1

1axat|on 1
Genera| r|nc|p|es
I. Concept, Nature and Character|st|cs of 1axat|on and 1axes
A. Def|n|t|on of 1axat|on: power lnherenL ln every soverelgn SLaLe Lo lmpose a charge or burden upon
persons, properLles, or rlghLs Lo ralse revenues for Lhe use and supporL of Lhe governmenL Lo enable
lL Lo dlscharge lLs approprlaLe funcLlons

CCC v. Co[uangco: Moneys ralsed by operaLlon of law for Lhe supporL of Lhe governmenL or for Lhe
dlscharge of lLs obllgaLlons

1. CCC vs Con[uangco (2001)-8lSnA8
CGG v. Co[uangco
lacLs:
Shares of sLock ln Lhe unlLed CoconuL lanLers 8ank (uC8), reglsLered ln Lhe of alleged 1mllllon
coconuL farmers, Lhe so-called CoconuL lndusLry lnvesLmenL lund Companles (Clll companles)
and Lduardo Co[uangco !r. (8espondenL) were sequesLered by Lhe CCC.
When a 8oard 8esoluLlon calllng for a sLockholders meeLlng for Lhe purpose elecLlng Lhe board
of dlrecLors of uC8 was approved, Lhe quesLlon was ralsed on who should voLe for Lhe
sequesLered shares, wheLher lL should be Lhe reglsLered owners or CCC.
o Ceneral 8ule: 1he rlghL Lo voLe sequesLered shares of sLock ln Lhe names of prlvaLe
lndlvlduals or enLlLles and alleged Lo have been acqulred wlLh lll-goLLen wealLh shall be
exerclsed by Lhe reglsLered owners.
Cne excepLlon Lo Lhls rule ls lf Lhe sequesLered shares were acqulred wlLh publlc
funds.
1he money used Lo purchase Lhe sequesLered uC8 shares come from Lhe CoconuL Consumer
SLablllzaLlon lund (CCSl), oLherwlse known as CoconuL levy funds.

lssue: WheLher Lhe CoconuL levy funds are publlc funds?

8ullng: ?es. 1he CoconuL levy funds saLlsfy Lhe general deflnlLlon of publlc funds because of Lhe
followlng reasons:
a) CoconuL levy funds are ralsed wlLh Lhe use of Lhe pollce and Laxlng powers of Lhe
SLaLe.
1axes
o Lnforced proporLlonal conLrlbuLlons from persons and properLles,
exacLed by Lhe SLaLe by vlrLue of lLs soverelgnLy for Lhe supporL of
Lhe governmenL and for all publlc needs.
o 3 elemenLs:
1) lL ls an enforced proporLlonal conLrlbuLlon from persons
and properLles,
2) lL ls lmposed by Lhe SLaLe by vlrLue of lLs soverelgnLy, and
3) lL ls levled for Lhe supporL of Lhe governmenL.
1he CoconuL levy funds fall squarely lnLo Lhese elemenLs:
1) 1hey were generaLed by vlrLue of sLaLuLory enacLmenLs
lmposed on Lhe coconuL farmers requlrlng Lhe paymenL of
prescrlbed amounLs.
2
u276 creaLed Lhe CoconuL Consumer SLablllzaLlon
lund (CCSl),
u961 and u1468 were amendaLory laws whlch
clarlfled coco levles.
2) 1he coconuL levles lmposed pursuanL Lo Lhe laws enacLed
by Lhe proper leglslaLlve auLhorlLles of Lhe SLaLe.
3) 1hey were clearly lmposed for a publlc purpose - Lo
advance Lhe governmenL's avowed pollcy of proLecLlng Lhe
coconuL lndusLry.
1axaLlon ls done noL merely Lo ralse revenues Lo supporL Lhe governmenL,
buL also Lo provlde means for Lhe rehablllLaLlon and Lhe sLablllzaLlon of a
LhreaLened lndusLry, whlch ls so affecLed wlLh publlc lnLeresL as Lo be wlLhln
Lhe pollce power of Lhe SLaLe.
b) 1hey are levles lmposed by Lhe SLaLe for Lhe beneflL of Lhe coconuL lndusLry and lLs
farmers.
c) 8espondenLs have [udlclally admlLLed LhaL Lhe sequesLered shares were purchased
wlLh publlc funds.
d) 1he Commlsslon on AudlL (CCA) revlews Lhe use of coconuL levy funds.
e) 1he 8ureau of lnLernal 8evenue (8l8), wlLh Lhe acqulescence of prlvaLe respondenLs,
has LreaLed Lhem as publlc funds.
1he very laws governlng Lhe coconuL levles recognlze Lhelr characLer

8. L|feb|ood 1heory: Government cannot and must not be estopped from co||ect|on of taxes as |t |s
the ||feb|ood of nat|on. It |s needed for government agenc|es to cont|nue to operate. State
effects |ts funct|on for we|fare of |ts const|tuents.
CIk v. C1A (1992)
1. Cl8 vs C1A (1994)-8CM8ALLS
uocLrlne: 1axes are Lhe llfeblood of Lhe naLlon Lhrough whlch Lhe governmenL agencles conLlnue Lo
operaLe and wlLh whlch Lhe SLaLe effecLs lLs funcLlons for Lhe welfare of lLs consLlLuenLs.
lacLs:
ln Aug 26 1986, prlvaLe respondenL (Cl1?18uS1 8anklng Corp) flled a clalm for refund wlLh 8l8 ln
Lhe amounL of 19,971,743 represenLlng Lhe alleged aggregaLe of Lhe excess of lLs carrled over
LoLal quarLerly paymenLs over Lhe acLual lncome Lax due LuS carrled over wlLhholdlng Lax
paymenLs on governmenL securlLles and renLal lncome, as compuLed ln lLs flnal lncome Lax
reLurn for Lhe calendar year endlng uec 31 1983
2 days laLer, prlvaLe respondenL, ln order Lo lnLerrupL Lhe runnlng of Lhe prescrlpLlve perlod flled
a peLlLlon wlLh Lhe CourL of 1ax Appeals clalmlng refund of lLs lncome Lax overpaymenL for Lhe
years 1983, 1984 and 1983 ln Lhe LoLal amounL of 19,971,743
CSC asserLs LhaL Lhe mere avernmenL of prlvaLe respondenL LhaL lL lncurred loss ln 1983 does
noL lpso facLo merlL a refund and LhaL assumlng prlvaLe respondenL ls enLlLled of refund, Lhe
rlghL Lo clalm Lhe refund has prescrlbed wlLh respecL Lo lncome Lax paymenLs prlor Lo Aug 28,
1984 pursuanL Lo Sec 292 and 293 of Lhe naLlonal lnLernal 8evenue Code slnce lL only flled Lhe
peLlLlon on Aug 28, 1986.
3
eLlLloner could noL presenL any evldence by reason of repeaLed fallure of Lhe 1ax
CredlL/8efund ulvlslon of 8l8 Lo LransmlL records of Lhe case
Pence, peLlLloner flled a moLlon for suspendlng Lhe proceedlngs 8u1 CourL of 1ax appeals
denled lLs moLlon
Lower courL ordered LhaL refund be granLed Lo Cl1?18uS1 whlch ls based on Lhe flndlngs of Lhe
CourL of 1ax Appeals:
1. WlLhholdlng Laxes was esLabllshed and Lhe auLhenLlclLy of whlch was noL dlspuLed
noL conLroverLed
2. no evldence was presenLed whlch could dlspuLe Lhe correcLness of Lhe lncome Lax
reLurn flled by ClLyLrusL
3. no deflclency assessmenL was lssued by peLlLloner
4. 1here was an audlL reporL submlLLed by 8l8 recommendlng Lax refund
MoLlon for reconslderaLlon was flled by Lhe eLlLloner alleglng LhaL ClLyLrusL had an ouLsLandlng
deflclency lncome Laxes whlch Lhey only came Lo know laLer
CourL of 1ax of Appeals denled Lhe moLlon for reconslderaLlon by reason LhaL Lhe ouLsLandlng
deflclency was noL ralsed ln Lhe pleadlngs
eLlLlon for 8evlew was flled by Lhe peLlLloner wlLh CA buL CA afflrms lower courLs [udgmenL
hence elevaLed Lhe case Lo SC argulng:
o CA erred ln afflrmlng Lhe granL of clalm for refund conslderlng LhaL ClLyLrusL falled Lo
prove and subsLanLlaLe lLs clalm for such refund and 8l8's flndlng of deflclency lncome
and buslness Lax llablllLles agalnsL Cl1?LrusL for Lhe year 1984 bars such paymenL
lssue: W/n prlvaLe respondenL ls enLlLled of refund?
8ullng: CA's declslon ls seL aslde and remanded Lhe case Lo CourL of 1ax appeals for furLher proceedlngs
and approprlaLe acLlons
1he facLs show LhaL desplLe Lhe fllllng of Lhe peLlLlon ln Lhe CourL of 1ax Appeals, Lhe 1ax 8efund
ulvlslon of Lhe 8l8 sLlll conLlnued Lo acL admlnlsLraLlvely on Lhe clalm of refund lnsLead of [usL
forwardlng Lhe case Lo Lhe CourL of 1ax Appeals as ordered. Pence, 8l8 represenLed by Cl8 was
denled lLs day ln courL by reason of Lhe mlsLake/negllgence of lLs offlclals and employees.
SC emphaslzed Lhe flrmly seLLled rule of law LhaL Lhe CovernmenL ls noL bound by Lhe errors
commlLLed by lLs agenL (offlclals and employees) Pence, Lhe CovernmenL cannoL and musL noL
be esLopped by Lhe neglecL of lLs agenLs parLlcularly ln Lhe maLLers lnvolvlng Laxes.
o 1AxLS are Lhe LllL8LCCu of Lhe naLlon Lhrough whlch Lhe governmenL agencles
conLlnue Lo operaLe and wlLh whlch Lhe SLaLe effecLs lLs funcLlons for Lhe welfare of lLs
consLlLuenLs
o 1he errors of cerLaln offlcers/agenLs of Lhe governmenL should never be allowed Lo
[eopardlze Lhe CovernmenL's flnanclal poslLlon
CourL of 1ax Appeals erred ln denylng peLlLloner's moLlon for reconslderaLlon alleglng Lhe
exlsLence of Lhe deflclency lncome and buslness Lax assessmenL agalnsL ClLyLrusL.
Pence, Lo award such refund desplLe Lhe exlsLence of LhaL deflclency assessmenL ls an absurdlLy
and a polarlLy ln concepLual effecLs. rlvaLe respondenL cannoL be enLlLled Lo refund Lhe same
Llme be llable for Lax deflclency assessmenL for Lhe same year.
CIk v. Cebu ort|and Cement
Cl8 vs Cebu orLlanL Cemend Company (1987)-CLL1C
IAC1S:
4
8y vlrLue of a declslon of Lhe C1A, as modlfled on appeal by Lhe Supreme CourL, Lhe Cl8 was ordered Lo
refund Lo Cebu orLland CemenL Company Lhe amounL of 339,408.98, represenLlng overpaymenLs of
ad valorem Laxes on cemenL produced and sold by lL. When respondenL moved for a wrlL of execuLlon,
peLlLloner opposed on Lhe ground LhaL Lhe prlvaLe respondenL had an ouLsLandlng sales Lax llablllLy Lo
whlch Lhe [udgmenL debL had already been credlLed. ln facL, lL was sLressed, Lhere was sLlll a balance
owlng on Lhe sales Laxes ln Lhe amounL of 4,789,279.83 plus 28 surcharge. 1he C1A granLed Lhe Cl8's
moLlon.
1he Cl8 clalms LhaL Lhe refund should be charged agalnsL Lhe Lax deflclency of Lhe prlvaLe respondenL on
Lhe sales of cemenL under SecLlon 186 of Lhe 1ax Code. Pls poslLlon ls LhaL cemenL ls a manufacLured
and noL a mlneral producL and Lherefore noL exempL from sales Laxes. 1he peLlLloner also denles LhaL
Lhe sales Lax assessmenLs have already prescrlbed because Lhe prescrlpLlve perlod should be counLed
from Lhe flllng of Lhe sales Lax reLurns, whlch had noL yeL been done by Lhe prlvaLe respondenL.
Meanwhlle, Lhe prlvaLe respondenL dlsclalms llablllLy for Lhe sales Laxes, on Lhe ground LhaL cemenL ls
noL a manufacLured producL buL a mlneral producL. As such, lL was exempLed from sales Laxes. Also, Lhe
alleged sales Lax deflclency could noL as yeL be enforced agalnsL lL because Lhe Lax assessmenL was noL
yeL flnal, Lhe same belng sLlll under proLesL and sLlll Lo be deflnlLely resolved on Lhe merlLs. 8esldes, Lhe
assessmenL had already prescrlbed, noL havlng been made wlLhln Lhe reglemenLary flve- year perlod
from Lhe flllng of Lhe Lax reLurns.
ISSUL: WheLher or noL sales Lax was properly lmposed upon prlvaLe respondenL.
nLLD: ?es, because cemenL has always been consldered a manufacLured producL and noL a mlneral
producL. 1hls maLLer was exLenslvely dlscussed and caLegorlcally resolved ln Commlssloner of lnLernal
8evenue v. 8epubllc CemenL CorporaLlon, declded on AugusL 10, 1983, sLaLlng LhaL cemenL qua cemenL
was never consldered as a mlneral producL wlLhln Lhe meanlng of SecLlon 246 of Lhe 1ax Code,
noLwlLhsLandlng LhaL aL leasL 80 of lLs componenLs are mlnerals, for Lhe slmple reason LhaL cemenL ls
Lhe producL of a manufacLurlng process and ls no longer Lhe mlneral producL conLemplaLed ln Lhe 1ax
Code (l.e., mlnerals sub[ecLed Lo slmple LreaLmenLs) for Lhe purpose of lmposlng Lhe ad valorem Lax.
1he argumenL LhaL Lhe assessmenL cannoL as yeL be enforced because lL ls sLlll belng conLesLed loses
slghL of Lhe urgency of Lhe need Lo collecL Laxes as "Lhe llfeblood of Lhe governmenL." lf Lhe paymenL of
Laxes could be posLponed by slmply quesLlonlng Lhelr valldlLy, Lhe machlnery of Lhe sLaLe would grlnd Lo
a halL and all governmenL funcLlons would be paralyzed
keyes v. A|manzor (1991)
8eyes vs Almazor (1991)-lL8nAnuLZ
lacLs
3 8eyeses owns land
Lhey leased lL as dwelllng slLes, LenanLs paylng less Lhan 300
LaLer 8A 6339 was enacLed, prohlblLlng for one year from lLs effecLlvlLy an lncrease ln monLhly
renLals of dwelllng unlLs where such renL do noL exceed 300 buL allowlng Lo lncrease ln renL by
noL more Lhan 10 LhereafLer.
8espondenL ClLy Assessor of Manlla re-classlfled and reassessed Lhe value of Lhe sub[ecL
properLles based on Lhe schedule of markeL values duly revlewed by Lhe SecreLary of llnance.
1he revlslon, as expecLed, enLalled an lncrease ln Lhe correspondlng Lax raLes prompLlng
peLlLloners Lo flle a Memorandum of ulsagreemenL wlLh Lhe 8oard of 1ax AssessmenL Appeals.
1hey averred LhaL Lhe reassessmenLs made were "excesslve, unwarranLed, lnequlLable,
conflscaLory and unconsLlLuLlonal" conslderlng LhaL Lhe Laxes lmposed upon Lhem greaLly
exceeded Lhe annual lncome derlved from Lhelr properLles. 1hey argued LhaL Lhe lncome
approach should have been used ln deLermlnlng Lhe land values lnsLead of Lhe comparable sales
approach whlch Lhe ClLy Assessor adopLed.
3

lssue: W/n 8espondenL ClLy Assessor excesslvely Laxed peLlLloners? ?es
Peld: boLh Lhe "Comparable Sales Approach" and Lhe "lncome Approach" are generally accepLable
meLhods of appralsal for LaxaLlon purposes. Powever, lL ls conceded LhaL Lhe proprleLy of one as agalnsL
Lhe oLher would of course depend on several facLors. Pence, lL has been sLressed LhaL Lhe assessors, ln
flndlng Lhe value of Lhe properLy, have Lo conslder all Lhe clrcumsLances and elemenLs of value and musL
exerclse a prudenL dlscreLlon ln reachlng concluslons.
Laxes are Lhe llfeblood of Lhe governmenL and so should be collecLed wlLhouL unnecessary hlndrance.
Powever, such collecLlon should be made ln accordance wlLh law as any arblLrarlness wlll negaLe Lhe
very reason for governmenL lLself lL ls Lherefore necessary Lo reconclle Lhe apparenLly confllcLlng
lnLeresLs of Lhe auLhorlLles and Lhe Laxpayers so LhaL Lhe real purpose of LaxaLlons, whlch ls Lhe
promoLlon of Lhe common good, may be achleved.
ln Lhls case, respondenL Assessor excesslvely re-assessed eLlLloner's properLy. SC ordered Lhe 8oard of
AssessmenL Lo make new assessmenL.
2. hll CuaranLy Co vs Cl8 (1963)-lC81LS
Doctr|ne: 1he power Lo Lax ls an aLLrlbuLe of soverelgnLy.
lL ls a power emanaLlng from necesslLy.
necessary burden Lo preserve Lhe SLaLe's soverelgnLy
Means Lo glve Lhe clLlzenry an army Lo reslsL an aggresslon, a navy Lo defend lLs shores from
lnvaslon, a corps of clvll servanLs Lo serve, publlc lmprovemenL deslgned for Lhe en[oymenL of
Lhe clLlzenry and Lhose whlch come wlLhln Lhe SLaLe's LerrlLory, and faclllLles and proLecLlon
whlch a governmenL ls supposed Lo provlde.
Iacts:
hll. CuaranLy ls a domesLlc lnsurance corporaLlon
LnLered lnLo relnsurance conLracLs, on varlous daLes, wlLh forelgn lnsurance companles noL
dolng buslness ln Lhe hlllpplnes
o relnsurance = forelgn companles Lo assume a porLlon of Lhe llablllLy on an equlvalenL
porLlon of Lhe rlsks lnsured.
o ln conslderaLlon of Lhe relnsurance, hll. CuaranLy agreed Lo cede Lo Lhe forelgn
relnsurers a porLlon of Lhe premlums on lnsurance lL has orlglnally underwrlLLen ln Lhe
hlllpplnes
hll. CuaranLy ceded Lhe ff amounLs Lo forelgn relnsurers:
o 1933: 832k
o 1934: 721k
o Lhese premlums were excluded by hll. CuaranLy from lLs gross lncome
! when lL flled lLs lncome Lax reLurns of Lhe sald years
8u1: Cl8 lncluded premlums ln lLs assessmenL
hll. CuaranLy proLesLed Lhe assessmenL
o ConLended: premlums ceded Lo forelgners noL dolng buslness ln Lhe hlllpplnes
o Pence noL sub[ecL Lo wlLhholdlng Lax

Issue: WCn hll. CuaranLy ls llable for wlLhholdlng Lax on Lhe premlum lL owes Lo forelgn relnsurance
companles?
ne|d: es
6
1ransacLlons or acLlvlLles LhaL consLlLuLed Lhe underLaklng Lo relnsure hlllpplne CuaranLy Co.,
lnc. agalnsL loses arlslng from Lhe orlglnal lnsurances ln Lhe hlllpplnes were performed ln Lhe
hlllpplnes
llablllLy of Lhe forelgn relnsurers commenced slmulLaneously wlLh Lhe llablllLy of hlllpplne
CuaranLy Co., lnc. under Lhe orlglnal lnsurances
SecLlon 24 of Lhe 1ax Code sub[ecLs forelgn corporaLlons Lo Lax on Lhelr lncome from sources
wlLhln Lhe hlllpplnes
sources" has been lnLerpreLed as Lhe acLlvlLy, properLy or servlce glvlng rlse Lo Lhe lncome
1he relnsurance premlums were lncome creaLed from Lhe underLaklng of Lhe forelgn
relnsurance companles Lo relnsure hlllpplne CuaranLy Co., lnc., agalnsL llablllLy for loss under
orlglnal lnsurances
underLaklng Look place ln Lhe hlllpplnes. Pence, sub[ecL Lo corporaLe lncome Lax
Conslderlng LhaL Lhe relnsurance premlums ln quesLlon were afforded proLecLlon by Lhe
governmenL and Lhe reclplenL forelgn relnsurers exerclsed rlghLs and prlvlleges guaranLeed by
our laws, such relnsurance premlums and relnsurers should share Lhe burden of malnLalnlng Lhe
sLaLe.
Cl8 vs Algue (1988)-kunC
Iacts:
Algue lnc. ls a domesLlc corp engaged ln englneerlng, consLrucLlon and oLher allled acLlvlLles
Cn !an. 14, 1963, Lhe corp recelved a leLLer from Lhe Cl8 regardlng lLs dellnquency lncome Laxes
from 1938-1939, amLg Lo 83,183.83
A leLLer of proLesL or reconslderaLlon was flled by Algue lnc on !an 18
Cn March 12, a warranL of dlsLralnL and levy was presenLed Lo Algue lnc. Lhru lLs counsel, ALLy.
Cuevara, who refused Lo recelve lL on Lhe ground of Lhe pendlng proLesL
Slnce Lhe proLesL was noL found on Lhe records, a flle copy from Lhe corp was produced and glven
Lo 8l8 AgenL 8eyes, who deferred servlce of Lhe warranL
Cn Aprll 7, ALLy. Cuevara was lnformed LhaL Lhe 8l8 was noL Laklng any acLlon on Lhe proLesL and lL
was only Lhen LhaL he accepLed Lhe warranL of dlsLralnL and levy earller soughL Lo be served
Cn Aprll 23, Algue flled a peLlLlon for revlew of Lhe declslon of Lhe Cl8 wlLh Lhe CourL of 1ax
Appeals
Cl8 conLenLlons:
- Lhe clalmed deducLlon of 73,000.00 was properly dlsallowed because lL was noL an ordlnary
reasonable or necessary buslness expense
- paymenLs are flcLlLlous because mosL of Lhe payees are members of Lhe same famlly ln conLrol of
Algue and LhaL Lhere ls noL enough subsLanLlaLlon of such paymenLs
C1A: 73k had been leglLlmaLely pald by Algue lnc. for acLual servlces rendered ln Lhe form of
promoLlonal fees. 1hese were collecLed by Lhe ayees for Lhelr work ln Lhe creaLlon of Lhe vegeLable Cll
lnvesLmenL CorporaLlon of Lhe hlllpplnes and lLs subsequenL purchase of Lhe properLles of Lhe
hlllpplne Sugar LsLaLe uevelopmenL Company.
Issue: W/n Lhe CollecLor of lnLernal 8evenue correcLly dlsallowed Lhe 73,000.00 deducLlon clalmed by
Algue as leglLlmaLe buslness expenses ln lLs lncome Lax reLurns
ku||ng:
1axes are Lhe llfeblood of Lhe governmenL and so should be collecLed wlLhouL unnecessary
hlndrance, made ln accordance wlLh law.
8A 1123: Lhe appeal may be made wlLhln LhlrLy days afLer recelpL of Lhe declslon or rullng
challenged
uurlng Lhe lnLervenlng perlod, Lhe warranL was premaLure and could Lherefore noL be served.
7
Crlglnally, Cl8 clalmed LhaL Lhe 73k promoLlonal fees Lo be personal holdlng company lncome, buL
laLer on conformed Lo Lhe declslon of C1A
1here ls no dlspuLe LhaL Lhe payees duly reporLed Lhelr respecLlve shares of Lhe fees ln Lhelr
lncome Lax reLurns and pald Lhe correspondlng Laxes Lhereon. C1A also found, afLer examlnlng Lhe
evldence, LhaL no dlsLrlbuLlon of dlvldends was lnvolved
Cl8 suggesLs a Lax dodge, an aLLempL Lo evade a leglLlmaLe assessmenL by lnvolvlng an lmaglnary
deducLlon
Algue lnc. was a famlly corporaLlon where sLrlcL buslness procedures were noL applled and
lmmedlaLe lssuance of recelpLs was noL requlred. aL Lhe end of Lhe year, when Lhe books were Lo be
closed, each payee made an accounLlng of all of Lhe fees recelved by hlm or her, Lo make up Lhe LoLal of
73,000.00. 1hls arrangemenL was undersLandable ln vlew of Lhe close relaLlonshlp among Lhe persons
ln Lhe famlly corporaLlon
1he amounL of Lhe promoLlonal fees was noL excesslve. 1he LoLal commlsslon pald by Lhe
hlllpplne Sugar LsLaLe uevelopmenL Co. Lo Algue lnc. was 123k. AfLer deducLlng Lhe sald fees, Algue
sLlll had a balance of 30,000.00 as clear proflL from Lhe LransacLlon. 1he amounL of 73,000.00 was 60
of Lhe LoLal commlsslon. 1hls was a reasonable proporLlon, conslderlng LhaL lL was Lhe payees who dld
pracLlcally everyLhlng, from Lhe formaLlon of Lhe vegeLable Cll lnvesLmenL CorporaLlon Lo Lhe acLual
purchase by lL of Lhe Sugar LsLaLe properLles.
Sec. 30 of Lhe 1ax Code: allowed deducLlons ln Lhe neL lncome - xpeoses - All tbe otJlooty ooJ
oecessoty expeoses polJ ot locotteJ Jotloq tbe toxoble yeot lo cottyloq oo ooy ttoJe ot bosloess,
locloJloq o teosoooble ollowooce fot solotles ot otbet compeosotloo fot petsoool setvlces octoolly
teoJeteJ xxx
Lhe burden ls on Lhe Laxpayer Lo prove Lhe valldlLy of Lhe clalmed deducLlon
ln Lhls case, Algue lnc. has proved LhaL Lhe paymenL of Lhe fees was necessary and reasonable ln
Lhe llghL of Lhe efforLs exerLed by Lhe payees ln lnduclng lnvesLors and promlnenL buslnessmen Lo
venLure ln an experlmenLal enLerprlse and lnvolve Lhemselves ln a new buslness requlrlng mllllons of
pesos.
1axes are whaL we pay for clvlllzaLlon socleLy. WlLhouL Laxes, Lhe governmenL would be paralyzed
for lack of Lhe moLlve power Lo acLlvaLe and operaLe lL. Pence, desplLe Lhe naLural relucLance Lo
surrender parL of one's hard earned lncome Lo Lhe Laxlng auLhorlLles, every person who ls able Lo musL
conLrlbuLe hls share ln Lhe runnlng of Lhe governmenL. 1he governmenL for lLs parL, ls expecLed Lo
respond ln Lhe form of Langlble and lnLanglble beneflLs lnLended Lo lmprove Lhe llves of Lhe people and
enhance Lhelr moral and maLerlal values
1axaLlon musL be exerclsed reasonably and ln accordance wlLh Lhe prescrlbed procedure. lf lL ls
noL, Lhen Lhe Laxpayer has a rlghL Lo complaln and Lhe courLs wlll Lhen come Lo hls succor
Algue lnc.'s appeal from Lhe declslon of Lhe Cl8 was flled on Llme wlLh Lhe C1A ln accordance wlLh 8ep.
AcL no. 1123. And we also flnd LhaL Lhe clalmed deducLlon by Algue lnc. was permlLLed under Lhe
lnLernal 8evenue Code and should Lherefore noL have been dlsallowed by Lhe Cl8
C. Inherent ower of the State
1. LuLz vs AraneLa (1933)-MACSuM8CL
Doctr|ne: lL ls lnherenL ln Lhe power Lo Lax LhaL a sLaLe be free Lo selecL Lhe sub[ecLs of LaxaLlon, and lL
has been repeaLedly held LhaL "lnequallLles whlch resulL from a slngllng ouL of one parLlcular class for
LaxaLlon, or exempLlon lnfrlnge no consLlLuLlonal llmlLaLlon".
Iacts: lalnLlff, WalLer LuLz, ln hls capaclLy as !udlclal AdmlnlsLraLor of Lhe lnLesLaLe LsLaLe of AnLonlo
!ayme Ledesma, seeks Lo recover from Lhe CollecLor of lnLernal 8evenue Lhe sum of 14,666.40 pald by
Lhe esLaLe as Laxes, under secLlon 3 of Lhe AcL, for Lhe crop years 1948-1949 and 1949-1930, alleglng
8
LhaL such Lax ls unconsLlLuLlonal and vold, belng levled for Lhe ald and supporL of Lhe sugar lndusLry
excluslvely, whlch ln plalnLlff's oplnlon ls noL a publlc purpose for whlch a Lax may be consLlLuLlonally
levled.
romulgaLed ln 1940, Lhe law ln quesLlon opens (secLlon 1) wlLh a declaraLlon of emergency, due Lo Lhe
LhreaL Lo our lndusLry by Lhe lmmlnenL lmposlLlon of exporL Laxes upon sugar as provlded ln Lhe 1ydlngs-
Mcuuffe AcL, and Lhe "evenLual loss of lLs preferenLlal poslLlon ln Lhe unlLed SLaLes markeL", wherefore,
Lhe naLlonal pollcy was expressed "Lo obLaln a read[usLmenL of Lhe beneflLs derlved from Lhe sugar
lndusLry by Lhe componenL elemenLs Lhereof" and "Lo sLablllze Lhe sugar lndusLry so as Lo prepare lL for
Lhe evenLuallLy of Lhe loss of lLs preferenLlal poslLlon ln Lhe unlLed SLaLes markeL and Lhe lmposlLlon of
Lhe exporL Laxes."
ln secLlon 2, CommonwealLh AcL 367 provldes for an lncrease of Lhe exlsLlng Lax on Lhe manufacLure of
sugar, on a graduaLed basls, on each plcul of sugar manufacLured, whlle secLlon 3 levles on owners or
persons ln conLrol of lands devoLed Lo Lhe culLlvaLlon of sugar cane and ceded Lo oLhers for a
conslderaLlon, on lease or oLherwlse -
a Lax equlvalenL Lo Lhe dlfference beLween Lhe money value of Lhe renLal or conslderaLlon collecLed and
Lhe amounL represenLlng 12 per cenLum of Lhe assessed value of such land.
Accordlng Lo secLlon 6 of Lhe law -
SLC. 6. All collecLlons made under Lhls AcL shall accrue Lo a speclal fund ln Lhe hlllpplne 1reasury, Lo be
known as Lhe 'Sugar Ad[usLmenL and SLablllzaLlon lund,' and shall be pald ouL only for any or all of Lhe
followlng purposes or Lo aLLaln any or all of Lhe followlng ob[ecLlves, as may be provlded by law.
llrsL, Lo place Lhe sugar lndusLry ln a poslLlon Lo malnLaln lLself, desplLe Lhe gradual loss of Lhe
prefernLlal poslLlon of Lhe hlllpplne sugar ln Lhe unlLed SLaLes markeL, and ulLlmaLely Lo lnsure lLs
conLlnued exlsLence noLwlLhsLandlng Lhe loss of LhaL markeL and Lhe consequenL necesslLy of meeLlng
compeLlLlon ln Lhe free markeLs of Lhe world,
Second, Lo read[usL Lhe beneflLs derlved from Lhe sugar lndusLry by all of Lhe componenL elemenLs
Lhereof - Lhe mlll, Lhe landowner, Lhe planLer of Lhe sugar cane, and Lhe laborers ln Lhe facLory and ln
Lhe fleld - so LhaL all mlghL conLlnue proflLably Lo engage Lhereln,lawphl1.neL
1hlrd, Lo llmlL Lhe producLlon of sugar Lo areas more economlcally sulLed Lo Lhe producLlon Lhereof, and
lourLh, Lo afford labor employed ln Lhe lndusLry a llvlng wage and Lo lmprove Lhelr llvlng and worklng
condlLlons: rovlded, 1haL Lhe resldenL of Lhe hlllpplnes may, unLll Lhe ad[ourmenL of Lhe nexL regular
sesslon of Lhe naLlonal Assembly, make Lhe necessary dlsbursemenLs from Lhe fund hereln creaLed (1)
for Lhe esLabllshmenL and operaLlon of sugar experlmenL sLaLlon or sLaLlons and Lhe underLaklng of
researchers (a) Lo lncrease Lhe recoverles of Lhe cenLrlfugal sugar facLorles wlLh Lhe vlew of reduclng
manufacLurlng cosLs, (b) Lo produce and propagaLe hlgher yleldlng varleLles of sugar cane more
adapLable Lo dlfferenL dlsLrlcL condlLlons ln Lhe hlllpplnes, (c) Lo lower Lhe cosLs of ralslng sugar cane,
(d) Lo lmprove Lhe buylng quallLy of denaLured alcohol from molasses for moLor fuel, (e) Lo deLermlne
Lhe posslblllLy of uLlllzlng Lhe oLher by-producLs of Lhe lndusLry, (f) Lo deLermlne whaL crop or crops are
sulLable for roLaLlon and for Lhe uLlllzaLlon of excess cane lands, and (g) on oLher problems Lhe soluLlon
of whlch would help rehablllLaLe and sLablllze Lhe lndusLry, and (2) for Lhe lmprovemenL of llvlng and
worklng condlLlons ln sugar mllls and sugar planLaLlons, auLhorlzlng hlm Lo organlze Lhe necessary
agency or agencles Lo Lake charge of Lhe expendlLure and allocaLlon of sald funds Lo carry ouL Lhe
purpose herelnbefore enumeraLed, and, llkewlse, auLhorlzlng Lhe dlsbursemenL from Lhe fund hereln
creaLed of Lhe necessary amounL or amounLs needed for salarles, wages, Lravelllng expenses,
equlpmenL, and oLher sundry expenses of sald agency or agencles.
Issue: W/n CA 367, belng levled for Lhe ald and supporL of Lhe sugar lndusLry excluslvely, ls noL for a
publlc purpose?
ne|d: no.
9
1he baslc defecL ln Lhe plalnLlff's poslLlon ls hls assumpLlon LhaL Lhe Lax provlded for ln CommonwealLh
AcL no. 367 ls a pure exerclse of Lhe Laxlng power. Analysls of Lhe AcL, and parLlcularly of secLlon 6
(hereLofore quoLed ln full), wlll show LhaL Lhe Lax ls levled wlLh a regulaLory purpose, Lo provlde means
for Lhe rehablllLaLlon and sLablllzaLlon of Lhe LhreaLened sugar lndusLry. ln oLher words, Lhe acL ls
prlmarlly an exerclse of Lhe pollce power.
1hls CourL can Lake [udlclal noLlce of Lhe facL LhaL sugar producLlon ls one of Lhe greaL lndusLrles of our
naLlon, sugar occupylng a leadlng poslLlon among lLs exporL producLs, LhaL lL glves employmenL Lo
Lhousands of laborers ln flelds and facLorles, LhaL lL ls a greaL source of Lhe sLaLe's wealLh, ls one of Lhe
lmporLanL sources of forelgn exchange needed by our governmenL, and ls Lhus plvoLal ln Lhe plans of a
reglme commlLLed Lo a pollcy of currency sLablllLy. lLs promoLlon, proLecLlon and advancemenL,
Lherefore redounds greaLly Lo Lhe general welfare. Pence lL was compeLenL for Lhe leglslaLure Lo flnd
LhaL Lhe general welfare demanded LhaL Lhe sugar lndusLry should be sLablllzed ln Lurn, and ln Lhe wlde
fleld of lLs pollce power, Lhe lawmaklng body could provlde LhaL Lhe dlsLrlbuLlon of beneflLs Lherefrom
be read[usLed among lLs componenLs Lo enable lL Lo reslsL Lhe added sLraln of Lhe lncrease ln Laxes LhaL
lL had Lo susLaln
As sLaLed ln !ohnson vs. SLaLe ex rel. Marey, wlLh reference Lo Lhe clLrus lndusLry ln llorlda -
1he proLecLlon of a large lndusLry consLlLuLlng one of Lhe greaL sources of Lhe sLaLe's wealLh and
Lherefore dlrecLly or lndlrecLly affecLlng Lhe welfare of so greaL a porLlon of Lhe populaLlon of Lhe SLaLe
ls affecLed Lo such an exLenL by publlc lnLeresLs as Lo be wlLhln Lhe pollce power of Lhe soverelgn.
Cnce lL ls conceded, as lL musL, LhaL Lhe proLecLlon and promoLlon of Lhe sugar lndusLry ls a maLLer of
publlc concern, lL follows LhaL Lhe LeglslaLure may deLermlne wlLhln reasonable bounds whaL ls
necessary for lLs proLecLlon and expedlenL for lLs promoLlon. Pere, Lhe leglslaLlve dlscreLlon musL be
allowed fully play, sub[ecL only Lo Lhe LesL of reasonableness, and lL ls noL conLended LhaL Lhe means
provlded ln secLlon 6 of Lhe law (above quoLed) bear no relaLlon Lo Lhe ob[ecLlve pursued or are
oppresslve ln characLer. lf ob[ecLlve and meLhods are allke consLlLuLlonally valld, no reason ls seen why
Lhe sLaLe may noL levy Laxes Lo ralse funds for Lhelr prosecuLlon and aLLalnmenL. 1axaLlon may be made
Lhe lmplemenL of Lhe sLaLe's pollce power.
1haL Lhe Lax Lo be levled should burden Lhe sugar producers Lhemselves can hardly be a ground of
complalnL, lndeed, lL appears raLlonal LhaL Lhe Lax be obLalned preclsely from Lhose who are Lo be
beneflLed from Lhe expendlLure of Lhe funds derlved from lL. AL any raLe, lL ls lnherenL ln Lhe power Lo
Lax LhaL a sLaLe be free Lo selecL Lhe sub[ecLs of LaxaLlon, and lL has been repeaLedly held LhaL
"lnequallLles whlch resulL from a slngllng ouL of one parLlcular class for LaxaLlon, or exempLlon lnfrlnge
Lven from Lhe sLandpolnL LhaL Lhe AcL ls a pure Lax measure, lL cannoL be sald LhaL Lhe devoLlon of Lax
money Lo experlmenLal sLaLlons Lo seek lncrease of efflclency ln sugar producLlon, uLlllzaLlon of by-
producLs and soluLlon of allled problems, as well as Lo Lhe lmprovemenLs of llvlng and worklng
condlLlons ln sugar mllls or planLaLlons, wlLhouL any parL of such money belng channeled dlrecLly Lo
prlvaLe persons, consLlLuLes expendlLure of Lax money for prlvaLe purposes.
2. Comez vs alomar (1968)-MAnALA?SA?
u|ck Iacts: lL ls clalmed LhaL Lhe AnLl-18 SLamp Law ls vlolaLlve of Lhe Lqual roLecLlon clause because
lL consLlLuLes mall users lnLo a class for Lhe purpose of Lax whlle leavlng unLaxed Lhe resL of Lhe
populaLlon (and LhaL even among posLal paLrons Lhe sLaLuLe dlscrlmlnaLorlly granLs exempLlons) !"#$%
noL unconsLlLuLlonal. LeglslaLure has Lhe lnherenL power Lo selecL Lhe sub[ecLs of LaxaLlon and Lo granL
exempLlons. 1he classlflcaLlon ls based on (1) ablllLy Lo pay (2) Ln[oymenL of a prlvllege (3)
AdmlnlsLraLlve convenlence.

Deta||ed Iacts:
10
1. Cn SepLember l3, 1963 Lhe peLlLloner 8en[amln . Comez malled a leLLer aL Lhe posL offlce ln
ampanga. 8ecause Lhls leLLer, addressed Lo a cerLaln AgusLln Aqulno of 1014 uagohoy SLreeL,
Slngalong, Manlla dld noL bear Lhe speclal anLl-18 sLamp requlred, lL was reLurned & unsenL.
2. eLlLloner broughL sulL for declaraLory rellef ln Lhe Cll ampanga, Lo LesL Lhe consLlLuLlonallLy of
Lhe sLaLuLe, as well as Lhe lmplemenLlng admlnlsLraLlve orders lssued, conLendlng LhaL lL vlolaLes
Lhe (1) equal proLecLlon clause of Lhe ConsLlLuLlon as well as Lhe rule of (2) unlformlLy and
equallLy of LaxaLlon.
3. LCWL8 CCu81: ueclared lL unconsLlLuLlonal.
4. 1hls appeal puLs ln lssue Lhe consLlLuLlonallLy of 8epubllc AcL 1633, as amended by 8epubllc AcL
2631, whlch provldes: 1o help ralse funds for Lhe hlllpplne 1uberculosls SocleLy, Lhe ulrecLor
of osLs shall order for Lhe perlod from AugusL 19 Lo SepLember 30 every year Lhe prlnLlng and
lssue of seml-posLal sLamps of dlfferenL denomlnaLlons wlLh face value showlng Lhe regular
posLage charge plus Lhe addlLlonal amounL of flve cenLavos for Lhe sald purpose, and durlng Lhe
sald perlod, no mall maLLer shall be accepLed ln Lhe malls unless lL bears such seml-posLal
sLamps: rovlded, 1haL no such addlLlonal charge of 3 cenLavos shall be lmposed on
newspapers. 1he addlLlonal proceeds reallzed from Lhe sale of Lhe seml-posLal sLamps shall
consLlLuLe a speclal fund and be deposlLed wlLh Lhe naLlonal 1reasury Lo be expended by Lhe
hlllpplne 1uberculosls SocleLy ln carrylng ouL lLs noble work Lo prevenL and eradlcaLe
Luberculosls.
3. 1he respondenL osLmasLer Ceneral, ln lmplemenLaLlon of Lhe law, LhereafLer lssued four (4)
admlnlsLraLlve orders wlLh Lhe approval of Lhe respondenL SecreLary of ubllc Works and
CommunlcaLlons.

Issue: WCn Lhe 8A and Lhe 4 admlnlsLraLlve orders vlolaLes equal proLecLlon as well as Lhe rule of
unlformlLy and equallLy of LaxaLlon?

ne|d: nC
1. kA1IC - LeglslaLure has Lhe lnherenL power Lo selecL Lhe sub[ecLs of LaxaLlon and Lo granL
exempLlons. 1hls power has apLly been descrlbed as "of wlde range and flexlblllLy". 1he reason for
Lhls ls LhaL LradlLlonally, closslflcotloo bos beeo o Jevlce fot flttloq tox ptoqtoms to locol oeeJs ooJ
osoqes lo otJet to ocbleve oo epoltoble Jlsttlbotloo of tbe tox botJeo. 1he classlflcaLlon ls based on
conslderaLlons of admlnlsLraLlve convenlence. lor lL ls now a seLLled prlnclple of law LhaL
conslderaLlon of pracLlcal admlnlsLraLlve convenlence and cosL ln Lhe admlnlsLraLlon of Lax laws
afford adequaLe ground for lmposlng a Lax on a well recognlzed and deflned class.
2. ALICA1ICN: ln Lhe case of Lhe anLl-18 sLamps, Lhe slngle mosL lmporLanL and lnfluenLlal
conslderaLlon LhaL led Lhe leglslaLure Lo selecL mall users as sub[ecLs of Lhe Lax ls Lhe relaLlve ease
and convenlence of collecLlng Lhe Lax Lhrough Lhe posL offlces. 1he small amounL of 3 cenLavos does
noL [usLlfy Lhe greaL expense and lnconvenlence of collecLlng Lhrough Lhe regular means of
collecLlon. Cn Lhe oLher hand, by placlng Lhe duLy of collecLlon on posLal auLhorlLles Lhe Lax was
made almosL self-enforclng, wlLh as llLLle cosL and lnconvenlence.
3. nor ls Lhe rule of unlformlLy and equallLy of LaxaLlon lnfrlnged by Lhe lmposlLlon of a flaL raLe raLher
Lhan a graduaLed Lax. A Lax need noL be measured by Lhe welghL of Lhe mall or Lhe exLenL of Lhe
servlce rendered. We have sald LhaL conslderaLlons of admlnlsLraLlve convenlence and cosL afford an
adequaLe ground for classlflcaLlon. 1he same conslderaLlons may lnduce Lhe leglslaLure Lo lmpose a
flaL Lax LhaL ln effecL ls a charge for Lhe LransacLlon, operaLlng equally on all persons wlLhln Lhe class
regardless of Lhe amounL.

D. Attr|butes of a Sound 1axat|on System: IA1
11
llscal Adequacy
AdmlnlsLraLlve leaslblllLy
1heoreLlcal !usLlce

1. Chavez vs Cngpln (1990)-L8LZ
IAC1S:
SecLlon 21 of resldenLlal uecree no. 464 provldes LhaL every flve years sLarLlng calendar year 1978,
Lhere shall be a provlnclal or clLy general revlslon of real properLy assessmenLs. 1he revlsed
assessmenL shall be Lhe basls for Lhe compuLaLlon of real properLy Laxes for Lhe flve succeedlng years.
Cn Lhe sLrengLh of Lhe aforemenLloned law, Lhe general revlslon of assessmenLs was compleLed ln
1984. Powever, LxecuLlve Crder no. 1019 was lssued, whlch deferred Lhe collecLlon of real properLy
Laxes based on Lhe 1984 values Lo !anuary 1,1988 lnsLead of !anuary 1, 1983.Cn november 23, 1986,
resldenL Corazon Aqulno lssued LxecuLlve order no.73. lL sLaLes LhaL beglnnlng !anuary 1, 1987, Lhe
1984 assessmenLs shall be Lhe basls of Lhe real properLy collecLlon. 1hus, lL effecLlvely repealed
LxecuLlve Crder no. 1019.lranclsco Chavez, a Laxpayer and a land-owner, quesLloned Lhe
consLlLuLlonallLy of LxecuLlve Crder no. 73. Pe alleges LhaL lL wlll brlng unreasonable lncrease ln real
properLy Laxes. ln facL, accordlng Lo hlm, Lhe appllcaLlon of Lhe assalled order wlll cause an excesslve
lncrease ln real properLy Laxes by 100 Lo 400 on lmprovemenLs and up Lo 100 on land.
ISSUL:WheLher or noL LxecuLlve Crder no. 73 lmposes unreasonable lncrease ln real properLy Laxes,
Lhus, should be declared unconsLlLuLlonal.
nLLD:
1he aLLack on LxecuLlve Crder no. 73 has no legal basls as Lhe general revlslon of assessmenLs ls a
conLlnulng process mandaLed by SecLlon 21 of resldenLlal uecreeno. 464. lf aL all, lL ls resldenLlal
uecree no. 464 whlch should be challenged as consLlLuLlonally lnflrm. Powever, Chavez falled Lo ralse
any ob[ecLlon agalnsL sald decree.WlLhouL LxecuLlve Crder no. 73, Lhe basls for collecLlon of real
properLy Laxes wlll sLlll be Lhe 1978 revlslon of properLy values.
Certa|n|y, to cont|nue co||ect|ng rea| property taxes based on va|uat|ons arr|ved at severa| years ago,
|n d|sregard of the |ncreases |n the va|ue of rea| propert|es that have occurred s|nce then, |s not |n
consonance w|th a sound tax system. I|sca| adequacy, wh|ch |s one of the character|st|cs of a sound
tax system, requ|res that sources of revenues must be adequate to meet government expend|tures
and the|r var|at|ons.

2. ulaz vs Sec of llnance (2011)-1A8AC
lAC1S:
eLlLloners 8enaLo v. ulaz and Aurora Ma. l. 1lmbol (peLlLloners) flled Lhls peLlLlon for declaraLory rellef
assalllng Lhe valldlLy of Lhe lmpendlng lmposlLlon of value-added Lax (vA1) by Lhe 8ureau of lnLernal
8evenue (8l8) on Lhe collecLlons of Lollway operaLors. CourL LreaLed Lhe case as one of prohlblLlon.
eLlLloners hold Lhe vlew LhaL Congress dld noL, when lL enacLed Lhe nl8C, lnLend Lo lnclude Loll fees
wlLhln Lhe meanlng of "sale of servlces" LhaL are sub[ecL Lo vA1, LhaL a Loll fee ls a "user's Lax," noL a sale
of servlces, LhaL Lo lmpose vA1 on Loll fees would amounL Lo a Lax on publlc servlce, and LhaL, slnce vA1
was never facLored lnLo Lhe formula for compuLlng Loll fees, lLs lmposlLlon would vlolaLe Lhe non-
lmpalrmenL clause of Lhe consLlLuLlon. 1he governmenL avers LhaL Lhe nl8C lmposes vA1 on all klnds of
servlces of franchlse granLees, lncludlng Lollway operaLlons, LhaL Lhe CourL should seek Lhe meanlng and
lnLenL of Lhe law from Lhe words used ln Lhe sLaLuLe, and LhaL Lhe lmposlLlon of vA1 on Lollway
operaLlons has been Lhe sub[ecL as early as 2003 of several 8l8 rullngs and clrculars.1he governmenL
12
also argues LhaL peLlLloners have no rlghL Lo lnvoke Lhe non-lmpalrmenL of conLracLs clause slnce Lhey
clearly have no personal lnLeresL ln exlsLlng Loll operaLlng agreemenLs (1CAs) beLween Lhe governmenL
and Lollway operaLors. AL any raLe, Lhe non-lmpalrmenL clause cannoL llmlL Lhe SLaLe's soverelgn Laxlng
power whlch ls generally read lnLo conLracLs.
lSSuL:
May Loll fees collecLed by Lollway operaLors be sub[ecLed Lo vA1 (Are Lollway operaLlons a franchlse
and/or a servlce LhaL ls sub[ecL Lo vA1)?
PLLu:
When a Lollway operaLor Lakes a Loll fee from a moLorlsL, Lhe fee ls ln effecL for Lhe laLLer's use of Lhe
Lollway faclllLles over whlch Lhe operaLor en[oys prlvaLe proprleLary rlghLs LhaL lLs conLracL and Lhe law
recognlze. ln Lhls sense, Lhe Lollway operaLor ls no dlfferenL from Lhe servlce provlders under SecLlon108
who allow oLhers Lo use Lhelr properLles or faclllLles for a fee. 1ollway operaLors are franchlse granLees
and Lhey do noL belong Lo excepLlons LhaL SecLlon 119 spares from Lhe paymenL of vA1. 1he word
"franchlse" broadly covers governmenL granLs of a speclal rlghL Lo do an acL or serles of acLs of publlc
concern. 1ollway operaLors are, owlng Lo Lhe naLure and ob[ecL of Lhelr buslness, "franchlse granLees."
1he consLrucLlon, operaLlon, and malnLenance of Loll faclllLles on publlc lmprovemenLs are acLlvlLles of
publlc consequence LhaL necessarlly requlre a speclal granL of auLhorlLy from Lhe sLaLe. A Lax ls lmposed
under Lhe Laxlng power of Lhe governmenL prlnclpally for Lhe purpose of ralslng revenues Lo fund publlc
expendlLures. 1oll fees, on Lhe oLher hand, are collecLed by prlvaLe Lollway operaLors as relmbursemenL
for Lhe cosLs and expenses lncurred ln Lhe consLrucLlon, malnLenance and operaLlon of Lhe Lollways, as
well as Lo assure Lhem a reasonable margln of lncome. AlLhough Loll fees are charged for Lhe use of
publlc faclllLles, Lherefore, Lhey are noL governmenL exacLlons LhaL can be properly LreaLed as a Lax.
1axes may be lmposed only by Lhe governmenL under lLs soverelgn auLhorlLy, Loll fees may be
demanded by elLher Lhe governmenL or prlvaLe lndlvlduals or enLlLles as an aLLrlbuLe of ownershlp.

ll. ClasslflcaLlons and ulsLlncLlons
A. Llcense/8egulaLory lees
1ax Llcense lee
Source Lxerclse of 1axlng ower LmanaLe from sLaLe's pollce
power
urpose 8alse 8evenue 8egulaLlon
Cb[ecL ersons, properLy, prlvllege 8lghL Lo exerclse a prlvllege
AmounL no llmlL Cnly necessary Lo carry ouL
regulaLlon

1. Lsso SLandard LsLern vs Cl8 (1989)-8lSnA8
Lsso Standard Lastern, Inc. v. Comm|ss|oner of Interna| kevenue
Source: hLLp://www.scrlbd.com/doc/33063386/ulgesLed-Cases-ln-1axaLlon-l-arL-1
lacLs:
ln C1A Case no. 1231, Lsso SLandard LasLern lnc. deducLed from lLs gross lncome for 1930, as
parL of lLs ordlnary and necessary buslness expenses Lhe amounL lL had spenL for drllllng and
exploraLlon of lLs peLroleum concesslons. 1hls clalm was dlsallowed by Lhe Commlssloner of
lnLernal 8evenue (Cl8) on Lhe ground LhaL Lhe expenses should be caplLallzed and mlghL be
wrlLLen off only as a loss when a dry hole" should resulL.
13
Lsso Lhen flled an amended reLurn where lL asked for Lhe refund of 323,279 by reason of lLs
abandonmenL as dry holes of several of lLs oll wells. Also clalmed as ordlnary and necessary
expenses ln Lhe same reLurn was Lhe amounL of 340,822.04, represenLlng margln fees lL had
pald Lo Lhe CenLral 8ank on lLs proflL remlLLances Lo lLs new ?ork head offlce.
Cn AugusL 3, 1964, Lhe Cl8 granLed a Lax credlL of 221,0333 only, dlsallowlng Lhe clalmed
deducLlon for Lhe margln fees pald on Lhe ground LhaL Lhe margln fees pald Lo Lhe CenLral 8ank
could noL be consldered Laxes or allowed deducLlble buslness expenses.
Lsso appealed Lo Lhe CourL of 1ax Appeals for Lhe refund of Lhe margln fees lL had earller pald
conLendlng LhaL Lhe margln fees were deducLlble from gross lncome elLher as a Lax or as an
ordlnary and necessary buslness expense. Powever, Lsso's appeal was denled.

lssues:
(1) WheLher or noL Lhe margln fees are Laxes?
(2) WheLher or noL Lhe margln fees are necessary and ordlnary expenses?

8ullng:
(1) no.
A Lax ls levled Lo provlde revenue for governmenL operaLlons, whlle Lhe proceeds of Lhe
margln fees are applled Lo sLrengLhen our counLry's lnLernaLlonal reserves.
1he margln fee was lmposed by Lhe SLaLe ln Lhe exerclse of lLs pollce and noL Lhe power
of LaxaLlon.
(2) no.
Crdlnarlly, an expense wlll be consldered necessary" where Lhe expendlLure ls
approprlaLe and helpful ln Lhe developmenL of Lhe Laxpayer's buslness.
lL ls ordlnary" when lL connoLes a paymenL whlch ls normal ln relaLlon Lo Lhe buslness
of Lhe Laxpayer and Lhe surroundlng clrcumsLances.
Slnce Lhe margln fees ln quesLlon were lncurred for Lhe remlLLance of funds Lo Lsso's Pead Cfflce ln new
?ork, whlch ls a separaLe and dlsLlncL lncome Laxpayer from Lhe branch ln Lhe hlllpplnes, for lLs dlsposal
abroad, lL can never be sald Lherefore LhaL Lhe margln fees were approprlaLe and helpful ln Lhe
developmenL of Lsso's buslness ln Lhe hlllpplnes excluslvely or were lncurred for Lhe purposes proper
Lo Lhe conducL of Lhe affalrs of Lsso's branch ln Lhe hlllpplnes excluslvely or for Lhe purpose of reallzlng
a proflL or of mlnlmlzlng a loss ln Lhe hlllpplnes excluslvely.

2. rogresslve uev'L Corp vs CC (1989)-8CM8ALLS
uocLlne: Llcense lee(lmposed ln Lhe exerclse of pollce power for purpose of regulaLlon) vs 1Ax(lmposed
ln Lhe exerclse of Laxlng power for Lhe purpose of ralslng revenue)
lacLs:
ln 1969 ClLy Councll of CC adopLed an Crdlnance known as MarkeL Code of CC and was
subsequenLly amended ln 1972 whlch provldes an lmposlLlon of a supervlslon fee- 3 Lax on
gross recelpLs on renLals or lease of space ln prlvaLely-owned publlc markeLs ln CC and fallure Lo
pay ln 3 consecuLlve monLhs, Lhe ClLy shall revoke Lhe permlL granLed Lo operaLe.
ln 1972, peLlLloner rogresslve uevelopmenL CorporaLlon (owner and operaLor of larmers
MarkeL and Shopplng CenLer ln CC) flled a peLlLlon for prohlblLlon wlLh prellmlnary ln[uncLlon
agalnsL respondenL on Lhe ground LhaL Lhe supervlslon fee or llcense Lax lmposed ls ln reallLy a
1Ax on lnCCML whlch Lhe respondenL should noL lmpose
14
o lor lL ls prohlblLed by Local AuLonomy Code whlch provldes LhaL no clLy, munlclpallLy or
munlclpal dlsLrlcL may levy or lmpose any Laxes on lncome of any klnd whaLsoever"
o AbsenL an express granL Lo lmpose such Lax by Lhe naLlonal governmenL
8espondenL malnLalns LhaL Lhe Lax on gross recelpLs ls nC1 a Lax on lncome
CSC also argued LhaL peLlLloner noL havlng pald Lhe supervlslon fee had no personallLy Lo
quesLlon and was esLopped from quesLlonlng lLs valldlLy. 1hey also argued LhaL Lhe Lax on gross
recelpLs was noL a Lax on lncome buL one lmposed for Lhe en[oymenL of Lhe prlvllege Lo engage
ln a parLlcular Lrade or buslness whlch was wlLhln Lhe power of respondenL Lo lmpose
Lower courL dlsmlssed Lhe peLlLlon rullng ln favor of Lhe respondenL hence Lhls peLlLlon for
revlew
lssue: W/n Lhe supervlslon fee ls a llcense fee or parLakes Lhe naLure of an lncome Lax?
8ullng: lL ls llcense Lax or fee for Lhe regulaLlon of Lhe buslness ln whlch Lhe peLlLloner ls engaged.
1ax Llcense lee
Applles Lo all klnds of exacLlons
of monles whlch become publlc
funds
1he lmposlLlon musL relaLe Lo an occupaLlon or acLlvlLy LhaL so
engages Lhe publlc lnLeresL ln healLh, morals, safeLy and
developmenL as Lo requlre regulaLlon for Lhe proLecLlon and
promoLlon of such publlc lnLeresL
1he lmposlLlon musL also bear a reasonable relaLlon Lo Lhe
probable expenses of regulaLlon, Laklng lnLo accounL noL only Lhe
cosLs of dlrecL regulaLlon buL also lLs lncldenLal consequences as
well.
A charge of a flxed sum whlch
bears no relaLlon aL all Lo Lhe
cosL of lnspecLlon and
regulaLlon
When an acLlvlLy, occupaLlon or professlon ls of such a characLer
LhaL lnspecLlon or supervlslon by publlc offlclals ls reasonably
necessary for Lhe safeguardlng and furLherance of publlc healLh,
morals and safeLy, or Lhe general welfare, Lhe leglslaLure may
provlde LhaL such lnspecLlon or supervlslon or oLher form of
regulaLlon shall be carrled ouL aL Lhe expense of Lhe persons
engaged ln such occupaLlon or performlng such acLlvlLy, and LhaL
no one shall engage ln Lhe occupaLlon or carry ouL Lhe acLlvlLy
unLll a fee or charge sufflclenL Lo cover Lhe cosL of Lhe lnspecLlon
or supervlslon has been pald.
lL ls lmposed ln Lhe exerclse of
Laxlng power and for Lhe
purposes of ralslng revenue
lL ls lmposed ln Lhe exerclse of pollce power for Lhe purpose of
regulaLlon
lf generaLlng revenue ls Lhe
prlmary purpose and regulaLlon
ls merely lncldenLal
8egulaLlon ls Lhe prlmary purpose and obLalnlng revenue
lncldenLal
1he larmers' MarkeL and Shopplng CenLer belng a publlc markeL requlred a llcense
lssued by Lhe respondenL ClLy and Lhe lssuance of whlch was done prlnclpally ln Lhe
exerclse of Lhe respondenL's pollce power.
1he operaLlon of a prlvaLely owned markeL was esLabllshed for Lhe rendlLlon of servlce
Lo Lhe general publlc hence warranLs close supervlslon and conLrol by Lhe respondenL
ClLy, for Lhe proLecLlon of Lhe healLh of Lhe publlc by lnsurlng Lhe malnLenance of
sanlLary and hyglenlc condlLlons ln Lhe markeL, compllance of all food sLuffs sold Lhereln
wlLh appllcable food and drug and relaLed sLandards, for Lhe prevenLlon of fraud and
oLher lmposlLlon upon Lhe buylng publlc.
13
LasLly, wlLh regard Lo peLlLloner's argumenL LhaL respondenL ls wlLhouL power Lo lmpose
a gross recelpLs Lax for revenue purposes absenL an express granL from Lhe naLlonal
governmenL. SC held LhaL as a general rule, Lhere musL be a sLaLuLory granL for a local
governmenL unlL Lo lmpose lawfully a gross recelpLs Lax, LhaL unlL noL havlng Lhe
lnherenL power of LaxaLlon 8u1 Lhe rule flnds no appllcaLlon ln Lhls case where whaL ls
lnvolved ls an exerclse of, prlnclpally, Lhe regulaLory power of Lhe respondenL ClLy and
where LhaL regulaLory power ls expressly accompanled by Lhe Laxlng power.


3. al vs Ldu (1988)-CLL1C
Iacts: 1he hlllpplne alrllnes ls engaged ln Lhe alr LransporLaLlon buslness under a leglslaLlve
franchlse, AcL 4271, whereln lL ls exempL from Lhe paymenL of Laxes. Cn Lhe sLrengLh of an oplnlon of
Lhe secreLary of [usLlce, AL was deLermlned noL Lo have been paylng moLor vehlcle reglsLraLlon fees
slnce 1936. 1he Land 1ransporLaLlon Commlssloner requlred all Lax exempL enLlLles, lncludlng AL, Lo
pay moLor vehlcle reglsLraLlon fees, AL proLesLed.
Issue: Are moLor vehlcle reglsLraLlon fees Laxes?
ku||ng:
lL ls posslble for an exacLlon Lo be boLh a Lax and a regulaLlon. Llcense fees and charges, looked Lo as a
source of revenue as well as a means of regulaLlon. 1he money collecLed under Lhe moLor vehlcle law ls
noL lnLended for Lhe expendlLures of Lhe moLor vehlcle offlce buL accrue Lo Lhe funds for Lhe
consLrucLlon and malnLenance of Lhe publlc roads, sLreeLs, and brldges. As Lhe fees are noL collecLed for
regulaLory purpose as an lncldenL Lo Lhe enforcemenL of regulaLlonal governlng operaLlon of moLor
vehlcles on publlc hlghways, buL Lo provlde revenue wlLh whlch Lhe governmenL ls Lo consLrucL and
malnLaln publlc hlghways for everyone's use, Lhey are Laxes, noL merely fees.

4. vlllegas vs Pul Chlong (1978)-lL8nAnuLZ
lacLs:
1he conLroverLed Crdlnance no. 6337 was passed by Lhe Munlclpal 8oard of Manlla on leb 22 1968 and
slgned by Mayor vlllegas, hereln peLlLloner.
ClLy Crdlnance no. 6337 ls enLlLlled:
An C8ulnAnCL MAklnC l1 unLAWluL lC8 An? L8SCn nC1 A Cl1lZLn Cl 1PL PlLllnLS 1C 8L
LMLC?Lu ln An? LACL Cl LMLC?MLn1 C8 1C 8L LnCACLu ln An? klnu Cl 18AuL, 8uSlnLSS C8
CCCuA1lCn Wl1Pln 1PL Cl1? Cl MAnlLA Wl1PCu1 ll8S1 SLCu8lnC Anu LMLC?MLn1 L8Ml1
l8CM 1PL MA?C8 Cl MAnlLA Anu lC8 C1PL8 u8CSLS
Sec. 1 of sald ordlnance prohlblLs allens from belng employed wlLhouL flrsL securlng an employmenL
permlL from Lhe Mayor.
rlvaLe respondenL Plu Chloln 1sal ao Po, employed ln Manlla flled a peLlLlon praylng for a resLralnlng
order Lo sLop Lhe sald ordlnance. Pul asserLs LhaL Lhe ordlnance ls dlscrlmlnaLyory and vlolaLlve of Lhe
rule of unlformlLy ln LaxaLlon.
Lower courL granLed Pul's peLlLlon and rendered Lhe ordlnance vold.
Pence, Lhls peLlLlon.
eLlLloner Mayor vlllegas argues LhaL Crdlnance no. 6337 cannoL be declared null and vold on Lhe
ground LhaL lL vlolaLed Lhe rule on unlformlLy of LaxaLlon because Lhe rule on unlformlLy of LaxaLlon
applles only Lo purely Lax or revenue measures and LhaL Crdlnance no. 6337 ls noL a Lax or revenue
16
measure buL ls an exerclse of Lhe pollce power of Lhe sLaLe, lL belng prlnclpally a regulaLory measure ln
naLure
W/n Lhe ordlnance ls a Lax or revenue measure? ?es
1he conLenLlon LhaL Crdlnance no. 6337 ls noL a purely Lax or revenue measure because lLs prlnclpal
purpose ls regulaLory ln naLure has no merlL. Whlle lL ls Lrue LhaL Lhe flrsL parL whlch requlres LhaL Lhe
allen shall secure an employmenL permlL from Lhe Mayor lnvolves Lhe exerclse of dlscreLlon and
[udgmenL ln Lhe processlng and approval or dlsapproval of appllcaLlons for employmenL permlLs and
Lherefore ls regulaLory ln characLer Lhe second parL whlch requlres Lhe paymenL of 30.00 as
employee's fee ls noL regulaLory buL a revenue measure.
1he 30.00 fee ls unreasonable noL only because lL ls excesslve buL because lL falls Lo conslder valld
subsLanLlal dlfferences ln slLuaLlon among lndlvldual allens who are requlred Lo pay lL.
1he ordlnance ln quesLlon vlolaLes Lhe due process of law and equal proLecLlon rule of Lhe ConsLlLuLlon.
1he declslon appealed from ls hereby afflrmed

3. Companla Ceneral de 1abacos vs ClLy of Manlla (1963)-lC81LS
Doctr|ne: "Lax" applles - generally speaklng - Lo all klnds of exacLlons whlch become publlc funds.
1he Lerm ls ofLen loosely used -lnclude levles for revenue as well as levles for regulaLory
purposes.
Llcense fees are commonly called Laxes.
Legally speaklng, however, llceose fee ls a legal concepL qulLe dlsLlncL from Lax,
Llcense ls lmposed ln Lhe exerclse of pollce power for purposes of regulaLlon
1ax ls lmposed under Lhe Laxlng power for Lhe purpose of ralslng revenues

Iacts:
Companla Ceneral de 1abacos (1abacalera) flled for Lax refund of 13k
o Alleged overpaymenL on wholesale and reLall of llquor
1abacalera's acLlon for refund ls based on Lhe Lheory LhaL:
o ln connecLlon wlLh lLs llpoot soles, lL should pay Lhe llcense fees prescrlbed by Crdlnance
no. 3338 (llcense) buL noL Lhe munlclpal sales Laxes lmposed by Crdlnances nos. 3634,
3301, and 3816,
o 1abacalera has pald Lhe sales Laxes of 13,208.00 - under Lhe Lhree ordlnances
menLloned
o 1abacalera overpaymenL made by mlsLake, and Lherefore refundable.
Slmply puL, 1abacalera belleves LhaL lL should noL pay lncome Laxes anymore as lL has pald
llcense fees/Lax
1abacalera furLher alleges LhaL Lhe Manlla ClLy 1reasurer wroLe Lo SCv AccounLlng llrm where
he sald LhaL 1abacalera need noL pay Lhe sales Laxes as lL has pald Lhe llcense fees


Issue: WCn 1he ClLy should refund Lhe sales Laxes Lo 1abacalera?

ne|d: NC.
llceose fee ls a legal concepL qulLe dlsLlncL from Lax,
17
Llcense fee ls lmposed ln Lhe exerclse of pollce power for purposes of regulaLlon
Sales Lax ls lmposed under Lhe Laxlng power for Lhe purpose of ralslng revenues
Crdlnance no. 3338 one LhaL prescrlbes munlclpal llcense fees
o prlvllege Lo engage ln Lhe buslness of selllng llquor or alcohollc beverages
o enacLed by Lhe Munlclpal 8oard of Manlla pursuanL Lo lLs charLer power Lo flx llcense
fees on, and regulaLe, Lhe sale of lnLoxlcaLlng llquors
1haL 1abacalera ls belng sub[ecLed Lo double LaxaLlon ls more apparenL Lhan real.
WhaL ls collecLed under Crdlnance no. 3338 ls a llcense fee for Lhe prlvllege of engaglng ln Lhe
sale of llquor
o noL anyone or anybody may freely engage, conslderlng LhaL Lhe sale of llquor
lndlscrlmlnaLely may endanger publlc healLh and morals

6. Amerlcan Mall Llnes vs ClLy of 8asllan (1961)-kunC
IAC1S:
Appellees are forelgn shlpplng companles llcensed Lo do buslness ln Lhe hlllpplnes, wlLh offlces ln
Manlla. 1helr vessels call aL 8asllan ClLy and anchor ln Lhe bay or channel wlLhln lLs LerrlLorlal waLers. As
Lhe clLy Lreasurer assessed and aLLempLed Lo collecL from Lhem Lhe anchorage fees prescrlbed ln Lhe
aforesald amendaLory ordlnance, Lhey flled Lhe presenL acLlon for ueclaraLory 8ellef Lo have Lhe courLs
deLermlne lLs valldlLy. upon Lhelr peLlLlon Lhe lower courL lssued a wrlL of prellmlnary ln[uncLlon
resLralnlng appellanLs from collecLlng or aLLempLlng Lo collecL from Lhem Lhe fees prescrlbed Lhereln.
AppellanL conLended LhaL, Lhrough lLs clLy councll, lL had auLhorlLy Lo enacL Lhe quesLloned ordlnance ln
Lhe exerclse of elLher lLs revenue-ralslng power or of lLs pollce power. 1he quesLlon Lo be resolved ls
wheLher Lhe ClLy of 8asllan has Lhe auLhorlLy Lo enacL Crdlnance 180 and Lo collecL Lhe anchorage fees
prescrlbed Lhereln.
ISSUL:ls Lhe ordlnance valld exerclse of Laxlng power of Lhe ClLy of 8asllan.
kULING:
under paragraph (a) sec. 14, 8.A. 288, lL ls clear LhaL Lhe ClLy of 8asllan may only levy and collecL Laxes
for general and speclal purposes ln accordance wlLh or as provlded by law, ln oLher words, Lhe clLy of
8asllan was noL granLed a blankeL power of LaxaLlon. 1he use of Lhe phrase "ln accordance wlLh law" -
whlch, ln our oplnlon, means Lhe same as "provlded by law" - clearly dlscloses Lhe leglslaLlve lnLenL Lo
llmlL Lhe Laxlng power of Lhe ClLy.
lL has been held LhaL Lhe power Lo regulaLe as an exerclse of pollce power does noL lnclude Lhe power Lo
lmpose fees for teveooe potposes. AppellanL clLy's own conLenLlon LhaL Lhe quesLloned ordlnance was
enacLed ln Lhe exerclse of lLs power of LaxaLlon, makes lL obvlous LhaL Lhe fees lmposed are noL merely
regulaLory.

7. Cerochl vs uCL (2007)-MACSuM8CL
Doctr|nes:
1he power Lo "regulaLe" means Lhe power Lo proLecL, fosLer, promoLe, preserve, and conLrol,
wlLh due regard for Lhe lnLeresLs, flrsL and foremosL, of Lhe publlc, Lhen of Lhe uLlllLy and of lLs
paLrons.
lf generaLlon of revenue ls Lhe prlmary purpose and regulaLlon ls merely lncldenLal, Lhe
lmposlLlon ls a Lax, buL lf regulaLlon ls Lhe prlmary purpose, Lhe facL LhaL revenue ls lncldenLally
ralsed does noL make Lhe lmposlLlon a Lax.

18
Iacts: eLlLloners 8omeo . Cerochl, kotolooq Nq 8oyoo (k8), and LnvlronmenLallsL Consumers
neLwork, lnc. (LCn) (peLlLloners), come before Lhls CourL ln Lhls orlglnal acLlon praylng LhaL SecLlon 34 of
8epubllc AcL (8A) 9136, oLherwlse known as Lhe LlecLrlc ower lndusLry 8eform AcL of 2001" (Ll8A),
lmposlng Lhe unlversal Charge, and 8ule 18 of Lhe 8ules and 8egulaLlons (l88) whlch seeks Lo lmplemenL
Lhe sald lmposlLlon, be declared unconsLlLuLlonal. eLlLloners also pray LhaL Lhe unlversal Charge
lmposed upon Lhe consumers be refunded and LhaL a prellmlnary ln[uncLlon and/or Lemporary
resLralnlng order (18C) be lssued dlrecLlng Lhe respondenLs Lo refraln from lmplemenLlng, charglng, and
collecLlng Lhe sald charge. 1he assalled provlslon of law reads:

SLC1lCn 34. uolvetsol cbotqe. - WlLhln one (1) year from Lhe effecLlvlLy of Lhls AcL, a
unlversal charge Lo be deLermlned, flxed and approved by Lhe L8C, shall be lmposed on
all elecLrlclLy end-users for Lhe followlng purposes:

(a) aymenL for Lhe sLranded debLs ln excess of Lhe amounL assumed by Lhe naLlonal
CovernmenL and sLranded conLracL cosLs of nC and as well as quallfled sLranded
conLracL cosLs of dlsLrlbuLlon uLlllLles resulLlng from Lhe resLrucLurlng of Lhe
lndusLry,

(b) Mlsslonary elecLrlflcaLlon,

(c) 1he equallzaLlon of Lhe Laxes and royalLles applled Lo lndlgenous or renewable
sources of energy vls-a-vls lmporLed energy fuels,

(d) An envlronmenLal charge equlvalenL Lo one-fourLh of one cenLavo per kllowaLL-hour
(0.0023/kWh), whlch shall accrue Lo an envlronmenLal fund Lo be used solely for
waLershed rehablllLaLlon and managemenL. Sald fund shall be managed by nC
under exlsLlng arrangemenLs, and

(e) A charge Lo accounL for all forms of cross-subsldles for a perlod noL exceedlng Lhree
(3) years.

1he unlversal charge shall be a non-bypassable charge whlch shall be passed on and
collecLed from all end-users on a monLhly basls by Lhe dlsLrlbuLlon uLlllLles. CollecLlons
by Lhe dlsLrlbuLlon uLlllLles and Lhe 18AnSCC ln any glven monLh shall be remlLLed Lo
Lhe SALM Corp. on or before Lhe flfLeenLh (13Lh) of Lhe succeedlng monLh, neL of any
amounL due Lo Lhe dlsLrlbuLlon uLlllLy. Any end-user or self-generaLlng enLlLy noL
connecLed Lo a dlsLrlbuLlon uLlllLy shall remlL lLs correspondlng unlversal charge dlrecLly
Lo Lhe 18AnSCC. 1he SALM Corp., as admlnlsLraLor of Lhe fund, shall creaLe a Speclal
1rusL lund whlch shall be dlsbursed only for Lhe purposes speclfled hereln ln an open
and LransparenL manner. All amounL collecLed for Lhe unlversal charge shall be
dlsLrlbuLed Lo Lhe respecLlve beneflclarles wlLhln a reasonable perlod Lo be provlded by
Lhe L8C.


Add|t|ona| Iacts:
!une 8, 2001: Congress enacLed Lhe Ll8A

!une 26, 2001: lL Look effecL.
19

Aprll 3 2002: 8espondenL naLlonal ower CorporaLlon-SLraLeglc ower uLlllLles Croup (nC-SuC) flled
wlLh respondenL Lnergy 8egulaLory Commlsslon (L8C) a peLlLlon for Lhe avallmenL from Lhe unlversal
Charge of lLs share for Mlsslonary LlecLrlflcaLlon, dockeLed as L8C Case no. 2002-163.

May 7, 2002: nC flled anoLher peLlLlon wlLh L8C, dockeLed as L8C Case no. 2002-194, praylng LhaL Lhe
proposed share from Lhe unlversal Charge for Lhe LnvlronmenLal charge of 0.0023 per kllowaLL-hour
(/kWh), or a LoLal of 119,488,847.39, be approved for wlLhdrawal from Lhe Speclal
1rusL lund (S1l) managed by respondenL ower SecLor AsseLs and
LlablllLles ManagemenL Croup (SALM) for Lhe rehablllLaLlon and managemenL of waLershed areas.

uecember 20, 2002: L8C lssued an Crder ln L8C Case no. 2002-163 provlslonally approvlng Lhe
compuLed amounL of0.0168/kWh as Lhe share of Lhe nC-SuC from Lhe unlversal Charge for
Mlsslonary LlecLrlflcaLlon and auLhorlzlng Lhe naLlonal 1ransmlsslon CorporaLlon (18AnSCC) and
ulsLrlbuLlon uLlllLles Lo collecL Lhe same from lLs end-users on a monLhly basls.

!une 26, 2003: L8C rendered lLs ueclslon (for L8C Case no. 2002-163) modlfylng lLs Crder of uecember
20, 2000 holdlng LhaL an addlLlonal amounL of 0.0203 per kllowaLL-hour should be added Lo
Lhe 0.0168 per kllowaLL-hour provlslonally auLhorlzed by Lhe Commlsslon ln Lhe sald Crder.
Accordlngly, a LoLal amounL of0.0373 per kllowaLL-hour ls hereby A8CvLu for wlLhdrawal from Lhe
Speclal 1rusL lund managed by SALM as lLs share from Lhe unlversal Charge for Mlsslonary
LlecLrlflcaLlon (uC-ML) effecLlve on Lhe followlng bllllng cycles:

(a) !une 26-!uly 23, 2003 for naLlonal 1ransmlsslon CorporaLlon (18AnSCC),
and
(b) !uly 2003 for ulsLrlbuLlon uLlllLles (uus).

Cn AugusL 13, 2003, nC-SuC flled a MoLlon for 8econslderaLlon asklng Lhe L8C, among oLhers, Lo seL
aslde Lhe above-menLloned ueclslon, whlch Lhe L8C granLed ln lLs Crder daLed CcLober 7, 2003.

Meanwhlle, on Aprll 2, 2003, L8C declded L8C Case no. 2002-194, auLhorlzlng Lhe nC Lo draw up
Lo 70,000,000.00 from SALM for lLs 2003 WaLershed 8ehablllLaLlon 8udgeL sub[ecL Lo Lhe avallablllLy
of funds for Lhe LnvlronmenLal lund componenL of Lhe unlversal Charge.

Cn Lhe basls of Lhe sald L8C declslons, respondenL anay LlecLrlc Company, lnc. (LCC)
charged peLlLloner 8omeo . Cerochl and all oLher end-users wlLh Lhe unlversal Charge as reflecLed ln
Lhelr respecLlve elecLrlc bllls sLarLlng from Lhe monLh of !uly 2003.

lSSuL: W/n Lhe unlversal Charge lmposed under Sec. 34 of Lhe Ll8A ls a Lax?

letltlooets cooteotloo.
o eLlLloners conLend LhaL Lhe unlversal Charge has Lhe characLerlsLlcs of a Lax and ls
collecLed Lo fund Lhe operaLlons of Lhe nC. 1hey argue LhaL Lhe cases lnvoked by Lhe
respondenLs clearly show Lhe regulaLory purpose of Lhe charges lmposed Lhereln, whlch
ls noL so ln Lhe case aL bench. ln sald cases, Lhe respecLlve funds
[20]
were creaLed ln
order Lo balance and sLablllze Lhe prlces of oll and sugar, and Lo acL as buffer Lo
counLeracL Lhe changes and ad[usLmenLs ln prlces, peso devaluaLlon, and oLher varlables
20
whlch cannoL be adequaLely and Llmely monlLored by Lhe leglslaLure. 1hus, Lhere was a
need Lo delegaLe powers Lo admlnlsLraLlve bodles.
[21]
eLlLloners poslL LhaL Lhe
unlversal Charge ls lmposed noL for a slmllar purpose.
kespooJeots cooteotloos.
o respondenL SALM Lhrough Lhe Cfflce of Lhe CovernmenL CorporaLe Counsel (CCCC)
conLends LhaL unllke a Lax whlch ls lmposed Lo provlde lncome for publlc purposes, such
as supporL of Lhe governmenL, admlnlsLraLlon of Lhe law, or paymenL of publlc
expenses, Lhe assalled unlversal Charge ls levled for a speclflc regulaLory purpose, whlch
ls Lo ensure Lhe vlablllLy of Lhe counLry's elecLrlc power lndusLry. 1hus, lL ls exacLed by
Lhe SLaLe ln Lhe exerclse of lLs lnherenL pollce power. Cn Lhls premlse, SALM submlLs
LhaL Lhere ls no undue delegaLlon of leglslaLlve power Lo Lhe L8C slnce Lhe laLLer merely
exerclses a llmlLed auLhorlLy or dlscreLlon as Lo Lhe execuLlon and lmplemenLaLlon of Lhe
provlslons of Lhe Ll8A.
o 8espondenLs ueparLmenL of Lnergy (uCL), L8C, and nC, Lhrough Lhe Cfflce of Lhe
SollclLor Ceneral (CSC), share Lhe same vlew LhaL Lhe unlversal Charge ls noL a Lax
because lL ls levled for a speclflc regulaLory purpose, whlch ls Lo ensure Lhe vlablllLy of
Lhe counLry's elecLrlc power lndusLry, and ls, Lherefore, an exacLlon ln Lhe exerclse of
Lhe SLaLe's pollce power. 8espondenLs furLher conLend LhaL sald unlversal Charge does
noL possess Lhe essenLlal characLerlsLlcs of a Lax, LhaL lLs lmposlLlon would redound Lo
Lhe beneflL of Lhe elecLrlc power lndusLry and noL Lo Lhe publlc, and LhaL lLs raLe ls
unlformly levled on elecLrlclLy end-users, unllke a Lax whlch ls lmposed based on Lhe
lndlvldual Laxpayer's ablllLy Lo pay. Moreover, respondenLs deny LhaL Lhere ls undue
delegaLlon of leglslaLlve power Lo Lhe L8C slnce Lhe Ll8A seLs forLh sufflclenL
deLermlnable sLandards whlch would gulde Lhe L8C ln Lhe exerclse of Lhe powers
granLed Lo lL. LasLly, respondenLs argue LhaL Lhe lmposlLlon of Lhe unlversal Charge ls
noL oppresslve and conflscaLory slnce lL ls an exerclse of Lhe pollce power of Lhe SLaLe
and lL complles wlLh Lhe requlremenLs of due process.
o 8espondenL LCC argues LhaL lL ls duLy-bound Lo collecL and remlL Lhe amounL
perLalnlng Lo Lhe Mlsslonary LlecLrlflcaLlon and LnvlronmenLal lund componenLs of Lhe
unlversal Charge, pursuanL Lo Sec. 34 of Lhe Ll8A and Lhe ueclslons ln L8C Case nos.
2002-194 and 2002-163. CLherwlse, LCC could be held llable under Sec. 46 of Lhe
Ll8A, whlch lmposes flnes and penalLles for any vlolaLlon of lLs provlslons or lLs l88.

Peld: no.

1o resolve Lhe lssue, lL ls necessary Lo dlsLlngulsh Lhe SLaLe's power of LaxaLlon from Lhe pollce power.

1he power Lo Lax ls an lncldenL of soverelgnLy and ls unllmlLed ln lLs range, acknowledglng ln lLs very
naLure no llmlLs, so LhaL securlLy agalnsL lLs abuse ls Lo be found only ln Lhe responslblllLy of Lhe
leglslaLure whlch lmposes Lhe Lax on Lhe consLlLuency LhaL ls Lo pay lL. lL ls based on Lhe prlnclple LhaL
Laxes are Lhe llfeblood of Lhe governmenL, and Lhelr prompL and cerLaln avallablllLy ls an lmperlous
need.hLLp://sc.[udlclary.gov.ph/[urlsprudence/2007/[uly2007/139796 .hLm - _fLn31 1hus, Lhe Lheory
behlnd Lhe exerclse of Lhe power Lo Lax emanaLes from necesslLy, wlLhouL Laxes, governmenL cannoL
fulflll lLs mandaLe of promoLlng Lhe general welfare and well-belng of Lhe people.

Cn Lhe oLher hand, pollce power ls Lhe power of Lhe sLaLe Lo promoLe publlc welfare by resLralnlng and
regulaLlng Lhe use of llberLy and properLy. lL ls Lhe mosL pervaslve, Lhe leasL llmlLable, and Lhe mosL
21
demandlng of Lhe Lhree fundamenLal powers of Lhe SLaLe. 1he [usLlflcaLlon ls found ln Lhe LaLln
maxlms solos popoll est soptemo lex (Lhe welfare of Lhe people ls Lhe supreme law) and slc otete too ot
olleoom ooo loeJos (so use your properLy as noL Lo ln[ure Lhe properLy of oLhers). As an lnherenL
aLLrlbuLe of soverelgnLy whlch vlrLually exLends Lo all publlc needs, pollce power granLs a wlde panoply
of lnsLrumenLs Lhrough whlch Lhe SLaLe, as poteos pottloe, glves effecL Lo a hosL of lLs regulaLory
powers. We have held LhaL Lhe power Lo "regulaLe" means Lhe power Lo proLecL, fosLer, promoLe,
preserve, and conLrol, wlLh due regard for Lhe lnLeresLs, flrsL and foremosL, of Lhe publlc, Lhen of Lhe
uLlllLy and of lLs paLrons.
[


1he conservat|ve and p|vota| d|st|nct|on between these two powers rests |n the purpose for wh|ch the
charge |s made. If generat|on of revenue |s the pr|mary purpose and regu|at|on |s mere|y |nc|denta|,
the |mpos|t|on |s a tax, but |f regu|at|on |s the pr|mary purpose, the fact that revenue |s |nc|denta||y
ra|sed does not make the |mpos|t|on a tax.

ln exacLlng Lhe assalled unlversal Charge Lhrough Sec. 34 of Lhe Ll8A, Lhe SLaLe's pollce power,
parLlcularly lLs regulaLory dlmenslon, ls lnvoked. Such can be deduced from Sec. 34 whlch enumeraLes
Lhe purposes for whlch Lhe unlversal Charge ls lmposed and whlch can be amply dlscerned as regulaLory
ln characLer. 1he Ll8A resonaLes such regulaLory purposes, Lhus:

SLC1lCn 2. ueclaraLlon of ollcy. - lL ls hereby declared Lhe pollcy of Lhe SLaLe:

(a) 1o ensure and acceleraLe Lhe LoLal elecLrlflcaLlon of Lhe counLry,
(b) 1o ensure Lhe quallLy, rellablllLy, securlLy and affordablllLy of Lhe supply of elecLrlc
power,
(c) 1o ensure LransparenL and reasonable prlces of elecLrlclLy ln a reglme of free and
falr compeLlLlon and full publlc accounLablllLy Lo achleve greaLer operaLlonal and
economlc efflclency and enhance Lhe compeLlLlveness of hlllpplne producLs ln Lhe
global markeL,
(d) 1o enhance Lhe lnflow of prlvaLe caplLal and broaden Lhe ownershlp base of Lhe
power generaLlon, Lransmlsslon and dlsLrlbuLlon secLors,
(e) 1o ensure falr and non-dlscrlmlnaLory LreaLmenL of publlc and prlvaLe secLor
enLlLles ln Lhe process of resLrucLurlng Lhe elecLrlc power lndusLry,
(f) 1o proLecL Lhe publlc lnLeresL as lL ls affecLed by Lhe raLes and servlces of elecLrlc
uLlllLles and oLher provlders of elecLrlc power,
(g) 1o assure soclally and envlronmenLally compaLlble energy sources and
lnfrasLrucLure,
(h) 1o promoLe Lhe uLlllzaLlon of lndlgenous and new and renewable energy resources
ln power generaLlon ln order Lo reduce dependence on lmporLed energy,
(l) 1o provlde for an orderly and LransparenL prlvaLlzaLlon of Lhe asseLs and llablllLles of
Lhe naLlonal ower CorporaLlon (nC),
([) 1o esLabllsh a sLrong and purely lndependenL regulaLory body and sysLem Lo ensure
consumer proLecLlon and enhance Lhe compeLlLlve operaLlon of Lhe elecLrlclLy
markeL, and
(k) 1o encourage Lhe efflclenL use of energy and oLher modallLles of demand slde
managemenL.


22
lrom Lhe aforemenLloned purposes, lL can be gleaned LhaL Lhe assalled unlversal Charge ls noL a Lax, buL
an exacLlon ln Lhe exerclse of Lhe SLaLe's pollce power. ubllc welfare ls surely promoLed.

Moreover, lL ls a well-esLabllshed docLrlne LhaL Lhe Laxlng power may be used as an lmplemenL of pollce
power. WlLh Lhe unlversal Charge, a Speclal 1rusL lund (S1l) ls also creaLed under Lhe admlnlsLraLlon of
SALM. 1he S1l has some noLable characLerlsLlcs slmllar Lo Lhe CSl and Lhe SSl, vlz.:

1) ln Lhe lmplemenLaLlon of sLranded cosL recovery, Lhe L8C shall conducL a revlew Lo
deLermlne wheLher Lhere ls under-recovery or over recovery and ad[usL (Lrue-up)
Lhe level of Lhe sLranded cosL recovery charge. ln case of an over-recovery, Lhe L8C
shall ensure LhaL any excess amounL shall be remlLLed Lo Lhe S1l. A separaLe
accounL shall be creaLed for Lhese amounLs whlch shall be held ln LrusL for any
fuLure clalms of dlsLrlbuLlon uLlllLles for sLranded cosL recovery. AL Lhe end of Lhe
sLranded cosL recovery perlod, any remalnlng amounL ln Lhls accounL shall be used
Lo reduce Lhe elecLrlclLy raLes Lo Lhe end-users.

2) WlLh respecL Lo Lhe assalled unlversal Charge, lf Lhe LoLal amounL collecLed for Lhe
same ls greaLer Lhan Lhe acLual avallmenLs agalnsL lL, Lhe SALM shall reLaln Lhe
balance wlLhln Lhe S1l Lo pay for perlods where a shorLfall occurs.

3) upon explraLlon of Lhe Lerm of SALM, Lhe admlnlsLraLlon of Lhe S1l shall be
Lransferred Lo Lhe uCl or any of Lhe uCl aLLached agencles as deslgnaLed by Lhe
uCl SecreLary.

1he CSC ls ln polnL when lL asseveraLes:

LvldenLly, Lhe esLabllshmenL and malnLenance of Lhe Speclal 1rusL lund, under Lhe lasL
paragraph of SecLlon 34, 8.A. no. 9136, ls well wlLhln Lhe pervaslve and non-walvable
power and responslblllLy of Lhe governmenL Lo secure Lhe physlcal and economlc
survlval and well-belng of Lhe communlLy, LhaL comprehenslve soverelgn auLhorlLy we
deslgnaLe as Lhe pollce power of Lhe SLaLe.

1hls feaLure of Lhe unlversal Charge furLher boosLs Lhe poslLlon LhaL Lhe same ls an exacLlon lmposed
prlmarlly ln pursulL of Lhe SLaLe's pollce ob[ecLlves. 1he S1l reasonably serves and assures Lhe
aLLalnmenL and perpeLulLy of Lhe purposes for whlch Lhe unlversal Charge ls lmposed, l.e., Lo ensure Lhe
vlablllLy of Lhe counLr
8. Csmenla vs Crbos (1993)-MAnALA?SA?
Doctr|ne: Money named as Lax buL acLually collecLed ln Lhe exerclse of pollce power may be placed ln a
speclal LrusL accounL.

Iacts:
1. Cn CcLober 10, 1984, resldenL lerdlnand Marcos lssued .u. 1936 creaLlng a Speclal AccounL ln Lhe
Ceneral lund, deslgnaLed as Lhe Cll rlce SLablllzaLlon lund (CSl). 1he CSl was deslgned Lo
relmburse oll companles for cosL lncreases ln crude oll and lmporLed peLroleum producLs resulLlng
from exchange raLe ad[usLmenLs and from lncreases ln Lhe world markeL prlces of crude oll
23
2. 1he CSl was reclasslfled lnLo a "LrusL llablllLy accounL" ln an LC and ordered released from Lhe
naLlonal 1reasury Lo Lhe MlnlsLry of Lnergy. 1he same LC also auLhorlzed Lhe lnvesLmenL of Lhe
fund ln governmenL securlLles, wlLh Lhe earnlngs from such placemenLs accrulng Lo Lhe fund.
3. eLlLloner argues LhaL Lhe creaLlon of Lhe LrusL fund vlolaLes 29(3), ArLlcle vl of Lhe ConsLlLuLlon,
readlng as follows: (3) All money collecLed on any Lax levled for a speclal purpose shall be LreaLed as
a speclol fooJ and pald ouL for such purposes only. lf Lhe purpose for whlch a speclal fund was
creaLed has been fulfllled or abandoned, Lhe balance, lf any, shall be Lransferred Lo Lhe general
funds of Lhe CovernmenL.
4. eLlLloner argues LhaL "Lhe monles collecLed.. musL be LreaLed as a 'SLClAL lunu,' noL as a 'LrusL
accounL' or a 'LrusL fund,' and LhaL "lf a speclal Lax ls collecLed for a speclflc purpose, Lhe revenue
generaLed Lherefrom shall 'be LreaLed as a speclal fund' Lo be oseJ ooly fot tbe potpose loJlcoteJ,
and noL channeled Lo anoLher governmenL ob[ecLlve."
3. eLlLloner furLher polnLs ouL LhaL slnce "a 'speclal fund' conslsLs of monles collecLed Lhrough Lhe
Laxlng power of a SLaLe, socb omooots belooq to tbe 5tote, alLhough Lhe use Lhereof ls llmlLed Lo Lhe
speclal purpose/ob[ecLlve for whlch lL was creaLed."
6. Pe also conLends LhaL Lhe "delegaLlon of leglslaLlve auLhorlLy" Lo Lhe L88 vlolaLes 28 (2). ArLlcle vl
of Lhe ConsLlLuLlon, vlz.: (2) 1he Congress may, by law, auLhorlze Lhe resldenL Lo flx, wlLhln
speclfled llmlLs, and sub[ecL Lo such llmlLaLlons and resLrlcLlons as lL may lmpose, Larlff raLes, lmporL
and exporL quoLas, Lonnage and wharfage dues, and oLher duLles or lmposLs wlLhln Lhe framework
of Lhe naLlonal developmenL program of Lhe CovernmenL, and, lnasmuch as Lhe delegaLlon relaLes
Lo Lhe exerclse of Lhe power of LaxaLlon, "tbe llmlts, llmltotloos ooJ testtlctloos most be
poootltotlve, tbot ls, tbe low most oot ooly speclfy bow to tox, wbo (sboll) be toxeJ (ooJ) wbot tbe
tox ls fot, bot olso lmpose o speclflc llmlt oo bow mocb to tox."
7. SolCen: Lhe argumenL of Lhe peLlLloner resLs on Lhe assumpLlon LhaL C8Sl ls a form of revenue
measure drawlng from a speclal Lax Lo be expended for a speclal purpose - nC1 CC88LC1.

Issue: W/n peLlLloner's conLenLlon was correcL.

ne|d: eLlLlon C8An1Lu (re nulllflcaLlon of relmbursemenL of flnanclng charges) buL ulSMlSSLu ln all
oLher aspecLs.
1. Whlle Lhe funds collecLed may be referred Lo as Laxes, Lhey are exacLed ln Lhe exerclse of Lhe pollce
power of Lhe SLaLe. Moreover, LhaL Lhe CSl ls a speclal fund ls plaln from Lhe speclal LreaLmenL
glven lL by L.C. 137. lL ls segregaLed from Lhe general fund, and whlle lL ls placed ln whaL Lhe law
refers Lo as a "LrusL llablllLy accounL," Lhe fund noneLheless remalns sub[ecL Lo Lhe scruLlny and
revlew of Lhe CCA. 1he CourL ls saLlsfled LhaL Lhese measures comply wlLh Lhe consLlLuLlonal
descrlpLlon of a "speclal fund." lndeed, Lhe pracLlce ls noL wlLhouL precedenL.
2. no undue delegaLlon - 1he provlslon conferrlng Lhe auLhorlLy upon Lhe L88 Lo lmpose addlLlonal
amounLs on peLroleum producLs provldes a sufflclenL sLandard by whlch Lhe auLhorlLy musL be
exerclsed. ln addlLlon Lo Lhe general pollcy of Lhe law Lo proLecL Lhe local consumer by sLablllzlng
and subsldlzlng domesLlc pump raLes, 8(c) of .u. 1936 expressly auLhorlzes Lhe L88 Lo lmpose
addlLlonal amounLs to ooqmeot tbe tesootces of tbe looJ.
3. lor valld delegaLlon, lL musL be (1) compleLe and (2) lL musL flx a sLandard
4. 8elmbursemenL of flnanclng charges ls noL auLhorlzed by u 1936 buL paymenL of lnvenLory losses
and cosL underrecoverles from sales of oll Lo nC are permlLLed Lo be made by Lhe Lnergy
8egulaLory 8oard.
3. 1hls CourL Lhus flnds no serlous lmpedlmenL Lo susLalnlng Lhe valldlLy of Lhe leglslaLlon, Lhe express
purpose for whlch Lhe lmposLs are permlLLed and Lhe general ob[ecLlves are readlly dlscernlble, and
Lhey consLlLuLe a sufflclenL sLandard upon whlch Lhe delegaLlon of power may be [usLlfled.
24

9. CCC vs Con[uango (2001)-L8LZ
IAC1S
(CCC) was creaLed by LxecuLlve Crder no. 1 Lo asslsL Lhe resldenL ln Lhe recovery of Lhe lll-
goLLen wealLh Lhus accumulaLed wheLher locaLed ln Lhe hlllpplnes or abroad."
Among Lhe properLles sequesLered by Lhe Commlsslon were shares of sLock ln Lhe unlLed
CoconuL lanLers 8ank (uC8) reglsLered ln Lhe names of Lhe alleged one mllllon coconuL
farmers," Lhe so-called CoconuL lndusLry lnvesLmenL lund companles (Clll companles) and
rlvaLe 8espondenL Lduardo Co[uangco !r. (herelnafLer Co[uangco").
1he general rule ls LhaL Lhe rlghL Lo voLe sequesLered shares of sLock reglsLered ln Lhe names of
prlvaLe lndlvlduals or enLlLles and alleged Lo have been acqulred wlLh lll-goLLen wealLh shallnbe
exerclsed by Lhe reglsLered owner.
An excepLlon Lo Lhls rule ls LhaL Lhe CCC may be granLed such voLlng rlghL provlded lL can (1)
show prlma facle evldence LhaL Lhe wealLh and/or Lhe shares are lndeed lll-goLLen, and (2)
demonsLraLe lmmlnenL danger of dlsslpaLlon of Lhe asseLs, Lhus necesslLaLlng Lhelr conLlnued
sequesLraLlon and voLlng by Lhe governmenL unLll a declslon, rullng wlLh flnallLy on Lhelr
ownershlp, ls promulgaLed by Lhe proper courL.
1he excepLlon Lo Lhls excepLlon ls LhaL Lhe abovemenLloned Lwo-Llered" LesL does noL apply
when Lhe sequesLered sLocks are acqulred wlLh funds LhaL are prlma facle publlc ln characLer or,
aL leasL, are affecLed wlLh publlc lnLeresL. 1he CCC may voLe on Lhe sald shares because lL ls
Lhe publlc whlch ls Lhe rlghLful owner of Lhe sald shares.
ISSUL: Are Lhe uC8 shares vesLed wlLh publlc lnLeresL and Lherefore CCC should have Lhe voLlng
rlghL?
nLLD: ?es. 1he uC8 were acqulred wlLh coconuL levy funds and Lhus Lhey are prlma facle publlc funds.
ubllc funds are Lhose moneys belonglng Lo Lhe SLaLe or Lo any pollLlcal subdlvlslon of Lhe SLaLe, more
speclflcally, Laxes, cusLoms duLles and moneys ralsed by operaLlon of law for Lhe supporL of Lhe
governmenL or for Lhe dlscharge of lLs obllgaLlons. Coconut |evy funds sat|sfy th|s genera| def|n|t|on of
pub||c funds because:
1. CoconuL levy funds are ralsed wlLh Lhe use of Lhe pollce and Laxlng powers of Lhe SLaLe.
lndeed, coconuL levy funds parLake of Lhe naLure of Laxes whlch, ln general, are enforced
proporLlonal conLrlbuLlons from persons and properLles, exacLed by Lhe SLaLe by vlrLue of
lLs soverelgnLy for Lhe supporL of governmenL and for all publlc needs. Llke oLher Lax
measures, Lhey were noL volunLary paymenLs or donaLlons by Lhe people. 1hey were
enforced conLrlbuLlons exacLed on paln of penal sancLlons, as provlded under u no. 276:
2. 1hey are levles lmposed by Lhe SLaLe for Lhe beneflL of Lhe coconuL lndusLry and lLs farmers.
1hey were clearly lmposed for a publlc purpose. 1here ls absoluLely no quesLlon LhaL Lhey were
collecLed Lo advance Lhe governmenL's avowed pollcy of proLecLlng Lhe coconuL lndusLry. 1hls CourL
Lakes [udlclal noLlce of Lhe facL LhaL Lhe coconuL lndusLry ls one of Lhe greaL economlc plllars of our
naLlon.
1axaLlon ls done noL merely Lo ralse revenues Lo supporL Lhe governmenL, buL also Lo provlde
means for Lhe rehablllLaLlon and Lhe sLablllzaLlon of a LhreaLened lndusLry, whlch ls so affecLed wlLh
publlc lnLeresL as Lo be wlLhln Lhe pollce power of Lhe SLaLe. 1hus, Lhe coconuL levy funds -- llke Lhe
23
sugar levy and Lhe oll sLablllzaLlon funds, as well as Lhe monles generaLed by Lhe Cn-llne LoLLery SysLem
-- are funds exacLed by Lhe SLaLe. 8elng enforced conLrlbuLlons, Lhey are ptlmo focle publlc funds.
10. lanLers roducLs vs lerLlphll Corp (2008)-1A8AC
lAC1S:
resldenL lerdlnand Marcos, exerclslng hls leglslaLlve powers, lssued LCl no. 1463 whlch provlded,
among oLhers, for Lhe lmposlLlon by Lhe lerLlllzer esLlclde AuLhorlLy (lA) of a caplLal recovery
componenL (C8C) on Lhe domesLlc sale of all grades of ferLlllzers ln Lhe hlllpplnes. 1he goal ls Lo make
and keep respondenL l vlable. AfLer Lhe1986 Ldsa 8evoluLlon, lA volunLarlly sLopped Lhe lmposlLlon
of Lhe 10 levy. WlLh Lhe reLurn of democracy, lerLlphll demanded from l a refund of Lhe amounLs lL
pald under LCl no. 1463, buL l refused Lo accede Lo Lhe demand lerLlphll flled a complalnL for
collecLlon and damages agalnsL lA and l wlLh Lhe 81C ln MakaLl. lL quesLloned Lhe consLlLuLlonallLy
of LCl no. 1463 for belng un[usL, unreasonable, oppresslve, lnvalld and an unlawful lmposlLlon LhaL
amounLed Lo a denlal of due process of law. lA, Lhrough Lhe SollclLor Ceneral, counLered LhaL Lhe
lssuance of LCl no.1463 was a valld exerclse of Lhe pollce power of Lhe SLaLe ln ensurlng Lhe sLablllLy of
Lhe ferLlllzer lndusLry ln Lhe counLry
lSSuL:
WheLher or noL lerLlphll has locus sLandl Lo quesLlon Lhe consLlLuLlonallLy of LCl no. 1463 - ?LS
WheLher Lhe levy ls ln exerclse of pollce power or LaxaLlon power- 1AxA1lCn
PLLu:
lerLlphll has locus sLandl because lL suffered dlrecL ln[ury, docLrlne of sLandlng ls a mere procedural
LechnlcallLy whlch may be walved. 1he lmposlLlon of Lhe levy was an exerclse of Lhe LaxaLlon power of
Lhe sLaLe. Whlle lL ls Lrue LhaL Lhe power Lo Lax can be used as an lmplemenL of pollce power, Lhe
prlmary purpose of Lhe levy was revenue generaLlon. lf Lhe purpose ls prlmarlly revenue, or lf revenue ls,
aL leasL, one of Lhe real and subsLanLlal purposes, Lhen Lhe exacLlon ls properly called a Lax. ollce power
and Lhe power of LaxaLlon are lnherenL powers of Lhe SLaLe. 1hese powers are dlsLlncL and have
dlfferenL LesLs for valldlLy. ollce power ls Lhe power of Lhe SLaLe Lo enacL leglslaLlon LhaL may lnLerfere
wlLh personal llberLy or properLy ln order Lo promoLe Lhe general welfare, whlle Lhe power of LaxaLlon ls
Lhe power Lo levy Laxes Lo be used for publlc purpose. 1he maln purpose of pollce power ls Lhe
regulaLlon of a behavlor or conducL, whlle LaxaLlon ls revenue generaLlon. 1he "lawful sub[ecLs" and
"lawful means" LesLs are used Lo deLermlne Lhe valldlLy of a law enacLed under Lhe pollce power. 1he
power of LaxaLlon, on Lhe oLher hand, ls clrcumscrlbed by lnherenL and consLlLuLlonal llmlLaLlons.
We agree wlLh Lhe 81C LhaL Lhe lmposlLlon of Lhe levy was an exerclse by Lhe SLaLe of lLs LaxaLlon power.
Whlle lL ls Lrue LhaL Lhe power of LaxaLlon can be used as an lmplemenL of pollce power, Lhe prlmary
purpose of Lhe levy ls revenue generaLlon. lf Lhe purpose ls prlmarlly revenue, or lf revenue ls, aL leasL,
one of Lhe real and subsLanLlal purposes, Lhen Lhe exacLlon ls properly called a Lax.
An lnherenL llmlLaLlon on Lhe power of LaxaLlon ls publlc purpose. 1axes are exacLed only for a publlc
purpose. 1hey cannoL be used for purely prlvaLe purposes or for Lhe excluslve beneflL of prlvaLe persons.
1he purpose of a law ls evldenL from lLs LexL or lnferable from oLher secondary sources. Pere, we agree
wlLh Lhe 81C and LhaL CA LhaL Lhe levy lmposed under LCl no. 1463 was noL for a publlc purpose
because lL expressly provlded LhaL Lhe levy be lmposed Lo beneflL l, a prlvaLe company. 1he purpose ls
expllclL from Clause 3 of Lhe law
11. Chevron hlllpplnes lnc vs 8ases Converslon (2010)-8lSnA8
Chevron h|||pp|nes, Inc. v. 8ases Convers|on Deve|opment Author|ty
lacLs:
26
8oard of ulrecLors of Clark uevelopmenL CorporaLlon (CuC, 8espondenL) lssued and approved
ollcy Culdellnes on Lhe MovemenL of eLroleum luel Lo and from Lhe Clark Speclal Lconomlc
Zone (CSLZ), whlch provlded for fees and charges, among Lhem:
o 8oyalLy fees
Suppllers dellverlng fuel from ouLslde sources shall be assessed Lhe followlng
royalLy fees:
0.30/ llLer- Lhose dellverlng CoasLal peLroleum fuel Lo CSLZ locaLors noL
sancLloned by CuC.
1.00/ llLer - Lhose brlnglng-ln peLroleum fuel (excepL !eL A-1) from
ouLslde sources.
Chevron hlllpplnes, lnc. (eLlLloner) ls a domesLlc corporaLlon supplylng fuel Lo nanox
hlllpplnes.
o nanox hlllpplnes ls a locaLor lnslde CSLZ.
CuC senL a leLLer Chevron, lnformlng lL LhaL a royalLy fee of 0.30/ llLer shall be assessed on lLs
dellverles Lo nanox.
Chevron was senL a SLaLemenL of AccounL for 113,000.
Chevron senL a leLLer Lo Lhe Chlef LxecuLlve Cfflcer of CuC Lo proLesL Lhe assessmenL of royalLy
fees. 8uL neverLheless, lL pald Lhe sald fees under proLesL.
When Chevron requesLed a refund for Lhe amounL lL had pald, lLs requesL was denled.
Chevron argues LhaL Lhe lmposlLlon of royalLy fees for revenue generaLlng purposes would
amounL Lo a Lax, whlch CuC dld noL have power Lo lmpose.

lssue: WheLher Lhe lmposlLlon of royalLy fees ls a Lax?

8ullng: no.
ln dlsLlngulshlng Lax and regulaLlon as a form of pollce power, Lhe deLermlnlng facLor ls Lhe
purpose of Lhe lmplemenLed measure.
o lf Lhe purpose ls prlmarlly Lo ralse revenue - 1ax, even Lhough Lhe measure resulLs ln
some form of regulaLlon.
o lf Lhe purpose ls prlmarlly Lo regulaLe - 8egulaLlon, an exerclse of Lhe pollce power,
even Lhough lncldenLally, revenue ls generaLed.
1he sub[ecL royalLy fee was lmposed prlmarlly for regulaLory purposes, and noL for Lhe
generaLlon of lncome or proflLs.
o 1he ollcy Culdellnes was lssued Lo ensure Lhe safeLy, securlLy, and good condlLlon of
Lhe peLroleum fuel lndusLry wlLhln Lhe CSLZ.
1he quesLloned royalLy fees form parL of Lhe regulaLory framework Lo ensure free flow or movemenL of
peLroleum fuel Lo and from Lhe CSLZ.
12. Angeles unlverslLy loundaLlon vs ClLy of Angeles (2012)-8CM8ALLS
uocLrlnes: 8ulldlng permlLs fees are noL charges on properLy, Lhey are noL lmposlLlons from whlch
peLlLloner ls exempL
lacLs:
eLlLloner (Angeles unlverslLy loundaLlon) s an educaLlonal lnsLlLuLlon LhaL was converLed lnLo a
non-sLock, non-proflL educaLlonal foundaLlon under Lhe provlslon of 8A 6033
27
ln AugusL 2003, eLlLloner flled wlLh Lhe Cfflce of Lhe ClLy 8ulldlng Cfflclal an appllcaLlon for
bulldlng permlL for Lhe consLrucLlon of an 11-sLorey bulldlng of Lhe Aul-Medlcal CenLer ln lLs
maln campus
1he offlce lssued an assessmenL for 126, 829.20 and an order of paymenL was also
subsequenLly lssued by Lhe ClLy lannlng and uevelopmenL offlce requlrlng peLlLloner Lo pay
238,741.64 as locaLlonal clearance fee
eLlLloner wroLe a leLLer addressed Lo boLh offlcer clalmlng LhaL lL ls exempL from paymenL of
Lhe bulldlng permlL and locaLlonal clearance fee argulng LhaL Lhey had been prevlously lssued a
bulldlng permlL acknowledglng such exempLlon for Lhe consLrucLlon of peLlLloner's 4-sLorey
bulldlng (bullL ln 2000 and 2004)
ClLy 1reasurer referred Lhe maLLer Lo Lhe uC! where uC! clLed prevlous lssuances of lLs offlce an
oplnlon declarlng peLlLloner exempL from paymenL of bulldlng permlL fees
8espondenL sLlll refuses Lo lssue Lhe permlL so peLlLloner pald Lhe assessed fees under proLesL.
SubsequenLly respondenL lssued Lhe necessary permlLs
eLlLloner LhereafLer formally requesLed Lhe respondenL Lo refund Lhe fees lL pald under proLesL
and slnce respondenL denled Lhe clalm, peLlLloner flled complalnL.
8espondenL argues:
o 1haL 8A 6033 should be consldered repealed by Lhe naLlonal 8ulldlng Code whlch
requlres every person, flrm or corporaLlon lncludlng agency or lnsLrumenLallLy of Lhe
governmenL Lo obLaln bulldlng permlL for any consLrucLlon xxx pay Lhe necessary
bulldlng permlL fees
o 1he assessmenLs are regulaLory ln naLure hence Lhey are noL consldered Lo be Laxes
whlch peLlLloner ls exempL
o 1he 11-sLorey bulldlng wlll be used as a school dormlLory whlch cannoL be consldered as
a use excluslvely for educaLlonal acLlvlLles
Lower courL ruled ln favor of peLlLloner buL CA reversed Lhe declslon of Lhe Lrlal courL and held
LhaL whlle peLlLloner ls a Lax-free enLlLy lLs ls noL exempL from Lhe paymenL of regulaLory fees.
8A 6033 only granLs exempLlon from lncome Lax derlved from lLs educaLlonal acLlvlLles and real
properLy excluslve for educaLlonal purposes
lssue: W/n Aul should be exempL?
8ullng: nC. eLlLlon ls denled CA's declslon ls afflrmed
8.A. no. 6033 granLed Lax exempLlons Lo educaLlonal lnsLlLuLlons llke peLlLloner whlch converLed
Lo non-sLock, non-proflL educaLlonal foundaLlons and speclflcally provldes LhaL foundaLlon shall
be exempL from Lhe paymenL of all Laxes, lmporL duLles, assessmenLs, and oLher charges
lmposed by Lhe CovernmenL on all lncome derlved from or properLy, real or personal, used
excluslvely for Lhe educaLlonal acLlvlLles of Lhe loundaLlon.
o eLlLloner's clalm for exempLlon resLs solely on lLs lnLerpreLaLlon of Lhe Lerm "oLher
charges lmposed by Lhe naLlonal CovernmenL" ln Lhe Lax exempLlon clause of 8.A. no.
6033.
As used ln Lhe Local CovernmenL Code of 1991, charges refers Lo pecunlary llablllLy, as renLs or
fees agalnsL persons or properLy, whlle fee means a charge flxed by law or ordlnance for Lhe
regulaLlon or lnspecLlon of a buslness or acLlvlLy.
o AlLhough "charges" ln lLs ordlnary meanlng appears Lo be a general Lerm whlch could
cover a speclflc "fee" does noL supporL peLlLloner's poslLlon LhaL bulldlng permlL fees are
among Lhose "oLher charges" from whlch lL was expressly exempLed.
28
o A bulldlng permlL fee ls a regulaLory lmposlLlon ls hlghllghLed by Lhe facL LhaL ln
processlng an appllcaLlon for a bulldlng permlL, Lhe 8ulldlng Cfflclal shall see Lo lL LhaL
Lhe appllcanL saLlsfles and conforms wlLh approved sLandard requlremenLs on zonlng
and land use, llnes and grades, sLrucLural deslgn, sanlLary and sewerage, envlronmenLal
healLh, elecLrlcal and mechanlcal safeLy as well as wlLh oLher rules and regulaLlons
lmplemenLlng Lhe naLlonal 8ulldlng Code.
Slnce bulldlng permlL fees are noL charges on properLy, Lhey are noL lmposlLlons from whlch peLlLloner ls
exempL.
SC does noL agree wlLh peLlLloner's argumenL LhaL Lhe bulldlng permlL fees collecLed by respondenLs are
ln reallLy Laxes because Lhe prlmary purpose ls Lo ralse revenues for Lhe local governmenL unlL.

A charge of a flxed sum whlch bears no relaLlon aL all Lo Lhe cosL of lnspecLlon and regulaLlon may be
held Lo be a Lax raLher Lhan an exerclse of Lhe pollce power.

eLlLloner falled Lo demonsLraLe LhaL Lhe bases of assessmenL were arblLrarlly deLermlned or unrelaLed
Lo Lhe acLlvlLy belng regulaLed.

eLlLloner also falled Lo adduced evldence Lo show LhaL Lhe raLes of bulldlng permlL fees lmposed and
collecLed by Lhe respondenLs were unreasonable or ln excess of Lhe cosL of regulaLlon and lnspecLlon.

LaslLy, peLlLloner falled Lo dlscharge lLs burden Lo prove LhaL lLs real properLy ls acLually, dlrecLly and
excluslvely used for educaLlonal purposes. Whlle Lhere ls no allegaLlon or proof LhaL peLlLloner leases
Lhe land Lo lLs presenL occupanLs, sLlll Lhere ls no compllance wlLh Lhe consLlLuLlonal and sLaLuLory
requlremenL LhaL sald real properLy ls acLually, dlrecLly and excluslvely used for educaLlonal purposes.
1he respondenLs correcLly assessed Lhe land for real properLy Laxes for Lhe Laxable perlod durlng whlch
Lhe land ls noL belng devoLed solely Lo peLlLloner's educaLlonal acLlvlLles. Accordlngly, Lhe CA dld noL err
ln rullng LhaL peLlLloner ls llkewlse noL enLlLled Lo a refund of Lhe real properLy Lax lL pald under proLesL.

8. Spec|a| Assessments D|st|ngu|shed from 1ax
Speclal assessmenL - naLure of Lax upon properLy
levled accordlng Lo beneflLs conferred on Lhe properLy
whole Lheory of speclal assessmenL: based on docLrlne LhaL properLy agalnsL whlch lL ls levled
o derlves some speclal beneflL from Lhe lmprovemenL
ulsLlncLlons from Lax. Speclal assessmenL:
o Can be levled only on land
o CannoL be made a personal llablllLy of persons assessed
o 8ased wholly on beneflLs
o LxcepLlonal as Lo Llme and locallLy
! 1ax: lmposlLlon of charge on ALL properLy, real and personal ln prescrlbed area
1hough Lhe purpose ls Lo make a local lmprovemenL on sLreeL or
hlghway
! Speclal AssessmenL: lmposed only on properLy owners beneflLed
ower Lo levy Speclal AssessmenL ls an exerclse of Laxlng power
8uL: exerclse of Laxlng power ln lmposlng assessmenL noL necessarlly make Lhe assessmenL a
Lax

1. 8epubllc v. 8acolod-Murcla Mllllng Co,
29

1hls ls a [olnL appeal by Lhree sugar cenLrals, 8acolod Murcla Mllllng Co., lnc., Ma-ao
Sugar CenLral Co., lnc., and 1allsay-Sllay Mllllng Co., slsLer companles under one
conLrolllng ownershlp and managemenL, from a declslon of Lhe CourL of llrsL lnsLance of
Manlla flndlng Lhem llable for speclal assessmenLs under SecLlon 13 of 8epubllc AcL no.
632.
8epubllc AcL no. 632 ls Lhe charLer of Lhe hlllpplne Sugar lnsLlLuLe, hllsugln for shorL, a
seml-publlc corporaLlon.
SecLlons 13 and 16 of Lhe aforemenLloned law provlde:
! Sec. 13. copltollzotloo. - 1o ralse Lhe necessary funds Lo carry ouL Lhe
provlslons of Lhls AcL and Lhe purposes of Lhe corporaLlon, Lhere shall be levled
on Lhe annual sugar producLlon a Lax of 1Ln CLn1AvCS [0.10] per plcul of
sugar Lo be collecLed for a perlod of flve (3) years beglnnlng Lhe crop year 1931-
1932. 1he amounL shall be borne by Lhe sugar cane planLers and Lhe sugar
cenLrals ln Lhe proporLlon of Lhelr correspondlng mllllng share, and sald levy
shall consLlLuLe a llen on Lhelr sugar quedans and/or warehouse recelpLs.
o Sec. 16. 5peclol looJ. - 1he proceeds of Lhe foregolng levy shall be seL aslde Lo
consLlLuLe a speclal fund Lo be known as Lhe "Sugar kesearch and Stab|||zat|on Iund,"
whlch shall be avallable excluslvely for Lhe use of Lhe corporaLlon. All Lhe lncome and
recelpLs derlved from Lhe speclal fund hereln creaLed shall accrue Lo, and form parL of
Lhe sald fund Lo be avallable solely for Lhe use of Lhe corporaLlon.

o 1he facLs of Lhls case bearlng relevance Lo Lhe lssue under conslderaLlon, as reclLed by
Lhe lower courL and accepLed by Lhe appellanLs, are Lhe followlng:
o x x x durlng Lhe 3 crop years menLloned ln Lhe law, namely 1931-1932, 1932-1933, 1933-
1934, 1934-1933 and 1933-1936, defendanL 8acolod-Murcla Mllllng Co., lnc., has pald
267,468.00 buL lefL an unpald balance of 216,070.30, defendanL Ma-ao Sugar CenLral
Co., lnc., has pald 117,613.44 buL lefL unpald balance of 233,800.20, defendanL
1allsay-Sllay Mllllng Company has pald 231,812.43 buL lefL unpald balance of
208,193.74, and defendanL CenLral Azucarera del uanao made a paymenL of
49,897.78 buL lefL unpald balance of 48,039.77. 1here ls no quesLlon regardlng Lhe
correcLness of Lhe amounLs pald and Lhe amounLs LhaL remaln unpald.
o lrom Lhe evldence presenLed, on whlch Lhere ls no conLroversy, lL was dlsclosed LhaL on
SepLember 3, 1931, Lhe hlllpplne Sugar lnsLlLuLe, known as Lhe PlLSuCln for shorL,
acqulred Lhe lnsular Sugar 8eflnery for a LoLal conslderaLlon of 3,070,909.60 payable,
ln accordance wlLh Lhe deed of sale LxhlblL A, ln 3 lnsLallmenLs from Lhe process of Lhe
sugar Lax Lo be collecLed, under 8epubllc AcL 632. 1he evldence furLher dlscloses LhaL
Lhe operaLlon of Lhe lnsular Sugar 8eflnery for Lhe years, 1934, 1933, 1936 and 1937
was dlsasLrous ln Lhe sense LhaL PlLSuCln lncurred Lremendous losses as shown by an
examlnaLlon of Lhe sLaLemenLs of lncome and expenses marked LxhlblLs 3, 6, 7 and 8.
1hrough Lhe LesLlmony of Mr. Cenon llor Cruz, former acLlng general manager of
PlLSuCln and aL presenL Lechnlcal consulLanL of sald enLlLy, presenLed by Lhe
defendanLs as wlLnesses, lL has been shown LhaL Lhe operaLlon of Lhe lnsular Sugar
8eflnery has consumed 70 of Lhe Lhlnklng Llme and efforL of Lhe PlLSuCln
managemenL. x x x .

o ISSULS:

30
o llrsL. lL ls fallaclous Lo argue LhaL no mlsmanagemenL or abuse of corporaLe power could
have been commlLLed by hllsugln solely because lLs charLer lncorporaLes so many
devlces or safeguards Lo preclude such abuse.

o Second. 1he appellanLs' refusal Lo conLlnue paylng Lhe assessmenL under 8epubllc AcL
632 may noL rlghLly be equaLed wlLh a Laxpayer's refusal Lo pay hls ordlnary Laxes
preclsely because Lhere ls a subsLanLlal dlsLlncLlon beLween a "speclal assessmenL" and
an ordlnary Lax. 1he purpose of Lhe former ls Lo flnance Lhe lmprovemenL of parLlcular
properLles, wlLh Lhe beneflLs of Lhe lmprovemenL accrulng or lnurlng Lo Lhe owners
Lhereof who, afLer all, pay Lhe assessmenL. 1he purpose of an ordlnary Lax, on Lhe oLher
hand, ls Lo provlde Lhe CovernmenL wlLh revenues needed for Lhe flnanclng of sLaLe
affalrs. 1hus, whlle Lhe refusal of a clLlzen Lo pay hls ordlnary Laxes may noL lndeed be
sancLloned because lL would lmpalr governmenL funcLlons, Lhe same would noL hold
Lrue ln Lhe case of a refusal Lo comply wlLh a speclal assessmenL.

o 1hlrd. upon a hosL of declslons of Lhe unlLed SLaLes Supreme CourL, Lhe lmposlLlon or
collecLlon of a speclal assessmenL upon properLy owners who recelve no beneflL from
such assessmenL amounLs Lo a denlal of due process.

kULING: We f|nd for the appe||ee.

o 1he naLure of a "speclal assessmenL" slmllar Lo Lhe case aL bar has already been
dlscussed and explalned by Lhls CourL ln Lhe case of lotz vs. Atooeto, 98 hll. 148. lor ln
Lhls LuLz case, CommonwealLh AcL 367, oLherwlse known as Lhe Sugar Ad[usLmenL AcL,
levles on owners or persons ln conLrol of lands devoLed Lo Lhe culLlvaLlon of sugar cane
and ceded Lo oLhers for a conslderaLlon, on lease or oLherwlse -
o a Lax equlvalenL Lo Lhe dlfference beLween Lhe money value of Lhe renLal or
conslderaLlon collecLed and Lhe amounL represenLlng 12 per cenLum of Lhe assessed
value of such land. (Sec. 3).

o under SecLlon 6 of Lhe sald law, CommonwealLh AcL 367, all collecLlons made
Lhereunder "shall accrue Lo a speclal fund ln Lhe hlllpplne 1reasury, Lo be known as Lhe
'Sugar Ad[ustment and Stab|||zat|on Iund,' and shall be pald ouL only for any or all of
Lhe followlng purposes or Lo aLLaln any or all of Lhe followlng ob[ecLlves, as may be
provlded by law." lL Lhen proceeds Lo enumeraLe Lhe sald purposes, among whlch are
"Lo place Lhe sugar lndusLry ln a poslLlon Lo malnLaln lLself, ... Lo read[usL Lhe beneflLs
derlved from Lhe sugar lndusLry ... so LhaL all mlghL conLlnue proflLably Lo engage
Lhereln, Lo llmlL Lhe producLlon of sugar Lo areas more economlcally sulLed Lo Lhe
producLlon Lhereof, and Lo afford laborers employed ln Lhe lndusLry a llvlng wage and Lo
lmprove Lhelr llvlng and worklng condlLlons.
o 1he plalnLlff ln Lhe above case, WalLer LuLz, conLended LhaL Lhe aforemenLloned Lax or
speclal assessmenL was unconsLlLuLlonal because lL was belng "levled for Lhe ald and
supporL of Lhe sugar lndusLry excluslvely," and Lherefore, noL for a publlc purpose. ln
re[ecLlng Lhe Lheory advanced by Lhe sald plalnLlff, Lhls CourL sald:
o 1he baslc defecL ln Lhe plalnLlff's poslLlon ln hls assumpLlon LhaL Lhe Lax provlded for ln
CommonwealLh AcL no. 367 ls a pure exerclse of Lhe Laxlng power. Analysls of Lhe AcL,
and parLlcularly SecLlon 6, wlll show LhaL tbe tox ls levleJ wltb o teqolototy potpose, to
ptovlJe meoos fot tbe tebobllltotloo ooJ stoblllzotloo of tbe tbteoteoeJ soqot
31
loJostty. lo otbet wotJs, tbe oct ls ptlmotlly oo exetclse of tbe pollce powet.
o lL was compeLenL for Lhe LeglslaLure Lo flnd LhaL Lhe general welfare demanded LhaL Lhe
sugar lndusLry should be sLablllzed ln Lurn, and ln Lhe wlde fleld of lLs pollce power, Lhe
law-maklng body could provlde LhaL Lhe dlsLrlbuLlon of beneflLs Lherefrom be
read[usLed among lLs componenLs, Lo enable lL Lo reslsL Lhe added sLraln of Lhe lncrease
ln Laxes LhaL lL had Lo susLaln
o Cnce lL ls conceded, as lL musL LhaL Lhe proLecLlon and promoLlon of Lhe sugar lndusLry
ls a maLLer of publlc concern, lL follows LhaL tbe leqlslotote moy Jetetmloe wltblo
teosoooble boooJs wbot ls oecessoty fot lts ptotectloo ooJ expeJleot fot lts ptomotloo.
nete, tbe leqlslotlve Jlsctetloo most be olloweJ foll ploy, sobject ooly to tbe test of
teosooobleoess, ooJ lt ls oot cooteoJeJ tbot tbe meoos ptovlJeJ lo 5ectloo 6 of tbe low
(obove pooteJ) beot oo telotloo to tbe objectlve potsoeJ ot ote opptesslve lo cbotoctet.
lf objectlve ooJ metboJs ote ollke coostltotlooolly vollJ, oo teosoo ls seeo wby tbe stote
moy oot levy toxes to tolse fooJs fot tbelt ptosecotloo ooJ ottolomeot. 1oxotloo moy be
moJe tbe lmplemeot of tbe stote's pollce powet.

o Cn Lhe auLhorlLy of Lhe above case, Lhen, We hold LhaL the spec|a| assessment at bar
may be cons|dered as s|m||ar|y as the above, that |s, that the |evy for the h||sug|n
Iund |s not so much an exerc|se of the power of taxat|on, nor the |mpos|t|on of a
spec|a| assessment, but, the exerc|se of the po||ce power for the genera| we|fare of
the ent|re country. It |s, therefore, an exerc|se of a sovere|gn power wh|ch no pr|vate
c|t|zen may |awfu||y res|C. 1o|| Iees:
C. 1oll lees
1o|| Iee 1ax
uemand of proprleLorshlp uemand of soverelgnLy
Charged for Lhe cosL and malnLenance of
properLy used
lor Lhe purpose of ralslng publlc revenue

1. ulaz v. SecreLary of llnance (2011)

lacLs:
eLlLloners 8enaLo v. ulaz and Aurora Ma. l. 1lmbol (peLlLloners) flled Lhls peLlLlon for
declaraLory rellef assalllng Lhe valldlLy of Lhe lmpendlng lmposlLlon of value-added Lax (vA1) by
Lhe 8ureau of lnLernal 8evenue (8l8) on Lhe collecLlons of Lollway operaLors. CourL LreaLed Lhe
case as one of prohlblLlon.
eLlLloners hold Lhe vlew LhaL Congress dld noL, when lL enacLed Lhe nl8C, lnLend Lo lnclude Loll
fees wlLhln Lhe meanlng of "sale of servlces" LhaL are sub[ecL Lo vA1, LhaL a Loll fee ls a "user's
Lax," noL a sale of servlces, LhaL Lo lmpose vA1 on Loll fees would amounL Lo a Lax on publlc
servlce, and LhaL, slnce vA1 was never facLored lnLo Lhe formula for compuLlng Loll fees, lLs
lmposlLlon would vlolaLe Lhe non-lmpalrmenL clause of Lhe consLlLuLlon.
1he governmenL avers LhaL Lhe nl8C lmposes vA1 on all klnds of servlces of franchlse granLees,
lncludlng Lollway operaLlons, LhaL Lhe CourL should seek Lhe meanlng and lnLenL of Lhe law from
Lhe words used ln Lhe sLaLuLe, and LhaL Lhe lmposlLlon of vA1 on Lollway operaLlons has been
Lhe sub[ecL as early as 2003 of several 8l8 rullngs and clrculars.
32
1he governmenL also argues LhaL peLlLloners have no rlghL Lo lnvoke Lhe non-lmpalrmenL of
conLracLs clause slnce Lhey clearly have no personal lnLeresL ln exlsLlng Loll operaLlng
agreemenLs (1CAs) beLween Lhe governmenL and Lollway operaLors. AL any raLe, Lhe non-
lmpalrmenL clause cannoL llmlL Lhe SLaLe's soverelgn Laxlng power whlch ls generally read lnLo
conLracLs.
lssue: May Loll fees collecLed by Lollway operaLors be sub[ecLed Lo vA1 (Are Lollway operaLlons a
franchlse and/or a servlce LhaL ls sub[ecL Lo vA1)?
8ullng:
When a Lollway operaLor Lakes a Loll fee from a moLorlsL, Lhe fee ls ln effecL for Lhe laLLer's use
of Lhe Lollway faclllLles over whlch Lhe operaLor en[oys prlvaLe proprleLary rlghLs LhaL lLs
conLracL and Lhe law recognlze. ln Lhls sense, Lhe Lollway operaLor ls no dlfferenL from Lhe
servlce provlders under SecLlon 108 who allow oLhers Lo use Lhelr properLles or faclllLles for a
fee.
1ollway operaLors are franchlse granLees and Lhey do noL belong Lo excepLlons LhaL SecLlon 119
spares from Lhe paymenL of vA1. 1he word "franchlse" broadly covers governmenL granLs of a
speclal rlghL Lo do an acL or serles of acLs of publlc concern. 1ollway operaLors are, owlng Lo Lhe
naLure and ob[ecL of Lhelr buslness, "franchlse granLees." 1he consLrucLlon, operaLlon, and
malnLenance of Loll faclllLles on publlc lmprovemenLs are acLlvlLles of publlc consequence LhaL
necessarlly requlre a speclal granL of auLhorlLy from Lhe sLaLe.
A Lax ls lmposed under Lhe Laxlng power of Lhe governmenL prlnclpally for Lhe purpose of ralslng
revenues Lo fund publlc expendlLures. 1oll fees, on Lhe oLher hand, are collecLed by prlvaLe
Lollway operaLors as relmbursemenL for Lhe cosLs and expenses lncurred ln Lhe consLrucLlon,
malnLenance and operaLlon of Lhe Lollways, as well as Lo assure Lhem a reasonable margln of
lncome. AlLhough Loll fees are charged for Lhe use of publlc faclllLles, Lherefore, Lhey are noL
governmenL exacLlons LhaL can be properly LreaLed as a Lax. 1axes may be lmposed only by Lhe
governmenL under lLs soverelgn auLhorlLy, Loll fees may be demanded by elLher Lhe governmenL
or prlvaLe lndlvlduals or enLlLles, as an aLLrlbuLe of ownershlp.

D. D|rect vs. Ind|rect 1ax

ulfference ls based on posslblllLy of shlfLlng Lhe burden of Lax, Laxes may be classlfled lnLo dlrecL or
lndlrecL Lax.
D|rect 1ax Ind|rect 1ax
1axpayer dlrecLly llable on LransacLlon or
buslness s/he engages ln
ald by person who can shlfL burden Lo
someone else
CusLom duLles, ad valorem Laxes pald by oll
companles Lo 8CC for lmporLaLlon of crude oll.
Ad valorem Laxes pald Lo 8l8 afLer converLlng
crude oll Lo peLroleum producLs.
Lxclse and ad valorem Laxes oll companles pay
Lo 8l8 upon removal of peLroleum producLs
from lLs reflnery ls shlfLed Lo lLs buyer
LxacLed from very person who lL ls lnLended or
deslred should pay Lhem
LxacLed from Lhose person ln Lhe expecLaLlon
and lnLenLlon LhaL can shlfL Lhe burden Lo
someone else
Seller passes on Lax Lo hls buyer. ShlfLs Lax
burden noL llablllLy Lo pay lL.
Seller sLlll bears llablllLy Lo pay Lhe Lax, noL Lhe
33
buyer.

CIk v. LD1 (200S): lmporLanL Lo deLermlne lf Lhe Lax exempLlon granLed Lo a Laxpayer speclflcally
lncludes lndlrecL Lax whlch ls shlfLed Lo hlm as parL of Lhe purchase prlce, oLherwlse lL ls presumed LhaL
Lhe Lax exempLlon embraces only Lhose Laxes for whlch Lhe buyer ls dlrecLly llable.
L. Ind|rect 1axes vs. W|thho|d|ng 1axes
lndlrecL 1axes WlLhholdlng 1axes
lncldence of LaxaLlon falls on 1 person, buL
burden Lhereof can be shlfLed or passed on Lo
anoLher person
lncldence and burden of LaxaLlon fall on 1
person - sLaLuLory Lax payer
8urden noL shlfLed Lo wlLhholdlng agenL , who
slmply collecLs, by wlLhholdlng Lhe Lax due
from lncome paymenLs Lo enLlLles arlslng from
lncome paymenLs Lo enLlLles arlslng from
cerLaln LransacLlons and remlLs Lhem Lo Lhe
same governmenL

Case: As|a Internat|ona| Auct|oneers Inc vs CIk (2012)
Iacts:
Cn AugusL 23, 2004, Asla lnLernaLlonal AucLloneers, lnc. (AlA" for brevlLy), a corporaLlon operaLlng
wlLhln Lhe Sublc Speclal Lconomlc Zone and ls engaged ln Lhe lmporLaLlon and selllng of
used moLor vehlcles and heavy equlpmenL, was assessed by Lhe Commlssloner of lnLernal 8evenue
(Cl8") for deflclency value Added 1ax and Lxclse 1ax ln
Lhe amounLs of 102,333,320.00 and 4,334,713.00, respecLlvely, or a LoLal amounL
of 106,870,233.00, lncluslve of penalLles and lnLeresL, for aucLlon sales conducLed on lebruary 3, 6, 7,
and 8, 2004.
AlA clalmed LhaL lL flled a Llmely proLesL leLLer Lhrough reglsLered mall on AugusL 30, 2004 and
submlLLedaddlLlonal supporLlng documenLs on SepLember 24, 2004 and november 22, 2004. Cl8's
fallure Lo acL on Lhe proLesL prompLed AlA Lo flle a peLlLlon for revlew before Lhe CourL of 1ax Appeals
on !une 20, 2003. Powever, Lhe Cl8 flled a moLlon Lo dlsmlss on Lhe ground of lack of [urlsdlcLlon slnce
AlA's fallure Lo flle lLs proLesL wlLhln Lhe 30-day reglamenLary perlod rendered Lhe
assessmenL flnal and execuLory.
AfLer Lrlal, Lhe CourL of 1ax Appeals llrsL ulvlslon ruled LhaL Lhere was no sufflclenL evldence Lo prove
Lhe recelpL of Lhe proLesL leLLer by Lhe Cl8. AlA flled a moLlon for reconslderaLlon buL was denled,
hence, Lhls peLlLlon for revlew.
Cn !anuary 30, 2008, AlA flled a ManlfesLaLlon and MoLlon wlLh Leave of Lhe Ponorable CourL Lo uefer
or Suspend lurLher roceedlngs slnce lL avalled of Lhe 1ax AmnesLy rogram under 8epubllc AcL 9480,
known as Lhe 1ax AmnesLy AcL of 2007. Cn lebruary 3, 2008, Lhe 8ureau of lnLernal 8evenue lssued a
CerLlflcaLlon of CuallflcaLlon sLaLlng LhaL AlA has avalled and quallfled for 1ax AmnesLy for 1axable ?ear
2003 and rlor ?ears" pursuanL Lo 8A 9480.
Issue:
ls AlA dlsquallfled from avalllng lLself of Lhe 1ax AmnesLy under SecLlon 8 (a) of 8A 9480?
ne|d:
no. under SecLlon 8 (a) of Lhe 8A 9480 wlLhholdlng agenLs wlLh respecL Lo Lhelr wlLhholdlng Lax
llablllLles shall be dlsquallfled Lo avall of Lhe Lax amnesLy. ln Lhls case, AlA was noL belng assessed as
wlLhholdlng agenL LhaL falled Lo wlLhhold or remlL Lhe deflclency vA1 and exclse Lax buL as a Laxpayer
who ls dlrecLly llable for Lhe sald Laxes. Moreover, 8A 9480 does noL exclude from lLs coverage
34
Laxpayers operaLlng wlLhln speclal economlc zones. Pence, AlA ls quallfled Lo avall of Lhe 1ax AmnesLy
under 8A 9480.

III. Inherent L|m|tat|ons on the ower of 1axat|on
A. ub||c urpose - f|rst requ|s|te of a |awfu| taxat|on
LlmlLaLlons proceed from Lhe very naLure of Laxlng power lLself
CannoL be used for purely prlvaLe purposes or for Lhe excluslve beneflL of prlvaLe persons
ower Lo Lax exlsLs for general welfare hence musL only be used for publlc purpose
ubllc purpose noL deflned. LlasLlc concepL LhaL can be hammered Lo flL modern sLandards
o Should be glve broad lnLerpreLaLlon
o noL only Lo Lhose LradlLlonally vlewed as essenLlally governmenLal funcLlon
o 8ulldlng of roads, dellvery of baslc servlces
o romoLlon of soclal [usLlce, relocaLlon of lllegal seLLlers, low-cosL houslng, urban and
agrarlan reform.
! lndlrecL publlc beneflL
Who deLermlnes publlc purpose = leglslaLlve prerogaLlve
o 1he purpose and noL Lhe number of persons beneflLed deLermlnes wheLher of noL Lax ls
for publlc purpose
Cases of ubllc urpose
o ubllc lmprovemenL
o unemploymenL rellef
o 8ulldlngs and roads/lnfrasLrucLure
o Local pollce forces under 8A 6141
o lndusLrles classlfled as lndlspensable under u 1987
o ConsLrucLlon of home slLes
o romoLlon of sclence and lnvenLlon
o upllfLmenL of Lhe underprlvlleged
o 8ehablllLaLlon of Lhe sugar lndusLry
o enslons Lo deservlng reLlrees
o Cll lndusLry's proLecLlon
o Soclallzed houslng
o LducaLlonal subsldy

Case 1: ascua| vs. Secretary of ub||c Works
C.8. no. L-10403 uecember 29, 1960

Iacts:
eLlLloner ascual ln hls capaclLy as governor of 8lzal flled a declaraLory rellef regardlng Lhe
approprlaLlon of governmenL funds Lo be used ln Lhe consLrucLlon, reconsLrucLlon and repalr of feeder
roads. Pe alleged LhaL Lhe sald properLy where Lhe road ls Lo be consLrucLed ls owned by SenaLor
ZulueLa. 3 monLhs afLer Lhe effecLlvlLy of sald Lax law, sald properLy was donaLed Lo Lhe governmenL,
and was accepLed by Lhe same. 1he Lrlal courL dlsmlss Lhe peLlLlon on Lhe ground LhaL Lhe approprlaLlon
was valldaLed by Lhe donaLlon of Lhe properLy Lo Lhe governmenL.

Issue: WheLher or noL Lhe subsequenL donaLlon of Lhe properLy Lo Lhe governmenL rendered Lhe Lax
law valld.
33

ku||ng: no, Lhe courL sLressed LhaL Lhe valldlLy of a sLaLuLe depends upon Lhe powers of Congress aL Lhe
Llme of lLs passage or approval, noL upon evenLs occurrlng, or acLs performed, subsequenLly LhereLo,
unless Lhe laLLer conslsLs of an amendmenL of Lhe organlc law, removlng, wlLh reLrospecLlve operaLlon,
Lhe consLlLuLlonal llmlLaLlon lnfrlnged by sald sLaLuLe.

8eferrlng Lo Lhe 83,000.00 approprlaLlon for Lhe pro[ecLed feeder roads ln quesLlon, Lhe legallLy
Lhereof depended upon wheLher sald roads were publlc or prlvaLe properLy when Lhe blll, whlch, laLLer
on, became 8epubllc AcL 920, was passed by Congress, or, when sald blll was approved by Lhe resldenL
and Lhe dlsbursemenL of sald sum became effecLlve, or on !une 20, 1933. lnasmuch as Lhe land on whlch
Lhe pro[ecLed feeder roads were Lo be consLrucLed belonged Lhen Lo respondenL ZulueLa, Lhe resulL ls
LhaL sald approprlaLlon soughL a prlvaLe purpose, and hence, was null and vold. 1he donaLlon Lo Lhe
CovernmenL, over flve (3) monLhs afLer Lhe approval and effecLlvlLy of sald AcL, made, accordlng Lo Lhe
peLlLlon, for Lhe purpose of glvlng a "semblance of legallLy", or legallzlng, Lhe approprlaLlon ln quesLlon,
dld noL cure lLs aforemenLloned baslc defecL. ConsequenLly, a [udlclal nulllflcaLlon of sald donaLlon need
noL precede Lhe declaraLlon of unconsLlLuLlonallLy of sald approprlaLlon.

1he LesL of Lhe consLlLuLlonallLy of a sLaLuLe requlrlng Lhe use of publlc funds ls wheLher Lhe sLaLuLe ls
deslgned Lo promoLe Lhe publlc lnLeresL, as opposed Lo Lhe furLherance of Lhe advanLage of lndlvlduals,
alLhough each advanLage Lo lndlvlduals mlghL loclJeotolly serve Lhe publlc
Case: 1|o v. V|deogram kegu|atory 8oard
Iacts: 1he case ls a peLlLlon flled by peLlLloner on behalf of vldeogram operaLors adversely affecLed by
resldenLlal uecree no. 1987, An AcL CreaLlng Lhe vldeogram 8egulaLory 8oard" wlLh broad powers Lo
regulaLe and supervlse Lhe vldeogram lndusLry.
A monLh afLer Lhe promulgaLlon of Lhe sald resldenLlal uecree, Lhe amended Lhe naLlonal lnLernal
8evenue Code provlded LhaL:
SLC. 134. vldeo 1apes. - 1here shall be collecLed on each processed vldeo-Lape casseLLe, ready for
playback, regardless of lengLh, an annual Lax of flve pesos, rovlded, 1haL locally manufacLured or
lmporLed blank vldeo Lapes shall be sub[ecL Lo sales Lax."
SecLlon 10. 1ax on Sale, Lease or ulsposlLlon of vldeograms. - noLwlLhsLandlng any provlslon of law Lo
Lhe conLrary, Lhe provlnce shall collecL a Lax of LhlrLy percenL (30) of Lhe purchase prlce or renLal raLe,
as Lhe case may be, for every sale, lease or dlsposlLlon of a vldeogram conLalnlng a reproducLlon of any
moLlon plcLure or audlovlsual program."
llfLy percenL (30) of Lhe proceeds of Lhe Lax collecLed shall accrue Lo Lhe provlnce, and Lhe oLher flfLy
percenL (30) shall accrue Lo Lhe munlclpallLy where Lhe Lax ls collecLed, 8CvluLu, 1haL ln
MeLropollLan Manlla, Lhe Lax shall be shared equally by Lhe ClLy/MunlclpallLy and Lhe MeLropollLan
Manlla Commlsslon."
1he raLlonale behlnd Lhe Lax provlslon ls Lo curb Lhe prollferaLlon and unregulaLed clrculaLlon of
vldeograms lncludlng, among oLhers, vldeoLapes, dlscs, casseLLes or any Lechnlcal lmprovemenL or
varlaLlon Lhereof, have greaLly pre[udlced Lhe operaLlons of movle houses and LheaLers. Such
unregulaLed clrculaLlon have caused a sharp decllne ln LheaLrlcal aLLendance by aL leasL forLy percenL
(40) and a Lremendous drop ln Lhe collecLlon of sales, conLracLor's speclflc, amusemenL and oLher
Laxes, Lhereby resulLlng ln subsLanLlal losses esLlmaLed aL 430 Mllllon annually ln governmenL
revenues.
vldeogram(s) esLabllshmenLs collecLlvely earn around 600 Mllllon per annum from renLals, sales and
dlsposlLlon of vldeograms, and Lhese earnlngs have noL been sub[ecLed Lo Lax, Lhereby deprlvlng Lhe
CovernmenL of approxlmaLely 180 Mllllon ln Laxes each year.
1he unregulaLed acLlvlLles of vldeogram esLabllshmenLs have also affecLed Lhe vlablllLy of Lhe movle
36
lndusLry.
Issues:
(1) WheLher or noL Lax lmposed by Lhe uLC8LL ls a valld exerclse of pollce power.
(2) WheLher or nor Lhe uLC8LL ls consLlLuLlonal.
ne|d: 1axaLlon has been made Lhe lmplemenL of Lhe sLaLe's pollce power. 1he levy of Lhe 30 Lax ls for a
publlc purpose. lL was lmposed prlmarlly Lo answer Lhe need for regulaLlng Lhe vldeo lndusLry,
parLlcularly because of Lhe rampanL fllm plracy, Lhe flagranL vlolaLlon of lnLellecLual properLy rlghLs, and
Lhe prollferaLlon of pornographlc vldeo Lapes. And whlle lL was also an ob[ecLlve of Lhe uLC8LL Lo
proLecL Lhe movle lndusLry, Lhe Lax remalns a valld lmposlLlon.
We flnd no clear vlolaLlon of Lhe ConsLlLuLlon whlch would [usLlfy us ln pronounclng resldenLlal uecree
no. 1987 as unconsLlLuLlonal and vold. Whlle Lhe underlylng ob[ecLlve of Lhe uLC8LL ls Lo proLecL Lhe
morlbund movle lndusLry, Lhere ls no quesLlon LhaL publlc welfare ls aL boLLom of lLs enacLmenL,
conslderlng Lhe unfalr compeLlLlon posed by rampanL fllm plracy, Lhe eroslon of Lhe moral flber of Lhe
vlewlng publlc broughL abouL by Lhe avallablllLy of unclasslfled and unrevlewed vldeo Lapes conLalnlng
pornographlc fllms and fllms wlLh bruLally vlolenL sequences, and losses ln governmenL revenues due Lo
Lhe drop ln LheaLrlcal aLLendance, noL Lo menLlon Lhe facL LhaL Lhe acLlvlLles of vldeo esLabllshmenLs are
vlrLually unLaxed slnce mere paymenL of Mayor's permlL and munlclpal llcense fees are requlred Lo
engage ln buslness."
WPL8LlC8L, Lhe lnsLanL eLlLlon ls hereby dlsmlssed. no cosLs.

8. Inherent|y Leg|s|at|ve
non-delegaLlon of Lhe power Lo Lax as lL ls excluslvely vesLed ln Lhe leglslaLure

Lxcept|ons:
ArL 3, Sec 28 (2) of 1987 ConsLlLuLlon
Congress may, by law, auLhorlze Lhe resldenL Lo lmpose Larlff raLes, lmporL and exporL quoLas,
sub[ecL Lo Lhe llmlLaLlons and guldellnes as Lhe Congress may lmpose, conslsLenL wlLh Lhe
naLlonal developmenL program of Lhe governmenL

ArL 10, Sec 3 of Lhe 1987 ConsLlLuLlon
Lach local gov'L unlL shall have Lhe power Lo creaLe lLs own sources of revenue, fees, charges,
sub[ecL Lo such guldellnes and llmlLaLlons as Lhe Congress may provlde conslsLenL wlLh Lhe baslc
pollcy of local auLonomy. Such Laxes, fees, and oLher charges shall accrue excluslvely Lo Lhe
local governmenL.
Case: eps|-Co|a 8ott||ng Co. v Mun|c|pa||ty of 1anauan (1976)
IAC1S: epsl Cola has a boLLllng planL ln Lhe MunlclpallLy of 1anauan, LeyLe. epsl Cola quesLlons Lhe
consLlLuLlonallLy of 8epubllc AcL 2264 whlch allows for Lhe delegaLlon of Laxlng powers Lo local
governmenL unlLs, LhaL allowlng local governmenLs Lo Lax companles llke epsl Cola ls conflscaLory and
oppresslve.
ln SepLember 1962, Lhe MunlclpallLy approved Crd|nance No. 23 whlch levles and collecLs from sofL
drlnks producers and manufacLurers a Lal of one-s|xteenth (1]16) of a centavo for every bott|e of sofL
drlnk corked."
ln uecember 1962, Lhe MunlclpallLy also approved Crd|nance No. 27 whlch levles and collecLs on sofL
drlnks produced or manufacLured wlLhln Lhe LerrlLorlal [urlsdlcLlon of Lhls munlclpallLy a tax of one
centavo 0.01) on each ga||on of vo|ume capac|ty."
37
epsl Cola assalled Lhe valldlLy of Lhe ordlnances as lL alleged LhaL Lhey consLlLuLe double LaxaLlon ln Lwo
lnsLances: a) double LaxaLlon because Crdlnance no. 27 covers Lhe same sub[ecL maLLer and lmpose
pracLlcally Lhe same Lax raLe as wlLh Crdlnance no. 23, b) double LaxaLlon because Lhe Lwo ordlnances
lmpose percenLage or speclflc Laxes.
1he MunlclpallLy assalled Lhe argumenLs presenLed by epsl Cola. lL argued, among oLhers, LhaL only
Crdlnance no. 27 ls belng enforced and LhaL Lhe laLLer law ls an amendmenL of Crdlnance no. 23, hence
Lhere ls no double LaxaLlon.
ISSUL: WheLher or noL Lhere ls undue delegaLlon of Laxlng powers. WheLher or noL Lhere ls double
LaxaLlon.
2) 1here |s no doub|e taxat|on. 1he argumenL of Lhe MunlclpallLy ls well Laken. lurLher, epsl Cola's
asserLlon LhaL Lhe delegaLlon of Laxlng power ln lLself consLlLuLes double LaxaLlon cannoL be merlLed. lL
musL be observed LhaL Lhe delegaLlng auLhorlLy speclfles Lhe llmlLaLlons and enumeraLes Lhe Laxes over
whlch local LaxaLlon may noL be exerclsed. 1he reason ls LhaL Lhe SLaLe has excluslvely reserved Lhe
same for lLs own prerogaLlve. Moreover, double LaxaLlon, ln general, ls noL forbldden by our
fundamenLal law unllke ln oLher [urlsdlcLlons. uouble LaxaLlon becomes obnoxlous only where Lhe
Laxpayer ls Laxed Lwlce for Lhe beneflL of Lhe same governmenLal enLlLy or by Lhe same [urlsdlcLlon for
Lhe same purpose, buL noL ln a case where one Lax ls lmposed by Lhe SLaLe and Lhe oLher by Lhe clLy or
munlclpallLy.
Cn Lhe lasL lssue ralsed, Lhe ordlnances do noL parLake of Lhe naLure of a percenLage Lax on sales, or
oLher Laxes ln any form based Lhereon. 1he tax |s |ev|ed on the produce (whether so|d or not) and not
on the sa|es, wh|ch |s proh|b|ted. Crdlnance 27 repeals Crdlnance 23. 1he volume capaclLy of Lhe
Laxpayer's producLlon of sofL drlnks ls consldered solely for purposes of deLermlnlng Lhe Lax raLe on Lhe
producLs, buL Lhere ls noL seL raLlo beLween Lhe volume of sales and Lhe amounL of Lhe Lax.
C. Government
Agencles performlng governmenLal funcLlons are Lax-exempL unless expressly Laxed.
Agencles performlng proprleLary funcLlons are sub[ecL Lo Lax unless expressly exempLed.
CCCCs perform proprleLary funcLlon = sub[ecL Lo LaxaLlon
o LxempLlons under 8A 8424 as amended by 8A 933
! CSlS, SSS, hllPealLh, CSC
lnsLrumenLallLy of naLlonal CovernmenL ls exempL from local LaxaLlon
o MlAA v. CA, ClLy of aranaque: real properLles are owned by Lhe 8epubllc of Lhe
hlllpplnes
o LxempL from real esLaLe Lax
o lnsLrumenLallLy ls broader Lhan CCCC
MlAA ls noL a CCCC
CASL: MIAA v. C|ty of aranaque

MlAA recelved llnal noLlces of 8eal LsLaLe 1ax uellnquency from Lhe ClLy of aranaque for Lhe Laxable
years 1992 Lo 2001. MlAA's real esLaLe Lax dellnquency was esLlmaLed aL 624 mllllon.
1he ClLy of aranaque, Lhrough lLs ClLy 1reasurer, lssued noLlces of levy and warranLs of levy on Lhe
AlrporL Lands and 8ulldlngs. 1he Mayor of Lhe ClLy of aranaque LhreaLened Lo sell aL publlc aucLlon Lhe
AlrporL Lands and 8ulldlngs should MlAA fall Lo pay Lhe real esLaLe Lax dellnquency.
MlAA flled wlLh Lhe CourL of Appeals an orlglnal peLlLlon for prohlblLlon and ln[uncLlon, wlLh prayer for
prellmlnary ln[uncLlon or Lemporary resLralnlng order. 1he peLlLlon soughL Lo resLraln Lhe ClLy of
aranaque from lmposlng real esLaLe Lax on, levylng agalnsL, and aucLlonlng for publlc sale Lhe AlrporL
Lands and 8ulldlngs.
38
aranaque's ConLenLlon: SecLlon 193 of Lhe Local CovernmenL Code expressly wlLhdrew Lhe Lax
exempLlon prlvlleges of governmenL-owned and-conLrolled corporaLlons" upon Lhe effecLlvlLy of Lhe
Local CovernmenL Code. 8espondenLs also argue LhaL a baslc rule of sLaLuLory consLrucLlon ls LhaL Lhe
express menLlon of one person, Lhlng, or acL excludes all oLhers. An lnLernaLlonal alrporL ls noL among
Lhe excepLlons menLloned ln SecLlon 193 of Lhe Local CovernmenL Code. 1hus, respondenLs asserL LhaL
MlAA cannoL clalm LhaL Lhe AlrporL Lands and 8ulldlngs are exempL from real esLaLe Lax.
MlAA's conLenLlon: AlrporL Lands and 8ulldlngs are owned by Lhe 8epubllc. 1he governmenL cannoL Lax
lLself. 1he reason for Lax exempLlon of publlc properLy ls LhaL lLs LaxaLlon would noL lnure Lo any publlc
advanLage, slnce ln such a case Lhe Lax debLor ls also Lhe Lax credlLor.
lssue: WCn AlrporL Lands and 8ulldlngs of MlAA are exempL from real esLaLe Lax under exlsLlng laws?
?es. Lrgo, Lhe real esLaLe Lax assessmenLs lssued by Lhe ClLy of aranaque, and all proceedlngs Laken
pursuanL Lo such assessmenLs, are vold.
Peld: MlAA ls noL a CovernmenL-Cwned or ConLrolled CorporaLlon
MlAA ls noL a governmenL-owned or conLrolled corporaLlon buL an lnsLrumenLallLy of Lhe naLlonal
CovernmenL and Lhus exempL from local LaxaLlon.
MlAA ls noL a sLock corporaLlon because lL has no caplLal sLock dlvlded lnLo shares. MlAA has no
sLockholders or voLlng shares.
MlAA ls also noL a non-sLock corporaLlon because lL has no members. A non-sLock corporaLlon musL
have members.
MlAA ls a governmenL lnsLrumenLallLy vesLed wlLh corporaLe powers Lo perform efflclenLly lLs
governmenLal funcLlons. MlAA ls llke any oLher governmenL lnsLrumenLallLy, Lhe only dlfference ls LhaL
MlAA ls vesLed wlLh corporaLe powers.
When Lhe law vesLs ln a governmenL lnsLrumenLallLy corporaLe powers, Lhe lnsLrumenLallLy does noL
become a corporaLlon. unless Lhe governmenL lnsLrumenLallLy ls organlzed as a sLock or non-sLock
corporaLlon, lL remalns a governmenL lnsLrumenLallLy exerclslng noL only governmenLal buL also
corporaLe powers. 1hus, MlAA exerclses Lhe governmenLal powers of emlnenL domaln, pollce auLhorlLy
and Lhe levylng of fees and charges. AL Lhe same Llme, MlAA exerclses all Lhe powers of a corporaLlon
under Lhe CorporaLlon Law, lnsofar as Lhese powers are noL lnconslsLenL wlLh Lhe provlslons of Lhls
LxecuLlve Crder."
8eal roperLy Cwned by Lhe 8epubllc ls noL 1axable
Sec 234 of Lhe LCC provldes LhaL real properLy owned by Lhe 8epubllc of Lhe hlllpplnes or any of lLs
pollLlcal subdlvlslons excepL when Lhe beneflclal use Lhereof has been granLed, for conslderaLlon or
oLherwlse, Lo a Laxable person followlng are exempLed from paymenL of Lhe real properLy Lax.Powever,
porLlons of Lhe AlrporL Lands and 8ulldlngs LhaL MlAA leases Lo prlvaLe enLlLles are noL exempL from real
esLaLe Lax. lor example, Lhe land area occupled by hangars LhaL MlAA leases Lo prlvaLe corporaLlons ls
sub[ecL Lo real esLaLe Lax.

D. Internat|ona| Com|ty

ArL. 2, Sec. 2 of Lhe ConsLlLuLlon: Lhe hlllpplnes adopLs Lhe generally accepLed prlnclples of
lnLernaLlonal law as parL of Lhe law of Lhe land, and adheres Lo Lhe pollcy of peace, equallLy,
[usLlce, freedom, cooperaLlon, and amlLy wlLh all naLlons.
Soverelgn LquallLy Among SLaLes
o SLaLes [urldlcally equal, en[oys Lhe same rlghL, have equal capaclLy ln Lhelr
exerclse
39
o Lven Lhe sLrongesL sLaLe cannoL assume [urlsdlcLlon over anoLher sLaLe, no
maLLer how weak
o Cr quesLlon Lhe valldlLy of lLs acLs ln so far as Lhey are made Lo Lake effecL
wlLhln lLs own LerrlLory.
unlversal rlnclple of lnLernaLlonal Law: lorelgn Lmbassles are consldered exLenslons
of Lhe LerrlLorlallLy of forelgn sLaLes
o 1o lmpose Laxes upon Lhem ls LanLamounL Lo exerclse of [urlsdlcLlon over Lhese
forelgn sLaLes.

Case: Deutsche 8ank v. CIk (2013)

lacLs:
CcL. 21, 2003: ueuLsche 8ank (eLlLloner), ln accordance wlLh Sec. 28(A)(3) of Lhe nl8C, wlLhheld
and remlLLed Lo Lhe Commlssloner of lnLernal 8evenue (Cl8/ 8espondenL) 67,688,333.31,
represenLlng 13 branch proflL remlLLance (881) on lLs regular banklng unlL (88u) neL lncome
remlLLed Lo ueuLsche 8ank Cermany (u8 Cermany) for 2002 and prlor Laxable years.
CcL. 4, 2003:
o 8ellevlng LhaL lL made an overpaymenL, ueuLsche 8ank flled a clalm for refund or
lssuance of Lax credlL cerLlflcaLe for 22,362,831.17.
o lL also requesLed from Lhe lnLernaLlonal 1ax Affalrs ulvlslon (l1Au) for a conflrmaLlon of
lLs enLlLlemenL Lo Lhe preferenLlal Lax raLe of 10 under Lhe 8-Cermany 1reaLy.
ueuLsche 8ank's clalm for refund was denled on Lhe ground LhaL Lhe appllcaLlon for a Lax LreaLy
rellef was noL flled wlLh l1Au prlor Lo Lhe paymenL of 881 and acLual remlLLance of lLs branch
proflLs Lo u8 Cermany, or prlor Lo lLs avallmenL of Lhe preferenLlal raLe of 10 under Lhe 8-
Cermany 1reaLy provlslon - whlch vlolaLed Lhe 13 day perlod mandaLed by 8evenue
Memorandum Crder (8MC) no. 1-2000.
Pence Lhe appeal by ueuLsche 8ank.
o Cl8 clalms LhaL Lhe requlremenL of prlor appllcaLlon under 8MC no. 1-2000 ls
mandaLory.
8MC no. 1-2000 alms Lo prevenL Lhe erroneous lnLerpreLaLlon and/ or
appllcaLlon of Lhe LreaLy provlslons - Lo foresLall assessmenLs agalnsL
corporaLlons who erroneously avalled of Lhe beneflLs of Lhe Lax LreaLy buL are
noL legally enLlLled Lo lL, as well as Lo save such lnvesLors from Lhe Ledlous
process of clalms for a refund due Lo an lnaccuraLe appllcaLlon of Lhe Lax LreaLy
provlslons.

lssue: WheLher Lhe fallure Lo sLrlcLly comply wlLh 8MC no. 1-2000 wlll deprlve persons or corporaLlons
of Lhe beneflL of a Lax LreaLy?

8ullng: no.
1he ConsLlLuLlon provldes for adherence Lo Lhe general prlnclples of lnLernaLlonal law as parL of
Lhe law of Lhe land.
o loctosootsetvooJodemands performance ln good falLh of LreaLy obllgaLlons on Lhe parL
of Lhe sLaLes LhaL enLer lnLo Lhe agreemenL.
o Lvery LreaLy ln force ls blndlng upon Lhe parLles, and obllgaLlons under Lhe LreaLy musL
be performed by Lhem ln good falLh.
o 1reaLles have Lhe force and effecL of law ln Lhls [urlsdlcLlon.
40
1ax LreaLles are enLered lnLo Lo reconclle Lhe naLlonal flscal leglslaLlons of Lhe conLracLlng
parLles and, ln Lurn, help Lhe Laxpayer avold slmulLaneous LaxaLlons ln 2 dlfferenL [urlsdlcLlons.
o 1ax convenLlons are drafLed Lo ellmlnaLe lnLernaLlonal [urldlcal double LaxaLlon - Lhe
lmposlLlon of comparable Laxes ln 2 or more sLaLes on Lhe same Laxpayer ln respecL of
Lhe same sub[ecL maLLer and for ldenLlcal perlod.
8aLlonale for dolng away wlLh double LaxaLlon: 1o encourage Lhe free flow of
goods and servlces and Lhe movemenL of caplLal, Lechnology and persons
beLween counLrles, condlLlons deemed vlLal ln creaLlng robusL and dynamlc
economles.
A sLaLe LhaL has conLracLed valld lnLernaLlonal obllgaLlons ls bound Lo make ln lLs leglslaLlons
Lhose modlflcaLlons LhaL may be necessary Lo ensure Lhe fulflllmenL of Lhe obllgaLlons
underLaken.
o 1he 8l8 musL noL lmpose addlLlonal requlremenLs LhaL would negaLe Lhe avallmenL of
Lhe rellefs provlded or under lnLernaLlonal agreemenLs. More so, when Lhe 8-Cermany
1ax 1reaLy does noL provlde for any pre-requlslLe for Lhe avallmenL of Lhe beneflLs.
1here ls noLhlng ln 8MC no. 1-2000 whlch would lndlcaLe a deprlvaLlon of enLlLlemenL Lo a Lax
LreaLy rellef for fallure Lo comply wlLh Lhe 13-day perlod. Whlle Lhe clear lnLenLlon of Lhe 8l8 ln
lmplemenLlng 8MC no. 1-2000 ls recognlzed, ouLrlghL denlal of a Lax LreaLy rellef for fallure Lo
sLrlcLly comply wlLh Lhe prescrlbed perlod ls noL ln harmony wlLh Lhe ob[ecLlves of Lhe
conLracLlng sLaLe Lo ensure LhaL Lhe beneflLs granLed under Lax LreaLles are en[oyed by duly
enLlLled persons or corporaLlons.
CbllgaLlons Lo comply wlLh a Lax LreaLy musL Lake precedence over Lhe ob[ecLlve of 8MC no. 1-
2000.
Whlle Lhe consequences soughL Lo be prevenLed by 8MC no. 1-2000 lnvolve an admlnlsLraLlve
procedure, Lhese may be remedled Lhrough oLher sysLem managemenL processes (e.g., Lhe
lmposlLlon of a flne or penalLy). 8uL Lhose who are enLlLled Lo Lhe beneflL of a LreaLy for fallure
Lo sLrlcLly complylng wlLh an admlnlsLraLlve lssuance requlrlng prlor appllcaLlon for Lax LreaLy
rellef.

CASL: Sea-Land Serv|ces vs CA (2001)-8CM8ALLS
uocLrlne: 1ransporL or shlpmenL of PCuSLPCLu goods and effecLs of uS MlllLary personnel ls
nC1 lncluded ln Lhe Lerm consLrucLlon, malnLenance, operaLlon and defenses of bases.
lacLs:
eLlLloner (Sea-Land) ls an Amerlcan lnLernaLlonal shlpplng company llcensed by SLC Lo
do buslness ln Lhe hlls enLered lnLo a conLracL wlLh uS governmenL Lo LransporL
mlllLary household goods and effecLs of uS mlllLary personnel asslgned Lo Lhe Sublc
naval 8ase
SubsequenLly, peLlLloner flled wlLh 8l8 lLs l18 and pald lncome Lax due of 1.3 as
requlred ln Sec 23(a) (2) of Lhe nl8C ln relaLlon Lo A9 of Lhe 8-uS 1ax LreaLy amounLlng
Lo 870,093.12
Powever, Lhey clalmed LhaL Lhey pald lL by mlsLake and flled a refund wlLh 8l8 buL
before Lhe clalm could be acLed upon by Cl8, peLlLloner flled a peLlLlon for revlew wlLh
C1A Lo sLop Lhe runnlng of 2 year prescrlpLlve perlod.
C1A and CA denled peLlLloners clalm for refund
41
lssue: W/n Lhe lncome LhaL peLlLloner derlved from servlces ln LransporLlng Lhe household
goods and effecLs of uS mlllLary personnel falls wlLhln Lhe Lax exempLlon provlded ln Axll p4 of
Lhe 8-uS mlllLary bases agreemenL?
8ullng: nC
8-MlllLary babes agreemenL provldes LhaL no naLlonal of uS or corporaLlon organlzed under
Lhe laws of Lhe uS, resldenL ln Lhe uS, shall be llable Lo pay lncome Lax ln Lhe hlllpplnes ln
respecL of any proflLs derlved under a conLracL made ln Lhe uS wlLh Lhe governmenL of Lhe uS ln
connecLlon wlLh Lhe CCn18uC1lCn, MAln1LnAnCL,CL8A1lCn and defense of Lhe bases or
any Lax ln Lhe naLure of a llcense ln respecL Lo any servlce or work for Lhe uS ln connecLlon wlLh
Lhe consLrucLlon, malnLenance, operaLlon and defense of Lhe bases.
Clearly, Lhe LransporL or shlpmenL of household goods and effecLs of uS mlllLary personnel ls
nC1 lncluded ln Lhe Lerm consLrucLlon, malnLenance, operaLlon and defense of Lhe bases"
nelLher could Lhe performance of Lhls servlce Lo Lhe uS governmenL musL be lnLerpreLed dlrecLly
relaLed Lo Lhe defense and securlLy of Lhe hlllpplne LerrlLorles.
SC emphaslzed LhaL when Lhe law speaks ln clear and caLegorlcal language Lhere ls no reason for
lnLerpreLaLlon or consLrucLlon buL only for appllcaLlon.
LasLly, Laws granLlng exempLlon from Lax are consLrued agalnsL Lhe Laxpayer and llberally ln
favor of Lhe Laxlng power.

L. 1err|tor|a| Iur|sd|ct|on]1err|tor|a||ty
Laws cease Lo operaLe beyond a counLry's [urlsdlcLlonal llmlLs
1axlng power of a counLry ls llmlLed Lo persons and properLles wlLhln lLs [urlsdlcLlon
8ules ln llxlng 1ax SlLus
1. oll/CaplLaLlon/CommunlLy 1ax: based on resldence of Lax payer, regardless of
source of lncome or locaLlon of properLy of Laxpayer
2. roperLy 1ax:
a. 8eal roperLy: Laxable ln sLaLe/counLry where lL ls locaLed, regardless of
wheLher owner ls resldenL or non-resldenL
b. ersonal roperLy: wherever lL ls acLually kepL or locaLed, held Lo be
domlclle of owner. lollows docLrlne of moblllo sepoootot petsooom.
movobles follow tbe petsoo
1hough mere flcLlon of law, wlLhouL consLlLuLlonal foundaLlon
Applled when convenlenL
rovlded noL lnconslsLenL wlLh express provlslons of law or would
noL resulL ln ln[usLlce, or properLy has noL acqulred yeL acLual slLus
elsewhere
1o acqulre slLus ln sLaLe, oLher Lhan domlcle of owner, Langlble
properLy musL have deflnlLe locaLlon
o Accompanled by some degree of permanency
o Mere Lemporary or LranslenL presence ls noL sufflclenL
Shares of sLock: slLus for purposes of LaxaLlon ls sLaLe where Lhey
are permanenLly kepL regardless of domlclle of owner or sLaLe
where corporaLlon was organlzed
8A 8424: properLles whlch have acqulred slLus. Consldered by law
as locaLed ln Lhe hlllpplnes, resldence of owner ls lmmaLerlal.
1. lranchlse exerclsed ln Lhe hlllpplnes
42
2. Shares of sLock, obllgaLlon, bonds lssued by domesLlc
corporaLlon where 83 of buslness ls locaLed ln Lhe
hlllpplnes. lL ls sub[ecL Lo donor's Lax and esLaLe Lax
3. Shares of sLock, obllgaLlon, bonds lssued by forelgn
corporaLlon whlch has acqulred buslness slLus, when such
have been used ln furLherance of Lhe buslness of Lhe forelgn
corporaLlon.
4. Shares/rlghLs ln a parLnershlp buslness or lndusLry
esLabllshed ln Lhe hlllpplnes.
c. uomlclle: consLlLuLes prlnclpal seaL of resldence, buslness, pursulLs,
connecLlons, aLLachmenLs, pollLlcal relaLlons
l. lnLenL Lo make lL a home and llve Lhere for an lndeflnlLe Llme
ll. lacL of llvlng ln place wlLh lnLenL Lo make lL one's home.
3. Lxclse 1ax: lmposed on Lhe exerclse of a rlghL or prlvllege
a. lncome 1ax:
l. lace: 1axed upon sources of lncome derlved from wlLhln Lhe
hlllpplnes
-non-resldenL allen, non-resldenL forelgn corp, non-resldenL clLlzen
ll. naLlonallLy: 1axed upon sources of lncome derlved from wlLhln and
ouLslde Lhe hlllpplnes
- resldenL clLlzen, domesLlc corporaLlon
lll. 8esldence: 1axed on lncome derlved from sources wlLhln Lhe
hlllpplnes
- resldenL allen, resldenL forelgn corp
b. uonor's 1ax
l. lace: non-resldenL allen - Lax based on properLles slLuaLed ln Lhe
hlllpplnes
ll. naLlonallLy: resldenL and non-resldenL clLlzen - Lax based on
properLles wherever slLuaLed
lll. 8esldence - resldenL allen: Lax based on where properLles slLuaLed
c. LsLaLe 1ax: Lax lmposed where properLy ls slLuaLed
d. vA1: slLus ls where LransacLlon ls made
CASL: MANILA LLLC1kIC v. A1CC: Lhe Supreme CourL ruled LhaL lnsurance premlum pald on a flre
lnsurance pollcy coverlng properLy slLuaLed ln Lhe hlls. are Laxable ln Lhe hlls. Lven Lhough Lhe flre
lnsurance conLracL was execuLed ouLslde Lhe hlls. and Lhe lnsurance pollcy ls dellvered Lo Lhe lnsured
Lhereln. 1hls ls because tbe lblllpploes Covetomeot most qet sometbloq lo tetoto fot tbe ptotectloo lt
qlves to tbe losoteJ ptopetty lo tbe lblls. ooJ by teosoo of socb ptotectloo, tbe losotet ls beoeflteJ
tbeteby.

CASL: kLAGAN v. CIk (1969)

keagan v. CIk: 1err|tor|a| Iur|sd|ct|on
Wllllam 8eagan was an employee of an Amerlcan corporaLlon provldlng Lechnlcal asslsLance Lo Lhe uS
Alr lorce ln Lhe hlllpplnes. Pe sold hls Cadlllac Lo a member of Lhe uS Marlne Corps aL Lhe Clark Alr
8ase ln ampanga. 1he Cl8 assessed hlm and he pald Lhe lncome Lax on Lhe amounL reallzed from Lhe
sale. 8eagan laLer proLesLed on Lhe ground LhaL Lhe sale was made ouLslde hlllpplne LerrlLory, beyond
lLs [urlsdlcLlonal power Lo Lax.
43

ISSUL: WheLher Lhe sale ls exempL from lncome Lax.

nLLD:no. 1he sale ls noL exempL from lncome Lax because lL Look place wlLhln hlllpplne LerrlLory.
1he hlllpplnes, belng lndependenL and soverelgn, lLs auLhorlLy may be exerclsed over lLs enLlre domaln.
Powever, any sLaLe may submlL Lo a resLrlcLlon of lLs soverelgn rlghLs. under cerLaln condlLlons, lLs laws
may as Lo some persons found wlLhln lLs LerrlLory no longer conLrol. lL may also allow anoLher power Lo
parLlclpaLe ln Lhe exerclse of [urlsdlcLlonal rlghLs over cerLaln porLlons of lLs LerrlLory. lf lL does, lL does
noL follow LhaL such areas become lmpressed wlLh an allen characLer. 1hey reLaln Lhelr sLaLus as naLlve
soll. 1hey are sLlll sub[ecL Lo lLs auLhorlLy. lL [urlsdlcLlon may be dlmlnlshed buL lL does noL dlsappear.
Pence, Lhe Clark Alr 8ase ls sLlll wlLhln Lhe [urlsdlcLlon of Lhe hlllpplnes for purposes of lncome Lax
leglslaLlon.


CASL: CIk v. M|tsub|sh| Meta| Corp, At|as Conso||dated M|n|ng (1990)

Doctr|ne: Whlle lnLernaLlonal comlLy ls lnvoked ln Lhls case on LhaL Lhe funds lnvolved ln Lhe loans are
Lhose of a forelgn governmenL, scrupulous care musL be Laken Lo avold openlng Lhe floodgaLes Lo Lhe
vlolaLlon of our Lax laws.

Iacts:
ALlas Mlnlng enLered lnLo a Loan and Sales conLracL wlLh MlLsublshl MeLal (MlLsublshl)
ALlas borrowed $20M from MlLsublshl MeLal
ALlas, ln shall Lo sell Lo MlLsublshl alone all Lhe copper concenLraLes produced from sald machlne
for a perlod of flfLeen (13) years
MlLsublshl ls a !apanese corporaLlon llcensed Lo engage buslness ln Lhe hlllpplnes
MlLsublshl ln Lurn applled for a loan wlLh lmporL-LxporL 8ank of !apan (Lxlm8ank)
o Cn Lhe condlLlon LhaL: MlLsublshl Lo use Lhe amounL as a loan Lo ALlas and as a
conslderaLlon for lmporLlng copper concenLraLes from ALlas
o A consorLlum of !apanese banks ln Lurn ralsed funds for MlLsublshl's $20M loan
ursuanL Lo Lhe conLracL, ALlas pald a LoLal of 13M ln lnLeresL paymenL Lo MlLsublshl for Lhe
years 1974-1973
MlLsublshl execuLed a walver and dlsclalmer of lLs lnLeresL ln Lhe clalm for Lax credlL ln favor
of ALlas
Cl8 dld noL acL on Lhe Lax credlL, hence, MlLsublshl and ALlas flled a eLlLlon for 8evlew wlLh C1A
8asls for Lax exempLlon: MlLsublshl was a mere agenL of Lxlmbank, whlch ls a flnanclng
lnsLlLuLlon owned, conLrolled and flnanced by Lhe !apanese CovernmenL
MlLsublshl and ALlas based Lhelr clalm on: naLlonal lnLernal 8evenue Code, (b) (7) (A), whlch
excludes from gross lncome:
(A) lncome recelved from Lhelr lnvesLmenLs ln Lhe hlllpplnes ln loans, sLocks, bonds or
oLher domesLlc securlLles, or from lnLeresL on Lhelr deposlLs ln banks ln Lhe hlllpplnes
by: (1) forelgn governmenLs, (2) flnanclng lnsLlLuLlons owned, conLrolled, or en[oylng
reflnanclng from Lhem, and (3) lnLernaLlonal or reglonal flnanclng lnsLlLuLlons
esLabllshed by governmenLs.
Issues:
44
1. WCn lnLeresL lncome from Lhe loans exLended Lo ALlas by MlLsublshl ls excludlble from gross
lncome LaxaLlon pursuanL Lo SecLlon 29 b) (7) (A) of Lhe Lax code and, Lherefore, exempL from
wlLhholdlng Lax. - no!
2. WheLher or noL MlLsublshl ls a mere condulL of Lxlmbank whlch wlll Lhen be consldered as Lhe
credlLor whose lnvesLmenLs ln Lhe hlllpplnes on loans are exempL from Laxes under Lhe code.
- nC!
ne|d:
1. ConLracL beLween Lxlmbank and MlLsublshl are Lhelrs alone, ALlas ls a Lhlrd parLy. Loan and
sales conLracL beLween MlLsublshl and ALlas does noL conLaln any dlrecL or lnferenLlal reference
Lo Lxlmbank whaLsoever. 1he agreemenL ls sLrlcLly beLween MlLsublshl as credlLor ln Lhe
conLracL of loan and ALlas as Lhe seller of Lhe copper concenLraLes.
o Lhe conLracL beLween Lxlmbank and MlLsublshl ls enLlrely dlfferenL. lL ls compleLe ln
lLself, does noL appear Lo be suppleLory or collaLeral Lo anoLher conLracL
2. Mere expedlenL of havlng a hlllpplne corporaLlon enLer lnLo a conLracL for loans or oLher
domesLlc securlLles wlLh prlvaLe forelgn enLlLles, whlch ln Lurn wlll negoLlaLe lndependenLly wlLh
Lhelr governmenLs, could be avalled of Lo Lake advanLage of Lhe Lax exempLlon law under
dlscusslon.
CASL: CIk vs Maruben| Corp (2001)-kUNG
Iacts:
Cl8 assalls Lhe CA declslon whlch afflrmed C1A, orderlng Cl8 Lo deslsL from collecLlng Lhe 1983
deflclencylncome, branch proflL remlLLance and conLracLor's Laxes from Marubenl Corp afLer flndlng Lhe
laLLer Lo have properly avalled of Lhe Lax amnesLy under LC 41 & 64, as amended.
Marubenl, a !apanese corporaLlon, engaged ln general lmporL and exporL Lradlng, flnanclng
and consLrucLlon, ls duly reglsLered ln Lhe hlllpplnes wlLh Manlla branch offlce. Cl8 examlned Lhe
Manlla branch's books of accounLs for flscal year endlng March 1983, and found LhaL respondenL had
undeclared lncome from conLracLs wlLh nuC and hllphos for consLrucLlon of a wharf/porL complex and
ammonla sLorage complex respecLlvely.
Cn AugusL 27, 1986, Marubenl recelved a leLLer from Cl8 assesslng lL for several deflclency Laxes. Cl8
clalms LhaL Lhe lncome respondenL derlved were lncome from hlllpplne sources, hence sub[ecL Lo
lnLernal revenue Laxes. Cn SepL 1986, respondenL flled 2 peLlLlons for revlew wlLh C1A: Lhe flrsL,
quesLloned Lhe deflclency lncome, branch proflL remlLLance and conLracLor's Lax assessmenLs and
second quesLloned Lhe deflclency commerclal broker's assessmenL.
Cn Aug 2, 1986, LC 41 declared a Lax amnesLy for unpald lncome Laxes for 1981-83, and LhaL Laxpayers
who wlshed Lo avall Lhls should on or before CcL 31, 1986. Marubenl flled lLs Lax amnesLy reLurn on CcL
30, 1986.
Cn nov 17, 1986, LC 64 expanded LC 41's scope Lo lnclude esLaLe and donor's Laxes under 1lLle 3 and
buslness Lax under Chap 2, 1lLle 3 of nl8C, exLended Lhe perlod of avallmenL Lo uec 13, 1986 and sLaLed
Lhose who already avalled amnesLy under LC 41 should flle an amended reLurn Lo avall of Lhe new
beneflLs. Marubenl flled a supplemenLal Lax amnesLy reLurn on uec 13, 1986.
C1A found LhaL Marubenl properly avalled of Lhe Lax amnesLy and deemed cancelled Lhe deflclency
Laxes. CA afflrmed on appeal.

Issue: W/n Marubenl ls exempLed from paylng Lax
ne|d:
43
es.
'( )* $+," -. ".."/,010,2
Cl8 clalms Marubenl ls dlsquallfled from Lhe Lax amnesLy because lL falls under Lhe excepLlon ln Sec 4b
of LC 41:
5ec. 4. xceptloos.-1be followloq toxpoyets moy oot ovoll tbemselves of tbe omoesty betelo qtooteJ.
xxx b) 1bose wltb locome tox coses olteoJy flleJ lo coott os of tbe effectlvlty beteof,
eLlLloner argues LhaL aL Lhe Llme respondenL flled for lncome Lax amnesLy on CcL 30, 1986, a case
had alreadybeen flled and was pendlng before Lhe C1A and Marubenl Lherefore fell under Lhe excepLlon.
Powever, Lhe polnL of reference ls Lhe daLe of effecLlvlLy of LC 41 and LhaL Lhe flllng of lncome Lax cases
musL have been made before and as of lLs effecLlvlLy.
LC 41 Look effecL on Aug 22, 1986. 1he case quesLlonlng Lhe 1983 deflclency was flled wlLh C1A on SepL
26, 1986. When LC 41 became effecLlve, Lhe case had noL yeL been flled. Marubenl does noL fall ln Lhe
excepLlon and ls Lhus, noL dlsquallfled from avalllng of Lhe amnesLy under LC 41 for Laxes on lncome
and branch proflLremlLLance.
1he dlfflculLy hereln ls wlLh respecL Lo Lhe conLracLor's Lax assessmenL (buslness Lax) and
respondenL'savallmenL of Lhe amnesLy under LC 64, whlch expanded LC 41's coverage. When LC 64
Look effecL on nov 17, 1986, lL dld noL provlde for excepLlons Lo Lhe coverage of Lhe amnesLy for
buslness, esLaLe and donor's Laxes. lnsLead, SecLlon 8 sald LC provlded LhaL:
5ectloo 8. 1be ptovlsloos of xecotlve OtJets Nos. 41 ooJ 54 wblcb ote oot coottoty to ot
locooslsteot wltb tbls omeoJototy xecotlve OtJet sboll temolo lo foll fotce ooJ effect.
uue Lo Lhe LC 64 amendmenL, Sec 4b cannoL be consLrued Lo refer Lo LC 41 and lLs daLe of effecLlvlLy.
1hegeneral rule ls LhaL an amendaLory acL operaLes prospecLlvely. lL may noL be glven a reLroacLlve
effecL unless lL ls so provlded expressly or by necessary lmpllcaLlon and no vesLed rlghL or obllgaLlons
of conLracL are Lherebylmpalred.
3( )* 40,54 -. ,+6+,0-*
Marubenl conLends LhaL assumlng lL dld noL valldly avall of Lhe amnesLy, lL ls sLlll noL llable
for Lhe deflclency Lax because Lhe lncome from Lhe pro[ecLs came from Lhe Cffshore orLlon" as
opposed Lo Cnshore orLlon". It c|a|ms a|| mater|a|s and equ|pment |n the contract under the
"Cffshore ort|on" were manufactured and comp|eted |n Iapan, not |n the h|||pp|nes, and are
therefore not sub[ect to h|||pp|ne taxes.
(8C: Marubenl won ln Lhe publlc blddlng for pro[ecLs wlLh governmenL corporaLlons nuC and hllphos.
ln LheconLracLs, Lhe prlces were broken down lnLo a !apanese ?en orLlon (l and ll) and hlllpplne esos
orLlon and flnanced elLher by CLCl or by suppller's credlL. 1he !apanese ?en orLlon l corresponds Lo
Lhe lorelgn Cffshore orLlon, whlle !apanese ?en orLlon ll and Lhe hlllpplne esos orLlon correspond
Lo Lhe hlllpplne Cnshore orLlon. Marubenl has already pald Lhe Cnshore orLlon, a facL LhaL Cl8 does
noL deny.)
Cl8 argues LhaL slnce Lhe Lwo agreemenLs are Lurn-key, Lhey call for Lhe supply of boLh maLerlals
and servlcesLo Lhe cllenL, Lhey are conLracLs for a plece of work and are lndlvlslble. 1he slLus of Lhe Lwo
pro[ecLs ls ln Lhe hlllpplnes, and Lhe maLerlals provlded and servlces rendered were all done and
compleLed wlLhln Lhe LerrlLorlal [urlsdlcLlon of Lhe hlllpplnes. Accordlngly, respondenL's enLlre recelpLs
from Lhe conLracLs, lncludlng lLs recelpLs from Lhe Cffshore orLlon, consLlLuLe lncome from hlllpplne
sources. 1he LoLal gross recelpLs coverlng boLh labor and maLerlals should be sub[ecLed
Lo conLracLor's Lax (a Lax on Lhe exerclse of a prlvllege of selllng servlces or labor raLher Lhan a
sale on producLs).

Marubenl, however, was able Lo sufflclenLly prove ln Lrlal LhaL noL all lLs work was performed ln Lhe
hlllpplnes because some of Lhem were compleLed ln !apan (and ln facL subconLracLed) ln accordance
wlLh Lhe provlslons of Lhe conLracLs. All servlces for Lhe deslgn, fabrlcaLlon, englneerlng and
46
manufacLure of Lhe maLerlals andequlpmenL under !apanese ?en orLlon l were made and compleLed ln
!apan. 1hese serv|ces were rendered outs|de h|||pp|nes' tax|ng [ur|sd|ct|on and are therefore not
sub[ect to contractor'stax.eLlLlon denled.

I. Const|tut|ona| L|m|tat|ons on ower to 1ax
a. Due process of |aw: no person shall be deprlved of llfe, llberLy or properLy wlLhouL due process
of law
kequ|rements of due process: noLlce and hearlng

CASL: CIk V. C1A (1988)

Iacts:
Campos 8ueda lmporLed 46 carLons or 27,000 pleces of 1ungsol flashers. 8efore Lhe goods arrlved aL Lhe
porL of Manlla, Campos 8ueda flled wlLh Lhe CollecLor of CusLoms of Manlla a requesL for value
lnformaLlon for Lhe declaraLlon of Lhe lmporLed flashers under 1ar|ff nead|ng No. 8S.09 of Lhe 1arlff and
CusLoms Code aL 30 ad va|orem duty, for classlflcaLlon purpose. 1he CusLoms appralser however, re-
classlfled Lhe goods under 1ar|ff nead|ng No. 8S.19 of Lhe 1arlff and CusLoms Code aL S0 ad va|orem.
When Lhe goods arrlved aL Lhe porL of Manlla, Campos 8ueda lmmedlaLely flled a CusLoms lmporL LnLry
and lnLernal 8evenue ueclaraLlon under 1arlff Peadlng no. 83.19 of Lhe 1arlff and CusLoms Code aL 30
ad valorem buL, under proLesL and pald duLles and Laxes on Lhe goods, also under proLesL. lL Lhen flled a
Llmely proLesL agalnsL Lhe re-classlflcaLlon resulLlng ln Lhe paymenL of addlLlonal cusLoms duLy and
advance sales Lax and prayed for Lhe refund of Lhe sald.
1he CollecLor of CusLoms dlsmlssed Lhe proLesL. Campos 8ueda appealed Lo Lhe Commlssloner buL was
denled, and Lhen appealed Lo C1A whlch modlfled Lhe Commlssloner's declslon by orderlng Lhe refund
Lo Campos 8ueda of Lhe sum of Lhe addlLlonal cusLoms duLy buL noL Lhe advance sales Lax. 1he
Commlssloner now appeals vla peLlLlon for revlew Lhe sald declslon.

Issue: W/n Campos 8ueda should pay 30 or 30 ad valorem duLy

ne|d:
30. 1P no 83.09 of Lhe 1arlff and CusLoms Code provldes:
85.09. lecttlcol llqbtloq ooJ slqoollloq epolpmeot ooJ electtlcol wloJscteeo wlpets, Jeftostets ooJ
Jemlstets, fot cycles ot motot veblcles oJ vol. J0X.
Cn Lhe oLher hand, Lhe same Code provldes under 1P no. 83.19:
85.19. lecttlcol oppototos fot mokloq ooJ bteokloq electtlcol cltcolts, fot tbe ptotectloo of electtlcol
cltcolts, ot fot mokloq coooectloos to ot lo electtlc cltcolts (fot exomple, swltcbes, teloys, foses, llqbtloq
ottestets, sotqe sopptessots, ploqs, lomp-bolJets ooJ jooctloo boxes), teslstots, flxeJ ot votloble
(locloJloq poteotlometets), otbet tboo beotloq teslstots, ptloteJ cltcolts, swltcb bootJs (otbet tboo
telepbooe swltcbbootJs) ooJ coottol pooels.
ln flndlng for Campos 8ueda, C1A found LhaL lL has adduced sufflclenL evldence Lo esLabllsh Lhe general
purpose or predomlnaLlng use Lo whlch flashers are applled, and for whlch peLlLloner lmporLed Lhem, ls
preclsely as elecLrlcal equlpmenL for slgnalllng purposes for moLor vehlcles, LhaL ls, Lo slgnal or lndlcaLe a
rlghL or lefL hand Lurn by means of elecLrlcal flashes ln fronL and aL Lhe rear of moLor vehlcles and noL
merely as elecLrlcal apparaLus as Lhe Commlssloner clalms.
It |s the predom|nat|ng use to wh|ch art|c|es are genera||y app||ed or used that determ|nes the|r
47
character for the purpose of f|x|ng the duty, and not the spec|f|c or spec|a| use wh|ch any part|cu|ar
|mporter may make of the art|c|es |mported.
arLs of machlnes, apparaLus of appllances whlch are sulLable for use solely or prlnclpally wlLh a
parLlcular klnd of machlne or wlLh a number of machlnes falllng wlLhln a speclflc headlng, as a rule, are
Lo be classlfled wlLh Lhe machlnes ln Lhe same headlng. Also, Lhe law does noL provlde LhaL an arLlcle
lmporLed for elecLrlcal llghLlng and slgnalllng equlpmenL for moLor vehlcles falllng under 1arlff Peadlng
no. 83.09, lf lmpotteJ olooe, shall be classlfled under 1arlff Peadlng no. 83.19 as 'elecLrlcal apparaLus
for maklng and breaklng elecLrlcal clrculLs LhaL provlslon should noL be read lnLo Lhe law per Lhe clrcular
of Lhe former AcLlng CusLoms CollecLor. et|t|on den|ed. C1A dec|s|on aff|rmed.

b. Lqua| protect|on of |aws: nor shall any person be denled Lhe equal proLecLlon of Lhe law
-ConsLlLuLlon requlres unlformlLy, noL equallLy ln LaxaLlon
-equallLy: burden of Lax falls equally and lmparLlally upon all persons and properLy sub[ecL Lo lL
-no hlgher raLe or greaLer levy ln proporLlon Lo value lmposed upon one person or specles or
properLy Lhan upon oLhers slmllarly slLuaLed or of llke characLer
-noL requlre equal raLes of LaxaLlon on dlfferenL classes of properLy
-nor prohlblL unequal LaxaLlon so long as Lhe ln equallLy ls noL based on arblLrary classlflcaLlon
-does noL prohlblL speclal leglslaLlon/leglslaLlon llmlLed elLher ln ob[ecLs Lo whlch lL ls dlrecLed, or
by Lhe LerrlLory wlLhln whlch lL operaLes
-merely requlres all person sub[ecLed Lo such leglslaLlon shall be LreaLed allke, under llke
clrcumsLances and condlLlons, boLh ln Lhe prlvlleges conferred and llablllLles lmposed
-absoluLe equallLy ls lmposslble: equallLy among equals
lor ClasslflcaLlon Lo be valld: (uCCL)
1. ClasslflcaLlon ls based on subsLanLlal DlsLlncLlon
2. Applles Lo presenL and fuLure Cond|t|on
3. Germane Lo Lhe purpose of Lhe law
4. Applles Lqually Lo all members of Lhe same class
CASL: 1IU v. CA (1999)
Doctr|ne: 1he consLlLuLlonal rlghLs Lo equal proLecLlon of Lhe law ls noL vlolaLed by an execuLlve order,
lssued pursuanL Lo law, granLlng Lax and duLy lncenLlves only Lo Lhe buslness and resldenLs wlLhln Lhe
secured area" of Lhe Sublc Speclal Lconomlc Zone and denylng Lhem Lo Lhose who llve wlLhln Lhe Zone
buL ouLslde such fenced-ln" LerrlLory. 1he ConsLlLuLlon does noL requlre absoluLe equallLy among
resldenLs. lL ls enough LhaL all persons under llke clrcumsLances or condlLlons are glven Lhe same
prlvlleges and requlred Lo follow Lhe same obllgaLlons. ln shorL, a classlflcaLlon based on valld and
reasonable sLandards does noL vlolaLe Lhe equal proLecLlon clause.
Iacts: eLlLloners assall Lhe CA declslon and resoluLlon LhaL upheld Lhe consLlLuLlonallLy and valldlLy of
LC 97-A, accordlng Lo whlch Lhe granL and en[oymenL of Lhe Lax and duLy lncenLlves auLhorlzed under
8A 7227 (An AcL AcceleraLlng Lhe Converslon of MlllLary 8eservaLlons lnLo CLher roducLlve uses,
CreaLlng Lhe 8ases Converslon and uevelopmenL AuLhorlLy for Lhls urpose, rovldlng lunds 1herefor
and for CLher urposes") were llmlLed Lo Lhe buslness enLerprlses and resldenLs wlLhln Lhe fenced-ln
area of Lhe Sublc Speclal Lconomlc Zone (SSLZ).
Among oLhers, SecLlon 12 of 8A 7227 provldes LhaL, 1he provlslon of exlsLlng laws, rules and
regulaLlons Lo Lhe conLrary noLwlLhsLandlng, no Laxes, local and naLlonal, shall be lmposed wlLhln Lhe
Sublc Speclal Lconomlc Zone. ln lleu of paylng Laxes, Lhree percenL (3) of Lhe gross lncome earned by
all buslnesses and enLerprlses wlLhln Lhe Sublc Speclal Lconomlc Zone shall be remlLLed Lo Lhe naLlonal
CovernmenL, one percenL (1) each Lo Lhe local governmenL unlLs affecLed by Lhe declaraLlon of Lhe
48
zone ln proporLlon Lo Lhelr populaLlon area, and oLher facLors. ln addlLlon, Lhere ls hereby esLabllshed a
developmenL fund of one percenL (1) of Lhe gross lncome earned by all buslnesses and enLerprlses
wlLhln Lhe Sublc Speclal Lconomlc Zone Lo be uLlllzed for Lhe developmenL of munlclpallLles ouLslde Lhe
ClLy of Clongapo and Lhe MunlclpallLy of Sublc, and oLher munlclpallLles conLlguous Lo Lhe base areas
xxx ln case of confllcL beLween naLlonal and local laws wlLh respecL Lo Lax exempLlon prlvlleges ln Lhe
Sublc Speclal Lconomlc Zone, Lhe same shall be resolved ln favor of Lhe laLLer,"
LC 97, whlch clarlfled Lhe appllcaLlon of Lhe lncenLlves provlded Lhus:
Sec. 1. Oo lmpott 1oxes ooJ uotles. - 1ax and duLy-free lmporLaLlons shall apply only Lo raw maLerlals,
caplLal goods and equlpmenL broughL ln by buslness enLerprlses lnLo Lhe SSLZ. LxcepL for Lhese lLems,
lmporLaLlons of oLher goods lnLo Lhe SSLZ, wheLher by buslness enLerprlses or resldenL lndlvlduals, are
sub[ecL Lo Laxes and duLles under relevanL hlllpplne laws.
1he exporLaLlon or removal of Lax and duLy-free goods from Lhe LerrlLory of Lhe SSLZ Lo oLher parLs of
Lhe hlllpplne LerrlLory shall be sub[ecL Lo duLles and Laxes under relevanL hlllpplne laws.
Sec. 2. Oo All Otbet 1oxes. - ln lleu of all local and naLlonal Laxes (excepL lmporL Laxes and duLles), all
buslness enLerprlses ln Lhe SSLZ shall be requlred Lo pay Lhe Lax speclfled ln SecLlon 12(c) of 8.A. no.
7227.
8espondenL CourL held LhaL Lhere ls no subsLanLlal dlfference beLween Lhe provlslons of LC 97-A and
SecLlon 12 of 8A 7227. ln boLh, Lhe 'Secured Area' ls preclse and well-deflned as '. . . Lhe lands occupled
by Lhe Sublc naval 8ase and lLs conLlguous exLenslons as embraced, covered and deflned by Lhe 1947
MlllLary 8ases AgreemenL beLween Lhe hlllpplnes and Lhe unlLed SLaLes of Amerlca, as amended . . .'"
1he appellaLe courL concluded LhaL such belng Lhe case, peLlLloners could noL clalm LhaL LC 97-A ls
unconsLlLuLlonal, whlle aL Lhe same Llme malnLalnlng Lhe valldlLy of 8A 7227.
1he courL o poo also explalned LhaL Lhe lnLenLlon of Congress was Lo conflne Lhe coverage of Lhe SSLZ Lo
Lhe secured area" and noL Lo lnclude Lhe enLlre Clongapo ClLy and oLher areas menLloned ln SecLlon
12 of Lhe law."
1he CourL of Appeals furLher [usLlfled Lhe llmlLed appllcaLlon of Lhe Lax lncenLlves as belng wlLhln Lhe
prerogaLlve of Lhe leglslaLure, pursuanL Lo lLs avowed purpose [of servlng] some publlc beneflL or
lnLeresL." lL ruled LhaL LC 97-A merely lmplemenLs Lhe leglslaLlve purpose of [8A 7227]."
ulsagreelng, peLlLloners now seek before us a revlew of Lhe aforeclLed CourL of Appeals ueclslon and
8esoluLlon.
Issue: W/n LC 37-A ls consLlLuLlonal
ne|d: LS. Sald Crder ls noL vlolaLlve of Lhe equal proLecLlon clause, nelLher ls lL dlscrlmlnaLory. 1here
are real and subsLanLlve dlsLlncLlons beLween Lhe clrcumsLances obLalnlng lnslde and Lhose ouLslde Lhe
Sublc naval 8ase, Lhereby [usLlfylng a valld and reasonable classlflcaLlon.
ClasslflcaLlon, Lo be valld, musL (1) resL on substant|a| d|st|nct|ons, (2) be germane to the purpose of
the |aw, (3) not be ||m|ted to ex|st|ng cond|t|ons on|y, and (4) app|y equa||y to a|| members of the
same c|ass.
We belleve lL was reasonable for Lhe resldenL Lo have dellmlLed Lhe appllcaLlon of some lncenLlves Lo
Lhe conflnes of Lhe former Sublc mlllLary base. lL ls Lhls speclflc area whlch Lhe governmenL lnLends Lo
Lransform and develop from lLs stotos poo oote as an abandoned naval faclllLy lnLo a self-susLalnlng
lndusLrlal and commerclal zone, parLlcularly for blg forelgn and local lnvesLors Lo use as operaLlonal
bases for Lhelr buslnesses and lndusLrles. 1he classlflcaLlon ls, Lherefore, germane Lo Lhe purposes of Lhe
law.
CerLalnly, Lhere are subsLanLlal dlfferences beLween Lhe blg lnvesLors who are belng lured Lo esLabllsh
and operaLe Lhelr lndusLrles ln Lhe so-called secured area" and Lhe presenL buslness operaLors ouLslde
Lhe area. Cn Lhe one hand, we are Lalklng of bllllon-peso lnvesLmenLs and Lhousands of oew, [obs. Cn
Lhe oLher hand, deflnlLely none of such magnlLude. ln Lhe flrsL, Lhe economlc lmpacL wlll be naLlonal, ln
Lhe second, only local.
49
lL ls well-seLLled LhaL Lhe equal-proLecLlon guaranLee does noL requlre LerrlLorlal unlformlLy of laws.As
long as Lhere are acLual and maLerlal dlfferences beLween LerrlLorles, Lhere ls no vlolaLlon of Lhe
consLlLuLlonal clause. And of course, anyone, lncludlng Lhe peLlLloners, possesslng Lhe requlslLe
lnvesLmenL caplLal can always avall of Lhe same beneflLs by channelllng hls or her resources or buslness
operaLlons lnLo Lhe fenced-off free porL zone.
LasLly, Lhe classlflcaLlon applles equally Lo all Lhe resldenL lndlvlduals and buslnesses wlLhln Lhe secured
area." 1he resldenLs, belng ln llke clrcumsLances or conLrlbuLlng dlrecLly Lo Lhe achlevemenL of Lhe end
purpose of Lhe law, are noL caLegorlzed furLher. lnsLead, Lhey are all slmllarly LreaLed, boLh ln prlvlleges
granLed and ln obllgaLlons requlred. et|t|on DLNILD.
CASL: CIk v. LINGALN GULI LLLC1kIC CWLk CC.Source:
hLLp://engr[hez.wordpress.com/2013/03/31/clr-vs-llngayen-gulf-elecLrlc-g-r-no-l-23771-augusL-04-
1988/
IAC1S: 1he respondenL Laxpayer operaLes an elecLrlc power planL servlng Lhe ad[olnlng munlclpallLles
of Llngayen and 8lnmaley, boLh ln Lhe provlnce of angaslnan, pursuanL Lo Lhe munlclpal franchlse
granLed lL by Lhelr respecLlve munlclpal counclls, under 8esoluLlon nos. 14 and 23 of !une 29 and !uly 2,
1946, respecLlvely.
8ureau of lnLernal 8evenue (8l8) assessed agalnsL and demanded from Lhe prlvaLe respondenL
deflclency franchlse Laxes and surcharges for Lhe years 1946 Lo 1934 applylng Lhe franchlse Lax raLe of
3 on gross recelpLs from March 1, 1948 Lo uecember 31, 1934 as prescrlbed ln SecLlon 239 of Lhe
naLlonal lnLernal 8evenue Code, |nstead of the |ower rates as prov|ded |n the mun|c|pa| franch|ses.
kespondent subm|ts that k.A. No. 3843 |s unconst|tut|ona| |nsofar as |t prov|des for the payment by
the pr|vate respondent of a franch|se tax of 2 of |ts gross rece|pts, wh||e other taxpayers s|m||ar|y
s|tuated were sub[ect to the S franch|se tax lmposed ln SecLlon 239 of Lhe 1ax Code, Lhereby
dlscrlmlnaLory and vlolaLlve of Lhe rule on unlformlLy and equallLy of LaxaLlon. CourL of Lax Appeals ruled
ln favor of respondenL.
ISSUL: WheLher or noL SecLlon 4 of 8.A. no. 3843, assumlng lL ls valld, could be glven reLroacLlve effecL
so as Lo render uncollecLed Laxes ln quesLlon whlch were assessed before lLs enacLmenL.
nLLD: ?LS. Appealed declslon was afflrmed. A Lax ls unlform when lL operaLes wlLh Lhe same force and
effecL ln every place where Lhe sub[ecL of lL ls found. unlformlLy means LhaL all properLy belonglng Lo
Lhe same class shall be Laxed allke 1he LeglslaLure has Lhe lnherenL power noL only Lo selecL Lhe sub[ecLs
of LaxaLlon buL Lo granL exempLlons. 1ax exempLlons have never been deemed vlolaLlve of Lhe equal
proLecLlon clause. lL ls Lrue LhaL Lhe prlvaLe respondenLs munlclpal franchlses were obLalned under AcL
no. 667 of Lhe hlllpplne Commlsslon, buL Lhese orlglnal franchlses have been replaced by a new
leglslaLlve franchlse, l.e. 8.A. no. 3843.
Clven Lhe valldlLy of sald law, lL should be applled reLroacLlvely so as Lo render uncollecLlble Lhe Laxes ln
quesLlon whlch were assessed before lLs enacLmenL. 1he quesLlon of wheLher a sLaLuLe operaLes
reLrospecLlvely or only prospecLlvely depends on Lhe leglslaLlve lnLenL. ln Lhe lnsLanL case, AcL no. 3843
provldes LhaL effecLlve . upon Lhe daLe Lhe orlglnal franchlse was granLed, no oLher Lax and/or llcenses
oLher Lhan Lhe franchlse Lax of Lwo pet ceotom on Lhe gross recelpLs . shall be collecLed, any provlslon
Lo Lhe conLrary noLwlLhsLandlng." kepub||c Act No. 3843 therefore spec|f|ca||y prov|ded for the
retroact|ve effect of the |aw.

c. unlformlLy
-ArL. 6, Sec 28 (1) of Lhe ConsLlLuLlon: 1he rule of LaxaLlon shall be unlform and equlLable
-8lack ulcLlonary: all Laxable arLlcles or klnds of properLy of Lhe same class shall be Laxed aL Lhe same
raLe.
30
-dlfferenL arLlcles may be Laxed aL dlfferenL amounLs , provlded LhaL Lhe raLe ls unlform on Lhe same
class everywhere, wlLh all people and aL all Llmes
-unlformlLy: requlres all Laxable properLy sub[ecLed Lo Lax, shall be allke
-ConsLlLuLlon requlres unlformlLy, noL equallLy ln LaxaLlon
-lmposlLlon of slngle Lax upon all persons, properLles or LransacLlon would resulL ln lnequallLy
=manlfesLly lmpracLlcal

Lqua||ty v. Un|form|ty
Lqua||ty: burden of Lax falls equally and lmparLlally on all persons and properLy sub[ecL Lo lL
-no hlgher raLe or greaLer levy ln proporLlon Lo value ls lmposed on one person or specles or properLy
LhaL upon oLhers slmllarly slLuaLed or of llke characLer

Un|form|ty: requlres all Laxable properLy shall be allke sub[ecLed Lo Lax.
-Lhls requlremenL ls vlolaLed lf parLlcular klnds, specles or lLems of properLy are selecLed Lo bear Lhe
whole burden of Lhe Lax
-whlle oLhers, whlch should be equally sub[ecL Lo lL are lefL-unLaxed

rogress|ve system of taxat|on
ArLlcle 6, SecLlon 28 of Lhe ConsLlLuLlon: Congress shall evolve a progresslve sysLem of LaxaLlon
-raLe goes up dependlng on Lhe resources of Lhe person affecLed

ls regresslve Lax law valld? ?es
-1he ConsLlLuLlon does noL really prohlblL Lhe lmposlLlon of regresslve Laxes
-slmply provldes: Congress shall evolve progresslve sysLem of LaxaLlon
-ulrecL Laxes are Lo be preferred and lndlrecL Laxes should be mlnlmlzed
-MandaLe Lo Congress ls nC1 Lo prescrlbe buL Lo evolve progresslve Lax sysLem
=Mere dlrecLlve Lo Congress, noL a [usLlclable rlghL nor legally enforceable
-cannoL avold regresslve Laxes, only Lo mlnlmlze Lhem

CASL: CI1 CI 8AGUIC v. DL LLCN (1968)

Source: hLLp://anLslegal.blogspoL.com/2012/07/clLy-of-bagulo-vs-de-leon.hLml
lAC1S: 1he ClLy of 8agulo passed an ordlnance lmposlng a llcense fee on any person, enLlLy or
corporaLlon dolng buslness ln Lhe ClLy. 1he ordlnance sourced lLs auLhorlLy from 8A no. 329, Lhereby
amendlng Lhe clLy charLer empowerlng lL Lo flx Lhe llcense fee and regulaLe buslnesses, Lrades and
occupaLlons as may be esLabllshed or pracLlced ln Lhe ClLy. ue Leon was assessed for 30 annual fee lL
belng shown LhaL he was engaged ln properLy renLal and derlvlng lncome Lherefrom. 1he laLLer assalled
Lhe valldlLy of Lhe ordlnance argulng LhaL lL ls ulLra vlres for Lhere ls no sLaLury auLhorlLy whlch expressly
granLs Lhe ClLy of 8agulo Lo levy such Lax, and LhaL Lhere lL lmposed double LaxaLlon, and vlolaLes Lhe
requlremenL of unlformlLy.

lSSuL: Are Lhe conLenLlons of Lhe defendanL-appellanL Lenable?

PLLu: no. llrsL, 8A 329 was enacLed amendlng SecLlon 2333 of Lhe 8evlsed AdmlnlsLraLlve Code
empowerlng Lhe ClLy Councll noL only Lo lmpose a llcense fee buL Lo levy a Lax for purposes of revenue,
Lhus Lhe ordlnance cannoL be consldered ulLra vlres for Lhere ls more Lhan ample sLaLury auLhorlLy for
Lhe enacLmenL Lhereof.
31
Second, an argumenL agalnsL double LaxaLlon may noL be lnvoked where one Lax ls lmposed by Lhe
sLaLe and Lhe oLher ls lmposed by Lhe clLy, so LhaL where, as here, Congress has clearly expressed lLs
lnLenLlon, Lhe sLaLuLe musL be susLalned even Lhough double LaxaLlon resulLs.
And Lhlrd, vlolaLlon of unlformlLy ls ouL of place lL belng wldely recognlzed LhaL Lhere ls noLhlng
lnherenLly obnoxlous ln Lhe requlremenL LhaL llcense fees or Laxes be exacLed wlLh respecL Lo Lhe same
occupaLlon, calllng or acLlvlLy by boLh Lhe sLaLe and Lhe pollLlcal subdlvlslons Lhereof.

CASL: SISCN v. ANCnL1A (1984)

Source: uberdlgesL
Slson assalls Lhe valldlLy of 8 133 w/c furLher amended Sec 21 of Lhe naLlonal lnLernal 8evenue Code of
1977. 1he law provldes LhaL Lhere'd be a hlgher Lax lmposL agalnsL lncome derlved from professlonal
lncome as opposed Lo regular lncome earners. Slson, as a professlonal buslnessman, and as Laxpayer
alleges LhaL by vlrLue Lhereof, he would be unduly dlscrlmlnaLed agalnsL by Lhe lmposlLlon of hlgher
raLes of Lax upon hls lncome arlslng from Lhe exerclse of hls professlon vls-a-vls Lhose whlch are
lmposed upon flxed lncome or salarled lndlvldual Laxpayers." Pe characLerlzes Lhe above secLlon as
arblLrary amounLlng Lo class leglslaLlon, oppresslve and caprlclous ln characLer. 1here ls a Lransgresslon
of boLh Lhe equal proLecLlon and due process clauses of Lhe ConsLlLuLlon as well as of Lhe rule requlrlng
unlformlLy ln LaxaLlon.
ISSUL: WheLher Lhe lmposlLlon of a hlgher Lax raLe on Laxable neL lncome derlved from buslness or
professlon Lhan on compensaLlon ls consLlLuLlonally lnflrm.
nLLD: 1he SC ruled agalnsL Slson. 1he power Lo Lax, an lnherenL prerogaLlve, has Lo be avalled of Lo
assure Lhe performance of vlLal sLaLe funcLlons. lL ls Lhe source of Lhe bulk of publlc funds. 1axes, belng
Lhe llfeblood of Lhe governmenL, Lhelr prompL and cerLaln avallablllLy ls of Lhe essence. Accordlng Lo Lhe
ConsLlLuLlon: 1he rule of LaxaLlon shall be unlform and equlLable." Powever, Lhe rule of unlformlLy does
noL call for perfecL unlformlLy or perfecL equallLy, because Lhls ls hardly aLLalnable. LquallLy and
unlformlLy ln LaxaLlon means LhaL all Laxable arLlcles or klnds of properLy of Lhe same class shall be Laxed
aL Lhe same raLe. 1he Laxlng power has Lhe auLhorlLy Lo make reasonable and naLural classlflcaLlons for
purposes of LaxaLlon. Where Lhe dlfferenLlaLlon" complalned of conforms Lo Lhe pracLlcal dlcLaLes of
[usLlce and equlLy" lL ls noL dlscrlmlnaLory wlLhln Lhe meanlng of Lhls clause and ls Lherefore unlform."
1here ls qulLe a slmllarlLy Lhen Lo Lhe sLandard of equal proLecLlon for all LhaL ls requlred ls LhaL Lhe Lax
applles equally Lo all persons, flrms and corporaLlons placed ln slmllar slLuaLlon.
WhaL mlsled Slson ls hls fallure Lo Lake lnLo conslderaLlon Lhe dlsLlncLlon beLween a Lax raLe and a Lax
base. 1here ls no legal ob[ecLlon Lo a broader Lax base or Laxable lncome by ellmlnaLlng all deducLlble
lLems and aL Lhe same Llme reduclng Lhe appllcable Lax raLe. 1axpayers may be classlfled lnLo dlfferenL
caLegorles. ln Lhe case of Lhe gross lncome LaxaLlon embodled ln 8 133, Lhe dlscernlble basls of
classlflcaLlon ls Lhe suscepLlblllLy of Lhe lncome Lo Lhe appllcaLlon of generallzed rules removlng all
deducLlble lLems for all Laxpayers wlLhln Lhe class and flxlng a seL of reduced Lax raLes Lo be applled Lo
all of Lhem. 1axpayers who are reclplenLs of compensaLlon lncome are seL aparL as a class. As Lhere ls
pracLlcally no overhead expense, Lhese Laxpayers are noL enLlLled Lo make deducLlons for lncome Lax
purposes because Lhey are ln Lhe same slLuaLlon more or less. Cn Lhe oLher hand, ln Lhe case of
professlonals ln Lhe pracLlce of Lhelr calllng and buslnessmen, Lhere ls no unlformlLy ln Lhe cosLs or
expenses necessary Lo produce Lhelr lncome. lL would noL be [usL Lhen Lo dlsregard Lhe dlsparlLles by
glvlng all of Lhem zero deducLlon and lndlscrlmlnaLely lmpose on all allke Lhe same Lax raLes on Lhe basls
of gross lncome. 1here ls ample [usLlflcaLlon Lhen for Lhe 8aLasang ambansa Lo adopL Lhe gross sysLem
of lncome LaxaLlon Lo compensaLlon lncome, whlle conLlnulng Lhe sysLem of neL lncome LaxaLlon as
regards professlonal and buslness lncome.
32
CASL: VILLANULVA v. CI1 CI ILCILC (1968)

uocLrlne: 1axes are unlform and equal when lmposed upon all properLy of Lhe same class or characLer
wlLhln Lhe Laxlng auLhorlLy. 1he facL LhaL Lhe owners of oLher classes of bulldlngs ln Lhe ClLy do noL pay
Lhe Laxes lmposed by Lhe ordlnance ls no argumenL aL agalnsL unlformlLy and equallLy of Lhe Lax
lmposlLlon.
Iacts:
Cn SepLember 30, 1946 Lhe munlclpal board of llollo ClLy enacLed Crdlnance 86 lmposlng llcense Lax
fees Lo Lhe ff:
o 1enemenL house 23 annually
o 1enemenL house, parLly or wholly engaged ln or dedlcaLed Lo buslness ln Lhe sLreeLs of !M
8asa and Aldequer 24 per aparLmenL
o 1enemenL house, parLly or wholly engaged ln buslness ln any oLher sLreeLs 12 per
aparLmenL
8y vlrLue of Lhe ordlnance, Lhe ClLy collecLed from spouses vlllanueva for Lhe llcense Lax. Spouses
vlllanueva has llkewlse been paylng real esLaLe Laxes on hls properLy aslde from Lhe llcense Lax
1he valldlLy and consLlLuLlonallLy of Lhls ordlnance was challenged by spouses vlllanueva belng
vlolaLlve of Lhe rule as Lo unlformlLy of LaxaLlon and for deprlvlng Lhe plalnLlff wlLh equal proLecLlon
clause of Lhe ConsLlLuLlon
1hey also alleged LhaL lL ls beyond Lhe powers of Lhe munlclpallLy hence should be ordered Lo refund
Lhe amounLs collecLed from Lhe plalnLlff
Issues:
1. ls Lhe ClLy of llollo empowered by Lhe Local AuLonomy AcL Lo lmpose LenemenL Laxes? ?LS
2. W/n Lhe ordlnance vlolaLe Lhe rule on unlformlLy of LaxaLlon?nC
3. W/n Lhe ordlnance lmposes double LaxaLlon? nC

ne|d: 1he ord|nance |s va||d
1. ?LS. 1he lmposlLlon by Lhe ordlnance of a llcense Lax on persons engaged ln Lhe buslness of
operaLlng LenemenL housesflnds auLhorlLy ln SecLlon 2 of Lhe Local AuLonomy AcL whlch
provldes LhaL charLered clLles have Lhe auLhorlLy Lo lmpose munlclpalllcense Laxes or fees upon
persons engaged ln any occupaLlon or buslness, or exerclslng prlvlleges wlLhln Lhelr respecLlve
LerrlLorles, and "oLherwlse Lo levy for publlc purposes, [usL and unlform Laxes, llcenses, or fees."
2. no. 1he appellees argue LhaL Lhere ls lack or unlformlLy and relaLlve lnequallLy because only
Laxpayers of Lhe ClLy of llollo are slngled ouL Lo pay Lhelr Laxes on Lhelr LenemenL houses, whlle
clLlzens of oLher clLles where Lhelr counclls do noL enacL slmllar Lax ordlnance are permlLLed Lo
escape Lhe lmposlLlon.
1axes are unlform and equal when lmposed upon all properLy of Lhe same class or characLer
wlLhln Lhe Laxlng auLhorlLy." 1he courL ruled LhaL LenemenL houses consLlLuLe a dlsLlncL class of
properLy. "
1he facL LhaL Lhe owners of oLher classes of bulldlngs ln Lhe ClLy of llollo do noL pay Lhe Laxes
lmposed by Lhe ordlnance ln quesLlon ls no argumenL aL all agalnsL unlformlLy and equallLy of
Lhe Lax lmposlLlon. nelLher ls Lhe rule of equallLy and unlformlLy vlolaLed by Lhe facL LhaL
LenemenL Laxes are noL lmposed ln oLher clLles, for Lhe same rule does noL requlre LhaL Laxes for
Lhe same purpose should be lmposed ln dlfferenL LerrlLorlal subdlvlslons aL Lhe same Llme. So
long as Lhe burden of Lhe Lax falls equally and lmparLlally on all owners or operaLors of
33
LenemenL houses slmllarly classlfled or slLuaLed, equallLy and unlformlLy of LaxaLlon ls
accompllshed.
3. nC. Whlle Lhe plalnLlff are Laxable under Lhe provlslons of Lhe naLlonal lnLernal 8evenue Code
as areal esLaLe dealers and sLlll Laxable under Lhe ordlnance does noL consLlLuLe double LaxaLlon
slnce lL ls well seLLled LhaL Lhe same Lax may be lmposed by Lhe naLlonal governmenL as well as
by Lhe local governmenL. 1here ls noLhlng lnherenLly obnoxlous ln Lhe exacLlon of llcense fees or
Laxes wlLh respecL Lo Lhe same occupaLlon, calllng or acLlvlLy by boLh Lhe SLaLe and a pollLlcal
subdlvlslon Lhereof.
ln order Lo consLlLuLe double LaxaLlon ln Lhe ob[ecLlonable or prohlblLed sense Lhe same
properLy musL be Laxed Lwlce when lL should be Laxed only once, boLh Laxes musL be lmposed
on Lhe same properLy or sub[ecL-maLLer, for Lhe same purpose, by Lhe same sLaLe, governmenL
or Laxlng auLhorlLy wlLhln Lhe same [urlsdlcLlon or Laxlng dlsLrlcL, durlng Lhe same Laxlng perlod,
and Lhey musL be Lhe same klnd or characLer of Lax.
lL has been shown LhaL a real esLaLe Lax and Lhe LenemenL Lax lmposed by Lhe ordlnance
alLhough lmposed by Lhe same Laxlng auLhorlLy are noL of Lhe same klnd or characLer.
CASL: LAS1LkN 1nLA1kICAL v. ALICNSC (1949)
Iacts: 1he munlclpal board of Manlla enacLed Crdlnance 2938 (serles of 1946) lmposlng a fee on Lhe
prlce of every admlsslon LlckeL sold by clnemaLograph LheaLers, vaudevllle companles, LheaLrlcal shows
and boxlng exhlblLlons, ln addlLlon Lo fees lmposed under SecLlons 633 and 778 of Crdlnance 1600.
LasLern 1heaLrlcal Co., among oLhers, quesLlon Lhe valldlLy of ordlnance, on Lhe ground LhaL lL ls
unconsLlLuLlonal for belng conLrary Lo Lhe provlslons on unlformlLy and equallLy of LaxaLlon and Lhe
equal proLecLlon of Lhe laws lnasmuch as Lhe ordlnance does noL Lax oLher klnds of amusemenL, such as
race Lracks, cockplLs, cabareLs, concerL halls, clrcuses, and oLher places of amusemenL.
Issue: WheLher Lhe ordlnance vlolaLes Lhe rule on unlformlLy and equallLy of LaxaLlon.
ne|d: LquallLy and unlformlLy ln LaxaLlon means LhaL all Laxable arLlcles or klnds of properLy of Lhe same
class shall be Laxed aL Lhe same raLe. 1he Laxlng power has Lhe auLhorlLy Lo make reasonable and naLural
classlflcaLlons for purposes of LaxaLlon, and Lhe LheaLer companles cannoL polnL ouL whaL places of
amusemenL Laxed by Lhe ordlnance do noL consLlLuLe a class by Lhemselves and whlch can be confused
wlLh Lhose noL lncluded ln Lhe ordlnance. 1he facL LhaL somew places of amusemenL are noL Laxed whlle
oLhers, llke Lhe ones hereln, are Laxed ls no argumenL aL all agalnsL Lhe equallLy and unlformlLy of Lhe Lax
lmposlLlon.
CASL: eps|-Co|a 8ott||ng vs C|ty of 8utuan (1968)- ILkNANDL2
Iacts: Crdlnance 110 was enacLed by Lhe ClLy of 8uLuan lmposlng a Lax of 0.10 per case of 24 boLLles of
sofLdrlnks or carbonaLed drlnks. 1he Lax was lmposed upon dealersengeged ln selllng sofLdrlnks or
carbonaLed drlnks. When Crdlnance 110, Lhe Lax was lmposed upon an agenL or conslgnee of any
person, assoclaLlon, parLnershlp, company or corporaLlon engaged ln selllng sofLdrlnks or carbonaLed
drlnks, wlLh agenL or conslgnee" belng parLlcularly deflned on Lhe lnserLed provlslon SecLlon 3-A. ln
effecL, merchanLs engaged ln Lhe sale of sofLdrlnks, eLc. are noL sub[ecL Lo Lhe Lax unless Lhey are agenLs
or conslgnees of anoLher dealer who musL be one engaged ln buslness ouLslde Lhe ClLy. epsl-Cola
8oLLllng Co. flled sulL Lo recover sums pald by lL Lo Lhe clLy pursuanL Lo Lhe Crdlnance, whlch lL clalms Lo
be null and vold.
Issue: WheLher Lhe Crdlnance ls dlscrlmlnaLory.
ne|d: 1he Crdlnance, as amended, ls dlscrlmlnaLory slnce only sales by agenLs or conslgnees" of ouLslde
dealers would be sub[ecL Lo Lhe Lax. Sales by local dealers, noL acLlng for or on behalf of oLher
merchanLs, regardless of Lhe volume of Lhelr sales , and even lf Lhe same exceeded Lhose made by sald
agenLs or conslgnees of producers or merchanLs esLabllshed ouLslde Lhe clLy, would be exempL from Lhe
34
Lax. 1he classlflcaLlon made ln Lhe exerclse of Lhe auLhorlLy Lo Lax, Lo be valld musL be reasonable, whlch
would be saLlsfled lf Lhe classlflcaLlon ls based upon subsLanLlal dlsLlncLlons whlch makes real
dlfferences, Lhese are germane Lo Lhe purpose of leglslaLlon or ordlnance, Lhe classlflcaLlon applles noL
only Lo presenL condlLlons buL also Lo fuLure condlLlons subsLanLlally ldenLlcal Lo Lhose of Lhe presenL,
and Lhe classlflcaLlon applles equally Lo all Lhose who belong Lo Lhe same class. 1hese condlLlons are noL
fully meL by Lhe ordlnance ln quesLlon.
CASL: 8r|t|sh Amer|can 1obacco vs Camacho and arayno (2008 and 2009)-ICk1LS
Doctr|ne: ClasslflcaLlon lf raLlonal ln characLer ls allowable. 1he Laxlng power has Lhe auLhorlLy Lo make
reasonable and naLural classlflcaLlons for purposes of LaxaLlon.
Iacts:
8rlLlsh Amerlcan 1obacco ls Lhe dlsLrlbuLor of Lucky SLrlke ClgareLLe ln Lhe hlllpplnes
1he company ls quesLlonlng Lhe consLlLuLlonallLy of 8A 8240, enLlLled "An AcL Amendlng
SecLlons 138, 139, 140, and 142 of Lhe nl8C, as Amended and lor CLher urposes," whlch Look
effecL on !anuary 1, 1997
1he law provlded a leglslaLlve freeze on brands of clgareLLes lnLroduced beLween Lhe perlod
!anuary 2, 1997 Lo uecember 31, 2003, such LhaL sald clgareLLes shall remaln ln Lhe classlflcaLlon
under whlch Lhe 8l8 has deLermlned Lhem Lo belong as of uecember 31, 2003, unLll revlsed by
Congress.
ln effecL: older brands or exlsLlng brands wlll have, ln Lhe long Lerm, lower prlce and Lax raLe as
lnflaLlon and prlce appreclaLlon were noL facLored ln.
o 1helr Lax raLe shall remaln unLll Congress changes lL
o Pence, a leglslaLlve freeze ln Lhe class of clgareLLes
neL 8eLall
rlce
(excludlng
exclse Lax
and vA1
2003 1ax 2007 1ax 2009 1ax 2011 1ax Supreme
CourL
ClasslflcaLlon
Less Lhan
3 per
pack
2/pack 2.23/pack 2.47/pack 2.72/pack Low-prlced
8eL 3-
6.30
6.33/pack 6.74/pack 7.14/pack 7.36/pack Medlum-
prlced
8eL 6.30-
10
10.33/pack 10.88/pack 11.43/pack 12/pack Plgh-prlced
Above 10 23/pack 26.06/pack 27.16/pack 28.30/pack remlum-
prlced
new brands shall be classlfled accordlng Lo currenL neL reLall prlce
new brands are Lhe ones reglsLered afLer !anuary 1, 1997
ln 2001, Lucky SLrlke was lnLroduced ln Lhe markeL
Lucky SLrlke was classlfled as premlum-prlced hence was lmposed Lhe Above 10 Lax raLe
Lucky SLrlke proLesLed Lhe 22.77M Lax assessmenL pegged aL 23/pack
Lucky SLrlke lnLerposes LhaL Lhe leglslaLlve freeze ls dlscrlmlnaLory agalnsL new brands and poses
barrler Lo enLry ln Lhe clgareLLe lndusLry
o LeglslaLlve freeze means: exlsLlng or "old" brands shall be Laxed based on Lhelr neL
reLall prlce as of CcLober 1, 1996.
33
o Pence, Lhe classlflcaLlon based on prlclng ls lower for older brands compared Lo new
enLranLs
Lucky SLrlke found lL unfalr LhaL hlllp Morrls and Marlboro are classlfled only as Plgh-prlced
whlle lL ls classlfled as remlum rlced.

WCN:

1. 1he perLlnenL porLlons of 8A 8240, as amended by 8A 9334, dlscrlmlnaLes agalnsL new
clgareLLe brands and favors old clgareLLe brands?
2. 1he classlflcaLlon freeze provlslon unduly favors older brands over newer brands?


!"#$% ln applylng Lhe raLlonal basls LesL, Lhe CourL found Lhe quesLloned law ConsLlLuLlonal.
A leglslaLlve classlflcaLlon LhaL ls reasonable does noL offend Lhe consLlLuLlonal guaranLy of Lhe
equal proLecLlon of Lhe laws.
1he classlflcaLlon ls consldered valld and reasonable provlded LhaL:
(1) lL resLs on subsLanLlal dlsLlncLlons,
(2) lL ls germane Lo Lhe purpose of Lhe law,
(3) lL applles, all Lhlngs belng equal, Lo boLh presenL and fuLure condlLlons, and
(4) lL applles equally Lo all Lhose belonglng Lo Lhe same class.
closslflcotloo fteeze ptovlsloo unlformly applles Lo all newly lnLroduced brands ln Lhe markeL,
llndlng LhaL Lhe assalled law seems Lo derogaLe, Lo a llmlLed exLenL, one of lLs avowed
ob[ecLlves (l.e. promoLlng falr compeLlLlon among Lhe players ln Lhe lndusLry) would suggesL
LhaL, by Congress's own sLandards, Lhe currenL exclse Lax sysLem on sln producLs ls lmperfecL.
8uL Lhe CourL cannoL declare a sLaLuLe unconsLlLuLlonal merely because lL can be lmproved or
LhaL lL does noL Lend Lo achleve all of lLs sLaLed ob[ecLlves.

CASL: 8r|t|sh Amer|can 1obacco Corporat|on v. I|nance Secretary Camacho, 8Ik Comm|ss|oner
arayno (2009)

Doctr|ne: A levy of Lax ls noL unconsLlLuLlonal because lL ls noL lnLrlnslcally equal and unlform ln lLs
operaLlon.1he unlformlLy rule does noL prohlblL classlflcaLlon for purposes of LaxaLlon

Iacts:
8rlLlsh Amerlcan 1obacco flled a MoLlon for 8econslderaLlon for Lhe CourL's declslon ln 2008
eLlLloner lnLerposes LhaL Lhe assalled provlslons:
(1) vlolaLe Lhe equal proLecLlon and unlformlLy of LaxaLlon clauses of Lhe ConsLlLuLlon,
(2) conLravene SecLlon 19,[1] ArLlcle xll of Lhe ConsLlLuLlon on unfalr compeLlLlon, and
(3) lnfrlnge Lhe consLlLuLlonal provlslons on regresslve and lnequlLable LaxaLlon.
eLlLloner furLher argues LhaL assumlng Lhe assalled provlslons are consLlLuLlonal, lL ls enLlLled Lo
a downward reclasslflcaLlon of Lucky SLrlke from Lhe premlum-prlced Lo Lhe hlgh-prlced Lax
brackeL.
Lucky SLrlke relLeraLes ln lLs M8 LhaL Lhe closslflcotloo fteeze ptovlsloo vlolaLes Lhe equal
proLecLlon and unlformlLy of LaxaLlon clauses because older brands are Laxed based on Lhelr
36
1996 neL reLall prlces whlle new brands are Laxed based on Lhelr presenL day neL reLall prlces.


nLLD: Mk |s den|ed
WlLhouL merlL and a rehash of peLlLloner's prevlous argumenLs before Lhls CourL
1he raLlonal basls LesL was properly applled Lo gauge Lhe consLlLuLlonallLy of Lhe assalled law ln
Lhe face of an equal proLecLlon challenge
1he classlflcaLlon ls consldered valld and reasonable provlded LhaL: (1) lL resLs on
subsLanLlal dlsLlncLlons, (2) lL ls germane Lo Lhe purpose of Lhe law, (3) lL applles, all
Lhlngs belng equal, Lo boLh presenL and fuLure condlLlons, and (4) lL applles equally Lo
all Lhose belonglng Lo Lhe same class.
1he closslflcotloo fteeze ptovlsloo was lnserLed ln Lhe law for reasons of pracLlcallLy and
expedlency.
o slnce a new brand was noL yeL ln exlsLence aL Lhe Llme of Lhe passage of 8A 8240, Lhen
Congress needed a unlform mechanlsm Lo flx Lhe Lax brackeL of a new brand.
o 1he currenL neL reLall prlce, slmllar Lo whaL was used Lo classlfy Lhe brands under Annex
u" as of CcLober 1, 1996, was Lhus Lhe loglcal and pracLlcal cholce
1he closslflcotloo fteeze ptovlsloo was ln Lhe maln Lhe resulL of Congress's earnesL efforLs Lo
lmprove Lhe efflclency and effecLlvlLy of Lhe Lax admlnlsLraLlon over sln producLs whlle Lrylng Lo
balance Lhe same wlLh oLher SLaLe lnLeresLs
CASL: CIk vs ICk1UNL 1C8ACCC CCk (2011 case)
IAC1S
under our Lax laws, manufacLurers of clgareLLes are sub[ecL Lo pay exclse Laxes on Lhelr producLs. rlor
Lo !anuary 1, 1997, Lhe exclses Laxes on Lhese producLs were ln Lhe form of ad valorem Laxes, pursuanL
Lo SecLlon 142 of Lhe 1977 naLlonal lnLernal 8evenue Code (1977 1ax Code).
8eglnnlng !anuary 1, 1997, 8epubllc AcL no. (8A) 8240[3] Look effecL and a shlfL from ad valorem Lo
speclflc Laxes was made.
1he speclflc Lax from any brand of clgareLLes wlLhln Lhe nexL Lhree (3) years of effecLlvlLy of Lhls AcL shall
noL be lower Lhan Lhe Lax [whlch] ls due from each brand on CcLober 1, 1996: rovlded, however, 1haL
ln cases where Lhe speclflc Lax raLes lmposed ln paragraphs (1), (2), (3) and (4) of Sec 142(c) of 1977 1ax
Code herelnabove wlll resulL ln an lncrease ln exclse Lax of more Lhan sevenLy percenL (70), for a brand
of clgareLLe, Lhe lncrease shall Lake effecL ln Lwo Lranches: flfLy percenL (30) of Lhe lncrease shall be
effecLlve ln 1997 and one hundred percenL (100) of Lhe lncrease shall be effecLlve ln 1998.
1he raLes of speclflc Lax on clgars and clgareLLes under paragraphs (1), (2), (3) and (4) hereof, shall be
lncreased by Lwelve percenL (12) on !anuary 1, 2000.
1o lmplemenL 8A 8240 and pursuanL Lo lLs rule-maklng powers, Lhe Cl8 lssued 8evenue 8egulaLlon no.
(88) 1-97 whose SecLlon 3(c) and (d) echoed Lhe above-quoLed porLlon of SecLlon 142 of Lhe 1977 1ax
Code, as amended.[4]
1he 1977 1ax Code was laLer repealed by 8A 8424, or Lhe naLlonal lnLernal 8evenue Code of 1997 (1997
1ax Code), and SecLlon 142, as amended by 8A 8240, was renumbered as SecLlon 143.
1hls Llme, Lo lmplemenL Lhe 12 lncrease ln speclflc Laxes mandaLed under SecLlon 143 of Lhe 1997 1ax
Code and agaln pursuanL Lo lLs rule-maklng powers, Lhe Cl8 lssued 88 17-99.
ursuanL Lo Lhese laws, respondenL lorLune 1obacco CorporaLlon (lorLune 1obacco) pald ln advance
exclse Laxes for Lhe year 2003 ln Lhe amounL of 11.13 bllllon, and for Lhe perlod coverlng !anuary 1 Lo
May 31, 2004 ln Lhe amounL of 4.90 bllllon.[3]
37
ln lLs declslon daLed May 26, 2006, Lhe C1A llrsL ulvlslon ruled ln favor of lorLune 1obacco and granLed
lLs clalm for refund.[8] 1he C1A llrsL ulvlslon's rullng was upheld on appeal by Lhe C1A en banc ln lLs
declslon daLed !uly 12, 2007.[9] 1he Cl8's moLlon for reconslderaLlon of Lhe C1A en banc's declslon was
denled ln a resoluLlon daLed CcLober 4, 2007.[10]
1nL ISSUL
lorLune 1obacco's clalm for refund of overpald exclse Laxes ls based prlmarlly on whaL lL conslders as an
"unauthor|zed adm|n|strat|ve |eg|s|at|on" on Lhe parL of Lhe Cl8. Speclflcally, lL assalls Lhe provlso ln
SecLlon 1 of 88 17-99 LhaL requlres Lhe paymenL of Lhe exclse Lax acLually belng pald prlor Lo !anuary 1,
2000" lf Lhls amounL ls hlgher Lhan Lhe new speclflc Lax raLe, l.e., Lhe raLes of speclflc Laxes lmposed ln
1997 for each caLegory of clgareLLe, plus 12. lL clalmed LhaL by lncludlng Lhe provlso, Lhe Cl8 wenL
beyond Lhe language of Lhe law and usurped Congress' power. As menLloned, Lhe C1A slded wlLh
lorLune 1obacco and allowed Lhe laLLer Lo clalm Lhe refund.
1nL CCUk1'S kULING
LxcepL for Lhe Lax perlod and Lhe amounLs lnvolved, Lhe case aL bar presenLs Lhe same lssue LhaL Lhe
CourL already resolved ln 2008 ln Cl8 v. lorLune 1obacco CorporaLlon.[13] ln Lhe 2008 lorLune 1obacco
case, Lhe CourL upheld Lhe Lax refund clalms of lorLune 1obacco afLer flndlng lnvalld Lhe provlso ln
SecLlon 1 of 88 17-99. We ruled:
5ectloo 145 stotes tbot Jotloq tbe ttoosltloo petloJ, l.e., wltblo tbe oext tbtee (J) yeots ftom tbe
effectlvlty of tbe 1ox coJe, tbe exclse tox ftom ooy btooJ of clqotettes sboll oot be lowet tboo tbe tox
Joe ftom eocb btooJ oo 1 Octobet 1996. 1bls poollflcotloo, bowevet, ls coosplcooosly obseot os teqotJs
tbe 12X locteose wblcb ls to be opplleJ oo clqots ooJ clqotettes pockeJ by mocbloe, omooq otbets,
effectlve oo 1 Iooooty 2000. cleotly ooJ oomlstokobly, 5ectloo 145 mooJotes o oew tote of exclse tox fot
clqotettes pockeJ by mocbloe Joe to tbe 12X locteose effectlve oo 1 Iooooty 2000 wltboot teqotJ to
wbetbet tbe teveooe collectloo stottloq ftom tbls petloJ moy toto oot to be lowet tboo tbot collecteJ
ptlot to tbls Jote.
8y addlng Lhe quallflcaLlon LhaL Lhe Lax due afLer Lhe 12 lncrease becomes effecLlve shall noL be lower
Lhan Lhe Lax acLually pald prlor Lo 1 !anuary 2000, 8evenue 8egulaLlon no. 17-99 effecLlvely lmposes a
Lax whlch ls Lhe hlgher amounL beLween Lhe ad valorem Lax belng pald aL Lhe end of Lhe Lhree (3)-year
LranslLlon perlod and Lhe speclflc Lax under paragraph C, sub-paragraph (1)-(4), as lncreased by 12 - a
slLuaLlon noL supporLed by Lhe plaln wordlng of SecLlon 143 of Lhe 1ax Code.
lollowlng Lhe prlnclple of sLare declsls, our rullng ln Lhe presenL case should no longer come as a
surprlse. 1he provlso ln SecLlon 1 of 88 17-99 clearly wenL beyond Lhe Lerms of Lhe law lL was supposed
Lo lmplemenL, and Lherefore enLlLles lorLune 1obacco Lo clalm a refund of Lhe overpald exclse Laxes
collecLed pursuanL Lo Lhls provlslon.
ka|s|ng government revenue |s not the so|e ob[ect|ve of kA 8240
1haL 8A 8240 (lncorporaLed as SecLlon 143 of Lhe 1997 1ax Code) was enacLed Lo ralse governmenL
revenues ls a glven facL, buL Lhls ls noL Lhe sole and only ob[ecLlve of Lhe law. Congresslonal
dellberaLlons show LhaL Lhe shlfL from ad valorem Lo speclflc Laxes lnLroduced by Lhe law was also
lnLended Lo curb Lhe corrupLlon LhaL became endemlc Lo Lhe lmposlLlon of ad valorem Laxes. Slnce ad
valorem Laxes were based on Lhe value of Lhe goods, Lhe prlces of Lhe goods were ofLen manlpulaLed Lo
yleld lesser Laxes. 1he lmposlLlon of speclflc Laxes, whlch are based on Lhe volume of goods produced,
would prevenL prlce manlpulaLlon and also cure Lhe unequal Lax LreaLmenL creaLed by Lhe skewed
valuaLlon of slmllar goods.
ku|e of un|form|ty of taxat|on v|o|ated by the prov|so |n Sect|on 1, kk 17-99
1he ConsLlLuLlon requlres LhaL LaxaLlon should be unlform and equlLable.[20] unlformlLy ln LaxaLlon
requlres LhaL all sub[ecLs or ob[ecLs of LaxaLlon, slmllarly slLuaLed, are Lo be LreaLed allke boLh ln
prlvlleges and llablllLles.[21] 1hls requlremenL, however, ls unwlLLlngly v|o|ated when the prov|so |n
Sect|on 1 of kk 17-99 ls applled ln cerLaln cases. 1o lllusLraLe Lhls polnL, we conslder Lhree brands of
38
clgareLLes (Camel, Champlon, unlon Amerlcan 8lend), all classlfled as lower-prlced clgareLLes under
SecLlon 143(c)(4) of Lhe 1997 1ax Code, slnce Lhelr neL reLall prlce ls below 3.00 per pack.
AlLhough Lhe brands all belong Lo Lhe same caLegory, Lhe provlso ln SecLlon 1, 88 17-99 auLhorlzed Lhe
lmposlLlon of dlfferenL (and grossly dlsproporLlonaLe) Lax raLes. lL effecLlvely exLended Lhe quallflcaLlon
sLaLed ln Lhe Lhlrd paragraph of SecLlon 143(c) of Lhe 1997 1ax Code LhaL was supposed Lo apply only
durlng Lhe LranslLlon perlod:
1he exclse Lax from any brand of clgareLLes wlLhln Lhe nexL Lhree (3) years from Lhe effecLlvlLy of 8.A.
no. 8240 shall noL be lower Lhan Lhe Lax, whlch ls due from each brand on CcLober 1, 1996[.]
1he Cl8 clalms LhaL Lhe provlso ln SecLlon 1 of 88 17-99 was paLLerned afLer Lhe Lhlrd paragraph of
SecLlon 143(c) of Lhe 1997 1ax Code. Slnce Lhe law's lnLenL was Lo lncrease revenue, lL found no reason
noL Lo apply Lhe same hlgher Lax rule" Lo exclse Laxes due afLer Lhe LranslLlon perlod desplLe Lhe
absence of a slmllar LexL ln Lhe wordlng of SecLlon 143(c). WhaL Lhe Cl8 mlsses ln hls argumenL ls LhaL he
applled Lhe rule noL only for clgareLLes, buL also for clgars, dlsLllled splrlLs, wlnes and fermenLed llquors:
rovlded, however, LhaL Lhe new speclflc Lax raLe for any exlsLlng brand of clgars [and] clgareLLes packed
by machlne, dlsLllled splrlLs, wlnes and fermenLed llquors shall noL be lower Lhan Lhe exclse Lax LhaL ls
acLually belng pald prlor Lo !anuary 1, 2000.
When Lhe perLlnenL provlslons of Lhe 1997 1ax Code lmposlng exclse Laxes on Lhese producLs are read,
however, Lhere ls noLhlng slmllar Lo Lhe Lhlrd paragraph of SecLlon 143(c) LhaL can be found ln Lhe
provlslons lmposlng exclse Laxes on dlsLllled splrlLs (SecLlon 141[23]) and wlnes (SecLlon 142[24]). ln facL,
Lhe rule wlll also noL apply Lo clgars as Lhese producLs fall under SecLlon 143(a).[23]
LvldenLly, Lhe 1997 1ax Code's provlslons on exclse Laxes have omlLLed Lhe adopLlon of cerLaln Lax
measures. 1o our mlnd, Lhese omlsslons are Lelllng lndlcaLlons of Lhe lnLenL of Congress noL Lo adopL Lhe
omlLLed Lax measures, Lhey are noL slmply unlnLended lapses ln Lhe law's wordlng LhaL, as Lhe Cl8
clalms, are neverLheless covered by Lhe splrlL of Lhe law. Pad Lhe lnLenLlon of Congress been solely Lo
lncrease revenue collecLlon, a provlslon slmllar Lo Lhe Lhlrd paragraph of SecLlon 143(c) would have been
lncorporaLed ln SecLlons 141 and 142 of Lhe 1997 1ax Code. 1hls, however, ls noL Lhe case.
WPL8LlC8L, ln vlew of Lhe foregolng, Lhe peLlLlon ls uLnlLu. 1he declslon daLed !uly 12, 2007 and Lhe
resoluLlon daLed CcLober 4, 2007 of Lhe CourL of 1ax Appeals ln C1A L.8. no. 228 are Alll8MLu. no
pronouncemenL as Lo cosLs.
CASL: AbakadaGuroarty||stvsLrm|ta (200S)-MAGSUM8CL
DCC1kINLS:
unlformlLy ln LaxaLlon means LhaL all Laxable arLlcles or klnds of properLy of Lhe same class shall
be Laxed aL Lhe same raLe. ulfferenL arLlcles may be Laxed aL dlfferenL amounLs provlded LhaL
Lhe raLe ls unlform on Lhe same class everywhere wlLh all people aL all Llmes.
rogresslve LaxaLlon ls bullL on Lhe prlnclple of Lhe Laxpayer's ablllLy Lo pay. 1hls prlnclple was
also llfLed from Adam SmlLh's coooos of 1oxotloo, and lL sLaLes:
o 1he sub[ecLs of every sLaLe oughL Lo conLrlbuLe Lowards Lhe supporL of Lhe governmenL,
as nearly as posslble, ln proporLlon Lo Lhelr respecLlve ablllLles, LhaL ls, ln proporLlon Lo
Lhe revenue whlch Lhey respecLlvely en[oy under Lhe proLecLlon of Lhe sLaLe.

UICk IAC1S:
8.A. no. 9337 ls a consolldaLlon of Lhree leglslaLlve bllls whlch became effecLlve on !uly 1,
2003. 8uL when sald daLe came, Lhe CourL lssued a Lemporary resLralnlng order, effecLlve
lmmedlaLely and conLlnulng unLll furLher orders, en[olnlng respondenLs from enforclng and
lmplemenLlng Lhe law because of Lhe confuslon ln Lhe lmplemenLaLlon of Lhe sald acL.
eLlLloners are assalllng Lhe consLlLuLlonallLy of some of Lhe provlslons of 8A 9337. 8A 9337 ls an
acL amendlng several provlslons of Lhe naLlonal lnLernal 8evenue Code (nl8C) of 1997.
Accordlng Lo Lhem, Lhey are vlolaLlve of ArL. vl, Sec 28(1) of Lhe ConsLlLuLlon. Also, Lhe
39
peLlLloners are conLendlng LhaL Lhe llmlLaLlon on Lhe credlLable lnpuL Lax ls anyLhlng buL
regresslve because lL ls Lhe smaller buslnesses wlLh hlgher lnpuL Lax-ouLpuL Lax raLlo LhaL wlll
suffer Lhe consequences.


IAC1S:
ln G.k. No. 1680S6: 8efore 8.A. no. 9337 Look effecL, peLlLloners A8AkAuA CukO arLy LlsL, et
ol., flled a peLlLlon for prohlblLlon on May 27, 2003. 1hey quesLlon Lhe consLlLuLlonallLy of
SecLlons 4, 3 and 6 of 8.A. no. 9337, amendlng SecLlons 106, 107 and 108, respecLlvely, of Lhe
naLlonal lnLernal 8evenue Code (nl8C).
o SecLlon 4 lmposes a 10 vA1 on sale of goods and properLles
o SecLlon 3 lmposes a 10 vA1 on lmporLaLlon of goods
o SecLlon 6 lmposes a 10 vA1 on sale of servlces and use or lease of properLles
! 1hese quesLloned provlslons conLaln a unlform ptovlso auLhorlzlng Lhe
resldenL, upon recommendaLlon of Lhe SecreLary of llnance, Lo ralse Lhe vA1
raLe Lo 12, effecLlve !an. 1, 2006, afLer any of Lhe followlng condlLlons have
been saLlsfled.
! eLlLloners argue LhaL Lhe law ls unconsLlLuLlonal, as lL consLlLuLes abandonmenL
by Congress of lLs excluslve auLhorlLy Lo flx Lhe raLe of Laxes under ArLlcle vl,
SecLlon 28(2) of Lhe 1987 hlllpplne ConsLlLuLlon.
ln G.k. No. 168461: AssoclaLlon of llllploos Shell uealers, lnc., et ol., quesLlons Lhe ff. provlslons
of 8.A. no. 9337:
! 5ectloo 8, amendlng SecLlon 110 (A)(2) of Lhe nl8C, requlrlng LhaL Lhe lnpuL Lax
on depreclable goods shall be amorLlzed over a 60-monLh perlod, lf Lhe
acqulslLlon, excludlng Lhe vA1 componenLs, exceeds Cne Mllllon esos (1,
000,000.00),
! 5ectloo 8, amendlng SecLlon 110 (8) of Lhe nl8C, lmposlng a 70 llmlL on Lhe
amounL of lnpuL Lax Lo be credlLed agalnsL Lhe ouLpuL Lax, and
! 5ectloo 12, amendlng SecLlon 114 (c) of Lhe nl8C, auLhorlzlng Lhe CovernmenL
or any of lLs pollLlcal subdlvlslons, lnsLrumenLallLles or agencles, lncludlng
CCCCs, Lo deducL a 3 flnal wlLhholdlng Lax on gross paymenLs of goods and
servlces, whlch are sub[ecL Lo 10 vA1 under SecLlons 106 (sale of goods and
properLles) and 108 (sale of servlces and use or lease of properLles) of Lhe nl8C.
o eLlLloners also belleve LhaL Lhese provlslons vlolaLe Lhe consLlLuLlonal guaranLee of
equal proLecLlon of Lhe law under ArLlcle lll, SecLlon 1 of Lhe ConsLlLuLlon, as Lhe
llmlLaLlon on Lhe credlLable lnpuL Lax lf: (1) Lhe enLlLy has a hlgh raLlo of lnpuL Lax, or (2)
lnvesLs ln caplLal equlpmenL, or (3) has several LransacLlons wlLh Lhe governmenL, ls noL
based on real and subsLanLlal dlfferences Lo meeL a valld classlflcaLlon.
o LasLly, peLlLloners conLend LhaL Lhe 70 llmlL ls anyLhlng buL progresslve, vlolaLlve of
ArLlcle vl, SecLlon 28(1) of Lhe ConsLlLuLlon, and LhaL lL ls Lhe smaller buslnesses wlLh
hlgher lnpuL Lax Lo ouLpuL Lax raLlo LhaL wlll suffer Lhe consequences Lhereof for lL wlpes
ouL whaLever meager marglns Lhe peLlLloners make.
8espondenLs' reply: 8.A. no. 9337 ls Lhe anchor of Lhe governmenL's flscal reform agenda.
o A reform ln Lhe value-added sysLem of LaxaLlon ls Lhe core revenue measure LhaL wlll LllL
Lhe balance Lowards a susLalnable macroeconomlc envlronmenL necessary for economlc
growLh.

ISSULS:
60
WheLher SecLlons 4, 3 6, 8 and 12 of 8.A. no. 9337 vlolaLe ArLlcle vl, SecLlon 28(1) of Lhe 1987
ConsLlLuLlon? nC.
o 1he rule of LaxaLlon shall be unlform and equlLable. 1he congress shall evolve a
progresslve sysLem of LaxaLlon.

nLLD:
uolfotmlty ooJ poltoblllty of 1oxotloo
unlformlLy ln LaxaLlon means LhaL all Laxable arLlcles or klnds of properLy of Lhe same class shall
be Laxed aL Lhe same raLe. ulfferenL arLlcles may be Laxed aL dlfferenL amounLs provlded LhaL
Lhe raLe ls unlform on Lhe same class everywhere wlLh all people aL all Llmes.
ln Lhls case, Lhe Lax law ls unlform as lL provldes a sLandard raLe of 0 or 10 (or 12) on all
goods and servlces. SecLlons 4, 3 and 6 of 8.A. no. 9337 provlde for a raLe of 10 (or 12) on
sale of goods and properLles, lmporLaLlon of goods, and sale of servlces and use or lease of
properLles. 1hese same secLlons also provlde for a 0 raLe on cerLaln sales and LransacLlon.
nelLher does Lhe law make any dlsLlncLlon as Lo Lhe Lype of lndusLry or Lrade LhaL wlll bear Lhe
70 llmlLaLlon on Lhe credlLable lnpuL Lax, 3-year amorLlzaLlon of lnpuL Lax pald on purchase of
caplLal goods or Lhe 3 flnal wlLhholdlng Lax by Lhe governmenL. lL musL be sLressed LhaL Lhe
rule of unlform LaxaLlon does noL deprlve Congress of Lhe power Lo classlfy sub[ecLs of LaxaLlon,
and only demands unlformlLy wlLhln Lhe parLlcular class
8.A. no. 9337 ls also equlLable. 1he law ls equlpped wlLh a Lhreshold margln. 1he vA1 raLe of
0 or 10 (or 12) does noL apply Lo sales of goods or servlces wlLh gross annual sales or
recelpLs noL exceedlng 1,300,000.00. Also, baslc marlne and agrlculLural food producLs ln Lhelr
orlglnal sLaLe are sLlll noL sub[ecL Lo Lhe Lax, Lhus ensurlng LhaL prlces aL Lhe grassrooLs level wlll
remaln accesslble.
lL ls admlLLed LhaL 8.A. no. 9337 puLs a premlum on buslnesses wlLh low proflL marglns, and
unduly favors Lhose wlLh hlgh proflL marglns. Congress was noL obllvlous Lo Lhls. 1hus, Lo
equallze Lhe welghLy burden Lhe law enLalls, Lhe law, under SecLlon 116, lmposed a 3
percenLage Lax on vA1-exempL persons under SecLlon 109(v), l.e., LransacLlons wlLh gross annual
sales and/or recelpLs noL exceedlng 1.3 Mllllon. 1hls acLs as a equallzer because ln effecL,
blgger buslnesses LhaL quallfy for vA1 coverage and vA1-exempL Laxpayers sLand on equal-
fooLlng.
Moreover, Congress provlded mlLlgaLlng measures Lo cushlon Lhe lmpacL of Lhe lmposlLlon of
Lhe Lax on Lhose prevlously exempL. Lxclse Laxes on peLroleum producLs and naLural gas were
reduced. ercenLage Lax on domesLlc carrlers was removed. ower producers are now exempL
from paylng franchlse Lax.
Aslde from Lhese, Congress also lncreased Lhe lncome Lax raLes of corporaLlons, ln order Lo
dlsLrlbuLe Lhe burden of LaxaLlon. uomesLlc, forelgn, and non-resldenL corporaLlons are now
sub[ecL Lo a 33 lncome Lax raLe, from a prevlous
32.hLLp://sc.[udlclary.gov.ph/[urlsprudence/2003/sep2003/168036.hLm - _fLn93lnLercorporaLe
dlvldends of non-resldenL forelgn corporaLlons are sLlll sub[ecL Lo 13 flnal wlLhholdlng Lax buL
Lhe Lax credlL allowed on Lhe corporaLlon's domlclle was lncreased Lo 20. 1he hlllpplne
AmusemenL and Camlng CorporaLlon (ACCC8) ls noL exempL from lncome Laxes anymore.
Lven Lhe sale by an arLlsL of hls works or servlces performed for Lhe producLlon of such works
was noL spared.
All Lhese were deslgned Lo ease, as well as spread ouL, Lhe burden of LaxaLlon, whlch would
oLherwlse resL largely on Lhe consumers. lL cannoL Lherefore be galnsald LhaL 8.A. no. 9337 ls
equlLable.
61

ltoqtesslvlty of 1oxotloo
rogresslve LaxaLlon ls bullL on Lhe prlnclple of Lhe Laxpayer's ablllLy Lo pay. 1hls prlnclple was
also llfLed from Adam SmlLh's coooos of 1oxotloo, and lL sLaLes:
o 1he sub[ecLs of every sLaLe oughL Lo conLrlbuLe Lowards Lhe supporL of Lhe governmenL,
as nearly as posslble, ln proporLlon Lo Lhelr respecLlve ablllLles, LhaL ls, ln proporLlon Lo
Lhe revenue whlch Lhey respecLlvely en[oy under Lhe proLecLlon of Lhe sLaLe.
1axaLlon ls progresslve when lLs raLe goes up dependlng on Lhe resources of Lhe person
affecLed.
1he vA1 ls an anLlLhesls of progresslve LaxaLlon. 8y lLs very naLure, lL ls regresslve. 1he prlnclple
of progresslve LaxaLlon has no relaLlon wlLh Lhe vA1 sysLem lnasmuch as Lhe vA1 pald by Lhe
consumer or buslness for every goods boughL or servlces en[oyed ls Lhe same regardless of
lncome. ln oLher words, Lhe vA1 pald eaLs Lhe same porLlon of an lncome, wheLher blg or
small. 1he dlsparlLy lles ln Lhe lncome earned by a person or proflL margln marked by a
buslness, such LhaL Lhe hlgher Lhe lncome or proflL margln, Lhe smaller Lhe porLlon of Lhe
lncome or proflL LhaL ls eaLen by vA1. A coovetso, Lhe lower Lhe lncome or proflL margln, Lhe
blgger Lhe parL LhaL Lhe vA1 eaLs away. AL Lhe end of Lhe day, lL ls really Lhe lower lncome
group or buslnesses wlLh low-proflL marglns LhaL ls always hardesL hlL.
neverLheless, Lhe ConsLlLuLlon does noL really prohlblL Lhe lmposlLlon of lndlrecL Laxes, llke Lhe
vA1. WhaL lL slmply provldes ls LhaL Congress shall "evolve a progresslve sysLem of LaxaLlon."
As sLaLed lo tbe 1oleotloo cose:
o 1he ConsLlLuLlon does noL really prohlblL Lhe lmposlLlon of lndlrecL Laxes whlch, llke Lhe
vA1, are regresslve. WhaL lL slmply provldes ls LhaL Congress shall 'evolve a progresslve
sysLem of LaxaLlon.' 1he consLlLuLlonal provlslon has been lnLerpreLed Lo mean slmply
LhaL 'dlrecL Laxes are . . . Lo be preferred [and] as much as posslble, lndlrecL Laxes should
be mlnlmlzed. lndeed, Lhe mandaLe Lo Congress ls noL Lo prescrlbe, buL Lo evolve, a
progresslve Lax sysLem. CLherwlse, sales Laxes, whlch perhaps are Lhe oldesL form of
lndlrecL Laxes, would have been prohlblLed because sales Laxes are also regresslve.
8esorL Lo lndlrecL Laxes should be mlnlmlzed buL noL avolded enLlrely because lL ls dlfflculL, lf
noL lmposslble, Lo avold Lhem by lmposlng such Laxes accordlng Lo Lhe Laxpayers' ablllLy Lo pay.
ln Lhe case of Lhe vA1, Lhe law mlnlmlzes Lhe regresslve effecLs of Lhls lmposlLlon by provldlng
for zero raLlng of cerLaln, whlle granLlng exempLlons Lo oLher LransacLlons.

ADDI1ICNAL NC1LS:
lopot 1ox ls deflned under SecLlon 110(A) of Lhe nl8C, as amended, as Lhe value-added Lax
due ftom or polJ by a vA1-reglsLered person on Lhe lmporLaLlon of goods or local purchase of
good and servlces, lncludlng lease or use of properLy, ln Lhe course of Lrade or buslness, from a
vA1-reglsLered person
Ootpot 1ox ls Lhe value-added Lax Joe on Lhe sale or lease of Laxable goods or properLles or
servlces by any person reglsLered or requlred Lo reglsLer under Lhe law.

u.non-lmpalrmenL of ConLracLs
1. Sec 10 Alll and Sec 11 Axll 1987 ConsLlLuLlon
AIII Sect|on 10. no law lmpalrlng Lhe obllgaLlon of conLracLs shall be passed.
AkII Sect|on 11. no franchlse, cerLlflcaLe, or any oLher form of auLhorlzaLlon for Lhe operaLlon of a publlc
uLlllLy shall be granLed excepL Lo clLlzens of Lhe hlllpplnes or Lo corporaLlons or assoclaLlons organlzed
62
under Lhe laws of Lhe hlllpplnes, aL leasL slxLy per cenLum of whose caplLal ls owned by such clLlzens,
nor shall such franchlse, cerLlflcaLe, or auLhorlzaLlon be excluslve ln characLer or for a longer perlod Lhan
flfLy years. nelLher shall any such franchlse or rlghL be granLed excepL under Lhe condlLlon LhaL lL shall be
sub[ecL Lo amendmenL, alLeraLlon, or repeal by Lhe Congress when Lhe common good so requlres. 1he
SLaLe shall encourage equlLy parLlclpaLlon ln publlc uLlllLles by Lhe general publlc. 1he parLlclpaLlon of
forelgn lnvesLors ln Lhe governlng body of any publlc uLlllLy enLerprlse shall be llmlLed Lo Lhelr
proporLlonaLe share ln lLs caplLal, and all Lhe execuLlve and managlng offlcers of such corporaLlon or
assoclaLlon musL be clLlzens of Lhe hlllpplnes.
D. Non-Impa|rment C|ause
ConLracL ls law beLween Lhe conLracLlng parLles
CbllgaLlon blnds parLles Lo perform agreemenL
MusL govern and conLrol conLracL ln every shape ln whlch lL ls lnLended Lo bear upon lL
WheLher affecLs: valldlLy, consLrucLlon, dlscharge
Any law whlch enlarges or ln any manner changes lnLenLlon of parLles dlscoverable ln lL
o lmpalrs conLracL lLself
Manner and degree change ls effecLed can lnfluence concluslon
WheLher law affecLs valldlLy, consLrucLlon, duraLlon, mode of dlscharge/evldence of agreemenL
lmpalrs Lhe conLracL
o 1hough may noL do so Lo same exLenL
no room for any sLlpulaLlon
When sLaLe sLlpulaLed by conLracL Lo glve exempLlon from LaxaLlon
o Cr commuLed uncerLaln Laxes for deflnlLe and flxed sum/s
o AfLerwards underLakes Lo Lax, ln same manner as lL Laxes oLher
sub[ecLs/persons/corporaLlons/properLy whlch were sub[ecL of exempLlon or
commuLaLlon
o CbllgaLlon of conLracL ls lmpalred
ConsLlLuLlonal prohlblLlon agalnsL lmpalrmenL of conLracLs: applles only
o Where lL ls clalmed LhaL Lhe obllgaLlon of conLracL ls lmpalred by law of Lhe sLaLe
o SLaLuLe or consLlLuLlonal provlslon of Lhe sLaLe
o noL apply Lo mere declslons of courLs consLrulng a conLracL (2 Cooley 1496)

Is 1ax Lxempt|on kevocab|e? DLLNDS


8LvCCA8LL:
o lf granL of exempLlon does noL consLlLuLe a conLracL
o Merely 'sponLaneous concesslon by leglslaLure
o noL connecLed wlLh any servlce or duLy lmposed
o SLaLe aL lLs pleasure, wlLhdraw an exempLlon
! Mere graLulLy possesslng no elemenL of conLracL
! Lven Lhough corporaLlon may lncur expense on falLh Lhereof
o SLaLuLe passed afLer corporaLlon creaLed, exempLlng lL wholly or parLlally from LaxaLlon
o WlLhouL paymenL of any conslderaLlon or assumpLlon of any new burden by Lhe
corporaLlon
o Mere graLulLy on parL of Lhe sLaLe
o LxempLlon may be revoked aL any Llme
63
o LxempLlon from LaxaLlon noL confer vesLed rlghL
! May be modlfled or repealed by leglslaLure
! unless: modlflcaLlon or repeal would lmpalr obllgaLlon of conLracL (2 Cooley
1469-1473
o lf basls of Lax exempLlon ls by vlrLue of franchlse
! LxempLlon may be revoked (ArL. 12, Sec. 11)
lf Lax exempLlon consLlLuLes blndlng conLracL for valuable conslderaLlon
o CovernmenL cannoL unllaLerally revoke Lax exempLlon
o CharLer of prlvaLe corporaLlon: conLracL beLween corporaLlon and sLaLe
! 8ased on conslderaLlon and accepLed by a corporaLlon
o 8uL granL of franchlse Lo corporaLlon noL lmply conLracL exempLlng properLy from
LaxaLlon/lncrease ln LaxaLlon
o no conLracL creaLed by provlslon ln charLer or franchlse LhaL corporaLlon shall pay
annually cerLaln Lax
o When governmenL enLers lnLo conLracL
! uescends Lo level of ordlnary lndlvldual
! CannoL lnvoke sLaLe lmmunlLy

CASL: k vsCagu|o (2007)-MANALASA
IAC1S:
1. Congress enacLed kA 7227(8ases Converslon and uevelopmenL AcL of 1992) whlch creaLed Lhe Sublc
Speclal Lconomlc and lreeporL Zone (S8l) and Lhe Sublc 8ay MeLropollLan AuLhorlLy (S8MA).
a. SecLlon 12 provldes LhaL *- ,+6"4 shall be lmposed wlLhln Lhe Sublc Speclal Lconomlc
Zone.
b. So 8espondenLdomesLlc CorporaLlons, dolng buslness aL Lhe S8l, applled for &were
granLed CerLlflcaLes of 8eglsLraLlon and 1ax LxempLlon
2. Congress subsequenLly passed kA 9334, whlch provldes LhaL all appllcable Laxes, lncludlng exclse
Laxes shall 7" +88#0"$ Lo clgars and clgareLLes, dlsLllled splrlLs, fermenLed llquors and wlnes broughL
dlrecLly lnLo Lhe freeporLs(1o sLop smuggllng!)
a. Cn Lhe basls of SecLlon 6, S8MA lssued a MLMCkANDUM declarlng LhaL,
alllmporLaLlons of clgars, clgareLLes, dlsLllled splrlLs, fermenLed llquors and wlnes lnLo
Lhe S8l, shall be ,9"+,"$ +4 -9$0*+92 0:8-9,+,0-*4 457;"/, ,- +## +88#0/+7#" ,+6"4< duLles
and charges, lncludlng exclse Laxes.
b. Meanwhlle, 8l8 requesLed CusLoms Commlssloner Lo lmmedlaLely collecL Lhe exclse Lax
due on lmporLed alcohol and Lobacco broughL Lo uuLy lree and lreeporL zones.
3. 8espondenL CorporaLlons soughL for reconslderaLlon" on Lhe lmposlLlon of Laxes, parLlcularly exclse
Laxes by Lhe CollecLor of CusLoms and Lhe S8MA AdmlnlsLraLor. 1helr requesL was denled prompLlng
Lhem Lo flle wlLh Lhe 81CClongapo.
a. Aspeclal clvll acLlon for declaraLory rellef" Lo have cerLaln provlslons of 8.A. no. 9334
declared unconsLlLuLlonal.
b. CCn1Ln1lCnS
8espondenL - CorporaLlons'
ConLenLlon
eLlLloner - 8epubllc's ConLenLlon 1rlal CourL
8A 9334 (no Lax exempLlon) ls
noL a repeal of 8A 7227 (granL Lax
exempLlon) because repeals by
lmpllcaLlon noL favored.
1ax exempLlons are noL presumed
and are sLrlcLly consLrued agalnsL
granLee
8uled ln favor
of
8espondenL
64
8A 9334 ls a general law, whlch
cannoL amend 8A 7227 LhaL ls a
speclal law.
An lncrease ln buslness expense ls
noL Lhe ln[ury" conLemplaLed by
law
8uled ln favor
of
8espondenL
8A 9334 vlolaLes one blll-one
sub[ecL rule and proscrlpLlon
agalnsL lmpalrmenL of conLracLs
1he drawback mechanlsm"
esLabllshed wlll negaLe Lhe
posslblllLy of Lhe feared ln[ury" Lo
respondenL corporaLlons
8uled ln favor
of
8espondenL
c. 8espondenLs prayed for Lhe lssuance of a wrlL of prellmlnary ln[uncLlon and/or (18C)
and prellmlnary mandaLory ln[uncLlon.
d. 1he same was granLed by !udge Caguloa. 1he ln[uncLlon bond was approved aL
1,000,000.
4. Pence, Lhls peLlLlon. eLlLloners conLend LhaL publc respondenL un[usLly lssued Lhe ln[uncLlve wrlL.
1hey argue LhaL 8A 9334 has clearly wlLhdrawn Lhe Lax exempLlon prevlously granLed.

ISSULS:WheLher publlc respondenL [udge commlLLed grave abuse of dlscreLlon amounLlng Lo lack or
excess ln [urlsdlcLlon ln lssulng Lhe ln[uncLlve wrlL desplLe Lhe absence of Lhe legal requlslLes for lLs
lssuance.

nLLD: LS. et|t|on Ak1L MLkI1CkICUS.
1. kA 7227 granted tax exempt|ons (|oca| and nat|ona|) to pr|vate respondents but |t |s c|ear that |n
enact|ng kA 9334, Congress expressed |ts |ntent|on to w|thdraw pr|vate respondents' tax
exempt|on pr|v||ege on the|r |mportat|ons of a|coho| and tobacco products.
2. Lvery presumpt|on must be |n favor of the const|tut|ona||ty of a statute. no vesLed rlghL ln a Lax
exempLlon. 8elng a mere sLaLuLory prlvllege, a Lax exempLlon may be modlfled or wlLhdrawn aL wlll
by Lhe granLlng auLhorlLy. 1o sLaLe oLherwlse ls Lo llmlL Lhe Laxlng power of Lhe SLaLe, whlch ls
unllmlLed, plenary, comprehenslve and supreme. 1he power Lo lmpose Laxes ls one so unllmlLed ln
force and so searchlng ln exLenL, lL ls sub[ecL only Lo resLrlcLlons, whlch resL on Lhe dlscreLlon of Lhe
auLhorlLy exerclslng lL.
3. As a general rule, Lax exempLlons are consLrued sLrlcLly agalnsL Lhe Laxpayer and llberally ln favor of
Lhe Laxlng auLhorlLy.
4. A Lax exempLlon cannoL be grounded upon Lhe conLlnued exlsLence of a sLaLuLe LhaL precludes lLs
change or repeal. Congress can enacL a law wlLhdrawlng a Lax exempLlon [usL as efflcaclously as lL
may granL Lhe same.
3. 1he rlghLs granLed under Lhe CerLlflcaLes of 8eglsLraLlon and 1ax LxempLlon of prlvaLe respondenLs
are noL absoluLe and uncondlLlonal. Whlle Lhe Lax exempLlon conLalned ln Lhe CerLlflcaLes of
8eglsLraLlon of prlvaLe respondenLs may have been parL of Lhe lnducemenL for carrylng on Lhelr
buslnesses ln Lhe S8l, Lhls exempLlon, neverLheless, ls far from belng conLracLual ln naLure ln Lhe
sense LhaL Lhe non-lmpalrmenL clause of Lhe ConsLlLuLlon can rlghLly be lnvoked.
6. WhaLever rlghL may have been acqulred on Lhe basls of Lhe CerLlflcaLes of 8eglsLraLlon and 1ax
LxempLlon musL yleld Lo Lhe SLaLe's valld exerclse of pollce power. lL ls well Lo remember LhaL Laxes
may be made Lhe lmplemenL of Lhe pollce power.
7. 1he feared ln[urlous effecLs of Lhe lmposlLlon of Laxes on lmporLed clgars, clgareLLes, dlsLllled splrlLs,
fermenLed llquors and wlnes cannoL posslbly ouLwelgh Lhe dlre consequences LhaL Lhe non-
collecLlon of Laxes, noL Lo menLlon Lhe unabaLed smuggllng lnslde Lhe S8l, would wreak on Lhe
governmenL. WhaLever damage would befall prlvaLe respondenLs musL perforce Lake a back seaL Lo
Lhe presslng need Lo curb smuggllng and ralse revenues for governmenLal funcLlons.
NC1LS: =445" -* =*;5*/,0-*
63
1. Cne such case of grave abuse obLalned ln Lhls case when !udge Caguloa lssued hls Crder and
LheWrlL of rellmlnary ln[uncLlon desplLe Lhe absence of a clear and unquesLloned legal rlghL of
prlvaLe respondenLs. Pe dlsregarded Lhe facL LhaL as a condlLlon slne qua non Lo Lhe lssuance of
a wrlL of prellmlnary ln[uncLlon, ptlvote tespooJeots oeeJeJ olso to sbow o cleot leqol tlqbt LhaL
oughL Lo be proLecLed. 1haL requlremenL ls noL saLlsfled. 1o sLress, Lhe posslblllLy of lrreparable
damage wlLhouL proof of an acLual exlsLlng rlghL would noL [usLlfy an ln[uncLlve rellef.
2. lndeed, SecLlons 204 and 229 of Lhe nl8C provlde for Lhe recovery of erroneously or lllegally
collecLed Laxes whlch would be Lhe naLure of Lhe exclse Laxes pald by prlvaLe respondenLs should
SecLlon 6 of 8.A. no. 9334 be declared unconsLlLuLlonal or lnvalld.
3. CourL flnds !udge Caguloa Lo have oversLepped hls dlscreLlon when he arblLrarlly flxed
Lheln[uncLlon bond of Lhe S8l enLerprlses aL only 1mllllon. 8ule 38, SecLlon 4(b) provldes LhaL a
bond ls execuLed ln favor of Lhe parLy en[olned Lo answer for all damages LhaL lL may susLaln by
reason of Lhe ln[uncLlon. 1he purpose of Lhe ln[uncLlon bond ls Lo proLecL Lhe defendanL agalnsL loss
or damage.
4. Lacklng Lhe requlslLe proof of publlc respondenL's alleged parLlallLy, Lhls CourL has no ground Lo
prohlblL hlm from proceedlng wlLh Lhe case for declaraLory rellef. lor Lhese reasons, prohlblLlon
does noL lle.

CASL: Mera|co vs rov|nce of Laguna (1999)-LkL2
MLkALCC v rov|nce of Laguna
uocLrlne: ConLracLual Lax exempLlons are noL Lo be confused wlLh Lax exempLlons granLed under a
franchlse.
lAC1S
Manlla LlecLrlc Company (ML8ALCC) on varlous daLes (Lhe laLesL belng !anuary 19, 1983) was granLed
franchlses by varlous munlclpallLles of Laguna. Cn SepL. 12 1991, 8A 7160 "Local CovernmenL Code of
1991" (LCC) was enacLed Lo Lake effecL on !an.1 1992 en[olnlng local govermenL unlLs Lo creaLe Lhelr
own sources of revenue and Lo levy Laxes, fees and charges, sub[ecL Lo Lhe llmlLaLlons, conslsLenL wlLh
Lhe baslc pollcy of local auLonomy. 8espondenL Laguna rovlnce enacLed Crdlnance no. 01-92 (effecLlve
!an. 1, 1993) provldlng, ln parL:

Sec. 2.09. lranchlse 1ax. - 1here ls hereby lmposed a Lax on buslnesses en[oylng a
franchlse, aL a raLe of flfLy percenL (30) of one percenL (1) of Lhe gross annual
recelpLs, whlch shall lnclude boLh cash sales and sales on accounL reallzed durlng Lhe
precedlng calendar year wlLhln Lhls provlnce, lncludlng Lhe LerrlLorlal llmlLs on any clLy
locaLed ln Lhe provlnce"

ML8ALCC was Lhen senL a demand leLLer Lo pay Lhe correspondlng Lax. ML8ALCC pald Lhe Lax under
proLesL (approx. hp19.3M) and laLer on flled a formal clalm for refund. lL conLends LhaL Lhe sLaLed
SecLlon 2.09 of Lhe LCC conLravened Lhe provlslons of SecLlon 1 of u 331, whlch provldes:

Any provlslon of law or local ordlnance Lo Lhe conLrary noLwlLhsLandlng, Lhe franchlse
Lax payable by all granLees of franchlses Lo generaLe, dlsLrlbuLe and sell elecLrlc currenL
for llghL, heaL and power shall be Lwo per cenL (2) of Lhelr gross recelpLs recelved from
Lhe sale of elecLrlc currenL and from LransacLlons lncldenL Lo Lhe generaLlon, dlsLrlbuLlon
and sale of elecLrlc currenL.

Such franchlse Lax shall be payable Lo Lhe Commlssloner of lnLernal 8evenue or hls duly
auLhorlzed represenLaLlve on or before Lhe LwenLleLh day of Lhe monLh followlng Lhe
66
end of each calendar quarLer or monLh, as may be provlded ln Lhe respecLlve franchlse
or perLlnenL munlclpal regulaLlon and shall, any provlslon of Lhe Local 1ax Code or any
oLher law Lo Lhe conLrary noLwlLhsLandlng, be ln lleu of all Laxes and assessmenLs of
whaLever naLure lmposed by any naLlonal or local auLhorlLy on earnlngs, recelpLs,
lncome and prlvllege of generaLlon, dlsLrlbuLlon and sale of elecLrlc currenL."

ML8ALCC Lhen flled a complalnL for refund wlLh a prayer for Lhe lssuance of a wrlL of prellmlnary
ln[uncLlon and/or 18C aL Lhe 81C of SLa. Cruz, Laguna.

lSSuL: W/n Lhe lmposlLlon of a franchlse Lax under SecLlon 2.09 of Laguna rovlnclal Crdlnance no. 01-
92, lnsofar as ML8ALCC ls concerned, ls vlolaLlve of Lhe non-lmpalrmenL clause of Lhe ConsLlLuLlon and
SecLlon 1 of resldenLlal uecree no. 331? NC

PLLu: Whlle Lhe CourL has, noL Loo lnfrequenLly, referred Lo Lax exempLlons conLalned ln speclal
franchlses as belng ln Lhe naLure of conLracLs and a parL of Lhe lnducemenL for carrylng on Lhe franchlse,
Lhese exempLlons, neverLheless, are far from belng sLrlcLly conLracLual ln naLure. Contractua| tax
exempt|ons, |n the rea| sense of the term and where the non-|mpa|rment c|ause of the Const|tut|on
can r|ght|y be |nvoked, are those agreed to by the tax|ng author|ty |n contracts, such as those
conta|ned |n government bonds or debentures, |awfu||y entered |nto by them under enab||ng |aws |n
wh|ch the government, act|ng |n |ts pr|vate capac|ty, sheds |ts c|oak of author|ty and wa|ves |ts
governmenta| |mmun|ty. 1ruly, Lax exempLlons of Lhls klnd may noL be revoked wlLhouL lmpalrlng Lhe
obllgaLlons of conLracLs. 1hese conLracLual Lax exempLlons, however, are noL Lo be confused wlLh Lax
exempLlons granLed under franchlses. A franchlse parLakes Lhe naLure of a granL whlch ls beyond Lhe
purvlew of Lhe non-lmpalrmenL clause of Lhe ConsLlLuLlon.

Also Lhe Local CovernmenL Code of 1991 expllclLly auLhorlzes provlnclal governmenLs, noLwlLhsLandlng
any exempLlon granLed by any law or oLher speclal law, x xx (Lo) lmpose a Lax on buslnesses en[oylng a
franchlse". (SecLlon 137 of Lhe LCC). 1hus Lhe LCC, has repealed, amended or modlfled resldenLlal
uecree no. 331 whlch granLs Lhe exempLlon Lo ML8ALCC from paylng franchlse Lax.

CASL: Cagayan L|ectr|c ower vs CIk (198S)-1A8AG
lAC1S:
Cagayan LlecLrlc ower & LlghL Co., lnc ls Lhe holder of a leglslaLlve franchlse, 8epubllc AcL no.
3247, under whlch lLs paymenL of 3 Lax on lLs gross earnlngs from Lhe sale of elecLrlc currenL ls
"ln lleu of all Laxes and assessmenLs of whaLever auLhorlLy upon prlvlleges, earnlngs, lncome,
franchlse, and poles, wlres, Lransformers, and lnsulaLors of Lhe granLee, from whlch Laxes and
assessmenLs Lhe granLee ls hereby expressly exempLed. (1Ax LxLM1)
Cn !une 27, 1968, 8epubllc AcL no. 3431 amended secLlon 24 of Lhe 1ax Code by maklng llable
for lncome Lax all corporaLe Laxpayers noL speclflcally exempL under paragraph (c) (1) of sald
secLlon and secLlon 27 of Lhe 1ax Code noLwlLhsLandlng Lhe "provlslons of exlsLlng speclal or
general laws Lo Lhe conLrary". >?54< .9+*/?04" /-:8+*0"4 @"9" 457;"/,"$ ,- 0*/-:" ,+6 0*
+$$0,0-* ,- .9+*/?04" ,+6( (1Ax LxLM1lCn Wl1Pu8AWn)
Cn AugusL 4, 1969, peLlLloner's franchlse was amended Lhereby reenacLlng Lhe Lax exempLlon ln
lLs orlglnal charLer. (1Ax LxLM1lCn 8LlnS1A1Lu)
8y reason of Lhe amendmenL Lo secLlon 24 of Lhe 1ax Code, Lhe Commlssloner of lnLernal
8evenue requlred Lhe peLlLloner Lo pay deflclency lncome Laxes for 1968-Lo 1971. 1he peLlLloner
67
conLesLed Lhe assessmenLs. 1he Commlssloner cancelled Lhe assessmenLs for 1970 and 1971 buL
lnslsLed on Lhose for 1968 and 1969.
1he peLlLloner flled a peLlLlon for revlew wlLh Lhe 1ax CourL, whlch on lebruary 26, 1982 held
Lhe peLlLloner llable only for Lhe lncome Lax for Lhe perlod from !anuary 1 Lo AugusL 3, 1969 or
before Lhe passage of 8epubllc AcL no. 6020 whlch relLeraLed lLs Lax exempLlon. 1he peLlLloner
appealed Lo Lhe Supreme CourL.

lSSuL:
W/n Cagayan LlecLrlc ls llable for lncome Lax (aslde from franchlse Lax) from !anuary Lo AugusL 1969?

PLLu:

?LS. Cagayan LlecLrlc ls only llable durlng Lhe perlod !anuary - AugusL 1969 or when 8A no. 3431
amended Lhe 1ax Code, wlLhdrawlng Lax exempLlon.

1he peLlLloner's was expllclLly exempL as a franchlsee aL Lhe onseL and Lhls exempLlon was resLored by
Lhe subsequenL enacLmenL of 8epubllc AcL no. 6020 on AugusL 4, 1969. 1he 1ax CourL Lhus acLed
correcLly ln holdlng peLlLloner llable for lncome Lax from !anuary 1 Lo AugusL 3, 1969, Lhe perlod when
lLs Lax exempLlon was modlfled by 8epubllc AcL no. 3431.

1he SC however noLed LhaL Lhe 1969 assessmenL was hlghly conLroverslal. 1he Commlssloner aL Lhe
ouLseL was noL cerLaln as Lo peLlLloner's lncome Lax llablllLy. lor Lhls reason, Lhe CourL held LhaL Cagayan
LlecLrlc should be llable only for Lax proper and should noL be held llable for Lhe surcharge and lnLeresL.

CASL: Casanovas vs nord (1907)-8ISNAk
Casanovas vs. nord Gk L-3473, 22 March 1907
(Source: hLLp://www.scrlbd.com/doc/39413090/ulgesLs-1ax-l-2003)
llrsL ulvlslon, Wlllard (!): 4 concur, 1 dlssenLs
Iacts:
ln 1897, Lhe Spanl sh CovernmenL, l n accordance wl Lh Lhe provl sl ons of Lhe royal decree
of 14 may1867, granLed !. Casanovas cerLaln mlnes ln Lhe provlnce of Ambos Camarlnes, of whlch
mlnes Lhe laLLer ls now Lhe owner. 1haL Lhese were val l dl y perfecLed ml nl ng concessl ons
granLed Lo prl or Lo 11 Aprl l 1899 l s conceded. 1hey were so consldered by Lhe CollecLor of lnLernal
8evenue and were by hlm sald Lo fall wlLhln Lhe provlslons of SecLlon 134 of AcL 1189 (lnLernal 8evenue
AcL). 1he Commlssloner, !nC S. Pord, lmposed upon Lhese properLles Lhe Lax menLloned ln SecLlon 134,
whlch Casanovas pald under proLesL.

Issue:
WheLher SecLlon 134 of AcL 1189 ls valld.

ne|d:
1he deed consLlLuLed a conLracL beLween Lhe Spanlsh CovernmenL and Casanovas. 1he obllgaLlon ln Lhe
conLracL was lmpalred by Lhe enacLmenL of SecLlon 134 of Lhe lnLernal 8evenue La, Lhereby lnfrlnglng
Lhe provlslons of SecLlon 3 of Lhe AcL of Congress of 1 !uly 1902. lurLhermore, Lhe secLlon confllcLs wlLh
SecLlon 60 of Lhe AcL of Congress of 1 !uly 1902, whlch lndlcaLe LhaL concesslons can be cancelled only
by reason of lllegallLy ln Lhe procedure by whlch Lhey were obLalned, or for fallure Lo comply wlLh Lhe
condlLlons prescrlbed as requl sl Les for Lhel r reLenLl on l n Lhe l aws under whl ch Lhey were
granLed. 1he grounds were noL shown or clalmed ln Lhe case. As Lo Lhe allegaLlon LhaL Lhe secLlon
68
vlolaLes unlformlLy of LaxaLlon, Lhe CourL found lL unnecessary Lo conslder Lhe clalm ln vlew of Lhe resulL
aL whlch Lhe CourL has arrlved.
CASL: h|| kura| L|ectr|c Cooperat|ves vs DILG and DCI (2003)-8CM8ALLS
uocLrlne: 1he consLlLuLlonal prohlblLlon on Lhe non-lmpalrmenL of Lhe obllgaLlon of conLracLs does noL
prohlblL every change ln exlsLlng laws. 1o fall wlLhln Lhe prohlblLlon, Lhe change musL noL only lmpalr
Lhe obllgaLlon of Lhe exlsLlng conLracL, buL Lhe lmpalrmenL musL be subsLanLlal.
lacLs:
Cn May 23, 2003, a class sulL was flled by peLlLloners ln Lhelr own behalf and ln behalf of oLher
elecLrlc cooperaLlves organlzed and exlsLlng under u 269 whlch are members of peLlLloner
hlllpplne 8ural LlecLrlc CooperaLlves AssoclaLlon, lnc. (PlL8LCA).
under Sec. 39 of u 269 elecLrlc cooperaLlves shall be exempL from Lhe paymenL of all naLlonal
CovernmenL, local governmenL, and munlclpal Laxes and fee, lncludlng franchlse, fllng
recordaLlon, llcense or permlL fees or Laxes and any fees, charges, or cosLs lnvolved ln any courL
or admlnlsLraLlve proceedlngs ln whlch lL may be parLy.
lrom 1971Lo 1978, ln order Lo flnance Lhe elecLrlflcaLlon pro[ecLs envlsloned by u 269, Lhe
hlllpplne CovernmenL, acLlng Lhrough Lhe naLlonal Lconomlc councll (now naLlonal Lconomlc
uevelopmenL AuLhorlLy) and Lhe nLA, enLered lnLo 6 loan agreemenLs wlLh Lhe governmenL of
Lhe uSA, Lhrough Lhe unlLed SLaLes Agency for lnLernaLlonal uevelopmenL (uSAlu) wlLh elecLrlc
cooperaLlves as beneflclarles.
o 1he loan agreemenLs conLaln slmllarly worded provlslons on Lhe Lax appllcaLlon of Lhe
loan and any properLy or commodlLy acqulred Lhrough Lhe proceeds of Lhe loan.
o SecLlon 6.3. 1axes and uuLles. 1he 8orrower covenanLs and agrees LhaL Lhls Loan
AgreemenL and Lhe Loan provlded for hereln shall be free from, and Lhe rlnclpal and
lnLeresL shall be pald Lo A.l.u. wlLhouL deducLlon for and free from, any LaxaLlon or fees
lmposed under any laws or decrees ln effecL wlLhln Lhe 8epubllc of Lhe hlllpplnes or
any such Laxes or fees so lmposed or payable shall be relmbursed by Lhe 8orrower wlLh
funds oLher Lhan Lhose provlded under Lhe Loan xxx
eLlLloners conLend LhaL pursuanL Lo Lhe provlslons of u 269 and Sec 6.3 ln Lhe loan
agreemenL, Lhey are exempL from paymenL of local Laxes, lncludlng paymenL of real properLy
Lax.WlLh Lhe passage however of Lhe Local CovernmenL Code, Lhey allege LhaL Lhelr Lax
exempLlons have been lnvALluL? wlLhdrawn.
o arLlcularly, peLlLloners assall Lhe valldlLy of Sec. 193 and 234 of Lhe sald code. Sec. 193
provldes for Lhe wlLhdrawal of Lax exempLlon prlvlleges granLed Lo all persons, wheLher
naLural or [urldlcal, excepL cooperaLlves duly reglsLered under 8A 6938, whlle Sec. 234
exempLs Lhe same cooperaLlves from paymenL of real properLy Lax.
LasLly, Lhey allege LhaL Lhe sald provlslons dlscrlmlnaLe agalnsL Lhem ln vlolaLlon of Lhe equal
proLecLlon clause and furLher unconsLlLuLlonal because Lhey lmpalr Lhe obllgaLlon of conLracLs
b/w hll CovernmenL and uS CovernmenL.
lssue:
(1) uoes Lhe Local CovernmenL Code (under Sec. 193 and 234) vlolaLe Lhe equal proLecLlon clause slnce
Lhe provlslons unduly dlscrlmlnaLe agalnsL peLlLloners who are duly reglsLered cooperaLlves under u
269? nC
(2) ls Lhere an lmpalrmenL of Lhe obllgaLlons of conLracL under Lhe loan enLered lnLo beLween Lhe
hlllpplne and Lhe uS CovernmenLs? nC

8ullng:
69
(1) no. 1he guaranLy of Lhe equal proLecLlon clause ls noL vlolaLed by a law based on a reasonable
classlflcaLlon.
ClasslflcaLlon, Lo be reasonable musL:
(a) resL on subsLanLlal classlflcaLlons,
(b) germane Lo Lhe purpose of Lhe law,
(c) noL llmlLed Lo Lhe exlsLlng condlLlons only, and
(d) apply equally Lo all members of Lhe same class.
SC held LhaL Lhere ls reasonable classlflcaLlon under Lhe Local CovernmenL Code Lo [usLlfy Lhe
dlfferenL Lax LreaLmenL beLween elecLrlc cooperaLlves covered by u 269 and elecLrlc
cooperaLlves under 8A 6938.
o llrsL, subsLanLlal dlsLlncLlons exlsL beLween cooperaLlves under u 269 and Lhose under
8A 6938. ln Lhe former, Lhe governmenL ls Lhe one LhaL funds Lhose so-called elecLrlc
cooperaLlves, whlle ln Lhe laLLer, Lhe members make equlLable conLrlbuLlon as source of
funds.
o Second, Lhe classlflcaLlon of Lax-exempL enLlLles ln Lhe Local CovernmenL Code ls
germane Lo Lhe purpose of Lhe law. 1he ConsLlLuLlonal mandaLe LhaL every local
governmenL unlL shall en[oy local auLonomy," does noL mean LhaL Lhe exerclse of Lhe
power by Lhe local governmenLs ls beyond Lhe regulaLlon of Congress. Sec. 193 of Lhe
LCC ls lndlcaLlve of Lhe leglslaLlve lnLenL Lo veL broad Laxlng powers upon Lhe local
governmenL unlLs and Lo llmlL exempLlons from local LaxaLlon Lo enLlLles speclflcally
provlded Lhereln.
o llnally, Sec. 193 and 234 of Lhe LCC permlL reasonable classlflcaLlon as Lhese
exempLlons are noL llmlLed Lo exlsLlng condlLlons and apply equally Lo all members of
Lhe same class.
(2) no. lL ls lngralned ln [urlsprudence LhaL Lhe consLlLuLlonal prohlblLlon on Lhe lmpalrmenL of Lhe
obllgaLlons of conLracLs does noL prohlblL every change ln exlsLlng laws. 1o fall wlLhln Lhe prohlblLlon,
Lhe change musL noL only lmpalr Lhe obllgaLlon of Lhe exlsLlng conLracL, buL Lhe lmpalrmenL musL be
subsLanLlal. Moreover, Lo consLlLuLe lmpalrmenL, Lhe law musL affecL a change ln Lhe rlghLs of Lhe
parLles wlLh reference Lo each oLher and noL wlLh respecL Lo non-parLles.
1he quoLed provlslon under Lhe loan agreemenL does noL purporL Lo granL any Lax exempLlon ln
favor of any parLy Lo Lhe conLracL, lncludlng Lhe beneflclarles. 1he provlslons slmply shlfL Lhe Lax
burden, lf any, on Lhe LransacLlons under Lhe loan agreemenLs Lo Lhe borrower and/or
beneflclary of Lhe loan. Pence, Lhe wlLhdrawal by Lhe Local CovernmenL Code under Sec. 193
and 234 of Lhe Lax exempLlons prevlously en[oyed by peLlLloners does noL lmpalr Lhe obllgaLlon
of Lhe borrower, Lhe lender or Lhe beneflclary under Lhe loan agreemenLs as, ln facL, no Lax
exempLlon ls granLed Lhereln.


L. Non-|mpr|sonment for non-payment of po|| tax
Art. 3, Sec. 20: No person sha|| be |mpr|soned for non-payment of debt or po|| tax
Whlle a person may noL be lmprlsoned for non-paymenL of cedula or poll Lax (pl v. Llnsangan)
o May be lmprlsoned for non-paymenL of oLher klnds of Laxes where law so expressly
provldes

I. Ireedom of ke||g|on
70
Art. 3, Sec. S: No |aw sha|| be made respect|ng an estab||shment of re||g|on or proh|b|t|ng the
free exerc|se thereof. 1he free exerc|se and en[oyment of re||g|ous profess|on and worsh|p
w|thout d|scr|m|nat|on or preference sha|| forever be a||owed. No re||g|ous test sha|| be
requ|red for the exerc|se of c|v|| or po||t|ca| r|ghts.

CASL: AMLkICAN 8I8LL SCCIL1 v. CI1 CI MANILA

Iacts: ln Lhe course of lLs mlnlsLry, Lhe hlllpplne agency of Lhe Amerlcan 8lble SocleLy has been
dlsLrlbuLlng and selllng blbles and/or gospel porLlons Lhereof LhroughouL Lhe hlllpplnes and LranslaLlng
Lhe same lnLo several hlllpplne dlaleLs. 1he acLlng ClLy 1reasurer of Manlla requlred Lhe socleLy Lo
secure Lhe correspondlng Mayor's permlL and munlclpal llcense fees, LogeLher wlLh compromlse
coverlng Lhe perlod from Lhe 4Lh quarLer of 1943 Lo Lhe 2nd quarLer of 1933. 1he socleLy pald such
under proLesL, and flled sulL quesLlonlng Lhe legallLy of Lhe ordlnances under whlch Lhe fees are belng
collecLed.
Issue: WheLher Lhe munlclpal ordlnances vlolaLe Lhe freedom of rellglous professlon and worshlp.
ne|d: A Lax on Lhe lncome of one who engages ln rellglous acLlvlLles ls dlfferenL from a Lax on properLy
used or employed ln connecLlon wlLh Lhose acLlvlLles. lL ls one Lhlng Lo lmpose a Lax on Lhe lncome or
properLy of a preacher, and anoLher Lo exacL a Lax for hlm for Lhe prlvllege of dellverlng a sermon. 1he
power Lo Lax Lhe exerclse of a prlvllege ls Lhe power Lo conLrol or suppress lLs en[oymenL. Lven lf
rellglous groups and Lhe press are noL alLogeLher free from Lhe burdens of Lhe governmenL, Lhe acL of
dlsLrlbuLlng and selllng blbles ls purely rellglous and does noL fall under SecLlon 27 (e) of Lhe 1ax Code
(CA 466). 1he facL LhaL Lhe prlce of blbles, eLc. are a llLLle hlgher Lhan acLual cosL of Lhe same does noL
necessarlly mean lL ls already engaged ln buslness for proflL. Crdlnance 2329 and 3000 are noL
appllcable Lo Lhe SocleLy.

C.rohlblLlon agalnsL LaxaLlon of real properLy of charlLable
lnsLlLuLlons,churches,parsonages,orconvenLs,mosques and non-proflL cemeLerles
1. Sec 28 Avl 1987 ConsLlLuLlon
AVI Sect|on 28.
1. 1he rule of LaxaLlon shall be unlform and equlLable. 1he Congress shall evolve a progresslve
sysLem of LaxaLlon.
2. 1he Congress may, by law, auLhorlze Lhe resldenL Lo flx wlLhln speclfled llmlLs, and sub[ecL Lo
such llmlLaLlons and resLrlcLlons as lL may lmpose, Larlff raLes, lmporL and exporL quoLas,
Lonnage and wharfage dues, and oLher duLles or lmposLs wlLhln Lhe framework of Lhe naLlonal
developmenL program of Lhe CovernmenL.
3. Char|tab|e |nst|tut|ons, churches and personages or convents appurtenant thereto, mosques,
non-prof|t cemeter|es, and a|| |ands, bu||d|ngs, and |mprovements, actua||y, d|rect|y, and
exc|us|ve|y used for re||g|ous, char|tab|e, or educat|ona| purposes sha|| be exempt from
taxat|on.
4. no law granLlng any Lax exempLlon shall be passed wlLhouL Lhe concurrence of a ma[orlLy of all
Lhe Members of Lhe Congress.


G. roh|b|t|on aga|nst taxat|on of rea| property of char|tab|e |nst|tut|ons, churches, parsonages or
convents, mosques and non-prof|t cemeter|es
Art. 6, Sec. 28 (3): Char|tab|e |nst|tut|ons, churches, parsonages or convents appurtenant
thereto, mosques, non-prof|t cemeter|es, and a|| |ands, bu||d|ngs and |mprovements actua||y,
71
d|rect|y and exc|us|ve|y used for re||g|ous, char|tab|e, or educat|ona| purposes sha|| be exempt
from taxat|on.
CemeLerles are exempL from paymenL of Laxes due Lo dlfflculLy of collecLlng Lax Lhereon
o Cbvlous lmproprleLy of selllng graves of dead Lo defray expenses of carrylng on Lhe
governmenL of Lhe llvlng
Churches and parsonages/convenLs appurLenanL LhereLo: exempL
o erform work whlch would oLherwlse be carrled on by publlc aL Lhe expense of
Laxpayers
o Lxpense of lnsLlLuLlons from LaxaLlon lessens Lhan lncreases burden on Laxpayers
o AcLually, dlrecLly, excluslvely used
! 1exL of exempLlon: use of Lhe properLy for purposed menLloned ln Lhe
ConsLlLuLlon
Lxcluslve buL noL AbsoluLe use:
o Lxcluslvely used: noL necessarlly mean LoLal or absoluLe use for rellglous, charlLable and
educaLlonal purposes
! Lven lf properLy ls lncldenLally used for sald purposes, Lax exempLlon wlll apply
o roperLy acLually owned by rellglous, charlLable and educaLlonal lnsLlLuLlon used for Lax-
exempL purposes
! LxempLlon from Lax shall noL aLLach

CASL: LLADCC v. CIk (196S)

Iacts: SomeLlme ln 1937, Lhe M.8. LsLaLe, lnc., of 8acolod ClLy, donaLed 10,000.00 ln cash Lo 8ev. lr.
Crlspln 8ulz, Lhen parlsh prlesL of vlcLorlas, negros CccldenLal, and predecessor of hereln peLlLloner, for
Lhe consLrucLlon of a new CaLhollc Church ln Lhe locallLy. 1he LoLal amounL was acLually spenL for Lhe
purpose lnLended.
Cn March 3, 1938, Lhe donor M.8. LsLaLe, lnc., flled Lhe donor's glfL Lax reLurn. under daLe of Aprll 29,
1960, Lhe respondenL Commlssloner of lnLernal 8evenue lssued an assessmenL for donee's glfL Lax
agalnsL Lhe CaLhollc arlsh of vlcLorlas, negros CccldenLal, of whlch peLlLloner was Lhe prlesL. 1he Lax
amounLed Lo 1,370.00 lncludlng surcharges, lnLeresLs of 1 monLhly from May 13, 1938 Lo !une 13,
1960, and Lhe compromlse for Lhe laLe flllng of Lhe reLurn.
eLlLloner lodged a proLesL Lo Lhe assessmenL and requesLed Lhe wlLhdrawal Lhereof.

Issue: w/n church are exempLed from glfL Lax? no, exempLed only on properLy Lax

ne|d: SecLlon 22 (3), ArL. vl of Lhe ConsLlLuLlon of Lhe hlllpplnes, exempLs from LaxaLlon cemeLerles,
cbotcbes and parsonages or convenLs, appurLenanL LhereLo, and all looJs, bollJloqs, and lmprovemenLs
used excluslvely for rellglous purposes. 1he exempLlon ls only from Lhe paymenL of Laxes assessed on
such properLles enumeraLed, as properLy Laxes, as conLra dlsLlngulshed from exclse Laxes.

ln Lhe presenL case, whaL Lhe CollecLor assessed was a donee's glfL Lax, Lhe assessmenL was noL on Lhe
properLles Lhemselves. lL dld noL resL upon general ownershlp, lL was an exclse upon Lhe use made of
Lhe properLles, upon Lhe exerclse of Lhe prlvllege of recelvlng Lhe properLles (hlpps vs. Com. of lnL. 8ec.
91 l 2d 627). ManlfesLly, glfL Lax ls noL wlLhln Lhe exempLlng provlslons of Lhe secLlon [usL menLloned. A
glfL Lax ls noL a properLy Lax, buL an exclse Lax lmposed on Lhe Lransfer of properLy by way of glfL lotet
vlvos, Lhe lmposlLlon of whlch on properLy used excluslvely for rellglous purposes, does noL consLlLuLe
an lmpalrmenL of Lhe ConsLlLuLlon. As well observed by Lhe learned respondenL CourL, Lhe phrase
"exempL from LaxaLlon," as employed ln Lhe ConsLlLuLlon (sopto) should noL be lnLerpreLed Lo mean
72
exempLlon from all klnds of Laxes. And Lhere belng no clear, poslLlve or express granL of such prlvllege by
law, ln favor of peLlLloner, Lhe exempLlon hereln musL be denled.

CASL: Abra Va||ey Co||ege vs Aqu|no (1988)-ICk1LS

Abra valley College, lnc. v. Pon. !uan . Aqulno (1988)
Source: 1axaLlon rlnclple and 8emedles by !usLlce !. ulmaampao

lacLs:
lor non-paymenL of real esLaLe Laxes, Lhe properLles of Abra valley !unlor College (AvC) was
sold aL a publlc aucLlon for Lhe saLlsfacLlon of Lhe unpald real properLy Laxes Lhereon
AvC: prlmary use of loL and bulldlng for educaLlonal purposes, noL Lhe lncldenLal use
1he Munlclpal 1reasurer argued LhaL Lhe loL and bulldlng are used:
1. lor educaLlonal purposes of Lhe college
2. As permanenL resldence of resldenL and ulrecLor of AvC, Mr. edro 8orgonla and hls
famlly lncludlng ln-laws and grandchlldren
3. lor commerclal purposes because ground floor ls used and renLed by norLhern
MarkeLlng CorporaLlon
AvC: Sec. 22 (3) of ArL 6 of 1933 ConsLlLuLlon and AvC: Sec 34 (c) of CA 470 as amended by 8A
409 or Lhe AssessmenL Law granL:
o exempLlon from realLy Laxes for 'cemeLerles, churches and parsonages or convenLs
appurLenanL LhereLo, and all lands, bulldlngs, and lmprovemenLs used excluslvely for
rellglous, charlLable or educaLlonal purposes

lssue: WCn Lhe loL and bulldlng ln quesLlon are used excluslvely for educaLlonal purposes? -nC!

Peld: 1he LesL of exempLlon from LaxaLlon ls Lhe use of Lhe properLy for purposes menLloned ln Lhe
ConsLlLuLlon
exempLlons exLend Lo faclllLles whlch are lncldenLal Lo and reasonably necessary for Lhe
accompllshmenL of Lhe maln purposes
Lhe use of Lhe school bulldlng/loL for commerclal purposes ls nelLher conLemplaLed by law, nor by
[urlsprudence
lncldenLal: 2
nd
floor as resldence of resldenL and famlly
o CompllmenLary Lo maln purpose - educaLlonal
Lease of 1
sL
floor Lo norLhern MarkeLlng Corp: cannoL by any sLreLch of lmaglnaLlon be consldered
lncldenLal Lo Lhe purpose of educaLlon
Slnce only porLlon ls used for purposes of commerce, lL ls only falr LhaL half of Lhe assessed Lax be
reLurned Lo AvC

CASL: nerrera vs C 8oard of Assessment Appea|s (1961)-kUNG

1he ulrecLor of 8ureau of PosplLals auLhorlzed Lhe peLlLloners Lo esLabllsh and operaLe Lhe SL.
CaLherlne's PosplLal. eLlLloners senL a leLLer Lo Lhe CC Assessor requesLlng exempLlon from paymenL of
real esLaLe Lax on Lhe loL, bulldlng and oLher lmprovemenL comprlslng Lhe hosplLal on Lhe ground LhaL lL
was esLabllshed for charlLable and humanlLarlan purposes, noL for commerclal galn. LxempLlon
was granLed for Lhe years 1933 Lo 1933.
73
SubsequenLly, Lhe CC Assessor noLlfled Lhe peLlLloners LhaL Lhe sald properLles were reclasslfled
from exempL Lo Laxable, and assessed Lhem for real properLy Laxes. eLlLloner appealed Lhe assessmenL
Lo Lhe respondenL, whlch afflrmed Lhe declslon of Lhe Assessor.
Issue: wheLher or noL Lhe loL, bulldlng and oLher lmprovemenLs occupled by Lhe SL. CaLherlne PosplLal
are exempL fromLhe real properLy Lax.
ku||ng:
ln Lhls case, Lhe bulldlng lnvolved ln Lhls case ls prlnclpally used as a hosplLal. lL ls used malnly as a
surglcal and orLhopedlc hosplLal. 1he hosplLal admlLs boLh charlLy and pay paLlenLs. eLlLloners also
operaLe wlLhln Lhe premlses of Lhe hosplLal a School of mldwlfery whereln Lhe sLudenLs Lhereln are
charged a maLrlculaLlon. 1he sLudenLs pracLlce boLh ln SL. CaLherlne's and SL. Mary's PosplLal, Lhe laLLer
also owned by peLlLloners. A separaLe seL of accounLlng books ls malnLalned by Lhe school for mldwlfery
dlsLlncL from LhaL kepL by Lhe hosplLal.
lL musL be noLed LhaL of Lhe 32 beds ln Lhe hosplLal, 20 are for charlLy paLlenLs. Powever, Lhe lncome
reallzed from pay paLlenLs ls spenL for lmprovemenL of Lhe charlLy wards. 1he admlsslon of pay paLlenLs
does noL deLracL from Lhe charlLable characLer of a hosplLal, lf all lLs funds excluslvely Lo Lhe
malnLenance of Lhe lnsLlLuLlon as a publlc charlLy.Where render|ng char|ty |s |ts pr|mary ob[ect, and the
funds der|ved from payments made by pat|ents ab|e to pay are devoted to the benevo|ent purposes
of the |nst|tut|on, the mere fact that a prof|t has been made w||| not depr|ve the hosp|ta| of |ts
benevo|ent character.
Moreover, Lhe exempLlon ln favor of properLy used excluslvely for charlLable or educaLlonal purposes ls
noL llmlLed Lo properLy acLually lndlspensable Lherefore buL exLends Lo faclllLles whlch are lncldenLal Lo
and reasonably necessary for Lhe accompllshmenL of Lhe sald purposes, such as, ln Lhe case of hosplLals,
"a school for Lralnlng nurses, a nurses' home, properLy use Lo provlde houslng faclllLles for lnLerns,
resldenL docLors, superlnLendenLs, and oLher members of Lhe hosplLal sLaff, and recreaLlonal faclllLles
for sLudenL nurses, lnLerns and resldenLs".
1he SL. CaLherlne's PosplLal ls, Lherefore, a charlLable lnsLlLuLlon, and Lhe facL LhaL lL admlLs pay-paLlenLs
does noL bar lL from clalmlng LhaL lL ls devoLed excluslvely Lo benevolenL purposes, lL belng admlLLed
LhaL Lhe lncome derlved from pay-paLlenLs ls devoLed Lo Lhe lmprovemenL of Lhe charlLy wards. 1he
exlsLence of "SL. CaLherlne's School of Mldwlfery" does noL, and cannoL, affecL Lhe exempLlon Lo whlch
SL. CaLherlne's PosplLal ls enLlLled under our fundamenLal law

CASL: 8|shop of Nueva Segov|a vs rov|nc|a| 8oard of I|ocos Norte (1927)-MAGSUM8CL
DCC1kINL: 1he exempLlon ln favor of Lhe convenL ln Lhe paymenL of Lhe land Lax refers Lo Lhe home of
Lhe parLles who presldes over Lhe church and who has Lo Lake care of hlmself ln order Lo dlscharge hls
duLles. lL musL lnclude noL only Lhe land acLually occupled by Lhe church, buL also Lhe ad[acenL ground
desLlned Lo Lhe ordlnary lncldenLal uses of man.

IAC1S:
8epresenLed by Lhe 8lshop of nueva Segovla, Lhe plalnLlff, Lhe 8oman CaLhollc, possesses and ls
Lhe owner of a parcel of land ln Lhe munlclpallLy of San nlcolas, llocos norLe, all four sldes of
whlch face on publlc sLreeLs. Cn Lhe souLh slde ls a parL of Lhe churchyard, Lhe convenL and an
ad[acenL loL used for a vegeLable garden, conLalnlng an area off 1,624 square meLers, ln whlch
Lhere ls a sLable and a well for Lhe use of Lhe convenL. ln Lhe cenLer ls Lhe remalnder of Lhe
churchyard and Lhe church. Cn Lhe norLh ls an old cemeLery wlLh Lwo of lLs walls sLlll sLandlng,
and a porLlon where formerly sLood a Lower, Lhe base of whlch sLlll be seen, conLalnlng a LoLal
area of 8,933 square meLers.
74
As requlred by Lhe defendanLs, on !uly 3, 1923 Lhe plalnLlff pald, under proLesL, Lhe land Lax on
Lhe loL ad[olnlng Lhe convenL and Lhe loL whlch formerly was Lhe cemeLery wlLh Lhe porLlon
where Lhe Lower sLood.
1he plalnLlff flled Lhls acLlon for Lhe recovery of Lhe sum pald by Lo Lhe defendanLs by way of
land Lax, alleglng LhaL Lhe collecLlon of Lhls Lax ls lllegal. 1he lower courL absolved Lhe
defendanLs from Lhe complalnL ln regard Lo Lhe loL ad[olnlng convenL and declared LhaL Lhe Lax
collecLed on Lhe loL, whlch formerly was Lhe cemeLery and on Lhe porLlon where Lhe lower
sLood, was lllegal. 8oLh parLles appealed from Lhls [udgmenL.
ISSUL:
W/n plalnLlff ls exempL from Lhe paymenL of land Lax wlLh regard Lo LhaL whlch was formerly a
cemeLery and Lhe one ad[olnlng Lhe convenL? ?LS
nLLD:
SC held LhaL boLh loLs are exempL from land Lax and Lhe defendanLs are ordered Lo refund Lo
plalnLlff whaLever was pald as such Lax, wlLhouL any speclal pronouncemenL as Lo cosLs.
1he exempLlon ln favor of Lhe convenL ln Lhe paymenL of Lhe land Lax (sec. 344 [c]
AdmlnlsLraLlve Code) refers Lo Lhe home of Lhe parLles who presldes over Lhe church and who
has Lo Lake care of hlmself ln order Lo dlscharge hls duLles. lL musL lnclude noL only Lhe land
acLually occupled by Lhe church, buL also Lhe ad[acenL ground desLlned Lo Lhe ordlnary
lncldenLal uses of man. LxcepL ln large clLles where Lhe denslLy of Lhe populaLlon and Lhe
developmenL of commerce requlre Lhe use of larger LracLs of land for bulldlngs, a vegeLable
garden belongs Lo a house and, ln Lhe case of a convenL, lL use ls llmlLed Lo Lhe necesslLles of Lhe
prlesL, whlch comes under Lhe exempLlon.
ln regard Lo Lhe loL whlch formerly was Lhe cemeLery, whlle lL ls no longer used as such, nelLher
ls lL used for commerclal purposes and, accordlng Lo Lhe evldence, ls now belng used as a
lodglng house by Lhe people who parLlclpaLe ln rellglous fesLlvlLles, whlch consLlLuLes an
lncldenLal use ln rellglous funcLlons, whlch also comes wlLhln Lhe exempLlon.

CASL: LUNG CLN1Lk CI 1nL nILIINLS v. UL2CN CI1 (2004)-MANALASA
DCC1kINL: orLlons of Lhe land leased Lo prlvaLe enLlLles as well as Lhose parLs of Lhe hosplLal leased Lo
prlvaLe lndlvlduals are noL exempL from such Laxes as Lhese are noL acLually, dlrecLly, and excluslvely"
used for charlLable purposes.

IAC1S:
1. 1he peLlLloner Lung CenLer of Lhe hlllpplnes ls a non-sLock and non-proflL enLlLy esLabllshed by u
1823. lL ls Lo be admlnlsLered by Lhe Cfflce of Lhe resldenL of Lhe hlllpplnes wlLh Lhe MlnlsLry of
PealLh and Lhe MlnlsLry of Puman SeLLlemenLs. lL was organlzed for Lhe welfare and beneflL of Lhe
llllplnos Lo help combaL Lhe hlgh lncldence of lung and pulmonary dlseases.
2. lL ls Lhe reglsLered owner of a parcel of land (Cuezon Avenue corner LlllpLlcal 8oad).
a. LrecLed ln Lhe loL ls a hosplLal (Lung CenLer of Lhe hlllpplnes).
b. A blg space aL Lhe ground floor ls belng leased Lo prlvaLe parLles, for canLeen and small sLore
spaces, and Lo medlcal or professlonal pracLlLloners who use Lhe same as Lhelr prlvaLe cllnlcs for
Lhelr paLlenLs whom Lhey charge for Lhelr professlonal servlces.
c. 1/2 of Lhe enLlre area on Lhe lefL slde of Lhe bulldlng ls vacanL, whlle a blg porLlon on Lhe rlghL
slde, ls belng leased for commerclal purposes Lo Lhe LlllpLlcal Crchlds and Carden CenLer.
3. eLlLloner accepLs paylng & non-paylng paLlenLs. Aslde from lLs lncome from paylng paLlenLs,
peLlLloner recelves annual gov'L subsldles.
73
4. 1he local governmenL of CC assessed Lhe peLlLloner real properLy Lax.
3. eLlLloner proLesLed Lhe sald assessmenL clalmlng LhaL lL ls exempL belng a charlLable lnsLlLuLlon.
Powever, Lhe ClLy Assessor, 8oard of AssessmenL Appeals, and CA denled peLlLloner's clalm for Lax
exempLlon. Pence, Lhls peLlLlon.

ISSULS:
1. WCn Lhe peLlLloner ls a charlLable lnsLlLuLlon - ?LS
2. WCn Lhe real properLles of Lhe peLlLloner are exempL from real properLy Laxes - nC1 ALL

nLLD:
1. ?LS, peLlLloner ls a charlLable lnsLlLuLlon wlLhln Lhe conLexL of Lhe 1973 and 1987 ConsLlLuLlons.
a. 1he 1LS1 Lo deLermlne wheLher an enLerprlse ls a charlLable lnsLlLuLlon/enLlLy or noL ls wheLher
lL exlsLs Lo carry ouL a purpose reorganlzed ln law as charlLable or wheLher lL ls malnLalned for
galn, proflL, or prlvaLe advanLage.
b. 1he elemenLs Lo be conslderedlnclude Lhe sLaLuLe creaLlng Lhe enLerprlse, lLs corporaLe
purposes, lLs consLlLuLlon and by-laws, Lhe meLhods of admlnlsLraLlon, Lhe naLure of Lhe acLual
work performed, Lhe characLer of Lhe servlces rendered, Lhe lndeflnlLeness of Lhe beneflclarles,
and Lhe use and occupaLlon of Lhe properLles. 1he peLlLloner meL Lhe foregolng requlremenLs.
c. A charlLable lnsLlLuLlon does noL lose lLs characLer as such and lLs exempLlon from Laxes slmply
because lL derlves lncome from paylng paLlenLs C8 recelves subsldles from Lhe governmenL, so
long as Lhe money recelved ls devoLed or used alLogeLher Lo Lhe charlLable ob[ecL, and no
money lnures Lo prlvaLe beneflL of persons managlng lL.
d. Pere, peLlLloner adduced subsLanLlal evldence LhaL lL spenL lLs lncome, lncludlng Lhe subsldles
for Lhe operaLlon of Lhe hosplLal. lL even lncurred a neL loss ln 1991 and 1992 from lLs
operaLlons.
2. CnL? orLlons of peLlLloner's real properLy LhaL are leased Lo prlvaLe enLlLles are noL exempL from
real properLy Laxes as Lhese are noL octoolly, Jltectly and excloslvely" used for charlLable purposes.
a. L1l1lCnL8'S A8CuMLn1 LhaL lL properLy ls exempL from real properLy Lax per lLs charLer has
no merlL. SecLlon 2 of lLs charLer provldes LhaL- "belng a non-proflL, non-sLock corporaLlon
organlzed prlmarlly Lo help combaL Lhe hlgh lncldence of lung and pulmonary dlseases ln Lhe
hlllpplnes, all donaLlons, conLrlbuLlons, endowmenLs and equlpmenL and supplles Lo be
lmporLed.. for Lhe octool ose ooJ beoeflt of Lhe Lung CenLer, shall be exempt from |ncome and
g|ft Laxes..1he Lung CenLer of Lhe hlllpplnes shall be exempL from Lhe paymenL of Laxes,
charges and fees lmposed by Lhe CovernmenL or any pollLlcal subdlvlslon or lnsLrumenLallLy
Lhereof wlLh respecL Lo equlpmenL purchases made by, or for Lhe Lung CenLer."
b. Clearly, Lhe peLlLloner does not en[oy any properLy Lax exempLlon prlvlleges for lLs rea|
properLles as well as Lhe bulldlng consLrucLed Lhereon. lf Lhe lnLenLlons were oLherwlse, Lhe
same should have been among Lhe enumeraLlon of Lax-exempL prlvlleges.
c. L1l1lCnL8'S CLAlM LhaL lL ls exempL from real properLy Lax per SecLlon 28, ArL. xlv of Lhe
hlllpplne ConsLlLuLlon ls noL correcL.
d. under Lhe 1973 and 1987 ConsLlLuLlons and 8ep. AcL no. 7160 [LCC] ln order Lo be enLlLled Lo
Lhe exempLlon, Lhe peLlLloner ls burdened Lo prove, by clear and unequlvocal proof, LhaL (a) lL ls
a charlLable lnsLlLuLlon, and (b) lLs real properLles are AC1uALL?, ul8LC1L? and LxCLuSlvLL?
used for charlLable purposes.
l. Lxcluslve" - possessedand en[oyed Lo Lhe excluslon of oLhers
ll. Lxcluslvely" - ln a manner Lo exclude, as en[oylng a prlvllege excluslvely.
e. lf real properLy ls used for one or more commerclal purposes, lL ls noL excluslvely used for Lhe
exempLed purposes buL ls sub[ecL Lo LaxaLlon. 1he words domlnanL use" or prlnclpal use"
76
cannoL be subsLlLuLed for Lhe words used excluslvely" wlLhouL dolng vlolence Lo Lhe
ConsLlLuLlons and Lhe law. Solely ls synonymous wlLh excluslvely.
f. WhaL ls meanL by acLual, dlrecL and excluslve" use of Lhe properLy for charlLable purposes ls
Lhe d|rect and |mmed|ate and actua| appllcaLlon of Lhe properLy lLself Lo Lhe purposes for whlch
Lhe charlLable lnsLlLuLlon ls organlzed. lL ls noL Lhe use of Lhe lncome from Lhe real properLy LhaL
ls deLermlnaLlve of wheLher Lhe properLy ls used for Lax-exempL purposes.
g. Pere, peLlLloner falled Lo dlscharge lLs burden Lo prove LhaL Lhe enLlreLy of lLs real properLy ls
acLually, dlrecLly and excluslvely used for charlLable purposes. orLlons of Lhe land leased Lo
prlvaLe enLlLles as well as Lhose parLs of Lhe hosplLal leased Lo prlvaLe lndlvlduals are noL exempL
from such Laxes. Cn Lhe oLher hand, Lhe porLlons of Lhe land occupled by Lhe hosplLal and
porLlons of Lhe hosplLal used for lLs paLlenLs, wheLher paylng or non-paylng, are exempL from
real properLy Laxes.

CASL: CIk vs S1. LUkL'S MLDICAL CLN1Lk(2012)-LkL2
Comm|ss|oner of Interna| kevenue v St. Luke's Med|ca|
Iacts:
SL. Luke's Medlcal CenLer, lnc. (SL. Luke's) ls a hosplLal organlzed as a non-sLock and non-proflL
corporaLlon.
1he 8l8 assessed SL. Luke's deflclency Laxes for 1998 comprlsed of deflclency lncome Lax, value-
added Lax, and wlLhholdlng Lax. 1he 8l8 clalmed LhaL SL. Luke's should be llable for lncome Lax aL
a preferenLlal raLe of 10 as provlded for by SecLlon 27(8). lurLher, Lhe 8l8 clalmed LhaL SL.
Luke's was acLually operaLlng for proflL ln 1998 because only 13 of lLs revenues came
from charlLable purposes. Moreover, Lhe hosplLal's board of LrusLees, offlcers and employees
dlrecLly beneflL from lLs proflLs and asseLs.
Cn Lhe oLher hand, SL. Luke's malnLalned LhaL lL ls a non-sLock and non-proflL lnsLlLuLlon for
charlLable and soclal welfare purposes exempL from lncome Lax under SecLlon 30(L) and (C) of
Lhe nl8C. lL argued LhaL Lhe maklng of proflL per se does noL desLroy lLs lncome Lax exempLlon.

Issue:WheLher SL. Luke's ls llable for deflclency lncome Lax ln 1998 under SecLlon 27(8) of Lhe nl8C,
whlch lmposes a preferenLlal Lax raLe of 10 on Lhe lncome of proprleLary non-proflL hosplLals.

ne|d: ?es. SecLlon 27(8) of Lhe nl8C does noL remove Lhe lncome Lax exempLlon of proprleLary non-
proflL hosplLals under SecLlon 30(L) and (C). SecLlon 27(8) on one hand, and SecLlon 30(L) and (C)
on Lhe oLher hand, can be consLrued LogeLher wlLhouL Lhe removal of such Lax exempLlon.

SecLlon 27(8) of Lhe nl8C lmposes a 10 preferenLlal Lax raLe on Lhe
lncome of (1) proprleLary non-proflL educaLlonal lnsLlLuLlons and (2) propr|etary non-prof|t
hosp|ta|s. 1he only quallflcaLlons for hosplLals are LhaL Lhey musL be proprleLary and non-
proflL. "ropr|etary" means pr|vate, followlng Lhe deflnlLlon of a proprleLary educaLlonal lnsLlLuLlon" as
any pr|vate school malnLalned and admlnlsLered by pr|vate lndlvlduals or groups" wlLh a
governmenL permlL. "Non-prof|t" means no net |ncome or asset accrues to or benef|ts any member or
spec|f|c person, wlLh all Lhe neL lncome or asseL devoLed Lo Lhe lnsLlLuLlon's purposes and all lLs
acLlvlLles conducLed noL for proflL.

"Non-prof|t" does noL necessarlly mean "char|tab|e." ln collectot of lotetool keveooe v. clob
llllploo loc. Je cebo, Lhls CourL consldered as non-proflL a sporLs club organlzed for recreaLlon and
enLerLalnmenL of lLs sLockholders and members. 1he club was prlmarlly funded by membershlp fees and
dues. lf lL had proflLs, Lhey were used for overhead expenses and lmprovlng lLs golf course. 1he club was
77
non-proflL because of lLs purpose and Lhere was no evldence LhaL lL was engaged ln a proflL-
maklng enLerprlse.

1he CourL flnds LhaL SL. Luke's ls a corporaLlon LhaL ls noL operaLed excluslvely" for charlLable
or soclal welfare purposes lnsofar as lLs revenues from paylng paLlenLs are concerned. 1hls rullng ls
based noL only on a sLrlcL lnLerpreLaLlon of a provlslon granLlng Lax exempLlon, buL also on Lhe clear and
plaln LexL of SecLlon 30(L) and (C). SecLlon 30(L) and (C) of Lhe nl8C requlres LhaL an lnsLlLuLlon be
operaLed excluslvely" for charlLable or soclal welfare purposes Lo be compleLely exempL from lncome
Lax. An |nst|tut|on under Sect|on 30(L) or (G) does not |ose |ts tax exempt|on |f |t earns |ncome from |ts
for-prof|t act|v|t|es. Such lncome from for-proflL acLlvlLles, under Lhe lasL paragraph of SecLlon 30, ls
merely sub[ecL Lo lncome Lax, prevlously aL Lhe ordlnary corporaLe raLe buL now at the preferent|a| 10
rate pursuant to Sect|on 27(8). (mpbosls sopplleJ)

SL. Luke's falls Lo meeL Lhe requlremenLs under SecLlon 30(L) and (C) of Lhe nl8C Lo
be compleLely Lax exempL from all lLs lncome. Powever, lL remalns a proprleLary non-proflL hosplLal
under SecLlon 27(8) of Lhe nl8C as long as lL does noL dlsLrlbuLe any of lLs proflLs Lo lLs members and
such proflLs are relnvesLed pursuanL Lo lLs corporaLe purposes. SL. Luke's, as a proprleLary non-proflL
hosplLal, ls enLlLled Lo Lhe preferenLlal Lax raLe of 10 on lLs neL lncome from lLs for-proflL acLlvlLles.

Powever good falLh and honesL bellef LhaL one ls noL sub[ecL Lo Lax on Lhe basls of prevlous
lnLerpreLaLlon of governmenL agencles Lasked Lo lmplemenL Lhe Lax law, are sufflclenL [usLlflcaLlon Lo
deleLe Lhe lmposlLlon of surcharges and lnLeresL."

WPL8LlC8L, SL. Luke's Medlcal CenLer, lnc. ls C8uL8Lu
1C A? Lhe deflclency lncome Lax ln 1998 based on Lhe 10 preferenLlal lncome Lax raLe under
SecLlon 27(8) of Lhe naLlonal lnLernal 8evenue Code. Powever, lL ls noL llable for surcharges
and lnLeresL on such deflclency lncome Lax under SecLlons 248 and 249 of
Lhe naLlonal lnLernal 8evenue Code. All oLher parLs of Lhe ueclslon and 8esoluLlon of Lhe CourL of
1ax Appeals are Alll8MLu.



n. roh|b|t|on aga|nst taxat|on of non-stock, non-prof|t educat|ona| |nst|tut|ons
Art. 14, Sec. 4(3): A|| revenues and assets of non-stock, non-prof|t educat|ona| |nst|tut|ons
used actua||y, d|rect|y an exc|us|ve|y (ADL) for educat|ona| purposes sha|| be exempt from
taxes and dut|es. Upon d|sso|ut|on and cessat|on of corporate ex|stence of such |nst|tut|ons,
the|r assets sha|| be d|sposed of |n the manner prov|ded by |aw.
roprleLary educaLlonal lnsLlLuLlons, lncludlng Lhose cooperaLlvely owned may be enLlLled Lo
such exempLlons
o Sub[ecL Lo llmlLaLlons provlded by law
o lncludlng resLrlcLlons on dlvldends and provlslons for relnvesLmenLs
Art. 14Sec. 4(4): Sub[ect to cond|t|ons prescr|bed by |aw,
o A|| grants, endowments, donat|ons or contr|but|ons used ADL for educat|ona|
purposes sha|| be exempt from tax
AuL used referrlng Lo rellglous lnsLlLuLlons cannoL be applled Lo above arLlcle
o rovlslons of ArL 6, Sec. 28(3) applles Lo 3 lnsLlLuLlons: rellglous, charlLable and
educaLlonal lnsLlLuLlons
o ArL. 14: applles solely Lo non-sLock, non-proflL educaLlonal lnsLlLuLlons
78
o Should apply llLeral lnLerpreLaLlon: solely
! Consonance wlLh prlnclple of sLrlcLlsslml [urls
! Lxcluslvely ls and 'excluslve word' lndlcaLlve of lnLenL LhaL provlslon ls
mandaLory
ArL. 14, Sec.
4(3)
ArL. 6, Sec. 28 (3)
C8An1LL non-sLock, non-proflL
educaLlonal lnsLlLuLlons
8ellglous, educaLlonal,
charlLable lnsLlLuLlons
1AxLS CCvL8Lu lncome Lax
CusLom duLles
roperLy 1ax (uLCS Crder
no.137-87)
roperLy 1ax


uLCS Crder no. 137-87
lmplemenLlng 8egulaLlons daLed 16 uec. 1987 underscored:
(1) LxempLlon granLed refers Lo lnLernal revenue Laxes and cusLom duLles lmposed by naLlonal
Cov'L
Cn all revenues and asseLs of non-sLock, non-proflL educaLlonal lnsLlLuLlons
(2) LxempLlon noL only llmlLed Lo revenues and asseLs derlved from sLrlcLly school operaLlons
lncome from LulLlon, oLher mlscellaneous fees from maLrlculaLlon, llbrary, 8C1C, eLc,
fees
Also exLends Lo lncldenLal lncome derlved from canLeen, booksLore and dormlLory
faclllLles
(3) ln case of lncldenLal lncome:
faclllLles menLloned musL noL only be owned and operaLed by Lhe school lLself
faclllLles musL be locaLed lnslde school campus
canLeens operaLed by concesslonalres are Laxable
(4) lncome unrelaLed Lo school operaLlons: lncome from money markeL placemenLs
1lme, oLher bank deposlLs are Laxable
(3) use of school's lncome or asseLs musL be ln consonance wlLh purposes for whlch school ls
creaLed
use musL be school-relaLed - granL of scholarshlp, faculLy equlpmenL, esLabllshmenL of
professorlal chalrs, eLc

uonor's 1ax
ArL. 14, Sec 4 (4): Sub[ecL Lo condlLlons prescrlbed by law, all granLs, endowmenLs, donaLlons,
conLlrubLlons used acLually, dlrecLly and excluslvely for educaLlonal purposes shall be exempL
from Lax
o noL self-execuLlng, requlres leglslaLlve enacLmenL
o rovlde cerLaln condlLlons for exempLlon
o 8A8424: decalred donaLlons above Lax exempL

LsLaLe 1ax
79
non-sLock,non-proflL educaLlonal lnsLlLuLlons: noL lncluded under Sec. 87 of 8A 8424 Lherefor
nC1 1Ax LxLM1
Cnly Lransfers Lo soclal welfaLe, culLural, charlLable lnsLlLuLlons are exempL from esLaLe Lax

value Added 1ax
under 8evenue 8egulaLlon no.6-97: once non-sLock, non-proflL educaLlonal lnsLlLuLlons engage
ln buslness
o 1hey are sub[ecL Lo vA1
1ax Code of 1987, Sec. 109 (m): prlvaLed educaLlonal lnsLlLuLlons shall be exempL from vA1
provlded, Lhey are accredlLed as such by uLCS or CPLd
o LxempLlon noL exLend Lo oLher acLlvlLles lnvolvlng sale of goods and servlces

CASL: CIk v. CA, MCA (1998)

uocLrlnes:
8enLal lncome derlved by a Lax-exempL organlzaLlon from Lhe lease of lLs properLles, real or personal, ls
nC1 LxLM1 from lncome LaxaLlon, even lf such lncome ls excluslvely used for Lhe accompllshmenL of
lLs ob[ecLlves.
A clalm of sLaLuLory exempLlon from LaxaLlon should be manlfesL and unmlsLakable from Lhe language of
Lhe law on whlch lL ls based. 1hus, lL musL expressly be granLed ln a sLaLuLe sLaLed ln a language Loo
clear Lo be mlsLaken. verba legls non esL recedendum - where Lhe law does noL dlsLlngulsh, nelLher
should we.
1he bare allegaLlon alone LhaL one ls a non-sLock, non-proflL educaLlonal lnsLlLuLlon ls lnsufflclenL Lo
[usLlfy lLs exempLlon from Lhe paymenL of lncome Lax. lL musL prove wlLh subsLanLlal evldence LhaL (1) lL
falls under Lhe classlflcaLlon non-sLock, non-proflL educaLlonal lnsLlLuLlon, and (2) Lhe lncome lL seeks Lo
be exempLed from LaxaLlon ls used acLually, dlrecLly, and excluslvely for educaLlonal purposes.
1he CourL cannoL change Lhe law or bend lL Lo sulL lLs sympaLhles and appreclaLlons. CLherwlse, lL would
be overspllllng lLs role and lnvadlng Lhe realm of leglslaLlon. 1he CourL, glven lLs llmlLed consLlLuLlonal
auLhorlLy, cannoL rule on Lhe wlsdom or proprleLy of leglslaLlon. 1haL prerogaLlve belongs Lo Lhe pollLlcal
deparLmenLs of governmenL.
IAC1S:
rlvaLe 8espondenL ?MCA ls a non-sLock, non-proflL lnsLlLuLlon, whlch conducLs varlous programs and
acLlvlLles LhaL are beneflclal Lo Lhe publlc, especlally Lhe young people, pursuanL Lo lLs rellglous,
educaLlonal and charlLable ob[ecLlves.

?MCA earned lncome from leaslng ouL a porLlon of lLs premlses Lo small shop owners, llke resLauranLs
and canLeen operaLors, and from parklng fees collecLed from non-members. eLlLloner lssued an
assessmenL Lo prlvaLe respondenL for deflclency lncome Laxes, expanded wlLhholdlng Laxes on renLals
and professlonal fees and deflclency wlLhholdlng Laxes on wages. (ln a nuLshell, ?MCA leased Lhelr
faclllLles, goL lncome, Cl8 wanLs Lo levy Lax!) rlvaLe respondenL formally proLesLed Lhe assessmenL.
?MCA opposed argulng LhaL lLs renLal lncome ls noL sub[ecL Lo Lax, malnly because of Lhe provlslons of
SecLlon 27 of nl8C whlch provldes LhaL clvlc league or organlzaLlons noL organlzed for proflL buL operaLe
excluslvely for promoLlon of soclal welfare and Lhose organlzed excluslvely for pleasure, recreaLlon and
oLher non-proflLble buslnesses shall noL be Laxed. 1hey clalmed LhaL whaLever lncome Lhey wlll earn wlll
be used Lo furLher Lhe lnsLlLuLlon goals.
ln reply, Lhe Cl8 denled Lhe clalms of ?MCA. 1hey elevaLed Lhe case on appeal. upon M8, CourL of
Appeals reversed lL's prevlous declslon and ruled ln favor of ?MCA.
ISSUL: W/n Lhe lncome derlved from renLals of real properLy owned by ?MCA ls sub[ecL Lo lncome Lax?
80
nLLD:
?LS. lncome of whaLever klnd and characLer of non-sLock non-proflL organlzaLlons from any of Lhelr
properLles, real or personal, or from any of Lhelr acLlvlLles conducLed for proflL, regard|ess of the
d|spos|t|on made of such lncome, shall be sub[ecL Lo Lhe Lax lmposed under Lhe nl8C.
8enLal lncome derlved by a Lax-exempL organlzaLlon from Lhe lease of lLs properLles, real or personal, ls
noL exempL from lncome LaxaLlon, even lf such lncome ls excluslvely used for Lhe accompllshmenL of lLs
ob[ecLlves.
8ecause Laxes are Lhe llfeblood of Lhe naLlon, Lhe CourL has always applled Lhe docLrlne of sLrlcL ln
lnLerpreLaLlon ln consLrulng Lax exempLlons. lurLhermore, a clalm of sLaLuLory exempLlon from LaxaLlon
should be manlfesL and unmlsLakable from Lhe language of Lhe law on whlch lL ls based. 1hus, Lhe
clalmed exempLlon musL expressly be granLed ln a sLaLuLe sLaLed ln a language Loo clear Lo be
mlsLaken".
verba legls non esL recedendum. 1he law does noL make a dlsLlncLlon. 1he renLal lncome ls Laxable
regardless of whence such lncome ls derlved and how lL ls used or dlsposed of. Where Lhe law does noL
dlsLlngulsh, nelLher should we.
rlvaLe respondenL also lnvokes ArLlcle xlv, SecLlon 4, par. 3 of Lhe ConsLlLuLlon, clalmlng LhaL lL ls a
non-sLock, non-proflL educaLlonal lnsLlLuLlon whose revenues and asseLs are used acLually, dlrecLly and
excluslvely for educaLlonal purposes so lL ls exempL from Laxes on lLs properLles and lncome." 1hls ls
wlLhouL merlL slnce Lhe exempLlon provlded lles on Lhe paymenL of properLy Lax, and noL on Lhe lncome
Lax on Lhe renLals of lLs properLy. 1he bare allegaLlon alone LhaL one ls a non-sLock, non-proflL
educaLlonal lnsLlLuLlon ls lnsufflclenL Lo [usLlfy lLs exempLlon from Lhe paymenL of lncome Lax.
lor Lhe ?MCA Lo be granLed Lhe exempLlon lL clalms under Lhe above provlslon, lL musL prove wlLh
subsLanLlal evldence LhaL (1) lL falls under Lhe classlflcaLlon non-sLock, non-proflL educaLlonal lnsLlLuLlon,
and (2) Lhe lncome lL seeks Lo be exempLed from LaxaLlon ls used acLually, dlrecLly, and excluslvely for
educaLlonal purposes. unforLunaLely for respondenL, Lhe CourL noLed LhaL noL a sclnLllla of evldence was
submlLLed Lo prove LhaL lL meL Lhe sald requlslLes.
1he CourL appreclaLes Lhe noblllLy of respondenL's cause. Powever, Lhe CourL's power and funcLlon are
llmlLed merely Lo applylng Lhe law falrly and ob[ecLlvely. lL cannoL change Lhe law or bend lL Lo sulL lLs
sympaLhles and appreclaLlons. CLherwlse, lL would be overspllllng lLs role and lnvadlng Lhe realm of
leglslaLlon. 1he CourL regreLs LhaL, glven lLs llmlLed consLlLuLlonal auLhorlLy, lL cannoL rule on Lhe
wlsdom or proprleLy of leglslaLlon. 1haL prerogaLlve belongs Lo Lhe pollLlcal deparLmenLs of governmenL.

CASL: CIk vs CA,C1A and ADMU (1997)- 8ISNAk
CIk v. CA, C1A, AdMU
Gk No.11S349, 18 Apr|| 1997
(Source: hLLp://purplehorn.blogspoL.com/2011/09/dlgesLed-cases-ln-LaxaLlon.hLml).
I A C 1 S: rlvaLe respondenL, ALeneo de Manlla unlverslLy, ls a non-sLock, non-proflL educaLlonal
lnsLlLuLlon wlLh auxlllary unlLs and branches all over Lhe counLry. 1he lnsLlLuLe of hlllpplne CulLure (lC)
ls an auxlllary unlL wlLh no legal personallLy separaLe and dlsLlncL from prlvaLe respondenL. 1he lC ls a
hlllpplne unlL engaged ln soclal sclence sLudles of hlllpplne socleLy and culLure. Cccaslonally, lL accepLs
sponsorshlps for lLs research acLlvlLles from lnLernaLlonal organlzaLlons, prlvaLe foundaLlons and
governmenL agencles.

Cn 8 !uly 1983, prlvaLe respondenL recelved from Cl8 a demand leLLer daLed 3 !une 1983, assesslng
prlvaLe respondenL Lhe sum of 174,043.97 for alleged deflclency conLracLor's Lax, and an assessmenL
daLed 27 !une 1983 ln Lhe sum of 1,141,837 for alleged deflclency lncome Lax, boLh for Lhe flscal year
ended 31 March 1978. uenylng sald Lax llablllLles, prlvaLe respondenL senL peLlLloner a leLLer-proLesL
and subsequenLly flled wlLh Lhe laLLer a memorandum conLesLlng Lhe valldlLy of Lhe assessmenLs.
81

AfLer some Llme peLlLloner lssued a flnal declslon daLed 3 AugusL 1988 reduclng Lhe assessmenL for
deflclency conLracLor's Lax from 193,473.33 Lo 46,316.41, excluslve of surcharge and lnLeresL.

1he lower courLs ruled ln favor of respondenL. Pence Lhls peLlLlon.

eLlLloner Commlssloner of lnLernal 8evenue conLends LhaL rlvaLe 8espondenL ALeneo de Manlla
unlverslLy "falls wlLhln Lhe deflnlLlon" of an lndependenL conLracLor and "ls noL one of Lhose menLloned
as excepLed", hence, lL ls properly a sub[ecL of Lhe Lhree percenL conLracLor's Lax levled by Lhe foregolng
provlslon of law. eLlLloner sLaLes LhaL Lhe "Lerm 'lndependenL conLracLor' ls noL speclflcally deflned so
as Lo dellmlL Lhe scope Lhereof, so much so LhaL any person who . . . renders physlcal and menLal servlce
for a fee, ls now lndublLably consldered an lndependenL conLracLor llable Lo 3 conLracLor's Lax."

I S S U L: WheLher or noL prlvaLe respondenL falls under Lhe purvlew of lndependenL conLracLor
pursuanL Lo SecLlon 203 of Lhe 1ax Code and ls sub[ecL Lo a 3 conLracLors Lax.

n L LD: 1he peLlLlon ls unmerlLorlous.

1he Lerm "|ndependent contractors" lnclude persons ([urldlcal or naLural) noL enumeraLed above (buL
noL lncludlng lndlvlduals sub[ecL Lo Lhe occupaLlon Lax under SecLlon 12 of Lhe Local 1ax Code) whose
acLlvlLy conslsLs essenLlally of Lhe sale of all klnds of servlces for a fee regardless of wheLher or noL Lhe
performance of Lhe servlce calls for Lhe exerclse or use of Lhe physlcal or menLal faculLles of such
conLracLors or Lhelr employees.
eLlLloner Commlssloner of lnLernal 8evenue erred ln applylng Lhe prlnclples of Lax exempLlon wlLhouL
flrsL applylng Lhe well-seLLled docLrlne of sLrlcL lnLerpreLaLlon ln Lhe lmposlLlon of Laxes. lL ls obvlously
boLh llloglcal and lmpracLlcal Lo deLermlne who are exempLed wlLhouL flrsL deLermlnlng who are
covered by Lhe aforesald provlslon. 1he Commlssloner should have deLermlned flrsL lf prlvaLe
respondenL was covered by SecLlon 203, applylng Lhe rule of sLrlcL lnLerpreLaLlon of laws lmposlng Laxes
and oLher burdens on Lhe populace, before asklng ALeneo Lo prove lLs exempLlon Lherefrom.

Interpretat|on of 1ax Laws. 1he docLrlne ln Lhe lnLerpreLaLlon of Lax laws ls LhaL (a) sLaLuLe wlll noL be
consLrued as lmposlng a Lax unless lL does so clearly, expressly, and unamblguously. . . . (A) Lax cannoL
be lmposed wlLhouL clear and express words for LhaL purpose. Accordlngly, Lhe general rule of requlrlng
adherence Lo Lhe leLLer ln consLrulng sLaLuLes applles wlLh pecullar sLrlcLness Lo Lax laws and Lhe
provlslons of a Laxlng acL are noL Lo be exLended by lmpllcaLlon." ln case of doubL, such sLaLuLes are Lo
be consLrued mosL sLrongly agalnsL Lhe governmenL and ln favor of Lhe sub[ecLs or clLlzens because
burdens are noL Lo be lmposed nor presumed Lo be lmposed beyond whaL sLaLuLes expressly and clearly
lmporL.

ALeneo's lnsLlLuLe of hlllpplne CulLure never sold lLs servlces for a fee Lo anyone or was ever engaged ln
a buslness aparL from and lndependenLly of Lhe academlc purposes of Lhe unlverslLy. lunds recelved by
Lhe ALeneo de Manlla unlverslLy are Lechnlcally noL a fee. 1hey may however fall as glfLs or donaLlons
whlch are Lax-exempL" as shown by prlvaLe respondenL's compllance wlLh Lhe requlremenL of SecLlon
123 of Lhe naLlonal lnLernal 8evenue Code provldlng for Lhe exempLlon of such glfLs Lo an educaLlonal
lnsLlLuLlon.

1ransact|on of IC not a contract of sa|e nor a contract for a p|ece of work. 1he LransacLlons of
ALeneo's lnsLlLuLe of hlllpplne CulLure cannoL be deemed elLher as a conLracL of sale or a conLracL for a
82
plece of work. 8y Lhe conLracL of sale, one of Lhe conLracLlng parLles obllgaLes hlmself Lo Lransfer Lhe
ownershlp of and Lo dellver a deLermlnaLe Lhlng, and Lhe oLher Lo pay Lherefor a prlce cerLaln ln money
or lLs equlvalenL. ln Lhe case of a conLracL for a plece of work, Lhe conLracLor blnds hlmself Lo execuLe a
plece of work for Lhe employer, ln conslderaLlon of a cerLaln prlce or compensaLlon. . . . lf Lhe conLracLor
agrees Lo produce Lhe work from maLerlals furnlshed by hlm, he shall dellver Lhe Lhlng produced Lo Lhe
employer and Lransfer domlnlon over Lhe Lhlng. . . ." ln Lhe case aL bench, lL ls clear from Lhe evldence
on record LhaL Lhere was no sale elLher of ob[ecLs or servlces because, as adverLed Lo earller, Lhere was
no Lransfer of ownershlp over Lhe research daLa obLalned or Lhe resulLs of research pro[ecLs underLaken
by Lhe lnsLlLuLe of hlllpplne CulLure.


I. assage of 1ax 8|||s
ConsLlLuLlon: ArL 6, Sec. 24: All approprlaLlon, revenue or Larlff bllls auLhorlzlng lncrease of publlc
debL, bllls of local appllcaLlon, and prlvaLe bllls shall orlglnaLe excluslvely ln Lhe Pouse or
8epresenLaLlve, buL Lhe SenaLe may propose or concur ln amendmenLs
8oLh houses may lnlLlaLe bllls, buL only Lower Pouse may propose Lax measures

CASL: 1CLLN1INC v. SLC. CI IINANCL (199S)

Doctr|ne: Whlle Sec 24 Avl provldes LhaL all approprlaLlon, revenue or Larlff bllls, bllls auLhorlzlng
lncrease of Lhe publlc debL, bllls of local appllcaLlon and prlvaLe bllls musL orlglnaLe excluslvely ln Lhe
Pouse of 8epresenLaLlves" lL ALSC AuuS, 8uL Lhe SenaLe my propose or concur wlLh amendmenLs".
And ln Lhe exerclse of Lhls power, SenaLe may propose an enLlrely new blll as a subsLlLuLe measure.

Iacts:
1olenLlno eL al ls quesLlonlng Lhe consLlLuLlonallLy of 8A 7716 oLherwlse known as Lhe Lxpanded
value Added 1ax (LvA1) Law.
1olenLlnoclalms LhaL Lhls revenue blll dld noL excluslvely orlglnaLe from Lhe Pouse of
8epresenLaLlves as requlred by SecLlon 24, ArLlcle 6 of Lhe ConsLlLuLlon. Lven Lhough 8A 7716
orlglnaLed as P8 11197 and LhaL lL passed Lhe 3 readlngs ln Lhe Po8, Lhe same dld noL compleLe
Lhe 3 readlngs ln SenaLe for afLer Lhe 1
sL
readlng lL was referred Lo Lhe SenaLe Ways & Means
CommlLLee LhereafLer SenaLe passed lLs own verslon known as SenaLe 8lll 1630.
1olenLlno furLher clalms LhaL whaL SenaLe could have done ls amend P8 11197 by sLrlklng ouL lLs
LexL and subsLlLuLlng lL w/ Lhe LexL of S8 1630 ln LhaL way Lhe blll remalns a Pouse 8lll and Lhe
SenaLe verslon [usL becomes Lhe LexL (only Lhe LexL) of Lhe P8".
lL should be noLed however LhaL 1olenLlno and co-peLlLloner 8ocoeven slgned Lhe sald SenaLe
8lll 1630.

ISSUL: WheLher or noL LvA1 orlglnaLed ln Lhe Po8.

kULING: LS, pet|t|on has no mer|t
1he enacLmenL of S8 1630 ls noL Lhe only lnsLance ln whlch Lhe SenaLe, ln Lhe exerclse of lLs
power Lo propose amendmenLs Lo bllls requlred Lo orlglnaLe ln Lhe Po8, passed lLs own verslon
of a Pouse revenue measure (several examples were glven ln Lhe case)
lurLher, amendmenL by subsLlLuLlon as urged by 1olenLlno concerns a mere maLLer of form. SC
held LhaL peLlLloner has noL shown whaL subsLanLlal dlfference lL would make lf, as Lhe SenaLe
83
acLually dld ln Lhls case, a separaLe blll llke 1630 ls lnsLead enacLed as a subsLlLuLe measure
Laklng ln conslderaLlon P8 11197.
Avl Sec 24 provldes LhaL all approprlaLlon, revenue or Larlff bllls, bllls auLhorlzlng lncrease of
Lhe publlc debL, bllls of local appllcaLlon, and prlvaLe bllls musL orlglnaLe excluslvely ln Lhe Po8"
lL also adds 8u1 1PL SLnA1L may 8CCSL or CCnCu8 wlLh AMLnuMLn1S". ln Lhe exerclse of
Lhls power, Lhe SenaLe may propose an enLlrely new blll as a subsLlLuLe measure by:
o Lndorslng Lhe blll wlLhouL changes
o Maklng changes ln Lhe blll by omlLLlng or addlng secLlons or alLerlng lLs language
o Maklng or endorslng an enLlrely new blll as a subsLlLuLe (commlLLee blll)
o Maklng no reporL aL all
1o excepL form Lhls procedure Lhe amendmenL of bllls whlch are requlred Lo orlglnaLe ln Lhe
Pouse by prescrlblng LhaL Lhe number of Pouse 8lll and lLs oLher parLs up Lo Lhe enacLlng clause
musL be preserved alLhough Lhe LexL of Lhe SenaLe amendmenL may be lncorporaLed ln place of
Lhe orlglnal body of Lhe blll ls Lo lnslsL on a mere LechnlcallLy and aL any raLe Lhere ls no rule ln
prescrlblng Lhls form.
1herefore SC 1630 as a subsLlLuLe measure a mere amendmenL of P8 11197
o ln facL, ln several lnsLances Lhe provlslons of S8 1630 clearly appear Lo be mere
amendmenLs of Lhe correspondlng provlslons of P8 11197 (as shown ln Lhe Labular
comparlson) and aL Lhe same Llme lndlcaLes LhaL Lhe provlslons of Lhe SenaLe blll were
preclsely lnLended Lo be amendmenLs Lo Lhe Pouse blll hence lLs orlglnal form dld noL
have Lo passed on second and Lhree readlngs. lL was enough LhaL afLer lL was passed on
flrsL readlng lL was referred Lo Lhe SenaLe CommlLLee on Ways and Means
o WlLhouL P8 11197, Lhe SenaLe could noL have enacLed S8 1630.
eLlLloners furLher conLenL LhaL a growlng budgeL deflclL ls noL an emergency hence vlolaLlve of
Sec vl 26(2) of Lhe ConsLlLuLlon whlch provldes LhaL no blll passed by elLher Pouse shall
become a law unless lL has passed Lhree readlngs..excepL when Lhe resldenL cerLlfles Lhe
necesslLy Lo meeL publlc calamlLy or emergency"
o ApparenLly, Lhe members of Lhe SenaLe (lncludlng some of Lhe peLlLloners) belleved LhaL
here was an urgenL need for conslderaLlon of S8 1630, alLhough Lhe [udlclal deparLmenL
ls noL bound by Lhe SenaLe's accepLance of Lhe resldenL's cerLlflcaLlon, Lhe respecL due
coequal deparLmenLs of Lhe governmenL ln maLLers commlLLed Lo Lhem by Lhe
ConsLlLuLlon and Lhe absence of a clear showlng of grave abuse of dlscreLlon cauLlon a
sLay of [udlclal hand.
Pence, SC holds LhaL such consolldaLlon was conslsLenL wlLh Lhe power of Lhe SenaLe Lo
propose or concur wlLh amendmenLs Lo Lhe verslon orlglnaLed ln Lhe Po8. WhaL Lhe
ConsLlLuLlon slmply means, ls LhaL Lhe lnlLlaLlve musL come from Lhe Po8. noLe also LhaL Lhere
were several lnsLances before where SenaLe passed lLs own verslon raLher Lhan havlng Lhe Po8
verslon as far as revenue and oLher such bllls are concerned. 1hls pracLlce of amendmenL by
subsLlLuLlon has always been accepLed. 1he proposlLlon of 1olenLlno concerns a mere maLLer of
form. 1here ls no showlng LhaL lL would make a slgnlflcanL dlfference lf SenaLe were Lo adopL hls
over whaL has been done.


I. Grant|ng of 1ax Lxempt|ons
lnherenL power of sLaLe Lo lmpose Laxes carles wlLh lL Lhe power Lo granL exempLlons
ower Lo Lax and power Lo exempL from Lax: essenLlal aLLrlbuLe of soverelgnlLy
o Lxerclsed ln ConsLlLuLlon or SLaLuLe
84
o unless Lhe ConsLlLuLlon expressly or by lmpllcaLlon prohlblLs acLlon by leglslaLure on
Lhe sub[ecL
LxempLlons from LaxaLlon may be creaLed dlrecLly by Lhe ConsLlLuLlon
o ArL 6, Sec 28 (3): granLs exempLlon Lo properLles AuL used for regllglous, charlLable
and educaLlonal purposes
LxempLlons by an acL of Lhe leglslaLure sub[ecL Lo llmlLaLlons as consLlLuLlon may place,
expressly or lmplledly on Lhe leglslaLlve power
ArL.6, Sec 28 (4): no law granLlng any Lax exempLlon shall be passed wlLhouL Lhe
concurrence of a ma[orlLy of all Lhe members of Lhe Congress
o AbsoluLe ma[orlLy voLe of Lhe Members of Congress ls requlred
o ln case of wlLhdrawal of Lax exempLlon: relaLlve ma[orlLy ls sufflclenL
1ax amnesLles, Lax condonaLlons, and Lax refunds =Lax exempLlons
o Law granLlng Lax amnesLles, Lax condonaLlons and Lax refunds requlres Lhe voLe of
an absoluLe ma[orlLy of Members of Congress
Ceneral 8ule: no exempLlon
o ConsLlLuLlonal granL of exempLlon may be self-execuLlng or may requlre acL of
Congress
o When ConsLlLuLlonal provlslon ls self-execuLlng = LeglslaLure can nelLher add nor
deLracL from lL
! LeglslaLure may prescrlbe a procedure Lo deLermlne wheLher clalmanL
enLlLled Lo consLlLuLlonal exempLlon
o lnLenL Lo granL exempLlon musL be clear
! oLherwlse: rule of consLrucLlon applles LhaL exempLlon from LaxaLlon are Lo
be sLrlcLly consLrued agalnsL exempLlon and ln favor of Lhe rlghL Lo Lax
When SLaLuLory LxempLlons are valld?
o ConsLuLlon confers on leglslaLure auLhorlLy Lo granL exempLlons wlLhln cerLaln llmlLs
o LxempLlon valld lf noL exceed Lhe ConsLlLuLlonal llmlLs
8ule on ConsLrucLlon of LxempLlons
o lnLenL of leglslaLure Lo granL Lax exempLlons expressed ln clear and unmlsLakable
Lerms
o Can never be lmplled from language LhaL wlll admlL any oLher reasonable
consLrucLlon
o LxempLlons are never presumed
1ax Lxempt|on 1ax Amnesty
lmmunlLy from all crlmlnal and clvll
obllgaLlons
lmmunlLy from clvll llablllLy only.
lmmunlLy or prlvlllege
Arlslng from non-paymenL of Laxes
Ceneral pardon glven Lo all lreedom from charge or burden of
83
! 8urden ls upon clalmanL Lo esLabllsh rlghL Lo exempLlon beyond reasonable
doubL
LxcepLlons Lo SLrlcL ConsLrucLlon 8ule:
1. SLaLuLe granLlng exempLlon expressly provldes for llberal consLrucLlon
2. Speclal Laxes relaLlng Lo speclal cases and affecLlng only speclal classes of
persons
3. roperLy owned by Lhe SLaLe or Lhe clLy or oLher publlc corporaLlon.
Lxpress exempLlon should noL be consLrued wlLh Lhe same degree of
sLrlcLness LhaL applles Lo exempLlons conLrary Lo Lhe pollcy of Lhe sLaLe
ubllc properLy: exempLlon ls Lhe rule and LaxaLlon Lhe exempLlon
4. LxempLlons Lo LradlLlonal exempLees = rellglous and charlLable lnsLlLuLlons
3. LxempLlons ln favor of Lhe governmenL, lLs pollLlcal subdlvlslons or
lnsLrumenLallLles
8ule ln sLrlcL lmplemenLaLlon does noL apply ln case of exempLlons ln
favor of governmenLal pollLlcal subdlvlslon or lnsLrumenLallLy (Maceda v.
Macaralg)
8asls for applylng rule of sLrlcL consLrucLlon granLlng exempLlons or
deducLlons
o Lven more obvlous Lhan wlLh reference Lo afflrmaLlve or levylng
provlslons of Lax sLaLues
o Mlnlmlze dlfferenLlal LreaLmenL and fosLer lmparLlallLy, falrness,
equallLy of LreaLmenL among Laxpayers
o racLlcal effecL of exempLlon ln favor of gov'L: reduce amounL of
money LhaL has Lo be handled by gov'L ln course of lLs operaLlons
6. 1axpayer falls wlLhln purvlew of exempLlon by clear leglslaLlve lnLenL (Cl8 v.
Arnoldus CarpenLry)
Meanlng of SLrlcL ConsLrucLlon 8ule: ln applylng rules of lnLerpreLaLlon for ascerLalnlng
lnLenLlon of Lhe leglslaLure
Well founded doubL exlsLs, Lhen ambulLy occurs whlch may be seLLled by
Lhe rule of sLrlcL consLrucLlon

CASL: ICnN nA LCLLS AL1LkNA1IVL CCALI1ICN v. LIM, L1 AL (2003)

Iacts:
8A no. 7227 creaLed Lhe 8ases Converslon and uevelopmenL AuLhorlLy (8CuA), whlch also creaLed Lhe
Sublc Speclal Lconomlc Zone (Sublc SLZ). Aslde from granLlng lncenLlves Lo Sublc SLZ, 8A 7227 also
granLed Lhe resldenL ls an express auLhorlLy Lo creaLe oLher SLZs ln Lhe areas covered respecLlvely by
Lhe Clark mlllLary reservaLlon, Lhe Wallace Alr SLaLlon ln San lernando, La unlon, and Camp !ohn Pay
Lhrough execuLlve proclamaLlons. 8CuA enLered lnLo a MCA and Lscrow AgreemenL wlLh 1un1Lx and
ASlAWC8Lu, prlvaLe corporaLlons under Lhe laws of Lhe 8rlLlsh vlrgln lslands, preparaLory Lo Lhe
formaLlon of a [olnL venLure for Lhe developmenL of oro olnL La unlon and Camp !ohn Pay as premler
LourlsL desLlnaLlons and recreaLlon cenLers. 8CuA, 1un1Lx and ASlAWC8Lu execuLed a !vA Lo puL up
Lhe 8agulo lnLernaLlonal uevelopmenL and ManagemenL CorporaLlon whlch would lease areas wlLhln
Laxpayers whlch oLhers are sub[ecLed
8eLroacLlve effecL. Cnly Lo pasL Lax
perlods
rospecLlve ln appllcaLlon
86
Camp !ohn Pay and oro olnL for Lhe aLLalnmenL of Lhe LourlsL and recreaLlon spoLs ln La unlon and
Camp !ohn Pay. resldenL 8amos lssued roclamaLlon no. 420 whlch esLabllshed a SLZ on a porLlon of
Camp !ohn Pay. 2nd senLence of SecLlon 3 of sald roclamaLlon provlded for naLlonal and local Lax
exempLlon wlLhln and granLed oLher economlc lncenLlves Lo Lhe !ohn Pay Speclal Lconomlc
Zone. SecLlon 3: lnvesLmenL CllmaLe ln !ohn Pay Speclal Lconomlc Zone.- ursuanL Lo SecLlon 3(m) and
SecLlon 13 of 8A no. 7227, Lhe !ohn Pay oro olnL uevelopmenL CorporaLlon shall lmplemenL all
necessary pollcles, rules, and regulaLlons governlng Lhe zone, lncludlng lnvesLmenL lncenLlves, ln
consulLaLlon wlLh perLlnenL governmenL deparLmenLs. Among oLhers, Lhe zone shall have all Lhe
appllcable lncenLlves of Lhe Speclal Lconomlc Zone under SecLlon 12 of 8epubllc AcL no. 7227 and Lhose
appllcable lncenLlves granLed ln Lhe LxporL rocesslng Zones, Lhe Cmnlbus lnvesLmenL Code of 1987, Lhe
lorelgn lnvesLmenL AcL of 1991, and new lnvesLmenL laws LhaL may herelnafLer be enacLed." eLlLloners
flled Lhls case Lo en[oln Lhe respondenLs from lmplemenLlng roc. 420 are unconsLlLuLlonal on grounds
of:
lor belng lllegal and lnvalld ln so far as lL granLs Lax exempLlons Lhus amounLlng Lo unconsLlLuLlonal
exerclse of by Lhe resldenL of power granLed only Lo leglslaLure
LlmlLs powers and lnLerferes wlLh Lhe auLonomy of Lhe clLy
vlolaLes rule LhaL all Laxes should be unlform and equlLable

Issue:
WheLher or noL roclamaLlon no. 420 ls consLlLuLlonal by provldlng for naLlonal and local Lax
exempLlon wlLhln and granLlng oLher economlc lncenLlves Lo Lhe !ohn Pay Speclal Lconomlc Zone.

ku||ng:
no, Lhe 2nd SenLence of SLC1lCn 3 of roclamaLlon no. 420 ls hereby declared nuLL and vClu and ls
accordlngly declared of no legal force and effecL. ubllc respondenLs are hereby en[olned from
lmplemenLlng Lhe aforesald vold provlslon. roclamaLlon no. 420, wlLhouL Lhe lnvalldaLed porLlon,
remalns valld and effecLlve. under SecLlon 12 of 8A no. 7227 lL ls clear LhaL CnL? 1PL Su8lC SLZ whlch
was granLed by Congress wlLh Lax exempLlon, lnvesLmenL lncenLlves and Lhe llke. 1PL8L lS nC Lx8LSS
Lx1LnSlCn Cl 1PL SAlu 8CvlSlCn ln 8LSluLn1lAL 8CCLAMA1lCn no. 420. Also found ln Lhe
dellberaLlons of Lhe SenaLe, a conflrmaLlon of Lhe excluslvlLy of Lhe Lax and lnvesLmenL prlvlleges Lo
Sublc SLZ. lL ls Lhe leglslaLure, unless llmlLed by a provlslon of Lhe sLaLe consLlLuLlon LhaL has full power
Lo exempL any person, corporaLlon or class of properLy from LaxaLlon, lLs power Lo exempL belng as
broad as lLs power Lo Lax. CLher Lhan Lhe Congress, Lhe ConsLlLuLlon may lLself provlde for speclflc Lax
exempLlons, or local governmenLs may pass ordlnances on exempLlon only from local Laxes. 1he
challenged granL of Lax exempLlon musL have concurrence of a ma[orlLy of all members of Congress. ln
same veln, Lhe oLher klnds of prlvlleges exLended Lo Lhe !ohn Pay SLZ are by LradlLlon and usage for
Congress Lo leglslaLe upon. 1ax exempLlon cannoL be lmplled as lL musL be caLegorlcally and
unmlsLakably expressed - lf lL were Lhe lnLenL of Lhe leglslaLure Lo granL Lo Lhe !ohn Pay SLZ Lhe same
Lax exempLlon and lncenLlves glven Lo Sublc SLZ, lL would have so expressly provlded ln 8A 7227. 8CuA,
under 8.A 7227, ls expressly enLrusLed wlLh broad rlghLs of ownershlp and admlnlsLraLlon over Camp
!ohn Pay, as Lhe governlng agency of Lhe !ohn Pay SLZ.

k. Veto ower of the res|dent

ArL. 6, Sec. 27 (2): 1he resldenL shall have Lhe power Lo veLo any parLlcular lLem or
lLems ln an approprlaLlon, revenue or Larlff blll buL Lhe veLo shall noL affecL Lhe lLems/s
Lo whlch he does noL ob[ecL.
87
lLem/s veLoed shall be reLurned Lo Lower Pouse LogeLher wlLh Lhe ob[ecLlons of Lhe
resldenL
lf afLer reconslderaLlon 2/3 of all members of such Pouse shall agree Lo pass Lhe blll, lL
shall be senL, LogeLher wlLh Lhe ob[ecLlon, Lo Lhe oLher Pouse by whlch lL shall llkewlse
be reconsldered, and lf approved by 2/3 of all Lhe Members of Lhe Pouse, lL shall
become a law.
L.. Iud|c|a| ower to kev|ew Lega||ty of 1ax
ArL. 8, Sec. 3: 1he Supreme CourL shall have Lhe followlng powers:
8evlew, revlse, reverse, modlfy or afflrm on appeal or cerLlorarl as Lhe law
or Lhe 8ules of CourL may provlde, flnal [udgmenLs or orders of lower courLs
ln:

(b) All cases lnvolvlng Lhe legallLy of any Lax, lmposL, assessmenL or Loll, or
any penalLy lmposed ln relaLlon LhereLo.

8l8 ueclslons ->C1A ->CA ->SC
Congress may noL pass a law declarlng Lhe declslons of C1A on Lax cases shall be flnal
and execuLory
8u1: law maklng declslon of C1A appealable dlrecLly Lo Lhe SC ls valld
Congress cannoL deprlve Lhe SC of lLs power Lo revlew, revlse, modlfy or afflrm declslons
of lower courLs.

V. Doub|e 1axat|on: where one Lax ls lmposed by Lhe sLaLe and Lhe oLher ls lmposed by Lhe clLy
Wldely recognlzed LhaL noLhlng ls lnherenLly obnoxlous ln Lhe requlremenL LhaL llcense fees or
Laxes be enacLed wlLh respecL Lo Lhe same occupaLlon, calllng or acLlvlLy
o 8y boLh Lhe sLaLe and Lhe pollLlcal subdlvlslon Lhereof
klnds of uouble 1axaLlon:
1. ulrecL: ob[ecLlonable or prohlblLed sense
Same properLy Laxed Lwlce when should only be Laxed once
8oLh Laxes musL be lmposed on same properLy or sub[ecL maLLer
lor Lhe same purpose, by Lhe same sLaLe or Laxlng auLhorlLy
WlLhln Lhe same [urlsdlcLlon or Laxlng dlsLrlcL
uurlng Lhe same Laxlng perlod
MusL be of Lhe same klnd or characLer of Lax
Lx: local buslness Lax based on gross revenue
2. lndlrecL: permlsslble double LaxaLlon
Allowed lf Laxes are of dlfferenL naLure or characLer
lmposed by dlfferenL Laxlng auLhorlLles
8eal esLaLe Lax and LenemenL Lax lmposed by local ordlnance, Lhough lmposed by
same Laxlng auLhorlLy are noL of same klnd or characLer
3. uomesLlc: arlses when Laxes are lmposed by local or naLlonal governmenL wlLhln Lhe
same sLaLe
4. lnLernaLlonal: lmposlLlon of comparable Laxes ln 2 or more sLaLes on Lhe same Laxpayer
ln respecL of same sub[ecL maLLer for ldenLlcal perlods
Doub|e taxat|on |n genera| not forb|dden by Const|tut|on
o We have noL adopLed ln[uncLlon agalnsL double LaxaLlon found ln uS ConsLlLuLlon
88
o uouble LaxaLlon ls obnoxlous only where Laxpayer ls Laxed Lwlce for Lhe beneflL of same
gov'Lal enLlLy or same [urlsdlcLlon for Lhe same purpose
o noL ln case where one Lax ls lmposed by SLaLe and Lhe oLher by Lhe clLy or munlclpallLy
o uesplLe lack of speclflc prohlblLlon: double LaxaLlon wlll noL be allowed lf resulLs Lo
vlolaLlon of equal proLecLlon clause
! lf cerLaln properLles sub[ecLed Lo addlLlonal Lax whlle oLhers slmllarly slLuaLed
are noL slmllarly Laxed
! Cwners of former have rlghL Lo complaln

1ax 1reaty = mode of e||m|nat|ong doub|e taxat|on
1. LxempLlon meLhod
lncome/caplLal whlch ls Laxable ln sLaLe of source/slLus ls exempLed ln sLaLe
of resldence
ln some lnsLances maybe Laken lnLo accounL ln deLermlnlng raLe of Lax
appllcable Lo Laxpayer's remalnlng lncome or caplLal
2. CredlL meLhod: Lax pald ln sLaLe of source/slLus ls credlLed agalnsL Lax levled ln sLaLe of
resldence
ulfference: exempLlons meLhod- focus ls on lncome/caplLal
o CredlL meLhod: focuses on Lhe Lax

CASL: kepub||c vs C1A (1992) - ILkNANDL2

1here are 2 |aws ln Lhls case:
Sec. 249 of Lhe nl8C Lhere shall be collecLed upon Lhe amounL of reserve deflclencles lncurred by Lhe
bank, and for Lhe perlod of Lhelr duraLlon, as provlded ln secLlon 1439, as amended by acL numbered
3610, one percenLum per monLh
Sec. 106 of Lhe CenLral 8ank AcL lmposlng penalLy of 1/10 of 1 for vlolaLlon of banklng law."
Iacts:
Cn SepLember 1971, respondenL commlssloner assessed peLlLloner Lhe amounL of 1,323,768.82, as 1
monLhly bank reserve deflclency Lax for Laxable year 1969
Cn Aprll 3 1973, respondenL commlssloner assessed peLlLloner Lhe amounL of 1,933,132.67, as 1
monLhly bank reserve deflclency Lax for Laxable year 1970
eLlLloner republlc argue LhaL LhaL ln case of a reserve deflclency, Lhe vlolaLlng bank would be llable aL
Lhe same Llme for a Lax of 1 a monLh (249, nl8C) payable Lo 8l8 as well as a penalLy of 1/10 of 1 a
day (secLlon 106, cenLral bank acL) payable Lo Lhe cenLral bank.
Issue: W/n Lhere was double LaxaLlon? no
ne|d: lL ls clear from Lhe sLaLuLes Lhen ln force LhaL Lhere was no double LaxaLlon lnvolved- one was a
penalLy and Lhe oLher was a Lax. AL any raLe, we have upheld Lhe valldlLy of double LaxaLlon. 1he
paymenL of 1/10 of 1 for lncurrlng Lhe reserve deflclencles ( secLlon 106, cenLral bank acL) ls a penalLy
as Lhe prlmary purpose lnvolved ls regulaLlon, whlle Lhe paymenL of 1 for Lhe same vlolaLlon (second
paragraph, secLlon 249, nl8C) ls a Lax for Lhe generaLlon of revenue whlch ls Lhe prlmary purpose ln Lhls
lnsLance. eLlLloner should noL complaln LhaL lL ls asked Lo pay Lwlce for lncurrlng reserve deflclencles. lL
can always avold Lhls predlcamenL by noL havlng reserve deflclencles. eLlLloner's case ls covered by
Lwo speclal laws-one a banklng law and Lhe oLher, a Lax law. 1hese Lwo laws should recelve such
consLrucLlon as Lo make Lhem harmonlze wlLh each oLher and wlLh Lhe oLher body of pre-exlsLlng laws.

CASL: rocter & Gamb|e v. Mun|c|pa||ty of Iagna (1979)
89
Doctr|ne:uouble LaxaLlon has also been deflned as Laxlng Lhe same person Lwlce by Lhe same
[urlsdlcLlon for Lhe same Lhlng
Iacts:
rocLer & Camble (&C) appealed Lhe [udgmenL of Lhe Cll upholdlng Lhe valldlLy of Mun.
Crdlnance no.4 of Lhe MunlclpallLy of !agna, llollo
1he ordlnance lmposed "sLorage fees on all exporLable copra deposlLed ln Lhe bodega wlLhln Lhe
[urlsdlcLlon of Lhe MunlclpallLy
&C ls a domesLlc corporaLlon wlLh prlnclpal offlces ln Manlla.
o consolldaLed corporaLlon of rocLer & Camble 1radlng Company and hlllpplne
ManufacLurlng Company
o laLer became rocLer & Camble 1radlng Company, hlllpplnes.
engaged ln Lhe manufacLure of soap, edlble oll, margarlne and oLher slmllar producLs,
o for Lhls purpose malnLalns a "bodega" ln defendanL MunlclpallLy where lL sLores copra
purchased ln Lhe munlclpallLy and Lherefrom shlps Lhe same for lLs manufacLurlng and
oLher operaLlons.
&C pald Lhe sLorage fees allegedly under proLesL
&C argued LhaL Lhe sLorage fee ls lnappllcable Lo lL as lL ls noL engaged ln Lhe buslness or Lrade
of sLorlng copra for oLhers for compensaLlon or proflL
o Lhe only copra lL sLores ls for lLs excluslve use ln connecLlon wlLh lLs buslness as
manufacLurer of soap, edlble oll, margarlne and oLher slmllar producLs
o LhaL Lhe levy ls lnLended as an "exporL Lax" as lL ls collecLed on "exporLable copra' , and,
Lherefore, beyond Lhe power of Lhe MunlclpallLy Lo enacL
Issue: WCN the Crd|nance |mpos|ng storage fee |s va||d? - LS!
ne|d:
SLorage fee lmposed ls acLually a munlclpal llcense Lax or fee
lor Lhe exerclse of prlvllege of sLorlng copra ln a bodega wlLhln Lhe MunlclpallLy's LerrlLorlal
[urlsdlcLlon
Warehouse used for keeplng or sLorlng copra ls an esLabllshmenL llkely Lo endanger Lhe publlc
safeLy or llkely Lo glve rlse Lo conflagraLlon because Lhe oll conLenL of Lhe copra when lgnlLed ls
dlfflculL Lo puL under conLrol by waLer and Lhe use of chemlcals ls necessary Lo puL ouL Lhe flre
lalnLlff's paymenL of sLorage fees lmposed noL amounL Lo double LaxaLlon.
lor double LaxaLlon Lo exlsL, Lhe same properLy musL be Laxed Lwlce, when lL should be Laxed
buL once.
uouble LaxaLlon has also been deflned as Laxlng Lhe same person Lwlce by Lhe same [urlsdlcLlon
for Lhe same Lhlng.
Surely, a Lax on plalnLlff's producLs ls dlfferenL from a Lax on Lhe prlvllege of sLorlng copra ln a
bodega slLuaLed wlLhln Lhe LerrlLorlal boundary of defendanL munlclpallLy.

CASL: eps| vs Mun or 1anauan - kUNG
epsl Cola has a boLLllng planL ln Lhe MunlclpallLy of 1anauan, LeyLe. ln SepLember 1962, Lhe
MunlclpallLy approved Crdlnance no. 23 whlch levles and collecLs from sofL drlnks producers and
manufacLurers a Lax of one-slxLeenLh (1/16) of a cenLavo for every boLLle of sofL drlnk corked."
ln uecember 1962, Lhe MunlclpallLy also approved Crdlnance no. 27 whlch levles and collecLs on sofL
drlnks produced or manufacLured wlLhln Lhe LerrlLorlal [urlsdlcLlon of Lhls munlclpallLy a Lax of one
cenLavo 0.01) on each gallon of volume capaclLy."
90
epsl Cola assalled Lhe valldlLy of Lhe ordlnances as lL alleged LhaL Lhey consLlLuLe double LaxaLlon ln Lwo
lnsLances: a) double LaxaLlon because Crdlnance no. 27 covers Lhe same sub[ecL maLLer and lmpose
pracLlcally Lhe same Lax raLe as wlLh Crdlnance no. 23, b) double LaxaLlon because Lhe Lwo ordlnances
lmpose percenLage or speclflc Laxes.
epsl Cola also quesLlons Lhe consLlLuLlonallLy of 8epubllc AcL 2264 whlch allows for Lhe delegaLlon of
Laxlng powers Lo local governmenL unlLs, LhaL allowlng local governmenLs Lo Lax companles llke epsl
Cola ls conflscaLory and oppresslve.
1he MunlclpallLy assalled Lhe argumenLs presenLed by epsl Cola. lL argued, among oLhers, LhaL only
Crdlnance no. 27 ls belng enforced and LhaL Lhe laLLer law ls an amendmenL of Crdlnance no. 23, hence
Lhere ls no double LaxaLlon.
ISSUL: WheLher or noL Lhere ls undue delegaLlon of Laxlng powers. WheLher or noL Lhere ls double
LaxaLlon.
nLLD: no. 1here ls no undue delegaLlon. 1he ConsLlLuLlon even allows such delegaLlon. LeglslaLlve
powers may be delegaLed Lo local governmenLs ln respecL of maLLers of local concern. 8y necessary
lmpllcaLlon, Lhe leglslaLlve power Lo creaLe pollLlcal corporaLlons for purposes of local self-governmenL
carrles wlLh lL Lhe power Lo confer on such local governmenLal agencles Lhe power Lo Lax. under Lhe
new ConsLlLuLlon, local governmenLs are granLed Lhe auLonomous auLhorlLy Lo creaLe Lhelr own sources
of revenue and Lo levy Laxes. SecLlon 3, ArLlcle xl provldes: Lach local governmenL unlL shall have Lhe
power Lo creaLe lLs sources of revenue and Lo levy Laxes, sub[ecL Lo such llmlLaLlons as may be provlded
by law." WlLhal, lL cannoL be sald LhaL SecLlon 2 of 8epubllc AcL no. 2264 emanaLed from beyond Lhe
sphere of Lhe leglslaLlve power Lo enacL and vesL ln local governmenLs Lhe power of local LaxaLlon.
1here ls no double LaxaLlon. 1he argumenL of Lhe MunlclpallLy ls well Laken. lurLher, epsl Cola's
asserLlon LhaL Lhe delegaLlon of Laxlng power ln lLself consLlLuLes double LaxaLlon cannoL be merlLed. lL
musL be observed LhaL Lhe delegaLlng auLhorlLy speclfles Lhe llmlLaLlons and enumeraLes Lhe Laxes over
whlch local LaxaLlon may noL be exerclsed. 1he reason ls LhaL Lhe SLaLe has excluslvely reserved Lhe
same for lLs own prerogaLlve. Moreover, double LaxaLlon, ln general, ls noL forbldden by our
fundamenLal law unllke ln oLher [urlsdlcLlons. uouble LaxaLlon becomes obnoxlous only where Lhe
Laxpayer ls Laxed Lwlce for Lhe beneflL of Lhe same governmenLal enLlLy or by Lhe same [urlsdlcLlon for
Lhe same purpose, buL noL ln a case where one Lax ls lmposed by Lhe SLaLe and Lhe oLher by Lhe clLy or
munlclpallLy.
CASL: eps| vs Mun of 1anauan - 1A8AG
uocttloe.
leqlslotlve powet to cteote polltlcol cotpototloos fot potposes of locol self-qovetomeot cottles wltb lt tbe
powet to coofet oo socb locol qovetomeotol oqeocles tbe powet to tox.
IAC1S:
lalnLlff-appellanL epsl-Cola commenced a complalnL wlLh prellmlnary ln[uncLlon Lo declare SecLlon 2
of 8epubllc AcL no. 2264, oLherwlse known as Lhe Local AuLonomy AcL, unconsLlLuLlonal as an undue
delegaLlon of Laxlng auLhorlLy as well as Lo declare Crdlnances nos. 23 and 27 denomlnaLed as
"munlclpal producLlon Lax" of Lhe MunlclpallLy of 1anauan, LeyLe, null and vold.

Crdlnance 23 levles and collecLs from sofL drlnks producers and manufacLurers a Lax of one-slxLeenLh
(1/16) of a cenLavo for every boLLle of sofL drlnk corked. Crdlnance 27 levles and collecLs on sofL drlnks
produced or manufacLured wlLhln Lhe LerrlLorlal [urlsdlcLlon of Lhls munlclpallLy a Lax of CnL CLn1AvC
(0.01) on each gallon (128 fluld ounces, u.S.) of volume capaclLy.

Aslde from Lhe undue delegaLlon of auLhorlLy, appellanL conLends LhaL lL allows double LaxaLlon, and
LhaL Lhe sub[ecL ordlnances are vold for Lhey lmpose percenLage or speclflc Lax. (uouble LaxaLlon
because Lax was lmposed on Lhe same sub[ecL maLLer and Lhe same raLe.)
91

ISSUL:
Are Lhe conLenLlons of Lhe appellanL Lenable - unconsLlLuLlonal and vold for double LaxaLlon?

nLLD:
nC. Crdlnances valld!

unuuL uLLLCA1lCn: Cn Lhe lssue of undue delegaLlon of Laxlng power, lL ls seLLled LhaL Lhe power of
LaxaLlon ls an essenLlal and lnherenL aLLrlbuLe of soverelgnLy, belonglng as a maLLer of rlghL Lo every
lndependenL governmenL, wlLhouL belng expressly conferred by Lhe people. lL ls a power LhaL ls purely
leglslaLlve and whlch Lhe cenLral leglslaLlve body cannoL delegaLe elLher Lo Lhe execuLlve or [udlclal
deparLmenL of Lhe governmenL wlLhouL lnfrlnglng upon Lhe Lheory of separaLlon of powers. 1he
excepLlon, however, lles ln Lhe case of munlclpal corporaLlons, Lo whlch, sald Lheory does noL apply.
LeglslaLlve powers may be delegaLed Lo local governmenLs ln respecL of maLLers of local concern. 8y
necessary lmpllcaLlon, Lhe leglslaLlve power Lo creaLe pollLlcal corporaLlons for purposes of local self-
governmenL carrles wlLh lL Lhe power Lo confer on such local governmenLal agencles Lhe power Lo Lax.

uCu8LL 1AxA1lCn: Also, Lhere ls no valldlLy Lo Lhe asserLlon LhaL Lhe delegaLed auLhorlLy can be
declared unconsLlLuLlonal on Lhe Lheory of double LaxaLlon. lL musL be observed LhaL Lhe delegaLlng
auLhorlLy speclfles Lhe llmlLaLlons and enumeraLes Lhe Laxes over whlch local LaxaLlon may noL be
exerclsed. 1he reason ls LhaL Lhe SLaLe has excluslvely reserved Lhe same for lLs own prerogaLlve.
Moreover, double LaxaLlon, ln general, ls noL forbldden by our fundamenLal law, so LhaL double LaxaLlon
becomes obnoxlous only where Lhe Laxpayer ls Laxed Lwlce for Lhe beneflL of Lhe same governmenLal
enLlLy or by Lhe same [urlsdlcLlon for Lhe same purpose, buL noL ln a case where one Lax ls lmposed by
Lhe SLaLe and Lhe oLher by Lhe clLy or munlclpallLy.
Cn Lhe lasL lssue ralsed, Lhe ordlnances do noL parLake of Lhe naLure of a percenLage Lax on sales, or
oLher Laxes ln any form based Lhereon. 1he Lax ls levled on Lhe produce (wheLher sold or noL) and noL
on Lhe sales. 1he volume capaclLy of Lhe Laxpayer's producLlon of sofL drlnks ls consldered solely for
purposes of deLermlnlng Lhe Lax raLe on Lhe producLs, buL Lhere ls noL seL raLlo beLween Lhe volume of
sales and Lhe amounL of Lhe Lax.

CASL: V|||anueva vs I|o||o - MAGSUM8CL

Luseb|o V|||anueva v C|ty of I|o||o

DCC1kINLS:
ln order Lo consLlLuLe double LaxaLlon ln Lhe ob[ecLlonable or prohlblLed sense Lhe same
properLy musL be Laxed Lwlce when lL should be Laxed buL once, boLh Laxes musL be lmposed on
Lhe same properLy or sub[ecL-maLLer, for Lhe same purpose by Lhe same SLaLe, CovernmenL, or
Laxlng auLhorlLy, wlLhln Lhe same [urlsdlcLlon or Laxlng dlsLrlcL, durlng Lhe same Laxlng perlod,
and Lhey musL be Lhe same klnd or characLer of Lax.
1here ls no consLlLuLlonal prohlblLlon agalnsL double LaxaLlon ln Lhe hlllpplnes


IAC1S:
uefendanL here ls appeallng from Lhe Cll of llollo whlch declared Crdlnance 11, serles of 1960,
lllegal and ordered lL Lo refund Lhe plalnLlff Lhe money collecLed from Lhe laLLer. 1hls ordlnance
ls enLlLled An ordlnance lmposlng Munlclpal Llcense 1ax on ersons Lngaged ln Lhe 8uslness of
92
CperaLlng 1enemenL Pouses".
SepL 30 1946: Crdlnance 86 was enacLed
o lmposes llcense Lax fees as follows
! 1enemenL house (casa de veclnldad) : 23 annually
! 1enemenL house, parLly or wholly engaged ln or dedlcaLed Lo buslness ln Lhe
sLreeLs of !M 8ASA, lznarL and Aldeguer: 24/aparLmenL
! 1enemenL house, parLly or wholly engaged ln buslness ln any oLher sLreeLs: 12
o 1hls ordlnance was challenged by plalnLlff and was declared ulLra vlres
!an 13 1960: Crdlnance 11, glven Lhe passage of 8A 2264 (Local AuLonomy AcL), was enacLed
o lL had acqulred Lhe auLhorlLy or power Lo enacL an ordlnance slmllar Lo Lhe prevlously
declared ulLra vlres acL
o 1lLle: An Crdlnance lmposlng Munlclpal Llcense 1ax on ersons Lngaged ln Lhe 8uslness
of CperaLlng 1enemenL Pouses
! Sec. 2 1enemenL houses: any bulldlng or dwelllng for renLlng space dlvlded lnLo
separaLe aparLmenLs or accessorlas
! Sec. 3. Munlclpal llcense Lax
1enemenL Pouses
o AparLmenLs house made of sLrong maLerlals: 20/door
o AparLmenL house made of mlxed maLerlals" 10/door
8oomlng house
o Cf sLrong maLerlals: 10/door
o Cf mlxed maLerlals: 3/door
1enemenL house, parLly or wholly engaged ln or dedlcaLed Lo buslness
ln Lhe sLreeLs of !M 8AZA, lznarL, ALdeguer, Cuanco and Ledesma from
llazoleLo Cay Lo valerla: 30/door
1enemenL house, parLly or wholly dedlcaLed Lo buslness ln any oLher
sLreeLs: 12/door
1enemenL houses aL Lhe sLreeLs surroundlng Lhe super markeL as soon
as sald place ls declared commerclal: 24/door
1he vlllanuevas are owners of 3 LenemenL houses, aggregaLely conLalnlng 43 aparLmenLs, whlle
Lhe oLhers are owners of 10 aparLmenLs, each of lLs aparLmenLs has a door leadlng Lo a sLreeL
and ls renLed by elLher llllplnos or Chlnese merchanLs.
o llrsL floor: SLore
o Second lloor: uwelllng of Lhe owner of Lhe sLoor
Luseblo vlllanueva also owns aparLmenL bulldlngs for renL ln 8acolod, uumagueLe, 8agulo and
CC, whlch clLles do noL lmpose LenemenL / aparLmenL Laxes
lalnLlffs all pald Laxes by vlrLue of Lhe ordlnance real esLaLe Laxes on Lhe properLy
lalnLlff alleges LhaL ordlnance 11 lmposes a properLy Lax or real esLaLe Lax.
1rlal courL sald LhaL Lhe ordlnance consLlLuLes double LaxaLlon slnce Lhere are already real esLaLe
Laxes and lncome Laxes pald plus Lhe LenemenL Lax.

ISSUL: W/n Crdlnance 11, serles of 1960, of Lhe ClLy of llollo, ls lllegal because lL lmposes double
LaxaLlon? nC.

nLLD:
lL ls Lrue LhaL Lhe plalnLlffs are Laxable under Lhe nl8C, and Lhe ordlnance. Powever boLh Lhe
naLlonal governmenL and Lhe local governmenL may lmpose Lhe same Lax.
93
lL ls a well-seLLled rule LhaL a llcense Lax may be levled upon a buslness/occupaLlon alLhough Lhe
land or properLy used ln connecLlon LherewlLh ls sub[ecL Lo properLy Lax. 1he SLaLe may collecL
an ad valorem Lax on properLy used ln a calllng, and aL Lhe same Llme lmpose a llcense Lax on
LhaL calllng, Lhe lmposlLlon of Lhe laLLer ls ln no sense a double Lax.
ln order Lo consLlLuLe double LaxaLlon ln Lhe ob[ecLlonable or prohlblLed sense Lhe same
properLy musL be Laxed Lwlce when lL should be Laxed buL once, boLh Laxes musL be lmposed on
Lhe same properLy or sub[ecL-maLLer, for Lhe same purpose by Lhe same SLaLe, CovernmenL, or
Laxlng auLhorlLy, wlLhln Lhe same [urlsdlcLlon or Laxlng dlsLrlcL, durlng Lhe same Laxlng perlod,
and Lhey musL be Lhe same klnd or characLer of Lax.
uouble LaxaLlon ls noL favored, buL ls permlsslble, provlded some oLher consLlLuLlonal
requlremenL ls noL Lhereby vlolaLed, such as Lhe requlremenL LhaL Laxes musL be unlform

CASL: kCVINCL CI 8ULACAN vs. CA, kLU8LIC CLMLN1

IAC1S: Cn !une 26, 1992, Lhe 5ooqqoolooq loololowlqoo of 8ulacan passed rovlnclal Crdlnance no. 3,
known as "An Crdlnance LnacLlng Lhe 8evenue Code of Lhe 8ulacan rovlnce." SecLlon 21 of Lhe
ordlnance provldes as follows:
Sec. 21 lmposltloo of 1ox. 1here ls hereby levled and collecLed a Lax of 10 of Lhe falr
markeL value ln Lhe locallLy per cublc meLer of ordlnary sLones, sand, gravel, earLh and
oLher quarry resources, such, buL noL llmlLed Lo marble, granlLe, volcanlc clnders, basalL,
Luff and rock phosphaLe, exLracLed from pobllc looJs or from beds of seas, lakes, rlvers,
sLreams, creeks and oLher publlc waLers wlLhln lLs LerrlLorlal [urlsdlcLlon.

ursuanL LhereLo, Lhe rovlnclal 1reasurer of 8ulacan, ln a leLLer daLed november 11, 1993, assessed
prlvaLe respondenL 8epubllc CemenL CorporaLlon 2,324,692.13 for exLracLlng llmesLone, shale and
slllca from several parcels of ptlvote looJ ln Lhe provlnce durlng Lhe Lhlrd quarLer of 1992 unLll Lhe
second quarLer of 1993. 8ellevlng LhaL Lhe provlnce, on Lhe basls of above-sald ordlnance, had no
auLhorlLy Lo lmpose Laxes on quarry resources exLracLed from prlvaLe lands, 8epubllc CemenL formally
conLesLed Lhe same on uecember 23, 1993 buL was denled by Lhe rovlnclal 1reasurer on !anuary 17,
1994. 8epubllc CemenL consequenLly flled a peLlLlon for declaraLory rellef wlLh Lhe 81C of 8ulacan on
lebruary 14, 1994. 1he provlnce flled a moLlon Lo dlsmlss 8epubllc CemenL's peLlLlon, whlch was
granLed by Lhe Lrlal courL on May 13, 1993, whlch ruled LhaL declaraLory rellef was lmproper, allegedly
because a breach of Lhe ordlnance had been commlLLed by 8epubllc CemenL.
Cn !uly 11, 1994, 8epubllc CemenL flled a peLlLlon for cettlototl wlLh Lhe Supreme CourL seeklng Lo
reverse Lhe Lrlal courL's dlsmlssal of Lhelr peLlLlon. 1he CourL, ln a resoluLlon daLed !uly 27, 1994,
referred Lhe same Lo Lhe CourL of Appeals. ln Lhe lnLerlm, Lhe rovlnce of 8ulacan lssued a warranL of
levy agalnsL 8epubllc CemenL, allegedly because of lLs unpald Lax llablllLles. negoLlaLlons beLween
8epubllc CemenL and peLlLloners resulLed ln an agreemenL and moJos vlveoJl (Lemporary agreemenL)
on uecember 12, 1994, whereby 8epubllc CemenL agreed Lo pay under proLesL 1,262,346.00, 30 of
Lhe Lax assessed by peLlLloner, ln exchange for Lhe llfLlng of Lhe warranL of levy. CA ruled LhaL rovlnce
of 8ulacan had no legal auLhorlLy.

ISSUL: W/n Lhe provlnclal governmenL could lmpose and/or assess Laxes on quarry resources exLracLed
by 8epubllc CemenL from prlvaLe lands pursuanL Lo SecLlon 21 of rovlnclal Crdlnance no. 3? No, a
prov|nce may not |evy exc|se taxes on art|c|es a|ready taxed by the Nat|ona| Interna| kevenue Code.

94
kULING

llrsL, wlLh regard Lo Lhe remedlal lssue. eLlLloners asserL LhaL Lhe CourL of Appeals could only rule on
Lhe proprleLy of Lhe Lrlal courL's dlsmlssal of 8epubllc CemenL's peLlLlon for declaraLory rellef, allegedly
because LhaL was Lhe sole rellef soughL by Lhe laLLer ln lLs peLlLlon for cettlototl. eLlLloners clalm LhaL
Lhe appellaLe courL oversLepped lLs [urlsdlcLlon when lL declared null and vold Lhe assessmenL made by
Lhe rovlnce of 8ulacan agalnsL 8epubllc CemenL. Powever, Lhe SC declared LhaL under Lhe prlnclple of
esLoppel, Lhe peLlLloners can no longer aLLack Lhe modus vlvendl approved by Lhe CA.
Second and more lmporLanLly, ls Lhe lssue on Lhe valldlLy of Lhe ordlnance. 1he perLlnenL provlslons of
Lhe Local CovernmenL Code are as follows:

Sec. 134. 5cope of 1oxloq lowets. - LxcepL as oLherwlse provlded ln Lhls Code, Lhe
provlnce may levy only Lhe Laxes, fees, and charges as provlded ln Lhls ArLlcle.

Sec. 138. 1ox oo 5ooJ, Ctovel ooJ Otbet Oootty kesootces. - 1he provlnce may levy and
collecL noL more Lhan Len percenL (10) of falr markeL value ln Lhe locallLy per cublc
meLer of ordlnary sLones, sand, gravel, earLh, and oLher quarry resources, as deflned
under Lhe naLlonal lnLernal 8evenue Code, as amended, exLracLed from pobllc looJs or
from Lhe beds of seas, lakes, rlvers, sLreams, creeks, and oLher publlc waLers wlLhln lLs
LerrlLorlal [urlsdlcLlon.
xxx xxx xxx

1he CA on Lhe basls of SecLlon 134, ruled LhaL a provlnce was empowered Lo lmpose Laxes only on sand,
gravel, and oLher quarry resources exLracLed from publlc lands, lLs auLhorlLy Lo Lax belng llmlLed by sald
provlslon only Lo Lhose Laxes, fees and charges provlded ln ArLlcle l, ChapLer 2, 1lLle 1 of 8ook ll of Lhe
Local CovernmenL Code. Cn Lhe oLher hand, peLlLloners clalm LhaL SecLlons 129 and 186 of Lhe Local
CovernmenL Code auLhorlzes Lhe provlnce Lo lmpose Laxes oLher Lhan Lhose speclflcally enumeraLed
under Lhe Local CovernmenL Code. 1he CA erred ln rullng LhaL a provlnce can lmpose only Lhe Laxes
speclflcally menLloned under Lhe Local CovernmenL Code. As correcLly polnLed ouL by peLlLloners,
SecLlon 186 allows a provlnce Lo levy Laxes oLher Lhan Lhose speclflcally enumeraLed under Lhe Code,
sub[ecL Lo Lhe condlLlons speclfled Lhereln.
Powever, ln splLe of Lhls, provlnce of 8ulacan ls sLlll prohlblLed from lmposlng Laxes on sLones, sand,
gravel, earLh and oLher quarry resources exLracLed from ptlvote looJs. 1he Lax lmposed by Lhe rovlnce
of 8ulacan ls an exclse Lax, belng a Lax upon Lhe performance, carrylng on, or exerclse of an acLlvlLy. 1he
Local CovernmenL Code provldes:

Sec. 133. - commoo llmltotloos oo tbe 1oxloq lowets of locol Covetomeot uolts. -
unless oLherwlse provlded hereln, Lhe exerclse of Lhe Laxlng powers of provlnces, clLles,
munlclpallLles, and barangays shall noL exLend Lo Lhe levy of Lhe followlng:
xxx xxx xxx
(h) Lxclse Laxes on arLlcles enumeraLed under Lhe naLlonal lnLernal 8evenue Code, as
amended, and Laxes, fees or charges on peLroleum producLs,
xxx xxx xxx

A provlnce may noL, Lherefore, levy exclse Laxes on arLlcles already Laxed by Lhe naLlonal lnLernal
8evenue Code. 1he naLlonal lnLernal 8evenue Code levles a Lax on oll quarry resources, regardless of
93
orlgln, wheLher exLracLed from publlc or prlvaLe land. 1hus, a provlnce may noL ordlnarlly lmpose Laxes
on sLones, sand, gravel, earLh and oLher quarry resources, as Lhe same are already Laxed under Lhe
naLlonal lnLernal 8evenue Code. 1he provlnce can, however, lmpose a Lax on sLones, sand, gravel, earLh
and oLher quarry resources exLracLed from publlc land because lL ls expressly empowered Lo do so
under Lhe Local CovernmenL Code. As Lo sLones, sand, gravel, earLh and oLher quarry resources
exLracLed from prlvaLe land, however, lL may noL do so, because of Lhe llmlLaLlon provlded by SecLlon
133 of Lhe Code ln relaLlon Lo SecLlon 131 of Lhe naLlonal lnLernal 8evenue Code.

VI. Iorms of Lscape from 1axat|on
A. 1ax Lvaslon: fraud Lhrough use of preLenses and forbldden devlces Lo lessen or defeaL Laxes
8. 1ax Avoldance: legal means used by Laxpayer Lo reduce Laxes

ut|vo Sons nardware v. C1A
lnLenLlon Lo mlnlmlze Laxes, when used ln conLexL of fraud, musL be proven by clear and
convlnclng evldence amounLlng more Lhan mere preponderance. Mere undersLaLemenL of Lax
ln lLself does noL prove fraud.
CourL Poldlng Co. v. Commr
1axpayer has legal rlghL Lo decrease or alLogeLher avold Laxes by means permlLLed by law
May perform acL LhaL he honesLly belleves Lo be sufflclenL Lo exempL hlm from Laxes
noL lncur fraud even lf acL LLherafLer ls found Lo be lnsufflclenL

ue Leon 1axaLlon 8ook: 1ax evaslon connoLes lnLegraLlon of 3 facLors (8aLLer, lraud under lederal 1ax
Law:
1. Lnd Lo be achleved - paymenL of less Lhan LhaL known by Laxpayer Lo be
legally due C8 Lhe nonpaymenL of Lax when lL ls shown Lo be due
2. Accompanylng sLaLe of mlnd -evll/bad falLh/wlllful/dellberaLe/ noL accldenLal
3. Course of acLlon / fallure of Lhe acLlon ls unlawful

CASL: De|pher 1rades Corp vs IAC (Ianuary 1988)-LkL2
De|pher 1rades Corp. vs. IAC (1988)

lAC1S:
acheco slbllngs co-owned a plece of land ln 8ulacan. ln 1974, Lhey leased lL ConsLrucLlon ComponenLs
lnLernaLlonal, lnc., granLlng Lhe laLLer Lhe rlghL of flrsL refusal should Lhe achecos choose Lo sell. CCll
Lhen asslgned lLs rlghLs Lo Pydro lpes hlls., lnc. wlLh Lhe consenL of Lhe achecos.
ln 1976, Lhe achecos and peLlLloner uelpher 1rades execuLed a deed of exchange whereby Lhe former
exchanged Lhe land for 2,300 no-par value shares of sLock ln Lhe laLLer corporaLlon. lL appears LhaL
uelpher 1rade ls a famlly corporaLlon organlzed by Lhe chlldren of Lhe acheco slbllngs. 8y vlrLue of Lhe
exchange, Lhe slbllngs galned 33 conLrol of Lhe corporaLlon.
Pydro ob[ecLed Lo Lhe exchange, clalmlng lL Lo be acLually a sale. 1herefore, lL should've been glven Lhe
flrsL opLlon Lo buy. 1he Lrlal courL ruled ln favor of Pydro and ordered Lhe uelpher Lo convey Lhe
properLy Lo Pydro. Cn appeal, lAC afflrmed Lhe declslon. Pence, Lhls peLlLlon.

lSSuL: WheLher or noL Lhere was a sale beLween Lhe achecos and uelpher.

PLLu: nC. 1he exchange was valld, lL was noL a sale.
8A1lC:
- 1he achecos remalned ln conLrol of Lhe properLy belng 33 sLockholders of uelpher
96
- 1he facL LhaL Lhey Loo no-par value shares ls slgnlflcanL because Lhey are owners of an allquoL
parL of Lhe asseLs, lncludlng Lhe land.
- ln effecL, uelpher ls a buslness condulL of Lhe achecos. All Lhe deed of exchange dld was
change Lhe naLure of ownershlp from unlncorporaLed Lo lncorporaLed form.
- Cne of the reasons for th|s |s to save on |ncome tax. Sec, 3S of the NIkC exempts from taxes
an exchange of a person's property for stock |n a corporat|on as a resu|t of such exchange sa|d
person (or persons not exceed|ng 4) ga|ns contro| of the corporat|on.
- AnoLher beneflL would be LhaL Lhe corporaLlon could hold on Lo Lhe properLy lnsLead of lL belng
Lled down ln successlon proceedlngs and Lhe consequenLlal paymenL of esLaLe and lnherlLance
Laxes.
- 1here ls noLhlng ob[ecLlonable wlLh Lhe esLaLe plannlng" LhaL Lhe achecos resorLed Lo.
- "1he |ega| r|ght of a taxpayer to decrease the amount of what otherw|se cou|d be h|s taxes or
a|together avo|d them, by means wh|ch the |aw perm|ts, cannot be doubted.

neng 1ong 1ext||es Co., Inc vs CIk (August 1968)-ILkNANDL2
Peng Long LexLlles vs Cl8

lacLs: ln 1932 Cl8 assessed Lhe peLlLloner deflclency sales Laxes and surcharges for Lhe year of
1949 and Lhe flrsL four monLhs of 1930 ln Lhe aggregaLe sum of 89,123.38. 1he assessmenL was
appealed Lo Lhe CourL of Lax appeals. C1A afflrmed. Pence Lhls peLlLlon for revlew.

1he deflclency Laxes ln quesLlon were assessed on lmporLaLlons of LexLlles from abroad. 1he
goods were wlLhdrawn from cusLoms by an-aslaLlc Commerclal whlch pald ln Lhe name of
peLlLloner, Lhe correspondlng advance sales Lax.

1he assessmenL for deflclency however was made agalnsL Lhe peLlLloner, Peng 1ong LexLlles on
Lhe ground LhaL lL was Lhe real lmporLer of Lhe goods and dld noL pay Lhe Laxes due on Lhe basls
of Lhe gross selllng prlces Lhereof.

lssue: w/n peLlLloner was Lhe lmporLer of goods? ?es a number of evldenLlary clrcumsLances
esLabllshed LhaL peLlLloner was Lhe lmporLer of goods
-w/n lL was gullLy of fraud so as Lo warranL Lhe lmposlLlon of a penalLy of 30 on Lhe deflclency?
no

Peld: We percelve ln Lhe enLlre seL-up an arrangemenL Lhrough whlch Lhe sales Laxes due could
be mlnlmlzed, by havlng an-AslaLlc Commerclal, as lndorsee of Lhe goods, wlLhdraw Lhe same
from CusLoms upon paymenL of Lhe advance sales Lax and Lhen execuLe a sale Lhereof Lo Peng
1ong 1exLlles aL cosL, or aL a negllglble proflL. As lL Lurned ouL, accordlng Lo Lhe CourL of 1ax
Appeals, "Lhe goods were made Lo appear as havlng (Lhus) been sold ... so LhaL no sales Lax was
pald by peLlLloner upon Lhe sales of such goods ... (and) nelLher, was any sales Lax pald on Lhe
supposed sales of sald goods by Lhe an-AslaLlc Commerclal Lo Lhe peLlLloner as Lhe sales were
made apparenLly aL cosL." 1hls ls so because "durlng Lhe perlod ln quesLlon," Lhe CourL of 1ax
Appeals added, "Lhe sales Lax on sales of lmporLed arLlcles was based on Lhe gross selllng prlce
Lhereof, Lhe advance sales Lax pald upon removal of Lhe goods from Lhe cusLomhouse belng
credlLed agalnsL Lhe Lax on Lhe acLual gross selllng prlce pald by Lhe lmporLer.

97
An aLLempL Lo mlnlmlze one's Lax does noL necessarlly consLlLuLe fraud. lL ls a seLLled prlnclple
LhaL a Laxpayer may dlmlnlsh hls llablllLy by any means whlch Lhe law permlLs. "1he lnLenLlon Lo
mlnlmlze Laxes, when used ln Lhe conLexL of fraud, musL be proved Lo exlsL by clear and
convlnclng evldence amounLlng Lo more Lhan mere preponderance, and cannoL, be [usLlfled by
mere speculaLlon. 1hls ls because fraud ls never llghLly Lo be presumed. no such evldence ls
shown by Lhe record ln Lhe case of Lhe hereln peLlLloner

CASL: CCMMISSICNLk CI IN1LkNAL kLVLNUL, 8",0,0-*"9< 14( 1nL LS1A1L CI 8LNIGNC . 1CDA, Ik.,
kepresented by Spec|a| Co-adm|n|strators Lorna kapunan and Mar|o Luza 8aut|sta, 9"48-*$"*,4
Doctr|ne: 1ax avoldance ls a Lax savlng devlce wlLhln Lhe means sancLloned by law whlle Lax evaslon ls a
scheme used ouLslde of Lhose lawful means and when avalled of , lL sub[ecLs Lhe Laxpayer Lo furLher or
addlLlonal clvll or crlmlnal llablllLles.
Iacts:
2 March 1989: Clbeles lnsurance CorporaLlon (ClC) auLhorlzed 8enlgno 1oda !r. resldenL and
owner of 99.991 of lssued and ouLsLandlng caplLal sLock Lo sell:
o Clbeles bulldlng and 2 parcels of land where bulldlng sLands for noL less Lhan 90M
30 AugusL 1989: Mr. 1oda sold properLy for 100M Lo 8afael AlLonaga
o ClC pald 73k CaplLal Calns 1ax
Cn Lhe same day, 30 AugusL Mr. AlonLaga sold Lhe sald properLles Lo 8oyal MaLch, lnc (8Ml) for
200M
o AlonLaga pald CaplLal Calns 1ax (CC1) of 10M
12 !uly 1990: Mr. 1oda sold hls enLlre lnLeresL ln ClC Lo Le Pun Choa for 12.3M
1993: 1oda dled
1994: 8l8 send assessmenL noLlce and demand leLLer Lo ClC for 80M as deflclency lncome Lax
o as ClC has dlfferenL owners, Cl8 senL noLlce of AssessmenL Lo Lhe LsLaLe of 8enlgno
1oda
Cl8 dlsmlssed proLesL of Lhe LsLaLe, alleglng:
o lraudulenL scheme dellberaLely perpeLraLed by Lhe ClC
o Coverlng up addlLlonal galn of 100M by selllng Lo AlLonaga who only pald 3 lncome
Lax raLe lnsLead of Lhe hlgher 33 lncome Lax raLe
C1A and CA ruled ln favor of Lhe LsLaLe: Cl8 falled Lo prove LhaL ClC commlLLed fraud Lo deprlve
Lhe governmenL of Laxes due lL
WCN: 1he 1ax plannlng schemed adopLed by Clbeles consLlLuLe Lax evaslon or Lax avoldance?
PLLu: 1Ax LvASlCn
1ax evaslon connoLes Lhe lnLegraLlon of Lhree facLors:
(1) Lhe end Lo be achleved, l.e., Lhe paymenL of less Lhan LhaL known by Lhe Laxpayer Lo be
legally due, or Lhe non-paymenL of Lax when lL ls shown LhaL a Lax ls due,
(2) an accompanylng sLaLe of mlnd whlch ls descrlbed as belng evll," ln bad falLh," wlllfull,"or
dellberaLe and noL accldenLal", and
(3) a course of acLlon or fallure of acLlon whlch ls unlawful.
All 3 are presenL ln Lhls case.
May and !uly, monLhs before Lhe sale Lo AlLonaga, ClC recelved 80M from 8oyal MaLch (3
rd

buyer) whlch ClC recorded as 'oLher lnv. - Clbeles 8ldg'
1oda LsLaLe admlLLed LhaL AlLonaga belng a mere condulL ls parL of Lax plannlng scheme of ClC
98
o Avold paylng 33 of 200M, AlLonaga only pald CC1 aL raLe of 3 of 200M
o scheme resorLed Lo by ClC ln maklng lL appear LhaL Lhere were Lwo sales of Lhe sub[ecL
properLles, l.e., from ClC Lo AlLonaga, and Lhen from AlLonaga Lo 8Ml cannoL be
consldered a leglLlmaLe Lax plannlng. Such scheme ls LalnLed wlLh fraud
vll. LxempLlon from 1axaLlon
CASL: LU2CN S1LVLDCkING CCkCkA1ICN vs. CCUk1 CI 1Ak ALALS and the CCMMISSICNLk CI
IN1LkNAL kLVLNUL

IAC1S:
eLlLloner-appellanL Luzon SLevedorlng CorporaLlon (LSC), ln 1961 and 1962, for Lhe repalr and
malnLenance of lLs LugboaLs, lmporLed varlous englne parLs and oLher equlpmenL for whlch lL pald,
under proLesL, Lhe assessed compensaLlng Lax. unable Lo secure a Lax refund from Lhe Cl8, on !anuary 2,
1964, lL flled a eLlLlon for 8evlew wlLh Lhe C1A, praylng among oLhers, LhaL lL be granLed Lhe refund of
Lhe amounL of 33,442.13.
eLlLloner conLends LhaL toqboots are embraced and lncluded ln Lhe Lerm cotqo vessel under Lhe Lax
exempLlon provlslons of SecLlon 190 of Lhe 8evenue Code, as amended by 8epubllc AcL. no. 3176. Pe
argues LhaL ln legal conLemplaLlon, Lhe LugboaL and a barge loaded wlLh cargoes wlLh Lhe former Lowlng
Lhe laLLer for loadlng and unloadlng of a vessel ln parL, consLlLuLe a slngle vessel. Accordlngly, lL
concludes LhaL Lhe englnes, spare parLs and equlpmenL lmporLed by lL and used ln Lhe repalr and
malnLenance of lLs LugboaLs are exempL from compensaLlng Lax.
1he C1A, however, ln a ueclslon daLed CcLober 21, 1969 denled Lhe varlous clalms for Lax refund. lLs
MoLlon for 8econslderaLlon was also denled.
ISSULS:
WheLher or noL peLlLloner's LugboaLs can be lnLerpreLed Lo be lncluded ln Lhe Lerm cargo vessels" for
purposes of Lhe Lax exempLlon provlded for ln SecLlon 190 of Lhe naLlonal lnLernal 8evenue Code, as
amended by 8epubllc AcL no. 3176.
nLLD:
eLlLlon wlLhouL merlL. SecLlon 190 of nl8C provldes LhaL Lhe Lax lmposed ln Lhls secLlon shall noL apply
Lo arLlcles Lo be used by Lhe lmporLer hlmself ln Lhe manufacLure or preparaLlon of arLlcles sub[ecL Lo
speclflc Lax or Lhose for conslgnmenL abroad and are Lo form parL Lhereof or Lo arLlcles Lo be used by Lhe
lmporLer hlmself as passenger and/or cargo vessel, wheLher coasLwlse or oceangolng, lncludlng englnes
and spare parLs of sald vessel.
1hls CourL has lald down Lhe rule LhaL as Lhe power of LaxaLlon ls a hlgh prerogaLlve of soverelgnLy, Lhe
rellnqulshmenL ls never presumed and any reducLlon or dlmunlLlon Lhereof wlLh respecL Lo lLs mode or
lLs raLe, musL be sLrlcLly consLrued, and Lhe same musL be couched ln clear and unmlsLakable Lerms ln
order LhaL lL may be applled. More speclflcally sLaLed, Lhe general rule ls LhaL any clalm for exempLlon
from Lhe Lax sLaLuLe should be sLrlcLly consLrued agalnsL Lhe Laxpayer.
As correcLly analyzed by Lhe CourL of 1ax Appeals, ln order LhaL Lhe lmporLaLlons ln quesLlon may be
declared exempL from Lhe compensaLlng Lax, lL ls lndlspensable LhaL Lhe requlremenLs of Lhe
amendaLory law be complled wlLh, namely: (1) Lhe englnes and spare parLs musL be used by Lhe
lmporLer hlmself as a passenger and/or cargo, vessel, and (2) Lhe sald passenger and/or cargo vessel
musL be used ln coasLwlse or oceangolng navlgaLlon.
As polnLed ouL by Lhe C1A, Lhe amendaLory provlslons of 8A 3176 llmlL Lax exempLlon from Lhe
compensaLlng Lax Lo lmporLed lLems Lo be used by Lhe lmporLer hlmself as operaLor of passenger and/or
cargo vessel.
As quoLed ln Lhe declslon of Lhe CourL of 1ax Appeals, a LugboaL ls deflned as follows:
99
A toqboot ls a sLrongly bullL, powerful sLeam or power vessel, used for Lowlng and, now, also used for
aLLendance on vessel. (WebsLer new lnLernaLlonal ulcLlonary, 2nd Ld.)
A toqboot ls a dlesel or sLeam power vessel deslgned prlmarlly for movlng large shlps Lo and from plers
for Lowlng barges and llghLers ln harbors, rlvers and canals. (Lncyclopedla lnLernaLlonal Croller, vol. 18,
p. 236).
A toq ls a sLeam vessel bullL for Lowlng, synonymous wlLh LugboaL. (8ouvler's Law ulcLlonary.).
under Lhe foregolng deflnlLlons, peLlLloner's LugboaLs clearly do noL fall under Lhe caLegorles of
passenger and/or cargo vessels. 1hus, lL ls a cardlnal prlnclple of sLaLuLory consLrucLlon LhaL where a
provlslon of law speaks caLegorlcally, Lhe need for lnLerpreLaLlon ls obvlaLed, no plauslble preLense
belng enLerLalned Lo [usLlfy non-compllance. All LhaL has Lo be done ls Lo apply lL ln every case LhaL falls
wlLhln lLs Lerms (Allled 8rokerage Corp. v. Commlssloner of CusLoms, L-27641, 40 SC8A 333 [1971],
Cul[ano, eLc. v. u8, L-26419, 33 SC8A 270 [1970]).
And, even lf consLrucLlon and lnLerpreLaLlon of Lhe law ls lnslsLed upon, followlng anoLher fundamenLal
rule LhaL sLaLuLes are Lo be consLrued ln Lhe llghL of purposes Lo be achleved and Lhe evlls soughL Lo be
remedled (eople v. urlslma eLc., eL al., L-42030-66, 86 SC8A 344 [1978], lL wlll be noLed LhaL Lhe
leglslaLure ln amendlng SecLlon 190 of Lhe 1ax Code by 8epubllc AcL 3176, as appearlng ln Lhe records,
lnLended Lo provlde lncenLlves and lnducemenLs Lo bolsLer Lhe shlpplng lndusLry and noL Lhe buslness of
sLevedorlng, as manlfesLed ln Lhe sponsorshlp speech of SenaLor Cll uyaL.
CASL: Man||a L|ectr|c Company vs Vera (Cctober 197S)-MAGSUM8CL
Man||a L|ectr|c Company, petltlooet vs 8en[am|n N. 1ab|os, tespooJeot

DCC1kINL: 1ax exempLlons are sLrlcLly consLrued agalnsL Lhe Laxpayer. Cne who clalms Lo be exempL
from Lhe paymenL of a parLlcular Lax musL do so under clear and unmlsLakable Lerms found ln Lhe
sLaLue.

IAC1S:
Meralco ls Lhe holder of a franchlse Lo consLrucL, malnLaln, and operaLe an elecLrlc llghL, heaL
and power sysLem ln Lhe ClLy of Manlla and lLs suburms
ln 1962, Meralco lmporLed & recelved from abroad on varlous daLes copper wlres, Lransformers
& lnsulaLors for use ln Lhe operaLlon of lLs buslness on whlch, Lhe CollecLor of CusLoms, as
uepuLy of Cl8, levled and collecLed a compensaLlng Lax amounLlng Lo a LoLal of 62,333.
ML8ALCC clalmed for refund, buL Cl8 dld noL Lake any acLlon on lL.
ln 1963, agaln, ML8ALCC lmporLed cerLaln quanLlLles of copper wlres, Lransformers and
lnsulaLors also Lo be used ln lLs buslness and agaln, a compensaLlng Lax on sald purchases was
collecLed.
ML8ALCC clalmed for a refund buL agaln was denled.

ISSUL: W/n ML8ALCC ls exempL from paymenL of a compensaLlng Lax on poles, wlres, Lransformers,
and lnsulaLors lmporLed by lL for use ln Lhe operaLlon of lLs elecLrlc llghL, heaL, and power sysLem? nC

nLLD:
1he law under w/c Lhe Cl8 assessed & collecLed Lhe correspondlng compensaLlng Laxes ln 1962-
63 was found ln Sec. 190 of Lhe nl8C.
o Sec. 190. compeosotloq 1ox. - All persons resldlng or dolng buslness ln Lhe hlllpplnes,
who purchase or recelve from wlLhouL Lhe hlllpplnes any commodlLles, goods, wares,
or merchandlse, excepLlng Lhose sub[ecL Lo speclflc Laxes under 1lLle lv of Lhls Code,
100
shall pay on Lhe LoLal value Lhereof aL Lhe Llme Lhey are recelved by such persons,
lncludlng frelghL, posLage, lnsurance, commlsslon and all slmllar charges, a
compensaLlng Lax equlvalenL Lo Lhe percenLage Laxes lmposed under Lhls 1lLle on
orlglnal LransacLlons effecLed by merchanLs, lmporLers, or manufacLurers, such Lax Lo be
pald before Lhe wlLhdrawal or removal of sald commodlLles, goods, wares, or
merchandlse from Lhe cusLomhouse or Lhe posL offlce xxx.
eLlLloner on Lhe oLher hand bases lLs clalm for exempLlon on par. 9 of lLs franchlse
o A8AC8AP 9. 1he granLee shall be llable Lo pay Lhe same Laxes upon lLs real esLaLe,
bulldlngs, planL (noL lncludlng poles, wlres, Lransformers, and lnsulaLors), machlnery,
and personal properLy as oLher persons are or may be hereafLer by law Lo pay.
lnconslderaLlon of arL 1wo of Lhe franchlse hereln granLed, Lo wlL, Lhe rlghL Lo bulld
and malnLaln ln Lhe ClLy of Manlla and lLs suburbs a planL for Lhe conveylng and
furnlshlng of elecLrlc currenL for llghL, heaL, and power, and Lo charge for Lhe same, Lhe
granLee shall pay Lo Lhe ClLy of Manlla a flve per cenLum of Lhe gross earnlngs recelved
form lLs buslness under Lhls franchlse ln Lhe ClLy and lLs suburbs: 8CvluLu, 1haL Lwo
and one-half per cenLum of Lhe gross earnlngs recelved from Lhe buslness of Lhe llne Lo
Malabon shall be pald Lo Lhe rovlnce of 8lzal. Sald percenLage shall be due and payable
aL Lhe Llmes sLaLed ln paragraph nlneLeen of arL Cne hereof, and afLer an audlL, llke
LhaL provlded ln paragraph LwenLy of arL Cne hereof, and sboll be lo lleo of oll toxes
ooJ ossessmeots of wbotsoevet ootote, ooJ by wbotsoevet ootbotlty opoo tbe
ptlvlleqes, eotoloqs, locome, ftoocblse, ooJ poles, wltes, ttoosfotmets, ooJ losolotots of
tbe qtootee, ftom wblcb toxes ooJ ossessmeots tbe qtootee ls beteby exptessly
exempteJ.
o eLlLloner argues LhaL Lhe above provlslon makes 2 references Lo Lhe exempLlon of Lhe
arLlcles ln quesLlon from all Laxes excepL Lhe franchlse Lax.
o eLlLloner also sLaLes LhaL whlle par. 9 does noL speclflcally menLlon Lhe compensaLlng
Lax Lhe clause lLallclze are broad and sweeplng enough Lo lnclude Lhe compensaLlng Lax
Cne who clalms Lo be exempL from Lhe paymenL of a parLlcular Lax musL do so under clear and
unmlsLakable Lerms found ln Lhe sLaLuLe. 1ax exempLlons are sLrlcLly consLrued agalnsL Lhe
Laxpayer, Lhey belng hlghly dlsfavored and may almosL be sald "Lo be odlous Lo Lhe law." Pe
who clalms an exempLlon musL be able Lo polnL Lo some poslLlve provlslon of law creaLlng Lhe
rlghL, lL cannoL be allowed Lo exlsL upon a mere vague lmpllcaLlon or lnference.

1he rlghL of
LaxaLlon wlll noL beheld Lo have been surrendered unless Lhe lnLenLlon Lo surrender ls
manlfesLed by words Loo plaln Lo be mlsLaken, for Lhe sLaLe cannoL sLrlp lLself of Lhe mosL
essenLlal power of LaxaLlon by doubLful words, lL cannoL, by amblguous language, be deprlved of
Lhls hlghesL aLLrlbuLe of soverelgnLy. So, when exempLlon ls clalmed, lL musL be shown
lndublLably Lo exlsL, for every presumpLlon ls agalnsL lL, and a well-founded doubL ls faLal Lo Lhe
clalm.
Second, and Lhls ls Lhe conLrolllng reason for Lhe denlal of peLlLloner's clalm ln Lhese cases, We
do noL see ln paragraph 9 of lLs peLlLloner's franchlse, on Lhe assumpLlon LhaL lL does exlsL as
worded, whaL may be consldered as "plaln and unamblguous Lerms" declarlng peLlLloner
ML8ALCC exempL from paylng a compensaLlng Lax on lLs lmporLs of poles, wlres, Lransformers,
and lnsulaLors. WhaL ML8ALCC really wanLs us Lo do, buL whlch We cannoL under Lhe prlnclples
enumeraLed earller, ls Lo lofet and lmply LhaL Lhere ls such an exempLlon from Lhe followlng
phrase: "... Lhe granLee shall pay Lo Lhe ClLy of Manlla flve per cenLum of Lhe gross earnlngs
recelved from lLs buslness ... and shall be ln lleu of all Laxes and assessmenLs of whaLsoever
naLure, and by whaLsoever auLhorlLy upon Lhe prlvlleges, earnlngs, lncome, franchlse, and poles,
101
wltes, ttoosfotmets, and losolotots of Lhe granLee, from whlch Laxes and assessmenLs Lhe
granLee ls hereby expressly exempLed."
noLe LhaL whaL Lhe above provlslon exempLs peLlLloner from, ls Lhe paymenL of properLy, Lax on
lLs poles, wlres, Lransformers, and lnsulaLors, lL does noL exempL lL from paymenL of Laxes llke
Lhe one ln quesLlon whlch, by mere necesslLy or consequence alone, fall upon properLy.
o 1he flrsL senLence of paragraph 9 of peLlLloner's franchlse expressly sLaLes LhaL Lhe
granLee llke any oLher Laxpayer shall pay Laxes upon lLs real esLaLe, bulldlngs, planL (noL
lncludlng poles, wlres, Lransformers, and lnsulaLors),machlnery, and personal properLy.
1hese are dlrecL Laxes lmposed upon Lhe Lhlng or properLy lLself. 1hus, whlle Lhe granLee
ls Lo pay Lax on lLs ploot, lLs poles, wlres, Lransformers, and lnsulaLors as formlng parL of
Lhe planL or lnsLallaLlon(slgnlflcanLly Lhe enumeraLlon ls ln parenLhesls and follows Lhe
word "planL") are exempL and as such are noL Lo be lncluded ln Lhe assessmenL of Lhe
properLy Lax Lo be pald.
o 1he endlng clause of paragraph 9 provldlng ln effecL LhaL Lhe percenLage Lax lmposed
upon peLlLloner shall be ln lleu of "all Laxes and assessmenLs of whaL and by whaLsoever
auLhorlLy" cannoL be sald Lo have granLed lL exempLlon from paymenL of compensaLlng
Lax. 1he phrase "all Laxes and assessmenLs of whaLsoever naLure and by whaLsoever
auLhorlLy" ls noL so broad and sweeplng, as peLlLloner would have us Lhlnk, as Lo lnclude
Lhe Lax ln quesLlon because Lhere ls an lmmedlaLely succeedlng phrase whlch llmlLs Lhe
scope of exempLlon Lo Laxes and assessmenLs "upon Lhe prlvlleges earnlngs, lncome,
franchlse, and poles, wltes, ttoosfotmets, and losolotots of Lhe granLee." 1he lasL clause
of paragraph merely reafflrms, wlLh regards Lo poles, wlres, Lransformers, and
lnsulaLors, whaL has been expressed ln Lhe LhaL flrsL senLence of Lhe same paragraph
namely, exemptloo of petltlooet ftom poymeot of ptopetty tox. lL ls a prlnclple of
sLaLuLory consLrucLlon LhaL general Lerms may be resLrlcLed by speclflc words, wlLh Lhe
resulL LhaL Lhe general language wlll be llmlLed by Lhe speclflc language whlch lndlcaLes
Lhe sLaLuLe's ob[ecL and purpose.
lL ls a well-seLLled rule or prlnclple ln LaxaLlon LhaL a compensaLlng Lax ls noL a properLy Lax buL
ls an exclse Lax. Cenerally sLaLed, an exclse Lax ls one LhaL ls lmposed on Lhe performance of an
acL, Lhe engaglng ln an occupaLlon, or Lhe en[oymenL of a prlvllege. A Lax upon properLy because
of lLs ownershlp lLs a dlrecL Lax, whereas one levled upon properLy becoose of lts ose ls an exclse
duLy.
o 1he compensaLlng Lax belng lmposed upon peLlLloner hereln, ML8ALCC, ls an lmposL on
lLs ose of lmpotteJ ottlcles and ls noL ln Lhe naLure of a dlrecL Lax on Lhe arLlcles
Lhemselves, Lhe laLLer Lax falllng wlLhln Lhe exempLlon. 1hus, ln lotetootloool 8osloess
Mocbloe cotp. vs. collectot of lotetool keveooe, 1936, 98 hll. 8eporLs 393, 393, whlch
lnvolved Lhe collecLlon of a compensaLlng Lax from Lhe plalnLlff-peLlLloner on buslness
machlnes lmporLed by lL, Lhls CourL sLaLed ln unequlvocal Lerms LhaL "lL ls noL Lhe acL of
lmporLaLlon LhaL ls Laxed under secLlon 190, buL tbe ose of lmpotteJ qooJs oot
sobjecteJ to soles tox" because "Lhe compensaLlng Lax was expressly deslgned as a
subsLlLuLe Lo make up or compensaLe for Lhe revenue losL Lo Lhe governmenL Lhrough
Lhe avoldance of sales Laxes by means of dlrecL purchases abroad. ..."

CASL: Davao Gu|f Lumber Corp vs CIk (Iu|y 1998)-1A8AG
lAC1S:
8epubllc AcL no. 1433 enLlLles mlners and foresL concessloners Lo Lhe refund of 23 of Lhe speclflc
Laxes pald by Lhe oll companles, whlch were evenLually passed on Lo Lhe user--Lhe peLlLloner ln Lhls
case--ln Lhe purchase prlce of Lhe oll producLs. eLlLloner flled before respondenL Commlssloner of
102
lnLernal 8evenue (Cl8) a clalm for refund ln Lhe amounL represenLlng 23 of Lhe speclflc Laxes
acLually pald on Lhe above-menLloned fuels and olls LhaL were used by peLlLloner ln lLs operaLlons.
Powever peLlLloner asserLs LhaL equlLy and [usLlce demands LhaL Lhe refund should be based on Lhe
lncreased raLes of speclflc Laxes whlch lL acLually pald, as prescrlbed ln SecLlons 133 and 136 of Lhe
nl8C. ubllc respondenL, on Lhe oLher hand, conLends LhaL lL should be based on speclflc Laxes
deemed pald under SecLlons 1 and 2 of 8A 1433.

lSSuL:
Should Lhe peLlLloner be enLlLled under 8epubllc AcL no. 1433 Lo Lhe refund of 23 of Lhe amounL of
speclflc Laxes lL acLually pald on varlous reflned and manufacLured mlneral olls and oLher oll
producLs, and noL on Lhe Laxes deemed pald and passed on Lo Lhem, as end-users, by Lhe oll
companles?

PLLu:
no. Accordlng Lo an emlnenL auLhorlLy on LaxaLlon, "Lhere ls no Lax exempLlon solely on Lhe ground
of equlLy." 1hus, Lhe Lax refund should be based on Lhe Laxes deemed pald. 8ecause Laxes are Lhe
llfeblood of Lhe naLlon, sLaLuLes LhaL allow exempLlons are consLrued sLrlcLly agalnsL Lhe granLee and
llberally ln favor of Lhe governmenL. CLherwlse sLaLed, any exempLlon from Lhe paymenL of a Lax
musL be clearly sLaLed ln Lhe language of Lhe law, lL cannoL be merely lmplled Lherefrom.

CASL: CIk vs CA and ADMU (Apr|| 1997)-LkL2
(Source: hLLp://purplehorn.blogspoL.com/2011/09/dlgesLed-cases-ln-LaxaLlon.hLml).

I A C 1 S: rlvaLe respondenL, ALeneo de Manlla unlverslLy, ls a non-sLock, non-proflL educaLlonal
lnsLlLuLlon wlLh auxlllary unlLs and branches all over Lhe counLry. 1he lnsLlLuLe of hlllpplne CulLure (lC)
ls an auxlllary unlL wlLh no legal personallLy separaLe and dlsLlncL from prlvaLe respondenL. 1he lC ls a
hlllpplne unlL engaged ln soclal sclence sLudles of hlllpplne socleLy and culLure. Cccaslonally, lL accepLs
sponsorshlps for lLs research acLlvlLles from lnLernaLlonal organlzaLlons, prlvaLe foundaLlons and
governmenL agencles.

Cn 8 !uly 1983, prlvaLe respondenL recelved from Cl8 a demand leLLer daLed 3 !une 1983, assesslng
prlvaLe respondenL Lhe sum of 174,043.97 for alleged deflclency conLracLor's Lax, and an assessmenL
daLed 27 !une 1983 ln Lhe sum of 1,141,837 for alleged deflclency lncome Lax, boLh for Lhe flscal year
ended 31 March 1978. uenylng sald Lax llablllLles, prlvaLe respondenL senL peLlLloner a leLLer-proLesL
and subsequenLly flled wlLh Lhe laLLer a memorandum conLesLlng Lhe valldlLy of Lhe assessmenLs.

AfLer some Llme peLlLloner lssued a flnal declslon daLed 3 AugusL 1988 reduclng Lhe assessmenL for
deflclency conLracLor's Lax from 193,473.33 Lo 46,316.41, excluslve of surcharge and lnLeresL.

1he lower courLs ruled ln favor of respondenL. Pence Lhls peLlLlon.

eLlLloner Commlssloner of lnLernal 8evenue conLends LhaL rlvaLe 8espondenL ALeneo de Manlla
unlverslLy "falls wlLhln Lhe deflnlLlon" of an lndependenL conLracLor and "ls noL one of Lhose menLloned
as excepLed", hence, lL ls properly a sub[ecL of Lhe Lhree percenL conLracLor's Lax levled by Lhe foregolng
provlslon of law. eLlLloner sLaLes LhaL Lhe "Lerm 'lndependenL conLracLor' ls noL speclflcally deflned so
as Lo dellmlL Lhe scope Lhereof, so much so LhaL any person who . . . renders physlcal and menLal servlce
for a fee, ls now lndublLably consldered an lndependenL conLracLor llable Lo 3 conLracLor's Lax."

103
I S S U L: WheLher or noL prlvaLe respondenL falls under Lhe purvlew of lndependenL conLracLor
pursuanL Lo SecLlon 203 of Lhe 1ax Code and ls sub[ecL Lo a 3 conLracLors Lax.

n L LD: 1he peLlLlon ls unmerlLorlous.

1he Lerm "|ndependent contractors" lnclude persons ([urldlcal or naLural) noL enumeraLed above (buL
noL lncludlng lndlvlduals sub[ecL Lo Lhe occupaLlon Lax under SecLlon 12 of Lhe Local 1ax Code) whose
acLlvlLy conslsLs essenLlally of Lhe sale of all klnds of servlces for a fee regardless of wheLher or noL Lhe
performance of Lhe servlce calls for Lhe exerclse or use of Lhe physlcal or menLal faculLles of such
conLracLors or Lhelr employees.
eLlLloner Commlssloner of lnLernal 8evenue erred ln applylng Lhe prlnclples of Lax exempLlon wlLhouL
flrsL applylng Lhe well-seLLled docLrlne of sLrlcL lnLerpreLaLlon ln Lhe lmposlLlon of Laxes. lL ls obvlously
boLh llloglcal and lmpracLlcal Lo deLermlne who are exempLed wlLhouL flrsL deLermlnlng who are
covered by Lhe aforesald provlslon. 1he Commlssloner should have deLermlned flrsL lf prlvaLe
respondenL was covered by SecLlon 203, applylng Lhe rule of sLrlcL lnLerpreLaLlon of laws lmposlng Laxes
and oLher burdens on Lhe populace, before asklng ALeneo Lo prove lLs exempLlon Lherefrom.

Interpretat|on of 1ax Laws. 1he docLrlne ln Lhe lnLerpreLaLlon of Lax laws ls LhaL (a) sLaLuLe wlll noL be
consLrued as lmposlng a Lax unless lL does so clearly, expressly, and unamblguously. . . . (A) Lax cannoL
be lmposed wlLhouL clear and express words for LhaL purpose. Accordlngly, Lhe general rule of requlrlng
adherence Lo Lhe leLLer ln consLrulng sLaLuLes applles wlLh pecullar sLrlcLness Lo Lax laws and Lhe
provlslons of a Laxlng acL are noL Lo be exLended by lmpllcaLlon." ln case of doubL, such sLaLuLes are Lo
be consLrued mosL sLrongly agalnsL Lhe governmenL and ln favor of Lhe sub[ecLs or clLlzens because
burdens are noL Lo be lmposed nor presumed Lo be lmposed beyond whaL sLaLuLes expressly and clearly
lmporL.

ALeneo's lnsLlLuLe of hlllpplne CulLure never sold lLs servlces for a fee Lo anyone or was ever engaged ln
a buslness aparL from and lndependenLly of Lhe academlc purposes of Lhe unlverslLy. lunds recelved by
Lhe ALeneo de Manlla unlverslLy are Lechnlcally noL a fee. 1hey may however fall as glfLs or donaLlons
whlch are Lax-exempL" as shown by prlvaLe respondenL's compllance wlLh Lhe requlremenL of SecLlon
123 of Lhe naLlonal lnLernal 8evenue Code provldlng for Lhe exempLlon of such glfLs Lo an educaLlonal
lnsLlLuLlon.
1ransact|on of IC not a contract of sa|e nor a contract for a p|ece of work. 1he LransacLlons of
ALeneo's lnsLlLuLe of hlllpplne CulLure cannoL be deemed elLher as a conLracL of sale or a conLracL for a
plece of work. 8y Lhe conLracL of sale, one of Lhe conLracLlng parLles obllgaLes hlmself Lo Lransfer Lhe
ownershlp of and Lo dellver a deLermlnaLe Lhlng, and Lhe oLher Lo pay Lherefor a prlce cerLaln ln money
or lLs equlvalenL. ln Lhe case of a conLracL for a plece of work, Lhe conLracLor blnds hlmself Lo execuLe a
plece of work for Lhe employer, ln conslderaLlon of a cerLaln prlce or compensaLlon. . . . lf Lhe conLracLor
agrees Lo produce Lhe work from maLerlals furnlshed by hlm, he shall dellver Lhe Lhlng produced Lo Lhe
employer and Lransfer domlnlon over Lhe Lhlng. . . ." ln Lhe case aL bench, lL ls clear from Lhe evldence
on record LhaL Lhere was no sale elLher of ob[ecLs or servlces because, as adverLed Lo earller, Lhere was
no Lransfer of ownershlp over Lhe research daLa obLalned or Lhe resulLs of research pro[ecLs underLaken
by Lhe lnsLlLuLe of hlllpplne CulLure.

CASL: Ca|tex h||s vs CCA (May 1992)-8ISNAk
104
CASL: Ca|tex h|||pp|nes vs. Comm|ss|on on Aud|t (CCA)
C8 92383, 8 May 1992
Ln 8anc, uavlde (!): 12 concur, 2 Look no parL
(Source: hLLp://ngbLaxrevcases.wordpress.com/)
lacLs: ln 1989, CCA senL a leLLer Lo CalLex, dlrecLlng lL Lo remlL lLs collecLlon Lo Lhe Cll rlce SLablllzaLlon
lund (CSl), excludlng LhaL unremlLLed for 1986 and 1988 of Lhe addlLlonal Lax on peLroleum producLs
auLhorlzed under SecLlon 8 of u 1936, and LhaL pendlng such remlLLance, all lLs clalms for
relmbursemenL from Lhe CSl shall be held ln abeyance. CalLex requesLed CCA, noLwlLhsLandlng an
early release of lLs relmbursemenL cerLlflcaLes from Lhe CSl, whlch CCA denled. Cn 31 May 1989,
CalLex submlLLed a proposal Lo CCA for Lhe paymenL and Lhe recovery of clalms. CCA approved Lhe
proposal buL prohlblLed CalLex from furLher offseLlng remlLLances and relmbursemenLs for Lhe currenL
and ensulng years. CalLex moved for reconslderaLlon.

lssue: WheLher Lhe amounLs due from CalLex Lo Lhe CSl may be offseLLed agalnsL CalLex' ouLsLandlng
clalms from sald funds.

Peld: 1axaLlon ls no longer envlsloned as a measure merely Lo ralse revenue Lo supporL Lhe exlsLence of
governmenL, Laxes may be levled wlLh a regulaLory purpose Lo provlde means for Lhe rehablllLaLlon and
sLablllzaLlon of a LhreaLened lndusLry whlch ls affecLed wlLh publlc lnLeresL as Lo be wlLhln Lhe pollce
power of Lhe sLaLe. u 1936, as amended by LC 137, expllclLly provldes LhaL Lhe source of CSl ls
LaxaLlon. A Laxpayer may noL offseL Laxes due from Lhe clalms LhaL he may have agalnsL Lhe governmenL.
1axes cannoL be Lhe sub[ecL of compensaLlon because Lhe governmenL and Laxpayer are noL muLually
credlLors and debLors of each oLher and a clalm for Laxes ls noL such a debL, demand, conLracL or
[udgmenL as ls allowed Lo be seL-off.

CASL: NDC vs CIk (Iune 1987)-8CM8ALLS
Source: http:]]www.scr|bd.com]doc]S9413090]D|gests-1ax-I-2003
Iacts:
1he naLlonal uevelopmenL Co. (nuC) enLered lnLo conLracLs ln 1okyo wlLh several !apanese shlpbulldlng
companles for Lhe consLrucLlon of 12 ocean-golng vessels. lnlLlal paymenLs were made ln cash and
Lhrough lrrevocable leLLers of credlL. When Lhe vessels were compl eLed and del l vered Lo Lhe nuC
l n1okyo, Lhe laLLer remlLLed Lo Lhe shlpbllders Lhe amounL of uS$ 4,066,380.70 as lnLeresL on Lhe
balance of Lhe purchase prlce. no Lax was wlLhheld. 1he Commlssloner Lhen held nuC llable on such Lax
ln Lhe LoLal amounLof 3,113,234.74. 1he 8ureau of lnLernal 8evenue served upon Lhe nuC a warranL of
dlsLralnL and levy afLernegoLlaLlons falled.

Issue: WheLher Lhe nuC ls llable for deflclency Lax.

ne|d:
1he !apanese shl pbul l ders were l l abl e on Lhe l nLeresL reml LLed Lo Lhem under SecLl on 37
of Lhe 1axCode. 1he nuC ls noL Lhe one Laxed. 1he lmposlLlon of Lhe deflclency Laxes on Lhe nuC ls a
penalLy for lLs fallure Lo wlLhhold Lhe same from Lhe !apanese shlpbullders. Such llablllLy ls lmposed by
SecLlon 33(c) of Lhe1ax Code. nuC was remlss ln Lhe dlscharge of lLs obllgaLlon of lLs obllgaLlon as Lhe
wlLhholdlng agenL of Lhe governmenL and so should be llable for lLs omlsslon


103
CASL: Smart Commun|cat|ons vs C|ty of Davao (September 2008)-1A8AG

lAC1S:

- A peLlLlon for revlew on cerLlorarl under 8ule 43 of Lhe 8ules of CourL flled by SmarL CommunlcaLlons,
lnc. (SmarL) agalnsL Lhe ClLy of uavao, represenLed by lLs Mayor, Pon. 8odrlgo 8. uuLerLe, and Lhe
Sanggunlang anlungsod of uavao ClLy
- SmarL conLends LhaL lLs LelecenLer ln uavao ClLy ls exempL from paymenL of franchlse Lax Lo Lhe ClLy,
on Lhe followlng grounds:
(a) Lhe lssuance of lLs franchlse under 8epubllc AcL (8.A.) no. 7294[3] subsequenL Lo 8.A. no. 7160
shows Lhe clear leglslaLlve lnLenL Lo exempL lL from Lhe provlslons of 8.A. 7160
(b) SecLlon 137 of 8.A. no. 7160 can only apply Lo exempLlons already exlsLlng aL Lhe Llme of lLs
effecLlvlLy and noL Lo fuLure exempLlons, (8A 7160 clause on Lhe removal lf exempLlons can noL apply
because lL was enacLed 8LlC8L SmarL's franchlse, 8A 7294)
(c) Lhe power of Lhe ClLy of uavao Lo lmpose a franchlse Lax ls sub[ecL Lo sLaLuLory llmlLaLlons such as Lhe
ln lleu of all Laxes" clause found ln SecLlon 9 of 8.A. no. 7294, (clause Lherefore sLaLes SmarL ls
exempLed from local and naLlonal Laxes as per SmarL
and (d) Lhe lmposlLlon of franchlse Lax by Lhe ClLy of uavao would amounL Lo a vlolaLlon of Lhe
consLlLuLlonal provlslon agalnsL lmpalrmenL of conLracLs.
- 81C ruled ln favor of uavao because Lhe amblgulLy ln Lhe "ln lleu of all Laxes" clause musL be
lnLerpreLed ln favor of Lhe clLy, agalnsL Laxpayer. M8 was also denled.

lSSuL: W/n SmarL ls llable Lo pay Lhe franchlse Lax lmposed by Lhe ClLy of uavao?

PLLu: ?LS! SmarL musL pay local Laxes.
- CourL agrees LhaL wlLhdrawal of Lax exempLlons or lncenLlves provlded ln 8.A. no. 7160 can only affecL
Lhose franchlses granLed prlor Lo Lhe effecLlvlLy of Lhe law. 1he lnLenLlon of Lhe leglslaLure Lo remove all
Lax exempLlons or lncenLlves granLed prlor Lo Lhe sald law ls evldenL ln Lhe language of SecLlon 193 of
8.A. no. 7160. no lnLerpreLaLlon ls necessary. LffecLlvely, SmarL's Lax exempLlons noL repealed because
lLs franchlse was enacLed afLer 8A 7160.
- Cn Lhe ln lleu of all Laxes clause: 8.A. no. 7294 ls noL deflnlLe ln granLlng exempLlon Lo SmarL from local
LaxaLlon. SecLlon 9 of 8.A. no. 7294 lmposes on SmarL a franchlse Lax equlvalenL Lo Lhree percenL (3) of
all gross recelpLs of Lhe buslness LransacLed under Lhe franchlse and Lhe sald percenLage shall be ln lleu
of all Laxes on Lhe franchlse or earnlngs Lhereof. 8.A. no 7294 does noL expressly provlde whaL klnd of
Laxes SmarL ls exempLed from. lL ls noL clear wheLher Lhe ln lleu of all Laxes" provlslon ln Lhe franchlse
of SmarL would lnclude exempLlon from local or naLlonal LaxaLlon. WhaL ls clear ls LhaL SmarL shall pay
franchlse Lax equlvalenL Lo Lhree percenL (3) of all gross recelpLs of Lhe buslness LransacLed under lLs
franchlse. 1he uncerLalnLy ln Lhe ln lleu of all Laxes" clause ln 8.A. no. 7294 on wheLher SmarL ls
exempLed from boLh local and naLlonal franchlse Lax musL be consLrued sLrlcLly agalnsL SmarL whlch
clalms Lhe exempLlon. SmarL has Lhe burden of provlng LhaL, aslde from Lhe lmposed 3 franchlse Lax,
Congress lnLended lL Lo be exempL from all klnds of franchlse Laxes - wheLher local or naLlonal.
Powever, SmarL falled ln Lhls regard.
nC1L : Powever, Lhe franchlse Lax LhaL Lhe ClLy of uavao may lmpose musL comply wlLh SecLlons 137
and 131 of 8.A. no. 7160. 1hus, Lhe local franchlse Lax LhaL may be lmposed by Lhe ClLy musL noL exceed
30 of 1 of Lhe gross annual recelpLs for Lhe precedlng calendar year based on Lhe lncome on recelpLs
reallzed wlLhln Lhe LerrlLorlal [urlsdlcLlon of uavao.
106
- Cn Lhe oplnlon lf Lhe uepL of llnance (SmarL says Lhey Lhlnk SmarL should be exempL: 1he flndlngs of
Lhe 8LCl are noL concluslve on Lhe courLs. 1o be sure, Lhe 8LCl ls noL an admlnlsLraLlve agency whose
flndlngs on quesLlons of facL are glven welghL and deference ln Lhe courLs.
- Cn equallLy of LreaLmenL for all Lelecoms franchlse holders: 1he accepLance of peLlLloner's Lheory
would resulL ln absurd consequences. eLlLloner's Lheory wlll leave Lhe CovernmenL wlLh Lhe burden of
havlng Lo keep Lrack of all granLed LelecommunlcaLlons franchlses, lesL some companles be LreaLed
unequally.
- Cn non-lmpalrmenL clause: We flnd LhaL Lhere ls no vlolaLlon of ArLlcle lll, SecLlon 10 of Lhe 1987
hlllpplne ConsLlLuLlon. As prevlously dlscussed, Lhe franchlse of SmarL does noL expressly provlde for
exempLlon from local Laxes. AbsenL Lhe express provlslon on such exempLlon under Lhe franchlse, we
are consLralned Lo rule agalnsL lL. 1he ln lleu of all Laxes" clause ln SecLlon 9 of 8.A. no. 7294 leaves
much room for lnLerpreLaLlon. uue Lo Lhls amblgulLy ln Lhe law, Lhe doubL musL be resolved agalnsL Lhe
granL of Lax exempLlon. Moreover, SmarL's franchlse was granLed wlLh Lhe express condlLlon LhaL lL ls
sub[ecL Lo amendmenL, alLeraLlon, or repeal.

CASL: N|tafan vs CIk (Iu|y 1987)-ILkNANDL2
N|tafan vs. Comm|ss|oner Gk L-78780, 23 Iu|y 1987
Iacts: eLlLloners were [udges. 1he Chlef !usLlce has prevlously lssued a dlrecLlve Lo Lhe llscal
ManagemenL and 8udgeL Cfflce Lo conLlnue Lo deducL wlLhholdlng Laxes from Lhe salarles of Lhe !usLlces
of Lhe Supreme CourL and oLher members of Lhe [udlclary. 1hls was afflrmed by Lhe Supreme CourL Ln
8anc on 4 uecember 1987. 81C [udges seek Lo prohlblL or en[oln Lhe Commlssloner of Lhe lnLernal
8evenue and Lhe llnanclal Cfflcer of Lhe Supreme CourL from maklng any deducLlon of wlLhholdlng
Laxes from Lhelr salarles.
1he CourL hereby makes of record LhaL lL had Lhen dlscarded Lhe rullng ln letfecto vs. Meet ooJ
oJeoclo vs. uovlJ, lofto, LhaL declared Lhe salarles of members of Lhe !udlclary exempL from paymenL
of Lhe lncome Lax and consldered such paymenL as a dlmlnuLlon of Lhelr salarles durlng Lhelr
conLlnuance ln offlce. 1he CourL hereby relLeraLes LhaL Lhe salarles of !usLlces and !udges are properly
sub[ecL Lo a general lncome Lax law appllcable Lo all lncome earners and LhaL Lhe paymenL of such
lncome Lax by !usLlces and !udges does noL fall wlLhln Lhe consLlLuLlonal proLecLlon agalnsL decrease of
Lhelr salarles durlng Lhelr conLlnuance ln offlce.
1he provlslon ln Lhe 1987 ConsLlLuLlon, whlch peLlLloners rely on, reads:
1he salary of Lhe Chlef !usLlce and of Lhe AssoclaLe !usLlces of Lhe Supreme CourL, and of [udges of lower
courLs shall be flxed by law. uurlng Lhelr conLlnuance ln offlce, Lhelr salary shall noL be JecteoseJ.

Issue: WheLher Lhe salarles of [udges are sub[ecL Lo Lax. ?es
ne|d: 1he salarles of members of Lhe !udlclary are sub[ecL Lo Lhe general lncome Lax applled Lo all
Laxpayers. AlLhough such lnLenL was somehow and lnadverLenLly noL clearly seL forLh ln Lhe flnal LexL of
Lhe 1987 ConsLlLuLlon, Lhe dellberaLlons of Lhe 1986 ConsLlLuLlonal Commlsslon negaLe Lhe conLenLlon
LhaL Lhe lnLenL of Lhe framers ls Lo reverL Lo Lhe orlglnal concepL of non-dlmlnuLlon" of salarles of
[udlclal offlcers. Pence, Lhe docLrlne ln erfecLo v. Meere and Lndencla vs. uavld, do noL apply
anymore. !usLlces and [udges are noL only Lhe clLlzens whose lncome have been reduced ln accepLlng
servlce ln governmenL and yeL sub[ecLed Lo lncome Lax. Such ls Lrue also of CablneL members and all
oLher employees.

107
CASL: CIk v. M|tsub|sh| Meta|
(Source: hLLp://coffeeafflclonado.blogspoL.com/2012/03/clr-vs-mlLsublshl-meLal-corporaLlon-gr.hLml)

Iacts: Cn Aprll 17, 1970, ALlas ConsolldaLed Mlnlng and uevelopmenL CorporaLlon enLered lnLo a Loan
and Sales ConLracLwlLh MlLsublshl MeLal CorporaLlon, a !apanese corporaLlon llcensed Lo engage ln
buslness ln Lhe hlllpplnes, for purposes of Lhe pro[ecLed expanslon of Lhe producLlve capaclLy of Lhe
former's mlnes ln 1oledo, Cebu. under sald conLracL, MlLsublshl agreed Lo exLend a loan Lo ALlas 'ln Lhe
amounL of $20,000,000.00, unlLed SLaLes currency. ALlas, ln Lurn underLook Lo sell Lo MlLsublshl all Lhe
copper concenLraLes produced for a perlod of flfLeen (13) years. MlLsublshl LhereafLer applled for a
loan wlLh Lhe LxporL-lmporL 8ank of !apan (Lxlmbank) for purposes of lLs obllgaLlon under sald conLracL.
lLs loan appllcaLlon was approved on May 26, 1970 ln Lhe equlvalenL sum of $20,000,000.00 ln unlLed
SLaLes currency aL Lhe Lhen prevalllng exchange raLe. 1he records ln Lhe 8ureau of lnLernal 8evenue
show LhaL Lhe approval of Lhe loan by Lxlmbank Lo MlLsublshl was sub[ecL Lo Lhe condlLlon LhaL
MlLsublshl would use Lhe amounL as a loan Lo ALlas and as a conslderaLlon for lmporLlng copper
concenLraLes from ALlas, and LhaL MlLsublshl had Lo pay back Lhe LoLal amounL of loan by SepLember 30,
1981. ursuanL Lo Lhe conLracL beLween ALlas and MlLsublshl, lnLeresL paymenLs were made by Lhe
former Lo Lhe laLLer LoLallng 13,143,966.79 for Lhe years 1974 and 1973. 1he correspondlng 13 Lax
Lhereon ln Lhe amounL of 1,971,393.01 was wlLhheld pursuanL Lo SecLlon 24 (b) (1) and SecLlon 33 (b)
(2) of Lhe naLlonal lnLernal 8evenue Code, as amended by resldenLlal uecree no. 131, and duly
remlLLed Lo Lhe CovernmenL.

Issue: WheLher or noL Lhe lnLeresL lncome from Lhe loans exLended Lo ALlas by MlLsublshl ls excludlble
from gross lncome LaxaLlon pursuanL Lo SecLlon 29 of Lhe Lax code and, Lherefore, exempL from
wlLhholdlng Lax.

ne|d: 1he courL ruled ln Lhe negaLlve. Lxlmbank had noLhlng Lo do wlLh Lhe sale of Lhe copper
concenLraLes slnce all LhaL MlLsublshl sLaLed ln lLs loan appllcaLlon wlLh Lhe former was LhaL Lhe amounL
belng procured would be used as a loan Lo and ln conslderaLlon for lmporLlng copper concenLraLes from
ALlas. Such an lnnocuous sLaLemenL of purpose could noL have been lnLended for, nor could lL legally
consLlLuLe, a conLracL of agency. 1he concluslon ls lndublLable, Ml1Su8lSPl, and nC1 LxlM8Ank, ls Lhe
sole credlLor of A1LAS, Lhe former belng Lhe owner of Lhe $20 mllllon upon compleLlon of lLs loan
conLracL wlLh LxlM8Ank of !apan. lL ls seLLled a rule ln Lhls [urlsdlcLlon LhaL laws
granLlng exempLlon from Lax are consLrued sLrlcLlsslml [urls agalnsL Lhe Laxpayer and llberally ln favor of
Lhe Laxlng power. 1axaLlon ls Lhe rule and exempLlon ls Lhe excepLlon. 1he burden of proof resLs upon
Lhe parLy clalmlng exempLlon Lo prove LhaL lL ls ln facL covered by Lhe exempLlon so clalmed, whlch Lhe
peLlLloners have falled Lo dlscharge. SlgnlflcanLly, prlvaLe respondenLs are noL among Lhe enLlLles whlch,
under SecLlon 29 of Lhe Lax code, are enLlLled Lo exempLlon and whlch should lndlspensably be Lhe parLy
ln lnLeresL ln Lhls case.

CASL: LD1 vs C|ty of Davao (Aug 2001)-8CM8ALLS
Source: hLLp://llLLlemlssfuLurelawyer.blogspoL.com/2011/08/LaxaLlon-case-dlgesL-pldL-vs-clLy-of.hLml
uocLrlne:
1he 1ax Code provlslon wlLhdrawlng Lhe Lax exempLlon was noL consLrued as prohlblLlng fuLure
granLs of exempLlons from all Laxes
1he granL of Laxlng powers Lo local governmenL unlLs under Lhe ConsLlLuLlon and Lhe LCC does
noL affecL Lhe power of Lhe Congress Lo granL exempLlon Lo cerLaln persons, pursuanL Lo a
declared naLlonal pollcy.
108
lacLs:
Lu1 pald a franchlse Lax equal Lo Lhree percenL (3) of lLs gross recelpLs. 1he franchlse Lax was
pald ln lleu of all Laxes on Lhls franchlse or earnlngs Lhereof" pursuanL Lo 8A 7082.
1he exempLlon from all Laxes on Lhls franchlse or earnlngs Lhereof" was subsequenLly
wlLhdrawn by 8A 7160 (LCC), whlch aL Lhe same Llme gave local governmenL unlLs Lhe power Lo
Lax buslnesses en[oylng a franchlse on Lhe basls of lncome recelved or earned by Lhem wlLhln
Lhelr LerrlLorlal [urlsdlcLlon.
o 1he LCC Look effecL on !anuary 1, 1992.
1he ClLy of uavao enacLed Crdlnance no. 319, Serles of 1992, whlch ln perLlnenL parL provldes:
o noLwlLhsLandlng any exempLlon granLed by law or oLher speclal laws, Lhere ls hereby
lmposed a Lax on buslnesses en[oylng a franchlse, a raLe of sevenLy-flve percenL (73) of
one percenL (1) of Lhe gross annual recelpLs for Lhe precedlng calendar year based on
Lhe lncome recelpLs reallzed wlLhln Lhe LerrlLorlal [urlsdlcLlon of uavao ClLy.
SubsequenLly, Congress granLed ln favor of Clobe Mackay Cable and 8adlo CorporaLlon (Clobe)
and SmarL lnformaLlon 1echnologles, lnc. (SmarL) franchlses whlch conLalned ln lleu of all
Laxes" provlsos.
ln 1993, lL(Congress) enacLed 8A 7923, or Lhe ubllc 1elecommunlcaLlon ollcy of Lhe
hlllpplnes, Sec. 23 of whlch provldes LhaL any advanLage, favor, prlvllege, exempLlon, or
lmmunlLy granLed under exlsLlng franchlses, or may hereafLer be granLed, shall lpso facLo
become parL of prevlously granLed LelecommunlcaLlons franchlses and shall be accorded
lmmedlaLely and uncondlLlonally Lo Lhe granLees of such franchlses. 1he law Look effecL on
March 16, 1993.
ln !anuary 1999, when Lu1 applled for a mayor's permlL Lo operaLe lLs uavao MeLro exchange,
lL was requlred Lo pay Lhe local franchlse Lax whlch Lhen had amounLed Lo 3,681,983.72. Lu1
challenged Lhe power of Lhe clLy governmenL Lo collecL Lhe local franchlse Lax and demanded a
refund of whaL had been pald as a local franchlse Lax for Lhe year 1997 and for Lhe flrsL Lo Lhe
Lhlrd quarLers of 1998.
Issue:
WheLher or noL by vlrLue of 8A 7923, Sec. 23, Lu1 ls agaln enLlLled Lo Lhe exempLlon from paymenL of
Lhe local franchlse Lax ln vlew of Lhe granL of Lax exempLlon Lo Clobe and SmarL.

Peld: eLlLlon uenled (81C's declslon was afflrmed)
eLlLloner conLends LhaL because Lhelr exlsLlng franchlses conLaln ln lleu of all Laxes" clauses, Lhe same
granL of Lax exempLlon musL be deemed Lo have become lpso facLo parL of lLs prevlously granLed
LelecommunlcaLlons franchlse.
8uL Lhe rule ls LhaL Lax exempLlons should be granLed only by a clear and unequlvocal provlslon
of law noL expressed ln a language Loo plaln Lo be mlsLaken" and assumlng LhaL Lhe charLers of
Clobe and of SmarL granL Lax exempLlons, Lhen Lhls runabouL way of granLlng Lax exempLlon Lo
Lu1 ls noL a dlrecL, clear and unequlvocal" way of communlcaLlng Lhe leglslaLlve lnLenL.
nor does Lhe Lerm exempLlon" ln Sec. 23 of 8A 7923 mean Lax exempLlon. 1he Lerm refers Lo
exempLlon from regulaLlons and requlremenLs lmposed by Lhe naLlonal 1elecommunlcaLlons
Commlsslon (n1C).
o Sect|on 23. poollty of 1teotmeot lo tbe 1elecommoolcotloos loJostty. - Any advanLage,
favor, prlvllege, exempLlon, or lmmunlLy granLed under exlsLlng franchlses, or may
hereafLer be granLed, shall lpso facLo become parL of prevlously granLed
109
LelecommunlcaLlons franchlses and shall be accorded lmmedlaLely and uncondlLlonally
Lo Lhe granLees of such franchlses: rovlded, however, 1haL Lhe foregolng shall nelLher
apply Lo nor affecL provlslons of LelecommunlcaLlons franchlses concernlng LerrlLory
covered by Lhe franchlse, Lhe llfe span of Lhe franchlse, or Lhe Lype of servlce auLhorlzed
by Lhe franchlse.
! lor lnsLance, 8A 7923, Sec. 17 provldes: 1he Commlsslon shall exempL any
speclflc LelecommunlcaLlons servlce from lLs raLe or Larlff regulaLlons lf Lhe
servlce has sufflclenL compeLlLlon Lo ensure falr and reasonable raLes of Larlffs.
! AnoLher exempLlon granLed by Lhe law ln llne wlLh lLs pollcy of deregulaLlon ls
Lhe exempLlon from Lhe requlremenL of securlng permlLs from Lhe n1C every
Llme a LelecommunlcaLlons company lmporLs equlpmenL.
Pence, 1ax exempLlons should be granLed only by clear and unequlvocal provlslon of law on Lhe basls of
language Loo plaln Lo be mlsLaken. lurLher, Lhe 1ax Code provlslon wlLhdrawlng Lhe Lax exempLlon was
noL consLrued as prohlblLlng fuLure granLs of exempLlons from all Laxes LasLly, Lhe granL of Laxlng
powers Lo local governmenL unlLs under Lhe ConsLlLuLlon and Lhe LCC does noL affecL Lhe power of Lhe
Congress Lo granL exempLlon Lo cerLaln persons, pursuanL Lo a declared naLlonal pollcy.

CASL: CIk vs kobertson (August 1986)-ICk1LS-LLUNG

CIk vs. kobertson [G.k. Nos. L-70116-19. August 12, 1986.]
Source: hLLp://berneguerrero.flles.wordpress.com/2012/08/2003hs30_Lax1.pdf
Iacts: lrank 8oberLson ls an Amerlcan clLlzen born ln Lhe hlllpplnes on 8 !uly 1924. Pe reslded ln Lhe
hlllpplnes unLll repaLrlaLed Lo Lhe unlLed SLaLes ln 1943 and Look resldence aL Long 8each, Callfornla.
Soon afLer he was employed by Lhe uS lederal CovernmenL wlLh a [ob aL Lhe uS navy. Pls work broughL
hlm Lo Lhe uS navy's varlous lnsLallaLlons overseas wlLh evenLual asslgnmenL aL Lhe uS naval Shlp 8epalr
laclllLy aL Sublc 8ay, Clongapo, hlllpplnes, ln 1962. Llke hls broLher lrank, !ames 8oberLson was born ln
Lhe hlllpplnes on 22 uecember 1918 and had slnce reslded ln Lhls counLry unLll repaLrlaLed Lo Lhe
unlLed SLaLes ln 1943 and Lhere, esLabllshed hls domlclle. Pe landed a [ob wlLh Lhe uS navy Shlpyard aL
Long 8each, Callfornla as a uS lederal Clvll Servlce employee. Pe reLurned Lo Lhe hlllpplnes ln 1938
wlLh asslgnmenL aL Lhe uS naval 8ase aL Sublc 8ay, Clongapo, and has slnce remalned Lhru 1972. 8oberL
P. CaLhey, on Lhe oLher hand, ls a unlLed SLaLes born clLlzen who flrsL came Lo Lhe hlllpplnes wlLh Lhe
uS llberaLlon force ln 1944, and upon dlscharge from Lhe mlllLary servlce ln 1946 Lurned a uS navy's
clvlllan employee wlLh sLaLlon aL MakaLl, MeLro Manlla. !ohn Carrlson ls a hlllpplne born Amerlcan
clLlzen also repaLrlaLed Lo Lhe unlLed SLaLes ln 1943 esLabllshlng hls domlclle aL San lranclsco, Callfornla.
Soon afLer he was employed by Lhe uS lederal CovernmenL ln lLs mlllLary lnsLallaLlons. Pe reLurned Lo
Lhe hlllpplnes ln 1932 asslgned aL Lhe uS naval 8ase, Sublc 8ay, hlllpplnes. 1hus, lrank and !ames
8oberLson, 8oberL CaLhey, and !ohn Carrlson are clLlzens of Lhe unlLed SLaLes, holders of Amerlcan
passporLs and admlLLed as Speclal 1emporary vlslLors under SecLlon 9 (a) vlsa of Lhe hlllpplne
lmmlgraLlon AcL of 1940, as amended, clvlllan employees ln Lhe uS MlllLary 8ase ln Lhe hlllpplnes ln
connecLlon wlLh lLs consLrucLlon, malnLenance, operaLlon, and defense, and lncomes are solely derlved
from salarles from Lhe uS governmenL by reason of Lhelr employmenL ln Lhe uS 8ases ln Lhe hlllpplnes.
1he Commlssloner of lnLernal 8evenue made assessmenLs agalnsL lrank 8oberLson (C1A Case 2733),
!ames W. 8oberLson (C1A 2736), 8oberL P. CaLhey (C1A 2738), and !ohn L. Carrlson (C1A Case 2739) for
deflclency lncome Lax for Laxable years 1969-1972, lncluslve of lnLeresLs and penalLles for Lhe amounLs
of 132,730,63, 190,433.17, 92,013.17, and 196,734.32 respecLlvely.
110
8alsed ln Lhe CourL of 1ax Appeals, Lhe cases were consolldaLed as Lhese lnvolve slmllar or ldenLlcal facL
slLuaLlons on a quesLlon lnvolvlng Lhe scope of Lhe Lax exempLlon provlslon ln ArLlcle xll, ar. 2, of Lhe
8- uS MlllLary 8ases AgreemenL of 1947. 1he courL a quo afLer due hearlng and on 14 uecember 1984,
rendered lLs [udgmenL ln favor of 8oberLson, eL.al. cancelllng and seLLlng aslde Lhe assessmenLs for
deflclency lncome Laxes. Pence, Lhe Commlssloner of lnLernal 8evenue flled a peLlLlon for revlew.
Peld: 1he Supreme CourL afflrmed Lhe appealed declslon of Lhe CourL of 1ax Appeals and dlsmlssed Lhe
peLlLlon for revlew, wlLhouL cosLs.
1. Art|c|e kIII, aragraph 2, of the k-US M|||tary 8ases Agreement of 1947 : no naLlonal of Lhe unlLed
SLaLes servlng ln or employed ln Lhe hlllpplnes ln connecLlon wlLh Lhe consLrucLlon, malnLenance,
operaLlon or defense of Lhe bases and resldlng ln Lhe hlllpplnes by reason only of such employmenL, or
hls spouse and mlnor chlldren and dependenL parenLs of elLher spouse, shall be llable Lo pay lncome Lax
ln Lhe hlllpplnes excepL ln respecL of lncome derlved from hlllpplne sources or sources oLher Lhan Lhe
unlLed SLaLes sources."
Law and facts of the case c|ear, kobertson, et.a|. are exempted from tax
1he law and Lhe facLs of Lhe case are so clear LhaL Lhere ls no room lefL for Lhe CourL Lo doubL Lhe
valldlLy of 8oberLson, eL.al.'s defense. ln order Lo avall oneself of Lhe Lax exempLlon under Lhe 8-uS
MlllLary 8ases AgreemenL: he musL be a naLlonal of Lhe unlLed SLaLes employed ln connecLlon wlLh Lhe
consLrucLlon, malnLenance, operaLlon or defense, of Lhe bases, resldlng ln Lhe hlllpplnes by reason of
such employmenL, and Lhe lncome derlved ls from Lhe uS CovernmenL (ArL. xll par. 2 of l-uS MlllLary
8ases AgreemenL of 1947). Sald clrcumsLances are all presenL ln Lhe presenL case.
CASL: k vs IAC (Apr|| 1991)-ILkNANDL2
8epubllc vs lAC
Cn Aprll 13, 1980, Lhe 8epubllc of Lhe hlllpplnes, Lhrough Lhe 8ureau of lnLernal 8evenue, commenced
an acLlon ln Lhe CourL of llrsL lnsLance, Lo collecL from Lhe spouses AnLonlo asLor and Clara 8eyes-
asLor deflclency lncome Laxes for Lhe years 1933 Lo 1939 ln Lhe amounL of 17,117.08 wlLh a 3
surcharge and 1 monLhly lnLeresL, and cosLs.
1he asLors flled a moLlon Lo dlsmlss Lhe complalnL, buL Lhe moLlon was denled. Cn AugusL 2, 1973, Lhey
flled an answer admlLLlng Lhere was an assessmenL agalnsL Lhem of 17,117.08 for lncome Lax
deflclency buL denylng llablllLy Lherefor. 1hey conLended LhaL Lhey had avalled of Lhe Lax amnesLy under
.u.'s nos. 23, 213 and 370 and had pald Lhe correspondlng amnesLy Laxes amounLlng Lo 10,400 or
10 of Lhelr reporLed unLaxed lncome under .u. 23, 2,931.20 or 20 of Lhe reporLed unLaxed lncome
under .u. 213, and a flnal paymenL on CcLober 26, 1973 under .u. 370 evldenced by Lhe
CovernmenL's Cfflclal 8ecelpL no. 1032388. ConsequenLly, Lhe CovernmenL ls ln esLoppel Lo demand
and compel furLher paymenL of lncome Laxes by Lhem.
W/n peLlLloners are llable for Lhe lncome Lax? no
Lven assumlng LhaL Lhe deflclency Lax assessmenL of 17,117.08 agalnsL Lhe asLor spouses were
correcL, slnce Lhe laLLer have already pald almosL Lhe equlvalenL amounL Lo Lhe CovernmenL by way of
amnesLy Laxes under .u. no. 213, and were granLed noL merely an exempLlon, buL an amnesLy, for
Lhelr pasL Lax falllngs, Lhe CovernmenL ls esLopped from collecLlng Lhe dlfference beLween Lhe
deflclency Lax assessmenL and Lhe amounL already pald by Lhem as amnesLy Lax.
111
A Lax amnesLy, belng a general pardon or lnLenLlonal overlooklng by Lhe SLaLe of lLs auLhorlLy Lo lmpose
penalLles on persons oLherwlse gullLy of evaslon or vlolaLlon of a revenue or Lax law, parLakes of an
absoluLe forglveness or walver by Lhe CovernmenL of lLs rlghL Lo collecL whaL oLherwlse would be due lL,
and ln Lhls sense, pre[udlclal LhereLo, parLlcularly Lo glve Lax evaders, who wlsh Lo relenL and are wllllng
Lo reform a chance Lo do so and Lhereby become a parL of Lhe new socleLy wlLh a clean slaLe
1he rule ls LhaL lo cose of Joobt, Lax sLaLuLes are Lo be consLrued sLrlcLly agalnsL Lhe CovernmenL and
llberally ln favor of Lhe Laxpayer, for Laxes, belng burdens, are noL Lo be presumed beyond whaL Lhe
appllcable sLaLuLe expressly and clearly declares
1he paymenL of deflclency lncome Laxes by Lhe asLors under u. no. 213, and Lhe accepLance Lhereof
by Lhe CovernmenL, operaLed Lo dlvesL Lhe laLLer of lLs rlghL Lo furLher recover deflclency lncome Laxes
from Lhe prlvaLe respondenLs pursuanL Lo Lhe exlsLlng deflclency Lax assessmenL agalnsL Lhem. 1he courL
held LhaL lf 8evenue 8egulaLlon no. 7-73 dld provlde an excepLlon Lo Lhe coverage of .u. 213, such
provlslon was null and vold for belng conLrary Lo, or resLrlcLlve of, Lhe clear mandaLe of .u. no. 213
whlch Lhe regulaLlon should lmplemenL. Sald revenue regulaLlon may noL prevall over Lhe provlslons of
Lhe decree, for lL would Lhen be an acL of admlnlsLraLlve leglslaLlon, noL mere lmplemenLaLlon, by Lhe
8ureau of lnLernal 8evenue.
CASL: nILIINL ACL1LLNL CC., INC. vs. CCMMISSICNLk CI IN1LkNAL kLVLNUL and CCUk1 CI
1Ak ALALS (1967)

lacLs: hll. AceLylene Co (AC) engaged ln Lhe manufacLure of oxygen and aceLylene gases
1933-1938: sale Lo naLlonal ower CorporaLlon (nC), agency of Lhe hll. governmenL
and Lo volce of Amerlca (vCA), agency of Lhe uS CovernmenL
o 1934 SC! Cplnlon: nC exempL from dlrecL and lndlrecL Laxes
Cl8 assessed and demanded 12k Laxes for sale Lo nC 167k and 1k Lo vCA
hll. AceLylene denled Lhe Lax llablllLy, alleglng LhaL vCA and nC are Lax-exempL
enLlLles
C1A: Lax on Lhe sale of arLlcles or goods ln secLlon 186 of Lhe Code ls a Lax on Lhe
manufacLurer and noL on Lhe buyer
o hlllpplne AceLylene Company, Lhe manufacLurer or producer of oxygen and
aceLylene gases sold Lo Lhe naLlonal ower CorporaLlon, cannoL clalm
exempLlon from Lhe paymenL of sales Lax slmply because lLs buyer - Lhe
naLlonal ower CorporaLlon - ls exempL from Lhe paymenL of all Laxes
o urchases of vCA noL covered by CerLlflcaLe of LxempLlon
WCn: ercenLage/Sales 1ax ls a Lax on Lhe manufacLurer or Lhe purchaser?
Peld: 1he CourL clLlng several uS declslons held LhaL hll. AceLylene ls llable for Lhe Laxes boLh for lLs
sales Lo nC and vCA.
Lax lmposed by secLlon 186 of Lhe naLlonal lnLernal 8evenue Code ls a Lax on Lhe manufacLurer
or producer and noL a Lax on Lhe purchaser
conLracLor ls noL exempL from Lhe paymenL of a sLaLe prlvllege Lax on Lhe buslness of sLorlng
gasollne slmply because Lhe lederal CovernmenL wlLh whlch lL has a conLracL for Lhe sLorage of
gasollne ls lmmune from sLaLe LaxaLlon
112
Lax burden may noL even be shlfLed Lo Lhe purchaser aL all. A declslon Lo absorb Lhe burden of
Lhe Lax ls largely a maLLer of economlcs.
13
1hen lL can no longer be conLended LhaL a sales Lax ls
a Lax on Lhe purchaser
As regards, Lhe sale Lo vCA, Lhe only exempLed based on Lhe AgreemenL beLween Lhe C8 and CuSA
are only sales made "for excluslve use ln Lhe consLrucLlon, malnLenance, operaLlon or defense of Lhe
bases

CASL: CIk vs. Iohn Gotamco and Sons, et.a|.[G.k. No. No. L-31092 Iebruary 27, 1987]

Iacts: 1he World PealLh CrganlzaLlon (WPC for shorL) ls an lnLernaLlonal organlzaLlon whlch has a
reglonal offlce ln Manlla. An agreemenL was enLered lnLo beLween Lhe 8epubllc of Lhe hlllpplnes and
Lhe sald CrganlzaLlon on !uly 22, 1931. SecLlon 11 of LhaL AgreemenL provldes, lnLer alla, LhaL "Lhe
CrganlzaLlon, lLs asseLs, lncome and oLher properLles shall be: (a) exempL from all dlrecL and lndlrecL
Laxes." 1he WPC declded Lo consLrucL a bulldlng Lo house lLs own offlces, as well as Lhe oLher unlLed
naLlons offlces sLaLloned ln Manlla. A blddlng was held for Lhe bulldlng consLrucLlon. 1he WPC lnformed
Lhe bldders LhaL Lhe bulldlng Lo be consLrucLed belonged Lo an lnLernaLlonal organlzaLlon exempLed
from Lhe paymenL of all fees, llcenses, and Laxes, and LhaL Lherefore Lhelr blds "musL Lake Lhls lnLo
accounL and should noL lnclude lLems for such Laxes, llcenses and oLher paymenLs Lo CovernmenL
agencles." 1hereafLer, Lhe consLrucLlon conLracLwas awarded Lo !ohn CoLamco & Sons, lnc. (CoLamco
for shorL). SubsequenLly, Lhe Commlssloner of lnLernal 8evenue senL a leLLer of demand Lo CoLamco
demandlng paymenL of for Lhe 3 conLracLor's Lax plus surcharges on Lhe gross recelpLs lL recelved from
Lhe WPC ln Lhe consLrucLlon of Lhe laLLer's bulldlng. WPC. 1he WPC lssued a cerLlflcaLlon LhaL Lhe bld
of !ohn CoLamco & Sons, should be exempLed from any Laxes ln connecLlon wlLh Lhe consLrucLlon of Lhe
World PealLh CrganlzaLlon offlce bulldlng because such can be consldered as an lndlrecL Lax Lo WPC.
Powever, 1he Commlssloner of lnLernal 8evenue conLends LhaL Lhe 3 conLracLor's Lax ls noL a dlrecL
nor an lndlrecL Lax on Lhe WPC, buL a Lax LhaL ls prlmarlly due from Lhe conLracLor, and Lhus noL covered
by Lhe Lax exempLlon agreemenL

Issue: WheLher or noL Lhe sald 3 conLracLor's Lax lmposed upon peLlLloner ls covered by Lhe dlrecL
and lndlrecL Lax exempLlon" granLed Lo WPC by Lhe governmenL.

ne|d: ?es. 1he 3 conLracLor's Lax lmposed upon peLlLloner ls covered by Lhe dlrecL and lndlrecL Lax
exempLlon" granLed Lo WPC. Pence, peLlLloner cannoL be held llable for such conLracLor's Lax. 1he
Supreme CourL explalned LhaL dlrecL Laxes are Lhose LhaL are demanded from Lhe very person who, lL ls
lnLended or deslred, should pay Lhem, whlle lndlrecL Laxes are Lhose LhaL are demanded ln Lhe flrsL
lnsLance from one person ln Lhe expecLaLlon and lnLenLlon LhaL he can shlfL Lhe burden Lo someone else.
Whlle lL ls Lrue LhaL Lhe conLracLor's Lax ls payable by Lhe conLracLor, however ln Lhe lasL analysls lL ls Lhe
owner of Lhe bulldlng LhaL shoulders Lhe burden of Lhe Lax because Lhe same ls shlfLed by Lhe conLracLor
Lo Lhe owner as a maLLer of self-preservaLlon. 1hus, lL ls an lndlrecL Lax agalnsL Lhe WPC because,
alLhough lL ls payable by Lhe peLlLloner, Lhe laLLer can shlfL lLs burden on Lhe WPC.

CASL: Maceda vs Macara|g (May 1991 and 1993)-MAGSUM8CL
May 31, 1991
Lrnesto M. Maceda, petltlooet vs. non. Cata||no Macar|g, et a|, tespooJeots

113
DCC1kINL: 1he rule of sLrlcL consLrucLlon of sLaLuLes granLlng Lax exempLlons does noL apply ln Lhe case
of exempLlons ln favor of a governmenLal pollLlcal subdlvlslon or lnsLrumenLallLy

IAC1S:
CommonwealLh AcL no. 120 creaLed Lhe naLlonal ower CorporaLlon (nC) as a publlc
corporaLlon Lo underLake Lhe dev'L of hydraullc power and Lhe producLlon of power from oLher
sources.
8A no. 338 granLed nC Lax and duLy exempLlon prlvlleges
o Sec. 2: 1o faclllLaLe paymenL of lLs lndebLedness, Lhe nC shall be exempL from all Laxes,
duLles, fees, lmposLs, charges and resLrlcLlons of Lhe 8, lLs provlnces, clLles &
munlclpallLles
8A 6393 revlsed Lhe charLer of Lhe nC whereln Congress declared as a naLlonal pollcy Lhe LoLal
elecLrlflcaLlon of Lhe hlllpplnes Lhrough Lhe dev'L of power from all sources Lo meeL Lhe needs
of lndusLrlal dev'L and rural elecLrlflcaLlon w/c should be pursued coordlnaLely and supporLed by
all lnsLrumenLallLles and agencles of Lhe gov'L, lncludlng lLs flnanclal lnsLlLuLlons.
o 1he corporaLe exlsLence of nC was exLended Lo carry ouL Lhls pollcy.
o Sec. 13 of Lhe law provlded ln deLall Lhe exempLlon of Lhe nC from all Laxes, duLles,
fees, lmposLs and oLher charges by Lhe gov'L and lLs lnsLrumenLallLles
u 380 amended sec. 13 pars. A and 8 of 8A 6393 by speclfylng Lhe exempLlon of nC from
Laxes dlrecLly or lndlrecLly on all peLroleum producLs used by nC ln lLs operaLlon
u 938 furLher amended Lhe provlslon by lnLegraLlng Lhe Lax exempLlon ln general Lerms under
one paragraph. lL exempLs nC from all forms of Laxes, duLles, fees, eLc"
o Slnce May 1976 unLll !une 1984, when u 1931 was promulgaLed, oll flrms never pald
exclse / speclflc and ad valorem Laxes for peLroleum producLs sold and dellvered Lo Lhe
nC. 1hls non-paymenL spanned a perlod of 8 years.
! uurlng Lhls perlod Lhe 8l8 dld noL collecL any Lax on Lhe purchases of nC on Lhe
bellef LhaL nC was exempL from lndlrecL Laxes
u 1931 wlLhdrew all Lax exempLlon prlvlleges granLed ln favor of governmenL-owned or -
conLrolled corporaLlons lncludlng Lhelr subsldlarles. Powever, sald law empowered Lhe
resldenL and/or Lhen MlnlsLer of llnance, upon recommendaLlon of Lhe llscal lncenLlves
8evlew 8oard (ll88), Lo resLore, parLlally or LoLally, Lhe exempLlon wlLhdrawn, or oLherwlse
revlse Lhe scope & coverage of any appllcable Lax and duLy
! Cll companles sLarLed Lo pay speclflc and ad valorem Laxes on Lhelr sale of oll
producLs Lo nC when u 1931 was promulgaLed.
! And for Lhe sales of peLroleum producLs dellvered Lo nC, nC pald Lhe duLles
and speclflc Lax componenL.
o ursuanL Lo Lhe power granLed Lo ll88, Lhe ll88 lssued 8esoluLlon no. 10-83 resLorlng
Lhe Lax & duLy exempLlon of nC from !une 1984-1983.
! nC applled wlLh Lhe 8l8 for a refund of speclflc Laxes pald on peLroleum
producLs
o Cn !an 7, 1986, ll88 lssued resoluLlon no. 1-86 lndeflnlLely resLorlng Lhe nC Lax and
duLy exempLlon prlvlleges effecLlve !uly 1, 1983.
! lL ls applled reLroacLlvely from !uly 1, 1983 Lo an lndeflnlLe perlod.
o 1he perlod ln quesLlon ls !une 11, 1984 Lo !une 30, 1983.
o nC presldenL wroLe Lo Lhe chalrman of ll88 requesLlng Lhe ll88 Lo resolve confllcLlng
rullngs on Lhe Lax exempLlon prlvlleges of Lhe nC.
114
o Cn CcL 1983, 8l8 8ullng no 186-83 sLaLes LhaL nC's exempLlon prlvlleges covers only
Laxes for whlch lL ls dlrecLly llable and does noL cover Laxes whlch are only shlfLed Lo lL
or for lndlrecL Laxes.
! 1hls poslLlon was a reverse of lLs May 1983 rullng whlch favored nC's lndlrecL
Lax exempLlon prlvllege.
o nC's LoLal refund clalm was 468.38 mllllon buL only a porLlon (38 mllllon) Lhereof
was approved and released. nC, Lhrough a deed of asslgnmenL, ls asslgnlng lLs Lax
credlL Lo CalLex ln parLlal seLLlemenL of lLs ouLsLandlng obllgaLlon Lo Lhe laLLer.
! As a resulL of Lhe favorable acLlon of 8l8 of Lhe 38m Lax credlL, Lhe nC
relLeraLed lLs requesL for Lhe release of Lhe balance of lLs pendlng refund of
Laxes.
1hls was denled by 8l8 sLaLlng LhaL nC's Lax free prlvllege Lo buy
peLroleum producLs covered only Lhe perlod from !une 11, 1984 Lo !une
30, 1983.
lurLhermore, 8l8 declared LhaL nC had already losL lLs Lax and duLy
exempLlons because lL only en[oys speclal prlvlleges for Laxes for whlch
lL ls Jltectly llable.

Cn March 10, 1987, however, LC 93 once agaln wlLhdrew all Lax and duLy lncenLlves granLed Lo
governmenL and prlvaLe enLlLles whlch had been resLored under u 1931 and 1933 buL lL gave
Lhe auLhorlLy Lo ll88 Lo resLore, revlse Lhe scope and prescrlbe Lhe daLe of effecLlvlLy of such Lax
and/or duLy exempLlons
o ll88 lssued 8esoluLlon no. 17-87 resLorlng nC's Lax and duLy exempLlon prlvlleges
effecLlve on Mar. 10, 1987
o Cn CcL. 3, 1987, Lhe resldenL, Lhrough Lxec. Sec. Macaralg, conflrmed & approved Lhe
ll88 resoluLlon.

ISSULS:
MAln lSSuL: W/n nC has ceased Lo en[oy lndlrecL Lax and duLy exempLlon wlLh Lhe enacLmenL
of u 938 whlch amended u 380? nC.
CC8CLLA8? lSSuLS:
o W/n ll8M 8esoluLlon no. 10-83 whlch resLored nC's Lax exempLlon prlvllege effecLlve
on !une 11 1984- !une 30 1983 and ll88 8esoluLlon no. 1-86 resLorlng nC's Lax
exempLlon prlvllege effecLlve !uly 1, 1983 lncluded lndlrecL Lax exempLlon Lo nC? ?LS
! eLlLloner argues LhaL only dlrecL Laxes are exempL.
o W/n ll88 could valldly and legally lssue 8esoluLlon no. 17-87 whlch resLored nC's Lax
exempLlon prlvllege effecLlve March 10 1987, and lf sald 8esoluLlon was valldly lssued,
Lhe naLure and exLenL of Lhe Lax exempLlon prlvllege resLored Lo nC? ?LS,
! eLlLloner avers LhaL Lhe resLoraLlon cannoL cover lndlrecL Laxes and lL cannoL
creaLe new Lax exempLlon noL oLherwlse granLed ln Lhe nC CharLer.

nLLD:
lL may be useful Lo dlsLlngulsh Lhe dlfference beLween a dlrecL Lax and an lndlrecL Lax.
o ulrecL Lax- a Lax for whlch a Laxpayer ls dlrecLly llable on Lhe LransacLlon or buslness lL
engages ln
! Lxamples: CusLom duLles, ad valorem Laxes pald Lo Lhe 8l8
113
o lndlrecL Lax- a Lax prlmarlly pald by persons who can shlfL Lhe burden upon someone
else.
! Lxample: Lxclse and ad valorem Laxes LhaL oll companles pay Lo Lhe 8l8 upon
removal of peLroleum producLs from lLs reflnery can be shlfLed Lo lLs buyer by
addlng Lhem Lo Lhe selllng prlce
1he nC ls a non-proflL publlc corporaLlon creaLed for Lhe general good and welfare wholly
owned by Lhe governmenL of Lhe 8. lrom Lhe very beglnnlng of lLs corporaLe exlsLence, Lhe
nC en[oyed preferenLlal Lax LreaLmenL Lo enable Lhe CorporaLlon Lo pay Lhe lndebLedness and
obllgaLlon and ln Lhe furLherance and effecLlve lmplemenLaLlon of Lhe pollcy enunclaLed ln 8A
6393"
lrom Lhe changes made ln Lhe nC charLer, Lhe lnLenLlon Lo sLrengLhen lLs preferenLlal Lax
LreaLmenL ls obvlous.
1he use of Lhe phrase all forms" of Laxes ln u 938 demonsLraLe Lhe lnLenLlon of Lhe law Lo glve
nC all Lhe Lax exempLlons lL has been en[oylng before.
o 8aLlonale for Lhls exempLlon: 8elng non-proflL, nC shall devoLe all lLs reLurns from lLs
caplLal lnvesLmenL as well as excess revenues from lLs operaLlon, for expanslon and for
lL Lo be able Lo pay lLs lndebLedness and obllgaLlons.
1he rule on sLrlcL lnLerpreLaLlon does noL apply ln Lhe case of exempLlons ln favor of a gov'L
pollLlcal subdlvlslon or lnsLrumenLallLy (should be consLrued llberally).
o lL does noL apply ln Lhe case of exempLlons runnlng Lo Lhe beneflL of Lhe governmenL
lLself or lLs agencles. ln such case, Lhe pracLlcal effecL of an exempLlon ls merely Lo
reduce Lhe amounL of money LhaL has Lo be handled by Lhe governmenL ln Lhe course of
lLs operaLlons
o ln Lhe case of properLy owned by Lhe sLaLe, LCus or oLher publlc corporaLlons:
LxempLlon ls Lhe rule and LaxaLlon ls Lhe excepLlon"
lL ls evldenL form Lhe provlslons of u 938 LhaL lLs purpose ls Lo malnLaln Lhe Lax exempLlon of
nC from all forms of Laxes lncludlng lndlrecL Laxes.
o 1hls Lax exempLlon ls lnLended noL only Lo lnsure LhaL Lhe nC shall conLlnue Lo
generaLe elecLrlclLy for Lhe counLry buL more lmporLanLly, Lo assure cheaper raLes Lo be
pald by Lhe consumers.
! uenylng Lhls Lax exempLlon would mean hamperlng lf noL paralyzlng Lhe
operaLlon of Lhe nC.
Iune 8, 1993
IAC1S: Same facLs (MoLlon for 8econslderaLlon)

ISSUL:
W/n nC ceased Lo en[oy exempLlon from lndlrecL Lax when u 938 sLaLed Lhe exempLlon ln
general Lerms? nC
W/n oll companles have Lo absorb Lhe Laxes Lhey add Lo Lhe bunker fuel oll Lhey sell Lo nC ln
vlew of Lhe lndlrecL Lax exempLlon of Lhe nC? ?LS.
nLLD:
lot lssoe oo. 1.
116
.u. no. 938 lumped up 13(b), 13(c), and 13(d) lnLo Lhe phrase "ALL lC8MS Cl 1AxLS, L1C.,",
lncluded 13(a) under Lhe "as well as" clause and added nCC subsldlarles as quallfled for Lax
exempLlons.
1hls ls Lhe only concluslon one can arrlve aL lf he has read all Lhe nC laws ln Lhe order of
enacLmenL or lssuance as narraLed above ln parL l hereof. resldenL Marcos musL have
consldered all Lhe nC sLaLuLes from C.A. no. 120 up Lo lLs laLesL amendmenLs, .u. no. 380,
.u. no. 393 and .u. no. 739, Anu came up wlLh a very slmple SecLlon 13, 8.A. no. 6393, as
amended by .u. no. 938.
Cne common Lheme ln all Lhese laws ls LhaL Lhe nC musL be enabled Lo pay lLs lndebLedness
whlch, as of .u. no. 938, was 12 8llllon ln LoLal domesLlc lndebLedness, aL any one Llme, and
u$4 8llllon ln LoLal forelgn loans aL any one Llme. 1he nC musL be and has Lo be exempL from
all forms of Laxes lf Lhls goal ls Lo be achleved.
lot lssoe oo. 2.
ln vlew of all Lhe foregolng, Lhe CourL rules and declares LhaL Lhe oll companles whlch supply
bunker fuel oll Lo nC have Lo pay Lhe Laxes lmposed upon sald bunker fuel oll sold Lo nC. 8y
Lhe very naLure of lndlrecL LaxaLlon, Lhe economlc burden of such LaxaLlon ls expecLed Lo be
passed on Lhrough Lhe channels of commerce Lo Lhe user or consumer of Lhe goods sold.
8ecause, however, Lhe nC has been exempLed from boLh dlrecL and lndlrecL LaxaLlon, Lhe nC
musL beheld exempLed from absorblng Lhe economlc burden of lndlrecL LaxaLlon. 1hls means,
on Lhe one hand, LhaL Lhe oll companles whlch wlsh Lo sell Lo nC absorb all or parL of Lhe
economlc burden of Lhe Laxes prevlously pald Lo 8l8, whlch could Lhey shlfL Lo nC lf nC dld
noL en[oy exempLlon from lndlrecL Laxes. 1hls means also, on Lhe oLher hand, LhaL Lhe nC may
refuse Lo pay Lhe parL of Lhe "normal" purchase prlce of bunker fuel oll whlch represenLs all or
parL of Lhe Laxes prevlously pald by Lhe oll companles Lo 8l8. lf nC noneLheless purchases such
oll from Lhe oll companles - because Lo do so may be more convenlenL and ulLlmaLely less
cosLly for nC Lhan nC lLself lmporLlng and haullng and sLorlng Lhe oll from overseas - nC ls
enLlLled Lo be relmbursed by Lhe 8l8 for LhaL parL of Lhe buylng prlce of nC whlch verlflably
represenLs Lhe Lax already pald by Lhe oll company-vendor Lo Lhe 8l8.
lL should be noLed aL Lhls polnL ln Llme LhaL Lhe whole lssue of who WlLL pay Lhese lndlrecL Laxes
PAS 8LLn 8LnuL8Lu moot ooJ ocoJemlc by L.C. no. 193 lssued on !une 16, 1987 by vlrLue of
whlch Lhe oJ volotem Lax raLe on bunker fuel oll was reduced Lo ZL8C (0) L8 CLn1uM.
o 1he oll companles can now dellver bunker fuel oll Lo nC wlLhouL havlng Lo worry abouL
who ls golng Lo bear Lhe economlc burden of Lhe oJ volotem Laxes. WhaL Lhls CourL wlll
now dlspose of are peLlLloner's complalnLs LhaL some lndlrecL Lax money has been
lllegally refunded by Lhe 8ureau of lnLernal 8evenue Lo Lhe nC and LhaL more clalms
for refunds by Lhe nC are belng processed for paymenL by Lhe 8l8.

CASL: SILkAIk (SINGACkL) 1L, L1D vs. CCMMISSICNLk CI IN1LkNAL kLVLNUL
G.k. No. 173S94, Iebruary 6, 2008

Iacts:
- eLlLloner, Sllkalr (Slngapore) Le. LLd. (Sllkalr), a corporaLlon organlzed under Lhe laws of
Slngapore whlch has a hlllpplne represenLaLlve offlce, ls an onllne lnLernaLlonal alr carrler
operaLlng Lhe Slngapore-Cebu-uavao-Slngapore, Slngapore-uavao-Cebu-Slngapore, and
Slngapore-Cebu-Slngapore rouLes.
117
- Cn uecember 19, 2001, Sllkalr flled wlLh Lhe 8ureau of lnLernal 8evenue (8l8) a wrlLLen
appllcaLlon for Lhe refund of 4,367,430.79 exclse Laxes lL clalmed Lo have pald on lLs purchases
of [eL fuel from eLron CorporaLlon from !anuary Lo !une 2000.
- C1A denled Sllkalr's peLlLlon on Lhe ground LhaL as Lhe exclse Lax was lmposed on eLron
CorporaLlon as Lhe manufacLurer of peLroleum producLs, any clalm for refund should be flled by
Lhe laLLer, and where Lhe burden of Lax ls shlfLed Lo Lhe purchaser, Lhe amounL passed on Lo lL ls
no longer a Lax buL becomes an added cosL of Lhe goods purchased.
- 1he llablllLy for exclse Lax on peLroleum producLs LhaL are belng removed from lLs reflnery ls
lmposed on Lhe manufacLurer/producer (5ectloo 1J0 of tbe Nlkc of 1997.
- 1he rlghL Lo clalm for Lhe refund of exclse Laxes pald on peLroleum producLs lles wlLh eLron
CorporaLlon who pald and remlLLed Lhe exclse Lax Lo Lhe 8l8. 8espondenL, on Lhe oLher hand,
may only clalm from eLron CorporaLlon Lhe relmbursemenL of Lhe Lax burden shlfLed Lo Lhe
former by Lhe laLLer. 1he exclse Lax parLaklng Lhe naLure of an lndlrecL Lax, ls clearly Lhe llablllLy
of Lhe manufacLurer or seller who has Lhe opLlon wheLher or noL Lo shlfL Lhe burden of Lhe Lax
Lo Lhe purchaser. Where Lhe burden of Lhe Lax ls shlfLed Lo Lhe [purchaser], Lhe amounL passed
on Lo lL ls no longer a Lax buL becomes an added cosL on Lhe goods purchased whlch consLlLuLes
a parL of Lhe purchase prlce.
Issue: WheLher or noL Lhe peLlLloner ls Lhe proper parLy Lo clalm for refund or Lax credlL.
ku||ng: no, 1he proper parLy Lo quesLlon, or seek a refund of, an lndlrecL Lax ls Lhe sLaLuLory Laxpayer,
Lhe person on whom Lhe Lax ls lmposed by law and who pald Lhe same even lf he shlfLs Lhe
burden Lhereof Lo anoLher.

SecLlon 130 (A) (2) of Lhe nl8C provldes LhaL "unless oLherwlse
speclflcally allowed, Lhe reLurn shall be flled and Lhe exclse Lax pald by Lhe manufacLurer or
producer before removal of domesLlc producLs from place of producLlon." 1hus, eLron
CorporaLlon, noL Sllkalr, ls Lhe sLaLuLory Laxpayer whlch ls enLlLled Lo clalm a refund based on
SecLlon 133 of Lhe nl8C of 1997 and ArLlcle 4(2) of Lhe Alr 1ransporL AgreemenL beLween 8
and Slngapore.
Sllkalr bases lLs clalm for refund or Lax credlL on SecLlon 133 (b) of Lhe nl8C of 1997 whlch
reads
Sec. 133. eLroleum roducLs sold Lo lnLernaLlonal Carrlers and LxempL LnLlLles of Agencles.
- eLroleum producLs sold Lo Lhe followlng are exempL from exclse Lax:
(b) LxempL enLlLles or agencles covered by Lax LreaLles, convenLlons, and oLher lnLernaLlonal
agreemenLs for Lhelr use and consumpLlon: ltovlJeJ, bowevet, 1haL Lhe counLry of sald
forelgn lnLernaLlonal carrler or exempL enLlLles or agencles exempLs from slmllar Laxes
peLroleum producLs sold Lo hlllpplne carrlers, enLlLles or agencles,
and ArLlcle 4(2) of Lhe Alr 1ransporL AgreemenL beLween Lhe CovernmenL of Lhe 8epubllc of
Lhe hlllpplnes and Lhe CovernmenL of Lhe 8epubllc of Slngapore (Alr 1ransporL AgreemenL
beLween 8 and Slngapore)
1he exempLlon granLed under SecLlon 133 (b) of Lhe nl8C of 1997 and ArLlcle 4(2) of Lhe Alr
1ransporL AgreemenL beLween 8 and Slngapore cannoL, wlLhouL a clear showlng of
leglslaLlve lnLenL, be consLrued as lncludlng lndlrecL Laxes. SLaLuLes granLlng Lax exempLlons
musL be consLrued lo sttlctlsslml jotls agalnsL Lhe Laxpayer and llberally ln favor of Lhe Laxlng
auLhorlLy, and lf an exempLlon ls found Lo exlsL, lL musL noL be enlarged by consLrucLlon.
CASL: CIk vs h|| She|| (Apr|| 2012) -LkL2
Source: see separaLe pdf flle
118
CASL: AL vs CIk (Iu|y 2013)-8ISNAk
AL v. CIk
lacLs:
CalLex hlllpplnes, lnc. sold lmporLed !eL A-1 luel Lo hlllpplne Alrllnes, lnc. (AL, eLlLloner) for
AL's domesLlc operaLlons.
CalLex elecLronlcally flled wlLh Lhe 8l8 lLs Lxclse 1ax 8eLurns for eLroleum producLs.
CalLex senL an AvlaLlon 8llllng lnvolce for Lhe purchase of avlaLlon fuel and wlLh a cerLlflcaLlon, lL
conflrmed Lhe relaLed exclse Laxes on Lhe LransacLlon.
o lL lndlcaLed LhaL Lhe exclse Laxes lL pald on Lhe lmporLed peLroleum producLs amounLed
Lo 2,932,037.90 and LhaL such was passed on Lo AL.
o CalLex also provlded LhaL lL dld noL flle any clalm for Lhe refund of Lhe sald exclse Lax.
AL senL a leLLer-requesL Lo Lhe Commlssloner of lnLernal 8evenue (Cl8, 8espondenL) seeklng a
refund of Lhe exclse Laxes passed on Lo lL by CalLex, hlnglng lL on lLs operaLlng franchlse, u1390,
whlch conferred upon lLs cerLaln Lax exempLlon prlvlleges on lLs purchase and/ or lmporLaLlon of
avlaLlon gas, fuel and oll, lncludlng Lhose whlch are passed on Lo lL by Lhe seller and/ or
lmporLer.
lL requesL was denled on Lhe ground LhaL slnce Lhe exclse Laxes were pald by CalLex, lL ls CalLex
as Lhe sLaLuLory Laxpayer LhaL may seek a refund and LhaL even lf Lhe Lax burden was shlfLed Lo
AL, AL cannoL be deemed a sLaLuLory Laxpayer.

lssue: WheLher AL has Lhe legal personallLy Lo flle a clalm for refund of Lhe passed on exclse Laxes?

8ullng: ?es.
under SecLlon 129 of Lhe naLlonal lnLernal 8evenue Code (nl8C), as amended, exclse Laxes are
lmposed on Lwo (2) klnds of goods,
1) Coods manufacLured or produced ln Lhe hlllpplnes for domesLlc sales or consumpLlon
or for any oLher dlsposlLlon, and
o 1axpayer obllgaLed Lo flle reLurn and pay exclse Laxes: ManufacLurer/ producer.
2) 1hlngs lmporLed.
o 1axpayer obllgaLed Lo flle reLurn and pay exclse Laxes: Cwner/ lmporLer.
Whlle Lhe nl8C mandaLes Lhe foregolng persons Lo pay Lhe appllcable exclse Laxes dlrecLly Lo
Lhe governmenL, Lhey may, however, shlfL Lhe economlc burden of such paymenLs Lo someone
else - usually Lhe purchaser of Lhe goods - slnce exclse Laxes are consldered as a klnd of lndlrecL
Lax.
lndlrecL Laxes - Lhose whlch are demanded ln Lhe flrsL lnsLance from one person wlLh Lhe
expecLaLlon and lnLenLlon LhaL he can shlfL Lhe economlc burden Lo someone else.
o SLaLuLory Laxpayer can Lransfer Lo lLs cusLomers Lhe value of Lhe exclse Laxes lL
pald or would be llable Lo pay Lo Lhe governmenL by LreaLlng lL as parL of Lhe
cosL of Lhe goods and Lacklng lL on Lo Lhe selllng prlce. CLherwlse known as
passlng on," ls largely a conLracLual affalr beLween Lhe parLles.
Lven lf Lhe purchaser effecLlvely pays Lhe value of Lhe Lax, Lhe
manufacLurer/producer (ln case of goods manufacLured or produced ln
Lhe hlllpplnes for domesLlc sales or consumpLlon or for any oLher
dlsposlLlon) or Lhe owner or lmporLer (ln case of lmporLed goods) are
sLlll regarded as Lhe sLaLuLory Laxpayers under Lhe law. 1o Lhls end, Lhe
purchaser does noL really pay Lhe Lax, raLher, he only pays Lhe seller
119
more for Lhe goods because of Lhe laLLer's obllgaLlon Lo Lhe governmenL
as Lhe sLaLuLory Laxpayer.
o ln Lhls relaLlon, SecLlon 204(c) of Lhe nl8C sLaLes LhaL lL ls Lhe sLaLuLory Laxpayer
whlch has Lhe legal personallLy Lo flle a clalm for refund.
Powever, Lhe abovemenLloned rule should noL apply Lo lnsLances where Lhe law clearly granLs
Lhe parLy Lo whlch Lhe economlc burden of Lhe Lax ls shlfLed an exempLlon from boLh dlrecL and
lndlrecL Laxes. ln whlch case, Lhe laLLer musL be allowed Lo clalm a Lax refund even lf lL ls noL
consldered as Lhe sLaLuLory Laxpayer under Lhe law.
AL's franchlse granLs lL an exempLlon from boLh dlrecL and lndlrecL Laxes on lLs purchase of
peLroleum producLs. 1herefore AL ls endowed wlLh Lhe legal sLandlng Lo flle Lhe sub[ecL Lax
refund clalm, noLwlLhsLandlng Lhe facL LhaL lL ls noL Lhe sLaLuLory Laxpayer as conLemplaLed by
law.
llnally, LCL 1483, whlch Lhe Cl8 clalms Lo have wlLhdrawn Lhe Lax exempLlon of AL, only
applled Lo Lhe purchase of domesLlc peLroleum producLs, noL lmporLed goods, whlch ls Lhe
sub[ecL ln Lhls case.

vlll. naLure, ConsLrucLlon, AppllcaLlon and Sources of 1ax Laws
A. hlllpplne PealLh Care rovlders vs Cl8 (SepLember 2009)-MACSuM8CL
8. Pllado vs Cl8 (CcLober 1936)-L8LZ
CASL: n||ado vs. Co||ectorGk L-9408, 31 Cctober 19S6
Source: hLLp://www.scrlbd.com/doc/39413090/ulgesLs-1ax-l-2003
Ln 8anc, 8auLlsLa Angelo (!): 8 concur
Iacts:
Lmlllo Pllado flled hls lncome Lax reLurn for 1931 wlLh Lhe Lreasurer of 8acolod ClLy, clalmlng a
deducLlble lLem of 12,837.63 from hls gross lncome pursuanL Lo Ceneral Clrcular v-123 lssued by Lhe
CollecLor of lnLernal 8evenue. 1he SecreLary of llnance, Lhrough Lhe CollecLor, lssued Ceneral Clrcular v-
139 whlch revoked and declared vold Clrcular v-123, and lald down Lhe rule[s] LhaL losses of properLy
whlch occurredln World War ll from flres, sLorms, shlpwreck or oLher casualLy, or from robbery, LhefL, or
embezzlemenL are deducLlble ln Lhe year of acLual loss or desLrucLlon of sald properLy. 1he deducLlons
were dlsallowed.
Issue:
WheLher lnLernal 8evenue Laws were enforced durlng Lhe war and wheLher Pllado can clalm
compensaLlon for desLrucLlon of hls properLy durlng Lhe war.
ne|d:
hlllpplnes lnLernal 8evenue Laws are noL pollLlcal ln naLure and as such were conLlnued ln force durlng
Lhe perlod of enemy occupaLlon and ln effecL were acLually enforced by Lhe occupaLlon governmenL.
Such Lax laws are deemed Lo be laws of Lhe occupled LerrlLory and noL of Lhe occupylng enemy. As of
Lhe end of 1943, Lhere was no law whlch Pllado could clalm for Lhe desLrucLlon of hls properLles durlng
Lhe baLLle for Lhe llberaLlon of Lhe hlllpplnes. under Lhe hlllpplne 8ehablllLaLlon AcL of 1948, Lhe
paymenL of clalms by Lhe War uamage Commlsslon depended upon lLs dlscreLlons non-paymenL of
whlch does noL glve rlse Lo any enforceable rlghL. Assumlng LhaL Lhe loss (deducLlble lLem) represenLs a
porLlon of Lhe 73 of hls war damage clalm, Lhe amounL would be aL mosL a proper deducLlon of hls
1930 gross lncome (noL on hls 1931 gross lncome) as Lhe lasL lnsLallmenL and noLlce of dlsconLlnuaLlon

CIk vs CA (Iebruary 1997)-1A8AG
120

lAC1S:
- Alhambra ls a domesLlc corporaLlon engaged ln Lhe sale and manufacLurlng of clgars and clgareLLes
- Cn May 1991, Lhe Cl8 assessed LhaL lL had a deflclency ad valorem Laxes of 480k for Lhe perlod of
nov 1990-!anuary 1991
- lL flled a proLesL wlLh Cl8, denled, flled a reconslderaLlon, also denled. lL flled a peLlLlon for revlew
wlLh Lhe C1A. Whlle Lhls was pendlng, lL pald 320k under proLesL. C1A ordered a refund.
- 1urns ouL Lhere are Lwo 8l8 8ullngs:
1988 - applles Sec 127 of Lhe Lax code, excludes vA1 from Lhe base amounL ln compuLlng for Ad
valorem Laxes
1991 - applles Sec 142 of Lhe Lax code for clgareLLes, lnCLuuLS vA1 Lo Lhe base amounL ln
compuLlng Ad valorem Laxes
- Alhambra had deflclency because lL used Lhe 1988 8l8 rullng
- Cl8 asserLs 1991 8l8 rullng musL be applled because Alhambra was ln bad falLh and lLs accounLlng
meLhod was noL approved by Lhe Cl8. Also LhaL accdg Lo Lhe nCC, no acqulred or vesLed rlghL can be
derlved from an acL LhaL ls lllegal.

lSSuL:
W/n Cl8 should refund Lhe 320k paymenL?

PLLu:
?LS! 8l8 1991 cannoL be applled reLroacLlvely. Cl8 dld noL prove Alhambra was ln bad falLh. lacLs
show LhaL Alhambra swlLched accounLlng meLhods Lo reflecL 8l8 8ullng of 1991 when Lhey found lL
was Lhe Lhe appllcable rullng - Lhls ls clearly a slgn of good falLh.

CASL: A8S-C8N vs C1A (Cctober 1981)-1A8AG

lAC1S:

uurlng Lhe perlod perLlnenL Lo Lhls case, peLlLloner corporaLlon was engaged ln Lhe buslness of
LelecasLlng local as well as forelgn fllms acqulred from forelgn corporaLlons noL engaged ln Lrade or
buslness wlLhln Lhe hlllpplnes. for whlch peLlLloner pald renLals afLer wlLhholdlng lncome Lax of 30of
one-half of Lhe fllm renLals. ln lmplemenLlng SecLlon 4(b) of Lhe 1ax Code, Lhe Commlssloner lssued
Ceneral Clrcular v-334. ursuanL LhereLo, A8S-C8n 8roadcasLlng Corp. duLlfully wlLhheld and Lurned
over Lo Lhe 8l8 30 of of Lhe fllm renLals pald by lL Lo forelgn corporaLlons noL engaged ln Lrade or
buslness ln Lhe hlllpplnes. 1he lasL year LhaL Lhe company wlLhheld Laxes pursuanL Lo Lhe Clrcular was
ln 1968. Cn 27 !une 1971, 8A 3431 amended SecLlon 24 (b) of Lhe 1ax Code lncreaslng Lhe Lax raLe from
30 Lo 33 and revlslng Lhe Lax basls from such amounL" referrlng Lo renLs, eLc. Lo gross lncome." ln
1971, Lhe Commlssloner lssued a leLLer of assessmenL and demand for deflclency wlLhholdlng lncome
Lax for years 1963 Lo 1968. 1he company requesLed for reconslderaLlon, where Lhe Commlssloner dld
noL acL upon.

lSSuL: WheLher 8evenue Memorandum Clrcular 4-71, revoklng Ceneral Clrcular v-334, may be
reLroacLlvely applled.

PLLu: 8ullngs or clrculars promulgaLed by Lhe Commlssloner have no reLroacLlve appllcaLlon where Lo
so apply Lhem would be pre[udlclal Lo Laxpayers. Pereln ,Lhe pre[udlce Lhe company of Lhe reLroacLlve
appllcaLlon of Memorandum Clrcular 4-71 ls beyond quesLlon. lL was lssued only ln 1971, or Lhree years
121
afLer 1968, Lhe lasL year LhaL peLlLloner had wlLhheld Laxes under Ceneral Clrcular no. v-334. 1he
assessmenL and demand on peLlLloner Lo pay deflclency wlLhholdlng lncome Lax was also made Lhree
years afLer 1968 for a perlod of Llme commenclng ln 1963. 1he company was no longer ln a poslLlon Lo
wlLhhold Laxes due from forelgn corporaLlons because lL had already remlLLed all fllm renLals and had no
longer conLrol over Lhem when Lhe new clrcular was lssued. lnsofar as Lhe enumeraLed excepLlons are
concerned, Lhe company does noL fall under any of Lhem.
CASL: h|||pp|ne 8ank of Commun|cat|ons v. CIk
(Source: hLLp://casesdlgesL.blogspoL.com/2009/07/pbcom-vs-clrgr-112024-[an-28-1999.hLml).
IAC1S:
eLlLloner, h|||pp|ne 8ank of Commun|cat|ons (8Com), a commerclal banklng corporaLlon duly
organlzed under hlllpplne laws, flled lLs quarLerly lncome Lax reLurns for Lhe flrsL and second quarLers
of 1983, reporLed proflLs, and pald Lhe LoLal lncome Lax of 3,016,934.00 by applylng 8Com's Lax credlL
memos for 3,401,701.00 and 1,613,233.00, respecLlvely. SubsequenLly, however, 8Com suffered neL
loss of 23,317,228.00, Lhereby showlng no lncome Lax llablllLy ln lLs Annual lncome 1ax 8eLurns for Lhe
year-ended uecember 31, 1983. lor Lhe succeedlng year, endlng uecember 31, 1986, Lhe peLlLloner
llkewlse reporLed a neL loss of 14,129,602.00, and Lhus declared no Lax payable for Lhe year.
8uL durlng Lhese Lwo years, 8Com earned renLal lncome from leased properLles. 1he lessees wlLhheld
and remlLLed Lo Lhe 8l8 wlLhholdlng credlLable Laxes of 282,793.30 ln 1983 and 234,077.69 ln 1986.
Cn AugusL 7, 1987, peLlLloner requesLed Lhe Commlssloner of lnLernal 8evenue, among oLhers, for a Lax
credlL of 3,016,934.00 represenLlng Lhe overpaymenL of Laxes ln Lhe flrsL and second quarLers of 1983.

1hereafLer, on !uly 23, 1988, peLlLloner flled a clalm for refund of credlLable Laxes wlLhheld by Lhelr
lessees from properLy renLals ln 1983 for 282,793.30 and ln 1986 for 234,077.69.
endlng Lhe lnvesLlgaLlon of Lhe respondenL Commlssloner of lnLernal 8evenue, peLlLloner lnsLlLuLed a
eLlLlon for 8evlew on november 18, 1988 before Lhe CourL of 1ax Appeals (C1A). 1he peLlLlon was
dockeLed as C1A Case no. 4309 enLlLled: "hlllpplne 8ank of CommunlcaLlons vs. Commlssloner of
lnLernal 8evenue."
1he C1A declded ln favor of Lhe 8l8 on Lhe ground LhaL Lhe eLlLlon was flled ouL of Llme as Lhe same
was flled beyond Lhe Lwo-year reglemenLary perlod. A moLlon for 8econslderaLlon was denled and Lhe
appeal Lo CourL of Appeals was llkewlse denled. 1hus, Lhls appeal Lo Supreme CourL.

Issues:

a) WheLher or noL 8evenue 8egulaLlons no. 7-83 whlch alLers Lhe reglemenLary perlod from Lwo (2)
years Lo Len (10) years ls valld.
b) WheLher or noL Lhe peLlLlon for Lax refund had already prescrlbed.

ku||ng:


a. kk 7-8S a|ter|ng the 2-year prescr|pt|ve per|od |mposed by |aw to 10-year prescr|pt|ve per|od
|s |nva||d.

AdmlnlsLraLlve lssuances are merely lnLerpreLaLlons and noL expanslons of Lhe provlslons of law, Lhus, ln
case of lnconslsLency, Lhe law prevalls over Lhem. AdmlnlsLraLlve agencles have no leglslaLlve power.

When Lhe AcLlng Commlssloner of lnLernal 8evenue lssued 8MC 7-83,
122
changlng Lhe prescrlpLlve perlod of Lwo years Lo Len years on clalms of excess quarLerly lncome Lax
paymenLs, such clrcular creaLed a clear lnconslsLency wlLh Lhe provlslon of Sec. 230 of 1977 nl8C. ln so
dolng, Lhe 8l8 dld noL slmply lnLerpreL Lhe law, raLher lL leglslaLed guldellnes conLrary Lo Lhe sLaLuLe
passed by Congress."

lL bears repeaLlng LhaL 8evenue memorandum-clrculars are consldered admlnlsLraLlve rullngs (ln Lhe
sense of more speclflc and less general lnLerpreLaLlons of Lax laws) whlch are lssued from Llme Lo Llme
by Lhe Commlssloner of lnLernal 8evenue. lL ls wldely accepLed LhaL Lhe lnLerpreLaLlon placed upon a
sLaLuLe by Lhe execuLlve offlcers, whose duLy ls Lo enforce lL, ls enLlLled Lo greaL respecL by Lhe courLs.
neverLheless, such lnLerpreLaLlon ls noL concluslve and wlll be lgnored lf [udlclally found Lo be
erroneous. 1hus, courLs wlll noL counLenance admlnlsLraLlve lssuances LhaL overrlde, lnsLead of
remalnlng conslsLenL and ln harmony wlLh, Lhe law Lhey seek Lo apply and lmplemenL."

lurLher, fundamenLal ls Lhe rule LhaL Lhe SLaLe cannoL be puL ln esLoppel by Lhe mlsLakes or errors of lLs
offlclals or agenLs. As polnLed ouL by Lhe respondenL courLs, Lhe nulllflcaLlon of 8MC no. 7-83 lssued by
Lhe AcLlng Commlssloner of lnLernal 8evenue ls an admlnlsLraLlve lnLerpreLaLlon whlch ls noL ln harmony
wlLh Sec. 230 of 1977 nl8C, for belng conLrary Lo Lhe express provlslon of a sLaLuLe. Pence, hls
lnLerpreLaLlon could noL be glven welghL for Lo do so would, ln effecL, amend Lhe sLaLuLe."

b. 8y |mp||cat|on of the above, c|a|m for refund had a|ready prescr|bed.

Slnce Lhe peLlLlon had been flled beyond Lhe prescrlpLlve perlod, Lhe same has already prescrlbed. 1he
facL LhaL Lhe flnal ad[usLed reLurn show an excess Lax credlL does noL auLomaLlcally enLlLle Laxpayer
clalm for refund wlLhouL any express lnLenL.

WPL8LlC8L, Lhe peLlLlon ls hereby uLnlLu. 1he declslon of Lhe CourL of Appeals appealed from ls
Alll8MLu, wlLh CCS1S agalnsL Lhe peLlLloner.
C. 8l8 8ullng no. 370-2011 (CcLober 2011)

lx. CLher uocLrlnes ln 1axaLlon
A. SeL off of 1axes
CASL: h||ex M|n|ng vs CIk (AugusL 1998)-8CM8ALLS
uocLrlne:
1axes cannoL be sub[ecL Lo compensaLlon for Lhe slmple reason LhaL Lhe governmenL and Lhe
Laxpayer are noL credlLors and debLors of each oLher
o A person cannoL refuse Lo pay a Lax on Lhe ground LhaL Lhe governmenL owes hlm an
amounL equal Lo or greaLer Lhan Lhe Lax belng collecLed.
o lurLher, Lhe collecLlon of a Lax cannoL awalL Lhe resulLs of a lawsulL agalnsL Lhe
governmenL.
uebLs are due Lo Lhe CovernmenL ln lLs corporaLe capaclLy whlle Laxes are due Lo CovernmenL ln
lLs soverelgn capaclLy.
lacLs:
123
ln 1992, 8l8 senL a leLLer Lo hllex asklng lL Lo seLLle lLs Lax llablllLles for Lhe 2
nd
Lo 4
Lh
quarLer of
1991 and 1
sL
and 2
nd
quarLer of 1992 (aLLachlng Lhe compuLaLlon)
hllex proLesLed Lhe demand for paymenL of Lhe Lax llablllLles sLaLlng LhaL lL has pendlng clalms
for vA1 lnpuL credlL/refund for Laxes lL pald from 1989-1991 Lherefore, Lhese clalms for Lax
credlL/refund should be applled agalnsL Lhe Lax llablllLles and Lhey wlll [usL pay Lhe balance.
ln reply, 8l8 found no merlL ln hllex's poslLlon slnce Lhese pendlng clalms have noL yeL been
esLabllshed or deLermlned wlLh cerLalnLy hence lL follows LhaL no legal compensaLlon can Lake
place.
Lower courL ruled agalnsL peLlLloner hence flled a moLlon for reconslderaLlon.
AfLer M8 was denled, hllex was able Lo obLaln lLs vA1 lnpuL credlL/refund noL only from 1989-
1991 buL also for 1992 and 1994 hence clalmlng LhaL Lhe granL of vA1 lnpuL credlL/refund off
seLs lLs exclse Lax llablllLles slnce boLh had already become due and demandable as well as fully
llquldaLed (legal compensaLlon can properly done)
lssue: W/n legal compensaLlon can properly done?
8ullng: nC
SC clLed several declslons ln rullng LhaL Lhere can be no off-seLLlng of Laxes agalnsL Lhe clalms LhaL may
have agalnsL Lhe governmenL. A person cannoL refuse Lo pay a Lax on Lhe ground LhaL Lhe governmenL
owes hlm an amounL equal Lo or greaLer Lhan Lhe Lax belng collecLed.
SC falled Lo see Lhe loglc of hllex's clalm for Lhls ls an ouLrlghL dlsregard of Lhe baslc prlnclple ln Lax law
LhaL Laxes are Lhe llfeblood of Lhe governmenL and so should be collecLed wlLhouL unnecessary
hlndrance.
lL should also be noLed LhaL a dlsLlngulshlng feaLure of a Lax ls LhaL lL ls compulsory raLher Lhan a maLLer
of bargaln. A Lax does noL depend upon Lhe consenL of Lhe Laxpayer. lf any Laxpayer can defer Lhe
paymenL of Laxes by ralslng Lhe defense LhaL lL sLlll has a pendlng clalm for refund or credlL, Lhls would
adversely affecL Lhe governmenL revenue sysLem.
Pence, hllex's whlmslcal reason would render lneffecLlve our Lax collecLlon sysLem, lL flnds no
supporL ln law or ln [urlsprudence
WlLh regard Lo hllex's conLenLlon of 8l8's delay Lo refund wlLhln 60 days whlch ls a vlolaLlon of 106
nl8C and had 8l8 been more dlllgenL and [udlclous wlLh Lhelr duLy, lL could have granLed Lhe refund
earller and avold delay ln paymenL.
SC however ruled LhaL Lhe same ls noL a valld reason for Lhe non-paymenL of Lax llablllLles for lL
ls seLLled rule LhaL ln Lhe performance of governmenLal funcLlon, Lhe SLaLe ls noL bound by Lhe
neglecL of lLs agenLs and offlcers.
AlLhough SC held LhaL Lhey cannoL condone 8l8's apparenL negllgenL ln performlng Lhelr duLles,
sLlll Lhe same cannoL [usLlfy hllex's non paymenL of Lax llablllLles (no one should Lake Lhe law ln
hls hands-should have gulded hllex's)

CASL: Iranc|a vs IAC (Iune 1988)-8ISNAk
Iranc|a vs. Intermed|ate Appe||ate Court
(Source: hLLp://ngbLaxrevcases.wordpress.com/).
C8 L-67649, 28 !une 1988
1hlrd ulvlslon, CuLlerrez !r. (!): 4 concur
lacLs: Lngraclo lrancla was Lhe reglsLered owner of a house and loL locaLed ln asay ClLy. A porLlon of
124
such properLy was exproprlaLed by Lhe 8epubllc of Lhe hlllpplnes ln 1977. lL appeared LhaL lrancla dld
noL pay hls real esLaLe Laxes from 1963 Lo 1977. 1hus, hls properLy was sold ln a publlc aucLlon by Lhe
ClLy 1reasurer of asay ClLy.

lssue: WheLher Lhe exproprlaLlon paymenL may compensaLe for Lhe real esLaLe Laxes due.

Peld: 1here can be no off-seLLlng of Laxes agalnsL Lhe clalms LhaL Lhe Laxpayer may have agalnsL Lhe
governmenL. A person cannoL refuse Lo pay a Lax on Lhe ground LhaL Lhe governmenL owes hlm an
amounL equal Lo or greaLer Lhan Lhe Lax belng collecLed. 1he collecLlon of a Lax cannoL awalL Lhe resulLs
of a lawsulL agalnsL Lhe governmenL. lnLernal revenue Laxes cannoL be Lhe sub[ecL of compensaLlon. 1he
CovernmenL and Lhe Laxpayer are noL muLually credlLors and debLors of each oLher under ArLlcle 1278
of Lhe Clvll Code and a clalm of Laxes ls noL such a debL, demand, conLracL or [udgmenL as ls allowed Lo
be seL-off.

CASL: k vs Mambu|ao (Iebruary 1962)-ILkNANDL2
kLU8LIC CI 1nL nILIINLS, plalnLlff-appellee, vs. MAM8ULAC LUM8Lk CCMAN, L1 AL.,
defendanLs-appellanLs.
lacLs: Mambulao owed 8 4,802.37 as foresL charges.
lrom !uly 31, 1948 Lo uecember 29, 1936, defendanL Mambulao Lumber company pald Lo Lhe 8epubllc
of Lhe hlllpplnes 8,200.32 for 'reforesLaLlon charges' and for Lhe perlod commenclng from Aprll 30,
1947 Lo !une 24, 1948, sald defendanL pald 927.08 Lo Lhe 8epubllc of Lhe hlllpplnes for 'reforesLaLlon
charges'.
1he LoLal amounL of Lhe reforesLaLlon charges pald by Mambulao Lumber Company ls 9,127.30, and lL
ls Lhe conLenLlon of Lhe defendanL Mambulao Lumber Company LhaL slnce Lhe 8epubllc of Lhe
hlllpplnes has noL made use of Lhose reforesLaLlon charges collecLed from lL for reforesLlng Lhe
denuded area of Lhe land covered by lLs llcense, Lhe 8epubllc of Lhe hlllpplnes should refund sald
amounL, or, lf lL cannoL be refunded, aL leasL lL should be compensaLed wlLh whaL Mambulao Lumber
Company owed Lhe 8epubllc of Lhe hlllpplnes for reforesLaLlon charges.
lL ls appellanL's conLenLlon LhaL sald sum of 9,127.30, noL havlng been used ln Lhe reforesLaLlon of Lhe
area covered by lLs llcense, Lhe same ls refundable Lo lL or may be applled ln compensaLlon of sald sum
of 4,802.37 due from lL as foresL charges.1owpbt1.et
AppellanL malnLalns LhaL Lhe prlnclple of a compensaLlon ln ArLlcle 1278 of Lhe new Clvll Code
2
ls
appllcable, such LhaL Lhe sum of 9,127.30 pald by lL as reforesLaLlon charges may compensaLe lLs
lndebLedness Lo appellee ln Lhe sum of 4,802.37 as foresL charges.
Issue: WheLher Lhe sum of 9,127.30 pald by Mambulao Lumber company Lo 8 as reforesLaLlon
charges from 1947 Lo 1936 may be seL off or applled Lo Lhe paymenL of Lhe sum of 4,802.37 as foresL
charges due and owlng from Mambulao Lo 8.
ne|d: no
AppellanL and appellee are noL muLually credlLors and debLors of each oLher. ConsequenLly, Lhe law on
compensaLlon ls lnappllcable.
A clalm for Laxes ls noL such a debL, demand, conLracL or [udgmenL as ls allowed Lo be seL-off under Lhe
sLaLuLes of seL-off, whlch are consLrued unlformly, ln Lhe llghL of publlc pollcy, Lo exclude Lhe remedy ln
an acLlon or any lndebLedness of Lhe sLaLe or munlclpallLy Lo one who ls llable Lo Lhe sLaLe or
munlclpallLy for Laxes. nelLher are Lhey a proper sub[ecL of recoupmenL slnce Lhey do noL arlse ouL of
Lhe conLracL or LransacLlon sued on. ...
1he general rule, based on grounds of publlc pollcy ls well-seLLled LhaL no seL-off ls admlsslble agalnsL
demands for Laxes levled for general or local governmenLal purposes. 1he reason on whlch Lhe general
rule ls based, ls LhaL Laxes are noL ln Lhe naLure of conLracLs beLween Lhe parLy and parLy buL grow ouL
123
of a duLy Lo, and are Lhe poslLlve acLs of Lhe governmenL, Lo Lhe maklng and enforclng of whlch, Lhe
personal consenL of lndlvldual Laxpayers ls noL requlred. ... lf Lhe Laxpayer can properly refuse Lo pay hls
Lax when called upon by Lhe CollecLor, because he has a clalm agalnsL Lhe governmenLal body whlch ls
noL lncluded ln Lhe Lax levy, lL ls plaln LhaL some leglLlmaLe and necessary expendlLure musL be curLalled.
lf Lhe Laxpayer's clalm ls dlspuLed, Lhe collecLlon of Lhe Lax musL awalL and ablde Lhe resulL of a lawsulL,
and meanwhlle Lhe flnanclal affalrs of Lhe governmenL wlll be Lhrown lnLo greaL confuslon.
1axpayer Su|t
1. AnLl-CrafL League of Lhe hlllpplnes vs San !uan (AugusL 1996)-lC81LS-LLunC
CASL: Ant|-Graft League of the h|||pp|nes v. k|za| Governor Iose M. 8arretto, Sr.
Doctr|ne: 1axpayers' 1ax ls proper only when:
!" ubllc funds are dlsbursed by a pollLlcal subdlvlslon or lnsLrumenLallLy and ln dolng so,
#" Law ls vlolaLed or some lrregularlLy ls commlLLed and peLlLloner ls dlrecLly affecLed by Lhe
alleged ulLra vlres acL.
lacLs: AnLl-CrafL League of Lhe hlllpplnes, a self-confessed non-governmenLal, non-sLock and non-
proflL organlzaLlon, whlch was consLlLuLed Lo proLecL Lhe lnLeresL of Lhe 8epubllc and lLs
lnsLrumenLallLles and pollLlcal subdlvlslons and lLs consLlLuenLs agalnsL abuses of lLs publlc offlclals and
employees
u 674 esLabllshed Lhe 1echnologlcal College of 8lzal
AuLhorlzed funds for Lhe purchase of land where college wlll be bullL
192k sqm purchased by rovlnce of 8lzal from CrLlgas &Co LLd. AL 110/sqm
ConsLrucLlon never maLerlallzed because resources of rovlnce was declmaLed due Lo creaLlon
of Lhe MeLro Manlla Councll ln 1976
12 years laLer, rovlnclal 8oard auLhorlzed Lhe Covernor Lo sell loL
1987: LoL sold Lo valley vlew 8ealLy for 134M, 700/sqm, gave downpaymenL of 30M
1988: CrLlgas flled acLlon for 8esclsslon of ConLracL, damages and prellmlnary ln[uncLlon
o vlolaLed Lerms of conLracL: for use only of 8lzal 1echnologlcal Colleges and 8lzal
rovlnclal PosplLal
new rovlnclal 8oard: 8esoluLlon Lo 8esclnd conLracL wlLh valley vlew due Lo exceedlngly low
prlce pre[udlclng Lhe provlnce
valley vlew flled ComplalnL for Speclflc erformance agalnsL Lhe rovlnce
o ulsmlssed, compromlse agreemenL, 30M downpaymenL reLurned
Compromlse AgreemenL wlLh CrLlgas approved by Lhe CourL:
o 8econvey loLs Lo CrLlgas aL 2,230/sqm LoLal of 432M
AnLl-CrafL League flled for nulllflcaLlon of Lhe CrLlgas compromlse and CourL's approval of lL
WCn: SulL flled AnLl-CrafL League ls a Laxpayer's sulL?

Peld: no
1here was no dlsbursemenL of publlc fund.
Cnly dlsbursemenL was ln 1973 when Lhe rovlnce of 8lzal purchased Lhe loLs from
CrLlgas and Co.
llrsL requlremenL LhaL would make Lhls peLlLlon a Laxpayer's sulL ls absenL
126
AbsenL Lhe dlsbursemenL of publlc funds, Laxpayer cannoL quesLlon Lhe valldlLy of
conLracL
o eLlLloner ls noL prlvy Lo Lhe conLracL
o no cause of acLlon, no locus sLandl

CASL: Ioya Vs. CGG

Iacts: Cn 9 AugusL 1990, MaLeo A.1. Caparas, Lhen Chalrman of CCC, wroLe Lhen resldenL Corazon C.
Aqulno, requesLlng her for auLhorlLy Lo slgn Lhe proposed ConslgnmenL AgreemenL beLween Lhe
8epubllc of Lhe hlllpplnes Lhrough CCC and ChrlsLle, Manson and Woods lnLernaLlonal, lnc.
concernlng Lhe scheduled sale on 11 !anuary 1991 of elghLy-Lwo Cld MasLers alnLlngs and anLlque
sllverware selzed from Malacanang and Lhe MeLropollLan Museum of Manlla alleged Lo be parL of Lhe lll-
goLLen wealLh of Lhe laLe resldenL Marcos, hls relaLlves and cronles. Cn 14 AugusL 1990, Lhen resldenL
Aqulno, Lhrough former LxecuLlve SecreLary CaLallno Macaralg, !r., auLhorlzed Chalrman Caparas Lo slgn
Lhe ConslgnmenL AgreemenL allowlng ChrlsLle's of new ?ork Lo aucLlon off Lhe sub[ecL arL pleces for and
ln behalf of Lhe 8epubllc of Lhe hlllpplnes. Cn 13 AugusL 1990, CCC, Lhrough Chalrman Caparas,
represenLlng Lhe CovernmenL of Lhe 8epubllc of Lhe hlllpplnes, slgned Lhe ConslgnmenL AgreemenL
wlLh ChrlsLle's of new ?ork. Accordlng Lo Lhe agreemenL, CCC shall conslgn Lo CP8lS1lL'S for sale aL
publlc aucLlon Lhe elghLy-Lwo Cld MasLers alnLlngs Lhen found aL Lhe MeLropollLan Museum of Manlla
as well as Lhe sllverware conLalned ln sevenLy-one carLons ln Lhe cusLody of Lhe CenLral 8ank of Lhe
hlllpplnes, and such oLher properLy as may subsequenLly be ldenLlfled by CCC and accepLed by
CP8lS1lL'S Lo be sub[ecL Lo Lhe provlslons of Lhe agreemenL.

Cn 26 CcLober 1990, Lhe Commlsslon on AudlL Lhrough Lhen Chalrman Lufemlo C. uomlngo submlLLed
Lo resldenL Aqulno Lhe audlL flndlngs and observaLlons of CCA on Lhe ConslgnmenL AgreemenL of 13
AugusL 1990 Lo Lhe effecL LhaL: Lhe auLhorlLy of former CCC Chalrman Caparas Lo enLer lnLo Lhe
ConslgnmenL AgreemenL was of doubLful legallLy, Lhe conLracL was hlghly dlsadvanLageous Lo Lhe
governmenL, CCC had a poor Lrack record ln asseL dlsposal by aucLlon ln Lhe u.S., and, Lhe asseLs
sub[ecL of aucLlon were hlsLorlcal rellcs and had culLural slgnlflcance, hence, Lhelr dlsposal was
prohlblLed by law.

AfLer Lhe oral argumenLs of Lhe parLles on 9 !anuary 1991, we lssued lmmedlaLely our resoluLlon
denylng Lhe appllcaLlon for prellmlnary ln[uncLlon Lo resLraln Lhe scheduled sale of Lhe arLworks on Lhe
ground LhaL peLlLloners had noL presenLed a clear legal rlghL Lo a resLralnlng order and LhaL proper
parLles had noL been lmpleaded.

Cn 11 !anuary 1991, Lhe sale aL publlc aucLlon proceeded as scheduled and Lhe proceeds of
$13,302,604.86 were Lurned over Lo Lhe 8ureau of 1reasury.

Issue:

WheLher or noL peLlLloners have legal sLandlng.

WheLher or noL Lhe Cld MasLers alnLlngs and anLlque sllverware are embraced ln Lhe phrase "culLural
Lreasure of Lhe naLlon".

127
WheLher or noL Lhe palnLlngs and sllverware are properLles of publlc domlnlon on whlch can be
dlsposed of Lhrough Lhe [olnL concurrence of Lhe resldenL and Congress.

WheLher or noL CCC has complled wlLh Lhe due process clause and oLher sLaLuLory requlremenLs for
Lhe exporLaLlon and sale of Lhe sub[ecL lLems.

WheLher or noL Lhe peLlLlon has become mooL and academlc, and lf so, wheLher Lhe above lssue
warranL resoluLlon from Lhls CourL.

ne|d: 1hls ls premlsed on Sec. 2, 8ule 3, of Lhe 8ules of CourL whlch provldes LhaL every acLlon musL be
prosecuLed and defended ln Lhe name of Lhe real parLy-ln-lnLeresL, and LhaL all persons havlng lnLeresL
ln Lhe sub[ecL of Lhe acLlon and ln obLalnlng Lhe rellef demanded shall be [olned as plalnLlffs. 1he CourL
wlll exerclse lLs power of [udlclal revlew only lf Lhe case ls broughL before lL by a parLy who has Lhe legal
sLandlng Lo ralse Lhe consLlLuLlonal or legal quesLlon. "Legal sLandlng" means a personal and subsLanLlal
lnLeresL ln Lhe case such LhaL Lhe parLy has susLalned or wlll susLaln dlrecL ln[ury as a resulL of Lhe
governmenLal acL LhaL ls belng challenged. 1he Lerm "lnLeresL" ls maLerlal lnLeresL, an lnLeresL ln lssue
and Lo be affecLed by Lhe decree, as dlsLlngulshed from mere lnLeresL ln Lhe quesLlon lnvolved, or a
mere lncldenLal lnLeresL. Moreover, Lhe lnLeresL of Lhe parLy plalnLlff musL be personal and noL one
based on a deslre Lo vlndlcaLe Lhe consLlLuLlonal rlghL of some Lhlrd and relaLed parLy.

1here are cerLaln lnsLances however when Lhls CourL has allowed excepLlons Lo Lhe rule on legal
sLandlng, as when a clLlzen brlngs a case for mandamus Lo procure Lhe enforcemenL of a publlc duLy for
Lhe fulflllmenL of a publlc rlghL recognlzed by Lhe ConsLlLuLlon, and when a Laxpayer quesLlons Lhe
valldlLy of a governmenLal acL auLhorlzlng Lhe dlsbursemenL of publlc funds.

eLlLloners' argumenLs are devold of merlL. 1hey lack basls ln facL and ln law. 1he ownershlp of Lhese
palnLlngs legally belongs Lo Lhe foundaLlon or corporaLlon or Lhe members Lhereof, alLhough Lhe publlc
has been glven Lhe opporLunlLy Lo vlew and appreclaLe Lhese palnLlngs when Lhey were placed on
exhlblL.

1he conflscaLlon of Lhese properLles by Lhe Aqulno admlnlsLraLlon however should noL be undersLood Lo
mean LhaL Lhe ownershlp of Lhese palnLlngs has auLomaLlcally passed on Lhe governmenL wlLhouL
complylng wlLh consLlLuLlonal and sLaLuLory requlremenLs of due process and [usL compensaLlon. lf
Lhese properLles were already acqulred by Lhe governmenL, any consLlLuLlonal or sLaLuLory defecL ln
Lhelr acqulslLlon and Lhelr subsequenL dlsposlLlon musL be ralsed only by Lhe proper parLles Lhe Lrue
owners Lhereof whose auLhorlLy Lo recover emanaLes from Lhelr proprleLary rlghLs whlch are proLecLed
by sLaLuLes and Lhe ConsLlLuLlon. Pavlng falled Lo show LhaL Lhey are Lhe legal owners of Lhe arLworks or
LhaL Lhe valued pleces have become publlcly owned, peLlLloners do noL possess any clear legal rlghL
whaLsoever Lo quesLlon Lhelr alleged unauLhorlzed dlsposlLlon.

nelLher can Lhls peLlLlon be allowed as a Laxpayer's sulL. Cbvlously, peLlLloners are noL challenglng any
expendlLure lnvolvlng publlc funds buL Lhe dlsposlLlon of whaL Lhey allege Lo be publlc properLles. lL ls
worLhy Lo noLe LhaL peLlLloners admlL LhaL Lhe palnLlngs and anLlque sllverware were acqulred from
prlvaLe sources and noL wlLh publlc money.

AnenL Lhe second requlslLe of acLual conLroversy, peLlLloners argue LhaL Lhls case should be resolved by
Lhls CourL as an excepLlon Lo Lhe rule on mooL and academlc cases, LhaL alLhough Lhe sale of Lhe
palnLlngs and sllver has long been consummaLed and Lhe posslblllLy of reLrlevlng Lhe Lreasure Lrove ls nll,
128
yeL Lhe novelLy and lmporLance of Lhe lssue ralsed by Lhe peLlLlon deserve Lhls CourL's aLLenLlon. 1hey
submlL LhaL Lhe resoluLlon by Lhe CourL of Lhe lssue ln Lhls case wlll esLabllsh fuLure guldlng prlnclples
and docLrlnes on Lhe preservaLlon of Lhe naLlon's prlceless arLlsLlc and culLural possesslons for Lhe
beneflL of Lhe publlc as a whole.

lor a courL Lo exerclse lLs power of ad[udlcaLlon, Lhere musL be an acLual case of conLroversy - one
whlch lnvolves a confllcL of legal rlghLs, an asserLlon of opposlLe legal clalms suscepLlble of [udlclal
resoluLlon, Lhe case musL noL be mooL or academlc or based on exLra-legal or oLher slmllar
conslderaLlons noL cognlzable by a courL of [usLlce. A case becomes mooL and academlc when lLs
purpose has become sLale, such as Lhe case before us. Slnce Lhe purpose of Lhls peLlLlon for prohlblLlon
ls Lo en[oln respondenL publlc offlclals from holdlng Lhe aucLlon sale of Lhe arLworks on a parLlcular daLe
- 11 !anuary 1991 - whlch ls long pasL, Lhe lssue ralsed ln Lhe peLlLlon have become mooL and
academlc.

1he culLural properLles of Lhe naLlon whlch shall be under Lhe proLecLlon of Lhe sLaLe are classlfled as Lhe
"lmporLanL culLural properLles" and Lhe "naLlonal culLural Lreasures." Cn Lhe oLher hand, a "naLlonal
culLural Lreasures" ls a unlque ob[ecL found locally, possesslng ouLsLandlng hlsLorlcal, culLural, arLlsLlc
and/or sclenLlflc value whlch ls hlghly slgnlflcanL and lmporLanL Lo Lhls counLry and naLlon. 1hls CourL
Lakes noLe of Lhe cerLlflcaLlon lssued by Lhe ulrecLor of Lhe Museum LhaL Lhe lLallan palnLlngs and
sllverware sub[ecL of Lhls peLlLlon do noL consLlLuLe proLecLed culLural properLles and are noL among
Lhose llsLed ln Lhe CulLural roperLles 8eglsLer of Lhe naLlonal Museum.

WPL8LlC8L, for lack of merlL, Lhe peLlLlon for prohlblLlon and mandamus ls ulSMlSSLu.


2. Lozada vs Comelec (!anuary 1983)-MACSuM8CL
CASL: ICSL MAkI LULALIC C. LC2ADA and kCMLC 8. IGC1, petltlooets vs. CCMLLLC, tespooJeot

DCC1kINLS:
A Laxpayer has no personallLy Lo sue Lhe CCMLLLC Lo compel Lhe laLer Lo hold a speclal elecLlon
of Lhe lnLerlm 8aLasang ambansa.
lL ls only when an acL complalned of, whlch may lnclude a leglslaLlve enacLmenL or sLaLuLe,
lnvolves Lhe lllegal expendlLure of publlc money LhaL Lhe so-called Laxpayer sulL may be allowed.

IAC1S:
1hls ls a peLlLlon for mandamus flled by Lozada and lgoL as represenLaLlve sulL for and ln behalf
of Lhose who wlsh Lo parLlclpaLe ln Lhe elecLlon lrrespecLlve of parLy afflllaLlon, Lo compel Lhe
CCMLLLC Lo call a speclal elecLlon Lo flll up 12 exlsLlng vacancles ln Lhe lnLerlm 8aLasan
ambansa (8). 1he peLlLlon ls based on Sec. 3 (2), ArL. vlll of Lhe 1973 ConsLlLuLlon
(2) ln case a vacancy arlses ln Lhe 8aLasan ambansa 18 monLhs or more before a
regular elecLlon, Lhe CCMLLLC shall call a speclal elecLlon Lo be held wlLhln 60 days afLer
Lhe vacancy occurs Lo elecL Lhe Member Lo serve Lhe unexplred Lerm.
Lozada clalms LhaL he ls a Laxpayer & a bona flde elecLor of Cebu ClLy and a LranslenL voLer of
CC, who deslres Lo run for Lhe poslLlon ln Lhe 8
lgoL alleges LhaL, as a Laxpayer, he has sLandlng Lo peLlLlon by mandamus Lhe calllng of a speclal
elecLlon as mandaLed by Lhe 1973 ConsLlLuLlon.
129
eLlLloners allege LhaL Lhey are xxx deeply concerned abouL Lhelr duLlLes as clLlzens & deslrous
Lo uphold Lhe consLlLuLlonal mandaLe & rule of law xxx". 1hey have flled Lhe lnsLanL peLlLlon on
Lhelr own & ln behalf of all oLher llllplnos slnce Lhe sub[ecL maLLers are of profound & general
lnLeresL"

ISSUL: W/n peLlLloners have sLandlng Lo flle Lhe lnsLanL peLlLlon?

nLLD: no.
As Laxpayers, peLlLloners may noL flle Lhe lnsLanL peLlLlon, for nowhere Lhereln ls lL alleged LhaL
Lax money ls belng lllegally spenL. 1he acL complalned of ls Lhe lnacLlon of Lhe CCMLLLC Lo call a
speclal elecLlon, as ls allegedly lLs mlnlsLerlal duLy under Lhe consLlLuLlonal provlslon above
clLed, and Lherefore, lnvolves no expendlLure of publlc funds. lL ls only when an acL complalned
of, whlch may lnclude a leglslaLlve enacLmenL or sLaLuLe, lnvolves Lhe lllegal expendlLure of
publlc money LhaL Lhe so-called Laxpayer sulL may be allowed. WhaL Lhe case aL bar seeks ls one
LhaL enLalls expendlLure of publlc funds whlch may be lllegal because lL would be spenL for a
purpose LhaL of calllng a speclal elecLlon whlch, as wlll be shown, has no auLhorlLy elLher ln Lhe
ConsLlLuLlon or a sLaLuLe.
As voLers, nelLher have peLlLloners Lhe requlslLe lnLeresL or personallLy Lo quallfy Lhem Lo
malnLaln and prosecuLe Lhe presenL peLlLlon. 1he unchallenged rule ls LhaL Lhe person who
lmpugns Lhe valldlLy of a sLaLuLe musL have a personal and subsLanLlal lnLeresL ln Lhe case such
LhaL he has susLalned, or wlll susLaln, dlrecL ln[ury as a resulL of lLs enforcemenL. ln Lhe case
before us, Lhe alleged lnacLlon of Lhe CCMLLLC Lo call a speclal elecLlon Lo flll-up Lhe exlsLlng
vacancles ln Lhe 8aLasan ambansa, sLandlng alone, would adversely affecL only Lhe generallzed
lnLeresL of all clLlzens. eLlLloners' sLandlng Lo sue may noL be predlcaLed upon an lnLeresL of Lhe
klnd alleged here, whlch ls held ln common by all members of Lhe publlc because of Lhe
necessarlly absLracL naLure of Lhe ln[ury supposedly shared by all clLlzens. ConcreLe ln[ury,
wheLher acLual or LhreaLened, ls LhaL lndlspensable elemenL of a dlspuLe whlch serves ln parL Lo
casL lL ln a form LradlLlonally capable of [udlclal resoluLlon. When Lhe asserLed harm ls a
"generallzed grlevance" shared ln subsLanLlally equal measure by all or a large class of clLlzens,
LhaL harm alone normally does noL warranL exerclse of [urlsdlcLlon. As adverLed Lo earller,
peLlLloners have noL demonsLraLed any permlsslble personal sLake, for peLlLloner Lozada's
lnLeresL as an alleged candldaLe and as a voLer ls noL sufflclenL Lo confer sLandlng. eLlLloner
Lozada does noL only fall Lo lnform Lhe CourL of Lhe reglon he wanLs Lo be a candldaLe buL
makes lndlscrlmlnaLe demand LhaL speclal elecLlon be called LhroughouL Lhe counLry. Lven hls
plea as a voLer ls predlcaLed on an lnLeresL held ln common by all members of Lhe publlc and
does noL demonsLraLe any ln[ury speclally dlrecLed Lo hlm ln parLlcular.

CASL: Abaya vs Lbdane (2007)-8CM8ALLS
Source: hLLp://anLslegal.blogspoL.com/2012/08/abaya-vs-ebdane-[r.hLml
uocLrlne: "A Laxpayer need noL be a parLy Lo Lhe conLracL Lo challenge lLs valldlLy."

lAC1S: 1he peLlLloners, larldel M. Abaya who clalms LhaL he flled Lhe lnsLanL peLlLlon as a Laxpayer,
former lawmaker, and a llllplno clLlzen, and larldel C. Carcla llkewlse clalmlng LhaL he flled Lhe sulL as a
Laxpayer, former mlllLary offlcer, and a llllplno clLlzen, malnly seek Lo nulllfy a uWP resoluLlon whlch
recommended Lhe award Lo prlvaLe respondenL Chlna 8oad & 8rldge CorporaLlon of Lhe conLracL for Lhe
lmplemenLaLlon of Lhe clvll works known as ConLracL ackage no. l (C l). 1hey also seek Lo annul Lhe
conLracL of agreemenL subsequenLly enLered lnLo by and beLween Lhe uWP and prlvaLe respondenL
Chlna 8oad & 8rldge CorporaLlon pursuanL Lo Lhe sald resoluLlon.
130

lSSuL: Pas peLlLloners Lhe legal sLandlng Lo flle Lhe lnsLanL case agalnsL Lhe governmenL?

PLLu: eLlLloners, as Laxpayers, possess locus sLandl Lo flle Lhe presenL sulL. 8rlefly sLaLed, locus sLandl ls
a rlghL of appearance ln a courL of [usLlce on a glven quesLlon. More parLlcularly, lL ls a parLy's personal
and subsLanLlal lnLeresL ln a case such LhaL he has susLalned or wlll susLaln dlrecL ln[ury as a resulL of Lhe
governmenLal acL belng challenged. Locus sLandl, however, ls merely a maLLer of procedure and lL has
been recognlzed LhaL ln some cases, sulLs are noL broughL by parLles who have been personally ln[ured
by Lhe operaLlon of a law or any oLher governmenL acL buL by concerned clLlzens, Laxpayers or voLers
who acLually sue ln Lhe publlc lnLeresL. ConsequenLly, Lhe CourL, ln a caLena of cases, has lnvarlably
adopLed a llberal sLance on locus sLandl, lncludlng Lhose cases lnvolvlng Laxpayers.
1he prevalllng docLrlne ln Laxpayer's sulLs ls Lo allow Laxpayers Lo quesLlon conLracLs enLered lnLo by Lhe
naLlonal governmenL or governmenL- owned or conLrolled corporaLlons allegedly ln conLravenLlon of
law. A Laxpayer ls allowed Lo sue where Lhere ls a clalm LhaL publlc funds are lllegally dlsbursed, or LhaL
publlc money ls belng deflecLed Lo any lmproper purpose, or LhaL Lhere ls a wasLage of publlc funds
Lhrough Lhe enforcemenL of an lnvalld or unconsLlLuLlonal law. SlgnlflcanLly, a Laxpayer need noL be a
parLy Lo Lhe conLracL Lo challenge lLs valldlLy.
Clorla klnLanar Case:
Alleged LhaL noL wlllful as Lhey delegaLed Lhe flllng of Lhelr l18 Lo Lhelr accounLanL
-presumpLlon- rules on evldence: person Lakes ordlnary care ln conducL of hls affalrs
-she knew whaL her Lax obllgaLlons are under Lhe law.
-dellberaLe lgnorance/consclous avoldance
-non=compllance wlLh 8l8 noLlces = shows lnLenL noL Lo flle l18

CASL: LCLL v. IUD ANN SAN1CS
uCC18lnL: lallure Lo supply correcL and accuraLe lnformaLlon ln Lhe lncome Lax reLurn musL be wlllful
Lo warranL convlcLlon.
Accused was charged for vlolaLlon of SecLlon 233 of Lhe naLlonal lnLernal 8evenue Code - for flllng a
false and fraudulenL lncome 1ax 8eLurn ("l18") for Laxable year 2002. 1he offense belng aLLrlbuLed Lo
Lhe accused ls wlllful fallure Lo supply correcL and accuraLe lnformaLlon, whlch resulLed Lo lncome Lax
deflclency.
Accordlng Lo Lhe CourL, Lhe essenLlal elemenLs of Lhe sald offense are as follows:
1) 1haL a person ls requlred Lo supply correcL and accuraLe lnformaLlon, 2) 1haL Lhere ls fallure Lo supply
correcL and accuraLe lnformaLlon aL Lhe Llme or Llmes requlred by law or rules and regulaLlons, and 3)
1haL such fallure Lo supply correcL and accuraLe lnformaLlon ls done wlllfully.
1he elemenL of wlllful fallure Lo supply correcL and accuraLe lnformaLlon musL be fully esLabllshed as a
poslLlve acL or sLale of mlnd. lL cannoL be presumed nor aLLrlbuLed Lo mere lnadverLenL or negllgenL
acLs. 1he prosecuLlon was able Lo prove LhaL Lhe accused falled Lo supply correcL and accuraLe
lnformaLlon ln her l18 for Lhe year 2002. Powever, lL ls well- seLLled LhaL mere undersLaLemenL of a Lax
ls noL lLself proof of fraud for Lhe purpose of Lax evaslon. 8ased on Lhe records of Lhe case, Lhe accused
denled Lhe slgnaLure appearlng on Lop of Lhe name "!udy Anne SanLos" ln Lhe l18 for Laxable year 2002
presenLed by Lhe prosecuLlon, and LhaL Lhe CerLlfled ubllc AccounLanL, who's parLlclpaLlon ls llmlLed Lo
Lhe preparaLlon of Lhe llnanclal SLaLemenLs aLLached Lo Lhe reLurn, llkewlse, denled slgnlng Lhe reLurn
on behalf of Lhe accused. lurLher, Lhe worklng papers, l.e., Lhe 8alance SheeL and lncome SLaLemenL, as
well as Lhe value-added Lax reLurns, lncome 1ax 8eLurn for year 2002, quarLerly Lax reLurn, schedule of
lnpuL Laxes and credlLable Lax cerLlflcaLes, were all provlded by Lhe Manager of Lhe accused. 1he CourL,
Lherefore, flnds Lhe records berefL of any evldence Lo esLabllsh Lhe key elemenL of wlllfulness on Lhe
parL of Lhe accused Lo supply Lhe correcL and accuraLe lnformaLlon on her sub[ecL reLurn. 1he burden of
131
proof ls on Lhe prosecuLlon Lo prove beyond reasonable doubL LhaL accused wlllfully falled Lo supply
correcL and accuraLe lnformaLlon. SLaLed dlfferenLly, Lhe prosecuLlon musL prove LhaL Lhe accused, a
llllplno clLlzen resldlng ln Lhe hlllpplnes, ls requlred noL only Lo flle an lncome Lax reLurn on lncome
from all sources, on or before Lhe flfLeenLh (13Lh) day of Aprll of each year, coverlng Lhe lncome for Lhe
precedlng Laxable year, buL also Lo supply correcL and accuraLe lnformaLlon Lhereof, and LhaL any fallure
Lhereof ls done wlllfully. 1he CourL, however, only flnds Lhe accused negllgenL, and such ls noL enough Lo
convlcL her ln Lhe case aL bench. negllgence, wheLher sllghL or gross, ls noL equlvalenL Lo Lhe fraud wlLh
lnLenL Lo evade Lhe Lax conLemplaLed by Lhe law. lraud musL amounL Lo lnLenLlonal wrongdolng wlLh
Lhe sole ob[ecL of avoldlng Lhe Lax. ln all crlmlnal cases, mere speculaLlons cannoL subsLlLuLe for proof ln
esLabllshlng Lhe gullL of Lhe accused. ln sum, Lhe CourL flnds Lhe fallure of Lhe prosecuLlon Lo esLabllsh
Lhe gullL of Lhe accused beyond Lhe requlred reasonable doubL. (eople of Lhe hlllpplnes vs. !udy Anne
SanLos y Lumagul, C1A Crlm. Case nC. C-012, !anuary 16, 2012)