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, the Commissioner of Internal Revenue was ordered to refund to the Cebu Portland Cement Company representing overpayments of ad valorem taxes on cement produced and sold by it. 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. The CTA 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. In his petition to review the said resolution, the CIR claims that the refund should be charged against the deficiency of the private respondent on the sales of cement under Sec. 186 of the Tax Code, which is a manufactured and not a mineral product and therefore not exempt from sales tax. The petitioner also denies that the sale tax assessments have already prescribed because the prescriptive period should be counted from the filing of the sales tax returns, which had not yet been done by the private respondent. 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. 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. The set-off is justified because taxes must be collected inasmuch as they are the lifeblood of the government and that it is a settled principle that the government is not duty bound to resolve a pending tax protest before it can collect the unpaid tax liability. Besides, if payment of taxes could be postponed by simply questioning their validity, government functions would be paralyzed.

COMMISSIONER OF INTERNAL REVENUE vs. ALGUE and THE COURT OF TAX APPEALS G.R. No. L-28896 February 17, 1988 FACTS: The Philippine Sugar Estate Development Company (PSEDC). Appointed Algue Inc. as its agent. Algue received a commission of 125,000.00 and it was from their commission that it paid organizers of VOICP 75,000.00 in proportional fees. He received an assessment from the CIR. He filed a letter of protest or reconsideration. The CIR contends that the claimed deduction was properly disallowed because it was not an ordinary, reasonable or necessary expense. Issue: Whether or not the CIR is correct Ruling: No. taxes are the lifeblood of the government and 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 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 is an arbitrary method of exaction by those in the seat of power. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself.

C.N. HODGES vs. MUNICIPAL BOARD OF THE CITY OF ILOILO G.R. No. L-18129 January 31, 1963

FACTS: The Municipal Board of the City of Iloilo enacted Ordinance No. 33, series of 1960, pursuant to the provisions of Republic Act No. 2264, known as the Local Autonomy Act, requiring any person, firm, association or corporation to pay a sales tax of 1/2 of 1% of the selling price of any motor vehicle and prohibiting the registration of the sale of the motor vehicle in the Motor Vehicles Office of the City of Iloilo unless the tax has been paid. C. N. Hodges, who was engaged in the business of buying and selling second-hand motor vehicles in the City of Iloilo, is one of those affected by the enactment of the ordinance, and believing that the same is invalid for having been passed in excess of the authority conferred by law upon the municipal board, he filed a petition for declaratory judgment with the Court of First Instance of Iloilo praying that said ordinance be declared void ab initio. The court a quo rendered decision holding that that part of the ordinance which requires the owner of a used motor vehicle to pay a sales tax of 1/2 of 1% of the selling price is valid, but the portion thereof which requires the payment of the tax as a condition precedent for the registration of the sale in the Motor Vehicles Office is invalid for being repugnant to Section 2(h) of Republic Act 2264. Both parties have appealed. ISSUE: Whether or not the ordinance in question is valid even with regard to the portion which requires the payment of the tax as a condition precedent for the registration of the sale in the Motor Vehicles Office of said city. RULING: The City of Iloilo has the authority and power to approve the ordinance in question for it merely imposes a percentage tax on the sale of a second-hand motor vehicle that may be carried out within the city by any person, firm, association or corporation owning or dealing with it who may come within the jurisdiction. The requirement of the ordinance cannot be considered a tax in the light viewed by the court a quo for the same is merely a coercive measure to make the enforcement of the contemplated sales tax more effective. Well-settled is the principle that taxes are imposed for the support of the government in return for the general advantage and protection which the government affords to taxpayers and their property. Taxes are the lifeblood of the government.

ASSOCIATION OF CUSTOM BROKERS, INC. vs. MUNICIPAL BOARD G.R. No. L-4376 May 22, 1953

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 [Section 18 (p) of Republic Act No. 409], 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 RULING: The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. Note that 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 we find in the ordinance, and which renders it offensive to the Constitution.

ESSO STANDARD EASTERN, INC v. COMMISSIONER OF INTERNAL REVENUE 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 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 representing margin fees it had paid to the Central Bank on its profit remittances to its New York head office. 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. ISSUE: Whether or not the margin fees are taxes; and whether or not the margin fees are necessary and ordinary business expenses. RULING: 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. Further, 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. A margin fee on foreign exchange is a form of exchange control or restriction designed to discourage imports and ultimately curtail excessive demand upon the itertnational reserve in order to stabilize the currency. PROGRESSIVE DEVELOPMENT CORPORATION v. QUEZON CITY G.R. No. L-36081, April 24, 1989

FACTS:

The City Council of Quezon City adopted Ordinance No. 7997, otherwise known as the Market Code of Quezon City. Section 3 of said ordinance provides that privately owned and operated public markets shall submit monthly to the Treasurer's Office, a certified list of stallholders showing the amount of stall fees or rentals paid daily by each stallholder and shall pay 10% of the gross receipts from stall rentals to the City as supervision fee. Progressive Development Corporation (Progressive), owner and operator of a public market known as the "Farmers Market & Shopping Center" filed a Petition for Prohibition with Preliminary Injunction against Quezon City on the ground that the supervision fee or license tax imposed by the above-mentioned ordinance is in reality a tax on income which Quezon City may not impose, the same being expressly prohibited by Republic Act No. 2264, as amended, otherwise known as the Local Autonomy Act. In its Answer, Quezon City, through the City Fiscal, contended that it had authority to enact the questioned ordinances, maintaining that the tax on gross receipts imposed therein is not a tax on income. The lower court ruled that the questioned imposition is not a tax on income, but rather a privilege tax or license fee which local governments, like Quezon City, are empowered to impose and collect. ISSUE: Whether the tax imposed by Quezon City on gross receipts of stall rentals is properly characterized as partaking of the nature of an income tax. RULING: No. The tax imposed in the controverted ordinance constitutes, not a tax on income, not a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of the business in which Progressive is engaged. While it is true that the amount imposed by the questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition, instead of one of regulation under the police power, it nevertheless will be presumed to be reasonable.

PHILIPPINE AIRLINES, INC. v. EDU G.R. No. L- 41383, August 15, 1988

FACTS: The Philippine Airlines (PAL) is a corporation engaged in the air transportation business under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the payment of taxes. Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate (Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the Land and Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Land Transportation Commissioner Romeo Edu (Edu) demanding a refund of the amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu and National Treasurer Ubaldo Carbonell (Carbonell). The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which in turn certified the case to the Supreme Court. ISSUE: Whether or not motor vehicle registration fees are considered as taxes. RULING: Yes. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle

registration fees. The motor vehicle registration fees are actually taxes intended for additional revenues of the government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program.

VILLEGAS v. HIU CHIONG TSAI PAO HO G.R. No. L-29646, November 10, 1978

FACTS: 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.

COMPAIA GENERAL DE TABACOS DE FILIPINAS vs. CITY OF MANILA, ET AL G.R. No. L-16619 June 29, 1963

FACTS: Petitioner filed an action in the CFI Manila to recover from City of Manila(City ) the sum of P15,280.00 allegedly overpaid by it as taxes on its wholesale and retail sales of liquor for the period from the third quarter of 1954 to the second quarter of 1957, inclusive, under Ordinances Nos. 3634, 3301, and 3816. Tabacalera's action for refund is based on the theory that, in connection with its liquor sales, it should pay the license fees but not the municipal sales taxes; and since it already paid the license fees aforesaid, the sales taxes paid by it. Under the three ordinances is an overpayment made by mistake, and therefore refundable. The City contends that for the permit issued to it Tabacalera is subject to pay the license fees prescribed by Ordinance No. 3358, aside from the sales taxes imposed by Ordinances Nos. 3634, 3301, and 3816. ISSUE: Whether or not the taxes imposed are valid

RULING: Ordinance No. 3358 is clearly one that prescribes municipal license fees for the privilege to engage in the business of selling liquor or alcoholic beverages. On the other hand, it is clear that Ordinances Nos. 3634, 3301, and 3816 impose taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila by virtue of its power to tax dealers for the sale of such merchandise. AMERICAN MAIL LINE, ET AL vs. CITY OF BASILAN, ET AL G.R. No. L-12647 May 31, 1961

FACTS: Appellees are foreign shipping companies licensed to do business in the Philippines, with offices in Manila. Their vessels call at Basilan City and anchor in the bay or channel within its territorial waters. As the city treasurer assessed and attempted to collect from them the anchorage fees prescribed in the aforesaid amendatory ordinance, they filed the present action for Declaratory Relief to have the courts determine its validity. Upon their petition the lower court issued a writ of preliminary injunction restraining appellants from collecting or attempting to collect from them the fees prescribed therein. Appellant contended that, through its city council, it had authority to enact the questioned ordinance in the exercise of either its revenue-raising power or of its police power. The question to be resolved is whether the City of Basilan has the authority to enact Ordinance 180 and to collect the anchorage fees prescribed therein. ISSUE: Whether or not the ordinance valid exercise of taxing power of the City of Basilan. RULING: Under paragraph (a) sec. 14, R.A. 288, it is clear that the City of Basilan may only levy and collect taxes for general and special purposes in accordance with or as provided by law; in other words, the city of Basilan was not granted a blanket power of taxation. The use of the phrase "in accordance with law" which, in our opinion, means the same as "provided by law" clearly discloses the legislative intent to limit the taxing power of the City. It has been held that the power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes. Appellant city's own contention that the questioned ordinance was enacted in the exercise of its power of taxation, makes it obvious that the fees imposed are not merely regulatory.

JOHN H. OSMEA vs. OSCAR ORBOS et al G.R. No. 99886 March 31, 1993 FACTS: 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 channeled 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 OF THE PHILIPPINES, vs. BACOLOD-MURCIA MILLING CO., INC., MA-AO SUGAR CENTRAL CO., INC., and TALISAY-SILAY MILLING COMPANY G.R. Nos. L-19824, L-19825 and 19826 July 9, 1966

FACTS: Joint appeal by three sugar centrals, respondents herein. from a decision of the Court of First Instance of Manila finding them liable for special assessments under Section 15 of Republic Act No. 632. The appellants' thesis is simply to the effect that the "10 centavos per picul of sugar" authorized to be collected under Sec. 15 of Republic 632 is a special assessment. As such, the proceeds thereof may be devoted only to the specific purpose for which the assessment was authorized, a special assessment being a levy upon property predicated on the doctrine that the property against which it is levied derives some special benefit from the improvement. It is not a tax measure intended to raise revenues for the Government. ISSUE: Whether or not the imposition of special assessment an exercise of the taxing power RULING: The Court deemed it relevant to discuss its holding in Lutz v. Araneta. For in this Lutz case, Commonwealth Act 567, otherwise known as the Sugar Adjustment Act, all collections made thereunder "shall accrue to a special fund in the Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid out only for any or all of the following purposes or to attain any or all of the following objectives, as may be provided by law." Analysis of the Act, and particularly Section 6, will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. On the authority of the above case, then, We hold that the special assessment at bar may be considered as similarly as the above, that is, that the levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but, the exercise of the 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.

VICTORIAS MILLING CO., INC. vs. THE MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS OCCIDENTAL, G.R. No. L-21183 September 27, 1968

FACTS: This case calls into question the validity of Ordinance No. 1, series of 1956, of the Municipality of Victorias, Negros Occidental. The disputed ordinance imposed license taxes on operators of sugar centrals and sugar refineries. The changes were: with respect to sugar centrals, by increasing the rates of license taxes; and as to sugar refineries, by increasing the rates of license taxes as well as

the range of graduated schedule of annual output capacity. For, the production of plaintiff Victorias Milling Co., Inc. in both its sugar central and its sugar refinery located in the Municipality of Victorias comes within these items. Plaintiff filed suit below to ask for judgment declaring Ordinance No. 1, series of 1956, null and void. The plaintiff contends that the ordinance is discriminatory since it singles out plaintiff which is the only operator of a sugar central and a sugar refinery within the jurisdiction of defendant municipality. The trial court rendered its judgment declaring that the ordinance in question refers to license taxes or fees. Both plaintiff and defendant directly appealed to the Supreme Court. ISSUE: Whether or not Ordinance No. 1, series of 1956, passed by defendant's municipal council as a regulatory enactment or as a revenue measure RULING: The present imposition must be treated as a levy for revenue purposes. A quick glance at the big amount of maximum annual tax set forth in the ordinance, P40,000.00 for sugar centrals, and P40,000.00 for sugar refineries, will readily convince one that the tax is really a revenue tax. And then, we read in the ordinance nothing which would as much as indicate that the tax imposed is merely for police inspection, supervision or regulation. Given the purposes just mentioned, we find no warrant in logic to give our assent to the view that the ordinance in question is solely for regulatory purpose. Plain is the meaning conveyed. The ordinance is for raising money. To say otherwise is to misread the purpose of the ordinance.

WALTER LUTZ vs. J. ANTONIO ARANETA G.R. No. L-7859 December 22, 1955

FACTS: This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act. Plaintiff, Walter Lutz seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be constitutioally levied. The action having been dismissed by the Court of First Instance, the plaintifs appealed the case directly to the Supreme Court. ISSUE: Whether or not the tax provided for in Commonwealth Act No. 567 a pure exercise of the taxing power RULING: Analysis of the Act, and particularly of section 6 will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. The protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the state's police power.

PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) vs. EDUARDO M. COJUANGCO JR, G.R. No. 147062-64 December 14, 2001

FACTS: The PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal. Among the

properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank (UCPB) registered in the names of the alleged "one million coconut farmers," the so-called Coconut Industry Investment Fund companies (CIIF companies) and Private Respondent Eduardo Cojuangco Jr. The trial court rendered its final Decision nullifying and setting aside the Resolution of the Sandiganbayan which lifted the sequestration of the subject UCPB shares. ISSUE: Whether or not the Coconut Levy Funds raised through the States police and taxing powers RULING: Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs. Based on this definition, a tax has three elements, namely: a) it is an enforced proportional contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State.

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 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: 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. Reyes vs Almanzor Facts: R.A. 6359 was enacted which prohibits an increase in monthly rentals of dwelling unit or land on which anothers dwelling is located, where the rental does not exceed Php300.00. The act also suspended article 1673 of the Civil Code thereby disallowing ejectment of lessees. These prohibitions were made absolute by the filing of Presidential Decree 20. Consequently, petitioners herein are precluded from increasing monthly rentals and in ejecting the lessees. The respondent city assessor of Manila reassessed the value of the petitioners properties based on the scheduled market value thereof. This entailed an increase in the tax rates prompting petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals averring that the reassessment was excessive, unwarranted, inequitable, confiscatory and

unconstitutional considering that the tax imposed upon them is greater than the annual income derived from the property. They also argued that the income approach should have been used in determining the land values instead of the comparable sales approach. The Board of tax Assessment Appeals considered the assessment valid and the same was affirmed by the Central Board of Assessment appeals, hence this petition. ISSUE: Whether or not income approach is the method to be used in the tax assessment and not the comparable sales approach. RULING: By no stretch of the imagination can the market value of properties covered by PD 20 be equated with the market value of properties not so covered. In the case at bar, not even factors determinant of the assessed value of subject properties under the comparable sales approach were presented by respondent namely: 1. That the sale must represent a bonafide arms length transaction between a willing seller and a willing buyer 2. The property must be comparable property. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties are comparable. Taxes are lifeblood of government, however, such collection should be made in accordance with the law and therefore necessary to reconcile conflicting interests of the authorities so that the real purpose of taxation, promotion of the welfare of common good can be achieved. CIR vs Algue G.R. No. L-28896 February 17, 1988 FACTS: Supra Issue: Whether or not the CIR is correctly disallow the deductions claimed by Algue as legitimate business expenses in its income tax return Ruling: The SC agree with respondent court that the amount of promotional fee was not excessive and was reasonable, hence, allowing deductions of the disputed amount in the provisions of the Tax Code on deductions from gross income. The Solicitor General is correct in saying the burden of prove the validity of claimed deductions is on the taxpayer. The private respondent has proved this. The amount in dispute was necessary and reasonable in the light of the efforts of the respondent corporation to induce investors. Philex Mining vs. CIR GR 125704, August 28, 1998 Facts: Philex Mining Corporation assails the decision of the court of appeals which affirmed the decision of the court of tax appeals ordering philex to pay its excise tax liability philex refused to pay and contended it has pending claims for vat input credit or refund against the government which should be made compensate or set-off its tax liability. Issue: Whether or not tax be subject for set-off? Ruling: No. tax cannot be the subject for compensation for simple reason that the government and the tax payer are not mutual creditors and debtors of each other. Debts are due in the government in its corporate

capacity while taxes are due to the government in its sovereign capacity. A tax payer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government that the collection of the tax is contingent on the result of the law suit it filed against the government. Francia vs. IAC 162 SCRA 753 FACTS: Francia was the registered owner of a house and lot in Pasay City. A portion of said property was expropriated by the republic. It appeared that Francia did not pay his real estate taxes from 1963 to 1977. He contended that his tax delinquency had been extinguished by legal compensation since the government owed him 4,116 when a portion of his land was expropriated. ISSUE: Whether or not there be off-setting of debts and taxes? RULING: No. there can be no off-setting of taxes original the claims against the claims that the taxpayer may have against the government. Taxes cannot be the subject of compensation. The government and the taxpayer are not mutually creditor and debtors of each other and a claim for each other and a claim for taxes is not such a debt demand, contract or judgement as is allowed to be set-off. Furthermore, the tax was due to the city government. While the expropriation effected by the national government. In fact, the expropriation payment was already deposited with the PNB long before the sale at public auction of his property was conducted. 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 for delinquency in the payment of income tax 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.

Domingo vs. Garlitos 8 SCRA 443 FACTS: In Domingo vs. Moscoso, the Supreme Court declared at final and executor the order of the court of first instance of Leyte for the payment of estate and inheritance taxes, charges and penalties amounting to 40, 058.55 by the estate of the late Walter Scott Pine. He petition for execution filed by the fiscal, however, was denied by the lower court the court held that the execution is unjustified as the government itself is indebted to the estate for 262,200; and ordered the amount of inheritance taxes be deducted from the governments indebtedness to the estate. Issues: Whether or not there be legal compensation? Ruling: Yes. The fact that the court having jurisdiction of the estate had found that the claim of the estate against the government has been appropriated for the purpose by a corresponding law ( RA 2700) shows that both the claim of the government for inheritance taxes and the claim of the intestate for services regarded have already become overdue and demandable as well as fully liquidated. Compensation, therefore, take place by operation of law, in accordance with the provisions of article 1279 and 1290 of the civil code, and both debts are extinguished to the 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 paid by defendant company to plaintiff as reforestation charges may be set off or applied to the payment of 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. 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 materializ ed 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. 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: Whether or not 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: 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. 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. 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. ISSUE: Whether or not petitioners as taxpayers challenge the validity of the act s 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: Whether or not the petitioners may file the instant petition as taxpayers 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. PASCUAL vs. THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL. G.R. No. L-10405 December 29, 1960

FACTS: Petitioner Wenceslao Pascual instituted this action for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An Act Appropriating Funds for Public Works", contained, in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and improvement" of Pasig feeder road terminals; that, at the time of the passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision situated at Pasig, Rizal" which projected feeder roads "do not connect any government property or any important premises to the main highway"; Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to sue", and that the petition did "not state a cause of action". ISSUE: Whether or not appropriation using public funds be made for public purposes only RULING: The right of the legislature to appropriate funds is correlative with its right to tax, and, under constitutional provisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose, no appropriation of state funds can be made for other than for a public purpose. The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public.

OSMEA VS. ORBOS G.R. No. 99886 March 31, 1993 FACTS: Petitioner seeks to have Sec.8, paragraph 1 C of PD 1956, as amended by EO 137 declared unconstitutional for being undue and invalid delegation of legislative power to the Energy regulatory Board. Under the assailed law, the ERB is given the authority to impose additional amounts on petroleum products and to impose additional amounts to augment the resources of the fund. He argue that the money collected pursuant to PD 1956 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 special purpose it shall be treated as a special fund to be used only for the purpose indicated. Issue: is there undue delegation of legislative power? Ruling: No. for a valid delegation of power, it is essential that the law delegating the power must be 1. Complete in itself, that it must set forth the policy to be executed by the delegate 2. It must fix the standard limits of which are sufficiently determinate or determined to which the delegate must conform. While the funds may be referred to as taxes, they are enacted in the exercise of the police power of the state. The fund remains subject to the review and accounting of the COA. These measures comply with the constitutional description of a special fund.

PEPSI-COLA BOTTLING COMPANY OF THE PHIILIPPINES, INC. VS. MUNICIPALITY OF TANAUAN G.R. No. L-31156 February 27, 1976

FACTS: Plaintiff commenced a complaint seeking to declare Section 2 of R.A. 2264 (Local Autonomy Act) unconstitutional as an undue delegation of taxing power and to declare Ordinance Nos. 23 and 27 issued by the Municipality of Tanauan, Leyte as null and void. Municipal Ordinance No. 23 levies and collects from soft drinks producers and manufacturers one-sixteenth (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 the municipality a tax of one centavo (P0.01) on each gallon of volume capacity. The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax. ISSUES: Whether or not Section 2 of R.A. 2264 an undue delegation of the power of taxation and Whether or not Ordinance Nos. 23 and 24 constitute double taxation and impose percentage or specific taxes RULING: 1. NO. The power of taxation is purely legislative and cannot be delegated to the executive or judicial department of the government without infringing upon the theory of separation of powers. But as an exception, the theory does not apply to municipal corporations. Legislative powers may be delegated to local governments in respect of matters of local concern. 2. NO. The Municipality of Tanauan discovered that manufacturers could increase the volume contents of each bottle and still pay the same tax rate since tax is imposed on every bottle corked. To combat this scheme, Municipal Ordinance No. 27 was enacted. As such, it was a repeal of Municipal Ordinance No. 23. In the stipulation of facts, the parties admitted that the Municipal Treasurer was enforcing Municipal Ordinance No. 27 only. Hence, there was no case of double taxation.

SOCIAL SECURITY SYSTEM VS. CITY OF BACOLOD G.R. No. L-35726 July 21, 1982

FACTS: Petitioner Social Security System, for operation purposes, maintains a five-storey building in Bacolod City occupying four parcels of land. Said lands and buildings were assessed for taxation. Petitioner failed to pay the realty taxes for the years 1968, 1969 and 1970. Consequently, the City of Bacolod levied upon said lands and buildings and declared them forfeited in its favor. In protest, petitioner wrote the city mayor through the city treasurer seeking reconsideration of the forfeiture proceeding on the ground that it is a government-owned and controlled corporation and as such, should be exempt from payment of real estate taxes. No action was however taken. Thereafter, petitioner filed an action in court for the nullification of the court proceedings. The court ruled that the properties of petitioner are not exempt from the payment of real property tax because these are not one of the exemptions under Section 29 of the Charter of Bacolod City and there is no other law providing for its exemption. ISSUE: Whether or not the subject properties maintained by petitioner SSS be exempt from payment of real property tax RULING: YES. Whether a government owned and controlled corporation is performing governmental or proprietary function is immaterial. Section 29 of the Charter of Bacolod City does not contain any qualification whatsoever in providing for the exemption from real estate taxes of "lands and buildings

owned by the Commonwealth or Republic of Philippines." Hence, when the legislature exempted lands and buildings owned by the government from payment of said taxes, what it intended was a broad and comprehensive application of such mandate, regardless of whether such property is devoted to governmental or proprietary purpose. P.D. 24 has amended the Social Security Act of 1954 expressly exempting the SSS from payment of any tax thereby removing all doubts as to its exemption.

SEA-LAND SERVICE, INC. VS. COURT OF APPEALS G.R. No. 122605 April 30, 2001

FACTS: Petitioner Sea-Land Service Incorporated, an American international shipping company licensed by the Securities and Exchange Commission to do business in the Philippines entered into a contract with the United States Government to transport military household goods and effects of U.S. military personnel assigned to the Subic Naval Base. Sea-Land paid its corresponding corporate income tax for the taxable year 1984 at the rate of 1.5% in accordance with Section 25(a)(2) of the National Internal Revenue Code in relation to Article 9 of the RP-US Tax Treaty. Subsequently, SeaLand filed a claim for refund alleging that the taxes it paid were made in mistake because under the RP-US Military Base Agreement, it is exempt from the payment of taxes. ISSUE: Whether or not the income that petitioner derived from services in transporting the household goods and effects of U.S. military personnel fall within the tax exemption provided in the RP-US Military Bases Agreement RULING: NO. Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. The transport or shipment of household goods and effects of U.S. military personnel is not included in the term "construction, maintenance, operation and defense of the bases. Neither could the performance of this service to the U.S. government be interpreted as directly related to the defense and security of the Philippine territories COMMISSIONER OF INTERNAL REVENUE vs. MITSUBISHI METAL CORPORATION G.R. No. L-54908. January 22, 1990

FACTS: Atlas Consolidated Mining and Development Corporation entered into a Loan and Sales Contract with Mitsubishi Metal Corporation for purposes of the projected expansion of the productive capacity of the former's mines in Toledo, Cebu. Under said contract, Mitsubishi agreed to extend a loan to Atlas 'in the amount of $20M. Atlas, in turn undertook to sell to Mitsubishi all the copper concentrates produced for a period of fifteen (15) years. Mitsubishi thereafter applied for a loan with the Export-Import Bank of Japan (Eximbank) for purposes of its obligation under said contract. Its loan application was approved on May 26, 1970 in the equivalent sum of $20M at the then prevailing exchange rate. Pursuant to the contract, interest payments were made by the Atlas to Mitsubishi for the years 1974 and 1975. The corresponding 15% tax thereon in the amount of P1,971,595.01 was withheld pursuant to Section 24 (b) (1) and Section 53 (b) (2) of the National Internal Revenue Code, as amended by Presidential Decree No. 131, and duly remitted to the Government. ISSUE: Whether or not the interest income from the loans extended to Atlas by Mitsubishi is excludible from gross income taxation pursuant to Section 29 of the tax code and, therefore, exempt from withholding tax. RULING: The court ruled in the negative. Eximbank had nothing to do with the sale of the copper concentrates since all that Mitsubishi stated in its loan application with the former was that the amount

being procured would be used as a loan to and in consideration for importing copper concentrates from Atlas. Such an innocuous statement of purpose could not have been intended for, nor could it legally constitute, a contract of agency. The conclusion is indubitable; MITSUBISHI, and NOT EXIMBANK, is the sole creditor of ATLAS, the former being the owner of the $20 million upon completion of its loan contract with EXIMBANK of Japan. It is settled a rule in this jurisdiction that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. 31 INFANTRY POST EXCHANGE vs. POSADAS G.R. No. 33403. September 4, 1930 FACTS: The 31st Infantry Post Exchange is a post exchange constituted in accordance with Army regulations and the laws of the United States. in the course of its duly authorized business transactions, the Exchange made many purchases of various and diverse commodities, goods, wares and merchandise from various merchants in the Philippines. The Commissioner collected a sales tax of 1 1/2 % of the gross value of the commodities, etc. from the merchants who sold said commodities to the Exchange. A formal protest was lodged by the Exchange. ISSUE: Whether or not the petitioner is exempt from the sales tax imposed against its suppliers. RULING: The court ruled in the negative. Taxes have been collected from merchants who made sales to Army Post Exchanges since 1904 (Act 1189, Section 139). Similar taxes are paid by those who sell merchandise to the Philippine Government, and by those who do business with the US Army and Navy in the Philippines. Herein, the merchants who effected the sales to the Post Exchange are the ones who paid the tax; and it is the officers, soldiers, and civilian employees and their families who are benefited by the post exchange to whom the tax is ultimately shifted. An Army Post Exchange, although an agency within the US Army, cannot secure exemption from taxation for merchants who make sales to the Post Exchange.
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COMMISSIONER OF INTERNAL REVENUE vs. MARUBENI CORPORATION G.R. No. 137377. December 18, 2001

FACTS: Respondent Marubeni Corporation is a foreign corporation and is duly registered to engage in business in the Philippines. Sometime in November 1985, petitioner Commissioner of Internal Revenue issued a letter of authority to examine the books of accounts of the Manila branch office of respondent corporation. In the course of the examination, petitioner found respondent to have undeclared income from two (2) contracts in the Philippines. Petitioner's revenue examiners recommended an assessment for deficiency income, branch profit remittance, contractor's and commercial broker's taxes. Respondent questioned this assessment. Respondent then received a letter form petitioner assessing respondent several deficiency taxes. Respondent filed two (2) petitions for review with the Court of Tax Appeals. Executive Order (E.O.) No. 41 declaring a one-time amnesty covering unpaid income taxes for the years 1981 to 1985 was issued. Under this E.O., a taxpayer who wished to avail of the income tax amnesty should comply with certain requirements. In accordance with the terms of E.O. No. 41, respondent filed its tax amnesty return dated October 30, 1986. On November 17, 1986, the scope and coverage of E.O. No. 41 was expanded by Executive Order (E.O.) No. 64. ISSUE: Whether or not herein respondent's deficiency tax liabilities were extinguished upon respondent's availment of tax amnesty under Executive Orders Nos. 41 and 64.

RULING: Section 4 (b) of E.O. No. 41 is very clear and unambiguous. It excepts from income tax amnesty those taxpayers "with income tax cases already filed in court as of the effectivity hereof." The point of reference is the date of effectivity of E.O. No. 41. The difficulty lies with respect to the contractor's tax assessment and respondent's availment of the amnesty under E.O. No. 64 including estate and donor's taxes and tax on business. In the instant case, the vagueness in Section 4 (b) brought about by E.O. No. 64 should be construed strictly against the taxpayer. The term "income tax cases" should be read as to refer to estate and donor's taxes and taxes on business while the word "hereof," to E.O. No. 64. Since Executive Order No. 64 took effect on November 17, 1986, consequently, insofar as the taxes in E.O. No. 64 are concerned, the date of effectivity referred to in Section 4 (b) of E.O. No. 41 should be November 17, 1986. There is nothing in E.O. No. 64 that provides that it should retroact to the date of effectivity of E.O. No. 41, the original issuance. Neither is it necessarily implied from E.O. No. 64 that it or any of its provisions should apply retroactively. REAGAN vs. COMMISSIONER OF INTERNAL REVENUE G.R. No. L-26379, 27. December 27, 1969

FACTS: William Reagan imported a tax-free 1960 Cadillac car with accessories valued at US $ 6,443.83, including freight, insurance and other charges. After acquiring a permit to sell the car from the base commander of Clark Air Base, Reagan sold the car to a certain Willie Johnson Jr. of the US Marine Corps stationed in Sangley Point, Cavite for US$ 6,600. Johnson sold the same, on the same day to Fred Meneses, a Filipino. As a result of the transaction, the Commissioner rendered Reagan liable for income tax in the sum of P2,970. Reagan claimed that he was exempt as the transaction occurred in Clark Air Base, which as he contends is a base outside the Philippines. ISSUE: Whether or not petitioner Reagan was covered by the tax exemption. RULING: The court ruled in the negative. The Philippines, as an independent and sovereign country, exercises its authority over its entire domain. Any state may, however, by its consent, express or implied, submit to a restriction of its sovereign rights. It may allow another power to participate in the exercise of jurisdictional right over certain portions of its territory. By doing so, it by no means follows that such areas become impressed with an alien character. The areas retain their status as native soil. Clark Air Base is within Philippine territorial jurisdiction to tax, and thus, Reagan was liable for the income tax arising from the sale of his automobile in Clark. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. Reagan has not done so, and cannot do so.

TIU vs. COURT OF APPEALS GR. No. 127410 January 20, 1999

FACTS: Congress, with the approval of the President, passed into law RA 7227 entitled "An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes." Section 12 thereof created the Subic Special Economic Zone and granted there to special privileges. President Ramos issued Executive Order No. 97, clarifying the application of the tax and duty incentives. The President issued Executive Order No. 97-A, specifying the area within which the tax-and-duty-free privilege was operative. The petitioners challenged before this Court the constitutionality of EO 97-A for allegedly being violative of their right to equal protection of the laws. This Court referred the matter to the Court of Appeals. Proclamation No. 532 was issued by President Ramos. It delineated the exact metes and bounds of the Subic Special Economic and Free Port Zone, pursuant to Section 12 of RA 7227. Respondent Court held that "there is no substantial difference

between the provisions of EO 97-A and Section 12 of RA 7227. In both, the 'Secured Area' is precise and well-defined as '. . . the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended . . .'" ISSUE: Whether or not Executive Order No. 97-A violates the equal protection clause of the Constitution RULING: No. The Court found real and substantive distinctions between the circumstances obtaining inside and those outside the Subic Naval Base, thereby justifying a valid and reasonable classification. The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another. The classification must also be germane to the purpose of the law and must apply to all those belonging to the same class. JOHN Hay PEOPLES ALTERNATIVE COALITION vs. BCDA GR. No. 119775 October 24, 2003

FACTS: Republic Act No. 7227 set out the policy of the government to accelerate the sound and balanced conversion into alternative productive uses of the former military bases. It created Bases Conversion and Development Authority. It also created the Subic Special Economic and Free Port Zone. It granted the Subic SEZ incentives. It expressly gave authority to the President to create through executive proclamation, subject to the concurrence of the local government units directly affected, other Special Economic Zones in the areas covered. BCDA entered into a Memorandum of Agreement and Escrow Agreement with Tuntex and Asiaworld. BCDA, Tuntex and Asiaworld executed a Joint Venture Agreement. The Sangguniang Panlungsod of Baguio City asked BCDA to exclude all the barangays partly or totally located within Camp John Hay from the reach or coverage of any plan or program for its development. The sanggunian adopted and submitted a 15-point concept for the development of Camp John Hay. BCDA, Tuntex and AsiaWorld agreed to some, but rejected or modified the other proposals. They stressed the need to declare Camp John Hay a SEZ as a condition precedent in accordance R.A. No. 7227. The sanggunian requested the Mayor to order the determination of realty taxes which may be collected from real properties of Camp John Hay. It was intended to intelligently guide the sanggunian in determining its position on whether Camp John Hay be declared a SEZ, it being of the view that such declaration would exempt the camps property and the economic activity therein from local or national taxation. The sanggunian passed a resolution seeking the issuance by President Ramos of a presidential proclamation declaring an area of 288.1 hectares of the camp as a SEZ. President Ramos issued Proclamation No. 420 which established a SEZ on a portion of Camp John Hay. ISSUE: Whether or not Proclamation No. 420 is constitutional RULING: While the grant of economic incentives may be essential to the creation and success of SEZs, free trade zones and the like, the grant thereof to the John Hay SEZ cannot be sustained. The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the extension of the same to the John Hay SEZ finds no support therein. Neither does the same grant of privileges to the John Hay SEZ find support in the other laws specified under Section 3 of Proclamation No. 420, which laws were already extant before the issuance of the proclamation or the enactment of R.A. No. 7227. More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. The challenged grant of tax exemption would circumvent the Constitutions imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress.

COCONUT OIL REFINERS ASSOCIATION INC. vs. BCDA G.R. No. 132527 July 29, 2005

FACTS: Republic Act No. 7227 was enacted providing for the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote the economic and social development of Central Luzon in particular and the country in general. President Ramos issued Executive Order No. 80 which declared that Clark shall have all the applicable incentives granted to the Subic Special Economic and Free Port Zone under Republic Act No. 7227. The CSEZ shall have all the applicable incentives in the Subic Special Economic and Free Port Zone under RA 7227. The CSEZ Main Zone covering the Clark Air Base proper shall have all the investment incentives, while the CSEZ Sub-Zone covering the rest of the CSEZ shall have limited incentives. The full incentives in the Clark SEZ Main Zone and the limited incentives in the Clark SEZ Sub-Zone shall be determined by the BCDA. BCDA passed Board Resolution No. 93-05-034 allowing the tax and duty-free sale at retail of consumer goods imported via Clark for consumption outside the CSEZ. The President issued EO No. 97, Clarifying the Tax and Duty Free Incentive Within the Subic Special Economic Zone Pursuant to R.A. No. 7227. EO 97 -A was issued, Further Clarifying the Tax and Duty-Free Privilege Within the Subic Special Economic and Free Port Zone. ISSUE: Whether or not Executive Order No. 97-A, Section 5 of Executive Order No. 80, and Section 4 of BCDA Board Resolution No. 93-05-034 are null and void RULING: The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 of Republic Act No. 7227 that . . .the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments. The Court reiterates that the second sentences of paragraphs 1.2 and 1.3 of Executive Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of Republic Act No. 7227. Said Section clearly provides that exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines. PROVINCE OF ABRA vs. HERNANDO G.R. No. L-49336 August 31, 1981

FACTS: On the face of this certiorari and mandamus petition, it clearly appears that the actuation of respondent Judge Hernando left much to be desired. There was a denial of a motion to dismiss an action for declaratory relief by Roman Catholic Bishop of Bangued desirous of being exempted from a real estate tax followed by a summary judgment granting such exemption, without even hearing the side of petitioner. It was the submission of counsel that an action for declaratory relief would be proper only before a breach or violation of any statute, executive order or regulation. Moreover, there being a tax assessment made by the Provincial Assessor on the properties of respondent, petitioner failed to exhaust the administrative remedies available under PD No. 464 before filing such court action. Respondent Judge alleged that there "is no question that the real properties sought to be taxed by the Province of Abra are properties of the respondent Roman Catholic Bishop of Bangued, Inc." The very next sentence assumed the very point it asked when he categorically stated: "Likewise, there is no dispute that the properties including their procedure are actually, directly and exclusively used by the Roman Catholic Bishop of Bangued, Inc. for religious or charitable purposes ." For him then: "The proper remedy of the petitioner is appeal and not this special civil action."

ISSUE: Whether or not the properties of respondent Roman Catholic Bishop should be exempt from taxation RULING: Respondent Judge would not have erred so grievously had he merely compared the provisions of the present Constitution with that appearing in the 1935 Charter on the tax exemption of "lands, buildings, and improvements." There is a marked difference. Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation." The present Constitution added "charitable institutions, mosques, and non-profit cemeteries" and required that for the exemption of ":lands, buildings, and improvements," they should not only be "exclusively" but also "actually and "directly" used for religious or charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration.

TOLENTINO vs. SECRETARY OF FINANCE G.R. No. 115455 October 30, 1995

FACTS: Motions were filed seeking reconsideration of the Supreme Court decision dismissing the petitions for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by the several petitioners in these cases. ISSUES: 1. Whether or not R.A. No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI Sec. 24 of the Constitution. 2. Whether or not R.A. No. 7716 is violative of press freedom and religious freedom under Art. III Secs. 4 and 5 of the Constitution. 3. Whether or not there is violation of the rule on taxation under Art. VI Sec. 28 (1) of the Constitution. 4. Whether or not there is an impairment of obligation of contracts under Art. III Sec. 10 of the Constitution. 5. Whether or not there is violation of the due process clause under Art. III Sec. 1 of the Constitution. RULING: 1. While Art. VI Sec. 24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills must "originate exclusively in the House of Representatives," it also adds, "but the Senate may propose or concur with amendments." In the exercise of this power, the Senate may propose an entirely new bill as a substitute measure. 2. Since the law granted the press a privilege, the law could take back the privilege anytime without offense to the Constitution. The VAT 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. 3. 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."

4. Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can extend to the defeat of that authority. 5. On the alleged violation of due process, hardship to taxpayers alone is not an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no different from the giving of advisory opinion that does not really settle legal issues. We are told that it is our duty under Art. VIII, Sec. 1 (2) to decide whenever a claim is made that "there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government." This duty can only arise if an actual case or controversy is before us.

ABAKADA Guro Party List vs. Ermita G.R. No. 168056 September 1, 2005

FACTS: Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition on May 27, 2005 questioning the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform proviso authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after specified conditions have been satisfied. Petitioners argue that the law is unconstitutional. ISSUES: 1. Whether or not there is a violation of Article VI, Section 24 of the Constitution. 2. Whether or not there is undue delegation of legislative power in violation of Article VI Sec 28(2) of the Constitution. 3. Whether or not there is a violation of the due process and equal protection under Article III Sec. 1 of the Constitution. RULING: 1. Since there is no question that the revenue bill exclusively originated in the House of Representatives, the Senate was acting within its constitutional power to introduce amendments to the House bill when it included provisions in Senate Bill No. 1950 amending corporate income taxes, percentage, and excise and franchise taxes. 2. There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible. Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward. 3. The power of the State to make reasonable and natural classifications for the purposes of taxation has long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection, the States power is entitled to presumption of validity. As a rule, the judiciary will not interfere with such power absent a clear showing of unreasonableness, discrimination, or arbitrariness.

MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC. vs. DEPARTMENT OF FINANCE SECRETARY G.R. No. 108524 November 10, 1994

FACTS:

Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation engaged in the buying and selling of copra in Misamis Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum Circular 47-91 which implemented VAT Ruling 190-90, copra was classified as agricultural food product under Sec. 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution. Petitioner sought to nullify Revenue Memorandum Circular No. 47-91 and enjoin the collection by respondent revenue officials of the Value Added Tax (VAT) on the sale of copra by members of petitioner organization as the classification had the effect of denying to the petitioner the exemption it previously enjoyed when copra was classified as an agricultural food product under Sec. 103(b) of the NIRC ISSUE: Whether there is violation of equal protection clause because while coconut farmers and copra producers are exempt, traders and dealers are not, although both sell copra in its original state. RULING: There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently.

COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS G.R. No. 119761 August 29, 1996

FACTS: Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes. The Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. The initial position of the CIR was to classify 'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category. RA No. 7654, was enacted and became effective. It amended Section 142(c)(1) of the NIRC. About a month after the enactment and two (2) days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93") Reclassification of Cigarettes Subject to Excise Tax, was issued by the BIR. Fortune Tobacco requested for a review, reconsideration and recall of RMC 37-93. The request was denied. The following day, or on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00. Fortune Tobacco filed a petition for review with the CTA. The CTA upheld the position of Fortune Tobacco and adjudged RMC No. 3793 as defective. ISSUE: Whether or not there is a violation of the due process of law. RULING: A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us that the circular cannot be viewed simply as a corrective measure or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654. In so doing, the BIR not simply intrepreted the law; verily, it legislated under its quasilegislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. The Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and effective administrative issuance.

COMMISSIONER OF INTERNAL REVENUE vs. LINGAYEN GULF OF ELECTRIC POWER G.R. No. L-23771 August 4, 1988

FACTS: The respondent taxpayer, Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the adjoining municipalities of Lingayen and Binmaley, Pangasinan, pursuant to the municipal franchise granted it by their respective municipal councils, under Resolution Nos. 14 and 25 of June 29 and July 2, 1946, respectively. Section 10 of these franchises provides that said grantee shall pay 2% of their gross earnings obtained thru this privilege. On November 21, 1955, the Bureau of Internal Revenue (BIR) assessed against and demanded from the private respondent the total amount of P19,293.41 representing deficiency franchise taxes and surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts from March 1, 1948 to December 31, 1954 as prescribed in Section 259 of the National Internal Revenue Code, instead of the lower rates as provided in the municipal franchises. Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963, granting to the private respondent a legislative franchise for the operation of the electric light, heat, and power system in the same municipalities of Pangasinan. Section 4 thereof provides that: In consideration of the franchise and rights hereby granted, the grantee shall pay into the Internal Revenue office of each Municipality in which it is supplying electric current to the public under this franchise, a tax equal to two per centum of the gross receipts from electric current sold or supplied under this franchise. The petitioner submits that the said law is unconstitutional insofar as it provides for the payment by the private respondent of a franchise tax of 2% of its gross receipts, while other taxpayers similarly situated were subject to the 5% franchise tax imposed in Section 259 of the Tax Code, thereby discriminatory and violative of the rule on uniformity and equality of taxation. ISSUE: Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the "uniformity and equality of taxation" clause of the Constitution. RULING: Uniformity means that all property belonging to the same class shall be taxed alike The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed violative of the equal protection clause. Charters or special laws granted and enacted by the Legislature are in the nature of private contracts. They do not constitute a part of the machinery of the general government.

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN vs. TAN G.R. No. 81311 June 30, 1988

FACTS: This petition seeks to nullify Executive Order No. 273 (EO 273), issued by the President of the Philippines, to take effect on 1 January 1988, and which amended certain sections of the National Internal Revenue Code and adopted the value-added tax (VAT, for short), for being unconstitutional in that its enactment is not alledgedly within the powers of the President; that the VAT is oppressive, discriminatory, regressive, and violates the due process and equal protection clauses and other provisions of the 1987 Constitution. ISSUE: Whether or not EO 273 was enacted by the president with grave abuse of discretion and whether or not such law is unconstitutional. RULING: Petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic manner by reason of passion or personal hostility. It appears that a comprehensive study of the VAT had been extensively discussed by this framers and other government agencies involved in its implementation, even under the past administration. The petitioners have failed to adequately show that the VAT is oppressive, discriminatory or unjust.

Petitioners merely rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification of a law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication. The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engage in business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from its application. SISON vs. ANCHETA G.R. No. L-59431 July 25, 1984

FACTS: Petitioner assailed the validity of Section 1 of Batas Pambansa Blg. 135 which further amends 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 alleges that by virtue thereof, "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. ISSUE: Whether or not BP 135 Sec 1 is violative of due procee and equal protection clause. RULING: The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here. does not suffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a provision as void or its face, he has not made out a case. This is merely to adhere to the authoritative doctrine that were the due process and equal protection clauses are invoked, considering that they arc not fixed rules but rather broad standards, there is a need for of such persuasive character as would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail. Due process was not violated. VILLEGAS vs. HUI CHIONG TSAI PAO G.R. No. L-29646 November 10, 1978

FACTS: Supra ISSUE: Whether or not the 50.00 employment permit fee imposed by virtue of Ordinance No. 6537 is a violation of the equal protection clause. RULING: The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. The same amount of P50.00 is being collected from every employed alien whether he is casual or permanent, part time or full time or whether he is a lowly employee or a highly paid executive. Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the exercise of the power which has been granted to him by the ordinance.

VILLANUEVA v. CITY OF ILOILO G.R. No. 26521 December 28, 1968

FACTS: On January 15, 1960 the municipal board of Iloilo City, believing, obviously, that with the passage of Republic Act 2264, otherwise known as the Local Autonomy Act, it had acquired the authority or power to enact an ordinance similar to that previously declared by this Court as ultra vires (taxing tenement houses), enacted Ordinance 11, series of 1960 which taxes those involve in the business of renting apartment houses. In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five tenement houses, aggregately containing 43 apartments, while the other appellees and the same Remedios S. Villanueva are owners of ten apartments. On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an amended complaint, respectively, against the City of Iloilo, in the aforementioned court, praying that Ordinance 11, series of 1960, be declared "invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact, and unconstitutional for being violative of the rule as to uniformity of taxation and for depriving said plaintiffs of the equal protection clause of the Constitution," and that the City be ordered to refund the amounts collected from them under the said ordinance. On March 30, 1966,1 the lower court rendered judgment declaring the ordinance illegal. ISSUE: Whether or not Ordinance 11 violate the rules of uniformity of taxation? RULING: No. This court has ruled that tenement houses constitute a distinct class of property. It has likewise ruled that taxes are uniform and equal when imposed upon all properties of the same class or character within the taxing authority. The fact, therefore, that the owners of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in question is no argument at all against uniformity and equality of the tax imposition.

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC. v. CITY OF BUTUAN G.R. No. 22814 August 28, 1968

FACTS: The City of Butuan enacted Ordinance No. 110 which was subsequently amended by Ordinance No. 122. Ordinance No. 110 as amended, imposes a tax on any person, association, etc. of P0.10 per case of 24 bottles of Pepsi-Cola and the plaintiff Pepsi-Cola paid under protest. The plaintiff filed a complaint for the recovery of the amount paid under protest on the ground that Ordinance No. 110 is illegal, that the tax imposed is excessive and that it is unconstitutional. Plaintiff maintains that the ordinance is null and void because it is unjust and discriminatory. ISSUE: Whether or not the ordinance in question is violative of the uniformity required by the Constitution? RULING: Yes. 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. The classification to be valid and reasonable must be: 1) based upon substantial distinctions; 2)germane to the purpose of the ordinance; 3) applicable, not only to present conditions, but also to future conditions substantially identical to those present; and 4) applicable equally to all those who belong to the same class. These conditions are not fully met by the ordinance in question.

ORMOC SUGAR COMPANY, INC. v. TREASURER OF ORMOC CITY

G.R. No. 23794 February 17, 1968

FACTS: The Municipal Board of Ormoc City passed Ordinance No. 4 imposing on any and all productions of centrifugal sugar milled at the Ormoc Sugar Company, Inc., in Ormoc City a municipal tax equivalent to one per centum (1%) per export sale to USA and other fore ign countries. Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc. Ormoc Sugar Company, Inc. filed before the Court of First Instance of Leyte a complaint against the City of Ormoc as well as its Treasurer, Municipal Board and Mayor alleging that the ordinance is unconstitutional for being violative of the equal protection clause and the rule of uniformity of taxation. The court rendered a decision that upheld the constitutionality of the ordinance. Hence, this appeal. ISSUE: Whether or not constitutional limits on the power of taxation, specifically the equal protection clause and rule of uniformity of taxation, were infringed? RULING: Yes. Equal protection clause applies only to persons or things identically situated and does not bar a reasonable classification of the subject of legislation, and a classification is reasonable where 1) it is based upon substantial distinctions; 2) these are germane to the purpose of the law; 3) the classification applies not only to present conditions, but also to future conditions substantially identical to those present; and 4) the classification applies only to those who belong to the same class. A perusal of the requisites shows that the questioned ordinance does not meet them, for it taxes only centrifugal sugar produced and exported by the Ormoc Sugar Company, Inc. and none other. The taxing ordinance should not be singular and exclusive as to exclude any subsequently established sugar central for the coverage of the tax.

LUTZ v. ARANETA G.R. No. 7859 December 22, 1955

FACTS: Supra ISSUE: Whether or not the law in question is constitutional RULING: Yes. The tax levied is with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. The act is primarily an exercise of the police power. That the tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint. It appears rational that the tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. At any rate, it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly ruled that inequalities which result from a singling out of one particular for taxation or exemption infringe no constitutional limitation. It appears of no moment that the funds raised under the Sugar Stabilization Act, now in question, should be exclusively spent in aid of the sugar industry, since it is that very enterprise that is being protected.

ASSOCIATION OF CUSTOMS BROKERS et al. vs. THE MUNICIPALITY BOARD of Manila et al. G.R. No. L-4376, May 22, 1953

FACTS:

Supra ISSUE: Whether or not Ordinance No. 3379 is valid as held by the CFI of Manila. RULING: No. The ordinance in question while it refers to property tax and it is fixed ad valorem yet we 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 (Act No. 3992) 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 (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we 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. EASTERN THEATRICAL CO., INC., ET AL. vs. VICTOR, ALFONSO G.R. No. L-1104 May 31, 1949

FACTS: Twelve corporation engaged in motion picture business filed a complaint to impugn the validity of Ordinance No. 2958 of the City of Manila- AN ORDINANCE IMPOSING A FEE ON THE PRICE OF EVERY ADMISSION TICKET SOLD BY CINEMATOGRAPHS, THEATERS VAUDEVILLE COMPANIES THEATRICAL SHOWS AND BOXING EXHIBITION. Plaintiffs, operator of theaters in Manila And distributor of local or imported films impugns Sections 1, 2 and 4 of said ordinance as null and void upon the following grounds: (a) For violation the Constitution more particular the provision regarding the uniformity and equality of taxation and the equal protection of the laws; ( b) because it contravenes, violates and is inconsistent with, existing national legislation more particularly revenue and tax laws and (c) because it is unfair, unjust, arbitrary capricious unreasonable oppressive and is contrary to and violation our basic and recognizes principles of taxation and licensing laws. ISSUE: Whether or not Ordinance No. 2958 violated the principle of equality and uniformity of taxation enjoined by the Constitution. RULING: No, the said Ordinance does not violate the principle of equality and uniformity of taxation. The fact that some places of amusement are not taxed while others, such as cinematographs, theaters, vaudeville companies, theatrical shows, and boxing exhibitions and other kinds of amusements or places of amusement are taxed, is no argument at all against the equality and uniformity of the tax imposition. Equality and uniformity of the tax imposition. 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; and the appellants cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be confused with those not included in the ordinance. PHILIPPINE TRUST COMPANY vs. YATCO G.R. Nos. L-46255, 46256, 46259 and 46277 January 23, 1940

FACTS: Prior to the filing of these suits, and for a number of years, the plaintiffs-appellants had been paying capital and deposit taxes without protest, formerly under section 111 of Act No. 1189, and later under section 1499 of the Revised Administrative Code of 1917, as amended. Appellants challenge the constitutionality of the aforesaid section of the Revised Administrative Code, principally on the grounds that it violates the rule regarding uniformity of

taxation, and that it is discriminatory, and therefore violative of the equal protection clause of the Constitution. Appellants stoutly maintain that although the foregoing provision is of general application and operates on all banks of the same kind doing business in the Philippines, the exemption of the National City Bank of New York from the impositions therein specifically provided (National City Bank of New York v. Posadas [296 U.S. 497, 80 Law ed. 351], makes the law discriminatory and violates the rule of uniformity in taxation ISSUE: Whether or not the said section of the Revised Administrative Code violates the rule on uniformity of taxation. RULING: No. A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found. Section 1499 of the Revised Administrative Code, as amended, applies uniformly to, and operates on, all banks in the Philippines without distinction and discrimination, and if the National City Bank of New York is exempted from its operation because it is a federal instrumentality subject only to the authority of Congress, that alone could have the effect of rendering it violative of the rule of uniformity. In every well-regulated and enlightened state or government, certain descriptions of property and also certain institutions are exempt from taxation, but these exemptions have never been regarded as disturbing the rules of taxation, even where the fundamental law had ordained that it should be uniform.

CHURCHILL vs. CONCEPCION G.R. No. 11572 September 22, 1916

FACTS: Section 100 of Act No. 2339 imposed an annual tax of P4 per square meter upon "electric signs, billboards, and spaces used for posting or displaying temporary signs, and all signs displayed on premises not occupied by buildings." This section was subsequently amended by Act No. 2432, effective by reducing the tax on such signs, billboards, etc., to P2 per square meter or fraction thereof. Francis A. Churchill and Stewart Tait, owners of a sign or billboard containing an area of 52 square meters constructed on private property in the city of Manila and exposed to public view, were taxes thereon P104. The tax was paid under protest. Plaintiffs assailed that they were gaining lesser profit than what they ought to receive because of the tax imposed by the said law. However, it was proven that there was no attempt on the part of the plaintiffs to raise the advertising rates in order to cope up with the said tax rates. It will thus be seen that the contention that the rates charged for advertising cannot be raised is purely hypothetical, based entirely upon the opinion of the plaintiffs, unsupported by actual test, and that the plaintiffs themselves admit that a number of other persons have voluntarily and without protest paid the tax herein complained of. ISSUE: Whether or not the tax void for lack of uniformity RULING: A tax is uniform, within the constitutional requirement, when it operates with the same force and effect in every place where the subject of it is found. "Uniformity," as applied to the constitutional provision that all taxes shall be uniform, means that all property belonging to the same class shall be taxed alike. The statute under consideration imposes a tax of P2 per square meter or fraction thereof upon every electric sign, bill-board, etc., wherever found in the Philippine Islands. Or in other words, "the rule of taxation" upon such signs is uniform throughout the Islands. The Legislature selected signs and billboards as a subject for taxation and it must be presumed that it, in so doing, acted with a full knowledge of the situation. MERALCO v. PROVINCE OF LAGUNA G.R. No. 131359. May 5, 1999.

FACTS Manila Electric Company (MERALCO) was granted a franchise from certain municipalities of Laguna. Republic Act 7160, otherwise known as the Local Government Code of 1991 was enacted, enjoining loval government units to create their own sources of revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to this Code, respondent province enacted a Provincial Ordinance providing that a tax on business enjoying franchise, at a rate of 50% of 1% of the gross annual receipts... On the basis of such ordinance, the Provincial Treasurer sent a demand letter to MERALCO for the tax payment. MERALCO paid under protest. Thereafter, a formal claim for refund was sent by MERALCO to the Provincial Treasurer claiming that the franchise tax it had paid and continue to pay to the National Government already includes the franchise tax as provided under Presidential Decree 551. The claim was denied. MERALCO filed an appeal with the trial court but was dismissed. Thus the petition. ISSUE Whether or not the imposition of a franchise tax of the Laguna Provincial Ordinance No. 01-92 violates the non-impairment clause of the Constitution. RULING No. Although local governments do not have the inherent power to tax, such power may be delegated to them either by basic law or by statute. This is provided under Article X of the 1987 Constitution. The rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. The Local Government Code of 1991 repealed the Tax Code. It explicitly authorizes provincial governments, notwithstanding any exemption granted by any law, or other special laws, xxx (to) impose a tax on business enjoying a franchise. The phrase, in lieu of all taxes have to give way to the peremptory language of the Local Government Code.

THE PROVINCE OF MISAMIS ORIENTAL v. CAGAYAN ELECTRIC POWER AND LIGHT COMPANY G.R. No. L-45355. January 12, 1990

FACTS Cagayan Electric Power and Light Company, Inc. (CEPALCO) was granted a franchise. Under Republic Act 3247. It was amended by Republic Act 3570 and Republic Act 6020. The Local Tax Code was promulgated which provides that the province may impose a tax on businesses enjoying franchise. Pursuant thereto, the Province of Misamis enacted Provincial Revenue Ordinance No. 19. It demanded payment. CEPALCO refused to pay, alleging that it is exempt from all taxes except the franchise tax required by Republic Act 6020. The provincial fiscal upheld the ordinance. CEPALCO paid under protest. On appeal to the Secretary of Justice, ruled in favor of CEPALCO. The province filed a petition with the trial court but was dismissed. Thus, the petition. ISSUE Whether or not CEPALCO is exempt from paying the provincial franchise tax. RULING Yes. First off, there is no provision in PD No. 231 expressly or impliedly amending or repealing sec. 3 of RA 6020 which exempts CEPALCO. The rule is that a special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special law unless there is manifest intent to repeal or alter the special law. The franchise of CEPALCO expressly exempts it from payment of all taxes of whatever authority except 3% tax on its gross earnings. Such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the grantee. Local Tax Regulation No. 3-75 issued by the Secretary of Finance on June 26, 1976, has made it crystal clear that the franchise tax provided in the Local Tax Code (P.D. No. 231, Sec. 9) may

only be imposed on companies with franchises that do not contain the exempting clause i n-lieu-of-alltaxes.

CAGAYAN ELECTRIC POWER AND LIGHT CO., INC v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-60126. September 25, 1985 FACTS: Petitioner Cagayan Electric Power and Light Co., Inc (CEPALCO) is the holder of a legislative franchise, Republic Act 3247 under which, it is exempted from taxes, and assessments of whatever authority upon privileges, earnings, income, franchise, and poles, wires transformers, and insulators. Republic Act 5431 amended Section 24 of the Tax Code, making the petitioner liable for income tax in addition to franchise tax. Republic Act 6020 was enacted under which, the petitioner was again tax exempted.The Commissioner of Internal Revenue (CIR) sent a demand letter requiring petitioner to pay the deficiency for income taxes for 1968-1971. Upon petitioner's contention, the CIR cancelled the assessments for 1970 but insisted those for 1968 and 1969. Petitioner filed a petition for review with the tax court which held petitioner responsible only for the period from January 1 to August 3, 1969, or before the passage of Republic Act 6420 which reiterated its tax exemption. Thus, the appeal. ISSUE: Whether or not petitioner's franchise is a contract which can be impaired by an implied appeal. RULING: Yes. Congress could impair petitioner's franchise by making it liable for income tax from which heretofore it was exempted by virtue of the exemption provided in its franchise. The Constitution provides that a franchise is subject to amendment, alteration, or repeal by Congress when public interest so requires. Petitioner's franchise, under Republic Act 3247 also provide it is subject to the Constitution. Republic Act 5431 withdrew petitioner's exemption but was restored by subsequent enactment. Thus, it is only liable for the period of January 1 to August 3, 1969 when its tax exemption was modified.

LEALDA ELECTRIC CO., INC v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-16428. April 30, 1963 FACTS: Alfredo, Mario and Benjamin Benito formed a partnership to operate an electric plant. Such electric plant was granted a franchise in the year 1915 to supply electric current to the municipalities of Albay. The franchise, the Certificate of public convenience and the electric plant was transferred to the said partnership. Under its franchise, the original grantee and successors-in-interest paid a franchise tax of 2% on the gross earnings, when section 259 of the National Internal Revenue Code was amended by Republic Act 39, which increased the franchise tax to 5%. On a date undisclosed, petitioner filed a petition for refund contending that on its charter, it was liable to pay a franchise tax of 2% and not 5% of its earnings and receipts. As several petitions were not given definite action, thus petitioner filed with the Court of Tax Appeals (CTA) a petition, praying for refund from the period of January 20, 1947 to October 14, 1958. The CTA dismissed the petition. Thus, the petition, on the ground that Act No.2475, as amended by Act 2620, granting its franchise constitute a private contract between the petitioner and the Government and such cannot be amended, altered or repealed by Section 259 of the Tax Code. ISSUE Whether or not petitioner should pay 5% of his gross earnings. RULING Yes. Petitioner's franchise does not specifically state that the rate of the franchise tax shall be 2% of his gross earnings or receipts. It simply provides that the grantee and successors-in-interest

shall pay the same franchise tax imposed upon other grantees at the time Act No. 2475 was enacted. Franchise holders did pay the rate of 2% until the rate was increased to 5%. Also, prior to its amendment, Section 259 of the Tax Code merely provided that grantees of franchises should pay on their gross earnings or receipts such taxes...as are specified in special charters upon whom franchises are conferred. This does not cover franchise holders whose charters did not specify the rate of franchise tax. It was covered under Section 10 of Act No. 3636. Consequently, section 259 of the Tax Code became the basic franchise tax to be paid by holders of all existing and future franchises. Such being the case, the act amending the section must be deemed applied to petitioner. J. CASANOVAS vs. HORD, G.R. No. 3473 March 22, 1907

FACTS: In 1897, the Spanish Government, in accordance with the provisions of the royal decree of 14 may 1867, granted J. Casanovas certain mines in the province of Ambos Camarines, of which mines the latter is now the owner. That these were validly perfected mining concessions granted to prior to 11 April 1899 is conceded. They were so considered by the Collector of Internal Revenue and were by him said to fall within the provisions of Section 134 of Act 1189 (Internal Revenue Act). The defendant Commissioner, JNO S. Hord, imposed upon these properties the tax mentioned in Section 134, which plaintiff Casanovas paid under protest. ISSUE: Whether or not Section 134 of Act 1189 is valid. RULING: The deed constituted a contract between the Spanish Government and Casanovas. The obligation in the contract was impaired by the enactment of Section 134 of the Internal Revenue Law, thereby infringing the provisions of Section 5 of the Act of Congress of 1 July 1902. Furthermore, the section conflicts with Section 60 of the Act of Congress of 1 July 1902, which indicate that concessions can be cancelled only by reason of illegality in the procedure by which they were obtained, or for failure to comply with the conditions prescribed as requisites for their retention in the laws under which they were granted. There is no claim in this case that there was any illegality in the procedure by which these concessions were obtained, nor is there any claim that the plaintiff has not complied with the conditions prescribed in the royal decree of 1867. As to the allegation that the section violates uniformity of taxation, the Court found it unnecessary to consider the claim in view of the result at which the Court has arrived.

AMERICAN BIBLE SOCIETY vs. CITY OF MANILA G.R. No. L-9637 April 30, 1957

FACTS: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines. The defendant appellee is a municipal corporation with powers that are to be exercised in conformity with the provisions of the Revised Charter of the City of Manila. In the course of its ministry, the Philippine agency of the American Bible Society has been distributing and selling bibles and/or gospel portions thereof throughout the Philippines and translating the same into several Philippine dialets. The acting City Treasurer of Manila required the society to secure the corresponding Mayors permit and municipal license fees, together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953. The society paid such under protest, and filed suit questioning the legality of the ordinances under which the fees are being collected. ISSUE: Whether or not the municipal ordinances violate the freedom of religious profession and worship.

RULING: A tax on the income of one who engages in religious activities is different from a tax on property used or employed in connection with those activities. It is one thing to impose a tax on the income or property of a preacher, and another to exact a tax for him for the privilege of delivering a sermon. The power to tax the exercise of a privilege is the power to control or suppress its enjoyment. Even if religious groups and the press are not altogether free from the burdens of the government, the act of distributing and selling bibles is purely religious and does not fall under Section 27 (e) of the Tax Code (CA 466). The fact that the price of bibles, etc. are a little higher than actual cost of the same does not necessarily mean it is already engaged in business for profit. Ordinance 2529 and 3000 are not applicable to the Society for in doing so it would impair its free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs.

ABRA VALLEY COLLEGE, INC vs. HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra G.R. NO. 39086 June 15, 1988

FACTS: Petitioner, an educational corporation and institution of higher learning duly incorporated with the Securities and Exchange Commission in 1948, filed a complaint to annul and declare void the "Notice of Seizure' and the "Notice of Sale" of its lot and building located at Bangued, Abra, for nonpayment of real estate taxes and penalties. Said "Notice of Seizure" by respondents Municipal Treasurer and Provincial Treasurer, defendants below, was issued for the satisfaction of the said taxes thereon. The parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial court ruled for the government, holding that the second floor of the building is being used by the director for residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not being used exclusively for educational purposes. Instead of perfecting an appeal, petitioner availed of the instant petition for review on certiorari with prayer for preliminary injunction before the Supreme Court. ISSUE: Whether or not the lot and building are used exclusively for educational purposes. RULING: Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from realty taxes for cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable or educational purposes. Reasonable emphasis has always been made that the exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. The use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. In the case at bar, the lease of the first floor of the building to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education. The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. The decision of the CFI Abra (Branch I) is affirmed subject to the modification that half of the assessed tax be returned to the petitioner. The modification is derived from the fact that the ground floor is being used for commercial purposes (leased) and the second floor being used as incidental to education (residence of the director).

COMMISSIONER OF INTERNAL REVENUE, vs. BISHOP OF THE MISSIONARY DISTRICT OF THE PHILIPPINE , G.R. No. L-19445 August 31, 1965

FACTS: Respondent Bishop of the Missionary District of the Philippines Islands of the Protestant, Episcopal Church in the U.S.A. is a corporation sole duly registered with the Securities and Exchange Commission. On the other hand, the Missionary District of the Philippine Islands of the Protestant Episcopal Church the U.S.A. (hereinafter referred to as Missionary District) is a duly incorporated and established religious society and owns and operates the St. Luke's Hospital in Quezon City, the Brent Hospital in Zamboanga City and the St. Stephen's High School in Manila. In 1957 to 1959, the Missionary District received various shipments of materials, supplies, equipment and other articles intended for use in the construction and operation of the new St. Lukes Hospital. On these shipments, the Commissioner collected compensation tax. The Missionary District filed claims for refund, but which was denied by the Commissioner on the gr ound that St. Lukes Hospital was not a charitable institution and therefore was not exempt from taxes because it admits pay patients. ISSUE: Whether or not the shipments for St. Lukes Hospital are tax-exempt. RULING: The following requisites must concur in order that a taxpayer may claim exemption under the law (1) the imported articles must have been donated; (2) the donee must be a duly incorporated or established international civic organization, religious or charitable society, or institution for civic religious or charitable purposes; and (3) the articles so imported must have been donated for the use of the organization, society or institution or for free distribution and not for barter, sale or hire. As the law does not distinguish or qualify the enjoyment or the exemption (as the Secretary of Finance did in Department Order 18, series of 1958), the admission of pay patients does not detract from the charitable character of a hospital, if its funds are devoted exclusively to the maintenance of the institution. Thus, the shipments are tax exempt.

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 lands, 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 donee's 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 vivos, the

imposition of which on property used exclusively for religious purposes, does not constitute an impairment of the Constitution.

HERRERA v. QUEZON CITY BOARD OF ASSESSMENT GR.No.L-15270 September 30, 1961

FACTS: On July 24, 1952, the Director of the Bureau of Hospitals authorized the petitioners to establish and operate the "St. Catherine's Hospital", located at 58 D. Tuazon, Sta. Mesa Heights, Quezon City (Exhibit "F-1", p. 7, BIR rec.). On or about January 3, 1953, the petitioners sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the lot, building and other improvements comprising the hospital stating that the same was established for charitable and humanitarian purposes and not for commercial gain. After an inspection of the premises in question and after a careful study of the case, the exemption from real property taxes was granted effective the years 1953, 1954 and 1955. Subsequently, however, the Quezon City Assessor notified the petitioners that the aforesaid properties were re-classified from exempt to "taxable" and thus assessed for real property taxes. The petitioners appealed the assessment to the Quezon City Board of Assessment Appeals, which affirmed the decision of the City Assessor. A motion for reconsideration thereof was denied. From this decision, the petitioners instituted the instant appeal. The building involved in this case is principally used as a hospital. ISSUE: Whether or not the lot, building and other improvements occupied by the St. Catherine Hospital are exempt from the real property tax. RULING: It is well settled, that the admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted "exclusively to the maintenance of the institution" as a "public charity". In other words, where rendering charity is its primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent purposes of the institution, the mere fact that a profit has been made will not deprive the hospital of its benevolent character" Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is "not limited to property actually indispensable" therefor, but extends to facilities which are "incidental to and reasonably necessary for" the accomplishment of said purposes. Within the purview of the Constitutional exemption from taxation, the St. Catherine's Hospital is, therefore, a charitable institution, and the fact that it admits pay-patients does not bar it from claiming that it is devoted exclusively to benevolent purposes, it being admitted that the income derived from pay-patients is devoted to the improvement of the charity wards, which represent almost two-thirds (2/3) of the bed capacity of the hospital, aside from "out-charity patients" who come only for consultation.

BISHOP OF NUEVA SEGOVIA v. PROVINCIAL BOARD OF ILOCOS NORTE G.RNo.L-27588 December 31, 1927

FACTS: The plaintiff, the Roman Catholic Apostolic Church, represented by the Bishop of Nueva Segovia, possesses and is the owner of a parcel of land in the municipality of San Nicolas, Ilocos Norte, all four sides of which face on public streets. On the south side is a part of the churchyard, the convent and an adjacent lot used for a vegetable garden, containing an area off 1,624 square meters, in which there is a stable and a well for the use of the convent. In the center is the remainder of the churchyard and the church. On the north is an old cemetery with two of its walls still standing, and a portion where formerly stood a tower, the base of which still be seen, containing a total area of 8,955 square meters.

As required by the defendants, on July 3, 1925 the plaintiff paid, under protest, the land tax on the lot adjoining the convent and the lot which formerly was the cemetery with the portion where the tower stood. The plaintiff filed this action for the recovery of the sum paid by to the defendants by way of land tax, alleging that the collection of this tax is illegal. The lower court absolved the defendants from the complaint in regard to the lot adjoining convent and declared that the tax collected on the lot, which formerly was the cemetery and on the portion where the lower stood, was illegal. Both parties appealed from this judgment. ISSUE Whether or not the lots of petitioner are exempted from land tax RULING The exemption in favor of the convent in the payment of the land tax (sec. 344 [c] Administrative Code) refers to the home of the parties who presides over the church and who has to take care of himself in order to discharge his duties. In therefore must, in the sense, include not only the land actually occupied by the church, but also the adjacent ground destined to the ordinary incidental uses of man. The judgment appealed from is reversed in all it parts and it is held that both lots are exempt from land tax and the defendants are ordered to refund to plaintiff whatever was paid as such tax, without any special pronouncement as to costs.

Commissioner of Internal Revenue v. Court of Appeals and YMCA G.R.No.L-124043 October 14, 1998

FACTS: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees collected from non-members. On July 2, 1984, the commissioner of internal revenue (CIR) issued an assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of YMCA. Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA) on March 14, 1989. In due course, the CTA issued this ruling in favor of the YMCA: ISSUE: Whether or not the YMCA is exempted from rental income derived from the lease of its properties RULING Petitioner argues that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them as such," the exemption does not apply to income derived "xxx from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income xxx" We agree with the commissioner. In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code.

LUNG CENTER OF THE PHILIPPINES vs.QUEZON CITY and CONSTANTINO P. ROSAS G.R. No. 144104 June 29, 2004

FACTS: The petitioner, a non-stock and non-profit entity is the registered owner of a parcel of land where erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City but the former filed a Claim for Exemption from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. ISSUE: Whether or not the petitionerS real properties are exempted from realty tax exemptions. RULING: Even as we find that the petitioner is a charitable institution, those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Under Section 2 of Presidential Decree No. 1823, the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges under Section 2.

Procter and Gamble Philippines Manufacturing Corp. vs. Municipality of Jagna G. R. No. L-24265 28 December 1979

FACTS: Petitioner Procter and Gamble Philippines Manufacturing Corp. is a consolidated corporation of Procter and Gamble Trading Company engaged in the manufacture of soap, edible oil, margarine and other similar products. Petitioner maintains a bodega in the m unicipality of Jagna, where it stores copra purchased in the municipality and ships the same for its manufacturing and other operations. In 1954, the Municipal Council of Jagna enacted Ordinance 4, imposing storage fees of all exportable copra deposite in the bodega within the jurisdiction of the municipality of Jagna, Bohol. From 1958 to 1963, the company paid the municipality, allegedly under protest, storage fees. In 1964, it filed suit, wherein it prayed that the Ordinance be declared inapplicable to it, and if not, that it be declared ultra vires and void. ISSUE: Whether the Ordinance is void, as it amounts to double taxation. RULING: The validity of the Ordinance must be upheld pursuant to the broad authority conferred upon municipalities by Commonwealth Act 472 (promulgated 1939), which was the prevailing law when the Ordinance is actually a municipal license tax or fee on persons, firms and corporations exercising the privilege of storing copra within the municipalitys territorial jurisdiction. Such fees imposed do not

amount to double taxation. For double taxation to exist, the same property must be taxed twice, when it should be taxed but once. A tax on the companys products is different from the tax on the privilege of storing copra in a bodega situated within the territorial boundary of the municipality.

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC. vs. MUNICIPALITY OF TANAUAN, G.R. No. L-31156 February 27, 1976

FACTS: Supra ISSUES: Whether or not Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes? RULING: No, the Ordinances does not constitute double taxation. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect.

VILLANUEVA, ET AL., vs.CITY OF ILOILO G.R. No. L-26521 December 28, 1968

FACTS: Supra ISSUE: Whether or not Ordinance 11, series of 1960, of the City of Iloilo, illegal because it imposes double taxation RULING: There is no double taxation. It is a well-settled rule that a license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax. In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed twice when it should be taxed but once; both taxes must be imposed on the same property or subject-matter, for the same purpose, by the same State, Government, or taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of tax." It has been shown that a real estate tax and the tenement tax imposed by the ordinance, although imposed by the same taxing authority, are not of the same kind or character. Compania General de Tabaccos de Filipinas vs City of Manila Facts: Supra Issue: Whether or not the taxes imposed constitute double taxation RULING: That Tabacalera is being subjected to double taxation is more apparent than real. As

already stated what is collected under Ordinance No. 3358 is a license fee for the privilege of engaging in the sale of liquor. On the other hand, what the three ordinances mentioned heretofore impose is a tax for revenue purposes based on the sales made of the same article or merchandise. It is already settled in this connection that both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation.

Delpher Trades Corporation vs. IAC G.R. No. L-69259. January 26, 1988.

FACTS: Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square meters of real estate in the Municipality of Polo (now Valenzuela), Province of Bulacan (now Metro Manila). The said co-owners leased to Construction Components International Inc. the same property and providing that during the existence or after the term of this lease the lessor should he decide to sell the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar conditions. On August 3, 1974, lessee Construction Components International, Inc. assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco. On January 3, 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property together with another parcel of land for 2,500 shares of stock of defendant corporation with a total value of P1,500,000.00. On the ground that it was not given the first option to buy the property, respondent Hydro Pipes Philippines, Inc., a complaint for reconveyance of Lot. No. 1095 in its favor. The Court of First Instance of Bulacan ruled in favor of the plaintiff. The lower court's decision was affirmed on appeal by the Intermediate Appellate Court.

ISSUE: Whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and the Delpher Trades Corporation on the other was meant to be a contract of sale. RULING: We rule for the petitioners. In the case at bar, in exchange for their properties, the Pachecos acquired 2,500 original unissued no par value shares of stocks of the Delpher Trades Corporation. Consequently, the Pachecos became stockholders of the corporation by subscription. "The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation, formed or to be formed." In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher Trades Corporation to take control of their properties and at the same time save on inheritance taxes. The records do not point to anything wrong or objectionable about this "estate planning" scheme resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted."

Heng Tong Textiles Co., Inc. Vs CIR G.R. No. L-19737. August 26, 1968.

FACTS: In 1952 the Collector of Internal Revenue assessed against the petitioner deficiency sales taxes and surcharges for the year 1949 and the first four months of 1950 in the aggregate sum of

P89,123.58. The assessment was appealed to the Board of Tax Appeals, whence the case was transferred to the Court of Tax Appeals upon its organization in 1954, and there was affirmed in its decision dated February 28, 1952. The deficiency taxes in question were assessed on importations of textiles from abroad. The goods were withdrawn from Customs by Pan- Asiatic Commercial Co., Inc., which paid, in the name of the petitioner, the corresponding advance sales tax under section 183(b) of the Internal Revenue Code. The assessment for the deficiency was made against the petitioner, Heng Tong Textiles Co., Inc. on the ground that it was the real importer of the goods and did not pay the taxes due on the basis of the gross selling prices thereof. ISSUE: Whether or not petitioner was guilty of fraud so as to warrant the imposition of a penalty of 50% on the deficiency. RULING: Petitioner excepts to the conclusion of the Court of Tax Appeals and avers that the importation papers were placed in the name of the petitioner only for purposes of accommodation, that is, to introduce the petitioner to textile suppliers abroad; and that the petitioner was not in a financial position to make the importations in question. These circumstances show nothing but a private arrangement between the petitioner and Pan-Asiatic Commercial, which in no way affected the role of the petitioner as the importer. The arrangement resorted to does not by itself alone justify the penalty imposed. Section 183(a), paragraph 3, of the Internal Revenue Code, as amended by Republic Act No. 253, speaks of willful neglect to file the return or willful making of a false or fraudulent return. An attempt to minimize one's tax does not necessarily constitute fraud. It is a settled principle that a taxpayer may diminish his liability by any means which the law permits. Commissioner of Internal Revenues vs. Toda G.R. No. 147188. September 14, 2004

FACTS: CIC authorized Benigno P. Toda, Jr., President and owner of 99.991% of its outstanding capital stock, to sell the Cibeles Building. Toda purportedly sold the property for P100 million to Rafael A. Altonaga, who, in turn, sold the same property on the same day to Royal Match Inc. (RMI) for P200 million. Three and a half years later Toda died. the BIR sent an assessment notice and demand letter to the CIC for deficiency income tax for the year 1989. The Estate of Benigno P. Toda, Jr., represented by special co-administrators Lorna Kapunan and Mario Luza Bautista, received a Notice of Assessment from the CIR for deficiency income tax for the year 1989. The Estate thereafter filed a letter of protest. The Commissioner dismissed the protest. On 15 February 1996, the Estate filed a petition for review with the CTA. In its decision the CTA held that the Commissioner failed to prove that CIC committed fraud to deprive the government of the taxes due it. It ruled that even assuming that a pre-conceived scheme was adopted by CIC, the same constituted mere tax avoidance, and not tax evasion. Hence, the CTA declared that the Estate is not liable for deficiency of income tax. The Commissioner filed a petition for review with the Court of Appeals. The Court of Appeals affirmed the decision of the CTA. Hence, this recourse to the SC. ISSUE: Whether or not this is a case of tax evasion or tax avoidance. RULING: Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being evil, in bad faith, willfull,or deliberate and not accidental; and (3) a course of action or failure of action which is unlawful. All these factors are present in the instant case. The scheme resorted to by CIC in making it appear that there were two sales of the subject properties, from CIC to Altonaga, and then from Altonaga to RMI cannot be considered a legitimate tax planning. Such scheme is tainted with fraud. Altonagas sole purpose of acquiring and transferring title of the subject properties on the same day was to create a tax shelter. The sale to him was merely a tax ploy, a sham, and without business

purpose and economic substance. Doubtless, the execution of the two sales was calculated to mislead the BIR with the end in view of reducing the consequent income tax liability. Davao Gulf Lumber Corporation vs. CIR G.R. No. 117359. July 23, 1998.

FACTS: Petitioner purchased, from various oil companies, refined and manufactured mineral oils as well as motor and diesel fuels. Said oil companies paid the specific taxes imposed on the sale of said products. Being included in the purchase price of the oil products, the specific taxes paid by the oil companies were eventually passed on to the petitioner in this case. Petitioner filed before Respondent CIR a claim for refund in the amount of P120,825.11, representing 25% of the specific taxes actually paid on the above-mentioned fuels and oils that were used by petitioner in its operations as forest concessionaire. Petitioner filed at the CTA a petition for review. The CTA rendered its decision finding petitioner entitled to a partial refund of specific taxes in the reduced amount of P2,923.15. In regard to the other purchases, the CTA granted the claim, but it computed the refund based on rates deemed paid under RA 1435, and not on the higher rates actually paid by petitioner under the NIRC. Insisting that the basis for computing the refund should be the increased rates prescribed by Sections 153 and 156 of the NIRC, petitioner elevated the matter to the Court of Appeals. The Court of Appeals affirmed the CTA Decision. Hence, this petition for review. ISSUE: Whether or not petitioner is entitled to the refund RULING: It must be stressed that petitioner is entitled to a partial refund under Section 5 of RA 1435, which was enacted to provide means for increasing the Highway Special Fund. A tax cannot be imposed unless it is supported by the clear and express language of a statute; on the other hand, once the tax is unquestionably imposed, [a] claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Since the partial refund authorized under Section 5, RA 1435, is in the nature of a tax exemption, it must be construed strictissimi juris against the grantee. Hence, petitioners claim of refund on the basis of the specific taxes it actually paid must expressly be granted in a statute stated in a language too clear to be mistaken.

PHILIPPINE ACETYLENE CO., INC. vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS G.R. No. L-19707 August 17, 1967

FACTS: The petitioner is a corporation engaged in the manufacture and sale of oxygen and acetylene gases. It made various sales of its products to the National Power Corporation and to the Voice of America an agency of the United States Government. The sales to the NPC amounted to P145,866.70, while those to the VOA amounted to P1,683, on account of which the respondent Commission of Internal Revenue assessed against, and demanded from, the petitioner the payment of P12,910.60 as deficiency sales tax and surcharge, pursuant to the Sec.186 of the National Internal Revenue Code. The petitioner denied liability for the payment of the tax on the ground that both the NPC and the VOA are exempt from taxation. ISSUE: Is the petitioner exempt from paying tax on sales it made to the 1) NPC and the 2) VOA because both entities are exempt from taxation? RULING: 1) No. SC hold that the tax imposed by section 186 of the National Internal Revenue Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very

remote and inconsequential sense. Accordingly its levy on the sales made to tax-exempt entities like the NPC is permissible. 2) No. Only sales made "for exclusive use in the construction, maintenance, operation or defense of the bases," in a word, only sales to the quartermaster, are exempt under Article V from taxation. Sales of goods to any other party even if it be an agency of the United States, such as the VOA, or even to the quartermaster but for a different purpose, are not free from the payment of the tax.

Commissioner of Internal Revenue vs. Courts of Tax Appeal, et al G.R. No. 115349 April 18, 1997

FACTS: Ateneo de Manila is an educational institution with auxiliary units and branches all over the Philippines. One such auxiliary unit is the Institute of Philippine Culture (IPC), which has no legal personality separate and distinct from that of private respondent. The IPC is a Philippine unit engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies. On July 8, 1983, private respondent received from petitioner Commissioner of Internal Revenue a demand letter dated June 3, 1983, assessing private respondent the sum of P174,043.97 for alleged deficiency contractor's tax the value of which was later on, upon private respondents request for reinvestigation, reduced to P46,516.41, Unsatisfied, Private respondent filed in the Court of Tax Appeals a petition for review of the said letter-decision of the petitioner which rendered a decision in its favor and ordered the tax assessment cancelled. ISSUE: Is Ateneo de Manila University, through its auxiliary unit or branch the Institute of Philippine Culture performing the work of an independent contractor and, thus, subject to the three percent contractor's tax levied by then Section 205 of the National Internal Revenue Code? RULING: No, The Supreme Court held that Ateneo de Manila University is not subject to the contractors tax. It explained that to fall under its coverage, Section 205 of the National Internal Revenue Code requires that the independent contractor be engaged in the business of selling its services. The Court, however, found no evidence that Ateneo's Institute of Philippine Culture ever sold its services for a fee to anyone or was ever engaged in a business apart from and independently of the academic purposes of the university. Moreover, the Court of Tax Appeals accurately and correctly declared that the funds received by the Ateneo de Manila University are technically not a fee. They may however fall as gifts or donations which are tax-exempt" as shown by private respondent's compliance with the requirement of Section 123 of the National Internal Revenue Code providing for the exemption of such gifts to an educational institution.

Caltex Philippines, Inc. v. Commission on Audit G.R. No. 92585 May 8, 1992

FACTS: Respondent Commission on Audit (COA) directed petitioner Caltex Philippines, Inc. (CPI) to remit to the Oil Price Stabilization Fund (OPSF) its collection of the additional tax on petroleum products pursuant to P.D. 1956, as well as unremitted collections of the above tax covering the years 1986, 1987 and 1988, with interests and surcharges, and advising it that all its claims for reimbursements from the OPSF shall be held in abeyance pending such remittance. COA further directed petitioner oil company to desist from further offsetting the taxes collected against outstanding claims for 1989 and subsequent periods.

Its motion for reconsideration of the eventual decision of the COA on the matter having been denied, CPI imputes that respondent commission erred in preventing the former from exercising the right to offset its remittances against the reimbursement vis--vis the OPSF. ISSUE: Whether or not the amounts due to the OPSF from petitioner may be offset against the latters outstanding claims from said fund? RULING: No. It is settled that a taxpayer may not offset taxes due from claims that he may have against the Government. Taxes cannot be the subject of compensation because the Government and the taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set off. The Court further ruled that taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the Government. Taxes may be levied for a regulatory purpose such as to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest, a concern which is within the police power of the State to address.

LUZON STEVEDORING CORPORATION vs. COURT OF TAX APPEALS , G.R. No. No. L-30232 July 29, 1988

FACTS: Herein petitioner imported various engine parts and other equipment for which it paid, under protest, the assessed compensating tax. Unable to secure a tax refund from the Commissioner of Internal Revenue, it filed a Petition for Review with the Court of Tax Appeals in order to be granted a refund. Petitioner contends that tugboats are included in the term cargo vessels which are exemped from compensating tax under article 190 of the National Internal Revenue Code. He argues that in legal contemplation, the tugboat and a barge loaded with cargoes with the former towing the latter for loading and unloading of a vessel in part, constitute a single vessel. Accordingly, it concludes that the engines, spare parts and equipment imported by it and used in the repair and maintenance of its tugboats are exempt from compensating tax. On the other hand, respondent contends that "tugboats" are not "Cargo vessel" because they are neither designed nor used for carrying and/or transporting persons or goods by themselves but are mainly employed for towing and pulling purposes. ISSUE: Whether or not tugboats are included in the term cargo vessels which are exempted from compensating tax under article 190 of the National Internal Revenue Code. RULING: No. tugboats are not included in the term cargo vessels which are exempted from compensating tax under article 190 of the National Internal Revenue Code. The Supreme Court explained that under the definition of tugboat, a diesel or steam power vessel designed primarily for moving large ships to and from piers for towing barges and lighters in harbors, rivers and canals. Which clearly do not fall under the categories of passenger and/or cargo vessels. Thus, it is a cardinal principle of statutory construction that where a provision of law speaks categorically, the need for interpretation is obviated, no plausible pretense being entertained to justify non-compliance. All that has to be done is to apply it in every case that falls within its terms.

NATIONAL DEVELOPMENT COMPANY vs. COMMISSIONER OF INTERNAL REVENUE G.R. No. No. L-53961 June 30, 1987

FACTS: National Development Company (NDC) is a domestic corporation with principal offices in Manila. It entered into contracts in Tokyo with several Japanese shipbuilding companies for the

construction of twelve ocean-going vessels. Initial payments were made in cash and through irrevocable letters of credit. Fourteen promissory notes were signed for the balance by the NDC and, as required by the shipbuilders, guaranteed by the Republic of the Philippines. Thereafter, remaining payments and the interests thereon were remitted in due time by the NDC to Tokyo. After the vessels were delivered, the NDC remitted to the shipbuilders in Tokyo the interest on the balance of the purchase price. No tax was withheld. The Commissioner of Internal Revenue held that the interest remitted to the Japanese shipbuilders on the unpaid balance of the purchase price of the vessels acquired by petitioner is subject to income tax under the Tax Code. The petitioner argues that the Japanese shipbuilders were not subject to tax under the Tax Code. Petitioner contends that the interest payments were obligations of the Republic of the Philippines and that the promissory notes of the NDC were government securities exempt from taxation under Section 29(b)[4] of the Tax Code. ISSUE: Whether petitioner should not be held liable due to the undertaking signed by the Secretary of Finance and because the interest payments were obligations of the Republic of the Philippines and that the promissory notes of the NDC were government securities exempt from taxation under Section 29(b)[4] of the Tax Code as alleged by petitioner. RULING: No. Petitioner should be held liable. There is nothing in Section 29(b)[4] of the Tax Code exempting the interests from taxes. Furthermore in the said undertaking, petitioner has not established a clear waiver therein of the right to tax interests. Tax exemptions cannot be merely implied but must be categorically and unmistakably expressed. Any doubt concerning this question must be resolved in favor of the taxing power. It is not the NDC that is being taxed. It was the income of the Japanese shipbuilders and not the Republic of the Philippines that was subject to the tax the NDC did not withhold. In effect, therefore, the imposition of the deficiency taxes on the NDC is a penalty for its failure to withhold the same from the Japanese shipbuilders.

MANILA ELECTRIC COMPANY vs. Commissioner of Internal Revenue G.R. Nos. No. L-29987s and L-23847 October 22, 1975

FACTS: MERALCO is the holder of a franchise by the Municipal Board of the City of Manila to Mr. Charles M. Swift and later assumed and taken over by petitioner to construct, maintain, and operate an electric light, heat, and power system in the City of Manila and its suburbs. In two separate occasions, MERALCO imported copper wires, transformers, and insulators for use in the operation of its business. The Collector of Customs, as Deputy of Commissioner of Internal Revenue, levied and collected a compensating tax for the said importation. MERALCO claims for a refund alleging that it was exempted from such compensating tax based on paragraph 9 of its franchise. The court stated that MERALCO's claim for exemption from the payment of the compensating tax is not clear or expressed. Hence, this appeal. ISSUE: Whether or not petitioner is exempted to pay compensating tax for its purchase or receipt of commodities, goods, wares, or merchandise outside the Philippines. RULING: No. One who claims to be exempt from the payment of a particular tax must do so under clear and unmistakable terms found in the statute. Tax exemptions are strictly construed against the taxpayer. In the case at bar, the Court is not aware whether or not the tax exemption provisions contained in Par. 9, Part Two of Act No. 484 of the Philippine Commission of 1902 was incorporated in the municipal franchise granted because no admissible copy of Ordinance of the said Board was ever presented in evidence by the petitioner. Furthermore there is no "plain and unambiguous terms" declaring petitioner MERALCO exempt from paying a compensating tax on its imports of poles, wires, transformers, and insulators. The last clause of paragraph 9 merely reaffirms, what has been expressed in the first sentence that petitioner is exempted from payment of property tax. A compensating tax is not a property tax but an excise tax imposed on the performance of an act, the engaging in an occupation, or the enjoyment of a privilege.

MACEDA vs. MACARAIG, G.R. No. No. 88291 May 31, 1991 and G.R. No. No. 88291 June 8, 1993

FACTS: Commonwealth Act No. 120 created the NPC as a public corporation to undertake the development of hydraulic power and the production of power from other sources. Several laws were enacted granting NPC tax and duty exemption privileges such as taxes, duties, fees, imposts, charges and restrictions of the Republic of the Philippines, its provinces, cities and municipalities "directly or indirectly," on all petroleum products used by NPC in its operation. However P.D. No. 1931 withdrew all tax exemption privileges granted in favor of government-owned or controlled corporations including their subsidiaries but empowered the President and/or the then Minister of Finance, upon recommendation of the FIRB to restore, partially or totally, the exemption withdrawn. BIR ruled that the exemption privilege enjoyed by NPC under said section covers only taxes for which it is directly liable and not on taxes which are only shifted to it. In 1986, BIR Commissioner Tan, Jr. states that all deliveries of petroleum products to NPC are tax exempt, regardless of the period of delivery.Thereafter, the FIRB issued several Resolutions in different occasions restoring the tax and duty exemption privileges of NPC indefinite period due to the restoration of the tax exemption privileges of NPC, NPC applied with the BIR for a "refund of Specific Taxes paid on petroleum products. On August 6, 1987, the Secretary of Justice, Opinion opined that "the power conferred upon Fiscal Incentives Review Board constitute undue delegation of legislative power and, therefore, unconstitutional. However, respondents Finance Secretary and the Executive Secretary declared that "NPC under the provisions of its Revised Charter retains its exemption from duties and taxes imposed on the petroleum products purchased locally and used for the generation of electricity. Thereafter investigations were made for the refund of the tax payments of the NPC which includes Millions of pesos Tax refund. Petitioner, as member of the Philippine Senate introduced as Resolution Directing the Senate Blue Ribbon Committee, In Aid of Legislation, to conduct a Formal and Extensive Inquiry into the Reported Massive Tax Manipulations and Evasions by Oil Companies, particularly Caltex (Phils.) Inc., Pilipinas Shell and Petrophil, Which Were Made Possible By Their Availing of the Non-Existing Exemption of National Power Corporation (NPC) from Indirect Taxes, Resulting Recently in Their Obtaining A Tax Refund Totalling P1.55 Billion From the Department of Finance. ISSUE: Whether or not respondent NPC is legally entitled to the questioned tax and duty refunds. RULING: Yes. In G.R. No. No. 88291 the Supreme Court ruled in favor of exempting NPC to the said taxes. Also in G.R. No. No. 88291 the Supreme Court ruled in favor of respondents. NPC under the provisions of its Revised Charter retains its exemption from duties and taxes imposed on the petroleum products purchased locally and used for the generation of electricity. Presidential Decree No. 938 amended the tax exemption of NPC by simplifying the same law in general terms. It succinctly exempts NPC from "all forms of taxes, duties, fees, imposts, as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings." the NPC electric power rates did not carry the taxes and duties paid on the fuel oil it used. The point is that while these levies were in fact paid to the government, no part thereof was recovered from the sale of electricity produced. As a consequence, as of our most recent information, some P1.55 B in claims represent amounts for which the oil suppliers and NPC are "out-of-pocket. There would have to be specific order to the Bureaus concerned for the resumption of the processing of these claims.

COMMISSIONER OF INTERNAL REVENUE vs. GOTAMCO & SONS, G.R. No. No. L-31092 February 27, 1987

FACTS:

The World Health Organization (WHO) is an international organization which has a regional office in Manila. An agreement was entered into between the Republic of the Philippines and the said. Section 11 of that Agreement provides, inter alia, that "the Organization, its assets, income and other properties shall be: (a) exempt from all direct and indirect taxes. The WHO decided to construct a building to house its own offices, as well as the other United Nations offices stationed in Manila. A bidding was held for the building construction. The WHO informed the bidders that the building to be constructed belonged to an international organization exempted from the payment of all fees, licenses, and taxes, and that therefore their bids "must take this into account and should not include items for such taxes, licenses and other payments to Government agencies." Thereafter, the construction contract was awarded to John Gotamco & Sons, Inc. (Gotamco for short). Subsequently, the Commissioner of Internal Revenue sent a letter of demand to Gotamco demanding payment of for the 3% contractor's tax plus surcharges on the gross receipts it received from the WHO in the construction of the latter's building. WHO. The WHO issued a certification that the bid of John Gotamco & Sons, should be exempted from any taxes in connection with the construction of the World Health Organization office building because such can be considered as an indirect tax to WHO. However, The Commissioner of Internal Revenue contends that the 3% contractor's tax is not a direct nor an indirect tax on the WHO, but a tax that is primarily due from the contractor, and thus not covered by the tax exemption agreement ISSUE: Whether or not the said 3% contractors tax imposed upon petitioner is covered by the direct and indirect tax exemption granted to WHO by the government. RULING: Yes. The 3% contractors tax imposed upon petitioner is covered by the direct and indirect tax exemption granted to WHO. Hence, petitioner cannot be held liable for such contractors tax. The Supreme Court explained that direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else. While it is true that the contractor's tax is payable by the contractor, However in the last analysis it is the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax against the WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO.

Commissioner of Internal Revenue vs. Court of Appeals and YMCA G.R. No. 124043, October 14, 1998

FACTS: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. The Commissioner of Internal Revenue issued an assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the Commissioner denied the claims of YMCA. YMCA filed a petition for review at the Court of Tax Appeals. The CTA ruled in favor of the YMCA. The Commissioner elevated the case to the Court of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contract of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contractors and income taxes. However, finding merit in YMCAs motion for reconsideration , the appellate court reversed itself and promulgated the first assessed resolution dated September 28, 1995 granting said motion of YMCA by affirming the CTAs decision in toto. On February 29, 1996, the Court of Appeals denied the Commissioners motion for reconsideration. ISSUE:

Whether or not the rental income of YMCA on its real estate is subject to tax. RULING: The Court ruled that the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real property, the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction.

Nitafan vs. Commissioner of Internal Revenue G.R. No. L-78780, July 23, 1987

FACTS: The Chief Justice has previously issued a directive to the Fiscal Management and Budget Office to continue the deduction of withholding taxes from salaries of the Justices of the Supreme Court and other members of the judiciary. This was affirmed by the Supreme Court en banc on December 4, 1987. Petitioners are the duly appointed and qualified Judges presiding over Branches 52, 19 and 53, respectively, of the RTC, National Capital Judicial Region, all with stations in Manila. They seek to prohibit and/or perpetually enjoin the Commissioner of Internal Revenue and the Financial Officer of the Supreme Court, from making any deduction of withholding taxes from their salaries. They contend that this constitutes diminution of salary contrary to Section 10, Article VIII of the 1987 Constitution, which provides that the salary of the members of the Supreme Court and judges of lower courts shall be fixed by law and that during their continuance in office, their salary shall not be decreased. With the filing of the petition, the Court deemed it best to settle the issue through judicial pronouncement, even if it had dealt with the matter administratively. The Supreme Court dismissed the petition for prohibition. ISSUE: Whether or not the salaries of judges are subject to tax. RULING: The salaries of members of the Judiciary are subject to the general income tax applied to all taxpayers. Although such intent was somehow and inadvertently not clearly set forth in the final text of the 1987 Constitution, the deliberations of the 1986 Constitutional Commission negate the contention that the intent of the framers is to revert to the original concept of non -diminution of salaries of judicial officers. Hence, the doctrine in Perfecto v. Meer and Endencia vs. David do not apply anymore. Justices and judges are not only the citizens whose income has been reduced in accepting service in government and yet subject to income tax. Such is true also of Cabinet members and all other employees.

Province of Abra vs. Hernando G.R. No. L-49336, August 31, 1981

FACTS: The provincial assessor made a tax assessment on the properties of the Roman Catholic Bishop of Bangued. The bishop claims tax exemption from real estate tax based on the provisions of Section 17, paragraph 3, Article VII of the 1973 Constitution. He filed an action for declaratory relief. Judge Hernando of the CFI Abra presided over the case. The petitioner province filed a motion to dismiss, based on lack of jurisdiction, which was denied. It was followed by a summary judgment granting the exemption without hearing the side of the petitioner. The Supreme Court granted the petition, set aside the June 19, 1978 resolution, and ordered the respondent judge, or whoever is acting on his behalf, to hear the case on merit; without costs.

ISSUE: Whether or not the properties of the Bishop of Bangued are tax-exempt. RULING: The 1935 and the 1973 Constitutions differ in language as to the exemption of religious property from taxes as they should not only be exclusively but also actually and directly used for religious purposes. Herein, the judge accepted at its face the allegation of the Bishop instead of demonstrating that there is compliance with the constitutional provision that allows an exemption. There was an allegation of lack of jurisdiction and of lack of cause of action, which should have compelled the judge to accord a hearing to the province rather than deciding the case immediately in favor of the Bishop. Exemption from taxation is not favored and is never presumed, so that if granted, it must be strictly construed against the taxpayer. There must be proof of the actual and direct use of the lands, buildings, and improvements for religious (or charitable) purposes to be exempted from taxation. The case was remanded to the lower court for a trial on merits.

Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation G.R. No. 54908 and G.R. No. 80041, January 22, 1990

FACTS: Supra ISSUE: Whether or not the interest income from the loans extended to Atlas by Mitsubishi is excludible from gross income taxation and thus exempt from withholding tax. RULING: It is settled that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which onus private respondents have failed to discharge. The taxability of a party cannot be blandly glossed over on the basis of a supposed broad, pragmatic analysis alone without substantial supportive evidence, lest governmental operations suffer due to diminution of much needed funds. Commissioner of Internal Revenue vs Gotamco and Sons, Inc. G.R. No. L-31092 February 27, 1987

FACTS: Supra ISSUE: Whether or not John Gotamco & Sons, Inc. should pay the 3% contractor's tax under Section 191 of the National Internal Revenue Code. RULING: No, The Supreme Court held that Respondent John Gotamco and Sons, Inc. is not required to pay the 3% contractors tax under the National Internal Revenue Code. It explained that direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else. The contractor's tax is of course payable by the contractor but in the last analysis it is the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of selfpreservation. Thus, it is an indirect tax. And it is an indirect tax on the WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO. It is the WHO that will pay the tax indirectly through the contractor and it certainly cannot be said that 'this tax has no bearing upon the

World Health Organization. Accordingly, finding no reversible error committed by the respondent Court of Tax Appeals, the Supreme Court affirmed the appealed decision.

31 Infantry Post Exchange vs. Posadas G.R. No. 33403 September 4, 1930

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FACTS: Supra ISSUE: Whether or not merchandise is relieved from said tax when it is sold to the Army or Navy of the United States for resale to individuals by means or through the post exchanges or ship's stores RULING: No, The Supreme Court ruled that merchandise is not exempted from taxes when it is sold to the Army of the United States for resale. It explained that although The revenue laws at that time provided that "no specific tax shall be collected on any articles sold and delivered directly to the United States Army or Navy for actual use or issue by the Army or Navy, and any taxes which have been paid on articles so sold and delivered for such use or issue shall be refunded upon such sale and delivery, the Court is not inclined to believe that goods sold to the soldiers and sailors of the Army and Navy, even though they be sold through said exchanges by the intervention of officers of the Army and Navy, are goods sold directly to the United States Army or Navy for actual use or issue by the Army or Navy.

PLDT vs. City of Davao G.R. No. 143867 August 22, 2001

FACTS: Petitioner Philippine Long Distance Telephone Co., Inc. (PLDT) applied for a Mayor's Permit to operate its Davao Metro Exchange. However, Respondent City of Davao withheld action on the application pending payment by petitioner of the local franchise tax in the amount of P3,681,985.72 for the first to the fourth quarter of 1999. Petitioner protested the assessment of the local franchise tax and requested a refund of the franchise tax paid by it for the year 1997 and the first to the third quarters of 1998. Petitioner contended that it was exempted from the payment of franchise tax based on an opinion of the Bureau of Local Government Finance (BLGF) citing Section 23 of RA 7925 which provides equality of treatment in the telecommunication industry. Nevertheless, respondent Adelaida B. Barcelona, City Treasurer of Davao, denied the protest and claim for tax refund of petitioner. ISSUE: Whether or not PLDT is exempted to pay the local franchise tax. RULING: No, the Supreme Court held that Petitioner PLDT is not exempted from the local franchise tax because it does not appear that, in approving 23 of R.A. No. 7925, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. It explained that the acceptance of petitioner's theory would result in absurd consequences. It is different if Congress enacts a law specifically granting uniform advantages, favor, privilege, exemption, or immunity to all telecommunications entities. Furthermore, the court emphasized that tax exemptions are highly disfavored.

Sea-Land Services, Inc. vs. Court of Appeals G.R. No. 122605 April 30, 2001

FACTS: Supra ISSUE: Whether or not the income that petitioner derived from services in transporting the household goods and effects of U.S. military personnel falls within the tax exemption provided in Article XII, paragraph 4 of the RP-US Military Bases Agreement. RULING: No, The Supreme Court held that the petitioner is not included in the tax exemption provided in the RP-US Military Bases Agreement. It explained that although the Military Bases agreement provides that no US national shall be liable to pay income tax in the Philippines in respect of any profits derived under a contract made in the United States with the government of the United States in connection with the construction, maintenance, operation and defense of the bases it is obvious that the transport or shipment of household goods and effects of U.S. military personnel is not included in the term "construction, maintenance, operation and defense of the bases." Neither could the performance of this service to the U.S. government be interpreted as directly related to the defense and security of the Philippine territories.

MERALCO VS. PROVINCE OF LAGUNA G.R. No. 131359. May 5, 1999

FACTS: Supra ISSUE: Whether or not the tax exemption should be withdrawn to give way to the authoritative language of the Local Government Code specifically providing for the withdrawal of such exemption without violating the Constitutiion. RULING: Yes. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts. These contractual tax exemptions, however, are not to be confused with tax exemptions granted under franchises. A franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution. Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so requires. TIU VS. COURT OF APPEALS G.R. NO. 127410. JANUARY 20, 1999

FACTS: Supra ISSUE: Whether the provisions of Executive Order No. 97-A confining the application of R.A. 7227 granting tax and duty incentives only to businesses and residents within the secured area and excluding the residents of the zone outside of the secured area is discriminatory or not. RULING: No. We rule in favor of the constitutionality and validity of the assailed EO. Said Order is not violative of the equal protection clause; neither is it discriminatory. Rather, we find real and

substantive distinctions between the circumstances obtaining inside and those outside the Subic Naval Base, thereby justifying a valid and reasonable classification. There are substantial differences between the big investors who are being lured to establish and operate their industries in the so-called secured area and the present business operators outside the area. On the one hand, we are talking of billion-peso investments and thousands of new jobs. On the other hand, definitely none of such magnitude. In the first, the economic impact will be national; in the second, only local. Even more important, at this time the business activities outside the secured area are not likely to have any impact in achieving the purpose of the law, which is to turn the former military base to productive use for the benefit of the Philippine economy. There is, then, hardly any reasonable basis to extend to them the benefits and incentives accorded in RA 7227. MACTAN CEBU INTERNATIONAL AIRPORT VS. MARCOS G.R. No. 120082. September 11, 1996

FACTS: Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958, mandated to principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City, and such other airports as may be established in the Province of Cebu (Sec. 3, RA 6958). Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter. However, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on several parcels of land belonging to the petitioner. Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favor the aforecited Section 14 of RA 6958 which exempts it from payment of realty taxes. It was also asserted that it is an instrumentality of the government performing governmental functions, citing Section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local government units. ISSUE: Whether or not the City of Cebu demand payment of realty taxes on several parcels of land belonging to the petitioner RULING: Yes. 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 in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Petitioner was only exempted from the payment of real property taxes. The grant of 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. Even if the petitioner was originally not a taxable person for purposes of real property tax, it had already become a taxable person for such purpose in view of the withdrawal of its exemption from the payment of real property taxes. The same is true even if it is conceded that petitioner is an agency or instrumentality of the government. COMMISSIONER OF INTERNAL REVENUE vs. ROBERTSON G.R. Nos. 70116-19. August 12, 1986

FACTS: The question involving this case is the scope of the tax exemption provision in Article XII, Par. 2, of the RP-US Military Bases Agreement of 1947. The private respondents are citizens of the United States; holders of American passports and admitted as Special Temporary Visitors under Section 9 (a) visa of the Philippine Immigration Act of 1940, as amended; civilian employees in the U.S. Military Base in the Philippines in connection with its construction, maintenance, operation, and defense; and incomes are solely derived from salaries from the U.S. government by reason of their employment in the U.S. Bases in the Philippines."

The Court a quo after due hearing, rendered its judgment in favor of respondents cancelling and setting aside the assessments for deficiency income taxes of respondents for the taxable years 1969-1972, inclusive of interests and penalties. ISSUE: Whether or not the public respondent erred in holding that private respondents are exempted from paying Philippine income tax. RULING: The law and the facts of the case are so clear that there is no room left for Us to doubt the validity of private respondents' defense. In order to avail oneself of the tax exemption under the RPUS Military Bases Agreement: he must be a national of the United States employed in connection with the construction, maintenance, operation or defense, of the bases, residing in the Philippines by reason of such employment, and the income derived is from the U.S. Government (Art. XII par. 2 of PI-US Military Bases Agreement of 1947). Said circumstances are all present in the case at bar. Likewise, We find no justifiable reason to disturb the findings and rulings of the lower court in its decision.

Basco vs PAGCOR G.R. No. 91649. May 14, 1991

FACTS: PAGCOR was created under P.D. 1869 to enable the Government to regulate and centralize all games of chance authorized by existing franchise or permitted by law. To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its Charter's repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistent therewith, are accordingly repealed, amended or modified. But petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local." ISSUE: Whether or not P.D. 1869 constitutes a waiver of the right of the city of Manila to impose taxes and legal fees to PAGCOR. RULING: The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it". Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent power to tax". The Charter of the City of Manila is subject to control by Congress.

Republic vs IAC G.R. No. L-69344. April 26, 1991

FACTS: The Republic of the Philippines, through the Bureau of Internal Revenue, commenced an action to collect from the spouses Antonio Pastor and Clara Reyes-Pastor deficiency income taxes for the years 1955 to 1959. The Pastors filed a motion to dismiss the complaint, but the motion was denied. They filed an answer admitting there was an assessment against them of P17,117.08 for income tax deficiency but denying liability therefor. They contended that they had availed of the tax amnesty under P.D.'s Nos. 23, 213 and 370 and had paid the corresponding amnesty taxes amounting to P10,400 or 10% of their reported untaxed income under P.D. 23, P2,951.20 or 20% of the reported untaxed income under P.D. 213, and a final payment on October 26, 1973 under P.D.

370 evidenced by the Government's Official Receipt No. 1052388. Consequently, the Government is in estoppel to demand and compel further payment of income taxes by them. ISSUE: Whether or not the payment of deficiency income tax under the tax amnesty and its acceptance by the Government operated to divest the Government of the right to further recover from the taxpayer, even if there was an existing assessment against the latter at the time he paid the amnesty tax. RULING: Even assuming that the deficiency tax assessment of P17,117.08 against the Pastor spouses were correct, since the latter have already paid almost the equivalent amount to the Government by way of amnesty taxes under P.D. No. 213, and were granted not merely an exemption, but an amnesty, for their past tax failings, the Government is estopped from collecting the difference between the deficiency tax assessment and the amount already paid by them as amnesty tax. A tax amnesty, being a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law, partakes of an absolute forgiveness or waiver by the Government of its right to collect what otherwise would be due it, and in this sense, prejudicial thereto, particularly to give tax evaders, who wish to relent and are willing to reform a chance to do so and thereby become a part of the new society with a clean slate.

Commissioner of Internal Revenue vs CA G.R. No. 108358. January 20, 1995

FACTS: E.O. 41 was promulgated declaring a one-time tax amnesty on unpaid income taxes, later amended to include estate and donor's taxes and taxes on business, for the taxable years 1981 to 1985. Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, its Tax Amnesty Return and Supplemental Tax Amnesty Return, respectively, and paid the corresponding amnesty taxes due. Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication received by private respondent, assessed the latter deficiency income and business taxes for its fiscal years ended 30 September 1981 and 30 September 1982 in an aggregate amount of P1,410,157.71. The taxpayer wrote back to state that since it had been able to avail itself of the tax amnesty, the deficiency tax notice should forthwith be cancelled and withdrawn. The request was denied by the Commissioner, on the ground that Revenue Memorandum Order 4-87, implementing E.O. 41, had construed the amnesty coverage to include only assessments issued by the Bureau of Internal Revenue after the promulgation of the executive order and not to assessments theretofore made. ISSUE: Whether or not the position taken by the Commissioner is valid RULING: The period of the amnesty was later extended to 05 December 1986 from 31 October 1986 by E.O. 54, dated 04 November 1986, and, its coverage expanded, under E.O. 64, dated 17 November 1986, to include estate and honors taxes and taxes on business. If, as the Commissioner argues, E.O. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases specifically excepted by it.

Hilado vs Collector of Internal Revenue GR L-9408. October 31, 1956

FACTS: Emilio Hilado filed his income tax return for 1951 with the treasurer of Bacolod City. He is claiming a deductible item of P12,837.65 from his gross income under the General Circular V-123 issued by the Collector of Internal Revenue. Subsequently, the Secretary of Finance, through the Collector, issued General Circular V-139 which revoked and declared void Circular V-123. It provided that losses of property which occurred in World War II from fires, storms, shipwreck or other casualty, or from robbery, theft, or embezzlement are deductible in the year of actual loss or destruction of said property. Thereafter, the deductions were disallowed. ISSUE: Whether or not Hilado can claim compensation for destruction of his property during the war under the laws in effect at that time. RULING: Philippines Internal Revenue Laws are not political in nature and as such were continued in force during the period of enemy occupation and in effect were actually enforced by the occupation government. Such tax laws are deemed to be laws of the occupied territory and not of the occupying enemy. As of the end of 1945, there was no law which Hilado could claim for the destruction of his properties during the battle for the liberation of the Philippines. Under the Philippine Rehabilitation Act of 1948, the payment of claims by the War Damage Commission depended upon its discretions non-payment of which does not give rise to any enforceable right. Assuming that the loss (deductible item) represents a portion of the 75% of his war damage claim, the amount would be at most a proper deduction of his 1950 gross income (not on his 1951 gross income) as the last installment and notice of discontinuation of payment by the War Damage Commission was made in 1950.

Misamis Oriental Association of Coco Traders, inc. vs. Department of Finance Secretary G.R. No. 108524. November 10, 1994

FACTS: Supra ISSUE: Whether RMC No. 47-91 is discriminatory and violative of the equal protection clause of the Constitution. RULING: The court ruled in the negative. Petitioner claims that RMC No. 47-91 is violative of the equal protection clause because while coconut farmers and copra producers are exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add that oil millers do not enjoy tax credit out of the VAT payment of traders and dealers. The argument has no merit. There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. It is not true that oil millers are exempt from VAT. Pursuant to 102 of the NIRC, they are subject to 10% VAT on the sale of services.

Commissioner of Internal Revenue vs. Court of Appeals and Alhambra Industries, Inc. G.R. No. 117982. February 6, 1997

FACTS: Alhambra Industries, Inc. is a domestic corporation engaged in the manufacture and sale of cigar and cigarette products. Private respondent received a letter from the Commissioner of Internal Revenue assessing it deficiency Ad Valorem Tax (AVT) in the amount P 488,396.62. Private respondent filed a protest against the proposed assessment with a request that the same be withdrawn and cancelled. Petitioner denied such protest. The dispute arose from the discrepancy in the taxable base on which the excise tax is to apply on account of two incongruous BIR Rulings:

(1) BIR Ruling 473-88 dated 4 October 1988 which excluded the VAT from the tax base in computing the fifteen percent (15%) excise tax due; and, (2) BIR Ruling 017-91 dated 11 February 1991 which included back the VAT in computing the tax base for purposes of the fifteen percent (15%) ad valorem tax. ISSUE: Whether Sec. 142 (d) of the Tax Code, which provides for the inclusion of the VAT in the tax base for purposes of computing the 15% ad valorem tax, is the applicable law in the instant case as it specifically applies to the manufacturer's wholesale price of cigar and cigarette products and not Sec. 127 (b) of the Tax Code which applies in general to the wholesale of goods or domestic products. RULING: Sec. 142 being a specific provision applicable to cigar and cigarettes must prevail over Sec. 127 (b), a general provision of law insofar as the imposition of the ad valorem tax on cigar and cigarettes is concerned. Consequently, the application of Sec. 127 (b) to the wholesale price of cigar and cigarette products for purposes of computing the ad valorem tax is patently erroneous. Accordingly, BIR Ruling 473-88 is void ab initio as it contravenes the express provisions of Sec. 142 (d) of the Tax Code. However, well-entrenched is the rule that rulings and circulars, rules and regulations promulgated by the Commissioner of Internal Revenue would have no retroactive application if to so apply them would be prejudicial to the taxpayers. The BIR is now ordered to refund private respondent of the collected taxes form the latter.

Commissioner of Internal Revenue vs. Lingayen Gulf Electric Power Co., Inc G.R. No. L-23771. August 4, 1988

FACTS: Supra ISSUES: (1) Whether or not the 5% franchise tax prescribed in Section 259 of the National Internal Revenue Code assessed against the private respondent on its gross receipts realized before the effectivity of R.A- No. 3843 is collectible. (2) Whether or not the respondent taxpayer is liable for the fixed and deficiency percentage taxes in the amount of P3,025.96 for the period before the approval of its municipal franchises. RULING: R.A. No. 3843 provided that the private respondent should pay only a 2% franchise tax on its gross receipts, "in lieu of any and all taxes and/or licenses of any kind, nature or description levied, established, or collected by any authority whatsoever, municipal, provincial, or national, now or in the future ... and effective further upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts ... shall be collected, any provision of law to the contrary notwithstanding." Thus, by virtue of R.A- No. 3843, the private respondent was liable to pay only the 2% franchise tax, effective from the date the original municipal franchise was granted. As to the second issue, the legislative franchise (R.A. No. 3843) exempted the grantee from all kinds of taxes other than the 2% tax from the date the original franchise was granted. The exemption, therefore, did not cover the period before the franchise was granted, i.e. before February 24, 1948. However, as pointed out by the respondent court in its findings, during the period covered by the instant case, that is from January 1, 1946 to December 31, 1961, the private respondent paid the amount of P34,184.36, which was very much more than the amount rightfully due from it. Hence, the private respondent should no longer be made to pay for the deficiency tax in the amount of P3,025.98 for the period from January 1, 1946 to February 29, 1948. ABS-CBN Broadcasting Corp. vs. Court of Tax Appeals G.R. No. L-52306. October 12, 1981

FACTS:

During the period pertinent to this case, petitioner corporation was engaged in the business of telecasting local as well as foreign films acquired from foreign corporations not engaged in trade or business within the Philippines for which petitioner paid rentals after withholding income tax of 30%of one-half of the film rentals. In implementing Section 4(b) of the Tax Code, the Commissioner issued General Circular V-334. Pursuant thereto, ABS-CBN Broadcasting Corp. dutifully withheld and turned over to the BIR 30% of of the film rentals paid by it to foreign corporations not engaged in trade or business in the Philippines. The last year that the company withheld taxes pursuant to the Circular was in 1968. On 27 June 1908, RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30% to 35% and revising the tax basis from such amount referring to rents, etc. to gross income. In 1971, the Commissioner issued a letter of assessment and demand for deficiency withholding income tax for years 1965 to 1968. The company requested for reconsideration; where the Commissioner did not act upon. ISSUES: Whether or not RMC 4-71 may be retroactively applied. RULING: Rulings or circulars promulgated by the Commissioner have no retroactive application where to so apply them would be prejudicial to taxpayers. Herein ,the prejudice the company of the retroactive application of Memorandum Circular 4-71 is beyond question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The assessment and demand on petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965. The company was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and had no longer control over them when the new circular was issued. Insofar as the enumerated exceptions are concerned, the company does not fall under any of them.

Philippine Bank of Commerce (PBcom) v. Commissioner of Internal Revenue (CIR) G.R. No. 112024. January 28, 1999

FACTS: Petitioner PBcom paid its quarterly income tax for the first and second quarters of 1985 totalling to Php5, 016,954.00. Subsequently, PBcom suffered losses so that when it filed its Annual Income Tax for the year- ended December 31, 1986, it reported a net loss and declared no tax payable for the year. Petitioner also earned rental income for both 1985 and 1986 and the corresponding tax thereof was with held and remitted by the lessees to the BIR. On August 7, 1987 or after more than two years from payment of taxes, PBcom filed for a tax refund. Pending investigation of the BIR, petitioner filed a petition for review with the Court of Tax Appeals. The CTA denied the tax refund on the ground that application for refund must be made within two years from the payment of tax as provided by the National Internal Revenue Code. Petitioner contended that the two year period has been changed to ten years upon a memorandum issued by the Commissioner of Internal Revenue. The Court of Appeal affirmed in toto the ruling of the CTA. ISSUE: Did the CTA erred in denying the plea for tax refund on the ground of prescription? RULING: No. The relaxation of revenue regulation by a memorandum issued by the BIR is not warranted as it disregards the two year period set by law. Section 230 of the National Internal Revenue Code of 1977 provides for the two year period for filing a claim for refund or credit. When the Acting Commissioner of Internal Revenue issued a memorandum changing the prescriptive period of two years to ten years, such circular created a clear inconsistency with the provision of Section 230 of NIRC. In so doing, the BIR did not simply interpret the law, rather it legislated guidelines contrary to the statute passed by the congress. Davao Gulf Lumber Corporation vs. CIR G.R. No. 117359. July 23, 1998.

Facts: Supra Issue: Whether or not petitioner is entitled to the refund of 25% of the amount of specific taxes it actually paid on various refined and manufactured mineral oils. RULING: At the outset, it must be stressed that petitioner is entitled to a partial refund under Section 5 of RA 1435, which was enacted to provide means for increasing the Highway Special Fund. A tax cannot be imposed unless it is supported by the clear and express language of a statute; on the other hand, once the tax is unquestionably imposed, [a] claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Since the partial refund authorized under Section 5, RA 1435, is in the nature of a tax exemption, it must be construed strictissimi juris against the grantee. Hence, petitioners claim of refund on the basis of the specific taxes it actually paid must expressly be granted in a statute stated in a language too clear to be mistaken.

UNGAB vs. CUSI "An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to defeat and evade the income tax." FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer, for allegedly evading payment of taxes and other violations of the NIRC. Ungab, subsequently filed a motion to quash on the ground that (1) the information are null and void for want of authority on the part of the State Prosecutor to initiate and prosecute the said cases; and (2)that the trial court has no jurisdiction to take cognizance of the case in view of his pending protest against the assessment made by the BIR examiner. The trial court denied the motion prompting the petitioner to file a petition for certiorari and prohibition with preliminary injunction and restraining order to annul and set aside the information filed. ISSUE: Is the contention that the criminal prosecution is premature since the CIR has not yet resolved the protest against the tax assessment tenable? HELD: No. The contention is without merit. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is within the cognizance of courts of first instance. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code. An assessment of a deficiency is not necessary to a criminal prosecution for wilful attempt to defeat and evade the income tax. A crime is complete when the violator has knowingly and wilfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the government's failure to discover the error and promptly to assess has no connections with the commission of the crime.

CIR V PASCOR REALTY & DEVT CORP et. al. GR No. 128315, June 29, 1999 Facts: The CIR authorized certain BIR officers to examine the books of accounts and other accounting records of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The examination resulted in

recommendation for the issuance of an assessment of P7,498,434.65 and P3,015,236.35 for 1986 and 1987, respectively. The Commissioner filed a criminal complaint for tax evasion against PRDC, its president and treasurer before the DOJ. Private respondents filed immediately an urgent request for reconsideration on reinvestigation disputing the tax assessment and tax liability. The Commissioner denied private respondents request for reconsideration/reinvestigation on the ground that no formal assessment has been issued which the latter elevated to the CTA on a petition for review. The Commissioners motion to dismiss on the ground of the CTAs lack of jurisdiction denied by CTA and ordered the Commissioner to file an answer. Instead of complying with the order of CTA, Commissioner filed a petition with the CA alleging grave abuse of discretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the revenue officers and the endorsement of said report as assessment which may be appealed to the CTA. The CA sustained the CTA decision and dismissed the petition. Issues: (1) Whether or not the criminal complaint for tax evasion can be construed as an assessment. (2) Whether or not an assessment is necessary before criminal charges for tax evasion may be instituted. Held: The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment. Neither the Tax Code nor the revenue regulations governing the protest assessments provide a specific definition or form of an assessment. An assessment must be sent to and received by the taxpayer, and must demand payment of the taxes described therein within a specific period. The revenue officers affidavit merely contained a computation of respondents tax liability. It did not state a demand or period for payment. It was addressed to the Secretary of Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint for tax evasion; it was not meant to be a notice of tax due and a demand to private respondents for the payment thereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows that commissioner intended to file a criminal complaint for tax evasion, not to issue an assessment. An assessment is not necessary before criminal charges can be filed. A criminal charge need not only be supported by a prima facie showing of failure to file a required return. The CIR had, in such tax evasion cases, discretion on whether to issue an assessment, or to file a criminal case against the taxpayer, or to do both.

PROTECTORS SERVICES, INC., V CA ET. AL. G.R. No 118176, April 12, 2000 Facts: Petition Protectors Services, Inc., (PSI) is a contractor engaged in recruiting security guards for clients. After an audit investigation, the BIR assessed PSI deficiency percentage taxes including surcharges, penalties and interests of P503,564.39, P831,464.30 and P1,514,047.86 for 1983, 1984 and 1985, respectively. On December 7, 1987, respondent CIR sent demand letters for payment of said assessments for 1983 and 1984 on December 10, 1987, but denied receiving the notice of deficiency tax for 1985. Petitioner PSI, sent a protest letter dated January 12, 1988 regarding the 1983 and 1984 assessments, claiming that gross receipts subject to percentage tax should exclude salaries of the security guards, employers share of SSS, SIF and Medicare contributions. Without formally acting thereon, the BIR sent a follow-up letter dated July 12, 1988 for the settlement of the taxes based on its computation, plus additional documentary stamp taxes of P2,025 on PSIs capitalization for 1983 and 1984 and as deficiency expanded withholding tax of P703.41, thereby bringing the total unsettled tax to P2,851,805.16. On July 12, 1988, petition paid the P2,025 documentary stamp tax and P703.41 deficiency expanded withholding tax. The following day, PSI filed its second protest for the 1983 and 1984 assessments and included for the first time its protest against the 1985 assessment. On November 9, 1990, the BIR denied the protests stating that salaries of security guards are part of taxable gross receipts for determination of contractors tax. PSI filed a petition for review on December 5, 1990 with the CTA averring that assessments for documentary stamp and expanded withholding taxes and without basis having been paid on July 22, 1988; the period for collection of the 1985 assessment letter therefore, the period to collect the percentage taxes for the first, second and third quarter of 1984 has lapsed, the assessment letter therefore having been sent on December

10, 1987, or beyond 3 years from filing of the quarterly returns, and that the base amount was erroneous since salaries of security guards, employers share of SSS, SIF and medicare contributions should not form part of taxable gross receipts. The CTA dismissed the petition stating that: (1) the assessments were made within the 3-year prescriptive period which should be reckoned from January 20, 1985, the date of filing the final return; (2) receipt of the 1985 assessment cannot be denied as all assessments were sent in 1 envelope, as testified to by BIR personal; and (3) the protest letter having filed only on January 12, 1988, or 33 days from December 10, 1987, the request for reinvestigation was filed out of time. On review by the CA, the CTAs decision was affirmed.

Issues: Whether or not the CTA has jurisdiction to act on the petition for review filed before it. Whether or not the assessments against PSI for deficiency percentage tax for 1983 and 1984 were made within the prescriptive period. Whether or not the period for collection of taxes for taxable years 1983, 1984 and 1985 has already prescribed. Whether or not the assessments are correct.

Held: An assessment maybe administratively protested within 30 days from receipt thereof; otherwise, the assessment shall become final and unappealable. In this case, PSI received the assessments on December 10, 1987 and protested the 1983 and 1984 assessments on January 12, 1988, or 33 days thereafter. Hence, the protests were filed out of time and PSI can no longer dispute the correctness of assessment. The CTA correctly dismissed the appeal for lack of jurisdiction. Petitioners contention that the Governments right to assess and collect the 1983, 1984 and 1985 assessments had already prescribed in view of BP700, which reduced the prescriptive period for assessment and collection of internal revenue taxes to 3 yrs, lacks merit BP700 was approved on April 5, 1984. The 3-year prescriptive period for assessment and collection of revenue taxes applied to taxes paid beginning 1984. Clearly, the tax assessment made on December 10, 1987, for the par 1983 was still covered by the 5-year statutory prescriptive period. The 3-year prescriptive period for assessment of contractors tax should be computed at the time of filing of the final annual percentage tax return, when it can be finally acclaimed if the taxpayer still has an unpaid tax, and not from the tentative quarterly payments. As to the contention that for failure of the BIR to commence collection of the 1983, 1984 and 1985 deficiency taxes either by judicial action or by distraint and levy, the governments right to collect the tax has prescribed, the court ruled that the suspension of the running of the statute of limitations for tax collection for the period during which the commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and 60 days thereafter. In the instant case, PSI filed a petition before the CTA to prevent the collection of the assessed deficiency tax. When the CTA dismissed the case, petitioner elevated the case to the SC, hoping for a review in the favor. The actions taken by petitioner before the CTA and the SC suspended the running of the statute of limitation. As to the correctness of the assessment, it was held that contractors tax on gross rece ipts imposed on business agents including private detective watchman agencies, was a tax on the sale of services or labor, imposed on the exercise of a privilege. The term gross receipts means all amounts received by the prime or principal contractor as the total price, undiminished by the amount paid to the subcontractor under the subcontract arrangement. Hence, gross receipts could not be diminished by employers SSS, SIF and medicare contributions. Furthermore, it has been consistently ruled by the BIR that the salaries paid to security guards should form part of the gross receipts subject to tax.

CIR vs. Isabela Cultural Corporation Facts: Isabela Cultural Corporation (ICC), a domestic corporation received an assessment notice for deficiency income tax and expanded withholding tax from BIR. It arose from the disallowance of ICCs claimed expense for professional and security services paid by ICC; as well as the alleged understatement of interest income on the three promissory notes due from Realty Investment Inc. The deficiency expanded withholding tax was allegedly due to the failure of ICC to withhold 1% e-withholding tax on its claimed deduction for security services. ICC sought a reconsideration of the assessments. Having received a final notice of assessment, it brought the case to CTA, which held that it is unappealable, since the final notice is not a decision. CTAs ruling wa s reversed by CA, which was sustained by SC, and case was remanded to CTA. CTA rendered a decision in favor of ICC. It ruled that the deductions for professional and security services were properly claimed, it said that even if services were rendered in 1984 or 1985, the amount is not yet determined at that time. Hence it is a proper deduction in 1986. It likewise found that it is the BIR which overstate the interest income, when it applied compounding absent any stipulation. Petitioner appealed to CA, which affirmed CTA, hence the petition. Issue: Whether or not the expenses for professional and security services are deductible. Held: No. One of the requisites for the deductibility of ordinary and necessary expenses is that it must have been paid or incurred during the taxable year. This requisite is dependent on the method of accounting of the taxpayer. In the case at bar, ICC is using the accrual method of accounting. Hence, under this method, an expense is recognized when it is incurred. Under a Revenue Audit Memorandum, when the method of accounting is accrual, expenses not being claimed as deductions by a taxpayer in the current year when they are incurred cannot be claimed in the succeeding year. The accrual of income and expense is permitted when the all-events test has been met. This test requires: 1) fixing of a right to income or liability to pay; and 2) the availability of the reasonable accurate determination of such income or liability. The test does not demand that the amount of income or liability be known absolutely, only that a taxpayer has at its disposal the information necessary to compute the amount with reasonable accuracy. From the nature of the claimed deductions and the span of time during which the firm was retained, ICC can be expected to have reasonably known the retainer fees charged by the firm. They cannot give as an excuse the delayed billing, since it could have inquired into the amount of their obligation and reasonably determine the amount. CIR vs. HANTEX TRADING CO., INC. G.R. No. 136975; March 31, 2005 Facts: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of plastic products, it imports synthetic resin and other chemicals for the manufacture of its products. For this purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received confidential information that the respondent had imported synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a subpoena to present its books of account which it failed to do. The bureau cannot find any original copies of the products Hentex imported since the originals were eaten by termites. Thus, the Bureau relied on the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as excerpts from the entries certified by Tomas and Danganan. The case was submitted to the CTA which ruled that Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency assessments issued by the petitioner were unlawful and baseless since the copies of the import entries relied upon in computing the deficiency tax of the respondent were not duly authenticated by the public officer charged with their custody, nor verified under oath by the EIIB and the BIR investigators.

Issue: Whether or not the final assessment of the petitioner against the respondent for deficiency income tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competent evidence and the law. Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the Commissioner of Internal Revenue has the power to make assessments and prescribe additional requirements for tax administration and enforcement. Among such powers are those provided in paragraph (b), which provides that Failure to submit required returns, statements, reports and other documents. When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation or when there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable. This provision applies when the Commissioner of Internal Revenue undertakes to perform her administrative duty of assessing the proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a return already filed in the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and accounting records of the taxpayer who is the subject of the assessment process, the accounting records of other taxpayers engaged in the same line of business, including their gross profit and net profit sales. Such evidence also includes data, record, paper, document or any evidence gathered by internal revenue officers from other taxpayers who had personal transactions or from whom the subject taxpayer received any income; and record, data, document and information secured from government offices or agencies, such as the SEC, the Central Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does not include mere photocopies of records/documents. The petitioner, in making a preliminary and final tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of records/documents. Mere photocopies of the Consumption Entries have no probative weight if offered as proof of the contents thereof. The reason for this is that such copies are mere scraps of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer. Companies exempt from zero-rate tax CIR vs. Reyes and Reyes vs. CIR GR Nos. 159694 & 163581 Facts: Decedent Tancinco left a 1,292 square-meter residential lot and an old house thereon. The heirs of the decedent received a final estate tax assessment notice and a demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge and interest. The CIR issued a preliminary collection letter to Reyes, followed by a Final Notice Before Seizure. Subsequently, a Warrant of Distraint and/or Levy was served upon the estate. Reyes initially protested the notice of levy but then the heirs proposed a compromise settlement of P1,000,000.00. The CIR rejected Reyess offer, pointing out that since the est ate tax is a charge on the estate and not on the heirs, the latters financial incapacity is immaterial as, in fact, the gross value of the estate amounting to P32,420,360.00 is more than sufficient to settle the tax liability. As the estate failed to pay its tax liability within the deadline, BIR notified Reyes that the subject property would be sold at public auction on August 8, 2000. Reyes filed a protest with the BIR Appellate Division. Assailing the scheduled auction sale, she asserted that the assessment, letter of demand, and the whole tax proceedings against the estate are void ab initio. She offered to file the corresponding estate tax return and pay the correct amount of tax without surcharge or interest. Issue: WON the assessment in this case can be used as a basis for the perfection of a tax compromise. Held: NO. The 2 paragraph of Sec. 228 of NIRC is clear and mandatory insofar as taxpayers shall be informed in writing of the law and the facts on which the assessment is made, otherwise the assessment shall be void. RA 8424 has already amended the provisions of Sec. 229 of NIRC on protesting an assessment. The old requirement of merely notifying the taxpayer of the CIRs findings was changed in 1998 of informing the taxpayer of not only the law, but also of the facts on which an assessment would be made, otherwise, the assessment itself would be invalid. Being invalid, the assessment canot be in turn be used as a basis for the perfection of a tax compromise.
nd

Hence, it is premature to declare the compromise on the tax liability of the estate perfected and consummated considering that the tax assessment is void. While administrative agencies, like the BIR, were not bound by procedural requirements, they were still required by law and equity to observe substantive due process. The reason behind this requirement, said the CA, was to ensure that taxpayers would be duly apprised of -- and could effectively protest -- the basis of tax assessments against them.7 Since the assessment and the demand were void, the proceedings emanating from them were likewise void, and any order emanating from them could never attain finality. Oceanic Wireless Network Inc. V Commissioner of Internal Revenue Facts: Petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax assessments for the taxable year 1984. Petitioner filed its protest against the tax assessments and requested reconsideration or cancellation of the same in a letter to the BIR Commissioner. Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax assessments while denying petitioners request for reinvestigation. Said letter likewise requested petitioner to pay the total amount of P8,644,998.71 within ten (10) days from receipt thereof, otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for the issuance of a warrant of distraint and levy without further notice. Upon petitioners failure to pay the subject tax assessments within the prescribed period, the Assistant Commissioner for Collection, acting for the CIR, issued the corresponding warrants of distraint and/or levy and garnishment. Petitioner filed a Petition for Review with the CTA to contest the issuance of the warrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of jurisdiction in a decision declaring that said petition was filed beyond the (30)-day period reckoned from the time when the demand letter of January 24, 1991 by the Chief of the BIR Accounts Receivable and Billing Division was presumably received by petitioner. The filing of the petition was held clearly beyond the reglementary period. The court a quo likewise stated that the finality of the denial of the protest by petitioner against the tax deficiency assessments was bolstered by the subsequent issuance of the warrants of distraint and/or levy and garnishment to enforce the collection of the deficiency taxes. The issuance was not barred by prescription because the mere filing of the letter of protest by petitioner which was given due course by the Bureau of Internal Revenue suspended the running of the prescription period as expressly provided under the then Section 224 of the Tax Code. Petitioner filed a MR arguing that the demand letter of January 24, 1991 cannot be considered as the final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a mere subordinate and not by the Commissioner himself. With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with the CA contending that there was no final decision to speak of because the Commissioner had yet to make a personal determination as regards the merits of petitioners case. CA denied petition. Hence, this petition. Issue: Whether or not a demand letter for tax deficiency assessments issued and signed by a subordinate officer who was acting in behalf of the Commissioner of Internal Revenue, is deemed final and executory and subject to an appeal to the Court of Tax Appeals. Whether said demand letter indeed attained finality despite the fact that it was issued and signed by the Chief of the Accounts Receivable and Billing Division instead of the BIR Commissioner. Ruling: Yes. 1. A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer. We laid down the rule that the Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. In this case, the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioners request for reconsideration when it reiterated the tax

deficiency assessments due from petitioner, and requested its payment. Failure to do so would result in the issuance of a warrant of distraint and levy to enforce its collection without further notice. In addition, the letter contained a notation indicating that petitioners request for reconsideration had been denied for lack of supporting documents. The demand letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a rejection of the request for reconsideration. As correctly held by the Court of Tax Appeals, while the denial of the protest was in the form of a demand letter, the notation in the said letter making reference to the protest filed by petitioner clearly shows the intention of the respondent to make it as *his+ final decision. 2. The general rule is that the CIR may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the NIRC enumerated in Section 7. It is clear that the act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned as non -delegable. Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and effect as that issued by the Commissioner himself, if not reviewed or revised by the latter such as in this case. A request for reconsideration must be made within (30) days from the taxpayers receipt of the tax deficiency assessment, otherwise, the decision becomes final, unappealable and therefore, demandable. A tax assessment that has become final, executory and enforceable for failure of the taxpayer to assail the same as provided in Section 228 can no longer be contested. Here, petitioner failed to avail of its right to bring the matter before the Court of Tax Appeals within the reglementary period upon the receipt of the demand letter reiterating the assessed delinquent taxes and denying its request for reconsideration which constituted the final determination by the Bureau of Internal Revenue on petitioners protest. Being a final disposition by said agency, the same would have been a proper subject for appeal to the Court of Tax Appeals. The rule is that for the Court of Tax Appeals to acquire jurisdiction, an assessment must first be disputed by the taxpayer and ruled upon by the Commissioner of Internal Revenue to warrant a decision from which a petition for review may be taken to the Court of Tax Appeals. Where an adverse ruling has been rendered by the Commissioner of Internal Revenue with reference to a disputed assessment or a claim for refund or credit, the taxpayer may appeal the same within thirty (30) days after receipt thereof. We agree with the factual findings of the Court of Tax Appeals that the demand letter may be presumed to have been duly directed, mailed and was received by petitioner in the regular course of the mail in the absence of evidence to the contrary. This is in accordance with Section 2(v), Rule 131 of the Rules of Court, and in this case, since the period to appeal has commenced to run from the time the letter of demand was presumably received by petitioner within a reasonable time after January 24, 1991, the period of thirty (30) days to appeal the adverse decision on the request for reconsideration had already lapsed when the petition was filed with the Court of Tax Appeals only on November 8, 1991. Hence, the Court of Tax Appeals properly dismissed the petition as the tax delinquency assessment had long become final and executory. CIR v. AICHI FORGING COMPANY OF ASIA, INC. G.R. No. 184823 October 6, 2010 Facts: Petitioner filed a claim of refund/credit of input vat in relation to its zero -rated sales from July 1, 2002 to September 30, 2002. The CTA 2nd Division partially granted respondents claim for refund/credit. Petitioner filed a Motion for Partial Reconsideration, insisting that the administrative and the judicial claims were filed beyond the two-year period to claim a tax refund/credit provided for under Sections 112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the two -year period, which expired on September 29, 2004. He cited as basis Article 13 of the Civil Code, which provides that when the law speaks of a year, it is equivalent to 365 days. In addition, petitioner argued that the simultaneous filing of the administrative and the judicial claims

contravenes Sections 112 and 229 of the NIRC. According to the petitioner, a prior filing of an administrative claim is a condition precedent before a judicial claim can be filed. The CTA denied the MPR thus the case was elevated to the CTA En Banc for review. The decision was affirmed. Thus the case was elevated to the Supreme Court. Respondent contends that the non-observance of the 120-day period given to the CIR to act on the claim for tax refund/credit in Section 112(D) is not fatal because what is important is that both claims are filed within the two-year prescriptive period. In support thereof, respondent cited Commissioner of Internal Revenue v. Victorias Milling Co., Inc. [130 Phil 12 (1968)] where it was ruled that if the CIR takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA before the end of the two-year period without awaiting the decision of the CIR. Issues: 1. Whether or not the claim for refund was filed within the prescribed period 2. Whether or not the simultaneous filing of the administrative and the judicial claims contravenes Section 229 of the NIRC, which requires the prior filing of an administrative claim, and violates the doctrine of exhaustion of administrative remedies Held: 1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (G.R. No. 172129, September 12, 2008), the two-year period should be reckoned from the close of the taxable quarter when the sales were made. In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No. 162155, August 28, 2007, 531 SCRA 436), we said that as between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is composed of 12 calendar months, it is the latter that must prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori. Thus, applying this to the present case, the two -year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, respondents administrative claim was timely filed. 2. Yes. We find the filing of the judicial claim with the CTA premature. Section 112(D) of the NIRC clearly provides that the CIR has 120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit], within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days. Subsection (A) of Section 112 of the NIRC states that any VAT -registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. The phrase within two (2) years x x x apply for the issuance of a tax credit certificate or refund refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA. The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. is inapplicable as the tax provision involved in that case is Section 306, now Section 229 of the NIRC. Section 229 does not apply to refunds/credits of input VAT. The premature filing of respondents claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA. Allied Banking Corporation vs. CIR G.R. No. 175097-February 5, 2010 FACTS: Preliminary Assessment Notice was issued against Allied Banking. The filed a protest on the PAN. BIR denied the protest and demanded payment of the deficiency taxes through the issuance of a formal letter of demand. Portions of the formal letter of demand, which brought the dispute is quoted hereunder: It is requested that the above deficiency tax be paid immediately upon receipts hereof, inclusive of penalties incident to delinquency. This is our final decision based oninvestigation. If you disagree,

you may appeal the final decision within 30 days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and demandable. Instead of filing a protest on the demand, Allied Banking appealed to CTA. BIR argued that it was prematurely appealed. ISSUE: WON the Formal Letter of Demand issued by the BIR can be construed as a final decision of the BIR, hence appealable to the CTA. Ruling: The petition is meritorious. Section 7 of RA 9282 expressly provides that the CTA exercises exclusive appellate jurisdiction to review by appeal decisions of the CIR in cases involving disputed assessments. The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction. The word decisions in the provision of RA 9282 has been interpreted to mean the decisi ons of the CIR on the protest of the taxpayer against the assessments. Corollary thereto, Section 228 of the National Internal Revenue Code (NIRC) provides for the procedure for protesting an assessment. In the instant case, petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was to dispute the assessments by filing an administrative protest within 30 days from receipt thereof. Petitioner, however, did not protest the final assessment notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply the rules, the dismissal of the Petition for Review by the CTA was proper. The case is an exception to the rule on exhaustion of administrative remedies. We find the CIR estopped from claiming that the filing of the Petition for Review was premature because petitioner failed to exhaust all administrative remedies. The Formal Letter of Demand with Assessment Notices which was not administratively protested by the petitioner can be considered a final decision of the CIR appealable to the CTA because the words used, specifically the words final decision and appeal, taken together led petitioner to believe that the Formal Letter of Demand with Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and that the available remedy was to appeal the same to the CTA. RCBC v CIR G.R 168498 April 24, 2007

Facts: Petitioner Rizal Commercial Banking Corporation received a Formal Letter of Demand dated May 25, 2001 from the respondent Commissioner of Internal Revenue for its tax liabilities particularly for Gross Onshore Tax in the amount of P53,998,428.29 and Documentary Stamp Tax. The petitioner filed a protest but the respondent failed to act upon the same. So, the petitioner filed a Petition for Review with the CTA for the cancellation of the above-mentioned assessments. The respondent filed a motion to resolve first the issue of CTAs jurisdiction, which was granted by the CTA. The petition for review was dismissed because it was filed beyond the 30-day period following the lapse of 180 days from petitioners submission of documents in support of its protest, as pursuant to Section 228 of the NIRC and R.A. No. 1125. The same became final and executory due to the negligence of the petitioners counsel. Hence, this petition Issue: Whether or not the petitioner was denied the opportunity to be heard? Whether or not the petitioner can still file the appeal despite the lapse of the 30-day period? Held: No, the Court held that he "essence of due process is a hearing before conviction and before an impartial and disinterested tribunal" but due process as a constitutional precept does not, always and in all situations, require a trial-type proceeding. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in suppo rt of ones defense. In this case, the petitioners counsel was present on the scheduled hearing and in fact orally argued its petition and that is sufficiently complies with the right to be heard.

In exceptional cases, when the mistake of counsel is so palpable that it amounts to gross negligence, this Court affords a party a second opportunity to vindicate his right. But this opportunity is unavailing in the case at bar, especially since petitioner had squandered the various opportunities available to it at the different stages of this case. Regarding the 30-day period, the petitioner can no longer file an appeal. Assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. In this case, the failure to comply with the 30-day statutory period bars the appeal and deprives the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessment.

Philippine Journalists Inc. v CIR G.R No. 162852 December 15, 2004 Facts: The Revenue District Office of the BIR issued a letter of authority for the examination of petitioner Philippine Journalists books of accounts. From the examination, the petitioner was told that there were deficiency taxes, inclusive of surcharges, interest and compromise penalty. Then, petitioner, through its Comptroller, Lorenza Tolentino, executed a waiver of statute of limitations pursuant to Sec.223 and Sec.224 and consented to the assessment and collection of taxes which may be found due after the examination at any time after the lapse of the period of limitations fixed by said Sections 223 and 224 and other relevant provisions of the NIRC, until the completion of the investigation. Petitioner had a deficiency of P136,952,408.97. On October 5, 1998, the Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the investigation. A Final Notice Before Seizure was sent to the petitioner but the latter merely questioned the amount of the deficiency and how the same was arrived. A Warrant of Distraint/Levy was received by petitioner for the deficiency. Petitioner filed a Petition for Review with the CTA, contending that no assessment was received by him; that the warrant of distraint/levy was issued prematurely; and that the assessment was made beyond the 3-year period. Regarding the assessment, the CTA ruled that the assessment was sufficiently proven by the receipts of the Post Master. As to the premature distraint/levy and the assessment made beyond the 3-year period, the CTA ruled in favor of the petitioner. The waiver of statute of limitations by the petitioner was invalid which resulted in the lapse of the 3 year period for assessment. Consequently, the petition was granted, declaring the order for payment of deficiency tax null and void. The CIR filed a motion for reconsideration but the same was denied. Undaunted, the CIR filed an appeal with the CA. The CA reversed the ruling of the CTA, stating that the waiver of limitations was valid and that the assessment notices was final and executory. Hence, this appeal. Issue: Whether or not the waiver of limitations was invalid, making the assessment beyond the 3 year period? Held: Yes, the court ruled that the waiver of limitation was invalid, making the assessment beyond the allowable period of 3 years. The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed. As found by the CTA, the Waiver of Statute of Limitations, signed by pe titioners comptroller on September 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No. 2090. It did not specify a definite agreed date between the BIR and petitioner, within which the former may assess and collect revenue taxes. Thus, petitioners waiver became unlimited in time, violating Section 222(b) of the NIRC.

G.R. No. 172129 September 12, 2008 CIR vs. MIRANT PAGBILAO CORPORATION (FORMERLY SOUTHERN ENERGY QUEZON, INC.) Facts: MPC, formerly Southern Energy Quezon, Inc., and also formerly known as Hopewell (Phil.) Corporation, is a domestic firm engaged in the generation of power which it sells to the National Power Corporation (NPC). MPC secured the services of Mitsubishi Corporation (Mitsubishi) of Japan. for the construction of the electrical and mechanical equipment portion of its Pagbilao, Quezon. It filed a petition for review before the CTA and contends that with the inaction of the CIR, its claim for refund forestall the running of the two-year prescriptive period under Section 229 of the NIRC. CIR asserted that the MPC's claim for refund cannot be granted because MPC's sale of electricity to NPC is not zero-rated for its failure to secure an approved application for zero -rating. CTA granted MPC's claim for input VAT refund or credit, but only P 10,766,939.48 and ordered the CIR to refund or issued Tax Credit Certificate to MPC. Before the CA, modified CTAs decision by ordering the CIR to make refund or issue a tax credit certificate in favor of MPC of its unutilized input VAT payments directly attributable to its effectively zero-rated sales, 2nd quarter 1998 of P146,760,509.48. ISSUES: Whether or not MPCs entitlement to zero-rating for VAT purposed for its sales and services to tax exempt NPC and Whether or not respondent may claim for Refund or Tax Credit for its unutilized input VAT, 2nd quarter of 1998 HELD: Petition is Partly granted, ordering the CIR for the issuance of the tax credit certificate to MPC representing its unutilized input VAT payments directly attributable to its effectively zero-rated sales, 2nd quarter of P10,766,939.48 but denying the tax refund or credit to the extent of P135,993,570 (P146,760,509.48 - P10,766,939.48) representing its input VAT payments for service purchases from Mitsubishi Corporation of Japan for the construction of a portion of its Pagbilao, Quezon power station on the ground that it has prescribed. The claim for tax refund may be based on a statute granting tax exemption, which is to be construed strictissimi juris against the taxpayer, meaning that the claim cannot be made to rest on vague inference. Where the rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes of the nature of an exemption, the claimant must show that he clearly falls under the exempting statute. It is clear that the unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always be the end of the quarter when the pertinent sales or transaction was made, regardless when the input VAT was paid. The creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after September 30, 1996 or on September 30, 1998. Consequently, MPC's claim for refund or tax credit filed on December 10, 1999 had already prescribed. MPC cannot avail itself of the provisions of Section 204(C) or 229 of the NIRC which, for the purpose of refund, prescribes a different starting point for the two-year prescriptive limit for the filing of a claim therefore and in both instances apply only to erroneous payment or illegal collection of internal revenue taxes. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.

Further, Section 105 of the NIRC provides that a creditable input VAT is an indirect tax which can be shifted or passed on to the buyer, transferee, or lessee of the goods, properties, or services of the taxpayer. The fact that the subsequent sale or transaction involves a wholly-tax exempt client, resulting in a zero-rated or effectively zero-rated transaction, does not, standing alone, deprive the taxpayer of its right to a refund for any unutilized creditable input VAT, albeit the erroneous, illegal, or wrongful payment angle does not enter the equation. Its application has been drawn from the Tax Credit Method, of which an entity can credit against or subtract from the VAT charged on its sales or outputs the VAT paid on its purchases, inputs and imports. If at the end of a taxable quarter the output taxes charged by a seller are equal to the input taxes passed on by the suppliers, no payment is required. It is when the output taxes exceed the input taxes that the excess has to be paid. If, however, the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-rated transactions or from the acquisition of capital goods, any excess over the output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes. It refers to the export sale of goods and supply of services. The tax rate is set at zero. When applied to the tax base, such rate obviously results in no tax chargeable against the purchaser. The seller of such transactions charges no output tax, but can claim a refund of or a tax credit certificate for the VAT previously charged by suppliers. Fishwealth Canning Corporation vs.Commissioner of Internal Revenue, CTA EB No. 223 dated July 5, 2007. Facts: FCC, engaged in the business of processing of imported fresh frozen sardines and mackerel, filed a protest of the Formal Letter of Demand with attached Final Assessment Notice for deficiencies in the amount of approximately P67.6MM for the year 1999. When the CIR issued its Final Decision on Disputed Assessment denying the same, FCC filed a motion for reconsideration questioning the FDDA. The CIR subsequently issued a Preliminary Collection Letter and, thereafter, a Final Notice before Seizure. The petition for review as well as the motion for reconsideration was denied by the CTA. Held: Petition is dismissed. A final decision or inaction of the CIR on a disputed assessment is appealable to the CTA. It is thus relevant to determine from the text of the Decision whether the order or decision has attained a character of finality. Where the wordings of the ruling signify a final determination on petitioners tax deficiencies and there being a clear instruction for petitioner to file an appeal and not a motion for reconsideration, then the matter is ripe for judicial review. Philippine Journalists Inc. v CIRG.R No. 162852December 15, 2004 Facts The Revenue District Office of the BIR issued a letter of a u t h o r i t y f o r the examination of petitioner Philippine Journalists books of accounts. From the examination, the petitioner was told that there were deficiency taxes, inclusive of surcharges, interest and compromise penalty. Then, petitioner, through its C o m p t r o l l e r, L o r e n z a To l e n t i n o , e x e c u t e d a w a i v e r o f s t a t u t e o f l i m i t a t i o n s p u r s u a n t t o Sec.223 and Sec.224 and consented to the assessment and collection of taxes which may be found due after the examination at any time after the lapse of the period of limitations fixed by said Sections 223 and 224 a n d o t h e r relevant provisions of the NIRC, until the completion of the investigation. Petitioner had a deficienc y of P136,952,408.97. On October 5, 1998, the Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the investigation. A Final Notice Before Seizure was s e n t t o t h e p e t i t i o n e r b u t t h e l a t t e r m e r e l y q u e s t i o n e d t h e a m o u n t o f t h e deficiency and how the same was arrived. A Warrant of Distraint/Levy was received by petitioner for the deficiency. P e t i t i o n e r f i l e d a P e t i t i o n f o r R e v i e w w i t h t h e C TA , c o n t e n d i n g t h a t n o assessment was received by him; that the warrant of distraint/levy was issued p r e m a t u r e l y ; a n d t h a t t h e a s s e s s m e n t w a s m a d e b e y o n d t h e 3 - y e a r p e r i o d . Regarding the assessment, the CTA ruled that the assessment was sufficiently proven by the receipts of the Post Master. As to the

premature distraint/levy and the assessment made beyond the 3 - year period, the CTA ruled in favor of the p e t i t i o n e r . T h e w a i v e r o f s t a t u t e o f l i m i t a t i o n s b y t h e p e t i t i o n e r w a s i n v a l i d which resulted in the lapse of the 3 year period for assessment. Consequently,the petition was granted, declaring the order for payment of deficiency tax null and void. T h e C I R f i l e d a m o t i o n f o r r e c o n s i d e r a t i o n b u t t h e s a m e w a s d e n i e d . Undaunted, the CIR filed an appeal with the CA. The CA reversed the ruling of the CTA, stating that the waiver of limitations was valid and that the assessment notices was final and executory. Hence, this appeal. Issue: Whether or not the waiver of limitations was invalid, making t h e assessment beyond the 3 year period? Held: Yes, the court ruled that the waiver of limitation was invalid, makingthe assessment beyond the allowable period of 3 years. The waiver of the s t a t u t e o f l i m i t a t i o n s i s n o t a w a i v e r o f t h e r i g h t t o i n v o k e t h e d e f e n s e o f prescription as erroneously held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer relinqu ishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of l imitations in the collection of t a x e s . T h u s , t h e l a w o n prescription, being a remedial measure, should be l i b e r a l l y c o n s t r u e d i n o r d e r t o a f f o r d s u c h p r o t e c t i o n . A s a c o r o l l a r y , t h e exceptions to the law on prescription should perforce be strictly construed. A s f o u n d b y t h e C TA , t h e W a i v e r o f S t a t u t e o f L i m i t a t i o n s , s i g n e d b y petitioners comptroller on September 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No. 20 - 90. It did not specify a definite agreed date betw een the BIR and petitioner, within which the former m a y a s s e s s a n d c o l l e c t r e v e n u e t a x e s . T h u s , p e t i t i o n e r s w a i v e r b e c a m e unlimited in time, violating Section 222(b) of the NIRC Philam Plans, Inc. vs. CIR, GR No. 156637 Facts: Petitioner PPI received a Final Assessment Notice (FAN) for alleged deficiency taxes in 1997. Petitioner promptly filed a protest and submitted documents in support thereof. There being no action by the CIR despite the lapse of 180 days from such filing, petitioner, within 30 days from the lapse of 180 days, filed a petition for review with the CTA. While the petition was pending, petitioner received the CIRs FDDA denying the protest and giving petitioner 30 days within which to elevate the matter on appeal to the CTA. Petitioner filed anew a Petition for Review Ex Abudante Ad Cautelam before the CTA, but it was eventually dismissed since it covered the same matters pending before the CTA 1st Division. Petitioner instead filed a supplemental pleading in the pending proceeding in its first petition, alleging respondents denial of its protest. After an Answer and a Reply thereto had been filed, petitioner also filed a Motion to Resolve Issue of Jurisdiction. The CTA 1st Division held that the filing of a petition for review does not preclude the respondent from issuing a FDDA. Upon denial of its motion for reconsideration, petitioner filed a petition for review of the resolutions with the CTA En banc. Issue: Whether or not CIR still has jurisdiction to issue the Final Decision on Disputed Assessment despite petitioners filing of an appeal with the CTA Held: Petition is denied due course for lack of merit. Based on Sec. 228 of the 1997 NIRC, the applicable law at the time the petition was filed, a taxpayer has two options: first, if the protest remained not acted upon within 180 days from submission of documents, he may appeal to the CTA within 30 days from lapse thereof; OR second, he may wait until the CIR decides on his protest before elevating the case to the CTA. Hence, the CIR still has the authority to issue the FDDA despite

petitioners filing of a petition for review with the CTA, though said FDDA if presented to the CTA shall be subject to its evaluation.