CITY OF MILWAUKEE VS.

MILWAUKEE AND SUB URBAN TRANSPORT

CORPORATION

FACTS:

The city implemented an ordinance which collected license fees from milwaukee and sub urban
transport. The city undertook to repave and widen streets to accommodate the trackless trolleys and
bear the expense of the obligation, formerly that of the company, to repave and maintain the track
zones; that the city obligated itself to prohibit parking of automobiles along portions of the routes, in
connection with which the court took judicial notice of the fact that the city has been put to the
expense of acquiring property for off-street parking, an expense due in part to such parking
limitations. When milwaukee and sub urban transport corporation filed a case in the lower court,
questioning the license fees whether it was trough the power of the city to tax or through it’s police
power. The lower court stated that the ordinances reveal substantial benefits proceeding to the
company and a concurring disadvantage and expense to the city. Therefore, it reasoned, the fees did
not constitute a tax for revenue but, rather, compensation for the costs assumed and services
rendered by the city. Therefore, milwaukee and sub urban tranportation went for appeal.

ISSUE:

Whether the license fees exacted under the city’s ordinances constitute a tax for revenue or a charge
for regulation.

RULING:

The higher court decided that the license fees under the ordinances constitute a tax for revenue. It
goes on by defining what taxation is.

“The term taxation defines the power by which the sovereign raises revenue to defray the
necessary expenses of government. Taxation is a merely a way of apportioning the cost of
government among those who in some measure are privileged to enjoy it’s benefits and must bear
it’s burdens. The purpose of taxation on the part of the government is to provide funds or property
with which to promote the general welfare the protection of it’s citizens. Taxation, in it’s broadest
and most general sense, includes every charge or burden imposed by the sovereign power upon
persons, property, or property rights for the use and support of the government and to enable it to
discharge it’s appropriate functions, and in that broad definition there is included a proportionate
levy upon persons or property and all the various other methods and devices by which revenue is
exacted from persons and property for public purposes.”

The court finds that any authority of the city to exact from the company the license fees for the
privilege of operating it’s lines is only through it’s power to tax for the state had delegated to the city
the right to tax the company for revenue this is the only authority it had to levy on the company. The
city has no right to call such a levy a consideration for a valuable right because the power it has in
collecting the licence fees is through it’s power to tax not its power to regulate. The City cannot
contend that the license fees collected are based on its power to regulate because under the power
to regulate it does not include the collection of fees for the use of public utilities. The power to collect
fees for the use of public utilities by the citizens is under the power to tax.

Therefore, the higher court reversed the decision of the lower court and the appeal of milwaukee and
sub urban transport corporation was granted.

MCIAA vs. MARCOS G.R. No. 120082, September 11, 1996 261
SCRA 667 Public Corporation, Taxation, Local Government
Code, Realty Tax,
OCTOBER 30, 2017
FACTS:

Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act
6958. Since the time of its creation, MCIAA enjoyed the privilege of exemption from payment
of realty taxes in accordance with Section 14 of its Charter. However on 11 October 1994, the
Office of the Treasurer of Cebu, demanded for the payment of realty taxes on several parcels
of land belonging to the petitioner.

Petitioner objected to such demand for payment as baseless and unjustified and asserted that
it is an instrumentality of the government performing governmental functions, which puts
limitations on the taxing powers of local government units.

The City refused to cancel and set aside petitioner’s realty tax account, insisting that the
MCIAA is a government controlled corporation whose tax exemption privilege has been
withdrawn by virtue of Sections 193 and 234 of the Local Government Code (LGC), and not
an instrumentality of the government but merely a government owned corporation performing
proprietary functions. MCIAA paid its tax account “under protest” when City is about to issue a
warrant of levy against the MCIAA’s properties.

MCIAA filed a Petition of Declaratory Relief with the RTC contending that the taxing power of
local government units do not extend to the levy of taxes or fees on an instrumentality of the
national government. It contends that by the nature of its powers and functions, it has the
footing of an agency or instrumentality of the national government; which claim the City
rejects. The trial court dismissed the petition, citing that close reading of the LGC provides the
express cancellation and withdrawal of tax exemptions of Government Owned and Controlled
Corporations.

ISSUE: Whether the MCIAA is exempted from realty taxes.

RULING:

Tax statutes are construed strictly against the government and liberally in favor of the
taxpayer. But since taxes are paid for civilized society, or are the lifeblood of the nation, the
law frowns against exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.

A claim of exemption from tax payments must be clearly shown and based on language in the
law too plain to be mistaken. Taxation is the rule, exemption therefrom is the exception.
However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid
rule of construction does not apply because the practical effect of the exemption is merely to
reduce the amount of money that has to be handled by the government in the course of its
operations.

Further, since taxation is the rule and exemption therefrom the exception, the exemption may
be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where
the exemption was granted to private parties based on material consideration of a mutual
nature, which then becomes contractual and is thus covered by the non-impairment clause of
the Constitution.

MCIAA is a “taxable person” under its Charter (RA 6958), and was only exempted from the
payment of real property taxes. The grant of the privilege only in respect of this tax is
conclusive proof of the legislative intent to make it a taxable person subject to all taxes,
except real property tax.

Since Republic Act 7160 or the Local Government Code (LGC) expressly provides that “All
general and special laws, acts, city charters, decrees [sic], executive orders, proclamations
and administrative regulations, or part of parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified accordingly.”

With that repealing clause in the LGC, the tax exemption provided for in RA 6958 had been
expressly repealed by the provisions of the LGC. Therefore, MCIAA has to pay the assessed
realty tax of its properties effective after January 1, 1992 until the present.

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY V.

FERDINAND J. MARCOS (Presiding Judge of RTC Cebu)
Davide, 1996
FACTS
Mactan Cebu International Airport Authority was created by virtue of RA 6958 to manage the
Mactan International Airport and the Lahug Airport. Since the time of its creation, petitioner
MCIAA enjoyed the privilege of exemption from payment of realty taxes. In Section 14 of its
Charter provides that “the Authority shall be exempt from realty taxes imposed by the National
Government or any of its political subdivisions, agencies and instrumentalities.”

In 1994, however, the Office of the Treasurer of the City of Cebu demanded payment for
realty taxes on several parcels of land belonging to petitioner. Petitioner objected to such
demand, citing Sec. 14. It asserted that it is an instrumentality of the government which
performs governmental functions, citing Sec. 133 of the Local Government Code which puts
limitations on the taxing powers of local government units. Sec. 133, LGC provides that the
exercise of the taxing powers of provinces, cities, municipalities and barangays shall not
extend to the levy of... taxes, fees or charges of any kind on the National government, its
agencies and instrumentalities and local government units.

The Respondent City refused to cancel and set aside the realty tax account, insisting that the
MCIAA is a GOCC whose tax exemption privilege has been withdrawn by virtue of Sections
193 and 234 of the LGC. Sec. 193 provides that tax exemptions or incentives granted to or
presently enjoyed by all persons, whether natural or juridical, including GOCCs except local
water districts, cooperatives duly registered under RA 6938, non-stock and non-profit
hospitals and educational institutions are hereby withdrawn upon the effectivity of this Code.
Section 234 meanwhile provides that exemption from payment of real property tax previously
granted to or presently enjoyed by all persons, whether natural or juridical, including GOCCs
are hereby withdrawn upon the effectivity of the LGC.

Because the City of Cebu was about to issue a warrant of levy against the properties of
MCIAA, the latter was compelled to pay its tax account under protest. MCIAA likewise filed a
petition for declaratory relief with the RTC of Cebu, contending that the taxing powers of local
government units do not extend to the levy of taxes or fees of any kind on an instrumentality
of the national government. MCIAA insisted that while it is indeed a GOCC, it nontheless
stands on the same footing as an agency or instrumentality of the national government by the
very nature of its powers and functions. The City however maintained that MCIAA is not an
instrumentality of the government but merely a GOCC performing proprietary functions, and
hence, the exemptions granted to it were deemed withdrawn by virtue of Secs. 193 and 234
of the LGC.

The trial court dismissed the petition. MR denied. Hence this petition. Petitioner asserts that
although it is a GOCC, it is mandated to perform functions in the same category as an
instrumentality of the government. An instrumentality of the Government is one created to
perform governmental functions primarily to promote certain aspects of the economic life of
the people. Petitioner further contends that being an instrumentality of the National
Government, respondent City of Cebu has no power nor authority to impose realty taxes upon
it in accordance with Sec. 133 of the LGC. In Basco v. PAGCOR, the SC said the local
governments have no power to tax instrumentalities of the National Gov't like PAGCOR,
which has a dual role (its role to regulate gambling casinos is governmental, placing it in the
category of an agency or instrumentality of the Government which should be exempt from
local taxes. Petitioner thus concludes that there is a distinction in the LGC between a GOCC
performing gov't functions as against one performing merely proprietary ones, and it is clear
from Secs. 133 and 234, LGC that the legislature meant to exclude instrumentalities of the
national government from the taxing powers of LGUs.

ISSUE
Whether petitioner is exempted from payment of taxes or not

RULING
No. Taxation is the rule and exemption is the exception. Thus, the exemption may be
withdrawn at the pleasure of the taxing authority. The only exception to this rule is where the
exemption was granted to private parties based on material consideration of a mutual nature,
which then becomes contractual and is thus covered by the non-impairment clause of the
Constitution.

The general rule, as laid down in Section 133 of the LGC is that the taxing powers of LGUs
cannot extend to the levy of, inter alia, “taxes, fees and charges of any kind on the National
Government, its agencies, and instrumentalities, and LGUs.” However, pursuant to Section
232, provinces, cities and municipalities in the Metro Manila Area MAY impose real property
taxes except on inter alia, real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been granted for
consideration or otherwise, to a taxable person (Sec. 234a).

As to tax exemptions/incentives granted to or presently enjoyed by natural or juridical

persons, including GOCCs,
GENERAL RULE: Tax exemptions or incentives are withdrawn upon the effectivity of
 the LGC
EXCEPTION: Those granted to local water districts, cooperatives duly registered
under RA 6938, non-stock and non-profit hospitals and educ institutions, and unless
otherwise provided in the LGC. This latter proviso could refer to Section 234
enumerating the properties exempt from real property tax. The last paragraph of
Section 234 further qualifies the retention of the exemption insofar as real property
taxes are concerned by limiting the retention only to those enumerated therein; all
others not included in the enumeration therefore lost the privilege upon the effectivity
of the LGC. Even as to real property owned by the Rep. Of the Philippines or any of
its political subdivisions covered by item (a) of the first paragraph of Section 234, the
exemption is withdrawn if the beneficial use of such property has been granted to a
taxable person for consideration or otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the
LGC, exemptions from payment of real property taxes granted to natural or juridical persons,
including government-owned or controlled corporations, except as provided in the said
section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily
follows that its exemption from such tax granted it by its charter has been withdrawn.

PHILIPPINE HEALTH CASE PROVIDERS, INC. V COMMISSIONER OF

INTERNAL REVENUE
GR NO. 167730, June 12, 2008

Philippine Health Care Providers has a health care agreement for its members having the following
health benefits such as (1) In patient service; (2) out patient service; and (3) emergency care where
the Health Care Providers is liable and indemnifies the members who incurs hospital services, medical
services or unknown or contingent events which they cover P75, 000 in benefits with respect to
anyone from sickness, injury or related causes. If it exceeds the maximum coverage, the members will
shoulder the extra expenses.

FACTS:
January 27, 2000 – The Commissioner of Internal Revenue (Respondent) sent the Philippine Health
Care Providers (Petitioner) a formal demand letter and assessment notice demanding the payment
deficiency taxes, including surcharges and interest, for the year 1996-1997.

Deficiency Tax Assessment

Year VAT Documentary Stamp Tax
1996 45,767,596.23 55,746,352.19
1997 54,738,434.03 68,450,258.73
TOTAL 100,506,030.26 124,196,610.92

The deficiency DST assessment was imposed on petitioner's health care agreement with the
members of its health care program pursuant to Section 185 of the 1997 Tax Code which
provides:

Section 185. Stamp tax on fidelity bonds and other insurance policies. - On all policies of
insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability
made or renewed by any person, association or company or corporation transacting the
business of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar,
elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and
fire insurance), and all bonds, undertakings, or recognizances, conditioned for the
 performance of the duties of any office or position, for the doing or not doing of anything
therein specified, and on all obligations guaranteeing the validity or legality of any bond or
other obligations issued by any province, city, municipality, or other public body or
organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing
any mercantile credits, which may be made or renewed by any such person, company or
corporation, there shall be collected a documentary stamp tax of fifty centavos (P0.50) on
each four pesos (P4.00), or fractional part thereof, of the premium charged.

Petitioners protested the assessment, but the respondent did not act on the protest. Petitioners filed
a petition for review in the Court of Tax Appeals seeking the cancellation of the deficiency VAT and
DST assessment.

RULING OF CTA – The petition is partially granted. The petitioner will pay only the VAT, including 25%
surcharges and 20% interest. The DST is cancelled and set aside.

The respondent appealed to the CA claiming that the health care agreement was a contract f
insurance to be subjected under Sec. 185 of the 1997 Tax Code.

RULING OF CA – The health care agreement is in the nature of a non-life insurance contract subject to
DST. The petition for review is granted, ordering the petitioner to pay for the full deficiency tax
assessment, including surcharges and interest

The petitioner filed a motion for reconsideration. The CA Denied.

The petitioner then raised the case to the Supreme Court

ISSUE – Whether the health care agreement of the petitioner is subject to DST.

CONTENTION OF THE PETITIONER:

(1) That the health care agreement is not an insurance contract but a contract for the provision on a
prepaid basis of medical services, including medical check-up, that are not based on loss or damage.
(2) That they are not engaged in the insurance business. They are a health maintenance organization
regulated by the DOH and not an insurance company under the jurisdiction of the Insurance
Commission

RULING OF SC: The Supreme Court does not agree on both contentions.
(1) The petitioner does not actually provides medical or hospital services but merely arranges for the
same and pays for the maximum coverage.

The health care agreement is not based on “loss or damages.” Because in the agreement, the
petitioner assumes the liability and indemnifies its members for hospital, medical and related
expenses. (Contract of Indemnity)

A contract of insurance is defined as an agreement whereby one undertakes for a

consideration to indemnify another against loss, damage or liability arising from an unknown
or contingent event.

In the agreement, petitioner is bound to indemnify any member who incurs hospital, medical
or any other expenses that is arising from sickness, injury or other stipulated contingency to
the extent agreed upon under the contract.

(2) The contention is irrelevant. Contracts between companies like the petitioner and the
beneficiaries under their plans are treated as insurance company.
DST is not a tax on the business transacted but an excise on the privilege, opportunity or facility
offered at exchanges for the transaction of the business. It is an excise on the facilities used in the
transaction of the business, separate and apart from the business itself.

The Supreme Court denied the petition and affirmed the decision of the CA.

Sison v Ancheta G.R. No. L-59431. July 25, 1984.

C. J. Fernando
Declaratory Relief

Facts:

Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg. 135. It

amended

Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on
citizens or residents on (a) taxable compensation income, (b) taxable net income, (c)
royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e)
dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted
gross income.

Petitioner as taxpayer alleged that "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his profession
vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers." He
characterizes the above section as arbitrary amounting to class legislation, oppressive and
capricious in character.

For petitioner, therefore, there is a transgression of both the equal protection and due process
clauses of the Constitution as well as of the rule requiring uniformity in taxation.

The OSG prayed for dismissal of the petition due to lack of merit.

Issue: Whether the imposition of a higher tax rate on taxable net income derived from
business or profession than on compensation is constitutionally infirm.

(WON there is a transgression of both the equal protection and due process clauses of the
Constitution as well as of the rule requiring uniformity in taxation)

Held: No. Petition dismissed

Ratio:

The need for more revenues is rationalized by the government's role to fill the gap not done
by public enterprise in order to meet the needs of the times. It is better equipped to administer
for the public welfare.

The power to tax, an inherent prerogative, has to be availed of to assure the performance of
vital state functions. It is the source of the bulk of public funds.

The power to tax is an attribute of sovereignty and the strongest power of the government.
There are restrictions, however, diversely affecting as it does property rights, both the due
process and equal protection clauses may properly be invoked, as petitioner does, to
invalidate in appropriate cases a revenue measure. If it were otherwise, taxation would be a
destructive power.

The petitioner failed to prove that the statute ran counter to the Constitution. He used
arbitrariness as basis without a factual foundation. This is merely to adhere to the
authoritative doctrine that where the due process and equal protection clauses are invoked,
considering that they are not fixed rules but rather broad standards, there is a need for proof
of such persuasive character as would lead to such a conclusion.

It is undoubted that the due process clause may be invoked where a taxing statute is
so arbitrary that it finds no support in the Constitution. An obvious example is where it can be
shown to amount to the confiscation of property. That would be a clear abuse of power.

It has also been held that where the assailed tax measure is beyond the jurisdiction of the
state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and
unreasonable, it is subject to attack on due process grounds.

For equal protection, the applicable standard to determine whether this was denied in the
exercise of police power or eminent domain was the presence of the purpose of hostility or
unreasonable discrimination.

It suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions not
being different, both in the privileges conferred and the liabilities imposed. Favoritism and
undue preference cannot be allowed. For the principle is that equal protection and security
shall be given to every person under circumstances, which if not identical are analogous. If
law be looks upon in terms of burden or charges, those that fall within a class should be
treated in the same fashion, whatever restrictions cast on some in the group equally binding
on the rest.
The equal protection clause is, of course, inspired by the noble concept of approximating the
ideal of the laws's benefits being available to all and the affairs of men being governed by that
serene and impartial uniformity, which is of the very essence of the idea of law.

The equality at which the 'equal protection' clause aims is not a disembodied equality. The
Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws are not abstract
propositions. They do not relate to abstract units A, B and C, but are expressions of policy
arising out of specific difficulties, addressed to the attainment of specific ends by the use of
specific remedies. The Constitution does not require things which are different in fact
or opinion to be treated in law as though they were the same.

Lutz v Araneta- it is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that 'inequalities which result from a singling out of
one particular class for taxation, or exemption infringe no constitutional limitation.

Petitioner- kindred concept of uniformity- Court- Philippine Trust Company- The rule of
uniformity does not call for perfect uniformity or perfect equality, because this is hardly
attainable

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

There is quite a similarity then to the standard of equal protection for all that is required is that
the tax "applies equally to all persons, firms and corporations placed in similar situation"

There was a difference between a tax rate and a tax base. There is no legal objection to a
broader tax base or taxable income by eliminating all deductible items and at the same time
reducing the applicable tax rate.

The discernible basis of classification is the susceptibility of the income to the application of
generalized rules removing all deductible items for all taxpayers within the class and fixing a
set of reduced tax rates to be applied to all of them. As there is practically no overhead
expense, these taxpayers are not entitled to make deductions for income tax purposes
because they are in the same situation more or less.

Taxpayers who are recipients of compensation income are set apart as a class.

On the other hand, in the case of professionals in the practice of their calling and
businessmen, there is no uniformity in the costs or expenses necessary to produce their
income. It would not be just then to disregard the disparities by giving all of them zero
deduction and indiscriminately impose on all alike the same tax rates on the basis of gross
income.
There was a lack of a factual foundation, the forcer of doctrines on due process and equal
protection, and he reasonableness of the distinction between compensation and taxable net
income of professionals and businessmen not being a dubious classification.

G.R. No. L-75697

VALENTIN TIO vs. VIDEOGRAM REGULATORY BOARD,
MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY
MAYOR and CITY TREASURER OF MANILA
FACTS:

This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly
on behalf of other videogram operators adversely affected. It assails the constitutionality of
Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with
broad powers to regulate and supervise the videogram industry.

On November 5, 1985, a month after the promulgation of the abovementioned decree,

Presidential Decree No. 1994 amended the National Internal Revenue Code providing, inter
alia:

SEC. 134. Video Tapes. — There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, That locally manufactured or imported blank video tapes shall be subject to
sales tax.

On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers,
Importers and Distributors Association of the Philippines, and Philippine Motion Pictures
Producers Association, hereinafter collectively referred to as the Intervenors, were permitted
by the Court to intervene in the case, over petitioner's opposition, upon the allegations that
intervention was necessary for the complete protection of their rights and that their "survival
and very existence is threatened by the unregulated proliferation of film piracy."

The rationale behind the enactment of the DECREE, is set out in its preambular clauses as
follows:

1. WHEREAS, the proliferation and unregulated circulation of videograms including,

among others, videotapes, discs, cassettes or any technical improvement or variation
thereof, 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 sales, contractor's specific, amusement
and other 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, particularly the more than 1,200 movie
houses and theaters throughout the country, and occasioned industry-wide
 displacement and unemployment due to the shutdown of numerous moviehouses and
theaters;

4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the

Government to create an environment conducive to growth and development of all
business industries, including the movie industry which has an accumulated
investment of about P3 Billion;

5. WHEREAS, proper taxation of the activities of videogram establishments will not

only alleviate the dire financial condition of the movie industry upon which more than
75,000 families and 500,000 workers depend for their livelihood, 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, 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;

7. WHEREAS, civic-minded citizens and groups have called for remedial measures to
curb these blatant malpractices which have flaunted our censorship and copyright
laws;

8. WHEREAS, in the face of these grave emergencies corroding the moral values of
the people and betraying the national economic recovery program, bold emergency
measures must be adopted with dispatch;

ISSUE:

Whether or not tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of
trade in violation of the due process clause of the Constitution.

HELD:

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 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 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. It is an end-user tax, imposed on retailers for every videogram they make
available for public viewing. It is similar to the 30% amusement tax imposed or borne by the
movie industry which the theater-owners pay to the government, but which is passed on to
the entire cost of the admission ticket, thus shifting the tax burden on the buying or the
viewing public. It is a tax that is imposed uniformly on all videogram operators.

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. It is inherent
in the power to tax that a state be free to select the subjects of taxation, and it has been
repeatedly held that "inequities which result from a singling out of one particular class for
taxation or exemption infringe no constitutional limitation". Taxation has been made the
implement of the state's police power. At bottom, the rate of tax is a matter better addressed
to the taxing legislature.

Arturo Tolentino v. Secretary of Finance and Commissioner of

Internal Revenue
235 SCRA 630 August 25, 1994

FACTS:
The Value Added Tax (VAT) is levied on the sale, barter or exchange of
goods and properties as well as on the sale or exchange of services. It is the
equivalent to 10% of the gross selling price or gross value in money of goods or
properties sold, bartered or exchange or of the gross receipt from the sale or
exchange of services. Meanwhile, Republic Act No. 7716, otherwise known as the
Expanded Value-Added Tax Law seeks to widen the tax base of the existing Vat
system and enhance its administration by amending the National Internal Revenue
Code.
These are various suits challenging the constitutionality of RA No. 7716.
Different petitioners presented different contentions which aroused from the different
provisions of said law which are the following:
 The Philippine Press Institute, Inc. (PPI) contends that by removing the
exemption of the press from the VAT while maintaining those granted to
others, the law discriminates against the press. At any rate, it is averred,
even non-discriminatory taxation of constitutionally guaranteed freedom
is unconstitutional, citing in support of the case of Murdock v.
Pennsylvania.
 Chamber of Real Estate and Builders Associations, Inc., (CREBA), on
the other hand, asserts that R.A. No. 7716 (1) impairs the obligations of
contracts, (2) classifies transactions as covered or exempt without
reasonable basis and (3) violates the rule that taxes should be uniform
and equitable and that Congress shall evolve a progressive system of
taxation.
 Further, the Cooperative Union of the Philippines (CUP), argues that
legislature was to adopt a definite policy of granting tax exemption to
cooperatives that the present Constitution embodies provisions on
cooperatives. To subject cooperatives to the VAT would, therefore, be to
infringe a constitutional policy.

ISSUE:
Whether or not, based on the aforementioned grounds of the petitioners, the
Expanded Value-Added Tax Law should be declared unconstitutional.

RULING:
No.
With respect to the first contention, it would suffice to say that since the law
granted the press a privilege, the law could take back the privilege anytime without
offense to the Constitution. The reason is simple: by granting exemptions, the State
does not forever waive the exercise of its sovereign prerogative. Indeed, in
withdrawing the exemption, the law merely subjects the press to the same tax burden
to which other businesses have long ago been subject. The PPI asserts that it does
not really matter that the law does not discriminate against the press because even
nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional.
The Court was speaking in that case (Murdock v. Pennsylvania) of a license tax,
which, unlike an ordinary tax, is mainly for regulation. Its imposition on the press is
unconstitutional because it lays a prior restraint on the exercise of its right. The VAT
is, however, different. It is not a license tax. It is not a tax on the exercise of a
privilege, much less a constitutional right. It is imposed on the sale, barter, lease or
exchange of goods or properties or the sale or exchange of services and the lease of
properties purely for revenue purposes. To subject the press to its payment is not to
burden the exercise of its right any more than to make the press pay income tax or
subject it to general regulation is not to violate its freedom under the Constitution.
Anent the first contention of CREBA, it has been held in an early case that
even though such taxation may affect particular contracts, as it may increase the
debt of one person and lessen the security of another, or may impose additional
burdens upon one class and release the burdens of another, still the tax must be paid
unless prohibited by the Constitution, nor can it be said that it impairs the obligation
of any existing contract in its true legal sense. It is next pointed out that while Section
4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products,
food items, petroleum, and medical and veterinary services, it grants no exemption
on the sale of real property which is equally essential. The sale of food items,
petroleum, medical and veterinary services, etc., which are essential goods and
services was already exempt under Section 103, pars. (b) (d) (1) of the NIRC before
the enactment of R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716
granted exemption to these transactions while subjecting those of petitioner to the
payment of the VAT. Finally, it is contended that R.A. No. 7716 also violates Art. VI,
Section 28 (par. 1) which provides that The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system of taxation. Nevertheless,
equality and uniformity of taxation mean that all taxable articles or kinds of property
of the same class be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation. To satisfy this
requirement it is enough that the statute or ordinance applies equally to all persons,
firms, and corporations placed in similar situation. Furthermore, the Constitution does
not really prohibit the imposition of indirect taxes which, like the VAT, are regressive.
What it simply provides is that Congress shall evolve a progressive system of
taxation. The constitutional provision has been interpreted to mean simply that direct
taxes are to be preferred and as much as possible, indirect taxes should be
minimized. The mandate to Congress is not to prescribe, but to evolve, a progressive
tax system.
As regards the contention of CUP, it is worth noting that its theory amounts to
saying that under the Constitution cooperatives are exempt from taxation. Such
theory is contrary to the Constitution under which only the following are exempt from
taxation: charitable institutions, churches, and parsonages, by reason of Art. VI,
Section 28 (par. 3), and non-stock, non-profit educational institutions by reason of
Art. XIV, Section 4 (par. 3). With all the foregoing ratiocinations, it is clear that the
subject law bears no constitutional infirmities and is thus upheld.

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in

their own respective behalf and as judicial co-guardians of
JOSE ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF
INTERNAL REVENUE, respondents.

Leido, Andrada, Perez and Associates for petitioners.

Office of the Solicitor General for respondents.

BENGZON, J.P., J.:

Facts:

Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their
grandchildren by hereditary succession several properties. To manage the above-mentioned
properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a
partnership called Roxas y Compania. At the conclusion of the WW2, the taenants 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 tenant-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 agree to sell 13,500 hectares to the Goavernment for distribution to actual occupants
for a price of P2,079,048.47 plus P300,000 for survey and distribution 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 farmlands to the tenants, and the disallowance of
deductions from gross income 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 farmlands 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 there from was taxed. The Roxas brothers protested the assessment but
inasmuch as said protest was denied, they instituted an appeal in the CTA which sustained
the assessment. Hence, this appeal.

Issue:
I. Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence
100% taxable? And is
Roxas y Cia liable for the payment of deficiency income for the sale of Nasugbu
farmlands?

II. Are the deductions for business expenses and contributions deductible?

Ruling:
I. NO. The proposition of the CIR cannot be favorably accepted in this isolated transaction
with its peculiar circumstances inspite of the fact that there were hundreds of vendees.
Although they paid for their respective holdings in installment for the period of 10 years, it
would nevertheless 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 farmlands to the
very farmers who tilled them for generations was not only in consonance 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 land 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%.

II. DISALLOWED DEDUCTIONS

Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet
given in honor of Sergio Osmena and P28.00 for San Miguel beer given as gifts to various
persons. The deduction were claimed as representation expenses. Representation expenses
are deductible from gross income as expenditures incurred in carrying on a trade or business
under Section 30(a) of the Tax Code provided the taxpayer proves that they are reasonable in
amount, ordinary and necessary, and incurred in connection with his business. In the case at
bar, the evidence does not show such link between the expenses and the business of Roxas
y Cia. The findings of the Court of Tax Appeals must therefore be sustained (disallowed
deduction).

The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City
Firemen, and Baguio City Police Christmas funds, Manila Police Trust Fund, Philippines
Herald's fund for Manila's neediest families and Our Lady of Fatima chapel at Far Eastern
University.

The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and
Baguio City Police are not deductible for the reason that the Christmas funds were not spent
for public purposes but as Christmas gifts to the families of the members of said entities.
Under Section 39(h), a contribution to a government entity is deductible when used
exclusively for public purposes. For this reason, the disallowance must be sustained. On the
other hand, the contribution to the Manila Police trust fund is an allowable deduction for said
trust fund belongs to the Manila Police, a government entity, intended to be used exclusively
for its public functions.

The contributions to the Philippines Herald's fund for Manila's neediest families were
disallowed on the ground that the Philippines Herald is not a corporation or an association
contemplated in Section 30 (h) of the Tax Code. It should be noted however that the
contributions were not made to the Philippines Herald but to a group of civic spirited citizens
organized by the Philippines Herald solely for charitable purposes. There is no question that
the members of this group of citizens do not receive profits, for all the funds they raised were
for Manila's neediest families. Such a group of citizens may be classified as an association
organized exclusively for charitable purposes mentioned in Section 30(h) of the Tax Code.
Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of
Fatima chapel at the Far Eastern University on the ground that the said university gives
dividends to its stockholders (it should be non-profit institution. Located within the premises of
the university, the chapel in question has not been shown to belong to the Catholic Church or
any religious organization. On the other hand, the lower court found that it belongs to the Far
Eastern University, contributions to which are not deductible under Section 30(h) of the Tax
Code for the reason that the net income of said university injures to the benefit of its
stockholders. The disallowance should be sustained.

Doctrines:

I. Sale of property by landowners to tenants under government policy to allocate lands to

the landless subject not subject to real estate dealer’s tax.

II. The power of taxation is sometimes called also the power to destroy. Therefore it should
be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be
exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden
egg”.

Commissioner of Internal Revenue

v.
Algue Inc. and the Court of Tax Appeals
G.R. No. L-28896, February 17, 1988

“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.”

FACTS:
Algue Inc. on January 1965 received a letter from the Commission of Internal Revenue
assessing a total amount of PhP 83,183.85 as delinquency income taxes. Algue Inc. filed a
letter of protest which requested a reconsideration. On March 12, 1965, a warrant of distraint
and levy was presented to Algue Inc., but BIR did not take action on the protest. Algue filed a
petition for review with the Commission of Internal Revenue with the Court of Tax Appeals.
Commissioner of Internal Revenue contends that the claimed deduction of PhP 75,000.00
was properly disallowed because it was not an ordinary reasonable or necessary business
expense. However, the Court of Tax Appeals sees it differently because it agreed with Algue
Inc. because the amount had been legitimately paid by the company. Commissioner of
Internal Revenue claims that the payments of the company were fictitious because the
payees are members of the same family in control of Algue and that the payment was for
promotional fees.

ISSUE:
 Whether the Collector of Internal Revenue correctly disallowed
PhP 75,000.00 deduction claimed by Algue Inc.

RULING:

The Supreme Court agrees with the Court of Tax Appeals and states that the amount of
promotional fees was not excessive. Sec. 30 of the Tax Code states that the deductions from
gross income is allowed in general – all ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business including a reasonable allowance
for salaries or other compensation for personal services rendered. Most of the payees were
not in the regular employ of Algue nor were they controlling stockholders. Taxes are what we
pay for civilization society. Without taxes, the government would be paralyzed for lack of
motive power to activate and operate it. Despite the natural reluctance to surrender part of
one’s hard earned income to the taxing authorities, every person who is able to must
contribute his share in the running of the government. The government, on its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values. This symbiotic relationship is
the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method
of exaction by those in the seat of power.

Taxation is a requirement in all democratic regimes that it be exercised reasonably and

in accordance with the procedure. If not then the taxpayer has a right to complain the courts
will then come to his succor. The tax collector may be stopped in his tracts if the taxpayer can
demonstrate that the law has not been observed.

The appealed decision of the Court of Tax Appeal is hereby affirmed.

9. Commissioner of Internal Revenue v. Pilipinas Shell

petroleum Corporation
GR No. 197945, July 9, 2018
FACTS:
Respondents Pilipinas Shell Petroleum Corporation (Shell) and Petron Corporation
(Petron) are domestic corporations engaged in the production of petroleum products and are
duly registered with the Board of Investments (BOI) under the Omnibus Investments Code of
1987.
From 1988 to 1996, respondents separately sold bunker oil and other fuel products to
other BOT-registered entities engaged in the export of their own manufactured goods (BOI
export entities). These BOT-registered export entities used Tax Credit Certificates (TCCs)
originally issued in their name to pay for these purchases. To proceed with this mode of
payment, the BOT-registered export entities executed Deeds of Assignment in favor of
respondents, transferring the TCCs to the latter. Subsequently, the Department of Finance
(DOF), through its One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOF
Center), approved the Deeds of Assignment.
In its collection letters of the petitioner CIR dated April 22, 1998 (1998 Collection
Letters) addressed to respondents, the BIR pointed out that respondents partly paid for their
excise tax liabilities during the Covered Years using TCCs issued in the names of other
companies; invalidated respondents' tax payments using said TCCs; and requested
respondent Shell and respondent Petron to pay their delinquent tax liabilities amounting to
P1,705,028,008.06 and P1,107,542,547.08, respectively.
Respondents separately filed their administrative protests against the 1998 Collection
Letters, but the BIR denied said protests. The BIR maintained that the transfers of the TCCs
from the BOI-registered export entities to respondents and the use of the same TCCs by
respondents to pay for their self-assessed specific tax liabilities were invalid, and reiterated its
demand that respondents pay their delinquent taxes.

This prompted respondent Petron to file a Petition for Review before the CTA.
Respondents raised similar arguments against petitioner, to wit: (a) The collection of tax
without prior assessment was a denial of the taxpayer's right to due process; (b) The use of
TCCs as payment of excise tax liabilities was valid; (c) Since the BIR approved the transfers
and subsequent use of the TCCs, it was estopped from questioning the validity thereof; and
(d) The BIR's right to collect the alleged delinquent taxes had already prescribed. The CTA
granted respondents' petitions in separate Decisions on 1999. Petitioner's motions for
reconsideration were denied by the CTA. Thus, petitioner CIR sought recourse before the
Court of Appeals through the consolidated petitions. However, the Court of Appeals dismissed
the petitions and found the transfer and utilization of the subject TCCs were valid, in
accordance with the 2007 Shell Case. The appellate court eventually denied petitioner's
motion for reconsideration.
Meanwhile, during the pendency of respondent Shell's CTA Case No. 6003 (which
was eventually elevated to this Court in the 2007 Shell Case), the BIR requested respondent
Shell to pay its purported excise tax liabilities amounting to P234,555,275.48, in a collection
letter dated June 17, 2002 (2002 Collection Letter). Shell filed a petition for review before the
CTA arguing that (a) the issuance of the 2002 Collection Letter and Warrant of Distraint
and/or Levy and enforcement of DOF Center's Executive Committee Resolution No. 03-05-99
violated its right to due process; (b) The DOF Center did not have authority to cancel the
TCCs; (c) The TCCs' transfers and utilizations were valid and legal; (d) It was an innocent
purchaser for value; (e) The HIR was estopped from invalidating the transfer and utilization of
the TCCs; and (f) The HIR's right to collect had already prescribed. The CTA Second Division
ruled in favor of respondent Shell. The CIR moved for reconsideration but was denied.
ISSUE: Whether the petitioner's attempts to collect the alleged deficiency excise taxes from
respondents are valid.
RULING: NO. Petitioner's attempts to collect the alleged deficiency excise taxes from
respondents are void and ineffectual because (a) the Issues regarding the transferred TCCs'
validity, respondents' qualifications as transferees of said TCCs, and respondents' use of the
TCCs to pay for their excise tax liabilities for the Covered Years, had already been settled
with finality in the 2007 Shell Case and 2010 Petron Case, and could no longer be re-litigated
on the ground of res judicata in the concept of conclusiveness of judgment; (b) petitioner's
resort to summary administrative remedies without a valid assessment was not in accordance
with the prescribed procedure and was in violation of respondents' right to substantive due
process; and (c) none of petitioner's collection efforts constitute a valid institution of a judicial
remedy for collection of taxes without an assessment, and any such judicial remedy is now
barred by prescription.
Wherefore, the Court DENIES the petition of the Commissioner of Internal Revenue.

(Pakibasa na lang po iyong full case for better understanding )

January 1, 2003 to June 30, 2003 – Filed

VAT returns
August 9, 2004 – Tax refund
COMMISSIONER OF INTERNAL REVENUE (CIR) December 7, 2004 – End of 120d for
CIR to decide
v. January 6, 2005 – End of 30d to file
DASH ENGINEERING PHILIPPINES, INC. (DEPI) judicial claim
May 5, 2005 – DEPI filed a PFR (almost
4months late)

GR 184145, Dec. 11, 2013

FACTS: Respondent DEPI filed its monthly and quarterly value-added tax (VAT)
returns for the period from January 1, 2003 to June 30, 2003. On August 9, 2004, it
filed a claim for tax refund for the unutilized input VAT attributable to its zero-
rated sales. Because petitioner Commissioner of Internal Revenue (CIR) failed to
act upon the said claim, respondent was compelled to file a petition for review
(This is a judicial claim) with the CTA on May 5, 2005. CTA ruled in favor of DEPI.
CIR elevated the case to CTA En Banc averring that the claim was filed out of
time. DEPI asserts that its petition was seasonably filed before the CTA in keeping
with the two-year prescriptive period provided for in Sections 204(c) and 229 of
the NIRC. CTA En Banc affirmed the CTA division ruling.

ISSUE: Whether respondent DEPI’s judicial claim was filed within the prescriptive
period under Sec. 112 of the Tax Code.

HELD: NO. The two-year period in Sec. 112 refers only to administrative claims.
Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally
collected taxes. Input VAT is not ‘excessively’ collected as understood under
Section 229 because at the time the input VAT is collected the amount paid is
correct and proper. Hence, respondent cannot advance its position by referring
to Section 229 because Section 112 is the more specific and appropriate
provision of law for claims for excess input VAT. Petitioner is entirely correct in its
assertion that compliance with the periods provided for in the above quoted
provision is indeed mandatory and jurisdictional, as affirmed in this Court’s ruling
in San Roque, where the Court En Banc settled the controversy surrounding the
application of the 120+30-day period provided for in Section 112 of the NIRC and
reiterated the Aichi doctrine that the 120+30-day period is mandatory and
jurisdictional.

Therefore, in accordance with San Roque, respondent’s judicial claim for refund
must be denied for having been filed late. Although respondent filed its
administrative claim with the BIR on August 9, 2004 before the expiration of the
two-year period in Section l 12(A), it undoubtedly failed to comply with the 120+
30-day period in Section 112(D) (now subparagraph C) which requires that upon
the inaction of the CIR for 120 days after the submission of the documents in
support of the claim, the taxpayer has to file its judicial claim within 30 days after
the lapse of the said period. The 120 days granted to the CIR to decide the case
ended on December 7, 2004. Thus, DEPI had 30 days therefrom, or until January 6,
2005, to file a petition for review with the CTA. Unfortunately, DEPI only sought
judicial relief on May 5, 2005 when it belatedly filed its petition to the CTA, despite
having had ample time to file the same, almost four months after the period
allowed by law. As a consequence of DEPI’s late filing, the CTA did not properly
acquire jurisdiction over the claim.

The Philippine Guaranty Co., Inc. v. The Commissioner Of Internal Revenue And The
Court Of Tax Appeals, G.R. No. L-22074, April 30, 1965

FACTS:
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into
reinsurance contracts with foreign insurance companies not doing business in the Philippines.
Thereafter, the PGCI agreed to cede to the foreign reinsurers a portion of the premiums on
insurance it has originally underwritten in the Philippines, in consideration for the assumption
by the foreign insurers of the liability on an equivalent portion of the risks insured. These
reinsurance contracts were signed by PGCI in Manila and by the foreign reinsurers outside
the Philippines.
The total premiums ceded to the foreign reinsurers are: P842,466.71 in 1953, and
P721,471.85 in 1954. These premiums were excluded by PGCI from its gross income when it
filed its income tax returns for 1953 and 1954. It also did not withhold or pay tax on them.
 On a letter dated April 13, 1959, the Commissioner of Internal Revenue assessed
against Philippine Guaranty Co., Inc. withholding tax on the ceded reinsurance premiums the
amount of 230,673 and 234,364 for 1953 and 1954, respectively.
PGCI protested the assessment on the ground that reinsurance premiums ceded to
foreign reinsurers not doing business in the Philippines are not subject to withholding tax. Its
protest was denied and it appealed to the Court of Tax Appeals.
The Court on Tax Appeals affirmed the decision with modification on the amount
payable. It held that PGCI shall pay the respective sums of P202,192.00 and P173,153.00 or
the total sum of P375,345.00 as withholding income taxes for the years 1953 and 1954, plus
the statutory delinquency penalties thereon, with costs.
PGCI appealed to the Supreme Court arguing that the reinsurance premiums in
question did not constitute income from sources within the Philippines because the foreign
reinsurers did not engage in business in the Philippines, nor did they have office here.
ISSUE:
Whether reinsurance premiums ceded to foreign reinsurers not doing business in the
Philippines are subject to withholding tax.
HELD:
Yes, Section 24 of the Tax Code subjects foreign corporations to tax on their income
from sources within the Philippines. The reinsurance premiums were income created from the
undertaking of the foreign reinsurance companies to reinsure PGCI against liability for loss
under original insurances. Hence, such undertaking took place in the Philippines. These
insurance premiums, thus, came from sources within the Philippines, therefore subject to
corporate income tax. Furthermore, such provision provides that a foreign corporation is not
required to engage in business in the Philippines in subjecting its income to tax. It suffices
that the activity creating the income is performed or done in the Philippines. What is
controlling is not the place of business but the place of activity that created an income.
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 Supreme Court affirmed the decision appealed from, and ordered the PGCI to
pay to the CIR the sums of P202,192.00 and P173,153.00, or a total amount of P375,345.00.

G.R. No. 187631 July 8, 2015

BATANGAS CITY, MARIA TERESA GERON, In her capacity as City Treasurer of Batangas City and
TEODULFO A. DEGUITO, In his capacity as City Legal Officer of Batangas City, Petitioners,
vs.
PILIPINAS SHELL PETROLEUM CORPORATION, Respondent.

FACTS: Petitioner Batangas City is a local government unit (LGU) with the capacity to sue and be sued
under its Charter and Section 22(a)(2) of the Local Government Code (LGC) of 1991. Petitioners
Teodulfo A. Deguito and Benjamin E. Pargas are the CityLegal Officer and City Treasurer, respectively,
of Batangas City.
Respondent Pilipinas Shell Petroleum Corporation operates an oil refinery and depot in Tabagao,
Batangas City, which manufactures and produces petroleum products that are distributed nationwide.

In 2002, respondent was only paying the amount of ₱98,964.71 for fees and other charges which
include the amount of ₱1,180.34 as Mayor’s Permit. However, on February 20, 2001, petitioner
Batangas City, through its City Legal Officer, sent a notice of assessment to respondent demanding
the payment of ₱92,373,720.50 and ₱312,656,253.04 as business taxes for its manufacture and
distribution of petroleum products. In addition, respondent was also required and assessed to pay the
amount of ₱4,299,851.00 as Mayor’s Permit Fee based on the gross sales of its Tabagao Refinery. The
assessment was allegedly pursuant of Section 134 of the LGC of 1991 and Section 23 of its Batangas
City Tax Code of 2002.

In response, respondent filed a protest on April 17, 2002 contending among others that it is not liable
for the payment of the local business tax either as a manufacturer or distributor of petroleum
products. It further argued that the Mayor’s Permit Fees are exorbitant, confiscatory, arbitrary,
unreasonable and not commensurable with the cost of issuing a license.

On May 13, 2002, petitioners denied respondent’s protest and declared that under Section 14 of the
Batangas City Tax Code of 2002, they are empowered to withhold the issuance of the Mayor’s Permit
for failure of respondent to pay the business taxes on its manufacture and distribution of petroleum
products.

On June 17, 2002, respondent filed a Petition for Review pursuant to Section 195 of the LGC of 1991
before the Regional Trial Court (RTC) of Batangas City.

In its petition, respondent maintained that petitioners have no authority to impose the said taxes and
fees, and argued that the levy of local business taxes on the business of manufacturing and
distributing gasoline and other petroleum products is contrary to law and against national policy. It
further contended that the Mayor’s Permit Fee levied by petitioners were unreasonable and
confiscatory.

In its Answer, petitioners contended that the City of Batangas can legally impose taxes on the
business of manufacturing and distribution of petroleum products, including the Mayor’s Permit Fees
upon respondent.

On October 29, 2004, the RTC of Batangas City rendered a Decision 5 sustaining the imposition of
business taxes by petitioners upon the manufacture and distribution of petroleum products by
respondent. However, the RTC withheld the imposition of Mayor’s Permit Fee in deference to the
provisions of Section 147 of the LGC, in relation to Section 143(h) of the same Code, which imposed a
limit to the power of petitioners to collect the said business taxes.

Respondent filed a "Motion for Partial Reconsideration." The RTC denied respondent’s motion for lack
of merit. Hence, respondent filed a Petition for Review with Extremely Urgent Application for a
Temporary Restraining Order and/or a Writ of Preliminary Injunction with the CTA Second Division on
April 27, 2005. The CTA Second Division granted respondent’s petition. It held that respondent is not
subject to the business taxes on the manufacture and distribution of petroleum products because of
the express limitation provided under Section 133(h) of the LGC.

In its petition, petitioners assert that any activity that involves the production or manufacture and the
distribution or selling of any kind or nature as a means of livelihood or with a view to profit can be
taxed by the LGUs. They posit that the authority granted to them by Section 143(h) of the LGC is so
broad that it practically covers any business that the sanggunian concerned may deem proper to tax,
even including businesses which are already subject to excise, value-added or percentage tax under
the National Internal Revenue Code (NIRC) provided that the same shall not exceed two percent of
the gross sales or receipts of the preceding calendar year.
ISSUE: Whether a LGU is empowered under the LGC to impose business taxes on persons or entities
engaged in the business of manufacturing and distribution of petroleum products.

RULING: No.

At the outset, it must be emphasized that although the power to tax is inherent in the State, the same
is not true for LGUs because although the mandate to impose taxes granted to LGUs is categorical and
long established in the 1987 Philippine Constitution, the same is not all encompassing as it is subject
to limitations as explicitly stated in Section 5, Article X of the 1987 Constitution, viz.:

SECTION 5. Each local government unit shall have the power to create its own sources of revenues
and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the local governments.

This Court expounded that the LGUs’ power to tax is subject to the limitations set forth under Section
133 of the LGC. Thus: It is already well-settled that although the power to tax is inherent in the State,
the same is not true for the LGUs to whom the power must be delegated by Congress and must be
exercised within the guidelines and limitations that Congress may provide. The Court expounded in
Pelizloy Realty Corporation v. The Province of Benguet that:

The power to tax "is an attribute of sovereignty," and as such, inheres in the State. Such, however,
is not true for provinces, cities, municipalities and barangays as they are not the sovereign; rather,
there are mere "territorial and political subdivisions of the Republic of the Philippines."

The rule governing the taxing power of provinces, cities, municipalities and barangays is summarized
in Icard v. City Council of Baguio:

It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of
taxation. The charter or statute must plainly show an intent to confer that power or the municipality,
cannot assume it. And the power when granted is to be construed in strictissimi juris. Any doubt or
ambiguity arising out of the term used in granting that power must be resolved against the
municipality. Inferences, implication, deductions – all these- have no place in the interpretation of the
taxing power of a municipal corporation.

Therefore, the power of a province to tax is limited to the extent that such power is delegated to it
either by the Constitution or by statute.

Second, Section 133 provides for the common limitations on the taxing powers of LGUs.

Among the common limitations on the taxing powers of LGUs under Section 133 of the LGC is
paragraph (h) which states:

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products.;13

From the foregoing, Section 133(h) clearly specifies the two kinds of taxes which cannot be imposed
by LGUs: (1) excise taxes on articles enumerated under the NIRC, as amended; and (2) taxes, fees or
charges on petroleum products.
Indisputably, the power of LGUs to impose business taxes derives from Section 143 of the LGC.
However, the same is subject to the explicit statutory impediment provided for under Section 133(h)
of the same Code which prohibits LGUs from imposing "taxes, fees or charges on petroleum
products." It can, therefore, be deduced that although petroleum products are subject to excise tax,
the same is specifically excluded from the broad power granted to LGUs under Section 143(h) of the
LGC to impose business taxes.

Pepsi Cola Bottling Co. of the Philippines Inc. v. Municipality of Tanauan, Leyte
Facts:
Pepsi-Cola commenced a complaint with preliminary injunction to declare Sec2 of
RA 2264 otherwise known as the Local Autonomy Act, unconstitutional as an undue
delegation of taxing authority as well as to declare ordinances nos. 23 and 27
denominated as municipal production tax of the Municipality of Tanauan, Leyte, null
and void. Municipal Ordinance No. 23 levies and collects from soft drinks producers
and manufacturers a tax of 1/16 of a centavo for every bottle of soft drink corked. On
the other hand 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 on each gallon of volume capacity. Aside from the undue
delegation of authority, appellant contends that it allows double taxation, and that
the subject ordinances are void for they impose percentage or specific tax.
Issue:
1. Whether Sec2 of RA 2264 an undue delegation of power, confiscatory and
oppressive
2. Do ordinance nos. 23 and 27 constitute double taxation and impose
percentage or specific taxes

Ruling:
1. On the issue of undue delegation of taxing power, it is settled that the power
of taxation is an essential and inherent attribute of sovereignty, belonging as a
matter of right to every independent government, without being expressly
conferred by the people. It is a power that is purely legislative and which the
central legislative body cannot delegate either to the executive or judicial
department of the government without infringing upon the theory separation
of powers. The exception, however, lies in the case of municipal corporations,
to which, said theory does not apply. 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.
2. Double taxation, in general, is not forbidden by our fundamental law, so that
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. On the last issue raised, the ordinances
do 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.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN

24 SCRA 789
GR No. L-22814, August 28, 1968

FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to
the City of Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110
which plaintiff assails as null and void because

1. it partakes of the nature of an import tax, amounts to double taxation,

2. highly unjust and discriminatory,
3. excessive, oppressive and confiscatory, and
4. constitutes an invalid delegation of the power to tax.
The ordinance imposes taxes for every case of softdrinks, liquors and other carbonated
beverages, regardless of the volume of sales, shipped to the agents and/or consignees by
outside dealers or any person or company having its actual business outside the City.

The second and last objections are manifestly devoid of merit. Indeed — independently of
whether or not the tax in question, when considered in relation to the sales tax prescribed by
Acts of Congress, amounts to double taxation, on which we need not and do not express any
opinion - double taxation, in general, is not forbidden by our fundamental law.

We have not adopted, as part thereof, the injunction against double taxation found in the
Constitution of the United States and of some States of the Union. Then, again, the general
principle against delegation of legislative powers, in consequence of the theory of separation
of powers is subject to one well-established exception, namely: legislative powers may be
delegated to local governments — to which said theory does not apply — in respect of
matters of local concern.

The third objection is, likewise, untenable. The tax of "P0.10 per case of 24 bottles," of soft
drinks or carbonated drinks — in the production and sale of which plaintiff is engaged — or
less than P0.0042 per bottle, is manifestly too small to be excessive, oppressive, or
confiscatory.

The first and the fourth objections merit, however, serious consideration. In this connection, it
is noteworthy that the tax prescribed in section 3 of Ordinance No. 110, as originally
approved, was imposed upon dealers "engaged in selling" soft drinks or carbonated drinks.
Thus, it would seem that the intent was then to levy a tax upon the sale of said merchandise.
As amended by Ordinance No. 122, the tax is, however, imposed only upon "any agent
and/or consignee of any person, association, partnership, company or corporation engaged in
selling ... soft drinks or carbonated drinks." And, pursuant to section 3-A, which was inserted
by said Ordinance No. 122:

... — Definition of the Term Consignee or Agent. — For purposes of this Ordinance, a
consignee of agent shall mean any person, association, partnership, company or corporation
who acts in the place of another by authority from him or one entrusted with the business of
another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft
drinks every month for resale, either retail or wholesale.

As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not
subject to the tax, unless they are agents and/or consignees of another dealer, who, in the
very nature of things, must be one engaged in business outside the City. Besides, the tax
would not be applicable to such agent and/or consignee, if less than 1,000 cases of soft
drinks are consigned or shipped to him every month. When we consider, also, that the tax
"shall be based and computed from the cargo manifest or bill of lading ... showing the number
of cases" — not sold — but "received" by the taxpayer, the intention to limit the application of
the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof
becomes apparent. Viewed from this angle, the tax partakes of the nature of an import duty,
which is beyond defendant's authority to impose by express provision of law.

Even however, if the burden in question were regarded as a tax on the sale of said
beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity
required by the Constitution and the law therefor, since only sales by "agents or consignees"
of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on
behalf of other merchants, regardless of the volume of their sales, and even if the same
exceeded those made by said agents or consignees of producers or merchants established
outside the City of Butuan, would be exempt from the disputed tax.

It is true that the uniformity essential to the valid exercise of the power of taxation does not
require identity or equality under all circumstances, or negate the authority to classify the
objects of taxation.5 The classification made in the exercise of this authority, to be valid, must,
however, be reasonable and this requirement is not deemed satisfied unless:

(1) it is based upon substantial distinctions which make real differences;

(2) these are germane to the purpose of the legislation or ordinance;

(3) the classification applies, not only to present conditions, but, also, to future conditions
substantially identical to those of the present; and

(4) the classification applies equally all those who belong to the same class.

These conditions are not fully met by the ordinance in question. Indeed, if its purpose were
merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no
reason why sales thereof by sealers other than agents or consignees of producers or
merchants established outside the City of Butuan should be exempt from the tax.

Keywords: Free Port

HON. EXECUTIVE SECRETARY vs. SOUTHWING HEAVY INDUSTRIES, INC.

Ynares-Santiago, J.:

The Consolidated Cases of:

G.R. No. 164171 February 20, 2006

HON. EXECUTIVE SECRETARY, HON. SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND

COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION
OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE
PORT ZONE, Petitioners,
vs.
SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON, UNITED AUCTIONEERS,
INC., represented by its President DOMINIC SYTIN, and MICROVAN, INC., represented by its President
MARIANO C. SONON, Respondents.

G.R. No. 164172 February 20, 2006

HON. EXECUTIVE SECRETARY, SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATION

(DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO),
COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE AND CHIEF OF LTO, SUBIC BAY FREE PORT
ZONE, Petitioners,
vs.
SUBIC INTEGRATED MACRO VENTURES CORP., represented by its President YOLANDA AMBAR,Respondent.

G.R. No. 168741 February 20, 2006

HON. EXECUTIVE SECRETARY, HON. SECRETARY OF FINANCE, THE CHIEF OF THE LAND TRANSPORTATION
OFFICE, THE COMMISSIONER OF CUSTOMS, and THE COLLECTOR OF CUSTOMS, SUBIC SPECIAL ECONOMIC
ZONE, Petitioners,
vs.
MOTOR VEHICLE IMPORTERS ASSOCIATION OF SUBIC BAY FREEPORT, INC., represented by its President
ALFREDO S. GALANG, Respondent.

FACTS: This instant consolidated petitions seek to annul the decisions of the Regional Trial Court which declared
Article 2, Section 3.1 of Executive Order 156 unconstitutional. Said EO 156 prohibits the importation of used
vehicles in the country inclusive of the Subic Bay Freeport Zone.

On December 12, 2002, President Gloria Macapagal Arroyo issued Executive Order 156 entitled "Providing for a
comprehensive industrial policy and directions for the motor vehicle development program and its implementing
guidelines." The said provision prohibits the importation of all types of used motor vehicles in the country
including the Subic Bay Freeport, or the Freeport Zone, subject to a few exceptions.

Consequently, three separate actions for declaratory relief were filed by Southwing Heavy Industries Inc, Subic
Integrated Macro Ventures Corp, and Motor Vehicle Importers Association of Subic Bay Freeport Inc. praying that
judgment be rendered declaring Article 2, Section3.1 of the EO 156 unconstitutional and illegal.

The RTC rendered a summary judgment declaring that Article 2, Section 3.1 of EO 156 constitutes an unlawful
usurpation of legislative power vested by the Constitution with Congress and that the proviso is contrary to the
mandate of Republic Act 7227(RA 7227) or the Bases Conversion and Development Act of 1992 which allows the
free flow of goods and capital within the Freeport.

The petitioner appealed in the CA but was denied on the ground of lack of any statutory basis for the President to
issue the same. It held that the prohibition on the importation of use motor vehicles is an exercise of police
power vested on the legislature and absent any enabling law, the exercise thereof by the President through an
executive issuance is void.

ISSUES:
 1. Whether or not the Private Respondents have the legal standing in questionaing the said law?

2. Whether or not Article2, Section 3.1 of EO 156 is a valid exercise of the President’s quasi-legislative
power.

HELD:

1. YES. Petitioners argue that respondents will not be affected by the importation ban considering that
their certificate of registration and tax exemption do not authorize them to engage in the importation
and/or trading of used cars.

The established rule that the constitutionality of a law or administrative issuance can be challenged by one who
will sustain a direct injury as a result of its enforcementhas been satisfied in the instant case. The broad subject
of the prohibited importation is “all types of used motor vehicles.” Respondents would definitely suffer a direct
injury from the implementation of EO 156 because their certificate of registration and tax exemption authorize
them to trade and/or import new and used motor vehicles and spare parts, except “used cars.” Other types of
motor vehicles imported and/or traded by respondents and not falling within the category of used cars would
thus be subjected to the ban to the prejudice of their business. Undoubtedly, respondents have the legal
standing to assail the validity of EO 156.

2. YES BUT

Police power is inherent in a government to enact laws, within constitutional limits, to promote the order, safety,
health, morals, and general welfare of society. It is lodged primarily with the legislature. By virtue of a valid
delegation of legislative power, it may also be exercised by the President and administrative boards, as well as
the lawmaking bodies on all municipal levels, including the barangay. Such delegation confers upon the President
quasi-legislative power which may be defined as the authority delegated by the law-making body to the
administrative body to adopt rules and regulations intended to carry out the provisions of the law and implement
legislative policy provided that it must comply with the following requisites:

(1) Its promulgation must be authorized by the legislature;

(2) It must be promulgated in accordance with the prescribed procedure;

(3) It must be within the scope of the authority given by the legislature; and

(4) It must be reasonable.

The first requisite was actually satisfied since EO 156 has both constitutional and statutory bases.

Anent the second requisite, that the order must be issued or promulgated in accordance with the prescribed
procedure, the presumption is that the said executive issuance duly complied with the procedures and
limitations imposed by law since the respondents never questioned the procedure that paved way for the
issuance of EO 156 but instead, what they challenged was the absence of substantive due process in the issuance
of the EO.

In the third requisite, the Court held that the importation ban runs afoul with the third requisite as administrative
issuances must not be ultra vires or beyond the limits of the authority conferred. In the instant case, the subject
matter of the laws authorizing the President to regulate or forbid importation of used motor vehicles, is
the domestic industry. EO 156, however, exceeded the scope of its application by extending the prohibition on the
importation of used cars to the Freeport, which RA 7227, considers to some extent, a foreign territory.
The domestic industry which the EO seeks to protect is actually the "customs territory" which is defined under
the Rules and Regulations Implementing RA 7227 which states: "the portion of the Philippines outside the Subic
Bay Freeport where the Tariff and Customs Code of the Philippines and other national tariff and customs laws are
in force and effect."

Regarding the fourth requisite, the Court finds that the issuance of EO is unreasonable. Since the nature of EO
156 is to protect the domestic industry from the deterioration of the local motor manufacturing firms, the Court
however, finds no logic in all the encompassing application of the assailed provision to the Freeport Zone which is
outside the customs territory of the Philippines. As long as the used motor vehicles do not enter the customs
territory, the injury or harm sought to be prevented or remedied will not arise.

The Court finds that Article 2, Section 3.1 of EO 156 is VOID insofar as it is made applicable within the secured
fenced-in former Subic Naval Base area but is declared VALID insofar as it applies to the customs territory or the
Philippine territory outside the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1
of EO 97-A (an EO executed by Pres. Fidel V. Ramos in 1993 providing the Tax and Duty Free Privilege within the
Subic Freeport Zone). Hence, used motor vehicles that come into the Philippine territory via the secured fenced-
in former Subic Naval Base area may be stored, used or traded therein, or exported out of the Philippine
territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in former Subic
Naval Base area.

Petitions are PARTIALLY GRANTED provided that said provision is declared VALID insofar as it applies to the
Philippine territory outside the presently fenced-in former Subic Naval Base area and VOID with respect to its
application to the secured fenced-in former Subic Naval Base area.

CENON S. CERVANTES v. THE AUDITOR GENERAL

Facts:

Cenon S. Cervantes was the manager of the NAFCO in 1949. By a

resolution of the Board of Directors of the corporation, he was granted
quarters allowance of not exceeding P400 a month effective the first
month. The said resolution was disapproved by the Control Committee of the
Government Enterprises Council on strength of the recommendation of the
NAFCO auditor, concurred in by the Auditor General, (1) that quarters
allowance constituted additional compensation prohibited by the charter of the
NAFCO, which fixes the salary of the general manager thereof at the sum not
to exceed P15,000 a year, and (2) that the precarious financial condition of
the corporation did not warrant the granting of such allowance.

Cervantes asked the Control Committee to reconsider its action and

approve his claim for allowance which was again referred by the Control
Committee to the auditor General for comment. The auditor General, in turn
referred it to the NAFCO auditor, who reaffirmed his previous
recommendation and emphasized that the fact that the corporation's finances
had not improved. Hence this petition for review.

Issue:

Whether Republic Act No. 51 is valid

Ruling:

The rule is that so long as the Legislature "lays down a policy and a
standard is established by the statute" there is no undue delegation. (11 Am.
Jur. 957). Republic Act No. 51 in authorizing the President of the Philippines,
among others, to make reforms and changes in government-controlled
corporations, lays down a standard and policy that the purpose shall be to
meet the exigencies attendant upon the establishment of the free and
independent government of the Philippines and to promote simplicity,
economy and efficiency in their operations. The standard was set and the
policy fixed. The President had to carry the mandate. This he did by
promulgating the executive order in question which, tested by the rule above
cited, does not constitute an undue delegation of legislative power.