Pascual v. Sec.

of Public Works (1960)

FACTS: CONCEPCION, J.: Congress passed an RA
appropriating P85K for the construction of Pasig feeder road
terminals.
Wenceslao Pascual, the Governor of Rial filed an action for
declarator! relief and in"unction, claiming that at the time of
the passage and approval of the Act, these feeder roads had not
!et #een constructed and $ere not connected to an!
government propert! or main high$a!. %he feeder roads $ere
actuall! $ithin the Antonio &u#division, $hich $as o$ned #!
'ose (ulueta, a mem#er of the &enate of the Philippines.
(ulueta, #efore the passage of the Act, had offered to donate
the propert! to the municipalit! of Pasig, #ut the deed of
donation $as e)ecuted onl! several months after the RA $as
passed. *ence, Congress appropriated pu#lic funds for the
construction of feeder roads that $ere, at the time the la$ $as
passed, private propert!.
ISSU: Whether the appropriation is valid.
!"#:
%he appropriation is invalid.
%he ta)ing po$er must #e e)ercised for pu#lic purposes onl!
and not for the advantage of private individuals. %he right of
the legislature to appropriate pu#lic funds is correlative $ith
its right to ta). As the Constitution prohi#its ta)ation e)cept
for a pu#lic purpose, so also no appropriation of state funds
can #e made other than for a pu#lic purpose.
%he test of the constitutionalit! of a statute re+uiring the use of
pu#lic funds is $hether the statute is designed to promote the
pu#lic interests as opposed to the furtherance of the advantage
of individuals, although such advantage to individuals might
incidentally serve the pu#lic.
,ven if su#se+uentl!, (ulueta e)ecuted the deed of donation in
favor of the municipalit!, ma-ing the roads pu#lic propert!,
the appropriation is still invalid. %he validit! of the statute
depends upon the po$ers of Congress at the time of its
passage, not upon events occurring after. At the time the #ill
$as passed, the road $as still private propert!.
%herefore, the appropriation sought a private purpose and $as
null and void. %he su#se+uent donation could not have cured
this nullit!.
TI$ %S. %I#$&'A( '&U"AT$') *$A'# +1,1
SC'A -0./ &.'. 0o. "12,692/ 1. 3u4 19.25
Fac6s: %he case is a petition filed #! petitioner on #ehalf of
videogram operators adversel! affected #! Presidential .ecree
/o. 0182, 3An Act Creating the 4ideogram Regulator! 5oard6
$ith #road po$ers to regulate and supervise the videogram
industr!.
A month after the promulgation of the said Presidential
.ecree, the amended the /ational 7nternal Revenue Code
provided that:
6&,C. 089. 4ideo %apes. : %here shall #e collected on each
processed video;tape cassette, read! for pla!#ac-, regardless
of length, an annual ta) of five pesos< Provided, %hat locall!
manufactured or imported #lan- video tapes shall #e su#"ect to
sales ta).6
6&ection 0=. %a) on &ale, >ease or .isposition of 4ideograms.
: /ot$ithstanding an! provision of la$ to the contrar!, the
province shall collect a ta) of thirt! percent ?8=@A of the
purchase price or rental rate, as the case ma! #e, for ever!
sale, lease or disposition of a videogram containing a
reproduction of an! motion picture or audiovisual program.B
3Cift! percent ?5=@A of the proceeds of the ta) collected shall
accrue to the province, and the other fift! percent ?5=@A shall
accrue to the municipalit! $here the ta) is collected<
PRD47.,., %hat in Eetropolitan Eanila, the ta) shall #e
shared e+uall! #! the Cit!FEunicipalit! and the Eetropolitan
Eanila Commission.B
%he rationale #ehind the ta) provision is to cur# the
proliferation and unregulated circulation of videograms
including, among others, videotapes, discs, cassettes or an!
technical improvement or variation thereof, have greatl!
pre"udiced the operations of movie houses and theaters. &uch
unregulated circulation have caused a sharp decline in
theatrical attendance #! at least fort! percent ?9=@A and a
tremendous drop in the collection of sales, contractorGs
specific, amusement and other ta)es, there#! resulting in
su#stantial losses estimated at P95= Eillion annuall! in
government revenues.
4ideogram?sA esta#lishments collectivel! earn around PH==
Eillion per annum from rentals, sales and disposition of
videograms, and these earnings have not #een su#"ected to ta),
there#! depriving the Government of appro)imatel! P08=
Eillion in ta)es each !ear.
%he unregulated activities of videogram esta#lishments have
also affected the via#ilit! of the movie industr!.
Issues:
?0A Whether or not ta) imposed #! the .,CR,, is a valid
e)ercise of police po$er.
?IA Whether or nor the .,CR,, is constitutional.
!el7: %a)ation has #een made the implement of the stateGs
police po$er. %he lev! of the 8=@ ta) is for a pu#lic purpose.
7t $as imposed primaril! to ans$er the need for regulating the
video industr!, particularl! #ecause of the rampant film pirac!,
the flagrant violation of intellectual propert! rights, and the
proliferation of pornographic video tapes. And $hile it $as
also an o#"ective of the .,CR,, to protect the movie
industr!, the ta) remains a valid imposition.
We find no clear violation of the Constitution $hich $ould
"ustif! us in pronouncing Presidential .ecree /o. 0182 as
unconstitutional and void. While the underl!ing o#"ective of
the .,CR,, is to protect the mori#und movie industr!, there
is no +uestion that pu#lic $elfare is at #ottom of its enactment,
considering 6the unfair competition posed #! rampant film
pirac!< the erosion of the moral fi#er of the vie$ing pu#lic
#rought a#out #! the availa#ilit! of unclassified and
unrevie$ed video tapes containing pornographic films and
films $ith #rutall! violent se+uences< and losses in
government revenues due to the drop in theatrical attendance,
not to mention the fact that the activities of video
esta#lishments are virtuall! unta)ed since mere pa!ment of
Ea!orGs permit and municipal license fees are re+uired to
engage in #usiness.6
W*,R,CDR,, the instant Petition is here#! dismissed. /o
costs.

T! CIT)
&$%'0(0T $F
8U9$0 CIT): A0#
T! CIT)
T'ASU'' $F
8U9$0 CIT): #'.
%ICT$' *. 0'I&A vs.
*A)A0
T"C$((U0ICATI
$0S: I0C.:
Petition for revie$ on
certiorari under Rule 95
.DC%R7/,:
A. T;e <o=er 6o 6a> is
<ri?aril@ ves6e7 i4 6;e
Co4Aress/ ;o=ever: i4
our Buris7ic6io4: i6 ?a@
be e>ercise7 b@ local
leAisla6ive bo7ies: 4o
lo4Aer ?erel@ be vir6ue
of a vali7 7eleAa6io4 as
before: bu6 <ursua46 6o
7irec6 au6;ori6@
co4ferre7 b@ Sec6io4 ,:
Ar6icle C of 6;e
Co4s6i6u6io4. U47er 6;e
la66er: 6;e e>ercise of 6;e
<o=er ?a@ be subBec6 6o
suc; Aui7eli4es a47
li?i6a6io4s as 6;e
Co4Aress ?a@ <rovi7e
=;ic;: ;o=ever: ?us6 be
co4sis6e46 =i6; 6;e basic
<olic@ of local au6o4o?@.
(a6 <. 6.0/ ?<;asis
su<<lie7.)
*. Ta>es i?<ose7 b@
local Aover4?e46 ?us6
be for a <ublic <ur<ose:
u4ifor? =i6;i4 a locali6@:
?us6 4o6 be co4fisca6or@:
a47 ?us6 be =i6;i4 6;e
Buris7ic6io4 of 6;e local
u4i6 6o <ass.
C. I47ee7: 6;e Ara46 of
6a>i4A <o=ers 6o local
Aover4?e46 u4i6s u47er
6;e Co4s6i6u6io4 a47 6;e
"&C 7oes 4o6 affec6 6;e
<o=er of Co4Aress 6o
Ara46 e>e?<6io4s 6o
cer6ai4 <erso4s:
<ursua46 6o a 7eclare7
4a6io4al <olic@. T;e leAal
effec6 of 6;e
co4s6i6u6io4al Ara46 6o
local Aover4?e46s
si?<l@ ?ea4s 6;a6 i4
i46er<re6i4A s6a6u6or@
<rovisio4s o4 ?u4ici<al
6a>i4A <o=ers: 7oub6s
?us6 be resolve7 i4 favor
of ?u4ici<al
cor<ora6io4s.
FACTS:
Respondent 5a!an
%elecommunications, 7nc.
is a leAisla6ive fra4c;ise
;ol7er u47er 'e<ublic
Ac6 ('e<. Ac6) 0o. D-,9
to es6ablis; a47 o<era6e
ra7io s6a6io4s for
7o?es6ic
6eleco??u4ica6io4s:
ra7io<;o4e:
broa7cas6i4A a47
6elecas6i4A.
Dn 'anuar! 0, 011I, Rep.
Act /o. 20H=, other$ise
-no$n as the 6>ocal
Government Code of
01106 ?>GCA, too- effect.
Sec6io4 -D- of 6;e Co7e
Ara46s local Aover4?e46
u4i6s =i6;i4 6;e (e6ro
(a4ila Area 6;e <o=er
6o lev@ 6a> o4 real
<ro<er6ies.
Except as provided
herein, any exemption
from payment of real
property tax previously
granted to, or enjoyed y,
all persons, !hether
natural or juridical,
including government"
o!ned"or"controlled
corporations is herey
!ithdra!n upon effectivity
of this Code
Dn 'ul! I=, 011I, #arel!
fe$ months after the >GC
too- effect: Co4Aress
e4ac6e7 'e<. Ac6 0o.
26DD: a?e47i4A
*a@a46elEs oriAi4al
fra4c;ise. %he
amendator! la$ ?Rep. Act
/o. 2H88A contained the
follo$ing ta) provision:
&,C. 00. %he grantee, its
successors or assigns s;all
be liable 6o <a@ 6;e sa?e
6a>es o4 6;eir real es6a6e:
buil7i4As a47 <erso4al
<ro<er6@: e>clusive of
6;is fra4c;ise, as other
persons or corporations
are no$ or hereafter ma!
#e re+uired #! la$ to pa!.
7n addition thereto, the
grantee, its successors or
assigns shall pa! a
franchise ta) e+uivalent to
three percent ?8@A of all
gross receipts of the
telephone or other
telecommunications
#usinesses transacted
under this franchise #! the
grantee, its successors or
assigns and the said
percentage shall #e in lieu
of all ta)es on this
franchise or earnings
thereof. Provided, %hat the
grantee, its successors or
assigns shall continue to
#e lia#le for income ta)es
pa!a#le under %itle 77 of
the /ational 7nternal
Revenue Code J. ))).
K,mphasis suppliedL
7t is undisputed that $ithin
the territorial #oundar! of
Mueon Cit!, 5a!antel
o$ned several real
properties on $hich it
maintained various
telecommunications
facilities.
7n 0118, the government
of 8ueFo4 Ci6@: <ursua46
6o 6;e 6a>i4A <o=er
ves6e7 o4 local
Aover4?e46 u4i6s b@
Sec6io4 ,: Ar6icle C of
6;e 19.2 Co4s6i6u6io4,
infra, in relation to &ection
I8I of the >GC, supra,
enacted Cit! Drdinance
/o. &P;10, &;18,
other$ise -no$n as the
Mueon Cit! Revenue
Code ?MCRCA i?<osi4A:
u47er Sec6io4 , 6;ereof:
a real <ro<er6@ 6a> o4 all
real <ro<er6ies i4
8ueFo4 Ci6@: a47:
rei6era6i4A i4 i6s Sec6io4
6: 6;e =i6;7ra=al of
e>e?<6io4 fro? real
<ro<er6@ 6a> u47er
Sec6io4 -DG of 6;e "&C:
su<ra. Fur6;er?ore:
?uc; like 6;e "&C: 6;e
8C'C: u47er i6s Sec6io4
-D0: =i6;7re= 6a>
e>e?<6io4 <rivileAes i4
Ae4eral.
Conforma#l! $ith the
Cit!Ns Revenue Code, ne$
ta) declarations for
5a!antelNs real properties
in Mueon Cit! $ere
issued #! the Cit!
Assessor and $ere
received #! 5a!antel on
August 08, 0118, e)cept
one ?%a) .eclaration /o.
0I9;=0=08A $hich $as
received on 'ul! 09, 0111.
Eean$hile, on Earch 0H,
0115, 'e<. Ac6 0o.
29-,:6 o6;er=ise k4o=4
as 6;e HPublic
Teleco??u4ica6io4s
Polic@ Ac6 of 6;e
P;ili<<i4es:H e4visaAe7
6o level 6;e <la@i4A fiel7
a?o4A
6eleco??u4ica6io4s
co?<a4ies.
Dn 'anuar! 2, 0111,
*a@a46el =ro6e 6;e office
of 6;e Ci6@ Assessor
seeki4A 6;e e>clusio4 of
i6s real <ro<er6ies i4 6;e
ci6@ fro? 6;e roll of
6a>able real <ro<er6ies.
With its re+uest having
#een denied, 5a!antel
interposed an appeal $ith
the >ocal 5oard of
Assessment Appeals
?>5AAA. And, evidentl!
on its firm #elief of its
e)empt status, *a@a46el
7i7 4o6 <a@ 6;e real
<ro<er6@ 6a>es assesse7
aAai4s6 i6 b@ 6;e 8ueFo4
Ci6@ Aover4?e46.
Dn account thereof, the
Mueon Cit! %reasurer
sent out notices of
delin+uenc! for the total
amount ofP98,828,I=8.08,
follo$ed #! the issuance
of several $arrants of lev!
against 5a!antelNs
properties preparator! to
their sale at a pu#lic
auction set on 'ul! 8=,
I==I.
%hreatened $ith the
imminent loss of its
properties, #ayantel
immediately !ithdre! its
appeal !ith the $#%% and
instead filed !ith the &'C
of (ue)on City a petition
for prohiition !ith an
urgent application for a
temporary restraining
order *'&O+ and,or !rit
of preliminary injunction.
Dn 'ul! I1, I==I, or in the
eve of the pu#lic auction
scheduled the follo$ing
da!, 6;e lo=er cour6
issue7 a T'$: follo$ed,
after due hearing, #! a
$rit of preliminar!
in"unction via its order of
August I=, I==I.
%heir motion for
reconsideration having
#een denied #! the court
in its Drder dated
.ecem#er 8=, I==8,
petitioners elevated the
case directl! to this Court.
ISSUS:
0. Whether or not
5a!antelNs real properties
in Mueon Cit! are e)empt
from real propert! ta)es
under its legislative
franchise< and
I. Whether or not
5a!antel is re+uired to
e)haust administrative
remedies #efore see-ing
"udicial relief $ith the trial
court.
!"#: Petitions for
prohi#ition are governed
#! the follo$ing provision
of Rule H5 of the Rules of
Court:
-EC. /. Petition for
prohiition. 0 1hen the
proceedings of any
triunal, 2 are !ithout or
in excess of its or his
jurisdiction, or !ith grave
ause of discretion
amounting to lac3 or
excess of jurisdiction, and
there is no appeal or any
other plain, speedy, and
ade4uate remedy in the
ordinary course of la!, a
person aggrieved therey
may file a verified petition
in the proper court,
alleging the facts !ith
certainty and praying that
judgment e rendered
commanding the
respondent to desist from
further proceedings in the
action or matter specified
therein, or other!ise,
granting such incidental
reliefs as la! and justice
may re4uire.
With the realit! that
5a!antelNs real properties
$ere alread! levied upon
on account of its
nonpa!ment of real estate
ta)es thereon, the Court
agrees $ith 5a!antel that
an appeal to the >5AA is
not a speed! and ade+uate
remed! $ithin the conte)t
of the afore+uoted &ection
I of Rule H5. %his is not to
mention of the auction
sale of said properties
alread! scheduled on 'ul!
8=, I==I.
Eoreover, one of the
recognied e)ceptions to
the e)haustion; of;
administrative remedies
rule is $hen, as here, onl!
legal issues are to #e
resolved. 7n fact, the
Court, cogniant of the
nature of the +uestions
presentl! involved, gave
due course to the instant
petition.
;;
%he lo$er court resolved
the issue in the
affirmative, asically
o!ing to the phrase
5exclusive of this
franchise5 found in
-ection 66 of #ayantel7s
amended franchise, &ep.
%ct No. 89::. 'o
petitioners, ho!ever, the
language of -ection 66 of
&ep. %ct No. 89:: is
neither clear nor
une4uivocal.
%he legislative intent
e)pressed in the phrase
He>clusive of 6;is
fra4c;iseH ca44o6 be
co4s6rue7 o6;er 6;a4
7is6i4Auis;i4A be6=ee4
6=o (-) se6s of <ro<er6ies:
be 6;e@ real or <erso4al:
o=4e7 b@ 6;e fra4c;isee:
4a?el@: (a) 6;ose
ac6uall@: 7irec6l@ a47
e>clusivel@ use7 i4 i6s
ra7io or
6eleco??u4ica6io4s
busi4ess: a47 (b) 6;ose
<ro<er6ies =;ic; are 4o6
so use7. I6 is =or6;@ 6o
4o6e that the properties
subject of the present
controversy is only those
which are admittedly
falling under the first
category.
As ma! #e recalled, the
ta)ing po$er of local
governments under #oth
the 0185 and the 0128
Constitutions solel!
depended upon an
ena#ling la$. Abse46 suc;
e4abli4A la=: local
Aover4?e46 u4i6s =ere
=i6;ou6 au6;ori6@ 6o
i?<ose a47 collec6 6a>es
o4 real <ro<er6ies =i6;i4
6;eir res<ec6ive
6erri6orial Buris7ic6io4s.
While &ection 09 of Rep.
Act /o. 8I51 ma! #e
validl! vie$ed as an
implied delegation of
po$er to ta), 6;e
7eleAa6io4 u47er 6;a6
<rovisio4: as couc;e7: is
li?i6e7 6o i?<osi6io4s
over <ro<er6ies of 6;e
fra4c;isee =;ic; are 4o6
ac6uall@: 7irec6l@ a47
e>clusivel@ use7 i4 6;e
<ursui6 of i6s fra4c;ise.
/ecessaril!, other
properties of 5a!antel
directl! used in the pursuit
of its #usiness are #e!ond
the pale of the delegated
ta)ing po$er of local
governments. 7n a ver!
real sense, therefore, real
properties of 5a!antel,
save those e)clusive of its
franchise, are su#"ect to
realt! ta)es. Oltimatel!,
therefore, the inevita#le
result $as that all realties
$hich are actuall!,
directl! and e)clusivel!
used in the operation of its
franchise are 6e)empted6
from an! propert! ta).
5a!antelNs franchise #eing
national in character, the
6e)emption6 thus granted
under &ection 09 of Rep.
Act /o. 8I51 applies to all
its real or personal
properties found an!$here
$ithin the Philippine
archipelago.
While the s!stem of local
government ta)ation has
changed $ith the onset of
the 0182 Constitution, the
po$er of local
government units to ta) is
still limited.
Section 5 does not
change the doctrine that
municipal corporations
do not possess inherent
powers of taxation. What
it does is to confer
municipal corporations a
general power to levy
taxes and otherwise
create sources of
revenue. They no longer
have to wait for a
statutory grant of these
powers. %he po$er of the
legislative authorit!
relative to the fiscal
po$ers of local
governments has #een
reduced to the authorit! to
impose limitations on
municipal po$ers.
(oreover: 6;ese
li?i6a6io4s ?us6 be
Hco4sis6e46 =i6; 6;e
basic <olic@ of local
au6o4o?@.H T;e
i?<or6a46 leAal effec6 of
Sec6io4 , is 6;us 6o
reverse 6;e <ri4ci<le 6;a6
7oub6s are resolve7
aAai4s6 ?u4ici<al
cor<ora6io4s.
!e4cefor6;: i4
i46er<re6i4A s6a6u6or@
<rovisio4s o4 ?u4ici<al
fiscal <o=ers: 7oub6s =ill
be resolve7 i4 favor of
?u4ici<al cor<ora6io4s.
7t is understood, ho$ever,
that
%here can reall! #e no
dispute that the po$er of
the Mueon Cit!
Government to ta) is
limited #! &ection I8I of
the >GC $hich e)pressl!
provides that 6a province
or cit! or municipalit!
$ithin the Eetropolitan
Eanila Area ma! lev! an
annual ad valorem ta) on
real propert! such as land,
#uilding, machiner!, and
other improvement not
hereinafter specificall!
e)empted.6 U47er 6;is
la=: 6;e "eAisla6ure
;iA;liA;6e7 i6s <o=er 6o
6;ereaf6er e>e?<6
cer6ai4 real6ies fro? 6;e
6a>i4A <o=er of local
Aover4?e46 u4i6s. A4
i46er<re6a6io4 7e4@i4A
Co4Aress suc; <o=er 6o
e>e?<6 =oul7 re7uce 6;e
<;rase H4o6 ;erei4af6er
s<ecificall@ e>e?<6e7H as
a <ure BarAo4: =i6;ou6
?ea4i4A =;a6soever.
0ee7less 6o s6a6e: suc;
absur7 si6ua6io4 is
u4acce<6able.
The more decisive
question turns on
whether Congress
actually did exempt
ayantel!s properties at
all by virtue of Section ""
of #ep. $ct %o. &'((.
Admittedl!, Rep. Act /o.
2H88 $as enacted
su#se+uent to the >GC.
Perfec6l@ a=are 6;a6 6;e
"&C ;as alrea7@
=i6;7ra=4 *a@a46elEs
for?er e>e?<6io4 fro?
real6@ 6a>es: Co4Aress
o<6e7 6o <ass 'e<. Ac6
0o. 26DD usi4A: u47er
Sec6io4 11 6;ereof:
e>ac6l@ 6;e sa?e 7efi4i4A
<;rase He>clusive of 6;is
fra4c;iseH =;ic; =as 6;e
basis for *a@a46elEs
e>e?<6io4 fro? real6@
6a>es <rior 6o 6;e "&C.
7n plain language, &ection
00 of Rep. Act /o. 2H88
states that 6the grantee, its
successors or assigns shall
#e lia#le to pa! the same
ta)es on their real estate,
#uildings and personal
propert!, e)clusive of this
franchise, as other persons
or corporations are no$ or
hereafter ma! #e re+uired
#! la$ to pa!.6
T;e Cour6 vie=s 6;is
subseIue46 <iece of
leAisla6io4 as a4 e><ress
a47 real i46e46io4 o4 6;e
<ar6 of Co4Aress 6o o4ce
aAai4 re?ove fro? 6;e
"&CEs 7eleAa6e7 6a>i4A
<o=er: all of 6;e
fra4c;iseeEs (*a@a46elEs)
<ro<er6ies 6;a6 are
ac6uall@: 7irec6l@ a47
e>clusivel@ use7 i4 6;e
<ursui6 of i6s fra4c;ise.
G.R. /o. 89808.ecem#er
08, 0181
P!I"IPPI0
C$((U0ICATI$0S
SAT""IT
C$'P$'ATI$0,
petitioner, vs. 3$S
"UIS A. A"CUA9: as
N'C Commissioner, and
0TC, respondents.
#$CT'I0:
Cundamental is the rule
that delegation of
legislative po$er ma! #e
sustained onl! upon the
ground that some standard
for its e)ercise is provided
and that the legislature in
ma-ing the delegation has
prescri#ed the manner of
the e)ercise of the
delegated po$er.
7n case of a delegation of
rate;fi)ing po$er, the onl!
standard $hich the
legislature is re+uired to
prescri#e for the guidance
of the administrative
authorit! is that the rate #e
reasona#le and "ust.
*o$ever, it has #een held
that even in the a#sence of
an e)press re+uirement as
to reasona#leness, this
standard may e implied.
As a general rule, notice
and hearing are not
essential to the validit! of
administrative action
$here the administrative
#od! acts in the e)ercise
of e)ecutive,
administrative, or
legislative functions< #ut
$here a pu#lic
administrative #od! acts
in a "udicial or +uasi;
"udicial matter, and its acts
are particular and
immediate rather than
general and prospective,
the person $hose rights or
propert! ma! #e affected
#! the action is entitled to
notice and hearing. ?Al#ert
vs. Pu#lic &ervice
CommissionA.
%he rule is that the po$er
of the &tate to regulate the
conduct and #usiness of
pu#lic utilities is limited
#! the consideration that it
is not the o$ner of the
propert! of the utilit!, or
clothed $ith the general
po$er of management
incident to o$nership,
since the private right of
o$nership to such
propert! remains and is
not to #e destro!ed #! the
regulator! po$er. %he
po$er to regulate is not
the po$er to destro!
useful and harmless
enterprises, #ut is the
po$er to protect, foster,
promote, preserve, and
control $ith due regard for
the interest, first and
foremost, of the pu#lic,
then of the utilit! and of
its patrons. An!
regulation, therefore,
$hich operates as an
effective confiscation of
private propert! or
constitutes an ar#itrar! or
unreasona#le infringement
of propert! rights is void,
#ecause it is repugnant to
the constitutional
guaranties of due process
and e+ual protection of the
la$s. ?28 C.'.& 0==5A
*ence, the inherent po$er
and authorit! of the &tate,
or its authoried agent, to
regulate the rates charged
#! pu#lic utilities should
#e su#"ect al$a!s to the
re+uirement that the rates
so fi)ed shall #e
reasona#le and "ust. A
commission has no po$er
to fi) rates $hich are
unreasona#le or to
regulate them ar#itraril!.
%his #asic re+uirement of
reasona#leness
comprehends such rates
$hich must not #e so lo$
as to #e confiscator!, or
too high as to #e
oppressive.
FACTS: &E;%$%<O, J.:
'A ,,1G granted
P*7>CDE&A% a
fra4c;ise to esta#lish,
construct, maintain
and operate
e+uipment and
facilities for
international satellite
communications. As
$ell as authorit! to
construct and operate
facilities needed to
deliver
telecommunications
services from the
communications
satellite s!stem and
ground terminals.
5! designation,
petitioner is also the
sole signator! for the
Philippines in
7/%,>&A% and
7/EAR&A%, I glo#al
commercial
telecommunications
satellite corporations
collectivel!
esta#lished #! various
states in line $ith the
principles set forth #!
the O/. %he satellite
services provided #!
petitioner ena#le said
international carriers
to serve the pu#lic
$ith indispensa#le
communication
services, such as
overseas telephone,
telex, facsimile,
telegrams, high speed
data, live television in
full color, and
television standard
conversion from
European to
%merican or vice
versa.
Petitioner $as
initiall! e)empted
from the "urisdiction
of /%C, #ut pursuant
to $ 196 ?'une 02,
0182A, petitioner $as
placed under the
"urisdiction, control
and regulation of
respondent /%C.
Respondent /%C no$
re+uired petitioner to
appl! for the re+uisite
certificate of pu#lic
convenience and
necessit! covering its
facilities and the
services it renders, as
$ell as the
corres<o47i4A
au6;ori6@ 6o c;arAe
ra6es.
After t$ice e)tending
the provisional
authorit! to continue
operating its e)isting
facilities ?&eptem#er
0H, 0182< &eptem#er
0H, 0188A, to render
the services it $as
then offering, and to
charge the rates it $as
then charging. %he 8
rd
provisional authorit!
granted #! /%C
directed the petitioner
6o c;arAe ?o7ifie7
re7uce7 ra6es
6;rouA; a re7uc6io4
of fif6ee4 <erce46
(1,J) on the present
authoried rates.
P*7>CDE&A%
assails this order as
undue delegation of
legislative po$er,
particularl! the
ad"udicator! po$ers
of /%C. %he e)ercise
of $hich re+uires an
e)press conferment
#! the legislative
#od!.
%hat if constitutional,
the same $as ultra
vires #ecause ?aA the
+uestioned order
violates procedural
due process for
having #een issued
$ithout prior notice
and hearing< and ?#A
the rate reduction it
imposes is un"ust,
unreasona#le and
confiscator!, thus
constitutive of a
violation of
su#stantive due
process.
ISSUS:
1. 7s the order
mandating a reduction
of certain rates undue
delegation of +uasi;
"udicial po$er to
respondent /%CP
0$.
-. Was there a violation
of procedural due
processP )S.
D. Was there a violation
of su#stantive due
processP )S.
!"#: When respondent
/%C esta#lishes a rate, its
act must #oth #e non;
confiscator! and must
have #een esta#lished in
the manner prescri#ed #!
the legislature< other$ise,
in the a#sence of a fi)ed
standard, the delegation of
po$er #ecomes
unconstitutional.
Pursuant to ,D ,G6
a47 196, /%C is
empo$ered to
determine and
prescri#e rates
pertinent to the
operation of pu#lic
service
communications
$hich necessaril!
include the po$er to
promulgate rules and
regulations in
connection there$ith.
Respondent /%C, in
the e)ercise of its
rate;fi)ing po$er, is
limited #! the
re+uirements of
pu#lic safet!, pu#lic
interest, reasona#le
feasi#ilit! and
reasona#le rates,
$hich con"ointl!
more than satisf! the
re+uirements of a
valid delegation of
legislative po$er is
<rovi7e7 for b@ $
,G6.
R, PRDC,.ORA> .O,
PRDC,&&: Petitioner
argues that the function
involved in the rate fi)ing;
po$er of /%C is
ad"udicator! and hence
+uasi;"udicial, not +uasi;
legislative< thus, notice
and hearing are necessar!
and the a#sence thereof
results in a violation of
due process.
%he order in +uestion
$hich $as issued #!
respondent Alcua
contains all the
attri#utes of a Iuasi1
Bu7icial
a7Bu7ica6io4. %he
order pertains
e)clusivel! to
petitioner and to no
other. Curther, it is
premised on a finding
of fact that there is
merit in a reduction of
some of the rates
charged $ithout
affording petitioner
the #enefit of an
e)planation as to $hat
particular aspect or
aspects of the
financial statements
$arranted a
corresponding rate
reduction.
&C #elieves that an
immediate reduction
in the rates $ould
adversel! affect
petitionerNs operations
and the +ualit! of its
service to the pu#lic
considering the
maintenance
re+uirements, the
pro"ects it still has to
underta-e and the
financial outla!
involved. /ota#l!,
petitioner $as not
even afforded the
opportunit! to cross;
e)amine the inspector
$ho issued the report
on $hich respondent
/%C #ased its
+uestioned order.
/%C categoricall!
admitted that the
+uestioned order $as
issued pursuant to its
+uasi;"udicial
functions #ut insists
that notice and
hearing are not
necessary since the
assailed order is
merely incidental to
the entire
proceedings,
therefore, temporar!
in nature. T;is
<os6ula6e is beref6 of
?eri6.
While respondents
ma! fi) a temporar!
rate pending final
determination of the
application of
petitioner, such rate;
fi)ing order,
temporar! though it
ma! #e, is not e)empt
from the statutor!
procedural
re+uirements of notice
and hearing, as $ell
as the re+uirement of
reasona#leness.
Assuming that such
po$er is vested in
/%C, it ma! not
e)ercise the same in
an ar#itrar! and
confiscator! manner.
Categoriing such an
order as temporar! in
nature does not
perforce entail the
applica#ilit! of a
different rule of
statutor! procedure
than $ould other$ise
#e applied to an!
other order on the
same matter unless
other$ise provided #!
the applica#le la$.
%he applica#le
statutor! provision is
Sec6io4 16(c) of 6;e
Public Service Ac6
*c+ 'o fix and
determine
individual or
joint rates, ...
!hich shall e
imposed,
oserved and
follo!ed
thereafter y
any pulic
service= ...
An order of
respondent /%C
prescri#ing reduced
rates, even for a
temporar! period,
could #e un"ust,
unreasona#le or even
confiscator!,
especiall! if the rates
are unreasona#l! lo$,
since the utilit!
permanentl! loses its
"ust revenue during
the prescri#ed period.
7n fact, such order is
in effect final insofar
as the revenue during
the period covered #!
the order is
concerned.
R, &O&5%A/%74, .O,
PRDC,&&: Petitioner
contends that the rate
reduction is confiscator!
in that its implementation
$ould virtuall! result in a
cessation of its operations
and eventual closure of
#usiness.
/%C perfunctoril!
declared that #ased on
the financial
statements, there is
merit for a rate
reduction $ithout an!
elucidation on $hat
implications and
conclusions $ere
necessaril! inferred
#! it from said
statements. /or did it
deign to e)plain ho$
the data reflected in
the financial
statements influenced
its decision to impose
a rate reduction.
Dn the other hand,
petitioner ma! li-el!
suffer a severe
dra$#ac-, $ith the
conse+uent detriment
to the pu#lic service,
should the order of
respondent /%C turn
out to #e
unreasona#le and
improvident.
Conse+uentl! &C
holds that the
challenged order,
particularly on the
issue of rates
provided therein,
#eing violative of the
due process clause is
void and should #e
nullified.
W*,R,CDR,, the
$rit pra!ed for is
GRA/%,. and the
order of respondents
is here#! &,%
A&7.,.
;>'IE&&E?, J&., J.,
concurring@
&enators and
Congressmen are directl!
elected #! the people.
Administrative officials
are not. 7f the mem#ers of
an administrative #od!
are, as is so often the case,
appointed not on the #asis
of competence and
+ualifications #ut out of
political or personal
considerations, it is not
onl! the sense of personal
responsi#ilit! to the
electorate affected #!
legislation $hich is
missing. %he e)pertise and
e)perience needed for the
issuance of sound rules
and regulations $ould also
#e sorel! lac-ing.
7 #elieve that in the
e)ercise of +uasi;
legislative po$ers,
administrative agencies,
much, much more than
Congress, should hold
hearings and should #e
given guidelines as to
$hen notices and hearings
are essential even in +uasi;
legislation.
S(IT!: *"" K C$.
(P!I".): I0C. vs.
C$((ISSI$0'
$F I0T'0A"
'%0U
KG.R. /o. >;I8I20. 'ul!
I5, 0125L
S@llabus:
0. %AQA%7D/<
CDEE7&&7D/,R DC
7/%,R/A> R,4,/O,
E,R,>R ,Q,RC7&,&
A#(I0IST'ATI%
FU0CTI$0 7/
EA%%,R& DC
A&&,&&E,/% A/.
CD>>,C%7D/ DC
&P,C7C7C %AQ,& D/
W7/,& O/.,R
SCTI$0 1DG $F T!
TAC C$#. : %here
can #e no uncertaint! that
the purpose of &ection 089
of the %a) Code is to
impose specific on ta)
$ines and imitation $ines.
%he first clause of said
section states so in plain
language. %he su#;
enumeration that follo$s
unmista-a#l! prescri#es
the amount of the ta)
specificall! to #e paid for
each t!pe of $ine or
imitation $ine so
classified and descri#ed.
%he section clearl! and
indu#ita#l! discloses the
legislative $ill, leaving to
the officers charged $ith
implementation and
e)ecution thereof no more
than the administrative
function of determining
$hether a particular -ind
of $ine or imitation $ine
falls in one class or
another. 7n the
performance of this
function the internal
revenue officers are
demonstrativel! guided #!
the sound, esta#lished
practices and technolog!
of $ine industr!.
I. D/, W*D ,/GAG,&
7/ W7/, %RA.7/G
5O&7/,&& 7& .O%R
5DO/. %D K/DW %*,
K7/.& DC W7/,& *,
.,A>& 7/. : Dne $ho
has chosen to engage in
the $ine trading #usiness
is dut! #ound to -no$ the
-inds of $ine he deals in,
particularl! insofar as
such -no$ledge ma! #e
relevant to the proper
appreciation of ta)
lia#ilities, and cannot ta-e
comfort in his pretended
ignorance of $hat a
spar-ling $ine is.
CA&%RD, ':
0a6ure: Petition for
revie$ of the decision of
the C%A affirming the
deficienc! assessment
made #! the C7R Revenue
against &mith 5ell.
Fac6s:
0. Petitioner imported l01
cases of 6Chatteau Ga!6
$ine $hich it declared as
6still $ine6 under &ection
089?#A of the %a) Code
and paid thereon the
specific ta) of P0.== per
liter of volume capacit!.
I. C7R ordered it ?$inesA
tested and anal!ed in the
57R >a#orator! Center to
determine the correct
amount of the
specific ta) due on the
said importation.
8. 57R concluded that
$ines should #e claasified
as 3spar-ling $ineB #ased
on a #oo- entitled
6Chemistr! S %echnolog!
of Wines and >i+uors6 #!
*erstein and 'aco#s.
?#ased it on the
gasSalcohol contentA
9. C7R then assessed a
deficienc! specific ta) on
the imported Chatteau
Ga! in the sum of
P00,208.1= under &ection
089?aA of the %a) Code
$hich imposes a specific
ta) of P0I.== per liter of
volume capacit! on
spar-ling $ines.
5. Petitioner contends:
a.A that assessment is
unconstitutional #ecause
&ection 089?aA of the %a)
Code under $hich it $as
issued la!s do$n an
insufficient and ha!
standard #! $hich the
polic! and purpose of the
la$ ma! #e ascertained
and as $ell gives the
Commissioner #lan-et
authorit! to decide $hat is
or is not the meaning of
3spar-ling $ines.B
#.A there is an a#dication
of legislative po$er
violative of the esta#lished
doctrine, delegate potestas
non potest delegare, and
the due process clause of
the Constitution.
H. C7R:
a.A Argued that &ection
089 of the %a) Code is
clear as to the categories
of the articles su#"ect to
specific ta)es and the
corresponding amounts of
ta) to #e paid.
2. C%A favored C7R
Issue:
WD/ the assessment
violated the esta#lished
doctrine, delegata potestas
non potest delegare, and
the due process
clause of the Constitution.
0$.
!el7:
0. &ection 089 of the %a)
Code provides: 6&pecific
ta) on $ines. : Dn $ines
and imitation $ines there
shall #e collected, per liter
of volume capacit!, the
follo$ing ta)es:
?aA &par-ling $ines,
regardless of proof, t$elve
pesos
?#A&till $ines containing
fourteen per centum of
alcohol or less, e)cept
those produced from
casu! and duhat, one peso.
?cA&till $ines containing
more than fourteen per
centum of alcohol, t$o
pesos. 7mitation $ines
containing more than
t$ent!;five per centum of
alcohol shall #e ta)ed as
distilled spirits.B
I. %he a#ove +uoted
provision is to impose a
specific ta) on $ines and
imitation $ines. %he first
clause of &ection 089
states so in plain language.
%he sole o#"ect of the su#;
enumeration that follo$s
is in turn unmista-a#l! to
prescri#e the amount of
the ta) specificall! to #e
paid for each t!pe of $ine
andFor imitation $ine so
classified and descri#ed.
T;e sec6io4 6;erefore
clearl@ a47 i47ubi6abl@
7iscloses 6;e leAisla6ive
=ill: leavi4A 6o 6;e
officers c;arAe7 =i6;
i?<le?e46a6io4 a47
e>ecu6io4 6;ereof 4o
?ore 6;a4 6;e
a7?i4is6ra6ive fu4c6io4
of 7e6er?i4i4A =;e6;er a
<ar6icular ki47 of =i4e
or i?i6a6io4 =i4e falls i4
o4e class or a4o6;er. 7n
the performance of this
function, the internal
revenue officers are
demonstra#l! guided #!
the sound esta#lished
practices and technolog!
of the $ine industr!, an
industr! as aged and
$idel! dispersed as one
can care to -no$.
8. *aving chosen to
engage in the $ine trading
#usiness, the <e6i6io4er is
7u6@ bou47 6o k4o= 6;e
ki47s of =i4e it
deals in, particularl!
insofar as such -no$ledge
ma! #e relevant to the
proper appreciation of its
ta) lia#ilities, and
cannot ta-e comfort in its
pretended ignorance of
$hat spar-ling $ine is.
ACCDR.7/G>R, the
decision of the Court of
%a) Appeals is affirmed, at
petitionerGs cost.
(A0I"A &AS
C$'P$'ATI$0: plainti
ff;appellant,
vs.
T! C$""CT$' $F
I0T'0A"
'%0U: defendant;
appellee.
&.'. 0o. "1G-2.0
3a4uar@ 12: 19D6
%rial Court for C7R,
Affirmed #! &C
#oc6ri4e:
R,: .747.,/.&:
.ividends of a domestic
corporation $hich are paid
and delivered in cash to
foreign corporations as
stoc-holders are su#"ect to
the pa!ment of the income
ta) not$ithstanding the
e)emption clause in the
charter of the corporation.
R,: &7%O&: 7f an interest
in propert! is ta)ed, the
situs of either the propert!
or interest must #e found
$ithin the state. 7f an
income is ta)ed, the
recipient thereof must
have a domicile $ithin the
state or the propert! or
#usiness out of $hich the
income issues must #e
situated $ithin the state so
that the income ma! #e
said to have a situs
therein.
Fac6s:
Eanila Gas is a
corporation organied
under Philippine >a$s. 7t
operates a gas plant in
Eanila and furnishes gas
service to the people of
Eanila and its
surrounding areas via a
franchise granted #! the
Philippine Government.
Eanila gas is associated
$ith 7slands Gas ?from
/e$ Ror-A and General
Cinance ?from (urich,
&$iterlandA. 5oth of
$hich are not Philippine
residents.
%he terms of franchise of
Eanila Gas included an
e)emption clause $hich
states:
3%he grantee shall
annuall! on the fifth da!
of 'anuar! of each !ear
pa! to the Cit! of Eanila
and the municipalities in
the Province of Rial in
$hich gas is sold, t$o and
one half per centum of the
gross receipts $ithin said
cit! and municipalities,
respectivel!, during the
preceding !ear. Sai7
<a@?e46 s;all be i4 lieu
of all 6a>es: I4sular:
<rovi4cial a47
?u4ici<al: e)cept ta)es
on the real estate,
#uildings, plant,
machiner!, and other
personal propert!
#elonging to the granteeB
Cor 018=;8I, Eanila Gas
paid dividends to their
foreign partners ?the
partners $ere stoc-holders
of EGA. %hese dividends
had income ta)es $ithheld
#! the Philippine
Government.
Pursuant to the a#ove
stated e)emption clause,
EG filed a case $ith the
%C of Eanila against the
C7R to recover P5H,252.82
?the amount $ithheldA.
%he %C dismissed the
complaint and pronounced
that the dividends $ere
ta)a#le.
/ot satisfied, EG filed the
present appeal.
7&&O,&:
0A WF/ the &tate
can ta) the
.ividends though
the! $ere to #e
paid to foreign
corporations ?&C:
R,&. -ee -I'>-A
IA WF/ the
.ividends $ere
ta)a#le ?&C:
R,&. -ee
<octrine re@
<ividendsA
*,>.:
7&&O, 7: %he approved
doctrine is that no state
ma! ta) an!thing not
$ithin its "urisdiction
$ithout violating the due
process clause of the
constitution. %he ta)ing
po$er of a state does not
e)tend #e!ond its
territorial limits, #ut
$ithin such it ma! ta)
persons, propert!, income,
or #usiness. 7f an interest
in propert! is ta)ed, the
situs of either the propert!
or interest must #e found
$ithin the state. If a4
i4co?e is 6a>e7: 6;e
reci<ie46 6;ereof ?us6
;ave a 7o?icile =i6;i4
6;e s6a6e or 6;e <ro<er6@
or busi4ess ou6 of =;ic;
6;e i4co?e issues ?us6
be si6ua6e7 =i6;i4 6;e
s6a6e so 6;a6 6;e i4co?e
?a@ be sai7 6o ;ave a
si6us 6;erei4.
7&&O, 77: %he Eanila Gas
Corporation operates its
#usiness entirel! $ithin
the Philippines. 7ts
earnings, therefore come
from local sources. T;e
<lace of ?a6erial
7eliver@ of 6;e i46eres6 6o
6;e foreiA4 cor<ora6io4s
<ai7 ou6 of 6;e reve4ue
of 6;e 7o?es6ic
cor<ora6io4 is of 4o
<ar6icular ?o?e46. T;e
<lace of <a@?e46 eve4 if
co4ce7e7 6o be ou6si7e of
6;e cou46r@ ca44o6 al6er
6;e fac6 6;a6 6;e i4co?e
=as 7erive7 fro? 6;e
P;ili<<i4es. %he $ord
6source6 conve!s onl! one
idea, that of origin, and
the origin of the income
$as the Philippines.
%herefore, the Collector of
7nternal Revenue $as
"ustified in $ithholding
income ta)es on interest
on #onds and other
inde#tedness paid to non;
resident corporations
#ecause this income $as
received from sources
$ithin the Philippine
7slands as authoried #!
the 7ncome %a) >a$.
?&7., CDEE,/%
/O/G PD/,/%, /A
PARA/G ,WA/A 5efore
concluding, it is #ut fair to
state that the $riterGs
opinion on the first su#"ect
and the first assigned error
herein discussed is
accuratel! set forth, #ut
that his opinion on the
second su#"ect and the
second assigned error is
not accuratel! reflected,
#ecause on this last
division his vie$s
coincide $ith those of the
appellant. *o$ever, in the
interest of the prompt
disposition of this case,
the decision has #een
$ritten up in accordance
$ith instructions received
from the court.
'udgment affirmed, $ith
the cost of this instance
assessed against the
appellant.
&.'. 0o. 1,D29D AuAus6
-9: -006
C$((ISSI$0' $F
I0T'0A"
'%0U: Petitioner,
vs.
3U"IA0 *AI'1
0ICL": as re<rese46e7
b@ (ari4a 8. &uF?a4
(A66or4e@1i41fac6) Respo
ndent.
FACTS:
Respondent 'uliane 5aier;
/ic-el, a non;resident
German citien, is the
President of
'O5A/7%,Q, 7nc., a
domestic corporation
engaged in
3KmLanufacturing,
mar-eting on $holesale
onl!, #u!ing or other$ise
ac+uiring, holding,
importing and e)porting,
selling and disposing
em#roidered te)tile
products.B %hrough
'O5A/7%,QNs General
Eanager, Earina M.
Guman, the corporation
appointed and engaged the
services of respondent as
commission agent. 7t $as
agreed that respondent
$ill receive 0=@ sales
commission on all sales
actuall! concluded and
collected through her
efforts. 7n 0115,
respondent received the
amount of P0,2=2,22I.H9,
representing her sales
commission income from
$hich 'O5A/7%,Q
$ithheld the
corresponding 0=@
$ithholding ta)
amounting to
P02=,222.IH, and remitted
the same to the 5ureau of
7nternal Revenue ?57RA.
Dn Dcto#er 02, 0112,
respondent filed her 0115
income ta) return
reporting a ta)a#le income
of P0,2=2,22I.H9 and a ta)
due of P02=,222.IH.
Respondent filed a claim
to refund the amount of
P02=,222.IH alleged to
have #een mista-enl!
$ithheld and remitted #!
'O5A/7%,Q to the 57R.
Respondent contended
that her sales commission
income is not ta)a#le in
the Philippines #ecause
the same $as a
compensation for her
services rendered in
German! and therefore
considered as income
from sources outside the
Philippines. %he C%A
rendered a decision
den!ing her claim. 7t held
that the commissions
received #! respondent
$ere actuall! her
remuneration in the
performance of her duties
as President of
'O5A/7%,Q and not as a
mere sales agent thereof.
%he income derived #!
respondent is therefore an
income ta)a#le in the
Philippines #ecause
'O5A/7%,Q is a
domestic corporation. Dn
petition $ith the Court of
Appeals, the latter
reversed the .ecision of
the C%A, holding that
respondent received the
commissions as sales
agent of 'O5A/7%,Q and
not as President thereof.
And since the 3sourceB of
income means the activit!
or service that produce the
income, the sales
commission received #!
respondent is not ta)a#le
in the Philippines #ecause
it arose from the
mar-eting activities
performed #! respondent
in German!. Petitioner
maintains that the income
earned #! respondent is
ta)a#le in the Philippines
#ecause the source thereof
is 'O5A/7%,Q, a
domestic corporation
located in the Cit! of
Ea-ati. 7t further argued
that since respondent is
the President of
'O5A/7%,Q, an!
remuneration she received
from said corporation
should #e construed as
pa!ment of her overall
managerial services to the
compan! and should not
#e interpreted as a
compensation for a
distinct and separate
service as a sales
commission agent.
Respondent, on the other
hand, claims that the
income she received $as
pa!ment for her mar-eting
services. &he contended
that income of nonresident
aliens li-e her is su#"ect to
ta) onl! if the source of
the income is $ithin the
Philippines. &ource,
according to respondent is
the situs of the activit!
$hich produced the
income. And since the
source of her income $ere
her mar-eting activities in
German!, the income she
derived from said
activities is not su#"ect to
Philippine income
ta)ation.
ISSU: Whether
respondentNs sales
commission income is
ta)a#le in the Philippines.
!"#:
Res. &ection I5 of the
/7RC provides that non;
resident aliens, $hether or
not engaged in trade or
#usiness, are su#"ect to
Philippine income ta)ation
on their income received
from all sources $ithin the
Philippines. %hus, the
-e!$ord in determining
the ta)a#ilit! of non;
resident aliens is the
incomeNs 3source.B
3&ource of incomeB
relates to the propert!,
activit! or service that
produced the income.
With respect to rendition
of la#or or personal
service, as in the instant
case, it is the place $here
the la#or or service $as
performed that determines
the source of the income.
%here is therefore no merit
in petitionerNs
interpretation $hich
e+uates source of income
in la#or or personal
service $ith the residence
of the pa!or or the place
of pa!ment of the income.
%he decisive factual
consideration here is not
the capacit! in $hich
respondent received the
income, #ut the
sufficienc! of evidence to
prove that the services she
rendered $ere performed
in German!. %he settled
rule is that ta) refunds are
in the nature of ta)
e)emptions and are to #e
construed strictissimi "uris
against the ta)pa!er. %he
fa)ed documents
presented #! respondent
did not constitute
su#stantial evidence, or
that relevant evidence that
a reasona#le mind might
accept as ade+uate to
support the conclusion
that it $as in German!
$here she performed the
income producing service
$hich gave rise to the
reported monthl! sales in
the months of Earch and
Ea! to &eptem#er of
0115. &he thus failed to
discharge the #urden of
proving that her income
$as from sources outside
the Philippines and
e)empt from the
application of our income
ta) la$. Petition
GRA/%,..
CI' v. (arube4i
Cor<ora6io4 (-001)/
3.Pu4o
Earu#eni $as a
'apanese
corporation
engaged in the
import and
e)port, trading,
and construction
#usiness. 7t
completed t$o
contracts in 0189,
the income from
$hich it did not
declare.
Dne of the
contracts $as
$ith /.C in
connection $ith
the construction
of a $harfFport
comple) in
>e!te. %he other
contract $as $ith
the Philippine
Phosphate
Certilier Corp
?PhilfosA for the
construction of
an ammonia
storage comple)
also in >e!te.
%he C7R then
made an
assessment on
Earu#eniGs
deficienc! ta)es.
7t found that the
/.C and Philpos
contracts $ere
made on a 3turn;
-e!B #asis ?a "o#
in $hich the
contractor agrees
to complete the
$or- of #uilding
and installation to
the point of
readiness or
occupanc!< in
other $ords, the
products are
#rought to the
client complete
and read! for
useA amounting
to a#out
P1H=ET.
%he t$o contracts
$ere divided into
t$o parts U the
offshore portion
and the onshore
portion. All
materials and
e+uipment in the
contract under
the offshore
portion $ere
manufactured and
completed in
'apan. After
manufacture,
these $ere
transported to
>e!te and
installed to the
pier $ith the use
of #olts.
C7R found that
Earu#eni $as
lia#le for
contractorGs ta)
on the offshore
portion.
Earu#eni filed a
petition $ith the
C%A, arguing
that the income
derived from the
offshore portion
should #e e)empt
from ta) since it
$as derived
outside of the
Philippine
"urisdiction.
I: WF/ income of
Earu#eni is ta)a#le even
if it claims that it $as
earned outside of the
Philippines. /D,
Earu#eni is /D% lia#le
for the contractorNs ta).
': A contractorNs ta) is in
the nature of an e)cise ta)
on the e)ercise of a
privilege of selling
services or la#or rather
than a sale of products. 7t
is directl! collecti#le from
the person e)ercising the
privilege. 5eing an e)cise
ta), it can #e levied #! the
ta)ing authorit! onl!
$hen the acts, privileges
or #usiness are done or
performed $ithin the
"urisdiction of said
authorit!. >i-e propert!
ta)es, it cannot #e
imposed on an occupation
or privilege outside the
ta)ing district.
7n this case, the ship
loaders, #oats and mo#ile
e+uipment used in the
construction pro"ects $ere
all designed, engineered
and fa#ricated in 'apan.
%he! $ere merel! shipped
to >e!te and assem#led
there. While the
construction and
installation $or- $ere
completed $ithin the
Philippines, some pieces
of e+uipment and supplies
$ere completel! designed
and engineered in 'apan.
&ince these services $ere
rendered outside the
ta)ing "urisdiction of the
Philippines, the! are
therefore not su#"ect to the
contractorNs ta).
(A0I"A "CT'IC
C$(PA0) vs. A.".
)ATC$: Collec6or of
I46er4al 'eve4ue (19D9)
#$CT'I0: When the
su#stantial elements of the
contract entered into are
situated in the RP, the
Government ac+uires the
po$er to ta).
Coreign corporations are
deemed to have su#mitted
to the "urisdiction of the
RP $hen it entered such
contract $ith a domestic
corporation.
FACTS:
7n 0185, plaintiff
Eanila ,lectric Compan!,
a corporation organied
and e)isting under the
la$s of the
Philippines:i4sure7 =i6;
6;e ci6@ of 0e= )ork
I4sura4ce Co?<a4@ a47
6;e U4i6e7 S6a6es
&uara46@ Co?<a4@:
cer6ai4 real a47 <erso4al
<ro<er6ies si6ua6e7 i4 6;e
P;ili<<i4es.
%he insurance $as
entered into in #ehalf of
said plaintiff #! its #ro-er
in /e$ Ror- Cit!. %he
insurance companies are
foreign corporations not
licensed to do business in
the )hilippines and
having no agents therein.
%he policies contained
provisions for the
settlement and pa!ment of
losses upon the occurrence
of an! ris- insured
against, a sample of $hich
is polic! /o. I= of the
/e$ Ror- insurance
Compan! attached to and
made an integral part of
the agreed statement of
facts. Plaintiff through its
#ro-er paid, in /e$ Ror-,
to said insurance compan!
premiums in the sum of
P10,H1H.
T;e Collec6or of
I46er4al 'eve4ue: u47er
6;e au6;ori6@ of sec6io4
19- of ac6 0o. -G-2: as
a?e47e7: assesse7 a47
levie7 a 6a> of o4e <er
ce46u? o4 sai7
<re?iu?s, $hich plaintiff
paid under protest.
%he protest having
#een overruled, plaintiff
instituted the <rese46
ac6io4 6o recover 6;e 6a>.
%he trial court
dismissed the complaint,
and from the "udgment
thus rendered, plaintiff
too- the instant appeal.
ISSU: Whether the
premiums $ere su#"ect to
ta). Whether or not the
disputed ta) is one
imposed #! the
Common$ealth of the
Philippines upon a
contract #e!ond its
"urisdiction.
!"#: We are of the
opinion and so hold that
$here the insured against
also $ithin the
Philippines, the ris-
insured against also $ithin
the Philippines, and
certain incidents of the
contract are to #e attended
to in the Philippines, such
as, pa!ment of dividends
$hen received in cash,
sending of an ad"uster into
the Philippines in case of
dispute, or ma-ing of
proof of loss, 6;e
Co??o4=eal6; of 6;e
P;ili<<i4es ;as 6;e
<o=er 6o i?<ose 6;e 6a>
u<o4 6;e i4sure7:
reAar7less of =;e6;er 6;e
co46rac6 is e>ecu6e7 i4 a
foreiA4 cou46r@ a47 =i6;
a foreiA4 cor<ora6io4.
Onder such circumstances,
subs6a46ial ele?e46s of
6;e co46rac6 ?a@ be sai7
6o be so si6ua6e7 i4 6;e
P;ili<<i4es as 6o Aive i6s
Aover4?e46 6;e <o=er 6o
6a>. And, even if it #e
assumed that the ta)
imposed upon the insured
$ill ultimatel! #e passed
on the insurer, thus
constituting an indirect ta)
upon the foreign
corporation, it $ould still
#e valid, #ecause 6;e
foreiA4 cor<ora6io4: b@
6;e s6i<ula6io4s of i6s
co46rac6: ;as subBec6e7
i6self 6o 6;e 6a>i4A
Buris7ic6io4 of 6;e
P;ili<<i4es.
After all, Common$ealth
of the Philippines, #!
protecting the properties
insured, #enefits the
foreign corporation, and it
is #ut reasona#le that the
latter should pa! a "ust
contri#ution therefor. I6
=oul7 cer6ai4l@ be a
7iscri?i4a6io4 aAai4s6
7o?es6ic cor<ora6io4s 6o
;ol7 6;e 6a> vali7 =;e4
6;e <olic@ is Aive4 b@
6;e? a47 i4vali7 =;e4
issue7 b@ foreiA4
cor<ora6io4s.
G.R. /o. >;9H2I= 'une
I8, 019=
W""S FA'&$ *A0L
K U0I$0 T'UST
C$(PA0): Petitioner"
%ppellant, vs. CI':
&espondent"%ppellee.
#$CT'I0: &ection
058H of the Administrative
Code, as amended,
provides that ever!
transmission #! virtue of
inheritance of an! share
issued #! an! corporation
of sociedad anonima
organi)ed or constituted
in the Philippines, is
su#"ect to the ta) therein
provided.
%he maxim AO#I$I%
-E(>>N'>&
PE&-ON%A, upon $hich
the rule that intangiles
have only one situs for the
purpose of inheritance
tax, and that such situs is
in the domicile of the
decedent at the time of his
death, has #een descri#ed
as a mere fiction of la$
having its origin in
consideration of general
convenience and pu#lic
polic!, and cannot #e
applied to limit or control
the right of the state to ta)
propert! $ithin its
"urisdiction and must !ield
to esta#lished fact of legal
o$nership, actual
presence and control
else$here, and cannot #e
applied if to do so result in
inescapa#le and patent
in"ustice.
FACTS: AO&%N, J.:
irdie *illian +ye
died ?018IA in >A,
California, her alleged
last residence and
domicile. &he left her
one;half con"ugal
share in 20:000
s;ares of s6ock in the
#enguet Consolidated
Aining Company, an
anon!mous
partnership ?sociedad
anonimaA, organied
under the la$s of the
Philippines.
&he left a $ill $hich
$as admitted to
pro#ate in California
$here her estate $as
administered and
settled. Petitioner"
appellant, 1ells
Bargo #an3 C >nion
'rust Company, $as
appointed trustee #!
the said $ill. %he
Cederal and &tate of
CaliforniaGs
inheritance ta)es due
on said shares have
#een dul! paid.
Respondent C7R
sought to su#"ect
ane$ the aforesaid
shares of stoc- to the
Philippine inheritance
ta). Petitioner;
appellant o#"ected.
Wherefore, a petition
for a declarator!
"udgment $as filed in
the lo$er court.
CC7;Eanila held that
the transmission #!
$ill of the said D,:000
s;ares of s6ock is
su#"ect to Philippine
inheritance ta).
*ence, this appeal #!
the petitioner.
Petitioner concedes:
?0A Philippine
inheritance ta) is not
a ta) propert!, #ut
upon transmission #!
inheritance, and ?IA
that as to real and
tangi#le personal
propert! of a non;
resident decedent,
located in the
Philippines, the
Philippine inheritance
ta) ma! #e imposed
upon their
transmission #! death,
for the self;evident
reason that, #eing a
propert! situated in
this countr!, its
transfer is upon
Philippine la$s.
7t is contended that as
to intangi#les, li3e the
shares of stoc3 in
4uestion, their situs is
in the domicile of the
o$ner, transmission
#! death necessaril!
ta-es place under his
domiciliar! la$s.
ISSU: Ea! the C7R
imposed an inheritance ta)
on the shares of stoc- of a
decedent $ho is domiciled
in CaliforniaP )S.
!"#:
T;e Iues6io4
i4volve7 is
esse46iall@ 4o6 o4e of
7ue1<rocess: bu6 of
6;e <o=er of 6;e
P;ili<<i4e
&over4?e46 6o 6a>.
7f that po$er #e
conceded, the
guarant! of due
process cannot
certainl! #e invo-ed
to frustrate it, unless
the la$ involved is
challenged on
considerations
repugnant to such
guarant! of due
process or that of the
e+ual protection of
the la$s: as $hen the
la$ is alleged to #e
ar#itrar!, oppressive
or discriminator!.
%he rela)ation of the
original rule rests on
either of t$o
fundamental
considerations:
o ?0A upon the
recognition
of the
inherent
po$er of
each
government
to ta)
persons,
properties
and rights
$ithin its
"urisdiction
and
en"o!ing,
thus, the
protection of
its la$s< and
o ?IA upon the
principle that
intangi#les, a
single
location in
space is
hardl!
possi#le,
considering
the multiple,
distinct
relationships
$hich ma!
#e entered
into $ith
respect
thereto.
7n the instant case, the
ac6ual si6us of the
shares of stoc- is in
the Philippines, the
corporation #eing
domiciled therein.
And #esides, the
cer6ifica6es of s6ock
have remained in this
countr! up to the time
$hen the deceased
died in California, and
the! $ere in
possession of the
secretary of the
#enguet
Consolidated, to
$hom the! have #een
delivered and
indorsed in #lan-.
%his indorsement
gave the secretar! the
right to vote the
certificates at the
general meetings of
the stoc-holders, to
collect dividends, and
dispose of the shares
in the manner she
ma! deem fit, $ithout
pre"udice to her
lia#ilit! to the o$ner
for violation of
instructions.
Cor all practical
purposes, the
secretar! had the legal
title to the certificates
of stoc- held in trust
for the true o$ner
thereof. %he o$ner
residing in California
has e)tended here her
activities $ith respect
to her intangi#les so
as to avail herself of
the protection and
#enefit of the
Philippine la$s.
Accor7i4Al@: 6;e
Buris7ic6io4 of 6;e
P;ili<<i4e
&over4?e46 6o 6a>
?us6 be u<;el7.
'udgment is
ACC7RE,..
C$((ISSI$0' $F
CUST$(S vs. C$U'T
$F TAC APPA"S a47
CA(P$S 'U#A
C$'P$'ATI$0
KG.R. /o. 2=H98. 'ul! 80,
0182L
S@llabus:
0. A.E7/7&%RA%74,
>AW< %AR7CC A/.
CO&%DE& CD.,<
5OR,AO DC
CO&%DE&< .O%7A5>,
4A>O, DC 7EPDR%,.
AR%7C>,< 5A&7&. :
Clearl!, from &ection I=0
of the %ariff and Customs
Code, the dutia#le value
of an imported article is
#ased on the home
consumption value or
price as declared in the
consular, commercial,
trade or sales invoice. 5ut
$here there is a
reasona#le dou#t, the
correct dutia#le value
shall #e ascertained from
the reports of the Revenue
Attache or Commercial
Attache and from such
other information that ma!
#e availa#le to the 5ureau
of Customs. Also re+uired
#! the statute is the
pu#lication from time to
time of the lists of the
home consumption values.
I. P'$C#I0&S
T!'I0 0$T
C(PT F'$( T!
$P'ATI$0 $F #U
P'$CSS. : While it is
true that appraisers of the
5ureau of Customs are
given ample lee$a! in
determining the correct
customs duties under
&ection 09=5 of the %ariff
and Customs Code,
&ection I=0 of the same
Code, $hich prescri#es
the criteria for the
determination of the
dutia#le values of
imported articles, has not
#een complied $ith. What
is more, administrative
proceedings are not
e)empt from the operation
of due process
re+uirements one of $hich
is that a finding #! an
administrative tri#unal
should #e supported #!
su#stantial evidence
presented at the hearing or
at least contained in the
records or disclosed to the
parties affected.
8. 0$01#ISC"$SU'
$F HA"'T
0$TICSH AS *ASIS
$F 'APP'AISA" $F
#UTIA*" %A"U $F
I(P$'T#
A'TIC"S: A
%I$"ATI$0 $F T!
'I&!T T$ #U
P'$CSS. : 7n this
case the 6Alert /otices6
on $hich petitioner #ased
its re;appraisal $ere not
disclosed during the
proceedings #efore the
5ureau of Customs nor
presented in evidence
#efore respondent Court.
%he re;appraisal made #!
petitioner, therefore, can
#e faulted $ith
ar#itrariness in disregard
of the standard of due
process to $hich all
governmental action
should conform to impress
upon it the stamp of
validit!.
0a6ure: E,>,/C7D;
*,RR,RA, ' p:
Petition for Revie$ on
Certiorari $hich see-s a
reversal of the .ecision of
respondent C%A ordering
petitioner to refund to
private respondent
Campos Rueda
Corporation the Customs
duties the latter had
overpaid on three of its
importations.
Fac6s:
0.A Campos Rueda
Corporation ordered
tungsol flashers from the
Onited &tates on t$o
occasions.
I.A %he shipments, are
$orth V0=,80I.I= and
V08,II=.0=, respectivel!.
Respondent Compan!
filed the necessar! 7mport
,ntr! for #oth.
8.A %he invoice and
declared unit price $as
V=.HH for the t$o
importations. *o$ever,
the 5ureau of Customs
reappraised it at the rate of
V0.=8 per piece #ased on
an 6Alert /otice6 sent #!
Cinance AttachWs a#road.
9.A Respondent Compan!
paid the increased ta)es
and duties amounting to
P08,510.== and
P5I,IIH.== for the
respective shipments, #ut
filed Eanila Protests /os.
1I29 and 1I25 claiming a
refund of said amounts.
5.A Respondent Compan!
also ordered sealed #eams
from the Onited &tates
$orth V08,1H9.59 for
$hich the corresponding
7mport ,ntr! $as filed.
H.A %he invoice price of
the merchandise $as
V=.1=8 per piece #ut the
Collector re;appraised it to
V0.85 a piece #ased on an
6Alert /otice6
2.A Again, Respondent
Compan! paid the
increased duties and ta)es
amounting to PH2,5I5.==
#ut filed at the same time
Eanila Protest /o. 1I82
for refund of the e)cess
paid.
8.A Collector denied the
protests. Commissioner of
Customs, affirmed in toto
the consolidated .ecision
appealed from on the
ground that 6Alert /otices
are sent #! Cinance
AttachWs in their official
capacit! as such officials,
a$are of their #ounden
dut! to -eep the
.epartment of Cinance
a#reast $ith the current
prices of commodities for
the imposition of correct
amount of duties and ta)es
on ta)a#le importations.6
1.A ,levated the case to
C%A $hich ordered to
refund the overpaid
customs duties to Campos
Rueda Corporation since it
violated &ection I=0 of the
%ariff and Customs Code
0=.A *ence the instant
petition
Issue:
0. WD/ there is a
violation of due process
$hen 5D& re;appraised
the importations.
!el7:
)S. ?violated the due
process re+uirement that
findings of Admin
%ri#unal should #e
supported #! su#stantial
evidence presented at the
hearing or at least
contained in the records or
disclosed to the parties
affectedA
0.A RespondentGs re;
appraisal of the su#"ect
shipments or articles
imported $ere #ased on
the alleged piece of
document -no$n as 6Alert
/otice6 $hich $as not
even presented #!
respondent to the Court.
I.A Records do not sho$
from $hat data the alleged
alerted value $as ta-en,
and ho$ the
Commissioner of Customs
ascertained and
esta#lished the home
consumption value of the
imported articles andFor
merchandise and $hen
and $here such alerted
value $as pu#lished as
re+uired #! la$. U47er
6;ese circu?s6a4ces: 6;e
re1a<<raisal ?a7e b@
res<o47e46 is clearl@ 4o6
i4 accor7a4ce =i6; 6;e
<rovisio4s of Sec6io4 -01
of 6;e Tariff a47
Cus6o?s Co7e.
8.A A7?i4is6ra6ive
<rocee7i4As are 4o6
e>e?<6 fro? the
operation of 7ue <rocess
reIuire?e46s one of
$hich is that a finding #!
an administrative tri#unal
should #e supported #!
su#stantial evidence
presented at the hearing or
at least contained in the
records or
disclosed to the parties
affected.
9.A 7n this case the HAler6
0o6icesH on $hich
petitioner #ased its re;
appraisal =ere 4o6
7isclose7 7uri4A 6;e
<rocee7i4As #efore the
5ureau of Customs nor
presented in evidence
#efore respondent Court.
T;e rea<<raisal ?a7e b@
<e6i6io4er: 6;erefore: ca4
be faul6e7 =i6;
arbi6rari4ess i4
7isreAar7 of 6;e
s6a47ar7 of 7ue <rocess
6o =;ic; all
Aover4?e46al ac6io4
s;oul7 co4for? 6o
i?<ress u<o4 i6 6;e
s6a?< of vali7i6@.
W*,R,CDR,, the
Petition for Revie$ on
Certiorari is denied, and
the appealed "udgment is
here#! affirmed.
XXAdditional 7nformation:
&ection I=0 of the %ariff
and Customs Code reads:
6Sec6io4 -01. 5asis of
.utia#le 4alue. : %he
dutia#le value of an
imported article su#"ect to
an ad valorem rate of dut!
shall #e #ased on the
home consumption value
or price ?e)cluding
internal e)cise ta)esA of
same, li-e or similar
articles, as #ought and
sold or offered for sale
freel! in the usual
$holesale +uantities in the
ordinar! course of trade,
in the principal mar-ets of
the countr! from $here
e)ported on the date of
e)portation to the
Philippines, or $here there
is none on such date, then
on the home consumption
value or price nearest to
the date of e)portation
including the value of all
containers, coverings
andFor pac-ings of an!
-ind and all other costs,
charges and e)penses
incident to placing the
article in a condition read!
for shipment to the
Philippines, plus ten ?0=A
per cent of such home
consumption value or
price.
6%he home consumption
value or price under this
section shall #e the value
or price declared in the
consular, commercial,
trade or sales invoice.
Where there e)ists a
reasona#le dou#t as to the
value or price of the
imported article declared
in the entr!, the correct
dutia#le value of the
article shall #e ascertained
from the reports of the
Revenue AttachW or
Commercial AttachW
?Coreign %rade Promotion
AttachWA pursuant to
Repu#lic Act /um#ered
Cift!;four hundred and
si)t!;si) or other
Philippine diplomatic
officers and from such
other information that ma!
#e availa#le to the 5ureau
of Customs. 6Crom the
data thus gathered, the
Commissioner of Customs
shall ascertain and
esta#lish the home
consumption values of
articles e)ported to the
Philippines and shall
pu#lish such lists of values
from time to time.
6When the dutia#le value
provided for in the
preceding paragraphs
cannot #e ascertained for
failure of the importer to
produce the documents
mentioned in the second
paragraph, or $here there
e)ists a reasona#le dou#t
as to dutia#le value of the
imported article declared
in the entr!, it shall #e the
domestic $holesale selling
price of such or similar
article in Eanila or other
principal mar-ets in the
Philippines on the date the
dut! #ecomes pa!a#le on
the article under
appraisement, in the usual
$holesale +uantities and
in the ordinar! course of
trade, minus :
6?aA %$ent! ?I=A per cent
thereof for e)penses and
profits< and?#A .uties and
ta)es paid thereon.6
5.A Clearl!, the dutia#le
value of an imported
article is #ased on the
home consumption value
or price as declared in the
consular, commercial,
trade or sales invoice. *u6
=;ere 6;ere is a
reaso4able 7oub6: 6;e
correc6 7u6iable value
s;all be ascer6ai4e7 fro?
6;e re<or6s of 6;e
'eve4ue A66ac;e or
Co??ercial A66ac;e a47
fro? suc; o6;er
i4for?a6io4 6;a6 ?a@ be
available 6o 6;e *ureau
of Cus6o?s. Also re+uired
#! the statute is the
pu#lication from time to
time of the lists of the
home consumption values.
H.A 7n the present case,
'easo4able 7oub6
reAar7i4A 6;e
7eclara6io4s =as 4o6
s;o=4 6o ;ave e>is6e7
such that recourse to
reports from commercial
attachWs or other
information #ecame
necessar!. 0ei6;er =as
6;ere co?<lia4ce =i6;
6;e reIuire?e46 i4
Sec6io4 -01 reAar7i4A
<ublica6io4 of 6;e lis6s of
7u6iable values of
i?<or6e7 ar6icles fro?
6i?e 6o 6i?e.
&' 0o. "1-D29G
Februar@ 12: 196.
$'($C SU&A'
C$(PA0):
I0C.: Plaintiff"%ppellant,
vs. T! T'ASU''
$F $'($C CIT): T!
(U0ICIPA" *$A'#
$F $'($C CIT):
!$0. ST*A0 C.
C$03$S as (a@or of
$r?oc Ci6@ a47
$'($C
CIT): <efendants"
%ppellees.
FACTS:
7n 01H9, Drmoc Cit!
passed a #ill $hich read:
3%here shall #e paid to the
Cit! %reasurer on an! and
all productions of
centrifugal sugar milled at
the Drmoc &ugar
Compan! 7ncorporated, in
Drmoc Cit! a municipal
ta) e+uivalent to one per
centum ?0@A per e)port
sale to the Onited &tates of
America and other foreign
countries.B %hough
referred to as a
3production ta)B, the
imposition actuall!
amounts to a ta) on the
e)port of centrifugal sugar
produced at Drmoc &ugar
Compan!, 7nc. Cor
production of sugar alone
is not ta)a#le< the onl!
time the ta) applies is
$hen the sugar produced
is e)ported. Drmoc &ugar
paid the ta) ?P2,=82.5=A in
protest averring that the
same is violative of &ec
II82 of the Revised
Administrative Code
$hich provides: 37t shall
not #e in the po$er of the
municipal council to
impose a ta) in an! form
$hatever, upon goods and
merchandise carried into
the municipalit!, or out of
the same, and an! attempt
to impose an import or
e)port ta) upon such
goods in the guise of an
unreasona#le charge for
$harfage, use of #ridges
or other$ise, shall #e
void.B And that the
ordinance is violative to
e+ual protection as it
singled out Drmoc &ugar
As #eing lia#le for such
ta) impost for no other
sugar mill is found in the
cit!.
ISSU: Whether there has
#een a violation of e+ual
protection.
!"#:
%he &C held in favor of
Drmoc &ugar. %he &C
noted that even if &ec
II82 of the RAC had
alread! #een repealed #! a
latter statute ?&ec I RA
IIH9A $hich effectivel!
authoried >GOs to ta)
goods and merchandise
carried in and out of their
turf, the act of Drmoc Cit!
is still violative of e+ual
protection. %he ordinance
is discriminator! for it
ta)es onl! centrifugal
sugar produced and
e)ported #! the Drmoc
&ugar Compan!, 7nc. and
none other. At the time of
the ta)ing ordinanceNs
enactment, Drmoc &ugar
Compan!, 7nc., it is true,
$as the onl! sugar central
in the cit! of Drmoc. &till,
the classification, to #e
reasona#le, should #e in
terms applica#le to future
conditions as $ell. Res.
,+ual protection clause
applies onl! to persons or
things identicall! situated
and does not #ar a
reasona#le classification
of the su#"ect of
legislation, and a
classification is reasona#le
$here 0A it is #ased upon
su#stantial distinctions< IA
these are germane to
thepurpose of the la$< 8A
the classification applies
not onl! to present
conditions, #ut also to
future conditions
su#stantiall! identical to
those present< and 9A the
classification applies onl!
to those $ho #elong to the
same class. %he ta)ing
ordinance should not #e
singular and e)clusive as
to e)clude an!
su#se+uentl! esta#lished
sugar central, of the same
class as plaintiff, from the
coverage of the ta). As it
is no$, even if later a
similar compan! is set up,
it cannot #e su#"ect to the
ta) #ecause the ordinance
e)pressl! points onl! to
Drmoc &ugar Compan!,
7nc. as the entit! to #e
levied upon
Tiu v. CA (1999) : Iual
Pro6ec6io4 of 6;e "a=s/
PA0&A0I*A0: 3.:
Congress passed
RA 2II2 $hich
created the &u#ic
&pecial
,conomic (one,
granting ta) and
dut! incentives
?ta) and dut!;free
importations of
ra$ materials,
capital and
e+uipmentA to
#usinesses and
residents $ithin
the area
encompassed #!
the one.
%he la$ provides
that no local and
national ta)es
shall #e imposed
$ithin the one.
7n lieu of ta)es,
8@ of the gross
income of
enterprises
operating $ithin
the one shall #e
remitted to the
/ational
Government, 0@
to the local
government
units, and 0@ to a
development
fund to #e
utilied for the
development of
municipalities
outside Dlangapo
and &u#ic.
Pres. Ramos later
issued an ,D
specif!ing a
3secured areaB
area $ithin the
one in $hich the
privileges $ere
operative.
o $92
ta)
and
dut!
;
free
imp
orta
tion
s
$ill
onl!
appl
! to
ra$
mat
erial
s,
capi
tal
goo
ds
and
e+ui
pme
nt
#ro
ught
in
#!
#usi
ness
ente
rpri
ses
into
the
&&,
(.
,)c
ept
for
imp
ort
ta)
and
duti
es,
all
#usi
ness
are
re+u
ired
to
pa!
the
spec
ifie
d
ta)e
s in
&ect
ion
0I?c
A of
RA
2II
2.
o $921A
the
ta)
incentiv
es are
onl!
applica#
le to
#usiness
enterpris
es and
individu
als
residing
$ithin
the
secured
area.
o
Petitioners
outside the
3secured areaB
challenged the
constitutionalit!
of this ,D for
allegedl! #eing
violative of their
right to e+ual
protection of the
la$s.
%he! assert that
the &&,(
encompasses ?0A
the Cit! of
Dlongapo, ?IA the
Eunicipalit! of
&u#ic in
(am#ales, and
?8A the area
formerl!
occupied #! the
&u#ic /aval
5ase. *o$ever,
,D 12;A,
according to
them, narro$ed
do$n the area
$ithin $hich the
special privileges
granted to the
entire one $ould
appl! to the
present 3fenced;
in former &u#ic
/aval 5aseB
onl!. 7t has
here#! e)cluded
the residents of
the first t$o
components of
the one from
en"o!ing the
#enefits granted
#! the la$.
I: WF/ the ,D confining
the application of the
privileges under RA 2II2
$ithin the secured area
and e)cluding the
residents of the one
outside the secured area
violates the e+ual
protection clause. /D.
': %here are real and
su#stantive distinctions
#et$een the circumstances
o#taining inside and
outside the &u#ic /aval
#ase, there#! "ustif!ing
avalid and reasona#le
classification.
Cor a valid
classification, the
follo$ing
re+uisites must
#e present:
0. it must rest on
su#stantial differences<
I. must #e
germane to the purpose of
the la$<
8. must not #e
limited to e)isting
conditions onl!< and
9. must appl!
e+uall! to all mem#ers of
the same class.
7n this case, the
purpose of the
la$ is to
accelerate the
conversion of
militar!
reservations into
productive areas
?economic or
industrial areasA .
%hus, the lands
covered under the
Eilitar! 5ases
Agreement are its
o#"ect.
%o achieve
purpose,
Congress deemed
it necessar! to
e)tend economic
incentives to
attract and
encourage
investors. 7t $as
thus reasona#le
for the President
to have delimited
the application of
some incentives
to the confines of
the former &u#ic
militar! #ase,
since it is this
specific area
$hich the
government
intends to
transform and
develop into a
self;sustaining
industrial and
economic one,
particularl! for
the use of #ig
foreign and local
investors to use
as operational
#ases for their
#usinesses and
industries. %hese
#ig investors
possess the
capital necessar!
to spur economic
gro$th and
generate
emplo!ment
opportunities.
%here are
su#stantial
differences
#et$een the #ig
investors $ho are
#eing lured to
esta#lish and
operate their
industries in the
so;called
3secured areaB
and the present
#usiness
operators outside
the area.
5ig investors lured into
secured areas
Present #i operators outside
the are
;#illion;peso investments S
thousand of ne$ "o#s
;national economic impact
;no such magnitude
;onl! local economic impact
;#i activities outside
secured areas are not li-el!
to have an! impact in
achieving purpose of la$
$hich is to turn former
militar! #ase to productive
use for the #enefit of the Phil
econom!
%here is, then, hardl! an!
reasona#le #asis to e)tend
to them the #enefits and
incentives accorded in RA
2II2
CIT) $F
*A&UI$: <lai46iff1
a<<ellee:
vs.
F$'TU0AT$ #
"$0: 7efe47a461
a<<ella46.
G.R. /o. >;I925H
Dcto#er 80, 01H8
#$CT'I0: ,+ualit!
and uniformit! in ta)ation
means that all ta)a#le
articles or -ind or propert!
of the same class shall #e
ta)ed at the same rate. A
ta) is considered uniform
$hen it operates $ith the
same force and effect in
ever! place $here the
su#"ect ma! #e found.
Where the statute or
ordinance in +uestion
applies e+uall! to all
persons, firms and
corporations placed in a
similar situation, there is
no infringement of the rule
on e+ualit!. 7ne+ualities
$hich result from a
singling out of one
particular class for
ta)ation or e)emption,
infringe no constitutional
limitation.
Fac6s:
.e >eon is a real estate
dealer in 5aguio and $as
6engaged in the rental of
his propert! in 5aguio6
deriving income
therefrom.
,mpo$ered #! the
amendment ?#! the
Congress via RA8I1A to
its charter $hich allo$ed
it to fi) the license fee and
regulate 6#usinesses,
trades and occupations as
ma! #e esta#lished or
practiced in the Cit!,6
5aguio issued Drdinance
/o. I08 $herein it
imposed an annual license
fee of P5= for his
#usiness.
.espite such an ordinance
and several demands from
the Cit! GovNt, de >eon
failed to pa! the license
fees. *ence, the Cit! of
5aguio filed a case against
him to compel him to pa!
the amount of P8== as
license fee covering the
period from the first
+uarter of 0158 to the
fourth +uarter of 01HI.
.e >eon did not agree
$ith the ordinance and
said that such $as
unconstitutional #ecause
allo$s dou#le ta)ation. As
such, it $as violative of
his right to due process.
%he Cit! court of 5aguio
upheld the validit! of the
ordinance and held de
>eon lia#le for the license
fees.
Onsatisfied, de >eon filed
the current appeal.
ISSUS:
WF/ the Drdinance $as
valid ?&C: R,&A
WF/ it the Drdinance
favored dou#le ta)ation
and ine+ualit! ?&C: /DA
!"#:
7&&O, 7: on 'ul! 05,
0198, Repu#lic Act /o.
8I1 $as enacted
amending the charter of
said cit! and adding to its
po$er to license the po$er
to ta) and to regulate. And
it is precisel! having in
vie$ this amendment that
Drdinance /o. 11 $as
approved in order to
increase the revenues of
the cit!. 7n our opinion,
the amendment a#ove
adverted to empo$ers the
cit! council not onl! to
impose a license fee #ut
also to lev! a ta) for
purposes of revenue, more
so $hen in amending
section I558 ?#A, the
phrase Gas provided #!
la$G has #een removed #!
section I of Repu#lic Act
/o. 8I1. %he cit! council
of 5aguio, therefore, has
no$ the po$er to ta), to
license and to regulate
provided that the su#"ects
affected #e one of those
included in the charter. 7n
this sense, the ordinance
under consideration
cannot #e considered ultra
vires $hether its purpose
#e to lev! a ta) or impose
a license fee. %he
terminolog! used is of no
conse+uence.6
7t $ould #e an undue and
un$arranted emasculation
of the a#ove po$er thus
granted if defendant;
appellant $ere to #e
sustained in his contention
that no such statutor!
authorit! for the
enactment of the
challenged ordinance
could #e discerned from
the language used in the
amendator! act. %hat is
a#out all that needs to #e
said in upholding the
lo$er court, considering
that the Cit! of 5aguio
$as not devoid of
authorit! in enacting this
particular ordinance.
7&&O, 77: 'ustice *olmes
made clear in this
language: 6%he o#"ection
to the ta)ation as dou#le
ma! #e laid do$n on one
side. ... %he 09th
Amendment Kthe due
process clauseL no more
for#ids dou#le ta)ation
than it does dou#ling the
amount of a ta), short of
confiscation or
proceedings
unconstitutional on other
grounds.6 With that
decision rendered at a time
$hen American
sovereignt! in the
Philippines $as
recognied, it possesses
more than "ust a
persuasive effect. %o
some, it delivered
the coup de grace to the
#oge! of dou#le ta)ation
as a constitutional #ar to
the e)ercise of the ta)ing
po$er. 7t $ould seem
though that in the Onited
&tates, as $ith us, its ghost
as noted #! an eminent
critic, still tal-s the
"uridical state. 7n a 0192
decision, ho$ever, $e
+uoted $ith approval this
e)cerpt from a leading
American
decision: 6Where, as here,
Congress has clearl!
e)pressed its intention, the
statute must #e sustained
even though dou#le
ta)ation results.6
At an! rate, it has #een
e)pressl! affirmed #! us
that such an 6argument
against dou#le ta)ation
ma! not #e invo-ed $here
one ta) is imposed #! the
state and the other is
imposed #! the cit! ..., it
#eing $idel! recognied
that there is nothing
inherentl! o#no)ious in
the re+uirement that
license fees or ta)es #e
e)acted $ith respect to the
same occupation, calling
or activit! #! #oth the
state and the political
su#divisions thereof.6
%he a#ove $ould clearl!
indicate ho$ lac-ing in
merit is this argument
#ased on dou#le ta)ation.
/o$, as to the claim that
there $as a violation of
the rule of uniformit!
esta#lished #! the
constitution. According to
the challenged ordinance,
a real estate dealer $ho
leases propert! $orth
P5=,=== or a#ove must
pa! an annual fee of P0==.
7f the propert! is $orth
P0=,=== #ut not over
P5=,===, then he pa!s P5=
and PI9 if the value is less
than P0=,===. Dn its face,
therefore, the a#ove
ordinance cannot #e
assailed as violative of the
constitutional re+uirement
of uniformit!.
7n Philippine 'rust
Company v. Datco, 'ustice
>aurel, spea-ing for the
Court, stated: 6A ta) is
considered uniform $hen
it operates $ith the same
force and effect in ever!
place $here the su#"ect
ma! #e found.6
W*,R,CDR,, the lo$er
court decision is here#!
affirmed. Costs against
defendant;appellant.
as6er4 T;ea6rical Co.
I4c v. Alfo4so: Iuali6@
a47 U4ifor?i6@ (19G9)
%he Cit! of
Eanila enacted
an ordinance
imposing a fee on
the price of ever!
admission tic-et
sold #!
cinematographers
, theatres,
vaudeville
companies and
#o)ing
e)hi#itions.
%hese fees shall
#e delivered #!
the operator I
da!s after the
performance.
Dther$ise, a
violation should
result to
imprisonment
and fine.
%hus, 0I
corporations
engaged in
motion picture
#usiness filed a
complaint
assailing the said
ordinance for
violating the
principle of
e+ualit! and
uniformit! of
ta)ation #ecause
it did /D% ta)
other places of
amusement, such
as racetrac-s,
ca#arets,
circuses, etc.
I: WFn the ordinance
violates the rule on
e+ualit! and uniformit! of
ta)ation.
': ,+ualit! and
uniformit! in ta)ation
means that all ta)a#le
articles or -inds of
propert! of the same class
shall #e ta)ed at the same
rate.
%he ta)ing po$er
has the authorit!
to ma-e
reasona#le and
natural
classifications for
purposes of
ta)ation.
%hus, the fact
that some places
of amusement are
ta)ed $hile
others li-e
theatres and
cinematographs
are not does not
violate
uniformit! and
e+ualit! in
ta)ation.
Petitioners
argued that the
Revised
Administrative
Code confers
upon the Cit! of
Eanila the po$er
to impose a ta)
on #usiness #ut
/D% on
amusement and,
conse+uentl!, the
ordinance $as
#e!ond the Cit!Gs
po$er to enact.
*DW,4,R, the
assumption is #ased on an
ar#itrar! la#eling of the
-ind of ta) authoried #!
the said Code. %he ver!
fact that the said Code
includes includes theaters,
cinematographs, etc. $ill
sho$ conclusivel! that the
po$er to ta) amusement is
e)pressl! included $ithin
the po$er granted #! the
said Code.
*ri6is; A?erica4
Tobacco v Ca?ac;o
(-009)
R.A. 8I9= $as
passed
recodif!ing the
/7RC $here &ec
09I $as
renum#ered &ec
095.
5ritish American
%o#acco assailed
the validit! of
&ec. 095 of the
/7RC ?amended
#! RA 8I9=A,
arguing that the
said provisions
are violative of
the e+ual
protection and
uniformit! clause
of the
Constitution.
&ection 095
provides for a
four;tier ta) rate
#ased on net
retail price per
pac- of
cigarettes: ?0A
lo$;priced, ?IA
medium;priced,
?8A high;priced,
and ?9A premium;
priced.
&ection 095
further provides
that /,W
5RA/.&
?registered after
'anuar! 0, 0112A
of cigarettes shall
#e ta)ed at their
current retail
price. 7f the
current net retail
price has not
#een esta#lished,
the suggested net
retail price shall
#e used to
determine the
specific ta)
classification.
Dn the other
hand, old or
e)isting #rands
?registered #efore
'anuar! 0, 0112A
shall #e ta)ed at
their net retail
price as of
Dcto#er 0, 011H.
o Net
retail
price E
price F
!hich
cigarett
es are
sold on
retail in
/G
superma
r3ets in
AA
o -uggest
ed net
retail
price E
net
retail
price F
!hich
rands
of
cigarett
es are
intended
y the
manufac
turer to
e sold
%o implement RA
8I9=, 57R issued
a Revenue
Regulation ?RR
/o. 0;12A
classif!ing
e)isting #rands of
cigarettes as
those e)isting or
active ?oldA
#rands prior to
'anuar! 0, 0112,
$hile ne$ #rands
of cigarettes are
those registered
after 'anuar! 0,
0112. Another
Revenue
Regulation $as
issued amending
the first ?RR /o.
1;I==8A #!
providing 57R
$ith the po$er to
periodicall!
revie$ ever! t$o
!ears F earlier the
current net retail
price of ne$
#rands to
,&%A5>7&* F
OP.A%, their
ta) classification.
7n 'une I==0,
5ritish American
%o#acco
introduced the
>uc-! &tri-e
Cilter, >uc-!
&tri-e >ights and
>uc-! &tri-e
Eenthol >ights.
>uc-! &tri-e $as
ta)ed #ased on its
suggested gross
retail price from
the time of its
introduction in
the mar-et in
I==0 until the
57R mar-et
surve! in I==8.
%he #rands $ere
sold at PII.59,
PII.H0 and
PI0.I8 so the
applica#le ta)
rate is P08.99 per
pac-. 5A% no$
argues that the
6classification
freee provision6
violates the e+ual
protection and
uniformit! of
ta)ation clauses
#ecause the
>uc-! &tri-e
#rands are ta)ed
#ased on their
011H net retail
prices $hile ne$
#rands are ta)ed
#ased on their
present da! net
retail prices.
%hus, >uc-!
&tri-e suffers
from higher ta)es
$hile its
competitors pa! a
lo$er amount.
5A% further
argued that the
to#acco e)cise
la$ $as
discriminator!
#ecause under it,
#rands that
entered the
mar-et after 011H
$ere imposed
ta)es #ased on
their current
retail prices $hile
older #rands paid
ta)es #ased on
their 011H retail
prices.
Eean$hile,
Philip Eorris,
Cortune %o#acco,
Eight! Corp. and
'% 7nternational
?respodnents;in;
interventionA
claim that no
ine+ualit! e)ists
#et$een
cigarettes and
that nullification
of said anne)
$ould #ring
a#out tremendous
loss.
7: 0. WFn &ec. 095 of
the /7RC violates ,PC
and uniformit! of ta)ation
clauses
I.WF/ the Revenue
Regulations are
invalid in so far as
the! empo$er 57R to
reclassif! and update
the classification of
ne$ #rands ever!
t$o !ears or earlier
R: &ec 095 /7RC is
constitutional #ut the RRs
are invalid for gratning the
57R the po$er to
reclassif! and update the
classification.
0A /7RC is
constitutional
%he classification
freee provision
does not violate
the e+ual
protection and
uniformit! of
ta)ation. 7t meets
the standards for
valid
classification:
rests on a
su#stantial
distinction, is
germane to the
purpose of the
la$, applies to
present and
future conditions
and applies
e+uall! to all
those #elonging
to the same class.
?/D%,: %he
second condition,
ho$ever, $as not
full! satisfied as
it failed to
promote fair
competition
among the
pla!ers in the
industr!.
*o$ever, this
does not ma-e
the assailed la$
unconstitutionalA
%he classification
freee provision
$as done in good
faith and is
germane to the
purpose of the
la$. 7t $as
inserted for
reasons of
practicalit! and
e)pedienc!.
&ince a ne$
#rand $as not !et
in e)istence at the
time of the
passage of RA
8I9=, then
Congress needed
a uniform
mechanism to fi)
the ta) #rac-et of
a ne$ #rand. %he
current net retail
price, similar to
$hat $as used to
classif! the
#rands as of
Dcto#er 0, 011H,
$as thus the
logical and
practical choice.
With the
amendments
introduced #! RA
1889, the
freeing of the
ta) classifications
no$ e)pressl!
applies not "ust to
old #rands
?cigarettes $hich
are ta)ed on the
#asis of average
net retail price as
of Dcto#er 0,
011HA #ut to
ne$er #rands
introduced after
the effectivit! of
RA 8I9= on
'anuar! 0, 0112
and an! ne$
#rand that $ill #e
introduced in the
future.
%hus, the
classification
freee provision
could hardl! #e
considered #iased
to$ared older
#rands over
ne$er #rands.
Congress $as
even $illing to
delegate the
po$er to
periodicall!
ad"ust the e)cise
ta) rate and ta)
#rac-ets as $ell
as to periodicall!
resurve! and
reclassif! the
cigarette #rands
#ased on the
increase in the
consumer price
inde) to the .DC
and the 57R.
%hus, the
provision $as the
result of
CongressNs
earnest efforts to
improve the
efficienc! and
effectivit! of the
ta)
administration
over sin products
$hile tr!ing to
#alance the same
$ith other &tate
interests.
$4 U4ifor?i6@:
Oniformit! of
ta)ation re+uires
that all su#"ects
or o#"ects of
ta)ation,
similarl! situated,
are to #e treated
ali-e #oth in
privileges and
lia#ilities. 7n the
instant case, there
is no +uestion
that the CCP
meets the
geographical
uniformit!
re+uirement
#ecause the
assailed la$
applies to A>>
C7GAR,%%,
5RA/.& n the
Philippines.
$4 I4eIui6abli6@
a47
'eAressivi6@:
5A% claims that
the use of
different ta)
#ases for old
#rands as against
ne$ #rands is
discriminator! F
ine+uita#le, and
that the CCP is
regressive in
character. %his
cannot #e
sustained #ecause
the CCP meets
the re+uirements
of the ,PC.
Dn regressivit! ;;
the e)cise ta)
imposed on
cigarettes is an
indirect ta), and
thus, regressive
in character.
*DW,4,R, this
does not mean
that the la$ ma!
#e declared
unconstitutional
#ecause the
Constitution does
not prohi#it the
imposition of
indirect ta)es #ut
merel! provides
that Congress
shall ,4D>4,
progressive
s!stem of
ta)ation.
IA %he 57R RR is
invalid #ecause
the /7RC does
/D% authorie
the 57R to update
the ta)
classification of
ne$ #rands ever!
I !ears or earlier.
%he po$er to
reclassif!
cigarette #rands
remains in
Congress.
Allo$ing the
periodic
reclassification of
#rands might
tempt cigarette
manufacturers to
manipulate their
#randsG price
levels or #ri#e the
ta) implementers
to allo$ their
#rands to #e
classified as a
lo$er ta) #rac-et.
G.R. /o. >;II9I0
Earch 08, 01H2
I(US "CT'IC C$.:
I0C., Petitioner, vs. CTA
and CI', &espondents.
#$CT'I0: %he status
of petitionerGs municipal
franchises as propert! and
propert! right is
dependent upon or
+ualified #! the nature and
limitations of the authorit!
under $hich said
franchises $ere granted #!
the municipal corporations
concerned. &uch authorit!
shall #e Ysu#"ect to the
po$er of Congress to
alter, modif! or repeal the
sameG. 7n effecting such
alteration, our legislative
department has ?erel@
e>ercise7 a <o=er
e><ressl@ reserve7
6;ere6o b@ sai7
fra4c;ises, and has acted
in conformit! there$ith,
not in violation of the
provisions thereof or to
the detriment of the rights
there#! vested in
petitioner herein.
FACTS: #EN;?ON, J.P.,
J.:
%he Eunicipal
Council of 7mus
granted ?018=A the
petitioner Imus
Electric Co., Inc. the
franchise to operate in
that municipalit! an
electric plant,
imposing a fra4c;ise
6a> of 0@ of its gross
receipts for the first
I= !ears and I@ for
the ne)t fifteen ?05A
!ears.
RA 81 amended
?0191A &ec. I51 of the
%a) Code imposing a
ta) of 5@ upon $hich
such franchises are
conferred.
Imus Electric paid
franchise ta) at the
rate of 5@ of its gross
receipts until 0158
$hen it filed a claim
for refund of
pa!ments made at the
aforesaid rate of 5@
for the period 0198;
0150.
&aid claim for refund
$as granted as to
period from 015=
;0150. /onetheless,
C7R assessed Imus
Electric demanding
pa!ment of deficienc!
ta) and surcharge.
Opon refusal of the
Commissioner to
reconsider the
assessment, Imus
Electric petitioned the
C%A for the revie$ of
the CommissionerGs
ruling alleging that:
o ?0A %he
franchise is a
private
contract
$hich $ould
#e impaired
#! the
application
of &ection
I51 and this
$ould #e in
violation of
the non;
impairment
clause of the
Constitution<
and
o ?IA &ection
I51 of the
%a) Code is
a general la$
$hich has
not repealed
the franchise
and as such
applies onl!
to charter
provisions
$hich do not
specif! the
rate of
franchise ta)
to #e paid.
C%A affirmed the
C7RNs decision
declaring petitioner
su#"ect to the
franchise ta) of 5@.
*ence this petition
ISSU: *as &ection I51
of the %a) Code repealed
the corresponding
provision in petitionerGs
franchise violating the
non;impairment clauseP
)S i6 =as re<eale7: bu6
4o viola6io4 si4ce 6;e
riA;6 is e><ressl@
reserve7.
!"#: As held in >ealda
case: 3As amended #! RA
81, &ection I51 of the %a)
Code #ecame the #asic ta)
la$ not onl! #ecause it
$as entitled 6%a) on
Corporate Cranchises6 #ut
also #ecause it 6fi)ed the
rate of franchise ta) to #e
paid #! holders of all
e)isting and future
franchises.6
%he status of petitionerGs
municipal franchises as
propert! and propert!
right is dependent upon or
+ualified #! the nature and
limitations of the authorit!
under $hich said
franchises $ere granted #!
the municipal corporations
concerned. &uch authorit!
shall #e Ysu#"ect to the
po$er of Congress to
alter, modif! or repeal the
sameG.
Cor all intents and
purposes, said legal
provision alters the
pertinent provisions of
said franchises. 7n
effecting such alteration,
our legislative department
has merel! e)ercised,
ho$ever, a po$er
e)pressl! reserved thereto
#! said franchises, and has
acted, therefore, in
conformit! there$ith, not
in violation of the
provisions thereof or to
the detriment of the rights
there#! vested in
petitioner herein.
Wherefore, the "udgment
appealed from is
ACC7RE,. $ith the
modification that the I5@
surcharge imposed on
petitioner should #e, and
is, eliminated, there#!
reducing the ta) from a
total of P8=,19=.88 ?$ith
surchargeA to PI9,25I.IH.
P;ili<<i4e 'ural lec6ric
Coo<era6ives
Associa6io4: I4c./ AAusa4
7el 0or6e lec6ric
Coo<era6ive: I4c./ Iloilo
I lec6ric Coo<era6ive:
I4c./ a47 Isabela I
lec6ric Coo<era6ive:
I4c.: petitioners, v. T;e
Secre6ar@: #I"&: a47
T;e Secre6ar@:
#e<ar6?e46 of Fi4a4ce,
respondents.
FACTS:
A class suit $as filed
#! petitioners in their
o$n #ehalf and for
other electric
cooperatives
organied and
e)isting under P...
/o. IH1 $ho are
mem#ers of petitioner
P*7>R,CA.
P*7>R,CA is an
association of 001
electric cooperatives
throughout the
countr!. Petitioners
A/,CD, 7>,CD 7
and 7&,>CD 7 are
non;stoc-, non;profit
electric cooperatives
organied and
e)isting under P...
/o. IH1 and
registered $ith the
/ational
,lectrification
Administration
?/,AA.
Onder P... /o. IH1,
as amended ?/,A
.ecreeA, it is the
declared polic! of the
&tate to provide the
total electrification of
the Philippines on an
area coverage #asis
the same #eing vital
to the people and the
sound development of
the nation.


Pursuant to this
polic!, P... /o. IH1
aims to promote,
encourage and assist
all pu#lic service
entities engaged in
suppl!ing electric
service, particularl!
electric cooperatives
#! giving ever!
tena#le support and
assistance to the
electric cooperatives
coming $ithin the
purvie$ of the la$.
&ection 81 of P... /o.
IH1 e)empts them
from the pa!ment of
all /ational
Government, local
government, and
municipal ta)es and
fee, including
franchise, fling
recordation, license or
permit fees or ta)es
and an! fees, charges,
or costs involved in
an! court or
administrative
proceedings in $hich
it ma! #e part!.
Crom 0120 to 0128, in
order to finance the
electrification pro"ects
envisioned #! P...
/o. IH1, the
Philippine
Government, acting
through the /ational
,conomic Council
?no$ /,.AA and the
/,A, entered into H
loan agreements $ith
the Onited &tates
Agenc! for
7nternational
.evelopment
?O&A7.A $ith electric
cooperatives,
including petitioners
A/,CD, 7>,CD 7
and 7&,>CD 7, as
#eneficiaries.
%he loan agreements
contain similarl!
$orded provisions on
the ta) application of
the loan and an!
propert! or
commodit! ac+uired
through the proceeds
of the loan.
Petitioners contend
that pursuant to the
provisions of P... /o.
IH1 and provision in
the loan agreements,
the! are e)empt from
pa!ment of local
ta)es, including
pa!ment of real
propert! ta). With the
passage of the >GC,
the! allege that their
ta) e)emptions have
#een invalidl!
$ithdra$n.
Petitioners assail
&ections 018 and I89
of the >GC, on the
ground that the
provisions
discriminate against
them, in violation of
the e+ual protection
clause. Curther, the!
su#mit that the said
provisions are
unconstitutional
#ecause the! impair
the o#ligation of
contracts #et$een the
Philippine
Government and the
Onited &tates
Government.
ISSUS:
(1) .oes the >GC
violate the e+ual
protection clause
since the
provisions undul!
discriminate
against
petitioners $ho
are dul!
registered
cooperatives
under P. IH1, as
amended, and no
under RA H188 or
the Cooperatives
Code of the
PhilippinesP U
0$
(-) 7s there an
impairment of the
o#ligations of
contract under
the loan entered
into #et$een the
Philippine and
the O&
GovernmentsP U
0$
!"#:
(1) T!' IS 0$
%I$"ATI$0 $F
T! 8UA"
P'$TCTI$0
C"AUS
%he pertinent parts of
&ections 018 and I89
of the >GC provide:
&ection 018.
1ithdra!al of 'ax
Exemption Privileges.
Onless other$ise
provided in this Code,
ta) e)emptions or
incentives granted to,
or presentl! en"o!ed
#! all persons,
$hether natural or
"uridical, including
government;o$ned
and controlled
corporations, e)cept
local $ater districts,
coo<era6ives 7ul@
reAis6ere7 u47er
'.A. 0o. 69D., non;
stoc- and non;profit
hospitals and
educational
institutions, are
here#! $ithdra$n
upon the effectivit! of
this Code.
&ection I89.
Exemptions from real
property tax. %he
follo$ing are
e)empted from
pa!ment of the real
propert! ta):
(7) All real <ro<er6@
o=4e7 b@ 7ul@
reAis6ere7
coo<era6ives as
<rovi7e7 for u47er
'.A. 0o. 69D./ a47
,)cept as provided
herein, an! e)emption
from pa!ment of real
propert! ta)
previousl! granted to,
or presentl! en"o!ed
#!, all persons
$hether natural or
"uridical, including all
government;o$ned
and controlled
corporations are
here#! $ithdra$n
upon effectivit! of
this Code.
Petitioners argue that
the provisions are
unconstitutional for
violating the e+ual
protection clause,
#eing undul!
discriminating against
petitioners $ho are
dul! registered
cooperatives under
P... /o. IH1 and not
under R.A. /o. H188
or the Cooperative
Code of the
Philippines. %he!
maintain that electric
cooperatives
registered $ith the
/,A under P... /o.
IH1 and electric
cooperatives
registered $ith the
Cooperative
.evelopment
Authorit! ?C.AA
under R.A. /o. H188
are similarl! situated
#ecause:
o Petitioners
are: aA
registered
$ith the
/,A $hich
is a
government
agenc! li-e
the C.A< #A
li-e C.A;
registered
cooperatives,
operate for
service to
their
mem#er;
consumers<
and cA prior
to the
enactment of
the >GC,
$ere alread!
ta);e)empt.


%he e+ual protection
clause under the
Constitution means
that no person or class
of persons shall #e
deprived of the same
protection of la$s
$hich is en"o!ed #!
other persons or other
classes in the same
place and in li-e
circumstances. T;us:
6;e Auara46@ of 6;e
eIual <ro6ec6io4 of
6;e la=s is 4o6
viola6e7 b@ a la=
base7 o4 reaso4able
classifica6io4.
Classification, to #e
reasona#le, must ?0A
rest on su#stantial
distinctions< ?IA #e
germane to the
purposes of the la$<
?8A not #e limited to
e)isting conditions
onl!< and ?9A appl!
e+uall! to all
mem#ers of the same
class.
%here is reasona#le
classification under
the >GC to "ustif! the
different ta) treatment
#et$een electric
cooperatives covered
#! P... /o. IH1 and
electric cooperatives
under R.A. /o. H188.
Firs6, su#stantial
distinctions e)ist
#et$een cooperatives
under P... /o. IH1
and cooperatives
under R.A. /o. H188.
%hese distinctions are
manifest in at least
t$o material respects
$hich go into the
nature of cooperatives
envisioned #! R.A.
/o. H188 and $hich
characteristics are not
present in the t!pe of
cooperative
associations created
under P... /o. IH1.
a. Ca<i6al
Co46ribu6io4s
b@ (e?bers
A
C$$P'ATI%
under R.A. /o.
H188 is defined
as: A dul!
registered
association of
persons $ith a
common #ond of
interest, $ho
have voluntaril!
"oined together to
achieve a la$ful
common or social
economic end,
?aki4A
eIui6able
co46ribu6io4s 6o
6;e ca<i6al
reIuire7 and
accepting a fair
share of the ris-s
and #enefits of
the underta-ing
in accordance
$ith universall!
accepted
cooperative
principles.

%he a#ove
definition
provides for the
follo$ing
ele?e46s of a
coo<era6ive: aA
association of
persons< #A
common #ond of
interest< cA
voluntar!
association< dA
la$ful common
social or
economic end< eA
capital
contri#utions< fA
fair share of ris-s
and #enefits< gA
adherence to
cooperative
values< and gA
registration $ith
the appropriate
government
authorit!.

%he importance
of capital
contri#utions #!
mem#ers of a
cooperative under
R.A. /o. H188
$as one of the
-e! factors $hich
distinguished
electric
cooperatives
under P... /o.
IH1 from electric
cooperatives
under the
Cooperative
Code. &enate
deli#erations:
o lec6ric
coo<era6ives
as 6;e@ e>is6
6o7a@ =oul7
4o6 fall
u47er 6;e
6er?
coo<era6ive
as use7 i4
6;is bill
because 6;e
co4ce<6 of a
coo<era6ive
is 6;a6
=;ic;
a7;eres a47
<rac6ices
cer6ai4
coo<era6ive
<ri4ci<les.
o Dne of the
most
important
re+uirements
is 6;e
<ri4ci<le
=;ere
?e?bers
bi47
6;e?selves
6o ;el<
6;e?selves.
I6 is because
of 6;eir
collec6ivi6@
6;a6 6;e@
ca4 ;ave
so?e
eco4o?ic
be4efi6s. 7n
this
particular
case
Kcooperatives
under P...
/o. IH1L, the
government
is the one
that funds
these so;
called
electric
cooperatives.
o Cooperatives
under P...
/o. IH1, 7o
4o6 ?ake
subs6a46ial
co46ribu6io4
6o 6;e
ca<i6al
reIuire7. I6
is 6;e
Aover4?e46
6;a6 <u6s i4
6;e ca<i6al:
i4 ?os6
cases.
o Ea-ing
e+uita#le
contri#utions
to the capital
re+uired
$ould
e)clude
electric
cooperatives
?P... /o.
IH1A.
5ecause the
mem#ership
does not
ma-e
e+uita#le
contri#utions
.
o T;e
?easure of
6;eir
Iualif@i4A
as a
coo<era6ive
=oul7 be
6;e
reIuire?e46
6;a6 a
?e?ber of
6;e elec6ric
coo<era6ive
?us6
co46ribu6e a
<ro ra6a
s;are of 6;e
ca<i6al of
6;e
coo<era6ive
i4 cas; 6o be
a
coo<era6ive.

Onder P.#. 0o.

-69, cooperatives
are not re+uired
to ma-e e+uita#le
contri#utions to
capital and to
+ualif! as a
mem#er ?under
P... /o. IH1A,
o4l@ 6;e
<a@?e46 of a
P,.00
?e?bers;i< fee
is re+uired
?refunda#le the
moment the
mem#er is no
longer
interestedA.

Onder the
Coo<era6ive
Co7e, the
ar6icles of
coo<era6io4 of a
cooperative
appl!ing for
registration ?us6
be acco?<a4ie7
=i6; 6;e bo47s
of the
accounta#le
officers and a
s$orn statement
of the treasurer
elected #! the
su#scri#ers
s;o=i4A 6;a6 a6
leas6 -,J of 6;e
au6;oriFe7 s;are
ca<i6al ;as bee4
subscribe7 a47
a6 leas6 -,J of
6;e 6o6al
subscri<6io4 ;as
bee4 <ai7 and in
no case shall the
paid;up share
capital #e less
than %$o
thousand pesos
?PI,===.==A.
b. >6e46 of
&over4?e46 Co46rol
over Coo<era6ives

%he
Cooperative
Code
adhered to
the <ri4ci<le
of
subsi7iari6@.
Pursuant to
this
principle, the
government
ma! onl!
engage in
development
activities
$here
cooperatives
do not
possess the
capa#ilit!
nor the
resources to
do so and
onl! upon
the re+uest
of such
cooperatives

Accordingl!,
the C.A is
the primar!
government
agenc!
tas-ed to
promote and
regulate the
institutional
development
of
cooperatives.

7n contrast,
P.#. 0o. -69
is re<le6e
=i6;
<rovisio4s
=;ic; Ara46
6;e 0A:
6;e <o=er 6o
co46rol a47
6ake over
6;e
?a4aAe?e4
6 a47
o<era6io4s
of
coo<era6ives
reAis6ere7
u47er i6.

%he e)tent of
government
control over
electric
cooperatives
covered #!
P... /o. IH1
is largel! a
function of
the role of
the /,A as a
<ri?ar@
source of
fu47s of
these electric
cooperatives.
7t is cr!stal
clear that
/,A
incurred
loans from
various
sources 6o
fi4a4ce 6;e
7evelo<?e4
6 a47
o<era6io4s
of 6;e
elec6ric
coo<era6ives
.
Conse+uentl
!,
amendments
$ere
primaril!
geared to
e)pand the
po$ers of
the /,A
over the
electric
cooperatives
to ensure that
loans granted
to them
$ould #e
repaid to the
government.
7n contrast,
cooperatives
under R.A.
/o. H188 are
envisioned to
#e self1
sufficie46
a47
i47e<e47e46
organiations
=i6;
?i4i?al
Aover4?e46
i46erve46io4
or
reAula6io4.

%he classification of
ta);e)empt entities in
the >GC is germane
to the purpose of the
la$. %he
Constitutional
mandate that ever!
local government unit
shall en"o! local
autonom!, does not
mean that the e)ercise
of po$er #! local
governments, is
#e!ond regulation #!
Congress. While each
government unit is
granted the po$er to
create its o$n sources
of revenue, Congress,
in light of its #road
po$er to ta), has the
discretion to
determine the e>6e46
of 6;e 6a>i4A <o=ers
of local government
units consistent $ith
the polic! of local
autonom!.

&ection 018 of the

>GC is indicative of
the legislative intent
to vest #road ta)ing
po$ers upon local
government units and
to limit e)emptions
from local ta)ation to
entities specificall!
provided therein.
(-) T!' IS 0$
%I$"ATI$0 $F
T! 0$01
I(PAI'(0T
C"AUS
7t is ingrained in
"urisprudence that the
constitutional
prohi#ition on the
impairment of the
o#ligation of contracts
does not prohi#it
ever! change in
e)isting la$s. %o fall
$ithin the prohi#ition,
the change must not
onl! impair the
o#ligation of the
e)isting contract, #ut
the impairment must
#e su#stantial.
&u#stantial
impairment pertains
to:
o A la$ $hich
changes the
terms of a
legal
contract
#et$een
parties,
either in the
time or mode
of
performance,
or imposes
ne$
conditions,
or dispenses
$ith those
e)pressed, or
authories
for its
satisfaction
something
different
from that
provided in
its terms, is
la$ $hich
impairs the
o#ligation of
a contract
and is
therefore
null and
void.
Eoreover, to
constitute impairment,
the la$ must affect a
change in the rights of
the parties $ith
reference to each
other and not $ith
respect to non;parties.
%he provisions under
the loan agreements,
do not grant an! ta)
e)emption in favor of
the #orro$er or the
#eneficiar! either on
the proceeds of the
loan itself or the
properties ac+uired
through the said loan.
7t simpl! states that
the loan proceeds and
the principal and
interest of the loan,
upon repa!ment #!
the #orro$er, shall #e
=i6;ou6 7e7uc6io4 of
a4@ 6a> or fee 6;a6
?a@ be <a@able
u47er P;ili<<i4e la=
as suc; 6a> or fee
=ill be absorbe7 b@
6;e borro=er =i6;
fu47s o6;er 6;a4 6;e
loa4 <rocee7s.
Curther, the provision
states that $ith
respect to an!
pa!ment made #! the
#orro$er to ?0A an!
contractor or an!
personnel of such
contractor or an!
propert! transaction
and ?IA an!
commodit!
transaction using the
proceeds of the loan,
6;e 6a> 6o be <ai7: if
a4@: o4 suc;
6ra4sac6io4s s;all be
absorbe7 b@ 6;e
borro=er a47Mor
be4eficiar@ 6;rouA;
fu47s o6;er 6;a4 6;e
loa4 <rocee7s.
%he import of the ta)
provision in the loan
agreements cited #!
petitioners is t$ofold:
?0A the #orro$er is
entitled to receive
from and is o#liged to
pa! the lender the
principal amount of
the loan and the
interest thereon i4
full: =i6;ou6 a4@
7e7uc6io4 of 6;e 6a>
co?<o4e46 6;ereof
i?<ose7 u47er
a<<licable
P;ili<<i4e la= a47
a4@ 6a> i?<ose7
s;all be <ai7 b@ 6;e
borro=er =i6; fu47s
o6;er 6;a4 6;e loa4
<rocee7s and ?IA $ith
respect to pa!ments
made to an!
contractor, its
personnel or an!
propert! or
commodit!
transaction entered
into pursuant to the
loan agreement and
$ith the use of the
proceeds thereof,
ta)es pa!a#le under
the said transactions
s;all be <ai7 b@ 6;e
borro=er a47Mor
be4eficiar@ =i6; 6;e
use of fu47s o6;er
6;a4 6;e loa4
<rocee7s.
%he +uoted provision
does not purport to
grant an! ta)
e)emption in favor of
an! part! to the
contract, including the
#eneficiaries thereof.
T;e <rovisio4s
si?<l@ s;if6 6;e 6a>
bur7e4, if an!, o4 6;e
6ra4sac6io4s u47er
6;e loa4 aAree?e46s
6o 6;e borro=er
a47Mor be4eficiar@ of
6;e loa4. %hus, the
$ithdra$al #! the
>GC under &ections
018 and I89 of the ta)
e)emptions
previousl! en"o!ed #!
petitioners does not
impair the o#ligation
of the #orro$er, the
lender or the
#eneficiar! under the
loan agreements as in
fact, no ta) e)emption
is granted therein.
W!'F$': the
petition is .,/7,. and
the %RD issued is
>7C%,..
A*'A %A"")
C$""&: I0C.:
re<rese46e7 b@ P#'$
%. *$'&$0IA:
petitioner, vs. !$0.
3UA0 P. A8UI0$:
3u7Ae: CFI: Abra/
A'(I0 (. CA'IA&A:
Provi4cial Treasurer:
Abra/ &ASPA' %.
*$S8U: (u4ici<al
Treasurer: *a4Aue7:
Abra/ !I'S $F
PAT'0$ (I""A':
respondents.
Petition for revie$ on
certiorari of the CC7Ns
decision decreeing the
valid the seiure and
sale of the Eunicipal
%reasurer of 5angued,
A#ra, the Provincial
%reasurer of the lot
and #uilding of the
A#ra 4alle! 'unior
College, 7nc.
FACTS:
A*'A %A"")
C$""&, an
educational
corporation and
institution of higher
learning incorporated
$ith the &,C in 0198,
file7 a co?<lai46 6o
a44ul a47 7eclare
voi7 6;e H0o6ice of
SeiFureN a47 6;e
H0o6ice of SaleH of
its lot and #uilding at
5anguet, A#ra, for
non;pa!ment of real
estate ta)es ?R,%A
and penalties
amounting to
P5,09=.80.
%he H0o6ice of
SeiFureH #!
respondents
Eunicipal %reasurer
and Provincial
%reasurer $as issued
for the satisfaction of
the said ta)es. %he
H0o6ice of SaleH $as
served to the
petitioner on 2F8F012I
for the sale at pu#lic
auction of the college
lot and #uilding,
$hich sale $as held
on the same date.
#r. Pa6er4o (illare
?then Eunicipal
Ea!orA offere7 6;e
;iA;es6 bi7 of
P6:000.00 =;ic; =as
acce<6e7. %he
certificate of sale $as
correspondingl!
issued to him.
K&u#se+uentl!, filed a
motion to dismiss the
complaintL
K%reasurerNs Ans$er
to the Complaint
Amender Ans$er
EillareNs Ans$erL
Dn Dcto#er 0I, 012I,
$ith the aforesaid sale
of the school premises
at pu#lic auction, the
respondent 'udge
ordered the
respondents
provincial and
municipal treasurers
to deliver to the Cler-
of Court the proceeds
of the auction sale.
*ence, on .ecem#er
09, 012I, petitioner,
through .irector
5orgonia, deposited
$ith the trial court the
sum of PH,===.==.
Dn April 0I, 0128, the
parties entered into a
&%7PO>A%7D/ DC
CAC%& adopted and
em#odied #! the trial
court in its +uestioned
decision.
Aside from the
&tipulation of Cacts,
the trial court found
the follo$ing:
o ?aA that the school
is recognied #!
the government
and is offering
Primar!, *igh
&chool and
College Courses,
and has a school
population of
more than one
thousand students
all in all<
o ?#A that it is
located right in
the heart of the
to$n of 5angued,
a fe$ meters
from the plaa
and a#out 0I=
meters from the
CC7 #uilding<
o ?cA that the
elementar! pupils
are housed in a
t$o;store!
#uilding across
the street<
o ?dA that the high
school and
college students
are housed in the
main #uilding<
o ?eA that the
.irector $ith his
famil! is in the
second floor of
the main
#uilding< and
o ?fA that the annual
gross income of
the school
reaches more
than one hundred
thousand pesos.
%he succeeding
Provincial Ciscal filed
a Eemorandum for
the Government and a
&upplemental
Eemorandum,
$herein the! opined
6that #ased on the
evidence, the la$s
applica#le, court
decisions and
"urisprudence, the
school #uilding and
school lot used for
educational purposes
of the A#ra 4alle!
College, 7nc., are
e)empted from the
pa!ment of ta)es.6
/onetheless, the trial
court disagreed
#ecause of the use of
the second floor #!
the .irector of
petitioner school for
residential purposes.
*e thus ruled for the
government and
rendered the assailed
decision.
Petitioner contends
that the primar! use
of the lot and #uilding
for educational
purposes, and not the
incidental use,
determines and
e)emption from
propert! ta)es under
&ection II ?8A, Article
47 of the 0185
Constitution.
Dn the other hand,
private respondents
maintain that the
college lot and
#uilding $hich $ere
su#"ected to seiure
and sale to ans$er for
the unpaid ta) are
used:
o ?0A for the
educational
purposes of the
college<
o ?IA as the
permanent
residence of the
President and
.irector thereof,
Er. 5orgonia and
his famil!
including the in;
la$s and
grandchildren<
and
o ?8A for
commercial
purposes #ecause
the ground floor
of the college
#uilding is #eing
used and rented
#! a commercial
esta#lishment,
the /orthern
Ear-eting
Corporation.
ISSUS:
(1) Was there a valid
seiure and sale of the
college lot and
#uildingP U )S
(-) Was petitioner
e)empted from
pa!ing propert! ta)es
and realt! ta)esP U
0$
!"#:
P,R%7/,/% >AW&
$hich grants
e)emption for
6cemeteries, churches
and parsonages or
convents appurtenant
thereto, and all lands,
#uildings, and
improvements used
exclusively for
religious, charita#le
or educational
purposes:
o %he
Co4s6i6
u6io4al
<rovisio
4 ?&ec.
II, par.
8,
Article
47, 0185
Constitu
tionA
$hich
e)pressl
! grants
e)empti
on from
realt!
ta)es
o Assess?
e46 "a=
$hich
e)empts
from
real
propert!
ta)
Petitioner argues that
the primar! use of the
school lot and
#uilding is the #asic
and controlling guide,
norm and standard to
determine ta)
e)emption, and not
the mere incidental
use thereof.
7n ,-C$ of -anila
vs. Collector of
lnternal #evenue
?010HA, this Court
ruled that $hile it
ma! #e true that the
RECA -eeps a
lodging and a
#oarding house and
maintains a restaurant
for its mem#ers, still
these do not constitute
#usiness in the
ordinar! acceptance
of the $ord, bu6 a4
i4s6i6u6io4 use7
e>clusivel@ for
reliAious, charita#le
and educational
purposes, and as such,
it is entitled to #e
e)empted from
ta)ation.
7n ishop of %ueva
Segovia v. )rovincial
oard of .locos
%orte ?012IA, the
Court included in the
e)emption a vegeta#le
garden in an ad"acent
lot and another lot
formerl! used as a
cemeter!.
o Clarif!i
ng that
the term
Huse7
e>clusiv
el@H
consider
s
incident
al use
also.
o %hus,
the
e>e?<6i
o4 fro?
<a@?e4
6 of la47
6a> i4
favor of
6;e
co4ve46
i4clu7es
: 4o6
o4l@ 6;e
la47
ac6uall@
occu<ie
7 b@ 6;e
buil7i4A
bu6 also
6;e
a7Bace4
6 Aar7e4
7evo6e7
6o 6;e
i4ci7e46
al use of
6;e
<aris;
<ries6.
%he lot
$hich is
not used
for
commer
cial
purposes
#ut
serves
solel! as
a sort of
lodging
place,
also
+ualifies
for
e)empti
on
#ecause
this
constitut
es
incident
al use in
religious
function
s.
%he phrase
H CC"USI%")
US# F$'
#UCATI$0A"
PU'P$SS H in the
cases of Herrera vs.
(ue)on City #oard of
assessment %ppeals
?01H0A and
Commissioner of
Internal &evenue vs.
#ishop of the
Aissionary <istrict
?01H5A:
o %he
e>e?<6i
o4 i4
favor of
<ro<er6
@ use7
e>clusiv
el@ for
charita#l
e or
educatio
nal
purposes
is O4o6
li?i6e7
6o
<ro<er6
@
ac6uall@
i47is<e
4sableO
6;erefor
, #ut
e>6e47s
6o
facili6ies
=;ic;
are
i4ci7e46
al 6o
a47
reaso4a
bl@
4ecessa
r@ for
6;e
acco?<l
is;?e46
of sai7
<ur<ose
s, such
as in the
case of
hospitals
, 6a
school
for
training
nurses, a
nursesG
home,
propert!
use to
provide
housing
facilities
for
interns,
resident
doctors,
superint
endents,
and
other
mem#er
s of the
hospital
staff,
and
recreatio
nal
facilities
for
student
nurses,
interns,
and
residents
G, such as
6Athleti
c fields6
includin
g 6a firm
used for
the
inmates
of the
institutio
n.
%he TST $F
C(PTI$0 from
ta)ation is the use of
the propert! for
purposes mentioned
in the Constitution.
7t must #e stressed
that $hile this Court
allo=s a ?ore liberal
a47 4o41res6ric6ive
i46er<re6a6io4 of the
phrase He>clusivel@
use7 for e7uca6io4al
<ur<osesH,
reaso4able e?<;asis
;as al=a@s bee4
?a7e 6;a6 e>e?<6io4
e>6e47s 6o facili6ies
=;ic; are i4ci7e46al
6o a47 reaso4abl@
4ecessar@ for 6;e
acco?<lis;?e46 of
6;e ?ai4 <ur<oses.
Dther$ise stated, 6;e
use of 6;e sc;ool
buil7i4A or lo6 for
co??ercial
<ur<oses is 4ei6;er
co46e?<la6e7 b@
la=: 4or b@
Buris<ru7e4ce.
%hus, $hile the use of
the second floor of the
main #uilding in the
case at #ar for
residential purposes
of the .irector and his
famil!, ma! find
"ustification under the
concept of incidental
use, $hich is
complimentar! to the
main or primar!
purpose:
educational, 6;e lease
of 6;e firs6 floor
6;ereof 6o 6;e
0or6;er4 (arke6i4A
Cor<ora6io4
CA00$T b@ a4@
s6re6c; of 6;e
i?aAi4a6io4 be
co4si7ere7
i4ci7e46al 6o 6;e
<ur<ose of
e7uca6io4.
*o$ever, it should #e
noted that the lease
appears to have #een
raised for the first
time in this Court.
%he matter $as not
ta-en up in the to
court is reall!
apparent in the
decision of
respondent 'udge. 7t
$as not made in the
stipulation of facts,
not even in the
description of the
school #uilding #! the
trial "udge, #oth
em#odied in the
decision nor as one of
the issues to resolve
in order to determine
$hether or not said
properl! ma! #e
e)empted from
pa!ment of real estate
ta)es. Dn the other
hand, it is note$orth!
that such fact $as not
disputed even after it
$as raised in this
Court.
7t is a)iomatic that
facts not raised in the
lo$er court cannot #e
ta-en up for the first
time on appeal.
/onetheless, as an
e)ception to the rule,
this Court has held
that in the interest of
su#stantial "ustice,
although a factual
issue is not s+uarel!
raised #elo$, the
Court is not prevented
from considering a
pivotal factual matter.
Onder the 0185
Constitution, 6;e 6rial
cour6 correc6l@
arrive7 a6 6;e
co4clusio4 6;a6 6;e
sc;ool buil7i4A as
=ell as 6;e lo6 =;ere
i6 is buil6: s;oul7 be
6a>e7, not #ecause the
second floor of the
same is #eing used #!
the .irector and his
famil! for residential
purposes, #ut because
6;e firs6 floor 6;ereof
is bei4A use7 for
co??ercial
<ur<oses. *o$ever,
since onl! a portion is
used for purposes of
commerce, it is onl!
fair that half of the
assessed ta) #e
returned to the school
involved.
PR,E7&,&
CD/&7.,R,., the
decision is here#!
ACC7RE,. su#"ect to the
modification that half of
the assessed ta) #e
returned to the petitioner.
"u4A Ce46er of 6;e P;ils
v 8C
%he >ung Center
of the
Philippines, a
non;stoc- and
non;profit entit!
esta#lished #!
virtue of P.
08I8, $as the
o$ner of a parcel
of land in MC.
7n the middle of
the lot $as a
hospital -no$n
as the >ung
Center of the
Philippines.
A #ig space at the
ground floor $as
#eing leased to
private parties,
for canteen and
small store
spaces, and to
medical
practitioners $ho
use the same as
their private
clinics for their
patients $hom
the! charge for
their professional
services.
Almost Z of the
entire area on the
left side of the
#uilding along M
Ave $as vacant
and idle, $hile a
#ig portion on the
right side, at the
corner of M Ave
and ,lliptical
Road, $as #eing
leased for
commercial
purposes to a
private enterprise
-no$n as the
,lliptical Drchids
and Garden
Center.
%he >ung Center
accepts pa!ing
and non;pa!ing
patients. 7t also
renders medical
services to out;
patients, #oth
pa!ing and non;
pa!ing. Aside
from its income
from pa!ing
patients, it also
received gov
su#sidies.
%he Cit!
Assessor of MC
assessed #oth the
land and the
hospital #uilding
for real propert!
ta)es amounting
to a#out P9E.
>ung Center filed
a Claim for
e)emption from
real propert!
ta)es sa!ing it
$as a charita#le
institution.
%he >ung
CenterNs re+uest
$as denied, and a
petition $as,
thereafter, filed
#efore the >ocal
5oard of
Assessment
Appeals of
Mueon Cit!
?MC;>5AAA for
the reversal of the
resolution of the
Cit! Assessor.
%he >ung Center
alleged that under
&ection I8,
paragraph 8 of
the 0182
Constitution, the
propert! is
e)empt from real
propert! ta)es. 7t
averred that a
minimum of H=@
of its hospital
#eds are
e)clusivel! used
for charit!
patients and that
the ma"or thrust
of its hospital
operation is to
serve charit!
patients.
*o$ever, the
>ocal 5oard held
>ung Center
lia#le for real
propert! ta)es.
.ecision $as
affirmed #! MC
Central 5oard.
Petition $as
elevated to &C.
7: 0AWFn >ung Center
is a charita#le institution
$ithin the conte)t of P.
08I8 and under the Consti
; R,&
IA WFn the real
properties of the >ung
Center are e)empt from
real propert! ta)es; /D
R: 0A )S: 6;e "u4A
Ce46er is a c;ari6able
i4s6i6u6io4.
%o determine
$hether an
enterprise is a
charita#le
institution, the
elements $hich
should #e
considered
include the
statute creating it,
its purpose, #!;
la$s, services
and natureF use of
properties.
Onder P. 08I8,
the >ung Center
is a non;profit
and non;stoc-
corporation
$hich, su#"ect to
the provisions of
the decree, is to
#e administered
#! the Dffice of
the President of
the Philippines
$ith the Einistr!
of *ealth and the
Einistr! of
*uman
&ettlements. 7t
$as organied for
the $elfare and
#enefit of the
Cilipino people
principall! to
help com#at the
high incidence of
lung and
pulmonar!
diseases in the
Philippines.
%he Articles of
7ncorporation of
>C provide that
its medical
services are to #e
rendered to the
pu#lic in general
in an! and all
$al-s of life
including those
$ho are poor and
the need! $ithout
discrimination.
A charita#le
institution does
not lose its
character as such
and its e)emption
from ta)es
simpl! #ecause it
derives income
from pa!ing
patients, $hether
out;patient, or
confined in the
hospital, or
receives su#sidies
from the
government, so
long as the
mone! received
is used for the
C*AR7%A5>,
o#"ective it is
intended for, and
no mone! inures
to the private
#enefit of the
persons
managing or
operating the
institution.
7n this case, the
mone! received
#! the >ung
Center #ecomes a
part of the trust
fund and must #e
devoted to pu#lic
trust purposes
and cannot #e
diverted to
private profit or
#enefit.
Onder P. 08I8,
the >ung Center
is entitled to
receive
donations. %he
>ung Center does
not lose its
character as a
charita#le
institution simpl!
#ecause of gov
su#sidies
?donationA.
IA 0$: 4o6 all
are e>e?<6 fro?
real <ro<er6@
6a>.
%he portions of
its real propert!
that are leased to
private entities
are not e)empt
from real
propert! ta)es as
these are not
actuall!, directl!
and e)clusivel!
used for
charita#le
purposes.
&ince ta)ation is
the rule and
e)emption is the
e)ception, a
claim for
e)emption from
ta) pa!ments
must #e clearl!
sho$n and #ased
on language in
the la$ too plain
to #e mista-en.
Onder P. 08I8,
the >ung Center
does /D% en"o!
an! propert! ta)
e)emption
privileges for its
real properties
and #uildings. 7f
the intentions
$ere other$ise,
the same should
have #een among
the enumeration
of ta) e)empt
privileges under
&ection I thereof.
Onder the 0128
and 0182
Constitutions and
RA 20H= in order
to #e entitled to
the e)emption of
propert! ta), the
>ung Center
should prove that
aA it is a
charita#le
institution< and
?#A its real
properties are
AC%OA>>R,
.7R,C%>R and
,QC>O&74,>R
used for
charita#le
purposes.
o 7f real
propert!
is used
for one
or more
commer
cial
purposes
, it is not
e)clusiv
el! used
for the
e)empte
d
purposes
#ut is
su#"ect
to
ta)ation.
%*O&,
3e)clusi
vel!B
means
&D>,>
R.
o What is
meant
#!
actual,
direct
and
e)clusiv
e use of
the
propert!
for
charita#l
e
purposes
is the
.7R,C%
,
7EE,.
7A%,,
AC%OA
>
applicati
on of the
PRDP,
R%R
itself to
the
purposes
for
$hich
the
charita#l
e
institutio
n is
organie
d. 7t is
/D% the
use of
7/CDE
, of the
propert!
$Fc is
the
controlli
ng factor
?to
e)emptA.
7n this case,
$hile portions of
the hospital are
used for the
treatment of
patients, other
parts are #eing
leased to private
individuals for
their clinics and a
canteen. Curther,
a portion of the
land is #eing
leased to a
private individual
for her #usiness
enterprise under
the #usiness
name 6,lliptical
Drchids and
Garden Center.6
%hus, portions of
the land leased to
private entities
and individuals
are /D% ta)
e)empt, $hile
those used for
patients, pa!ing
and non;pa!ing,
are e)empt.
CI' v CA a47 )(CA
(199./ <a4Aa4iba4)
RECA is a non;
stoc-, non;profit
institution, $hich
conducts various
programs and
activities that are
#eneficial to the
pu#lic, especiall!
the !oung people,
pursuant to its
religious,
educational and
charita#le
o#"ectives.
7n 018=, RECA,
among others, an
amount of
income ?a#out
P2==-TA from
leasing out a
portion of its
premises to small
shop o$ners, li-e
restaurants and
canteen
operators, and
from par-ing fees
collected from
non;mem#ers.
%he C7R thus
issued an
assessment to
RECA totaling
a#out P905-T
including
surcharge and
interest, for
deficienc!
income ta),
deficienc!
e)panded
$ithholding ta)es
on rentals and
professional fees
and deficienc!
$ithholding ta)
on $ages.
RECA protested
the assessment
and filed a letter.
7n repl!, the C7R
denied the claims
of RECA.
RECA thus filed
a petition to the
C%A to ta-e out
the ta)es and
C%A ruled in
favor of RECA.
C7R filed a
petition $ith the
CA to reverse,
#ut CA affirmed
C%AGs decision.
7: WFn the
income derived
from rentals of
real propert!
o$ned #! RECA
?esta#lished as 6a
$elfare,
educational and
charita#le non;
profit
corporation6A is
su#"ect to income
ta) under the
/7RC and
Constitution
R: R,&, the
income derived
#! RECA from
rentals of its real
propert! is
su#"ect to income
ta).
/snder the
%.#C0 While
&ection I2 of the
/7RC provides
that non;profit
organiations and
clu#s shall not #e
ta)ed on their
income, it also
provides that this
e)emption $ill
/D% appl! to
income derived
from 0A
properties, real or
personal, and IA
an! other
activities
conducted for
profit shall #e
su#"ect to ta)
?amended #! P.
0952A.
Appl!ing the
doctrine of strict
interpretation of
ta) e)emptions,
the phrase 6an!
of their activities
conducted for
profitB does /D%
+ualif! the $ord
3properties.B
%his ma-es
income from the
propert! of the
organiation
ta)a#le,
regardless of ho$
that income is
used ;; $hether
for profit or for
loft! non;profit
purposes.
/nder the
Constitution0
Article 47,
&ection I8 of the
Constitution
e)empts
3charita#le
institutionsB from
the pa!ment not
onl! of ta)es.
*DW,4,R,
acdg to consti
framers, the
e)emption does
/D% pertain to
income ta) #ut
onl! propert!
ta)es.
Cor the RECA to
#e granted the
e)emption as an
3educational
institutionB under
the Consti ?Art
09 &ec 9A, it must
prove $ith
su#stantial
evidence that:
a. it falls
under
the
classific
ation
non;
stoc-,
non;
profit
educatio
nal
institutio
n< and
#. the
income
it see-s
to #e
e)empte
d from
ta)ation
is used
actuall!,
directl!,
and
e)clusiv
el! for
educatio
nal
purposes

*o$ever, no evidence
$as su#mitted #!
RECA to prove
that the! met the
re+uisites. %he
term 3educational
institutionB or
3institution of
learningB has
ac+uired a $ell;
-no$n technical
meaning, of
$hich the
mem#ers of the
Constitutional
Commission are
deemed
cogniant.

Onder the ,ducation

Act of 018I, such
term refers to
schools, $hich is
s!non!mous $ith
formal education
DR a school
seminar!,
college, or
educational
esta#lishment.
%he Court, upon
e)amining the
3Amended
Articles of
7ncorporationB
and 35!;>a$sB
of the RECA,
#ut found nothing
in them that even
hints that it is a
school or an
educational
institution.

,ven if RECA is an
educational
institution, the
Court also notes
that RECA did
not su#mit proof
of the
proportionate
amount of the
su#"ect income
that $as actuall!,
directl! and
e)clusivel! used
for educational
purposes.
%1T+ *if -ir as3s aout
ho! this differs !ith
O'HE& cases+@ 'he cases
relied on y DAC% do not
support its cause. DAC%
of Aanila v. CI& and %ra
Ialley College, Inc. v.
%4uino are not applicale,
ecause the controversy in
oth cases involved
exemption from the
payment of property tax,
not income tax. Hospital
de -an Juan de <ios, Inc.
v. Pasay City is not in
point either, ecause it
involves a claim for
exemption from the
payment of regulatory
fees, specifically electrical
inspection fees, imposed
y an ordinance of Pasay
City "" an issue not at all
related to that involved in
a claimed exemption from
the payment if income
taxes imposed on
property leases. In Jesus
-acred Heart College v.
Com. Of Internal
&evenue, the party
therein, !hich claimed an
exemption from the
payment of income tax,
!as an educational
institution !hich
sumitted sustantial
evidence that the income
suject of the controversy
had een devoted or used
solely for educational
purposes. On the other
hand, DAC% in the
present case had not given
any proof that it is an
educational institution, or
that of its rent income is
actually, directly and
exclusively used for
educational purposes.
CI' v CA a47 A6e4eo 7e
(a4ila (1992/
<a4Aa4iba4)
Ateneo de Eanila
Oniversit!, is a
non;stoc-, non;
profit educational
institution, $as
conducting
research through
an au)iliar! unit,
the 7nstitute of
Philippine
Culture.
7n 0188, Ateneo
received from
C7R a demand
letter assessing
Ateneo of the the
sum of a#out
P02=-T for
alleged
deficienc!
contractorNs ta),
and an
assessment in the
sum of a#out
P0ET for alleged
deficienc!
income ta) for
the fiscal !ear of
Earch 0128.
.en!ing said ta)
lia#ilities, Ateneo
sent C7R a letter;
protest contesting
the validit! of the
assessments.
C7R rendered a
letter;decision
canceling the
assessment for
deficienc!
income ta) #ut
modified the
assessment for
deficienc!
contractorNs ta)
#! increasing the
amount due to
P01=-T.
Ateneo re+uested
for a
reconsideration
or reinvestigation
of the modified
assessment. At
the same time, it
filed in the C%A a
petition for
revie$ of the said
letter;decision.
While the
petition $as
pending #efore
the C%A, C7R
issued a final
decision reducing
the assessment
for deficienc!
contractorNs ta)
from P01=-T to
P9H-T, e)clusive
of surcharge and
interest.
C%A canceled the
deficienc!
contractorNs ta)
assessment, $Fc
$as affirmed #!
the CA.
C7R filed a
petition for
revie$ #efore the
&C.
7: WFn Ateneo
should pa! the
8@ contractorNs
ta) under &ec I=5
of the %a) Code
R: /D.
0A 7n case of
dou#t, statutes on
ta) imposition
are to #e
construed
strongl! against
the GD4 and in
favor of citiens,
#ecause #urdens
are /D% to #e
imposed nor
presumed #e!ond
$hat is
e)pressed.
AteneoNs 7PC
/,4,R sold its
services for a fee
to an!one or $as
ever engaged in a
#usiness apart
from and
independentl! of
the academic
purposes of the
universit!.
Cunds received
#! Ateneo are
technicall! not a
fee. %he! ma!
ho$ever fall as
gifts or donations
$hich are 3ta);
e)emptB as
sho$n #!
AteneoNs
compliance $F
the /7RC
re+uirement
providing for the
e)emption of
such gifts to an
educational
institution.
IA %he term
[independent
contractorsN
include persons
$hose activit!
consists
essentiall! of the
sale of all -inds
of services for a
fee.
'he term Jgross
receipts7 means
all amounts
received y the
prime or
principal
contractor as the
total contract
price,
undiminished y
amount paid to
the
sucontractor,
shall e excluded
from the taxale
gross receipts of
the
sucontractor.
AteneoNs 7PC
cannot #e
deemed either as
a contract of sale
or a contract for a
piece of $or-. 5!
the contract of
sale, one of the
contracting
parties o#ligates
himself to
transfer the
o$nership of and
to deliver a
determinate
thing, and the
other to pa!
therefor a price
certain in mone!
or its e+uivalent.
7n the case of a
contract for a
piece of $or-,
the contractor
#inds himself to
e)ecute a piece of
$or- for the
emplo!er, in
consideration of a
certain price or
compensation.
*DW,4,R, it is
clear in from the
evidence on
record that there
$as no sale either
of o#"ects or
services #ecause
there $as no
transfer of
o$nership over
the research data
o#tained or the
results of
research pro"ects
underta-en #! the
7PC.
T$ SU(:
Ateneo is /D% a
contractor selling
its services for a
fee #ut an
academic
institution
conducting these
researches
pursuant to its
commitments to
education and,
ultimatel!, to
pu#lic service.
,ducation is and
/D% profit is the
motive for
underta-ing the
research pro"ects.
Tole46i4o v. Sec. of
Fi4a4ce (199,)
&everal parties filed
complaints in the &C
+uestioning the legalit! of
,)panded 4A% la$ ?RA
220HA, $hich sought to
$iden the ta) #ase of the
e)isting 4A% s!stem
?XI%'@ a tax levied on the
sale, arter or exchange
of goods and properties
%- 1E$$ %- as on the
sale or exchange of
services= or -IAP$D tax
on spending ,
consumptionA:
0A %he
P;ili<<i4e Press
I4s6i6u6e
contends that #!
removing 4A%
e)emption from
the press $hile
maintaining those
granted to others,
the ,4A% >a$
discriminates
against the press
and violates the
freedom of the
press.
R: &ince the la$
granted the press
a privilege, the
la$ could ta-e
#ac- the privilege
an!time
W7%*DO%
offense to the
Constitution.
%he &tate, #!
granting
e)emptions, does
/D% forever
$aive the
e)ercise of its
sovereign
prerogative. 7n
$ithdra$ing the
e)emption, the
la$ merel!
su#"ects the press
to the same ta)
#urden to $hich
other #usinesses
have alread!
#een su#"ect.
%he case of
;rosjean v.
%merican Press
Co. cited #! the
PP7 is different
#ecause in that
case, the ta) $as
found to #e
discriminator!
#ecause it $as
imposed onl! on
ne$spapers
$hose $ee-l!
circulation $as
over PI=-. %hese
papers $ere
critical of a
certain senator
$ho controlled
the state
legislature. %he
censorial
motivation of the
la$ $as thus
evident.
*DW,4,R, in
this case, the
motivation $as
not to censor #ut
merel! to raise
revenues.
What the
legislature cannot
impose upon the
press is a license
tax, $hich is
mainl! for
regulation A/.
is
unconstitutional
#ecause it la!s
PR7DR
R,&%RA7/% on
the e)ercise of a
right.
7n this case, the
4A% is not a
license ta)
#ecause it is not a
ta) on the
e)ercise of a
privilege or of a
constitutional
right. 7t is
imposed on the
sale of goods
purel! for
revenue
purposes.
IA Philippine
5i#le &ociet!
claims that the
imposition of
4A% on the sales
of its #i#les
7/CR7/G,& on
religious freedom
#ecause the ta)
7/CR,A&,& the
price of the
#i#les, $hile
R,.OC7/G the
volume of sales.
7t also claims
e)emption from
the registration
fee of P0-.
R: %he resulting
#urden on the
e)ercise of
religious freedom
is so
7/C7.,/%A> as
to ma-e it
difficult to
differentiate it
from an! other
economic
imposition that
might ma-e the
right to
disseminate
religious
doctrines costl!.
%o follo$ P5&N
argument of
increasing the ta)
on the sale of
vestments $ould
#e to la! an
impermissi#le
#urden on the
right of the
preacher to ma-e
a sermon.
%he registration
fee is reall! "ust
to pa! for the
e)penses of
registration and
enforcement of
the provisions of
the la$. ,ven if
P5& is e)cused
from pa!ing
ta)es on those
#i#les that it
distri#utes for
free, it still has to
pa! the
registration fee
since it also
engages in the
sale of #i#les.
8. CR,5A claims
that the la$:
aA impairs the
o#ligations of
contracts #ecause
the application of
the ta) to e)isting
contracts of the
sale of real
propert! #!
installment $ould
result in
su#stantial
increases in
monthl!
amortiations,
$hich the #u!er
did not anticipate
at the time he
entered into the
contract.
#A violates e+ual
protection since
the la$ e)empts
lo$;cost housing
from 4A% #ut
/D% middle;
class housing.
cA 5eing an
indirect,
regressive ta),
4A% violates the
constitutional
mandate to
provide a
progressive
s!stem of
ta)ation.
R:
aA 4A% does /D%
violate the non;
impairment
clause #ecause
the o#ligation of
contracts
CA//D% defeat
the authorit! of
the government
to ta) #! virtue of
its sovereignt!.
#A /either did it
violate ,PC
#ecause there
$as a su#stantial
distinction
#et$een the
homeless poor
and the middle
class. %he middle
class can afford
to rent houses
$hile the
homeless poor
cannot.
cA As to it #eing a
regressive ta),
the Constitution
does not prohi#it
regressive ta)es.
What it simpl!
provides is that
Congress shall
evolve a
progressive
s!stem of
ta)ation, $hich
means that direct
ta)es are to #e
preferred and
indirect ta)es
minimied.
4A% provides
e)emptions in
favor of #asic
goods utilied #!
the lo$er income
#rac-ets and its
#urden actuall!
falls more on
those goods that
consumers from
the higher
income #rac-et
#u!.
%herefore, the ta)
is not repugnant
to the
Constitution.
3o;4 !a@ Peo<les
Al6er4a6ive Coali6io4 v.
"i? (-00D/ car<io
?orales)
RA /o. 2II2
created the 5ases
Conversion and
.evelopment
Authorit!
?5C.AA, $hich
also created the
&u#ic &pecial
,conomic (one
?&u#ic &,(A.
Aside from
granting
incentives to
&u#ic &,(, RA
2II2 also granted
the President is
an e)press
authorit! to
create other &,(s
in the areas
covered
respectivel! #!
the Clar- militar!
reservation, the
Wallace Air
&tation in &an
Cernando, >a
Onion, and Camp
'ohn *a! through
e)ecutive
proclamations.
5C.A entered
into a EDA and
,scro$
Agreement $ith
%O/%,Q and
A&7AWDR>.,
private
corporations
under the la$s of
the 5ritish 4irgin
7slands,
preparator! to the
formation of a
"oint venture for
the development
of Poro Point >a
Onion and Camp
'ohn *a! as
premier tourist
destinations and
recreation
centers.
5C.A,
%O/%,Q and
A&7AWDR>.
e)ecuted a '4A to
put up the 5aguio
7nternational
.evelopment and
Eanagement
Corporation
$hich $ould
lease areas $ithin
Camp 'ohn *a!
and Poro Point
for the attainment
of the tourist and
recreation spots
in >a Onion and
Camp 'ohn *a!.
President Ramos
issued
Proclamation /o.
9I= $hich
esta#lished a &,(
on a portion of
Camp 'ohn *a!.
I
nd
sentence of
&ection 8 of said
Proclamation
provided for
national and local
ta) e)emption
$ithin and
graned other
economic
incentives to the
'ohn *a! &pecial
,conomic (one.
3&ection 8:
7nvestment
Climate in 'ohn
*a! &pecial
,conomic (one.;
Pursuant to
&ection 5?mA and
&ection 05 of RA
/o. 2II2, the
'ohn *a! Poro
Point
.evelopment
Corporation shall
implement all
necessar!
policies, rules,
and regulations
governing the
one, including
investment
incentives, in
consultation $ith
pertinent
government
departments.
A?o4A o6;ers:
6;e Fo4e s;all
;ave all 6;e
a<<licable
i4ce46ives of 6;e
S<ecial
co4o?ic 9o4e
u47er Sec6io4 1-
of 'e<ublic Ac6
0o. 2--2 a47
6;ose a<<licable
i4ce46ives
Ara46e7 i4 6;e
><or6
Processi4A
9o4es: the
Dmni#us
7nvestment Code
of 0182, the
Coreign
7nvestment Act of
0110, and ne$
investment la$s
that ma!
hereinafter #e
enacted.B
Petitioners filed
this case to en"oin
the respondents
from
implementing
Proc. 9I=. is
unconstitutional
on grounds of:
o Cor
#eing
illegal
and
invalid
in so far
as it
grants
ta)
e)empti
ons thus
amounti
ng to
unconsti
tutional
e)ercise
of #! the
Presiden
t of
po$er
granted
onl! to
legislatu
re
o >imits
po$ers
and
interfere
s $ith
the
autonom
! of the
cit!
o 4iolates
rule that
all ta)es
should
#e
uniform
and
e+uita#l
e
I: WF/
Proclamation /o.
9I= is
constitutional #!
providing for
national and local
ta) e)emption
$ithin and
granting other
economic
incentives to the
'ohn *a! &pecial
,conomic (one.
/D, I
nd
sentence,
&ection 8 of said
proclamation is
unconstitutional.
WF/
Proclamation /o.
9I= is
constitutional for
limiting or
interfering $ith
the local
autonom! of
5aguio Cit!. R,&
': T;e -
47
Se46e4ce of
SCTI$0 D of
Procla?a6io4
0o. G-0 is
;ereb@ 7eclare7
0U"" a47
%$I# and is
accordingl!
declared of no
legal force and
effect. Pu#lic
respondents are
here#! en"oined
from
implementing the
aforesaid void
provision.
Proclamation /o.
9I=, $ithout the
invalidated
portion, remains
valid and
effective.
U47er Sec6io4
1- of 'A 0o.
2--2 i6 is clear
6;a6 $0") T!
SU*IC S9
=;ic; =as
Ara46e7 b@
Co4Aress =i6;
6a> e>e?<6io4:
i4ves6?e46
i4ce46ives a47
6;e like. T!'
IS 0$
CP'SS
CT0SI$0
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?&ection 0I -ept
mentioning &u#ic
&pecial
,conomic (one,
specificall!JA
Also fou47 i4
6;e 7elibera6io4s
of 6;e Se4a6e: a
co4fir?a6io4 of
6;e e>clusivi6@ of
6;e 6a> a47
i4ves6?e46
<rivileAes 6o
Subic S9.
PSe4a6or
A4Aara: T;e
&e46le?a4 is
absolu6el@
correc6. (r.
Presi7e46. S$
W (UST
C$0FI0
T!S
P$"ICIS
$0") T$
SU*IC.N
7t is the
legislature, unless
limited #! a
provision of the
state constitution
that has full
po$er to e)empt
an! person,
corporation or
class of propert!
from ta)ation, its
po$er to e)empt
#eing as #road as
its po$er to ta).
Dther than the
Congress, the
Constitution ma!
itself provide for
specific ta)
e)emptions, or
local
governments ma!
pass ordinances
on e)emption
onl! from local
ta)es. %he
challenged grant
of ta) e)emption
must have
concurrence of a
ma"orit! of all
mem#ers of
Congress. 7n
same vein, the
other -inds of
privileges
e)tended to the
'ohn *a! &,(
are #! tradition
and usage for
Congress to
legislate upon.
%a) e)emption
cannot #e implied
as it must #e
categoricall! and
un mista-a#l!
e)pressed U if it
$ere the intent of
the legislature to
grant to the 'ohn
*a! &,( the
same ta)
e)emption and
incentives given
to &u#ic &,(, it
$ould have so
e)pressl!
provided in RA
2II2.
5C.A, under R.A 2II2,
is e)pressl! entrusted $ith
#road rights of o$nership
and administration over
Camp 'ohn *a!, as the
governing agenc! of the
'ohn *a! &,(.