90808229 taxation-case-digests

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COMMISSIONER

OF

INTERNAL

REVENUE

Vs.

CEBU

PORTLAND

CEMENT

COMPANY and COURT OF TAX

APPEALS

G.R.

No.

L-29059

December 15, 1987

FACTS: By virtue of a decision of the

Court of Tax Appeals rendered on
June 21, 1961, as modified on appeal
by the Supreme Court on February
27,

1965,

the

Commissioner

of

Internal Revenue was ordered to

refund to the Cebu Portland Cement

Company the amount of P359,408.98,

representing

overpayments

of

ad

valorem taxes on cement produced

and sold by it after October 1957. On
March 28, 1968, following denial of
motions for reconsideration filed by
both the petitioner and the private
respondent, the latter moved for a writ
of execution to enforce the said
judgment. The motion was opposed
by the petitioner on the ground that
the

private

respondent

had

an

outstanding sales tax liability to which

the judgment debt had already been
credited. In fact, it was stressed, there
was still a balance owing on the sales
taxes in the amount of P 4,789,279.85
plus 28% surcharge. On April 22,
1968, the Court of Tax Appeals
granted the motion, holding that the
alleged sales tax liability of the private
respondent was still being questioned
and therefore could not be set-of
against the refund. ISSUE: Whether or
not

the

judgment

debt

can

be

enforced against private respondents

sales tax liability, the latter still being
questioned. RULING: The argument
that the assessment cannot as yet be

enforced because it is still being

contested loses sight of the urgency of
the need to collect taxes as "the
lifeblood of the government." If the
payment of taxes could be postponed
by simply questioning their validity, the
machinery of the state would grind to
a halt and all government functions
would be paralyzed. The Tax Code
provides: Sec. 291. Injunction not
available to restrain collection of tax. No court shall have authority to grant
an injunction to restrain the collection
of any national internal revenue tax,
fee or charge imposed by this Code. It
goes without saying that this injunction
is

available

assessment

not
is

only

when

already

the
being

questioned in a court of justice but

more so if, as in the instant case, the
challenge to the assessment is stilland only-on the administrative level.
There is all the more reason to apply
the rule here because it appears that
even after crediting of the refund
against the tax deficiency, a balance
of more than P 4 million is still due
from

the

private

COMMISSIONER

OF

respondent.
INTERNAL

REVENUE vs. ALGUE and THE

COURT OF TAX APPEALS G.R. No.
L-28896 February 17, 1988 FACTS:
The

Philippine

Sugar

Estate

Development Company had earlier

appointed

Algue

as

its

agent,

authorizing it to sell its land, factories

and

oil

manufacturing

process.

Pursuant to such authority, Alberto

Guevara, Jr., Eduardo Guevara, Isabel
Guevara, Edith, O'Farell, and Pablo
Sanchez, worked for the formation of
the

Vegetable

Oil

Investment

Corporation, inducing other persons to

invest

in

it.

incorporation

Ultimately,
largely

after

through

its
the

promotion of the said persons, this

new

corporation

purchased

the

PSEDC properties. For this sale,

Algue received as agent a 1
2. 2. commission of P126,000.00, and it
was from this commission that the
P75,000.00 promotional fees were
paid to the aforenamed individuals.
The

petitioner

contends

that

the

claimed deduction of P75,000.00 was

properly disallowed because it was
not

an

ordinary

reasonable

or

necessary business expense. The

Court of Tax Appeals had seen it

diferently. Agreeing with Algue, it held
that the said amount had been
legitimately

paid

respondent

for

by

the

actual

private
services

rendered. The payment was in the

form of promotional fees. ISSUE:
Whether or not the Collector of
Internal Revenue correctly disallowed
the P75,000.00 deduction claimed by
private respondent Algue as legitimate
business expenses in its income tax
returns. RULING: The Supreme Court
agrees with the respondent court that
the amount of the promotional fees
was not excessive. The amount of
P75,000.00 was 60% of the total
commission. This was a reasonable
proportion, considering that it was the
payees who did practically everything,
from the formation of the Vegetable
Oil Investment Corporation to the
actual purchase by it of the Sugar
Estate properties. It is said that taxes
are what we pay for civilization
society.

Without

taxes,

the

government would be paralyzed for

lack of the motive power to activate
and operate it. Hence, despite the

natural reluctance to surrender part of

one's hard earned income to the
taxing authorities, every person who is
able to must contribute his share in
the running of the government. C.N.
HODGES vs. MUNICIPAL BOARD OF
THE CITY OF ILOILO G.R. No. L18129 January 31, 1963 FACTS: On
June 13, 1960, the Municipal Board of
the City of Iloilo enacted Ordinance
No. 33, series of 1960, pursuant to the
provisions of Republic Act No. 2264,
known as the Local Autonomy Act,
requiring any person, firm, association
or corporation to pay a sales tax of 1/2
of 1% of the selling price of any motor
vehicle and prohibiting the registration
of the sale of the motor vehicle in the
Motor Vehicles Office of the City of
Iloilo unless the tax has been paid. C.
N. Hodges, who was engaged in the
business

of

buying

and

selling

second-hand motor vehicles in the

City of Iloilo, is one of those afected
by the enactment of the ordinance,
and believing that the same is invalid
for having been passed in excess of
the authority conferred by law upon
the municipal board, he filed on June

27, 1960 a petition for declaratory

judgment with the Court of First
Instance of Iloilo praying that said
ordinance be declared void ab initio.
The court a quo rendered decision on
December 8, 1960 holding that that
part of the ordinance which requires
the owner of a used motor vehicle to
pay a sales tax of 1/2 of 1% of the
selling price is valid, but the portion
thereof which requires the payment of
the tax as a condition precedent for
the registration of the sale in the Motor
Vehicles Office is invalid for being
repugnant to Section 2(h) of Republic
Act 2264. Both parties have appealed.
ISSUE: Whether or not the ordinance
in question is valid even with regard to
the

portion

which

requires

the

payment of the tax as a condition

precedent for the registration of the
sale in the Motor Vehicles Office of
said city. RULING: The City of Iloilo
has

the

authority

and

power

to

approve the ordinance in question for

it merely imposes a percentage tax on
the sale of a second-hand motor
vehicle that may be carried out within
the

city

by

any

person,

firm,

association or corporation owning or

dealing with it who may come within
the jurisdiction. The requirement of the
ordinance cannot be considered a tax
in the light viewed by the court a quo
for the same is merely a coercive
measure to make the enforcement of
the contemplated sales tax more
efective. Well-settled is the principle
that taxes are imposed for the support
of the government in return for the
general

advantage

which the

and

government

protection
afords

to

taxpayers and their property. Taxes

are the lifeblood of the government.
ASSOCIATION

OF

CUSTOM

BROKERS,

vs.

MUNICIPAL

INC.

BOARD G.R. No. L-4376 May 22,

1953 FACTS: The Association of
Customs

Brokers,

Inc.,

which

is

composed of all brokers and public

service operators of motor vehicles in
the City of Manila challenge the
validity Ordinance No. 3379 on the
ground that (1) while it levies a socalled property tax it is in reality a
license tax which is beyond the power
of the Municipal Board of the City of
Manila; (2) said ordinance ofends

against the rule of uniformity of

taxation; and (3) it constitutes double
taxation. The respondents contend on
their

part

that

the

challenged

ordinance imposes a property tax

which is within the power of the City of
Manila to impose under its Revised
Charter [Section 18 (p) of Republic
Act No. 409], and that the tax in
question does not violate the rule of
uniformity of taxation, nor does it
constitute double taxation. ISSUE: 2
3. 3. Whether or not the ordinance is null
and void RULING: The ordinance
infringes the rule of the uniformity of
taxation ordained by our Constitution.
Note that the ordinance exacts the tax
upon all motor vehicles operating
within the City of Manila. It does not
distinguish between a motor vehicle
for hire and one which is purely for
private use. Neither does it distinguish
between a motor vehicle registered in
the City of Manila and one registered
in another place but occasionally
comes to Manila and uses its streets
and public highways. This is an
inequality

which

we

ordinance,

and

which

find

in

renders

the
it

ofensive to the Constitution. ESSO

STANDARD

EASTERN,

COMMISSIONER

OF

INC

v.

INTERNAL

REVENUE G.R. Nos. L-28508-9, July

7, 1989 FACTS: In CTA Case No.
1251, Esso Standard Eastern Inc.
(Esso) deducted from its gross income
for 1959, as part of its ordinary and
necessary business expenses, the
amount it had spent for drilling and
exploration

of

concessions.

its

This

petroleum
claim

was

disallowed by the Commissioner of

Internal Revenue (CIR) on the ground
that

the

expenses

should

be

capitalized and might be written of as

a loss only when a "dry hole" should
result. Esso then filed an amended
return where it asked for the refund of
P323,279.00

by

reason

of

its

abandonment as dry holes of several

of its oil wells. Also claimed as
ordinary and necessary expenses in
the same return was the amount of
P340,822.04,

representing

margin

fees it had paid to the Central Bank on

its profit remittances to its New York
head office. On August 5, 1964, the
CIR

granted

tax

credit

of

P221,033.00

only,

disallowing

the

claimed deduction for the margin fees

paid on the ground that the margin
fees paid to the Central Bank could
not be considered taxes or allowed as
deductible business expenses. Esso
appealed to the Court of Tax Appeals
(CTA) for the refund of the margin fees
it had earlier paid contending that the
margin fees were deductible from
gross income either as a tax or as an
ordinary

and

necessary

business

expense. However, Essos appeal was

denied. ISSUE: (1) Whether or not the
margin fees are taxes. (2) Whether or
not the margin fees are necessary and
ordinary business expenses. RULING:
(1) No. A tax is levied to provide
revenue for government operations,
while the proceeds of the margin fee
are applied to strengthen our country's
international reserves. The margin fee
was imposed by the State in the
exercise of its police power and not
the

power

of

taxation.

(2)

No.

Ordinarily,

an

expense

will

be

considered

'necessary'

where

the

expenditure is appropriate and helpful

in the development of the taxpayer's

business. It is 'ordinary' when it

connotes a payment which is normal
in relation to the business of the
taxpayer

and

the

surrounding

circumstances. Since the margin fees

in question were incurred for the
remittance of funds to Esso's Head
Office in New York, which is a
separate and distinct income taxpayer
from the branch in the Philippines, for
its disposal abroad, it can never be
said therefore that the margin fees
were appropriate and helpful in the
development of Esso's business in the
Philippines

exclusively

or

were

incurred for purposes proper to the

conduct of the afairs of Esso's branch
in the Philippines exclusively or for the
purpose of realizing a profit or of
minimizing a loss in the Philippines
exclusively.

PROGRESSIVE

DEVELOPMENT CORPORATION v.
QUEZON CITY G.R. No. L-36081,
April 24, 1989 FACTS: On December
24, 1969, the City Council of Quezon
City adopted Ordinance No. 7997,
otherwise known as the Market Code
of Quezon City. Section 3 of said
ordinance

provides

that

privately

owned and operated public markets

shall submit monthly to the Treasurer's
Office, a certified list of stallholders
showing the amount of stall fees or
rentals

paid

daily

by

each

stallholder, ... and shall pay 10% of

the gross receipts from stall rentals to
the City, ... , as supervision fee. On
July

15,

1972,

Progressive

Development

Corporation

(Progressive), owner and operator of

a

public

market

known

as

the

"Farmers Market & Shopping Center"

filed a Petition for Prohibition with
Preliminary Injunction against Quezon
City

on

the

ground

that

the

supervision fee or license tax imposed

by the above-mentioned ordinance is
in reality a tax on income which
Quezon City may not impose, the
same being expressly prohibited by
Republic Act No. 2264, as amended,
otherwise

known

as

the

Local

Autonomy Act. In its Answer, Quezon

City,

through

the

City

Fiscal,

contended that it had authority to

enact

the

questioned

ordinances,

maintaining that the tax on gross

receipts imposed therein is not a tax

on income. The lower court ruled that

the questioned imposition is not a tax
on income, but rather a privilege tax
or

license

fee

which

local

governments, like Quezon City, are

empowered to impose and collect.
ISSUE: 3
4. 4. Whether

the

tax

imposed

by

Quezon City on gross receipts of stall

rentals is properly characterized as
partaking of the nature of an income
tax. RULING: No. The tax imposed in
the

controverted

ordinance

constitutes, not a tax on income, not a

city income tax (as distinguished from
the national income tax imposed by
the National Internal Revenue Code)
within the meaning of Section 2 (g) of
the Local Autonomy Act, but rather a
license tax or fee for the regulation of
the business in which Progressive is
engaged. While it is true that the
amount imposed by the questioned
ordinances may be considered in
determining whether the exaction is
really one for revenue or prohibition,
instead of one of regulation under the
police power, it nevertheless will be
presumed

to

be

reasonable.

PHILIPPINE AIRLINES, INC. v. EDU

G.R. No. L- 41383, August 15, 1988
FACTS: The Philippine Airlines (PAL)
is a corporation engaged in the air
transportation

business

under

legislative franchise, Act No. 42739.

Under its franchise, PAL is exempt
from the payment of taxes. Sometime
in 1971, however, Land Transportation
Commissioner

Romeo

F.

Elevate

(Elevate) issued a regulation pursuant

to Section 8, Republic Act 4136,
otherwise known as the Land and
Transportation
requiring

all

and
tax

Traffic
exempt

Code,
entities,

among them PAL to pay motor vehicle

registration
protestations,

fees.

Despite

Elevate

PAL's

refused

to

register PAL's motor vehicles unless

the amounts imposed under Republic
Act 4136 were paid. PAL thus paid,
under protest, registration fees of its
motor vehicles. After paying under
protest, PAL through counsel, wrote a
letter dated May 19,1971, to Land
Transportation Commissioner Romeo
Edu (Edu) demanding a refund of the
amounts paid. Edu denied the request
for

refund.

Hence,

PAL

filed

complaint against Edu and National

Treasurer

Ubaldo

Carbonell

(Carbonell). The trial court dismissed

PAL's complaint. PAL appealed to the
Court

of

Appeals

which

in

turn

certified the case to the Supreme

Court. ISSUE: Whether or not motor
vehicle

registration

fees

are

considered as taxes. RULING: Yes. If

the purpose is primarily revenue, or if
revenue is, at least, one of the real
and substantial purposes, then the
exaction is properly called a tax. Such
is

the

case

of

motor

vehicle

registration fees. The motor vehicle

registration fees are actually taxes
intended for additional revenues of the
government even if one fifth or less of
the amount collected is set aside for
the operating expenses of the agency
administering the program.
5.
6. VILLEGAS v. HIU CHIONG TSAI PAO
HO G.R. No. L-29646, November 10,
1978
7.
8.

FACTS: On February 22, 1968, the

Municipal Board of Manila passed City
Ordinance No. 6537. The said city

ordinance was also signed by then

Manila Mayor Antonio J. Villegas
(Villegas). Section 1 of the said city
ordinance prohibits aliens from being
employed or to engage or participate
in any position or occupation or
business enumerated therein, whether
permanent,

temporary

or

casual,

without first securing an employment

permit from the Mayor of Manila and
paying the permit fee of P50.00 except
persons employed in the diplomatic or
consular missions of foreign countries,
or

in

the

programs

of

Government

technical
both
and

assistance

the

Philippine

any

foreign

government, and those working in

their

respective

members

of

households,

religious

orders

and
or

congregations, sect or denomination,

who are not paid monetarily or in kind.
Hiu Chiong Tsai Pao Ho (Tsai Pao Ho)
who was employed in Manila, filed a
petition with the CFI of Manila to
declare City Ordinance No. 6537 as
null and void for being discriminatory
and violative of the rule of the
uniformity in taxation. The trial court
declared City Ordinance No. 6537 null

and void. Villegas filed the present

petition.

9. ISSUE: Whether or not City Ordinance

No. 6537 is a tax or revenue measure.

10. RULING: Yes. The contention that City

Ordinance No. 6537 is not a purely tax
or revenue measure because its
principal purpose is regulatory in
nature has no merit. While it is true
that the first part which requires that
the alien shall secure an employment
permit from the Mayor involves the
exercise of discretion and judgment in
the

processing

disapproval

of

and

approval

applications

or
for

employment permits and therefore is

regulatory in character the second
part which requires the payment of
P50.00 as employee's fee is not
regulatory but a revenue measure.
There is no logic or justification 4
11. 5. in exacting P50.00 from aliens who
have been cleared for employment. It
is obvious that the purpose of the
ordinance is to raise money under the
guise

of

GENERAL

regulation.
DE

COMPAIA

TABACOS

DE

FILIPINAS vs. CITY OF MANILA, ET

AL G.R. No. L-16619 June 29, 1963
FACTS: Petitioner filed an action in the
CFI Manila to recover from City of
Manila(City ) the sum of P15,280.00
allegedly overpaid by it as taxes on its
wholesale and retail sales of liquor for
the period from the third quarter of
1954 to the second quarter of 1957,
inclusive,

under

Ordinances

Nos.

3634, 3301, and 3816. Tabacalera's

action for refund is based on the
theory that, in connection with its
liquor sales, it should pay the license
fees but not the municipal sales taxes;
and since it already paid the license
fees aforesaid, the sales taxes paid by
it amounting to the sum of
P15,208.00

under

the

three

ordinances is an overpayment made

by mistake, and therefore refundable.
The City contends that for the permit
issued to it Tabacalera is subject to
pay the license fees prescribed by
Ordinance No. 3358, aside from the
sales taxes imposed by Ordinances
Nos. 3634, 3301, and 3816. ISSUE:
Whether or not the taxes imposed are
valid RULING: Ordinance No. 3358 is

clearly one that prescribes municipal

license fees for the privilege to
engage in the business of selling
liquor or alcoholic beverages. On the
other hand, it is clear that Ordinances
Nos. 3634, 3301, and 3816 impose
taxes

on

the

sales

of

general

merchandise, wholesale or retail, and

are revenue measures enacted by the
Municipal Board of Manila by virtue of
its power to tax dealers for the sale of
such merchandise. That Tabacalera is
being subjected to double taxation is
more apparent than real. As already
stated

what

is

collected

under

Ordinance No. 3358 is a license fee

for the privilege of engaging in the
sale of liquor. On the other hand, what
the

three

ordinances

mentioned

heretofore impose is a tax for revenue

purposes based on the sales made of
the same article or merchandise. It is
already settled in this connection that
both a license fee and a tax may be
imposed on the same business or
occupation, or for selling the same
article, this not being in violation of the
rule

against

double

taxation.

AMERICAN MAIL LINE, ET AL vs.

CITY OF BASILAN, ET AL G.R. No. L12647

May

Appellees

31,

are

1961
foreign

FACTS:
shipping

companies licensed to do business in

the Philippines, with offices in Manila.
Their vessels call at Basilan City and
anchor in the bay or channel within its
territorial waters. As the city treasurer
assessed and attempted to collect
from

them

prescribed

the

anchorage

in

the

fees

aforesaid

amendatory ordinance, they filed the

present action for Declaratory Relief to
have the courts determine its validity.
Upon their petition the lower court
issued a writ of preliminary injunction
restraining appellants from collecting
or attempting to collect from them the
fees

prescribed

contended

that,

therein.
through

Appellant
its

city

council, it had authority to enact the

questioned ordinance in the exercise
of either its revenue-raising power or
of its police power. The question to be
resolved is whether the City of Basilan
has the authority to enact Ordinance
180 and to collect the anchorage fees
prescribed therein. ISSUE: Is the
ordinance valid exercise of taxing

power of the City of Basilan. RULING:

Under paragraph (a) sec. 14, R.A.
288, it is clear that the City of Basilan
may only levy and collect taxes for
general

and

special

purposes

in

accordance with or as provided by

law; in other words, the city of Basilan
was not granted a blanket power of
taxation. The use of the phrase "in
accordance with law" which, in our
opinion, means the same as "provided
by law" clearly discloses the
legislative intent to limit the taxing
power of the City. It has been held that
the power to regulate as an exercise
of police power does not include the
power to impose fees for revenue
purposes.

Appellant

contention

that

the

city's

own

questioned

ordinance was enacted in the exercise

of its power of taxation, makes it
obvious that the fees imposed are not
merely regulatory. JOHN H. OSMEA
vs. OSCAR ORBOS et al G.R. No.
99886 March 31, 1993 FACTS: 5
12. 6. October

10,

1984,

President

Ferdinand Marcos issued P.D. 1956

creating a Special Account in the
General Fund, designated as the Oil

Price Stabilization Fund (OPSF). The

OPSF was designed to reimburse oil
companies for cost increases in crude
oil and imported petroleum products
resulting

from

exchange

rate

adjustments and from increases in the

world market prices of crude oil.
Subsequently,
reclassified
account,".
Aquino

the

into

OPSF
"trust

President

the

liability

Corazon

promulgated

expanding

was

E.

O.

grounds

C.
137
for

reimbursement to oil companies for

possible cost under recovery incurred
as a result of the reduction of
domestic

prices

of

petroleum

products. The petitioner argues inter

alia

that

"the

monies

collected

pursuant to . . P.D. 1956, as amended,

must be treated as a 'SPECIAL
FUND,' not as a 'trust account' or a
'trust fund,' and that "if a special tax is
collected for a specific purpose, the
revenue generated therefrom shall 'be
treated as a special fund' to be used
only for the purpose indicated, and not
channeled

to

another

government

objective." Petitioner further points out

that since "a 'special fund' consists of

monies collected through the taxing

power of a State, such amounts
belong to the State, although the use
thereof

is

limited

to

the

special

purpose/objective for which it was

created." ISSUE: Whether or not the
funds collected under PD 1956 is an
exercise of the power of taxation
RULING: The levy is primarily in the
exercise of the police power of the
State. While the funds collected may
be referred to as taxes, they are
exacted in the exercise of the police
power of the State. What petitioner
would wish is the fixing of some
definite, quantitative restriction, or "a
specific limit on how much to tax." The
Court is cited to this requirement by
the petitioner on the premise that what
is involved here is the power of
taxation; but as already discussed,
this is not the case. What is here
involved is not so much the power of
taxation as police power. Although the
provision authorizing the ERB to
impose additional amounts could be
construed to refer to the power of
taxation, it cannot be overlooked that
the overriding consideration is to

enable the delegate to act with

expediency

in

carrying

out

the

objectives of the law which are

embraced by the police power of the
State. It would seem that from the
above-quoted ruling, the petition for
prohibition should fail. REPUBLIC OF
THE PHILIPPINES, vs. BACOLODMURCIA MILLING CO., INC., MA-AO
SUGAR CENTRAL CO., INC., and
TALISAY-SILAY MILLING COMPANY
G.R. Nos. L-19824, L-19825 and
19826 July 9, 1966 FACTS: Joint
appeal

by

three

sugar

centrals,

respondents herein. from a decision of

the Court of First Instance of Manila
finding

them

liable

for

special

assessments under Section 15 of

Republic Act No. 632. The appellants'
thesis is simply to the efect that the
"10 centavos per picul of sugar"
authorized to be collected under Sec.
15 of Republic 632 is a special
assessment. As such, the proceeds
thereof may be devoted only to the
specific

purpose

for

which

the

assessment was authorized, a special

assessment

being

levy

upon

property predicated on the doctrine

that the property against which it is

levied derives some special benefit
from the improvement. It is not a tax
measure intended to raise revenues
for the Government. ISSUE: Is the
imposition of special assessment an
exercise of the taxing power RULING:
The Court deemed it relevant to
discuss its holding in Lutz v. Araneta.
For in this Lutz case, Commonwealth
Act 567, otherwise known as the
Sugar Adjustment Act, all collections
made thereunder "shall accrue to a
special fund in the Philippine Treasury,
to be known as the 'Sugar Adjustment
and Stabilization Fund,' and shall be
paid out only for any or all of the
following purposes or to attain any or
all of the following objectives, as may
be provided by law." Analysis of the
Act, and particularly Section 6, will
show that the tax is levied with a
regulatory purpose, to provide means
for the rehabilitation and stabilization
of the threatened sugar industry. In
other words, the act is primarily an
exercise of the police power. On the
authority of the above case, then, We
hold that the special assessment at

bar may be considered as similarly as

the above, that is, that the levy for the
Philsugin Fund is not so much an
exercise of the power of taxation, nor
the

imposition

of

special

assessment, but, the exercise of the

police power for the general welfare of
the entire country. It is, therefore, an
exercise of a sovereign power which
no private citizen may lawfully resist.
VICTORIAS MILLING CO., INC. vs.
THE MUNICIPALITY OF VICTORIAS,
PROVINCE
OCCIDENTAL

OF
G.R.

NEGROS
No.

L-21183

September 27, 1968 FACTS: 6

13. 7. This case calls into question the
validity of Ordinance No. 1, series of
1956, of the Municipality of Victorias,
Negros

Occidental.

The

disputed

ordinance imposed license taxes on

operators of sugar centrals and sugar
refineries. The changes were: with
respect

to

sugar

centrals,

by

increasing the rates of license taxes;

and

as

to

sugar

refineries,

by

increasing the rates of license taxes

as well as the range of graduated
schedule of annual output capacity.
For, the production of plaintif Victorias

Milling Co., Inc. in both its sugar

central and its sugar refinery located
in the Municipality of Victorias comes
within these items. Plaintif filed suit
below to ask for judgment declaring
Ordinance No. 1, series of 1956, null
and void. The plaintif contends that
the ordinance is discriminatory since it
singles out plaintif which is the only
operator of a sugar central and a
sugar refinery within the jurisdiction of
defendant municipality. The trial court
rendered its judgment declaring that
the ordinance in question refers to
license taxes or fees. Both plaintif and
defendant directly appealed to the
Supreme

Court.

ISSUE:

Was

Ordinance No. 1, series of 1956,

passed

by

defendant's

municipal

council as a regulatory enactment or

as a revenue measure? RULING: The
present imposition must be treated as
a levy for revenue purposes. A quick
glance at the big amount of maximum
annual tax set forth in the ordinance,
P40,000.00 for sugar centrals, and
P40,000.00 for sugar refineries, will
readily convince one that the tax is
really a revenue tax. And then, we

read in the ordinance nothing which

would as much as indicate that the tax
imposed

is

merely

for

police

inspection, supervision or regulation.

Given the purposes just mentioned,
we find no warrant in logic to give our
assent to the view that the ordinance
in question is solely for regulatory
purpose.

Plain

is

the

meaning

conveyed. The ordinance is for raising

money. To say otherwise is to misread
the

purpose

WALTER

of

LUTZ

the
vs.

ordinance.

J. ANTONIO

ARANETA G.R. No. L-7859 December

22, 1955 FACTS: This case was
initiated in the Court of First Instance
of Negros Occidental to test the
legality of the taxes imposed by
Commonwealth
otherwise

Act

known

as

No.

567,

the

Sugar

Adjustment Act. Plaintif, Walter Lutz

seeks to recover from the Collector of
Internal

Revenue

the

sum

of

P14,666.40 paid by the estate as

taxes, under section 3 of the Act, for
the crop years 1948-1949 and 19491950;

alleging

that

such

tax

is

unconstitutional and void, being levied

for the aid and support of the sugar

industry exclusively, which in plaintif's

opinion is not a public purpose for
which a tax may be constitutioally
levied.

The

action

having

been

dismissed by the Court of First

Instance, the plaintifs appealed the
case directly to the Supreme Court.
ISSUE: Is the tax provided for in
Commonwealth Act No. 567 a pure
exercise

of

the

taxing

power?

RULING: Analysis of the Act, and

particularly of section 6 will show that
the tax is levied with a regulatory
purpose, to provide means for the
rehabilitation and stabilization of the
threatened sugar industry. In other
words, the act is primarily an exercise
of the police power. The protection
and promotion of the sugar industry is
a matter of public concern, it follows
that the Legislature may determine
within reasonable bounds what is
necessary

for

its

protection

and

expedient for its promotion. If objective

and methods are alike constitutionally
valid, no reason is seen why the state
may not levy taxes to raise funds for
their

prosecution

and

attainment.

Taxation may be made the implement

of the state's police power. REPUBLIC

OF THE PHILIPPINES, represented
by the PRESIDENTIAL COMMISSION
ON GOOD GOVERNMENT (PCGG)
vs.

COCOFED,

ET

AL.

and

BALLARES, ET AL., EDUARDO M.

COJUANGCO

JR.

SANDIGANBAYAN

and

(First

the

Division)

G.R. No. 147062-64 December 14,

2001 FACTS: The PCGG issued and
implemented
sequestrations,

numerous
freeze

orders

and

provisional takeovers of allegedly illgotten

companies,

assets

and

properties, real or personal. Among

the properties sequestered by the
Commission were shares of stock in
the United Coconut Planters Bank
(UCPB) registered in the names of the
alleged "one million coconut farmers,"
the

so-called

Coconut

Industry

Investment Fund companies (CIIF

companies) and Private Respondent
Eduardo Cojuangco Jr. On January
23, 1995, the trial court rendered its
final Decision nullifying and setting
aside

the

Sandiganbayan

Resolution
which

of

the

lifted

the

sequestration of the subject UCPB

shares. 7
14. 8. ISSUE: Are the Coconut Levy
Funds raised through the States
police and taxing powers? RULING:
Indeed, coconut levy funds partake of
the nature of taxes which, in general,
are

enforced

contributions

proportional

from

persons

and

properties, exacted by the State by

virtue of its sovereignty for the support
of government and for all public
needs. Based on this definition, a tax
has three elements, namely: a) it is an
enforced

proportional

contribution

from persons and properties; b) it is

imposed by the State by virtue of its
sovereignty; and c) it is levied for the
support of the government. Taxation is
done not merely to raise revenues to
support the government, but also to
provide means for the rehabilitation
and the stabilization of a threatened
industry, which is so afected with
public interest as to be within the
police

power

of

the

State.

WENCESLAO PASCUAL vs. THE

SECRETARY OF PUBLIC WORKS
AND COMMUNICATIONS, ET AL.

G.R. No. L-10405 December 29, 1960

FACTS:

On

petitioner

August

31,

Wenceslao

1954,
Pascual

instituted this action for declaratory

relief, with injunction, upon the ground
that Republic Act No. 920, entitled "An
Act Appropriating Funds for Public
Works", approved on June 20, 1953,
contained, in section 1-C (a) thereof,
an item (43[h]) of P85,000.00 "for the
construction,

reconstruction,

repair,

extension and improvement" of Pasig

feeder road terminals; that, at the time
of the passage and approval of said
Act, the aforementioned feeder roads
were

"nothing

but

projected

and

planned subdivision roads, not yet

constructed, . . . within the Antonio
Subdivision . . . situated at . . . Pasig,
Rizal" which projected feeder roads
"do not connect any government
property or any important premises to
the

main

highway";

Respondents

moved to dismiss the petition upon the

ground that petitioner had "no legal
capacity to sue", and that the petition
did "not state a cause of action".
ISSUE: Should appropriation using
public funds be made for public

purposes only? RULING: The right of

the legislature to appropriate funds is
correlative with its right to tax, and,
under constitutional provisions against
taxation except for public purposes
and prohibiting the collection of a tax
for one purpose and the devotion
thereof

to

another

purpose,

no

appropriation of state funds can be

made for other than for a public
purpose.

The

test

of

the

constitutionality of a statute requiring

the use of public funds is whether the
statute is designed to promote the
public interest, as opposed to the
furtherance

of

the

advantage

of

individuals, although each advantage

to individuals might incidentally serve
the public. OSMEA VS. ORBOS
G.R. No. 99886 March 31, 1993
FACTS: October 10, 1984, President
Ferdinand Marcos issued P.D. 1956
creating a Special Account in the
General Fund, designated as the Oil
Price Stabilization Fund (OPSF). The
OPSF was designed to reimburse oil
companies for cost increases in crude
oil and imported petroleum products
resulting

from

exchange

rate

adjustments and from increases in the

world market prices of crude oil.
Subsequently,
reclassified
account,".
Aquino

the

into

OPSF

"trust

President

the

liability

Corazon

promulgated

expanding

was

E.

O.

grounds

C.
137
for

reimbursement to oil companies for

possible cost under recovery incurred
as a result of the reduction of
domestic

prices

of

petroleum

products. The petitioner argues inter

alia

that

"the

monies

collected

pursuant to . . P.D. 1956, as amended,

must be treated as a 'SPECIAL
FUND,' not as a 'trust account' or a
'trust fund,' and that "if a special tax is
collected for a specific purpose, the
revenue generated therefrom shall 'be
treated as a special fund' to be used
only for the purpose indicated, and not
channeled

to

another

government

objective." Petitioner further points out

that since "a 'special fund' consists of
monies collected through the taxing
power of a State, such amounts
belong to the State, although the use
thereof

is

limited

to

the

special

purpose/objective for which it was

created." ISSUE: Do the powers

granted to the ERB under P.D. 1956
partake of the nature of the taxation
power of the State? RULING: NO. The
OPSF

was

established

"for

the

purpose of minimizing the frequent

price

changes

exchange

brought

rate

about

adjustment

by

and/or

changes in world market prices of

crude oil and imported petroleum
products. While the funds collected
may be referred to as taxes, they are
exacted in the exercise of the police
power of the State. 8
15. 9. PEPSI-COLA

BOTTLING

COMPANY OF THE PHIILIPPINES,

INC.

VS.

MUNICIPALITY

OF

TANAUAN G.R. No. L-31156 February

27, 1976 FACTS: In February 1963,
plaintif

commenced

complaint

seeking to declare Section 2 of R.A.

2264

(Local

unconstitutional

Autonomy
as

an

Act)
undue

delegation of taxing power and to

declare Ordinance Nos. 23 and 27
issued by the Municipality of Tanauan,
Leyte as null and void. Municipal
Ordinance No. 23 levies and collects
from

soft

drinks

producers

and

manufacturers one-sixteenth (1/16) of

a centavo for every bottle of soft drink
corked. On the other hand, Municipal
Ordinance No. 27 levies and collects
on

soft

drinks

manufactured

within

produced
the

or

territorial

jurisdiction of the municipality a tax of

one centavo (P0.01) on each gallon of
volume capacity. The tax imposed in
both Ordinances Nos. 23 and 27 is
denominated as "municipal production
tax. ISSUES: 1. Is Section 2 of R.A.
2264 an undue delegation of the
power of taxation? 2. Do Ordinance
Nos. 23 and 24 constitute double
taxation and impose percentage or
specific taxes? RULING: 1. NO. The
power of taxation is purely legislative
and cannot be delegated to the
executive or judicial department of the
government without infringing upon
the theory of separation of powers.
But as an exception, the theory does
not apply to municipal corporations.
Legislative powers may be delegated
to local governments in respect of
matters of local concern. 2. NO. The
Municipality of Tanauan discovered
that manufacturers could increase the

volume contents of each bottle and

still pay the same tax rate since tax is
imposed on every bottle corked. To
combat

this

scheme,

Municipal

Ordinance No. 27 was enacted. As

such, it was a repeal of Municipal
Ordinance No. 23. In the stipulation of
facts, the parties admitted that the
Municipal Treasurer was enforcing
Municipal Ordinance No. 27 only.
Hence, there was no case of double
taxation.

SOCIAL

SECURITY

SYSTEM VS. CITY OF BACOLOD

G.R. No. L-35726 July 21, 1982
FACTS:
System,

Petitioner
for

Social

operation

Security
purposes,

maintains a five-storey building in

Bacolod City occupying four parcels of
land. Said lands and buildings were
assessed for taxation. Petitioner failed
to pay the realty taxes for the years
1968, 1969 and 1970. Consequently,
the City of Bacolod levied upon said
lands and buildings and declared
them forfeited in its favor. In protest,
petitioner wrote the city mayor through
the

city

reconsideration

treasurer
of

the

seeking
forfeiture

proceeding on the ground that it is a

government-owned

and

controlled

corporation and as such, should be

exempt from payment of real estate
taxes. No action was however taken.
Thereafter, petitioner filed an action in
court for the nullification of the court
proceedings. The court ruled that the
properties of petitioner are not exempt
from the payment of real property tax
because these are not one of the
exemptions under Section 29 of the
Charter of Bacolod City and there is
no

other

law

providing

for

its

exemption. ISSUE: Should the subject

properties maintained by petitioner
SSS be exempt from payment of real
property tax? RULING: YES. Whether
a government owned and controlled
corporation

is

performing

governmental or proprietary function is

immaterial. Section 29 of the Charter
of Bacolod City does not contain any
qualification whatsoever in providing
for the exemption from real estate
taxes of "lands and buildings owned
by the Commonwealth or Republic of
Philippines."
legislature

Hence,

when

the

exempted

lands

and

buildings owned by the government

from payment of said taxes, what it

intended

was

broad

and

comprehensive application of such

mandate, regardless of whether such
property is devoted to governmental or
proprietary purpose. Further, P.D. 24
has amended the Social Security Act
of 1954 expressly exempting the SSS
from payment of any tax thereby
removing

all

exemption.

doubts

as

SEA-LAND

to

its

SERVICE,

INC. VS. COURT OF APPEALS G.R.

No. 122605 April 30, 2001 FACTS:
Petitioner

Sea-Land

Service

Incorporated,

an

American

international

shipping

company

licensed

the

by

Securities

and

Exchange Commission to do business

in the Philippines entered into a
contract

with

Government

the
to

United

transport

States
military

household goods and efects of U.S.

military personnel assigned to the
Subic Naval Base. Sea-Land paid 9
16. 10. its

corresponding

corporate

income tax for the taxable year 1984

at the rate of 1.5% in accordance with
Section

25(a)(2)

of

the

National

Internal Revenue Code in relation to

Article 9 of the RP-US Tax Treaty.

Subsequently, Sea-Land filed a claim
for refund alleging that the taxes it
paid were made in mistake because
under

the

RP-US

Military

Base

Agreement, it is exempt from the

payment of taxes. ISSUE: Does the
income that petitioner derived from
services in transporting the household
goods and efects of U.S. military
personnel fall within the tax exemption
provided in the RP-US Military Bases
Agreement?
granting

RULING:

exemption

NO.

from

Laws

tax

are

construed strictissimi juris against the

taxpayer and liberally in favor of the
taxing

power.

The

transport

or

shipment of household goods and

efects of U.S. military personnel is not
included in the term "construction,
maintenance, operation and defense
of the bases. Neither could the
performance of this service to the U.S.
government be interpreted as directly
related to the defense and security of
the

Philippine

COMMISSIONER

territories
OF

INTERNAL

REVENUE vs. MITSUBISHI METAL

CORPORATION G.R. No. L-54908.

January 22, 1990 FACTS: On April 17,

1970, Atlas Consolidated Mining and
Development Corporation entered into
a Loan and Sales Contract with
Mitsubishi

Metal

Corporation

for

purposes of the projected expansion

of the productive capacity of the
former's mines in Toledo, Cebu. Under
said contract, Mitsubishi agreed to
extend a loan to Atlas 'in the amount
of

$20,000,000.00,

United

States

currency. Atlas, in turn undertook to

sell to Mitsubishi all the copper
concentrates produced for a period of
fifteen (15) years. Mitsubishi thereafter
applied for a loan with the ExportImport Bank of Japan (Eximbank) for
purposes of its obligation under said
contract. Its loan application was
approved on May 26, 1970 in the
equivalent sum of $20,000,000.00 in
United States currency at the then
prevailing exchange rate. Pursuant to
the

contract

between

Atlas

and

Mitsubishi, interest payments were

made by the former to the latter
totaling P13,143,966.79 for the years
1974 and 1975. The corresponding
15% tax thereon in the amount of

P1,971,595.01 was withheld pursuant

to Section 24 (b) (1) and Section 53
(b)

(2)

of

Revenue

the

National

Code,

as

Internal

amended

by

Presidential Decree No. 131, and duly

remitted to the Government. ISSUE:
Whether or not the interest income
from the loans extended to Atlas by
Mitsubishi is excludible from gross
income taxation pursuant to Section
29 of the tax code and, therefore,
exempt from withholding tax. RULING:
The court ruled in the negative.
Eximbank had nothing to do with the
sale of the copper concentrates since
all that Mitsubishi stated in its loan
application with the former was that
the amount being procured would be
used as a loan to and in consideration
for importing copper concentrates
from

Atlas.

Such

an

innocuous

statement of purpose could not have

been intended for, nor could it legally
constitute, a contract of agency. The
conclusion

is

indubitable;

MITSUBISHI, and NOT EXIMBANK, is

the sole creditor of ATLAS, the former
being the owner of the $20 million
upon completion of its loan contract

with EXIMBANK of Japan. It is settled

a rule in this jurisdiction that laws
granting

exemption

from

tax

are

construed strictissimi juris against the

taxpayer and liberally in favor of the
taxing power. Taxation is the rule and
exemption

is

the exception. 31st

INFANTRY POST EXCHANGE vs.

POSADAS

G.R.

No.

33403.

September 4, 1930 FACTS: The 31st

Infantry Post Exchange is a post
exchange constituted in accordance
with Army regulations and the laws of
the United States. in the course of its
duly authorized business transactions,
the Exchange made many purchases
of various and diverse commodities,
goods, wares and merchandise from
various merchants in the Philippines.
The Commissioner collected a sales
tax of 1 1/2 % of the gross value of the
commodities, etc. from the merchants
who sold said commodities to the
Exchange.

formal

protest

was

lodged by the Exchange. ISSUE:

Whether or not the petitioner is
exempt from the sales tax imposed
against its suppliers. RULING: The
court ruled in the negative. Taxes

have been collected from merchants

who

made

sales

to

Army

Post

Exchanges since 1904 (Act 1189,

Section 139). Similar taxes are paid
by those who sell merchandise to the
Philippine Government, and by those
who do business with the US Army
and Navy in the Philippines. Herein,
the merchants who 10
17. 11. efected the sales to the Post
Exchange are the ones who paid the
tax; and it is the officers, soldiers, and
civilian employees and their families
who

are

benefited

exchange

to

ultimately

shifted.

by

whom

the

the

An

post

tax

Army

is

Post

Exchange, although an agency within

the

US

Army,

cannot

secure

exemption from taxation for merchants

who

make

sales

to

the

Post

Exchange.

COMMISSIONER

OF

INTERNAL

REVENUE

vs.

MARUBENI CORPORATION G.R. No.

137377. December 18, 2001 FACTS:
Respondent Marubeni Corporation is
a foreign corporation and is duly
registered to engage in business in
the

Philippines.

November

1985,

Sometime

in

petitioner

Commissioner of Internal Revenue

issued a letter of authority to examine
the books of accounts of the Manila
branch

office

of

respondent

corporation. In the course of the

examination,

petitioner

respondent

to

have

found

undeclared

income from two (2) contracts in the

Philippines.

Petitioner's

revenue

examiners

recommended

an

assessment for deficiency income,

branch profit remittance, contractor's
and

commercial

broker's

taxes.

Respondent

questioned

this

assessment.

Respondent

then

received

letter

assessing

form

petitioner

respondent

several

deficiency taxes. On September 26,

1986,

respondent

filed

two

(2)

petitions for review with the Court of

Tax Appeals. Earlier, on August 2,
1986, Executive Order (E.O.) No. 41
declaring

one-time

amnesty

covering unpaid income taxes for the

years 1981 to 1985 was issued. Under
this E.O., a taxpayer who wished to
avail of the income tax amnesty
should

comply

with

certain

requirements. In accordance with the

terms of E.O. No. 41, respondent filed

its tax amnesty return dated October
30, 1986. On November 17, 1986, the
scope and coverage of E.O. No. 41
was expanded by Executive Order
(E.O.) No. 64. ISSUE: Whether or not
herein respondent's deficiency tax
liabilities

were

extinguished

upon

respondent's availment of tax amnesty

under Executive Orders Nos. 41 and
64. RULING: Section 4 (b) of E.O. No.
41 is very clear and unambiguous. It
excepts from income tax amnesty
those taxpayers "with income tax
cases already filed in court as of the
efectivity

hereof."

The

point

of

reference is the date of efectivity of

E.O. No. 41. The difficulty lies with
respect

to

assessment

the
and

contractor's

tax

respondent's

availment of the amnesty under E.O.

No. 64 including estate and donor's
taxes and tax on business. In the
instant case, the vagueness in Section
4 (b) brought about by E.O. No. 64
should be construed strictly against
the taxpayer. The term "income tax
cases" should be read as to refer to
estate and donor's taxes and taxes on

business while the word "hereof," to

E.O. No. 64. Since Executive Order
No. 64 took efect on November 17,
1986, consequently, insofar as the
taxes in E.O. No. 64 are concerned,
the date of efectivity referred to in
Section 4 (b) of E.O. No. 41 should be
November 17, 1986. There is nothing
in E.O. No. 64 that provides that it
should

retroact

to

the

date

of

efectivity of E.O. No. 41, the original

issuance. Neither is it necessarily
implied from E.O. No. 64 that it or any
of

its

provisions

retroactively.
COMMISSIONER

should

REAGAN
OF

apply
vs.

INTERNAL

REVENUE G.R. No. L-26379, 27.

December 27, 1969 FACTS: William
Reagan imported a tax-free 1960
Cadillac car with accessories valued
at US $ 6,443.83, including freight,
insurance and other charges. After
acquiring a permit to sell the car from
the base commander of Clark Air
Base, Reagan sold the car to a certain
Willie Johnson Jr. of the US Marine
Corps stationed in Sangley Point,
Cavite for US$ 6,600. Johnson sold
the same, on the same day to Fred

Meneses, a Filipino. As a result of the

transaction,

the

Commissioner

rendered Reagan liable for income tax

in the sum of P2,970. Reagan claimed
that he was exempt as the transaction
occurred in Clark Air Base, which as
he contends is a base outside the
Philippines. ISSUE: Whether or not
petitioner Reagan was covered by the
tax exemption. RULING: The court
ruled in the negative. The Philippines,
as an independent and sovereign
country, exercises its authority over its
entire

domain.

Any

state

may,

however, by its consent, express or

implied, submit to a restriction of its
sovereign rights. It may allow another
power to participate in the exercise of
jurisdictional

right

over

certain

portions of its territory. By doing so, it

by no means follows that such areas
become impressed with an alien
character. The areas retain their status
as native soil. Clark Air Base is within
Philippine territorial jurisdiction to tax,
and thus, Reagan was liable for the
income tax arising from the sale of his
automobile in Clark. The law does not
look with favor on tax exemptions and

that he who would seek to be thus

privileged must justify it by words too
plain

to

be

categorical

to

mistaken
be

and

too

misinterpreted.

Reagan has not done so, and cannot

do so. 11
18. 12. TIU vs. COURT OF APPEALS
GR. No. 127410 January 20, 1999
FACTS: Congress, with the approval
of the President, passed into law RA
7227 entitled "An Act Accelerating the
Conversion of Military Reservations
Into Other Productive Uses, Creating
the

Bases

Development

Conversion
Authority

for

and
this

Purpose, Providing Funds Therefor

and for Other Purposes." Section 12
thereof created the Subic Special
Economic Zone and granted there to
special privileges. President Ramos
issued

Executive

Order

No.

97,

clarifying the application of the tax and

duty incentives. The President issued
Executive Order No. 97-A, specifying
the area within which the tax-andduty-free privilege was operative. The
petitioners

challenged

before

this

Court the constitutionality of EO 97-A

for allegedly being violative of their

right to equal protection of the laws.

This Court referred the matter to the
Court of Appeals. Proclamation No.
532 was issued by President Ramos.
It delineated the exact metes and
bounds

of

Economic

the

and

Subic

Free

Special

Port

Zone,

pursuant to Section 12 of RA 7227.

Respondent Court held that "there is
no substantial diference between the
provisions of EO 97-A and Section 12
of RA 7227. In both, the 'Secured
Area' is precise and well-defined as '. .
. the lands occupied by the Subic
Naval

Base

and

its

contiguous

extensions as embraced, covered and

defined by the 1947 Military Bases
Agreement between the Philippines
and the United States of America, as
amended . . .'" ISSUE: Whether or not
Executive Order No. 97-A violates the
equal

protection

clause

of

the

Constitution RULING: No. The Court

found real and substantive distinctions
between the circumstances obtaining
inside and those outside the Subic
Naval Base, thereby justifying a valid
and reasonable classification. The
fundamental right of equal protection

of the laws is not absolute, but is

subject to reasonable classification. If
the groupings are characterized by
substantial distinctions that make real
diferences, one class may be treated
and regulated diferently from another.
The

classification

must

also

be

germane to the purpose of the law

and must apply to all those belonging
to the same class. JOHN PEOPLES
ALTERNATIVE COALITION vs. BCDA
GR. No. 119775 October 24, 2003
FACTS: Republic Act No. 7227 set out
the policy of the government to
accelerate the sound and balanced
conversion into alternative productive
uses of the former military bases. It
created

Bases

Conversion

and

Development Authority. It also created

the Subic Special Economic and Free
Port Zone. It granted the Subic SEZ
incentives. It expressly gave authority
to the President to create through
executive proclamation, subject to the
concurrence of the local government
units directly afected, other Special
Economic Zones in the areas covered.
BCDA entered into a Memorandum of
Agreement and Escrow Agreement

with Tuntex and Asiaworld. BCDA,

Tuntex and Asiaworld executed a Joint
Venture Agreement. The Sangguniang
Panlungsod of Baguio City asked
BCDA to exclude all the barangays
partly or totally located within Camp
John Hay from the reach or coverage
of any

plan or program for its

development.

The

sanggunian

adopted and submitted a 15-point

concept for the development of Camp
John

Hay.

AsiaWorld
rejected

BCDA,
agreed

or

Tuntex
to

modified

some,
the

and
but
other

proposals. They stressed the need to

declare Camp John Hay a SEZ as a
condition precedent in accordance
R.A.

No.

7227.

The

sanggunian

requested the Mayor to order the

determination of realty taxes which
may be collected from real properties
of Camp John Hay. It was intended to
intelligently guide the sanggunian in
determining its position on whether
Camp John Hay be declared a SEZ, it
being of the view that such declaration
would exempt the camps property
and the economic activity therein from
local

or

national

taxation.

The

sanggunian

passed

resolution

seeking the issuance by President

Ramos of a presidential proclamation
declaring an area of 288.1 hectares of
the camp as a SEZ. President Ramos
issued Proclamation No. 420 which
established a SEZ on a portion of
Camp John Hay. ISSUE: Whether
Proclamation No. 420 is constitutional
RULING: While the grant of economic
incentives may be essential to the
creation and success of SEZs, free
trade zones and the like, the grant
thereof to the John Hay SEZ cannot
be sustained. The incentives under
R.A. No. 7227 are exclusive only to
the Subic SEZ, hence, the extension
of the same to the John Hay SEZ
finds no support therein. Neither does
the same grant of privileges to the
John Hay SEZ find support in the
other laws specified under Section 3
of Proclamation No. 420, which laws
were

already

extant

before

the

issuance of the proclamation or the

enactment of R.A. No. 7227. More
importantly, the nature of most of the
assailed privileges is one of tax
exemption. It is the legislature, unless

limited by a provision of the state

constitution, that has full power to
exempt any person or corporation or
class of property from taxation, its
power to exempt being as broad as its
power to tax. The challenged grant of
tax exemption would circumvent the
Constitutions imposition that a law
granting any tax exemption must have
the concurrence of a majority of all the
members of Congress. 12
19. 13. COCONUT

OIL

REFINERS

ASSOCIATION INC. vs. BCDA G.R.

No. 132527 July 29, 2005 FACTS:
Republic Act No. 7227 was enacted
providing for the sound and balanced
conversion of the Clark and Subic
military

reservations

and

their

extensions into alternative productive

uses in the form of special economic
zones

in

order

to

promote

the

economic and social development of

Central Luzon in particular and the
country in general. President Ramos
issued Executive Order No. 80 which
declared that Clark shall have all the
applicable incentives granted to the
Subic Special Economic and Free
Port Zone under Republic Act No.

7227. The CSEZ shall have all the

applicable incentives in the Subic
Special Economic and Free Port Zone
under RA 7227. The CSEZ Main Zone
covering the Clark Air Base proper
shall

have

all

the

investment

incentives, while the CSEZ Sub-Zone

covering the rest of the CSEZ shall
have

limited

incentives.

The

full

incentives in the Clark SEZ Main Zone

and the limited incentives in the Clark
SEZ Sub-Zone shall be determined by
the

BCDA.

BCDA

passed

Board

Resolution No. 93-05-034 allowing the

tax and duty-free sale at retail of
consumer goods imported via Clark
for consumption outside the CSEZ.
The President issued EO No. 97,
Clarifying the Tax and Duty Free
Incentive Within the Subic Special
Economic Zone Pursuant to R.A. No.
7227. EO 97- A was issued, Further
Clarifying the Tax and Duty-Free
Privilege Within the Subic Special
Economic

and

Free

Port

Zone.

ISSUE: Whether or not Executive

Order

No.

97-A,

Section

of

Executive Order No. 80, and Section 4

of BCDA Board Resolution No. 93-05-

034 are null and void RULING: The

Court finds that the setting up of such
commercial establishments which are
the only ones duly authorized to sell
consumer items tax and duty-free is
still well within the policy enunciated in
Section 12 of Republic Act No. 7227
that . . .the Subic Special Economic
Zone shall be developed into a selfsustaining,

industrial,

commercial,

financial and investment center to

generate employment opportunities in
and around the zone and to attract
and

promote

productive

foreign

investments. The Court reiterates that

the second sentences of paragraphs
1.2 and 1.3 of Executive Order No.
97- A, allowing tax and duty-free
removal

of

goods

to

certain

individuals, even in a limited amount,

from the Secured Area of the SSEZ,
are null and void for being contrary to
Section 12 of Republic Act No. 7227.
Said Section clearly provides that
exportation or removal of goods from
the territory of the Subic Special
Economic Zone to the other parts of
the Philippine territory shall be subject
to customs duties and taxes under the

Customs and Tarif Code and other

relevant tax laws of the Philippines.
PROVINCE

OF

HERNANDO

G.R.

ABRA
No.

vs.

L-49336

August 31, 1981 FACTS: On the face

of

this

certiorari

and

mandamus

petition, it clearly appears that the

actuation

of

respondent

Judge

Hernando left much to be desired.

There was a denial of a motion to
dismiss an action for declaratory relief
by

Roman

Catholic

Bishop

of

Bangued desirous of being exempted

from a real estate tax followed by a
summary

judgment

granting

such

exemption, without even hearing the

side

of

petitioner.

It

was

the

submission of counsel that an action

for declaratory relief would be proper
only before a breach or violation of
any

statute,

executive

order

or

regulation. Moreover, there being a tax

assessment made by the Provincial
Assessor
respondent,

on

the

properties

petitioner

failed

of
to

exhaust the administrative remedies

available under PD No. 464 before
filing such court action. Respondent
Judge

alleged that there

"is no

question

that

the

real

properties

sought to be taxed by the Province of

Abra are properties of the respondent
Roman Catholic Bishop of Bangued,
Inc." The very next sentence assumed
the very point it asked when he
categorically stated: "Likewise, there is
no

dispute

that

the

properties

including their procedure are actually,

directly and exclusively used by the
Roman Catholic Bishop of Bangued,
Inc.

for

religious

or

charitable

purposes." For him then: "The proper

remedy of the petitioner is appeal and
not this special civil action." ISSUE:
Whether or not the properties of
respondent Roman Catholic Bishop
should

be

exempt

from

taxation

RULING: Respondent Judge would

not have erred so grievously had he
merely compared the provisions of the
present

Constitution

with

that

appearing in the 1935 Charter on the

tax exemption of "lands, buildings, and
improvements." There is a marked
diference.

Under

the

1935

Constitution: "Cemeteries, churches,

and

parsonages

or

convents

appurtenant thereto, and all lands,

buildings, and improvements used

exclusively for religious, charitable, or
educational purposes shall be exempt
from

taxation."

Constitution

The

present

added

"charitable

institutions, mosques, and non-profit

cemeteries" and required that for the
exemption of ":lands, buildings, and
improvements," they should not only
be "exclusively" but also "actually and
"directly"

used

for

religious

or

charitable purposes. The Constitution

is worded diferently. The change
should not be ignored. It must be duly
taken into consideration. 13
20. 14. TOLENTINO vs. SECRETARY OF
FINANCE G.R. No. 115455 October
30, 1995 FACTS: Motions were filed
seeking

reconsideration

of

the

Supreme Court decision dismissing

the petitions for the declaration of
unconstitutionality of R.A. No. 7716,
otherwise known as the Expanded
Value-Added Tax Law. The motions, of
which there are 10 in all, have been
filed by the several petitioners in these
cases. ISSUES: 1. Whether or not
R.A. No. 7716 did not "originate
exclusively"

in

the

House

of

Representatives as required by Art. VI

Sec.

24

of

the

Constitution.

2.

Whether or not R.A. No. 7716 is

violative

of

press

freedom

and

religious freedom under Art. III Secs.

4 and 5 of the Constitution. 3.
Whether or not there is violation of the
rule on taxation under Art. VI Sec. 28
(1) of the Constitution. 4. Whether or
not

there

is

an

impairment

of

obligation of contracts under Art. III

Sec.

10

of

the

Constitution.

5.

Whether or not there is violation of the

due process clause under Art. III Sec.
1 of the Constitution. RULING: 1.
While Art. VI Sec. 24 provides that all
appropriation, revenue or tarif bills,
bills authorizing increase of the public
debt, bills of local application, and
private bills must "originate exclusively
in the House of Representatives," it
also adds, "but the Senate may
propose or concur with amendments."
In the exercise of this power, the
Senate may propose an entirely new
bill as a substitute measure. 2. Since
the law granted the press a privilege,
the law could take back the privilege
anytime

without

ofense

to

the

Constitution. The VAT is not a license

tax. It is not a tax on the exercise of a
privilege, much less a constitutional
right. It is imposed on the sale, barter,
lease

or

exchange

of

goods

or

properties or the sale or exchange of

services and the lease of properties
purely

for

revenue

purposes.

To

subject the press to its payment is not

to burden the exercise of its right any
more than to make the press pay
income tax or subject it to general
regulation is not to violate its freedom
under

the

Constitution.

3.

The

Constitution does not really prohibit

the imposition of indirect taxes which,
like the VAT, are regressive. What it
simply provides is that Congress shall
"evolve
taxation."

progressive
4.

Contracts

system

of

must

be

understood as having been made in

reference to the possible exercise of
the

rightful

authority

of

the

government and no obligation of

contract can extend to the defeat of
that authority. 5. On the alleged
violation of due process, hardship to
taxpayers alone is not an adequate
justification for adjudicating abstract

issues. Otherwise, adjudication would

be no diferent from the giving of
advisory opinion that does not really
settle legal issues. We are told that it
is our duty under Art. VIII, Sec. 1 (2)
to decide whenever a claim is made
that "there has been a grave abuse of
discretion amounting to lack or excess
of jurisdiction on the part of any
branch

or

instrumentality

of

the

government." This duty can only arise

if an actual case or controversy is
before us. ABAKADA Guro Party List
vs.

Ermita

G.R.

No.

168056

September 1, 2005 FACTS: Before

R.A. No. 9337 took efect, petitioners
ABAKADA GURO Party List, et al.,
filed a petition for prohibition on May
27,

2005

questioning

the

constitutionality of Sections 4, 5 and 6

of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the
National

Internal

Revenue

Code

(NIRC). Section 4 imposes a 10% VAT

on sale of goods and properties,
Section 5 imposes a 10% VAT on
importation of goods, and Section 6
imposes a 10% VAT on sale of
services

and

use

or

lease

of

properties.

These

questioned

provisions contain a uniform proviso

authorizing

the

President,

upon

recommendation of the Secretary of

Finance, to raise the VAT rate to 12%,
efective

January

specified

1,

conditions

2006,

after

have

been

satisfied. Petitioners argue that the

law is unconstitutional. ISSUES: 1.
Whether or not there is a violation of
Article

VI,

Section

24

of

the

Constitution. 2. Whether or not there

is undue delegation of legislative
power in violation of Article VI Sec
28(2) of the Constitution. 3. Whether
or not there is a violation of the due
process and equal protection under
Article III Sec. 1 of the Constitution.
RULING: 1. Since there is no question
that

the

revenue

originated

in

Representatives,

bill

the
the

exclusively
House

Senate

of
was

acting within its constitutional power to

introduce amendments to the House
14
21. 15. bill when it included provisions in
Senate

Bill

No.

1950

amending

corporate income taxes, percentage,

and excise and franchise taxes. 2.

There is no undue delegation of

legislative power but only of the
discretion as to the execution of a law.
This is constitutionally permissible.
Congress

does

not

abdicate

its

functions or unduly delegate power

when it describes what job must be
done, who must do it, and what is the
scope of his authority; in our complex
economy that is frequently the only
way in which the legislative process
can go forward. 3. The power of the
State to make reasonable and natural
classifications for the purposes of
taxation has long been established.
Whether it relates to the subject of
taxation, the kind of property, the rates
to be levied, or the amounts to be
raised, the methods of assessment,
valuation and collection, the States
power is entitled to presumption of
validity. As a rule, the judiciary will not
interfere with such power absent a
clear showing of unreasonableness,
discrimination,

or

arbitrariness.

MISAMIS ORIENTAL ASSOCIATION

OF

COCO

TRADERS,

DEPARTMENT
SECRETARY

OF
G.R.

INC.

vs.

FINANCE
No.

108524

November 10, 1994 FACTS: Petitioner

Misamis Oriental Association of Coco
Traders, Inc. is a domestic corporation
engaged in the buying and selling of
copra

in

Misamis

Oriental.

The

petitioner alleges that prior to the

issuance of Revenue Memorandum
Circular 47-91 on June 11, 1991,
which implemented VAT Ruling 19090,

copra

was

classified

as

agricultural food product under Sec.

103(b)

of

the

National

Internal

Revenue Code and, therefore, exempt

from VAT at all stages of production or
distribution. Petitioner sought to nullify
Revenue Memorandum Circular No.
47-91 and enjoin the collection by
respondent revenue officials of the
Value Added Tax (VAT) on the sale of
copra

by

members

of

petitioner

organization as the classification had

the efect of denying to the petitioner
the exemption it previously enjoyed
when copra was classified as an
agricultural food product under Sec.
103(b) of the NIRC ISSUE: Whether
there is violation of equal protection
clause because while coconut farmers
and copra producers are exempt,

traders and dealers are not, although

both sell copra in its original state.
RULING: There is a material or
substantial

diference

between

coconut farmers and copra producers,

on the one hand, and copra traders
and dealers, on the other. The former
produce and sell copra, the latter
merely sell copra. The Constitution
does

not

forbid

the

diferential

treatment of persons so long as there

is a reasonable basis for classifying
them diferently. COMMISSIONER OF
INTERNAL REVENUE vs. COURT OF
APPEALS G.R. No. 119761 August
29, 1996 FACTS: Fortune Tobacco
Corporation ("Fortune Tobacco") is
engaged

in

the

manufacture

of

diferent brands of cigarettes. The

Philippine Patent Office issued to the
corporation separate certificates of
trademark

registration

"Champion,"

"Hope,"

and

over
"More"

cigarettes. The initial position of the

CIR

was

to

classify

'Champion,'

'Hope,' and 'More' as foreign brands

since they were listed in the World
Tobacco Directory as belonging to
foreign companies. However, Fortune

Tobacco changed the names of 'Hope'

to

'Hope

Luxury'

and

'More'

to

'Premium More,' thereby removing the

said brands from the foreign brand
category. RA No. 7654, was enacted
and became efective on 03 July
1993. It amended Section 142(c)(1) of
the NIRC. About a month after the
enactment and two (2) days before the
efectivity

of

RA

Memorandum
("RMC

7654,

Circular

37-93")

Revenue

No.

37-93

Reclassification

of

Cigarettes Subject to Excise Tax, was

issued by the BIR. Fortune Tobacco
requested

for

review,

reconsideration and recall of RMC 3793. The request was denied on 29

July 1993. The following day, or on 30
July 1993, the CIR assessed Fortune
Tobacco for ad valorem tax deficiency
amounting to P9,598,334.00. On 03
August 1993, Fortune Tobacco filed a
petition for review with the CTA. The
CTA upheld the position of Fortune
Tobacco and adjudged RMC No. 3793 as defective. ISSUE: Whether or
not there is a violation of the due
process of law. RULING: A reading of
RMC 37-93, particularly considering

the circumstances under which it has

been issued, convinces us that the
circular cannot be viewed simply as a
corrective measure or merely as
construing Section 142(c)(1) of the
NIRC, as amended, but has, in fact
and most importantly, been made in
order

to

place

"Hope

Luxury,"

"Premium More" and 15

22. 16. "Champion"

within

the

classification of locally manufactured

cigarettes bearing foreign brands and
to thereby have them covered by RA
7654. In so doing, the BIR not simply
intrepreted the law; verily, it legislated
under its quasi-legislative authority.
The

due

observance

of

the

requirements of notice, of hearing,

and of publication should not have
been then ignored. The Court is
convinced that the hastily promulgated
RMC 37-93 has fallen short of a valid
and efective administrative issuance.
COMMISSIONER

OF

INTERNAL

REVENUE vs. LINGAYEN GULF OF

ELECTRIC POWER G.R. No. L-23771
August

4,

1988

FACTS:

The

respondent taxpayer, Lingayen Gulf

Electric Power Co., Inc., operates an

electric

power

plant

serving

the

adjoining municipalities of Lingayen

and Binmaley, Pangasinan, pursuant
to the municipal franchise granted it
by their respective municipal councils,
under Resolution Nos. 14 and 25 of
June

29

and

July

2,

1946,

respectively. Section 10 of these

franchises provides that said grantee
shall pay 2% of their gross earnings
obtained

thru

this

privilege.

On

November 21, 1955, the Bureau of

Internal

Revenue

against

and

(BIR)

demanded

assessed
from

the

private respondent the total amount of

P19,293.41 representing deficiency
franchise taxes and surcharges for the
years 1946 to 1954 applying the
franchise tax rate of 5% on gross
receipts from March 1, 1948 to
December 31, 1954 as prescribed in
Section 259 of the National Internal
Revenue Code, instead of the lower
rates as provided in the municipal
franchises.Pending the hearing of the
said cases, Republic Act (R.A.) No.
3843 was passed on June 22, 1 963,
granting to the private respondent a
legislative franchise for the operation

of the electric light, heat, and power

system in the same municipalities of
Pangasinan.

Section

thereof

provides that: In consideration of the

franchise and rights hereby granted,
the grantee shall pay into the Internal
Revenue office of each Municipality in
which it is supplying electric current to
the public under this franchise, a tax
equal to two per centum of the gross
receipts from electric current sold or
supplied under this franchise. The
petitioner submits that the said law is
unconstitutional insofar as it provides
for

the

payment

by

the

private

respondent of a franchise tax of 2% of

its

gross

taxpayers

receipts,
similarly

while

other

situated

were

subject to the 5% franchise tax

imposed in Section 259 of the Tax
Code,

thereby

discriminatory

and

violative of the rule on uniformity and

equality of taxation. ISSUE: Whether
or not Section 4 of R.A. No. 3843 is
unconstitutional for being violative of
the

"uniformity

and

equality

of

taxation" clause of the Constitution.

RULING: Uniformity means that all
property belonging to the same class

shall be taxed alike The Legislature

has the inherent power not only to
select the subjects of taxation but to
grant exemptions. Tax exemptions
have never been deemed violative of
the equal protection clause. Charters
or special laws granted and enacted
by the Legislature are in the nature of
private

contracts.

They

do

not

constitute a part of the machinery of

the general government. KAPATIRAN
NG

MGA

NAGLILINGKOD

SA

PAMAHALAAN vs. TAN G.R. No.

81311 June 30, 1988 FACTS: This
petition seeks to nullify Executive
Order No. 273 (EO 273, for short),
issued

by

the

President

of

the

Philippines on 25 July 1987, to take

efect on 1 January 1988, and which
amended certain sections of the
National Internal Revenue Code and
adopted the value-added tax (VAT, for
short), for being unconstitutional in
that its enactment is not alledgedly
within the powers of the President;
that

the

VAT

discriminatory,

is

oppressive,

regressive,

and

violates the due process and equal

protection

clauses

and

other

provisions of the 1987 Constitution.

ISSUE: Whether or not EO 273 was
enacted by the president with grave
abuse of discretion and whether or not
such law is unconstitutional. RULING:
Petitioners have failed to show that
EO 273 was issued capriciously and
whimsically or in an arbitrary or
despotic manner by reason of passion
or personal hostility. It appears that a
comprehensive study of the VAT had
been extensively discussed by this
framers
agencies

and

other

involved

government
in

its

implementation, even under the past

administration. The petitioners have
failed to adequately show that the VAT
is oppressive, discriminatory or unjust.
Petitioners

merely

rely

upon

newspaper articles which are actually

hearsay and have evidentiary value.
To justify the nullification of a law,
there must be a clear and unequivocal
breach of the Constitution, not a
doubtful

and

argumentative

implication. The disputed sales tax is

also equitable. It is imposed only on
sales of goods or services by persons
engage in business with an aggregate

gross

annual

sales

exceeding

P200,000.00. Small corner sari-sari

stores are consequently exempt from
its application. 16
23. 17. SISON vs. ANCHETA G.R. No. L59431

July

25,

1984

FACTS:

Petitioner assailed the validity of

Section 1 of Batas Pambansa Blg.
135 which further amends Section 21
of the National Internal Revenue Code
of 1977, which provides for rates of
tax on citizens or residents on (a)
taxable compensation income, (b)
taxable net income, (c) royalties,
prizes, and other winnings, (d) interest
from bank deposits and yield or any
other monetary benefit from deposit
substitutes and from trust fund and
similar arrangements, (e) dividends
and share of individual partner in the
net profits of taxable partnership, (f)
adjusted gross income. Petitioner as
taxpayer alleges that by virtue thereof,
"he would be unduly discriminated
against by the imposition of higher
rates of tax upon his income arising
from the exercise of his profession visa-vis those which are imposed upon
fixed income or salaried individual

taxpayers. He characterizes the above

section as arbitrary amounting to
class

legislation,

capricious

in

oppressive

character.

and

ISSUE:

Whether or not BP 135 Sec 1 is

violative of due procee and equal
protection

clause.

RULING:

The

difficulty confronting petitioner is thus

apparent. He alleges arbitrariness. A
mere allegation, as here. does not
suffice. There must be a factual
foundation of such unconstitutional
taint. Considering that petitioner here
would condemn such a provision as
void or its face, he has not made out a
case. This is merely to adhere to the
authoritative doctrine that were the
due process and equal protection
clauses are invoked, considering that
they arc not fixed rules but rather
broad standards, there is a need for of
such persuasive character as would
lead to such a conclusion. Absent
such a showing, the presumption of
validity must prevail. Due process was
not

violated.

VILLEGAS

vs.

HUI

CHIONG TSAI PAO G.R. No. L-29646

November

10,

1978

FACTS:

On

February 22, 1968, the Municipal

Board

of

Manila

passed

City

Ordinance No. 6537. The said city

ordinance was also signed by then
Manila Mayor Antonio J. Villegas
(Villegas). Section 1 of the said city
ordinance prohibits aliens from being
employed or to engage or participate
in any position or occupation or
business enumerated therein, whether
permanent,

temporary

or

casual,

without first securing an employment

permit from the Mayor of Manila and
paying the permit fee of P50.00 except
persons employed in the diplomatic or
consular missions of foreign countries,
or

in

the

programs

of

Government

technical
both
and

assistance

the

Philippine

any

foreign

government, and those working in

their

respective

members

of

households,

religious

orders

and
or

congregations, sect or denomination,

who are not paid monetarily or in kind.
Hiu Chiong Tsai Pao Ho (Tsai Pao Ho)
who was employed in Manila, filed a
petition with the CFI of Manila to
declare City Ordinance No. 6537 as
null and void for being discriminatory
and violative of the rule of the

uniformity in taxation. The trial court

declared City Ordinance No. 6537 null
and void. Villegas filed the present
petition. ISSUE: Whether or not the
50.00 employment permit fee imposed
by virtue of Ordinance No. 6537 is a
violation

of

the

equal

protection

clause. RULING: The P50.00 fee is

unreasonable not only because it is
excessive but because it fails to
consider valid substantial diferences
in situation among individual aliens
who are required to pay it. Although
the equal protection clause of the
Constitution

does

not

forbid

classification, it is imperative that the

classification should be based on real
and substantial diferences having a
reasonable relation to the subject of
the particular legislation. The same
amount of P50.00 is being collected
from every employed alien whether he
is casual or permanent, part time or
full time or whether he is a lowly
employee or a highly paid executive.
Ordinance No. 6537 is void because it
does not contain or suggest any
standard or criterion to guide the
mayor in the exercise of the power

which has been granted to him by the

ordinance. VILLANUEVA v. CITY OF
ILOILO G.R. No. 26521 December 28,
1968 FACTS: The municipal board of
Iloilo City enacted Ordinance 86,
imposing license tax fees as follows:
1) tenement house, P25.00anually; 2)
tenement house, partly or wholly
engaged in or dedicated to business
in the streets of J.M. Basa, Iznart 17
24. 18. Aldequer, P24.00 per apartment;
3) tenement house, partly or wholly
engaged in business in any other
streets, P12.00 per apartment. The
validity and constitutionality of this
ordinance were challenged by the
spouses Villanueva, owners of 4
tenement

houses

containing

34

apartments. ISSUE: Does Ordinance

11 violate the rules of uniformity of
taxation? RULING: No. This court has
ruled that tenement houses constitute
a distinct class of property. It has
likewise ruled that taxes are uniform
and equal when imposed upon all
properties of the same class or
character within the taxing authority.
The fact, therefore, that the owners of
other classes of buildings in the City of

Iloilo do not pay the taxes imposed by

the ordinance in question is no
argument at all against uniformity and
equality of the tax imposition. PEPSICOLA

BOTTLING

PHILIPPINES,

INC.

CO.

OF

v.

CITY

THE
OF

BUTUAN G.R. No. 22814 August 28,

1968 FACTS: The City of Butuan
enacted Ordinance No. 110 which
was

subsequently

amended

by

Ordinance No. 122. Ordinance No.

110 as amended, imposes a tax on
any person, association, etc. of P0.10
per case of 24 bottles of Pepsi-Cola
and the plaintif Pepsi-Cola paid under
protest. The plaintif filed a complaint
for the recovery of the amount paid
under protest on the ground that
Ordinance No. 110 is illegal, that the
tax imposed is excessive and that it is
unconstitutional.

Plaintif

maintains

that the ordinance is null and void

because

it

is

unjust

and

discriminatory. ISSUE: Whether or not

the ordinance in question is violative
of the uniformity required by the
Constitution?

RULING:

Yes.

Only

sales by agents or consignees of

outside dealers would be subject to

the tax. Sales by local dealers, not

acting for or on behalf of other
merchants, regardless of the volume
of their sales, and even if the same
exceeded those made by said agents
or

consignees

of

producers

or

merchants established outside the

City of Butuan, would be exempt from
the disputed tax. The classification to
be valid and reasonable must be: 1)
based upon substantial distinctions;
2)germane to the purpose of the
ordinance; 3) applicable, not only to
present conditions, but also to future
conditions substantially identical to
those present; and 4) applicable
equally to all those who belong to the
same class. These conditions are not
fully met by the ordinance in question.
ORMOC SUGAR COMPANY, INC. v.
TREASURER OF ORMOC CITY G.R.
No. 23794 February 17, 1968 FACTS:
The Municipal Board of Ormoc City
passed Ordinance No. 4 imposing on
any and all productions of centrifugal
sugar milled at the Ormoc Sugar
Company, Inc., in Ormoc City a
municipal tax equivalent to one per
centum (1%) per export sale to USA

and

other

foreign

countries.

Payments for said tax were made,

under

protest,

Company,

by

Inc.

Ormoc

Sugar

Ormoc

Sugar

Company, Inc. filed before the Court

of First Instance of Leyte a complaint
against the City of Ormoc as well as
its Treasurer, Municipal Board and
Mayor alleging that the ordinance is
unconstitutional for being violative of
the equal protection clause and the
rule of uniformity of taxation. The
court rendered a decision that upheld
the constitutionality of the ordinance.
Hence, this appeal. ISSUE: Whether
or not constitutional limits on the
power of taxation, specifically the
equal protection clause and rule of
uniformity of taxation, were infringed?
RULING: Yes. Equal protection clause
applies only to persons or things
identically situated and does not bar a
reasonable
subject

of

classification

of

legislation,

and

the
a

classification is reasonable where 1) it

is based upon substantial distinctions;
2) these are germane to the purpose
of the law; 3) the classification applies
not only to present conditions, but also

to

future

conditions

substantially

identical to those present; and 4) the

classification applies only to those
who belong to the same class. A
perusal of the requisites shows that
the questioned ordinance does not
meet them, for it taxes only centrifugal
sugar produced and exported by the
Ormoc Sugar Company, Inc. and none
other. The taxing ordinance should not
be singular and exclusive as to
exclude any subsequently established
sugar central for the coverage of the
tax. 18
25. 19. LUTZ v. ARANETA G.R. No. 7859
December 22, 1955 FACTS: This case
was initiated in the Court of First
Instance of Negros Occidental to test
the legality of the taxes imposed by
Commonwealth Act No. 567 (Sugar
Adjustment Act). Section 3 of the said
law levies on owners or persons in
control

of

lands

devoted

to

the

cultivation of sugar cane and ceded to

others for a consideration, on lease or
otherwise a tax equivalent to the
diference between the money value
of the rental or consideration collected
and the amount representing 12 per

centum of the assessed value of such

land. Plaintif Lutz, in his capacity as
Judicial Administrator of the Intestate
Estate of Ledesma, seeks to recover
from the Collector of Internal Revenue
the sum paid by him as taxes alleging
that such tax is unconstitutional and
void, being levied for the aid and
support

of

the

sugar

industry

exclusively, which in plaintifs opinion

is not a public purpose for which a tax
may be constitutionally levied. The
action having been dismissed by the
Court of First Instance, the plaintifs
appealed the case. ISSUE: Whether
or

not

the

law

in

question

is

constitutional? RULING: Yes. The tax

levied is with a regulatory purpose, to
provide means for the rehabilitation
and stabilization of the threatened
sugar industry. The act is primarily an
exercise of the police power. That the
tax to be levied should burden the
sugar

producers

themselves

can

hardly be a ground of complaint. It

appears rational that the tax be
obtained precisely from those who are
to be benefited from the expenditure
of the funds derived from it. At any

rate, it is inherent in the power to tax

that a state be free to select the
subjects of taxation, and it has been
repeatedly

ruled

that

inequalities

which result from a singling out of one

particular for taxation or exemption
infringe no constitutional limitation. It
appears of no moment that the funds
raised under the Sugar Stabilization
Act, now in question, should be
exclusively spent in aid of the sugar
industry, since it is that very enterprise
that

is

being

protected.

OF

CUSTOMS

ASSOCIATION
BROKERS

et

al.

vs.

THE

MUNICIPALITY BOARD of Manila et

al. G.R. No. L-4376, May 22, 1953
FACTS:

This

is

petition

for

declaratory relief to test the validity of

Ordinance No. 3379 passed by the
Municipal Board of the City of Manila
on March 24, 1950.The petitioners
which is composed of all brokers and
public service operators of motor
vehicles in the City of Manila, and G.
Manlapit, Inc., a member of said
association, also a public service
operator of the trucks in said City,
challenge

the

validity

of

said

ordinance on the ground that (1) while

it levies a so-called property tax it is in
reality a license tax which is beyond
the power of the Municipal Board of
the City of Manila. ISSUE: Whether or
not Ordinance No. 3379 is valid as
held by the CFI of Manila. RULING:
No. The ordinance in question while it
refers to property tax and it is fixed ad
valorem yet we cannot reject the idea
that it is merely levied on motor
vehicles operating within the City of
Manila with the main purpose of
raising

funds

to

be

expended

exclusively for the repair, maintenance

and improvement of the streets and
bridges in said city. This is precisely
what the Motor Vehicle Law (Act No.
3992) intends to prevent, for the
reason that, under said Act, municipal
corporation already participate in the
distribution of the proceeds that are
raised for the same purpose of
repairing, maintaining and improving
bridges and public highway (section
73 of the Motor Vehicle Law). This
prohibition is intended to prevent
duplication in the imposition of fees for
the same purpose. It is for this reason

that we believe that the ordinance in

question merely imposes a license fee
although under the cloak of an ad
valorem

tax

prohibition

to

circumvent

the

adverted

to.

above

EASTERN THEATRICAL CO., INC.,

ET AL. vs. VICTOR, ALFONSO G.R.
No. L-1104 May 31, 1949 FACTS:
Twelve corporation engaged in motion
picture business filed a complaint to
impugn the validity of Ordinance No.
2958 of the City of Manila- AN
ORDINANCE IMPOSING A FEE ON
THE PRICE OF EVERY ADMISSION
TICKET

SOLD

CINEMATOGRAPHS,
VAUDEVILLE

BY
THEATERS
COMPANIES

THEATRICAL SHOWS AND BOXING

EXHIBITION. 19
26. 20. Plaintifs, operator of theaters in
Manila And distributor of local or
imported films impugns Sections 1, 2
and 4 of said ordinance as null and
void upon the following grounds: (a)
For violation the Constitution more
particular the provision regarding the
uniformity and equality of taxation and
the equal protection of the laws; (b)
because it contravenes, violates and

is inconsistent with, existing national

legislation more particularly revenue
and tax laws and (c) because it is
unfair,

unjust,

unreasonable

arbitrary
oppressive

capricious
and

is

contrary to and violation our basic and

recognizes principles of taxation and
licensing laws. ISSUE: Whether or not
Ordinance No. 2958 violated the
principle of equality and uniformity of
taxation enjoined by the Constitution.
RULING: No, the said Ordinance does
not violate the principle of equality and
uniformity of taxation. The fact that
some places of amusement are not
taxed

while

others,

such

as

cinematographs, theaters, vaudeville

companies,

theatrical

shows,

and

boxing exhibitions and other kinds of

amusements or places of amusement
are taxed, is no argument at all
against the equality and uniformity of
the

tax

uniformity

imposition.
of

the

Equality
tax

and

imposition.

Equality and uniformity in taxation

means that all taxable articles or kinds
of property of the same class shall be
taxed at the same rate. The taxing
power has the authority to make

reasonable and natural classifications

for purposes of taxation; and the
appellants cannot point out what
places of amusement taxed by the
ordinance do not constitute a class by
themselves

and

which

can

be

confused with those not included in

the ordinance. PHILIPPINE TRUST
COMPANY vs. YATCO G.R. Nos. L46255, 46256, 46259 and 46277
January 23, 1940 FACTS: Prior to the
filing of these suits, and for a number
of years, the plaintifs-appellants had
been paying capital and deposit taxes
without protest, formerly under section
111 of Act No. 1189, and later under
section

1499

Administrative

of

the

Code

of

Revised
1917,

as

amended. Appellants challenge the

constitutionality

of

the

aforesaid

section of the Revised Administrative

Code, principally on the grounds that it
violates the rule regarding uniformity
of

taxation,

and

that

it

is

discriminatory, and therefore violative

of the equal protection clause of the
Constitution.

Appellants

stoutly

maintain that although the foregoing

provision is of general application and

operates on all banks of the same

kind doing business in the Philippines,
the exemption of the National City
Bank

of

New

impositions

York

therein

from

the

specifically

provided (National City Bank of New

York v. Posadas [296 U.S. 497, 80
Law

ed.

351],

makes

the

law

discriminatory and violates the rule of

uniformity in taxation ISSUE: Whether
or not the said section of the Revised
Administrative Code violates the rule
on uniformity of taxation. RULING: No.
A tax is considered uniform when it
operates with the same force and
efect in every place where the subject
may be found. Section 1499 of the
Revised

Administrative

Code,

as

amended, applies uniformly to, and

operates

on,

all

banks

in

the

Philippines without distinction and

discrimination, and if the National City
Bank of New York is exempted from
its operation because it is a federal
instrumentality subject only to the
authority of Congress, that alone
could have the efect of rendering it
violative of the rule of uniformity. In
every well-regulated and enlightened

state

or

government,

certain

descriptions of property and also

certain institutions are exempt from
taxation, but these exemptions have
never been regarded as disturbing the
rules of taxation, even where the
fundamental law had ordained that it
should be uniform. CHURCHILL vs.
CONCEPCION

G.R.

No.

11572

September 22, 1916 FACTS: Section

100 of Act No. 2339 imposed an
annual tax of P4 per square meter
upon "electric signs, billboards, and
spaces used for posting or displaying
temporary

signs,

and

all

signs

displayed on premises not occupied

by

buildings."

This

section

was

subsequently amended by Act No.

2432, efective by reducing the tax on
such signs, billboards, etc., to P2 per
square meter or fraction thereof.
Francis A. Churchill and Stewart Tait,
owners

of

sign

or

billboard

containing an area of 52 square

meters

constructed

on

private

property in the city of Manila and

exposed to public view, were taxes
thereon P104. The tax was paid under
protest. Plaintifs assailed that they

were gaining lesser profit than what

they ought to receive because of the
tax imposed by the said law. However,
it was proven that there was no
attempt on the part of the plaintifs to
raise the advertising rates in order to
cope up with the said tax rates. It will
thus be seen that the contention that
the rates charged for advertising
cannot

be

raised

is

purely

hypothetical, based entirely upon the

opinion of the plaintifs, unsupported
by 20
27. 21. actual test, and that the plaintifs
themselves admit that a number of
other persons have voluntarily and
without protest paid the tax herein
complained of. ISSUE: Is the tax void
for lack of uniformity? RULING: A tax
is uniform, within the constitutional
requirement, when it operates with the
same force and efect in every place
where the subject of it is found.
"Uniformity,"

as

applied

to

the

constitutional provision that all taxes

shall be uniform, means that all
property belonging to the same class
shall be taxed alike. The statute under
consideration imposes a tax of P2 per

square meter or fraction thereof upon

every electric sign, bill-board, etc.,
wherever

found in the

Philippine

Islands. Or in other words, "the rule of

taxation" upon such signs is uniform
throughout
Legislature

the

Islands.

selected

The

signs

and

billboards as a subject for taxation and

it must be presumed that it, in so
doing, acted with a full knowledge of
the situation. MANILA ELECTRIC
COMPANY

v.

PROVINCE

OF

LAGUNA and BENITO BALAZO in his

capacity as Provincial Treasurer of
Laguna G.R. No. 131359. May 5,
1999.

FACTS

Manila

Electric

Company (MERALCO) was granted a

franchise from certain municipalities of
Laguna. On September 13, 1991,
Republic Act 7160, otherwise known
as the Local Government Code of
1991 was enacted, enjoining loval
government units to create their own
sources of revenue and to levy taxes,
fees and charges, subject to the
limitations

expressed

therein,

consistent with the basic policy of

local

autonomy.

Pursuant

to

this

Code, respondent province enacted a

Provincial Ordinance providing that a

tax on business enjoying franchise, at
a rate of 50% of 1% of the gross
annual receipts... On the basis of
such

ordinance,

the

Provincial

Treasurer sent a demand letter to

MERALCO
MERALCO

for

the

paid

tax

payment.

under

protest.

Thereafter, a formal claim for refund

was

sent

by

MERALCO

to

the

Provincial Treasurer claiming that the

franchise tax it had paid and continue
to pay to the National Government
already includes the franchise tax as
provided under Presidential Decree
551.

The

claim

was

denied.

MERALCO filed an appeal with the

trial court but was dismissed. Thus the
petition.

ISSUE

Whether

the

imposition of a franchise tax under

section 2.09 of the Laguna Provincial
Ordinance No. 01-92 violates the nonimpairment clause of the Constitution.
RULING

No.

Although

local

governments do not have the inherent

power to tax, such power may be
delegated to them either by basic law
or by statute. This is provided under
Article X of the 1987 Constitution. The

rationale for the current rule is to

safeguard

the

viability

and

self-

sufficiency of local government units

by directly granting them general and
broad

tax

powers.

The

Local

Government Code of 1991 repealed

the Tax Code. It explicitly authorizes
provincial

governments,

notwithstanding

any

exemption

granted by any law, or other special

laws, xxx (to) impose a tax on
business enjoying a franchise. The
phrase, in lieu of all taxes have to
give way to the peremptory language
of the Local Government Code. THE
PROVINCE OF MISAMIS ORIENTAL
represented

by

TREASURER
ELECTRIC
COMPANY

its

PROVINCIAL

v.

CAGAYAN

POWER
G.R.

AND
No.

LIGHT
L-45355.

January 12, 1990 FACTS Cagayan

Electric Power and Light Company,
Inc.

(CEPALCO)

was

granted

franchise on June 17, 1961 under

Republic Act 3247. It was amended by
Republic Act 3570 and Republic Act
6020. On June 28, 1973, the Local
Tax Code was promulgated which
provides that the province may impose

tax

on

businesses

franchise.

Pursuant

Province

of

enjoying

thereto,

Misamis

the

enacted

Provincial Revenue Ordinance No. 19.

It

demanded

payment.

CEPALCO

refused to pay, alleging that it is

exempt from all taxes except the
franchise tax required by Republic Act
6020. The provincial fiscal upheld the
ordinance.

CEPALCO

paid

under

protest. On appeal to the Secretary of

Justice, ruled in favor of CEPALCO.
The province filed a petition with the
trial court but was dismissed. Thus,
the

petition.

ISSUE

Whether

CEPALCO is exempt from paying the

provincial franchise tax. RULING Yes.
First of, there is no provision in PD
No.

231

expressly

or

impliedly

amending or repealing sec. 3 of RA

6020 which exempts CEPALCO. The
rule is that a special and local statute
applicable to a particular case is not
repealed by a 21
28. 22. later statute which is general in its
terms, provisions and application even
if the terms of the general act are
broad enough to include the cases in
the

special

law

unless

there

is

manifest intent to repeal or alter the

special

law.

The

franchise

of

CEPALCO expressly exempts it from

payment of all taxes of whatever
authority except 3% tax on its gross
earnings. Such exemption is part of
the inducement for the acceptance of
the franchise and the rendition of
public service by the grantee. Local
Tax Regulation No. 3-75 issued by the
Secretary of Finance on June 26,
1976, has made it crystal clear that
the franchise tax provided in the Local
Tax Code (P.D. No. 231, Sec. 9) may
only be imposed on companies with
franchises that do not contain the
exempting clause in-lieu-of-all-taxes.
CAGAYAN ELECTRIC POWER AND
LIGHT CO., INC v. COMMISSIONER
OF

INTERNAL

REVENUE

and

COURT OF TAX APPEALS G.R. No.

L-60126. September 25, 1985 FACTS:
Petitioner Cagayan Electric Power and
Light Co., Inc (CEPALCO) is the
holder

of

legislative

franchise,

Republic Act 3247 under which, it is

exempted

from

taxes,

and

assessments of whatever authority

upon privileges, earnings, income,

franchise,

and

poles,

wires

transformers, and insulators. On June

27, 1968, Republic Act 5431 amended
Section 24 of the Tax Code, making
the petitioner liable for income tax in
addition to franchise tax. On August 4,
1969, Republic Act 6020 was enacted
under which, the petitioner was again
tax exempted. The Commissioner of
Internal

Revenue

(CIR)

sent

demand letter on February 15, 1973,

requiring

petitioner

to

pay

the

deficiency for income taxes for 19681971. Upon petitioner's contention,

the CIR cancelled the assessments
for 1970 but insisted those for 1968
and 1969. Petitioner filed a petition for
review with the tax court which held
petitioner responsible only for the
period from January 1 to August 3,
1969, or before the passage of
Republic Act 6420 which reiterated its
tax exemption. Thus, the appeal.
ISSUE: Whether petitioner's franchise
is a contract which can be impaired by
an implied appeal. RULING: Yes.
Congress could impair petitioner's
franchise by making it liable for
income tax from which heretofore it

was

exempted

by

virtue

of

the

exemption provided in its franchise.

The

Constitution

provides

that

franchise is subject to amendment,

alteration, or repeal by Congress
when public interest so requires.
Petitioner's franchise, under Republic
Act 3247 also provide it is subject to
the Constitution. Republic Act 5431
withdrew petitioner's exemption but
was

restored

by

subsequent

enactment. Thus, it is only liable for

the period of January 1 to August 3,
1969 when its tax exemption was
modified. LEALDA ELECTRIC CO.,
INC

v.

COMMISSIONER

OF

INTERNAL REVENUE and COURT

OF TAX APPEALS G.R. No. L-16428.
April 30, 1963 FACTS: On June 11,
1949, Alfredo, Mario and Benjamin
Benito

formed

partnership

to

operate an electric plant. Such electric

plant was granted a franchise in the
year 1915 to supply electric current to
the

municipalities

of

Albay.

The

franchise, the Certificate of public

convenience and the electric plant
was

transferred

to

the

said

partnership. Under its franchise, the

original grantee and successors-ininterest paid a franchise tax of 2% on

the gross earnings, until October 1,
1946,

when

section

259

of

the

National Internal Revenue Code was

amended by Republic Act 39, which
increased the franchise tax to 5%. On
a date undisclosed, petitioner filed a
petition for refund contending that on
its charter, it was liable to pay a
franchise tax of 2% and not 5% of its
earnings and receipts. As several
petitions

were

not

given

definite

action, thus petitioner filed with the

Court of Tax Appeals (CTA) a petition,
praying for refund from the period of
January 20, 1947 to October 14,
1958. The CTA dismissed the petition.
Thus, the petition, on the ground that
Act No.2475, as amended by Act
2620, granting its franchise constitute
a

private

contract

between

the

petitioner and the Government and

such cannot be amended, altered or
repealed by Section 259 of the Tax
Code.

ISSUE

Whether

petitioner

should pay 5% of his gross earnings.

RULING Yes. Petitioner's franchise
does not specifically state that the rate

of the franchise tax shall be 2% of his

gross earnings or receipts. It simply
provides

that

the

grantee

and

successors-in-interest shall pay the

same franchise tax imposed upon
other grantees at the time Act No.
2475 was enacted. Franchise holders
did pay the rate of 2% until the rate
was increased to 5%. 22