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Sison v. Ancheta GR No.

L-59431; 25 July 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 or not 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 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.

ARTURO M. TOLENTINO, petitioner, vs. THE SECRETARY OF FINANCE and THE COMMISSIONER OF
INTERNAL REVENUE, respondents. G.R. No. 115455 August 25, 1994

FACTS: Herein various petitioners seek to declare RA 7166 as unconstitutional as it seeks to widen the tax base of the
existing VAT system and enhance its administration by amending the National Internal Revenue Code. The value-added
tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services.
It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or
exchanged or of the gross receipts from the sale or exchange of services.

CREBA asserts that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered or
exempt without reasonable basis and (3) violates the rule that taxes should be uniform and equitable and that Congress
shall "evolve a progressive system of taxation."

With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of real
property by installment or on deferred payment basis would result in substantial increases in the monthly amortizations to
be paid because of the 10% VAT. The additional amount, it is pointed out, is something that the buyer did not anticipate at
the time he entered into the contract.

It is next pointed out that while Section 4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products,
food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of real property which is
equally essential. The sale of real property for socialized and low-cost housing is exempted from the tax, but CREBA
claims that real estate transactions of "the less poor," i.e., the middle class, who are equally homeless, should likewise be
exempted.
Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, Section 28(1) which
provides that "The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of
taxation."

ISSUE: Whether or not RA 7166 violates the principle of progressive system of taxation.

HELD: No, there is no justification for passing upon the claims that the law also violates the rule that taxation must be
progressive and that it denies petitioners' right to due process and that equal protection of the laws. The reason for this
different treatment has been cogently stated by an eminent authority on constitutional law thus: "When freedom of the
mind is imperiled by law, it is freedom that commands a momentum of respect; when property is imperiled it is the
lawmakers' judgment that commands respect. This dual standard may not precisely reverse the presumption of
constitutionality in civil liberties cases, but obviously it does set up a hierarchy of values within the due process clause."
Petitioners contend that as a result of the uniform 10% VAT, the tax on consumption goods of those who are in the higher-
income bracket, which before were taxed at a rate higher than 10%, has been reduced, while basic commodities, which
before were taxed at rates ranging from 3% to 5%, are now taxed at a higher rate.

Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by respondents that in fact it
distributes the tax burden to as many goods and services as possible particularly to those which are within the reach of
higher-income groups, even as the law exempts basic goods and services. It is thus equitable. The goods and properties
subject to the VAT are those used or consumed by higher-income groups. These include real properties held primarily for
sale to customers or held for lease in the ordinary course of business, the right or privilege to use industrial, commercial or
scientific equipment, hotels, restaurants and similar places, tourist buses, and the like. On the other hand, small business
establishments, with annual gross sales of less than P500,000, are exempted. This, according to respondents, removes
from the coverage of the law some 30,000 business establishments. On the other hand, an occasional paper of the
Center for Research and Communication cities a NEDA study that the VAT has minimal impact on inflation and income
distribution and that while additional expenditure for the lowest income class is only P301 or 1.49% a year, that for a
family earning P500,000 a year or more is P8,340 or 2.2%.

Lacking empirical data on which to base any conclusion regarding these arguments, any discussion whether the VAT is
regressive in the sense that it will hit the "poor" and middle-income group in society harder than it will the "rich," is largely
an academic exercise. On the other hand, the CUP's contention that Congress' withdrawal of exemption of producers
cooperatives, marketing cooperatives, and service cooperatives, while maintaining that granted to electric cooperatives,
not only goes against the constitutional policy to promote cooperatives as instruments of social justice (Art. XII, 15) but
also denies such cooperatives the equal protection of the law is actually a policy argument. The legislature is not required
to adhere to a policy of "all or none" in choosing the subject of taxation. 44

Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA), petitioner in G.R. 115754, that
the VAT will reduce the mark up of its members by as much as 85% to 90% any more concrete. It is a mere allegation. On
the other hand, the claim of the Philippine Press Institute, petitioner in G.R. No. 115544, that the VAT will drive some of its
members out of circulation because their profits from advertisements will not be enough to pay for their tax liability, while
purporting to be based on the financial statements of the newspapers in question, still falls short of the establishment of
facts by evidence so necessary for adjudicating the question whether the tax is oppressive and confiscatory.

Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by the Constitution to do
is to "evolve a progressive system of taxation." This is a directive to Congress, just like the directive to it to give priority to
the enactment of laws for the enhancement of human dignity and the reduction of social, economic and political
inequalities (Art. XIII, 1), or for the promotion of the right to "quality education" (Art. XIV, 1). These provisions are put
in the Constitution as moral incentives to legislation, not as judicially enforceable rights.

Tan v. Del Rosario G.R. No. 109289. October 3, 1994

Facts: Petitioners assail RA 7496, also commonly known as the Simplified Net Income Taxation Scheme ("SNIT"),
amending certain provisions of the National Internal Revenue Code, as violative of the constitutional requirement that
taxation shall be "shall be uniform and equitable." The law would now attempt to tax single proprietorships and
professionals differently from the manner it imposes the tax on corporations and partnerships.

Petitioner gives a fairly extensive discussion on the merits of the law, illustrating, in the process, what he believes to be an
imbalance between the tax liabilities of those covered by the amendatory law and those who are not.

Issue: Whether or not RA 7496 is violative of the constitutional requirement that taxation shall be uniform and equitable.

Held: Petition denied. Uniformity of taxation means that (1) the standards that are used therefore are substantial and not
arbitrary, (2) the categorization is germane to achieve legislative purpose, (3) the law applies, all things being equal, to
both present and future conditions and (4) the classification applies equally well to all those belonging to the same class.

With the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage
(subjects) and situs (place) of taxation. This court cannot freely delve into those matters which, by constitutional fiat,
rightly rest on legislative judgment. Of course, where a tax measure becomes so unconscionable and unjust as to amount
to confiscation of property, courts will not hesitate to strike it down, for, despite all its plenitude, the power to tax cannot
override constitutional proscriptions. This stage, however, has not been demonstrated to have been reached within any
appreciable distance in this controversy before us.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE HON. COURT OF APPEALS, R.O.H.
AUTO PRODUCTS PHILIPPINES, INC. and THE HON. COURT OF TAX APPEALS, respondents. G.R. No.
108358 January 20, 1995

Facts: On 22 August 1986, Executive Order No. 41 was promulgated declaring a one-time tax amnesty on unpaid income
taxes, later amended to include estate and donor's taxes and taxes on business, for the taxable years 1981 to 1985.
Respondent R.O.H. Auto Products Philippines, Inc., availing of the amnesty, filed in October 1986 and November 1986,
its Tax Amnesty Return and Supplemental Tax Amnesty Return No. and paid the corresponding amnesty taxes due.

Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication received by private respondent
on August 13, 1986, assessed the latter deficiency income and business taxes for its fiscal years 1981 and 1982 in an
aggregate amount of P1,410,157.71. Meanwhile, respondent averred that since it had been able to avail itself of the tax
amnesty, the deficiency tax notice should forthwith be cancelled and withdrawn. This was denied by the CIR Revenue
Memorandum Order No. 4-87, implementing Executive Order No. 41, had construed the amnesty coverage to include only
assessments issued by the Bureau of Internal Revenue after the promulgation of the executive order on August 22 1986
and not to assessments theretofore made.

On appeal, The Court of Tax appeal upheld for the respondent, which was further upheld by the Court of Appeals.

ISSUE: Whether or not the the deficiency assessments were extinguished by reason of respondents availment of the tax
amnesty.

HELD: Yes, as the scope of the amnesty covers the unpaid income taxes for the years 1981 to 1985. If, as the
Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already
assessed (administratively) prior to August 22, 1986, the law could have simply so provided in its exclusionary clauses. It
did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a
general grant of tax amnesty subject only to the cases specifically excepted by it.

Further, the law provides that, upon full compliance with the conditions of the tax amnesty and the rules and regulations
issued pursuant to this Executive order, the taxpayer shall be relieved of any income tax liability on any untaxed income
from January 1, 1981 to December 31, 1985, including increments thereto and penalties on account of the non-payment
of the said tax. Civil, criminal or administrative liability arising from the non-payment of the said tax, which are actionable
under the National Internal Revenue Code, as amended, are likewise deemed extinguished.

American Bible Society vs. City of Manila GR No. L-9637 | April 30, 1957

Facts:
American Bible Society is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing
business in the Philippines through its Philippine agency established in Manila in November, 1898
City of Manila is a municipal corporation with powers that are to be exercised in conformity with the provisions of
Republic Act No. 409, known as the Revised Charter of the City of Manila
American Bible Society has been distributing and selling bibles and/or gospel portions throughout the Philippines and
translating the same into several Philippine dialect
City Treasurer of Manila informed American Bible Society that it was violating several Ordinances for operating without
the necessary permit and license, thereby requiring the corporation to secure the permit and license fees covering the
period from 4Q 1945-2Q 1953
To avoid closing of its business, American Bible Society paid the City of Manila its permit and license fees under protest
American Bible filed a complaint, questioning the constitutionality and legality of the Ordinances 2529 and 3000, and
prayed for a refund of the payment made to the City of Manila. They contended:
They had been in the Philippines since 1899 and were not required to pay any license fee or sales tax
it never made any profit from the sale of its bibles
City of Manila prayed that the complaint be dismissed, reiterating the constitutionality of the Ordinances in question
Trial Court dismissed the complaint
American Bible Society appealed to the Court of Appeals

Issue: WON American Bible Society liable to pay sales tax for the distribution and sale of bibles
.
Ruling: NO Under Sec. 1 of Ordinance 3000, one of the ordinance in question, person or entity engaged in any of the
business, trades or occupation enumerated under Sec. 3 must obtain a Mayors permit and license from the City
Treasurer. American Bible Societys business is not among those enumerated However, item 79 of Sec. 3 of the
Ordinance provides that all other businesses, trade or occupation not mentioned, except those upon which the City is not
.
empowered to license or to tax P5.00 Therefore, the necessity of the permit is made to depend upon the power of the
City to license or tax said business, trade or occupation. 2 provisions of law that may have bearing on this case:

Chapter 60 of the Revised Administrative Code, the Municipal Board of the City of Manila is empowered to tax and fix
the license fees on retail dealers engaged in the sale of books.

Sec. 18(o) of RA 409: to tax and fix the license fee on dealers in general merchandise, including importers and
indentors, except those dealers who may be expressly subject to the payment of some other municipal tax. Further,
Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For purposes of the
tax on retail dealers, general merchandise shall be classified into four main classes: namely (1) luxury articles, (2) semi-
luxury articles, (3) essential commodities, and (4) miscellaneous articles. A separate license shall be prescribed for each
class but where commodities of different classes are sold in the same establishment, it shall not be compulsory for the
owner to secure more than one license if he pays the higher or highest rate of tax prescribed by ordinance. Wholesale
dealers shall pay the license tax as such, as may be provided by ordinance.

The only difference between the 2 provisions is the limitation as to the amount of tax or license fee that a retail dealer
has to pay per annum . As held in Murdock vs. Pennsylvania, The power to impose a license tax on the exercise of these
freedoms provided for in the Bill of Rights, is indeed as potent as the power of censorship which this Court has
repeatedly struck down. It is not a nominal fee imposed as a regulatory measure to defray the expenses of policing the
activities in question. It is in no way apportioned. It is flat license tax levied and collected as a condition to the pursuit of
activities whose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to
suppress their exercise. That is almost uniformly recognized as the inherent vice and evil of this flat license tax.

Further, the case also mentioned that the power to tax the exercise of a privilege is the power to control or suppress its
enjoyment. Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of
the resources necessary for its maintenance. Those who can tax the privilege of engaging in this form of missionary
evangelism can close all its doors to all those who do not have a full purse

Under Sec. 27(e) of Commonwealth Act No. 466 or the National Internal Revenue Code, Corporations or
associations organized and operated exclusively for religious, charitable, . . . or educational purposes, . . .: Provided,
however, That the income of whatever kind and character from any of its properties, real or personal, or from any activity
conducted for profit, regardless of the disposition made of such income, shall be liable to the tax imposed under this
Code shall not be taxed

The price asked for the bibles and other religious pamphlets was in some instances a little bit higher than the actual cost
of the same but this cannot mean that American Bible Society was engaged in the business or occupation of selling said
"merchandise" for profit.

Therefore, the Ordinance cannot be applied for in doing so it would impair American Bible Societys free exercise and
enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from,
sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it.

Misamis Oriental v. Cagayan Electric (1990)

Facts: Cagayan Electric Power and light Co, Inc. (CEPALCO) was granted a franchise in 1961 under RA 3247 to install,
operate and maintain an electric light, heat and power system in Cagayan de Oro and its suburbs. In 1973, the Local
Tax Code (PD 231) was promulgated, where Section 9 thereof providing for a franchise tax. Pursuant thereto, the
province of Misamis Oriental enacted Provincial Revenue Ordinance 19, whose Section 12 also provides for a franchise
tax. The Provincial Treasurer demanded payment of the provincial franchise tax from CEPALCO. CEPALCO paid under
protest.

Issue: Whether CEPALCO is exempt from the provincial franchise tax.

Held: Local Tax Regulation 3-75 issued by the Secretary of Finance in 1976 made it clear that the franchise tax provided
in the Local Tax Code may only be imposed on companies with franchise that do not contain the exempting clause, i.e.
in-lieu-of-all-taxes-proviso. CEPALCOs franchise i.e. RA 3247, 3571 and 6020 (Section 3 thereof), uniformly provides
that in consideration of the franchise and rights hereby granted, the grantee shall pay a franchise tax equal to 3% of the
gross earnings for electric current sold under the franchise, of which 2% goes to the national Treasury and 1% goes into
the treasury of the municipalities of Tagoloan, Opol, Villanueva, Jasaan, and Cagayan de Oro, as the case may be:
Provided, that the said franchise tax of 3% of the gross earnings shall be in lieu of all taxes and assessments of whatever
authority upon privileges, earnings, income, franchise and poles, wires, transformers, and insulators of the grantee from
which taxes and assessments the grantee is hereby expressly exempted.

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C.


DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA v. HON. BIENVENIDO TAN G.R. No.
81311. June 30, 1988
FACTS: The four consolidated cases questions the validity of the VAT (Executive Order 273) for being unconstitutional in
that its enactment is not allegedly within the powers of the President; that the VAT is oppressive, discriminatory,
regressive, and violates the due process and equal protection clauses and other provisions of the 1987 Constitution.

The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners have failed to show
justification for the exercise of its judicial powers. He also questions the legal standing of the petitioners who, he contends,
are merely asking for an advisory opinion from the Court, there being no justiciable controversy for resolution.

ISSUE: Whether VAT is unconstitutional.

RULING: No. First, the Court held that the President had authority to issue EO 273 as it was provided in the Provisional
constitution that the President shall have legislative powers.

Second, petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic
manner by reason of passion or personal hostility. It appears that a comprehensive study of the VAT had been extensively
discussed by this framers and other government agencies involved in its implementation, even under the past
administration.

Lastly, petitioners also failed to prove that EO 273 is oppressive, discriminatory, unjust and regressive, in violation of the
equal protection clause. Petitioners merely rely upon newspaper articles which are actually hearsay and have evidentiary
value. To justify the nullification of a law. there must be a clear and unequivocal breach of the Constitution, not a doubtful
and argumentative implication. As the Court sees it, EO 273 satisfies all the requirements of a valid tax.

In any event, if petitioners seriously believe that the adoption and continued application of the VAT are prejudicial to the
general welfare or the interests of the majority of the people, they should seek recourse and relief from the political
branches of the government. The Court, following the time-honored doctrine of separation of powers, cannot substitute its
judgment for that of the President as to the wisdom, justice and advisability of the adoption of the VAT. The Court can only
look into and determine whether or not EO 273 was enacted and made effective as law, in the manner required by, and
consistent with, the Constitution, and to make sure that it was not issued in grave abuse of discretion amounting to lack or
excess of jurisdiction; and, in this regard, the Court finds no reason to impede its application or continued implementation.

Kapatiran ng mga Naglilingkod sa Pamahalaan v. Tan GR No 81311 June 30, 1988

FACTS: EO 372 was issued by the President of the Philippines which amended the Revenue Code, adopting the value-
added tax (VAT) effective January 1, 1988. Four petitions assailed the validity of the VAT Law from being beyond the
President to enact; for being oppressive, discriminatory, regressive and violative of the due process and equal protection
clauses, among others, of the Constitution. The Integrated Customs Brokers Association particularly contend that it unduly
discriminate against customs brokers (Section 103r) as the amended provision of the Tax Code provides that service
performed in the exercise of profession or calling (except custom brokers) subject to occupational tax under the Local Tax
Code and professional services performed by registered general professional partnerships are exempt from VAT.

ISSUE: Whether the E-VAT law is void for being discriminatory against customs brokers

RULING: No. The phrase except custom brokers is not meant to discriminate against custom brokers but to avert a
potential conflict between Sections 102 and 103 of the Tax Code, as amended. The distinction of the customs brokers
from the other professionals who are subject to occupation tax under the Local Tax Code is based on material differences,
in that the activities of customs partake more of a business, rather than a profession and were thus subjected to the
percentage tax under Section 174 of the Tax Code prior to its amendment by EO 273. EO 273 abolished the percentage
tax and replaced it with the VAT. If the Association did not protest the classification of customs brokers then, there is no
reason why it should protest now.

Commissioner v. Lingayen Gulf Electric GR No L-23771, August 4, 1988


FACTS: Lingayen Gulf Electric Power operates an electric power plant serving the municipalities of Lingayen and
Binmaley, Pangasinan, pursuant to municipal franchise granted it by the respective municipal councils. The franchises
provided that the grantee shall pay quarterly to the provincial treasury of Pangasinan 1% of the gross earnings obtained
through the privilege for the first 20 years (from 1946) and 2% during the remaining 15 years of the life of the franchise. In
1955, the BIR assessed and demanded against the company deficiency franchise taxes and surcharges from the years
1946 to 1954 applying the franchise tax rate of 5% on gross receipts from 1948 to 1954. The company asked for a
reinvestigation, which was denied. CTA, however, ruled for Lingayen. Hence, this petition.

ISSUES:
1. Whether the Court can inquire into the wisdom of the franchise
2. Whether a rate below 5% is violative of the uniformity clause in the Constitution

RULING:

1. No, the Court does not have the authority to inquire into the wisdom of the Act. Charters or special laws granted
and enacted by the legislature are in the nature of private contracts. They do not constitute a part of the
machinery of the general government. Also, the Court ought not to disturb the ruling of the Court of Tax Appeals
on the constitutionality of the law in question.

2. No. The legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax
exemptions have never been deemed violative of the equal protection clause. Herein, the 5% franchise tax rate
provided in Section 259 of the Tax Code was never intended to have universal application. Section 259 expressly
allows the payment of taxes at rates lower than 5% when the charter granting the franchise precludes the
imposition of a higher tax. RA 3843, the law granting the franchise, did not only fix and specify a franchise tax of
2% on its gross receipts but made it in lieu of any and all taxes, all laws to the contrary notwithstanding. The
company, hence, is not liable for deficiency taxes.

Abra Valley College vs Aquino (G.R. No. L-39086)

FACTS: Petitioner, an educational corporation and institution of higher learning duly incorporated with the Securities and
Exchange Commission in 1948, filed a complaint to annul and declare void the Notice of Seizure and the Notice of Sale
of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31. Said Notice of Seizure by respondents Municipal Treasurer and Provincial Treasurer, defendants below, was
issued for the satisfaction of the said taxes thereon.

The parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial
court ruled for the government, holding that the second floor of the building is being used by the director for residential
purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and
thus the property is not being used exclusively for educational purposes. Instead of perfecting an appeal, petitioner
availed of the instant petition for review on certiorari with prayer for preliminary injunction before the Supreme Court, by
filing said petition on 17 August 1974.

ISSUE: Whether or not the lot and building are used exclusively for educational purposes.

HELD: Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from
realty taxes for cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable or educational purposes. Reasonable emphasis has always been
made that the exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of
the main purposes. The use of the school building or lot for commercial purposes is neither contemplated by law, nor by
jurisprudence. In the case at bar, the lease of the first floor of the building to the Northern Marketing Corporation cannot
by any stretch of the imagination be considered incidental to the purpose of education. The test of exemption from
taxation is the use of the property for purposes mentioned in the Constitution.The decision of the CFI Abra (Branch I) is
affirmed subject to the modification that half of the assessed tax be returned to the petitioner. The modification is derived
from the fact that the ground floor is being used for commercial purposes (leased) and the second floor being used as
incidental to education (residence of the director).
PASCUAL & DRAGONVS CIR AND CTA G.R. 78133October 18, 1988

Gancayco, J.:

FACTS: Petitioners bought two parcels of land and another 3 parcels the following year.The 2 parcels were sold in 1968
while the other 3 were sold in 1970.Realizing profits from the sale, petitioners filed capital gains tax.However, they were
assessed with deficiency tax for corporate income taxes.

ISSUE: Whether or not petitioners formed an unregistered partnership thereby assessed with corporate income tax.

RULING: By the contract of partnership, two or more persons bind themselves to contribute money, industry or property
to a common fund with the intention of dividing profits among themselves.There is no evidence though, that petitioners
entered into an agreement to contribute MPI to a common fund and that they intend to divide profits among
themselves.The petitioners purchased parcels of land and became co-owners thereof.Their transactions of selling the lots
were isolated cases.The character of habituality peculiar to the business transactions for the purpose of gain was not
present.

The sharing of returns foes not in itself establish a partnership whether or not the persons sharing therein have a joint or
common right or interest in the property.There must be a clear intent to form partnership, the existence of a juridical
personality different from the individual partners, and the freedom of each party to transfer or assign the whole property.

Jesus Estanislao vs. Amado Costales G.R. 96516 May 8, 1991 / 196 SCRA 853

Gancayco, J.:

FACTS: The Sanggunian Panglungsod passed ordinance No 44 of Zamboanga City. The same was sent to the Minister
of Finance where it was found out to contravenes Section 19 of the local Tax Code. The authority of the city is limited to
the imposition of a percentage tax on the gross sales or receipts of said production. The tax being imposed in the
ordinance is based on the output or production and not on the gross sales or receipts as authorized under the local tax
code. The city Mayor of Zamboanga questioned such decision of the Finance Minister and the lower court ruled in favor of
the former by reason of prescription. The ordinance imposed P0.01 per liter of softdrinks produced, manufactured and or
bottled within the territorial jurisdiction of the City of Zamboanga.

ISSUE: Whether or not Ordinance No. 44 contravenes the Local Tax Code of 1974.

RULING: The court ruled that the tax ordinances issued by the local autonomy is governed by the Local Tax Code of
1974 as it was stated in Section 64 (a) thereof all existing tax ordinances of provinces, cities, municipalities and barrios
shall be deemed ipso facto nullified on June 30, 1974. The court also clarified that the 120 days that lapsed before the
Minister of Finance acted on the ordinance did not render the action inoperative due to prescription. Even if the Secretary
of Finance failed to review or act on the ordinance within 120 days, it does not follow as a legal consequence thereof that
an otherwise invalid ordinance is thereby validated. It does not also mean that the Secretary can no longer act by
suspending and/or revoking an invalid ordinance even after the lapse of 120 day period.

Basco vs. PAGCOR G.R. no. 91649 May 14,1991

Facts: PAGCOR was created by virtue of PD 1067 A dated January 1, 1977 and granted a franchise under PD 1067
B. subsequently. On July 11, 1983, it was created under PD 1869 to enable the government to regulate and centralize all
games of chance authorize by existing franchise or permitted by law. Petitioners contend that the exemption clause in PD
1869 is violative of the principle of local autonomy.

Issue: is the contention meritorious?

Ruling: No. LGUs has no power to tax instrumentalities of the national government. PAGCOR is a GOCC with an original
charter. All of its stocks are owned by the national government. In addition to its corporate power it also exercises
regulatory powers. It should be exempt from local taxes otherwise its operation might be burdened, impeded or subjected
to control by any local government. Local Government are not sovereign within the state or an imperium in imperio.