AN ACT IMPOSING A TAX ON THE SALE, BARTER
OR EXCHANGE OF SHARES OF STOCK LISTED
AND TRADED THROUGH THE LOCAL STOCK
EXCHANGE OR THROUGH INITIAL PUBLIC
OFFERING, AMENDING FOR THE PURPOSE THE
NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, BY INSERTING A NEW SECTION AND
REPEALING CERTAIN SUBSECTIONS THEREOF
(May 5, 1994)
House Bill No. 9187, November 3, 1993
Senate Bill No. 1127, March 23, 1994
Thus, the enactment of S. No. 1630 is not the only instance in
which the Senate, in the exercise of its power to propose
amendments to bills required to originate in the House, passed its
own version of a House revenue measure. It is noteworthy that, in
the particular case of S. No. 1630, petitioners Tolentino and Roco,
as members of the Senate, voted to approve it on second and third
readings.
On the other hand, amendment by substitution, in the manner
urged by petitioner Tolentino, concerns a mere matter of form.
Petitioner has not shown what substantial difference it would make
if, as the Senate actually did in this case, a separate bill like S. No.
1630 is instead enacted as a substitute measure, "taking into
Consideration . . . H.B. 11197."
Indeed, so far as pertinent, the Rules of the Senate only provide:
RULE XXIX
AMENDMENTS
xxx xxx xxx
§68. Not more than one amendment to the original
amendment shall be considered.
No amendment by substitution shall be entertained
unless the text thereof is submitted in writing.
Any of said amendments may be withdrawn before a
vote is taken thereon.
§69. No amendment which seeks the inclusion of a
legislative provision foreign to the subject matter of a
bill (rider) shall be entertained.
xxx xxx xxx
§70-A. A bill or resolution shall not be amended by
substituting it with another which covers a subject
 distinct from that proposed in the original bill or
resolution. (emphasis added).
Nor is there merit in petitioners' contention that, with regard to
revenue bills, the Philippine Senate possesses less power than the
U.S. Senate because of textual differences between constitutional
provisions giving them the power to propose or concur with
amendments.
Art. I, §7, cl. 1 of the U.S. Constitution reads:
All Bills for raising Revenue shall originate in the
House of Representatives; but the Senate may
propose or concur with amendments as on other Bills.
Art. VI, §24 of our Constitution reads:
All appropriation, revenue or tariff bills, bills authorizing
increase of the public debt, bills of local application,
and private bills shall originate exclusively in the House
of Representatives, but the Senate may propose or
concur with amendments.
The addition of the word "exclusively" in the Philippine Constitution
and the decision to drop the phrase "as on other Bills" in the
American version, according to petitioners, shows the intention of
the framers of our Constitution to restrict the Senate's power to
propose amendments to revenue bills. Petitioner Tolentino
contends that the word "exclusively" was inserted to modify
"originate" and "the words 'as in any other bills' (sic) were
eliminated so as to show that these bills were not to be like other
bills but must be treated as a special kind."
The history of this provision does not support this contention. The
supposed indicia of constitutional intent are nothing but the relics
of an unsuccessful attempt to limit the power of the Senate. It will
be recalled that the 1935 Constitution originally provided for a
unicameral National Assembly. When it was decided in 1939 to
change to a bicameral legislature, it became necessary to provide
for the procedure for lawmaking by the Senate and the House of
Representatives. The work of proposing amendments to the
Constitution was done by the National Assembly, acting as a
constituent assembly, some of whose members, jealous of
preserving the Assembly's lawmaking powers, sought to curtail the
powers of the proposed Senate. Accordingly they proposed the
following provision:
All bills appropriating public funds, revenue or tariff
bills, bills of local application, and private bills shall
originate exclusively in the Assembly, but the Senate
may propose or concur with amendments. In case of
disapproval by the Senate of any such bills, the
Assembly may repass the same by a two-thirds vote of
all its members, and thereupon, the bill so repassed
shall be deemed enacted and may be submitted to the
President for corresponding action. In the event that
the Senate should fail to finally act on any such bills,
the Assembly may, after thirty days from the opening
of the next regular session of the same legislative
term, reapprove the same with a vote of two-thirds of
all the members of the Assembly. And upon such
reapproval, the bill shall be deemed enacted and may
be submitted to the President for corresponding action.
The special committee on the revision of laws of the Second
National Assembly vetoed the proposal. It deleted everything after
the first sentence. As rewritten, the proposal was approved by the
National Assembly and embodied in Resolution No. 38, as
amended by Resolution No. 73. (J. ARUEGO, KNOW YOUR
CONSTITUTION 65-66 (1950)). The proposed amendment was
submitted to the people and ratified by them in the elections held
on June 18, 1940.
This is the history of Art. VI, §18 (2) of the 1935 Constitution, from
which Art. VI, §24 of the present Constitution was derived. It
explains why the word "exclusively" was added to the American
text from which the framers of the Philippine Constitution borrowed
and why the phrase "as on other Bills" was not copied.
Considering the defeat of the proposal, the power of the Senate to
propose amendments must be understood to be full, plenary and
complete "as on other Bills." Thus, because revenue bills are
required to originate exclusively in the House of Representatives,
the Senate cannot enact revenue measures of its own without
such bills. After a revenue bill is passed and sent over to it by the
House, however, the Senate certainly can pass its own version on
the same subject matter. This follows from the coequality of the
two chambers of Congress.
That this is also the understanding of book authors of the scope of
the Senate's power to concur is clear from the following
commentaries:
The power of the Senate to propose or concur with
amendments is apparently without restriction. It would
seem that by virtue of this power, the Senate can
practically re-write a bill required to come from the
House and leave only a trace of the original bill. For
example, a general revenue bill passed by the lower
house of the United States Congress contained
provisions for the imposition of an inheritance tax . This
was changed by the Senate into a corporation tax. The
amending authority of the Senate was declared by the
United States Supreme Court to be sufficiently broad
to enable it to make the alteration. [Flint v. Stone Tracy
Company, 220 U.S. 107, 55 L. ed. 389].
(L. TAÑADA AND F. CARREON, POLITICAL LAW OF
THE PHILIPPINES 247 (1961))
The above-mentioned bills are supposed to be initiated
by the House of Representatives because it is more
numerous in membership and therefore also more
representative of the people. Moreover, its members
are presumed to be more familiar with the needs of the
country in regard to the enactment of the legislation
involved.
The Senate is, however, allowed much leeway in the
exercise of its power to propose or concur with
amendments to the bills initiated by the House of
Representatives. Thus, in one case, a bill introduced in
the U.S. House of Representatives was changed by
the Senate to make a proposed inheritance tax a
corporation tax. It is also accepted practice for the
Senate to introduce what is known as an amendment
 by substitution, which may entirely replace the bill
initiated in the House of Representatives.
(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145
(1993)).
In sum, while Art. VI, §24 provides that all appropriation, revenue
or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills must "originate exclusively in the
House of Representatives," it also adds, "but the Senate may
propose or concur with amendments." In the exercise of this
power, the Senate may propose an entirely new bill as a substitute
measure. As petitioner Tolentino states in a high school text, a
committee to which a bill is referred may do any of the following:
(1) to endorse the bill without changes; (2) to make
changes in the bill omitting or adding sections or
altering its language; (3) to make and endorse an
entirely new bill as a substitute, in which case it will be
known as a committee bill; or (4) to make no report at
all.
(A. TOLENTINO, THE GOVERNMENT OF THE
PHILIPPINES 258 (1950))
To except from this procedure the amendment of bills which are
required to originate in the House by prescribing that the number
of the House bill and its other parts up to the enacting clause must
be preserved although the text of the Senate amendment may be
incorporated in place of the original body of the bill is to insist on a
mere technicality. At any rate there is no rule prescribing this form.
S. No. 1630, as a substitute measure, is therefore as much an
amendment of H. No. 11197 as any which the Senate could have
made.
II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners'
basic error is that they assume that S. No. 1630 is an independent
and distinct bill. Hence their repeated references to its certification
that it was passed by the Senate "in substitution of S.B. No. 1129,
taking into consideration P.S. Res. No. 734 and H.B. No. 11197,"
implying that there is something substantially different between the
reference to S. No. 1129 and the reference to H. No. 11197. From
this premise, they conclude that R.A. No. 7716 originated both in
the House and in the Senate and that it is the product of two "half-
baked bills because neither H. No. 11197 nor S. No. 1630 was
passed by both houses of Congress."
In point of fact, in several instances the provisions of S. No. 1630,
clearly appear to be mere amendments of the corresponding
provisions of H. No. 11197. The very tabular comparison of the
provisions of H. No. 11197 and S. No. 1630 attached as
Supplement A to the basic petition of petitioner Tolentino, while
showing differences between the two bills, at the same time
indicates that the provisions of the Senate bill were precisely
intended to be amendments to the House bill.
Without H. No. 11197, the Senate could not have enacted S. No.
1630. Because the Senate bill was a mere amendment of the
House bill, H. No. 11197 in its original form did not have to pass
the Senate on second and three readings. It was enough that after
it was passed on first reading it was referred to the Senate
Committee on Ways and Means. Neither was it required that S.
No. 1630 be passed by the House of Representatives before the
two bills could be referred to the Conference Committee.
There is legislative precedent for what was done in the case of H.
No. 11197 and S. No. 1630. When the House bill and Senate bill,
which became R.A. No. 1405 (Act prohibiting the disclosure of
bank deposits), were referred to a conference committee, the
question was raised whether the two bills could be the subject of
such conference, considering that the bill from one house had not
been passed by the other and vice versa. As Congressman Duran
put the question:
MR. DURAN. Therefore, I raise this question of order
as to procedure: If a House bill is passed by the House
but not passed by the Senate, and a Senate bill of a
similar nature is passed in the Senate but never
passed in the House, can the two bills be the subject of
a conference, and can a law be enacted from these
two bills? I understand that the Senate bill in this
particular instance does not refer to investments in
government securities, whereas the bill in the House,
which was introduced by the Speaker, covers two
subject matters: not only investigation of deposits in
banks but also investigation of investments in
government securities. Now, since the two bills differ in
their subject matter, I believe that no law can be
enacted.
Ruling on the point of order raised, the chair (Speaker Jose B.
Laurel, Jr.) said:
THE SPEAKER. The report of the conference
committee is in order. It is precisely in cases like this
where a conference should be had. If the House bill
had been approved by the Senate, there would have
been no need of a conference; but precisely because
the Senate passed another bill on the same subject
matter, the conference committee had to be created,
and we are now considering the report of that
committee.
(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42
(emphasis added))
III. The President's certification. The fallacy in thinking that H. No.
11197 and S. No. 1630 are distinct and unrelated measures also
accounts for the petitioners' (Kilosbayan's and PAL's) contention
that because the President separately certified to the need for the
immediate enactment of these measures, his certification was
ineffectual and void. The certification had to be made of the
version of the same revenue bill which at the moment was being
considered. Otherwise, to follow petitioners' theory, it would be
necessary for the President to certify as many bills as are
presented in a house of Congress even though the bills are merely
versions of the bill he has already certified. It is enough that he
certifies the bill which, at the time he makes the certification, is
under consideration. Since on March 22, 1994 the Senate was
considering S. No. 1630, it was that bill which had to be certified.
For that matter on June 1, 1993 the President had earlier certified
H. No. 9210 for immediate enactment because it was the one
which at that time was being considered by the House. This bill
was later substituted, together with other bills, by H. No. 11197.
As to what Presidential certification can accomplish, we have
already explained in the main decision that the phrase "except
when the President certifies to the necessity of its immediate
enactment, etc." in Art. VI, §26 (2) qualifies not only the
requirement that "printed copies [of a bill] in its final form [must be]
distributed to the members three days before its passage" but also
the requirement that before a bill can become a law it must have
passed "three readings on separate days." There is not only
textual support for such construction but historical basis as well.
Art. VI, §21 (2) of the 1935 Constitution originally provided:
(2) No bill shall be passed by either House unless it
shall have been printed and copies thereof in its final
form furnished its Members at least three calendar
days prior to its passage, except when the President
shall have certified to the necessity of its immediate
enactment. Upon the last reading of a bill, no
amendment thereof shall be allowed and the question
upon its passage shall be taken immediately
thereafter, and the yeasand nays entered on the
Journal.
When the 1973 Constitution was adopted, it was provided in Art.
VIII, §19 (2):
(2) No bill shall become a law unless it has passed
three readings on separate days, and printed copies
thereof in its final form have been distributed to the
Members three days before its passage, except when
the Prime Minister certifies to the necessity of its
immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
This provision of the 1973 document, with slight modification, was
adopted in Art. VI, §26 (2) of the present Constitution, thus:
(2) No bill passed by either House shall become a law
unless it has passed three readings on separate days,
and printed copies thereof in its final form have been
distributed to its Members three days before its
passage, except when the President certifies to the
necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill,
no amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and
the yeasand nays entered in the Journal.
The exception is based on the prudential consideration that if in all
cases three readings on separate days are required and a bill has
to be printed in final form before it can be passed, the need for a
law may be rendered academic by the occurrence of the very
emergency or public calamity which it is meant to address.
Petitioners further contend that a "growing budget deficit" is not an
emergency, especially in a country like the Philippines where
budget deficit is a chronic condition. Even if this were the case, an
enormous budget deficit does not make the need for R.A. No.
7716 any less urgent or the situation calling for its enactment any
less an emergency.
Apparently, the members of the Senate (including some of the
petitioners in these cases) believed that there was an urgent need
for consideration of S. No. 1630, because they responded to the
call of the President by voting on the bill on second and third
readings on the same day. While the judicial department is not
bound by the Senate's acceptance of the President's certification,
the respect due coequal departments of the government in matters
committed to them by the Constitution and the absence of a clear
showing of grave abuse of discretion caution a stay of the judicial
hand.
At any rate, we are satisfied that S. No. 1630 received thorough
consideration in the Senate where it was discussed for six days.
Only its distribution in advance in its final printed form was actually
dispensed with by holding the voting on second and third readings
on the same day (March 24, 1994). Otherwise, sufficient time
between the submission of the bill on February 8, 1994 on second
reading and its approval on March 24, 1994 elapsed before it was
finally voted on by the Senate on third reading.
The purpose for which three readings on separate days is required
is said to be two-fold: (1) to inform the members of Congress of
what they must vote on and (2) to give them notice that a measure
is progressing through the enacting process, thus enabling them
and others interested in the measure to prepare their positions
with reference to it. (1 J. G. SUTHERLAND, STATUTES AND
STATUTORY CONSTRUCTION §10.04, p. 282 (1972)). These
purposes were substantially achieved in the case of R.A. No.
7716.
IV. Power of Conference Committee. It is contended (principally by
Kilosbayan, Inc. and the Movement of Attorneys for Brotherhood,
Integrity and Nationalism, Inc. (MABINI)) that in violation of the
constitutional policy of full public disclosure and the people's right
to know (Art. II, §28 and Art. III, §7) the Conference Committee
met for two days in executive session with only the conferees
present.
As pointed out in our main decision, even in the United States it
was customary to hold such sessions with only the conferees and
their staffs in attendance and it was only in 1975 when a new rule
was adopted requiring open sessions. Unlike its American
counterpart, the Philippine Congress has not adopted a rule
prescribing open hearings for conference committees.
It is nevertheless claimed that in the United States, before the
adoption of the rule in 1975, at least staff members were present.
These were staff members of the Senators and Congressmen,
however, who may be presumed to be their confidential men, not
stenographers as in this case who on the last two days of the
conference were excluded. There is no showing that the conferees
themselves did not take notes of their proceedings so as to give
petitioner Kilosbayan basis for claiming that even in secret
diplomatic negotiations involving state interests, conferees keep
notes of their meetings. Above all, the public's right to know was
fully served because the Conference Committee in this case
submitted a report showing the changes made on the differing
versions of the House and the Senate.
Petitioners cite the rules of both houses which provide that
conference committee reports must contain "a detailed, sufficiently
explicit statement of the changes in or other amendments." These
changes are shown in the bill attached to the Conference
Committee Report. The members of both houses could thus
ascertain what changes had been made in the original bills without
the need of a statement detailing the changes.
The same question now presented was raised when the bill which
became R.A. No. 1400 (Land Reform Act of 1955) was reported by
the Conference Committee. Congressman Bengzon raised a point
of order. He said:
MR. BENGZON. My point of order is that it is out of
order to consider the report of the conference
committee regarding House Bill No. 2557 by reason of
the provision of Section 11, Article XII, of the Rules of
this House which provides specifically that the
conference report must be accompanied by a detailed
statement of the effects of the amendment on the bill of
the House. This conference committee report is not
accompanied by that detailed statement, Mr. Speaker.
Therefore it is out of order to consider it.
Petitioner Tolentino, then the Majority Floor Leader, answered:
MR. TOLENTINO. Mr. Speaker, I should just like to say
a few words in connection with the point of order raised
by the gentleman from Pangasinan.
There is no question about the provision of the Rule
cited by the gentleman from Pangasinan, but this
provision applies to those cases where only portions of
the bill have been amended. In this case before us an
entire bill is presented;therefore, it can be easily seen
from the reading of the bill what the provisions are.
Besides, this procedure has been an established
practice.
After some interruption, he continued:
MR. TOLENTINO. As I was saying, Mr. Speaker, we
have to look into the reason for the provisions of the
Rules, and the reason for the requirement in the
provision cited by the gentleman from Pangasinan is
when there are only certain words or phrases inserted
in or deleted from the provisions of the bill included in
the conference report, and we cannot understand what
those words and phrases mean and their relation to
the bill. In that case, it is necessary to make a detailed
statement on how those words and phrases will affect
the bill as a whole; but when the entire bill itself is
copied verbatim in the conference report, that is not
necessary. So when the reason for the Rule does not
exist, the Rule does not exist.
(2 CONG. REC. NO. 2, p. 4056. (emphasis added))
Congressman Tolentino was sustained by the chair. The record
shows that when the ruling was appealed, it was upheld by viva
voce and when a division of the House was called, it was
sustained by a vote of 48 to 5. (Id.,p. 4058)
Nor is there any doubt about the power of a conference committee
to insert new provisions as long as these are germane to the
subject of the conference. As this Court held in Philippine Judges
Association v. Prado, 227 SCRA 703 (1993), in an opinion written
by then Justice Cruz, the jurisdiction of the conference committee
is not limited to resolving differences between the Senate and the
House. It may propose an entirely new provision. What is
important is that its report is subsequently approved by the
respective houses of Congress. This Court ruled that it would not
entertain allegations that, because new provisions had been
added by the conference committee, there was thereby a violation
of the constitutional injunction that "upon the last reading of a bill,
no amendment thereto shall be allowed."
Applying these principles, we shall decline to look into
the petitioners' charges that an amendment was made
upon the last reading of the bill that eventually became
R.A. No. 7354 and that copies thereof in its final
form were not distributedamong the members of each
House. Both the enrolled bill and the legislative
journals certify that the measure was duly enacted i.e.,
in accordance with Article VI, Sec. 26 (2) of the
Constitution. We are bound by such official assurances
from a coordinate department of the government, to
which we owe, at the very least, a becoming courtesy.
(Id. at 710. (emphasis added))
It is interesting to note the following description of conference
committees in the Philippines in a 1979 study:
Conference committees may be of two types: free or
instructed. These committees may be given
instructions by their parent bodies or they may be left
without instructions. Normally the conference
committees are without instructions, and this is why
they are often critically referred to as "the little
legislatures." Once bills have been sent to them, the
conferees have almost unlimited authority to change
the clauses of the bills and in fact sometimes introduce
new measures that were not in the original legislation.
No minutes are kept, and members' activities on
conference committees are difficult to determine. One
congressman known for his idealism put it this way: "I
killed a bill on export incentives for my interest group
[copra] in the conference committee but I could not
have done so anywhere else." The conference
committee submits a report to both houses, and
usually it is accepted. If the report is not accepted, then
the committee is discharged and new members are
appointed.
(R. Jackson, Committees in the Philippine Congress, in
COMMITTEES AND LEGISLATURES: A
COMPARATIVE ANALYSIS 163 (J. D. LEES AND M.
SHAW, eds.)).
In citing this study, we pass no judgment on the methods of
conference committees. We cite it only to say that conference
committees here are no different from their counterparts in the
United States whose vast powers we noted in Philippine Judges
Association v. Prado, supra. At all events, under Art. VI, §16(3)
each house has the power "to determine the rules of its
proceedings," including those of its committees. Any meaningful
change in the method and procedures of Congress or its
committees must therefore be sought in that body itself.
V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that
R.A. No. 7716 violates Art. VI, §26 (1) of the Constitution which
provides that "Every bill passed by Congress shall embrace only
one subject which shall be expressed in the title thereof." PAL
contends that the amendment of its franchise by the withdrawal of
its exemption from the VAT is not expressed in the title of the law.
Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2%
on its gross revenue "in lieu of all other taxes, duties, royalties,
registration, license and other fees and charges of any kind,
nature, or description, imposed, levied, established, assessed or
collected by any municipal, city, provincial or national authority or
government agency, now or in the future."
PAL was exempted from the payment of the VAT along with other
entities by §103 of the National Internal Revenue Code, which
provides as follows:
§103. Exempt transactions. — The following shall be
exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws
or international agreements to which the Philippines is
a signatory.
R.A. No. 7716 seeks to withdraw certain exemptions, including
that granted to PAL, by amending §103, as follows:
§103. Exempt transactions. — The following shall be
exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws,
except those granted under Presidential Decree Nos.
66, 529, 972, 1491, 1590. . . .
The amendment of §103 is expressed in the title of R.A. No. 7716
which reads:
AN ACT RESTRUCTURING THE VALUE-ADDED
TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND
ENHANCING ITS ADMINISTRATION, AND FOR
THESE PURPOSES AMENDING AND REPEALING
THE RELEVANT PROVISIONS OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED, AND
FOR OTHER PURPOSES.
By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE
VALUE-ADDED TAX (VAT) SYSTEM [BY] WIDENING ITS TAX
BASE AND ENHANCING ITS ADMINISTRATION, AND FOR
THESE PURPOSES AMENDING AND REPEALING THE
RELEVANT PROVISIONS OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED AND FOR OTHER
PURPOSES," Congress thereby clearly expresses its intention to
amend any provision of the NIRC which stands in the way of
accomplishing the purpose of the law.
PAL asserts that the amendment of its franchise must be reflected
in the title of the law by specific reference to P.D. No. 1590. It is
unnecessary to do this in order to comply with the constitutional
requirement, since it is already stated in the title that the law seeks
to amend the pertinent provisions of the NIRC, among which is
§103(q), in order to widen the base of the VAT. Actually, it is the
bill which becomes a law that is required to express in its title the
subject of legislation. The titles of H. No. 11197 and S. No. 1630 in
fact specifically referred to §103 of the NIRC as among the
provisions sought to be amended. We are satisfied that sufficient
notice had been given of the pendency of these bills in Congress
before they were enacted into what is now R.A. No. 7716.
In Philippine Judges Association v. Prado, supra, a similar
argument as that now made by PAL was rejected. R.A. No. 7354
is entitled AN ACT CREATING THE PHILIPPINE POSTAL
CORPORATION, DEFINING ITS POWERS, FUNCTIONS AND
RESPONSIBILITIES, PROVIDING FOR REGULATION OF THE
INDUSTRY AND FOR OTHER PURPOSES CONNECTED
THEREWITH. It contained a provision repealing all franking
privileges. It was contended that the withdrawal of franking
privileges was not expressed in the title of the law. In holding that
there was sufficient description of the subject of the law in its title,
including the repeal of franking privileges, this Court held:
To require every end and means necessary for the
accomplishment of the general objectives of the statute
to be expressed in its title would not only be
unreasonable but would actually render legislation
impossible. [Cooley, Constitutional Limitations, 8th Ed.,
p. 297] As has been correctly explained:
The details of a legislative act need not be
specifically stated in its title, but matter
germane to the subject as expressed in the
title, and adopted to the accomplishment of
the object in view, may properly be
included in the act. Thus, it is proper to
create in the same act the machinery by
which the act is to be enforced, to prescribe
the penalties for its infraction, and to
remove obstacles in the way of its
execution. If such matters are properly
connected with the subject as expressed in
the title, it is unnecessary that they should
also have special mention in the title.
(Southern Pac. Co. v. Bartine, 170 Fed.
725)
(227 SCRA at 707-708)
VI. Claims of press freedom and religious liberty. We have held
that, as a general proposition, the press is not exempt from the
taxing power of the State and that what the constitutional
guarantee of free press prohibits are laws which single out the
press or target a group belonging to the press for special treatment
or which in any way discriminate against the press on the basis of
the content of the publication, and R.A. No. 7716 is none of these.
Now it is contended by the PPI that by removing the exemption of
the press from the VAT while maintaining those granted to others,
the law discriminates against the press. At any rate, it is averred,
"even nondiscriminatory taxation of constitutionally guaranteed
freedom is unconstitutional."
With respect to the first contention, it would suffice to say that
since the law granted the press a privilege, the law could take
back the privilege anytime without offense to the Constitution. The
reason is simple: by granting exemptions, the State does not
forever waive the exercise of its sovereign prerogative.
Indeed, in withdrawing the exemption, the law merely subjects the
press to the same tax burden to which other businesses have long
ago been subject. It is thus different from the tax involved in the
cases invoked by the PPI. The license tax in Grosjean v. American
Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be
discriminatory because it was laid on the gross advertising receipts
only of newspapers whose weekly circulation was over 20,000,
with the result that the tax applied only to 13 out of 124 publishers
in Louisiana. These large papers were critical of Senator Huey
Long who controlled the state legislature which enacted the
license tax. The censorial motivation for the law was thus evident.
On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota
Comm'r of Revenue, 460 U.S. 575, 75 L. Ed. 2d 295 (1983), the
tax was found to be discriminatory because although it could have
been made liable for the sales tax or, in lieu thereof, for the use tax
on the privilege of using, storing or consuming tangible goods, the
press was not. Instead, the press was exempted from both taxes.
It was, however, later made to pay a special use tax on the cost of
paper and ink which made these items "the only items subject to
the use tax that were component of goods to be sold at retail." The
U.S. Supreme Court held that the differential treatment of the
press "suggests that the goal of regulation is not related to
suppression of expression, and such goal is presumptively
unconstitutional." It would therefore appear that even a law that
favors the press is constitutionally suspect. (See the dissent of
Rehnquist, J. in that case)
Nor is it true that only two exemptions previously granted by E.O.
No. 273 are withdrawn "absolutely and unqualifiedly" by R.A. No.
7716. Other exemptions from the VAT, such as those previously
granted to PAL, petroleum concessionaires, enterprises registered
with the Export Processing Zone Authority, and many more are
likewise totally withdrawn, in addition to exemptions which are
partially withdrawn, in an effort to broaden the base of the tax.
The PPI says that the discriminatory treatment of the press is
highlighted by the fact that transactions, which are profit oriented,
continue to enjoy exemption under R.A. No. 7716. An enumeration
of some of these transactions will suffice to show that by and large
this is not so and that the exemptions are granted for a purpose.
As the Solicitor General says, such exemptions are granted, in
some cases, to encourage agricultural production and, in other
cases, for the personal benefit of the end-user rather than for
profit. The exempt transactions are:
(a) Goods for consumption or use which are in their
original state (agricultural, marine and forest products,
cotton seeds in their original state, fertilizers, seeds,
seedlings, fingerlings, fish, prawn livestock and poultry
feeds) and goods or services to enhance agriculture
(milling of palay, corn, sugar cane and raw sugar,
livestock, poultry feeds, fertilizer, ingredients used for
the manufacture of feeds).
(b) Goods used for personal consumption or use
(household and personal effects of citizens returning to
the Philippines) or for professional use, like
 professional instruments and implements, by persons
coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum
products or to be used for manufacture of petroleum
products subject to excise tax and services subject to
percentage tax.
(d) Educational services, medical, dental, hospital and
veterinary services, and services rendered under
employer-employee relationship.
(e) Works of art and similar creations sold by the artist
himself.
(f) Transactions exempted under special laws, or
international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt
not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions
for Reconsideration, pp. 58-60)
The PPI asserts that it does not really matter that the law does not
discriminate against the press because "even nondiscriminatory
taxation on constitutionally guaranteed freedom is
unconstitutional." PPI cites in support of this assertion the following
statement in Murdock v. Pennsylvania, 319 U.S. 105, 87 L. Ed.
1292 (1943):
The fact that the ordinance is "nondiscriminatory" is
immaterial. The protection afforded by the First
Amendment is not so restricted. A license tax certainly
does not acquire constitutional validity because it
classifies the privileges protected by the First
Amendment along with the wares and merchandise of
hucksters and peddlers and treats them all alike. Such
equality in treatment does not save the ordinance.
Freedom of press, freedom of speech, freedom of
religion are in preferred position.
The Court was speaking in that case of a license tax, which, unlike
an ordinary tax, is mainly for regulation. Its imposition on the press
is unconstitutional because it lays a prior restraint on the exercise
of its right. Hence, although its application to others, such those
selling goods, is valid, its application to the press or to religious
groups, such as the Jehovah's Witnesses, in connection with the
latter's sale of religious books and pamphlets, is unconstitutional.
As the U.S. Supreme Court put it, "it is one thing to impose a tax
on income or property of a preacher. It is quite another thing to
exact a tax on him for delivering a sermon."
A similar ruling was made by this Court in American Bible Society
v. City of Manila, 101 Phil. 386 (1957) which invalidated a city
ordinance requiring a business license fee on those engaged in
the sale of general merchandise. It was held that the tax could not
be imposed on the sale of bibles by the American Bible Society
without restraining the free exercise of its right to propagate.
The VAT is, however, different. It is not a license tax. It is not a tax
on the exercise of a privilege, much less a constitutional right. It is
imposed on the sale, barter, lease or exchange of goods or
properties or the sale or exchange of services and the lease of
properties purely for revenue purposes. To subject the press to its
payment is not to burden the exercise of its right any more than to
make the press pay income tax or subject it to general regulation
is not to violate its freedom under the Constitution.
Additionally, the Philippine Bible Society, Inc. claims that although
it sells bibles, the proceeds derived from the sales are used to
subsidize the cost of printing copies which are given free to those
who cannot afford to pay so that to tax the sales would be to
increase the price, while reducing the volume of sale. Granting that
to be the case, the resulting burden on the exercise of religious
freedom is so incidental as to make it difficult to differentiate it from
any other economic imposition that might make the right to
disseminate religious doctrines costly. Otherwise, to follow the
petitioner's argument, to increase the tax on the sale of vestments
would be to lay an impermissible burden on the right of the
preacher to make a sermon.
On the other hand the registration fee of P1,000.00 imposed by
§107 of the NIRC, as amended by §7 of R.A. No. 7716, although
fixed in amount, is really just to pay for the expenses of registration
and enforcement of provisions such as those relating to
accounting in §108 of the NIRC. That the PBS distributes free
bibles and therefore is not liable to pay the VAT does not excuse it
from the payment of this fee because it also sells some copies. At
any rate whether the PBS is liable for the VAT must be decided in
concrete cases, in the event it is assessed this tax by the
Commissioner of Internal Revenue.
VII. Alleged violations of the due process, equal protection and
contract clauses and the rule on taxation. CREBA asserts that
R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies
transactions as covered or exempt without reasonable basis and
(3) violates the rule that taxes should be uniform and equitable and
that Congress shall "evolve a progressive system of taxation."
With respect to the first contention, it is claimed that the application
of the tax to existing contracts of the sale of real property by
installment or on deferred payment basis would result in
substantial increases in the monthly amortizations to be paid
because of the 10% VAT. The additional amount, it is pointed out,
is something that the buyer did not anticipate at the time he
entered into the contract.
The short answer to this is the one given by this Court in an early
case: "Authorities from numerous sources are cited by the
plaintiffs, but none of them show that a lawful tax on a new
subject, or an increased tax on an old one, interferes with a
contract or impairs its obligation, within the meaning of the
Constitution. Even though such taxation may affect particular
contracts, as it may increase the debt of one person and lessen
the security of another, or may impose additional burdens upon
one class and release the burdens of another, still the tax must be
paid unless prohibited by the Constitution, nor can it be said that it
impairs the obligation of any existing contract in its true legal
sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39
Phil. 567, 574 (1919)). Indeed not only existing laws but also "the
reservation of the essential attributes of sovereignty, is . . . read
into contracts as a postulate of the legal order." (Philippine-
American Life Ins. Co. v. Auditor General, 22 SCRA 135, 147
(1968)) Contracts must be understood as having been made in
reference to the possible exercise of the rightful authority of the
government and no obligation of contract can extend to the defeat
of that authority. (Norman v. Baltimore and Ohio R.R., 79 L. Ed.
885 (1935)).
It is next pointed out that while §4 of R.A. No. 7716 exempts such
transactions as the sale of agricultural products, food items,
petroleum, and medical and veterinary services, it grants no
exemption on the sale of real property which is equally essential.
The sale of real property for socialized and low-cost housing is
exempted from the tax, but CREBA claims that real estate
transactions of "the less poor," i.e., the middle class, who are
equally homeless, should likewise be exempted.
The sale of food items, petroleum, medical and veterinary
services, etc., which are essential goods and services was already
exempt under §103, pars. (b) (d) (1) of the NIRC before the
enactment of R.A. No. 7716. Petitioner is in error in claiming that
R.A. No. 7716 granted exemption to these transactions, while
subjecting those of petitioner to the payment of the VAT.
Moreover, there is a difference between the "homeless poor" and
the "homeless less poor" in the example given by petitioner,
because the second group or middle class can afford to rent
houses in the meantime that they cannot yet buy their own homes.
The two social classes are thus differently situated in life. "It is
inherent in the power to tax that the State be free to select the
subjects of taxation, and it has been repeatedly held that
'inequalities which result from a singling out of one particular class
for taxation, or exemption infringe no constitutional limitation.'"
(Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio
v. De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA
654, 663 (1984); Kapatiran ng mga Naglilingkod sa Pamahalaan
ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).
Finally, it is contended, for the reasons already noted, that R.A.
No. 7716 also violates Art. VI, §28(1) which provides that "The rule
of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation."
Equality and uniformity of taxation means that all taxable articles
or kinds of property of the same class be taxed at the same rate.
The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation. To satisfy this
requirement it is enough that the statute or ordinance applies
equally to all persons, forms and corporations placed in similar
situation. (City of Baguio v. De Leon, supra; Sison, Jr. v.
Ancheta, supra)
Indeed, the VAT was already provided in E.O. No. 273 long before
R.A. No. 7716 was enacted. R.A. No. 7716 merely expands the
base of the tax. The validity of the original VAT Law was
questioned in Kapatiran ng Naglilingkod sa Pamahalaan ng
Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to
those made in these cases, namely, that the law was "oppressive,
discriminatory, unjust and regressive in violation of Art. VI, §28(1)
of the Constitution." (At 382) Rejecting the challenge to the law,
this Court held:
As the Court sees it, EO 273 satisfies all the
requirements of a valid tax. It is uniform. . . .
The sales tax adopted in EO 273 is applied similarly on
all goods and services sold to the public, which are not
exempt, at the constant rate of 0% or 10%.
 The disputed sales tax is also equitable. It is imposed
only on sales of goods or services by persons engaged
in business with an aggregate gross annual sales
exceeding P200,000.00. Small corner sari-sari stores
are consequently exempt from its application. Likewise
exempt from the tax are sales of farm and marine
products, so that the costs of basic food and other
necessities, spared as they are from the incidence of
the VAT, are expected to be relatively lower and within
the reach of the general public.
(At 382-383)
The CREBA claims that the VAT is regressive. A similar claim is
made by the Cooperative Union of the Philippines, Inc. (CUP),
while petitioner Juan T. David argues that the law contravenes the
mandate of Congress to provide for a progressive system of
taxation because the law imposes a flat rate of 10% and thus
places the tax burden on all taxpayers without regard to their
ability to pay.
The Constitution does not really prohibit the imposition of indirect
taxes which, like the VAT, are regressive. What it simply provides
is that Congress shall "evolve a progressive system of taxation."
The constitutional provision has been interpreted to mean simply
that "direct taxes are . . . to be preferred [and] as much as
possible, indirect taxes should be minimized." (E. FERNANDO,
THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed.
(1977)). Indeed, the mandate to Congress is not to prescribe, but
to evolve, a progressive tax system. Otherwise, sales taxes, which
perhaps are the oldest form of indirect taxes, would have been
prohibited with the proclamation of Art. VIII, §17(1) of the 1973
Constitution from which the present Art. VI, §28(1) was taken.
Sales taxes are also regressive.
Resort to indirect taxes should be minimized but
not avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the taxpayers'
ability to pay. In the case of the VAT, the law minimizes the
regressive effects of this imposition by providing for zero rating of
certain transactions (R.A. No. 7716, §3, amending §102 (b) of the
NIRC), while granting exemptions to other transactions. (R.A. No.
7716, §4, amending §103 of the NIRC).
Thus, the following transactions involving basic and essential
goods and services are exempted from the VAT:
(a) Goods for consumption or use which are in their
original state (agricultural, marine and forest products,
cotton seeds in their original state, fertilizers, seeds,
seedlings, fingerlings, fish, prawn livestock and poultry
feeds) and goods or services to enhance agriculture
(milling of palay, corn sugar cane and raw sugar,
livestock, poultry feeds, fertilizer, ingredients used for
the manufacture of feeds).
(b) Goods used for personal consumption or use
(household and personal effects of citizens returning to
the Philippines) and or professional use, like
professional instruments and implements, by persons
coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum
products or to be used for manufacture of petroleum
 products subject to excise tax and services subject to
percentage tax.
(d) Educational services, medical, dental, hospital and
veterinary services, and services rendered under
employer-employee relationship.
(e) Works of art and similar creations sold by the artist
himself.
(f) Transactions exempted under special laws, or
international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt
not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions
for Reconsideration, pp. 58-60)
On the other hand, the transactions which are subject to the VAT
are those which involve goods and services which are used or
availed of mainly by higher income groups. These include real
properties held primarily for sale to customers or for lease in the
ordinary course of trade or business, the right or privilege to use
patent, copyright, and other similar property or right, the right or
privilege to use industrial, commercial or scientific equipment,
motion picture films, tapes and discs, radio, television, satellite
transmission and cable television time, hotels, restaurants and
similar places, securities, lending investments, taxicabs, utility cars
for rent, tourist buses, and other common carriers, services of
franchise grantees of telephone and telegraph.
The problem with CREBA's petition is that it presents broad claims
of constitutional violations by tendering issues not at retail but at
wholesale and in the abstract. There is no fully developed record
which can impart to adjudication the impact of actuality. There is
no factual foundation to show in the concrete the application of the
law to actual contracts and exemplify its effect on property rights.
For the fact is that petitioner's members have not even been
assessed the VAT. Petitioner's case is not made concrete by a
series of hypothetical questions asked which are no different from
those dealt with in advisory opinions.
The difficulty confronting petitioner is thus apparent.
He alleges arbitrariness. A mere allegation, as here,
does not suffice. There must be a factual foundation of
such unconstitutional taint. Considering that petitioner
here would condemn such a provision as void on its
face, he has not made out a case. This is merely to
adhere to the authoritative doctrine that where the due
process and equal protection clauses are invoked,
considering that they are not fixed rules but rather
broad standards, there is a need for proof of such
persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of
validity must prevail.
(Sison, Jr. v. Ancheta, 130 SCRA at 661)
Adjudication of these broad claims must await the development of
a concrete case. It may be that postponement of adjudication
would result in a multiplicity of suits. This need not be the case,
however. Enforcement of the law may give rise to such a case. A
test case, provided it is an actual case and not an abstract or
hypothetical one, may thus be presented.
Nor is hardship to taxpayers alone an adequate justification for
adjudicating abstract issues. Otherwise, adjudication would be no
different from the giving of advisory opinion that does not really
settle legal issues.
We are told that it is our duty under Art. VIII, §1, ¶2 to decide
whenever a claim is made that "there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the government." This duty can
only arise if an actual case or controversy is before us. Under Art .
VIII, §5 our jurisdiction is defined in terms of "cases" and all that
Art. VIII, §1, ¶2 can plausibly mean is that in the exercise of
that jurisdiction we have the judicial power to determine questions
of grave abuse of discretion by any branch or instrumentality of the
government.
Put in another way, what is granted in Art. VIII, §1, ¶2 is "judicial
power," which is "the power of a court to hear and decide cases
pending between parties who have the right to sue and be sued in
the courts of law and equity" (Lamb v. Phipps, 22 Phil. 456, 559
(1912)), as distinguished from legislative and executive power.
This power cannot be directly appropriated until it is apportioned
among several courts either by the Constitution, as in the case of
Art. VIII, §5, or by statute, as in the case of the Judiciary Act of
1948 (R.A. No. 296) and the Judiciary Reorganization Act of 1980
(B.P. Blg. 129). The power thus apportioned constitutes the court's
"jurisdiction," defined as "the power conferred by law upon a court
or judge to take cognizance of a case, to the exclusion of all
others." (United States v. Arceo, 6 Phil. 29 (1906)) Without an
actual case coming within its jurisdiction, this Court cannot inquire
into any allegation of grave abuse of discretion by the other
departments of the government.
VIII. Alleged violation of policy towards cooperatives. On the other
hand, the Cooperative Union of the Philippines (CUP), after briefly
surveying the course of legislation, argues that it was to adopt a
definite policy of granting tax exemption to cooperatives that the
present Constitution embodies provisions on cooperatives. To
subject cooperatives to the VAT would therefore be to infringe a
constitutional policy. Petitioner claims that in 1973, P.D. No. 175
was promulgated exempting cooperatives from the payment of
income taxes and sales taxes but in 1984, because of the crisis
which menaced the national economy, this exemption was
withdrawn by P.D. No. 1955; that in 1986, P.D. No. 2008 again
granted cooperatives exemption from income and sales taxes until
December 31, 1991, but, in the same year, E.O. No. 93 revoked
the exemption; and that finally in 1987 the framers of the
Constitution "repudiated the previous actions of the government
adverse to the interests of the cooperatives, that is, the repeated
revocation of the tax exemption to cooperatives and instead
upheld the policy of strengthening the cooperatives by way of the
grant of tax exemptions," by providing the following in Art. XII:
§1. The goals of the national economy are a more
equitable distribution of opportunities, income, and
wealth; a sustained increase in the amount of goods
and services produced by the nation for the benefit of
the people; and an expanding productivity as the key
 to raising the quality of life for all, especially the
underprivileged.
The State shall promote industrialization and full
employment based on sound agricultural development
and agrarian reform, through industries that make full
and efficient use of human and natural resources, and
which are competitive in both domestic and foreign
markets. However, the State shall protect Filipino
enterprises against unfair foreign competition and
trade practices.
In the pursuit of these goals, all sectors of the
economy and all regions of the country shall be given
optimum opportunity to develop. Private enterprises,
including corporations, cooperatives, and similar
collective organizations, shall be encouraged to
broaden the base of their ownership.
§15. The Congress shall create an agency to promote
the viability and growth of cooperatives as instruments
for social justice and economic development.
Petitioner's contention has no merit. In the first place, it is not true
that P.D. No. 1955 singled out cooperatives by withdrawing their
exemption from income and sales taxes under P.D. No. 175, §5.
What P.D. No. 1955, §1 did was to withdraw the exemptions and
preferential treatments theretofore granted to private business
enterprises in general, in view of the economic crisis which then
beset the nation. It is true that after P.D. No. 2008, §2 had restored
the tax exemptions of cooperatives in 1986, the exemption was
again repealed by E.O. No. 93, §1, but then again cooperatives
were not the only ones whose exemptions were withdrawn. The
withdrawal of tax incentives applied to all, including government
and private entities. In the second place, the Constitution does not
really require that cooperatives be granted tax exemptions in order
to promote their growth and viability. Hence, there is no basis for
petitioner's assertion that the government's policy toward
cooperatives had been one of vacillation, as far as the grant of tax
privileges was concerned, and that it was to put an end to this
indecision that the constitutional provisions cited were adopted.
Perhaps as a matter of policy cooperatives should be granted tax
exemptions, but that is left to the discretion of Congress. If
Congress does not grant exemption and there is no discrimination
to cooperatives, no violation of any constitutional policy can be
charged.
Indeed, petitioner's theory amounts to saying that under the
Constitution cooperatives are exempt from taxation. Such theory is
contrary to the Constitution under which only the following are
exempt from taxation: charitable institutions, churches and
parsonages, by reason of Art. VI, §28 (3), and non-stock, non-
profit educational institutions by reason of Art. XIV, §4 (3).
CUP's further ground for seeking the invalidation of R.A. No. 7716
is that it denies cooperatives the equal protection of the law
because electric cooperatives are exempted from the VAT. The
classification between electric and other cooperatives (farmers
cooperatives, producers cooperatives, marketing cooperatives,
etc.) apparently rests on a congressional determination that there
is greater need to provide cheaper electric power to as many
people as possible, especially those living in the rural areas, than
there is to provide them with other necessities in life. We cannot
say that such classification is unreasonable.
We have carefully read the various arguments raised against the
constitutional validity of R.A. No. 7716. We have in fact taken the
extraordinary step of enjoining its enforcement pending resolution
of these cases. We have now come to the conclusion that the law
suffers from none of the infirmities attributed to it by petitioners and
that its enactment by the other branches of the government does
not constitute a grave abuse of discretion. Any question as to its
necessity, desirability or expediency must be addressed to
Congress as the body which is electorally responsible,
remembering that, as Justice Holmes has said, "legislators are the
ultimate guardians of the liberties and welfare of the people in
quite as great a degree as are the courts." (Missouri, Kansas &
Texas Ry. Co. v. May, 194 U.S. 267, 270, 48 L. Ed. 971, 973
(1904)). It is not right, as petitioner in G.R. No. 115543 does in
arguing that we should enforce the public accountability of
legislators, that those who took part in passing the law in question
by voting for it in Congress should later thrust to the courts the
burden of reviewing measures in the flush of enactment. This
Court does not sit as a third branch of the legislature, much less
exercise a veto power over legislation.
WHEREFORE, the motions for reconsideration are denied with
finality and the temporary restraining order previously issued is
hereby lifted.
SO ORDERED.
[No. L-4817. May 26, 1954]
SILVESTRE M. PUNSALAN, ET AL., plaintiffs and
appellants vs. THE MUNICIPAL BOARD OF THE ClTY OF
MANILA, ET AL., defendants and appellants.
1.1.TAXATION; LEGISLATIVE DEPARTMENT DETERMINES
WHAT ENTITIES SHOULD BE EMPOWERED TO IMPOSE
OCCUPATION TAX.—It is not for the courts to judge what
particular cities or municipalities should be empowered to
impose occupation taxes in addition to those imposed by
the National Government. That matter is peculiarly within
the domain of the political departments and the courts
would do well not to encroach upon it.
1.2.ID.; DOUBLE TAXATION.—There is double taxation where
one tax is imposed by the state and the other is imposed by
the city, it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or
taxes be enacted with respect to the same occupation,
calling or activity by both the state and the political
subdivisions thereof. (Citing 1 Cooley on Taxation, 4th ed.,
p. 492 and 51 Am. Jur., 341.)
REYES, J.:
This suit was commenced in the Court of First Instance of Manila
by two lawyers; a medical practitioner, a public accountant, a
dental surgeon and a pharmacist, purportedly "in their own behalf
and in behalf of other professionals practising in the City of Manila
who may desire to join it." Object of the suit is the annulment of
Ordinance No. 3398 of the City of Manila together with the
provision of the Manila charter authorizing it and the refund of
taxes collected under the ordinance but paid under protest.
The ordinance in question, which was approved by the
municipal board of the City of Manila on July 25, 1950, imposes a
municipal occupation tax on persons exercising various
professions in the city and penalizes non-payment of the tax "by a
fine of not more than two hundred pesos or by imprisonment of not
more than six months, or by both such fine and imprisonment in
the discretion of the court." Among the professions taxed were
those to which plaintiffs belong. The ordinance was enacted
pursuant to paragraph (1) of section 18 of the Revised Charter of
the City of Manila (as amended by Republic Act No. 409), which
empowers the Municipal Board of said city to impose a municipal
ocupation tax, not to exceed P50 per annum, on persons engaged
in the various professions above referred to.
Having already paid their occupation tax under section 201 of the
National Internal Revenue Code, plaintiff s, upon being required to
pay the additional tax prescribed in the ordinance, paid the same
under protest and then brought the present suit for the purpose
already stated. The lower court upheld the validity of the provision
of law authorizing the enactment of the ordinance but declared the
ordinance itself illegal and void on the ground that the penalty
therein provided for non-payment of the tax was not legally
authorized. From this decision both parties appealed to this Court,
and the only question they have presented for our determination is
whether this ruling is correct or not, for though the decision is silent
on the refund of taxes paid plaintiffs make no assignment of error
on this point.
To begin with defendants' appeal, we find that the lower court
was in error in saying that the imposition of the penalty provided
for in the ordinance was without the authority of law. The last
paragraph (kk) of the very section that authorizes the enactment of
this tax ordinance (section 18 of the Manila Charter) in express
terms also empowers the Municipal Board "to fix penalties for the
violation of ordinances which shall not exceed to (sic) two hundred
pesos fine or six months' imprisonment, or both such fine and
imprisonment, for a single offense." Hence, the pronouncement
below that the orlinance in question is illegal and void because it
imposes a penalty not authorized by law is clearly without basis.
As to plaintiffs' appeal, the contention in substance is that this
ordinance and the law authorizing it constitute class legislation, are
unjust and oppressive, and authorize what amounts to double
taxation.
In raising the hue and cry of "class legislation", the burden of
plaintiffs' complaint is not that the professions to which they
respectively belong have been singled out for the imposition of this
municipal occupation tax; and in any event, the Legislature may, in
its discretion, select what occupations shall be taxed, and in the
exercise of that discretion it may tax all, or it may select ex or
taxation certain classes and leave the others untaxed. (Cooley on
Taxation, Vol. 4, 4th ed., pp. 3393-3395.) Plaintiffs' complaint is
that while the law has authorized the City of Manila to impose the
said tax, it has withheld that authority from other chartered cities,
not to mention municipalities. We do not think it is for the courts to
judge what particular cities or municipalities should be empowered
to impose occupation taxes in addition to those imposed by the
National Government. That matter is peculiarly within the domain
of the political departments and the courts would do well not to
encroach upon it. Moreover, as the seat of the National
Government and with a population and volume of trade many
times that of any other Philippine city or municipality, Manila, no
doubt, offers a more lucrative field for the practice of the
professions, so that it is but fair that the professionals in Manila be
made to pay a higher occupation tax than their brethren in the
provinces.
Plaintiffs brand the ordinance unjust and oppressive because
they say that it creates discrimination within a class in that while
professionals with offices in Manila have to pay the tax, outsiders
who have no offices in the city but practice their profession therein
are not subject to the tax. Plaintiffs make a distinction that is not ex
ound in the ordinance. The ordinance imposes the tax upon every
person "exercising" or "pursuing"—in the City of Manila naturally—
any one of the occupations named, but does not say that such
person must have his office in Manila. What constitutes exercise or
pursuit of a profession in the city is a matter of judicial
determination.
The argument against double taxation may not be invoked
where one tax is imposed by the state and the other is imposed by
the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely
recognized that there is nothing inherently obnoxious in the
requirement that license fees or taxes be exacted with respect to
the same occupation, calling or activity by both. the state and the
political subdivisions thereof. (51 Am. Jur., 341.)
In view of the foregoing, the judgment appealed from is
reversed in so far as it declares Ordinance No. 3398 of the City of
Manila illegal and void and affirmed in so far as it holds the validity
of the provision of the Manila charter authorizing it. With costs
against plaintiffsappellants.
Pablo, Bengzon, Montemayor, Jugo, Bautista
Angelo, Labrador, and Concepcion, JJ., concur.
PARÁS, C. J., dissenting:
I. am constrained to dissent from the decision of the majority upon
the ground that the Municipal Board of Manila cannot outlaw what
Congress of the Philippines has already authorized. The plaintiffs-
appellants—two lawyers, a physician, an accountant, a dentist and
a pharmacist—had already paid the occupation tax under section
201 of the National Internal Revenue Code and are thereby duly
licensed to practice their respective professions throughout the
Philippines; and yet they had been required to pay another
occupation tax under Ordinance No. 3398 for practising in the City
of Manila. This is a glaring example of contradiction—the license
granted by the National Government is in effect withdrawn by the
City in case of non-payment of the tax under the ordinance. If it be
argued that the national occupation tax is collected to allow the
professional residing in Manila to pursue his calling in other places
in the Philippines, it should then be exacted only from
professionals practising simultaneously in and outside of Manila.
At any rate, we are confronted with the following situation:
Whereas the professionals elsewhere pay only one occupation
tax, in the City of Manila they have to pay two, although all are on
equal footing insofar as opportunities for earning money out of
their pursuits are concerned. The statement that practice in Manila
is more lucrative than in the provinces, may be true perhaps with
reference only to a limited few, but certainly not to the general
mass of practitioners in any field. Again, provincial residents who
have occasional or isolated practice in Manila may have to pay the
city tax. This obvious discrimination or lack of uniformity cannot be
brushed aside or justified by any trite pronouncement that double
taxation is legitimate or that legislation may validly affect certain
classes.
My position is that a professional who has paid the occupation tax
under the National Internal Revenue Code should be allowed to
practice in Manila even without paying the similar tax imposed by
Ordinance No. 3398. The City cannot give what said prof essional
already has. I. would not say that this Ordinance, enacted by the
Municipal Board pursuant to paragraph (1 of section 18 of the
Revised Charter of Manila, as amended by Republic Act No. 409,
empowering the Board to impose a municipal occupation tax not to
exceed P50 per annum, is invalid; but that only one tax, either
under the Internal Revenue Code or under Ordinance No. 3398,
should be imposed upon a practitioner in Manila.
Judgment reversed.
No. L-19201. June 16, 1965.
REV. FR. CASIMIRO LLADOC, petitioner, vs.The
COMMISSIONER OF INTERNAL REVENUE and The COURT
OF TAX APPEALS, respondents.
Taxation; Constitutional exemption for religious purpose refers
only to property taxes.—Section 22(3), Art. VI of the Constitution of
the Philippines, exempts from taxation cemeteries, churches and
parsonages or convents, appurtenant thereto, and all lands,
buildings, and improvements used exclusively for religious
purposes. The exemption is only from the payment of taxes
assessed on such properties enumerated, as property taxes, as
contra-distinguished from excise taxes.
Same: Same; Gift tax; Imposition of gift tax on property used
for religious purposes not violation of Constitution.—A gift tax is
not a property tax, but an excise tax imposed on the transfer of
property by way of gift inter vivos, the imposition of which on
property used exclusively for religious purposes, does not
constitute an impairment of the Constitution.
Same; Same; Parties; Head of diocese real party in interest in
gift tax on church property.—The head of the diocese and not the
parish priest is the real party in interest in the imposition of a
donee’s tax on property donated to the church for religious
purposes.
PAREDES, J.:
Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated
P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest of
Victorias, Negros Occidental, and predecessor of herein petitioner,
for the construction of a new Catholic Church in the locality. The
total amount was actually spent for the purpose intended.
On March 3, 1958, the donor M.B. Estate, Inc., filed the donor’s
gift tax return. Under date of April 29, 1960, the respondent
Commissioner of Internal Revenue issued an assessment for
donee’s gift tax against the Catholic Parish of Victorias, Negros
Occidental, of which petitioner was the priest. The tax amounted to
P1,370.00 including surcharges, interests of 1% monthly from May
15, 1958 to June 15, 1960, and the compromise for the late filing
of the return.
Petitioner lodged a protest to the assessment and requested the
withdrawal thereof. The protest and the motion for reconsideration
presented to the Commissioner of Internal Revenue were denied.
The petitioner appealed to the Court of Tax Appeals on November
2, 1960. In the petition for review, the Rev. Fr. Casimiro Lladoc
claimed, among others, that at the time of the donation, he was not
the parish priest in Victorias; that there is no legal entity or juridical
person known as the “Catholic Parish Priest of Victorias,” and,
therefore, he should not be liable for the donee’s gift tax. It was
also asserted that the assessment of the gift tax, even against the
Roman Catholic Church, would not be valid, for such would be a
clear violation of the provisions of the Constitution.
After hearing, the CTA rendered judgment, the pertinent
portions of which are quoted below:
“x x x. Parish priests of the Roman Catholic Church under canon
laws are similarly situated as its Archbishops and Bishops with
respect to the properties of the church within their parish. They are
the guardians, superintendents or administrators of these
properties, with the right of succession and may sue and be sued.
x      x      x      x      x      x
“The petitioner impugns the fairness of the assessment with the
argument that he should not be held liable for gift taxes on
donation which he did not receive personally since he was not yet
the parish priest of Victorias in the year 1957 when said donation
was given. It is intimated that if someone has to pay at all, it should
be petitioner’s predecessor, the Rev. Fr. Crispin Ruiz, who
received the donation in behalf of the Catholic parish of Victorias
or the Roman Catholic Church. Following petitioner’s line of
thinking, we should be equally unfair to hold that the assessment
now in question should have been addressed to, and collected
from, the Rev. Fr. Crispin Ruiz to be paid from income derived
from his present parish whereever it may be. It does not seem
right to indirectly burden the present parishioners of Rev. Fr. Ruiz
for donee’s gift tax on a donation to which they were not benefited.
x      x      x      x      x      x
“We saw no legal basis then as we see none now, to include
within the Constitutional exemption, taxes which partake of the
nature of an excise upon the use made of the properties or upon
the exercise of the privilege of receiving the properties. (Phipps vs.
Commissioner of Internal Revenue, 91 F [2d] 627; 1938, 302 U.S.
742.)
“It is a cardinal rule in taxation that exemptions from payment
thereof are highly disfavored by law, and the party claiming
exemption must justify his claim by a clear, positive, or express
grant of such privilege by law. (Collector vs. Manila Jockey
Club, G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.)
“The phrase ‘exempt from taxation’ as employed in Section 22(3),
Article VI of the Constitution of the Philippines, should not be
interpreted to mean exemption from all kinds of taxes. Statutes
exempting charitable and religious property from taxation should
be construed fairly though strictlyand in such manner as to give
effect to the main intent of the lawmakers. (Roman Catholic
Church vs. Hastrings, 5 Phil. 701.)
x      x      x      x      x      x
“WHEREFORE, in view of the foregoing considerations, the
decision of the respondent Commissioner of Internal Revenue
appealed from, is hereby affirmed except with regard to the
imposition of the compromise penalty in the amount of P20.00
(Collector of Internal Revenue v. U.S.T., G.R. No. L11274, Nov.
28, 1958); xxx, and the petitioner, the Rev. Fr. Casimiro Lladoc is
hereby ordered to pay to the respondent the amount of P900.00 as
donee’s gift tax, plus the surcharge of five per centum (5%) as ad
valorem penalty under Section 119 (c) of the Tax Code, and one
per centum (1%) monthlv interest from May 15, 1958 to the date of
actual payment. The surcharge of 25% provided in Section 120 for
failure to file a return may not be imposed as the failure to file a
return was not due to willful neglect, (x x x) No costs.”
The above judgment is now before us on appeal, petitioner
assigning two (2) errors allegedly committed by the Tax Court, all
of which converge on the singular issue of whether or not
petitioner should be liable for the assessed donee’s gift tax on the
P10,000.00 donated for the construction of the Victorias Parish
Church.
Section 22(3), Art. VI of the Constitution of the Philippines,
exempts from taxation cemeteries, churches and parsonages or
convents, appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious purposes. The
exemption is only from the payment of taxes assessed on such
properties enumerated, as property taxes, as contradistinguished
from excise taxes. In the present case, what the Collector
assessed was a donee’s gift tax; the assessment was not on the
properties themselves. It did not rest upon general ownership; it
was an excise upon the use made of the properties, upon the
exercise of the privilege of receiving the properties (Phipps vs.
Com. of Int. Rec., 91 F2d 627). Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A gift tax is not
a property tax, but an excise tax imposed on the transfer of
property by way of gift inter vivos, the imposition of which on
property used exclusively for religious purposes, does not
constitute an impairment of the Constitution. As well observed by
the learned respondent Court, the phrase “exempt from taxation,”
as employed in the Constitution (supra) should not be interpreted
to mean exemption from all kinds of taxes. And there being no
clear, positive or express grant of such privilege by law, in favor of
petitioner, the exemption herein must be denied.
The next issue which readily presents itself, in view of
petitioner’s thesis, and Our finding that a tax liability exists, is, who
should be called upon to pay the gift tax? Petitioner postulates that
he should not be liable, because at the time of the donation he
was not the priest of Victorias. We note the merit of the above
claim, and in order to put things in their proper light, this Court, in
its Resolution of March 15, 1965, ordered the parties to show
cause why the Head of the Diocese to which the parish of Victorias
pertains, should not be substituted in lieu of petitioner Rev. Fr.
Casimiro Lladoc, it appearing that the Head of such Diocese is the
real party in interest. The Solicitor General, in representation of the
Commissioner of Internal Revenue, interposed no objection to
such a substitution. Counsel for the petitioner did not also offer
objection thereto.
On April 30; 1965, in a resolution, We ordered the Head of the
Diocese to present whatever legal issues and/or defenses he
might wish to raise, to which resolution counsel for petitioner, who
also appeared as counsel for the Head of the Diocese, the Roman
Catholic Bishop of Bacolod, manifested that it was submitting itself
to the jurisdiction and orders of this Court and that it was
presenting, by reference, the brief of petitioner Rev. Fr. Casimiro
Lladoc, as its own and for all purposes.
In view hereof and considering that, as heretofore stated, the
assessment at bar had been properly made and the imposition of
the tax is not a violation of the constitutional provision exempting
churches, parsonages or convents, etc. (Art. VI, sec. 22[3],
Constitution), the Head of the Diocese, to which the parish
Victorias pertains, is liable for the payment thereof.
The decision appealed from should be, as it is hereby affirmed
insofar as tax liability is concerned; it is modified, in the sense that
petitioner herein is not personally liable for the said gift tax, and
that the Head of the Diocese, herein substitute petitioner, should
pay, as he is presently ordered to pay, the said gift tax, without
special pronouncement as to costs.
     Bengzon, C.J., Bautista Angelo, Concepcion, Reyes,
J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar,
JJ.,concur.
     Barrera, J., took no part.
Decision affirmed with modification.

G.R. No. 162015             March 6, 2006
THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY
TREASURER OF QUEZON CITY, DR. VICTOR B.
ENRIGA, Petitioners,  further pay to the Treasurer of the Philippines each year, within ten
vs.
BAYAN TELECOMMUNICATIONS, INC., Respondent.
DECISION
GARCIA,J.:
Before the Court, on pure questions of law, is this petition for
review on certiorari under Rule 45 of the Rules of Court to nullify
and set aside the following issuances of the Regional Trial Court
(RTC) of Quezon City, Branch 227, in its Civil Case No. Q-02-
47292, to wit:
1) Decision1 dated June 6, 2003, declaring respondent Bayan
Telecommunications, Inc. exempt from real estate taxation on its
real properties located in Quezon City; and
2) Order2 dated December 30, 2003, denying petitioners’ motion
for reconsideration.
The facts:
Respondent Bayan Telecommunications, Inc.3 (Bayantel) is a
legislative franchise holder under Republic Act (Rep. Act) No.
32594 to establish and operate radio stations for domestic
telecommunications, radiophone, broadcasting and telecasting.
Of relevance to this controversy is the tax provision of Rep. Act
No. 3259, embodied in Section 14 thereof, which reads:
SECTION 14. (a) The grantee shall be liable to pay the same
taxes on its real estate, buildings and personal property, exclusive
of the franchise, as other persons or corporations are now or
hereafter may be required by law to pay. (b) The grantee shall
days after the audit and approval of the accounts as prescribed in
this Act, one and one-half per centum of all gross receipts from the
business transacted under this franchise by the said grantee
(Emphasis supplied). 
On January 1, 1992, Rep. Act No. 7160, otherwise known as the
"Local Government Code of 1991" (LGC), took effect. Section 232
of the Code grants local government units within the Metro Manila
Area the power to levy tax on real properties, thus:
SEC. 232. – Power to Levy Real Property Tax. – A province or city
or a municipality within the Metropolitan Manila Area may levy an
annual ad valorem tax on real property such as land, building,
machinery and other improvements not hereinafter specifically
exempted.
Complementing the aforequoted provision is the second paragraph
of Section 234 of the same Code which withdrew any exemption
from realty tax heretofore granted to or enjoyed by all persons,
natural or juridical, to wit:
SEC. 234 - Exemptions from Real Property Tax. The following are
exempted from payment of the real property tax: 
xxx xxx xxx
Except as provided herein, any exemption from payment of real
property tax previously granted to, or enjoyed by, all persons,
whether natural or juridical, including government-owned-or-
controlled corporations is hereby withdrawn upon effectivity of this
Code (Emphasis supplied).
On July 20, 1992, barely few months after the LGC took effect,
Congress enacted Rep. Act No. 7633, amending Bayantel’s
original franchise. The amendatory law (Rep. Act No. 7633)
contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to
pay the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay.
In addition thereto, the grantee, its successors or assigns shall pay
a franchise tax equivalent to three percent (3%) of all gross
receipts of the telephone or other telecommunications businesses
transacted under this franchise by the grantee, its successors or
assigns and the said percentage shall be in lieu of all taxes on this
franchise or earnings thereof. Provided, That the grantee, its
successors or assigns shall continue to be liable for income taxes
payable under Title II of the National Internal Revenue Code ….
xxx. [Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon City,
Bayantel owned several real properties on which it maintained
various telecommunications facilities. These real properties, as
hereunder described, are covered by the following tax
declarations:  supra. Furthermore, much like the LGC, the QCRC, under its
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-096-
04072 and D-096-04073 pertaining to Bayantel’s Head
Office and Operations Center in Roosevelt St., San
Francisco del Monte, Quezon City allegedly the nerve center
of petitioner’s telecommunications franchise operations, said
Operation Center housing mainly petitioner’s Network
Operations Group and switching, transmission and related
equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-124-
00920 and D-124-00941 covering Bayantel’s land, building
and equipment in Maginhawa St., Barangay East Teacher’s
Village, Quezon City which houses telecommunications
facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-011-
10811, and D-011-11540 referring to Bayantel’s Exchange
Center located in Proj. 8, Brgy. Bahay Toro, Tandang Sora,
Quezon City which houses the Network Operations Group
and cover switching, transmission and other related
equipment. 
In 1993, the government of Quezon City, pursuant to the taxing
power vested on local government units by Section 5, Article X of
the 1987 Constitution, infra, in relation to Section 232 of the LGC,
supra, enacted City Ordinance No. SP-91, S-93, otherwise known
as the Quezon City Revenue Code (QCRC),5 imposing, under
Section 5 thereof, a real property tax on all real properties in
Quezon City, and, reiterating in its Section 6, the withdrawal of
exemption from real property tax under Section 234 of the LGC,
Section 230, withdrew tax exemption privileges in general, as
follows:
SEC. 230. Withdrawal of Tax Exemption Privileges. – Unless
otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or
juridical, including government owned or controlled corporations,
except local water districts, cooperatives duly registered under RA
6938, non-stock and non-profit hospitals and educational
institutions, business enterprises certified by the Board of
Investments (BOI) as pioneer or non-pioneer for a period of six (6)
and four (4) years, respectively, … are hereby withdrawn effective
upon approval of this Code (Emphasis supplied).  On account thereof, the Quezon City Treasurer sent out notices of
Conformably with the City’s Revenue Code, new tax declarations
for Bayantel’s real properties in Quezon City were issued by the
City Assessor and were received by Bayantel on August 13, 1998,
except one (Tax Declaration No. 124-01013) which was received
on July 14, 1999.
Meanwhile, on March 16, 1995, Rep. Act No. 7925,6 otherwise
known as the "Public Telecommunications Policy Act of the
Philippines," envisaged to level the playing field among
telecommunications companies, took effect. Section 23 of the Act
provides:
SEC. 23. Equality of Treatment in the Telecommunications
Industry. – Any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or may hereafter be granted,
shall ipso facto become part of previously granted
telecommunications franchises and shall be accorded immediately
and unconditionally to the grantees of such franchises: Provided,
however, That the foregoing shall neither apply to nor affect
provisions of telecommunications franchises concerning territory
covered by the franchise, the life span of the franchise, or the type
of service authorized by the franchise. 
On January 7, 1999, Bayantel wrote the office of the City Assessor
seeking the exclusion of its real properties in the city from the roll
of taxable real properties. With its request having been denied,
Bayantel interposed an appeal with the Local Board of
Assessment Appeals (LBAA). And, evidently on its firm belief of its
exempt status, Bayantel did not pay the real property taxes
assessed against it by the Quezon City government. 
delinquency for the total amount of P43,878,208.18, followed by
the issuance of several warrants of levy against Bayantel’s
properties preparatory to their sale at a public auction set on July
30, 2002.
Threatened with the imminent loss of its properties, Bayantel
immediately withdrew its appeal with the LBAA and instead filed
with the RTC of Quezon City a petition for prohibition with an
urgent application for a temporary restraining order (TRO) and/or
writ of preliminary injunction, thereat docketed as Civil Case No.
Q-02-47292, which was raffled to Branch 227 of the court.
On July 29, 2002, or in the eve of the public auction scheduled the
following day, the lower court issued a TRO, followed, after due
hearing, by a writ of preliminary injunction via its order of August
20, 2002.
And, having heard the parties on the merits, the same court came
out with its challenged Decision of June 6, 2003, the dispositive
portion of which reads:
WHEREFORE, premises considered, pursuant to the enabling
franchise under Section 11 of Republic Act No. 7633, the real
estate properties and buildings of petitioner [now, respondent
Bayantel] which have been admitted to be used in the operation of
petitioner’s franchise described in the following tax declarations
are hereby DECLARED exempt from real estate taxation:
(1) Tax Declaration No. D-096-04071 –
(2) Tax Declaration No. D-096-04074 –
(3) Tax Declaration No. D-124-01013 –
(4) Tax Declaration No. D-011-10810 –
(5) Tax Declaration No. D-011-10811 –
(6) Tax Declaration No. D-011-10809 –
(7) Tax Declaration No. D-124-00941 –
(8) Tax Declaration No. D-124-00940 –
(9) Tax Declaration No. D-124-00939 –
(10) Tax Declaration No. D-096-04072 –
(11) Tax Declaration No. D-096-04073 –
(12) Tax Declaration No. D-011-11540 –
The preliminary prohibitory injunction issued in the August 20,
2002 Order of this Court is hereby made permanent. Since this is
a resolution of a purely legal issue, there is no pronouncement as
to costs.
SO ORDERED.
Their motion for reconsideration having been denied by the court
in its Order dated December 30, 2003, petitioners elevated the
case directly to this Court on pure questions of law, ascribing to
the lower court the following errors:
I. [I]n declaring the real properties of respondent exempt from real
property taxes notwithstanding the fact that the tax exemption
granted to Bayantel in its original franchise had been withdrawn by
the [LGC] and that the said exemption was not restored by the
enactment of RA 7633.
II. [In] declaring the real properties of respondent exempt from real
property taxes notwithstanding the enactment of the [QCRC] which
withdrew the tax exemption which may have been granted by RA
7633.
III. [In] declaring the real properties of respondent exempt from
real property taxes notwithstanding the vague and ambiguous
grant of tax exemption provided under Section 11 of RA 7633.
IV. [In] declaring the real properties of respondent exempt from
real property taxes notwithstanding the fact that [it] had failed to
exhaust administrative remedies in its claim for real property tax
exemption. (Words in bracket added.)
As we see it, the errors assigned may ultimately be reduced to two
(2) basic issues, namely:
1. Whether or not Bayantel’s real properties in Quezon City
are exempt from real property taxes under its legislative
franchise; and
2. Whether or not Bayantel is required to exhaust
administrative remedies before seeking judicial relief with the
trial court.
We shall first address the second issue, the same being
procedural in nature.
Petitioners argue that Bayantel had failed to avail itself of the
administrative remedies provided for under the LGC, adding that
the trial court erred in giving due course to Bayantel’s petition for
prohibition. To petitioners, the appeal mechanics under the LGC
constitute Bayantel’s plain and speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following provision of
Rule 65 of the Rules of Court:
SEC. 2. Petition for prohibition. – When the proceedings of any
tribunal, … are without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be
rendered commanding the respondent to desist from further
proceedings in the action or matter specified therein, or otherwise,
granting such incidental reliefs as law and justice may require.
With the reality that Bayantel’s real properties were already levied
upon on account of its nonpayment of real estate taxes thereon,
the Court agrees with Bayantel that an appeal to the LBAA is not a
speedy and adequate remedy within the context of the
aforequoted Section 2 of Rule 65. This is not to mention of the
auction sale of said properties already scheduled on July 30,
2002.  petitioners, however, the language of Section 11 of Rep. Act No.
Moreover, one of the recognized exceptions to the exhaustion- of-
administrative remedies rule is when, as here, only legal issues
are to be resolved. In fact, the Court, cognizant of the nature of the
questions presently involved, gave due course to the instant
petition. As the Court has said in Ty vs. Trampe:7
xxx. Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there is a
well-settled exception in cases where the controversy does not
involve questions of fact but only of law. xxx. 
Lest it be overlooked, an appeal to the LBAA, to be properly
considered, required prior payment under protest of the amount
of P43,878,208.18, a figure which, in the light of the then prevailing
Asian financial crisis, may have been difficult to raise up. Given
this reality, an appeal to the LBAA may not be considered as a
plain, speedy and adequate remedy. It is thus understandable why
Bayantel opted to withdraw its earlier appeal with the LBAA and,
instead, filed its petition for prohibition with urgent application for
injunctive relief in Civil Case No. Q-02-47292. The remedy availed
of by Bayantel under Section 2, Rule 65 of the Rules of Court must
be upheld.
This brings the Court to the more weighty question of whether or
not Bayantel’s real properties in Quezon City are, under its
franchise, exempt from real property tax.
The lower court resolved the issue in the affirmative, basically
owing to the phrase "exclusive of this franchise" found in Section
11 of Bayantel’s amended franchise, Rep. Act No. 7633. To
7633 is neither clear nor unequivocal. The elaborate and extensive
discussion devoted by the trial court on the meaning and import of
said phrase, they add, suggests as much. It is petitioners’ thesis
that Bayantel was in no time given any express exemption from
the payment of real property tax under its amendatory franchise.
There seems to be no issue as to Bayantel’s exemption from real
estate taxes by virtue of the term "exclusive of the franchise"
qualifying the phrase "same taxes on its real estate, buildings and
personal property," found in Section 14, supra, of its franchise,
Rep. Act No. 3259, as originally granted.
The legislative intent expressed in the phrase "exclusive of this
franchise" cannot be construed other than distinguishing between
two (2) sets of properties, be they real or personal, owned by the
franchisee, namely, (a) those actually, directly and exclusively
used in its radio or telecommunications business, and (b) those
properties which are not so used. It is worthy to note that the
properties subject of the present controversy are only those which
are admittedly falling under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259
effectively works to grant or delegate to local governments of
Congress’ inherent power to tax the franchisee’s properties
belonging to the second group of properties indicated above, that
is, all properties which, "exclusive of this franchise," are not
actually and directly used in the pursuit of its franchise. As may be
recalled, the taxing power of local governments under both the
1935 and the 1973 Constitutions solely depended upon an
enabling law. Absent such enabling law, local government units
were without authority to impose and collect taxes on real
properties within their respective territorial jurisdictions. While
Section 14 of Rep. Act No. 3259 may be validly viewed as an
implied delegation of power to tax, the delegation under that
provision, as couched, is limited to impositions over properties of
the franchisee which are not actually, directly and exclusively used
in the pursuit of its franchise. Necessarily, other properties of
Bayantel directly used in the pursuit of its business are beyond the
pale of the delegated taxing power of local governments. In a very
real sense, therefore, real properties of Bayantel, save those
exclusive of its franchise, are subject to realty taxes. Ultimately,
therefore, the inevitable result was that all realties which are
actually, directly and exclusively used in the operation of its
franchise are "exempted" from any property tax.
Bayantel’s franchise being national in character, the "exemption"
thus granted under Section 14 of Rep. Act No. 3259 applies to all
its real or personal properties found anywhere within the Philippine
archipelago. 
However, with the LGC’s taking effect on January 1, 1992,
Bayantel’s "exemption" from real estate taxes for properties of
whatever kind located within the Metro Manila area was, by force
of Section 234 of the Code, supra, expressly withdrawn. But, not
long thereafter, however, or on July 20, 1992, Congress passed
Rep. Act No. 7633 amending Bayantel’s original franchise. Worthy
of note is that Section 11 of Rep. Act No. 7633 is a virtual
reenacment of the tax provision, i.e., Section 14, supra, of
Bayantel’s original franchise under Rep. Act No. 3259. Stated
otherwise, Section 14 of Rep. Act No. 3259 which was deemed
impliedly repealed by Section 234 of the LGC was expressly
revived under Section 14 of Rep. Act No. 7633. In concrete terms,
the realty tax exemption heretofore enjoyed by Bayantel under its The power to tax is primarily vested in the Congress; however, in
original franchise, but subsequently withdrawn by force of Section our jurisdiction, it may be exercised by local legislative bodies, no
234 of the LGC, has been restored by Section 14 of Rep. Act No. longer merely be virtue of a valid delegation as before, but
7633.  pursuant to direct authority conferred by Section 5, Article X of the
The Court has taken stock of the fact that by virtue of Section 5, Constitution. Under the latter, the exercise of the power may be
Article X of the 1987 Constitution,8 local governments are subject to such guidelines and limitations as the Congress may
empowered to levy taxes. And pursuant to this constitutional provide which, however, must be consistent with the basic policy
empowerment, juxtaposed with Section 2329 of the LGC, the of local autonomy. (at p. 680; Emphasis supplied.)
Quezon City government enacted in 1993 its local Revenue Code, Clearly then, while a new slant on the subject of local taxation now
imposing real property tax on all real properties found within its prevails in the sense that the former doctrine of local government
territorial jurisdiction. And as earlier stated, the City’s Revenue units’ delegated power to tax had been effectively modified with
Code, just like the LGC, expressly withdrew, under Section 230 Article X, Section 5 of the 1987 Constitution now in place, .the
thereof, supra, all tax exemption privileges in general.  basic doctrine on local taxation remains essentially the same. For
This thus raises the question of whether or not the City’s Revenue as the Court stressed in Mactan, "the power to tax is [still] primarily
Code pursuant to which the city treasurer of Quezon City levied vested in the Congress." 
real property taxes against Bayantel’s real properties located This new perspective is best articulated by Fr. Joaquin G. Bernas,
within the City effectively withdrew the tax exemption enjoyed by S.J., himself a Commissioner of the 1986 Constitutional
Bayantel under its franchise, as amended. Commission which crafted the 1987 Constitution, thus: 
Bayantel answers the poser in the negative arguing that once What is the effect of Section 5 on the fiscal position of municipal
again it is only "liable to pay the same taxes, as any other persons corporations? Section 5 does not change the doctrine that
or corporations on all its real or personal properties, exclusive of municipal corporations do not possess inherent powers of taxation.
its franchise."  What it does is to confer municipal corporations a general power to
Bayantel’s posture is well-taken. While the system of local levy taxes and otherwise create sources of revenue. They no
government taxation has changed with the onset of the 1987 longer have to wait for a statutory grant of these powers. The
Constitution, the power of local government units to tax is still power of the legislative authority relative to the fiscal powers of
limited. As we explained in Mactan Cebu International Airport local governments has been reduced to the authority to impose
Authority:10 limitations on municipal powers. Moreover, these limitations must
be "consistent with the basic policy of local autonomy." The
important legal effect of Section 5 is thus to reverse the principle
that doubts are resolved against municipal corporations.
Henceforth, in interpreting statutory provisions on municipal fiscal
powers, doubts will be resolved in favor of municipal corporations.
It is understood, however, that taxes imposed by local government
must be for a public purpose, uniform within a locality, must not be
confiscatory, and must be within the jurisdiction of the local unit to
pass.11(Emphasis supplied).
In net effect, the controversy presently before the Court involves,
at bottom, a clash between the inherent taxing power of the
legislature, which necessarily includes the power to exempt, and
the local government’s delegated power to tax under the aegis of
the 1987 Constitution.  favor of municipal corporations. (Emphasis supplied.)
Now to go back to the Quezon City Revenue Code which imposed
real estate taxes on all real properties within the city’s territory and
removed exemptions theretofore "previously granted to, or
presently enjoyed by all persons, whether natural or juridical
….,"12 there can really be no dispute that the power of the Quezon
City Government to tax is limited by Section 232 of the LGC which
expressly provides that "a province or city or municipality within the
Metropolitan Manila Area may levy an annual ad valorem tax on
real property such as land, building, machinery, and other
improvement not hereinafter specifically exempted." Under this
law, the Legislature highlighted its power to thereafter exempt
certain realties from the taxing power of local government units. An
interpretation denying Congress such power to exempt would
reduce the phrase "not hereinafter specifically exempted" as a
pure jargon, without meaning whatsoever. Needless to state, such
absurd situation is unacceptable. 
For sure, in Philippine Long Distance Telephone Company, Inc.
(PLDT) vs. City of Davao,13 this Court has upheld the power of
Congress to grant exemptions over the power of local government
units to impose taxes. There, the Court wrote:
Indeed, the grant of taxing powers to local government units under
the Constitution and the LGC does not affect the power of
Congress to grant exemptions to certain persons, pursuant to a
declared national policy. The legal effect of the constitutional grant
to local governments simply means that in interpreting statutory
provisions on municipal taxing powers, doubts must be resolved in
As we see it, then, the issue in this case no longer dwells on
whether Congress has the power to exempt Bayantel’s properties
from realty taxes by its enactment of Rep. Act No. 7633 which
amended Bayantel’s original franchise. The more decisive
question turns on whether Congress actually did exempt
Bayantel’s properties at all by virtue of Section 11 of Rep. Act No.
7633.
Admittedly, Rep. Act No. 7633 was enacted subsequent to the
LGC. Perfectly aware that the LGC has already withdrawn
Bayantel’s former exemption from realty taxes, Congress opted to
pass Rep. Act No. 7633 using, under Section 11 thereof, exactly
the same defining phrase "exclusive of this franchise" which was
the basis for Bayantel’s exemption from realty taxes prior to the
LGC. In plain language, Section 11 of Rep. Act No. 7633 states
that "the grantee, its successors or assigns shall be liable to pay
the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay."
The Court views this subsequent piece of legislation as an express
and real intention on the part of Congress to once again remove
from the LGC’s delegated taxing power, all of the franchisee’s
(Bayantel’s) properties that are actually, directly and exclusively
used in the pursuit of its franchise. 
WHEREFORE, the petition is DENIED. 
No pronouncement as to costs.
SO ORDERED.
CANCIO C. GARCIA
Associate Justice