Table of Contents

Pimentel V. Aguirre ....................................................................................................................................... 1 Bengzon Vs Drilon ......................................................................................................................................... 2 Tio Vs Videogram Regulatory Board ............................................................................................................. 3 Silkair Vs Cir................................................................................................................................................... 4 City Assessor Of Cebu Vs. Association Of Benevola De Cebu ....................................................................... 5 American Bible Society Vs Manila ................................................................................................................. 6 Alternative Center For Organization Reforms Vs Zamora ............................................................................ 7 Apostolic Prefect Of Mt. Province Vs. Treasurer Of Baguio.......................................................................... 8 Commissioner Of Internal Revenue Vs. Algue And The Court Of Tax Appeals ............................................. 9 Philippine Airlines, Inc. V. Edu..................................................................................................................... 10 Walter Lutz Vs. J. Antonio Araneta ............................................................................................................. 11 Wenceslao Pascual Vs. The Secretary Of Public Works And Communications, Et Al. ................................ 12 Association Of Customs Brokers Et Al. Vs. The Municipality Board Of Manila Et Al. ................................. 13 Tiu Vs. Court Of Appeals ............................................................................................................................. 14 Tolentino Vs. Secretary Of Finance ............................................................................................................. 15 Commissioner Of Internal Revenue V. Court Of Appeals And Ymca .......................................................... 16 Lung Center Of The Philippines Vs. Quezon City And Constantino P. Rosas .............................................. 17 Commissioner Of Internal Revenues Vs. Toda ............................................................................................ 18 National Development Company Vs. Commissioner Of Internal Revenue................................................. 19 Ernesto M. Maceda Vs. Hon. Catalino Macaraig, Jr., Et Al.......................................................................... 20 Caltex Philippines, Inc. V. Commission On Audit ........................................................................................ 21 Reyes V. Almonzor ...................................................................................................................................... 22 Melecio R. Domingo Vs. Hon. Lorenzo C. Garlitos ...................................................................................... 23 Bolinao Electronics Corp Vs. Valencia ......................................................................................................... 24 Transglobe International, Inc. V Ca ............................................................................................................. 26 Boc And Eeib Vs. Ogario .............................................................................................................................. 27 Terminal Facilities Tefasco/ Vs. Ppa ............................................................................................................ 28 Chevron Phils V.Commissioner Of Bureau Of Customs, ............................................................................. 29 Garcia Vs. Executive Secretary .................................................................................................................... 30 Manila Electric Company V. Province Of Laguna ........................................................................................ 31 Allied Banking Corp. Vs. Quezon City Govt, Et. Al. ..................................................................................... 32 Digitel Vs Province Of Pangasinan .............................................................................................................. 33 Fels Energy Vs Province Of Batangas .......................................................................................................... 36

Pimentel v. Aguirre
G.R. NO. 132988 FACTS: This is a petition for certiorari and prohibition seeking to annul Section 1 of Administrative Order No. 372, issued by the President, insofar as it requires local government units to reduce their expenditures by 25% of their authorized regular appropriations for non-personal services and to enjoin respondents from implementing Section 4 of the Order, which withholds a portion of their internal revenue allotments. HELD: Section 1 of the AO does not violate local fiscal autonomy. Local fiscal autonomy does not rule out any manner of national government intervention by way of supervision, in order to ensure that local programs, fiscal and otherwise, are consistent with national goals. AO 372 is merely directory and has been issued by the President consistent with his powers of supervision over local governments. A directory order cannot be characterized as an exercise of the power of control. The AO is intended only to advise all government agencies and instrumentalities to undertake cost-reduction measures that will help maintain economic stability in the country. It does not contain any sanction in case of noncompliance. The Local Government Code also allows the President to interfere in local fiscal matters, provided that certain requisites are met: (1) an unmanaged public sector deficit of the national government; (2) consultations with the presiding officers of the Senate and the House of Representatives and the presidents of the various local leagues; (3) the corresponding recommendation of the secretaries of the Department of Finance, Interior and Local Government, and Budget and Management; and (4) any adjustment in the allotment shall in no case be less than 30% of the collection of national internal revenue taxes of the third fiscal year preceding the current one. Section 4 of AO 372 cannot be upheld. A basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the national internal revenue. This is mandated by the Constitution and the Local Government Code. Section 4 which orders the withholding of 10% of the LGUs IRA clearly contravenes the Constitution and the law.

BENGZON VS DRILON G.R. NO. 103524 FACTS: On 15 Jan 1992, some provisions of the Special Provision for the Supreme Court and the Lower Courts General Appropriations were vetoed by the President because a resolution by the Court providing for appropriations for retired justices has been enacted. The vetoed bill provided for the increase of the pensions of the retired justices of the Supreme Court, and the Court of Appeals as well as members of the Constitutional Commission. ISSUE: Whether or not the veto of the President on that portion of the General Appropriations bill is constitutional. HELD: The Justices of the Court have vested rights to the accrued pension that is due to them in accordance to Republic Act 1797. The president has no power to set aside and override the decision of the Supreme Court neither does the president have the power to enact or amend statutes promulgated by her predecessors much less to the repeal of existing laws. The veto is unconstitutional since the power of the president to disapprove any item or items in the appropriations bill does not grant the authority to veto part of an item and to approve the remaining portion of said item.

TIO VS VIDEOGRAM REGULATORY BOARD FACTS: Tio is a videogram operator who assailed the constitutionality of PD 1987 entitled An Act Creating the Videogram Regulatory Board with broad powers to regulate and supervise the videogram industry. The PD was also reinforced by PD1994 which amended the National Internal Revenue Code. The amendment provides that there shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided, that locally manufactured or imported blank video tapes shall be subject to sales tax. The said law was brought about by the need to regulate the sale of videograms as it has adverse effects to the movie industry. The proliferation of videograms has significantly lessened the revenue being acquired from the movie industry, and that such loss may be recovered if videograms are to be taxed. Sec 10 of the PD imposes a 30% tax on the gross receipts payable to the LGUs. Tio countered, among others, that the tax imposition provision is a rider and is not germane to the subject matter of the PD. ISSUE: Whether or not the PD embraces only one subject. HELD: The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. It is not necessary that the title express each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts of the statute are related, and are germane to the subject matter expressed in the title, or as long as they are not inconsistent with or foreign to the general subject and title. An act having a single general subject, indicated in the title, may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general object." The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly construed as to cripple or impede the power of legislation. It should be given a practical rather than technical construction. In the case at bar, the questioned provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the PD, which is the regulation of the video industry through the VRB as expressed in its title. The tax provision is not inconsistent with, nor foreign to that general subject and title. As a tool for regulation it is simply one of the regulatory and control mechanisms scattered throughout the PD. The express purpose of the PD to include taxation of the video industry in order to regulate and rationalize the uncontrolled distribution of videograms is evident from Preambles 2 and 5 of the said PD which explain the motives of the lawmakers in presenting the measure. The title of the PD, which is the creation of the VRB, is comprehensive enough to include the purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the title or that the latter be an index to the body of the PD.

SILKAIR VS CIR
GR 82902 SEPTEMBER 13, 2004 FACTS: Silkair, an online international air carrier, filed with the Bureau of Internal Revenue (BIR) a written application for the refund of P4,567,450.79 excise taxes it claimed to have paid on its purchases of jet fuel from Petron Corporation from January to June 2000. As the BIR had not yet acted on the application, Silkair filed a Petition for Review before the CTA. Opposing the petition, respondent CIR alleged that petitioner failed to prove that the sale of the petroleum products was directly made from a domestic oil company to the international carrier. CTA denied Silkairs petition on the ground that as the excise tax was imposed on Petron Corporation as the manufacturer of petroleum products, any claim for refund should be filed by the latter; and where the burden of tax is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost of the goods purchased. Hence, this appeal. ISSUE: Whether Silkair may claim for the refund of excise taxes erroneously paid. HELD: NO. As the excise tax was imposed on Petron Corporation as the manufacturer of petroleum products, any claim for refund should be filed by the latter; and where the burden of tax is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost of the goods purchased. Therefore, the right to claim for the refund of excise taxes paid on petroleum products lies with Petron Corporation who paid and remitted the excise tax to the BIR. Respondent, on the other hand, may only claim from Petron the reimbursement of the tax burden shifted to the former by the latter. The excise tax partaking the nature of an indirect tax, is clearly the liability of the manufacturer or seller who has the option whether or not to shift the burden of the tax to the purchaser. Where the burden of the tax is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost on the goods purchased which constitutes a part of the purchase price. In sum, the incidence of taxation or the person statutorily liable to pay the tax falls on Petron though the impact of taxation or the burden of taxation falls on another person, which in this case is petitioner Silkair.

CITY ASSESSOR OF CEBU VS. ASSOCIATION OF BENEVOLA DE CEBU

GR 152904 JUNE 28,2007 FACTS: Benevola de Cebu is a non-stock non-profit organization which in 1990, a medical arts building was constructed and in 1998 was issued with a certification classifying the building as commercial. City assessor of Cebu assessed the building with a market value of Php 28,060,520 and on assessed value of Php 9,821,180 at the assessment level of 35% and not 10% which is currently imposed on private respondent herein. Petitioner claimed that the building is used as commercial clinic/spaces for renting out to physicians and thus classified as commercial. Benevola de Cebu contended that the building is used actually, directly and exclusively part of hospital and should have an assessment level of 10% ISSUE: Whether or not the new building is liable to pay the 35% assessment level? RULING: We hold that the new building is an integral part of the hospital and should not be assessed as commercial. Being a tertiary hospital, it is mandated to fully departmentalized and be equipped with the service capabilities needed to support certified medical specialist and other licensed physicians. The fact that they are holding office is a separate building does not take away the essence and nature of their services vis-a-vis the overall operation of the hospital and to its patients. Under the Local Government Code, Sec. 26: All lands, buildings and other improvements thereon actually, directly and exclusively used for hospitals, cultural or scientific purposes and those owned and used by local water districts shall be classified as special.

AMERICAN BIBLE SOCIETY VS MANILA

GRN 9637 April 30, 1957 FACTS: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation and in the course of its ministry, it has been selling bible and or gospel portions throughout the country and translating the same into several Philippine dialects. The City of Manila considered appellant as conducting the business of general merchandize and required it to secure the necessary permit and license fees. ISSUE: Whether or not appellant if engaged in business as a religious corporation and thus be made to pay fees or taxes. RULING: It may be true that the price of bibles and pamphlets was a bit higher than the actual cost of the same, but this could not mean that appellant is engaged in business for profit. For this reason, we believe that the ordinance requiring them to pay fees or taxes would impair its free exercise of its religious freedom thru distribution of pamphlets.

ALTERNATIVE CENTER FOR ORGANIZATION REFORMS VS ZAMORA

GRN 144256 June 8, 2005 FACTS: In the year 2000, the GAA appropriated PhP 111,778,000,000.00 of IRA as programmed fund. It appropriated a separate amount of P10B of IRA under the classification of unprogrammed fund, the latter amount to be released only upon the occurrence of the conditions stated in the GAA. ISSUE: Whether or not the questioned provision violate the constitutional injunction that the just share of local governments in the national taxes of the IRA shall be automatically released. RULING: Article X Section 6 of the Constitution provides: LGUs shall have a just share, as determined by law, in the national taxes which shall be automatically released to them. While automatic release implies that the just share should be released to them as a matter of course, withholding its release pending an event contravened the constitutional mandate.

APOSTOLIC PREFECT OF MT. PROVINCE VS. TREASURER OF BAGUIO GR L-47252 FACTS: In 1937, an ordinance (Ord. 137) was passed in the City of Baguio. The said ordinance sought to assess properties of property owners within the defined city limits. APMP, on the other hand, is a religious corporation duly established under Philippine laws. Pursuant to the ordinance, it contributed a total amount of P1,019.37. It filed the said contribution in protest. APMP later averred that it should be exempt from the said special contribution since as a religious institution, it has a constitutionally guaranteed right not to be taxed including its properties. ISSUE: Whether or not APMP is exempt from taxes. HELD: The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. Based on Justice Cooleys words: "While the word 'tax' in its broad meaning, includes both general taxes and special assessments, and in a general sense a tax is an assessment, and an assessment is a tax, yet there is a recognized distinction between them in that assessment is confined to local impositions upon property for the payment of the cost of public improvements in its immediate vicinity and levied with reference to special benefits to the property assessed. The differences between a special assessment and a tax are that (1) a special assessment can be levied only on land; (2) a special assessment cannot (at least in most states) be made a personal liability of the person assessed; (3) a special assessment is based wholly on benefits; and (4) a special assessment is exceptional both as to time and locality. The imposition of a charge on all property, real and personal, in a prescribed area, is a tax and not an assessment, although the purpose is to make a local improvement on a street or highway. A charge imposed only on property owners benefited is a special assessment rather than a tax notwithstanding the statute calls it a tax." In the case at bar, the Prefect cannot claim exemption because the assessment is not taxation per se but rather a system for the benefits of the inhabitants of the city.

COMMISSIONER OF INTERNAL REVENUE vs. ALGUE and THE COURT OF TAX APPEALS
G.R. No. L-28896 February 17, 1988 FACTS: The Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it. Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the PSEDC properties. For this sale, Algue received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. ISSUE: Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns. RULING: The Supreme Court agrees with the respondent court that the amount of the promotional fees was not excessive. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government.

PHILIPPINE AIRLINES, INC. v. EDU

G.R. No. L- 41383, August 15, 1988 FACTS: The Philippine Airlines (PAL) is a corporation engaged in the air transportation business under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the payment of taxes. Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate (Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the Land and Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated May 19, 1971, to Land Transportation Commissioner Romeo Edu (Edu) demanding a refund of the amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu and National Treasurer Ubaldo Carbonell (Carbonell). The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which in turn certified the case to the Supreme Court. ISSUE: Whether or not motor vehicle registration fees are considered as taxes. RULING: Yes. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle registration fees. The motor vehicle registration fees are actually taxes intended for additional revenues of the government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program.

10

WALTER LUTZ vs. J. ANTONIO ARANETA

G.R. No. L-7859 December 22, 1955 FACTS: This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act. Plaintiff, Walter Lutz seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The action having been dismissed by the Court of First Instance, the plaintiffs appealed the case directly to the Supreme Court. ISSUE: Is the tax provided for in Commonwealth Act No. 567 a pure exercise of the taxing power? RULING: Analysis of the Act, and particularly of section 6 will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. The protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the state's police power.

11

WENCESLAO PASCUAL vs. THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL.
G.R. No. L-10405 December 29, 1960 FACTS: On August 31, 1954, petitioner Wenceslao Pascual instituted this action for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An Act Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and improvement" of Pasig feeder road terminals; that, at the time of the passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . . Pasig, Rizal" which projected feeder roads "do not connect any government property or any important premises to the main highway"; Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to sue", and that the petition did "not state a cause of action". ISSUE: Should appropriation using public funds be made for public purposes only? RULING: The right of the legislature to appropriate funds is correlative with its right to tax, and, under constitutional provisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose, no appropriation of state funds can be made for other than for a public purpose. The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public.

12

ASSOCIATION OF CUSTOMS BROKERS et al. vs. THE MUNICIPALITY BOARD of Manila et al.
G.R. No. L-4376, May 22, 1953 FACTS: 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 petitioners which is composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila. ISSUE: Whether or not Ordinance No. 3379 is valid as held by the CFI of Manila. RULING: No. The ordinance in question while it refers to property tax and it is fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to.

13

TIU vs. COURT OF APPEALS

GR. No. 127410 January 20, 1999 FACTS: Congress, with the approval of the President, passed into law RA 7227 entitled "An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefore and for Other Purposes." Section 12 thereof created the Subic Special Economic Zone and granted there to special privileges. President Ramos issued Executive Order No. 97, clarifying the application of the tax and duty incentives. The President issued Executive Order No. 97-A, specifying the area within which the tax-andduty-free privilege was operative. The petitioners challenged before this Court the constitutionality of EO 97-A for allegedly being violative of their right to equal protection of the laws. This Court referred the matter to the Court of Appeals. Proclamation No. 532 was issued by President Ramos. It delineated the exact metes and bounds of the Subic Special Economic and Free Port Zone, pursuant to Section 12 of RA 7227. Respondent Court held that "there is no substantial difference between the provisions of EO 97-A and Section 12 of RA 7227. In both, the 'Secured Area' is precise and well-defined as '. . . the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended . . .'" ISSUE: Whether or not Executive Order No. 97-A violates the equal protection clause of the Constitution RULING: No. The Court found real and substantive distinctions between the circumstances obtaining inside and those outside the Subic Naval Base, thereby justifying a valid and reasonable classification. The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another. The classification must also be germane to the purpose of the law and must apply to all those belonging to the same class.

14

TOLENTINO vs. SECRETARY OF FINANCE

G.R. No. 115455 October 30, 1995 FACTS: Motions were filed seeking reconsideration of the Supreme Court decision dismissing the petitions for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by the several petitioners in these cases. ISSUES: 1. Whether or not R.A. No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI Sec. 24 of the Constitution. 2. Whether or not R.A. No. 7716 is violative of press freedom and religious freedom under Art. III Secs. 4 and 5 of the Constitution. 3. Whether or not there is violation of the rule on taxation under Art. VI Sec. 28 (1) of the Constitution. 4. Whether or not there is an impairment of obligation of contracts under Art. III Sec. 10 of the Constitution. 5. Whether or not there is violation of the due process clause under Art. III Sec. 1 of the Constitution. RULING: 1. While Art. VI Sec. 24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills must "originate exclusively in the House of Representatives," it also adds, "but the Senate may propose or concur with amendments." In the exercise of this power, the Senate may propose an entirely new bill as a substitute measure. 2. Since the law granted the press a privilege, the law could take back the privilege anytime without offense to the Constitution. The VAT is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general regulation is not to violate its freedom under the Constitution. 3. The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall "evolve a progressive system of taxation." 4. Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can extend to the defeat of that authority. 5. On the alleged violation of due process, hardship to taxpayers alone is not an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no different from the giving of advisory opinion that does not really settle legal issues. We are told that it is our duty under Art. VIII, Sec. 1 (2) to decide whenever a claim is made that "there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government." This duty can only arise if an actual case or controversy is before us.

15

Commissioner of Internal Revenue v. Court of Appeals and YMCA

G.R.NO.L-124043 OCTOBER 14, 1998 FACTS: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees collected from non-members. On July 2, 1984, the commissioner of internal revenue (CIR) issued an assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of YMCA. Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA) on March 14, 1989. In due course, the CTA issued this ruling in favor of the YMCA: ISSUE: Whether or not the YMCA is exempted from rental income derived from the lease of its properties RULING: Petitioner argues that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them as such," the exemption does not apply to income derived "xxx from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income xxx" We agree with the commissioner. In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code.

16

LUNG CENTER OF THE PHILIPPINES vs. QUEZON CITY and CONSTANTINO P. ROSAS
G.R. No. 144104 June 29, 2004 FACTS: The petitioner, a non-stock and non-profit entity is the registered owner of a parcel of land where erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City but the former filed a Claim for Exemption from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. ISSUE: Whether or not the petitioners real properties are exempted from realty tax exemptions. RULING: Even as we find that the petitioner is a charitable institution, those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Under Section 2 of Presidential Decree No. 1823, the petitioner does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges under Section 2.

17

Commissioner of Internal Revenues vs. Toda

G.R. NO. 147188. SEPTEMBER 14, 2004 FACTS: On 2 March 1989, CIC authorized Benigno P. Toda, Jr., President and owner of 99.991% of its outstanding capital stock, to sell the Cibeles Building. On 30 August 1989, Toda purportedly sold the property for P100 million to Rafael A. Altonaga, who, in turn, sold the same property on the same day to Royal Match Inc. (RMI) for P200 million. Three and a half years later Toda died. On 29 March 1994, the BIR sent an assessment notice and demand letter to the CIC for deficiency income tax for the year 1989. On 27 January 1995, the Estate of Benigno P. Toda, Jr., represented by special co-administrators Lorna Kapunan and Mario Luza Bautista, received a Notice of Assessment from the CIR for deficiency income tax for the year 1989. The Estate thereafter filed a letter of protest. The Commissioner dismissed the protest. On 15 February 1996, the Estate filed a petition for review with the CTA. In its decision the CTA held that the Commissioner failed to prove that CIC committed fraud to deprive the government of the taxes due it. It ruled that even assuming that a pre-conceived scheme was adopted by CIC, the same constituted mere tax avoidance, and not tax evasion. Hence, the CTA declared that the Estate is not liable for deficiency of income tax. The Commissioner filed a petition for review with the Court of Appeals. The Court of Appeals affirmed the decision of the CTA. Hence, this recourse to the SC. ISSUE: Whether or not this is a case of tax evasion or tax avoidance. RULING: Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being evil, in bad faith, willful, or deliberate and not accidental; and (3) a course of action or failure of action which is unlawful. All these factors are present in the instant case. The scheme resorted to by CIC in making it appear that there were two sales of the subject properties, i.e., from CIC to Altonaga, and then from Altonaga to RMI cannot be considered a legitimate tax planning. Such scheme is tainted with fraud. Altonagas sole purpose of acquiring and transferring title of the subject properties on the same day was to create a tax shelter. The sale to him was merely a tax ploy, a sham, and without business purpose and economic substance. Doubtless, the execution of the two sales was calculated to mislead the BIR with the end in view of reducing the consequent income tax liability.

18

NATIONAL DEVELOPMENT COMPANY vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. No. L-53961 June 30, 1987 FACTS: National Development Company (NDC) is a domestic corporation with principal offices in Manila. It entered into contracts in Tokyo with several Japanese shipbuilding companies for the construction of twelve ocean-going vessels. Initial payments were made in cash and through irrevocable letters of credit. Fourteen promissory notes were signed for the balance by the NDC and, as required by the shipbuilders, guaranteed by the Republic of the Philippines. Thereafter, remaining payments and the interests thereon were remitted in due time by the NDC to Tokyo. After the vessels were delivered, the NDC remitted to the shipbuilders in Tokyo the interest on the balance of the purchase price. No tax was withheld. The Commissioner of Internal Revenue held that the interest remitted to the Japanese shipbuilders on the unpaid balance of the purchase price of the vessels acquired by petitioner is subject to income tax under the Tax Code. The petitioner argues that the Japanese shipbuilders were not subject to tax under the Tax Code. Petitioner contends that the interest payments were obligations of the Republic of the Philippines and that the promissory notes of the NDC were government securities exempt from taxation under Section 29(b)[4] of the Tax Code. ISSUE: Whether petitioner should not be held liable due to the undertaking signed by the Secretary of Finance and because the interest payments were obligations of the Republic of the Philippines and that the promissory notes of the NDC were government securities exempt from taxation under Section 29(b)[4] of the Tax Code as alleged by petitioner. RULING: No. Petitioner should be held liable. There is nothing in Section 29(b)[4] of the Tax Code exempting the interests from taxes. Furthermore in the said undertaking, petitioner has not established a clear waiver therein of the right to tax interests. Tax exemptions cannot be merely implied but must be categorically and unmistakably expressed. Any doubt concerning this question must be resolved in favor of the taxing power. It is not the NDC that is being taxed. It was the income of the Japanese shipbuilders and not the Republic of the Philippines that was subject to the tax the NDC did not withhold. In effect, therefore, the imposition of the deficiency taxes on the NDC is a penalty for its failure to withhold the same from the Japanese shipbuilders.

19

ERNESTO M. MACEDA vs. HON. CATALINO MACARAIG, JR., et al.

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

20

Caltex Philippines, Inc. v. Commission on Audit

G.R. NO. 92585 MAY 8, 1992 FACTS: Respondent Commission on Audit (COA) directed petitioner Caltex Philippines, Inc. (CPI) to remit to the Oil Price Stabilization Fund (OPSF) its collection of the additional tax on petroleum products pursuant to P.D. 1956, as well as unremitted collections of the above tax covering the years 1986, 1987 and 1988, with interests and surcharges, and advising it that all its claims for reimbursements from the OPSF shall be held in abeyance pending such remittance. COA further directed petitioner oil company to desist from further offsetting the taxes collected against outstanding claims for 1989 and subsequent periods. Its motion for reconsideration of the eventual decision of the COA on the matter having been denied, CPI imputes that respondent commission erred in preventing the former from exercising the right to offset its remittances against the reimbursement vis--vis the OPSF. ISSUE: Whether or not the amounts due to the OPSF from petitioner may be offset against the latters outstanding claims from said fund? RULING: No. It is settled that a taxpayer may not offset taxes due from claims that he may have against the Government. Taxes cannot be the subject of compensation because the Government and the taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set off. The Court further ruled that taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the Government. Taxes may be levied for a regulatory purpose such as to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest, a concern which is within the police power of the State to address.

21

Reyes v. Almonzor
G.R. NOS. L-49839 APRIL 26, 1991 FACTS: The National legislature enacted R.A. 6359 which prohibits an increase in monthly rentals of dwelling unit or land on which anothers dwelling is located, where the rental does not exceed Php300.00. The act also suspended article 1673 of the Civil Code thereby disallowing ejectment of lessees. These prohibitions were made absolute by the filing of Presidential Decree 20. Consequently, petitioners herein are precluded from increasing monthly rentals and in ejecting the lessees. The respondent city assessor of Manila reassessed the value of the petitioners properties based on the scheduled market value thereof. This entailed an increase in the tax rates prompting petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals averring that the reassessment was excessive, unwarranted, inequitable, confiscatory and unconstitutional considering that the tax imposed upon them is greater than the annual income derived from the property. They also argued that the income approach should have been used in determining the land values instead of the comparable sales approach. The Board of tax Assessment Appeals considered the assessment valid and the same was affirmed by the Central Board of Assessment appeals, hence this petition. ISSUE: Did the board err in adopting the comparable sales approach in fixing the assessed value of the properties? RULING: The petition is impressed with merit. It is unquestionable that both the Comparable Sales Approach and the Income Approach are generally acceptable methods of appraisal for taxation purposes. However, it is conceded that the proprietary of one, as against the other would depend on several factors. Hence, as early as 1923, it has been stressed that the assessors , in finding the value of the property, have to consider all the circumstances and elements of value and must exercise a prudent discretion in reaching conclusions.

22

MELECIO R. DOMINGO vs. HON. LORENZO C. GARLITOS

G.R. No. L-18994, June 29, 1963 FACTS: This is a petition for certiorari and mandamus against respondent judge seeking to annul certain orders of the court and for an order in this Court to direct respondent to execute the judgment in favor of the Government against the estate of Walter Scott Price for internal revenue taxes. It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674, January 30, 1960, this Court declared as final and executory the order for the payment by the estate of the estate and inheritance taxes, charges and penalties, amounting to P40,058.55, issued by the Court of First Instance of Leyte in, special proceedings No. 14 entitled "In the matter of the Intestate Estate of the Late Walter Scott Price." In order to enforce the claims against the estate the fiscal presented a petition dated June 21, 1961, to the court below for the execution of the judgment. The petition was, however, denied by the court which held that the execution is not justifiable ISSUE: Whether or not the petitioner has the clear right to execute the judgment for taxes against the estate of the deceased Walter Scott Price. RULING: The petition to set aside the above orders of the court below and for the execution of the claim of the Government against the estate must be denied for lack of merit. The ordinary procedure by which to settle claims of indebtedness against the estate of a deceased person, as an inheritance tax, is for the claimant to present a claim before the probate court so that said court may order the administrator to pay the amount thereof. Another ground for denying the petition is the fact that the court having jurisdiction of the estate had found that the claim of the estate against the Government has been recognized and an amount of P262,200 has already been appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount. It is clear, therefore, that the petitioner has no clear right to execute the judgment for taxes against the estate of the deceased Walter Scott Price.

23

bolinao electronics corp vs. valencia

GR. L-20740 FACTS: This is an original petition for prohibition, mandatory injunction with preliminary injunction filed by the Bolinao Electronics Corporation, Chronicle Broadcasting Network, Inc., and Monserrat Broadcasting System, Inc., owners and operators of radio and television stations enumerated therein, against respondents Secretary of Public Works and Communications and Acting Chief of the Radio Control Division. Later the Republic of the Philippines, as operator of the Philippine Broadcasting Service, sought and was allowed to intervene in this case, said intervenor having been granted a construction permit to install and operate a television station in Manila. renewal of their station licenses were denied because it should be filed two month before the expiration of the license. Pursuant to Section 3 of Act 3846, as amended by Republic Act 584, on the powers and duties of the Secretary of Public Works and Communications(formerly Commerce And Communications), he may approve or disapprove any application for renewal of station or operator license, provided, however, That no application for renewal shall be disapproved without giving the licensee a hearing. Thus the notices of hearing were sent by respondents to petitioners. Clearly, the intention of the investigation is to find out whether there is ground to disapprove the applications for renewal. According to petitioner however, the violation has ceased to exist when the act of late filing was condoned or pardoned by respondents by the issuance of the circular dated July24, 1962.The lone reason given for the investigation of petitioners' applications, i.e., late filing thereof, is therefore no longer tenable. The violation, in legal effect, ceased to exist and, hence, there is neither reason nor need for the present investigation. ISSUES: (1) Whether the investigation being conducted by respondents, in connection with petitioners' applications for renewal of their station licenses, has any legal basis; (2) whether or not there was abandonment or renunciation by the Chronicle Broadcasting Network (CBN) of channel 9in favor of PBS; and (3) whether or not Philippine Broadcasting Service can legally operate Channel 9 and is entitled to damages, for CBN's refusal to give up operations thereof. HELD: In the case at bar, the issuance of the said circular, the lone reason given for the investigation of petitioners' applications, i.e., late filing thereof, is therefore no longer tenable. The violation, in legal effect, ceased to exist and, hence, there is no reason or need for the present investigation. There was no express agreement there was abandonment or renunciation by the Chronicle Broadcasting Network (CBN) of channel 9 in favor of PBS. The only basis of the contention of the respondents that there was such renunciation is the statement "Channel 10 assigned in lieu of Channel 9", appearing in the construction permit to transfer television station DZXL-TV from Quezon City to Baguio City, issued to petitioner. This statement alone, however, does not establish any agreement between the radio control authority and the station operator, on the switch or change of operations of CBN from Channel 9 to Channel 10.As regard intervenor's claim for damages, it would have been sufficient to state that it having failed to prove the alleged agreement between CBN and said intervenor on the exchange of use of Channel 9 and 10, no right belonging to said intervenor had been violated by petitioner's refusal to give up its present operation of Channel 9. Based on the Appropriations Act the amount appropriated for the operation of the Philippine Broadcasting Service was made subject to the condition that the same shall not be used or expended for operation of television stations in Luzon, where there are already existing commercial television stations. This gives rise to the question of whether the President may legally veto a condition attached to an appropriation or item in the appropriation bill. the
24

executive's veto power does not carry with it the power to strike out conditions or restrictions, has been adhered to in subsequent cases. If the veto is unconstitutional, it follows that the same produced no effect whatsoever, and the restriction imposed by the appropriation bill, therefore, remains. Any expenditure made by the intervenor PBS, for the purpose of installing or operating a television station in Manila, where there are already television stations in operation, would be in violation of the express condition for the release of the appropriation and, consequently, null and void. It is not difficult to see that even if it were able to prove its right to operate on Channel 9, said intervenor would not have been entitled to reimbursement of its illegal expenditures

25

Transglobe International, Inc. V Ca

January 25, 1999 Facts: A shipment from Hong Kong arrived at the port of Manila, aboard the S/S Seadragon. Its inward foreign manifest indicated that it contained various hand tools. Acting on an information that the shipment violated provisions of tariff and customs code, the Economic Intelligence and Investigation Bureau (EIIB) agents seized the shipment while in transit to the container yard. The EIIB recommended seizure of the shipment, and for which a warrant of seizure and distraint was issued by the District Collector. For failure of petitioner, to appear during the hearing despite due notice, collector decreed the forfeiture of the shipment in favor of the government. Issue: Whether or not Transglobe is allowed to redeem the forfeited shipments. Held: As a means of settlement under Sec. 2307, TCC, redemption of forfeited property is unavailing in 3 instances: 1. Where there is fraud; 2. Where the importation is absolutely prohibited; 3. Where the release of the property is contrary to law. The fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up same right.

26

BOC and EEIB vs. Ogario

G.R. No. 138081, March 30, 2000 Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these proceedings. FACTS: On December 9, 1998, Felipe Bartolome, District Collector of Customs of Cebu, issued a Warrant of Seizure and Detention of 25,000 bags of rice, bearing the name of SNOWMAN, Milled in Palawan. According to the EIIB, the rice was landed in Palawan by a foreign vessel and then placed in sacks marked SNOWMAN, Milled in Palawan. It was then shipped to Cebu City on board the vessel M/V Alberto. Forfeiture proceedings were commenced but respondents filed a complaint for injunction with the RTC of Cebu City, impugning the issuance of the Warrant. The RTC ruled in favor of respondents and ordered the return of the goods. Meanwhile, in the forfeiture proceedings before the Collector of Customs of Cebu, a decision was rendered ordering the goods forfeited in favor of the government. ISSUE: Whether or not the RTC has jurisdiction to pass upon the validity of seizure and forfeiture proceedings HELD: There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these proceedings. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus. The rule that RTCs have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the governments drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform. Even if the seizure by the Collector of Customs were illegal, such act does not deprive the BOC of jurisdiction thereon.

27

Terminal Facilities TEFASCO/ Vs. PPA

GRN 135826 February 27, 2002 Facts: Tefasco proposed to construct as specialized terminal complex with part facilities and a provision for sport services in Davao City. On May 7, 1976, PPA accepted the projects TOCs and was authorized to start work. Tefasco contracted dollar lessons concern from private commercial institution abroad to construct its specialized facilities and long after the ground breaking, PPA passed a resolution which imposed a construction; PPA issued another permit the provision of which states that 10% of arrastre and stevedoring gross income and 100% wharf age and berthing charges be given as government share it had paid and for damage as a result of alleged illegal exaction from its clients of 100% berthing and wharf age fees. RTC ruled for Tefasco. Issue: Whether or not the collection of 100% wharf age fees and berthing charge are valid. Ruling: The authorization for a Tefasco to construct a port was truly a binding construct between the parties. It was a 2-way advantage for both parties which were the consideration for the contract. The right- privilege dichotomy came to an end when courts realized that individuals should not be subjected to the unfettered whims of government officials to withhold privileges previously given them. In as much as the part is privately owned and maintained, we rule that applicable rate for imported or exported articles loaded or unloaded thereat is not more than 100% but only 50%. As regards berthing charges, the Courts opinion is that only vessels berthing at the national ports are liable for berthing fees. The Berthing fees imposed upon vessels berthing are national ports are applied by the national government for the maintenance ports. The national ports does not maintain municipal ports which are solely maintain by private entities or municipalities. Thus, PPA erred in collecting berthing fees.

28

Chevron Phils v.Commissioner of Bureau of Customs,

GR 178759, Aug 11, 2008 FACTS: Effective date of reduction of tariff rate from 10% to 3% per RA 8180 (Apr 16, 1996) while importations arrived in the Phils prior to Apr 16, 1996; Import Entry Declarations [IED] were filed prior to said later date but the Import Entry Internal Revenue Declarations [IEIRD] were filed after said date. Chevron paid customs duties at 3%. Three years later, an informer reported the transactions and investigation conducted. The CBOC declared the importations abandoned for failure to enter them within 30 days from unloading and issued assessments for more than P1 Billion. Hence the appeal to CTA division which ruled that 10% applied per Sec 204, 205 and 1408; there was fraud but no abandonment. Both parties went to CTA en banc, which ruled that there was abandonment because IEIRD was not filed within 30 days per Sec 1301 in relation to Sec 205, thus abandonment ensued per Sec 1801 and 1802; notice of abandonment per CMO 15-94 was not necessary because Chevron had knowledge; and agreed there was fraud for failure file entry that was intended to avoid higher rate of duties. ISSUES: 1. whether entry under Section 1301 in relation to Section 1801 of the TCC refers to the IED or the IEIRD? 2. whether fraud was perpetrated by petitioner? RULING: 1. The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the correct and final amount of customs duties and avoid smuggling of goods into the country. Entry refers to both. They must be filed within 30 days. 2. Yes there was fraud. Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is taken of another. It is a question of fact and the circumstances constituting it must be alleged and proved in the court below. The finding of the lower court as to the existence or non-existence of fraud is final and cannot be reviewed here unless clearly shown to be erroneous. In this case, fraud was established by the IPD-CIIS of the BOC. Both the CTA First Division and en banc agreed completely with this finding. Chevron bided its time to avail of lower rate. Hence, due to the presence of fraud, the one year prescriptive period of the finality of liquidation under Section 1603 was inapplicable and 3. whether the importations can be considered abandoned under Section 1801. Yes, per Sec 1801 as amended by RA 7651. Notice was not necessary because BOC learned of fraud after 3 years and importations had been released. Abandoned article ipso facto deemed the property of the government per Sec 1802. This section cannot be questioned as unconstitutional collaterally. Besides, there is clear intent to do away with seizure proceedings in abandonment. Ordered to pay (P893,781,768.21) plus six percent (6%) legal interest per annum accruing from the date of promulgation of this decision until its finality. Upon finality of this decision, the sum so awarded shall bear interest at the rate of twelve percent (12%) per annum until its full satisfaction.

29

GARCIA VS. EXECUTIVE SECRETARY

211 SCRA 219 July 3, 1992 FACTS: The President issued an EO which imposed, across the board, including crude oil and other oil products, additional duty ad valorem. The Tariff Commission held public hearings on said EO and submitted a report to the President for consideration and appropriate action. The President, on the other hand issued an EO which levied a special duty of P0.95 per liter of imported crude oil and P1.00 per liter of imported oil products. ISSUE: Whether or not the President may issue an EO which is tantamount to enacting a bill in the nature of revenue-generating measures. RULING: The Court said that although the enactment of appropriation, revenue and tariff bills is within the province of the Legislative, it does not follow that EO in question, assuming they may be characterized as revenue measure are prohibited to the President, that they must be enacted instead by Congress. Section 28 of Article VI of the 1987 Constitution provides: The Congress may, by law authorize the President to fix tariff rates and other duties or imposts The relevant Congressional statute is the Tariff and Customs Code of the Philippines and Sections 104 and 401, the pertinent provisions thereof.

30

MANILA ELECTRIC COMPANY v. PROVINCE OF LAGUNA

G.R. No. 131359. May 5, 1999 FACTS: Manila Electric Company (MERALCO) was granted a franchise from certain municipalities of Laguna. On September 13, 1991, Republic Act 7160, otherwise known as the Local Government Code of 1991 was enacted, enjoining local government units to create their own sources of revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to this Code, respondent province enacted a Provincial Ordinance providing that a tax on business enjoying franchise, at a rate of 50% of 1% of the gross annual receipts... On the basis of such ordinance, the Provincial Treasurer sent a demand letter to MERALCO for the tax payment. MERALCO paid under protest. Thereafter, a formal claim for refund was sent by MERALCO to the Provincial Treasurer claiming that the franchise tax it had paid and continue to pay to the National Government already includes the franchise tax as provided under Presidential Decree 551. The claim was denied. MERALCO filed an appeal with the trial court but was dismissed. Thus the petition. ISSUE Whether the imposition of a franchise tax under section 2.09 of the Laguna Provincial Ordinance No. 01-92 violates the non-impairment clause of the Constitution. RULING: No. Although local governments do not have the inherent power to tax, such power may be delegated to them either by basic law or by statute. This is provided under Article X of the 1987 Constitution. The rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. The Local Government Code of 1991 repealed the Tax Code. It explicitly authorizes provincial governments, notwithstanding any exemption granted by any law, or other special laws, xxx (to) impose a tax on business enjoying a franchise. The phrase, in lieu of all taxes have to give way to the peremptory language of the Local Government Code.

31

ALLIED BANKING CORP. vs. QUEZON CITY GOVT, et. al.

G. R. NO. 154126, September 15, 2006 FACTS: The above-entitled case is a motion for clarification which shall be treated as a motion for reconsideration filed by petitioner. In light of the decision rendered by the Supreme Court where it held null and void the proviso of Section 3, Quezon City Ordinance No. 357 Series of 1995 which provides for the adoption of a method of assessment or appraisal of real property contrary to the Local Government Code and its Implementing Rules and Regulations and the Local Assessment Regulations No. 1-92, petitioner asks for a refund of the tax paid by it pursuant to the above questioned proviso. Petitioner contends that the return of the real property tax erroneously collected and paid is a necessary consequence of the Supreme Courts decision finding that the proviso is invalid, hence, there is no need to claim for a refund with the Local Board of Assessment Appeals. ISSUE: Whether or not petitioner is automatically entitled to the payment of a tax refund. RULING: There is no doubt that petitioner is entitled to a refund of the taxes paid by it pursuant to the declared invalid proviso of the questioned ordinance. However, to automatically effect the refund or tax credit to petitioner or those similarly situated runs counter to the express provision of the Local Government Code. It bears stressing that entitlement to a tax refund does not necessarily call for the automatic payment of the sum claimed. The amount of the claim being a factual matter, it must still be proven in the normal course and in accordance with the administrative procedure for obtaining a refund of real property taxes, as provided under the Local Government Code. That is, the taxpayer must file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within two (2) years from the date the taxpayer is entitled to such reduction or adjustment. Hence, petitioners claim for refund must be pursued in accordance with the Local Government Code.

32

Digitel vs Province of Pangasinan

February 23, 2007 FACTS: The present petition stemmed from a Complaint for Mandamus, Collection of Sum of Money and Damages instituted by the Province of Pangasinan against Digital Telecommunications Philippines, Inc. Section 137 LGC withdrew any exemption from the payment of franchise tax by authorizing the LGUs to impose a franchise tax on businesses at a rate not exceeding 50% of 1% of the gross annual receipts of the business. Section 232 also authorizes the imposition of an ad valorem tax on real property by the LGUs within the Metropolitan Manila Area wherein the land, building, machinery and other improvement not thereinafter specifically exempted. Digitel was granted, under Provincial Ordinance No. 18-92, a provincial franchise to install, maintain and operate a telecommunications system within Pangasinan. Under the Sec 6 of the provincial franchise, the grantee is required to pay franchise and real property taxes. The Sangguniang Panlalawigan also enacted Provincial Tax Ordinance 1 (Real Property Tax Ordinance of 1992). Section 4, however, expanded the application of Sec. 6 of the provincial franchise of Digitel to include machineries and other improvements, not thereinafter exempted,. Provincial Tax Ordinance No 4 was then enacted. Sections 4, 5 and 6 positively imposed a franchise tax on businesses enjoying a franchise within the province of Pangasinan. Thereafter, Digitel was granted by RA 7678 a legislative franchise. Under its legislative franchise, particularly Sec. 5 thereof, petitioner DIGITEL became liable for the payment of a franchise tax as may be prescribed by law of all gross receipts of the telephone or other telecommunications businesses transacted under it by the grantee, as well as real property tax on its real estate, and buildings exclusive of this franchise. Later, the Province of Pangasinan found that Digitel had a franchise tax deficiency for the years of 1992, 1993 and 1994. In the interregnum, on 16 March 1995, Congress passed RA 7925, otherwise known as The Public Telecommunications Policy Act of the Philippines. Section 23 of this law entitled Equality of Treatment in the Telecommunications Industry, provided for the ipso facto application to any previously granted telecommunications franchises of any advantage, favor, privilege, exemption or immunity granted under existing franchises, or those still to be granted, to be accorded immediately and unconditionally to earlier grantees. Thereafter, Digitel opposed Pangasinans claim on the ground that prior to the approval of its legislative franchise, its operation of a telecommunications system was done under a Facilities Management Agreement it had previously executed with the DOTC. It clarified that since the facilities in Pangasinan are just part of the government owned facilities awarded to DIGITEL, not only did the DOTC retain ownership of said facilities, the latter likewise provided for the budget for) expenses under its allocation from the government; hence, all revenues generated from the operation of the facilities inured to the DOTC; and all the fees received by petitioner DIGITEL were purely for services rendered. Further, it argued that under its legislative franchise, the payment of a franchise tax to the BIR would be in lieu of all taxes on said franchise or the earnings therefrom. The Province of Pangasinan filed a Complaint for Mandamus, Collection of Sum of Money and Damages before Branch 68 of the RTC of Lingayen, Pangasinan. The trial court decided the Province. It ruled that Digitels legislative franchise does not work to exempt the latter from payment of provincial franchise and real property taxes. It ruled that provincial and legislative franchises are separate and distinct from each other. Moreover, it pointed out that LGH already withdrew any exemption granted to anyone. On the other hand, Digitel maintains that its legislative franchise being an earlier enactment, by virtue of Section 23 of Republic Act No. 7925, the ipso facto, immediate and unconditional application to it of the tax exemption found in the franchises of Globe, Smart and Bell. Stated simply, Section 23 of Republic Act No. 7925, in relation to the pertinent provisions of the legislative franchises of Globe, Smart and Bell, the national franchise tax for which Digitel is liable to pay shall be in lieu of any and all taxes of any kind, nature or description

33

levied, established or collected by any authority whatsoever, municipal, provincial, or national, from which the grantee is hereby expressly granted. Issue: WON Digitel is exempt from the payment of provincial franchise tax in view of Section 23 of RA 7925 in relation to the exemptions enjoyed by other telcos. Held: No: Prior to the enactment of its legislative franchise, Digitel did not enjoy and exemption from the payment of franchise and real property taxes. In fact the provincial franchise made Digitel liable for the payment of such taxes. The case at bar is actually not one of first impression. Indeed, as far back as 2001, this Court has had the occasion to rule against the claim for tax exemption under RA 7925. In the case of PLDT v. City of Davao, we already clarified the confusion brought about by the effect of Section 23 of Republic Act No. 7925 that the word exemption as used in the statute refers or pertains merely to an exemption from regulatory or reporting requirements of the DOTC or the NTC and not to the grantees tax liability. In said case, the Court ruled that Congress did not intend Section 23 to operate as a blanket tax exemption to all telcos. Moreover, tax exemptions must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. Moreover, it ruled that PLDTs theory will leave the Government with the burden of having to keep track of all granted telecommunications franchises, lest some companies be treated unequally. It is different if Congress enacts a law specifically granting uniform advantages, favor, privilege, exemption, or immunity to all telecommunications entities. R.A. No. 7925 is thus a legislative enactment designed to set the national policy on telecommunications and provide the structures to implement it to keep up with the technological advances in the industry and the needs of the public. The thrust of the law is to promote gradually the deregulation of the entry, pricing, and operations of all public telecommunications entities and thus promote a level playing field in the telecommunications industry. There is nothing in the language of 23 nor in the proceedings of both the House of Representatives and the Senate in enacting R.A. No. 7925 which shows that it contemplates the grant of tax exemptions to all telecommunications entities, including those whose exemptions had been withdrawn by the LGC. The issue is then settled, the Court has no recourse but to deny Digitels claim for exemption from payment of provincial franchise tax. The foregoing pronouncement notwithstanding, in view of the passage of RA 7716 abolishing the franchise tax imposed on telecommunications companies effective 1 January 1996 and in its place is imposed a 10% VAT, the inlieu-of-all-taxes clause/provision in the legislative franchises of Globe, Smart and Bell, among others, has now become functus officio, made inoperative for lack of a franchise tax. Therefore, taking into consideration the above, from 1 January 1996, Digitel ceased to be liable for national franchise tax and in its stead is imposed a 10% VAT in accordance with Section 108 of the Tax Code. Issue: WON Digitel is exempt from payment of real estate tax under its legislative franchise. Held: Yes. Pertinent Provision: SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay x x x. Owing to the phrase exclusive of this franchise, petitioner DIGITEL stands firm in its position that it is equally exempt from the payment of real property tax. It maintains that said phrase found in Section 5 qualifies or delimits the scope of its liability respecting real property tax that real property tax should only be imposed on its assets that are actually, directly and exclusively used in the conduct of its business pursuant to its franchise. According to the Province, however, the phrase exclusive of this franchise in the legislative franchise of Digitel did not specifically or categorically express that such franchise grant intended to
34

provide privilege to the extent of impliedly repealing RA 7160. Thus, the question is, whether or not petitioner DIGITELs real properties located within the territorial jurisdiction of respondent Province of Pangasinan are exempt from real property taxes by virtue of Section 5 of Republic Act No. 7678. We rule in the affirmative. However, it is with the caveat that such exemption solely applies to those real properties actually, directly and exclusively used by the grantee in its franchise. The present issue actually boils down to a dispute between the inherent taxing power of Congress and the delegated authority to tax of the local government borne by the 1987 Constitution. In the PLDT v. City of Davao, we already sustained the power of Congress to grant exemptions over and above the power of the local governments delegated taxing authority notwithstanding the source of such power. Had Congress intended to tax each and every real property of Digitel, regardless of whether or not it is used in the business or operation of its franchise, it would not have incorporated a qualifying phrase, which such manifestation admittedly is. And, to our minds, the issue in this case no longer dwells on whether Congress has the power to exempt Digitels properties from realty taxes by its enactment of RA 7678 which contains the phrase exclusive of this franchise, in the face of the mandate of the Local Government Code. The more pertinent issue to consider is whether or not, by passing Ra7678, Congress intended to exempt Digitels real properties actually, directly and exclusively used by the grantee in its franchise. The fact that Republic Act No. 7678 was a later piece of legislation can be taken to mean that Congress, knowing fully well that the Local Government Code had already withdrawn exemptions from real property taxes, chose to restore such immunity even to a limited degree. In view of the unequivocal intent of Congress to exempt from real property tax those real properties actually, directly and exclusively used by petitioner DIGITEL in the pursuit of its franchise, respondent Province of Pangasinan can only levy real property tax on the remaining real properties of the grantee located within its territorial jurisdiction not part of the above-stated classification. Said exemption, however, merely applies from the time of the effectivity of petitioner DIGITELs legislative franchise and not a moment sooner. In fine, petitioner DIGITEL is found accountable to respondent Province of Pangasinan for the following tax liabilities: 1) as to provincial franchise tax, from 13 November 1992 until actually paid; and 2) as to real property tax, for the period starting from 13 November 1992 until 28 December 1992, it shall be imposed only on the lands and buildings of petitioner DIGITEL located within the subject jurisdiction; for the period commencing from 29 December 1992 until 16 February 1994, in addition to the lands and buildings aforementioned, it shall similarly be imposed on machineries and other improvements; and, by virtue of the National Franchise of petitioner DIGITEL or Republic Act No. 7678, in accordance with the Courts ruling in the abovementioned Bayantel case, from the date of effectivity on 17 February 1994 until the present, it shall be imposed only on real properties NOT actually, directly and exclusively used in the franchise of petitioner DIGITEL. In addition to the foregoing summary, pertinent provisions of law respecting interests, penalties and surcharges shall also be made to apply to herein subject tax liabilities.

35

Fels Energy vs Province of Batangas

February 16, 2007 FACTS: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement, was for a period of five years. Article 10 states that NPC shall be responsible for the payment of taxes. (other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit fees and other similar fees and charges. Polar Energy then assigned its rights under the Agreement to Fels despite NPCs initial opposition. FELS received an assessment of real property taxes on the power barges from Provincial Assessor Lauro C. Andaya of Batangas City. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of the Provincial Assessor. NPC filed a petition with the LBAA. The LBAA ordered Fels to pay the real estate taxes. The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real property for taxation purposes because they are installed at a specific location with a character of permanency. The LBAA also pointed out that the owner of the bargesFELS, a private corporationis the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time. Fels appealed to the CBAA. The CBAA reversed and ruled that the power barges belong to NPC; since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. Upon MR, the CBAA reversed itself. ISSUE: WON the petitioner may be assessed real property taxes HELD: Yes. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. [48] Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed. We find no reason to depart from this rule in this case. In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation. Moreover, Article 415 (9) of the New Civil Code provides that *d+docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. Petitioners maintain nevertheless that the power barges are exempt from real estate
36

tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation, and transmission of electric power. We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement: OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity. It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5, Article 5 of the Agreement provides: OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7. It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being contrary to law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and conditions. Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and the entity that would seek to be.

37