1. Vera vs.

Fernandez 89 SCRA 199 Facts: A Motion for allowance of claim and for payment of taxes was filed on june 3, 1969 representing the claim of indebtedness of the late Luis D. Tongoy for deficiency of income taxes. The administrator opposed the motion on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court. Respondent judge Fernandez dismissed the claim. On September 18, 1969, a motion for reconsideration was filed, which was thereafter denied.

Issue: Whether the claim for the payment of taxes is barred under Rule 86 of the Rules of Court

Held: No, the claim for the payment of taxes is not barred. In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, it was held that the prescription of taxes are governed by the NIRC and not by other provisions of law. Also, in the case of Pineda vs. CFI of Tayabas, it was pointed out that the court may direct the payment of taxes upon motion showing that the taxes have been assessed against the estate. Claims for taxes may be collected even after the estate has been distributed among the heirs. The reason for the liberal treatment of claims for taxes as exception from the statute of non-claims is that taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. To safeguard the interest of the people, neglect or omission to collect such should not be allowed to detriment other people.

case 5 CIR v. CTA 234 SCRA 348

FACTS: A petition for review of the decision of the BIR denying the tax refund of Citytrust was filed with the CTA. It was submitted for decision based solely on the pleadings and evidence submitted by Citytrust. CIR could not present any evidence by reason of the repeated failure of the Tax Credit/Refund Division of the BIR to transmit the records of the case, as well as the investigation report thereon, to the Solicitor General. The CTA rendered its decision ordering BIR to grant a refund to Citytrust in the amount of P13,314,506.14. The CA affirmed the judgment of the CTA.
Issue: Whether or not Citytrust is entitled to a refund.

HELD: It is a long and firmly settled rule of law that the government is not bound by the errors committed by its agents. In the performance of its government functions, the State can not be estopped by the neglect of its agents and officers. Although the government may generally be estopped through affirmative acts of public officers acting within their authority, their neglect or omission of public duties as exemplified in this case will not and should not produce that effect. Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the government cannot and must be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its functions for the welfare of its constituents. The errors of certain administrative officers should never be allowed to jeopardize the government's financial position, especially in the case at bar where the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy. Judgment of the CA is SET ASIDE and the case is REMANDED to the CTA for further proceedings and appropriate action.

Case #6 - Commissioner vs. Algue, 158 SCRA 9 Facts: The Philippine Sugar Estate Development Company (PSEDC). Appointed Algue Inc. as its agent. Algue received a commission of 125,000.00 and it was from their commission that it paid organizers of VOICP 75,000.00 in proportional fees. He received an assessment from the CIR. He filed a letter of protest or reconsideration. The CIR contends that the claimed deduction was properly disallowed because it was not an ordinary, reasonable or necessary expense. Issue: Is the CIR correct? Ruling: No. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. Every person who is able to pay 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 is an arbitrary method of exaction by those in the seat of power. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself.

case 7 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC., respondents. PANGANIBAN, J.: Facts: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. YMCA earned income from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and from parking fees collected from non-members. The commissioner of internal revenue (CIR) issued an assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. YMCA formally protested the assessment and. The CIR denied the claims of YMCA. Issue: Whether or not the income derived from rentals of real property owned by YMCA, established as a welfare, educational, and charitable non-profit corporation, is subject to income tax under the NIRC and the Constitution. Held: The SC agree with the CIR that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them as such," the exemption does not apply to income derived ". . . from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income . . . ." The CIR adds that "rental income derived by a tax-exempt organization from the lease of its properties, real or personal, [is] not, therefore, exempt from income taxation, even if such income [is] exclusively used for the accomplishment of its objectives." Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation should be manifest. and unmistakable from the language of the law on which it is based. Thus, the claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken." Private respondent also invokes Article XIV, Section 4, par. 3 of the Constitution, claiming that the YMCA "is a nonstock, non-profit educational institution whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and income." The Court reiterate that private respondent is exempt from the payment of property tax, but not income tax on the rentals from its property. The bare allegation alone that it is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. Laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA to be granted the exemption it claims under the aforecited provision, it must prove with substantial evidence that (1) it 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. However, the Court notes that not a scintilla of evidence was submitted by private respondent to prove that it met the said requisites.

10. PHILIPPINE BANK OF COMMUNICATIONS, petitioner, VS. COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF APPEALS, respondent. G.R. No. 112024 January 28, 1999 Facts: Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of 1985, repo rted profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by applying PBCom's tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 for P3,401,701.00 and P1,615,253.00, respectively. Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the yearended December 31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared no tax payable for the year. But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On August 7, 1987, petitioner requested the Commissioner of Internal Revenue (CIR), among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985. Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69. Pending the investigation of the respondent CIR, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). On May 20, 1993, the CTA rendered a decision which denied the request of petitioner for a tax refund or credit in the sum amount of P5,299,749.95, on the ground that it was filed beyond the two-year reglementary period provided for by law. The petitioner's claim for refund in 1986 amounting to P234,077.69 was likewise denied on the assumption that it was automatically credited by PBCom against its tax payment in the succeeding year. On June 22, 1993, petitioner filed a Motion for Reconsideration of the CTA's decision but the same was denied due course for lack of merit. Thereafter, PBCom filed a petition for review of said decision and resolution of the CTA with the Court of Appeals (CA). However on September 22, 1993, the CA affirmed in toto the CTA's resolution dated July 20, 1993, hence this petition. Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying on the applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular states that overpaid income taxes are not covered by the two-year prescriptive period under the tax Code and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the BIR within ten (10) years. Issue: Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of prescription, despite petitioner's reliance on Revenue Memorandum Circular No. 7-85, changing the prescriptive period of two years to ten years. Held: Contrary to the petitioner's contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive period set by law. Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal. Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible. Claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes; its functions should not be unduly delayed or hampered by incidental matters. The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.

15. Caltex Philippines vs. Commission on Audit (COA) GR 92585, 8 May 1992 En Banc, Davide (J): 12 concur, 2 took no part FACTS: On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc. (CPI), hereinafter referred to as Petitioner, directing the latter to remit to the OPSF its collection, excluding that unremitted for the years 1986 and 1988, of the additional tax on petroleum products authorized under the aforesaid Section 8 of P.D. No. 1956 which as of 31 December 1987, amounted to 335,037,649.00 and informing it that, pending such remittance, all of its claims for from the OPSF shall be held in abeyance. Caltex in its letter of 3 May 1989, petitioner requested the COA for an early release of its reimbursement certificates from the OPSF covering claims with the Office of energy Affairs In its Answer dated 8 May 1989, the COA denied petitioner's request for the early release of the reimbursement certificates from the OPSF. COA further prohibited Caltex from offseting remittances and reimbursements for the current and ensuing years ISSUE: Whether the amounts due from Caltex to the OPSF may be offsetted against Caltex outstanding claims from said funds. HELD: NO. A taxpayer may not offset taxes due from the claims that he may have against the government. Although petitioner's financing losses, if indeed incurred, may constitute cost underecovery in the sense that such were incurred as a result of the inability to fully offset financing expenses from yields in money market placements, they do not, however, fall under the foregoing provision of P.D. No. 1956, as amended, because the same did not result from the reduction of the domestic price of petroleum products. Until paragraph (2), Section 8 of the decree, as amended, is further amended by Congress, this Court can do nothing. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within the police power of the state.

M u n i c i p a l i t

16) G.R. Nos. 89898-99 October 1, 1990 MUNICIPALITY OF MAKATI, petitioner, vs. THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF SILVINO R. PASTRANA,respondents. FACTS: The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private respondent Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-5499. It appears that the action for eminent domain was filed on May 20, 1986, Attached to petitioner's complaint was a certification that a bank account (Account No. S/A 265-537154-3) had been opened with the PNB Buendia Branch under petitioner's name containing the sum of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due hearing where the parties presented their respective appraisal reports regarding the value of the property, respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised value of the property at P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment of P338,160.00 which was earlier released to private respondent. After this decision became final and executory, private respondent moved for the issuance of a writ of execution. This motion was granted by respondent RTC judge. After issuance of the writ of execution, a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff was informed that a "hold code" was placed on the account of petitioner. As a result of this, private respondent filed a motion dated January 27, 1988 praying that an order be issued directing the bank to deliver to respondent sheriff the amount equivalent to the unpaid balance due under the RTC decision dated June 4, 1987. Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the expropriation amount should be done in installments which the respondent RTC judge failed to state in his decision. Private respondent filed its opposition to the motion. Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing the court that private respondent was no longer the true and lawful owner of the subject property because a new title over the property had been registered in the name of Philippine Savings Bank, Inc. (PSB) Respondent RTC judge issued an order requiring PSB to make available the documents pertaining to its transactions over the subject property, and the PNB Buendia Branch to reveal the amount in petitioner's account which was garnished by respondent sheriff. In compliance with this order, PSB filed a manifestation informing the court that it had consolidated its ownership over the property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After several conferences, PSB and private respondent entered into a compromise agreement whereby they agreed to divide between themselves the compensation due from the expropriation proceedings. Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved the compromise agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the sum of P4,953,506.45 which corresponds to the balance of the appraised value of the subject property under the RTC decision dated June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB and private respondent to execute the necessary deed of conveyance over the subject property in favor of petitioner. Petitioner's motion to lift the garnishment was denied. Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the other hand, for failure of the manager of the PNB Buendia Branch to comply with the order dated September 8, 1988, private respondent filed two succeeding motions to require the bank manager to show cause why he should not be held in contempt of court. During the hearings conducted for the above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed the court that he was still waiting for proper authorization from the PNB head office enabling him to make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at the PNB Buendia Branch could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds without the proper appropriation required under the law, citing the case of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899]. Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not apply to the case because petitioner's PNB Account No. S/A 265-537154-3 was an account specifically opened for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42. Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions, the Court of Appeals dismissed both petitions for lack of merit, sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner's PNB Account No. 265-537154-3, and affirmed his authority to levy on such funds.

Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the present petition for review with prayer for preliminary injunction. Issue: Whether or not the money in the bank account of the petitioner can be disbursed to the private respondent. Held: There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-530850-7 are public funds of the municipal government. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute More particularly, the properties of a municipality, whether real or personal, which are necessary for public use cannot be attached and sold at execution sale to satisfy a money judgment against the municipality. Municipal revenues derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the municipality, are exempt from execution The foregoing rule finds application in the case at bar. Absent a showing that the municipal council of Makati has passed an ordinance appropriating from its public funds an amount corresponding to the balance due under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be validly effected on the public funds of petitioner deposited in Account No. S/A 263-530850-7. Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered against it, the claimant may avail of the remedy of mandamus in order to compel the enactment and approval of the necessary appropriation ordinance, and the corresponding disbursement of municipal funds therefor In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner. No appeal was taken therefrom. For three years now, petitioner has enjoyed possession and use of the subject property notwithstanding its inexcusable failure to comply with its legal obligation to pay just compensation. Petitioner has benefited from its possession of the property since the same has been the site of Makati West High School since the school year 19861987. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from expropriation proceedings it had in fact initiated. The State's power of eminent domain should be exercised within the bounds of fair play and justice. In the case at bar, considering that valuable property has been taken, the compensation to be paid fixed and the municipality is in full possession and utilizing the property for public purpose, for three (3) years, the Court finds that the municipality has had more than reasonable time to pay full compensation.

17. Roxas Y Cia vs CTA Facts: Roxas Siblings inherited properties, one of which is an agricultural land in Nasugbu Batangas. The tenants who have all been tilling the subject lands expressed their desire to purchase from the Roxas siblings the parcels which they actually occupied. The government, in consonance with its constitutional mandate to acquire big landed estates and apportion them among the tenant farmers, persuaded the Roxas siblings to sell their landholdings. Since the government did not have funds to cover the purchase price, loans were granted and Roxas siblings allowed payment through installment. Roxas derived from said installments a net gain, 50% of which was reported for income tax purposes as gain on the sale of capital asset. The CIR subsequently demanded among others, payment for real estate dealers tax referring to the act of subdividing the Nasugbu farmlands and selling them to the farmer occupants on installment. Issue: WON Roxas siblings should be imposed with a real estate dealers tax in view of the sale of Nasugbu farmlands. Held: No. The court held that the sale was not only in consonance with, but more in obedience to the request and pursuant to the policy of the government to allocate lands to the landless. It was the bounden duty of the government to pay the agreed compensation after it had persuaded the Roxas siblings to sell. The court went on to discuss the power of taxation is sometimes called the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the hen that lays the golden egg. In order to maintain the general publics trust and confidence, this power must be used justly and not treacherously. It does not conform with the sense of justice for the government to persuade the taxpayer to lend it a helping hand and later on penalize him for duly answering the urgent call. Roxas cannot therefore be considered as a real estate dealer. Thus, pursuant to the tax code, the lands sold are capital assets and gain derived thereof is capital gain taxable only to the extent of 50%.

#18 G.R. No. 90776 June 3, 1991 PHILIPPINE PETROLEUM CORPORATION, petitioner, vs. MUNICIPALITY OF PILILLA, RIZAL, Represented by MAYOR NICOMEDES F. PATENIA, respondent. FACTS: Petitioner is a business enterprise engaged in the manufacture of lubricated oil basestock which is a petroleum product, with its refinery plant situated at Malaya, Pililla, Rizal. PPC owns and maintains an oil refinery including 49 storage tanks for its petroleum products in Malaya, Pililla, Rizal. Under Section 142 of the NIRC of 1939, manufactured oils and other fuels are subject to specific tax. On June 28, 1973, PD 231 (Local Tax Code) was issued enacted. Sections 19 and 19 (a) provide that the municipality may impose taxes on business, except on those for which fixed taxes are provided on manufacturers, importers or producers of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines in accordance with the schedule listed therein. The Secretary of Finance issued Provincial Circular No. 26-73 (December 27, 1973) directed to all provincial, city and municipal treasurers to refrain from collecting any local tax imposed in old or new tax ordinances in the business of manufacturing, wholesaling, retailing, or dealing in petroleum products subject to the specific tax under the NIRC. Provincial Circular No. 26 A-73 (January 9, 1973)was also issued instructing all City Treasurers to refrain from collecting any local tax imposed in tax ordinances enacted before or after the effectivity of the Local Tax Code, on the businesses of manufacturing, wholesaling, retailing, or dealing in, petroleum products subject to the specific tax under the NIRC. Respondent enacted Municipal Tax Ordinance No. 1, S-1974 otherwise known as "The Pililla Tax Code of 1974" which took effect on July 1, 1974. Sections 9 and 10 of the said ordinance imposed a tax on business, except for those for which fixed taxes are provided in the Local Tax Code on manufacturers, importers, or producers of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines in accordance with the schedule found in the Local Tax Code, as well as mayor's permit, sanitary inspection fee and storage permit fee for flammable, combustible or explosive substances, while Section 139 of the disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges. On April 13, 1974, P.D. 436 was promulgated increasing the specific tax on lubricating oils, gasoline, bunker fuel oil, diesel fuel oil and other similar petroleum products levied under Sections 142, 144 and 145 of the NIRC, and granting provinces, cities and municipalities certain shares in the specific tax on such products in lieu of local taxes imposed on petroleum products. The questioned Municipal Tax Ordinance No. 1 was reviewed and approved by the Provincial Treasurer of Rizal, but was not implemented and/or enforced by the Municipality of Pililla because of its having been suspended up to now in view of Provincial Circular Nos. 26-73 and 26 A-73. On June 3, 1977, P.D. 1158 otherwise known as the National Internal Revenue Code of 1977 was enacted, Section 153 of which specifically imposes specific tax on refined and manufactured mineral oils and motor fuels. Enforcing the provisions of the ordinance, the respondent filed a complaint against PPC for the collection of the business tax from 1979 to 1986; storage permit fees from 1975 to 1986; mayor's permit and sanitary inspection fees from 1975 to 1984. PPC, however, have already paid the last- named fees starting 1985. The RTC rendered a decision against petitioner. ISSUE: WON PPC whose oil products are subject to specific tax under the NIRC, is still liable to pay (a) tax on business and (b) storage fees, considering Provincial Circular No. 6-77; and mayor's permit and sanitary inspection fee unto the respondent Municipality of Pililla, Rizal, based on Municipal Ordinance No. 1.

 HELD: There is no question that Pililla's Municipal Tax Ordinance No. 1 imposing the assailed taxes, fees and charges is valid especially Section 9 (A) which according to the trial court "was lifted in toto and/or is a literal reproduction of Section 19 (a) of the Local Tax Code as amended by P.D. No. 426." It conforms with the mandate of said law. But P.D. No. 426 amending the Local Tax Code is deemed to have repealed Provincial Circular Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19 and 19 (a), were carried over into P.D. No. 426 and no exemptions were given to manufacturers, wholesalers, retailers, or dealers in petroleum products. Well-settled is the rule that administrative regulations must be in harmony with the provisions of the law. Furthermore, while Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in P.D. No. 436. The exercise by local governments of the power to tax is ordained by the present Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 26-73 (1) would be tantamount to restricting their power to tax by mere administrative issuances.

Case 21 PETRON CORPORATION v. MAYOR TOBIAS M. TIANGCO and MUNICIPAL TREASURER MANUEL T. ENRIQUEZ of the MUNIPALITY OF NAVOTAS, METRO MANILA G.R. 158881, 16 April 2006, Second Division, (Tinga, J.) While local government units are authorized to burden all such other class of goods with taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

In accordance to the New Navotas Revenue Code or Ordinance 92-03, petitioner Petron Corporation was assessed a total tax of P6,259,087.62. Petron filed a letter protest arguing that it is exempt from paying local business taxes as provided by Article 232 (h) of the Implementing Rules of the Local Government Code. The letter-protest was denied. A Complaint for Cancellation of Assessment was filed before the Regional Trial Court (RTC) of Malabon. The RTC dismissed the Complaint and required Petron to pay the assessed tax. A Motion for Reconsideration was filed but it was later denied by the court. Hence, the filing of this petition. ISSUE: Whether or not a local government unit is empowered under the Local Government Code (LGC) to impose business taxes on persons or entities engaged in the sale of petroleum HELD: Petition GRANTED. Section 133(h) of the LGC reads as follows: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and Barangays shall not extend to the levy of the following: xxx (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; Evidently, Section 133 prescribes the limitations on the capacity of local government units to exercise their taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local government units, namely: excise taxes on articles enumerated under the National Internal Revenue Code [(NIRC)], as amended; and taxes, fees or charges on petroleum products. The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the provision, a municipality is authorized to impose business taxes on a whole host of business activities. Suffice it to say, unless there is another provision of law which states otherwise, Section 143, broad in scope as it is, would undoubtedly cover the business of selling diesel fuels, or any other petroleum product for that matter. Section 133(h) provides two kinds of taxes which cannot be imposed by local government units: excise taxes on articles enumerated under the NIRC, as amended; and taxes, fees or charges on petroleum products. There is no doubt that among the excise taxes on articles enumerated under the NIRC are those levied on petroleum products, per Section 148 of the NIRC. The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically enumerates several types of business on which it may impose taxes, including manufacturers, wholesalers, distributors, dealers of any article of commerce of whatever nature; those engaged in the export or commerce of essential commodities; retailers; contractors and other independent contractors; banks and financial institutions; and peddlers engaged in the sale of any merchandise or article of commerce. This obviously broad power is further supplemented by paragraph (h) of Section 143 which authorizes the sanggunian to impose taxes on any other businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax.

This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987 Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges, though the power is subject to such guidelines and limitations as the Congress may provide. There is no doubt that following the 1987 Constitution and the Code, the fiscal autonomy of local government units has received greater affirmation than ever. Previous decisions that have been skeptical of the viability, if not the wisdom of reposing fiscal autonomy to local government units have fallen by the wayside. Section 5(a) of the Code states that [a]ny provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. But somewhat conversely, Section 5(b) then proceeds to assert that [i]n case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer. And this latter qualification has to be respected as a constitutionally authorized limitation which Congress has seen fit to provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the power of local government units to impose taxes. Section 133(h) states that local government units shall not extend to the levy of xxx taxes, fees or charges on petroleum products. Respondents assert that the phrase taxes, fees or charges on petroleum products pertains to the imposition of direct or excise taxes on petroleum products, and not business taxes. If the phrase actually pertains to excise taxes, then it would be an exercise in utter redundancy, since the preceding phrase already prohibits the imposition of excise taxes on articles already subject to such taxes under the NIRC, such as petroleum products. There would be no sense on the part of the legislature to twice emphasize in the same sentence that excise taxes on petroleum products are beyond the pale of local government taxation. The Court concedes that a tax on a business is distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase taxes, fees or charges on petroleum products does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. It would have been a different matter had Congress, in crafting Section 133(h), barred excise taxes or direct taxes, or any category of taxes only, for then it would be understood that only such specified taxes on petroleum products could not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish. The language of Section 133(h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all taxes, fees and charges. The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to taxes, fees and charges pertains only to one class of articles of the many subjects of excise taxes, specifically, petroleum products. While local government units are authorized to burden all such other class of goods with taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

23. HYDRO RESOURCES CONTRACTORS CORPORATION, petitioner, vs. THE COURT OF TAX APPEALS and THE HON. DEPUTY MINISTER OF FINANCE, ALFREDO PIO DE RODA, respondents. 1990 Dec 21 2nd Division G.R. No. 80276 FACTS: The National Irrigation Administration (NIA) entered into an agreement, sometime in August 1978, with petitioner Hydro Resources Contractors Corporation (Hydro for short), for the construction of the Magat River Multipurpose Project in Isabela. Under the aforesaid contract, petitioner was allowed to procure new construction equipment, spare parts and tools from abroad, the payment for which was advanced by NIA under a financing plan embodied in the contract. By the terms of the contract NIA undertakes payment of all the import duties and taxes incident to the importations deductible from the proceeds of the contract price. HYDRO shall repay NIA in full the value of the construction equipment out of the same proceeds before eventual transfer or taking ownership of subject construction equipment upon termination of the contract. NIA reneged and failed in the compliance of its tax obligations. In the meantime, HYDRO had fully repaid the value of the construction equipment so much so that NIA executed deeds of sale covering the same and transferring the ownership thereof in favor of petitioner. Upon the transfer of the ownership of the said equipment HYDRO was assessed by the Bureau of Customs the corresponding customs duty and compensating tax. This amount was paid by HYDRO to the Bureau of Customs. In addition, HYDRO was assessed additional 3% ad valorem duty prescribed in Executive Order 860. HYDRO also paid this amount but this time under protest. The Collector of Customs acted favorably on petitioner's protest and ordered the refund of the amount paid for the ad valorem duty in the form of tax credit. The Acting Commissioner of Customs affirmed the ruling of the Collector of Customs. These findings of the Collector of Customs as well as the Acting Customs Commissioner were reversed by the Deputy Minister of Finance. Petitioner appealed to the Court of Tax Appeals but the same affirmed the ruling of the Deputy Minister of Finance denying petitioner's claim for refund. ISSUE: WHETHER OR NOT THE HYDRO RESOURCES IS LIABLE FOR THE PAYMENT OF AD VALOREM TAX? HELD: No, it is not liable for the payment of ad valorem tax. The subsequent executions of the Deeds of Sale of the equipment in question on December 6, 1982 and March 24, 1983 are not relevant and material in the consideration of the application of Executive Order No. 860 because said Deeds of Sale were mere formalities in the implementation of Contract No. MPI-C-1 executed on August 1978, which should be reckoned and construed as the actual date of sale. This must be so because the contract of purchase and sale of the NIA-

financed/owned equipment to Hydro took place in 1978 when Contract No. MPI-C-1 was signed by NIA and HYDRO wherein the contracting parties provided for their financing, procurement, delivery, repayment, transfer of possession and ownership. The said scheme contemplated a Contract of Sale within the purview of Art. 1458 of the Civil Code. "Let it suffice that the procurement of the equipment, as earlier stated, was not on a tax exempt basis as the import liabilities thereon have been secured to be paid under the terms of the financial scheme in the contract. The formality of vesting of title over the equipment was not an unwarranted expectation but a matter of an implementation of a pre- existing agreement, hence, the imported articles can only be subject to the rates of import duties/taxes prevailing at the time of entry or withdrawal from customs' custody (Sec. 205, TCC) in 1978 and 1979, thus foreclosing any retroactive application of the 1982 Executive Order.

27. Gerochi vs DOE Facts: Petitioners filed an 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, and Rule 18 of the Rules and Regulations (IRR) which seeks to implement the said imposition, be declared unconstitutional. Petitioners contend, among others, that the assailed provision of law and are unconstitutional since 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. Petitioners contend that the Universal Charge has the characteristics of a tax and is collected to fund the operations of the NPC. 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. 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. ISSUE: Whether or not the Universal Charge imposed under Sec. 34 of the EPIRA is a tax. HELD: The power to tax is based on the principle that taxes are the lifeblood of the government, and their prompt and certain availability is an imperious need. 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. 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.It is the most pervasive, the least limitable, and the most demanding of the three fundamental powers of the State. 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 imposed and which can be amply discerned as regulatory in character. The EPIRA resonates such regulatory purposes. It is a well-established doctrine that the taxing power may be used as an implement of police power. In Valmonte v. Energy Regulatory Board, et al.and in Gaston v. Republic Planters Bank, this 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.

28. GOMEZ V. PALOMAR Facts Herein petitioner Benjamin Gomez questions the constitutionality of Republic Act 1635, as amended by RA 2631 (Anti-TB Stamp Law), which provides as follows: To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order for the period from August nineteen to September thirty every year the printing and issue of semi-postal stamps of different denominations with face value showing the regular postage charge plus the additional amount of five centavos for the said purpose, and during the said period, no mail matter shall be accepted in the mails unless it bears such semi-postal stamps: Provided, That no such additional charge of five centavos shall be imposed on newspapers. The additional proceeds realized from the sale of the semi-postal stamps shall constitute a special fund and be deposited with the National Treasury to be expended by the Philippine Tuberculosis Society in carrying out its noble work to prevent and eradicate tuberculosis. On September l5, 1963 petitioner mailed a letter at the post office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of 1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB stamp required by the statute, it was returned to the petitioner. In view of this development, the petitioner brought suit for declaratory relief in the Court of First Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing administrative orders issued, contending that it violates the equal protection clause of the Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the statute and the orders unconstitutional; hence this appeal by the respondent postal authorities. Issue: Whether or not RA 1635 violates the equal protection clause and the rule of uniformity and equality of taxation Ruling It is said that the statute is violative of the equal protection clause of the Constitution. More specifically the claim is made that it constitutes mail users into a class for the purpose of the tax while leaving untaxed the rest of the population and that even among postal patrons the statute discriminatorily grants exemption to newspapers while Administrative Order 9 of the respondent Postmaster General grants a similar exemption to offices performing governmental functions. The five centavo charge levied by Republic Act 1635, as amended, is in the nature of an excise tax, laid upon the exercise of a privilege, namely, the privilege of using the mails. As such the objections leveled against it must be viewed in the light of applicable principles of taxation. It is settled that the legislature has the inherent power to select the subjects of taxation and to grant exemptions. In the field of taxation, more than in other areas, the legislature possesses the greatest freedom in classification. The reason for this is that traditionally, classification has been a device for fitting tax programs to local needs and usages in order to achieve an equitable distribution of the tax burden. While the principle that there must be a reasonable relationship between classification made by the legislation and its purpose is undoubtedly true in some contexts, it has no application to a measure whose sole purpose is to raise revenue. So long as the classification imposed is based upon some standard capable of reasonable comprehension, be that standard based upon ability to produce revenue or some other legitimate distinction, equal protection of the law has been afforded. The classification of mail users is not without any reason. It is based on ability to pay, let alone the enjoyment of a privilege, and on administrative convenience. In the allocation of the tax burden, Congress must have concluded that the contribution to the anti-TB fund can be assured by those who can afford the use of the mails. It is not accurate to say that the statute constituted mail users into a class. Mail users were already a class by themselves even before the enactment of the statue and all that the legislature did was merely to select their class. Legislation is essentially empiric and Republic Act 1635, as amended, no more than reflects a distinction that exists in fact. Moreover, granted the power to select the subject of taxation, the State's power to grant exemption must likewise be conceded as a necessary corollary. The legislature may withhold the burden of the tax in order to foster what it conceives to be a beneficent enterprise, such as the case of newspapers. As for the Government and its instrumentalities, their exemption rests on the State's sovereign immunity from taxation. The State cannot be taxed without its consent. Finally, the rule of uniformity and equality of taxation is not infringed by the imposition of a flat rate rather than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the service rendered. Considerations of administrative convenience and cost afford an adequate ground for classification. The same considerations may induce the legislature to impose a flat tax which in effect is a charge for the transaction, operating equally on all persons within the class regardless of the amount involved.

29. Punsalan vs Municipal Board of the City of Manila. G.R. No. L-4817 May 26, 1954 Facts:This suit was commenced 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 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. Required tax by the questioned ordinance was paid under protest. The lower court upheld the validity of the charter provision but declared the ordinance itself illegal and void on the ground that the penalty there in provided for nonpayment of the tax was not legally authorized. Issue: Whether the ordinance and the law authorizing it constitute class legislation, are unjust and oppressive, and authorize what amounts to double taxation. Held: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. Section 18 of Manila Charter in fact authorize to fix tax and provide penalty as much as what has been provided in the Ordinance in question. Regarding "class legislation", 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. 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. 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 this requires 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 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.

31. Meriwether vs. Garrett 102 US 472 October 1880 Facts: The city of Memphis, Tennesee is a municipal corporation with the ordinary powers to make contracts and to levy and collect taxes to meet its expenditures. In June 1987, it was financially in a bad condition. On February 28, 1879, herein appellee Robert Garrett and others filed a bill against the City of Memphis, Tennessee asserting that they are the owners and holders of overdue bonds and other indebtedness and that because of the malfeasance and incompetency of the officers charged with the collection of taxes, a large proportion remained uncollected, thus resulting to incompetency. Thus, they pray for the appointment of a receiver and that Garrett be given the powers stated in Chapter 71 of Acts of 1877, including the power to collect all outstanding indebtedness and claim of every kind, to settle the complainants debts. Thereafter, the legislature of Tennessee passed Chapter 10, of Acts of 1879 repealing the charters of certain municipal corporations and Chapter 11, of Acts of 1879 establishing taxing districts and providing the means of local government for the same. On March 13, 1879, the legislature passed Chapter 92, of Acts of 1879, imposing the collection and disposal of taxes assessed for municipal corporations of Tennessee whose charters have been or may be repealed, or which may surrender their Charters, and for the compromise settlement of the debts of such extinct municipal corporations. Pursuant to the Acts passed, the Governor of Tennessee appointed Minor Meriwether as receiver and back-tax collector. The complainants filed an amended and supplemental bill alleging that the appointment of Meriwether is interfering and hindering Mr. Latham as receiver of the court. Though the petitioners themselves were indebted to the city of Memphis, they refused to pay to Latham. Thus, the defendants filed for injunction restraining Meriweather from collecting taxes. The presiding judge held that the parties and other creditors may recover the debts due them and that all the assets and property of the city, including unpaid taxes may be applied as payment of the debts. Latham, as receiver, was directed to retain possession of all the assets and property and may be disposed only through court order. Meriwether appealed before the SC. Issue: Whether the court has the right to seize and impound the assets of the Corporation and place those in the hands of the receiver. Whether the court has the power to collect the taxes due the creditors before the repealing of the charters. Whether the appointment of Meriwether as receiver and back-tax collector can be validly made by an act of the legislature. Held: Properties that are held for public use cannot be subjected to the payment of the debts of the city. Upon the repeal of the Charter, these properties are automatically transferred to the control of the State. Also, private properties may not be used as payments for the debt, except through taxation. The power of taxation is legislative, and cannot be exercised by any other than the legislative. Taxes levied according to law before the repeal of the charter, other than such that were levied in obedience to the special requirement of contracts, and those that were levied under judicial direction for the payment of judgments recovered against the city, cannot be collected through the instrumentality of a court of chancery at the instance of the creditors of the city. Such taxes can only be collected under authority from the legislature. If there is none, the remedy is to appeal to the legislature, which could grant the same. Lastly, the receiver and back-tax collector appointed under the authority of the act of March 13, 1879, is a public officer, clothed with authority from the legislature for the collection of the taxes levied before the repeal

of the charter. The funds collected by him from taxes levied under judicial direction cannot be appropriated to any other uses than those for which they were raised. He, as well as any other agent of the State charged with the duty of their collection, can be compelled by appropriate judicial orders to proceed with the collection of such taxes by sale of property or by suit or in any other way authorized by law, and to apply the proceeds upon the judgments. The decree of the court below is reversed. The cause is remanded, with instructions to dismiss the bills, without prejudice. If, on the settlement of the accounts of the receiver herein, it shall be found he has any money in his hands collected on taxes levied under judicial direction to pay judgments in favor of parties to the suit, an order may be made directing its appropriation to the payment of such judgment.

37. Tio vs. Videogram Regulatory Board Gr. No. L-75697 June 18, 1987 Melencio-Herrera, J. Facts: The petition 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. The DECREE imposes a tax of 30% on the gross receipts and petitioners argue that the tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution. Issue: WON that the tax provision of the DECREE is a rider and is without merit. Held: 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. The tax 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. The tax provision is not inconsistent with, nor foreign to that general subject and title. 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. 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. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. Taxation has been made the implement of the state's police power. Petition is hereby dismissed.

38.Abakada Guro Party List, et al. vs. Ermita, G.R. No. 168056, 9/1/05 Facts: Petitioners filed a petition for prohibition on 5/27/05 before R.A. No. 9337 took effect. They question the constitutionality of Sections 4, 5, & 6 of said law, amending Sections 106, 107, & 108, respectively of the National Internal Revenue Code. Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, & Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform proviso authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective 1/1/06, after any of the following conditions has been satisfied: 1. Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous years exceeds two and four-fifth percent (2 4/5%); or 2. National gov't deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%). Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28 (2) of the 1987 Philippine Constitution. Issue: Whether or not R.A. 9337 is unconstitutional Held: It has been said that taxes are the lifeblood of the gov't. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But IT does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes. Congress did not delegate the power to tax but the mere implementation of the law. The intent and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply execute the legislative policy. That Congress chose to do so in such a manner that is not within the province of the Court to inquire into, its task being to interpret the law. The VAT is a tax on spending or consumption it is levied on the sale, barter, exchange or lease of goods or properties and services. Being an indirect tax on expenditure, the seller of goods or services may pass on the amount of tax paid to the buyer. In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or business it engages in, without transferring the burden to someone else.

44) GR No. L-47252 April 18, 1941 THE APOSTOLIC OF THE MOUNTAIN PROVINCE PREFECT vs.. THE TREASURER OF THE CITY OF BAGUIO, FACTS: In 1937, an ordinance (Ord. 137) was passed in the City of Baguio. The said ordinance sought to assess properties of property owners within the defined city limits. APMP, on the other hand, is a religious corporation duly established under Philippine laws. Pursuant to the ordinance, it contributed a total amount of P1,019.37. It filed the said contribution in protest. APMP later averred that it should be exempt from the said special contribution since as a religious institution, it has a constitutionally guaranteed right not to be taxed including its properties.

ISSUE: Whether or not APMP is exempt from taxes. HELD: The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. Based on Justice Cooleys words: "While the word 'tax' in its broad meaning, includes both general taxes and special assessments, and in a general sense a tax is an assessment, and an assessment is a tax, yet there is a recognized distinction between them in that assessment is confined to local impositions upon property for the payment of the cost of public improvements in its immediate vicinity and levied with reference to special benefits to the property assessed. The differences between a special assessment and a tax are that (1) a special assessment can be levied only on land; (2) a special assessment cannot (at least in most states) be made a personal liability of the person assessed; (3) a special assessment is based wholly on benefits; and (4) a special assessment is exceptional both as to time and locality. The imposition of a charge on all property, real and personal, in a prescribed area, is a tax and not an assessment, although the purpose is to make a local improvement on a street or highway. A charge imposed only on property owners benefited is a special assessment rather than a tax notwithstanding the statute calls it a tax." In the case at bar, the Prefect cannot claim exemption because the assessment is not taxation per se but rather a system for the benefits of the inhabitants of the city. According to the stipulation of facts, the appellant can not invoke with success the exemption established by the Constitucion because was not incorporated nor proven that their Property exactly who paid the special tax were used exclusively for religious. True, it stipulated that the properties were dedicated to religious purposes, but not agreed or proved that such use was exclusive, and may therefore be that the properties to be more devoted to religious purposes and to use also be earmarked for other purposes nonreligious.

As for the validity of Ordinance No. 137 as amended, it is undeniable that Baguio City is authorized by section 8 (1) of Law No. 1963, now Article 2553 (1) of the Revised Administrative Code, for discussed creating the special tax to repay the cats caused by drainage and sewerage system that was built for the benefit of all inhabitants of that city.

45. VICTORIAS MILLING CO., INC., plaintiff-appellant, vs. THE MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS OCCIDENTAL, defendant-appellant. G.R. No. L-21183 Facts: The disputed ordinance was approved by the municipal Council of Victorias on September 22, 1956 by way of an amendment to two municipal ordinances separately imposing license taxes on operators of sugar centrals and sugar refineries. The changes were: with respect to sugar centrals, by increasing the rates of license taxes; and as to sugar refineries, by increasing the rates of license taxes as well as the range of graduated schedule of annual output capacity. Ordinance No. 1 is labeled "An Ordinance Amending Ordinance No. 25, Series of 1953 and Ordinance No. 18, Series of 1947 on Sugar Central by Increasing the Rates on Sugar Refinery Mill by Increasing the Range of Graduated Schedule on Capacity Annual Output Respectively". Of importance are the provisions of Section 1(m) relating to sugar centrals and Section 2(m) covering sugar refineries with specific reference to the maximum annual license tax, viz: Section No. 1 Any person, corporation or other forms of Companies, operating Sugar Central or engage[d] in the manufacture of centrifugal sugar shall be required to pay the following annual municipal license tax, payable quarterly, to wit: (m) Sugar Central with mill having a capacity of producing an annual output of from 1,500,001 piculs or more shall be required to pay an annual municipal license tax of P40,000.00. Section No. 2 Any person, corporation or other forms of Companies shall be required to pay an annual municipal license tax for the operation of Sugar Refinery Mill at the following rates: (m) Sugar Refinery with mill having a capacity of producing an annual output of from 1,750,001 bags of 100 lbs. or more shall be required to pay an annual municipal license tax of P40,000.00. For, the production of plaintiff Victorias Milling Co., Inc. in both its sugar central and its sugar refinery located in the Municipality of Victorias comes within these items in the schedule. Plaintiff filed asked for judgment declaring Ordinance No. 1, series of 1956, null and void. The reasons put forth by plaintiff are that: (a) the ordinance exceeds the amounts fixed in Provincial Circular 12-A issued by the Finance Department on February 27, 1940; (b) it is discriminatory since it singles out plaintiff which is the only operator of a sugar central and a sugar refinery within the jurisdiction of defendant municipality; (c) it constitutes double taxation; and (d) the national government has preempted the field of taxation with respect to sugar centrals or refineries. Issue: Whether or not Ordinance No. 1, series of 1956, of the Municipality of Victorias, Negros Occidental is valid. Held: To be recalled at this point is that Ordinance No. 1, series of 1956, is but an amendment of Ordinance No. 18, series of 1947, in reference to refineries, and Ordinance No. 25, series of 1953, covering sugar centrals. Ordinance No. 18 imposes "municipal taxes on persons, firms or corporations operating refinery mills in this municipality." Ordinance No. 25 speaks of municipal taxes "relative to the output of the sugar centrals." What are these taxes for? Resolution No. 60 of the municipal council of Victorias, adopted also on September 22, 1956 in conjunction with Ordinance No. 1, series of 1956, furnishes a ready answer. It reads in part: WHEREAS, the Municipal Treasurer informed the Municipal Council of the revenue of the Municipality and the heavy obligations which confront it because of the implementation of Minimum Wage Law on the salaries and wages it pays to its municipal employees and laborers thus greatly draining the Municipal Treasury; September 27, 1968

WHEREAS, this local administration is committed to the plan of ameliorating the deplorable situation existing in the barrios, sitios and rural areas by giving them essential and necessary facilities calculated to improve conditions thereat thru improvements of roads and feeder roads; WHEREAS, one of the causes of the municipality's financial difficulty is low rates of municipal taxes imposed by some of the ordinances enacted by the local legislative body; WHEREAS, [in] . . . the ordinances known as Ordinance No. 25, Series of 1953, dealing on theoperation of Sugar Central, and Ordinance No. 18, Series of 1947, which exclusively deals with the operation of Sugar Refinery Mill, the rates so given are rates suggested and determined by the Provincial Circular No. 12-A, dated February 27, 1940 issued by the Department of Finance as regards to Sugar Centrals; WHEREAS, the Municipal Council has come to the conclusion that the rates provided for in such ordinances are no longer adequate if made in keeping with the present high cost of living; WHEREAS, the Municipal Council has also taken cognizance of the fact that the price of sugar per picul today is more than twice its pre-war average price; . . . . Given the purposes just mentioned, we find no warrant in logic to give our assent to the view that the ordinance in question is solely for regulatory purpose. Plain is the meaning conveyed. The ordinance is for raising money. To say otherwise is to misread the purpose of the ordinance.1awphl.nt We should not hang so heavy a meaning on the use of the term "municipal license tax". This does not necessarily connote the idea that the tax is imposed as the lower court would want it to mean a revenue measure in the guise of a license tax. For really, this runs counter to the declared purpose to make money. Besides, the term "license tax" has not acquired a fixed meaning. It is often "used indiscriminately to designate impositions exacted for the exercise of various privileges." It does not refer solely to a license for regulation. In many instances, it refers to "revenue-raising exactions on privileges or activities." On the other hand, license fees are commonly called taxes. But, legally speaking, the latter are "for the purpose of raising revenues," in contrast to the former which are imposed "in the exercise of police power for purposes of regulation." We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Precisely because of these considerations the present imposition must be treated as a levy for revenue purposes. A quick glance at the big amount of maximum annual tax set forth in the ordinance, P40,000.00 for sugar centrals, and P40,000.00 for sugar refineries, will readily convince one that the tax is really a revenue tax. And then, we read in the ordinance nothing which would as much as indicate that the tax imposed is merely for police inspection, supervision or regulation. The Supreme Court ruled that Ordinance No. 1, series of 1956, of the Municipality of Victorias, was promulgated not in the exercise of the municipality's regulatory power but as a revenue measure a tax on occupation or business. The authority to impose such tax is backed by the express grant of power in Section 1 of Commonwealth Act 472. Judgment is hereby rendered: declaring valid and subsisting Ordinance No. 1, series of 1956, of the Municipality of Victorias, Province of Negros Occidental.

#46 G.R. No. L-16254 February 21, 1922 G.A. CUUNJIENG, plaintiff-appellee, vs. FRED L. PATSTONE, engineer of the city of Manila, defendant-appellant. FACTS: The plaintiff desires a erect a warehouse on Azcarraga Street but is denied a building permit until be shall have made provision for the construction of an arcade over the side walk in front of the building and until he shall have further complied with section 1 of Ordinance No.301 of the City of Manila, i.e. payment of of the assessed value of the land. The plaintiff refuses to construct the arcade and to comply with the ordinance in question on the grounds that the arcade is unnecessary and unsuitable for his warehouse and that the city has no power to require its construction; and that the ordinance in exacting the payment of a fee of one-half of the assessed value of the city of land covered by the arcade is in excess of the legislative powers of the Municipal Board and, therefore, unconstitutional. It seems, however, to be conceded that under the climatic conditions here existing, arcades are both useful and desirable from the standpoint of public convenience and that the Municipal Board, under the general welfare of the city charter, has power to provide for the construction of arcades on certain by assignment of. ISSUE: Whether the fee was validly imposed. HELD: No. The city does not posses such an extraordinary power as that of compelling property holders to lease the portions of the public sidewalks, which adjoin their lands, requires no argument. The charge of one-half of the assessed value imposed on applicants for building permits can therefore, not be considered as rent, and to be valid must either be a tax or a license fee. In imposing a fee equal to one-half of the assessed value of the portion of the sidewalk covered by the arcade in question, the Municipal Board of the city of Manila exceeded its powers. The construction of buildings is a useful enterprises and the amount of the license fee should therefore be limited to the cost of licensing, regulating, and surveillance. It appears that without the arcade the normal fee for the building permit would have been about P31, with the arcade the fee exacted is P525.60. It does not appear that the cost of licensing, regulating, and surveillance would be materially increased through the construction of the arcade, and it is therefore clear that the excess fee is imposed for the purpose of revenue There is nothing in the character of the city of Manila indicating an intention on the part of the Legislature to confer power on the Municipal Board to impose a license tax for revenue on the construction of buildings. The power conferred in relation to such construction is considered merely as police power from which, as we have seen, taxing power is not inferred. Under the circumstances, to hold the fee in this case valid would amount to judicial legislation, particularly undesirable in the present instance where the Legislature, upon its attention being called to the matter, would no doubt willingly grant as much power as could wisely be placed in the hands of the municipality. Therefore, the City of Manila has the power to require the construction of arcades in certain circumstances but that the license fee prescribed by city Ordinance No. 301 is illegal.

47. City of Iloilo vs Villanueva Facts: Spouses Villanueva are owners of apartment houses in Iloilo where a city ordinance was passed imposing license tax fees for tenant houses. The spouses Villanueva refused to pay the taxes and the City of Iloilo filed a case to recover the same. Spouses Villanueva contend that the ordinance under which the tax infringes the powers granted to the city by its charter and that the said ordinance is violative of the constitutional provisions requiring uniformity of taxation upon the theory that it is oppressive, unreasonable and discriminatory. Because of the issue on constitutionality, the case was elevated to the court of first instance. Issue: WON the municipal board imposed the license fees as a revenue measure and therefore exceeded the powers granted to it by its charter. Held: Yes. The court held that although the municipal board was granted with the power to impose a license fee in exercise of its police power, the license fee for the purpose of raising revenue is not warranted. Imposing a license fee to raise revenues must be expressly granted by the charter or statute and is not to be implied from the conferred power to license and merely regulate. The court distinguished authority to impose a license in exercise of police power from the exercise of power to tax. If the fee is designed to raise substantially more than the cost of the regulation to which it purports to be an incident, its purpose is to raise revenue. If it is a fee to be attached to a particular provision for regulation, and appears to be imposed to cover the cost of that regulation, then it is merely a regulatory measure. Further, it is well settled that a municipal corporation, unlike a sovereign state, is clothed with no inherent power of taxation. The charter or statute must plainly show an intent to confer that power or the municipality cannot assume it. It not appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to the city of Iloilo by its charter, the exercise of such power cannot be assumed and hence the ordinance in question is ultra vires in so far as its taxes a tenement house such as those belonging to the spouses Villanueva

Case 51 E S S O S T A N D A R D E A S T E R N , I N C v s . COMMISSIONEROFINTERNALREVENUEG.R. Nos. L-28508-9, July 7, 1989 F CS AT: In CTA Case No. 1251, Esso Standard Eastern Inc.(E sso ) d e d u cte d fro m its g ro ss in co m e fo r 1 9 5 9 , a s p a rt o f i t s o r d i n a r y a n d n e c e s s a r y b u s i n e s s e x p e n s e s , t h e a m o u n t i t h a d s p e n t f o r d r i l l i n g a n d e x p l o r a t i o n of its petroleum concessions. This c l a i m w a s d i s a l l o w e d b y the Commissioner of Internal Revenue (CIR) on the ground that the expenses should be capitalized and might be written off as a loss only when a "dry hole" should result. Esso then file d a n a m e n d e d re tu rn w h e re it a ske d fo r th e re fu n d o f P323,279.00 by reason of its abandonment as dry holes of s e v e r a l o f i t s o i l w e l l s . A l s o c l a i m e d a s o r d i n a r y a n d n e c e s s a r y e x p e n s e s i n t h e s a m e r e t u r n w a s t h e a m o u n t o f P 3 4 0 ,8 2 2 .0 4 , re p re se n tin g m a rg in fe e s it h a d p a id to th e Central Bank on its profit remittances to its New York head o ffice . O n A u g u st 5 , 1 9 6 4 , th e C IR g ra n te d a ta x cre d it o f P 2 2 1 ,0 3 3 .0 0 o n ly , d isa llo w in g th e cla im e d d e d u ctio n fo r the margin fees paid on the ground that the margin fees paid to the Central Bank could not be considered taxes or allowed as deductible business expenses. Esso appealed to the Court of T a x A p p e a ls (C T A ) fo r th e re fu n d o f th e m a rg in fe e s it h a d earlier paid contending that the margin fees were deductible from gross i n c o m e e i t h e r a s a t a x o r a s a n ordinary and necessary business expense. However, E s s o s appeal was denied. ISSUE: 1. W h e t h e r o r n o t t h e m a r g i n f e e s a r e t a x e s 2. Whether or not the margin fees are necessary and ordinary business expenses. RULING: 1 . N o . A t a x i s l e v i e d t o p r o v i d e r e v e n u e f o r government operations, while the proceeds of the margin fee are applied to strengthen our country's international reserves. T h e m a rg in fe e w a s im p o se d b y th e S ta te in th e e xe rcise o f i t s p o l i c e p o w e r a n d n o t t h e p o w e r o f t a x a t i o n . 2. N o . Ordinarily, an expense will be considered 'necessary' where the expenditure is appropriate and helpful in the development of th e ta xp a ye r's b u sin e ss. It is 'o rd in a ry' w h e n it co n n o te s a p a ym e n t w h ich is n o rm a l in re la tio n to th e b u sin e ss o f th e t a x p a y e r a n d t h e s u r r o u n d i n g circumstances. Since the margin fees in question were incurred for the r e m i t t a n c e of funds to Esso's Head Office in New York, which is a separate a n d d i s t i n c t i n c o m e t a x p a y e r f r o m t h e b r a n c h i n t h e P h ilip p in e s, fo r its d isp o sa l a b ro a d , it ca n n e v e r b e sa id therefore that the margin fees were appropriate and helpful in t h e d e v e l o p m e n t o f E s s o ' s b u s i n e s s i n t h e P h i l i p p i n e s e xclu sive ly o r w e re in cu rre d fo r p u rp o se s p ro p e r to th e co n d u ct o f th e a ffa irs o f E sso 's b ra n ch in th e P h ilip p in e s e x c l u s i v e l y o r f o r t h e p u r p o s e o f r e a l i z i n g a p r o f i t o r o f minimizing a loss in the Philippines exclusively

53. PHILIPPINE AIRLINES, INC. (PAL), plaintiff-appellant, vs. ROMEO F. EDU, in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity as National Treasurer, defendants-appellants. 1988 Aug 15En Banc G.R. No. L-41383 FACTS: Under its franchise, PAL is exempt from the payment of taxes. However, LTO Commissioner issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest. After paying under protest, PAL demanded a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise. Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory exactions and not revenue measures and, therefore, do not come within the exemption granted to PAL under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell. The trial court rendered a decision dismissing the appellant's complaint "guided by the later ruling laid down by the Supreme Court in the case of Republic v. Philippine Rabbit Bus Lines, Inc. (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the case to us. ISSUE: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees? HELD: The motor vehicle registration fees are taxes. It appears that the expenditures of the Motor Vehicle Office are but a small portion ---- about 5 per centum ---- of the total collections from motor vehicle registration fees. And as proof that the money collected is not intended for the expenditures of that office, the law itself provides that all such money shall accrue to the funds for the construction and maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, for their express object is to provide revenue with which the Government is to discharge one of its principal functions ---- the construction and maintenance of public highways for everybody's use. They are veritable taxes, not merely fees.

If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax (Umali, id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision appears as Section 59(b) in the Land Transportation Code. It is patent there from that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 59(b) speaks of "taxes or fees . . . for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur . . ." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional tax," where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 4136. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration fee and chauffeurs' license fee. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of sec. 61, aforequoted. SECOND ISSUE: May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL? The answer is NO. The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5431, dated June 27, 1968, repealed all earlier tax exemptions of corporate taxpayers found in legislative franchises similar to that invoked by PAL in this case.

56. NDC V. CIR Facts The national Development Company entered into contracts in Tokyo with several Japanese shipbuilding companies for the construction of twelve ocean-going vessels. The purchase price was to come from the proceeds of bonds issued by the Central Bank. Initial payments were made in cash and through irrevocable letters of credit. Fourteen promissory notes were signed for the balance by the NDC and, as required by the shipbuilders, guaranteed by the Republic of the Philippines. Pursuant thereto, the remaining payments and the interests thereon were remitted in due time by the NDC to Tokyo. The vessels were eventually completed and delivered to the NDC in Tokyo. The NDC remitted to the shipbuilders in Tokyo the total amount of US$4,066,580.70 as interest on the balance of the purchase price. No tax was withheld. The Commissioner then held the NDC liable on such tax in the total sum of P5,115,234.74. Negotiations followed but failed. The BIR thereupon served on the NDC a warrant of distraint and levy to enforce collection of the claimed amount. The NDC went to the Court of Tax Appeals.The BIR was sustained by the CTA except for a slight reduction of the tax deficiency in the sum of P900.00, representing the compromise penalty. The NDC then came to this Court in a petition for certiorari. Issue: Whether or not NDC is liable for deficiency tax Ruling The Japanese shipbuilders were liable to tax on the interest remitted to them under Section 37 of the Tax Code. The petitioner argues that the Japanese shipbuilders were not subject to tax under the above provision because all the related activities (the signing of the contract, the construction of the vessels, the payment of the stipulated price, and their delivery to the NDC) were done in Tokyo. The law, however, does not speak of activity but of "source," which in this case is the NDC. This is a domestic and resident corporation with principal offices in Manila. As the Tax Court put it: It is quite apparent, under the terms of the law, that the Government's right to levy and collect income tax on interest received by foreign corporations not engaged in trade or business within the Philippines is not planted upon the condition that 'the activity or labor and the sale from which the (interest) income flowed had its situs' in the Philippines. The law specifies: 'Interest derived from sources within the Philippines, and interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise.' Nothing there speaks of the 'act or activity' of nonresident corporations in the Philippines, or place where the contract is signed. The residence of the obligor who pays the interest rather than the physical location of the securities, bonds or notes or the place of payment, is the determining factor of the source of interest income. It is also incorrect to suggest that the Republic of the Philippines could not collect taxes on the interest remitted because of the undertaking signed by the Secretary of Finance in each of the promissory notes that: Upon authority of the President of the Republic of the Philippines, the undersigned, for value received, hereby absolutely and unconditionally guarantee (sic), on behalf of the Republic of the Philippines, the due and punctual payment of both principal and interest of the above note. There is nothing in the above undertaking exempting the interests from taxes. Petitioner has not established a clear waiver therein of the right to tax interests. Tax exemptions cannot be merely implied but must be categorically and unmistakably expressed. Any doubt concerning this question must be resolved in favor of the taxing power.

57. FRANCIA VS IAC Facts: Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated at Pasay City, Metro Manila. On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to the assessed value of the aforesaid portion. However, Since 1963 up to 1977 , Francia failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public auction by the City Treasurer of Pasay City in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property. Petitioner Francia contended that he was not informed of the sale, thus, he filed an action, and subsequently an amended complaint to annul the sale. The RTC ruled in favor of the defendant, ordering, among others, the Registry of Deeds to issue a nev TCT to Ho Fernandez. Hence, this petition ISSUE: Whether or not Francia's obligation to pay Real Property tax was offset by the indebtedness of the Government to him in the amount of Php 4116.00. HELD: The Supreme Court affirmed the RTC 's decision. It explained: A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out of the contract or transaction sued on. ... (80 C.J.S., 7374). "The general rule based on grounds of public policy is well-settled that no set-off admissible against demands for taxes levied for general or local governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature of contracts between the party and party but grow out of duty to, and are the positive acts of the government to the making and enforcing of which, the personal consent of individual taxpayers is not required. ..."

59. Philex vs CIR aug 28 1998 Facts: Philex Mining Corp assails the order to pay tax for the amount of 110,677.669.52. Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P119,977,037.02 plus interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities according to him. The CTA and CA denied the petitioners request to offset the tax liabilities by the pending claim. However, few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input credit/refund which is way more than the tax liability assessed. Issue: whether or not it is possible to offset Philex's tax liabilities now that the pending tax refund claim had been decided. Held: Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. 17 There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. 18 We find no cogent reason to deviate from the aforementioned distinction. We have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a pending tax claim for refund or credit against the government which has not yet been granted. It must be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of bargain. 25 Hence, a tax does not depend upon the consent of the taxpayer. 26 If any taxpayer can defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit, this would adversely affect the government revenue system. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection of the tax is contingent on the result of the lawsuit it filed against the government. Philex's theory that would automatically apply its VAT input credit/refund against its tax liabilities can easily give rise to confusion and abuse, depriving the government of authority over the manner by which taxpayers credit and offset their tax liabilities.

61. Pascual vs. Sec. of Public Works, et. Al 110 Phil. 331 Facts: Petitioner Wenceslao Pascual instituted an action for declaratory relief, with injunction on the ground that RA 920, An Act Appropriating for Public Works allotting P85,000.00 for construction and repair of feeder road terminals, was indeed planned subdivision roads within Antonio Subdivision, owned by respondent Jose Zulueta, a member of the Senate of the Philippines at the time of the passage and approval of the Act. On May 29, 1953, Zulueta addressed a letter to the Municipal Council of Pasig, Rizal offering to donate the feeder roads, subject to the condition that the donor would submit the plan of the roads and agree to change the names of two of the street. The donation was not executed, thus, Zulueta wrote a letter to the district engineer calling his attention for the approval of RA 920. The district engineer did not endorse the letter because the feeder roads were private property. Thus, the petitioner prayed that RA 920 be declared unconstitutional. CFI Rizal dismissed the case. Issue: Whether the appropriation of funds in RA 920 is unconstitutional. Held: Yes, the appropriation of funds was held unconstitutional. Under the express and implied provisions of the Constitution, public funds may only be used for public purpose. The right of the Legislature to appropriate public funds is correlative with its right to tax. Under constitutional provisions of against taxation unless for public purpose, no appropriation of state funds may be made other than public purpose. Thus, in the case at bar, the appropriation was for a private purpose, the land being owned by Zulueta. The act of the Congress is null and void itself and the donation was made five (5) months after the Act was approved, thus, the judicial nullification of the donation does not determine the constitutionality of the Republic Act.

#67

LOUISVILLE & JEFFERSONVILLE FERRY CO. v. COM. OF KENTUCKY, 188 U.S. 385 (1903)

188 U.S. 385 LOUISVILLE & JEFFERSONVILLE FERRY RY COMPANY, Plff. in Err., v. COMMONWEALTH OF KENTUCKY. No. 17. Argued January 17, 1902 Facts: This action was brought against the Louisville & Jeffersonville Ferry Company, a corporation of Kentucky, to recover certain taxes alleged to be due that commonwealth in virtue of the valuation and assessment by the state board of valuation and assessment of the corporate franchise of the defendant company for the year 1894. By an act of the general assembly of Kentucky, approved March the 16th, 1869, the Louisville & Jeffersonville Ferry Company was created a corporation, with power to carry on the business of ferrying freight, passengers, and vehicles over the Ohio river, and to purchase ferryboats, wharves, and ferry franchises for any ferry or ferries between Louisville, Kentucky, and Jeffersonville, Indiana; and upon the purchase of such franchises to have the right to carry on and conduct a ferry or ferries between those cities. It was also authorized to accept boats, franchises, wharves, and other property in payment of stock subscribed and at such prices as might be agreed on. The defendant company states in its answer 'that the only ferry franchises owned by it are those which were granted by the authorities of the state of Indiana.' All tangible property of the defendant company in Kentucky was assessed in the fall of 1893 for the state tax for the year 1894, and that tax was paid. The property so assessed consisted of all the company's boats and other personal property, it having no real estate in Kentucky. For the same year all real estate owned by the defendant in Indiana was assessed by the authorities of that state, and the tax thereon paid. The company had no intangible property except the franchise granted to it. 'The board of valuation and assessment ascertained what had been the net earnings of the defendant up to September 15th, 1893, for the year preceding that date. It then capitalized said net earnings at 6 per cent,- that is, to have been such an amount as at 6 per cent would produce the sum of $121,050. From this the board deducted $54,164, being the assessed value of the defendant's property in Kentucky and Indiana, leaving the sum of $66,886 as the value of defendant's franchise.' The boats owned by the defendant company when this action was brought, and also those owned by it in 1893, 'were regularly enrolled, under the laws of the United States, at the port of Louisville, and were assessed, as above stated, by the sheriff of Jefferson county, in the fall of that year, and the tax paid upon them in the year 1894.' The defendant brought 'before the board of valuation and assessment, before that board had made its assessment final, the fact that its whole capital stock had been issued in consideration of the transfer of the said ferry franchises granted by the state of Indiana and attendant property, and showed that all its property had been assessed as above explained, and protested against any assessment being made upon its franchises as being beyond the jurisdiction of the said board and outside of the territorial jurisdiction of the state of Kentucky, and not taxable in Kentucky; and it protested against the said board making any valuation whatever of its capital stock because all of its property had been once assessed, and any valuation made upon its capital stock would include alone these franchises and profits resulting to the defendant from engaging in interstate commerce; and the defendant further requested the said board, if it should insist upon making a valuation upon its capital stock, to deduct there from the value of these franchises. The said board refused to enter into the question of the valuation of the said franchise granted by the state of Indiana, as aforesaid, and owned and operated by this defendant, and refused to regard the fact that the profits which were earned by this defendant came from interstate commerce.'

Issue: Whether the assessment of the state of Kentucky is beyond its jurisdiction. Held: There is, in our judgment, no escape from the conclusion that Kentucky thus asserts its authority to tax a property right, an incorporeal hereditament, which has its situs in Indiana. While the mode, form, and extent of taxation are, speaking generally, limited only by the wisdom of the legislature, that power is limited by a principle inhering in the very nature of constitutional government, namely, that the taxation imposed must have relation to a subject within the jurisdiction of the taxing government. We recognize the difficulty which sometimes exists in particular cases in determining the situs of personal property for purposes of taxation, and the above cases have been referred to because they have gone into judgment and recognize the general rule that the power of the state to tax is limited to subjects within its jurisdiction or over which it can exercise dominion. No difficulty can exist in applying the general rule in this case; for, beyond all question, the ferry franchise derived from Indiana is an incorporeal hereditament derived from and having its legal situs in that state. It is not within the jurisdiction of Kentucky. The taxation of that franchise or incorporeal hereditament by Kentucky is, in our opinion, a deprivation by that state of the property of the ferry company without due process of law in violation of the 14th Amendment of the Constitution of the United States; as much so as if the state taxed the real estate owned by that company in Indiana.

74)THE STANDARD OIL COMPANY OF NEW YORK, vs. JUAN POSADAS, Jr., Collector of Internal Revenue of the Philippine Islands, February 26, 1931 G.R. No. L-34029 FACTS: The Standard Oil Company of New York is a foreign corporation duly authorized to do business in the Philippines. During the period from October 1, 1929, to December 31, 1929, the Standard Oil Company sold and delivered in the Philippines to the Quartermaster Department of the United States Army, for the use of the Army, fuel oil and asphalt of the value of P6,832.84. The Collector of Internal Revenue of the Philippine Government, acting under authority of section 1459 of the Administrative Code and Act No. 3243 of the Philippine Legislature as ratified by the Congress of the United States, demanded a tax of one and one-half per cent upon the value of the merchandise, amounting to P102.49. During the identical period of time above-mentioned, the Standard Oil Company likewise made delivery in the Philippines to the United States Navy, under a contract executed in New York, United States, for the use of the Navy, of fuel oil of the value of P172,059.36, which was paid in New York, and which contract provided that all internal revenue taxes and charges under the laws of the Philippine Islands were to be assumed and paid by the United States Navy. The Collector of Internal Revenue required payment of the sales tax upon the value of the fuel oil, in the amount of P2,580.89. the Standard Oil Company paid the taxes assessed under protest and is now suing to recover the corresponding refunds. ISSUE: Whether sales of merchandise made in the Philippines to the United States Army and the United States Navy are subject to the sales tax.

Held: No,. The United States Army and the United States Navy derive their powers from the Constitution of the United States. The Congress of the United States has created two agencies, or more correctly stated, three agencies to serve the United States in the Philippine Islands. Two of these agencies are the United States Army and the United States Navy, and the third is the Government of the Philippine Islands. The military establishment and the civil government stand side by side but independent of each other in the Philippines. The tax collected from the plaintiff by one of these agencies, the Philippine Government, is in reality a tax on the United States Army and the United States Navy in other words, on the United States Government for the consumer pays the tax as part of the purchase price. It would further appear perfectly clear that the principle which prohibits a State from taxing the instrumentalities of the Federal Government applies with equal force to the Philippine Islands. It is sufficient to state that, in our opinion, the assessment and collection by the Philippine Government of the tax on sales of merchandise made in the Philippines to the United States Army and the United States Navy is illegal. Judgment reversed, and the record ordered returned to the court of origin for further proceedings, without express finding as to costs in either instance.

75.NATIONAL DEVELOPMENT COMPANY, plaintiff-appellee, vs. CEBU CITY and AUGUSTO PACIS as Treasurer of Cebu City, defendant-appellants FACTS: Petitioner National Development Company (NDC), a government-owned or controlled corporation (GOCC) existing by virtue of C.A. 182 and E.O. 399, is authorized to engage in commercial, industrial, mining, agricultural and other enterprises necessary or contributory to economic development or important to public interest. On 20 March 1970, NDC wrote the City Assessor demanding full refund of the real estate taxes paid to CEBU claiming that the land and the warehouse standing thereon belonged to the Republic and therefore exempt from taxation. CEBU did not acquiesce in the demand, hence, the present suit filed 25 October 1972 in the Court of First Instance of Manila. ISSUE: Is a public land reserved by the President for warehousing purposes in favor of a government-owned or controlled corporation, as well as the warehouse subsequently erected thereon, exempt from real property tax? HELD: The National Development Company (NDC) is exempt from real estate tax on the reserved land but liable for the warehouse erected thereon. A reserved land is defined as a "[p]ublic land that has been withheld or kept back from sale or disposition." The land remains "absolute property of the government." The government "does not part with its title by reserving them (lands), but simply gives notice to all the world that it desires them for a certain purpose." the warehouse constructed on a public reservation, a different rule should apply because "[t]he exemption of public property from taxation does not extend to improvements on the public lands made by pre-emptioners, homesteaders and other claimants, or occupants, at their own expense, and these are taxable by the state . . ." Consequently, the warehouse constructed on the reserved land by NWC (now under administration by NDC), indeed, should properly be assessed real estate tax as such improvement does not appear to belong to the Republic.

#76 G.R. No. L-21841 October 28, 1966 ESSO STANDARD EASTERN, INC., petitioner-appellant, vs. ACTING COMMISSIONER OF CUSTOMS, respondent-appellee. FACTS: Claim for the refund of P722.84 paid in 1956 as special import tax on pump parts imported by petitioner. Petitioner's ground: The imported articles "consist of equipment and spare parts for its own exclusive use and therefore were exempt from special import tax", by the terms of Section 6, Republic Act 1394. The Collector of Customs of Manila rejected the claim. Respondent Acting Commissioner of Customs, on appeal, affirmed the rejection. Petitioner's case suffered the same fate in the Court of Tax Appeals. ISSUE: Are the imported pump parts exempt from the payment of special import tax? HELD: No. By Section 1 of Republic Act 1394, a special import tax is imposed "on all goods, articles or products imported or brought into the Philippines" during the period from 1956 up to and including 1965 in accordance with the schedule of rates therein provided. Exempt from this tax, by express mandate of Section 6 of the same law, inter alia, are "machinery, equipment, accessories, and spare parts, for the use of industries, miners, mining enterprises, planters and farmers". Petitioner is engaged in the industry of processing gasoline, and manufacturing lubricating oil, grease and tin containers. Petitioner owns gasoline stations with pumps, which are leased to and operated by gasoline dealers. It sells gasoline to these dealers. The pump parts imported by petitioner in 1956 were intended, installed and actually used by gasoline dealers in pumping gasoline from under around tanks into customers' motor vehicles. These pump parts, in other words, are used in the sale at retail of gasoline not by petitioner but by lessees of gasoline stations. In this factual environment, it is quite evident that the pump parts are not used in petitioner's industry of processing gasoline, or manufacturing lubricating oil, grease and tin containers. The drive of petitioner's argument is that marketing of its gasoline product "is corollary to or incidental to its industrial operations." But this contention runs smack against the familiar rules that exemption from taxation is not favored, and that exemption in tax statutes are never presumed. Which are but statements in adherence to the ancient rule that exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.

Case 81 Eastern Theatrical Co. vs. Alfonso GR L-1104, 31 May 1944 Second Division, Perfecto (J): 5 concur Facts: The municipal board of Manila enacted Ordinance 2958 (series of 1946) imposing a fee on the price of every admission ticket sold by cinematograph theaters, vaudeville companies, theatrical shows and boxing exhibitions, in addition to fees imposed under Sections 633 and 778 of Ordinance 1600. Eastern Theatrical Co., among others, question the validity of ordinance, on the ground that it is unconstitutional for being contrary to the provisions on uniformity and equality of taxation and the equal protection of the laws inasmuch as the ordinance does not tax other kinds of amusement, such as race tracks, cockpits, cabarets,concert halls, circuses, and other places of amusement. Issue: Whether the ordinance violates the rule on uniformity and equality of taxation. 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; and the theater companies cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be confused with those not included in the ordinance. The fact that somew places of amusement are not taxed while others, like the ones herein, are taxed is no argument at all against the equality and uniformity of the tax imposition.

83. JUAN LUNA SUBDIVISION, INC., plaintiff-appellee, vs. M. SARMIENTO, ET AL., defendants-appellants. 1952 May 28 En Banc G.R. No. L-3538 D E C I S I O N FACTS: Juna Luan Subd., Inc. (Juan, for brevity) issued to the City Treasurer of Manila, and the City Treasurer accepted, Check No. 628334. This check was to be applied to plaintiff's land tax for the second semester of 1941 the exact amount of which was yet undetermined, and so it was entered in the ledger, Exhibit "F", as a deposit by the taxpayer. The City Treasurer's office does not show what was done with the check. But the books of the Philippine Trust Company do reveal that it was deposited with the Philippine National Bank, the City Treasurer's sole depository, and that it was presented by that Bank to the Philippine Trust Company and was cashed by the drawee. The City Treasurer refused after liberation to refund the plaintiff's deposit or apply it to such future taxes as might be found due, while the Philippine Trust Company was unwilling to reverse its debit entry against the Juan Luna Subdivision, Inc. It was upon this predicament that the Juan Luna Subdivision, Inc. brought this suit against the City Treasurer and the Philippine Trust Company as defendants in the alternative. ISSUE: Whether the provision allowing the remission covers taxes paid before the enactment of Commonwealth Act 703 or taxes which were still unpaid. HELD: There is no ambiguity in the language of the law. It says "taxes and penalties due and payable," the literal meaning of which taxes owed or owing. Note that the provision speaks of penalties, and note that penalties accrue only when taxes are not paid on time. The word "remit" underlined by the appellant does not help its theory, for to remit is to desist or refrain from exacting, inflicting, or enforcing something as well as to restore what has already been taken. The remission of taxes due and payable to the exclusion of taxes already collected does not constitute unfair discrimination. Each set of taxes is a class by itself, and the law would be open to attack as class legislation only if all taxpayers belonging to one class were not treated alike. They are not. As to the justice of the measure, the confinement of the condonation to delinquent taxes was not without good reason. The property owners who had paid their taxes before liberation and those who had not were not on the same footing on the need of material relief. It is true that the ravages and devastations brought by war operations had rendered the bulk

84) G.R. No. L-4376

May 22, 1953

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. Teotimo A. Roja for appellants. City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees. FACTS: This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal Board of the City of Manila on March 24, 1950. The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the trucks in said City, challenge the validity of said ordinance 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. The respondents, contend on their part that the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it constitute double taxation. Court of First Instance of Manila sustained the validity of the ordinance and dismissed the petition. Hence this appeal. The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority conferred by section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board the power "to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding." It is contended that this power is broad enough to confer upon the City of Manila the power to enact an ordinance imposing the property tax on motor vehicles operating within the city limits. ISSUE: Whetehr or not the ordinance levies a license tax and therefore beyond the power of the City of Manila. Held: It has been held that "If a tax is in its nature an excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise. The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on the other hand, if the tax is levied upon persons on account of their business, it will be construed as a license or occupation tax, even though it is graduated according to the property used in such business, or on the gross receipts of the business. (37 C.J., 172) The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad valoremyet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to. It is also our opinion that 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

84. G.R. No. L-4376

May 22, 1953

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. Teotimo A. Roja for appellants. City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees. FACTS: This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal Board of the City of Manila on March 24, 1950. The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the trucks in said City, challenge the validity of said ordinance 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. The respondents, contend on their part that the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it constitute double taxation. Court of First Instance of Manila sustained the validity of the ordinance and dismissed the petition. Hence this appeal. The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority conferred by section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board the power "to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding." It is contended that this power is broad enough to confer upon the City of Manila the power to enact an ordinance imposing the property tax on motor vehicles operating within the city limits. ISSUE: Whetehr or not the ordinance levies a license tax and therefore beyond the power of the City of Manila. Held: It has been held that "If a tax is in its nature an excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise. The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on the other hand, if the tax is levied upon persons on account of their business, it will be construed as a license or occupation tax, even though it is graduated according to the property used in such business, or on the gross receipts of the business. (37 C.J., 172) The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad valoremyet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to. It is also our opinion that 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

86. BASCO V. PAGCOR Facts PAGCOR was created by virtue of PD 1067-A dated Jan1, 1977 and was granted a franchise under PD 1067-B also dated Jan 1, 1977 to establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines. Its operation was originally conducted in the well known floating casino Philippine Tourist. The operation was considered a success for it proved to be a potential source of revenue to fund infrastructure and socioeconomic projects, thus, PD 1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective. Subsequently, on July 11, 1983, PAGCORs charter was created under PD 1869 to enable the Government to fully regulate and centralize all games of chance authorized by existing franchise or permitted by law, under the following declared policy which states: It is hereby declared to be the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law. Petitioners Basco et al. filed an instant petition seeking to annul PAGCOR Charter (PD 1869) because it waived the Manila City government's right to impose taxes and license fees, which is recognized by law. Futhermore, petitioners alleged that the law has intruded into the local government's right to impose local taxes and license fees, which is in contravention of the constitutionally enshrined principle of local autonomy. Issue: Whether or not PAGCORs charter has intruded into the local governments right to impose taxes and license fees Ruling Petitioners contend that the exemption clause in P.D. 1869 is violative of the principle of local autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local." Their contention is without merit for the following reasons: (a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it. Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent power to tax". (b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal corporations are mere creatures of Congress" which has the power to "create and abolish municipal corporations" due to its "general legislative powers." Congress, therefore, has the power of control over Local governments. And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. (c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government. Therefore, only the National Government has the power to issue "licenses or permits" for the operation of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the issuance of "licenses or permits" is no longer vested in the City of Manila. (d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government. (e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. 1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides: Sec. 5. Each local government unit shall have the power to create its own source of revenue and to levy taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government. The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees.

87. ABAKADA vs Purisima FACTS: The petitioners sought to prevent respondents from implementing and enforcing RA 93352 (Attrition Act of 2005), Petitioners alleged, among others the unconstitutionality of the law because the assailed act contained a provision in which The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to promulgate and issue the implementing rules and regulations of RA 9335, to be approved by a Joint Congressional Oversight Committee created for such purpose. On the other hand, respondent, contended, among others that the creation of the congressional oversight committee under the law enhances, rather than violates, separation of powers. It ensures the fulfillment of the legislative policy and serves as a check to any over-accumulation of power on the part of the executive and the implementing agencies. ISSUE: Whether or not the creation of the Congressional Oversight Comittee is unconstitutional HELD: The Supreme court partially granted the petiton and declared unconstitutional Section 12 of the assailed act, which created the Congressional Oversight Committee. It explained: Where Congress delegates the formulation of rules to implement the law it has enacted pursuant to sufficient standards established in the said law, the law must be complete in all its essential terms and conditions when it leaves the hands of the legislature. And it may be deemed to have left the hands of the legislature when it becomes effective because it is only upon effectivity of the statute that legal rights and obligations become available to those entitled by the language of the statute. Subject to the indispensable requisite of publication under the due process clause,61 the determination as to when a law takes effect is wholly the prerogative of Congress.62 As such, it is only upon its effectivity that a law may be executed and the executive branch acquires the duties and powers to execute the said law. Before that point, the role of the executive branch, particularly of the President, is limited to approving or vetoing the law.63 From the moment the law becomes effective, any provision of law that empowers Congress or any of its members to play any role in the implementation or enforcement of the law violates the principle of separation of powers and is thus unconstitutional. Under this principle, a provision that requires Congress or its members to approve the implementing rules of a law after it has already taken effect shall be unconstitutional, as is a provision that allows Congress or its members to overturn any directive or ruling made by the members of the executive branch charged with the implementation of the law.

89. MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC., petitioner, vs. DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS ORIENTAL, respondents. Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose members, individually or collectively, are engaged in the buying and selling of copra in Misamis Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum Circular 47-91 on June 11, 1991, which implemented VAT Ruling 190-90, copra was classified as agricultural food product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution. Respondents represent departments of the executive branch of government charged with the generation of funds and the assessment, levy and collection of taxes and other imposts. Under 103(a), the sale of agricultural non-food products in their original state is exempt from VAT only if the sale is made by the primary producer or owner of the land from which the same are produced. The sale made by any other person or entity, like a trader or dealer, is not exempt from the tax. On the other hand, under 103(b) the sale of agricultural food products in their original state is exempt from VAT at all stages of production or distribution regardless of who the seller is.

On June 11, 1991, respondent Commissioner of Internal Revenue issued the circular in question, classifying copra as an agricultural non-food product and declaring it "exempt from VAT only if the sale is made by the primary producer pursuant to Section 103(a) of the Tax Code, as amended." 2
The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed when copra was classified as an agricultural food product under 103(b) of the NIRC. Petitioner contends that the Bureau of Food and Drug of the Department of Health and not the BIR is the competent government agency to determine the proper classification of food products. Petitioner cites the opinion of Dr. Quintin Kintanar of the Bureau of Food and Drug to the effect that copra should be considered "food" because it is produced from coconut which is food and 80% of coconut products are edible.

issues: 1. Whether copra is an agricultural food or non-food product for purposes of assessing VAT.
2. Whether RMC No. 47-91 is discriminatory and violative of the equal protection clause of the Constitution because while coconut farmers and copra producers are exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add that oil millers do not enjoy tax credit out of the VAT payment of traders and dealers. 3. Whether RMC No. 47-91 is counterproductive because traders and dealers would be forced to buy copra from coconut farmers who are exempt from the VAT and that to the extent that prices are reduced the government would lose revenues as the 10% tax base is correspondingly diminished. held: 1. In interpreting 103(a) and (b) of the NIRC, the Commissioner of Internal Revenue gave it a strict construction consistent with the rule that tax exemptions must be strictly construed against the taxpayer and liberally in favor of the state. Indeed, even Dr. Kintanar said that his classification of copra as food was based on "the broader definition of food which includes agricultural commodities and other components used in the manufacture/processing of food." Moreover, as the government agency charged with the enforcement of the law, the opinion of the Commissioner of Internal Revenue, in the absence of any showing that it is plainly wrong, is entitled to great weight. Indeed, the ruling was made by the Commissioner of Internal Revenue in the exercise of his power under 245 of the NIRC to "make rulings or opinions in connection with the implementation of the provisions of internal revenue laws,including rulings on the classification of articles for sales tax and similar purposes."

In the case at bar, we find no reason for holding that respondent Commissioner erred in not considering copra as an "agricultural food product" within the meaning of 103(b) of the NIRC. As

former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. 8
It is not true that oil millers are exempt from VAT. Pursuant to 102 of the NIRC, they are subject to 10% VAT on the sale of services. Under 104 of the Tax Code, they are allowed to credit the input tax on the sale of copra by traders and dealers, but there is no tax credit if the sale is made directly by the copra producer as the sale is VAT exempt. In the same manner, copra traders and dealers are allowed to credit the input tax on the sale of copra by other traders and dealers, but there is no tax credit if the sale is made by the producer. 3. This is not so. The sale of agricultural non-food products is exempt from VAT only when made by the primary producer or owner of the land from which the same is produced, but in the case of agricultural food products their sale in their original state is exempt at all stages of production or distribution. At any rate, the argument that the classification of copra as agricultural non-food product is counterproductive is a question of wisdom or policy which should be addressed to respondent officials and to Congress. the petition is DISMISSED.

91. State Railroad Tax Cases 92 US 575 The Act of Illinois of 1872 makes special provisions for the taxation of railroads and other corporations, the main feature of which is leaving to each county, city and town the property local in the same manner that other similar property is taxed in that municipality, and at the same time to subject to the taxation on some fair bases that which is not in its nature so clearly local, but which, by reason of its being incident to the railroad, should pay its share to the State and to all the countries, towns and citites through of which any part of the road runs. With this, the appellees insist that the Act creating the State Board of Equalization is unconstitutional because it classified the property to determine what addition or deduction from the aggregate assessed value should be made. They contest that the Cinstitution requires the property, for the purpose of taxation, be valued separately, stating that the exaction made by means of the illegal assessments set forth that the Act is unconstitutional. Issues: Whether taxes may be subject to injunction. Whether the Act is unconstitutional and violates the equal protection clause. Held: No, taxes may not be subjected to injunction and the Act is constitutional. While the court does not lay down absolute rule limiting the powers of the court in restraining the collection of taxes, it is essential that it cannot authorize injunction against its collection. No injunction, preliminary or final, can ba granted until it is shown that all taxes conceded to be due have been paid or tendered. Also, it is not unconstitutional that the city prescribed a different rule of taxation for companies and industries because the equal protection clause in the Constitution implies that it shall be equal to everyone according to the class of which it operates. Each person shall pay a tax according to the value of his property. Thus, the decisions in the cases are reversed. The cases are remanded to the Circuit Court with directions to dissolve the injunction and dismiss the bills.

96.JOAQUIN DE VILLATA, petitioner, vs. J.S. STANLEY, Acting Insular Collector of Customs, respondent Facts: Petitioner applied for a writ of prohibition directed against the Collector of Customs to restrain the latter from enforcing against the former the provisions of Customs Administrative Circular (CAC) No. 627 that prescribes regulations for the transportation of mails on vessels engaged in the Philippine coastwise trade. Petitioner alleged in his complaint that he is the master of S.S. Vizcaya of the coastwise trade; that as such captain , on July 6, 1912, when sailing from the port of Gubat to the port of Legaspi, he failed to notify the postmaster of the former port, in advance, of his intended sailing, and therefore failed to carry the mails between said ports; that defendant is threatening to suspend or revoke the license of plaintiff by reason of said facts, under and by virtue of the terms of Customs Administrative Circular No. 627. Issue: Whether or not the Collector of Customs is correct Held: The Insular Collector of Customs was clothed with the necessary authority for the preparation, promulgation and enforcement of CAC No. 627 at the date of its promulgation and at the date of the institution of this action. Our statutes , although they require uniformity of taxation, do not prescribe the rule as to equality in taxation which prevails in some jurisdiction. The constitutional law requiring uniformity of taxation imposes the duty upon the State directly to lay its burdens uniformly and evenly upon all.

97. G.R. No. L-6093

February 24, 1954

THE SHELL CO. OF P.I., LTD., plaintiff-appellant, vs. E. E. VAO, as Municipal Treasurer of the Municipality of Cordova, Province of Cebu, defendant-appellee. PADILLA, J.: Facts: The Municipal Council of Cordova, Province of Cebu, adopted the following ordinances: No. 10, series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the privilege of installation manager; No. 9, series of 1947, which imposes an annual tax of P40 for local deposits in drums of combustible and inflammable materials and an annual tax of P200 for tin can factories; and No. 11, series of 1948, which imposes an annual tax of P150 on tin can factories having a maximum output capacity of 30,000 tin cans. 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 defendant denies that they are so. Issue: Whether or not the subject municipal ordinances are valid. Held: It is contended that as the municipal ordinance imposing an annual tax of P40 for minor local deposit in drums of combustible and inflammable materials, and of P200 for tin factory was adopted under and pursuant to Section 2244 of the Revised Administrative Code, which provides that the municipal council in the exercise of the regulative authority may require any person engaged in any business or occupation to obtain permit for which a reasonable fee may be charged, such annual fees are unauthorized and illegal. 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 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 articles. Likewise, Ordinance No. 10, which imposes as annual tax of P150 on installation manager comes under the provisions of Commonwealth Act No. 472. But it is claimed that installation manager is a designation made by the plaintiff and such designation cannot be deemed to be a calling as defined in Section 178 of the National Internal Revenue Code, and that the installation manager employed by the plaintiff is a salaried employee which may not be taxed by the municipal council under the provisions of Commonwealth Act no. 472. This contention is without merit, because even if the installation manager is a salaried employee of the plaintiff, still, it is an occupation and one occupation or line of business does not become exempt by being conducted with some other occupation or business for which such tax has been paid and the occupation tax must be paid by each individual engaged in a calling subject thereto. And pursuant to Section 179 of the National Internal Revenue Code, the payment of occupation tax shall not exempt any person from any tax provided by law or ordinance in places where such occupation in regulated by municipal law, nor shall the payment of any such tax be held to prohibit any municipality from placing a tax upon the same occupation, for local purposes, where the imposition of such tax is authorized by law. 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 or 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. Lastly, Ordinance no. 11 is valid and lawful because it is neither a percentage tax nor one on specified articles, which are the only exemptions provided in Section 1, Commonwealth Act no. 472. Neither does it fall under any of the prohibitions provided for in Section 3 of the same Act. The judgment appealed from is hereby affirmed, with costs against the appellant.

102) G.R. No. L-25501 July 29, 1977COMMISSIONER OF INTERNAL REVENUE, vs. PHILIPPINE POWER AND DEVELOPMENT CO., INC, and THE COURT OF TAX APPEALS, G.R. No. L-25507 July 29, 1977PHILIPPINE POWER AND DEVELOPMENT CO., INC., and vs .COMMISSIONER OF INTERNAL REVENUE, FACTS: On July 14, 1977 the parties and their respective counsels filed the following: JOINT MANIFESTATION AND MOTION COME NOW Commissioner of Internal Revenue, and the Philippine Power and Development Co., Inc., by their respective counsel, and to this Honorable Court respectfully manifest: 1. That on October 31, 1965, the Court of Tax Appeals rendered a decision in CTA Case No. 1152, the dispositive portion of which is quoted as follows: WHEREFORE, the assessment appealed from is hereby modified. -Petitioner is hereby ordered to pay respondent Commissioner, within 30 days from the date this decision becomes final, deficiency franchise tax for the period from October 1, 1955 to June 30, 1960 in the amount of ?138,175.52. If the said amount is not paid within 30 days from the date this decision becomes final, the same shall be subject to the surcharge of 25% for delinquency pursuant to Section 259 of the Revenue Code. 2. That the said decision was appealed by the Commissioner of Internal Revenue and the Philippine Power and Development Co., Inc., to this Honorable Court, which appeals, docketed as G.R. No. L-25501 and G.R. No. L-25507, are pending resolution; 3. That the Philippine Power and Development Co., Inc. had availed of the privileges of Letter of Instructions No. 308 and in the letter dated December 17, 1976, the Commissioner of Internal Revenue informed the taxpayer herein that its offer to pay 15% of its deficiency franchise tax from October 1, 1955 to June 30, 1960 was increased to 30% of P133,175.52 (the amount adjudged by the Court of Tax Appeals and on appeal to the Supreme Court) or P33,952.66, in full and complete settlement of the tax liabilities in question, a xerox copy of which letter is hereto attached as Annex 'A' and made an integral part hereof; 4. That the Philippine Power and Development Co., Inc. applied its tax credit of P79,229.06 against the said amount of P33,952.66 and accordingly, the Commissioner of Internal Revenue issued Tax Debit memo dated January 17, 1977, a xerox copy of which is hereto attached as Annex 'B' and made an integral part hereof; 5. That in view of the aforesaid application of the taxpayer's tax credit liability of P33,952.66, the appeals of the Commissioner of Internal Revenue and the Philippine Power and Development Co., Inc. have become moot and academic. WHEREFORE, it is respectfully prayed that the aforesaid appeals be dismiss without costs. Manila, June 14, 1977. (Sgd.) EFREN I. PLANA ESTELITO P. MENDOZA Acting Commissioner of Solicitor General Internal Revenue (Sgd.) REYNATO S. PUNO Assistant Solicitor General PHILIPPINE POWER & (Sgd.) LOLITA O. GAL-LANG DEVELOPMENT CO., Solicitor INC. By: (Sgd.) RAMON A. AGULLANA Special Attorney (Sgd.) PELAGIO M. ACHACOSO Vice-Pres. & Gen. Mgr. POBLADOR, NAZARENO, AZADA, TOMACRUZ & PAREDES

#104 G.R. No. 131359 May 5, 1999 MANILA ELECTRIC COMPANY, petitioner, vs. PROVINCE OF LAGUNA and BENITO R. BALAZO, in his capacity as Provincial Treasurer of Laguna,respondents. FACTS: On various dates, certain municipalities of the Province of Laguna, including, Bian, Sta. Rosa, San Pedro, Luisiana, Calauan and Cabuyao, by virtue of existing laws then in effect, issued resolutions through their respective municipal councils granting franchise in favor of petitioner Manila Electric Company ("MERALCO") for the supply of electric light, heat and power within their concerned areas. On 19 January 1983, MERALCO was likewise granted a franchise by the National Electrification Administration to operate an electric light and power service in the Municipality of Calamba, Laguna. On 12 September 1991, Republic Act No. 7160, otherwise known as the "Local Government Code of 1991," was enacted enjoining local government units to create their own sources of revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to the provisions of the Code, respondent province enacted Laguna Provincial Ordinance No. 01-92, providing, in part the imposition of franchise tax at a rate of 50% of the 1% of the gross annual receipts. On the basis of the above ordinance, respondent Provincial Treasurer sent a demand letter to MERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which then amounted to P19,520.628.42, under protest. A formal claim for refund was thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to the National Government pursuant to P.D. 551 already included the franchise tax imposed by the Provincial Tax Ordinance. ISSUE: Whether the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92, insofar as petitioner is concerned, is violative of the non-impairment clause of the Constitution and Section 1 of Presidential Decree No. 551. Whether Republic Act No. 7160, otherwise known Local Government Code of 1991, has repealed, amended or modified Presidential Decree No. 551. HELD: Local governments do not have the inherent power to tax except to the extent that such power might be delegated to them either by the basic law or by statute. Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. The Local Government Code of 1991 has incorporated and adopted, by and large, the provisions of the now repealed Local Tax Code, While the Court has, not too infrequently, referred to tax exemptions contained in special franchises as being in the nature of contracts and a part of the inducement for carrying on the franchise, these exemptions, nevertheless, are far from being strictly contractual in nature. Contractual tax exemptions, in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its private capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts. These contractual tax exemptions, however, are not to be confused with tax exemptions granted under franchises. A franchise partakes the nature of a grant, which is beyond the purview of the non-impairment clause of the Constitution. Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so requires. Petition is dismissed.

105. SMART COMMUNICATIONS, INC., PETITIONER, VS. THE CITY OF DAVAO, REPRESENTED HEREIN BY ITS MAYOR HON. RODRIGO R. DUTERTE, AND THE SANGGUNIANG PANLUNGSOD OF DAVAO CITY, RESPONDENTS G.R. No. 155491, September 16, 2008 FACTS: On February 18, 2002, Smart filed a special civil action for declaratory relief under Rule 63 of the Rules of Court, for the ascertainment of its rights and obligations under the Tax Code of the City of Davao, particularly Section 1, Article 10 thereof, the pertinent portion of which reads: Notwithstanding any exemption granted by any law or other special law, there is hereby imposed a tax on businesses enjoying a franchise, at a rate of seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the income or receipts realized within the territorial jurisdiction of Davao City. Smart contends that its telecenter in Davao City is exempt from payment of franchise tax to the City, on the following grounds: (a) the issuance of its franchise under Republic Act (R.A.) No. 7294 subsequent to R.A. No. 7160 shows the clear legislative intent to exempt it from the provisions of R.A. 7160; (b) Section 137 of R.A. No. 7160 can only apply to exemptions already existing at the time of its effectivity and not to future exemptions; (c) the power of the City of Davao to impose a franchise tax is subject to statutory limitations such as the "in lieu of all taxes" clause found in Section 9 of R.A. No. 7294; and (d) the imposition of franchise tax by the City of Davao would amount to a violation of the constitutional provision against impairment of contracts. ISSUE: Whether Smart is liable to pay the franchise tax imposed by the City of Davao in view of the "in lieu of all taxes" clause in its franchise? HELD: YES. The grant of tax exemption by R.A. No. 7294 is not to be interpreted from a consideration of a single portion or of isolated words or clauses, but from a general view of the act as a whole. Every part of the statute must be construed with reference to the context. R.A. No 7294 does not expressly provide what kind of taxes Smart is exempted from. It is not clear whether the "in lieu of all taxes" provision in the franchise of Smart would include exemption from local or national taxation. The uncertainty in the "in lieu of all taxes" clause in R.A. No. 7294 on whether Smart is exempted from both local and national franchise tax must be construed strictly against Smart which claims the exemption.

107. Mayor Villegas vs Hiu Chiong Tsai Pao Ho Facts: Respondent questioned the validity of the ordinance passed by petitioner Villegas that imposes a payment of 50 pesos for an employment permit applicable only to non-Filipino citizens. Respondent argues the following: that the permit fee is a revenue measure imposed on aliens is discriminatory and violative of the rule of uniformity in taxation, as a police power measure, it makes no distinction between the useful and non-useful occupations imposing a fixed rate, which is out of proportion to the cost of registration and that it fails to prescribe any standard to guide or limit the action of Mayor Villegas thus violating the fundamental principle on illegal delegation of legislative powers; and lastly, it is arbitrary oppressive and unreasonable being applied only to aliens who are thus deprived of their rights to life, liberty and property and therefore violating the due process and equal protection clauses of the constitution. Villegas contend that the ordinance is not purely a tax or revenue measure because its principal purpose is regulatory. Issue: WON the ordinance imposing a 50 peso fee for non Filipino citizens prior to employment is not a revenue measure but a valid regulatory measure Held: No. The Court held, while it is true that the first part of the ordinance which requires an alien to secure an employment permit involves the exercise of discretion and judgment in the processing and approval of applications and therefore regulatory in character, the part which requires a 50 peso payment is a revenue measure. There is no logic or justification in exacting 50 pesos from aliens who have been cleared from employment. The court held the fee to be unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the constitution does not forbid classification, it is imperative that the classification be based on real and substantial differences having a reasonable relation to the subject of the particular regulation. Such equal protection clause is a limitation on the power of taxation. The ordinance does not lay down any criterion or standard to guide the mayor in the exercise of his discretion therefore it must be considered an unlimited delegation of power which is invalid.

Case 111 Commissioner vs. Bishop of Missionery District of the Philippine Islands GR L-19445, 31 August 1965 En Banc, Regala (J): 7 concur, 1 took no part Facts: The Missioner y District of the Philippine Islands, of the Protestant Episcopal Church in the United States, owns and operates the St. Lukes Hospital in Quezon City, the Brent Hospital in Zamboanga City, and the St. Stephens High School in Manila. In 1957 to 1959, the Missionary District received various shipments of materials, supplies, equipment and other articles intended for use in the construction and operation of the new St. Lukes Hospital. On these shipments, the Commissioner collected compensation tax. The Missionary District filed claims for refund, but which was denied by the Commissioner on the ground that St. Lukes Hospital was not a charitable institution and therefore was not exempt from taxes. Issue: Whether the shipments for St. Lukes Hospital are tax-exempt. Held: Under RA 1916, which covers taxes on donations in any form and all articles imported into the Philippines, requires that the imported articles ush have been donated, the donee must be a duly incorporated or established international civic organization, religious or charitable society or institution for civic, religious or charitable purposes; and the articles must have been donated for the use of the organization, society or institution; or for free distribution and not for sale, barter or hire. As the law does not distinguish or qualify the enjoyment or the exemption (as the Secretary of Finance did in Department Order 18, series of 1958), the admission of pay patients does not detract from the charitable character of a hospital, if its funds are devoted exclusively to the maintenance of the institution. Thus, the shipments are tax exempt.

#112 G.R. No. L-27588 December 31, 1927 THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA, as representative of the Roman Catholic Apostolic Church, plaintiff-appellant, vs. THE PROVINCIAL BOARD OF ILOCOS NORTE, ET AL., defendants-appellants. FACTS: The Roman Catholic Apostolic Church, represented by the Bishop of Nueva Segovia, possesses and is the owner of a parcel of land in the municipality of San Nicolas, Ilocos Norte, all four sides of which face on public streets. On the south side is a part of the churchyard, the convent and an adjacent lot used for a vegetable garden, containing an area off 1,624 square meters, in which there is a stable and a well for the use of the convent. In the center is the remainder of the churchyard and the church. On the north is an old cemetery with two of its walls still standing, and a portion where formerly stood a tower, the base of which still be seen, containing a total area of 8,955 square meters. As required by the defendants, on July 3, 1925 the plaintiff paid, under protest, the land tax on the lot adjoining the convent and the lot, which formerly was the cemetery with the portion, where the tower stood. The plaintiff filed this action for the recovery of the sum paid by to the defendants by way of land tax, alleging that the collection of this tax is illegal. The lower court absolved the defendants from the complaint in regard to the lot adjoining convent and declared that the tax collected on the lot, which formerly was the cemetery and on the portion where the lower stood, was illegal. Both parties appealed from this judgment. ISSUE: Whether or not the lots of the petitioner are exempted from land tax. HELD: Yes. The exemption in favor of the convent in the payment of the land tax (sec. 344 [c] Administrative Code) refers to the home of the parties who presides over the church and who has to take care of himself in order to discharge his duties. In therefore must, in the sense, include not only the land actually occupied by the church, but also the adjacent ground destined to the ordinary incidental uses of man. Except in large cities where the density of the population and the development of commerce require the use of larger tracts of land for buildings, a vegetable garden belongs to a house and, in the case of a convent, it use is limited to the necessities of the priest, which comes under the exemption. In regard to the lot which formerly was the cemetery, while it is no longer used as such, neither is it used for commercial purposes and, according to the evidence, is now being used as a lodging house by the people who participate in religious festivities, which constitutes an incidental use in religious functions, which also comes within the exemption. The judgment appealed from is reversed in all it parts and it is held that both lots are exempt from land tax and the defendants are ordered to refund to plaintiff whatever was paid as such tax, without any special pronouncement as to costs. So ordered.

113. ARTURO M. TOLENTINO, petitioner, vs. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, AUGUST 25, 1994 GR NO. 115455 1994 Aug 25 En Banc G.R. No. 115455 D E C I S I O N FACTS: The valued-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code. The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Valued-Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had originated in the House of Representatives, it was not passed by the Senate but was simply consolidated with the Senate version in the Conference Committee to produce the bill which the President signed into law. ISSUE: Whether or not the RA 7716 is invalid as it violates the provision of the Constitution that the 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? HELD:

RA 7716 is valid. 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. 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. 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.

114. PAL V. SEC. OF FINANCE Facts T h e s e a r e v a r i o u s s u i t s f o r c e r t i o r a r i a n d p r o h i b i t i o n challenging the constitutionality of RA 7716. The Value-Added Tax [VAT] is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code. In the case at bar, PAL attacks the formal validity of Republic Act No. 7716. PAL contends that it violates Art. VI, Section26 [1] which provides that, "Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof." It is contended that neither H. No. 11197 nor S. No.1630 provided for removal of exemption of PAL transactions from the payment of the VAT and that this was made only in the Conference Committee bill which became Republic Act No.7716 without reflecting this fact in its title. The title of Republic Act No. 7716 is: A N A C T R E S T R U C T U R I N G T H E V A L U E - A D D E D TAX [VAT] SYSTEM, WIDENING ITS TAX BASE ANDE N H A N C I N G I T S A D M I N I S T R A T I O N , A N D F O R T H E S E P U R P O S E S A M E N D I N G A N D R E P E A L I N G THE RELEVANT PROVISIONS OF THE NATIONALINTERNAL REVENUE CODE, AS AMENDED, ANDFOR OTHER PURPOSES. Furthermore, section 103 of RA 7716 states the following: Section 103. Exempt Transactions.-T h e f o l l o w i n g s h a l l b e exempt from the value-added tax:[q] Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972,1491, 1590. T h e e f f e c t o f t h e a m e n d m e n t i s t o r e m o v e t h e e x e m p t i o n granted to PAL, as far as the VAT is concerned. Philippine Airlines [PAL] claims that its franchise under P.D.No. 1590 which makes it liable for a franchise tax of only 2% of gross revenues "in lieu of all the other fees and charges of any k i n d , n a t u r e o r d e s c r i p t i o n , imposed, levied, established, assessed or collected by any municipal, city, provincial, or n a t i o n a l a u t h o r i t y o r g o v e r n m e n t a g e n c y , n o w o r i n t h e future," cannot be amended by Rep. Act No. 7716 as to make it[PAL] liable for a 10% value-added tax on revenues, because Sec. 24 of P.D. No. 1590 provides that PAL's franchise can only be amended, modified or repealed by a special law specifically for that purpose. Issue: Whether or not the amendment of Section 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 Ruling The court ruled in the affirmative. 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 Section103 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. T h e c o n s t i t u t i o n a l requirement that every bill passed by C o n g r e s s s h a l l e m b r a c e o n l y o n e s u b j e c t w h i c h s h a l l b e expressed in its title is intended to prevent surprise upon the m e m b e r s o f C o n g r e s s a n d t o i n f o r m t h e p e o p l e o f p e n d i n g 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. Republic Act No. 7716 expressly amends PAL's franchise [P. D.N o . 1 5 9 0 ] b y s p e c i f i c a l l y e x c e p t i n g f r o m t h e g r a n t o f exemptions from the VAT PAL's exemption under P. D. No.1590. This is within the power of Congress to do under Art.XII, Section 11 of the Constitution, which provides that the g r a n t o f a f r a n c h i s e f o r t h e o p e r a t i o n o f a p u b l i c u t i l i t y i s subject to amendment, alteration or repeal by Congress when the common good so requires.

117. MINNEAPOLIS STAR VS. MINNESOTA COMM OF REVENUE FACTS: The appellant, Minneapolis Star & Tribune Co., "Star Tribune," is the publisher of a morning newspaper and an evening newspaper (until 1982) in Minneapolis. From 1967 until 1971, it enjoyed an exemption from the sales and use tax provided by Minnesota for periodic publications. In 1971, however, while leaving the exemption from the sales tax in place, the legislature amended the scheme to impose a "use tax" on the cost of paper and ink products consumed in the production of a publication. In 1974, the legislature again amended the statute, this time to exempt the first $100,000 worth of ink and paper consumed by a publication in any calendar year, in effect giving each publication an annual tax credit of $4,000. After the enactment of the $100,000 exemption, 11 publishers, producing 14 of the 388 paid circulation newspapers in the State, incurred a tax liability in 1974. Star Tribune was one of the 11, and, of the $893,355 collected, it paid $608,634, or roughly two-thirds of the total revenue raised by the tax. Star Tribune instituted this action to seek a refund of the use taxes it paid from January 1, 1974, to May 31, 1975. It challenged the imposition of the use tax on ink and paper used in publications as a violation of the guarantees of freedom of the press and equal protection in the First and Fourteenth Amendments. The Minnesota Supreme Court upheld the tax against the federal constitutional challenge. Hence the petition. ISSUE: Whether or not the imposition of the "use tax" violated Star Tribune's freedom of the press and equal protection rights. HELD: The High Court reversed the decison of the Minnesota Supreme Court. It explained: Minnesota has offered no adequate justification for the special treatment of newspapers. Its interest in raising revenue, standing alone, cannot justify such treatment, for the alternative means of taxing businesses generally is clearly available. And the State has offered no explanation of why it chose to use a substitute for the sales tax, rather than the sales tax itself. A rule that would automatically allow the State to single out the press for a different method of taxation as long as the effective burden is no different from that on other taxpayers or, as Minnesota asserts here, is lighter than that on other businesses, is to be avoided. The possibility of error inherent in such a rule poses too great a threat to concerns at the heart of the First Amendment. Minnesota's ink and paper tax violates the First Amendment not only because it singles out the press, but also because it targets a small group of newspapers. The effect of the $100,000 exemption is that only a handful of publishers in the State pay any tax at all, and even fewer pay any significant amount of tax. To recognize a power in the State not only to single out the press, but also to tailor the tax so that it singles out a few members of the press, presents such a potential for abuse that no interest suggested by Minnesota can justify the scheme.

119. Abra Valley College v. Aquino [GR L-39086, 15 June 1988] Facts: Petitioner Abra Valley College is an educational corporation and institution of higher learning duly incorporated with the SEC in 1948. On 6 July 1972, the Municipal and Provincial treasurers (Gaspar Bosque and Armin Cariaga, respectively) and issued a Notice of Seizure upon the petitioner for the college lot and building (OCT Q-83) for the satisfaction of said taxes thereon. The treasurers served upon the petitioner a Notice of Sale on 8 July 1972, the sale being held on the same day. Dr. Paterno Millare, then municipal mayor of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving the sale of the college lot and building. The certificate of sale was correspondingly issued to him. The petitioner filed a complaint on 10 July 1972 in the court a quo to annul and declare void the Notice of Seizure and the Notice of Sale of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31. On 12 April 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial court ruled for the government, holding that the second floor of the building is being used by the director for residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not being used exclusively for educational purposes. Instead of perfecting an appeal, petitioner availed of the instant petition for review on certiorari with prayer for preliminary injunction before the Supreme Court, by filing said petition on 17 August 1974. The Supreme Court affirmed the decision of the CFI Abra (Branch I) subject to the modification that half of the assessed tax be returned to the petitioner. The modification is derived from the fact that the ground floor is being used for commercial purposes (leased) and the second floor being used as incidental to education (residence of the director). Issue: Should there be tax exemption? Ruling: Interpretation of the phrase used exclusively for educational purposes Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from realty taxes for Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable or educational purposes. This constitution is relative to Section 54, paragraph c, Commonwealth Act 470 as amended by RA 409 (Assessment Law). An institution used exclusively for religious, charitable and educational purposes, and as such, it is entitled to be exempted from taxation; notwithstanding that it keeps a lodging and a boarding house and maintains a restaurant for its members (YMCA case). A lot which is not used for commercial purposes but serves solely as a sort of lodging place, also qualifies for exemption because this constitutes incidental use in religious functions (Bishop of Nueva Segovia case). Exemption in favour of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes (Herrera v. Quezon City Board of Assessment Appeals). While the Court allows a more liberal and non-restrictive interpretation of the phrase exclusively used for educational purposes, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. The use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. In the case at bar, the lease of the first floor of the building to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education.

Case # 120 - Lladoc vs. CIR, 14 PHIL 2923 (L 19201, 16 June 1945) Facts: Sometime in 1957, M.B. Estate Inc., of Bacolod City, donated 10,000.00 pesos in cash to Fr. Crispin Ruiz, the parish priest of Victorias, Negros Occidental, and predecessor of Fr. Lladoc, for the construction of a new Catholic church in the locality. The donated amount was spent for such purpose. On March 3, 1958, the donor M.B. Estate filed the donor's gift tax return. Under date of April 29, 1960. Commissioner of Internal Revenue issued an assessment for the donee's gift tax against the Catholic Parish of Victorias of which petitioner was the parish priest. Issue: Whether or not the imposition of gift tax despite the fact the Fr. Lladoc was not the Parish priest at the time of donation, Catholic Parish priest of Victorias did not have juridical personality as the constitutional exemption for religious purpose is valid. Held: Yes, imposition of the gift tax was valid, under Section 22(3) Article VI of the Constitution contemplates exemption only from payment of taxes assessed on such properties as Property taxes contra distinguished from Excise taxes The imposition of the gift tax on the property used for religious purpose is not a violation of the Constitution. A gift tax is not a property by way of gift inter vivos. The head of the Diocese and not the parish priest is the real party in interest in the imposition of the donee's tax on the property donated to the church for religious purpose.

121. YMCA vs. Collector of Internal Revenue 33 Phil. 217 Facts: The Young Mens Christian Association (YMCA), an association of young men, was incorporated under the Philippine law in June 1907. The association was founded exclusively for religious, charitable and educational purposes, improving the spiritual, mental, social and physical condition of men. The City of Manila assessed and levied tax over the property and grounds, particularly the lodging and boarding houses, of the YMCA, thus, the latter paid the imposed tax under protest. Subsequently, YMCA filed an action for recovery of money contesting that the said property is under tax exemption on the ground that it is for religious, charitable and educational purposes. The appellee opposed this statement by stating that an institution must devote itself exclusively to one or the other of the purpose mentioned in the statute before it can be subject to tax exemption. The RTC ruled in favor of the City of Manila. Issue: Whether the building and grounds of YMCA are subject to taxation. Held: No, the building and grounds of YMCA are not subject to taxation. The Supreme Court ruled that the lodging and boarding houses of YMCA does not amount to a business. Firstly, no profit is gained by YMCA from the property being questioned. Secondly, the association did not use the property to obtain money from the boarders and the lodgers rather, it was used to keep the membership intact and retain influence and control over their members. Also, the word exclusively does not mean that the association should only limit itself to one purpose to be exempt from taxation. The institution may be a combination of any of the purposes stated and can still be entitled to exemption.

127. [G. R. No. 119775. October 24, 2003]

JOHN HAY PEOPLES ALTERNATIVE COALITION, MATEO CARIO FOUNDATION INC., CENTER FOR ALTERNATIVE SYSTEMS FOUNDATION INC., REGINA VICTORIA A. BENAFIN REPRESENTED AND JOINED BY HER MOTHER MRS. ELISA BENAFIN, IZABEL M. LUYK REPRESENTED AND JOINED BY HER MOTHER MRS. REBECCA MOLINA LUYK, KATHERINE PE REPRESENTED AND JOINED BY HER MOTHER ROSEMARIE G. PE, SOLEDAD S. CAMILO, ALICIA C. PACALSO ALIAS KEVAB, BETTY I. STRASSER, RUBY C. GIRON, URSULA C. PEREZ ALIAS BA-YAY, EDILBERTO T. CLARAVALL, CARMEN CAROMINA, LILIA G. YARANON, DIANE MONDOC, petitioners, vs. VICTOR LIM, PRESIDENT, BASES CONVERSION DEVELOPMENT AUTHORITY; JOHN HAY PORO POINT DEVELOPMENT CORPORATION, CITY OF BAGUIO, TUNTEX (B.V.I.) CO. LTD., ASIAWORLD INTERNATIONALE GROUP, INC., DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, respondents. CARPIO MORALES, J.:

Facts: Republic Act No. 7227, the Bases Conversion and Development Act of 1992, set out the policy of the
government to accelerate the sound and balanced conversion into alternative productive uses of the former military bases under the 1947 Philippines-United States of America Military Bases Agreement, namely, the Clark and Subic military reservations as well as their extensions including the John Hay Station (Camp John Hay or the camp) in the City of Baguio. As noted in its title, R.A. No. 7227 created public respondent Bases Conversion and Development Authority(BCDA), vesting it with powers pertaining to the multifarious aspects of carrying out the ultimate objective of utilizing the base areas in accordance with the declared government policy. BCDA entered into a Memorandum of Agreement and Escrow Agreement with private respondents Tuntex (B.V.I.) Co., Ltd (TUNTEX) and Asiaworld Internationale Group, Inc. (ASIAWORLD), private corporations registered under the laws of the British Virgin Islands, preparatory to the formation of a joint venture for the development of Poro Point in La Union and Camp John Hay as premier tourist destinations and recreation centers. BCDA, TUNTEX and ASIAWORLD stressed the need to declare Camp John Hay a SEZ as a condition precedent to its full development in accordance with the mandate of R.A. No. 7227. President Ramos then issued Proclamation No. 420, which established a SEZ on a portion of Camp John Hay The issuance of Proclamation No. 420 spawned the present petition for prohibition, mandamus and declaratory relief challenging, in the main, its constitutionality or validity as well as the legality of the Memorandum of Agreement and Joint Venture Agreement between public respondent BCDA and private respondents TUNTEX and ASIAWORLD.

Issue: Whether Proclamation No. 420 is constitutional by providing for national and local tax exemption within and
granting other economic incentives to the John Hay Special Economic Zone.

Held: The issue refers to petitioners objection against the creation by Proclamation No. 420 of a regime of tax exemption
within the John Hay SEZ. Petitioners argue that nowhere in R. A. No. 7227 is there a grant of tax exemption to SEZs yet to be established in base areas, unlike the grant under Section 12 thereof of tax exemption and investment incentives to the therein established Subic SEZ. The grant of tax exemption to the John Hay SEZ, petitioners conclude, thus contravenes Article VI, Section 28 (4) of the Constitution which provides that No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress. It is clear that under Section 12 of R.A. No. 7227 it is only the Subic SEZ which was granted by Congress with tax exemption, investment incentives and the like. There is no express extension of the aforesaid benefits to other SEZs still to be created at the time via presidential proclamation. The deliberations of the Senate confirm the exclusivity to Subic SEZ of the tax and investment privileges accorded it under the law. As gathered from Section 12 of R.A. No. 7227, the privileges given to Subic SEZ consist principally of exemption from tariff or customs duties, national and local taxes of business entities therein, free market and trade of specified goods or properties, liberalized banking and finance, and relaxed immigration rules for foreign investors. Yet, apart from these, Proclamation No. 420 also makes available to the John Hay SEZ benefits existing in other laws such as the privilege of export processing zone-based businesses of importing capital equipment and raw materials free from taxes, duties and other restrictions; tax and duty exemptions, tax holiday, tax credit, and other incentives under the Omnibus Investments Code of 1987; and the applicability to the subject zone of rules governing foreign investments in the Philippines. While the grant of economic incentives may be essential to the creation and success of SEZs, free trade zones and the like, the grant thereof to the John Hay SEZ cannot be sustained. The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the extension of the same to the John Hay SEZ finds no support therein. Neither does the same grant of privileges to the John Hay SEZ find support in the other laws specified under Section 3 of Proclamation No. 420, which laws were already extant before the issuance of the proclamation or the enactment of R.A. No. 7227.

130) PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant, vs. MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees. G.R. No. L-31156 February 27, 1976 FACTS: On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2 of Republic Act No. 2264. 1 otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void. The municipality of Tanuan Leyte passed Ordinances Nos. 23 and 27 that embrace or cover the same subject matter and the production tax rates imposed therein are practically the same, and second, that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by the latter of the provisions of said Ordinance No. 27, series of 1962. Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked." For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly report, of the total number of bottles produced and corked during the month. On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity." 4For the purpose of computing the taxes due, the person, fun company, partnership, corporation or plant producing soft drinks shall submit to the Municipal Treasurer a monthly report of the total number of gallons produced or manufactured during the month. The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.' On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due under the oft the said Ordinances; and to pay the costs." From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals, which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as amended. ISSUE: 1) Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive? 2) Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes? HELD: 1. NO it is not undue delegation of power.. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by the people. It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in respect of matters of local concern. Under the New Constitution, local governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5, Article XI provides: "Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation. Municipalities may be permitted to tax subjects which for reasons of public policy the State has not deemed wise to tax for more general purposes. This is not to say though that the constitutional injunction against deprivation of property without due process of law may be passed over under the guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are provided. But, a tax does not violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will result in an injury rather than a benefit to such taxpayer. Due process does not require that the property subject to the tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of the tax and the

imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect. Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent with the provisions of the former." That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a specific tax. Undoubtedly, the taxing authority conferred on local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting those which are mentioned therein." As long as the text levied under the authority of a city or municipal ordinance is not within the exceptions and limitations in the law, the same comes within the ambit of the general rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in cabisus non excepti. The limitation applies, particularly, to the prohibition against municipalities and municipal districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on articles subject to specific tax except gasoline, under the provisions of the National Internal Revenue Code." For purposes of this particular limitation, a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume of sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to enact. But, the imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks produced or manufactured under Ordinance No. 27 does not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products, but there is not set ratio between the volume of sales and the amount of the tax.

#132 G.R. No. 99886 March 31, 1993 JOHN H. OSMEA, petitioner, vs. OSCAR ORBOS, in his capacity as Executive Secretary; JESUS ESTANISLAO, in his capacity as Secretary of Finance; WENCESLAO DELA PAZ, in his capacity as Head of the Office of Energy Affairs; REX V. TANTIONGCO, and the ENERGY REGULATORY BOARD, respondents. FACTS: On October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). It was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Later, the OPSF was reclassified into a "trust liability account," by virtue of Executive Order (E.O.) 1024, and ordered released from the National Treasury to the Ministry of Energy. President Corazon C. Aquino, amending PD 1956, promulgated Executive Order No. 137, expanding the grounds for reimbursement to oil companies for possible cost under recovery incurred due to the reduction of domestic prices of petroleum products, the amount of the under recovery being left for determination by the Ministry of Finance. Petitioner argues, among others, that "the monies collected pursuant to P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a special fund' to be used only for the purpose indicated, and not channeled to another government objective." Further, that since "a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created." He also contends that the "delegation of legislative authority" to the Energy Regulatory Board (ERB) violates Section 28 (2) of Article VI of the Constitution and, inasmuch as the delegation relates to the exercise of the power of taxation, "the limits, limitations and restrictions must be quantitative, that is, the law must not only specify how to tax, who (shall) be taxed (and) what the tax is for, but also impose a specific limit on how much to tax." Petitioner assumes that the Fund is formed from a tax undoubtedly because a portion thereof is taken from collections of ad valorem taxes and the increases thereon. Thus, the petitioner seeks the corrective, prohibitive and coercive remedies provided by Rule 65 of the Rules of Court. ISSUES: 1. Whether or not the powers granted to the Energy Regulatory Board (ERB) under P.D. 1956, as amended, partake of the nature of the taxation power of the State. 2. Whether or not there is an undue delegation of legislative power to the Energy Regulatory Board (ERB) of the exercise of the power of taxation. HELD: The petitioner's perceptions are, in the Court's view, not quite correct. To address this critical misgiving in the position of the petitioner on these issues, the Court recalls its holding in Valmonte v. Energy Regulatory Board, et al.The OPSF was established precisely to protect local consumers from the adverse consequences that such frequent oil price adjustments may have upon the economy. Thus, the OPSF serves as a pocket, as it were, into which a portion of the purchase price of oil and petroleum products paid by consumers as well as some tax revenues are inputted and from which amounts are drawn from time to time to reimburse oil companies, when appropriate situations arise, for increases in, as well as underrecovery of, costs of crude importation. The OPSF is thus a buffer mechanism through which the domestic consumer prices of oil and petroleum products are stabilized, instead of fluctuating every so often, and oil companies are allowed to recover those portions of their costs which they would not otherwise recover given the level of domestic prices existing at any given time. To the extent that some tax revenues are also put into it, the OPSF is in effect a device through which the domestic prices of petroleum products are subsidized in part. It appears to the Court that the establishment and maintenance of the OPSF is well within that 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. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund." Indeed, the practice is not without precedent. With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In

135. Villanueva Vs City of Iloilo 26 SCRA 578 FACTS: Relying on the passage of RA 2264 or the Local Autonomy Act, Iloilo enacted Ordinance 11 Series of 1960, imposing a municipal license tax on tenement houses in accordance with the schedule of payment provided by therein. Villanueva and the other appellees are apartment owners from whom the city collected license taxes by virtue of Ordinance 11. Appellees aver that the said ordinance is unconstitutional for RA 2264 does not empower cities to impose apartment taxes; that the same is oppressive and unreasonable for it penalizes those who fail to pay the apartment taxes; that it constitutes not only double taxation but treble taxation; and, that it violates uniformity of taxation. Issues: 1. Does the ordinance impose double taxation? 2. Is Iloilo city empowered by RA 2264 to impose tenement taxes? Held: 1. While it is true that appellees are taxable under the NIRC as real estate dealers, and taxable under Ordinance 11, double taxation may not be invoked. This is because the same tax may be imposed by the national government as well as by the local government. The contention that appellees are doubly taxed because they are paying real estate taxes and the tenement tax is also devoid of merit. A license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax. In order to constitute double taxation, both taxes must be the same kind or character. Real estate taxes and tenement taxes are not of the same character. 2. RA 2264 confers local governments broad taxing powers. The imposition of the tenement taxes does not fall within the exceptions mentioned by the same law. It is argued however that the said taxes are real estate taxes and thus, the imposition of more the 1 per centum real estate tax which is the limit provided by CA 158, makes the said ordinance ultra vires. The court ruled that the tax in question is not a real estate tax. It does not have the attributes of a real estate tax. By the title and the terms of the ordinance, the tax is a municipal tax which means an imposition or exaction on the right to use or dispose of property, to pursue a business, occupation or calling, or to exercise a privilege. Tenement houses being offered for rent or lease constitute a distinct form of business or calling and as such, the imposition of municipal tax finds support in Section 2 of RA 2264.

137: CIR vs Solidbank Facts: What is in dispute here is the imposition of the 20% final withholding tax of the passive income plus the 5% Gross receipts tax on the gross receipts including the passive income of the banks. Under the tax code, the final withholding tax is withheld at source and is thus not actually and physically received by the banks because it is paid directly to the government by the entities from which the bank derives their income. The contemplation is that the final withholding tax is constructively received by the banks and forms part of their gross receipts or earnings which is imposable with the said 5%. Relying on a ruling of the CTA wherein it was held that the 20% final withholding tax on a banks interest income should not form part of its taxable gross receipts for the purposes of computing gross receipts tax, Solidbank sent a letter of request to the BIR asking for a refund of alleged overpaid gross receipts tax. On the same day, it filed a petition for review with the CTA on the same subject matter. On appeal, the CA upheld the argument of Solidbank saying that the banks interest income did not form part of the taxable gross receipts in computing for the 5% GRT because the FWT was not actually received by the bank but was directly remitted to the government. Issue: Whether or not there is double taxation in having the 20% FWT on banks interest income form part of the taxable gross receipts in computing for the 5% GRT. Held: No. The court held that the GRT and FWT are two different types of tax, the former being a percentage tax and the latter being an income tax. There is no double taxation in the case at hand. Double taxation means taxing the same person twice by the same jurisdiction for the same thing. Otherwise described as direct duplicate taxation the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period, and they must be of the same kind or character. The court emphasized that the taxes imposed on solidbank are different. The subject matter of FWT is the passive income generated in the form of interest on deposits and yield on deposit substitutes while the subject matter of the GRT is the privilege of engaging in the business of banking. A tax based on receipts is a tax on business rather than on the property hence it is an excise rather than a property tax. It is not an income tax unlike the FWT. Further, although both taxes are national in scope because they are imposed by the same taxing authority and operate within the same Philippine jurisdiction for the same purpose of raising revenues, the taxing periods they affect are different. The FWT is deducted and withheld as soon as the income is earned and is paid after every calendar quarter in which it is earned. On the other hand, the GRT is neither deducted nor withheld, but is paid only after every taxable quarter in which it is earned. Lastly, the difference is the FWT is an income tax subject to withholding while the GRT is a percentage tax not subject to withholding. In sum, the court held that there is no double taxation because there is no taxing twice.

Case 141 Chavez v. National Housing Authority 530 SCRA 235 (2007) Then Pres. Aquino (1988) issued Memorandum Order (MO) 161 directing the implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan(the Plan). Under MO 11A, which contained the guidelines which prescribed the functions of responsibilities of 15 various government departments and offices tasked to implement the Plan. Specifically, the National Housing Authority (NHA) was ordered conduct feasibility studies and develop low-cost housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects. While the Department of Environment and Natural Resources was tasked to review and evaluate proposed projects under the Plan with regard to their environmental impact, conduct regular monitoring of activities of the Plan to ensure compliance with environmental standards and assist DOH in the conduct of the study on hospital waste management. Pursuant to MO161A, the NHA formulated the Smokey Mountain Development Plan and Reclamation of the Area Across R-10" or the Smokey Mountain Development and Reclamation Project (The Project); R-10 aka Radial Road 10 is a property west of the Smokey Mountain. As authorized by then President Ramos, R-II Builders, Inc. (RBI) which garnered the highest score in a public bidding, and NHA entered in to a Joint Venture Agreement (JVA) for the development of the Smokey Mountain Dumpsite. Subsequently, President Ramos issued Proclamation No. 39 placing the reclamation area under the administration and disposition of NHA. The JVA was later modified/amended (Amended and Restated Joint Venture Agreement or ARJVA), causing material and substantial modification. Clarifying the terms and condition of the ARJVA, NHA and RBI executed an Amendment to the Amended and Restated Joint Venture Agreement (AARJVA). To comply with the AARJVA, NHA and RBI entered into a Supplemental Agreement covering the aforementioned modifications. However, newly elected President Estrada failed to act upon the approval of the said agreement causing the NHA, on 1998, to grant RBIs request to suspend work on The Project. Through the Housing and Urban Development Coordinating Council (HUDCC), as directed by July 2002 Cabinet Meeting, RBI lamented the decision of the government to bid out the remaining works unilaterally terminating the Project with RBI and all the agreements related thereto. As such, RBI demanded the payment of just compensations for all the accomplishments and costs incurred. Meanwhile, respondent Harbour Centre Port Terminal Inc. (HCPTI) entered into an agreement with the asset pool, wherein NHA was a major component, for the development and operations of a port in the Smokey Mountain Area. On 2004, Sol. Gen.Francisco Chavez filed the instant petition which impleaded as respondents the NHA, RBI, R-IIHoldings, HCPTI and Mr. Reghis Romero II, raising constitutional issues. NHA then reported that temporary and permanent housing structures had been turned over by respondent RBI and that beneficiary-families had been transferred to their permanent homes from the Project. HELD: Petition partially granted. Writ of prohibition is denied. Writ of mandamus is granted. RATIO/DOCTRINE: The OSG claims that the jurisdiction over petitions for prohibition and mandamus is concurrent with other lower courts like the Regional Trial Courts and the Court of Appeals. Respondent NHA argues that the instant petition is misfiled because it does not introduce special and important reasons or exceptional and compelling circumstances to warrant direct recourse to this Court and that the lower courts are more equipped for factual issues since this Court is not a trier of facts. Judicial hierarchy was made clear in the case of People v. Cuaresma, thus: There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a general determinant of the appropriate forum for petitions for the extraordinary writs... This is an established policy. It is a policy that is necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. In the light of existing jurisprudence, we find paucity of merit in respondents' postulation. While direct recourse to this Court is generally frowned upon and discouraged, we have however ruled in Santiago v. Vasquez that such resort to us may be allowed in certain situations, wherein this Court ruled that petitions for certiorari, prohibition, or mandamus, though cognizable by other courts, may directly be filed with us if "the redress desired cannot be obtained in the appropriate courts or where exceptional compelling circumstances justify availment of a remedy within and calling for the exercise of [this Court's] primary jurisdiction." The instant petition challenges the constitutionality and legality of the SMDRP involving several hectares of government land and hundreds of millions of funds of several government agencies. Moreover, serious constitutional challenges are made on the different aspects of the Project which allegedly affect the right of Filipinos to the distribution of natural resources in the country and the right to information of a citizen--matters which have been considered to be of extraordinary significance and grave consequence to the public in general. These concerns in the instant action compel us to turn a blind eye to the judicial structure meant to provide an orderly dispensation of justice and consider the instant petition as a justified deviation from an established precept.

142. MACEDA V. MACARAIG Facts Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the development of hydraulic power and the production of power from other sources. On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. R.A. No. 358 was also enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate taxes. On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the non-profit character and tax exemptions of NPC as follows: The Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this act (RA No. 6395), the Corporation is hereby declared exempt: (a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees in any court or administrative proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities, and municipalities and other government agencies and instrumentalities; (b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities; (c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods required for its operations and projects; and (d) From all taxes, duties, fees, imposts and all other charges its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of electric power. On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role under aforesaid P.D.No. 40. PD 380 (1974) specified that NAPOCORs exemption includes all taxes, etc. imposed, directly or indirectly. PD 938 integrated the exemptions in favor of GOCCs including their subsidiaries; however, empowering the President or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB) to restore, partially or completely, the exemptions withdrawn or revised. The FIRB issued Resolution 10-85 (7 February 1985) restoring the duty and tax exemptions privileges of NAPOCOR for period 11 June 1984- 30 June 1985. Resolution 1-86 (1January 1986) restored such exemption indefinitely effective 1July 1985. EO 93 (1987) again withdrew the exemption. FIRB issued Resolution 17-87 (24 June 1987) restoring NAPOCORs exemption, which was approved by the President on 5 October 1987. Since 1976, oil firms never paid excise or specific and ad valorem taxes for petroleum products sold and delivered to NAPOCOR. Oil companies started to pay specific and ad valorem taxes on their sales of oil products to NAPOCOR only in 1984. NAPOCOR claimed for a refund (P468.58 million). Only portion thereof, corresponding to Caltex, was approved and released by way of a tax credit memo. The claim for refund of taxes paid by PetroPhil, Shell and Caltex amounting to P410.58 million was denied. NAPOCOR moved for reconsideration, stating that all deliveries of petroleum products to NAPOCOR are tax exempt, regardless of the period of delivery. Issue: Whether or not NAPOCOR ceased to enjoy exemption from indirect tax when PD 938 stated the exemption in general terms. Ruling It should be noted that section 13, R.A. No. 6395, provided for tax exemptions for the following items:13(a) : court or administrative proceedings; 13(b) : income, franchise, realty taxes; 13(c) : import of foreign goods required for its operations and projects;c13(d) : petroleum products used in generation of electric power. P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,", included 13(a) under the "as well as" clause and added PNOC subsidiaries as qualified for tax exemptions. This is the only conclusion one can arrive at if he has read all the NPC laws in the order of enactment or issuance as narrated above. President Marcos must have considered all the NPC statutes from C.A. No. 120 up to its latest amendments, P.D. No. 380, P.D. No.395 and P.D. No. 759, AND came up with a very simple Section 13, R.A. No. 6395, as amended by P.D. No. 938. One common theme in all these laws is that the NPC must be enable to pay its indebtedness which, as of P.D. No. 938, was P12Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved. The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395 and further amended by P.D. No. 380 which provides: The loans, credits and indebtedness contracted this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including import restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its agencies and political subdivisions. P.D. No. 938 did not amend the same and so the tax exemption provision in Section 8 (b), R.A. No. 6395, as amended by P.D. No.380, still stands. Since the subject

143. CHEVRON PHILIPPINES, INC. VS BASES CONVERSION DEVELOPMENT AUTHORITY (BCDA) and CLARK DEVELOPMENT CORPORATION (CDC) GR NO. 173863 SEPTEMBER 15, 2010 FACTS: The Board of Directors of respondent CDC issued and approved Policy Guidelines on the Movement of Petroleum Fuel to and from the Clark Special Economic Zone (CSEZ). After the aforementioned policy guidelines were implemented, CDC sent a letter to Chevron informing it that a royalty fee shall be assessed on its deliveries to Nanox Philippines. Thereafter, a Statement of Account was sent by CDC billing the petitioner for royalty fees for its fuel sales from Coastal depot to Nanox Philippines. Chevron protest the assessment for royalty fees but paid the fees under protest. CDC again wrote a letter to Chevron demanding for the settlement of the royalty fees. Chevron responded reiterating its continuing objection over the assess royalty fees and requested a refund for the amount paid under protest. CDC denied the protest. Hence, Chevron elevated the protest before BCDA arguing that the royalty fees imposed had no reasonable relation to the probable expenses of regulation and that the imposition on a per unit measurement of fuel sales was for a revenue generating purpose, thus, akin to a tax. The protest was however denied by BCDA. Chevron appealed to the Office of the President which dismissed the appeal for lack of merit. ISSUE: Whether or not the imposition of royalty fees for revenue generating purposes would amount to tax, which the respondents have no power to impose? HELD: No, the imposition of royalty fees in this case does not amount to tax. In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is generated. Thus, in Gerochi v. Department of Energy, the Court stated: The conservative and pivotal distinction between these two (2) 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. In the case at bar, the court held that the subject royalty fee was imposed primarily for regulatory purposes, and not for the generation of income or profits as petitioner claims. The Policy Guidelines on the Movement of Petroleum Fuel to and from the Clark Special Economic Zone was issued, first and foremost, to ensure the safety, security, and good condition of the petroleum fuel industry within the CSEZ. The questioned royalty fees form part of the regulatory framework to ensure free flow or movement of petroleum fuel to and from the CSEZ. The fact that respondents have the exclusive right to distribute and market petroleum products within CSEZ pursuant to its JVA with SBMA and CSBTI does not diminish the regulatory purpose of the royalty fee for fuel products supplied by petitioner to its client at the CSEZ.

145) G.R. No. 165109 145. MANUEL N. MAMBA, vs. EDGAR R. LARA, Facts:

December 14, 2009

The Sangguniang Panlalawigan of Cagayan passed Resolution No. 2001-272 4 authorizing Governor Edgar R. Lara (Gov. Lara) to engage the services of and appoint Preferred Ventures Corporation as financial advisor or consultant for the issuance and flotation of bonds to fund the priority projects of the governor without cost and commitment. The Sangguniang Panlalawigan approved Resolution No. 2002-061-A 7 authorizing Gov. Lara to negotiate, sign and execute contracts or agreements pertinent to the flotation of the bonds of the provincial government in an amount not to exceed P500 million for the construction and improvement of priority projects to be approved by the Sangguniang Panlalawigan. The majority of the members of the Sangguniang Panlalawigan of Cagayan approved Ordinance No. 19-2002, 8 authorizing the bond flotation of the provincial government in an amount not to exceed P500 million to fund the construction and development of the new Cagayan Town Center. The Resolution likewise granted authority to Gov. Lara to negotiate, sign and execute contracts and agreements necessary and related to the bond flotation subject to the approval and ratification by the Sangguniang Panlalawigan. The Sangguniang Panlalawigan approved Resolution No. 350-2003 9 ratifying the Cagayan Provincial Bond Agreements entered into by the provincial government, represented by Gov. Lara, Petitioners Manuel N. Mamba, Raymund P. Guzman and Leonides N. Fausto filed a Petition for Annulment of Contracts and Injunction with prayer for a Temporary Restraining Order/Writ of Preliminary Injunction 13against Edgar R. Lara,et al. At the time of the filing of the petition, Manuel N. Mamba was the Representative of the 3rd Congressional District of the province of Cagayan 14 while Raymund P. Guzman and Leonides N. Fausto were members of the Sangguniang Panlalawigan of Cagayan. 15 On the assumption that the controversy presents justiciable issues which this Court may take cognizance of, petitioners in the present case who presumably presented legitimate interests in the controversy are not parties to the questioned contract. Contracts produce effect as between the parties who execute them. Only a party to the contract can maintain an action to enforce the obligations arising under said contract (Young vs. CA, 169 SCRA 213). Issue: Whether or not the petitioner as a taxpayer and not party to a contract have legal standing to sue Held: Petitioners have legal standing to sue as taxpayers A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that the public money is being deflected to any improper purpose, or that there is wastage of public funds through the enforcement of an invalid or unconstitutional law. 39 A person suing as a taxpayer, however, must show that the act complained of directly involves the illegal disbursement of public funds derived from taxation. 40 He must also prove that he has sufficient interest in preventing the illegal expenditure of money raised by taxation and that he will sustain a direct injury because of the enforcement of the questioned statute or contract. 41 In other words, for a taxpayers suit to prosper, two requisites must be met: (1) public funds derived from taxation are disbursed by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed and (2) the petitioner is directly affected by the alleged act.

147. NDR VS CIR (Marubueni vs. CIR) 177 SCRA 500 FACTS: Marubeni Corporation of Japan has equity investments in AG&P of Manila. For the first quarter of 1981 ending March 31, AG&P declared and paid cash dividends to petitioner in the amount of P849,720 and withheld the corresponding 10% final dividend tax thereon. Similarly, for the third quarter of 1981 ending September 30, AG&P declared and paid P849,720 as cash dividends to petitioner and withheld the corresponding 10% final dividend tax thereon. AG&P directly remitted the cash dividends to petitioner's head office in Tokyo, Japan, net not only of the 10% final dividend tax in the amounts of P764,748 for the first and third quarters of 1981, but also of the withheld 15% profit remittance tax based on the remittable amount after deducting the final withholding tax of 10%. Thus, for the first and third quarters of 1981, AG&P as withholding agent paid 15% branch profit remittance on cash dividends declared and remitted to petitioner at its head office in Tokyo in the total amount of P229,424.40 on April 20 and August 4, 1981. In a letter dated January 29, 1981, petitioner sought a ruling from the Bureau of Internal Revenue on whether or not the dividends petitioner received from AG&P are effectively connected with its conduct or business in the Philippines as to be considered branch profits subject to the 15% profit remittance tax imposed under Section 24 (b) (2) of the National Internal Revenue Code as amended by Presidential Decrees Nos. 1705 and 1773. In reply, the commissioner ruled that Pursuant to Section 24 (b) (2) of the Tax Code, as amended, only profits remitted abroad by a branch office to its head office which are effectively connected with its trade or business in the Philippines are subject to the 15% profit remittance tax. Consequently, in a letter dated September 21, 1981 and filed with the Commissioner of Internal Revenue on September 24, 1981, petitioner claimed for the refund or issuance of a tax credit of P229,424.40. However, said claim was denied since the recipient of the dividends, being a non-resident stockholder, nevertheless, said dividend income is subject to the 25 % tax pursuant to Article 10 (2) (b) of the Tax Treaty dated February 13, 1980 between the Philippines and Japan. Petitioner appealed to the Court of Tax Appeals which affirmed the denial of the refund. Hene, the petition. ISSUE Whether or not the petitioners are entitled to the issuance of a tax credit HELD : The Supreme court granted the petiton. It explained: The alleged overpaid taxes were incurred for the remittance of dividend income to the head office in Japan which is a separate and distinct income taxpayer from the branch in the Philippines. There can be no other logical conclusion considering the undisputed fact that the investment (totalling 283.260 shares including that of nominee) was made for purposes peculiarly germane to the conduct of the corporate affairs of Marubeni Japan, but certainly not of the branch in the Philippines. It is thus clear that petitioner, having made this independent investment attributable only to the head office, cannot now claim the increments as ordinary consequences of its trade or business in the Philippines and avail itself of the lower tax rate of 10 % But while public respondents correctly concluded that the dividends in dispute were neither subject to the 15 % profit remittance tax nor to the 10 % intercorporate dividend tax, the recipient being a non-resident stockholder, they grossly erred in holding that no refund was forthcoming to the petitioner because the taxes thus withheld totalled the 25 % rate imposed by the Philippine-Japan Tax Convention pursuant to Article 10 (2) (b). To simply add the two taxes to arrive at the 25 % tax rate is to disregard a basic rule in taxation that each tax has a

Case # 148 - Jumamil vs. Caf, et al. [GR 144570, 21 September 2005]

FACTS: Facts: In 1989, Vivencio V. Jumamil filed before the Regional Trial Court (RTC) of Panabo, Davao del Norte a petition for declaratory relief with prayer for preliminary injunction and writ of restraining order against Mayor Jose J. Cafe and the members of the Sangguniang Bayan of Panabo, Davao del Norte. He questioned the constitutionality of Municipal Resolution 7, Series of 1989 (Resolution 7). Resolution 7, enacting Appropriation Ordinance 111, provided for an initial appropriation of P765,000 for the construction of stalls around a proposed terminal fronting the Panabo Public Market which was destroyed by fire. Subsequently, the petition was amended due to the passage of Resolution 49, series of 1989 (Resolution 49), denominated as Ordinance 10, appropriating a further amount of P1,515,000 for the construction of additional stalls in the same public market. Prior to the passage of these resolutions, Mayor Cafe had already entered into contracts with those who advanced and deposited (with the municipal treasurer) from their personal funds the sum of P40,000 each. Some of the parties were close friends and/or relatives of Cafe, et al. The construction of the stalls which Jumamil sought to stop through the preliminary injunction in the RTC was nevertheless finished, rendering the prayer therefor moot and academic. The leases of the stalls were then awarded by public raffle which, however, was limited to those who had deposited P40,000 each. Thus, the petition was amended anew to include the 57 awardees of the stalls as private respondents. Jumamil alleges that Resolution Nos. 7 and 49 were unconstitutional because they were passed for the business, occupation, enjoyment and benefit of private respondents, some of which were close friends and/or relative of the mayor and the sanggunian, who deposited the amount of P40,000.00 for each stall, and with whom also the mayor had a prior contract to award the would be constructed stalls to all private respondents; that resolutions and ordinances did not provide for any notice of publication that the special privilege and unwarranted benefits conferred on the private respondents may be availed of by anybody who can deposit the amount of P40,000; and that nor there were any prior notice or publication pertaining to contracts entered into by public and private respondents for the construction of stalls to be awarded to private respondents that the same can be availed of by anybody willing to deposit P40,000.00. The Regional Trial Court dismissed Jumamils petition for declaratory relief with prayer for preliminary injunction and writ of restraining order, and ordered Jumamil to pay attorneys fees in the amount of P1,000 to each of the 57 private respondents. Issue: 1. WON Jumamil had the legal standing to bring the petition for declaratory relief? 2. Whether the rule on locus standi should be relaxed? Held: 1. Legal standing or locus standi is a partys personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the governmental act being challenged. It calls for more than just a generalized grievance. The term interest means a material interest, an interest in issue affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Unless a persons constitutional rights are adversely affected by the statute or ordinance, he has no legal standing. Jumamil brought the petition in his capacity as taxpayer of the Municipality of Panabo, Davao del Norte and not in his personal capacity. He was questioning the official acts of the the mayor and the members of the Sanggunian in passing the ordinances and entering into the lease contracts with private respondents. A taxpayer need not be a party to the contract to challenge its validity. Parties suing as taxpayers must specifically prove sufficient interest in preventing the illegal expenditure of money raised by taxation. The expenditure of public funds by an officer of the State for the purpose of executing an unconstitutional act constitutes a misapplication of such funds. 2. Objections to a taxpayer's suit for lack of sufficient personality, standing or interest are procedural matters. Considering the importance to the public of a suit assailing the constitutionality of a tax law, and in keeping with the Court's duty, specially explicated in the 1987 Constitution, to determine whether or not the other branches of the Government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Supreme Court may brush aside technicalities of procedure and take cognizance of the suit. There being no doctrinal definition of transcendental importance, the following determinants formulated by former Supreme Court Justice Florentino P. Feliciano are instructive: (1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of

151. South African Airways vs. CIR 670 SCRA 669 Facts: Petitioner South African Airways is a foreign corporation existing under the laws of Republic of South Africa, with office located therein. In the Philippines, it is an internal air carrier without landing rights in the country but with general sales through Aerotel, wwhich sells passage documents for petitioners off-line flights for the carriage of passengers and cargo between ports outside the jurisdiction of the Philippines. It is neither registered with SEC as a corporation, branch office, or partnership and nor does it have a license to do business in the Philippines. For the year 2000, the petitioner filed quarterly and annual income tax returns but in 2001, it filed with the BIR a refund for the erroneously paid tax on the GPB. The claim was unheeded. The petitioner filed a Motion for Reconsideration and a Petition for Review and both were denied. Issue: Whether the petitioner is entitled for refund. Held: No, the petitioner is not entitled for refund. The petition was denied by the Court. GPB was defined as the amount of gross revenue derived from carriage of persons, excess baggage, cargo and mail originating from the Philippines in a continuous and interrupted flight, irrespective of the place of sale of issue and the place of payment of the ticket or passage document. Although it does not maintain flights to and from the Philippines, this fact does not preclude that he is not entitled to pay any other income tax for the sale of passage documents in the Philippines. Sec. 28 (A)(3)(a) does not exempt all international carriers nor is it intended by the Congress in amending the definition of the GBP. It is the general rule that resident foreign corporations shall be liable for a 32% income tax on their income from within the Philippines, except for foreign resident foreign corporations that are international carriers that derive income from carriage of persons, excess baggage, cargo and mail originating from the Philippines, which shall be taxed at 2 % of their GPB. The petitioner does not fall under the exception. Thus, the correct interpretation is that, if an international air carrier maintains flights to and from the Philippines, it shall be taxed at the rate of 2 % of its GPB, while air carriers that do not have flights to and from the Philippines but nonetheless, earn income from other activities will be taxed with 32% of their income. The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated therein are true and correct. The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself and without unquestionabe evidence, cannot be the basis for the grant of the refund.