LUTZ VS. ARANETA [98 Phil 148; G.R. No.

L-7859; 22 Dec 1955]

Facts: 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 ( Commonwealth Act 567) is
unconstitutional.

Held: 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 is a 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. Therefore, the tax levied under the Sugar Adjustment Act is held
to be constitutional.


TIO VS. VIDEOGRAM REGULATORY BOARD [151 SCRA 208; G.R. No. L-75697; 18 Jun 1987]


Facts: The case is a petition filed by petitioner on behalf of videogram operators adversely affected by
Presidential Decree No. 1987, An Act Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry.

A month after the promulgation of the said Presidential Decree, the amended the National Internal
Revenue Code provided that:

"SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette, ready for
playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or
imported blank video tapes shall be subject to sales tax."

"Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to
the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate,
as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any
motion picture or audiovisual program.

Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty
percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED, That in
Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan
Manila Commission.

The rationale behind the tax provision is to curb the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes or any technical improvement or
variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such
unregulated circulation have caused a sharp decline in theatrical attendance by at least forty percent
(40%) and a tremendous drop in the collection of sales, contractor's specific, amusement and other
taxes, thereby resulting in substantial losses estimated at P450 Million annually in government
revenues.

Videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and
disposition of videograms, and these earnings have not been subjected to tax, thereby depriving the
Government of approximately P180 Million in taxes each year.

The unregulated activities of videogram establishments have also affected the viability of the movie
industry.


Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.

Held: Taxation has been made the implement of the state's police power. The levy of the 30% tax is for a
public purpose. It was imposed primarily to answer the need for regulating the video industry,
particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and
the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to
protect the movie industry, the tax remains a valid imposition.

We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree
No. 1987 as unconstitutional and void. While the underlying objective of the DECREE is to protect the
moribund movie industry, there is no question that public welfare is at bottom of its enactment,
considering "the unfair competition posed by rampant film piracy; the erosion of the moral fiber of the
viewing public brought about by the availability of unclassified and unreviewed video tapes containing
pornographic films and films with brutally violent sequences; and losses in government revenues due to
the drop in theatrical attendance, not to mention the fact that the activities of video establishments are
virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to
engage in business."

WHEREFORE, the instant Petition is hereby dismissed. No costs.


ROXAS v CTA
Antonio, Eduardo and Jose formed a partnership, Roxas y Compania, to manage the 19,000
hectares agricultural lands in Nasugbu, Batangas, a residential lot in Malate, Manila and shares of stocks
in different corporations acquired from their ancestors.
After the WWII, the Government persuaded the Roxas brothers and agreed to sell 13,500
hectares of their property in Batangas to be distributed by the government to the actual occupants as
part of the governments land reform program, for P2,079,048.47 plus P300,000.00 for survey and
subdivision expenses.
However, the government did not have enough funds to pay them. So they make arrangement
for the Rehabilitation Finance Corp. to advance 1.5M as loan with the land as collateral. Roxas y Cia. will
then pay its loan from the proceeds of the yearly amortizations paid by the farmers.
Antonio and Eduardo got married, leaving Jose to stay in the house for which he paid rentals to
Roxas y Cia. the amount of P8000/yr.
The CIR assessed the company deficiencies in real estate dealers tax on the house rentals from
Jose, securities dealers tax from profits from the purchase and sale of securities and the unreported net
profits from the sale of the Batangas Land. It also disallowed deductions claimed by the brothers. Roxas
protested the assessment.
Issues:
1. W/N Roxas y Cia. is liable for payment of fixed real estate dealers tax? YES
2. W/N the profit derived from the sale of Batangas land considered an ordinary gain 100%
taxable?NO
3. W/N the expenses claimed can be included as deductions?
R: The Roxas y Cia. is liable to pay fixed tax as real estate dealer from the rentals of Jose but the
Batangas land is considered a capital asset 50% taxable only. The contributions to the Manila Police
trust fund was allowed as deductions. The Christmas funds to Pasay Police, Pasay Fireman, Baguio
Police were not allowed as deductions. As well as the contributions to civic org., Our lady of Fatima
Chapel.

Rationale:
1. Section 194 of the Tax Code, in considering as real estate dealers owners of real estate receiving
rentals of at least P3,000.00 a year, does not provide any qualification as to the persons paying the
rentals.
. "Real estate dealer" includes any person engaged in the business of buying, selling, exchanging,
leasing or renting property on his own account as principal and holding himself out as a full or part-time
dealer in real estate or as an owner of rental property or properties rented or offered to rent for an
aggregate amount of three thousand pesos or more a year: . ...
2. The sale of the Batangas land is only an isolated transaction and it was done at the request of
the government for lack of funds to pay the said property. The Municipality of Nasugbu even passed a
resolution expressing gratitude to the Roxas y Cia. In fine, Roxas y Cia. cannot be considered a real
estate dealer for the sale in question. Hence, pursuant to Section 34 of the Tax Code the lands sold to
the farmers are capital assets, and the gain derived from the sale thereof is capital gain, taxable only to
the extent of 50%.
3. Deductions must be proven by the taxpayer to be reasonable, ordinary and necessary and must
be incurred in connection to the business.
Tickets for banquet in Honor of Sergio Osmena no connection to the business
Civic Groups (organized by Herald) for needy Herald not a corporation but an association for
charity
Contributions (Our Lady of Fatima at FEU) FEU gives dividends and Fatima has not shown to
belong to Church
A contribution to the government entity is valid as deductions if used EXCLUSIVELY for public purposes.
Christmas Funds (Pasay & Baguio Police, Pasay Fireman) Not for public purpose, gifts to
families of public officials
Contributions (Manila Police Trust Fund) intended to be used for public purpose




Caltex v Commission on Audit (this doesnt cover all the issues, pls read the digest gen made/the original
if you wanna be super sure)
The Oil Price Stabilization Fund (OPSF) was created by PD1958, amended by EO 137, 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. It was to be sourced from
tax collections.
COA sent a letter to Caltex, directing it to remit its collection to the OPSF, excluding that
unremitted for 1986 and 1988 of the additional tax on petroleum products authorized under Section 8
of PD 1956; and that pending such remittance, all its claims for reimbursement from the OPSF shall be
held in abeyance.
Caltex requested COA for an early release of its reimbursement certificates from the OPSF. It
invoked in support of such COA Circular No. 89-299 on the lifting of pre-audit of government
transactions of national government agencies and GOCCs.
However, COA denied this, and repeated its earlier directive to Caltex to forward payment of its
unremitted collections to the OPSF.
Caltex ten submitted a proposal to COA for the payment and the recovery of claims.
COA approved the proposal but prohibited Caltex from further offseting remittances and
reimbursements for the current and ensuing years. Caltex moved for reconsideration.
I:1) W/n Caltex can claim for reimbursement of under recovery arising from sales to NAPOCOR -
YES
1) W/n Caltex could be reimbursed on its sales to ATLAS and MARCOPPER-NO
2) W/n the amounts due from Caltex to the OPSF may be offsetted against Caltex outstanding
claims from said funds-NO
R: NO.
1) The COA admits in their Comment that under recovery arising from sales to NPC are
reimbursable because NPC was granted full exemption from the payment of taxes; to prove this, COA
traces the laws providing for such exemption.
The last law cited is the Fiscal Incentives Regulatory Board's 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, NPC's tax exemption
was confirmed and approved. Hence, Caltex can recover its claim arising from sales of petroleum
products to the National Power Corporation.
2) With respect to its claim for reimbursement on sales to ATLAS and MARCOPPER, Caltex relies
on Letter of Instruction (LOI) 1416 w/c ordered the suspension of payments of all taxes, duties, fees and
other charges, whether direct or indirect, due and payable by the copper mining companies in distress
to the national government.
Pursuant to this LOI, Minister of Energy Velasco issued a Memorandum Circular w/c advised oil
companies that ATLAS and MARCOPPER mining corps are among those declared to be in distress.
COA denied such claim based on the fact that Caltex has no authority to claim reimbursement
for the uncollected impost because LOI-1416 was issued when the OPSF was not yet existing and could
not have contemplated OPSF imposts at the time of its formulation. The LOI was also never published in
the Official Gazette so it has no force and effect.
The SC said that even granting arguendo that the LOI has force and effect, Caltexs 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 this case, CALTEX 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
3) Taxation is no longer envisioned as a measure merely to raise revenue to support the
existence of government; taxes may be levied with a regulatory purpose to provide means for the
rehabilitation and stabilization of a threatened industry which is affected with public interest as to be
within the police power of the state.
PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation. A
taxpayer may not offset taxes due from the claims that he may have against the government.
Taxes cannot be the subject of compensation because the government and taxpayer are not
mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract
or judgment as is allowed to be set-off.

Luzon Stevedoring v CTA
Luzon Stevedoring Corp., in 1961 and 1962, imported various engine parts and other equipment
for the repair and maintenance of its tugboats for which it paid the assessed compensating tax under
protest.
Unable to secure a tax refund from the CIR, it filed a Petition for Review with the CTA, praying to
be granted a refund of about P33k+.
The CTA however denied the claims for refund due to lack of sufficient legal justification.
LS filed a Motion for Reconsideration, but the same was denied.
LS contends that "tugboats" are embraced and included in the term "cargo vessel" under the tax
exemption provisions of Section 190 of the Revenue Code, as amended by RA 3176.
LS argues that in legal contemplation, the tugboat and a barge loaded with cargoes with the
tugboat towing the cargoe vessel for loading and unloading constitute a SINGLE VESSEL. Thus, the
engines, spare parts and equipment imported by it and used in the repair and maintenance of its
tugboats are exempt from compensating tax.
On the other hand, CTA contended that "tugboats" are not "Cargo vessel" because they are
neither designed nor used for carrying and/or transporting persons or goods by themselves but are
mainly employed for towing and pulling purposes. Thus, they do not fall w/in the purview of the Tax
Code amended by RA 3176.
I: W/n the tax exemption accorded to cargo vessels also applicable to the tugboats
NO.
1) The general rule is that any claim for exemption from the tax statute should be strictly
construed against the taxpayer.
In order that the importations in question may be declared exempt from the compensating tax,
it is indispensable that the requirements of the amendatory law be complied with, namely:
o 1) the engines and spare parts must be used by the importer himself as a passenger and/or
cargo vessel
o 2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation
Accdg to Webster, a tugboat is a strongly built, powerful steam or power vessel, used for
towing and, now, also used for attendance on vessel. Grolier Encyclopedia further provides that a
tugboat is a diesel or steam power vessel designed primarily for moving large ships to and from piers
for towing barges and lighters in harbors, rivers and canals. It is, according to Bouviers, a vessel built
for TOWING.
Clearly, the corporations tugboats do NOT fall under the categories of passenger and/or cargo
vessels.
It is a cardinal principle of statutory construction that when the law is clear, no interpretation is
needed.
2) Regardless of construction and interpretation, it is also a fundmental rule that statutes are to
be construed in the light of purposes to be achieved and the evils sought to be remedied.
In this case, the legislature in amending Section 190 of the Tax Code by RA 3176 intended to
provide incentives and inducements to bolster the shipping industry and NOT the business of
stevedoring, as manifested in the sponsorship speech of Senator Gil Puyat.
On analysis of the corporations transactions, CTA found no evidence that tugboats are
passenger and/or cargo vessels used in the shipping industry as an independent business.
On the contrary, the corporations own evidence supports the view that it is engaged as a
stevedore, i.e. the work of unloading and loading of a vessel in port; and towing of barges containing
cargoes is a part of its undertaking as a stevedore.
Its trade name is indicative that its sole and principal business is stevedoring and lighterage,
taxed under Section 191 of the National Internal Revenue Code as a contractor, and not an entity which
transports passengers or freight for hire which is taxed under Section 192 of the same Code as a
common carrier by water.

National Development Company v CIR
The NDC entered into contracts in Tokyo with several Japanese shipbuilding companies for the
construction of 12 ocean-going vessels.
The purchase price was to come from the proceeds of bonds issued by the Central Bank.
Initial payments were made in cash and through irrevocable letters of credit. 14 promissory
notes were signed for the balance by the NDC and, as required by the shipbuilders, guaranteed by the
Republic of the Philippines.
The remaining payments and the interests thereon were remitted in due time by the NDC to
Tokyo.
The vessels were eventually completed and delivered to the NDC in Tokyo.
NDC remitted to the shipbuilders in Tokyo the total amount of about US$4M+ as interest on the
balance of the purchase price. No tax was withheld.
The Commissioner then held the NDC liable on such tax in the total sum of P5k+. Negotiations
followed but failed.
The BIR thereupon served on the NDC a warrant of distraint and levy to enforce collection of the
claimed amount.
The NDC went to the CTA, w/c ruled in favor of the BIR, except for a slight reduction of the tax
deficiency in the sum of P900, representing the compromise penalty.
I: W/n NDC should be held liable for for withholding taxes on the interest remitted to the
Japanese corporation
R: YES.
The interest remitted to the Japanese shipbuilders in Japan on the UNPAID BALANCE of the
purchase price of the vessels acquired by NDC is interest derived from sources within the Philippines and
therefore subject to income tax under the NIRC.
The law, however, does not speak of activity but of the SOURCE. The Governments right to levy
and collect income tax on interest received by foreign corporations not engaged in trade or business
within the Philippines is NOT based on the condition that the ACTIVITY be in the Philippines.
Instead, it is the RESIDENCE of the obligor who pays the interest that is material in determining
the source of interest. It is not the physical location of the securities, bonds or notes or the place of
payment.
The law specifies: interest derived from SOURCES within the Philippines and interests on bonds,
notes or other interest bearing obligations of residents, corporate or otherwise.
In this case, NDC is a Philippine corporation engaged in the business in the Philippines, it is a
domestic corporation and resident of the Philippines. Thus, it is subject to tax.
2) NDC also has no basis for saying that the interest payments were obligations of the Republic
of the Philippines and that the government notes were exempt from taxation.
The law invoked (RA 1407) did NOT state any exemption on said interest on securities.
NDC has not established any tax exemption on the said transaction. The government was NOT
the one who issued the notes but merely guaranteed the said issuances.
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.
3) In suggesting that the NDC is merely an administrator of the funds of the Republic of the
Philippines, the NDC closes its eyes to the nature of the entity as a corporation. As such, it is governed in
its proprietary activities not only by its charter but also by the Corporation Code and other pertinent
laws.
4) Lastly, it must be noted that NDC is NOT the one being taxed. The tax was due on the
interests earned by the Japanese shipbuilders. It was the income of these companies and NOT the
Republic of the Philippines that was subject to the tax the NDC did not withhold.
In effect, therefore, the imposition of the deficiency taxes on the NDC is a penalty for its failure
to withhold the same from the Japanese shipbuilders, as imposed by the Tax Code.
LASTLY, the court has stated that in case of the doubt, the one withholding can just the pay tax
and ask for refund later when an error in the payment exists.




Commissioner of Internal Revenue v. Algue
The Phil. Sugar Estate Development Company (PSEDC) appointed Algue, Inc., a family corporation, as its agent, authorizing it to
sell its land, factories, and oil manufacturing process.
Pursuant to this authority, five members of the family corporation formed the Vegetable Oil Investment Corp. and induced other
persons to invest in it.
The newly formed corporation then purchased the PSEDC properties. For this sale, PSEDC gave Algue, Inc. a commission of
P125,000.
From this amount, Algue Inc. paid the five family members P75,000 as promotional fees.
Algue, Inc. declared this P75,000 as a deduction from its income tax as a legitimate business expense.
The CIR questioned the deduction, claiming that it was not an ordinary, reasonable, or necessary expense and was merely an
attempt to evade payment of taxes.
I: W/n the P75,000 is tax-deductible as a legitimate business expense of Algue, Inc.
R: Yes, the P75,000 promotional fee is tax-deductible.
Sec. 30 of the Tax Code provides that ordinary and necessary expenses 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 are tax-
deductible.
However, the burden in proving the validity of a claimed deduction belongs to the taxpayer. In this case, the burden has been
satisfactorily discharged by the taxpayer Algue, Inc.
Algue, Inc. was able to prove that the promotional fees were not fictitious and were in fact paid periodically to the five family
members. Moreover, the amount of the promotional fees was reasonable, considering that the five payees actually performed a
service for Algue, Inc. by making the sale of the properties of PSEDC possible.
As a result of this sale, Algue, Inc. earned a net commission of P50,000.
Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to
activate and operate it.
Hence, despite the natural reluctance to surrender part of ones hard-earned income, every person who is able to must contribute
his share in running the government. The government, for its part, is expected to respond in the form of BENEFITS for general
welfare. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an
arbitrary exaction by those in the seat of power.
However, it should also be exercised reasonably and in accordance with the prescribed procedure. If it is not, the taxpayer has a
right to complain to the courts.



CIR v. PINEDA
GR No. L-22734, September 15, 1967
21 SCRA 105

FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Atty. Manuel
Pineda. Estate proceedings were had in Court so that the estate was divided among and awarded to the heirs. Atty Pineda's
share amounted to about P2,500.00. After the estate proceedings were closed, the BIR investigated the income tax liability
of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not
filed. Thereupon, the representative of the Collector of Internal Revenue filed said returns for the estate issued an
assessment and charged the full amount to the inheritance due to Atty. Pineda who argued that he is liable only to extent
of his proportional share in the inheritance.

ISSUE: Can BIR collect the full amount of estate taxes from an heir's inheritance.


HELD: Yes. The Government can require Atty. Pineda to pay the full amount of the taxes assessed.
The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the
inheritance, for unpaid income taxes for which said estate is liable. By virtue of such lien, the Government has the right to
subject the property in Pineda's possession to satisfy the income tax assessment. After such payment, Pineda will have a
right of contribution from his co-heirs, to achieve an adjustment of the proper share of each heir in the distributable estate.
All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting
from each one of them the amount of the tax proportionate to the inheritance received; and second, is by subjecting said
property of the estate which is in the hands of an heir or transferee to the payment of the tax due. This second remedy is
the very avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may
be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and
their prompt and certain availability is an imperious need.


CIR v. CA, CITY TRUST BANKING CORP.
GR No. 86785, November 21, 1991
234 SCRA 348

FACTS: Respondent corporation Citytrust filed a refund of overpaid taxes with the BIR by which the
latter denied on the ground of prescription. Citytrust filed a petition for review before the CTA. The case
was submitted for decision based solely on the pleadings and evidence submitted by the respondent
because the CIR could not present any evidence by reason of the repeated failure of the Tax
Credit/Refud Division of the BIR to transmit the records of the case, as well as the investigation report
thereon, to the Solicitor General. CTA rendered the decision ordering BIR to grant the respondent's
request for tax refund amounting to P 13.3 million.

ISSUE: Failure of the CIR to present evidence to support the case of the government, should the
respondent's claim be granted?

HELD: Not yet. It is a long and firmly settled rule of law that the Government is not bound by the errors
committed by its agents. In the performance of its governmental functions, the State cannot be
estopped by the neglect of its agent and officers. Although the Government may generally be estopped
through the affirmative acts of public officers acting within their authority, their neglect or omission of
public duties as exemplified in this case will not and should not produce that effect.
Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the
Government cannot and must not be estopped particularly in matters involving taxes. Taxes are the
lifeblood of the nation through which the government agencies continue to operate and with which the
State effects its functions for the welfare of its constituents. The errors of certain administrative officers
should never be allowed to jeopardize the Government's financial position, especially in the case at bar
where the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced
just because of bureaucratic lethargy. Thus, it is proper that the case be remanded back to the CTA for
further proceedings and reception of evidence.


MARCOS II v. CA
GR No. 120880, June 5, 1997
293 SCRA 77

FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's
petition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies
during the period of his exile in the US. The Marcos family was assessed by the BIR, and notices were
constructively served to the Marcoses, however the assessment were not protested administratively by
Mrs. Marcos and the heirs of the late president so that they became final and unappealable after the
period for filing of opposition has prescribed. Marcos contends that the properties could not be levied to
cover the tax dues because they are still pending probate with the court, and settlement of tax
deficiencies could not be had, unless there is an order by the probate court or until the probate
proceedings are terminated.

ISSUE: Is the contention of Bongbong Marcos correct?


HELD: No. The deficiency income tax assessments and estate tax assessment are already final and
unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by the
government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary
tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions and
Criminal actions), and is not affected or precluded by the pendency of any other tax remedies instituted
by the government.
The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a
mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax
Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late
President, on the ground that it was required to seek first the probate court's sanction. There is nothing
in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate
settlement court's approval of the state's claim for estate taxes, before the same can be enforced and
collected.

On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not
to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive
share to any party interested in the estate, unless it is shown a Certification by the Commissioner of
Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's
contention that it is the probate court which approves the assessment and collection of the estate tax.

PHILEX MINING CORP. v. CIR
GR No. 125704, August 28, 1998
294 SCRA 687

FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming the Court of
Tax Appeals decision ordering it to pay the amount of P110.7 M as excise tax liability for the period from
the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully paid
pursuant to Sections 248 and 249 of the Tax Code of 1977. Philex protested the demand for payment of
the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for
the years 1989 to 1991 in the amount of P120 M plus interest. Therefore these claims for tax
credit/refund should be applied against the tax liabilities.

ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the
petitioner?

HELD: No. Philex's claim is an outright disregard of the basic principle in tax law that taxes are the
lifeblood of the government and so should be collected without unnecessary hindrance. Evidently, to
countenance Philex's whimsical reason would render ineffective our tax collection system. Too
simplistic, it finds no support in law or in jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it
has a pending tax claim for refund or credit against the government which has not yet been
granted.Taxes cannot be subject to compensation for the simple reason that the government and the
taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and
debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government
in its sovereign capacity. xxx 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.


Villanueva v. City of Iloilo: Uniformity
The municipal board of Iloilo enacted ORDINANCE 11 (series of 1980) imposing 86 license tax fees on persons engaged in the
business of operating tenement houses ((tenement house any building or dwelling for renting space divided into separate
apartments or accessories).
The Villanuevas, owners of 4 tenement houses containing 34 apartments, challenged the validity of such ordinance because only
the taxpayers of the City of Iloilo are singled out to pay taxes on their tenement houses, while citizens of other cities, where their
councils do not enact a similar tax ordinance are permitted to escape such imposition.
Lower court rendered the ordinance illegal as it is oppressive and unreasonable, constitutes double taxation and violates
uniformity.
I: W/n the ordinance violates the rule on equality and uniformity in taxation.
R: NO.
1) The rule on equality and uniformity does not require that taxes for the same purpose should be imposed in different territorial
subdivisions at the same time.
Taxes are uniform and equal when imposed upon all property of the same class or character within the taxing authority.
In this case, tenement buildings constitute a distinct class of property.
2) Contrary to petitioners' assertion that the tax in question is a REAL ESTATE tax, this argument cannot be sustained.
The tax is not a fixed proportion of the assessed value of the tenement houses, and does not require the intervention of assessors
or appraisers. It is not payable at a designated time or date, and is not enforceable against the tenement houses either by sale or
distraint.
RATHER, it is seen from the context of the ordinance that the intention is to impose a license tax on the operation of tenement
houses, which is a form of business or calling.
3) Also, the petitioners' contention that they are doubly taxed because they are paying the real estate taxes and the tenement tax
imposed by the ordinance in question is devoid of merit.
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. This would not constitute double taxation because there is only double taxation when the SAME PROPERTY /
SUBECT MATTER is taxed twice for the same purpose, w/in the same jurisdiction and period, and of the same kind of character of
tax.
Real estate and tenement tax aer NOT of the same kind / 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.

Pepsi-Cola Bottling Co. of the Phil. v. City of Butuan: Uniformity
The City of Butuan enacted an ordinance imposing on any agent and/or consignee of any entity engaged in selling soft drinks a
tax of 10 cents per case of 24 bottles to be paid at the end of every month.
The tax shall be based from the cargo manifest, bill of lading, or on any record showing the number of cases received within the
month.
The ordinance provides that the revenue derived from such "shall be alloted as follows: 40% for Roads and Bridges Fund; 40%
for the General Fund and 20% for the School Fund.
Pepsi filed an action to nullify the ordinance on the ground that it partakes of the nature of an import tax and is highly unjust and
discriminatory.
I: W/n the ordinance is valid
R: The ordinance is null and void.
1) The tax is discriminatory and violative of uniformity because it is levied only on those persons who are agents or consignees of
another dealer, who must be one engaged in business outside the city.
Thus, local dealers (w/in city) NOT acting for or on behalf of other merchants would be exempt from the tax.
2) Moreover, the tax shall be based on the number of bottles received, NOT SOLD, by the taxpayer. These circumstances show
that the ordinance is limited in application to those soft drinks brought into the City from outside thereof.
The tax thus partakes of the nature of an import duty, which is beyond the authority of the city to impose by express provision of
law.
3) In order for valid classification to take place it must be germane to purpose of law, rest on substantial distinctions, apply
equally to all members of same class, apply to present and future conditions.
There is no valid classification here because if the purpose of the law were merely to levy a burden upon the sale of soft drinks,
there is no reason why sales thereof by dealers other than agents or consignees of producers or merchants outside the city
should be exempt from the tax.
On double taxation argument: double taxation, in general, is not forbidden by our fundamental law, so it cannot be sustained.


Ormoc Sugar Co. v. Treasurer of Ormoc City: Uniformity and
Equal Protection
The Municipal Board of Ormoc City passed Ordinance No 4 imposing a municipal tax of 1% per export sale of sugar milled at the
Ormoc Sugar Company.
Ormoc questioned the validity of the ordinance on the ground that it violated the equal protection clause and the rule of
uniformity in taxation.
I: W/n the ordinance is valid.
R: NO, it is NOT.
The Local Autonomy Act gave chartered cities, municipalities and municipal districts authority to levy for public purposes just and
uniform taxes, licenses or fees.
For a tax to be just and uniform, it must apply equally to things identically situated. HOWEVER, classification can be made as long
as it is be germane to purpose of law, rest on substantial distinctions, apply equally to all members of same class, apply to
present and future conditions.
In this case, the tax imposed is violative of the equal protection clause.
When the taxing ordinance was enacted, Ormoc Sugar was the ONLY sugar central in the city.
A reasonable classification should be in terms applicable to future conditions as well. The taxing power should not be singular and
exclusive as to exclude any subsequent established sugar central from the coverage of the tax.
A subsequently established sugar central cannot be subject to tax because the ordinance expressly points to Ormoc Sugar
Company Inc as the entity to be levied upon.

Francia v IAC
Engracio Francia was the registered owner of a residential lot and a 2-story house in Pasay City.
Subsequently, a 125-sqm portion of Francias property was expropriated by the Republic of the Philippines for the sum of P4k+
representing the estimated amount equivalent to the assessed value of the aforesaid portion. This was because of Francias
failure to pay taxes for 14 years.
The property was then sold at public auction pursuant to Section 73 of PD 464 known as the Real Property Tax Code. Fernandez
was the highest bidder for the property.
Francia was not present during the auction sale since he was in Iligan City at that time helping his uncle ship bananas.
Francia then received a notice of hearing of an LRC Case, where Fernandez sought to cancel Francias TCT and issue a new one in
his name.
Francia thus filed a complaint to annul the auction sale, alleging that:
o his tax liability should have been offset with the money paid to him by the government when they expropriated his
other property
o He was not duly notified of the auction sale
o the price at which his property was sold was grossly inadequate with that of the propertys actual value (shocking to
the senses)
Lower court and IAC dismissed the complaint.
I: W/n the auction was valid
R: YES, it was valid
By legal compensation, obligations of persons, who in their own right are reciprocally debtors and creditors of each other, are
extinguished (Art. 1278, Civil Code).
The circumstances of the case do not satisfy the requirements provided by Article 1279
o (1) that each one of the obligors be bound principally and that he be at the same time a principal creditor of the
other..xxx
o (3) that the two debts be due.
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.
The government and taxpayer are NOT mutually creditors and debtors of each other.
In this case, the tax was due to the city government while the expropriation was effected by the national government.
Moreover, the amount of P4k+ paid by the national government for the lot was deposited w/ the PNB LONG BEFORE the auction
of the remaining property.
OTHERS: Francia cannot deny receiving notice of the sale because he IN FACT admitted in his testimony that he received a letter
regarding the sale, and it was negligence on his part when he ignored such notice; As a general rule, gross inadequacy of price is
not material when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the
lesser the price, the easier it is for the owner to effect redemption.

Republic of the Phils v Mambulao Lumber Co
Mambulao Lumber Company owed the Republic of the Philippines a total sum of about P4k+ (plus 6% legal interest from the date
of the filing of the complaint) for forest charges covering the period from September 10, 1952 to May 24, 1953.
The liability was covered by a bond executed by General Insurance & Surety Corporation for the Company in favor of the
Republic.
The Company did not disput that it did have liabilities totaling about P4k+. HOWEVER, as a defense, it also claimed to have paid
to the RP P9k+ for reforestation charges from July 1948 to December 1956 and April 1947 to June 1948.
These were paid in pursuance of RA 115 w/c provides that there shall be collected, in addition to the regular forest charges
provided under the NIRC, the amount of 50 cents on each cubic meter of timber cut out and removed from any public forest for
commercial purposes. (purpose: reforestation of water sheds, denuded areas, etc.)
The Company contended that since the Republic had not made use of those reforestation charges collected, Republic should
refund them, so it requested a refund from the Director of Forestry (that the amt be credited w/ reforestation charges imposed on
them) so that the amount if paid could be set-off
I: W/n the P9k+ paid by the Company as reforestation charges may be SET OFF with the P4k+ forest charges due them
R: NO, they cannot be set-off.
1) There is nothing in the law which requires that the amount collected as reforestation charges should be used exclusively for
the reforestation of the area covered by the license of a licensee or concessionaire, and that if not so used, the same should be
refunded to him.
The amount paid by a licensee as reforestation charges is in the nature of a tax which forms a part of the Reforestation Fund,
payable by him irrespective of whether the area covered by his license is reforested or not. Said fund, as the law expressly
provides, shall be expended in carrying out the purposes provided for thereunder, namely, the reforestation or afforestation,
among others, of denuded areas needing reforestation or afforestation.
2) Under Article 1278, NCC, compensation should take place when two persons are CREDITORS and DEBTORS of each other.
In this case, RP and the Company are NOT mutual creditors and debtors of each other. Said amount are in the coffers of the
government as tax collected. Since they are not mutually creditors and debtors of each other. Consequently, the law on
compensation is inapplicable.
A claim for taxes is NOT a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are
construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or
municipality to one who is liable to the state or municipality for taxes.
The general rule, based on grounds of public policy is well-settled that no set-off is admissible against demands for taxes levied
for general or local governmental purposes. Why? Taxes are NOT in the nature of contracts between the party and party but
grow out of a duty to, and are the positive acts of the government. Making and enforcing them does NOT require CONSENT of
taxpayers.



Punsalan vs. Mun. Board of City of Manila
PUNSALAN v. MUN. BOARD OF CITY OF MANILA
GR No. L-23645, October 29, 1968
95 PHIL 46

FACTS: The plaintiffs--two lawyers, medical practitioner, a dental surgeon, a CPA, and a pharmacist--
sought the
annulment of Ordinance No.3398 of the City of Manila which imposes a municipal occupation tax on
persons
exercising various professions in the city and penalizes non-payment of the tax, contending in substance
that this
ordinance and the law authorizing it constitute class legislation, are unjust and oppressive, and
authorize what
amounts to double taxation. The burden of plaintiffs' complaint is not that the professions to which
they
respectively belong have been singled out for the imposition of this municipal occupation tax, but that
while the
law has authorized the City of Manila to impose the said tax, it has withheld that authority from other
chartered
cities, not to mention municipalities.

ISSUE: Does the law constitute a class legislation? Is it for the Court to determine which political unit
should
impose taxes and which should not?

HELD: No. It is not for the courts to judge what particular cities or municipalities should be empowered
to impose
occupation taxes in addition to those imposed by the National Government. That matter is peculiarly
within the
domain of the political departments and the courts would do well not to encroach upon it. Moreover, as
the seat
of the National Government and with a population and volume of trade many times that of any other
Philippine
city or municipality, Manila, no doubt, offers a more lucrative field for the practice of the professions, so
that it is
but fair that the professionals in Manila be made to pay a higher occupation tax than their brethren in
the
provinces.