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G.R. No.

192935 December 7, 2010



The genesis of the foregoing cases can be traced to the events prior to the historic May 2010 elections,
when then Senator Benigno Simeon Aquino III declared his staunch condemnation of graft and
corruption with his slogan, "Kung walang corrupt, walang mahirap." The Filipino people, convinced of his
sincerity and of his ability to carry out this noble objective, catapulted the good senator to the

To transform his campaign slogan into reality, President Aquino found a need for a special body to
investigate reported cases of graft and corruption allegedly committed during the previous

Thus, at the dawn of his administration, the President on July 30, 2010, signed Executive Order No. 1
establishing the Philippine Truth Commission of 2010 (Truth Commission).

A special civil action for prohibition was instituted by petitioner Louis Biraogo (Biraogo) in his capacity as
a citizen and taxpayer. Biraogo assails Executive Order No. 1 for being violative of the legislative power
of Congress under Section 1, Article VI of the Constitution as it usurps the constitutional authority of the
legislature to create a public office and to appropriate funds therefor.


Whether or not Executive Order No. 1 violates the principle of separation of powers by usurping the
powers of Congress to create and to appropriate funds for public offices, agencies and commissions


The Chief Executive’s power to create the Ad hoc Investigating Committee cannot be doubted. Having
been constitutionally granted full control of the Executive Department, to which respondents belong,
the President has the obligation to ensure that all executive officials and employees faithfully comply
with the law. With AO298 as mandate, the legality of the investigation is sustained. Such validity is not
affected by the fact that the investigating team and the PCAGC had the same composition, or that the
former used the offices and facilities of the latter in conducting the inquiry.

South African Airways vs CIR

GR 180356, 16 February 2010

FACTS: Petitioner is a foreign corporation duly established under the laws of South Africa, having its
principal office at Johannesburg International Airport. It has no landing rights in the Philippines, being
merely an internal carrier. It is not registered with the SEC and is not licensed to do business in the
Philippines, but has a general sales agent in the Philippines, Aerotel Ltd. Corp, which sells passage
documents for compensation or commission for petitioner’s off-line flights for the carriage of
passengers and cargo between ports or points outside Philippine territory.

In 2000, petitioner paid about Php 1.7 million in taxes as 2.5% of its GPB (Gross Philippine Billings). The
definition of GPB has changed over the years. Under the 1939 NIRC, 2.5% tax on GPB was imposed on
international carriers existing under foreign laws but engaged in business within the Philippines. Under
the 1977 NIRC, it was imposed on international carriers selling passage documents in the Philippines
provided the cargo/mail is of Philippine origin. Under the 1986 and 1993 NIRC, it was imposed on gross
revenue realized from uplifts of passengers anywhere in the world and excess baggage, cargo, and mail
of Philippine origin covered by passage documents sold in the Philippines. Under the 1997 NIRC, it refers
to gross revenue from carriage of persons, excess baggage, cargo and mail of Philippine origin in a
continuous and uninterrupted flight irrespective of where the passage document for such was sold.

In 2003, petitioner filed for a tax refund with the BIR, claiming that Php 1.7 million was erroneously paid
on the ground that it is not liable for tax on its GPB or for any other income tax. The claim, however, was
not answered, prompting petitioner to file for a review before the CTA.

The CTA denied the petition on the ground that although petitioner was not liable for 2.5% of GPB, it
was liable to pay 32% income tax because it was engaged in a business in the Philippines. Hence,
petitioner appeals before the SC, arguing that granting that it is liable for the 32% income tax, it is
nevertheless has the right to be refunded of the taxes it wrongly paid for 2.5% of its GPB or that such
amount should be offset from its 32% income tax liability as a matter of legal compensation.


What tax is petitioner liable for?


Petitioner is not liable for the 2.5% tax on GPB because it does not maintain flights to or from the
Philippines—it is merely selling passage documents for the transfer of such on flights outside Philippine
territory. However, it is liable for the 32% income tax because off-line air carriers having general sales
agents in the Philippines are engaged in or doing business in the Philippines, and that their income from
sales of passage documents here is income from within the Philippines (CIR vs British Overseas Airways).

The general rule is that under Sec. 28 (A) (1) of the 1997 NIRC, resident foreign corporations are liable
for 32% tax on all income from sources within the Philippines. The exception is that under Sec. 28 (A) (3)
of the 1997 NIRC, they are only liable for 2.5% on their GBP if such foreign corporation is an
international carrier maintaining flights to and from the Philippines lifting persons, excess baggage,
cargo, or mail, originating from the Philippines. Petitioner does not belong to the latter category; hence
the general rule applies to it.