G.R. No. 156 September 27, 1946 MILTON GREENFIELD, plaintiff-appellant, vs. BIBIANO L. MEER, defendant-appellee. FERIA, J.

: This is an appeal from the decision of the Court of First Instance of Manila which dismisses the complaint of the plaintiff and appellant containing two causes of action; one to recover the sum of P9, !."# paid as income ta$ for the %ear "9&9 '% plaintiff to defendant under protest, '% reason of defendant having disallowed a deduction of P(),& ).! alleged '% plaintiff to 'e losses in his trade or 'usiness; and the other to reclaim, in the event the first cause of action is dismissed, the sum of P#)* collected '% defendant from plaintiff illegall% according to the latter, 'ecause the former has erroneousl% computed the ta$ on personal and additional e$emptions. The following are the pertinent facts stipulated and su'mitted '% the parties to the lower court+ ,. That since the %ear "9&& up to the present time, the plaintiff has 'een continuousl% engaged in the em'roider% 'usiness located at &!* Cristo'al, Cit% of Manila and carried on under his name; &. That in "9&* the plaintiff 'egan engaging in 'u%ing and selling mining stoc-s and securities for his own e$clusive account and not for the account of others . . .; #. That .$hi'it / attached to the complaint and made a part hereof represents plaintiff0s purchases and sales of each class of stoc- and securit% as well as the profits and losses resulting on each class during the %ear "9&9; *. That the plaintiff has not 'een a dealer in securities as defined in section !# 1t2 of Commonwealth /ct 3o. #((; that he has no esta'lished place of 'usiness for the purchase and 3et income as per return of plaintiff for "9&9 /dd+ 3et 8oss on sale of mining stoc-s and securities disallowed in audit Total net income as per office audit /mount of ta$ on net income as per office audit 8ess+ Ta$ on e$emptions+ Personal e$emption /dditional e$emption Total Ta$ on e$emption 3et amount of ta$ due P,,* ", P&,* . . .

sale of mining stoc-s and securities; and that he was never a mem'er of an% stoc- e$change; (. That the plaintiff filed an income ta$ return for the calendar %ear "9&9 showing that he made a net profit amounting to P*,,##9.,9 on em'roider% 'usiness and P"),!* on dividends from various corporations; and that from the purchase and sales of mining stoc-s and securities he made a profit of P" ,)#".& and incurred losses in the amount of P)!, #9." , there'% sustaining a net loss of P(),& ).! , which income ta$ return is hereto attached and mar-ed .$hi'it 4; ). That in said income ta$ return for "9&9, the plaintiff declared the results of his stoctransactions under 5chedule 4 1Income from 4usiness2;'ut the defendant ruled that the% should 'e declared in the income ta$ return, .$hi'it 4, under 5chedule 6 17ains and 8osses from 5ales or .$changes of Capital /ssets, real or personal2; !. That in said income ta$ return, said plaintiff claims his deduction of P(),& ).! representing the net loss sustained '% him in mining stoc-s securities during the %ear "9&9; and that the defendant disallowed said item of deduction on the ground that said losses were sustained '% the plaintiff from the sale of mining stoc-s and securities which are capital assets, and that the loss arising from the sale of the same should 'e allowed onl% to the e$tent of the gains from such sales, which gains were alread% ta-en into consideration in the computation of the alleged net loss of P(),& ).! ; 9. That the defendant assessed plaintiff0s income ta$ return for the %ear "9&9 at P"&,))". ( as shown in the following computation appearing in the audit sheet of the defendant hereto attached and mar-ed .$hi'it C; P) ,,99.,9 (),& ).! P"&),( ). 9 999999999 P"&,!,". (

* . P"&,))". ( 999999999

" . That the defendant computed the graduated rate of income ta$ due on the entire net income as per office audit, without first deducting therefrom the amount of personal and additional e$emptions to which the plaintiff is entitled, allowing said plaintiff a deduction from the assessed ta$ the amount of P* corresponding to the e$emption of P&,* ; "". That the plaintiff, o':ecting and e$cepting to all the ruling of the defendant a'ove mentioned and in assessing plaintiff with P"&,))". (, claimed from the defendant the refund of P9, !."# or in the alternative case P#)*, which claim of plaintiff was overruled '% the defendant; The ;uestions raised '% appellant in his four 1#2 assignments of error ma% 'e reduced into the following+ 1"2 <hether the losses sustained '% the plaintiff from the 'u%ing and selling of mining securities during the %ear "9&9 are losses incurred in trade and 'usiness, deducti'le under section & 1d2 1"21/2 of Commonwealth /ct 3o. #(( from his gains in his em'roider% 'usiness and other income; or whether the% are capital losses from sales of capital assets which shall 'e allowed onl% to the e$tent of the gains from such sales under section &# of the same Commonwealth /ct 3o. #((. /nd 1,2 whether, under the present law, the personal and additional e$emptions granted '% section ,& of the same /ct, should 'e considered as a credit against or 'e deducted from the net income, or whether it is the ta$ on such e$emptions that should 'e deducted from the ta$ on the total net income. ". /s to the first ;uestion, it is agreed in the a'ove-;uoted stipulation of facts that the plaintiff was not a dealer in securities or share of stoc- as defined in section !# 1t2 of Commonwealth /ct 3o. #((. The ;uestion for determination is whether appellant, though not a dealer in mining securities, ma% 'e considered as engaged in the 'usiness of 'u%ing and selling them under section & 1d2, 1"2 1/2 of said /ct 3o. #((. It is evident that, ta-ing into consideration the nature of mining securities, which ma% 'e 'ought or sold either as a 'usiness or for speculation purposes onl%, the 3ational /ssem'l% of the Philippines has deemed it necessar% to define or determine 'eforehand in section !# 1t2 of Commonwealth /ct 3o. #(( who ma% 'e considered as persons engaged in the trade or 'usiness of 'u%ing and selling securities within the meaning of the phrase =incurred in trade or 'usiness= used in section & 1 d2 1"2 1/2 of the same /ct, in order to avoid an% ;uestion or dou't as to deducti'ilit% of all losses incurred '% a merchant in securities from his net income from whatever source. The definition of dealer or merchant in securities given in said section !# 1t2 includes persons, natural or :uridical, who are engaged in the purchase and sale of securities whether for his their own account or for others, provided the% have a place of 'usiness and are regularl% engaged therein. There was formerl% some dou't or ;uestion as to whether a person engaged in 'u%ing or selling securities for his own

account might 'e considered as engaged in that trade or 'usiness, and several cases involving such ;uestion had 'een su'mitted to the >nited 5tates Federal Courts for ruling, and to the Income Ta$ >nits of the >nited 5tates 4ureau of Internal ?evenue for opinion. 4ut with the inclusive definition of the term =dealer= or merchant of securities given in section !# 1t2 of /ct 3o. #((, such dou't can no longer arise. 5aid section !# 1t2 reads as follows+ 1t2 The term =dealer in securities= means a merchant of stoc-s or securities, whether an individual, partnership, or corporation, with an esta'lished place of 'usiness, regularl% engaged in the purchase of securities and their resale of customers; that is, one who as a merchant 'u%s securities and sells them to customers with a view to the gains and profits that ma% 'e derived therefrom. /ppellant assumes, however, that the a'ove-;uoted definition does not cover or include all persons engaged in the trade or 'usiness of 'u%ing and selling securities within the meaning of said section & 1d2 1"2 1/2. @e contends that, although he is not a dealer in mining securities, he ma% 'e considered as having 'een engaged in the trade or 'usiness of 'u%ing and selling securities. /nd in support of his contention appellant ;uotes Apinion 3o. "!"! of the Income Ta$ >nit of the >nited 5tates 4ureau of Internal ?evenue1I.T. 3o. "!"!, C.4. II, pp. &9-#"2, in which opinion the following was said+ The ta$pa%er is not a mem'er of an% stoce$change, has no place of 'usiness, and does not ma-e purchase and sales of securities for customers. Much of his trading is done on margin. @e devotes the greater part of the time in his 'ro-er0s office -eeping in touch with the mar-et. @e has no other trade or 'usiness, his income consisting entirel% of interest 'onds, dividends on stoc-s, and profits from the sale or disposition of securities. /dvice is re;uested 1"2 whether this ta$pa%er is entitled to the 'enefit of section , # of the ?evenue /ct of "9,", with reference to a net loss incurred in "9,", from the sale of stoc-s; 1,2 whether he is entitled to the 'enefit of section , ( of the ?evenue /ct of "9,", with regard to gains derived in "9,, from the sale of two 'loc-s of stocheld more than two %ears. ". 5ection , # 1a2 provides in part+ That as used in this section the term =net loss= means onl% net losses resulting from the operation of an% trade or 'usiness regularl% carried on '% the ta$pa%er . . . The ;uestion is, than, whether the ta$pa%er was regularl% engaged in the trade or 'usiness of 'u%ing and selling securities. The interpretation placed upon the term ='usiness or trade= '% the courts and the department ma% 'e

indicated '% a few illustrative decisions. In two earl% cases 1In re Marson B"!)"C, Fed. Cas. 3o. 9"#,, and In re <oodward B"!)(C, Fed. Cas. 3o. "! "2 it was held that a speculator in stoc-s was not a =merchant or tradesman= within the meaning of the 4an-ruptc% /ct of "!(). It was said in the former case+ =The onl% 'usiness he was engaged in was what is called speculating in stoc-s, that is, 'u%ing and selling them, with a view to his own profit, to 'e made '% the e$cess of the selling price over the 'u%ing price . . . The fact that the 'an-rupt was engaged in no other 'usiness can not have the effect to ma-e him a merchant or a tradesman, 'ecause he carried on the 'usiness he did carr% on in the wa% which he carried it on.= That is, although his 'usiness was 'u%ing and selling, since this 'usiness was simpl% with a view to his own profit and not for others, has was not a merchant or tradesman. Compare In re 5uret% 7uarantee D Trust Co. 1B"9 ,C, "," Fed., )&2 and In re @.?. 8eighton D Co. 1B"9 (C, "#) Fed., &""2. <ith this 'ac-ground, the 6epartment, in Treasur% 6ecisions "9!9, , *, , 9 , and ,"&* 1not pu'lished in 4ulletin service2, held that the provision of paragraph 4 of the "9"& /ct, allowing as a deduction for the purpose of the normal ta$ =losses actuall% sustained during the %ear, incurred in trade . . .=, did not include losses from isolated transactions; for instance, in stoc-s and 'onds. In Mente vs. .isner 1B"9, C, ,(( Fed., "("2 1certiorari denied, ,*# >.5., (&*2, these rulings were upheld in a case in which a manufacturer of 'agging was denied deductions for losses in 'u%ing and selling cotton on the cotton e$change for his individual account, not connected with his manufacturing 'usiness. 1Cf. 4lac- vs. 4olen B"9, C, ,(! Fed., #,).2 8i-ewise, in 8.A. ( " 1not pu'lished in 4ulletin service2, it was held that =losses sustained '% a person in 'u%ing and selling securities in his own account, he not 'eing a licensed stoc- and 'ond 'ro-er 'u%ing and selling for others as well as for himself, are not deducti'le as losses in trade within the meaning of paragraph 4 of the /ct of Acto'er &, "9"&.= The 'asis of these opinions is thus seen to 'e 1"2 that dealing in securities on one0s own account is not technicall% a =trade=; 1,2 that isolated transactions in securities, not connected with the ta$ pa%er0s regular 'usiness do not constitute a =trade.= In the /ct of 5eptem'er !, "9"(, the wording of the "9"& /ct was slightl% changed 1section * BaC, fourth2 to permit a deduction of =losses actuall% sustained during the %ear, incurred in his 'usiness or trade . . .= >nder this more li'eral provision, it has 'een uniforml% held that where a ta$pa%er

devoted all his time, or the ma:or portion of it, to 'u%ing and selling securities on his own account, this occupation was his ='usiness=; and therefore he was permitted to deduct losses sustained in such dealings as 'eing =incurred in his 'usiness.= /. ?. ?. # # 1C.4. #, p. "*)2; sem'le 8. A.( ". These rulings are inferentiall% supported '% the definitions of trade or 'usiness to comprehend =all his activities for gain, profit, or livelihood, entered into with sufficient fre;uenc%, or occup%ing such portion of his time or attention as to constitute a vocation,= contained in article ! of ?egulations #", relative to the war e$cess-profits ta$ 1approved in <oods vs. 8ewell%n B"9,"C, ,!9 Fed., #9!2. . . It is su'mitted that these decisions are a sound interpretation of the accepted definition of 'usiness+ =4usiness is a ver% comprehensive term and em'races ever%thing a'out which a person can 'e emplo%ed.= 4lac-0s 8aw 6ictionar%, "*!, citing People vs. Commissioners of Ta$es 1,& 3ew Eor-, ,#,, ,##2. =That which occupies the time, attention and la'or of men for the purpose of a livelihood or profit.= 4ouvier0s 8aw 6ictionar%, Fol. ", p. ,)&. Fling vs. 5tone Trac% Co. 1"9" 2, ,, >. 5., " ) at ")"; &" 5up Ct., &#,; ** 8aw. ed., &!9; /nn. Cas. "9",-4, "&",; cited with approval in Fon 4aum'ach vs. 5argent 8and Compan% 1"9"(2, ,#, >. 5., * &, at *"*. If the% are sound, the facts of the instant case re;uire a ruling that the ta$pa%er was regularl% engaged in the 'usiness of 'u%ing and selling securities on his own account and was, therefore, entitled to the 'enefit of the provisions of section , #1a2. 1I. T. 3o. "!"!; C. 4. II-,, pp. &9#".2 4ut, assuming arguendo that the a'ove-;uoted opinion ma% 'e applied to the present case, it is evident that the appellant can not 'e considered as having 'een engaged in the 'usiness of 'u%ing and selling securities within the meaning of section & 1d2 1"2 1/2 of /ct 3o. #(( /ccording to said opinion, in order that he ma% so 'e considered, it is necessar% that he must devote all his time or at least a ma:or portion thereof to said 'usiness and that the latter must 'e regularl% carried on '% him. In the stipulation of facts presented in this case it is agreed that =since the %ear "9&& up to the present time, the plaintiff has 'een continuousl% engaged in the em'roider% 'usiness,= and that =in "9&*, the plaintiff 'egan engaging in buying and selling mining stoc-s and securities for his own e$clusive account.= There is nothing therein to show that plaintiff and appellant has regularl% devoted all his time or the ma:or portion thereof to the 'usiness of 'u%ing and selling mining securities for his own account. An the contrar%, it having 'een stipulated that he has 'een continuousl% engaged in the em'roider% 'usiness during the same time, it necessaril% follows that he has not and could not have devoted regularl% all his time or a ma:or

portion thereof to the 'u%ing and selling of mining securities. Furthermore, from .$hi'it / attached to the complaint and made a part of said stipulation of facts, which represents plaintiff0s purchases and sales of each class of stoc-s and securities as well as the profits and losses resulting therefrom during the %ear "9&9, it appears that he made purchases and sales of securities onl% on several da%s of some months and nothing on others. /s shown in said e$hi'it, during the month of Ganuar%, "9&9, appellant purchased shares of stoc- of different mining corporations on Ganuar% ,, &, #, (, "&, "9, , , ,*, & , and sold some of them on Ganuar% #, " , "& and &". 6uring Fe'ruar% he made purchases on the dates ", !, "&, "#, ,*, and ,); and sales on (, 9, " , "(, ,,, and & , and sold some on March 9 onl%. 6uring /pril he made two purchases on /pril & and *, and one sale on /pril #. 6uring Ma% he purchased mining shares of stoc- on Ma% 9, " , "&, "9, ,#, and ,*; and sold some of them on Ma% 9, " , ",, "&, and &". 6uring Gune appellant made purchases on ", &, *, !, "&, "*, and "), and sales on ,,, ,&, ,#, and ,!. 6uring Gul%, purchases on ", &, (, "9; and sales on Gul% ,#, ,*, ,(, and ,). 6uring /ugust he purchased shares of stoc- on some mining corporations on *,), "(, and "! and sold shares of one mining corporation on /ugust " onl%. 6uring 5eptem'er appellant did not purchase or sell an% securities. 6uring Acto'er he sold securities onl% on the ",th of said month, and he made no purchase at all. /nd during 3ovem'er and 6ecem'er he did not purchase or sell an%. /ppellant contends that as from .$hi'it / it appears that the mining securities were inventoried in order to arrive at his profits and losses, the% cannot 'e considered as capital assets, 'ecause, according to section &#, the term capital assets does not include propert% which would properl% 'e included in the inventor%. 4ut it is to 'e o'served that the law refers not to propert% merel% included, 'ut to that which would 'e properl% included in the inventor%. 5ection "#! of the Income Ta$ ?egulations 3o. , of Fe'ruar% " , "9# 1&9 Aff. 7aH., &,*2, provides that =the securities 1to 'e2 inventoried as here provided ma% include onl% those held for purposes of resale and not for investment,= and that =the ta$pa%ers who 'u% and sell or hold securities for investment or speculation, . . . are not dealers insecurities within the meaning of this rule.= /nd the 7eneral Counsel of the Federal 4ureau of Internal ?evenue, after ;uoting /rticle " * of >nited 5tates ?egulations )# from which said section "#! of our Income Ta$ ?egulations was ta-en, said that a person not a dealer in securities is precluded from the use of inventories in computing his net income.=1C. 4. I-,, p. ",!, 7. C. M., 9(*(.2 The lower court has not therefore erred in dismissing appellant0s first cause of action, on the ground that the losses sustained '% appellant from the 'u%ing and selling of mining securities are not losses incurred in 'usiness or trade 'ut are capital losses from sales of capital assets, as contended '% appellee.

,. <ith regard to the second point, the lower court held that, as the new law does not provide that the personal e$emptions shall 'e allowed in the nature of a deduction from the net income, as prescri'ed in the old law, and there is a distinction 'etween e$emption and deduction, the ta$ due on said e$emptions must 'e deducted from the ta$ due on the whole net income, instead of deducting the total amount of the e$emptions from the net income. The argument of the appellee in support of the lower court0s decision is that the omission in section ,& of /ct 3o. #(( of the phrase =in the nature of a deduction= found in section ) of the old law, shows that it was the intention of the 3ational /ssem'l% to adopt the innovation proposed '% the Ta$ Commission which prepared the draft of the new law, an innovation 'ased on what is -nown as the =<isconsin Plan= now in operation in several /merican states. >nder said plan, the cumulative amount of the ta$ is fi$ed on an% given amount of net income without regard to the status of the ta$pa%er, and then this amount is reduced '% the ta$ credit fi$ed in the law according to the status of the ta$pa%er and the num'er of his dependents as follows+ for single individuals, there is allowed a ta$ credit of P" ; for married persons or heads of famil%, P& ; and for each dependent 'elow ," %ears of age, P" . 5ection ) of the old law provided+ =For the purpose of the normal ta$ onl%, there shall 'e allowed as an e$emption in the nature of a deduction from the amount of the net income . . .=; while section ,& of the new law provides+ =For the purpose of the ta$ provided for in this Title there shall 'e allowed the following e$emptions.= 3ow, the ;uestion to 'e determined or answered is+ 6oes this change in the phraseolog% of the law show the intention of the 3ational /ssem'l% to change the theor% or polic% of the old law so as to deduct now the ta$ on the personal and additional e$emptions from the ta$ fi$ed on the amount of the net income, instead of deducting the amount of personal and additional e$emptions from that of the net income, 'efore determining the ta$ due on the latterJ It is a well-settled rule of statutor% construction that where a statue has 'een enacted which is suscepti'le of several interpretations there is no 'etter means for ascertaining the will and intention of the legislature than that which is afforded '% the histor% of the statue. Ta-ing into consideration the histor% of section ,& of the Commonwealth /ct 3o. #((, the answer to the a'ovepropounded ;uestion must o'viousl% 'e in the negative. 5ection ,, of the 'ill entitled =/n /ct to revise, amend and codif% the Internal ?evenue 8aws of the Philippines,= prepared '% the Ta$ Commission and su'mitted to the 3ational /ssem'l% of the Philippines, in su'stitution of section ) of the old Income Ta$ 8aw, reads as follows+ 5.C. ,,. Amount of tax credit allowable to individuals.KThere shall 'e allowed as a credit in the nature of a deduction from the amount of the ta$ pa%a'le '% each citiHen or resident of the Philippines under section , +

1a2 Tax credit of single individuals.KThe sum of P10 if the person ma-ing the return is a single person or a married person legall% separated from his or her spouse. 1'2 Tax credit of a married person or head of family.KThe sum of P& if the person ma-ing the return is a married man with a wife not legall% separated from him, or a married woman with a hus'and not legall% separated from her, or the head of the famil%; Provided, That from the ta$ due on the aggregate income of 'oth hus'and and wife when not legall% separated only one tax credit of P30 shall be deducted. For the purpose of this section, the term =head of a famil%= includes an unmarried man or a woman with one or 'oth parents, or one or more 'rothers or sisters, or one or more legitimate, recogniHed natural or adopted children dependent upon him or her for their chief support where such 'rothers, sisters, or children are less than twent%-one %ears of age. 1c2 Additional tax credit for dependents.KThe sum of P10 for each legitimate, recogniHed natural, or adopted child wholl% dependent upon the ta$pa%er, if such dependents are under twent%-one %ears of age, or incapa'le of self-support 'ecause mentall% or ph%sicall% defective. The additional ta$ credit under this paragraph shall 'e allowed onl% if the person ma-ing the return is the head of the famil%. 4ut the 3ational /ssem'l%, instead of adopting or incorporating said proposed section ,, in the 3ational Internal ?evenue Code, C. /. 3o. #((, copied su'stantiall% in section ,& of the latter provision of section ) of the old law relating to personal and additional e$emptions, with the onl% modification that the amount of personal e$emption of single individuals has 'een reduced from two thousand to one thousand pesos, and that of married persons or heads of famil% from four thousand to two thousand five hundred pesos. If it were the intention of the 3ational /ssem'l% to adopt the =<isconsin plan= proposed '% the ta$ Commission, it would have adopted literall%, or at least su'stantiall%, the provisions of said section ,, as section ,& of Commonwealth /ct 3o. #((, instead of su'stantiall% incorporating section ) of the old Income Ta$ 8aw as section ,& of the new, e$cept the first paragraph thereof which reads+ =For the purpose of the normal ta$ onl%, there shall 'e allowed as an e$emption in the nature of a deduction from the amount of the net income.= This was changed in said section ,&, which provides+ =For the purpose of the ta$ provided for in this Title, there shall 'e allowed the following e$emptions+= From the fact that the 3ational /ssem'l% discarded completel% section ,, of the 'ill drafted in accordance with the =<isconsin Plan= and su'mitted '% the Ta$ Commission, it is to 'e presumed that the 3ational /ssem'l% of the Philippines did not intend to introduce an% su'stantial change in the old law in so far as

the effect of personal and additional e$emptions on the income ta$ is concerned. The mere fact that the phrase =in the nature of a deduction= found in section ) of the old law was omitted in section ,& of the new or 3ational Internal ?evenue Code did not and could not effect an% change in the law. It is evident that said phrase was added or inserted in said section ) onl% out of e$treme caution, 'ecause, even without it, the e$emption would have to 'e deducted from the gross income in order to determine the net income su':ect to ta$. @ad the provision in the old law 'een drafted in e$actl% the same term as that of said section ,&, the same construction should have 'een adopted. 4ecause =.$ception is an immunit% or privilege; it is freedom from a charge or 'urden to which others are su':ected.= 1Florar vs. 5herifan, "&) Ind., ,!; &( 3. .., &(*, &(9.2 If the amounts of personal and additional e$emptions fi$ed in section ,& are e$empt from ta$ation, the% should not 'e included as part of the net income, which is ta$a'le. There is nothing in said section ,& to :ustif% the contention that the ta$ on personal e$emptions 1which are e$empt from ta$ation2 should first 'e fi$ed, and then deducted from the ta$ on the net income. The change of phraseolog% alone does not lead to the conclusion that it was the intention of the lawma-er to amend or change the constructions of the old law as contended '% the appellee. For it is a well-esta'lished rule, recogniHed '% the 5upreme Court of Ahio in the case of Conger vs. 4ar-er0s /dm0r 1"" Ahio 5t., "2; =that in the revision of statutes, neither an alteration in phraseolog% nor the omission or addition of words in the latter statute, shall 'e held, necessaril%, to alter the construction of the former act. /nd the court is onl% warranted in holding the construction of a statute, when revised, to 'e changed, where the intent of the legislature to ma-e such change is clear, or the language used in the new act plainl% re;uires such change of construction. It should 'e remem'ered that condensation is a necessit% in the wor- of compilation or codification. Very fre uently words which do not materially affect the sense will be omitted from the statutes as incorporated in the code! or that same general idea will be expressed in briefer phrases. 3o design of altering the law itself could rightl% 'e predicated upon such modifications of the language.= 1.mphasis ours.2 15ee 4lac- on the construction and Interpretation of the 8aws, 5econd .dition, pp. *9#, *9*.2 Aur Income Ta$ 8aw is patterned after the >nited 5tates ?evenue or Income Ta$ 8aws. the >nited 5tates ?evenue 8aws of "9"(, "9"!, "9,", "9,#, "9,(, "9,! and "9&, considered the personal and additional e$emptions as credits against the net income for the purpose of the normal ta$; and su'se;uentl%, the >nited 5tates ?evenue /cts of "9&#, "9&( and "9&! amended the former acts '% ma-ing said e$emptions as credits against the net income for the purpose of 'oth the normal ta$ and surta$. 5ection ) of our old Income Ta$ 8aw, instead of providing that the personal and additional e$emptions shall 'e allowed as a credit against the net income, as in the >nited 5tates ?evenue

/cts, prescri'ed that the amounts specified therein shall 'e allowed as an e$emption in a nature of deduction from the amount of the net income. <hich has e$actl% the same effect as the provision regarding personal and additional e$emptions in the said >nited 5tates ?evenue /cts. For, as it was e$plained in the <a%s and Means Committee ?eport 3o. )(#, )&d Congress, ,d 5ession, pages (, ,&+ To carr% out the polic% of retaining practicall% the same ta$ 'urden on ordinar% income, it is necessar% in connection with the proposed plan to allow the personal e$emption and credits for dependents as an offset against surta$ as well as normal ta$. The personal e$emption and credits for defendants would appear to 'e in lieu of deductions for necessar% living e$penses. The% ma% well appl% to 'oth ta$es as do all other ordinar% deductions. /nd Paul and Mertens, 8aw of Federal Ta$ation, Fol. &, p. * 9, state regarding the change in the >nited 5tates ?evenue /ct of "9&#+ =The practical effect of this statutor% change is to convert the personal e$emption and credit for dependents into deductions . . .= 1.mphasis ours.2 The lower court, therefore, erred in not declaring that personal and additional e$emptions claimed '% appellant should 'e credited against or deducted from the net income, and conse;uentl% in not sentencing appellee to refund to appellant the sum of P#)*. In view of all the foregoing, the decision of the lower court is affirmed in so far as it dismisses appellant0s first cause of action, and is reversed in so far as it dismissed his second cause of action. /ppellee is sentenced to refund to appellant the sum of P#)* claimed in the second cause of action of the complaint. <ithout pronouncement as to costs. 5o ordered. G.R. No. 91649 M ! 14, 1991 ATTORNE"S #$MBERTO BAS%O, EDILBERTO BAL%E, SO%RATES MARANAN AND LOREN&O SAN%#E&,petitioners, vs. '#ILI''INE AM$SEMENTS AND GAMING %OR'ORATION ('AG%OR), respondent. 'ARAS, J.:p / TF ad proudl% announces+ =The new P/7CA? K responding through responsi'le gaming.= 4ut the petitioners thin- otherwise, that is wh%, the% filed the instant petition see-ing to annul the Philippine /musement and 7aming Corporation 1P/7CA?2 Charter K P6 "!(9, 'ecause it is allegedl% contrar% to morals, pu'lic polic% and order, and 'ecause K /. It constitutes a waiver of a right pre:udicial to a third person with a right recogniHed '% law. It waived the Manila Cit% government0s right to impose ta$es and license fees, which is recogniHed '% law; 4. For the same reason stated in the immediatel% preceding paragraph, the law has

intruded into the local government0s right to impose local ta$es and license fees. This, in contravention of the constitutionall% enshrined principle of local autonom%; C. It violates the e;ual protection clause of the constitution in that it legaliHes P/7CA? K conducted gam'ling, while most other forms of gam'ling are outlawed, together with prostitution, drug traffic-ing and other vices; 6. It violates the avowed trend of the Cor% government awa% from monopolistic and cron% econom%, and toward free enterprise and privatiHation. 1p. ,, /mended Petition; p. ), "ollo2 In their 5econd /mended Petition, petitioners also claim that P6 "!(9 is contrar% to the declared national polic% of the =new restored democrac%= and the people0s will as e$pressed in the "9!) Constitution. The decree is said to have a =gam'ling o':ective= and therefore is contrar% to 5ections "", ", and "& of /rticle II, 5ec. " of /rticle FIII and 5ection & 1,2 of /rticle IIF, of the present Constitution 1p. &, 5econd /mended Petition; p. ,", "ollo2. The procedural issue is whether petitioners, as ta$pa%ers and practicing law%ers 1petitioner 4asco 'eing also the Chairman of the Committee on 8aws of the Cit% Council of Manila2, can ;uestion and see- the annulment of P6 "!(9 on the alleged grounds mentioned a'ove. The Philippine /musements and 7aming Corporation 1P/7CA?2 was created '% virtue of P.6. " ()-/ dated Ganuar% ", "9)) and was granted a franchise under P.6. " ()-4 also dated Ganuar% ", "9)) =to esta'lish, operate and maintain gam'ling casinos on land or water within the territorial :urisdiction of the Philippines.= Its operation was originall% conducted in the well -nown floating casino =Philippine Tourist.= The operation was considered a success for it proved to 'e a potential source of revenue to fund infrastructure and socio-economic pro:ects, thus, P.6. "&99 was passed on Gune ,, "9)! for P/7CA? to full% attain this o':ective. 5u'se;uentl%, on Gul% "", "9!&, P/7CA? was created under P.6. "!(9 to ena'le the 7overnment to regulate and centraliHe all games of chance authoriHed '% e$isting franchise or permitted '% law, under the following declared polic% K 5ec. ". #eclaration of Policy. K It is here'% declared to 'e the polic% of the 5tate to centraliHe and integrate all games of chance not heretofore authoriHed '% e$isting franchises or permitted '% law in order to attain the following o':ectives+ 1a2 To centraliHe and integrate the right and authorit% to operate and conduct games of chance into one corporate entit% to 'e controlled, administered and supervised '% the 7overnment. 1'2 To esta'lish and operate clu's and casinos, for amusement and recreation, including sports gaming pools, 1'as-et'all, foot'all, lotteries, etc.2 and such other forms of amusement and

recreation including games of chance, which ma% 'e allowed '% law within the territorial :urisdiction of the Philippines and which will+ 1"2 generate sources of additional revenue to fund infrastructure and socio-civic pro:ects, such as flood control programs, 'eautification, sewerage and sewage pro:ects, Tulungan ng 4a%an Centers, 3utritional Programs, Population Control and such other essential pu'lic services; 1,2 create recreation and integrated facilities which will e$pand and improve the countr%0s e$isting tourist attractions; and 1&2 minimiHe, if not totall% eradicate, all the evils, malpractices and corruptions that are normall% prevalent on the conduct and operation of gam'ling clu's and casinos without direct government involvement. 15ection ", P.6. "!(92 To attain these o':ectives P/7CA? is given territorial :urisdiction all over the Philippines. >nder its Charter0s repealing clause, all laws, decrees, e$ecutive orders, rules and regulations, inconsistent therewith, are accordingl% repealed, amended or modified. It is reported that P/7CA? is the third largest source of government revenue, ne$t to the 4ureau of Internal ?evenue and the 4ureau of Customs. In "9!9 alone, P/7CA? earned P&.#& 4illion, and directl% remitted to the 3ational 7overnment a total of P,.* 4illion in form of franchise ta$, government0s income share, the President0s 5ocial Fund and @ost Cities0 share. In addition, P/7CA? sponsored other socio-cultural and charita'le pro:ects on its own or in cooperation with various governmental agencies, and other private associations and organiHations. In its & "L, %ears of operation under the present administration, P/7CA? remitted to the government a total of P(., 4illion. /s of 6ecem'er &", "9!9, P/7CA? was emplo%ing #,#9# emplo%ees in its nine 192 casinos nationwide, directl% supporting the livelihood of Four Thousand Four @undred 3inet%-Four 1#,#9#2 families. 4ut the petitioners, are ;uestioning the validit% of P.6. 3o. "!(9. The% allege that the same is =null and void= for 'eing =contrar% to morals, pu'lic polic% and pu'lic order,= monopolistic and tends toward =cron% econom%=, and is violative of the e;ual protection clause and local autonom% as well as for running counter to the state policies enunciated in 5ections "" 1Personal 6ignit% and @uman ?ights2, ", 1Famil%2 and "& 1?ole of Eouth2 of /rticle II, 5ection " 15ocial Gustice2 of /rticle IIII and 5ection , 1.ducational Falues2 of /rticle IIF of the "9!) Constitution. This challenge to P.6. 3o. "!(9 deserves a searching and thorough scrutin% and the most deli'erate consideration '% the Court, involving as it does the e$ercise of what has 'een descri'ed as =the highest and most delicate function which 'elongs to the :udicial department of the government.= 15tate v. Manuel, , 3.C. "##; 8oHano v. MartineH, "#( 5C?/ &,&2. /s <e enter upon the tas- of passing on the validit% of an act of a co-e;ual and coordinate 'ranch of the government <e need not 'e reminded of the time-honored principle,

deepl% ingrained in our :urisprudence, that a statute is presumed to 'e valid. .ver% presumption must 'e indulged in favor of its constitutionalit%. This is not to sa% that <e approach Aur tas- with diffidence or timidit%. <here it is clear that the legislature or the e$ecutive for that matter, has over-stepped the limits of its authorit% under the constitution, <e should not hesitate to wield the a$e and let it fall heavil%, as fall it must, on the offending statute 18oHano v. MartineH, supra2. In Victoriano v. $li%alde "ope &or'ers( )nion, et al, *9 5C?/ *#, the Court thru Mr. Gustice Maldivar underscored the K . . . thoroughl% esta'lished principle which must 'e followed in all cases where ;uestions of constitutionalit% as o'tain in the instant cases are involved. /ll presumptions are indulged in favor of constitutionalit%; one who attac-s a statute alleging unconstitutionalit% must prove its invalidit% 'e%ond a reasona'le dou't; that a law ma% wor- hardship does not render it unconstitutional; that if an% reasona'le 'asis ma% 'e conceived which supports the statute, it will 'e upheld and the challenger must negate all possi'le 'asis; that the courts are not concerned with the wisdom, :ustice, polic% or e$pedienc% of a statute and that a li'eral interpretation of the constitution in favor of the constitutionalit% of legislation should 'e adopted. 16anner v. @ass, "9# 3.<. *nd *&#, *&9; 5pur'ec- v. 5tatton, " ( 3.<. *nd (( , ((&; *9 5C?/ ((; see also e.g. 5alas v. Garencio, #( 5C?/ )&#, )&9 B"9) C; Peralta v. Commission on .lections, !, 5C?/ & , ** B"9)!C; and @eirs of Ardona v. ?e%es, ",* 5C?/ ,, , ,#"-,#, B"9!&C cited in CitiHens /lliance for Consumer Protection v. .nerg% ?egulator% 4oard, "(, 5C?/ *,", *# 2 Af course, there is first, the procedural issue. The respondents are ;uestioning the legal personalit% of petitioners to file the instant petition. Considering however the importance to the pu'lic of the case at 'ar, and in -eeping with the Court0s dut%, under the "9!) Constitution, to determine whether or not the other 'ranches of government have -ept themselves within the limits of the Constitution and the laws and that the% have not a'used the discretion given to them, the Court has 'rushed aside technicalities of procedure and has ta-en cogniHance of this petition. 1Napatiran ng mga 3agliling-od sa Pamahalaan ng Pilipinas Inc. v. Tan, "(& 5C?/ &)"2 <ith particular regard to the re;uirement of proper part% as applied in the cases 'efore us, <e hold that the same is satisfied '% the petitioners and intervenors 'ecause each of them has sustained or is in danger of sustaining an immediate in:ur% as a result of the acts or measures complained of. /nd even if, strictl% spea-ing the% are not covered '% the definition, it is still within the wide discretion of the Court to waive the re;uirement and so remove the

impediment to its addressing and resolving the serious constitutional ;uestions raised. In the first .mergenc% Powers Cases, ordinar% citiHens and ta$pa%ers were allowed to ;uestion the constitutionalit% of several e$ecutive orders issued '% President Ouirino although the% were involving onl% an indirect and general interest shared in common with the pu'lic. The Court dismissed the o':ection that the% were not proper parties and ruled that =the transcendental importance to the pu'lic of these cases demands that the% 'e settled promptl% and definitel%, 'rushing aside, if we must technicalities of procedure.= <e have since then applied the e$ception in man% other cases. 1/ssociation of 5mall 8andowners in the Philippines, Inc. v. 5ec. of /grarian ?eform, ")* 5C?/ &#&2. @aving disposed of the procedural issue, <e will now discuss the su'stantive issues raised. 7am'ling in all its forms, unless allowed '% law, is generall% prohi'ited. 4ut the prohi'ition of gam'ling does not mean that the 7overnment cannot regulate it in the e$ercise of its police power. The concept of police power is well-esta'lished in this :urisdiction. It has 'een defined as the =state authorit% to enact legislation that ma% interfere with personal li'ert% or propert% in order to promote the general welfare.= 1.du v. .ricta, &* 5C?/ #!", #!)2 /s defined, it consists of 1"2 an imposition or restraint upon li'ert% or propert%, 1,2 in order to foster the common good. It is not capa'le of an e$act definition 'ut has 'een, purposel%, veiled in general terms to underscore its all-comprehensive em'race. 1Philippine /ssociation of 5ervice .$porters, Inc. v. 6rilon, "(& 5C?/ &!(2. Its scope, ever-e$panding to meet the e$igencies of the times, even to anticipate the future where it could 'e done, provides enough room for an efficient and fle$i'le response to conditions and circumstances thus assuming the greatest 'enefits. 1.du v. .ricta, supra2 It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter. /long with the ta$ing power and eminent domain, it is in'orn in the ver% fact of statehood and sovereignt%. It is a fundamental attri'ute of government that has ena'led it to perform the most vital functions of governance. Marshall, to whom the e$pression has 'een credited, refers to it succinctl% as the plenar% power of the state =to govern its citiHens=. 1Tri'e, /merican Constitutional 8aw, &,&, "9)!2. The police power of the 5tate is a power co-e$tensive with self-protection and is most aptl% termed the =law of overwhelming necessit%.= 1?u'i v. Provincial 4oard of Mindoro, &9 Phil. (( , ) !2 It is =the most essential, insistent, and illimita'le of powers.= 15mith 4ell D Co. v. 3ational, # Phil. "&(2 It is a d%namic force that ena'les the state to meet the agencies of the winds of change. <hat was the reason 'ehind the enactment of P.6. "!(9J

P.6. "!(9 was enacted pursuant to the polic% of the government to =regulate and centraliHe thru an appropriate institution all games of chance authoriHed '% e$isting franchise or permitted '% law= 1"st whereas clause, P6 "!(92. /s was su'se;uentl% proved, regulating and centraliHing gam'ling operations in one corporate entit% K the P/7CA?, was 'eneficial not :ust to the 7overnment 'ut to societ% in general. It is a relia'le source of much needed revenue for the cash strapped 7overnment. It provided funds for social impact pro:ects and su':ected gam'ling to =close scrutin%, regulation, supervision and control of the 7overnment= 1#th <hereas Clause, P6 "!(92. <ith the creation of P/7CA? and the direct intervention of the 7overnment, the evil practices and corruptions that go with gam'ling will 'e minimiHed if not totall% eradicated. Pu'lic welfare, then, lies at the 'ottom of the enactment of P6 "!9(. Petitioners contend that P.6. "!(9 constitutes a waiver of the right of the Cit% of Manila to impose ta$es and legal fees; that the e$emption clause in P.6. "!(9 is violative of the principle of local autonom%. The% must 'e referring to 5ection "& par. 1,2 of P.6. "!(9 which e$empts P/7CA?, as the franchise holder from pa%ing an% =ta$ of an% -ind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether 3ational or 8ocal.= 1,2 Income and other taxes. K a2 Franchise @older+ 3o ta$ of an% -ind or form, income or otherwise as well as fees, charges or levies of whatever nature, whether 3ational or 8ocal, shall 'e assessed and collected under this franchise from the Corporation; nor shall an% form or ta$ or charge attach in an% wa% to the earnings of the Corporation, e$cept a franchise ta$ of five 1*P2 percent of the gross revenues or earnings derived '% the Corporation from its operations under this franchise. 5uch ta$ shall 'e due and pa%a'le ;uarterl% to the 3ational 7overnment and shall 'e in lieu of all -inds of ta$es, levies, fees or assessments of an% -ind, nature or description, levied, esta'lished or collected '% an% municipal, provincial or national government authorit% 15ection "& B,C2. Their contention stated hereina'ove is without merit for the following reasons+ 1a2 The Cit% of Manila, 'eing a mere Municipal corporation has no inherent right to impose ta$es 1Icard v. Cit% of 4aguio, !& Phil. !) ; Cit% of Iloilo v. Fillanueva, " * Phil. &&); 5antos v. Municipalit% of Caloocan, ) 5C?/ (#&2. Thus, =the Charter or statute must plainl% show an intent to confer that power or the municipalit% cannot assume it= 1Medina v. Cit% of 4aguio, ", 5C?/ (,2. Its =power to ta$= therefore must alwa%s %ield to a legislative act which is superior having 'een passed upon '% the state itself which has the =inherent power to ta$= 14ernas, the ?evised B"9)&C Philippine Constitution, Fol. ", "9!& ed. p. ##*2. 1'2 The Charter of the Cit% of Manila is su':ect to control '% Congress. It should 'e stressed that =municipal

corporations are mere creatures of Congress= 1>nson v. 8acson, 7.?. 3o. )9 9, Ganuar% "!, "9*)2 which has the power to =create and a'olish municipal corporations= due to its =general legislative powers= 1/suncion v. Eriantes, ,! Phil. (); Merdanillo v. Arandia, * 5C?/ *#"2. Congress, therefore, has the power of control over 8ocal governments 1@e'ron v. ?e%es, 7.?. 3o. 9",#, Gul% ,, "9* 2. /nd if Congress can grant the Cit% of Manila the power to ta$ certain matters, it can also provide for e$emptions or even ta-e 'ac- the power. 1c2 The Cit% of Manila0s power to impose license fees on gam'ling, has long 'een revo-ed. /s earl% as "9)*, the power of local governments to regulate gam'ling thru the grant of =franchise, licenses or permits= was withdrawn '% P.6. 3o. ))" and was vested e$clusivel% on the 3ational 7overnment, thus+ 5ec. ". /n% provision of law to the contrar% notwithstanding, the authorit% of chartered cities and other local governments to issue license, permit or other form of franchise to operate, maintain and esta'lish horse and dog race trac-s, :ai-alai and other forms of gam'ling is here'% revo-ed. 5ec. ,. @ereafter, all permits or franchises to operate, maintain and esta'lish, horse and dog race trac-s, :ai-alai and other forms of gam'ling shall 'e issued '% the national government upon proper application and verification of the ;ualification of the applicant . . . Therefore, onl% the 3ational 7overnment has the power to issue =licenses or permits= for the operation of gam'ling. 3ecessaril%, the power to demand or collect license fees which is a conse;uence of the issuance of =licenses or permits= is no longer vested in the Cit% of Manila. 1d2 8ocal governments have no power to ta$ instrumentalities of the 3ational 7overnment. P/7CA? is a government owned or controlled corporation with an original charter, P6 "!(9. /ll of its shares of stoc-s are owned '% the 3ational 7overnment. In addition to its corporate powers 15ec. &, Title II, P6 "!(92 it also e$ercises regulator% powers thus+ 5ec. 9. "egulatory Power. K The Corporation shall maintain a ?egistr% of the affiliated entities, and shall e$ercise all the powers, authorit% and the responsi'ilities vested in the 5ecurities and .$change Commission over such affiliating entities mentioned under the preceding section, including, 'ut not limited to amendments of /rticles of Incorporation and 4%-8aws, changes in corporate term, structure, capitaliHation and other matters concerning the operation of the affiliated entities, the provisions of the Corporation Code of the Philippines to the contrar% notwithstanding, e$cept onl% with respect to original incorporation. P/7CA? has a dual role, to operate and to regulate gam'ling casinos. The latter role is governmental, which

places it in the categor% of an agenc% or instrumentalit% of the 7overnment. 4eing an instrumentalit% of the 7overnment, P/7CA? should 'e and actuall% is e$empt from local ta$es. Atherwise, its operation might 'e 'urdened, impeded or su':ected to control '% a mere 8ocal government. The states have no power '% ta$ation or otherwise, to retard, impede, 'urden or in an% manner control the operation of constitutional laws enacted '% Congress to carr% into e$ecution the powers vested in the federal government. 1MC Culloch v. Marland, # <heat &"(, # 8 .d. *)92 This doctrine emanates from the =supremac%= of the 3ational 7overnment over local governments. Gustice @olmes, spea-ing for the 5upreme Court, made reference to the entire a'sence of power on the part of the 5tates to touch, in that wa% 1ta$ation2 at least, the instrumentalities of the >nited 5tates 1Gohnson v. Mar%land, ,*# >5 *"2 and it can 'e agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them. 1/ntieau, Modern Constitutional 8aw, Fol. ,, p. "# , emphasis supplied2 Atherwise, mere creatures of the 5tate can defeat 3ational policies thru e$termination of what local authorities ma% perceive to 'e undesira'le activities or enterprise using the power to ta$ as =a tool for regulation= 1>.5. v. 5ancheH, &# >5 #,2. The power to ta$ which was called '% Gustice Marshall as the =power to destro%= 1Mc Culloch v. Mar%land, supra2 cannot 'e allowed to defeat an instrumentalit% or creation of the ver% entit% which has the inherent power to wield it. 1e2 Petitioners also argue that the 8ocal /utonom% Clause of the Constitution will 'e violated '% P.6. "!(9. This is a pointless argument. /rticle I of the "9!) Constitution 1on 8ocal /utonom%2 provides+ 5ec. *. .ach local government unit shall have the power to create its own source of revenue and to lev% ta$es, fees, and other charges sub+ect to such guidelines and limitation as the congress may provide, consistent with the 'asic polic% on local autonom%. 5uch ta$es, fees and charges shall accrue e$clusivel% to the local government. 1emphasis supplied2 The power of local government to =impose ta$es and fees= is alwa%s su':ect to =limitations= which Congress ma% provide '% law. 5ince P6 "!(9 remains an =operative= law until =amended, repealed or revo-ed= 15ec. &, /rt. IFIII, "9!) Constitution2, its =e$emption clause= remains as an e$ception to the e$ercise of the power of local governments to impose ta$es and fees. It cannot therefore 'e violative 'ut rather is consistent with the principle of local autonom%. 4esides, the principle of local autonom% under the "9!) Constitution simpl% means =decentraliHation= 1III ?ecords of

the "9!) Constitutional Commission, pp. #&*-#&(, as cited in 4ernas, The Constitution of the ?epu'lic of the Philippines, Fol. II, First .d., "9!!, p. &)#2. It does not ma-e local governments sovereign within the state or an =imperium in imperio.= 8ocal 7overnment has 'een descri'ed as a political su'division of a nation or state which is constituted '% law and has su'stantial control of local affairs. In a unitar% s%stem of government, such as the government under the Philippine Constitution, local governments can onl% 'e an intra sovereign subdivision of one sovereign nation, it cannot 'e an imperium in imperio. 8ocal government in such a s%stem can onl% mean a measure of decentraliHation of the function of government. 1emphasis supplied2 /s to what state powers should 'e =decentraliHed= and what ma% 'e delegated to local government units remains a matter of polic%, which concerns wisdom. It is therefore a political ;uestion. 1CitiHens /lliance for Consumer Protection v. .nerg% ?egulator% 4oard, "(, 5C?/ *&92. <hat is settled is that the matter of regulating, ta$ing or otherwise dealing with gam'ling is a 5tate concern and hence, it is the sole prerogative of the 5tate to retain it or delegate it to local governments. /s gambling is usuall% an offense against the ,tate, legislative grant or express charter power is generally necessary to empower the local corporation to deal with the sub+ect. . . . In the a'sence of e$press grant of power to enact, ordinance provisions on this sub+ect which are inconsistent with the state laws are void. 18igan v. 7adsden, /la /pp. " ) 5o. )&& .$-Parte 5olomon, 9, Cals. ## , ,) P/C )*) following in re /h Eou, !! Cal. 99, ,* P/C 9)#, ,, /m 5t. ?ep. ,! , "" 8?/ #! , as cited in Mc Ouinllan Fol. & Ibid, p. *#!, emphasis supplied2 Petitioners ne$t contend that P.6. "!(9 violates the e;ual protection clause of the Constitution, 'ecause =it legaliHed P/7CA? K conducted gam'ling, while most gam'ling are outlawed together with prostitution, drug traffic-ing and other vices= 1p. !,, "ollo2. <e, li-ewise, find no valid ground to sustain this contention. The petitioners0 posture ignores the well-accepted meaning of the clause =e;ual protection of the laws.= The clause does not preclude classification of individuals who ma% 'e accorded different treatment under the law as long as the classification is not unreasona'le or ar'itrar% 1Itchong v. @ernandeH, " " Phil. ""**2. / law does not have to operate in e;ual force on all persons or things to 'e conforma'le to /rticle III, 5ection " of the Constitution 16.C5 v. 5an 6iego, 7.?. 3o. !9*),, 6ecem'er ,", "9!92. The =e;ual protection clause= does not prohi'it the 8egislature from esta'lishing classes of individuals or o':ects upon which different rules shall operate 18aurel v. Misa, #& A.7. ,!#)2. The Constitution does not re;uire situations which are different in fact or opinion to 'e treated

in law as though the% were the same 17omeH v. Palomar, ,* 5C?/ !,)2. Gust how P.6. "!(9 in legaliHing gam'ling conducted '% P/7CA? is violative of the e;ual protection is not clearl% e$plained in the petition. The mere fact that some gam'ling activities li-e coc-fighting 1P.6 ##92 horse racing 1?./. & ( as amended '% ?/ 9!&2, sweepsta-es, lotteries and races 1?/ ""(9 as amended '% 4.P. #,2 are legaliHed under certain conditions, while others are prohi'ited, does not render the applica'le laws, P.6. "!(9 for one, unconstitutional. If the law presuma'l% hits the evil where it is most felt, it is not to 'e overthrown 'ecause there are other instances to which it might have 'een applied. 17omeH v. Palomar, ,* 5C?/ !,)2 The e;ual protection clause of the "#th /mendment does not mean that all occupations called '% the same name must 'e treated the same wa%; the state ma% do what it can to prevent which is deemed as evil and stop short of those cases in which harm to the few concerned is not less than the harm to the pu'lic that would insure if the rule laid down were made mathematicall% e$act. 16ominican @otel v. /riHona, ,#9 >5 ,(*"2. /nent petitioners0 claim that P6 "!(9 is contrar% to the =avowed trend of the Cor% 7overnment awa% from monopolies and cron% econom% and toward free enterprise and privatiHation= suffice it to state that this is not a ground for this Court to nullif% P.6. "!(9. If, indeed, P6 "!(9 runs counter to the government0s policies then it is for the .$ecutive 6epartment to recommend to Congress its repeal or amendment. The :udiciar% does not settle polic% issues. The Court can onl% declare what the law is and not what the law should 'e. >nder our s%stem of government, polic% issues are within the domain of the political 'ranches of government and of the people themselves as the repositor% of all state power. 1Falmonte v. 4elmonte, Gr., ") 5C?/ ,*(2. An the issue of =monopol%,= however, the Constitution provides that+ 5ec. "9. The 5tate shall regulate or prohi'it monopolies when pu'lic interest so re;uires. 3o com'inations in restraint of trade or unfair competition shall 'e allowed. 1/rt. III, 3ational .conom% and Patrimon%2 It should 'e noted that, as the provision is worded, monopolies are not necessaril% prohi'ited '% the Constitution. The state must still decide whether pu'lic interest demands that monopolies 'e regulated or prohi'ited. /gain, this is a matter of polic% for the 8egislature to decide. An petitioners0 allegation that P.6. "!(9 violates 5ections "" 1Personalit% 6ignit%2 ", 1Famil%2 and "& 1?ole of Eouth2

10

of /rticle II; 5ection "& 15ocial Gustice2 of /rticle IIII and 5ection , 1.ducational Falues2 of /rticle IIF of the "9!) Constitution, suffice it to state also that these are merel% statements of principles and, policies. /s such, the% are 'asicall% not self-e$ecuting, meaning a law should 'e passed '% Congress to clearl% define and effectuate such principles. In general, therefore, the "9&* provisions were not intended to 'e self-e$ecuting principles read% for enforcement through the courts. The% were rather directives addressed to the e$ecutive and the legislature. If the e$ecutive and the legislature failed to heed the directives of the articles the availa'le remed% was not :udicial or political. The electorate could e$press their displeasure with the failure of the e$ecutive and the legislature through the language of the 'allot. 14ernas, Fol. II, p. ,2 .ver% law has in its favor the presumption of constitutionalit% 1Eu Cong .ng v. Trinidad, #) Phil. &!); 5alas v. Garencio, #! 5C?/ )&#; Peralta v. Comelec, !, 5C?/ & ; /''as v. Comelec, ")9 5C?/ ,!)2. Therefore, for P6 "!(9 to 'e nullified, it must 'e shown that there is a clear and une;uivocal 'reach of the Constitution, not merel% a dou'tful and e;uivocal one. In other words, the grounds for nullit% must 'e clear and 'e%ond reasona'le dou't. 1Peralta v. Comelec, supra2 Those who petition this Court to declare a law, or parts thereof, unconstitutional must clearl% esta'lish the 'asis for such a declaration. Atherwise, their petition must fail. 4ased on the grounds raised '% petitioners to challenge the constitutionalit% of P.6. "!(9, the Court finds that petitioners have failed to overcome the presumption. The dismissal of this petition is therefore, inevita'le. 4ut as to whether P.6. "!(9 remains a wise legislation considering the issues of =moralit%, monopol%, trend to free enterprise, privatiHation as well as the state principles on social :ustice, role of %outh and educational values= 'eing raised, is up for Congress to determine. /s this Court held in -iti%ens( Alliance for -onsumer Protection v. $nergy "egulatory .oard, "(, 5C?/ *," K Presidential 6ecree 3o. "9*(, as amended '% .$ecutive Arder 3o. "&) has, in an% case, in its favor the presumption of validit% and constitutionalit% which petitioners Falmonte and the NM> have not overturned. Petitioners have not underta-en to identif% the provisions in the Constitution which the% claim to have 'een violated '% that statute. This Court, however, is not compelled to speculate and to imagine how the assailed legislation ma% possi'l% offend some provision of the Constitution. The Court notes, further, in this respect that petitioners have in the main put in ;uestion the wisdom, :ustice and e$pedienc% of the esta'lishment of the AP5F, issues which are not properl% addressed to this Court and which this Court ma% not constitutionall%

pass upon. Those issues should 'e addressed rather to the political departments of government+ the President and the Congress. Parentheticall%, <e wish to state that gam'ling is generall% immoral, and this is precisel% so when the gam'ling resorted to is e$cessive. This e$cessiveness necessaril% depends not onl% on the financial resources of the gam'ler and his famil% 'ut also on his mental, social, and spiritual outloo- on life. @owever, the mere fact that some persons ma% have lost their material fortunes, mental control, ph%sical health, or even their lives does not necessaril% mean that the same are directl% attri'uta'le to gam'ling. /ambling may have been the antecedent,but certainly not necessarily the cause. For the same conse;uences could have 'een preceded '% an overdose of food, drin-, e$ercise, wor-, and even se$. <@.?.FA?., the petition is 6I5MI55.6 for lac- of merit. 5A A?6.?.6. G.R. No*. L+216,,+,4 -./e 29, 1967 %OMMISSIONER OF INTERNAL RE0EN$E /1 %OMMISSIONER OF %$STOMS, petitioners, vs. BOTEL#O S#I''ING %OR'ORATION /1 GENERAL S#I''ING %O., IN%., respondents. %ON%E'%ION, C.J.: /ppeal '% the 7overnment from a decision of the Court of Ta$ /ppeals, reversing of the decisions of the Commissioner of Internal ?evenue and the Commissioner of Customs, in Cases 3o. 9*( and 9*) of said Court, holding 4otelho 5hipping Corporation and 7eneral 5hipping Co., Inc. K hereinafter referred to collectivel% as the 4u%ers K lia'le for the pa%ment of the sum of P#!&,#&&. and P#9#,!,#. , respectivel%, as compensating ta$es on the vessels =ML5 Maria ?osello= and =ML5 7eneral 8im.= An /ugust & , "9( , the ?eparations Commission of the Philippines K hereinafter referred to as the Commission K and 4otelho 5hipping Corporation K hereinafter referred to as 4otelho K entered into a =Contract of Conditional Purchase and 5ale of ?eparations 7oods,= where'% the former agreed to sell to 4otelho for P(,)9!,!!!.!! the vessel =ML5 Maria ?osello,= procured '% the Commission from Gapan, pursuant to the provisions of the PhilippineGapanese ?eparations /greement of Ma% 9, "9*(. An 5eptem'er "9, "9( , the Commission signed a similar contract with 7eneral 5hipping Co., Inc. K hereinafter referred to as 7eneral 5hipping K for the sale thereto of =ML5 7eneral 8im= at the price of P(,9*",(((.((. 4oth agreements, couched in identical terms, e$cept as to price, stipulated that+ a2 The ?eparations Commission =retains title to and ownership of the a'ove descri'ed vessel until it is full% paid for.= 1.$h. =/=, p. ,, 'oth cases2 '2 The stipulated purchase price of the ML5 M/?I/ ?A5.88A was to 'e paid '% 4otelho to the Commission under a deferred pa%ment plan

11

in " e;ual %earl% installments of P)"),&&&.#9, 'earing &P interest per annum, 'eginning /ugust &", "9(, and /ugust &" of ever% %ear thereafter until the %ear "9),, while the purchase price of the ML5 7.3.?/8 8IM was to 'e paid '% 7eneral 5hipping to the Commission under a deferred pa%ment plan in " e;ual %earl% installments of P),&,"&,.(!, 'earing &P interest per annum 'eginning 5eptem'er & of ever% %ear until the %ear "9),. 1.$hs. 9, p. # and /-,, 'oth cases2 15ee ?espondents0 'rief, p. #.2 6elivered in Gapan to its respective 'u%ers, acting on 'ehalf of the Commission, the vessels, upon their departure from To-%o, on the maiden trip thereof to the Philippines, were issued, '% the Philippine Fice-Consul in said cit%, provisional certificates of Philippine registr% in the name of the Commission, so that the vessels could proceed to the Philippines and secure therein the respective final registration document. >pon arrival at the port of Manila, the 4u%er filed the corresponding applications for registration of the vessels, 'ut, the 4ureau of Customs placed the same under custod% and refused to give due course to said applications, unless the aforementioned sums of P#!&,#&& and P#9#,!,# 'e paid as compensating ta$. /s the Commissioner of Customs refused to reconsider the stand ta-en '% his office, the 4u%ers simultaneousl% filed with the Court of Ta$ /ppeals their respective petitions for review, against the Commissioner of Customs and the Commissioner of Internal ?evenue K hereinafter referred to collectivel% as /ppellants K with urgent motion for suspension of the collection of said ta$. /fter a :oint hearing on this motion, the same was, on Acto'er &", "9( , granted '% the Ta$ Court, upon the sum of a P* , . 'ond '% each one of the 4u%ers. An Gune "), "9(", while these cases were pending trial in said Court, ?epu'lic /ct 3o. & )9 amended ?epu'lic /ct 3o. ")!9 K the Ariginal ?eparations /ct, under which the aforementioned contracts with the 4u%ers had 'een e$ecuted K '% e$empting 'u%ers of reparations goods ac;uired from the Commission, from lia'ilit% for the compensating ta$. Moreover, section , of ?epu'lic /ct 3o. & )9, provides+ $ $ $ This /ct shall ta-e effect upon its approval, e$cept that the amendment contained in 5ection seven hereof relating to the re;uirements of procurement orders including the re;uirement of down pa%ment '% private applicant end-users shall not appl% to procurement orders alread% dut% issued and verified at the time of the passage of this amendator% /ct, and e$cept further that the amendment contained in 5ection ten relating to the insurance of the reparations goods '% the endusers upon deliver% shall appl% also to goods covered '% contracts alread% entered into '% the Commission and end-user prior to the approval of this amendator% /ct as well as goods alread%

delivered to the end-user, and e$cept further that the amendments contained in 5ections eleven and twelve hereof relating to the terms of installment pa%ments on capital goods disposed of to private parties, and the e$ecution of a performance 'ond 'efore deliver% of reparations goods, shall not appl% to contracts for the utiliHation of reparations goods alread% entered into '% the Commission and the end-users prior to the approval of this amendator% /ct+ Provided, That an% end-user ma% appl% for the renovation of his utiliHation contract with the Commission in order to avail of an% provision of this amendator% /ct which is more favora'le to an applicant end-user than has heretofore 'een granted in li-e manner and to the same e$tent as an end-user filing his application after the approval of this amendator% /ct, and the Commission ma% agree to such renovation on condition that the end-user shall voluntaril% assume all the new o'ligations provided for in this amendator% /ct. Invo-ing the provisions of this section , , the 4u%ers applied, therefore, for the renovation of their utiliHations contracts with the Commission, which granted the application, and, then, filed with the Ta$ Court, their supplemental petitions for review. 5u'se;uentl%, the parties su'mitted 5tipulations of Fact and, after a :oint trial, at which the% introduced additional evidence, said Court rendered the appealed decision, reversing the decisions herein /ppellants, and declared said 4u%ers e$empt from the compensating ta$ sought to 'e assessed against the vessels aforementioned. @ence, these appeals '% the 7overnment 7.?. 3o. 8-,"(&& refers to the case as regards =ML5 Maria ?osello,= whereas =ML5 7eneral 8im= is the su':ect-matter of 7.?. 3o. 8-,"(&#. It seems clear that, under ?epu'lic /ct 3o. ")!9 K pursuant to which the contracts of Conditional Purchase and 5ale in ;uestion had 'een e$ecuted K the vessels =ML5 Maria ?osello= and =ML5 7eneral 8im= were su':ect to compensating ta$. Indeed, 5ection "# of said /ct provides that =reparations goods o'tained '% private parties shall 'e e$empt only from the pa%ment of customs duties, consular fees and the special import ta$.= /lthough this 5ection was amended '% ?./. 3o. & )9, to include the compensating ta$= among the e$emptions enumerated therein, such amendment too- place, not onl% after the contracts involved in these appeals had 'een perfected and partl% consummated, 'ut, also, after the corresponding compensating ta$ had 'ecome due and pa%ment thereof demanded '% /ppellants herein. It is, moreover, o'vious that said additional e$emption should not and cannot 'e given retroactive operation, in the a'sence of a manifest intent of Congress to do this effect. The issue in the cases at 'ar hinges on whether or not such intent is clear. /ppellants maintain the negative, upon the ground that a ta$ e$emption must 'e clear and e$plicit; that there is no e$press provision for the retroactivit% of the e$emption,

12

esta'lished '% ?epu'lic /ct 3o. & )9, from the compensating ta$; that the favora'le provisions, which are referred to in section , thereof, cannot include the e$emption from compensating ta$; and, that Congress could not have intended an% retroactive e$emption, considering that the result thereof would 'e pre:udicial to the 7overnment. The inherent wea-ness of the last ground 'ecomes manifest when we consider that, if true, there could 'e no ta$ e$emption of an% -ind whatsoever, even if Congress should wish to create one, 'ecause ever% such e$emption implies a waiver of the right to collect what otherwise would 'e due to the 7overnment, and, in this sense, is pre:udicial thereto. In fact, however, ta$ e$emptions ma% and do e$ist, such as the one prescri'ed in section "# of ?epu'lic /ct 3o. ")!9, as amended '% ?epu'lic /ct 3o. & )9, which, '% the wa%, is =clear and e$plicit,= thus, meeting the first ground of appellant0s contention. It ma% not 'e amiss to add that no ta$ e$emption K li-e an% other legal e$emption or e$ception K is given without an% reason therefor. In much the same wa% as other statutor% commands, its avowed purpose is some pu'lic 'enefit or interest, which the lawma-ing 'od% considers sufficient to offset the monetar% loss entitled in the grant of the e$emption. Indeed, section , of ?epu'lic /ct 3o. & )9 e$acts a valua'le consideration for the retroactivit% of its favora'le provisions, namel%, the voluntar% assumption, '% the end-user who 'ought reparations goods prior to Gune "), "9(" of =all the new o'ligations provided for in= said /ct. The argument adduced in support of the third ground is that the view adopted '% the Ta$ Court would operate to grant e$emption to particular persons, the 4u%ers herein. It should 'e noted, however, that there is no constitutional in:unction against granting ta$ e$emptions to particular persons. In fact, it is not unusual to grant legislative franchises to specific individuals or entities, conferring ta$ e$emptions thereto. <hat the fundamental law for'ids is the denial of e;ual protection, such as through unreasona'le discrimination or classification.10wph11234t Furthermore, 5ection "# of the 8aw on ?eparations, as amended, e$empts from the compensating ta$, not particular persons, 'ut persons 'elonging to a particular class. Indeed, appellants do not assail the constitutionalit% of said section "#, insofar as it grants e$emptions to end-users who, after the approval of ?epu'lic /ct 3o. & )9, on Gune "), "9(", purchased reparations goods procured '% the Commission. From the viewpoint of Constitutional 8aw, especiall% the e;ual protection clause, there is no difference 'etween the grant of e$emption to said end-users, and the e$tension of the grant to those whose contracts of purchase and sale mere made beforesaid date, under ?epu'lic /ct 3o. ")!9. It is true that ?epu'lic /ct 3o. & )9 does not e$plicitl% declare that those who purchased reparations goods prior to Gune "), "9(", are e$empt from the compensating ta$. It does not sa% so, 'ecause the% do not reall% en:o% such e$emption, unless the% compl% with the proviso in 5ection

, of said /ct, by applying for the renovation of their respective utili%ation contracts, =in order to avail of any provision of the /mendator% /ct which is more favora'le= to the applicant. In other words, it is manifest, from the language of said section , , that the same intended to give such 'u%ers the opportunit% to 'e treated =in li-e manner and to the same e$tent as an end-user filing his application after this approval of this /mendator% /ct.= 8i-e the =most-favored-nation-clause= in international agreements, the aforementioned section , thus see-s, not to discriminate or to create an e$emption or e$ception, 'ut to abolish the discrimination, e$emption or e$ception that would otherwise result, in favor of the enduser who 'ought after Gune "), "9(" and against one who 'ought prior thereto. Indeed, it is difficult to find a su'stantial :ustification for the distinction 'etween the one and the other. /s correctl% held '% the Ta$ Court in Philippine Ace 5ines! Inc2 v2 -ommissioner of Internal "evenue 1C.T./. 3os. 9(# and 9!#, Ganuar% ,*, "9(&2, and reiterated in the cases under consideration+ $ $ $ In providing that the favora'le provision of ?epu'lic /ct 3o. & )9 shall 'e availa'le to applicants for renovation of their utiliHation contracts, on condition that said applicants shall voluntaril% assume all the new o'ligations provided in the new law, the law intends to place persons who ac;uired reparations goods 'efore the enactment of the amendator% /ct on the same footing as those who ac;uire reparations goods after its enactment. This is so 'ecause of the provision that once an application for renovation of a utiliHation contract has 'een approved, the favora'le provisions of said /ct shall 'e availa'le to the applicant =in li-e manner and to the same e$tent, as an end-user filing his application alter the approval of this amendator% /ct.= To den% e$emption from compensating ta$ to one whose utiliHation contract has 'een renovated, while granting the e$emption to one who files an application for ac;uisition of reparations goods after the approval of the new law, would 'e contrar% to the e$press mandate of the new law, that the% 'oth 'e su':ect to the same privileges in li-e manner and to the same e$tent. It would 'e manifest distortion of the literal meaning and purpose of the new law. <herefore, the appealed decision of the Court of Ta$ /ppeals is here'% affirmed in toto, without an% pronouncement as to costs. It is so ordered. G.R. No. 95222 M r34 2,, 1992 %OMMISSIONER OF INTERNAL RE0EN$E, petitioner, vs. T#E #ON. %O$RT OF A''EALS, T#E %O$RT OF TA5 A''EALS, G%L RETIREMENT 'LAN, repre*e/te1 b! 6t* Tr.*tee+ D6re3tor, respondents. MELEN%IO+#ERRERA, J.:

13

This case is said to 'e precedent setting. <hile the amount involved is insignificant, the 5olicitor 7eneral avers that there are a'out !* claims of the same nature pending in the Court of Ta$ /ppeals and 4ureau of Internal ?evenue totalling appro$imatel% P", M. Petitioner, the Commissioner of Internal ?evenue, see-s a reversal of the 6ecision of respondent Court of /ppeals, dated /ugust ,), "99 , in C/-7.?. 5P 3o. , #,(, entitled =Commissioner of Internal ?evenue vs. 7C8 ?etirement Plan, represented '% its Trustee-6irector and the Court of Ta$ /ppeals,= which affirmed the 6ecision of the latter Court, dated "* 6ecem'er "9!(, in Case 3o. &!!!, ordering a refund, in the sum of P"",& ,."9, to the 7C8 ?etirement Plan representing the withholding ta$ on income from mone% mar-et placements and purchase of treasur% 'ills, imposed pursuant to Presidential 6ecree 3o. "9*9. There is no dispute with respect to the facts. Private ?espondent, 7C8 ?etirement Plan 17C8, for 'revit%2 is an emplo%ees0 trust maintained '% the emplo%er, 7C8 Inc., to provide retirement, pension, disa'ilit% and death 'enefits to its emplo%ees. The Plan as su'mitted was approved and ;ualified as e$empt from income ta$ '% Petitioner Commissioner of Internal ?evenue in accordance with ?ep. /ct 3o. #9"). 1 In "9!#, ?espondent 7C8 made investsments and earned therefrom interest income from which was witheld the fifteen per centum 1"*P2 final witholding ta$ imposed '% Pres. 6ecree 3o. "9*9, 2 which too- effect on "* Acto'er "9!#, to wit+ #ate 6ind of Investment Principal Income $arned 178 Tax /CIC ",L *L!# Mar-et Placement P,&(,*"*.&, P!,)*".9( P",&",.(( " L,,L!# K ,&#,(&,.)* 9,!"*.!9 ",#),.&! ""L"9L!# K ,,*,!!(.*" " ,(,9.,, ",*9#.&! ""L,&L!# K &##,##!.(# "),&"&.&& ,,*9). ",L *L!# K &,#,(&&.!" "*, )).## ,,,(".*, CAM4/3N Treasur% 4ills ,, (#."* KKKKKK P"",& ,."9 An "* Ganuar% "9!*, ?espondent 7C8 filed with Petitioner a claim for refund in the amounts of P",&",.(( withheld '% /nscor Capital and Investment Corp., and P,, (#."* '% Commercial 4an- of Manila. An ", Fe'ruar% "9!*, it filed a second claim for refund of the amount of P),9,*. withheld '% /nscor, stating in 'oth letters that it disagreed with the collection of the "*P final withholding ta$ from the interest income as it is an entit% full% e$empt from income ta$ as provided under ?ep. /ct 3o. #9") in relation to 5ection *( 1'2 , of the Ta$ Code. The refund re;uested having 'een denied, ?espondent 7C8 elevated the matter to respondent Court of Ta$ /ppeals 1CT/2. The latter ruled in favor of 7C8, holding that emplo%ees0 trusts are e$empt from the "*P final withholding ta$ on interest income and ordering a refund of the ta$ withheld. >pon appeal, originall% to this Court, 'ut

referred to respondent Court of /ppeals, the latter upheld the CT/ 6ecision. 4efore us now, Petitioner assails that disposition. It appears that under ?ep. /ct 3o. "9!&, which too- effect on ,, Gune "9*), amending 5ec. *( 1'2 of the 3ational Internal ?evenue Code 1Ta$ Code, for 'revit%2, emplo%ees0 trusts were e$empt from income ta$. That law provided9 5ec. *( Imposition of tax2 K 1a2 Application of tax2 K The ta$es imposed '% this Title upon individuals shall appl% to the income of estates or of an% -ind of propert% held in trust, including K $$$ $$$ $$$ 1'2 $xception2 K The ta$ imposed '% this Title shall not appl% to emplo%ees0 trust which forms a part of a pension, stoc- 'onus or profitsharing plan of an emplo%er for the 'enefit of some or all of his emplo%ees 1"2 if contri'utions are made to trust '% such emplo%er, or emplo%ees, or 'oth, for the purpose of distri'uting to such emplo%ees the earnings and principal of the fund accumulated '% the trust in accordance with such plan, . . . An & Gune "9)), Pres. 6ecree 3o. ""*( provided, for the first time, for the withholding from the interest on 'andeposits at the source of a ta$ of fifteen per cent 1"*P2 of said interest. @owever, it also allowed a specific e$emption in its 5ection *&, as follows+ 5ec. *&. <ithholding of ta$ at source. K $$$ $$$ $$$ 1c2 &ithholding tax on interest on ban' deposits2 K 1"2 "ate of withholding tax2 K .ver% 'an- or 'an-ing institution shall deduct and withhold from the interest on 'an- deposits 1e$cept interest paid or credited to nonresident alien individuals and foreign corporations2, a ta$ e;ual to fifteen per cent of the said interest+ Provided, however, That no withholding of ta$ shall 'e made if the aggregate amount of the interest on all deposit accounts maintained '% a depositor alone or together with another in an% one 'an- at an% time during the ta$a'le period does not e$ceed three hundred fift% pesos a %ear or eight%-seven pesos and fift% centavos per ;uarter. For this purpose, interest on a deposit account maintained '% two persons shall 'e deemed to 'e e;uall% owned '% them. 1,2 Treatment of ban' deposit interest2 K The interest income shall 'e included in the gross income in computing the depositor0s income ta$ lia'ilit% in according with e$isting law. 1&2 #epositors en+oying tax exemption privileges or preferential tax treatment2 K In all cases where the depositor is ta$-e$empt or is en:o%ing preferential income ta$ treatment under e$isting laws, the withholding ta$ imposed in this paragraph shall 'e refunded or credited as the

14

case ma% 'e upon su'mission to the Commissioner of Internal ?evenue of proof that the said depositor is a ta$-e$empt entit% or en:o%s a preferential income ta$ treatment. $$$ $$$ $$$ This e$emption and preferential ta$ treatment were carried over in Pres. 6ecree 3o. ")&9, effective on ") 5eptem'er "9! , which law also su':ected interest from 'an- deposits and %ield from deposit su'stitutes to a final ta$ of twent% per cent 1, P2. The pertinent provisions read+ 5ec. ,. 5ection ," of the same Code is here'% amended '% adding a new paragraph to read as follows+ 5ec. ,". ?ates of ta$ on citiHens or residents. K $$$ $$$ $$$ Interest from Philippine Currenc% 'andeposits and %ield from deposit su'stitutes whether received '% citiHens of the Philippines or '% resident alien individuals, shall 'e su':ect to the final ta$ as follows+ 1a2 "*P of the interest on savings deposits, and 1'2 , P of the interest on time deposits and %ield from deposit su'stitutes, which shall 'e collected and paid as provided in 5ections *& and *# of this Code. Provided, That no ta$ shall 'e imposed if the aggregate amount of the interest on all Philippine Currenc% deposit accounts maintained '% a depositor alone or together with another in an% one 'an- at an% time during the ta$a'le period does not e$ceed .ight @undred Pesos 1P! . 2 a %ear or Two @undred Pesos 1P, . 2 per ;uarter. Provided! further! That if the recipient of such interest is exempt from income taxation! no tax shall be imposed and that! if the recipient is en+oying preferential income tax treatment! then the preferential tax rates so provided shall be imposed 1.mphasis supplied2. 5ec. &. 5ection ,# of the same Code is here'% amended '% adding a new su'section 1cc2 'etween su'sections 1c2 and 1d2 to read as follows+ 1cc2 ?ates of ta$ on interest from deposits and %ield from deposit su'stitutes. K Interest on Philippine Currenc% 'an- deposits and %ield from deposit su'stitutes received '% domestic or resident foreign corporations shall 'e su':ect to a final ta$ on the total amount thereof as follows+ 1a2 "*P of the interest on savings deposits; and 1'2 , P of the interest on time deposits and %ield from deposit su'stitutes which shall 'e collected and paid as provided in 5ections *& and *# of this Code. Provided! That if the recipient of such interest is exempt from income taxation! no tax shall be imposed and that! if the recipient is

en+oying preferential income tax treatment! then the preferential tax rates so provided shall be imposed 1.mphasis supplied2. 5ec. 9. 5ection *&1e2 of the same Code is here'% amended to read as follows+ 5e. *&1e2 <ithholding of final ta$ on interest on 'an- deposits and %ield from deposit su'stitutes. K 1"2 &ithholding of final tax2 K .ver% 'anor non-'an- financial intermediar% shall deduct and withhold from the interest on 'an- deposits or %ield from deposit su'stitutes a final ta$ e;ual to fifteen 1"*P2 per cent of the interest on savings deposits and twent% 1, P2 per cent of the interest on time deposits or %ield from deposit su'stitutes+Provided, however, That no withholding ta$ shall 'e made if the aggregate amount of the interest on all deposit accounts maintained '% a depositor alone or together with another in an% one 'an- at an% time during the ta$a'le period does not e$ceed .ight @undred Pesos a %ear or Two @undred Pesos per ;uarter. For this purpose, interest on a deposit account maintained '% two persons shall 'e deemed to 'e e;uall% owned '% them. 1,2 #epositors or placers:investors en+oying tax exemption privileges or preferential tax treatment2 K In all cases where the depositor or placerLinvestor is ta$ e$empt or is en:o%ing preferential income ta$ treatment under e$isting laws, the withholding ta$ imposed in this paragraph shall 'e refunded or credited as the case ma% 'e upon su'mission to the Commissioner of Internal ?evenue of proof that the said depositor, or placerLinvestor is a ta$ e$empt entit% or en:o%s a preferential income ta$ treatment. 5u'se;uentl%, however, on "* Acto'er "9!#, Pres. 6ecree 3o. "9*9 was issued, amending the aforestated provisions to read+ 5ec. ,. 5ection ,"1d2 of this Code, as amended, is here'% further amended to read as follows+ 1d2 ;n interest from ban' deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements2 K Interest from Philippine Currenc% 4an- deposits and %ield or an% other monetar% 'enefit from deposit su'stitutes and from trust fund and similar arrangements whether received '% citiHens of the Philippines, or '% resident alien individuals, shall 'e su':ect to a "*P final ta$ to 'e collected and paid as provided in 5ections *& and *# of this Code. 5ec. &. 5ection ,#1cc2 of this Code, as amended, is here'% further amended to read as follows+

15

1cc2 "ates of tax on interest from deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements2 K Interest on Philippine Currenc% 4an- deposits and %ield or an% other monetar% 'enefit from deposit su'stitutes and from trust fund and similar arrangements received '% domestic or resident foreign corporations shall 'e su':ect to a "*P final ta$ to 'e collected and paid as provided in 5ection *& and *# of this Code. 5ec. #. 5ection *& 1d2 1"2 of this code is here'% amended to read as follows+ 5ec. *& 1d2 1"2. &ithholding of <inal Tax2 K .ver% 'an- or non-'an- financial intermediar% or commercial. industrial, finance companies, and other non-financial companies authoriHed '% the 5ecurities and .$change Commission to issue deposit su'stitutes shall deduct and withhold from the interest on 'andeposits or %ield or an% other monetar% 'enefit from deposit su'stitutes a final ta$ e;ual to fifteen per centum1"*P2 of the interest on deposits or %ield or an% other monetar% 'enefit from deposit su'stitutes and from trust fund and similar arrangements. It is to 'e noted that the e$emption from withholding ta$ on interest on 'an- deposits previousl% e$tended '% Pres. 6ecree 3o. ")&9 if the recipient 1individual or corporation2 of the interest income is e$empt from income ta$ation, and the imposition of the preferential ta$ rates if the recipient of the income is en:o%ing preferential income ta$ treatment, were 'oth a'olished '% Pres. 6ecree 3o. "9*9. Petitioner thus su'mits that the deletion of the e$empting and preferential ta$ treatment provisions under the old law is a clear manifestation that the single "*P 1now , P2 rate is impossi'le on all interest incomes from deposits, deposit su'stitutes, trust funds and similar arrangements, regardless of the ta$ status or character of the recipients thereof. In short, petitioner0s position is that from "* Acto'er "9!# when Pres. 6ecree 3o. "9*9 was promulgated, emplo%ees0 trusts ceased to 'e e$empt and thereafter 'ecame su':ect to the final withholding ta$. >pon the other hand, 7C8 contends that the ta$ e$empt status of the emplo%ees0 trusts applies to all -inds of ta$es, including the final withholding ta$ on interest income. That e$emption, according to 7C8, is derived from 5ection *(1'2 and not from 5ection ," 1d2 or ,# 1cc2 of the Ta$ Code, as argued '% Petitioner. The sole issue for determination is whether or not the 7C8 Plan is e$empt from the final withholding ta$ on interest income from mone% placements and purchase of treasur% 'ills re;uired '% Pres. 6ecree 3o. "9*9. <e uphold the e$emption. To 'egin with, it is significant to note that the 7C8 Plan was ;ualified as e$empt from income ta$ '% the Commissioner of Internal ?evenue in accordance with ?ep. /ct 3o. #9") approved on ") Gune "9(). This law specificall% provided+

5ec. ". Any provision of law to the contrary notwithstanding! the retirement 'enefits received '% officials and emplo%ees of private firms, whether individual or corporate, in accordance with a reasona'le private 'enefit plan maintained '% the emplo%er shall 'e exempt from all taxes and shall not 'e lia'le to attachment, lev% or seiHure '% or under an% legal or e;uita'le process whatsoever e$cept to pa% a de't of the official or emplo%ee concerned to the private 'enefit plan or that arising from lia'ilit% imposed in a criminal action; . . . 1emphasis ours2. In so far as emplo%ees0 trusts are concerned, the foregoing provision should 'e ta-en in relation to then 5ection *(1'2 1now *&B'C2 of the Ta$ Code, as amended '% ?ep. /ct 3o. "9!&, supra! which too- effect on ,, Gune "9*). This provision specificall% e$empted emplo%ee0s trusts from income ta$ and is repeated hereunder for emphasis+ 5ec. *(. Imposition of Tax. K 1a2 /pplication of ta$. K The ta$es imposed '% this Title upon individuals shall appl% to the income of estates or of an% -ind of propert% held in trust. $$$ $$$ $$$ 1'2 $xception2 K The ta$ imposed '% this Title shall not appl% to emplo%ee0s trust which forms part of a pension, stoc- 'onus or profitsharing plan of an emplo%er for the 'enefit of some or all of his emplo%ees . . . The ta$-e$emption privilege of emplo%ees0 trusts, as distinguished from an% other -ind of propert% held in trust, springs from the foregoing provision. It is unam'iguous. Manifest therefrom is that the ta$ law has singled out emplo%ees0 trusts for ta$ e$emption. /nd rightl% so, '% virtue of the raison de(etre 'ehind the creation of emplo%ees0 trusts. .mplo%ees0 trusts or 'enefit plans normall% provide economic assistance to emplo%ees upon the occurrence of certain contingencies, particularl%, old age retirement, death, sic-ness, or disa'ilit%. It provides securit% against certain haHards to which mem'ers of the Plan ma% 'e e$posed. It is an independent and additional source of protection for the wor-ing group. <hat is more, it is esta'lished for their e$clusive 'enefit and for no other purpose. The ta$ advantage in ?ep. /ct 3o. "9!&, 5ection *(1'2, was conceived in order to encourage the formation and esta'lishment of such private Plans for the 'enefit of la'orers and emplo%ees outside of the 5ocial 5ecurit% /ct. .nlightening is a portion of the e$planator% note to @.4. 3o. (* &, now ?./. "9!&, reading+ Considering that under 5ection ") of the social 5ecurit% /ct, all contri'utions collected and pa%ments of sic-ness, unemplo%ment, retirement, disa'ilit% and death 'enefits made thereunder together with the income of the pension trust are e$empt from an% ta$, assessment, fee, or charge, it is proposed that a similar s%stem providing for retirement, etc. 'enefits for

16

emplo%ees outside the 5ocial 5ecurit% /ct 'e e$empted from income ta$es. 1Congressional ?ecord, @ouse of ?epresentatives, Fol. IF, Part. ,, 3o. *), p. "!*9, Ma% &, "9*); cited in Commissioner of Internal ?evenue v. Fisa%an .lectric Co., et al., 7.?. 3o. 8-,,("", ,) Ma% "9(!, ,& 5C?/ )"*2; emphasis supplied. It is evident that ta$-e$emption is li-ewise to 'e en:o%ed '% the income of the pension trust. Atherwise, ta$ation of those earnings would result in a diminution accumulated income and reduce whatever the trust 'eneficiaries would receive out of the trust fund. This would run afoul of the ver% intendment of the law. The deletion in Pres. 6ecree 3o. "9*9 of the provisos regarding ta$ e$emption and preferential ta$ rates under the old law, therefore, can not 'e deemed to e$tent to emplo%ees0 trusts. 5aid 6ecree, 'eing a general law, can not repeal '% implication a specific provision, 5ection *(1'2 now *& B'C2 in relation to ?ep. /ct 3o. #9") granting e$emption from income ta$ to emplo%ees0 trusts. ?ep. /ct "9!&, which e$cepted emplo%ees0 trusts in its 5ection *( 1'2 was effective on ,, Gune "9*) while ?ep. /ct 3o. #9") was enacted on ") Gune "9(), long 'efore the issuance of Pres. 6ecree 3o. "9*9 on "* Acto'er "9!#. / su'se;uent statute, general in character as to its terms and application, is not to 'e construed as repealing a special or specific enactment, unless the legislative purpose to do so is manifested. This is so even if the provisions of the latter are sufficientl% comprehensive to include what was set forth in the special act 1Fillegas v. 5u'ido, 7.?. 3o. 8-&")"", & 5eptem'er "9)", #" 5C?/ "9 2. 3ota'l%, too, all the ta$ provisions herein treated of come under Title II of the Ta$ Code on =Income Ta$.= 5ection ," 1d2, as amended '% ?ep. /ct 3o. "9*9, refers to the final ta$ on individuals and falls under Chapter II; 5ection ,# 1cc2 to the final ta$ on corporations under Chapter III; 5ection *& on withholding of final ta$ to ?eturns and Pa%ment of Ta$ under Chapter FI; and 5ection *( 1'2 to ta$ on .states and Trusts covered '% Chapter FII, 5ection *( 1'2, ta-en in con:unction with 5ection *( 1a2, supra! e$plicitl% e$cepts emplo%ees0 trusts from =the ta$es imposed '% this Title.= 5ince the final ta$ and the withholding thereof are em'raced within the title on =Income Ta$,= it follows that said trust must 'e deemed e$empt therefrom. Atherwise, the e$ception 'ecomes meaningless. There can 'e no den%ing either that the final withholding ta$ is collected from income in respect of which emplo%ees0 trusts are declared e$empt 15ec. *( B'C, now *& B'C, Ta$ Code2. The application of the withholdings s%stem to interest on 'an- deposits or %ield from deposit su'stitutes is essentiall% to ma$imiHe and e$pedite the collection of income ta$es '% re;uiring its pa%ment at the source. If an emplo%ees0 trust li-e the 7C8 en:o%s a ta$-e$empt status from income, we see no logic in withholding a certain percentage of that income which it is not supposed to pa% in the first place.

Petitioner also relies on ?evenue Memorandum Circular &"-!#, dated & Acto'er "9!#, and 4ureau of Internal ?evenue ?uling 3o. ,)-e- - *-!*, dated "# Ganuar% "9!*, as authorities for the argument that Pres. 6ecree 3o. "9*9 withdrew the e$emption of emplo%ees0 trusts from the withholding of the final ta$ on interest income. 5aid Circular and ?uling pronounced that the deletion of the e$empting and preferential ta$ treatment provisions '% Pres. 6ecree 3o. "9*9 is a clear manifestation that the single "*P ta$ rate is imposa'le on all interest income regardless of the ta$ status or character of the recipient thereof. 4ut since we herein rule that Pres. 6ecree 3o. "9*9 did not have the effect of revo-ing the ta$ e$emption en:o%ed '% emplo%ees0 trusts, reliance on those authorities is now misplaced. <@.?.FA?., the <rit of -ertiorari pra%ed for is 6.3I.6. The :udgment of respondent Court of /ppeals, affirming that of the Court of Ta$ /ppeals is >P@.86. 3o costs. 5A A?6.?.6. G.R. No. L+19274 - /. r! ,1, 1967 %OMMISSIONER OF INTERNAL RE0EN$E, petitioner, vs. ANTONIO G. G$ERRERO, /1 t4e %O$RT OF TA5 A''EALS, respondents. ----------------------------G.R. No. L+19279 - /. r! ,1, 1967 ANTONIO G. G$ERRERO, petitioner, vs. T#E %OMMISSIONER OF INTERNAL RE0EN$E, respondent. %ON%E'%ION, C.J.: These are two 1,2 appeals from the same decision of the Court of Ta$ /ppeals. Ane 18-"9 )#2 was ta-en '% the Commissioner of Internal ?evenue, and the other 18-"9 !92 '% /ntonio 7. 7uerrero. The dispositive part of said decision reads+ In line with the foregoing opinion, the decision appealed from is here'% modified. Petitioner 1/ntonio 7. 7uerrero2 is ordered to pa% the sum of P&,))*.(( within thirt% da%s from the date this decision 'ecomes final. 3o pronouncement as to costs. 1.mphasis ours.2 5aid /ntonio 7. 7uerrero was, during the %ears "9#9 and "9* , a dealer in logs, which he used to sell to the /parri 8um'er Compan%, hereinafter referred to as the compan%. An /pril ,, "9*#, the then Collector of Internal ?evenue made an assessment and demand re;uiring 7uerrero to pa% the sum of P#, "#.9", representing fi$ed and percentage ta$es and forest charges, as well as surcharges and penalties, in connection with his aforementioned 'usiness transactions with the compan%. >pon 7uerrero0s re;uest, the matter was su'mitted to the Conference 5taff of the 4ureau of Internal ?evenue, which, in due course, thereafter, or on Ganuar% "", "9*(, recommended that the assessment 'e increased to P*,"&9."), computed as follows+ P, .

C-"# producer0s fi$ed ta$ for "9#9 and "9* . . . . . . . . . . . . . . . . . . .

17

*P sales ta$ on P"!,)( ., 1P"#,&)).9, D P#,&!,.,!2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,*P surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total for fi$ed and sales ta$es and surcharges . . . . . . . . Fol. of tim'er, Gul% #, "9#9 to Ma% ,", "9* 1#",!! D "&,!9,2 . . . /dd+ # P for s;uaring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9&!. " ,&#.* P","9,.*" **,)), 4d. ft ,,,& 9 = = = =

Total volume to 'e assessed . . . . . . . . . . . . . . . . . . . . . . . )!, !"

or . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . "!#."* cu. m. ?egular forest charges on "!#."* cu. m. at P&.* . . . . . . . . . . . . . & P surcharge for cutting without license . . . . . . . . . . . . . . . . . . . P (##.*& ",9&&.*9 &,,.,( &,,.,( &,,.,( P&,*##.9 #!.)9 "#(.&) ",., ",., ",., P,&".)( P#,9(9.")

* P 1$2 surcharge for transporting without invoice . . . . . . . . . . . . . * P surcharge for discharging without permit . . . . . . . . . . . . . . . . . * P surcharge for late pa%ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forest charges D surcharges . . . . . . . . . . . . . . . . . . . . . . . ?egular forest charges on "&.9# cu. m. at P&.* . . . . . . . . . . . . . . . & P surcharge for cutting without license . . . . . . . . . . . . . . . . . . . .

,*P surcharge for transporting without invoice . . . . . . . . . . . . . . . . ,*P surcharge for discharging without permit . . . . . . . . . . . . . . . . . ,*P surcharge for late pa%ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forest charges D surcharges . . . . . . . . . . . . . . . . . . . . . . . . TAT/8 /MA>3T 6>. . . . . . . . . . . . . . . . . . . . . . . . . . . . . In addition to the a'ove amount, the sums of P, . and P" . as compromise penalties in e$tra:udicial settlement of his penal lia'ilities under sections , ! and , 9 of the 3.I.?.C. should 'e reiterated. That another sum of P* . as compromise penalt% for his violation of the 4oo--eeping ?egulations should 'e imposed against the ta$pa%er, he having admitted during the hearing of this case that he did not -eep 'oo-s of accounts for his tim'er 'usiness. This recommendation was approved '% the Collector of Internal ?evenue, who, accordingl%, made the corresponding reassessment upon receipt of notice of which 7uerrero re;uested, on Fe'ruar% " , "9*(, a rehearing 'efore the Conference 5taff. Instead of acting on this re;uest, on /pril , , "9*(, the corresponding Internal ?evenue ?egional 6irector issued a warrant of distraint and lev% against the properties of 7uerrero, in order to effect the collection of his ta$ lia'ilities under said reassessment. @ence, on Gune !, "9*(, 7uerrero filed with the Court of Ta$ /ppeals the corresponding petition for review. 5u'se;uentl%, said court rendered the decision appealed from. @ence, these appeals. There is no dispute as to the volume of sales of logs made '% 7uerrero during the %ears "9#9 and "9* , upon which the disputed reassessment is 'ased. The onl% issues in these appeals are whether or not he is lia'le for the pa%ment of+ 1"2 P&,))*.((, '% wa% of forest charges and

surcharges on the logs sold to the compan%, which the Court of Ta$ /ppeals answered in the affirmative; 1,2 P","9,.*", '% wa% of fi$ed and percentage ta$es and surcharges as producer of said logs, which said court decided in the negative; 1&2 P((!.&(, as additional forest charges and sales ta$es, as well as surcharges, which was decided '% the trial court in favor of the ta$pa%er; and 1#2 P", . and P* . as compromise penalties for violation of 5ections , ! and , 9 of the ?evised Internal ?evenue Code and of the 'oo--eeping regulations, respectivel%, li-ewise, decided '% the Court of Ta$ /ppeals against the 7overnment. <ith respect to the first item, 7uerrero maintains that, he is not lia'le therefor 'ecause he 'ought the logs in ;uestion for the compan%, as agent thereof and with mone% 'elonging thereto. @owever, 'efore the Conference 5taff of the then 4ureau of Internal ?evenue, 7uerero had+ claimed that he financed his 'usiness with his ownmone% and sold the logs to the compan% on a commission 'asis. Moreover, he admitted having sold some lum'er to other enterprises in Manila, although he had previousl% asserted that he dealt e$clusivel% with the compan%. >pon the other hand, the au$iliar% invoices presented 'efore the 4ureau of Internal ?evenue were either spurious, or referred to logs other than those involved in the disputed reassessment. Thus, for instance, in e$hi'it !-// 1A.?. 3o. (*)! #9, p. !,, 4I? record2, the word =Gune= was

18

superimposed over the word =Ma%= and, at the 'ac- of .$hi'it !-//-" 1p. !", 4I? record2, which is the corresponding invoice, two similar alterations were made. In the au$iliar% invoices .$hi'its -& and -# 1PP. ,!-,9, 4I? record2, su'mitted '% 7uerrero to the Conference 5taff, as .$hi'its C-& and C-#, his name is written 1script2, in in-, on the space opposite the word consignee=. @owever, in the copies of said au$iliar% invoices 1.$hi'its !-?-, and !-5 pp. "") and ""9, 4I? record2, ta-en from the compan%, the corresponding space is blan'. /gain, the ta$pa%er0s name on said .$hi'its -& and -# is handwritten with a penmanship that is mar-edl% different from that of 5egundo /gustin, the signator% of said invoices, who had supposedl% accomplished the same, thus indicating that said name could not have 'een written '% 5egundo /gustin, and rendering the authenticit% of the documents highl% dou'tful. Furthermore, said invoices, as well as the other invoices su'mitted '% 7uerrero to the Conference 5taff 1.$hi'its C-" to C-"#, also, mar-ed as .$hi'its -" to -"#, pp. "!-&", 4I? record2, referred to logs other than those involved in the ;uestioned reassessment. The foregoing circumstances clearl% indicate that the logs involved in said reassessment were o'tained from illegal sources, and that the forest charges due thereon had not 'een paid. 5ince these charges =are liens on the products and collecti'le from whomsoever is in possession= thereof, =unless he can show that he has the re;uired au$iliar% and official invoice and discharge permit= 1Collector of Internal ?evenue vs. Pio 4arretto and 5ons, 8-""! *, Ma% &", "9( 2 K which 7uerrero has not shown K it follows that he is 'ound to pa% the aforementioned forest charges and surcharges, in the sum of P&,))*.((. /s regards the second item of P","9,.*", representing fi$ed and percentage ta$es and surcharges, as producer of the logs involved in the reassessment, the Court of Ta$ /ppeals held that 7uerrero is not lia'le therefor, upon the theor% that said logs were sold by the /overnment to the one who had cut, and removed the products from the forest; that the original sale of said logs was, therefore, made '% the 7overnment, not '% the concessionaire or cutter of the forest products; and that, accordingl%, 7uerrero is not lia'le for the pa%ment of the corresponding fi$ed and percentage ta$es thereon. This theor% is 'ased upon the premise that, whereas in -ollector of Internal "evenue vs2 =2"2 5acson, 8-",9#* 1/pril ,9, "9( 2, we held that forest charges are internal revenue ta$es, this ruling was reversed in -ollector of Internal "evenue vs2 Pio .arretto ,ons, 8-""! * 1Ma% &", "9( 2. It is true that the dispositive portion of our decision in the first case e$pressl% sustained the concurring and dissenting opinion of a mem'er of the Court of Ta$ /ppeals in the appealed decision thereof and that the writer of the opinion maintained that forest charges are internal revenue ta$es. / careful perusal of the te$t of the decision of the 5upreme Court therein shows, however, that said dissenting opinion is not the ratio decidendi of the aforementioned decision. It should 'e noted that the Collector of Internal ?evenue

contested the :urisdiction of the Court of Ta$ /ppeals to entertain the appeal ta-en '% 8acson from the assessment made '% said officer involving forest charges, and that the 5upreme Court upheld the authorit% of the ta$ court to hear and decide said appeal, 'ecause the issue therein was the validity of said assessment. From the viewpoint of the 5upreme Court, this issue was decisive on the ;uestion of :urisdiction of the Court of Ta$ /ppeals, regardless of whether forest charges were ta$es or not. /t this :uncture, it ma% not 'e amiss to advert to a pro'lem of semantics arising from the operation of 5ection "*!! of the ?evised /dministrative Code, the counterpart of which is now 5ection &"* of the 3ational Internal ?evenue Code, pursuant to which+ .ver% internal revenue ta$ on propert% or on an% 'usiness or occupation, and ever% ta$ on resources and receipts, and an% increment to an% of them incident to delin;uenc%, shall constitute a lien superior to all other charges or liens not onl% on the propert% itself upon which such ta$ ma% 'e imposed 'ut also upon the propert% used in an% 'usiness or occupation upon which the ta$ is imposed and upon all propert% rights therein. $$$ $$$ $$$ The enforcement of this lien '% the Commissioner 1formerl% Collector2 of Internal ?evenue, has often induced the parties adversel% affected there'% to raise the ;uestion whether a given charge is a ta$ or not, on the theor% that there would 'e no lien if said ;uestion were decided in the negative. In connection therewith, said parties had tended to distinguish 'etween ta$es, on the one hand K as 'urdens imposed upon persons andLor properties, '% wa% of contri'utions to the support of the 7overnment, in consideration of general 'enefits derived from its operation K and license fees K charged in the e$ercise of the regulatory authorit% of the state, under its police power K and other charges K for specific things or special or particular 'enefits received from the 7overnment K on the other hand. It is high time to stress that the term =ta$,= as it appears in said 5ection "*!! of the ?evised /dministrative Code and 5ection &"* of the 3ational Internal ?evenue Code, is used in these provisions, not in the limited sense adverted to a'ove, 'ut, in a broad sense encompassing all /overnment revenues collectible by the -ommissioner of Internal "evenue under said -ode, whether involving ta$es, in the strict technical sense thereof, or not. Thus, under the heading =in:unction not availa'le to restrain collection of tax=, 5ection & * of said Code K which is the first provision of Title II 1entitled =7eneral /dministrative Provisions=2, Chapter I 1entitled ="emedies in 7eneral2 thereof K provides+ 3o court shall have authorit% to grant an in:unction to restrain the collection of an% national internal-revenue ta$, fee, or charge imposed '% this Code.

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5imilarl%, under the heading =Civil remedies for the collection of delin;uent ta$es,= 5ection &"( of the same Code ordains; The civil remedies for the collection of internal revenue ta$es, fees, or charges, and an% increment thereto resulting from delin;uenc% shall 'e 1a2 '% distraint of goods, chattels, or effects, and other personal propert% of whatever character, including stoc-s and other securities, de'ts, credits, 'an- accounts, and interest in and rights to personal propert%, and '% lev% upon real propert% and interest in or rights to real propert%; and 1'2 '% :udicial action. .ither of these remedies or 'oth simultaneousl% ma% 'e pursued in the discretion of the authorities charged with the collection of such ta$es. 3o e$emption shall 'e allowed against the internal revenue ta$es in an% case. 1.mphasis supplied.2 In other words, the 3ational Internal ?evenue Code ma'es a distinction between taxes, on the one hand, and fees or charges, on the other; 'ut as used in Title I> of said -ode, the term =ta$= includes =an% national internal revenue ta$, fee or charge imposed '%= the Code. /nd it is in this sense onl% that we sustained the view ta-en in the aforementioned concurring dissenting opinion in Collector of Internal "evenue vs2 5acson 1supra2. @ence, in $xhibit !-I-, !-I-& !-44-" !-//-" #ate Ma% 9, "9#9 Ma% 9, "9#9 Ma% , , "9#9 Ma% ,", "9#9 Volume #.9(( Cu. m. ,."*" Cu. m. *., Cu. m.

the .arretto case, it was held that the 7overnment does not sell forest products, 'ut merel% collects charges on the privilege granted '% it =for the exploitation of forest concessions, i.e., charges for the right to exercise the privilege granted '% the 7overnment to the licensee of cutting tim'er from a pu'lic forest or forest reserve=. In line with this view, we stressed in -ordero vs2 /onda! 8-,,&(9 1Acto'er "*, "9((2, the declaration made in -ebu Portland -ement -o2 vs2 -ommissioner of Internal "evenue, 8-"!(#9 1Fe'ruar% ,), "9(*2, that a mining ad valorem ta$ =is a ta$ not on the minerals, 'ut upon the privilege of severing or e$tracting the same from the earth,= although strictl% a fee for something received is not a ta$. /s a conse;uence, the original sale, as contemplated in 5ection "!( of the Internal ?evenue Code, is made by the concessionaire or whoever cuts or removes forest products from pu'lic forests or forest reserves K in the case at 'ar, 7uerrero, who is accordingl%, 'ound to pa% said sum of P","9,.*". <hile this case was 'eing heard in the Court of Ta$ /ppeals, certain documents were discovered, tending to show that 7uerrero had evaded the pa%ment of forest charges on certain logs 1other than those heretofore mentioned2, which had 'een shipped and sold '% him to the compan%. 5aid documents, which were found in the possession of the latter, covered logs shipped and sold thereto as follows+ Invoice ",,),,(& ",,),,(& (*)! #" Page "*( 14I? ?ec.2 "** )) !" = = = = = =

#.(& Cu. m. /-(*)! #!

The aforementioned documents consist of au$iliar% invoices K purporting to have 'een issued '% Concessionaire 5egundo /gustin to 7uerrero as consignee of the logs therein mentioned K which are not included in /gustin0s certificate 1.$hi'it , p. &, 4I? record2 of the invoices covering logs sold '% him to 7uerrero, thus showing that the said invoices 1.$hi'its !-I-,, !-I-&, !-44-" and !-//-"2 are spurious; that the logs therein descri'ed must have 'een o'tained '% 7uerrero from illegal sources; and that the forest charges and the sale and percentage ta$es thereon have not 'een paid. /lthough these charges and ta$es are not included in the original and revised assessments made in this case, petitioner herein maintains that 7uerrero ma% nevertheless 'e held lia'le therefor, inasmuch as+ <here plaintiffs themselves show facts upon which the% should not recover, whether defendant pleaded such fact as a defense or not, their claim should 'e dismissed. $vidence introduced without ob+ection becomes property of the case and all the parties are amenable to any favorable or unfavorable effects resulting from the

evidence. 1.mphasis ours; 4eam vs. Eatco, !, Phil. & .2 Petitioner0s contention is untena'le. The foregoing doctrine deals with plaintiff0s right to recover, when his own evidence proves the contrar%. In short, it refers to a point in issue. In the case at 'ar, the additional logs under consideration were not included in the contested assessments. 5ince the :urisdiction of the Court of Ta$ /ppeals is purel% appellate, said Court correctl% declined to ma-e an award thereon, for lac- of :urisdiction over the same. <ith reference to the last two 1,2 items of P", . and P* . , the Court of Ta$ /ppeals did not sentence 7uerrero to pa% the same upon the ground that he had not entered into a compromise agreement with the 7overnment. The record shows, however, that 7uerrero had e$pressed his willingness to pa% =an% compromise penalt% which ma% 'e imposed '% the @onora'le Court.= In short we find that the Court of Ta$ /ppeals has erred in not sentencing /ntonio 7. 7uerrero to pa%, 'esides the sum of P&,))*.(( awarded in the decision appealed from, the aforementioned additional sums of P","9,.*", P", . and P* . . Thus modified, with the addition of these sums in the award in favor of the 7overnment and against

20

/ntonio 7. 7uerrero, the decision appealed from is here'% affirmed, therefore, in all other respect, with costs against the latter. It is so ordered. G.R. No. L+19727 A.8.*t 17, 1967 '#ILI''INE A%ET"LENE %O., IN%., petitioner, vs. %OMMISSIONER OF INTERNAL RE0EN$E /1 %O$RT OF TA5 A''EALS, respondents. %ASTRO, J.: The petitioner is a corporation engaged in the manufacture and sale of o$%gen and acet%lene gases. 6uring the period from Gune ,, "9*& to Gune & , "9*!, it made various sales of its products to the 3ational Power Corporation, an agenc% of the Philippine 7overnment, and to the Foice of /merica an agenc% of the >nited 5tates 7overnment. The sales to the 3PC amounted to P"#*,!((.) , while those to the FA/ amounted to P",(!&, on account of which the respondent Commission of Internal ?evenue assessed against, and demanded from, the petitioner the pa%ment of P",,9" .( as deficienc% sales ta$ and surcharge, pursuant to the following-provisions of the 3ational Internal ?evenue Code+ 5ec. "!(. Percentage tax on sales of other articles.KThere shall 'e levied, assessed and collected once onl% on ever% original sale, 'arter, e$change, and similar transaction either for nominal or valua'le considerations, intended to transfer ownership of, or title to, the articles not enumerated in sections one hundred and eight%four and one hundred and eight%-five a ta$ e;uivalent to seven per centum of the gross selling price or gross value in mone% of the articles so sold, 'artered e$changed, or transferred, such ta$ to 'e paid '% the manufacturer or producer+ . . . . 5ec. "!&. Payment of percentage taxes.K 1a2 In general.KIt shall 'e the dut% of ever% person conducting 'usiness on which a percentage ta$ is imposed under this Title, to ma-e a true and complete return of the amount of his, her, or its gross monthl% sales, receipts or earnings, or gross value of output actuall% removed from the factor% or mill warehouse and within twent% da%s after the end of each month, pa% the ta$ due thereon+ Provided, That an% person retiring from a 'usiness su':ect to the percentage ta$ shall notif% the nearest internal revenue officer thereof, file his return or declaration and pa% the ta$ due thereon within twent% da%s after closing his 'usiness. If the percentage ta$ on an% 'usiness is not paid within the time specified a'ove, the amount of the ta$ shall 'e increased '% twent%-five per centum, the increment to 'e a part of the ta$. The petitioner denied lia'ilit% for the pa%ment of the ta$ on the ground that 'oth the 3PC and the FA/ are e$empt from ta$ation. It as-ed for a reconsideration of the

assessment and, failing to secure one, appealed to the Court of Ta$ /ppeals. The court ruled that the ta$ on the sale of articles or goods in section "!( of the Code is a ta$ on the manufacturer and not on the 'u%er with the result that the =petitioner Philippine /cet%lene Compan%, the manufacturer or producer of o$%gen and acet%lene gases sold to the 3ational Power Corporation, cannot claim e$emption from the pa%ment of sales ta$ simpl% 'ecause its 'u%er K the 3ational Power Corporation K is e$empt from the pa%ment of all ta$es.= <ith respect to the sales made to the FA/, the court held that goods purchased '% the /merican 7overnment or its agencies from manufacturers or producers are e$empt from the pa%ment of the sales ta$ under the agreement 'etween the 7overnment of the Philippines and that of the >nited 5tates, provided the purchases are supported '% certificates of e$emption, and since purchases amounting to onl% P**!, out of a total of P",(!&, were not covered '% certificates of e$emption, onl% the sales in the sum of P**! were su':ect to the pa%ment of ta$. /ccordingl%, the assessment was revised and the petitioner0s lia'ilit% was reduced from P",,9" .( , as assessed '% the respondent commission, to P",,!",."(. " The petitioner appealed to this Court. Its position is that it is not lia'le for the pa%ment of ta$ on the sales it made to the 3PC and the FA/ 'ecause 'oth entities are e$empt from ta$ation. I The 3PC en:o%s ta$ e$emption '% virtue of an act, of Congress which provides as follows+ 5ec. ,. To facilitate the pa%ment of its inde'tedness, the 3ational Power Corporation shall 'e e$empt from all ta$es, e$cept real propert% ta$, and from all duties, fees, imposts, charges, and restrictions of the ?epu'lic of the Philippines, its provinces, cities and municipalities. It is contended that the immunit% thus given to the 3PC would 'e impaired '% the imposition of a ta$ on sales made to it 'ecause while the ta$ is paid '% the manufacturer or producer, the ta$ is ultimatel% shifted '% the latter to the former. The petitioner invo-es in support of its position a "9*# opinion of the 5ecretar% of Gustice which ruled that the 3PC is e$empt from the pa%ment of all ta$es =whether direct or indirect.= <e 'egin with an anal%sis of the nature of the percentage 1sales2 ta$ imposed '% section "!( of the Code. Is it a ta$ on the producer or on the purchaserJ 5tatutes of the t%pe under consideration, which impose a ta$ on sales, have 'een descri'ed as =actBsC with schiHophrenic s%mptoms,=& as the% apparentl% have two faces K one that of a vendor ta$, the other, a vendee ta$. Fortunatel% for us the provisions of the Code throw some light on the pro'lem. The Code states that the sales ta$ =shall 'e paid '% the manufacturer or producer,= # who must =ma-e a true and complete return of the amount of his, her or its gross monthl% sales, receipts or earnings or gross value of output actuall% removed from the factor% or mill warehouse and

21

within twent% da%s after the end of each month, pa% the ta$ due thereon.=* 4ut it is argued that a sales ta$ is ultimatel% passed on to the purchaser, and that, so far as the purchaser is an entit% li-e the 3PC which is e$empt from the pa%ment of =all ta$es, e$cept real propert% ta$,= the ta$ cannot 'e collected from sales. Man% %ears ago, Mr. Gustice Aliver <endell @olmes e$pressed dissatisfaction with the use of the phrase =pass the ta$ on.= <riting the opinion of the >.5. 5upreme Court in 5ash(s Products v2 )nited ,tates,( he said+ =The phrase 0passed the ta$ on0 is inaccurate, as o'viousl% the ta$ is laid and remains on the manufacturer and on him alone. The purchaser does not reall% pa% the ta$. @e pa%s or ma% pa% the seller more for the goods 'ecause of the seller0s o'ligation, 'ut that is all. . . . The price is the sum total paid for the goods. The amount added 'ecause of the ta$ is paid to get the goods and for nothing else. Therefore it is part of the price . . .=. It ma% indeed 'e that the incidence of the ta$ ultimatel% settles on the purchaser, 'ut it is not for that reason alone that one ma% validl% argue that it is a ta$ on the purchaser. The e$emption granted to the 3PC ma% 'e li-ened to the immunit% of the Federal 7overnment from state ta$ation and vice versa in the federal s%stem of government of the >nited 5tates. In the earl% case of Panhandle ;il -o2 v2 =ississippi) the doctrine of intergovernment mental ta$ immunit% was held as prohi'iting the imposition of a ta$ on sales of gasoline made to the Federal 7overnment. 5aid the 5upreme court of the >nited 5tates+ / charge at the prescri'ed. rate is made on account of ever% gallon ac;uired '% the >nited 5tates. It is immaterial that the seller and not the purchaser is re;uired to report and ma-e pa%ment to the state. 5ale and purchase constitute a transaction '% which the ta$ is measured and on which the 'urden rests. . . . The necessar% operation of these enactments when so construed is directl% to retard, impede and 'urden the e$ertion '% the >nited 5tates, of its constitutional powers to operate the fleet and hospital. . . . To use the num'er of gallons sold the >nited 5tates as a measure of the privilege ta$ is in su'stance and legal effect to ta$ the sale. . . . /nd that is to ta$ the >nited 5tates K to e$act tri'ute on its transactions and appl% the same to the support of the state.10wph11234t Gustice @olmes did not agree. In a powerful dissent :oined '% Gustices 4randeis and 5tone, he said+ If the plaintiff in error had paid the ta$ and added it to the price the government would have nothing to sa%. It could ta-e the gasoline or leave it 'ut it could not re;uire the seller to a'ate his charge even if it had 'een ar'itraril% increased in the hope of getting more from the government than could 'e got from the pu'lic at large. . . . It does not appear that the government would have

refused to pa% a price that included the ta$ if demanded, 'ut if the government had refused it would not have e$onerated the seller. . . . . . . I am not aware that the President, the Mem'ers of the Congress, the Gudiciar% or to come nearer to the case at hand, the Coast 7uard or the officials of the Feterans0 @ospital Bto which the sales were madeC, 'ecause the% are instrumentalities of government and cannot function na-ed and unfed, hitherto have 'een held entitled to have their 'ills for food and clothing cut down so far as their 'utchers and tailors have 'een ta$ed on their sales; and I had not supposed that the 'utchers and tailors could omit from their ta$ returns all receipts from the large class of customers to which I have referred. The ;uestion of interference with 7overnment, I repeat, is one of reasona'leness and degree and it seems to me that the interference in this case is too remote. 4ut time was not long in coming to confirm the soundness of @olmes0 position. 5oon it 'ecame o'vious that to test the constitutionalit% of a statute '% determining the part% on which the legal incidence of the ta$ fell was an unsatisfactor% wa% of doing things. The fall of the 'astion was signalled '% Chief Gustice @ughes0 statement in?ames v2 #ravo -onstructing -o.! that =These cases Breferring to Panhandle and Indian Motorc%cle Co. v. >nited 5tates, ,!& >.5. *) 1"9&"2C have 'een distinguished and must 'e deemed to 'e limited to their particular facts.= In "9#", Alabama v2 6ing @ .oo%er9 held that the constitutional immunit% of the >nited 5tates from state ta$ation was not infringed '% the imposition of a state sales ta$ with which the seller was chargea'le 'ut which he was re;uired to collect from the 'u%er, in respect of materials purchased '% a contractor with the >nited 5tates on a costplus 'asis for use in carr%ing out its contract, despite the fact that the economic 'urden of the ta$ was 'orne '% the >nited 5tates. The asserted right of the one to 'e free of ta$ation '% the other does not spell immunit% from pa%ing the added costs, attri'uta'le to the ta$ation of those who furnish supplies to the 7overnment and who have 'een granted no ta$ immunit%. 5o far as a different view has prevailed, see Panhandle Ail Co. v. Mississippi and 7raves v. Te$as Co., supra, we thin- it no longer tena'le. Further inroads into the doctrine of Panhandle were made in "9#& when the >.5. 5upreme Court held that immunit% from state regulation in the performance of governmental functions '% Federal officers and agencies did not e$tend to those who merel% contracted to furnish supplies or render services to the government even though as a result of an increase in the price of such supplies or services attri'uta'le to the state regulation, its ultimate effect ma% 'e to impose an additional economic 'urden on the 7overnment."

22

4ut if a complete turna'out from the rule announced in Panhandle was %et to 'e made, it was so made in "9*, in$sso ,tandard ;il v2 $vans"" which held that a contractor is not e$empt from the pa%ment of a state privilege ta$ on the 'usiness of storing gasoline simpl% 'ecause the Federal 7overnment with which it has a contract for the storage of gasoline is immune from state ta$ation. This ta$ was imposed 'ecause .sso stored gasoline. It is not . . . 'ased on the worth of the government propert%. Instead, the amount collected is graduated in accordance with the e$ercise of .sso0s privilege to engage in such operations; so it is not =on= the federal propert%. . . . Federal ownership of the fuel will not immuniHe such a private contractor from the ta$ on storage. It ma% generall%, as it did here, 'urden the >nited 5tates financiall%. 4ut since Games vs. 6ravo Contracting Co., & , >.5. "&#, "*", !, 8. ed. "**, "(), *! 5. Ct. , !, ""# /8? &"!, this has 'een no fatal flaw. . . . ", <e have determined the current status of the doctrine of intergovernmental ta$ immunit% in the >nited 5tates, '% showing the drift of the decisions following announcement of the original rule, to point up the that fact that even in those cases where e$emption from ta$ was sought on the ground of state immunit%, the attempt has not met with success. /s Thomas ?eed Powell noted in "9#* in reviewing the development of the doctrine+ 5ince the #ravo case settled that it does not matter that the economic 'urden of the gross receipts ta$ ma% 'e shifted to the 7overnment, it could hardl% matter that the shift comes a'out '% e$plicit agreement covering ta$es rather than '% 'eing a'sor'ed in a higher contract price '% 'idders for a contract. The situation differed from that in the Panhandle and similar cases in that the% involved 'ut two parties whereas here the transaction was tripartite. These cases are condemned in so far as the% rested on the economic ground of the ultimate incidence of the 'urden 'eing on the 7overnment, 'ut this condemnation still leaves open the ;uestion whether either the state or the >nited 5tates when acting in governmental matters ma% 'e made legall% lia'le to the other for a ta$ imposed on it as vendee. The carefull% chosen language of the Chief Gustice -eeps these cases from foreclosing the issue. . . . Eet at the time it would have 'een a rash man who would find in this a dictum that a sales ta$ clearl% on the 7overnment as purchaser is invalid or a dictum that Congress ma% immuniHe its contractors."&

If a claim of e$emption from sales ta$ 'ased on state immunit% cannot command assent, much less can a claim resting on statutor% grant. It ma% indeed 'e that the economic 'urden of the ta$ finall% falls on the purchaser; when it does the ta$ 'ecomes a part of the price which the purchaser must pa%. It does not matter that an additional amount is 'illed as ta$ to the purchaser. The method of listing the price and the ta$ separatel% and defining ta$a'le gross receipts as the amount received less the amount of the ta$ added, merel% avoids pa%ment '% the seller of a ta$ on the amount of the ta$. The effect is still the same, namel%, that the purchaser does not pa% the ta$. @e pa%s or ma% pa% the seller more for the goods 'ecause of the seller0s o'ligation, 'ut that is all and the amount added 'ecause of the ta$ is paid to get the goods and for nothing else."# 4ut the ta$ 'urden ma% not even 'e shifted to the purchaser at all. / decision to a'sor' the 'urden of the ta$ is largel% a matter of economics."* Then it can no longer 'e contended that a sales ta$ is a ta$ on the purchaser. <e therefore hold that the ta$ imposed '% section "!( of the 3ational Internal ?evenue Code is a ta$ on the manufacturer or producer and not a ta$ on the purchaser e$cept pro'a'l% in a ver% remote and inconse;uential sense. /ccordingl% its lev% on the sales made to ta$-e$empt entities li-e the 3PC is permissi'le. II This conclusion should dispose of the same issue with respect to sales made to the FA/, e$cept that a claim is here made that the e$emption of such sales from ta$ation rests on stronger grounds. .ven the Court of Ta$ /ppeals appears to share this view as is evident from the following portion of its decision+ <ith regard to petitioner0s sales to the Foice of /merica, it appears that the petitioner and the respondent are in agreement that the Foice of /merica is an agenc% of the >nited 5tates 7overnment and as such, all goods purchased locall% '% it directl% from manufacturers or producers are e$empt from the pa%ment of the sales ta$ under the provisions of the agreement 'etween the 7overnment of the Philippines and the 7overnment of the >nited 5tates, 15ee Commonwealth /ct 3o. )&&2 provided such purchases are supported '% seriall% num'ered Certificates of Ta$ .$emption issued '% the vendee-agenc%, as re;uired '% 7eneral Circular 3o. F-#", dated Acto'er "(, "9#). . . . The circular referred to reads+ 7oods purchased locall% '% >.5. civilian agencies directl% from manufacturers, producers or importers shall 'e e$empt from the sales ta$. It was issued purportedl% to implement the /greement 'etween the ?epu'lic of the Philippines and the >nited 5tates of /merica Concerning Militar% 4ases,"( 'ut we find nothing in the language of the /greement to warrant the general e$emption granted '% that circular.

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The pertinent provisions of the /greement read+ /?TIC8. F. K $xemption from -ustoms and ;ther #uties 3o import, e$cise, consumption or other ta$, dut% or impost shall 'e charged on material, e;uipment, supplies or goods, including food stores and clothing, for e$clusive use in the construction, maintenance, operation or defense of the 'ases, consigned to, or destined for, the >nited 5tates authorities and certified '% them to 'e for such purposes. /?TIC8. IFIII.K,ales and ,ervices &ithin the .ases ". It is mutuall% agreed that the >nited 5tates 5hall have the right to esta'lish on 'ases, free of all licenses; fees; sales, e$cise or other ta$es, or imposts; 7overnment agencies, including concessions, such as sales commissaries and post e$changes, messes and social clu's, for the e$clusive use of the >nited 5tates militar% forces and authoriHed civilian personnel and their families. The merchandise or services sold or dispensed '% such agencies shall 'e free of all ta$es, duties and inspection '% the Philippine authorities. . . . 5ales to 3PC 5ales to FA/ Total sales su':ect to ta$ )P sales ta$ due thereon /dd+ ,*P surcharge Total amount due and collecti'le P"#*,!((.) P ",(!&. P"#),*#9.) P " ,&,!.#! P ,,*!,.", P ",,9" .(

Thus onl% sales made =for e$clusive use in the construction, maintenance, operation or defense of the 'ases,= in a word, onl% sales to the ;uartermaster, are e$empt under article F from ta$ation. 5ales of goods to an% other part% even if it 'e an agenc% of the >nited 5tates, such as the FA/, or even to the ;uartermaster 'ut for a different purpose, are not free from the pa%ment of the ta$. An the other hand, article IFIII e$empts from the pa%ment of the ta$ sales made within the 'ase by 1not sales to2 commissaries and the li-e in recognition of the principle that a sales ta$ is a ta$ on the seller and not on the purchaser. It is a familiar learning in the /merican law of ta$ation that ta$ e$emption must 'e strictl% construed and that the e$emption will not 'e held to 'e conferred unless the terms under which it is granted clearl% and distinctl% show that such was the intention of the parties.") @ence, in so far as the circular of the 4ureau of Internal ?evenue would give the ta$ e$emptions in the /greement an e$pansive construction it is void. <e hold, therefore, that sales to the FA/ are su':ect to the pa%ment of percentage ta$es under section "!( of the Code. The petitioner is thus lia'le for P",,9" .( , computed as follows+

/ccordingl%, the decision a uo is modified '% ordering the petitioner to pa% to the respondent Commission the amount of P",,9" .( as sales ta$ and surcharge, with costs against the petitioner. G.R. No. 77291 M ! ,1, 1991 ERNESTO M. MA%EDA, petitioner, vs. #ON. %ATALINO MA%ARAIG, -R., 6/ 46* 3 p 36t! * E9e3.t6:e Se3ret r!, O;;63e o; t4e 're*61e/t< #ON. 0I%ENTE R. -A"ME, 6/ 46* 3 p 36t! * Se3ret r! o; t4e Dep rtme/t o; F6/ /3e< #ON. SAL0ADOR MISON, 6/ 46* 3 p 36t! * %omm6**6o/er, B.re . o; %.*tom*< #ON. -OSE $. ONG, 6/ 46* 3 p 36t! * %omm6**6o/er o; I/ter/ = Re:e/.e< NATIONAL 'O>ER %OR'ORATION< t4e FIS%AL IN%ENTI0ES RE0IE> BOARD< % =te9 ('46=*.) I/3.< '6=6p6/ * S4e== 'etro=e.m %orpor t6o/< '46=6pp6/e N t6o/ = O6= %orpor t6o/< /1 'etrop46= %orpor t6o/, respondents. GAN%A"%O, J.:p This petition see-s to nullif% certain decisions, orders, rulings, and resolutions of respondents .$ecutive 5ecretar%, 5ecretar% of Finance, Commissioner of Internal ?evenue, Commissioner of Customs and the Fiscal

Incentives ?eview 4oard FI?4 for e$empting the 3ational Power Corporation 13PC2 from indirect ta$ and duties. The relevant facts are not in dispute. An 3ovem'er &, "9!(, Commonwealth /ct 3o. ", created the 3PC as a pu'lic corporation to underta-e the development of h%draulic power and the production of power from other sources. 1 An Gune #, "9#9, ?epu'lic /ct 3o. &*! granted 3PC ta$ and dut% e$emption privileges underK 5ec. ,. To facilitate pa%ment of its inde'tedness, the 3ational Power Corporation shall 'e e$empt from all ta$es, duties, fees, imposts, charges and restrictions of the ?epu'lic of the Philippines, its provinces, cities and municipalities. An 5eptem'er " , "9)", ?epu'lic /ct 3o. (&9* revised the charter of the 3PC wherein Congress declared as a national polic% the total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and rural electrification which should 'e pursued coordinatel% and supported '% all instrumentalities and agencies of the government, including its financial institutions. 2 The corporate e$istence of 3PC was e$tended to carr% out this polic%, specificall% to

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underta-e the development of h%dro electric generation of power and the production of electricit% from nuclear, geothermal and other sources, as well as the transmission of electric power on a nationwide 'asis. , 4eing a non-profit corporation, 5ection "& of the law provided in detail the e$emption of the 3PC from all ta$es, duties, fees, imposts and other charges '% the government and its instrumentalities. An Ganuar% ,,, "9)#, Presidential 6ecree 3o. &! amended section "&, paragraphs 1a2 and 1d2 of ?epu'lic /ct 3o. (&9* '% specif%ing, among others, the e$emption of 3PC from such ta$es, duties, fees, imposts and other charges imposed =directl% or indirectl%,= on all petroleum products used '% 3PC in its operation. Presidential 6ecree 3o. 9&! dated Ma% ,), "9)( further amended the aforesaid provision '% integrating the ta$ e$emption in general terms under one paragraph. An Gune "", "9!#, Presidential 6ecree 3o. "9&" withdrew all ta$ e$emption privileges granted in favor of governmentowned or controlled corporations including their su'sidiaries. 4 @owever, said law empowered the President andLor the then Minister of Finance, upon recommendation of the FI?4 to restore, partiall% or totall%, the e$emption withdrawn, or otherwise revise the scope and coverage of an% applica'le ta$ and dut%. Pursuant to said law, on Fe'ruar% ), "9!*, the FI?4 issued ?esolution 3o. " -!* restoring the ta$ and dut% e$emption privileges of 3PC from Gune "", "9!# to Gune & , "9!*. An Ganuar% ), "9!(, the FI?4 issued resolution 3o. "-!( indefinitel% restoring the 3PC ta$ and dut% e$emption privileges effective Gul% ", "9!*. @owever, effective March " , "9!), .$ecutive Arder 3o. 9& once again withdrew all ta$ and dut% incentives granted to government and private entities which had 'een restored under Presidential 6ecree 3os. "9&" and "9** 'ut it gave the authorit% to FI?4 to restore, revise the scope and prescri'e the date of effectivit% of such ta$ andLor dut% e$emptions. An Gune ,#, "9!) the FI?4 issued ?esolution 3o. ")-!) restoring 3PC0s ta$ and dut% e$emption privileges effective March " , "9!). An Acto'er *, "9!), the President, through respondent .$ecutive 5ecretar% Macaraig, Gr., confirmed and approved FI?4 ?esolution 3o. ")-!). /s alleged in the petition, the following are the 'ac-ground facts+ The following are the facts relevant to 3PC0s ;uestioned claim for refunds of ta$es and duties originall% paid '% respondents Calte$, Petrophil and 5hell for specific and ad valorem ta$es to the 4I?; and for Customs duties and ad valorem ta$es paid '% P3AC, 5hell and Calte$ to the 4ureau of Customs on its crude oil importation. Man% of the factual statements are reproduced from the 5enate Committee on /ccounta'ilit% of Pu'lic Afficers and Investigations 14lue ?i''on2 ?eport 3o. #)# dated Ganuar% ",,

"9!9 and approved '% the 5enate on /pril ,", "9!9 1cop% attached hereto as /nne$ =/=2 and are identified in ;uotation mar-s+ ". 5ince Ma% ,), "9)( when P.6. 3o. 9&! was issued until Gune "", "9!# when P.6. 3o. "9&" was promulgated a'olishing the ta$ e$emptions of all government-owned or-controlled corporations, the oil firms never paid e$cise or specific and ad valorem ta$es for petroleum products sold and delivered to the 3PC. This nonpa%ment of ta$es therefore spanned a period of eight 1!2 %ears. 1par. ,&, p. ), /nne$ =/=2 6uring this period, the 4ureau of Internal ?evenue was not collecting specific ta$es on the purchases of 3PC of petroleum products from the oil companies on the erroneous 'elief that the 3ational Power Corporation 13PC2 was e$empt from indirect ta$es as reflected in the letter of 6eput% Commissioner of Internal ?evenue 16CI?2 ?omulo Filla to the 3PC dated Acto'er ,9, "9! granting 'lan-et authorit% to the 3PC to purchase petroleum products from the oil companies without pa%ment of specific ta$ 1cop% of this letter is attached hereto as petitioner0s /nne$ =4=2. ,. The oil companies started to pa% specific and ad valorem ta$es on their sales of oil products to 3PC onl% after the promulgation of P.6. 3o. "9&" on Gune "", "9!#, withdrawing all e$emptions granted in favor of government-owned or-controlled corporations and empowering the FI?4 to recommend to the President or to the Minister of Finance the restoration of the e$emptions which were withdrawn. =5pecificall%, Calte$ paid the total amount of P*!, , ,"" .)9 in specific and ad valorem ta$es for deliveries of petroleum products to 3PC covering the period from Acto'er &", "9!# to /pril ,), "9!*.= 1par. ,&, p. ), /nne$ =/=2 &. Calte$ 'illings to 3PC until Gune " , "9!# alwa%s included customs dut% without the ta$ portion. 4eginning Gune "", "9!#, when P.6. "9&" was promulgated a'olishing 3PC0s ta$ e$emptions, Calte$0s 'illings to 3PC alwa%s included 'oth duties and ta$es. 1Caturla, tsn, Act. " , "9!!, pp. "-*2 1par. ,#, p, ), /nne$ =/=2 #. For the sales of petroleum products delivered to 3PC during the period from Acto'er, "9!# to /pril, "9!*, 3PC was 'illed a total of P*,,, "(,)).&# 1sic2 including 'oth duties and ta$es, the specific ta$ component 'eing valued at P*!, , ,"" .)9. 1par. ,*, p. !, /nne$ =/=2. *. Fiscal Incentives ?eview 4oard 1FI?42 ?esolution " -!*, dated Fe'ruar% ), "9!*, certified true cop% of which is hereto attached as /nne$ =C=, restored the ta$ e$emption privileges of 3PC effective retroactivel% to Gune "", "9!# up to Gune

25

& , "9!*. The first paragraph of said resolution reads as follows+ ". .ffective Gune "", "9!#, the ta$ and dut% e$emption privileges en:o%ed '% the 3ational Power Corporation under C./. 3o. ", , as amended, are restored up to Gune & , "9!*. 4ecause of this restoration 1/nne$ =7=2 the 3PC applied on 5eptem'er "", "9!* with the 4I? for a =refund of 5pecific Ta$es paid on petroleum products . . . in the total amount of P*!, , ,"" .)9. 1par. ,(, pp. !-9, /nne$ =/=2 (. In a letter to the president of the 3PC dated Ma% !, "9!* 1cop% attached as petitioner0s /nne$ =6=2, /cting 4I? Commissioner ?u'en /ncheta declared+ FI?4 ?esolution 3o. " -!* serves as sufficient 'asis to allow 3PC to purchase petroleum products from the oil companies free of specific and ad valorem ta$es, during the period in ;uestion. The =period in ;uestion= is Gune " ", " 9!# to Gune & , " 9!*. ). An Gune (, "9!*KThe president of the 3PC, Mr. 7a'riel Itchon, wrote Mr. Cesar Firata, Chairman of the FI?4 1/nne$ =.=2, re;uesting =the FI?4 to resolve conflicting rulings on the ta$ e$emption privileges of the 3ational Power Corporation 13PC2.= These rulings involve FI?4 ?esolutions 3o. "-!# and " -!*. 1par. # , p. ",, /nne$ =/=2 !. In a letter to the President of 3PC 1/nne$ =F=2, dated Gune ,(, "9!*, Minister Cesar Firata confirmed the ruling of Ma% !, "9!* of /cting 4I? Commissioner ?u'en /ncheta, 1par. #", p. ",, /nne$ =/=2 9. An Acto'er ,,, "9!*, however, under 4I? ?uling 3o. "!(-!*, addressed to @anil 6evelopment Co., 8td., a Norean contractor of 3PC for its infrastructure pro:ects, certified true cop% of which is attached hereto as petitioner0s /nne$ =.=, 4I? /cting Commissioner ?u'en /ncheta ruled+ In ?epl% please 'e informed that after a re-stud% of 5ection "&, ?./. (&9*, as amended '% P.6. 9&!, this Affice is of the opinion, and so holds, that the scope of the tax exemption privilege en+oyed by AP- under said section covers only taxes for which it is directly liable and not on taxes which are only shifted to it. 1Phil. /cet%lene vs. C.I.?. et al., 7.?. 8-"9) ), /ug. "), "9()2 5ince contractor0s ta$ is directl% pa%a'le '% the contractor, not '% 3PC, %our re;uest for e$emption, 'ased on the stipulation in the aforesaid contract that 3PC shall assume pa%ment of %our contractor0s ta$ lia'ilit%, cannot 'e granted for lac- of legal 'asis.= 1/nne$ =@=2 1emphasis added2

5aid 4I? ruling clearl% states that 3PC0s e$emption privileges covers 1sic2 onl% ta$es for which it is directl% lia'le and does not cover ta$es which are onl% shifted to it or for indirect ta$es. The 4I?, through /ncheta, reversed its previous position of Ma% !, "9!* adopted '% /ncheta himself favoring 3PC0s indirect ta$ e$emption privilege. " . Furthermore, =in a 4I? ?uling, unnum'ered, =dated Gune & , "9!(, =addressed to Calte$ 1/nne$ =F=2, the 4I? Commissioner declared that P/80s ta$ e$emption is limited to ta$es for which P/8 is directl% lia'le, and that the pa%ment of specific and ad valorem ta$es on petroleum products is a direct lia'ilit% of the manufacturer or producer thereof=. 1par. *", p. "*, /nne$ =/=2 "". An Ganuar% ), "9!(, FI?4 ?esolution 3o. "-!( was issued restoring 3PC0s ta$ e$emptions retroactivel% from Gul% ", "9!* to a indefinite period, certified true cop% of which is hereto attached as petitioner0s /nne$ =@=. ",. 3PC0s total refund claim was P#(!.*! million 'ut onl% a portion thereof i.e. the P*!, , ,"" .)9 1corresponding to Calte$2 was approved and released '% wa% of a Ta$ Credit Memo 1/nne$ =O=2 dated Gul% ), "9!(, certified true cop% of which Bis2 attached hereto as petitioner0s /nne$ =F,= which was assigned '% 3PC to Calte$. 4I? Commissioner Tan approved the 6eed of /ssignment on Gul% & , "9!), certified true cop% of which is hereto attached as petitioner0s /nne$ =7=2. 1pars. ,(, *,, *&, pp. 9 and "*, /nne$ =/=2 The 6eed of /ssignment stipulated among others that 3PC is assigning the ta$ credit to Calte$ in partial settlement of its outstanding o'ligations to the latter while Calte$, in turn, would appl% the assigned ta$ credit against its specific ta$ pa%ments for two 1,2 months. 1per memorandum dated Gul% ,!, "9!( of 6CI? Filla, cop% attached as petitioner /nne$ =7=2 "&. /s a result of the favora'le action ta-en '% the 4I? in the refund of the P*!. million ta$ credit assigned to Calte$, the 3PC reiterated its re;uest for the release of the 'alance of its pending refunds of ta$es paid '% respondents Petrophil, 5hell and Calte$ covering the period from Gune "", "9!# to earl% part of "9!( amounting to P#" .*! million. 1The claim of the first two 1,2 oil companies covers the period from Gune "", "9!# to earl% part of "9!(; while that of Calte$ starts from Gul% ", "9!* to earl% "9!(2. This re;uest was denied on /ugust "!, "9!(, under 4I? ?uling "*,-!( 1certified true cop% of which is attached hereto as petitioner0s /nne$ =I=2. The 4I? ruled that 3PC0s ta$ free privilege to 'u% petroleum

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products covered onl% the period from Gune "", "9!# up to Gune & , "9!*. It further declared that, despite FI?4 3o. "-!(, 3PC had alread% lost its ta$ and dut% e$emptions 'ecause it onl% en:o%s special privilege for ta$es for which it is directly lia'le. This ruling, in effect, denied the P#" Million ta$ refund application of 3PC 1par. ,!, p. 9, /nne$ =/=2 "#. 3PC filed a motion for reconsideration on 5eptem'er "!, "9!(. >ntil now the 4I? has not resolved the motion. 14enigna, II &, Act. "), "9!!, p. ,; Memorandum for the Complainant, Act. ,(, "9!!, p. "*2.= 1par. ,9, p. 9, /nne$ =/=2 "*. An 6ecem'er ,,, "9!(, in a ,nd Indorsement to the @on. Fulgencio 5. Factoran, Gr., 4I? Commissioner Tan, Gr. 1certified true cop% of which is hereto attached and made a part hereof as petitioner0s /nne$ =G=2, reversed his previous position and states this time that all deliveries of petroleum products to 3PC are ta$ e$empt, regardless of the period of deliver%. "(. An 6ecem'er "), "9!(, President CoraHon C. /;uino enacted .$ecutive Arder 3o. 9&, entitled =<ithdrawing /ll Ta$ and 6ut% Incentives, 5u':ect to Certain .$ceptions, .$panding the Powers of the Fiscal Incentives ?eview 4oard and Ather Purposes.= "). An Gune ,#, "9!), the FI?4 issued ?esolution 3o. ")-!), which restored 3PC0s ta$ e$emption privilege and included in the e$emption =those pertaining to its domestic purchases of petroleum and petroleum products, and the restorations were made to retroact effective March " , "9!), a certified true cop% of which is hereto attached and made a part hereof as /nne$ =N=. "!. An /ugust (, "9!), the @on. 5edfre% /. ArdoQeH, 5ecretar% of Gustice, issued Apinion 3o. )), series of "9!), opining that =the power conferred upon Fiscal Incentives ?eview 4oard '% 5ection ,a 1'2, 1c2 and 1d2 of .$ecutive order 3o. 9& constitute undue delegation of legislative power and, therefore, BareC unconstitutional,= a cop% of which is hereto attached and made a part hereof as Petitioner0s /nne$ =8.= "9. An Acto'er *, "9!), respondent .$ecutive 5ecretar% Macaraig, Gr. in a Memorandum to the Chairman of the FI?4 a certified true cop% of which is hereto attached and made a part hereof as petitioner0s /nne$ =M,= confirmed and approved FI?4 ?es. 3o. ")-!) dated Gune ,#, "9!), allegedl% pursuant to 5ections " 1f2 and , 1e2 of .$ecutive Arder 3o. 9&. , . 5ecretar% Ficente Ga%me in a repl% dated Ma% , , "9!! to 5ecretar% Catalino Macaraig, who '% letter dated Ma% ,, "9!! as-ed him to rule =on whether or not, as the law now stands, the 3ational Power Corporation is still

e$empt from ta$es, duties . . . on its local purchases of . . . petroleum products . . .= declared that =3PC under the provisions of its ?evised Charter retains its e$emption from duties and ta$es imposed on the petroleum products purchased locall% and used for the generation of electricit%,= a certified true cop% of which is attached hereto as petitioner0s /nne$ =3.= 1par. & , pp. 9-" , /nne$ =/=2 ,". ?espondent .$ecutive 5ecretar% came up li-ewise with a confirmator% letter dated Gune " *, "9!! 'ut without the usual official form of =4% the /uthorit% of the President,= a certified true cop% of which is hereto attached and made a part hereof as Petitioner0s /nne$ =A=. ,,. The actions of respondents Finance 5ecretar% and the .$ecutive 5ecretar% are 'ased on the ?.5A8>TIA3 3o. ")-!) of FI?4 restoring the ta$ and dut% e$emption of the respondent 3PC pertaining to its domestic purchases of petroleum products 1petitioner0s /nne$ N supra2. ,&. 5u'se;uentl%, the newspapers particularl%, the #aily /lobe! in its issue of Gul% "", "9!! reported that the Affice of the President and the 6epartment of Finance had ordered the 4I? to refund the ta$ pa%ments of the 3PC amounting to Pl.*! 4illion which includes the P#" Million Ta$ refund alread% re:ected '% 4I? Commissioner Tan, Gr., in his 4I? ?uling 3o. "*,-!(. /nd in a letter dated Gul% ,!, "9!! of >ndersecretar% Marcelo 4. Fernando to 4I? Commissioner Tan, Gr. the Pl.*! 4illion ta$ refund was ordered released to 3PC 1par. &", p. " , /nne$ =/=2 ,#. An /ugust !, "9!!, petitioner =wrote 'oth >ndersecretar% Fernando and Commissioner Tan re;uesting them to hold in a'e%ance the release of the Pl.*! 'illion and await the outcome of the investigation in regard to 5enate ?esolution 3o. ,,),= copies attached as Petitioner0s /nne$es =P= and =P-" = 1par. &,, p. " , /nne$ =/=2. ?eacting to this letter of the petitioner, >ndersecretar% Fernando wrote Commissioner Tan of the 4I? dated /ugust, "9!! re;uesting him to hold in a'e%ance the release of the ta$ refunds to 3PC until after the termination of the 4lue ?i''on investigation. ,*. In the 4ureau of Customs, oil companies import crude oil and 'efore removal thereof from customs custod%, the corresponding customs duties and ad valorem ta$es are paid. 4un-er fuel oil is one of the petroleum products processed from the crude oil; and same is sold to 3PC. /fter the sale, 3PC applies for ta$ credit covering the duties and ad valorem exemption under its Charter. 5uch applications are processed '% the 4ureau of Customs and the corresponding ta$ credit certificates are issued in

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favor of 3PC which, in turn assigns it to the oil firm that imported the crude oil. These certificates are eventuall% used '% the assignee-oil firms in pa%ment of their other dut% and ta$ lia'ilities with the 4ureau of Customs. 1par. ) , p. "9, /nne$ =/=2 / lesser amount totalling P)# million, covering the period from "9!* to the present, is 'eing sought '% respondent 3PC for refund from the 4ureau of Customs for duties paid '% the oil companies on the importation of crude oil from which the processed products sold locall% '% them to 3PC was derived. @owever, 'ased on figures su'mitted to the 4lue ?i''on Committee of the Philippine 5enate which conducted an investigation on this matter as mandated '% 5enate ?esolution 3o. ,,) of which the herein petitioner was the sponsor, a much 'igger figure was actuall% refunded to 3PC representing duties and ad valorem ta$es paid to the 4ureau of Customs '% the oil companies on the importation of crude oil from "9)9 to "9!*. ,(. Meantime, petitioner, as mem'er of the Philippine 5enate introduced P.5. ?es. 3o. ,,), entitled+ ?esolution 6irecting the 5enate 4lue ?i''on Committee, In /id of 8egislation, To conduct a Formal and .$tensive In;uir% into the ?eported Massive Ta$ Manipulations and .vasions '% Ail Companies, particularl% Calte$ 1Phils.2 Inc., Pilipinas 5hell and Petrophil, <hich <ere Made Possi'le 4% Their /vailing of the 3on-.$isting .$emption of 3ational Power Corporation 13PC2 from Indirect Ta$es, ?esulting ?ecentl% in Their A'taining / Ta$ ?efund Totalling P".** 4illion From the 6epartment of Finance, Their ?efusal to Pa% 5ince "9)( Customs 6uties /mounting to 4illions of Pesos on Imported Crude Ail Purportedl% for the >se of the 3ational Power Corporation, the 3on-Pa%ment of 5urta$ on <indfall Profits from Increases in the Price of Ail Products in /ugust "9!) amounting Ma%'e to as Much as Pl., 4illion 5urta$ Paid '% Them in "9!# and For Ather Purposes. ,). /cting on the a'ove ?esolution, the 4lue ?i''on Committee of the 5enate did conduct a length% formal in;uir% on the matter, calling all parties interested to the witness stand including representatives from the different oil companies, and in due time su'mitted its Committee ?eport 3o. #)# . . . K The 4lue ?i''on Committee recommended the following courses of action. ". Cancel its approval of the ta$ refund of P*!, , ,"" .) to the 3ational Power Corporation 13PC2 and its approval of Ta$ Credit memo covering said amount 1/nne$ =P= hereto2, dated Gul% ), "9!(, and cancel its approval of the 6eed of /ssignment 1/nne$ =O= hereto2 '% 3PC to

Calte$, dated Gul% ,!, "9!(, and collect from Calte$ its ta$ lia'ilities which were erroneousl% treated as paid or settled with the use of the ta$ credit certificate that 3PC assigned to said firm.+ ".". 3PC did not have an% indirect ta$ e$emption since Ma% ,), "9)( when P6 9&! was issued. Therefore, the grant of a ta$ refund to 3PC in the amount of P*! million was illegal, and therefore, null and void. 5uch refund was a nullit% right from the 'eginning. @ence, it never transferred an% right in favor of 3PC. ,. 5top the processing andLor release of Pl.*! 'illion ta$ refund to 3PC andLor oil companies on the same ground that the 3PC, since Ma% ,), "9)( up to Gune "), "9!) was never granted an% indirect ta$ e$emption. 5o, the P".*! 'illion represent ta$es legall% and properl% paid '% the oil firms. &. 5tart collection actions of specific or e$cise and ad valorem ta$es due on petroleum products sold to 3PC from Ma% ,), "9)( 1promulgation of P6 9&!2 to Gune "), "9!) 1issuance of .A "9*2. 4. For the 4ureau of Customs 14AC2 to do the following+ ". 5tart recover% actions on the illegal dut% refunds or dut% credit certificates for purchases of petroleum products '% 3PC and allegedl% granted under the 3PC charter covering the %ears "9)!"9!! . . . ,!. An March & , "9!9, acting on the re;uest of respondent Finance 5ecretar% for clearance to direct the 4ureau of Internal ?evenue and of Customs to proceed with the processing of claims for ta$ creditsLrefunds of the 3PC, respondent .$ecutive 5ecretar% rendered his ruling, the dispositive portion of which reads+ I3 FI.< AF T@. FA?.7AI37, the clearance is here'% 7?/3T.6 and, accordingl%, unless restrained '% proper authorities, that department andLor its line-ta$ 'ureaus ma% now proceed with the processing of the claims of the 3ational Power Corporation for dut% and ta$ free e$emption andLor ta$ creditsL refunds, if there 'e an%, in accordance with the ruling of that 6epartment dated Ma% , ,"9!!, as confirmed '% this Affice on Gune "*, "9!! . . . 5 @ence, this petition for certiorari, prohi'ition and mandamus with pra%er for a writ of preliminar% in:unction andLor restraining order, pra%ing among others that+ ". >pon filing of this petition, a temporar% restraining order forthwith 'e issued against respondent FI?4 .$ecutive 5ecretar% Macaraig, and 5ecretar% of Finance Ga%me restraining them and other persons acting for, under, and in their

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'ehalf from enforcing their resolution, orders and ruling, to wit+ /. FI?4 ?esolution 3o. ")-!) dated Gune ,#, "9!) 1petitioner0s /nne$ =N=2; 4. Memorandum-Arder of the Affice of the President dated Acto'er *, "9!) 1petitioner0s /nne$ =M=2; C. Arder of the .$ecutive 5ecretar% dated Gune "*, "9!! 1petitioner0s /nne$ =A=2; 6. Arder of the .$ecutive 5ecretar% dated March & , l9!9 1petitioner0s /nne$ =O=2; and .. ?uling of the Finance 5ecretar% dated Ma% , , "9!! 1petitioner0s /nne$ =3=2. ,. 5aid temporar% restraining order should also include respondent Commissioners of Customs Mison and Internal ?evenue Ang restraining them from processing and releasing an% pending claim or application '% respondent 3PC for ta$ and dut% refunds. &. Thereafter, and during the pendenc% of this petition, to issue a writ or preliminar% in:unction against a'ove-named respondents and all persons acting for and in their 'ehalf. #. / decision 'e rendered in favor of the petitioner and against the respondents+ /. 6eclaring that respondent 3PC did not en:o% indirect ta$ e$emption privilege since Ma% ,), "9)( up to the present; 4. 3ullif%ing the setting aside the following+ ". FI?4 ?esolution 3o. ")-!) dated Gune ,#, "9!) 1petitioner0s /nne$ =N=2; ,. Memorandum-Arder of the Affice of the President dated Acto'er *, "9!) 1petitioner0s /nne$ =M=2; &. Arder of the .$ecutive 5ecretar% dated Gune "*, "9!! 1petitioner0s /nne$ =A=2; #. Arder of the .$ecutive 5ecretar% dated March & , "9!9 1petitioner0s /nne$ =O=2; *. ?uling of the Finance 5ecretar% dated Ma% , , "9!! 1petitioner0s /nne$ =3= (. Ta$ Credit memo dated Gul% ), "9!( issued to respondent 3PC representing ta$ refund for P*!, , ,"" .)9 1petitioner0s /nne$ =F=2; ). 6eed of /ssignment of said ta$ credit memo to respondent Calte$ dated Gul% & , "9!) 1petitioner0s /nne$ =7=2; !. /pplication of the assigned ta$ credit of Calte$ in pa%ment of its ta$ lia'ilities with the 4ureau of Internal ?evenue and 9. Illegal dut% and ta$ refunds issued '% the 4ureau of Customs to respondent 3PC '% wa% of ta$ credit certificates from "9)9 up to the present. C. 6eclaring as illegal and null and void the pending claims for ta$ and dut% refunds '%

respondent 3PC with the 4ureau of Customs and the 4ureau of Internal ?evenue; 6. Prohi'iting respondents Commissioner of Customs and Commissioner of Internal ?evenue from enforcing the a'ove;uestioned resolution, orders and ruling of respondents .$ecutive 5ecretar%, 5ecretar% of Finance, and FI?4 '% processing and releasing respondent 3PC0s ta$ and dut% refunds; .. Ardering the respondent Commissioner of Customs to den% as 'eing null and void the pending claims for refund of respondent 3PC with the 4ureau of Customs covering the period from "9!* to the present; to cancel and invalidate the illegal pa%ment made '% respondents Calte$, 5hell and P3AC '% using the ta$ credit certificates assigned to them '% 3PC and to recover from respondents Calte$, 5hell and P3AC all the amounts appearing in said ta$ credit certificates which were used to settle their dut% and ta$ lia'ilities with the 4ureau of Customs. F. Ardering respondent Commissioner of Internal ?evenue to den% as 'eing null and void the pending claims for refund of respondent 3PC with the 4ureau of Internal ?evenue covering the period from Gune "", "9!# to Gune "), "9!). P.TITIA3.? pra%s for such other relief and remed% as ma% 'e :ust and e;uita'le in the premises. 6 The issues raised in the petition are the following+ To determine whether respondent 3PC is legall% entitled to the ;uestioned ta$ and dut% refunds, this @onora'le Court must resolve the following issues+ =ain issueB <hether or not the respondent 3PC has ceased to en:o% indirect ta$ and dut% e$emption with the enactment of P.6. 3o. 9&! on Ma% ,), "9)( which amended P.6. 3o. &! , issued on Ganuar% "", "9)#. -orollary issuesB ". <hether or not FI?4 ?esolution 3o. " !* dated Fe'ruar% ), "9!* which restored 3PC0s ta$ e$emption privilege effective Gune "", "9!# to Gune & , "9!* and FI?4 ?esolution 3o. "-!( dated Ganuar% ), "9!( restoring 3PC0s ta$ e$emption privilege effective Gul% ", "9!* included the restoration of indirect ta$ e$emption to 3PC and ,. <hether or not FI?4 could validl% and legall% issue ?esolution 3o. ")-!) dated Gune ,#, "9!) which restored 3PC0s ta$ e$emption privilege effective March " , "9!); and if said ?esolution was validl% issued, the nature and e$tent of the ta$ e$emption privilege restored to 3PC. 7 In a resolution dated Gune (, "9!9, the Court, without giving due course to the petition, re;uired respondents to

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comment thereon, within ten 1" 2 da%s from notice. The respondents having su'mitted their comment, on Acto'er " , "9!9 the Court re;uired petitioner to file a consolidated repl% to the same. /fter said repl% was filed '% petitioner on 3ovem'er "*, "9!9 the Court gave due course to the petition, considering the comments of respondents as their answer to the petition, and re;uiring the parties to file simultaneousl% their respective memoranda within twent% 1, 2 da%s from notice. The parties having su'mitted their respective memoranda, the petition was deemed su'mitted for resolution. First the preliminar% issues. Pu'lic respondents allege that petitioner does not have the standing to challenge the ;uestioned orders and resolution. In the petition it is alleged that petitioner is =instituting this suit in his capacit% as a ta$pa%er and a dul%-elected 5enator of the Philippines.= Pu'lic respondent argues that petitioner must show he has sustained direct in:ur% as a result of the action and that it is not sufficient for him to have a mere general interest common to all mem'ers of the pu'lic. 7 The Court however agrees with the petitioner that as a ta$pa%er he ma% file the instant petition following the ruling in 5o%ada when it involves illegal e$penditure of pu'lic mone%. The petition ;uestions the legalit% of the ta$ refund to 3PC '% wa% of ta$ credit certificates and the use of said assigned ta$ credits '% respondent oil companies to pa% for their ta$ and dut% lia'ilities to the 4I? and 4ureau of Customs. /ssuming petitioner has the personalit% to file the petition, pu'lic respondents also allege that the proper remed% for petitioner is an appeal to the Court of Ta$ /ppeals under 5ection ) of ?./. 3o. ",* instead of this petition. @owever 5ection "" of said law providesK 5ec. "". <ho ma% appeal; effect of appeal K/n% person, association or corporation adversel% affected '% a decision or ruling of the Commissioner of Internal ?evenue, the Collector of Customs 1Commissioner of Customs2 or an% provincial or Cit% 4oard of /ssessment /ppeals ma% file an appeal in the Court of Ta$ /ppeals within thirt% da%s after receipt of such decision or ruling. From the foregoing, it is onl% the ta$pa%er adversel% affected '% a decision or ruling of the Commissioner of Internal ?evenue, the Commissioner of Customs or an% provincial or cit% 4oard of /ssessment /ppeal who ma% appeal to the Court of Ta$ /ppeals. Petitioner does not fall under this categor%. Pu'lic respondents also contend that mandamus does not lie to compel the Commissioner of Internal ?evenue to impose a ta$ assessment not found '% him to 'e proper. It would 'e tantamount to a usurpation of e$ecutive functions. 9 .ven in =eralco, this Court recogniHes the situation when mandamus can control the discretion of the Commissioners of Internal ?evenue and Customs when the

e$ercise of discretion is tainted with ar'itrariness and grave a'use as to go 'e%ond statutor% authorit%. 12 Pu'lic respondents then assert that a writ of prohi'ition is not proper as its function is to prevent an unlawful e$ercise of :urisdiction 11 or to prevent the oppressive e$ercise of legal authorit%. 12 Precisel%, petitioner ;uestions the lawfulness of the acts of pu'lic respondents in this case. 3ow to the main issue. It ma% 'e useful to ma-e a distinction, for the purpose of this disposition, 'etween a direct ta$ and an indirect ta$. / direct ta$ is a ta$ for which a ta$pa%er is directl% lia'le on the transaction or 'usiness it engages in. .$amples are the custom duties and ad valorem ta$es paid '% the oil companies to the 4ureau of Customs for their importation of crude oil, and the specific and ad valorem ta$es the% pa% to the 4ureau of Internal ?evenue after converting the crude oil into petroleum products. An the other hand, =indirect ta$es are ta$es primaril% paid '% persons who can shift the 'urden upon someone else .= 1, For e$ample, the e$cise and ad valorem ta$es that oil companies pa% to the 4ureau of Internal ?evenue upon removal of petroleum products from its refiner% can 'e shifted to its 'u%er, li-e the 3PC, '% adding them to the =cash= andLor =selling price.= The main thrust of the petition is that under the latest amendment to the 3PC charter '% Presidential 6ecree 3o. 9&!, the e$emption of 3PC from indirect ta$ation was revo-ed and repealed. <hile petitioner concedes that 3PC en:o%ed 'road e$emption privileges from 'oth direct and indirect ta$es on the petroleum products it used, under 5ection "& of ?epu'lic /ct 3o, (&9* and more so under Presidential 6ecree 3o. &! , however, '% the deletion of the phrases =directl% or indirectl%= and =on all petroleum products used '% the Corporation in the generation, transmission, utiliHation and sale of electric power= he contends that the e$emption from indirect ta$es was withdrawn '% P.6. 3o. 9&!. Petitioner further states that the e$emption of 3PC provided in 5ection "& of Presidential 6ecree 3o. 9&! regarding the pa%ments of =all forms of ta$es, etc.= cannot 'e interpreted to include indirect ta$ e$emption. @e citesPhilippine Aceytelene -o. Inc. vs. -ommissioner of Internal "evenue. 14 Petitioner emphasiHes the principle in ta$ation that the e$ception contained in the ta$ statutes must 'e strictl% construed against the one claiming the e$emption, and that the rule that a tax statute granting e$emption must 'e strictl% construed against the one claiming the e$emption is similar to the rule that a statute granting ta$ing power is to 'e construed strictl%, with dou'ts resolved against its e$istence. 15 Petitioner cites rulings of the 4I? that the phrase e$emption from =all ta$es, etc.= from =all forms of ta$es= and =in lieu of all ta$es= covers onl% ta$es for which the ta$pa%er is directl% lia'le. 16 An the corollar% issues. First, FI?4 ?esolution 3os. " -!* and " -!( issued under Presidential 6ecree 3o. "9&", the relevant provision of which are to wit+ P.6. 3o. "9&" provides as follows+

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5ec. ". The provisions of special or general law to the contrar% notwithstanding, all exemptions from the payment of duties! taxes . . . heretofore granted in favor of government-owned or controlled corporations are here'% withdrawn. 1.mphasis supplied.2 5ec. ,. The President of the Philippines andLor the =inister of <inance, upon therecommendation of the <iscal Incentives "eview .oard . . . is here'% empowered to restore, partiall% or totall%, the e$emptions withdrawn '% 5ection " a'ove . . . 1.mphasis supplied.2 The relevant provisions of FI?4 resolution 3os. " -!* and "-!( are the following+ "esolution. Ao. 10CD7 4. IT ?.5A8F.6 /5 IT I5 @.?.4E ?.5A8F.6, That+ ". .ffective Gune "", "9!#, the ta$ and dut% e$emption privileges en:o%ed '% the 3ational Power Corporation under C./. 3o. ", as amended are restored up to Gune & , "9!*. ,. Provided, That to restoration does not appl% to the following+ a. importations of fuel oil 1crude e;uivalent2 and coal as per FI?4 ?esolution 3o. "!#; '. commerciall%-funded importations; and c. interest income derived from an% investment source. &. Provided further, That in case of importations funded '% international financing agreements, the 3PC is here'% re;uired to furnish the FI?4 on a periodic 'asis the particulars of items received or to 'e received through such arrangements, for purposes of ta$ and dut% e$emptions privileges. 17 "esolution Ao. 1CDE 4. IT ?.5A8F.6 /5 IT I5 @.?.4E ?.5A8F.6+ That+ ". .ffective Gul% ", "9!*, the ta$ and dut% e$emption privileges en:o%ed '% the 3ational Power Corporation 13PC2 under Commonwealth /ct 3o. ", , as amended, are restored+ Provided, That importations of fuel oil 1crude oil e;uivalent2, and coal of the herein grantee shall 'e su':ect to the 'asic and additional import duties; Provided! further, that the following shall remain full% ta$a'le+ a. Commerciall%-funded importations; and '. Interest income derived '% said grantee from 'an- deposits and %ield or an% other monetar% 'enefits from deposit su'stitutes, trust funds and other similar arrangements. ,. The 3PC as a government corporation is e$empt from the real propert% ta$ on land and improvements owned '% it provided that the 'eneficial use of the propert% is not transferred to

another pursuant to the provisions of 5ec. " 1a2 of the ?eal Propert% Ta$ Code, as amended. 17 Petitioner does not ;uestion the validit% and enforcea'ilit% of FI?4 ?esolution 3os. " -!* and "-!(. Indeed, the% were issued in compliance with the re;uirement of 5ection ,, P.6. 3o. "9&", where'% the FI?4 should ma-e the recommendation su':ect to the approval of =the President of the Philippines andLor the Minister of Finance.= <hile said ?esolutions do not appear to have 'een approved '% the President, the% were nevertheless approved '% the Minister of Finance who is also dul% authoriHed to approve the same. In fact it was the Minister of Finance who signed and promulgated said resolutions. 19 The o'servation of Mr. Gustice 5armiento in the dissenting opinion that FI?4 ?esolution 3os. " -!* and "-!( which were promulgated '% then /cting Minister of Finance /lfredo de ?oda, Gr. and Minister of Finance Cesar ../ Firata, as Chairman of FI?4 respectivel%, should 'e separatel% approved '% said Minister of Finance as re;uired '% P.6. "9&" is, a superfluit%. /n e$amination of the said resolutions which are reproduced in full in the dissenting opinion show that the said officials signed said resolutions in the dual capacit% of Chairman of FI?4 and Minister of Finance. Mr. Gustice 5armiento also ma-es reference to the case Aational Power -orporation vs. Province of Albay, 22wherein the Court o'served that under P.6. 3o. ))( the power of the FI?4 was onl% recommendator% and re;uires the approval of the President to 'e valid. Thus, in said case the Court held that FI?4 ?esolutions 3os. " -!* and "-!( not having 'een approved '% the President were not valid and effective while the validit% of FI?4 ")-!) was upheld as it was dul% approved '% the Affice of the President on Acto'er *, "9!). @owever, under 5ection , of P.6. 3o. "9&" of Gune "", "9!#, hereina'ove reproduced, which amended P.6. 3o. ))(, it is clearl% provided for that such FI?4 resolution, ma% 'e approved '% the =President of the Philippines andLor the Minister of Finance.= To repeat, as FI?4 ?esolutions 3os. " -!* and "-!( were dul% approved '% the Minister of Finance, hence the% are valid and effective. To this e$tent, this decision modifies or supersedes the Court0s earlier decision in Albay afore-referred to. Petitioner, however, argues that under 'oth FI?4 resolutions, onl% the ta$ and dut% e$emption privileges en:o%ed '% the 3PC under its charter, C./. 3o. ", , as amended, are restored, that is, onl% its direct ta$ e$emption privilege; and that it cannot 'e interpreted to cover indirect ta$es under the principle that ta$ e$emptions are construed stricissimi +uris against the ta$pa%er and li'erall% in favor of the ta$ing authorit%. Petitioner argues that the release '% the 4I? of the P*!. million refund to respondent 3PC '% wa% of a ta$ credit certificate 21 which was assigned to respondent Calte$ through a deed of assignment approved '% the 4I? 22 is patentl% illegal. @e also contends that the pending claim of respondent 3PC in the amount of P#" .*! million with

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respondent 4I? for the sale and deliver% to it of 'un-er fuel '% respondents Petrophil, 5hell and Calte$ from Gul% ", "9!* up to "9!(, 'eing illegal, should not 'e released. 3ow to the second corollar% issue involving the validit% of FI?4 ?esolution 3o. ")-!) issued on Gune ,#, "9!). It was issued under authorit% of .$ecutive Arder 3o. 9& dated 6ecem'er "), "9!( which grants to the FI?4 among others, the power to recommend the restoration of the ta$ and dut% e$emptionsLincentives withdrawn thereunder. Petitioner stresses that on /ugust (, "9!) the 5ecretar% of Gustice rendered Apinion 3o. )) to the effect that the powers conferred upon the FI?4 '% 5ection ,1a2, 1'2, and 1c2 and 1#2 of .$ecutive Arder 3o. 9& =constitute undue delegation of legislative power and is, therefore, unconstitutional.= Petitioner o'serves that the FI?4 did not merel% recommend 'ut categoricall% restored the ta$ and dut% e$emption of the 3PC so that the memorandum of the respondent .$ecutive 5ecretar% dated Acto'er *, "9!) approving the same is a surplusage. Further assuming that FI?4 ?esolution 3o. ")-!) to have 'een legall% issued, following the doctrine in Philippine Aceytelene, petitioner avers that the restoration cannot cover indirect ta$es and it cannot create new indirect ta$ e$emption not otherwise granted in the 3PC charter as amended '% Presidential 6ecree 3o. 9&!. The petition is devoid of merit. The 3PC is a non-profit pu'lic corporation created for the general good and welfare 2, wholl% owned '% the government of the ?epu'lic of the Philippines. 24 From the ver% 'eginning of its corporate e$istence, the 3PC en:o%ed preferential ta$ treatment 25 to ena'le the Corporation to pa% the inde'tedness and o'ligation and in furtherance and effective implementation of the polic% enunciated in 5ection one of =?epu'lic /ct 3o. (&9*= 26which provides+ 5ec. ". #eclaration of PolicyKCongress here'% declares that 1"2 the comprehensive development, utiliHation and conservation of Philippine water resources for all 'eneficial uses, including power generation, and 1,2 the total electrification of the Philippines through the development of power from all sources to meet the need of rural electrification are primar% o':ectives of the nation which shall 'e pursued coordinatel% and supported '% all instrumentalities and agencies of the government including its financial institutions. From the changes made in the 3PC charter, the intention to strengthen its preferential ta$ treatment is o'vious. >nder ?epu'lic /ct 3o. &*!, its e$emption is provided as follows+ 5ec. ,. To facilitate pa%ment of its inde'tedness, the 3ational Power Corporation shall 'e e$empt from all taxes! duties, fees, imposts, charges, and restrictions of the "epublic of the Philippines, its provinces, cities and municipalities.= >nder ?epu'lic /ct 3o. (&9*+

5ec. "&. AonCprofit -haracter of the -orporation; $xemption from all Taxes, #uties, <ees, Imposts and other -harges by /overnment and /overnmental Instrumentalities.K The Corporation shall 'e nonprofit and shall devote all its returns from its capital investment, as well as e$cess revenues from its operation, for e$pansion. To ena'le the Corporation to pa% its inde'tedness and o'ligations and in furtherance and effective implementation of the polic% enunciated in 5ection one of this /ct, the Corporation is here'% declared e$empt+ 1a2 From the pa%ment of all ta$es, duties, fees, imposts, charges, costs and service fees in an% court or administrative proceedings in which it ma% 'e a part%, restrictions and duties to the ?epu'lic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities; 1'2 From all income ta$es, franchise ta$es and realt% ta$es to 'e paid to the 3ational 7overnment, its provinces, cities, municipalities and other government agencies and instrumentalities; 1c2 From all import duties, compensating ta$es and advanced sales ta$, and wharfage fees on import of foreign goods re;uired for its operations and pro:ects; and 1d2 <rom all taxes, duties, fees, imposts, and all other charges imposed by the "epublic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities,on all petroleum products used by the -orporation in the generation, transmission, utili%ation, and sale of electric power. 1.mphasis supplied.2 >nder Presidential 6ecree 3o. &! + 5ec. "&. AonCprofit -haracter of the -orporation+ $xemption from all Taxes, #uties, <ees, Imposts and other -harges by the /overnment and /overnment Instrumentalities.K The Corporation shall 'e nonprofit and shall devote all its returns from its capital investment as well as e$cess revenues from its operation, for e$pansion. To ena'le the Corporation to pa% its inde'tedness and o'ligations and in furtherance and effective implementation of the polic% enunciated in 5ection one of this /ct, the Corporation, including its su'sidiaries, is here'% declared, e$empt+ 1a2 From the pa%ment of all ta$es, duties, fees, imposts, charges, costs and services fees in an% court or administrative proceedings in which it ma% 'e a part%, restrictions and duties to the ?epu'lic of the Philippines, its provinces, cities,

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municipalities and other government agencies and instrumentalities; 1'2 From all income ta$es, franchise ta$es and realt% ta$es to 'e paid to the 3ational 7overnment, its provinces, cities, municipalities and other governmental agencies and instrumentalities; 1c2 From all import duties, compensating ta$es and advanced sales ta$, and wharfage fees on import of foreign goods re;uired for its operation and pro:ects; and 1d2 <rom all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the "epublic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum produced used by the -orporation in the generation, transmission,utili%ation, and sale of electric power. 1.mphasis supplied.2 >nder Presidential 6ecree 3o. 9&!+ 5ec. "&. AonCprofit -haracter of the -orporation+ $xemption from All Taxes, #uties, <ees, Imposts and ;ther -harges by the /overnment and /overnment Instrumentalities.KThe Corporation shall 'e nonprofit and shall devote all its returns from its capital investment as well as e$cess revenues from its operation, for e$pansion. To ena'le the Corporation to pa% the inde'tedness and o'ligations and in furtherance and effective implementation of the polic% enunciated in 5ection Ane of this /ct, the Corporation, including its su'sidiaries here'% declared e$empt from the pa%ment of 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. 1.mphasis supplied.2 It is noted that in the earlier law, ?./. 3o. &*! the e$emption was worded in general terms, as to cover =all ta$es, duties, fees, imposts, charges, etc. . . .= @owever, the amendment under ?epu'lic /ct 3o. (&9* enumerated the details covered '% the e$emption. 5u'se;uentl%, P.6. 3o. &! , made even more specific the details of the e$emption of 3PC to cover, among others, both direct and indirect taxes on all petroleum products used in its operation. Presidential 6ecree 3o. 9&! amended the ta$ e$emption '% simplif%ing the same law in general terms. It succinctl% e$empts 3PC from =all forms of taxes, duties, fees, imposts, as well as costs and service fees including filing fees, appeal 'onds, supersedeas 'onds, in an% court or administrative proceedings.= The use of the phrase =all forms= of ta$es demonstrate the intention of the law to give 3PC all the ta$ e$emptions it has 'een en:o%ing 'efore. The rationale for this e$emption is that 'eing non-profit the 3PC =shall devote all its returns

from its capital investment as well as e$cess revenues from its operation, for e$pansion. To ena'le the Corporation to pa% the inde'tedness and o'ligations and in furtherance and effective implementation of the polic% enunciated in 5ection one of this /ct, . . .= 27 The pream'le of P.6. 3o. 9&! statesK <@.?./5, in the application of the ta$ e$emption provision of the ?evised Charter, the non-profit character of the 3PC has not 'een full% utiliHed because of restrictive interpretations of the taxing agencies of the government on said provisions. . . . 1.mphasis supplied.2 It is evident from the foregoing that the lawma-er did not intend that the said provisions of P.6. 3o. 9&! shall 'e construed strictl% against 3PC. An the contrar%, the law mandates that it should 'e interpreted li'erall% so as to enhance the ta$ e$empt status of 3PC. @ence, petitioner cannot invo-e the rule on strictissimi +uris with respect to the interpretation of statutes granting ta$ e$emptions to 3PC. Moreover, it is a recogniHed principle that the rule on strict interpretation does not appl% in the case of e$emptions in favor of a government political su'division or instrumentalit%. 27 The 'asis for appl%ing the rule of strict construction to statutor% provisions granting ta$ e$emptions or deductions, even more o'vious than with reference to the affirmative or lev%ing provisions of ta$ statutes, is to minimiHe differential treatment and foster impartialit%, fairness, and e;ualit% of treatment among ta$ pa%ers. The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting e$emptions to government agencies ma% 'e construed li'erall%, in favor of non ta$ lia'ilit% of such agencies.29 In the case of propert% owned '% the state or a cit% or other pu'lic corporations, the e$press e$emption should not 'e construed with the same degree of strictness that applies to e$emptions contrar% to the polic% of the state, since as to such propert% =e$emption is the rule and ta$ation the e$ception.= ,2 The contention of petitioner that the e$emption of 3PC from indirect ta$es under 5ection "& of ?./. 3o. (&9* and P.6. 3o. &! , is deemed repealed '% P.6. 3o. 9&! when the reference to it was deleted is not well-ta-en. ?epeal '% implication is not favored unless it is manifest that the legislature so intended. /s laws are presumed to 'e passed with deli'eration and with -nowledge of all e$isting ones on the su':ect, it is logical to conclude that in passing a statute it is not intended to interfere with or a'rogate a former law relating to the same su':ect matter,

33

unless the repugnanc% 'etween the two is not onl% irreconcila'le 'ut also clear and convincing as a result of the language used, or unless the latter /ct full% em'races the su':ect matter of the earlier. ,1 The first effort of a court must alwa%s 'e to reconcile or ad:ust the provisions of one statute with those of another so as to give sensi'le effect to 'oth provisions. ,2 The legislative intent must 'e ascertained from a consideration of the statute as a whole, and not of an isolated part or a particular provision alone. ,, <hen construing a statute, the reason for its enactment should 'e -ept in mind and the statute should 'e construed with reference to its intended scope and purpose ,4 and the evil sought to 'e remedied. ,5 The 3PC is a government instrumentalit% with the enormous tas- of underta-ing development of h%droelectric generation of power and production of electricit% from other sources, as well as the transmission of electric power on a nationwide 'asis, to improve the ;ualit% of life of the people pursuant to the 5tate polic% em'odied in 5ection ., /rticle II of the "9!) Constitution. It is evident from the provision of P.6. 3o. 9&! that its purpose is to maintain the ta$ e$emption of 3PC from all forms of ta$es including indirect ta$es as provided for under ?./. 3o. (!9* and P.6. 3o. &! if it is to attain its goals. Further, the construction of P.6. 3o. 9&! '% the Affice charged with its implementation should 'e given controlling weight. ,6 5ince the Ma% !, "9!* ruling of Commissioner /ncheta, to the letter of the 5ecretar% of Finance of Gune ,(, "9!* confirming said ruling, the letters of the 4I? of /ugust "!, "9!(, and 6ecem'er ,,, "9!(, the letter of the 5ecretar% of Finance of Fe'ruar% "9, "9!), the Memorandum of the .$ecutive 5ecretar% of Acto'er 9, "9!), '% authorit% of the President, confirming and approving FI?4 ?esolution 3o. ")-!), the letter of the 5ecretar% of Finance of Ma% , , "9!! to the .$ecutive 5ecretar% rendering his opinion as re;uested '% the latter, and the latter0s repl% of Gune "*, "9!!, it was uniforml% held that the grant of ta$ e$emption to 3PC under C./. 3o. ", , as amended, included exemption from payment of all taxes relative to AP-(s petroleum purchases including indirect taxes. ,7 Thus, then 5ecretar% of Finance Ficente Ga%me in his letter of Ma% , , "9!! to the .$ecutive 5ecretar% Macaraig aptl% stated the :ustification for this ta$ e$emption of 3PC K The issue turns on the effect to the exemption of AP- from taxes of the deletion of the phrase (taxes imposed indirectly on oil products and its exemption from (all forms of taxes.( It is suggested that the change in language evidenced an intention to e$empt 3PC onl% from ta$es directl% imposed on or pa%a'le '% it; since ta$es on fuel-oil purchased '% it; since ta$es on fuel-oil purchased '% 3PC locall% are levied on and paid '% its oil suppliers, 3PC there'% lost its e$emption from those ta$es. The principal authorit% relied on is the "9() case of Philippine Acetylene

-o., Inc. vs. -ommissioner of Internal "evenue, , 5C?/ " *(. First of all, tracing the changes made through the years in the "evised -harter, the strengthening of AP-(s preferential tax treatment was clearly the intention. To the e$tent that the e$planator% =whereas clauses= ma% disclose the intent of the law-ma-er, the changes effected by P.#. F3D can only be read as being expansive rather than restrictive, including its version of ,ection 13. Aur Ta$ Code does not recogniHe that there are ta$es directl% imposed and those imposed indirectl%. The te$t'oo- distinction 'etween a direct and an indirect ta$ ma% 'e 'ased on the possi'ilit% of shifting the incidence of the ta$. / direct ta$ is one which is demanded from the ver% person intended to 'e the pa%or, although it ma% ultimatel% 'e shifted to another. /n e$ample of a direct ta$ is the personal income ta$. An the other hand, indirect ta$es are those which are demanded from one person in the e$pectation and intention that he shall indemnif% himself at the e$pense of another. /n e$ample of this t%pe of ta$ is the sales ta$ levied on sales of a commodit%. The distinction 'etween a direct ta$ and one indirectl% imposed 1or an indirect ta$2 is reall% of no moment. <hat is more relevant is that when an =indirect ta$= is paid '% those upon whom the ta$ ultimatel% falls, it is paid not as a tax 'ut as an additional part of the cost or of the mar-et price of the commodit%. This distinction was made clear '% Chief Gustice Castro in the Philippine /cet%lene case, when he anal%Hed the nature of the percentage 1sales2 ta$ to determine whether it is a ta$ on the producer or on the purchaser of the commodit%. >nder out Ta$ Code, the sales ta$ falls upon the manufacturer or producer. The phrase =pass on= the ta$ was criticiHed as 'eing inaccurate. Gustice Castro sa%s that the ta$ remains on the manufacturer alone. The purchaser does not pa% the ta$; he pa%s an amount added to the price 'ecause of the ta$. Therefore, the ta$ is not =passed on= and does not for that reason 'ecome an =indirect ta$= on the purchaser. It is eminently possible that the law ma'er in enacting P .#. F3D in 1FGE may have used lessons from the analysis of -hief ?ustice -astro in 1FEG Philippine Acetylene case. &hen P.#. F3D which exempted APfrom Hall forms of taxesH was issued in =ay 1FGE, the soCcalled oil crunch had already drastically pushed up crude oil Prices from about I1.00 per bbl in 1FG1 to about I10 and a pea' Jas it turned outK of about I3L per bbl in 1FD1. In 1FGLC GD, AP- was operating the =eralco thermal plants

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under a lease agreement. The power generated by the leased plants was sold to =eralco for distribution to its customers. This lease and sale arrangement was entered into for the benefit of the consuming public, by reducing the burden on the swiftly rising world crude oil prices.This ob+ective was achieved by the use of AP-(s Htax umbrella under its "evised -harterBthe exemption from specific taxes on locally purchased fuel oil. In this context, I can not interpret P.#. F3D to have withdrawn the exemption from tax on fuel oil to which AP- was already entitled and which exemption /overnment in fact was utili%ing to soften the burden of high crude prices. There is one other consideration which I consider pivotal. The taxes paid by oil companies on oil products sold to AP-, whether paid to them by AP- or no never entered into the rates charged by AP- to its customers not even during those periods of uncertainty engendered by the issuance of P.#. 1F31 and $. 0. F3 on AP:-s tax status. Ao tax component on the fuel have been charged or recovered by AP- through its rates. There is an import dut% on the crude oil imported '% the local refineries. /fter the refining process, specific and ad valorem ta$es are levied on the finished products including fuel oil or residue upon their withdrawal from the refiner%. These ta$es are paid '% the oil companies as the manufacturer thereof. In selling the fuel oil to AP-, the oil companies include in their billings the duty and tax component.AP- pays the oil companies( invoices including the duty component but net of the tax component.AP- then applies for drawbac' of customs duties paid and for a credit in amount e uivalent to the tax paid Jby the oil companiesK on the products purchased. The tax credit is assigned to the oil companiesKas payment, in effect, of the tax component shown in the sales invoices. 13AT.+ These procedures varied over timeKThere were instances when 3PC paid the ta$ component that was shifted to it and then applied for ta$ credit. There were also side issues raised 'ecause of P.6. "9&" and ..A. 9& which withdrew all e$emptions of government corporations. In these latter instances, the resolutions of the Fiscal Incentives ?eview 4oard 1FI?42 come into pla%. These incidents will not 'e touched upon for purposes of this discussion2. 3PC rates of electricit% are structured such that changes in its cost of fuel are automaticall% 1without need of fresh approvals2 reflected in the su'se;uent months 'illing rates. This Fuel Cost /d:ustment clause protects 3PC0s rate of return. If AP- should ever accept liability to the tax and duty component on the oil

products, such amount will go into its fuel cost and be passed on to its customers through corresponding increases in rates. ,ince 1FGL, when AP- operated the oilCfired generating stations leased from =eralco Jwhich plants it bought in 1FGFK, until the present time, no tax on fuel oil ever went into AP-(s electric rates. That the exemption of AP- from the tax on fuel was not withdrawn by P.#. F3D is impressed upon me by yet another circumstance. It is conceded that AP- at the very least, is exempt from taxes to which it is directly liable. AP- therefore could very well have imported its fuel oil or crude residue for burning at its thermal plants. There would have been no uestion in such a case as to its exemption from all duties and taxes, even under the strictest interpretation that can be put forward. Mowever, at the time P.#. F3D was issued in 1FGE, there were already operating in the Philippines three oil refineries. The establishment of these refineries in the Philippines involved heavy investments, were economically desirable and enabled the country to import crude oil and process : refine the same into the various petroleum products at a savings to the industry and the public. The refining process produced as its largest output, in volume, fuel oil or residue, whose conventional economic use was for burning in electric or steam generating plants. Mad there been no use locally for the residue, the oil refineries would have become largely unviable. /gain, in this circumstances, I cannot accept that P.6. 9&! would have in effect forced 3PC to '%-pass the local oil refineries and import its fossil fuel re;uirements directl% in order to avail itself of its e$emption from =direct ta$es.= The oil refineries had to 'eep operating both for economic development and national security reasons. In fact, the restoration by the <I". of AP-(s exemption after P.#. 1F31 and $.;. F3 expressly excluded direct fuel oil importations, so as not to pre+udice the continued operations of the local oil refineries. To answer %our ;uer% therefore, it is the opinion of this #epartment that AP- under the provisions of its "evised -harter retains its exemption from duties and taxes imposed on the petroleum products purchased locally and used for the generation of electricity. The 6epartment in issuing this ruling does so pursuant to its power and function to supervise and control the collection of government revenues '% the application and implementation of revenue laws. It is prepared to ta-e the measures supplemental to this ruling necessar% to carr% the same into full effect.

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As presented rather extensively above, the AP- 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 conse uence, as of our most recent information, some P1.77 . in claims represent amounts for which the oil suppliers and AP- are HoutCofCpoc'et. There would have to be specific order to the .ureaus concerned for the resumption of the processing of these claims.= ,7 In the latter of Gune "*, "9!! of then .$ecutive 5ecretar% Macaraig to the then 5ecretar% of Finance, the said opinion ruling of the latter was confirmed and its implementation was directed. ,9 The Court finds and so holds that the foregoing reasons adduced in the aforestated letter of the 5ecretar% of Finance as confirmed '% the then .$ecutive 5ecretar% are well-ta-en. <hen the 3PC was e$empted from all forms of taxes, duties, fees, imposts and other charges, under P.6. 3o. 9&!, it means e$actl% what it sa%s, i.e., all forms of taxes including those that were imposed directl% or indirectl% on petroleum products used in its operation. ?eference is made in the dissenting opinion to contrar% rulings of the 4I? that the e$emption of the 3PC e$tends onl% to ta$es for which it is directl% lia'le and not to ta$es merel% shifted to it. @owever, these rulings are predicated on Philippine Acytelene. The doctrine in Philippine Acytelene decided in "9() '% this Court cannot appl% to the present case. It involved the sales ta$ of products the plaintiff sold to 3PC from Gune ,, "9*& to Gune & ,"9*! when 3PC was en:o%ing ta$ e$emption from all ta$es under Commonwealth /ct 3o. ", , as amended '% ?epu'lic /ct 3o. &*! issued on Gune #, "9#9 hereina'ove reproduced. In said case, this Court held, that the sales ta$ is due from the manufacturer and not the 'u%er, so plaintiff cannot claim e$emptions simpl% 'ecause the 3PC, the 'u%er, was e$empt. @owever, on 5eptem'er " , "9)", ?epu'lic /ct 3o. (&9* was passed as the revised charter of 3PC where'% 5ection "& thereof was amended '% emphasiHing its non-profit character and e$panding the e$tent of its ta$ e$emption. /s petitioner concedes, 5ection "&1d2 aforestated of this amendment under ?epu'lic /ct 3o. (&#* spells out clearl% the e$emption of the 3PC from indirect ta$es. /nd as hereina'ove stated, in P.6. 3o. &! , the e$emption of 3PC from indirect ta$es was emphasiHed when it was specified to include those imposed =directl% and indirectl%.= Thereafter, under P.6. 3o. 9&! the ta$ e$emption of 3PC was integrated under 5ection "& defining the same in general terms to cover =all forms of ta$es, duties, fees, imposts, etc.= which, as hereina'ove discussed, logicall% includes e$emption from indirect ta$es on petroleum products used in its operation.

This is the status of the ta$ e$emptions the 3PC was en:o%ing when P.6. 3o. "9&" was passed, on the authorit% of which FI?4 ?esolution 3os. " -!* and "-!( were issued, and when .$ecutive Arder 3o. 9& was promulgated, '% which FI?4 ?esolution ")-!) was issued. Thus, the ruling in Philippine Acetylene cannot appl% to this case due to the different environmental circumstances. /s a matter of fact, the amendments of 5ection "&, under ?./. 3o. (&9*, P.6. 3o, &! and P.6. 3o. !&! appear to have 'een 'rought a'out '% the earlier inconsistent rulings of the ta$ agencies due to the doctrine in Philippine Acetylene, so as to leave no dou't as to the e$emption of the 3PC from indirect ta$es on petroleum products it uses in its operation. .ffectivel%, said amendments superseded if not a'rogated the ruling inPhilippine Acetylene that the ta$ e$emption of 3PC should 'e limited to direct ta$es onl%. In the light of the foregoing discussion the first corollar% issue must conse;uentl% 'e resolved in the affirmative, that is, FI?4 ?esolution 3o. " -!* dated Fe'ruar% ), "9!* and FI?4 ?esolution 3o. "-!( dated Ganuar% ), "9!( which restored 3PC0s ta$ e$emption privileges included the restoration of the indirect ta$ e$emption of the 3PC on petroleum products it used. An the second corollar% issue as to the validit% of FI?4 resolution 3o. ")-!) dated Gune ,#, "9!) which restored 3PC0s ta$ e$emption privilege effective March " , "9!), the Court finds that the same is valid and effective. It provides as follows+ 4. IT ?.5A8F.6, /5 IT I5 @.?.4E ?.5A8F.6, That the ta$ and dut% e$emption privileges of the 3ational Power Corporation, including those pertaining to its domestic purchases of petroleum and petroleum products, granted under the terms and conditions of Commonwealth /ct 3o. ", 1Creating the 3ational Power Corporation, defining its powers, o':ectives and functions, and for other purposes2, as amended, are restored effective March " , "9!), su':ect to the following conditions+ ". The restoration of the ta$ and dut% e$emption privileges does not appl% to the following+ ".". Importation of fuel oil 1crude e;uivalent2 and coal; ".,. Commerciall%-funded importations 1i.e., importations which include 'ut are not limited to those financed '% the 3PC0s own internal funds, domestic 'orrowings from an% source whatsoever, 'orrowing from foreign-'ased private financial institutions, etc.2; and ".&. Interest income derived from an% source. ,. The 3PC shall su'mit to the FI?4 a report of its e$pansion program, including details of disposition of relieved ta$ and dut% pa%ments for such e$pansion on an annual 'asis or as often as the FI?4 ma% re;uire it to do so. This report shall

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'e in addition to the usual FI?4 reporting re;uirements on incentive availment. 42 .$ecutive Arder 3o. 9& provides as followsK 5ec. ". The provisions of an% general or special law to the contrar% notwithstanding, all ta$ and dut% incentives granted = to government and private entities are here'% withdrawn, e$cept+ a2 those covered '% the non-impairment clause of the Constitution; '2 those conferred '% effective international agreements to which the 7overnment of the ?epu'lic of the Philippines is a signator%; c2 those en:o%ed-'% enterprises registered with+ 1i2 the 4oard of Investments pursuant to Presidential 6ecree 3o. ")!9, as amended; 1ii2 the .$port Processing Mone /uthorit%, pursuant to Presidential 6ecree 3o. ((, as amended; 1iii2 the Philippine Feterans Investment 6evelopment Corporation Industrial /uthorit% pursuant to Presidential 6ecree 3o. *&!, as amended; d2 those en:o%ed '% the copper mining industr% pursuant to the provisions of 8etter of Instruction 3o. "#"(; e2 those conferred under the four 'asic codes namel%+ 1i2 the Tariff and Customs Code, as amended; 1ii2 the 3ational Internal ?evenue Code, as amended; 1iii2 the 8ocal Ta$ Code, as amended; 1iv2 the ?eal Propert% Ta$ Code, as amended; f2 those approved by the President upon the recommendation of the <iscal Incentives "eview .oard. 5ec. ,. The Fiscal Incentives ?eview 4oard created under Presidential 6ecree 3o. ))(, as amended, is here'% authoriHed to+ a2 restore ta$ andLor dut% e$emptions withdrawn hereunder in whole or in part; '2 revise the scope and coverage of ta$ andLof dut% e$emption that ma% 'e restored. c2 impose conditions for the restoration of ta$ andLor dut% e$emption; d2 prescri'e the date or period of effectivit% of the restoration of ta$ andLor dut% e$emption; e2 formulate and su'mit to the President for approval, a complete s%stem for the grant of su'sidies to deserving 'eneficiaries, in lieu of or in com'ination with the restoration of ta$ and dut% e$emptions or preferential treatment in ta$ation, indicating the source of funding therefor, eligi'le 'eneficiaries and the terms and conditions for the

grant thereof ta-ing into consideration the international commitments of the Philippines and the necessar% precautions such that the grant of su'sidies does not 'ecome the 'asis for countervailing action. 5ec. &. In the discharge of its authorit% hereunder, the Fiscal Incentives ?eview 4oard shall ta-e into account an% or all of the following considerations+ a2 the effect on relative price levels; '2 relative contribution of the beneficiary to the revenue generation effort; c2 nature of the activity the beneficiary is engaged ; d2 in general, the greater national interest to be served. True it is that the then 5ecretar% of Gustice in Apinion 3o. )) dated /ugust (, "9)) was of the view that the powers conferred upon the FI?4 '% 5ections ,1a2, 1'2, 1c2, and 1d2 of .$ecutive Arder 3o. 9& constitute undue delegation of legislative power and is therefore unconstitutional. @owever, he was overruled '% the respondent .$ecutive 5ecretar% in a letter to the 5ecretar% of Finance dated March & , "9!9. The .$ecutive 5ecretar%, '% authorit% of the President, has the power to modif%, alter or reverse the construction of a statute given '% a department secretar%. 41 / reading of 5ection & of said law shows that it set the polic% to 'e the greater national interest. The standards of the delegated power are also clearl% provided for. The re;uired =standard= need not 'e e$pressed. In $du vs. $ricta 42 and in #e la 5lana vs. Alba 4, this Court held+ =The standard ma% 'e either e$press or implied. If the former, the non-delegated o':ection is easil% met. The standard though does not have to 'e spelled out specificall%. It could 'e implied from the polic% and purpose of the act considered as a whole.= In People vs. "osenthal 44 the 'road standard of =pu'lic interest= was deemed sufficient. In -alalang vs. &illiams,45, it was =pu'lic welfare= and in -ervantes vs. Auditor /eneral, 46 it was the purpose of promotion of =simplicit%, econom% and efficienc%.= /nd, implied from the purpose of the law as a whole, =national securit%= was considered sufficient standard 47 and so was =protection of fish fr% or fish eggs. 47 The o'servation of petitioner that the approval of the President was not even re;uired in said .$ecutive Arder of the ta$ e$emption privilege approved '% the FI?4 unli-e in previous similar issuances, is not well-ta-en. An the contrar%, under 5ection l1f2 of .$ecutive Arder 3o. 9&, aforestated, such ta$ and dut% e$emptions e$tended '% the FI?4 must 'e approved '% the President. In this case, FI?4 ?esolution 3o. ")-!) was approved '% the respondent .$ecutive 5ecretar%, '% authorit% of the President, on Acto'er "*, "9!). 49 Mr. Gustice Isagani /. CruH commenting on the delegation of legislative power stated K The latest in our :urisprudence indicates that delegation of legislative power has 'ecome

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the rule and its non-delegation the e$ception. The reason is the increasing comple$it% of modern life and man% technical fields of governmental functions as in matters pertaining to ta$ e$emptions. This is coupled '% the growing ina'ilit% of the legislature to cope directl% with the man% pro'lems demanding its attention. The growth of societ% has ramified its activities and created peculiar and sophisticated pro'lems that the legislature cannot 'e e$pected reasona'l% to comprehend. 5pecialiHation even in legislation has 'ecome necessar%. To man% of the pro'lems attendant upon present da% underta-ings, the legislature ma% not have the competence, let alone the interest and the time, to provide the re;uired direct and efficacious, not to sa% specific solutions. 52 Thus, in the case of Tablarin vs. /utierre%, 51 this Court enunciated the rationale in favor of delegation of legislative functionsK Ane thing however, is apparent in the development of the principle of separation of powers and that is that the ma$im of delegatus non potest delegare or delegati potestas non potest delegare, adopted this practice 1#elegibus et -onsuetudiniis Anglia edited '% 7... <oodline, Eale >niversit% Press, "9,,, Fol. ,, p. "()2 'ut which is also recogniHed in principle in the ?oman 8aw d. ")."!.&2 has been made to adapt itself to the complexities of modern government, giving rise to the adoption, within certain limits, of the principle of subordinate legislation, not only in the )nited ,tates and $ngland but in practically all modern governments. 1People vs. ?osenthal and AsmeQa, (! Phil. &"!, "9&92.Accordingly, with the growing complexities of modern life, the multiplication of the sub+ects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency toward the delegation of greater power by the legislative, and toward the approval of the practice by the -ourts . 1.mphasis supplied.2 The legislative authorit% could not or is not e$pected to state all the detailed situations wherein the ta$ e$emption privileges of persons or entities would 'e restored. The tasma% 'e assigned to an administrative 'od% li-e the FI?4. Moreover, all presumptions are indulged in favor of the constitutionalit% and validit% of the statute. 5uch presumption can 'e overturned if its invalidit% is proved 'e%ond reasona'le dou't. Atherwise, a li'eral interpretation in favor of constitutionalit% of legislation should 'e adopted. 52 ..A. 3o. 9& is complete in itself and constitutes a valid delegation of legislative power to the FI?4 /nd as a'ove discussed, the ta$ e$emption privilege that was restored to 3PC '% FI?4 ?esolution 3o. ")-!) of Gune "9!) includes

e$emption from indirect ta$es and duties on petroleum products used in its operation. Indeed, the validit% of .$ecutive Arder 3o. 9& as well as of FI?4 ?esolution 3o. ")-!) has 'een upheld in Albay.5, In the dissenting opinion of Mr. Gustice CruH, it is stated that P.6. 3os. "9&" and "9** issued '% President Marcos in "9!# are invalid as the% were presuma'l% promulgated under the infamous /mendment 3o. ( and that as the% cover ta$ exemption, under 5ection ")1#2, /rticle FIII of the "9)& Constitution, the same cannot 'e passed =without the concurrence of the ma:orit% of all the mem'ers of the 4atasan Pam'ansa.= /nd, even conceding that the reservation of legislative power in the President was valid, it is opined that it was not validl% e$ercised as there is no showing that such presidential encroachment was :ustified under the conditions then e$isting. Conse;uentl%, it is concluded that .$ecutive Arder 3o. 9&, which was intended to implement said decrees, is also illegal. The authorit% of the President to su'-delegate to the FI?4 powers delegated to him is also ;uestioned. In Albay, 54 as a'ove stated, this Court upheld the validit% of P.6. 3os. ))( and "9&". The latter decree withdrew ta$ e$emptions of government-owned or controlled corporations including their su'sidiaries 'ut authoriHed the FI?4 to restore the same. 3evertheless, in Albay, as a'ove-discussed, this Court ruled that the ta$ e$emptions under FI?4 ?esolution 3os. " -!* and "-!( cannot 'e enforced as said resolutions were onl% recommendator% and were not dul% approved '% the President of the Philippines as re;uired '% P.6. 3o. ))(. 55 The Court also sustained in Albay the validit% of .$ecutive Arder 3o. 9&, and of the ta$ e$emptions restored under FI?4 ?esolution 3o. ")-!) which was issued pursuant thereto, as it was dul% approved '% the President as re;uired '% said e$ecutive order. Moreover, under 5ection &, /rticle IFIII of the Transitor% Provisions of the "9!) Constitution, it is provided that+ /ll e$isting laws, decrees, e$ecutive orders, proclamation, letters of instructions, and other e$ecutive issuances not inconsistent with this constitution shall remain operative until amended, repealed or revo-ed. Thus, P.6. 3os. ))( and "9&" are valid and operative unless it is shown that the% are inconsistent with the Constitution. .ven assuming arguendo that P.6. 3os. ))(, "9&" and .$ecutive Arder 3o. 9& are not valid and are unconstitutional, the result would 'e the same, as then the latest applica'le law would 'e P.6. 3o. 9&! which amended the 3PC charter '% granting e$emption to 3PC from all forms of taxes. /s a'ove discussed, this e$emption of 3PC covers direct and indirect ta$es on petroleum products used in its operation. This is as it should 'e, if <e are to hold as invalid and inoperative the withdrawal of such ta$ e$emptions under P.6. 3o. "9&" as well as under .$ecutive Arder 3o. 9& and the delegation of the power to restore these e$emptions to the FI?4.

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The Court realiHes the magnitude of the conse;uences of this decision. To reiterate, in Albay this Court ruled that the 3PC is lia'le for real estate ta$es as of Gune "", "9!# 1the date of promulgation of P.6. 3o. "9&"2 when 3PC had ceased to en:o% ta$ e$emption privileges since FI?4 ?esolution 3os. " !* and "-!( were not validl% issued. The real estate ta$ lia'ilit% of 3PC from Gune "", "9!# to 6ecem'er ", "99 is estimated to amount to P).#9 'illion plus another P#.)( 'illion in fuel import duties the firm had earlier paid to the government which the 3PC now proposed to pass on to the consumers '% another &&centavo increase per -ilowatt hour in power rates on top of the ")-centavo increase per -ilowatt hour that too- effect :ust over a wee- ago., 56 @ence, another case has 'een filed in this Court to stop this proposed increase without a hearing. /s a'ove-discussed, at the time FI?4 ?esolutions 3os. " !* and "-!( were issued, P.6. 3o. ))( dated /ugust ,#, "9)* was alread% amended '% P.6. 3o. "9&" , 57 wherein it is provided that such FI?4 resolutions ma% 'e approved not onl% '% the President of the Philippines 'ut also '% the Minister of Finance. 5uch resolutions were promulgated '% the Minister of Finance in his own right and also in his capacit% as FI?4 Chairman. Thus, a separate approval thereof '% the Minister of Finance or '% the President is unnecessar%. /s earlier stated a ree$amination of the ruling in Albay on this aspect is therefore called for and conse;uentl%, Albay must 'e considered superseded to this e$tent '% this decision. This is 'ecause P.6. 3o. 9&! which is the latest amendment to the 3PC charter granting the 3PC e$emption from all forms of taxes certainl% covers real estate ta$es which are direct ta$es. This ta$ e$emption is intended not onl% to insure that the 3PC shall continue to generate electricit% for the countr% 'ut more importantl%, to assure cheaper rates to 'e paid '% the consumers. The allegation that this is in effect allowing ta$ evasion '% oil companies is not ;uite correct. There are various arrangements in the pa%ment of crude oil purchased '% 3PC from oil companies. 7enerall%, the custom duties paid '% the oil companies are added to the selling price paid '% 3PC. /s to the specific and ad valorem ta$es, the% are added a part of the seller0s price, 'ut 3PC pa%s the price net of ta$, on condition that 3PC would see- a ta$ refund to the oil companies. 3o ta$ component on fuel had 'een charged or recovered '% 3PC from the consumers through its power rates. 57 Thus, this is not a case of ta$ evasion of the oil companies 'ut of ta$ relief for the 3PC. The 'illions of pesos involved in these e$emptions will certainl% inure to the ultimate good and 'enefit of the consumers who are there'% spared the additional 'urden of increased power rates to cover these ta$es paid or to 'e paid '% the 3PC if it is held lia'le for the same. The fear of the serious implication of this decision in that 3PC0s suppliers, importers and contractors ma% claim the same privilege should 'e dispelled '% the fact that 1a2 this

decision particularl% treats of onl% the e$emption of the 3PC from all ta$es, duties, fees, imposts and all other charges imposed '% the government on the petroleum products it used or uses for its operation; and 1'2 5ection "&1d2 of ?./. 3o. (&9* and 5ection "&1d2 of P.6. 3o. &! , 'oth specificall% e$empt the 3PC from all ta$es, duties, fees, imposts and all other charges imposed '% the government on all petroleum products used in its operation onl%, which is the ver% e$emption which this Court deems to 'e carried over '% the passage of P.6. 3o. 9&!. /s a matter of fact in 5ection "&1d2 of P.6. 3o. &! it is specified that the aforesaid e$emption from ta$es, etc. covers those =directl% or indirectl%= imposed '% the =?epu'lic of the Philippines, its provincies, cities, municipalities and other government agencies and instrumentalities= on said petroleum products. The e$emption therefore from direct and indirect ta$ on petroleum products used '% 3PC cannot 'enefit the suppliers, importers and contractors of 3PC of other products or services. The Court realiHes the lauda'le o':ective of petitioner to improve the revenue of the government. The amount of revenue received or e$pected to 'e received '% this ta$ e$emption is, however, not going to an% of the oil companies. There would 'e no loss to the government. The said amount shall accrue to the 'enefit of the 3PC, a government corporation, so as to ena'le it to sustain its tremendous tas- of providing electricit% for the countr% and at the least cost to the consumers. 6en%ing this ta$ e$emption would mean hampering if not paral%Hing the operations of the 3PC. The resulting increased revenue in the government will also mean increased power rates to 'e shouldered '% the consumers if the 3PC is to survive and continue to provide our power re;uirements. 59The greater interest of the people must 'e paramount. <@.?.FA?., the petition is 6I5MI55.6 for lac- of merit. 3o pronouncement as to costs. 5A A?6.?.6. G.R. No. 122625 Apr6= ,2, 2221 SEA+LAND SER0I%E, IN%., petitioner, vs. %O$RT OF A''EALS /1 %OMMISSIONER OF INTERNAL RE0EN$E, respondents. 'ARDO, J.? T4e % *e /ppeal via certiorari from the decision of the Court of /ppeals affirming in toto that of the Court of Ta$ /ppeals which denied petitionerRs claim for ta$ credit or refund of income ta$ paid on its gross Philippine 'illings for ta$a'le %ear "9!#, in the amount of P!) , 9&.",. " T4e F 3t* The facts, as found '% the Court of /ppeals, are as follows+ =5ea-8and 5ervice Incorporated 15./8/362, an /merican international shipping compan% licensed '% the 5ecurities and .$change Commission to do 'usiness in the Philippines entered into a contract with the >nited 5tates 7overnment to transport militar% household goods

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and effects of >.5. militar% personnel assigned to the 5u'ic 3aval 4ase. =From the aforesaid contract, 5./-8/36 derived an income for the ta$a'le %ear "9!# amounting to P*!, (,, ).*#. 6uring the ta$a'le %ear in ;uestion, 5./-8/36 filed with the 4ureau of Internal ?evenue 14I?2 the corresponding corporate Income Ta$ ?eturn 1IT?2 and paid the income ta$ due thereon of ".*P as re;uired in 5ection ,* 1a21,2 of the 3ational Internal ?evenue Code 13I?C2 in relation to /rticle 9 of the ?P->5 Ta$ Treat%, amounting to P!) , 9&.",. =Claiming that it paid the aforementioned income ta$ '% mista-e, a written claim for refund was filed with the 4I? on "* /pril "9!). @owever, 'efore the said claim for refund could 'e acted upon '% pu'lic respondent Commissioner of Internal ?evenue, petitioner-appellant filed a petition for review with the CT/ doc-eted as CT/ Case 3o. #"#9, to :udiciall% pursue its claim for refund and to stop the running of the two-%ear prescriptive period under the then 5ection ,#& of the 3I?C. =An ," Fe'ruar% "99*, CT/ rendered its decision den%ing 5./-8/36Rs claim for refund of the income ta$ it paid in "9!#.=, An March & , "99*, petitioner appealed the decision of the Court of Ta$ /ppeals to the Court of /ppeals.& /fter due proceedings, on Acto'er ,(, "99*, the Court of /ppeals promulgated its decision dismissing the appeal and affirming in toto the decision of the Court of Ta$ /ppeals.# @ence, this petition.* T4e I**.e The issue raised is whether or not the income that petitioner derived from services in transporting the household goods and effects of >.5. militar% personnel falls within the ta$ e$emption provided in /rticle III, paragraph # of the ?P->5 Militar% 4ases /greement. T4e %o.rt@* R.=6/8 <e den% the petition. The ?P->5 Militar% 4ases /greement provides+ =3o national of the >nited 5tates, or corporation organiHed under the laws of the >nited 5tates, shall 'e lia'le to pa% income ta$ in the Philippines in respect of an% profits derived under a contract made in the >nited 5tates with the government of the >nited 5tates in connection with the construction, maintenance, operation and defense of the 'ases, or an% ta$ in the nature of a license in respect of an% service or wor- for the >nited 5tates in connection with the construction, maintenance, operation and defense of the 'ases.=( Petitioner 5ea-8and 5ervice, Inc. a >5 shipping compan% licensed to do 'usiness in the Philippines earned income during ta$a'le %ear "9!# amounting to P*!, (,, ).*#,

and paid income ta$ thereon of ".*P amounting to P!) , 9&.",. The ;uestion is whether petitioner is e$empted from the pa%ment of income ta$ on its revenue earned from the transport or shipment of household goods and effects of >5 personnel assigned at 5u'ic 3aval 4ase. =8aws granting e$emption from ta$ are construed strictissimi +uris against the ta$pa%er and li'erall% in favor of the ta$ing power. Ta$ation is the rule and e$emption is the e$ception.=) The law =does not loo- with favor on ta$ e$emptions and that he who would see- to 'e thus privileged must :ustif% it '% words too plain to 'e mista-en andtoo categorical to 'e misinterpreted.=! >nder /rticle III 1#2 of the ?P->5 Militar% 4ases /greement, the Philippine 7overnment agreed to e$empt from pa%ment of Philippine income ta$ nationals of the >nited 5tates, or corporations organiHed under the laws of the >nited 5tates, residents in the >nited 5tates in respect of an% profit derived under a contract made in the >nited 5tates with the 7overnment of the >nited 5tates in connection with the 3o/*tr.3t6o/, m 6/te/ /3e, oper t6o/ /1 1e;e/*e o; t4e b *e*. It is o'vious that the transport or shipment of household goods and effects of >.5. militar% personnel is not included in the term =construction, maintenance, operation and defense of the 'ases.= 3either could the performance of this service to the >.5. government 'e interpreted as directl% related to the defense and securit% of the Philippine territories. =<hen the law spea-s in clear and categorical language, there is no reason for interpretation or construction, 'ut onl% for application.=9 /n% interpretation that would give it an e$pansive construction to encompass petitionerRs e$emption from ta$ation would 'e unwarranted. The avowed purpose of ta$ e$emption =is some pu'lic 'enefit or interest, which the lawma-ing 'od% considers sufficient to offset the monetar% loss entailed in the grant of the e$emption.=" The hauling or transport of household goods and personal effects of >. 5. militar% personnel would not directl% contri'ute to the defense and securit% of the Philippines. <e see no reason to reverse the ruling of the Court of /ppeals, which affirmed the decision of the Court of Ta$ /ppeals. The 5upreme =Court will not set aside lightl% the conclusion reached '% the Court of Ta$ /ppeals which, '% the ver% nature of its function, is dedicated e$clusivel% to the consideration of ta$ pro'lems and has necessaril% developed an e$pertise on the su':ect, unless there has 'een an a'use or improvident e$ercise of authorit%.= "" @ence, the Court of /ppeals did not err or gravel% a'use its discretion in dismissing the petition for review. <e can not grant the petition.1Nwphi12nOt T4e -.18me/t >#EREFORE, the Court DENIES the petition for lac- of merit. 3o costs. SO ORDERED.

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G.R. No. 117,59 -.=! 2,, 1997 DA0AO G$LF L$MBER %OR'ORATION, petitioner, vs. %OMMISSIONER OF INTERNAL RE0EN$E /1 %O$RT OF A''EALS, respondents. 'ANGANIBAN, J.: 4ecause ta$es are the life'lood of the nation, statutes that allow e$emptions are construed strictl% against the grantee and li'erall% in favor of the government. Atherwise stated, an% e$emption from the pa%ment of a ta$ must 'e clearl% stated in the language of the law; it cannot 'e merel% implied therefrom. ,tatement of the -ase This principium is applied '% the Court in resolving this petition for review under ?ule #* of the ?ules of Court, assailing the 6ecision 1 of ?espondent Court of /ppeals 2 in C/-7? 5P 3o. &#*!" dated 5eptem'er ,(, "99#, which affirmed the Gune ,", "99# 6ecision , of the Court of Ta$ /ppeals 4 in CT/ Case 3o. &*)#. The dispositive portion of the CT/ 6ecision affirmed '% ?espondent Court reads+ <@.?.FA?., :udgment is here'% rendered ordering the respondent to refund to the petitioner the amount of P,,9,&."* representing the partial refund of specific ta$es paid on manufactured oils and fuels. 5 The Antecedent <acts The facts are undisputed. 6 Petitioner is a licensed forest concessionaire possessing a Tim'er 8icense /greement granted '% the Ministr% of 3atural ?esources 1now 6epartment of .nvironment and 3atural ?esources2. From Gul% ", "9! to Ganuar% &", "9!, petitioner purchased, from various oil companies, refined and manufactured mineral oils as well as motor and diesel fuels, which it used e$clusivel% for the e$ploitation and operation of its forest concession. 5aid oil companies paid the specific ta$es imposed, under 5ections "*& and "*( 7 of the "9)) 3ational Internal ?evenue Code 13I?C2, on the sale of said products. 4eing included in the purchase price of the oil products, the specific ta$es paid '% the oil companies were eventuall% passed on to the user, the petitioner in this case. An 6ecem'er "&, "9!,, petitioner filed 'efore ?espondent Commissioner of Internal ?evenue 1CI?2 a claim for refund in the amount of P", ,!,*."", representing ,*P of the specific ta$es actuall% paid on the a'ove-mentioned fuels and oils that were used '% petitioner in its operations as forest concessionaire. The claim was 'ased on Insular 5umber -o2 vs2 -ourt of Tax Appeals 7 and 5ection * of ?/ "#&* which reads+ 5ec. *. The proceeds of the additional ta$ on manufactured oils shall accrue to the road and 'ridge funds of the political su'division for whose 'enefit the ta$ is collected+ Provided, however, That whenever an% oils mentioned a'ove are used '% miners or forest concessionaires in their operations, twent%-five per centum of the specific ta$ paid thereon shall 'e refunded '% the Collector of Internal ?evenue upon su'mission of proof of

actual use of oils and under similar conditions enumerated in su'paragraphs one and two of section one hereof, amending section one hundred fort%-two of the Internal ?evenue Code+ Provided, further, That no new road shall 'e constructed unless the routes or location thereof shall have 'een approved '% the Commissioner of Pu'lic @ighwa%s after a determination that such road can 'e made part of an integral and articulated route in the Philippine @ighwa% 5%stem, as re;uired in section twent%-si$ of the Philippine @ighwa% /ct of "9*&. It is an un;uestioned fact that petitioner complied with the procedure for refund, including the su'mission of proof of the actual use of the aforementioned oils in its forest concession as re;uired '% the a'ove-;uoted law. Petitioner, in support of its claim for refund, su'mitted to the CI? the affidavits of its general manager, the president of the Philippine <ood Products /ssociation, and three disinterested persons, all attesting that the said manufactured diesel and fuel oils were actuall% used in the e$ploitation and operation of its forest concession. An Ganuar% , , "9!&, petitioner filed at the CT/ a petition for review doc-eted as CT/ Case 3o. &*)#. An Gune ,", "99#, the CT/ rendered its decision finding petitioner entitled to a partial refund of specific ta$es the latter had paid in the reduced amount of P,,9,&."*. The CT/ ruled that the claim on purchases of lu'ricating oil 1from Gul% ", "9! to Ganuar% "9, "9!"2 and on manufactured oils other than lu'ricating oils 1from Gul% ", "9! to Ganuar% #, "9!"2 had prescri'ed. 6isallowed on the ground that the% were not included in the original claim filed 'efore the CI? were the claims for refund on purchases of manufactured oils from Ganuar% ", "9! to Gune & , "9! and from Fe'ruar% ", "9!, to Gune & , "9!,. In regard to the other purchases, the CT/ granted the claim, 'ut it computed the refund 'ased on rates deemed paid under ?/ "#&*, and not on the higher rates actualh% paid '% petitioner under the 3I?C. Insisting that the 'asis for computing the refund should 'e the increased rates prescri'ed '% 5ections "*& and "*( of the 3I?C, petitioner elevated the matter to the Court of /ppeals. /s noted earlier, the Court of /ppeals affirmed the CT/ 6ecision. @ence, this petition for review. 9 Public "espondent(s "uling In its petition 'efore the Court of /ppeals, petitioner raised the following arguments+ I. The respondent Court of Ta$ /ppeals failed to appl% the 5upreme Court0s 6ecision in Insular 5umber -o2 v2 -ourt of Tax Appeals which granted the claim for partial refund of specific ta$es paid '% the claimant, without ;ualification or limitation. II. The respondent Court of Ta$ /ppeals ignored the increase in rates imposed '% succeeding amendator% laws,under which the petitioner paid the specific ta$es on manufactured and diesel fuels.

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III. In its decision, the respondent Court of Ta$ /ppeals ruled contrar% to esta'lished tenets of law when it lent itself to interpreting 5ection * of ?./. "#&*, when the construction of said law is not necessar%. IF. 5ections " and , of ?./. "#&* are not the operative provisions to 'e applied 'ut rather, 5ections "*& and "*( of the 3ational Internal ?evenue Code, as amended. F. To rule that the 'asis for computation of the refunded ta$es should 'e 5ections " and , of ?./. "#&* rather than 5ection "*& and "*( of the 3ational Internal ?evenue Code is unfair, erroneous, ar'itrar%, ine;uita'le and oppressive. 12 The Court of /ppeals held that the claim for refund should indeed 'e computed on the 'asis of the amounts deemed paid under 5ections " and , of ?/ "#&*. In so ruling, it cited our pronouncement in -ommissioner of Internal "evenue v2 "io Tuba Aic'el =ining -orporation 11 and su'se;uent ?esolution dated Gune "*, "99, clarif%ing the said 6ecision. ?espondent Court further ruled that the claims for refund which prescri'ed and those which were not filed at the administrative level must 'e e$cluded. The Issue In its Memorandum, petitioner raises one critical issue+ <hether or not petitioner is entitled under ?epu'lic /ct 3o. "#&* to the refund of ,*P of the amount of specific ta$es it actuall% paid on various refined and manufactured mineral oils and other oil products ta$ed under 5ec. "*& and 5ec. "*( of the "9)) 15ec. "#, and 5ec. "#* of the "9&92 3ational Internal ?evenue Code. 12 In the main, the ;uestion 'efore us pertains onl% to the computation of the ta$ refund. Petitioner argues that the refund should 'e 'ased on the increased rates of specific ta$es which it actuall% paid, as prescri'ed in 5ections "*& and "*( of the 3I?C. Pu'lic respondent, on the other hand, contends that it should 'e 'ased on specific ta$es deemed paid under 5ections " and , of ?/ "#&*. The -ourt(s "uling The petition is not meritorious. Petitioner $ntitled to "efund )nder ,ec2 7 of "A 1L37 /t the outset, it must 'e stressed that petitioner is entitled to a partial refund under 5ection * of ?/ "#&*, which was enacted to provide means for increasing the @ighwa% 5pecial Fund. The rationale for this grant of partial refund of specific ta$es paid on purchases of manufactured diesel and fuel oils rests on the character of the @ighwa% 5pecial Fund. The specific ta$es collected on gasoline and fuel accrue to the Fund, which is to 'e used for the construction and maintenance of the highwa% s%stem. 4ut 'ecause the gasoline and fuel purchased '% mining and lum'er concessionaires are used within their own compounds and roads, and their vehicles seldom use the national highwa%s, the% do not directl% 'enefit from the Fund and its use.

@ence, the ta$ refund gives the mining and the logging companies a measure of relief in light of their peculiar situation. 1, <hen the @ighwa% 5pecial Fund was a'olished in "9!*, the reason for the refund li-ewise ceased to e$ist. 14 5ince petitioner purchased the su':ect manufactured diesel and fuel oils from Gul% ", "9! to Ganuar% &", "9!, and su'mitted the re;uired proof that these were actuall% used in operating its forest concession, it is entitled to claim the refund under 5ection * of ?/ "#&*. Tax "efund ,trictly -onstrtued Against the /rantee Petitioner su'mits that it is entitled to the refund of ,* percent of the specific ta$es it had actuall% paid for the petroleum products used in its operations. In other words, it claims a refund 'ased on the increased rates under 5ections "*& and "*( of the 3I?C. 15 Petitioner argues that the statutor% grant of the refund privilege, specificall% the phrase =twent%-five per centum of the specific ta$ paid thereon shall 'e refunded '% the Collector of Internal ?evenue,= is =clear and unam'iguous= enough to re;uire construction or ;ualification thereof. 16 In addition, it cites our pronouncement in Insular 5umber vs2 -ourt of Tax Appeals+ 17 . . . 5ec. * Bof ?/ "#&*C ma-es reference to su'paragraphs " and , of 5ection " onl% for the purpose of prescri'ing the procedure for refund. This e$press reference cannot 'e e$panded in scope to include the limitation of the period of refund. If the limitation of the period of refund of specific ta$es paid on oils used in aviation and agriculture is intended to cover similar ta$es paid on oil used '% miners and forest concessionaires, there would have 'een no need of dealing with oil used '% miners and forest concessions separatel% and 5ection * would ver% well have 'een included in 5ection " of ?epu'lic /ct 3o. "#&*, notwithstanding the different rate of e$emption. Petitioner then reasons that =the e$press mention of 5ection " of ?/ "#&* in 5ection * cannot 'e e$panded to include a limitation on the ta$ rates to 'e applied . . . Botherwise,C 5ection * should ver% well have 'een included in 5ection " . . . .= 17 The Court is nor persuaded. The relevant statutor% provisions do not clearl% support petitioner0s claim for refund. ?/ "#&* provides+ 5ec. " 5ection one hundred and fort%-two of the 3ational Internal ?evenue Code, as amended, is further amended to read as follows+ 5ec. "#,. ,pecific tax on manufactured oils and other fuels. K An refined and manufactured mineral oils and motor fuels, there shall 'e collected the following ta$es+ 1a2 Nerosene or petroleum, per liter of volume capacit%, two and one-half centavos; 1'2 8u'ricating oils, per liter of volume capacit%, seven centavos;

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1c2 3aptha, gasoline, and all other similar products of distillation, per liter of volume capacit%, eight centavos; and 1d2 An denatured alcohol to 'e used for motive power, per liter of volume capacit%, one centavo+Provided, That if the denatured alcohol is mi$ed with gasoline, the specific ta$ on which has alread% 'een paid, onl% the alcohol content shall 'e su':ect to the ta$ herein prescri'ed. For the purpose of this su'section, the removal of denatured alcohol of not less than one hundred eight% degrees proof 1ninet% per centum a'solute alcohol2 shall 'e deemed to have 'een removed for motive power, unless shown to the contrar%. <henever an% of the oils mentioned a'ove are, during the five %ears from Gune eighteen, nineteen hundred and fift% two, used in agriculture and aviation, fift% per centum of the specific ta$ paid thereon shall 'e refunded '% the Collector of Internal ?evenue upon the su'mission of the following+ 1"2 / sworn affidavit of the producer and two disinterested persons proving that the said oils were actuall% used in agriculture, or in lieu thereof. 1,2 5hould the producer 'elong to an% producers0 association or federation, dul% registered with the 5ecurities and .$change Commission, the affidavit of the president of the association or federation, attesting to the fact that the oils were actuall% used in agriculture. 1&2 In the case of aviation oils, a sworn certificate satisfactor% to the Collector proving that the said oils were actuall% used in aviation+ Provided, That no such refunds shall 'e granted in respect to the oils used in aviation '% citiHens and corporations of foreign countries which do not grant e;uivalent refunds or e$emptions in respect to similar oils used in aviation '% citiHens and corporations of the Philippines. 5ec. , 5ection one hundred and fort%-five of the 3ational Internal ?evenue Code, as amended, is further amended to read as follows+ 5ec. "#*. ,pecific Tax on #iesel fuel oil. K An fuel oil, commerciall% -nown as diesel fuel oil, and on all similar fuel oils, having more or less the same generating power, there shall 'e collected, per metric ton, one peso. $$$ $$$ $$$ 5ec. *. The proceeds of the additional ta$ on manufactured oils shall accrue to the road and 'ridge funds of the political su'division for whose 'enefit the ta$ is collected+ Provided, however, That whenever an% oils mentioned a'ove are used '% miners or forest concessionaires in their operations, twent%-five per centum of the specific ta$ paid thereon shall 'e refunded '% the Collector of Internal ?evenue upon su'mission of proof of

actual use of oils and under similar conditions enumerated in su'paragraphs one and two of section one hereof, amending section one hundred fort%-two of the Internal ?evenue Code+ Provided, further, That no new road shall 'e constructed unless the route or location thereof shall have 'een approved '% the Commissioner of Pu'lic @ighwa%s after a determination that such road can 'e made part of an integral and articulated route in the Philippine @ighwa% 5%stem, as re;uired in section twent%-si$ of the Philippine @ighwa% /ct of "9*&. 5u'se;uentl% the "9)) 3I?C, P6 "(), and .A (), amended the first two provisions, renum'ering them and prescri'ing higher rates. /ccordingl%, petitioner paid specific ta$es on petroleum products purchased from Gul% ", "9! to Ganuar% &", "9!, under the following statutor% provisions. From Fe'ruar% !, "9! to March , , "9!", 5ections "*& and "*( provided as follows+ 5ec. "*&. ,pecific tax on manufactured oils and other fuels. K An refined and manufactured mineral oils and motor fuels, there shall 'e collected the following ta$es which shall attach to the articles hereunder enumerated as soon as the% are in e$istence as such+ 1a2 Nerosene, per liter of volume capacit%, seven centavos; 1'2 8u'ricating oils, per liter of volume capacit%, eight% centavos; 1c2 3aphtha, gasoline and all other similar products of distillation, per liter of volume capacit%, ninet%-one centavos+ Provided, That on premium and aviation gasoline, the ta$ shall 'e one peso per liter of volume capacit%; 1d2 An denatured alcohol to 'e used for motive power, per liter of volume capacit%, one centavo+Provided, That unless otherwise provided for '% special laws, if the denatured alcohol is mi$ed with gasoline, the specific ta$ on which has alread% 'een paid, onl% the alcohol content shall 'e su':ect to the ta$ herein prescri'ed. For the purposes of this su'section, the removal of denatured alcohol of not less than one hundred eight% degrees proof 1ninet% per centum a'solute alcohol2 shall 'e deemed to have 'een removed for motive power, unless shown to the contrar%; 1e2 Processed gas, per liter of volume capacit%, three centavos; 1f2 Thinners and solvents, per liter of volume capacit%, fift%-seven centavos; 1g2 8i;uefied petroleum gas, per -ilogram, fourteen centavos+ Provided, That li;uefied petroleum gas used for motive power shall 'e ta$ed at the e;uivalent rate as the specific ta$ on diesel fuel oil; 1h2 /sphalts, per -ilogram, eight centavos;

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1i2 7reases, wa$es and petrolatum, per -ilogram, fift% centavos; 1:2 /viation tur'o :et fuel, per liter of volume capacit%, fift%-five centavos. 1/s amended '% 5ec. ", P.6. 3o. "(),.2 $$$ $$$ $$$ 5ec. "*(. ,pecific tax on diesel fuel oil. K An fuel oil, commerciall% -nown as diesel fuel oil, and on all similar fuel oils, having more or less the same generating power, per liter of volume capacit%, seventeen and one-half centavos, which ta$ shall attach to this fuel oil as soon as it is in e$istence as such. Then on March ,", "9!", these provisions were amended '% .A (), to read+ 5ec. "*&. ,pecific tax on manufactured oils and other fuels. K An refined and manufactured mineral oils and motor fuels, there shall 'e collected the following ta$es which shall attach to the articles hereunder enumerated as soon as the% are in e$istence as such+ 1a2 Nerosene, per liter of volume capacit%, nine centavos; 1'2 8u'ricating oils, per liter of volume capacit%, eight% centavos; 1c2 3aphtha, gasoline and all other similar products of distillation, per liter of volume capacit%, one peso and si$ centavos+ Provided, That on premium and aviation gasoline, the ta$ shall 'e one peso and ten centavos and one peso, respectivel%, per liter of volume capacit%; 1d2 An denatured alcohol to 'e used for motive power, per liter of volume capacit%, one centavo;Provided, That unless otherwise provided for '% special laws, if the denatured alcohol is mi$ed with gasoline, the specific ta$ on which has alread% 'een paid, onl% the alcohol content shall 'e su':ect to the ta$ herein prescri'ed. For the purpose of this su'section, the removal of denatured alcohol of not less than one hundred eight% degrees proof 1ninet% per centum a'solute alcohol2 shall 'e deemed to have 'een removed for motive power, unless shown to the contrar%; 1e2 Processed gas, per liter of volume capacit%, three centavos; 1f2 Thinners and solvents, per liter of volume capacit%, si$t%-one centavos; 1g2 8i;uefied petroleum gas, per -ilogram, twent%-one centavos+ Provided, That, li;uified petroleum gas used for motive power shall 'e ta$ed at the e;uivalent rate as the specific ta$ on diesel fuel oil; 1h2 /sphalts, per -ilogram, twelve centavos; 1i2 7reases, wa$es and petrolatum, per -ilogram, fift% centavos;

1:2 /viation tur'o-:et fuel, per liter of volume capacit%, si$t%-four centavos. $$$ $$$ $$$ 5ec. "*(. ,pecific tax on diesel fuel oil. K An fuel oil, commerciall% -nown as diesel fuel oil, and all similar fuel oils, having more or less the same generating power, per liter of volume capacit%, twent%-five and one-half centavos, which ta$ shall attach to this fuel oil as soon as it is in e$istence as such. / ta$ cannot 'e imposed unless it is supported '% the clear and e$press language of a statute; 19 on the other hand, once the ta$ is un;uestiona'l% imposed, =BaC claim of e$emption from ta$ pa%ments must 'e clearl% shown and 'ased on language in the law too plain to 'e mista-en.= 22 5ince the partial refund authoriHed under 5ection *, ?/ "#&*, is in the nature of a ta$ e$emption, 21 it must 'e construed strictissimi ?uris against the grantee. @ence, petitioner0s claim of refund on the 'asis of the specific ta$es it actuall% paid must e$pressl% 'e granted in a statute stated in a language too clear to 'e mista-en. <e have carefull% scrutiniHed ?/ "#&* and the su'se;uent pertinent statutes and found no e$pression of a legislative will authoriHing a refund 'ased on the higher rates claimed '% petitioner. The mere fact that the privilege of refund was included in 5ection *, and not in 5ection ", is insufficient to support petitioner0s claim. <hen the law itself does not e$plicitl% provide that a refund under ?/ "#&* ma% 'e 'ased on higher rates which were none$istent at the time of its enactment, this Coure cannot presume otherwise. / legislative lacuna cannot 'e filled '% :udicial fiat. 22 The issue is not reall% novel. In -ommissioner of Internal "evenue vs2 -ourt of Appeals and Atlas -onsolidated =ining and #evelopment -orporation 2, 1the second /tlas case2, the CI? contended that the refund should 'e 'ased on 5ections " and , of ?/ "#&*, not 5ections "*& and "*( of the 3I?C of "9)). In categoricall% ruling that Private ?espondent /tlas Consolidated Mining and 6evelopment Corporation was entitled to a refund 'ased on 5ections " and , of ?/ "#&*, the Court, through Mr. Gustice @ilario 7. 6avide, Gr., reiterated our pronouncement in -ommissioner of Internal "evenue vs2 "io Tuba Aic'el and =ining -orporation + Aur ?esolution of ,* March "99, modif%ing our & 5eptem'er "99" 6ecision in the "io Tuba case sets forth the controlling doctrine. In that ?esolution, we stated+ 5ince the private respondent0s claim for refund covers specific ta$es paid from "9! to Gul% "9!& then we find that the private respondent is entitled to a refund. It should 'e made clear, however, that ?io Tu'a is not entitled to the whole amount it claims as refund. The specific taxes on oils which "io Tuba paid for the aforesaid period were no longer based on the rates specified by ,ections 1 and * of "2A2 Ao2 1L37 but on the increased rates mandated

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under ,ections 173 and 17E of the Aational Internal "evenue -ode of 1FGG. <e note however, that the latter law does not specificall% provide for a refund to these mining and lum'er companies of specific ta$es paid on manufactured and diesel fuel oils. In Insular 5umber -o2 v2 -ourt of Tax Appeals, 1" # 5C?/ )" B"9!"C2, the Court held that the authoriHed partial refund under 5ection * of ?./. 3o. "#&* parta-es of the nature of a ta$ e$emption and therefore cannot 'e allowed unless granted in the most e$plicit and categorical language. ,ince the grant of refund privileges must be strictly construed against the taxpayer! the basis for the refund shall be the amounts deemed paid under ,ections 1 and * of "2A2 Ao2 1L37. /CCA?6I378E, the decision in 7.?. 3os. !&*!&-!# is here'% MA6IFI.6. The private respondent(s -5AI= for "$<)A# is /"AAT$#! computed on the basis of the amounts deemed paid under ,ections 1 and * of "2A2 Ao2 1L37, without interest. 24 <e rule, therefore, that since /tlas0s claims for refund cover specific ta$es paid 'efore "9!*, it should 'e granted the refund 'ased on the rates specified '% 5ections " and , of ?./. 3o. "#&* and not on the increased rates under 5ections "*& and "*( of the Ta$ Code of "9)), provided the claims are not %et 'arred '% prescription. 1.mphasis supplied.2 Insular 5umber -o2 and <irst Atlas -ase Aot Inconsistent &ith "io Tuba and ,econd Atlas -ase Petitioner argues that the applica'le :urisprudence in this case should 'e -ommissioner of Internal "evenue vs2 Atlas -onsolidated and =ining -orp. 1the first /tlas case2, an unsigned resolution, and Insular 5umber -o2 vs2 -ourt of Tax Appeals, an en banc decision. 25 Petitioner also as-s the Court to ta-e a =second loo-= at "io Tubaand the second /tlas case, 'oth decided '% 6ivisions, in view of Insular which was decided en banc. Petitioner posits that =BICn view of the similarit% of the situation of herein petitioner with Insular 8um'er Compan% 1claimant inInsular 5umber2 and ?io Tu'a 3ic-el Mining Corporation 1claimant in "io Tuba2, a dilemma has 'een created as to whether or not Insular 5umber, which has 'een decided '% the @onora'le Court en banc, or "io Tuba, which was decided onl% B'%C the Third 6ivision of the @onora'le Court, should appl%.= 26 <e find no conflict 'etween these two pairs of cases. 3either Insular 5umber -o. nor the first /tlas case ruled on the issue of whether the refund privilege under 5ection * should 'e computed 'ased on the specific ta$ deemed paid under 5ections " and , of ?/ "#&*, regardless of what was actuall% paid under the increased rates. "io Tuba and the second /tlas case did.

Insular 5umber -o. decided a claim for refund on specific ta$ paid on petroleum products purchased in the %ear "9(&, when the increased rates under the 3I?C of "9)) were nor %et in effect. Thus, the issue now 'efore us did not e$ist at the time, since the applica'le rates were still those prescri'ed under 5ections " and , of ?/ "#&*. An the other hand, the issue raised in the first /tlas case was whether the claimant was entitled to the refund under 5ection *, notwithstanding its failure to pa% an% additional ta$ under a municipal or cit% ordinance. /lthough /tlas purchased petroleum products in the %ears, "9)( to "9)! when the rates had alread% 'een changed, the Court did not decide or ma-e an% pronouncement on the issue in that case. Clearl%, it is impossi'le for these two decisions to clash with our pronouncement in "io Tuba and second /tlas case, in which we ruled that the refund granted 'e computed on the 'asis of the amounts deemed paid under 5ections " and , of ?/ "#&*. In this light, we find no 'asis for petitioner0s invocation of the constitutional proscription that =no doctrine or principle of law laid down '% the Court in a decision rendered en banc or in division ma% 'e modified or reversed e$cept '% the Court sitting en banc. 27 Finall%, petitioner asserts that =e;uit% and :ustice demand that the computation of the ta$ refunds 'e 'ased on actual amounts paid under 5ections "*& and "*( of the 3I?C.= 27 <e disagree. /ccording to an eminent authorit% on ta$ation, =there is no ta$ e$emption solel% on the, ground of e;uit%.= 29 <@.?.FA?., the petition is here'% 6.3I.6 and the assailed 6ecision of the Court of /ppeals is /FFI?M.6. 5A A?6.?.6. G.R. No. 14,767 A.8.*t 22, 2221 '#ILI''INE LONG DISTAN%E TELE'#ONE %OM'AN", IN%., petitioner, vs. %IT" OF DA0AO /1 ADELAIDA B. BAR%ELONA, 6/ 4er 3 p 36t! * t4e %6t! Tre *.rer o; D : o,respondents. MENDO&A, J.? This is a petition for review on certiorari under ?ule #* of the "99) ?ules of Civil Procedure of the resolution, " dated Gune ,&, , , of the ?egional Trial Court, 4ranch "&, 6avao Cit%, affirming the ta$ assessment of petitioner and the denial of its claim for ta$ refund '% the Cit% Treasurer of 6avao. The facts are as follows+ An Ganuar% "999, petitioner Philippine 8ong 6istance Telephone Co., Inc. 1P86T2 applied for a Ma%or0s Permit to operate its 6avao Metro .$change. ?espondent Cit% of 6avao withheld action on the application pending pa%ment '% petitioner of the local franchise ta$ in the amount of P&,(!",9!*.), for the first to the fourth ;uarter of "999. , In a letter dated Ma% &", "999, & petitioner protested the assessment of the local franchise ta$ and re;uested a refund of the franchise ta$ paid '% it for the %ear "99) and the first to the third ;uarters of "99!. Petitioner contended that it was e$empt from the pa%ment of franchise ta$ 'ased

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on an opinion of the 4ureau of 8ocal 7overnment Finance 1487F2, dated Gune ,, "99!, which reads as follows+ P86T+ 5ection ", of ?/ ) !, provides as follows+ =5.CTIA3 ",. The grantee, its successors or assigns shall 'e lia'le to pa% the same ta$es on their real estate, 'uildings, and personal propert%, e$clusive of this franchise, as other persons or corporations are now or hereafter ma% 'e re;uired '% law to pa%. In addition thereto, the grantee, its successors or assigns shall pa% a franchise ta$ e;uivalent to three percent 1&P2 of all gross receipts of the telephone or other telecommunications 'usinesses transacted under this franchise '% the grantee, its successors or assigns, and the said percentage shall 'e in lieu of all ta$es on this franchise or earnings thereof . . .= It appears that ?/ ) !, further amending /ct 3o. &#&( which granted to P86T a franchise to install, operate and maintain a telephone s%stem throughout the Philippine Islands was approved on /ugust &, "99". 5ection ", of said franchise, li-ewise, contains the =in lieu of all ta$es= proviso. In this connection, 5ection ,& of ?/ )9,*, ;uoted hereunder, which was approved on March ", "99*, provides for the e;ualit% of treatment in the telecommunications industr%+ =5.CTIA3 ,&. $ uality of Treatment in the Telecommunications Industry. K /n% advantage, favor, privilege, e$emption, or immunit% granted under e$isting franchises, or ma% hereafter 'e granted, shall ipso facto become part of previously granted telecommunications franchise and shall 'e accorded immediatel% and unconditionall% to the grantees of such franchises+ Provided, however, That the foregoing shall neither appl% to nor affect provisions of telecommunications franchises concerning territor% covered '% the franchise, the life span of the franchise, or the t%pe of service authoriHed '% the franchise.= 1Italics supplied.2 An the 'asis of the afore;uoted 5ection ,& of ?/ )9,*, P86T as a telecommunications franchise holder 'ecomes automaticall% covered '% the ta$ e$emption provisions of ?/ )9,*, which too- effect on March "(, "99*. /ccordingl%, P86T shall 'e e$empt from the pa%ment of franchise and 'usiness ta$es imposa'le '% 87>s under 5ections "&) and "#& 1sic2, respectivel%, of the 87C, upon the effectivit% of ?/ )9,* on March "(, "99*. @owever, P86T shall 'e lia'le to pa% the franchise and 'usiness ta$es on its gross receipts realiHed from Ganuar% ", "99, up to March "*, "99*, during which period P86T was not en:o%ing the =most favored clause= proviso of ?/ ) ,* 1sic2.#

In a letter dated 5eptem'er ,), "999, respondent /delaida 4. 4arcelona, Cit% Treasurer of 6avao, denied the protest and claim for ta$ refund of petitioner,* citing the legal opinion of the Cit% 8egal Afficer of 6avao and /rt. " , S" of Ardinance 3o. ,& , 5eries of "99", as amended '% Ardinance 3o. *"9, 5eries of "99,, which provides+ 3otwithstanding an% e$emption granted '% an% law or other special law, there is here'% imposed a ta$ on 'usinesses en:o%ing a franchise, at a rate of 5event%-five percent 1)*P2 of one percent 1"P2 of the gross annual receipts for the preceding calendar %ear 'ased on the income or receipts realiHed within the territorial :urisdiction of 6avao Cit%.( Petitioner received respondent Cit% Treasurer0s order of denial on Acto'er ", "999. An 3ovem'er &, "999, it filed a petition in the ?egional Trial Court of 6avao see-ing a reversal of respondent Cit% Treasurer0s denial of petitioner0s protest and the refund of the franchise ta$ paid '% it for the %ear "99! in the amount of P,,*! ,!,9.,&. The petition was filed pursuant to SS"9* and "9( of the 8ocal 7overnment Code 1?./. 3o. )"( 2. 3o claim for refund of franchise ta$es paid in "99) was made as the same had alread% prescri'ed under S"9( of the 87C, which provides that claims for the refund of ta$es paid under it must 'e made within two 1,2 %ears from the date of pa%ment of such ta$es.) The trial court denied petitioner0s appeal and affirmed the Cit% Treasurer0s decision. It ruled that the 87C withdrew all ta$ e$emptions previousl% en:o%ed '% all persons and authoriHed local government units to impose a ta$ on 'usinesses en:o%ing a franchise notwithstanding the grant of ta$ e$emption to them. The trial court li-ewise denied petitioner0s claim for e$emption under ?./. 3o. )9,* for the following reasons+ 1"2 it is clear from the wording of S"9& of the 8ocal 7overnment Code that Congress did not intend to e$empt an% franchise holder from the pa%ment of local franchise and 'usiness ta$es; 1,2 the opinion of the .$ecutive 6irector of the 4ureau of 8ocal 7overnment Finance to the contrar% is not 'inding on respondents; and 1&2 petitioner failed to present an% proof that 7lo'e and 5mart were en:o%ing local franchise and 'usiness ta$ e$emptions. @ence, this petition for review 'ased on the following grounds+ I. T@. 8A<.? CA>?T .??.6 I3 /PP8EI37 5.CTIA3 "&) AF T@. 8AC/8 7AF.?3M.3T CA6., <@IC@ /88A<5 / CITE TA IMPA5. / F?/3C@I5. T/I, /36 5.CTIA3 "9& T@.?.AF, <@IC@ P?AFI6.5 FA? <IT@6?/</8 AF T/I .I.MPTIA3 P?IFI8.7.5. II. T@. 8A<.? CA>?T .??.6 I3 3AT @A86I37 T@/T >36.? P.TITIA3.?05 F?/3C@I5., /5 IMP8ICIT8E /M.36.6 /36 .IP/36.6 4E 5.CTIA3 ,& AF ?.P>48IC /CT 3A. )9,* 1P>48IC T.8.CAMM>3IC/TIA35

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PA8ICE /CT2, T/NI37 I3TA /CCA>3T T@. F?/3C@I5.5 AF 78A4. T.8.CAM, I3C. /36 5M/?T CAMM>3IC/TIA35, I3C., <@IC@ <.?. .3/CT.6 5>45.O>.3T TA T@. 8AC/8 7AF.?3M.3T CA6., 3A F?/3C@I5. /36 4>5I3.55 T/I.5 M/E 4. IMPA5.6 A3 P.TITIA3.? 4E ?.5PA36.3T CITE. III. T@. 8A<.? CA>?T .??.6 I3 3AT 7IFI37 <.I7@T TA T@. ?>8I37 AF T@. 4>?./> AF 8AC/8 7AF.?3M.3T FI3/3C. T@/T P.TITIA3.? I5 .I.MPT F?AM T@. P/EM.3T AF F?/3C@I5. /36 4>5I3.55 T/I.5, /MA37 AT@.?5, IMPA5/48. 4E 8AC/8 7AF.?3M.3T >3IT5 >36.? T@. 8AC/8 7AF.?3M.3T CA6.. <irst. The 87C, which too- effect on Ganuar% ", "99,, provides+ 5.CTIA3 "&). <ranchise Tax. K 3otwithstanding an% e$emption granted '% an% law or other special law, the province ma% impose a ta$ on 'usinesses en:o%ing a franchise, at a rate not e$ceeding fift% percent 1* P2 of one percent 1"P2 of the gross annual receipts for the preceding calendar %ear 'ased on the incoming receipt, or realiHed, within its territorial :urisdiction. In the case of a newl% started 'usiness, the ta$ shall not e$ceed one-twentieth 1"L, 2 of one percent 1"P2 of the capital investment. In the succeeding calendar %ear, regardless of when the 'usiness started to operate, the ta$ shall 'e 'ased on the gross receipts for the preceding calendar %ear, or an% fraction thereof, as provided herein.! 5.CTIA3 "9&. &ithdrawal of Tax $xemption Privileges. K >nless otherwise provided in this Code, ta$ e$emptions or incentives granted to, or presentl% en:o%ed '% all persons, whether natural or :uridical, including governmentowned or -controlled corporations, e$cept local water districts, cooperatives dul% registered under ?./. (9&!, non-stoc- and non-profit hospitals and educational institutions, are here'% withdrawn upon the effectivit% of this Code. The trial court held that, under these provisions, all e$emptions granted to all persons, whether natural and :uridical, including those which in the future might 'e granted, are withdrawn unless the law granting the e$emption e$pressl% states that the e$emption also applies to local ta$es. <e disagree. 5ec. "&) does not state that it covers future e$emptions. In Philippine Airlines! Inc2 v2 $du,9 where a provision of the Ta$ Code enacted on Gune ,), "9(! 1?./. *#&"2 withdrew the e$emption en:o%ed '% P/8, it was held that a su'se;uent amendment of P/80s franchise, e$empting it from all other ta$es e$cept that imposed '% its franchise, again entitled P/8 to e$emption from the date of the enactment of such amendment. The Ta$ Code provision withdrawing the ta$ e$emption was not

construed as prohi'iting future grants of e$emptions from all ta$es. Indeed, the grant of ta$ing powers to local government units under the Constitution and the 87C does not affect the power of Congress to grant e$emptions to certain persons, pursuant to a declared national polic%. The legal effect of the constitutional grant to local governments simpl% means that in interpreting statutor% provisions on municipal ta$ing powers, dou'ts must 'e resolved in favor of municipal corporations." The ;uestion, therefore, is whether, after the withdrawal of its e$emption '% virtue of S"&) of the 87C, petitioner has again 'ecome entitled to e$emption from local franchise ta$. Petitioner answers in the affirmative and points to S,& of ?./. 3o. )9,*, in relation to the franchises of 7lo'e Telecom 17lo'e2 and 5mart Communications, Inc. 15mart2, which allegedl% grant the latter e$emption from local franchise ta$es. To 'egin with, ta$ e$emptions are highl% disfavored. The reason for this was e$plained '% this Court in Asiatic Petroleum -o2 v2 5lanes,"" in which it was held+ . . . .$emptions from ta$ation are highl% disfavored, so much so that the% ma% almost 'e said to 'e odious to the law. @e who claims an e$emption must 'e a'le to point to some positive provision of law creating the right. . . /s was said '% the 5upreme Court of Tennessee in Memphis vs. >. D P. 4an- 19" Tenn., *#(, ** 2, =The right of ta$ation is inherent in the 5tate. It is a prerogative essential to the perpetuit% of the government; and he who claims an e$emption from the common 'urden must :ustif% his claim '% the clearest grant of organic or statute law.= Ather utterances e;uall% or more emphatic come readil% to hand from the highest authorit%. In Ahio 8ife Ins. and Trust Co. vs. 6e'olt 1"( @oward, #"(2, it was said '% Chief Gustice Tane%, that the right of ta$ation will not 'e held to have 'een surrendered, =unless the intention to surrender is manifested '% words too plain to 'e mista-en.= In the case of the 6elaware ?ailroad Ta$ 1"! <allace, , (, ,,(2, the 5upreme Court of the >nited 5tates said that the surrender, when claimed, must 'e shown '% clear, unam'iguous language, which will admit of no reasona'le construction consistent with the reservation of the power. If a dou't arises as to the intent of the legislature, that dou't must 'e solved in favor of the 5tate. In .rie ?ailwa% Compan% vs. Commonwealth of Penns%lvania 1," <allace, #9,, #992, Mr. Gustice @unt, spea-ing of e$emptions, o'served that a 5tate cannot strip itself of the most essential power of ta$ation '% dou'tful words. =It cannot, '% am'iguous language, 'e deprived of this highest attri'ute of sovereignt%.= In Tennessee vs. <hitworth 1"") >.5., ",9, "&(2, it was said+ =In all cases of this -ind the ;uestion is as to the intent of the legislature, the presumption alwa%s 'eing

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against an% surrender of the ta$ing power.= In Farrington vs. Tennessee and Count% of 5hel'% 19* >.5., ()9, (!(2, Mr. Gustice 5wa%ne said+ =. . . <hen e$emption is claimed, it must 'e shown indu'ita'l% to e$ist. /t the outset, ever% presumption is against it. / well-founded dou't is fatal to the claim. It is onl% when the terms of the concession are too e$plicit to admit fairl% of an% other construction that the proposition can 'e supported.= The ta$ e$emption must 'e e$pressed in the statute in clear language that leaves no dou't of the intention of the legislature to grant such e$emption. /nd, even if it is granted, the e$emption must 'e interpreted in strictissimi +urisagainst the ta$pa%er and li'erall% in favor of the ta$ing authorit%.", In the present case, petitioner :ustifies its claim of ta$ e$emption '% strained inferences. First, it cites ?./. 3o. )9,*, otherwise -nown as the Pu'lic Telecommunications Polic% /ct of the Philippines, S,& of which reads+ 5.CTIA3 ,&. $ uality of Treatment in the Telecommunications Industry. K /n% advantage, favor, privilege, e$emption, or immunit% granted under e$isting franchises, or ma% hereafter 'e granted, shall ipso facto 'ecome part of previousl% granted telecommunications franchises and shall 'e accorded immediatel% and unconditionall% to the grantees of such franchises+ Provided, however, That the foregoing shall neither appl% to nor affect provisions of telecommunications franchises concerning territor% covered '% the franchise, the life span of the franchise, or the t%pe of service authoriHed '% the franchise. Petitioner then claims that 5mart and 7lo'e en:o% e$emption from the pa%ment of the franchise ta$ '% virtue of their legislative franchises per opinion of the 4ureau of 8ocal 7overnment Finance of the 6epartment of Finance. Finall%, it argues that 'ecause 5mart and 7lo'e are e$empt from the franchise ta$, it follows that it must li-ewise 'e e$empt from the ta$ 'eing collected '% the Cit% of 6avao 'ecause the grant of ta$ e$emption to 5mart and 7lo'e ipso facto e$tended the same e$emption to it. The acceptance of petitioner0s theor% would result in a'surd conse;uences. To illustrate+ In its franchise, 7lo'e is re;uired to pa% a franchise ta$ of onl% one and one-half percentum 1"TP2 of all gross receipts from its transactions while 5mart is re;uired to pa% a ta$ of three percent 1&P2 on all gross receipts from 'usiness transacted. Petitioner0s theor% would re;uire that, to level the pla%ing field, an% =advantage, favor, privilege, e$emption, or immunit%= granted to 7lo'e must 'e e$tended to all telecommunications companies, including 5mart. If, later, Congress again grants a franchise to another telecommunications compan% imposing, sa%, one percent 1"P2 franchise ta$, then all other telecommunications franchises will have to 'e ad:usted to =level the pla%ing

field= so to spea-. This could not have 'een the intent of Congress in enacting S,& of ?ep. /ct )9,*. Petitioner0s theor% will leave the 7overnment with the 'urden of having to -eep trac- of all granted telecommunications franchises, lest some companies 'e treated une;uall%. It is different if Congress enacts a law specificall% granting uniform advantages, favor, privilege, e$emption, or immunit% to all telecommunications entities. The fact is that the term =e$emption= in S,& is too general. / cardinal rule in statutor% construction is that legislative intent must 'e ascertained from a consideration of the statute as a whole and not merel% of a particular provision. For, ta-en in the a'stract, a word or phrase might easil% conve% a meaning which is different from the one actuall% intended. / general provision ma% actuall% have a limited application if read together with other provisions. "& @ence, a consideration of the law itself in its entiret% and the proceedings of 'oth @ouses of Congress is in order."# /rt. I of ?ep. /ct 3o. )9,* contains the general provisions, stating that the /ct shall 'e -nown as the Pu'lic Telecommunications Polic% /ct of the Philippines, and a definition of terms."* /rt. II provides for its policies and o':ectives, which is to foster the improvement and e$pansion of telecommunications services in the countr% through+ 1"2 the construction of telecommunications infrastructure and interconnection facilities, having in mind the efficient use of the radio fre;uenc% spectrum and e$tension of 'asic services to areas not %et served; 1,2 fair, :ust, and reasona'le rates and tariff charges; 1&2 sta'le, transparent, and fair administrative processes; 1#2 reliance on private enterprise for direct provision of telecommunications services; 1*2 dispersal of ownership of telecommunications entities in compliance with the constitutional mandate to democratiHe the ownership of pu'lic utilities; 1(2 encouragement of the esta'lishment of interconnection with other countries to provide access to international communications highwa%s and development of a competitive e$port-oriented domestic telecommunications manufacturing industr%; and 1)2 development of human resources s-ills and capa'ilities to sustain the growth and development of telecommunications."( /rt. III provides for its administration. The operational and administrative functions are delegated to the 3ational Telecommunications Commission 13TC2, while polic%ma-ing, research, and negotiations in international telecommunications matters are left with the 6epartment of Transportation and Communications.") /rt. IF classifies the categories of telecommunications entities as+ 8ocal .$change Aperator, Inter-.$change Carrier, International Carrier, Falue-/dded 5ervice Provider, Mo'ile ?adio 5ervices, and ?adio Paging 5ervices."! /rt. F provides for the use of other services and facilities, such as customer premises e;uipment, which ma% 'e used within the premises of telecommunications su'scri'ers su':ect onl% to the re;uirement that it is t%peapproved '% the 3TC, and radio fre;uenc% spectrum, the assignment of which shall 'e su':ect to periodic review. "9

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/rt. FI, entitled Franchise, ?ates and ?evenue 6etermination, provides for the re;uirement to o'tain a franchise from Congress and a Certificate of Pu'lic Convenience and 3ecessit% from the 3TC 'efore a telecommunications entit% can 'egin its operations. It also provides for the 3TC0s residual power to regulate the rates or tariffs when ruinous competition results or when a monopol% or a cartel or com'ination in restraint of free competition e$ists and the rates or tariffs are distorted or una'le to function freel% and the pu'lic is adversel% affected. There is also a provision relating to revenue sharing arrangements 'etween inter-connecting carriers., /rt. FII provides for the rights of telecommunications users.," /rt. FIII, entitled Telecommunications 6evelopment, where S,& is found, provides for pu'lic ownership of telecommunications entities, privatiHation of e$isting facilities, and the e;ualit% of treatment provision.,, /rt. II contains the Final Provisions.,& ?./. 3o. )9,* is thus a legislative enactment designed to set the national polic% on telecommunications and provide the structures to implement it to -eep up with the technological advances in the industr% and the needs of the pu'lic. The thrust of the law is to promote graduall% the deregulation of the entr%, pricing, and operations of all pu'lic telecommunications entities and thus promote a level pla%ing field in the telecommunications industr%. ,#There is nothing in the language of S,& nor in the proceedings of 'oth the @ouse of ?epresentatives and the 5enate in enacting ?./. 3o. )9,* which shows that it contemplates the grant of ta$ e$emptions to all telecommunications entities, including those whose e$emptions had 'een withdrawn '% the 87C. <hat this Court said in Asiatic Petroleum -o2 v2 5lanes,* applies mutatis mutandis to this case+ =<hen e$emption is claimed, it must 'e shown indu'ita'l% to e$ist. /t the outset, ever% presumption is against it. / wellfounded dou't is fatal to the claim. It is onl% when the terms of the concession are too e$plicit to admit fairl% of an% other construction that the proposition can 'e supported.= In this case, the word =e$emption= in S,& of ?./. 3o. )9,* could contemplate e$emption from certain regulator% or reporting re;uirements, 'earing in mind the polic% of the law. It is noteworth% that, in holding 5mart and 7lo'e e$empt from local ta$es, the 487F did not 'ase its opinion on S,& 'ut on the fact that the franchises granted to them after the effectivit% of the 87C e$empted them from the pa%ment of local franchise and 'usiness ta$es. ,econd. In the case of petitioner, the 487F opined that S,& of ?./. 3o. )9,* amended the franchise of petitioner and in effect restored its e$emptions from local ta$es. Petitioner contends that courts should not set aside conclusions reached '% the 487F 'ecause its function is precisel% the stud% of local ta$ pro'lems and it has necessaril% developed an e$pertise on the su':ect. To 'e sure, the 487F is not an administrative agenc% whose findings on ;uestions of fact are given weight and

deference in the courts. The authorities cited '% petitioner pertain to the Court of Ta$ /ppeals,,( a highl% specialiHed court which performs :udicial functions as it was created for the review of ta$ cases.,) In contrast, the 487F was created merel% to provide consultative services and technical assistance to local governments and the general pu'lic on local ta$ation, real propert% assessment, and other related matters, among others.,! The ;uestion raised '% petitioner is a legal ;uestion, to wit, the interpretation of S,& of ?./. 3o. )9,*. There is, therefore, no 'asis for claiming e$pertise for the 487F that administrative agencies are said to possess in their respective fields. Petitioner li-ewise argues that the 487F en:o%s the presumption of regularit% in the performance of its dut%. It does en:o% this presumption, 'ut this has nothing to do with the ;uestion in this case. This case does not concern the regularit% of performance of the 487F in the e$ercise of its duties, 'ut the correctness of its interpretation of a provision of law. In sum, it does not appear that, in approving S,& of ?./. 3o. )9,*, Congress intended it to operate as a 'lan-et ta$ e$emption to all telecommunications entities. /ppl%ing the rule of strict construction of laws granting ta$ e$emptions and the rule that dou'ts should 'e resolved in favor of municipal corporations in interpreting statutor% provisions on municipal ta$ing powers, we hold that S,& of ?./. 3o. )9,* cannot 'e considered as having amended petitioner0s franchise so as to entitle it to e$emption from the imposition of local franchise ta$es. Conse;uentl%, we hold that petitioner is lia'le to pa% local franchise ta$es in the amount of P&,(!",9!*.), for the period covering the first to the fourth ;uarter of "999 and that it is not entitled to a refund of ta$es paid '% it for the period covering the first to the third ;uarter of "99!. <@.?.FA?., the petition for review on certiorari is 6.3I.6 and the decision of the ?egional Trial Court, 4ranch "&, 6avao Cit% is /FFI?M.6. 5A A?6.?.6.

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