TAXATION LAW REVIEW

GENERAL PRINCIPLES

GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827
FACTS:
Petitioner Benjamin Gomez mailed a
letter at the post office in San Fernando,
Pampanga. It did not bear the special anti-TB
stamp required by the RA 1635. It was returned
to the petitioner. Petitioner now assails the
constitutionality of the statute claiming that RA
1635 otherwise known as the Anti-TB Stamp law
is violative of the equal protection clause
because it constitutes mail users into a class for
the purpose of the tax while leaving untaxed the
rest of the population and that even among
postal patrons the statute discriminatorily grants
exemptions. The law in question requires an
additional 5 centavo stamp for every mail being
posted, and no mail shall be delivered unless
bearing the said stamp.
ISSUE:
Is
the
Anti-TB
Stamp
Law
unconstitutional, for being allegedly violative of
the equal protection clause?
HELD:
No. It is settled that the legislature has
the inherent power to select the subjects of
taxation and to grant exemptions. This power
has aptly been described as "of wide range and
flexibility." Indeed, it is said that in the field of
taxation, more than in other areas, the
legislature possesses the greatest freedom in
classification. The reason for this is that
traditionally, classification has been a device for
fitting tax programs to local needs and usages in
order to achieve an equitable distribution of the
tax burden. The classification of mail users is
based on the ability to pay, the enjoyment of a
privilege and on administrativeconvenience. Tax
exemptions have never been thought of as
raising revenues under the equal protection
clause.

PAL VS EDU
HR L-41383 August 15, 1988

Page |1

CIR v. PINEDA
21 SCRA 105

FACTS:

FACTS:

PAL is engaged in air transportation

business under a legislative franchise wherein it
is exempt from tax payment. PAL has not been
paying motor vehicle registration since 1956.
The Land Registration Commissioner required
all tax exempt entities including PAL to pay
motor vehicle registration fees.

Atanasio Pineda died, survived by his

wife, FelicisimaBagtas, 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: Whether or not registration fees as to

motor vehicles are taxes to which PAL is
exempted.
HELD:
Taxes are for revenue whereas fees are
exactions for purposes of regulation and
inspection, and are for that reason limited in
amount to what is necessary to cover the cost of
the services rendered in that connection. It is the
object of the charge, and not the name, that
determines whether a charge is a tax or a fee.
The money collected under Motor Vehicle Law is
not intended for the expenditures of the MV
Office but accrues to the funds for the
construction and maintenance of public roads,
streets and bridges.
As fees are not collected for regulatory purposes
as an incident to the enforcement of regulations
governing the operation of motor vehicles on
public highways but to provide revenue with
which the Government is to construct and
maintain public highways for everyones use,
they are veritable taxes, not merely fees. PAL is
thus exempt from paying such fees, except for
the period between (June 27, 1968 to April 9,
1979) wheretax exemption in the franchise was
repealed.

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

TAXATION LAW REVIEW

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.

FRANCIA VS IAC
162 SCRA 753
FACTS:
Francia was the registered owner of a house
and lot in Pasay City. A portion of said property
was expropriated by the republic. It appeared
that Francia did not pay his real estate taxes
from 1963 to 1977. He contended that his tax
delinquency had been extinguished by legal
compensation since the government owed him
4,116 when a portion of his land was
expropriated.
ISSUE: can there be off-setting of debts and
taxes?
RULING:
No. there can be no off-setting of
taxes original the claims against the claims that
the taxpayer may have against the government.
Taxes cannot be the subject of compensation.
The government and the taxpayer are not
mutually creditor and debtors of each other and
a claim for each other and a claim for taxes is
not such a debt demand, contract or judgement
as is allowed to be set-off. Furthermore, the tax
was due to the city government. While the

GENERAL PRINCIPLES
expropriation
effected
by
the
national
government. In fact, the expropriation payment
was already deposited with the PNB long before
the sale at public auction of his property was
conducted.

DOMINGO VS GARLITOS
G.R. NO. 18993 June 29, 1963
Labrador, J.:
FACTS:
In Domingo vs. Moscoso, the Supreme
Court declared as final and executor the order of
the lower court for the payment of estate and
inheritance taxes, charges and penalties
amounting to Php 40,058.55 by the estate of the
of the late Walter Price. The petitioner for
execution filed by the fiscal was denied by the
lower court. The court held that the execution is
unjustified as the Government is indebted to the
estate for Php262,200 and ordered the amount
of inheritance taxes can be deducted from the
Governments indebtedness to the estate.
ISSUE: Whether or not a tax and a debt may be
compensated.
RULING:
The court having jurisdiction of the
Estate had found that the claim of the Estate
against the government has been recognized
and the amount has already been appropriated
by a corresponding law. 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 takes
place by operation of law and both debts are
extinguished to the concurrent amount.
Therefore the petitioner has no clear right to
execute the judgment for taxes against the
estate of the deceased Walter Price.

Page |2

PHILEX MINING CORP. v. CIR

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
nd
liability for the period from the 2 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'swhimsical
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

TAXATION LAW REVIEW

due to the Government in its corporate capacity,
while taxes are due to the Government in its
sovereign capacity. xxx There can be no offsetting 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.

CALTEX PHILIPPINES VS CA
G.R. 925585 MAY 8, 1992
FACTS:
In 1989, COA sent a letter to Caltex
directing it to remit to OPSF its collection of the
additional tax on petroleum authorized under PD
1956 and pending such remittance, all of its
claims from the OPSF shall be held in
abeyance. Petitioner requested COA for the
early release of its reimbursement certificates
from the OPSF covering claims with the Office of
Energy Affairs. COA denied the same.
ISSUE: Whether or not petitioner can avail of the
right to offset any amount that it may be required
under the law to remit to the OPSF against any
amount that it may receive by way of
reimbursement.
RULING:
It is a settled rule that 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
debtors and creditors of each other and a claim
for taxes is not such a debt, demand, contract or
judgment as is allowed to be set-off.
The oil companies merely acted as agents for
the government in the latters collection since
taxes are passed unto the end-users, the
consuming public.

GENERAL PRINCIPLES

VERA v. FERNANDEZ
GR No. L-31364 March 30, 1979
89 SCRA 199

Page |3

affairs. This should not hold true to government

officials with respect to matters not of their own
personal concern. This is the philosophy behind
the government's exception, as a general rule,
from the operation of the principle of estoppel.

FACTS:
The BIR filed on July 29, 1969 a motion
for allowance of claim and for payment of taxes
representing the estate's tax deficiencies in 1963
to 1964 in the intestate proceedings of Luis
Tongoy. The administrator opposed arguing that
the claim was already barred by the statute of
limitation, Section 2 and Section 5 of Rule 86 of
the Rules of Court which provides that all claims
for money against the decedent, arising from
contracts, express or implied, whether the same
be due, not due, or contingent, all claims for
funeral expenses and expenses for the last
sickness of the decedent, and judgment for
money against the decedent, must be filed
within the time limited in the notice; otherwise
they are barred forever.
ISSUE: Does the statute of non-claims of the
Rules of Court bar the claim of the government
for unpaid taxes?
HELD:
No. The reason for the more liberal
treatment of claims for taxes against a
decedent's estate in the form of exception from
the application of the statute of non-claims, is
not hard to find. Taxes are the lifeblood of the
Government and their prompt and certain
availability are imperious need. (CIR vs. Pineda,
21 SCRA 105). Upon taxation depends the
Government ability to serve the people for
whose benefit taxes are collected. To safeguard
such interest, neglect or omission of government
officials entrusted with the collection of taxes
should not be allowed to bring harm or detriment
to the people, in the same manner as private
persons may be made to suffer individually on
account of his own negligence, the presumption
being that they take good care of their personal

LUTZ VS ARANETA
95 PHIL 148
FACTS:
Commonwealth Act No. 567, otherwise
known as Sugar Adjustment Act was
promulgated in 1940 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 export
taxes. 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
Sec.3 of the Act, 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. The action has been
dismissed by the Court of First Instance.
Issue: Whether or not the tax imposed is
constitutional.
Held:
Yes. The act is primarily an exercise of
the police power. It is shown in the Act that the
tax is levied with a regulatory purpose, to
provide means for the rehabilitation and
stabilization of the threatened sugar industry.
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.

TAXATION LAW REVIEW

The funds raised under the Act 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; but the
legislature is not required by the Constitution to
adhere to a policy of all or none.

PASCUALL VS PUBLIC WORKS

110 PHIL 331

GENERAL PRINCIPLES
still a private property cannot be ignored. In
accordance with the rule that the taxing power
must be exercised for public purposes only,
money raised by taxation can be expanded only
for public purposes and not for the advantage of
private individuals. Inasmuch as the land on
which the projected feeder roads were to be
constructed belonged then to Zulueta, the result
is that said appropriation sought a private
purpose, and, hence, was null and void.
PEPSI VS BUTUAN
24 SCRA 789

FACTS:
In 1953, Republic Act No. 920 was
passed. This law appropriated P85,000.00 for
the
construction,
reconstruction,
repair,
extension and improvement Pasig feeder road
terminals. WenceslaoPascual, then governor of
Rizal, assailed the validity of the law. He claimed
that the appropriation was actually going to be
used for private use for the terminals sought to
be improved were part of the Antonio
Subdivision. The said Subdivision is owned by
Senator Jose Zulueta who was a member of the
same Senate that passed and approved the
same RA. Pascual claimed that Zulueta
misrepresented in Congress the fact that he
owns those terminals and that his property
would be unlawfully enriched at the expense of
the taxpayers if the said RA would be upheld.
Pascual then prayed that the Secretary of Public
Works and Communications be restrained from
releasing funds for such purpose. Zulueta, on
the other hand, perhaps as an afterthought,
donated the said property to the City of Pasig.

Ordinance 110 was enacted by the City

of Butuan imposing a tax of P0.10 per case of
24 bottles of softdrinks or carbonated drinks.
The tax was imposed upon dealersengeged in
selling softdrinks or carbonated drinks. When
Ordinance 110, the tax was imposed upon an
agent or consignee of any person, association,
partnership, company or corporation engaged in
selling softdrinks or carbonated drinks, with
agent or consignee being particularly defined
on the inserted provision Section 3-A. In effect,
merchants engaged in the sale of softdrinks, etc.
are not subject to the tax unless they are agents
or consignees of another dealer who must be
one engaged in business outside the City.
Pepsi-Cola Bottling Co. filed suit to recover
sums paid by it to the city pursuant to the
Ordinance, which it claims to be null and void.
ISSUE:
Whether
discriminatory.

the

Ordinance

is

HELD:
No, the appropriation is void for being
an appropriation for a private purpose. The
subsequent donation of the property to the
government to make the property public does
not cure the constitutional defect. The fact that
the law was passed when the said property was

consignees of producers or merchants

established outside the city, would be exempt
from the tax. The classification made in the
exercise of the authority to tax, to be valid must
be reasonable, which would be satisfied if the
classification is based upon substantial
distinctions which makes real differences; these
are germane to the purpose of legislation or
ordinance; the classification applies not only to
present conditions but also to future conditions
substantially identical to those of the present;
and the classification applies equally to all those
who belong to the same class. These conditions
are not fully met by the ordinance in question.

FACTS:

ISSUE: Whether or not the appropriation is valid.

HELD:

Page |4

The Ordinance, as amended, is

discriminatory 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

PEPSI VS TANAUN
69 SCRA 460
FACTS:
Pepsi Cola has a bottling plant in the
Municipality of Tanauan, Leyte. In September
1962, the Municipality approved Ordinance No.
23 which levies and collects from soft drinks
producers and manufacturers a tai of onesixteenth (1/16) of a centavo for every bottle of
soft drink corked.In December 1962, the
Municipality also approved Ordinance No. 27
which levies and collects on soft drinks
produced or manufactured within the territorial
jurisdiction of this municipality a tax of one
centavo P0.01) on each gallon of volume
capacity.
Pepsi Cola assailed the validity of the
ordinances as it alleged that they constitute
double taxation in two instances: a) double
taxation because Ordinance No. 27 covers the
same subject matter and impose practically the
same tax rate as with Ordinance No. 23, b)
double taxation because the two ordinances
impose percentage or specific taxes.
Pepsi Cola also questions the constitutionality of
Republic Act 2264 which allows for the
delegation of taxing powers to local government

TAXATION LAW REVIEW

units; that allowing local governments to tax
companies like Pepsi Cola is confiscatory and
oppressive.
The Municipality assailed the arguments
presented by Pepsi Cola. It argued, among
others, that only Ordinance No. 27 is being
enforced and that the latter law is an
amendment of Ordinance No. 23, hence there is
no double taxation.

GENERAL PRINCIPLES
State has exclusively reserved the same for its
own prerogative. Moreover, double taxation, in
general, is not forbidden by our fundamental law
unlike in other jurisdictions. 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.

or

(ii) National

as

percentage of GDP of the previous year

exceeds one and one-half percent (1%)
Petitioners allege that the grant of
stand-by authority to the President to increase
the VAT rate is an abdication by Congress of its
is not covered by Section 28 (2), Article VI

ABAKADA VS ERMITA

Consti. They argue that VAT is a tax levied on

the

No. There is no undue delegation. The

Constitution even allows such delegation.
Legislative powers may be delegated to local
governments in respect of matters of local
concern. By necessary implication, the
legislative power to create political corporations
for purposes of local self-government carries
with it the power to confer on such local
governmental agencies the power to tax. Under
the New Constitution, local governments are
granted the autonomous authority to create their
own sources of revenue and to levy taxes.
Section 5, Article XI provides: Each local
government unit shall have the power to create
its sources of revenue and to levy taxes, subject
to such limitations as may be provided by law.
Withal, it cannot be said that Section 2 of
Republic Act No. 2264 emanated from beyond
the sphere of the legislative power to enact and
vest in local governments the power of local
taxation.
There is no double taxation. The argument of
the Municipality is well taken. Further, Pepsi
Colas assertion that the delegation of taxing
power in itself constitutes double taxation cannot
be merited. It must be observed that the
delegating authority specifies the limitations and
enumerates the taxes over which local taxation
may not be exercised. The reason is that the

government deficit

exclusive power to tax because such delegation

ISSUE:
1. Whether or not there is undue delegation of
taxing powers.
2. Whether or not there is double taxation.
HELD:

Page |5

FACTS:

sale

or

exchange

of goods

and

services which cant be included within the

On May 24, 2005, the President signed

purview of tariffs under the exemption delegation

into law Republic Act 9337 or the VAT Reform

since this refers to customs duties, tolls or

Act. Before the law took effect on July 1, 2005,

tribute

the Court issued a TRO enjoining government

government

from implementing the law in response to a slew

imported/exported goods. They also said that

of petitions for

the President has powers to cause, influence or

certiorari

and

prohibition

questioning the constitutionality of the new law.

payable

upon

and

merchandise

usually

to

imposed

the
on

create the conditions provided by law to bring

about the conditions precedent. Moreover, they

The challenged section of R.A. No. 9337

allege that no guiding standards are made by

is the common proviso in Sections 4, 5 and 6:

law as to how the Secretary of Finance will

That the President, upon the recommendation

make the recommendation.

of the Secretary of Finance, shall, effective

January 1, 2006, raise the rate of value-added

ISSUE:Whether or not the RA 9337's stand-by

tax to 12%, after any of the following conditions

authority to the Executive to increase the VAT

has been satisfied:

rate,

especially

recommendatory

on

account

power

of

the

granted

to

(i) Value-added tax collection as a percentage

the Secretary of

of Gross

delegation of legislative power? NO

Domestic

Product (GDP)

of

the

previous year exceeds two and four-fifth percent

(2 4/5%);

HELD:

Finance,

constitutes

undue

TAXATION LAW REVIEW

The

powers

which

GENERAL PRINCIPLES

Congress

Page |6

is

the operation of the 12% rate effective January

In making his recommendation to the

prohibited from delegating are those which are

1, 2006, contingent upon a specified fact or

President on the existence of either of the two

strictly, or inherently and exclusively, legislative.

condition. It leaves the entire operation or non-

conditions, the Secretary of Finance is not acting

Purely legislative power which can never be

operation of the 12% rate upon factual matters

as the alter ego of the President or even her

delegated is the authority to make a complete

outside of the control of the executive. No

subordinate. He is acting as the agent of the

law- complete as to the time when it shall take

discretion would be exercised by the President.

legislative department, to determine and declare

effect and as to whom it shall be applicable, and

Highlighting the absence of discretion is the fact

the event upon which its expressed will is to take

to determine the expediency of its enactment. It

that the word SHALL is used in the common

effect. The Secretary of Finance becomes the

is the nature of the power and not the liability of

proviso. The use of the word SHALL connotes a

means or tool by which legislative policy is

its use or the manner of its exercise which

mandatory order. Its use in a statute denotes an

determined and implemented, considering that

determines the validity of its delegation.

imperative obligation and is inconsistent with the

he possesses all the facilities to gather data and

idea of discretion.

information and has a much broader perspective

The exceptions are:

to properly evaluate them. His function is to

(a) delegation of tariff powers to President under

Thus, it is the ministerial duty of the

gather and collate statistical data and other

Constitution

President to immediately impose the 12% rate

pertinent information and verify if any of the two

(b) delegation of emergency powers to President

upon the existence of any of the conditions

conditions laid out by Congress is present.

under Constitution

specified by Congress. This is a duty, which

(c) delegation to the people at large

cannot be evaded by the President. It is a clear

(d) delegation to local governments

directive to impose the 12% VAT rate when the

functions or unduly delegate power when it

(e) delegation to administrative bodies

specified conditions are present.

describes what job must be done, who must do

Congress

does

not

abdicate

its

it, and what is the scope of his authority; in our

For the delegation to be valid, it must be
complete

and

it

fix

Finance the authority to ascertain the existence

defines

of a fact--- whether by December 31, 2005, the

legislative policy, marks its limits, maps out its

VAT collection as a percentage of GDP of the

boundaries and specifies the public agency

previous year exceeds 2 4/5 % or the national

legislative power but only of the discretion as to

to apply it.

government deficit as a percentage of GDP of

the execution of a law. This is constitutionally

the previous year exceeds one and 1%. If

permissible. Congress did not delegate the

either of these two instances has occurred,

power to tax but the mere implementation of the

the Secretary of

law.

one

astandard.

complex economy that is frequently the only way

sufficient standard is

must

Congress just granted the Secretary of

which

In this case, it is not a delegation of

legislative

power

BUT

delegation

of

Finance,

by

legislative

ascertainment of facts upon which enforcement

mandate, must submit such information to the

and administration of the increased rate under

President.

in which the legislative process can go forward.

There

is

no

undue

delegation

the law is contingent. The legislature has made

BAGATSING VS RAMIREZ

of

TAXATION LAW REVIEW

GENERAL PRINCIPLES

FACTS:

ISSUE: Did the petitioner corporation sufficiently

establish the factual bases for its applications for
refund/credit of input VAT?

The Municipal Board of Manila enacted

Ordinance No. 7522, An Ordinance Regulating
the Operation of Public Markets and Prescribing
Fees for the Rentals of Stalls and Providing
Penalties for Violation thereof and for other
Purposes. Respondent were seeking the
declaration of nullity of the Ordinance for
the reason that a) the publication requirement
under the Revised Charter of the City
of Manila has not been complied with, b) the
Market
Committee
was
not
given
any participation in the enactment, c) Sec. 3(e)
of the Anti-Graft and Corrupt Practices Act has
been violated, and d) the ordinance would
violate P.D. 7 prescribing the collection of fees
and charges on livestock and animal products.
ISSUE:What law shall govern the publication of
tax ordinance enacted by the Municipal Board
of Manila, the Revised City Charter or the Local
Tax Code.
HELD:
The fact that one is a special law and
the other a general law creates the presumption
that the special law is to be considered an
exception to the general. The Revised Charter of
Manila speaks of ordinance in general whereas
the Local Tax Code relates to ordinances
levying or imposing taxes, fees or other charges
in particular. In regard therefore, the Local Tax
Code controls.
ATLAS VS CIR

"The taxpayer must justify his claim for tax

exemption or refund by the clearest grant of
organic or statute law and should not be
permitted to stand on vague implications."
"Export processing zones (EPZA) are effectively
considered as foreign territory for tax purposes."
FACTS:
Petitioner
corporation,
a
VAT-registered
taxpayer engaged in mining, production, and
sale of various mineral products, filed claims
with the BIR for refund/credit of input VAT on its
purchases of capital goods and on its zero-rated
sales in the taxable quarters of the years 1990
and 1992. BIR did not immediately act on the
matter prompting the petitioner to file a petition
for review before the CTA. The latter denied the
claims on the grounds that for zero-rating to
apply, 70% of the company's sales must
consists of exports, that the same were not filed
within the 2-year prescriptive period (the claim
for 1992 quarterly returns were judicially filed
only on April 20, 1994), and that petitioner failed
to submit substantial evidence to support its
claim
for
refund/credit.
The petitioner, on the other hand,
contends that CTA failed to consider the
following: sales to PASAR and PHILPOS within
the EPZA as zero-rated export sales; the 2-year
prescriptive period should be counted from the
date of filing of the last adjustment return which
was April 15, 1993, and not on every end of the
applicable quarters; and that the certification of
the independent CPA attesting to the
correctness of the contents of the summary of
suppliers invoices or receipts examined,
evaluated and audited by said CPA should
substantiate its claims.

Page |7

HELD:
No. Although the Court agreed with the
petitioner corporation that the two-year
prescriptive period for the filing of claims for
refund/credit of input VAT must be counted from
the date of filing of the quarterly VAT return, and
that sales to PASAR and PHILPOS inside the
EPZA are taxed as exports because these
export processing zones are to be managed as
a separate customs territory from the rest of the
Philippines, and thus, for tax purposes, are
effectively considered as foreign territory, it still
denies the claims of petitioner corporation for
refund of its input VAT on its purchases of
capital goods and effectively zero-rated sales
during the period claimed for not being
established and substantiated by appropriate
and
sufficient
evidence.
Tax refunds are in the nature of tax
exemptions. It is regarded as in derogation of
the sovereign authority, and should be
construed in strictissimijuris against the person
or entity claiming the exemption. The taxpayer
who claims for exemption must justify his claim
by the clearest grant of organic or statute law
and should not be permitted to stand on vague
implications.

NDC VS CIR

TAXATION LAW REVIEW

GENERAL PRINCIPLES

FACTS:

FACTS:
The National Development Co. (NDC)
entered into contracts in Tokyo with several
Japaneseshipbuilding
companies
for
the
construction of 12 ocean-going vessels. Initial
payments were made in cashand through
irrevocable letters of credit. When the vessels
were completed and delivered to the NDC
inTokyo, the latter remitted to the shipbilders the
amount of US$ 4,066,580.70 as interest on the
balance of thepurchase price. No tax was
withheld. The Commissioner then held NDC
liable on such tax in the total amountof
P5,115,234.74. The Bureau of Internal Revenue
served upon the NDC a warrant of distraint and
levy afternegotiations failed.
ISSUE: Whether the NDC is liable for deficiency
tax.
HELD:
The Japanese shipbuilders were liable
on the interest remitted to them under Section
37 of the TaxCode. The NDC is not the one
taxed. The imposition of the deficiency taxes on
the NDS is a penalty for itsfailure to withhold the
same from the Japanese shipbuilders. Such
liability is imposed by Section 53(c) of theTax
Code. NDC was remiss in the discharge of its
obligation of its obligation as the withholding
agent of thegovernment and so should be liable
for its omission.

Petitioner Manila International Airport

Authority (MIAA) operates and administers the
Ninoy Aquino International Airport (NAIA)
Complex under Executive Order No. 903 (EO
903),3 otherwise known as the Revised Charter
of the Manila International Airport Authority,
issued by then President Ferdinand E. Marcos.
The NAIA Complex is located along the border
between Pasay City and Paraaque City. MIAA
received Final Notices of Real Property Tax
Delinquency from the City of Pasay for the
taxable years 1992 to 2001. The Court of
Appeals upheld the power of the City of Pasay
to impose and collect realty taxes on the NAIA
Pasay properties. MIAA filed a motion for
reconsideration, which the Court of Appeals
denied.
ISSUE: The issue raised in this petition is
whether the NAIA Pasay properties of MIAA are
exempt from real property tax.
RULING: The Supreme Court held that the
Airport Lands and Buildings of MIAA are
properties devoted to public use and thus are
properties of public dominion. Properties of
public dominion are owned by the State or the
Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of
public dominion:
(1) Those intended for public use, such as
roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores,
roadsteads, and others of similar character;
(2) Those which belong to the State, without
being for public use, and are intended for some
public service or for the development of the
national wealth.

MIAA VS. CITY OF PASAY

G.R. No. 163072April 02, 2009

The term "ports x xx constructed by the State"

includes airports and seaports. The Airport

Page |8

Lands and Buildings of MIAA are intended for

public use, and at the very least intended for
public service. Whether intended for public use
or public service, the Airport Lands and
Buildings areproperties of public dominion. As
properties of public dominion, the Airport Lands
and Buildings are owned by the Republic and
thus exempt from real estate tax under Section
234(a) of the Local Government Code.

NDC VS CEBU CITY

FACTS:
National Development Company (NDC)
is a GOCC authorized to engage in commercial,
industrial,
mining,agricultural
and
other
enterprises necessary or contributory to
economic development or important to public
interest. It alsooperates subsidiary corporations
one of which is National Warehousing
Corporation (NWC).On August 10, 1939, the
President issued Proclamation No. 430
reserving Block no. 4, Reclamation Area No. 4,
of CebuCity for warehousing purposes under the
administration of NWC. Subsequently, in 1940, a
warehouse with a floor area of 1,940 square
meters more or less, was constructed thereon.In
1947; EO 93 dissolved NWC with NDC taking
over its assetsand functions.In 1948, Cebu City
assessed and collected from NDC real estate
taxes on the land and the warehouse thereon.
By the firstquarter of 1970, a total of
P100,316.31 was paid by NDC 11 of which only
P3,895.06 was under protest. NDC asked for
afull refund contending that the land and the
warehouse belonged to the Republic and
therefore exempt from taxation. TheCFI ordered
Cebu City to refund to NDC the real estate taxes
paid by it.
ISSUE: Whether or not the land is exempted
from tax.
Whether or not the warehouse is exempted from
tax.

TAXATION LAW REVIEW

GENERAL PRINCIPLES

HELD:
The SC finds that National Development
Company (NDC) is exempt from real estate tax
on the reserved land but liable for the
warehouse erected thereon. The land The
Republic, like any individual, may form a
corporation with personality and existence
distinct from its own.The separate personality
allows a GOCC to hold and possess properties
in its own name and, thus, permit greater
independence and flexibility in its operations. It
may, therefore, be stated that tax exemption of
property owned by the Republic of the
Philippines "refers to properties owned by the
Government and by its agencies which do not
have separate and distinct personalities
(unincorporated entities).To come within the
ambit of the exemption provided in Art. 3, par.
(a), of the Assessment Law, it is important to
establish that the property is owned by the
government or its unincorporated agency, and
once government ownership is determined, the
nature of the use of the property, whether for
proprietary or sovereign purposes. The land
remains absolute property of the government."
The government "does not part with its title by
reserving them (lands), but simply gives notice
to all theworld that it desires them for a certain
purpose." As its title remains with the Republic,
the reserved land is clearly recovered by the tax
exemption provision. The warehouse As
regards the warehouse constructed on a public
reservation, a different rule should apply
because "[t]he exemption of public property from
taxation does not extend to improvements on
the
public
lands
made
by
preemptioners,homesteaders and other claimants,
or occupants, at their own expense, and these
are taxable by the state . . ." Consequently, the
warehouse constructed on the reserved land by
NWC (now under administration by NDC),
indeed, should properly be assessed real estate
tax as such improvement does not appear to
belong to the Republic.

MCIAA vs. Marcos GR 120082, September 11,

1996
FACTS:
MCIAA was created by virtue of RA
6958. Since the time of its creator, MCIAA
enjoyed the privilege of exemption from payment
of realty taxes in accordance with sec. 14 of its
charter. On October 11, 1994 however The
treasurer of Cebu city demanded payments for
realty taxes on several parcels of lands
belonging to the petitioners. MCIAA objected to
such demand for payment as baseless and
unjustified, claiming in its favour Sec. 14 of R.A.
6958 which exempt it from payment of realty
taxes. Respondent refuse to cancel MCIAAs tax
account, insisting that it is the GOCCs whose
tax exemption privilege has been withdrawn by
virtue of Sec 193 and 234 of the LGC.
Issue: is the contention meritorious?
Ruling:
No. Sec 193 LGC prescribe the general
rule that they are withdrawn upon the effectivity
of the code except those granted to local water
districts, cooperative duly registered under R.A.
6938, non-stock, non-profit hospitals and
educational institutions, and unless otherwise
provided in the LGC the latter provision called
only refer to Sec 234 which enumerate the
properties exempt from real property tax but the
last paragraph of sec 234 further qualifies the
retention of the exemption. Only to those
enumerated therein. Thus, for petitioner to be
exempt must show that the parcels of land in
question any of those enumerated in 234.
REYES vs ALMANZOR GR Nos. L-49839-46,
April 26, 1991
FACTS:

Page |9

Petitioners JBL Reyes et al. owned a

parcel of land in Tondo which are leased and
occupied as dwelling units by tenants who were
paying monthly rentals of not exceeding P300.
Sometimes in 1971 the Rental Freezing Law
was passed prohibiting for one year from its
effectivity, an increase in monthly rentals of
dwelling units where rentals do not exceed three
hundred pesos (P300.00), so that the Reyeses
were precluded from raising the rents and from
ejecting the tenants. In 1973, respondent City
Assessor of Manila re-classified and reassessed
the value of the subject properties based on the
schedule of market values, which entailed an
increase in the corresponding tax rates
prompting petitioners to file a Memorandum of
Disagreement averring that the reassessments
made
were
"excessive,
unwarranted,
inequitable, confiscatory and unconstitutional"
considering that the taxes imposed upon them
greatly exceeded the annual income derived
from their properties. They argued that the
income approach should have been used in
determining the land values instead of the
comparable sales approach which the City
Assessor adopted.
ISSUE: Is the approach on tax assessment used
by the City Assessor reasonable?
HELD:
No. The taxing power has the authority
to make a reasonable and natural classification
for purposes of taxation but the government's
act must not be prompted by a spirit of hostility,
or at the very least discrimination that finds no
support in reason. It suffices then that the laws
operate equally and uniformly on all persons
under similar circumstances or that all persons
must be treated in the same manner, the
conditions not being different both in the
privileges conferred and the liabilities imposed.
Consequently, it stands to reason that
petitioners who are burdened by the government
by its Rental Freezing

TAXATION LAW REVIEW

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.

CHAMBER OF REAL ESTATE AND

BUILDERS ASSOCIATION, INC. vs.
EXECUTIVE SECRETARY- Minimum
Corporate Income Tax
FACTS:
CREBA assails the imposition of the
minimum corporate income tax (MCIT) as being
violative of the due process clause as it levies
income tax even if there is no realized gain.
They also question the creditable withholding tax
(CWT) on sales of real properties classified as
ordinary assets stating that (1) they ignore the
different treatment of ordinary assets and capital
assets; (2) the use of gross selling price or fair
market value as basis for the CWT and the
collection of tax on a per transaction basis (and
not on the net income at the end of the year) are
inconsistent with the tax on ordinary real
properties; (3) the government collects income
tax even when the net income has not yet been
determined; and (4) the CWT is being levied
upon real estate enterprises but not on other
enterprises, more particularly those in the
manufacturing sector.

ISSUE:
Are the impositions of the MCIT on domestic
corporations and
CWT on income from sales
of real properties classified as
ordinary assets
unconstitutional?

GENERAL PRINCIPLES

HELD:
NO. MCIT does not tax capital but only
taxes income as shown by the fact that the
MCIT is arrived at by deducting the capital spent
by a corporation in the sale of its goods, i.e., the
cost of goods and other direct expenses from
gross sales. Besides, there are sufficient
safeguards that exist for the MCIT: (1) it is only
imposed on the 4th year of operations; (2) the
law allows the carry forward of any excess MCIT
paid over the normal income tax; and (3) the
Secretary of Finance can suspend the
imposition of MCIT in justifiable instances.
The regulations on CWT did not shift the
tax base of a real estate business income tax
from net income to GSP or FMV of the property
sold since the taxes withheld are in the nature of
advance tax payments and they are thus just
installments on the annual tax which may be due
at the end of the taxable year. As such the tax
base for the sale of real property classified as
ordinary assets remains to be the net taxable
income and the use of the GSP or FMV is
because these are the only factors reasonably
known to the buyer in connection with the
performance of the duties as a withholding
agent.
Neither is there violation of equal protection
even if the CWT is levied only on the real
industry as the real estate industry is, by itself, a
class on its own and can be validly treated
different from other businesses.

Manila Race Horse v. Dela Fuente

RULING: In taxing only boarding stables for race

horses, we do not believe that the ordinance,

Page |
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makes arbitrary classification. In the case of

Eastern Theatrical Co. Inc., vs. Alfonso, it was
said there is equality and uniformity in taxation
if all articles or kinds of property of the same
class are taxed at the same rate. Thus, it was
held in that case, that "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 not argument at all against the equality and
uniformity of tax imposition." Applying this
criterion to the present case, there would be
discrimination if some boarding stables of the
same class used for the same number of horses
were not taxed or were made to pay less or
more than others.
From the viewpoint of economics and
public policy the taxing of boarding stables for
race horses to the exclusion of boarding stables
for horses dedicated to other purposes is not
indefensible. The owners of boarding stables for
race horses and, for that matter, the race horse
owners themselves, who in the scheme of
shifting may carry the taxation burden, are a
class by themselves and appropriately taxed
where owners of other kinds of horses are
taxed less or not at all, considering that equity
in taxation is generally conceived in terms of
ability to pay in relation to the benefits received
by the taxpayer and by the public from the
business or property taxed. Race horses are
devoted to gambling if legalized, their owners
derive fat income and the public hardly any
profit from horse racing, and this business
demands relatively heavy police supervision.
Taking
everything
into
account,
the

TAXATION LAW REVIEW

differentiation against which the plaintiffs

complain conforms to the practical dictates of
justice and equity and is not discrimatory within
the meaning of the Constitution.
ARTURO TOLENTINO VS SEC. OF FINANCE

GENERAL PRINCIPLES

passed its own version rather than having the

HoR version as far as revenue and other such
bills are concerned. This practice of amendment
by substitution has always been accepted. The
proposition of Tolentino concerns a mere matter
of form. There is no showing that it would make
a significant difference if Senate were to adopt
his over what has been done.

FACTS:
Arturo Tolentino et al are 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 with 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. (Its ironic however to note that
Tolentino and co-petitioner Raul Roco even
signed the said Senate Bill.)
ISSUE: Whether or not the EVAT law is
procedurally infirm.
HELD:
No. By a 9-6 vote, the Supreme Court
rejected the challenge, holding that such
consolidation was consistent with the power of
the Senate to propose or concur with
amendments to the version originated in the
HoR. What the Constitution simply means,
according to the 9 justices, is that the initiative
must come from the HoR. Note also that there
were several instances before where Senate

GARCIA VS EXEC. SECRETARY

FACTS:
On 27 November 1990, Cory issued EO
438 which imposed, in addition to any other
duties, taxes and charges imposed by law on all
articles imported into the Philippines, an
additional duty of 5% ad valorem. This additional
duty was imposed across the board on all
imported articles, including crude oil and other
oil products imported into the Philippines. In
1991, EO 443 increased the additional duty to
9%. In the same year, EO 475 was passed
reinstating the previous 5% duty except that
crude oil and other oil products continued to be
taxed at 9%. Garcia, a representative from
Bataan, avers that EO 475 and 478 are
unconstitutional for they violate Sec 24 of Art 6
of the Constitution which provides: " All
appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of
local application, and private bills shall originate
exclusively in the House of Representatives, but
the Senate may propose or concur with
amendments." He contends that since the
Constitution vests the authority to enact revenue
bills in Congress, the President may not assume
such power of issuing Executive Orders Nos.
475 and 478 which are in the nature of revenuegenerating measures.
ISSUE: whether or not EO 475 and 478 are
unconstitutional

Page |
11

HELD:
Under Section 24, Article VI of the
Constitution, the enactment of appropriation,
revenue and tariff bills, like all other bills is, of
course, within the province of the Legislative
rather than the Executive Department. It does
not follow, however, that therefore Executive
Orders Nos. 475 and 478, assuming they may
be characterized as revenue measures, are
prohibited to the President, that they must be
enacted instead by the Congress of the
Philippines. Section 28(2) of Article VI of the
Constitution provides as follows: "(2) The
Congress may, by law, authorize the President
to fix within specified limits, and subject to such
limitations and restrictions as it 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."
There is thus explicit constitutional permission to
Congress to authorize the President "subject to
such limitations and restrictions as [Congress]
may impose" to fix "within specific limits" "tariff
rates . . . and other duties or imposts . . . ."

OSMEA VS ORBOS
FACTS:
Senator John Osmea assails the
constitutionality of paragraph 1c of PD 1956, as
amended by EO 137, empowering the Energy
Regulatory Board (ERB) to approve the increase
of fuel prices or impose additional amounts on
petroleum products which proceeds shall accrue
to the Oil Price Stabilization Fund (OPSF)
established for the reimbursement to ailing oil
companies in the event of sudden price
increases. The petitioner avers that the
collection on oil products establishments is an
undue and invalid delegation of legislative power

TAXATION LAW REVIEW

to tax. Further, the petitioner points out 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. It
thus appears that the challenge posed by the
petitioner is premised primarily on the view that
the powers granted to the ERB under P.D. 1956,
as amended, partake of the nature of the
taxation power of the State.
ISSUE: Is there an undue delegation of the
legislative power of taxation?
HELD:
None. 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 as 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."
With regard to the alleged undue delegation of
legislative power, the Court finds that the
provision conferring the authority upon the ERB
to impose additional amounts on petroleum
products provides a sufficient standard by which
the authority must be exercised. In addition to
the general policy of the law to protect the local
consumer by stabilizing and subsidizing
domestic pump rates, P.D. 1956 expressly
authorizes the ERB to impose additional
amounts to augment the resources of the Fund.

GENERAL PRINCIPLES

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