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table taxes withheld in 1989 and whether petitioner applied

such creditable taxes withheld to its 1990 income tax


1ST SESSION liability, the appellate court held that petitioner is not
entitled to a refund because it had already elected to apply
PASEO REALTY AND DEVELOPMENT CORP. vs.COURT OF the total amount of P172,447.00, which includes the
APPEALSG.R. No. 119286 October 13, 2004FACTS: P54,104.00 refund claimed, against its income tax liability
Paseo Realty and Development Corporation, a domestic for 1990. The appellate court elucidated on the reason for
corporation engaged in the lease of two parcels of land at its dismissal of petitioners claim for refund.
Paseo de Roxas in Makati City. On April 16, 1990, petitioner ISSUE:
filed its Income Tax Return for the calendaryear1989 Whether or not the alleged excess taxes paid by a
declaring a gross income of P1,855,000.00, deductions of corporation during a taxable year should be refunded or
P1,775,991.00, net income of P79,009.00, an income tax credited against its tax liabilities for the succeeding year?
due thereon in the amount of P27,653.00, prior years RULING:
excess credit of P146,026.00, and creditable taxes withheld The petition must be denied. As a matter of principle, it is
in 1989 of P54,104.00 or a total tax credit of P200,130.00 not advisable for this Court to set aside the conclusion
and credit balance of P172,477.00.In a resolution dated reached by an agency such as the CTA which is, by the very
October 21, 1993 Respondent Court reconsidered its nature of its functions, dedicated exclusively to the study
decision of July 29, 1993 and dismissed the petition for and consideration of tax problems and has necessarily
review, stating that it has developed an expertise on the subject, unless there has
overlooked the fact that the petitioners 1989 Corporate been an abuse or improvident exercise of its authority. This
Income Tax Return interdiction finds particular application in this case since the
(Exh. A) indicated that the amount of P54,104.00 subject CTA, after careful consideration of the merits of the
of petitioners claim for refund has already been included Commissioner of Internal Revenues motion for
as part and parcel of the P172,477.00 which the petitioner reconsideration, reconsidered its earlier decision which
automatically applied as tax credit for the succeeding ordered the latter to refund the amount of P54,104.00 to
taxable year 1990. petitioner. Its resolution cannot be successfully assailed
Petitioner filed a Motion for Reconsideration which was based, as it is, on the pertinent laws as applied to the facts.
denied by respondent Court on March 10,1994.Petitioner Petitioners 1989 tax return indicates an aggregate
filed a Petition for Review dated April 3, 1994 with the creditable tax of P172,477.00, representing its 1988 excess
Courtof Appeals. Resolving the twin issues of whether petiti credit of P146,026.00 and 1989 creditable tax of P54,104.00
oner is entitled to a refund of P54,104.00 representingcredi less tax due for 1989, which it elected to apply as tax credit
for the succeeding taxable year. According to petitioner, it exemption from tax payments must be clearly shown and
successively utilized this amount when it obtained refunds be based on language in the law too plain to be mistaken.
in CTA Case No. 4439 and CTA Case No. 4528 and applied Else wise stated, taxation is the rule, exemption therefrom
its1990 tax liability, leaving a balance of P54,104.00, the is the exception.
amount subject of the instant claim for refund.
The confusion as to petitioners entitlement to a refund
CREBA VS ROMULO
could altogether have
Been avoided had it presented its tax return for 1990. Such
FACTS:
return would have shown whether petitioner actually
applied its 1989 tax credit of P172,477.00, which includes CREBA assails the imposition of the minimum corporate
the P54,104.00 creditable taxes withheld for 1989subject of income tax (MCIT) as being violative of the due process
the instant claim for refund, against its 1990 tax liability as clause as it levies income tax even if there is no realized
it had elected in its 1989 return, or at least, whether gain. They also question the creditable withholding tax
petitioners tax credit of P172,477.00 was applied to its (CWT) on sales of real properties classified as ordinary
approved refunds as it claims. As clearly shown from the assets stating that (1) they ignore the different treatment of
above-quoted provisions, in case the corporation is entitled ordinary assets and capital assets; (2) the use of gross
to a refund of the excess estimated quarterly income taxes selling price or fair market value as basis for the CWT and
paid, the refundable amount shown on its final adjustment the collection of tax on a per transaction basis (and not on
return maybe credited against the estimated quarterly the net income at the end of the year) are inconsistent with
income tax liabilities for the taxable quarters of the the tax on ordinary real properties; (3) the government
succeeding year. The carrying forward of any excess or collects income tax even when the net income has not yet
overpaid income tax for a given taxable year is limited to been determined; and (4) the CWT is being levied upon real
the succeeding taxable year only. Taxation is a destructive estate enterprises but not on other enterprises, more
power which interferes with the personal and property particularly those in the manufacturing sector.
rights of the people and takes from them a portion of their ISSUE:
property for the support of the government. And since
taxes are what we pay for civilized society, or are the Are the impositions of the MCIT on domestic corporations
lifeblood of the nation, the law frowns against exemptions and CWT on income from sales of real properties
from taxation and statutes granting tax exemptions are classified as ordinary assets unconstitutional?
thus construed strictissimi juris against the taxpayer and
liberally in favor of the taxing authority. A claim of refund or HELD:
NO. MCIT does not tax capital but only taxes income as PHIL. GUARANTY CO. VS. CIRFACTS:
shown by the fact that the MCIT is arrived at by deducting The Philippine Guaranty Co., Inc., a domestic insurance company,
the capital spent by a corporation in the sale of its goods, entered into reinsurance contracts, on various dates, with foreign
i.e., the cost of goods and other direct expenses from gross insurance companies not doing business in the Philippines. Petitioner
sales. Besides, there are sufficient safeguards that exist for thereby agreed to cede to the foreign reinsurers a portion of the
the MCIT: (1) it is only imposed on the 4th year of premiums on insurance it has originally underwritten in the
operations; (2) the law allows the carry forward of any Philippines, in consideration for the assumption by the latter of
excess MCIT paid over the normal income tax; and (3) the liability on an equivalent portion of the risks insured.
Secretary of Finance can suspend the imposition of MCIT in Said reinsurrance contracts were signed by Philippine Guaranty Co.,
justifiable instances. Inc. in manila and by the foreign reinsurers outside the Philippines.
Said premiums were excluded by Philippine Guaranty Co., Inc. from
its income when it file its income tax returns. It did not
The regulations on CWT did not shift the tax base of a real
withhold or pay tax on them. Consequently, the CIR assessed against
estate business income tax from net income to GSP or FMV
PETITIONER withholding tax on the ceded reinsurance premiums.
of the property sold since the taxes withheld are in the
Petitioner protested the assessment on the that reinsurance
nature of advance tax payments and they are thus just
premiums ceded to foreign reinsurers not doing business in the
installments on the annual tax which may be due at the end
Philippines are not subject to withholding tax.
of the taxable year. As such the tax base for the sale of real
CTA:: IN FAVOR OF RESPONDENTR
property classified as ordinary assets remains to be the net
ISSUE:
taxable income and the use of the GSP or FMV is because
whether reinsurance premiums ceded to foreign reinsurers not
these are the only factors reasonably known to the buyer in
doing business in the Philippines are subject to tax
connection with the performance of the duties as a
HELD:
withholding agent.
Yes.
Neither is there violation of equal protection even if the
The reinsurance premiums are subject to tax. The reinsurance
CWT is levied only on the real industry as the real estate
contracts show that the transactions or activities that
industry is, by itself, a class on its own and can be validly
constituted the undertaking to reinsure Philippine Guaranty
treated different from other businesses.
Co., Inc. against loses arising from the original insurances in the
Philippines were performed in the Philippines.
Section /4 of the Tax Code subjects foreign corporations to tax on
their income from sources within the Philippine.Sources means
the activity, property, or service giving rise to the income. The
original insurance undertakings too" place in the Philippines. It is not
required that the foreign corporation be engaged in business in the The respondent filed a collection suit in the RTC of
Philippines. what is controlling is not the place of business, but the Cabanatuan City, demanding that petitioner pay the
place of activity that created the income. Thus, the income is assessed tax, plus surcharge equivalent to 25% of the
subject to income tax. amount of tax and 2% monthly interest. Respondent
alleged that petitioners exemption from local taxes has
been repealed by Sec. 193 of RA 7160 (Local Government
National Power Corporation vs City of Cabanatuan
Code). The trial court issued an order dismissing the case.
FACTS: On appeal, the Court of Appeals reversed the decision of
NAPOCOR, the petitioner, is a government-owed and the RTC and ordered the petitioner to pay the city
controlled corporation created under Commonwealth Act government the tax assessment.
120. It is tasked to undertake the development of
hydroelectric generations of power and the production of ISSUES:
electricity from nuclear, geothermal, and other sources, as (1) Is the NAPOCOR excluded from the coverage of the
well as, the transmission of electric power on a nationwide franchise tax simply because its stocks are wholly owned by
basis. the National Government and its charter characterized is as
a non-profit organization?
For many years now, NAPOCOR sells electric power to the
resident Cabanatuan City, posting a gross income of (2) Is the NAPOCORs exemption from all forms of taxes
P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance repealed by the provisions of the Local Government Code
No. 165-92, the respondent assessed the petitioner a (LGC)?
franchise tax amounting to P808,606.41, representing 75%
of 1% of the formers gross receipts for the preceding year. HELD:
(1) NO. To stress, a franchise tax is imposed based not on
Petitioner, whose capital stock was subscribed and wholly the ownership but on the exercise by the corporation of a
paid by the Philippine Government, refused to pay the tax privilege to do business. The taxable entity is the
assessment. It argued that the respondent has no authority corporation which exercises the franchise, and not the
to impose tax on government entities. Petitioner also individual stockholders. By virtue of its charter, petitioner
contend that as a non-profit organization, it is exempted was created as a separate and distinct entity from the
from the payment of all forms of taxes, charges, duties or National Government. It can sue and be sued under its own
fees in accordance with Sec. 13 of RA 6395, as amended.
name, and can exercise all the powers of a corporation against him by the imposition of higher rates upon his
under the Corporation Code. income as a professional, that it amounts to class
legislation, and that it transgresses against the equal
To be sure, the ownership by the National Government of protection and due process clauses of the Constitution as
its entire capital stock does not necessarily imply that well as the rule requiring uniformity in taxation.
petitioner is no engage din business.
Issue: Whether BP 135 violates the due process and equal
(2) YES. One of the most significant provisions of the LGC is protection clauses, and the rule on uniformity in taxation.
the removal of the blanket exclusion of instrumentalities Held: There is a need for proof of such persuasive character
and agencies of the National Government from the as would lead to a conclusion that there was a violation of
coverage of local taxation. Although as a general rule, LGUs the due process and equal protection clauses. Absent such
cannot impose taxes, fees, or charges of any kind on the showing, the presumption of validity must prevail. Equality
National Government, its agencies and instrumentalities, and uniformity in taxation means that all taxable articles or
this rule now admits an exception, i.e. when specific kinds of property of the same class shall be taxed at the
provisions of the LGC authorize the LGUs to impose taxes, same rate. The taxing power has the authority to make
fees, or charges on the aforementioned entities. The reasonable and natural classifications for purposes of
legislative purpose to withdraw tax privileges enjoyed taxation. Where the differentitation conforms to the
under existing laws or charter is clearly manifested by the practical dictates of justice and equity, similar to the
language used on Sec. 137 and 193 categorically standards of equal protection, it is not discriminatory within
withdrawing such exemption subject only to the exceptions the meaning of the clause and is therefore uniform.
enumerated. Since it would be tedious and impractical to Taxpayers may be classified into different categories, such
attempt to enumerate all the existing statutes providing for as recipients of compensation income as against
special tax exemptions or privileges, the LGC provided for professionals. Recipients of compensation income are not
an express, albeit general, withdrawal of such exemptions entitled to make deductions for income tax purposes as
or privileges. No more unequivocal language could have there is no practically no overhead expense, while
been used. professionals and businessmen have no uniform costs or
expenses necessary to produce their income. There is
Sison vs. Ancheta, ample justification to adopt the gross system of income
taxation to compensation income, while continuing the
Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, system of net income taxation as regards professional and
alleged that its provision (Section 1) unduly discriminated business income.
Tio vs. Videogram Regulatory Board general object of the decree, which is the regulation of the
Facts: video industry through the VRB as expressed in its title. The
tax provision is not inconsistent with nor foreign to the
1. Petitioner on his own behalf and purportedly on behalf of general subject and title. As a tool for regulation it is simply
other videogram operators adversely affected assailed the one of the regulatory and control mechanisms scattered
constitutionality of PD 1987 entitled "An Act Creating the throughout the decree.
Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry. The Decree 3. The express purpose of PD 1987 to include taxation of the
promulgated on October 5, 1985, took effect on April 10, video industry in order to regulate and rationalize the
1986, fifteen (15) days after completion of its publication in heretofore uncontrolled distribution of videos is evident
the Official Gazette. from Preambles 2 and 5. Those preambles explain the
motives of the lawmaker in presenting the measure.
2. PD 1994 issued a month thereafter reinforced PD 1987 and
in effect amended the National Internal Revenue Code Philippine Airlines, Inc. vs. Edu
(NIRC). Petitioner contended among others that the tax FACTS:
provision of the decree is a rider. PAL is engaged in the air transportation business under a
legislative franchise (Act 4271), wherein it is exempt from
ISSUE: Whether or not the PD 1987 is unconstitutional due the
to the tax provision included payment of taxes. On the strength of an opinion of the
Secretary of Justice, PAL was determined to have not been
RULING: PD 1987 is constitutional. paying motor vehicle registration fees since 1956. The Land
Transportation Commissioner required all tax-exempt
1. The title of the decree, which calls for the creation of the entities, including PAL, to pay motor vehicle registration
VRB is comprehensive enough to include the purposes fees. PAL protested. The trial court dismissed PALs
expressed in its Preamble and reasonably covered in all its complaint. Hence, this petition.
provisions. It is unnecessary to express all those objectives
in the title or that the latter be an index to the body of the ISSUE:
decree. Are motor vehicle registration fees taxes or regulatory
taxes?
2. The foregoing provision is allied and germane to, and is
reasonably necessary for the accomplishment of the RULING:
They are taxes. Tax are for revenue, whereas fees are void and unconstitutional. The sugar industry situation at
exactions for purposes of regulation and inspection, and are the time of the enactment was in an imminent threat of
for that reason limited in amount to what is necessary to loss and needed to be stabilized by imposition of
cover the cost of the services rendered in that connection. emergency measures.
It is the object of the charge, and not the name, that
determines whether a charge is a tax or a fee. The money ISSUE: Is CA 567 constitutional, despite its being allegedly
collected under the Motor Vehicle Law is not intended for violative of the equal protection clause, the purpose of
the expenditures of the Motor Vehicle Law is not intended which is not for the benefit of the general public but for the
for the expenditures of the Motor Vehicles Office but rehabilitation only of the sugar industry?
accrues to the funds for the construction and maintenance
of public roads, streets and bridges. HELD: Yes. The protection and promotion of the sugar
As the fees are not collected for regulatory purposes as an industry is a matter of public concern, it follows that the
incident to the enforcement of regulations governing the Legislature may determine within reasonable bounds what
operation of motor vehicles on public highways, but to is necessary for its protection and expedient for its
provide revenue with which the Government is to construct promotion. Here, the legislative discretion must be allowed
and maintain public highways for everyones use, they are to fully play, subject only to the test of reasonableness; and
veritable taxes, not merely fees. it is not contended that the means provided in the law bear
PAL is, thus, exempt from paying such fees, except for the no relation to the objective pursued or are oppressive in
period between June 27, 1968 to April 9, 1979, where its character. If objective and methods are alike
tax exception in the franchise was repealed. constitutionally valid, no reason is seen why the state may
not levy taxes to raise funds for their prosecution and
Lutz vs. Araneta, attainment. Taxation may be made the implement of the
FACTS: Plaintiff Walter Lutz, in his capacity as judicial state's police power.
administrator of the intestate estate of Antionio Ledesma, Osmea vs. Orbos
sought to recover from the CIR the sum of P14,666.40 paid
by the estate as taxes, under section 3 of the CA 567 or the FACTS: Senator John Osmea assails the constitutionality of
Sugar Adjustment Act thereby assailing its constitutionality, paragraph 1c of PD 1956, as amended by EO 137,
for it provided for an increase of the existing tax on the empowering the Energy Regulatory Board (ERB) to approve
manufacture of sugar, alleging that such enactment is not the increase of fuel prices or impose additional amounts on
being levied for a public purpose but solely and exclusively petroleum products which proceeds shall accrue to the Oil
for the aid and support of the sugar industry thus making it Price Stabilization Fund (OPSF) established for the
reimbursement to ailing oil companies in the event of policy of the law to protect the local consumer by stabilizing
sudden price increases. The petitioner avers that the and subsidizing domestic pump rates, P.D. 1956 expressly
collection on oil products establishments is an undue and authorizes the ERB to impose additional amounts to
invalid delegation of legislative power to tax. Further, the augment the resources of the Fund.
petitioner points out that since a 'special fund' consists of
monies collected through the taxing power of a State, such
2ND SESSION
amounts belong to the State, although the use thereof is
limited to the special purpose/objective for which it was 1. Chavez v Ongpin (1990)
created. It thus appears that the challenge posed by the
petitioner is premised primarily on the view that the
powers granted to the ERB under P.D. 1956, as amended, Chavez v Ongpin
partake of the nature of the taxation power of the State. GR No 76778, June 6, 1990

ISSUE: Is there an undue delegation of the legislative power FACTS:


of taxation? Section 21 of Presidential Decree 464 provides that every 5
years starting calendar year 1978, there shall be a provincial
HELD: None. It seems clear that while the funds collected or city general revision of real property assessments. The
may be referred to as taxes, they are exacted in the general revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued
exercise of the police power of the State. Moreover, that
EO 73 stating that beginning January 1, 1987, the 1984
the OPSF as a special fund is plain from the special
assessments shall be the basis of real property taxes.
treatment given it by E.O. 137. It is segregated from the Francisco Chavez, a taxpayer and landowner, questioned the
general fund; and while it is placed in what the law refers to constitutionality of EO 74. He alleges that it will bring
as a "trust liability account," the fund nonetheless remains unreasonable increase in real property taxes.
subject to the scrutiny and review of the COA. The Court is
satisfied that these measures comply with the ISSUE:
constitutional description of a "special fund." With regard Is EO 73 constitutional?
to the alleged undue delegation of legislative power, the
Court finds that the provision conferring the authority upon RULING:
the ERB to impose additional amounts on petroleum Yes. Without EO 73, the basis for collection of real property
products provides a sufficient standard by which the taxes will still be the 1978 revision of property values.
authority must be exercised. In addition to the general Certainly, to continue collecting real property taxes based on
valuations arrived at several years ago, in disregard of the - the claimed deduction of P75,000.00 was properly
increases in the value of real properties that have occurred disallowed because it was not an ordinary reasonable or
since then is not in consonance with a sound tax system. necessary business expense
Fiscal adequacy, which is one of the characteristics of a - payments are fictitious because most of the payees are
sound tax system, requires that sources of revenue must be members of the same family in control of Algue and that
adequate to meet government expenditures and their there is not enough substantiation of such payments
variations. CTA: 75K had been legitimately paid by Algue Inc. for
actual services rendered in the form of promotional fees.
2. Commissioner of Internal Revenue vs. Algue Inc. These were collected by the Payees for their work in the
GR No. L-28896 | Feb. 17, 1988 creation of the Vegetable Oil Investment Corporation of the
Philippines and its subsequent purchase of the properties of
Facts: the Philippine Sugar Estate Development Company.
Algue Inc. is a domestic corp engaged in engineering,
construction and other allied activities Issue: W/N the Collector of Internal Revenue correctly
On Jan. 14, 1965, the corp received a letter from the CIR disallowed the P75,000.00 deduction claimed by Algue as
regarding its delinquency income taxes from 1958-1959, legitimate business expenses in its income tax returns
amtg to P83,183.85
A letter of protest or reconsideration was filed by Algue Ruling:
Inc on Jan 18 Taxes are the lifeblood of the government and so should
On March 12, a warrant of distraint and levy was be collected without unnecessary hindrance, made in
presented to Algue Inc. thru its counsel, Atty. Guevara, who accordance with law.
refused to receive it on the ground of the pending protest RA 1125: the appeal may be made within thirty days
Since the protest was not found on the records, a file after receipt of the decision or ruling challenged
copy from the corp was produced and given to BIR Agent During the intervening period, the warrant was premature
Reyes, who deferred service of the warrant and could therefore not be served.
On April 7, Atty. Guevara was informed that the BIR Originally, CIR claimed that the 75K promotional fees to
was not taking any action on the protest and it was only then be personal holding company income, but later on
that he accepted the warrant of distraint and levy earlier conformed to the decision of CTA
sought to be served There is no dispute that the payees duly reported their
On April 23, Algue filed a petition for review of the respective shares of the fees in their income tax returns and
decision of the CIR with the Court of Tax Appeals paid the corresponding taxes thereon. CTA also found, after
CIR contentions: examining the evidence, that no distribution of dividends
was involved
CIR suggests a tax dodge, an attempt to evade a enterprise and involve themselves in a new business
legitimate assessment by involving an imaginary deduction requiring millions of pesos.
Algue Inc. was a family corporation where strict business Taxes are what we pay for civilization society. Without
procedures were not applied and immediate issuance of taxes, the government would be paralyzed for lack of the
receipts was not required. at the end of the year, when the motive power to activate and operate it. Hence, despite the
books were to be closed, each payee made an accounting of natural reluctance to surrender part of one's hard earned
all of the fees received by him or her, to make up the total of income to the taxing authorities, every person who is able to
P75,000.00. This arrangement was understandable in view must contribute his share in the running of the government.
of the close relationship among the persons in the family The government for its part, is expected to respond in the
corporation form of tangible and intangible benefits intended to improve
The amount of the promotional fees was not excessive. the lives of the people and enhance their moral and material
The total commission paid by the Philippine Sugar Estate values
Development Co. to Algue Inc. was P125K. After deducting Taxation must be exercised reasonably and in accordance
the said fees, Algue still had a balance of P50,000.00 as with the prescribed procedure. If it is not, then the taxpayer
clear profit from the transaction. The amount of P75,000.00 has a right to complain and the courts will then come to his
was 60% of the total commission. This was a reasonable succor
proportion, considering that it was the payees who did
practically everything, from the formation of the Vegetable Algue Inc.s appeal from the decision of the CIR was filed
Oil Investment Corporation to the actual purchase by it of on time with the CTA in accordance with Rep. Act No.
the Sugar Estate properties. 1125. And we also find that the claimed deduction by Algue
Sec. 30 of the Tax Code: allowed deductions in the net
Inc. was permitted under the Internal Revenue Code and
income Expenses - All the ordinary and necessary
expenses paid or incurred during the taxable year in should therefore not have been disallowed by the CIR.
carrying on any trade or business, including a reasonable
allowance for salaries or other compensation for personal
services actually rendered xxx 3. Hydro Resources Contractors Corporation v CTA
the burden is on the taxpayer to prove the validity of the Facts:
claimed deduction National Irrigation Administration (NIA) entered into an
In this case, Algue Inc. has proved that the payment of agreement with Hydro Resources for the construction of the
the fees was necessary and reasonable in the light of the Magat River Multipurpose Project in Isabela. Under their
efforts exerted by the payees in inducing investors and contract, Hydro was allowed to procure new construction
prominent businessmen to venture in an experimental equipment, the payment for which will be advanced by NIA.
Hydro shall repay NIA the costs incurred and the manner of
repayment shall be through deductions from each monthly Ayala Securities Corp. (Ayala) failed to file returns of their
payment due to Hydro. Hydro shall repay NIA the full value accumulated surplus so Ayala was charged with 25% surtax
of the construction before the eventual transfer of by the Commissioner of internal Revenue. The CTA (Court
ownership. of Tax Appeals) reversed the Commissioners decision and
Upon transfer, Hydro was assessed an additional 3% ad held that the assessment made against Ayala was beyond the
valorem duty which it paid under protest. The Collector of 5-yr prescriptive period as provided in section 331 of the
Customs then ordered for the refund of the ad valorem duty National Internal Revenue Code. Commissioner now files a
in the form of tax credit. This was then reversed by the motion for reconsideration of this decision. Ayala invokes
Deputy Minister of Finance. the defense of prescription against the right of the
Issue: Commissioner to assess the surtax.
Whether or not the imposition of the 3% ad valorem tax on
importations is valid. Issue:
Held: Whether or not the right to assess and collect the 25% surtax
No. EO 860 which was the basis for the imposition of the ad has prescribed after five years.
valorem duty took effect December 1982. The importations
were effected in 1978 and 1979 by NIA. It is a cardinal rule Held:
that laws shall have no retroactive effect unless contrary is No. There is no such time limit on the right of the
provided. EO 860 does not provide for its retroactivity. The Commissioner to assess the 25% surtax since there is no
Deputy Minister of Finance even clarified that letters of express statutory provision limiting such right or providing
credit opened prior to the effectivity of EO 860 are not for its prescription. Hence, the collection of surtax is
subject to its provisions. imprescriptible. The underlying purpose of the surtax is to
In the case, the procurement of the equipment was not on a avoid a situation where the corporation unduly retains its
tax exempt basis as the import liabilities have been secured surplus earnings instead of declaring and paying dividends
to paid under a financial scheme. It is a matter of to its shareholders. SC reverses the ruling of the CTA.
implementing a pre-existing agreement, hence, the imported
articles can only be subject to the rates of import duties
prevailing at the time of entry or withdrawal from the 3RD SESSION
customs custody.
1. Victorias Milling Co. vs. Municipality of Victorias
GR L-21183, 27 September 1968 En Banc, Sanchez
4. Commissioner of Internal Revenue v Ayala (J): 9 concur
Securities Corporation
Facts:
Facts: Ordinance 1 (1956) was approved by the municipal Facts: On 30 September 1946, the Municipal Board of
council of Victorias by way of an amendment to 2 municipal Iloilo City enacted Ordinance 86 imposing license tax
ordinances separately imposing license taxes on operators of fees upon tenement house (P25); tenemen house partly
sugar centrals and sugar refineries. The changes were: (1) engaged or wholly engaged in and dedicated to business
with respect to sugar centrals, by increasing the rates of in Baza, Iznart, and Aldeguer Streets (P24 per
license taxes; and (2) as to sugar refineries, by increasing the apartment); and tenement house, padtly or wholly
rates of license taxes as well as teh range of graduated engaged in business in other streets (P12 per apartment).
schedule of annual output capacity. Victorias Milling The validity of such ordinance was challenged by
questioned the validity of Ordinance 1 as it, among others, Eusebio and Remedios Villanueva, owners of four
allegedly singled out Victorias Milling Co. since it is the tenement houses containing 34 apartments. The Supreme
only operator of a sugar central and a sugar refinery within Court held the ordinance to be ultra vires. On 15 January
the jurisdiction of the municipality. 1960, however, the municipal board, believing that it
acquired authority to enact an ordinance of the same
Issue: Whether Ordinance 1 is discriminatory.
nature pursuant to the Local Autonomy Act, enacted
Held: The ordinance does not single out Victorias as the Ordinance 11 (series of 1960), Eusebio and Remedios
only object of the ordinance but is made to apply to any Villaniueva assailed the ordinance anew.
sugar central or sugar refinery which may happen to operate
Issue: Whether Ordinance 11 violate the rule of
in the municipality. The fact that Victorias Milling is
uniformity of taxation.
actually the sole operator of a sugar central and a sugar
refinery does not make the ordinance discriminatory. The Held: The Court has ruled that tenement houses
ordinance is unlike that in Ormoc Sugar Company vs. constitute a distinct class of property; and that taxes are
Municipal Board of Ormoc City, which specifically spelled uniform and equal when imposed upon all property of the
out Ormoc Sugar as the subject of the taxation, the name of same class or character within the taxing authority. The
the company herein was never mentioned in the ordinance. fact that the owners of the other classes of buildings in
Iloilo are not imposed upon by the ordinance, or that
tenement taxes are imposed in other cities do not violate
2. Villanueva vs. Iloilo City GR L-26521, 28 the rule of equality and uniformity. The rule does not
December 1968 En Banc, Castro (J): 8 concur require that taxes for the same purpose should be
imposed in different territorial subdivisions at the same
time. So long as the burden of tax falls equally and licensed by the Securities and Exchange
impartially on all owners or operators of tenement houses Commission to do business in the Philippines
similarly classified or situated, equality and uniformity is entered into a contract with the United States
Government to transport military household
accomplished. The presumption that tax statutes are
goods and effects of U.S. military personnel
intended to operate uniformly and equally was not assigned to the Subic Naval Base.
overthrown herein.
"From the aforesaid contract, SEA-LAND
derived an income for the taxable year 1984
amounting to P58,006,207.54. During the
4th SESSION
taxable year in question, SEA-LAND filed with
the Bureau of Internal Revenue (BIR) the
G.R. No. 122605 April 30, 2001
corresponding corporate Income Tax Return
SEA-LAND SERVICE, INC., petitioner, (ITR) and paid the income tax due thereon of
vs. 1.5% as required in Section 25 (a)(2) of the
COURT OF APPEALS and COMMISSIONER OF National Internal Revenue Code (NIRC) in
INTERNAL REVENUE, respondents. relation to Article 9 of the RP-US Tax Treaty,
amounting to P870,093.12.
PARDO, J.:
"Claiming that it paid the aforementioned
The Case income tax by mistake, a written claim for
refund was filed with the BIR on 15 April 1987.
Appeal via certiorari from the decision of the Court of However, before the said claim for refund could
Appeals affirming in toto that of the Court of Tax Appeals be acted upon by public respondent
which denied petitioners claim for tax credit or refund of Commissioner of Internal Revenue, petitioner-
income tax paid on its gross Philippine billings for taxable appellant filed a petition for review with the
year 1984, in the amount of P870,093.12.1 CTA docketed as CTA Case No. 4149, to
judicially pursue its claim for refund and to stop
The Facts the running of the two-year prescriptive period
under the then Section 243 of the NIRC.
The facts, as found by the Court of Appeals, are as follows:

"Sea-Land Service Incorporated (SEA-LAND),


an American international shipping company
"On 21 February 1995, CTA rendered its maintenance, operation and defense of the
decision denying SEA-LANDs claim for bases, or any tax in the nature of a license in
refund of the income tax it paid in 1984."2 respect of any service or work for the United
States in connection with the construction,
On March 30, 1995, petitioner appealed the decision of the maintenance, operation and defense of the
Court of Tax Appeals to the Court of Appeals.3 bases."6

After due proceedings, on October 26, 1995, the Court of Petitioner Sea-Land Service, Inc. a US shipping company
Appeals promulgated its decision dismissing the appeal and licensed to do business in the Philippines earned income
affirming in toto the decision of the Court of Tax Appeals.4 during taxable year 1984 amounting to P58,006,207.54, and
paid income tax thereon of 1.5% amounting to P870,093.12.
Hence, this petition.5
The question is whether petitioner is exempted from the
The Issue payment of income tax on its revenue earned from the
transport or shipment of household goods and effects of US
The issue raised is whether or not the income that petitioner personnel assigned at Subic Naval Base.
derived from services in transporting the household goods
and effects of U.S. military personnel falls within the tax "Laws granting exemption from tax are
exemption provided in Article XII, paragraph 4 of the RP- construed strictissimi juris against the taxpayer and liberally
US Military Bases Agreement. in favor of the taxing power. Taxation is the rule and
exemption is the exception."7 The law "does not look with
The Courts Ruling favor on tax exemptions and that he who would seek to be
thus privileged must justify it by words too plain to be
We deny the petition.
mistaken and too categorical to be misinterpreted."8
The RP-US Military Bases Agreement provides:
Under Article XII (4) of the RP-US Military Bases
"No national of the United States, or Agreement, the Philippine Government agreed to exempt
corporation organized under the laws of the from payment of Philippine income tax nationals of the
United States, shall be liable to pay income tax United States, or corporations organized under the laws of
in the Philippines in respect of any profits the United States, residents in the United States in respect of
derived under a contract made in the United any profit derived under a contract made in the United States
States with the government of the United States with the Government of the United States in connection with
in connection with the construction, the construction, maintenance, operation and defense of
the bases.
It is obvious that the transport or shipment of household WHEREFORE, the Court DENIES the petition for lack of
goods and effects of U.S. military personnel is not included merit.
in the term "construction, maintenance, operation and
defense of the bases." Neither could the performance of this No costs.
service to the U.S. government be interpreted as directly
related to the defense and security of the Philippine SO ORDERED.
territories. "When the law speaks in clear and categorical
language, there is no reason for interpretation or
construction, but only for application."9 Any interpretation
5TH SESSION
that would give it an expansive construction to encompass
petitioners exemption from taxation would be unwarranted. PASCUAL vs. SECRETARY OF PUBLIC WORKS
110 PHIL 331
The avowed purpose of tax exemption "is some public GR No. L-10405, December 29, 1960
benefit or interest, which the lawmaking body considers
sufficient to offset the monetary loss entailed in the grant of "A law appropriating the public revenue is invalid if the
the exemption."10 The hauling or transport of household public advantage or benefit, derived from such expenditure,
goods and personal effects of U. S. military personnel would is merely incidental in the promotion of a particular
not directly contribute to the defense and security of the enterprise."
Philippines.
FACTS: Governor Wenceslao Pascual of Rizal instituted
We see no reason to reverse the ruling of the Court of
this action for declaratory relief, with injunction, upon the
Appeals, which affirmed the decision of the Court of Tax
ground that RA No. 920, which apropriates funds for public
Appeals. The Supreme "Court will not set aside lightly the
works particularly for the construction and improvement of
conclusion reached by the Court of Tax Appeals which, by
Pasig feeder road terminals. Some of the feeder roads,
the very nature of its function, is dedicated exclusively to the
however, as alleged and as contained in the tracings attached
consideration of tax problems and has necessarily developed
to the petition, were nothing but projected and planned
an expertise on the subject, unless there has been an abuse or
subdivision roads, not yet constructed within the Antonio
improvident exercise of authority."11
Subdivision, belonging to private respondent Zulueta,
Hence, the Court of Appeals did not err or gravely abuse its situated at Pasig, Rizal; and which projected feeder roads do
discretion in dismissing the petition for review. We can not not connect any government property or any important
grant the petition.1wphi1.nt premises to the main highway. The respondents' contention
is that there is public purpose because people living in the
The Judgment subdivision will directly be benefitted from the construction
of the roads, and the government also gains from the as on the sale or exchange of services. RA 7716
donation of the land supposed to be occupied by the streets, seeks to widen the tax base of the existing VAT
made by its owner to the government. system and enhance its administration by
amending the National Internal Revenue Code.
ISSUE: Should incidental gains by the public be considered There are various suits challenging the
"public purpose" for the purpose of justifying an expenditure constitutionality of RA 7716 on various grounds.
of the government?

HELD: No. It is a general rule that the legislature is without One contention is that RA 7716 did not originate
power to appropriate public revenue for anything but a exclusively in the House of Representatives as
public purpose. It is the essential character of the direct required by Art. VI, Sec. 24 of the Constitution,
object of the expenditure which must determine its validity because it is in fact the result of the consolidation
as justifying a tax, and not the magnitude of the interest to of 2 distinct bills, H. No. 11197 and S. No. 1630.
be affected nor the degree to which the general advantage of There is also a contention that S. No. 1630 did not
the community, and thus the public welfare, may be pass 3 readings as required by the Constitution.
ultimately benefited by their promotion. Incidental to the
public or to the state, which results from the promotion of Issue:
private interest and the prosperity of private enterprises or Whether or not RA 7716 violates Art. VI, Secs. 24
business, does not justify their aid by the use public money. and 26(2) ofthe Constitution
The test of the constitutionality of a statute requiring the
use of public funds is whether the statute is designed to Held:
promote the public interest, as opposed to the furtherance of The argument that RA 7716 did not originate
the advantage of individuals, although each advantage to exclusively in the House of Representatives as
individuals might incidentally serve the public. required by Art. VI, Sec. 24 of the Constitution will
not bear analysis. To begin with, it is not the law
but the revenue bill which is required by the
6th SESSION Constitution to originate exclusively in the House
of Representatives. To insist that a revenue statute
Tolentino v. Secretary of Finance and not only the bill which initiated the legislative
ntino v. Secretary of Finance process culminating in the enactment of the law
Facts: must substantially be the same as the House bill
The value-added tax (VAT) is levied on the sale, would be to deny the Senates power not only to
barter or exchange of goods and properties as well concur with amendments but also to propose
amendments. Indeed, what the Constitution simply
means is that the initiative for filing revenue, tariff
or tax bills, bills authorizing an increase of the
public debt, private bills and bills of local
application must come from the House of American Bible Society v City of Manila GR No.
Representatives on the theory that, elected as they L-9637, April 30, 1957
are from the districts, the members of the House
can be expected to be more sensitive to the local FACTS:
needs and problems. Nor does the In the course of its ministry, the Philippine agency of American Bible
Constitutionprohibit the filing in the Senate of a Society (a foreign, non-stock, non-profit, religious,
substitute bill in anticipation of its receipt of the missionary corporation) has been distributing and selling bibles and/or
gospel portions thereof throughout the Philippines. The acting City
bill from the House, so long as action by the Treasurer of Manila informed plaintiff that it was conducting the
Senate as a body is withheld pending receipt of the business of general merchandise since November 1945, without
House bill. providing itself with the necessary Mayors permit and municipal
license, in violation of Ordinance No. 3000, as amended, and
The next argument of the petitioners was that S. Ordinances Nos. 2529, 3028 and 3364. The society paid such under
No. 1630 did not pass 3 readings on separate days protest and filed suit questioning the legality of the ordinances under
which the fees are being collected.
as required by the Constitution because the
second and third readings were done on the same ISSUES:
day. But this was because the President had
certified S. No. 1630 as urgent. The presidential
certification dispensed with the requirement not 1. Whether or not the ordinances of the City of Manila are
only of printing but also that of reading the bill on constitutional and valid
2. Whether the provisions of said ordinances are applicable or not
separate days. That upon the certification of a to the case at bar
billby the President the requirement of 3 readings
on separate days and of printing and distribution RULING:
can be dispensed with is supported by the 1. Yes, they are constitutional. The ordinances do not deprive
weightof legislative practice. defendant of his constitutional right of the free exercise and enjoyment
of religious profession and worship, even though it prohibits him from
introducing and carrying out a scheme or purpose which he sees fit to
claim as part of his religious system. It seems clear, therefore, that
Ordinance No. 3000 cannot be considered unconstitutional, even if
applied to plaintiff society.
ISSUE: Whether or not there has been a violation of equal protection.
2. The ordinance is inapplicable to said business, trade or occupation HELD: The SC held in favor of Ormoc Sugar. The SC noted that even
of the plaintiff. Even if religious groups and the press are not if Sec 2287 of the RAC had already been repealed by a latter statute
altogether free from the burdens of the government, the act of (Sec 2 RA 2264) which effectively authorized LGUs to tax goods and
distributing and selling bibles is purely religious and does not fall merchandise carried in and out of their turf, the act of Ormoc City is
under Section 27e of the Tax Code (CA 466). The fact that the price of still violative of equal protection. The ordinance is discriminatory for
it taxes only centrifugal sugar produced and exported by the Ormoc
bibles, etc. are a little higher than actual cost of the same does not
Sugar Company, Inc. and none other. At the time of the taxing
necessarily mean it is already engaged in business for profit. Thus, the ordinances enactment, Ormoc Sugar Company, Inc., it is true, was the
Ordinances are not applicable to the Society. only sugar central in the city of Ormoc. Still, the classification, to be
reasonable, should be in terms applicable to future conditions as well.
The taxing ordinance should not be singular and exclusive as to
exclude any subsequently established sugar central, of the same class
Ormoc Sugar vs Treasurer of Ormoc City (1968) as plaintiff, from the coverage of the tax. As it is now, even if later a
similar company is set up, it cannot be subject to the tax because the
ordinance expressly points only to Ormoc Sugar Company, Inc. as the
entity to be levied upon.
Equal Protection
Facts: In 1964, Ormoc City passed a bill which read: There shall be
paid to the City Treasurer on any and all productions of centrifugal
sugar milled at the Ormoc Sugar Company Incorporated, in Ormoc
City a municipal tax equivalent to one per centum (1%) per export sale
to the United States of America and other foreign countries. Though
referred to as a production tax, the imposition actually amounts to a
tax on the export of centrifugal sugar produced at Ormoc Sugar
Company, Inc. For production of sugar alone is not taxable; the only
time the tax applies is when the sugar produced is exported. Ormoc
Sugar paid the tax (P7,087.50) in protest averring that the same is
violative of Sec 2287 of the Revised Administrative Code which
provides: It shall not be in the power of the municipal council to
impose a tax in any form whatever, upon goods and merchandise
carried into the municipality, or out of the same, and any attempt to
impose an import or export tax upon such goods in the guise of an
unreasonable charge for wharfage, use of bridges or otherwise, shall be
void. And that the ordinance is violative to equal protection as it
singled out Ormoc Sugar As being liable for such tax impost for no
other sugar mill is found in the city.