TAX REVIEW CASES

CIR vs. CA,

CTA

and

xerox copy of RMC 37-93. CIR assessed

FORTUNE

Fortune

Tobacco

for ad

valorem tax

deficiency amounting to P9,598,334.00.

TOBACCO CORP.
G.R. No. 119761; August 29, 1996

Fortune Tobacco filed a petition for

By: Roman Almalbis

review with the CTA.

Facts: Fortune

Tobacco

Corporation

CTA upheld the

position of Fortune. CA affirmed.

("Fortune Tobacco"), engaged in the

manufacture

of

cigarettes,
"Hope,"

different

brands

registered

and

"More"

of

"Champion,"
cigarettes.

BIR

Issue: WON it was necessary for BIR to

follow the legal requirements when it
issued its RMC

classified them as foreign brands since

they were listed in the World Tobacco
Directory

as

belonging

to

foreign

companies. However, Fortune changed

the

names

of

'Hope'

to

'Hope

Luxury' and 'More' to 'Premium More,'

thereby removing the said brands from

Held. YES. CIR may not disregard legal

requirements in the exercise of its quasilegislative

A 45% Ad Valorem taxes were imposed

on these brands. Then Republic Act
("RA") No. 7654 was enacted 55% for
while

45%

for

foreign

locally

brand

manufactured

brands. 2 days before the effectivity of

RA

7654,

Revenue

Memorandum

Circular No. 37-93 ("RMC 37-93"), was

issued by the BIR saying since there is
no showing who the real owner/s are of
Champion, Hope and More, it follows
that

the same

shall

be

considered

locally manufactured foreign brand for

purposes

of

valorem tax -

determining
55%.

BIR

the ad
sent via

telefax a copy of RMC 37-93 to Fortune

Tobacco
particular.

addressed
Then

to

publication,

filing, and prior hearing.

When an administrative rule is merely
interpretative in nature, its applicability
issuance

manufactured

which

needs nothing further than its bare

the foreign brand category.

locally

powers

no

Fortune

one

in

Tobacco

received, by ordinary mail, a certified

for

it

gives

no

real

consequence more than what the law

itself has already prescribed. BUT when,
upon the other hand, the administrative
rule goes beyond merely providing for
the means that can facilitate or render
least cumbersome the implementation
of the law but substantially increases
the burden of those governed, the
agency must accord, at least to those
directly affected, a chance to be heard,
before that new issuance is given the
force and effect of law.
RMC 37-93 cannot be viewed simply as
construing

Section

142(c)(1)

of

the

NIRC, as amended, but has, in fact and

most importantly, been made in order to
place "Hope Luxury," "Premium More"
and "Champion" within the classification
of

locally

manufactured

cigarettes

bearing foreign brands and to thereby

1

have them covered by RA 7654 which

Issue:

subjects mentioned brands to 55% the

BIR not simply interpreted the law;
verily, it legislated under its quasilegislative

authority.

observance

of

the

The

due

requirements

of

notice, of hearing, and of publication

WON R can claim 20% sales

discount

as

tax

credit

instead

of

deduction from gross income or gross

sales.
Held:

should not have been then ignored.

R can claim 20% sales discount as

tax credit. The 20% sales discount being
privilege discount under the law shall be
treated as a reduction from any tax
liability.
The privilege enjoyed by senior

CIR

vs.

Central

Luzon

Drug

state,

Corporation

but

rather

from

the

private

establishment. Accordingly tax credit

By: Joefrey Uy

granted to these establishments can be

deemed as their just compensation for

Facts:
R

citizens does not come directly from the

is

domestic

corporation

operating under the name and style

private property taken by the state for

public use.
******JC*******

"Mercury Drug".
On 1996, R granted 20% sales

ANTERO M. SISON, JR. vs. RUBEN B.

discount to qualified senior citizens in

ANCHETA,

Acting

Commissioner,

their purchases of medicines pursuant

Bureau of Internal Revenue

to RA 7432. Sales discount totaled to

G.R. No. L-59431 July 25, 1984

904, 769. 00 pesos.

On April 15, 1997, R filed an
annual ITR for taxable year of 1996
declaring that it incurred net losses from
its operations.
R

Facts:
Petitioner Antero Sison Jr. challenged the
constitutionality of Section 1 of Batas

filed

refund/credit

By: Red Convocar

with

claim
P

from

for

tax

the

20%

Pambansa Blg. 135. It amended Section

21

of

the

National Internal

discount however the latter denied the

Revenue Code of 1977, which provides

claim. CTA ordered P to issue tax credit

for rates of tax on citizens or residents

certificate in favor of R. CA affirmed in

on (a) taxable compensation income, (b)

toto.

taxable net income, (c) royalties, prizes,

and other winnings, (d) interest from
2

bank deposits and yield or any other

that due process and equal protection

monetary

clauses are invoked, the presumption of

benefit

from

deposit

substitutes and from trust fund and

validity must prevail.

similar arrangements, (e) dividends and

share of individual partner in the net

On due process - It is undoubted that it

profits

may be invoked where a taxing statute

of

taxable

partnership,

(f)

adjusted gross income.

is so arbitrary that it finds no support in

the Constitution. An obvious example is

Petitioner as taxpayer alleged that "he

where it can be shown to amount to the

would be unduly discriminated against

confiscation of property. That would be a

by the imposition of higher rates of tax

clear abuse of power.

upon

his

income

arising

from

the

exercise of his profession vis-a-vis those

On equal protection - it suffices that the

which are imposed upon fixed income or

laws operate equally and uniformly on

salaried

He

all persons under similar circumstances,

as

both in the privileges conferred and the

individual

characterizes

the

taxpayers."
above

section

arbitrary amounting to class legislation,

liabilities imposed.

oppressive and capricious in character.

For petitioner, therefore, there is a

On the concept of uniformity - this

transgression

requirement

of

both

the

equal

is

met

when

the

tax

protection and due process clauses of

operates with the same force and effect

the Constitution as well as of the rule

in every place where the subject may be

requiring uniformity in taxation.

found. The rule of uniformity does not

call for perfect uniformity or perfect

The

OSG

prayed

for

dismissal

of

the petition due to lack of merit.

equality,

because

this

is

hardly

unattainable. Equality and uniformity in

taxation means that all taxable articles

Issue:

or kinds of property of the same class

Whether the imposition of a higher tax

shall be taxed the same rate.

rate on taxable net income derived from

business

or

profession

than

on

compensation is constitutionally infirm.

What misled petitioner is his failure to

take into consideration the distinction
between a tax rate and a tax base.

Held:

There is no legal objection to a broader

No.

tax

The petitioner failed to prove that the

eliminating all deductible items and at

statute ran counter to the Constitution.

the same time reducing the applicable

He used arbitrariness as basis without a

tax rate.

factual foundation.

into different categories.

A mere allegation

base

or

taxable

income

by

Taxpayers may be classified

does not suffice. Absent such a showing

3

In the case of the gross income taxation

FACTS:

embodied in Batas Pambansa Blg. 135,

Petitioner,

the, discernible basis of classification is

the susceptibility of the income to the
application

of

generalized

rules

removing all deductible items for all

taxpayers within the class and fixing a
set of reduced tax rates to be applied to
all

of

them.

Taxpayers

who

are

recipients of compensation income are

set

apart

as

class.

As

there

is

practically no overhead expense, these

taxpayers are not entitled to make
deductions for income tax purposes
because they are in the same situation

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 income tax of

P5,016,954.00 by applying PBCom's tax
credit memos for P3,401,701.00 and
P1,615,253.00,

respectively.

Subsequently, PBCom suffered net loss

of P25,317,228.00, thereby showing no
income tax liability in its Annual Income
Tax

more or less.

Philippine

Returns

for

the

year-ended

December 31, 1985. For the succeeding

On the other hand, in the case of
professionals in the practice of their
calling and businessmen, there is no
uniformity in the costs or expenses
necessary to produce their income. It
would not be just then to disregard the
disparities by giving all of them zero
deduction and indiscriminately impose
on all alike the same tax rates on the

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

basis of gross income.

requested the Commissioner of Internal

There is ample justification then for the
Batasang Pambansa to adopt the gross
system

of

income

taxation

to

compensation income, while continuing

Revenue, among others, for a tax credit

of

professional

and

business

income.
Philippine Bank of Communications
v.CIR

representing

the

overpayment of taxes in the first and

second quarters of 1985.

the system of net income taxation as

regards

P5,016,954.00

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

By: PJ Doronila

of

the

respondent

Commissioner

of
4

Internal Revenue, petitioner instituted a

quarterly income tax payments, such

Petition for Review on November 18,

circular created a clear inconsistency

1988 before the Court of Tax Appeals

with the provision of Sec. 230 of 1977

(CTA). The petition was docketed as CTA

NIRC. In so doing, the BIR did not simply

Case No. 4309 entitled: "Philippine Bank

interpret the law; rather it legislated

of Communications vs. Commissioner of

guidelines

Internal Revenue." The CTA decided in

passed by Congress.

contrary

to

the

statute

favor of the BIR on the ground that the

It bears repeating that Revenue

Petition was filed out of time as the

same was filed beyond the two-year
reglementary

period.

motion

for

Reconsideration was denied and the

appeal to Court of Appeals was likewise
denied. Thus, this appeal to Supreme

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

Court.

widely accepted that the interpretation

Issues:

placed upon a statute by the executive

officers, whose duty is to enforce it, is

a) Whether or not Revenue Regulations

No.

7-85

which

alters

the

reglementary period from two (2)

years to ten (10) years is valid.

entitled to great respect by the courts.

Nevertheless, such interpretation is not
conclusive

and

will

be

ignored

if

judicially found to be erroneous. Thus,

b) Whether or not the petition for tax

courts

will

not

countenance

administrative issuances that override,

refund had already prescribed.

instead of remaining consistent and in

Ruling:

harmony with, the law they seek to

apply and implement.

RR 7-85 altering the 2-year prescriptive

period

imposed

by

law

to

10-year

prescriptive period is invalid.

Further, fundamental is the rule that

the State cannot be put in estoppel by
the mistakes or errors of its officials or

Administrative
merely

issuances

interpretations

are

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
Internal

the

Acting

Revenue

Commissioner
issued

RMC

of

7-85,

changing the prescriptive period of two

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

statute.

Hence,

his

interpretation could not be given weight

years to ten years on claims of excess

5

for to do so would, in effect, amend the

the publication requirement under the

statute.

Revised Charter of the City of Manila has

b. By implication of the above, claim

not been complied with.

for refund had already prescribed.

Since the petition had been filed
beyond

the

prescriptive

period,

the

CFI: declared the Ordinance a

nullity on the primary ground of noncompliance with the requirement of

same has already prescribed. The fact

publication

that the final adjusted return show an

Charter.

under

the

Revised

City

excess tax credit does not automatically

Petitioners

entitle taxpayer claim for refund without

for

Reconsideration stressed: (a) that only a

any express intent.

WHEREFORE,

Motion

the petition

is

hereby

DENIED. The decision of the Court of

Appeals appealed from is AFFIRMED,
with COSTS against the petitioner.

post-publication is required by the Local

Tax Code; and (b) private respondents
failed

to

exhaust

all

administrative

remedies by filing directly with the CFI.

MR was denied.

*****Rommel******

Hence, this petition for review on

BAGATSING VS RAMIREZ

certiorari.

G.R. No. L-41631 December 17, 1976

(NOTE: The Revised City Charter

(R.A.

By: Ace Macalalag

409,

as

amended)

publication of the
before

FACTS:

its

requires

ordinance

enactment

and

after

its

approval;
In 1974, the Municipal Board of
Manila enacted Ordinance No. 7522, "an

the Local Tax Code (P.D. No. 231)

only requires publication after approval)

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." The petitioner City
Mayor, Ramon D. Bagatsing, approved
the ordinance on June 15, 1974.
In 1975, respondent Federation of
Manila Market Vendors, Inc. commenced
a civil case before the CFI of Manila
presided over by respondent Judge,

ISSUE:
1. What

law

shall

govern

the

publication of a tax ordinance

enacted by the Municipal Board of
Manila: Revised City Charter or
Local Tax Code?
2. Was there failure to exhaust all
administrative remedies?
HELD:

seeking the declaration of nullity of the

subject Ordinance for the reason that:

1. LOCAL TAX CODE governs.

6

While the Revised Charter of the

general statute treats in particular. This

of

publication

is the circumstance obtaining in the

before the enactment of the ordinance

case at bar. Section 17 of the Revised

and after the approval thereof in two

Charter of the City of Manila speaks of

daily newspapers of general circulation

"ordinance" in general, i.e., irrespective

in the city, the Local Tax Code only

of

prescribes

City

Manila

requires

and

scope

thereof,

the

whereas, Section 43 of the Local Tax

levying

or

Code relates to "ordinances levying or

imposing taxes, fees or other charges"

imposing taxes, fees or other charges"

either in a newspaper or publication

in particular. In regard, therefore, to

widely circulated within the jurisdiction

ordinances

of the local government or by posting

Charter of the City of Manila is doubtless

the ordinance in the local legislative hall

dominant,

or

other

loses its continuity when it approaches

conspicuous places within the territorial

the realm of "ordinances levying or

jurisdiction of the local government.

imposing taxes, fees or other charges"

Petitioners' compliance with the Local

in particular. There, the Local Tax Code

Tax Code rather than with the Revised

controls. Here, as always, a general

Charter

provision must give way to a particular

of

"ordinances

premises

of

publication

nature

after

approval

for

the

and

the

in

City

two

spawned

this

litigation.

provision.

in

general,

but,

that

Special

the

Revised

dominant

provision

force

governs.

This is especially true where the law

There is no question that the Revised
Charter of the City of Manila is a special
act since it relates only to the City of
Manila, whereas the Local Tax Code is a
general

law

because

it

applies

universally to all local governments.

And the rule commonly said is
that a prior special law is not ordinarily
repealed by a subsequent general law.
The fact that one is special and the
other general creates a presumption
that the special is to be considered as
remaining an exception of the general,
one as a general law of the land, the
other as the law of a particular case.
However, the rule readily yields to
a situation where the special statute
refers to a subject in general, which the

containing the particular provision was

enacted later than the one containing
the general provision. The City Charter
of Manila was promulgated on June 18,
1949 as against the Local Tax Code
which was decreed on June 1, 1973.
2.

The principle of exhaustion of

administrative

remedies

is

strongly

asserted by petitioners as having been

violated

by

private

respondent

in

bringing a direct suit in court. This is

because Section 47 of the Local Tax
Code provides that any question or
issue raised against the legality of any
tax ordinance, or portion thereof, shall
be referred for opinion to the city fiscal
in the case of tax ordinance of a city.
The

opinion

of

the

city

fiscal

is
7

appealable to the Secretary of Justice,

corporation demanding that the latter

whose

and

pay the assessed franchise tax due, plus

executory unless contested before a

surcharge and interest. It alleged that

competent court within thirty (30) days.

NAPOCORs exemption from local taxes

But, the petition below plainly shows

has already been withdrawn by the

that

Local

decision

the

shall

controversy

be

final

between

the

Government

Code.

NAPOCOR

parties is deeply rooted in a pure

submitted that it is not liable to pay an

question of law: whether it is

the

annual

franchise

because the citys

Revised Charter of the City of Manila or

taxing

power

limited

the Local Tax Code that should govern

entities that are engaged in trade or

the publication of the tax ordinance. In

occupation

for

other words, the dispute is sharply

NAPOCOR

Charter,

focused

exercise of police power, should prevail

on

the

applicability

of

the

Revised City Charter or the Local Tax

is

profit,

over

to

and
being

private

that
a

the

the
valid
LGC.

Code on the point at issue, and not on

the legality of the imposition of the tax.

Issue: Whether NAPOCOR is liable to

Exhaustion of administrative remedies

pay annual franchise tax to the City of

before resort to judicial bodies is not an

Cabanatuan

absolute rule. It admits of exceptions.

Where the question litigated upon is

Held: Yes. The power to tax is no longer

purely a legal one, the rule does not

vested exclusively on Congress; local

apply.

legislative

The

principle

may

also

be

bodies

are

now

disregarded when it does not provide a

given direct authority tolevy taxes, fees

plain, speedy and adequate remedy. It

and

may and should be relaxed when its

general rule, LGUs cannot impose taxes,

application

fees or charges of any kind on the

may

cause

great

and

irreparable damage.

other

charges.

Although

as

National Government, its agencies and

instrumentalities, this rule now admits

ACCORDINGLY, the decision of the court

below is hereby reversed and set aside.
Ordinance No. 7522 of the City of
Manila, dated June 15, 1975, is hereby
held to have been validly enacted.

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

NAPOCOR vs. City of Cabanatuan

the
By: Irish Mombay
Facts: City
collection

of
suit

government

performing governmental functions may

Cabanatuan
against

government-owned

filed

NAPOCOR,

and

controlled

be

subject

to

tax.

A franchise is a privilege conferred by

government authority, which does not
8

belong

to

citizens

of

the

country

Grantee shall be liable to pay the

same taxes on their real estate,
buildings, and personal property,
exclusive of this franchise, as
other persons or corporations

grantee shall pay a franchise tax

equivalent to three percent (3%)
of all gross receipts of the
telephone or other
telecommunications businesses
transacted under this franchise by
the grantee, its successors or
assigns, and the said
percentage shall be in lieu of
all taxes on this franchise or
earnings thereof

generally as a matter of common right.

It may be construed in two senses: the
right

vested

in

the

individuals

composing the corporation and the right

and

privileges

corporation.

conferred

upon

A franchise

the
tax is

understood in the second sense; it is not

levied on the corporation simply for
existing as a corporation but on its
exercise

of the

granted

to

it

rights
by

the

or

privileges

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.

CIR vs PLDT
G.R. No. 140230 December 15, 2005
By: Jonica Rei
FACTS:
PLDT is a grantee of a franchise under
Republic Act (R.A.) No. 7082 to install,
operate and maintain a
telecommunications system throughout
the Philippines.
For equipment, machineries and spare
parts it imported for its business on
different dates from October 1992 May
1994, PLDT paid the BIR 1)
compensating tax (126M+), 2) advance
sales tax (12M+) and other internal
revenue taxes. For similar importations,
it also paid VAT (116M+) from March
1994 to May 1994.
Later on, PLDT addressed a letter to the
BIR seeking a confirmatory ruling on its
tax exemption privilege under Section
12 of R.A. 7082 which provides that:

The BIR issued a ruling holding that "in

lieu of all taxes" provision clearly
exempts PLDT from all taxes including
the 10% value-added tax on its
importation of equipment, machineries
and spare parts needed in its franchise
operations, with the exception of the
enumerated taxes for which PLDT is
expressly made liable.
Armed with the ruling, PLDT filed a claim
for tax credit/refund of the VAT,
compensating taxes, advance sales
taxes and other taxes it had been
paying "in connection with its
importation of various equipment,
machineries and spare parts needed for
its operations".
With its claim not having been acted
upon by the BIR, PLDT filed with the CTA
a petition for review.
CTA granted PLDTs petition. It held that
the PLDT is entitled to the reduced
amount of P223M+ representing
erroneously paid value-added taxes,
compensating taxes, advance sales
taxes and other BIR taxes on its
importation of equipments (sic),
machineries and spare parts for the
period covering the taxable years 1992
to 1994. Excluded, however, from the
final computation are those taxes that
were paid prior to December 16, 1992
as they fall outside the two-year
prescriptive period for claiming for a
refund as provided by law.
9

(Dissenting opinion of Associate Judge

Amancio Q. Saga on CTA ruling: the
phrase "in lieu of all taxes" found in
Section 12 of R.A. No. 7082, supra,
refers to exemption from "direct taxes
only" and does not cover "indirect
taxes", such as VAT, compensating tax
and advance sales tax.)
BIRs motion for recon was denied.
On appeal, CA affirmed CTA ruling.
ISSUE:
1. W/N the clause covers direct taxes
only and not indirect taxes.
2. W/N PLDT is exempt from payment of
VAT, compensating taxes, advance sales
taxes and other BIR taxes on its
importations by virtue of the provision
in its franchise that the 3% franchise
tax on its gross receipts shall be IN LIEU
OF ALL TAXES on its franchise or
earnings thereof.
RULING:
1. DIRECT TAXES ONLY. The clause "in
lieu of all taxes" in Section 12 of RA
7082 is immediately followed by the
limiting or qualifying clause "on this
franchise or earnings thereof",
suggesting that the exemption is limited
to taxes imposed directly on PLDT since
taxes pertaining to PLDTs franchise or
earnings are its direct liability.
Accordingly, indirect taxes, not being
taxes on PLDTs franchise or earnings,
are outside the purview of the "in lieu"
provision.
All told, we fail to see how Section 12 of
RA 7082 operates as granting PLDT
blanket exemption from payment of
indirect taxes, which, in the ultimate
analysis, are not taxes on its franchise
or earnings. PLDT has not shown its
eligibility for the desired exemption.
None should be granted.
2. ENTITLED to Tax Credit Certificate or
to refund to PLDT only the of
P94,673,422.00 advance sales tax and
compensating tax ERRONEOUSLY
COLLECTED BY BOC. LESS VAT due on
the importations in question, but have
otherwise remained uncollected.

NOTE:
On January 1, 1988, a multi-stage VAT
was put into place to replace the tax on
original and subsequent sales tax. When
BOC assessed the company for advance
sales tax and compensating tax for
importations entered between Oct 1992
and May 1994, VAT has already
replaced, if not eliminated, the said
taxes assessed. Amount PLDT paid
were, in context, erroneous tax
payments and would theoretically be
refundable. It should be emphasized,
however, that, such importations were,
when made, already subject to VAT.
Factoring in the fact that a portion of the
claim was barred by prescription, the
CTA had determined that PLDT is
entitled to a total refundable amount of
P94,673,422.00 (P87,257,031.00 of
compensating tax + P7,416,391.00 =
P94,673,422.00). Accordingly, it
behooves the BIR to grant a refund of
the advance sales tax and
compensating tax in the total amount of
P94,673,422.00, subject to the condition
that PLDT present proof of payment of
the corresponding VAT on said
transactions.
See full case for nature and definitions
of above-mentioned taxes (advance
sales, compensating tax, etc.)

REMEDIAL ISSUE; STARE DECISIS

RULING OF CA GENERALLY NOT
BINDING
In CA-G.R. SP No. 40811, entitled
Commissioner of Internal Revenue vs.
Philippine Long Distance Company.
There, the Sixteenth Division of the
appellate court declared that under the
express provision of Section 12 of R.A.
7082, supra, "the payment [by PLDT] of
the 3% franchise tax of [its] gross
receipts shall be in lieu of all taxes"
exempts PLDT from payment of
compensating tax, advance sales tax,
VAT and other internal revenue taxes on
its importation of various equipment,
machinery and spare parts for the use
of its telecommunications system.

10

The said CA decision in the previous has

already become final and executory,
hence, promting the CA to rule on the
present case on the ground of stare
decisis.

Cebu, demanded payment from realty

For reasons needing no belaboring,

however, the Court is not at all
concluded by the ruling of the Court of
Appeals in its earlier CA-G.R. SP No.
47895. Blind adherence to precedents,
simply as precedent, no longer rules.
More important than anything else is
that the court is right, thus its duty to
abandon any doctrine found to be in
violation of the law in force. BIR
Commissioners decision not to pursue
the issue in the previous case does not
estop the government from
subsequently questioning the ruling,
especially in in matters involving taxes.
Errors of certain administrative officers,
if that be the case, should never be
allowed to jeopardize the governments
financial position

and unjustified claiming in its favor the

Mactan Cebu International Airport

Authority v. Marcos 261 SCRA 667
(1996)

in

the

P2229078.79.

total

Petitioner

amount

of

objected

to

such demand for payment as baseless

afore cited Section 14 of R.A. 6958. It
was

also

asserted

instrumentality
performing
citing

of

that
the

governmental

Section

133

of

it

is

an

government
functions,
the

Local

Government Code of 1991.

Section 133. Common limitations on the
Taxing Powers of Local Government
Units.
The exercise of the taxing powers of the
provinces,

cities,

barangays,

municipalities shall not extend to the

levi of the following:
xxx Taxes, fees or charges of any kind in
the National Government, its agencies

By: Gwapo Vincent Von

and instrumentalities, and LGUs. xxx

Facts:
Petitioner

taxes

Respondent City refused to cancel and

Mactan

Cebu

International

set aside petitioners realty tax account,

Airport Authority was created by virtue

insisting

of R.A. 6958, mandated to principally

government-controlled

undertake the economical, efficient, and

whose tax exemption privilege has been

effective

and

withdrawn by virtue of Sections 193 and

supervision of the Mactan International

234 of Labor Code that took effect on

Airport and Lahug Airport, and such

January 1, 1992.

control,

management,

other airports as may be established in

Cebu.
Since the time of its creation, petitioner
MCIAA

enjoyed

the

privilege

of

exemption from payment of realty taxes

in accordance with Section 14 of its
charter. However, on October 11, 1994,
Mr. Eustaquio B. Cesa, Officer in Charge,
Office of the Treasurer of the City of

that

the

MCIAA

is

corporation

Issue:
Whether or not the petitioner is a
taxable person?
Rulings:
Taxation is the rule and exemption is the
exception.

MCIAAs

exemption

from

payment of taxes is withdrawn by virtue

11

of Sections 193 and 234 of Labor Code.

(Butuan) enacted Ordinance No. 110,

Statutes granting tax exemptions shall

which

be

engaged

strictly

construed

against

the

imposed
in

tax

selling

on

soft

dealers

drinks

or

taxpayer and liberally construed in favor

carbonated drinks. Ordinance No. 110

of the taxing authority.

was later amended by Ordinance No.

The petitioner cannot claim that it was

never a taxable person under its
Charter. It was only exempted from the
payment of realty taxes. The grant of
the privilege only in respect of this tax is
conclusive proof of the legislative intent
to make it a taxable person subject to
all taxes, except real property tax.

122. Consequently, the tax was now

imposed on any agent and/or consignee
of any person, association, partnership,
company, or corporation engaged in
selling x x x soft drinks or carbonated
drinks. According to the Court, this
obviously pertains to a situation wherein
an outside dealer taps a local agent
and/or consignee to sell his products in

Pepsi-Cola Bottling Co. v. City of

said agents and/or consignees locality.

Butuan Concepcion

Since Pepsi-Cola has a storage facility in

the city receiving soft drinks from Cebu,

G.R. No. L-22814, August 28, 1968

and since said facility sells the same

By: Kristiane Osorio

RATIO

carbonated beverages to the people of

DECIDENDI

The

uniformity

required under the Constitution is not

absolute uniformity. It only requires that
people belonging to the same class be
taxed uniformly. For classification to be
valid, the following must concur: (1) it is
based upon substantial distinctions; (2)
these are germane to the purpose of the
legislation
classification

or

ordinance;
applies

(3)

to

the

present

conditions and future ones substantially

identical to those of the present; and (4)
the

classification

applies

equally

to

those belonging to the same class.

FACTS: Pepsi-Cola Bottling Co. of the
Philippines (Pepsi-Cola) has a storage
facility in the City of Butuan for its soft
drinks manufactured in Cebu. Products
from this facility are sold to consumers
in the said city. The City of Butuan

the

city,

it

was

assessed

the

tax

imposed by Ordinance 110, as amended

by Ordinance 122 (Ordinance 110, as
amended).

Pepsi-Cola

paid

under

protest. Pepsi-Cola brought the matter

of recovering the amounts paid before
the

lower

court.

It

dismissed

the

complaint, hence this appeal.

ISSUE:

W/N

the

tax

imposed

by

Ordinance 110, as amended, violates

the uniformity requirement.
HELD:

YES,

Ordinance

110,

as

amended, unfairly singles out agents

and/or consignees of outside dealers.
The Constitution (what is being referred
to

here

is

the

1935

Constitution)

provides: The rule of taxation shall be

uniform and equitable. x x x (See also
par.

1,

Sec.

Constitution)

28,

Art.

Ordinance

VI,
110,

1987
as
12

amended, defines what it means by

the date of the promulgation of this

agent or consignee, to wit: any

decision, in addition to the costs, and

person,

defendants

association,

partnership,

herein

are,

accordingly,

company, or corporation who acts in the

restrained and prohibited permanently

place of another x x x or one entrusted

from

with the business of another or to whom

amended. It is so ordered.

enforcing

said

Ordinance,

as

is consigned or shipped x x x cases of

hard liquor[s] or soft drinks every month
for resale, either retail or wholesale.
For

classification

to

be

valid,

the

following must concur: (1) it is based

EUSEBIO VILLANUEVA,

ET AL

vs.

CITY OF ILOILO,
G.R. No. L-26521

December 28,

1968

upon substantial distinctions; (2) these

are germane to the purpose of the
legislation

or

classification

ordinance;
applies

(3)

to

the

present

conditions and future ones substantially

identical to those of the present; and (4)
the

classification

applies

equally

to

those belonging to the same class. The

ordinance exempts local dealers not
acting

for

merchants

or

in

from

behalf
paying

of
the

outside
tax

it

imposes. It only applies to local dealers

acting

for

or

in

behalf

of

By: Edgar Praile II

outside

merchants. Butuan did not offer any

explanation as to why a distinction
between the two was made. If the
purpose of the tax measure was merely
to create a new revenue source by
levying tax upon the sale of soft drinks,
there is no reason for favoring one over
the other. WHEREFORE, the decision
appealed from is hereby reversed, and
another one shall be entered annulling
Ordinance No. 110, as amended by
Ordinance No. 122, and sentencing the
City of Butuan to refund to plaintiff
herein the amounts collected from and
paid under protest by the latter, with

FACTS: On September 30, 1946 the

municipal board of Iloilo City enacted
Ordinance 86, imposing license tax fees
on

tenement

houses.

The

Supreme

Court, however, declared the ordinance

ultra vires. On January 15, 1960 the
municipal board of Iloilo City, believing
that with the passage of Republic Act
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, series of
1960, imposing municipal license tax on
persons engaged in the business of
operating tenement houses.
On July 11, 1962 and April 24, 1964, the
plaintiffs-appellees filed a complaint,
and

an

amended

complaint,

respectively, against the City of Iloilo, in

the aforementioned court, praying that
Ordinance

11,

series

of

1960,

be

declared "invalid for being beyond the

powers of the Municipal Council of the

interest thereon at the legal rate from

13

City

of

Iloilo

to

and

State may collect an ad valorem tax on

unconstitutional for being violative of

property used in a calling, and at the

the rule as to uniformity of taxation and

same time impose a license tax on that

for depriving said plaintiffs of the equal

calling, the imposition of the latter kind

protection clause of the Constitution,"

of tax being in no sense a double tax. At

and that the City be ordered to refund

all events, there is no constitutional

the amounts collected from them under

prohibition against double taxation in

the said ordinance.

the Philippines.

On March 30, 1966, the lower court

2.

rendered

aforequoted provisions of Republic Act

judgment

enact,

declaring

the

ordinance illegal.

NO.

It

is

now

settled

that

the

2264 confer on local governments broad

ISSUES:

taxing

authority

which

almost

"everything,

extends

excepting

to

those

1. Is Ordinance 11, series of 1960, of

which are mentioned therein," provided

the City of Iloilo, illegal because it

that the tax so levied is "for public

imposes double taxation?

2. Is the City of Iloilo empowered by

purposes, just and uniform," and does

the Local Autonomy Act to impose

tenement taxes?
3. Is Ordinance 11, series of 1960,

not

transgress

any

constitutional

provision or is not repugnant to a

controlling statute. The imposition of the

unreasonable

tenement taxes does not fall within the

because it carries a penal clause?

4. Does Ordinance 11, series of

exceptions mentioned by the same law.

oppressive

1960,

and

violate

the

rule

of

uniformity of taxation?

double taxation may not be invoked.

The same tax may be imposed by the
national government as well as by the
government.

There

is

nothing

inherently obnoxious in the exaction of

license fees or taxes with respect to the
same occupation, calling or activity by
both

the

State

and

are real estate taxes and thus, the

imposition of more the 1 per centum

HELD: 1. NO. The argument against

local

It is argued however that the said taxes

political

subdivision thereof. It is a well-settled

rule that a license tax may be levied
upon a business or occupation although
the land or property used in connection
therewith is subject to property tax. The

real

estate

tax

which

is

the

limit

provided by CA 158, Iloilo City Charter,

makes the said ordinance ultra vires.
The court ruled that the tax in question
is not a real estate tax. It does not have
the attributes of a real estate tax. By
the title and the terms of the ordinance,
the tax is a municipal tax which means
an imposition or exaction on the right to
use or dispose of property, to pursue a
business, occupation or calling, or to
exercise a privilege. Tenement houses
being offered for rent or lease constitute
a distinct form of business or calling and

14

as such, the imposition of municipal tax

and

uniformity

of

taxation

finds support in Section2 of RA 2264.

accomplished.

3. NO. It is elementary, that "a tax is not

CIR vs. SC Johnson and Son

is

a debt in the sense of an obligation

incurred by contract, express or implied,

By: Purita San Diego-Heria

and therefore is not within the meaning

of constitutional or statutory provisions
abolishing or prohibiting imprisonment

Facts:

for debt, and a statute or ordinance

corporation

which

under the Philippine Laws, entered into

punishes

the

non-payment

Respondent
organized

domestic

and

operating

thereof by fine or imprisonment is not,

in conflict with that prohibition. Nor is

Johnson and Son, USA, a non-resident

the tax in question a poll tax, for the

foreign corporation based in the USA

latter is a tax of a fixed amount upon all

pursuant to which the respondent was

persons, or upon all persons of a certain

granted the right to use the trademark,

class,

specified

patents and technology owned by the

to

their

later including the right to manufacture,

property or the occupations in which

package and distribute the products

they may be engaged. Therefore, the

covered by the Agreement and secure

tax in question is not oppressive in the

assistance in management, marketing

manner the lower court puts it. On the

and production from SC Johnson and

other hand, the charter of Iloilo City

Son USA.

resident

territory,

without

within

regard

licensed

is

agreement

with

the

SC

empowers its municipal board to "fix

penalties for violations of ordinances,
which shall not exceed a fine of two
hundred

pesos

or

six

months'

imprisonment, or both such fine and

imprisonment for each offense."

For the use of trademark or technology,

respondent was

obliged to pay SC

Johnson and Son, USA royalties based

on a percentage of net sales and
subjected the same to 25% withholding
tax

on

royalty

payments

which

4. NO. This Court has already ruled that

respondent paid for the period covering

tenement houses constitute a distinct

July 1992 to May 1993 in the total

class of property. It has likewise ruled

amount of P1,603,443.00.

that "taxes are uniform and equal when

imposed upon all property of the same
class or character within the taxing
authority. 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

On October 29, 1993, respondent filed

with

the

International

Tax

Affairs

Division (ITAD) of the BIR a claim for

refund of overpaid withholding tax on
royalties arguing that, the antecedent
facts attending respondents case fall
squarely within the same circumstances
15

under

which

and

exemption. The burden of proof is upon

Gillette rulings were issued. Since the

him who claims the exemption in his

agreement

the

favor and he must be able to justify his

the

claim by the clearest grant of organic or

Technology

said

was

MacGeorge

approved

Transfer

by

Board,

preferential tax rate of 10% should

statute

law.

Private

apply to the respondent. So, royalties

claiming for a refund of the alleged

paid by the respondent to SC Johnson

overpayment

and Son, USA is only subject to 10%

however there is nothing on record to

withholding tax.

support a claim that the tax on royalties

of

respondent

tax

on

is

royalties;

under the RP-US Treaty is paid under

The Commissioner did not act on said
claim for refund. Private respondent SC
Johnson & Son, Inc. then filed a petition

similar circumstances as the tax on

royalties under the RP-West Germany
Tax Treaty.

for review before the CTA, to claim a

refund of the overpaid withholding tax

Commissioner of Internal Revenue

on royalty payments from July 1992 to

vs. Court of Appeals, Court of Tax

May 1993.

Appeals, and YMCA (Young Mens

Christian

On May 7, 1996, the CTA rendered its

decision in favor of SC Johnson and
ordered the CIR to issue a tax credit

Association

By: Enna Trivilegio

FACTS:

representing overpaid withholding tax

YMCA

on

institution

which

programs

and

payments

beginning

July

1992 to May 1993.

the

Philippines, Inc.)

certificate in the amount of P163,266.00

royalty

of

is

non-stock,

non-profit,

conducts
activities

various
that

are

beneficial to the public, especially the

The CIR thus filed a petition for review

young people, pursuant to its religious,

with the CA which rendered the decision

educational, and charitable objectives.

subject of this appeal on November 7,

In 1980,

1996 finding no merit in the petition and

income from leasing out portion of its

affirming in toto the CTA ruling.

premises to small shop owners such as

Issue: Whether or not tax refunds are

considered as tax exemptions.?

YMCA earned

P676,829.80

restaurants and canteen and earned

P44,259.00 from parking fees from nonmembers.

Held: It bears stress that tax refunds

In 1984, CIR issued assessment for

are in the nature of tax exemptions. As

deficiency

such

expanded withholding tax on rentals,

they

are

registered

as

in

income

professional

be construed strictissimi juris against

withholding tax on wages amounting to

the

P415,615.01.

or

entity

claiming

the

CIR:

YMCA

and

deficiency

derogation of sovereign authority and to

person

fees,

tax,

formally

deficiency

protested
16

assessment;

claims

denied.

purposes.

CTA: YMCA filed petition for review;

CONSTITUTION: Under Article VI, Sec. 28

ruled

of

in

favour

of

YMCA

the

Constitution,

it

Leasing of YMCA facilities to small shop

charitable

owners,

canteen

payment not only of taxes. However,

operators and operation of parking lot

according to the constitutional framers,

are

the

the exemption does not pertain to

accomplishment of objectives of YMCA.

income tax but only property taxes.

Rentals were minimal and enough to

For

cover

exemption

restaurant

reasonably

costs

and

necessary

of

for

operation

maintenance
CA:

and
only.

in

favour

of

CIR

the

institutions

exempts

YMCA

to

as

be

from

the

granted

an

the

educational

institution under the Constitution (Art.

XIV,

Sec.

4),

it

must

prove

with

MR: in favour of YMCA; court cannot

substantial evidence that: 1) it falls

depart from CTAs findings of facts

under the classification non-stock, non-

ISSUE/S: W/N the income derived from

profit educational institution, and 2) the

rentals of real property owned by the

income it seeks to be exempted from

YMCA

welfare,

taxation is used actually, directly, and

educational, and charitable non-profit

exclusively for educational purposes.

corporationsubject

However, no evidence was submitted by

established

as
to

income

tax

YMCA to prove that they met the

under NIRC and the Constitution.

RULING: YES. The income derived by
YMCA from rentals of its real property is
subject

to

income

tax.

NIRC: While Sec. 27 of NIRC provides

that non-profit organizations and clubs
shall not be taxed on their income, it
also provides that this exemption will
not apply to income derived from 1)
properties, real or personal, and 2) any
other activities conducted for profit shall
be subject to tax (amended by PD 1457)
Applying

the

doctrine

of

strict

interpretation or tax exemptions, the

phrase any of their activities conducted
for profit does not qualify the word
properties. This makes income from
the property of the organization taxable.
Regardless of how that income is used
whether for profit or for lofty non-profit

requisites.

The

term

educational

institution or institution of learning

has acquired a well-known technical
meaning, of which the members of the
Constitutional Commission are deemed
cognizant.
Under the Education Act of 1982, such
term

refers

to

schools,

which

is

synonymous with formal education or a

school seminary, college, or educational
establishment.

The

Court,

upon

examining the Amended Articles of

Incorporation

and By-laws of

the

YMCA, but found nothing in them that

even hints that it is a school or an
educational
Even

if

YMCA

institution.
is

an

educational

institution, the Court also notes that

YMCA did not submit proof of the
proportionate amount of the subject
17

income that was actually, directly, and

assessment should take effect a year

exclusively

after or on January 1, 2008. Also, Petron

used

for

educational

purposes.

sought the approval of a surety bond in

the amount of P1,286,057,899.54.

TALENTO vs. ESCALADA

Petron received from petitioner a final

notice of delinquent real property tax

By: Vanity Gail Trivilegio

with
Facts:

Petron

received

from

the

warning

properties

that

would

be

the

subject

levied

and

Provincial Assessor's Office of Bataan a

auctioned should Petron fail to settle the

notice of revised assessment over its

revised assessment due.

machineries and pieces of equipment in

Bataan. Petron was given a period of 60

Consequently, Petron sent a letter to

days within which to file an appeal with

petitioner stating that in view of the

the Local Board of Assessment Appeals

pendency of its appeal with the LBAA,

(LBAA).

any action by the Treasurer's Office on

Based

assessment,

on

said

petitioner

revised
Provincial

the

subject

properties

would

be

Treasurer of Bataan informed Petron

premature. However, petitioner replied

that

that

its

total

only

Petron's

payment

under

liability

is

(deficiency

real

protest shall bar the collection of the

property tax due from 1994 to first and

realty taxes due pursuant to Sections

second quarters of 2007).

231 and 252 of the LGC.

Petron filed a petition with the LBAA

With the issuance of a Warrant of Levy

contesting the revised assessment on

against its machineries and pieces of

the

equipment,

Petron

motion

lift

P1,731,025,403.06

following

subject

grounds:

assessment

1.

that

the

pertained

to

to

filed

the

final

an

urgent

notice

of

properties that have been previously

delinquent real property tax and warrant

declared 2. that the assessment covered

of levy with the LBAA. It argued that the

periods of more than 10 years which is

issuance of the notice and warrant is

not allowed under the (LGC). According

premature because an appeal has been

to Petron, the possible valid assessment

filed with the LBAA, where it posted a

pursuant to Section 222 of the LGC

surety

could only be for the years 1997 to

P1,286,057,899.54.

2006. Petron further contended that the

fair market value or replacement cost
used by petitioner included items which
should

be

properly

excluded;

that

prompt payment of discounts were not

considered

in

determining

the

fair

market value; and that the subject

bond

in

the

amount

of

Petron received a notice of sale of its

properties scheduled on October 17,
2007.

Consequently,

on

October

8,

2007, Petron withdrew its motion to lift

the

final

notice

of

delinquent

real

property tax and warrant of levy with

18

the LBAA. On even date, Petron filed

Held: SC stated that the issues raised

with the RTC of Bataan the instant case

by Petron would have a direct bearing

(docketed as Civil Case No. 8801) for

on

prohibition with prayer for the issuance

Provincial

of a temporary restraining order (TRO)

necessary that these issues be first

and preliminary injunction.

resolved before the subject properties

the

assessment
Treasurer

made
and

by
it

the
was

were sold in public auction. Additionally,

RTC issued a TRO for 20 days enjoining
petitioner from proceeding with the
public auction of Petron's properties.
Petitioner thereafter filed an urgent
motion for the immediate dissolution of
the TRO, followed by a motion to
dismiss Petron's petition for prohibition.
RTC

granted

issuance

of

Petron's
writ

petition

of

for

preliminary

injunction, subject to Petron's posting of

a P444,967,503.52 bond in addition to
its previously posted surety bond of
P1,286,057,899.54,

to

complete

the

total amount equivalent to the revised

assessment of P1,731,025,403.06. Also,
RTC held that in scheduling the sale of
the properties despite the pendency of
Petron's appeal and posting of the
surety bond with the LBAA, petitioner
deprived Petron of the right to appeal.
Hence,

petitioner

filed

the

the Supreme Court had occasion to

point out that under Rule V, Section 7 of
the Rules of Procedure of the LBAA: An
appeal shall not suspend the collection
of the corresponding realty taxes on the
real property subject of the appeal as
assessed by the Provincial, City or
Municipal Assessor, without prejudice to
the subsequent adjustment depending
upon the outcome of the appeal. An
appeal may be entertained but the
hearing thereof shall be deferred until
the corresponding taxes due on the real
property subject of the appeal shall
have been paid under protest or the
petitioner shall have given a surety
bond xxx. Here, Petron posted a surety
bond equivalent to the amount of the
assessment due, in compliance with the
above-cited rule.

instant

petition for certiorari under Rule 65 of

the Rules of Court.
Issue: whether the collection of taxes
could be suspended by reason of the
filing of an appeal to and posting of a
surety bond with the LBAA?

19