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Concept, Nature and Characteristics of Taxation and Taxes

TAXES, Lifeblood Theory Commissioner of Internal Revenue vs.Cebu Portland Cement Company G.R. No. L-29059, December 15, 1987 CRUZ, J.: FACTS: By virtue of a decision of the Court of Tax Appeals, the Commissioner of Internal Revenue was ordered to refund to the Cebu Portland Cement Company the amount of P 359,408.98, representing overpayments of ad valorem taxes on cement produced and sold by it. Following denial of motions for reconsideration filed by both the petitioner and the private respondent, the latter moved for a writ of execution to enforce the said judgment. The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. Thereafter, the Court of Tax Appeals granted the respondent's motion, holding that the alleged sales tax liability of the private respondent was still being questioned and therefore could not be set-off against the refund. Despite the contention of the CIR that the enforcement of the deficiency was well within his power, respondent disclaims liability for the sales taxes, on the ground that cement is not a manufactured product but a mineral product. As such, it was exempted from sales taxes under Section 188 of the Tax Code after the effectivity of Rep. Act No. 1299. Hence, this petition. ISSUE: Whether tax assessment/ deficiency can be enforced even if there is a case contesting it? HELD: Yes. The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as " the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception already noted, the Tax Code provides:
Sec. 291. Injunction not available to restrain collection of tax. No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.

It goes without saying that this injunction is available not only when the assessment is already being questioned in a court of justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on the administrative level. To require the petitioner to actually refund to the private respondent the amount of the judgment debt, which he will later have the right to distrain for payment of its sales tax liability is in our
Taxation Law Cases based under the syllabus of Atty. Bravo

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view an Idle ritual. We hold that the respondent Court of Tax Appeals erred in ordering such a charade.

TAXATION, Purpose of Taxation Commisioner of Internal Revenue v. Algue, Inc. and The Court of Appeals G.R. No. L-28896, February 17, 1988 CRUZ, J.: FACTS: Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities. It received a letter from the CIR assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959.Algue then filed a letter of protest or request for reconsideration, which was stamp received on the same day by petitioner. After such, a warrant of distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. After a search of the protest in the dockets proved futile, Guevara produced his file copy and gave a photostat to BIR agent, who deferred service of the warrant. After Guevara was finally informed that the BIR was not taking any action on the protest, he accepted the warrant of distraint and levy earlier sought to be served. Sixteen days later, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals. CIR contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense. However, the CTA disagrees, saying that the P75,000.00 had been legitimately paid by Algue Inc. for actual services rendered in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company. Hence this petition. ISSUE: Whether the Collector of Internal Revenue correctly disallowed the P75, 000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns? HELD: No. The Supreme Court agrees with the respondent court that the amount of the promotional fees was not excessive. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. Also, taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.

TAXATION, Power to Tax by Municipalities C.N. Hodges v. The Municipal Board of the City of Iloilo, et al. G.R. No. L-18129, January 31, 1963 BAUTISTA ANGELO, J. FACTS: The Municipal Board of the City of Iloilo enacted Ordinance No. 33, series of 1960, pursuant to the provisions of Republic Act No. 2264, known as the Local Autonomy Act, requiring any person, firm, association or corporation to pay a sales tax of 1/2 of 1% of the selling price of any motor vehicle and prohibiting the registration of the sale of the motor vehicle in the Motor Vehicles Office of the City of Iloilo unless the tax has been paid. It is expressly required therein that the payment of the municipal tax shall be a requirement for registration and transfer of ownership. C. N. Hodges, who was engaged in the business of buying and selling second-hand motor vehicles in the City of Iloilo, believes that the same is invalid for having been passed in excess of the authority conferred by law upon the municipal board. He filed on June 27, 1960 a petition for declaratory judgment with the Court of First Instance of Iloilo praying that said ordinance be declared void ab initio, and that the City of Iloilo be ordered to refund to him the amounts he was required to pay thereunder without prejudice to determining its validity in an appropriate action. The case having been submitted under a stipulation of facts, the court a quo rendered decision holding that that part of the ordinance which requires the owner of a used motor vehicle to pay a sales tax of 1/2 of 1% of the selling price is valid, but the portion thereof which requires the payment of the tax as a condition precedent for the registration of the sale in the Motor Vehicles Office is invalid for being repugnant to Section 2(h) of Republic Act 2264. Hence this appeal by both of the parties. ISSUE: Whether the City of Iloilo is empowered to impose the tax? HELD: Yes. Pursuant to the Local Autonomy Act, It would appear that the City of Iloilo, thru its municipal board, is empowered (a) to impose municipal licenses, taxes or fees upon any person engaged in any occupation or business, or exercising any privilege, in the city; (b) to regulate and impose reasonable fees for services rendered in connection with any business, profession or occupation conducted within the city; and (c) to levy for public purposes just and uniform taxes, licenses or fees. It would also appear that municipalities and municipal districts are prohibited from imposing any percentage tax on sales or other taxes in any form on articles subject to specific tax, except gasoline, under the provisions of the National Internal Revenue Code. From the cursory analysis of the provisions above-stated we can readily draw the conclusion that the City of Iloilo has the authority and power to approve the ordinance in question for it merely imposes a percentage tax on the sale of a second-hand motor vehicle that may be carried out within the city by any person, firm, association or corporation owning or dealing with it who may come within the jurisdiction. Indeed, it cannot be disputed that a sales tax of 1/2 of 1% of the selling price of a second-hand motor vehicle comes within the category of a just tax

within the provision of Section 2 of Republic Act 2264. It is true that the tax in question is in the form of a percentage tax on the proceeds of the sale of a second-hand motor vehicle which comes within the prohibition of the section above adverted to; but the prohibition only refers to municipalities and municipal districts and does not comprehend chartered cities as the City of Iloilo.

TAXES, Uniformity of Taxation Association of Customs Brokers, Inc. v. The Municipal Board of the City of Manila G.R. No. L-4376, May 22, 1953 BAUTISTA ANGELO, J.: FACTS: The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the trucks in said City, challenge the validity of Ordinance No. 3379, passed by the Municipal Board of the City of Manila on the ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes double taxation. The respondents, represented by the city fiscal, contend on their part that the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it constitute double taxation. Despite the conflicting contentions, the Court of First Instance of Manila sustained the validity of the ordinance and dismissed the petition. Hence this appeal. ISSUE: Whether Ordinance No. 3379 is null and void? HELD: Yes. The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila, and one registered in another place but occasionally comes to Manila and uses its streets and public highways. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the word "operating" used therein. The word "operating" denotes a connotation which is akin to a registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees. There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a temporary stay or for short errands, and it cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. The fact that they are benefited by their use they should also be made to share the corresponding burden. And yet such is not the case. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution. In addition, while as a rule an ad valorem tax is a property tax, the rule should not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. Thus, it has been held that "If a tax is in its nature an

excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed."The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount.