32.

Basco vs PAGCOR (197 SCRA 52) May 14, 1991

Facts:

Petitioner is seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter --
PD 1869, because it is allegedly contrary to morals, public policy and order, and because it constitutes a
waiver of a right prejudicial to a third person with a right recognized by law. It waived the Manila City
government’s right to impose taxes and license fees, which is recognized by law. For the same reason,
the law has intruded into the local government’s right to impose local taxes and license fees. This is in
contravention of the constitutionally enshrined principle of local autonomy.

Issue:

Whether or not Presidential Decree No. 1869 is valid.

Ruling:

1. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Their
charter or statute must plainly show an intent to confer that power, otherwise the municipality cannot
assume it. Its power to tax therefore must always yield to a legislative act which is superior having been
passed upon by the state itself which has the “inherent power to tax.”

The Charter of Manila is subject to control by Congress. It should be stressed that “municipal
corporations are mere creatures of Congress”, which has the power to “create and abolish municipal
corporations” due to its “general legislative powers”. Congress, therefore, has the power of control over
the Local governments. And if Congress can grant the City of Manila the power to tax certain matters, it
can also provide for exemptions or even take back the power.

2. The City of Manila’s power to impose license fees on gambling, has long been revoked by P.D. No. 771
and vested exclusively on the National Government. Therefore, only the National Government has the
power to issue “license or permits” for the operation of gambling.

3. Local governments have no power to tax instrumentalities of the National Government. PAGCOR is
government owned or controlled corporation with an original charter, P.D. No. 1869. All of its shares of
stocks are owned by the National Government. PAGCOR has a dual role, to operate and to regulate
gambling casinos. The latter role is governmental, which places it in the category of an agency or
instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be
and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or
subjected to control by a mere Local Government.

4. Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. No.
1869.

Article 10, Section 5 of the 1987 Constitution:

“Each local government unit shall have the power to create its own source of revenue and to levy taxes,
fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent
with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local
government.”
SC said this is a pointless argument. The power of the local government to “impose taxes and fees” is
always subject to “limitations” which Congress may provide by law. Besides, the principle of local
autonomy under the 1987 Constitution simply means “decentralization.” It does not make local
governments sovereign within the state.

Wherefore, the petition is DISMISSED.

33. PAGCOR vs BIR (645 scra 338) March 15, 2011

Facts:

The Philippine Amusement and Gaming Corporation (PAGCOR) was created by P.D. No. 1067-A in 1977.
Obviously, it is a government owned and controlled corporation (GOCC). In 1998, R.A. 8424 or the
National Internal Revenue Code of 1997 (NIRC) became effective. Section 27 thereof provides that
GOCC’s are NOT EXEMPT from paying income taxation but it exempted the following GOCCs: 1. GSIS 2.
SSS 3. PHILHEALTH 4. PCSO 5. PAGCOR.

But in May 2005, R.A. 9337, a law amending certain provisions of R.A. 8424, was passed. Section 1
thereof excluded PAGCOR from the exempt GOCCs hence PAGCOR was subjected to pay income
taxation. In September 2005, the Bureau of Internal Revenue issued the implementing rules and
regulations (IRR) for R.A. 9337. In the said IRR, it identified PAGCOR as subject to a 10% value added tax
(VAT) upon items covered by Section 108 of the NIRC (Sale of Services and Use or Lease of Properties).
PAGCOR questions the constitutionality of Section 1 of R.A. 9337 as well as the IRR. PAGCOR avers that
the said provision violates the equal protection clause. PAGCOR argues that it is similarly situated with
SSS, GSIS, PCSO, and PHILHEALTH, hence it should not be excluded from the exemption.

ISSUE:

Whether or not PAGCOR should be subjected to income taxation.

HELD:

Yes. Section 1 of R.A. 9337 is constitutional. It was the express intent of Congress to exclude PAGCOR
from the exempt GOCCs hence PAGCOR is now subject to income taxation.

PAGCOR’s contention that the law violated the constitution is not tenable. The equal protection clause
provides that all persons or things similarly situated should be treated alike, both as to rights conferred
and responsibilities imposed.

The general rule is, ALL GOCC’s are subject to income taxation. However, certain classes of GOCC’s may
be exempt from income taxation based on the following requisites for a valid classification under the
principle of equal protection: 1) It must be based on substantial distinctions. 2) It must be germane to
the purposes of the law. 3) It must not be limited to existing conditions only. 4) It must apply equally to
all members of the class. When the Supreme Court looked into the records of the deliberations of the
lawmakers when R.A. 8424 was being drafted, the SC found out that PAGCOR’s exemption was not really
based on substantial distinctions. In fact, the lawmakers merely exempted PAGCOR from income
taxation upon the request of PAGCOR itself. This was changed however when R.A. 9337 was passed and
now PAGCOR is already subject to income taxation. Anent the issue of the imposition of the 10% VAT
against PAGCOR, the BIR had overstepped its authority. Nowhere in R.A. 9337 does it state that PAGCOR
is subject to VAT. Therefore, that portion of the IRR issued by the BIR is void. In fact, Section 109 of R.A.
9337 expressly exempts PAGCOR from VAT. Further, PAGCOR’s charter exempts it from VAT.

To recapitulate, PAGCOR is subject to income taxation but not to VAT.

34. 34. Commissioner of Internal Revenue vs. Metro Star Superama Inc. (637 SCRA 633) December 08,
2010

Facts:

In January 2001, a revenue officer was authorized to examine the books of accounts of Metro Star
Superama, Inc. In April 2002, after the audit review, the revenue district officer issued a formal
assessment notice against Metro Star advising the latter that it is liable to pay P292,874.16 in deficiency
taxes. Metro Star assailed the issuance of the formal assessment notice as it averred that due process
was not observed when it was not issued a pre-assessment notice. Nevertheless, the Commissioner of
Internal Revenue authorized the issuance of a Warrant of Distraint and/or Levy against the properties of
Metro Star.

Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in favor of
Metro Star.

ISSUE: Whether or not due process was observed in the issuance of the formal assessment notice
against Metro Star.

HELD: No. It is true that there is a presumption that the tax assessment was duly issued. However, this
presumption is disregarded if the taxpayer denies ever having received a tax assessment from the
Bureau of Internal Revenue. In such cases, it is incumbent upon the BIR to prove by competent evidence
that such notice was indeed received by the addressee-taxpayer. The onus probandi was shifted to the
BIR to prove by contrary evidence that the Metro Star received the assessment in the due course of
mail. In the case at bar, the CIR merely alleged that Metro Star received the pre-assessment notice in
January 2002. The CIR could have simply presented the registry receipt or the certification from the
postmaster that it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on
why it failed to comply with the requirement of service of the pre-assessment notice. The Supreme
Court emphasized that the sending of a pre-assessment notice is part of the due process requirement in
the issuance of a deficiency tax assessment,” the absence of which renders nugatory any assessment
made by the tax authorities.

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance.
But even so, it is a requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure.
35. Negros Oriental II Electric Cooperative, Inc. vs. Sangguniang Panlungsod of Dumaguete (155 SCRA
421) November 05, 1987

Facts:

In 1985, the Sangguniang Panlungsod (SP) of Dumaguete sought to conduct an investigation in

connection with pending legislation related to the operations of public utilities. Invited in the hearing
were the heads of NORECO II (Negros Oriental II Electric Cooperative, Inc.) – Paterio Torres and Arturo
Umbac. NORECO II is alleged to have installed inefficient power lines in the said city. Torres and Umbac
refused to appear before the SP and they alleged that the power to investigate, and to order the
improvement of, alleged inefficient power lines to conform to standards is lodged exclusively with the
National Electrification Administration (NEA); and neither the Charter of the City of Dumaguete nor the
[old] Local Government Code (Batas Pambansa Blg. 337) grants the SP such power. The SP averred that
inherent in the legislative functions performed by the respondent SP is the power to conduct
investigations in aid of legislation and with it, the power to punish for contempt in inquiries on matters
within its jurisdiction.

ISSUE: Whether or not LGUs can issue contempt.

HELD: No. There is no express provision either in the 1973 Constitution or in the LGC (BP 337) granting
local legislative bodies, the power to subpoena witnesses and the power to punish non-members for
contempt. Absent a constitutional or legal provision for the exercise of these powers, the only possible
justification for the issuance of a subpoena and for the punishment of non-members for contumacious
behavior would be for said power to be deemed implied in the statutory grant of delegated legislative
power. But, the contempt power and the subpoena power partake of a judicial nature. They cannot be
implied in the grant of legislative power. Neither can they exist as mere incidents of the performance of
legislative functions. To allow local legislative bodies or administrative agencies to exercise these powers
without express statutory basis would run afoul of the doctrine of separation of powers. There being no
provision in the LGC explicitly granting local legislative bodies, the power to issue compulsory process
and the power to punish for contempt, the SP of Dumaguete is devoid of power to punish the
petitioners Torres and Umbac for contempt. The Ad Hoc Committee of said legislative body has even
less basis to claim that it can exercise these powers. Even assuming that the SP and the Ad-Hoc
Committee had the power to issue the subpoena and the order complained of, such issuances would
still be void for being ultra vires. The contempt power (and the subpoena power) if actually possessed,
may only be exercised where the subject matter of the investigation is within the jurisdiction of the
legislative body.
36. PEOPLE VS. JALOSJOS (324 SCRA 689) February 3, 2000

FACTS:

Romeo G. Jalosjos is a full-fledged member of Congress who is now confined at the national penitentiary
while his conviction for statutory rape on two counts and acts of lasciviousness on six counts is pending
appeal. Jalosjos, filed a motion asking that he be allowed to fully discharge his duties of a Congressman
including attendance at legislative sessions and committee meetings despite his having convicted in the
first instance including of a non-bailable offense.

Jalosjos argument is the mandate of sovereign will which he states that he was re-elected as
Congressman of First District of ZAmboanga del Norte by his constituents in order that their voices will
be heard and since the accused-appellant is treated as bona fide member of the House of
Representatives, the latter urges co-equal branch of government to respect his mandate.

ISSUE:

Whether or not accused-appellant, Romeo G. Jalosjos, be allowed to discharge his mandate as member
of the House of Representatives.

HELD:

No. The immunity from arrest or detention of Senators or members of the House of Representatives
arises from a provision of the Constitution and shows that this privilege has always been granted in a
restrictive sense. It is true, that election is the expression of the sovereign power of the people.
However, the rights and privileges from being elected as public official may be restricted by law.
Privilege has to be granted by law, not inferred from the duties of a position, the higher the rank the
greater the requirement of obedience rather than exemption.

The accused-appellant Romeo Jalosjos has not given any reason why he should be exempted from the
operation of Section 11 Article 6 of the Constitution. The members of Congress cannot compel absent
members to attend sessions if the reason for the abuse is a legitimate one. The confinement of a
Congressman with a crime punishable with imprisonment by more than (6) six months is not merely
authorized by law, has constitutional foundations. Allowing Jalosjos to attend in Congressional sessions
and meetings for five (5) days in a week which will make him a free man with all the privileges and
would make his status to that of a special class, it also would be a making of the purpose of the
correction system.
37. POBRE vs. DEFENSOR-SANTIAGO (597 SCRA 1) August 25, 2009

FACTS:

Petitioner Antero Pobre made aware to the court the contents of Senator Miriam Defensor-Santiago’s
speech delivered on the senate floor. The following excerpts are the ones in question:

XXX “I am not angry. I am irate. I am foaming in the mouth. I am homicidal. I am humiliated, debase, and
degraded. And I am not only that I feel like throwing up to be living my middle years in a country of this
nature. I am nauseated. I spit on the face of Chief Justice Artemio Panganiban and his cohorts in the
Supreme Court, I am no longer interested in the position (of Chief Justice) if I was to be surrounded by
idiots. I would rather be in another environment but not in the Supreme Court of Idiots. XXX.

According to Pobre, the words of the lady senator were disrespectful and requested that the latter be
disbarred or be subjected to disciplinary action.

Senator Miriam Defensor-Santiago argued that the statements she made were covered by the
constitutional provision on parliamentary immunity, being part of a speech she delivered in the
discharge of her duty as member of Congress or its committee. She claims to have made those
comments to expose anomalies with regard to the selection process of the Judicial Bar Council for the
next Chief Justice.

The argument of the respondent is based on the Article VI Section 11 which states that:

“A Senator or Member of the House of Representative shall, in all offenses punishable by not more than
six years imprisonment, be privileged from arrest while the Congress is in session. No member shall be
questioned nor be held liable in any other place for an speech or debate in the Congress or in any
committee thereof.”

ISSUE:

Whether or not Miriam Defensor-Santiago can be charged for her comments on the Judiciary

HELD:

The Court ruled in favor of Defensor-Santiago in this case. The plea of Senator Santiago for the
dismissal of the complaint for disbarment or disciplinary action is well taken. Indeed, her privilege
speech is not actionable criminally or in a disciplinary proceeding under the Rules of Court.

Despite this, the court feels that the lady senator has gone beyond the limits of decency and
good conduct for the statements made which were intemperate and highly improper in substance. The
court is not hesitant to impose some form of disciplinary sanctions on her, but the factual and legal
circumstances of this case, however, deter the Court from doing so, even without any sign of remorse
from her.

Petition dismissed.
38. Jimenez vs Cabangbang (17 SCRA 876) August 3, 1966

Facts:

On November 14, 1958, defendant Cabangbang published an open letter to thePresident in several
newspapers of general circulation in the Philippines. The publication talkedabout the alleged operational
plans of the then Secretary of National Defense to launch hispresidential career in 1961 elections.
Cabangbang's letter mentioned the names of Nicanor Jimenes and his comrades as subordinates to the
'Planners' behind the alleged operation. Theysued Cabangbang for the crime of libel and sought financial
compensation for the damagescaused by the letter. The defendant moved to dismiss the complaint on
the grounds that theletter was a privileged form of communication and that it was not libellous.

Issue:

Whether the contested publication could be classified as a privileged form of communication under the
provisions of sec. 15, Article VI of the Constitution.

Held:

No. Under the provisions of sec. 15, Article VI of the Constitution, "speech or debate therein" only refers
to the utterances made by Congress members in the performance of their official duties, such as
delivering speeches, making statements, or casting votes in the Congressional hall while the same is in
session. It could also refer to the introduction of bills in Congress, whether it is session or not, and other
acts performed by Congress members in their official capacity whether there was a session or not,
whether inside or outside the premises of one's office.

In the case at bar, the Court ruled that Cabangbang's letter cannot be classified as a privileged form of
communication because it was published during a time when the Congress was not in session.
Moreover, the defendant was not performing his official duty as either a member of Congress when he
intended the letter to be published. Therefore, the open letter was not privileged. Because of these
reasons, Cabangbang's open letter cannot be classified as a privileged form of communication.