Concept, Nature, and Characteristics of Taxation and Taxes COMMISSIONER OF INTERNAL REVENUE vs.

CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS G.R. No. L-29059 December 15, 1987

FACTS: By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as modified on appeal by the Supreme Court on February 27, 1965, the Commissioner of Internal Revenue was ordered to refund to the Cebu Portland Cement Company the amount of P359,408.98, representing overpayments of ad valorem taxes on cement produced and sold by it after October 1957. On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and the private respondent, the latter moved for a writ of execution to enforce the said judgment. The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. On April 22, 1968, the Court of Tax Appeals granted the motion, holding that the alleged sales tax liability of the private respondent was still being questioned and therefore could not be set-off against the refund. ISSUE: Whether or not the judgment debt can be enforced against private respondents sales tax liability, the latter still being questioned. RULING: The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. The Tax Code provides: Sec. 291. Injunction not available to restrain collection of tax. - No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code. It goes without saying that this injunction is available not only when the assessment is already being questioned in a court of justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on the administrative level. There is all the more reason to apply the rule here because it appears that even after crediting of the refund against the tax deficiency, a balance of more than P 4 million is still due from the private respondent. Commissioner vs. Algue GRL-28890, 17 February 1988First Division, Cruz (J); 4 concur Facts: The Philippine Sugar Estate Development Company (PSEDC) appointed Algue Inc. as its agent, authorizing it to sell its land, factories, and oil manufacturing process. The Vegetable Oil Investment Corporation (VOICP) purchased PSEDC properties. For the sale, Algue received a commission of P125,000 and it was from this commission that it paid Guevara, et. al. organizers of the VOICP, P75,000in promotional fees. In 1965, Algue received an assessment from the Commissioner of Internal Revenue in the amount of P83,183.85 as delinquency income tax for years 1958 and 1959. Algue filed a protestor request for reconsideration which was not acted upon by the Bureau of Internal Revenue (BIR). The counsel for Algue had to accept the warrant of distrant and levy. Algue, however, filed a petition for review with the Court of Tax Appeals. Issue: Whether the assessment was reasonable. Held: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Every person who is able to pay must contribute his share in the running of the government. The Government, for his 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 is an arbitrary method of exaction by those in the seat of power. Tax collection, however, should be made in accordance with law as any arbitrariness will negate the very reason for government itself. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate that the law has not been observed. Herein, the claimed deduction (pursuant to Section 30[a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation 2: as to compensation for personal services) had been legitimately by Algue Inc. It has further proven that the payment of fees was reasonable and necessary in light of the efforts exerted by the payees in inducing investors (in VOICP) to involve themselves in an experimental enterprise or a business requiring millions of pesos. The assessment was not reasonable. Hodges vs. Iloilo City GR L-18129, 31 January 1963 En Banc, Bautista Angelo (J): 7 concur, 2 affirm, 1 took no part Facts: In 1960, the Municipal Board of Iloilo enacted Ordinance 33 requiring the payment of a sales tax of 1/2 of 1% of the selling price of any motor vehicle and prohibiting the registration of the sale involving said vehicle in the Motors Vehicle Office of Iloilo unless the tas has been paid. It also expressly required that the payment of the municipal tax shall be a requirement for registration and transfer of ownership. CN Hodges, engaged in buying-and-selling of second hand motor vehicles in the city, assailed the ordinance as invalid for being passed in excessof the authority conferred by law upon the municipal board. Issue: Whether the City of Iloilo is empowered to impose the tax. Held: The City of Iloilo is empowered to impose municipal licenses, taxes or fees upon any person engaged in any occupation or business, or exercising any privilege in the City; to regulate and impose reasonable fees for services rendered conducted within the city, and to levy for public purposes just and uniform taxes, licenses, or fees. The tax in question is in the form of percentage tax on the proceeds of the sale of a motor vehicle. The prohibition against such tax refer only to municipalities and municipal districts and does not comprehend chartered cities as the City of Iloilo.

Classifications and Distinctions Association of Custom Brokers Inc., vs. Municipal Board [G.R. No. L-4376 May 22, 1953] Post under case digests, Taxation at Thursday, February 23, 2012 Facts: The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor vehicles in the City of Manila challenge the validity Ordinance No. 3379 on the ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes double taxation. The respondents contend on their part that the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter, and that the tax in question does not violate the rule of uniformity of taxation, nor does it constitute double taxation.

Issue: Whether or not the ordinance is null and void. Held: Coming to the ordinance in question, the Court finds that its title refers to it as "An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila", and that in its section 1 it provides that the tax should be 1 per cent ad valorem per annum. It also provides that the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be expended exclusively for the repair, maintenance and improvement of its streets and bridges. While as a rule an ad valorem tax is a property tax, and this rule is supported by some authorities, the rule should not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad valorem yet the Court cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway. This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that the Court believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to. The ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to Manila and uses its streets and public highways. This is an inequality which the Court finds in the ordinance, and which renders it offensive to the Constitution. Esso Standard Eastern Inc. vs. CIR (G.R. Nos. L-28508-9, July 7, 1989) Facts: In CTA Case No. 1251, Esso Standard Eastern Inc. (Esso) deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its petroleum concessions. This claim was disallowed by the Commissioner of Internal Revenue (CIR) on the ground that the expenses should be capitalized and might be written off as a loss only when a "dry hole" should result. Esso then filed an amended return where it asked for the refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells. Also claimed as ordinary and necessary expenses in the same return was the amount of P340,822.04, representing margin fees it had paid to the Central Bank on its profit remittances to its New York head office. On August 5, 1964, the CIR granted a tax credit of P221,033.00 only, disallowing the claimed deduction for the margin fees paid on the ground that the margin fees paid to the Central Bank could not be considered taxes or allowed as deductible business expenses. Esso appealed to the Court of Tax Appeals (CTA) for the refund of the margin fees it had earlier paid contending that the margin fees were deductible from gross income either as a tax or as an ordinary and necessary business expense. However, Essos appeal was denied. Issues: (1) Whether or not the margin fees are taxes. (2) Whether or not the margin fees are necessary and ordinary business expenses. Held: (1) No. A tax is levied to provide revenue for government operations, while the proceeds of the margin fee are applied to strengthen our country's international reserves. The margin fee was imposed by the State in the exercise of its police power and not the power of taxation. (2) No. Ordinarily, an expense will be considered 'necessary' where the expenditure is appropriate and helpful in the development of the taxpayer's business. It is 'ordinary' when it connotes a payment which is normal in relation to the business of the taxpayer and the surrounding circumstances. Since the margin fees in question were incurred for the remittance of funds to Esso's Head Office in New York, which is a separate and distinct income taxpayer from the branch in the Philippines, for its disposal abroad, it can never be said therefore that the margin fees were appropriate and helpful in the development of Esso's business in the Philippines exclusively or were incurred for purposes proper to the conduct of the affairs of Esso's branch in the Philippines exclusively or for the purpose of realizing a profit or of minimizing a loss in the Philippines exclusively. If at all, the margin fees were incurred for purposes proper to the conduct of the corporate affairs of Esso in New York, but certainly not in the Philippines. Progressive Development Corporation vs. Quezon City GR 36081, 24 April 1989 Third Division, Feliciano (J): 4 concur Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where privately owned and operated public markets to pay 10% of the gross receipts from stall rentals to the City, as supervision fee. Such ordinance was amended by Ordinance 9236 (1972), which imposed a 5% tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon City. Progressive Development Corp., owned and operator of Farmers Market and Shopping Center, filed a petition for prohibition against the city on the ground that the supervision fee or license tax imposed is in reality a tax on income the city cannot impose. Issue: Whether the supervision fee / license tax is a tax on income. Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on income, nor a city income tax (distinguished from the national income tax by the Tax Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of business in which the company is engaged. To be considered a license fee, the imposition must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulations for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of the regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. The gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due to the city to cover the latters administrative expenses. The use of the gross amount of stall rentals, as basis for the determination of the collectible amount of license tax, does not by itself convert or render the license tax into a prohibited city tax on income. For ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related items sold in the privately owned market; and the higher the volume of goods sold in such market, the greater extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public.

Philippine Airlines vs. Edu GR L-41383, 15 August 1988 En Banc, Gutierrez Jr. (J): 13 concur Facts: The Philippine Airlines (PAL) is engaged in the air transportation business under a legislative franchise, Act 4271, wherein it is exempt from the payment of taxes. On the strength of an opinion of the Secretary of Justice (Opinion 307 of 1956), PAL was determined to have not been paying motor vehicle registration fees since 1956. The Land Transportation Commissioner required all tax exempt entities, including PAL, to pay motor vehicle registration fees. PAL protested. Issue: Whether registration fees as to motor vehicles are taxes to which Philippine Airlines is exempt. Held: Taxes are for revenue, whereas fees are exactions for purposes of regulation and inspection, and are for that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. It is the object of the charge, and not the name, that determines whether a charge is a tax or a fee. The money collected under the Motor Vehicle Law is not intended for the expenditures of the Motor Vehicle Office but accrues to the funds for the construction and maintenance of public roads, streets and bridges. As the fees are not collected for regulatory purposes as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, but to provide revenue with which the Government is to construct and maintain public highways for everyones use, they are veritable taxes, not merely fees. PAL is, thus, exempt from paying such fees, except for the period between 27 June 1968 to 9 April 1979, where its tax exception in the franchise was repealed. VILLEGAS v. HIU CHIONG TSAI PAO HO G.R. No. L-29646, November 10, 1978 FACTS: On February 22, 1968, the Municipal Board of Manila passed City Ordinance No. 6537. The said city ordinance was also signed by then Manila Mayor Antonio J. Villegas (Villegas). Section 1 of the said city ordinance prohibits aliens from being employed or to engage or participate in any position or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00 except persons employed in the diplomatic or consular missions of foreign countries, or in the technical assistance programs of both the Philippine Government and any foreign government, and those working in their respective households, and members of religious orders or congregations, sect or denomination, who are not paid monetarily or in kind. Hiu Chiong Tsai Pao Ho (Tsai Pao Ho) who was employed in Manila filed a petition with the CFI of Manila to declare City Ordinance No. 6537 as null and void for being discriminatory and violative of the rule of the uniformity in taxation. The trial court declared City Ordinance No. 6537 null and void. Villegas filed the present petition. ISSUE: Whether or not City Ordinance No. 6537 is a tax or revenue measure. RULING: Yes. The contention that City Ordinance No. 6537 is not a purely tax or revenue measure because its principal purpose is regulatory in nature has no merit. While it is true that the first part which requires that the alien shall secure an employment permit from the Mayor involves the exercise of discretion and judgment in the processing and approval or disapproval of applications for employment permits and therefore is regulatory in character the second part which requires the payment of P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic or justification in exacting P50.00 from aliens who have been cleared for employment. It is obvious that the purpose of the ordinance is to raise money under the guise of regulation. Compania General de Tobacos de Filipinas vs. Manila GR L-16619, 29 June 1963 En Banc, Dizon (J): 8 concur, 2 took no part Facts: Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed license fees prescribed by Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance 3634 and 3816 were passed; where the term general merchandise found therein included all articles in Sections 123 to 148 of the Tax Code (thus, also liquor under Sections 133 to 135). The Tabacalera paid its wholesalers and retailers taxes. In 1954, the City Treasurer addressed a letter to an accounting firm, expressing the view that liquor dealers paying the annual wholesale and retail fixed tax under Ordinance 3358 are not subject to the wholesale and retail dealers taxes prescribed by City Ordinances 3634, 3301, and 3816. The Tabacalera, upon learning of said stopped including quarterly sworn declarations required by the latter ordinances, and in 1957, demanded refunde of the alleged overpayment. The claim was disallowed. Issue: Whether there is a distinction between Ordinance 3358 and Ordinances 3634, 3301 and 3816, to prevent refund to the company. Held: Generally, the term tax applies to all kinds of exactions which become public funds. Legally, however, a license fee is a legal concept quite distinct from tax: the former is imposed in the exercise of police power for purposes of regulation, while the latter is imposed under the taxing power for the purpose of raising revenues. Ordinance 3358 prescribes municipal license fees for the privilege to engage in the business of selling liquor or alcohol beverages; considering that the sale of intoxicating liquor is (potentially) harmful to public health and morals, and must be subject to supervision or regulation by the State and by cities and municipalities authorized to act in the premises. On the other hand, Ordinances 3634, 3301 and 3816 imposed taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila. Both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, without it being in violation of the rule against double taxation. The contrary view of the Treasurer in its letter is of no consequence as the government is not bound by the errors or mistakes committed by its officers, specially on matters of law. The company, thus, is not entitled to refund. American Mail Line vs. Basilan GR L-12647, 31 May 1961 En Banc, Dizon (J): 9 concur, 1 took no part Facts: The City Council of Basilan City enacted Ordinance 180 (1955) imposing upon a foreign vessel engaged in coastwise trade which may anchor within the territorial waters of Basilan City to pay an anchorage fee of half centavo per registered gross ton of the vessle for the first 24 hours, provided that the maximum charge shall not exceed P75 per day. As the city treasurer assessed and attempted to collect from American Mail Line the anchorage fees, the company filed an action for declaratory relief to have the courts determine the validity of the ordinance. Issue: Whether the anchorage fees were for regulatory or revenue purposes.

Held: The fees required are intended for revenue purposes. The fees have no proper or reasonable relation to the cost of issuing the permits and the cost of inspection or surveillance; being based upon the tonnage of the vessels. The fees imposed on the vessels exceed even the harbor fees imposed by the National Government to raise revenues for the Port Works Fund. The City of Basilan was not granted a blanket authority or power of taxation, but merely given the powers to levy and collect taxes for general and special purposes in accordance with or as provided by law. The power to regulate as an exercise of police power does not include the power to impose fees for review purposes. The ordinance was invalid. JOHN H. OSMEA vs. OSCAR ORBOS et al G.R. No. 99886 March 31, 1993 FACTS: October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Subsequently, the OPSF was reclassified into a "trust liability account,". President Corazon C. Aquino promulgated E. O. 137 expanding the grounds for reimbursement to oil companies for possible cost under recovery incurred as a result of the reduction of domestic prices of petroleum products. The petitioner argues inter alia that "the monies collected pursuant to . . P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a special fund' to be used only for the purpose indicated, and not channelled to another government objective." Petitioner further points out that since "a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created." ISSUE: Whether or not the funds collected under PD 1956 is an exercise of the power of taxation RULING: The levy is primarily in the exercise of the police power of the State. While the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit on how much to tax." The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation as police power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that the overriding consideration is to enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State. It would seem that from the above-quoted ruling, the petition for prohibition should fail.

Republic vs. Bacolod-Murcia Milling Co. GR L-19824-26, 9 July 1999 En Banc, Regala (J): 7 concur, 1 took no part Facts: RA 632 created the Philippine Sugar Institute, a semi-public corporation. In 1951, the Institute acquired the Insular Sugar Refinery for P3.07 million payable in installments from the proceeds of the sugar tax to be collected under RA 632. The operation of the refinery for 1954 to 1957 was disastrous as the Institute suffered tremendous losses. Contending that the purchase of the refinery with money from the Institutes fund was not authorized under RA 632, and that the continued operation of the refinery is inimical to their interest, Bacolod-Murcia Milling Co., Ma-ao Sugar Central, Talisay-Silay Milling Co. and the Central Azucarera del Danao refused to continue with their contribution to said fund. The trial court found them liable under RA 632. Issue: Whether the taxpayers may refuse to pay the special assessment, allegedly distinct from an ordinary tax which no one can refuse to pay. Held: The nature of a special assessment similar to the case has been discussed and explained in Lutz vs. Araneta. The special assessment or levy for the Philippine Sugar Institute (Philsugin) Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but the exercise of police power for the general welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist. Section 2a of the Charter authorizing Philsugin to conduct research work for the sugar industry in all its phases, either agricultural or industrial, for the purpose of introducing into the sugar industry such practices or processes that will reduce the cost of production and achieve greater efficiency in the industry, justifies the acquisition of the refinery in question. The financial loss resulting from the operation thereof is no means an index that the industry did not profit therefrom, as other gains of a different nature (such as experience) may have been realized. Victorias Milling Co. vs. Municipality of Victorias GR L-21183, 27 September 1968 En Banc, Sanchez (J): 9 concur Facts: Ordinance 1 (1956) was approved by the municipal council of Victorias by way of an amendment to 2 municipal ordinances separately imposing license taxes on operators of sugar centrals and sugar refineries. The changes were: (1) with respect to sugar centrals, by increasing the rates of license taxes; and (2) as to sugar refineries, by increasing the rates of license taxes as well as teh range of graduated schedule of annual output capacity. Victorias Milling questioned the validity of Ordinance 1 as it, among others, allegedly singled out Victorias Milling Co. since it is the only operator of a sugar central and a sugar refinery within the jurisdiction of the municipality. Issue: Whether Ordinance 1 is discriminatory. Held: The ordinance does not single out Victorias as the only object of the ordinance but is made to apply to any sugar central or sugar refinery which may happen to operate in the municipality. The fact that Victorias Milling is actually the sole operator of a sugar central and a sugar refinery does not make the ordinance discriminatory. The ordinance is unlike that in Ormoc Sugar Company vs. Municipal Board of Ormoc City, which specifically spelled out Ormoc Sugar as the subject of the taxation, the name of the company herein was never mentioned in the ordinance.

LLADOC v. Commissioner of Internal Revenue G.R. No. L-19201 June 16, 1965 FACTS: Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10, 000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of herein petitioner, for the construction of a new Catholic Church in the locality. The total amount was actually spent for the purpose intended. On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April 29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner was the priest. Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest and the motion for reconsideration presented to the Commissioner of Internal Revenue were denied. The petitioner appealed to the Court of Tax Appeals. ISSUE: Whether or not the assessment for donees gift tax was valid, considering the fact that the Constitution exempts petitioner from taxation RULING: Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation cemeteries, churches and parsonages or convents, appurtenant thereto, and all ands, buildings, and improvements used exclusively for religious purposes. The exemption is only from the payment of taxes assessed on such properties enumerated, as property taxes, as contra distinguished from excise taxes. In the present case, what the Collector assessed was a donees gift tax; the assessment was not on the properties themselves. It did not rest upon general ownership; it was an excise upon the use made of the properties, upon the exercise of the privilege of receiving the properties. Manifestly, gift tax is not within the exempting provisions of the section just mentioned. A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivo, the imposition of which on property used exclusively for religious purposes, does not constitute an impairment of the Constitution. The phrase exempt from taxation should not be interpreted to mean exemption from all kinds of taxes. The exemption is only from the payment of taxes assessed on such properties as property taxes as contradistinguished from excise taxes. A donees gift tax is not a property tax but an excise tax imposed on the transfer of property by way of gift inter vivos. It does not rest upon general ownership, but an excise upon the use made of the properties, upon the exercise of the privilege of receiving the properties. The imposition of such excise tax on property used for religious purpose do not constitute an impairment of the Constitution. The tax exemption of the parish, thus, does not extend to excise taxes.

Power to Tax includes the Power to Destroy Commissioner of Internal Revenue v. Tokyo Shipping Co. LTD G.R. No. L-68252. May 26, 1995 FACTS: Private Respondent is a foreign corporation represented in the Philippines by Soriamont Steamship Agencies, Incorporated. It owns and operates tramper vessel M/V Gardenia. Nasutra chartered M/V Gardenia to load raw sugar in the Philippines. Soriamont Agency paid the required income and common carrier taxes for its transaction with Nasutra. However, upon arrival, the vessel found no sugar for loading. Private respondent, therefore, filed a claim for tax credit before the petitioner Commissioner of Internal Revenue for erroneous payment. Due to the failure of petitioner to act promptly on the matter, private respondent filed a petition for review before the Court of Tax Appeals (CTA) which favoured the tax credit. Petitioner filed a motion for reconsideration, but it was denied by the CTA, hence this petition contending that private respondent has the burden of proof to support its claim of refund, that it failed to prove that it did not realize any receipt from its charter agreement and it suppressed evidence when it did not present its charter agreement. ISSUE: Whether or not private respondent failed to prove that it derived no receipt from its charter agreement, hence, not entitled to a refund. RULING: We find no merit in the petition. The respondent Court of Tax Appeals held that sufficient evidence has been adduced by private respondent proving that it derived no receipt from its charter agreement with Nasutra. The Clearance Vessel to a Foreign Port issued by the District Collector of Customs support such finding. Moreover, the BIR examiner and its appellate division both recommended the approval of private respondents claim of tax refund. Pursuant to Section 24 (b) (2) of the National Internal Revenue Code which at that time, a resident foreign corporation engaged in the transport of cargo is liable for taxes depending on the amount of income it derives from sources within the Philippines. Thus, before such a tax liability can be enforced the taxpayer must be shown to have earned income sourced from the Philippines. Indeed, a claim for refund is in the nature of a claim for exemption 8 and should be construed in strictissimi juris against the taxpayer. And Tokyo has the burden of proof to establish the factual basis of its claim for tax refund. But sufficient evidence has already been adduced by Tokyo proving that it derived no receipt from its charter agreement with NASUTRA - M/V "Gardenia" arrived in Iloilo on January 10, 1981 but found no raw sugar to load and returned to Japan without any cargo laden on board.

Reyes vs. Almanzor 196 SCRA 322; April 26, 1991

FACTS: Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said tenants were paying monthly rentals not exceeding three hundred pesos (P300.00) in July, 1971. On July 14, 1971, the National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter. On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with a definite period. Consequently, the Reyeses were precluded from raising the rentals and from ejecting the tenants thereof. The City Assessor of Manila assessed the value of the Reyeses property on the schedule of market values duly reviewed by the Secretary of Finance. The revision entailed an increase to the tax rates and the petitioners averred that the reassessment imposed upon them greatly exceeded the annual income derived from their properties. ISSUE: WON income approach is the method to be used in the tax assessment and not the comparable sales approach. HELD: The income approach and not the comparable sales approach must be used. By no strength of the imagination can the market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value in view of the rental restrictions. In the case at bar, not even the factors determinant of the assessed value of subject properties under the "comparable sales approach" were presented by the public respondents, namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property must be comparable property. Nothing can justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially during the time in question, there were hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties were comparable with other residential properties not burdened by P.D. 20. It is unquestionable that both the Comparable Sales Approach and the Income Approach are generally acceptable methods of appraisal for taxation purposes. However, it is conceded that the proprietary of one, as against the other would depend on several factors. Hence, as early as 1923, it has been stressed that the assessors , in finding the value of the property, have to consider all the circumstances and elements of value and must exercise a prudent discretion in reaching conclusions. Set-off / Compensation PHILEX. v. CIR, CA, CTA (Set- Off) FACTS: * BIR sent a letter to Philex asking it to settle its tax liabilities. * Philex protested the demand stating that it has pending claims for VAT input credit/refund. Therefore these claims for tax credit/refund should be applied against the tax liabilities. * BIRfound no merit in Philex's position since these pending claims have not yet been established or determined with certainty. * Philex raised the issue to the CTA and CA which both favored CIR. * A few days after the denial of its MfR on the CA decision, Philex was able to obtain its VAT input credit/refund. Hence, this petition. * Philex argues that that the refund/credit should off-set its tax liabilities since both had already become "due and demandable, as well as fully liquidated;" hence, legal compensation can properly take place. * Respondents argues that taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract. ISSUE: Whether tax liabilities could be subject to set-off? HELD: NO, tax liabilities could not be set-off. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. Taxes cannot be subject to set-off or compensation, thus: ...there can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. (Francia v. Intermediate Appellate Court). Aforementioned ruling has been applied in Caltex Philippines, Inc. v. Commission on Audit, which reiterated that: ...a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be the subject of compensation because the government and taxpayer are not mutuallly 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. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection of the tax is contingent on the result of the lawsuit it filed against the government. ENGRACIO FRANCIA vs. INTERMEDIATE APPELLATE COURT G.R. No. L-67649, June 28, 1988 FACTS: Engracio Francia is the registered owner of a residential lot and a two-story house located in Pasay City. On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the Republic for the sum of P4,116.00. Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public auction pursuant the Real Property Tax Code in order to satisfy a tax delinquency of P2, 400.00. Ho Fernandez was the highest bidder for the property. Francia was not present during the auction sale since he was in Iligan City at that time helping his uncle ship bananas. On March

3, 1979, Francia received a notice of hearing In re: Petition for Entry of New Certificate of Title" filed by Ho Fernandez, seeking the cancellation of TCT and the issuance in his name of a new certificate of title. Upon verification through his lawyer, Francia discovered that a Final Bill of Sale had been issued in favour of Ho Fernandez by the City Treasurer on December 11, 1978. The auction sale and the final bill of sale were both annotated at the back of TCT No. 4739 (37795) by the Register of Deeds. On March 20, 1979, Francia filed a complaint to annul the auction sale. The lower court rendered a decision against his favour. The Intermediate Appellate Court affirmed the decision of the lower court in toto. Hence, this petition for review. ISSUE: Whether or not the contention of Francia that his tax delinquency of P2,400.00 has been extinguished by legal compensation is correct claiming that the government owed him P4,116.00 when a portion of his land was expropriated on October 15, 1977. RULING: This principal contention of the petitioner has no merit. We have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax is being collected. The collection of a tax cannot await the results of a lawsuit against the government. A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out of the contract or transaction sued on. There can be no off-setting of taxes against the claims that the taxpayer may have against the Government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. Internal revenue taxes cannot be the subject of compensation. The Government and the taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a claim of taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. COMMISSIONER OF INTERNAL REVENUE vs. ITOGON-SUYOC MINES, INC G.R. No. L-25299, July 29, 1969 FACTS: Respondent Itogon-Suyoc Mines, Inc. filed on January 13, 1961, its income tax return for the fiscal year 1959- 1960. It declared a taxable income of P114,368.04 and a tax due thereon amounting to P26,310.41, for which it paid on the same day, the amount of P13,155.20 as the first installment of the income tax due. On May 17, 1961, petitioner filed an amended income tax return, reporting therein a net loss of P331, 707.33. It thus sought a refund from the Commissioner of Internal Revenue, now the petitioner. On February 14, 1962, respondent Itogon-Suyoc Mines, Inc. filed its income tax return for the fiscal year 1960-1961, setting forth its income tax liability to the tune of P97,345.00, but deducting the amount of P13,155.20 representing alleged tax credit for overpayment of the preceding fiscal year 1959- 1960. 0n December 18, 1962, petitioner Commissioner of Internal Revenue assessed against the respondent the amount of P1, 512.83 as 1% monthly interest on the aforesaid amount of P13,155.20 from January 16, 1962 to December 31, 1962. The basis for such an assessment was the absence of legal right to deduct said amount before the refund or tax credit thereof was approved by petitioner Commissioner of Internal Revenue. Such an assessment was contested by respondent before the Court of Tax Appeals which ruled in its favour. Hence this petition for review. ISSUE: Whether or not the Court of Tax Appeals erred when it absolved Respondent Corporation "from liability to pay the sum of P1, 512.83 as 1% monthly interest for delinquency in the payment of income tax for the fiscal year 1960-1961. RULING: It could not be error for the Court of Tax Appeals, considering the admitted fact of overpayment, entitling respondent to refund, to hold that petitioner should not repose an interest on the aforesaid sum of P13,155.20 "which after all was paid to and received by the government even before the incidence of the tax in question." It would be, according to the Court of Tax Appeals, "unfair and unjust" to do so. The National Internal Revenue Code provides that interest upon the amount determined as a deficiency shall be assessed and shall be paid upon notice and demand from the Commissioner of Internal Revenue at the specified. It is made clear, however, in an earlier provision found in the same section that if in any preceding year, the taxpayer was entitled to a refund of any amount due as tax, such amount, if not yet refunded, may be deducted from the tax to be paid. There is no question respondent was entitled to a refund. Instead of waiting for the sum involved to be delivered to it, it deducted the said amount from the tax that it had to pay. That it had a right to do according to the law. The Tax Code provides that interest upon the amount determined as a deficiency shall be assessed and shall be paid upon notice and demand from the Commissioner at the rate therein specified. It made clear, however, in an earlier provision found in the same section that if in any preceding year, the taxpayer was entitled to a refund of any amount due as tax, such amount, if not refunded, may be deducted from the tax to be paid. Although the imposition of monthly interest does not constitute penalty but a just compensation to the State for the delay in paying the tax and for the concomitant use by the taxpayer of funds that rightfully should be in governments hands; in light of the overpayment for 1959 and 1960, it cannot be said that the taxpayer was guilty of delay enabling it to utilize the money. The company is entitled to refund. MELECIO R. DOMINGO vs. HON. LORENZO C. GARLITOS G.R. No. L-18994, June 29, 1963 FACTS: This is a petition for certiorari and mandamus against respondent judge seeking to annul certain orders of the court and for an order in this Court to direct respondent to execute the judgment in favor of the Government against the estate of Walter Scott Price for internal revenue taxes. It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674, January 30, 1960, this Court declared as final and executory the order for the payment by the estate of the estate and inheritance taxes, charges and penalties, amounting to P40,058.55, issued by the Court of First Instance of Leyte in, special proceedings No. 14 entitled "In the matter of the Intestate Estate of the Late Walter Scott Price." In order to enforce the claims against the estate the fiscal presented a petition dated June 21, 1961, to the court below for the execution of the judgment. The petition was, however, denied by the court which held that the execution is not justifiable ISSUE: Whether or not the petitioner has the clear right to execute the judgment for taxes against the estate of the deceased Walter Scott Price.

RULING: The petition to set aside the above orders of the court below and for the execution of the claim of the Government against the estate must be denied for lack of merit. The ordinary procedure by which to settle claims of indebtedness against the estate of a deceased person, as an inheritance tax, is for the claimant to present a claim before the probate court so that said court may order the administrator to pay the amount thereof. Another ground for denying the petition is the fact that the court having jurisdiction of the estate had found that the claim of the estate against the Government has been recognized and an amount of P262,200 has already been appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount. It is clear, therefore, that the petitioner has no clear right to execute the judgment for taxes against the estate of the deceased Walter Scott Price. The court having jurisdiction of the Estate had found that the claim of the Estate against the Government has been recognized and an amount of P262,200 has already been appropriated by a corresponding law (RA 2700). Under the circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable as well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with Article 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount. REPUBLIC OF THE PHILIPPINES vs. MAMBULAO LUMBER COMPANY, ET AL G.R. No. L-17725, February 28, 1962 FACTS: There are three causes of action in this case in which the defendants admitted all these three liabilities with an aggregate amount of P4, 802.37. Though such liabilities are admitted it interposed the defence though exhibits that from July 31, 1948 to December 29, 1956, defendant Mambulao Lumber Company paid to the Republic of the Philippines P8,200.52 for 'reforestation charges' and for the period commencing from April 30, 1947 to June 24, 1948, said defendant paid P927.08 to the Republic of the Philippines for 'reforestation charges'. These reforestation were paid to the plaintiff in pursuance of Section 1 of Republic Act 115 which provides that there shall be collected, in addition to the regular forest charges provided under Section 264 of Commonwealth Act 466 known as the National Internal Revenue Code, the amount of P0.50 on each cubic meter of timber... cut out and removed from any public forest for commercial purposes. The total amount of the reforestation charges paid by Mambulao Lumber Company is P9,127.50, and it is the contention of the defendant that since the Republic of the Philippines has not made use of those reforestation charges collected from it for reforesting the denuded area of the land covered by its license, the Republic of the Philippines should refund said amount, or, if it cannot be refunded, at least it should be compensated with what Mambulao Lumber Company owed the Republic of the Philippines for reforestation charges. ISSUE: Whether or not the sum of P9, 127.50 paid by defendant company to plaintiff as reforestation charges from 1947 to 1956 may be set off or applied to the payment of the sum of P4,802.37 as forest charges due and owing from defendant to plaintiff. RULING: The court find defendants claim devoid of any merit. Note that there is nothing in the law which requires that the amount collected as reforestation charges should be used exclusively for the reforestation of the area covered by the license of a licensee or concessionaire, and that if not so used; the same should be refunded to him. The general rule, based on grounds of public policy is well-settled that no set-off is admissible against demands for taxes levied for general or local governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature of contracts between the party and party but grow out of a duty to, and are the positive acts of the government, to the making and enforcing of which, the personal consent of individual taxpayers is not required. Internal revenue taxes, such as forest charges, cannot be the subject of set-off or compensation. A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of setoff, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the State or municipality to one who is liable to the State or municipality for taxes. Neither are they subject of recoupment since they do not arise out of the contract or transaction sued on. Taxes are not in the nature of contracts between the parties but grow out of a duty to, and are the positive acts of the government, to the making and enforcing of which, the personal consent of individual taxpayers is not required.

Taxpayer suit The Anti-Graft League of the Philippines, Inc. vs. San Juan G.R. No. 97787. August 1, 1996 FACTS: Acting upon an authority granted by the Office of the President, the Province was able to negotiate with respondent Ortigas & Co., Ltd. (Ortigas) for the acquisition of four parcels of land located in Ugong Norte, Pasig. Three deeds of absolute sale were executed on April 22 and May 9, 1975, whereby Ortigas transferred its ownership over a total of 192,177 square meters of land to the Province at P110.00 per square meter. The projected construction, however, never materialized because of the decimation of the Provinces resources brought about by the creation of the Metro Manila Commission (MMC) in 1976. The said property was eventually sold to Valley View Realty Development Corporation (Valley View) for P700.00 per square meters. The said property was eventually sold to Valley View Realty Development Corporation (Valley View) for P700.00 per square meter or a total of P134,523,900.00, of which 30 million was given as down payment. On May 10, 1988, after learning about the sale, Ortigas filed before Branch 151 of the Regional Trial Court of Pasig an action for rescission of contract plus damages with preliminary injunction against the Province. Docketed as Civil No. 55904, the complaint alleged that the Province violated one of the terms of its contracts with Ortigas by selling the subject lots which were intended to be utilized solely as a site for the construction of the Rizal Technological Colleges and the Rizal Provincial Hospital. ISSUE: Is the present action a taxpayers suit? RULING: Petitioner and respondents agree that to constitute a taxpayers suit, two requisites must be met, namely, that public funds are disbursed by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed, and that the petitioner is directly affected by the alleged ultra vires act. In the case at bar, disbursement of public funds was only made in 1975 when the Province bought the lands from Ortigas at P110.00 per square meter in line with the objectives of P.D. 674. Undeniably, as a taxpayer, petitioner would somehow be adversely affected by an illegal use of public money. When, however, no such unlawful spending has been

shown, as in the case at bar, petitioner, even as a taxpayer cannot question the transaction validly executed by and between the Province and Ortigas for the simple reason that it is not privy to said contract. In other words, petitioner has absolutely no cause of action, and consequently no locus standi, in the instant case. Joya, ET. al. vs. PCGG, G.R. No. 96541 August 24, 1993 FACTS: All thirty-five (35) petitioners in this Special Civil Action for Prohibition and Mandamus with Prayer for Preliminary Injunction and/or Restraining Order seek to enjoin the Presidential Commission on Good Government (PCGG) from proceeding with the auction sale scheduled on 11 January 1991 by Christie's of New York of the Old Masters Paintings and 18th and 19th century silverware seized from Malacaang and the Metropolitan Museum of Manila and placed in the custody of the Central Bank. On 9 August 1990, Mateo A.T. Caparas, then Chairman of PCGG, wrote then President Corazon C. Aquino, requesting her for authority to sign the proposed Consignment Agreement between the Republic of the Philippines through PCGG and Christie, Manson and Woods International, Inc. concerning the scheduled sale on 11 January 1991 of eighty-two (82) Old Masters Paintings and antique silverware seized from Malacaang and the Metropolitan Museum of Manila alleged to be part of the ill-gotten wealth of the late President Marcos, his relatives and cronies. On 14 August 1990, then President Aquino, through former Executive Secretary Catalino Macaraig, Jr., authorized Chairman Caparas to sign the Consignment Agreement allowing Christie's of New York to auction off the subject art pieces for and in behalf of the Republic of the Philippines. On 15 August 1990, PCGG, through Chairman Caparas, representing the Government of the Republic of the Philippines, signed the Consignment Agreement with Christie's of New York. ISSUE: Can petitioners as taxpayers challenge the validity of the acts of the PCGG? RULING: No. They lack basis in fact and in law. These paintings legally belongs to the foundation or corporation or the members thereof, although the public has been given the opportunity to view and appreciate these paintings when they were placed on exhibit. Similarly, as alleged in the petition, the pieces of antique silverware were given to the Marcos couple as gifts from friends and dignitaries from foreign countries on their silver wedding and anniversary, an occasion personal to them Not every action filed by a taxpayer can qualify to challenge the legality of official acts done by the government. A taxpayer's suit can prosper only if the governmental acts being questioned involve disbursement of public funds upon the theory that the expenditure of public funds by an officer of the state for the purpose of administering an unconstitutional act constitutes a misapplication of such funds, which may be enjoined at the request of a taxpayer. Lozada vs. COMELEC G.R. No. L-59068 January 27, 1983 FACTS: This is a petition for mandamus filed by Jose Mari Eulalio C. Lozada and Romeo B. Igot as a representative suit for and in behalf of those who wish to participate in the election irrespective of party affiliation, to compel the respondent COMELEC to call a special election to fill up existing vacancies numbering twelve (12) in the Interim Batasan Pambansa. Petitioner Lozada claims that he is a taxpayer and a bonafide elector of Cebu City and a transient voter of Quezon City, Metro Manila, who desires to run for the position in the Batasan Pambansa; while petitioner Romeo B. Igot alleges that, as a taxpayer, he has standing to petition by mandamus the calling of a special election as mandated by the 1973 Constitution. The respondent COMELEC, represented by counsel, opposes the petition alleging, substantially, that petitioners lack standing to file the instant petition for they are not the proper parties to institute the action ISSUE: As taxpayers, may the petitioners file the instant petition? RULING: As taxpayers, petitioners may not file the instant petition, for nowhere therein is it alleged that tax money is being illegally spent. The act complained of is the inaction of the COMELEC to call a special election, as is allegedly its ministerial duty under the constitutional provision above cited, and therefore, involves no expenditure of public funds. It is only when an act complained of, which may include a legislative enactment or statute, involves the illegal expenditure of public money that the so-called taxpayer suit may be allowed. I. No standing as taxpayers 1. As taxpayers, petitioners may not file the instant petition, for nowhere therein is it alleged that tax money is being illegally spent. The act complained of is the inaction of the COMELEC and therefore, involves no expenditure of public funds. 2. It is only when an act complained of involves the illegal expenditure of public money that the so-called taxpayer suit may be allowed. 3. What the case at bar seeks is one that entails expenditure of public funds. (In other words, they are effectively asking for the government to spend, not questioning the validity of such spending). Moreover, such spending could actually be illegal because it would be spent for a purpose that, as will be shown, COMELEC has no authority to call for. II. 1. 2. 3. No standing as voters As voters, neither have petitioners the requisite interest or personality to qualify them to maintain and prosecute the present petition. The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement. In the case before Us, the alleged inaction of the COMELEC to call a special election would adversely affect only the generalized interest of all citizens. Petitioners' standing to sue may not be predicated upon an interest of the kind alleged, which is held in common by all members of the public because of the necessarily abstract nature of the injury supposedly shared by all citizens. Concrete injury, actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution.

Holding: Petition denied.