G.R. No.
92585 May 8, 1992
CALTEX PHILIPPINES, INC., petitioner,
vs.
THE HONORABLE COMMISSION ON AUDIT,
HONORABLE COMMISSIONER BARTOLOME C.
FERNANDEZ and HONORABLE COMMISSIONER
ALBERTO P. CRUZ, respondents.
Topic: (1) tax vs. ordinary debt, (2) purpose/objective of
taxation: non-revenue / special / regulatory
Ponente: Davide, Jr. J.
DOCTRINE:
A taxpayer may not offset taxes due from the claims that he
may have against the government.
QUICK FACTS: Caltex Philippines questions the decisions
of COA for disallowing the offsetting of its claims for
reimbursement with its due OPSF remittance
FACTS:
The Oil Price Stabilization Fund (OPSF) was created under
Sec. 8, PD 1956, as amended by EO 137 for the purpose of
minimizing frequent price changes brought about by exchange
rate adjustments. It will be used to reimburse the oil
companies for cost increase and possible cost underrecovery
incurred due to reduction of domestic prices.
COA sent a letter to Caltex directing the latter to remit to the
OPSF its collection. Caltex requested COA for an early release
of its reimbursement certificates which the latter denied.
COA disallowed recover of financing charges, inventory
losses and sales to marcopper and atlas but allowed the
recovery of product sale or those arising from export sales.
Petitioner’s Contention:
Department of Finance issued Circular No. 4-88 allowing
reimbursement. Denial of claim for reimbursement would be
inequitable. NCC (compensation) and Sec. 21, Book V, Title I-
B of the Revised Administrative Code (Retention of Money
for Satisfaction of Indebtedness to Government) allows
offsetting.
Amounts due do not arise as a result of taxation since PD 1956
did not create a source of taxation, it instead established a
special fund. This lack of public purpose behind OPSF
exactions distinguishes it from tax.
Respondent’s Contention:
Based on Francia v. IAC, there’s no offsetting of taxes against
the the claims that a taxpayer may have against the
government, as taxes do not arise from contracts or depend
upon the will of the taxpayer, but are imposed by law.
ISSUE: WON Caltex is entitled to offsetting
DECISION: NO. COA AFFIRMED
HELD:
 It is settled that a taxpayer may not offset taxes due
from the claims that he may have against the
government. Taxes cannot be 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.
 Technically, the oil companies merely act as agents
for the Government in the latter’s collection since the
taxes are, in reality, passed unto the end-users – the
consuming public. Their primary obligation is to
account for and remit the taxes collection to the
administrator of the OPSF.
 There is not merit in Caltex’s contention that the
OPSF contributions are not for a public purpose
because they go to a special fund of the government.
Taxation is no longer envisioned as a measure merely
to raise revenue to support the existence of the
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.
 The oil industry is greatly imbued with public interest
as it vitally affects the general welfare.
 PD 1956, as amended by EO No. 137 explicitly
provides that the source of OPSF is taxation.
TIO vs. VIDEOGRAM REGULATORY BOARD
Citation: 151 SCRA 208; G.R. No. L-75697; June 18, 1987
Ponente: Melencio-Herrera, J.
DOCTRINES:
Validity of law; title of bill – The Constitutional requirement
that "every bill shall embrace only one subject which shall be
expressed in the title thereof" is sufficiently complied with if
the title be comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not necessary
that the title express each and every end that the statute wishes
to accomplish. The requirement is satisfied if all the parts of
the statute are related, and are germane to the subject matter
expressed in the title, or as long as they are not inconsistent
with or foreign to the general subject and title.
Taxation; security against oppressive taxation – 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 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.
Taxation as a revenue and regulatory measure – The tax
imposed by the DECREE is not only a regulatory but also a
revenue measure prompted by the realization that earnings of
videogram establishments of around P600 million per annum
have not been subjected to tax, thereby depriving the
Government of an additional source of revenue. . . . The levy
Page 1 of 10
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.
Undue delegation of legislative power – The grant in Section
11 of the DECREE of authority to the BOARD to "solicit the
direct assistance of other agencies and units of the government
and deputize, for a fixed and limited period, the heads or
personnel of such agencies and units to perform enforcement
functions for the Board" is not a delegation of the power to
legislate but merely a conferment of authority or discretion as
to its execution, enforcement, and implementation. "The true
distinction is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall
be, and conferring authority or discretion as to its execution to
be exercised under and in pursuance of the law. The first
cannot be done; to the latter, no valid objection can be made."
Besides, in the very language of the decree, the authority of
the BOARD to solicit such assistance is for a "fixed and
limited period" with the deputized agencies concerned being
"subject to the direction and control of the BOARD." That the
grant of such authority might be the source of graft and
corruption would not stigmatize the DECREE as
unconstitutional. Should the eventuality occur, the aggrieved
parties will not be without adequate remedy in law.
FACTS:
Valentin Tio is a videogram establishment operator adversely
affected by Presidential Decree No. 1987 entitled "An Act
Creating the Videogram Regulatory Board".
P.D. No. 1987 provides for the levy of a tax over each cassette
sold (Sec. 134) and a 30% tax on the gross receipts of a
videogram establishment, payable to the local government
(Sec. 10). The rationale for this decree is set forth in its
preambulatory/whereas clauses to wit:
1. WHEREAS, the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs,
cassettes ... have greatly prejudiced the operations of
moviehouses and theaters, and have caused a sharp decline in
theatrical attendance by at least forty percent (40%) and a
tremendous drop in the collection of [taxes] thereby resulting
in substantial losses estimated at P450 Million annually in
government revenues;
2. WHEREAS, videogram(s) establishments collectively earn
around P600 Million per annum from rentals, sales and
disposition of videograms, and such earnings have not been
subjected to tax, thereby depriving the Government of
approximately P180 Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram
establishments have also affected the viability of the movie
industry, ...;
Page 2 of 10
5. WHEREAS, proper taxation of the activities of videogram
establishments will not only alleviate the dire financial
condition of the movie industry ..., but also provide an
additional source of revenue for the Government, and at the
same time rationalize the heretofore uncontrolled distribution
of videograms;
6. WHEREAS, the rampant and unregulated showing of
obscene videogram features constitutes a clear and present
danger to the moral and spiritual well-being of the youth
[READ: PORN], and impairs the mandate of the Constitution
for the State to support the rearing of the youth for civic
efficiency and the development of moral character and
promote their physical, intellectual, and social well-being;
8. WHEREAS, in the face of these grave emergencies
corroding the moral values of the people [AGAIN, READ:
PORN] and betraying the national economic recovery
program, bold emergency measures must be adopted with
dispatch; (emphasis supplied and certain passages omitted)
ISSUES:
The petioner, among others, raised the following issues:
1. Whether or not the imposition of the 30% tax is a rider and
the same is not germane to the subject matter of the law.
2. Whether or not there is undue delegation of power and
authority; and
HELD:
1. No, the tax is not a rider and is germane to the purpose and
subject of the law.
The Constitutional requirement that "every bill shall embrace
only one subject which shall be expressed in the title thereof"
is sufficiently complied with if the title be comprehensive
enough to include the general purpose which a statute seeks to
achieve. It is not necessary that the title express each and
every end that the statute wishes to accomplish. The
requirement is satisfied if all the parts of the statute are
related, and are germane to the subject matter expressed in the
title, or as long as they are not inconsistent with or foreign to
the general subject and title.
Reading section 10 of P.D. No. 1987 closely, one can see that
the foregoing provision is allied and germane to, and is
reasonably necessary for the accomplishment of, the general
object of the law, which is the regulation of the video industry
through the Videogram Regulatory Board as expressed in its
title. The tax provision is not inconsistent with, nor foreign to
that general subject and title. As a tool for regulation it is
simply one of the regulatory and control mechanisms scattered
throughout the decree.
Aside from revenue collection, tax laws may also be enacted
for the purpose of regulating an activity. At the same time, the
videogram industry is also an untapped source of revenue
which the government may validly tax. All of this is evident
from preambulatory clauses nos. 2, 5, 6 and 8, quoted in part
above.
The levy of the 30% tax is also 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 law to protect the movie industry, the
tax remains a valid imposition.
2. No. There was no undue delegation of law making
authority.
Petitioner was concerned that Section 11 of P.D. No. 1987
stating that the videogram board (Board) has authority to
"solicit the direct assistance of other agencies and units of the
government and deputize, for a fixed and limited period, the
heads or personnel of such agencies and units to perform
enforcement functions for the Board" is an undue delegation
of legislative power.
This is not a delegation of the power to legislate but merely a
conferment of authority or discretion as to its execution,
enforcement, and implementation. "The true distinction is
between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and
conferring authority or discretion as to its execution to be
exercised under and in pursuance of the law. The first cannot
be done; to the latter, no valid objection can be made."
Besides, in the very language of the decree, the authority of
the Board to solicit such assistance is for a "fixed and limited
period" with the deputized agencies concerned being "subject
to the direction and control of the Board."
The petition was DISMISSED.
PEPSI-COLA vs MUNICIPALITY OF TANAUAN G.R.
No. L-31156 February 27, 1976
Facts: The municipality of Tanauan, Leyte enacted two
ordinances in 1962:
The first one, Municipal Ordinance No. 23 levies and collects
"from soft drinks producers and manufacturers a tax of one-
sixteenth (1/16) of a centavo for every bottle of soft drink
corked." For the purpose of computing the taxes due, the
person, firm, company or corporation producing soft drinks
shall submit to the Municipal Treasurer a monthly report, of
the total number of bottles produced and corked during the
month.
Municipal Ordinance No. 27 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 (128 fluid ounces, U.S.) of volume
capacity." For the purpose of computing the taxes due, the
person, firm, company, partnership, corporation or plant
producing soft drinks shall submit to the Municipal Treasurer
a monthly report of the total number of gallons produced or
manufactured during the month.
Pepsi-Cola commenced a complaint with preliminary
injunction before the Court of First Instance of Leyte for that
Page 3 of 10
court to declare Section 2 of the Local Autonomy Act
unconstitutional as an undue delegation of taxing authority as
well as to declare Ordinances Nos. 23 and 27 null and void.
Section 2 of the Local Autonomy Act of 1959 provides: “xxx,
all chartered cities, municipalities and municipal district shall
have authority to impose municipal license taxes or fees upon
persons engaged in any occupation or business, or exercising
privileges in chartered cities, municipalities or municipal
districts xxxx.” Pepsi said both Ordinances Nos. 23 and 27
embrace or cover the same subject matter and the production
tax rates imposed therein are practically the same, and second,
that on January 17, 1963, the acting Municipal Treasurer of
Tanauan, Leyte, as per his letter addressed to the Manager of
the Pepsi-Cola Bottling Plant in said municipality, sought to
enforce compliance by the latter of the provisions of said
Ordinance No. 27 series of 1962.
Issues: 1. — Is Section 2, Republic Act No. 2264 an undue
delegation of power, confiscatory and oppressive and invalid
as double taxation? 2. — Do Ordinances Nos. 23 and 27
constitute double taxation and impose percentage or specific
taxes? 3. — Are Ordinances Nos. 23 and 27 unjust and unfair?
Held: 1. As to undue delegation: The rule is that the power of
taxation is purely legislative and cannot be delegated. The
exception, however, lies in the case of municipal corporations.
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.
Moreover, under the New Constitution, local governments are
granted the autonomous authority to create their own sources
of revenue and to levy taxes. The plenary nature of the taxing
power thus delegated, contrary to plaintiff-appellant's
pretense, would not suffice to invalidate the said law as
confiscatory and oppressive.
As to the ordinances being confiscatory and oppressive: The
taking of property without due process of law may not be
passed over under the guise of taxing power. This is not to say
though that the constitutional injunction against deprivation of
property without due process of law may be passed over under
the guise of the taxing power, except when the taking of the
property is in the lawful exercise of the taxing power, as when
(1) the tax is for a public purpose; (2) the rule on uniformity of
taxation is observed; (3) either the person or property taxed is
within the jurisdiction of the government levying the tax; and
(4) in the assessment and collection of certain kinds of taxes
notice and opportunity for hearing are provided. Due process
does not require that the property subject to the tax or the
amount of tax to be raised should be determined by judicial
inquiry, and a notice and hearing as to the amount of the tax
and the manner in which it shall be apportioned are generally
not necessary to due process of law.
As to the municipal ordinance being invalid on the ground of
double taxation resulting for delegation by the National
Government: There is no validity to the assertion that the
delegated authority can be declared unconstitutional on the
theory of double taxation. It must be observed that the
delegating authority specifies the limitations and enumerates
the taxes over which local taxation may not be exercised.
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.
2. There is no double taxation here. Ordinance No. 23, the first
tax, levies or collects from soft drinks producers or
manufacturers a tax of one-sixteen (1/16) of a centavo for
every bottle corked, irrespective of the volume contents of the
bottle used. When it was discovered that the producer or
manufacturer could increase the volume contents of the bottle
and still pay the same tax rate, the Municipality of Tanauan
enacted Ordinance No. 27 imposing a tax of one centavo
(P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. The difference between the two ordinances clearly
lies in the tax rate of the soft drinks produced: in Ordinance
No. 23, it was 1/16 of a centavo for every bottle corked; in
Ordinance No. 27, it is one centavo (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity.
The intention of the Municipal Council of Tanauan in enacting
Ordinance No. 27 is thus clear: it was intended as a plain
substitute for the prior Ordinance No. 23, and operates as a
repeal of the latter, even without words to that effect.
Moreover, the municipality mentioned in its letter that it was
only seeking to enforce Ordinance No. 27, series of 1962.
[As to the remaining Ordinance No. 27 imposes a percentage
or a specific tax? Undoubtedly, the taxing authority conferred
on local governments under Section 2, Republic Act No. 2264,
is broad enough as to extend to almost "everything, accepting
those which are mentioned therein." As long as the tax levied
under the authority of a city or municipal ordinance is not
within the exceptions and limitations in the law, the same
comes within the ambit of the general rule. The limitation
applies, particularly, to the prohibition against municipalities
and municipal districts to impose "any percentage tax or other
taxes in any form based thereon nor impose taxes on articles
subject to specific tax except gasoline, under the provisions of
the National Internal Revenue Code." For purposes of this
particular limitation, a municipal ordinance which prescribes a
set ratio between the amount of the tax and the volume of sale
of the taxpayer imposes a sales tax and is null and void for
being outside the power of the municipality to enact.
The imposition of "a tax of one centavo (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity" on all soft drinks
produced or manufactured under Ordinance No. 27 does not
partake of the nature of a percentage tax on sales, or other
taxes in any form based thereon. The tax is levied on the
produce (whether sold or not) and not on the sales. The
volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on
the products, but there is not set ratio between the volume of
sales and the amount of the tax.
Nor can the tax levied on softdrinks be treated as a specific
tax. Specific taxes are those imposed on specified articles,
such as distilled spirits, wines, fermented liquors, products of
tobacco other than cigars and cigarettes, matches firecrackers,
manufactured oils and other fuels, coal, bunker fuel oil, diesel
fuel oil, cinematographic films, playing cards, saccharine,
opium and other habit-forming drugs. Soft drink is not one of
those specified.]
Page 4 of 10
3. The tax of one (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity on all softdrinks, produced or
manufactured, or an equivalent of 1-½ centavos per case is not
unjust and unfair. Municipal corporations are allowed much
discretion in determining the rates of imposable taxes. This is
in line with the constitutional policy of according the widest
possible autonomy to local governments in matters of local
taxation. Unless the amount is so excessive as to be
prohibitive, courts will go slow in writing off an ordinance as
unreasonable.
Association of Small Landowners in the Philippines v.
Honorable Secretary of Agrarian Reform
G.R. No. 78742
July 14, 1989
Ponente: CRUZ, J.
FACTS
 Cases have been consolidated because they involve
common legal questions. They will be subject to one
common discussion and resolution.
G.R. No. 79777:
 The petitioners are Nicolas Manaay and his wife who
own a 9-hectare riceland worked by four tenants and
Augustin Hermano, Jr. who owns a 5-hectare riceland
worked by four tenants. They question the
constitutionality of P.D. No. 27, E.O. Nos. 228 &
229, and R.A. No. 6657 since their tenants were
declared full owners of the mentioned lands.
G.R. No. 79310
 Landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental and Planters’
Committee Inc., with 1400 planter-members,
submitted a petition seeking to prohibit the
implementation of Proc. No. 131 and E.O. No. 229.
 Aug. 27, 1987 – A motion for intervention was filed
by the National Federation of Sugarcane Planters,
which claim 20 000 members). It was granted by the
court.
 Sept. 10, 1987 – A motion for intervention was filed
by Manuel Barcelona, et al., representing coconut
and riceland owners. It was granted by the court.
G.R. No. 79744
 Sept. 3 1986 – The petitioner protested the erroneous
inclusion of his small landholding under Operation
Land Transfer accusing the then Secretary of DAR of
violation of due process and the requirement for just
compensation. Certificates of Land Transfer were
issued to the private respondents who then refused to
pay lease rentals. The petitioner is asking for the
recall and cancellation of these certificates.
 Dec. 24, 1986 – Petitioner claims his petition was
denied without hearing.
 Feb. 17, 1987 – A motion for reconsideration was
filed which had not been acted upon when E.O. Nos.
 228 & 229 were issued which rendered his motion
moot.
ISSUES
1. Whether or not the President had the power to
promulgate Proc. No. 131 and E.O. Nos. 228 & 229
2. Whether or not the President had the legislative
power for issuing the measures
3. Whether or not Proc. No. 131 conforms to the
requirements of a valid appropriation as specified in
the Constitution
4. Whether or not Proc. No. 131 and E.O. No. 229
should be invalidated because they do not provide for
retention limits required by Article 13, Section 4 of
the Constitution
5. Whether or not E.O. No. 229 violates constitutional
requirement that a bill should only have one subject,
to be expressed in its title
6. Whether or not the writ of mandamus can issue to
compel the performance of a discretionary act,
especially by a specific department of the
government.
7. Whether this statute is an exercise of police power or
the power of eminent domain
8. Whether or not the statutes are valid exercises of
police power
9. Whether or not the equal protection clause was
violated
10. Whether or not the content and manner of the just
compensation provided for in the CARP Law is not
violative of the Constitution
11. Whether or not there is contravention of a well-
accepted principle of eminent domain by divesting
the landowner of his property even before actual
payment to him in full of just compensation
RULING
1. YES. P.D. No. 27 by President Marcos during Martial
Law has been sustained in Gonzales v. Estrella.
President Aquino is authorized under Section 6 of the
Transitory Provisions of the 1987 Constitution to
promulgate Proc. No. 131 and E.O. Nos. 228 & 229.
2. YES. The said measures were issued before July 27,
1987, when the Congress was formally convened and
took over legislative power.
3. NO. Proc. No. 131 is not an appropriation measure
for that is not its principal purpose and therefore is
not required to conform to the requirements.
4. NO. R.A. No. 6657 does provide for such limits now
in Section 6 of the law.
5. NO. It is settled that the title of the bill does not have
to be a catalogue of its contents and will suffice if the
matters embodied in the text are relevant to each
other and may be inferred from the title.
6. NO. The rule is that mandamus will lie to compel the
discharge of the discretionary duty itself but not to
Page 5 of 10
control the discretion to be exercised. In other words,
mandamus can issue to require action only but not
specific action.
7. It is an exercise of the power of eminent domain
because there is payment of just compensation unlike
in the exercise of police power wherein confiscation
of property is not compensable.
8. YES. A statute may be sustained under the police
power only if there is a concurrence of the lawful
subject and the lawful method. As the subject and
purpose of agrarian reform have been laid down by
the Constitution itself, we may say that the first
requirement has been satisfied. What remains to be
examined is the validity of the method employed to
achieve the constitutional goal.
9. NO. The petitioners have not shown that they belong
to a different class and entitled to a different
treatment. The argument that not only landowners but
also owners of other properties must be made to share
the burden of implementing land reform must be
rejected. There is a substantial distinction between
these two classes of owners that is clearly visible
except to those who will not see.
10. NO. It is declared that although money is the
traditional mode of payment, other modes of payment
shall be permitted as compensation. The court accepts
the theory that payment of the just compensation is
not always required to be made fully in money, they
find further that the proportion of cash payment to the
other things of value constituting the total payment,
as determined on the basis of the areas of the lands
expropriated, is not unduly oppressive upon the
landowner. The other modes, which are likewise
available to the landowner at his option, are also not
unreasonable because payment is made in shares of
stock, LBP bonds, other properties or assets, tax
credits, and other things of value equivalent to the
amount of just compensation.
(Court: We do not mind admitting that a certain
degree of pragmatism has influenced our decision on
this issue. The Court is as acutely anxious as the rest
of our people to see the goal of agrarian reform
achieved at last after the frustrations and deprivations
of our peasant masses during all these disappointing
decades. We are aware that invalidation of the said
section will result in the nullification of the entire
program, killing the farmer's hopes even as they
approach realization and resurrecting the spectre of
discontent and dissent in the restless countryside.
That is not in our view the intention of the
Constitution, and that is not what we shall decree
today.)
11. NO. The CARP Law conditions the transfer of
possession and ownership of the land to the
government on receipt by the landowner of the
corresponding payment or the deposit by the DAR of
the compensation in cash or LBP bonds with an
accessible bank. Until then, title also remains with
the landowner.
DISPOSITIVE
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos.
228 and 229 are SUSTAINED against all the constitutional
objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the
State only upon full payment of compensation to their
respective owners.
3. All rights previously acquired by the tenant- farmers under
P.D. No. 27 are retained and recognized.
4. Landowners who were unable to exercise their rights of
retention under P.D. No. 27 shall enjoy the retention rights
granted by R.A. No. 6657 under the conditions therein
prescribed.
5. Subject to the above-mentioned rulings all the petitions are
DISMISSED, without pronouncement as to costs.
CIR v. CENTRAL LUZON DRUG CORPORATION, GR
No. 159610, 2008-06-12
Facts:
Respondent is a domestic corporation engaged in the retail of
medicines and other pharmaceutical products.[5] In 1997, it
operated eight drugstores under the business name and style
"Mercury Drug."
Pursuant to the provisions of RA 7432 and Revenue
Regulations No. (RR) 2-94[7] issued by the Bureau of Internal
Revenue (BIR), respondent granted 20% sales discount to
qualified senior citizens on their purchases of medicines
covering the calendar year
The sales discount granted to senior citizens totaled
P2,798,508.00.
On 15 April 1998, respondent filed its 1997 Corporate Annual
Income Tax Return reflecting a nil income tax liability due to
net loss incurred from business operations of P2,405,140.00.
Respondent alleged that the overpaid tax was the result of the
wrongful implementation... of RA 7432. Respondent treated
the 20% sales discount as a deduction from gross sales in
compliance with RR 2-94 instead of treating it as a tax credit
as provided under Section 4(a) of RA 7432
On 6 April 2000, respondent filed a Petition for Review with
the CTA in order to toll the running of the two-year statutory
period within which to file a judicial claim. Respondent
reasoned that RR 2-94, which is a mere implementing
administrative regulation, cannot modify,... alter or amend the
clear mandate of RA 7432. Consequently, Section 2(i) of RR
2-94 is without force and effect for being inconsistent with the
law it seeks to implement.
In his Answer, petitioner stated that the construction given to a
statute by a specialized administrative agency like the BIR is
entitled to great respect and should be accorded great weight.
Page 6 of 10
the CTA rendered a Decision ordering petitioner to issue a tax
credit certificate in the amount of P2,376,805.63 in favor of
respondent.
he Court of Appeals affirmed the CTA's decision in toto.
he Court of Appeals disagreed with petitioner's contention that
the CTA's decision applied a literal interpretation of the law. It
reasoned that under the verba legis rule, if the statute is clear,
plain, and free from ambiguity, it must be given its literal...
meaning and applied without interpretation. This principle
rests on the presumption that the words used by the legislature
in a statute correctly express its intent and preclude the court
from construing it differently.
Issues:
Whether the appellate court erred in holding that respondent
may claim the 20% senior citizens' sales discount as a tax
credit deductible from future income tax liabilities instead of a
mere deduction from gross income or gross sales; and
Whether the appellate court erred in holding that respondent is
entitled to a refund.
Ruling:
The petition lacks merit.
The issues presented are not novel. In two similar cases
involving the same parties where respondent lodged its claim
for tax credit on the senior citizens' discount granted in
1995[22] and 1996,[23] this Court has squarely ruled that...
the 20% senior citizens' discount required by RA 7432 may be
claimed as a tax credit and not merely a tax deduction from
gross sales or gross income. Under RA 7432, Congress
granted the tax credit benefit to all covered establishments
without conditions. The net loss... incurred in a taxable year
does not preclude the grant of tax credit because by its nature,
the tax credit may still be deducted from a future, not a
present, tax liability. However, the senior citizens' discount
granted as a tax credit cannot be refunded.
RA 7432 expressly allows private establishments... to claim
the amount of discounts they grant to senior citizens... as tax
credit.
Tax credit is defined as a peso-for-peso reduction from a
taxpayer's tax liability. It is a direct subtraction from the tax
payable to the government.
On the other hand, RR 2-94 treated the amount of senior
citizens' discount as a tax deduction which is only a
subtraction... from gross income resulting to a lower taxable
income.
RR 2-94 affords merely a fractional reduction in the... taxes
payable to the government depending on the applicable tax
rate.

In Commissioner of Internal Revenue v. Central Luzon Drug
Corporation,[24] the Court ruled that petitioner's definition in
RR 2-94 of a tax credit is clearly erroneous.
To deny the tax credit, despite the plain mandate of the law, is
indefensible.
In
Commissioner of Internal Revenue v. Central Luzon Drug
Corporation, the Court declared, "When the law says that the
cost of the discount may be claimed as a tax credit, it means
that the amount-- when claimed ― shall be treated as a
reduction from any tax... liability, plain and simple."
The tax credit may still be deducted from a future, not a
present, tax liability.
In the petition filed before this Court, petitioner alleged that
respondent incurred a net loss from its business operations in
1997; hence, it did not pay any income tax. Since no tax
payment was made, it follows that no tax credit can also be
claimed because tax credits are... usually applied against a tax
liability.[25]
In Commissioner of Internal Revenue v. Central Luzon Drug
Corporation,[26] the Court stressed that prior payment of tax
liability is not a pre-condition before a taxable entity can avail
of the tax credit. The Court declared, "Where there is no tax...
liability or where a private establishment reports a net loss for
the period, the tax credit can be availed of and carried over to
the next taxable year."[27] It is irrefutable that under RA 7432,
Congress has granted the tax credit benefit to all covered...
establishments without conditions. Therefore, neither a tax
liability nor a prior tax payment is required for the existence or
grant of a tax credit.[28] The applicable law on this point is
clear and without any qualifications.[29]
Hence, respondent is entitled to claim the amount of
P2,376,805.63 as tax credit despite incurring net loss from
business operations for the taxable year 1997.
The senior citizens' discount may be claimed... as a tax credit
and not a refund.
Section 4(a) of RA 7432 expressly provides that private
establishments may claim the cost as a tax credit. A tax credit
can only be utilized as payment for future internal revenue tax
liabilities of the taxpayer while a tax refund, issued as a check
or a warrant, can be... encashed. A tax refund can be availed of
immediately while a tax credit can only be utilized if the
taxpayer has existing or future tax liabilities.
RA 9257 now specifically provides that all covered
establishments... may claim the senior citizens' discount as tax
deduction.
Contrary to the provision in RA 7432 where the senior
citizens' discount granted by all covered establishments can be
Page 7 of 10
claimed as tax credit, RA 9257 now specifically provides that
this discount should be treated as tax deduction.
With the effectivity of RA 9257 on 21 March 2004, there is
now a new tax treatment for senior citizens' discount granted
by all covered establishments. This discount should be
considered as a deductible expense from gross income and no
longer as tax credit.
The present case, however, covers the taxable year 1997 and is
thus governed by the old law, RA 7432.
CASE DIGEST: DOUBLE TAXATION
NURSERY CARE CORPORATION, ET AL, vs.
ACEVEDO, G.R. No. 180651, July 30, 2014
FACTS OF THE CASE:
• The CITY OF MANILA assessed and collected taxes
from the individual petitioners pursuant to Section 15 (Tax on
Wholesalers, Distributors, or Dealers) and Section 17 (Tax on
Retailers) of the Revenue Code of Manila. At the same time,
the CITY OF MANILA imposed additional taxes upon the
petitioners pursuant to Section 21 of the Revenue Code of
Manila, as amended, as a condition for the renewal of their
respective business licenses for the year 1999. SECTION 21
OF THE REVENUE CODE OF MANILA stated: Section 21.
Tax on Business Subject to the Excise, Value-Added or
Percentage Taxes under the NIRC - On any of the following
businesses and articles of commerce subject to the excise,
VALUE-ADDED OR PERCENTAGE TAXES under the
National Internal Revenue Code, hereinafter referred to as
NIRC, as amended, a tax of FIFTY PERCENT (50%) OF
ONE PERCENT (1%) per annum on the gross sales or
receipts of the preceding calendar year is hereby imposed: A)
On person who sells goods and services in the course of trade
or businesses; x x x PROVIDED, that all registered businesses
in the City of Manila already paying the aforementioned tax
shall be exempted from payment thereof.
• To comply with the City of Manila’s assessment of
taxes under Section 21, the PETITIONERS paid under protest
the following amounts corresponding to the first quarter of
1999, to wit: (a) Nursery Care Corporation ₱595,190.25; (b)
Shoemart Incorporated ₱3,283,520.14; (c) Star Appliance
Center ₱236,084.03; (d) H & B, Inc. ₱1,271,118.74; (e)
Supplies Station, Inc. ₱239,501.25; (f) Hardware Work Shop,
Inc. ₱609,953.24. By letter dated March 1, 1999, the
PETITIONERS formally requested the Office of the City
Treasurer for the tax credit or refund of the local business
taxes paid under protest. However, then City Treasurer
Anthony Acevedo (Acevedo) denied the request.
• On April 8, 1999, the PETITIONERS, sought the
reconsideration of the denial of their request. Still, the CITY
TREASURER did not reconsider. In the meanwhile, Liberty
Toledo succeeded Acevedo as the City Treasurer of Manila.
PETITIONERS filed their respective petitions for certiorari in
the Regional Trial Court (RTC) in Manila.
• RTC held that it perceives NO INSTANCE OF THE
CONSTITUTIONALLY PROSCRIBED DOUBLE
TAXATION, in the strict, narrow or obnoxious sense, imposed
upon the petitioners under Section 15 and 17, on the one hand,
and under Section 21, on the other, of the questioned
Ordinance. The tax imposed under Section 15 and 17, as
against that imposed under Section 21, are levied against
different tax objects or subject matter. The tax under Section
15 is imposed upon wholesalers, distributors or dealers, while
that under Section 17 is imposed upon retailers. In short, taxes
imposed under Section 15 and 17 is a tax on the business of
wholesalers, distributors, dealers and retailers. On the other
hand, the tax imposed upon herein petitioners under Section
21 is not a tax against the business of the petitioners (as
wholesalers, distributors, dealers or retailers) but is rather a tax
against consumers or end-users of the articles sold by
petitioners. CA affirmed the decision of the RTC.
ISSUE: Whether or not the collection of taxes under Section
21 of Ordinance No. 7794, as amended, constitutes double
taxation. YES
RULING:
• There is DOUBLE TAXATION when the same
taxpayer is taxed twice when he should be taxed only once for
the same purpose by the same taxing authority within the same
jurisdiction during the same taxing period, and the taxes are of
the same kind or character. DOUBLE TAXATION is
obnoxious.
• DOUBLE TAXATION means taxing the same
property twice when it should be taxed only once; that is,
"taxing the same person twice by the same jurisdiction for the
same thing." It is obnoxious when the taxpayer is taxed twice,
when it should be but once. Otherwise described as "DIRECT
DUPLICATE TAXATION," the two taxes must be imposed on
the same subject matter, for the same purpose, by the same
taxing authority, within the same jurisdiction, during the same
taxing period; and the taxes must be of the same kind or
character.
• Using the aforementioned test, the COURT finds that
there is INDEED DOUBLE TAXATION IF RESPONDENT
IS SUBJECTED TO THE TAXES UNDER BOTH
SECTIONS 14 AND 21 OF TAX ORDINANCE NO. 7794,
since these are being imposed: (1) on the same subject matter
– the privilege of doing business in the City of Manila; (2) for
the same purpose – to make persons conducting business
within the City of Manila contribute to city revenues; (3) by
the same taxing authority – petitioner City of Manila; (4)
within the same taxing jurisdiction – within the territorial
jurisdiction of the City of Manila; (5) for the same taxing
periods – per calendar year; and (6) of the same kind or
character – a local business tax imposed on gross sales or
receipts of the business.
• Based on the foregoing reasons, PETITIONER
should not have been subjected to taxes under Section 21 of
the Manila Revenue Code for the fourth quarter of 2001,
considering that it had already been paying local business tax
under Section 14 of the same ordinance.
• Accordingly, respondent’s assessment under both
Sections 14 and 21 had no basis. PETITIONER is indeed
liable to pay business taxes to the City of Manila;
nevertheless, considering that the FORMER has already paid
these taxes under Section 14 of the Manila Revenue Code, it is
exempt from the same payments under Section 21 of the same
Page 8 of 10
code. Hence, payments made under Section 21 must be
refunded in favor of petitioner. It is undisputed that
PETITIONER paid business taxes based on Sections 14 and
21 for the fourth quarter of 2001 in the total amount of
₱470,932.21. Therefore, it is ENTITLED TO A REFUND OF
₱164,552.04 corresponding to the payment under Section 21
of the Manila Revenue Code.
• In fine, the IMPOSITION OF THE TAX UNDER
SECTION 21 OF THE REVENUE CODE OF MANILA
constituted double taxation, and the taxes collected pursuant
thereto must be refunded.
IMPORTANT PRINCIPLE: WHEN IS THERE DOUBLE
TAXATION; REQUISITES OF DOUBLE TAXATION
WHEN IS THERE DOUBLE TAXATION?
• There is DOUBLE TAXATION when the same
taxpayer is taxed twice when he should be taxed only once for
the same purpose by the same taxing authority within the same
jurisdiction during the same taxing period, and the taxes are of
the same kind or character. DOUBLE TAXATION is
obnoxious.
• DOUBLE TAXATION means taxing the same
property twice when it should be taxed only once; that is,
"taxing the same person twice by the same jurisdiction for the
same thing." It is obnoxious when the taxpayer is taxed twice,
when it should be but once. Otherwise described as "DIRECT
DUPLICATE TAXATION," the two taxes must be imposed on
the same subject matter, for the same purpose, by the same
taxing authority, within the same jurisdiction, during the same
taxing period; and the taxes must be of the same kind or
character.
REQUISITES OF DOUBLE TAXATION:
Using the aforementioned test, the COURT finds that there is
INDEED DOUBLE TAXATION IF RESPONDENT IS
SUBJECTED TO THE TAXES UNDER BOTH SECTIONS
14 AND 21 OF TAX ORDINANCE NO. 7794, since these are
being imposed:
(1) On the same subject matter – the privilege of doing
business in the City of Manila;
(2) For the same purpose – to make persons conducting
business within the City of Manila contribute to city revenues;
(3) By the same taxing authority – petitioner City of Manila;
(4) Within the same taxing jurisdiction – within the territorial
jurisdiction of the City of Manila;
(5) For the same taxing periods – per calendar year; and
(6) Of the same kind or character – a local business tax
imposed on gross sales or receipts of the business.
ABAKADA Guro Party List vs. Ermita
G.R. No. 168056 September 1, 2005
Facts:
1.) They question the constitutionality of Sections 4, 5
and 6 of R.A. No. 9337, amending Sections 106, 107 and 108,
respectively, of the National Internal Revenue Code (NIRC).
a.) Section 4 imposes a 10% VAT on sale of goods and
properties.
b.) Section 5 imposes a 10% VAT on importation of
goods
c.) Section 6 imposes a 10% VAT on sale of services and
use or lease of properties
2.) These questioned provisions contain a uniform
proviso authorizing the President, upon recommendation of
the Secretary of Finance, to raise the VAT rate to 12%,
effective January 1, 2006:
a.) Value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two and
four-fifth percent (2 4/5%); or
b.) National government deficit as a percentage of GDP
of the previous year exceeds one and one-half percent (1 %)
3.) Petitioners argue that the law is unconstitutional, as it
constitutes abandonment by Congress of its exclusive
authority to fix the rate of taxes under Article VI, Section
28(2) of the 1987 Philippine Constitution.
Article VI, Section 28(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.
Issues:
One of the substantive issues is whether Sections 4, 5 and 6 of
R.A. No. 9337, amending Sections 106, 107 and 108 of the
NIRC, violate the following provisions of the Constitution
specifically Article VI, Section 28(2) for ABAKADA Guro vs
Ermita.
Petitioners contend:
1.) Delegating to the President the legislative power to
tax is contrary to republicanism.
2.) The law also effectively nullified the Presidents
power of control, which includes the authority to set aside and
nullify the acts of her subordinates like the Secretary of
Finance, by mandating the fixing of the tax rate by the
President upon the recommendation of the Secretary of
Finance.
The principle of non-delegation of powers is instructive for the
following contentions. The principle of separation of powers
ordains that each of the three great branches of government
has exclusive cognizance of and is supreme in matters falling
within its own constitutionally allocated sphere.
A logical corollary to the doctrine of separation of powers is
the principle of non-delegation of powers, as expressed in the
Latin maxim: potestas delegata non delegari potest which
means what has been delegated, cannot be delegated. This
doctrine is based on the ethical principle that such as delegated
power constitutes not only a right but a duty to be performed
by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another.
Page 9 of 10
With respect to the Legislature, Section 1 of Article VI of the
Constitution provides that the Legislative power shall be
vested in the Congress of the Philippines which shall consist
of a Senate and a House of Representatives. The powers which
Congress is prohibited from delegating are those which are
strictly, or inherently and exclusively, legislative. Purely
legislative power, which can never be delegated, has been
described as the authority to make a complete law complete as
to the time when it shall take effect and as to whom it shall be
applicable and to determine the expediency of its enactment.
Delegation is only permissible on the following premises: If
the law
(a) is complete in itself, setting forth therein the policy to be
executed, carried out, or implemented by the delegate;
(b) fixes a standard the limits of which are sufficiently
determinate and determinable to which the delegate must
conform in the performance of his functions. A sufficient
standard is one which defines legislative policy, marks its
limits, maps out its boundaries and specifies the public agency
to apply it. It indicates the circumstances under which the
legislative command is to be effected.
In Wayman vs. Southard, the Supreme Court of the United
States ruled that the legislature may delegate a power not
legislative which it may itself rightfully exercise. The power to
ascertain facts is such a power which may be delegated. There
is nothing essentially legislative in ascertaining the existence
of facts or conditions as the basis of the taking into effect of a
law.
Clearly, the legislature may delegate to executive officers or
bodies the power to determine certain facts or conditions, or
the happening of contingencies, on which the operation of a
statute is, by its terms, made to depend, but the legislature
must prescribe sufficient standards, policies or limitations on
their authority. While the power to tax cannot be delegated to
executive agencies, details as to the enforcement and
administration of an exercise of such power may be left to
them, including the power to determine the existence of facts
on which its operation depends.
The rationale for this is that the preliminary ascertainment of
facts as basis for the enactment of legislation is not of itself a
legislative function, but is simply ancillary to legislation.
Thus, the duty of correlating information and making
recommendations is the kind of subsidiary activity which the
legislature may perform through its members, or which it may
delegate to others to perform.
The case before the Court is not a delegation of legislative
power. It is simply a delegation of ascertainment of facts upon
which enforcement and administration of the increase rate
under the law is contingent. The legislature has made the
operation of the 12% rate effective January 1, 2006,
contingent upon a specified fact or condition. It leaves the
entire operation or non-operation of the 12% rate upon factual
matters outside of the control of the executive.
The Court finds no merit to the contention of petitioners
ABAKADA GURO Party List, et al. that the law effectively
nullified the Presidents power of control over the Secretary of
Finance by mandating the fixing of the tax rate by the
President upon the recommendation of the Secretary of
Finance.

WHEREFORE, Republic Act No. 9337 not being

unconstitutional, the petitions in G.R. Nos. 168056, 168207,
168461, 168463, and 168730, are hereby DISMISSED.

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