1
PASEO REALTY & DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL
REVENUE, respondents.
G.R. No. 119286, October 13, 2004
DOCTRINES
Taxation is a destructive power which interferes with the
personal and property rights of the people and takes from
them a portion of their property for the support of the
government. And since taxes are what we pay for civilized
society, or are the lifeblood of the nation, the law frowns
against exemptions from taxation and statutes granting
tax exemptions are thus construed strictissimi
juris against the taxpayer and liberally in favor of the
taxing authority.
while a taxpayer is given the choice whether to claim for
refund or have its excess taxes applied as tax credit for the
succeeding taxable year, such election is not final. Prior
verification and approval by the Commissioner of Internal
Revenue is required. The availment of the remedy of tax
credit is not absolute and mandatory.
FACTS
Paseo Realty, a domestic corporation engaged in the lease
of two (2) parcels of land at Paseo de Roxas in Makati City,
filed a claim for "the refund of excess creditable
withholding and income taxes amounting to P54,104.00.
The content of the income tax return filed on April 1990 is
shown below:
It argued that it did not apply the P54, 104.00 to its 1990
income tax return.
Any excess of the total quarterly payments over the actual
income tax computed and shown in the adjustment or
final corporate income tax return shall either (a) be
refunded to the corporation, or (b) may be credited
against the estimated quarterly income tax liabilities for
the quarters of the succeeding taxable year. x x x. The
carrying forward of any excess or overpaid income tax for
a given taxable year is limited to the succeeding taxable
year only. (BIR Revenue Regulation No. 10-77)
The taxpayer is allowed three (3) options if the sum of its
quarterly tax payments made during the taxable year is
not equal to the total tax due for that year: (a) pay the
balance of the tax still due; (b) carry-over the excess
credit; or (c) be credited or refunded the amount paid.
(Section 76 of Republic Act No. 8424 - Tax Reform Act of
1997) -dito carry over succeeding years na
CONTENTIONS
CTA – Paseo Realty not entitled to a refund because it
had already elected to apply the total amount of
₱172,447.00, which includes the ₱54,104.00 refund
claimed, against its income tax liability for 1990.
Court of Appeals denied petitioner’s Motion for
Reconsideration
OSG – Not having submitted its tax return for 1990 to
show whether the amount was indeed applied against its
tax liability for 1990, Paseo’s election in its tax return
stands. Paseo’s election to apply its overpaid income tax
as tax credit against its tax liabilities for the succeeding
taxable year is mandatory and irrevocable.
 2

ISSUE:

WON Paseo Realty is entitled to tax refund- NO

RULING:

The grant of a refund is founded on the assumption that the tax return is valid, i.e., that the facts stated therein are
true and correct. Without the tax return, it is error to grant a refund since it would be virtually impossible to determine
whether the proper taxes have been assessed and paid. In this case, Paseo did not present its 1990 income tax return
to prove its claimed refund had already been automatically credited against its 1990 tax liability.

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
G.R. No. L-28896 February 17, 1988

DOCTRINES

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.
All the ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or
business, including a reasonable allowance for salaries or
other compensation for personal services actually
rendered are deductible from the Gross Income

FACTS:

Algue Inc., a domestic corporation engaged in CTA - held that the said amount had been legitimately
engineering, construction and other allied activities, was paid by the private respondent for actual services
assessed by the CIR amounting to P83,183.85 as rendered. The payment was in the form of promotional
delinquency income taxes for the years 1958 and 1959. fees.

CIR - claimed deduction of P75,000.00 was properly

disallowed because it was not an ordinary reasonable or
necessary business expense Algue received as agent a commission of P126,000.00 for
the sale of Philippine Sugar Estate Development Company
properties, and it was from this commission that the
P75,000.00 promotional fees were paid to the aforenamed
individuals.

ISSUE:

whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue Inc as
legitimate business expenses in its income tax returns.

RULING:

NO. Algue Inc 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.
 3

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

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.

G.R. No. L-22734             September 15, 1967

FACTS:

When Atanasio Pineda died, estate proceedings were had
in the Court of First Instance of Manila. Manuel B.
Pineda's share amounted to about P2,500.00.
After the estate proceedings were closed, the Bureau of
Internal Revenue investigated the income tax liability of
the estate for the years 1945, 1946, 1947 and 1948 and it
found that the corresponding income tax returns were not
filed
The Commissioner of Internal Revenue has appealed to Us
and has proposed to hold Manuel B. Pineda liable for the
payment of all the taxes found by the Tax Court to be due
from the estate in the total amount of P760.28 instead of
only for the amount of taxes corresponding to his share in
the estate.
Manuel B. Pineda opposes the proposition on the ground
that as an heir he is liable for unpaid income tax due the
estate only up to the extent of and in proportion to any
share he received
After hearing the parties, the Court of Tax Appeals
rendered judgment reversing the decision of the
Commissioner on the ground that his right to assess and
collect the tax has prescribed. The Commissioner
appealed and this Court affirmed the findings of the Tax
Court in respect to the assessment for income tax for the
year 1947 but held that the right to assess and collect the
taxes for 1945 and 1946 has not prescribed. For 1945 and
1946 the returns were filed on August 24, 1953;
assessments for both taxable years were made within five
years therefrom or on October 19, 1953; and the action to
collect the tax was filed within five years from the latter
date, on August 7, 1957. For taxable year 1947, however,
the return was filed on March 1, 1948; the assessment
was made on October 19, 1953, more than five years from
the date the return was filed; hence, the right to assess
income tax for 1947 had prescribed. Accordingly, We
remanded the case to the Tax Court for further
appropriate proceedings.

ISSUE:
 4

WON Government can require Manuel B. Pineda to pay the full amount of the taxes assessed.

RULING:

YES. the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting
from each one of them the amount of the tax proportionate to the inheritance received . The reason why in case suit is
filed against all the heirs the tax due from the estate is levied proportionately against them is to achieve thereby two
results: first, payment of the tax; and second, adjustment of the shares of each heir in the distributed estate
as lessened by the tax.

Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property
belonging to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an
heir or transferee to the payment of the tax due, the estate. This second remedy is the very avenue the Government
took in this case to collect the tax. The Bureau of Internal Revenue should be given, in instances like the case at bar,
the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the
particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and their prompt
and certain availability is an imperious need
 1

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of

Rizal, petitioner-appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET
AL., respondents-appellees.
G.R. No. L-10405, December 29, 1960

FACTS: Wenceslao Pascual, Provincial Governor of Rizal, filed an action for declaratory relief
with injunction on the ground that RA 920 (An Act Appropriating Funds for Public Works)
contained in Section 1-C (a) an item of P85,000 “for the construction, reconstruction, repair,
extension and improvement” of Pasig feeder road terminals privately owned by respondent
Zulueta. The latter filed a motion to dismiss on the ground that Pascual had no legal capacity to
sue, and that the petition did not state a cause of action. The lower court granted the said
motion.

ISSUE: WON the appropriation in question was for a private purpose

RULING: YES. The Supreme Court ruled in favor of Pascual.

As a taxpayer, Pascual had legal standing. The SC also ruled that the subject appropriation was
illegal because it appropriated public funds for the improvement of private property. The right
of the legislature to appropriate funds is correlative with its right to tax, and under
constitutional provisions against taxation except for public purposes. Taxing power must be
exercised for public purposes only.

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.

CENON S. CERVANTES, petitioner,
vs.
THE AUDITOR GENERAL, respondent.
G.R. No. L-4043, May 26, 1952

FACTS: Cervantes, the manager of the National Abaca and Other Fibers Corporation (NAFCO) with
a salary of P15,000 a year was granted quarters allowance by a resolution of the Board of Directors
of the corporation but the same was disapproved by Control Committee of the Government
Enterprises Council on strength of the recommendation of the NAFCO auditor, concurred in by the
Auditor General, (1) that quarters allowance constituted additional compensation prohibited by the
charter of the NAFCO, which fixes the salary of the general manager thereof at the sum not to
exceed P15,000 a year, and (2) that the precarious financial condition of the corporation did not
warrant the granting of such allowance.
 2

under RA 51, The President of the Philippines was authorized to effect reforms and changes in
government owned and controlled corporations for the purpose of promoting simplicity, economy and
efficiency in their operation. Hence, EO 93 was promulgated

Executive Order No. 93 creating the Government Enterprises Council

ISSUE:

1. WON the quarters allowance is prohibited

2. WON RA 51 is undue delegation of legislative power

RULING:

1. Yes. quarters allowance is considered additional compensation. it was disapproved by the

Control Committee in the exercise of powers granted to it by Executive Order No. 93

2. NO. the rule is that so long as the Legislature "lays down a policy and a standard is
established by the statute" there is no undue delegation. Republic Act No. 51 in authorizing
the President of the Philippines, among others, to make reforms and changes in government-
controlled corporations, lays down a standard and policy that the purpose shall be to meet
the exigencies attendant upon the establishment of the free and independent government of
the Philippines and to promote simplicity, economy and efficiency in their operations . The
standard was set and the policy fixed. The President had to carry the mandate

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MARUBENI CORPORATION, respondent.
G.R. No. 137377, December 18, 2001

FACTS: Respondent Marubeni Corporation is a foreign corporation organized and existing under the
laws of Japan. It is engaged in general import and export trading, financing and the construction
business. It is duly registered to engage in such business in the Philippines and maintains a branch
office in Manila

Petitioner CIR assessed Marubeni for deficiency income, branch profit remittance, contractor's and
commercial broker's taxes. This was questioned by Marubeni. Subsequently, Executive Order (E.O.)
No. 41 and 64 declaring a one-time amnesty covering unpaid income taxes for the years 1981 to
1985 was issued. Marubeni availed of the tax amnesty, hence, the CTA and CA held that Marubeni
properly availed of the tax amnesty under E.O. Nos. 41 and 64.

However, CIR appealed contending that Marubeni is disqualified from availing of the said amnesties
because the latter falls under the exception in Section 4 (b) of E.O. No. 41 ( Those with income tax
cases already filed in Court as of the effectivity hereof)
 3

Marubeni’s argument that assuming it did not validly avail of the amnesty under the two Executive
Orders, it is still not liable for the deficiency contractor's tax because the income from the projects
came from the "Offshore Portion" of the contracts.

ISSUE: WON the services rendered by Marubeni is subject to contractor’s tax

RULING: No. While the construction and installation work were completed within the Philippines, the
evidence is clear that some pieces of equipment and supplies were completely designed and
engineered in Japan. The two sets of ship unloader and loader, the boats and mobile equipment for
the NDC project and the ammonia storage tanks and refrigeration units were made and completed in
Japan. They were already finished products when shipped to the Philippines. The other
construction supplies listed under the Offshore Portion such as the steel sheets, pipes and
structures, electrical and instrumental apparatus, these were not finished products when shipped to
the Philippines. They, however, were likewise fabricated and manufactured by the sub-
contractors in Japan. All services for the design, fabrication, engineering and manufacture of the
materials and equipment under Japanese Yen Portion I were made and completed in Japan. These
services were rendered outside the taxing jurisdiction of the Philippines and are therefore not
subject to contractor's tax.

A contractor's tax is a tax imposed upon the privilege of engaging in business. 45 It is generally in the
nature of an excise tax on the exercise of a privilege of selling services or labor rather than a sale on
products;46 and is directly collectible from the person exercising the privilege. 47 Being an excise tax,
it can be levied by the taxing authority only when the acts, privileges or business are done or
performed within the jurisdiction of said authority.48 Like property taxes, it cannot be imposed on
an occupation or privilege outside the taxing district.49

In the case at bar, it is undisputed that respondent was an independent contractor under the terms of
the two subject contracts. Respondent, however, argues that the work therein were not all performed
in the Philippines because some of them were completed in Japan in accordance with the provisions
of the contracts.

A tax amnesty is a general pardon or intentional overlooking by the State of its authority to impose
penalties on persons otherwise guilty of evasion or violation of a revenue or tax law.

The two contracts were divided into two parts, i.e., the Onshore Portion and the Offshore Portion. All
materials and equipment in the contract under the "Offshore Portion" were manufactured and
completed in Japan, not in the Philippines, and are therefore not subject to Philippine taxes.

Under the Philippine Onshore Portion, Marubeni does not deny its liability for the contractor's tax on
the income from the two projects. It is with regard to the gross receipts from the Foreign Offshore
Portion of the two contracts that the liabilities involved in the assessments subject of this case arose.
CIR argues that since the two agreements are turn-key, they call for the supply of both materials and
services to the client, they are contracts for a piece of work and are indivisible. The situs of the two
projects is in the Philippines, and the materials provided and services rendered were all done and
completed within the territorial jurisdiction of the Philippines. Accordingly, respondent's entire receipts
from the contracts, including its receipts from the Offshore Portion, constitute income from Philippine
sources. The total gross receipts covering both labor and materials should be subjected to
contractor's tax in accordance with the ruling in Commissioner of Internal Revenue v. Engineering
Equipment & Supply Co
 4

DEUTSCHE BANK AG MANILA BRANCH, PETITIONER,

vs.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
G.R. No. 188550, August 19, 2013

FACTS: Deutsche Bank withheld and remitted 15% branch profit remittance tax (BPRT) to CIR.
Believing it made an overpayment of the BPRT, Deutsche filed a claim for tax refund or issuance of
its tax credit certificate, and requested a confirmation of its entitlement to the preferential tax rate of
10% under the RP-Germany Tax Treaty. But the BIR take no action. Hence, it filed a petition for
review to the CTA.

The CTA denied the claim of Deutsche Bank because the application for a tax treaty relief was not
filed with International Tax Affairs Division (ITAD) prior to the payment of its BPRT and actual
remittance of its branch profits to DB Germany, or prior to its availment of the preferential rate of ten
percent (10%) under the RP-Germany Tax Treaty provision. The court a quo held that Deutsche
violated the fifteen (15) day period mandated under Section III paragraph (2) of Revenue
Memorandum Order (RMO) No. 1-2000.

ISSUE: WON the failure to strictly comply with RMO No. 1-2000 will deprive persons or corporations
of the benefit of a tax treaty

RULING: NO. By virtue of the RP-Germany Tax Treaty, we are bound to extend to a branch in the
Philippines, remitting to its head office in Germany, the benefit of a preferential rate equivalent to
10% BPRT.

Our Constitution provides for adherence to the general principles of international law as part of the
law of the land. The time-honored international principle of pacta sunt servanda demands the
performance in good faith of treaty obligations on the part of the states that enter into the agreement.
Every treaty in force is binding upon the parties, and obligations under the treaty must be performed
by them in good faith. More importantly, treaties have the force and effect of law in this jurisdiction.

Tax treaties are entered into "to reconcile the national fiscal legislations of the contracting parties
and, in turn, help the taxpayer avoid simultaneous taxations in two different jurisdictions.

The BIR must not impose additional requirements that would negate the availment of the reliefs
provided for under international agreements

Bearing in mind the rationale of tax treaties, the period of application for the availment of tax treaty
relief as required by RMO No. 1-2000 should not operate to divest entitlement to the relief as it would
constitute a violation of the duty required by good faith in complying with a tax treaty
 5

THE COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX
APPEALS, respondents.
G.R. No. L-23771 August 4, 1988

FACTS: Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the
adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan. The BIR
assessed against and demanded deficiency franchise taxes and surcharges for the years 1946 to
1954 applying the franchise tax rate of 5% on gross receipts from March 1, 1948 to December 31,
1954 as prescribed in Section 259 of the National Internal Revenue Code, instead of the lower rates
as provided in the municipal franchises. Subsequently, RA 3843 was passed granting Lingayen Gulf
a legislative franchise for the operation of the electric light, heat, and power system in the same
municipalities of Pangasinan wherein a 2% tax on gross receipts from electric current sold or
supplied shall be imposed, in lieu of any and all taxes and/or licenses of any kind.

The CIR submits that the said law is unconstitutional insofar as it provides for the payment by the
private respondent of a franchise tax of 2% of its gross receipts, while other taxpayers similarly
situated were subject to the 5% franchise tax imposed in Section 259 of the Tax Code, thereby
discriminatory and violative of the rule on uniformity and equality of taxation.

ISSUE: Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the
"uniformity and equality of taxation" clause of the Constitution

RULING: NO. A tax is uniform when it operates with the same force and effect in every place where
the subject of it is found. Uniformity means that all property belonging to the same class shall be
taxed alike. The Legislature has the inherent power not only to select the subjects of taxation but to
grant exemptions.

Tax exemptions have never been deemed violative of the equal protection clause.   It is true that the
1

private respondents municipal franchises were obtained under Act No. 667   of the Philippine
2

Commission, but these original franchises have been replaced by a new legislative franchise, i.e.
R.A. No. 3843. As correctly held by the respondent court, the latter was granted subject to the terms
and conditions established in Act No. 3636,   as amended by C.A. No. 132. These conditions Identify
3

the private respondent's power plant as falling within that class of power plants created by Act No.
3636, as amended. The benefits of the tax reduction provided by law (Act No. 3636 as amended by
C.A. No. 132 and R.A. No. 3843) apply to the respondent's power plant and others circumscribed
within this class. R.A-No. 3843 merely transferred the petitioner's power plant from that class
provided for in Act No. 667, as amended, to which it belonged until the approval of R.A- No. 3843,
and placed it within the class falling under Act No. 3636, as amended. Thus, it only effected the
transfer of a taxable property from one class to another.

The question of whether a statute operates retrospectively or only prospectively depends on the
legislative intent. In the instant case, Act No. 3843 provides that "effective ... upon the date the
original franchise was granted, no other tax and/or licenses other than the franchise tax of two per
centum on the gross receipts ... shall be collected, any provision to the contrary notwithstanding."
Republic Act No. 3843 therefore specifically provided for the retroactive effect of the law.
 6

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-

appellants,
vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE
CITY MAYOR, all of the City of Manila, respondents-appellees.
G.R. No. L-4376, May 22, 1953

FACTS: The Association of Customs Brokers, Inc challenge the validity of ordinance 3379 on the
ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the
power of the Municipal Board of the City of Manila; (2) said ordinance offends against the rule of
uniformity of taxation; and (3) it constitutes double taxation.

An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila", and
that in its section 1 it provides that the tax should be 1 percent ad valorem per annum. It also
provides that the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and
shall be expended exclusively for the repair, maintenance and improvement of its streets and
bridges."

the Court of First Instance of Manila sustained the validity of the ordinance and dismissed the
petition. Hence this appeal.

ISSUE: WON Ordinance No. 3379 offends against the rule of uniformity of taxation

RULING: Yes. the ordinance infringes the rule of the uniformity of taxation ordained by our
Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating within the City
of Manila. It does not distinguish between a motor vehicle for hire and one which is purely for private
use. Neither does it distinguish between a motor vehicle registered in the City of Manila and one
registered in another place but occasionally comes to Manila and uses its streets and public
highways. The distinction is important if we note that the ordinance intends to burden with the tax
only those registered in the City of Manila as may be inferred from the word "operating" used therein.
The word "operating" denotes a connotation which is akin to a registration, for under the Motor
Vehicle Law no motor vehicle can be operated without previous payment of the registration fees.
There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a
temporary stay or for short errands, and it cannot be denied that they contribute in no small degree to
the deterioration of the streets and public highway. The fact that they are benefited by their use they
should also be made to share the corresponding burden. And yet such is not the case. This is an
inequality which we find in the ordinance, and which renders it offensive to the Constitution.

THE SHELL CO. OF P.I., LTD., plaintiff-appellant,

vs.
E. E. VAÑO, as Municipal Treasurer of the Municipality of Cordova, Province of
Cebu, defendant-appellee.
G.R. No. L-6093, February 24, 1954
 7

FACTS: The Municipal Council of Cordova, Province of Cebu, adopted ordinances, among others,
No. 10, series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the
privilege of installation manager. . The Shell Co. of P.I. Ltd., a foreign corporation, filed suit for the
refund of the taxes paid by it, on the ground that the ordinances imposing such taxes are ultra vires. 

The permit and the fee referred to may be required and charged by the Municipal Council of Cordova
in the exercise of its regulative authority, whereas the ordinance which imposes the taxes in question
was adopted under and pursuant to the provisions of Commonwealth Act No. 472, which authorizes
municipal councils and municipal district councils "to impose license taxes upon persons engaged in
any occupation or business, or exercising privileges in the municipality or municipal district, by
requiring them to secure licenses at rates fixed by the municipal council or municipal district council ,"
which shall be just and uniform but not "percentage taxes and taxes on specified articles."

ISSUE: WON the ordinance is discriminatory and hostile

RULING: The contention that the ordinance is discriminatory and hostile because there is no other
person in the locality who exercises such "designation" or occupation is also without merit, because
the fact that there is no other person in the locality who exercises such a "designation" or calling
does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to
any person or firm who exercises such calling or occupation named or designated as
"installation manager."

Akbayan Citizen Actions Party v. Aquino, G.R. No. 170516, July 16, 2008
FACTS: Akbayan, non-government organizations, Congresspersons, citizens and taxpayers
requested, via the petition for mandamus and prohibition, to obtain from respondents the full text of
the Japan-Philippines Economic Partnership Agreement (JPEPA) including the Philippine and
Japanese offers submitted during the negotiation process and all pertinent attachments and annexes
thereto. The Congress, through the House Committee called for an inquiry into the JPEPA, but at the
same time, the Executive refused to give them the said copies until the negotiation was completed.

JPEPA was the bilateral free trade agreement entered between the Philippine government with
Japan, concerned with trade in goods, rules of origin, customs procedures, paperless trading, trade
in services, investment, intellectual property rights, government procurement, movement of natural
persons, cooperation, competition policy, mutual recognition, dispute avoidance and settlement,
improvement of the business environment, and general and final provisions.

ISSUE: Whether or not the President can validly exclude Congress, exercising its power of inquiry
and power to concur in treaties, from the negotiation process

RULING: YES. Akbayan argue that the President cannot exclude Congress from the JPEPA
negotiations since whatever power and authority the President has to negotiate international trade
agreements is derived only by delegation of Congress, pursuant to Article VI, Section 28(2) of the
Constitution and Sections 401 and 402 of Presidential Decree No. 1464.

The subject of Article VI Section 28(2) of the Constitution is not the power to negotiate treaties and
international agreements, but the power to fix tariff rates, import and export quotas, and other taxes.
 8

As to the power to negotiate treaties, the constitutional basis thereof is Section 21 of Article VII – the
article on the Executive Department.

While the power then to fix tariff rates and other taxes clearly belongs to Congress, and is exercised
by the President only be delegation of that body, it has long been recognized that the power to enter
into treaties is vested directly and exclusively in the President, subject only to the concurrence of at
least two-thirds of all the Members of the Senate for the validity of the treaty. In this light, the
authority of the President to enter into trade agreements with foreign nations provided under P.D.
1464 may be interpreted as an acknowledgment of a power already inherent in its office. It may not
be used as basis to hold the President or its representatives accountable to Congress for the conduct
of treaty negotiations.

The Congress, while possessing vast legislative powers, may not interfere in the field of treaty
negotiations. While Article VII, Section 21 provides for Senate concurrence, such pertains only to the
validity of the treaty under consideration, not to the conduct of negotiations attendant to its
conclusion. Moreover, it is not even Congress as a while that has been given the authority to concur
as a means of checking the treaty-making power of the President, but only the Senate.

LUNG CENTER OF THE PHILIPPINES, petitioner,

vs.
QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of
Quezon City, respondents.
G.R. No. 144104 , June 29, 2004

FACTS: Lung Center of the Philippines is a non-stock and non-profit entity. It is the registered owner
of a parcel of land, Erected in the middle of the aforesaid lot is a hospital known as the Lung Center
of the Philippines. A big space at the ground floor is being leased to private parties.

both the land and the hospital building of the petitioner were assessed for real property taxes by the
City Assessor of Quezon City. Lung Center filed a Claim for Exemption from real property taxes with
the City Assessor, predicated on its claim that it is a charitable institution. It alleged that under Article
VI, Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes.

ISSUE:

a. whether the petitioner is a charitable institution within the context of Presidential Decree No.
1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160; and
b. whether the real properties of the petitioner are exempt from real property taxes

RULING: Petition partially granted.

a. petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. The
test whether an enterprise is charitable or not is whether it exists to carry out a purpose
reorganized in law as charitable or whether it is maintained for gain, profit, or private
advantage. It is a non-profit and non-stock corporation. It was organized for the welfare
 9

and benefit of the Filipino people principally to help combat the high incidence of lung
and pulmonary diseases in the Philippines.

As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-
patient, or confined in the hospital, or receives subsidies from the government, so long as the
money received is devoted or used altogether to the charitable object which it is intended to
achieve; and no money inures to the private benefit of the persons managing or operating the
institution

b. those portions of its real property that are leased to private entities are not exempt from real
property taxes as these are not actually, directly and exclusively used for charitable
purposes. The tax exemption under this constitutional provision covers property taxes only.

As Chief Justice Hilario G. Davide, Jr., what is exempted is not the institution itself . . .; those
exempted from real estate taxes are lands, buildings and improvements actually, directly and
exclusively used for religious, charitable or educational purposes.

CITY ASSESSOR OF CEBU CITY, petitioner,

vs.
ASSOCIATION OF BENEVOLA DE CEBU, INC., respondent.
G.R. No. 152904, June 8, 2007

FACTS: Association of Benevola de Cebu, Inc. is a non-stock, non-profit organization and is the
owner of Chong Hua Hospital (CHH). It constructed the CHH Medical Arts Center (CHHMAC).

City Assessor of Cebu City assessed the CHHMAC building as "commercial" and assessed at the
assessment level of 35% for commercial buildings, and not at the 10% special assessment currently
imposed for CHH and its other separate buildings.

City Assessor argued that CHHMAC is not a part of the CHH building but a separate building which
is actually used as commercial clinic/room spaces for renting out to physicians and, thus, classified
as "commercial." On the other hand, respondent contended in its position paper that CHHMAC
building is actually, directly, and exclusively part of CHH and should have a special assessment level
of 10% as provided under City Tax Ordinance LXX.

The LBAA, CBAA and CA held that the facilities and utilities of CHHMAC are undoubtedly necessary
and indispensable for the CHH to achieve its ultimate purpose.

ISSUE: WON the new building is commercial and therefore liable for 35% assessment level

RULING: NO.

Chong Hua Hospital Medical Arts Center is an integral part of Chong Hua Hospital

The CHHMAC facility is definitely incidental to and reasonably necessary for the operations of
Chong Hua Hospital
 10

the CHHMAC facility, while seemingly not indispensable to the operations of CHH, is definitely
incidental to and reasonably necessary for the operations of the hospital. the CHHMAC facility
is primarily used by the hospital’s accredited physicians to perform medical check-up, diagnosis,
treatment, and care of patients. For another, it also serves as a specialized outpatient department of
the hospital.

Charging rentals for the offices used by its accredited physicians cannot be equated to a
commercial venture

First, CHHMAC is only for its consultants or accredited doctors and medical specialists. Second, the
charging of rentals is a practical necessity: (1) to recoup the investment cost of the building, (2) to
cover the rentals for the lot CHHMAC is built on, and (3) to maintain the CHHMAC building and its
facilities. Third, as correctly pointed out by respondent, it pays the proper taxes for its rental income.
And, fourth, if there is indeed any net income from the lease income of CHHMAC, such does not
inure to any private or individual person as it will be used for respondent’s other charitable projects.

COMMISSIONER OF INTERNAL REVENUE, Petitioner

vs.
DE LA SALLE UNIVERSITY, INC., Respondent
G.R. No. 196596

FACTS: the BIR through a Formal Letter of Demand assessed DLSU the following deficiency taxes:
(1) income tax on rental earnings from restaurants/canteens and bookstores operating within the
campus; (2) value-added tax (VAI) on business income; and (3) documentary stamp tax (DSI) on
loans and lease contracts.

DLSU, a non-stock, non-profit educational institution, principally anchored its petition on Article XIV,
Section 4 (3) of the Constitution AND the income it seeks to be exempted from taxation is used
actually, directly and exclusively for educational purposes.

the Commissioner posits that a tax-exempt organization like DLSU is exempt only from property tax
but not from income tax on the rentals earned from property

ISSUE: Whether DLSU' s income and revenues proved to have been used actually, directly and
exclusively for educational purposes are exempt from duties and taxes

RULING: The income, revenues and assets of non-stock, non-profit educational institutions proved
to have been used actually, directly and exclusively for educational purposes are exempt from duties
and taxes.

Article XIV, Section 4 (3) of the 1987 Constitution, which reads:

(3) All revenues and assets of non-stock, non-profit educational institutions used actually,

directly, and exclusively for educational purposes shall
be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of
such institutions, their assets shall be disposed of in the manner provided by law.
 11

Proprietary educational institutions, including those cooperatively owned, may likewise be

entitled to such exemptions subject to the limitations provided by law including restrictions on
dividends and provisions for reinvestment.

NON-STOCK, NON-PROFIT EDUC PROPRIETARY EDUCATION

tax exemption is conditioned only on the actual, direct and exemptions may be subject to
exclusive use of their revenues and assets for educational limitations imposed by Congress.
purposes.

that Article XIV, Section 4 (3) does not require that the
revenues and income must have also been sourced from By the Tax Code's clear terms, a
educational activities or activities related to the purposes proprietary educational institution is
of an educational institution. The phrase all revenues is entitled only to the reduced rate of
unqualified by any reference to the source of revenues. 10% corporate income tax. The
Thus, so long as the revenues and income are used reduced rate is applicable only if: (1)
actually, directly and exclusively for educational purposes, the proprietary educational
then said revenues and income shall be exempt from institution is nonprofit and (2) its
taxes and duties. gross income from unrelated trade,
business or activity does not exceed
when a non-stock, non-profit educational institution proves 50% of its total gross income.
that it uses its revenues actually, directly, and exclusively
for educational purposes, it shall be exempted from
income tax, VAT, and Local Busines Tax. On the other
hand, when it also shows that it uses its assets in the form
of real property for educational purposes, it shall be
exempted from RPT.

requisites for availing the tax exemption under Article XIV, Section 4 (3):

(1) the taxpayer falls under the classification non-stock, non-profit educational institution; and

(2) the income it seeks to be exempted from taxation is used actually, directly and exclusively for
educational purposes

We find that unlike Article VI, Section 28 (3) of the Constitution (pertaining to charitable institutions,
churches, parsonages or convents, mosques, and non-profit cemeteries), which exempts from
tax only the assets, i.e., "all lands, buildings, and improvements, actually, directly, and
exclusively used for religious, charitable, or educational purposes ... ," Article XIV, Section 4
(3) categorically states that "[a]ll revenues and assets ... used actually, directly, and exclusively for
educational purposes shall be exempt from taxes and duties."
 12