Professional Documents
Culture Documents
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TAX 1- 3RD BATCH ON CONSTITUTIONAL
LIMITATIONS UP TO THE LAST
FULLTEXTS
CASE NO. 1
AZCUNA, J.:
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432,[3] was
signed into law by President Gloria Macapagal-Arroyo and it became effective
on March 21, 2004. Section 4(a) of the Act states:
...
The establishment may claim the discounts granted under (a),
(f), (g) and (h) as tax deduction based on the net cost of the goods
sold or services rendered: Provided, That the cost of the discount shall
be allowed as deduction from gross income for the same taxable year
that the discount is granted. Provided, further, That the total amount
of the claimed tax deduction net of value added tax if applicable, shall
be included in their gross sales receipts for tax purposes and shall be
subject to proper documentation and to the provisions of the National
Internal Revenue Code, as amended.[4]
On May 28, 2004, the DSWD approved and adopted the Implementing
Rules and Regulations of R.A. No. 9257, Rule VI, Article 8 of which states:
Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior citizens.
This is because the discount is treated as a deduction, a tax-deductible expense that
is subtracted from the gross income and results in a lower taxable income. Stated
otherwise, it is an amount that is allowed by law[15] to reduce the income prior to
the application of the tax rate to compute the amount of tax which is due.[16] Being
a tax deduction, the discount does not reduce taxes owed on a peso for peso basis
but merely offers a fractional reduction in taxes owed.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. The measure is not the takers gain but
the owners loss. The word just is used to intensify the meaning of the
word compensation, and to convey the idea that the equivalent to be rendered for
the property to be taken shall be real, substantial, full and ample.[18]
A tax deduction does not offer full reimbursement of the senior citizen
discount. As such, it would not meet the definition of just compensation.[19]
Having said that, this raises the question of whether the State, in promoting
the health and welfare of a special group of citizens, can impose upon private
establishments the burden of partly subsidizing a government program.
The Senior Citizens Act was enacted primarily to maximize the contribution
of senior citizens to nation-building, and to grant benefits and privileges to them
for their improvement and well-being as the State considers them an integral part
of our society.[20]
The priority given to senior citizens finds its basis in the Constitution as set
forth in the law itself. Thus, the Act provides:
...
The law is a legitimate exercise of police power which, similar to the power
of eminent domain, has general welfare for its object. Police power is not capable
of an exact definition, but has been purposely veiled in general terms to underscore
its comprehensiveness to meet all exigencies and provide enough room for an
efficient and flexible response to conditions and circumstances, thus assuring the
greatest benefits. [22] Accordingly, it has been described as the most essential,
insistent and the least limitable of powers, extending as it does to all the great
public needs.[23] It is [t]he power vested in the legislature by the constitution to
make, ordain, and establish all manner of wholesome and reasonable laws, statutes,
and ordinances, either with penalties or without, not repugnant to the constitution,
as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same.[24]
In treating the discount as a tax deduction, petitioners insist that they will
incur losses because, referring to the DOF Opinion, for every P1.00 senior citizen
discount that petitioners would give, P0.68 will be shouldered by them as
only P0.32 will be refunded by the government by way of a tax deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-
hypertensive maintenance drug Norvasc as an example. According to the latter, it
acquires Norvasc from the distributors at P37.57 per tablet, and retails it at P39.60
(or at a margin of 5%). If it grants a 20% discount to senior citizens or an amount
equivalent to P7.92, then it would have to sell Norvasc at P31.68 which translates
to a loss from capital of P5.89 per tablet. Even if the government will allow a tax
deduction, only P2.53 per tablet will be refunded and not the full amount of the
discount which is P7.92. In short, only 32% of the 20% discount will be
reimbursed to the drugstores.[28]
The Court is not oblivious of the retail side of the pharmaceutical industry
and the competitive pricing component of the business. While the Constitution
protects property rights, petitioners must accept the realities of business and the
State, in the exercise of police power, can intervene in the operations of a business
which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of
the Constitution provides the precept for the protection of property, various laws
and jurisprudence, particularly on agrarian reform and the regulation of contracts
and public utilities, continuously serve as a reminder that the right to property can
be relinquished upon the command of the State for the promotion of public
good.[30]
Undeniably, the success of the senior citizens program rests largely on the
support imparted by petitioners and the other private establishments concerned.
This being the case, the means employed in invoking the active participation of the
private sector, in order to achieve the purpose or objective of the law, is reasonably
and directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a
legislative act.[31]
No costs.
SO ORDERED.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
CASE NO. 2-
REYES VS ALMANZOR 196 SCRA 322 ( IDEM: PREVIOUS FT)
CASE NO. 3
[G.R. No. 119761. August 29, 1996]
DECISION
VITUG, J.:
"x x x xxx x x x.
"(1) On locally manufactured cigarettes which are currently classified and taxed
at fifty-five percent (55%) or the exportation of which is not authorized by contract
or otherwise, fifty-five (55%) provided that the minimum tax shall not be less than
Five Pesos (P5.00) per pack.
"x x x x x x x x x.
About a month after the enactment and two (2) days before the
effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC
37-93"), was issued by the BIR the full text of which expressed:
"REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
July 1, 1993
"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION'
cigarettes which are locally manufactured are appropriately considered as locally
manufactured cigarettes bearing a foreign brand, this Office is compelled to review
the previous rulings on the matter.
"Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956,
provides:
"Under the foregoing, the test for imposition of the 55% ad valorem tax on
cigarettes is that the locally manufactured cigarettes bear a foreign brand regardless
of whether or not the right to use or title to the foreign brand was sold or
transferred by its owner to the local manufacturer. The brand must be originally
owned by a foreign manufacturer or producer. If ownership of the cigarette brand
is, however, not definitely determinable, 'x x x the listing of brands manufactured
in foreign countries appearing in the current World Tobacco Directory shall
govern. x x x'
(SGD) LIWAYWAY
VINZONS-CHATO
Commissioner"
On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner
Victor A. Deoferio, Jr., sent via telefax a copy of RMC 37-93 to Fortune
Tobacco but it was addressed to no one in particular. On 15 July 1993,
Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC
37-93.
In a letter, dated 19 July 1993, addressed to the appellate division of
the BIR, Fortune Tobacco, requested for a review, reconsideration and
recall of RMC 37-93. The request was denied on 29 July 1993. The
following day, or on 30 July 1993, the CIR assessed Fortune Tobacco
for ad valoremtax deficiency amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with the
CTA. [8]
On 10 August 1994, the CTA upheld the position of Fortune Tobacco
and adjudged:
In its resolution, dated 11 October 1994, the CTA dismissed for lack of
merit the motion for reconsideration.
The CIR forthwith filed a petition for review with the Court of Appeals,
questioning the CTA's 10th August 1994 decision and 11th October 1994
resolution. On 31 March 1993, the appellate court's Special Thirteenth
Division affirmed in all respects the assailed decision and resolution.
In the instant petition, the Solicitor General argues: That -
"(2) In the fixing of rates, no rule or final order shall be valid unless the proposed
rates shall have been published in a newspaper of general circulation at least two
(2) weeks before the first hearing thereon.
"In addition such rule must be published. On the other hand, interpretative rules
are designed to provide guidelines to the law which the administrative agency is in
charge of enforcing." [12]
"It has been observed that one of the problem areas bearing on compliance with
Internal Revenue Tax rules and regulations is lack or insufficiency of due notice to
the tax paying public. Unless there is due notice, due compliance therewith may
not be reasonably expected. And most importantly, their strict enforcement could
possibly suffer from legal infirmity in the light of the constitutional provision on
`due process of law' and the essence of the Civil Code provision concerning
effectivity of laws, whereby due notice is a basic requirement (Sec. 1, Art. IV,
Constitution; Art. 2, New Civil Code).
"In order that there shall be a just enforcement of rules and regulations, in
conformity with the basic element of due process, the following procedures are
hereby prescribed for the drafting, issuance and implementation of the said
Revenue Tax Issuances:
"(1). This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit
Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue
Memorandum Orders bearing on internal revenue tax rules and regulations.
"(2). Except when the law otherwise expressly provides, the aforesaid internal
revenue tax issuances shall not begin to be operative until after due notice thereof
may be fairly presumed.
"Due notice of the said issuances may be fairly presumed only after the following
procedures have been taken:
The court quoted at length from the transcript of the hearing conducted on
10 August 1993 by the Committee on Ways and Means of the House of
Representatives; viz:
"x x x xxx x x x.
"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is
why I felt that we . . . I wanted to come up with a more extensive coverage and
precisely why I asked that revenue memorandum circular that would cover all
those similarly situated would be prepared but because of the lack of time and I
came out with a study of RA 7654, it would not have been possible to really come
up with the reclassification or the proper classification of all brands that are listed
there. x x x' (italics supplied) (Exhibit 'FF-2d', page IX-1)
"x x x xxx x x x.
"HON. DIAZ. But did you not consider that there are similarly situated?
"MS. CHATO. That is precisely why, Sir, after we have come up with this
Revenue Memorandum Circular No. 37-93, the other brands came about the would
have also clarified RMC 37-93 by I was saying really because of the fact that I was
just recently appointed and the lack of time, the period that was allotted to us to
come up with the right actions on the matter, we were really caught by the July 3
deadline. But in fact, We have already prepared a revenue memorandum circular
clarifying with the other . . . does not yet, would have been a list of locally
manufactured cigarettes bearing a foreign brand for excise tax purposes which
would include all the other brands that were mentioned by the Honorable
Chairman. (Italics supplied) (Exhibit 'FF-2-d,' par. IX-4)."18
All taken, the Court is convinced that the hastily promulgated RMC 37-
93 has fallen short of a valid and effective administrative issuance.
WHEREFORE, the decision of the Court of Appeals, sustaining that of
the Court of Tax Appeals, is AFFIRMED. No costs.
SO ORDERED.
TAX CASES ON EQUAL PROTECTION OF THE LAW
CASE NO. 1
GOMEZ VS PALOMAR ( IDEM : PREVIOUS CASE)
CASE NO. 2
PERFECTO, J.:
SEC. 3. The fees herein prescribed shall not be paid where the
admission fees or charge are collection for and in behalf of any
charitable education or religion institution or association.
All place of amusement which are operate by U.S. Army and Navy
with fund belonging to the U.S. Government are hereby exempted
from fees herein imposed.
SEC. 4. Any person violation any of the provision of this ordinance
shall upon conviction thereof be punished by a fine of not more than
P200 or by imprisonment for not more than six months or by both
such fine and imprisonment in the discretion of the court. If the
violation is committed by the club firm or corporation the manager the
managing director or person charged with the management of the
business of such club firm or corporation shall be criminally
responsible therefor.
Defendants allege also that since May 1, 1946, when the ordinance in
question took effect plaintiffs have been charging the theater-going public
increased prices for admission to the cinematographs owned and operated
to the graduated tax imposed by said ordinance and as a result while
refusing to pay said tax but at the same time collecting an amount equal to
said tax plaintiffs have taken undue advantage of said ordinance to realized
more profits.
Plaintiffs appellants assign in the their brief three errors committed by the
trial court. We will consider them separately.
Appellants contend that the lower court erred in holding that under section
2444 (m) of the Revised administrative Code the Municipal Board of the
City ofManila had the power to enact Ordinance No. 2958.
To tax fix the license fee and regulate the business of hotels
restaurants refreshment places, cafes, lodging houses, boarding
houses livery garages warehouses, pawnshops theaters,
cinematographs; and further to fix the location of and to tax fix the
license fee for and regulate the businessof lively stables, the license
fee for and regulate the business of livery stable, boarding stables,
embalmers, public billiard table public pool tables, bowling alleys,
dance halls, public dancing halls, cabarets, circusand other similar
parades, public vehicles, race tracks, horse races,Junk dealers,
theatrical performances, public exhibitions, circus andother
performances and places of amusements, match factories,
blacksmith shops, foundries, steam boilers, lumber yards, shipyards,
thestorage and sale of gunpowder, tar, pitch, resin, coal, oil,
gasoline,benzene, turpentine, 'hemp, cotton, nitroglycerin, petroleum
or any Ofthe products thereof and of all other highly combustible or
explosivematerials and other establishment likely to endanger the
public safety or give rise to conflagration or explosion and subject to
the provision of ordinance issue by the (Philippines Health Service)
Bureau of Health in accordance with law tanneries, renders tallow
chandlers bone factories and soap factories.
By virtue of the specific power granted in the above quoted provision of the
Revised Administration Code Ordinance No. 2958 was enacted.
(b) When the amount paid for admission exceeds twenty-nine but
does not exceed thirty-nine centavos, three centavos on each
admission;
(c) When the amount paid for admission exceeds thirty-nine centavos
but does not exceed forty-nine centavos four centavos on each
admission.
(d) When the amount paid for admission exceeds forty-nine centavos
but does not exceed fifty-nine centavos five admission.
(e) When the amount paid for admission exceeds fifty-nine centavos
but does not exceed sixty-nine centavos six centavos on each
admission.
(f) When the amount paid for admission exceeds sixty-nine centavos
but does not exceed seventy nine centavos seven centavos on each
admission.
(g) When the amount paid for admission exceeds seventy nine
centavos but does not exceed eighty-nine centavos eight centavos on
each admission;
SEC. 261. Exemption. The tax herein imposed shall not be paid
where the admission fee or charges are collected by or for and in
behalf of any religious, charitable, scientific, or educational institution
or association, and where no part of the net proceeds of such
admission fees or charges inures to the benefit of any private
stockholder or individual.
Ordinance No. 2958 does not specify the kind of the tax sought to be
imposed but the seven schedules and other details of said ordinance are,
in every respect, identical with the amusement tax provided by section 260
of Commonwealth Act No. 466.
The very fact that section 2444 (m) of the Revised Administrative Code
includes theaters, cinematographs, public billiard tables, public pool tables,
bowling alleys, dance halls, public dancing halls, cabarets, circuses and
other similar places, race tracks, horse races, theatrical performances,
public exhibition, circus and other performances and places of
amusements, will show conclusively that the power to tax amusement is
expressly included within the power granted by section 2444(m) of the
Revised Administrative Code.
Plaintiffs-appellants contend that the lower court erred in not holding that
section 2444 (m) of the Revised Administrative Code was repealed or the
power therein contained was withdrawn by the National Assembly by the
enactment of Commonwealth Act No. 466 known as the National Internal
Revenue Code.
In support of this contention, plaintiffs aver that the Charter of the City of
Manila, containing section 2444(m) of the Revised Administrative Code,
was enacted on December 8, 1929. On April 25, 1940, the National
Assembly enacted Commonwealth Act No. 466, including provisions on
amusement tax, covering the whole field on taxation and provided for more
than what the ordinance in question has provided. As a result, there are
two taxing powers seeking to occupy exactly the same field of legislation,
and so the apparent conflict must be resolved with the conclusion that, with
the enactment of Commonwealth Act No. 466, as later amended by
Republic Act No. 39, section 2444(m) of the Revised Administrative Code
has been impliedly repealed and the power therein delegated to the City of
Manila withdrawn.
Finally, plaintiffs contend that the trial court erred in not holding that
Ordinance No. 2958 violated the principle of equality and uniformity of
taxation enjoined by the Constitution (sec. 22, sub-sec. 1, Art. VI,
Constitution of the philippines).
To support this contenttion, appellantts point out to the fact that the
ordinance in question does not tax "many more kinds of amusements" than
those therein specified, such as "race tracks, cockpits, cabarets, concert
halls, circuses, and other places of amusement." the argument has
absolutely no merit. The fact that some places of amusement are not taxed
while others, such as cinematographs, theaters, vaudeville companies,
theatrical shows, and boxing exhibitions and other kinds of amusements or
places of amusement are taxed, is no argument at all against the equality
and uniformity of the tax imposition. Equality and uniformity of the tax
imposition. Equality and uniformity in taxation means that all taxable
articles or kinds of property of the same class shall be taxed at the same
rate. The taxing power has the authority to make reasonable and natural
classifications for purposes of taxation; and the appellants cannot point out
what places of amusement taxed by the ordinance do not constitute a class
by themselves and which can be confused with those not included in the
ordinance.
The judgment of the trial court is affirmed with costs against appellants.
CASE NO. 3
TUASON, J.:
This action was instituted for a declaratory relief by the Manila Race Horses
Trainers Association, Inc., a non-stock corporation duly organized and
existing under and by virtue of the laws of the Philippines, who allege that
they are owners of boarding stables for race horses and that their rights as
such are affected by Ordinance No. 3065 of the City of Manila approved on
July 1, 1947.1 They made the Mayor of Manila defendant and prayed that
said ordinance be declared invalid as violative of the Philippine
Constitution.
The case was submitted on the pleadings, and the decision was that the
ordinance in question "is constitutional and valid and has been enacted in
accordance with the powers of the Municipal Board granted by the Charter
of the City of Manila."
It is also plain from the text of the whole ordinance that the number of
horses is used in the assessment purely as a method of fixing an equitable
and practical distribution of the burden imposed by the measure. Far from
being obnoxious, the method is fair and just. It is but fair and just that for a
boarding stable where only one horse is maintained proportionately less
amount should be exacted than for a stable where more horses are kept
and from which greater income is derived.
We do not share plaintiff's opinion, apropos the second proposition, that the
ordinance in question is discriminatory and savors of class legislation. In
taxing only boarding stables for race horses, we do not believe that the
ordinance, makes arbitrary classification. In the case of Eastern Theatrical
Co. Inc., vs. Alfonso, 46 Off. Gaz. Supp. to No. 11, p. 303,* it was said
there is equality and uniformity in taxation if all articles or kinds of property
of the same class are taxed at the same rate. Thus, it was held in that
case, that "the fact that some places of amusement are not taxed while
others, such as cinematographs, theaters, vaudeville companies, theatrical
shows, and boxing exhibitions and other kinds of amusements or places of
amusement are taxed, is not argument at all against the equality and
uniformity of tax imposition." Applying this criterion to the present case,
there would be discrimination if some boarding stables of the same class
used for the same number of horses were not taxed or were made to pay
less or more than others.
From the viewpoint of economics and public policy the taxing of boarding
stables for race horses to the exclusion of boarding stables for horses
dedicated to other purposes is not indefensible. The owners of boarding
stables for race horses and, for that matter, the race horse owners
themselves, who in the scheme of shifting may carry the taxation burden,
are a class by themselves and appropriately taxed where owners of other
kinds of horses are taxed less or not at all, considering that equity in
taxation is generally conceived in terms of ability to pay in relation to the
benefits received by the taxpayer and by the public from the business or
property taxed. Race horses are devoted to gambling if legalized, their
owners derive fat income and the public hardly any profit from horse racing,
and this business demands relatively heavy police supervision. Taking
everything into account, the differentiation against which the plaintiffs
complain conforms to the practical dictates of justice and equity and is not
discrimatory within the meaning of the Constitution.
Not having been raised in the pleading, this question was properly ignored,
not to say that even it had been raised it would not have been available as
basis for a declaration of nullity of the ordinance. The clause of the
ordinance taxing or licensing boarding stables for race horses does not
prejudice the plaintiffs in any material way, and it is well settled that a
person who is not adversely affected by a licensing ordinance may not
attack its validity. Stated differently, he may not complain that a licensing
ordinance is invalid as against a class other than that to which he belongs.
(62 C. J. S.830, 831.) By analogy, where a municipal ordinance is valid in
some of its parts and invalid as to others and the valid parts are separable
from the invalid ones in which latter case the valid provisions stand as
operative the plaintiff may contest the validity of the provisions that injure
his interest but not those that do not.
We are of the opinion that the trial court committed no error and the
judgment is affirmed with costs against the plaintiff-appellants.
CASE NO. 4
PUNSALAN VERSUS MUN. BOARD OF MANILA ( IDEM: PREVIOUS CASE)
CASE NO. 5
FERNANDO, J.:
Unless it can be shown then that such a grant of authority is not broad
enough to justify the enactment of the ordinance now assailed, the decision
appealed from must be affirmed. The task confronting defendant-appellant,
therefore, was far from easy. Why he failed is understandable, considering
that even a cursory reading of the above amendment readily discloses that
the enactment of the ordinance in question finds support in the power thus
conferred.
There is here a misapprehension of the Judiciary Act. The City Court has
jurisdiction. Only recently, on September 7, 1968 to be exact, we rejected a
contention similar in character in Nemenzo v. Sabillano.4 The plaintiff in
that case filed a claim for the payment of his salary before the Justice of the
Peace Court of Pagadian, Zamboanga del Sur. The question of jurisdiction
was raised; the defendant Mayor asserted that what was in issue was the
enforcement of the decision of the Commission of Civil Service; the Justice
of the Peace Court was thus without jurisdiction to try the case. The above
plea was curtly dismissed by Us, as what was involved was "an ordinary
money claim" and therefore "within the original jurisdiction of the Justice of
the Peace Court where it was filed, considering the amount involved." Such
is likewise the situation here.
The above would clearly indicate how lacking in merit is this argument
based on double taxation.
Now, as to the claim that there was a violation of the rule of uniformity
established by the constitution. According to the challenged ordinance, a
real estate dealer who leases property worth P50,000 or above must pay
an annual fee of P100. If the property is worth P10,000 but not over
P50,000, then he pays P50 and P24 if the value is less than P10,000. On
its face, therefore, the above ordinance cannot be assailed as violative of
the constitutional requirement of uniformity. In Philippine Trust Company v.
Yatco,12 Justice Laurel, speaking for the Court, stated: "A tax is considered
uniform when it operates with the same force and effect in every place
where the subject may be found."
There was no occasion in that case to consider the possible effect on such
a constitutional requirement where there is a classification. The opportunity
came in Eastern Theatrical Co. v. Alfonso.13 Thus: "Equality and uniformity
in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation; ..."
About two years later, Justice Tuason, speaking for this Court in Manila
Race Horses Trainers Assn. v. De la Fuente14 incorporated the above
excerpt in his opinion and continued: "Taking everything into account, the
differentiation against which the plaintiffs complain conforms to the practical
dictates of justice and equity and is not discriminatory within the meaning of
the Constitution."
To satisfy this requirement then, all that is needed as held in another case
decided two years later, 15 is that the statute or ordinance in question
"applies equally to all persons, firms and corporations placed in similar
situation." This Court is on record as accepting the view in a leading
American case16 that "inequalities which result from a singling out of one
particular class for taxation or exemption infringe no constitutional
limitation."17
It is thus apparent from the above that in much the same way that the plea
of double taxation is unavailing, the allegation that there was a violation of
the principle of uniformity is inherently lacking in persuasiveness. There is
no need to pass upon the other allegations to assail the validity of the
above ordinance, it being maintained that the license fees therein imposed
"is excessive, unreasonable and oppressive" and that there is a failure to
observe the mandate of equal protection. A reading of the ordinance will
readily disclose their inherent lack of plausibility.
3. That would dispose of all the errors assigned, except the last two, which
would predicate a grievance on the complaint having been started by the
City Treasurer rather than the City Mayor of Baguio. These alleged errors,
as was the case with the others assigned, lack merit.
In much the same way that an act of a department head of the national
government, performed within the limits of his authority, is presumptively
the act of the President unless reprobated or disapproved,18 similarly the
act of the City Treasurer, whose position is roughly analogous, may be
assumed to carry the seal of approval of the City Mayor unless repudiated
or set aside. This should be the case considering that such city official is
called upon to see to it that revenues due the City are collected. When
administrative steps are futile and unavailing, given the stubbornness and
obduracy of a taxpayer, convinced in good faith that no tax was due,
judicial remedy may be resorted to by him. It would be a reflection on the
state of the law if such fidelity to duty would be met by condemnation rather
than commendation.
So, much for the analytical approach. The conclusion thus reached has a
reinforcement that comes to it from the functional and pragmatic test. If a
city treasurer has to await the nod from the city mayor before a municipal
ordinance is enforced, then opportunity exists for favoritism and undue
discrimination to come into play. Whatever valid reason may exist as to
why one taxpayer is to be accorded a treatment denied another, the
suspicion is unavoidable that such a manifestation of official favor could
have been induced by unnamed but not unknown consideration. It would
not be going too far to assert that even defendant-appellant would find no
satisfaction in such a sad state of affairs. The more desirable legal doctrine
therefore, on the assumption that a choice exists, is one that would do
away with such temptation on the part of both taxpayer and public official
alike.
CASE NO. 6
FERNANDO, C.J.:
The success of the challenge posed in this suit for declaratory relief or
prohibition proceeding 1 on the validity of Section I of Batas Pambansa Blg.
135 depends upon a showing of its constitutional infirmity. The assailed
provision further amends Section 21 of the National Internal Revenue Code
of 1977, which provides for rates of tax on citizens or residents on (a)
taxable compensation income, (b) taxable net income, (c) royalties, prizes,
and other winnings, (d) interest from bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and similar
arrangements, (e) dividends and share of individual partner in the net
profits of taxable partnership, (f) adjusted gross income. 2 Petitioner 3 as
taxpayer alleges that by virtue thereof, "he would be unduly discriminated
against by the imposition of higher rates of tax upon his income arising
from the exercise of his profession vis-a-vis those which are imposed upon
fixed income or salaried individual taxpayers. 4 He characterizes the above
sction as arbitrary amounting to class legislation, oppressive and capricious
in character 5For petitioner, therefore, there is a transgression of both the
equal protection and due process clauses 6 of the Constitution as well as of
the rule requiring uniformity in taxation. 7
This Court finds such a plea more than justified. The petition must be
dismissed.
1. It is manifest that the field of state activity has assumed a much wider
scope, The reason was so clearly set forth by retired Chief Justice
Makalintal thus: "The areas which used to be left to private enterprise and
initiative and which the government was called upon to enter optionally,
and only 'because it was better equipped to administer for the public
welfare than is any private individual or group of individuals,' continue to
lose their well-defined boundaries and to be absorbed within activities that
the government must undertake in its sovereign capacity if it is to meet the
increasing social challenges of the times." 11 Hence the need for more
revenues. The power to tax, an inherent prerogative, has to be availed of to
assure the performance of vital state functions. It is the source of the bulk
of public funds. To praphrase a recent decision, taxes being the lifeblood of
the government, their prompt and certain availability is of the essence. 12
2. The power to tax moreover, to borrow from Justice Malcolm, "is an
attribute of sovereignty. It is the strongest of all the powers of of
government." 13 It is, of course, to be admitted that for all its plenitude 'the
power to tax is not unconfined. There are restrictions. The Constitution sets
forth such limits . Adversely affecting as it does properly rights, both the
due process and equal protection clauses inay properly be invoked, all
petitioner does, to invalidate in appropriate cases a revenue measure. if it
were otherwise, there would -be truth to the 1803 dictum of Chief Justice
Marshall that "the power to tax involves the power to destroy." 14 In a
separate opinion in Graves v. New York, 15 Justice Frankfurter, after
referring to it as an 1, unfortunate remark characterized it as "a flourish of
rhetoric [attributable to] the intellectual fashion of the times following] a free
use of absolutes." 16 This is merely to emphasize that it is riot and there
cannot be such a constitutional mandate. Justice Frankfurter could rightfully
conclude: "The web of unreality spun from Marshall's famous dictum was
brushed away by one stroke of Mr. Justice Holmess pen: 'The power to tax
is not the power to destroy while this Court sits." 17 So it is in the
Philippines.
6. Now for equal protection. The applicable standard to avoid the charge
that there is a denial of this constitutional mandate whether the assailed act
is in the exercise of the lice power or the power of eminent domain is to
demonstrated that the governmental act assailed, far from being inspired
by the attainment of the common weal was prompted by the spirit of
hostility, or at the very least, discrimination that finds no support in reason.
It suffices then that the laws operate equally and uniformly on all persons
under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different, both in the privileges conferred
and the liabilities imposed. Favoritism and undue preference cannot be
allowed. For the principle is that equal protection and security shall be
given to every person under circumtances which if not Identical are
analogous. If law be looked upon in terms of burden or charges, those that
fall within a class should be treated in the same fashion, whatever
restrictions cast on some in the group equally binding on the rest." 20 That
same formulation applies as well to taxation measures. The equal
protection clause is, of course, inspired by the noble concept of
approximating the Ideal of the laws benefits being available to all and the
affairs of men being governed by that serene and impartial uniformity,
which is of the very essence of the Idea of law. There is, however, wisdom,
as well as realism in these words of Justice Frankfurter: "The equality at
which the 'equal protection' clause aims is not a disembodied equality. The
Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws
are not abstract propositions. They do not relate to abstract units A, B and
C, but are expressions of policy arising out of specific difficulties, address
to the attainment of specific ends by the use of specific remedies. The
Constitution does not require things which are different in fact or opinion to
be treated in law as though they were the same." 21Hence the constant
reiteration of the view that classification if rational in character is allowable.
As a matter of fact, in a leading case of Lutz V. Araneta, 22 this Court,
through Justice J.B.L. Reyes, went so far as to hold "at any rate, it is
inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that 'inequalities which result from
a singling out of one particular class for taxation, or exemption infringe no
constitutional limitation.'" 23
7. Petitioner likewise invoked the kindred concept of uniformity. According
to the Constitution: "The rule of taxation shag be uniform and
equitable." 24 This requirement is met according to Justice Laurel
in Philippine Trust Company v. Yatco, 25 decided in 1940, when the tax
"operates with the same force and effect in every place where the subject
may be found. " 26 He likewise added: "The rule of uniformity does not call
for perfect uniformity or perfect equality, because this is hardly
attainable." 27 The problem of classification did not present itself in that
case. It did not arise until nine years later, when the Supreme Court held:
"Equality and uniformity in taxation means that all taxable articles or kinds
of property of the same class shall be taxed at the same rate. The taxing
power has the authority to make reasonable and natural classifications for
purposes of taxation, ... . 28 As clarified by Justice Tuason, where "the
differentiation" complained of "conforms to the practical dictates of justice
and equity" it "is not discriminatory within the meaning of this clause and is
therefore uniform." 29 There is quite a similarity then to the standard of
equal protection for all that is required is that the tax "applies equally to all
persons, firms and corporations placed in similar situation." 30
CASE NO. 7
TUASON, J.:
This is an appeal by the City Treasurer of the City of Manila from the
following judgment handed down in the above-entitled cause:
The facts of the case, in so far as they are not in controversy, are these:
The plaintiff was a corporation duly organized and existing under the laws
of the Philippines with principal office in Manila. On December 29, 1941 it
issued to the City Treasurer of Manila, and the City Treasurer accepted
checks No. 628334 for P2,210.52 drawn upon the Philippine Trust
Company with which it had a credit balance of P4,940.17 on its account.
This check was to be applied to plaintiff's land tax for the second semester
of 1941 the exact amount of which was yet undetermine and so it was
entered in the ledger, Exhibit "F", as deposit by the taxpayer. On February
20, 1942, presumably after the exact amount had been verified, which was
P341.60, the balance of P1,868.92, covered by voucher No. 1487 of the
City Treasure's office, was noted in the ledger as a credit to the Juan Luna
Subdivision, Inc.
Further than this, the records of the City Treasurer's office do not show
what was done with the check. But the books of the Philippine Trust
Company do reveal that it was deposited with the Philippine National Bank,
the City Treasurer's sole depository, on December 29, 1941, and that it
was presented by that Bank to the Philippine Trust Company on May 1,
1944 and was cashed by the drawee. Manuel F. Garcia, Assistant
Treasurer of the Philippine Trust Company, testified that soon after his
bank was authorized in March, 1942, to reopen for business (it had been
closed by order of the Japanese military authorities,) it received from the
Philippine National Bank a bundle of checks, including appellees check No.
628334, drawn upon the Philippine Trust Company before the Japanese
occupation and held in abeyance by the Philippine National Bank pending
resumption of operation by the Philippine Trust Company; that these
checks, including the appellee's check, were accepted and the amounts
thereof debited against the respective drawer's accounts; that with respect
to check No. 628334, the operation was effected on May 1, 1944.
The City refused after liberation to refund the plaintiff's deposit or apply it to
such future taxes as might be found due, while the Philippine Trust
Company was unwilling to reverse its debit entry against the Juan Luna
Subdivision, Inc. It was upon this predicament that the Juan Luna
Subdivision, Inc. brought this suit against the City Treasurer and the
Philippine Trust Company as defendants in the alternative. The purpose of
the action is determine which of the two defendants is liable for plaintiff's
check. There is a separate cause of action which concerns the plaintiff and
the City Treasurer alone.
On the main cause of action the burden of the City Treasurer's defense is
that his office was not benefited why the check. He denies that the said
check was cashed "or rather there was no proof that it was." It is pointed
out that Mr. Gibbs, testifying in open court, admitted that he had never
received nor could he have received the cancelled checks;" that "the courts
finding that sum P2,210.52 was in fact and in truth added to the actual cash
of the Treasurer of the City of Manila is based on conjectures and surprises
without any support of pertinent and competent proof;" that "special ledger
sheet of the City Treasurer . . . simply showed that some accounting
transaction in the book value was done or accomplished but these
accounting processes did not show that actual payment had been made
(by the Philippine National Bank) to the City Treasurer, and that the City
Treasurer had in effect received said amount represented by said checks;"
that "the burden of proving that the check in question was in fact paid rest
on the defendant Philippine Trust Company." It is further argued that "there
is a lot of difference between the book value and the cash value of this
check," that the acceptance by the City Treasurer and the issuance of the
Official Receipt No. 755402 on December 29, 1941 in favor of Juan Luna
Subdivision, Inc. did not simultaneously and automatically place in the
hands of the City Treasurer the cash value represented by the said checks
in the amount of P2,210.52".
That the plaintiff's check was deposited by the City Treasurer with the
Philippine National Bank, and the latter was paid the cash equivalent
thereof by the Philippine Trust Company, admits of no doubt. The entries in
the books of the latter bank are not in the least impugned. Whether the City
Treasurer was paid that amount by the Philippine National Bank or given
credit for it, the City Treasurer would neither admit nor deny. He said:
A. Not that I am not willing (to admit); I am willing, but I am not the
right party to admit that the check was actually collected by the City of
Manila from the Philippine Trust Company, The Philippine Trust
Company never submitted any financial statement. To my knowledge,
the City Treasurer of Manila has never been informed by the
Philippine Trust Company or by the Philippine National Bank, which is
the depository of the City of Manila, that same check was collected by
the City Manila from the Philippine National Bank; by that I am not
trying to say that the check was not actually collected by the City.
A. Yes, sir.
A. That is right.
Q. And the Philippine National Bank has not rendered you any
account of its collections?
From the fact that the Philippine National Bank was open throughout the
Japanese occupation and the other facts heretofore admitted or not denied,
it is to be presumed that the Philippine National Bank credited the City
Treasurer with the amount of the check in question, and that the City
Treasurer, taking ordinary care of his concerns, withdrew that amount. This
is in accordance with the presumption that things happened according to
the ordinary course of business and habits. The burden is on the City
Treasurer, not on the plaintiff, to rebut these presumptions.
But the point is not material at all as far as the plaintiff is concerned. What
became of the check or where the money went is a matter between the City
Treasurer and the Philippine National Bank. The drawer of the check had
funds on deposit to meet it; the City Treasurer accepted it and deposited it
with the Philippine National Bank, and the Philippine National Bank,
collected the equivalent amount from the drawee Bank. In the light of these
circumstances, the City Treasurer became the Philippine National Bank's
creditor and the Juan Luna Subdivision, Inc. was released from liability on
its checks. If the City Treasurer did not collect his credit from the Philippine
National Bank or otherwise make use of it, he alone was to blame and
should suffer the consequences of his neglect. That the City Treasurer held
the check merely in trust for plaintiff does not alter the situation as far as his
branch of the case goes.
The plaintiff claims the whole amount of the check contending that taxes for
the last semester of 1941 have been remitted by Commonwealth Act No.
703.
Does this provision cover taxes paid before its enactment as the plaintiff
maintains and the court below held, or does it refer, as the City Treasurer
believes, only to taxes which were still unpaid?
We do not see that literal interpretation of Commonwealth Act No. 703 runs
counter and does violence to its spirit and intention , nor do we think that
such interpretation would be "constitutionally bad" in that "it would unduly
discriminate against taxpayers who had paid in favor of delinquent
taxpayers."
The remission of taxes due and payable to the exclusion of taxes already
collected does not constitute unfair discrimination. Each set of taxes is a
class by itself, and the law would be open to attack as class legislation only
if all taxpayers belonging to one class were not treated alike. They are not.
It is said that the plaintiff's check was in the nature of deposit, held trust by
the City Treasurer, and that for this reason, plaintiff's taxes are to be
regarded as still due and payable. This argument is well taken but only to
the extent of P1,868.92. The amount of P341.60 as early as February 20,
1942, had been applied to the second half of plaintiff's 1941 tax and
become part of the general funds of the city treasury. From that date that
tax was legally and actually paid and settled.
CASE NO. 8
This is a petition for declaratory relief to test the validity of Ordinance No.
3379 passed by the Municipal Board of the City of Manila on March 24,
1950.
The respondents, represented by the city fiscal, contend on their part that
the challenged ordinance imposes a property tax which is within the power
of the City of Manila to impose under its Revised Charter [Section 18 (p) of
Republic Act No. 409], and that the tax in question does not violate the rule
of uniformity of taxation, nor does it constitute double taxation.
The issues having been joined, the Court of First Instance of Manila
sustained the validity of the ordinance and dismissed the petition. Hence
this appeal.
The disputed ordinance was passed by the Municipal Board of the City of
Manila under the authority conferred by section 18 (p) of Republic Act No.
409. Said section confers upon the municipal board the power "to tax motor
and other vehicles operating within the City of Manila the provisions of any
existing law to the contrary notwithstanding." It is contended that this power
is broad enough to confer upon the City of Manila the power to enact an
ordinance imposing the property tax on motor vehicles operating within the
city limits.
Coming now to the ordinance in question, we find that its title refers to it as
"An Ordinance Levying a Property Tax on All Motor Vehicles Operating
Within the City of Manila", and that in its section 1 it provides that the tax
should be 1 per cent ad valorem per annum. It also provides that the
proceeds of the tax "shall accrue to the Streets and Bridges Funds of the
City and shall be expended exclusively for the repair, maintenance and
improvement of its streets and bridges." Considering the wording used in
the ordinance in the light in the purpose for which the tax is created, can we
consider the tax thus imposed as property tax, as claimed by respondents?
The ordinance in question falls under the foregoing rules. While it refers to
property tax and it is fixed ad valoremyet we cannot reject the idea that it is
merely levied on motor vehicles operating within the City of Manila with the
main purpose of raising funds to be expended exclusively for the repair,
maintenance and improvement of the streets and bridges in said city. This
is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent,
for the reason that, under said Act, municipal corporation already
participate in the distribution of the proceeds that are raised for the same
purpose of repairing, maintaining and improving bridges and public
highway (section 73 of the Motor Vehicle Law). This prohibition is intended
to prevent duplication in the imposition of fees for the same purpose. It is
for this reason that we believe that the ordinance in question merely
imposes a license fee although under the cloak of an ad valorem tax to
circumvent the prohibition above adverted to.
It is also our opinion that the ordinance infringes the rule of the uniformity of
taxation ordained by our Constitution. Note that the ordinance exacts the
tax upon all motor vehicles operating within the City of Manila. It does not
distinguish between a motor vehicle for hire and one which is purely for
private use. Neither does it distinguish between a motor vehicle registered
in the City of Manila and one registered in another place but occasionally
comes to Manila and uses its streets and public highways. The distinction
is important if we note that the ordinance intends to burden with the tax
only those registered in the City of Manila as may be inferred from the word
"operating" used therein. The word "operating" denotes a connotation
which is akin to a registration, for under the Motor Vehicle Law no motor
vehicle can be operated without previous payment of the registration fees.
There is no pretense that the ordinance equally applies to motor vehicles
who come to Manila for a temporary stay or for short errands, and it cannot
be denied that they contribute in no small degree to the deterioration of the
streets and public highway. The fact that they are benefited by their use
they should also be made to share the corresponding burden. And yet such
is not the case. This is an inequality which we find in the ordinance, and
which renders it offensive to the Constitution.
CASE NO. 9
Payments for said tax were made, under protest, by Ormoc Sugar
Company, Inc. on March 20, 1964 for P7,087.50 and on April 20, 1964 for
P5,000, or a total of P12,087.50.
On June 1, 1964, Ormoc Sugar Company, Inc. filed before the Court
of First Instance of Leyte, with service of a copy upon the Solicitor General,
a complaint 3 against the City of Ormoc as well as its Treasurer, Municipal
Board and Mayor, alleging that the afore-stated ordinance is
unconstitutional for being violative of the equal protection clause (Sec. 1[1],
Art. III, Constitution) and the rule of uniformity of taxation (Sec. 22[1]), Art.
VI, Constitution), aside from being an export tax forbidden under Section
2287 of the Revised Administrative Code. It further alleged that the tax is
neither a production nor a license tax which Ormoc City under Section 15-
kk of its charter and under Section 2 of Republic Act 2264, otherwise
known as the Local Autonomy Act, is authorized to impose; and that the tax
amounts to a customs duty, fee or charge in violation of paragraph 1 of
Section 2 of Republic Act 2264 because the tax is on both the sale and
export of sugar.
Answering, the defendants asserted that the tax ordinance was
within defendant city's power to enact under the Local Autonomy Act and
that the same did not violate the afore-cited constitutional limitations. After
pre-trial and submission of the case on memoranda, the Court of First
Instance, on August 6, 1964, rendered a decision that upheld the
constitutionality of the ordinance and declared the taxing power of
defendant chartered city broadened by the Local Autonomy Act to include
all other forms of taxes, licenses or fees not excluded in its charter.
The Constitution in the bill of rights provides: ". . . nor shall any
person be denied the equal protection of the laws." (Sec. 1 [1], Art. III)
In Felwa vs. Salas, 5 We ruled that the equal protection clause applies only
to persons or things identically situated and does not bar a reasonable
classification of the subject of legislation, and a classification is reasonable
where (1) it is based on substantial distinctions which make real
differences; (2) these are germane to the purpose of the law; (3) the
classification applies not only to present conditions but also to future
conditions which are substantially identical to those of the present; (4) the
classification applies only to those who belong to the same class.
CASE NO. 11
CASE NO. 11
MENDOZA, J.:
First. Petitioner contends that the Bureau of Food and Drug of the
Department of Health and not the BIR is the competent government agency
to determine the proper classification of food products. Petitioner cites the
opinion of Dr. Quintin Kintanar of the Bureau of Food and Drug to the effect
that copra should be considered "food" because it is produced from
coconut which is food and 80% of coconut products are edible.
On the other hand, the respondents argue that the opinion of the BIR, as
the government agency charged with the implementation and interpretation
of the tax laws, is entitled to great respect.
10 April 1991
QUIN
TIN
L.
KINT
ANA
R,
M.D.,
Ph.D.
Direc
tor
Assis
tant
Secr
etary
of
Healt
h for
Stan
dards
and
Regu
lation
s
The reason for this distinction is that a legislative rule is in the nature of
subordinate legislation, designed to implement a primary legislation by
providing the details thereof. In the same way that laws must have the
benefit of public hearing, it is generally required that before a legislative
rule is adopted there must be hearing. In this connection, the Administrative
Code of 1987 provides:
Third. Petitioner likewise claims that RMC No. 47-91 is discriminatory and
violative of the equal protection clause of the Constitution because while
coconut farmers and copra producers are exempt, traders and dealers are
not, although both sell copra in its original state. Petitioners add that oil
millers do not enjoy tax credit out of the VAT payment of traders and
dealers.
It is not true that oil millers are exempt from VAT. Pursuant to 102 of the
NIRC, they are subject to 10% VAT on the sale of services. Under 104 of
the Tax Code, they are allowed to credit the input tax on the sale of copra
by traders and dealers, but there is no tax credit if the sale is made directly
by the copra producer as the sale is VAT exempt. In the same manner,
copra traders and dealers are allowed to credit the input tax on the sale of
copra by other traders and dealers, but there is no tax credit if the sale is
made by the producer.
This is not so. The sale of agricultural non-food products is exempt from
VAT only when made by the primary producer or owner of the land from
which the same is produced, but in the case of agricultural food products
their sale in their original state is exempt at all stages of production or
distribution. At any rate, the argument that the classification of copra as
agricultural non-food product is counterproductive is a question of wisdom
or policy which should be addressed to respondent officials and to
Congress.
SO ORDERED.
CASE NO. 12
ARTURO M. TOLENTINO,
Petitioner,
G. R. No. 115455
____________________________________________________
__________
RESOLUTION
MENDOZA, J.:
A. Does Republic Act No. 7716 violate Art. VI, Section 24 of the
Constitution?
B. Does it violate Art. VI, Section 26[2] of the Constitution?
C. What is the extent of the power of the Bicameral Conference
Committee?
II. Substantive Issues:
These questions will be dealt with in the order they are stated
above. As will presently be explained, not all of these questions
are judicially cognizable because not all provisions of the
Constitution are self-executing and, therefore, judicially
enforceable. The other departments of the government are
equally charged with the enforcement of the Constitution
especially the provisions relating to them.
I. PROCEDURAL ISSUES
The contention of petitioners is that in enacting Republic Act No.
7716 or the Expanded Value-Added Tax Law, Congress violated
the Constitution because, although H. No. 11197 had originated
in the House of Representatives, it was not passed by the Senate
but was simply consolidated with the Senate version [S. No.
1630] in the Conference Committee to produce the bill which the
President signed into law. The following provisions of the
Constitution are cited in support of the proposition that because
Republic Act No. 7716 was passed in this manner, it did not
originate in the House of Representatives and it has not thereby
become a law:
Art. VI, Section 24: All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application,
and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with
amendments.
Id., Section 26[2]: No bill passed by either House shall become a
law unless it has passed three readings on separate days, and
printed copies thereof in its final form have been distributed to its
Members three days before its passage, except when the
President certifies to the necessity of its immediate enactment to
meet a public calamity or emergency. Upon the last reading of a
bill, no amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and the yeas and
nays entered in the Journal.
Rule XII:
Section 26. In the event that the Senate does not agree with the
House of Representatives on the provision of any bill or joint
resolution, the differences shall be settled by a conference
committee of both Houses which shall meet within ten days after
their composition.
The President shall designate the members of the conference
committee in accordance with subparagraph (c), Section 3 of Rule
III.
Each Conference Committee Report shall contain a detailed and
sufficiently explicit statement of the changes in or amendments to
the subject measure, and shall be signed by the conferees.
The consideration of such report shall not be in order unless the
report has been filed with the Secretary of the Senate and copies
thereof have been distributed to the Members. [Emphasis
added].
Rule XIV:
Separate Opinions
NARVASA, C.J.:
PADILLA, J.:
VITUG, J.:
CRUZ, J.:
REGALADO, J.:
Undeniably, the value-added tax system may have its own merits
to commend its continued adoption, and the proposed widening
of its base could achieve laudable governmental objectives if
properly formulated and conscientiously implemented. We would
like to believe, however, that ours is not only an enlightened
democracy nurtured by a policy of transparency but one where
the edicts of the fundamental law are sacrosanct for all, barring
none. While the realization of the lofty ends of this administration
should indeed be the devout wish of all, likewise barring none, it
can never be justified by methods which, even if unintended, are
suggestive of Machiavellism.
Accordingly, I vote to grant the instant petitions and to invalidate
Republic Act No. 7716 for having been enacted in violation of
Section 24, Article VI of the Constitution.
Under the Rules of the House, the first reading of a bill consists of
a reading of the number, title, and author followed by the referral
to the appropriate committees; [7] the second reading consists
of the reading in full of the bill with the amendments proposed by
the committee, it any; [8] and the third reading is the reading of
the bill in the form as approved on second reading and takes
place only after printed copies thereof in its final form have been
distributed to the Members at least three days before, unless the
bill iscertified. [9] At the second reading, the following takes
place:
[1] Reading of the bill;
[2] Sponsorship;
[3] Debates;
[4] Period of Amendments; and
[5] Voting on Second Reading. [10]
At the third reading, the votes shall be taken immediately and the
yeas and nays entered in the Journal. [11] Clearly, whether in
the Senate or in the House, every bill must pass the three
readings on separate days, except when the bill is certified.
Amendments to the bill on third reading are constitutionally
prohibited.[12]
After its passage by one chamber, the bill should then be
transmitted to the other chamber for its concurrence. Section 83,
Rule XIV of the Rules of the House expressly provides:
Sec. 83. Transmittal to Senate.- The Secretary General, without
need of express order, shall transmit to the Senate for its
concurrence all the bills and joint or concurrent resolutions
approved by the House or the amendments of the House to the
bills or resolutions of the Senate, as the case may be. If the
measures approved without amendments are bills or resolutions
of the Senate, or if amendments of the Senate to bills of the
House are accepted, he shall forthwith notify the Senate of the
action taken.
and Section 85, Rule XIV of the Rules of the House which reads:
Sec. 85. Conference Committee Reports.- In the event that the
House does not agree with the Senate on the amendments to any
bill or joint resolution, the differences may be settled by
conference committees of both Chambers.
Note that in the former, the word "exclusively" does not appear.
And, in the latter, the phrase "as on other Bill," which is found in
the former, does not appear. These are very significant in
determining the authority of the upper chamber over the bills
enumerated in Section 24. Since the origination is not exclusively
vested in the House of Representatives of the United States, the
Senate's authority to propose or concur with amendments is
necessarily broader. That broader authority is further confirmed
by the phrase "as on other Bills," i.e., its power to propose or
concur with amendments thereon is the same as in ordinary bills.
The absence of this phrase in our Constitution was clearly
intended to restrict or limit the Philippine Senate's power to
propose or concur with amendments. In the light of the
exclusivity of origination and the absence of the phrase "as on
other Bills," the Philippine Senate cannot amend by substitution
with an entirely new bill of its own any bill covered by Section 24
of Article VI which the House of Representatives transmitted to it
because such substitution would indirectly violate Section 24.
These obvious substantive differences between Section 7, Article
I of the U.S. Constitution and Section 24, Article VI of our
Constitution are enough reasons why this Court should neither
allow itself to be misled by Flint vs. Stone nor be awed by Rainey
vs. United States [27] and the opinion of Messrs. Ogg and
Ray[28] which the majority cites to support the view that the
power of the U.S. Senate to amend a revenue measure is
unlimited. Rainey concerns the Tariff Act of 1909 of the United
States of America and specifically involved was its Section 37
which was an amendment introduced by the U.S. Senate. It was
claimed by the petitioners that the said section is a revenue
measure which should originate in the House of Representatives.
The U.S. Supreme Court, however, adopted and approved the
finding of the court a quo that:
The section in question is not void as a bill for raising revenue
originating in the Senate, and not in the House of
Representatives. It appears that the section was proposed by the
Senate as an amendment to a bill for raising revenue which
originated in the House. That is sufficient.
Third , even under the regime of the 1935 Constitution which did
not contain the above provision, this Court, through Mr. Chief
Justice Makalintal in Astorga vs. Villegas, [38] declared that it
cannot be truly said that Mabanag vs. Lopez Vito [39] has laid to
rest the question of whether the enrolled bill doctrine or the
journal entry rule should be adhered to in this jurisdiction, and
stated:
As far as Congress itself is concerned, there is nothing sacrosanct
in the certification made by the presiding officers. It is merely a
mode of authentication. The lawmaking process in Congress ends
when the bill is approved by both Houses, and the certification
does not add to the validity of the bill or cure any defect already
present upon its passage. In other words, it is the approval of
Congress and not the signatures of the presiding officers that is
essential. Thus the [1935] Constitution says that "(e)very bill
passed by the Congress shall, before it becomes law, be
presented to the President." In Brown vs. Morris, supra, the
Supreme Court of Missouri, interpreting a similar provision in the
State Constitution, said that the same "makes it clear that the
indispensable step in the passage" and it follows that if a bill,
otherwise fully enacted as a law, is not attested by the presiding
officer, other proof that it has "passed both houses will satisfy the
constitutional requirement."
Fourth , even in the United States, the enrolled bill doctrine has
been substantially undercut. This is shown in the disquisitions of
Mr. Justice Reynato S. Puno in his dissenting opinion, citing
Sutherland, Statutory Construction.
Last , the pleadings of the parties have established beyond doubt
that H.B; No. 11197 was not acted on second and third readings
in the Senate and S.B. No. 1630, which was approved by the
Senate on second and third readings in substitution of S.B. No.
1129, was never transmitted to the House for its passage.
Otherwise stated, they were only passed in their respective
chamber of origin but not in the other. In no way can each
become a law under paragraph 2, Section 26, Article VI of the
Constitution. For the Court to close its eyes to this fact because of
the enrolled bill doctrine is to shrink its duty to hold "inviolate
what is decreed by the Constitution." [40]
I vote then to grant these petitions and to declare R. A. No. 7716
as unconstitutional.
ROMERO, J.:
Few issues brought before this Court for resolution have roiled
the citizenry as much as the instant case brought by nine
petitioners which challenges the constitutionality of Republic Act
No. 7716 [to be referred to herein as the "Expanded Value Added
Tax" or EVAT law to distinguish it from Executive Order No. 273
which is the VAT law proper] that was enacted on May 5, 1994. A
visceral issue, it has galvanized the populace into mass action
and strident protest even as the EVAT proponents have taken to
podia and media in a post facto information campaign.
The Court is confronted here with an atypical case. Not only is it a
vatful of seething controversy but some unlikely petitioners
invoke unorthodox remedies. Three Senator-petitioners would
nullify a statute that bore the indispensable stamp of approval of
their own Chamber with two of them publicly repudiating what
they had earlier endorsed. With two former colleagues, one of
them an erstwhile Senate President, making common cause with
them, they would stay the implementation by the Executive
Department of a law which they themselves have initiated. They
address a prayer to a co-equal Department to probe their official
acts for any procedural irregularities they have themselves
committed lest the effects of these aberrations inflict such
damage or irreparable loss as would bring down the wrath of the
people on their heads.cralaw
To the extent that they perceive that a vital cog in the internal
machinery of the Legislature has malfunctioned from having
operated in blatant violation of the enabling Rules they have
themselves laid down, they would now plead that this other
Branch of Government step in, invoking the exercise of what is at
once a delicate and awesome power. Undoubtedly, the case at
bench is as much a test for the Legislature as it is for the
Judiciary.cralaw
A backward glance on the Value Added Tax (VAT) is in order at
this point.cralaw
The first codification of the country's internal revenue laws was
effected with the enactment of Commonwealth Act No. 466,
commonly known as the "National Internal Revenue Code" which
was approved on June 15, 1939 and took effect on July 1, 1939,
although the provisions on the income tax were made retroactive
to January 1, 1939.cralaw
Since 1939 when the turnover tax was replaced by the
manufacturer's sales tax, the Tax Code had provided for a single-
stage value-added tax on original sales by manufacturers,
producers and importers computed on the "cost deduction
method" and later, on the basis of the "tax credit method." The
turnover tax was re-introduced in 1985 by Presidential Decree
No. 1991 (as amended by Presidential Decree No. 2006). [1]
In 1986, a tax reform package was approved by the Aquino
Cabinet. It contained twenty-nine measures, one of which
proposed the adoption of the VAT, as well as the simplification of
the sales tax structure and the abolition of the turnover
tax.cralaw
Up until 1987, the system of taxing goods consisted of [a] an
excise tax on certain selected articles; [b] fixed and percentage
taxes on original and subsequent sales, on importations and on
milled articles; and [c] mining taxes on mineral products.
Services were subjected to percentage taxes based mainly on
gross receipts. [2]
On July 25, 1987, President Corazon C. Aquino signed into law
Executive Order No. 273 which adopted the VAT. From the former
single-stage value-added tax, it introduced the multi-stage VAT
system where "the value-added tax is imposed on the sale of and
distribution process culminating in sale, to the final consumer.
Generally described, the taxpayer [the seller] determines his tax
liability by computing the tax on the gross selling price or gross
receipt ["output tax"] and subtracting or crediting the earlier VAT
on the purchase or importation of goods or on the sale of service
["input tax"] against the tax due on his own sale." [3]
On January 1, 1988, implementing rules and regulations for the
VAT were promulgated. President Aquino then issued
Proclamation No. 219 on February 12, 1988 urging the public and
private sectors to join the nationwide consumers' education
campaign for VAT.cralaw
Soon after the implementation of Executive Order No. 273, its
constitutionality was assailed before this Court in the case of
Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc.,
et al. v. Tan. [4] The four petitioners sought to nullify the VAT
law "for being unconstitutional in that its enactment is not
allegedly within the powers of the President; that the VAT is
oppressive, discriminatory, regressive, and violates the due
process and equal protection clauses and other provisions of the
1987 Constitution." [5] In dismissing the consolidated petitions,
this Court stated:
The Court, following the time-honored doctrine of separation of
powers cannot substitute its judgment for that of the President as
to the wisdom, justice and advisability of the VAT. The Court can
only look into and determine whether or not Executive Order No.
273 was enacted and made effective as law, in the manner
required by and consistent with, the Constitution, and to make
sure that it was not issued in grave abuse of discretion amounting
to lack or excess of jurisdiction; and, in this regard, the Court
finds no reason to impede its application or continued
implementation. [6]
Although declared constitutional, the VAT law was sought to be
amended from 1992 on by a series of bills filed in both Houses of
Congress. In chronological sequence, these were:
Republic Act No. 7716 merely expanded the base of the VAT law
even as the tax retained its multi-stage character.cralaw
At the oral hearing held on July 7, 1994, this Court delimited
petitioners' arguments to the following issues culled from their
respective petitions.cralaw
PROCEDURAL ISSUES
Does Republic Act No. 7716 violate Article VI, Section 24, of the
Constitution?[13]
Does it violate Article VI, Section 26, paragraph 2, of
theConstitution? [14]
What is the extent of the power of the Bicameral Conference
Committee?
SUBSTANTIVE ISSUES
Does the law violate the following provisions in Article III (Bill of
Rights) of the Constitution: 1. Section 1 [15]
2. Section 4 1 [16]
3. Section 5 [17]
4. Section 10 [18]
Does the law violate the following other provisions of the
Constitution?
1. Article VI, Section 28, paragraph 1 [19]
2. Article VI, Section 28, paragraph 3 [20]
As a result of the unedifying experience of the past where the
Court had the propensity to steer clear of questions it perceived
to be "political" in nature, the present Constitution, in contrast,
has explicitly expanded judicial power to include the duty of the
courts, especially the Supreme Court, "to determine whether or
not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or
instrumentality of the Government." [21] I submit that under
this explicit mandate, the Court is empowered to rule upon acts
of other Government entities for the purpose of determining
whether there may have been, in fact, irregularities committed
tantamount to violation of the Constitution, which case would
clearly constitute a grave abuse of discretion on their part.cralaw
In the words of the sponsor of the above-quoted Article of the
Constitution on the Judiciary, the former Chief Justice Roberto R.
Concepcion, "the judiciary is the final arbiter on the question of
whether or not a branch of government or any of its officials has
acted without jurisdiction or in excess of jurisdiction, or so
capriciously as to constitute an abuse of discretion amounting to
excess of jurisdiction or lack of jurisdiction. This is not only a
judicial power but a duty to pass judgment on matters of this
nature.cralaw
This is the back ground of paragraph 2 of Section 1, which means
that the courts cannot hereafter exhibit its wonted reticence by
claiming that such matters constitute a political
question." [22] In the instant petitions, this Court is called
upon, not so much to exercise its traditional power of judicial
review as to determine whether or not there has indeed been a
grave abuse of discretion on the part of the Legislature
amounting to lack or excess of jurisdiction.cralaw
Where there are grounds to resolve a case without touching on its
constitutionality, the Court will do so with utmost alacrity in due
deference to the doctrine of separation of powers anchored on
the respect that must be accorded to the other branches of
government which are coordinate, coequal and, as far as
practicable, independent of one another. Once it is palpable that
the constitutional issue is unavoidable, then it is time to assume
jurisdiction, provided that the following requisites for a judicial
inquiry are met: that there must be an actual and appropriate
case; a personal and substantial interest of the party raising the
constitutional question; the constitutional question must be raised
at the earliest possible opportunity and the decision of the
constitutional question must be necessary to the determination of
the case itself, the same being the lis mota of the case. [23]
Having assured ourselves that the above-cited requisites are
present in the instant petitions, we proceed to take them
up.cralaw
ARTICLE VI, SECTION 24
Some petitioners assail the constitutionality of Republic Act No.
7716 as being in violation of Article VI, Section 24 of the
Constitution which provides:
All appropriation, revenue or tariff bills, bills authorizing increase
of the public debt, bills of local application, and private bills, shall
originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.cralaw
In G.R. Nos. 115455 and 115781, petitioners argue:
(a) The bill which became Republic Act No. 7716 did not originate
exclusively in the House of Representatives. The Senate, after
receiving H.B. No. 11197, submitted its own bill, S.B. No. 1630,
and proceeded to vote and approve the same after second and
third readings.cralaw
(b) The Senate exceeded its authority to "propose or concur with
amendments" when it submitted its own bill, S.B. No. 1630,
recommending its approval "in substitution of S.B. No. 1129,
taking into consideration P.S. Res. No. 734 and H.B. No. 11197."
(c) H.B. No. 11197 was not deliberated upon by the Senate.
Neither was it voted upon by the Senate on second and third
readings, as what was voted upon was S.B. No. 1630.
Article VI, Section 24 is taken word for word from Article VI,
Section 18 of the 1935 Constitution which was, in turn, patterned
after Article I, Section 7 (1) of the Constitution of the United
States, which states:
All bills for raising revenue shall originate in the House of
Representatives, but the Senate may propose or concur with
amendments as on other bills.cralaw
The historical precedent for requiring revenue bills to originate in
Congress is explained in the U.S. case of Morgan v. Murray. [24]
The constitutional requirement that all bills for raising revenue
shall originate in the House of Representatives stemmed from a
remedial outgrowth of the historic conflict between Parliament
[i.e., Commons] and the Crown, whose ability to dominate the
monarchially appointive and hereditary Lords was patent. [See 1
Story, Constitution, S 875 et seq., 5th Ed.; 1 Cooley,
Constitutional Limitations, pp. 267, 268, 8th Ed., 1 Sutherland,
Statutory Construction, S 806, 3d Ed.] There was a measure of
like justification for the insertion of the provision of article I, S 7,
cl. 1, of the Federal Constitution. At that time [787] and
thereafter until the adoption [in 1913] of the Seventeenth
Amendment providing for the direct election of senators, the
members of the United States Senate were elected for each state
by the joint vote of both houses of the Legislature of the
respective states, and hence, were removed from the
people.cralaw
The legislative authority under the 1935 Constitution being
unicameral in the form of the National Assembly, it served no
purpose to include the subject provision in the draft submitted by
the 1934 Constitutional Convention to the Filipino people for
ratification.cralaw
In 1940, however, the Constitution was amended to establish a
bicameral Congress of the Philippines composed of a House of
Representatives and a Senate. In the wake of the creation of a
new legislative machinery, new provisions were enacted
regarding the law-making power of Congress. The National
Assembly explained how the final formulation of the subject
provision came about:
The concurrence of both houses would be necessary to the
enactment of a law. However, all appropriation, revenue or tariff
bills, bills authorizing an increase of the public debt, bills of local
application, and private bills, should originate exclusively in the
House of Representatives, although the Senate could propose or
concur with amendments.cralaw
In one of the first drafts of the amendments, it was proposed to
give both houses equal powers in lawmaking. There was,
however, much opposition on the part of several members of the
Assembly. In another draft; the following provision, more
restrictive than the present provision in the amendment, was
proposed and for sometime was seriously considered:
All bills appropriating public funds, revenue or tariff bills, bills of
local application, and private bills shall originate exclusively in the
Assembly, but the Senate may propose or concur with
amendments. In case of disapproval by the Senate of any such
bills, the Assembly may repass the same by a two-thirds vote of
all its members, and thereupon, the bill so repassed shall be
deemed enacted and may be submitted to the President for
corresponding action. In the event that the Senate should fail to
finally act on any such bills, the Assembly may, after thirty days
from the opening of the next regular sessions of the same
legislative term, reapprove the same with a vote of two-thirds of
all the members of the Assembly. And upon such reapproval, the
bill shall be deemed enacted and may be submitted to the
president for corresponding action.cralaw
However, the special committee voted finally to report the
present amending provision as it is now worded; and in that form
it was approved by the National Assembly with the approval of
Resolution No. 38 and later of Resolution No. 73.[25] [Emphasis
supplied].
Thus, the present Constitution is identically worded as its 1935
precursor: "All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application,
and private bills, shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with
amendments." [Emphasis supplied].
That all revenue bills, such as Republic Act No. 7716, should
"originate exclusively in the House of Representatives" logically
flows from the more representative and broadly-based character
of this Chamber.cralaw
It is said that the House of Representatives being the more
popular branch of the legislature, being closer to the people, and
having more frequent contacts with them than the Senate, should
have the privilege of taking the initiative in the proposals of
revenue and tax project, the disposal of the people's money, and
the contracting of public indebtedness. These powers of initiative
in the raising and spending of public funds enable the House of
Representatives not only to implement but even to determine the
fiscal policies of the government. They place on its shoulders
much of the responsibility of solving the financial problems of the
government, which are so closely related to the economic life of
the country, and of deciding on the proper distribution of
revenues for such uses as may best advance public
interests. [26]
The popular nature of the Lower House has been more
pronounced with the inclusion of Presidentially-appointed sectoral
representatives, as provided in Article VI, Section 5 [2], of the
Constitution, thus: "The party-list representatives shall constitute
twenty per centum of the total number of representatives
including those under the party list. For three consecutive terms
after the ratification of this Constitution, one-half of the seats
allocated to party-list representatives shall be filled, as provided
by law, by selection or election from the labor, peasant, urban
poor, indigenous cultural communities, women, youth, and such
other sectors as may be provided by law, except the religious
sector." [Emphasis supplied].
This novel provision which was implemented in the Batasang
Pambansa during the martial law regime [27] was eventually
incorporated in the present Constitution in order to give those
from the marginalized and often deprived sector, an opportunity
to have their voices heard in the halls of the Legislature, thus
giving substance and meaning to the concept of "people
empowerment."
That the Congressmen indeed have access to, and consult their
constituencies has been demonstrated often enough by the fact
that even after a House bill has been transmitted to the Senate
for concurrence, some Congressmen have been known to express
their desire to change their earlier official position or reverse
themselves after having heard their constituents' adverse
reactions to their representations.cralaw
In trying to determine whether the mandate of the Constitution
with regard to the initiation of revenue bills has been preserved
inviolate, we have recourse to the tried and tested method of
definition of terms. The term "originate" is defined by Webster's
New International Dictionary [3rd Edition, 1986] as follows: "v.i.,
to come into being; begin; to start."
On the other hand, the word "exclusively" is defined by the same
Webster's Dictionary as "in an exclusive manner; to the exclusion
of all others; only; as, it is his, exclusively." Black's Law
Dictionary has this definition: "apart from all others; only; solely;
substantially all or for the greater part. To the exclusion of all
other; without admission of others to participation; in a manner
to exclude. Standard Oil Co. of Texas v. State, Tex. Civ. App.,
142 S.W. 2d 519, 521, 522, 523."
This Court had occasion to define the term "exclusive" as follows:
In its usual and generally accepted sense, the term means
possessed to the exclusion of others; appertaining to the subject
alone; not including, admitting or pertaining to another or others;
undivided, sole. [28]
When this writer, during the oral argument of July 7, 1994, asked
the petitioner in G. R. No. 115455 whether he considers the word
"exclusively" to be synonymous with "solely," he replied in the
affirmative. [29]
A careful examination of the legislative history traced earlier in
this decision shows that the original VAT law, Executive Order No.
273, was sought to be amended by ten House bills which finally
culminated in House Bill No. 11197, as well as two Senate bills. It
is to be noted that the first House Bill No. 253 was filed on July
22, 1992, and two other House bills followed in quick succession
on August 10 and September 9, 1992 before a Senate Resolution,
namely, Senate Res. No. 734, was filed on September 10, 1992
and much later, a Senate Bill proper, viz., Senate Bill No. 1129 on
March 1, 1993. Undoubtedly, therefore, these bills originated or
had their start in the House and before any Senate bill amending
the VAT law was filed. In point of time and venue, the conclusion
is ineluctable that Republic Act No. 7716, which is indisputably a
revenue measure, originated in the House of Representatives in
the form of House Bill No. 253, the first EVAT bill.cralaw
Additionally, the content and substance of the ten amendatory
House Bills filed over the roughly one-year period from July 1992
to August 1993 reenforce the position that these revenue bills,
pertaining as they do, to Executive Order No. 273, the prevailing
VAT law, originated in the Lower House.cralaw
House Bill Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297,
10012 and 10100 were intended to restructure the VAT system
by exempting or imposing the tax on certain items or otherwise
introducing reforms in the mechanics of implementation. [30] Of
these, House Bill No. 9210 was favored with a Presidential
certification on the need for its immediate enactment to meet a
public emergency. Easily the most comprehensive, it noted that
the revenue performance of the VAT, being far from satisfactory
since the collections have always fallen short of projections, "the
system is rendered inefficient, inequitable and less
comprehensive." Hence, the Bill proposed several amendments
designed to widen the tax base of the VAT and enhance its
administration. [31]
That House Bill No. 11197 being a revenue bill, originated from
the Lower House was acknowledged, in fact was virtually taken
for granted, by the Chairmen of the Committee on Ways and
Means of both the House of Representatives and the Senate.
Consequently, at the April 19, 1994 meeting of the Bicameral
Conference Committee, the Members agreed to make the House
Bill as the "frame of reference" or "base" of the discussions of the
Bicameral Conference Committee with the "amendments" or
"insertions to emanate from the Senate."[32]
As to whether the bills originated exclusively in the Lower House
is altogether a different matter. Obviously, bills amendatory of
VAT did not originate solely in the House to the exclusion of all
others for there were P.S. Res. No. 734 filed in the Senate on
September 10, 1992 followed by Senate Bill No. 1129 which was
filed on March 1, 1993. About a year later, this was substituted
by Senate Bill No. 1630 that eventually became the EVAT law,
namely, Republic Act No. 7716.cralaw
Adverting to the passage of the amendatory VAT bills in the
Lower House, it is to be noted that House Bill No. 11197 which
substituted all the prior bills introduced in said House complied
with the required readings, that is, the first reading consisting of
the reading of the title and referral to the appropriate Committee,
approval on second reading on November 11, 1993 and on third
reading on November 17, 1993 before being finally transmitted to
the Senate. In the Senate, its identity was preserved and its
provisions were taken into consideration when the Senate
Committee on Ways and Means submitted Com. Report No. 349
which recommended for approval "S.B. No. 1630 in substitution
of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and
H.B. No. 11197." At this stage, the subject bill may be considered
to have passed first reading in the Senate with the submission of
said Committee Report No. 349 by the Senate Committee on
Ways and Means to which it had been referred earlier. What
remained, therefore, was no longer House Bill No. 11197 but
Senate Bill No. 1630. Thence, the Senate, instead of transmitting
the bill to the Lower House for its concurrence and amendments,
if any, took a "shortcut," bypassed the Lower House and instead,
approved Senate Bill No. 1630 on both second and third readings
on the same day, March 24, 1994.cralaw
The first irregularity, that is, the failure to return Senate Bill No.
1630 to the Lower House for its approval is fatal inasmuch as the
other chamber of legislature was not afforded the opportunity to
deliberate and make known its views. It is no idle dictum that no
less than the Constitution ordains: "The legislative power shall be
vested in the Congress of the Philippines which shall consist of a
Senate and a House of Representatives." [33] [Emphasis
supplied].
It is to be pointed out, too, that inasmuch as Senate Bill No. 1630
which had "taken into consideration" House Bill No. 11197 was
not returned to the Lower House for deliberation, the latter
Chamber had no opportunity at all to express its views thereon or
to introduce any amendment. The customary practice is, after the
Senate has considered the Lower House Bill, it returns the same
to the House of origin with its amendments. In the event that
there may be any differences between the two, the same shall
then be referred to a Conference Committee composed of
members from both Chambers which shall then proceed to
reconcile said differences.cralaw
In the instant case, the Senate transmitted to the Lower House
on March 24, 1994, a letter informing the latter that it had
"passed S. No. 1630entitled xxx [and] in view of the disagreeing
provisions of said bill and House Bill No. 11197, entitled xxx the
Senate requests a conference xxx." This, in spite of the fact that
Com. Report No. 349 of the Senate Committee on Ways and
Means had already recommended for approval on February 7,
1994 "S.B. No. 1630 taking into consideration H.B. No. 11197."
Clearly, the Conference Committee could only have acted upon
Senate Bill No. 1630, for House Bill No. 11197 had already been
fused into the former.cralaw
At the oral hearing of July 7, 1994, petitioner in G. R. No. 115455
admitted, in response to this writer's query, that he had
attempted to rectify some of the perceived irregularities by
presenting a motion in the Senate to recall the bill from the
Conference Committee so that it could revert to the period of
amendment, but he was outvoted, in fact "slaughtered." [34]
In accordance with the Rules of the House of Representatives and
the Senate, Republic Act No. 7716 was duly authenticated after it
was signed by the President of the Senate and the Speaker of the
House of Representatives followed by the certifications of the
Secretary of the Senate and the Acting Secretary General of the
House of Representatives. [35] With the signature of President
Fidel V. Ramos under the words "Approved: 5 May 1994," it was
finally promulgated.cralaw
Its legislative journey ended, Republic Act No. 7716 attained the
status of an enrolled bill which is defined as one "which has been
duly introduced, finally passed by both houses, signed by the
proper officers of each, approved by the governor [or president]
and filed by the secretary of state." [36]
Stated differently:
It is a declaration by the two houses, through their presiding
officers, to the president, that a bill, thus attested, has received
in due form, the sanction of the legislative branch of the
government, and that it is delivered to him in obedience to the
constitutional requirement that all bills which pass Congress shall
be presented to him. And when a bill, thus attested, receives his
approval, and is deposited in the public archives, its
authentication as a bill that has passed Congress should be
deemed complete and unimpeachable. As the President has no
authority to approve a bill not passed by Congress, an enrolled
Act in the custody of the Secretary of State, and having the
official attestations of the Speaker of the House of
Representatives, of the President of the Senate, and of the
President of the United States, carries, on its face, a solemn
assurance by the legislative and executive departments of the
government, charged, respectively, with the duty of enacting and
executing the laws, that it was passed by Congress. The respect
due to coequal and independent departments requires the judicial
department to act upon that assurance, and to accept, as having
passed Congress, all bills authenticated in the manner stated;
leaving the courts to determine, when the question properly
arises, whether the Act, so authenticated, is in conformity with
the Constitution. [37]
PUNO, J.:
6. - 6. - 6. Real
properties held
primarily for sale to
customers or held
for lease in the
ordinary course or
business
B. The HB and the BCC Bills has each a provision which includes
THE SALE OF GOLD TO BANGKO SENTRAL NG PILIPINAS as
falling under the term Export Sales, hence subject to 0% VAT.
The Senate Bill does not contain such provision [See Section 102-
A thereof].cralaw
III. On Section 102
This section was amended to include as subject to a 10% VAT the
gross receipts derived from THE SALE OR EXCHANGE OF
SERVICES, INCLUDING THE USE OR LEASE OF PROPERTIES.
The SB, HB, and BCC have the same provisions on this.cralaw
However, on what are included in the term SALE OR EXCHANGE
OF SERVICES, the BCC included/inserted the following [not found
in either the House or Senate Bills]:
1. Services of lessors of property WHETHER PERSONAL OR REAL;
[See BCC Report/Bill p. 7]
2. WAREHOUSING SERVICES (Ibid.)
3. Keepers of RESTHOUSES, PENSION HOUSES, INNS, RESORTS
(Ibid.)
4. Common carriers by LAND, AIR AND SEA (Ibid.)
5. SERVICES OF FRANCHISE GRANTEES OF TELEPHONE AND
TELEGRAPH;
6. RADIO AND TELEVISION BROADCASTING
7. ALL OTHER FRANCHISE GRANTEES EXCEPT THOSE UNDER
SECTION 117 OF THIS CODE
8. SERVICES OF SURETY, FIDELITY, INDEMNITY, AND BONDING
COMPANIES.
9. Also inserted by the BCC (on page B thereof) is the LEASE OR
USE OF OR THE RIGHT TO USE OF SATTELITE TRANSMISSION
AND CABLE TELEVISION TIME
IV. On Section 103 ]Exempt Transactions]
The BCC deleted subsection (f) in its entirety, despite its
retention in both the House and Senate Bills, thus under RA
7716, the "printing, publication, importation or sale of books and
any newspaper, magazine, review, or bulletin which appears at
regular intervals with fixed prices for subscription and sale and
which is not devoted principally to the publication of
advertisements" is subject to VAT.
Subsection (g) was amended by the BCC (both Senate and House
Bills did not) by changing the word TEN to FIVE, thus:
"Importation of passenger and/or cargo vessel of more than five
thousand ton to ocean going, including engine and spare parts of
said vessel to be used by the importer himself as operator
thereof." In short, importation of vessels with tonnage of more
than 5 thousand is VAT exempt.cralaw
Subsection L, was amended by the BCC by adding the qualifying
phrase: EXCEPT THOSE RENDERED BY PROFESSIONALS.cralaw
Subsection U which exempts from VAT "Transactions which are
exempt under special laws", was amended by BCC by adding the
phrase: EXCEPT THOSE GRANTED UNDER PD NOS. 66, 529, 972,
1491, and 1590, and NON-ELECTRIC COOPERATIVES under RA
6938. This is the reason why
cooperatives are now subject to VAT.cralaw
While the SALE OF REAL PROPERTIES was included in the exempt
transactions under the House Bill, the BCC made a qualification
by stating:
(S) SALE OF REAL PROPERTIES NOT PRIMARILY HELD FOR SALE
TO CUSTOMERS OR HELD FOR LEASE IN THE ORDINARY COURSE
OF TRADE OR BUSINESS OR REAL PROPERTY UTILIZED FOR
LOW-COST AND SOCIALIZED HOUSING AS DEFINED BY R.A. NO.
7279 OTHERWISE KNOWN AS THE URBAN DEVELOPMENT AND
HOUSING ACT OF 1992 AND OTHER RELATED LAWS.cralaw
Under the Senate Bill, the sale of real property utilized for low-
cost and socialized housing as defined by R. A. 7279, is one of
the exempt transactions.
Under the House Bill, also exempt from VAT, is the SALE OF
PROPERTIES OTHER THAN THE TRANSACTIONS MENTIONED IN
THE FOREGOING PARAGRAPHS WITH A GROSS ANNUAL SALES
AND/OR RECEIPTS OF WHICH DOES NOT EXCEED THE AMOUNT
PRESCRIBED IN THE REGULATIONS TO BE PROMULGATED BY
THE SECRETARY OF FINANCE WHICH SHALL NOT BE LESS THAN
P350,000.00 OR HIGHER THAN P600,000.00 Under the Senate
Bill, the amount is P240,000.00. The BCC agreed at the amount
of not less than P480,000.00 or more than P720,000.00 SUBJECT
TO TAX UNDER SEC. 112 OF THIS CODE.
The BCC did not include, as VAT exempt, the sale or transfer of
securities as defined in the Revised Securities Act [B.P. 178]
which was contained in both Senate and House Bills.
V On Section 104
The phrase INCLUDING PACKAGING MATERIALS was included by
the BCC on Section 104 (A) (1) (B), and the phrase ON WHICH A
VALUE-ADDED TAX HAS BEEN ACTUALLY on Section 104 (A)
(2).cralaw
These phrases are not contained in either House and Senate
Bills.cralaw
VI On Section 107
Both House and Senate Bills provide for the payment of P500.00
VAT registration fee. The BCC provides for P1,000.00 VAT
fee.cralaw
VII On Section 112
While both the Senate and House Bills provide that a person
whose sales or receipts and are exempt under Section 103[w] of
the Code, and who are not VAT registered shall pay a tax
equivalent to THREE (3) PERCENT of his gross quarterly sales or
receipts, the BCC inserted the phrase: THREE PERCENT UPON
THE EFFECTIVITY OF THIS ACT AND FOUR PERCENT (4%) TWO
YEARS THEREAFTER.cralaw
VIII On Section 115
Sec. 17 of S.B. 1630 Sec. 12 of House Bill 11197 amends this
Section by clarifying that common carriers by land, air or water
FOR THE TRANSPORT OF PASSENGERS are subject to Percentage
Tax equivalent to 3% of their quarterly gross sales.cralaw
The BCC adopted this and the House Bill's provision that the
GROSS RECEIPTS OF COMMON CARRIERS DERIVED FROM THEIR
INCOMING AND OUTGOING FREIGHT SHALL NOT BE SUBJECTED
TO THE LOCAL TAXES IMPOSED UNDER RA 7160. The Senate Bill
has no similar provision.cralaw
IX On Section 117
This Section has not been touched by either Senate and House
Bills. But the BCC amended it by subjecting franchises on
ELECTRIC, GAS and WATER UTILITIES A TAX OF TWO PERCENT
(2%) ON GROSS RECEIPTS DERIVED
X On Section 121
The BCC adopted the Senate Bills' amendment to this section by
subjecting to 5% premium tax on life insurance business. The
House Bill does not contain this provision.cralaw
XI Others
(A) The House Bill does not contain any provision on the
deferment of VAT collection on Certain Goods and Services as
does the Senate Bill [Section 19, S.B. 1630]. But although the
Senate Bill authorizes the deferment on certain goods and
services for no longer than 3 years, there is no specific provision
that authorizes the President to EXCLUDE from VAT any of these.
The BCC uses the word EXCLUDE.cralaw
(B) Moreover, the Senate Bill defers the VAT on services of actors
and actresses etc. for 3 years but the BCC defers it for only 2
years.cralaw
(C) Section 18 of the BCC Bill [R.A. 7716] is an entirely new
provision not contained in the House/Senate Bills.cralaw
(D) The period within which to promulgate the implementing
rules and regulations is within 60 days under S.B. 1630; No
specific period under the House Bill, within 90 days under R. A.
7716 [BCC].cralaw
(E) The House Bill provides for a general repealing clause i.e., all
inconsistent laws etc. are repealed. Section 16 of the Senate Bill
expressly repeals Sections 113, 114, 116, 119 and 120 of the
Code. The same Senate Bill, however, contains a general
repealing clause in Sec. 21 thereof.cralaw
R. A. 7716 [BCC's Bill] expressly repeals Sections 113, 114 and
116 of the NIRC; Article 39 [c] [d] and [e] of E. O. 226 and
provides the repeal of Sec. 119 and 120 of the NIRC upon the
expiration of two [2] years unless otherwise excluded by the
President.cralaw
The charge that the Bicameral Conference Committee added new
provisions in the bills of the two chambers is hardly disputed by
respondents. Instead, respondents justify them. According to
respondents: [1] the Bicameral Conference Committee has an ex
post veto power or a veto after the fact of approval of the bill by
both Houses; [2] the bill prepared by the Bicameral Conference
Committee, with its additions and deletions, was anyway
approved by both Houses; [3] it was the practice in past
Congresses for conference committees to insert in bills approved
by the two Houses new provisions that were not originally
contemplated by them; and [4] the enrolled bill doctrine
precludes inquiry into the regularity of the proceedings that led to
the enactment of R. A. 7716.cralaw
With due respect, I reject these contentions which will cave in on
closer examination.cralaw
First. There is absolutely no legal warrant for the bold submission
that a Bicameral Conference Committee possesses the power to
add/delete provisions in bills already approved on third reading
by both Houses or an ex post vetopower. To support this
postulate that can enfeeble Congress itself, respondents cite no
constitutional provision, no law, not even any rule or
regulation. [3]Worse, their stance is categorically repudiated by
the rules of both the Senate and the House of Representatives
which define with precision, the parameters of power of a
Bicameral Conference Committee. Thus, Section 209, Rule XII of
the Rules of the Senate provides:
In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution,
the differences shall be settled by a conference committee of both
Houses which shall meet within ten days after their composition.
Each Conference Committee Report shall contain a detailed and
sufficiently explicit statement of the changes in or amendments to
the subject measure, and shall be signed by the
conferees. [Emphasis supplied].
The counterpart rule of the House of Representatives is cast in
near identical language. Section 85 of the Rules of the House of
Representatives pertinently provides:
In the event that the House does not agree with the Senate on
the amendments to any bill or joint resolution, the differences
may be settled by a conference committee of both chambers.
Each report shall contain a detailed, sufficiently explicit statement
of the changes in or amendments to the subject
measure. [Emphasis supplied].
The Jefferson's Manual has been adopted [4] as a supplement to
our parliamentary rules and practice. Section 456 of Jefferson's
Manual similarly confines the powers of a conference
committee, viz: [5]
The managers of a conference must confine themselves to the
differences committed to them and may not include subjects not
within the disagreements, even though germane to a question in
issue.
a. Constitutional rules.
b. Statutory rules or charter provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary authority.
f. Parliamentary law.
g. Customs and usages.
BELLOSILLO, J.:
which in fact suggests, very clearly, that the subject revenue bill
actually originated from the Lower House and was only amended,
perhaps considerably, by the Senate after it was passed by the
former and transmitted to the latter.
In the cases cited, where the statutes passed by the U.S.
Congress were upheld, the revenue bills did not actually originate
from the Senate but, in fact, from the Lower House. Thus, the
Supreme Court of the United States, speaking through Chief
Justice White in Rainey v. United States [5] upheld the revenue
bill passed by Congress and adopted the ruling of the lower court
that:
The section in question is not void as a bill for raising revenue
originating in the Senate and not in the House of Representatives.
It appears that the section was proposed by the Senate as an
amendment to a bill for raising revenue which originated in the
House. That is sufficient.
PADILLA, J.:
The Solicitor General prays for the dismissal of the petitions on the ground
that the petitioners have failed to show justification for the exercise of its
judicial powers, viz. (1) the existence of an appropriate case; (2) an
interest, personal and substantial, of the party raising the constitutional
questions; (3) the constitutional question should be raised at the earliest
opportunity; and (4) the question of constitutionality is directly and
necessarily involved in a justiciable controversy and its resolution is
essential to the protection of the rights of the parties. According to the
Solicitor General, only the third requisite that the constitutional question
should be raised at the earliest opportunity has been complied with. He
also questions the legal standing of the petitioners who, he contends, are
merely asking for an advisory opinion from the Court, there being no
justiciable controversy for resolution.
Objections to taxpayers' suit for lack of sufficient personality standing, or
interest are, however, in the main procedural matters. Considering the
importance to the public of the cases at bar, and in keeping with the Court's
duty, under the 1987 Constitution, to determine wether or not the other
branches of government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the discretion
given to them, the Court has brushed aside technicalities of procedure and
has taken cognizance of these petitions.
But, before resolving the issues raised, a brief look into the tax law in
question is in order.
The VAT is a tax levied on a wide range of goods and services. It is a tax
on the value, added by every seller, with aggregate gross annual sales of
articles and/or services, exceeding P200,00.00, to his purchase of goods
and services, unless exempt. VAT is computed at the rate of 0% or 10% of
the gross selling price of goods or gross receipts realized from the sale of
services.
The VAT is said to have eliminated privilege taxes, multiple rated sales tax
on manufacturers and producers, advance sales tax, and compensating tax
on importations. The framers of EO 273 that it is principally aimed to
rationalize the system of taxing goods and services; simplify tax
administration; and make the tax system more equitable, to enable the
country to attain economic recovery.
The VAT is not entirely new. It was already in force, in a modified form,
before EO 273 was issued. As pointed out by the Solicitor General, the
Philippine sales tax system, prior to the issuance of EO 273, was
essentially a single stage value added tax system computed under the
"cost subtraction method" or "cost deduction method" and was imposed
only on original sale, barter or exchange of articles by manufacturers,
producers, or importers. Subsequent sales of such articles were not subject
to sales tax. However, with the issuance of PD 1991 on 31 October 1985, a
3% tax was imposed on a second sale, which was reduced to 1.5% upon
the issuance of PD 2006 on 31 December 1985, to take effect 1 January
1986. Reduced sales taxes were imposed not only on the second sale, but
on every subsequent sale, as well. EO 273 merely increased the VAT
on every sale to 10%, unless zero-rated or exempt.
It should be noted that, under both the Provisional and the 1987
Constitutions, the President is vested with legislative powers until a
legislature under a new Constitution is convened. The first Congress,
created and elected under the 1987 Constitution, was convened on 27 July
1987. Hence, the enactment of EO 273 on 25 July 1987, two (2) days
before Congress convened on 27 July 1987, was within the President's
constitutional power and authority to legislate.
The contention is without merit. The word "convene" which has been
interpreted to mean "to call together, cause to assemble, or convoke," 1 is
clearly different from assumption of office by the individual members of
Congress or their taking the oath of office. As an example, we call to mind
the interim National Assembly created under the 1973 Constitution, which
had not been "convened" but some members of the body, more particularly
the delegates to the 1971 Constitutional Convention who had opted to
serve therein by voting affirmatively for the approval of said Constitution,
had taken their oath of office.
To uphold the submission of petitioner Valmonte would stretch the
definition of the word "convene" a bit too far. It would also defeat the
purpose of the framers of the 1987 Constitutional and render meaningless
some other provisions of said Constitution. For example, the provisions of
Art. VI, sec. 15, requiring Congress to convene once every year on the
fourth Monday of July for its regular session would be a contrariety, since
Congress would already be deemed to be in session after the individual
members have taken their oath of office. A portion of the provisions of Art.
VII, sec. 10, requiring Congress to convene for the purpose of enacting a
law calling for a special election to elect a President and Vice-President in
case a vacancy occurs in said offices, would also be a surplusage. The
portion of Art. VII, sec. 11, third paragraph, requiring Congress to convene,
if not in session, to decide a conflict between the President and the Cabinet
as to whether or not the President and the Cabinet as to whether or not the
President can re-assume the powers and duties of his office, would also be
redundant. The same is true with the portion of Art. VII, sec. 18, which
requires Congress to convene within twenty-four (24) hours following the
declaration of martial law or the suspension of the privilage of the writ of
habeas corpus.
The 1987 Constitution mentions a specific date when the President loses
her power to legislate. If the framers of said Constitution had intended to
terminate the exercise of legislative powers by the President at the
beginning of the term of office of the members of Congress, they should
have so stated (but did not) in clear and unequivocal terms. The Court has
not power to re-write the Constitution and give it a meaning different from
that intended.
The Court also finds no merit in the petitioners' claim that EO 273 was
issued by the President in grave abuse of discretion amounting to lack or
excess of jurisdiction. "Grave abuse of discretion" has been defined, as
follows:
The petitioners" assertions in this regard are not supported by facts and
circumstances to warrant their conclusions. They have failed to adequately
show that the VAT is oppressive, discriminatory or unjust. Petitioners
merely rely upon newspaper articles which are actually hearsay and have
evidentiary value. To justify the nullification of a law. there must be a clear
and unequivocal breach of the Constitution, not a doubtful and
argumentative implication. 4
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It
is uniform. The court, in City of Baguio vs. De Leon, 5 said:
The sales tax adopted in EO 273 is applied similarly on all goods and
services sold to the public, which are not exempt, at the constant rate of
0% or 10%.
At any rate, the distinction of the customs brokers from the other
professionals who are subject to occupation tax under the Local Tax Code
is based upon material differences, in that the activities of customs brokers
(like those of stock, real estate and immigration brokers) partake more of a
business, rather than a profession and were thus subjected to the
percentage tax under Sec. 174 of the National Internal Revenue Code prior
to its amendment by EO 273. EO 273 abolished the percentage tax and
replaced it with the VAT. If the petitioner Association did not protest the
classification of customs brokers then, the Court sees no reason why it
should protest now.
The Court takes note that EO 273 has been in effect for more than five (5)
months now, so that the fears expressed by the petitioners that the
adoption of the VAT will trigger skyrocketing of prices of basic commodities
and services, as well as mass actions and demonstrations against the VAT
should by now be evident. The fact that nothing of the sort has happened
shows that the fears and apprehensions of the petitioners appear to be
more imagined than real. It would seem that the VAT is not as bad as we
are made to believe.
In any event, if petitioners seriously believe that the adoption and continued
application of the VAT are prejudicial to the general welfare or the interests
of the majority of the people, they should seek recourse and relief from the
political branches of the government. The Court, following the time-honored
doctrine of separation of powers, cannot substitute its judgment for that of
the President as to the wisdom, justice and advisability of the adoption of
the VAT. The Court can only look into and determine whether or not EO
273 was enacted and made effective as law, in the manner required by,
and consistent with, the Constitution, and to make sure that it was not
issued in grave abuse of discretion amounting to lack or excess of
jurisdiction; and, in this regard, the Court finds no reason to impede its
application or continued implementation.
SO ORDERED.
Case no. 3
AQUINO, J.:
This is about the liability of petitioner Cagayan Electric Power & Light Co.,
Inc. for income tax amounting to P75,149.73 for the more than seven-
month period of the year 1969 in addition to franchise tax.
On June 27, 1968, Republic Act No. 5431 amended section 24 of the Tax
Code by making liable for income tax all corporate taxpayers not
specifically exempt under paragraph (c) (1) of said section and section 27
of the Tax Code notwithstanding the "provisions of existing special or
general laws to the contrary". Thus, franchise companies were subjected
to income tax in addition to franchise tax.
The petitioner filed a petition for review with the Tax Court, which on
February 26, 1982 held the petitioner liable only for the income tax for the
period from January 1 to August 3, 1969 or before the passage of Republic
Act No. 6020 which reiterated its tax exemption. The petitioner appealed to
this Court.
It contends that the Tax Court erred (1) in not holding that the franchise tax
paid by the petitioner is a commutative tax which already includes the
income tax; (2) in holding that Republic Act No. 5431 as amended, altered
or repealed petitioner's franchise; (3) in holding that petitioner's franchise is
a contract which can be impaired by an implied repeal and (4) in not
holding that section 24(d) of the Tax Code should be construed strictly
against the Government.
The Tax Court acted correctly in holding that the exemption was restored
by the subsequent enactment on August 4, 1969 of Republic Act No. 6020
which reenacted the said tax exemption. Hence, the petitioner is liable only
for the income tax for the period from January 1 to August 3, 1969 when its
tax exemption was modified by Republic Act No. 5431.
For this reason, it should be liable only for tax proper and should not be
held liable for the surcharge and interest. (Advertising Associates, Inc. vs.
Commissioner of Internal Revenue and Court of Tax Appeals, G. R. No.
59758, December 26, 1984,133 SCRA 765; Imus Electric Co., Inc. vs.
Commissioner of Internal Revenue, 125 Phil. 1024; C.M. Hoskins & Co.,
Inc. vs. Commissioner of Internal Revenue, L-28383, June 22, 1976, 71
SCRA 511.)
SO ORDERED.
CASE NO. 4
PHIL POWER AND DEVELOPMENT CO VS
COMMISSIONER, CTA CTA CASE NO. 1152, OCT 31,
1965- NO FT.
vs .
TEEHANKEE, J:
On July 14, 1977 the parties and their respective counsels filed the
following:
INC.
By:
Special Attorney
CASE NO. 1
PARAS, J.:
That since the school is not exempt from paying taxes, it should
therefore pay all back taxes in the amount of P5,140.31 and
back taxes and penalties from the promulgation of this decision;
That the amount deposited by the plaintaff him the sum of
P60,000.00 before the trial, be confiscated to apply for the
payment of the back taxes and for the redemption of the
property in question, if the amount is less than P6,000.00, the
remainder must be returned to the Director of Pedro Borgonia,
who represents the plaintiff herein;
On August 10, 1972, the respondent Paterno Millare (now deceased) filed
through counstel a motion to dismiss the complaint.
On October 12, 1972, with the aforesaid sale of the school premises at
public auction, the respondent Judge, Hon. Juan P. Aquino of the Court of
First Instance of Abra, Branch I, ordered (Annex "6," ibid; Rollo, pp. 109-
110) the respondents provincial and municipal treasurers to deliver to the
Clerk of Court the proceeds of the auction sale. Hence, on December 14,
1972, petitioner, through Director Borgonia, deposited with the trial court
the sum of P6,000.00 evidenced by PNB Check No. 904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted
and embodied by the trial court in its questioned decision. Said Stipulations
reads:
STIPULATION OF FACTS
2. That the plaintiff Abra Valley Junior College, Inc. is the owner
of the lot and buildings thereon located in Bangued, Abra under
Original Certificate of Title No. 0-83;
Sgd.
Agripi
no
Brilla
ntes
Typ
AGRI
PINO
BRIL
LANT
ES
Attor
ney
for
Plaint
iff
Sgd.
Loret
o
Rold
an
Typ
LOR
ETO
ROL
DAN
Provi
ncial
Fisca
l
Coun
sel
for
Defe
ndant
s
Provi
ncial
Treas
urer
of
Abra
and
the
Muni
cipal
Treas
urer
of
Bang
ued,
Abra
Sgd.
Dem
etrio
V.
Pre
Typ.
DEM
ETRI
O V.
PRE
Attor
ney
for
Defe
ndant
Pater
no
Millar
e
(Roll
o, pp.
17-
18)
Aside from the Stipulation of Facts, the trial court among others, found the
following: (a) that the school is recognized by the government and is
offering Primary, High School and College Courses, and has a school
population of more than one thousand students all in all; (b) that it is
located right in the heart of the town of Bangued, a few meters from the
plaza and about 120 meters from the Court of First Instance building; (c)
that the elementary pupils are housed in a two-storey building across the
street; (d) that the high school and college students are housed in the main
building; (e) that the Director with his family is in the second floor of the
main building; and (f) that the annual gross income of the school reaches
more than one hundred thousand pesos.
From all the foregoing, the only issue left for the Court to determine and as
agreed by the parties, is whether or not the lot and building in question
are used exclusively for educational purposes. (Rollo, p. 20)
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant,
Hon. Eustaquio Z. Montero, filed a Memorandum for the Government on
March 25, 1974, and a Supplemental Memorandum on May 7, 1974,
wherein they opined "that based on the evidence, the laws applicable, court
decisions and jurisprudence, the school building and school lot used for
educational purposes of the Abra Valley College, Inc., are exempted from
the payment of taxes." (Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44
and 49).
Nonetheless, the trial court disagreed because of the use of the second
floor by the Director of petitioner school for residential purposes. He thus
ruled for the government and rendered the assailed decision.
After having been granted by the trial court ten (10) days from August 6,
1974 within which to perfect its appeal (Per Order dated August 6, 1974;
Annex "G" of Petition; Rollo, p. 57) petitioner instead availed of the instant
petition for review on certiorari with prayer for preliminary injunction before
this Court, which petition was filed on August 17, 1974 (Rollo, p.2).
In the resolution dated August 16, 1974, this Court resolved to give DUE
COURSE to the petition (Rollo, p. 58). Respondents were required to
answer said petition (Rollo, p. 74).
II
III
IV
The main issue in this case is the proper interpretation of the phrase "used
exclusively for educational purposes."
Petitioner contends that the primary use of the lot and building for
educational purposes, and not the incidental use thereof, determines and
exemption from property taxes under Section 22 (3), Article VI of the 1935
Constitution. Hence, the seizure and sale of subject college lot and
building, which are contrary thereto as well as to the provision of
Commonwealth Act No. 470, otherwise known as the Assessment Law, are
without legal basis and therefore void.
On the other hand, private respondents maintain that the college lot and
building in question which were subjected to seizure and sale to answer for
the unpaid tax are used: (1) for the educational purposes of the college; (2)
as the permanent residence of the President and Director thereof, Mr.
Pedro V. Borgonia, and his family including the in-laws and grandchildren;
and (3) for commercial purposes because the ground floor of the college
building is being used and rented by a commercial establishment, the
Northern Marketing Corporation (See photograph attached as Annex "8"
(Comment; Rollo, p. 90]).
Due to its time frame, the constitutional provision which finds application in
the case at bar is Section 22, paragraph 3, Article VI, of the then 1935
Philippine Constitution, which expressly grants exemption from realty taxes
for "Cemeteries, churches and parsonages or convents appurtenant
thereto, and all lands, buildings, and improvements used exclusively for
religious, charitable or educational purposes ...
The following are exempted from real property tax under the
Assessment Law:
In this regard petitioner argues that the primary use of the school lot and
building is the basic and controlling guide, norm and standard to determine
tax exemption, and not the mere incidental use thereof.
The test of exemption from taxation is the use of the property for purposes
mentioned in the Constitution (Apostolic Prefect v. City Treasurer of
Baguio, 71 Phil, 547 [1941]).
It must be stressed however, that while this Court allows a more liberal and
non-restrictive interpretation of the phrase "exclusively used for educational
purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935
Philippine Constitution, reasonable emphasis has always been made that
exemption extends to facilities which are incidental to and reasonably
necessary for the accomplishment of the main purposes. Otherwise stated,
the use of the school building or lot for commercial purposes is neither
contemplated by law, nor by jurisprudence. Thus, while the use of the
second floor of the main building in the case at bar for residential purposes
of the Director and his family, may find justification under the concept of
incidental use, which is complimentary to the main or primary purpose
educational, the lease of the first floor thereof to the Northern Marketing
Corporation cannot by any stretch of the imagination be considered
incidental to the purpose of education.
Indeed, it is axiomatic that facts not raised in the lower court cannot be
taken up for the first time on appeal. Nonetheless, as an exception to the
rule, this Court has held that although a factual issue is not squarely raised
below, still in the interest of substantial justice, this Court is not prevented
from considering a pivotal factual matter. "The Supreme Court is clothed
with ample authority to review palpable errors not assigned as such if it
finds that their consideration is necessary in arriving at a just decision."
(Perez vs. Court of Appeals, 127 SCRA 645 [1984]).
Under the 1935 Constitution, the trial court correctly arrived at the
conclusion that the school building as well as the lot where it is built, should
be taxed, not because the second floor of the same is being used by the
Director and his family for residential purposes, but because the first floor
thereof is being used for commercial purposes. However, since only a
portion is used for purposes of commerce, it is only fair that half of the
assessed tax be returned to the school involved.
CASE NO. 2
PAREDES, J.:
On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax
return. Under date of April 29, 1960, the respondent Commissioner of
Internal Revenue issued an assessment for donee's gift tax against the
Catholic Parish of Victorias, Negros Occidental, of which petitioner was the
priest. The tax amounted to P1,370.00 including surcharges, interests of
1% monthly from May 15, 1958 to June 15, 1960, and the compromise for
the late filing of the return.
After hearing, the CTA rendered judgment, the pertinent portions of which
are quoted below:
... . Parish priests of the Roman Catholic Church under canon laws
are similarly situated as its Archbishops and Bishops with respect to
the properties of the church within their parish. They are the
guardians, superintendents or administrators of these properties, with
the right of succession and may sue and be sued.
The next issue which readily presents itself, in view of petitioner's thesis,
and Our finding that a tax liability exists, is, who should be called upon to
pay the gift tax? Petitioner postulates that he should not be liable, because
at the time of the donation he was not the priest of Victorias. We note the
merit of the above claim, and in order to put things in their proper light, this
Court, in its Resolution of March 15, 1965, ordered the parties to show
cause why the Head of the Diocese to which the parish of Victorias
pertains, should not be substituted in lieu of petitioner Rev. Fr. Casimiro
Lladoc it appearing that the Head of such Diocese is the real party in
interest. The Solicitor General, in representation of the Commissioner of
Internal Revenue, interposed no objection to such a substitution. Counsel
for the petitioner did not also offer objection thereto.
CASE NO. 3
G.R. No. L-7988 January 19, 1916
MORELAND, J.:
The question at issue in this case is whether or not the building and
grounds of the Young Men's Christian Association of Manila are subject to
taxation, under section 48 of the charter of the city of Manila quoted in the
footnote [syllabus].
The city of Manila, contending that the property is taxable, assessed it and
levied a tax thereon. It was paid under protest and this action begun to
recover it on the ground that the property was exempt from taxation under
the charter of the city of Manila. The decision was for the city and the
association appealed.
The Young Men's Christian Association came to the Philippine with the
army of occupation in 1898. When the large body of troops in Manila was
removed to permanent quarters at Fort William McKinley in February, 1905,
an independent association for Manila was organized under the direction of
the Army and navy departments. Shortly after the organization of the
association the directors made a formal request to the international
committee of the Young Men's Christian Association in New York City for
the assistance and cooperation of its foreign department. I response to this
request Mr. John R. Mott, general secretary of the foreign department,
visited Manila in January 1907. After a conference with the directors and
interested friends it was decided to conduct a campaign to secure funds for
an adequate and permanent association. In the name of the international
committee and friends in America Mr. Mott guaranteed P170,000 for the
construction of a building on condition that friend in the Philippines secure
the site and adequately furnish the building. The campaign for funds was
begun here on February 15, 1907, and, by the 15th of March following,
P83,000 was subscribed, nearly one thousand different persons
contributing. Thereupon the Young Men's Christian Association of Manila
was incorporated under the law of the Philippine Islands and received its
character in June, 1907.
A site for the new building was selected on Calle Concepcion, Ermita, and
the building contract was let on the 8th of January following. The
cornerstone was laid with appropriate ceremonies on July 10, 1908, and
the building was formally dedicated on October 20, 1909.
The building is composed of three parts. The main structure, located in the
center, is three stories high and includes a reception hall, social hall and
game rooms, lecture room, library, reading room and rooming apartments.
The small building lying to the left of the principal structure, as one faces
the front from Called Concepcion, is the kitchen and servant's quarters.
The large wing to the right is known as the athletic building, where the
bowling alleys, swimming pool, locker rooms and gymnasium-auditorium
are located. The construction is of reinforced concrete with steel trussed
roof covered with interlocking red tiles.
The main or central portion of the building is 150 by 45 feet and stands 20
meters back from the sidewalk. An iron canopy, suspended by brackets,
projects over the driveway which lies in front and shelters the main
entrance. A wide arched doorway opens into a large reception room, on the
left of which is the public office and the secretary's private office, while on
the right is the reading and writing rooms, and beyond that the library, each
about 30 feet square. From the reception room, on the left, a broad
concrete stairway leads to the second floor.
Passing out of the rear of the reception hall one enters upon a veranda
some 15 feet in width running the full length of the main structure which
looks out on the tennis courts and affords an excellent place for lounging,
games and general social purposes. To the left of the entrance hall and
also opening upon the veranda are two large rooms of about the same size
as those on the right of the reception hall, the first being the billiard room
and the other the restaurant. The athletic building is entered from the rear
veranda. It is a two story wing 68 by 85 feet. Passing from the veranda into
the athletic hall one finds first, on the left, the toilet room, and beyond this,
to the rear, the shower baths and locker rooms. The swimming pool is in
the center of the athletic wing and is 60 by 19 feet in size, lined with
cement. To the right of the swimming pool are the bowling alleys. A wide
stairways leads to the second floor. Above the swimming-pool and bowling
alley is a large room 50 by 85 feet which is the gymnasium and also the
auditorium when occasion requires. About one-third of the roof converting
the athletic wing is used as a roof garden.
The second and third floors of the main building are given over almost
wholly to rooming apartments and baths. On the second floor over the
entrance hall is a members' parlor, from which a small balcony projects
over the main entrance. The remainder of the second floor and all to the
third are composed of the living rooms. These apartments, of which there
are 14 on the second and 20 on the third floor are approximately 18 by 14
feet each. They provide accommodations for 64 men.
The purposes of the association, as set forth in its charter and constitution,
are:
The institution has also its religious department. In that department there
are, generally speaking, three main lines of work Bible study, religious
meetings and special classes. Course are offered in the Life of Christ and
the Old Testament and in the larger social significance of the teachings of
Jesus. Meetings are held on Sunday afternoons and several times during
the week and courses are offered in the study of missions, in the method of
teaching the Bible and kindred subjects.
The institution also has charitable features. It makes no profit on any of its
activities. The professors and instructors in all departments serve without
pay and freely give of their time and ability to further the purposes of the
institution. The chief secretary and his assistant receive no salary from the
institution. Whatever they are paid comes from the United States. In
estimating the cost of instruction in the various departments, or of the other
things for which pay is received, no account is taken of the interest on the
money invested in the grounds and building, of deterioration in value
resulting from the lapse of time, or of the fact that the professors and
instructors and certain officials receive no pay. We have, then, a building
and grounds, professors and instructors, and certain institution officials,
furnished free of charge, and which makes no profit even on that basis.
This, it would seem, would lend some color to the claim that the association
takes on some of the aspect of a charitable institution. While it appears that
the association is not exclusively religious or charitable or educational, it is
demonstrated that it is a happy combination of all three, giving to its
membership the religious opportunities of the church, the educational
opportunities of the school and the blessings of charity where needed
without the recipient feeling or even knowing that he is the object of charity.
The judgment appealed from is reversed and the cause remanded with
instructions to enter a judgment against the city of Manila and in favor of
the Young Men's Christian Association of Manila in the sum of P6,221.35.
Without costs in this instance. So ordered.
CASE NO. 4
The plaintiff filed this action for the recovery of the sum paid by to the
defendants by way of land tax, alleging that the collection of this tax is
illegal. The lower court absolved the defendants from the complaint in
regard to the lot adjoining convent and declared that the tax collected on
the lot, which formerly was the cemetery and on the portion where the
lower stood, was illegal. Both parties appealed from this judgment.
The exemption in favor of the convent in the payment of the land tax (sec.
344 [c] Administrative Code) refers to the home of the parties who presides
over the church and who has to take care of himself in order to discharge
his duties. In therefore must, in the sense, include not only the land actually
occupied by the church, but also the adjacent ground destined to the
ordinary incidental uses of man. Except in large cities where the density of
the population and the development of commerce require the use of larger
tracts of land for buildings, a vegetable garden belongs to a house and, in
the case of a convent, it use is limited to the necessities of the priest, which
comes under the exemption.lawphi1.net
In regard to the lot which formerly was the cemetery, while it is no longer
used as such, neither is it used for commercial purposes and, according to
the evidence, is now being used as a lodging house by the people who
participate in religious festivities, which constitutes an incidental use in
religious functions, which also comes within the exemption.
The judgment appealed from is reversed in all it parts and it is held that
both lots are exempt from land tax and the defendants are ordered to
refund to plaintiff whatever was paid as such tax, without any special
pronouncement as to costs. So ordered.
Separate Opinions
CASE NO 5
G.R. No. L-15270 September 30, 1961
CONCEPCION, J.:
The facts and the issue are set forth in the aforementioned decision
of the Court of Tax Appeals, from which we quote:
1955
Income Expenses Deficit
P 6,859.32
Charity
14,038.92
Ward P17,433.30 P3,464.94
Pay Ward
P20,898.24
(Exhibits "B", "B-1" and "B-2")
1956
Income Expenses Deficit
P 5,559.89 P 341.53
Charity
16,249.04
Ward P21,467.40
Pay Ward
P21,809.93
(Exhibits "C", "C-1" and "C-2")
Aside from the St. Catherine and St. Mary hospitals, the petitioners
declared that they also own lands and coconut plantations in Quezon
Province, and other real estate in the City of Manila consisting of
apartments for rent. The petitioner, Jose V. Herrera, is an architect, actively
engaged in the practice of his profession, with office at Tuason Building,
Escolta, Manila. He was formerly Chairman, Board of Examiners for
Architects and Chairman, Board of Architects connected with the United
Nations. He was also connected with the Allied Technologists which
constructed the Veterans Hospital in Quezon City.
The only issue raised, is whether or not the lot, building and other
improvements occupied by the St. Catherine Hospital are exempt from the
real property tax. The resolution of this question boils down to the corollary
issue as to whether or not the said properties are used exclusively for
charitable or educational purposes. (Petitioners' brief, pp. 24-29).
The Court of Tax Appeals decided the issue in the negative, upon
the ground that the St. Catherine's Hospital "has a pay ward for ... pay-
patients, who are charged for the use of the private rooms, operating room,
laboratory room, delivery room, etc., like other hospitals operated for profit"
and that "petitioners and their family occupy a portion of the building for
their residence." With respect to petitioners' claim for exemption based
upon the operation of the school of midwifery, the Court conceded that "the
proposition might be proper if the property used for the school of midwifery
were separate and distinct from the hospital." It added, however, that, "in
the instant case, the portions of the building used for classrooms of the
school of midwifery have not been shown to be exclusively for school
purposes"; that said portions "rather ... have a dual use, i.e., for classroom
and for hospital use, the latter not being a purpose that renders the
property tax exempt;" that part of the building and lot in question "is used
as a hospital, part as residence of the petitioners, part as garage, part as
dormitory and part as school"; and that "the portion dedicated to
educational and charitable purposes can not be identified from those
destined to other uses; and the building is itself an indivisible unit of
property."
Thus, we have held that the U.S.T. Hospital was not established for
profit-making purposes, although it had 140 paying beds maintained only to
partly finance the expenses of the free wards, containing 203 beds for
charity patients (U.S.T. Hospital Employees Association vs. Sto. Tomas
University Hospital, L-6988, May 24, 1954), that St. Paul's Hospital of Iloilo,
a corporation organized for "charitable educational and religious purposes"
can not be considered as engaged in business merely because its
pharmacy department charges paying patients the cost of their medicine,
plus 10% thereof, to partly offset the cost of medicines supplied free of
charge to charity patients (Collector of Internal Revenue vs. St. Paul's
Hospital of Iloilo, L-12127, May 25, 1959), and that the amendment of the
original articles of incorporation of the University of Visayas to convert it
from a non-stock to a stock corporation and the increase of its assets from
P9,000 to P50,000, distributed among the members of the original non-
stock corporation in terms of shares of stock, as well as the subsequent
move of its board of trustees to double the stock dividends of the
corporation, in view of a gain of P200,000.00 in property, besides good-will,
which was not carried out, does not justify the inference that the
corporation has become one for business and profit, none of its profits
having inured to the benefit of any stockholder or individual (Collector of
Internal Revenue vs. University of Visayas, L-13554, February 28, 1961).
Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Paredes and De Leon, JJ.,
concur.
CASE NO. 6
REGALA, J.:
On different dates in 1957, 1958 and 1959, the Missionary District in the
Philippines received from the Missionary Society in the United States
various shipments of materials, supplies, equipment and other articles
intended for use in the construction and operation of the new St. Luke's
Hospital in Quezon City and the Brent Hospital and St. Stephen's High
School. The Missionary District also received from a certain William Minnis
of Canada a stove for the use of the Brent Hospital.
The Bishop of the Missionary District filed claims for refund of the amount
he had paid on the ground that under Republic Act No. 1916, the materials
and articles received by him were exempt from the payment of
compensating tax. As the two-year period for recovery of tax was about to
expire, the Bishop of the Missionary District filed a petition for review in the
Court of Tax Appeals, without awaiting action on his claim for refund.
Subsequently, he also filed two supplemental petitions for review covering
other shipments received by him and on which he had paid compensating
taxes.
After trial, the Tax Court rendered a decision holding the shipments exempt
from taxation ordering the petitioner to refund to the respondent the amount
of P118,847. It denied a motion for reconsideration of its decision,
prompting petitioner to interpose this appeal.
2. The Tax Court's holding that the real donors are the people who
contributed money to the Missionary Society in America is based on the
uncorroborated testimony of Robert Meyer, Treasurer of the Missionary
District in the Philippines, who did not have personal knowledge of the
alleged contribution. The alleged contributors were not even identified.
This order was issued pursuant to the power given him by the last proviso
of Republic Act No. 1916 which provides:
This Court has already held that the following requisites must concur in
order that a taxpayer may claim exemption under the law (1) the imported
articles must have been donated; (2) the donee must be a duly
incorporated or established international civic organization, religious or
charitable society, or institution for civic religious or charitable purposes;
and (3) the articles so imported must have been donated for the use of the
organization, society or institution or for free distribution and not for barter,
sale or hire. (Commissioner v. Church of Jesus Christ "New Jerusalem,"
G.R. No. L-15772, Oct. 31, 1961)
The Tax Court's finding that the materials and supplies were purchased by
the Missionary Society with money obtained from contributions from other
people who should be considered the real donors is also assailed as being
based on the uncorroborated testimony of Robert Meyer, Treasurer of the
Missionary District, who it is said, did not have personal knowledge of the
matter testified to by him. This is not so. As respondent points out, the
various deeds of donation state in paragraph 3 that the "Missionary Society
is a non-profit organization and derives its support from voluntary
contributions."
Hospitals that admit pay patients and charity patients ... are not
charitable institutions for purposes of Republic Act No 1916.
Again, it should be enough to point out that the admission of pay patients
does not detract from the charitable character of a hospital, if, as in the
case of St. Luke's Hospital, its funds are devoted exclusively to the
Maintenance of the institution (Cf., e.g., Herrera v. Quezon City Board of
Assessment Appeals, G.R. No. 15270, September 30, 1961). The
Secretary of Finance cannot limit or otherwise qualify the enjoyment of this
exemption granted under Republic Act No. 1916 in implementing the law.
CASE NO. 7
FERNANDO, C.J.:
On the face of this certiorari and mandamus petition filed by the Province of
Abra, 1 it clearly appears that the actuation of respondent Judge Harold M.
Hernando of the Court of First Instance of Abra left much to be desired.
First, there was a denial of a motion to dismiss 2 an action for declaratory
relief by private respondent Roman Catholic Bishop of Bangued desirous of
being exempted from a real estate tax followed by a summary
judgment 3granting such exemption, without even hearing the side of
petitioner. In the rather vigorous language of the Acting Provincial Fiscal,
as counsel for petitioner, respondent Judge "virtually ignored the pertinent
provisions of the Rules of Court; ... wantonly violated the rights of petitioner
to due process, by giving due course to the petition of private respondent
for declaratory relief, and thereafter without allowing petitioner to answer
and without any hearing, adjudged the case; all in total disregard of basic
laws of procedure and basic provisions of due process in the constitution,
thereby indicating a failure to grasp and understand the law, which goes
into the competence of the Honorable Presiding Judge." 4
It was the submission of counsel that an action for declaratory relief would
be proper only before a breach or violation of any statute, executive order
or regulation. 5 Moreover, there being a tax assessment made by the
Provincial Assessor on the properties of respondent Roman Catholic
Bishop, petitioner failed to exhaust the administrative remedies available
under Presidential Decree No. 464 before filing such court action. Further,
it was pointed out to respondent Judge that he failed to abide by the
pertinent provision of such Presidential Decree which provides as follows:
"No court shall entertain any suit assailing the validity of a tax assessed
under this Code until the taxpayer, shall have paid, under protest, the tax
assessed against him nor shall any court declare any tax invalid by reason
of irregularities or informalities in the proceedings of the officers charged
with the assessment or collection of taxes, or of failure to perform their
duties within this time herein specified for their performance unless such
irregularities, informalities or failure shall have impaired the substantial
rights of the taxpayer; nor shall any court declare any portion of the tax
assessed under the provisions of this Code invalid except upon condition
that the taxpayer shall pay the just amount of the tax, as determined by the
court in the pending proceeding." 6
When asked to comment, respondent Judge began with the allegation that
there "is no question that the real properties sought to be taxed by the
Province of Abra are properties of the respondent Roman Catholic Bishop
of Bangued, Inc." 7 The very next sentence assumed the very point it asked
when he categorically stated: "Likewise, there is no dispute that the
properties including their procedure are actually, directly and exclusively
used by the Roman Catholic Bishop of Bangued, Inc. for religious or
charitable purposes." 8 For him then: "The proper remedy of the petitioner
is appeal and not this special civil action." 9 A more exhaustive comment
was submitted by private respondent Roman Catholic Bishop of Bangued,
Inc. It was, however, unable to lessen the force of the objection raised by
petitioner Province of Abra, especially the due process aspect. it is to be
admitted that his opposition to the petition, pressed with vigor, ostensibly
finds a semblance of support from the authorities cited. It is thus impressed
with a scholarly aspect. It suffers, however, from the grave infirmity of
stating that only a pure question of law is presented when a claim for
exemption is made.
WHEREFORE, the petition is granted and the resolution of June 19, 1978
is set aside. Respondent Judge, or who ever is acting on his behalf, is
ordered to hear the case on the merit. No costs.
CASE NO. 1
CASTRO, J.:
Appeal by the defendant City of Iloilo from the decision of the Court of First
Instance of Iloilo declaring illegal Ordinance 11, series of 1960, entitled,
"An Ordinance Imposing Municipal License Tax On Persons Engaged In
The Business Of Operating Tenement Houses," and ordering the City to
refund to the plaintiffs-appellees the sums of collected from them under the
said ordinance.
I. Tenement houses:
P20.00 per door
(a) Apartment house made of strong materials p.a.
P10.00 per door
(b) Apartment house made of mixed materials p.a.
P10.00 per door
II Rooming house of strong materials p.a.
P5.00 per door
Rooming house of mixed materials p.a.
III. Tenement house partly or wholly engaged in
or dedicated to business in the following streets:
J.M. Basa, Iznart, Aldeguer, Guanco and P30.00 per door
Ledesma from Plazoleto Gay to Valeria. St. p.a.
IV. Tenement house partly or wholly engaged in P12.00 per door
or dedicated to business in any other street p.a.
V. Tenement houses at the streets surrounding
the super market as soon as said place is P24.00 per door
declared commercial p.a.
On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a
complaint, and an amended complaint, respectively, against the City of
Iloilo, in the aforementioned court, praying that Ordinance 11, series of
1960, be declared "invalid for being beyond the powers of the Municipal
Council of the City of Iloilo to enact, and unconstitutional for being violative
of the rule as to uniformity of taxation and for depriving said plaintiffs of the
equal protection clause of the Constitution," and that the City be ordered to
refund the amounts collected from them under the said ordinance.
On March 30, 1966,1 the lower court rendered judgment declaring the
ordinance illegal on the grounds that (a) "Republic Act 2264 does not
empower cities to impose apartment taxes," (b) the same is "oppressive
and unreasonable," for the reason that it penalizes owners of tenement
houses who fail to pay the tax, (c) it constitutes not only double taxation,
but treble at that and (d) it violates the rule of uniformity of taxation.
(h) Taxes or fees for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving thereof;
A tax ordinance shall go into effect on the fifteenth day after its
passage, unless the ordinance shall provide otherwise: Provided,
however, That the Secretary of Finance shall have authority to
suspend the effectivity of any ordinance within one hundred and
twenty days after its passage, if, in his opinion, the tax or fee therein
levied or imposed is unjust, excessive, oppressive, or confiscatory,
and when the said Secretary exercises this authority the effectivity of
such ordinance shall be suspended.
In such event, the municipal board or city council in the case of cities
and the municipal council or municipal district council in the case of
municipalities or municipal districts may appeal the decision of the
Secretary of Finance to the court during the pendency of which case
the tax levied shall be considered as paid under protest.
Does the tax imposed by the ordinance in question fall within any of the
exceptions provided for in section 2 of the Local Autonomy Act? For this
purpose, it is necessary to determine the true nature of the tax. The
appellees strongly maintain that it is a "property tax" or "real estate
tax,"3 and not a "tax on persons engaged in any occupation or business or
exercising privileges," or a license tax, or a privilege tax, or an excise
tax.4 Indeed, the title of the ordinance designates it as a "municipal license
tax on persons engaged in the business of operating tenement houses,"
while section 1 thereof states that a "municipal license tax is
hereby imposed on tenement houses." It is the phraseology of section 1 on
which the appellees base their contention that the tax involved is a real
estate tax which, according to them, makes the ordinance ultra vires as it
imposes a levy "in excess of the one per centum real estate tax allowable
under Sec. 38 of the Iloilo City Charter, Com. Act 158."5.
It is our view, contrary to the appellees' contention, that the tax in question
is not a real estate tax. Obviously, the appellees confuse the tax with the
real estate tax within the meaning of the Assessment Law,6 which, although
not applicable to the City of Iloilo, has counterpart provisions in the Iloilo
City Charter.7 A real estate tax is a direct tax on the ownership of lands and
buildings or other improvements thereon, not specially exempted,8 and is
payable regardless of whether the property is used or not, although the
value may vary in accordance with such factor.9The tax is usually single or
indivisible, although the land and building or improvements erected thereon
are assessed separately, except when the land and building or
improvements belong to separate owners.10 It is a fixed proportion11 of the
assessed value of the property taxed, and requires, therefore, the
intervention of assessors.12 It is collected or payable at appointed
times,13 and it constitutes a superior lien on and is enforceable against the
property14 subject to such taxation, and not by imprisonment of the owner.
The tax imposed by the ordinance in question does not possess the
aforestated attributes. It is not a tax on the land on which the tenement
houses are erected, although both land and tenement houses may belong
to the same owner. The tax is not a fixed proportion of the assessed value
of the tenement houses, and does not require the intervention of assessors
or appraisers. It is not payable at a designated time or date, and is not
enforceable against the tenement houses either by sale or distraint.
Clearly, therefore, the tax in question is not a real estate tax.
While it is true that the plaintiffs-appellees are taxable under the aforesaid
provisions of the National Internal Revenue Code as real estate dealers,
and still taxable under the ordinance in question, the argument against
double taxation may not be invoked. The same tax may be imposed by the
national government as well as by the local government. There is nothing
inherently obnoxious in the exaction of license fees or taxes with respect to
the same occupation, calling or activity by both the State and a political
subdivision thereof.21.
The contention that the plaintiffs-appellees are doubly taxed because they
are paying the real estate taxes and the tenement tax imposed by the
ordinance in question, is also devoid of merit. It is a well-settled rule that a
license tax may be levied upon a business or occupation although the land
or property used in connection therewith is subject to property tax. The
State may collect an ad valorem tax on property used in a calling, and at
the same time impose a license tax on that calling, the imposition of the
latter kind of tax being in no sensea double tax.22.
3. The appellant City takes exception to the conclusion of the lower court
that the ordinance is not only oppressive because it "carries a penal clause
of a fine of P200.00 or imprisonment of 6 months or both, if the owner or
owners of the tenement buildings divided into apartments do not pay the
tenement or apartment tax fixed in said ordinance," but also
unconstitutional as it subjects the owners of tenement houses to criminal
prosecution for non-payment of an obligation which is purely sum of
money." The lower court apparently had in mind, when it made the above
ruling, the provision of the Constitution that "no person shall be imprisoned
for a debt or non-payment of a poll tax."26 It is elementary, however, that "a
tax is not a debt in the sense of an obligation incurred by contract, express
or implied, and therefore is not within the meaning of constitutional or
statutory provisions abolishing or prohibiting imprisonment for debt, and a
statute or ordinance which punishes the non-payment thereof by fine or
imprisonment is not, in conflict with that prohibition."27 Nor is the tax in
question a poll tax, for the latter is a tax of a fixed amount upon all persons,
or upon all persons of a certain class, resident within a specified territory,
without regard to their property or the occupations in which they may be
engaged.28 Therefore, the tax in question is not oppressive in the manner
the lower court puts it. On the other hand, the charter of Iloilo
City29 empowers its municipal board to "fix penalties for violations of
ordinances, which shall not exceed a fine of two hundred pesos or six
months' imprisonment, or both such fine and imprisonment for each
offense." In Punsalan, et al. vs. Mun. Board of Manila, supra, this Court
overruled the pronouncement of the lower court declaring illegal and void
an ordinance imposing an occupation tax on persons exercising various
professions in the City of Manilabecause it imposed a penalty of fine and
imprisonment for its violation.30.
4. The trial court brands the ordinance as violative of the rule of uniformity
of taxation.
"... because while the owners of the other buildings only pay real
estate tax and income taxes the ordinance imposes aside from these
two taxes an apartment or tenement tax. It should be noted that in the
assessment of real estate tax all parts of the building or buildings are
included so that the corresponding real estate tax could be properly
imposed. If aside from the real estate tax the owner or owners of the
tenement buildings should pay apartment taxes as required in the
ordinance then it will violate the rule of uniformity of taxation.".
Complementing the above ruling of the lower court, the appellees argue
that there is "lack of uniformity" and "relative inequality," because "only the
taxpayers of the City of Iloilo are singled out to pay taxes on their tenement
houses, while citizens of other cities, where their councils do not enact a
similar tax ordinance, are permitted to escape such imposition." .
5. The last important issue posed by the appellees is that since the
ordinance in the case at bar is a mere reproduction of Ordinance 86 of the
City of Iloilo which was declared by this Court in L-12695, supra, as ultra
vires, the decision in that case should be accorded the effect of res
judicata in the present case or should constitute estoppel by judgment. To
dispose of this contention, it suffices to say that there is no identity of
subject-matter in that case andthis case because the subject-matter in L-
12695 was an ordinance which dealt not only with tenement houses but
also warehouses, and the said ordinance was enacted pursuant to the
provisions of the City charter, while the ordinance in the case at bar was
enacted pursuant to the provisions of the Local Autonomy Act. There is
likewise no identity of cause of action in the two cases because the main
issue in L-12695 was whether the City of Iloilo had the power under its
charter to impose the tax levied by Ordinance 11, series of 1960, under the
Local Autonomy Act which took effect on June 19, 1959, and therefore was
not available for consideration in the decision in L-12695 which was
promulgated on March 23, 1959. Moreover, under the provisions of section
2 of the Local Autonomy Act, local governments may now tax any taxable
subject-matter or object not included in the enumeration of matters
removed from the taxing power of local governments.Prior to the enactment
of the Local Autonomy Act the taxes that could be legally levied by local
governments were only those specifically authorized by law, and their
power to tax was construed in strictissimi juris. 35.
PEPSI V. TANAUAN
PEPSI V. BUTUAN
DECISION
PANGANIBAN, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court praying for the nullification of the October 30, 1996 Decision[1] of
the Court of Appeals[2] in CA-GR SP No. 40853, which effectively affirmed the
January 25, 1996 Resolution[3] of the Court of Tax Appeals[4] in CTA Case No.
5271. The CTA disposed as follows:
Petitioner also seeks to nullify the February 13, 1997 Resolution[5] of the Court
of Appeals denying reconsideration.
The Facts
As found by the Court of Appeals, the undisputed facts of the case are as
follows:
In a letter dated May 17, 1995, the CIR denied the urgent request for
reconsideration/reinvestigation of the private respondents on the ground that no
formal assessment has as yet been issued by the Commissioner.
Private respondents then elevated the Decision of the CIR dated May 17, 1995 to
the Court of Tax Appeals on a petition for review docketed as CTA Case No. 5271
on July 21, 1995. On September 6, 1995, the CIR filed a Motion to Dismiss the
petition on the ground that the CTA has no jurisdiction over the subject matter of
the petition, as there was no formal assessment issued against the petitioners. The
CTA denied the said motion to dismiss in a Resolution dated January 25, 1996 and
ordered the CIR to file an answer within thirty (30) days from receipt of said
resolution. The CIR received the resolution on January 31, 1996 but did not file an
answer nor did she move to reconsider the resolution.
Instead, the CIR filed this petition on June 7, 1996, alleging as grounds that:
Respondent Court of Tax Appeals acted with grave abuse of discretion and
without jurisdiction in considering the affidavit/report of the revenue officer and
the indorsement of said report to the secretary of justice as assessment which may
be appealed to the Court of Tax Appeals;
In denying the motion to dismiss filed by the CIR, the Court of Tax Appeals
stated:
We agree with petitioners contentions, that the criminal complaint for tax evasion
is the assessment issued, and that the letter denial of May 17, 1995 is the decision
properly appealable to [u]s. Respondents ground of denial, therefore, that there
was no formal assessment issued, is untenable.
It is the Courts honest belief, that the criminal case for tax evasion is already an
assessment. The complaint, more particularly, the Joint Affidavit of Revenue
Examiners Lagmay and Savellano attached thereto, contains the details of the
assessment like the kind and amount of tax due, and the period covered.
Petitioners are right, in claiming that the provisions of Republic Act No. 1125,
relating to exclusive appellate jurisdiction of this Court, do not, make any mention
of formal assessment. The law merely states, that this Court has exclusive
appellate jurisdiction over decisions of the Commissioner of Internal Revenue
on disputed assessments, andother matters arising under the National Internal
Revenue Code, other law or part administered by the Bureau of Internal Revenue
Code.
As far as this Court is concerned, the amount and kind of tax due, and the period
covered, are sufficient details needed for an assessment. These details are more
than complete, compared to the following definitions of the term as quoted
hereunder. Thus:
Assessment is laying a tax. Johnson City v. Clinchfield R. Co., 43 S.W. (2d) 386,
387, 163 Tenn. 332. (Words and Phrases, Permanent Edition, Vol. 4, p. 446)
The word assessment when used in connection with taxation, may have more than
one meaning. The ultimate purpose of an assessment to such a connection is to
ascertain the amount that each taxpayer is to pay. More commonly, the word
assessment means the official valuation of a taxpayers property for purpose of
taxation. State v. New York, N.H. and H.R. Co. 22 A. 765, 768, 60 Conn. 326,
325. (Ibid. p. 445)
From the above, it can be gleaned that an assessment simply states how much tax
is due from a taxpayer. Thus, based on these definitions, the details of the tax as
given in the Joint Affidavit of respondents examiners, which was attached to the
tax evasion complaint, more than suffice to qualify as an assessment. Therefore,
this assessment having been disputed by petitioners, and there being a denial of
their letter disputing such assessment, this Court unquestionably acquired
jurisdiction over the instant petition for review.[6]
As earlier observed, the Court of Appeals sustained the CTA and dismissed the
petition.
Hence, this recourse to this Court.[7]
The Court of Appeals held that the tax court committed no grave abuse of
discretion in ruling that the Criminal Complaint for tax evasion filed by the
Commissioner of Internal Revenue with the Department of Justice constituted an
assessment of the tax due, and that the said assessment could be the subject of a
protest. By definition, an assessment is simply the statement of the details and the
amount of tax due from a taxpayer. Based on this definition, the details of the tax
contained in the BIR examiners Joint Affidavit,[8] which was attached to the
criminal Complaint, constituted an assessment. Since the assailed Order of the
CTA was merely interlocutory and devoid of grave abuse of discretion, a petition
for certiorari did not lie.
Issues
Petitioners submit for the consideration of this Court the following issues:
(1) Whether or not the criminal complaint for tax evasion can be construed
as an assessment.
(2) Whether or not an assessment is necessary before criminal charges for tax
evasion may be instituted.
(3) Whether or not the CTA can take cognizance of the case in the absence of an
assessment.[9]
In the main, the Court will resolve whether the revenue officers Affidavit-
Report, which was attached to the criminal Complaint filed with the Department of
Justice, constituted an assessment that could be questioned before the Court of Tax
Appeals.
Petitioner argues that the filing of the criminal complaint with the Department
of Justice cannot in any way be construed as a formal assessment of private
respondents tax liabilities. This position is based on Section 205 of the National
Internal Revenue Code[10] (NIRC), which provides that remedies for the collection
of deficient taxes may be by either civil or criminal action. Likewise, petitioner
cites Section 223(a) of the same Code, which states that in case of failure to file a
return, the tax may be assessed or a proceeding in court may be begun without
assessment.
Respondents, on the other hand, maintain that an assessment is not an action or
proceeding for the collection of taxes, but merely a notice that the amount stated
therein is due as tax and that the taxpayer is required to pay the same. Thus,
qualifying as an assessment was the BIR examiners Joint Affidavit, which
contained the details of the supposed taxes due from respondent for taxable years
ending 1987 and 1988, and which was attached to the tax evasion Complaint filed
with the DOJ. Consequently, the denial by the BIR of private respondents request
for reinvestigation of the disputed assessment is properly appealable to the CTA.
We agree with petitioner. Neither the NIRC nor the revenue regulations
governing the protest of assessments[11] provide a specific definition or form of an
assessment. However, the NIRC defines the specific functions and effects of an
assessment. To consider the affidavit attached to the Complaint as a proper
assessment is to subvert the nature of an assessment and to set a bad precedent that
will prejudice innocent taxpayers.
True, as pointed out by the private respondents, an assessment informs the
taxpayer that he or she has tax liabilities. But not all documents coming from the
BIR containing a computation of the tax liability can be deemed assessments.
To start with, an assessment must be sent to and received by a taxpayer, and
must demand payment of the taxes described therein within a specific
period. Thus, the NIRC imposes a 25 percent penalty, in addition to the tax due, in
case the taxpayer fails to pay the deficiency tax within the time prescribed for its
payment in the notice of assessment. Likewise, an interest of 20 percent per
annum, or such higher rate as may be prescribed by rules and regulations, is to be
collected from the date prescribed for its payment until the full payment.[12]
The issuance of an assessment is vital in determining the period of limitation
regarding its proper issuance and the period within which to protest it. Section
203[13]of the NIRC provides that internal revenue taxes must be assessed within
three years from the last day within which to file the return. Section 222,[14] on the
other hand, specifies a period of ten years in case a fraudulent return with intent to
evade was submitted or in case of failure to file a return. Also, Section 228[15] of
the same law states that said assessment may be protested only within thirty days
from receipt thereof. Necessarily, the taxpayer must be certain that a specific
document constitutes an assessment. Otherwise, confusion would arise regarding
the period within which to make an assessment or to protest the same, or whether
interest and penalty may accrue thereon.
It should also be stressed that the said document is a notice duly sent to the
taxpayer. Indeed, an assessment is deemed made only when the collector of
internal revenue releases, mails or sends such notice to the taxpayer.[16]
In the present case, the revenue officers Affidavit merely contained a
computation of respondents tax liability. It did not state a demand or a period for
payment. Worse, it was addressed to the justice secretary, not to the taxpayers.
Respondents maintain that an assessment, in relation to taxation, is simply
understood to mean:
A notice to the effect that the amount therein stated is due as tax and a demand for
payment thereof.[17]
Fixes the liability of the taxpayer and ascertains the facts and furnishes the data
for the proper presentation of tax rolls.[18]
Even these definitions fail to advance private respondents case. That the BIR
examiners Joint Affidavit attached to the Criminal Complaint contained some
details of the tax liabilities of private respondents does not ipso facto make it an
assessment. The purpose of the Joint Affidavit was merely to support and
substantiate the Criminal Complaint for tax evasion. Clearly, it was not meant to
be a notice of the tax due and a demand to the private respondents for payment
thereof.
The fact that the Complaint itself was specifically directed and sent to the
Department of Justice and not to private respondents shows that the intent of the
commissioner was to file a criminal complaint for tax evasion, not to issue an
assessment. Although the revenue officers recommended the issuance of an
assessment, the commissioner opted instead to file a criminal case for tax
evasion. What private respondents received was a notice from the DOJ that a
criminal case for tax evasion had been filed against them, not a notice that the
Bureau of Internal Revenue had made an assessment.
In addition, what private respondents sent to the commissioner was a motion
for a reconsideration of the tax evasion charges filed, not of an assessment, as
shown thus:
This is to request for reconsideration of the tax evasion charges against my client,
PASCOR Realty and Development Corporation and for the same to be referred to
the Appellate Division in order to give my client the opportunity of a fair and
objective hearing[19]
CONCEPCION JR., J:
It is not disputed that sometime in July, 1974, BIR Examiner Ben Garcia
examined the income tax returns filed by the herein petitioner, Quirico P.
Ungab, for the calendar year ending December 31, 1973. In the course of
his examination, he discovered that the petitioner failed to report his
income derived from sales of banana saplings. As a result, the BIR District
Revenue Officer at Davao City sent a "Notice of Taxpayer" to the petitioner
informing him that there is due from him (petitioner) the amount of
P104,980.81, representing income, business tax and forest charges for the
year 1973 and inviting petitioner to an informal conference where the
petitioner, duly assisted by counsel, may present his objections to the
findings of the BIR Examiner. 1 Upon receipt of the notice, the petitioner
wrote the BIR District Revenue Officer protesting the assessment, claiming
that he was only a dealer or agent on commission basis in the banana
sapling business and that his income, as reported in his income tax returns
for the said year, was accurately stated. BIR Examiner Ben Garcia,
however, was fully convinced that the petitioner had filed a fraudulent
income tax return so that he submitted a "Fraud Referral Report," to the
Tax Fraud Unit of the Bureau of Internal Revenue. After examining the
records of the case, the Special Investigation Division of the Bureau of
Internal Revenue found sufficient proof that the herein petitioner is guilty of
tax evasion for the taxable year 1973 and recommended his
prosecution: t.hqw
(1) For having filed a false or fraudulent income tax return for
1973 with intent to evade his just taxes due the government
under Section 45 in relation to Section 72 of the National
Internal Revenue Code;
The petitioner seeks the annulment of the informations filed against him on
the ground that the respondent State Prosecutor is allegedly without
authority to do so. The petitioner argues that while the respondent State
Prosecutor may initiate the investigation of and prosecute crimes and
violations of penal laws when duly authorized, certain requisites,
enumerated by this Court in its decision in the case of Estrella vs.
Orendain, 12should be observed before such authority may be exercised;
otherwise, the provisions of the Charter of Davao City on the functions and
powers of the City Fiscal will be meaningless because according to said
charter he has charge of the prosecution of all crimes committed within his
jurisdiction; and since "appropriate circumstances are not extant to warrant
the intervention of the State Prosecution to initiate the investigation, sign
the informations and prosecute these cases, said informations are null and
void." The ruling adverted to by the petitioner reads, as
follows: t.hqw
The contention is without merit. Contrary to the petitioner's claim, the rule
therein established had not been violated. The respondent State
Prosecutor, although believing that he can proceed independently of the
City Fiscal in the investigation and prosecution of these cases, first sought
permission from the City Fiscal of Davao City before he started the
preliminary investigation of these cases, and the City Fiscal, after being
shown Administrative Order No. 116, dated December 5, 1974, designating
the said State Prosecutor to assist all Provincial and City fiscals throughout
the Philippines in the investigation and prosecution of all violations of the
National Internal Revenue Code, as amended, and other related laws,
graciously allowed the respondent State Prosecutor to conduct the
investigation of said cases, and in fact, said investigation was conducted in
the office of the City Fiscal. 13
The petitioner also claims that the filing of the informations was precipitate
and premature since the Commissioner of Internal Revenue has not yet
resolved his protests against the assessment of the Revenue District
Officer; and that he was denied recourse to the Court of Tax Appeals.
The contention is without merit. What is involved here is not the collection
of taxes where the assessment of the Commissioner of Internal Revenue
may be reviewed by the Court of Tax Appeals, but a criminal prosecution
for violations of the National Internal Revenue Code which is within the
cognizance of courts of first instance. While there can be no civil action to
enforce collection before the assessment procedures provided in the Code
have been followed, there is no requirement for the precise computation
and assessment of the tax before there can be a criminal prosecution
under the Code. t.hqw
SO ORDERED.
CHAPTER II
CASE NO. 1
REGALADO, J.:
However, the tax court held ACMDC liable for the amount of
P1,572,637.48, exclusive of interest, consisting of 25% surcharge for late
payment of the ad valorem tax and late filing of notice of removal of silver,
gold and pyrite extracted during certain periods, and for alleged deficiency
manufacturer's sales tax and contractor's tax.
Still not satisfied with the said judgment which had reduced its tax liability to
P906,124.49, as a final recourse ACMDC came to this Court on a petition
for review on certiorari in G.R. No. 105563, claiming that it is not liable at all
for any deficiency. tax assessments for 1975 and 1976. In our resolution of
September 1, 1993, G.R. No. 104151 was ordered consolidated with G.R.
No. 105563. 8
The pertinent provisions of the National Internal Revenue Code (tax code,
for facility) at the time material to this controversy, read as follows:
In other words, the assessment shall be based, not upon the cost of
production or extraction of said minerals or mineral products, but on the
price which the same before or without undergoing a process of
manufacture would command in the ordinary course of business. 9
In the instant case, the allowance by the tax court of smelting and refining
charges as deductions is not contrary to the above-mentioned provisions of
the tax code which ostensibly prohibit any form of deduction except freight
and insurance charges. A review of the records will show that it was the
London Metal Exchange price on wire bar which was used as tax base by
ACMDC for purposes of the 2%ad valorem tax on copper concentrates
since there was no available market price quotation in the commodity
exchange or markets of the world for copper concentrates nor was there
any market quotation locally obtainable. 10 Hence, the charges for smelting
and refining were assessed not on the basis of the price of the copper
extracted at the mine site which is prohibited by law, but on the basis of the
actual market value of the manufactured copper which in this case is the
price quoted for copper wire bar by the London Metal Exchange.
The issue of whether the ad valorem tax should be based upon the value of
the finished product, or the value upon extraction of the raw materials or
minerals used in the manufacture of said finished products, has been
passed upon by us in several cases wherein we held that the ad
valorem tax is to be computed on the basis of the market value of the
mineral in its condition at the time of such removal and before it undergoes
a chemical change through manufacturing process, as distinguished from a
purely physical process which does not necessarily involve the change or
transformation of the raw material into a composite distinct product. 11
Thus, in the case of Cebu Portland Cement Co. vs. Commissioner of
Internal Revenue, 12 this Court ruled:
This view was subsequently affirmed in the resolution of the Court denying
the motion for reconsideration of its aforesaid decision, 13 reiterated that
the pertinent part of which reiterated that
It was copper ore that was extracted by ACMDC from its mine site which,
through a simple physical process of removing impurities therefrom, was
converted into copper concentrate In turn, this copper concentrate
underwent the process of smelting and refining, and the finished product is
called copper cathode or copper wire bar.
The copper wire bar is the manufactured copper. It is not the mineral
extracted from the mine site nor can it be considered a mineral product
since it has undergone a manufacturing process, to wit:
A Mining Process
B Milling Process
A. Smelting
B. Refining
C. Fabricating
Moreover, it is also worth noting at this point that the decision of the tax
court was based on its previous ruling in the case of Atlas Consolidated
Mining and Development Corporation vs. Commissioner of Internal
Revenue, 15 dated January 23, 1981, which we quote with approval:
In resume:
The Commissioner of Internal Revenue argues that the ruling in the case
above stated is not binding, considering that the incumbent Commissioner
of Internal Revenue is not bound by decisions or rulings of his predecessor
when he finds that a different construction of the law should be adopted,
invoking therefor the doctrine enunciated in Hilado vs. Collector of internal
Revenue, et a1, 16 This trenches on specious reasoning. What was
involved in the Hilado case was a previous ruling of a former Commissioner
of Internal Revenue. In the case at bar, the Commissioner based his
findings on a previous decision rendered by the Court of Tax Appeals itself.
ACMDC argues that the Court of Appeals erred in holding it liable to pay
25% surcharge on silver, gold and pyrite extracted by it during tax year
1976.
In case the royalties or ad valorem taxes are not paid within the
period prescribed above, there shall be added thereto a
surcharge of twenty-five per centum. Where a false or
fraudulent return is made, there shall be added to the royalties
or ad valorem taxes a surcharge of fifty per centum of their
amount. The surcharge So, added: shall be collected in the
same manner and as part of the royalties or ad valorem taxes,
as the case may be.
Under the aforesaid provision, the payment of the ad valorem tax shall be
made upon removal of the mineral products from the mine site or if
payment cannot be made, by filing a bond in the form and amount to be
approved by the Commissioner conditioned upon the payment of the said
tax.
In the instant case, the records show that the payment of the ad
valorem tax on gold, silver and pyrite was belatedly made. ACMDC,
however, maintains that it should not be required to pay the 25% surcharge
because the correct quantity of gold and silver could be determined only
after the copper concentrates had gone through the process of smelting
and refining in Japan while the amount of pyrite cannot be determined until
after the flotation process separating the copper mineral from the waste
material was finished.
Prefatorily, it must not be lost sight of that bad faith is ; not essential for the
imposition of the 25% surcharge for late payment of the ad valorem tax.
Hence,
MISSING PAGE 19
Q. Percentage?
A. Yes.
A. Yes.
Q. Now where do you submit the results of the
laboratory testing?
A. Makati.
We see it (sic) that even if the silver and gold cannot as yet be
physically separated from the copper concentrate until the
process of smelting and refining was completed, the estimated
commercial quantity of the silver and gold could have been
determined in much the same way that petitioner is able to
estimate the commercial quantity of copper during the assay. If,
as stated by petitioner, it is able to estimate the grade of the
copper ore, and it has determined the grade not only of the
copper but also those of the gold and silver during the assay
(Petitioner's Memorandum, p. 207, Record), ergo, the estimated
commercial quantity of the silver and gold subject to ad
valorem tax could have also been determined and provisionally
paid as for copper. 25
The other allegation of ACMDC is that there was no removal of pyrite from
the mine site because the pyrite was delivered to its sister company, Atlas
Fertilizer Corporation, whose plant is located inside the mineral concession
of ACMDC in Sangi, Toledo City. ACMDC, however, is already barred by
estoppel in pais from putting that matter in issue.
An ad valorem tax on pyrite for the same tax year was already declared
and paid by ACMDC. In fact, that payment was used as the basis for
computing the 25% surcharge. It was only when ACMDC was assessed for
the 25% surcharge that said issue was raised by it. Also, the evidence
shows that deliveries of pyrite were not exclusively made to its sister
company, Atlas Fertilizer Corporation. There were shipments of pyrite to
other companies located outside of its mine site, in addition to those
delivered to its aforesaid sister company. 26
The manufacturer's tax is imposed under Section 186 of the tax code then
in force which provides:
On the other hand, the contractor's tax is provided for under Section 191 of
the same code, paragraph 17 of which declares that lessors of personal
property shall be subject to a contractor's tax of 3% of the gross receipts.
Sections 186 and 191 fall under Title V of the tax code, entitled "Privilege
Taxes on Business and Occupation." These "privilege taxes on business"
are taxes imposed upon the privilege of engaging in business. They are
essentially excise taxes. 27 To be held liable for the payment of a privilege
tax, the person or entity must be engaged in business, as shown by the fact
that the drafters of the tax code had purposely grouped said provisions
under the general heading adverted to above.
The foregoing notwithstanding, it has likewise been ruled that one act may
be sufficient to constitute carrying on a business according to the intent
with which the act is done. A single sale of liquor by one who intends to
continue selling is sufficient to render him liable for "engaging in or carrying
on" the business of a liquor dealer. 29
Thus, where the end sought is to make a profit, the act constitutes "doing-
business." This is not without basis. The term "business," as used in the
law imposing a license tax on business, trades, and so forth, ordinarily
means business in the trade or commercial sense only, carried on with a
view to profit or livelihood; 31 It is thus restricted to activities or affairs
where profit is the purpose, or livelihood is the motive. Since the term
"business" is being used without any qualification in our aforesaid tax code,
it should therefore be therefore be construed in its plain and ordinary
meaning, restricted to activities for profit or livelihood. 32
After a careful review of the records and on the basis of the legal concept
of "engaging in business" hereinbefore discussed, we are inclined to agree
with ACMDC that it should not and cannot be held liable for the payment of
the manufacturer's tax.
First, under the tax code then in force, the 7% manufacturer's sales tax is
imposed on the manufacturer for every original sale, barter, exchange and
other similar transaction intended to transfer ownership of articles. As
hereinbefore quoted, and we repeat the same for facility of reference, the
term "manufacturer" is defined in the tax code as including "every person
who by physical or chemical process alters the exterior texture or form or
inner substance of any raw material or manufactured or partially
manufactured product in such manner as to prepare it for a special use or
uses to which it could not have been put in its original condition, or who by
any such process alters the quality of any such raw material or
manufactured or partially manufactured product so as to reduce it to
marketable shape or prepare it for any of the uses of industry, or who by
any such process combines any such raw material or manufactured or
partially manufactured products with other materials or products of the
same or of different kinds and in such manner that the finished product of
such process or manufacture can be put to a special use or uses to which
such raw materials or manufactured or partially manufactured products in
their original condition could not have been put, and who in addition alters
such raw material or manufactured or partially manufactured products, or
combines the same to produce such finished products for the purpose of
their sale or distribution to others and not for his own use or
consumption. 33
At most, whatever profit ACMDC may have realized from that single
transaction was just incidental to its primordial purpose of accommodating
other mining companies. Well-settled is the rule that anything done as a
mere incident to, or as a necessary consequence of, the principal business
is not ordinarily taxed as an independent business in itself. 36 Where a
person or corporation is engaged in a distinct business and, as a feature
thereof, in an activity merely incidental which serves no other person or
business, the incidental and restricted activity is not considered as intended
to be separately taxed. 37
Considering that there was a series of transactions involved, plus the fact
that there was an apparent and protracted intention to profit from such
activities, it can be safely concluded that ACMDC was habitually engaged
in the leasing out of its plane, motor boat and dump truck, and is perforce
subject to the contractor's tax.
The allegation of ACMDC that it did not realize any profit from the leasing
out of its said personal properties, since its income therefrom covered only
the costs of operation such as salaries and fuel, is not supported by any
documentary or substantial evidence. We are not, therefore, convinced by
such disavowal.
Assessments are prima facie presumed correct and made in good faith.
Contrary to the theory of ACMDC, it is the taxpayer and not the Bureau of
Internal Revenue who has the duty of proving otherwise. It is an elementary
rule that in the absence of proof of any irregularities in the performance of
official duties, an assessment will not be disturbed. All presumptions are in
favor of tax assessments. 41 Verily, failure to present proof of error in
assessments will justify judicial affirmance of said assessment. 42
CASE NO. 2
PADILLA, J.:
year on 1, 230
hectares.....................................4,920.00
TOTAL AMOUNT
DUE............................ P14,449.00 2
For failure anew to serve summons, the Court of First Instance of Manila
issued an order dated 4 October 1962 dismissing Civil Case No. 42911
without prejudice. The order of dismissal became final on 5 November
1962.
As herein earlier stated, the Court a quo rendered a decision against the
private respondent. On appeal to the respondent Court of Appeals, the
decision was reversed. Petitioner, Republic of the Philippines, filed a
motion for reconsideration which was likewise denied by said Court in a
resolution dated 31 May 1974. Hence, this petition, with the following
assignment of errors:
I
II
III
Since petitioner has not adduced proof that private respondent had in fact
received the demand letter of 16 July 1955, it can not be assumed that
private respondent received said letter. Records, however, show that
petitioner wrote private respondent a follow-up letter dated 19 September
1956, reiterating its demand for the payment of taxes as originally
demanded in petitioner's letter dated 16 July 1955. This follow-up letter is
considered a notice of assessment in itself which was duly received by
private respondent in accordance with its own admission. 8 The aforesaid
letter reads:
Sept
embe
r 19,
1956
Gentlemen:
JOS
E
ARA
NAS
Deputy Collector
of Internal
9
Revenue
In a suit for collection of internal revenue taxes, as in this case, where the
assessment has already become final and executory, the action to collect is
akin to an action to enforce a judgment. No inquiry can be made therein as
to the merits of the original case or the justness of the judgment relied
upon. ...
SO ORDERED.
TAX CASES ON DISTRAINT AND LEVY
CASE NO. 2
PARAS, J.:
Under the law (Commonwealth Act No. 470, section 35), the provincial
treasurer is enjoined to set forth in the notice, among other particulars, the
date of the tax sale. We are of the opinion that this mandatory requirement
was not satisfied in the present case, because the announcement that the
sale would take place on December 15, 1940 and every day thereafter, is
as general and indefinite as a notice for the sale "within this or next year" or
"some time within the month of December." In order to enable a taxpayer to
protect his rights, he should at least appraised of the exact date of the
proceeding by which he is to lose his property. When we consider the fact
that the sale in favor of the appellant was executed on May 12, 1941, or
nearly five months after December 15, 1940, the violation of the mandatory
requirement becomes more obvious. Indeed, in his motion for
reconsideration (seeRecord on Appeal, pp. 33-41), the appellant had
admitted, unknowingly perhaps, that when he went to the office of the
municipal treasurer after reading the notice of sale in December, 1940, to
inquire about the advertised land, he was told to return on May 12, 1941.
The implication that follows is that the tax officials had really adopted the
view that they could sell any of the numerous forfeited lots on any date
subsequent to December 15, 1940, without new notice, thereby making the
resulting sale more private than public, likewise in violation of the law. It
may be observed that as regards tax sales, unlike ordinary execution sales,
the statute does not expressly authorize adjournment from day to day. The
reminder may, however, be given that the tax officials will greatly be
inconvenienced by following the law strictly, especially when numerous
properties are, as in the present case (132 parcels), to be disposed of for
tax delinquency. We will not venture to disagree, but it is believed that the
officials who are ever solicitous in protecting private proprietary rights, shall
have helped, to the same extent, in maintaining the solid foundation of the
Government which they seek to serve and of which they themselves are a
part.
What has been said is sufficient to decide this appeal, although it will not
altogether be amiss to refer to details that further support the judgment of
the lower court. The appellee was admittedly not notified of the auction
sale, and this also vitiates the proceeding. She is the registered owner of
the land and, since 1934, has become liable for the taxes thereon. For all
purposes, she is the delinquent taxpayer "against whom the taxes were
assessed," referred to in section 34 of Commonwealth Act No. 470. It
cannot be Nemesio Cabrera for the latter's obligation to pay taxes ended
where the appellee's liability began. Neither the alleged receipt by the
appellee of a copy of certificate of sale dated May 12, 1941, nor her failure
to redeem thereafter, had the effect of validating the prior tax proceeding.
The sale in favor of the appellant cannot bind the appellee, since the land
purportedly conveyed was owned by Nemesio Cabrera, not by the
appellee; and, at the time of the sale, Nemesio Cabrera had no interest
whatsoever in the land in question that could have passed to the appellant.
The appellee may be criticized for her failure to have the land transferred to
her name in the assessment record. The circumstance, nevertheless,
cannot supplant the absence of notice. Of course, it is the duty of any
person acquiring at the time real property to prepare and submit a tax
declaration within sixty days (Commonwealth Act No. 470, section 12), but
it is no less true that when the owner refuses or fails to make the required
declaration, the provincial assessor should himself declare the property in
the name of the defaulting owner (Commonwealth Act No. 470, section 14).
In this case there is absolutely no showing that the appellee had
deliberately failed to make the declaration to defraud the tax officials; and it
may be remarked that there can be no reason why her Torrens title, which
binds the whole world, cannot at least charge the Government which had
issued it, with notice thereof. A little synchronization between the offices of
the register of deeds and of the provincial assessor, with perhaps very
negligible additional clerical work on the part of both, will surely result in a
more efficient enforcement of the tax laws.
Not having appealed, the appellee cannot now pretend that the judgement
of the lower court is erroneous in so far as it failed to award damages in her
favor for the sum of P500. While an appellee can on appeal make a
counter-assignment of error, it must be with a view merely to sustaining the
judgement, not to obtaining other affirmative relief.
The appealed judgment is affirmed, with costs of both instances against the
appellant. So ordered.
CASE NO 3
TRACEY, J.:
After this case had been finally submitted to this court, and was
awaiting decision, a petition was presented in behalf of the plaintiff, not
through her attorneys of record but through a new attorney, in the following
words:
By the judgment of the court below the plaintiff had been awarded
the real property in suit, together with damages for its detention.
It is obvious that the motion does not comply with the power granted
by the plaintiff nor fall within its terms. The notice of motion does not ask for
the discontinuance or cessation or abandonment of the suit, but on the
contrary prays for a judgment absolving the defendants of the claim set up
in the complaint, without any costs. Such a judgment would be one upon
the merits and would preclude the plaintiff from any claim which she might
hereafter, on fuller devices, see fit to make against these defendants. Such
action, possibly so prejudicial to her interests, her power attorney has not
authorized any person to take in her behalf. The two things, a
discontinuance and a judgment of absolution on the merits, are not only
different in degree but in kind, and in the opinion of the majority of this court
the one does not include the other.
Second. If, however, it might be that the motion for a judgment upon
the merits could be considered as including the other kind of relief, that is, a
mere discontinuance, on the principle that the greater includes the less,
then the relief asked for can not be granted, because it is tied up with the
condition that there shall be no award of costs. The award of costs is at the
disposal of the court, not of the parties, especially to the prejudice of the
defendants, who are third persons, not before us on this motion and whom
we can not presume to accept terms to unfavorable to them in their
character as innocent purchasers.
. . . and shall have the same right and power over such
judgments, decrees, and executions to enforce his client as his client
had or may have to the extent that may be necessary for the payment
of his just fees and disbursements.
The justice sitting in this case do not all agree on each of the
aforesaid grounds, but they are not unanimously of the opinion that the
motion must be denied.
DECISION.
This action was brought in the Court of First Instance of the city of
Manila to set aside a sale of real estate valued at P95,697.10 for unpaid
taxes amounting to P2,934.76 to the defendant Jimenez, and also the
transfer of a one-half interest therein by him to the defendant Fuster, on
two grounds, first, that the defendants had secured title under the tax sale
by conspiracy with one Vicente Ablaza, plaintiff's agent, who allowed the
property to go to sale while having in his hands ample funds for the
payment of taxes; and, second, that the tax sale was invalid by reason of
defects in the proceedings to impose the tax.
The first cause of action was opened up, but was not persisted in at
the trial and the case comes before us on the questions only of the
irregularity of the proceedings for the sale. The most serious of these are
the following:
(1) The statement of the owner, filed by Ablaza, as her agent, gave
her name as "Doa Antonia Valencia y Orus." In the assessment roll for the
year 1901 the name given was "Valencia, Antonio." In the roll of 1902 it
was "Valencia, Antonia," while the tax deed had it "Antonia Valencia."
(2) The correct description given in the owner's filed statement read:
The words "Lots" and "Blocks" were proved to refer to a plan made
by the assessor and collector and kept in his office for his own use, but to
which individuals might have access, on which it was shown as lots 24, 25,
16, and part of 28 in block 1. This plan was made after the filing of the
declaration by the property owners but before the assessment.
(3) The amount of the taxes in these several document is set down in
columns, the cents being divided from the dollars, but without any dollar-
mark.
(4) That only proof of the fixing of the notices of sale was a recital in
the certificate of the city assessor and collector that the notice was posted
"at the main entrance of said municipal building and at five other public
places in the city of Manila," without specifying the places, and also a
recital in the deed that a copy was posted in the proper barrio.
(5) The tax certificate did not fully recite the proceedings and give the
details required by sections 78 and 80 of Act No. 82, but, on the contrary,
showed the defects n the description and notice of sale, whereas the final
deed substantially complied with the statute.
The tax law applicable to Manila does not attempt to give any special
probative effect to the deed of the assessor and collector, and therefore
leaves the purchaser to establish the regularity of all vital steps in the
assessment and sale. By section 84 and 86 of Act No. 82 it is enacted that
no tax shall be declared invalid for irregularities unless they "shall have
impaired the substantial rights of the taxpayer."
The first apparent defect in this assessment is the error in the name
of the owner.
In Marx vs. Hanthorn (148 U.S., 172), where it does not even appear
that under the law of the State of Oregon the tax was a personal one, the
tax was held bad because the owner's name had been written in the roll as
"Ida F. Hawthorn" instead of "Ida J. Hanthorn."
Under the Municipal Law of the Philippines, sections 74 to 78, the tax
is primarily a personal one and is enforcible against realty only in the event
of a deficiency of personality, whereas in the City of Manila its character is
somewhat qualified by the provisions in section 47 of the charter only.
Nevertheless, the requirement of the statute in so imperative that the rule of
the Hanthorn case is manifestly applicable here.
The judgment of the Court of First Instance not only awarded the
plaintiff the real estate, but also the rents and profits thereon, both from the
time the defendants took possession until the commencement of the action,
and those accrued during the pendency of the action which have been
collected by the defendant Gabriel Fuster y Fuster as receiver. This part of
the judgment should be modified.
In the present instance, the final deed is regular on its face, and in
the opinion of the majority of the court, in the absence of actual notice,
sufficed to protect the holders thereof, although the preliminary certificate of
sale which they had held and surrendered showed in its recital that the sale
was irregular. Therefore, applying either the Spanish or the American
criterions as to good faith, the plaintiff may not recover the rents and profits
down to the time when it is plain that the defendants were advised of the
vice of their title.lawphil.net
This limit is fixed at the date on which, after being informed by the
beginning of an action, they voluntarily appear therein and assert their
claim. (Judgments of the supreme court of Spain of November 23, 1900,
and October 12, 1901.)
The defendants' first pleading in this case, the demurrer, was served
on the 16th of May, 1906, and the plaintiff is entitled to recover the rents
and profits from that date until the termination of the action, and the
receiver must account to her therefor.
This action is hereby remanded to the Court of First Instance for the
purpose of taking such accounts and conducting such other proceedings
herein as may be necessary to carry out the aforesaid judgment, but
without costs of this instance. So ordered.
CONCEPCION JR., J:
It is not disputed that sometime in July, 1974, BIR Examiner Ben Garcia
examined the income tax returns filed by the herein petitioner, Quirico P.
Ungab, for the calendar year ending December 31, 1973. In the course of
his examination, he discovered that the petitioner failed to report his
income derived from sales of banana saplings. As a result, the BIR District
Revenue Officer at Davao City sent a "Notice of Taxpayer" to the petitioner
informing him that there is due from him (petitioner) the amount of
P104,980.81, representing income, business tax and forest charges for the
year 1973 and inviting petitioner to an informal conference where the
petitioner, duly assisted by counsel, may present his objections to the
findings of the BIR Examiner. 1 Upon receipt of the notice, the petitioner
wrote the BIR District Revenue Officer protesting the assessment, claiming
that he was only a dealer or agent on commission basis in the banana
sapling business and that his income, as reported in his income tax returns
for the said year, was accurately stated. BIR Examiner Ben Garcia,
however, was fully convinced that the petitioner had filed a fraudulent
income tax return so that he submitted a "Fraud Referral Report," to the
Tax Fraud Unit of the Bureau of Internal Revenue. After examining the
records of the case, the Special Investigation Division of the Bureau of
Internal Revenue found sufficient proof that the herein petitioner is guilty of
tax evasion for the taxable year 1973 and recommended his
prosecution: t.hqw
(1) For having filed a false or fraudulent income tax return for
1973 with intent to evade his just taxes due the government
under Section 45 in relation to Section 72 of the National
Internal Revenue Code;
The petitioner seeks the annulment of the informations filed against him on
the ground that the respondent State Prosecutor is allegedly without
authority to do so. The petitioner argues that while the respondent State
Prosecutor may initiate the investigation of and prosecute crimes and
violations of penal laws when duly authorized, certain requisites,
enumerated by this Court in its decision in the case of Estrella vs.
Orendain, 12should be observed before such authority may be exercised;
otherwise, the provisions of the Charter of Davao City on the functions and
powers of the City Fiscal will be meaningless because according to said
charter he has charge of the prosecution of all crimes committed within his
jurisdiction; and since "appropriate circumstances are not extant to warrant
the intervention of the State Prosecution to initiate the investigation, sign
the informations and prosecute these cases, said informations are null and
void." The ruling adverted to by the petitioner reads, as
follows: t.hqw
The contention is without merit. Contrary to the petitioner's claim, the rule
therein established had not been violated. The respondent State
Prosecutor, although believing that he can proceed independently of the
City Fiscal in the investigation and prosecution of these cases, first sought
permission from the City Fiscal of Davao City before he started the
preliminary investigation of these cases, and the City Fiscal, after being
shown Administrative Order No. 116, dated December 5, 1974, designating
the said State Prosecutor to assist all Provincial and City fiscals throughout
the Philippines in the investigation and prosecution of all violations of the
National Internal Revenue Code, as amended, and other related laws,
graciously allowed the respondent State Prosecutor to conduct the
investigation of said cases, and in fact, said investigation was conducted in
the office of the City Fiscal. 13
The petitioner also claims that the filing of the informations was precipitate
and premature since the Commissioner of Internal Revenue has not yet
resolved his protests against the assessment of the Revenue District
Officer; and that he was denied recourse to the Court of Tax Appeals.
The contention is without merit. What is involved here is not the collection
of taxes where the assessment of the Commissioner of Internal Revenue
may be reviewed by the Court of Tax Appeals, but a criminal prosecution
for violations of the National Internal Revenue Code which is within the
cognizance of courts of first instance. While there can be no civil action to
enforce collection before the assessment procedures provided in the Code
have been followed, there is no requirement for the precise computation
and assessment of the tax before there can be a criminal prosecution
under the Code. t.hqw
SO ORDERED.
TAX CASE ON ASSESSMENT OF LIABILITY
CUEVAS, J.:
On July 31, 1957, Agent Banzuela submitted his report wherein it was
stated among others that
Gentlemen:
Sales Tax x x x
Forest Charges
Sgd.
Mele
ncio
Domi
ngo
Actin
g
Com
missi
oner
of
Intern
al
Reve
nue
After trial, judgment was rendered by the trial court, the dispositive portion
of which reads
As herein earlier stated, the then Court of Appeals affirmed the decision of
the trial court. Petitioner filed a motion for reconsideration which was
denied by the said court in its Resolution dated June 7, 1973. Hence, the
instant appeal, petitioner presenting the lone issue of whether or not the
right of plaintiff (respondent herein) to file a judicial action for the collection
of the amount of P15,443.55 as forest charges and surcharges due from
the petitioner Mambulao Lumber Company for the year 1949 has already
prescribed.
(c) Where the assessment of any internal revenue tax has been
made within the period of limitation above prescribed such tax
may be collected by distraint or levy or by a proceeding in court,
but only if begun (1) within five years after the assessment of
the tax, or (2) prior to the expiration of any period for collection
agreed upon in writing by the Collector of Internal Revenue and
the taxpayer before the expiration of such five-year period. The
period so agreed upon may be extended by subsequent
agreements in writing made before the expiration of the period
previously agreed upon.
petitioner argues that counting from January 15, 1949 when the Bureau of
Forestry in Daet, Camarines Norte made an assessment and demand for
payment of the amount of P15,443.55 as forest charges and surcharges for
the year 1949, up to the filing of the complaint for collection before the
lower court on August 25, 196 1, more than five (5) years had already
elapsed, hence, the action had clearly prescribed.
In a suit for collection of internal revenue taxes, as in this case, where the
assessment has already become final and executory, the action to collect is
akin to an action to enforce a judgment. No inquiry can be made therein as
to the merits of the original case or the justness of the judgment relied
upon. Petitioner is thus already precluded from raising the defense of
prescription.
Where the taxpayer did not contest the deficiency income tax
assessed against him, the same became final and properly
collectible by means of an ordinary court action. The taxpayer
cannot dispute an assessment which is being enforced by
judicial action, He should have disputed it before it was brought
to court. 11
CASE NO. 1
-----------------------------
-----------------------------
-----------------------------
L-21551:
L-21557:
L-24972:
L-24978:
TEEHANKEE, J.:
These four appears involve two decisions of the Court of Tax
Appeals determining the taxpayer's income tax liability for the years 1950
to 1954 and for the year 1957. Both the taxpayer and the Commissioner of
Internal Revenue, as petitioner and respondent in the cases a quo
respectively, appealed from the Tax Court's decisions, insofar as their
respective contentions on particular tax items were therein resolved against
them. Since the issues raised are interrelated, the Court resolves the four
appeals in this joint decision.
1. Losses
1950 8,989.76
1951 27,732.66
1950 17,418.95
1951 29,125.82
1952 26,744.81
1953 21,932.62
1954 42,938.56
1951 8,380.25
1952 7,621.73
1950 P 8,180.40
1951 8,768.11
1952 18,002.16
1953 13,655.25
1954 29,314.98
P
1950
30,050.00
1951 1,382.85
RESUME
1950 P2,748.00
1951 108,724.00
1952 3,600.00
1953 2,501.00
1954 5,863.00
Total P123,436.00
1. Re allowances/disallowances of losses.
Again, assuming that in this case there was a valid and subsisting
debt and that the debtor was incapable of paying the debt in 1951, when
petitioner wrote off the advances and deducted the amount in its return for
said year, yet the debt is not deductible in 1951 as a worthless debt. It
appears that the debtor was still in operation in 1951 and 1952, as
petitioner continued to give advances in those years. It has been held that if
the debtor corporation, although losing money or insolvent, was still
operating at the end of the taxable year, the debt is not considered
worthless and therefore not deductible. 3
The Tax Court held that the taxpayer's loss of its investment in its
subsidiary could not be deducted for the year 1951, as the subsidiary was
still in operation in 1951 and 1952. The taxpayer, on the other hand, claims
that its advances were irretrievably lost because of the staggering losses
suffered by its subsidiary in 1951 and that its advances after 1949 were
"only limited to the purpose of salvaging whatever ore was already
available, and for the purpose of paying the wages of the laborers who
needed help." 7 The correctness of the Tax Court's ruling in sustaining the
disallowance of the write-off in 1951 of the taxpayer's claimed losses is
borne out by subsequent events shown in Cases L-24972 and L-24978
involving the taxpayer's 1957 income tax liability. (Infra, paragraph 6.) It will
there be seen that by 1956, the obligation of the taxpayer's subsidiary to it
had been reduced from P587,398.97 in 1951 to P442,885.23 in 1956, and
that it was only on January 1, 1956 that the subsidiary decided to cease
operations. 8
The same holds true in the case of the alleged increase in net worth
of petitioner for the year 1951 in the sum of P1,382.85. It appears that
certain items (all amounting to P1,382.85) remained in petitioner's books as
outstanding liabilities of trade creditors. These accounts were discovered in
1951 as having been paid in prior years, so that the necessary adjustments
were made to correct the errors. If there was an increase in net worth of the
petitioner, the increase in net worth was not the result of receipt by
petitioner of taxable income." 13 The Commissioner advances no valid
grounds in his brief for contesting the Tax Court's findings. Certainly, these
increases in the taxpayer's net worth were not taxable increases in net
worth, as they were not the result of the receipt by it of unreported or
unexplained taxable income, but were shown to be merely the result of the
correction of errors in its entries in its books relating to its indebtednesses
to certain creditors, which had been erroneously overstated or listed as
outstanding when they had in fact been duly paid. The Tax Court's action
must be affirmed.
These cases refer to the taxpayer's income tax liability for the year
1957. Upon examination of its corresponding income tax return, the
Commissioner assessed it for deficiency income tax in the amount of
P38,918.76, computed as follows:
The Tax Court, having satisfied itself with the adequacy of the
taxpayer's accounting method and procedure as properly reflecting
the taxpayer's income or losses, and the Commissioner having failed
to show the contrary, we reiterate our ruling [supra, paragraph 1 (d)
and (e)] that we find no compelling reason to disturb its findings.
6. Disallowance of amortization of alleged "contractual rights." The
reasons for sustaining this disallowance are thus given by the Tax Court:
The law in point is Section 30(g) (1) (B) of the Revenue Code,
before its amendment by Republic Act No. 2698, which provided in
part:
The taxpayer insists in this appeal that it could use as a method for
depletion under the pertinent provision of the Tax Code its "capital
investment," representing the alleged value of its contractual rights and
titles to mining claims in the sum of P242,408.10 and thus deduct outright
one-fifth (1/5) of this "capital investment" every year. regardless of whether
it had actually mined the product and sold the products. The very
authorities cited in its brief give the correct concept of depletion charges
that they "allow for the exhaustion of the capital value of the deposits by
production"; thus, "as the cost of the raw materials must be deducted from
the gross income before the net income can be determined, so the
estimated cost of the reserve used up is allowed." 22 The alleged "capital
investment" method invoked by the taxpayer is not a method of depletion,
but the Tax Code provision, prior to its amendment by Section 1, of
Republic Act No. 2698, which took effect on June 18, 1960, expressly
provided that "when the allowances shall equal the capital invested ... no
further allowances shall be made;" in other words, the "capital investment"
was but the limitation of the amount of depletion that could be claimed. The
outright deduction by the taxpayer of 1/5 of the cost of the mines, as if it
were a "straight line" rate of depreciation, was correctly held by the Tax
Court not to be authorized by the Tax Code.
DECISION
PADILLA, J.:
On the same day, 25 February 1957, all the parties to this case
submitted to the Court the following stipulation of facts dated 7
February 1957:
"Approved:
"BIBIANO L. MEER
"Collector of Internal Revenue"
CASE NO 3
DECISION
TORRES, JR., J.:
No pronouncements as to costs.
SO ORDERED."
More than seven years since the demise of the late Ferdinand E.
Marcos, the former President of the Republic of the Philippines, the matter
of the settlement of his estate, and its dues to the government in estate
taxes, are still unresolved, the latter issue being now before this Court for
resolution. Specifically, petitioner Ferdinand R. Marcos II, the eldest son of
the decedent, questions the actuations of the respondent Commissioner of
Internal Revenue in assessing, and collecting through the summary remedy
of Levy on Real Properties, estate and income tax delinquencies upon the
estate and properties of his father, despite the pendency of the
proceedings on probate of the will of the late president, which is docketed
as Sp. Proc. No. 10279 in the Regional Trial Court of Pasig, Branch 156.
Petitioner had filed with the respondent Court of Appeals a Petition
for Certiorari and Prohibition with an application for writ of preliminary
injunction and/or temporary restraining order on June 28, 1993, seeking to -
I. Annul and set aside the Notices of Levy on real property dated February 22,
1993 and May 20, 1993, issued by respondent Commissioner of Internal Revenue;
II. Annul and set aside the Notices of Sale dated May 26, 1993;
III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service),
from proceeding with the Auction of the real properties covered by Notices
of Sale.
After the parties had pleaded their case, the Court of Appeals rendered
its Decision[2] on November 29, 1994, ruling that the deficiency
assessments for estate and income tax made upon the petitioner and the
estate of the deceased President Marcos have already become final and
unappealable, and may thus be enforced by the summary remedy of
levying upon the properties of the late President, as was done by the
respondent Commissioner of Internal Revenue.
No pronouncements as to cost.
SO ORDERED."
(1) The Notices of Levy on Real Property were issued beyond the period
provided in the Revenue Memorandum Circular No. 38-68.
(2) [a] The numerous pending court cases questioning the late President's
ownership or interests in several properties (both personal and real) make the
total value of his estate, and the consequent estate tax due, incapable of exact
pecuniary determination at this time. Thus, respondents assessment of the
estate tax and their issuance of the Notices of Levy and Sale are premature,
confiscatory and oppressive.
[b] Petitioner, as one of the late President's compulsory heirs, was never
notified, much less served with copies of the Notices of Levy, contrary to the
mandate of Section 213 of the NIRC. As such, petitioner was never given an
opportunity to contest the Notices in violation of his right to due process of
law.
"On September 29, 1989, former President Ferdinand Marcos died in Honolulu,
Hawaii, USA.
On June 27, 1990, a Special Tax Audit Team was created to conduct investigations
and examinations of the tax liabilities and obligations of the late president, as well
as that of his family, associates and "cronies". Said audit team concluded its
investigation with a Memorandum dated July 26, 1991. The investigation disclosed
that the Marcoses failed to file a written notice of the death of the decedent, an
estate tax returns [sic], as well as several income tax returns covering the years
1982 to 1986, -all in violation of the National Internal Revenue Code (NIRC).
Subsequently, criminal charges were filed against Mrs. Imelda R. Marcos before
the Regional Trial of Quezon City for violations of Sections 82, 83 and 84 (has
penalized under Sections 253 and 254 in relation to Section 252- a & b) of the
National Internal Revenue Code (NIRC).
The Commissioner of Internal Revenue thereby caused the preparation and filing
of the Estate Tax Return for the estate of the late president, the Income Tax
Returns of the Spouses Marcos for the years 1985 to 1986, and the Income Tax
Returns of petitioner Ferdinand 'Bongbong' Marcos II for the years 1982 to 1985.
On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax
assessment no. FAC-2-89-91-002464 (against the estate of the late president
Ferdinand Marcos in the amount of P23,293,607,638.00 Pesos); (2) Deficiency
income tax assessment no. FAC-1-85-91-002452 and Deficiency income tax
assessment no. FAC-1-86-91-002451 (against the Spouses Ferdinand and Imelda
Marcos in the amounts of P149,551.70 and P184,009,737.40 representing
deficiency income tax for the years 1985 and 1986); (3) Deficiency income tax
assessment nos. FAC-1-82-91-002460 to FAC-1-85-91-002463 (against petitioner
Ferdinand 'Bongbong' Marcos II in the amounts of P258.70 pesos; P9,386.40
Pesos; P4,388.30 Pesos; and P6,376.60 Pesos representing his deficiency income
taxes for the years 1982 to 1985).
The Commissioner of Internal Revenue avers that copies of the deficiency estate
and income tax assessments were all personally and constructively served on
August 26, 1991 and September 12, 1991 upon Mrs. Imelda Marcos (through her
caretaker Mr. Martinez) at her last known address at No. 204 Ortega St., San Juan,
M.M. (Annexes 'D' and 'E' of the Petition). Likewise, copies of the deficiency tax
assessments issued against petitioner Ferdinand 'Bongbong' Marcos II were also
personally and constructively served upon him (through his caretaker) on
September 12, 1991, at his last known address at Don Mariano Marcos St. corner
P. Guevarra St., San Juan, M.M. (Annexes 'J' and 'J-1' of the Petition). Thereafter,
Formal Assessment notices were served on October 20, 1992, upon Mrs. Marcos
c/o petitioner, at his office, House of Representatives, Batasan Pambansa, Quezon
City. Moreover, a notice to Taxpayer inviting Mrs. Marcos (or her duly authorized
representative or counsel), to a conference, was furnished the counsel of Mrs.
Marcos, Dean Antonio Coronel - but to no avail.
On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy
on real property against certain parcels of land owned by the Marcoses - to satisfy
the alleged estate tax and deficiency income taxes of Spouses Marcos.
On May 20, 1993, four more Notices of Levy on real property were issued for the
purpose of satisfying the deficiency income taxes.
On May 26, 1993, additional four (4) notices of Levy on real property were again
issued. The foregoing tax remedies were resorted to pursuant to Sections 205 and
213 of the National Internal Revenue Code (NIRC).
In response to a letter dated March 12, 1993 sent by Atty. Loreto Ata (counsel of
herein petitioner) calling the attention of the BIR and requesting that they be duly
notified of any action taken by the BIR affecting the interest of their client
Ferdinand 'Bongbong Marcos II, as well as the interest of the late president -
copies of the aforesaid notices were served on April 7, 1993 and on June 10, 1993,
upon Mrs. Imelda Marcos, the petitioner, and their counsel of record, 'De Borja,
Medialdea, Ata, Bello, Guevarra and Serapio Law Office'.
Notices of sale at public auction were posted on May 26, 1993, at the lobby of the
City Hall of Tacloban City. The public auction for the sale of the eleven (11)
parcels of land took place on July 5, 1993. There being no bidder, the lots were
declared forfeited in favor of the government.
On June 25, 1993, petitioner Ferdinand 'Bongbong' Marcos II filed the instant
petition for certiorari and prohibition under Rule 65 of the Rules of Court, with
prayer for temporary restraining order and/or writ of preliminary injunction."
It has been repeatedly observed, and not without merit, that the
enforcement of tax laws and the collection of taxes, is of paramount
importance for the sustenance of government. Taxes are the lifeblood of
the government and should be collected without unnecessary
hindrance. However, such collection should be made in accordance with
law as any arbitrariness will negate the very reason for government itself. It
is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is
the promotion of the common good, may be achieved."[3]
Whether or not the proper avenues of assessment and collection of the
said tax obligations were taken by the respondent Bureau is now the
subject of the Court's inquiry.
Petitioner posits that notices of levy, notices of sale, and subsequent
sale of properties of the late President Marcos effected by the BIR are null
and void for disregarding the established procedure for the enforcement of
taxes due upon the estate of the deceased. The case of Domingo vs.
Garlitos[4] is specifically cited to bolster the argument that "the ordinary
procedure by which to settle claims of indebtedness against the estate of a
deceased, person, as in an inheritance (estate) tax, is for the claimant to
present a claim before the probate court so that said court may order the
administrator to pay the amount therefor." This remedy is allegedly,
exclusive, and cannot be effected through any other means.
Petitioner goes further, submitting that the probate court is not
precluded from denying a request by the government for the immediate
payment of taxes, and should order the payment of the same only within
the period fixed by the probate court for the payment of all the debts of the
decedent. In this regard, petitioner cites the case of Collector of Internal
Revenue vs. The Administratrix of the Estate of Echarri (67 Phil 502),
where it was held that:
"The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal
Revenue (52 Phil 803), relied upon by the petitioner-appellant is good authority on
the proposition that the court having control over the administration proceedings
has jurisdiction to entertain the claim presented by the government for taxes due
and to order the administrator to pay the tax should it find that the assessment was
proper, and that the tax was legal, due and collectible. And the rule laid down in
that case must be understood in relation to the case of Collector of Customs vs.
Haygood, supra., as to the procedure to be followed in a given case by the
government to effectuate the collection of the tax. Categorically stated, where
during the pendency of judicial administration over the estate of a deceased person
a claim for taxes is presented by the government, the court has the authority to
order payment by the administrator; but, in the same way that it has authority to
order payment or satisfaction, it also has the negative authority to deny the
same. While there are cases where courts are required to perform certain duties
mandatory and ministerial in character, the function of the court in a case of the
present character is not one of them; and here, the court cannot be an organism
endowed with latitude of judgment in one direction, and converted into a mere
mechanical contrivance in another direction."
On the other hand, it is argued by the BIR, that the state's authority to
collect internal revenue taxes is paramount. Thus, the pendency of probate
proceedings over the estate of the deceased does not preclude the
assessment and collection, through summary remedies, of estate taxes
over the same. According to the respondent, claims for payment of estate
and income taxes due and assessed after the death of the decedent need
not be presented in the form of a claim against the estate. These can and
should be paid immediately. The probate court is not the government
agency to decide whether an estate is liable for payment of estate of
income taxes. Well-settled is the rule that the probate court is a court with
special and limited jurisdiction.
Concededly, the authority of the Regional Trial Court, sitting, albeit with
limited jurisdiction, as a probate court over estate of deceased individual, is
not a trifling thing. The court's jurisdiction, once invoked, and made
effective, cannot be treated with indifference nor should it be ignored with
impunity by the very parties invoking its authority.
In testament to this, it has been held that it is within the jurisdiction of
the probate court to approve the sale of properties of a deceased person by
his prospective heirs before final adjudication;[5] to determine who are the
heirs of the decedent;[6] the recognition of a natural child;[7] the status of a
woman claiming to be the legal wife of the decedent;[8] the legality of
disinheritance of an heir by the testator;[9] and to pass upon the validity of a
waiver of hereditary rights.[10]
The pivotal question the court is tasked to resolve refers to the authority
of the Bureau of Internal Revenue to collect by the summary remedy of
levying upon, and sale of real properties of the decedent, estate tax
deficiencies, without the cognition and authority of the court sitting in
probate over the supposed will of the deceased.
The nature of the process of estate tax collection has been described
as follows:
"Strictly speaking, the assessment of an inheritance tax does not directly involve
the administration of a decedent's estate, although it may be viewed as an incident
to the complete settlement of an estate, and, under some statutes, it is made the
duty of the probate court to make the amount of the inheritance tax a part of the
final decree of distribution of the estate. It is not against the property of decedent,
nor is it a claim against the estate as such, but it is against the interest or property
right which the heir, legatee, devisee, etc., has in the property formerly held by
decedent. Further, under some statutes, it has been held that it is not a suit or
controversy between the parties, nor is it an adversary proceeding between the state
and the person who owes the tax on the inheritance. However, under other
statutes it has been held that the hearing and determination of the cash value of the
assets and the determination of the tax are adversary proceedings. The proceeding
has been held to be necessarily a proceeding in rem.[11]
"Sec. 3. Powers and duties of the Bureau.-The powers and duties of the Bureau of
Internal Revenue shall comprehend the assessment and collection of all national
internal revenue taxes, fees, and charges, and the enforcement of all forfeitures,
penalties, and fines connected therewith, including the execution of judgments in
all cases decided in its favor by the Court of Tax Appeals and the ordinary
courts. Said Bureau shall also give effect to and administer the supervisory and
police power conferred to it by this Code or other laws."
Thus, it was in Vera vs. Fernandez[12] that the court recognized the
liberal treatment of claims for taxes charged against the estate of the
decedent. Such taxes, we said, were exempted from the application of the
statute of non-claims, and this is justified by the necessity of government
funding, immortalized in the maxim that taxes are the lifeblood of the
government. Vectigalia nervi sunt rei publicae - taxes are the sinews of the
state.
"Claims for taxes, whether assessed before or after the death of the deceased, can
be collected from the heirs even after the distribution of the properties of the
decedent. They are exempted from the application of the statute of non-
claims. The heirs shall be liable therefor, in proportion to their share in the
inheritance."[13]
"Thus, the Government has two ways of collecting the taxes in question. One, by
going after all the heirs and collecting from each one of them the amount of the tax
proportionate to the inheritance received. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code upon all property and rights to property
belong to the taxpayer for unpaid income tax, is by subjecting said property of the
estate which is in the hands of an heir or transferee to the payment of the tax due
the estate. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105,
September 15, 1967.)
From the foregoing, it is discernible that the approval of the court, sitting
in probate, or as a settlement tribunal over the deceased is not a
mandatory requirement in the collection of estate taxes. It cannot therefore
be argued that the Tax Bureau erred in proceeding with the levying and
sale of the properties allegedly owned by the late President, on the ground
that it was required to seek first the probate court's sanction. There is
nothing in the Tax Code, and in the pertinent remedial laws that implies the
necessity of the probate or estate settlement court's approval of the state's
claim for estate taxes, before the same can be enforced and collected.
On the contrary, under Section 87 of the NIRC, it is the probate or
settlement court which is bidden not to authorize the executor or judicial
administrator of the decedent's estate to deliver any distributive share to
any party interested in the estate, unless it is shown a Certification by the
Commissioner of Internal Revenue that the estate taxes have been
paid. This provision disproves the petitioner's contention that it is the
probate court which approves the assessment and collection of the estate
tax.
If there is any issue as to the validity of the BIR's decision to assess the
estate taxes, this should have been pursued through the proper
administrative and judicial avenues provided for by law.
Section 229 of the NIRC tells us how:
Apart from failing to file the required estate tax return within the time
required for the filing of the same, petitioner, and the other heirs never
questioned the assessments served upon them, allowing the same to lapse
into finality, and prompting the BIR to collect the said taxes by levying upon
the properties left by President Marcos.
Petitioner submits, however, that "while the assessment of taxes may
have been validly undertaken by the Government, collection thereof may
have been done in violation of the law. Thus, the manner and method in
which the latter is enforced may be questioned separately, and irrespective
of the finality of the former, because the Government does not have the
unbridled discretion to enforce collection without regard to the clear
provision of law."[14]
Petitioner specifically points out that applying Memorandum Circular
No. 38-68, implementing Sections 318 and 324 of the old tax code
(Republic Act 5203), the BIR's Notices of Levy on the Marcos properties,
were issued beyond the allowed period, and are therefore null and void:
xxx
(c) Any internal revenue tax which has been assessed within the period of
limitation above prescribed, may be collected by distraint or levy or by a
proceeding in court within three years following the assessment of the tax.
xxx
The omission to file an estate tax return, and the subsequent failure to
contest or appeal the assessment made by the BIR is fatal to the
petitioner's cause, as under the above-cited provision, in case of failure to
file a return, the tax may be assessed at any time within ten years after the
omission, and any tax so assessed may be collected by levy upon real
property within three years following the assessment of the tax. Since the
estate tax assessment had become final and unappealable by the
petitioner's default as regards protesting the validity of the said
assessment, there is now no reason why the BIR cannot continue with the
collection of the said tax. Any objection against the assessment should
have been pursued following the avenue paved in Section 229 of the NIRC
on protests on assessments of internal revenue taxes.
Petitioner further argues that "the numerous pending court cases
questioning the late president's ownership or interests in several properties
(both real and personal) make the total value of his estate, and the
consequent estate tax due, incapable of exact pecuniary determination at
this time. Thus, respondents' assessment of the estate tax and their
issuance of the Notices of Levy and sale are premature and oppressive."
He points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034
and 0141, which were filed by the government to question the ownership
and interests of the late President in real and personal properties located
within and outside the Philippines. Petitioner, however, omits to allege
whether the properties levied upon by the BIR in the collection of estate
taxes upon the decedent's estate were among those involved in the said
cases pending in the Sandiganbayan. Indeed, the court is at a loss as to
how these cases are relevant to the matter at issue. The mere fact that the
decedent has pending cases involving ill-gotten wealth does not affect the
enforcement of tax assessments over the properties indubitably included in
his estate.
Petitioner also expresses his reservation as to the propriety of the BIR's
total assessment of P23,292,607,638.00, stating that this amount deviates
from the findings of the Department of Justice's Panel of Prosecutors as
per its resolution of 20 September 1991. Allegedly, this is clear evidence of
the uncertainty on the part of the Government as to the total value of the
estate of the late President.
This is, to our mind, the petitioner's last ditch effort to assail the
assessment of estate tax which had already become final and
unappealable.
It is not the Department of Justice which is the government agency
tasked to determine the amount of taxes due upon the subject estate, but
the Bureau of Internal Revenue[16] whose determinations and assessments
are presumed correct and made in good faith.[17] The taxpayer has the duty
of proving otherwise. In the absence of proof of any irregularities in the
performance of official duties, an assessment will not be disturbed. Even
an assessment based on estimates is prima facie valid and lawful where it
does not appear to have been arrived at arbitrarily or capriciously. The
burden of proof is upon the complaining party to show clearly that the
assessment is erroneous. Failure to present proof of error in the
assessment will justify the judicial affirmance of said assessment.[18] In this
instance, petitioner has not pointed out one single provision in the
Memorandum of the Special Audit Team which gave rise to the questioned
assessment, which bears a trace of falsity. Indeed, the petitioner's attack
on the assessment bears mainly on the alleged improbable and
unconscionable amount of the taxes charged. But mere rhetoric cannot
supply the basis for the charge of impropriety of the assessments made.
Moreover, these objections to the assessments should have been
raised, considering the ample remedies afforded the taxpayer by the Tax
Code, with the Bureau of Internal Revenue and the Court of Tax Appeals,
as described earlier, and cannot be raised now via Petition for Certiorari,
under the pretext of grave abuse of discretion. The course of action taken
by the petitioner reflects his disregard or even repugnance of the
established institutions for governance in the scheme of a well-ordered
society. The subject tax assessments having become final, executory and
enforceable, the same can no longer be contested by means of a disguised
protest. In the main, Certiorari may not be used as a substitute for a lost
appeal or remedy.[19] This judicial policy becomes more pronounced in view
of the absence of sufficient attack against the actuations of government.
On the matter of sufficiency of service of Notices of Assessment to the
petitioner, we find the respondent appellate court's pronouncements sound
and resilient to petitioner's attacks.
"Anent grounds 3(b) and (B) - both alleging/claiming lack of notice - We find,
after considering the facts and circumstances, as well as evidences, that there was
sufficient, constructive and/or actual notice of assessments, levy and sale, sent to
herein petitioner Ferdinand "Bongbong" Marcos as well as to his mother Mrs.
Imelda Marcos.
Even if we are to rule out the notices of assessments personally given to the
caretaker of Mrs. Marcos at the latter's last known address, on August 26, 1991 and
September 12, 1991, as well as the notices of assessment personally given to the
caretaker of petitioner also at his last known address on September 12, 1991 - the
subsequent notices given thereafter could no longer be ignored as they were sent at
a time when petitioner was already here in the Philippines, and at a place where
said notices would surely be called to petitioner's attention, and received by
responsible persons of sufficient age and discretion.
Thus, on October 20, 1992, formal assessment notices were served upon Mrs.
Marcos c/o the petitioner, at his office, House of Representatives, Batasan
Pambansa, Q.C. (Annexes "A", "A-1", "A-2", "A-3"; pp. 207-210,
Comment/Memorandum of OSG). Moreover, a notice to taxpayer dated October
8, 1992 inviting Mrs. Marcos to a conference relative to her tax liabilities, was
furnished the counsel of Mrs. Marcos - Dean Antonio Coronel (Annex "B", p. 211,
ibid). Thereafter, copies of Notices were also served upon Mrs. Imelda Marcos,
the petitioner and their counsel "De Borja, Medialdea, Ata, Bello, Guevarra and
Serapio Law Office", on April 7, 1993 and June 10, 1993. Despite all of these
Notices, petitioner never lifted a finger to protest the assessments, (upon which the
Levy and sale of properties were based), nor appealed the same to the Court of Tax
Appeals.
There being sufficient service of Notices to herein petitioner (and his mother) and
it appearing that petitioner continuously ignored said Notices despite several
opportunities given him to file a protest and to thereafter appeal to the Court of Tax
Appeals, - the tax assessments subject of this case, upon which the levy and sale of
properties were based, could no longer be contested (directly or indirectly) via this
instant petition for certiorari."[20]
Petitioner argues that all the questioned Notices of Levy, however, must
be nullified for having been issued without validly serving copies thereof to
the petitioner. As a mandatory heir of the decedent, petitioner avers that
he has an interest in the subject estate, and notices of levy upon its
properties should have been served upon him.
We do not agree. In the case of notices of levy issued to satisfy the
delinquent estate tax, the delinquent taxpayer is the Estate of the decedent,
and not necessarily, and exclusively, the petitioner as heir of the
deceased. In the same vein, in the matter of income tax delinquency of the
late president and his spouse, petitioner is not the taxpayer liable. Thus, it
follows that service of notices of levy in satisfaction of these tax
delinquencies upon the petitioner is not required by law, as under Section
213 of the NIRC, which pertinently states:
"xxx
xxx"
The foregoing notwithstanding, the record shows that notices of
warrants of distraint and levy of sale were furnished the counsel of
petitioner on April 7, 1993, and June 10, 1993, and the petitioner himself on
April 12, 1993 at his office at the Batasang Pambansa.[21] We cannot
therefore, countenance petitioner's insistence that he was denied due
process. Where there was an opportunity to raise objections to
government action, and such opportunity was disregarded, for no justifiable
reason, the party claiming oppression then becomes the oppressor of the
orderly functions of government. He who comes to court must come with
clean hands. Otherwise, he not only taints his name, but ridicules the very
structure of established authority.
IN VIEW WHEREOF, the Court RESOLVED to DENY the present
petition. The Decision of the Court of Appeals dated November 29, 1994 is
hereby AFFIRMED in all respects.
SO ORDERED.
TAX CASE ON CRIMINAL LIABILITY (SUSPENSION OF
PRESCRIPTIVE PERIODS)
DECISION
MENDOZA, J.:
This is a petition for review of the decision[1] of the Regional Trial Court,
Branch 44, San Fernando, Pampanga, dismissing the suit filed by the Bureau of
Internal Revenue for collection of tax.
The facts are as follows:
On July 18, 1986, the BIR issued to respondent Salud V. Hizon a deficiency
income tax assessment of P1,113,359.68 covering the fiscal year 1981-
1982. Respondent not having contested the assessment, petitioner, on January 12,
1989, served warrants of distraint and levy to collect the tax deficiency. However,
for reasons not known, it did not proceed to dispose of the attached properties.
More than three years later, or on November 3, 1992, respondent wrote the BIR
requesting a reconsideration of her tax deficiency assessment. The BIR, in a letter
dated August 11, 1994, denied the request. On January 1, 1997, it filed a case with
the Regional Trial Court, Branch 44, San Fernando, Pampanga to collect the tax
deficiency. The complaint was signed by Norberto Salud, Chief of the Legal
Division, BIR Region 4, and verified by Amancio Saga, the Bureaus Regional
Director in Pampanga.
Respondent moved to dismiss the case on two grounds: (1) that the complaint
was not filed upon authority of the BIR Commissioner as required by 221 [2] of the
National Internal Revenue Code, and (2) that the action had already
prescribed. Over petitioners objection, the trial court, on August 28, 1997,
granted the motion and dismissed the complaint. Hence, this petition. Petitioner
raises the following issues:[3]
There is no question that the National Internal Revenue Code explicitly provides
that in the matter of filing cases in Court, civil or criminal, for the collection of
taxes, etc., the approval of the commissioner must first be secured. . . . [A]n action
will not prosper in the absence of the commissioners approval. Thus, in the
instant case, the absence of the approval of the commissioner in the institution of
the action is fatal to the cause of the plaintiff . . . .
The trial court arrived at this conclusion because the complaint filed by the BIR
was not signed by then Commissioner Liwayway Chato.
Sec. 221 of the NIRC provides:
Form and mode of proceeding in actions arising under this Code. Civil and
criminal actions and proceedings instituted in behalf of the Government under the
authority of this Code or other law enforced by the Bureau of Internal Revenue
shall be brought in the name of the Government of the Philippines and shall be
conducted by the provincial or city fiscal, or the Solicitor General, or by the legal
officers of the Bureau of Internal Revenue deputized by the Secretary of
Justice, but no civil and criminal actions for the recovery of taxes or the
enforcement of any fine, penalty or forfeiture under this Code shall be begun
without the approval of the Commissioner. (Emphasis supplied)
To implement this provision Revenue Administrative Order No. 5-83 of the BIR
provides in pertinent portions:
The following civil and criminal cases are to be handled by Special Attorneys and
Special Counsels assigned in the Legal Branches of Revenue Regions:
....
In all the abovementioned cases, the Regional Director is authorized to sign all
pleadings filed in connection therewith which, otherwise, requires the signature of
the Commissioner.
....
[M]emorand[a], circulars and orders emanating from bureaus and agencies whether
in the purely public or quasi-public corporations are mere guidelines for the
internal functioning of the said offices. They are not laws which courts can take
judicial notice of. As such, they have no binding effect upon the courts for such
memorand[a] and circulars are not the official acts of the legislative, executive and
judicial departments of the Philippines . . . .[5]
....
(d) The conditions to be observed by revenue officers, provincial fiscals and other
officials respecting the institution and conduct of legal actions and proceedings.
RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate.
As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7
of the present Code authorizes the BIR Commissioner to delegate the powers
vested in him under the pertinent provisions of the Code to any subordinate official
with the rank equivalent to a division chief or higher, except the following:
(a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify
any existing ruling of the Bureau;
(c) The power to compromise or abate under 204(A) and (B) of this Code, any
tax deficiency: Provided, however, that assessments issued by the Regional
Offices involving basic deficiency taxes of five hundred thousand pesos
(P500,000.00) or less, and minor criminal violations as may be determined by rules
and regulations to be promulgated by the Secretary of Finance, upon the
recommendation of the Commissioner, discovered by regional and district
officials, may be compromised by a regional evaluation board which shall be
composed of the Regional Director as Chairman, the Assistant Regional Director,
heads of the Legal, Assessment and Collection Divisions and the Revenue District
Officer having jurisdiction over the taxpayer, as members; and
None of the exceptions relates to the Commissioners power to approve the filing
of tax collection cases.
Second. With regard to the issue that the case filed by petitioner for the
collection of respondents tax deficiency is barred by prescription, 223(c) of the
NIRC provides:
Any internal revenue tax which has been assessed within the period of limitation
above-prescribed may be collected by distraint or levy or by a proceeding in court
within three years[7]following the assessment of the tax.
for the period during which the Commissioner is prohibited from making the
assessment or beginning distraint or levy or a proceeding in court and for sixty
days thereafter; when the taxpayer requests for a reinvestigation which is
granted by the Commissioner; when the taxpayer cannot be located in the
address given by him in the return filed upon which the tax is being assessed or
collected; provided, that, if the taxpayer informs the Commissioner of any
change in address, the running of the statute of limitations will not be
suspended; when the warrant of distraint or levy is duly served upon the
taxpayer, his authorized representative or a member of his household with
sufficient discretion, and no property could be located; and when the taxpayer
is out of the Philippines.
Petitioner argues that, in accordance with this provision, respondents request for
reinvestigation of her tax deficiency assessment on November 3, 1992 effectively
suspended the running of the period of prescription such that the government could
still file a case for tax collection.[9]
The contention has no merit. Sec. 229[10] of the Code mandates that a request
for reconsideration must be made within 30 days from the taxpayers receipt of the
tax deficiency assessment, otherwise the assessment becomes final, unappealable
and, therefore, demandable.[11] The notice of assessment for respondents tax
deficiency was issued by petitioner on July 18, 1986. On the other hand,
respondent made her request for reconsideration thereof only on November 3,
1992, without stating when she received the notice of tax assessment. She
explained that she was constrained to ask for a reconsideration in order to avoid the
harassment of BIR collectors.[12] In all likelihood, she must have been referring to
the distraint and levy of her properties by petitioners agents which took place on
January 12, 1989. Even assuming that she first learned of the deficiency
assessment on this date, her request for reconsideration was nonetheless filed late
since she made it more than 30 days thereafter. Hence, her request for
reconsideration did not suspend the running of the prescriptive period provided
under 223(c). Although the Commissioner acted on her request by eventually
denying it on August 11, 1994, this is of no moment and does not detract from the
fact that the assessment had long become demandable.
Nonetheless, it is contended that the running of the prescriptive period under
223(c) was suspended when the BIR timely served the warrants of distraint and
levy on respondent on January 12, 1989.[13] Petitioner cites for this purpose our
ruling in Advertising Associates Inc. v. Court of Appeals.[14] Because of the
suspension, it is argued that the BIR could still avail of the other remedy under
223(c) of filing a case in court for collection of the tax deficiency, as the BIR in
fact did on January 1, 1997.
Petitioners reliance on the Courts ruling in Advertising Associates Inc. v.
Court of Appeals is misplaced. What the Court stated in that case and, indeed, in
the earlier case of Palanca v. Commissioner of Internal Revenue,[15] is that the
timely service of a warrant of distraint or levy suspends the running of the period
to collect the tax deficiency in the sense that the disposition of the attached
properties might well take time to accomplish, extending even after the lapse of the
statutory period for collection. In those cases, the BIR did not file any collection
case but merely relied on the summary remedy of distraint and levy to collect the
tax deficiency. The importance of this fact was not lost on the Court. Thus,
in Advertising Associates, it was held:[16] It should be noted that the
Commissioner did not institute any judicial proceeding to collect the tax. He relied
on the warrants of distraint and levy to interrupt the running of the statute of
limitations.
Moreover, if, as petitioner in effect says, the prescriptive period was suspended
twice, i.e., when the warrants of distraint and levy were served on respondent on
January 12, 1989 and then when respondent made her request for reinvestigation of
the tax deficiency assessment on November 3, 1992, the three-year prescriptive
period must have commenced running again sometime after the service of the
warrants of distraint and levy. Petitioner, however, does not state when or why this
took place and, indeed, there appears to be no reason for such. It is noteworthy
that petitioner raised this point before the lower court apparently as an alternative
theory, which, however, is untenable.
For the foregoing reasons, we hold that petitioners contention that the action
in this case had not prescribed when filed has no merit. Our holding, however, is
without prejudice to the disposition of the properties covered by the warrants of
distraint and levy which petitioner served on respondent, as such would be a mere
continuation of the summary remedy it had timely begun. Although considerable
time has passed since then, as held in Advertising Associates Inc. v. Court of
Appeals[17] and Palanca v. Commissioner of Internal Revenue,[18] the enforcement
of tax collection through summary proceedings may be carried out beyond the
statutory period considering that such remedy was seasonably availed of.
WHEREFORE, the petition is DENIED.
To inquire into the existence of jurisdiction over the subject matter is the
primary concern of a court, for thereon would depend the ability of its entire
proceedings. In this case, the parties submitted voluntarily to the
jurisdiction of the Court of Tax Appeals, adduced their evidence thereat.
Thereafter, they submitted their cause for decision. At no stage of the
proceedings have they raised the issue of jurisdiction. However, as
aforesaid, the consent of the parties does not confer jurisdiction over the
subject matter. Hence, We shall proceed to inquire whether or not the
Court of Tax Appeals had jurisdiction to entertain the so-called appeal of
the taxpayer in this case.
Leonardo S. Villa, a doctor of medicine, and his wife filed joint income tax
returns for the years 1951, 1952, 1953, 1954, 1955 and 1956 on April 2,
1952, March 30, 1953, February 26, 1954, March 31, 1955, April 2, 1956
and March 23, 1957, respectively. Subsequently, the Bureau of Internal
Revenue determined the income of the Villa spouses by the use of
networth method and accordingly issued on February 23, 1961
assessments for deficiency income tax for the years 1951, 1952, 1953,
1954 and 1956 and residence tax for 1951 to 1957. Dr. Villa received the
assessments on April 7, 1961. Without contesting the said assessments in
the Bureau of Internal Revenue, he filed on May 4, 1961 a petition for
review in the Court of Tax Appeals.
The Court of Tax Appeals took cognizance of the appeal, tried the case on
the merits and rendered the following judgment:
Note that the law uses the word "decisions", not "assessments", further
indicating the legislative intention to subject to judicial review
the decision of the Commissioner on the protest against an assessment but
not the assessment itself. 6
Since in the instant case the taxpayer appealed the assessment of the
Commissioner of Internal Revenue without previously contesting the same,
the appeal was premature and the Court of Tax Appeals had no jurisdiction
to entertain said appeal. For, as stated, the jurisdiction of the Tax Court is
to review by appealdecisions of Internal Revenue on disputed
assessments. The Tax Court is a court of special jurisdiction. As such, it
can take cognizance only of such matters as are clearly within its
jurisdiction. 7
FACTS: The BIR examined the books of account of Pascor Realty and Devt Corp
for years 1986, 1987 and 1988, from which a tax liability of 10.5 Million Pesos
was found. Based on the recommendations of the examiners, the CIR filed an
information with the DOJ for tax evasion against the officers of Pascor. Upon
receipt of the subpoena, the latter filed an urgent request for
reconsideration/reinvestigation with the CIR, which was immediately denied upon
the ground that no formal assessment has yet been issued by the Commisioner.
Pascor elevated the CIR's decision to the CTA on a petition for review. The CIR
filed a Motion to Dismiss on the ground of lack of jurisdiction of CTA as there was
no formal assessment made against the respondents. The CTA dismissed the
motion, hence this petition.
HELD: No. Section 222 of the NIRC states that an assessment is not necessary
before a criminal charge can be filed. This is the general rule. Private respondents
failed to show that they are entitled to an exception. Moreover, the criminal charge
need only be supported by a prima facie showing of failure to file a required return.
This fact need not be proven by an assessment.
The issuance of an assessment must be distinguished from the filing of a
complaint. Before an assessment is issued, there is, by practice, a pre-assessment
notice sent to the taxpayer. The taxpayer is then given a chance to submit position
papers and documents to prove that the assessment is unwarranted. If the
commissioner is unsatisfied, an assessment signed by him or her is then sent to the
taxpayer informing the latter specifically and clearly that an assessment has been
made against him or her. In contrast, the criminal charge need not go through all
these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer
is notified that a criminal case had been filed against him, not that the
commissioner has issued an assessment. It must be stressed that a criminal
complaint is instituted not to demand payment, but to penalize the taxpayer for
violation of the Tax Code.
FACTS: The Commissioner of Internal Revenue served two notices and demand
for payment of the respective deficiency ad valorem and buiness taxes for taxable
years 1975 and 1976 against the respondent Atlas Consolidated Mining and
Development Corporation (ACMDC). The latter protested both assessments but
the same were denied, hence it filed two separate petitions for review in the Court
of Tax Appeals. The CTA rendered a consolidated decision holding, inter alia, that
ACMDC was not liable for deficiency ad valorem taxes on copper and silver for
1975 and 1976 thereby effectively sustaining the theory of ACMDC that in
computing the ad valorem tax on copper mineral, the refining and smelting charges
should be deducted, in addition to freight and insurance charges.
However, the tax court held ACMDC liable for the amount consisting of 25%
surcharge for late payment of the ad valorem tax and late filing of notice of
removal of silver, gold and pyrite extracted during certain periods, and for alleged
deficiency manufacturer's sales tax and such contractor's tax for leasing out of its
personal properties. ACDMC elevated the matter to the Supreme Court claiming
that the leasing out was a mere isolated transaction, hence should not be subjected
to contractor's tax.
ISSUE: Is the claim of the private respondent, with respect to the contractor's tax,
impressed with merit?
HELD: No. It is being held that ACMDC was not a manufacturer subject to the
percentage tax imposed by Section 186 of the tax code. However such conclusion
cannot be made with respect to the contractor's tax being imposed on ACMDC. It
cannot validly claim that the leasing out of its personal properties was merely an
isolated transaction. Its book of accounts shows that several distinct payments were
made for the use of its personal properties such as its plane, motor boat and dump
truck. The series of transactions engaged in by ACMDC for the lease of its
aforesaid properties could also be deduced from the fact that during the period
there were profits earned and reported therefor. The allegation of ACMDC that it
did not realize any profit from the leasing out of its said personal properties, since
its income therefrom covered only the costs of operation such as salaries and fuel,
is not supported by any documentary or substantial evidence.
Assessments are prima facie presumed correct and made in good faith. Contrary
to the theory of ACMDC, it is the taxpayer and not the BIR who has the duty of
proving otherwise. It is an elementary rule that in the absence of proof of any
irregularities in the performance of official duties, an assessment will not be
disturbed. All presumptions are in favor of tax assessments. Verily, failure to
present proof of error in assessments will justify judicial affirmance of said
assessment.
FACTS: The petitioner sought the review on certiorari of the decision of the
respondent Court of Appeals reversing the decision of the then Court of First
Instance of Manila which ordered private respondent Nielson & Co., Inc. to pay
the Government the amount of P11,496.00 as ad valorem tax, occupation fees,
additional residence tax and 25% surcharge for late payment, for the years 1949 to
1952. Petitioner claims that the demand letter of 16 July 1955 showed an imprint
indicating that the original thereof was released and mailed on 4 August 1955 by
the Chief, Records Section of the Bureau of Internal Revenue, and that the original
letter was not returned to said Bureau; thus, said demand letter must be considered
to have been received by the private respondent. According to petitioner, if service
is made by ordinary mail, unless the actual date of receipt is shown, service is
deemed complete and effective upon the expiration of five (5) days after mailing.
As the letter of demand dated 16 July 1955 was actually mailed to private
respondent, there arises the presumption that the letter was received by private
respondent in the absence of evidence to the contrary. More so, where private
respondent did not offer any evidence, except the self-serving testimony of its
witness, that it had not received the original copy of the demand letter dated 16
July 1955.
HELD: As to the first issue, no. As correctly observed by the respondent court in
its appealed decision, while the contention of petitioner is correct that a mailed
letter is deemed received by the addressee in the ordinary course of mail, still this
is merely a disputable presumption, subject to controversion, and a direct denial of
the receipt thereof shifts the burden upon the party favored by the presumption to
prove that the mailed letter was indeed received by the addressee. Since petitioner
has not adduced proof that private respondent had in fact received the demand
letter of 16 July 1955, it can not be assumed that private respondent received said
letter. As to the second issue, Yes. Records show that petitioner wrote private
respondent a follow-up letter dated 19 September 1956, reiterating its demand for
the payment of taxes as originally demanded in petitioner's letter dated 16 July
1955. This follow-up letter is considered a notice of assessment in itself which was
duly received by private respondent in accordance with its own admission. And
consequently, under Section 7 of Republic Act No. 1125, the assessment is
appealable to the Court of Tax Appeals within thirty (30) days from receipt of the
letter. The taxpayer's failure to appeal in due time, as in the case at bar, makes the
assessment in question final, executory and demandable. Thus, private respondent
is now barred from disputing the correctness of the assessment or from invoking
any defense that would reopen the question of its liability on the merits.
FACTS: The Collector of Internal Revenue sent a warrant of distraint and levy
against the properties of Restituto Codiera for collection of certain deficiency
specific tax. However, it could not be effected in view of the attachment of the said
properties of the CFI-Manila of another case. After seven years, the Collector of
Internal Revenue issued a warrant of distraint and levy commanding the City
Treasurer of Cebu City to distrain the goods, chattels, or effects and other personal
property of whatever character, and levy upon the real property and interest in or
rights to real property of the estate of the deceased. The heirs of the deceased filed
the action with the CTA barring the government to collect said deficiency on the
ground of prescription therefore praying to declare null and void, and of no legal
force and effect the warrant of distraint and levy which the respondent issued on
March 7, 1955.
ISSUE: Does the attachment made by a court in a civil case over certain properties
of a taxpayer bar the government from enforcing a warrant of distraint and levy
over the aforesaid properties in order to collect the taxes due?
HELD: No. There may be a valid reason for non-distraint of the property which
was due to the attachment of the CFI-Manila in another case. However, such
property levied by a competent court may, with the consent thereof, be
subsequently distrained, subject to the prior lien of the attachment creditor. The
attachment merely deprives the Collector of Internal Revenue the power to divest
the Court of its jurisdiction over said property but it does not impair such rights as
the Government may have for the collection of taxes.
FACTS: The Provincial Treasurer of Tayabas issued a notice for the sale at public
auction of the real properties of Nemesio Cabrera forfeited for tax delinquency on
December 15, 1940. The letter sent to Nemesio Cabrera was returned marked
Unclaimed for the latter was already dead in 1935. The land was actually sold in
a rescheduled public auction sale on May 1941 to Catigbac and was finalized in
May 1942. Basilia Cabrera, the registered owner of the land subject to attachment,
filed a complaint with the CFI-Tayabas against the Provincial Treasurer and
Catigbac attacking the validity of the sale on the grounds that she was not notified,
even though the property had remained in the assessment book in the name of
Nemesio Cabrera, because she became the registered owner thereof since 1934
when a Torrens Title was issued to her by the Register of Deeds of Tayabas.
ISSUE: Is there a need for new notices if the land was not sold on the date
specified in the previous notice?
HELD: Yes. Under the law, even if the notice state that the sale would take place
on a specified date and every day thereafter, it is a general and indefinite notice. In
order to protect the taxpayers rights, the taxpayer should at least be apprised of the
exact date of the proceeding by which she is to lose her property. Besides, the
appellee admittedly being not notified also vitiates the proceeding. She is the
registered owner of the land and had become liable for taxes thereon. For all
purposes, she is the delinquent taxpayer "against whom the taxes were assessed." It
cannot be Nemesio for the latter's obligation to pay ended where Basilia's liability
began.
Basilia may be criticized for failure to have changed the name in the assessment
record. However, such circumstance, nevertheless, cannot supplant the absence of
notice.
FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana
saplings producer, for allegedly evading payment of taxes and other violations of
the NIRC. Ungab, subsequently filed a motion to quash on the ground that (1) the
information are null and void for want of authority on the part of the State
Prosecutor to initiate and prosecute the said cases; and (2)that the trial court has no
jurisdiction to take cognizance of the case in view of his pending protest against
the assessment made by the BIR examiner. The trial court denied the motion
prompting the petitioner to file a petition for certiorari and prohibition with
preliminary injunction and restraining order to annul and set aside the information
filed.
ISSUE: Is the contention that the criminal prosecution is premature since the CIR
has not yet resolved the protest against the tax assessment tenable?
HELD: No. The contention is without merit. What is involved here is not the
collection of taxes where the assessment of the Commissioner of Internal Revenue
may be reviewed by the Court of Tax Appeals, but a criminal prosecution for
violations of the National Internal Revenue Code which is within the cognizance of
courts of first instance. While there can be no civil action to enforce collection
before the assessment procedures provided in the Code have been followed, there
is no requirement for the precise computation and assessment of the tax before
there can be a criminal prosecution under the Code.
An assessment of a deficiency is not necessary to a criminal prosecution for
wilful attempt to defeat and evade the income tax. A crime is complete when the
violator has knowingly and wilfully filed a fraudulent return with intent to evade
and defeat the tax. The perpetration of the crime is grounded upon knowledge on
the part of the taxpayer that he has made an inaccurate return, and the government's
failure to discover the error and promptly to assess has no connections with the
commission of the crime.
FACTS: The Bureau of Forestry sent a demand letter dated January 15, 1949 to
Mambulao Lumber Co. demanding for the payment of forest charges and
surcharges. Mambulao protested the assessment. On August 29,1958, the BIR
likewise wrote a letter to the company demanding payment, which subsequently
requested reinvestigation. The BIR gave the company twenty (20) days from
receipt within which to submit the results of its verification of payments. For
failure to comply and failure to pay its tax liability despite demands, CIR filed a
complaint for collection with CFI-Manila on August 25, 1961. The CFI-Manila
and Court of Appeals decided against Mambulao ordering it to pay the tax liability.
Petitioner argued that the collection is barred by the statute of limitations under
Sections 332 of the NIRC. As stated, the collection should be made within the five
(5) year period. From 1949 (date when the Bureau of Forestry assessed and
demand payment as forestry charges and surcharges) up to 1961 (date of filing of
complaint), it is already more than five years.
HELD: No. The action for collection is not barred by prescription. The basis of the
complaint filed on August 1961 was the demand letter made by the CIR on August
29, 1958 and not the demand letter of the Bureau of Forestry on January 1949. So
that the reckoning date of the 5-year period should be from the date of the BIR
letter and not that of the Bureau of Forestry. This must be so because forest
charges are internal revenue taxes and the BIR has the sole power and duty to
collect them.
HELD: No. It has been held that "a judicial action for the collection of a tax is
begun by the filing of a complaint with the proper court of first instance, or where
the assessment is appealed to the Court of Tax Appeals, by filing an answer to the
taxpayer's petition for review wherein payment of the tax is prayed for." This is but
logical for where the taxpayer avails of the right to appeal the tax assessment to the
Court of Tax Appeals, the said Court is vested with the authority to pronounce
judgment as to the taxpayer's liability to the exclusion of any other court. In the
present case, regardless of whether the assessments were made on February 24 and
27, 1956, as claimed by the Commissioner, or on December 27, 1955 as claimed
by the taxpayer, the government's right to collect the taxes due has clearly not
prescribed, as the taxpayer's appeal or petition for review was filed with the Tax
Court on May 4, 1960, with the Commissioner filing on May 20, 1960 his Answer
with a prayer for payment of the taxes due, long before the expiration of the five-
year period to effect collection by judicial action counted from the date of
assessment.
FACTS: The Solicitor General, in behalf of the Republic of the Philippines, filed
before CFI of Manila an action against the defendant Araneta, as principals, and
Manila Surety, as surety, to recover the internal revenue taxes including
surcharges, the payment of which was guaranteed by a bond executed when the
first extrajudicial demand for payment was made. The appellant-taxpayers contend
that the appellee's cause of action has prescribed, because the action for recovery
of internal revenue taxes and surcharge due brought on 22 February 1957, was not
commenced within the period of five years after the assessment dated 15 May 1948
had been made, as provided for in Section 331 of the Tax Code.
ISSUE: Has the action to recover the taxes due from the taxpayer and the surety
already prescribed?
MARCOS II vs. CA
273 SCRA 47
GR No. 120880, June 5, 1997
"The approval of the court sitting in probate is not a mandatory requirement
in the collection of estate taxes."
"In case of failure to file a return, the tax may be assessed at anytime within
10 years after the omission."
FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of
Appeals to grant CIR's petition to levy the properties of the late Pres. Marcos to
cover the payment of his tax delinquencies during the period of his exile in the US.
The Marcos family was assessed by the BIR after it failed to file estate tax returns.
However the assessment were not protested administratively by Mrs. Marcos and
the heirs of the late president so that they became final and unappealable after the
period for filing of opposition has prescribed. Marcos contends that the properties
could not be levied to cover the tax dues because they are still pending probate
with the court, and settlement of tax deficiencies could not be had, unless there is
an order by the probate court or until the probate proceedings are terminated.
Petitioner also pointed out that applying Memorandum Circular No. 38-68, the
BIR's Notices of Levy on the Marcos properties were issued beyond the allowed
period, and are therefore null and void.
ISSUE: Are the contentions of Bongbong Marcos correct?
HELD: No. The deficiency income tax assessments and estate tax assessment are
already final and unappealable -and-the subsequent levy of real properties is a tax
remedy resorted to by the government, sanctioned by Section 213 and 218 of the
National Internal Revenue Code. This summary tax remedy is distinct and separate
from the other tax remedies (such as Judicial Civil actions and Criminal actions),
and is not affected or precluded by the pendency of any other tax remedies
instituted by the government.
The approval of the court, sitting in probate, or as a settlement tribunal over the
deceased's estate is not a mandatory requirement in the collection of estate taxes.
On the contrary, under Section 87 of the NIRC, it is the probate or settlement court
which is bidden not to authorize the executor or judicial administrator of the
decedent's estate to deliver any distributive share to any party interested in the
estate, unless it is shown a Certification by the Commissioner of Internal Revenue
that the estate taxes have been paid. This provision disproves the petitioner's
contention that it is the probate court which approves the assessment and collection
of the estate tax.
On the issue of prescription, the omission to file an estate tax return, and the
subsequent failure to contest or appeal the assessment made by the BIR is fatal to
the petitioner's cause, as under Sec.223 of the NIRC, in case of failure to file a
return, the tax may be assessed at anytime within 10 years after the omission, and
any tax so assessed may be collected by levy upon real property within 3 years
(now 5 years) following the assessment of the tax. Since the estate tax assessment
had become final and unappealable by the petitioner's default as regards protesting
the validity of the said assessment, there is no reason why the BIR cannot continue
with the collection of the said tax.
FACTS: On July 18, 1986, the BIR issued to respondent Salud V. Hizon a
deficiency income tax assessment covering the fiscal year 1981-1982. Respondent
not having contested the assessment, petitioner BIR, on January 12, 1989, served
warrants of distraint and levy to collect the tax deficiency. However, for reasons
not known, it did not proceed to dispose of the attached properties.
More than three years later, the respondent wrote the BIR requesting a
reconsideration of her tax deficiency assessment. The BIR, in a letter dated August
11, 1994, denied the request. On January 1, 1997, it filed a case with the RTC to
collect the tax deficiency. Hizon moved to dismiss the case on two grounds: (1)
that the complaint was not filed upon authority of the BIR Commissioner as
required by Sec. 221 of the NIRC, and (2) that the action had already prescribed.
Over petitioner's objection, the trial court granted the motion and dismissed the
complaint.
BIR on the other hand contends that respondent's request for reinvestigation of
her tax deficiency assessment on November 1992 effectively suspended the
running of the period of prescription.
HELD: Yes. Sec. 229 of the NIRC mandates that a request for reconsideration
must be made within 30 days from the taxpayer's receipt of the tax deficiency
assessment, otherwise the assessment becomes final, unappealable and, therefore,
demandable. The notice of assessment for respondent's tax deficiency was issued
by petitioner on July 18, 1986. On the other hand, respondent made her request for
reconsideration thereof only on November 3, 1992, without stating when she
received the notice of tax assessment. Hence, her request for reconsideration did
not suspend the running of the prescriptive period provided under Sec. 223(c).
Although the Commissioner acted on her request by eventually denying it on
August 11, 1994, this is of no moment and does not detract from the fact that the
assessment had long become demandable.
FACTS: The spouses Villa filed joint income tax returns for the years 1951 to
1956. The BIR issued assessments for deficiency of income tax for the said years.
Without contesting the said assessments with the CIR, they filed a petition for
review with the CTA. The CTA took cognizance of the of the appeal and rendered
favorable judgment to the spouses. The CIR appealed to the SC questioning the
jurisdiction of the CTA.
ISSUE: Is an appeal to the CTA proper in this case? Is the CTA vested with
jurisdiction?
HELD: No. The rule is that where a taxpayer questions an assessment and asks the
Collector to reconsider or cancel the same because he (the taxpayer) believes he is
not liable therefor, the assessment becomes a "disputed assessment" that the
Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals
only upon receipt of the decision of the Collector on the disputed assessment.
Since in the instant case the taxpayer appealed the assessment of the Commissioner
of Internal Revenue without previously contesting the same, the appeal was
premature and the Court of Tax Appeals had no jurisdiction to entertain said
appeal. For, as stated, the jurisdiction of the Tax Court is to review by appeal
decisions of Internal Revenue on disputed assessments. The Tax Court is a court of
special jurisdiction. As such, it can take cognizance only of such matters as are
clearly within its jurisdiction.