CIR v.

Central Luzon Drug

G.R. No. 159647. April 15, 2005

FACTS:
Respondent is a domestic corporation primarily engaged in retailing of medicines and other
pharmaceutical products.
Respondent granted twenty (20%) percent sales discount to qualified senior citizens on their
purchases of medicines pursuant to Republic Act No. [R.A.] 7432 and its Implementing Rules and
Regulations. The amount allegedly representing the 20% sales discount granted by respondent to
qualified senior citizens totaled P904,769.00. Subsequently, respondent filed its Annual Income Tax
Return for taxable year 1996 declaring therein that it incurred net losses from its operations.
Respondent filed with petitioner a claim for tax refund/credit in the amount of P904,769.00
allegedly arising from the 20% sales discount granted by respondent to qualified senior citizens in
compliance with [R.A.] 7432. Unable to obtain affirmative response from petitioner, respondent elevated
its claim to the Court of Tax Appeals [(CTA or Tax Court)] via a Petition for Review which was later
dismissed for lack of merit. CTA reasoned that credit is premised on the existence of tax liability on the
part of taxpayer. In other words, if there is no tax liability, tax credit is not available.
Respondent lodged a Motion for Reconsideration which was granted by the CTA and ordered
herein petitioner to issue a Tax Credit Certificate in favor of the respondent. CA upheld the resolution of
the CTA. Hence this Petition.

ISSUE:
Whether or not the respondent, despite incurring a net loss, may still claim the 20 percent sales
discount as a tax credit.

HELD:
Petition is not meritorious. On the Sole Issue, that claim of 20 Percent Sales Discount as Tax
Credit Despite Net Loss Section could be given to the respondent? The answer is in the affirmative.
Section 4(a) of RA 743210 grants to senior citizens the privilege of obtaining a 20 percent discount on
their purchase of medicine from any private establishment in the country. The latter may then claim the
cost of the discount as a tax credit.
“Tax credit” is explicitly provided for in Sec4 of RA 7432. The discount given to Senior citizens
is a tax credit, not a deduction from the gross sales of the establishment concerned. The tax credit that
is contemplated under this Act is a form of just compensation, not a remedy for taxes that were
erroneously or illegally assessed and collected. In the same vein, prior payment of any tax liability is a
pre-condition before a taxable entity can benefit from tax credit. The credit may be availed of upon
payment, if any. Where there is no tax liability or where a private establishment reports a net loss for
the period, the tax credit can be availed of and carried over to the next taxable year.
NPC v. City of Cabanatuan
G.R. No. 149110. April 9, 2003

FACTS:

Petitioner is a government-owned and controlled corporation created under Commonwealth Act

No. 120, as amended. It is tasked to undertake the “development of hydroelectric generations of power
and the production of electricity from nuclear, geothermal and other sources, as well as, the
transmission of electric power on a nationwide basis.” Concomitant to its mandated duty, petitioner has,
among others, the power to construct, operate and maintain power plants, auxiliary plants, power
stations and substations for the purpose of developing hydraulic power and supplying such power to
the inhabitants.
Petitioner sells electric power to the residents of Cabanatuan City. Pursuant to section 37 of
Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax.
Petitioner, whose capital stock was subscribed and paid wholly by the Philippine Government,
refused to pay the tax assessment. It argued that the respondent has no authority to impose tax on
government entities. Petitioner also contended that as a non-profit organization, it is exempted from the
payment of all forms of taxes, charges, duties or fees.
The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City,
demanding that petitioner pay the assessed tax due, plus a surcharge. Respondent alleged that
petitioner's exemption from local taxes has been repealed by section 193 of Rep. Act No. 7160 (The
LGC of 1991).
RTC dismissed the case. In the CA, petitioner had the RTC’s order reversed. Petitioner filed a
Motion for Reconsideration upon the CA’s decision but was dismissed by the latter. Thus the petition.

ISSUE:
Whether or not the respondent city government has the authority to issue Ordinance No. 165-
92 and impose an annual tax on "businesses enjoying a franchise," pursuant to section 151 in relation
to section 137 of the LGC.

HELD:
Yes. It is within the sphere of authority of the private respondent to issue an ordinance and
impose an annual tax pursuant to section 151 in relation to section 137 of the LGC. One of the most
significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and
agencies of the national government from the coverage of local taxation. Although as a general rule,
LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e., when specific provisions of the LGC authorize
the LGUs to impose taxes, fees or charges on the aforementioned entities.
In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the
respondent city government to impose on the petitioner the franchise tax in question.
Kapatiran ng mga Naglilingkod sa Pamahalaan v. Tan
GR No 81311, June 30, 1988

FACTS:

A consolidated petition seeks to nullify Executive Order No. 273, issued by the President of the
Philippines 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 allegedly within
the powers of the President; that the VAT is oppressive, discriminatory, regressive, and violates the due
process and equal protection clauses and other provisions of the 1987 Constitution.
The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners
have failed to show justification for the exercise of its judicial powers.
Petitioners first contend that EO 273 is unconstitutional on the Ground that the President had
no authority to issue EO 273. This contention is without merit, it should be recalled that under
Proclamation No. 3, which decreed a Provisional Constitution, sole legislative authority was vested
upon the President. Art. II, sec. 1 of the Provisional Constitution.

ISSUE:
Whether or not VAT is oppressive, discriminatory, regressive, and violates the due process and
equal protection clauses and other provisions of the 1987 Constitution.

HELD:
The petitioners’ assertions in this regard are not supported by facts and circumstances to
warrant their conclusions. They have failed to adequately show that the VAT is oppressive,
discriminatory or unjust. Petitioners merely rely upon newspaper articles which are actually hearsay and
have evidentiary value. To justify the nullification of a law there must be a clear and unequivocal breach
of the Constitution, not a doubtful and argumentative implication.
The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the
public, which are not exempt, at the constant rate of 0% or 10%.
With regard on the issue that the VAT is discriminatory, regressive, and it violates the due
process and equal protection clauses of the constitution by singling out the customs brokers under Sec.
103 (r) of the National Internal Revenue Code.
The phrase "except customs brokers" is not meant to discriminate against customs brokers. It
was inserted in Sec. 103(r) to complement the provisions of Sec. 102 of the Code, which makes the
services of customs brokers subject to the payment of the VAT and to distinguish customs brokers from
other professionals who are subject to the payment of an occupation tax under the Local Tax Code.
With the insertion of the clarificatory phrase "except customs brokers" in Sec. 103(r), a potential
conflict between the two sections, (Secs. 102 and 103), insofar as customs brokers are concerned, is
averted.
David v. Macapagal-Arroyo
G.R. No. 171396, May 3, 2006

FACTS:

These seven (7) consolidated petitions for certiorari and prohibition allege that in issuing
Presidential Proclamation No. 1017 (PP 1017) and General Order No. 5 (G.O. No. 5), President Gloria
Macapagal-Arroyo committed grave abuse of discretion. Petitioners contend that respondent officials of
the Government, in their professed efforts to defend and preserve democratic institutions, are actually
trampling upon the very freedom guaranteed and protected by the Constitution. Hence, such issuances
are void for being unconstitutional.
In their presentation of the factual bases of PP 1017 and G.O. No. 5, respondents stated that
the proximate cause behind the executive issuances was the conspiracy among some military officers,
leftist insurgents of the New People’s Army (NPA), and some members of the political opposition in a
plot to unseat or assassinate President Arroyo. They considered the aim to oust or assassinate the
President and take-over the reigns of government as a clear and present danger.

ISSUE:
Whether or not petitioners have legal standing.

HELD:

Yes. The Court holds that all the petitioners herein have locus standi.

The difficulty of determining locus standi arises in public suits. Here, the plaintiff who asserts a
"public right" in assailing an allegedly illegal official action, does so as a representative of the general
public. He may be a person who is affected no differently from any other person. He could be suing as
a "stranger," or in the category of a "citizen," or ‘taxpayer." In either case, he has to adequately show
that he is entitled to seek judicial protection. In other words, he has to make out a sufficient interest in
the vindication of the public order and the securing of relief as a "citizen" or "taxpayer.
Case law in most jurisdictions now allows both "citizen" and "taxpayer" standing in public
actions. The distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a
taxpayer’s suit is in a different category from the plaintiff in a citizen’s suit. In the former, the plaintiff is
affected by the expenditure of public funds, while in the latter, he is but the mere instrument of the
public concern. As held by the New York Supreme Court in People ex rel Case v. Collins: "In matter of
mere public right, however…the people are the real parties…It is at least the right, if not the duty, of
every citizen to interfere and see that a public offence be properly pursued and punished, and that a
public grievance be remedied." With respect to taxpayer’s suits, Terr v. Jordan held that "the right of a
citizen and a taxpayer to maintain an action in courts to restrain the unlawful use of public funds to his
injury cannot be denied."
The US Supreme Court ruled that for a private individual to invoke the judicial power to
determine the validity of an executive or legislative action, he must show that he has sustained a direct
injury as a result of that action, and it is not sufficient that he has a general interest common to all
members of the public.
Direct injury test was adopted in our jurisdiction in People v. Vera, it held that the person who
impugns the validity of a statute must have "a personal and substantial interest in the case such that he
has sustained, or will sustain direct injury as a result."
By way of summary, the following rules may be culled from the cases decided by this Court.
Taxpayers, voters, concerned citizens, and legislators may be accorded standing to sue, provided that
the following requirements are met:
(1) the cases involve constitutional issues;

(2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure
is unconstitutional;

(3) for voters, there must be a showing of obvious interest in the validity of the election law in question;

(4) for concerned citizens, there must be a showing that the issues raised are of transcendental
importance which must be settled early; and

(5) for legislators, there must be a claim that the official action complained of infringes upon their
prerogatives as legislators.

The locus standi of petitioners in G.R. No. 171396, particularly David and Llamas, is beyond
doubt. The same holds true with petitioners in G.R. No. 171409, Cacho-Olivares and Tribune
Publishing Co. Inc. They alleged "direct injury" resulting from "illegal arrest" and "unlawful search"
committed by police operatives pursuant to PP 1017. Rightly so, the Solicitor General does not question
their legal standing.
It must always be borne in mind that the question of locus standi is but corollary to the bigger
question of proper exercise of judicial power. This is the underlying legal tenet of the "liberality doctrine"
on legal standing. It cannot be doubted that the validity of PP No. 1017 and G.O. No. 5 is a judicial
question which is of paramount importance to the Filipino people. To paraphrase Justice Laurel, the
whole of Philippine society now waits with bated breath the ruling of this Court on this very critical
matter. The petitions thus call for the application of the "transcendental importance" doctrine, a
relaxation of the standing requirements for the petitioners in the "PP 1017 cases."
Abakada Guro Party List v. Ermita
G.R. No. 168056, September 1, 2005

FACTS:
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition
for prohibition on May 27, 2005. They question 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%, effective January 1, 2006,
after any of the following conditions have been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following
conditions has been satisfied:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or

(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half
percent (1 ½%).

Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of

its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine
Constitution.

ISSUE:
1. Whether or not there was an undue delegation of legislative power in violation of Article VI
Sec 28 Par 1 and 2 of the Constitution.
2. Whether or not there was a violation of the due process and equal protection under Article
III Sec. 1 of the Constitution.

HELD:

1. The Court held that there was no Undue Delegation of Legislative Power. In People vs. Vera,45
the Court, through eminent Justice Jose P. Laurel, expounded on the concept and extent of
delegation of power in this wise:
In testing whether a statute constitutes an undue delegation of legislative power or not, it is
usual to inquire whether the statute was complete in all its terms and provisions when it left the
hands of the legislature so that nothing was left to the judgment of any other appointee or delegate
of the legislature.
‘The true distinction’, says Judge Ranney, ‘is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot
be done; to the latter no valid objection can be made.’
The principle which permits the legislature to provide that the administrative agent may
determine when the circumstances are such as require the application of a law is defended upon
the ground that at the time this authority is granted, the rule of public policy, which is the essence of
the legislative act, is determined by the legislature. In other words, the legislature, as it is its duty to
do, determine that, under given circumstances, certain executive or administrative action is to be
taken, and that, under other circumstances, different or no action at all is to be taken. What is thus
left to the administrative official is not the legislative determination of what public policy demands,
but simply the ascertainment of what the facts of the case require to be done according to the terms
of the law by which he is governed. The efficiency of an Act as a declaration of legislative will must,
of course, come from Congress, but the ascertainment of the contingency upon which the Act shall
take effect may be left to such agencies as it may designate. The legislature, then, may provide that
a law shall take effect upon the happening of future specified contingencies leaving to some other
person or body the power to determine when the specified contingency has arisen.
In Edu vs. Ericta, the Court reiterated: What cannot be delegated is the authority under the
Constitution to make laws and to alter and repeal them; the test is the completeness of the statute
in all its terms and provisions when it leaves the hands of the legislature. To determine whether or
not there is an undue delegation of legislative power, the inquiry must be directed to the scope and
definiteness of the measure enacted. The legislative does not abdicate its functions when it
describes what job must be done, who is to do it, and what is the scope of his authority. For a
complex economy, that may be the only way in which the legislative process can go forward. A
distinction has rightfully been made between delegation of power to make the laws which
necessarily involves a discretion as to what it shall be, which constitutionally may not be done, and
delegation of authority or discretion as to its execution to be exercised under and in pursuance of
the law, to which no valid objection can be made. The Constitution is thus not to be regarded as
denying the legislature the necessary resources of flexibility and practicability.
Clearly, the legislature may delegate to executive officers or bodies the power to determine
certain facts or conditions, or the happening of contingencies, on which the operation of a statute is,
by its terms, made to depend, but the legislature must prescribe sufficient standards, policies or
limitations on their authority. While the power to tax cannot be delegated to executive agencies,
details as to the enforcement and administration of an exercise of such power may be left to them,
including the power to determine the existence of facts on which its operation depends.
The case before the Court is not a delegation of legislative power. It is simply a delegation
of ascertainment of facts upon which enforcement and administration of the increase rate under the
law is contingent. The legislature has made the operation of the 12% rate effective January 1,
2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation
of the 12% rate upon factual matters outside of the control of the executive.

2. The equal protection clause under the Constitution means that "no person or class of persons
shall be deprived of the same protection of laws which is enjoyed by other persons or other
classes in the same place and in like circumstances."
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 State’s 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.
The law does not make any classification in 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. Petitioners’ alleged distinctions are based on variables that bear
different consequences. While the implementation of the law may yield varying end results
depending on one’s profit margin and value-added, the Court cannot go beyond what the
legislature has laid down and interfere with the affairs of business.
The equal protection clause does not require the universal application of the laws on all
persons or things without distinction. This might in fact sometimes result in unequal protection.
What the clause requires is equality among equals as determined according to a valid
classification. By classification is meant the grouping of persons or things similar to each other
in certain particulars and different from all others in these same particulars.