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People Vs. Sandiganbayan Case Digest
People Vs. Sandiganbayan
211 SCRA 241 G.R. No. 101724
July 3, 1992
Facts: Two letter complaints were filed with the Tanodbayan by Teofilo
Gelacio on October 28,1986 and December 9, 1986, a political leader of
Governor Valentina Plaza, wife of Congressman Democrito Plaza of Agusan
del Sur, shortly after private respondent had replaced Mrs. Plaza as
OIC/provincial Governor of Agusan del Sur on March 1986 The complaint
questioned the issuance to Governor Paredes, when he was still the
provincial attorney in 1976 of a free patent title for a lot in the Rosario public
land subdivision in San Francisco, Agusan del Sur. He misrepresented to a
Lands Inspector of the Bureau of Lands that the lands subject herein are
disposable lands, thereby inducing said inspector to recommend approval of
his application for free patent. On August 10, 1989 an information for
violation of RA 3019 Anti-Graft and Corrupt Practices Act was then filed in
the Sandiganbayan after an ex parte preliminary investigation. A motion to
quash the information was filed by the private respondent contending among
others that he is charged for an offence which has prescribed. Said motion
was granted. The crime was committed on January 21, 1976, period of
prescription was 10 years, therefore it has prescribed in 1986. Now the
motion to quash was being assailed.
Issue: Whether or Not the motion to quash validly granted.
Held: Yes. RA 3019, being a special law the computation of the period for the
prescription of the crime is governed by Sec. 29 of Act No. 3326, which
begins to run from the day of the commission of the crime and not the
discovery of it. Additionally, BP 195 which was approved on March 16, 1982,
amending Sec. 11 of RA 3019 by increasing ten to fifteen years of the period
for the prescription or extinguishment of a violation of RA 3019 may not be
given retroactive application to the crime which was committed by Paredes,
as it is prejudicial to the accused. To apply BP 195 to Paredes would make it
an ex post facto law1 for it would alter his situation to his disadvantage by
making him criminally liable for a crime that had already been extinguished
under the law existing when it was committed.
CITY OF ILOILO VS VILLANUEVA
G.R. NO. L-12695 [March 23, 1959]
FACTS:
Spouses Villanueva owned a four apartment houses (TENEMENT
HOUSE).Each apartment is occupied by one family and the food for each is
cooked therein. The Municipal Board of Iloilo city enacted Ordinance No.86
which provides to collect from owners of Tenement houses an annual
License tax fee.
Pursuant to Ordinance No.86 the city sought to collect from the spouses an
annual license tax fee of P24 for each of their apartments. Allegedly due,
20% penalty is imposed. The spouses having refused to pay the same, the
City of Iloilo filed in the municipal court action to recover the tax and penalty
above mentioned. The spouses answered the complaint contending that the
ordinance under which the tax is sought to be collected infringes the powers
granted to the city by its charter and that said ordinance is violative of the
constitutional provisions requiring uniformity of taxation upon the theory
that it is oppressive, unreasonable and discriminatory.
Because issue of constitutionality is raised, the case was elevated to the
court of 1st instance. Thereafter the court rendered judgment upholding the
legality of the ordinance and ordering the spouses to pay the taxes with
interest and cost. Defendants appealed but sense it involves only question of
law it was elevated.
ISSUE:
Whether the power thus conferred to the municipal board has been
properly exercised?
RULING:
It is clear from the charter that its municipal board is given the
power to impose a license fee upon the owner of any business or occupation
established in the city in the exercise of its police power. This is clearly
inferred in C.A. No.158. But in fixing the fee to be exacted, it becomes
important to determine its nature and purpose. Either as a police
regulation or purely as a revenue measure, for the rules that governs its
validity is different. Thus, it has been held that license fee for revenue rest
upon the taxing power as distinguished from the police power and the power
of the municipality to exact such fees must be expressly granted by the
charter or statute and is not to be implied from the conferred power to
license and regulate merely. Now the ordinance in question reveals that the
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P24 tax fee charged is not merely regulation but for revenue. For it was far
exceeds.
Now even if the section 21 of the charter gives the city power to tax for the
purpose of revenue and fix license fee, regulate hotels, lodging houses, or
boarding houses therein enumerated in the charter. The object at bar
(TENEMENT HOUSE) is deferent from what is stated in the charter.
It is well settled that a municipal corporation, unlike a sovereign state, is
clothed with no inherent power of taxation. That, the power to tax owners of
tenement houses is not one of those appearing and clearly or expressly
granted to the city of Iloilo by its charter. Wherefore, the decision appealed
from is reversed. The complaint is dismissed without cost.
American Bible Society vs. City of Manila
GR No. L-9637 | April 30, 1957
Facts:
· American Bible Society is a foreign, non-stock, non-profit, religious,
missionary corporation duly registered and doing business in the Philippines
through its Philippine agency established in Manila in November, 1898
· City of Manila is a municipal corporation with powers that are to be
exercised in conformity with the provisions of Republic Act No. 409, known
as the Revised Charter of the City of Manila
· American Bible Society has been distributing and selling bibles and/or
gospel portions throughout the Philippines and translating the same into
several Philippine dialect
· City Treasurer of Manila informed American Bible Society that it was
violating several Ordinances for operating without the necessary permit and
license, thereby requiring the corporation to secure the permit and license
fees covering the period from 4Q 1945-2Q 1953
· To avoid closing of its business, American Bible Society paid the City of
Manila its permit and license fees under protest
· American Bible filed a complaint, questioning the constitutionality and
legality of the Ordinances 2529 and 3000, and prayed for a refund of the
payment made to the City of Manila. They contended:
a. They had been in the Philippines since 1899 and were not required to pay
any license fee or sales tax
b. it never made any profit from the sale of its bibles
· City of Manila prayed that the complaint be dismissed, reiterating the
constitutionality of the Ordinances in question
· Trial Court dismissed the complaint
· American Bible Society appealed to the Court of Appeals
Issue: WON American Bible Society liable to pay sales tax for the
distribution and sale of bibles
Ruling: NO
· Under Sec. 1 of Ordinance 3000, one of the ordinance in question,
person or entity engaged in any of the business, trades or occupation
enumerated under Sec. 3 must obtain a Mayor’s permit and license from the
City Treasurer. American Bible Society’s business is not among those
enumerated
· However, item 79 of Sec. 3 of the Ordinance provides that all other
businesses, trade or occupation not mentioned, except those upon which the
City is not empowered to license or to tax P5.00
· Therefore, the necessity of the permit is made to depend upon the power
of the City to license or tax said business, trade or occupation.
· 2 provisions of law that may have bearing on this case:
a. Chapter 60 of the Revised Administrative Code, the Municipal Board
of the City of Manila is empowered to tax and fix the license fees on retail
dealers engaged in the sale of books
b. Sec. 18(o) of RA 409: to tax and fix the license fee on dealers in general
merchandise, including importers and indentors, except those dealers who
may be expressly subject to the payment of some other municipal tax.
Further, Dealers in general merchandise shall be classified as (a) wholesale
dealers and (b) retail dealers. For purposes of the tax on retail dealers,
general merchandise shall be classified into four main classes: namely (1)
luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4)
miscellaneous articles. A separate license shall be prescribed for each class
but where commodities of different classes are sold in the same
establishment, it shall not be compulsory for the owner to secure more than
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one license if he pays the higher or highest rate of tax prescribed by
ordinance. Wholesale dealers shall pay the license tax as such, as may be
provided by ordinance
· The only difference between the 2 provisions is the limitation as to the
amount of tax or license fee that a retail dealer has to pay per annum
· As held in Murdock vs. Pennsylvania, The power to impose a license tax
on the exercise of these freedoms provided for in the Bill of Rights, is indeed
as potent as the power of censorship which this Court has repeatedly struck
down. It is not a nominal fee imposed as a regulatory measure to defray the
expenses of policing the activities in question. It is in no way apportioned. It
is flat license tax levied and collected as a condition to the pursuit of
activities whose enjoyment is guaranteed by the constitutional liberties of
press and religion and inevitably tends to suppress their exercise. That is
almost uniformly recognized as the inherent vice and evil of this flat license
tax.
· Further, the case also mentioned that the power to tax the exercise of a
privilege is the power to control or suppress its enjoyment. Those who can
tax the exercise of this religious practice can make its exercise so costly as to
deprive it of the resources necessary for its maintenance. Those who can tax
the privilege of engaging in this form of missionary evangelism can close all
its doors to all those who do not have a full purse
· Under Sec. 27(e) of Commonwealth Act No. 466 or the National
Internal Revenue Code,Corporations or associations organized and operated
exclusively for religious, charitable, . . . or educational purposes, . . .: Provided,
however, That the income of whatever kind and character from any of its
properties, real or personal, or from any activity conducted for profit,
regardless of the disposition made of such income, shall be liable to the tax
imposed under this Code shall not be taxed
· The price asked for the bibles and other religious pamphlets was in some
instances a little bit higher than the actual cost of the same but this cannot
mean that American Bible Society was engaged in the business or
occupation of selling said "merchandise" for profit
· Therefore, the Ordinance cannot be applied for in doing so it would impair
American Bible Society’s free exercise and enjoyment of its religious
profession and worship as well as its rights of dissemination of religious
beliefs.
Wherefore, and on the strength of the foregoing considerations, We
hereby reverse the decision appealed from, sentencing defendant return
to plaintiff the sum of P5,891.45 unduly collected from it
CIR v Solidbank Corporation (G.R. No. 148191)
Facts:
Solidbank filed its Quarterly Percentage Tax Returns reflecting gross receipts
amounting to P1,474,693.44. It alleged that the total included
P350,807,875.15 representing gross receipts from passive income which was
already subjected to 20%final withholding tax (FWT).
The Court of Tax Appeals (CTA) held in Asian Ban Corp. v Commissioner,
that the 20% FWT should not form part of its taxable gross receipts for
purposes of computing the tax.
Solidbank, relying on the strength of this decision, filed with the BIR a letter-
request for the refund or tax credit. It also filed a petition for review with the
CTA where the it ordered the refund.
The CA ruling, however, stated that the 20% FWT did not form part of the
taxable gross receipts because the FWT was not actually received by the
bank but was directly remitted to the government.
The Commissioner claims that although the FWT was not actually received
by Solidbank, the fact that the amount redounded to the bank’s benefit
makes it part of the taxable gross receipts in computing the Gross Receipts
Tax. Solidbank says the CA ruling is correct.
Issue:
Whether or not the FWT forms part of the gross receipts tax.
Held:
Yes. In a withholding tax system, the payee is the taxpayer, the person on
whom the tax is imposed. The payor, a separate entity, acts as no more than
an agent of the government for the collection of tax in order to ensure its
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payment. This amount that is used to settle the tax liability is sourced from
the proceeds constitutive of the tax base. On 27 November 1990, Cory issued Executive Order 438 which imposed, in
addition to any other duties, taxes and charges imposed by law on all
These proceeds are either actual or constructive. Both parties agree that
there is no actual receipt by the bank. What needs to be determined is if articles imported into the Philippines, an additional duty of 5% ad valorem.
there is constructive receipt. Since the payee is the real taxpayer, the rule on
This additional duty was imposed across the board on all imported articles,
constructive receipt can be rationalized.
including crude oil and other oil products imported into the Philippines. In
The Court applied provisions of the Civil Code on actual and constructive
possession. Article 531 of the Civil Code clearly provides that the acquisition 1991, EO 443 increased the additional duty to 9%. In the same year, EO 475
of the right of possession is through the proper acts and legal formalities
was passed reinstating the previous 5% duty except that crude oil and other
established. The withholding process is one such act. There may not
be actual receipt of the income withheld; however, as provided for in Article oil products continued to be taxed at 9%. Garcia, a representative from
532, possession by any person without any power shall be considered as
acquired when ratified by the person in whose name the act of possession is Bataan, avers that EO 475 and 478 are unconstitutional for they violate Sec
executed. 24 of Art 6 of the Constitution which provides: ” All appropriation, revenue
In our withholding tax system, possession is acquired by the payor as the or tariff bills, bills authorizing increase of the public debt, bills of local
withholding agent of the government, because the taxpayer ratifies the very
act of possession for the government. There is thus constructive receipt. application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.”
The processes of bookkeeping and accounting for interest on deposits and
yield on deposit substitutes that are subjected to FWT are tantamount to He contends that since the Constitution vests the authority to enact revenue
delivery, receipt or remittance. Besides, Solidbank admits that its income is
bills in Congress, the President may not assume such power of issuing
subjected to a tax burden immediately upon “receipt”, although it claims
that it derives no pecuniary benefit or advantage through the withholding Executive Orders Nos. 475 and 478 which are in the nature of revenue-
process.
generating measures.
There being constructive receipt, part of which is withheld, that income is
included as part of the tax base on which the gross receipts tax is imposed.
ISSUE: Whether or not EO 475 and 478 are constitutional.
HELD: Under Section 24, Article VI of the Constitution, the enactment of
appropriation, revenue and tariff bills, like all other bills is, of course, within
Enrique Garcia vs Executive Secretary the province of the Legislative rather than the Executive Department. It does
on November 16, 2011
not follow, however, that therefore Executive Orders Nos. 475 and 478,

Political Law – Congress Authorizing the President to Tax assuming they may be characterized as revenue measures, are prohibited to
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prior to the effectivity of the law would violate the constitutional provision of
the President, that they must be enacted instead by the Congress of the
“non-impairment of contracts.”
Philippines. Section 28(2) of Article VI of the Constitution provides as follows:
ISSUE: Whether R.A. No. 7716 is unconstitutional on ground that it violates
“(2) The Congress may, by law, authorize the President to fix within specified
the contract clause under Art. III, sec 10 of the Bill of Rights.
limits, and subject to such limitations and restrictions as it may impose,
tariff rates, import and export quotas, tonnage and wharfage dues, and other RULING: No. The Supreme Court the contention of CREBA, that the
imposition of the VAT on the sales and leases of real estate by virtue of
duties or imposts within the framework of the national development program contracts entered into prior to the effectivity of the law would violate the
of the Government.” There is thus explicit constitutional permission to constitutional provision of non-impairment of contracts, is only slightly less
abstract but nonetheless hypothetical. It is enough to say that the parties to
Congress to authorize the President “subject to such limitations and
a contract cannot, through the exercise of prophetic discernment, fetter the
restrictions as [Congress] may impose” to fix “within specific limits” “tariff exercise of the taxing power of the State. For not only are existing laws read
rates . . . and other duties or imposts . . . .” into contracts in order to fix obligations as between parties, but the
reservation of essential attributes of sovereign power is also read into
contracts as a basic postulate of the legal order. The policy of protecting
contracts against impairment presupposes the maintenance of a government
which retains adequate authority to secure the peace and good order of
TOLENTINO VS. THE SECRETARY OF FINANCE Case Digest society. In truth, the Contract Clause has never been thought as a limitation
on the exercise of the State's power of taxation save only where a tax
ARTURO M. TOLENTINO VS. THE SECRETARY OF FINANCE and THE
exemption has been granted for a valid consideration.
COMMISSIONER OF INTERNAL REVENUE
1994 Aug 25
Such is not the case of PAL in G.R. No. 115852, and the Court does not
G.R. No. 115455
understand it to make this claim. Rather, its position, as discussed above, is
235 SCRA 630
that the removal of its tax exemption cannot be made by a general, but only
FACTS: The valued-added tax (VAT) is levied on the sale, barter or exchange
by a specific, law.
of goods and properties as well as on the sale or exchange of services. It is
equivalent to 10% of the gross selling price or gross value in money of goods
Further, the Supreme Court held the validity of Republic Act No. 7716 in its
or properties sold, bartered or exchanged or of the gross receipts from the
formal and substantive aspects as this has been raised in the various cases
sale or exchange of services. Republic Act No. 7716 seeks to widen the tax
before it. To sum up, the Court holds:
base of the existing VAT system and enhance its administration by amending
the National Internal Revenue Code.
(1) That the procedural requirements of the Constitution have been complied
with by Congress in the enactment of the statute;
The Chamber of Real Estate and Builders Association (CREBA) contends that
the imposition of VAT on sales and leases by virtue of contracts entered into
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(2) That judicial inquiry whether the formal requirements for the enactment
of statutes - beyond those prescribed by the Constitution - have been
observed is precluded by the principle of separation of powers;
(3) That the law does not abridge freedom of speech, expression or the press,
nor interfere with the free exercise of religion, nor deny to any of the parties
the right to an education; and
(4) That, in view of the absence of a factual foundation of record, claims that
the law is regressive, oppressive and confiscatory and that it violates vested
rights protected under the Contract Clause are prematurely raised and do
not justify the grant of prospective relief by writ of prohibition.
WHEREFORE, the petitions are DISMISSED.
Sison vs Ancheta
GR No. L-59431, 25 July 1984
Facts: Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero
M. Sison, as taxpayer, alleges that "he would be unduly discriminated
against by the imposition of higher rates of tax upon his income arising from
the exercise of his profession vis-a-vis those which are imposed upon fixed
income or salaried individual taxpayers. He characterizes said provision as
arbitrary amounting to class legislation, oppressive and capricious in
character. It therefore violates both the equal protection and due process
clauses of the Constitution as well asof the rule requiring uniformity in
taxation.
Issue: Whether or not the assailed provision violates the equal protection
and due process clauses of the Constitution while also violating the rule that
taxes must be uniform and equitable.
Held: The petition is without merit.
On due process - it is undoubted that it may be invoked where a taxing
statute is so arbitrary that it finds no support in the Constitution. An
obvious example is where it can be shown to amount to the confiscation of
property from abuse of power. Petitioner alleges arbitrariness but his mere
allegation does not suffice and there must be a factual foundation of such
unconsitutional taint.
On equal protection - it suffices that the laws operate equally and uniformly
on all persons under similar circumstances, both in the privileges conferred
and the liabilities imposed.
On the matter that the rule of taxation shall be uniform and equitable - this
requirement is met when the tax operates with the same force and effect in
every place where the subject may be found." Also, :the rule of uniformity
does not call for perfect uniformity or perfect equality, because this is hardly
unattainable." When the problem of classification became of issue, the Court
said: "Equality and uniformity in taxation means that all taxable articles or
kinds of property of the same class shall be taxed the same rate. The taxing
power has the authority to make reasonable and natural classifications for
purposes of taxation..." As provided by this Court, where "the differentation"
complained of "conforms to the practical dictates of justice and equity" it "is
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not discriminatory within the meaning of this clause and is therefore
uniform."
City of Baguio vs. De Leon
CITY OF BAGUIO vs. DE LEON
25 SCRA 938
GR No. L-24756, October 31, 1968
"There is no double taxation where one tax is imposed by the state and the
other is imposed by the city."
FACTS: The City of Baguio passed an ordinance imposing a license fee on
any person, entity or corporation doing business in the City. The ordinance
sourced its authority from RA No. 329, thereby amending the city charter
empowering it to fix the license fee and regulate businesses, trades and
occupations as may be established or practiced in the City. De Leon was
assessed for P50 annual fee it being shown that he was engaged in property
rental and deriving income therefrom. The latter assailed the validity of the
ordinance arguing that it is ultra vires for there is no statury authority which
expressly grants the City of Baguio to levy such tax, and that there it
imposed double taxation, and violates the requirement of uniformity.
ISSUE: Are the contentions of the defendant-appellant tenable?
HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised
Administrative Code empowering the City Council not only to impose a
license fee but to levy a tax for purposes of revenue, thus the ordinance
cannot be considered ultra vires for there is more than ample statury
authority for the enactment thereof.
Second, an argument against double taxation may not be invoked where
one tax is imposed by the state and the other is imposed by the city, so that
where, as here, Congress has clearly expressed its intention, the statute
must be sustained even though double taxation results.
And third, violation of uniformity is out of place it being widely recognized
that there is nothing inherently obnoxious in the requirement that license
fees or taxes be exacted with respect to the same occupation, calling or
activity by both the state and the political subdivisions thereof.
Maceda vs. Macaraig Jr.
MACEDA vs. MACARAIG, JR.
197 SCRA 771
GR No. 88291 May 31, 1991
"A taxpayer may question the legality of a law or regulation when it involves
illegal expenditure of public money."
FACTS: Senator Ernesto Maceda sought to nullify certain decisions, orders,
rulings, and resolutions of respondents Executive Secretary, Secretary of
Finance, Commissioner of Internal Revenue, Commissioner of Customs and
the Fiscal Incentives Review Board FIRB for exempting the National Power
Corporation (NPC) from indirect tax and duties. RA 358, RA 6395 and PD
380 expressly grant NPC exemptions from all taxes whether direct or
indirect. In 1984, however, PD 1931 and EO 93 withdrew all tax exemptions
granted to all GOCCs including the NPC but granted the President and/or
the Secretary of Finance by recommendation of the FIRB the power to restore
certain tax exemptions. Pursuant to the latter law, FIRB issued a resolution
restoring the tax and duty exemption privileges of the NPC. The actions of
the respondents were thus questioned by the petitioner by this petition for
certiorari, prohibition and mandamus with prayer for a writ of preliminary
injunction and/or restraining order. To which public respondents argued,
among others, that petitioner does not have the standing to challenge the
questioned orders and resolution because he was not in any way affected by
such grant of tax exemptions.
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ISSUE: Has a taxpayer the capacity to question the legality of the resolution
issued by the FIRB restoring the tax exemptions?
HELD: Yes. In this petition it is alleged that petitioner is "instituting this suit
in his capacity as a taxpayer and a duly-elected Senator of the Philippines."
Public respondent argues that petitioner must show that he has sustained
direct injury as a result of the action and that it is not sufficient for him to
have a mere general interest common to all members of the public. The
Court however agrees with the petitioner that as a taxpayer he may file the
instant petition following the ruling in Lozada when it involves illegal
expenditure of public money. The petition questions the legality of the tax
refund to NPC by way of tax credit certificates and the use of said assigned
tax credits by respondent oil companies to pay for their tax and duty
liabilities to the BIR and Bureau of Customs.
Pelaez vs Auditor General
on December 18, 2011
Political Law – Sufficient Standard Test and Completeness Test
From Sept 04 to Oct 29, 1964, the President (Marcos) issued executive
orders creating 33 municipalities – this is purportedly in pursuant to Sec 68
of the Revised Administrative Code which provides that the President of the
Philippines may by executive order define the boundary, or boundaries, of
any province, sub-province, municipality, [township] municipal district or
other political subdivision, and increase or diminish the territory comprised
therein, may divide any province into one or more subprovinces…The VP
Emmanuel Pelaez and a taxpayer filed a special civil action to prohibit the
auditor general from disbursing funds to be appropriated for the said
municipalities. Pelaez claims that the EOs are unconstitutional. He said that
Sec 68 of the RAC has been impliedly repealed by Sec 3 of RA 2370 which
provides that barrios may “not be created or their boundaries altered nor
their names changed” except by Act of Congress or of the corresponding
provincial board “upon petition of a majority of the voters in the areas
affected” and the “recommendation of the council of the municipality or
municipalities in which the proposed barrio is situated.” Pelaez argues,
accordingly: “If the President, under this new law, cannot even create a
barrio, can he create a municipality which is composed of several barrios,
since barrios are units of municipalities?” The Auditor General countered
that only barrios are barred from being created by the President.
Municipalities are exempt from the bar and that t a municipality can be
created without creating barrios. Existing barrios can just be placed into the
new municipality. This theory overlooks, however, the main import of Pelaez’
argument, which is that the statutory denial of the presidential authority to
create a new barrio implies a negation of the bigger power to create
municipalities, each of which consists of several barrios.
ISSUE: Whether or not Congress has delegated the power to create barrios to
the President by virtue of Sec 68 of the RAC.
HELD: Although Congress may delegate to another branch of the
government the power to fill in the details in the execution, enforcement or
administration of a law, it is essential, to forestall a violation of the principle
9
of separation of powers, that said law: (a) be complete in itself — it must set
forth therein the policy to be executed, carried out or implemented by the
delegate — and (b) fix a standard — the limits of which are sufficiently
determinate or determinable — to which the delegate must conform in the
performance of his functions. Indeed, without a statutory declaration of
policy, the delegate would, in effect, make or formulate such policy, which is
the essence of every law; and, without the aforementioned standard, there
would be no means to determine, with reasonable certainty, whether the
delegate has acted within or beyond the scope of his authority.
In the case at bar, the power to create municipalities is eminently legislative
in character not administrative.
Commissioner vs. AlgueGRL-28890, 17 February 1988
First Division, Cruz (J); 4 concur
Facts:
The Philippine Sugar Estate Development Company (PSEDC) appointed
Algue Inc. as its agent,authorizing it to sell its land, factories, and oil
manufacturing process. The Vegetable Oil InvestmentCorporation (VOICP)
purchased PSEDC properties. For the sale, Algue received a commission of
P125,000and it was from this commission that it paid Guevara, et. al.
organizers of the VOICP, P75,000 in promotionalfees. In 1965, Algue received
an assessment from the Commissioner of Internal Revenue in the amount
ofP83,183.85 as delinquency income tax for years 1958 amd 1959. Algue
filed a protest or request forreconsideration which was not acted upon by the
Bureau of Internal Revenue (BIR). The counsel for Alguehad to accept the
warrant of distrant and levy. Algue, however, filed a petition for review with
the Coourt ofTax Appeals.
Issue:
Whether the assessment was reasonable.
Held:
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance.Every person who is able to pay must contribute his
share in the running of the government. The Government,for his part, is
expected to respond in the form of tangible and intangible benefits intended
to improve thelives of the people and enhance their moral and material
values. This symbiotic relationship is the rationale oftaxation and should
dispel the erroneous notion that is an arbitrary method of exaction by those
in the seat ofpower.Tax collection, however, should be made in accordance
with law as any arbitrariness will negate the veryreason for government
itself. For all the awesome power of the tax collector, he may still be stopped
in histracks if the taxpayer can demonstrate that the law has not been
observed. Herein, the claimed deduction(pursuant to Section 30 [a] [1] of the
Tax Code and Section 70 [1] of Revenue Regulation 2: as tocompensation for
personal services) had been legitimately by Algue Inc. It has further proven
that thepayment of fees was reasonable and necessary in light of the efforts
exerted by the payees in inducinginvestors (in VOICP) to involve themselves
in an experimental enterprise or a business requiring millions ofpesos.The
assessment was not reasonable
Allied Thread vs. City of ManilaGR L-40296, 21 November 1984
En Banc, Abad Santos (J): 10 concur, 2 took no part
Facts:
Allied Thread Co. Inc. is engaged in the business of manufacturing sewing
thread and yarn. It operatesits factory and maintains an office in Pasig,
Rizal. In order to sell its products in Manila and in other parts ofthe
Philippines, it engaged the services of a sales broker, Ker & Co. Ltd., the
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latter deriving commissionsfrom every sale made for its principal. The City of
Manila enacted Ordinance 7516 imposing business taxesbased on gross
sales on a graduated basis on manufacturers, importers or producers doing
business in Manila.Allied Thread and Ker & Co. alleged that said ordinance
is invalid for being contrary to Section 54 of PD426.
Issue:
Whether Alleid Thread is properly taxed in Manila.
Held:
Ordinance 7516, as amended, imposes a business tax on manufacturers,
importers or producers doingbusiness in Manila. The tax imposition is upon
the performance of an act, enjoyment of a privilege, or theengaging in an
occupation, and hence is in the nature of an excise tax. The power to levy an
excise upon theperforance of an act or the engaging in an occupation does
not depend upon the domicile of the person subjecttot he excise, nor upon
the physical location of the property and in connection with the act or
occupationtaxed, but depends upon the place in which the act is performed
or occupation engaged in. Thus, since AlliedThread sells its products in the
City of Manila through its broker, Ker & Co., it cannot escapte the tax
liabilityimposed by Ordinance 7516, as amended.
Issue:
Whether Ordinance 1 is discriminatory.
Held:
The ordinance does not single out Victorias as the only object of the
ordinance but is made to apply toany sugar central or sugar refinery which
may happen to operate in the municipality. The fact that VictoriasMilling is
actually the sole operator of a sugar central and a sugar refinery does not
make the ordinancediscriminatory. The ordinance is unlike that in Ormoc
Sugar Company vs. Municipal Board of Ormoc City,which specifically spelled
out Ormoc Sugar as the subject of the taxation, the name of the company
hereinwas never mentioned in the ordinance.
[39]Punsalan vs. ManilaGR L-4817, 26 May 1954
En Banc, Reyes (J): 7 concur
Facts:
Ordinance 3398 was enacted pursuant to paragraph 1 of Section 18 ofthe
Revised Charter of the Cityof Manila, imposing a municipal occupation tax
on persons exercising various professions in the city. Variousprofessionals
filed suit to annul the ordinance and the provision of law authorizing the
enactment of theordinance, and to call for the refund collected taxes under
the ordinance.
Issue:
Whether the Ordinance violates the equal protection clause.
Held:
The legislature may, in its discretion, select what occupation shall be taxed,
and in the exercise of thatdiscretion it may tax all, or it may select for
taxation certain classes and leave the other untaxed. Manila, asthe seat of
the National Government and with a population and volume of trade many
times that of any otherPhilippine city or municipality, offers a more lucrative
field for the practice of the professions, so that it is butfair that the
professionals in Manila be made to pay a higher occupation tax than their
brethen in theprovinces. The ordinance imposes the tax upon every person
“exercising” or “pursuing” any of the occupationnamed in the ordinance, and
does not make any distinction between professional having offices in Manila
andoutsiders who practice their profession therein. What constitutes
exercise or pursuit of a profession in the cityis a matter of judicial
determination.The Ordinance does not violate the equal protection clause.
11

Ormoc Sugar vs. Treasurer of Ormoc CityGR L-23794, 17 February 1968 The validity of such ordinance was challenged byEusebio and Remedios
En Banc, Bangzon JP (J): 9 concur Villanueva, owners of four tenement houses containing 34 apartments. The
Facts: SupremeCourt held the ordinance to be ultra vires. On 15 January 1960,
however, the municipal board, believing that itacquired authority to enact an
In 1964, the Municipal Board of Ormoc City passed Ordinance 4, imposing
ordinance of the same nature pursuant to the Local Autonomy Act,
on any and all productionsof centrifuga sugar milled at the Ormoc Sugar Co.
enactedOrdinance 11 (series of 1960), Eusebio and Remedios Villaniueva
Inc. in Ormoc City a municpal tax equivalent to 1% perexport sale to the
assailed the ordinance anew.
United States and other foreign countries. The company paid the said tax
under protest. Itsubsequently filed a case seeking to invalidate the ordinance Issue:
for being unconstitutional.
Whether Ordinance 11 violate the rule of uniformity of taxation.
Issue:
Held:
Whether the ordinance violates the equal protection clause.
The Court has ruled that tenement houses constitute a distinct class of
Held: property; and that taxes areuniform and equal when imposed upon all
property of the same class or character within the taxing authority.The fact
The Ordinance taxes only centrifugal sugar produced and exported by the
that the owners of the other classes of buildings in Iloilo are not imposed
Ormoc Sugar Co. Inc. andnone other. At the time of the taxing ordinance’s
upon by the ordinance, orthat tenement taxes are imposed in other cities do
enacted, the company was the only sugar central in OrmocCity. The
not violate the rule of equality and uniformity. The ruledoes not require that
classification, to be reasonable, should be in terms applicable to future
taxes for the same purpose should be imposed in different territorial
conditions as well. Thetaxing ordinance should not be singular and exclusive
subdivisions at thesame time. So long as the burden of tax falls equally and
as to exclude any subsequently established sugar central, of the same class
impartially on all owners or operators of tenementhouses similarly classified
as the present company, from the coverage of the tax. As it is now, even if
or situated, equality and uniformity is accomplished. The presumption that
later asimilar company is set up, it cannot be subject to the tax because the
taxstatutes are intended to operate uniformly and equally was not
ordinance expressly points only to thecompany as the entity to be levied
overthrown herein.
upon

Villanueva vs. Iloilo City GR L-26521, 28 December 1968

En Banc, Castro (J): 8 concur
Facts:
On 30 September 1946, the Municipal Board of Iloilo City enacted Ordinance
86 imposing license taxfees upon tenement house (P25); tenemen house
partly engaged or wholly engaged in and dedicated tobusiness in Baza,
Iznart, and Aldeguer Streets (P24 per apartment); and tenement house,
padtly or whollyengaged in business in other streets (P12 per apartment).
Abra Valley College vs. AquinoGR L-39086, 15 June 1988
Second Division, Paras (J): 4 concur
Facts:
Abra Valley College rents out the ground floor of its college building to
Northern MarketingCorporation while the second floor thereof is used by the
Director of the College for residential purposes. Themunicipal and provincial
12
treasurers served upon the College a “notice of seizure” and later a “notice of
sale”due to the alleged failure of the College to pay real estate taxes and
penalties thereon. The school filed suit toannul said notices, claiming that it
is tax-exempt.
Issue:
Whether the College is exempt from taxes.
Held:
While the Court allows a more liberal and non-restrictive interpretation of
the phrase “exclusively isedfor educational purposes,” reasonable emphasis
has always been made that exemption extends to facilitieswhich are
incidental to and reasonably necessary for the accomplishment of the main
purposes. While thesecond floor’s use, as residence of the director, is
incidental to education; the lease of the first floor cannot byany stretch of
imagination be considered incidental to the purposes of education. The test
of exemption fromtaxation is the use of the property for purposes mentioned
in the Constititution.
Maceda vs. MacaraigGR 88291, 31 May 1991
En Banc, Gancayco (J): 6 concur, 2 took no part, 1 dissents
Facts:
Commonwealth Act 120 created NAPOCOR as a public corporation to
undertake the development ofhydraulic power and the production of power
from other sources. RA 358 (1949) granted NAPOCOR tax andduty
exemption privileges. RA 6395 (1971) revised the charter of the NAPOCOR,
tasking it to carry out thepolicy of the national electrification, and provided
in detail NAPOCOR’s tax exceptions. PD 380 (1974)specified that
NAPOCOR’s exemption includes all taxes, etc. imposed “directly or
indirectly.” PD 938integrated the exemptions in favor of GOCCs including
their subsidiaries; however, empowering the Presidentor the Minister of
Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB)
to restore,partially or completely, the exemptions withdrawn or revised. The
FIRB issued Resolution 10-85 (7 February1985) restoring the duty and tax
exemptions privileges of NAPOCOR for period 11 June 1984- 30 June
1985.Resolution 1-86 (1January 1986) restored such exemption indefinitely
effective 1 July 1985. EO 93 (1987)again withdrew the exemption. FIRB
issued Resolution 17-87 (24 June 1987) restoring NAPOCOR’sexemption,
which was approved by the President on 5 October 1987.Since 1976, oil
firms never paid excise or specific and ad valorem taxes for petroleum
products sold anddelivered to NAPOCOR. Oil companies started to pay
specific and ad valorem taxes on their sales of oilproducts to NAPOCOR only
in 1984. NAPOCOR claimed for a refund (P468.58 million). Only
portionthereof, corresponding to Caltex, was approved and released by way
of a tax credit memo. The claim forrefund of taxes paid by PetroPhil, Shell
and Caltex amounting to P410.58 million was denied. NAPOCORmoved for
reconsideration, starting that all deliveries of petroleum products to
NAPOCOR are tax exempt,regardless of the period of delivery.
Issue:
Whether NAPOCOR cease to enjoy exemption from indirect tax when
PD 938 stated the exemption ingeneral terms.
Held:
NAPOCOR is a non-profit public corporation created for the general good and
welfare, and whollyowned by the government of the Republic of the
Philippines. From the very beginning of the corporation’sexistence,
NAPOCOR enjoyed preferential tax treatment “to enable the corporation to
pay the indebtness andobligation” and effective implementation of the policy
enunciated in Section 1 of RA 6395. From thepreamble of PD 938, it is
evident that the provisions of PD 938 were not intended to be strictly
construedagainst NAPOCOR. On the contrary, the law mandates that it
should be interpreted liberally so as to enhance the tax exempt status of
13
NAPOCOR. It is recognized principle that the rule on strict interpretation
does not apply in the case of exemptions in favor of government political
subdivision or instrumentality. In the case ofproperty owned by the state or
a city or other public corporations, the express exception should not
beconstrued with the same degree of strictness that applies to exemptions
contrary to the policy of the state,since as to such property “exception is the
rule and taxation the exception.”
Pascual vs Secretary of Public Works Case Digest
WENCESLAU PASCUAL, AS PROVINCIAL GOVERNOR VS. SECRETARY OF
PUBLIC WORKS
FACTS: On August 31, 1954, petitioner Wenceslao Pascual, as Provincial
Governor of Rizal, 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, an item
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"; that the aforementioned Antonio Subdivision
were private properties of respondent Jose C. Zulueta, who, at the time of
the passage and approval of said Act, was a member of the Senate of the
Philippines; that on May 29, 1953, respondent Zulueta, addressed a letter to
the Municipal Council of Pasig, Rizal, offering to donate said projected feeder
roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the offer
was accepted by the council, subject to the condition "that the donor would
submit a plan of the said roads and agree to change the names of two of
them"; that no deed of donation in favor of the municipality of Pasig was,
however, executed; that on July 10, 1953, respondent Zulueta wrote another
letter to said council, calling attention to the approval of Republic Act No.
920, and the sum of P85,000.00 appropriated therein for the construction of
the projected feeder roads in question; that the municipal council of Pasig
endorsed said letter of respondent Zulueta to the District Engineer of Rizal,
who, up to the present "has not made any endorsement thereon"; that
inasmuch as the projected feeder roads in question were private property at
the time of the passage and approval of Republic Act No. 920, the
appropriation of P85,000.00 therein made, for the construction,
reconstruction, repair, extension and improvement of said projected feeder
roads, was "illegal and, therefore, void ab initio"; that said appropriation of
P85,000.00 was made by Congress because its members were made to
believe that the projected feeder roads in question were "public roads and
not private streets of a private subdivision'"; that, "in order to give a
semblance of legality, when there is absolutely none, to the aforementioned
appropriation", respondent Zulueta executed, on December 12, 1953, while
he was a member of the Senate of the Philippines, an alleged deed of
donation—copy of which is annexed to the petition—of the four (4) parcels of
land constituting said projected feeder roads, in favor of the Government of
the Republic of the Philippines; that said alleged deed of donation was, on
the same date, accepted by the then Executive Secretary; that being subject
to an onerous condition, said donation partook of the nature of a contract;
that, as such, said donation violated the provision of our fundamental law
prohibiting members of Congress from being directly or indirectly financially
interested in any contract with the Government, and, hence, is
unconstitutional, as well as null and void ab initio, for the construction of
the projected feeder roads in question with public funds would greatly
enhance or increase the value of the aforementioned subdivision of
respondent Zulueta, "aside from relieving him from the burden of
constructing his subdivision streets or roads at his own expense"; that the
construction of said projected feeder roads was then being undertaken by
the Bureau of Public Highways; and that, unless restrained by the court, the
respondents would continue to execute, comply with, follow and implement
the aforementioned illegal provision of law, "to the irreparable damage,
detriment and prejudice not only to the petitioner but to the Filipino
nation."
ISSUE: Whether or not the statute is unconstitutional and void?
HELD: "It is a general rule that the legislature is without power to
appropriate public revenue for anything but a public purpose. * * * It is the
essential character of the direct object of the expenditure which must
determine its validity as justifying a tax, and not the magnitude of the
interests to be affected nor the degree to which the general advantage of the
14
community, and thus the public welfare, may be ultimately benefited by
their promotion. Incidental advantage to the public or to the state, which
results from the promotion of private interests and the prosperity of private
enterprises or business, does not justify their aid by the use of public
money." (25 R.L.C. pp. 398-400; Italics supplied.)
The rule is set forth in Corpus Juris Secundum in the following language:
"In accordance with the rule that the taxing power must be exercised for
public purposes only, money raised by taxation can be expended only for
public purposes and not for the advantage of private individuals."
Explaining the reason underlying said rule, Corpus Juris Secundum states:
"Generally, under the express or implied provisions of the constitution,
public funds may be used only for a public purpose. 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
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 interests, as
opposed to the furtherance of the advantage of individuals, although each
advantage to individuals might incidentally serve the public. * * * ." (81
C.J.S. p. 1147; italics supplied.)
The validity of a statute depends upon the powers of Congress at the time of
its passage or approval, not upon events occurring, or acts performed,
subsequently thereto. Referring to the P85,000.00 appropriation for the
projected feeder roads in question, the legality thereof depended upon
whether said roads were public or private property when the bill, which, later
on, became Republic Act No. 920, was passed by Congress, or, when said bill
was approved by the President and the disbursement of said sum became
effective, or on June 20, 1953. Inasmuch as the land on which the projected
feeder roads were to be constructed belonged then to respondent Zulueta,
the result is that said appropriation sought a private purpose, and, hence,
was null and void.4 The donation to the Government, over five (5) months
after the approval and effectivity of said Act, made, according to the petition,
for the purpose of giving a "semblance of legality", or legalizing, the
appropriation in question, did not cure its aforementioned basic defect.
Consequently, a judicial nullification of said donation need not precede the
declaration of unconstitutionality of said appropriation.
CASE DIGEST: Gonzales vs. Hechanova, et. al. (1963)
FACTS:
Respondent Executive Secretary Rufino G. Hechanova authorized an
importation of tons foreign rice. Such act is being questioned by petitioner
Ramon Gonzales, a rice planter and president of the Iloilo Palay and Corn
Planters Association, for being violative of a particular statute which
proscribes importation of rice and corn by government agencies.
Respondents aver that petitioner as a rice planter does not give him
sufficient interest to file herein petition.
ISSUE:
Whether or not petitioner is a real party in interest.
HELD:
Yes. “ x x x, [S] ince the purchase of said commodity will have to be
effected with public funds mainly raised by taxation, and as a rice producer
and landowner, petitioner must necessarily be a taxpayer, it follows that he
has sufficient personality and interest to seek judicial assistance with a view
to restraining what he believes to be an attempt to unlawfully disburse said
funds.”
Domingo vs. Garlitos
Posted by she lamsen Labels: Case Digest, Taxation Law,Taxation Law
Digests
GR L-18993
15
29 June 1963
FACTS:
In Domingo vs. Moscoso (106 PHIL 1138), the Supreme Court declared as
final and executory the order of the Court of First Instance of Leyte for the
payment of estate and inheritance taxes, charges and penalties amounting to
P40,058.55 by the Estate of the late Walter Scott Price. The petition for
execution filed by the fiscal, however, was denied by the lower court. The
Court held that the execution is unjustified as the Government itself is
indebted to the Estate for 262,200; and ordered the amount of inheritance
taxes be deducted from the Government’s indebtedness to the Estate.
ISSUE:
Whether a tax and a debt may be compensated.
HELD:
The court having jurisdiction of the Estate had found that the claim of the
Estate against the Government has been recognized and an amount of
P262,200 has already been appropriated by a corresponding law (RA 2700).
Under the circumstances, both the claim of the Government for inheritance
taxes and the claim of the intestate for services rendered have already
become overdue and demandable as well as fully liquidated. Compensation,
therefore, takes place by operation of law, in accordance with Article 1279
and 1290 of the Civil Code, and both debts are extinguished to the
concurrent amount.
Philex Mining vs CIR
PHILEX MINING CORP. v. CIR
GR No. 125704, August 28, 1998
294 SCRA 687
FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of
Appeals affirming the Court of Tax Appeals decision ordering it to pay the
amount of P110.7 M as excise tax liability for the period from the 2 nd quarter
of 1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until
fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977. Philex
protested the demand for payment of the tax liabilities stating that it has
pending claims for VAT input credit/refund for the taxes it paid for the years
1989 to 1991 in the amount of P120 M plus interest. Therefore these claims
for tax credit/refund should be applied against the tax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims
of tax refund of the petitioner?
HELD: No. Philex's claim is an outright disregard of the basic principle in tax
law that taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance. Evidently, to countenance Philex's
whimsical reason would render ineffective our tax collection system. Too
simplistic, it finds no support in law or in jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax
liabilities on the ground that it has a pending tax claim for refund or credit
against the government which has not yet been granted.Taxes cannot be
subject to compensation for the simple reason that the government and the
taxpayer are not creditors and debtors of each other. There is a material
distinction between a tax and debt. Debts are due to the Government
in its corporate capacity, while taxes are due to the Government in its
sovereign capacity. xxx There can be no off-setting of taxes against the
claims that the taxpayer may have against the government. A person cannot
refuse to pay a tax on the ground that the government owes him an amount
equal to or greater than the tax being collected. The collection of a tax
cannot await the results of a lawsuit against the government.
16
Philippiine Guaranty Inc. vs. CIR
PHIL. GUARANTY CO., INC. v. CIR
GR No. L-22074, April 30, 1965
13 SCRA 775
FACTS:
The petitioner Philippine Guaranty Co., Inc., a domestic insurance
company, entered into reinsurance contracts with foreign insurance
companies not doing business in the country, thereby ceding to foreign
reinsurers a portion of the premiums on insurance it has originally
underwritten in the Philippines. The premiums paid by such companies were
excluded by the petitioner from its gross income when it file its income tax
returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on
them. Consequently, the CIR assessed against the petitioner withholding
taxes on the ceded reinsurance premiums to which the latter protested the
assessment on the ground that the premiums are not subject to tax for the
premiums did not constitute income from sources within the Philippines
because the foreign reinsurers did not engage in business in the Philippines,
and CIR's previous rulings did not require insurance companies to withhold
income tax due from foreign companies.
ISSUE: Are insurance companies not required to withhold tax on
reinsurance premiums ceded to foreign insurance companies, which
deprives the government from collecting the tax due from them?
HELD:
No. The power to tax is an attribute of sovereignty. It is a power emanating
from necessity. It is a necessary burden to preserve the State's sovereignty
and a means to give the citizenry an army to resist an aggression, a navy to
defend its shores from invasion, a corps of civil servants to serve, public
improvement designed for the enjoyment of the citizenry and those which
come within the State's territory, and facilities and protection which a
government is supposed to provide. Considering that the reinsurance
premiums in question were afforded protection by the government and the
recipient foreign reinsurers exercised rights and privileges guaranteed by our
laws, such reinsurance premiums and reinsurers should share the burden
of maintaining the state.
The petitioner's defense of reliance of good faith on rulings of the CIR
requiring no withholding of tax due on reinsurance premiums may free the
taxpayer from the payment of surcharges or penalties imposed for failure to
pay the corresponding withholding tax, but it certainly would not exculpate
it from liability to pay such withholding tax. The Government is not estopped
from collecting taxes by the mistakes or errors of its agents.
Pepsi-Cola vs. Municipality of Tanauan
PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF
TANAUAN
69 SCRA 460
GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local self-
government carries with it the power to confer on such local governmental
agencies the power to tax.
FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with
preliminary injunction to declare Section 2 of Republic Act No. 2264,
otherwise known as the Local Autonomy Act, unconstitutional as an undue
delegation of taxing authority as well as to declare Ordinances Nos. 23 and
27 denominated as "municipal production tax" of the Municipality of
Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft
drinks producers and manufacturers a tax of one-sixteenth (1/16) of a
centavo for every bottle of soft drink corked, and Ordinance 27 levies and
collects on soft drinks produced or manufactured within the territorial
jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each
gallon (128 fluid ounces, U.S.) of volume capacity. Aside from the undue
delegation of authority, appellant contends that it allows double taxation,
and that the subject ordinances are void for they impose percentage or
specific tax.
17
ISSUE: Are the contentions of the appellant tenable?
HELD: No. On the issue of undue delegation of taxing power, it is settled that
the power of taxation is an essential and inherent attribute of sovereignty,
belonging as a matter of right to every independent government, without
being expressly conferred by the people. It is a power that is purely
legislative and which the central legislative body cannot delegate either to
the executive or judicial department of the government without infringing
upon the theory of separation of powers. The exception, however, lies in the
case of municipal corporations, to which, said theory does not apply.
Legislative powers may be delegated to local governments in respect of
matters of local concern. By necessary implication, the legislative power to
create political corporations for purposes of local self-government carries
with it the power to confer on such local governmental agencies the power to
tax.
Also, there is no validity to the assertion that the delegated authority can
be declared unconstitutional on the theory of double taxation. It must be
observed that the delegating authority specifies the limitations and
enumerates the taxes over which local taxation may not be exercised. The
reason is that the State has exclusively reserved the same for its own
prerogative. Moreover, double taxation, in general, is not forbidden by our
fundamental law, so that double taxation becomes obnoxious only where the
taxpayer is taxed twice for the benefit of the same governmental entity or by
the same jurisdiction for the same purpose, but not in a case where one tax
is imposed by the State and the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature of a
percentage tax on sales, or other taxes in any form based thereon. The tax is
levied on the produce (whether sold or not) and not on the sales. The volume
capacity of the taxpayer's production of soft drinks is considered solely for
purposes of determining the tax rate on the products, but there is not set
ratio between the volume of sales and the amount of the tax.
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY vs. TUDTUD
Case Digest
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY v. BENJAMIN
TUDTUD, et al.
571 SCRA 165 (2008), SECOND DIVISION (Carpio Morales, J.)
The former owner reacquires the property expropriated if the
expropriation of the same was subject to condition that when that
purpose is ended or abandoned, it shall be returned to the owner.
FACTS: The National Airports Corporation (NAC) filed a complaint for
expropriation in order to expand the Cebu Lahug Airport. It sought to
acquire, by negotiated sale or expropriation, several lots adjoining the then
existing airport which included the parcels of land owned by the
predecessors-in-interest of respondents Benjamin Tudtud et al. NAC assured
the owners that they would reacquire the land if it is no longer needed by the
airport. The Court of First Instance of Cebu granted the expropriation.
No structures related to the operation of the Cebu Lahug Airport were
constructed on the land expropriated. Respondent Lydia Adlawan (Lydia),
acting as attorney-in-fact of the original owners, sent a letter to the general
manager of the petitioner Mactan Cebu International Airport Authority
(MCIAA), the new owner of the lot and demanded to repurchase the lot at the
same price paid at the time of the taking, without interest.
Lydia filed a complaint before the Regional Trial Court (RTC) of Cebu City for
reconveyance and damages against the MCIAA. The RTC of Cebu rendered
judgment in favor of Tudtud et al. MCIAA appealed to the Court of Appeals
but it affirmed the RTC decision. MCIAA then filed a Motion for
Reconsideration but was denied.
ISSUE: Whether or not Tudtud et al. are entitled for the reconveyance of the
land expropriated
18

HELD: Tudtud et al.’s witness respondent Justiniano Borga declared that

the original owners did not oppose the expropriation of the lot upon the
assurance of the NAC that they would reacquire it if it is no longer needed by
the airport. The rights and duties between the MCIAA and Tudtud et al are
governed by Article 1190 of the Civil Code which provides: When the
conditions have for their purpose the extinguishment of an obligation to give,
the parties, upon the fulfillment of said conditions, shall return to each other
what they have received. In case of the loss, deterioration, or improvement of
the thing, the provisions which, with respect to the debtor, are laid down in
the preceding article [Article 1189] shall be applied to the party who is bound
to return.
While the MCIAA is obliged to reconvey Lot No. 988 to Tudtud et al., they
must return to the MCIAA what they received as just compensation for the
expropriation of Lot No. 988, plus legal interest to be computed from default,
which in this case runs from the time the MCIAA complies with its obligation
to the respondents. Tudtud et al., must likewise pay the MCIAA the
necessary expenses it may have incurred in sustaining Lot No. 988 and the
monetary value of its services in managing it to the extent that Tudtud et al.,
were benefited thereby. Following Article 1187 of the Civil Code, the MCIAA
may keep whatever income or fruits it may have obtained from Lot No. 988,
and Tudtud et al., need not account for the interests that the amounts they
received as just compensation may have earned in the meantime.
Philippine corporation. This rate goes down to 15% ONLY IF the country of
domicile of the foreign stockholder corporation “shall allow” such foreign
corporation a tax credit for “taxes deemed paid in the Philippines,” applicable
against the tax payable to the domiciliary country by the foreign stockholder
corporation. However, such tax credit for “taxes deemed paid in the
Philippines” MUST, as a minimum, reach an amount equivalent to 20
percentage points
FACTS:
Procter and Gamble Philippines declared dividends payable to its parent
company and sole stockholder, P&G USA. Such dividends amounted to Php
24.1M. P&G Phil paid a 35% dividend withholding tax to the BIR which
amounted to Php 8.3M It subsequently filed a claim with the Commissioner
of Internal Revenue for a refund or tax credit, claiming that pursuant to
Section 24(b)(1) of the National Internal Revenue Code, as amended by
Presidential Decree No. 369, the applicable rate of withholding tax on the
dividends remitted was only 15%.

CIR VS PROCTER AND GAMBLE PHILIPPINE MANUFACTURING

MAIN ISSUE:
CORPORATION (204 SCRA 377)
Whether or not P&G Philippines is entitled to the refund or tax credit.
NON-RESIDENT FOREIGN CORPORATION- DIVIDENDS

HELD:
Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax rate will be applied
YES. P&G Philippines is entitled.
to dividend remittances to non-resident corporate stockholders of a
Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax rate will be applied
19

to dividend remittances to non-resident corporate stockholders of a

Philippine corporation. This rate goes down to 15% ONLY IF he country of P 100.00
domicile of the foreign stockholder corporation “shall allow” such foreign - 35.00
corporation a tax credit for “taxes deemed paid in the Philippines,” applicable 65. 00 -- available for remittance
against the tax payable to the domiciliary country by the foreign stockholder
corporation. However, such tax credit for “taxes deemed paid in the P 65. 00
Philippines” MUST, as a minimum, reach an amount equivalent to 20 x 35% -- Regular Philippine dividend tax rate
percentage points which represents the difference between the regular 35% P 22.75 -- regular dividend tax
dividend tax rate and the reduced 15% tax rate. Thus, the test is if USA
“shall allow” P&G USA a tax credit for ”taxes deemed paid in the Philippines” P 65.0o
applicable against the US taxes of P&G USA, and such tax credit must reach x 15% -- Reduced dividend tax rate
at least 20 percentage points. Requirements were met. P 9.75 -- reduced dividend tax

NOTES: Breakdown: P 65.00 -- dividends remittable

a) Deemed paid requirement: US Internal Revenue Code, Sec 902: a domestic - 9.75 -- dividend tax withheld at reduced rate
corporation (owning 10% of remitting foreign corporation) shall be deemed to P 55.25 -- dividends actually remitted to P&G USA
have paid a proportionate extent of taxes paid by such foreign corporation
upon its remittance of dividends to domestic corporation. Dividends actually
remitted by P&G Phil = P 55.25
b) 20 percentage points requirement: (computation is as follows) ---------------------------------- ------------- x P35 = P29.75
P 100.00 -- corporate income earned by P&G Phils Amount of accumulated P 65.00
x 35% -- Philippine income tax rate profits earned
P 35.00 -- paid by P&G Phil as corporate income tax
P35 is the income tax paid.
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P29.75 is the tax credit allowed by Sec 902 of US Tax Code for Phil corporate
income tax ‘deemed paid’ by the parent company. Since P29.75 is much
higher than P13, Sec 902 US Tax Code complies with the requirements of
sec 24 NIRC. (I did not understand why these were divided and multiplied.
Point is, requirements were met)
Reason behind the law:
Since the US Congress desires to avoid or reduce double taxation of the
same income stream, it allows a tax credit of both (i) the Philippine dividend
tax actually withheld, and (ii) the tax credit for the Philippine corporate
income tax actually paid by P&G Philippines but “deemed paid” by P&G
USA.
Moreover, under the Philippines-United States Convention “With Respect to
Taxes on Income,” the Philippines, by treaty commitment, reduced the
regular rate of dividend tax to a maximum of 20% of he gross amount of
dividends paid to US parent corporations, and established a treaty obligation
on the part of the United States that it “shall allow” to a US parent
corporation receiving dividends from its Philippine subsidiary “a [tax] credit
for the appropriate amount of taxes paid or accrued to the Philippines by the
Philippine [subsidiary].
Note:
The NIRC does not require that the US tax law deem the parent corporation
to have paid the 20 percentage points of dividend tax waived by the
Philippines. It only requires that the US “shall allow” P&G-USA a “deemed
paid” tax credit in an amount equivalent to the 20 percentage points waived
by the Philippines. Section 24(b)(1) does not create a tax exemption nor does
it provide a tax credit; it is a provision which specifies when a particular
(reduced) tax rate is legally applicable.
Section 24(b)(1) of the NIRC seeks to promote the in-flow of foreign equity
investment in the Philippines by reducing the tax cost of earning profits here
and thereby increasing the net dividends remittable to the investor. The
foreign investor, however, would not benefit from the reduction of the
Philippine dividend tax rate unless its home country gives it some relief from
double taxation by allowing the investor additional tax credits which would
be applicable against the tax payable to such home country. Accordingly
Section 24(b)(1) of the NIRC requires the home or domiciliary country to give
the investor corporation a “deemed paid” tax credit at least equal in amount
to the 20 percentage points of dividend tax foregone by the Philippines, in
the assumption that a positive incentive effect would thereby be felt by the
investor.
[G.R. No. 127105. June 25, 1999]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. S.C. JOHNSON
AND SON, INC., and COURT OF APPEALS, respondents.
Facts:
SC JOHNSON AND SON, USA a domestic corporation organized and
operating under the Philippine laws, entered into a license agreement with
21
SC Johnson and Son, United States of America (USA), a non-resident foreign
corporation based in the U.S.A. pursuant to which the [respondent] was
granted the right to use the trademark, patents and technology owned by the
latter including the right to manufacture, package and distribute the
products covered by the Agreement and secure assistance in management,
marketing and production from SC Johnson and Son, U. S. A.
The said License Agreement was duly registered with the Technology
Transfer Board of the Bureau of Patents, Trade Marks and
Technology Transfer under Certificate of Registration No. 8064 . For
the use of the trademark or technology, SC JOHNSON AND SON,
USA was obliged to pay SC Johnson and Son, USA royalties based
on a percentage of net sales and subjected the same to 25%
withholding tax on royalty payments which respondent paid for the
period covering July 1992 to May 1993.00 On October 29, 1993, SC
JOHNSON AND SON, USA filed with the International Tax Affairs
Division (ITAD) of the BIR a claim for refund of overpaid withholding
tax on royalties arguing that, since the agreement was approved by
the Technology Transfer Board, the preferential tax rate of 10%
should apply to the respondent. We therefore submit that royalties
paid by the [respondent] to SC Johnson and Son, USA is only subject
to 10% withholding tax pursuant to the most-favored nation clause of
the RP-US Tax Treaty in relation to the RP-West Germany Tax Treaty
Issue:
WHETHER OR NOT SC JOHNSON AND SON,USA IS ENTITLED TO THE
“MOST FAVORED NATION” TAX RATE OF 10% ON ROYALTIES AS
PROVIDED IN THE RP-US TAX TREATY IN RELATION TO THE RP-WEST
GERMANY TAX TREATY.
Ruling :
In the case at bar, the state of source is the Philippines because the royalties
are paid for the right to use property or rights, i.e. trademarks, patents and
technology, located within the Philippines.The United States is the state of
residence since the taxpayer, S. C. Johnson and Son, U. S. A., is based
there. Under the RP-US Tax Treaty, the state of residence and the state of
source are both permitted to tax the royalties, with a restraint on the tax
that may be collected by the state of source. Furthermore, the method
employed to give relief from double taxation is the allowance of a tax credit to
citizens or residents of the United States
against the United States tax, but such amount shall not exceed the
limitations provided by United States law for the taxable year. The
Philippines may impose one of three rates- 25 percent of the gross amount of
the royalties; 15 percent when the royalties are paid by a corporation
registered with the Philippine Board of Investments and engaged in preferred
areas of activities; or the lowest rate of Philippine tax that may be imposed
on royalties of the same kind paid under similar circumstances to a resident
of a third state.
Given the purpose underlying tax treaties and the rationale for the most
favored nation clause, the concessional tax rate of 10 percent provided for in
the RP-Germany Tax Treaty should apply only if the taxes imposed upon
royalties in the RP-US Tax Treaty and in the RP-Germany Tax Treaty are
paid under similar circumstances. This would mean that private respondent
must prove that the RP-US Tax Treaty grants similar tax reliefs to residents
of the United States in respect of the taxes imposable upon royalties earned
from sources within the Philippines as those allowed to their German
counterparts under the RP-Germany Tax Treaty.
The RP-US and the RP-West Germany Tax Treaties do not contain similar
provisions on tax crediting. Article 24 of the RP-Germany Tax Treaty,
expressly allows crediting against German income and corporation tax of
20% of the gross amount of royalties paid under the law of the Philippines.
On the other hand, Article 23 of the RP-US Tax Treaty, which is the
counterpart provision with respect to relief for double taxation, does not
provide for similar crediting of 20% of the gross amount of royalties paid
At the same time, the intention behind the adoption of the provision on
“relief from double taxation” in the two tax treaties in question should be
considered in light of the purpose behind the most favored nation clause.
The purpose of a most favored nation clause is to grant to the contracting
party treatment not less favorable than that which has been or may be
granted to the “most favored” among other countries.The most favored
nation clause is intended to establish the principle of equality of
international treatment by providing that the citizens or subjects of the
contracting nations may enjoy the privileges accorded by either party to
those of the most favored nation. The essence of the principle is to allow the
taxpayer in one state to avail of more liberal provisions granted in another
tax treaty to which the country of residence of such taxpayer is also a party
provided that the subject matter of taxation, in this case royalty income, is
the same as that in the tax treaty under which the taxpayer is liable. The
similarity in the circumstances of payment of taxes is a condition for the
22

enjoyment of most favored nation treatment precisely to underscore the need

for equality of treatment.
The RP-US Tax Treaty does not give a matching tax credit of 20 percent for
the taxes paid to the Philippines on royalties as allowed under the RP-West
Germany Tax Treaty, private respondent cannot be deemed entitled to the 10
percent rate granted under the latter treaty for the reason that there is no
payment of taxes on royalties under similar circumstances.
It bears stress that tax refunds are in the nature of tax exemptions. As such
they are regarded as in derogation of sovereign authority and to be
construed strictissimi juris against the person or entity claiming the
exemption. The burden of proof is upon him who claims the exemption in his
favor and he must be able to justify his claim by the clearest grant of organic
or statute law. Private respondent is claiming for a refund of the alleged
overpayment of tax on royalties; however, there is nothing on record to
support a claim that the tax on royalties under the RP-US Tax Treaty is paid
under similar circumstances as the tax on royalties under the RP-West
Germany Tax Treaty.