Taxreview cases.docx

8/10/2019 Taxreview cases.docx

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1 Tax Cases (courtesy of L. Profugo)

Commissioner of Internal Revenue v. Pineda

21 SCRA 105

Facts:

Manuel Pineda received as one of the heirs of Antonio Pineda the amount of P2,500.00 ashis share in the estate of his father. After the estate proceedings, the BIR assessed the tax

liability of the estate for the year 1945-1948. Pineda contested the assessment and

appealed to the Court of Tax Appeals that proportionate part due to him as an heir. The

CTA reversed the ruling of the Commissioner on the ground that his right to assess and

collect the tax has prescribed. The High Court Affirmed the CTA in respect to the

assessment for income tax for the year 1947 but held the right to asses and collect the taxes

for 1945 and 1946, upon remand to the CTA, the court held Pineda liable for payment of his

corresponding share. The Commissioner appealed contending that Pineda should be held

liable for the payment of all taxes to be due from the estate instead of only for the amount

of taxes corresponding to his share.

Issue:

Whether or not Manuel Pineda is liable to pay all the taxes due on the estate instead of only

his corresponding share

Ruling:

Pineda is liable for the assessment as an heir and as holder-transferee of property

belonging to the estate/taxpayer. As an heir, he is individually answerable for the part of

the tax proportionate to the share he received from the inheritance. His liability, however,

cannot exceed the amount of his share. As a holder of the property belonging to the estate,Pineda is liable for tax up to the amount of property in his possession. The reason is the

government has a lien on the P2,500.00 received by him from the estate as his share in the

inheritance, for the unpaid taxes for which said estate is liable. Pineda will have a right of

contribution from his heirs.


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Roxas v. Court of Tax Appeals

23 SCRA 276

Facts:

The Roxas children inherited from their parents an agricultural land with an area of 19,000hectares in Nasugbu, Batangas, a residential house and lot at Malate, Manila and shares of

stocks in different corporations. To manage the same, the children namely; Antonio,

Eduardo and Jose, all surnamed Roxas, formed a corporation called Roxas y Compania.

At the conclusion of the Second World Warm, the government bought the agricultural land

in Nasugbu, Batangas for distribution among the landless tenant-farmers occupying the

same.

When Antonio and Eduardo got married, they lived elsewhere and left Jose in the old house.

In fairness to his brothers, Jose paid to Roxasy Compania rentals in the sum of P8,000.00 a

year.

In 1958, the CIR demanded from the company real estate dealers tax, compromise penalty

and tax for dealers in security for the year 1952. In the same assessment the brothers were

also assessed deficiency income taxes for 1953 and 1955 derived from the sale of Nasugbu

farm lands to the tenants and the disallowance of certain deductions. The Commissioner

considered the partnership ass engaged in business of real estate; hence, 100% of the profit

was taxed. The brothers protested the assessment but said protest was denied. They

brought the case to the CTA whose judgment is under review.

Issues:

1. Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence,

100% taxable?

2. Are the deductions for business expenses and contributions taxable?

3. Is Roxas y Compania liable for the payment of fixed tax on real estate dealers?

Ruling:

1. The act of subdividing a farm land and selling the same to the farmers-occupants on

installment in response to the Governments policy to allocate land to th e landless is not

subject to real estate dealers tax. The business activity of the landowner in selling the

land involved an isolated transaction with its peculiar circumstances and not to beconsidered as an act of a dealer even though there are hundreds of vendees. The gains

derived are taxable only to the extent of 50%.

The power of taxation is also called the power to destroy. Therefore, it must be

exercised with caution to minimize injury to the proprietary rights of a taxpayer. It

must be exercised fairly, equally and uniformly, lest the tax collector kill the hen that

lays the golden eggs


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2. As to representation expenses claimed, they are deductible from gross income as

expenditures incurred in carrying on a trade or business under Section 30(a) of the Tax

Code provided the taxpayer proves that the amount is ordinary and necessary and

incurred in connection with his business. In the case at bar, the evidence does not show

such link between the expenses and the business of Roxas y Compania.

On the claim for deduction of contributions made, only those contributions made to a

government entity under Section 39(h) of the Tax Code and Section 30(h) of the same

law are deductible. Hence, the contributions to the Christmas funds of Pasay City Police,

Pasay City Firemen and Baguio City Police were disallowed on the ground that they

were not for public purpose. The contributions to the FEU for the construction of a

chapel is also disallowed for the said university gives dividends to its stockholders

3. The imposition of a real estate dealers tax for the income received from Jose Roxas as

rental was upheld. Section 194 of the Tax Code in considering as real estate dealres

owners of real estate receiving rentals of at least P3,000.00 a year, does not providequalifications as to the person paying the rentals

The decision of the Court of Tax Appeals is modified.


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Vero v. Fernandez

89 SCRA 199

Facts:

There are two orders from the Court of First Instance of Negros Occidental dismissing theMotion for the Allowance and for an order of payment of taxes by the government in the

intestate estate proceedings of the estate of the late Luis Tongoy. The dismissal is anchored

on the ground that the claim was already barred by the Statute of Non-claims provided for

in the Rule 86, Section 5 of the Rules of Court.

Issue:

Whether or not the period of limitation within which to claim taxes maybe made by the

government on the basis of the governing provision of the Rules of Court or by the NIRC.

Ruling:

Under Section 5, Rule 86 of the Rules of Court, all claims for money against the decedent

arising from contract express of implied, due or not due, funeral cases and expenses for the

last sickness of the decedent must be filed within the time stated in the notice, otherwise,

they are barred forever.

Said section makes no mention of monetary obligations created by law such as taxes which

is of entirely different character from the claims so enumerated. Applying thus the rule

EXPRESSION UNIUS EST ECLUSIO ALTERUIS, it follows that taxes are not among the

claims that have to be file as aforestated.


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Sison v. Ancheta

130 SCRA 654

Facts:

A petition for declartory relief was filed by petitioner assailing the constitutionality ofSection 1 of B.P. 135 which amended Section 21 (a) of the National Internal Revenue Code.

It is alleged that petitioner would be unduly discriminated against by the imposition of

higher tax rates upon his income derived from the exercise of his profession vis--visthose

which are imposed upon fixed income or salaried individual taxpayers.

Issues:

1. Whether or not Section 1 of BP 135 is violative of the due process and equal

protection clauses;

2. Whether or not said section violates the rule on uniformity and equality in taxation.

Ruling:

1. The government in order to meet the increasing social challenge of the time needs more

revenues to perform its vital functions, taxes are the lifeblood of the government, hence,

its prompt and certain availability is of the essence. It is, however, subject to certain

restrictions.

Mere allegation of arbitrariness will not suffice to render the statute invalid considering

that the due process and equal protection clauses are not fixed rules but broad

standards which must be persuasively proved. Equal protection means that laws should

operate uniformly and equally on all persons under similar circumstances, both inprivileged conferred and liabilities imposed.

It is inherent in the power to tax that the state be free to select the subject of taxation

and inequalities which result from the singling out of a particular class for taxation or

exemption infringes no constitutional limitation.

2. The requirement that the rule on taxation should be uniform and equitable is amply

met when the tax operates with the same force and effect in every place where the

subject may be found; and when all taxable articles or kinds of properties of the same

class shall be taxed at the same rate.

What apparently misled petitioner was his failure to take into consideration the

distinction between a tax rate and a tax base. There is no legal objection to a broader

tax base on taxable compensation income by eliminating all deductible items and

reducing the applicable tax rates thereon as this classification rests on substantial

distinction that makes real differences, one of which is the susceptibility of

compensation income to the application of generalized rules since practically, salaried

individuals incur no overheard expenses in earning their income. On the other hand,


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there is no uniformity in cost/s expenses necessary to produce their income in the case

of professionals in the practice of their profession and businessmen, hence, it would be

unjust to disregard these disparities by giving them all zero deduction and

discriminately impose on all alike the same tax rates on the basis of their gross income.


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Tio v. Videogram Regulatory Borad

151 SCRA 208

Facts:

A petition was filed by petitioner in his own behalf and purportedly on behalf of the othervideogram operators adversely affected by PD No. 1987 entitled An Act Creating the

Videogram Regulatory Board with broad power to regulate and supervise the videogram

industry. On November 5, 1985, PD No. 1994 amended the National Internal Revenue Code

wherein an annual tax of five pesos was imposed on each processed video-tape cassette

ready for playback, regardless of length. Petitioner attacked the constitutionality of the

decree on the grounds that the imposition of a 30% tax on the fross receipts of the sales

and rentals of videotapes is harsh, oppressive, confiscatory and in restraint of trade, among

others.

Issue:

One of the issues raised in this case is whether or not Section 10 of PD 1987 imposing a

30% tax on gross receipts of the sales and rentals of videotapes is harsh, oppressive, and

confiscatory.

Ruling:

A tax does not cease to be valid merely because it regulate, discourages, or even definitely

deters the activities taxed. The power to impose taxes is so unlimited in force and so

searching in extent that the courts scarcely venture to declare that it is subject ito any

restrictions whatever, except such as rest in the discretion of the authority which exercises

it.

The tax imposed by the decree is not only regulatory but also a revenue measure prompted

by the realization that earnings of videogram establishment of around 600 million per

annum have not been subjected to tax, thereby depriving the government of an additional

source of revenue. Ii is an end-user tax imposed on retailers for every videogram they make

available for public viewing. It is a tax imposed uniformly on all videogram operators.

The levy of the 30% tax is for public purpose. It was imposed primarily to answer the need

for regulations of the video industry, particularly because of the rampant film piracy, the

flagrant violation of intellectual property rights, and the proliferation of pornographic

videotapes. And while it was also an objective of the decree to protect the movie industry,the tax remains a valid imposition.


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The Commissioner of Internal Revenue v. Algue and the Court of Tax Appeals

158 SCRA 9

Facts:

Private respondent Algue was assessed by the BIR a delinquency income tax on January14,1965. On January 18, 1965, Algue filed a letter of protest contesting among others the

disallowance of P75,000.00 it claimed as an ordinary business expenses. Thereafter, a

warrant of distraint and levy was presented to Algue which the latter refused to receive

because of the pending protest. It appeared that the BIR had no record of said protest,

hence, Algue furnished the former with a copy of the same. On April 7, 1965, the BIR

informed private respondent that it was not taking any action on the protest. Thus, Algue

appealed in April 23,1965.

Issues:

1.

Whether or not the appeal was made on time and in accordance with law.2. Whether or not the Collector correctly disallowed the P75,000.00 deduction claimed

by Algue as legitimate business expenses.

Ruling:

1. The appeal was filed on time and in accordance with RA 1125 which provides that the

appeal may be made within 30 dayes from the receipt of the ruling or decision

challenged. While it is true that as a rule a warrant of distraint and levy is proof of the

finality of the assessment and is rantamount to an outright denial of a Motion for

Reconsideration, there is special circumstances in the case at bar which prevents the

application of the doctrine. Algue filed a letter of protest four days after the assessmentwas received which was not taken into account by the BIR before the warrant was

issued as the latter did not even have a copy thereof, hence, the warrant was premature

and considering that the protest was not pro forma, it had the effect of suspending on

January 18, the 30-day appeal period which started to run again only on April 7,1965

when Algue was informed by the BIR of its implied rejection of the protest. Thus, when

the appeal was filed on April 23, 1965, only 20 days of the 30 day reglementary period

had been consumed.

2. The amount of P75,000.00 claimed as promotional fees should be allowed as ordinary

and necessary business expenses paid or incurred in carrying on a trade or business

which under the Tax Code include a reasonable allowance for salaries or othercompensation for personal services actually rendered.

Taxes are what we pay for a civilized society. Without taxes, the government would be

paralyzed for lack of motive power to activate and operate it. Hence, every person is

expected to contribute and the government is in turn is expected to respond in the form


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of tangible and intangible benefits to the taxpayer. This symbiotic relationship is the

rationale of taxation.


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Standard oil Company of New York v. Posadas

55 Phil 715

Facts:

The Standard Oil Co. of New York is a foreign corporation duly authorized to do business inthe Philippines. From October to December 1929, it sold and delivered to the Department

of US Army in the Philippines fuel oil and asphalt. It also delivered fuel to the US Navy

under a contract executed in New York. The US Army and US Navy were assessed taxes in

the amount of 1 % of the value of the merchandize paid by the Standard Oil COmpant

who claimed a refund for taxes paid under protest.

Issue:

Whether or not the Philippine Government can impose taxes on sale of merchandise in the

Philippines to the US Army and US Navy.

Ruling:

The US government created 3 agencies in the Philippines to serve the United States the

US Army, US Navy and the government of the Philippine Islands. The tax collected from the

plaintiff is in fact a tax on the US Army and the US Navy in other words, the US

government itself. It would be observed to think that a derivative sovereignty like the

Government of the Philippine Islands could tax the instrumentality of the very government

which brought it into existence.


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Lutz v. Araneta

98 Phil. 149

Facts:

Commonwealth Act No. 567 was enacted in 1940. Section 2 of the said law provides for atax on manufacture of sugar on a graduated basis; on each picul of sugar manufactured;

while Section 3 levies on owners or persons in contest of lands devoted to the cultivation of

sugar cane and ceded to others for a consideration on lease or otherwise. Plaintiff Walter

Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme

Ledesma, seekd to recover the taxes paid by the estate under Section 3 of the Said Act for

crop years 1948-1949 and 1949-1950, alleging that the tax is unconstitutional and void

being levied for the aid and support of the sugar industry exclusively which in plaintiffs

opinion is not for public purpose.

Issue:

Whether or not Commonwealth Act No. 567 otherwise known as the Sugar Adjustment Act

is constitutional.

Ruling:

An analysis of the Act particularly Section 6 thereof shows that the tax is levied with a

regulatory purpose, to provide means for the rehabilitation and stabilization of the sugar

industry, one of the great industries occupying a leading position among our export

products. Its promotion and advancement is, therefore, for the general welfare. That the tax

to be levied should burden the sugar producers themselves can hardly be a ground for

complaint for it appears rational that the tax be obtained precisely for those who are to bebenefitted.

Even from the standpoint that the act is a pure tax measure, it cannot be said that the

devotion of tax money to experimental stations to seek increase of efficiency in sugar

production, utilization of by-products and solutions of allied problems, as well as to the

improvement of living and working conditions of sugar workers without any part of the

money being channeled to private persons constitutes expenditures of tax money for

private purposes.


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Pascual v. Secretary of Public Works

110 Phil 148

Facts:

Respondent Zulueta is the owner of several parcels of residential lot situated in Pasig, Rizal.Certain portions of which have been reserved for the projected feeder roads which were

provate property when RA 920 was enacted. Respondent at the time of the passage of the

law was a member of the Senate of the Philippines. Petitioner Pascual, as Provincial

Governor prays that the law be declared null and void and the deed of donation of the said

feeder road be declared unconstitutional or illegal. The feeder road do not connect any

government property or any important premises of the main highway

Issue:

Whether or not RA 920 which provides for the repairm extension and improvement of said

roads unconstitutional.

Ruling:

Yes. The land on which the projected feeder roads are to constructed belongs to a private

person. An appropriation made by the Congress for that purpose is null and void and the

donation to the government made over 5 months. After the approval and effectivity of the

act for the purpose of giving a semblance of legality of the appropriation does not cure the

basic defect.

The legislative is without power to appropriate public revenues for anything but public

purpose. Incidental advantage to the public of the statute which results in the promotion ofprivate interests and the prosperity of private enterprises or business does not justify their

aid by the use of public money.


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Board of Assessment Appeals of Laguna v. Court of Tax Appeal

8 SCRA 224

Facts:

This case is a petition for review of the Court of Tax Appeals decision reversing the Boardof Assessment Appeals of Laguna.

The National Waterworks and Sewerage Authority is a public corporation owned by the

Government of the Philippines as well as properties comprising the waterworks and

sewerage system placed under it. The Cabuyao-Sta. Rosa-Bian Waterworks system was

assessed real estate taxes in the ground that although the properties were owned by the

government, the same are held in a proprietary capacity.

Issue:

Whether or not the water pipes, reservoirs, intake and buildings used by the respondentNAWASA in the operation of its waterworks system in Sta. Rosa, Cabuyao and Bian are

subject to real estate taxes.

Ruling:

Under the Commonwealth Act No. 470 (Section 3), any property owned by the government,

Republic of the Philippines, provincial, city, municipality/district are exempted from real

estate taxation. It makes no distinction between property held in sovereign capacity and

those possessed in a patrimonial or proprietary capacity, the test is ownership and since

the properties in question are owned by the Republic of the Philippines, they shoul be

exempt from real estate taxes whether possessed by the government as a proprietaryproperty or governmental capcacity.

Taxes are financial burdens imposed to raise revenues to defray the expenses of the

government; hence, a tax on the property of the government, and paid by it would merely

have the effect of taking money from one pocket and putting it in another pocket.


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Benjamin P. Gomez v. Enrico Palomar

25 SCRA 827

Facts:

Republic Act No. 163 was enacted to help raise funds for the Philippine TuberculosisSociety. It provides that for the period covering from August 19 to September 30 every

year, no mail matter shall be accepted unless it bears the 5 centavo anti-TB postal stamps.

Petitioner mailed a letter at the post-office in San Fernando, Pampanga which was denied

delivery on the ground that it did not bear the special anti-TB stamp. Thus, petition

questioned the validity of the law.

Issues:

1. Whether or not the statue in question violates the equal protection clause

2. Whether or not the imposition is for public purpose

Ruling:

The equal protection clause guarantee is not violated just because the statute constitute

mail users into a class for the purpose of taxation while leaving untaxed the rest of the

population. It is inherent in the power to tax that the state is free to select the subject of

taxation or exemption. In the case at bar, mail users were segregated as a class because of

ability to pay, enjoyment of a privilege and administrative convenience which are adequate

grounds for the imposition of the tax. The singling out of the Philippine Tuberculosis

Society to the exclusion of other diseases equally a menace to public health was not

violative of the equal protection clause since it is never a requirement that all evils of the

same genus be eradicated or none at all.

Eradication of a dreaded disease is a public purpose and does not mean returning what the

taxpayer pays but rather the privilege of living in an organized society established and

safeguarded by the devotion of taxes for said public purpose.


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Pepsi Cola Bottling Co. of the Philippines v. Municipality of Tanauan, Leyte

69 SCRA 460

Facts:

The Municipality of Tanauan, Leyte enacted two ordinances pursuant to RA 2264 ( Local

Autonomy Act). Ordinance No. 23 levies and collects from soft drink products and

manufacturers within the jurisdiction of the Municpality a tax of 1/16 centavo for every

bottle corked. Ordinance No. 27 on the otherhand, levies a tax of 1 centavo for each gallon

of soft drink. Pepsi Cola assailed the two ordinances on the ground that they are

unconstitutional for being violative of the due process clause and it constitute double

taxation.

Issues:

1.

Whether or not the ordinances violate the due process clause of the Constitution.2. Whether or not there is double taxation.

Ruling:

1. Under the Constitution, local government units are given the power to create their own

source of revenue subject to such limitation as maybe provided by law. Due process

only requires that the tax is for a public purpose; that the same is uniform and

equitable; that the property is within the jurisdiction of the taxing authority; and in the

assessment and collection thereof, notice and opportunity to be heard are afforded to

the taxpayer. Due process is not violated although the tax will result in an injury rather

than a benefit to the taxpayer. Judicial inquiry is not necessary as the amount of the taxand the manner on which the same shall be apportioned are generally not necessary to

due process.

2. Double taxation is not generally forbidden by the Constitution and becomes obnoxious

only as a violation of the equal protection clause when a taxpayer is taxed twice for the

benefit of the same government by the same taxing power or jurisdiction for the same

purpose over the same subject matter while others who are similarly situated are not so

taxed but not when a tax is imposed by the State and another tax is imposed by the City

or Municipality.


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Bagatsing v. Ramirez

74SCRA 315

Facts:

The Municipal Board of Manila enacted Ordinance No. 7522 prescribing fees for the rentalsof stalls of public markets. The federation of Manila Market Vendors, Inc. filed a case for the

declaration of nullity of the law for the reasons that the publication requirement was not

complied with and that the Market Committee was not given any participation in the

enactment of the ordinance, among others.

Issue:

The chief question raised is: Whether or not the Revised City Charter (RA 409, as amended)

which requires publication of the ordinance before its enactment and after its approval will

govern the publication of the subject ordinance.

Ruling:

The nexus of the present controversy is the apparent conflict between the Revised City

Charter of Manila and the Local Tax Code on the manner of publishing a tax ordinance. The

Revised City Charter requires publication of the ordinance before and after the approval of

ordinances levying or imposing taxes, fees, or other charges either in a newspaper of

general circulation within the local government jurisdiction or by posting the same in a

conspicuous places in the locality. Section 17 of the Revised Charter of Manila speaks of

ordinances levying or imposing taxes, fees or other charges in particular.

Thus, the Local Tax Code controls in the case at bar. This especially true where the lawcontaining the particular provision was enacted later as a general provision must give way

to a particular provision.


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National Development Company v. Cebu City

215 SCRA 382

Facts:

Petitioner is a government owned corporation authorized to engage in commercial,industrial, mining and other enterprises necessary or contributory to economic

development or important to public interest. It operates a subsidiary corporation, NWC.

The latters assets and functions were taken over by the NDC when it was dissolved. In

1939, a 4599 square meter lot was renewed by Proc. No. 430 for warehousing purposes of

the NWC. The City of Cebu assessed and collected from NDC real estate taxes on the land

and the warehouse therein. By the first quarter of 1970, a total of P100,316.31 was paid by

NDC of which only P3,895.06 was under protest. NDC filed a complaint claiming for refund

of the real estate taxes paid on the ground that the land and warehouse standing thereon

belongs to the Republic and therefore, exempt from taxation.

Issue:

Whether or not the land and the warehouse standing thereon are exempt from taxation.

Ruling:

Properties owned by the government and by its agencies which do not have separate and

distinct personalities (unincorporated entities) are exempt from real estate taxes. The test

is thus, ownership and once established, the nature of the use of the property, whether

proprietary or sovereign becomes immaterial. Since in this case, what appears to have been

cede to NDC was merely the administration of the property while the government retains

the ownership thereof, the land is clearly covered by the exemption.

As regards the warehouse, however, which was constructed on the reserved land, a

different rule should apply because exemption of public property from taxation does not

extend to improvements therein made by occupants or claimants at their own expense, and

these are taxable by the state. Consequently, the warehouse constructed on the reserved

land by the NDC should be properly assessed real estate tax as such improvements does

not appear to belong to the Republic.


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Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan

163 SCRA 371

Facts:

This case involves four (4) consolidated petitions filed by petitioners KAPATIRAN, KMU,

Integrated Customs Brokers and Ricardo Valmonte seeking to nullify E.O. No. 273 which

amended certain sections of the National Internal Revenue Code and adopted the Value

Added Tax. It is alleged that VAT is unconstitutional for not being within the powers of the

President to enact, oppressive, discriminatory, regressive, violative of the due process and

equal protection clause of the Constitution and other provisions of the 1987 Constitution.

Issues:

1. Whether or not E.O. No. 273 is oppressive, discriminatory, unjust and regressive in

violation of Art. 6 [28(1)]2. Whether or not the law unduly discriminate against custom brokers

Ruling:

Petitioners failed to adequately show that the VAT is oppressive, discriminatory or unjust.

Petitioners merely rely upon newspaper articles which are actually hearsay and have no

evidentiary value. As the court sees it, E.O. No. 273 satisfies all the requirements of a valid

tax law. It is uniform. The sales tax adopted om EO 273 is applied similarly on all goods and

services sold to the public, which are not exempt, at the constant rate of 0% or 10%.

The disputed tax is also equitable. It is imposed only on sales of goods or services bypersons engaged in business with an aggregate gross (income) annueal sales exceeding P

200,000.00. Exempt from tax are small corner sari-sari store and sales of farm and marine

products, so that the costs of the basic food and other necessities, spared as they are from

the incidence of VAT, are expected to be relatively lower and within the reach of the

general public.

The Court likewise finds no merit in the contention that E.O. No. 273 more particularly the

new Sec. 103(r) of the NIRC discriminates against customs brokers. The phrase was

inserted to complement the provisions of Sec. 102 of the Code which makes the services of

customs brokers subject to the payment of the VAT and to distinguish custom brokers from

other professionals who are subject to the payment of an occupation tax under the LocalTax Code.

The distinction of the custom brokers under the Local Tax Code from other professionals

who are subject to occupation tax is based upon material difference in that the activities of

the custom brokers partake more of a business rather than a profession and were

subjected to the percentage tax under Sec. 174 of the NIRC prior to its amendment by E.O.

No. 273. E.O. No. 273 abolished the percentage tax and replaced it with VAT.


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Reyes v. Almanzor

196 SCRA 322

Facts:

Petitioners are owners of land which were leased and occupied as dwelling by the tenantswith monthly rentals not exceeding P200.00. On July 14, 1971, RA 6539 was passed

prohibiting for one year the increase in monthly rentals of land/dwellings whose rental

does not exceed P300.00 but not allowing an increase of not more than 10%, thereafter, the

prohibition was made absolute. Petitioners properties were re-assessed and imposed

higher tax rates using the comparable sales approach instead of the annual income

approach.

Issue:

Whether or not the re-assessment of the properties of the petitioner using the said

approach violates the due process clause of the Constitution.

Ruling:

The re-assessment of the properties in question is harsh, oppressive and confiscatory;

hence, violative of the due process clause. Although under the Real Property Tax Code, for

taxation purposes, the properties must be appraised at their current and fair market value,

by no stretch of the imagination can the market value of the properties covered by P.D. No.

20 be equated with the market value of properties not so covered. The power to tax is an

attribute of sovereignty, but for all its plenitude, the power is not unconfined and is subject

to restrictions affecting as it does property rights.


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Tolentino v. Secretary of Finance

235 SCRA 630

Facts:

R.A. 7116 was enacted seeking to widen the tax base of the of the existing VAT system.Some provisions of the NIRC were amended. Petitioners assail the validity of the law that it

was not passed nor originated from the House of Representatives. Another issue was that

the Phil. Press Institute and Philippine Bible Society claimed that it violated their rights

under the Bill of Rights insofar as it withdrew the exemption previously granted to mass

print media. The law was claimed to be discriminatory. PBS alleged that it violates the

freedom of religion clause.

Issue:

Whether or not the law was invalid on the ground that it did not originate from the House

of Representatives; that it violates the equal protection clause and freedom of religionclause of the Constitution.

Ruling:

Petitioners contention that the law did not originated from the House of Representatives

as a requirement of the Constitution is untenable. It is not the law but the Revenue bill

which must originate exclusively from the House of Representatives.

As to the issue of abridgement of the press freedom, the publisher of a newspaper has no

immunity from the application of general laws. He has no special privilege to invade the

rights and liberties of others. The press is taxed on transactions involving printing andpublication which are different from the transaction of broadcast media. Hence, there is

reasonable basis for classification.

Neither was there infringement of religious freedom. The VAT is imposed not for the

exercise of the privilege but for the purpose of defraying the cost of registration.

As to the contention that VAT is regressive, the provision requiring Congress shall evolve a

progressive system of taxation is not mandatory. It seeks to avoid but not to prohibit the

imposition of regressive taxes.


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Easters Theatrical Co. v. Alfonso

83 Phil. 852

Facts:

Twelve corporations engaged in Motion Pictures business initiated proceedings through acomplaint impugning the validity of Ordinance No. 2958 of the City of Manila imposing a

fee on the price of every admission tickets sold by cinematograph theaters, Vaudeville

companies, theatrical show and boxing exhibitions. They alleged that the ordinance is

violative of the following: a.) uniformity and equality of taxation and equal protection

clause of the Consitution; b.) lack of authority to enact the ordinance; c.) inconsistency with

existing revenue and tax laws and d.) being unfair, unjust, oppressive, arbitrary, capricious

and unreasonable. The lower court upheld the validity of the ordinance. Hence, this case.

Issues:

1.

Whether or not the ordinance was beyond the City of Manila to enact.2. Whether or not the ordinance is violative of the principle of equality and uniformity

in taxation.

Ruling:

Plaintiffs argument that the power granted under the Administrative Code to the City of

Manila [Section 2444(m)] is limited to the authority to impose a tax on business with the

exclusion of the power to impose a tax on amusement is based on arbitrary labeling of the

kind of tax authorized by said section. The tax therein cannot be restricted within a smaller

scope than what is authorized by the words used to the extent of excluding what plaintiffs

describe as a tax on amusement. The very fact that Section 2444(m) of the ReviseAdministrative Code includes theaters, cinematographs, public billiard tables and other

places of amusement and performance will show conclusively that the power to tax

amusement is expressly involved within the power granted by Section 2444(m) of the

Revise Administrative Code.

The argument that Ordinance No. 2958 violated the principle of equality and uniformity of

taxation enjoined by the Constitution has no merit. The fact that some places of amusement

are taxed while others are not is nor argument at all against the equality and uniformity of

the tax imposition. Equality and uniformity means that all taxable articles or kinds of

property of the same class shall be taxed at the same rate


22/61


Manila Race Horse Trainers Association v. de la Fuente

88 Phil 60

Facts:

The Manila Horses Trainers Association, Inc., a non-stock corporation under Philippine law,filed a case for declaratory relief praying that Ordinance No. 3065 of Manila be declared

violative of the Philippine Constitution. It is alleged that the same is a tax on horses and

that it is discriminatory and savor class legislation.

Issue:

Whether or not the Ordinance No, 3065 is discriminatory, obnoxious and beyond the

power of the city to enact

Ruling:

The ordinance is a tax on race horses as distinct from boarding stables. The spirit rather

than the letter, of an ordinance determines the construction thereof, and the court looks

less to its words and more to the context, subject matter, consequence and effect.

Accordingly, what is within the spirit is within the ordinance although it is not within the

letter thereof, while that which is in the letter although not within the spirit is not within

the ordinance. The intent to tax or license stables and not horses is clearly manifest.

The use of the number of horses as a method of fixing an equitable and practical

distribution of the burden imposed far from being obnoxious is fair and just.

The questioned ordinance is likewise, not discriminatory or savors class legislation. Thefact that the same places of amusement are taxed while others are not is not an argument

against the equality and uniformity of the tax imposition. There would be discrimination if

some boarding stables of the same class used for the same number of horses were not

taxed or were made to pay less or more than others.


23/61


Juan Luna Subdivision, Inc. v. Sarmiento

91 Phil 371

Facts:

Plaintiff is a corporation duly organized under Philippine Laws. In December 194, it issuedto the City Treasurer of Manila a clerk for P2,210.52 as payment of its taxes for the second

quarter of 194. The check was drawn against Philippine Trust Company. Meanwhile, after

the war, Commonwealth Act 703 was passed remitting all taxes due and payable for the

second semester of 1941. On February 20, 1942, the exact amount of tax of plaintiff

corporation was verified to be P341.60, plaintiff claimed the refund but was refused by the

City Treasurer nor the latter was willing to reverse its debt entry against JLS, holding

inapplicable the provision of CA 703

Issue:

Whether or not Commonwealth Act No. 703 was discriminatory and violative of the equalprotection clause of the Consitution.

Ruling:

The remission of taxes due and payable to the exclusion of taxes already collected does not

constitute unfair discrimination for each set of taxes is a class by itself and the law would

be open to attach to class legislation only if taxpayers belonging to the same class are not

treated alike. Taxpayers who have paid their taxes before the liberation and those who had

not are not in equal footing in material need. Those who had been in arrears would satisfy

their obligation in genuine currency while those paid during the Japanese occupation had

been satisfied with Japanese notes many of which were well-nigh worthless. To refundthose taxes with the restored currency would be to unduly enrich many of the payers at a

greater expense to the people at large.


24/61


Association of Customs Brokers, Inc. v. Municipal Board of the City of Manila, et. al.

93 Phil 107

Facts:

The Association of Customs Brokers, Inc. composed of all brokers and public serviceoperators of motor vehicles in the City of Manila and G. Manlapit, Inc. a member thereof

challenge the validity of Ordinance No. 3379 of the Municipal Board of the City of Manila.

The act levies a property tax on all motor vehicles operating within the city. Petitioners

contend that while it levies a so called property tax, it is in reality a license tax and beyond

the power of the board to enact. Said ordinance also offends the rule of uniformity in

taxation and that it constitutes double taxation.

The Court of First Instance of Manila dismissed the petition and sustained the validity of

the ordinance. Hence, this petition.

Issues:

1. Whether or not the tax imposed by Ordinance No. 3379 is a property tax

2. Whether or not the ordinance infringes the rule on uniformity of taxation.

Ruling:

Under Section 70(b) of the Motor Vehicle Law, no fees maybe exacted or demanded for the

operation of any motor vehicle other than those provided therein, the only exception being

that refers to a property tax which may be imposed by a municipal corporation.

The ordinance while it refers to a property tax was enacted for the purpose of raising fundsto be expended exclusively for the repair, maintenance and improvements of the streets

and bridges in the said city. The nature and purpose of the tax as gathered from its context

show that it is an excise tax or a license tax.

The ordinance also infringes on the rule on uniformity of taxation. It exacts tax upon all

motor vehicles operating within the City of Manila. It does not distinguish between a motor

vehicle for hire and one for private use. Neither does it distinguish between a vehicle

registered in Manila and one registered elsewhere but occasionally comes to Manila and

uses its streets and public highways. The distinction is important because it intends to

burden only that operating in Manila. The fact that all the motor vehicle who come to

Manila contribute to the deterioration of the streets and highways, they should also bemade to share the corresponding burden. Yet this is not the case. There is inequality in the

ordinance.


25/61


Punsalan, et. al. v. Municipal Board of Manila, et. al.

95 Phil 46

Facts:

The City of manila enacted Ordinance No. 398 imposing a municipal occupation tax on allpersons exercising various professionals in the City of Manila and penalizing non-payment

thereof. Petitioners assail the validity of the ordinance on the ground that they were

already paying occupation tax under the NIRC. Furthermore, the professionals in other city

were not similarly taxed; thus, it constitute double taxation and violative of the equal

protection clause.

Issues:

1. Whether or not the ordinance is violative of the equal protection clause of the

Constitution.

2.

Whether or not it constitutes double taxation.

Ruling:

In raising the issue of class legislation, plaintiffs claim that while the law authorized the

City of Manila to impose the tax, it was withheld from other chartered cities. This is

justified by the fact that Manila, being the seat of National Government with a population of

and volume of trade many times that of other cities or municipality. Manila, no doubt offers

more lucrative place for the practice of profession. It is but fair that professionals in Manila

be made to pay higher occupation tax than in the province or other cities.

Double taxation, on the other hand, may not be invoked where one is imposed by the State

and the other by the city.


26/61


Llados v. Commissioner of Internal Revenue

G.R. L-19201, June 16, 1965

Facts:

In 1957, M.B. Estate, Inc. of Bacolod City donated P10,000.00 cash to Rev. Fr. Crispin Ruiz,then parish priest of Victorias, Negros Occidental and predecessor of petitioner for the

construction of a new church. The donors gift tax return was filled by M. B. Estate, Inc. the

donation was assessed a donors gift tax with interest and charges. Petitioner who is the

new parish priest of the place protested the same. It was denied by the Commissioner of

the Internal Revenue. The CTA affirmed the decision.

Issue:

The pivotal issue in this case is whether or not petitioner should be liable for the

construction of the Victorias Parish Church

Ruling:

Under Section 22(3) Article VI of the Constitution, cemeteries, churches and parsonages or

convents appurtenant thereto, and all lands, buildings and improvements used exclusively

for religious purposes are exempt from the payment of property taxes. What the collector

assessed was the donees gift tax not on the property itself. It did not rest upon general

ownership but as an excise upon the use made of the properties, upon the excise of the

privilege of receiving the properties. Manifestly, gift tax is not within the exempting

provision.

Petitioners assertion that he should not be made liable because at the time of the donation,he was not ye parish priest of Victorias is meritorious. The Head of Diocese, the Roman

Catholic Bishop of Bacolod to which the parish of Victorias pertains, is liable for the

payment of tax.

The decision appealed from is affirmed insofar as tax liability is concerned but modified

insofar as to the person liable for the payment thereof is concerned.


27/61


Ormoc Sugar Co., Inc. v. Treasurer of Ormoc City, et. al.

22 SCRA 603

Facts:

The Municipal Board of Ormoc City passed an ordinance imposing on any and allproduction of centrifugal sugar melted at the Ormoc Sugar Company. A municipal tax

equivalent to 1% per export sale to the USA and other foreign countries. Plaintiff paid the

taxes under protest and contested the validity of the ordinance on the ground that is

violative of the equal protection clause of the Constitution.

Issue:

Whether or not the ordinance in question is in violation of the Consitution provision of

equal protection.

Ruling:

A valid classification of subjects of taxation must be made for a tax law to be valid. The

requisites are the following: a) it must be based on substantial distinctions which make

real difference; b) it must be germane to the purpose of the law; c) it must not apply to

existing conditions only but to future conditions identical to those of the present; and d) it

must be applied to all those belonging to the same class.

The questioned ordinance does not meet said conditions. It is applied only to centrifugal

sugar produced and exported by Ormoc Sugar Co. Although at the time of its enactment, the

only sugar company in Ormoc is the plaintiff, the classification is unreasonable for it will

not apply to future conditions as it expressly points only to Ormoc Sugar Co. as the entitylevied upon. The ordinance violates the equal protection clause.


28/61


Pepsi Cola Bottling Co. of the Phil. Inc. v. City of Butuan

24 SCRA789

Facts:

Plaintiff in this case seeks to recover the sums paid by it to the City of Butuan pursuant toMunicipal Ordinance No. 122, series of 1960 which it assails to be null and void on the

following grounds: a) it partakes of the nature of an import tax; b) it amounts to double

taxation; c) it is excessive and confiscatory; d) unjust and discriminatory; and e) RA 2264

upon the authority of which it was enacted is an unconstitutional delegation of legislative

powers. The CFI dismissed the complaint.

Issue:

Whether or not Ordinance No. 110 as amended by Ordinance No. 122 is null and void

Ruling:

The second and last objections (double taxation and undue delegation of legislative power)

are without merit. Double taxation, in general, is not forbidden by our fundamental law.

Likewise, the principle against non-delegation of legislative powers, is subject to one well-

established exception; namely, legislative power may be delegated to local governments

in respect of matters of local concern.

The fifth and fourth objections merit consideration. The tax limits the application of the

ordinance to soft drinks and carbonated drinks brought into the city from outside; hence,

partakes of the nature of an import duty which is beyond defendants authority to impose

by express provision of the law.

Even if the tax would be regarded as a tax on the sale of beverage, it would still be invalid,

as discriminatory, and hence, violative of the uniformity required by the Constitution and

the law; therefore, since only sales by agents or consignee of outside dealers would be

subject to tax. Sales by local dealers, not acting for or on behalf of other merchants

regardless of the volume of their sales, and even if the same exceeded those made by said

agents or consignee of producers or merchants established outside the City of Butuan,

would be exempt from the disputed tax.


29/61


City of Baguio v. de Leon

25 SCRA 938

Facts:

Defendant-appellant Fortunato de Leon assailed the decision of the lower court inupholding the validity of an ordinance of the City of Baguio imposing a license fee on any

person, firm or entity or corporation doing business in the City of Baguio. He was held

liable as a real estate dealer with a property therein worth more than P10,000.00 but not in

excess of P50,000.00. Appellants appeal is anchored on the ground that the same is beyond

the City of Baguio to enact and violative of the due process clause for being a double

taxation.

Issues:

1. Whether or not the ordinance is beyond the City of Baguio to enact

2.

Whether or not the ordinance is violative of due process

Ruling:

Republic Act No. 329 amended the city charter adding to the power of the city the power to

license, the power to tax and to regulate. The city council of Baguio, therefore, has now the

power to tax, license and regulate provided that the subjects affected be one of those

included in the charter. In this sense, the ordinance is not ultra vires.

Neither is it violative of the due process clause because double taxation as a rule infringe

no Constitutional limitation.


30/61


Villegas v. Hiu Chiong Tsai Pao Ho

86 SCRA 270

Facts:

The City of Manila enacted Ordinance No. 6537 prohibiting aliens from being employed orto engage or participate in any occupation or business whether temporary, casual or

permanent without first securing an employment permit from the Mayor and paying a

permit fee of P50.00. Private respondent challenge the Constitutionality of the ordinance

on the ground that it violates the due process clause and equal protection clause of the

Constitution.

Issue:

Whether or not Ordinance No. 6537 is valid

Ruling:

The ordinance infringes the due process clause of the Constitution which applies to citizens

and aliens alike. It requires a person before he can be employed to secure a permit from the

Mayor who may withhold or grant the same. It is tantamount to denying him the means of

livelihood. For while the Philippines is not obliged to admit aliens within its territory, once

admitted, he cannot be deprived of his life which includes his means of livelihood without

due process of law.

The P50.00 permit fee is unreasonable and excessive. There is no logic in exacting the

amount from aliens because it violates the equal protection clause. It failed to consider

valid substantial differences among individual aliens.

The ordinance is held invalid.


31/61


Tan v. Del Rosario

237 SCRA 324

Facts:

Petitioner claims to be a taxpayer adversely affected by R.A. 7496 commonly known asSimplified Net Income Taxation Scheme (SNIT) amending certain provisions of NIRC and

the validity of Section 06; Revenue Regulations no. 2-93 promulgated pursuant to the said

law. It said that the enactment of RA 7496 violated Section 26(1) and Section 28(1) of

Article VI and Section 1, Article of the new Constitution.

Issue:

Whether or not RA 7496 and Revenue Regulation No. 2-93 are constitutional.

Ruling:

On the contention that RA 7496 is violative of the constitutional pr ovision that the bill

shall embrace only one subject which shall be expressed in the title thereof, the court that

the objective against log-rolling legislative appears to have been sufficiently met. Anything

else would be a requirement which could not have been the intendment of the

constitutional mandate.

Petitioners contention that the law is violative of the equal protection clause for it would

now attempt to tax single proprietorship and professionals differently from the manner it

imposes the tax on corporations and partnerships has no basis. Such system of taxation has

long been prevailing even before the enactment of RA 7496. Uniformity in taxation like the

kindred concept of equal protection merely requires that all subjects of taxation equallysimilarly situated are to be treated alike both in privileges and liabilities. Uniformity does

not forefend classifications as long as the standards used are substantial and not arbitrary.

On the ground that the Revenue Regulation No. 2-93 is invalid, the real objection of the

petitioners is focused on the administrative interpretation by public respondent that would

apply SNIT to GPP.

SNIT is not intended or envisioned to cover corporations and partnerships which are

independently subjected to the payment of income tax. Section 6 of the said revenue

regulation did not alter but merely confirmed the tax treatment of individuals and

corporations under the Tax Code.

The questioned statue and regulation are held valid.


32/61


Misamis Oriental Assocation of Cocotraders Inc. v. Secretary of the

Department of Finance

238 SCRA 63

Facts:

Petitioner is a domestic corporation whose members are engaged in the buying and selling

of copra. Prior to the issuance of Revenue Memorandum Circular 47-91, copra was

classified as an agricultural food product and therefore exempt from VAT at all stages of

production or distribution [103(b) of the NIRC]. On June 11, 1991, the Commissioner

issued the questioned circular classifying copra as an agricultural and declaring exempt

from VAT only if the sale is made by the primary producer pursuant to Section 103(a) of

the Tax Code as amended. Hence, the petition for prohibition and injunction seeking to

nullify the questioned circular and enjoin the collection by the respondent revenue officials

of the VAT on the said products.

Issue:

Whether or not the CIR erred in not considering copra as an agricultural food product for

purposes of Section 103 of the NIRC.

Ruling:

In interpreting Section 103(a) and (b) of the NIRC, the CIR gave it a strict construction

consistent with the rule that tax exemption must be strictly construed against the taxpayer

and liberally in favor of the State. Dr. Rintanar of the BFD who classified copra as food,

based the same on broader definition of food which modulates agricultural commodities

and other components in the manufacturing and processing.

The contention that the former commissioner of the BIR classified copra as an agricultural

food product, hence, it must be classified as so is not binding upon his successor.


33/61


Casanova v. Herd

8 PHIL 125

Facts:

In 1987, the Spanish government granted to herein plaintiff mining concessions in Ambos,Camarines of which plaintiff is the miner. These were valid mining concessions prior to

April 11, 1989 . They were so considered by the provision of Act No. 1189 (Section 134) of

the Internal Revenue Act. Defendant imposed the tax mentioned in Section 134 which

plaintiff paid under protest on the ground that it is violative of the non-impairment of

obligations and contract clause of the Constitution.

Issue:

Whether or not the statute violates the non-impairment clause as regards the contract

when it levied taxes on the properties of the plaintiff.

Ruling:

Yes. The concession granted by the Government of Spain to the plaintiff constitutes as a

contract between the parties; that Section 134 of the Internal Revenue Act impairs the

obligations of this contract and is therefore void unto them.


34/61


American Bible Society v. City of Manila

101 SCRA 386

Facts:

Plaintiff is a foreign, non-stock, non-profit religious missionary corporation duly registeredin the Philippines. In the course of its ministry, plaintiffs Philippine agency has been

distributing and selling Bibles and/or gospel portion thereof throughout the Philippines

and translating the same in Philippine dialect. In 1953, the acting city treasurer of Manila

required plaintiff to pay the necessary mayors permit and municipal license pursuant to

Ordinance 3000. Plaintiff protested the requirement but paid to avoid closing of its

business. Plaintiff, thus, filed a complaint praying that Municipal Ordinances Nos. 2529,

3028 and 3364 be declared illegal and unconstitutional and to refund to the plaintiff the

amount it paid under protest.

Issue:

1. Whether or not Ordinances Nos. 3000 as amended and 2529, 3028, and 3364 are

constitutional and valid.

2. Whether the provisions are applicable to the case at bar.

Ruling:

Plaintiff posits that said ordinances are unconstitutional and illegal because it violates the

constitutional provision on freedom of religion and its free exercise. It retains the

enjoyment of its religious profession, to wit: the distribution and sale of Bibles and other

religious literature to the people of the Philippines.

In the case at bar, the price asked for the Bibles and other religious articles was in some

instances a little bit higher than the actual cost of the same, but this cannot mean that the

appellant was engaged in the business of selling such merchandise for profit. For said

reason, the provisions of ordinance no. 2529, as amended cannot be applied to the

appellant, for in so doing, it would impair its free exercise and enjoyment of the right to

religious profession and worship as well as its right to disseminate religious beliefs.

With respect to ordinance no. 3000, it does not seem to impose any charge upon the

enjoyment of a right granted under the constitution nor the exercise of religious practice. It

seem clear, therefore, that the questioned ordinance cannot be considered unconstitutional

even if it applied to plaintiff society. But with regard to ordinance no. 2529 as amended ofthe city of Manila is not applicable to the plaintiff-appellant and defendant appellee is

powerless to require a license or to tax the business of plaintiff without violating its

religious freedom. Ordinance No. 3000 as amended is also inapplicable to said business.


35/61


Roman Catholic Church v. Hastings

5 PHIL 701

Facts:

The assessor and collector of the City of Manila imposed a tax upon the residence of theRoman Catholic Archbishop of Manila. The same was located from 80-100 meters distance

from the Cathedral Church. It is occupies as a residence by the Archbishop who is the head

pastor of all the churches in his diocese, the Cathedral being his special church. Appellant

claimed that it is exempt from taxation by virtue of Section 48 of Act No. 183 of the

Philippine Commission. The claim was denied. Hence, this case.

Issue:

Whether or not the property used as a residence by the Archbishop qualifies as a

parsonage: adjacent to theChurch for purposes of tax exemption pursuant to Act no. 183.

Ruling:

The statute should be construed strictly but not unnaturally. The statute should be

construed with due regard to the policy of its true enactment. A fair reading of its terms are

of the broadest sense indicates no intention to exclude from its benefits any place of

worship or any clerical residence used in connection therewith. The word parsonage as

used in the Spanish context is too narrow for it would not include the residence of a

protestant clergyman or a Jewish rabbi. The English word a parsonage must be read, not

in a technical sense but in the broad meaning of a ministerial residence used in connection

with any place of worship of any denomination.

* Dissenting Opinions

1. J. Johnson

It being the theory of the government that all properties shall contribute equally, in

proportion to its value to the support of the government, a law exempting a tax must be

strictly construed. The word adjacentadjoining or contiguous property only.

2. J. Carson

The exemption as to churches, with their adjacent parsonages and convents contained in

Act No. 183, does not extend to parsonage and convents which do not stand on the same

integral lot with their respective churches.


36/61


YMCA v. Collector

33 PHIL 217

Facts:

YMCA of Manila aims to develop the Christian character of its members and help improvetheir mental, physical and social condition of young men. It is a religious, charitable and

educational institution combined. YMCA erected a new building to achieve these purposes.

The city of Manila levied a tax thereon contending that the institution is running a business

by providing board and lodging house.

Issue:

Whether or not the building and the grounds of YMCA are subject to taxation.

Ruling:

No. There is no doubt about the correctness of the contention that an institution must

devote itself exclusively to all or other purposes mentioned in the statute before it can be

exempt from taxation, but the statute does not say that it must be devoted solely to only

one of those purposes and still be entitled to exemption. YMCA is an institution exclusively

for religious, educational and charitable purposes, and as such, it is entitled to tax

exemption.

The association realizes no profit. The purpose of maintaining the lodges and boarders is to

keep membership continually within the sphere and influence of the institution and

thereby to prevent the opportunities which vice presents to young men in foreign countrieswho lack home or other similar influences.

Dissenting Opinion: J. Carson

The statutory exemptions from taxation should be strictly construed.


37/61


The Roman Catholic Bishop of Nueva Segovia v. Provisional Board of Ilocos Norte

51 PHIL 351

Facts:

The plaintiff is the owner of a parcel of land in San Nicolas, Ilocos Norte all four sides ofwhich face public streets. Adjacent to the church yard and the convent is a lot containing an

area of 1,624 square meters used as a vegetable garden as well as a stable for the use of the

convent. On the opposite side was an old cemetery used as lodging house by the people

who participate in religious festivities. The provincial board assessed land tax on the lot

adjoining the convent and the lot on where the former cemetery was located. Under the

law, cemeteries, burial grounds and all lands, buildings and improvements used exclusively

for religious purposes are exempt from taxation. Plaintiff paid the tax under protest. It

sought to recover the sum paid alleging that the collection was illegal.

Issue:

Whether or not the lot on which the vegetable garden and the former cemetery are exempt

from taxation.

Ruling:

Yes. The exemption in favor of the convent from the payment of land tax under the

Administrative Code includes not only the land occupied by the Church but also those

adjacent to the ground destined to the ordinary, incidental uses of man.

Likewise, the former cemetery wherein the lot was used as a lodging house for the peoplewho participate in religious festivities constitute as an incidental use in the religious

functions is also exempt from taxation.

Dissenting Opinion: J. Malcom

The property legally exempt from the payment of the tax must be devoted to some

purposes specified by law. A huerta not needed or used for religious purpose is not tax

exempt. A cemetery or burial ground is thus not exempt.


38/61


Herrera v. QC Board of Assessment Appeal

3 SCRA 186

Facts:

St. Catherine hospital in Quezon City was granted tax exemption from real property taxeffective the years 1953 to 1955. In August 1955 the properties of the said hospital were

classified as taxable. The building involved is principally a hospital with 32 beds, 20 of

which all for charity patients while the remaining 12 beds are for pay-patients. The income

realized from pay-ward is used for the improvement of the charity wards. Petitioners also

operate a school of midwifery granted recognition by the Secretary of Education. The same

is located within the said premises.

Issue:

Whether or not the lot, building and other improvements by St. Catherine Hospital are

exempt from real property tax.

Ruling:

The hospital is exempt from real property tax. The income realized from the payment in

the pay-ward is used for the improvement of the charity-ward. The exemption in favor of

the property used for charitable and educational purposes is not limited to the actual

property and indispensible therefore. It extends to facilities which are incidental to and

reasonably necessary for the accomplishment of said purpose. That St. Catherine is,

therefore, a charitable institution and the fact that it admits pay-patients whose payment

us devoted to the improvement of the charity ward does not bar it from claiming the tax

exemption benefit.

The existence of the school of midwifery does not and cannot affect its exemption under

the law. All lands, buildings and improvements used exclusively for religious, charitable

and educational purposes shall be exempt from taxation pursuant to the constitution

regardless of whether or not material profits are derived from the operation of the

institution in question.


39/61


Abra Valley Colleges v. Aquino

162 SCRA 106

Facts:

Abra Valley Colleges is an educational institution. The second floor of the school building isoccupies by the Director of the college and his family for residential purpose while the

ground floor was leased to a commercial entity. A notice of distraint and seizure was served

upon it for non-payment of real estate taxes and penalties. The case was decided by the

trial court and ruled in favor of the government. Hence, this case.

Issue:

Whether or not the school building is actually, directly and exclusively used for

educational purpose as to be exempt from real property tax.

Ruling:

The test of exemption from taxation is the use of the property for purposes mentioned in

the constitution. Exemption extends to facilities which are incidental to and reasonably

necessary for the accomplishment of the main purpose. Thus, while the use of the second

floor of the main building in the case at bar for the residential purpose of the director and

his family may find justification under the concept of incidental use, the lease of the first

floor to Northern Marketing Corporation cannot be considered incidental to the purpose of

education. Since only a portion is used for purposes of commerce, half the assessed tax

should be returned to the petitioner.


40/61


Osmena v. Orbos

200 SCRA 203

Facts:

PD 1956 created a special account in the general fund designated as Oil Price StabilizationFund (OPSF) designated to reimburse oil companies from the cost increases in crude oil

and imported petroleum products resulting from exchange rate adjustments and increases

in the world market of crude oil. OPSF was later reclassified into a trust liability account

and ordered released from the National treasury to the Ministry of Energy. The decree was

later amended by EO 137 expanding the grounds for reimbursement to include cost under

recovery incurred as a result of the reduction of domestic prices of petroleum products.

Petitioner questions the validity of the law.

Issue:

1.

Whether or not the trust account in the book of accounts of the Ministry of Energy(now Office of Energy Affairs) is violative of Section 29(3) of Article VI of the

Constitution;

2. Whether or not Section 8 paragraph 1cc of PD 1956 is an undue delegation of

legislative power;

3. Whether or not reimbursement to oil companies pursuant to the OPSF contravenes

section 8 paragraph 2(2) of the said law;

4. Whether or not the order dated December 10, 1990 is valid;

Ruling:

1.

While the fund collected may be referred to as taxes, they are exacted in the exerciseof police power. Moreover, while OPSF is a special fund from the special treatment

given by EO 137, it is segregated from the general fund and while it is placed from

the general fund to as trust liability account, the fund nevertheless remains subject

to scrutiny and review by COA. The Court is satisfied that these measures comply

with the constitutional description of a special fund.

2. The provisions conferring authority to the ERB to impose additional amounts on

petroleum products provides sufficient standard by which the authority must be

exercised.

3.

On the ground that the reimbursement to oil companies paid out if OPSF is illegal,the Court finds for the petitioner. Reimbursement for cost under recovery from

sales of oil to the NPC is equally permissible like payment of inventory losses.

However, with the enactment of RA 6952 which authorizes the reimbursement of

cost under recovery incurred as result of fuel oil sales to NPC, the doubt of its

propriety was already dispelled.


41/61


4. Anent the overpayment refunds, no substantive discussion has been presented to

show that it is prohibited under PD 1956.

The petition is granted insofar as it prays for the nullification of the reimbursement of

financing charges pursuant to EO 137 and dismissed in all other aspects.


42/61


Progressive Development Corporation v. QC

172 SCRA 629

Facts:

The City Council of Quezon City enacted Ordinance No. 7997 Series of 169, otherwiseknown as the Market Code of Quezon City. It provides for the implementation of the

supervision fee. It was amended by Ordinance No. 9236 Series of 1972 which imposes the

payment of a 5% on gross receipts on rentals or lease of space in privately owned public

market. PDC, owner and operator of Farmers Market and Shopping Center questioned the

validity of the ordinance on the ground that the supervision or license tax imposed is in

reality a tax on income and beyond the power of the city council to enact.

Issue:

Whether or not the tax imposed on gross receipts of stalls rentals partakes the nature of

income tax.

Ruling:

The tax does not come within the meaning of Section 2(g) of the Local Government Act but

a license tax or fee for the government regulation of the business in which the petitioner is

engaged. A license fee is imposed in the exercise of police power primarily for purposes of

regulation while a tax is imposed for the primary purpose of raising revenue. Thus, if the

generating of revenue is the primary purpose and regulation is merely incidental, it is a tax,

but if the primary purpose is regulation, as in this case, the fact that incidental revenue is

obtained does not make it a tax.


43/61


Collector v. UST / UST v. Collector

104 PHIL 1062

Facts:

Two appeals were interposed by the parties from the decision of the CTA modifying thedecision of CIR collector in the sense that USTs claim for refund was denied on the ground

of prescription. The deficiency assessment of P2,451.04 for percentage tax us contested by

the university on the ground that it overpaid or has a refundable tax with the BIR.

Issue:

1. Whether or not USTs claim was barred by prescription;

2. Whether or not UST was erroneously assessed in the amount collected;

Ruling:

The deficiency assessment of P2,451.04 for the percentage taxes and surcharges is

recognized but the amount is deemed pay by way of recoupment to the extent of such

amount which UST erroneously paid for the period from January 1, 1948 to June 30, 1950.


44/61


Republic v. Mambulao

Facts:

Mambulao Lumber was assessed for tax liabilities by the government. It admitted theliabilities in favor of the Republoc. The company is also paying regular forest charges for

the Reforestation Fund. Since the government has not make use of the fund in reforesting

the denuded areas covered by its license, it contends that the amount paid should be

refunded or at least compensated with what Mambulao owed the Republic. The argument

was denied by the government but the court ruled in favor of the respondent.

Issue:

Whether or not taxes payable to the government may be subject to set-off or compensation.

Ruling:

Compensation may not be availed of for the following reasons:

The amount paid by Mambulao as reforestation fee is in the nature of a tax which forms

part of the reforestation of the denuded area irrespective of whether the area belongs to

the licensee or not. It accrues to the government as taxes and may not be compensated

considering that Mambulao and the Republic are not mutual debtors and creditors of each

other in their own right.

A claim for taxes is not such a debt, demand or judgment nor contract as allowed to be set

off under the statutes.


45/61


Domingo v. Carlitos

8 SCRA 443

Facts:

A petition for execution of judgment to enforce the claims of the government against theestate of the late Walter Scott Price for the payment of estate and inheritance taxes were

denied by the respondent court holding that the execution is not justifiable for the

government is indebted to the estate.

Issue:

Whether or not the taxes due to the government may be off-set or compensated.

Ruling:

In the earlier case of Mambulao Lumber, the court held that the compensation may not beavailed of. However, the case at bar is different. Compensation may be availed of for the

following reasons:

1. The claim of the estate against the government has been recognized and the amount

had already been appropriated by the passage of RA 2700.

2. Both the claims of the government for inheritance taxes and the estate tax for

services rendered have already become due and demandable as well as fully

liquidated;

Therefore, compensation takes place by operation of law in accordance with Articles 279 &

280 of the New Civil Code and both debts are extinguished even thought the parties are nitaware of it .


46/61


Francia v. IAC

162 SCRA 753

Facts:

Engracio is the regiested owner of a lot and two-storey house was built upon it. In 1997, aportion of his house was expropriated by the Republic for P1,116.00 representing the

estimated amount equivalent to the assessed value of the said portion. Since 1963 up to

1977, Engracio failed to pay his real estate taxes. Hence, his property was sold at a public

auction. Engracio claimed that the sale was null and void, hence, his complaint for the

declaration of its nullity. The same was dismissed by the court. One of En gracios argument

was that his tax delinquency had been extinguished by legal compensation since the

government owed him P4,116.00 when his land was expropriated in 1977. Thus, the tax

obligation had been set-off by operation of law.

Issue:

Whether or not taxes may be subject of compensation as provided for in Article 1287 of the

New Civil Code.

Ruling:

The SC affirmed the order of dismissal since IR taxes cannot be the subject of

compensation. Government and taxpayers are not mutually creditors and debtors of each

other under the New Civil Code. Hence, a claim for taxes is not a debt, demand, contract, or

judgment as is allowed to be set-off.


47/61


Yutivo Sons Hrdware v. CTA

1 SCRA 160

Facts:

Yutivo is a domestic corporation organized under Philippine laws. Prior to the last worldwar, it was engaged in the importation and sale of hardware supplies and equipment. In

1946, it bought a number of cars from GM Overseas Corporation. As importer, GM paid

sales tax prescribed by the tax code on its selling price to Yutivo. In June 1946, Southern

Motors (SM) was organized to engage in the business of selling cars, trucks and spare parts.

SMs incorporators were among the founders of Yutivo. GM withdrew from the Philippines

in 1947 and appointed Yutivo as importer for Visayas and Mindanao. Yutivo continued its

sales to SM paying the sales tax on the basis of the selling price. In 1950, the CIR demanded

from Yutivo tax payment of deficiency sales tax and surcharges. It claimed that the taxable

sales were retail sales by SM to the public and wholesale made by Yutivo to the latter

inasmuch as SM and Yutivo were one and the same corporation, the former being the

subsidiary of the latter. Yutivo was assessed a second time. The Tax Court affirmed theCollectors view. Reconsideration was denied. Hence, the present petition for review.

Issue:

1. Whether or not SM was organized for purposes of evading tax liability by Yutivo;

2. Whether or not the CT erred in assessing the sales tax against Yutivo for its sale to

SM;

Ruling:

The CTA was not justified in finding that SM was organized for no other purpose but to

defraud the government of its lawful revenues. The intention to minimize tax when used in

the context of fraud must be proved to exist by clear and convincing evidence amounting to

more than preponderance and cannot be justified by mere speculation. This is because

fraud was not presumed. The transaction between Yutivo and SM has always been in the

open, embodied in private and public documents, constantly subject to inspection by tax

authorities.

SM however, is believed to be actually owned by the petitioner. All cash assets of SM were

handled by Yutivo and all cash transactions were actually maintained by Yutivo. Yutivo was

at all times in control of the funds of SM. The latter being a mere instrumentality of Yutivo,the CTA correctly disregard the technical defense of separate corporate entity in order to

arrive at a true tax liability of Yutivo.


48/61


Ungab v. Cusi

97 SCRA 879

Facts:

Quirico Ungab was notified by the BIR that he failed to report in his income tax return theincome derived from the sale of banana saplings. He was invited to a conference where he

may present objections to the findings of the BIR officer. Upon receipt of the notice, he

wrote the BIR protesting the assessment. The Special Investigation Division found

sufficient proof that the petitioner is guilty of tax evasion for taxable year 1973 and

recommended his prosecution. The State Prosecutor found probable cause and

recommended the filing of information against the petitioner. A motion to quash the

information was files by the petitioner for lack of jurisdiction in view of his pending protest

for assessment.

Issue:

1. Whether or not the filing of the cases were premature on the ground that CIR has

yet to resolve plaintiffs protest;

2. Whether or not the State prosecutor has authority to conduct preliminary

investigation;

Ruling:

The contention of the petitioner was without merit. What is involved in this case is not a

collection of taxes where assessment of the CIR may be reviewed by the CTA, but a criminal

prosecution which is within the jurisdiction of CFI. Besides, it has been ruled that a petition

for reconsideration of an assessment may affect the suspension of the prescriptive periodfor the collection of taxes but not the prescriptive period for the prosecution of criminal

action for violation of the law.

As to the second issue, there was no rule violated as the State Prosecutor sought

permission from the City Fiscal who allowed him to conduct the investigation in the Fiscals

Office.


49/61


CIR v. Rufino

148 SCRA 42

Facts:

Respondents were majority stockholder of the defunct Bartero Theatrical Co. Inc. It wasengaged in operating theaters, opera houses and other places of amusement particularly

lyric and capitol theaters. The president of the corporation (old) was Ernesto Rufino. The

respondents were also stockholders of another corporation which was organized for a

term of 50years.The corporation is also engaged in the same type of business as the old

corporation. Its new corporate manager was Vicente Rufino. In a stockholders meeting, the

new corporation was merged with the old corporation. The business of the old corporation,

its assets, good will and liabilities were transferred to the new corporation, which is

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