Escolar Documentos
Profissional Documentos
Cultura Documentos
Association of Customs Brokers, Inc. vs. Municipal Board 7 Esso Standard Eastern, Inc. vs. Commissioner of Internal Revenue 9 Progressive Development Corporation vs. Quezon City 11 PAL vs. Edu 13 Villegas vs. hiu Chiong Tsai Pao Ho 15 Compania General Tobacos de Filipinas vs. City of Manila 17 American Mail Lines vs. City of Basilan 19 Osmea vs. Orbos 20 Republic of the Philippines vs. Bacolod -Murcia Milling Co. 22 Victorias Milling Co., Inc. v. Municipality of Victorias 24 Lutz vs. Araneta 26 PCGG vs. Cojuangco 27
Pascual vs. Secretary of Public Works 28 Osmea vs. Orbos 29 Pepsi-Cola Bottling Company vs. Municipality of Tanauan 31 Social Security System vs. City of Bacolod 33 Sea-Land Services, Inc. vs. Court of Appeals 34 Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation 36 31st Infantry Post Exchange vs. Posadas 38 Commissioner of Internal Revenue vs. Marubeni Corporation 39 Reagan vs. Commissioner of Internal Revenue 41 Tiu vs. Court of Appeals 42 John Hay Peoples Alternative Coalition vs. BCDA 43 Coconut Oil Refines Association Inc. vs. BCDA 45 Province of Abra vs. Hernando 49 Tolentino vs. Secretary of Finance 51 Abakada Group Party List vs. Ermita 54 Misamis Oriental Association of Coco Traders, Inc. vs. Deparment of 58 Finance Secretary Commissioner of Internal Revenue vs. Court of Appeals 59 Commissioner of Internal Revenue vs. Lingayen Gulf Electric Power Co., Inc. 61 Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan 63 Sison vs. Ancheta 65 Villegas vs. Hiu Chiong Tsai Pao Ho 66 Villanueva vs. City of Iloilo 68 Pepsi-Cola Bottling Co. of the Philippines Inc., vs. City of Butuan 70
Ormoc Sugar Company, Inc. vs. Treasurer of Ormoc City 72 Lutz vs. Araneta 73 Association of Customs Brokers, Inc. vs. Municipal Board 75 Eastern Theatrical Co., Inc. vs. Alfonso 77 Philippine Trust Company vs. Yatco 78 Churchill vs. Concepcion 80 Meralco vs. Province of Laguna 82 Province of Misamis Oriental vs. Cagayan Electric Power and Light 84 Company, Inc. Cagayan Electric Power & Light Co., Inc. vs. Commissioner of Internal 86 Revenue Lealda vs. Commissioner of Internal Revenue 88 Casanovas vs. Hord 90 American Bible Society vs. City of Manila 91 Abra Valley College vs. Aquino 92 Commissioner of Internal Revenue vs. Bishop of the Missionary District of 93 the Philippines Lladoc vs. Commissioner of Internal Revenue 94 Herrera vs. Quezon City Board of Assessment Appeals 96 Bishop of Nueva Segovia vs. Provincial Board of Ilocos Norte 98 Commissioner of Internal Revenue vs. Court of Appeals and YMCA 99 Lung Center of the Philippines vs. Quezon City 101
Republic Bank vs. Court of Tax Appeals 104 Proctor & Gamble Philippine Manufacturing Corp. vs Municipality of Jagna 106 Pepsi-Cola Bottling Company vs. Municipality of Tanauan 107 Villanueva vs. City of Iloilo 108 Victoria Milling Co., Inc. vs. Municipality of Victorias 112 Compania General De Tabacos de Filipinas vs. City of Manila 114 Province of Bulacan vs. Court of Appeals 116
Delpher Trades Corp. vs. Intermediate Appellate Court 118 Heng Tong Textiles Co., Inc. vs. Commissioner of Internal Revenue 120 Commissioner of Internal Revenue vs. Toda 121
Davao Gulf Lumber Corp. vs. Commissioner of Internal Revenue 123 Philippine Acetylene Co., Inc. vs. Commissioner of Internal Revenue 124 Commissioner of Internal Revenue vs. Court of Appeals and Ateneo de 126 Manila University Caltex Philippines, Inc. vs. Commission on Audit 128 Luzon Stevedoring Corp. vs. Court of Tax Appeals 131 National Development Company vs. Commissioner of Internal Revenue 133 Manila Electric Company vs. Vera 134 Maceda vs. Macaraig 135 Commissioner of Internal Revenue vs. Gotamco & Sons, Inc. 137 Commissioner of Internal Revenue vs. Court of Appeals and YMCA 138
Nitafan vs. Commissioner of Internal Revenue 139 Province of Abra vs. Hernando 140 Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation 141 31st Infantry Post Exchange vs. Posadas 143 PLDT vs. City of Davao 144 Sea-Land Services, Inc. vs. Court of Appeals 146 Meralco vs. Province of Laguna 147 Tiu vs. Court of Appeals 148 Mactan Cebu International Airport Authority vs. Marcos 150 Commissioner of Internal Revenue vs. Robertson 152 Basco vs. PAGCOR 154 Republic of the Philippines vs. Intermediate Appellate Court 156 Commissioner of Internal Revenue vs. Court of Appeals 158
Hilado vs. Commissioner of Internal Revenue 160 Misamis Oriental Association of Coco Traders, Inc. vs. Department of 161 Finance Secretary Commissioner of Internal Revenue vs. Court of Appeals 163 Commissioner of Internal Revenue vs. Lingayen Gulf Electric Power Co., Inc. 165 ABS-CBN Broadcasting Corp. vs. Court of Tax Appeals 166 Philippine Bank of Communication vs. Commissioner of Internal Revenue 168
Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd. 170 Reyes vs. Almanzor 172 Commissioner of Internal Revenue vs. Algue 174
Set-off of Taxes
Philex Mining Corp. vs. Commissioner of Internal Revenue 176 Francia vs. Intermediate Appellate Court 178 Commissioner of Internal Revenue vs. Itogon-Suyoc Mines, Inc. 180 Domingo vs. Garlitos 182 Republic of the Philippines vs. Mambulao Lumber Company 183
Taxpayer Suit
Anti-Graft League of the Philippines vs. San Juan 185 Joya vs. Presidential Commission on Good Government 187 Lozada vs. COMELEC 189
C. Tax Remedies
St. Stephens Association and St. Stephens Girls School vs. Collector of 193 Internal Revenue Advertising Associates vs. Court of Appeals and Commissioner of Internal 195 Revenue
Commissioner of Internal Revenue vs. Isabela Cultural Corporation 197 Surigao Electric Co. and Arturo Lumenian vs. Municipality of Surigao 199 Yabes vs. Flojo 201 Commissioner of Internal Revenue v. Algue 203 Commissioner of Internal Revenue v. Union Shipping Corporation and the 206 CTA Philippine Journalists, Inc v. Commissioner of Internal Revenue 208 CIR vs. Philippine Global Communications, Inc. 211 RCBC vs. CIR 213 Oceanic Wireless vs. CIR 214 Fishwealth v. Commissioner of Internal Revenue 216
Part II
Local Taxation
Lung Center of the Philippines vs. Quezon City 217 Philippine Rural Electric Cooperatives vs. The Secretary, DILG 220 City Assessor of Cebu City vs. Association of Benevola de Cebu 222 City Government of San Pablo vs. Hon. Bienvenido Reyes 224 First Philippine Industrial Corp. vs. Court of Appeals 225 Manila Electric Company vs. Province of Laguna 227 Philippine Basketball Association vs. Court of Appeals 229 MIAA vs. CA and the City of Paraaque 232 Province of Bulacan vs. Court of Appeals 235 Drilon vs. Lim 237
Davao Sawmill Co. vs. Castillo 239 City of Baguio vs. Busuego 241 Reyes, et al. vs. Almanzar 243 Pecson vs. Court of Appeals 245 Mathay, Jr. v. Macalincag 247 Patalinghug v. Court of Appeals 249 Ty, et. al. vs. Trampe 251 Talento vs. Escalada 253 FELS Energy vs. Province of Batangas 255 Mactan Cebu International Airport Authority vs. Marcos 257 Sesbreo vs. Central Board of Assessment Appeals 259 Lopez vs. City of Manila 261 Cagayan Robina Sugar Miling Co. vs. Court of Appeals 265 Light Rail Transit Authority vs. Central Board of Assessment Appeals 267
Jao vs. Court of Appeals 269 Transglobe International vs. Court of Appeals 270 Acting Commissioner of Customs vs. Court of Appeals 271 Chevron vs. Commission of BOC 272
The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on the other hand, if the tax is levied upon persons on account of their business, it will be construed as a license or occupation tax, even though it is graduated according to the property used in such business, or on the gross receipts of the business. 5. Esso Standard Eastern, Inc. (formerly, Standard-Vacuum Oil Company) v The Commissioner of Internal Revenue A margin fee is imposed by the State in the exercise of its police power and not the power of taxation. A margin fee is not a tax but an exaction designed to curb the excessive demands upon our international reserve. A tax is a levy for the purpose of providing revenue for government operations. 6. Progressive Development Corp. v. Quezon City If the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. 7. Philippine Airlines, Inc. v. Edu If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle registration fees. Fees may be properly regarded as taxes even though they also serve as an instrument of regulation. 8. Villegas vs. Hiu Chiong Tsai Pao Ho While it is true that the first part of Ordinance No. 6537, which requires that the alien to secure an employment permit, is regulatory in character, the second part which requires the payment of P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic or justification in exacting P50.00 from aliens who have been cleared for employment. It is obvious that the purpose of the ordinance is to raise money under the guise of regulation. 9. Compania General de Tabacos de Filipinas v. City of Manila A license fee is a legal concept quite distinct from tax; the former is imposed in the exercise of police power for purposes of regulation, while the latter is imposed under the taxing power for the purpose of raising revenues. Both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation. 10. American Mail Lines v. City of Basilan The power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes. Fees for purely regulatory purposes may only be of sufficient amount to include the expenses of issuing the license and the cost of the necessary inspection or police surveillance.
11. Osmea vs. Orbos Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA 12. Republic vs. Bacolod-Murcia Milling Co. The protection of a large industry constituting one of the great source of the state's wealth and therefore directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such an extent by public interests as to be within the police power of the sovereign. The levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but, the exercise of the police power for the general welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist. 13. Victorias Milling Co., Inc. v. Municipality of Victorias The designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Thus, "when no police inspection, supervision, or regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all persons engaged in the business designated, without qualification or hindrance, may come, and a license on payment of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is strong that the power of taxation, and not the police power, is being exercised." 14. Lutz v. Araneta Analysis of the Act will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation. Hence it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain. 15. PCGG v. Cojuanco Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs. Based on this definition, a tax has three elements, namely: a) it is an enforced proportional contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall squarely into these elements The coconut levy funds -- like the sugar levy and the oil stabilization funds, as well as the monies generated by the On-line Lottery System -- are funds exacted by the State. Being enforced contributions, they are prima facie public funds.
III. Limitations on the Power of Taxation 16. Pascual v. Secretary of Public Works and Communications The right of the legislature to appropriate funds is correlative with its right to tax, under the constitutional provision against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose as appropriation for state funds can be made for other than a public purpose. 17. John Osmea v. Oscar Orbos For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard limits of which are sufficiently determinate or determinable to which the delegate must conform. 18. Pepsi-Cola Bottling Company v. Municipality of Tanauan Double taxation, in general, is not forbidden by our fundamental law. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality. 19. Social Security System v. City of Bacolod and Reynaldo When the legislature exempted lands and buildings owned by the government from payment of said taxes, what it intended was a broad and comprehensive application of such mandate, regardless of whether such property is devoted to governmental or proprietary purpose. It is axiomatic that when public property is involved, exemption is the rule and taxation, the exception.. 20. Sea-Land Service, Inc. v. Court of Appeals Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. Any interpretation that would give it an expansive construction to encompass an exemption from taxation would be unwarranted. 21. Commissioner of Internal Revenue v. Mitsubishi Metal Corporation Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which onus petitioners have failed to discharge. 22. Thirty-First Infantry Post Exchange and First Lieutenant David L. Hardee v. Juan Posadas The sale of merchandise through the post exchanges to the individuals of the United States Army and Navy are not goods sold and delivered directly to the United States Army or Navy for the actual use or issue by the Army or Navy and are therefore, not exempt from the payment of the internal revenue tax imposed by the law.
23. Commissioner of Internal Revenue v. Marubeni Corporation A tax amnesty is a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law. It partakes of an absolute forgiveness or waiver by the government of its right to collect what is due it and to give tax evaders who wish to relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption, is never favored nor presumed in law. If granted, the terms of the amnesty, like that of a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority. 24. William Reagan, Etc. v. Commissioner of Internal Revenue The Philippines being independent and sovereign, its authority may be exercised over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies must submit to its terms. 25. Conrado L. Tiu vs. Court of Appeals The Constitution does not require absolute equality among residents. It is enough that all persons under like circumstances or conditions are given the same privileges and required to follow the same obligations. In short, a classification based on valid and reasonable standards does not violate the equal protection clause. 26. John Hay Peoples Alternative Coalition v. Bases Conversion Development Authority The nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local governments may pass ordinances on exemption only from local taxes. 27. Coconut Oil Refiners Association, Inc. vs. Hon Ruben Torres The mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition. 28. The Province Of Abra vs. Honorable Harold M. Hernando It has been the constant and uniform holding that exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi juris. 29. Arturo M. Tolentino vs.The Secretary of Finance and The Commisioner of Internal Revenue The VAT is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general regulation is not to violate its freedom under the Constitution.
30. Abakada Guro Party List vs. The Honorable Executive Secretary Eduardo Ermita It is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by the President. 31. MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC. vs. DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS ORIENTAL There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. 32. COMMISSIONER OF INTERNAL REVENUE vs. HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION In a legislative rule (as opposed to interpretative), due observance of the requirements of notice, of hearing, and of publication must be observed. 33. THE COMMISSIONER OF INTERNAL REVENUE vs. LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX APPEALS A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike. 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. 34. KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA vs. HON. BIENVENIDO TAN, as Commissioner of Internal Revenue 1) The 1987 Constitution mentions a specific date when the President loses her power to legislate. If the framers of said Constitution had intended to terminate the exercise of legislative powers by the President at the beginning of the term of office of the members of Congress, they should have so stated (but did not) in clear and unequivocal terms. 2) 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. The legislative process started long before the signing when the data were gathered, proposals were weighed and the final wordings of the measure were drafted, revised and finalized. 3) To justify the nullification of a law. there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication and not merely rely upon newspaper articles which are actually hearsay and have evidentiary value 4) The distinction of the customs brokers from the other professionals who are subject to occupation tax under the Local Tax Code is based upon material differences, in that the activities of customs brokers (like those of stock, real estate and immigration brokers) partake more of a business, rather than a profession and were thus subjected to the percentage tax .
35. ANTERO M. SISON, JR. vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue et al. Taxpayers may be classified into different categories. To repeat, it is enough that the classification must rest upon substantial distinctions that make real differences. There is ample justification then for the Batasang Pambansa 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. 36. Villegas v. Hiu Chiong Tsai Pao Ho Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. 37. Villanueva v. City of Iloilo A license tax may be levied upon a business or occupational though the land or property used in connection therewith is subject to property tax. The rule of equality and uniformity is not violated by the fact that tenement taxes are not imposed in other cities, for the same rule does not require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time. So long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses similarly classified or situated, equality and uniformity of taxation is accomplished. 38. Pepsi-Cola Bottling Co. of the Philippines, Inc v. City of Butuan When the intention to limit the application of the ordinance to those merchandise brought into the City from outside thereof is apparent, the tax partakes the nature of an import duty, which is beyond defendant's authority to impose by express provision of law. 39. Ormoc Sugar Co. v. Treasurer of Ormoc CityOrmoc Sugar Co. v. Treasurer of Ormoc City The classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance should not be singular and exclusive as to exclude any subsequently established sugar central, of the same class as plaintiff, for the coverage of the tax. 40. Lutz v. Araneta If objectives and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made with the implement of the states police power. Inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.
41. Association of Customs Broker Inc. vs. The Municipal Board While the ordinance in question refers to property tax and it is fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to. Also, the ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. It does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila nor one registered in another place but occasionally comes to Manila and uses its streets and public highways. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution. 42. Eastern Theatrical Co., Inc., et al. vs. Alfonso 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; and the theater companies cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be confused with those not included in the ordinance. The fact that somehow places of amusement are not taxed while others, like the ones herein, are taxed is no argument at all against the equality and uniformity of the tax imposition. 43. Churchill vs. Concepcion Uniformity in taxation means that all taxable articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean that lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and luxuries shall all be assessed at the same rate. The rule does not require taxes to be graded according to the value of the subject(s) upon which they are imposed, especially those levied as privilege or occupation taxes. 44. Philippine Trust Company vs. A.L. Yatco A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found. The rule of uniformity does not call for perfect uniformity or perfect equality, because this is hardly attainable. 45. Meralco vs. Province of Laguna Local Governments do not have the inherent power to tax except to the extent that such power might be delegated to them either by the basic law or by statute. Presently, Under Article X of the 1987 Constitution, a general delegation of that power has been given in favor of the Local Government Units (LGU). 46. Province of Misamis Oriental v. Cagayan Electric Power and Light Company Inc. A special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special law unless there is manifest intent to repeal or alter the special law.
47. Cagayan Electric Power & Light Co. Inc. v. CIR The Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress when the public interest so requires. 48. Lealda v. CIR It seems clear, therefore, that the intention of the legislature was to impose upon the grantee and his successors in interest, the obligation to pay the same franchise tax imposed upon other grantees or franchise holders at the time Act 2475 was enacted. 49. J. Casanovas vs. JNO S. Hord The concessions can be cancelled only by reason of illegality in the procedure by which they were obtained, or for failure to comply with the conditions prescribed as requisites for their retention in the laws under which they were granted. 50. American Bible Society vs. City of Manila A tax on the income of one who engages in religious activities is different from a tax on property used or employed in connection with those activities. It is one thing to impose a tax on the income or property of a preacher, and another to exact a tax for him for the privilege of delivering a sermon. The power to tax the exercise of a privilege is thepower to control or suppress its enjoyment. 51. Abra Valley College vs. Aquino 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. 52. Commissioner of Internal Revenue vs. Bishop of the Missionary District of the Philippines The following requisites must concur in order that a taxpayer may claim exemption under the law:(1) the imported articles must have been donated; (2) the done must be duly incorporated or established international civic organization, religious or charitable society, or institution for civic religious or charitable purposes; and (3) the articles so imported must have been donated for the use of the organization, society or institution or for free distribution and not for barter, sale or hire. 53. Lladoc vs. Commissioner of Internal Revenue Imposition of the gift tax was valid, under Section 22(3) Article VI of the Constitution contemplates exemption only from payment of taxes assessed on such properties as Property taxes contra distinguished from Excise taxes The imposition of the gift tax on the property used for religious purpose is not a violation of the Constitution. A gift tax is not a property by way of gift inter vivos. 54. Herrera v. Quezon City Board of Assessment Appeals Where rendering charity is its primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent purposes of the institution, the mere fact that a profit has been made will not deprive the hospital of its benevolent character. The exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes.
55. Bishop of Nueva Segovia vs. Provincial Board of Ilocos Norte The exemption in favor of the convent in the payment of land tax refers to the home of the priest who presides over the church and who has to take care of himself in order to discharge his duties. The exemption includes not only the land actually occupied by the Church but also the adjacent ground destined to the ordinary incidental uses of man. 56. Commissioner of Internal Revenue v. Court of Appeals and YMCA Rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not exempt from income taxation, even if such income is exclusively used for the accomplishment of its objectives. A claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, it must expressly be granted in a statute stated in a language too clear to be mistaken. Verba legis non est recedendum where the law does not distinguish, neither should we. The bare allegation alone that one is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. It must prove with substantial evidence that (1) it falls under the classification non-stock, non- profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. 57. Lung Center of the Philippines v. Quezon City What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. III. Situs of Taxation and Double Taxation 58. Republic Bank, Petitioner, Vs. Court Of Tax Appeals And The Commissioner Of Internal Revenue, Respondents It is clear from the statutes then in force that there was no double taxation involved -- one was a penalty and the other was a tax. At any rate, we have upheld the validity of double taxation. The payment of 1/10 of 1% is a penalty as the primary purpose involved is regulation, while the payment of 1% for the same violation is a tax for the generation of revenue which is the primary purpose in this instance. 59. Procter and Gamble Philippines Manufacturing Corp. vs. Municipality of Jagna For double taxation to exist, the same property must be taxed twice, when it should be taxed but once. Double taxation has also been defined as taxing the same person twice by the same jurisdiction for the same thing. Surely, a tax on plaintiff's products is different from a tax on the privilege of storing copra in a bodega situated within the territorial boundary of defendant municipality. 60. PEPSI-COLA BOTTLING COMPANY OF THE PHIILIPPINES, INC. vs. MUNICIPALITY OF TANAUAN Municipalities are empowered to impose, not only municipal license taxes upon persons engaged in any business or occupation but also to levy for public purposes, just and uniform taxes. The ordinance in question (Ordinance No. 27) comes within the second power of a municipality.
61. Villanueva, Et Al., v City of Iloilo In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed twice when it should be taxed but once; both taxes must be imposed on the same property or subject-matter, for the same purpose, by the same State, Government, or taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of tax 62. Victorias Milling Co. v Municipality of Victoria For double taxation to exist, "the same property must be taxed twice, when it should be taxed but once." Double taxation has also been "defined as taxing the same person twice by the same jurisdiction for the same thing." 63. Compania General De Tabacos De Filipinas v City of Manila, Et Al Both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation. 64. Province of Bulacan v Court of Appeals A province may not levy excise taxes on articles already taxed by the National Internal Revenue Code. IV. Forms of Escape from Taxation 65. Delpher Trades Corporation v. IAC and Hydro Pipes Philippines By changing the nature of their ownership from unincorporated to incorporated form, petitioners were able to save on inheritance tax. 66. Heng Tong Textiles Co., Inc. v. CIR An attempt to minimize one's tax does not necessarily constitute fraud. It is a settled principle that a taxpayer may diminish his liability by any means which the law permits. 67. CIR v. The Estate of Benigno Toda, Jr. Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e. the payment of less than that known by the taxpayer to be legally due, or the non- payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being evil, in bad faith, willfull, or deliberate and not accidental; and (3) a course of action or failure of action which is unlawful. In cases of fraudulent returns, false returns with intent to evade tax, and failure to file a return, the period within which to assess tax is ten years from discovery of the fraud, falsification or omission, as the case may be. A corporation has a juridical personality distinct and separate from the persons owning or composing it. Thus, the owners or stockholders of a corporation may not generally be made to answer for the liabilities of a corporation and vice versa. V. Exemption from Taxation 68. Davao Gulf Lumber Corporation v. CIR Because taxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government. Any exemption from the payment of a tax must be clearly stated in the language of the law; it cannot be merely implied therefrom.
69. Philippine Acetylene Inc. vs. Commissioner of Internal Revenue The tax imposed by section 186 of the National Internal Revenue Code is a tax on the manufacturer or producer and not a tax on the purchaser. The purchaser does not pay the tax. He pays or may pay the seller more for the goods because of the seller's obligation, but that is all and the amount added because of the tax is paid to get the goods and for nothing else. 70. Commissioner of Internal Revenue v. Court of Appeals, Court of Tax Appeals, and Ateneo de Manila University Private respondent is mandated by law to undertake research activities to maintain its university status and it occasionally accepts sponsorship for unfunded IPC research projects from international organizations, private foundations and governmental agencies. The funds received by private respondent are not given in the concept of a fee or price in exchange for the performance of a service or delivery of an object. Rather, the amounts are in the nature of an endowment or donation given by IPC's benefactors solely for the purpose of sponsoring or funding the research with no strings attached which are taxexempt. 71. Caltex Philippines, Inc. v. Commission on Audit, Commissioner Bartolome Fernandez and Commissioner Alberto Cruz Tax exemptions as a general rule are construed strictly against the grantee and liberally in favor of the taxing authority. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed. The party claiming exemption must therefore be expressly mentioned in the exempting law or at least be within its purview by clear legislative intent. 72. Luzon Stevedoring Corp. v. Court of Tax Appeals, Commissioner of Internal Revenue In order that the importations of tugboats may be declared exempt from the compensating tax, the following requirements must be complied with: (1) the engines and spare parts must be used by the importer himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation. The amendatory provisions of R.A. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer himself as operator of passenger and/or cargo vessel. 73. National Development Company v. Commissioner Of Internal Revenue Tax exemptions cannot be merely implied but must be categorically and unmistakably expressed. Any doubt concerning this question must be resolved in favor of the taxing power. 74. Manila Electric Company v. Misael P. Vera One who claims to be exempt from the payment of a particular tax must do so under clear and unmistakable terms found in the statute. Tax exemptions are strictly construed against the taxpayer. 75. Ernesto M. Maceda v. Hon. Catalino Macaraig, Jr., et al. The National Power Corporation under the provisions of its Revised Charter retains its exemption from duties and taxes imposed on the petroleum products purchased locally and used for the generation of electricity.
76. Commissioner Of Internal Revenue v. John Gotamco & Sons, Inc. and The Court of Tax Appeals Direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else. 77. COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS Under Section 27 of the NIRC, the income from any property of exempt organizations, as well as that arising from any activity it conducts for profit is taxable. The phrase any of their activities conducted for profit does not qualify the word properties. This makes income from the property of the organization taxable, regardless of how the income is used- whether for profit of for lofty non-profit purposes. On the other hand, Article VI, Section 28 of paragraph 3 of the Constitution, failed to prove by substantial evidence that: 1) it falls under the classification non-stock, non-profit educational institution; and 2) the income it seeks to be exempted from taxation is actually, directly and exclusively for educational purposes. 78. DAVID G. NITAFAN vs. COMMISSIONER OF INTERNAL REVENUE The payment of income tax, which is applicable to all income earners, by Justices and Judges does not fall within the constitutional protection against decrease of their salaries during their continuance in office. 79. THE PROVINCE OF ABRA vs. HONORABLE HAROLD M. HERNANDO To be exempt under the Constitution, lands, buildings and improvements of religious and charitable institutions must not only be exclusively but also actually and directly used for religious and charitable purposes. 80. COMMISSIONER OF INTERNAL REVENUE vs. MITSUBISHI METAL CORPORATION Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The taxability of a party cannot be blandly glossed over on the basis of a supposed broad, pragmatic analysis alone without substantial supportive evidence. VI. Exemption from Taxation 81. 31st Infantry Post Exchange v. Posadas Whenever a state engages in a business which is of a private nature, that business is not withdrawn from the taxing power of the Nation, or, conversely stated, whenever the National Government permits an organization under its control to engage in a business which is of a private nature, that business is not withdrawn from the taxing power of the state. 82. PLDT v. City of Davao The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority 83. Sea Land Services, Inc. v. CA Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception.
84. MERALCO v. Province of Laguna Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. 85. Tiu vs. Court of Appeals The constitutional right to equal protection of the law is not violated by an executive order, issued pursuant to law, granting tax and duty incentives only to businesses and residents within the secured area of the Subic Special Economic Zone and denying them to those who live within the Zone but outside such fenced-in territory. A classification based on valid and reasonable standards does not violate the equal protection clause. 86. Mactan Cebu International Airport vs. Marcos The law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations. 87. Commissioner of Internal Revenue vs. Robertson Although the laws granting tax exemptions must be construed in strictissimi juris against the taxpayer, and that the burden of proof is with the person or entity given the exemption. The court, however, will not deem itself authorized to depart from the plain meaning of the tax exemption provision, so explicit in terms and so searching in extent. 88. Basco vs. PAGCOR The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. The power to tax which was called as the "power to destroy" cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. 89. Republic of the Philippines v. Intermediate Appellate Court The rule is that in case of doubt, tax statutes are to be construed strictly against the Government and liberally in favor of expressly and clearly declares. 90. Commissioner of internal Revenue v. Court of Appeals A tax amnesty, being a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law, partakes of an absolute forgiveness or waiver by the Government of its right to collect what otherwise would be due it, and in this sense, prejudicial thereto, particularly to give tax evaders, who wish to relent and are willing to reform a chance to do so and thereby become a part of the new society with a clean slate.
VII. NATURE, CONSTRUCTION, APPLICATION & SOURCES OF TAX LAWS 91. Hilado v. Collector of Internal Revenue It is a legal maxim, that excepting that of a political nature, Law once established continues until changed by some competent legislative power. It is not changed merely by change of sovereignty. It seems too clear for serious argument that an administrative officer cannot change a law enacted by Congress. A regulation that is merely an interpretation of the statute when once determined to have been erroneous becomes nullity. An erroneous construction of the law by the Treasury Department or the collector of internal revenue does not preclude or estop the government from collecting a tax which is legally due. 92. Misamis Oriental of Coco Traders, inc. v. Department of Finance Secretary The Commissioner of Internal Revenue is not bound by the ruling of his predecessors. 7 To the contrary, the overruling of decisions is inherent in the interpretation of laws. 93. Commissioner of Internal Revenue v. Court of Appeals Well-entrenched is the rule that rulings and circulars, rules and regulations promulgated by the Commissioner of Internal Revenue would have no retroactive application if to so apply them would be prejudicial to the taxpayers. 94. CIR vs. Lingayen Gulf Electric Power Co., Inc. The power of the Legislature to alter, amend, or repeal any franchise is always deemed reserved. 95. ABS-CBN Broadcasting Corporation v. Court of Tax Appeals Rulings or circulars promulgated by the CIR have no retroactive application where to so apply them would be prejudicial to taxpayers. 96. Philippine Bank of Communications v. Commissioner of Internal Revenue Administrative issuances are merely interpretations and not expansions of the provisions of law, thus, in case of inconsistency, the law prevails over them. Administrative agencies have no legislative power. VIII. POWER TO TAX INVOLVES POWER TO DESTROY 97. Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd. The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. 98. Reyes vs. Almanzor The power to tax is not the power to destroy while the Supreme Court sits. 99. Commissioner of Internal Revenue vs. Algue Taxes are, indeed, the lifeblood of the nation but the exercise of taxation must be done reasonably and through the prescribed procedure.
IX. SET-OFF OF TAXES 100. Philex Mining Corp. vs. Commissioner of Internal Revenue Taxes cannot be the subject for compensation for simple reason that the government and the tax payer are not mutual creditors and debtors of each other. 101. Francia v. Intermediate Appellate Court There can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. 102. Commissioner of Internal Revenue v. Itogon-Suyoc Mines, Inc. The National Internal Revenue Code provides that interest upon the amount determined as a deficiency shall be assessed and shall be paid upon notice and demand from the Commissioner of Internal Revenue at the specified. It is made clear, however, in an earlier provision found in the same section that if in any preceding year, the taxpayer was entitled to a refund of any amount due as tax, such amount, if not yet refunded, may be deducted from the tax to be paid. 103. Domingo v. Garlitos Under the above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount. 104. Republic of the Philippines v. Mambulao Lumber Company Appellant and appellee are not mutually creditors and debtors of each other. Consequently, the law on compensation is inapplicable. With respect to the forest charges which the defendant Mambulao Lumber Company has paid to the government, they are in the coffers of the government as taxes collected, and the government does not owe anything, crystal clear that the Republic of the Philippines and the Mambulao Lumber Company are not creditors and debtors of each other, because compensation refers to mutual debts. X. TAXPAYER SUIT 105. Anti-Graft League of the Philippines v. San Juan In order to constitute a taxpayers suit, two requisites must be met. First, public funds are disbursed by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed. Second, the petitioner is directly affected by the alleged ultra vires act. 106. Joya v. Presidential Commission on Good Governance Not every action filed by a taxpayer can qualify to challenge the legality of official acts done by the government. A taxpayer's suit can prosper only if the governmental acts being questioned involve disbursement of public funds upon the theory that the expenditure of public funds by an officer of the state for the purpose of administering an unconstitutional act constitutes a misapplication of such funds, which may be enjoined at the request of a taxpayer. 107. Lozada v. Commission on Elections A taxpayers suit may be allowed only when an act complained of, which may include a legislative enactment of statute, involves the illegal expenditure of public money.
B. TAX LAWS & REGULATIONS 108. Commissioner of Internal Revenue v. S.C. Johnson The essence of the principle of the most-favored nation clause is to allow the taxpayer in one state to avail more liberal provisions granted in another tax treaty to which the country of residence of such taxpayer is also a party provided that the subject matter of taxation is the same as that in the tax treaty under which the taxpayer is liable. Tax refunds are in the nature of tax exemptions and they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify hi claim by the clearest grant of organic or statute law. C. TAX REMEDIES 109. St. Stephens Association and St. Stephens Girls School v. The Collector of Internal Revenue The period for appeal to the respondent court in this case must be computed from the time petitioners received the decision of the respondent Collector of Internal Revenue on the disputed assessment, and not from the time they received said assessment. 110. Advertising Associates, Inc. v. Court of Appeals and CIR The petition for review was filed on time. The reviewable decision is that contained in Commissioner Plana's letter of May 23, 1979 and not the warrants of distraint. 111. Commissioner of Internal Revenue v. Isabela Cultural Corporation The Final Notice Before Seizure should be considered as a denial of respondents request for reconsideration of the disputed assessment. The Notice should be deemed as petitioner's last act, since failure to comply with it would lead to the distraint and levy of respondent's properties, as indicated therein. 112. Surigao Electric, Co., Inc. and Arturo Lumanlan v. Municipality of Surigao A municipal government or a municipal corporation such as the Municipality of Surigao is a government entity recognized, supported and utilized by the National Government as a part of its government machinery and functions; a municipal government actually functions as an extension of the national government and, therefore, it is an instrumentality of the latter; and by express provisions of Section 14(e) of Act 2677, an instrumentality of the national government is exempted from the jurisdiction of the PSC except with respect to the fixing of rates. This exemption is even clearer in Section 13(a). It would be to erode the term "government entities" of its meaning if we are to reverse the Public Service Commission and to hold that a municipality is to be considered outside its scope. 113. Yabes vs. Flojo Court of Tax Appeals has exclusive jurisdiction over complaints involving an assessment made by a Commissioner which has not yet become final and incontestable.
114. Commissioner of Internal Revenue v. Algue Deductions on gross income includes all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered. 115. Commissioner of Internal Revenue v. Union Shipping Corporation and the CTA If an individual or corporation is not in the actual possession, custody, or control of the funds, it can neither be physically nor legally liable or obligated to pay the socalled withholding tax on income. 116. Philippine Journalists, Inc v. Commissioner of Internal Revenue The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the Commissioner of Internal Revenue on matters relating to assessments or refunds. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected. 117. CIR v. Philippine Global Communications, Inc. The law prescribed a period of three years from the date the return was actually filed or from the last date prescribed by law for the filing of such return, whichever came later, within which the BIR may assess a national internal revenue tax. The three-year period for collection of the assessed tax began to run on the date the assessment notice had been released, mailed or sent by the BIR. 118. RCBC v Commissioner of Internal Revenue As provided under section 228, Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. 119. Ocean Wireless Network v. Commissioner of Internal Revenue In this case, the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioners request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. ; Moreover, the general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. 120. Fishwealth v. Commissioner of Internal Revenue If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.
PART II. A. LOCAL TAXATION 121. Lung Center of the Philippines vs. Quezon City The portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. 122. Philippine Rural Electric Cooperatives vs. The Secretary, Department of Interior and Local Government The withdrawal by the Local Government Code under Sections 193 and 234 of the tax exemptions previously enjoyed by petitioners does not impair the obligations of the borrower, the lender or the beneficiary under loan agreements as in fact, no taxation exemption is granted taxation exemption is granted therein. 123. City Assessor of Cebu City vs. Association of Benevola de Cebu The Chong Hua Hospital Medical Arts Center building should be classified as commercial and should not be imposed the commercial level of 35% as it is not operated primarily for profit but as an integral part of CHH. The CHHMAC, with operations being devoted for the benefit of the CHHs patients, should be accorded the 10% special assessment. 124. City Government of San Pablo vs. Hon. Bienvenido Reyes The franchise tax under the LGC is imposable despite any exemption enjoyed under special laws. Hence, in the absence of any provision of the Code to the contrary, any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn. 125. First Philippine Industrial Corporation v. Court of Appeals A "common carrier" is exempted from business tax as provided for in Section 133 (j), of the Local Government Code. It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. 126. Manila Electric Company vs. Province of Laguna Where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. 127. Philippine Basketball Asscoiation vs. Court of Appeals The government can never be in estoppel particularly in matters involving taxes. It is an established rule that erroneous application and enforcement of the law by public officers do not preclude subsequent correct application of the statute and the Government is never estopped by mistake or error on the part of its agents. 128. MIAA vs Court of Appeals and the City of Paraaque Real Properties owned by Republic of the Philippines are exempt from real estate tax. An instrumentality of the government is likewise exempt from local taxation.
129. Province of Bulacan vs. Court of Appeals The preemption on taxation refers to an instance wherein the National Government elects to tax a particular area, impliedly withholding from the local government the delegated power to tax the same field. 130. Drilon v. Lim Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Such is an act not of control but of mere supervision. B. REAL PROPERTY TAXATION 131. Davao Sawmill Co. v. Castillo It must further be pointed out that while not conclusive, the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease. 132. City of Baguio v. Busuego While the GSIS may be exempt from real estate tax, the exemption does not cover property belonging to it "where the beneficial use thereof has been granted for consideration or otherwise to a taxable person." 133. Reyes, et al. v. Almanzor It is declared that the first Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes is that the property must be "appraised at its current and fair market value." By no strength of the imagination can the market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value in view of the rental restrictions. 134. Pecson vs. Court of Appeals Notices of the sale of the public auction may be sent to the delinquent taxpayer, either (i) at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or (ii) at his residence, if known to such treasurer or barrio captain. 135. Mathay, Jr. v. Macalincag Section 9 of P.D. 921 is specific and mandatory. The Schedule of Values that will serve as the basis for the appraisal and assessment for taxation purposes of real properties located within the Metropolitan Area shall be prepared jointly by the City Assessors of the Districts created under Section one hereof, with the City Assessor of Manila acting as Chairman.
136. Patalinghug vs. Court of Appeals A tax declaration is not conclusive of the nature of the property for zoning purposes. A property may have been declared by its owner as residential for real estate taxation purposes but it may well be within a commercial zone. A discrepancy may thus exist in the determination of the nature of property for real estate taxation purposes visa-vis the determination of a property for zoning purposes. 137. Ty, et. al. Vs. Trampe RA 7160 (LGC) and PD 921 are compatible laws and can be harmonized in order to achieve the objective that real estate tax should not unduly burden the taxpayer and at the same time encouraging local government units to consolidate or coordinate their efforts, services and resources. Thus new schedule of values and assessments within Metro Manila must be jointly agreed by the city, municipal assessors within the Assessment Districts. 138. Talento vs. Escalada Generally, even pending on appeal the LBAA, CBAA or the courts may not supend the collection of taxes, only a payment under protest may stay an impending levy, however, under certain conditions provided under the Rules of Procedure of the LBAA and the ammendments made by RA 9282, the collection of taxes may be suspended pending the resolution of an appeal. 139. FELS Energy vs. Province of Batangas First; should a taxpayer wish to question the assessment made by the city, provincial or municipal assessor, the proper recourse would be to appeal before the Local Board of Assessment Appeals within 60 days from receipt of assessment. Second; movable property such as barges may be considered real property subject to real property tax depending on the nature of their use. Lastly; taxation is the rule and excemption is the exception, thus strict construction against excemptions. 140. Mactan Cebu International Airport Authority vs. Marcos The Local Government Code's excemptions found in Sec. 133 of the LGC is the general provision for excemption but this is further refined by Sec. 232 and 234, the objective of which is to limit those who may enjoy the privilege of excemption and to increase those that can be taxed by the local government in order to maximize their income to attain fiscal autonomy. When there is doubt as to whether an entity is excempt or not, the rule is that the law shall be strictly interpreted against exemption. 141. Sesbreo v. Central Board of Assessment Appeals Petitioner failed to pay under protest the tax assessed against his property. This is a violation of Section 64 of Presidential Decree No. 464 20 which requires that, before a court may entertain any suit assailing the validity of a tax assessment, the taxpayer must first pay under protest the tax assessed against him. As a rule, no issue may be raised on appeal unless it has been brought before the lower tribunal for its consideration. 21 The Court has held in several cases, however, that an appellate court has an inherent authority to review unassigned errors (1) which are closely related to an error properly raised, or (2) upon which the determination of the error properly assigned is dependent, or (3) where the Court finds that consideration of them is necessary in arriving at a just decision of the case.
142. Lopez v. City of Manila Should the taxpayers question the excessiveness of the amount of tax, he must first pay the amount due, in accordance with Section 252 of R.A. 7160. Then, he must request the annotation of the phrase "paid under protest" and accordingly appeal to the Board of Assessment Appeals by filing a petition under oath together with copies of the tax declarations and affidavits or documents to support his appeal. The reduced assessment levels multiplied by the schedule of fair market values of real properties, provided by Manila Ordinance No. 7894, resulted to decrease in taxes. To that extent, the ordinance is likewise, a social legislation intended to soften the impact of the tremendous increase in the value of the real properties subject to tax. The lower taxes will ease, in part, the economic predicament of the low and middle- income groups of taxpayers. 143. Cagayan Robina Sugar Milling Co. v. Court of Appeals Section 28 must be read in consonance with Section 3 (n)[8] of the said law, which defines "market value." Under the latter provision, the LBAA and CBAA were not precluded from adopting various approaches to value determination, including adopting the APT "floor bid price" for petitioner's properties. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. 144. Light Rail Transit Authority v. Central Board of Assessment Appeals The Light Rail Transit Authority and the Metro Transit Organization function as service-oriented business entities, which provide valuable transportation facilities to the paying public. In the absence, however, of any express grant of exemption in their favor, they are subject to the payment of real property taxes. C. TARIFF & CUSTOMS LAWS 145. Jao v. Court of Appeals The estate of an inhabitant of the Philippines shall be settled or letters of administration granted in the proper court located in the province where the decedent resides at the time of his death. 146. Transglobe International v. Court of Appeals Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. The fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up same right. 147. Acting Commissioner of Customs v. Court of Appeals In all proceedings taken for the seizure and/or forfeiture of any vehicle, vessel, aircraft, beast or articles under the provisions of the tariff and customs laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first shown for the institution of such proceedings and that seizure and/or forfeiture was made under the circumstances and in the manner described in the preceding sections of this Code
148. Chevron v. Commissioner of Bureau of Customs Under the relevant provisions of the TCC (Sec 205, 1301, 1802), both the IED and IEIRD should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft. When the importer fails to file the entry within the said period, he "shall be deemed to have renounced all his interests and property rights" to the importations and these shall be considered impliedly abandoned in favor of the government.
Commissioner of Internal Revenue v. Cebu Portland Cement Company and Court of Tax Appeals
[G.R. No. L-29059. December 15, 1987] Digest by: ALVIAR, Joyce B PONENTE: Cruz, J. FACTS: By virtue of a decision of the CTA rendered on June 21, 1961, as modified on appeal by the SC on February 27, 1965, the CIR was ordered to refund to the Cebu Portland Cement Co. the amount of P359,408.92, representing overpayments of ad valorem taxes on cement produced and sold by it after October1957. On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and the private respondent, the latter moved for writ of execution to enforce the said judgment. The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P4,789,278.85 plus 28% surcharge. On April 22, 1968, CTA granted the motion, holding that the alleged sales tax liability of Cebu Portland was still being questioned and therefore could not be set-off against the refund. In his petition to review the said resolution, the CIR claims that the refund should be charged against the deficiency of the private respondent on the sales of cement under Sec. 186 of the Tax Code, which is a manufactured and not a mineral product and therefore not exempt from sales tax. The petitioner also denies that the sale tax assessments have already prescribed because the prescriptive period should be counted from the filing of the sales tax returns, which had not yet been done by the private respondent. Cebu Portland questioned the assessed tax based also on Article 186 of the Tax Code, and on jurisprudence contending that cement was adjudged a mineral and not a manufactured product; and thusly they were not liable for their alleged tax deficiency. Thereby, petitioner filed this petition for review. ISSUE: Whether or not assessment of taxes can be enforced (set-off against the deficiency sales tax of Cebu Portland) even if there is a case contesting it. HELD: The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as the lifeblood of
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the government. If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception in RA 1125 , the Tax Code provides that injunction is not available to restrain collection of tax. Thereby, we hold that the respondent Court of Tax Appeals erred in its order. The Tax Code provides: Sec. 291. Injunction not available to restrain collection of tax. No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code. To require the CIR to actually refund to the Cebu Portland the amount of the judgment debt, which he will later have the right to distrain for payment of its sales tax liability is in our view an Idle ritual.
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running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. Otherwise, the taxpayer has a right to complain and the courts will then come to his succor. For all the power vested in the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has been in this case, that the law has not been observed.
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taxes on articles subject to specific tax, except gasoline, under the provisions of the national internal revenue code: ............ Hence, The City of Iloilo is empowered (a) to impose Municipal licenses, taxes or fees upon any person engaged in any occupation or business, or exercising any privilege in the City; (b) to regulate and impose reasonable fees for services rendered or conducted within the City, and (c) to levy for public purposes just and uniform taxes, licenses, or fees. It would also appear that municipalities and municipal districts are prohibited from imposing any percentage tax on sales or other taxes in any form on articles subject to specific tax, except gasoline, under the provisions of the National Internal Revenue Code. The tax in question is in the form of percentage tax on the proceeds of the sale of a motor vehicle. The prohibition against such tax as mentiones, refer only to municipalities and municipal districts and does not comprehend chartered cities like the City of Iloilo. 2. CFI undoubtedly had in mind the provisions of Section 2(h) of Republic Act No. 2264 which prohibits a chartered city from imposing a tax on the registration of motor vehicles and the issuance of all kinds of licenses or permits for the driving thereof, which is one of the exceptions constituting a restriction on the taxation power granted by said Act to a city, municipality or municipal district. But the requirement of the ordinance cannot be considered a tax, for the same is merely a coercive measure to make the enforcement of the contemplated sales tax more effective. Well-settled is the principle that taxes are imposed for the support of the government in return for the general advantage and protection which the government affords to taxpayers and their. Taxes are the lifeblood of the government. It is imperative that the power to impose them to be clothed with the implied authority to devise ways and means to accomplish their collection in the most effective manner. Without this implied power the end of government may falter or fail.
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Association of Customs Brokers Inc. and G. Manlapit v The Municipal Board, The City Trasurer, The City Assessor and the City Mayor of the City of Manila
[G.R. No. L-28896. February 17, 1988] Digest by: ALVIAR, Joyce B PONENTE: Bautista Angelo, J. FACTS: The Municipal Board of Manila passed ordinance No. 3379 which imposes a property tax that is within the power of the City under its revised charter. The ordinance was passed by the Municipal Board under the authority conferred by section 18 of RA 409, which confers upon the municipal board the power to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding. The plaintiff, an association composed of all brokers and public service operators of Motor Vehicles in the City of Manila filed this petition for declaratory relief challenging the validity of the ordinance on the following grounds; that while it levies a so-called property tax, it is in reality a license fee which is beyond the power of the board to impose; that the said ordinance goes against the rule on uniformity of taxation; and, that the said imposition constitutes double taxation. ISSUE: 1. What is the Character of an ad valorem tax? 2. Whether or not the ordinance infringes on the uniformity of taxes as ordained by the Constitution. HELD: 1. As a rule an ad valorem tax is a property tax, and supported by some authorities, however it should not be taken in its absolute sense, if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. Thus, it has been held that If a tax is in its nature an excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise. The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on the other hand, if the tax is levied upon persons on account of their business, it will be construed as a license or occupation tax, even though it is graduated according to the property used in such business, or on the gross receipts of the business.
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2. YES, The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. The Motor Vehicle Law (Section 70[b]) provides that no fees may be exacted or demanded for the operation of any motor vehicle other than those therein provided , the only exception being that which refers to property tax which may be imposed by municipal corporations. While the ordinance refers to property tax and it is fixed ad valorem, it is merely levied on motor vehicles operating within the city of Manila with the main purpose of raising funds to be expanded exclusively for the repair, maintenance and improvement of streets and bridges in said city. Because of this, the ordinance in question merely imposes a license fee although under the cloak of being an ad valorem tax to circumvent the prohibition provided by the Motor Vehicle Law. Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the word operating used. The word operating is akin to a registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees. There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a temporary purposes, and it cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. The fact that they are benefited by their use they should also be made to share the corresponding burden. And yet such is not the case. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution.
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Esso Standard Eastern, Inc. (formerly, Standard-Vacuum Oil Company) v The Commissioner of Internal Revenue
[G.R. No. L-29059. December 15, 1987] Digest by: ALVIAR, Joyce B. PONENTE: : Cruz, J. FACTS: The CTA denied ESSOs claims for refund of overpaid income taxes of P102,246.00 for 1959 and P434,234.93for 1960 in CTA Cases No. 1251 and 1558 respectively. In CTA Case No.1251, ESSO deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its petroleum concessions. This claim was disallowed by the respondent Commissioner of Internal Revenue on the ground that the expenses should be capitalized and might be written off as a loss only when a dry hole should result. ESSO then filed an amended return where it asked for the refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells and claimed as ordinary and necessary expenses the margin fees paid to the Central Bank on profit remittances to its New York head office. In another CTA Case, the CIR assessed ESSO a deficiency income tax for the year 1960 arising from the disallowance of the margin fees paid by ESSO to the Central Bank on its profit remittances to its New York head office. ESSO settled the same by applying as tax credit its overpayment on its income tax in 1959 and paying under protest the remaining amount. The CIR denied the claims for refund of the overpayment of its 1959 and 1960 income taxes, holding that the margin fees paid to the Central Bank could not be considered taxes or allowed as deductible business expenses. ESSO appealed to the CTA and sought the refund, contending that the margin fees were deductible from gross income either as a tax or as an ordinary and necessary business expense, which was also denied. ISSUE: Whether or not the margin fees were deductible from gross income as a tax or an ordinary and necessary business expense. HELD: The margin fee was imposed by the State in the exercise of its police power and not the power of taxation. In citing two previous cases the Court held that a margin fee is not a tax but an exaction designed to curb the excessive demands upon our international reserve. In Caltex (Phil.) Inc. v. Acting Commissioner of Customs, the Court stated: A margin levy on foreign exchange is a form of exchange control or restriction designed to discourage imports and encourage exports, and ultimately, curtail any excessive demand upon the international reserve in order to stabilize the currency. By its nature, the margin levy is part of the rate of exchange as fixed by the government. Moreover, it has been settled that a tax is levied to provide revenue for government operations, while the proceeds of the margin fee are applied to strengthen our countrys international reserves. In Chamber of Agriculture and Natural Resources of the Philippines v. Central Bank, The same idea was expressed, though in connection with a different levy: we do not
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find merit in the argument that the 20% retention of exporters foreign exchange constitutes an export tax. A tax is a levy for the purpose of providing revenue for government operations, while the proceeds of the 20% retention, are applied to strengthen the Central Banks international reserve. The margin fees are not ordinary and necessary business expenses. Esso contends that such remittance was an expenditure necessary and proper for the conduct of its corporate affairs. The Court citing a case, laid down the rules on the deductibility of business expenses, thus: the law allowing expenses as deduction from gross income for purposes of the income tax is Section 30(a) of the National Internal Revenue which allows a deduction of all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. An item of expenditure, in order to be deductible under this section of the statute, must fall squarely within its language. We come, then, to the statutory test of deductibility where it is axiomatic that to be deductible as a business expense, three conditions are imposed, namely: (1) the expense must be ordinary and necessary, (2) it must be paid or incurred within the taxable year, and (3) it must be paid or incurred in carrying on a trade or business. In addition, not only must the taxpayer meet the business test, he must substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will be disallowed. Ordinarily, an expense will be considered necessary where the expenditure is appropriate and helpful in the development of the taxpayers business. It is ordinary when it connotes a payment which is normal in relation to the business of the taxpayer and the surrounding circumstances. Assuming that the expenditure is ordinary and necessary in the operation of the taxpayers business, the answer to the question as to whether the expenditure is an allowable deduction as a business expense must be determined from the nature of the expenditure itself, depends on the extent and permanency of the work accomplished by the expenditure. The Court held that CTA was correct in saying that the margin fees are not expenses in connection with the production or earning of petitioners incomes in the Philippines. Since the margin fees in question were incurred for the remittance of funds to petitioners Head Office in New York, a separate and distinct income taxpayer from the branch in the Philippines, for its disposal abroad, it can never be said therefore that the margin fees were appropriate and helpful in the development of petitioners business in the Philippines exclusively or were incurred for purposes proper to the conduct of the affairs of petitioners branch in the Philippines exclusively or for the purpose of realizing a profit or of minimizing a loss in the Philippines exclusively. ESSO has not shown that the remittance to the head office of part of its profits was made in furtherance of its own trade or business. It is clear that ESSO, having assumed an expense properly attributable to its head office, cannot now claim this as an ordinary and necessary expense paid or incurred in carrying on its own trade or business. PAGE
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the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. The Farmers Market and Shopping Center being a public market in the sense of a market open to and inviting the patronage of the general public, even though privately owned, petitioners operation thereof required a license issued by the respondent City, the issuance of which, applying the standards set forth above, was done principally in the exercise of the respondents police power. The operation of a privately owned market is as equivalent to or quite the same as the operation of a government-owned market; both are established for the rendition of service to the general public, which warrants close supervision and control by the respondent City for the protection of the health of the public. The Supreme Court held that the five percent (5%) tax imposed in Ordinance No. 9236 constitutes, not a tax on income, not a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of the business in which the petitioner is engaged. PAGE
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intended only for rigidly purposes in the exercise of the States police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without changing the earlier deputy. of registration payments as fees, their nature has become that of taxes. In view of the foregoing, the Supreme Court ruled that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program. PAGE
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The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. The same amount of P50.00 is being collected from every employed alien whether he is casual or permanent, part time or full time or whether he is a lowly employee or a highly paid executive. PAGE
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The license fees imposed by it are essentially for purposes of regulation, and are justified, considering that the sale of intoxicating liquor is, potentially at least, harmful to public health and morals, and must be subject to supervision or regulation by the state and by cities and municipalities authorized to act in the premises. On the other hand, it is clear that Ordinances Nos. 3634, 3301, and 3816 impose taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila by virtue of its power to tax dealers for the sale of such merchandise. Both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation. PAGE
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Osmea v. Orbos
[G.R. No. 99886. March 31, 1993] Digest by: AUMENTADO, Adrian F. PONENTE: Narvasa J. FACTS: On October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). It was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Later, the OPSF was reclassified into a trust liability account, by virtue of Executive Order (E.O.) 1024, and ordered released from the National Treasury to the Ministry of Energy. President Corazon C. Aquino, amending PD 1956, promulgated Executive Order No. 137, expanding the grounds for reimbursement to oil companies for possible cost under recovery incurred due to the reduction of domestic prices of petroleum products, the amount of the under recovery being left for determination by the Ministry of Finance. Petitioner argues, among others, that the monies collected pursuant to P.D. 1956, as amended, must be treated as a SPECIAL FUND, not as a trust account or a trust fund, and that if a special tax is collected for a specific purpose, the revenue generated therefrom shall be treated as a special fund to be used only for the purpose indicated, and not channeled to another government objective. Further, that since a special fund consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created. The petitioner does not suggest that a trust account is illegal per se, but maintains that the monies collected, which form part of the OPSF, should be maintained in a special account of the general fund for the reason that the Constitution so provides, and because they are, supposedly, taxes levied for a special purpose. He assumes that the Fund is formed from a tax undoubtedly because a portion thereof is taken from collections of ad valorem taxes and the increases thereon. ISSUE: What is the nature and character of the OPSF? HELD: While the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a trust liability account, the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a special fund. Indeed, the practice is not without precedent. PAGE
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Also of relevance is this Courts ruling in relation to the sugar stabilization fund the nature of which is not far different from the OPSF. In Gaston v. Republic Planters Bank, this Court upheld the legality of the sugar stabilization fees and explained their nature and character, viz.: The stabilization fees collected are in the nature of a tax, which is within the power of the State to impose for the promotion of the sugar industry (Lutz v. Araneta, 98 Phil. 148) ......... The tax collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide a means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State (Lutz v. Araneta, supra). xxx xxx xxx The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market. The fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose. Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, administered in trust for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance if any, is to be transferred to the general funds of the Government. That is the essence of the trust intended. The character of the Stabilization Fund as a special kind of fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law (1987) Constitution, Article VI, Sec. 29 (3), lifted from the 1935 Constitution, Article VI, Sec. 23(1). PAGE
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The basic defect in the plaintiffs position in his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly Section 6, will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. We hold that the special assessment at bar may be considered as similarly as the above, that is, that the levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but, the exercise of the police power for the general welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist. PAGE
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want it to mea na reve nue meas ure in the guise of a licen se tax. For reall y, this runs coun ter to the decla red purp ose to mak e mon ey. Besi des, the term lice nse tax has not acqu ired a fixed mea ning. It is often use d indis crimi natel y to desig nate impo sitio ns exact ed for the
exerc ise of vario us privil eges. It does not refer solel y to a licens e for regul ation. In many insta nces, it refer s to reve nueraisin g exact ions on privil eges or activi ties. On the other hand, licens e fees are com monl y calle d taxes. But, legall y spea king, the latter are for the purp ose of raisin g reven ues, in
contr ast to the form er whic h are impo sed in the exer cise of polic e pow er for purp oses of regul ation . We acco rdin gly say that the desig natio n give n by the muni cipal auth oriti es does not deci de whet her the impo sitio n is prop erly a licen se tax or a licen se fee. The deter
mini ng facto rs are the purp ose and effect of the impo sition as may be appa rent from the provi sions of the ordin ance. Thus, whe n no polic e inspe ction, super visio n, or regul ation is provi ded, nor any stand ard set for the appli cant to estab lish, or that he agree s to attai n or main tain, but any and all perso ns
enga ged in the busi ness desig nate d, with out quali ficati on or hind ranc e, may com e, and a licen se on pay ment of the stipu lated sum will issue , to do busi ness, subje ct to no pres cribe d rule of cond uct
and unde r no guar dian eye, but accor ding to the unres train ed judg ment or fancy of the appli cant and licens ee, the presu mpti on is stron g that the powe r of taxati on, and not the polic e powe r, is being exerc ised. PAGE
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Lutz v. Araneta
[G.R. No. L-7859. December 22, 1955] Digest by: AUMENTADO, Adrian F. PONENTE: Reyes J. FACTS: Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948- 1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiffs opinion is not a public purpose for which a tax may be constitutionally levied. ISSUE: Whether or not the imposition of the taxes are valid? HELD: Yes. The basic defect in the plaintiffs position is his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. The tax is levied with regulatory purpose; such is to provide means for the rehabilitation and stabilization of the sugar industry. The act is primarily an exercise of police power, and not a pure exercise of taxing power. As sugar production is one of the great industries of the Philippines, and that its promotion, protection and advancement redounds greatly to the general welfare. The legislature found that the general welfare demands that the industry should be stabilized, and provided that the distribution of benefits therefrom be readjusted among its component to enable it to resist the added strain of the increase in tax that it had to sustain. PAGE
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PCGG v. Cojuanco
[G.R. Nos. 147062-64. December 14, 2001] Digest by: AUMENTADO, Adrian F. PONENTE: Panganiban J. FACTS: The PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal. Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank(UCPB) registered in the names of the alleged one million coconut farmers, the so-called Coconut Industry Investment Fund companies (CIIF companies) and Private Respondent Eduardo Cojuangco Jr. On January 23, 1995, the trial court rendered its final Decision nullifying and setting aside the Resolution of the Sandiganbayan which lifted the sequestration of the subject UCPB shares. ISSUE: Are the Coconut Levy Funds raised through the States police and taxing powers? HELD: Yes. Coconut levy funds partake of the nature of taxes which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs. Based on this definition, a tax has three elements, namely: a) it is an enforced proportional contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State. Even if the money is allocated for a special purpose and raised by special means, it is still public in character. In the case before us, the funds were even used to organize and finance State offices. It cannot be denied that the coconut industry is one of the major industries supporting the national economy. It is, therefore, the States concern to make it a strong and secure source not only of the livelihood of a significant segment of the population, but also of export earnings the sustained growth of which is one of the imperatives of economic stability. The coconut levy funds constitute state funds even though they may be held for a special public purpose. Such coconut levy funds -- like the sugar levy and the oil stabilization funds, as well as the monies generated by the On-line Lottery System -- are funds exacted by the State. Being enforced contributions, they are prima facie public funds. PAGE
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to enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State. For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard limits of which are sufficiently determinate or determinable to which the delegate must conform. The standard, as the Court has already stated, may even be implied. In that light, there can be no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a determinable standard which guides the exercise of the power granted to the ERB. By the same token, the proper exercise of the delegated power may be tested with ease. It seems obvious that what the law intended was to permit the additional imposts for as long as there exists a need to protect the general public and the petroleum industry from the adverse consequences of pump rate fluctuations. Where the standards set up for the guidance of an administrative officer and the action taken are in fact recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the judgment of such officer conform to the legislative standard, there is no failure in the performance of the legislative functions. PAGE
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plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendantsappellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent with the provisions of the former. PAGE
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milit ary pers onne l is not inclu ded in the term con struc tion, main tena nce, oper ation and defe nse of the base s. Neit her coul d the perf orma nce of this servi ce to the U. S. gove rnm ent be inter prete d as direc tly relat ed to the defe nse and secu rity of the Phili ppin e territ ories . Whe n the
law spea ks in clear and categ orical langu age, there is no reaso n for inter preta tion or const ructi on, but only for appli catio n. Any inter preta tion that woul d give it an expa nsive const ructi on to enco mpas s petiti oner s exem ption from taxati on woul d be unwa rrant ed. Laws grant ing exem ption from tax are const rued
strict issim i juris agai nst the taxp ayer and liber ally in favor of the taxin g pow er. Taxa tion is the rule and exe mpti on is the exce ption . The law does not look with favor on tax exe mpti ons and that he who woul d seek to be thus privi lege d must justif y it by word s too plain to be mist
aken and too categ orical to be misin terpr eted. The avow ed purp ose of tax exem ption is some publi c benef it or inter est, whic h the lawm aking body consi ders suffic ient to offset the mone tary loss entail ed in the grant of the exem ption. The hauli ng or trans port of hous ehold good s and perso nal effect s of U. S. milit ary perso nnel
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as a cond uit of the cons ortiu m of Japa nese bank s or the EXIM BAN K of Japa n. Whil e the loans were secu red by MITS UBIS HI prim arily as a loan to and in consi derat ion for impo rting copp er conc entra tes from ATL AS, the fact rema ins that it was a loan by EXIM BAN K of Japa n to MITS UBIS HI
and not to ATLA S. Thus, the trans actio n betw een MITS UBIS HI and EXIM BAN K of Japan was a distin ct and separ ate contr act from that enter ed into by MITS UBIS HI and ATLA S. It is too settle da rule in this juris dictio n that laws grant ing exem ption from tax are const rued strict issim i juris again st the taxpa
yer and liber ally in favor of the taxin g pow er. Taxa tion is the rule and exe mpti on is the exce ption . The burd en of proo f rests upon the part y clai ming exe mpti on to prov e that it is in fact cove red by the exe mpti on so clai med, whic h onus
petiti oners have failed to disch arge. Signif icantl y, priva te respo nden ts are not even amon g the entiti es whic h, unde r Secti on 29 (b) (7) (A) of the tax code, are entitl ed to exem ption and whic h shoul d indis pens ably be the party in inter est in this case. PAGE
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Thirty-First Infantry Post Exchange and First Lieutenant David L. Hardee vs Juan Posadas, Jr., Collector of Internal Revenue
[G.R. No. 33403. September 4, 1930] Digest by: BAUTISTA, Cecille Catherine A. PONENTE: Malcolm, J. FACTS: Thirty-first Infantry Post Exchange, is a post exchange constituted in accordance with the Army Regulations and the laws of the United States, with its place of business in the Cuartel de Espaa in the City of Manila, P. I. It is an agency within the United States Army, under the control of the officers of the Army which is designed for the accommodation, convenience, and assistance of the personnel of the Army. All of the goods sold to and purchased by the plaintiff Exchange are intended for resale to and are in fact resold, as they have been in the past, to the officers, soldiers and the civilian employees of the Army, and their families. The defendant and his predecessors in that office have collected from the merchants who made the sales of the commodities, goods, wares, and merchandise to the plaintiff Exchange, taxes at the rate of one and one-half per centum on the gross value in money of the commodities, goods, wares, and merchandise, sold by them to the plaintiff Exchange. petitioner to grant a tax credit in favor of Atlas. ISSUE: Whether or not a tax may be levied by the Government of the Philippine Islands on sales made by merchants to Post Exchanges of the United States Army in the Philippines HELD: The Court, citing the case of Walter E. Olsen vs Rafferty, ruled that the sale of merchandise through the post exchanges to the individuals of the United States Army and Navy are not goods sold and delivered directly to the United States Army or Navy for the actual use or issue by the Army or Navy and are therefore, not exempt from the payment of the internal revenue tax imposed by the law. Since no law of the Congress forbids the taxation of merchants who deal with Army Post Exchanges, and since the Congress has legalized the applicable law, and in doing so has granted no immunity from taxation to merchants who deal with Army Post Exchanges, the Congress has permitted such transactions with Army Post Exchanges, on the assumption that Post Exchanges are agencies of the United States, to be taxed by the Philippine Government. It must be understood, however, that the waiver must be clear, and that every well grounded doubt should be resolved in favor of the exemption. PAGE
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amnesty herein granted: a) Those falling under the provisions of Executive Order Nos. 1, 2 and 14; b) Those with income tax cases already filed in Court as of the effectivity hereof; The point of reference is the date of effectivity of E.O. No. 41. E.O. No. 41 took effect on August 22, 1986. CTA Case No. 4109 questioning the 1985 deficiency income, branch profit remittance and contractors tax assessments was filed by respondent with the Court of Tax Appeals on September 26, 1986. When E.O. No. 41 became effective on August 22, 1986, CTA Case No. 4109 had not yet been filed in court. Respondent corporation did not fall under the said exception in Section 4 (b), hence, respondent was not disqualified from availing of the amnesty for income tax under E.O. No. 41. The difficulty lies with respect to the contractors tax assessment and respondents availment of the amnesty under E.O. No. 64. E.O. No. 64 expanded the coverage of E.O. No. 41 by including estate and donors taxes and tax on business. When E.O. No. 64 took effect on November 17, 1986, it did not provide for exceptions to the coverage of the amnesty for business, estate and donors taxes. By virtue of Section 8 of E.O. No. 64, the provisions of E.O. No. 41 not contrary to or inconsistent with the amendatory act were reenacted in E.O. No. 64. Thus, Section 4 of E.O. No. 41 on the exceptions to amnesty coverage also applied to E.O. No. 64. With respect to Section 4 (b) in particular, this provision excepts from tax amnesty coverage a taxpayer who has income tax cases already filed in court as of the effectivity hereof. In view of the amendment introduced by E.O. No. 64, Section 4 (b) cannot be construed to refer to E.O. No. 41 and its date of effectivity. The general rule is that an amendatory act operates prospectively. While an amendment is generally construed as becoming a part of the original act as if it had always been contained therein,10 it may not be given a retroactive effect unless it is so provided expressly or by necessary implication and no vested right or obligations of contract are thereby impaired.11 E.O. Nos. 41 and 64 are tax amnesty issuances. A tax amnesty is a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law. It partakes of an absolute forgiveness or waiver by the government of its right to collect what is due it and to give tax evaders who wish to relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption, is never favored nor presumed in law. If granted, the terms of the amnesty, like that of a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority. For the right of taxation is inherent in government. The State cannot strip itself of the most essential power of taxation by doubtful words. He who claims an exemption (or an amnesty) from the common burden must justify his claim by the clearest grant of organic or state law. It cannot be allowed to exist upon a vague implication. If a doubt arises as to the intent of the legislature, that doubt must be resolved in favor of the state. PAGE
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Petitioners argue that nowhere in R. A. No. 7227 is there a grant of tax exemption to SEZs yet to be established in base areas, unlike the grant under Section 12 thereof of tax exemption and investment incentives to the therein established Subic SEZ. The grant of tax exemption to the John Hay SEZ, petitioners conclude, thus contravenes Article VI, Section 28 (4) of the Constitution which provides that No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress. Respondents contend that by extending to the John Hay SEZ economic incentives similar to those enjoyed by the Subic SEZ which was established under R.A. No. 7227, the proclamation is merely implementing the legislative intent of said law to turn the US military bases into hubs of business activity or investment. the laws. ISSUE: Whether Proclamation No. 420 is constitutional by providing for national and local tax exemption within and granting other economic incentives to the John Hay Special Economic Zone. HELD: No. It is clear that under Section 12 of R.A. No. 7227 it is only the Subic SEZ which was granted by Congress with tax exemption, investment incentives and the like. There is no express extension of the aforesaid benefits to other SEZs still to be created at the time via presidential proclamation. The deliberations of the Senate confirm the exclusivity to Subic SEZ of the tax and investment privileges accorded it under the law. Moreover the nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local governments may pass ordinances on exemption only from local taxes. The challenged grant of tax exemption would circumvent the Constitutions imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress. In the same vein, the other kinds of privileges extended to the John Hay SEZ are by tradition and usage for Congress to legislate upon. Contrary to public respondents suggestions, the claimed statutory exemption of the John Hay SEZ from taxation should be manifest and unmistakable from the language of the law on which it is based; it must be expressly granted in a statute stated in a language too clear to be mistaken. Tax exemption cannot be implied as it must be categorically and unmistakably expressed. If it were the intent of the legislature to grant to the John Hay SEZ the same tax exemption and incentives given to the Subic SEZ, it would have so expressly provided in the R.A. No. 7227. PAGE
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Resolution No. 93-05-034 on May 18, 1993, allowing the tax and duty-free sale at retail of consumer goods imported via Clark for consumption outside the CSEZ. On June 10, 1993, the President issued Executive Order No. 97, Clarifying the Tax and Duty Free Incentive Within the Subic Special Economic Zone Pursuant to R.A. No. 7227. Said issuance in part states, thus: SECTION 1. On Import Taxes and Duties - Tax and duty-free importations shall apply only to raw materials, capital goods and equipment brought in by business enterprises into the SSEZ. Except for these items, importations of other goods into the SSEZ, whether by business enterprises or resident individuals, are subject to taxes and duties under relevant Philippine laws. The exportation or removal of tax and duty-free goods from the territory of the SSEZ to other parts of the Philippine territory shall be subject to duties and taxes under relevant Philippine laws. On June 19, 1993, Executive Order No. 97-A was issued, Further Clarifying the Tax and Duty-Free Privilege Within the Subic Special Economic and Free Port Zone. The relevant provisions read, as follows: SECTION 1. The following guidelines shall govern the tax and duty-free privilege within the Secured Area of the Subic Special Economic and Free Port Zone: 1.1 The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and duty-free. Consumption items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein. 1.2. Residents of the SSEFPZ living outside the Secured Area can enter the Secured Area and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, these residents can purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US$100 per month per person. Only residents age 15 and over are entitled to this privilege. 1.3. Filipinos not residing within the SSEFPZ can enter the Secured Area and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, they can purchase and bring out [of] the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US$200 per year per person. Only Filipinos age 15 and over are entitled to this privilege. Petitioners assail the $100 monthly and $200 yearly tax-free shopping privileges granted by the aforecited provisions respectively to SSEZ residents living outside the Secured Area of the SSEZ and to Filipinos aged 15 and over residing outside the SSEZ. PAGE
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ISSUE: Whether or not the assailed issuances are unconstitutional, illegal and void for being an exercise of executivelawmaking, contrary to RA No. 7227 and in violation of the Constitutional provisions, particularly the equal protectionclause, prohibition of unfair competition and combinations in restraint of trade, and preferential use of Filipino labor,domestic materials and locally produced goods? HELD: On the issue of executive legislation, petitioners contend that the wording of RA No. 7227 clearly limits the grant of tax incentives to the importation of raw materials, capital and equipment only. Hence, they claim that the assailed issuances constitute executive legislation for invalidly granting tax incentives in the importation of consumer goods such as those being sold in the duty-free shops, in violation of the letter and intent of RA No. 7227. The Court held that Section12 of RA No. 7227 clearly does not restrict the duty-free importation only to raw materials, capital and equipment. To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the free flow of goods or capital within, into, and out of the zones is insured. The phrase tax and duty-free importations of raw materials, capital and equipment was merely cited as an example of incentives that may be given to entities operating within the zone. Moreover, the records of the Senate containing the discussion of the concept of special economic zone in Section 12 (a)of Republic Act No. 7227 show the legislative intent that consumer goods entering the SSEZ which satisfy the needs of the zone and are consumed there are not subject to duties and taxes in accordance with Philippine laws. However, the second sentences of paragraphs 1.2 and 1.3 of EO No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section12 of RA No. 7227. Said Section clearly provides that exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines. On the other hand, insofar as the CSEZ is concerned, the case for an invalid exercise of executive legislation is tenable. While Section 12 of RA No. 7227 expressly provides for the grant of incentives to the SSEZ, it fails to make any similar grant in favor of other economic zones, including the CSEZ. Tax and duty- free incentives being in the nature of tax exemptions, the basis thereof should be categorically and unmistakably expressed from the language of the statute. Consequently, in the absence of any express grant of tax and duty-free privileges to the CSEZ in RA No. 7227, there would be no legal basis to uphold the questioned portions of two issuances: Section 5 of Executive Order No. 80 and Section 4 of BCDA Board Resolution No. 93-05-034, which both pertain to the CSEZ. On the issue on equal protection, it is an established principle of constitutional law that the guaranty of the equal protection of the laws is not violated by a legislation based on a reasonable classification. Classification, to be valid, must (1) rest on substantial distinction, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class. In this case, the Court found that theres real and substantial distinction between residents within the secured area and those living within the economic zone but outside the fenced-off area. A significant distinction between the two PAGE
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groups is that enterprises outside the zones maintain their businesses within Philippine customs territory, while private respondents and the other duly-registered zone enterprises operate within the so-called separate customs territory. The classification is also germane to the purpose of RA No. 7227 because its purpose is to convert the lands formerly occupied by the US military bases into economic or industrial areas. In furtherance of such objective, Congress deemed it necessary to extend economic incentives to the establishments within the zone to attract and encourage foreign and local investors. The classification, moreover, is not limited to the existing conditions when the law was promulgated, but to future conditions as well, inasmuch as the law envisioned the former military reservation to ultimately develop into a selfsustaining investment center. And, lastly, the classification applies equally to all retailers found within the secured area. On the issue of unfair competition the Court held that the mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition. Said constitutional prohibition cannot hinder the Legislature from using tax incentives as a tool to pursue RA No. 7227 policies of developing the SSEZ into a self-sustaining entity that will generate employment and attract foreign and local investment. Lastly, on the issue of preferential use of Filipino labor, materials and goods, the Court held that this Constitutional provision did not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Philippine economy. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair Furthermore, Executive Department, with its subsequent issuance of Executive Order Nos. 444 and 303, has already provided certain measures to prevent that unfair competition. The petition is PARTLY GRANTED. Section 5 of Executive Order No. 80 and Section 4 of BCDA Board Resolution No. 93-05-034 are hereby declared NULL and VOID and are accordingly declared of no legal force and effect. All portions of Executive Order No. 97-A are valid and effective, except the second sentences in paragraphs 1.2 and 1.3of said Executive Order, which are hereby declared INVALID. PAGE
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there is compliance with the constitutional provision that allows an exemption, this is it. Instead, respondent Judge accepted at its face the allegation of private respondent. All that was alleged in the petition for declaratory relief filed by private respondents, after mentioning certain parcels of land owned by it, are that they are used actually, directly and exclusively as sources of support of the parish priest and his helpers and also of private respondent Bishop. In the motion to dismiss filed on behalf of petitioner Province of Abra, the objection was based primarily on the lack of jurisdiction, as the validity of a tax assessment may be questioned before the Local Board of Assessment Appeals and not with a court. There was also mention of a lack of a cause of action, but only because, in its view, declaratory relief is not proper, as there had been breach or violation of the right of government to assess and collect taxes on such property. It clearly appears, therefore, that in failing to accord a hearing to petitioner Province of Abra and deciding the case immediately in favor of private respondent, respondent Judge failed to abide by the constitutional command of procedural due process. The petition is granted and the resolution of June 19, 1978 is set aside. Respondent Judge, or who ever is acting on his behalf, is ordered to hear the case on the merit. PAGE
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Arturo M. Tolentino vs.The Secretary of Finance and The Commisioner of Internal Revenue
[G.R. No. 115455. October 30, 1995] Digest by: BONAVENTE, Arianne PONENTE: Mendoza, J.: FACTS: Tolentino et al is questioning the constitutionality of RA 7716 otherwise known as the Expanded Value Added Tax (EVAT) Law. Tolentino averred that this revenue bill did not exclusively originate from the House of Representatives as required by Section 24, Article 6 of the Constitution. Even though RA 7716 originated as HB 11197 and that it passed the 3 readings in the HoR, the same did not complete the 3 readings in Senate for after the 1st reading it was referred to the Senate Ways & Means Committee thereafter Senate passed its own version known as Senate Bill 1630. Tolentino averred that what Senate could have done is amend HB 11197 by striking out its text and substituting it w/ the text of SB 1630 in that way the bill remains a House Bill and the Senate version just becomes the text (only the text) of the HB. Tolentino and co-petitioner Roco [however] even signed the said Senate Bill. ISSUE: Whether or not EVAT originated in the HoR. HELD: The contention has no merit. The addition of the word exclusively in the Philippine Constitution and the decision to drop the phrase as on other Bills in the American version, according to petitioners, shows the intention of the framers of our Constitution to restrict the Senates power to propose amendments to revenue bills. Petitioner Tolentino contends that the word exclusively was inserted to modify originate and the words as in any other bills (sic) were eliminated so as to show that these bills were not to be like other bills but must be treated as a special kind. The history of this provision does not support this contention. The supposed indicia of constitutional intent are nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935 Constitution originally provided for a unicameral National Assembly. When it was decided in 1939 to change to a bicameral legislature, it became necessary to provide for the procedure for lawmaking by the Senate and the House of Representatives. The work of proposing amendments to the Constitution was done by the National Assembly, acting as a constituent assembly, some of whose members, jealous of preserving the Assemblys lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed the following provision: All bills appropriating public funds, revenue or tariff bills, bills of local application, and private bills shall originate exclusively in the Assembly, but the Senate may propose or concur with amendments. In case of disapproval by PAGE
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the Senate of any such bills, the Assembly may repass the same by a two-thirds vote of all its members, and thereupon, the bill so repassed shall be deemed enacted and may be submitted to the President for corresponding action. In the event that the Senate should fail to finally act on any such bills, the Assembly may, after thirty days from the opening of the next regular session of the same legislative term, reapprove the same with a vote of two-thirds of all the members of the Assembly. And upon such reapproval, the bill shall be deemed enacted and may be submitted to the President for corresponding action. This is the history of Art. VI, 18 (2) of the 1935 Constitution, from which Art. VI, 24 of the present Constitution was derived. It explains why the word exclusively was added to the American text from which the framers of the Philippine Constitution borrowed and why the phrase as on other Bills was not copied. Considering the defeat of the proposal, the power of the Senate to propose amendments must be understood to be full, plenary and complete as on other Bills. Thus, because revenue bills are required to originate exclusively in the House of Representatives, the Senate cannot enact revenue measures of its own without such bills. After a revenue bill is passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same subject matter. This follows from the coequality of the two chambers of Congress. The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application to others, such those selling goods, is valid, its application to the press or to religious groups, such as the Jehovahs Witnesses, in connection with the latters sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put it, it is one thing to impose a tax on income or property of a preacher. It is quite another thing to exact a tax on him for delivering a sermon. A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which invalidated a city ordinance requiring a business license fee on those engaged in the sale of general merchandise. It was held that the tax could not be imposed on the sale of bibles by the American Bible Society without restraining the free exercise of its right to propagate. The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general regulation is not to violate its freedom under the Constitution. 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 PAGE
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contract. The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall evolve a progressive system of taxation. The constitutional provision has been interpreted to mean simply that direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized. (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed. (1977)). Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, 17(1) of the 1973 Constitution from which the present Art. VI, 28(1) was taken. Sales taxes are also regressive. We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We have in fact taken the extraordinary step of enjoining its enforcement pending resolution of these cases. We have now come to the conclusion that the law suffers from none of the infirmities attributed to it by petitioners and that its enactment by the other branches of the government does not constitute a grave abuse of discretion. Any question as to its necessity, desirability or expediency must be addressed to Congress as the body which is electorally responsible, remembering that, as Justice Holmes has said, legislators are the ultimate guardians of the liberties and welfare of the people in quite as great a degree as are the courts. (Missouri, Kansas & Texas Ry. Co. v. May, 194 U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543 does in arguing that we should enforce the public accountability of legislators, that those who took part in passing the law in question by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the flush of enactment. This Court does not sit as a third branch of the legislature, much less exercise a veto power over legislation. PAGE
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Abakada Guro Party List vs. The Honorable Executive Secretary Eduardo Ermita
[G.R. No. 168056. September 1, 2005] Digest by: BONAVENTE, Arianne PONENTE: Austria-Martinez, J.: FACTS: Petitioners ABAKADA GURO Party List, et al. question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform proviso authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions have been satisfied, to wit: . . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution. Aside from questioning the so-called stand-by authority of the President to increase the VAT rate to 12%, on the ground that it amounts to an undue delegation of legislative power, petitioners also contend that the increase in the VAT rate to 12% contingent on any of the two conditions being satisfied violates the due process clause embodied in Article III, Section 1 of the Constitution, as it imposes an unfair and additional tax burden on the people, in that: (1) the 12% increase is ambiguous because it does not state if the rate would be returned to the original 10% if the conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate from year to year; and (3) the increase in the VAT rate, which is supposed to be an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the previous year, should only be based on fiscal adequacy. Petitioners further claim that the inclusion of a stand-by authority granted to the President by the Bicameral Conference Committee is a violation of the no-amendment rule upon last reading of a bill laid down in Article VI, Section 26(2) of the Constitution. PAGE
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Thereafter, a petition for prohibition was filed by the Association of Pilipinas Shell Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337: 1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on depreciable goods shall be amortized over a 60-month period, if the acquisition, excluding the VAT components, exceeds One Million Pesos (P1, 000,000.00); 2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the amount of input tax to be credited against the output tax; and 3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5% final withholding tax on gross payments of goods and services, which are subject to 10% VAT under Sections 106 (sale of goods and properties) and 108 (sale of services and use or lease of properties) of the NIRC. Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive, excessive, and confiscatory. According to petitioners, the contested sections impose limitations on the amount of input tax that may be claimed. Petitioners also argue that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited without due process of law. Petitioners further contend that like any other property or property right, the input tax credit may be transferred or disposed of, and that by limiting the same, the government gets to tax a profit or value-added even if there is no profit or value-added. Petitioners also believe that these provisions violate the constitutional guarantee of equal protection of the law under Article III, Section 1 of the Constitution, as the limitation on the creditable input tax if: (1) the entity has a high ratio of input tax; or (2) invests in capital equipment; or (3) has several transactions with the government, is not based on real and substantial differences to meet a valid classification. Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI, Section 28(1) of the Constitution, and that it is the smaller businesses with higher input tax to output tax ratio that will suffer the consequences thereof for it wipes out whatever meager margins the petitioners make. Governor Enrique T. Garcia filed a petition for certiorari and prohibition, alleging unconstitutionality of the law on the ground that the limitation on the creditable input tax in effect allows VAT-registered establishments to retain a portion of the taxes they collect, thus violating the principle that tax collection and revenue should be solely allocated for public purposes and expenditures. Petitioner Garcia further claims that allowing these establishments to pass on the tax to the consumers is inequitable, in violation of Article VI, Section 28(1) of the Constitution. The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents. PAGE
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Preliminarily, respondents contend that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners failed to cast doubt on its validity. Relying on the case of Tolentino vs. Secretary of Finance, respondents argue that the procedural issues raised by petitioners, i.e., legality of the bicameral proceedings, exclusive origination of revenue measures and the power of the Senate concomitant thereto, have already been settled. With regard to the issue of undue delegation of legislative power to the President, respondents contend that the law is complete and leaves no discretion to the President but to increase the rate to 12% once any of the two conditions provided therein arise. Respondents also refute petitioners argument that the increase to 12%, as well as the 70% limitation on the creditable input tax, the 60-month amortization on the purchase or importation of capital goods exceeding P1,000,000.00, and the 5% final withholding tax by government agencies, is arbitrary, oppressive, and confiscatory, and that it violates the constitutional principle on progressive taxation, among others. Finally, respondents manifest that R.A. No. 9337 is the anchor of the governments fiscal reform agenda. A reform in the value-added system of taxation is the core revenue measure that will tilt the balance towards a sustainable macroeconomic environment necessary for economic growth. ISSUE: Whether or not the questioned provisions of R.A. No. 9337 are unconstitutional. HELD: Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate is a virtual abdication by Congress of its exclusive power to tax because such delegation is not within the purview of Section 28 (2), Article VI of the Constitution, which provides: The Congress may, by law, authorize the President to fix within specified limits, and may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the government. The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by the President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the President does not come into play. It is a clear directive to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of certain facts or conditions by a person or body other than the legislature itself. PAGE
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The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the law effectively nullified the Presidents power of control over the Secretary of Finance by mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. The Court cannot also subscribe to the position of petitioners Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase upon the recommendation of the Secretary of Finance. Neither does the Court find persuasive the submission of petitioners Escudero, et al. that any recommendation by the Secretary of Finance can easily be brushed aside by the President since the former is a mere alter ego of the latter. In the absence of any provision providing for a return to the 10% rate, which in this case the Court finds none, petitioners argument is, at best, purely speculative. There is no basis for petitioners fear of a fluctuating VAT rate because the law itself does not provide that the rate should go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer present. The rule is that where the provision of the law is clear and unambiguous, so that there is no occasion for the courts seeking the legislative intent, the law must be taken as it is, devoid of judicial addition or subtraction. Petitioners claim that the contested sections impose limitations on the amount of input tax that may be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited against the output tax. Petitioners argument is not absolute. It assumes that the input tax exceeds 70% of the output tax, and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the input tax is less than 70% of the output tax, then 100% of such input tax is still creditable. Every law enjoys in its favor the presumption of constitutionality. Their arguments notwithstanding, petitioners failed to justify their call for the invalidity of the law. Hence, R.A. No. 9337 is not unconstitutional. Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056, 168207, 168461, 168463, and 168730, are hereby dismissed. PAGE
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MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC. vs. DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS ORIENTAL
[G.R. No. 108524. November 10, 1994] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: Mendoza, J.: FACTS: Petitioner are engaged in the buying and selling of copra in Misamis Oriental. They seek to nullify Revenue Memorandum Circular No. 47-91 and enjoin the collection by respondent revenue officials of the Value Added Tax (VAT) on the sale of copra by members of petitioner organization. They allege that prior to the issuance of the assailed Revenue Memorandum, which implemented VAT Ruling 190-90, copra was classified as agricultural food product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution. However, respondent Commissioner of Internal Revenue issued the circular in question, classifying copra as an agricultural non-food product and declaring it exempt from VAT only if the sale is made by the primary producer pursuant to Section 103(a) of the Tax Code, as amended. The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed when copra was classified as an agricultural food product under 103(b) of the NIRC. Petitioner likewise claims that RMC No. 47-91 is discriminatory and violative of the equal protection clause of the Constitution because while coconut farmers and copra producers are exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add that oil millers do not enjoy tax credit out of the VAT payment of traders and dealers. ISSUE: Whether there was violation of the equal protection clause. HELD: No. There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. PAGE
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COMMISSIONER OF INTERNAL REVENUE vs. HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION
[G.R. No. 119761. August 29, 1996] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: VITUG, J. FACTS: On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration over Champion, Hope, and More cigarettes. The Commissioner of Internal Revenue Bienvenido A. Tan, Jr. classify them as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of Hope to Hope Luxury and More to Premium More, thereby removing the said brands from the foreign brand category. Proof was also submitted to the Bureau (of Internal Revenue [BIR]) that Champion was an original Fortune Tobacco Corporation register and therefore a local brand. Ad Valorem taxes were imposed on these brands. A bill, which later became Republic Act (RA) No. 7654 was enacted. In effect, a revenue memorandum circular was issued which stated that the aforesaid brands of cigarettes, viz: HOPE, MORE and CHAMPION being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes. The CTA ruled that the Revenue Memorandum Circular reclassifying the brands of cigarettes, viz: HOPE, MORE and CHAMPION being manufactured by Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still classified as other locally manufactured cigarettes and taxed at 45% or 20% as the case may be. ISSUE: 1. Whether there was violation of due process in the issuance of the circular. 2. Whether the circular is discriminatory (violation of uniformity in taxation). HELD: 1. Yes, there was violation of due process. Being a legislative rule (as opposed to interpretative), due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. It has been observed that one of the problem areas bearing on compliance with Internal PAGE
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Revenue Tax rules and regulations is lack or insufficiency of due notice to the tax paying public. Unless there is due notice, due compliance therewith may not be reasonably expected. And most importantly, their strict enforcement could possibly suffer from legal infirmity in the light of the constitutional provision on due process of law and the essence of the Civil Code provision concerning effectivity of laws, whereby due notice is a basic requirement. In order that there shall be a just enforcement of rules and regulations, in conformity with the basic element of due process, the following procedures are hereby prescribed for the drafting, issuance and implementation of the said Revenue Tax Issuances: (a) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing on internal revenue tax rules and regulations. (b) Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances shall not begin to be operative until after due notice thereof may be fairly presumed. Due notice of the said issuances may be fairly presumed only after the following procedures have been taken. 2. Yes, there was no uniformity. The assailed RMC 37-93 would only apply to Hope Luxury, Premium More and Champion cigarettes and that other cigarettes bearing foreign brands have not been similarly included within the scope of the circular. PAGE
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THE COMMISSIONER OF INTERNAL REVENUE vs. LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX APPEALS
[G.R. No. L-23771. August 4, 1988] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: SARMIENTO, J. FACTS: The respondent taxpayer, Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan, pursuant to the municipal franchise granted it by their respective municipal councils, under Resolution Nos. 14 and 25 of June 29 and July 2, 1946, respectively. On February 24, 1948, the President of the Philippines approved the franchises granted to the private respondent. On November 21, 1955, the Bureau of Internal Revenue (BIR) assessed against and demanded from the private respondent the total amount of P19,293.41 representing deficiency franchise taxes and surcharges. Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963, granting to the private respondent a legislative franchise for the operation of the electric light, heat, and power system in the same municipalities of Pangasinan which states that no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts as provided for in the original franchise shall be collected from the grantee. The petitioner submits that the said law is unconstitutional insofar as it provides for the payment by the private respondent of a franchise tax of 2% of its gross receipts, while other taxpayers similarly situated were subject to the 5% franchise tax imposed in Section 259 of the Tax Code, thereby discriminatory and violative of the rule on uniformity and equality of taxation. ISSUE: 1. Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the uniformity and equality of taxation clause of the Constitution. 2. If the abovementioned Section 4 of R.A. No. 3843 is valid, whether or not it could be given retroactive effect so as to render uncollectible the taxes in question which were assessed before its enactment. HELD: 1. No violation of uniformity and equality of taxation. A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike 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. It is true that the PAGE
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priva te resp onde nts muni cipal franc hises were obtai ned unde r Act No. 667 of the Phili ppin e Com missi on, but thes e origi nal franc hises have been repla ced by a new legisl ative franc hise, i.e. R.A. No. 3843 . As corr ectly held by the resp onde nt court , the latte r was gran ted subje ct to the term s and
condi tions estab lishe d in Act No. 3636, as amen ded by C.A. No. 132. Thes e condi tions ident ify the priva te respo nden ts powe r plant as fallin g withi n that class of powe r plant s creat ed by Act No. 3636, as amen ded. The benef its of the tax reduc tion provi ded by law (Act No. 3636 as amen
ded by C.A. No. 132 and R.A. No. 3843 ) appl y to the resp onde nts pow er plant and othe rs circu mscr ibed withi n this class. R.ANo. 3843 mere ly trans ferre d the petiti oner s pow er plant from that class provi ded for in Act No. 667, as ame nded , to whic h it belo nged until the appr oval of
R.ANo. 3843, and place d it withi n the class fallin g unde r Act No. 3636, as amen ded. Thus, it only effect ed the trans fer of a taxab le prop erty from one class to anoth er. Furth ermo re, the 5% franc hise tax rate provi ded in Secti on 259 of the Tax Code was never inten ded to have a unive rsal appli catio
n. The said Secti on 259 of the Tax Code expr essly allo ws the pay ment of taxes at rates lowe r than 5% whe n the chart er gran ting the franc hise of a gran tee, like the one gran ted to the priva te resp onde nt unde r Secti on 4 of R.A. No. 3843 , precl udes the impo sitio n of a high
er tax. R.A. No. 3843 did not only fix and speci fy a franc hise tax of 2% on its gross recei pts, but made it in lieu of any and all taxes, all laws to the contr ary notw ithsta nding , thus, leavi ng no room for doub t regar ding the legisl ative inten t. Char ters or speci al laws grant ed and enact ed by the Legis latur
e are in the natu re of priva te contr acts. They do not cons titut ea part of the mac hine ry of the gene ral gove rnm ent. They are usua lly adop ted after caref ul consi derat ion of the priva te right s in relati on with resul tant bene fits to the State ... in passi ng a speci al chart er the atten tion of
the Legis latur e is direc ted to the facts and circu msta nces whic h the act or chart er is inten ded to meet. The Legis latur e consi der and make provi sion for all the circu msta nces of a parti cular case. In view of the foreg oing, SC finds no reaso n to distu rb the respo nden t court s rulin g uphol ding the const itutio
nalit y of the law in ques tion. 2. Yes. In the insta nt case, Act No. 3843 provi des that effe ctive ... upon the date the origi nal franc hise was gran ted, no othe r tax and/ or licen ses othe r than the franc hise
tax of two per centu m on the gross recei pts ... shall be collec ted, any provi sion to the contr ary notw ithsta nding . Repu blic Act No. 3843 there fore speci ficall y provi ded for the retro activ e effect of the law. PAGE
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KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA vs. HON. BIENVENIDO TAN, as Commissioner of Internal Revenue
[G.R. No. 81311. June 30, 1988] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: PADILLA, J. FACTS: There are four petitions which seek to nullify Executive Order No. 273 issued by the President which amended certain sections of the National Internal Revenue Code and adopted the value-added tax for being unconstitutional in that its enactment is not alledgedly 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. ISSUE: 1. Whether the President had no authority to issue EO 273. 2. Whether there was grave abuse of discretion on the part of the President. 3. Whether EO 273 is oppressive, discriminatory, unjust and regressive. 4. Whether EO 273 unduly discriminates against customs brokers. HELD: 1. Yes, under both the Provisional and the 1987 Constitutions, the President is vested with legislative powers until a legislature under a new Constitution is convened. The first Congress, created and elected under the 1987 Constitution, was convened on 27 July 1987. Hence, the enactment of EO 273 on 25 July 1987, two (2) days before Congress convened on 27 July 1987, was within the Presidents constitutional power and authority to legislate. The 1987 Constitution mentions a specific date when the President loses her power to legislate. If the framers of said Constitution had intended to terminate the exercise of legislative powers by the President at the beginning of the term of office of the members of Congress, they should have so stated (but did not) in clear and unequivocal terms. The Court has not power to rewrite the Constitution and give it a meaning different from that intended. 2. No grave abuse if discretion. 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. The signing of E.O. 273 was merely the last stage in the exercise of her (Pres. Aquino) legislative powers. The legislative process started long before the signing when the data were gathered, proposals were weighed and the final wordings of the measure were drafted, revised and finalized. Certainly, it cannot be said that the President made a jump, so to speak, on the Congress, two days before it convened. PAGE
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3. No. The petitioners assertions in this regard are not supported by facts and circumstances to warrant their conclusions. They have failed to adequately show that the VAT is oppressive, discriminatory or unjust. 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. 4. No. At any rate, the distinction of the customs brokers from the other professionals who are subject to occupation tax under the Local Tax Code is based upon material differences, in that the activities of customs brokers (like those of stock, real estate and immigration brokers) partake more of a business, rather than a profession and were thus subjected to the percentage tax under Sec. 174 of the National Internal Revenue Code prior to its amendment by EO 273. EO 273 abolished the percentage tax and replaced it with the VAT. If the petitioner Association did not protest the classification of customs brokers then, the Court sees no reason why it should protest now. PAGE
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ANTERO M. SISON, JR. vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue et al.
[G.R. No. L-59431. July 25, 1984] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: PADILLA, J. FACTS: The validity of Section I of Batas Pambansa Blg. 135 is questioned due to constitutional infirmities. The assailed provision further amends Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted gross income. Petitioner as taxpayer alleges that by virtue thereof, he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. He characterizes the above sction as arbitrary amounting to class legislation, oppressive and capricious in character. For petitioner, therefore, there is a transgression of both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity in taxation. ISSUE: Whether the assailed law is discriminatory. HELD: No. Taxpayers may be classified into different categories. To repeat, it is enough that the classification must rest upon substantial distinctions that make real differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the, discernible basis of classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of them. Taxpayers who are recipients of compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers are e not entitled to make deductions for income tax purposes because they are in the same situation more or less. On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income. There is ample justification then for the Batasang Pambansa 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. PAGE
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the exer cise of his discr etion . It has been held that wher e an ordi nanc e of a muni cipal ity fails to state any polic y or to set up any stan dard to guid e or limit the may ors actio n, expr esses no purp ose to be attai ned by requi ring a per mit, enu mera tes no cond ition s for its gran t or refus
al, and entir ely lacks stand ard, thus confe rring upon the Mayo r arbit rary and unres tricte d powe r to grant or deny the issua nce of build ing perm its, such ordin ance is invali d, being an undef ined and unli mite d deleg ation of powe r to allow or preve nt an activi ty per se lawfu l. PAGE
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exer cisin g privi leges withi n their resp ectiv e territ ories , and othe rwis e to levy for publi c purp oses, just and unifo rm taxes , licen ses, or fees. 3. NO. The ordi nanc e is not viola tive of the rule of unifo rmit y in taxat ion. The Supr eme Cour t has alrea dy ruled that tene ment hous es cons
titute a distin ct class of prop erty. It has likew ise ruled that taxe s are unifo rm and equal when impo sed upon all prop erty of the same class or chara cter withi n the taxin g autho rity. The fact, there fore, that the owne rs of other class es of build ings in the City of Iloilo do not pay the taxes impo sed by the ordin ance
in ques tion is no argu ment at all agai nst unifo rmit y and equa lity of the tax impo sitio n. Neit her is the rule of equa lity and unifo rmit y viola ted by the fact that tene ment taxes are not impo sed in othe r cities , for the same rule does not requi re that taxes for the same
purp ose shoul d be impo sed in differ ent territ orial subdi visio ns at the same time. So long as the burd en of the tax falls equal ly and impa rtiall y on all owne rs or oper ators of tene ment hous es simil arly classi fied or situat ed, equal ity and unifo rmity of taxati on is acco mplis hed. PAGE
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required by the Constitution and the law therefor, since only sales by agents or consignees of outside dealers would be subject to the 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 consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax. It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class. These conditions are not fully met by the ordinance in question. Indeed, if its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by sealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. PAGE
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Lutz v. Araneta
[G.R. No. L-7859. December 22, 1955] Digest by: DE GUZMAN, Pristine B. PONENTE: REYES, J.B L., J.. FACTS: Due to the threat to industry by the imminent imposition of export taxes upon sugar as provided in the Tydings-McDuffe Act, and the eventual loss of its preferential position in the United States market; the National Assembly promulgated Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act to obtain a readjustment of the benefits derived from the sugar industry by the component elements thereof and to stabilize the sugar industry so as to prepare it for the eventuality of the loss of its preferential position in the United States market and the imposition of the export taxes. Walter Lutz, as the Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from J. Antonio Araneta, the Collector of Internal Revenue, the sum of money paid by the estate as taxes, pursuant to the Sugar Adjustment Act. Under Section 3 of said Act, taxes are levied on the owners or persons in control of the lands devoted to the cultivation of sugar cane. Furthermore, Section 6 states all the collections made under said Act shall be for aid and support of the sugar industry exclusively. Lutz contends that such purpose is not a matter of public concern hence making the tax levied for that cause unconstitutional and void. The Court of First Instance dismissed his petition, thus this appeal before the Supreme Court. ISSUE: Whether or not the tax levied under the Sugar Adjustment Act is unconstitutional. HELD: NO. The tax levied under the Sugar Adjustment Act is constitutional. The tax under said Act is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. Since sugar production is one of the great industries of our nation, its promotion, protection, and advancement, therefore redounds greatly to the general welfare. Hence, said objectives of the Act are of public concern and is therefore constitutional. It follows that the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. If objectives and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made with the implement of the states police power. In addition, it is only rational that the taxes be obtained from those that will directly benefit from it. At any rate, it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation PAGE
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From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization Act, now in question, should be exclusively spent in aid of the sugar industry, since it is that very enterprise that is being protected. It may be that other industries are also in need of similar protection; that the legislature is not required by the Constitution to adhere to a policy of all or none. if the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other instances to which it might have been applied; and that the legislative authority, exerted within its proper field, need not embrace all the evils within its reach 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 solution of allied problems, as well as to the improvements of living and working conditions in sugar mills or plantations, without any part of such money being channeled directly to private persons, constitutes expenditure of tax money for private purposes. PAGE
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ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., vs. THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY MAYOR, all of the City of Manila
[G.R. No. L-4376, May 22, 1953] Digest by: DESTURA, Kristina Bianca D. PONENTE: BAUTISTA ANGELO, J. FACTS: The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the trucks in said City, challenge the validity of Ordinance No. 3379 passed by the Municipal Board of the City of Manila on March 24, 1950 on the ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes double taxation. The respondents, represented by the city fiscal, contend on their part that the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it constitute double taxation. The Court of First Instance of Manila sustained the validity of the ordinance and dismissed the petition. Hence this appeal. ISSUE: 1. Whether or not Ordinance no. 3379 is void for having passed beyond the power of the Municipal Board of the City of Manila. 2. Whether or not Ordinance no. 3379 violates the rule of uniformity of taxation. HELD: 1. In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the Motor Vehicles Law, as amended, (Act No. 3992) which has a bearing on the power of the municipal corporation to impose tax on motor vehicles operating in any highway in the Philippines. The pertinent provisions are contained in section 70 (b) which provide in part: No further fees than those fixed in this Act shall be exacted or demanded by any public highway, bridge or ferry, or for the exercise of the profession of chauffeur, or for the operation of any motor vehicle by the owner thereof: Provided, however, That nothing in this Act shall be construed to exempt any motor vehicle from the payment of any lawful and equitable insular, local or municipal property tax imposed thereupon........................... Note that under the said section no fees may be exacted or demanded for the operation PAGE
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of any motor vehicle other than those therein provided, the only exception being that which refers to the property tax which may be imposed by a municipal corporation. This provision is all-inclusive in that sense that it applies to all motor vehicles. In this sense, this provision should be construed as limiting the broad grant of power conferred upon the City of Manila by its Charter to impose taxes. While it refers to property tax and it is fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to. 2. The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to Manila and uses its streets and public highways. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the word operating used therein. The word operating denotes a connotation which is akin to a registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees. There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a temporary stay or for short errands, and it cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. The fact that they are benefited by their use they should also be made to share the corresponding burden. And yet such is not the case. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution. PAGE
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EASTERN THEATRICAL CO., INC., ET AL., vs. VICTOR, ALFON- SO as City Treasurer of Manila, THE MUNICIPAL BOARD OF THE CITY OF MANILA, and JUAN NOLASCO, as Mayor of the City of Manila
[G.R. No. L-1104, May 31, 1949] Digest by: DESTURA, Kristina Bianca D. PONENTE: PERFECTO, J. FACTS: The municipal board of Manila enacted Ordinance 2958 (series of 1946) imposing a fee on the price of every admission ticket sold by cinematograph theaters, vaudeville companies, theatrical shows and boxing exhibitions, in addition to fees imposed under Sections 633 and 778 of Ordinance 1600. Plaintiffs, operator of theaters in Manila And distributor of local or imported films allege that they are interested in the provision of section 1,2 and 4 of said ordinance which they impugn as null and void upon the following grounds: (a) For violation the Constitution more particular the provision regarding the uniformity and equality of taxation and the equal protection of the laws; (b) because the Municipal Board of Manila exceeded and over-stepped the power granted it the Charter of the City of Manila; (c) because it contravenes violates and is inconsistent with, existing national legislation more particularly revenue and tax laws and (d) because it is unfair, unjust, arbitrary capricious unreasonable oppressive and is contrary to and violation our basic and recognizes principles of taxation and licensing laws. ISSUE: Whether the ordinance violates the rule on uniformity and equality of taxation. HELD: The fact that some places of amusement are not taxed while others, such as cinematographs, theaters, vaudeville companies, theatrical shows, and boxing exhibitions and other kinds of amusements or places of amusement are taxed, is no argument at all against the equality and uniformity of the tax imposition. Equality and uniformity of the tax imposition. 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; and the appellants cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be confused with those not included in the ordinance. PAGE
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PHILIPPINE TRUST COMPANY, PEOPLES BANK AND TRUST COMPANY, THE YOKOHAMA SPECIE BANK, LTD., and THE CHARTERED BANK OF INDIA, AUSTRALIA AND CHINA, vs. A.L. YATCO, as Collector of Internal Revenue,
[G.R. Nos. L-46255, 46256, 46259 and 46277, January 23, 1940] Digest by: DESTURA, Kristina Bianca D. PONENTE: LAUREL, J FACTS: The original plaintiffs in the Court of First Instance of Manila were the Philippine Trust Company, the Peoples Bank and Trust Company, the Yokohama Specie Bank, Ltd., the Chartered Bank of India, Australia & China, the Bank of the Philippine Islands, the Hongkong & Shanghai Banking Corporation, and the China Banking corporation. As the last three named Banks did not appeal from the decision of the lower court, we are here concerned with the appeal taken by the plaintiffs named in the four above-titled cases. The records disclosed that prior to the filing of these suits, and for a number of years, the plaintiffs-appellants had been paying capital and deposit taxes without protest, formerly under section 111 of Act No. 1189, and later under section 1499 of the Revised Administrative Code of 1917, as amended. In the trial court, by agreement of the parties, the case were submitted and heard together on a joint stipulation of facts. After trial, the Court of First Instance of Manila dismissed the actions and upheld the validity of section 1499 of the Revised Administrative Code, as amended by Act No. 3199. Appellants challenge the constitutionality of the aforesaid section of the Revised Administrative Code, principally on the grounds that it violates the rule regarding uniformity of taxation, and that it is discriminatory, and therefore violative of the equal protection clause of the Constitution. ISSUE: Whether or not said section of thr Revised Administrative Code violates the Rule on uniformity of taxation. HELD: No. A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found. (State v. Railroad Tax Cases, 92 U.S. 575, 595, 612, 23 Law. ed. 363, 373.) Section 1499 of the Revised Administrative Code, as amended, applies uniformly to, and operates on, all banks in the Philippines without distinction and discrimination, and if the National City Bank of New York is exempted from its operation because it is a federal instrumentality subject only to the authority of Congress, that alone could have the effect of rendering it violative of the rule of uniformity. In every well-regulated and enlightened state or government, certain descriptions of property and also certain PAGE
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institutions are exempt from taxation, but these exemptions have never been regarded as disturbing the rules of taxation, even where the fundamental law had ordained that it should be uniform. (Des Moines Bank v. Fairweather, 263 U.S. 103,118). The rule of uniformity does not call for perfect uniformity or perfect equality, because this is hardly attainable. PAGE
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FRANCIS A. CHURCHILL and STEWART TAIT, ET AL, vs. VENANCIO CONCEPCION, as Acting Collector of Internal Revenue,
[G.R. No. 11572, September 22, 1916] Digest by: DESTURA, Kristina Bianca D. PONENTE: TRENT, J.: FACTS: Section 100 of Act No. 2339, passed February 27, 1914, effective July 1, 1914, imposed an annual tax of P4 per square meter upon electric signs, billboards, and spaces used for posting or displaying temporary signs, and all signs displayed on premises not occupied by buildings. This section was subsequently amended by Act No. 2432, effective January 1, 1915, by reducing the tax on such signs, billboards, etc., to P2 per square meter or fraction thereof. Section 26 of Act No. 2432 was in turn amended by Act No. 2445, but this amendment does not in any way affect the questions involved in the case under consideration. The taxes imposed by Act No. 2432, as amended, were ratified by the Congress of the United States on March 4, 1915. Francis A. Churchill and Stewart Tait, copartners doing business under the firm name and style of the Mercantile Advertising Agency, owners of a sign or billboard containing an area of 52 square meters constructed on private property in the city of Manila and exposed to public view, were taxes thereon P104. The tax was paid under protest and the plaintiffs having exhausted all their administrative remedies instituted the present action under section 140 of Act No. 2339 against the Collector of Internal Revenue to recover back the amount thus paid. From a judgment dismissing the complaint upon the merits. ISSUE: Whether the statute or tax is void for lack of uniformity. HELD: A tax is uniform when it operates with the same force and effect in every place where the subject of it is found (State Railroad Tax Cases, 92 U.S., 575.) The words uniform throughout the United States, as required of a tax by the Constitution, do not signify an intrinsic, but simply a geographical, uniformity, and such uniformity is therefore the only uniformity which is prescribed by the Constitution. (Patton vs. Brady, 184 U.S., 608; 46 L. Ed., 713.) A tax is uniform, within the constitutional requirement, when it operates with the same force and effect in every place where the subject of it is found. (Edye vs. Robertson, 112 U.S., 580; 28 L. Ed., 798.) Uniformity, as applied to the constitutional provision that all taxes shall be uniform, means that all property belonging to the same class shall be taxed alike. (Adams vs. Mississippi State Bank, 23 South, 395, citing Mississippi Mills vs Cook, 56 Miss., 40.) The statute under consideration imposes a tax of P2 per square meter or fraction thereof upon every electric sign, bill-board, etc., wherever found in the Philippine Islands. Or in other words, the rule of taxation upon such signs is uniform throughout the Islands. The rule, which we PAGE
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have just quot ed from the Phili ppin e Bill, does not requi re taxes to be grad ed acco rdin g to the valu e of the subje ct or subje cts upon whic h they are impo sed, espe cially thos e levie d as privi lege or occu patio n taxes . We can hardl y see wher ein the tax in ques tion cons titut es doub le taxat
ion. The fact that the land upon whic h the billbo ards are locat ed is taxed at so much per unit and the billbo ards at so much per squar e mete r does not const itute dou ble taxati on. Doub le taxati on, withi n the true mean ing of that expre ssion, does not neces sarily affect its validi ty. (1 Coole y on Taxat ion, 3d ed., 389.) And
agai n, it is not for the judic iary to say that the class ificat ion upon whic h the tax is base d is mere arbit rary selec tion and not base d upon any reas onab le grou
nds. The Legis latur e select ed signs and billbo ards as a subje ct for taxati on and it must be presu med that it, in so doing , acted with a full know ledge of the situat ion. PAGE
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private capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts. These contractual tax exemptions, however, are not to be confused with tax exemptions granted under franchises. A franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution. The Local Government Code of 1991 explicitly authorizes provincial governments, notwithstanding any exemption granted by any law or other special law, to impose a tax on businesses enjoying a franchise. Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units, LGC has effectively withdrawn under Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities. MERALCO further contends that in a plethora of cases, the phrase shall be in lieu of all taxes and at any time levied, established by, or collected by any authority exempted the franchise holder from any other tax imposed by the then Internal Revenue Code and local ordinaces. The SC holds otherwise. Court has held that the phrase in lieu of all taxes have to give way to the peremptory language of the Local Government Code specifically providing for the withdrawal of such exemptions, privileges, and that upon the effectivity of the Local Government Code all exemptions except only as provided therein can no longer be invoked by MERALCO to disclaim liability for the local tax. In fine, the Court has viewed its previous rulings as laying stress more on the legislative intent of the amendatory law - whether the tax exemption privilege is to be withdrawn or not rather than on whether the law can withdraw, without violating the Constitution, the tax exemption or not. PAGE
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Province of Misamis Oriental v. Cagayan Electric Power and Light Company Inc.
[G.R. No. 131359. May 5, 1999] Digest by: ERIGA, Ronald Fredric H. PONENTE: Grino-Aquino FACTS: Cagayan Electric Power and Light Company, Inc. (CEPALCO) was granted a franchise on June 17, 1961 under RA 3247 to install, operate and maintain an electric light, heat and power system in the City of Cagayan de Oro and its suburbs. The franchise was amended on June 21, 1963 by RA 3570 which added the municipalities of Tagoloan and Opol to CEPALCOs sphere of operation, and was further amended on August 4, 1969 by RA 6020 which extended its field of operation to the municipalities of Villanueva and Jasaan. On June 28, 1973, the Local Tax Code (PD 231) was promulgated. Pursuant thereto, the Province of Misamis Oriental enacted Provincial Revenue Ordinance 19 which provide for a franchise tax. The Provincial Treasurer of Misamis Oriental demanded payment of the provincial franchise tax from CEPALCO. The company refused to pay, alleging that it is exempt from all taxes except the franchise tax required by RA 6020. Nevertheless, CEPALCO paid under protest on May 27, 1974 the sum of P4,276.28 and appealed the fiscals ruling to the Secretary of Justice who reversed it and ruled in favor of CEPALCO. On 16 February 1976, the Province filed in the CFI Misamis Oriental a complaint for declaratory relief praying that the Court exercise its power to construe PD 231 in relation to the franchise of CEPALCO (RA 6020), and to declare the franchise as having been amended by PD 231. The Court dismissed the complaint and ordered the Province to return to CEPALCO the sum of P4,276.28 paid under protest. ISSUE: Whether or not the imposed franchise tax is valid. HELD: Section 9 of PD 231 provides that any provision of special laws to the contrary notwithstanding, the province may impose a tax on businesses enjoying franchise, based on the gross receipts realized within its territorial jurisdiction, at the rate of not exceeding one- half of one per cent of the gross annual receipts for the preceding calendar year. In the case of newly started business, the rate shall not exceed three thousand pesos per year. Sixty per cent of the proceeds of the tax shall accrue to the general fund of the province and forty per cent to the general fund of the municipalities serviced by the business on the basis of the gross annual receipts derived therefrom by the franchise holder. In the case of a newly started business, forty per cent of the proceeds of the tax shall be divided equally among the municipalities serviced by the business. PAGE
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The Provincial Revenue Ordinance 19 provides that there shall be levied, collected and paid on businesses enjoying franchise tax of one-half of one per cent of their gross annual receipts for the preceding calendar year realized within the territorial jurisdiction of the province of Misamis Oriental. There is no provision in PD 231 expressly or impliedly amending or repealing Section 3 of RA 6020. The perceived repugnancy between the two statutes should be very clear before the Court may hold that the prior one has been repealed by the later, since there is no express provision to that effect. The rule is that a special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special law unless there is manifest intent to repeal or alter the special law. Republic Acts 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while PD 231 is a general tax law. The presumption is that the special statutes are exceptions to the general law (PD 231) because they pertain to a special charter granted to meet a particular set of conditions and circumstances. The CEPALCOs franchise expressly exempts it from payment of all taxes of whatever authority except the three per centum (3%) tax on its gross earnings. The Local Tax Regulation 3-75 issued by the Secretary of Finance on 26 June 1976, has made it crystal clear that the franchise tax provided in the Local Tax Code (PD 231, Sec. 9) may only be imposed on companies with franchises that do not contain the exempting clause. The provision: shall be in lieu of all taxes of every name and nature in the franchise of the Manila Railroad exempts the Manila Railroad from payment of internal revenue tax. The Court pointed out that such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the grantee. As a charter is in the nature of a private contract, the imposition of another franchise tax on the corporation by the local authority would constitute an impairment of the contract between the government and the corporation. PAGE
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corporate taxpayers not expressly exempted therein and in section 27 of the Code, had the effect of withdrawing the companys exemption from income tax. The exemption was restored by the subsequent enactment on 4 August 1969 of RA 6020 which reenacted the said tax exemption. Hence, the company is liable only for the income tax for the period from January 1 to August 3, 1969 when its tax exemption was modified by RA 5431. PAGE
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Lealda v. CIR
[G.R. No. L-16428. April 30, 1963.] Digest by: ERIGA, Ronald Fredric H. PONENTE: Dizon FACTS: Julian M. Locsin Anson was granted a franchise in 1915, to operate an electric light and power plant to supply electric current to the residents of the municipalities of Legaspi and Daraga in Albay province (Act 2475, as amended by Act 2620). Subsequently, he sold his franchise, certificate of public convenience and the electric plant to Saturnino Benito, who in turn sold the same to Alfredo, Mario and Benjamin, all surnamed Benito, on March 13, 1941. On June 11, 1949, the Benitos and other parties formed a partnership to operate the electric plant. After the incorporation of Lealda Electric on February 8, 1951, the franchise, certificate of public convenience and the electric plant was transferred to it by said partnership. All these transactions were approved by the Public Service Commission. Since 1915, the original grantee and, after him, his various successors in interest, paid a franchise tax of 2% on the gross earnings or receipts from the business operated under the franchise until October 1, 1946 when Section 259 of the National Internal Revenue Code was amended by RA 39 which increased the franchise tax to 5%. Upon the approval of this mandatory act, Lealda Electric was required to pay, as it did pay, the increased franchise tax, except those that became payable before its incorporation, these having been paid by its predecessors in interest. Apparently on 27 October 1953, Lealda Electric had filed a claim for refund, action on which, however, was held in abeyance pending receipt by the Collector of Internal Revenue of an audit report expected from the General Auditing Office. On January 8, 1954, Lealda Electric filed with the Commissioner of Internal Revenue a petition for refund contending that, under its charter, it was liable to pay a franchise tax equivalent to only 2% and not 5% of its gross earnings or receipts. On June 22, 1958, Lealda Electric filed its last claim for refund of the total amount of P78,891.34 representing alleged excess payments of franchise tax covering the period from 20 January 1947 to April 15, 1958. On January 8, 1959 petitioner filed with the Court of Tax Appeals a petition for review praying for the refund of the total sum of P84,573.61 representing alleged excess payments of franchise tax for the period from January 20, 1947 to October 14, 1958, and for an order restraining said commission and its agents from collecting from it more than 2% of its gross earnings or receipts, as franchise tax. After proper proceedings in the Court of Tax Appeals, the court held that Lealda Electric was subject to pay the 5% franchise tax as prescribed in Section 259 of the National Internal Revenue Code, as amended by RA 39 and, as a consequence, dismissing the petition for refund for lack of merit. ISSUE: Whether or not Lealda is entitled to the refund. PAGE
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HEL D: No. Leal da Elect rics franc hise does not speci ficall y state that the rate of the franc hise tax to be paid there unde r by the origi nal gran tee and his succ esso rs in inter est shall be 2% of his gros s earni ngs or recei pts. It seem s clear , there fore, that the inten tion of the legisl
ature was to impo se upon the grant ee and his succe ssors in inter est, the oblig ation to pay the same franc hise tax impo sed upon other grant ees or franc hise holde rs at the time Act 2475 was enact ed. Prior to its amen dmen t, Secti on 259 of the Tax Code mere ly provi ded that the grant ees of franc hises shoul
d pay on their gros s earni ngs or recei pts suc h taxes , char ges and perc enta ges as are speci fied in speci al chart ers of corp orati ons upon who m such franc hises are conf erre d This provi sion did not cove r the case of franc hise hold ers who se chart ers did not speci fy the
rate of franc hise tax to be paid by them. Cons eque ntly, prior to the enact ment of RA 39, the franc hise tax paid by grant ees whos e chart ers did not speci fy the rate of the franc hise tax to be paid by them was the one provi ded for in Secti on 10 of Act 3636, know n as the Mode l Elect ric Light and Powe r Franc hise
Act. Cons eque ntly, Secti on 259 of the Tax Code , as ame nded by RA 39, beca me the basic franc hise tax law beca use it was not only entitl ed Tax on Corp orate Fran chise s but it fixed the rate of the franc hise tax to be paid by hold ers of all exist ing and
futur e franc hises. Such being the case, the provi sions of the act amen ding said secti on must be deem ed to apply likew ise to Leald a Elect ric beca use its franc hise was alrea dy existi ng at the time of the adopt ion of the amen dmen t. Tax exem ption s are not presu med. PAGE
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Casanovas v. Hord
[G.R. No. 3473, March 22, 1907] Digest by: ESCANER, Michael Joseph PONENTE: Willard, J. FACTS: The Spanish Government in 1897 granted petitioner certain mines in the province of Ambos Camarines in accordance with the provisions of the royal decree of 14th May 1867. The mines granted are now in the ownership of petitioner. Petitioner contended that these were validly perfected mining concessions granted to him prior to 11th of April 1899. The Collector of Internal Revenue considered the mines to fall within the provisions of Section 134 of Act 1189 (InternalRevenue Act). The defendant Commissioner, JNO S. Hord, imposed upon these properties the tax mentioned in Section134, which plaintiff Casanovas paid under protest. ISSUE: Whether or not Section 134 of Act 1189 is valid. HELD: The deed constituted a contract between the Spanish Government and Casanovas. The concessions can be cancelled only by reason of illegality in the procedure by which they were obtained, or for failure to comply with the conditions prescribed as requisites for their retention in the laws under which they were granted. There is no claim in this case that there was any illegality in the procedure by which these concessions were obtained, nor is there any claim that the plaintiff has not complied with the conditions prescribed in the royal decree of 1867. The obligation in the contract was impaired by the enactment of Section 134 of the Internal Revenue Law PAGE
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Commissioner of Internal Revenue vs. Bishop of the Missionary District of the Philippines
[G.R. No. L-19445, August 31, 1965] Digest by: ESCANER, Michael Joseph PONENTE: Regala, J. FACTS: In 1957 to 1959, the Missionary District received various shipments of materials, supplies, equipment and other articles intended for use in the construction and operation of the new St. Lukes Hospital. On these shipments, the Commissioner collected compensation tax. The Missionary District filed claims for refund, but which was denied by the Commissioner on the ground that St. Lukes Hospital was not a charitable institution and therefore was not exempt from taxes because it admits pay patients. ISSUE: Whether or not the shipments for St. Lukes Hospital are tax-exempt. HELD: The following requisites must concur in order that a taxpayer may claim exemption under the law:(1) the imported articles must have been donated; (2) the done must be duly incorporated or established international civic organization, religious or charitable society, or institution for civic religious or charitable purposes; and (3) the articles so imported must have been donated for the use of the organization, society or institution or for free distribution and not for barter, sale or hire. As the law does not distinguish or qualify the enjoyment or the exemption (as the Secretary of Finance did in Department Order 18, series of 1958), the admission of pay patients does not detract from the charitable character of a hospital, if its funds are devoted exclusively to the maintenance of the institution. Thus, the shipments are tax exempt. PAGE
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Lladoc, the exemption herein must be denied. However, the Court noted the merit of Lladocs claim, and held as liable the Head of Deocese for being the real party in interest instead of Lladoc who was held to be not personally liable; the former manifested that it was submitting himself to the jurisdiction and orders of the Court and he presented Lladocs brief, by reference, as his own and for all purposes. PAGE
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Jose V. Herrera and Ester Herrera vs. The Quezon City Board Of Assessment Appeals
[L-15270 ,September 30, 1961] Digest by: GARCIA, Vianne Marie O. PONENTE: Concepcion, J. FACTS: Petitioners Jose and Ester Herrera were authorized by the Director of the Bureau of Hospitals to establish and operate the St. Catherines Hospital. In 1953, the petitioners sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the lot, building and other improvements comprising the hospital stating that the same was established for charitable and humanitarian purposes and not for commercial gain which was granted effective the years 1953 to 1955. Subsequently, however, in a letter dated August 10, 1955 the Quezon City Assessor notified the petitioners that the aforesaid properties were reclassified from exempt to taxable and thus assessed for real property taxes effective 1956. The petitioners appealed the assessment to the Quezon City Board of Assessment Appeals, which, affirmed the decision of the City Assessor. A motion for reconsideration thereof was denied. From this decision, the petitioners instituted the instant appeal. The building involved in this case is principally used as a hospital. From the evidence presented by petitioners, it is made to appear that there are two kinds of charity patients (a) those who come for consultation only (outcharity patients); and (b) those who remain in the hospital for treatment (lying-in-patients). Petitioners also operate within the premises of the hospital the St. Catherines School of Midwifery which was granted government recognition by the Secretary of Education. The students practice in the St. Catherines Hospital, as well as in the St. Marys Hospital, which is also owned by the petitioners. A separate set of accounting books is maintained by the school for midwifery distinct from that kept by the hospital. However, the petitioners have refused to submit a separate statement of accounts of the school. ISSUE: Whether or not the said properties are used exclusively for charitable or educational purposes which are exempt from real property tax HELD: The Supreme Court ruled in the affirmative. The Court of Tax Appeals decided the issue in the negative, upon the ground that the St. Catherines Hospital has a pay ward for ... pay-patients, who are charged for the use of the private rooms, operating room, laboratory room, delivery room, etc., like other hospitals operated for profit and that petitioners and their family occupy a portion of the building for their residence. It should be noted, however, that, according to the very statement of facts made in the decision appealed from, of the thirty-two (32) beds in the hospital, twenty (20) are for charity-patients; that the income realized from pay-patients is spent for improvement of the charity wards; and that petitioners, Dr. Ester Ochangco Herrera, as directress of said hospital, PAGE
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does not receive any salary, although its resident physician gets a monthly salary of P170.00. It is well settled, in this connection, that the admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted exclusively to the maintenance of the institution as a public charity. In other words, where rendering charity is its primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent purposes of the institution, the mere fact that a profit has been made will not deprive the hospital of its benevolent character. Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as, in the case of hospitals, a school for training nurses, a nurses home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns and residents. Within the purview of the Constitutional exemption from taxation, the St. Catherines Hospital is, therefore, a charitable institution, and the fact that it admits pay-patients does not bar it from claiming that it is devoted exclusively to benevolent purposes, it being admitted that the income derived from pay-patients is devoted to the improvement of the charity wards, which represent almost two-thirds (2/3) of the bed capacity of the hospital, aside from outcharity patients who come only for consultation. PAGE
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on its properties and income. This is without merit since the exemption provided lies on the payment of property tax, and not on the income tax on the rentals of its property. The bare allegation alone that one is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. For the YMCA to be granted the exemption it claims under the above provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. Unfortunately for respondent, the Court noted that not a scintilla of evidence was submitted to prove that it met the said requisites. The Court appreciates the nobility of respondents cause. However, the Courts power and function are limited merely to applying the law fairly and objectively. It cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be overspilling its role and invading the realm of legislation. The Court regrets that, given its limited constitutional authority, it cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the political departments of government. PAGE
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As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out- patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution. The money received by the petitioner becomes a part of the trust fund and must be devoted to public trust purposes and cannot be diverted to private profit or benefit. 2. Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160 (otherwise known as the Local Government Code of 1991) as follows: SECTION 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property tax: (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes. We note that under the 1935 Constitution, ... all lands, buildings, and improvements used exclusively for charitable purposes shall be exempt from taxation. However, under the 1973 and the present Constitutions, for lands, buildings, and improvements of the charitable institution to be considered exempt, the same should not only be exclusively used for charitable purposes; it is required that such property be used actually and directly for such purposes. What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a private individual for her business enterprise under the business name Elliptical Orchids and Garden Center. Indeed, the petitioners evidence shows that it collected P1,136,483.45 as PAGE
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rentals in 1991 and P1,679,999.28 for 1992 from the said lessees. Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. PAGE
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If petitioner had been candid and honest enough, it would have stated under what title and chapter of the Tax Code the second paragraph of Section 249 falls. As it then stood, the law stated: xxx TITLE VIII - MISCELLANEOUS TAXES Sec. 249. Tax on Banks. xxx xxx xxx. There shall be collected upon the amount of reserve deficiencies incurred by the bank, and for the period of their duration, as provided in section one hundred twenty six of Act numbered one thousand four hundred and fifty-nine, as amended by Act Numbered Three thousand six hundred and ten, one per centum per month. xxx xxx xxx. (As amended by Rep. Act No. 6110) As the law stood during the years the petitioner was assessed for taxes on reserve deficiencies (1969 & 1970), petitioner had to pay twice -- the first, a penalty, to the Central Bank by virtue of Section 106 for violation of Secs. 100 and 101, all of theCentral Bank Act and the second, a tax to the Bureau of Internal Revenue for incurring a reserve deficiency. As correctly analyzed by the petitioner and public respondents, the new legislations on bank reserves merely provided the basis for computation of the reserve deficiency of petitioner bank. Petitioner submits that it was not the legislative intention that banks with reserve deficiencies would pay twice as the Tax Code (CA 466, as amended by P.D. 69) enacted on January 1, 1973 did not contain said questioned provision. While petitioner might have a point, the wisdom of this legislation is not the province of the Court. It is clear from the statutes then in force that there was no double taxation involved -- one was a penalty and the other was a tax. At any rate, We have upheld the validity of double taxation. The payment of 1/10 of 1% for incurring reserve deficiencies (Section 106, Central Bank Act) is a penalty as the primary purpose involved is regulation, while the payment of 1% for the same violation (Second Paragraph, Section 249, NIRC) is a tax for the generation of revenue which is the primary purpose in this instance. Petitioner should not complain that it is being asked to pay twice for incurring reserve deficiencies. It can always avoid this predicament by not having reserve deficiencies. Petitioners case is covered by two special laws -- one a banking law and the other, a tax law. These two laws should receive such construction as to make them harmonize with each other and with the other body of pre- existing laws. PAGE
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them under the said ordinance. On March 30, 1966, the lower court rendered judgment declaring the ordinance illegal on the grounds that (a) RA 2264 does not empower cities to impose apartment taxes, (b) the same is oppressive and unreasonable, for the reason that it penalizes owners of tenement houses who fail to pay the tax, (c) it constitutes not only double taxation, but treble at that and (d) it violates the rule of uniformity of taxation. ISSUE: 1. Is Ordinance 11, series of 1960, of the City of Iloilo, illegal because it imposes double taxation? 2. Is the City of Iloilo empowered by the Local Autonomy Act to impose tenement taxes? 3. Is Ordinance 11, series of 1960, oppressive and unreasonable because it carries a penal clause? 4. Does Ordinance 11, series of 1960, violate the rule of uniformity of taxation? HELD: 1. No. While it is true that the plaintiffs-appellees are taxable under Sec. 182 (A) (3) (s) of the National Internal Revenue Code as real estate dealers, and still taxable under the ordinance in question, the argument against double taxation may not be invoked. The same tax may be imposed by the national government as well as by the local government. There is nothing inherently obnoxious in the exaction of license fees or taxes with respect to the same occupation, calling or activity by both the State and a political subdivision thereof. The contention that the plaintiffs-appellees are doubly taxed because they are paying the real estate taxes and the tenement tax imposed by the ordinance in question, is also devoid of merit. It is a wellsettled rule that a license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax. The State may collect an ad valorem tax on property used in a calling, and at the same time impose a license tax on that calling, the imposition of the latter kind of tax being in no sense a double tax. In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed twice when it should be taxed but once; both taxes must be imposed on the same property or subject-matter, for the same purpose, by the same State, Government, or taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of tax. It has been shown that a real estate tax and the tenement tax imposed by the ordinance, although imposed by the same taxing authority, are not of the same kind or character. At all events, there is no constitutional prohibition against double taxation in the Philippines. It is something not favored, but is permissible, provided some other constitutional requirement is not thereby violated, such as the requirement that taxes must be uniform. 2. Yes. RA 2264 confers on local governments broad taxing authority which extends to almost everything, excepting those which are mentioned therein, provided that the tax so levied is for public purposes, just and uniform, and does not transgress any constitutional provision or is not repugnant to a controlling statute. Thus, when a tax, levied under the PAGE
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auth ority of a city or muni cipal ordi nanc e, is not withi n the exce ption s and limit ation s afore ment ione d, the same com es withi n the ambi t of the gene ral rule, purs uant to the rules of expr essio uniu s est exclu sio alteri us, and exce ptio firm at regul um in casib us non exce pti. The appe llees stron gly
maintai n that it is a prope rty tax or real estate tax, and not a tax on person s engage d in any occupa tion or busines s or exercis ing privileg es, or a license tax, or a privileg e tax, or an excise tax. It is our view that the tax in questio n is not a real estate tax. A real estate tax is a direct tax on the owners hip of lands and buildin gs or other improv ements thereo n, not speciall y exempt ed, and is payabl e
rega rdles s of whet her the prop erty is used or not, altho ugh the valu e may vary in acco rdan ce with such facto r. The tax is usua lly singl e or indiv isibl e, altho ugh the land and build ing or impr ove ment s erect ed there on are asses sed sepa ratel y, exce pt whe n the land and build ing or
improv ements belong to separat e owners . It is a fixed propor tion of the assesse d value of the proper ty taxed, and require s, therefo re, the interve ntion of assesso rs. It is collecte d or payabl e at appoin ted times, and it constit utes a superio r lien on and is enforce able against the proper ty subject to such taxatio n, and not by impris onmen t of the owner. The tax impose d by the ordina nce in questio n does not posses
s the afore state d attri bute s. The subje ctmatt er of the ordi nanc e is tene ment hous es who se natu re and esse nce are expr essly set forth in secti on 2 whic h defin es a tene ment hous e as any build ing or dwel ling for renti ng spac e divid ed into sepa rate apart ment s or acce ssori as. The Supr
eme Court defined a teneme nt house as any house or buildin g, or portion thereof , which is rented, leased, or hired out to be occupie d, or is occupie d, as the home or residen ce of three familie s or more living indepe ndently of each other and doing their cookin g in the premis es or by more than two familie s upon any floor, so living and cookin g, but having a commo n right in the halls, stairwa
ys, yard s, wate rclose ts, or privi es, or some of them . Tene ment hous es, bein g nece ssari ly offer ed for rent or lease by their very natu re and esse nce, there fore cons titut ea disti nct form of busi ness or calli ng, simil ar to the hotel or mote l busi ness, or the oper ation of lodgi ng
houses or boardi ng houses. The lower court has interch angeab ly denomi nated the tax in questio n as a teneme nt tax or an apartm ent tax. Called by either name, it is not among the excepti ons listed in section 2 of the Local Autono my Act. 3. No. A tax is not a debt in the sense of an obligati on incurre d by contrac t, express or implied , and therefo re is not within the meanin g of constit utional or statuto
ry provi sions aboli shin g or proh ibitin g impr ison ment for debt, and a statu te or ordi nanc e whic h puni shes the nonpay ment there of by fine or impr ison ment is not, in confl ict with that proh ibitio n. Nor is the tax in ques tion a poll tax, for the latte r is a tax of a fixed amo unt upon all
person s, or upon all person s of a certain class, residen t within a specifie d territor y, withou t regard to their proper ty or the occupa tions in which they may be engage d. Theref ore, the tax in questio n is not oppres sive in the manne r the lower court puts it. On the other hand, the charter of Iloilo City empow ers its munici pal board to fix penalti es for violatio ns of ordina nces, which shall not exceed a fine
of two hund red peso s or six mont hs impr ison ment , or both such fine and impr ison ment for each offen se. 4. No. This Cour t has alrea dy ruled that tene ment hous es cons titut ea disti nct class of prop erty. It has like wise ruled that taxe s are unifo rm and equa l whe n impo sed upon all PAGE
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prop erty of the same class or char acter withi n the taxin g auth ority. The fact, there fore, that the own ers of othe r class es of build ings in the City of Iloilo do not pay the taxes impo sed by the ordi nanc e in ques tion is no argu ment at all agai nst unifo rmit y and equa lity of the tax impo sitio n.
Neither is the rule of equalit y and unifor mity violate d by the fact that teneme nt taxes are not impose d in other cities, for the same rule does not require that taxes for the same purpos e should be impose d in differe nt territor ial subdivi sions at the same time. So long as the burden of the tax falls equally and imparti ally on all owners or operat ors of teneme nt houses similarl y classifi ed or situate
d, equa lity and unifo rmit y of taxat ion is acco mpli shed. The plain tiffsappe llees, as own ers of tene ment hous es in the City of Iloilo , have not
shown that the tax burden is not equally or unifor mly distrib uted among them, to overthr ow the presum ption that tax statute s are intende d to operat e unifor mly and equally . PAGE
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othe r. Seco nd. The disp uted taxes are impo sed on occu patio n or busi ness. Both taxes are not on suga r. The amo unt there of depe nds on the annu al outp ut capa
city of the mills concer ned, regardl ess of the actual sugar milled. Plaintif fs argume nt perhap s could make out a point if the object of taxatio n here were the sugar it produc es, not the busines s of produc ing it. PAGE
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409, as amended). The license fees imposed by it are essentially for purposes of regulation, and are justified, considering that the sale of intoxicating liquor is, potentially at least, harmful to public health and morals, and must be subject to supervision or regulation by the state and by cities and municipalities authorized to act in the premises. On the other hand, Ordinances Nos. 3634, 3301, and 3816 impose taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila by virtue of its power to tax dealers for the sale of such merchandise (Section 10 [o], Republic Act No. 409, as amended.). Under Ordinance No. 3634 the word merchandise as employed therein clearly includes liquor. Aside from this, we have held in City of Manila vs. Inter-Island Gas Service, Inc., that the word merchandise refers to all subjects of commerce and traffic; whatever is usually bought and sold in trade or market; goods or wares bought and sold for gain; commodities or goods to trade; and commercial commodities in general. Ordinance No. 3358 is a license fee for the privilege of engaging in the sale of liquor, a calling in which not anyone or anybody may freely engage, considering that the sale of liquor indiscriminately may endanger public health and morals. On the other hand, what the three ordinances mentioned heretofore impose is a tax for revenue purposes based on the sales made of the same article or merchandise. It is already settled in this connection that both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation. PAGE
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of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; xxx xxx xxx A province may not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code which provides: Sec. 151. Mineral Products. (A) Rates of Tax. There shall be levied, assessed and collected on minerals, mineral products and quarry resources, excise tax as follows: xxx xxx xxx (2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based on the actual market value of the gross output thereof at the time of removal, in case of those locally extracted or produced; or the values used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and valueadded tax, in the case of importation. It is clearly apparent from the above provision that the NIRC levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry resources, as the same are already taxed under the NIRC. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly empowered to do so under the LGC. As to stones, sand, gravel, earth and other quarry resources extracted from private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the NIRC. PAGE
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interests by the Pachecos to a third party. The Pacheco family merely changed their ownership from one form to another. The ownership remained in the same hands. Hence, the private respondent has no basis for its claim of a light of first refusal PAGE
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2. No. Section 269 of the NIRC of 1986 (now Section 222 of the Tax Reform Act of 1997) read: Sec. 269. Exceptions as to period of limitation of assessment and collection of taxes.-(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court after the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for collection thereof Put differently, in cases of (1) fraudulent returns; (2) false returns with intent to evade tax; and (3) failure to file a return, the period within which to assess tax is ten years from discovery of the fraud, falsification or omission, as the case may be. 3. Yes. A corporation has a juridical personality distinct and separate from the persons owning or composing it. Thus, the owners or stockholders of a corporation may not generally be made to answer for the liabilities of a corporation and vice versa. There are, however, certain instances in which personal liability may arise, to wit: 1. He assents to the (a) patently unlawful act of the corporation, (b) bad faith or gross negligence in directing its affairs, or (c) conflict of interest, resulting in damages to the corporation, its stockholders, or other persons; 2. He consents to the issuance of watered down stocks or, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto; 3. He agrees to hold himself personally and solidarily liable with the corporation; or 4. He is made, by specific provision of law, to personally answer for his corporate action. It is worth noting that when the late Toda sold his shares of stock to Le Hun T. Choa, he knowingly and voluntarily held himself personally liable for all the tax liabilities of CIC and the buyer for the years 1987, 1988, and 1989. When the late Toda undertook and agreed to hold the BUYER and Cibeles free from any all income tax liabilities of Cibeles for the fiscal years 1987, 1988, and 1989, he thereby voluntarily held himself personally liable therefor. Respondent estate cannot, therefore, deny liability for CICs deficiency income tax for the year 1989 by invoking the separate corporate personality of CIC, since its obligation arose from Todas contractual undertaking, as contained in the Deed of Sale of Shares of Stock. PAGE
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Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue and Court of Tax Appeals
[L-19707. August 17, 1967] Digest by: MAGAT, Kristianne Santiago PONENTE: Castro FACTS: The petitioner is a corporation engaged in the manufacture and sale of oxygen and acetylene gases, who made various sales of its products to the National Power Corporation (Phil. Gov. Agency), and to the Voice of America (US Gov. Agency). The sales to the NPC amounted to P145,866.70, while those to the VOA amounted to P1,683, on account of which the respondent Commission of Internal Revenue assessed against, and demanded from, the petitioner the payment of P12,910.60 as deficiency sales tax and surcharge, pursuant to the provisions of Secs. 183 and 186 of the National Internal Revenue Code. The petitioner denied liability for the payment of the tax on the ground that both the NPC and the VOA are exempt from taxation. It asked for a reconsideration of the assessment and, failing to secure one, appealed to the Court of Tax Appeals. The court ruled that the tax on the sale of articles or goods in section 186 of the Code is a tax on the manufacturer and not on the buyer with the result that petitioner cannot claim exemption from the payment of sales tax simply because NPC is exempt from the payment of all taxes. With respect to the sales made to the VOA, the court held that goods purchased by the American Government or its agencies are exempt from the payment of the sales tax under the agreement between the Philippines and that of the United States, provided the purchases are supported by certificates of exemption. ISSUE: Whether petitioner is liable for the payment of tax on the sales it made to the NPC and the VOA because both entities are exempt from taxation. HELD: Yes. The tax imposed by section 186 of the National Internal Revenue Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very remote and inconsequential sense. It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax becomes a part of the price which the purchaser must pay. It does not matter that an additional amount is billed as tax to the purchaser. The method of listing the price and the tax separately and defining taxable gross receipts as the amount received less the amount of the tax added, merely avoids payment by the seller of a tax on the amount of the tax. The effect is still the same, namely, that the purchaser does not pay the tax. He pays or may pay the seller more for the goods because of the sellers obligation, but that is all and the amount added because of the tax is paid to get the goods and for nothing else. Even if the NPC enjoys tax exemption by virtue of an act of Congress, petitioner still has to pay the tax on the sales made. PAGE
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With rega rd to petiti oner s sales to the Voic e of Ame rica, the provi sions of the agre eme nt betw een the Gove rnm ent of the Phili ppin es and the Gove rnm ent of the Unit ed State s, provi de that good s purc hase d locall y by U.S. civili an agen cies direc tly from man ufact urer s, prod
ucers or import ers shall be exempt from the sales tax, provid ed such purcha ses are suppor ted by serially umber ed Certific ates of Tax Exempt ion issued by the vendee agency. Howev er, we find nothin g in the langua ge of the Agree ment to warran t the general exempt ion grante d by that circula r. The agreem ent provid es that only sales made for exclusi ve use in the constru ction, mainte nance, operati
on or defe nse of the base s, in a word , only sales to the quar term aster , are exe mpt unde r articl eV from taxat ion. Sales of good s to any othe r part y even if it be an agen cy of the Unit
ed States, such as the VOA, or even to the quarter master but for a differe nt purpos e, are not free from the payme nt of the tax. We hold, therefo re, that sales to the VOA are subject to the payme nt of percent age taxes under section 186 of the Code. PAGE
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Commissioner of Internal Revenue v. Court of Appeals, Court of Tax Appeals, and Ateneo de Manila University
[G.R. No. 115349. April 18, 1997] Digest by: MAGAT, Kristianne Santiago PONENTE: Panganiban FACTS: Private respondent is a non-stock, non-profit educational institution with auxiliary units and branches all over the Philippines, one of which is the Institute of Philippine Culture (IPC), which has no legal personality separate and distinct from that of private respondent. The IPC is a Philippine unit engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies. On July 1983, private respondent received from petitioner Commissioner of Internal Revenue a demand letter assessing private respondent the sum of P174,043.97 for alleged deficiency contractors tax, and an assessment in the sum of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended March 31, 1978. Private respondent denied the liability by contesting the validity of the assessments. Petitioner further modified the assessment for deficiency contractors tax by increasing the amount due to P193,475.55. Unsatisfied, private respondent requested for a reconsideration and at the same time filed in the respondent court a petition for review of the said letter-decision of the petitioner. While the petition was pending before the respondent court, petitioner reduced the assessment for deficiency contractors tax to P46,516.41, exclusive of surcharge and interest. On July 1993, the respondent court ruled that the deficiency contractors tax assessment in the amount of P46,516.41 exclusive of surcharge and interest for the fiscal year ended March 31, 1978 is cancelled. ISSUE: Whether Ateneo de Manila University, through its auxiliary unit or branch the Institute of Philippine Culture performing the work of an independent contractor and, thus, subject to the three percent contractors tax levied by then Sec. 205 of the NIRC. HELD: No. To fall under its coverage, Section 205 of the National Internal Revenue Code requires that the independent contractor be engaged in the business of selling its services. We find no evidence that Ateneos Institute of Philippine Culture ever sold its services for a fee to anyone or was ever engaged in a business apart from and independently of the academic purposes of the university. The funds received by Ateneos Institute of Philippine Culture are not given in the concept of a fee or price in exchange for the performance of a service or delivery of an object. Rather, the amounts are in the nature of an endowment or donation given by IPCs benefactors PAGE
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solel y for the purp ose of spon sorin g or fundi ng the rese arch with no strin gs attac hed whic h are taxexe mpt. Priva te resp onde nt is man date d by law to unde rtake rese arch activ ities to main tain its univ ersit y statu s. Since it can only finan ce a limit ed num ber of IPCs rese arch proje cts,
private respon dent occasio nally accepts sponso rship for unfund ed IPC researc h project s from interna tional organiz ations, private founda tions and govern mental agencie s. It bears stressi ng that private respon dent is a nonstock, nonprofit educati onal corpor ation. The fact that it accepte d sponso rship for IPCs unfund ed project s is merely inciden tal. For, the main functio n of the IPC is to undert ake researc
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HELD: For sales to NPC, we find for the petitioner. The respondents themselves admit in their Comment that underrecovery arising from sales to NPC are reimbursable because NPC was granted full exemption from the payment of taxes; to prove this, respondents trace the laws providing for such exemption. The last law cited is the Fiscal Incentives Regulatory Boards Resolution No. 17-87 of 24 June 1987 which provides, in part, that the tax and duty exemption privileges of the National Power Corporation, including those pertaining to its domestic purchases of petroleum and petroleum products . . . are restored effective March 10, 1987. In a Memorandum issued on 5 October 1987 by the Office of the President, NPCs tax exemption was confirmed and approved. Furthermore, as pointed out by respondents, the intention to exempt sales of petroleum products to the NPC is evident in the recently passed Republic Act No. 6952 establishing the Petroleum Price Standby Fund to support the OPSF. The pertinent part of Section 2, Republic Act No. 6952 provides: Application of the Fund shall be subject to the following conditions: (1) That the Fund shall be used to reimburse the oil companies for (a) cost increases of imported crude oil and finished petroleum products resulting from foreign exchange rate adjustments and/or increases in world market prices of crude oil; (b) cost underrecovery incurred as a result of fuel oil sales to the National Power Corporation (NPC); and (c) other cost underrecoveries incurred as may be finally decided by the Supreme Court For sales to ATLAS and MARCOPPER, petitioner relies on Letter of Instruction (LOI) 1416, dated 17 July 1984. Pursuant to this LOI, then Minister of Energy issued Memorandum Circular No. 84-11-22 advising the oil companies that Atlas Consolidated Mining Corporation and Marcopper Mining Corporation are among those declared to be in distress. LOI 1416 could not have intended to exempt said distressed mining companies from the payment of OPSF dues for the following reasons: a) LOI 1416 granting the alleged exemption was issued on July 17, 1984. P.D. 1956 creating the OPSF was promulgated on October 10, 1984, while E.O. 137, amending P.D. 1956, was issued on February 25, 1987; b) LOI 1416 was issued in 1984 to assist distressed copper mining companies in line with the governments effort to prevent the collapse of the copper industry. P.D No. 1956, as amended, was issued for the purpose of minimizing frequent price changes brought about by exchange rate adjustments and/or changes in world market prices of crude oil and imported petroleum products; and c) LOI 1416 caused the suspension of all taxes, duties, fees, imposts and other charges, whether direct or indirect, due and payable by the copper mining companies in distress to the Notional and Local Governments . . . On the other hand, OPSF dues are not payable by (sic) distressed copper companies but by oil companies. It is to be noted that the copper mining companies do not pay OPSF dues. Rather, such imposts are built in or already incorporated in the prices of oil products. While LOI 1416 suspends the payment of taxes by distressed mining companies, it does not accord petitioner the same privilege with respect to its obligation to pay OPSF dues. Also, it is apparent that LOI 1416 was never published in the Official Gazette 45 as required by Article 2 of the Civil Code. Therefore it has no binding force or effect as it was never published in the Official Gazette after its issuance. PAGE
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Even granting arguendo that LOI 1416 has force and effect, petitioners claim must still fail. Tax exemptions as a general rule are construed strictly against the grantee and liberally in favor of the taxing authority. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed. The party claiming exemption must therefore be expressly mentioned in the exempting law or at least be within its purview by clear legislative intent. In the case at bar, petitioner failed to prove that it is entitled, as a consequence of its sales to ATLAS and MARCOPPER, to claim reimbursement from the OPSF under LOI 1416. Though LOI 1416 may suspend the payment of taxes by copper mining companies, it does not give petitioner the same privilege with respect to the payment of OPSF dues. PAGE
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that it is enga ged as a steve dore, that is, the work of unlo adin g and loadi ng of a vess el in port; and towi ng of barg es cont ainin g carg oes is a part of petiti oner s unde rtaki ng as a steve dore. In fact, even its trade nam e is indic ative
that its sole and princip al busines s is steved oring and lighter age, taxed under Section 191 of the Nation al Interna l Revenu e Code as a contrac tor, and not an entity which transp orts passen gers or freight for hire which is taxed under Section 192 of the same Code as a commo n carrier by water. PAGE
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provi sions of its Revi sed Char ter retai ns its exe mpti on from dutie s and taxes impo sed on the petr oleu m prod ucts purc hase d locall y and used for the gene ratio n of elect ricity . Presi denti al Decr ee No. 938 ame nded the tax exe mpti on of NPC by simp lifyin g the same law in gene ral term s. It
succinc tly exempt s NPC from all forms of taxes, duties, fees, impost s, as well as costs and service fees includi ng filing fees, appeal bonds, supers edeas bonds, in any court or admini strative procee dings. the NPC electric power rates did not carry the taxes and duties paid on the fuel oil it used. The point is that while these levies were in fact paid to the govern ment, no part thereof was recover ed
from the sale of elect ricity prod uced. As a cons eque nce, as of our most rece nt infor mati on, some P1.5 5B in clai ms repr esen t amo unts for whic h the oil supp liers and NPC are outofpock et. Ther e woul d have to be speci fic orde r to the Bure aus conc erne d for the resu mpti on of the proc
essing of these claims. constru ed against the taxpay er. In the case at bar, the Court is not aware whethe r or not the tax exempt ion provisi ons contain ed in Par. 9, Part Two of Act No. 484 of the Philipp ine Commi ssion of 1902 was incorp orated in the munici pal franchi se grante d becaus e no admissi ble copy of Ordina nce of the said Board was ever present ed in eviden ce by the petitio ner. Furthe
rmor e there is no plai n and una mbig uous term s decla ring petiti oner MER ALC O exe mpt from payi ng a com pens ating tax on its impo rts of poles , wire s, trans form ers, and insul ators . The last claus e of para grap h9 mere ly
reaffir ms, what has been express ed in the first senten ce that petitio ner is exempt ed from payme nt of proper ty tax. A compe nsating tax is not a proper ty tax but an excise tax impose d on the perfor mance of an act, the engagi ng in an occupa tion, or the enjoym ent of a privileg e. PAGE
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Commissioner Of Internal Revenue v. John Gotamco & Sons, Inc. and The Court of Tax Appeals
[L-31092. February 27, 1987] Digest by: MAGBUHOS, Denise Dianne A. PONENTE: Yap FACTS: The World Health Organization (WHO for short) is an international organization that has a regional office in Manila. An agreement was entered into between the Republic of the Philippines and the said Organization on July 22,1951. Section 11 of that Agreement provides, inter alia, that the Organization, its assets, income and other properties shall be: (a) exempt from all direct and indirect taxes. The WHO decided to construct a building to house its own offices, as well as the other United Nations offices stationed in Manila. A bidding was held for the building construction. The WHO informed the bidders that the building to be constructed belonged to an international organization exempted from the payment of all fees, licenses, and taxes, and that therefore their bids must take this into account and should not include items for such taxes, licenses and other payments to Government agencies. Thereafter, the construction contract was awarded to John Gotamco & Sons, Inc. (Gotamco for short). Subsequently, the Commissioner of Internal Revenue sent a letter of demand to Gotamco demanding payment of for the 3% contractors tax plus surcharges on the gross receipts it received from the WHO in the construction of the latters building. WHO. The WHO issued a certification that the bid of John Gotamco & Sons, should be exempted from any taxes in connection with the construction of the World Health Organization office building because such can be considered as an indirect tax to WHO. However, The Commissioner of Internal Revenue contends that the 3% contractors tax is neither a direct nor an indirect tax on the WHO, but a tax that is primarily due from the contractor, and thus not covered by the tax exemption agreement. ISSUE: Whether or not the said 3% contractors tax imposed upon petitioner is covered by the direct and indirect tax exemption granted to WHO by the government. HELD: Yes. The 3% contractors tax imposed upon petitioner is covered by the direct and indirect tax exemption granted to WHO. Hence, petitioner cannot be held liable for such contractors tax. The Supreme Court explained that direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else. While it is true that the contractors tax is payable by the contractor, however in the last analysis it is the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax against the WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO. PAGE
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own ed, contr olled , or enjo ying refin anci ng from them , and (3) inter natio nal or regio nal finan cing instit ution s esta blish ed by gove rnm ents. Here in priva te resp onde nts are not even amo ng the entiti es whic h, unde r Secti on 29 (b) (7) (A) of the tax code, are entitl ed to exe
mption and which should indispe nsably be the party in interes t in this case. It is a settled rule that that laws grantin g exempt ion from tax are constru ed strictis simi juris against the taxpay er and liberall y in favor of the taxing power. Taxatio n is the rule and exempt ion is the excepti on. The taxabili ty of a party cannot be blandly glossed over on the basis of a suppos ed broad, pragma tic analysi s
alon e with out subs tanti al supp ortiv e evid ence. PAGE
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of the US. It is designe d for the accom modati on, conven ience and assista nce of the Armys person nel. All the goods purcha sed are intende d for resale and are in fact resold to the officers , soldier s and civilian employ ees of the Army, and their family. The net procee ds derived from the resale do not accrue to the general funds of the US but are used for the better ment of the Army person nel. The Exchan ge
mad hants e who purc made hase the s of sales of vario the us commo and dities, diver etc. se taxes at com the modi rate of ties, % on good the s, gross ware value s and in merc money hand of the ise commo from dities, vario etc. us sold by merc them hant to the s of Exchan the ge. It Phili intends ppin to es. collect The the CIR same colle from ctor, the herei Exchan n ge. The resp Exchan onde ge nt, made a have formal colle legal cted protest from . the ISSUE said : merc Whether or not a tax may be levied by the Government of the Philippine Islands on sales made by merchants to Post Exchanges of the United States Army in the Philippines. HELD: Yes. Philippine law as thus enacted and expressly confirmed by the Congress, makes particular mention of the persons exempt from this tax, without, however, including in the enumeration commercial transactions with Army Post Exchanges. The sale of merchandise through the post exchanges to the individuals of the United States Army and Navy are not goods sold and delivered directly to the United States Army or Navy for the actual use or issue by the Army or Navy and are therefore, not exempt from the payment of the internal revenue tax imposed by the law. Since no law of the Congress forbids the taxation of merchants who deal with Army Post Exchanges, and since the Congress has legalized the applicable law, and in doing so has granted no immunity from taxation to merchants who deal with Army Post Exchanges, the Congress has permitted such transactions with Army Post Exchanges, on the assumption that Post Exchanges are agencies of the United States, to be taxed by the Philippine Government. PAGE
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gran ting tax exe mpti ons and the rule that doub ts shou ld be resol ved in favor of muni cipal corp orati ons in inter preti ng statu tory provi sions on muni cipal taxin
g powers , we hold that 23 of R.A. No. 7925 cannot be conside red as having amend ed petitio ners franchi se so as to entitle it to exempt ion from the imposit ion of local franchi se taxes. PAGE
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belonging to the same class. Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class. From the very title itself, it is clear that RA 7227 aims primarily to accelerate the conversion of military reservations into productive uses. Obviously, the lands covered under the 1947 Military Bases Agreement are its object. Thus, the law avows as one of its policies is to encourage the active participation of the private sector in transforming the Clark and Subic military reservations and their extensions into other productive uses. More so, the law declared it a policy to develop the zone into a self-sustaining, industrial, commercial, financial and investment center. In furtherance of such objective, Congress deemed it necessary to extend economic incentives to attract and encourage investors, both local and foreign. Among such enticements are: (1) a separate customs territory within the zone, (2) tax-and-duty-free importations and (3) restructured income tax rates on business enterprises within the zone. Certainly, there are substantial differences between the big investors who are being lured to establish and operate their industries in the so-called secured area and the present business operators outside the area. On the one hand, we are talking of billion-peso investments and thousands of new jobs. On the other hand, definitely none of such magnitude. The classification occasioned by EO 97-A was not unreasonable, capricious or unfounded. To repeat, it was based, rather, on fair and substantive considerations that were germane to the legislative purpose. PAGE
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pleasure of the taxing authority. The only exception to this rule is where the exemption was granted to private parties based on material consideration of a mutual nature, which then becomes contractual and is thus covered by the non-impairment clause of the Constitution. The taxes, fees or charges, as provided by Section 133 of the Local Government Code, referred to are of any kind; hence, they include all, unless otherwise provided by the LGC. Reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. Even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the foregoing disquisitions, it had already become, even if it be conceded to be an agency or instrumentality of the Government, a taxable person for such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner. PAGE
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It bears repeating as so disclosed in the records that the petitioners together with families upon repatriation in 1945 had since acquired domicile and residency in the United States. And, obtained employment with the United States Federal Service. Not until after several years of a hiatus, petitioners did return to the Philippines not so much of honoring a pledge nor of sentimental journey but by reason of taking up assigned duties with the United States military bases in the Philippines where they were gainfully employed by the U.S. Federal Government. It appeals too much of a stretch to hold petitioners straight-jacketed to an irreversible situs of birth constraint and by reason thereof deny altogether any opportunity to a serendipitous enjoyment of a tax relief accorded in the Agreement. Such a random quirk of pirouette in the tax treatment falls sharply at odds with the shared expectations of the high contracting parties. This Court will not deem itself authorized to depart from the plain meaning of the tax exemption provision, so explicit in terms and so searching in extent. PAGE
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Basco v. PAGCOR
[G.R. No. 91649 May 14, 1991] Digest by: : MEJIA, Daryll Margaret V. PONENTE: Paras FACTS: The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 to establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines. Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to regulate and centralize all games of chance authorized by existing franchise or permitted by law. To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of Internal Revenue and the Bureau of Customs. But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is null and void for being contrary to morals, public policy and public order, monopolistic and tends toward crony economy, and is violative of the equal protection clause and local autonomy. Petitioner refers to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local. as violative of the principle of local autonomy. ISSUE: Whether the establishment of PAGCOR pursuant to P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees and that the exemption clause in P.D. 1869 is violative of the principle of local autonomy. HELD: Their contention stated hereinabove is without merit for the following reasons: (a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Thus, the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it. Its power to tax therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the inherent power to tax. (b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that municipal corporations are mere creatures of Congress which has the power to PAGE
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create and abolish municipal corporations due to its general legislative powers. Congress, therefore, has the power of control over Local governments. And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. Therefore, only the National Government has the power to issue licenses or permits for the operation of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the issuance of licenses or permits is no longer vested in the City of Manila. (d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government. The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. PAGE
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The finding of the appellate court that the deficiency income taxes were paid by the Pastors, and accepted by the Government, under P.D. 213, granting amnesty to persons who are required by law to file income tax returns but who failed to do so, is entitled to the highest respect and may not be disturbed except under exceptional circumstances. PAGE
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A tax amnesty, being a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law, partakes of an absolute forgiveness or waiver by the Government of its right to collect what otherwise would be due it, and in this sense, prejudicial thereto, particularly to give tax evaders, who wish to relent and are willing to reform a chance to do so and thereby become a part of the new society with a clean slate. PAGE
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Misamis Oriental Assoc. of CoCo Traders, Inc. vs. Department of Finance Secretary
[G.R. No. 108524 November 10, 1994] Digest by: : NIEVA, Aubin Arn R. PONENTE: Mendoza FACTS: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose members, individually or collectively, are engaged in the buying and selling of copra in Misamis Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum Circular 47-91 on June 11, 1991, which implemented VAT Ruling 190-90, copra was classified as agricultural food product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution. Under 103(a), as above quoted, the sale of agricultural non-food products in their original state is exempt from VAT only if the sale is made by the primary producer or owner of the land from which the same are produced. The sale made by any other person or entity, like a trader or dealer, is not exempt from the tax. On the other hand, under 103(b) the sale of agricultural food products in their original state is exempt from VAT at all stages of production or distribution regardless of who the seller is. Petitioner contends that the Bureau of Food and Drug of the Department of Health and not the BIR is the competent government agency to determine the proper classification of food products. On the other hand, the respondents argue that the opinion of the BIR, as the government agency charged with the implementation and interpretation of the tax laws, is entitled to great respect. ISSUE: Whether or not the contention of the Commissioner is correct. HELD: It is correct. we find no reason for holding that respondent Commissioner erred in not considering copra as an agricultural food product within the meaning of 103(b) of the NIRC. As the Solicitor General contends, copra per se is not food, that is, it is not intended for human consumption. Simply stated, nobody eats copra for food. That previous Commissioners considered it so, is not reason for holding that the present interpretation is wrong. The Commissioner of Internal Revenue is not bound by the ruling of his predecessors. To the contrary, the overruling of decisions is inherent in the interpretation of laws. Petitioner likewise claims that RMC No. 47-91 is discriminatory and violative of the equal protection clause of the Constitution because while coconut farmers and copra producers are exempt, traders and dealers are not, although both sell copra in its original PAGE
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state. Petitioners add that oil millers do not enjoy tax credit out of the VAT payment of traders and dealers. The argument has no merit. There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. is finally argued that RMC No. 47-91 is counterproductive because traders and dealers would be forced to buy copra from coconut farmers who are exempt from the VAT and that to the extent that prices are reduced the government would lose revenues as the 10% tax base is correspondingly diminished. This is not so. The sale of agricultural non-food products is exempt from VAT only when made by the primary producer or owner of the land from which the same is produced, but in the case of agricultural food products their sale in their original state is exempt at all stages of production or distribution. At any rate, the argument that the classification of copra as agricultural non-food product is counterproductive is a question of wisdom or policy which should be addressed to respondent officials and to Congress. PAGE
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Without doubt, private respondent would be prejudiced by the retroactive application of the revocation as it would be assessed deficiency excise tax as bad faith is also absent. PAGE
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Commissioner of the Internal Revenue vs. Lingayen Gulf Electric Power Co., Inc.
[GR L-23771, 4 August 1988] Digest by: : ONG, Fina N. PONENTE: Sarmiento, J: FACTS: Lingayen Gulf Electric Power operates an electric power plant serving the municipalities of Lingayen and Binmaley, Pangaisnan, 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 1948, the Philippine President approved the franchise (RA 3843). In 1955, the BIR assessed and demanded against the company deficiency franchise taxes and surcharges for 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. ISSUE: Whether or not the 5% franchise tax prescribed in Section 259 of the National Internal Revenue Code assessed against the private respondent on its gross receipts realized before the effectivity of R.A- No. 3843 is collectible. HELD: The court held in negative. R.A. No. 3843 granted the private respondent a legislative franchise in June, 1963, amending, altering, or even repealing the original municipal franchises, and providing that the private respondent should pay only a 2% franchise tax on its gross receipts, in lieu of any and all taxes and/or licenses of any kind, nature or description levied, established, or collected by any authority whatsoever, municipal, provincial, or national, now or in the future and effective further upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts shall be collected, any provision of law to the contrary notwithstanding. Thus, by virtue of R.A- No. 3843, the private respondent was liable to pay only the 2% franchise tax, effective from the date the original municipal franchise was granted. PAGE
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b) The assessment and demand on petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965. c) ABS-CBN was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and no longer had any control over them when the new Circular was issued. And in so far as the enumerated exceptions (to non-retroactivity) are concerned, ABSCBN does not fall under any of them. PAGE
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HELD: RR 7-85 altering the 2-year prescriptive period imposed by law to 10-year prescriptive period is invalid. Administrative issuances are merely interpretations and not expansions of the provisions of law, thus, in case of inconsistency, the law prevails over them. Administrative agencies have no legislative power. When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it issued guidelines contrary to the statute passed by Congress. It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement. Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. As pointed out by the respondent courts, the nullification of RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is not in harmony with Sec. 230 of 1977 NIRC, for being contrary to the express provision of a statute. Hence, his interpretation could not be given weight for to do so would, in effect, amend the statute. PAGE
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The tax was paid way back in 1980 and despite the clear showing that it was erroneously paid, the government succeeded in delaying its refund for fifteen (15) years. After fifteen (15) long years and the expenses of litigation, the money that will be finally refunded to the private respondent is just worth a damaged nickel. This is not, however, the kind of success the government, especially the BIR, needs to increase its collection of taxes. Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR should refund without any unreasonable delay what it has erroneously collected. The power of taxation is sometimes called also the power to destroy. Therefore it should 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 egg. And, in order to maintain the general publics trust and confidence in the Government this power must be used justly and not treacherously. PAGE
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1. That the sale must represent a bonafide arms length transaction between a willing seller and a willing buyer 2. The property must be comparable property. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties are comparable. Taxes are lifeblood of government, however, such collection should be made in accordance with the law and therefore necessary to reconcile conflicting interests of the authorities so that the real purpose of taxation, promotion of the welfare of common good can be achieved. The power to tax is an attribute of sovereignty. In fact, it is the strongest of all the powers of government. But for all its plenitude the power to tax is not unconfined as there are restrictions. Adversely effecting as it does property rights, both the due process and equal protection clauses of the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it were otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that the power to tax involves the power to destroy. The web or unreality spun from Marshalls famous dictum was brushed away by one stroke of Mr. Justice Holmes pen, thus: The power to tax is not the power to destroy while this Court sits. So it is in the Philippines. PAGE
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legitimate fees for actual services rendered, that is, the creation of the VOIC and the sale of the properties of Phil. Sugar Estate and hence, allowed as deduction. Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. PAGE
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Set-off Of Taxes
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capacity. A tax payer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government that the collection of the tax is contingent on the result of the law suit it filed against the government. PAGE
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Article 1278 of the Civil Code and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. There are other factors which compel us to rule against the petitioner. The tax was due to the city government while the expropriation was effected by the national government. Moreover, the amount of P4,116.00 paid by the national government for the 125 square meter portion of his lot was deposited with the Philippine National Bank long before the sale at public auction of his remaining property. Notice of the deposit dated September 28, 1977 was received by the petitioner on September 30, 1977. The petitioner admitted in his testimony that he knew about the P4,116.00 deposited with the bank but he did not withdraw it. It would have been an easy matter to withdraw P2,400.00 from the deposit so that he could pay the tax obligation thus aborting the sale at public auction. PAGE
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What is therefore sought to be avoided is for the taxpayer to make use of funds that should have been paid to the government. Here, in view of the overpayment for the fiscal year 1959- 1960, the sum of P13,155.20 had already formed part of the public funds. It cannot be said, therefore, that respondent taxpayer was guilty of any delay enabling it to utilize a sum of money that should have been in the government treasury. PAGE
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Domingo v. Garlitos
[G.R. No. L-18994. June 29, 1963] Digest by: : OSOTEO, Maureen Kascha L. PONENTE: Labrador FACTS: In Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674 this Court declared as final and executory the order for the payment by the estate of the estate and inheritance taxes, charges and penalties, amounting to P40,058.55 issued by the Court of First Instance of Leyte in, special proceedings No. 14 entitled In the matter of the Intestate Estate of the Late Walter Scott Price. In order to enforce the claims against the estate the fiscal presented a petition for the execution of the judgment. The petition was, however, denied by the respondent which held that the execution is not justifiable as the Government is indebted to the estate under administration in the amount of P262,200. Respondent ordered that the payment of inheritance taxes in the sum of P40,058.55 due the Collector of Internal Revenue be deducted from the amount of P262,200.00 due and payable to the Administratrix Simeona K. Price, in this estate, the balance to be paid by the Government to her without further delay. ISSUE: Whether the claim by the Government against the estate may be deducted from its debt to the estate and whether compensation may take place HELD: Yes. The court having jurisdiction of the estate had found that the claim of the estate against the Government has been recognized and an amount of P262,200 has already been appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount, thus: ART. 1200. When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguished both debts to the concurrent amount, eventhough the creditors and debtors are not aware of the compensation. PAGE
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to the maki ng and enfo rcing of whic h, the pers onal cons ent of indiv idual taxp ayer s is not requi red. If the taxp ayer can prop erly refus e to pay his tax whe n calle d upon by the Colle ctor, beca use he has a clai m agai nst the gove rnm ental body whic h is not inclu ded in the tax levy,
it is plain that some legitim ate and necess ary expend iture must be curtaile d. If the taxpay ers claim is dispute d, the collecti on of the tax must await and abide the result of a lawsuit , and meanw hile the financi al affairs of the govern ment will be thrown into great confusi on. (47 Am. Jur. 766767.) PAGE
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Pa rt I: G en
Taxpayer Suit
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HELD: No. In order to constitute a taxpayers suit, two requisites must be met, namely, that public funds are disbursed by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed, and that the petitioner is directly affected by the alleged ultra vires act. In the said case, the first requirement was not present because the petitioner never referred to such purchase as an illegal disbursement of public funds but focused on the alleged fraudulent reconveyance of said property to Ortigas because the price paid was lower than the prevailing market value of neighboring lots. Since petitioner failed to show that there was unlawful spending of public money, he, even as a taxpayer, cannot question the transaction validly executed by and between the Province and Ortigas simply because he is not privy to the contract. Therefore, petitioner has no locus standi. PAGE
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HELD: 1. No. Not every action filed by a taxpayer can qualify to challenge the legality of official acts done by the government. A taxpayers suit can prosper only if the governmental acts being questioned involve disbursement of public funds upon the theory that the expenditure of public funds by an officer of the state for the purpose of administering an unconstitutional act constitutes a misapplication of such funds, which may be enjoined at the request of a taxpayer. In the said case, the action cannot be considered as a taxpayers suit because the petitioners are not challenging any expenditure involving public funds but the disposition of what they alleged to be public properties. 2. No. The paintings were donated by private persons from different parts of the world to the Metropolitan Museum of Manila Foundation, a non-profit and non-stock corporation established to promoted non-Philippine arts, wherein Former First Lady Imelda Marcos is the chairman. Accordingly, the ownership of the paintings legally belongs to the foundation or corporation or the members thereof. On the other hand, the pieces of antique silverware were given to the Marcos couple as gifts from friends and dignitaries from foreign countries on their silver wedding and anniversary. The confiscation of these properties by the Aquino administration does not mean that the ownership of these paintings has automatically passed on the government without complying with constitutional and statutory requirements of due process and just compensation. PAGE
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sought to be reviewed by this Court under its certiorari jurisdiction, which is the only known provision conferring jurisdiction or authority on the Supreme Court over the COMELEC. Further, the holding of special elections in several regional districts where vacancies exist, would entail huge expenditure of money. Only the Batasang Pambansa can make the necessary appropriation for the purpose, and this power may neither be subject to mandamus by the courts much less may COMELEC compel the Batasang Pambansa to exercise its power of appropriation. From the role Batasang Pambansa has to play in the holding of special elections, which is to appropriate the funds for the expenses thereof, it would seem that the initiative on the matter must come from the said body, not the COMELEC, even when the vacancies would occur in the regular not interim Batasang Pambansa. The power to appropriate is the sole and exclusive prerogative of the legislative body, the exercise of which may not be compelled through a petition for mandamus. Moreover, the provision of Section 5(2), Article VIII of the Constitution was intended to apply to vacancies in the regular National Assembly, now Batasang Pambansa, not to the Interim Batasang Pambansa. PAGE
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Part I:
191
crediting of 20% of the gross amount of royalties paid. The purpose of a most favored nation clause is to grant to the contracting party treatment not less favorable than that which has been or may be granted to the most favored among other countries. The most favored nation clause is intended to establish the principle of equality of international treatment by providing that the citizens or subjects of the contracting nations may enjoy the privileges accorded by either party to those of the most favored nation. The essence of the principle is to allow the taxpayer in one state to avail of more liberal provisions granted in another tax treaty to which the country of residence of such taxpayer is also a party provided that the subject matter of taxation, in this case royalty income, is the same as that in the tax treaty under which the taxpayer is liable. Both Article 13 of the RP-US Tax Treaty and Article 12 (2) (b) of the RPWest Germany Tax Treaty, above-quoted, speaks of tax on royalties for the use of trademark, patent, and technology. The entitlement of the 10% rate by U.S. firms despite the absence of a matching credit (20% for royalties) would derogate from the design behind the most grant equality of international treatment since the tax burden laid upon the income of the investor is not the same in the two countries. The similarity in the circumstances of payment of taxes is a condition for the enjoyment of most favored nation treatment precisely to underscore the need for equality of treatment. Further, since the RP-US Tax Treaty does not give a matching tax credit of 20% for the taxes paid to the Philippines on royalties as allowed under the RP-West Germany Tax Treaty, S.C. Johnson cannot be deemed entitled to the 10% rate granted under the latter treaty for the reason that there is no payment of taxes on royalties under similar circumstances. PAGE
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Part I:
Tax Remedies
St. Stephens Association and St. Stephens Girls School v. The Collector of Internal Revenue
[G.R. No. L-11238. August 21, 1958] Digest by: PALATTAO, Claudine M. PONENTE: Reyes, J.B.L. FACTS: On January 21, 1950, the petitioner St. Stephens Association turned over the amount of P9,252.48 to the St. Stephens Chinese Girls School, and the transfer of funds was entered in the ledger and cash book of the School as a donation from the Association. Having come across the book entry in a routine inspection of the books of the School, an examiner of the Bureau of Internal Revenue reported the donation to the Collector and thereafter, the Collector of Internal Revenue sent petitioners his Assessment Notice No. GA-3008-50 dated October 15, 1954, demanding the payment of the amounts of P98.70 and P699.07 as donors and donees gift taxes on the donation in question, including surcharges and interests. On November 13, 1954, petitioners wrote the Collector a letter requesting the cancellation and withdrawal of the assessment notice in question on the ground that the amount of P9,252.48 was erroneously entered by the bookkeeper as a donation from the Association to the School, when the truth was that said amount was obtained by the former by means of small contributions from the public and allocated to the School for its maintenance. On April 21, 1955, petitioners received a letter from the Collector dated April 6, 1955, denying the request embodied in their letter of November 13, 1954, and insisting that the assessment in question be paid. On May 9, 1955, petitioners filed their reply to the Collectors letter of April 6, 1955, rebutting the arguments of the Collector in support of the assessment, and asking for its reconsideration. On July 25, 1955, petitioners received the letter of the Collector dated July 11, 1955, again denying their request that the assessment in question be cancelled and withdrawn, and stating in its last paragraph that: This decision becomes final thirty days after your receipt hereof unless an appeal is taken to the Court of Tax Appeals within the same period, in accordance with the provisions of Republic Act No. 1125. On August 15, 1955, the respondent court promulgated a resolution dismissing the petition for lack of jurisdiction. The resolution was premised on the courts findings that the period for petitioners appeal started to run from their receipt of the assessment notice in question; that said period was interrupted by the filing of petitioners two requests for the cancellation of the assessment, but started to run again when said requests were denied; and that from November 12, 1954, when petitioners received the assessment notice, to August 13, 1955, when they filed their petition for review, deducting the time when their two requests for cancellation were pending with the respondent Collector, 37 days had elapsed and therefore, their petition was filed out of time and did not confer jurisdiction upon the respondent court. From this resolution of dismissal, petitioners appealed to this Court. PAGE
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ISSUE: Whether the period for appeal to the respondent court must be computed from the time petitioners received the decision of the respondent on the disputed assessment and not from the time they received said assessment. HELD: Yes. The period for appeal to the respondent court in this case must be computed from the time petitioners received the decision of the respondent Collector of Internal Revenue on the disputed assessment, and not from the time they received said assessment. We believe the respondent court erred in holding that the assessment in question is the respondent Collectors decision or ruling appealable to it, and that consequently, the period of thirty days prescribed by section 11 of Republic Act No. 1125 within which petitioner should have appealed to the respondent court must be counted from its receipt of said assessment. Where a taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a disputed assessment that the Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on the disputed assessment, in accordance with paragraph (1) of section 7, Republic Act No. 1125, conferring appellate jurisdiction upon the Court of Tax Appeals to review decisions of the Collector of Internal Revenue in cases involving disputed assessment . . . PAGE
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ISSUE: Whether or not the petition for review was filed on time HELD: Yes. The petition for review was filed on time. The reviewable decision is that contained in Commissioner Planas letter of May 23, 1979 and not the warrants of distraint. No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the Commissioners final decision within the meaning of section 7 of Republic Act No. 1125. The Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. The directive is in consonance with this Courts dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. That procedure is demanded by the pressing need for fair play, regularity and orderliness in administrative action. PAGE
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the assessment, it sends a letter to the BIR indicating its protest, stating the reasons therefor, and submitting such proof as may be necessary. That letter is considered as the taxpayers request for reconsideration of the delinquent assessment. After the request is filed and received by the BIR, the assessment becomes a disputed assessment on which it must render a decision. That decision is appealable to the Court of Tax Appeals for review. The Final Notice Before Seizure cannot but be considered as the commissioners decision disposing of the request for reconsideration filed by respondent, who received no other response to its request. Not only was the Notice the only response received; its content and tenor supported the theory that it was the CIRs final act regarding the request for reconsideration. The very title expressly indicated that it was a finalnotice prior to seizure of property. The letter itself clearly stated that respondent was being given this LAST OPPORTUNITY to pay; otherwise, its properties would be subjected to distraint and levy. Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its request for reconsideration remains unacted upon 180 days after submission thereof. In this case, the said period of 180 days had already lapsed when respondent filed its request for reconsideration on March 23, 1990, without any action on the part of the CIR. Lastly, jurisprudence dictates that a final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. In the instant case, the second notice received by private respondent verily indicated its nature - that it was final. Unequivocably, therefore, it was tantamount to a rejection of the request for reconsideration. Having admitted as a fact private respondents request for reconsideration, petitioner must have passed upon it prior to the issuance of the Final Notice Before Seizure. PAGE
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franchise or right shall be granted to any individual or corporation except under a condition that it shall be subject to amendment, alteration or repeal by Congress. Such amendment or alteration need not be express; it may be implied from a latter act of general applicability, such as the one now under consideration. Reference by petitioners to the statute providing the procedure for the taking over and operation by the government of public utilities, in their view to further strengthen [their] contention, as to the commission of this alleged error is unavailing, even if such statute were applicable, which it is not. What is to be regulated by this enactment is the exercise of eminent domain, which is a taking of private property for public use upon the payment of just compensation. There is here no taking. There is here no appropriation. What was owned before by petitioners continue to remain theirs. There is to be no transfer of ownership. Rather, a municipal corporation, by virtue of Commonwealth Act No. 2677, may further promote community welfare by itself engaging in supplying public services, without the need of a certificate of public convenience. If at all then, the exercise of this governmental prerogative comes within the broad, well-nigh, undefined scope of the police power. It is not here, of course, the ordinary case of restraint on property or liberty, by the imposition of a regulation. What the amendatory act in effect accomplishes is to lend encouragement and support for the municipal corporation itself undertaking an activity as a result of which, profits of a competing private firm would be adversely affected. PAGE
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HELD: No. The respondent Court of First Instance of Cagayan can only acquire jurisdiction over this case filed against the heirs of the taxpayer if the assessment made by the Commissioner of Internal Revenue had become final and incontestable. If the contrary is established, as this Court holds it to be, considering the aforementioned conclusion of the Court of Tax Appeals on the finality and incontestability of the assessment made by the Commissioner is correct, then the Court of Tax Appeals has exclusive jurisdiction over this case. Petitioners received the summons in Civil Case No. II-7 of the respondent Court of First Instance of Cagayan on January 20, 1971, and petitioners filed their appeal with the Court of Tax Appeals in CTA Case No. 2216, on February 12, 1971, well within the thirty-day prescriptive period under Section 11 of Republic Act No. 1125. The Court of Tax Appeals has exclusive appellate jurisdiction to review on appeal any decision of the Collector of Internal Revenue in cases involving disputed assessments and other matters arising under the National Internal Revenue Code. For want of jurisdiction over the case, the Court of First Instance of Cagayan should have dismissed the complaint filed in Civil Case No. IIPAGE
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This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. This finding of the respondent court is in accord with the following provision of the Tax Code: SEC. 30. Deductions from gross income.--In computing net income there shall be allowed as deductions (a) Expenses: (1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; and Revenue Regulations No. 2, Section 70 (1), reading as follows: SEC. 70. Compensation for personal services.--Among the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and its practical application may be further stated and illustrated as follows: Any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend on stock. This is likely to occur in the case of a corporation having few stockholders, Practically all of whom draw salaries. If in such a case the salaries are in excess of those ordinarily paid for similar services, and the excessive payment correspond or bear a close relationship to the stockholdings of the officers of employees, it would seem likely that the salaries are not paid wholly for services rendered, but the excessive payments are a distribution of earnings upon the stock .......... (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.) It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its controlling stockholders. The private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed. 2. On the issue of time, according to RA No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged. It is true that as a rule the warrant PAGE
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of distr aint and levy is pro of of the finali ty of the asses sme nt and rend ers hope less a requ est for reco nsid erati on, bein g tant amo unt to an outri ght deni al there of and mak es the said requ est dee med rejec ted. But there is a speci al circu msta nce in the
case at bar that preven ts applica tion of this accepte d doctrin e. The proven fact is that four days after the private respon dent receive d the petitio ners notice of assess ment, it filed its letter of protest . This was appare ntly not taken into accoun t before the warran t of distrai nt and levy was issued becaus e such protest could not be located . PAGE
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Under the circumstances, the Commissioner of Internal Revenue, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, it was only when private respondent received the summons on the civil suit for collection of deficiency income on December 28, 1978 that the period to appeal commenced to run. The request for reinvestigation and reconsideration was in effect considered denied by petitioner when the latter filed a civil suit for collection of deficiency income. So. that on January 10, 1979 when private respondent filed the appeal with the Court of Tax Appeals, it consumed a total of only thirteen (13) days well within the thirty day period to appeal pursuant to Section 11 of R.A. 1125. Neither can private respondent be liable for withholding tax under Section 53 of the Internal Revenue Code since it is not in possession, custody or control of the funds received by and remitted to Yee Fong Hong, Ltd., a non-resident taxpayer. As correctly ruled by the CTA, if an individual or corporation like the petitioner in this case, is not in the actual possession, custody, or control of the funds, it can neither be physically nor legally liable or obligated to pay the so-called withholding tax on income claimed by Yee Fong Hong, Ltd. PAGE
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HELD: 1. Yes. Section 7(1) of Republic Act No. 1125, the Act Creating the Court of Tax Appeals, provides for the jurisdiction of that special court: SEC. 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue; The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the Commissioner of Internal Revenue on matters relating to assessments or refunds. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected. 2. NO. The second issue focuses on Revenue Memorandum Circular No. 20-90 (RMO No. 20-90) on the requisites of a valid waiver of the statute of limitations. The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation. Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain. The Waiver of Statute of Limitations, signed by petitioners comptroller on September 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No. 20-90. It did not specify a definite agreed date between the BIR and petitioner, within which the former may assess and collect revenue taxes. Thus, petitioners waiver became unlimited in time, violating Section 222(b) of the NIRC. The waiver is also defective from the government side because it was signed only by a revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is NOT unilateral act of the taxpayer but is in fact and in law an agreement between the taxpayer and the BIR. When the petitioners comptroller signed the waiver on September 22, 1997, it was not yet complete and final because the BIR had not assented. There is compliance with the provision of RMO No. 20-90 only after the taxpayer received a copy of the waiver accepted by the BIR. The requirement to furnish the taxpayer with a copy of the waiver is not only to give notice of the existence of the document but of the acceptance by the BIR and the perfection of the agreement. PAGE
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The waiver is therefore incomplete and defective and thus the three-year prescriptive period was not tolled or extended and continued to run until April 17, 1998. Consequently, the Assessment/Demand No. 33-1-00075794 issued on December 9, 1998 was invalid because it was issued beyond the three (3) year period. In the same manner, Warrant of Distraint and/ or Levy No. 33-06-046 which petitioner received on March 28, 2000 is also null and void for having been issued pursuant to an invalid assessment. PAGE
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for this petiti on, is the insta nce whe n the taxp ayer requ ests for a reinv estig ation whic h is gran ted by the Com missi oner. How ever, this exce ption does not appl y to this case since the resp onde nt neve r requ este d for a reinv estig ation . More impo rtant ly, the CIR coul d not have cond ucte da reinv estig
ation where, as admitt ed by the CIR in its Petitio n, the respon dent refused to submit any new eviden ce. In the present case, the separat e letters of protest dated 6 May 1994 and 23 May 1994 are request s for reconsi deratio n. The CIRs allegati on that there was a request for reinves tigatio n is inconc eivable since respon dent consist ently and categor ically refused to submit new eviden ce and cooper
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delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the National Internal Revenue Code (NIRC) enumerated in Section 7 and nothing in this section speaks of the nondelegation of issuing a demand letter by the Chief. Here, petitioner failed to avail of its right to bring the matter before the Court of Tax Appeals within the reglementary period upon the receipt of the demand letter reiterating the assessed delinquent taxes and denying its request for reconsideration which constituted the final determination by the Bureau of Internal Revenue on petitioners protest. Being a final disposition by said agency, the same would have been a proper subject for appeal to the Court of Tax Appeals. \ PAGE
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Part II:
Local Taxation
217
HELD: The petition is partially granted. 1. Yes. The petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or private advantage. Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks of life including those who are poor and the needy without discrimination. After all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity. As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out- patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution. 2. No. Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. Under Section 2 of Presidential Decree No. 1823, the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges. What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a private individual for her business enterprise. PAGE
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Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. PAGE
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Also, there is no violation of non-impairment clause. The loan agreement does not grant any tax exemption in favor of the borrower or the beneficiary either on the proceeds of the loan itself or the properties acquired through the said loan. It simply states that the loan proceeds and the principal and interest of the loan, upon repayment by the borrower, shall be without deduction of any tax or fee that may be payable under Philippine laws as such tax or fee will be absorbed by the borrower with funds other than the loan proceeds. This only means that whatever taxes imposed by the Philippines, if any, will be paid by the borrower and cannot be shifted to the lender. Thus, the withdrawal by the Local Government Code of the tax exemptions previously enjoyed by the petitioners does not impair the obligation of the borrower, the lender or the beneficiary under the loan agreements as in fact, no tax exemption is granted therein. PAGE
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from being an integral part of the overall operation of the hospital. Respondents charge of rentals for the offices and clinics its accredited physicians occupy cannot be equated to a commercial venture, which is mainly for profit. First, CHHMAC is only for its consultants or accredited doctors and medical specialists. Second, the charging of rentals is a practical necessity: (1) to recoup the investment cost of the building, (2) to cover the rentals for the lot CHHMAC is built on, and (3) to maintain the CHHMAC building and its facilities. Third, as correctly pointed out by respondent, it pays the proper taxes for its rental income. And, fourth, if there is indeed any net income from the lease income of CHHMAC, such does not inure to any private or individual person as it will be used for respondents other charitable projects. PAGE
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that is, to all pers ons who choo se to empl oy its servi ces, and trans ports the good s by land and for com pens ation . The fact that petiti oner has a limit ed clien tele does not exclu de it from the defin ition of a com mon carri er. Also, the defin ition of com mon carri ers in the Civil Code mak es no disti nctio n as
to the means of transp orting, as long as it is by land, water or air. It does not provid e that the transp ortatio n of the passen gers or goods should be by motor vehicle. 2. No. Petitio ner is exempt ed from payme nt of tax From the foregoi ng disquis ition, there is no doubt that petitio ner is a comm on carrier and, therefo re, exempt from the busines s tax as provid ed for in Section 133 (j), of the Local Govern
ment Code . It is clear that the legisl ative inten t in exclu ding from the taxin g pow er of the local gove rnm ent unit the impo sitio n of busi ness tax agai nst com mon carri ers is to prev ent a dupli catio n of the socalle d com mon carri ers
tax. Petitio ner is already paying three (3%) percent commo n carrier s tax on its gross sales/e arnings under the Nation al Interna l Revenu e Code. To tax petitio ner again on its gross receipt s in its transp ortatio n of petrole um busines s would defeat the purpos e of the Local Govern ment Code. PAGE
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HELD: Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. Nevertheless, the fundamental law did not intend the delegation to be absolute and unconditional; the constitutional objective obviously is to ensure that, while the local government units are being strengthened and made more autonomous,[6] the legislature must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions; (b) each local government unit will have its fair share of available resources; (c) the resources of the national government will not be unduly disturbed; and (d) local taxation will be fair, uniform, and just. The Local Government Code of 1991 has incorporated and adopted, by and large the provisions of the now repealed Local Tax Code, which had been in effect since 01 July 1973, promulgated into law by Presidential Decree No. 231[7] pursuant to the then provisions of Section 2, Article XI, of the 1973 Constitution. The 1991 Code explicitly authorizes provincial governments, notwithstanding any exemption granted by any law or other special law, x x x (to) impose a tax on businesses enjoying a franchise. Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units, the Local Government Code has effectively withdrawn under Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities. The Code, in addition, contains a general repealing clause in its Section 534 which states that All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. While the Court has, not too infrequently, referred to tax exemptions contained in special franchises as being in the nature of contracts and a part of the inducement for carrying on the franchise, these exemptions, nevertheless, are far from being strictly contractual in nature. Contractual tax exemptions, in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its private capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts.[14] These contractual tax exemptions, however, are not to be confused with tax exemptions granted under franchises. A franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution.[15] Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so requires. WHEREFORE, the instant petition is hereby DISMISSED. PAGE
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While Section 13 of the Local Tax Code mentions other places of amusement, professional basketball games are definitely not within its scope. Under the principle of ejusdem generis, where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned.9 Thus, in determining the meaning of the phrase other places of amusement, one must refer to the prior enumeration of theaters, cinematographs, concert halls and circuses with artistic expression as their common characteristic. Professional basketball games do not fall under the same category as theaters, cinematographs, concert halls and circuses as the latter basically belong to artistic forms of entertainment while the former caters to sports and gaming. Likewise erroneous is the stance of petitioner that respondent Commissioners issuance of BIR Ruling No. 2318612 and BIR Revenue Memorandum Circular No. 8-8813 both upholding the authority of the local government to collect amusement taxes should bind the government or that, if there is any revocation or modification of said rule, the same should operate prospectively. It bears stressing that the government can never be in estoppel, particularly in matters involving taxes. It is a well-known rule that erroneous application and enforcement of the law by public officers do not preclude subsequent correct application of the statute, and that the Government is never estopped by mistake or error on the part of its agents. As regards to the second issue, the court finds the petitioners contention that income from the cession of streamer and advertising spaces to VEI is not subject to amusement tax untenable. The questioned proviso may be found in Section 1 of PD 1456 which states: SECTION 1. Section 268 of the National Internal Revenue Code of 1977, as amended, is hereby further amended to read as follows: Sec. 268. Amusement taxes. There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai, race tracks and bowling alleys, a tax equivalent to: xxx xxx xxx of their gross receipts, irrespective of whether or not any amount is charged or paid for admission. For the purpose of the amusement tax, the term gross receipts embraces all the receipts of the proprietor, lessee or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. (A person, or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.) (emphasis ours) The foregoing definition of gross receipts is broad enough to embrace the cession of advertising and streamer spaces as the same embraces all the receipts of the proprietor, lessee PAGE
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or operator of the amusement place. The law being clear, there is no need for an extended interpretation. The last issue for resolution concerns the liability of petitioner for the payment of surcharge and interest on the deficiency amount due. Petitioner contends that it is not liable, as it acted in good faith, having relied upon the issuances of the respondent Commissioner. This issue must necessarily fail as the same has never been posed as an issue before the respondent court. Issues not raised in the court a quo cannot be raised for the first time on appeal. All things studiedly considered, the Court rules that the petitioner is liable to pay amusement tax to the national government, and not to the local government, in accordance with the rates prescribed by PD 1959. WHEREFORE, the Petition is DENIED PAGE
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are owned by the Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor. ISSUE: Whether or not the airport lands an buildings of MIAA are exempt from real estate tax. HELD: The court rule that MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local governments. First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows: SEC. 2. General Terms Defined. - x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied) A government-owned or controlled corporation must be organized as a stock or non-stock corporation. MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 234(a) of the Local Government Code exempts from real estate tax any real property owned by the Republic of the Philippines. This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing [t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x. The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. PAGE
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The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax. However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City of Paraaque. We declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties. We also declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila International Airport Authority. PAGE
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HELD: The petition is devoid of merit. The appellate court, on the basis of Section 134, ruled that a province was empowered to impose taxes only on sand, gravel, and other quarry resources extracted from public lands, its authority to tax being limited by said provision only to those taxes, fees and charges provided in Article One, Chapter 2, Title One of Book II of the Local Government Code. 11 On the other hand, petitioners claim that Sections 129 12 and 186 13 of the Local Government Code authorizes the province to impose taxes other than those specifically enumerated under the Local Government Code. The Court of Appeals erred in ruling that a province can impose only the taxes specifically mentioned under the Local Government Code. As correctly pointed out by petitioners, Section 186 allows a province to levy taxes other than those specifically enumerated under the Code, subject to the conditions specified therein. A province may not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code. The National Internal Revenue Code levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Code. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly empowered to do so under the Local Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the National Internal Revenue Code. WHEREFORE, premises considered, the instant petition is DISMISSED for lack of merit and the decision of the Court of Appeals is hereby AFFIRMED in toto. PAGE
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is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He did not pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did not say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in reviewing the said measure was determine if the petitioners were performing their functions in accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and the grant of powers to the city government under the Local Government Code. As we see it, that was an act not of control but of mere supervision. 2. There is compliance with the procedural requirements for the enactment of the ordinance. In his resolution, Secretary Drilon declared that there were no written notices of public hearings on the proposed Manila Revenue Code that were sent to interested parties as required by Art. 276(b) of the Implementing Rules of the Local Government Code nor were copies of the proposed ordinance published in three successive issues of a newspaper of general circulation pursuant to Art. 276(a). No minutes were submitted to show that the obligatory public hearings had been held. Neither were copies of the measure as approved posted in prominent places in the city in accordance with Sec. 511(a) of the Local Government Code. Finally, the Manila Revenue Code was not translated into Pilipino or Tagalog and disseminated among the people for their information and guidance, conformably to Sec. 59(b) of the Code. Judge Palattao found otherwise. Posting of the ordinance as approved is may be omitted and this omission does not affect its validity, considering that its publication in three successive issues of a newspaper of general circulation will satisfy due process. It has also not been shown that the text of the ordinance has been translated and disseminated, but this requirement applies to the approval of local development plans and public investment programs of the local government unit and not to tax ordinances. PAGE
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Part II:
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property the character determined by the parties. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease. A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. PAGE
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HELD: Defendant-Appellant is liable for the payment of Real Property Tax. The court of first instance may have erred in pronouncing the Contract to Sell as a perfected contract of sale, contrary to its very terms that title remained with the seller who undertook to execute a final deed of absolute sale and deliver to the purchaser title to the property only after completion of the stipulated payments, but this is not decisive of the issue. The delivery of possession by the seller GSIS to the purchaser was clearly with the intention of passing to the latter the possession, use of and control over said property, and all the other attributes of ownership, short of the naked ownership such that it included in said transfer the incidental obligation to pay the taxes thereon, for nothing more was left to the GSIS except its right to receive full payment of the purchase price. The fact that in the contract to sell the GSIS, although aware of its own exemption from taxation stipulated and exacted from the purchaser the payment of taxes amounts to an interpretation on its part that such an immunity was not to be transmitted to a private person who becomes the beneficial owner and user of the property. Verily, this interpretative regulation by the administrative agency officially charged with the duty of administering and enforcing Commonwealth Act 186 which contains the tax-exempting provision at issue carries great weight in determining the operation of said provision. The position taken by the GSIS is but in conformity with Section 40(a) of Presidential Decree No. 464 entitled The Real Property Tax Code promulgated on May 20, 1974 which reads as follows: Exemptions from Real Property Tax. The exemptions shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter; Provided, however, That this exemption shall not apply to real property of the above-named entitles the beneficial use of which has been granted, for consideration or otherwise, to a taxable person x x x. Thus under this provision, while the GSIS may be exempt from real estate tax the exemption does not cover property belonging to it where the beneficial use thereof has been granted for consideration or otherwise to a taxable person. There can be no doubt that under the provisions of the contract in question, the purchaser to whose possession the property had been transferred was granted beneficial use thereof. It follows on the strength of the provision sec. 40(a) of PD 464 that the said property is not exempt from the real property tax. While this decree just cited was still inexistent at the time the taxes at issue were assessed on the herein appellant, indeed its above quoted provision sheds light upon the legislative intent behind the provision of Commonwealth Act 186, pertaining to exemption of the GSIS from taxes. The end result is but in consonance with the established rule in taxation that exemptions are held strictly against the taxpayer and liberally in favor of the taxing authority. PAGE
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ISSUE: Whether or not the respondent Board was correct in adopting the Comparable Sales Approach method in fixing the assessed value. HELD: No. Under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes is that the property must be appraised at its current and fair market value. By no strength of the imagination can the market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value in view of the rental restrictions. In the case at bar, not even the factors determinant of the assessed value of subject properties under the comparable sales approach were presented by the public respondents, namely: (1) that the sale must represent a bonafide arms length transaction between a willing seller and a willing buyer and (2) the property must be comparable property. Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties. PAGE
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the tax year s starti ng from 1982 (Exh. S; also Exh. 3), the addr ess of petiti oner was reco rded as 79 Paqu ita, Mla. The Cour t of Appe als adva nced the theo ry that the num ber 79 was furni shed by petiti oner hims elf, basi ng its concl usio n on the addr ess give n by petiti oner in his com
plaint, which was No. 79 Kamias Road, Quezon City. Petitio ners content ion that he would have receive d the notices had they been sent to No. 1009 Paquita , Sampal oc, Manila, becaus e the occupa nts thereof forwar ded the letters addres sed to him to his Quezon City residen ce, loses force when one conside rs that the Court of First Instanc e of Quezon City sent him a notice, in connec tion with
the proc eedi ngs for the cons olida tion of title, at No. 1009 Paqu ita St., Sam palo c, Mani la, whic h rema ined uncl aime d. The petiti oner shou ld kno w that if an own er fails to pay the real estat e taxes on prop erty, the said prop erty shall be sold at publi c aucti on to reco ver the
delinqu ent taxes. When petitio ners proper ty was sold at a public auction in Decem ber 1980, the tax delinqu ency must have accum ulated for several years. It was only on July 12, 1982 that the order for consoli dation of title in the name of respon dent Nepom uceno was issued and it was only on Decem ber 8, 1983 that the title over the proper ty was transfe rred to respon dents Tan and Nuguid
. All thro ugho ut thes e year s, petiti oner neve r displ ayed an inter est in payi ng the real estat
e taxes on the proper ty. Worse, he introdu ced improv ements thereo n withou t reporti ng the same for tax purpos es PAGE
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City Assessor of Manila acting as Chairman, indicates that the said Schedule of Market Values was prepared contrary to and unauthorized under Section 9 of P.D. 921 and its implementing rule on Section 1.02 of AR No. 7-77. The conclusion is, therefore, inevitable that the said Schedule of Market Values, having been prepared by the respondent City Assessor contrary to the express provision of and without authority under Section 9 is illegal and therefore void. An illegal act confers no rights, creates no duties, and in the eyes of the law, it is as if the same had never existed. It can be slain at sight. Such is the case of the questioned Schedule of Market Values, which is hereby declared void and without force and effect. Therefore, the realty tax rates based on the Schedule of Market Values are likewise void and unenforceable. The Supreme Court agrees with the Boards conclusion that the Schedules of Market Values for real properties located in Quezon City, the Municipality of Pasig and the Municipality of Makati, respectively prepared solely by the City Assessor of Quezon City, and the Municipal Assessors of Pasig and Makati, failed to comply with the explicit requirements of Presidential Decree No. 921 in relation to the corresponding Administrative Regulations promulgated by the Department of Finance (No. 7-77) on July 25, 1977, and are on that account illegal and void. PAGE
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A tax decla ratio n only enab les the asses sor to ident ify the same for asses sme nt level s. In fact, a tax decla ratio n does not bind a provi ncial /city asses sor, for unde r Sec. 22 of the Real Estat e Tax Code , appr aisal and asses sme nt are base d on the actu al use irres pecti ve of any previ ous asses sme
nt or taxpay ers valuati on thereo n, which is based on a taxpay ers declara tion. In fact, a piece of land declare d by a taxpay er as residen tial may be assesse d by the provinc ial or city assesso r as comme rcial becaus e its actual use is comme rcial. Even if Tepoot s buildin g was declare d for taxatio n purpos es as residen tial, once a local govern ment has reclassi fied an area as comme rcial that determ
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[G.R. No. 117577; December 1, 1995] Digest by: RUAYA, Ronald S. PONENTE: Panganiban FACTS: Herein petitioners Ty and MVR Picture Tube Inc. both own lands and buildings in the municipality of Pasig. On January 1994, the Municipal Assessor of Pasig sent a notice of assesment with respect to the petitioners properties within the municipality. Finding the new assessment to be higher than previous assessments, petitioners sought the reconsideration of the assessor. At the same time, petitioners sought before the Regional Trial presided by public respondent Judge Trampe for a Petition for Prohibition with prayer for a restraining order and/or writ of preliminary injunction to declare null and void the new schedule of values and the corresponding assessments and to enjoin the collection of real estate taxes based on said assessments. However respondent denied the petition and the subsequent motion for reconsideration. Petitioners averred in the said petition that the new schedule of values and tax assessment be declared void as it was solely done by the municipal assessor hence it did not comply with PD 921 requiring a jointly agreed schedule of values for assessment of the municipal assessor and the assessors within the Assessment District. Moreover, they aver that the stark increase in the new assessment reaching as high as 500% was oppressive and confiscatory. In denying the petition, respondent judge ruled that the new schedule of values for assessment was valid since PD 921 was already repealed by RA 7160 or Local Government Code and that the petitioners have also failed to exhaust all administrative remedies in accordance to Sec. 226 and 252 of RA 7160 before filing a suit before the courts. Thus the petitioners filed a Petition for Review before the Supreme Court. ISSUE: Whether or not PD 921 was repealed by RA 7160, whether petitioners failed to exhaust all administrative remedies before going to court and whether the new assessment can be deemed oppressive and confiscatory? HELD: The Supreme Court found that PD 921 was neither expressly nor impliedly repealed by RA 7160, the respondent failed to harmonize the provisions of PD 921 and RA 7160; the latter law sought to provide autonomy and efficient functioning of the local governments while PD 921 ensured efficiency and effectiveness in the assessment of real property in the Assessment Districts of Metro Manila by requiring a jointly agreed schedule of values by all of the assessors in the district. As such, it would be apropos to harmonize the two laws in line with the intent of these laws where the autonomy of local governments may be enhanced as intended by RA 7160 by grouping themselves together as is the case in PD 921 with regard to real estate assessments. By this harmonization, both the preamble of P.D. 921 decreeing PAGE
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that the real estate taxes shall not unduly burden the taxpayer and the operative principle of decentralization provided under Sec. 3, R.A. 7160 encouraging local government units to consolidate or coordinate their efforts, services and resources shall be fulfilled. As such, PD 921 still being an existing law, it is thus required that any schedule of values for new assessment as proposed by a municipal assessor must be jointly agreed upon by other municipal, city assessors of the Assessment District and any new schedule of values made solely by a municipal assessor is illegal and void. As to the issue of failure of petitioner to exhaust all administrative remedies, the Supreme Court ruled that such requirement was not absolutely necessary in the case at bar since it was from the start, purely a question of law and is thus within the ambit of the courts to remedy. Having already decided upon the two prior issues, the SC no longer decided whether the new schedule of values for tax assesment were oppressive or confiscatory amounting to being unconstitutional. It is axiomatic that the constitutionality of a law, regulation, ordinance or act will not be resolved by courts if the controversy can be, as in this case it has been, settled on other grounds. The Supreme Court ordered that the Decision and Order of respondent Judge be reversed and set aside. And to declare as null and void the questioned Schedule of Market Values for properties in Pasig prepared by respondent Assessor, as well as the corresponding assessments and real estate tax increases based thereon; and enjoining the respondent Treasurer from collecting the real estate tax increases made on the basis of said Schedule and assessments. PAGE
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[G.R. No. 180884; June 27, 2008] Digest by: RUAYA, Ronald S. PONENTE: Ynares-Santiago FACTS: Private respondent Petron Corporation operates several machineries and equipment in Lamao, Limay, Bataan. On June of 2007 the Provincial Assessors Office of Bataan delivered a notice of revised assessment over the corporations machineries and equipment totalling to a tax liability of Php 1, 731, 025, 403 for the period from 1994 to 2006. Petron sought an appeal with the Local Board of Assessment Appeals on August 17, 2007 averring that the revised assessment included items already declared and that the period covered by the assessment exceeded 10 years, which is prohibited by the Local Government Code (LGC). Together with the said petition, Petron sought approval of a surety bond amounting to some Php 1.2 billion. However on August 22, 2008, Petron received from the Provincial Treasurers Office a letter of final notice of delinquent real property tax with a warning that should Petron be unable to settle its tax liabilities, its properties shall be levied and sold at public auction. Thus Petron sent a letter to the Provincial Treasurer stating that any levy on thier property pending the LBAA would be premature, but the treasurer replied by citing Sections 231 and 252 of the LGC whereby on a payment under protest by Petron will bar the levy and sale of its property. On September 2008, a warrant for levy was issued prompting Petron to seek its lifting with the LBAA and posted the surety bond of Php 1.2 billion but the treasurer subsequently issued a notice of sale of petrons properties prompting Petron to seek for a TRO with the RTC. The RTC granted a TRO provided Petron add some Php 500 million to the bond to be equivalent to its outstanding tax liability. Treasure sought the TRO dissolution but was denied, hence petitioner treasurer sought recourse before the Supreme Court through Rule 65 of the Rules of Court questionaing the issuance of the TRO. ISSUE: Whether or not Provincial Treasurer acted accordingly in not supending the collection of the tax liability of Petron and whether the TRO was properly issued? HELD: As to the issuance of the TRO, the Supreme Court found it to be an appropriate relief for Petron. As established by law, a TRO may be issued if and when the conditions for its issuance are met as required under Rule 58 Section 3 of the Rules of Court enumerating the grounds and also when the following requisites are met: (1) the existence of a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity for the writ to prevent serious damage. From the facts shown, clearly the entire operation of Petron in Bataan hinges on the actions of the provincial Treasurer since the value of the property sought to be levied amounted to Php 1.7 billion, a significant amount that could undoubtedly hamper Petrons existence in the area. PAGE
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Moreover, the recourse sought by petitioner before the Supreme Court was improper; resort to Rule 65 is only available when all means of appeal are already availed of or are not available, in this case, the petitioner has not sought reconsideration before the RTC that ordered the TRO nor did the petitioner seek the proper remedy before the Court of Appeals through Rule 45. Although litigation is not a battle of technicalities, the SC emphasized that that procedure must be followed for the orderly and efficient administration of justice and is a matter of jurisdiction. In fact, petitioner was also beyond the reglementary period to question the order. With regard to the Provincial Treasurers continued enforcement of the levy despite the LBAA appeal, the SC gave focus to the LBAA Rules of Procedure whereby it is stated in Section 7, Rule V that: An appeal shall not suspend the collection of the corresponding realty taxes on the real property subject of the appeal as assessed by the Provincial, City or Municipal Assessor, x x x. An appeal may be entertained but the hearing thereof shall be deferred until the corresponding taxes due on the real property subject of the appeal shall have been paid under protest or the petitioner shall have given a surety bond, x x x. Corollarily, Section 11 of Republic Act No. 9282, which amended Republic Act No. 1125 (The Law Creating the Court of Tax Appeals) provides: No appeal taken to the Court of Appeals from the Collector of Internal Revenue x x x shall suspend the payment, levy, distraint, and/or sale of any property for the satisfaction of his tax liability as provided by existing law. Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the processing may suspend the collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more t h a n double the amount with the Court. Thus, although it is true that the LBAA or the courts generally cannot suspend the payment of taxes even on appeal, however should a bond be posted, it is proper to suspend. PAGE
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[G.r. No. 168557; February 16, 2007] Digest by: RUAYA, Ronald S. PONENTE: Callejo Sr. FACTS: POLAR Energy Inc., an electric company entered into a 5-year lease agreement with the National Power Corporation (NPC), a GOCC, for the former to provide and operate diesel power barges to be moored at Balayan Bay in Calaca, Batangas. In the said agreement, there is a stipulation whereby the NPC shall be responsible for the payment of all taxes, import duties, fees, charges and other levies imposed by the National Government of the Republic of the Philippines or any agency or instrumentality... Thereafter, the rights of POLAR were assigned to petitioner company FELS Energy Inc. On August 1995 FELS received an assessment of real property taxes for their power barges from the Provincial Assessor of Batangas, thus prompting FELS to refer the matter to NPC and reminded the latter of their supposed agreement for NPC to pay such taxes, at the same time, FELS authorized NPC to represent it with regard to the assessment of the Provincial Assessor. NPC sought a reconsideration with the Provincial Assessor which was denied, NPC petitioned the Local Board of Assessment Appeals (LBAA) to set aside the Provincial Assessors assessment and to declare the barges as non-taxable, but the LBAA declared they were real property for purposes of taxation since they are installed at a specific location with a character of permanency. The LBAA also pointed out that the owner of the barges-FELS, a private corporation-is the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time. NPC now sought recourse from the Central Board of Assessment Appeals (CBAA) seeking to set aside and lift the levy made upon the barges, initially the CBAA ruled favorably for NPC but reversed itself and affirmed the LBAA decision prompting NPC as well as FELS to seek remedy before the Court of Appeals who also affirmed the the CBAAs decision primarily on the basis that the period with which to file an appeal before the LBAA had lapsed and thus the right of the local government to collect the taxes due with respect to the taxpayers property had become absolute. ISSUE: Whether or not FELS is liable to pay the real property taxes due for the power barges? HELD: Yes, FELS remains liable for the payment of the real property taxes for their power barges. On the matter of prescription to appeal before the LBAA, it is clear in RA 7160 Sec. 226 that upon the receipt of the notice of assessment, the 60-day period to appeal should the PAGE
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taxpayer wish to, begins and will run uninterrupted. It is not on the receipt of the denial of the Provicial Assessor as claimed by petitioners since a recourse before the provncial assessor is not the remedy sanctioned by law. The taxpayers failure to question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable, thus, precluding the taxpayer from questioning the correctness of the assessment, or from invoking any defense that would reopen the question of its liability on the merits. Moreover, contrary to FELS argument that the mistake of NPC in seeking recourse before the provincial assessor instead of the LBAA does not bind them, their act of authorizing NPC to represent them means they are bound and any subsequent action by FELS on the same matter is barred by res judicata and forum-shopping. Thus the SC denied FELS petition and affirmed the CAs decision. Nevertheless, the SC expounded on the taxability of the subject property-- the power barges are deemed to be real property as defined in Article 415 (9) of the New Civil Code: docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. As to the contention that the power barges being leased by NPC are excempt from real propery tax according RA7160, the SC explained that for such provision of RA 7160 to apply, the machinery must be actually, directly and exclusively used by the government or its instrumentalities which is not the situation in this case since it is still FELS who operate the power barges according to the agreement. Moreover, the excemption contemplated in RA 7160 as can be applied in the case at bar pertains only to excemption that NPC enjoys, such previlege does not extend to FELS which is a private entity. Lastly, the rule on tax excemption applies; that there should be strict construction of laws granting exemptions. PAGE
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[G.R. No. 120082; September 11, 1996] Digest by: RUAYA, Ronald S. PONENTE: Davide, Jr. FACTS: Herein petitioner Mactan Cebu International Airport Authority (MCIAA) was created by RA 6958 to introduce a body that would undertake the operations and administration of airports in the Province of Cebu. As provided in its charter; MCIAA is mandated to principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City, x x x and such other airports as may be established in the Province of Cebu x x x. In line with its creation, Sec. 14 of RA 6958 provides: The Authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities x x x. However, in October 1994, the Office of the Treasurer of Cebu demanded from MCIAA the payment of real estate taxes from its parcels of lands amounting to Php 2.2 million, and when a warrant for levy was issued, MCIAA was forced to pay under protest. MCIAA argues that Sec. 14 of RA 6958 or its original charter expressly provides that it is excempt form payment of real estate taxes. Moreover, MCIAA further avers that RA 7160 or the Local Government Code (LGC) in particular Sec. 133 provides that: Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: x x x (o) Taxes, fees or charges of any kind on the national government, its agencies a n d instrumentalities and local government units. Hence, MCIAA avers that being a government intrumentality performing governmental functions, then it falls under the exemption provided under Sec. 133. But such argument was to no avail when it sought a Petition for Declaratory Relief before the respondent Judge Marcos of RTC Cebu City. When MCIAA sought for reconsideration, the same was denied by respondent, primarily on the premise that MCIAA does not qualify as an instrumentality of the government, hence it does not qualify for excemption, and that the excemption granted to it by its charter was repealed by RA 7160 through Sections 193, 232 and 234 of the LGC. ISSUE: Whether or not MCIAA is excempted from paying real estate taxes in the city of Cebu based on its charter and based on RA 7160s excemptions? HELD: No, the Supreme Court held that the excemption granted by the legislature to MCIAA through its charter has already been revoked. Such is the power to tax that it is unlimited but through legislature, certain limitations may be imposed as well as certain prviliges such as excemptions. However it is always subject to the decision of the legislature. In the case at bar, when legislature enacted RA 7160, it intended to further increase the autonomy of PAGE
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local governments. One such autonomy is fiscal autonomy, thus the legislature has deligated it the power to tax, in particular real estate taxes upon the properties within its jurisdiction. In giving local governments autonomy in imposing taxes, it expressly revoked the previous excemptions granted to various agencies and GOCCs, such as the provisions of Sec. 193, 232 and 234, which upon closer scrutiny of the Supreme Court clearly shows that MCIAAs excemption was revoked. Section 133 provides the general excemptions while 193, 232 and 234 further specify those agencies and instrumentalities that are specified to continue to enjoy excemptions, unfortunately for MCIAA it is not one of those; the provision that previously included GOCCs with tax excemptions in its charters was no longer retained, nor does MCIAA qualify as an instrumentality as it merely is a GOCC exerciseing proprietary functions. This is further shown in the fact that in its charter, MCIAA is deemed a taxable person merely enjoying excemption as per the provisions of its charter, but since it has been revoked, being a taxable person still, MCIAA is thus subject to real estate tax. The rule is that strict construction is used when it comes to tax excemption, clearly, had the legislature intended MCIAA to continue to be excempted, it would have expressed so. Instead, legislature intended to increase local fiscal autonomy, as such, it can only be the legislatures intention to revooke the excemption so that the local government may benefit from the additional income that it can gain from these entities such as MCIAA within their territory. Thus, MCIAAs petition is denied, the RTCs decision is affirmed. PAGE
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[G.R. No. 106588. March 24, 1997] Digest by: SANTOS, Maricar J. PONENTE: Panganiban FACTS: Petitioner purchased from Estrella Benedicto Tan two (2) parcels of land.The conveyance included a residential house of strong materials constructed on the lots abovementioned located in Cebu City. Thereafter, petitioner declared the real property constructed on the said lots for purpose of tax assessment as a residential house of strong materials with a floor area of sixty (60) square meters. Effective in the year 1980, the declared property was assessed by Respondent City Assessor of Cebu City under Tax Declaration No. 02-20454 at a market value of P60,000.00 and an assessed value of P36,900.00. The field inspectors of the Cebu City Assessor discovered that the real property declared and assessed under Tax Declaration No. 02-20454 was actually a residential building consisting of four (4) storeys with a fifth storey used as a roof deck. These findings were confirmed by the Board of Commissioners in an ocular inspection conducted on the subject property. Petitioner protested the new assessment for being excessive and unconscionable, 8 contending that it was increased by more than 1,000% as compared to its previous market value of P60,000.00. He questioned the new assessment before the Local Board of Assessment Appeals of Cebu City, which however dismissed petitioners appeal. Hence, petitioner elevated his case to Respondent Central Board of Assessment Appeals which ordered some modification. Petitioner then filed a motion for reconsideration. During the hearing on said motion, the parties submitted a joint manifestation or compromise agreement. The same was assailed by petitioner. ISSUE: Wheteher or not Respondent CBAA gravely erred in resolving the matter of back taxes which was never raised in issue in the Local Board of Assessment Appeals of Cebu City or in the appeal by the petitioner before the Central Board of Assessment Appeals (CBAA). HELD: The petition has no merit. The CBAA decision dared September 30, 1991 and the assailed Resolution dated July 28, 1992 show that petitioner failed to pay under protest the tax assessed against his property. This is a violation of Section 64 of Presidential Decree No. 464 20 which requires that, before a court may entertain any suit assailing the validity of a tax assessment, the taxpayer must first pay under protest the tax assessed against him. The said section provides: Sec. 64. Restriction upon power of court to impeach tax. No court shall entertain any suit assailing the validity of tax assessed under this Code until the PAGE
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taxpayer shall have paid, under protest, the tax assessed against him nor shall any court declare any tax invalid by reason of irregularities or informalities in the proceedings of the officers charged with the assessment or collection of taxes, or of failure to perform their duties within this time herein specified for their performance unless such irregularities, informalities or failure shall have impaired the substantial rights of the taxpayer; nor shall any court declare any portion of the tax assessed under the provisions of Code invalid except upon condition that the taxpayer shall pay the just amount of the tax, as determined by the court in the pending proceeding. For the foregoing lapses, if for no other, this case ought to be dismissed. As a rule, no issue may be raised on appeal unless it has been brought before the lower tribunal for its consideration. 21 The Court has held in several cases, however, that an appellate court has an inherent authority to review unassigned errors (1) which are closely related to an error properly raised, or (2) upon which the determination of the error properly assigned is dependent, or (3) where the Court finds that consideration of them is necessary in arriving at a just decision of the case. In the present case, we hold that Respondent CBAA did not err in considering the issue of back taxes, the same being closely related to an error properly raised. Petitioner himself assailed the subject assessment before the Respondent CBAA for being excessive and unconscionable. In resolving this issue, Respondent CBAA was duty-bound to review the factual antecedents of the case and to apply thereon the pertinent provisions of law. In the process, Respondent CBAA applied Section 25 of PD 464 which had authorized the imposition of back taxes. In any event, consideration of the question of the back taxes is essential to a just decision on the case, as will be shown below. Section 24 merely lays down the general rule that assessments under PD 464 are to be given prospective application. It cannot be construed in such a manner as to eliminate the imposition of back taxes. If Section 24, instead of Section 25, were made to apply as suggested by petitioner, he would in effect be excused from the payment of back taxes on the undeclared excess area of his property. The Court, clearly, cannot allow a taxpayer evade his obligation to the government by letting him pay taxes on property based on its gross undervaluation at P60,000.00, when the same had then a current market value of P449,860.00. PAGE
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[G.R. No. 127139. February 19, 1999] Digest by: SANTOS, Maricar J. PONENTE: QUISUMBING, J.: FACTS: Sec. 219 of Republic Act 7160 (R.A. 7160) or the Local Government Code of 1991 requires the conduct of the general revision of real property as follows: General Revision of Assessment 2 and Property Classification The provincial, city or municipal assessor shall undertake a general revision of real property assessments within two (2) years after the effectivity of this Code and every three (3) years thereafter. Mrs. Lourdes Laderas, the newly appointed City Assessor of Manila, received Memorandum Circular No. 04-95 , from the Bureau of Local Government Finance, Department of Finance. This memorandum relates to the failure of most of the cities and municipalities of Metropolitan Manila, including the City of Manila, to conduct the general revision of real property. In the year 1995, the increase in valuation of real properties compared to the year- 1979 market values ranges from 600% to 3,330%, but the City Assessors office initially fixed the general average of increase to 1,700%. Mrs. Laderas felt that the increase may have adverse reactions from the public, hence, she ended up reducing the increase in the valuation of real properties to 1,020%. With the implementation of Manila Ordinance No. 7894, the tax on the land owned by the petitioner was increased by five hundred eighty percent (580%). With respect to the improvement on petitioners property, the tax increased by two hundred fifty percent (250%). As a consequence of these increases, petitioner Jaime C. Lopez, filed a special proceeding for the declaration of nullity of the City of Manila Ordinance No. 7894 with preliminary injunction and prayer for temporary restraining order (TRO). The petition alleged that Manila Ordinance No. 7894 appears to be unjust, excessive, oppressive or confiscatory. As a result, Manila Ordinance No. 7905 reduced the tax increase of petitioners residential land to one hundred fifty-five percent (155%), while the tax increase for residential improvement was eighty-two percent (82%). The maximum tax increase on classified commercial estates is three hundred percent (300%) but the tax increase on commercial land was only, two hundred eightyeight percent (288%), and seventy-two percent (72%) on commercial portion of the improvement. The court directed the issuance of a writ of injunction and denied, in the meanwhile, the motion to dismiss by the respondent. PAGE
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On October 24, 1996, the trial court granted the motion to dismiss filed by the respondent. The dismissal order was justified by petitioners failure to exhaust the administrative remedies and that the petition had become moot and academic when Manila Ordinance No. 7894 was repealed by Manila Ordinance No. 7905. ISSUE: Whether or not the tax is excessive, oppressive or confiscatory. HELD: As a general rule, where the law provides for the remedies against the action of an administrative board, body, or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. Therefore, where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts. 9 This rule, however, admits certain exceptions. With regard to question on the legality of a tax ordinance, the remedies available to the taxpayers are provided under Section 187, 226, and 252 of R.A. 7160. Sec. 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality or legality of tax ordinance on appeal within thirty (30) days from effectivity thereof, to the Secretary of Justice. The petitioner after finding that his assessment is unjust, confiscatory, or excessive, must have brought the case before the Secretary of Justice for question of legality or constitutionality of the city ordinance. Under Section 226 of R.A. 7160, an owner of real property who in not satisfied with the assessment of his property may, within sixty (60) days from notice of assessment, appeal to the Board of Assessment Appeals. Should the taxpayers question the excessiveness of the amount of tax, he must first pay the amount due, in accordance with Section 252 of R.A. 7160. Then, he must request the annotation of the phrase paid under protest and accordingly appeal to the Board of Assessment Appeals by filing a petition under oath together with copies of the tax declarations and affidavits or documents to support his appeal. 12 We have carefully scrutinized the record of this case and we found no cogent reason to depart from the findings made by the trial court on this point. As correctly found by the trial court, the petition does not fall under any of the exceptions to excuse compliance with the rule on exhaustion of administrative remedies, to wit: One of the reasons for the doctrine of exhaustion is the separation of powers which enjoins upon the judiciary a becoming policy of non-interference with matters coming PAGE
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primarily within the competence of other department .......... Sec. 212. Preparation of Schedule of Fair Market Values Before any general revision of property assessment is made pursuant to the provisions of this Title, there shall be prepared a schedule of fair market values by the provincial, city and the municipal assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in their respective local government units [LGU] for enactment by ordinance of the sanggunian concerned. The schedule of fair market values shall be published in a newspaper of general circulation in the province, city or municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or municipal hall and in two other conspicuous public places therein. Sec. 221. Date of Effectivity of Assessment of Reassessment All assessments or reassessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of the succeeding year: Provided, however, That the reassessment of real property due to its partial or total destruction, or to a major change in its actual use, or to any great and sudden inflation or deflation of real property values, or to the gross illegality of the assessment when made or to any other abnormal causes, shall be made within ninety (90) days from the date any such cause or causes occurred, and shall take effect at the beginning of the quarter next following assessment. The preparation of fair market values as a preliminary step in the conduct of general revision was set forth in Section 212 of R.A. 7160, to wit: (1) The city or municipal assessor shall prepare a schedule of fair market values for the different classes of real property situated in their respective Local Government Units for the enactment of an ordinance by the sanggunian concerned. (2) The schedule of fair market values shall be published in a newspaper of general circulation in the province, city or municipality concerned or the posting in the provincial capitol or other places as required by law. It was clear from the records that Mrs. Lourdes Laderas, the incumbent City Assessor, prepared the fair market values of real properties and in preparation thereof, she considered the fair market values prepared in the calendar year 1992. Upon that basis, the City Assessors Office updated the schedule for the year 1995. In fact, the initial schedule of fair market values of real properties showed an increase in real estate costs, which rages from 600% 3,330 % over the values determined in the year 1979. However, after a careful study on the movement of prices, Mrs. Laderas eventually lowered the average increase to 1,020%. Thereafter, the proposed ordinance with the schedule of the fair market values of real properties was published in the Manila Standard on October 28, 1995 and Balita on November 1, 1995. 18 Under the circumstances of this case, was compliance with the requirement provided under Sec. 212 of R.A. 7160. Thereafter, on January 1, 1996, the Sanggunian approved Manila Ordinance No. 7894. The schedule of values of real properties in the City of Manila, which formed an integral part of the ordinance, was likewise approved on the same date. Coming down to specifics, we find it desirable to lay down the procedure in computing the real property tax. With the introduction of assessment levels, tax rates could be maintained, PAGE
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although tax payments can be made either higher or lower depending on their percentage (assessment level) applied to the fair market value of property to derive its assessed value which is subject to tax. Moreover, classes and values of real properties can be given proper consideration, like assigning lower assessment levels to residential properties and higher levels to properties used in business. Although, we are in full accord with the ruling of the trial court, it is likewise necessary to stress that Manila Ordinance No. 7905 is favorable to the taxpayers when it specifically states that the reduced assessment levels shall be applied retroactively to January 1, 1996. The reduced assessment levels multiplied by the schedule of fair market values of real properties, provided by Manila Ordinance No. 7894, resulted to decrease in taxes. To that extent, the ordinance is likewise, a social legislation intended to soften the impact of the tremendous increase in the value of the real properties subject to tax. The lower taxes will ease, in part, the economic predicament of the low and middle-income groups of taxpayers. PAGE
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[G. R. No. 122451. October 12, 2000] Digest by: SANTOS, Maricar J. PONENTE: QUISUMBING, J.: FACTS: The Assets Privatization Trust (APT) offered for sale all the assets and properties of the Cagayan Sugar Corporation (CASUCO), which had been foreclosed and transferred to APT by the Development Bank of the Philippines. The APT set the floor bid price for the said properties at three hundred fifty five million pesos (P355,000,000.00). Petitioner, as the highest bidder, acquired the aforesaid properties for a total price of P464,000,000.00. Among the properties bought by petitioner were sugar mill machineries located at the CASUCO millsite in Sto. Domingo, Piat, Cagayan. The market value of these machineries was pegged at P391,623,520.00 and the assessed value was set at P313,298,820.00 under Tax Declaration No. 5355. The Provincial Assessor of Cagayan issued a Notice of Assessment of Real Property to petitioner covering the machineries installed at the CASUCO millsite based on the market value of P391,623,520.00 and the assessed value thereof at P313,298,820.00. Petitioner appealed the assessment to the LBAA, on the ground that it was excessive, erroneous, and unjust. The LBAA resolved that the basis of the market value for assessment purposes of the properties acquired by petitioner should be the APT floor bid price of P355,000,000.00. The LBAA then deducted from this amount the value of the land (P4,721,130.00), the total market value of the buildings (P17,605,340.00), to derive the market value of the machineries, amounting to P332,673,530.00. By further deducting the value of machineries not subject to real property tax, the LBAA fixed the market value of the petitioners machineries at P260,327,060.00 for assessment purposes. The LBAA ordered the Provincial Assessor of Cagayan to make the necessary amendments, as a result of which Declaration No. 5514 was issued, putting the assessed value of petitioners machineries at P208,261,650.00. The petitioner filed with the CBAA an Appeal of Assessment identical with its earlier appeal. The CBAA dismissed petitioners appeal on the ground that it was time-barred. ISSUE: Whether or not the Court of Appeals err in finding the assessment of petitioners machineries proper and correct under the Real Property Tax Code. HELD: We note that the real property tax being assessed and collected against petitioners machineries is for 1990. Hence, in this case, the applicable law is the Real Property Tax Code (P.D. No. 464), and not the Local Government Code of 1991 (R.A. No. 7160). We agree with petitioner that Section 28 of the Real Property Tax Code provides for a formula for computing the current market value of machineries. However, Section 28 must PAGE
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be read in consonance with Section 3 of the said law, which defines market value. Under the latter provision, the LBAA and CBAA were not precluded from adopting various approaches to value determination, including adopting the APT floor bid price for petitioners properties. As correctly pointed out by the CBAA and affirmed by the court a quo:Valuation on the basis of a floor bid price is not bereft of any basis in law. One of the approaches to value is the Sales Analysis Approach or the Market Data Approach where the source of market data for valuation is from offer of sales or bids of real property. Valuation based on the floor bid price belongs to this approach, pursuant to Section 3(n) Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise.[10] In the instant case, petitioner failed to show that the use by the LBAA and CBAA of the APT floor bid price, pursuant to Section 3 (n) of the Real Property Tax Code was incorrect and done in bad faith. The method used by the LBAA and CBAA cannot be deemed erroneous since there is no rigid rule for the valuation of property, which is affected by a multitude of circumstances and which rules could not foresee nor provide for. Worthy of note, petitioner has not shown that the current market value of its properties would be significantly lower if its proposed formula is adopted. A party challenging an appraisers finding of value is required not only to prove that the appraised value is erroneous but also what the proper value is. Factual findings of administrative agencies, which have acquired expertise in their field, are generally binding and conclusive upon the Court. The Court will not presume to interfere with the intelligent exercise of the judgment of men specially trained in appraising property. PAGE
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in all provinces, cities and municipalities an annual ad valorem tax on real property such as lands, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted.[7] The character of tax as a property tax must be determined by its incidents, and form the natural and legal effect thereof. It is irrelevant to associate the carriageways and/or the passenger terminals as accessory improvements when the view of taxability is focused on the character of the property. The latter situation is not a novel issue as it has already been resolved by this Honorable Court in the case of City of Manila vs. IAC (GR No. 71159, November 15, 1989) wherein it was held: The New Civil Code divides the properties into property for public and patrimonial property (Art. 423), and further enumerates the property for public use as provincial road, city streets, municipal streets, squares, fountains, public waters, public works for public service paid for by said [provinces], cities or municipalities; all other property is patrimonial without prejudice to provisions of special laws. (Art. 424, Province of Zamboanga v. City of Zamboanga, 22 SCRA 1334 [1968]) The foregoing enumeration in law does not specify or include carriageway or passenger terminals as inclusive of properties strictly for public use to exempt petitioners properties from taxes. Precisely, the properties of petitioner are not exclusively considered as public roads being improvements placed upon the public road, and this separability nature of the structure in itself physically distinguishes it from a public road. Considering further that carriageways or passenger terminals are elevated structures which are not freely accessible to the public, viz-a-viz roads which are public improvements openly utilized by the public, the former are entirely different from the latter. Though the creation of the LRTA was impelled by public service -- to provide mass transportation to alleviate the traffic and transportation situation in Metro Manila -- its operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives.[9] Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government- owned or controlled corporation. Basis of Assessment Is Actual Use of Real Property. Under the Real Property Tax Code, real property is classified for assessment purposes on the basis of actual use,[10] which is defined as the purpose for which the property is principally or predominantly utilized by the person in possession of the property. PAGE
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Part II:
[G.R. No. 128314. May 29, 2002] Digest by: VILLANUEVA, Jenno Antonio G. PONENTE: YNARES-SANTIAGO, J. FACTS: Rodolfo and Perico were the sons and heirs of Spouses Ignacio Jao Tayag and Andrea v. Jao who died intestate on 1988 and 1989, respectively. The decedents left real estate, cash, shares of stock and other personal properties. Perico then instituted a petition in RTC Quezon City (QC) for the issuance of letters of administration over the estate of their parents, alleging among other things, that his brother Roberto was dissipating the estates assets and was receiving rentals from several properties without rendering the necessary accounting and forcibly opening vaults and disposing of the cash and valuables therein. Rodolfo moved to dismiss (MTD) the petition on the ground of improper venue. He alleged that the petition should have been instituted in Angeles City, Pampanga (AC) where their mother used to run a bakery and truly reside. He submitted documentary evidence previously executed by their parents such as income tax returns, voters affidavits, statement of assets and liabilities, real estate tax payments, vehicle registration and passports, all indicating that their residence was in AC. Perico countered that the residence at the time of death was in QC, as their parents who were already undergoing medical treatment in the Medical City in Mandaluyong have been staying in Rodolfos house in QC for four years and that in their death certificates, Rodolfo himself, filled in as place of residence, his address in QC and thereafter, affixed his signature. Rodolfo filed a rejoinder and asserted that he only put his address as reference and that he did so by mistake and in good faith and further maintaining that it is AC and not QC that should be the proper venue. Upon the failure of both parties to nominate for the estates administrator, the court appointed Carlos Sundiam and denied Rodolfos MTD, further ruling that he cannot disown his own representations by taking an inconsistent position on his own admission. Via petition for Certiorari, Rodolfo appealed and the CA affirmed the denial. MFR was also denied. ISSUE: Where should the settlement proceedings be had. HELD: The estate of an inhabitant of the Philippines shall be settled or letters of administration granted in the proper court located in the province where the decedent resides at the time of his death. (Sec. 1, Rule 73, RoC). Rodolfos contention invoking the case of Eusebio v. Eusebio was misplaced as the facts therein differed from the case at bar. Unlike in Eusebio, there is substantial proof that the decedents have transferred to Rs QC residence and other factors indicate that their stay was more than temporary. Rodolfo failed to sufficiently refute Pericos assertion that their elderly parents stayed in Rs house for some three to four years before they died in the late 1980s. Furthermore, the decedents respective death certificates state that they were both residents of Quezon City at the time of their demise. Significantly, it was Rodolfo himself who filled up his late mothers death certificate. To the SC, this unqualifiedly shows that at that time, at least, R recognized his deceased mothers residence to be QC. PAGE
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G.R. No. 126634. January 25, 1999 Digest by: VILLANUEVA, Jenno Antonio G. PONENTE: BELLOSILLO, J. FACTS: A shipment from Hong Kong arrived at the port of Manila, aboard the S/S Seadragon. Its inward foreign manifest indicated that it contained various hand tools. Acting on an information that the shipment violated provisions of tariff and customs code, the Economic Intelligence and Investigation Bureau (EIIB) agents seized the shipment while in transit to the container yard. The EIIB recommended seizure of the shipment, and for which a warrant of seizure and distraint was issued by the District Collector. For failure of petitioner, to appear during the hearing despite due notice, collector decreed the forfeiture of the shipment in favor of the government. ISSUE: Whether or not Transglobe is allowed to redeem the forfeited shipments. HELD: As a means of settlement under Sec. 2307, TCC, redemption of forfeited property is unavailing in 3 instances: 1. Where there is fraud; 2. Where the importation is absolutely prohibited; 3. Where the release of the property is contrary to law. The fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up same right. PAGE
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package from the vessel or aircraft. As a result, the position of petitioner, that the import entry to be filed within the 30-day period refers to the IED and not the IEIRD, has no legal basis. 2. YES. The law is clear and explicit. It gives a non-extendible period of 30 days for the importer to file the entry which we have already ruled pertains to both the IED and IEIRD. Thus under Section 1801 in relation to Section 1301, when the importer fails to file the entry within the said period, he shall be deemed to have renounced all his interests and property rights to the importations and these shall be considered impliedly abandoned in favor of the government. PAGE
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