Tax Digest

TAXATION1 CASE DIGESTS
11. PCGG v. Cojuangco Petitioner: Republic of the Philippines, represented by the Presidential Commission on Good Government (PCGG Respondents: Cocofed, et al. and !allares, et al., "duardo #. Cojuangco $r. and the %andiganbayan (&irst 'ivision &acts: (mmediately after the 1)*+ "'%, Revolution, then President Cora-on C. ,.uino issued "/ecutive 0rder ("0 1os. 1, 2 and 13. 0n the e/plicit premise that 4vast resources of the government have been amassed by former President &erdinand ". #arcos, his immediate family, relatives, and close associates both here and abroad,4 the Presidential Commission on Good Government (PCGG 5as created by "/ecutive 0rder 1o. 1 to assist the President in the recovery of the ill6gotten 5ealth thus accumulated 5hether located in the Philippines or abroad. "/ecutive 0rder 1o. 2 states that the ill6 gotten assets and properties are in the form of ban7 accounts, deposits, trust accounts, shares of stoc7s, buildings, shopping centers, condominiums, mansions, residences, estates, and other 7inds of real and personal properties in the Philippines and in various countries of the 5orld. "/ecutive 0rder 1o. 13, on the other hand, empo5ered the PCGG, 5ith the assistance of the 0ffice of the %olicitor General and other government agencies, inter alia, to file and prosecute all cases investigated by it under "0 1os. 1 and 2. Pursuant to these la5s, the PCGG issued and implemented numerous se.uestrations, free-e orders and provisional ta7eovers of allegedly ill6gotten companies, assets and properties, real or personal. ,mong the properties se.uestered by the Commission 5ere shares of stoc7 in the 8nited Coconut Planters !an7 (8CP! registered in the names of the alleged 9one million coconut farmers,9 the so6 called Coconut (ndustry (nvestment &und companies (C((& companies and Private Respondent "duardo Cojuangco $r. (hereinafter 9Cojuangco9 . :he first division of the %andiganbayan in Civil Case 1os. ;;<16,, ;;<<6!, and ;;<<6P allo5ed respondents C0C0&"', et al, !allares, et al, as 5ell as Cojuangco, et al, to e/ercise their right to vote their shares of stoc7 and to be voted upon in the 8CP! at the + #arch 2;;1 %toc7holder=s #eeting, and any subse.uent continuation or resetting thereof. :hey 5ere also permitted to perform such acts as 5ill normally follo5 in the e/ercise of these rights as stoc7holders. ,ll of the aforementioned persons are ac7no5ledged registered stoc7holders of the 8CP!. :he Republic of the Philippines (Republic contended that the %andiganbayan committed grave abuse of discretion in enjoining the Presidential Commission on Good Government (PCGG from voting the se.uestered shares of stoc7 in the 8CP! despite the fact that the se.uestration shares 5ere purchased 5ith coconut levy funds. :he same funds 5ere declared public in character. , previous resolution allo5ed the PCGG to vote the se.uestered shares. (ssues: 'o the coconut levy funds parta7e of the nature of ta/es> (f the ans5er is in the affirmative, do they constitute public funds> Court=s Ruling: :he %upreme Court held that the coconut levy funds parta7e of the nature of ta/es. Conse.uently, the government should be allo5ed to continue voting those shares inasmuch as they 5ere purchased 5ith coconut levy funds ? that are prima facie public in character or, at the very least, are clearly affected 5ith public interest. Rationale: :he right to vote se.uestered shares of stoc7 registered in the names of private individuals or entitles and alleged to have been ac.uired 5ith ill6gotten 5ealth shall, as a rule, be e/ercised by the registered o5ner. :he PCGG may, ho5ever, be granted such voting right provided in can (1 sho5 prima facie evidence that the 5ealth and@or the shares are indeed ill6gottenA and (2 demonstrate imminent danger of dissipation of the assets, thus necessitating their continued se.uestration and voting by the government until a decision, ruling 5ith finality on their o5nership, is promulgated by the proper court. Coconut levy funds parta7e of the nature of ta/es 5hich, in general, are enforced proportional contributions from persons and properties, e/acted by the %tate by virtue of its sovereignty for the support of government and for all public needs. !ased on this definition, a ta/ has three elements, namely: a it is an enforced proportional contribution from persons and propertiesA b it is imposed by the %tate by virtue of its sovereigntyA and c it is levied for the support of the government. :a/ation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabili-ation of a threatened industry, 5hich is so affected 5ith public interest as to be 5ithin the police po5er of the %tate :o avoid misunderstanding and confusion, the Court 5as categorical and positive than its earlier pronouncements: the coconut levy funds are not only affected 5ith public interestA they are, in fact, prima facie public funds. Public funds are those moneys belonging to the %tate or to any political subdivision of the %tateA more specifically, ta/es, customs duties and moneys raised by operation of la5 for the support of the government or for the discharge of its obligations. Baving conclusively sho5n that the se.uestered 8CP! shares 5ere purchased 5ith coconut levies, the Court held that these funds and shares are, at the very least, affected 5ith public interest.
12. C(R v PC': Petitioner: Commissioner of (nternal Revenue
MCZNOA / ALSC2016 / ATTY. MONTERO

Respondent: Philippine Cong 'istance :elephone Company &acts: (ssue: :his is a petition for revie5 and reversal of the decision of the C, affirming the Court of :a/ ,ppeals (C:, decision in favor of PC': and against the C(R for ta/es paid to the !ureau of (nternal Revenue (!(R in connection 5ith its importation from 1))2 to 1))3 of e.uipment, machineries and spare parts. &or e.uipment, machineries and spare parts it imported for its business on different dates from 0ctober 1, 1))2 to #ay <1, 1))3, PC': paid the !(R the amount of P1+3,D1;,)D<.;;, bro7en do5n as follo5s: (a compensating ta/ of P12+,E1<,;<E.;;A advance sales ta/ of P12,3+;,21).;; and other internal revenue ta/es of P2D,<<E,+)E.;;. &or similar importations made bet5een #arch 1))3 to #ay <1, 1))3, PC': paid P11+,;31,<<<.;; value6added ta/ (F,: . ,s a franchise holder of a grant to install, operate, and maintain telecommunications facilities throughout the Philippines, PC': 5as entitled to a ta/ e/emption privilege under %ec12 or R,E;*2 (grant of franchise reads: %ec. 12. :he grantee G shall be liable to pay the same ta/es on their real estate, buildings, and personal property, e/clusive of this franchise, as other persons or corporations are no5 or hereafter may be re.uired by la5 to pay. (n addition thereto, the grantee, G shall pay a franchise ta/ e.uivalent to three percent (<H of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee, its successors or assigns, and the said percentage shall be in lieu of all ta/es on this franchise or earnings thereof: Provided, :hat the grantee G shall continue to be liable for income ta/es payable under :itle (( of the 1ational (nternal Revenue Code pursuant to %ec. 2 of "/ecutive 0rder 1o. E2 unless the latter enactment is amended or repealed, in 5hich case the amendment or repeal shall be applicable thereto. (n vie5 thereof, PC': 5rote a letter to the !(R re.uesting confirmation of its e/emption privilege. (n response, the !(R deemed PC': liable for the <H franchise ta/ and e/empt from F,: on its importation of e.uipment, machineries and spare parts needed in its franchise operations, confirming PC':=s e/emption privilege. ,rmed 5ith the !(R ruling, PC': filed a claim for ta/ credit@refund of the F,:, compensating ta/es, advance sales ta/es and other ta/es it had been paying erroneously from 0ctober, 1))26 'ecember, 1))3. (n &ebruary, 1))*, the C:, granted this petition, although ruling that a portion (from 0ct6'ec1+, 1))2 had already prescribed and 5as beyond the 26yr period allo5ed by la5 for refunds :he C(R 5as thereby ordered to R"&81' or to (%%8" in favor of petitioner a :a/ Credit Certificate in the reduced amount of P22<,2+D,2E+.;; representing erroneously paid value6added ta/es, compensating ta/es, advance sales ta/es and other !(R ta/es on its importation of e.uipments (sic , machineries and spare parts for the period covering the ta/able years 1))2 to 1))3. :his decision 5as punctuated by a dissenting opinion of $udge ,mancio %aga 5ho clarified that the Iin lieu ofJ provision of %ec12 refers only to direct ta/es and not to indirect ta/es such as F,:, compensating ta/, and advance sales ta/. K01 :B" C, "RR"' (1 B0C'(1G :B,: PC': (% "L"#P: &R0# :B" P,M#"1: 0& F,C8"6 ,''"' :,L"%, C0#P"1%,:(1G :,L"%, ,'F,1C" %,C"% :,L"% ,1' 0:B"R !(R :,L"% 01 (:% (#P0R:,:(01%, !M F(R:8" 0& :B" PR0F(%(01 (1 (:% &R,1CB(%" :B,: :B" <H &R,1CB(%" :,L 01 (:% GR0%% R"C"(P:% %B,CC !" (1 C("8 0& ,CC :,L"% 01 (:% &R,1CB(%" 0R ",R1(1G% :B"R"0&. Beld: M"%, :he C, erred in holding that PC': is e/empt from the payment of F,:, etc in lieu of all ta/es on its franchise or earnings. Rationale: :he court has ruled, time and again, that ta/ation is the rule, "/emption is the e/ception. ,ccordingly, statutes granting ta/ e/emptions must be construed in strictissimi juris against the ta/payer and liberally in favor of the ta/ing authority. :o him, therefore, 5ho claims a refund or e/emption from ta/ payments rests the burden of justifying the e/emption by 5ords too plain to be mista7en and too categorical to be misinterpreted. :he clause Iin lieu of all taxes in %ection 12 of R, E;*2 is immediately follo5ed by the limiting or .ualifying clause Ion this franchise or earnings thereof , suggesting that the e/emption is limited to ta/es imposed directly on PC': since ta/es pertaining to PC':=s franchise or earnings are its direct liability. ,ccordingly, indirect ta/es, not being ta/es on PC':=s franchise or earnings, are outside the purvie5 of the Iin lieuJ provision. :he 1;H F,: on importation of goods parta7es of an e/cise ta/ levied on the privilege of importing articles. (t is not a ta/ on the franchise of a business enterprise or on its earnings. (t is imposed on all ta/payers 5ho import goods (unless such importation falls under the category of an e/empt transaction under %ec. 1;) of the Revenue Code 5hether or not the goods 5ill eventually be sold, bartered, e/changed or utili-ed for personal consumption. :he F,: on importation replaces the advance sales ta/ payable by regular importers 5ho import articles for sale or as ra5 materials in the manufacture of finished articles for sale. 0ther Cearnings: 1. 'irect ta/es are those that are e/acted from the very person 5ho, it is intended or desired, should pay themA they are impositions for 5hich a ta/payer is directly liable on the transaction or business he is engaged in. 0n the other hand, indirect ta/es are those that are demanded, in the first instance, from, or are paid by, one person in the e/pectation and intention that he can shift the burden to someone else. %tated other5ise, indirect ta/es are ta/es 5herein the liability for the payment of the ta/ falls on one person but the burden thereof can be shifted or passed :he !(R moved for reconsideration and the same 5as denied. :his 5as elevated to the C, on appeal, and the appeal 5as dismissed. :hus, the elevation to the %C.
2.

on to another person, such as 5hen the ta/ is imposed upon goods before reaching the consumer 5ho ultimately pays for it. a. ,dvance sales ta/ has the attributes of an indirect ta/ because the ta/6paying importer of goods for sale or of ra5 materials to be processed into merchandise can shift the ta/ or, to borro5 from Philippine Acetylene Co, Inc. vs. Commissioner of Internal Revenue, lay the Ieconomic burden of the ta/J, on the purchaser, by subse.uently adding the ta/ to the selling price of the imported article or finished product. Compensating ta/ also parta7es of the nature of an e/cise ta/ payable by all persons 5ho import articles, 5hether in the course of business or not. :he rationale for compensating ta/ is to place, for ta/ purposes, persons purchasing from merchants in the Philippines on a more or less e.ual basis 5ith those 5ho buy directly from foreign countries.
b.
13. PC,1:"R% PR0'8C:%, (1C., vs. &"R:(PB(C C0RP0R,:(01. &acts: President &erdinand #arcos, e/ercising his legislative po5ers, issued C0( 1o. 13+D 5hich provided, among others, for the imposition by the &ertili-er Pesticide ,uthority (&P, of a capital recovery component (CRC on thedomestic sale of all grades of fertili-ers in the Philippines. :he goal is to ma7e and 7eep respondent PP( viable. ,fter the1)*+ "dsa Revolution, &P, voluntarily stopped the imposition of the P1; levy. Kith the return of democracy, &ertiphildemanded from PP( a refund of the amounts it paid under C0( 1o. 13+D, but PP( refused to accede to the demand&ertiphil filed a complaint for collection and damages against &P, and PP( 5ith the R:C in #a7ati. (t .uestioned theconstitutionality of C0( 1o. 13+D for being unjust, unreasonable, oppressive, invalid and an unla5ful imposition thatamounted to a denial of due process of la5. &P,, through the %olicitor General, countered that the issuance of C0( 1o.13+D 5as a valid e/ercise of the police po5er of the %tate in ensuring the stability of the fertili-er industry in the country (ssue@Beld: Khether the levy is in e/ercise of police po5er or ta/ation po5er6 M"% Ratio: Ke agree 5ith the R:C that the imposition of the levy 5as an e/ercise by the %tate of its ta/ation po5er. Khile itis true that the po5er of ta/ation can be used as an implement of police po5er, the primary purpose of the levy isrevenue generation. (f the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes,then the e/action is properly called a ta/. ,n inherent limitation on the po5er of ta/ation is public purpose. :a/es aree/acted only for a public purpose. :hey cannot be used for purely private purposes or for the e/clusive benefit of private persons. :he purpose of a la5 is evident from its te/t or inferable from other secondary sources. Bere, 5e agree 5ith the R:C and that C, that the levy imposed under C0( 1o. 13+D 5as not for a public purpose because it e/pressly provided that the levy be imposed to benefit PP(, a private company. Note !he operative act doctrine states that acts done "hen a la" "as actually constitutional are valid even "hen that la" is later repealed. In this case, #$I %&'( "as actually unconstitutional to )egin "ith, PPI is not precluded from paying )ac* the money granted to it )y the said la".

the tax is imposed upon goods )efore reaching the consumer "ho ultimately pays for it. $n the other hand, in case of "ithholding of taxes, the incidence and )urden of taxation fall on the same entity, the statutory taxpayer. !he )urden of taxation is not shifted to the "ithholding agent "ho merely collects, )y "ithholding, the tax due from income payments to entities arising from certain transactions and remits the same to the government. 6ue to this difference, the deficiency 4A! and excise tax cannot )e deemed as "ithholding taxes merely )ecause they constitute indirect taxes. Asia International Auctioneers, Inc. vs. Commissioner of Internal Revenue, 7.R. No. %8/%%(. 9eptem)er :', :1%:.
2+. ,sia (nternational ,uctioneers, (nc. v. Commissioner of (nternal Revenue &acts: 0n ,ugust 2D, 2;;3, ,sia (nternational ,uctioneers, (nc. (I,(,J for brevity , a corporation 0perating 5ithin the %ubic %pecial "conomic None and is engaged in the importation and selling of used motor vehicles and heavy e.uipment, 5as assessed by the Commissioner of (nternal Revenue (IC(RJ for deficiency Falue ,dded :a/ and "/cise :a/ in the amounts of P 1;2,D<D,D2;.;; and P3,<<3,E1D.;;, respectively, or a total amount of P 1;+,*E;,2<D.;;, inclusive of penalties and interest, for auction sales conducted on &ebruary D, +, E, and *, 2;;3.,(, claimed that it filed a timely protest letter through registered mail on ,ugust <;, 2;;3 and submitted additional supporting documents on %eptember 23, 2;;3 and 1ovember 22, 2;;3. C(R=s failure to act on the protest prompted ,(, to file a petition for revie5 before the Court of :a/ ,ppeals on $une 2;, 2;;D. Bo5ever, the C(R filed a motion to dismiss on the ground of lac7 of jurisdiction since ,(,=s failure to file its protest 5ithin the <;6day reglamentary period rendered the assessment final and e/ecutory. ,fter trial, the Court of :a/ ,ppeals &irst 'ivision ruled that there 5as no sufficient evidence to prove the receipt of the protest letter by the C(R. ,(, filed a motion for reconsideration but 5as deniedA hence, this petition for revie5. 0n $anuary <;, 2;;*, ,(, filed a #anifestation and #otion 5ith Ceave of the Bonorable Court to 'efer or %uspend &urther Proceedings since it availed of the :a/ ,mnesty Program under Republic ,ct )3*;, 7no5n as the :a/ ,mnesty ,ct of 2;;E. 0n &ebruary D, 2;;*, the !ureau of (nternal Revenue issued a Certification of Oualification stating that ,(, Ihas availed and .ualified for :a/ ,mnesty for :a/able Mear 2;;D and Prior MearsJ pursuant to R, )3*;. (ssue: (s ,(, dis.ualified from availing itself of the :a/ ,mnesty under %ection * (a of R, )3*;> Beld: 1o. 8nder %ection * (a of the R, )3*; 5ithholding agents 5ith respect to their 5ithholding ta/ liabilities shall be dis.ualified to avail of the ta/ amnesty. (n this case, ,(, 5as not being assessed as 5ithholding agent that failed to 5ithhold or remit the deficiency F,: and e/cise ta/ but as a ta/payer 5ho is directly liable for the said ta/es. #oreover, R, )3*; does not e/clude from its coverage ta/payers operating 5ithin special economic -ones. Bence, ,(, is .ualified to avail of the :a/ ,mnesty under R, )3*;. Note Indirect !axes vs. +ithholding !axes. !he Commissioner of Internal Revenue ,CIRcontends that taxpayer is dis.ualified to avail itself of amnesty under Repu)lic Act No. /&01 )ecause it is 2deemed a "ithholding agent for deficiency value3added tax ,4A!- and excise taxes. !he CIR did not assess taxpayer as a "ithholding agent that failed to "ithhold or remit the deficiency 4A! and excise tax to the 5ureau of Internal Revenue under the relevant provisions of the National Internal Revenue Code. Indirect taxes, li*e value3added tax ,4A!- and excise tax, are different from "ithholding taxes. !o distinguish, in indirect taxes, the incidence of taxation falls on one person )ut the )urden thereof can )e shifted or passed on to another person, such as "hen

:his is an appeal from the decision of the Court of &irst (nstance of Ceyte in its Civil Case 1o. <2)3, challenging the po5er of ta/ation delegated to municipalities under the Cocal ,utonomy ,ct (Republic ,ct 1o. 22+3, as amended, $une 1), 1)D) . 0n &ebruary 13, 1)+<, Pepsi6Cola !ottling Company of the Philippines, (nc., commenced a complaint 5ith preliminary injunction before the Court of &irst (nstance of Ceyte for that court to declare %ection 2 of Republic ,ct 1o. 22+3 unconstitutional as an undue delegation of ta/ing authority as 5ell as to declare 0rdinances 1os. 2< and 2E, series of 1)+2, of the municipality of :anauan, Ceyte, null and void. 0n $uly 2<, 1)+<, the parties entered into a %tipulation of &acts, the material portions of 5hich state that, first, both 0rdinances 1os. 2< and 2E embrace or cover the same subject matter and the production ta/ rates imposed therein are practically the same, and second, that on $anuary 1E, 1)+<, the acting #unicipal :reasurer of :anauan, Ceyte, as per his letter addressed to the #anager of the Pepsi6Cola !ottling Plant in said municipality, sought to enforce compliance by the latter of the provisions of said 0rdinance 1o. 2E, series of 1)+2. #unicipal 0rdinance 1o. 2<, of :anauan, Ceyte, 5hich 5as approved on %eptember 2D, 1)+2, levies and collects 9from soft drin7s producers and manufacturers one6si/teenth (1@1+ of a centavo for every bottle of soft drin7 cor7ed.9 &or the purpose of computing the ta/es due, the person, firm, company or corporation producing soft drin7s shall submit to the #unicipal :reasurer a monthly report, of the total number of bottles produced and cor7ed during the month. 0n the other hand, #unicipal 0rdinance 1o. 2E, 5hich 5as approved on 0ctober 2*, 1)+2, levies and collects 9on soft drin7s produced or manufactured 5ithin the territorial jurisdiction of this municipality a ta/ of 01" C"1:,F0 (P;.;1 on each gallon (12* fluid ounces, 8.%. of volume capacity.9 :he Court of &irst (nstance of Ceyte rendered judgment 9dismissing the complaint and upholding the constitutionality of Q%ection 2, Republic ,ct 1o. 22+3R declaring 0rdinance 1os. 2< and 2E legal and constitutional. (%%8": 1. (s %ection 2, Republic ,ct 1o. 22+3 an undue delegation of po5er, confiscatory and oppressive> 2. 'o 0rdinances 1os. 2< and 2E constitute double ta/ation and impose percentage or specific ta/es> <. ,re 0rdinances 1os. 2< and 2E unjust and unfair> B"C': :he constitutionality of %ection 2 of Republic ,ct 1o. 22+3 is hereby upheld and #unicipal 0rdinance 1o. 2E of the #unicipality of :anauan, Ceyte, series of 1)+2, re6pealing #unicipal 0rdinance 1o. 2< is hereby declared of valid and legal effect. 2*. P"P%(6C0C, v. #unicipal of Ceyte &,C:%: 8nder the 1e5 Constitution, local governments are granted the autonomous authority to create their o5n sources of revenue and to levy ta/es. %ection D, ,rticle L( provides: 9"ach local government unit shall have the po5er to create its sources of revenue and to levy ta/es, subject to such limitations as may be provided by la5.9 Kithal, it cannot be
LIMITATIONS ON THE POWER OF TAXATION A. INHERENT LIMITATIONS
27. PASCUAL VS. SEC OF PUBLIC WORKS &,C:%: (n 1)D<, R, )2; 5as passed. :his la5 appropriated P*D,;;;.;; Ifor the construction, reconstruction, repair, e/tension and improvementJ of IPasig feeder road terminals. Pascual, then governor of Ri-al, assailed the validity of the la5. Be claimed that the appropriation 5as actually going to be used for private use for the terminals sought to be improved 5ere part of the ,ntonio %ubdivision. :he said %ubdivision is o5ned by %enator Nulueta 5ho 5as a member of the same %enate that passed and approved the same R,. Pascual claimed that Nulueta misrepresented in Congress the fact that he o5ns those terminals and that his property 5ould be unla5fully enriched at the e/pense of the ta/payers if the said R, 5ould be upheld. Pascual then prayed that the %ec of Public Kor7s be restrained from releasing funds for such purpose. Nulueta, on the other hand, perhaps as an afterthought, donated the said property to the City of Pasig. (%%8": Khether or not the appropriation is valid. B"C': :he donation of the property to the government to ma7e the property public does not cure the constitutional defect. :he fact that the la5 5as passed 5hen the said property 5as still a private property cannot be ignored. I(n accordance 5ith the rule that the ta/ing po5er must be e/ercised for public purposes only, money raised by ta/ation can be e/panded only for public purposes and not for the advantage of private individuals.J (nasmuch as the land on 5hich the projected feeder roads 5ere to be constructed belonged then to Nulueta, the result is that said appropriation sought a private purpose, and, hence, 5as null and void. :he rule is that if the public advantage or benefit is merely incidental in the promotion of a particular enterprise, suchdefect shall render the la5 invalid. 0n the other hand, if 5hat is incidental is the promotion of a private enterprise, the ta/ la5 shall bedeemed Pfor public purpose

said that %ection 2 of Republic ,ct 1o. 22+3 emanated from beyond the sphere of the legislative po5er to enact and vest in local governments the po5er of local ta/ation. :he difference bet5een the t5o ordinances clearly lies in the ta/ rate of the soft drin7s produced: in 0rdinance 1o. 2<, it 5as 1@1+ of a centavo for every bottle cor7edA in 0rdinance 1o. 2E, it is one centavo (P;.;1 on each gallon (12* fluid ounces, 8.%. of volume capacity. :he intention of the #unicipal Council of :anauan in enacting 0rdinance 1o. 2E is thus clear: it 5as intended as a plain substitute for the prior 0rdinance 1o. 2<, and operates as a repeal of the latter, even 5ithout 5ords to that effect. :he ta/ of one (P;.;1 on each gallon (12* fluid ounces, 8.%. of volume capacity on all soft drin7s, produced or manufactured, or an e.uivalent of 16S centavos per case, cannot be considered unjust and unfair. ,n increase in the ta/ alone 5ould not support the claim that the ta/ is oppressive, unjust and confiscatory. #unicipal corporations are allo5ed much discretion in determining the rates of imposable ta/es. :his is in line 5ith the constitutional policy of according the 5idest possible autonomy to local governments in matters of local ta/ation, an aspect that is given e/pression in the Cocal :a/ Code (P' 1o. 2<1, $uly 1, 1)E< . 8nless the amount is so e/cessive as to be prohibitive, courts 5ill go slo5 in 5riting off an ordinance as unreasonable. Republic of the Philippines. 0n the other hand, the City of ParaTa.ue invo7es %ec. 1)< of the CGC, 5hich e/pressly 5ithdre5 the ta/ e/emption privileges of government6o5ned and controlled corporations (G0CC upon the affectivity of the CGC.(t asserts that an international airport is not among the e/ceptions mentioned in the said la5. #ean5hile, the City of ParaTa.ue posted and published notices announcing the public auction sale of the airport lands and buildings. (n the afternoon before the scheduled public auction, #(,, applied 5ith the Court for the issuance of a :R0 to restrain the auction sale. :he Court issued a :R0 on the day of the auction sale, ho5ever, the same 5as received only by the City of ParaTa.ue three hours after the sale. (%%8": Khether or not the airport lands and buildings of #(,, are e/empt from real estate ta/> B"C': :he airport lands and buildings of #(,, are e/empt from real estate ta/ imposed by local governments. %ec. 23<(a of the CGC e/empts from real estate ta/ any real property o5ned by the Republic of the Philippines. :his e/emption should be read in relation 5ith %ec.1<<(o of the CGC, 5hich provides that the e/ercise of the ta/ing po5ers of local governments shall not e/tend to the levy of ta/es, fees or charges of any 7ind on the 1ational Government, its agencies and instrumentalities. :hese provisions recogni-e the basic principle that local governments cannot ta/ the national government, 5hich historically merely delegated to local governments the po5er to ta/. :he rule is that a ta/ is never presumed and there must be clear language in the la5 imposing the ta/. :his rule applies 5ith greater force 5hen local governments see7 to ta/ national government instrumentalities. #oreover, a ta/ e/emption is construed liberally in favor of national government instrumentalities. #(,, is not a G0CC, but an instrumentality of the government. :he Republic remains the beneficial o5ner of the properties. #(,, itself is o5ned solely by the Republic. ,t any time, the President can transfer bac7 to the Republic title tithe airport lands and buildings 5ithout the Republic paying #(,, any consideration. ,s long as the airport lands and buildings are reserved for public use, their o5nership remains 5ith the %tate. 8nless the President issues a proclamation 5ithdra5ing these properties from public use, they remain properties of public dominion. ,s such, they are inalienable, hence, they are not subject to levy on e/ecution or foreclosure sale, and they are e/empt from real estate ta/. Bo5ever, portions of the airport lands and buildings that #(,, leases to private entities are not e/empt from real estate ta/. (n such a case, #(,, has granted the beneficial use of such portions for a consideration to a ta/able person
2). #(,, vs. City of Parana.ue &,C:%: :he #anila (nternational ,irport ,uthority (#(,, operates the 1inoy ,.uino (nternational ,irport (1,(, Comple/ in ParaTa.ue City under "/ecutive 0rder 1o. );< (#(,, Charter , as amended. ,s such operator, it administers the land, improvements and e.uipment 5ithin the 1,(, Comple/. (n #arch 1))E, the 0ffice of the Government Corporate Counsel (0GCC issued 0pinion 1o. ;+1 to the effect that the Cocal Government Code of 1))1 (CGC 5ithdre5 the e/emption from real estate ta/ granted to #(,, under %ection 21of its Charter. :hus, #(,, paid some of the real estate ta/ already due. (n $une 2;;1, it received &inal 1otices of Real "state :a/ 'elin.uency from the City of ParaTa.ue for the ta/able years 1))2 to 2;;1. :he City :reasurer subse.uently issued notices of levy and 5arrants of levy on the airport lands and buildings. ,t the instance of #(,,, the 0GCC issued 0pinion 1o. 13E clarifying 0pinion 1o. ;+1, pointing out that %ec. 2;+ of the CGC re.uires persons e/empt from real estate ta/ to sho5 proof of e/emption. ,ccording to the 0GCC, %ec. 21 of the #(,, Charter is the proof that #(,, is e/empt from real estate ta/. #(,,, thus, filed a petition 5ith the Court of ,ppeals see7ing to restrain the City of Parana.ue from imposing real estate ta/ on, levying against, and auctioning for public sale the airport lands and buildings, but this 5as dismissed for having been filed out of time. Bence, #(,, filed this petition for revie5, pointing out that it is e/empt from real estate ta/ under %ec. 21 of its charter and %ec. 2<3 of the CGC. (t invo7es the principle that the government cannot ta/ itself as a justification for e/emption, since the airport lands and buildings, being devoted to public use and public service, are o5ned by the
<;. %",6C,1' %"RF(C", (1C. F%. C08R: 0& ,PP",C% &,C:%:

Petitioner %ea6Cand %ervice (ncorporated, an ,merican international shipping company licensed by the %ecurities and "/change Commission to do business in the Philippines entered into a contract 5ith the 8nited %tates Government to transport military household goods and effects of 8.%. military personnel assigned to the %ubic 1aval !ase. %ea6Cand paid its corresponding corporate income ta/ for the ta/able year 1)*3 at the rate of 1.DH in accordance 5ith %ection 2D(a (2 of the 1ational (nternal Revenue Code in relation to ,rticle ) of the RP68% :a/ :reaty. %ubse.uently, %ea6Cand filed a claim for refund alleging that the ta/es it paid 5ere made in mista7e because under the RP68% #ilitary !ase ,greement, it is e/empt from the payment of ta/es. (%%8": 'oes the income that petitioner derived from services in transporting the household goods and effects of 8.%. military personnel fall 5ithin the ta/ e/emption provided in the RP68% #ilitary !ases ,greement> R8C(1G: 10. Ca5s granting e/emption from ta/ are construed strictissimi juris against the ta/payer and liberally in favor of the ta/ing po5er. :he transport or shipment of household goods and effects of 8.%. military personnel is not included in the term 9construction, maintenance, operation and defense of the bases.J 1either could the performance of this service to the 8.%. government be interpreted as directly related to the defense and security of the Philippine territories
&,C:%: Reagan, an ,merican citi-en and an employee of !endi/ Radio, 'ivision of !endi/ ,viation Corporation, 5hich provides technical assistance to the 8% ,ir &orce, 5as assigned at Clar7 ,ir !ase. ) months thereafter before his tour of duty e/pired, he imported a ta/6free 1)+; Cadillac car 5ith accessories valued at U+,33<.*<, inclusive of freight, insurance and other charges. ,fter more than 2 months, he as7ed his !ase Commander at the Clar7 ,ir !ase for a permit to sell the car 5hich 5as granted provided that the sale should be made to a member of the 8% ,rmed &orces or a 8% citi-en employed in the 8% military base in the Philippines. Be then sold the car for U+,+;; to $ohnson, $r. 5ho 5as a member of the 8% #arine Corps in Cavite. $ohnson, $r. then sold the car to #eneses for P<2,;;;. ,s a result of the transaction thus made, respondent C(R fi/ed as his net ta/able income arising from the sale the amount of P1E,)12.<3, ma7ing him liable for income ta/ in the sum of P2,)E) plus the legal rate of interest. ,fter paying the income ta/, he sought a refund from C(R claiming that he is e/empt. Khile the action 5as pending, he filed the case 5ith the C:, see7ing the recovery of 5hat he paid plus the legal rate of interest. Reagan is imputing that the Clar7 ,ir &orce is foreign soil or territory and thus is beyond the government=s jurisdictional po5er to ta/. Bis ground is based upon an obiter dictum in a 1)+2 deicision (%%8": Khether the said income ta/ of P2,)E) 5as legally collected by the C(R from Reagan> (s Clar7 ,ir &orce foreign soil or territory> B"C':
<1. <1st (1&,1:RM P0%: "LCB,1G" vs. P0%,',% &,C:%: :he <1st (nfantry Post "/change is a post e/change constituted in accordance 5ith ,rmy regulations and the la5s of the 8nited %tates. in the course of its duly authori-ed business transactions, the "/change made many purchases of various and diverse commodities, goods, 5ares and merchandise from various merchants in the Philippines. :he Commissioner collected a sales ta/ of 1 1@2 H of the gross value of the commodities, etc. from the merchants 5ho sold said commodities to the "/change. , formal protest 5as lodged by the "/change. (%%8": Khether or not the petitioner is e/empt from the sales ta/ imposed against its suppliers. R8C(1G: :he court ruled in the negative. :a/es have been collected from merchants 5ho made sales to ,rmy Post "/changes since 1);3 (,ct 11*), %ection 1<) . %imilar ta/es are paid by those 5ho sell merchandise to the Philippine Government, and by those 5ho do business 5ith the 8% ,rmy and 1avy in the Philippines. Berein, the merchants 5ho effected the sales to the Post "/change are the ones 5ho paid the ta/A and it is the officers, soldiers, and civilian employees and their families 5ho are benefited by the post e/change to 5hom the ta/ is ultimately shifted. ,n ,rmy Post "/change, although an agency 5ithin the 8% ,rmy, cannot secure e/emption from ta/ation for merchants 5ho ma7e sales to the Post "/change. <2. R",G,1 F. C(R Petitioner 5as liable for the income ta/ arising from the sale of his automobile in the Clar7 &ield ,ir !ase 5hich clearly 5ithin the Philippine Government=s territorial jurisdiction to ta/. 1othing is better settled than that the Philippines being independent and sovereign, its authority may be e/ercised over its entire domain. :here is no portion thereof that is beyond its po5er. (ts la5s govern therein, and everyone to 5hom it applies must submit to its terms. :he ground occupied by an embassy is not in fact the territory of the foreign %tate to 5hich the premises belong through possession or o5nership. :he la5fulness or unla5fulness of acts there committed is determined by the territorial sovereign. :he first and crucial error imputed to the Court of :a/ ,ppeals to the effect that it should have held that the Clar7 ,ir &orce is foreign soil or territory for purposes of income ta/ legislation is clearly 5ithout support in la5. ,s thus correctly vie5ed, petitioner4s hope for the reversal of the decision completely fades a5ay. :here is nothing in the #ilitary !ases ,greement that lends support to such an assertion. (t has not become foreign soil or territory. :his country4s jurisdictional rights therein, certainly not e/cluding the po5er to ta/, have been preserved. ,s to certain ta/ matters, an appropriate e/emption 5as provided for. :he ruling relied upon 5as from the case %aura (mport and "/port Co. v. #eer, 5hich affirmed a decision rendered E months ago holding liable as an importer, 5ithin the contemplation of the 1(RC provision, the trading firm that purchased army goods from a 8% government agency in the

Philippines. $udge :uason, in this case, proceeded to discuss the role of the ,merican military contingent in the Philippines as a belligerent occupant. (n the course of such a dissertion, dra5ing on his 5ell67no5n gift for rhetoric and cogni-ant that he 5as ma7ing an as if statement, he did say: ;+hile in army )ases or installations "ithin the Philippines those goods "ere in contemplation of la" on foreign soil.; %uch statement 5as only an obiter dictum and is not controlling on the .uestion before the court, 5hich is the petitioner=s liability for the income ta/. :he provision in the #ilitary !ases ,greement of the Philippine Government=s consent that the 8% e/ercise jurisdiction in certain cases is only a matter of comity, courtesy or e/pediency over the bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed therein. :his provision cannot be construed as a limitation upon the rights of the Philippine Government. :he conclusion is thus irresistible that the crucial error assigned, the only one that calls for discussion to the effect that for income ta/ purposes the Clar7 ,ir &orce !ase is outside Philippine territory, is utterly 5ithout merit. Government. :hey allege that #itsubishi 5as merely the conduit bet5een ,tlas and "/imban7, and that the ultimate creditor 5as really "/imban7. :he %C held that #itsubishi 5as not a mere agent of "/imban7. (t entered into the agreement 5ith ,tlas in its o5n independent capacity. :he transaction bet5een #itsubishi and ,tlas on the one hand, and bet5een #itsubishi and "/imban7 on the other, 5ere separate and distinct. 1o agency relationship 5as established bet5een "/imban7 and #itsubishi. %ince the transaction 5as bet5een #itsubishi and ,tlas, the e/emption that 5ould have been applicable to "/imban7, does not apply. :he interest is therefore not e/empt from ta/.
<3. C(R F. #,R8!"1( C0RP0R,:(01 &,C:%: #arubeni 5as a $apanese corporation engaged in the import and e/port, trading, and construction business. (t completed t5o contracts in 1)*3, the income from 5hich it did not declare. 0ne of the contracts 5as 5ith the 1ational 'evelopment Company (1'C in connection 5ith the construction of a 5harf@port comple/ in Ceyte. :he other contract 5as 5ith the Philippine Phosphate &ertili-er Corp (Philfos for the construction of an ammonia storage comple/ also in Ceyte. :he Commissioner of (nternal Revenue (C(R then made an assessment on #arubeni4s deficiency ta/es. (t found that the 1'C and Philpos contracts 5ere made on a Iturn67eyJ basis (a job in 5hich the contractor agrees to complete the 5or7 of building and installation to the point of readiness or occupancyA in other 5ords, the products are brought to the client complete and ready for use amounting to about P)+;#V. :he t5o contracts 5ere divided into t5o parts ? the offshore portion and the onshore portion. ,ll materials and e.uipment in the contract under the offshore portion 5ere manufactured and completed in $apan. ,fter manufacture, these 5ere transported to Ceyte and installed to the pier 5ith the use of bolts. (R found that #arubeni 5as liable for contractor4s ta/ on the offshore portion. #arubeni filed a petition 5ith the C:,, arguing that the income derived from the offshore portion should be e/empt from ta/ since it 5as derived outside of the Philippine jurisdiction. (10:": :here 5as another argument on ta/ amnesty plus a brief history on the project, but ( didn4t include this anymore since it4s not relevant to the topic (%%8": Khether the income of #arubeni is ta/able even if it claims that it 5as earned outside of the Philippines.
<<. C(R F. #(:%8!(%B( #":,C C0RP.: (1:"R1,:(01,C C0#(:M &,C:%: ,tlas Consolidated #ining entered into a Coan and %ales Contract 5ith #itsubishi. 8nder the Contract, #itsubishi 5ould lend ,tlas U2;# for the installation of a ne5 concentrator for copper production, and in turn, ,tlas 5ould sell to #itsubishi all the copper concentrates produced from the machine for the ne/t 1D years. :hereafter, #itsubishi applied for a loan 5ith "/imban7 of $apan so that it could comply 5ith its obligations under the contract. #itsubishi also applied for a loan 5ith a consortium of $apanese ban7s. :he total amount of both loans 5as U2;#. ,tlas made interest payments in favor of #itsubishi totaling P1<#. :he corresponding 1DH ta/ on the interest in the amount of P1.)# 5as 5ithheld and remitted to the Government. %ubse.uently, #itsubishi and ,tlas filed a claim for ta/ credit, re.uesting that the P1.)# be applied against their e/isting ta/ liabilities on the ground that the interest earned by #itsubishi on the loan 5as e/empt from ta/ as provided in the 1ational Revenue Code. (%%8": Khether the interest is ta/6e/empt. B"C': 1o, the interest is not e/empt from ta/. :he 1ational (nternal Revenue Code provides that income received from loans in the Philippines e/tended by financing institutions o5ned, controlled, or financed by foreign governments are e/empt from ta/. #itsubishi and ,tlas claim that the interest earned from the loan falls under the above e/emption because #itsubishi 5as merely acting as an agent of "/imban7, 5hich is a financing institution o5ned, controlled, and financed by the $apanese
B"C': 1o. #arubeni is not liable for the contractor=s ta/.
, contractor=s ta/ is in the nature of an e/cise ta/ on the e/ercise of a privilege of selling services or labor rather than a sale of products. (t is directly collectible from the person e/ercising the privilege. !eing an e/cise ta/, it can be levied by the ta/ing authority only 5hen the acts, privileges or business are done or performed 5ithin the jurisdiction of said authority. Ci7e property ta/es, it cannot be imposed on an occupation or privilege outside the ta/ing district. (n this case, the ship loaders, boats and mobile e.uipment used in the construction projects 5ere all designed, engineered and fabricated in $apan. :hey 5ere merely shipped to Ceyte and assembled there. Khile the construction and installation 5or7 5ere completed 5ithin the Philippines, some pieces of e.uipment and supplies 5ere completely designed and engineered in $apan. %ince these services 5ere rendered outside the ta/ing jurisdiction of the Philippines, they are therefore not subject to the contractor=s ta/.

B. CONSTITUTIONAL LIMITATIONS ,merica, as amended . . .=J :he appellate court concluded that such being the case, petitioners could not claim that "0 )E6, is unconstitutional, 5hile at the same time maintaining the validity of R, E22E. :he court a .uo also e/plained that the intention of Congress 5as to confine the coverage of the %%"N to the Isecured areaJ and not to include the Ientire 0longapo City and other areas mentioned in %ection 12 of the la5.J :he Court of ,ppeals further justified the limited application of the ta/ incentives as being 5ithin the prerogative of the legislature, pursuant to its Iavo5ed purpose Qof servingR some public benefit or interest.J (t ruled that I"0 )E6, merely implements the legislative purpose of QR, E22ER.J 'isagreeing, petitioners no5 see7 before us a revie5 of the aforecited Court of ,ppeals 'ecision and Resolution. ISSUE" K@1 "0 <E6, is constitutional HELD" M"%. %aid 0rder is not violative of the e.ual protection clauseA neither is it discriminatory. :here are real and substantive distinctions bet5een the circumstances obtaining inside and those outside the %ubic 1aval !ase, thereby justifying a valid and reasonable classification. Ke believe it 5as reasonable for the President to have delimited the application of some incentives to the confines of the former %ubic military base. (t is this specific area 5hich the government intends to transform and develop from its status .uo ante as an abandoned naval facility into a self6 sustaining industrial and commercial -one, particularly for big foreign and local investors to use as operational bases for their businesses and industries. :he classification is, therefore, germane to the purposes of the la5. Certainly, there are substantial differences bet5een the big investors 5ho are being lured to establish and operate their industries in the so6called Isecured areaJ and the present business operators outside the area. 0n the one hand, 5e are tal7ing of billion6peso investments and thousands of ne5, jobs. 0n the other hand, definitely none of such magnitude. (n the first, the economic impact 5ill be nationalA in the second, only local. (t is 5ell6settled that the e.ual6protection guarantee does not re.uire territorial uniformity of la5s.,s long as there are actual and material differences bet5een territories, there is no violation of the constitutional clause. ,nd of course, anyone, including the petitioners, possessing the re.uisite investment capital can al5ays avail of the same benefits by channelling his or her resources or business operations into the fenced6off free port -one. Castly, the classification applies e.ually to all the resident individuals and businesses 5ithin the Isecured area.J :he residents, being in li7e circumstances or contributing directly to the achievement of the end purpose of the la5, are not categori-ed further. (nstead, they are all similarly treated, both in privileges granted and in obligations re.uired. Petition '"1("'. #. $OHN HAY PEOPLES ALTERNATIVE COALITION V. LIM
(i)
UNIFORMITY
!. TIU V. CA FACTS" Petitioners assail the C, decision and resolution that upheld the constitutionality and validity of "0 )E6,, according to 5hich the grant and enjoyment of the ta/ and duty incentives authori-ed under R, E22E (I,n ,ct ,ccelerating the Conversion of #ilitary Reservations (nto 0ther Productive 8ses, Creating the !ases Conversion and 'evelopment ,uthority for this Purpose, Providing &unds :herefor and for 0ther PurposesJ 5ere limited to the business enterprises and residents 5ithin the fenced6in area of the %ubic %pecial "conomic None (%%"N . ,mong others, %ection 12 of R, E22E provides that, I:he provision of e/isting la5s, rules and regulations to the contrary not5ithstanding, no ta/es, local and national, shall be imposed 5ithin the %ubic %pecial "conomic None. (n lieu of paying ta/es, three percent (<H of the gross income earned by all businesses and enterprises 5ithin the %ubic %pecial "conomic None shall be remitted to the 1ational Government, one percent (1H each to the local government units affected by the declaration of the -one in proportion to their population area, and other factors. (n addition, there is hereby established a development fund of one percent (1H of the gross income earned by all businesses and enterprises 5ithin the %ubic %pecial "conomic None to be utili-ed for the development of municipalities outside the City of 0longapo and the #unicipality of %ubic, and other municipalities contiguous to the base areas /// (n case of conflict bet5een national and local la5s 5ith respect to ta/ e/emption privileges in the %ubic %pecial "conomic None, the same shall be resolved in favor of the latterAJ "0 )E, 5hich clarified the application of the incentives provided thus: %ec. 1. 0n (mport :a/es and 'uties. W :a/ and duty6free importations shall apply only to ra5 materials, capital goods and e.uipment brought in by business enterprises into the %%"N. "/cept for these items, importations of other goods into the %%"N, 5hether by business enterprises or resident individuals, are subject to ta/es and duties under relevant Philippine la5s. :he e/portation or removal of ta/ and duty6free goods from the territory of the %%"N to other parts of the Philippine territory shall be subject to duties and ta/es under relevant Philippine la5s. %ec. 2. 0n ,ll 0ther :a/es. W (n lieu of all local and national ta/es (e/cept import ta/es and duties , all business enterprises in the %%"N shall be re.uired to pay the ta/ specified in %ection 12(c of R.,. 1o. E22E. Respondent Court held that Ithere is no substantial difference bet5een the provisions of "0 )E6, and %ection 12 of R, E22E. (n both, the X%ecured ,rea= is precise and 5ell6defined as X. . . the lands occupied by the %ubic 1aval !ase and its contiguous e/tensions as embraced, covered and defined by the 1)3E #ilitary !ases ,greement bet5een the Philippines and the 8nited %tates of

None, specificallyG ,lso found in the deliberations of the %enate, a confirmation of the e/clusivity of the ta/ and investment privileges to %ubic %"N. I%enator ,ngara: :he Gentleman is absolutely correct. #r. President. %0 K" #8%: C01&(1" :B"%" P0C(C("% 01CM :0 %8!(C.J (t is the legislature, unless limited by a provision of the state constitution that has full po5er to e/empt any person, corporation or class of property from ta/ation, its po5er to e/empt being as broad as its po5er to ta/. 0ther than the Congress, the Constitution may itself provide for specific ta/ e/emptions, or local governments may pass ordinances on e/emption only from local ta/es. :he challenged grant of ta/ e/emption must have concurrence of a majority of all members of Congress. (n same vein, the other 7inds of privileges e/tended to the $ohn Bay %"N are by tradition and usage for Congress to legislate upon. :a/ e/emption cannot be implied as it must be categorically and un mista7ably e/pressed ? if it 5ere the intent of the legislature to grant to the $ohn Bay %"N the same ta/ e/emption and incentives given to %ubic %"N, it 5ould have so e/pressly provided in R, E22E. !C',, under R., E22E, is e/pressly entrusted 5ith broad rights of o5nership
FACTS" R, 1o. E22E created the !ases Conversion and 'evelopment ,uthority (!C', , 5hich also created the %ubic %pecial "conomic None (%ubic %"N . ,side from granting incentives to %ubic %"N, R, E22E also granted the President is an e/press authority to create other %"Ns in the areas covered respectively by the Clar7 military reservation, the Kallace ,ir %tation in %an &ernando, Ca 8nion, and Camp $ohn Bay through e/ecutive proclamations. !C', entered into a #0, and "scro5 ,greement 5ith :81:"L and ,%(,K0RC', private corporations under the la5s of the !ritish Firgin (slands, preparatory to the formation of a joint venture for the development of Poro Point Ca 8nion and Camp $ohn Bay as premier tourist destinations and recreation centers. !C',, :81:"L and ,%(,K0RC' e/ecuted a $F, to put up the !aguio (nternational 'evelopment and #anagement Corporation 5hich 5ould lease areas 5ithin Camp $ohn Bay and Poro Point for the attainment of the tourist and recreation spots in Ca 8nion and Camp $ohn Bay. President Ramos issued Proclamation 1o. 32; 5hich established a %"N on a portion of Camp $ohn Bay. 2nd sentence of %ection < of said Proclamation provided for national and local ta/ e/emption 5ithin and granted other economic incentives to the $ohn Bay %pecial "conomic None. I%ection <: (nvestment Climate in $ohn Bay %pecial "conomic None.6 Pursuant to %ection D(m and %ection 1D of R, 1o. E22E, the $ohn Bay Poro Point 'evelopment Corporation shall implement all necessary policies, rules, and regulations governing the -one, including investment incentives, in consultation 5ith pertinent government departments. ,mong others, the -one shall have all the applicable incentives of the %pecial "conomic None under %ection 12 of Republic ,ct 1o. E22E and those applicable incentives granted in the "/port Processing Nones, the Petitioners filed this case to enjoin the respondents from implementing Proc. 32; for being unconstitutional on grounds of: &or being illegal and invalid in so far as it grants ta/ e/emptions thus amounting to unconstitutional e/ercise of by the President of po5er granted only to legislature Cimits po5ers and interferes 5ith the autonomy of the city Fiolates rule that all ta/es should be uniform and e.uitable ISSUE" 1. K@1 Proclamation 1o. 32; is constitutional by providing for national and local ta/ e/emption 5ithin and granting other economic incentives to the $ohn Bay %pecial "conomic None. 10, 2nd sentence, %ection < of said proclamation is unconstitutional. K@1 Proclamation 1o. 32; is constitutional for limiting or interfering 5ith the local autonomy of !aguio City.
7. COCONUT OIL REFINERS ASSOCIATION INC. V. BCDA FACTS" R, E22E 5as enacted providing for the sound and balanced conversion of the Clar7 and %ubic military reservations and their e/tensions into alternative productive uses in the form of special economic -ones. President Ramos issued "0 *; 5hich declared that Clar7 (C%"N shall have all the applicable incentives granted to the %ubic %pecial "conomic and &ree Port None (%%"N under R, E22E. Petitioners claim that the said ".0 as 5ell as R, E22E are replete 5ith constitutional infirmities and must be declared invalid and void. Petitioner assails: "0 *; and !C', !oard Resolution: allo5ing the ta/ and duty6free sale at retail of consumer goods imported via clar7 for consumption outside C%"N. "0 )E, "0 )E6,: granting U1;; monthly and U2;; yearly ta/6free shopping privileges to %%"N residents living outside secured area of %%"N and to &ilipinos aged 1D and over residing outside %%"N Petitioners argue that the "/ecutive 'epartment, by allo5ing thru .uestioned issuances the setting up of ta/ and duty free shops and the removal of consumer ggoods and items from the -ones 5ithout payment of correspondning duties and ta/es arbitrarily provided additional e/emptions to the limitations imposed by R, E22E. ISSUE" (other issues: e.ual protection clause, preferential use of &ilipino labor, prohibition against unfair competition K@1 assailed issuances amounts to violation of the rule on separation of po5ers being e/ecutive legislation. HELD"
2.
HELD" M"%. :he 2nd %entence of %"C:(01 < of Proclamation 1o. 32; is hereby declared 18CC and F0(' and is accordingly declared of no legal force and effect. Public respondents are hereby enjoined from implementing the aforesaid void provision. Proclamation 1o. 32;, 5ithout the invalidated portion, remains valid and effective. 8nder %ection 12 of R, 1o. E22E it is clear that 01CM :B" %8!(C %"N 5hich 5as granted by Congress 5ith ta/ e/emption, investment incentives and the li7e. :B"R" (% 10 "LPR"%% "L:"1%(01 0& :B" %,(' PR0F(%(01 (1 PR"%('"1:(,C PR0CC,#,:(01 1o. 32;. (%ection 12 7ept mentioning %ubic %pecial "conomic
Petitioners claim that the 5ording of R, E22E clearly limits the grant of ta/ incentives to the importation of ra5 materials and capital e.uipment only, hence they claim that assailed issuances constitute e/ecutive legislation for invalidly granting ta/ incentives in importation of consumer goods. :he court ho5ever said that to limit the ta/6free importation privilege of enterprises to those located inside the special -one only to ra5 materials clearly runs counter to the intention of the legislature to create a free port 5here Ifree flo5 of goods or capital 5ithin, into and out of the -onesJ is insured. :he records of the %enate containing the discussion of the concept of %"N in %ec 12a R, E22E sho5 the legislative intent that consumer goods entering the %%"N 5hich satisfy the needs of the -one and are consumed there are not subject to duties and ta/es in accordance 5ith Philippine la5s. ,ccording to %enator Guingona: :he %"N could embrace the needs of tourism, servicing, financing and other investment aspects. Bo5ever 5ith regard to the e/ecutive order issued by President Ramos concerning Clar7 as being a %"N (and thus enjoy ta/ e/emptions and incentives the court declared that such 5as an invalid e/ercise of e/ecutive legislation. ,s 5as decided in the case of Camp $ohn $ay, 5herein the court held that $ohn Bay 5as not granted any ta/ e/emption as it 5as not any5here stated in the la5. ,s in this case, R, E22E e/pressly provides for the grant of incentives to the %%"N it fails to ma7e any similar grant ho5ever to the other economic -ones including Clar7. :a/ and duty free incentives being in the nature of ta/ e/emptions the basis thereof should be categorically and unmista7ably e/pressed from the language of the statute.
#otion 'enied. :he Constitution does not really prohibit imposition of (ndirect :a/es. (t has been interpreted to mean simply that 'irect :a/es are to be preferred as much as possible 5hereas (ndirect :a/es should be minimi-ed. %ales :a/es are the oldest form of (ndirect :a/es. (t merelye/pandsthe base of the :a/. Resort to indirect ta/es should beminimi-ed but not avoid entirely because it is difficult, if not (#P0%%(!C", to avoid them by imposing such ta/es according to the :a/payers ability to pay. Khere F,: imposes regressive ta/ation, the Ca5 on F,: minimi-es the regressive effects of this imposition by providing for N"R0 Rating of certain transactions li7e Goods in its 0riginal %tate (Palay, Corn , "ducational %ervices, Kor7 of ,rt, "/port sales by person not F,: registered. :ransactions 5hich involve F,: are goods and services used or availed mainly by higher income group.
'. ABAKADA GURO PARTY LIST V. THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA FACTS" R.,. )<<E @ the "F,: Ca5, a F,: reform ,ct enacted on #ay 23, 2;;D. %ections 3, D and + of said ,ct amends %ections 1;+, 1;E and 1;*, respectively, of the 1(RC. %ection 3 imposes a 1;H F,: on sale of goods and properties, %ection D imposes a 1;H F,: on importation of goods, and %ection + imposes a 1;H F,: on sale of services and use or lease of properties. :his la5 authori-ed the President, upon recommendation of the %ecretary of &inance, to raise the F,: rate to 12H effective $anuary 1, 2;;+, if t5o conditions are satisfied: F,: collection as a percentage of G'P of the previous year e/ceeds 2 3@DH 1ational government deficit as a percentage of G'P of the previous year e/ceeds 1 SH maintaining the rate of 1;H until the conditions above too7 place. (t also inserted a provision imposing a E;H limit on the amount of input ta/ to be credited against the output ta/.
%. ARTURO TOLENTINO VS. SEC OF FINANCE & CIR FACTS" :he Case is about challenging the Constitutionality of R,EE1+ other5ise 7no5n as "/panded Falue ,dded :a/ ("F,: . , lot of issues 5ere thro5n li7e: (1 it did not originate e/clusively in the Bouse of RepresentativesA (2 :he Gro5ing !udget deYcit is not an "mergency, especially Philippines 5here budget deYcit is a chronic condition. :hese are motions directly Yled to the %upreme Court see7ing reconsideration to dismiss the case. :he enactment of R, EE1+ other5ise 7no5n as "F,: 5as brought about by the enormous budget deYcit of the Philippines. (t is an amendment 5hich see7s to restructure the F,: by 5idening its ta/ base. ,rturo :olentino together 5ith other petitioners li7e the CR"!, and other Civil %ociety riding on the popularity of the issue on "F,: to gain political grounds assents that "F ,: violates the rules that ta/es should be uniform and e.uitable and that Congress shall evolve a progressive system of :a/ation. CR"!, claims that F,: is regressive because the la5 imposes a Zat rate of 1;H and thus places the :a/ !urden on all ta/ payers 5ithout regard to their ability to pay. :he mandate of Congress is to evolve a progressive ta/ system. ISSUES"
Petitions 5ere thus filed assailing the constitutionality of the la5: ,!,[,', argued that Congress abandoned its e/clusive authority to fi/ ta/es by giving the President the authority upon the &inance %ec=s recommendation to raise F,: to 12H %en. Pimentel and Rep. "scudero argued that the la5 5as an undue delegation of legislative po5ers and a violation of due process Pilipinas %hell dealers argued that the F,: reform 5as arbitrary, oppressive and confiscatory.
Khether or not "F,: violates the rule that :a/es evolve a progressive system of :a/ation>
HELD"

0n the other hand, respondents countered that the la5 5as complete, that it left no discretion to the President, and that it merely charged the President 5ith carrying out the rate increase once any of the 2 conditions arise. services. (t does 10: even ma7e any distinction as to the type of industry @ trade that 5ill bear the E;H limitation on the creditable input ta/, Dyear amorti-ation of input ta/ paid on purchase of capital goods or the DH final 5ithholding ta/ by the government. :he la5 is also e.uitable because it is e.uipped 5ith a threshold marginWthe 1;@12H F,: rate 5ill not apply to the sale of goods 5@ gross annual sales at P1.D or belo5. %mall corner sari6sari stores are conse.uently e/empt from its application.
ISSUE" D. K@1 R.,. )<<E is constitutional HELD" M"%, it is valid and constitutional. 1. Ca5 5as 10: an undue delegation of legislative po5er. Congress didn=t delegate the po5er to ta/ but the mere implementation of the la5 ? the ascertainment of facts contingent on conditions already provided. (n this case, the legislature made the operation of the 12H rate contingent upon 2 specified conditions. :hus, no discretion 5ould be e/ercised by the President, and he 5ould only e/ercise the ministerial duty of imposing the 12H rate. #oreover, the President can=t alter or modify @ nullify @ set aside the findings of fact of the %ecretary of &inance, 5ho 5ill ascertain the said conditions because the %o& 5ill not act as alter ego of President but ,G"1: of the legislative department. (). MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS* INC. V. DEPARTMENT OF FINANCE SECRETARY FACTS" Petitioner #isamis 0riental ,ssociation of Coco :raders, (nc. is a domestic corporation 5hose members, individually or collectively, are engaged in the buying and selling of copra in #isamis 0riental. :he petitioner alleges that prior to the issuance of Revenue #emorandum Circular 3E6)1 on $une 11, 1))1, 5hich implemented F,: Ruling 1);6);, copra 5as classified as agricultural food product under U 1;<(b of the 1ational (nternal Revenue Code and, therefore, e/empt from F,: at all stages of production or distribution. 8nder %ec. 1;<(b of the 1(RC, the sale of agricultural food products in their original state is e/empt from F,: at all stages of production or distribution. :he reclassification had the effect of denying to the petitioner the e/emption it previously enjoyed 5hen copra 5as classified as an agricultural food product under \1;<(b of the 1(RC. Petitioner challenges R#C 1o. 3E6)1 on various grounds. ISSUES" (1 Khether the !(R is the proper the competent government agency to determine the proper classification of food products. (2 Khether R#C 1o. 3E6)1 is discriminatory and violative of the e.ual protection clause of the Constitution. HELD" :he court, as to the first issue, ruled in the affirmative. :he !(R, as the government agency charged 5ith the implementation and interpretation of the ta/ la5s, is entitled to great respect. (n interpreting %ection 1;< of the 1(RC, the Commissioner of (nternal Revenue correctly gave it a strict construction consistent 5ith the rule that ta/ e/emptions must be strictly construed against the ta/payer and liberally in favor of the state. :he ruling 5as made by the Commissioner of (nternal "ven if F,: is regressive, it is still constitutional. :he constitution does 10: prohibit the imposition of indirect ta/es @ a regressive system of ta/ation. (t simply provides that Congress shall "F0CF" a progressive system of ta/ation, meaning direct ta/es must be preferred to indirect ta/es. (n the case of the F,:, the la5 minimi-es the regressive effects of this imposition by providing for -ero rating of certain transactions.
2.
:he 12H increase does 10: impose an unfair and unnecessary additional ta/ burden. !ecause of the country=s gloomy states of economic affairs, it is necessary to raise revenue to meet government e/penditures.
<.
:he E;H limitation on input ta/ does 10: violate due process and "PC (nput ta/ is 10: a property right but a %:,:8:0RM privilege, 5@c may be regulated. !esides, the unutili-ed input ta/ may be credited in the subse.uent periods or even refunded, so it is 10: completely lost. 1either does it violate "PC 5@ regard to the DH creditable 5ithholding ta/ imposed on payments made by the government for :,L,!C" :R,1%,C:(01%. :his is because it is applied e.ually to members of the same class. :a/able transactions 5ith the government are subject to a uniform DH rate, in contrast to its different rates prior to amendment. (t is clear that Congress intended to treat differently ta/able transactions 5ith the government.
3.
:he la5 is consistent 5@ 8niformity and ".uitability of :a/ation 8niformity of ta/ation means that all ta/able articles@property of the %,#" CC,%% be ta/ed at the %,#" R,:". (n this case, the ta/ la5 is uniform as it provides for a standard rate of 1;H @ 12H on all goods and

Revenue in the e/ercise of his po5er under \ 23D of the 1(RC to 9ma7e rulings or opinions in connection 5ith the implementation of the provisions of internal revenue la5s, including rulings on the classification of articles for sales ta/ and similar purposes.J Kith regard to the second issue, the court ruled in the negative. Petitioner li7e5ise claims that R#C 1o. 3E6)1 is violative of the e.ual protection clause because 5hile coconut farmers and copra producers are e/empt, traders and dealers are not, although both sell copra in its original state. Petitioners add that oil millers do not enjoy ta/ credit out of the F,: payment of traders and dealers. :he argument has no merit. :here is a material or substantial difference bet5een coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. :he former produce and sell copra, the latter merely sell copra. :he Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. (t is not true that oil millers are e/empt from F,:. Pursuant to \ 1;2 of the 1(RC, they are subject to 1;H F,: on the sale of services.
ISSUES" 1. Khether or not the DH franchise ta/ prescribed in %ection 2D) of the 1ational (nternal Revenue Code assessed against the private respondent on its gross receipts reali-ed before the effectivity of R.,6 1o. <*3< is collectible. Khether or not %ection 3 of R.,. 1o. <*3< is unconstitutional for being violative of the 9uniformity and e.uality of ta/ation9 clause of the Constitution. (f the abovementioned %ection 3 of R.,. 1o. <*3< is valid, 5hether or not it could be given retroactive effect so as to render uncollectible the ta/es in .uestion 5hich 5ere assessed before its enactment.
2.
<.
(1.CIR V. LINGAYEN GULF ELECTRIC POWER CO. FACTS" Cingayen Gulf "lectric Po5er operates an electric po5er plant serving the municipalities of Cingayen and !inmaley, Pangaisnan, pursuant to municipal franchise granted it by the respective municipal councils. :he franchises provided that the grantee shall pay .uarterly to the Provincial :reasury of Pangasinan 1H ofthe gross earnings obtained through the privilege for the first 2; years (from 1)3+ , and 2H during the remaining 1D years of the life of the franchise. !ureau of (nternal Revenue (!(R assessed against and demanded from the private respondent deficiency franchise ta/es and surcharges for the years 1)3+ to 1)D3 applying the franchise ta/ rate of DH on gross receipts from #arch 1, 1)3* to 'ecember <1, 1)D3 as prescribed in %ection 2D) of the 1ational (nternal Revenue Code, instead of the lo5er rates as provided in the municipal franchises. :he private respondent protested the said assessment and re.uested for a conference 5ith a vie5 to settling the liability amicably. :he Commissioner denied the re.uest of the private respondent. :hus, the private respondent appealed to the Court of :a/ ,ppeals. Pending the hearing of the case, Republic ,ct (R.,. 1o. <*3< 5as passed granting to the private respondent a legislative franchise for the operation of the electric light, heat, and po5er system in the same municipalities of Pangasinan. %ection 3 thereof provides that:
QGR the grantee shall pay into the (nternal Revenue office of each #unicipality in 5hich it is supplying electric current to the public under this franchise, a ta/ e.ual to t5o per centum of the gross receipts from electric current sold or supplied under this franchise. :he grantee is hereby e/pressly e/empted and effective further upon the date the original franchise 5as granted, no other ta/ and@or licenses other than the franchise ta/ of t5o per centum on the gross receipts as provided for in the original franchise shall be collected, any provision of la5 to the contrary not5ithstanding.
HELD" 1. Ke find no merit in petitioner4s contention. R.,. 1o. <*3< granted the private respondent a legislative franchise in $une, 1)+<, amending, altering, or even repealing the original municipal franchises, and providing that the private respondent should pay only a 2H franchise ta/ on its gross receipts, 9in lieu of any and all ta/es and@or licenses of any 7ind, nature or description levied, established, or collected by any authority 5hatsoever, municipal, provincial, or national, no5 or in the future ... and effective further upon the date the original franchise 5as granted, no other ta/ and@or licenses other than the franchise ta/ of t5o per centum on the gross receipts ... shall be collected, any provision of la5 to the contrary not5ithstanding.9 :hus, by virtue of R.,6 1o. <*3<, the private respondent 5as liable to pay only the 2H franchise ta/, effective from the date the original municipal franchise 5as granted. , ta/ is uniform 5hen it operates 5ith the same force and effect in every place 5here the subject of it is found. 8niformity means that all property belonging to the same class shall be ta/ed ali7e :he Cegislature has the inherent po5er not only to select the subjects of ta/ation but to grant e/emptions. :a/ e/emptions have never been deemed violative of the e.ual protection clause. (t is true that the private respondents municipal franchises 5ere obtained under ,ct 1o. ++E 2 of the Philippine Commission, but these original franchises have been replaced by a ne5 legislative franchise, i.e. R.,. 1o. <*3<. :hus, it only effected the transfer of a ta/able property from one class to another. Given the validity of said la5, it should be applied retroactively so as to render uncollectible the ta/es in .uestion 5hich 5ere assessed before its enactment. :he .uestion of 5hether a statute operates retrospectively or only prospectively depends on the legislative intent. (n the instant case, ,ct 1o. <*3< provides that Ieffective G upon the date the original franchise 5as granted, no other ta/ and@or licenses other than the franchise ta/ of t5o per centum on the gross receipts G shall be collected, any provision to the contrary not5ithstanding.J Republic ,ct 1o. <*3< therefore specifically provided for the retroactive effect of the la5.
2.
<.
0n %eptember 1D, 1)+3, the respondent court ruled that the provisions of R.,. 1o. <*3< should apply and accordingly dismissed the claim of the Commissioner of (nternal Revenue. :he said ruling is no5 the subject of the petition at bar.

(2. KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS V. TAN 1e/t, the petitioners claim that "0 2E< is oppressive, discriminatory, unjust and regressive. FACTS" :hese four (3 petitions see7 to nullify "/ecutive 0rder 1o. 2E< issued by the President of the Philippines, and 5hich amended certain sections of the 1ational (nternal Revenue Code and adopted the value6added ta/, for being unconstitutional in that its enactment is not allegedly 5ithin the po5ers of the PresidentA that the F,: is oppressive, discriminatory, regressive, and violates the due process and e.ual protection clauses and other provisions of the 1)*E Constitution. :he F,: is a ta/ levied on a 5ide range of goods and services. (t is a ta/ on the value, added by every seller, 5ith aggregate gross annual sales of articles and@or services, e/ceeding P2;;,;;.;;, to his purchase of goods and services, unless e/empt. F,: is computed at the rate of ;H or 1;H of the gross selling price of goods or gross receipts reali-ed from the sale of services. :he F,: is said to have eliminated privilege ta/es, multiple rated sales ta/ on manufacturers and producers, advance sales ta/, and compensating ta/ on importations. :he framers of "0 2E< that it is principally aimed to rationali-e the system of ta/ing goods and servicesA simplify ta/ administrationA and ma7e the ta/ system more e.uitable, to enable the country to attain economic recovery. :he F,: is not entirely ne5. (t 5as already in force, in a modified form, before "0 2E< 5as issued. ,s pointed out by the %olicitor General, the Philippine sales ta/ system, prior to the issuance of "0 2E<, 5as essentially a single stage value added ta/ system computed under the 9cost subtraction method9 or 9cost deduction method9 and 5as imposed only on original sale, barter or e/change of articles by manufacturers, producers, or importers. %ubse.uent sales of such articles 5ere not subject to sales ta/. Bo5ever, 5ith the issuance of P' 1))1 on <1 0ctober 1)*D, a <H ta/ 5as imposed on a second sale, 5hich 5as reduced to 1.DH upon the issuance of P' 2;;+ on <1 'ecember 1)*D, to ta7e effect 1 $anuary 1)*+. Reduced sales ta/es 5ere imposed not only on the second sale, but on every subse.uent sale, as 5ell. "0 2E< merely increased the F,: on every sale to 1;H, unless -ero6rated or e/empt. ISSUE" Khether or not "0 2E< is unconstitutional HELD" 1o. Petitioners have failed to sho5 that "0 2E< 5as issued capriciously and 5himsically or in an arbitrary or despotic manner by reason of passion or personal hostility. (t appears that a comprehensive study of the F,: had been e/tensively discussed by this framers and other government agencies involved in its implementation, even under the past administration. ,s the %olicitor General correctly sated. 9:he signing of ".0. 2E< 5as merely the last stage in the e/ercise of her legislative po5ers. :he legislative process started long before the signing 5hen the data 5ere gathered, proposals 5ere 5eighed and the final 5ordings of the measure 5ere drafted, revised and finali-ed. Certainly, it cannot be said that the President made a jump, so to spea7, on the Congress, t5o days before it convened.9 :he petitioners9 assertions in this regard are not supported by facts and circumstances to 5arrant their conclusions. :hey have failed to ade.uately sho5 that the F,: is oppressive, discriminatory or unjust. Petitioners merely rely upon ne5spaper articles 5hich are actually hearsay and have evidentiary value. :o justify the nullification of a la5, there must be a clear and une.uivocal breach of the Constitution, not a doubtful and argumentative implication. ,s the Court sees it, "0 2E< satisfies all the re.uirements of a valid ta/. (t is uniform. , ta/ is considered uniform 5hen it operates 5ith the same force and effect in every place 5here the subject may be found.9 :he sales ta/ adopted in "0 2E< is applied similarly on all goods and services sold to the public, 5hich are not e/empt, at the constant rate of ;H or 1;H. :he disputed sales ta/ is also e.uitable. (t is imposed only on sales of goods or services by persons engage in business 5ith an aggregate gross annual sales e/ceeding P2;;,;;;.;;. %mall corner sari6sari stores are conse.uently e/empt from its application. Ci7e5ise e/empt from the ta/ are sales of farm and marine products, spared as they are from the incidence of the F,:, are e/pected to be relatively lo5er and 5ithin the reach of the general public. :he Court li7e5ise finds no merit in the contention of the petitioner (ntegrated Customs !ro7ers ,ssociation of the Philippines that "0 2E<, more particularly the ne5 %ec. 1;< (r of the 1ational (nternal Revenue Code, unduly discriminates against customs bro7ers. ,t any rate, the distinction of the customs bro7ers from the other professionals 5ho are subject to occupation ta/ under the Cocal :a/ Code is based upon material differences, in that the activities of customs bro7ers (li7e those of stoc7, real estate and immigration bro7ers parta7e more of a business, rather than a profession and 5ere thus subjected to the percentage ta/ under %ec. 1E3 of the 1ational (nternal Revenue Code prior to its amendment by "0 2E<. "0 2E< abolished the percentage ta/ and replaced it 5ith the F,:.
( . SISON V. ANCHETA FACTS" %ison assails the validity of !P 1<D 5@c further amended %ec 21 of the 1ational (nternal Revenue Code of 1)EE. :he la5 provides that there=d be a higher ta/ impost against income derived from professional income as opposed to regular income earners. %ison, as a professional businessman, and as ta/payer alleges that by virtue thereof, Ihe 5ould be unduly discriminated against by the imposition of higher rates of ta/ upon his income arising from the e/ercise of his profession vis6a6 vis those 5hich are imposed upon fi/ed income or salaried individual ta/payers.J Be characteri-es the above section as arbitrary amounting to class legislation, oppressive and capricious in character. :here is a transgression of both the e.ual protection and due process clauses of the Constitution as 5ell as of the rule re.uiring uniformity in ta/ation. ISSUE"
Khether the imposition of a higher ta/ rate on ta/able net income derived from business or profession than on compensation is constitutionally infirm. HELD" 1. 0n due process: 'ue process clause may be invo7ed 5here a ta/ing statute is so arbitrary that it finds no support in the Constitution. "/ample: 5hen ta/ation amounts to the confiscation of property, 5hich is a clear abuse of po5erA 5hen assailed ta/ measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable 0n e.ual protection: :he Constitution does not re.uire things 5hich are different in fact or opinion to be treated in la5 as though they 5ere the same. ,t any rate, it is inherent in the po5er to ta/ that a state be free to select the subjects of ta/ation, and it has been repeatedly held that 4ine.ualities 5hich result from a singling out of one particular class for ta/ation, or e/emption infringe no constitutional limitation. 0n uniform ta/ation: ,ccording to the Constitution: 9:he rule of ta/ation shall be uniform and e.uitable.9 (t is met 5hen the ta/ operates 5ith the same force and effect in every place 5here the subject may be found. :he rule of uniformity does not call for perfect uniformity or perfect e.uality, because this is hardly attainable. %upreme Court held: 9".uality and uniformity in ta/ation means that all ta/able articles or 7inds of property of the same class shall be ta/ed at the same rate. :he ta/ing po5er has the authority to ma7e reasonable and natural classifications for purposes of ta/ation. Khere the differentiation complained of conforms to the practical dictates of justice and e.uity it 9is not discriminatory 5ithin the meaning of this clause and is therefore uniform.9 ,pparently, 5hat misled petitioner is his failure to ta7e into consideration the distinction bet5een a ta/ rate and a ta/ base. :here is no legal objection to a broader ta/ base or ta/able income by eliminating all deductible items and at the same time reducing the applicable ta/ rate. :a/payers may be classified into different categories. (t. is enough that the classification must rest upon substantial distinctions that ma7e real differences. (n the case of the gross income ta/ation embodied in !atas Pambansa !lg. 1<D, the, discernible basis of classification is the susceptibility of the income to the application of generali-ed rules removing all deductible items for all ta/payers 5ithin the class and fi/ing a set of reduced ta/ rates to be applied to all of them. :a/payers 5ho are recipients of compensation income are set apart as a class. ,s there is practically no overhead e/pense, these ta/payers are e not entitled to ma7e deductions for income ta/ purposes because they are in the same situation more or less. 0n the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or e/penses necessary to produce their income. (t 5ould not be just then to disregard the disparities by giving all of them -ero deduction and indiscriminately impose on all ali7e the same ta/ rates on the basis of gross income. :here is ample justification then for the !atasang Pambansa to adopt the gross system of income ta/ation to compensation income, 5hile continuing the system of net income ta/ation as regards professional and business income.
((. VILLANUEVA V. CITY OF ILOILO FACTS" 0n %eptember <;, 1)3+ the municipal board of (loilo City enacted 0rdinance *+. :he %upreme Court, ho5ever, declared the ordinance ultra vires. 0n $anuary 1D, 1)+; the municipal board of (loilo City, believing that 5ith the passage of Republic ,ct 22+3, other5ise 7no5n as the Cocal ,utonomy ,ct, it had ac.uired the authority or po5er to enact an ordinance similar to that previously declared by the %upreme Court as ultra vires, enacted 0rdinance 11 (eleven , series of 1)+;, imposing municipal license ta/ on persons engaged in the business of operating tenement houses. (n (loilo City, the appellees "usebio Fillanueva and Remedios %. Fillanueva are o5ners of five tenement houses, aggregately containing 3< apartments, 5hile the other appellees and the same Remedios %. Fillanueva are o5ners of ten apartments. !y virtue of the ordinance in .uestion, the appellant City collected from spouses "usebio Fillanueva and Remedios %. Fillanueva, for the years 1)+;61)+3, the sum of PD,*23.<;, and from the appellees Pio %ian #elli-a, :eresita %. :opacio, and Remedios %. Fillanueva, for the years 1)+;61)+3, the sum of P1,<1E.;;. 0n $uly 11, 1)+2 and ,pril 23, 1)+3, the plaintiffs6appellees filed a complaint, and an amended complaint, respectively, against the City of (loilo, praying that 0rdinance 11, series of 1)+;, be declared 9invalid for being beyond the po5ers of the #unicipal Council of the City of (loilo to enact, and unconstitutional for being violative of the rule as to uniformity of ta/ation and for depriving said plaintiffs of the e.ual protection clause of the Constitution,9 and that the City be ordered to refund the amounts collected from them under the said ordinance. :he lo5er court rendered judgment declaring the ordinance illegal. ISSUES" (1 Khether or not the City of (loilo is empo5ered by the Cocal ,utonomy ,ct to impose tenement ta/es. (2 Khether or not 0rdinance 11, series of 1)+;, does violate the rule of uniformity of ta/ation. HELD" (1 Mes. :he lo5er court has interchangeably denominated the ta/ in .uestion as a tenement ta/ or an apartment ta/. Called by either name, it is not among the e/ceptions listed in %ection 2 of the Cocal ,utonomy ,ct. :he imposition by the ordinance of a license ta/ on persons engaged in the business of operating tenement houses finds authority in %ection 2 of the Cocal ,utonomy ,ct 5hich provides that chartered cities have the authority to impose municipal license ta/es or fees upon persons engaged in any occupation or business, or e/ercising privileges 5ithin their respective territories, and 9other5ise to levy for public purposes, just and uniform ta/es, licenses, or fees.9 (2 1o. :he ordinance is not violative of the rule of uniformity in ta/ation. :he %upreme Court has already ruled that tenement houses constitute a distinct class of property. (t has li7e5ise ruled that
2.
<.

9ta/es are uniform and e.ual 5hen imposed upon all property of the same class or character 5ithin the ta/ing authority.9 :he fact, therefore, that the o5ners of other classes of buildings in the City of (loilo do not pay the ta/es imposed by the ordinance in .uestion is no argument at all against uniformity and e.uality of the ta/ imposition. 1either is the rule of e.uality and uniformity violated by the fact that tenement ta/es are not imposed in other cities, for the same rule does not re.uire that ta/es for the same purpose should be imposed in different territorial subdivisions at the same time. %o long as the burden of the ta/ falls e.ually and impartially on all o5ners or operators of tenement houses similarly classified or situated, e.uality and uniformity of ta/ation is accomplished. Bence, the judgment of the lo5er court is reversed. :he ordinance in .uestion is valid.
(t is true that the uniformity essential to the valid e/ercise of the po5er of ta/ation does not re.uire identity or e.uality under all circumstances, or negate the authority to classify the objects of ta/ation. :he classification made in the e/ercise of this authority, to be valid, must, ho5ever, be reasonable and this re.uirement is not deemed satisfied unless: (1 it is based upon substantial distinctions 5hich ma7e real differencesA (2 these are germane to the purpose of the legislation or ordinanceA (< the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the presentA and (3 the classification applies e.ually to all those 5ho belong to the same class. :hese conditions are not fully met by the ordinance in .uestion. (ndeed, if its purpose 5as merely to levy a burden upon the sale ofsoft drin7s or carbonated beverages, there is no reason 5hy sales thereof by dealers other than agents or consignees of producers or merchants established outside the City of !utuan should be e/empt from the ta/. Bence, decision appealed from is reversed. City of !utuan is sentenced to refund plaintiff and is restrained and prohibited permanently from enforcing said 0rdinance, as amended.
(!. PEPSI+COLA BOTTLING CO. V. CITY OF BUTUAN FACTS" Plaintiff, Pepsi6Cola !ottling Company of the Philippines, is a domestic corporation 5ith offices and principal place of business in Oue-on City. Plaintiff4s 5arehouse in the City of !utuan serves as storage for its products the 9Pepsi6Cola9 soft drin7s for sale to customers in the City of !utuan and all the municipalities in the Province of ,gusan. :hese 9Pepsi6Cola9 soft drin7s are bottled in Cebu City and shipped to the !utuan City 5arehouse of plaintiff for distribution and sale in the City of !utuan and all municipalities of ,gusan. 0n ,ugust 1+, 1)+;, the City of !utuan enacted 0rdinance 1o. 11; 5hich 5as subse.uently amended by 0rdinance 1o. 122 and effective 1ovember 2*, 1)+;. 0rdinance 1o. 11; as amended, imposes a ta/ on any person, association, etc., of P;.1; per case of 23 bottles of Pepsi6 Cola. :he plaintiff paid under protest the amount of P3.)2+.+< from ,ugust 1+ to 'ecember <1, 1)+; and the amount of P),2D;.3; from $anuary 1 to $uly <;, 1)+1. :he plaintiff filed a complaint for the recovery of the total amount of P13,1EE.;< paid under protest, on the ground that 0rdinance 1o. 11; as amended of the City of !utuan is illegal, that the ta/ imposed is e/cessive and that it is unconstitutional. :he Court of &irst (nstance ruled in favor of the defendant. ISSUE" Khether or not the disputed ordinance is void because it is highly unjust and discriminatory HELD" Mes. "ven if the burden in .uestion 5ere regarded as a ta/ on the sale of said beverages, it 5ould still be invalid, as discriminatory, and hence, violative of the uniformity re.uired by the Constitution and the la5, since only sales by 9agents or consignees9 of outside dealers 5ould be subject to the ta/. %ales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same e/ceeded those made by said agents or consignees of producers or merchants established outside the City of !utuan, 5ould be e/empt from the disputed ta/.
(#. ORMOC SUGAR CO.* VS. TREASURER OF ORMOC FACTS" 0n $anuary 2), 1)+3, the #unicipal !oard of 0rmoc City passed 0rdinance 1o. 3, %eries of 1)+3, imposing 9on any and all productions of centrifugal sugar milled at the 0rmoc %ugar Company, (nc., in 0rmoc City a municipal ta/ e.uivalent to one per centum (1H per e/port sale to the 8nited %tates of ,merica and other foreign countries.9 Payments for said ta/ 5ere made, under protest, by 0rmoc %ugar Company, (nc. on #arch 2;, 1)+3 for PE,;*E.D; and on ,pril 2;, 1)+3 for PD,;;;.;;, or a total of P12,;*E.D;. 0n $une 1, 1)+3, 0rmoc %ugar Company, (nc. filed before the Courtof &irst (nstance of Ceyte a complaint against the City of 0rmoc as 5ell as its :reasurer, #unicipal !oard and #ayor, alleging that the afore6stated ordinance is unconstitutional for being violative of the e.ual protection clause (%ec. 1Q1R, ,rt. (((, Constitution and the rule of uniformity of ta/ation (%ec. 22Q1R, ,rt. F(, Constitution , aside from being an e/port ta/ forbidden under %ection 22*E of the Revised ,dministrative Code. (t further alleged that the ta/ is neither a production nor a license ta/ 5hich 0rmoc City under %ection 1D677 of its charter and under %ection 2 of Republic ,ct 22+3, other5ise 7no5n as the Cocal ,utonomy ,ct, is authori-ed to imposeA and that the ta/ amounts to a customs duty, fee or charge in violation of paragraph 1 of %ection 2 of Republic ,ct 22+3 because the ta/ is on both the sale and e/port of sugar. :he Court of &irst (nstance, on ,ugust +, 1)+3, upheld the constitutionality of the ordinance and declared the ta/ing po5er of defendant chartered city broadened by the Cocal ,utonomy ,ct. ISSUE"

Khether or not the constitutional limits on the po5er of ta/ation, specifically the e.ual protection clause and rule of uniformity, 5ere infringed. HELD" Mes. ".ual protection clause applies only to persons or things identically situated, and does not bar a reasonable classification of the subject of legislation. , classification is reasonable 5here (1 it is based on substantial distinctions 5hich ma7e real differencesA (2 these are germane to the purpose of the la5A (< the classification applies not only to present conditions but also to future conditions 5hich are substantially identical to those of the presentA (3 the classification applies only to those 5ho belong to the same class. , perusal of the re.uisites instantly sho5s that the .uestioned ordinance does not meet them, for it ta/es only centrifugal sugar produced and e/ported by the 0rmoc %ugar Company, (nc. and none other. ,t the time of the ta/ing ordinance4s enactment, 0rmoc %ugar Company, (nc., it is true, 5as the only sugar central in the city of 0rmoc. %till, the classification, to be reasonable, should be in terms applicable to future conditions as 5ell. :he ta/ing ordinance should not be singular and e/clusive as to e/clude any subse.uently established sugar central, of the same class as plaintiff, from the coverage of the ta/. ,s it is no5, even if later a similar company is set up, it cannot be subject to the ta/ because the ordinance e/pressly points only to 0rmoc %ugar Company, (nc. as the entity to be levied upon. Bence, decision appealed from is reversed and the challenged ordinance is declared unconstitutional. Khether or not the said section of the Revised ,dministrative Code violates the rule on uniformity of ta/ation. HELD" 1o. , ta/ is considered uniform 5hen it operates 5ith the same force and effect in every place 5here the subject may be found. %ection 13)) of the Revised ,dministrative Code, as amended, applies uniformly to, and operates on, all ban7s in the Philippines 5ithout distinction and discrimination, and if the 1ational City !an7 of 1e5 Mor7 is e/empted from its operation because it is a federal instrumentality subject only to the authority of Congress, that alone could have the effect of rendering it violative of the rule of uniformity. (n every 5ell6regulated and enlightened state or government, certain descriptions of property and also certain institutions are e/empt from ta/ation, but these e/emptions have never been regarded as disturbing the rules of ta/ation, even 5here the fundamental la5 had ordained that it should be uniform.
(%. BRITISH AMERICAN TOBACCO V CAMACHO FACTS" R.,. *23; 5as passed recodifying the 1(RC 5here %ec 132 5as renumbered %ec 13D. !ritish ,merican :obacco assailed the validity of %ec. 13D of the 1(RC (amended by R, *23; , arguing that the said provisions are violative of the e.ual protection and uniformity clause of the Constitution. %ection 13D provides for a four6tier ta/ rate based on net retail price per pac7 of cigarettes: (1 lo56priced, (2 medium6priced, (< high6priced, and (3 premiumpriced. %ection 13D further provides that 1"K !R,1'% (registered after $anuary 1, 1))E of cigarettes shall be ta/ed at their current retail price. (f the current net retail price has not been established, the suggested net retail price shall be used to determine the specific ta/ classification. 0n the other hand, old or e/isting brands (registered before $anuary 1, 1))E shall be ta/ed at their net retail price as of 0ctober 1, 1))+. (1et retail price ] price ^ 5hich cigarettes are sold on retail in 2; supermar7ets in ##A %uggested net retail price ] net retail price ^ 5hich brands of cigarettes are intended by the manufacturer to be sold . :o implement R, *23;, !(R issued a Revenue Regulation (RR 1o. 16 )E classifying e/isting brands of cigarettes as those e/isting or active (old brands prior to $anuary 1, 1))E, 5hile ne5 brands of cigarettes are those registered after $anuary 1, 1))E. ,nother Revenue Regulation 5as issued amending the first (RR 1o. )62;;< by providing !(R 5ith the po5er to periodically revie5 every t5o years @ earlier the current net retail price of ne5 brands to "%:,!C(%B @ 8P',:" their ta/ classification. (n $une 2;;1, !ritish ,merican :obacco introduced the Cuc7y %tri7e &ilter, Cuc7y %tri7e Cights and Cuc7y %tri7e #enthol Cights. Cuc7y %tri7e 5as ta/ed based on its suggested gross retail price from the time of its introduction in the mar7et in 2;;1 until the !(R mar7et survey in 2;;<. :he brands 5ere sold at P22.D3, P22.+1 and P21.2< so the applicable ta/ rate is P1<.33 per pac7. !,: no5 argues that the 9classification free-e provision9 violates the e.ual protection and uniformity of ta/ation clauses because the Cuc7y %tri7e brands are ta/ed based on their 1))+ net retail prices 5hile ne5 brands are ta/ed based on their present day net retail prices. :hus, Cuc7y %tri7e suffers from higher ta/es 5hile its competitors pay a lo5er amount. !,: further argued that the tobacco e/cise la5 5as discriminatory because under it, brands that entered the mar7et after 1))+ 5ere imposed ta/es based on their current retail prices
(7. PHILIPPINE TRUST COMPANY V. YATCO FACTS: Prior to the filing of these suits, and for a number of years, the plaintiffs6appellants had been paying capital and deposit ta/es 5ithout protest, formerly under section 111 of ,ct 1o. 11*), and later under section 13)) of the Revised ,dministrative Code of 1)1E, as amended. ,ppellants challenge the constitutionality of the aforesaid section of the Revised ,dministrative Code, principally on the grounds that it violates the rule regarding uniformity of ta/ation, and that it is discriminatory, and therefore violative of the e.ual protection clause of the Constitution. ,ppellants stoutly maintain that although the foregoing provision is of general application and operates on all ban7s of the same 7ind doing business in the Philippines, the e/emption of the 1ational City !an7 of 1e5 Mor7 from the impositions therein specifically provided (1ational City !an7 of 1e5 Mor7 v. Posadas ma7es the la5 discriminatory and violates the rule of uniformity in ta/ation ISSUE"

5hile older brands paid ta/es based on their 1))+ retail prices. #ean5hile, Philip #orris, &ortune :obacco, #ighty Corp. and $: (nternational (respondents6in6intervention claim that no ine.uality e/ists bet5een cigarettes and that nullification of said anne/ 5ould bring about tremendous loss. ISSUES" 1. 2. K@1 %ec. 13D of the 1(RC violates "PC and uniformity of ta/ation clauses K@1 the Revenue Regulations are invalid in so far as they empo5er !(R to reclassify and update the classification of ne5 brands every t5o years or earlier HELD" %ec. 13D 1(RC is constitutional but the RRs are invalid for granting the !(R the po5er to reclassify and update the classification. :he classification free-e provision does not violate the e.ual protection and uniformity of ta/ation. (t meets the standards for valid classification: rests on a substantial distinction, is germane to the purpose of the la5, applies to present and future conditions and applies e.ually to all those belonging to the same class. (10:": :he second condition, ho5ever, 5as not fully satisfied as it failed to promote fair competition among the players in the industry. Bo5ever, this does not ma7e the assailed la5 unconstitutional . :he classification free-e provision 5as done in good faith and is germane to the purpose of the la5. (t 5as inserted for reasons of practicality and e/pediency. %ince a ne5 brand 5as not yet in e/istence at the time of the passage of R, *23;, then Congress needed a uniform mechanism to fi/ the ta/ brac7et of a ne5 brand. :he current net retail price, similar to 5hat 5as used to classify the brands as of 0ctober 1, 1))+, 5as thus the logical and practical choice. Kith the amendments introduced by R, )<<3, the free-ing of the ta/ classifications no5 e/pressly applies not just to old brands (cigarettes 5hich are ta/ed on the basis of average net retail price as of 0ctober 1, 1))+ but to ne5er brands introduced after the effectivity of R, *23; on $anuary 1, 1))E and any ne5 brand that 5ill be introduced in the future. :hus, the classification free-e provision could hardly be considered biased to5ard older brands over ne5er brands. Congress 5as even 5illing to delegate the po5er to periodically adjust the e/cise ta/ rate and ta/ brac7ets as 5ell as to periodically resurvey and reclassify the cigarette brands based on the increase in the consumer price inde/ to the '0& and the !(R. :hus, the provision 5as the result of Congress=s earnest efforts to improve the efficiency and effectivity of the ta/ administration over sin products 5hile trying to balance the same 5ith other %tate interests. O, U,i-./0i12" 8niformity of ta/ation re.uires that all subjects or objects of ta/ation, similarly situated, are to be treated ali7e both in privileges and liabilities. (n the instant case, there is no .uestion that the C&P meets the geographical uniformity re.uirement because the assailed la5 applies to ,CC C(G,R"::" !R,1'% n the Philippines. O, I,345i1678i12 6,9 R3:/3;;i<i12" !,: claims that the use of different ta/ bases for old brands as against ne5 brands is discriminatory @ ine.uitable, and that the C&P is regressive in character. :his cannot be sustained because the C&P meets the re.uirements of the "PC.
Republic ,ct )<<D (,ttrition ,ct of 2;;D 5as enacted to optimi-e the revenue6generation capability and collection of the !ureau of (nternal Revenue (!(R and the !ureau of Customs (!0C . :he la5 intends to encourage !(R and !0C officials and employees to e/ceed their revenue targets by providing a system of re5ards and sanctions through the creation of a Re5ards and (ncentives &und (&und and a Revenue Performance "valuation !oard (!oard . (t covers all officials and employees of the !(R and the !0C 5ith at least si/ months of service, regardless of employment status. :he &und is sourced from the collection of the !(R and the !0C in e/cess of their revenue targets for the year, as determined by the 'evelopment !udget and Coordinating Committee ('!CC . ,ny incentive or re5ard is ta7en from the fund and allocated to the !(R and the !0C in proportion to their contribution in the e/cess collection of the targeted amount of ta/ revenue. Petitioners, invo7ing their right as ta/payers filed this petition challenging the constitutionality of R, )<<D, a ta/ reform legislation, claim, among others, that limiting the scope of the system of re5ards and incentives only to officials and employees of the !(R and the !0C violates the constitutional guarantee of e.ual protection. :here is no valid basis for classification or distinction as to 5hy such a system should not apply to officials and employees of all other government agencies. ISSUES" Khether or not limiting the scope of the system of re5ards and incentives (under R, )<<D only to officials and employees of the !(R and the !0C violates the constitutional guarantee of e.ual protection. HELD" 1o. Petitioners have failed to overcome the presumption of constitutionality in favor of R, )<<D. :he e.ual protection clause recogni-es a valid classification, that is, a classification that has a reasonable foundation or rational basis and not arbitrary. Kith respect to R, )<<D, its e/pressed public policy is the optimi-ation of the revenue6generation capability and collection of the !(R and the !0C. %ince the subject of the la5 is the revenue6 generation capability and collection of the !(R and the !0C, the incentives and@or sanctions provided in the la5 should logically pertain to the said agencies. #oreover, the la5 concerns only the !(R and the !0C because they have the common distinct primary function of generating revenues for the national government through the collection of ta/es, customs duties, fees and charges. :he !(R performs the follo5ing functions: %ec. 1*. !he 5ureau of Internal Revenue . ? :he !ureau of (nternal Revenue, 5hich shall be headed by and subject to the supervision and control of the Commissioner of (nternal Revenue, 5ho shall be appointed by the President upon the recommendation of the %ecretary Qof the '0&R, shall have the follo5ing functions: (1 A;;3;; 6,9 =.883=1 688 16>3;* -33; 6,9 =?6/:3; 6,9 6==.5,1 -./ 688 /3<3,53; =.883=139@
('. ABAKADA GURO PARTY LIST VS. PURISIMA FACTS"

(2 "/ercise duly delegated police po5ers for the proper performance of its functions and duties //// //// //// :his time, to implement the 12H increase in specific ta/es mandated under %ection 13D of the 1))E :a/ Code and again pursuant to its rule6ma7ing po5ers, the C(R issued RR 1E6)), 5hich reads: %ection 1. 1e5 Rates of %pecific :a/. :he specific ta/ rates imposed under the follo5ing sections are hereby increased by t5elve percent (12H . QGRProvided, ho5ever, that the ne5 specific ta/ rate for any e/isting brand of cigars QandR cigarettes pac7ed by machine, distilled spirits, 5ines and fermented li.uors shall not be lo5er than the e/cise ta/ that is actually being paid prior to $anuary 1, 2;;;. Pursuant to these la5s, respondent &ortune :obacco Corporation (&ortune :obacco paid in advance e/cise ta/es for the year 2;;< in the amount of P11.1D billion, and for the period covering $anuary 1 to #ay <1, 2;;3 in the amount of P3.); billion. (n $une 2;;3, &ortune :obacco filed an administrative claim for ta/ refund 5ith the C(R for erroneously and@or illegally collected ta/es in the amount of P3)1 million. Kithout 5aiting for the C(R=s action on its claim, &ortune :obacco filed 5ith the C:, a judicial claim for ta/ refund. (n its decision dated #ay 2+, 2;;+, the C:, &irst 'ivision ruled in favor of &ortune :obacco and granted its claim for refund. :he C:, &irst 'ivision=s ruling 5as upheld on appeal by the C:, en banc in its decision dated $uly 12, 2;;E.) :he C(R=s motion for reconsideration of the C:, en banc=s decision 5as denied in a resolution dated 0ctober 3, 2;;E . &ortune :obacco=s claim for refund of overpaid e/cise ta/es is based primarily on 5hat it considers as an 9unauthori-ed administrative legislation9 on the part of the C(R. %pecifically, it assails the proviso in %ection 1 of RR 1E6)) that re.uires the payment of the 9e/cise ta/ actually being paid prior to $anuary 1, 2;;;9 if this amount is higher than the ne5 specific ta/ rate, i.e., the rates of specific ta/es imposed in 1))E for each category of cigarette, plus 12H. (t claimed that by including the proviso, the C(R 5ent beyond the language of the la5 and usurped Congress= po5er. ,s mentioned, the C:, sided 5ith &ortune :obacco and allo5ed the latter to claim the refund. :he C(R points out that %ection 13D(c of the 1))E :a/ Code categorically declares that 9QtRhe e/cise ta/ from any brand of cigarettes 5ithin the Qthree6year transition period from $anuary 1, 1))E to 'ecember <1, 1)))R shall not be lo5er than the ta/, 5hich is due from each brand on 0ctober 1, 1))+.9 Be posits that there is no plausible reason 5hy the ne5 specific ta/ rates due beginning $anuary 1, 2;;; should not be subject to the same rule as those due during the transition period. :o the C(R, the adoption of the 9higher ta/ rule9 during the transition period unmista7ably sho5s the intent of Congress not to lessen the e/cise ta/ collection. :hus, the C:, should have construed the ambiguity or omission in %ection 13D(c in a manner that 5ould uphold the la5=s policy and intent. &ortune :obacco argues other5ise. :o it, %ection 13D(c of the 1))E :a/ Code read and interpreted as it is 5rittenA it imposes a 12H increase on the rates of e/cise ta/es provided under sub6paragraphs (1 , (2 , (< , and (3 onlyA it does not say that the ta/ due during the transition period shall continue to be collected if the amount is higher than the ne5 specific ta/ rates. (t
:he 1)EE :a/ Code 5as later repealed by R, *323, or the 1ational (nternal Revenue Code of 1))E (1))E :a/ Code , and %ection 132, as amended by R, *23;, 5as renumbered as %ection 13D.
0n the other hand, the !0C has the follo5ing functions: %ec. 2<. !he 5ureau of Customs. ? :he !ureau of Customs 5hich shall be headed and subject to the management and control of the Commissioner of Customs, 5ho shall be appointed by the President upon the recommendation of the %ecretaryQof the '0&R and hereinafter referred to as Commissioner, shall have the follo5ing functions: (1 (2 (< C.883=1 =5;1.0 951i3;* 16>3; 6,9 1?3 =.//3;A.,9i,: -33;* =?6/:3; 6,9 A3,681i3;A A==.5,1 -./ 688 =5;1.0; /3<3,53; =.883=139A "/ercise police authority for the enforcement of tariff and customs la5sA //// //// ////
!oth the !(R and the !0C are bureaus under the '0&. :hey principally perform the special function of being the instrumentalities through 5hich the %tate e/ercises one of its great inherent functions ? ta/ation. (ndubitably, such substantial distinction is germane and intimately related to the purpose of the la5. Bence, the classification and treatment accorded to the !(R and the !0C under R, )<<D fully satisfy the demands of e.ual protection.
!). CIR V. FORTUNE TOBACCO (2)11) FACTS" !eginning $anuary 1, 1))E, Republic ,ct 1o. (R, *23;< too7 effect and a shift from ad valorem to specific ta/es 5as made. %ec 132 stated that: :he specific ta/ from any brand of cigarettes 5ithin the ne/t three (< years of effectivity of this ,ct shall not be lo5er than the ta/ Q5hichR is due from each brand on 0ctober 1, 1))+: Provided, ho5ever, :hat in cases 5here the specific ta/ rates imposed in paragraphs (1 , (2 , (< and (3 hereinabove 5ill result in an increase in e/cise ta/ of more than seventy percent (E;H , for a brand of cigarette, the increase shall ta7e effect in t5o tranches: fifty percent (D;H of the increase shall be effective in 1))E and one hundred percent (1;;H of the increase shall be effective in 1))*. :he rates of specific ta/ on cigars and cigarettes under paragraphs (1 , (2 , (< and (3 hereof, shall be increased by t5elve percent (12H on $anuary 1, 2;;;. Qemphases oursR :o implement R, *23; and pursuant to its rule6ma7ing po5ers, the C(R issued Revenue Regulation 1o. (RR 16)E 5hose %ection <(c and (d echoed the above6.uoted portion of %ection 132 of the 1)EE :a/ Code, as amended.

contends that the 9higher ta/ rule9 applies only to the three6year transition period to offset the burden caused by the shift from ad valorem to specific ta/es.
:he e/cise ta/ from any brand of cigarettes 5ithin the ne/t three (< years from the effectivity of R.,. 1o. *23; shall not be lo5er than the ta/, 5hich is due from each brand on 0ctober 1, 1))+Q.R (n the process, the C(R also perpetuated the une.ual ta/ treatment of similar goods that 5as supposed to be cured by the shift from ad valorem to specific ta/es. !1. BUREAU OF CUSTOMS EMPLOYEES ASSOC V. TEVES
ISSUES" FACTS" 1. 2. K@1 C(R 5ent beyond the terms of the la5 K@1 there 5as uniformity of ta/ation &ormer Pres. ,rroyo signed into la5 R.,. 1o. )<<D for the purpose of optimi-ing the revenue6 generation capability and collection of the !(Rand !0C and to encourage !(R and !0C officials and employees to e/ceed their revenue targets by providing a system of re5ards andsanctions through the creation of Re5ards and (ncentives &und and a Revenue Performance "valuation !oard.:he !oards in the !(R and !0C are composed of %ecretaries of &inance, !udget and their undersecretaries, 'ir Gen 1"', and his deputy 'irGen, Commissioners of !(R and !0C and their deputy commissioners, t5o representatives from ran7 and file employees and representativefrom the officials nominated by their recogni-ed organi-ation."ach !oard has the duty to: 1. 2. <. 3. D. +. Prescribe the rules and guidelines for the allocation, distribution and release of the &und %et criteria and procedures for removing from the service officials and employees 5hose revenue collection falls short of the target :erminate personnel in accordance 5ith the criteria adopted by the !oard Prescribe a system for performance evaluation Perform other functions, including the issuance of rules and regulations and %ubmit an annual report to Congress.
HELD" %ection 13D states that during the transition period, i.e., 5ithin the ne/t three (< years from the effectivity of the :a/ Code, the e/cise ta/ from any brand of cigarettes shall not be lo5er than the ta/ due from each brand on 1 0ctober 1))+. :his .ualification, ho5ever, is conspicuously absent as regards the 12H increase 5hich is to be applied on cigars and cigarettes pac7ed by machine, among others, effective on 1 $anuary 2;;;. Clearly and unmista7ably, %ection 13D mandates a ne5 rate of e/cise ta/ for cigarettes pac7ed by machine due to the 12H increase effective on 1 $anuary 2;;; 5ithout regard to 5hether the revenue collection starting from this period may turn out to be lo5er than that collected prior to this date. !y adding the .ualification that the ta/ due after the 12H increase becomes effective shall not be lo5er than the ta/ actually paid prior to 1 $anuary 2;;;, Revenue Regulation 1o. 1E6)) effectively imposes a ta/ 5hich is the higher amount bet5een the ad valorem ta/ being paid at the end of the three (< 6year transition period and the specific ta/ under paragraph C, sub6paragraph (1 6(3 , as increased by 12H ? a situation not supported by the plain 5ording of %ection 13D of the :a/ Code.1+ &ollo5ing the principle of stare decisis,1our ruling in the present case should no longer come as a surprise. :he proviso in %ection 1 of RR 1E6)) clearly 5ent beyond the terms of the la5 it 5as supposed to implement, and therefore entitles &ortune :obacco to claim a refund of the overpaid e/cise ta/es collected pursuant to this provision. :he amount involved in the present case and the C(R=s firm insistence of its arguments nonetheless compel us to ta7e a second loo7 at the issue, but our findings ultimately lead us to the same conclusion. (ndeed, 5e find more reasons to disagree 5ith the C(R=s construction of the la5 than those stated in our 2;;* &ortune :obacco ruling, 5hich 5as largely based on the application of the rules of statutory construction. Rule of uniformity of ta/ation violated by the proviso in %ection 1, RR 1E6)) ,lthough the brands all belong to the same category, the proviso in %ection 1, RR 1E6)) authori-ed the imposition of different (and grossly disproportionate ta/ rates (see column Q'R . (t effectively e/tended the .ualification stated in the third paragraph of %ection 13D(c of the 1))E :a/ Code that 5as supposed to apply only during the transition period:
Petitioner !ureau of Customs "mployees ,ssociation (!0C", contends that enactment and implementation of R.,. 1o. )<<D are tainted 5ith constitutional infirmities. Pursuant to R, )<<D and its (RR, Collection 'istrict Performance Contracts 5as disseminated to lo5er ran7ing officials and employees for signing. !0C", contends that the target 5as impossible to meet due to governments o5n policies on reduced tariff rates and ta/ brea7s to big business, the occurrence of natural calamities and because of other economic factors. !0C", claimed that some !0C employees 5ere coerced and forced to sign the performance contract. :he personnel 5ere threatened if they 5ill not sign they 5ould face possible reassignment, reshuffling, or 5orse be placed on floating status. Petition 5as filed to the %upreme Court. !0C", argued among others, that its members and other !0C employees are in great danger of losing their jobs should they failed to meet the re.uired target, in clear violation of their constitutional right of security of tenure and the irrespective families prejudice. 'uring the first year implementation of R, )<<D, !0C employees e/erted commendable efforts and e/ceed their target of 1)+! of as much as2! for that year alone. Bo5ever this 5as attained because oil companies made advance ta/ payments to !0C. Re5ards are given, 5hich they described as unjust, unfair, dubious and fraudulent because only top officials of !0C got huge re5ard 5hile the employees received only P*,D;;.;;. ISSUES" 1. K01 R,)<<D and its (RR violate the right to due process

2. <. K01 R,)<<D and its (RR violates e.ual protection clause K01 R,)<<D and its (RR violates constitution %ubic %pecial "conomic None shall be operated and managed as a separate customs territory ensuring free flo5 or movement of goods and capital 5ithin, into and e/ported out of the %ubic %pecial "conomic None, as 5ell as provide incentives and e.uipment. Bo5ever, e/portation or removal of goods from the territory of the %ubic %pecial "conomic None to the other parts of the Philippine territory shall be subject to customs duties and ta/es under the Customs and :ariff Code :he provisions of e/isting la5s, rules and regulations to the contrary not5ithstanding, no ta/es, local and national, shall be imposed 5ithin the %ubic %pecial "conomic None.
HELD"
1.
%ection E of R, )<<D clearly give due consideration that may affect the level of collection. (n the same manner, e/emptions 5ere set, contravening !0C",=s claim that its members may be removed for unattained target collection even due to causes 5hich are beyond their control. #oreover, an employee=s right to be heard is not at all prevented and his right to appeal is not deprived of him. (n fine, a !(R or !0C official or employee in this case cannot be arbitrarily removed from the service 5ithout according him his constitutional right to due process. :he la5 concerns only the !(R and the !0C because they have the common distinct primary function of generating revenues for the national government through the collection of ta/es, customs duties, fees and charges. !oth the !(R and the !0C are bureaus under the '0&. :hey principally perform the special function of being the instrumentalities through 5hich the %tate e/ercises one of its great inherent functionsW ta/ation. (ndubitably, such substantial distinction is germane and intimately related to the purpose of the la5. Bence, the classification and treatment accorded to the !(R and the !0C under R, Q1o.R )<<D fully satisfy the demands of e.ual protection. :his case there 5as a valid delegation of legislative po5er. :he court ruled that the test for validity of delegation of legislative po5er 5ere fully satisfied. R, )<<D ade.uately states the policy and standards to guide the President in fi/ing revenue targets and the implementing agencies carrying out the provisions of the la5 as stated in %ection 2 'eclaration of Policy. :he court has recogni-ed the follo5ing as sufficient standards: Public (nterest, $ustice and e.uity, public convenience and 5elfare and simplicity, economy and 5elfare. (n this case, the declared policy optimi-ation of the revenue6generation capability and collection of the !(R and !0C is infused 5ith public interest
Pursuant to the la5, several private respondents applied for and 5ere granted Certificates of Registration and :a/ "/emption by the %!#,. :heir respective certificates states that: :he Company shall be entitled to ta/ and duty6free importation of ra5 materials, capital e.uipment, and household and personal items for use solely on the %ubic !ay &reeport None. Congress subse.uently passed R, )<<3 effective $an. 1, 2;;D 5hich states that all importations of cigars, cigarettes, distilled spirits, fermented li.uors and 5ines into the %!&, including those intended to be transhipped to other free ports in the Philippines, shall be treated as ordinary importations subject to all applicable ta/es, duties and charges, including e/cise ta/es. (%ec. + 0n &eb. <, 2;;D, former !(R Commissioner Payano, re.uested the Customs Commissioner $ereos to immediately collect the e/cise ta/ due on imported alcohol and tobacco products brought to the 'uty &ree Philippines ('&P and &reeport -ones. 0n &eb. E, 2;;D, %!#, issued a #emorandum directing the departments concerned to re.uire locators@importers in the %!& to pay the corresponding duties and ta/es on their importations of cigars, cigarettes, li.uors and 5ines before said items are cleared and released from the &reeport. Bo5ever, certain %!& locators 5hich 5ere e/clusively engaged in the transhipment of cigarette products for foreign destinations 5ere allo5ed by the %!#, to process their import documents subject to their submission of an 8nderta7ing 5ith the !ureau of Customs. 0n &eb. 1D, 2;;D, private respondents 5rote the offices of the Collector of Customs and the %!#, ,dministrator re.uesting for a reconsideration of the directives in the imposition of duties and ta/es on cigars, cigarettes, li.uor and 5ines. 'espite these letters, they 5ere not allo5ed to file any 5arehouse entry for shipment. :hus, the private respondent enterprises, brought before the R:C of 0longapo City a civil action for declatory relief to have certain provisions of R, )<<3 declared unconstitutional. :hese are their arguments: R, )<<3 should not be interpreted as altering, modifying or amending the provisions of R, E22E because repeals by implication are not favoured , general la5 li7e R, )<<3 cannot amend R, E22E, 5hich is a special la5 :he assailed la5 violates the one6bill6one6subject rule embodied in %ec. 2+ ,rt. F( of the Constitution as 5ell as the constitutional proscription against the impairment of the obligations of contracts. :he private respondents also prayed for the issuance of a 5rit of preliminary injunction and@or :emporary Restraining 0rder (:R0 and preliminary mandatory injunction alleging that great and
2.
<.
(ii)
NON+IMPAIRMENT
!2. REPUBLIC OF THE PHILIPPINES VS. CAGUIOA FACTS" (n 1))2, Congress enacted Republic ,ct 1o. E22E also 7no5n as the !ases Conversion and 'evelopment ,ct of 1))2 5hich created the %ubic %pecial "conomic and &reeport None (%!& and the %ubic !ay #etropolitan ,uthority (%!#, (ncluded in R, E22E:

irreparable loss and injury 5ould befall them as a conse.uence of the imposition of ta/es on alcohol and tobacco products brought into the %!&. Petitioners opposed the private respondents= prayer arguing that: :a/ e/emptions are not presumed and even 5hen granted, are strictly construed against the grantee ,n increase in business e/pense is not the injury contemplated by la5 :he dra5bac7 mechanism established in the la5 clearly negates the possibility of the feared injury :a/es are the lifeblood of the government and their prompt and certain availability is an imperious need. Greater injury 5ould be inflicted on the public should the 5rit be granted. 0n #ay 11, 2;;D Caguioa granted private respondents= application for issuance of 5rit of preliminary injunction. Petitioners see7 via petition for certiorari and prohibition to annul the #ay 3, 2;;D 0rder issued by public respondent Caguioa of the R:C granting private respondents= application for issuance of 5rit of preliminary injunction. ISSUE" 1. 2. Khether or not, Caguioa erred in the issuance of the 5rit of preliminary injunction Khether or not, R, )<<3 is unconstitutional because it violates the constitutional provision on the proscription against the impairment of obligations of contracts. , ta/ e/emption cannot be grounded upon the continued e/istence of a statute 5hich precludes its change or repeal. :he rights granted under the Certificates of Registration and :a/ "/emption of private respondents are not absolute and unconditional as to constitute rights in esse 6 those clearly founded on or granted by la5 or is enforceable as a matter of la5. Khatever right may have been ac.uired on the basis of the Certificates of Registration and :a/ "/emption must yield to the %tate4s valid e/ercise of police po5er.:he feared injurious effects of the imposition of duties, charges and ta/es on imported cigars, cigarettes, distilled spirits, fermented li.uors and 5ines on private respondents4 businesses cannot possibly out5eigh the dire conse.uences that the non6collection of ta/es, not to mention the unabated smuggling inside the %!&, 5ould 5rea7 on the government.
! . MERALCO V. PROVINCE OF LAGUNA FACTS" #eralco 5as granted by several municipalities of the Province of Caguna a franchise to operate. (n 1))1 Republic ,ct 1o. E1+; 5as issued in 5hich enjoined local government units to create their o5n sources of revenue and to levy ta/es, fees and charges, subject to the limitations e/pressed therein, consistent 5ith the basic policy of local autonomy. Pursuant to this respondent province enacted Caguna Provincial 0rdinance 1o. ;16)2, effective ;1 $anuary 1))< 5hich imposed ta/es on businesses enjoying a franchise at a rate of fifty percent (D;H of one percent (1H of the gross annual receipts, 5hich shall include both cash sales and sales on account reali-ed during the preceding calendar year 5ithin this province, including the territorial limits on any city located in the province. Petitioner #eralco paid the said ta/ under protest. , formal claim for refund 5as thereafter sent by #eralco to the Provincial :reasurer claiming that the franchise ta/ it had paid and continued to pay to the 1ational Government pursuant to P.'. DD1 already included the franchise ta/ imposed by the Provincial :a/ 0rdinance. #eralco also contended that Caguna=s imposition of franchise ta/ contravened the provisions of P.'. DD1 %ection 1 5hich provided that the franchise ta/ payable by all grantees of franchises to generate, distribute and sell electric current for light, heat and po5er shall be t5o per cent (2H of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current. :he issue 5as brought to a trial court, 5herein a decision 5as made in favor of the Province of Caguna, hence this petition. ISSUE" Khether the imposition of franchise ta/ by the Province of Caguna is violative of the non6 impairment clause of the Constitution. HELD" :he imposition of franchise ta/ 5as deemed a valid e/ercise of po5er by the local government of Caguna.
HELD" :he arguments raised by private respondents 5hich pertain to the constitutionality of R, )<<3 subject matter of the case pending litigation before the trial court have no bearing in resolving the present petition. 0n the issue of the issuance of the preliminary injunction and the petitioners petition for certiorari: :he 5rit of certiorari to nullify and set aside the 0rder of #ay 3, 2;;D as 5ell as the Krit of Preliminary (njunction issued by respondent Caguioa is granted. ,s a rule, courts should avoid issuing a 5rit of preliminary injunction 5hich 5ould in effect dispose of the main case 5ithout trial. , court may issue a 5rit of preliminary injunction only 5hen the petitioner assailing a statute has made out a case of unconstitutionality or invalidity strong enough, in the mind of the judge, to overcome the presumption of validity, in addition to a sho5ing of a clear legal right to the remedy sought. :a/ e/emption being a mere statutory privilege, may be modified or 5ithdra5 at 5ill by the granting authority. :a/ation is subject to restrictions 5hich rest on the discretion of the authority e/ercising it. ,s a general rule, ta/ e/emptions are construed strictissimi juris against the ta/payer and liberally in favor of the ta/ing authority. :he burden of proof rests upon the party claiming e/emption to prove that it is in fact covered by the e/emption so claimed. (n case of doubt, non6e/emption is favored.

the treasury of the #unicipalities of :agoloan, 0pol, Fillanueva and $asaan and Cagayan de 0ro City, as the case may be: Provided, :hat the said franchise ta/ of three per centum of the gross earnings shall be in lieu of all ta/es and assessments of 5hatever authority upon privileges earnings, income, franchise, and poles, 5ires, transformers, and insulators of the grantee from 5hich ta/es and assessments the grantee is hereby e/pressly e/empted. 0n $une 2*, 1)E<, the Cocal :a/ Code (P.'. 1o. 2<1 5as promulgated, %ection ) of 5hich provides: %ec. ). &ranchise :a/.W,ny provision of special la5s to the contrary not5ithstanding, the province may impose a ta/ on businesses enjoying franchise, based on the gross receipts reali-ed 5ithin its territorial jurisdiction, at the rate of not e/ceeding one6half of one per cent of the gross annual receipts for the preceding calendar year. Pursuant thereto, the Province of #isamis 0riental (herein petitioner enacted Provincial Revenue 0rdinance 1o. 1), 5hose %ection 12 reads: %ec. 12. &ranchise :a/.W:here shall be levied, collected and paid on businesses enjoying franchise ta/ of one6half of one per cent of their gross annual receipts for the preceding calendar year reali-ed 5ithin the territorial jurisdiction of the province of #isamis 0riental. :he Provincial :reasurer of #isamis 0riental demanded payment of the provincial franchise ta/ from C"P,CC0. :he company refused to pay, alleging that it is e/empt from all ta/es e/cept the franchise ta/ re.uired by R.,. 1o. +;2;. 1evertheless, in vie5 of the opinion rendered by the Provincial &iscal, upon C"P,CC04s re.uest, upholding the legality of the Revenue 0rdinance, C"P,CC0 paid under protest on #ay 2E, 1)E3 the sum of P 3,2E+.2* and appealed the fiscal4s ruling to the %ecretary of $ustice 5ho reversed it and ruled in favor of C"P,CC0. 0n $une 2+, 1)E+, the %ecretary of &inance issued Cocal :a/ Regulation 1o. <6ED adopting entirely the opinion of the %ecretary of $ustice. ISSUE" 5hether or not a corporation 5hose franchise e/pressly provides that the payment of the franchise ta/ of three per centum of the gross earnings shall be in lieu of all ta/es and assessments of 5hatever authority upon privileges, earnings, income, franchise, and poles, 5ires, transformers, and insulators of the grantee, is e/empt from paying a provincial franchise ta/. ? HELD" FACTS" Cagayan "lectric Po5er and Cight Company, (nc. (C"P,CC0 for short 5as granted a franchise on $une 1E, 1)+1 under Republic ,ct 1o. <23E to install, operate and maintain an electric light, heat and po5er system in the City of Cagayan de 0ro and its suburbs R.,. 1os. <23E, <DE; and +;2; uniformly provide that: %ec. <. (n consideration of the franchise and rights hereby granted, the grantee shall pay a franchise ta/ e.ual to three per centum of the gross earnings for electric current sold under this franchise, of 5hich t5o per centum goes into the 1ational :reasury and one per centum goes into C"P,CC0 is e/empt. :he rule is that a special and local statute applicable to a particular case is not repealed by a later statute 5hich is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special la5 (id. unless there is manifest intent to repeal or alter the special la5. Republic ,cts 1os. <23E, <DE; and +;2; are special la5s applicable only to C"P,CC0, 5hile P.'. 1o. 2<1 is a general ta/ la5. :he presumption is that the special statutes are e/ceptions to the general la5 (P.'. 1o. 2<1 because they pertain to a special charter granted to meet a particular set of conditions and circumstances. :he franchise of respondent C"P,CC0 e/pressly e/empts it from payment of 9all ta/es of 5hatever authority9 e/cept the three per centum (<H ta/ on its gross earnings. Cocal :a/ Regulation 1o. <6ED issued by the %ecretary of &inance on $une 2+, 1)E+, has made it crystal clear
8nder the present Constitution, 5here there is neither a grant nor a prohibition by statute, ta/ po5er must be deemed to e/ist, although Congress may provide statutory limitations and guidelines. :his rule=s purpose is to safeguard the viability and self6sufficiency of local government units by directly granting them general and broad ta/ po5ers. Bo5ever this delegation is not absolute and unconditional as the legislature must see to it that (a the ta/payer 5ill not be over6 burdened or saddled 5ith multiple and unreasonable impositionsA (b each local government unit 5ill have its fair share of available resourcesA (c the resources of the national government 5ill not be unduly disturbedA and (d local ta/ation 5ill be fair, uniform, and just. :he Cocal Government Code contains a provision 5hich also provides for the 5ithdra5al of all ta/ e/emptions that it may have previously granted as in this case. :he 1))1 Code e/plicitly authori-es provincial governments, not5ithstanding Iany e/emption granted by any la5 or other special la5, / / / (to impose a ta/ on businesses enjoying a franchise. (t has also been held the oft used term in ta/ e/emptions in Ilieu of all ta/esJ should be deemed to give 5ay to this po5er of the Cocal Governments to 5ithdra5 such e/emptions. :he Courts have also vie5ed its previous rulings on ta/ e/emption cases as laying stress on the legislative intent of the amendatory la5 5hether the ta/ e/emption privilege is to be 5ithdra5n or not rather than on 5hether the la5 can or cannot 5ithdra5 the ta/ e/emption, 5ithout violating the constitution. Khile the Court often refers to ta/ e/emptions in special franchises as being in the nature of contracts and as a part of inducement for carryon on the franchise, they are far from being strictly contractual in nature. Contractual ta/ e/emptions are those agreed to by the ta/ing authority in contracts, such as those contained in government bonds or debentures, la5fully entered into by them under enabling la5s in 5hich the government, acting in its private capacity, sheds its cloa7 of authority and 5aives its governmental immunity. :a/ e/emptions of this 7ind may not be revo7ed 5ithout impairing the obligations of contracts. :hey should not ho5ever be confused 5ith ta/ e/emptions granted under franchises. , franchise parta7es the nature of a grant 5hich is beyond the purvie5 of the non6impairment clause of the Constitution. :he 1)*E Constitution is e/plicit that no franchise for the operation of a public utility shall be granted e/cept under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and 5hen the common good so re.uires.
!(. PROVINCE OF MISAMIS ORIENTAL V. CAGAYAN ELECTRIC

that the franchise ta/ provided in the Cocal :a/ Code (P.'. 1o. 2<1, %ec. ) may only be imposed on companies 5ith franchises that do not contain the e/empting clause. :hus it provides: :he franchise ta/ imposed under local ta/ ordinance pursuant to %ection ) of the Cocal :a/ Code, as amended, shall be collected from businesses holding franchise but not from business establishments 5hose franchise contain the 9in6lieu6of6all6ta/es6proviso9. %imilarly, 5e ruled that the provision: 9shall be in lieu of all ta/es of every name and nature9 in the franchise of the #anila Railroad (%ubsection 12, %ection 1, ,ct 1o. 1D1; e/empts the #anila Railroad from payment of internal revenue ta/ for its importations of coal and oil under ,ct 1o. 23<2 and the ,mendatory ,cts of the Philippine Cegislature (#anila Railroad vs. Rafferty, 3; Phil. 223 . :hose magic 5ords: 9shall be in lieu of all ta/es9 also e/cused the Cotabato Cight and (ce Plant Company from the payment of the ta/ imposed by 0rdinance 1o. E of the City of Cotabato the passage of Republic ,ct 1o. +;2; 5hich reiterated its ta/ e/emption. :he petitioner appealed to this Court. ISSUE" Khether or not petitioner is e/empted from income ta/> HELD" KB"R"&0R", the judgment of the :a/ Court is affirmed 5ith the modification that the petitioner is liable only for the ta/ proper and that it should not pay the delin.uency penalties. 1o costs. Ke hold that Congress could impair petitioner4s legislative franchise by ma7ing it liable for income ta/ from 5hich heretofore it 5as e/empted by virtue of the e/emption provided for in section < of its franchise. :he Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress 5hen the public interest so re.uires (%ec. *, ,rt. L(F, 1)<D ConstitutionA %ec. D, ,rt. L(F, 1)E< Constitution , %ection 1 of petitioner4s franchise, Republic ,ct 1o. <23E, provides that it is subject to the provisions of the Constitution and to the terms and conditions established in ,ct 1o. <+<+ 5hose section 12 provides that the franchise is subject to amendment, alteration or repeal by Congress. Republic ,ct 1o. D3<1, in amending section 23 of the :a/ Code by subjecting to income ta/ all corporate ta/payers not e/pressly e/empted therein and in section 2E of the Code, had the effect of 5ithdra5ing petitioner4s e/emption from income ta/. :he :a/ Court acted correctly in holding that the e/emption 5as restored by the subse.uent enactment on ,ugust 3, 1)+) of Republic ,ct 1o. +;2; 5hich reenacted the said ta/ e/emption. Bence, the petitioner is liable only for the income ta/ for the period from $anuary 1 to ,ugust <, 1)+) 5hen its ta/ e/emption 5as modified by Republic ,ct 1o. D3<1. (t is relevant to note that franchise companies, li7e the Philippine Cong 'istance :elephone Company, have been paying income ta/ in addition to the franchise ta/. Bo5ever, it cannot be denied that the said 1)+) assessment appears to be highly controversial. :he Commissioner at the outset 5as not certain as to petitioner4s income ta/ liability. (t had reason not to pay income ta/ because of the ta/ e/emption in its franchise. &or this reason, it should be liable only for ta/ proper and should not be held liable for the surcharge and interest.
!!. CAGAYAN ELECTRIC POWER V. CIR FACTS" :his is about the liability of petitioner Cagayan "lectric Po5er _ Cight Co., (nc. for income ta/ amounting to PED,13).E< for the more than seven6month period of the year 1)+) in addition to franchise ta/. :he petitioner is the holder of a legislative franchise, Republic ,ct 1o. <23E, under 5hich its payment of <H ta/ on its gross earnings from the sale of electric current is 9in lieu of all ta/es and assessments of 5hatever authority upon privileges, earnings, income, franchise, and poles, 5ires, transformers, and insulators of the grantee, from 5hich ta/es and assessments the grantee is hereby e/pressly e/empted9 (%ec. < . 0n $une 2E, 1)+*, Republic ,ct 1o. D3<1 amended section 23 of the :a/ Code by ma7ing liable for income ta/ all corporate ta/payers not specifically e/empt under paragraph (c (1 of said section and section 2E of the :a/ Code not5ithstanding the 9provisions of e/isting special or general la5s to the contrary9. :hus, franchise companies 5ere subjected to income ta/ in addition to franchise ta/. Bo5ever, in petitioner4s case, its franchise 5as amended by Republic ,ct 1o. +;2;, effective ,ugust 3, 1)+), by authori-ing the petitioner to furnish electricity to the municipalities of Fillanueva and $asaan, #isamis 0riental in addition to Cagayan de 0ro City and the municipalities of :agoloan and 0pol. :he amendment reenacted the ta/ e/emption in its original charter or neutrali-ed the modification made by Republic ,ct 1o. D3<1 more than a year before. !y reason of the amendment to section 23 of the :a/ Code, the Commissioner of (nternal Revenue in a demand letter dated &ebruary 1D, 1)E< re.uired the petitioner to pay deficiency income ta/es for 1)+*6to 1)E1. :he petitioner contested the assessments. :he Commissioner cancelled the assessments for 1)E; and 1)E1 but insisted on those for 1)+* and 1)+). :he petitioner filed a petition for revie5 5ith the :a/ Court, 5hich on &ebruary 2+, 1)*2 held the petitioner liable only for the income ta/ for the period from $anuary 1 to ,ugust <, 1)+) or before
!#. CASANOVAS V. HORD F6=1;"

Casanovas brought this action for the recovery of the sum of P),+;;, paid by him under protest as ta/es on certain mining claims o5ned by him in the Province of ,mbos Camarines against Collector of (nternal Revenue, Bord. (n $anuary, 1*)E, the %panish Government, in accordance 5ith the provisions of the royal decree of the 13th of #ay, 1*+E, granted to Casanovas certain mines in the said Province, of 5hich mines the latter is no5 the o5ner. :hat in the said 'ecree, the plaintiff6appellant, on each mining claim of +;,;;; s..m. shall pay forty escudos (P2;.;; and t5enty escudos (P1;.;; for 1D;,;;; s.. m., iron mines and mines of combustible minerals shall be e/empt from the annual ta/ for a period of <; years, a further ta/ of <H shall be paid on the gross earnings. ,nd no other ta/es, e/cept those mentioned in the said 'ecree shall be imposed upon mining and metallurgical industries. Bord conceded that there 5ere valid perfected mining concessions granted prior to the 11th of ,pril, 1*)), ho5ever, the said concessions 5ould fall 5ithin the provisions of sec. 1<3 of ,ct 1o. 11*) ((nternal Revenue ,ct , and accordingly imposed ta/ upon these properties. %"C. 1<3. 0n all valid perfected mining concessions granted prior to ,pril eleventh, eighteen hundred and ninety6nine, there shall be levied and collected on the after $anuary first, nineteen hundred and five, the follo5ing ta/es: 2. (a 0n each claim containing an area of si/ty thousand s.uare meters, an annual ta/ of one hundred pesosA (b and at the same rate proportionately on each claim containing an area in e/cess of, or less than, si/ty thousand s.uare meters. <. 0n the gross output of each an ad valorem ta/ e.ual to three per centum of the actual mar7et value of such output. Casanovas claimed that said provision is void, as it violated section D of the ,ct of Congress of $uly 1, 1);2 5hich provides that I1o la5 impairing the obligations of contract shall be enactedJ. ISSUE" K@1 %ec. 1<3 of ,ct 1o. 11*) is valid> 10 HELD" :he judgment is R"F"R%"' and ordered in favor of the plaintiff ?appellant and against the defendant6appellee for P),+;;, 5ith interest thereon. :he Court finds that this deed constituted a contract bet5een the %panish Government and the plaintiff, the obligation of 5hich contract 5as impaired by the enactment of section 1<3 of the (nternal Revenue Ca5 above cited, thereby infringing the provisions above .uoted from section D of the act of Congress of $uly 1, 1);2.:he %tate had no po5er by subse.uent legislation to impose ta/es upon the property that 5ould infringe the obligations of contract. (n Conflict 5ith %ection +; of the ,ct of Congress of $uly 1, 1);2. I:hat nothing in this ,ct shall be construed to effect the rights of any person, partnership, or corporation, having a valid, perfected mining concession granted prior to ,pril eleventh, eighteen hundred and ninety6nine, but all such concessions shall be conducted under the provisions of the la5 in force at the time they 5ere granted, subject at all times to cancellation by reason of illegality in the procedure by 5hich they 5ere obtained, or for failure to comply 5ith the conditions prescribed as re.uisite to their retention in the la5s under 5hich they 5ere granted: Provided, :hat the o5ner or o5ners of every such concession shall cause the corners made by its boundaries to be distinctly mar7ed 5ith permanent monuments 5ithin si/ months after this act has been promulgated in the Philippine (slands, and that any concessions, the boundaries of 5hich are not so mar7ed 5ithin this period shall be free and open to e/plorations and purchase under the provisions of this actJ (n this section, concessions can be canceled only by reason of illegality in the procedure by 5hich they 5ere obtained, or for failure to comply 5ith the conditions prescribed as re.uisite for their retention in the la5s under 5hich they 5ere granted. :here is nothing in the section 5hich indicates that they can be canceled for failure to comply 5ith the conditions prescribed by subse.uent legislation.
(iii)
TAXATION OF SPECIAL ENTITIES
!7. AMERICAN BIBLE SOCIETY V. CITY OF MANILA FACTS" (n the course of its ministry, plaintiff4s Philippine agency has been distributing and selling bibles and@or gospel portions thereof (e/cept during the $apanese occupation throughout the Philippines and translating the same into several Philippine dialects. :he acting City :reasurer of the City of #anila informed plaintiff that it 5as conducting the business of general merchandise since 1ovember, 1)3D, 5ithout providing itself 5ith the necessary #ayor4s permit and municipal license, in violation of 0rdinance 1o. <;;;, as amended, and 0rdinances 1os. 2D2), <;2* and <<+3, and re.uired plaintiff to secure, 5ithin three days, the corresponding permit and license fees, together 5ith compromise covering the period from the 3th .uarter of 1)3D to the 2nd .uarter of 1)D<, in the total sum of PD,*21.3D. Plaintiff protested against this re.uirement, but the City :reasurer demanded that plaintiff deposit and pay under protest the sum of PD,*)1.3D, if suit 5as to be ta7en in court regarding the same. :o avoid the closing of its business as 5ell as further fines and penalties in the premises, plaintiff paid to the defendant under protest the said permit and license fees in the aforementioned amount, giving at the same time notice to the City :reasurer that suit 5ould be ta7en in court to .uestion the legality of the ordinances under 5hich, the said fees 5ere being collected, 5hich 5as done on the same date by filing the complaint that gave rise to this action. (n its complaint plaintiff prays that judgment be rendered declaring the said #unicipal 0rdinance 1o. <;;;, as amended, and 0rdinances 1os. 2D2), <;2* and <<+3 illegal and unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum of PD,*)1.3D paid under protest.

suppress its enjoyment. . . . :hose 5ho can ta/ the e/ercise of this religious practice can ma7e its e/ercise so costly as to deprive it of the resources necessary for its maintenance. (t is flat license ta/ levied and collected as a condition to the pursuit of activities 5hose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their e/ercise. :he right to enjoy freedom of the press and religion occupies a preferred position as against the constitutional right of property o5ners. (t may be true that in the case at bar the price as7ed for the bibles and other religious pamphlets 5as in some instances a little bit higher than the actual cost of the same but this cannot mean that appellant 5as engaged in the business or occupation of selling said 9merchandise9 for profit.
'efendant ans5ered the complaint, maintaining in turn that said ordinances 5ere enacted by the #unicipal !oard of the City of #anila by virtue of the po5er granted to it by section 2333, subsection (m62 of the Revised ,dministrative Code, superseded on $une 1*, 1)3), by section 1*, subsection (1 of Republic ,ct 1o. 3;), 7no5n as the Revised Charter of the City of #anila, and praying that the complaint be dismissed, 5ith costs against plaintiff. R:C dismissed the complaint. ISSUES" 1. 2. K01 the ordinances of the City of #anila, 1os. <;;;, as amended, and 2D2), <;2* and <<+3, are constitutional and valid K01 the provisions of said ordinances are applicable or not to the case at bar.
HELD" 'ecision appealed from is R"F"R%"'. M"%, it is valid. 0rdinance <;;; is of general application and not particularly directed against institutions li7e the plaintiff, and it does not contain any provisions 5hatever prescribing religious censorship nor restraining the free e/ercise and enjoyment of any religious profession. :he necessity of the permit is made to depend upon the po5er of the City to license or ta/ said business, trade or occupation. :he license fees re.uired to be paid .uarterly in %ection 1 of said 0rdinance 1o. 2D2), as amended, are not imposed directly upon any religious institution but upon those engaged in any of the business or occupations therein enumerated, such as retail 9dealers in general merchandise9 5hich, it is alleged, cover the business or occupation of selling bibles, boo7s, etc. :he business of 9retail dealers in general merchandise9 is e/pressly enumerated in subsection (o , section 1* of Republic ,ct 1o. 3;)A hence, an ordinance prescribing a municipal ta/ on said business does not have to be approved by the President to be effective, as it is not among those referred to in said subsection (ii . #oreover, the .uestioned ordinances are still in force, having been promulgated by the #unicipal !oard of the City of #anila under the authority granted to it by la5. 0rdinance 1o. 2D2), as amended, cannot be applied to appellant, for in doing so it 5ould impair its free e/ercise and enjoyment of its religious profession and 5orship as 5ell as its rights of dissemination of religious beliefs. Kith respect to 0rdinance 1o. <;;;, as amended, 5hich re.uires the obtention the #ayor4s permit before any person can engage in any of the businesses, trades or occupations enumerated therein, it does 10: impose any charge upon the enjoyment of a right granted by the Constitution, nor ta/ the e/ercise of religious practices. 0rdinance 1o. <;;; cannot be considered unconstitutional, even if applied to plaintiff %ociety. !ut as 0rdinance 1o. 2D2) of the City of #anila, as amended, is not applicable, 0rdinance 1o. <;;;, as amended is also inapplicable to said business, trade or occupation of the plaintiff. :he license fee herein involved is imposed upon appellant for its distribution and sale of bibles and other religious literature. :he po5er to ta/ the e/ercise of a privilege is the po5er to control or
!%. CIR V. BISHOP OF THE MISSIONARY DISTRICT FACTS" :he #issionary 'istrict (#issionary 'istrict of the Philippine (slands of the Protestant "piscopal Church the 8.%.,. , a duly established religious order in the Philippines, received from the #issionary %ociety ('omestic and &oreign #issionary %ociety of the Protestant "piscopal Church in the 8% various shipments of materials, supplies, e.uipment and other articles intended for use in the construction and operation of the ne5 %t. Cu7e4s Bospital in Oue-on City and the !rent Bospital and %t. %tephen4s Bigh %chool. :he #issionary 'istrict also received from a certain Killiam #innis of Canada a stove for the use of the !rent Bospital. 0n these shipments, the Commissioner of (nternal Revenue levied and collected the total amount of P11*,*3E as compensating ta/. :he !ishop of the #issionary 'istrict filed claims for refund on the ground that under R, 1)1+, the materials and articles received by him 5ere e/empt from the payment of compensating ta/. ,s the t5o6year period for recovery of ta/ 5as about to e/pire, the !ishop filed a petition for revie5 in the Court of :a/ ,ppeals, 5ithout a5aiting action on his claim for refund. %ubse.uently, he also filed t5o supplemental petitions for revie5 covering other shipments received by him and on 5hich he had paid compensating ta/es. :he C(R denied respondent4s claim for refund on the ground that %t. Cu7e4s Bospital 5as not a charitable institution and, therefore, 5as not e/empt under the la5. Be also contends that the importations in .uestion cannot be considered 9donations9 because the #issionary %ociety, 5hich made the shipments, and the #issionary 'istrict in the Philippines are not different persons but rather are one and the same, the latter being a mere branch of the former. ,fter trial, the :a/ Court rendered a decision holding the shipments e/empt from ta/ation ordering the petitioner to refund to the respondent the amount of P11*,*3E. (t denied the petitioner=s a motion for reconsideration of its decision. ISSUE"

K01 %t. Cu7e4s Bospital is e/empt from ta/ation. 1ote: :he %ecretary of &inance states in his 'ept. 0rder 1o. 1* that hospitals admitting pay patients and charity patients are not charitable institutions. #.!. "state, (nc., of !acolod City, donated P1;,;;;.;; in cash to Rev. &r. Crispin Rui-, then parish priest of Fictorias, 1egros 0ccidental, for the construction of a ne5 Catholic Church in the locality. :he total amount 5as actually spent for the purpose intended. :he follo5ing year, &r. Rui- 5as subsitituted by his successor, &r. Casimiro Cladoc (petitioner . %ubse.uently, the donor #.!. "state, (nc. filed the donor4s gift ta/ return. :he respondent Commissioner of (nternal Revenue issued an assessment for donee4s gift ta/ against the Catholic Parish of Fictorias, of 5hich &r. Cladoc 5as already the priest. :he :a/ amounted to P1,<E;.;; including surcharges plus interests of 1H monthly, and the compromise for the late filing of the return. &r. Cladoc lodged a protest to the assessment and re.uested the 5ithdra5al thereof. :hese 5ere denied. :he petitioner then appealed to the Court of :a/ ,ppeals. Be contested among others: that at the time of the donation, he 5as not the parish priest in Fictorias and it 5as his predecessor, &r. Rui-, that should be liable that there is no legal entity or juridical person 7no5n as the 9Catholic Parish Priest of Fictorias,9 and, therefore, he should not be liable for the donee4s gift ta/ and the head of the 'iocese should be liable instead. that the assessment of the gift ta/, even against the Roman Catholic Church, 5ould not be valid, for such 5ould be a clear violation of section 22(< , ,rt. F( of the Constitution 5hich e/empts from ta/ation cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings, and improvements used e/clusively for religious purposes. C:,: affirmed the decision of the Commissioner of (nternal Revenue e/cept 5ith regard to the imposition of the compromise penalty in the amount of P2;.;;. :he petioner then appealed to the %C.
HELD" M"%. Petitions is denied. :his Court has already held that the follo5ing re.uisites must concur in order that a ta/payer may claim e/emption under the la5 (1 the imported articles must have been donatedA (2 the donee must be a duly incorporated or established international civic organi-ation, religious or charitable society, or institution for civic religious or charitable purposesA and (< the articles so imported must have been donated for the use of the organi-ation, society or institution or for free distribution and not for barter, sale or hire. !y stipulation of the parties, the respondent !ishop is admitted to be a corporation sole duly registered 5ith the %ecurities and "/change Commission and that the #issionary 'istrict is a 9duly incorporated and established religious society.9 :hey are, therefore, entities separate and distinct from the #issionary. :he fact that the #issionary 'istrict, of 5hich respondent is the !ishop, is a branch of the #issionary %ociety is of no moment. (t is a branch only in religious matters, in matters of faith and dogma. (n other respects, it is independent. :he :a/ Court4s finding that the materials and supplies 5ere purchased by the #issionary %ociety 5ith money obtained from contributions from other people 5ho should be considered the real donors is also assailed as being based on the uncorroborated testimony of Robert #eyer, :reasurer of the #issionary 'istrict, 5ho it is said, did not have personal 7no5ledge of the matter testified to by him. :his is not so. ,s respondent points out, the various deeds of donation state in paragraph < that the 9#issionary %ociety is a non6profit organi-ation and derives its support from voluntary contributions.9 C(R denied respondent4s claim for refund because pursuant to the last proviso of R, 1)1+, the %ecretary of &inance issued 'epartment 0rder 1o. 1* on 0ctober 2;, 1)D*, stating that Bospitals that admit pay patients and charity patients ... are not charitable institutions for purposes of Republic ,ct 1o 1)1+. (t should be enough to point out that the admission of pay patients does not detract from the charitable character of a hospital, if, as in the case of %t. Cu7e4s Bospital, its funds are devoted e/clusively to the #aintenance of the institution. :he %ecretary of &inance cannot limit or other5ise .ualify the enjoyment of this e/emption granted under R, 1)1+ in implementing the la5.
:he %upreme Court issued a resolution ordering parties to sho5 cause 5hy the Bead of the 'iocese should or should not be substituted in lieu of Cladoc. (t also issued a resolution ordering the Bead of the 'iocese to present issues and defenses he might 5ish to raise. :he Roman Catholic !ishop of !acolod, manifested that it 5as submitting itself to the jurisdiction and orders of this Court and that it 5as presenting, by reference, the brief of petitioner &r. Cladoc as its o5n and for all purposes. ISSUE" Khether or not &r Cladoc should be liable for the assessed donee4s gift ta/ on the P1;,;;;.;; donated for the construction of the Fictorias Parish Church. HELD" :he ta/ liability e/ists` Bo5ever, &r. Cladoc is 10: personally liable for the said gift ta/. (nstead, the %upreme Court ordered that the Bead of the 'iocese (!ishop of !acolod should pay the said gift ta/.
!'. LLADOC V. CIR FACTS"

Gift ta/ is an e/cise ta/, not property ta/A "/cise ta/ is 10: included in ta/ e/emption even if e/clusively used for religious purposes. :he e/emption is only from the payment of ta/es assessed on such properties enumerated, as property ta/es, as contra distinguished from e/cise ta/es. (n the present case, 5hat the Collector assessed 5as a donee4s gift ta/A the assessment 5as not on the properties themselves. (t did not rest upon general o5nershipA it 5as an e/cise upon the use made of the properties, upon the e/ercise of the privilege of receiving the properties. #anifestly, gift ta/ is not 5ithin the e/empting provisions of the section just mentioned. , gift ta/ is not a property ta/, but an e/cise ta/ imposed on the transfer of property by 5ay of gift inter vivos, the imposition of 5hich on property used e/clusively for religious purposes, does not constitute an impairment of the Constitution. ,s 5ell observed by the learned respondent Court, the phrase 9e/empt from ta/ation,9 as employed in the Constitution (supra should not be interpreted to mean e/emption from all 7inds of ta/es. ,nd there being no clear, positive or e/press grant of such privilege by la5, in favor of petitioner, the e/emption herein must be denied. Bead of 'iocese is the real party in interest. :he Court gave merit to the claim of &r. Cladoc that cannot be liable as he 5as not yet a priest of Fictorias at the time of donation. :he ICatholic Parish Priest of FictoriasJ as the donee pertains to the Bead of the 'iocese, therefore ma7ing the latter the real party in interest and thus validly may substitute &r. Cladoc as party in the caseA and thus liable for the payment of the e/cise ta/.
Petitioners also operate 5ithin the premises of the hospital the 9%t. Catherine4s %chool of #id5ifery9. :he students practice in the %t. Catherine4s Bospital, as 5ell as in the %t. #ary4s Bospital, 5hich is also o5ned by the petitioners. ISSUE" Khether or not the lot, building and other improvements occupied by the %t. Catherine Bospital are e/empt from the real property ta/ and 5hether or not the said properties are used e/clusively for charitable or educational purposes. HELD" "/empted from real property ta/. (t should be noted, ho5ever, that, according to the very statement of facts made in the decision appealed from, of the thirty6t5o (<2 beds in the hospital, t5enty (2; are for charity6patientsA that 9the income reali-ed from pay6patients is spent for improvement of the charity 5ardsA9 and that 9petitioners, as directress9 of said hospital, 9does not receive any salary,9 although its resident physician gets a monthly salary of P1E;.;;. 9(n other 5ords, 5here rendering charity is its primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent purposes of the institution, the mere fact that a profit has been made 5ill not deprive the hospital of its benevolent character9 #oreover, the e/emption in favor of property used e/clusively for charitable or educational purposes is 9not limited to property actually indispensable9 therefor but e/tends to facilities 5hich are 9incidental to and reasonably necessary for9 the accomplishment of said purposes, such as, in the case of hospitals, 9a school for training nurses, a nurses4 home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns and residents9 Kithin the purvie5 of the Constitutional e/emption from ta/ation, the %t. Catherine4s Bospital is, therefore, a charitable institution, and the fact that it admits pay6patients does not bar it from claiming that it is devoted e/clusively to benevolent purposes, it being admitted that the income derived from pay6patients is devoted to the improvement of the charity 5ards, 5hich represent almost t5o6thirds (2@< of the bed capacity of the hospital, aside from 9out6charity patients9 5ho come only for consultation. ,gain, the e/istence of 9%t. Catherine4s %chool of #id5ifery9, 5ith an enrollment of about 2;; students, 5ho practice partly in %t. Catherine4s Bospital and partly in %t. #ary4s Bospital, 5hich, li7e5ise, belongs to petitioners herein, does not, and cannot, affect the e/emption to 5hich %t. Catherine4s Bospital is entitled under our fundamental la5. 0n the contrary, it furnishes another ground for e/emption for or 9all lands, building and improvements used e/clusively for religious, charitable or educational purposes shall be e/empt from ta/ation,9 pursuant to the Constitution, regardless of 5hether or not material profits are derived from the operation of the institutions in .uestion. (n other 5ords, Congress may, if it deems fit to do so, impose ta/es upon such 9profits9, but said 9lands, buildings and improvements9 are beyond its ta/ing po5er.
#). HERRERA V. BUECON CITY BOARD OF ASSESSMENT APPEALS FACTS" 'irector of the !ureau of Bospitals authori-ed the petitioners to establish and operate the 9%t. Catherine4s Bospital9. 0n or about $anuary <, 1)D<, the petitioners sent a letter to the Oue-on City ,ssessor re.uesting e/emption from payment of real estate ta/ on the lot, building and other improvements comprising the hospital stating that the same 5as established for charitable and humanitarian purposes and not for commercial gain. ,fter an inspection of the premises and after a careful study of the case, the e/emption from real property ta/es 5as granted effective the years 1)D<, 1)D3 and 1)DD. %ubse.uently, ho5ever, in a letter the Oue-on City ,ssessor notified the petitioners that the previously mentioned properties 5ere re6classified from e/empt to 9ta/able9 and thus assessed for real property ta/es effective 1)D+. :he petitioners appealed the assessment to the Oue-on City !oard of ,ssessment ,ppeals, 5hich, in a decision affirmed the decision of the City ,ssessor. :he building involved in this case is principally used as a hospital. (t is mainly a surgical and orthopedic hospital 5ith emphasis on obstetrical cases, the latter constituting );H of the total number of cases registered therein. :he hospital has thirty6t5o (<2 beds, of 5hich t5enty (2; are for charity6patients and t5elve (12 for pay6patients. (t is made to appear that there are t5o 7inds of charity patients W (a those 5ho come for consultation only (9out6charity patients9 A and (b those 5ho remain in the hospital for treatment (9lying6in6patients9 . :he out6charity patients are given free consultation and prescription, although sometimes they are furnished 5ith free medicines. :he charity lying6in6patients are given free medical service and medicine although the food served to the pay6patients is very much better than that given to the former.
#2. CIR <. COURT OF APPEALS* COURT OF TAX APPEALS 6,9 YOUNG MENDS CHRISTIAN ASSOCIATION OF THE PHILIPPINES* INC. #1. THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA <. THE PROVINCIAL BOARD OF ILOCOS NORTE FACTS" :he Roman Catholic ,postolic Church, represented by the !ishop of 1ueva %egovia, possesses and is the o5ner of a parcel of land in the municipality of %an 1icolas, (locos 1orte, all four sides of 5hich face on public streets. 0n the south side is a part of the churchyard, the convent and an adjacent lot used for a vegetable garden and in 5hich there is a stable and a 5ell for the use of the convent. (n the center is the remainder of the churchyard and the church. 0n the north is an old cemetery 5ith t5o of its 5alls still standing, and a portion 5here formerly stood a to5er, the base of 5hich still be seen. :he Province of (locos 1orte re.uired the Church to pay the land ta/ on the lot adjoining the convent and the lot 5hich formerly 5as the cemetery 5ith the portion 5here the to5er stood. :he !ishop paid under protest and then filed an action for the recovery of the amounts paid, alleging that the collection of this ta/ is illegal. ISSUE" Khether or not the parcels of land are e/empt from ta/. HELD" :he lots are e/empt from land ta/. :he Province of (locos 1orte 5as ordered to refund the amounts paid. FACTS" M#C, is a non6stoc7, non6profit institution, 5hich conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. (n 1)*;, M#C,, among others, an amount of income (about PE;;7V from leasing out a portion of its premises to small shop o5ners, li7e restaurants and canteen operators, and from par7ing fees collected from non6members. :he C(R thus issued an assessment to M#C, totaling about P31D7V including surcharge and interest, for deficiency income ta/, deficiency e/panded 5ithholding ta/es on rentals and professional fees and deficiency 5ithholding ta/ on 5ages. M#C, protested the assessment and filed a letter. (n reply, the C(R denied the claims of M#C,.M#C, thus filed a petition to the C:, to ta7e out the ta/es and C:, ruled in favor of M#C,. C(R filed a petition 5ith the C, to reverse, but C, affirmed C:,4s decision. ISSUE" K@1 the income derived from rentals of real property o5ned by M#C, (established as 9a 5elfare, educational and charitable non6profit corporation9 is subject to income ta/ under the 1(RC and Constitution HELD" M"%, the income derived by M#C, from rentals of its real property is subject to income ta/. 8nder the 1(RC: Khile %ection 2E of the 1(RC provides that non6profit organi-ations and clubs shall not be ta/ed on their income, it also provides that this e/emption 5ill not apply to income derived from 1 properties, real or personal, and 2 any other activities conducted for profit shall be subject to ta/ (amended by P' 13DE . !ecause ta/es are the lifeblood of the nation, the Court has al5ays applied the doctrine of strict interpretation in construing ta/ e/emptions. , claimed e/emption must e/pressly be granted in a statute stated in a language too clear to be mista7en. :he phrase 9any of their activities conducted for profitJ does not .ualify the 5ord Iproperties.J :his ma7es income from the property of the organi-ation ta/able, regardless of ho5 that income is used 66 5hether for profit or for lofty non6 profit purposes. :hus, the e/emption claimed by the M#C, is e/pressly disallo5ed by the very 5ording of the aforementioned la5. 8nder the Constitution: M#C, submits that ,rticle F(, %ection 2* of the Constitution e/empts Icharitable institutionsJ from the payment not only of property ta/es but also of income ta/ from any source. Bo5ever, it is clear from the debates and opinions of the constitutional framers that the e/emption does not pertain to income ta/ but only property ta/es.
:he e/emption in favor of the convent in the payment of the land ta/ (sec. <33 QcR ,dministrative Code refers to the home of the parties 5ho presides over the church and 5ho has to ta7e care of himself in order to discharge his duties. (t 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. "/cept in large cities 5here the density of the population and the development of commerce re.uire 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, 5hich comes under the e/emption. (n regard to the lot 5hich formerly 5as the cemetery, 5hile it is no longer used as such, neither is it used for commercial purposes and, according to the evidence, is no5 being used as a lodging house by the people 5ho participate in religious festivities, 5hich constitutes an incidental use in religious functions, 5hich also comes 5ithin the e/emption.

(n 1))<, both the land and hospital building 5ere assessed for real property ta/es in P3,DD3,*+; by the City ,ssessor. Petitioner filed a Claim for "/emption from real property ta/es 5ith the City ,ssessor, on the ground that it is a charitable institution. (t 5as denied. :hey appealed his decision to the Cocal !oard of ,ssessment ,ppeals 5ho dismissed their petition and 5as affirmed by the Central !oard of ,ssessment ,ppeals as 5ell as the Court of ,ppeals. Cung Center alleges that under %ec.2*, par.< of the Constitution, the property is e/empt from real property ta/es. (t averred that a minimum of +;H of its hospital beds 5ere used for charity patients and that the major thrust of its hospital is to serve charity patients. :hus, it contends that it is a charitable institution e/empt from ta/es. ISSUES" 1. 2. Khether Cung Center is a charitable institution 5ithin the conte/t of P'1*2< and the 1)E< and 1)*E Constitutions> Khether the real properties of Cung Center are e/empt from real property ta/es>
M#C, also posits that it is an 9educational instititution9 5ithin the purvie5 of ,rt L(F, %ec 3. &or the M#C, to be granted the e/emption, it must prove 5ith substantial evidence that: it falls under the classification non6stoc7, non6profit educational institutionA and the income it see7s to be e/empted from ta/ation is used actually, directly, and e/clusively for educational purposes. Bo5ever, no evidence 5as submitted by M#C, to prove that they met the re.uisites. :he term Ieducational institutionJ or Iinstitution of learningJ has ac.uired a 5ell67no5n technical meaning, of 5hich the members of the Constitutional Commission are deemed cogni-ant. 8nder the "ducation ,ct of 1)*2, such term refers to schools, 5hich is synonymous 5ith formal education 0R a school seminary, college, or educational establishment. :he Court, upon e/amining the I,mended ,rticles of (ncorporationJ and I!y6Ca5sJ of the M#C,, but found nothing in them that even hints that it is a school or an educational institution. "ven if M#C, is an educational institution, the Court also notes that M#C, did not submit proof of the proportionate amount of the subject income that 5as actually, directly and e/clusively used for educational purposes. NOTE: ,if 9ir as*s a)out ho" this differs "ith $!<=R cases- !he cases relied on )y >?CA do not support its cause. >?CA of ?anila v. CIR and A)ra 4alley College, Inc. v. A.uino are not applica)le, )ecause the controversy in )oth cases involved exemption from the payment of property tax, not income tax. <ospital de 9an @uan de 6ios, Inc. v. Pasay City is not in point either, )ecause it involves a claim for exemption from the payment of regulatory fees, specifically electrical inspection fees, imposed )y an ordinance of Pasay City 33 an issue not at all related to that involved in a claimed exemption from the payment if income taxes imposed on property leases. In @esus 9acred <eart College v. Com. $f Internal Revenue, the party therein, "hich claimed an exemption from the payment of income tax, "as an educational institution "hich su)mitted su)stantial evidence that the income su)ject of the controversy had )een devoted or used solely for educational purposes. $n the other hand, >?CA in the present case had not given any proof that it is an educational institution, or that of its rent income is actually, directly and exclusively used for educational purposes.
HELD" Petition 5as partially granted. ,s a charitable institution, Cung Center is e/empt from real property ta/es but those portions that are leased to private entities are ta/able. Charity may be applied to almost anything that tend to promote the 5ell6being of social man. :he test 5hether an enterprise is charitable or not is 5hether it e/ists to carry out a purpose reorgani-ed in la5 as charitable or 5hether it is maintaining for gain, profit or private advantage. 8nder P'1*2<, petitioner is a non6profit and non6stoc7 corporation to be administered by the 0ffice of the President 5ith the #inistry of Bealth and the #inistry of Buman %ettlements. (t 5as organi-ed for the 5elfare and benefit of the &ilipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines. Bence, its medical services are to be rendered to the public in general in any and all 5al7s of life including those 5ho are poor and needy 5ithout discrimination. ,s a general principle, a charitable institution does not lose its character as such and its e/emption from ta/es simply because it derives income from paying patients, 5hether out6patient or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object 5hich it is intended to achieve and no money inures to the private benefit of any of the persons managing or operating the institution. (n this case, petitioner adduced substantial evidence that it spent its income, including the subsidies from government for 1))1 and 1))2 for its patients and for the operation of the hospital. (t even incurred a net loss in those years from its operations. "ven though petitioner is a charitable institution, the Court held that the portions of its real property leased to private entities are not e/empt as they are not actually, directly and e/clusively used for charitable purposes. P'1*2< holds that petitioner does not enjoy any property ta/ e/emption privileges for its real properties as 5ell as the building. :he ta/ e/emption under the Constitution only covers property ta/.
# . LUNG CENTER OF THE PHILIPPINES V. BUECON CITY FACTS" Cung Center is a non6stoc7 and non6profit entity established by P' 1o. 1*2<. (t is the registered o5ner of a parcel of land located at Oue-on ,ve, OC. "rected in the middle of the aforesaid lot is a hospital 7no5n as the Cung Center of the Philippines. , big space at the ground floor is being leased to private parties as canteen and small store spaces as 5ell as to medical practitioners 5ho use the same as private clinics for their patients 5hom they charge for their professional fees. Cung Center accepts paying and non6paying patients and renders medical services to both paying and non6paying out6patients. ,side from its income from paying patients, it receives annual subsidies from the government.

administered by private individuals or groupsJ 5ith a government permit. I1on6profitJ means no net income or asset accrues to or benefits any member or specific person, 5ith all the net income or asset devoted to the institution=s purposes and all its activities conducted not for profit. I1on6 profitJ does not necessarily mean Icharitable.J (n Collector of (nternal Revenue v. Club &ilipino (nc. de Cebu, this Court considered as non6profit a sports club organi-ed for recreation and entertainment of its stoc7holders and members. :he club 5as primarily funded by membership fees and dues. (f it had profits, they 5ere used for overhead e/penses and improving its golf course. :he club 5as non6profit because of its purpose and there 5as no evidence that it 5as engaged in a profit6ma7ing enterprise. :o be a charitable institution, ho5ever, an organi-ation must meet the substantive test of charity in Cung Center. :he issue in Cung Center concerns e/emption from real property ta/ and not income ta/. Bo5ever, it provides for the test of charity in our jurisdiction. Charity is essentially a gift to an indefinite number of persons 5hich lessens the burden of government. (n other 5ords, charitable institutions provide for free goods and services to the public 5hich 5ould other5ise fall on the shoulders of government. :hus, as a matter of efficiency, the government forgoes ta/es 5hich should have been spent to address public needs, because certain private entities already assume a part of the burden. :his is the rationale for the ta/ e/emption of charitable institutions. :he loss of ta/es by the government is compensated by its relief from doing public 5or7s 5hich 5ould have been funded by appropriations from the :reasury :he Constitution e/empts charitable institutions only from real property ta/es. (n the 1(RC, Congress decided to e/tend the e/emption to income ta/es. Bo5ever, the 5ay Congress crafted %ection <;(" of the 1(RC is materially different from %ection 2*(< , ,rticle F( of the Constitution. ("mphasis supplied %ection <;(" of the 1(RC defines the corporation or association that is e/empt from income ta/. 0n the other hand, %ection 2*(< , ,rticle F( of the Constitution does not define a charitable institution, but re.uires that the institution Iactually, directly and e/clusivelyJ use the property for a charitable purpose. :o be e/empt from real property ta/es, %ection 2*(< , ,rticle F( of the Constitution re.uires that a charitable institution use the property Iactually, directly and e/clusivelyJ for charitable purposes. :o be e/empt from income ta/es, %ection <;(" of the 1(RC re.uires that a charitable institution must be Iorgani-ed and operated e/clusivelyJ for charitable purposes. Ci7e5ise, to be e/empt from income ta/es, %ection <;(G of the 1(RC re.uires that the institution be Ioperated e/clusivelyJ for social 5elfare. Bo5ever, the last paragraph of %ection <; of the 1(RC .ualifies the 5ords Iorgani-ed and operated e/clusivelyJ by providing that: 1ot5ithstanding the provisions in the preceding paragraphs, the income of 5hatever 7ind and character of the foregoing organi-ations 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, shall be subject to ta/ imposed under this Code. (n short, the last paragraph of %ection <; provides that if a ta/ e/empt charitable institution conducts IanyJ activity for profit, such activity is not ta/ e/empt even as its not6for6profit activities remain ta/ e/empt.
8nder the 1)*E Constitution, petitioner is burdened to prove that it is a charitable institution and its real properties are ,C:8,CCM, '(R"C:CM ,1' "LCC8%(F"CM used for charitable purposes. (f real property is used for one or more commercial purposes, it is not e/clusively used for the e/empted purposes but is subject to ta/ation. Khat is meant by actual, direct and e/clusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for 5hich the charitable institution is organi-ed, not the use of the income from the real property that is determinative of 5hether the property is used for ta/6e/empt purposes. Petitioner had failed to prove that the entirety of its real property is actually, directly and e/clusively used for charitable purposes. :he portions of the land leased to private entities as 5ell as those parts of the hospital leased to private individuals are not e/empt from such ta/es. 0n the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients 5hether paying or non6paying are e/empt from real property ta/es.
#(. CIR V. ST. LUKEDS MEDICAL CENTER FACTS" %t. Cu7e=s #edical Center, (nc. (%t. Cu7e=s is a hospital organi-ed as a non6stoc7 and non6profit corporation.:he !(R assessed %t. Cu7e=s deficiency ta/es for 1))* comprised of deficiency income ta/, value6added ta/, and 5ithholding ta/. :he !(R claimed that %t. Cu7e=s should be liable for income ta/ at a preferential rate of 1;H as provided for by %ection 2E(! . &urther, the !(R claimed that %t. Cu7e=s 5as actually operating for profit in 1))* because only 1<H of its revenues came from charitable purposes. #oreover, the hospital=s board of trustees, officers and employees directly benefit from its profits and assets. 0n the other hand, %t. Cu7e=s maintained that it is a non6stoc7 and non6profit institution for charitable and social 5elfare purposes e/empt from income ta/ under %ection <;(" and (G of the 1(RC. (t argued that the ma7ing of profit per se does not destroy its income ta/ e/emption. ISSUE" Khether %t. Cu7e=s is liable for deficiency income ta/ in 1))* under %ection 2E(! of the 1(RC, 5hich imposes a preferential ta/ rate of 1;a on the income of proprietary non6profit hospitals. HELD" %ection 2E(! of the 1(RC does not remove the income ta/ e/emption of proprietary non6profit hospitals under %ection <;(" and (G . %ection 2E(! on one hand, and %ection <;(" and (G on the other hand, can be construed together 5ithout the removal of such ta/ e/emption. %ection 2E(! of the 1(RC imposes a 1;H preferential ta/ rate on the income of (1 proprietary non6profit educational institutions and (2 proprietary non6profit hospitals. :he only .ualifications for hospitals are that they must be proprietary and non6profit. IProprietaryJ means private, follo5ing the definition of a Iproprietary educational institutionJ as Iany private school maintained and

:hus, even if the charitable institution must be Iorgani-ed and operated e/clusivelyJ for charitable purposes, it is nevertheless allo5ed to engage in Iactivities conducted for profitJ 5ithout losing its ta/ e/empt status for its not6for6profit activities. :he only conse.uence is that the Iincome of 5hatever 7ind and characterJ of a charitable institution Ifrom any of its activities conducted for profit, regardless of the disposition made of such income, shall be subject to ta/.J Prior to the introduction of %ection 2E(! , the ta/ rate on such income from for6profit activities 5as the ordinary corporate rate under %ection 2E(, . Kith the introduction of %ection 2E(! , the ta/ rate is no5 1;H. ("mphasis supplied :he Court finds that %t. Cu7e=s is a corporation that is not Ioperated e/clusivelyJ for charitable or social 5elfare purposes insofar as its revenues from paying patients are concerned. :his ruling is based not only on a strict interpretation of a provision granting ta/ e/emption, but also on the clear and plain te/t of %ection <;(" and (G . %ection <;(" and (G of the 1(RC re.uires that an institution be Ioperated e/clusivelyJ for charitable or social 5elfare purposes to be completely e/empt from income ta/. ,n institution under %ection <;(" or (G does not lose its ta/ e/emption if it earns income from its for6profit activities. %uch income from for6profit activities, under the last paragraph of %ection <;, is merely subject to income ta/, previously at the ordinary corporate rate but no5 at the preferential 1;H rate pursuant to %ection 2E(! . ("mphasis supplied %t. Cu7e=s fails to meet the re.uirements under %ection <;(" and (G of the 1(RC to be completely ta/ e/empt from all its income. Bo5ever, it remains a proprietary non6profit hospital under %ection 2E(! of the 1(RC as long as it does not distribute any of its profits to its members and such profits are reinvested pursuant to its corporate purposes. %t. Cu7e=s, as a proprietary non6profit hospital, is entitled to the preferential ta/ rate of 1;H on its net income from its for6profit activities. %t. Cu7e=s is therefore liable for deficiency income ta/ in 1))* under %ection 2E(! of the 1(RC. Bo5ever, %t. Cu7e=s has good reasons to rely on the letter dated + $une 1)); by the !(R, 5hich opined that %t. Cu7e=s is Ia corporation for purely charitable and social 5elfare purposesJ and thus e/empt from income ta/. (n #ichael $. Chuillier, (nc. v. Commissioner of (nternal Revenue, the Court said that Igood faith and honest belief that one is not subject to ta/ on the basis of previous interpretation of government agencies tas7ed to implement the ta/ la5, are sufficient justification to delete the imposition of surcharges and interest.J

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