1. [G.R. No. 119286. October 13, 2004.

PASEO REALTY & DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS,

COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

Padilla Law Office for petitioner.

SYNOPSIS

Petitioner Paseo Realty and Development Corporation is a domestic corporation engaged in the
lease of two (2) parcels of land at Paseo de Roxas in Makati City. Petitioner filed its Income Tax
Return for the calendar year 1989 declaring a gross income of P1,855,000.00, deductions of
P1,775,991.00, net income of P79,009.00, an income tax due thereon in the amount of
P27,653.00, prior year's excess credit of P146,026.00, and creditable taxes withheld in 1989 of
P54,104.00, or a total tax credit of P200,130.00 and credit balance of P172,477.00. Petitioner
filed with respondent Court of Tax Appeals (CTA) a claim for "the refund of excess creditable
withholding and income taxes for the years 1989 and 1990 in the aggregate amount of
P147,036.15. Respondent rendered a decision ordering respondent Commissioner to refund in
favor of petitioner the amount of P54,104.00 representing excess creditable withholding taxes
paid for January to July, 1989. Respondent Commissioner moved for reconsideration of the
decision, alleging that the P54,104.00 ordered to be refunded "has already been included and is
part and parcel of the P172,477.00 which petitioner automatically applied as tax credit for the
succeeding taxable year 1990. Respondent Court reconsidered its decision and dismissed the
petition for review, stating that it had "overlooked the fact that the petitioner's 1989 Corporate
Income Tax Return (Exh. "A") indicated that the amount of P54,104.00 subject of petitioner's
claim for refund had already been included as part and parcel of the P172,477.00 which the
petitioner automatically applied as tax credit for the succeeding taxable year 1990." Petitioner
filed a Motion for Reconsideration, but was denied. Petitioner's Petition for Review with the
Court of Appeals was dismissed. Hence, the present petition.

The Supreme Court denied the petition. According to the Court, the confusion as to petitioner's
entitlement to a refund could altogether have been avoided had it presented its tax return for
1990. Such return would have shown whether petitioner actually applied its 1989 tax credit of
P172,477.00, which includes the P54,104.00 creditable taxes withheld for 1989 subject of the
instant claim for refund, against its 1990 tax liability as it had elected in its 1989 return, or at
least, whether petitioner's tax credit of P172,477.00 was applied to its approved refunds as it
claims. The Court emphasized that the grant of a refund is founded on the assumption that the tax
return is valid, i.e., that the facts stated therein are true and correct. Without the tax return, it is
error to grant a refund since it would be virtually impossible to determine whether the proper
taxes have been assessed and paid. Had petitioner presented its 1990 tax return in refutation of
respondent Commissioner's allegation that it did not present evidence to prove that its claimed
refund had already been automatically credited against its 1990 tax liability, the CTA would not
have reconsidered its earlier Decision. As it is, the absence of petitioner's 1990 tax return was the
principal basis of the CTA's Resolution reconsidering its earlier Decision to grant petitioner's
claim for refund. Petitioner's failure to present sufficient evidence to prove its claim for refund is
fatal to its cause. A taxpayer claiming a refund has the burden of proof to establish the factual
basis of his or her claim for tax credit or refund. Tax refunds, like tax exemptions, are construed
strictly against the taxpayer.

SYLLABUS

1. TAXATION; CORPORATE INCOME TAX; TAX CREDIT; CONFUSION AS TO

PETITIONER'S ENTITLEMENT TO A REFUND COULD HAVE BEEN AVOIDED HAD IT
PRESENTED ITS TAX RETURN FOR THE YEAR 1990; WITHOUT THE TAX RETURN, IT
IS ERROR TO GRANT A REFUND SINCE IT WOULD BE VIRTUALLY IMPOSSIBLE TO
DETERMINE WHETHER THE PROPER TAXES HAVE BEEN ASSESSED AND PAID. —
The confusion as to petitioner's entitlement to a refund could altogether have been avoided had it
presented its tax return for 1990. Such return would have shown whether petitioner actually
applied its 1989 tax credit of P172,477.00, which includes the P54,104.00 creditable taxes
withheld for 1989 subject of the instant claim for refund, against its 1990 tax liability as it had
elected in its 1989 return, or at least, whether petitioner's tax credit of P172,477.00 was applied
to its approved refunds as it claims. The return would also have shown whether there remained
an excess credit refundable to petitioner after deducting its tax liability for 1990. As it is, we only
have petitioner's allegation that its tax due for 1990 was P33,240.00 and that this was applied
against its remaining tax credits using its own "first in, first out" method of computation. It
would have been different had petitioner not included the P54,104.00 creditable taxes for 1989 in
the total amount it elected to apply against its 1990 tax liabilities. Then, all that would have been
required of petitioner are: proof that it filed a claim for refund within the two (2)-year
prescriptive period provided under Section 230 of the NIRC; evidence that the income upon
which the taxes were withheld was included in its return; and to establish the fact of withholding
by a copy of the statement (BIR Form No. 1743.1) issued by the payor to the payee showing the
amount paid and the amount of tax withheld therefrom. However, since petitioner opted to apply
its aggregate excess credits as tax credit for 1990, it was incumbent upon it to present its tax
return for 1990 to show that the claimed refund had not been automatically credited and applied
to its 1990 tax liabilities. The grant of a refund is founded on the assumption that the tax return is
valid, i.e., that the facts stated therein are true and correct. Without the tax return, it is error to
grant a refund since it would be virtually impossible to determine whether the proper taxes have
been assessed and paid.
2. ID.; ID.; ID.; ABSENCE OF PETITIONER'S 1990 TAX RETURN WAS THE
PRINCIPAL BASIS OF THE COURT OF TAX APPEAL'S RESOLUTION RECONSIDERING
ITS EARLIER DECISION TO GRANT PETITIONER'S CLAIM FOR REFUND. — Why
petitioner failed to present such a vital piece of evidence confounds the Court. Petitioner could
very well have attached a copy of its final adjustment return for 1990 when it filed its claim for
refund on November 13, 1991. Annex "B" of its Petition for Review dated December 26, 1991
filed with the CTA, in fact, states that its annual tax return for 1990 was submitted in support of
its claim. Yet, petitioner's tax return for 1990 is nowhere to be found in the records of this case.
Had petitioner presented its 1990 tax return in refutation of respondent Commissioner's
allegation that it did not present evidence to prove that its claimed refund had already been
automatically credited against its 1990 tax liability, the CTA would not have reconsidered its
earlier Decision. As it is, the absence of petitioner's 1990 tax return was the principal basis of the
CTA's Resolution reconsidering its earlier Decision to grant petitioner's claim for refund.
Petitioner could even still have attached a copy of its 1990 tax return to its petition for review
before the Court of Appeals. The appellate court, being a trier of facts, is authorized to receive it
in evidence and would likely have taken it into account in its disposition of the petition.

3. ID.; ID.; ID.; PETITIONER'S FAILURE TO PRESENT SUFFICIENT EVIDENCE TO

PROVE ITS CLAIM FOR REFUND IS FATAL TO ITS CAUSE; TAX REFUNDS ARE
STRICTLY CONSTRUED AGAINST THE TAXPAYER. — In BPI-Family Savings Bank v.
Court of Appeals, although petitioner failed to present its 1990 tax return, it presented other
evidence to prove its claim that it did not apply and could not have applied the amount in dispute
as tax credit. Importantly, petitioner therein attached a copy of its final adjustment return for
1990 to its motion for reconsideration before the CTA buttressing its claim that it incurred a net
loss and is thus entitled to refund. Considering this fact, the Court held that there is no reason for
the BIR to withhold the tax refund. In this case, petitioner's failure to present sufficient evidence
to prove its claim for refund is fatal to its cause. After all, it is axiomatic that a claimant has the
burden of proof to establish the factual basis of his or her claim for tax credit or refund. Tax
refunds, like tax exemptions, are construed strictly against the taxpayer.

4. ID.; ID.; ID.; THE AVAILMENT OF THE REMEDY OF TAX CREDIT IS NOT
ABSOLUTE AND MANDATORY; PRIOR VERIFICATION AND APPROVAL BY THE
COMMISSIONER OF INTERNAL REVENUE IS REQUIRED. — While a taxpayer is given
the choice whether to claim for refund or have its excess taxes applied as tax credit for the
succeeding taxable year, such election is not final. Prior verification and approval by the
Commissioner of Internal Revenue is required. The availment of the remedy of tax credit is not
absolute and mandatory. It does not confer an absolute right on the taxpayer to avail of the tax
credit scheme if it so chooses. Neither does it impose a duty on the part of the government to sit
back and allow an important facet of tax collection to be at the sole control and discretion of the
taxpayer. Contrary to petitioner's assertion however, the taxpayer's election, signified by the
ticking of boxes in Item 10 of BIR Form No. 1702, is not a mere technical exercise. It aids in the
proper management of claims for refund or tax credit by leading tax authorities to the direction
they should take in addressing the claim.

5. ID.; ID.; ID.; A CLAIM FOR REFUND OR EXEMPTION FROM TAX PAYMENTS
MUST BE CLEARLY SHOWN AND BE BASED ON LANGUAGE IN THE LAW TOO
PLAIN TO BE MISTAKEN; TAXATION IS THE RULE, EXEMPTION THEREFROM IS THE
EXCEPTION. — Taxation is a destructive power which interferes with the personal and property
rights of the people and takes from them a portion of their property for the support of the
government. And since taxes are what we pay for civilized society, or are the lifeblood of the
nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are
thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
A claim of refund or exemption from tax payments must be clearly shown and be based on
language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption
therefrom is the exception.

2. [G.R. No. 120082. September 11, 1996.]

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. HON.

FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial Court,
Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor, HON. TOMAS R.
OSMEÑA, and EUSTAQUIO B. CESA, respondents.

The Solicitor General for petitioner.

The Office of the City Attorney for City of Cebu.

SYLLABUS

1. POLITICAL LAW; GOVERNMENT; POWER OF TAXATION; CONSTRUED. — As a

general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only
in the responsibility of the legislature which imposes the tax on the constituency who are to pay
it. Nevertheless, effective limitations thereon may be imposed by the people through their
Constitution. Our Constitution, for instance, provides that the rule of taxation shall be uniform
and equitable and Congress shall evolve a progressive system of taxation. So potent indeed is the
power that it was once opined that "the power to tax involves the power to destroy." Verily,
taxation is a destructive power which interferes with the personal and property rights of the
people and takes from them a portion of their property for the support of the government.
Accordingly, tax statutes must be construed strictly against the government and liberally in favor
of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the
nation, the law frowns against exemptions from taxation and statutes granting the exemptions are
thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
A claim of exemption from tax payments must be clearly shown and based on language in the
law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the
exception. However, if the grantee of the exemption is a political subdivision or instrumentality,
the rigid rule of construction does not apply because the practical effect of the exemption is
merely to reduce the amount of money that has to be handled by the government in the course of
its operation.

2. ID., ID.; ID.; MAY BE EXERCISED BY THE LOCAL LEGISLATIVE BODIES. —

The power to tax is primarily vested in the Congress; however, in our jurisdictions, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before,
but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the
latter, the exercise of the power may be subject to such guidelines and limitations as the
Congress may provide which, however, must be consistent with the basic policy of local
autonomy. The LGC, enacted pursuant to Section 3, Article X of the Constitution, provides for
the exercise by local government units of their power to tax, the scope thereof or its limitations,
and the exemptions from taxation. Section 133 of the LGC prescribes the common limitations on
the taxing powers of local government units.

3. ID.; ID .; ID.; EXEMPTION FROM PAYMENT OF TAX MAY BE WITHDRAWN AT

THE PLEASURE OF THE TAXING AUTHORITY; EXCEPTION. — There can be no question
that under Section 14 of R.A. No. 6958 the petitioner is exempt from the payment of realty taxes
imposed by the National Government or any of its political subdivisions, agencies, and
instrumentalities. Nevertheless, since taxation is the rule and exemption therefrom the exception,
the exemption may thus be withdrawn at the pleasure of the taxing authority. The only exception
to this rule is where the exemption was granted to private parties based on material consideration
of a mutual nature, which then becomes contractual and is thus covered by the non-impairment
claim of the Constitution.

4. ID.; LOCAL GOVERNMENT CODE; SEC. 234 PROVIDES FOR THE EXEMPTION
FROM THE PAYMENT OF REAL PROPERTY TAX; BASIS THEREOF. — Section 234 of the
LGC provides for the exemptions from payment of real property taxes and withdraws previous
exemptions therefrom granted to natural and juridical persons, including government-owned and
controlled corporations, except as provided therein. These exemptions are based on the
ownership, character, and use of the property. Thus: (a) Ownership Exemptions. Exemptions
from real property taxes on the basis of ownership are real properties owned by: (i) the Republic,
(ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, (vi) registered cooperatives. (b)
character exemptions. Exempted from real property taxes on the basis of their character are: (i)
charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents
appurtenant thereto, mosques, and (iii) non-profit or religious cemeteries. (c) Usage exemptions.
Exempted from real property taxes on the basis of the actual, direct and exclusive use to which
they are devoted are: (i) all lands, buildings and improvements which are actually, directly and
exclusively used for religious, charitable or educational purposes; (ii) all machineries and
equipment actually, directly and exclusively used by local water districts or by government-
owned or controlled corporations engaged in the supply and distribution of water and/or
generation and transmission of electric power; and (iii) all machinery and equipment used for
pollution control and environmental protection. To help provide a healthy environment in the
midst of the modernization of the country, all machinery and equipment for pollution control and
environmental protection may not be taxed by local governments. 2. Other Exemptions
Withdrawn. All other exemptions previously granted to natural or juridical persons including
government-owned or controlled corporations are withdrawn upon effectivity of the Code.

5. ID.; REPUBLIC OF THE PHILIPPINES AS DISTINGUISHED FROM NATIONAL

GOVERNMENT. — The terms "Republic of the Philippines" and "National Government" are
not interchangeable. The former is broader and synonymous with "Government of the Republic
of the Philippines" which the Administrative Code of 1987 defines as the "corporate
governmental entity through which the functions of government are exercised throughout the
Philippines, including, save as the contrary appears from the context, the various arms through
which political authority is made effective in the Philippines, whether pertaining to the
autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of
local government." (Section 2[1], Introductory Provisions, Administrative Code of 1987.) These
"autonomous regions, provincial, city, municipal or barangay subdivisions" are the political
subdivisions. (Section 1, Article X, 1987 Constitution.) On the other hand, "National
Government" refers "to the entire machinery of the central government, as distinguished from the
different forms of local government." (Section 2[2], Introductory Provisions, Administrative
Code of 1987. The National Government then is composed of the three great departments: the
executive, the legislative and the judicial.

6. ID.; GOVERNMENT; AGENCY AS DISTINGUISHED FROM INSTRUMENTALITY.

— An "agency" of the Government refers to "any of the various units of the Government,
including a department, bureau, office, instrumentality, or government-owned or controlled
corporation, or a local government or a distinct unit therein," while an "instrumentality" refers to
"any agency of the National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually, through a
charter. This term includes regulatory agencies, chartered institutions and government-owned
and controlled corporations."
3. [G.R. No. L-31156. February 27, 1976.]

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant, vs.

MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendants-
appellees.

Sabido, Sabido & Associates for plaintiff-appellant.

Assistant Solicitor General Conrado T . Limcaoco and Solicitor Enrique M. Reyes for
defendants-appellees.

SYNOPSIS

Pepsi-Cola Bottling Company of the Philippines, Inc., filed a complaint with preliminary
injunction before the Court of First Instance of Leyte to declare Section 2 of R.A. No. 2264,
(known as the Local Autonomy Act) unconstitutional as an undue delegation of the taxing
authority and declare null and void Municipal Ordinance No. 23, which levies and collects from
soft drinks producers and manufactures a tax of 1/16 of a centavo for every bottle of soft drinks
corked, and Municipal Ordinance No. 27 which levies and collects on soft drinks produced or
manufactured within the territorial jurisdiction a tax of one centavo on each gallon of volume
capacity. The trial court dismissed the complaint and upheld the constitutionality of Sec. 2 of
R.A. No. 2264 and declared Municipal Ordinances Nos. 27 valid and constitutional. Appealed to
the Court of Appeals, the case was certified to the Supreme Court as involving pure question of
law.

The Supreme Court upheld the validity of the delegation to Municipal Corporation or authority
to tax and likewise the validity of Municipal Ordinance No. 27, which repealed Municipal
Ordinance No. 23.

SYLLABUS

1. TAXATION; NATURE; NON-DELEGATION OF POWER, EXCEPTION. — The

power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of
right to every independent government, without being expressly conferred by the people. It is a
power that is purely legislative and which the central legislative body cannot delegate either to
the executive or judicial department of government without infringing upon the theory of
separation of powers. The exception, however, lies in the case of municipal corporations, to
which, said theory does not apply. Legislative powers may be delegated to local governments in
respect of matters of local concern. This is sanctioned by immemorial. By necessary implication,
the legislative power to create political corporations for purpose of local self-government carries
with it the power to confer on such local government agencies the power to tax.

2. ID.; ID.; ID.; SCOPE OF LOCAL GOVERNMENT'S POWER TO TAX. — The taxing
authority conferred on local governments under Section 2, Republic Act No. 2264, is broad
enough as to extend to almost "everything, excepting those which are mentioned therein." As
long as the tax levied under the authority of a city or municipal ordinance is not within the
exceptions and limitations in the law, the same comes within the ambit of the general rule,
pursuant to the rules of expresio unius est exclusio alterius, and exceptio firmat regulum in
casibus non excepti. Municipalities are empowered to impose not only municipal license taxes
upon persons engaged in any business or occupation but also to levy for public purposes, just and
uniform taxes.

3. ID.; ID.; ID.; LIMITATION. — Municipalities and municipal districts are prohibited to
impose "any percentage tax on sales or other in any form based thereon nor impose taxes on
articles subject to specific tax, except gasoline, under the provisions of the National Internal
Revenue Code." For purposes of this particular limitation, a municipal ordinance which
prescribes a set of radio between the amount of the tax and the volume of sales of the taxpayer
imposes a sales tax and is null and void for being outside the power of the municipality to enact.

4. ID.; ID.; ID.; DELEGATION OF POWER TO TAX UNDER NEW CONSTITUTION.

— Under the New Constitution, local governments are granted autonomous authority to create
their own sources of revenue and to levy taxes. Section 5, Article XI Provides: "Each local
government unit shall have the power to create its sources of revenue and to levy taxes, subject
to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of
Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and
vest in local governments the power of local taxation.

5. ID.; ID.; ID.; VALIDITY THEREOF. — The plenary nature of the delegated power of
local governments under Section 2, of R.A. No. 2264 would not suffice to invalidate the law as
confiscatory and oppressive. In delegating the authority, the State is not limited to the measure of
that which is exercised by itself. When it is said that the taxing power may be delegated to
municipalities and the like, it is meant that there may be delegated such measure of power to
impose and collect taxes the legislature may deem expedient. Thus, municipalities may be
permitted to tax subjects which for reasons of public policy the State has not deemed wise to tax
for more general purposes.
6. ID.; REQUISITES FOR LAWFUL EXERCISE OF TAXING POWER. — Constitutional
injunction against deprivation of property without due process of law may not be passed over
under the guise of the taxing power, except when the taking of the property is in the lawful
exercise of the taxing power, as when, (1) the tax is for a public purpose; (2) the rule on
uniformity of taxation observed; (3) either the person or property taxed is within the jurisdiction
of the government levying the tax; and (4) in the assessment and collection of certain kinds of
taxes, notice and opportunity for hearing are provided.

7. ID.; ID.; INSTANCES WHERE DUE PROCESS IS VIOLATED. — Due process is

usually violated where the tax imposed is for a private as distinguished from the public purposes;
a tax a imposed on property outside the State, i.e., extra-territorial taxation; and arbitrary or
oppressive methods are used in assessing and collecting taxes. But, a tax does not violate the due
process clause, as applied to a particular taxpayer, although the purpose of the tax will result in
an injury rather than a benefit to such taxpayer. Due process does not require that the property
subject to the tax or the amount of tax to be raised should be determined by judicial inquiry, and
a notice and hearing as to the amount of tax and the manner in which it shall be apportioned are
generally not necessary to due process of law.

8. ID.; DOUBLE TAXATION; GENERALLY NOT FORBIDDEN. — The delegated

authority under Section 2 of the Local Autonomy Act cannot be declared unconstitutional on the
theory of double taxation. It must be observed that the delegating authority specifies the
limitations and enumerates the taxes over local taxation may not be exercised. The reason is that
the State has exclusively reversed the same for its own prerogative. Moreover, double taxation,
in general, is not forbidden by the fundamental law, since the injunction against double taxation
found in the Constitution of the United States and some states of the Union has not been adopted
as part thereof.

9. ID.; ID.; ID.; EXCEPTION. — Double taxation becomes obnoxious only where the
taxpayer is taxed twice for the benefit of the same governmental entity or by the same
jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the
other by the city or municipality.

10. ID.; ID.; ID.; INSTANT CASE. — Where, as in the case at bar, the municipality of
Tanauan enacted Ordinance No. 27 imposing a tax of one centavo on each gallon of volume
capacity while in the previous Ordinance No. 23, it was 1/16 of a centavo for every bottle
corked, it is clear that the intention of the municipal council was to substitute Ordinance No. 27
to that of Ordinance No. 23, repealing the latter.

11. ID.; TAX LEVIED ON PRODUCE, NOT PERCENTAGE TAX. — The imposition of "a
tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all
soft drinks produced or manufactured under Ordinance No. 27 does not partake of a nature of a
percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the
produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's
production of soft drinks is considered solely for purposes of determining the tax rate on the
products, but there is no set ratio between the volume of sales and the amount of tax.

12. ID.; ID.; ID.; MUNICIPALITY ALLOWED TO INCREASE TAX AS LONG AS

AMOUNT IS REASONABLE. — The tax of one centavo (P0.01) on each gallon (128 fluid
ounces, U.S.) of volume capacity of all soft drinks, produced or manufactured or an equivalent of
1-1/2 centavos per case, cannot be considered unjust and unfair. An increase in the tax alone
would not support the claim that the tax is oppressive, unjust and confiscatory. Municipal
corporations are allowed much discretion in determining the rates of impossible taxes. This is in
line with the constitutional policy of according the widest possible autonomy to local
government in matters of taxation, an aspect that is given expression in the Local Tax Code (PD
No. 231, July 1, 1973).

13. ID.; SPECIFIC TAXES; ARTICLES SUBJECT TO SPECIFIC TAX. — Specific taxes
are those imposed on specified articles, such as distilled spirits, wines, fermented liquors,
products of tobacco other than cigars and cigarettes, matches, firecrackers, manufactured oils and
other fuels, coal bunker fuel oil cinematographic films, playing cards, saccharine, opium and
other habit forming drugs.

FERNANDO, J., concurring:

1. CONSTITUTIONAL LAW; TAXATION; POWER OF MUNICIPAL CORPORATION

TO TAX UNDER THE NEW CONSTITUTION. — The present Constitution is quite explicit as
to the power of taxation vested in local and municipal corporations. It is therein specifically
provided: "Each local government unit shall have the power to create its own sources to revenue
and to levy taxes, subject to such limitations as may be provided by law."

2. ID.; ID.; LIMITATION ON POWER TO TAX UNDER THE 1935 CONSTITUTION. —

The only limitation on the authority to tax under the 1935 Constitution was that while the
President of the Philippines was vested with the power of control over all executive departments,
bureaus, or offices, he could only "exercise general supervision over all local governments as
may be provided by law." As far as legislative power over local government was concerned, no
restriction whatsoever was placed in the Congress of the Philippines. It would appear therefore
that the extent of the taxing power was solely for the legislative body to decide.

3. ID.; ID.; MUNICIPAL CORPORATION'S POWER TO TAX MUST BE CLEARLY

SHOWN. — Although the scope of municipal taxing power had been enlarged by subsequent
legislations, the Court, in Golden Ribbon Lumber Co. vs. City of Butuan, L-18534, December
24, 1964, reaffirmed the traditional concept, thus: "The rule is well-settled that municipal
corporations, unlike sovereign states, are clothed with no power of taxation; that its charter or a
statute must clearly show an intent to confer that power of the municipal corporation cannot
assume and exercise it, and that any such power granted must be construed strictly, any doubt or
ambiguity arising from the terms of the grant to be resolved against the municipality."

4. ID.; ID.; DOUBLE TAXATION. — The objection to the taxation as double may be laid
down on one side. The 14th Amendment (the due process clause) no more forbids double
taxation than it does doubling the amount of a tax, short of confiscation or proceedings
unconstitutional on other grounds.

4. [G.R. No. 127249. February 27, 1998.]

CAMARINES NORTE ELECTRIC COOPERATIVE, INC. (CANORECO); RUBEN N.

BARRAMEDA; ELVIS L. ESPIRITU; MERARDO G. ENERO, JR.; MARCELITO B. ABAS;
and REYNALDO V. ABUNDO, petitioners, vs. HON. RUBEN D. TORRES, in his capacity as
Executive Secretary; REX TANTIONGCO; HONESTO DE JESUS; ANDRES IBASCO;
TEODULO M. MEA; and VICENTE LUKBAN, respondents.

Benjamin A. Moraleda, Jr., Froilan M. Bacungan & Associates and Peñaflor & Perez Law
Offices for petitioners.

Nestor C. Barbosa for private respondents.

SYNOPSIS

Because of the squabble and struggle between two groups vying for the control of the
management of the Camarines Norte Electric Cooperative, Inc., (CANORECO), the President of
the Philippines issued Memorandum Order No. 409 constituting an Ad Hoc Committee to
temporarily take over and manage the affairs of CANORECO. Herein petitioners assert in their
petition that there is no provision in the Constitution or in a statute expressly, or even impliedly,
authorizing the President or his representatives to take over or order the take-over of electric
cooperatives. CHTcSE

The Supreme Court found the petition meritorious. The Court held that having registered with
the Cooperative Development Authority (CDA) pursuant to Section 128 of R.A. No. 6938 and
Section 17 of R.A. 6939, CANORECO was brought under the coverage of said laws. Article 38
of R.A. No. 6939 vests upon the board of directors the conduct and management of the affairs of
the cooperatives, and Article 39 provides for the powers of the board of directors. Memorandum
Order No. 409 has no constitutional and statutory basis. It violates the basic underlying principle
enshrined in Article 4(2) of R.A. No. 6938 that cooperatives are democratic organizations and
that their affairs shall be administered by persons elected or appointed in a manner agreed upon
by the members. It also runs counter to the policy set forth in Section 1 of R.A. No. 6939 that the
State shall maintain a policy of non-interference in the management and operation of
cooperatives.

Petition granted.

SYLLABUS

1. POLITICAL LAW; ADMINISTRATIVE LAW; ADMINISTRATIVE AGENCIES; A

FINAL RESOLUTION OR DECISION OF AN ADMINISTRATIVE AGENCY ALSO BINDS
THE OFFICE OF THE PRESIDENT EVEN IF SUCH AGENCY IS UNDER THE
ADMINISTRATIVE SUPERVISION AND CONTROL OF THE LATTER. — Under Section
15, Chapter III of Book VII of the Administrative Code of 1987 (Executive Order No. 292),
decisions of administrative agencies become final and executory fifteen days after receipt of a
copy thereof by the party adversely affected unless within that period an administrative appeal or
judicial review, if proper, has been perfected. One motion for reconsideration is allowed. A final
resolution or decision of an administrative agency also binds the Office of the President even if
such agency is under the administrative supervision and control of the latter. We have stated
before, and reiterate it now, that administrative decisions must end sometime, as fully as public
policy demands that finality be written on judicial controversies. Public interest requires that
proceedings already terminated should not be altered at every step, for the rule of non quieta
movere prescribes that what had already been terminated should not be disturbed. A disregard of
this principle does not commend itself to sound public policy.

2. ID.; ID.; ID.; POLICE POWER CANNOT BE INVOKED TO CLOTHE WITH

VALIDITY THE ASSAILED MEMORANDUM ORDER NO. 409. — Neither can police power
be invoked to clothe with validity the assailed Memorandum Order No. 409. Police power is the
power inherent in a government to enact laws, within constitutional limits, to promote the order,
safety, health, morals, and general welfare of society. It is lodged primarily in the legislature. By
virtue of a valid delegation of legislative power, it may also be exercised by the President and
administrative boards, as well as the lawmaking bodies on all municipal levels, including the
barangay. Delegation of legislative powers to the President is permitted in Sections 23(2) and
28(2) of Article VI of the Constitution. The pertinent laws on cooperatives, namely, R.A. No.
6938, R.A. No. 6939, and P.D. No. 269 as amended by P.D. No. 1645 do not provide for the
President or any other administrative body to take over the internal management of a
cooperative.
3. ID.; ID.; MEMORANDUM ORDER NO. 409 HAS NO CONSTITUTIONAL AND
STATUTORY BASIS. — We do not then hesitate to rule that Memorandum Order No. 409 has
no constitutional and statutory basis. It violates the basic underlying principle enshrined in
Article 4(2) of R.A. No. 6938 that cooperatives are democratic organizations and that their
affairs shall be administered by persons elected or appointed in a manner agreed upon by the
members. Likewise, it runs counter to the policy set forth in Section 1 of R.A. No. 6939 that the
State, except as provided in said Act, maintain a policy of non-interference in the management
and operation of cooperatives.

5. Republic vs Philippine Rabbit

6. [G.R. No. L-18330. July 31, 1963.]

JOSE DE BORJA, petitioner-appellee, vs. VICENTE G. GELLA, ET AL., respondents-

appellants.

David Guevara for petitioner-appellee.

Solicitor General for respondent-appellant Treasurer of the Philippines.

Assistant City Fiscal H. A. Avendaño for respondent-appellant Treasurer of Pasay City.

SYLLABUS

1. OBLIGATIONS AND CONTRACTS; BACKPAY CERTIFICATES; RIGHTS OF

ASSIGNEE; CANNOT BE USED TO PAY REAL ESTATE TAXES. — The assignee of
Backpay certificates cannot compel the government to accept said certificates in payment of his
real estate taxes, for the reason that in order that such payment may be allowed the tax must be
owned by the applicant himself. This is the correct implication that may be drawn from the use
of the word "his taxes" in Section 2 of Republic Act No. 304, as amended.

2. ID.; ID.; ID.; DISCOUNTING AT MATURITY OR NEGOTIATION. — The right of an

assignee or subsequent holder of a backpay certificate is at most to have it discounted upon
maturity or to negotiate it in the meantime.

3. ID.; ID.; ID.; COMPENSATION CANNOT BE EFFECTED WITH REGARD TO

ASSIGNEE'S REAL ESTATE TAXES. — Compensation cannot take place between the
obligation of the appellee, an assignee of a backpay certificate, for real estate taxes, and the
obligation of the government based on said certificates. In the first place, the debtor in the
certificate of indebtedness is the Republic of the Philippines, whereas the real estate taxes owed
by appellee are due to the City of Manila and Pasay City, each one of which having a distinct and
separate personality from our Republic. With regard to the certificates, the creditor is the
appellee while the debtor is the Republic of the Philippines. And with regard to the taxes, the
creditors are the cities of Manila and Pasay while the debtor is the appellee. Therefore, each one
of the obligors concerning the two obligations is not at the same time the principal creditor of the
other. Secondly, it cannot be said that the certificates are already due. Although on their faces the
certificates issued to appellee state that they are redeemable from its approval on June 18, 1948,
yet the law provides that they are redeemable "within ten years from the date of issuance" of the
certificates. Therefore, there is no certainty when the certificates are really redeemable within the
meaning of the law.

7. [G.R. No. 87479. June 4, 1990.]

NATIONAL POWER CORPORATION, petitioner, vs. THE PROVINCE OF ALBAY, ALBAY

GOVERNOR ROMEO R. SALALIMA, and ALBAY PROVINCIAL TREASURER ABUNDIO
M. NUÑEZ, respondents.

8. [G.R. No. L- 49529. March 31, 1989.]

VALLEY TRADING CO., INC., petitioner, vs. COURT OF FIRST INSTANCE OF ISABELA,
BRANCH II; DR. CARLOS UY (in his capacity as Mayor of Cauayan, Isabela); MOISES
BALMACEDA (in his capacity as Municipal Treasurer of Cauayan, Isabela); and
SANGGUNIANG BAYAN of Cauayan, Isabela, respondents.

Jesus M. Aguas for petitioner.

The Solicitor General for respondents.

SYLLABUS

1. REMEDIAL LAW; SPECIAL PROCEEDINGS; INJUNCTION; COURT MAY REFUSE

GRANT THEREOF WITH OR WITHOUT NOTICE; INSTANCES. — While it correctly
pointed out that Section 6 of Rule 58 provides for the grounds for objection to an injunction,
petitioner ignores the circumstances under which these objections may be appreciated by the trial
court. Thus, if the ground is the insufficiency of the complaint, the same is apparent from the
complaint itself and preliminary injunction may be refused outright, with or without notice to the
adverse party. In fact, under said section, the court may also refuse an injunction on other
grounds on the basis of affidavits which may have been submitted by the parties in connection
with such application. In the foregoing instances, a hearing is not necessary.

2. ID.; ID.; NOTICE AND HEARING ARE REQUIRED WHEN GRANT THEREOF IS
PROPER. — If there is a prima facie showing on the face of the motion and/or pleadings that the
grant of preliminary injunction may be proper, in which case notice to the opposing party would
be necessary since the grant of such writ on an ex parte proceeding is now proscribed. A hearing
should be conducted since, under such circumstances, only in case of extreme urgency will the
writ issue prior to a final hearing. Such requirement for prior notice and hearing underscores the
necessity that a writ of preliminary injunction is to be dispensed with circumspection both sides
should be heard whenever possible. It does not follow, however, that such a hearing is
indispensable where right at the outset the court is reasonably convinced that the writ will not lie.
What was then discouraged, and is now specifically prohibited, is the issuance of the writ
without notice and hearing.

3. ID.; ID.; ID.; AVAILABLE ONLY ON GROUNDS PROVIDED BY LAW. — The

issuance of a writ of preliminary injunction in the present case, as in any other case, is addressed
to the sound discretion of the court, conditioned on the existence of a clear and positive right of
the movant which should be protected. It is an extraordinary peremptory remedy available only
on the grounds expressly provided by law, specifically Section 3 of Rule 58 of the Rules of
Court.

4. ID.; ID.; ID.; ISSUANCE THEREOF, NOT PROPER IF IT WOULD DISPOSE OF THE
MAIN CASE. — Equally pertinent is the rule that courts should avoid issuing a writ of
preliminary injunction which, in effect, would dispose of the main case without trial.

5. ID.; ID.; ID.; ISSUED UPON A CLEAR SHOWING OF A CLEAR LEGAL RIGHT TO
THE REMEDY SOUGHT. — Laws are presumed to be valid unless and until the courts declare
the contrary in clear and unequivocal terms. A court should issue a writ of preliminary injunction
only when the petitioner assailing a statute has made out a case of unconstitutionality or
invalidity strong enough to overcome, in the mind of the judge, the presumption of validity, aside
from a showing of a clear legal right to the remedy sought.

6. ID.; ID.; ID.; MERE ALLEGATION OF THE UNCONSTITUTIONALITY OF

STATUTE DOES NOT JUSTIFY ISSUANCE THEREOF. — The mere fact that a statute is
alleged to be unconstitutional or invalid will not entitle a party to have its enforcement enjoined.

7. TAXATION; POLICY; TO DISCOURAGE DELAY IN THE COLLECTION OF

TAXES. — The damage to petitioner's property rights must perforce take a back seat to the
paramount need of the State for funds to sustain governmental functions. Compared to the
damage to the State which may be caused by reduced financial resources, the damage to
petitioner is negligible. The policy of the law is to discountenance any delay in the collection of
taxes because of the oft-repeated but unassailable consideration that taxes are the lifeblood of the
Government and their prompt and certain availability is an imperious need.

9. [G.R. No. L-25043. April 26, 1968.]

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalfs
and as judicial co-guardians of JOSE ROXAS, petitioners, vs. COURT OF TAX APPEALS and
COMMISSIONER OF INTERNAL REVENUE, respondents.

Leido, Andrada, Perez and Associates, for petitioners.

Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete and Atty.
Orlando R. Resurreccion for respondents.

SYLLABUS

1. TAXATION; "POWER TO DESTROY", TO BE EXERCISED FAIRLY, EQUALLY

AND UNIFORMLY. — The power of taxation is sometimes called also the power to destroy. It
should, therefore, be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the "hen
that lays the golden egg".

2. ID.; REAL ESTATE DEALER'S TAX, HELD INAPPLICABLE. — Even where there
were hundreds of vendees who paid for their respective holdings in installment for 10 years, such
fact did not make the act of subdividing the Nasugbu farm and selling them to the farmers-
occupants thereof on installment basis a business of selling real estate. This was an isolated
transaction: the sale of the farm was made in obedience to the request of the Government whose
policy was to allocate lands to the landless. The Government's duty was to pay the agreed price
of the farm lands after it had persuaded the petitioner to sell its hacienda. But the Government
lacked funds and Roxas y Cia, obligingly shouldered the government's burden. It does not
conform to one's sense of justice for the Government to persuade the taxpayer to lend it a helping
hand and later to penalize him for doing so. The sale, therefore, made by Roxas y Cia, to the
farmers of its farmlands does not make the company a real estate dealer, and the lands sold to the
farmers are capital assets. The gain derived therefrom is capital gain, and is taxable only to the
extent of 50%, not 100%.

3. ID.; TAX DEDUCTIONS; CLAIMS DISALLOWED. — Contributions to the Christmas

funds of the Pasay City Police, Pasay City Firemen and Baguio City Police are not deductible
because the Christmas funds were not spent for public purposes but as Christmas gifts to the
families of members of said entities. Section 39 (h) of the Tax Code provides that a contribution
to a government entity is deductible only when used exclusively for public purposes. The
contribution to the chapel of the FEU located in the premises of said school is not deductible
because said chapel was not shown to belong to the Catholic church or any religious
organization; on the contrary it was found to belong to the FEU contributions to which are not
deductible under sec. 30 (h) of the Tax Code because the net income of said university inures to
the benefit of its stockholders.

4. ID.; ID.; CLAIMS ALLOWED. — Contributions to the Philippines Herald's fund for
Manila's neediest families are allowable deductions because such contributions were not made to
the Philippines Herald but to a group of civic spirited citizens organized by the Herald solely for
charitable purposes and said citizens do not receive profits. Such group of citizens may,
therefore, be classified as an association exclusively organized for charitable purpose mentioned
in sec. 30(h) of the Tax Code. Contributions to the Manila y Police Trust Fund constitute
allowable deductions because the trust fund belongs to the Manila Police, a government entity
intended to be used exclusively for its public functions.

10. [G.R. No. L-4043. May 26, 1952.]

CENON S. CERVANTES, petitioner, vs. THE AUDITOR GENERAL, respondent.

Cenon Cervantes in his own behalf.

Solicitor General Pompeyo Diaz and Solicitor Felix V. Makasiar for respondent.

SYLLABUS

1. CORPORATIONS; GOVERNMENT CONTROLLED CORPORATION. — With its

controlling stock owned by the Government and the power of appointing its directors vested in
the President of the Philippines there can be no question that the National Abaca and other Fibers
Corporation, otherwise known as the NAFCO, is a government controlled corporation subject to
the provisions of Republic Act No. 51 and the executive order (No. 93) promulgated in
accordance therewith.

2. ID.; ID.; OFFICERS; SALARY QUARTERS ALLOWANCE; POWER OF CONTROL

COMMITTEE TO APPROVE OR DISAPPROVE RESOLUTION OF NAFCO BOARD OF
DIRECTORS. — The National Abaca and other Fibers Corporation (NAFCO) was subject to the
powers of the Control Committee, created in Executive Order No. 93 promulgated in accordance
with the provisions of Republic Act No. 51, among which is the power of supervision for the
purpose of insuring efficiency and economy in the operations of the corporation and also the
power to pass upon the program of activities and the yearly budget of expenditures approved by
its board of directors. Under these powers the Control Committee had the right to pass upon, and
consequently to approve or disapprove, the resolution of the NAFCO board of directors granting
quarters allowance to the manager of the NAFCO as such allowance necessarily constituted an
item of expenditure in the corporation's budget. The granting of the allowance amounted to an
illegal increase of the Manager's salary beyond the limit fixed in the Corporate Charter.

3. STATUTE; TIME, COMPUTATION OF. — In the computation of the time for doing an
act, the first day is excluded and the last day included (Section 13, Rev. Ad. Code.) As the act
was approved on October 4, 1946, and the President was given a period of one year within which
to promulgate his executive order and that order was in fact promulgated on October 4, 1947, it
is obvious that under the above rule the said executive order was promulgated within the period
given.

4. CONSTITUTIONAL LAW; DELEGATION OF LEGISLATIVE POWER. — The rule is

that so long as the Legislature "lays down a policy and a standard is established by the statute"
there is no undue delegation. (11 Am. Jur. 957). Republic Act No. 51, in authorizing the
President of the Philippines to make reforms and changes in government-controlled corporations,
lays down a standard and policy that the purpose shall be to meet the exigencies attendant upon
the establishment of the free and independent Government of the Philippines and to promote
simplicity, economy and efficiency in their operations. The standard was set and the policy fixed.
The President had to carry out the mandate, and this he did by promulgating Executive Order
(No. 93) in accordance with Republic Act No. 51, which, tested by the said rule, does not
constitute an undue delegation of legislative power.

5. PUBLIC OFFICER; SALARY; QUARTERS ALLOWANCE CONSIDERED

ADDITIONAL COMPENSATION. — Executive Order No. 332 of 1941, which prohibits the
payment of additional compensation to those working for the Government and its
instrumentalities, including government-controlled corporations, was, in 1945, amended by
Executive Order No. 77 by expressly exempting from the prohibition the payment of quarters
allowance "in favor of local government officials and employees entitled to this under existing
law." The amendment is a clear indication that quarters allowance was meant to be included in
the term "additional compensation", for otherwise the amendment would not have expressly
excepted it from the prohibition. For the purposes of the executive order just mentioned, quarters
allowance is considered additional compensation and, therefore, prohibited.

11. [G.R. No. L-31364 March 30, 1979.]

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional

Director, Revenue Region No. 14, Bureau of Internal Revenue, petitioners, vs. HON. JOSE F.
FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and
FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY, respondents.

SYNOPSIS

In the course of the intestate proceedings of the estate of the late Luis D. Tongoy, the court
dismissed, and later refused to reconsider its dismissal of, the Motion for Allowance of Claim
and For An Order of Payment of Taxes by the Government of the Republic of the Philippines in
the subject estate for deficiency income taxes on the ground that the claim was filed beyond the
period provided in Section 2, and was already barred under Section 5 of Rule 86 of the Rules of
Court. Hence, this appeal.

The Supreme Court reversed the assailed orders and ruled that the invoked Rule makes no
mention of claims for monetary obligations of the decedent created by law; such as taxes which
is entirely of different character from the claims expressly enumerated therein, thus necessarily
and implication excluding the same from its operation and effect; that claims for taxes against a
decedent's estate, as well as the matter of prescription thereof are governed by the provisions of
the National Internal Revenue Code; and that before the inheritance has passed to the heirs, the
unpaid taxes due the government may be collected even without its having been presented under
Section 2, Rule 86 of the Rules of Court.

SYLLABUS

1. STATUTORY CONSTRUCTION; PRINCIPLE OF EXPRESSIO UNIUS EST

EXCLUSIO ALTERIUS APPLIED TO SECTION 5, RULE 86, RULES OF COURT. — Since
Section 5, Rule 86 of the Rules of Court makes no mention of claims for monetary obligations of
the decedent created by law, such as taxes which is entirely of different character from the claims
expressly enumerated therein, such as: "all claims for money against the decedent arising from
contract, express or implied, whether the same be due, not due or contingent, all claims for
funeral expenses and expenses for the last sickness of the decedent and judgment for money
against the decedent," it necessarily, and by implication excludes the same from its operation and
effect, under the familiar rule of statutory construction of expressio unius exclusio alterius.

2. TAXATION; GOVERNING RULES. — The assessment, collection and recovery of

taxes, as well as the matter of prescription thereof are governed by the provisions of the National
Internal Revenue Code and not by other provisions of law.

3. ID.; CLAIMS FOR TAXES AGAINST DECEDENT'S ESTATE ARE LIENS IN FAVOR
OF THE GOVERNMENT — Claims for taxes against a decedent's estate are liens in favor of the
Government of the Philippines from the time the assessment was made by the Commissioner of
Internal Revenue until paid with interests, penalties, etc. By virtue of such lien, the property of
the estate already in the hands of an heir or transferee may be subject to the payment of the tax
due the estate. A fortiori, before the inheritance has passed to the heirs, the unpaid taxes due from
the decedent may be collected, even without its having been presented under Section 2, Rule 86
of the Rules of Court.

4. ID.; ID.; REASON FOR EXCEPTION FROM APPLICABILITY OF STATUTE OF

NON-CLAIMS — The reason for the more liberal treatment of claims for taxes against a
decedent's estate in the form of exception from the application of the statute of non-claims, is not
hard to find. Taxes are the livelihood of the Government and their prompt and certain availability
are imperious need. Upon taxation depends the Government ability to serve the people for whose
benefit taxes are collected. To safeguard such interest, neglect or omission of government
officials entrusted with the collection of taxes should not be allowed to bring harm or detriment
to the people in the same manner as private persons may be made to suffer individually on
account of his own negligence, the presumption being that they take good care of their personal
affairs. This should not hold true to government officials with respect to matters not of their own
personal concern. This is the philosophy behind the Government's exception, as a general rule,
from the operation of the principle of estoppel.

12. REPUBLIC V. PATANAO 20 SCRA 712

13. [G.R. Nos. 147062-64. December 14, 2001.]

REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT (PCGG), petitioner, vs. COCOFED et al. and BALLARES et al., 1
EDUARDO M. COJUANGCO JR. and the SANDIGANBAYAN (First Division) respondents.

SYNOPSIS

The first Division of the Sandiganbayan in Civil Case Nos. 0033-A, 0033-B and 0033-P allowed
respondents COCOFED, et al., and Ballares, et al., as well as Eduardo Cojuangco, et al.,
acknowledged registered stockholders of the United Coconut Planters Bank (UCPB) and all
other registered stockholders of the bank, to exercise their right to vote their shares of stock and
themselves to be voted upon in the UCPB at the scheduled Stockholders' Meeting on March 6,
2001 or on any subsequent continuation or resetting thereof, and to perform such acts as will
normally follow in the exercise of these rights as registered stockholders. In its petition, the
Republic of the Philippines, represented by the Presidential Commission on Good Government
(PCGG), contended that respondent Sandiganbayan committed grave abuse of discretion in
enjoining them from voting the sequestered shares of stock in UCPB despite the fact that the
sequestration share were purchased with coconut levy funds (which were declared public in
character) and the continuing effectivity of Resolution dated February 16, 1993 in G.R. No.
96073 which allows the PCGG to vote said sequestered shares.

The Supreme Court uphold the contention of the PCGG ands set aside the assailed order of the
Sandiganbayan. The Court held that the government should be allowed to continue voting those
shares inasmuch as they were purchased with coconut levy funds — funds that are prima facie
public in character or, at the very least, are "clearly affected withy public interest," and because
they belong to it as the prima facie beneficial and true owner thereof. Voting is an act of
dominion that should be exercised by the share owner. One of the recognized rights of an owner
is the right to vote at meetings of the corporation. The right to vote is classified as the right to
control. Voting rights may be for the purpose of, among others, electing or removing directors,
amending a charter or making or amending by laws. Because the subject UCPB shares were
acquired with government funds, the government becomes their prima facie beneficial and true
owner. Ownership includes the right to enjoy, dispose of, exclude and recover a thing without
limitations other than those established by law or by the owner. Ownership has been aptly
described as the most comprehensive of all real rights and the right to vote shares is a mere
incident of ownership. In the present case, the government has been shown to be the prima facie
owner of the funds used to purchase the shares. Hence, it should be allowed the rights and
privileges flowing from such fact.

SYLLABUS

1. MERCANTILE LAW; CORPORATION CODE; SHARES OF STOCK; GENERAL

RULE; SEQUESTERED SHARES OF STOCK ARE VOTED BY THE REGISTERED
HOLDER. — It is necessary to restate the general rule that the registered owner of the shares of
a corporation exercises the right and the privilege of voting. This principle applies even to shares
that are sequestered by the government, over which the PCGG as a mere conservator cannot, as a
general rule, exercise acts of dominion. On the other hand, it is authorized to vote these
sequestered shares registered in the names of private persons and acquired with allegedly ill-
gotten wealth, if it is able to satisfy the two-tiered test devised by the Court in Cojuangco v.
Calpo and PCGG v. Cojuangco Jr., as follows: (1) Is there prima facie evidence showing that the
said shares are ill-gotten and thus belong to the State? (2) Is there an imminent danger of
dissipation, thus necessitating their continued sequestration and voting by the PCGG, while the
main issue is pending with the Sandiganbayan?

2. ID.; ID.; ID.; EXCEPTION TO THE RULE; SEQUESTERED SHARES ACQUIRED

WITH PUBLIC FUNDS. — The Court in Baseco v. PCGG (hereinafter "Baseco") and
Cojuangco Jr. v. Roxas ("Cojuangco-Roxas") has provided two clear "public character"
exceptions under which the government is granted the authority to vote the shares: (1) Where
government shares are taken over by private persons or entities who/which registered them in
their own names, and (2) Where the capitalization or shares that were acquired with public funds
somehow landed in private hands. The exceptions are based on the common-sense principle that
legal fiction must yield to truth; that public property registered in the names of non-owners is
affected with trust relations; and that the prima facie beneficial owner should be given the
privilege of enjoying the rights flowing from the prima facie fact of ownership.

3. ID:, ID.; ID.; COCONUT LEVY FUNDS ARE AFFECTED WITH PUBLIC INTEREST.
— Having conclusively shown that the sequestered UCPB shares were purchased with coconut
levies, we hold that these funds and shares are, at the very least, "affected with public interest."
The Resolution issued by the Court on February 16, 1993 in Republic v. Sandiganbayan stated
that coconut levy funds were "clearly affected with public interest"; thus, herein private
respondents — even if they are the registered shareholders — cannot be accorded the right to
vote them.

4. ID.; ID.; COCONUT LEVY FUNDS ARE PRIMA FACIE PUBLIC FUNDS; SAID
FUND SATISFY THE GENERAL DEFINITION OF PUBLIC FUNDS. — To avoid
misunderstanding and confusion, this Court will even be more categorical and positive than its
earlier pronouncements: the coconut levy funds are not only affected with public interest; they
are, in fact, prima facie public funds. Public funds are those moneys belonging to the State or to
any political subdivision of the State; more specifically, taxes, customs duties and moneys raised
by operation of law for the support of the government or for the discharge of its obligations.
Undeniably, coconut levy funds satisfy this general definition of public funds.

5. ID.; ID.; ID.; COCONUT LEVY FUND RAISED THROUGH STATE'S POLICE AND
TAXING POWER. — Indeed, coconut levy funds partake of the nature of taxes which, in
general, are enforced proportional contributions from persons and properties, exacted by the
State by virtue of its sovereignty for the support of government and for all public needs. Based
on this definition, a tax has three elements, namely: a) it is an enforced proportional contribution
from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is
levied for the support of the government. The coconut levy funds fall squarely into these
elements.

6. ID.; ID.; ID.; HAVING BEEN ACQUIRED WITH PUBLIC FUNDS, THE SUBJECT
SHARES BELONG, PRIMA FACIE, TO THE GOVERNMENT. — Having shown that the
coconut levy funds are not only affected with public interest, but are in fact prima facie public
funds, this Court believes that the government should be allowed to vote the questioned shares,
because they belong to it as the prima facie beneficial and true owner. As stated at the beginning,
voting is an act of dominion that should be exercised by the share owner. One of the recognized
rights of an owner is the right to vote at meetings of the corporation. The right to vote is
classified as the right to control. Voting rights may be for the purpose of, among others, electing
or removing directors, amending a charter, or making or amending bylaws. Because the subject
UCPB shares were acquired with government funds, the government becomes their prima facie
beneficial and true owner. Ownership includes the right to enjoy, dispose of, exclude and recover
a thing without limitations other than those established by law or by the owner. Ownership has
been aptly described as the most comprehensive of all real rights. And the right to vote shares is
a mere incident of ownership. In the present case, the government has been shown to be the
prima facie owner of the funds used to purchase the shares. Hence, it should be allowed the
rights and privileges flowing from such fact.

7. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; GRAVE ABUSE OF

DISCRETION MAY ARISE WHEN A LOWER COURT OR TRIBUNAL VIOLATES OR
CONTRAVENES THE CONSTITUTION, THE LAW OR EXISTING JURISPRUDENCE. —
We hold that the Sandiganbayan gravely abused its discretion when it contravened the rulings of
this Court in Baseco and Cojuangco-Roxas — thereby unlawfully, capriciously and arbitrarily
depriving the government of its right to vote sequestered shares purchased with coconut levy
funds which are prima facie public funds. Indeed, grave abuse of discretion may arise when a
lower court or tribunal violates or contravenes the Constitution, the law or existing
jurisprudence. In one case, this Court ruled that the lower court's resolution was "tantamount to
overruling a judicial pronouncement of the highest Court . . . and unmistakably a very grave
abuse of discretion." TSIDEa

8. ID.; ID.; ID.; PUBLIC CHARACTER OF SHARES IS A VALID ISSUE. — The main
issue of who may vote the shares cannot be determined without passing upon the question of the
public/private character of the shares and the funds used to acquire them. The latter issue,
although not specifically raised in the Court a quo, should still be resolved in order to fully
adjudicate the main issue. Indeed, this Court has "the authority to waive the lack of proper
assignment of errors if the unassigned errors closely relate to errors properly pinpointed out or if
the unassigned errors refer to matters upon which the determination of the questions raised by
the errors properly assigned depend." Therefore, "where the issues already raised also rest on
other issues not specifically presented as long as the latter issues bear relevance and close
relation to the former and as long as they arise from matters on record, the Court has the
authority to include them in its discussion of the controversy as well as to pass upon them."

9. ID.; ID.; ID.; NO POSITIVE RELIEF FOR INTERVENORS; THEIR RIGHT IS

DEPENDENT UPON THE SANDIGANBAYAN'S RESOLUTION ON THE ACTION FOR
THE RECOVERY OF THE SEQUESTERED SHARES. — We cannot rule on intervenors'
alleged right to vote at this time and in this case. That right is dependent upon the
Sandiganbayan's resolution of their action for the recovery of said sequestered shares. Given the
patent fact that intervenors are not registered stockholders of UCPB as of the moment, their
asserted rights cannot be ruled upon in the present proceedings. Hence, no positive relief can be
given them now, except insofar as they join petitioner in barring private respondents from voting
the subject shares.

VITUG, J., separate opinion:

1. MERCANTILE LAW, CORPORATION CODE; SHARES OF STOCK; PURCHASE

BY THE COCONUT INDUSTRY INVESTMENT FUND COMPANIES OF THE COCONUT
FARMER'S SHARE IN UNITED COCONUT PLANTERS BANK DID NOT CHANGE THE
PUBLIC CHARACTER OF THE SHARES. — To account for their equity holdings in the bank,
COCOFED, et al., in their Memorandum, would advance that, in 1975, COCOFED, a private
national association of coconut producers, was designated by the Philippine Coconut Authority
("PCA") as being the implementing agency for the free distribution of the shares of stock of the
UCPB to the coconut farmers. By 02 May 1981, 232,805,852.16 of said shares were distributed
to the farmers. Still there remained 15,619,419.84 shares registered in the name of COCOFED
which, according to it, were ultimately given to the farmers. Prior to June 1986, a substantial
number of the coconut farmers sold their shares in the bank at prices below par value. By way of
a financial assistance to the selling coconut farmers, the UCPB Board of Directors authorized the
CIIF companies to purchase their holdings in the bank at par value. These transactions,
nevertheless, did not change the character of the UCPB shares, these having been bought with
coconut levy funds which the Court distinctly characterized to be "clearly affected with public
interest" and "raised such as they were by the State's police and taxing powers." The fundamental
rule is that tax proceeds may only be used for a public purpose, which may either be a general
public purpose to support the existence of the state or a special public purpose to pursue certain
legitimate objects of government in the exercise of police power, and none other. As a measure to
ensure the proper utilization of money collected for a specified public purpose, the 1987
Constitution, restating another general principle, treats the proceeds as a special fund to be paid
out for such purpose. If, however, that purpose has been fulfilled or is no longer forthcoming, the
balance, if any, shall then be transferred to the general funds of the government, which may
thereafter be appropriated by Congress and expended for any legitimate purpose within the scope
of the general fund. An entity, whether public or private, which holds the tax money has no
authority to disburse it or to pay any of it to anyone, the power to dispose of such money being
vested in the legislature. Thus, the 1987 Constitution, like its counterparts in the 1935 and the
1973 Constitution, mandates that no money shall be paid out of the national treasury except in
pursuance of an appropriation made by law.

2. ID.; ID.; ID.; PENDING A CONCLUSIVE DETERMINATION ON THE LEGALITY

OF THE 10% EQUITY RETENTION STANDING IN THE NAME OF RESPONDENT
EDUARDO COJUANGCO, JR., IT WOULD BE NEITHER RIGHT NOR JUST TO DEPRIVE
HIM FROM MEANWHILE EXERCISING HIS RIGHT TO AT LEAST VOTE THE SAME. —
Respondent Eduardo Cojuangco, Jr., upon the other hand, in claiming ownership over a portion
of the sequestered UCPB shares, advanced two documents — an agreement in May 1975, where
he appeared to have exercised his option to acquire the UCPB shares of stock owned by the
family of the late Don Jose Cojuangco, Sr., amounting to 72.2% equity holding in the bank, at
two hundred pesos (Php200.00) per share, and the "Agreement for the Acquisition of a
Commercial Bank for the Benefit of the Coconut Farmers of the Philippines," dated 25 May
1975, whereby the PCA purchased with funds from the CCSF the aforesaid UCPB shares from
Eduardo Cojuangco, Jr., also at two hundred pesos (Php200.00) per share. In the latter
agreement, it was stipulated that as compensation for exercising his personal and exclusive
option to acquire the UCPB shares and for transferring such shares to the PCA, Eduardo
Cojuangco, Jr., would receive one (1) share for every nine (9) shares acquired by the PCA and
additional equity in the bank. In sum, correlating the two agreements, Eduardo Cojuangco, Jr.,
would contend, in effect, that he retained title over roughly 10% equity holding in the bank and
established his prima facie right over the corresponding shares independently sourced from the
coconut levy funds. Even if it were to be conceded that the said 10% holding in UCPB of
Eduardo Cojuangco, Jr., could be assailed, pending a conclusive determination on the legality of
such a retention, however, it would neither be right nor just to deprive him from meanwhile
exercising his right to at least vote the same. For the foregoing reasons, I vote to grant the
petition in part and to deny it insofar as the shares of stock pertaining to the 10% of the 72%
equity retention standing in the name of Eduardo Cojuangco, Jr., are concerned. In passing, I
should like to state my understanding of the ruling of the Court. I must first clarify, however, that
sequestration does not mean the vesting of title in the hands of the sequestering authority; rather,
the term implies the preservation of assets. Neither ownership nor rights thereover are acquired
or lost by virtue alone of sequestration — a mere ancillary remedy to secure a disputed asset.

MELO, J., dissenting opinion:

1. MERCANTILE LAW; CORPORATION LAW; SHARES OF STOCK; THE VALIDITY

OF THE ACQUISITION OF THE UNITED COCONUT PLANTERS BANK SHARES IS THE
VERY LIS MOTA OF THE ACTION FOR RECONVEYANCE, ACCOUNTING, REVERSION
AND RESTITUTION FILED BY THE PCGG WITH THE SANDIGANBAYAN; TO RULE ON
THE MATTER WOULD BE TO PREEMPT SAID COURT. — The view expressed by the
majority that the UCPB shares, having been acquired with the use of coconut levy funds, and,
therefore belong to the government, may very well turn out to be correct. However, since these
issues are still pending litigation at the Sandiganbayan, it would be premature, I submit, to rule
on this point at this time. Verily, the validity of the acquisition by Cojuangco Jr., et al. of their
UCPB shares is the very lis mota of the action for reconveyance, accounting, reversion, and
restitution filed by the PCGG with the Sandiganbayan. To rule on this matter would be to
preempt said court. Too, the argument that the coconut levy funds used to purchase the
sequestered UCPB shares of stock are public funds does not appear to have been raised before
the Sandiganbayan; consequently, the Sandiganbayan did not rule on the nature of the fund. It
would be absurd to hold that the Sandiganbayan gravely abused its discretion in not holding that
the sequestered shares belong prima facie to the government, the issue of whether or not coconut
levy funds are public funds not having been raised before it.

2. ID.; ID.; ID.; THE DETERMINATION OF WHETHER THE COCONUT LEVY

FUNDS ARE PUBLIC FUNDS INVOLVES THE ASCERTAINMENT OF THE
CONSTITUTIONALITY OF SECTION 5 OF ARTICLE III OF PRESIDENTIAL DECREE
NO. 1468. — Moreover, and as mentioned earlier, the nature of the funds used is a matter which
should be decided first-hand by the Sandiganbayan when it resolves the merits of Civil Case No.
0033-A. Note should also be taken of the fact that the determination of whether the coconut levy
funds are public funds involves the ascertainment of the constitutionality of Section 5, Article III
of Presidential Decree No. 961 and Section 5, Article III of Presidential Decree No. 1468.
Presidential Decrees No. 961 and 1468 have not been repealed, revoked, or declared
unconstitutional, hence they are presumed valid and binding. Without a previous declaration of
unconstitutionality, the coconut levy funds may not thus be characterized as prima facie
belonging to the government. That issue must first be resolved by the Sandiganbayan. In fact,
when the Solicitor General, in G.R. No. 96073, filed a motion to declare the coconut levies
collected pursuant to the various issuances as public funds and to declare Section 5, Article III of
Presidential Decree No. 1468 as unconstitutional, the Court denied the same in a Resolution
dated March 26, 1996.

3. ID.; ID.; ID.; THE QUESTION OF WHETHER THE COCONUT LEVY FUNDS ARE
PUBLIC FUNDS IS NOT IN ISSUE IN THE PRESENT CASE. — And if it is to be recalled,
the issue involved herein is whether or not the Sandiganbayan committed grave abuse of
discretion when it issued the disputed order allowing respondents to vote the UCPB shares of
stock registered in their names. The question of whether the coconut levy funds are public funds
is not in issue here. In fact, the constitutionality of Presidential Decrees No. 961 and 1468 have
not been raised by the PCGG during the proceedings before the Sandiganbayan. Moreover, it
should be pointed out that the avowed purpose of sequestration is to preserve the assets
sequestered to assure that if, and when, judgment is rendered in favor of the petitioner, the
judgment may be implemented. "Preservation," not "deprivation" before judgment, is its essence.
In the instant case, however, the actuations of PCGG with regard to the sequestered shares
partake more of deprivation rather than preservation. As pointed out by respondents, since 1986,
only one (1) stockholders' meeting of UCPB has been held. At this meeting, PCGG voted all of
the shares, as a result of which all members of the Board of UCPB, since 1986 to the present,
have been PCGG nominees. When vacancies in the Board occur because of resignation,
replacements are installed by the remaining members of the Board — on nomination of the
PCGG. The stockholders' meeting scheduled on March 6, 2001 would have been the first
stockholders' meeting since 1986 at which registered stockholders would exercise their right to
vote and by their vote elect the members of the Board of Directors. Also, the shares of stock in
UCPB were sequestered in 1986. The civil action "Republic of the Philippines v. Eduardo M.
Cojuangco, Jr., Civil Case No. 033," was instituted before the Sandiganbayan on July 30, 1987.
This action included, among other things, the UCPB shares of stock and was filed to maintain the
effectivity of the writs of sequestration pursuant to Section 26, Article XVIII of the Constitution.
Notwithstanding the lapse of more than 14 years, the proceedings have barely gone beyond the
pre-trial stage. PCGG's exercise of the right to vote the sequestered shares of stock for a period
of 14 years constitutes effectively a deprivation of a property right belonging to the registered
stockholders (18 Am. Jur. 2d, Corporations 2d Section 1065, p. 859, citing cases), a state of
affairs not within the contemplation of "sequestration" as a means of preservation of assets.

4. ID.; ID.; INCIDENTS CONCERNING THE VOTING OF THE SEQUESTERED

SHARES BEING MATTERS INCIDENTAL TO THE SEQUESTRATION SHOULD BE
ADDRESSED TO THE SANDIGANBAYAN. — I regret to say that I find unacceptable the
contention that the "law of the case" herein should be the Resolution dated February 16, 1993, in
Republic of the Philippines vs. Sandiganbayan, et al. For one, the UCPB shares of stock of
respondents COCOFED, et al. and Ballares, et al. are not the subject of the case relied upon.
Hence, the Resolution therein could not have referred to or covered said shares. For another, and
more importantly, what is invoked by petitioner is, in effect, merely a restraining order which
was not re-affirmed by the Court when we rendered the main decision in the said consolidated
sequestration cases. Rather, what I believe is truly applicable herein is the Court's decision in
COCOFED vs. PCGG (178 SCRA 236 [1989]) wherein it was held that "the incidents
concerning the voting of the sequestered shares, the COCOFED elections, and the replacement
of directors, being matters incidental to the sequestration, should be addressed to the
Sandiganbayan." Thus, the Sandiganbayan has been given by the Court full discretion to
evaluate and to allow or disallow the duly registered stockholders of the UCPB shares to exercise
the right to vote the said shares in the UCPB elections and/or appointment/replacement of its
directors. If, as in the case at hand, the Sandiganbayan, in the exercise of its sound discretion and
for justifiable reasons cited in its assailed Order of February 28, 2001, allowed herein private
respondents to vote the sequestered shares in question, one would simply be at a loss to
understand how such action could be said to be tainted with grave abuse of discretion.
14. [G.R. No. 112024. January 28, 1999.]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. COMMISSIONER OF

INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF APPEALS, respondents.

The Solicitor General for respondents.

Angara, Abello Concepcion Regala for petitioner.

SYNOPSIS

Petitioner, Philippine Bank of Communications, on August 7, 1987, requested the Commissioner

of Internal Revenue (CIR) for a tax credit of P5,016,954.00 representing the overpayment of
taxes in the first and second quartets of 1985. On July 25, 1988, it filed a claim for refund of
creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in
1986 for P234,077.69. Pending investigation by the CIR, petitioner instituted a petition for
review on Nov. 18, 1988 before the Court of Tax Appeals (CTA). In 1993, the CTA rendered a
decision denying the request for a tax refund or credit in the amount of P5,299,749.95 on the
ground that it was filed beyond the two-year reglementary period. The petitioner's claim for
refund in 1986 was likewise denied on the assumption that it was automatically credited by
PBCom against its tax payment in the succeeding year. These pronouncements by the CTA were
affirmed in toto by the CA. Hence, this petition. Petitioner argues that its claim for refund tax
credits are not yet barred by prescription relying on the applicability of Revenue Memorandum
Circular No. 7-85 stating that overpaid income taxes are not covered by the two-year prescriptive
period under the Tax Code and that taxpayers may claim refund or tax credits within (ten) 10
years under Art. 1414 of the Civil Code. CTAIDE

The Supreme Court ruled that when the Acting Commissioner of Internal Revenue issued RMC
7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly
income tax payments, such circular created a clear inconsistency with the provision of Sec. 230
of the 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated
guidelines contrary to the statute passed by Congress. It bears repeating that Revenue
memorandum-circulars are considered administrative rulings (in the sense of more specific and
less general interpretations of tax laws) which are issued from time to time by the Commissioner
of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the
executive officers, whose duty is to enforce it, is entitled to great respect by the courts.
Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be
erroneous. Thus, courts will not countenance administrative issuances that override, instead of
remaining consistent and in harmony with, the law they seek to apply and implement.

SYLLABUS

1. TAXATION; GENERAL PRINCIPLES; BASIS AND PURPOSE; GENERATE FUNDS

FOR THE STATE TO FINANCE THE NEEDS OF THE CITIZENRY AND ADVANCE THE
COMMON WEAL. — Basic is the principle that "taxes are the lifeblood of the nation." The
primary purpose is to generate funds for the State to finance the needs of the citizenry and to
advance the common weal. Due process of law under the Constitution does not require judicial
proceedings in tax cases. This must necessarily be so because it is upon taxation that the
government chiefly relies to obtain the means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the collection of taxes levied should be summary
and interfered with as little as possible.

2. ID.; TAX REFUND FOR CLAIMING REFUND ON OVERPAYMENT;

PRESCRIPTIVE PERIOD THEREOF. — From the same perspective, claims for refund or tax
credit should be exercised within the time fixed by law because the BIR being an administrative
body enforced to collect taxes, its functions should not be unduly delayed or hampered by
incidental matters. Section 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec.
229, NIRC of 1997) provides for the prescriptive period for filing a court proceeding for the
recovery of tax erroneously or illegally collected. The rule states that the taxpayer may file a
claim for refund or credit with the Commissioner of Internal Revenue, with two (2) years after
payment of tax, before any suit in CTA is commenced. The two-year prescriptive period
provided, should be computed from the time of filing the Adjustment Return and final payment
of the tax for the year. cTDECH

3. ADMINISTRATIVE LAW; ADMINISTRATIVE BODIES; CIRCULARS AND

ISSUANCES; SHOULD NOT RUN AGAINST THE STATUTE PASSED BY CONGRESS. —
When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive
period of two to ten years on claims of excess quarterly income tax payments, such circular
created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR
did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by
Congress. It bears repeating that Revenue memorandum-circulars are considered administrative
rulings which are issued from time to time by the Commissioner of Internal Revenue. It is widely
accepted that the interpretation placed upon a statute by the executive officers, whose duty is to
enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not
conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not
countenance administrative issuances that override, instead of remaining consistent and in
harmony with, the law they seek to apply and implement.
4. ID.; COMMISSIONER OF INTERNAL REVENUE; ERRORS IN ADMINISTRATIVE
INTERPRETATION; CANNOT PUT THE STATE IN ESTOPPEL. — Fundamental is the rule
that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. As
pointed out by the respondent courts, the nullification of RMC No. 7-85 issued by the Acting
Commissioner of Internal Revenue is an administrative interpretation which is not in harmony
with Sec. 230 of 1977 NIRC, for being contrary to the express provision of a statute. Hence, his
interpretation could not be given weight for to do so would, in effect, amend the statute.

5. ID.; ADMINISTRATIVE BODIES; ADMINISTRATIVE DECISIONS; DO NOT FORM

PART OF THE LEGAL SYSTEM. — Article 8 of the Civil Code recognizes judicial decisions,
applying or interpreting statutes as part of the legal system of the country. But administrative
decisions do not enjoy that level of recognition. A memorandum-circular of a bureau head could
not operate to vest a taxpayer with a shield against judicial action. For there are no vested rights
to speak of respecting a wrong construction of the law by the administrative officials and such
wrong interpretation could not place the Government in estoppel to correct or overrule the same.
Moreover, the non-retroactivity of rulings by the Commissioner of Internal Revenue is not
applicable in this case because the nullity of RMC No. 7-85 was declared by respondent courts
and not by the Commissioner of Internal Revenue.

6. TAXATION; PAYMENT; CLAIM FOR REFUND; CONSTRUED IN STRICTISSIMI

JURIS AGAINST THE TAXPAYER. — As repeatedly held by this Court, a claim for refund is
in the nature of a claim for exemption and should be construed in strictissimi juris against the
taxpayer.

7. ID.; NATIONAL INTERNAL REVENUE CODE, INCOME TAX; EXCESS OF THE

TOTAL QUARTERLY PAYMENTS THEREOF IS EITHER REFUNDED OR CREDITED
AGAINST THE ESTIMATED QUARTERLY INCOME TAX LIABILITIES FOR THE
SUCCEEDING TAXABLE YEAR. — Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997
NIRC) provides that any excess of the total quarterly payments over the actual income tax
computed in the adjustment or final corporate income tax return, shall either (a) be refunded to
the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for
the quarters of the succeeding taxable year.

8. ID.; ID.; ID.; ID.; REMEDIES ARE IN THE ALTERNATIVE AND THE CHOICE OF
ONE PRECLUDES THE OTHER. — The corporation must signify in its annual corporate
adjustment return (by marking the option box provided in the BIR form) its intention, whether to
request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease
the administration of tax collection, these remedies are in the alternative, and the choice of one
precludes the other.
9. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF QUASI-JUDICIAL
BODIES; ACCORDED GREAT WEIGHT. — That the petitioner opted for an automatic tax
credit in accordance with Sec. 69 of the 1977 NIRC, as specified in its 1986 Final Adjusted
Income Tax Return, is a finding of fact which we must respect. Moreover, the 1987 annual
corporate tax return of the petitioner was not offered as evidence to controvert said fact. Thus,
we are bound by the findings of fact by respondent courts, there being no showing of gross error
or abuse on their part to disturb out reliance thereon.

15. [G.R. No. 81311. June 30, 1988.]

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC.,

HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA,
petitioners, vs. HON. BIENVENIDO TAN, as Commissioner of Internal Revenue, respondent.

16. [G.R. No. L-17725. February 28, 1962.]

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. MAMBULAO LUMBER

COMPANY, ET AL., defendants-appellants.

Solicitor General for plaintiff-appellee.

Arthur Tordesillas for defendants-appellants.

SYLLABUS

1. PUBLIC FORESTS; REFORESTATION CHARGES; NATURE OF FUND

COLLECTED. — Under Section 1 of Republic Act No. 115 the amount collected as
reforestation charges from a timber licensee or concessionaire, reforestation charges from a
timber licensee or concessionaire, shall constitute a fund to be known as the Reforestation Fund,
and the same shall be expanded by the Director of Forestry, with the approval of the Secretary of
Agriculture and Natural Resources for the reforestation or afforestation, among others, of
denuded areas which, upon investigation, are found to be needing reforestation or afforestation.

2. ID.; ID.; ID.; The amount paid by a licensee as reforestation or afforestation charges, is in
the nature of a tax which forms part of the Reforestation Fund, payable by him, irrespective of
whether the area covered by his license is reforested or not. Said Fund, as the law expressly
provides, shall be expended in carrying out the purposes provided for thereunder, namely, the
reforestation or afforestation, among others, of denuded areas needing reforestation or
afforestation.

3. OBLIGATIONS AND CONTRACTS; COMPENSATION WHEN PARTIES ARE NOT

CREDITOR OR DEBTOR OF EACH OTHER. — Where appellant and appellee are not
mutually creditors and debtors of each other, the law on compensation is inapplicable.

4. ID.; ID.; INTERNAL REVENUE TAXES. — Internal Revenue Taxes, such as forest
charges, cannot be the subject of set-off or compensation. It is because taxes are not in the nature
of contracts between the parties but grow out of a duty to, and are positive acts of, the
government, to the making and enforcing of which, the personal consent of the individual
taxpayer is not required.

17. Philex Mining Corporation v. Commissioner of Internal Revenue, G.R. No. 125704, August
28, 1998, 294 SCRA 687.

18. [G.R. No. 103379. November 23, 1993.]

SAN CARLOS MILLING, CO., INCORPORATED, petitioner, vs. COMMISSIONER OF

INTERNAL REVENUE and COURT OF APPEALS, respondents.

Valdes, Valdes & Associates for petitioner.

The Solicitor General for respondent Commissioner of Internal Revenue.

SYLLABUS

1. TAXATION; NATIONAL INTERNAL REVENUE CODE; TAX CREDIT UNDER

SECTION 86 OF THE TAX CODE; PRIOR APPROVAL OF THE COMMISSIONER OF
INTERNAL REVENUE, REQUIRED. — Prior approval by the Commissioner of Internal
Revenue of the tax credit under then Section 86 (now Section 69) of the Tax Code would appear
to be the most reasonable interpretation to be given to said section. An opportunity must be given
the internal revenue branch of the government to investigate and confirm the veracity of the
claims of the taxpayer. The absolute freedom that petitioner seeks to automatically credit tax
payments against tax liabilities for a succeeding taxable year, can easily give rise to confusion
and abuse, depriving the government of authority and control over the manner by which the
taxpayers credit and offset their tax liabilities, not to mention the resultant loss of revenue to the
government under such a scheme.
2. ID.; ID.; ID.; AMOUNT TO BE DETERMINED BY THE COMMISSIONER, NOT
THE TAXPAYER. — Petitioner points out that the automatic tax credit scheme under the law
refers to the amount "shown" in the final adjustment return of the corporate taxpayer and not as
determined by the Commissioner, thereby recognizing the computation made by the taxpayer.
This contention is not impressed with merit. To reiterate, Section 7 of Revenue Regulation No.
10-77 provides that "(a)ny excess . . . computed and shown . . . shall either (a) be refunded to the
corporation, or (b) may be credited against the estimated quarterly income tax liabilities . . ." The
above rule is clear. It does not mean that reference to the amount "shown" in the final adjustment
return prepared by the taxpayer implies that the taxpayer need not seek approval of the
Commissioner prior to its effective availment of the tax credit scheme, it cannot simply credit n
amount it deems as correct.

3. ID.; ID.; ID.; SECTION 7 OF REVENUE REGULATION NO. 10-77; MERELY AN

ALTERNATIVE REMEDY. — It provides two (2) remedies, that is, the excess may either be
refunded or credited, and, insofar as the option of tax credit is concerned, this right should not be
construed as an absolute right which is available to the taxpayer at his sole option. It is our view
that tax credit under the cited provision should be construed as an alternative remedy (to a
refund) subject to the fulfillment of certain requirements, i.e., prior verification and approval by
the Commissioner of Internal Revenue.

4. ID.; ID.; ID.; AVAILABILITY OF REMEDY, NOT ABSOLUTE AND MANDATORY.

— Further, the cited legal provision itself employs the word "may" in the phrase "may be
credited," implying that the availability of the remedy of tax credit is not absolute and
mandatory; it does not confer an absolute right on the taxpayer to avail of the tax credit scheme if
it so chooses; neither does it impose a duty on the part of the government to sit back and allow an
important facet of tax collection to be at the sole control and discretion of the taxpayer.

5. ID.; ID.; CONSTRUCTION OF THE WORD "MAY" IN STATUTE. — As aptly held by

this Court in In re Guarina: "Whether the word 'may' in a statute is to be construed as mandatory
and imposing a duty, or merely permissive and conferring discretion, is to be determined in each
case from the apparent intention of the statute as gathered from the context, as well as from the
language of the particular provision. The question in each case is whether, taken as a whole and
viewed in the light of surrounding circumstances, it can be said that a purpose existed on the part
of the legislator to enact a law mandatory in character. If it can, then it should be given a
mandatory effect; if not, then it should be given its ordinary permissive effect . . ."
19. [G.R. No. 78389. October 16, 1989.]

JOSE LUIS MARTIN C. GASCON, FAUSTINO "BONG" L. LAPIRA, and SPOUSES

ALBERTO AND KARLA LIM, petitioners, vs. The Hon. JOKER T. ARROYO, in his official
capacity as Executive Secretary to the President, Hon. TEODORO C. BENIGNO, as Press
Secretary, Hon. REINERIO REYES, as the Secretary of Transportation and Communication,
Hon. JOSE ALCUAZ, as Chairman of the National Telecommunications Commission, Hon.
CONRADO A. LIMCAOCO, JR., as the Officer-in-Charge of the People's Television 4, ABS-
CBN BROADCASTING CORPORATION, and MESSRS. VICENTE ABAD SANTOS,
PASTOR DEL ROSARIO and CATALINO MACARAIG, JR., in their respective capacities as
Chairman and Members of the "Arbitration Committee", respondents.

SYLLABUS

1. CIVIL PROCEDURE; DECISION THOUGH RENDERED ON THE MERITS

CONSIDERED NOT RENDERED IN A PROPER JUSTICIABLE CASE WHERE
PETITIONERS DO NOT HAVE LEGAL STANDING. — A decision on the merits rendered in a
case where the petitioners do not have the necessary legal standing, would in essence be a
decision not rendered in a proper, justiciable controversy or case. Such a decision appears to me
to be very close to a decision rendered in a petition for declaratory relief or for an advisory
opinion. The Court, of course, has no jurisdiction ratione materiae over declaratory relief cases or
petitions for advisory opinion. It seems to me that disregard of the requirement of legal standing,
where such requirement is applicable, would in effect amount to the Court acting in cases where
it has no subject matter jurisdiction.

2. ID.; SUBSTANTIVE ISSUE; NEED TO BE TRIED IN A PROPER CASE BETWEEN

THE PROPER PARTIES. — The statements made by the Court in respect of the substantive
issue raised — that is, the validity of the agreement to arbitrate said to have been entered into
between the Government of the Republic of the Philippines and the ABS-CBN Broadcasting
Corporation — are, I submit with respect, unnecessary and therefore obiter. That substantive
issue is important; it, among other things, would presumably affect the validity and
enforceability of any award rendered by the arbitral tribunal. But it should be litigated in a proper
case or controversy, between parties who have legal standing to file the case and legal interest in
the subject matter of the case if only for the reason that then the Court might hope to have the
benefit of thorough analysis by counsel of the substantive issues raised.

20. [G.R. No. L-28972. October 31, 1972.]

CITY COUNCIL OF CEBU CITY represented by COUNCILORS FLORENCIO S. UROT,
EULOGIO E. BORRES, RONALD DUTERTE, RAYMUNDO A. CRYSTAL, BIENVENIDO
A. TUDTUD, JOHN U. OSMEÑA and MARIO R. VELOSO, in their capacity as the Majority
Members of the City Council of Cebu and as Citizens of the said City; plaintiffs-appellants, vs.
CARLOS J. CUIZON, Mayor of the City of Cebu, JESUS E. ZABATE, Acting City Treasurer of
the City of Cebu, PHILIPPINE NATIONAL BANK and TROPICAL COMMERCIAL
COMPANY, INCORPORATED, defendants-appellees.

21. [G.R. Nos. L-19824-26. July 9, 1966.]

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. BACOLOD-MURCIA MILLING

CO., MA-AO SUGAR. CENTRAL CO., INC., and TALISAY-SILAY MILLING COMPANY,
defendants-appellants.

22. [G.R. No. 16254. February 21, 1922.]

G. A. CUUNJIENG, plaintiff-appellee, vs. FRED L. PATSTONE, engineer of the city of Manila,

defendant-appellant.

City Fiscal Diaz for appellant.

Gabriel La O for appellee.

SYLLABUS

1. CIVIL PROCEDURE; MANDAMUS. — The question of the constitutionality of a

statute may be raised by the petitioner in mandamus proceedings, but the respondent will not, as
a general rule, be permitted to question the validity of a statute which has not been judicially
declared unconstitutional.

2. MUNICIPAL CORPORATIONS; POWERS. — The city of Manila has no power to

compel property holders to lease the portions of the public sidewalks which adjoin their lands.

3. ID.; ID.; LICENSE FEES; USEFUL OCCUPATIONS OR ENTERPRISES. — In the

absence of special authority to impose a license fee or tax for revenue, the fee for licenses for the
regulation of useful occupations or enterprises may only be of a sufficient amount to include the
expense of issuing the license and the cost of the necessary inspection and police surveillance,
taking into account not only the expense of direct regulation but also incidental consequences.
4. ID.; ID.; ID.; NON-USEFUL OCCUPATIONS. — In fixing fees for licenses for non-
useful occupations, a municipal corporation is allowed a wider discretion than in regard to
license fees for useful occupations, and aside from applying the legal principle that municipal
ordinances must not be unreasonable, oppressive, or tyrannical, the courts have generally
declined to interfere with such discretion.

5. ID.; ID.; ID.; FOR REVENUE. — License fees for revenue rest upon the taxing power as
distinguished from the police power, and the power of the municipality to exact such fees must
be expressly granted by charter or statute and is not to be implied from the conferred power to
license and regulate merely.

6. ID.; ID.; ID. — Section 2507 of the Administrative Code authorizes the Municipal Board
of the city of Manila to establish fire limits, determine the kinds of buildings or structures that
may be erected within said limits, regulate the manner of constructing and repairing the same,
and fix the fees for permits for the construction, repair, or demolition of buildings and structures.
Under this provision the Municipal Board passed an ordinance requiring land owners desiring to
erect buildings upon their property along certain streets to build arcades over the portions of the
sidewalks adjoining their lands, and to pay therefor by way of license fees one-half of the
assessed value of the city land located within the arcades. Held: That this is a license fee for
revenue not authorized under existing statutes.

23. GARCIA VS. EXECUTIVE SECRETARY ET AL., GR. NO 101273, JULY 33, 1992

24. [G.R. No. 88291. May 31, 1991.]

ERNESTO M. MACEDA, petitioner, vs. HON. CATALINO MACARAIG, JR., in his capacity
as Executive Secretary, Office of the President; HON. VICENTE R. JAYME, in his capacity as
Secretary of the Department of Finance; HON. SALVADOR MISON, in his capacity as
Commissioner, Bureau of Customs; HON. JOSE U. ONG, in his capacity as Commissioner of
Internal Revenue; NATIONAL POWER CORPORATION; the FISCAL INCENTIVES
REVIEW BOARD; Caltex (Phils.) Inc.; Pilipinas Shell Petroleum Corporation; Philippine
National Oil Corporation; and Petrophil Corporation, respondents.

Villamor & Villamor Law Offices for petitioner.

Angara, Abello, Concepcion, Regala & Cruz for Pilipinas Shell Petroleum Corporation.

Siguion Reyna, Montecillo & Ongsiako for Caltex (Phils.), Inc.

SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS; CASE OF MERALCO

SECURITIES CORPORATION VS. SAVELLANO, 117 SCRA 804 (1982), APPLIED. — In
Meralco, this Court recognizes the situation when mandamus can control the discretion of the
Commissioners of Internal Revenue and Customs when the exercise of discretion is tainted with
arbitrariness and grave abuse as to go beyond statutory authority.

2. ID.; ID.; WRIT OF PROHIBITION; ISSUANCE THEREOF PROPER IN CASE AT

BAR. — Public respondents assess that a writ of prohibition is not proper as its function is to
prevent an unlawful exercise of jurisdiction or to prevent the oppressive exercise of legal
authority. Precisely, petitioner questions the lawfulness of the acts of public respondents in this
case.

3. TAXATION; TAXPAYERS SUIT; TO PROSPER DIRECT INJURY TO THE

PETITIONER NOT NECESSARY; WHERE ISSUE INVOLVES ILLEGAL EXPENDITURE
OF PUBLIC MONEY. — In the petition it is alleged that petitioner is "instituting this suit in his
capacity as a taxpayer and a duly-elected Senator of the Philippines." Public respondent argues
that petitioner must show he has sustained direct injury as a result of the action and that it is not
sufficient for him to have a mere general interest common to all members of the public. The
Court however agrees with the petitioner that as a taxpayer he may file the instant petition
following the ruling in Lozada when it involves illegal expenditure of public money. The petition
questions the legality of the tax refund to NPC by way of tax credit certificates and the use of
said assigned tax credits by respondent oil companies to pay for their tax and duty liabilities to
the BIR and Bureau of Customs.

4. ID.; APPEAL; COURT OF TAX APPEALS; SECTION 7 OF REPUBLIC ACT NO. 125;
NOT APPLICABLE IN CASE AT BAR. — Assuming petitioner has the personality to file the
petition, public respondents also allege that the proper remedy for petitioner is an appeal to the
Court of Tax Appeals under Section 7 of R.A. No. 125 instead of this petition. However Section
11 of said law provides — "Sec. 11. Who may appeal; effect of appeal — Any person,
association or corporation adversely affected by a decision or ruling of the Commissioner of
Internal Revenue, the Collector of Customs (Commissioner of Customs) or any provincial or
City Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty
days after receipt of such decision or ruling." From the foregoing, it is only the taxpayer
adversely affected by a decision or ruling of the Commissioner of Internal Revenue, the
Commissioner of Customs or any provincial or city Board of Assessment Appeal who may
appeal to the Court of Tax Appeals. Petitioner does not fall under this category.

5. ID.; DISTINCTION BETWEEN DIRECT AND INDIRECT TAXES. — A direct tax is a

tax for which a taxpayer is directly liable on the transaction or business it engages in. Examples
are the custom duties and ad valorem taxes paid by the oil companies to the Bureau of Customs
for their importation of crude oil, and the specific and ad valorem taxes they pay to the Bureau of
Internal Revenue after converting the crude oil into petroleum products. On the other hand,
"indirect taxes are taxes primarily paid by persons who can shift the burden upon someone else."
For example, the excise and ad valorem taxes that oil companies pay to the Bureau of Internal
Revenue upon removal of petroleum products from its refinery can be shifted to its buyer, like
the NPC, by adding them to the "cash" and/or "selling price."

6. ID.; CASE OF NATIONAL POWER CORPORATION VS. PROVINCE OF ALBAY

(G.R. NO. 87479, JUNE 4, 1990) MODIFIED OR SUPERSEDED IN CASE AT BAR. — In the
case of National Power Corporation vs. Province of Albay, the Court observed that under P.D.
No. 776 the power of the FIRB was only recommendatory and requires the approval of the
President to be valid. Thus, in said case the Court held that FIRB Resolutions Nos. 10-85 and 1-
86 not having been approved by the President were not valid and effective while the validity of
FIRB 17-87 was upheld as it was duly approved by the Office of the President on October 5,
1987. However, under Section 2 of P.D. No. 1931 of June 11, 1984, hereinabove reproduced,
which amended P.D. No. 776, it is clearly provided for that such FIRB resolution, may be
approved by the "President of the Philippines and/or the Minister of Finance." To repeat, as FIRB
Resolutions Nos. 10-85 and 1-86 were duly approved by the Minister of Finance, hence they are
valid and effective. To this extent, this decision modifies or supersedes the Court's earlier
decision in National Power Corporation vs. Province of Albay.

7. ID.; NATIONAL POWER CORPORATION; EXEMPT FROM BOTH DIRECT AND

INDIRECT TAXES. — Under R.A. No. 358 the exemption was worded in general terms, as to
cover "all taxes, duties, fees, imposts, charges, etc. . . ." However, the amendment under
Republic Act No. 6395 enumerated the details covered by the exemption. Subsequently, P.D. No.
380, made even more specific the details of the exemption of NPC to cover, among others, both
direct and indirect taxes on all petroleum products used in its operation. Presidential Decree No.
938 amended the tax exemption by simplifying the same law in general terms. It succinctly
exempts NPC from "all forms of taxes, duties, fees, imposts, as well as costs and service fees
including filing fees, appeal bonds, supersedeas bonds, in any court or administrative
proceedings." The use of the phrase "all forms" of taxes demonstrate the intention of the law to
give NPC all the tax exemptions it has been enjoying before.

8. ID.; ID.; ID.; RATIONALE. — The rationale for this exemption is that being non-profit
the NPC "shall devote all its returns from its capital investment as well as excess revenues from
its operation, for expansion. To enable the Corporation to pay the indebtedness and obligations
and in furtherance and effective implementation of the policy enunciated in Section one of this
Act, . . . ." The preamble of P.D. No. 938 states — "WHEREAS, in the application of the tax
exemption provision of the Revised Charter, the non-profit character of the NPC has not been
fully utilized because of restrictive interpretations of the taxing agencies of the government on
said provisions . . ."

9. ID.; ID.; GRANT OF TAX EXEMPTION; INTERPRETED LIBERALLY IN FAVOR

OF A GOVERNMENT INSTRUMENTALITY. — The lawmaker did not intend that the said
provisions of P.D. No. 938 shall be construed strictly against NPC. On the contrary, the law
mandates that it should be interpreted liberally so as to enhance the tax-exempt status of NPC.
Hence, petitioner cannot invoke the rule on strictissimi juris with respect to the interpretation of
statutes granting tax exemptions to NPC. Moreover, it is a recognized principle that the rule on
strict interpretation does not apply in the case of exemptions in favor of a government political
subdivision or instrumentality.

10. ID.; ID.; ID.; EXEMPTION FROM INDIRECT TAXES; NOT REPEALED BY
PRESIDENTIAL DECREE NO. 938; REPEAL BY IMPLICATION NOT FAVORED. — The
contention of petitioner that the exemption of NPC from indirect taxes under Section 13 of R.A.
No. 6395 and P.D. No. 380, is deemed repealed by P.D. No. 938 when the reference to it was
deleted is not well-taken. Repeal by implication is not favored unless it is manifest that the
legislature so intended. As laws are presumed to be passed with deliberation and with knowledge
of all existing ones on the subject, it is logical to conclude that in passing a statute it is not
intended to interfere with or abrogate a former law relating to the same subject matter, unless the
repugnancy between the two is not only irreconcilable but also clear and convincing as a result of
the language used, or unless the latter Act fully embraces the subject matter of the earlier. The
first effort of a court must always be to reconcile or adjust the provisions of one statute with
those of another so as to give sensible effect to both provisions. The legislative intent must be
ascertained from a consideration of the statute as a whole, and not of an isolated part or a
particular provision alone. When construing a statute, the reason for its enactment should be kept
in mind and the statute should be construed with reference to its intended scope and purpose and
the evil sought to be remedied. The NPC is a government instrumentality with the enormous task
of undertaking development of hydroelectric generation of power and production of electricity
from other sources, as well as the transmission of electric power on a nationwide basis, to
improve the quality of life of the people pursuant to the State policy embodied in Section E,
Article II of the 1987 Constitution. It is evident from the provisions of P.D. No. 938 that its
purpose is to maintain the tax exemption of NPC from all forms of taxes including indirect taxes
as provided for under R.A. No. 6395 and P.D. No. 380 if it is to attain its goals.

11. ID.; PRESIDENTIAL DECREE NO. 938; CONSTRUCTION AND INTERPRETATION

BY OFFICE CHARGED WITH THE IMPLEMENTATION THEREOF GIVEN WEIGHT. —
The construction of P.D. No. 938 by the Office charged with its implementation should be given
controlling weight. Since the May 8, 1985 ruling of Commissioner Ancheta, to the letter of the
Secretary of Finance of June 26, 1985 confirming said ruling, the letters of the BIR of August 18,
1986, and December 22, 1986, the letter of the Secretary of Finance of February 19, 1987, the
Memorandum of the Executive Secretary of October 9, 1987, by authority of the President,
confirming and approving FIRB Resolution No. 17-87, the letter of the Secretary of Finance of
May 20, 1988 to the Executive Secretary rendering his opinion as requested by the latter, and the
latter's reply of June 15, 1988, it was uniformly held that the grant of tax exemption to NPC
under C.A. No. 120, as amended, included exemption from payment of all taxes relative to
NPC's petroleum purchases including indirect taxes. The Court finds and so holds that the
foregoing reasons adduced in the aforestated letter of the Secretary of Finance as confirmed by
the then Executive Secretary are well-taken. When the NPC was exempted from all forms of
taxes, duties, fees, imposts and other charges, under P.D. No. 938, it means exactly what it says,
i.e., all forms of taxes including those that were imposed directly or indirectly on petroleum
products used in its operation.

12. ID.; CASE OF PHILIPPINE ACETYLENE CO. INC. VS. COMMISSIONER OF

INTERNAL REVENUE, 20 SCRA 1056 (1967); NOT APPLICABLE IN CASE AT BAR. —
The doctrine in Philippine Acetylene decided in 1967 by this Court cannot apply to the present
case. It involved the sales tax of products the plaintiff sold to NPC from June 2, 1953 to June 30,
1958 when NPC was enjoying tax exemption from all taxes under Commonwealth Act No. 120,
as amended by Republic Act No. 358 issued on June 4, 1949 hereinabove reproduced. In said
case, this Court held, that the sales tax is due from the manufacturer and not the buyer, so
plaintiff cannot claim exemptions simply because the NPC, the buyer, was exempt. However, on
September 10, 1971, Republic Act No. 6395 was passed as the revised charter of NPC whereby
Section 13 thereof was amended by emphasizing its non-profit character and expanding the
extent of its tax exemption. As petitioner concedes, Section 13(d) aforestated of this amendment
under Republic Act No. 6345 spells out clearly the exemption of the NPC from indirect taxes.
And as hereinabove stated, in P.D. No. 380, the exemption of NPC from indirect taxes was
emphasized when it was specified to include those imposed "directly and indirectly." Thereafter,
under P.D. No. 938 the tax exemption of NPC was integrated under Section 13 defining the same
in general terms to cover "all forms of taxes, duties, fees, imposts, etc." which, as hereinabove
discussed, logically includes exemption from indirect taxes on petroleum products used in its
operation. This is the status of the tax exemptions the NPC was enjoying when P.D. No. 1931
was passed, on the authority of which FIRB Resolution Nos. 10-85 and 1-86 were issued, and
when Executive Order No. 93 was promulgated, by which FIRB Resolution 17-87 was issued.
Thus, the ruling in Philippine Acetylene cannot apply to this case due to the different
environmental circumstances. As a matter of fact, the amendments of Section 13, under R.A. No.
6395, P.D. No. 380 and P.D. No. 838 appear to have been brought about by the earlier
inconsistent rulings of the tax agencies due to the doctrine in Philippine Acetylene, so as to leave
no doubt as to the exemption of the NPC from indirect taxes on petroleum products it uses in its
operation. Effectively, said amendments superseded if not abrogated the ruling in Philippine
Acetylene that the tax exemption of NPC should be limited to direct taxes only.
13. ADMINISTRATIVE LAW; DEPARTMENT SECRETARY; MAY BE OVERRULED BY
EXECUTIVE SECRETARY; CASE AT BAR. — Section 2 of E.O. No. 93 provides: "SECTION
2. The Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended,
is hereby authorized to: a) restore tax and or duty exemptions withdrawn hereunder in whole or
in part; b) revise the scope and coverage of tax and of duty exemption that may be restored. c)
impose conditions for the restoration of tax and or duty exemption; d) prescribe the date or
period of effectivity of the restoration of tax and or duty exemption; e) formulate and submit to
the President for approval, a complete system for the grant of subsidies to deserving
beneficiaries, in lieu of or in combination with the restoration of tax and duty exemptions or
preferential treatment in taxation, indicating the source of funding therefor, eligible beneficiaries
and the terms and conditions for the grant thereof taking into consideration the international
commitments of the Philippines and the necessary precautions such that the grant of subsidies
does not become the basis for countervailing action. The then Secretary of Justice in Opinion No.
77 dated August 6, 1977 was of the view that the powers conferred upon the FIRB by Sections
2(a), (b), (c), and (d) of Executive Order No. 93 constitute undue delegation of legislative power
and is therefore unconstitutional. However, he was overruled by the respondent Executive
Secretary in a letter to the Secretary of Finance dated March 30, 1989. The Executive Secretary,
by authority of the President, has the power to modify, alter or reverse the construction of a
statute given by a department secretary.

14. CONSTITUTIONAL LAW; NON-DELEGATION OF LEGISLATIVE POWER;

STANDARD TEST; IMPLIED UNDER SECTION 3 OF EXECUTIVE ORDER 93. — A
reading of Section 3 of E.O. No. 93 which provides: "SECTION 3. In the discharge of its
authority hereunder, the Fiscal Incentives Review Board shall take into account any or all of the
following considerations: a) the effect on relative price levels; b) relative contribution of the
beneficiary to the revenue generation effort; c) nature of the activity the beneficiary is engaged;
d) in general, the greater national interest to be served." Shows that it set the policy to be the
greater national interest. The standards of the delegated power are also clearly provided for. The
required "standard" need not be expressed. In Edu vs. Ericta and in De la Llana vs. Alba, this
Court held: "The standard may be either express or implied. If the former, the non-delegated
objection is easily met. The standard though does not have to be spelled out specifically. It could
be implied from the policy and purpose of the act considered as a whole." In People vs.
Rosenthal the broad standard of "public interest" was deemed sufficient. In Calalang vs.
Williams, it was "public welfare" and in Cervantes vs. Auditor General, it was the purpose of
promotion of "simplicity, economy and efficiency." And, implied from the purpose of the law as
a whole, "national security" was considered sufficient standard and so was "protection of fish-fry
or fish eggs."

15. ID.; ID.; CASE OF TABLARIN VS. GUTIERREZ, 152 SCRA 730 (1981);
ENUNCIATED THE RATIONALE IN FAVOR OF DELEGATION OF LEGISLATIVE
FUNCTIONS. — In the case of Tablarin vs. Gutierrez, this Court enunciated the rationale in
favor of delegation of legislative functions — "One thing however, is apparent in the
development of the principle of separation of powers and that is that the maxim of delegatus non
potest delegare or delegati potestas non potest delegare, adopted this practice (Delegibus et
Consuetudiniis, Anglia edited by G.E. Woodline, Yale University Press, 1922, Vol. 2, p. 167) but
which is also recognized in principle in the Roman Law (d. 17.18.3) has been made to adapt
itself to the complexities of modern government, giving rise to the adoption, within certain
limits, of the principle of subordinate legislation, not only in the United States and England but
in practically all modern governments. (People vs. Rosenthal and Osmeña, 68 Phil. 318, 1939).
Accordingly, with the growing complexities of modern life, the multiplication of the subjects of
governmental regulation, and the increased difficulty of administering the laws, there is a
constantly growing tendency toward the delegation of greater power by the legislative, and
toward the approval of the practice by the Courts."

16. ID.; ID.; EXECUTIVE ORDER NO. 93; CONSTITUTIONALITY THEREOF

UPHELD. — The legislative authority could not or is not expected to state all the detailed
situations wherein the tax exemption privileges of persons or entities would be restored. The task
may be assigned to an administrative body like the FIRB. Moreover, all presumptions are
indulged in favor of the constitutionality and validity of the statute. Such presumption can be
overturned if its invalidity is proved beyond reasonable doubt. Otherwise, a liberal interpretation
in favor of constitutionality of legislation should be adopted. E.O. No. 93 is complete in itself
and constitutes a valid delegation of legislative power to the FIRB. And as above discussed, the
tax exemption privilege that was restored to NPC by FIRB Resolution No. 17-87 of June 1987
includes exemption from indirect taxes and duties on petroleum products used in its operation.

17. ID.; ID.; PRESIDENTIAL DECREE NO. 776 AND 1931; CONSTITUTIONALITY
UPHELD IN THE CASE OF NATIONAL POWER CORPORATION VS. PROVINCE OF
ALBAY (G.R. NO. 87479, JUNE 4, 1990). — In Albay, as above stated, this Court upheld the
validity of P.D. Nos. 776 and 1931. The latter decree withdrew tax exemptions of government-
owned or controlled corporations including their subsidiaries but authorized the FIRB to restore
the same. Nevertheless, in Albay, as above-discussed, this Court ruled that the tax exemptions
under FIRB Resolution Nos. 10-85 and 1-86 cannot be enforced as said resolutions were only
recommendatory and were not duly approved by the President of the Philippines as required by
P.D. No. 776. The Court also sustained in Albay the validity of Executive Order No. 93, and of
the tax exemptions restored under FIRB Resolution No. 17-87 which was issued pursuant
thereto, as it was duly approved by the President as required by said executive order. Moreover,
under Section 3, Article XVIII of the Transitory Provisions of the 1987 Constitution, it is
provided that: "All existing laws, decrees, executive orders, proclamation, letters of instructions,
and other executive issuances not inconsistent with this constitution shall remain operative until
amended, repealed or revoked." Thus, P.D. Nos. 776 and 1931 are valid and operative unless it is
shown that they are inconsistent with the Constitution.
18. ID.; LATEST LAW APPLICABLE ON TAX EXEMPTION OF NATIONAL POWER
CORPORATION. — Even assuming arguendo that P.D. Nos. 776, 1931 and Executive Order
No. 93 are not valid and are unconstitutional, the result would be the same, as then the latest
applicable law would be P.D. No. 938 which amended the NPC charter by granting exemption to
NPC from all forms of taxes. As above discussed, this exemption of NPC covers direct and
indirect taxes on petroleum products used in its operation. This is as it should be, if We are to
hold as invalid and inoperative the withdrawal of such tax exemptions under P.D. No. 1931 as
well as under Executive Order No. 93 and the delegation of the power to restore these
exemptions to the FIRB.

19. ID.; GRANT OF TAX EXEMPTION TO NATIONAL POWER CORPORATION NOT A

CASE OF TAX EVASION. — This 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 the consumers. The allegation that this is in effect allowing tax evasion by oil
companies is not quite correct. There are various arrangements in the payment of crude oil
purchased by NPC from oil companies. Generally, the custom duties paid by the oil companies
are added to the selling price paid by NPC. As to the specific and ad valorem taxes, they are
added as part of the seller's price, but NPC pays the price net of tax, on condition that NPC
would seek a tax refund to the oil companies. No tax component on fuel had been charged or
recovered by NPC from the consumers through its power rates. Thus, this is not a case of tax
evasion of the oil companies but of tax relief for the NPC.

25. [G.R. No. 108524. November 10, 1994.]

MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC., petitioner, vs.

DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF
INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS
ORIENTAL, respondents.

SYLLABUS

1. ADMINISTRATIVE LAW; ADMINISTRATIVE INTERPRETATION OF LAWS BY

GOVERNMENT AGENCY CHARGED WITH ITS ENFORCEMENT, ENTITLED TO GREAT
WEIGHT. — Under Section 103(a) of the NIRC, the sale of agricultural non-food products in
their original state is exempt from VAT only if the sale is made by the primary producer or owner
of the land from which the same are produced. The sale made by any other person or entity, like
a trader or dealer, is not exempt from the tax. On the other hand, under Section 103(b) the sale of
agricultural food products in their original state is exempt from VAT at all stages of production or
distribution regardless of who the seller is. We agree with respondents. In interpreting Section
103(a) and (b) of the NIRC, the Commissioner of Internal Revenue gave it a strict construction
consistent with the rule that tax exemptions must be strictly construed against the taxpayer and
liberally in favor of the state. Indeed, even Dr. Kintanar said that his classification of copra food
was based on "the broader definition of food which includes agricultural commodities and other
components used in the manufacture/processing of food." Moreover, as the government agency
charged with the enforcement of the law, the opinion of the Commissioner of Internal Revenue,
in the absence of any showing that it is plainly wrong, is entitled to great weight. Indeed, the
ruling was made by the Commissioner of Internal Revenue in the exercise of his power under
Section 245 of the NIRC to "make rulings or opinions in connection with the implementation of
the provisions of internal revenue laws, including rulings on the classification of articles for sales
tax and similar purposes."

2. ID.; DISTINCTION BETWEEN LEGISLATIVE RULES AND INTERPRETATIVE

RULES. — There is a distinction in administrative law between legislative rules and
interpretative rules. There would be force in petitioner's argument if the circular in question were
in the nature of a legislative rule. But it is not. It is a mere interpretative rule. In addition such
rule must be published. On the other hand, interpretative rules are designed to provide guidelines
to the law which the administrative agency is in charge of enforcing. Accordingly, in considering
a legislative rule a court is free to make three inquiries: (i) whether the rule is within the
delegated authority of the administrative agency; (ii) whether it is reasonable; and (iii) whether it
was issued pursuant to proper procedure. But the court is not free to substitute its judgment as to
the desirability or wisdom of the rule for the legislative body, by its delegation of administrative
judgment, has committed those questions to administrative judgments and not to judicial
judgments. In the case of an interpretative rule, the inquiry is not into the validity but into the
correctness or propriety of the rule. As a matter of power a court, when confronted with an
interpretative rule, is free to (i) give the force of law to the rule; (ii) go to the opposite extreme
and substitute its judgment; or (iii) give some intermediate degree of authoritative weight to the
interpretative rule.

3. ID.; ID.; REASON. — The reason for this distinction is that a legislative rule is in the
nature of subordinate legislation, designed to implement a primary legislation by providing the
details thereof. In the same way that laws must have the benefit of public hearing, it is generally
required that before a legislative rule is adopted there must be hearing.

4. TAXATION; NATIONAL INTERNAL REVENUE CODE; COMMISSIONER OF

INTERNAL REVENUE; NOT BOUND BY THE RULING OF HIS PREDECESSOR; MAY
CONSIDER COPRA AS A NON-FOOD PRODUCT; CASE AT BAR. — In the case at bar, we
find no reason for holding that respondent Commissioner erred in not considering copra as an
"agricultural food product" within the meaning of Section 103(b) of the NIRC. As the Solicitor
General contends, "copra per se is not food, that is, it is not intended for human consumption.
Simply stated, nobody eats copra for food." That previous Commissioners considered it so, is not
reason for holding that the present interpretation is wrong. The Commissioner of Internal
Revenue is not bound by the ruling of his predecessors. To the contrary, the overruling of
decisions is inherent in the interpretation of laws.

5. CONSTITUTIONAL LAW; EQUAL PROTECTION CLAUSE; SUBSTANTIAL

DIFFERENCE BETWEEN COCONUT FARMER AND COPRA PRODUCERS,
REASONABLE BASIS FOR DIFFERENT CLASSIFICATION FOR PURPOSES OF
TAXATION; CASE AT BAR. — Petitioner likewise claims that RMC No. 47-91 is
discriminatory and violative of the equal protection clause of the Constitution because while
coconut farmers and copra producers are exempt, traders and dealers are not, although both sell
copra in its original state. Petitioners add that oil millers do not enjoy tax credit out of the VAT
payment of traders and dealers. The argument has no merit. There is a material or substantial
difference between coconut farmers and copra producers, on the one hand, and copra traders and
dealers, on the other. The former produce and sell copra, the latter merely sell copra. The
Constitution does not forbid the differential treatment of persons so long as there is a reasonable
basis for classifying them differently. It is not true that oil millers are exempt from VAT. Pursuant
to Section 102 of the NIRC, they are subject to 10% VAT on the sale of services. Under Section
104 of the Tax Code, they are allowed to credit the input tax on the sale of copra by traders and
dealers, but there is no tax credit if the sale is made directly by the copra producer as the sale is
VAT exempt. In the same manner, copra traders and dealers are allowed to credit the input tax on
the sale of copra by other traders and dealers, but there is no tax credit if the sale is made by the
producer.

6. TAXATION; NATIONAL INTERNAL REVENUE CODE; VAT; ALLEGATION OF

COUNTER PRODUCTIVITY OF CLASSIFICATION OF COPRAS AS AN AGRICULTURAL
NON-FOOD, A QUESTION OF WISDOM OR POLICY. — The sale of agricultural non-food
products is exempt from VAT only when made by the primary producer or owner of the land
from which the same is produced, but in the case of agricultural food products their sale in their
original state is exempt at all stages of production or distribution. At any rate, the argument that
the classification of copra as agricultural non-food product is counterproductive is a question of
wisdom or policy which should be addressed to respondent officials and to Congress.
26. PHILIPPINE AIRLINES, INC. VS. SECRETARY OF FINANCE, ET AL., GR 115852,
OCT. 30 1995

27. [G.R. No. L-24813. April 28, 1969.]

DR. HERMENEGILDO SERAFICA, plaintiff-appellant, vs. THE TREASURER OF ORMOC

CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON. ESTEBAN C. CONEJOS, as
Mayor of Ormoc City and ORMOC CITY, defendants-appellees.

Cleto P. Evangelista for plaintiff-appellant.

The City Fiscal of Ormoc City for defendants-appellees.

SYLLABUS

1. TAXATION; SALES TAX; VALIDITY OF CITY ORDINANCE IMPOSING SALES

TAX ON LUMBER; DOUBLE TAXATION NOT PROHIBITED. — A city ordinance imposing
a tax on the sale of lumber cannot be declared null and void on the ground that "the ordinance in
question imposes in effect double taxation because the business of lumber yard is already
regulated under the Charter and the sale of lumber is `a mere incident of the business of lumber
yard.'" Suffice it to say that regulation and taxation are two different things, the first being an
exercise of police power, whereas the latter is not, apart from the fact that double taxation is not
prohibited in the Philippines.

2. ID.; ID.; ID.; PRESUMPTION OF VALIDITY STANDS IN THE ABSENCE OF

PROOF THAT TAX IN QUESTION IS OPPRESSIVE. — Where the validity of the tax imposed
on the sale of lumber is assailed on the ground that it is "unfair, unjust, arbitrary, unreasonable,
oppressive and contrary to the principles of taxation" but there is no proof of the fact that the tax
in question is imposed regardless of the class of lumber sold although there are several categories
thereof commanding different prices, nor of the prices corresponding to each category, the Court
has no means to ascertain the accuracy of the unfairness of the tax and must, accordingly, rely
upon the presumption that the ordinance is valid unless and until the contrary has been duly
established.

3. ID.; ID.; ID.; HOLDING OF PUBLIC HEARING IN THE ENACTMENT OF TAX

ORDINANCE; NON-COMPLIANCE WITH SUGGESTION DOES NOT AFFECT VALIDITY
OF TAX ORDINANCE. — Provincial Circular No. 24 of the Department of Finance, dated
March 31, 1960, suggesting that, "in the enactment of tax ordinances . . . , under the Local
Autonomy Act, . . . where practicable, public hearing be held wherein the views of the public . . .
may be heard," is a mere suggestion, compliance with which is not obligatory, so that failure to
act in accordance therewith can not and does not affect the validity of the tax ordinance.

4. ID.; ID.; ID.; PROHIBITION ON THE IMPOSITION OF TAXES ON FOREST

PRODUCTS DOES NOT APPLY TO TAX ON SALE THEREOF. — The limitation in Sec. 2 of
R.A. No. 2264 as amended providing that "no city, municipality or municipal district may levy or
impose ... (a) Taxes on forest products or forest concessions" has no application to the case at bar
wherein the validity of a sales tax on lumber is being questioned. The tax in question is being
imposed not upon lumber, but upon its sale. Said tax is not levied upon the lumber in the sawmill
and does not become due until after the lumber has been sold.

5. ID.; ID.; ID.; PROHIBITION ON THE IMPOSITION OF A SALES TAX LIMITED TO

MUNICIPALITIES AND MUNICIPAL DISTRICTS, CITIES NOT INCLUDED. — The
proviso in Sec. 2 of R.A. No. 2264 as amended prohibiting the imposition of "any percentage tax
on sales or other taxes in any form based thereon," is an injunction directed exclusively to
"municipalities and municipal districts" and does not apply to cities.

28. [G.R. No. L-16315. May 30, 1964.]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HAWAIIAN-PHILIPPINE

COMPANY, respondent.

Solicitor General for petitioner.

Hilado & Hilado for respondent.

SYLLABUS

1. TAXATION; FIXED AND PERCENTAGE TAXES; WAREHOUSEMAN. — A

warehouseman is one who receives and stores goods of another for compensation.

2. ID.; ID.; ID.; SUGAR CENTRAL STORING SUGAR OF ITS PLANTERS IS A

WAREHOUSEMAN. — A sugar central storing sugar of its planters in its warehouses and
collecting storage fees after the first ninety days of deposit is liable as warehouseman for the
payment of the fixed and percentage taxes prescribed in Sections 182 and 191 of the National
Internal Revenue Code.
3. ID.; ID.; NO DOUBLE TAXATION ON TAXING SUGAR CENTRAL FOR ITS
WAREHOUSE BUSINESS. — A sugar central's warehousing business, although carried on in its
relation to the operation of its central, is a distinct and separate business, and there can be no
double taxation where the State imposes a tax on its warehouse fees collected.

29. [G.R. No. L-16619. June 29, 1963.]

COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee, vs. CITY OF

MANILA, ET AL., defendants-appellants.

Ponce Enrile, Siguion Reyna, Montecillo & Belo for plaintiff-appellee.

City Fiscal Hermogenes Concepcion, Jr., and Assistant City Fiscal M.T . Reyes for defendants-
appellants.

SYLLABUS

1. TAXATION; WHOLESALE AND RETAIL SALES ON LIQUOR; DISTINCTION

BETWEEN LICENSE FEE AND TAX. — The term "tax" applies — generally speaking — to
all kinds of exactions which become public funds. The term is often loosely used to include
levies for revenue as well as levies for regulatory purposes. Thus license fees are commonly
called taxes. Legally speaking, license fee is a legal concept quite distinct from tax; the former is
imposed in the exercise of police power for purposes of regulation, while the latter is imposed
under the taxing power for the purpose of raising revenue (McQuillin, Municipal Corporations,
Vol. 9, 3rd Edition, p. 26).

2. ID.; ID.; ID.; VALID IMPOSITION OF LICENSE FEE AND TAX ON SAME
BUSINESS OR OCCUPATION, OR FOR SELLING SAME ARTICLE. — Both a licensee fee
and a tax may be imposed on the same business or occupation, or for selling the same article this
not being a violation of the rule against double taxation (Bentley Gray Dry Goods Co. vs. City of
Tampa, 137 Fla. 641, 188 SO. 758; McQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p.
83).

3. ID.; ID.; MEANING OF WORD "MERCHANDISE". — The word "merchandise" refers

to all subjects of commerce and traffic; whatever is usually bought and sold in trade or market;
goods or wares bought and sold for gain; commodities or goods to trade; and commercial
commodities in general. (City of Manila vs. Inter Island Gas Service Inc., G.R. No. L-8799,
August 31, 1956.)

30. [G.R. No. L-20312. February 26, 1972.]

SAN MIGUEL BREWERY, INC., plaintiff-appellant, vs. THE CITY OF CEBU, defendant-
appellee.

[G.R. No. L-20496. February 26, 1972.]

CEBU PORTLAND CEMENT COMPANY, plaintiff-appellant, vs. MUNICIPALITY OR

NAGA, CEBU and THE MUNICIPAL TREASURER, NAGA, CEBU, defendants-appellees.

L-20312

Picazo & Agcaoili for plaintiff and appellant.

Quirico del Mar, Eliseo Ynclino and Assistant City Fiscal for defendant and appellee.

SYLLABUS

1. POLITICAL LAW; LOCAL AUTONOMY ACT; GRANT OF POWER TO MUNICIPAL

CORPORATIONS TO LEVY TAXES; SECTION 2. — Referring to section 2 of Republic Act
No. 2264 (Local Autonomy Act), this Court declared in Nin Bay Mining Co. vs. Municipality of
Roxas, Palawan, that said Act "confers upon all chartered cities, municipalities and municipal
districts the general power to levy, not only taxes, but also, municipal license taxes, subject to
specified exceptions, as well as service fees."

2. ID.; ID.; ID.; ID.; POWER TO TAX, PLENARY. — Luzon Surety Co., Inc. vs. City of
Bacolod cited with approval the fact that this Court has consistently upheld the "doctrine that the
grant of the power to tax to chartered cities under section 2 of the Local Autonomy Act is
sufficiently plenary to cover everything excepting those which are mentioned therein, subject
only to the limitation that the tax so levied is for public purposes, just and uniform.

3. ID.; ID.; ID.; ORDINANCE IMPOSING TAX PRESUMED VALID; TAXPAYER TO

PROVE THAT TAX IS EXCESSIVE, OPPRESSIVE AND CONFISCATORY; CASE AT BAR.
— The objection of Cebu Portland that the tax in question is excessive, oppressive and
confiscatory cannot be sustained because it has not introduce any evidence in support of its claim
for "an ordinance carries with it the presumption of validity. The question of reasonableness
though is open to judicial inquiry. Much should be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an ordinance as unreasonable unless the amount is
so excessive as to be prohibitive. A rule which has gained acceptance is that factors relevant to
such an inquiry are the municipal conditions as a whole and the nature of the business made
subject to imposition."

4. ID.; ID.; ID.; TAX NOT PERCENTAGE, SALES OR SPECIFIC TAX IN CASE AT
BAR. — The tax involved in L-20496 does not partake of the nature of a percentage or sales tax
or a specific tax, merely because the amount of the tax is dependent upon the maximum annual
capacity of the cement factory subject thereto for settled is the rule that a graduation of the tax
based upon the taxpayer's volume of business, when the same is considered solely for purposes
of classification, and there is no set ratio between said volume and the amount of the tax, does
not render the latter invalid as a sales, percentage or specific tax.

5. ID.; ID.; GRANT OF POWER TO CHARTERED CITIES TO IMPOSE SALES TAX;

SECTION 2. — The authority of cities under section 2 of Rep. Act No. 2264, to impose a sales
tax has already been upheld in City of Bacolod vs. Gruet and Pepsi-Cola Bottling Co. of the
Philippines, Inc. vs. City of Butuan.

6. TAXATION; DOUBLE TAXATION; CONCEPT OF; NOT PROHIBITED BY

CONSTITUTION; NO DOUBLE TAXATION IN CASE AT BAR. — There is double taxation
when the same person is taxed by the same jurisdiction for the same purpose, which is not the
case in L-20312, for the ordinance in question imposes a tax on the sale or disposal of every
"bottle or container" of "liquor or intoxicating beverages," and, as such, is a typical tax or
revenue measure, whereas the sum of P600 it pays annually is for a "second-class wholesale
liquor license," which is a license to engage in the business of wholesale liquor in Cebu city, and,
accordingly, constitutes a regulatory measure, in the exercise of the police power. In any case,
however, double taxation is not prohibited by the Constitution.

31. [G.R. No. 115455. October 30, 1995.]

ARTURO M. TOLENTINO, petitioner, vs. THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE, respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; LEGISLATURE; POWER OF THE SENATE TO

PROPOSE AMENDMENTS TO REVENUE BILLS; S. NO. 1630 AS A SUBSTITUTE
MEASURE TO H. NO. 11197. — The enactment of S. No. 1630 is not the only instance in
which the Senate, in the exercise of its power to propose amendments to bills required to
originate in the House, passed its own version of a House revenue measure. Art. VI, § 24 of our
Constitution reads: 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. The power of the
Senate to propose amendments must be understood to be full, plenary and complete "as on other
Bills." Because revenue bills are required to originate exclusively in the House of
Representatives, the Senate cannot enact revenue measures of its own without such bills. After a
revenue bill is passed and sent over to it by the House, however, the Senate certainly can pass its
own version on the same subject matter. This follows from the coequality of the two chambers of
Congress. The provision "but the Senate may propose or concur with amendments" means the
Senate may propose an entirely new bill as a substitute measure. To except from the procedure
(Re: bill referred to a committee) the amendment of bills which are required to originate in the
House by prescribing that the number of the House bill and its other parts up to the enacting
clause must be preserved although the text of the Senate amendment may be incorporated in
place of the original body of the bill is to insist on a mere technicality. At any rate there is no rule
prescribing this form. S. No. 1630, as a substitute measure, is therefore as much an amendment
of H. No. 11197 as any which the Senate could have made. In point of fact, in several instances
the provisions of S. No. 1630, clearly appear to be mere amendments of the corresponding
provisions of H. No. 11197. The very tabular comparison of the provisions thereof, while
showing differences between the two bills, at the same time indicates that the provisions of the
Senate bill were precisely intended to be amendments to the House bill. Without H. No. 11197,
the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere amendment
of the House bill, H. No. 11197 in its original form did not have to pass the Senate on second and
third readings. It was enough that after it was passed on first reading it was referred to the Senate
Committee on Ways and Means. Neither was it required that S. No. 1630 be passed by the House
of Representatives before the two bills could be referred to the Conference Committee.

2. ID.; ID.; PRESIDENT'S CERTIFICATION IN RELATION TO THE REQUIREMENT

OF THREE READINGS ON SEPARATE DAYS BEFORE A BILL BECOMES A LAW; CASE
AT BAR. — The President's certification had to be made of the version of the same revenue bill
which at the moment was being considered. It is enough that he certifies the bill which, at the
time he makes the certification, is under consideration. Since on March 22, 1994 the Senate was
considering S. No. 1630, it was that bill which had to be certified. For that matter on June 1,
1993 the President had earlier certified H. No. 9210 for immediate enactment because it was the
one which at that time was being considered by the House. This bill was later substituted,
together with other bills, by H. No. 11197. As to what Presidential certification can accomplish,
we have already explained in the main decision that the phrase "except when the President
certifies to the necessity of its immediate enactment, etc." in Art. VI, § 26 (2) qualifies not only
the requirement that "printed copies [of a bill] in its final form [must be] distributed to the
members three days before its passage" but also the requirement that before a bill can become a
law it must have passed "three readings on separate days." There is not only textual support for
such construction but historical basis as well. This exception is based on the prudential
consideration that if in all cases three readings on separate days are required and a bill has to be
printed in final form before it can be passed, the need for a law may be rendered academic by the
occurrence of the very emergency or public calamity which it is meant to address. The members
of the Senate (including some of the petitioners in these cases) believed that there was an urgent
need for consideration of S. No. 1630, because they responded to the call of the President by
voting on the bill on second and third readings on the same day. While the judicial department is
not bound by the Senate's acceptance of the President's certification, the respect due coequal
departments of the government in matters committed to them by the Constitution and the absence
of a clear showing of grave abuse of discretion caution a stay of the judicial hand. At any rate,
we are satisfied that S. No. 1630 received thorough consideration in the Senate where it was
discussed for six days. Only its distribution in advance in its final printed form was actually
dispensed with by holding the voting on second and third readings on the same day (March 24,
1994). Otherwise, sufficient time between the submission of the bill on February 8, 1994 on
second reading and its approval on March 24, 1994 elapsed before it was finally voted on by the
Senate on third reading. The purpose for which three readings on separate days is required is said
to be two-fold: (1) to inform the members of Congress of what they must vote on and (2) to give
them notice that a measure is progressing through the enacting process, thus enabling them and
others interested in the measure to prepare their positions with reference to it. These purposes
were substantially achieved in the case of R.A. No. 7716.

3. ID.; ID.; CONFERENCE COMMITTEE; CLOSE-DOOR MEETING;

CONSTITUTIONAL RIGHT TO KNOW, NOT VIOLATED THEREOF IN LIEU OF REPORT
SUBMITTED BY THE COMMITTEE. — The public's right to know was fully served because
the Conference Committee in this case submitted a report showing the changes made on the
differing versions of the House and the Senate. These changes are shown in the bill attached to
the Conference Committee Report. The members of both houses could thus ascertain what
changes had been made in the original bills without the need of a statement detailing the
changes. Nor is there any doubt about the power of a conference committee to insert new
provisions as long as these are germane to the subject of the conference. As this Court held in
Philippine Judges Association v. Prado, 227 SCRA 703 (1993), in an opinion written by then
Justice Cruz, the jurisdiction of the conference committee is not limited to resolving differences
between the Senate and the House. It may propose an entirely new provision. What is important
is that its report is subsequently approved by the respective houses of Congress. This Court ruled
that it would not entertain allegations that, because new provisions had been added by the
conference committee, there was thereby a violation of the constitutional injunction that "upon
the last reading of a bill, no amendment thereto shall be allowed." At all events, under Art. VI, §
16(3) each house has the power "to determine the rules of its proceedings," including those of its
committees. Any meaningful change in the method and procedures of Congress or its committees
must therefore be sought in that body itself.

4. ID.; ID.; RA 7716 (EXPANDED VALUE-ADDED-TAX [VAT] LAW); REQUIREMENT

THAT BILL SHALL EMBRACE ONLY ONE (1) SUBJECT EXPRESSED IN THE TITLE
THEREOF, NOT VIOLATED IN CASE AT BAR; AMENDMENT OF SEC. 103 OF THE
NATIONAL INTERNAL REVENUE CODE EXEMPTING THE PHILIPPINE AIRLINES
(PAL) AND OTHERS FROM PAYING VAT EXPRESSED IN RA 7716, SUFFICIENT;
SEPARATE STATEMENT AMENDING FRANCHISE, NOT NECESSARY. — Art. VI, § 26 (1)
of the Constitution provides that "Every bill passed by Congress shall embrace only one subject
which shall be expressed in the title thereof." PAL contends that the amendment of its franchise
by the withdrawal of its exemption from the VAT is not expressed in the title of R.A. No. 7716.
PAL was exempted from the payment of the VAT along with other entities by 103 of the National
Internal Revenue Code. Now, R.A. No. 7716 seeks to withdraw certain exemptions, including
that granted to PAL, by amending § 103. Such amendment of § 103 is expressed in the title of
R.A. No. 7716. Congress thereby clearly expresses its intention to amend any provision of the
NIRC which stands in the way of accomplishing the purpose of the law. PAL asserts that the
amendment of its franchise must be reflected in the title of the law by specific reference to P.D.
No. 1590. It is unneccesary to do this in order to comply with the constitutional requirement,
since it is already stated in the title that the law seeks to amend the pertinent provisions of the
NIRC, among which is § 103(q), in order to widen the base of the VAT. Actually, it is the bill
which becomes a law that is required to express in its title the subject of legislation. The titles of
H. No. 11197 and S. No. 1630 in fact specifically referred to § 103 of the NIRC as among the
provisions sought to be amended. We are satisfied that sufficient notice had been given of the
pendency of these bills in Congress before they were enacted into what is now R.A. No. 7716.
CDta

5. ID.; ID.; ID.; TAXATION AND FREEDOM OF THE PRESS, ELABORATED. — As a

general proposition, the press is not exempt from the taxing power of the State and that what the
constitutional guarantee of free press prohibits are laws which single out the press or target a
group belonging to the press for special treatment or which in any way discriminate against the
press on the basis of the content of the publication, and R.A. No. 7716 is none of these. Since the
law granted the press a privilege, the law could take back the privilege anytime without offense
to the Constitution. The reason is simple: by granting exemptions, the State does not forever
waive the exercise of its sovereign prerogative. Indeed, in withdrawing the exemption, the law
merely subjects the press to the same tax burden to which other businesses have long ago been
subject. And VAT is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or
the sale or exchange of services and the lease of properties purely for revenue purposes. To
subject the press to its payment is not to burden the exercise of its right any more than to make
the press pay income tax or subject it to general regulation is not to violate its freedom under the
Constitution.

6. ID.; ID.; ID.; TAXATION AND FREEDOM OF RELIGION IN CASE AT BAR. — The
Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the
sales are used to subsidize the cost of printing copies which are given free to those who cannot
afford to pay so that to tax the sales would be to increase the price, while reducing the volume of
sale. Granting that to be the case, the resulting burden on the exercise of religious freedom is so
incidental as to make it difficult to differentiate it from any other economic imposition that might
make the right to disseminate religious doctrines costly. The registration fee imposed by § 107 of
the NIRC, as amended by 7 of R.A. No. 7716, although fixed in amount, is really just to pay for
the expenses of registration and enforcement of provisions such as those relating to accounting in
§ 108 of the NIRC. That the PBS distributes free bibles and therefore is not liable to pay the VAT
does not excuse it from the payment of this fee because it also sells some copies. At any rate
whether the PBS is liable for the VAT must be decided in concrete cases, in the event it is
assessed this tax by the Commissioner of Internal Revenue.

7. ID.; ID.; ID.; TAXATION AND NON-IMPAIRMENT OF CONTRACTS. —

"Authorities from numerous sources are cited by the plaintiffs, but none of them show that a
lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or
impairs its obligation, within the meaning of the Constitution. Even though such taxation may
affect particular contracts, as it may increase the debt of one person and lessen the security of
another, or may impose additional burdens upon one class and release the burdens of another,
still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs
the obligation of any existing contract in its true legal sense." Indeed not only existing laws but
also "the reservation of the essential attributes of sovereignty, is . . . read into contracts as a
postulate of the legal order." Contracts must be understood as having been made in reference to
the possible exercise of the rightful authority of the government and no obligation of contract can
extend to the defeat of that authority.

8. ID.; ID.; ID.; ON REAL ESTATE TRANSACTIONS; EQUALITY AND UNIFORMITY

OF TAXATION; VALIDITY OF VAT. — CREBA claims that real estate transactions of "the less
poor," i.e., the middle class, who are equally homeless, should be exempted. There is a difference
between the "homeless poor" and the "homeless less poor" in the example given by petitioner,
because the second group or middle class can afford to rent houses in the meantime that they
cannot yet buy their own homes. The two social classes are thus differently situated in life. "It is
inherent in the power to tax that the 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.'" Equality and uniformity of taxation
means that all taxable articles or kinds of property of the same class be taxed at the same rate.
The taxing power has the authority to make reasonable and natural classifications for purposes of
taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to
all persons, forms and corporations placed in similar situation. Indeed, the VAT was already
provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716 merely
expands the base of the tax. The validity of the original VAT Law was questioned on grounds
similar to those made in these cases, namely, that the law was "oppressive, discriminatory, unjust
and regressive in violation of Art. VI, § 28(1) of the Constitution." This Court held: EO 273
satisfies all the requirements of a valid tax. It is uniform. . . . The sales tax adopted in EO 273 is
applied similarly on all goods and services sold to the public, which are not exempt, at the
constant rate of 0% or 10%. The disputed sales tax is also equitable. It is imposed only on sales
of goods or services by persons engaged in business with an aggregate gross annual sales
exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from its
application. Likewise exempt from the tax are sales of farm and marine products, so that the
costs of basic food and other necessities, spared as they are from the incidence of the VAT, are
expected to be relatively lower and within the reach of the general public.

9. ID.; ID.; ID.; VAT IS AN INDIRECT AND REGRESSIVE TAX WHICH IS NOT
ACTUALLY PROHIBITED BY THE CONSTITUTION. — The Constitution does not really
prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply
provides is that Congress shall "evolve a progressive system of taxation." The constitutional
provision has been interpreted to mean simply that "direct taxes are . . . to be preferred [and] as
much as possible, indirect taxes should be minimized." Indeed, the mandate to Congress is not to
prescribe, but to evolve, a progressive tax system. Sales taxes, are form of indirect taxes, and
they are also regressive. Resort to indirect taxes should be minimized but not avoided entirely
because it is difficult, if not impossible, to avoid them by imposing such taxes according to the
taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this
imposition by providing for zero rating of certain transactions (R.A. No. 7716, 3, amending §
102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, § 4,
amending § 103 of the NIRC) Transactions involving basic and essential goods and services are
exempted from the VAT. On the other hand, the transactions which are subject to the VAT are
those which involve goods and services which are used or availed of mainly by higher income
groups.

10. ID.; JUDICIARY; JUDICIAL POWER; CASE MUST BE ACTUAL FOR

ADJUDICATION. — CREBA's petition claims constitutional violations at wholesale and in the
abstract. There is no fully developed record which can impart to adjudication the impact of
actuality. There is no factual foundation to show in the concrete the application of the law to
actual contracts and exemplify its effect on property rights. A test case may be presented
provided, it is an actual case and not an abstract or hypothetical one. Our duty under Art. VIII, §
1 (2) to decide whenever a claim is made that "there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
government" can only arise if an actual case or controversy is before us.

11. ID.; LEGISLATION; RA NO. 7716; ON COOPERATIVES; NO VIOLATION OF

CONSTITUTIONAL POLICY TOWARDS THE SAME SIMPLY BECAUSE TAX
EXEMPTION WAS NOT GRANTED. — The Constitution does not require that cooperatives be
granted tax exemptions in order to promote their growth and viability. There is no basis for
petitioner's assertion that the government's policy toward cooperatives had been one of
vacillation, as far as the grant of tax privileges was concerned, and that it was to put an end to
this indecision that the constitutional provisions under Art. XII, § 1 and § 15 were adopted.
Perhaps as a matter of policy cooperatives should be granted tax exemptions, but that is left to
the discretion of Congress. If Congress does not grant exemption and there is no discrimination
to cooperatives, no violation of any constitutional policy can be charged. That electric
cooperatives are exempted from the VAT, We say: The classification between electric and other
cooperatives apparently rests on a congressional determination that there is greater need to
provide cheaper electric power to as many people as possible, especially those living in the rural
areas, than there is to provide them with other necessities in life. We cannot say that such
classification is unreasonable.

12. ID.; JUDICIARY; RULING ON THE ACTION OF CONSTITUTIONAL VALIDITY OF

RA NO. 7716. — We have carefully read the various arguments raised against the constitutional
validity of R.A. No. 7716. We have in fact taken the extraordinary step of enjoining its
enforcement pending resolution of these cases. We have now come to the conclusion that the law
suffers from none of the infirmities attributed to it by petitioners and that its enactment by the
other branches of the government does not constitute a grave abuse of discretion. Any question
as to its necessity, desirability or expediency must be addressed to Congress as the body which is
electorally responsible, remembering that, as Justice Holmes has said, "legislators are the
ultimate guardians of the liberties and welfare of the people in quite as great a degree as are the
courts." It is not right that we should enforce the public accountability of legislators, that those
who took part in passing the law in question by voting for it in Congress should later thrust to the
courts the burden of reviewing measures in the flush of enactment. This Court does not sit as a
third branch of the legislature, much less exercise a veto power over legislation.
32. [G.R. No. L-59431. July 25, 1984.]

ANTERO M. SISON, JR., petitioner, vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau
of Internal Revenue; ROMULO VILLA, Deputy Commissioner, Bureau of Internal Revenue;
TOMAS TOLEDO, Deputy Commissioner, Bureau of Internal Revenue; MANUEL ALBA,
Minister of Budget, FRANCISCO TANTUICO, Chairman, Commissioner on Audit, and CESAR
E. A. VIRATA, Minister of Finance, respondents.

Antero M. Sison for petitioner and for his own behalf.

The Solicitor General for respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; POWER OF THE STATE TO TAX; EXERCISE THEREOF

NECESSARY FOR THE PERFORMANCE OF ITS VITAL FUNCTIONS. — It is manifest that
the field of state activity has assumed a much wider scope. Hence the need for more revenues.
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. To paraphrase a recent decision, taxes
being the lifeblood of the government, their prompt and certain availability is of the essence. (Cf.
Vera v. Fernandez, L-31364, March 30, 1979, 89 SCRA 199)

2. ID., ID.; ID.; POWER TO TAX NOT WITHOUT RESTRICTIONS. — The power to tax,
to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of all the
powers of government." (Sarasola v. Trinidad, 40 Phil. 252, 262 [1919]) It is, of course, to be
admitted that for all its plenitude, the power to tax is not unconfined. There are restrictions. The
Constitution sets forth such limits. .Adversely 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, there would be truth to the 1803
dictum of Chief Justice Marshall that "the power to tax involves the power to destroy."
(McCulloch vs. Maryland, 4 Wheaton 316)

3. ID.; ID.; SECTION 1 BATAS PAMBANSA BLG. 135; NOT A TRANSGRESSION OF

THE DUE PROCESS IN THE ABSENCE OF A SHOWING OF ARBITRARINESS. —
Petitioner alleges arbitrariness. A mere allegation does not suffice. There must be a factual
foundation of such unconstitutional taint. Considering that petitioner would condemn the
provision as void on its face, he has not made out a case. 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. Absent such a showing, the
presumption of validity must prevail.
4. ID.; ID.; ID.; INEQUALITY RESULTING FROM THE CLASSIFICATION MADE,
NOT A TRANSGRESSION OF THE EQUAL PROTECTION CLAUSE AND THE RULE ON
UNIFORMITY. — Classification, if rational in character, is allowable. In a leading case, Lutz v.
Araneta, 98 Phil. 143 (1955), the Court went so far as to hold "at any rate, it is inherent in the
power to tax that a state be free to select the subject 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 likewise invoked the kindred
concept of uniformity. According to the Constitution: "The rule of taxation shall be uniform and
equitable." (Art. VIII, Sec. 17, par. 1) This requirement is met according to Justice Laurel in
Philippine Trust Company v: Yatco, 69 Phil. 420 (1940) when the tax "operates with the same
force and effect in every place where the subject may be found. The rule of uniformity does not
call for perfect uniformity or perfect equality, because this is hardly attainable."

5. ID.; ID., ID., AMPLE JUSTIFICATION EXISTS FOR THE ADOPTION OF THE
GROSS SYSTEM OF INCOME TAXATION TO COMPENSATION INCOME. — In the case
of the gross income taxation embodied in Batas Pambansa Blg. 135, 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. Taxpayers who are recipients of compensation income are set apart as a
class. 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. 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 is ample justification for the
Batasang Pambansa 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.