Compania General de Tobacos de Filipinas vs.

Manila GR L-16619, 29 June 1963 En Banc, Dizon (J): 8

concur, 2 took no part

Facts: Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed license
fees prescribed by Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance 3634 and 3816
were passed; where the term “general merchandise” found therein included all articles in Sections 123
to 148 of the Tax Code (thus, also liquor under Sedctions 133 to 135). The Tabacalera paid its
wholesaler’s and retailer’s taxes. In 1954, the City Treasurer addressed a letter to an accounting firm,
expressing the view that liquor dealers paying the annual wholesale and retail fixed tax under Ordinance
3358 are not subject to the wholesale aand retail deaklers’ taxes prescribed by City Ordinances 3634,
3301, and 3816. The Tabacalera, upon learning of said stopped including quarterly sworn declaratons
required by the latter ordinances, and in 1957, demanded refunde of the alleged overpayment. The
claim was disallowed.

Issue: Whether there is a distinction between Ordinance 3358 and Ordinances 3634, 3301 and 3816, to
prevent refund to the company.

Held: Generally, the term “tax” applies to all kinds of exactions which become public funds. Legally,
however, a license fee is a legal concept quite distinct from tax: the former is imposed in the exercise of
police power for purposes of regulation, while the latter is imposed under the taxing power for the
purpose of raising revenues. Ordinance 3358 prescribes municipal license fees for the privilege to
engage in the business of selling liquor or alcohol beverages; considering that the sale of intoxicating
liquor is (potentially) harmful to public health and morals, and must be subject to supervision or
regulation by the State and by cities and municipalities authorized to act in the premises. On the other
hand, Ordinances 3634 , 3301 and 3816 imposed taxes on the sales of general merchandise, wholesale
or retail, and are revenue measures enacted by the Municipal Board of Manila. Both a license fee and a
tax may be imposed on the same business or occupation, or for selling the same article, without it being
in violation of the rule against double taxation. The contrary view of the Treasurer in its letter is of no
consequence as the government is not bound by the errors or mistakes committed by its officers,
specially on matters of law. The company, thus, is not entitled to refund.

Wells Fargo vs. Collector of Internal Revenue

GR 46720, 28 June 1940
First Division, Moran (J): 4 concur, 1 concur in result
Facts: Birdie Lillian Eye died on 16 September 1932, at Los Angeles, California, the place of
her alleged last residence and domicile. Among the properties she left was her 1/2 conjugal
shares of stock in the Benguet Consolidated Mining Co., an anonymous partnership (sociedad
anonima), organized under the laws of the Philippines. She left a will duly admitted to probate in
California where her estate was administered and settled. Wells Fargo bank and Union Trust
Co. was duly appointed trustee of the trust by the said will. The Federal and California State’s
inheritance taxes due thereon have been duly paid. The Collector of Internal Revenue in the
Philippines, however, sought to subject the shares of stock to inheritance tax, to which Wells
Fargo objected.
Issue: Whether the shares of stock are subject to Philippine inheritance tax considering that the
decedent was
domiciled in California.
Held: Originally, the settled law in the United States is that intangibles have only one situs for
the purpose of inheritance tax, and such situs is in the domicile of the decedent at the time of
his or her death. But the rule has been relaxed. The maxim “mobila sequuntur personam,” upon
which the rule rests, has been decried as a mere “fiction of law having its origin in
considerations of general convenience and public policy, and cannot be applied to limit or
control teh right of the State to tax property within its jurisdiction” and must “yield to established
fact of legal ownership, actual presence and control elsewhere, and cannot be applied if to do
so whould result in inescapable and patent injustice.” The relaxation of the original rule rests on
either of two fundamental considerations: (1) upon the recognition of the inherent power of each
government to tax persons, properties, and rights within its jurisdiction and enjoying, thus, the
protection of its laws; and (2) upon the principle that as to intangibles, a single location in space
is hardly possible, considering the multiple, distinct relationships which may be entered into with
respect thereto. Herein, the actual situs of the shares of stock is in the Philippines, the
corporation being domiciled therein. The certificates of stock remained in the Philippines up to
the time when the deceased died in California, and they were in possession of one Syrena
McKee, secretary of the corporation, to whom they have been delivered and indorsed in blank.
McKee had the legal title to the certificates of stock held in trust for the true owner thereof. The
owner residing in California has extended here her activities with respect to her intangibles so
as to avail hereself of the protection and benefit of Philippine laws. Accordingly, the jurisdiction
of the Philippine Government to tax must be upheld.

Progressive Development Corporation vs. Quezon City

GR 36081, 24 April 1989
Third Division, Feliciano (J): 4 concur
Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where privately owned
and operated public markets to pay 10% of the gross receipts from stall rentals to the City, as
supervision fee. Such ordinance was amended by Ordinance 9236 (1972), which imposed a 5%
tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon
City. Progressive Development Corp., owned and operator of Farmer’s Market and Shopping
Center, filed a petition for prohibition against the city on the ground that the supervision fee or
license tax imposed is in reality a tax on income the city cannot impose.

Issue: Whether the supervision fee / license tax is a tax on income.

Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on income, nor a city
income tax (distinguished from the national income tax by the Tax Code) within the meaning of
Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of
business in which the company is engaged. To be considered a license fee, the imposition must
relate to an occupation or activity that so engages the public interest in health, morals, safety
and development as to require regulations for the protection and promotion of such public
interest; the imposition must also bear a reasonable relation to the probable expenses of the
regulation, taking into account not only the costs of direct regulation but also its incidental
consequences as well. The gross receipts from stall rentals have been used only as a basis for
computing the fees or taxes due to the city to cover the latter’s administrative expenses. The
use of the gross amount of stall rentals, as basis for the determination of the collectible amount
of license tax, does not by itself convert or render the license tax into a prohibited city tax on
income. For ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of
foodstuffs and related items sold in the privately owned market; and the higher the volume of
goods sold in such market, the greater extent and frequency of inspection and supervision that
may be reasonably required in the interest of the buying public.
 PHILIPPINE AIRLINES, INC. v. EDU
G.R. No. L- 41383, August 15, 1988

FACTS:
The Philippine Airlines (PAL) is a corporation engaged in the air transportation business
under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the
payment of taxes.
Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate
(Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the
Land and Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to
pay motor vehicle registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the
amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration
fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated
May 19,1971, to Land Transportation Commissioner Romeo Edu (Edu) demanding a refund of
the amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu
and National Treasurer Ubaldo Carbonell (Carbonell).

The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which
in turn certified the case to the Supreme Court.

ISSUE:
Whether or not motor vehicle registration fees are considered as taxes.

RULING:
Yes. If the purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle
registration fees. The motor vehicle registration fees are actually taxes intended for additional
revenues of the government even if one fifth or less of the amount collected is set aside for the
operating expenses of the agency administering the program.
http://lex-estudyante.blogspot.com/2012/06/philippine-airlines-inc-v-edu.html
Meralco v Yatco (1939)

Meralco v Yatco
GR No. 45697, November 1, 1939

FACTS:
Meralco entered into an insurance contract with a new york based insurance company. Yatco, the
Commissioner of
Internal Revenue, levied taxes on the premium paid. Meralco paid under protest alleging that the
Philippines had no jurisdiction.

ISSUE:
Whether the CIR exceeded his powers in taxing Meralco’s paid premium

RULING:
No. Where the risk insured against and certain incidents of the contract are to be attended in the
Philippines such as
payment of dividends when received in cash, the Philippines may impose tax regardless whether the
contract is executed abroad. Under such circumstances, substantial elements of the contract may be said
to be so situated in the Philippines as to give its government the power to tax. Even if it be assumed that
the tax imposed upon the insured will ultimately be passed on to the insurer, thus constituting an indirect
tax upon the foreign corporation, by stipulations of its contract, has subjected itself to the taxing
jurisdiction of the Philippines.

After all, the Government of the Philippines, by protecting the properties insured, benefits the foreign
corporation. It is thus reasonable that the latter should pay a just contribution therefor.
http://victormorvis.blogspot.com/2015/06/meralco-v-yatco-1939.html
Tan vs. Del Rosario
Facts:

Petitioners challenge the constitutionality of RA 7496 or the simplified income taxation

scheme (SNIT) under Arts (26) and (28) and III (1). The SNIT contained changes in the tax
schedules and different treatment in the professionals which petitioners assail as unconstitutional
for being isolative of the equal protection clause in the constitution.

Issue:
Is the contention meritorious?

Ruling:

No. uniformity of taxation, like the hindered concept of equal protection, merely require
that all subjects or objects of taxation similarly situated are to be treated alike both privileges
and liabilities. Uniformity, does not offend classification as long as it rest on substantial
distinctions, it is germane to the purpose of the law. It is not limited to existing only and must apply
equally to all members of the same class.

The legislative intent is to increasingly shift the income tax system towards the
scheduled approach in taxation of individual taxpayers and maintain the present global treatment on
taxable corporations. This classification is neither arbitrary nor inappropriate.

Silvestre M. Punzalan et.al. Vs. Municipal Board of the City of ManilaFacts

-This case is filed in the CFI of Manila by 2 lawyers, medical practitioner, CPA,
dental surgeon andpharmacist.-They filed this in their and other professional's
behalf.-The object of the suit is their aim to nullify Ordinance No. 3398 of City
of Manila, the charterauthorizing it and the refund of the taxes they paid unr
protest.-Ordinance No. 3398 was approved by the municipal board of the City of
Manila on July 25, 1950. Itimposes municipal occupation tax on persons exercising
various professions in the city and penalizes itsnon payment Note:penalty is fine
and/or imprisonment of not more than 6 mo)-Tax amount should not exceed
P50/annum.-After the said professionals paid their occupation tax under Section
201 of the National InternalRevenue Code, they paid the tax in the said ordinance
under protest.-Lower court upheld the validity of law authorizing it but nullify the
ordinance because penalty in thesaid ordinance has no legal basis.

Issue
Whether or not the ruling of lower court is correct.

Held

-Yes, the lower court erred in saying that the imposing ordinance must be nullified
because penalty insaid ordinance has no legal basis.-Manila Charter Sec 18
provides that penalties for violation of ordinances shall not exceed P2000.00
fineor 6 mo. imprisonment or both for one single offense.-As to the professionals'
claim that the ordinance is unjust and oppressive because it createsdiscrimination
within a class in the sense that the professionals with Manila offices pay more
taxes, SCruled that:1. Since Manila is the seat of the National Government and
with a population and voluminous amount oftrade compared to other Philippine city
or municipality, it can be assumed that it offers a more lucrativefield for
professionals. Therefore, it is only fair that professionals in Manila shall pay
higher occupationtax.2. The contention of the professionals that professionals
with Manila offices have to pay tax butoutsiders who have no office in the city but
practice their profession are subject to tax is not found inthe Ordinance.3. Finally,
this case cannot be tantamount to double taxation since the first tax was imposed
by the Statewhile the second tax was imposed by a city.

Ruling

Judgment is reversed. Ordinance No. 3398 is valid. Costs against the professionals
who were theplaintiffs-appellants in this case.

Gaston vs. Republic Planter

, 158 SCRA 626
Facts:
Petitioners are sugar producers and planters and millers filed aMANDAMUS to
implement the privatization of Republic Planters Bank, and for thetransfer of the shares
in the government bank to sugar producers and planters.(because they are allegedly
the true beneficial owners of the bank since they pay P1.00per picul of sugar from the
proceeds of sugar producers as STABILIZATION FEES).The shares are currently held
by Philsucom / Sugar Regulatory Admin.

The Solgen countered that the stabilization fees are considered governmentfunds and
that the transfer of shares to from Philsucom to the sugar producers would beirregular.
Issues
: What is the nature of the P1.00 stabilization fees collected from sugar producers? Are
they funds held in trust for them, or are they public funds? Are theshares in the bank
(paid using these fees) owned by the government Philsucom or privately by the different
sugar planters from whom such fees were collected?
RULING:
PUBLIC FUNDS. While it is true that the collected fees were usedto buy shares in RPB,
it did not collect said fees for the account of sugar producers. Thestabilization fees were
charged on sugar produced and milled which ACCRUED TOPHILSUCOM, under PD
338.The fees collected ARE IN THE NATURE OF A TAX., which is within the power of
the state to impose FOR THE PROMOTION OF THE SUGAR INDUSTRY.
Theyconstitute sugar liens. The collections accrue to a SPECIAL FUNDS. It is levied
notpurely for taxation, but for regulation, to provide means TO STABILIZE THE
SUGARINDUSTRY. The levy is primarily an exercise of police powers.The fact that the
State has taken money pursuant to law is sufficient to constitutethem as STATE
FUNDS, even though held for a special purpose. Having been leviedfor a special
purpose, the revenues are treated as a special fund, administered in trustfor the
purpose intended. Once the purpose has been fulfilled or abandoned, thebalance will be
transferred to the general funds of g
ov’t.
It is a special fund since the funds are deposited in PNB, not in the NationalTreasury.
The sugar planters are NOT BENEFICIAL OWNERS. The money is collectedfrom them
only because they it is also they who are to be benefited from theexpenditure of funds
derived from it. The investing of the funds in RPB is not alien to thepurpose since the
Bank is a commodity bank for sugar, conceived for the sugar
industry’ growth and development.
Revenues derived from taxes cannot be used purely for private purposes or for the
exclusive benefit of private persons. The Stabilization Fund is to be utilized for
thebenefit of the ENTIRE SUGAR INDUSTRY, and all its components, stabilization
of domestic and foreign markets, since the sugar industry is of vital importance to the
country’s economy and national interest.
Facts:With the passage of Republic Act No. (RA) 9337, the Philippine Amusement
and Gaming Corporation(PAGCOR) has been excluded from the list of government-
owned and
–
controlled corporations (GOCCs) thatare exempt from tax under Section27(c) of the Tax
Code; PAGCOR is now subject to corporate income tax.The Supreme Court (SC) held
that the omission of PAGCOR from the list of tax-exempt GOCCs by RA 9337does not
violate the right to equal protection of the laws under Section 1, Article III of the
Constitution,because
PAGCOR’s exemption from
payment of corporate income tax was not based on classification showingsubstantial
distinctions; rather, it was granted
upon the corporation’s own
request to be exempted fromcorporate income tax. Legislative records likewise reveal
that the legislative intention is to require PAGCOR topay corporate income tax.With
regard to the issue that the removal of PAGCOR from the exempted list violates the
non-impairmentclause contained in Section 10, Article III of the Constitution
—
which provides that no law impairing theobligation of contracts shall be passed
—
the SC explained that following its previous ruling in the caseof Manila Electric
Company v. Province of Laguna 366 Phil. 428(1999), this does not apply.Franchises
such as that granted to PAGCOR partake of the nature of a grant, and is thus beyond
the purview ofthe non-impairment clause of the Constitution.As regards the liability
of PAGCOR to VAT, the SC finds Section 4.108-3 of Revenue Regulations No. (RR) 16-
2005, which subjects PAGCOR and its licensees and franchisees to VAT, null and void
for being contrary to theNational Internal Revenue Code (NIRC), as amended by RA
9337. According to the SC, RA 9337 does notcontainanyprovisionthatsubjectsPAGCORtoVAT.
Instead,theSCfindssupporttotheVATexemptionofPAGCOR under Section 109(k) of the Tax
Code, which provides that transactions exempt under internationalagreements to which
the Philippines is a signatory or under special laws [except Presidential Decree No.
(PD)
529] are exempt from VAT. Considering that PAGCOR’s charter, i.e., PD1869 —
which grants PAGCORexemption from taxes
—
is a special law, it is exempt from payment of VAT.

https://www.scribd.com/doc/235083212/Pagcor-vs-Bir-Digest
Case Digest: Lung Center of the Philippines
vs. Quezon City and Constantino Rosas
G.R. No. 144104 June 29, 2004

FACTS:

The Petitioner is a non-stock, non-profit entity which owns a parcel of land in Quezon City. Erected in the
middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. The ground floor is being
leased to a canteen, medical professionals whom use the same as their private clinics, as well as to other private
parties. The right portion of the lot is being leased for commercial purposes to the Elliptical Orchids and
Garden Center. The petitioner accepts paying and non-paying patients. It also renders medical services to out-
patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives
annual subsidies from the government.

Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5 million, predicating its
claim as a charitable institution. The city assessor denied the Claim. When appealed to the QC-Local Board of
Assessment, the same was dismissed. The decision of the QC-LBAA was affirmed by the Central Board of
Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are used exclusively for charity.

ISSUE:

Whether or not the Petitioner is entitled to exemption from realty taxes notwithstanding the fact that it admits
paying clients and leases out a portion of its property for commercial purposes.

HELD:

The Court held that the petitioner is indeed a charitable institution based on its charter and articles of
incorporation. As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-patient or confined
in the hospital, or receives subsidies from the government, so long as the money received is devoted or used
altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of
the persons managing or operating the institution.

http://reenfab.blogspot.com/2014/04/case-digest-lung-center-of-philippines.html
Despite this, the Court held that the portions of real property that are leased to private entities are not exempt
from real property taxes as these are not actually, directly and exclusively used for charitable purposes.
(strictissimi juris) Moreover, P.D. No. 1823 only speaks of tax exemptions as regards to:

 income and gift taxes for all donations, contributions, endowments and equipment and supplies to
be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the
Philippines for the actual use and benefit of the Lung Center; and
 taxes, charges and fees imposed by the Government or any political subdivision or instrumentality
thereof with respect to equipment purchases (expression unius est exclusion alterius/expressium facit
cessare tacitum).

NATIONAL POWER CORPORATION vs. PROVINCE OF QUEZON - Real Property

Tax

FACTS:
NPC is a GOCC that entered into an Energy Conversion Agreement (ECA) under a build-
operate-transfer (BOT) arrangement with Mirant Pagbilao Corp. Under the agreement, Mirant
will build and finance a thermal power plant in Quezon, and operate and maintain the same for
25 years, after which, Mirant will transfer the power plant to the Respondent without
compensation. NPC also undertook to pay all taxes that the government may impose on Mirant.
Quezon then assessed Mirant real property taxes on the power plant and its machineries.

ISSUES:
(1) Can Petitioner file the protest against the real property tax assessment?
(2) Can Petitioner claim exemption from the RPT given the BOT arrangement with Mirant?
(3) Is payment under protest required before an appeal to the LBAA is made?

HELD:
(1) NO. The two entities vested with personality to contest an assessment are (a) the owner or
(b) the person with legal interest in the property. NPC is neither the owner nor the
possessor/user of the subject machineries even if it will acquire ownership of the plant at the
end of 25 years. The Court said that legal interest should be an interest that is actual and
material, direct and immediate, not simply contingent or expectant. While the Petitioner does
indeed assume responsibility for the taxes due on the power plant and its machineries, the tax
liability referred to is the liability arising from law that the local government unit can rightfully and
successfully enforce, not the contractual liability that is enforceable between the parties to a
contract. The local government units can neither be compelled to recognize the protest of a tax
assessment from the Petitioner, an entity against whom it cannot enforce the tax liability.

(2) NO. To successfully claim exemption under Section 234 (c) of the LGC, the claimant must
prove two elements: a) the machineries and equipment are actually, directly, and exclusively
used by local water districts and government-owned or controlled corporations; and b) the local
water districts and government-owned and controlled corporations claiming exemption must be
engaged in the supply and distribution of water and/or the generation and transmission of
electric power. Since neither the Petitioner nor Mirant satisfies both requirements, the claim for
exemption must fall.

(3) YES. If a taxpayer disputes the reasonableness of an increase in a real property tax
assessment, he is required to "first pay the tax" under protest. The case of Ty does not apply as
it involved a situation where the taxpayer was questioning the very authority and power of the
assessor, acting solely and independently, to impose the assessment and of the treasurer to
collect the tax. A claim for tax exemption, whether full or partial, does not question the authority
of local assessors to assess real property tax.
http://www.batasnatin.com/law-library/taxation-law/real-property/1925-national-power-
corporation-vs-province-of-quezon-real-property-tax.html
COCOFED vs Republic
https://www.scribd.com/doc/103104329/9/COCOFED-vs-Republic-GR-Nos-177857-58-January-
24-2012

http://docslide.us/documents/9-cocofed-vs-republic.html

Purpose must be Public in Nature

Taxes are imposed only for a public purpose. The Fund in particular was createdfor the
protection of the entire coconut industry, and more importantly for the consumingpublic.
It was created not especially for the coconut farmers but for the entire coconutindustry,
albeit the improvement of the industry would doubtless redound to the benefitof the
farmers.Thus, the SC cannot allow the conversion of special funds into a private fund
for
the benefit of private individuals. Under Art. VI, Section 29 (3), ―
All money collected onany tax levied for a special purpose shall be treated as a special
fund and paid out for such purpose only. If the purpose for which a special fund was
created has beenfulfilled or abandoned, the balance, if any, shall be transferred to the
general funds of
the Government.‖
The SC ruled that the fact that the coconut levy funds were collected from thepersons
or entities in the coconut industry, among others, does not and cannot entitlethem to be
beneficial owners of the subject funds
–
or more bluntly, owners thereof intheir private capacity. Said private individuals i.e. the
farmers cannot own the UCPBshares of stocks so purchased using the said special
funds of the Government