Tax1 Case Digest I.

I.
Scope and Limitation of taxation
Roxas v CTA
GR No L-25043, April 26, 1968
FACTS:
Antonio, Eduardo and Jose Roxas, brothers and at the same time partners of the Roxas y Compania,
inherited from their grandparents several properties which included farmlands. The tenants expressed
their desire to purchase the farmland. The tenants, however, did not have enough funds, so the Roxases
agreed to a purchase by installment. Subsequently, the CIR demanded from the brothers the payment of
deficiency income taxes resulting from the sale, 100% of the profits derived therefrom was taxed. The
brothers protested the assessment but the same was denied. On appeal, the Court of Tax Appeals
sustained the assessment. Hence, this petition.
ISSUE:
Is Roxas liable?
RULING:
No. It should be borne in mind that the sale of the farmlands to the very farmers who tilled them for
generations was not only in consonance with, but more in obedience to the request and pursuant to the
policy of our Government to allocate lands to the landless.
In order to maintain the general publics trust and confidence in the Government this power must be used
justly and not treacherously. It does not conform with the sense of justice for the Government to persuade
the taxpayer to lend it a helping hand and later on penalize him for duly answering the urgent call.
In fine, Roxas cannot be considered a real estate dealer and is not liable for 100% of the sale. Pursuant
to Section 34 of the Tax Code, the lands sold to the farmers are capital assets and the gain derived from
the sale thereof is capital gain, taxable only to the extent of 50%.
Pascual vs Secretary of Public Works
110 Phil. 331 Political Law Appropriation For Private Use Not Allowed
In 1953, Republic Act No. 920 was passed. This law appropriated P85,000.00 for the construction,
reconstruction, repair, extension and improvement Pasig feeder road terminals. Wenceslao Pascual,
then governor of Rizal, assailed the validity of the law. He claimed that the appropriation was actually
going to be used for private use for the terminals sought to be improved were part of the Antonio
Subdivision. The said Subdivision is owned by Senator Jose Zulueta who was a member of the same
Senate that passed and approved the same RA. Pascual claimed that Zulueta misrepresented in
Congress the fact that he owns those terminals and that his property would be unlawfully enriched at the
expense of the taxpayers if the said RA would be upheld. Pascual then prayed that the Secretary of
Public Works and Communications be restrained from releasing funds for such purpose. Zulueta, on the
other hand, perhaps as an afterthought, donated the said property to the City of Pasig.
ISSUE: Whether or not the appropriation is valid.
HELD: No, the appropriation is void for being an appropriation for a private purpose. The subsequent
donation of the property to the government to make the property public does not cure the constitutional
defect. The fact that the law was passed when the said property was still a private property cannot be
ignored. In accordance with the rule that the taxing power must be exercised for public purposes only,
money raised by taxation can be expanded only for public purposes and not for the advantage of private
individuals. Inasmuch as the land on which the projected feeder roads were to be constructed belonged
then to Zulueta, the result is that said appropriation sought a private purpose, and, hence, was null and
void.
ALTEX PHILIPPINES VS CA
G.R. 925585 MAY 8, 1992
FACTS:
In 1989, COA sent a letter to Caltex directing it to remit to OPSF its collection of the additional tax on
petroleum authorized under PD 1956 and pending such remittance, all of its claims from the OPSF shall
be held in abeyance. Petitioner requested COA for the early release of its reimbursement certificates from
the OPSF covering claims with the Office of Energy Affairs. COA denied the same.
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I. Scope and Limitation of taxation
ISSUE:
Whether or not petitioner can avail of the right to offset any amount that it may be required under the law
to remit to the OPSF against any amount that it may receive by way of reimbursement.
RULING:
It is a settled rule that a taxpayer may not offset taxes due from the claims that he may have against the
government. Taxes cannot be the subject of compensation because the government and taxpayer are not
mutually debtors and creditors of each other and a claim for taxes is not such a debt, demand, contract or
judgment as is allowed to be set-off.
The oil companies merely acted as agents for the government in the latters collection since taxes are
passed unto the end-users, the consuming public.
TIO VS. VIDEOGRAM REGULATORY BOARD [151 SCRA 208; G.R. No. L-75697; 18 Jun 1987]
Friday, January 30, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Political Law
Facts: The case is a petition filed by petitioner on behalf of videogram operators adversely affected by
Presidential Decree No. 1987, An Act Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry.
A month after the promulgation of the said Presidential Decree, the amended the National Internal
Revenue Code provided that:
"SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette, ready for
playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or
imported blank video tapes shall be subject to sales tax."
"Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to
the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as
the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any
motion picture or audiovisual program.
Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty
percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED, That in
Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila
Commission.
The rationale behind the tax provision is to curb the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes or any technical improvement or
variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such unregulated
circulation have caused a sharp decline in theatrical attendance by at least forty percent (40%) and a
tremendous drop in the collection of sales, contractor's specific, amusement and other taxes, thereby
resulting in substantial losses estimated at P450 Million annually in government revenues.
Videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and
disposition of videograms, and these earnings have not been subjected to tax, thereby depriving the
Government of approximately P180 Million in taxes each year.
The unregulated activities of videogram establishments have also affected the viability of the movie
industry.
Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.

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Held: Taxation has been made the implement of the state's police power. The levy of the 30% tax is for a
public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly
because of the rampant film piracy, the flagrant violation of intellectual property rights, and the
proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the
movie industry, the tax remains a valid imposition.
We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree
No. 1987 as unconstitutional and void. While the underlying objective of the DECREE is to protect the
moribund movie industry, there is no question that public welfare is at bottom of its enactment,
considering "the unfair competition posed by rampant film piracy; the erosion of the moral fiber of the
viewing public brought about by the availability of unclassified and unreviewed video tapes containing
pornographic films and films with brutally violent sequences; and losses in government revenues due to
the drop in theatrical attendance, not to mention the fact that the activities of video establishments are
virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to
engage in business."
WHEREFORE, the instant Petition is hereby dismissed. No costs.
Gaston vs. Republic Planters Bank

Post under case digests, Political Law at Monday, March 12, 2012 Posted by Schizophrenic Mind
Facts: Petitioners are sugar producers and planters and millers filed a MANDAMUS to implement the
privatization of Republic PlantersBank, and for the transfer of the shares in the government bank to sugar
producers and planters. (because they are allegedly the true beneficial owners of the bank since they pay
P1.00 per picul of sugar from the proceeds of sugar producers as STABILIZATIONFEES)
The shares are currently held by Philsucom / Sugar Regulatory Admin.
The Solgen countered that the stabilization fees are considered government funds and that the transfer of
shares to from Philsucom to the sugar producers would be irregular.
Issue: What is the nature of the P1.00 stabilization fees collected from sugar producers? Are they funds
held in trust for them, or are they public funds? Are the shares in the bank (paid using thesefees) owned
by the government Philsucom or privately by the different sugar planters from whom such fees were
collected?
Held: PUBLIC FUNDS. While it is true that the collected fees were used to buy shares in RPB, it did not
collect said fees for the account of sugar producers. The stabilization fees were charged on sugar
produced and milled which ACCRUED TO PHILSUCOM, under PD 338.
The fees collected ARE IN THE NATURE OF A TAX., which is within the power of the state
to impose FOR THE PROMOTION OF THE SUGAR INDUSTRY. They constitute sugar liens. The
collections accrue to a SPECIAL FUNDS. It is levied not purely for taxation, but for regulation, to provide
means TO STABILIZE THE SUGAR INDUSTRY. The levy is primarily an exercise of police powers.
The fact that the State has taken money pursuant to law is sufficient to constitute them as STATE
FUNDS, even though held for a special purpose. Having been levied for a special purpose, the revenues
are treated as a special fund, administered in trust for the purpose intended. Once the purpose has been
fulfilled or abandoned, the balance will be transferred to the general funds of govt.
It is a special fund since the funds are deposited in PNB, not in the National Treasury.
The sugar planters are NOT BENEFICIAL OWNERS. The money is collected from them only because
they it is also they who are to be benefited from the expenditure of funds derived from it. The investing of
the funds in RPB is not alien to the purpose since the Bank is a commodity bank for sugar, conceived for
the sugar industry growth and development.
Revenues derived from taxes cannot be used purely for private purposes or for the exclusive benefit of
private persons. The Stabilization Fund is to be utilized for the benefit of the ENTIRE SUGAR
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INDUSTRY, and all its components, stabilization of domestic and foreign markets, since the sugar
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industry is of vital importance to the countrys economy and national interest.

Tan v Del Rosario
Facts:
1. Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income Taxation Scheme
("SNIT"), which amended certain provisions of the NIRC, as well as the Rules and Regulations
promulgated by public respondents pursuant to said law.
2. Petitioners posit that RA 7496 is unconstitutional as it allegedlyviolates the following provisions of the
Constitution:
-Article VI, Section 26(1) Every bill passed by the Congress shall embrace only one subject which shall
be expressed in the title thereof.
- Article VI, Section 28(1) The rule of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation.
- Article III, Section 1 No person shall be deprived of . . . property without due process of law, nor shall
any person be denied the equal protection of the laws.
3. Petitioners contended that public respondents exceeded their rule-making authority in applying SNIT to
general professional partnerships. Petitioner contends that the title of HB 34314, progenitor of RA 7496,
is deficient for being merely entitled, "Simplified Net Income Taxation Scheme for the Self-Employed and
Professionals Engaged in the Practice of their Profession" (Petition in G.R. No. 109289) when the full text
of the title actually reads,
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and Professionals
Engaged In The Practice of Their Profession, Amending Sections 21 and 29 of the National Internal
Revenue Code,' as amended. Petitioners also contend it violated due process.
5. The Solicitor General espouses the position taken by public respondents.

6. The Court has given due course to both petitions.
ISSUE: Whether or not the tax law is unconstitutional for violating due process
NO. The due process clause may correctly be invoked only when there is a clear contravention of
inherent or constitutional limitations in the exercise of the tax power. No such transgression is so evident
in herein case.
1. Uniformity of taxation, like the concept of equal protection, merely requires that all subjects or objects of
taxation, similarly situated, are to be treated alike both in privileges and liabilities. Uniformity does not
violate classification as long as: (1) the standards that are used therefor are substantial and not arbitrary,
(2) the categorization is germane to achieve the legislative purpose, (3) the law applies, all things being
equal, to both present and future conditions, and (4) the classification applies equally well to all those
belonging to the same class.
2. What is apparent from the amendatory law is the legislative intent to increasingly shift the income tax
system towards the schedular approach in the income taxation of individual taxpayers and to maintain, by
and large, the present global treatment on taxable corporations. The Court does not view this
classification to be arbitrary and inappropriate.
ISSUE 2: Whether or not public respondents exceeded their authority in promulgating the RR
No. There is no evident intention of the law, either before or after the amendatory legislation, to place in
an unequal footing or in significant variance the income tax treatment of professionals who practice their
respective professions individually and of those who do it through a general professional partnership.
Sison vs Ancheta (1984)

February 15, 2013 markerwins Tax Law
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Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision (Section 1)
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unduly discriminated against him by the imposition of higher rates upon his income as a professional, that
it amounts to class legislation, and that it transgresses against the equal protection and due process
clauses of the Constitution as well as the rule requiring uniformity in taxation.
Issue: Whether BP 135 violates the due process and equal protection clauses, and the rule on uniformity
in taxation.
Held: There is a need for proof of such persuasive character as would lead to a conclusion that there was
a violation of the due process and equal protection clauses. Absent such showing, the presumption of
validity must prevail. Equality and uniformity in taxation means that all taxable articles or kinds of property
of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable
and natural classifications for purposes of taxation. Where the differentitation conforms to the practical
dictates of justice and equity, similar to the standards of equal protection, it is not discriminatory within the
meaning of the clause and is therefore uniform. Taxpayers may be classified into different categories,
such as recipients of compensation income as against professionals. Recipients of compensation income
are not entitled to make deductions for income tax purposes as there is no practically no overhead
expense, while professionals and businessmen have no uniform costs or expenses necessaryh to
produce their income. There is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income taxation as regards professional and
business income.
Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan (1988)
Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan GR No 81311 June 30, 1988
FACTS:
EO 372 was issued by the President of the Philippines which amended the Revenue Code, adopting the
value-added tax (VAT) effective January 1, 1988. Four petitions assailed the validity of the VAT Law from
being beyond the President to enact; for being oppressive, discriminatory, regressive and violative of the
due process and equal protection clauses, among others, of the Constitution. The Integrated Customs
Brokers Association particularly contend that it unduly discriminate against customs brokers (Section
103r) as the amended provision of the Tax Code provides that service performed in the exercise of
profession or calling (except custom brokers) subject to occupational tax under the Local Tax Code and
professional services performed by registered general professional partnerships are exempt from VAT.
ISSUE:
Whether the E-VAT law is void for being discriminatory against customs brokers
RULING:
No. The phrase except custom brokers is not meant to discriminate against custom brokers but to avert
a potential conflict between Sections 102 and 103 of the Tax Code, as amended. The distinction of the
customs brokers from the other professionals who are subject to occupation tax under the Local Tax
Code is based on material differences, in that the activities of customs partake more of a business, rather
than a profession and were thus subjected to the percentage tax under Section 174 of the Tax Code prior
to its amendment by EO 273. EO 273 abolished the percentage tax and replaced it with the VAT. If the
Association did not protest the classification of customs brokers then, there is no reason why it should
protest now.
Basco vs. PAGCOR (G.R. No. 91649) - Digest

Facts:
Petitioner is seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter --
PD 1869, because it is allegedly contrary to morals, public policy and order, and because it constitutes a
waiver of a right prejudicial to a third person with a right recognized by law. It waived the Manila Cit
governments right to impose taxes and license fees, which is recognized by law. For the same reason,
the law has intruded into the local governments right to impose local taxes and license fees. This is in
contravention of the constitutionally enshrined principle of local autonomy.
Issue:
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Whether or not Presidential Decree No. 1869 is valid.

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Ruling:
1. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Their
charter or statute must plainly show an intent to confer that power, otherwise the municipality cannot
assume it. Its power to tax therefore must always yield to a legislative act which is superior having been
passed upon by the state itself which has the inherent power to tax.
The Charter of Manila is subject to control by Congress. It should be stressed that municipal corporations
are mere creatures of Congress, which has the power to create and abolish municipal corporations due
to its general legislative powers. Congress, therefore, has the power of control over the Local
governments. And if Congress can grant the City of Manila the power to tax certain matters, it can also
provide for exemptions or even take back the power.
2. The City of Manilas power to impose license fees on gambling, has long been revoked by P.D. No.
771 and vested exclusively on the National Government. Therefore, only the National Government has
the power to issue license or permits for the operation of gambling.
3. Local governments have no power to tax instrumentalities of the National Government. PAGCOR is
government owned or controlled corporation with an original charter, P.D. No. 1869. All of its shares of
stocks are owned by the National Government. PAGCOR has a dual role, to operate and to regulate
gambling casinos. The latter role is governmental, which places it in the category of an agency or
instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to
control by a mere Local Government.
4. Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. No.
1869.
Article 10, Section 5 of the 1987 Constitution:

Each local government unit shall have the power to create its own source of revenue and to levy taxes,
fees, and other charges subject to such guidelines and limitation as the congress may provide,
consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local government.
SC said this is a pointless argument. The power of the local government to impose taxes and fees is
always subject to limitations which Congress may provide by law. Besides, the principle of local
autonomy under the 1987 Constitution simply means decentralization. It does not make local
governments sovereign within the state.
Wherefore, the petition is DISMISSED.
NAPOCOR vs. City of Cabanatuan

Post under case digests, Taxation at Wednesday, February 08, 2012 Posted by Schizophrenic Mind
Facts: City of Cabanatuan filed a collection suit against NAPOCOR, a government-owned and controlled
corporation demanding that the latter pay the assessed franchise tax due, plus surcharge and interest. It
alleged that NAPOCORs exemption from local taxes has already been withdrawn by the Local
Government Code. NAPOCOR submitted that it is not liable to pay an annual franchise because the citys
taxing power is limited to private entities that are engaged in trade or occupation for profit, and that the
NAPOCOR Charter, being a valid exercise of police power, should prevail over the LGC.
Issue: Whether NAPOCOR is liable to pay annual franchise tax to the City of Cabanatuan
Held: Yes. The power to tax is no longer vested exclusively on Congress; local legislative bodies are now
given direct authority tolevy taxes, fees and other charges. Although as a general rule, LGUs
cannot impose taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits of an exception, i.e., when specific provisions of the LGC authorize
the LGUs to impose taxes, fees or charges on the aforementioned entities. Nothing prevents Congress
from decreeing that even instrumentalities or agencies of the government
performing governmental functions may be subject to tax.
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A franchise is a privilege conferred by government authority, which does not belong to citizens of the
country generally as a matter ofcommon right. It may be construed in two senses: the right vested in the
individuals composing the corporation and the right and privileges conferred upon the corporation. A
franchise tax is understood in the second sense; it is not levied on the corporation simply for existing as a
corporation but on its exercise of the rights or privileges granted to it by the government. NAPOCOR is
covered by the franchise tax because it exercises a franchise in the second sense and it is exercising its
rights or privileges under this franchise within the territory of the City.
National Power Corporation vs City of Cabanatuan
G.R. No. 149110 April 9, 2003
NATIONAL POWER CORPORATION, petitioner,
vs.
CITY OF CABANATUAN, respondent.
FACTS: Petitioner is a government-owned and controlled corporation created under Commonwealth Act
No. 120, as amended.
For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross
income of P107,814,187.96 in 1992.7 Pursuant to section 37 of Ordinance No. 165-92,8 the respondent
assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latters
gross receipts for the preceding year.
Petitioner refused to pay the tax assessment arguing that the respondent has no authority to impose tax
on government entities. Petitioner also contended that as a non-profit organization, it is exempted from
the payment of all forms of taxes, charges, duties or fees in accordance with sec. 13 of Rep. Act No.
6395, as amended.
The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due,
plus surcharge. Respondent alleged that petitioners exemption from local taxes has been repealed by
section 193 of the LGC, which reads as follows:
Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
RTC upheld NPCs tax exemption. On appeal the CA reversed the trial courts Order on the ground that
section 193, in relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions granted
to the petitioner.
ISSUE: W/N the respondent city government has the authority to issue Ordinance No. 165-92 and impose
an annual tax on businesses enjoying a franchise
HELD: YES. Taxes are the lifeblood of the government, for without taxes, the government can neither
exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from
the very existence of the state whose social contract with its citizens obliges it to promote public interest
and common good. The theory behind the exercise of the power to tax emanates from necessity;32
without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of
the people.
Section 137 of the LGC clearly states that the LGUs can impose franchise tax notwithstanding any
exemption granted by any law or other special law. This particular provision of the LGC does not admit
any exception. In City Government of San Pablo, Laguna v. Reyes,74 MERALCOs exemption from the
payment of franchise taxes was brought as an issue before this Court. The same issue was involved in
the subsequent case of Manila Electric Company v. Province of Laguna.75 Ruling in favor of the local
government in both instances, we ruled that the franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special laws, viz:
It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support
their position that MERALCOs tax exemption has been withdrawn. The explicit language of section 137
which authorizes the province to impose franchise tax notwithstanding any exemption granted by any law
or other special law is all-encompassing and clear. The franchise tax is imposable despite any exemption
enjoyed under special laws.
Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise
provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all persons,
whether natural or juridical, including government-owned or controlled corporations except (1) local water
districts, (2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and
educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the
exemptions to the three enumerated entities. It is a basic precept of statutory construction that the
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express mention of one person, thing, act, or consequence excludes all others as expressed in the
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familiar maxim expressio unius est exclusio alterius. In the absence of any provision of the Code to the
contrary, and we find no other provision in point, any existing tax exemption or incentive enjoyed by
MERALCO under existing law was clearly intended to be withdrawn.
Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local
government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual
receipts for the preceding calendar based on the incoming receipts realized within its territorial
jurisdiction. The legislative purpose to withdraw tax privileges enjoyed under existing law or charter is
clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing such
exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical
to attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the
LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more
unequivocal language could have been used.76 (emphases supplied)
Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and
support myriad activities of the local government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.
As this Court observed in the Mactan case, the original reasons for the withdrawal of tax exemption
privileges granted to government-owned or controlled corporations and all other units of government were
that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly
situated enterprises. With the added burden of devolution, it is even more imperative for government
entities to share in the requirements of development, fiscal or otherwise, by paying taxes or other charges
due from them.
Enrique Garcia vs Executive Secretary (1992)
211 SCRA 219 Political Law Congress Authorizing the President to Tax
In November 1990, President Corazon Aquino issued Executive Order No. 438 which imposed, in
addition to any other duties, taxes and charges imposed by law on all articles imported into the
Philippines, an additional duty of 5% ad valorem tax. This additional duty was imposed across the board
on all imported articles, including crude oil and other oil products imported into the Philippines. In 1991,
EO 443 increased the additional duty to 9%. In the same year, EO 475 was passed reinstating the
previous 5% duty except that crude oil and other oil products continued to be taxed at 9%. Enrique
Garcia, a representative from Bataan, avers that EO 475 and 478 are unconstitutional for they violate
Section 24 of Article VI of the Constitution which provides:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the House of Representatives, but the Senate
may propose or concur with amendments.
He contends that since the Constitution vests the authority to enact revenue bills in Congress, the
President may not assume such power by issuing Executive Orders Nos. 475 and 478 which are in the
nature of revenue-generating measures.
ISSUE: Whether or not EO 475 and 478 are constitutional.
HELD: Under Section 24, Article VI of the Constitution, the enactment of appropriation, revenue and tariff
bills, like all other bills is, of course, within the province of the Legislative rather than the Executive
Department. It does not follow, however, that therefore Executive Orders Nos. 475 and 478, assuming
they may be characterized as revenue measures, are prohibited to be exercised by the President, that
they must be enacted instead by the Congress of the Philippines.
Section 28(2) of Article VI of the Constitution provides as follows:
(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national development program of the
Government.
There is thus explicit constitutional permission to Congress to authorize the President subject to such
limitations and restrictions as [Congress] may impose to fix within specific limits tariff rates . . . and
other duties or imposts . . . . In this case, it is the Tariff and Customs Code which authorized the
President ot issue the said EOs.
Maceda v Macaraig
Facts:
The petition seeks to nullify certain decisions, orders, ruling, and resolutions of the respondents
(Macaraig et. al) for exempting the National Power Corporation (NPC) from indirect tax and duties.
Commonwealth Act 120 created NPC as a public corporation. RA 6395 revised the charter of NPC and
provided in detail the exemption of NPC from all taxes, duties and other charges by the government.
There were many resolutions and decisions that followed after RA 6395 which talked about the exemption
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and non-exemption from taxes of NPC.

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Issue:
Whether or not NPC is really exempt from indirect taxes
Held:
Yes. NPC is a non-profit public corporation created for the general good and welfare of the people. From
the very beginning of its corporate existence, NPC enjoyed preferential tax treatment to enable it to pay
its debts and obligations. From the changes made in the NPC charter, the intention to strengthen its
preferential tax treatment is obvious. The tax exemption is intended not only to insure that the NPC shall
continue to generate electricity for the country but more importantly, to assure cheaper rates to be paid by
consumers.
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Some Notes on Direct and Indirect Taxes:
Direct Taxes those which a taxpayer is directly liable on the transaction or business it engages in.
Examples are: custom duties, ad valorem taxes paid by oil companies for importation of crude oil
Indirect Taxes paid by persons who can shift the burden upon someone else.
Examples are: ad valorem taxes that oil companies pay to BIR upon removal of petroleum products from
its refinery can be shifted to its buyer, like the NPC
Dissenting Opinion of Justice Sarmiento: The fact that NPC has been tasked with the enormous
undertaking to improve the quality of life, is no reason, to include indirect taxes, within the coverage of its
preferential tax treatment. The deletion of indirect taxes as stated in one of the assailed orders (PD
938), is significant, because if said law truly intends to exempt NPC from indirect taxes, it would have said
so specifically.
Maceda v Macaraig (1991)
Maceda v Macaraig
GR No 88291, May 31, 1991
FACTS:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the development of
hydraulic power and the production of power from other sources. RA 358 granted NAPOCOR tax and
duty exemption privileges. RA 6395 revised the charter of the NAPOCOR, tasking it to carry out the policy
of the national electrification and provided in detail NAPOCORs tax exceptions. PD 380 specified that
NAPOCORs exemption includes all taxes, etc. imposed directly or indirectly. PD 938 dated May 27,
1976 further amended the aforesaid provision by integrating the tax exemption in general terms under
one paragraph.
ISSUE:
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the enactment of PD 938
on May 27, 1976 which amended PD 380 issued on January 11, 1974
RULING:
No, it is still exempt.
NAPOCOR is a non-profit public corporation created for the general good and welfare, and wholly owned
by the government of the Republic of the Philippines. From the very beginning of the corporations
existence, NAPOCOR enjoyed preferential tax treatment to enable the corporation to pay the
indebtedness and obligation and effective implementation of the policy enunciated in Section 1 of RA
6395.
From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be
interpreted liberally so as to enhance the tax exempt status of NAPOCOR.
It is recognized that the rule on strict interpretation does not apply in the case of exemptions in favor of
government political subdivision or instrumentality. In the case of property owned by the state or a city or
other public corporations, the express exception should not be construed with the same degree of
strictness that applies to exemptions contrary to the policy of the state, since as to such property
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exception is the rule and taxation the exception.

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Ernesto M. Maceda vs. Energy Regulatory Board, et al.

18 July 1991 :: G.R. No. 96266

Medialdea, J.
FACTS:
Upon the outbreak of the Persian Gulf conflict on August 1990, private respondents oil companies filed
with the ERB their respective applications on oil price increases. ERB then issued an order granting a
provisional increase of P1.42 per liter. Petitioner Maceda filed a petition for Prohibition seeking to nullify
said increase.
ISSUE:
Whether or not the decisions of the Energy Regulatory Board should be subject to presidential review.
HELD:
Pursuant to Section 8 of E.O. No. 172, while hearing is indispensable, it does not preclude the Board from
ordering a provisional increase subject to final disposition of whether or not to make it permanent or to
reduce or increase it further or to deny the application. The provisional increase is akin to a temporary
restraining order, which are given ex-parte.
The Court further noted the Solicitor Generals comments that the ERB is not averse to the idea of a
presidential review of its decision, except that there is no law at present authorizing the same. The Court
suggested that it will be under the scope of the legislative to allow the presidential review of the decisions
of the ERB since, despite its being a quasi-judicial body, it is still an administrative body under the Office
of the President whose decisions should be appealed to the President under the established principle of
exhaustion of administrative remedies, especially on a matter as transcendental as oil price increases
which affect the lives of almost all Filipinos.
CIR vs. British Overseas Airways Corporation (BOAC)

Post under case digests, Taxation at Sunday, February 26, 2012 Posted by Schizophrenic Mind
Facts: British Overseas Airways Corp (BOAC) is a 100% British Government-owned corporation engaged
in international airline business and is a member of the Interline Air Transport Association, and thus, it
operates air transportation services and sells transportation tickets over the routes of the other airline
members.
From 1959 to 1972, BOAC had no landing rights for traffic purposes in the Philippines and thus, did not
carry passengers and/or cargo to or from the Philippines but maintained a general sales agent in the
Philippines - Warner Barnes & Co. Ltd. and later, Qantas Airways - which was responsible for selling
BOAC tickets covering passengers and cargoes. The Commissioner of Internal Revenue
assesseddeficiency income taxes against BOAC.
Issue: Whether the revenue derived by BOAC from ticket sales in the Philippines, constitute income of
BOAC from Philippine sources, and accordingly taxable.
Held: The source of an income is the property, activity, or service that produced the income. For the
source of income to be considered as coming from the Philippines, it is sufficient that the income is
derived from activity within the Philippines. Herein, the sale of tickets in the Philippines is the activity that
produced the income. The tickets exchanged hands here and payment for fareswere also made here in
the Philippine currency.
The situs of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred
within Philippine territory, enjoying the protection accorded by the Philippine government. In consideration
of such protection, the flow of wealth should share the burden of supporting the government. PD 68, in
relation to PD 1355, ensures that international airlines are taxed on their income from Philippine sources.
The 2 1/2% tax on gross billings is an income tax. If it had been intended as an excise tax or percentage
tax, it would have been placed under Title V of the Tax Code covering taxes on business.
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IR vs. JAPAN AIRLINES (JAL)

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Let's go to another airline. Still on the issue of SITUS in taxation. This is actually a reiteration of the
decision promulgated in CIR vs. BOAC. The case previously posted.
I'm sure you know Japan Airlines right? Don't you turn Japanese on me... "I think I'm turning Japanesa
think am turnin Japanesa.. tarararattattarat..." Sorry, got carried way.
Well JAL is also a foreign corporation likewise engaged in the business of International air carriage.
Now if British Overseas Airways Corp. (BOAC) merely used ticket sales agent and stayed at bay. JAL is
different. JAL maintained an office at the Filipinas Hotel, Roxas Boulevard Manila since mid-July of
1957.
The said office did not sell tickets but was merely for the promotion of the company.
But that's what they think. On July 17 1957, JAL constituted Philippine Airlines (PAL) as its ticket agent in
the Philippines. PAL therefore sold tickets for and in behalf of JAL. Same as BOAC there was absence of
flight operations to and from the Philippines in this case. Meaning JAL likewise had no landing rights. And
so like BOAC what were talking about here are connecting flights.
So obviously this didn't escape the long 'nose'.. I mean claws of the BIR. On June 1972, JAL received
deficiency income tax assessments notices and a demand letter from petitioner CIR for years 1959
through 1963.
Of course JAL protested as BOAC did, against said assessments alleging that as a non-resident foreign
corporation, it is taxable only on income from Philippines sources as determined by section 37 of the Tax
Code, there being no income on said years, JAL is not liable for taxes.
ISSUE:
Whether or not the proceeds from sales of JAL tickets sold in the Philippines by Philippine Airlines (PAL)
are taxable as income from sources within the Philippines.
HELD:
YES. Court said the ticket sales are taxable.
Citing the case of CIR v BOAC, the court reiterated that the source of an income is the property,
activity orservice that produced the income. For the source of income to be considered as coming from
the Philippines, it is sufficient that the income is derived from activity within the Philippines.
The absence of flight operations to and from the Philippines is not determinative of the source of income
or the situs of income taxation.
The test of taxability is the source, and the source of the income is that activity which produced the
income. In this case, as JAL constituted PAL as its agent, the sales of JAL tickets made by PAL is
taxable
JAL likewise lost this case.
Wells Fargo Banks & Union Trust Company vs Collector of Internal Revenue
70 Phil. 325 Mercantile Law Corporation Code Shares of Stock Situs of Shares of Stock
In September 1932, Birdie Lillian Eye died in Los Angeles, California, USA which was also her place of
domicile. She left various properties. Among those properties include some intangibles consisting of
70,000 shares in the Benguet Consolidated Mining Company, a corporation organized and existing under
Philippine laws.
The Collector of Internal Revenue sought to assess and collect estate tax on the said shares. Wells Fargo
11
Banks & Union Trust Company, the trustee of the estate of the decedent Eye, objected to said
assessment. Wells Fargo averred that said shares were already subjected to inheritance tax in California
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and hence cannot be taxed again in the Philippines (note at that time the Philippines was still under the
Commonwealth and were not yet totally independent from the US).
ISSUE: Whether or not the shares are subject to estate tax in the Philippines.
HELD: Yes. The Supreme Court ruled that even though the Philippines was considered a US territory at
that time, it is still a separate jurisdiction from the US in several aspects particularly taxation. Hence, the
Philippines has the power to tax said shares. The situs of taxation is here in the Philippines because the
situs of the shares of stock concerned is here in the Philippines because of the fact that the said shares
were issued here by a corporation organized and existing under the laws of the Philippines which is also
domiciled here. Further, (and this is the deeper reason), when Eye was alive, she actually delivered the
title to said shares to the resident secretary of the corporation here in the Philippines hence the shares
never left the Philippines.
Note: As a rule, intangibles follow the person (mobilia sequuntur personam). Hence, intangibles are
taxable in the place where their owner may be domiciled. However, Section 104 of the NIRC provides that
if the shares have attained business situs here in the Philippines, then said shares are taxable here even
if the owner of said shares are domiciled abroad.
Arturo Tolentino vs Secretary of Finance

235 SCRA 630 (1994) 249 SCRA 635 (1995) Political Law Origination of Revenue Bills EVAT
Amendment by Substitution
Arturo Tolentino et al are questioning the constitutionality of RA 7716 otherwise known as the Expanded
Value Added Tax (EVAT) Law. Tolentino averred that this revenue bill did not exclusively originate from
the House of Representatives as required by Section 24, Article 6 of the Constitution. Even though RA
7716 originated as HB 11197 and that it passed the 3 readings in the HoR, the same did not complete the
3 readings in Senate for after the 1st reading it was referred to the Senate Ways & Means Committee
thereafter Senate passed its own version known as Senate Bill 1630. Tolentino averred that what Senate
could have done is amend HB 11197 by striking out its text and substituting it with the text of SB 1630 in
that way the bill remains a House Bill and the Senate version just becomes the text (only the text) of the
HB. (Its ironic however to note that Tolentino and co-petitioner Raul Roco even signed the said Senate
Bill.)
ISSUE: Whether or not the EVAT law is procedurally infirm.
HELD: No. By a 9-6 vote, the Supreme Court rejected the challenge, holding that such consolidation was
consistent with the power of the Senate to propose or concur with amendments to the version originated
in the HoR. What the Constitution simply means, according to the 9 justices, is that the initiative must
come from the HoR. Note also that there were several instances before where Senate passed its own
version rather than having the HoR version as far as revenue and other such bills are concerned. This
practice of amendment by substitution has always been accepted. The proposition of Tolentino concerns
a mere matter of form. There is no showing that it would make a significant difference if Senate were to
adopt his over what has been done.
Pepsi-Cola vs. City of Butuan

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN
24 SCRA 789
GR No. L-22814, August 28, 1968
"The classification made in the exercise of power to tax, to be valid, must be reasonable ."
FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the City of
Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110 which plaintiff assails as
null and void because it partakes of the nature of an import tax, amounts to double taxation, highly unjust
and discriminatory, excessive, oppressive and confiscatory, and constitutes an invlaid delegation of the
power to tax. The ordinance imposes taxes for every case of softdrinks, liquors and other carbonated
beverages, regardless of the volume of sales, shipped to the agents and/or consignees by outside
dealers or any person or company having its actual business outside the City.
ISSUE: Does the tax ordinance violate the uniformity requirement of taxation?
HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the
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sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity
required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside
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dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants,
regardless of the volume of their sales, and even if the same exceeded those made by said agents or
consignees of producers or merchants established outside the City of Butuan, would be exempt from the
disputed tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not require
identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The
classification made in the exercise of this authority, to be valid, must, however, be reasonable and this
requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real
differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification
applies, not only to present conditions, but, also, to future conditions substantially identical to those of the
present; and (4) the classification applies equally to all those who belong to the same class.
Manila Race Horse Trainers Assoc & Juan Sordan vs Manuel Dela Fuente
January 11, 1951
Amparo, J.
Digest by: KY Bautista
Topic: Rule of taxation shall be uniform and equitable

Provision: Art VI. Sec 28. (1) The rule of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation.
DOCTRINE: There is equality and uniformity in taxation when: all articles or kinds of property of the same
class are taxed at the same rate. Equity in taxation is conceived in terms of ABILITY TO PAY in relation to
BENEFITS RECEIVED by the taxpayer & the public from the business taxed. Race horses are devoted to
GAMBLING if legalized, and their owners derive fat incomes but the public hardly profits from race
horsing. This business also demands heavy police supervision.
FACTS:
- On July 1947, the Manila Mayor approved Ordinance 3065 1
- Manila Race Horse Trainers Association (MRHTA), a non-stock corporation duly organized under
Phil laws, allege that theyre owners of boarding stables for race horses and that their rights as
such are affected by such ordinance. They instituted this action for declaratory relief and made
the Manila Mayor defendant, praying that said ordinance be declared invalid for being
unconstitutional.
- CFI declared the ordinance constitutional & enacted in accordance with the powers of Municipal
Board granted by the Manila Charter.
- On appeal, MRHTA make 2 main arguments:
o ARGUMENT 1: Ordinance is a tax on race horses as distinct from boarding stables. In
Sec 22 of the ordinance, the basis of license fees is the number of race horses kept in
the stables to be paid by the maintainers at the rate of P10 a year xxx fee increases
correspondingly for each race horse xxx. Thus, if you have an empty stable, you pay no
license fee.
o ARGUMENT 2: The ordinance is discriminatory and savors of class legislation.
o ARGUMENT 3 (not so relevant): Contended for the first time in the SC that the
Municipal Board of Manila is without power to enact ordinance taxing private stables for
race horses. (Note: Ignored by the court.)
ISSUES/HELD:
1. Is the tax discriminatory? NO
2. Is it a tax on race horses or stables? Tax on STABLES. (to be precise, on owners of stables)
1
An ordinance providing for license fees on persons maintaining or conducting any boarding stable for horse races and/or race horse stables, or places where horse are kept,
fed, or boarded for others, for compensation or hire, and/or for private, and for other purposes
2
SEC. 2. Fees. For every license granted under the provisions of this ordinance, there shall be paid an annual license fee, which may be paid either annually, semestrally or
quarterly at the option of the taxpayer, to wit:
Boarding stable for race horses:

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Class A For each race horse, kept, maintained, fed or boarded in boarding stables - P10.00
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Class B For each race horse, kept, maintained, or fed in private race horse stables - P5.00
DISPOSITIVE: CFI affirmed w/ costs against plaintiffs.
RATIO:
Petitioners: Ordinance is discriminatory and amounts to class legislation (because in effect, stable
owners for horses that are NOT used for racing will be taxed less or not all)
SC: NO.
- There is equality and uniformity in taxation when: all articles or kinds of property of the same
class are taxed at the same rate.
- From the viewpoint of economics and public policy, the taxing of boarding stables for race horses
to the exclusion of boarding stables for horses dedicated to other purposes is not indefensible.
WHY?
o Owners of boarding stables + owners of race horses are a CLASS BY THEMSELVES
o Equity in taxation is conceived in terms of ABILITY TO PAY in relation to BENEFITS
RECEIVED by the taxpayer & the public from the business taxed.
o Race horses are devoted to GAMBLING if legalized, and their owners derive fat incomes.
But the public hardly profits from race horsing. This business also demands heavy police
supervision.
o Taking all into account, the differentiation against which MRHTA complains of actually
conforms to justice and equity.
Petitioners: Ordinance is a tax on race horses distinct from boarding stables.

SC: No. Its a tax assessed on owners of stables.
- Spirit of the ordinance determines construction, thus court looks at the context, subject matter
consequence and effect.
- Thus, from the context of the ordinance, the intent to tax or license STABLES and NOT HORSES
is clearly manifest. The tax assessed is not on the owners of the horses but on the owners of the
stables. (Of course, theres also nothing stopping stable owners from shifting the tax to the horse
owners in the form of increased rents or fees, which is generally the case)
- The number of horses used in the assessment is purely a method of fixing an equitable &
practical distribution of the burden imposed by the measure. This method is FAIR AND JUST.
Why? Because its fair that for a stable where only one horse is maintained, less amount should
be taken than for a stable with many horses.
EASTERN THEATRICAL CO., INC. ET AL vs VICTOR ALFONSO

No. L-1104 May 31, 1949
Perpecto, J.:
Topic: Taxation; Statutory Construction
FACTS
Twelve corporations engaged in the motion picture business filed a complaint to impugn the
validity of Ord No.2958 of the City of Manila entitiled "AN ORDINANCE IMPOSING A FEE ON THE
PRICE OF EVERY ADMISSION TICKET SOLD BY CINEMATOGRAPHS THEATERS, VAUDEVILLE
COMPANIES, THEATRICAL SHOWS AND BOXING EXHIBITIONS AND PROVIDING FOR OTHER
PURPOSES.
Plaintiffs, impugn as null and void, Sections 1, 2, and 4 upon the following grounds; (a) For
violating the Constitution, more particularly the provisions regarding the uniformity and equality of taxation
and the equal protection of the laws (b) because the Municipal Board of Manila exceeded and
overstepped the powers granted it by the Charter of the City of Manila (c) because it contravenes,
violates, and is inconsistent with, existing national legislation, more particularly revenue and tax laws
and, (d) because it is unfair, unjust, arbitrary, capricious, unreasonable, oppressive, and is contrary to and
violates our basic and recognized principles of taxation and licensing laws.
Defendants allege as affirmative defenses that; (a) the ordinance was passed by the Municipal
Board by virtue of its express legislative power to tax, fix license fee and regulate the business of
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theatres, (b) that the graduated tax required by said ordinance being applied to all as a class without
distinction or exception and does not violate the constitutional prohibition against uniformity and equality
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of taxation, (c) that the tax imposed by NIRC is collected for the National Government whereas Ord No.
2958 is for the City of Manila and that there is no case of double taxation, (d) that said ordinance having
been enacted under the express power of the Municipal Board to tax for revenue, as distinguished from
its power to license for purely police purposes, the fact that the amounts collected thereunder are higher
than what are needed for police regulation and supervision does not render said ordinance unfair, unjust,
capricious, unreasonable and oppressive (e) that, considering the nature of the business of the plaintiffs
and the enormous volume of business they handle, the graduated tax fixed by the ordinance is not
unreasonable.
Defendants also allege that since the ordinance in question took effect, plaintiffs have been
charging the theatre-going public increased rates of prices of admissions equal and corresponding to the
graduated tax imposed by the ordinance, an as a result while refusing to pay said tax but at the same
time collecting the said tax, plaintiffs have taken undue advantage of said ordinance to realize more
profits.
September 5, 1946, CFI upheld the validity of Ord. No 2958.
ISSUE
Whether Ordinance No. 2958 is valid? YES
RULING
PROVISIONS OF SECTION 2444 (M) OF THE REVISED ADMINISTRATIVE CODE,
CONSTRUED.The whole argument of plaintiffs hinges on the assumption that the power granted to the
City of Manila by section 2444 (ra) of the Revised Administrative Code is limited to the authority to impose
a tax on business, with exclusion of the power to impose a tax on amusement but, the assumption is
based on an arbitrary labelling of the kind of tax authorized by said section 2444 (m). The distinction as to
the power to tax business and the power to tax amusement has no ground under the provisions of section
2444 (m) of the Revised Administrative Code. The tax therein authorized cannot be defined as tax on
business and cannot be restricted within a smaller scope than what is authorized by the words used, to
the extent of excluding what plaintiffs describe as tax on amusement.
The very fact that section 2444(m) of the Revised Administrative Code includes theatres,
cinematographs, public billiard tables, public pool tables, bowling alleys, dance halls, public dancing halls,
cabarets, circuses and other similar places, race tracks, horse races, theatrical performances, public
exhibition, circus and other performances and places of amusements, will show conclusively that the
power to tax amusement is expressly included within the power granted by section 2444 (m) of the
Revised Administrative Code.
In support of the contention that section 2444 (m) of the Revised Administrative Code was
repealed, plaintiffs aver that the Charter of the City of Manila, containing section 2444 (m) of the Revised
Administrative Code, was enacted on. December 8, 1929. On April 25, 1940, the National Assembly
enacted Commonwealth Act No. 466, including provisions on amusement tax, covering the whole field on
taxation and provided for more than what the ordinance in question has provided. As a result, there are
two taxing powers seeking to occupy exactly the same field of legislation, and so the apparent conflict
must be resolved with the conclusion that, with the enactment of Commonwealth Act No. 466, as later
amended by Republic Act No. 39, section 2444 (m) of the Revised Administrative Code has been
impliedly repealed and the power therein delegated to the City of Manila withdrawn. Held: That the
conflict pointed out is imaginary. Both provisions of law may stand together and be enforced at
the same time without any incompatibility.
EQUALITY AND UNIFORMITY OF TAXATION VALIDITY OF ORDINANCE NO. 2958.

Appellants point out to the fact that the ordinance in question does not tax "many more kinds of
amusements" than those therein specified, such as "race tracks, cockpits, cabarets, concert halls,
circuses, and other places of amusement." The argument has absolutely no merit. The fact that some
places of amusement are not taxed while others, such as cinematographs, theaters, vaudeville
companies, theatrical shows, and boxing exhibitions and other kinds of amusements or places of
amusement are taxed, is no argument at all against the equality and uniformity of the tax imposition.
Equality and uniformity in taxation means that all taxable articles or kinds of property of the same
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class shall be taxed at the same rate. The taxing power has the authority to make reason able and
natural classifications for purposes of taxation and the appellants cannot point out what places
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of amusement taxed by the ordinance do not constitute a class by themselves and which can be
confused with those not included in the ordinance.
Shell Corporation v. Vano (As Municipal Treasurer)

GR L-6093, 94 Phil 387, February 24, 1954
Facts:
The Municipal Council of Cordova, Cebu adopted Ordinance 10 which imposes an annual tax on
occupation or the exercise of the privilege of installation manager and Ordinance 11 imposing an annual
tax on tin can factories having a maximum output capacity of 30,000 tin cans. Shell, a foreign
corporation, disputed the ordinances and contended that: first, installation manager is a designation
made by the company and such designation cannot be deemed to be a calling as defined in Sec 178 of
NIRC and that the installation manager employed by Shell is a salaried employee which may not be taxed
by the municipal council under the provisions of NIRC; second, the ordinance is discriminatory and hostile
because there is no other person in the locality who exercises such designation or calling; and third, the
imposition of tax on tin can factories having a 30,000 maximum output capacity is unlawful because it is a
percentage tax and falls under the exceptions provided in the Tax Code.
Issue: W/N an installation manager, although a salaried employee, is liable for occupation tax
Ruling:
Yes. Even if the installation manager is a salaried employee of the corporation, still it is an
occupation. Further, one occupation or line of business does not become exempt by being conducted
with some other occupation or business for which such tax has been paid. The occupation tax must be
paid by each individual engaged in a calling subject to it.
Issue 2: W/N the ordinance is unconstitutional because it is hostile and discriminatory
Ruling:
No. The fact that there is no other person in the locality who exercises such a designation or calling
does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any
person or firm who exercises such calling or occupation named or designated as installation manager.
Issue 3: W/N the annual tax imposition on tin can factories having an annual output capacity of
30,000 is valid
Ruling:
Yes. It is not a percentage tax because the maximum annual output capacity is not a percentage. It is
not a share or a tax based on the amount of the proceeds realized out of the sale of the tin cans
manufactured therein but on the business of manufacturing tin cans having a maximum annual output
capacity of 30,000 tin cans.
Issue 4: W/N the Municipal Treasurer should have been impleaded in this case
Ruling:
No. In an action for refund of municipal taxes claimed to have been paid and collected under an illegal
ordinance, it is not the municipal treasuer who is the real party-in-interest but the municipality concerned
that is empowered to sue and be sued.
##
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Abra Valley College vs Aquino (G.R. No. L-39086)
Posted: July 25, 2011 in Case Digests
0
FACTS: Petitioner, an educational corporation and institution of higher learning duly incorporated with the
Securities and Exchange Commission in 1948, filed a complaint to annul and declare void the Notice of
Seizure and the Notice of Sale of its lot and building located at Bangued, Abra, for non-payment of real
estate taxes and penalties amounting to P5,140.31. Said Notice of Seizure by respondents Municipal
Treasurer and Provincial Treasurer, defendants below, was issued for the satisfaction of the said taxes
thereon.
The parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned
decision. The trial court ruled for the government, holding that the second floor of the building is being
used by the director for residential purposes and that the ground floor used and rented by Northern
Marketing Corporation, a commercial establishment, and thus the property is not being used exclusively
for educational purposes. Instead of perfecting an appeal, petitioner availed of the instant petition for
review on certiorari with prayer for preliminary injunction before the Supreme Court, by filing said petition
on 17 August 1974.
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ISSUE: Whether or not the lot and building are used exclusively for educational purposes.
HELD: Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants
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exemption from realty taxes for cemeteries, churches and parsonages or convents appurtenant thereto,
and all lands, buildings, and improvements used exclusively for religious, charitable or educational
purposes. Reasonable emphasis has always been made that the exemption extends to facilities which
are incidental to and reasonably necessary for the accomplishment of the main purposes. The use of the
school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. In the
case at bar, the lease of the first floor of the building to the Northern Marketing Corporation cannot by any
stretch of the imagination be considered incidental to the purpose of education. The test of exemption
from taxation is the use of the property for purposes mentioned in the Constitution.
The decision of the CFI Abra (Branch I) is affirmed subject to the modification that half of the assessed
tax be returned to the petitioner. The modification is derived from the fact that the ground floor is being
used for commercial purposes (leased) and the second floor being used as incidental to education
(residence of the director).
ABRA VALLEY COLLEGE INC. vs. AQUINO
This is an old taxation case which had been covered by the 1935 Constitution.
Question: Is tax exemption which is embraced in the words "Exclusively Used for Educational
Purposes" liberally construed?
Answer: YES.
Therefore: A reasonable emphasis can be made that the tax exemption may extend to facilities which are
INCIDENTAL TO and REASONABLY NECESSARY for the accomplishment of the main purpose (which
is to educate).
Further Question: Can a ground floor of an educational institution (which is tax exempted), being used for
commercial purpose and its second floor being used for residential purpose fall under said extension?
Further Answer: The residential issue may be qualified depending on who is residing. The commercial
issue? NO.
FACTS:
Abra Valley College (a private school), located at Benguet, Abra, an educational corporation and
institution of higher learning incorporated with the SEC filed a complaint with the Benguet provincial fiscal
to annul and declare void the NOTICE OF SEIZURE and a NOTICE OF SALE of its lot and building by
the municipal and provincial treasurers for non-payment of real estate taxes and its penalties.
So a certain Paterno Mellare who probably was with Public Respondent AQUINO (sorry I didnt read any
further) who most probably (patay to, Im inferring once again) are the municipal and provincial treasurers
filed through counsel a motion to dismiss the complaint.
So what the Provincial Fiscal did was they filed a memorandum for the government where they opined
that based on the evidence, the laws applicable, and previous court decisions and jurisprudence, the
school building and the school lot used for educational purpose of Abra Valley College are exempted from
payment of taxes.
The trial court disagreed. Lets try to look at the evidence and what they found out.
You see what actually happened here was that Abra Valley College (AVC) was renting out the ground
floor of its college building to Northern Marketing Corporation (NMC) while the second floor thereof is
used by the Director of the College for residential purposes. So this is precisely the reason why the
municipal and provincial treasurers served upon the College a notice of seizure and later a notice of
sale due to the alleged failure of the College to pay real estate taxes and penalties thereon.
So this falls under a case of a claim for tax exemption.

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ISSUE:
Page
Was the tax imposition on the College is violative of the Constitutional prohibition against taxation of
religious, charitable, and educational entities?
Maybe we should rephrase the question. The question is, whether or not the lot and building in question
are used exclusively for educational purpose? E pinaparenta yung ground floor eh, ginawa namang
residential yung second floor. Kaya siguro sinabe ng municipal and provincial treasurers Pinaglololoko
nyo kame, ok tataxan namen kayo, and pag di na kayo makabayad, we will seize that property, then we
will sell it (again dont quote me on that, para may istorya lang).
RULING:
While the Court allows a more liberal and non-restrictive interpretation of the phrase exclusively
used for educational purposes, reasonable emphasis has always been made that exemption extends
to facilities which are incidental to and reasonably necessary for the accomplishment of the main
purposes.
While the second floors use, as residence of the director, is incidental to education the lease of the first
floor cannot by any stretch of imagination be considered incidental to the purposes of education.
The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution.
So there we go. Let's reiterate: While the use of the second floor of the main building in the case at bar
for residential purposes of the Director of the school and his family may find justification under the
concept of INCIDENTAL USE, which is complimentary to the main or primary purpose which is
educational, the lease of the first floor thereof to the Northern Marketing Corporation cannot by any
stretch of imagination be considered incidental to the purpose of education.
So the Supreme Court affirmed the lower court ruling stating it correctly arrived at the conclusion that the
school building as well as the lot where it is built, should be taxed. Not because of the second floor issue
but of the first floor.
However since it is only a portion of its premises is used for purpose of commerce, the high court directed
that it is only fair that half of the assessed tax be returned to the school.
Posted by Chip Clavecilla at 1:21 AM

Labels: Educational, Tax Exemption, TAXATION
Lung Center of the Philippines vs. Quezon City and Constantino Rosas
G.R. No. 144104 June 29, 2004
FACTS:
The Petitioner is a non-stock, non-profit entity which owns a parcel of land in Quezon City. Erected in the
middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. The ground floor is
being leased to a canteen, medical professionals whom use the same as their private clinics, as well as to
other private parties. The right portion of the lot is being leased for commercial purposes to the Elliptical
Orchids and Garden Center. The petitioner accepts paying and non-paying patients. It also renders
medical services to out-patients, both paying and non-paying. Aside from its income from paying patients,
the petitioner receives annual subsidies from the government.
Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5 million, predicating its
claim as a charitable institution. The city assessor denied the Claim. When appealed to the QC-Local
Board of Assessment, the same was dismissed. The decision of the QC-LBAA was affirmed by the
Central Board of Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are
used exclusively for charity.
ISSUE:
Whether or not the Petitioner is entitled to exemption from realty taxes notwithstanding the fact that it
18
admits paying clients and leases out a portion of its property for commercial purposes.
Page
HELD:
The Court held that the petitioner is indeed a charitable institution based on its charter and articles of
incorporation. As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-patient or
confined in the hospital, or receives subsidies from the government, so long as the money received is
devoted or used altogether to the charitable object which it is intended to achieve; and no money inures
to the private benefit of the persons managing or operating the institution.
Despite this, the Court held that the portions of real property that are leased to private entities are not
exempt from real property taxes as these are not actually, directly and exclusively used for charitable
purposes. (strictissimi juris) Moreover, P.D. No. 1823 only speaks of tax exemptions as regards to:
income and gift taxes for all donations, contributions, endowments and equipment and
supplies to be imported by authorized entities or persons and by the Board of Trustees of the Lung
Center of the Philippines for the actual use and benefit of the Lung Center; and
taxes, charges and fees imposed by the Government or any political subdivision or
instrumentality thereof with respect to equipment purchases (expression unius est exclusion
alterius/expressium facit cessare tacitum).
Neptali Gonzales vs Macaraig

Political Law Veto Power Inappropriate Provision in an Appropriation Bill
Gonzales, together w/ 22 other senators, assailed the constitutionality of Corys veto of Section 55 of the
1989 Appropriations Bill (Sec 55 FY 89, and subsequently of its counterpart Section 16 of the 1990
Appropriations Bill (Sec 16 FY 90). Gonzalez averred the following: (1) the Presidents line-veto power as
regards appropriation bills is limited to item/s and does not cover provision/s; therefore, she exceeded her
authority when she vetoed Section 55 (FY 89) and Section 16 (FY 90) which are provision (2) when the
President objects to a provision of an appropriation bill, she cannot exercise the item-veto power but
should veto the entire bill; (3) the item-veto power does not carry with it the power to strike out conditions
or restrictions for that would be legislation, in violation of the doctrine of separation of powers; and (4) the
power of augmentation in Article VI, Section 25 [5] of the 1987 Constitution, has to be provided for by law
and, therefore, Congress is also vested with the prerogative to impose restrictions on the exercise of that
power.
ISSUE: Whether or not the President exceeded the item-veto power accorded by the Constitution. Or
differently put, has the President the power to veto `provisions of an Appropriations Bill.
HELD: SC ruled that Congress cannot include in a general appropriations bill matters that should be
more properly enacted in separate legislation, and if it does that, the inappropriate provisions inserted by
it must be treated as item, which can be vetoed by the President in the exercise of his item-veto power.
The SC went one step further and rules that even assuming arguendo that provisions are beyond the
executive power to veto, and Section 55 (FY 89) and Section 16 (FY 90) were not provisions in the
budgetary sense of the term, they are inappropriate provisions that should be treated as items for the
purpose of the Presidents veto power.
SAN MIGUEL CORPORATION vs. HON. CELSO AVELINO, Presiding Judge of CFI Cebu and the
City of Mandaue (Fernando, 1979)
City of Cebu, in accordance with Presidential Decree No. 231, enacted in 1973, to take effect on January
1, 1974 the Mandaue City Tax Code. City Treasurer, on April 1, 1974, demanded from SMC payment of
the made specific tax on the total volume of beer it produced in the City of Mandaue. SMC on April 8,
1974, contested the correction of said specific tax "on the ground that Section 12(e) (7) in relation to
Section 12(e) (1) and (2), Mandaue City Ordinance No. 97, is illegal and void because it imposed a
specific tax beyond its territorial jurisdiction. In an opinion the City Fiscal upheld its validity which was
reversed by the Secretary of Justice, saying the ordinance was of doubtful validity. City of Cebu then
filed a suit for collection where it squarely put in issue the validity of such ordinance.
San Miguel Corporation filed a motion to dismiss claiming that the Ordinance No. 97, Section 12 should
be nullified and that the filing of the suit is not the appeal contemplated in the Presidential Decree.
19
CFI: motion to dismiss denied. SMC went to SC praying for writs of certiorari and prohibition.
Page
SMC: A suit for collection is not the appeal provided for in the last sentence of Section 47: "The decision
of the Secretary of Justice shall be final and executory unless, within thirty days upon receipt thereof, the
aggrieved party contests the same in a court of competent jurisdiction."
City: A suit for collection cannot be viewed other than as an appeal. The City did definitely contest the
correctness of the decision of the Secretary of Justice in a court of competent jurisdiction. Such an action
is in accordance with the traditional and appropriate procedure to test the legality of a statute, decree, or
ordinance.
Issue Can Citys act of filing suit after the Secretary of Justices opinion was rendered be considered "an
appeal" under the Presidential Decree? Yes, action by City valid. The writs prayed for, certiorari and
prohibition, cannot issue.
1. The validity of a statute, an executive order or ordinance is a matter for the judiciary to decide
and whenever in the disposition of a pending case such a question becomes unavoidable then it
is not only the power but the duty of the Court to resolve such a question. It is undoubted that
under the Constitution, even the legislative body cannot deprive this Court of its appellate
jurisdiction over all cases coming from inferior courts where the constitutionality or validity of an
ordinance or the legality of any tax, impost, assessment, or toll is in question. 3 Since it is likewise
expressly provided in Section 43 of the Judiciary Act that the original jurisdiction over all civil
actions involving the legality of any tax, impost or assessment appertains to the Court of First
Instance, it takes a certain degree of ingenuity to allege that the lower court was bereft of such
authority. Both under the Constitution and the Judiciary Act, respondent Judge is vested with jurisdiction
to make a declaration regarding an ordinances validity. It would be therefore premature for the corrective
power of this Tribunal to be interposed, just because he did not grant the motion to dismiss on the
allegation that there was lack of jurisdiction. Authorities support the municipal power to impose specific
taxes on beverages manufactured within its territorial boundaries, City of Bacolod v. Gruet and City of
Naga v. Court of Appeals. In the first case cited, the entity involved is SMC itself.
2. To construe Section 47 the way SMC does would be to raise a serious constitutional question. It would
in effect bar what otherwise would be a proper case cognizable by a court precisely in the
exercise of the conceded power of judicial review just because the procedure contended for
which is that of an "appeal" under the circumstances a term vague and ambiguous, was not
followed. It would run counter to the well-settled doctrine that between two possible modes of
constructions, the one which would not be in conflict with what is ordained by the Constitution is to be
preferred. Every intendment of the law should lean towards its validity, not its invalidity.
3. Secretary of justices declaration that the ordinance in question was "of doubtful validity is far from a
categorical declaration of its being repugnant to the Constitution or its being ultra vires. Presumption of
validity continues misgivings as to the likelihood of an alleged infringement of any binding norm do not
suffice.
4. This decision however does not extend to any de determination as to the validity, or lack of it, of the
assailed ordinance. To do so would be, at the very least, premature. That is a function for the lower court
to perform.
Petition dismissed. Case remanded for further proceedings.
Sison vs Ancheta (1984)

3
3 According to Article X, Section 5, par. (2) of the Constitution: "The Supreme Court shall have the following powers: ... (2) Review
20
and revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of the Court may provide, final judgments and
decrees in inferior courts in (a) all cases in which the constitutionality or validity of any treaty, executive agreement, law,
Page
ordinance, or executive order or regulation is in question, (b) All cases involving the legality of any tax, impost assessment, or toll, or
any penalty imposed in relation thereto." Under the 1935 Constitution, the equivalent provision is found in Article VIII, Section,
Section 2, par. (1) and (2).
Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision (Section 1)
unduly discriminated against him by the imposition of higher rates upon his income as a professional, that
it amounts to class legislation, and that it transgresses against the equal protection and due process
clauses of the Constitution as well as the rule requiring uniformity in taxation.
Issue: Whether BP 135 violates the due process and equal protection clauses, and the rule on uniformity
in taxation.
Held: There is a need for proof of such persuasive character as would lead to a conclusion that there was
a violation of the due process and equal protection clauses. Absent such showing, the presumption of
validity must prevail. Equality and uniformity in taxation means that all taxable articles or kinds of property
of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable
and natural classifications for purposes of taxation. Where the differentitation conforms to the practical
dictates of justice and equity, similar to the standards of equal protection, it is not discriminatory within the
meaning of the clause and is therefore uniform. Taxpayers may be classified into different categories,
such as recipients of compensation income as against professionals. Recipients of compensation income
are not entitled to make deductions for income tax purposes as there is no practically no overhead
expense, while professionals and businessmen have no uniform costs or expenses necessaryh to
produce their income. There is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income taxation as regards professional and
business income.
Sison v Ancheta G.R. No. L-59431. July 25, 1984.
C. J. Fernando
Declaratory Relief
Facts:
Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg. 135. It amended
Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or
residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other
winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes
and from trust fund and similar arrangements, (e) dividends and share of individual partner in the net
profits of taxable partnership, (f) adjusted gross income.
Petitioner as taxpayer alleged that "he would be unduly discriminated against by the imposition of higher
rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed
upon fixed income or salaried individual taxpayers." He characterizes the above section as arbitrary
amounting to class legislation, oppressive and capricious in character.
For petitioner, therefore, there is a transgression of both the equal protection and due process clauses of
the Constitution as well as of the rule requiring uniformity in taxation.
The OSG prayed for dismissal of the petition due to lack of merit.
Issue: Whether the imposition of a higher tax rate on taxable net income derived from business or
profession than on compensation is constitutionally infirm.
(WON there is a transgression of both the equal protection and due process clauses of the Constitution
as well as of the rule requiring uniformity in taxation)
Held: No. Petition dismissed
Ratio:
The need for more revenues is rationalized by the government's role to fill the gap not done by public
enterprise in order to meet the needs of the times. It is better equipped to administer for the public
welfare.
21
The power to tax, an inherent prerogative, has to be availed of to assure the performance of vital state
functions. It is the source of the bulk of public funds.
Page
The power to tax is an attribute of sovereignty and the strongest power of the government. There are
restrictions, however, diversely affecting as it does property rights, both the due process and equal
protection clauses may properly be invoked, as petitioner does, to invalidate in appropriate cases a
revenue measure. If it were otherwise, taxation would be a destructive power.
The petitioner failed to prove that the statute ran counter to the Constitution. He used arbitrariness as
basis without a factual foundation. This is merely to adhere to the authoritative doctrine that where the
due process and equal protection clauses are invoked, considering that they are not fixed rules but rather
broad standards, there is a need for proof of such persuasive character as would lead to such a
conclusion.
It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it
finds no support in the Constitution. An obvious example is where it can be shown to amount to
the confiscation of property. That would be a clear abuse of power.
It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not
for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to
attack on due process grounds.
For equal protection, the applicable standard to determine whether this was denied in the exercise of
police power or eminent domain was the presence of the purpose of hostility or unreasonable
discrimination.
It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or
that all persons must be treated in the same manner, the conditions not being different, both in the
privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For
the principle is that equal protection and security shall be given to every person under circumstances,
which if not identical are analogous. If law be looks upon in terms of burden or charges, those that fall
within a class should be treated in the same fashion, whatever restrictions cast on some in the group
equally binding on the rest.
The equal protection clause is, of course, inspired by the noble concept of approximating the ideal of the
laws's benefits being available to all and the affairs of men being governed by that serene and impartial
uniformity, which is of the very essence of the idea of law.
The equality at which the 'equal protection' clause aims is not a disembodied equality. The Fourteenth
Amendment enjoins 'the equal protection of the laws,' and laws are not abstract propositions. They do not
relate to abstract units A, B and C, but are expressions of policy arising out of specific difficulties,
addressed to the attainment of specific ends by the use of specific remedies. The Constitution does not
require things which are different in fact or opinion to be treated in law as though they were the same.
Lutz v Araneta- it is inherent in the power to tax that a state be free to select the subjects of taxation, and
it has been repeatedly held that 'inequalities which result from a singling out of one particular class for
taxation, or exemption infringe no constitutional limitation.
Petitioner- kindred concept of uniformity- Court- Philippine Trust Company- The rule of uniformity does
not call for perfect uniformity or perfect equality, because this is hardly attainable
Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class
shall be taxed at the same rate. The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation
There is quite a similarity then to the standard of equal protection for all that is required is that the tax
"applies equally to all persons, firms and corporations placed in similar situation"
There was a difference between a tax rate and a tax base. There is no legal objection to a broader tax
base or taxable income by eliminating all deductible items and at the same time reducing the applicable
22
tax rate.
Page
The discernible basis of classification is the susceptibility of the income to the application of generalized
rules removing all deductible items for all taxpayers within the class and fixing a set of reduced tax rates
to be applied to all of them. As there is practically no overhead expense, these taxpayers are not entitled
to make deductions for income tax purposes because they are in the same situation more or less.
Taxpayers who are recipients of compensation income are set apart as a class.
On the other hand, in the case of professionals in the practice of their calling and businessmen, there is
no uniformity in the costs or expenses necessary to produce their income. It would not be just then to
disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the
same tax rates on the basis of gross income.
There was a lack of a factual foundation, the forcer of doctrines on due process and equal protection, and
he reasonableness of the distinction between compensation and taxable net income of professionals and
businessmen not being a dubious classification.
Villegas vs Hiu Chiong Tsai Pao Ho (1978)
Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those employed
in the diplomatic and consular missions of foreign countries, in technical assistance programs of the
government and another country, and members of religious orders or congregations) to procure the
requisite mayors permit so as to be employed or engage in trade in the City of Manila. The permit fee is
P50, and the penalty for the violation of the ordinance is 3 to 6 months imprisonment or a fine of P100 to
P200, or both.
Issue: Whether the ordinance imposes a regulatory fee or a tax.
Held: The ordinances purpose is clearly to raise money under the guise of regulation by exacting P50
from aliens who have been cleared for employment. The amount is unreasonable and excessive because
it fails to consider difference in situation among aliens required to pay it, i.e. being casual, permanent,
part-time, rank-and-file or executive.
[ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being applied only
to aliens who are thus deprived of their rights to life, liberty and property and therefore violates the due
process and equal protection clauses of the Constitution. Further, the ordinance does not lay down any
criterion or standard to guide the Mayor in the exercise of his discretion, thus conferring upon the mayor
arbitrary and unrestricted powers. ]
American Bible Society vs. City of Manila
American Bible Society vs. City of Manila

GR No. L-9637 | April 30, 1957
Facts:
American Bible Society is a foreign, non-stock, non-profit, religious, missionary corporation duly
registered and doing business in the Philippines through its Philippine agency established in Manila in
November, 1898
City of Manila is a municipal corporation with powers that are to be exercised in conformity with the
provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila
American Bible Society has been distributing and selling bibles and/or gospel portions throughout the
Philippines and translating the same into several Philippine dialect
City Treasurer of Manila informed American Bible Society that it was violating several Ordinances for
operating without the necessary permit and license, thereby requiring the corporation to secure the permit
and license fees covering the period from 4Q 1945-2Q 1953
To avoid closing of its business, American Bible Society paid the City of Manila its permit and license
fees under protest
American Bible filed a complaint, questioning the constitutionality and legality of the Ordinances 2529
and 3000, and prayed for a refund of the payment made to the City of Manila. They contended:
23
a. They had been in the Philippines since 1899 and were not required to pay any license fee or sales tax
b. it never made any profit from the sale of its bibles
Page
City of Manila prayed that the complaint be dismissed, reiterating the constitutionality of the Ordinances
in question
Trial Court dismissed the complaint
American Bible Society appealed to the Court of Appeals
Issue: WON American Bible Society liable to pay sales tax for the distribution and sale of bibles
Ruling: NO
Under Sec. 1 of Ordinance 3000, one of the ordinance in question, person or entity engaged in any of
the business, trades or occupation enumerated under Sec. 3 must obtain a Mayors permit and license
from the City Treasurer. American Bible Societys business is not among those enumerated
However, item 79 of Sec. 3 of the Ordinance provides that all other businesses, trade or occupation not
mentioned, except those upon which the City is not empowered to license or to tax P5.00
Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax
said business, trade or occupation.
2 provisions of law that may have bearing on this case:
a. Chapter 60 of the Revised Administrative Code, the Municipal Board of the City of Manila is
empowered to tax and fix the license fees on retail dealers engaged in the sale of books
b. Sec. 18(o) of RA 409: to tax and fix the license fee on dealers in general merchandise, including
importers and indentors, except those dealers who may be expressly subject to the payment of some
other municipal tax. Further, Dealers in general merchandise shall be classified as (a) wholesale dealers
and (b) retail dealers. For purposes of the tax on retail dealers, general merchandise shall be classified
into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and
(4) miscellaneous articles. A separate license shall be prescribed for each class but where commodities
of different classes are sold in the same establishment, it shall not be compulsory for the owner to secure
more than one license if he pays the higher or highest rate of tax prescribed by ordinance. Wholesale
dealers shall pay the license tax as such, as may be provided by ordinance
The only difference between the 2 provisions is the limitation as to the amount of tax or license fee that
a retail dealer has to pay per annum
As held in Murdock vs. Pennsylvania, The power to impose a license tax on the exercise of these
freedoms provided for in the Bill of Rights, is indeed as potent as the power of censorship which this
Court has repeatedly struck down. It is not a nominal fee imposed as a regulatory measure to defray the
expenses of policing the activities in question. It is in no way apportioned. It is flat license tax levied and
collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the constitutional
liberties of press and religion and inevitably tends to suppress their exercise. That is almost uniformly
recognized as the inherent vice and evil of this flat license tax.
Further, the case also mentioned that the power to tax the exercise of a privilege is the power to control
or suppress its enjoyment. Those who can tax the exercise of this religious practice can make its exercise
so costly as to deprive it of the resources necessary for its maintenance. Those who can tax the privilege
of engaging in this form of missionary evangelism can close all its doors to all those who do not have a
full purse
Under Sec. 27(e) of Commonwealth Act No. 466 or the National Internal Revenue
Code,Corporations or associations organized and operated exclusively for religious, charitable, . . . or
educational purposes, . . .: Provided, however, That the income of whatever kind and character from any
of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition
made of such income, shall be liable to the tax imposed under this Code shall not be taxed
The price asked for the bibles and other religious pamphlets was in some instances a little bit higher
than the actual cost of the same but this cannot mean that American Bible Society was engaged in the
business or occupation of selling said "merchandise" for profit
Therefore, the Ordinance cannot be applied for in doing so it would impair American Bible Societys
free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination
of religious beliefs.
Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision
appealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected
from it
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I.

Scope and Limitation of taxation

(2) Whether or nor the DECREE is constitutional.

WHEREFORE, the instant Petition is hereby dismissed. No costs.

Gaston vs. Republic Planters Bank

The shares are currently held by Philsucom / Sugar Regulatory Admin.

industry is of vital importance to the countrys economy and national interest.

Tan v Del Rosario

5. The Solicitor General espouses the position taken by public respondents.

Sison vs Ancheta (1984)

Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan (1988)

Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan GR No 81311 June 30, 1988

Basco vs. PAGCOR (G.R. No. 91649) - Digest

Whether or not Presidential Decree No. 1869 is valid.

Article 10, Section 5 of the 1987 Constitution:

Wherefore, the petition is DISMISSED.

NAPOCOR vs. City of Cabanatuan

and non-exemption from taxes of NPC.

Maceda v Macaraig (1991)

exception is the rule and taxation the exception.

Ernesto M. Maceda vs. Energy Regulatory Board, et al.

18 July 1991 :: G.R. No. 96266

CIR vs. British Overseas Airways Corporation (BOAC)

IR vs. JAPAN AIRLINES (JAL)

YES. Court said the ticket sales are taxable.

JAL likewise lost this case.

Arturo Tolentino vs Secretary of Finance

Pepsi-Cola vs. City of Butuan

Topic: Rule of taxation shall be uniform and equitable

Boarding stable for race horses:

DISPOSITIVE: CFI affirmed w/ costs against plaintiffs.

Petitioners: Ordinance is a tax on race horses distinct from boarding stables.

EASTERN THEATRICAL CO., INC. ET AL vs VICTOR ALFONSO

September 5, 1946, CFI upheld the validity of Ord. No 2958.

EQUALITY AND UNIFORMITY OF TAXATION VALIDITY OF ORDINANCE NO. 2958.

Shell Corporation v. Vano (As Municipal Treasurer)

ABRA VALLEY COLLEGE INC. vs. AQUINO

So this falls under a case of a claim for tax exemption.

Posted by Chip Clavecilla at 1:21 AM

Neptali Gonzales vs Macaraig

Petition dismissed. Case remanded for further proceedings.

Sison vs Ancheta (1984)

Held: No. Petition dismissed

Issue: Whether the ordinance imposes a regulatory fee or a tax.

American Bible Society vs. City of Manila

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