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GR Nos. L-49839-46, April 26, 1991
196 SCRA 322
FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased
and occupied as dwelling
units by tenants who were paying monthly rentals of not exceeding P300. Sometimes
in 1971 the Rental
Freezing Law was passed prohibiting for one year from its effectivity, an increase in
monthly rentals of dwelling
units where rentals do not exceed three hundred pesos (P300.00), so that the Reyes
were precluded from
raising the rents and from ejecting the tenants. In 1973, respondent City Assessor of
Manila re-classified and
reassessed the value of the subject properties based on the schedule of market
values, which entailed an
increase in the corresponding tax rates prompting petitioners to file a Memorandum
of Disagreement averring
that the reassessments made were "excessive, unwarranted, inequitable,
confiscatory and unconstitutional"
considering that the taxes imposed upon them greatly exceeded the annual income
derived from their
properties. They argued that the income approach should have been used in
determining the land values instead
of the comparable sales approach which the City Assessor adopted.
ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?
HELD: No. The taxing power has the authority to make a reasonable and natural
classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at
the very least discrimination
that finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under
similar circumstances or that all persons must be treated in the same manner, the
conditions not being different
both in the privileges conferred and the liabilities imposed.
Consequently, it stands to reason that petitioners who are burdened by the
government by its Rental Freezing
Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not
now be penalized by the
same government by the imposition of excessive taxes petitioners can ill afford and
eventually result in the
forfeiture of their properties.

Sison vs Ancheta (1984)

Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its
provision (Section 1) unduly discriminated against him by the imposition of higher
rates upon his income as a professional, that it amounts to class legislation, and that
it transgresses against the equal protection and due process clauses of the
Constitution as well as the rule requiring uniformity in taxation.

Issue: Whether BP 135 violates the due process and equal protection clauses, and
the rule on uniformity in taxation.
Held: There is a need for proof of such persuasive character as would lead to a
conclusion that there was a violation of the due process and equal protection clauses.
Absent such showing, the presumption of validity must prevail. Equality and
uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation. Where the
differentiation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the
clause and is therefore uniform. Taxpayers may be classified
into different
categories, such as recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make deductions for income
tax purposes as there is no practically no overhead expense, while professionals and
businessmen have no uniform costs or expenses necessary to produce their income.
There is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income taxation as regards
professional and business income.

Obillos et al vs. CIR/CA

GRN L68118 October 29, 1985
Aquino, J.:
Petitioners sold the lots they inherited from their father and derived a total profit of
P33,584 for each of them. They treated the profit as capital gain and paid an income
tax thereof. The CIR required petitioners to pay corporate income tax on their
shares, .20% tax fraud surcharge and 42% accumulated interest. Deficiency tax was
assessed on the theory that they had formed an unregistered partnership or joint
Whether or not partnership was formed by the siblings thus be assessed of the
corporate tax.
Petitioners were co-owners and to consider them partners would obliterate the
distinction between co-ownership and partnership. The petitioners were not engaged
in any joint venture by reason of that isolated transaction.
Art 1769 the sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or interest in
any property from which the returns are derived. There must be an unmistakable
intention to form partnership or joint venture.

CIR vs. Algue Inc.

Commissioner of Internal Revenue vs. Algue Inc.
GR No. L-28896 | Feb. 17, 1988

Algue Inc. is a domestic corp engaged in engineering, construction and other

allied activities

On Jan. 14, 1965, the corp received a letter from the CIR regarding its
delinquency income taxes from 1958-1959, amtg to P83,183.85

A letter of protest or reconsideration was filed by Algue Inc on Jan 18

On March 12, a warrant of distraint and levy was presented to Algue Inc. thru
its counsel, Atty. Guevara, who refused to receive it on the ground of the pending

Since the protest was not found on the records, a file copy from the corp was
produced and given to BIR Agent Reyes, who deferred service of the warrant

On April 7, Atty. Guevara was informed that the BIR was not taking any action
on the protest and it was only then that he accepted the warrant of distraint and
levy earlier sought to be served

On April 23, Algue filed a petition for review of the decision of the CIR with the
Court of Tax Appeals

CIR contentions:

the claimed deduction of P75,000.00 was properly disallowed because it

was not an ordinary reasonable or necessary business expense

payments are fictitious because most of the payees are members of the
same family in control of Algue and that there is not enough substantiation of
such payments

CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered
in the form of promotional fees. These were collected by the Payees for their work
in the creation of the Vegetable Oil Investment Corporation of the Philippines and
its subsequent purchase of the properties of the Philippine Sugar Estate
Development Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by Algue as legitimate business expenses in its income tax returns

Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance, made in accordance with law.

RA 1125: the appeal may be made within thirty days after receipt of the
decision or ruling challenged

During the intervening period, the warrant was premature and could therefore
not be served.

Originally, CIR claimed that the 75K promotional fees to be personal holding

company income, but later on conformed to the decision of CTA

There is no dispute that the payees duly reported their respective shares of the
fees in their income tax returns and paid the corresponding taxes thereon. CTA
also found, after examining the evidence, that no distribution of dividends was

CIR suggests a tax dodge, an attempt to evade a legitimate assessment by

involving an imaginary deduction

Algue Inc. was a family corporation where strict business procedures were not
applied and immediate issuance of receipts was not required. at the end of the
year, when the books were to be closed, each payee made an accounting of all of
the fees received by him or her, to make up the total of P75,000.00. This
arrangement was understandable in view of the close relationship among the
persons in the family corporation

The amount of the promotional fees was not excessive. The total commission
paid by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K.
After deducting the said fees, Algue still had a balance of P50,000.00 as clear
profit from the transaction. The amount of P75,000.00 was 60% of the total
commission. This was a reasonable proportion, considering that it was the payees
who did practically everything, from the formation of the Vegetable Oil
Investment Corporation to the actual purchase by it of the Sugar Estate

Sec. 30 of the Tax Code: allowed deductions in the net income Expenses - All
the ordinary and necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a reasonable allowance for salaries
or other compensation for personal services actually rendered xxx

the burden is on the taxpayer to prove the validity of the claimed deduction

In this case, Algue Inc. has proved that the payment of the fees was necessary
and reasonable in the light of the efforts exerted by the payees in inducing
investors and prominent businessmen to venture in an experimental enterprise
and involve themselves in a new business requiring millions of pesos.

Taxes are what we pay for civilization society. Without taxes, the government
would be paralyzed for lack of the motive power to activate and operate it. Hence,
despite the natural reluctance to surrender part of one's hard earned income to
the taxing authorities, every person who is able to must contribute his share in
the running of the government. The government for its part, is expected to
respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values

Taxation must be exercised reasonably and in accordance with the prescribed

procedure. If it is not, then the taxpayer has a right to complain and the courts
will then come to his succor

Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in
accordance with Rep. Act No. 1125. And we also find that the claimed deduction by
Algue Inc. was permitted under the Internal Revenue Code and should therefore not

have been disallowed by the CIR


May toll fees collected by tollway operators be subject to VAT?

(1) VAT is imposed on all kinds of services and tollway operators who are engaged
in constructing, maintaining, and operating expressways are no different from lessors
of property, transportation contractors, etc.
(2) Not only do they fall under the broad term under (1) but also come under those
described as all other franchise grantees which is not confined only to legislative
franchise grantees since the law does not distinguish. They are also not a franchise
grantee under Section 119 which would have made them subject to percentage tax
and not VAT.
(3) Neither are the services part of the enumeration under Section 109 on VATexempt transactions.
(4) The toll fee is not a users tax and thus it is permissible to impose a VAT on the
said fee. The MIAA case does not apply and the Court emphasized that toll fees are
not taxes since they are not assessed by the BIR and do not go the general coffers of
the government. Toll fees are collected by private operators as reimbursement for
their costs and expenses with a view to a profit while taxes are imposed by the
government as an attribute of its sovereignty. Even if the toll fees were treated as
users tax, the VAT can not be deemed as a tax on tax since the VAT is imposed on
the tollway operator and the fact that it might pass-on the same to the tollway user,
it will not make the latter directly liable for VAT since the shifted VAT simply becomes
part of the cost to use the tollways.
(5) The assertion that the VAT imposed is not administratively feasible given the
manner by which the BIR intends to implement the VAT (i.e., rounding off the toll
rates and putting any excess collection in an escrow account) is not enough to
invalidate the law. Non-observance of the canon of administrative feasibility will not
render a tax imposition invalid except to the extent that specific constitutional or
statutory limitations are impaired.

Rodriguez v Gella
G.R. No. L-6266 February 2, 1953
Paras, C.J.:

1. Petitioners sought to invalidate Executive Orders (EO) 545 and 546 issued on
November 10, 1952. EO 545 appropriated the sum of P37,850,500 for urgent
and essential public works, while EO 546 set aside the sum of P11,367,600 for
relief in the provinces and cities visited by typhoons, floods, droughts,
earthquakes, volcanic action and other calamities.


Section 26 of Article VI of the Constitution provides that "in times of war or

other national emergency, the Congress may by law authorize the President,
for a limited period and subject to such restrictions as it may prescribe, to
promulgate rules and regulations to carry out a declared national policy."
Accordingly the National Assembly passed Commonwealth Act No. 671,
declaring (in section 1) the national policy that "the existence of war between
the United States and other countries of Europe and Asia, which involves the
Philippines makes it necessary to invest the President with extraordinary
powers in order to meet the resulting emergency," and (in section 2)
authorizing the President, "during the existence of the emergency, to
promulgate such rules and regulations as he may deem necessary to carry out
the national policy declared in section 1."


House Bill No. 727 sought to repeal all Emergency Powers Acts but was
vetoed by the President. HB 727 may at least be considered as a concurrent
resolution of the Congress to formally declare the termination of the
emergency powers.

ISSUE: Whether or not the Executive Orders are still operative


EOs 545 and 546 must be declared as having no legal anchorage. The
Congress has since liberation repeatedly been approving acts appropriating
funds for the operation of the Government, public works, and many others
purposes, with the result that as to such legislative task the Congress must be
deemed to have long decided to assume the corresponding power itself and to
withdraw the same from the President.


CA 671 was in pursuance of the constitutional provision, it has to be

assumed that the National Assembly intended it to be only for a limited
period. If it be contended that the Act has not yet been duly repealed, and such
step is necessary to a cessation of the emergency powers delegated to the
President, the result would be obvious unconstitutionality, since it may never
be repealed by the Congress, or if the latter ever attempts to do so, the
President may wield his veto.


If the President had ceased to have powers with regards to general

appropriations, none can remain in respect of special appropriations;
otherwise he may accomplish indirectly what he cannot do directly. Besides, it
is significant that Act No. 671 expressly limited the power of the President to
that continuing "in force" appropriations which would lapse or otherwise
become inoperative, so that, even assuming that the Act is still effective, it is

doubtful whether the President can by executive orders make new



The specific power "to continue in force laws and appropriations which
would lapse or otherwise become inoperative" is a limitation on the general
power "to exercise such other powers as he may deem necessary to enable the
Government to fulfil its responsibilities and to maintain and enforce its
authority." Indeed, to hold that although the Congress has, for about seven
years since liberation, been normally functioning and legislating on every
conceivable field, the President still has any residuary powers under the Act,
would necessarily lead to confusion and overlapping, if not conflict.

5. The framers of the Constitution, however, had the vision of and were careful
in allowing delegation of legislative powers to the President for a limited
period "in times of war or other national emergency." They had thus entrusted
to the good judgment of the Congress the duty of coping with any national
emergency by a more efficient procedure; but it alone must decide because
emergency in itself cannot and should not create power. In our democracy the
hope and survival of the nation lie in the wisdom and unselfish patriotism of
all officials and in their faithful adherence to the Constitution.
Mactan Cebu (MCIAA) vs. Marcos
GR 120082 September 11, 1996 261 SCRA 667
Davide Jr., .: (CJ)
Mactan Cebu International Airport Authority (MCIAA) was created to principally
undertake to economical, efficient and effective control, management and
supervision of the Mactan International Airport and such other airports as may be
established in the province of Cebu Section 14 of its charter excempts the
Authority from payment of realty taxes but in 1994, the City Treasurer demanded
payment for realty taxes on several parcels of land belonging to the other. MCIAA
filed a petition in RTC contending that, by nature of its powers and functions, it has
the same footing of an agency or instrumentality of the national government. The
RTC dismissed the petition based on Section 193 & 234 of the local Government Code
or R.A. 7160. Thus this petition.
Whether or not the MCIAA is excempted from realty taxes?
With the repealing clause of RA 7160 the tax exemption provided. All general and

special in the charter of the MCIAA has been expressly repeated. It state laws, acts,
City Charters, decrees, executive orders, proclamations and administrative
regulations, or part of parts thereof which are inconsistent with any of the provisions
of the Code are hereby repeated or modified accordingly. Therefore the SC affirmed
the decision and order of the RTC and herein petitioner has to pay the assessed realty
tax of its properties effective January 1, 1992 up to the present.

NAPOCOR vs. City of Cabanatuan

Facts: City of Cabanatuan filed a collection suit against NAPOCOR, a governmentowned and controlled corporation demanding that the latter pay the assessed

from local taxes has already been withdrawn by the Local Government Code.
NAPOCOR submitted that it is not liable to pay an annual franchise because the citys
taxing power is limited to private entities that are engaged in trade or occupation for
franchise tax due, plus surcharge and interest. It alleged that NAPOCORs

profit, and that the NAPOCOR Charter, being a valid exercise of police power, should
prevail over the LGC.
Issue: Whether NAPOCOR is liable to pay annual franchise tax to the City of
Held: Yes. The power to tax is no longer vested exclusively on Congress; local

legislative bodies are now given direct authority to levy taxes, fees and other charges.
Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on
the National Government, its

agencies and instrumentalities, this rule now admits of

an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose
taxes, fees or charges on the aforementioned entities. Nothing prevents Congress
from decreeing that even instrumentalities or agencies of the government performing
governmental functions may be subject to tax.
A franchise is a privilege conferred by government authority, which does not belong
to citizens of the country generally as a matter of common right. It may be construed
in two senses: the right vested inthe

individuals composing the corporation and the

right and privileges conferred upon the corporation. A franchise tax is understood in

second sense; it is not levied on the corporation simply for existing as a

corporation but on its exercise of the rights or privileges granted to it by the

government. NAPOCOR is covered by the franchise tax because it exercises a
franchise in the second sense and it is exercising its rights or privileges under this
franchise within the territory of the City.

PBCom. vs. CIR(GR 112024. Jan. 28, 1999)

Petitioner, Philippine Bank of Communications (PBCom), a commercial banking
corporation duly organized under Philippine laws, filed its quarterly income tax
returns for the first and second quarters of 1985, reported profits, and paid the total











P3,401,701.00 and P1,615,253.00, respectively. Subsequently, however, PBCom

suffered net loss of P25,317,228.00, thereby showing no income tax liability in its
Annual Income Tax Returns for the year-ended December 31, 1985. For the
succeeding year, ending December 31, 1986, the petitioner likewise reported a net
loss of P14,129,602.00, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from leased properties. The
lessees withheld and remitted to the BIR withholding creditable taxes of P282,795.50
in 1985 and P234,077.69 in 1986. On August 7, 1987, petitioner requested the
Commissioner of Internal Revenue, among others, for a tax credit of P5,016,954.00
representing the overpayment of taxes in the first and second quarters of 1985.
Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes
withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986
for P234,077.69.
Pending the investigation of the respondent Commissioner of Internal Revenue,
petitioner instituted a Petition for Review on November 18, 1988 before the Court of
Tax Appeals (CTA). The petition was docketed as CTA Case No. 4309 entitled:
"Philippine Bank of Communications vs. Commissioner of Internal Revenue."

The CTA decided in favor of the BIR on the ground that the Petition was filed out of
time as the same was filed beyond the two-year reglementary period. A motion for
Reconsideration was denied and the appeal to Court of Appeals was likewise denied.
Thus, this appeal to Supreme Court.
a) Whether or not Revenue Regulations No. 7-85 which alters the reglementary
period from two (2) years to ten (10) years is valid.
b) Whether or not the petition for tax refund had already prescribed.

RR 7-85 altering the 2-year prescriptive period imposed by law to 10-

year prescriptive period is invalid.

Administrative issuances are merely interpretations and not expansions of the provisions
of law, thus, in case of inconsistency, the law prevails over them. Administrative agencies
have no legislative power.
When the Acting Commissioner of Internal Revenue issued RMC 7-85,
changing the prescriptive period of two years to ten years on claims of excess quarterly
income tax payments, such circular created a clear inconsistency with the provision of
Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it
legislated guidelines contrary to the statute passed by Congress.
It bears repeating that Revenue memorandum-circulars are considered administrative
rulings (in the sense of more specific and less general interpretations of tax laws) which
are issued from time to time by the Commissioner of Internal Revenue. It is widely
accepted that the interpretation placed upon a statute by the executive officers, whose
duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such
interpretation is not conclusive and will be ignored if judicially found to be erroneous.
Thus, courts will not countenance administrative issuances that override, instead of
remaining consistent and in harmony with, the law they seek to apply and implement.
Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes
or errors of its officials or agents. As pointed out by the respondent courts, the
nullification of RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is
an administrative interpretation which is not in harmony with Sec. 230 of 1977 NIRC, for
being contrary to the express provision of a statute. Hence, his interpretation could not be
given weight for to do so would, in effect, amend the statute.

By implication of the above, claim for refund had already prescribed.

Since the petition had been filed beyond the prescriptive period, the same has
already prescribed. The fact that the final adjusted return show an excess tax credit
does not automatically entitle taxpayer claim for refund without any express intent.
WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals
appealed from is AFFIRMED, with COSTS against the petitioner.

Lung Center of the Philippines vs. Quezon City [GR No. 144104 June 29, 2004]
Facts: Lung Center of the Philippines is a non-stock and non-profit entity established

by virtue of PD No. 1823. It is the

registered ownerof the land on which the Lung

Center of the Philippines Hospital is erected. A big space in the ground floor of the
hospital is being leased to
medical or

private parties, for canteen and small store spaces, and to

professional practitioners who use the same as their private clinics. Also, a

big portion on the right side of the hospital is being leased for commercial purposes
to a private

enterprise known as the Elliptical Orchids and Garden Center.

When the City Assessor of Quezon City assessed both its land and hospital building
for real property taxes, the Lung Center of the Philippines filed a claim for exemption
on its averment that it is a charitable institution with a minimum of 60% of its
hospital beds exclusively used

for charity patients and that the major thrust of its

hospital operation is to serve charity patients. The claim for exemption was denied,
prompting a petition for the reversal of the resolution of the City Assessor with


Local Board of Assessment Appeals of Quezon City, which denied the same. On
appeal, the Central Board of Assessment Appeals of Quezon City affirmed the local
boards decision, finding that Lung Center of the Philippines is not a charitable
institution and that its properties were not actually, directly and exclusively used for
charitable purposes. Hence, the present petition for review with averments that the
Lung Center ofthe Philippines is a charitable institution under Section 28(3), Article VI
of the

Constitution, notwithstanding that it accepts paying patients and rents out

portions of the hospital building to private individuals and enterprises.

Issue: Is the Lung Center of the Philippines a charitable institution within the context
of the Constitution, and therefore, exempt from real property tax?
Held: The Lung Center of the Philippines is a charitable institution. To determine
whether an enterprise is a charitable institution or not, the elements which should be
considered include the statute creating the enterprise, its corporate purposes, its
constitution and by-laws, the methods of administration, the nature of the actual
work performed, that character of the services rendered, the indefiniteness of the
beneficiaries and the use and occupation of the properties.
However, under the Constitution, in order to be entitled to exemption from real
property tax, there must be clear and unequivocal proof that (1) it is a charitable
institution and (2)its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used
for charitable purposes. While portions of the hospital are used for treatment of
patients and the dispensation

of medical services to them, whether paying or non-

paying, other portions thereof are being leased to private individuals and enterprises.

Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred

from participation or enjoyment. If real property is used for one or more commercial
purposes, it is not exclusively used for the exempted purposes but is subject to

PLDT vs. Province of Laguna

Philippine Long Distance Telephone Company, Inc.
vs. Province of Laguna, et al.
G.R. No. 151899 August 16, 2005
Facts: PLDT is a holder of a legislative franchise under Act No. 3436, as amended, to
render local and international telecommunications services. The terms and conditions
of its franchise were later consolidated under Republic Act No. 7082, Section 12 of
which embodies the so-called in-lieu-of-all taxes clause, whereunder PLDT shall pay
a franchise tax equivalent to 3% of all its gross receipts, which franchise tax shall be
in lieu of all taxes.
Thereafter, the Local Government Code took effect. Section 137 of the Code, in
relation to Section 151 thereof, grants provinces and other local government units
the power to impose local franchise tax on businesses enjoying a franchise. Invoking
its authority, the Province of Laguna, through its local legislative assembly, enacted a
provincial ordinance imposing a franchise tax upon all businesses enjoying a
franchise, which includes PLDT. In compliance with the ordinance, PLDT paid the
Province of Laguna its local franchise tax liability for the year 1998 in the amount of
Prior thereto, Congress enacted the Public Telecommunications Policy Act of the
Philippines. Then, the Department of Finance, thru its Bureau of Local Government
Finance (BLGF), issued a ruling to the effect that PLDT, among other
telecommunication companies, became exempt from local franchise tax. Accordingly,
PLDT shall be exempt from the payment of franchise and business taxes imposable
by LGUs under Sections 137 and 143, respectively of the Local Government Code,
upon the effectivity of RA 7925. However, PLDT shall be liable to pay the franchise
and business taxes on its gross receipts during the period that PLDT was not enjoying
the most favored clause provision of RA 7025.
PLDT then refused to pay the Province of Laguna its local franchise tax liability for the
following year and it even filed with the Office of the Provincial Treasurer a written
claim for refund of the amount it paid as local franchise tax for the previous year.
Issue: Does Section 23 of Rep. Act No. 7925 operate to exempt PLDT from payment
of franchise tax?

Held: No. In approving Section 23 of R.A. No. 7925, Congress intended it to operate
as a blanket tax exemption to all telecommunications entities. Applying the rule of
strict construction of laws granting tax exemptions and the rule that doubts should be
resolved in favor of municipal corporations in interpreting statutory provisions on
municipal taxing powers, we hold that section 23 of R.A. No. 7925 cannot be
considered as having amended petitioners franchise so as to entitle it to exemption
from the imposition of local franchise taxes.
The tax exemption must be expressed in the statute in clear language that leaves no
doubt of the intention of the legislature to grant such exemption. And, even if it is
granted, the exemption must be interpreted in strictissimi juris against the taxpayer
and liberally in favor of the taxing authority.
Mutatis mutandis also applies to this case: When exemption is claimed, it must be
shown indubitably to exist. At the outset, every presumption is against it. A wellfounded doubt is fatal to the claim. It is only when the terms of the concession are
too explicit to admit fairly of any other construction that the proposition can be

Taxation Case Digest: PLDT vs City of Davao,

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The
franchise tax was paid in lieu of all taxes on this franchise or earnings thereof
pursuant to RA 7082. The exemption from all taxes on this franchise or earnings
thereof was subsequently withdrawn by RA 7160 (LGC), which at the same time
gave local government units the power to tax businesses enjoying a franchise on the
basis of income received or earned by them within their territorial jurisdiction. The
LGC took effect on January 1, 1992.
The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part
provides: Notwithstanding any exemption granted by law or other special laws, there
is hereby imposed a tax on businesses enjoying a franchise, a rate of seventy-five
percent (75%) of one percent (1%) of the gross annual receipts for the preceding
calendar year based on the income receipts realized within the territorial jurisdiction
of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and Radio
Corporation (Globe) and Smart Information Technologies, Inc. (Smart) franchises
which contained in leiu of all taxes provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the
Philippines, Sec. 23 of which provides that any advantage, favor, privilege,
exemption, or immunity granted under existing franchises, or may hereafter be
granted, shall ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to the grantees of
such franchises. The law took effect on March 16, 1995.
In January 1999, when PLDT applied for a mayors permit to operate its Davao Metro
exchange, it was required to pay the local franchise tax which then had amounted to
P3,681,985.72. PLDT challenged the power of the city government to collect the local
franchise tax and demanded a refund of what had been paid as a local franchise tax
for the year 1997 and for the first to the third quarters of 1998.

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption
from payment of the local franchise tax in view of the grant of tax exemption to
Globe and Smart.
Petitioner contends that because their existing franchises contain in lieu of all taxes
clauses, the same grant of tax exemption must be deemed to have become ipso
facto part of its previously granted telecommunications franchise. But the rule is that
tax exemptions should be granted only by a clear and unequivocal provision of law
expressed in a language too plain to be mistaken and assuming for the nonce that
the charters of Globe and of Smart grant tax exemptions, then this runabout way of
granting tax exemption to PLDT is not a direct, clear and unequivocal way of
communicating the legislative intent.
Nor does the term exemption in Sec. 23 of RA 7925 mean tax exemption. The term
refers to exemption from regulations and requirements imposed by the National
Telecommunications Commission (NTC). For instance, RA 7925, Sec. 17 provides: The
Commission shall exempt any specific telecommunications service from its rate or
tariff regulations if the service has sufficient competition to ensure fair and
reasonable rates of tariffs. Another exemption granted by the law in line with its
policy of deregulation is the exemption from the requirement of securing permits
from the NTC every time a telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision of law on
the basis of language too plain to be mistaken.

CIR vs. Solid Bank

GRN 148191 November 25, 2003
Panganiban, J.;
Solid Bank declared gross receipts included the amount from passive income which
was already subjected to 20% final withholding tax (FWT). CTA affirmed that the 20%
FWT should not form part of its taxable gross receipts for purpose of computing the
gross receipts tax on such basis, Bank filed a request for refund. CTA ordered the
refund while CA held that indeed, the 20% FWT on a banks interest income does not
form part of the taxable gross receipts in computing the 5% GRT because the FWT
was not actually received by the bank, but was directly remitted to the government.
Whether or not the 20% FWT on a banks interest income forms part of the taxable
gross receipts in computing the 5% gross receipts tax.
In China Banking vs. CA, this Court ruled that the amount interest income withheld in
payment of 20% FWT forms part of the gross receipts in computing for the GRT on
A percentage tax is a national tax measured by a certain percentage of the gross
selling price or gross value in money of goods sold, bartered or imported; or of the
gross receipts or earnings derived by any person engaged in the sale of services. It is
not subject to withholding.
An income tax is national tax imposed on the net or the gross income realized in a

taxable year.
It is subject to withholding.
In a withholding tax system, the payee is the taxpayer, the person on whom tax is
reposed, the payer, a separate entity, acts as no more than an agent of the
government for the collection of taxes Possession is acquired by the payer as the
withholding agent of the government because the taxpayer ratifies the very act of
possession for the government. There is constructive receipt, of such income and is
included as part of the tax base.

Villanueva vs. City of Iloilo [December 28, 1968, L-26521]

Facts: On September 30, 1946 the municipal board of Iloilo City enacted


86. The Supreme Court, however, declared theordinance ultra vires. On January 15,
1960 the municipal board ofIloilo City, believing that with the passage of Republic


2264, otherwise known as the Local Autonomy Act, it had acquired the authority or
power to enact an ordinance similar to that previously declared by the Supreme Court
as ultra vires, enacted Ordinance 11 (eleven), series of 1960, imposing municipal

license tax on persons engaged in the business of operating tenement houses.

In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners
of five tenement houses, aggregately containing 43 apartments, while the other
appellees and the same Remedios S. Villanueva are owners of ten apartments. By
virtue of the ordinance in question, the appellant City collected from spouses Eusebio
Villanueva and Remedios S. Villanueva, for the years 1960-1964, the sum of
P5,824.30, and from the appellees Pio Sian Melliza, Teresita S. Topacio, and Remedios
S. Villanueva, for the years 1960-1964, the sum of P1,317.00.
On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an
amended complaint, respectively, against the City of Iloilo, praying that Ordinance
11, series of 1960, be declared "invalid for being beyond the powers of the Municipal

unconstitutional for being violative of the rule

as to uniformity of taxation and for depriving said plaintiffs of the equal protection
clause of the Constitution," and that the City be ordered to refund the amounts
Council of the City of Iloilo to enact, and

collected from them under the saidordinance. The lower court rendered judgment
declaring theordinance illegal.
(1) Whether or not the City of Iloilo is empowered by the Local Autonomy Act to
impose tenement taxes.

(2) Whether or not Ordinance 11, series of 1960, does violate the rule of uniformity of
(1) Yes. The lower court has interchangeably denominated the tax in question as a
tenement tax or an apartment tax. Called by either name, it is not among the
exceptions listed in Section 2 of the Local Autonomy Act. The

imposition by the

ordinance of a license tax onpersons engaged in the business of operating tenement

houses finds authority in Section 2 of the Local Autonomy Act which provides that
chartered cities have the authority to impose municipal licensetaxes or fees upon
persons engaged in any occupation or business, or exercising privileges within their
respective territories, and "otherwise to levy for public purposes, just and uniform
taxes, licenses, or fees."
(2) No. The ordinance is not violative of the rule of uniformity in taxation. The
Supreme Court has already ruled that tenement houses constitute a distinct class of
property. It has likewise ruled that "taxes are uniform and equal when imposed upon
all property of the same class or character within the taxing authority." The fact,
therefore, that the owners of other classes of buildings in the City ofIloilo do not pay
the taxes imposed by the ordinance in question is no argument at all against
uniformity and equality of the tax imposition. Neither is the rule of equality and
uniformity violated by the fact that tenement taxes are not imposed in other cities,
for the same rule does not require that taxes for the same purpose should be
imposed in different territorial subdivisions at the same time. So long as the burden
of the tax falls equally and impartially on all owners or operators of tenement houses
similarly classified or situated, equality and uniformity of taxation is accomplished.
Hence, the

judgment of the lower court is reversed. The ordinance in question is valid.

Bagatsing v. Ramirez
G.R. No. L-41631 (December 17, 1976)
The Municipal Board of Manila enacted Ordinance No. 7522, An Ordinance Regulating
the Operation of Public Markets and Prescribing Fees for the Rentals of Stalls and
Providing Penalties for Violation thereof and for other Purposes. Respondent were
seeking the declaration of nullity of the Ordinance for the reason that a) the
publication requirement under the Revised Charter of the City of Manila has not been
complied with, b) the Market Committee was not given any participation in the
enactment, c) Sec. 3(e) of the Anti-Graft and Corrupt Practices Act has been violated,

and d) the ordinance would violate P.D. 7 prescribing the collection of fees and
charges on livestock and animal products.
What law shall govern the publication of tax ordinance enacted by the Municipal
Board of Manila, the Revised City Charter or the Local Tax Code.
The fact that one is a special law and the other a general law creates the
presumption that the special law is to be considered an exception to the general. The
Revised Charter of Manila speaks of ordinance in general whereas the Local Tax
Code relates to ordinances levying or imposing taxes, fees or other charges in
particular. In regard therefore, the Local Tax Code controls.


GR No. 125704, August 28, 1998
294 SCRA 687
FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals
affirming the Court of Tax
Appeals decision ordering it to pay the amount of P110.7 M as excise tax liability for the
period from the 2nd
quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully
paid pursuant to
Sections 248 and 249 of the Tax Code of 1977. Philex protested the demand for payment
of the tax liabilities
stating that it has pending claims for VAT input credit/refund for the taxes it paid for the
years 1989 to 1991 in
the amount of P120 M plus interest. Therefore these claims for tax credit/refund should
be applied against the
tax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax
refund of the petitioner?
HELD: No. Philex's claim is an outright disregard of the basic principle in tax law that
taxes are the lifeblood of the

government and so should be collected without unnecessary hindrance. Evidently, to

countenance Philex's
whimsical reason would render ineffective our tax collection system. Too simplistic, it
finds no support in law or in
To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the
ground that it has a
pending tax claim for refund or credit against the government which has not yet been
granted.Taxes cannot be
subject to compensation for the simple reason that the government and the taxpayer are
not creditors and
debtors of each other. There is a material distinction between a tax and debt. Debts are
due to the Government
in its corporate capacity, while taxes are due to the Government in its sovereign capacity.
xxx There can be no
off-setting of taxes against the claims that the taxpayer may have against the government.
A person cannot
refuse to pay a tax on the ground that the government owes him an amount equal to or
greater than the tax
being collected. The collection of a tax cannot await the results of a lawsuit against the
Stateland Investment Corp vs. CIR
G.R. 171956

January 18, 2008

Sandoval-Guiterrez, J.:
Petitioner filed income tax return for 1997 having an accumulated tax credits
of P23,632,959.05 from which 1997 tax was deducted, leaving P13,929,793.51
unutilized. Petitioner opted to apply this amount as tax credit to the succeeding
taxable year 1998. For 1998, petitioner still had an unutilized tax credit after
deducting 1998 tax, thus filed for a refund. CTA ruled that failure of petitioner to
present its 1999 corporate annual income tax return shows that it incurred a net loss
thus no tax liability.
Whether or not petitioner is entitles to the refund representing the excess
creditable withholding tax for 1997.

A corporation entitled to a refund of excess creditable withholding tax may
either obtain the refund or credit the amount to the succeeding taxable year. Sec 76
states In case the corporation is entitled to a refund of the excess estimated
quarterly taxes paid, the refundable amount shown on its final adjustment return may
be credited against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years.
Petitioner filed with BIR its claim for the refund within the two-year statutory
limitation. Both CTA and CA failed to consider that petitioners intention was to apply
the tax credit to 1997 to its income tax due for 1998. It was not necessary for
petitioner to file it ITR for 1999, thus requiring ITR of the succeeding year be
presented has no basis in law.
This Court held that if a tax payer suffered a net loss in the succeeding year,
incurring no tax liability to which a previous years tax credit could be applied there is
no reason for BIR to withhold the refund that rightfully belongs to the tax payer.

People v. Vera Reyes, 67 Phil 190

Subject: Labor Standards
Doctrine: Police Power (Basis of States power to intervene)
The defendant was charged with a violation of Act No. 2549, as amended by Acts
Nos. 3085 and 3958 The information alleged that from September 9 to October 28,
1936, and for the some time after, the accused, in his capacity as president and
general manager of the Consolidated Mines, having engaged the services of Severa
Velasco de Vera as stenographer, at an agreed salary of P35 a month willfully and
illegally refused to pay the salary of said stenographer corresponding to the abovementioned period of time, which was long due and payable, in spite of her repeated
The accused interposed a demurrer on the ground that the facts alleged in the
information do not constitute any offense, and that even if they did, the laws
penalizing it are unconstitutional.
After the hearing, the court sustained the demurrer, declaring unconstitutional the

last part of section 1 of Act No. 2549 as last amended by Act No. 3958, which
considers as an offense the facts alleged in the information, for the reason that it
violates the constitutional prohibition against imprisonment for debt, and dismissed
the case, with costs de oficio.
In this appeal the Solicitor-General contends that the court erred in declaring Act No.
3958 unconstitutional.
ISSUE: Whether the said constitutional provision is unconstitutional.
No. The last part of section 1 considers as illegal the refusal of an employer to pay,
when he can do so, the salaries of his employees or laborers on the fifteenth or last
day of every month or on Saturday of every week, with only two days extension, and
the nonpayment of the salary within the periods specified is considered as a violation
of the law.
The same Act exempts from criminal responsibility the employer who, having failed
to pay the salary, should prove satisfactorily that it was impossible to make such
The court held that this provision is null because it violates the provision of section 1
(12), Article III, of the Constitution, which provides that no person shall be imprisoned
for debt.
We do not believe that this constitutional provision has been correctly applied in this
case. A close perusal of the last part of section 1 of Act No. 2549, as amended by
section 1 of Act No. 3958, will show that its language refers only to the employer
who, being able to make payment, shall abstain or refuse to do so, without
justification and to the prejudice of the laborer or employee. An employer so
circumstanced is not unlike a person who defrauds another, by refusing to pay his
just debt. In both cases the deceit or fraud is the essential element constituting the
offense. The first case is a violation of Act No. 3958, and the second isestafa
punished by the Revised Penal Code. In either case the offender cannot certainly
invoke the constitutional prohibition against imprisonment for debt.


The Government of Japan and the Government of the Philippines, through their
respective representatives, namely, Mr. Yoshihisa Ara, Ambassador Extraordinary and
Plenipotentiary of Japan to the Republic of the Philippines, and then Secretary of
Foreign Affairs Domingo L. Siazon, have reached an understanding concerning

Japanese loans to be extended to the Philippines. These loans were aimed at

promoting our countrys economic stabilization and development efforts.
The assailed resolution recommended the award to private respondent China Road &
Bridge Corporation of the contract for the implementation of civil works for Contract
Package No. I (CP I), which consists of the improvement/rehabilitation of the San
Andres (Codon)-Virac-Jct. Bago-Viga road, with the length of 79.818 kilometers, in the
island province of Catanduanes.The DPWH caused the publication of the Invitation to
Prequalify and to Bid for the implementation of the CP I project, in two leading
national newspapers, namely, the Manila Times and Manila Standard on November 22
and 29, and December 5, 2002.
A total of twenty-three (23) foreign and local contractors responded to the invitation
by submitting their accomplished prequalification documents on January 23, 2003. In
accordance with the established prequalification criteria, eight contractors were
evaluated or considered eligible to bid as concurred by the JBIC. Prior to the opening
of the respective bid proposals, it was announced that the Approved Budget for the
Contract (ABC) was in the amount of P738,710,563.67.
The bid goes to private respondent China Road & Bridge Corporation was corrected
from the original P993,183,904.98 (with variance of 34.45% from the ABC) to
P952,564,821.71 (with variance of 28.95% from the ABC) based on their letter
clarification dated April 21, 2004.
The petitioners anchor the instant petition on the contention that the award of the
contract to private respondent China Road & Bridge Corporation violates RA 9184,
particularly Section 31 thereof which reads:
SEC. 31. Ceiling for Bid Prices. The ABC shall be the upper limit or ceiling for the Bid
prices. Bid prices that exceed this ceiling shall be disqualified outright from further
participating in the bidding. There shall be no lower limit to the amount of the award.
The petitioners insist that Loan Agreement is neither an international nor an
executive agreement that would bar the application of RA 9184. They point out that
to be considered a treaty, an international or an executive agreement, the parties
must be two sovereigns or States whereas in the case of Loan Agreement No. PHP204, the parties are the Philippine Government and the JBIC, a banking agency of
Japan, which has a separate juridical personality from the Japanese Government.
The respondents however contend that foreign loan agreements, including Loan
Agreement No. PH-P204, as executive agreements and, as such, should be observed
pursuant to the fundamental principle in international law of pacta sunt servanda.
The Constitution, the public respondents emphasize, recognizes the enforceability of
executive agreements in the same way that it recognizes generally accepted
principles of international law as forming part of the law of the land. 34 This
recognition allegedly buttresses the binding effect of executive agreements to which
the Philippine Government is a signatory. It is pointed out by the public respondents
that executive agreements are essentially contracts governing the rights and
obligations of the parties. A contract, being the law between the parties, must be
faithfully adhered to by them. Guided by the fundamental rule of pacta sunt
servanda, the Philippine Government bound itself to perform in good faith its duties
and obligations under Loan Agreement.

Issue :
Whether or not the the loan agreement violates RA 9184.
The court ruled in favor of the respondents.
Significantly, an exchange of notes is considered a form of an executive agreement,
which becomes binding through executive action without the need of a vote by the
Senate or Congress. executive agreements, They sometimes take the form of
exchange of notes and at other times that of more formal documents denominated
agreements or protocols.
The fundamental principle of international law of pacta sunt servanda, which is, in
fact, embodied in Section 4 of RA 9184 as it provides that [a]ny treaty or
international or executive agreement affecting the subject matter of this Act to which
the Philippine government is a signatory shall be observed, the DPWH, as the
executing agency of the projects financed by Loan Agreement No. PH-P204, rightfully
awarded the contract for the implementation of civil works for the CP I project to
private respondent China Road & Bridge Corporation.


197 SCRA 771
GR No. 88291 May 31, 1991
"A taxpayer may question the legality of a law or regulation when it involves illegal
expenditure of public money."
FACTS: Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and
resolutions of respondents Executive Secretary, Secretary of Finance, Commissioner of
Internal Revenue, Commissioner of Customs and the Fiscal Incentives Review Board
FIRB for exempting the National Power Corporation (NPC) from indirect tax and duties.
RA 358, RA 6395 and PD 380 expressly grant NPC exemptions from all taxes whether
direct or indirect. In 1984, however, PD 1931 and EO 93 withdrew all tax exemptions
granted to all GOCCs including the NPC but granted the President and/or the Secretary of
Finance by recommendation of the FIRB the power to restore certain tax exemptions.
Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty exemption
privileges of the NPC. The actions of the respondents were thus questioned by the
petitioner by this petition for certiorari, prohibition and mandamus with prayer for a writ
of preliminary injunction and/or restraining order. To which public respondents argued,
among others, that petitioner does not have the standing to challenge the questioned
orders and resolution because he was not in any way affected by such grant of tax
ISSUE: Has a taxpayer the capacity to question the legality of the resolution issued by the
FIRB restoring the tax exemptions?
HELD: Yes. In this petition it is alleged that petitioner is "instituting this suit in his

capacity as a taxpayer and a duly-elected Senator of the Philippines." Public respondent

argues that petitioner must show that he has sustained direct injury as a result of the
action and that it is not sufficient for him to have a mere general interest common to all
members of the public. The Court however agrees with the petitioner that as a taxpayer he
may file the instant petition following the ruling in Lozada when it involves illegal
expenditure of public money. The petition questions the legality of the tax refund to NPC
by way of tax credit certificates and the use of said assigned tax credits by respondent oil
companies to pay for their tax and duty liabilities to the BIR and Bureau of Customs.
Case Digest: Chavez v. National Housing Authority

On August 5, 2004, former Solicitor General Francisco Chavez, filed an instant

petition raising constitutional issues on the JVA entered by National Housing Authority
and R-II Builders, Inc.

On March 1, 1988, then-President Cory Aquino issued Memorandum order No. (MO)
161 approving and directing implementation of the Comprehensive and Integrated
Metropolitan Manila Waste Management Plan. During this time, Smokey Mountain, a
wasteland in Tondo, Manila, are being made residence of many Filipinos living in a
subhuman state.

As presented in MO 161, NHA prepared feasibility studies to turn the dumpsite into
low-cost housing project, thus, Smokey Mountain Development and Reclamation
Project (SMDRP), came into place. RA 6957 (Build-Operate-Transfer Law) was passed
on July 1990 declaring the importance of private sectors as contractors in
government projects. Thereafter, Aquino proclaimed MO 415 applying RA 6957 to
SMDRP, among others. The same MO also established EXECOM and TECHCOM in the
execution and evaluation of the plan, respectively, to be assisted by the Public
Estates Authority (PEA).

Notices of public bidding to become NHAs venture partner for SMDRP were published
in newspapers in 1992, from which R-II Builders, Inc. (RBI) won the bidding process.
Then-President Ramos authorized NHA to enter into a Joint Venture Agreement with

Under the JVA, the project involves the clearing of Smokey Mountain for eventual
development into a low cost housing complex and industrial/commercial site. RBI is
expected to fully finance the development of Smokey Mountain and reclaim 40
hectares of the land at the Manila Bay Area. The latter together with the commercial
area to be built on Smokey Mountain will be owned by RBI as enabling components.
If the project is revoked or terminated by the Government through no fault of RBI or
by mutual agreement, the Government shall compensate RBI for its actual expenses
incurred in the Project plus a reasonable rate of return not exceeding that stated in
the feasibility study and in the contract as of the date of such revocation,
cancellation, or termination on a schedule to be agreed upon by both parties.

To summarize, the SMDRP shall consist of Phase I and Phase II. Phase I of the project
involves clearing, levelling-off the dumpsite, and construction of temporary housing
units for the current residents on the cleared and levelled site. Phase II involves the
construction of a fenced incineration area for the on-site disposal of the garbage at
the dumpsite.

Due to the recommendations done by the DENR after evaluations done, the JVA was
amended and restated (now ARJVA) to accommodate the design changes and
additional work to be done to successfully implement the project. The original 3,500
units of temporary housing were decreased to 2,992. The reclaimed land as enabling
component was increased from 40 hectares to 79 hectares, which was supported by
the issuance of Proclamation No. 465 by President Ramos. The revision also provided
for the 119-hectare land as an enabling component for Phase II of the project.

Subsequently, the Clean Air Act was passed by the legislature which made the
establishment of an incinerator illegal, making the off-site dumpsite at Smokey
Mountain necessary.

On August 1, 1998, the project was suspended, to be later

reconstituted by President Estrada in MO No. 33.

On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement
whereby both parties agreed to terminate the JVA and subsequent agreements.
During this time, NHA reported that 34 temporary housing structures and 21
permanent housing structures had been turned over by RBI.


Whether respondents NHA and RBI have been granted the power and

authority to reclaim lands of the public domain as this power is vested exclusively
in PEA as claimed by petitioner

Whether respondents NHA and RBI were given the power and authority by

DENR to reclaim foreshore and submerged lands

Whether respondent RBI can acquire reclaimed foreshore and submerged

lands considered as alienable and outside the commerce of man

Whether respondent RBI can acquire reclaimed lands when there was no

declaration that said lands are no longer needed for public use

Whether there is a law authorizing sale of reclaimed lands

Whether the transfer of reclaimed lands to RBI was done by public bidding

Whether RBI, being a private corporation, is barred by the Constitution to

acquire lands of public domain

Whether respondents can be compelled to disclose all information related to


Whether the operative fact doctrine applies to the instant position


Executive Order 525 reads that the PEA shall be primarily responsible for

integrating, directing, and coordinating all reclamation projects for and on behalf
of the National Government. This does not mean that it shall be responsible for
all. The requisites for a valid and legal reclamation project are approval by the
President (which were provided for by MOs), favourable recommendation of PEA
(which were seen as a part of its recommendations to the EXECOM), and
undertaken either by PEA or entity under contract of PEA or by the National
Government Agency (NHA is a government agency whose authority to reclaim
lands under consultation with PEA is derived under PD 727 and RA 7279).

Notwithstanding the need for DENR permission, the DENR is deemed to have

granted the authority to reclaim in the Smokey Mountain Project for the DENR is

one of the members of the EXECOM which provides reviews for the project. ECCs
and Special Patent Orders were given by the DENR which are exercises of its
power of supervision over the project. Furthermore, it was the President via the
abovementioned MOs that originally authorized the reclamation. It must be noted
that the reclamation of lands of public domain is reposed first in the Philippine

The reclaimed lands were classified alienable and disposable via MO 415

issued by President Aquino and Proclamation Nos. 39 and 465 by President


Despite not having an explicit declaration, the lands have been deemed to be

no longer needed for public use as stated in Proclamation No. 39 that these are to
be disposed to qualified beneficiaries. Furthermore, these lands have already
been necessarily reclassified as alienable and disposable lands under the BOT law.

Letter I of Sec. 6 of PD 757 clearly states that the NHA can acquire property

rights and interests and encumber or otherwise dispose of them as it may deem

There is no doubt that respondent NHA conducted a public bidding of the right

to become its joint venture partner in the Smokey Mountain Project. It was noted
that notices were published in national newspapers. The bidding proper was done
by the Bids and Awards Committee on May 18, 1992.

RA 6957 as amended by RA 7718 explicitly states that a contractor can be

paid a portion as percentage of the reclaimed land subject to the constitutional

requirement that only Filipino citizens or corporation with at least 60% Filipino
equity can acquire the same. In addition, when the lands were transferred to the
NHA, these were considered Patrimonial lands of the state, by which it has the
power to sell the same to any qualified person.

This relief must be granted. It is the right of the Filipino people to information

on matters of public concerned as stated in Article II, Sec. 28, and Article III, Sec.
7 of the 1987 Constitution.

When the petitioner filed the case, the JVA had already been terminated by

virtue of MOA between RBI and NHA. The properties and rights in question after
the passage of around 10 years from the start of the projects implementation

cannot be disturbed or questioned. The petitioner, being the Solicitor General at

the time SMDRP was formulated, had ample opportunity to question the said
project, but did not do so. The moment to challenge has passed.


GR No. 137377| J. Puno

CIR assails the CA decision which affirmed CTA, ordering CIR to desist from collecting
the 1985 deficiency income, branch profit remittance and contractors taxes from
Marubeni Corp after finding the latter to have properly availed of the tax amnesty
under EO 41 & 64, as amended.
Marubeni, a Japanese corporation, engaged in general import and export trading,
financing and construction, is duly registered in the Philippines with Manila branch
office. CIR examined the Manila branchs books of accounts for fiscal year ending
March 1985, and found that respondent had undeclared income from contracts with
NDC and Philphos for construction of a wharf/port complex and ammonia storage
complex respectively.
On August 27, 1986, Marubeni received a letter from CIR assessing it for several
deficiency taxes. CIR claims that the income respondent derived were income from
Philippine sources, hence subject to internal revenue taxes. On Sept 1986,
respondent filed 2 petitions for review with CTA: the first, questioned the deficiency
income, branch profit remittance and contractors tax assessments and second
questioned the deficiency commercial brokers assessment.
On Aug 2, 1986, EO 41 declared a tax amnesty for unpaid income taxes for 1981-85,
and that taxpayers who wished to avail this should on or before Oct 31, 1986.
Marubeni filed its tax amnesty return on Oct 30, 1986.
On Nov 17, 1986, EO 64 expanded EO 41s scope to include estate and donors taxes
under Title 3 and business tax under Chap 2, Title 5 of NIRC, extended the period of
availment to Dec 15, 1986 and stated those who already availed amnesty under EO
41 should file an amended return to avail of the new benefits. Marubeni filed a
supplemental tax amnesty return on Dec 15, 1986.
CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled
the deficiency taxes. CA affirmed on appeal.


W/N Marubeni is exempted from paying tax

1. On date of effectivity
CIR claims Marubeni is disqualified from the tax amnesty because it falls under the
exception in Sec 4b of EO 41:

Sec. 4. Exceptions.The following taxpayers may not avail themselves of the amnesty
herein granted: xxx b) Those with income tax cases already filed in Court as of the
effectivity hereof;
Petitioner argues that at the time respondent filed for income tax amnesty on Oct 30,
1986, a case had already been filed and was pending before the CTA and Marubeni
therefore fell under the exception. However, the point of reference is the date of
effectivity of EO 41 and that the filing of income tax cases must have been made
before and as of its effectivity.
EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was
filed with CTA on Sept 26, 1986. When EO 41 became effective, the case had not yet
been filed. Marubeni does not fall in the exception and is thus, not disqualified from
availing of the amnesty under EO 41 for taxes on income and branch profit
The difficulty herein is with respect to the contractors tax assessment (business tax)
and respondents availment of the amnesty under EO 64, which expanded EO 41s
coverage. When EO 64 took effect on Nov 17, 1986, it did not provide for exceptions
to the coverage of the amnesty for business, estate and donors taxes. Instead,
Section 8 said EO provided that:

Section 8. The provisions of Executive Orders Nos. 41 and 54 which are not contrary to
or inconsistent with this amendatory Executive Order shall remain in full force and
Due to the EO 64 amendment, Sec 4b cannot be construed to refer to EO 41 and its
date of effectivity. The general rule is that an amendatory act operates prospectively.
It may not be given a retroactive effect unless it is so provided expressly or by
necessary implication and no vested right or obligations of contract are thereby
2. On situs of taxation
Marubeni contends that assuming it did not validly avail of the amnesty, it is still not
liable for the deficiency tax because the income from the projects came from the
Offshore Portion as opposed to Onshore Portion. It claims all materials and
equipment in the contract under the Offshore Portion were manufactured
and completed in Japan, not in the Philippines, and are therefore not
subject to Philippine taxes.

(BG: Marubeni won in the public bidding for projects with government corporations
NDC and Philphos. In the contracts, the prices were broken down into a Japanese Yen
Portion (I and II) and Philippine Pesos Portion and financed either by OECF or by
suppliers credit. The Japanese Yen Portion I corresponds to the Foreign Offshore
Portion, while Japanese Yen Portion II and the Philippine Pesos Portion correspond to
the Philippine Onshore Portion. Marubeni has already paid the Onshore Portion, a fact
that CIR does not deny.)
CIR argues that since the two agreements are turn-key, they call for the supply of
both materials and services to the client, they are contracts for a piece of work and
are indivisible. The situs of the two projects is in the Philippines, and the materials
provided and services rendered were all done and completed within the territorial
jurisdiction of the Philippines. Accordingly, respondents entire receipts from the
contracts, including its receipts from the Offshore Portion, constitute income from
Philippine sources. The total gross receipts covering both labor and materials should
be subjected to contractors tax (a tax on the exercise of a privilege of selling
services or labor rather than a sale on products).
Marubeni, however, was able to sufficiently prove in trial that not all its work was
performed in the Philippines because some of them were completed in Japan (and in
fact subcontracted) in accordance with the provisions of the contracts. All services for
the design, fabrication, engineering and manufacture of the materials and equipment
under Japanese Yen Portion I were made and completed in Japan. These services
were rendered outside Philippines taxing jurisdiction and are therefore not
subject to contractors tax.Petition denied.