SITUS OF TAXATION AND DOUBLE TAXATION

63. Adina - Compania General de Tabacos de Filipinas vs. City of Manila (June 29,
1963)
IMPOSITION OF LICENSE FEE AND SALES TAXES NOT TANTAMOUNT TO
DOUBLE TAXATION
Compaia General de Tabacos de Filipinas v. City of Manila
G.R. No. 16619. June 29, 1963
Dizon, J.
FACTS:
Compaia General de Tabacos de Filipinas (Tabacalera) filed an action for refund of
the overpayment it effected as taxes on its wholesale and retail sales of liquor.
Pursuant to various Ordinances of the City of Manila, Tabacalera paid the City (a)
fixed license fees and (b) sales taxes as a wholesale and retail dealer of general
merchandise. Included in the taxes it paid on all its sales of general merchandise is
the tax corresponding to the liquor sales.
Tabacalera contended that in connection with its liquor sales, it should pay the
license fees but not the municipal sales taxes. The payment of sales taxes anent the
liquor sales it earned is an overpayment made by mistake because it already paid
the license fees. Tabacalera also contended that it was subjected to double taxation
and hence, refund should be effected.
The City Government of Manila argued that for the permit it issued to Tabacalera
granting proper authority to conduct or engage in the sale of alcoholic beverages or
liquors, it is subject to pay the license fees.
ISSUE:
Was Tabacalera subjected to double taxation by the imposition of sales taxes on its
liquor sales despite having already paid the license fees for sale thereof?
RULING:
No, Tabacalera was not subjected to double taxation. A license fee is collected for
the privilege of engaging in the sale of liquor, a calling in which not anyone or
anybody may freely engage, considering that the sale of liquor indiscriminately may
endanger public health and morals. The sales taxes imposed were for revenue
purposes based on the sales made on the same article or merchandise. Already
settled is the rule that both a license fee and a tax may be imposed on the same
business or occupation, or for selling the same article, this not being in violation of
the rule against double taxation.
Therefore, the imposition of license fee and a tax and payment thereof by
Tabacalera did not amount to double taxation.
***

NATURE, CONSTRUCTION, APPLICATION, AND SOURCES OF TAX LAWS

95. Adina - Commissioner of Internal Revenue vs. Lingayen Gulf Electric Power
(August 4, 1988)
TAX EXEMPTION MUST EXPRESSLY PROVIDE FOR ITS RETROACTIVE
APPLICATION
Commissioner of Internal Revenue v. Lingayen Gulf Electric Power Co., Inc.
G.R. No. L-23771. August 4, 1988
Sarmiento, J.
FACTS:
The Commissioner of Internal Revenue (CIR) impugns the Court of Tax Appeals
Decision absolving Lingayen Gulf Electric Power from paying the deficiency
percentage, franchise, and fixed taxes, and surcharges assessed against it. Pursuant
to municipal franchises, Lingayen operated electric power plant serving the
Municipalities of Lingayen and Binmaley, Pangasinan. The franchises ordered
Lingayen to pay quarterly into the Provincial Treasury of Pangasinan, one to two per
centum of its gross earnings obtained through the privilege granted. The Bureau of
Internal Revenue assessed against and demanded from Lingayen deficiency
franchise taxes and surcharges applying the franchise tax rate of 5% on gross
receipts as prescribed in Section 259 of the National Internal Revenue Code (NIRC)
instead of the lower rates as provided in the municipal franchises. Republic Act No.
(RA) 3843 was enacted granting Lingayen a legislative franchise for the operation of
the electric, light, heat, and power system in the same municipalities of Pangasinan.
Section 4 thereof provides that:
In consideration of the franchise and rights hereby granted, the
grantee shall pay into the Internal Revenue office of each Municipality
in which it is supplying electric current to the public under this
franchise, a tax equal to two per centum of the gross receipts from
electric current sold or supplied under this franchise. Said tax shall be
due and payable quarterly and shall be in lieu of any and all taxes
and/or licenses of any kind, nature or description levied, established,
or collected by any authority whatsoever, municipal, provincial or
national, now or in the future, on its poles, wires, insulator ... and on
its franchise, rights, privileges, receipts, revenues and profits, from
which taxes and/or licenses, the grantee is hereby expressly
exempted and effective further upon the date the original franchise
was granted, no other tax and/or licenses other than the franchise tax
of two per centum on the gross receipts as provided for in the original
franchise shall be collected, any provision of law to the contrary
notwithstanding. (Underscores supplied for easy reference of salient
points.)
The CIR contended that Lingayen is liable for the 5% franchise tax assessed against
Lingayen on its gross receipts realized before the effectivity of RA 3843 because
Section 259 thereof apply to existing and future franchises. The original franchises
of Lingayen did not contain a proviso that the tax provided therein shall be in lieu
of all taxes but contained a reservation clause that they shall be subject to
amendment, alteration, or repeal. The CIR stressed that even in the absence of the

reservation clause, the power of the Legislature to alter, amend, or repeal any
franchise is always deemed reserved.
Lingayen protested the assessment of the deficiency franchise taxes and surcharges
and sought the reconsideration and amicable settlement thereof but the CIR denied
them.
ISSUE:
Was Lingayen liable to deficiency taxes assessed by the BIR?
RULING:
No, Lingayen was not liable for the deficiency assessments. By virtue of RA 3843,
Lingayen was liable to pay only the 2% franchise tax, effective from the date of the
original municipal franchises were granted. The Legislature has the inherent power
not only to select the subjects of taxation but to grant exemptions. Tax exemptions
have never been deemed violative of the equal protection clause. RA 3843
specifically provided for the retroactive effect of the law.
Therefore, Lingayen was not liable for the deficiency taxes assessed because RA
3843, which grants it tax exemptions, specifically provided for its retroactive
application, i.e., from the date of the original municipal franchises were granted.