1) VERA v. FERNANDEZ GR No.

L-31364 March 30, 1979 89 SCRA 199

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 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.

2) PAL VS EDU G.R. No. L-41383, August 15, 1988 164 SCRA 320
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
since1956. The Land Registration Commissioner required all tax exempt entities including
PAL to pay motor vehicle registration fees.
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
everyone’s 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 where its tax
exemption in the franchise was repealed.
3) TIO v. VRB GR No. L-75697, June 18, 1987, 151 SCRA 208
"The public purpose of a tax may legally exist even if the motive which impelled
the legislature to impose the tax was to favor one industry over another."
FACTS:
The petitioner assails the validity of PD 1987 entitled an "Act creating the Videogram
Regulatory Board," citing especially Section 10 thereof, which imposes a tax of 30% on
the gross receipts payable to the local government. Petitioner contends that aside from
its being a rider and not germane to the subject matter thereof, and such imposition was
being harsh, confiscatory, oppressive and/or unlawfully restraints trade in violation of the
due process clause of the Constitution.
ISSUE:
Whether or not PD 1987 is a valid exercise of taxing power of the state?
HELD:
Yes. It is beyond serious question that a tax does not cease to be valid merely
because it regulates, discourages, or even definitely deters the activities taxed. The
power to impose taxes is one so unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to any restrictions whatever, except
such as those rest in the discretion of the authority which exercises it. In imposing a tax,
the legislature acts upon its constituents. This is, in general, a sufficient security against
erroneous and oppressive taxation. The levy of the 30% tax is for a public purpose. It
was imposed primarily to answer the need for regulating the video industry, particularly
because of the rampant film piracy, the flagrant violation of intellectual property rights,
and the proliferation of pornographic video tapes. And while it was also an objective of
the DECREE to protect the movie industry, the tax remains a valid imposition. The
public purpose of a tax may legally exist even if the motive which impelled the legislature
to impose the tax was to favor one industry over another.

4) CALTEX v. CIR 208 SCRA 755 GR 92585, 8 May 1992

Facts:
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil
Price Stabilization Fund (OPSF), excluding that unremitted for 1986 and 188 of the
additional tax on petroleum products authorized under Section 8 of PD 1956; and that
pending such remittance, all its claims for reimbursement from the OPSF shall be held in
abeyance. Caltex requested COA, notwithstanding an early release of its reimbursement
certificates from the OPSF, which COA denied. On 31 May 1989, Caltex submitted a
proposal to COA for the payment and the recovery of claims. COA approved the proposal
but prohibited Caltex from further offseting remittances and reimbursements for the
current and ensuing years. Caltex moved for reconsideration.
Issue:
Whether the amounts due from Caltex to the OPSF may be offsetted against
Caltex’ outstanding claims from said funds?
Held:
Taxation is no longer envisioned as a measure merely to raise revenue to support
the existence of government; taxes may be levied with a regulatory purpose to provide
means for the rehabilitation and stabilization of a threatened industry which is affected
with public interest as to be within the police power of the state. PD 1956, as amended
by EO 137, explicitly provides that the source of OPSF is taxation. A taxpayer may not
offset taxes due from the claims that he may have against the government. Taxes cannot
be the subject of compensation because the government and taxpayer are not mutually
creditors and debtors of each other and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.

5) COMMISSIONER v. ALGUE, INC. GR No. L-28896, February 17, 1988 158 SCRA
9 (NOTE: IMPORTANT DAW SABI NI SIR)
FACTS:
Private respondent corporation Algue, Inc. filed its income tax returns for 1958 and
1959 showing deductions, for promotional fees paid, from their gross income, thus
lowering their taxable income. The BIR assessed Algue based on such deductions
contending that the claimed deduction is disallowed because it was not an ordinary,
reasonable and necessary expense.
ISSUE:
Should an uncommon business expense be disallowed as a proper deduction in
computation of income taxes, corollary to the doctrine that taxes are the lifeblood of the
government?
HELD:
No. Private respondent has proved that the payment of the fees was necessary
and reasonable in the light of the efforts exerted by the payees in inducing investors and
prominent businessmen to venture in an experimental enterprise and involve themselves
in a new business requiring millions of pesos. This was no mean feat and should be, as
it was, sufficiently recompensed. It is well-settled that taxes are the lifeblood of the
government and so should be collected without unnecessary hindrance On the other
hand, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so that the real
purpose of taxation, which is the promotion of the common good, may be achieved. But
even as we concede the inevitability and indispensability of taxation, it is a requirement
in all democratic regimes that it be exercised reasonably and in accordance with the
prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts
will then come to his succor. For all the awesome power of the tax collector, he may still
be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has
not been observed.

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

FACTS:
Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the
eldest of whom is Atty. Manuel Pineda. Estate proceedings were had in Court so that the
estate was divided among and awarded to the heirs. Atty Pineda's share amounted to
about P2,500.00. After the estate proceedings were closed, the BIR investigated the
income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found
that the corresponding income tax returns were not filed. Thereupon, the representative
of the Collector of Internal Revenue filed said returns for the estate issued an assessment
and charged the full amount to the inheritance due to Atty. Pineda who argued that he is
liable only to extent of his proportional share in the inheritance.
ISSUE:
Can BIR collect the full amount of estate taxes from an heir's inheritance.
HELD:
Yes. The Government can require Atty. Pineda to pay the full amount of the taxes
assessed. The reason is that the Government has a lien on the P2,500.00 received by
him from the estate as his share in the inheritance, for unpaid income taxes for which said
estate is liable. By virtue of such lien, the Government has the right to subject the property
in Pineda's possession to satisfy the income tax assessment. After such payment, Pineda
will have a right of contribution from his co-heirs, to achieve an adjustment of the proper
share of each heir in the distributable estate. All told, the Government has two ways of
collecting the tax in question. One, by going after all the heirs and collecting from each
one of them the amount of the tax proportionate to the inheritance received; and second,
is by subjecting said property of the estate which is in the hands of an heir or transferee
to the payment of the tax due. This second remedy is the very avenue the Government
took in this case to collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the most
expeditious way to collect the tax as may be envisioned in the particular provision of the
Tax Code above quoted, because taxes are the lifeblood of government and their prompt
and certain availability is an imperious need.
7) CIR v. CA, CITY TRUST BANKING CORP. GR No. 86785, November 21, 1991
234 SCRA 348
FACTS:
Respondent corporation Citytrust filed a refund of overpaid taxes with the BIR by
which the latter denied on the ground of prescription. Citytrust filed a petition for review
before the CTA. The case was submitted for decision based solely on the pleadings and
evidence submitted by the respondent because the CIR could not present any evidence
by reason of the repeated failure of the Tax Credit/Refud Division of the BIR to transmit
the records of the case, as well as the investigation report thereon, to the Solicitor
General. CTA rendered the decision ordering BIR to grant the respondent's request for
tax refund amounting to P 13.3 million.
ISSUE:
Failure of the CIR to present evidence to support the case of the government,
should the respondent's claim be granted?
HELD:
Not yet. It is a long and firmly settled rule of law that the Government is not bound
by the errors committed by its agents. In the performance of its governmental functions,
the State cannot be estopped by the neglect of its agent and officers. Although the
Government may generally be estopped through the affirmative acts of public officers
acting within their authority, their neglect or omission of public duties as exemplified in
this case will not and should not produce that effect. Nowhere is the afore stated rule
more true than in the field of taxation. It is axiomatic that the Government cannot and
must not be estopped particularly in matters involving taxes. Taxes are the lifeblood of
the nation through which the government agencies continue to operate and with which
the State effects its functions for the welfare of its constituents. The errors of certain
administrative officers should never be allowed to jeopardize the Government's financial
position, especially in the case at bar where the amount involves millions of pesos the
collection whereof, if justified, stands to be prejudiced just because of bureaucratic
lethargy. Thus, it is proper that the case be remanded back to the CTA for further
proceedings and reception of evidence

8) PHIL. GUARANTY CO., INC. v. CIR GR No. L-22074, April 30, 1965 13 SCRA 775
FACTS:
The petitioner Philippine Guaranty Co., Inc., a domestic insurance company,
entered into reinsurance contracts with foreign insurance companies not doing business
in the country, thereby ceding to foreign reinsurers a portion of the premiums on insurance
it has originally underwritten in the Philippines. The premiums paid by such companies
were excluded by the petitioner from its gross income when it filed its income tax returns
for 1953 and 1954. Furthermore, it did not withhold or pay tax on them. Consequently,
the CIR assessed against the petitioner withholding taxes on the ceded reinsurance
premiums to which the latter protested the assessment on the ground that the premiums
are not subject to tax for the premiums did not constitute income from sources within the
Philippines because the foreign reinsurers did not engage in business in the Philippines,
and CIR's previous rulings did not require insurance companies to withhold income tax
due from foreign companies.
ISSUE:
Are insurance companies not required to withhold tax on reinsurance premiums
ceded to foreign insurance companies, which deprives the government from collecting
the tax due from them?
HELD:
No. The power to tax is an attribute of sovereignty. It is a power emanating from
necessity. It is a necessary burden to preserve the State's sovereignty and a means to
give the citizenry an army to resist an aggression, a navy to defend its shores from
invasion, a corps of civil servants to serve, public improvement designed for the
enjoyment of the citizenry and those which come within the State's territory, and facilities
and protection which a government is supposed to provide. Considering that the
reinsurance premiums in question were afforded protection by the government and the
recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such
reinsurance premiums and reinsurers should share the burden of maintaining the state.
 The petitioner's defense of reliance of good faith on rulings of the CIR requiring no
withholding of tax due on reinsurance premiums may free the taxpayer from the payment
of surcharges or penalties imposed for failure to pay the corresponding withholding tax,
but it certainly would not exculpate it from liability to pay such withholding tax. The
Government is not estopped from collecting taxes by the mistakes or errors of its agents

9) ANTERO M. SISON, JR., petitioner, vs. RUBEN B. ANCHETA, et al. G.R. No. L-
59431 July 25, 1984 160 SCRA 654 (IMPORTANT DAW SABI NI SIR)
Facts:
Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision
(Section 1) unduly discriminated against him by the imposition of higher rates upon his
income as a professional, that it amounts to class legislation, and that it transgresses
against the equal protection and due process clauses of the Constitution as well as the
rule requiring uniformity in taxation.
Issue:
Whether BP 135 violates the due process and equal protection clauses, and the
rule on uniformity in taxation?
Held:
There is a need for proof of such persuasive character as would lead to a
conclusion that there was a violation of the due process and equal protection clauses.
Absent such showing, the presumption of validity must prevail. Equality and uniformity in
taxation means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate.
The taxing power has the authority to make reasonable and natural classifications
for purposes of taxation. Where the differentiation conforms to the practical dictates of
justice and equity, similar to the standards of equal protection, it is not discriminatory
within the meaning of the clause and is therefore uniform.
Taxpayers may be classified into different categories, such as recipients of
compensation income as against professionals. Recipients of compensation income are
not entitled to make deductions for income tax purposes as there is no practically no
overhead expense, while professionals and businessmen have no uniform costs or
expenses necessary to produce their income. There is ample justification to adopt the
gross system of income taxation to compensation income, while continuing the system of
net income taxation as regards professional and business income.

10) LUTZ v. ARANETA GR No. L-7859, December 22, 1955 98 PHIL 148
(IMPORTANT SABI NI SIR)
FACTS:
Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate
of Antionio Ledesma, sought to recover from the CIR the sum of P14,666.40 paid by the
estate as taxes, under section 3 of the CA 567 or the Sugar Adjustment Act thereby
assailing its constitutionality, for it provided for an increase of the existing tax on the
manufacture of sugar, alleging that such enactment is not being levied for a public
purpose but solely and exclusively for the aid and support of the sugar industry thus
making it void and unconstitutional. The sugar industry situation at the time of the
enactment was in an imminent threat of loss and needed to be stabilized by imposition of
emergency measures.
ISSUE:
Is CA 567 constitutional, despite its being allegedly violative of the equal protection
clause, the purpose of which is not for the benefit of the general public but for the
rehabilitation only of the sugar industry?
HELD:
Yes. The protection and promotion of the sugar industry is a matter of public
concern, it follows that the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative
discretion must be allowed to fully play, subject only to the test of reasonableness; and it
is not contended that the means provided in the law bear no relation to the objective
pursued or are oppressive in character. If objective and methods are alike constitutionally
valid, no reason is seen why the state may not levy taxes to raise funds for their
prosecution and attainment. Taxation may be made the implement of the state's police
power.

11) Francia vs. Intermediate Appellate Court GR L-67649, 28 June 1988

Facts:
Engracio Francia was the registered owner of a house and lot located in Pasay
City. A portion of such property was expropriated by the Republic of the Philippines in
1977. It appeared that Francia did not pay his real estate taxes from 1963 to 1977. Thus,
his property was sold in a public auction by the City Treasurer of Pasay City.
Issue:
Whether the expropriation payment may compensate for the real estate taxes due?
Held:
There can be no off-setting of taxes against the claims that the taxpayer may have
against the government. A person cannot refuse to pay a tax on the ground that the
government owes him an amount equal to or greater than the tax being collected. The
collection of a tax cannot await the results of a lawsuit against the government. Internal
revenue taxes cannot be the subject of compensation. The Government and the taxpayer
are not mutually creditors and debtors of each other under Article 1278 of the Civil Code
and a claim of taxes is not such a debt, demand, contract or judgment as is allowed to be
set-off.

12) PHILEX MINING CORP. v. CIR GR No. 125704, August 28, 1998 294 SCRA 687
(Important daw sabi ni sir)
FACTS:
Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming
the Court of Tax Appeals decision ordering it to pay the amount of P110.7 M as excise
tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus
20% annual interest from 1994 until fully paid pursuant to Sections 248 and 249 of the
Tax Code of 1977. Philex protested the demand for payment of the tax liabilities stating
that it has pending claims for VAT input credit/refund for the taxes it paid for the years
1989 to 1991 in the amount of P120 M plus interest. Therefore these claims for tax
credit/refund should be applied against the tax liabilities.
ISSUE:
Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund
of the petitioner?
HELD:
No. Philex's claim is an outright disregard of the basic principle in tax law that taxes
are the lifeblood of the government and so should be collected without unnecessary
hindrance. Evidently, to countenance Philex's whimsical reason would render ineffective
our tax collection system. Too simplistic, it finds no support in law or in jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on
the ground that it has a pending tax claim for refund or credit against the government
which has not yet been granted. Taxes cannot be subject to compensation for the simple
reason that the government and the taxpayer are not creditors and debtors of each other.
There is a material distinction between a tax and debt. Debts are due to the Government
in its corporate capacity, while taxes are due to the Government in its sovereign capacity.
xxx There can be no off-setting of taxes against the claims that the taxpayer may have
against the government. A person cannot refuse to pay a tax on the ground that the
government owes him an amount equal to or greater than the tax being collected. The
collection of a tax cannot await the results of a lawsuit against the government.
 13) Rep vs Erecta 173 SCRA 623 (important daw sabi ni sir)
The SC allowed taxes due from the taxpayer to be considered paid through the
delivery of certificates of indebtedness.
It held that: "In effect, while judgment shall be rendered in favour of the Republic
against Sampaguita for unpaid taxes, judgment ought at the same time issue for
Sampaguita commanding payment to it by the Republic of the same sum representing
the face value of the certificate of indebtedness assigned to it and for recovery of which
it had specifically prayed in its counterclaim."
14) Panhandle vs Mississippi US 218 (1928),
Butler (J)
Facts:
The laws of Mississippi provided that “any person engaged in the business of
distributor of gasoline, or retail dealer in gasoline, shall pay an excise tax for the privilege
of engaging in such business,” except that sold in interstate commerce or puchased
outside the state and brought in by the consumer for his own use. Since 1925, Panhandle
Oil Co. has been engaged in such business. Subsequently, the State sued to recover
taxes claimed on account of sales made by the company to the United States for the use
of its Coast Guard fleet in service in the Gulf of Mexico and its Veteran’s Hospital at
Gulfport. The company defended on the ground that Mississippi statutes relevant to the
case, if construed to impose taxes on such sales, are repugnant to the federal
constitution.
Issue:
Whether Panhandle Oil Co. is liable for the excise tax imposed by the State of
Mississippi.
Held:
The United States is empowered by the Constitution to maintain and operate the
fleet and the hospital. Authorization and laws enacted pursuant to the Constitution are
supreme, and in case of conflict, control state enactments. The States may not burden or
interfere with the exertion of national power, or make it a source of revenue or take the
funds raised or tax the means for the performance of federal functions. While the State of
Mississippi may impose charges upon the company for the privilege of carrying trade that
is subject to the power of the State, it may not lay any tax upon transactions by which the
United States secures the things desired for its governmental purposes. The necessary
operation of the statutes when so construed is directly to retard, impede, and burden the
exertion by the United States of its constitutional powers to operate the fleet and the
hospital. The exactions demanded infringe upon the right to have the Constitutional
independence of the United States, in respect to such purchases, remain untrammeled.
Panhandle Oil Co. is, thus, not liable for the taxes claimed.
[Note: It is not in the main body or decision, but in the dissenting opinion of Justice Holmes
that the following doctrine was enunciated:
“... (The Court), so often has defeated the attempt to tax in certain ways, can defeat
an attempt to discriminate or otherwise go too far without wholly abolishing the power to
tax. The power to tax is not the power to destroy while this Court sits. The power to fix
rates is the power to destroy if unlimited, but this Court while it endeavors to prevent
confiscation does not prevent the fixing of rates. A tax is not an unconstitutional regulation
in every case where an absolute prohibition of sales would be one.”]

15) Roxas y Cia vs CTA 23 SCRA 276

Facts:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their
grandchildren by hereditary succession several properties. To manage the above-
mentioned roperties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose
Roxas, formed a partnership called Roxas y Compania. At the conclusion of the WW2,
the tenants who have all been tilling the lands in Nasugbu for generations expressed their
desire to purchase from Roxas y Cia. the parcels which they actually occupied. For its
part, the Government, in consonance with the constitutional mandate to acquire big
landed estates and apportion them among landless tenants’ farmers, persuaded the
Roxas brothers to part with their landholdings. Conferences were held with the farmers in
the early part of 1948 and finally the Roxas brothers agreed to sell 13,500 hectares to the
Government for distribution to actual occupants for a price of P2,079,048.47 plus
P300,000.00 for survey and subdivision expenses. It turned out however that the
Government did not have funds to cover the purchase price, and so a special
arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas
y Cia. the amount of P1,500,000.00 as loan. Collateral for such loan were the lands
proposed to be sold to the farmers. Under the arrangement, Roxas y Cia. allowed the
farmers to buy the lands for the same price but by installment, and contracted with the
Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly
amortizations paid by the farmers. The CIR demanded from Roxas y Cia the payment
of deficiency income taxes resulting from the inclusion as income of Roxas y Cia. of the
unreported 50% of the net profits for 1953 and 1955 derived from the sale of the Nasugbu
farm lands to the tenants, and the disallowance of deductions from grossincome of
various business expenses and contributions claimed by Roxas y Cia. and the Roxas
brothers. For the reason that Roxas y Cia. subdivided its Nasugbu farm lands and sold
them to the farmers on installment, the Commissioner considered the partnership as
engaged in the business of real estate, hence,100% of the profits derived therefrom was
taxed. The Roxas brothers protested the assessment but in as much as said protest was
denied, they instituted an appeal in the CTA which sustained the assessment. Hence, this
appeal.
Issue:
Is Roxas y Cia. liable for the payment of deficiency income for the sale of Nasugbu
farmlands?
Ruling:
NO. The proposition of the CIR cannot be favorably accepted in this isolated
transaction with its peculiar circumstances in spite of the fact that there were hundreds of
vendees. Although they paid for their respective holdings in installment for a period of 10
years, it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during
the 10-year amortization period. It should be borne in mind that the sale of the Nasugbu
farm lands to the very farmers who tilled them for generations was not only inconsonance
with, but more in obedience to the request and pursuant to the policy of our Government
to allocate lands to the landless. It was the bounden duty of the Government to pay the
agreed compensation after it had persuaded Roxas y Cia. to sell its haciendas, and to
subsequently subdivide them among the farmers at very reasonable terms and prices.
However, the Government could not comply with its duty for lack of funds. Obligingly,
Roxas y Cia. shouldered the Government's burden, went out of its way and sold lands
directly to the farmers in the same way and under the same terms as would have been
the case had the Government done it itself. For this magnanimous act, the municipal
council of Nasugbu passed a resolution expressing the people's gratitude. In fine, Roxas
y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant
to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the
gain derived from the sale thereof is capital gain, taxable only to the extent of 50%.

16) 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
administrative convenience. Tax exemptions have never been thought of as raising
revenues under the equal protection clause.
17) Tiu vs CA 301 SCRA 278 (IMPORTANT SABI NI SIR)
The constitutionality and validity of EO 97-A, that provides that the grant and
enjoyment of the tax and duty incentives authorized under RA 7227 were limited to the
business enterprises and residents within the fenced-in area of the Subic Special
Economic Zone (SSEZ), was questioned.
Nature of the case: A petition for review to reverse the decision of the Court of Appeals
which upheld the constitutionality and validity of the E.O. 97-A.
Facts of the case:
The petitioners assail the constitutionality of the said Order claiming that they are
excluded from the benefits provided by RA 7227 without any reasonable standards and
thus violated the equal protection clause of the Constitution. The Court of Appeals upheld
the validity and constitutionality and denied the motion for reconsideration. Hence, this
petition was filed.
Issue: WON E.O. 97-A violates the equal protection clause of the Constitution
Arguments: Petitioners contend that the SSEZ encompasses (1) the City of Olongapo,
(2) the Municipality of Subic in Zambales, and (3) the area formerly occupied by the Subic
Naval Base. However, EO 97-A, according to them, narrowed down the area within which
the special privileges granted to the entire zone would apply to the present “fenced-in
former Subic Naval Base” only. It has thereby excluded the residents of the first two
components of the zone from enjoying the benefits granted by the law. It has effectively
discriminated against them, without reasonable or valid standards, in contravention of the
equal protection guarantee.
The solicitor general defends the validity of EO 97-A, arguing that Section 12 of RA 7227
clearly vests in the President the authority to delineate the metes and bounds of the
SSEZ. He adds that the issuance fully complies with the requirements of a valid
classification.
Decision: Panganiban J., The Court held that the classification was based on valid and
reasonable standards and does not violate the equal protection clause.
The fundamental right of equal protection of the laws is not absolute, but is subject to
reasonable classification. If the groupings are characterized by substantial distinctions
that make real differences, one class may be treated and regulated differently from
another. The classification must also be germane to the purpose of the law and must
apply to all those belonging to the same class.
Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the
purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to
all members of the same class.
Ruling: Petition denied. The challenge decision and resolution were affirmed.

18) Ormoc Sugar vs. Treasurer of Ormoc City GR L-23794, 17 February 1968 22
SCRA 603
Facts:
In 1964, the Municipal Board of Ormoc City passed Ordinance 4, imposing on any
and all productions of centrifuga sugar milled at the Ormoc Sugar Co. Inc. in Ormoc City
a municpal tax equivalent to 1% per export sale to the United States and other foreign
countries. The company paid the said tax under protest. It subsequently filed a case
seeking to invalidate the ordinance for being unconstitutional.
Issue:
Whether the ordinance violates the equal protection clause?
Held:
The Ordinance taxes only centrifugal sugar produced and exported by the Ormoc
Sugar Co. Inc. and none other. At the time of the taxing ordinance’s enacted, the company
was the only sugar central in Ormoc City. The classification, to be reasonable, should be
in terms applicable to future conditions as well. The taxing ordinance should not be
singular and exclusive as to exclude any subsequently established sugar central, of the
same class as the present company, from the coverage of the tax. As it is now, even if
later a similar company is set up, it cannot be subject to the tax because the ordinance
expressly points only to the company as the entity to be levied upon.
19) Abra Valley College vs. Aquino GR L-39086, 15 June 1988 162 SCRA 106
Facts:
Abra Valley College rents out the ground floor of its college building to Northern
Marketing Corporation while the second floor thereof is used by the Director of the College
for residential purposes. The municipal and provincial treasurers served upon the College
a “notice of seizure” and later a “notice of sale” due to the alleged failure of the College
to pay real estate taxes and penalties thereon. The school filed suit to annul said notices,
claiming that it is tax-exempt.
Issue:
Whether or not the tax imposition on the College is violative of the Constitutional
prohibition against taxation of religious, charitable, and educational entities?
Held:
While the Court allows a more liberal and non-restrictive interpretation of the
phrase “exclusively used for educational purposes,” reasonable emphasis has always
been made that exemption extends to facilities which are incidental to and reasonably
necessary for the accomplishment of the main purposes. While the second floor’s use, as
residence of the director, is incidental to education; the lease of the first floor cannot by
any stretch of imagination be considered incidental to the purposes of education. The test
of exemption from taxation is the use of the property for purposes mentioned in the
Constitution.
20) Province of Abra vs Hernando 107 SCRA 104
Fact:

First, there was a denial of a motion to dismiss an action for declaratory relief by
private respondent Roman Catholic Bishop of Bangued desirous of being exempted from
a real estate tax followed by a summary judgment granting such exemption, without even
hearing the side of petitioner, wantonly violated the rights of petitioner to due process, by
giving due course to the petition of private respondent for declaratory relief, and thereafter
without allowing petitioner to answer and without any hearing, adjudged the case; all in
total disregard of basic laws of procedure and basic provisions of due process in the
constitution, thereby indicating a failure to grasp and understand the law, which goes into
the competence of the Honorable Presiding Judge.” It was the submission of counsel that
an action for declaratory relief would be proper only before a breach or violation of any
statute, executive order or regulation. Moreover, there being a tax assessment made by
the Provincial Assessor on the properties of respondent Roman Catholic Bishop,
petitioner failed to exhaust the administrative remedies available under Presidential
Decree No. 464 before filing such court action. Further, it was pointed out to respondent
Judge that he failed to abide by the pertinent provision of such Presidential Decree.

Issue:

Whether Tax exemption is presumed in favor of the claimant?

Held:
 No, Respondent Judge would not have erred so grievously had he merely
compared the provisions of the present Constitution with that appearing in the 1935
Charter on the tax exemption of “lands, buildings, and improvements.” There is a marked
difference. Under the 1935 Constitution: “Cemeteries, churches, and parsonages or
convents appurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious, charitable, or educational purposes shall be exempt from
taxation.” The present Constitution added “charitable institutions, mosques, and non-
profit cemeteries” and required that for the exemption of “:lands, buildings, and
improvements,” they should not only be “exclusively” but also “actually and “directly” used
for religious or charitable purposes. The Constitution is worded differently. The change
should not be ignored. It must be duly taken into consideration. Reliance on past decisions
would have sufficed were the words “actually” as well as “directly” not added. There must
be proof therefore of the actual and direct use of the lands, buildings, and improvements
for religious or charitable purposes to be exempt from taxation. According to
Commissioner of Internal Revenue v. Guerrero: “From 1906, in Catholic Church v.
Hastings to 1966, in Esso Standard Eastern, Inc. v. Acting Commissioner of Customs, it
has been the constant and uniform holding that exemption from taxation is not favored
and is never presumed, so that if granted it must be strictly construed against the
taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an
exempting provision should be construed strictissimi juris.” In Manila Electric Company v.
Vera, a 1975 decision, such principle was reiterated, reference being made to Republic
Flour Mills, Inc. v. Commissioner of Internal Revenue; Commissioner of Customs v.
Philippine Acetylene Co. & CTA; and Davao Light and Power Co., Inc. v. Commissioner
of Customs.