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TAXATION LAW 1- ATTY.
CARDONA-2018 RBM 1
GENERAL PRINCIPLES OF TAXATION
I. TAXATION
A. NATURE of INTERNAL REVENUE LAW
1) HILADO v. CIR
losses of property which occurred during World War II
INTERNATIONAL LAW; NATURE OF INTERNAL REVENUE LAWS; ENFORCEABLE DURING ENEMY OCCUPATION.—Internal revenue laws
are not political in nature and as such were continued in force during- the period of enemy occupation and in effect were actually
enforced by the occupation government. As a matter of fact, income tax returns were filed during that period and income tax
payments were effected and considered valid and legal. Such tax laws are deemed to be the laws of the occupied territory and
not of the occupying enemy.DECISION AFFIRMED.
SCOPE and NATURE of TAXATION
INHERENT ATTRIBUTE of SOVEREIGNTY
1) SISON v. ANCHETA
higher taxes on professional income against those who have fixed income or salaried individuals
The power to tax "is an attribute of sovereignty. It is the strongest of all the powers of government." It is 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."
PETITION DISMISSED.
2) CIR v. PINEDA
death of Atanasio Pineda-estate divided to heirs
WAYS OF COLLECTION. — The Government has two ways of collecting the taxes in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received. Another remedy, pursuant to
the lien created by Section 315 of the Tax Code upon all property and rights to property belonging to the taxpayer for unpaid
income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due
the estate.
DECISION is MODIFIED.
3) PHIL GUARANTY v. CIR
reinsurance with foreign reinsurance companies
The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the
State’s sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a
corps of civil servants to serve, public improvements designed for the enjoyment of the citizenry and those which come within the
State’s territory, and facilities and protection which a government is supposed to provide. Considering that the reinsurance
premiums in question were afforded protection by the government and the recipient foreign reinsurers exercised rights and
privileges guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the state.
DECISION AFFIRMED.
“Oyy! Lumaban si papa matapang, oyy! Lumaban si papa, matapang, Aaaww!” (Sex Bomb Girls,2002)
TAXATION LAW 1- ATTY. CARDONA-2018 RBM 2
4) CIR v. ALGUE
delinquency in income taxes-Algue as agent of Phil Sugar Estate Dev't-Vegetable Oil Investment Corporation-promotional fees
Taxation; Nature of taxes; Purpose of taxation; Collection of taxes should be made in accordance with law.—Taxes are the
lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such collection should
be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore nece ssary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, whi ch is the
promotion of the common good, may be achieved.
CTA AFFIRMED.
THEORY and BASIS of TAXATION
1) CIR v. ALGUE
Rationale of taxation.—It is said that taxes are what we pay for civilized society. Without taxes, the government would be paralyzed
for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard-
earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government.
The government, for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives
of the people and enhance their moral and material values, This SYMBIOTIC RELATIONSHIP is the rationale of taxation and should
dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.
CTA AFFIRMED.
2) LORENZO v. POSADAS
trustee of the estate of Thomas Hanley
The obligation to pay taxes rests not upon the privileges enjoyed by, or the protection afforded to, a citizen by the government,
but upon the necessity of money or the support of the state. For this reason, no one is allowed to object to or resist the payment of
taxes solely because no personal benefit to him can be pointed out.
That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus, no court is allowed to grant inj unction
to restrain the collection of any internal revenue tax.
JUDGMENT MODIFIED.
PURPOSES of TAXATION
GENERAL/FISCAL/REVENUE
1) CIR v. ALGUE
2) PAL v. EDU
registration fees-Act 42739-legislative franchise-PAL is exempt from the payment of taxes
The purpose behind the law requiring owners of vehicles to pay their registration is mainly to raise revenue for the construction and
maintenance of highways.— Presently, Sec. 61 of the Land Transportation and Traffic Code provides: “Sec. 61. Disposal of Monies
Collected.—Monies collected under the provisions of this Act shall be deposited in a special trust account in the National Treasury
to constitute the Highway Special Fund, which shall be apportioned and expended in accordance with the provisions of the
‘Philippine Highway Act of 1935.’ Provided, however, That the amount necessary to maintain and equip the Land Transportation
Commission but not to exceed twenty per cent of the total collection during one year, shall be set aside for the purpose. (As
amended by RA 6374, approved August 6, 1971).”
It appears clear from the above provisions that the legislative intent and purpose behind the law requiring owners of vehicles to
pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a much lesser degree,
pay for the operating expenses of the administering agency.
The nature of an exaction is to be determined by the purpose for which it is being exacted e.g. if the purpose is primarily revenue,
or if revenue is at least one of the substantial purposes, then the exaction is properly called a tax.
PETITION PARTIALLY GRANTED.
3) TOLENTINO v. SEC of FINANCE
RA 7716-Expanded Value-Added Tax Law
Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by the Constitution to do is to to
Congress, just like the directive to it to give priority to the enactment of laws for the enhancement of human dignity and the
reduction of social, economic and political inequalities (Art. XIII, § 1), or for the promotion of the right to “quality education” (Art.
XIV, § 1). These provisions are put in the Constitution as moral incentives to legislation, not as judicially enforceable rights.
PETITIONS are DISMISSED.
NON-REVENUE/SPECIAL or REGULATORY
1) OSMENA v. ORBOS and 2) CALTEX v. CoA
The OPSF is a Trust Account' which was established 'for the purpose of minimizing the frequent price changes brought about by
exchange rate adjustment and/or changes in world market prices of crude oil and imported petroleum products.' The OPSF was
established precisely to protect local consumers from the adverse consequences that such frequent oil price adjustments may
have upon the economy.
CHARACTERTISTICS of a SOUND TAX SYSTEM
CHAVEZ v. ONGPIN
EO 73- providing for the collection of real property taxes based on the 1984 real property values, as provided for under SEC 21 of
the real property tax code
Sound tax system; Fiscal adequacy requires that sources of revenues must be adequate to meet government expenditures and
their variations.—We agree with the observation of the Office of the Solicitor General that without Executive Order No. 73, the basis
for collection of real property taxes will still be the 1978 revision of property values. Certainly, to continue collecting real property
taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have
occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound
tax system, requires that sources of revenues must be adequate to meet government expenditures and their variations.
PETITION DISMISSED.
2) TAGANITO MINING v. CIR
Beneficiated Nickel Silicate ore and chromite ore- excise taxes-different analysis
This set-up established by the petitioner is contrary to the principle of ADMINISTRATIVE FEASIBILITY which is one of the basic principles
of a sound tax system. Tax laws should be capable of convenient, just and effective administration which is why it fizxes a standard
or a uniform tax base upon which taxes should be paid. In the case of excise taxes on minerals and mineral products, the basis
provided by law is the actual market value of these minerals at the time of removal.
PETITION DENIED.
TAXATION DISTINGUISHED from POLICE POWER and EMINENT DOMAIN
1) REPUBLIC v. BACOLOD-MURCIA MILLING CO.
Police power; Taxation; Levy on sugar centrals for the purpose of constituting the Sugar Research and Stabilization Fund is an
exercise of the police power, not of the taxing power.—The contribution, which is levied upon sugar centrals and sugar cane
planters under Republic Act No. 632 in order to constitute the Sugar Research and Stabilization Fund or the capital of the Philippine
Sugar Institute (Philsugin), is not an exercise of the power of taxation nor the imposition of a special assessment but is an exercise
of the police power for the general welfare of the country. It is an exercise of the sovereign power which no private citizen may
lawfully resist. It is constitutional, being similar to the levy under the Sugar Adjustment Act (Com. Act No. 567) which constituted the
Sugar Adjustment and Stabilization Fund (Lutz vs. Araneta, 98 Phil. 148).
DECISION AFFIRMED.
2) TANADA v. ANGARA
WTO-World Trade Organization
When the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign rights under
the "concept of sovereignty as auto-limitation." Under Article 2 of the UN Charter, "(a)ll members shall give the United Nations every
assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to any state
against which the United Nations is taking preventive or enforcement action." Apart from the UN Treaty, the Philippines has entered
into many other international pacts — both bilateral and multilateral — that involve limitations on Philippine sovereignty the
Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain and police power. The
underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in
granting the same privilege and immunities to the Philippines, its o�cials and its citizens. The same reciprocity characterizes the
Philippine commitments under WTO-GATT. The point is that, as shown by the foregoing treaties, a portion of sovereignty may be
waived without violating the Constitution, based on the rationale that the Philippines "adopts the generally accepted principles
of international law as part of the law of the land and adheres to the policy of . . . cooperation and amity with all nations."
PETITON DISMISSED.
3) OSMENA v. ORBOS
Money named as a tax but actually collected in the exercise of police power may be placed in a special trust account—Hence,
it seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of
the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from
the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remai ns subject
to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a
"special fund." Indeed, the practice is not without precedent.
PETITION PARTLY GRANTED and DISMISSED in all other respects.
WHEN is TAX considered as an IMPLEMENT of POLICE POWER?
1) LUTZ v. ARANETA
Judicial Administrator of the Intestate Estate of the deceased Antonio Jayme Ledesma
CONSTITUTIONAL LAW; TAXATION; POWER OF STATE TO LEVY TAX IN AND SUPPORT OF SUGAR INDUSTRY. — As the protection and
promotion of the sugar industry is a matter of public concern the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative must be allowed full play, subject only to the test
of reasonableness; and it is not contended that the means provided in section 6 of Commonwealth Act No. 567 bear no relation
to the objective pursued or are oppressive in character. If objective an methods are alike constitutionally valid, no reason is seen
why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the
state's police power (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S. vs. Butler, 297 U.S. 1, 80 L. Ed. 477;
M'Culloch vs. Maryland, 4 Wheat, 316, 4 L. Ed. 579).
DECISION AFFIRMED.
2) TIO v. VIDEOGRAM REGULATORY BOARD
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry,
particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid
imposition.
"The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to fav or one
industry over another.
"It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that
"inequities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation'."
Taxation has been made the implement of the state's police power.
PETITION DISMISSED.
MAY the POWER of TAXATION be used as an IMPLEMENT of the POWER of EMINENT DOMAIN?
1) CIR v. CENTRAL LUZON DRUG CORP
Mercury drug-senior citizen's discount
Eminent Domain; Just Compensation; The tax credit benefit granted to the establishments can be deemed as their just
compensation for private property taken by the State for public use.—Sections 2.i and 4 of RR 2-94 deny the exercise by the State
of its power of eminent domain. Be it stressed that the privilege enjoyed by senior citizens does not come directly from the State,
but rather from the private establishments concerned. Accordingly, the tax credit benefit granted to these establishments can be
deemed as their just compensation for private property taken by the State for public use.
The discount privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to which these
citizens belong; As a result of the 20 percent discount imposed by R.A. 7432, an establishment becomes entitled to a just
compensation, and this term refers not only to the issuance of a tax credit certificate indicating the correct amount of the discounts
given, but also to the promptness in its release.
The taxation power can also be used as an implement for the exercise of the power of eminent domain. Tax measures are but
“enforced contributions exacted on pain of penal sanctions” and “clearly imposed for a public purpose.” In recent years, the
power to tax has indeed become a most effective tool to realize social justice, public welfare, and the equitable distribution of
wealth.
PETITION DENIED.
II. TAXES
A. ESSENTIAL CHARACTERISTICS of TAXES
1. PAYABLE in MONEY
1) BORJA v. GELLA
delinquency in real estate taxes-backpay certificate
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 othe r.
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.
DECISION REVERSED.
2.PERSONAL to the TAXPAYER
1) TAN v. DEL ROSARIO
SNIT-Simplified Net Income tax
The income tax is imposed not on the professional partnership, which is tax exempt, but on the partners themselves in their individual
capacity computed on their distributive shares of partnership profits.
2) CIR v. SANTOS
Guild of Philippine Jewellers
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.—
The respondents presented an exhaustive study on the tax rates on jewelry levied by different Asian countries. This is meant to
convince us that compared to other countries, the tax rates imposed on said industry in the Philippines is oppressive and
confiscatory. This Court, however, cannot subscribe to the theory that the tax rates of other countries should be used as a yardstick
in determining what may be the proper subjects of taxation in our own country. It should be pointed out that in imposing the
aforementioned taxes and duties, the State, acting through the legislative and executive branches,\ is exercising its sovereign
prerogative. 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.”
CLASSIFICATION of TAXES
AS to WHO BEARS the BURDEN and INCIDENCE
INDIRECT BURDEN
1) TOLENTINO v. SEC of FINANCE
E-VAT
Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by respondents that in fact it distributes
the tax burden to as many goods and services as possible particularly to those which are within the reach of higher-income groups,
even as the law exempts basic goods and services. It is thus equitable. The goods and properties subject to the VAT are those used
or consumed by higher-income groups.
TAXES DISTINGUISHED from other IMPOSITIONS
1. DEBTS
1) CALTEX v. CoA
It is settled that a taxpayer may not affect taxes due from the claims that he may have against the government.—It is settled that
a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be the subject of
compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes
is not such a debt, demand, contract or judgment as is allowed to be set-off.
JUDGMENT AFFIRMED.
2) FRANCIA v. IAC
a portion of his land was expropriated by the government-failed to pay real estate taxes
Internal Revenue Taxes can not be subject of setoff or compensation- The general rule based on grounds of public policy is well-
settled that no set-off is admissible against demands for taxes levied for general or local governmental purposes. The reason on
which the general rule is based, is that taxes are not in the nature of contracts between the party and party but grow out of duty
to, and are the positive acts of the government to the making and enforcing of which, the personal consent of individual taxpayer
is not required.
PETITION DISMISSED.
3) REPUBLIC v. MAMBULAO LUMBER COMPANY
reforestation charges
Where appellant and appellee are not mutually creditors and debtors of each other, the law on compensation is inapplicable.
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.
JUDGMENT AFFIRMED.
4) DOMINGO v. CARLITOS
In the matter of the Intestate Estate of the Late Walter Scott Price
Compensation between taxes and claims of intestate recognized and appropriated for by law.—The fact that the court having
jurisdiction of the estate had found that the claim of the estate against the Government has been appropriated for the purpose
by a corresponding law (Rep. Act No. 2700) shows that both the claim of the Government for inheritance taxes and the claim of
the intestate for services rendered have already become OVERDUE and DEMANDABLE as well as FULLY LIQUIDATED.
Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil
Code, and both debts are extinguished to the concurrent amount.
PETITION DISMISSED.
2. LICENSE FEES
1) VICTORIAS MILLING CO. v. MUNICIPALITY of VICTORIAS, NEGROS OCCIDENTAL
two municipal ordinances separately imposing license taxes on operators of sugar centrals and sugar refineries
Concept of municipal license tax; Designation given does not decide whether the imposition is a license tax or a license fee;
Determining factors.—The use of the term "municipal license tax" does not necessarily connote the idea that the tax is imposed as
a revenue measure in the guise of a license tax. For really, this runs counter to the declared purpose to make money. Besides, the
term "license tax" has not acquired a fixed meaning. It is often "used indiscriminately to designate impositions exacted for the
exercise of various privileges. In many instances, it refers to "revenue-raising exactions on privileges or activities". On the other hand,
license fees are commonly called taxes. But legally speaking, the latter are "'for the purpose of raising rev enues", in contrast to the
former which are imposed "in the exercise of the police power for purposes of regulation". (Compañia General de Tabacos de
Filipinas v. City of Manila, L-16619, June 29, 1963.)
ORDINANCE VALID. COMPLAINT DISMISSED.
3. PENALTIES
1) NATIONAL DEV'T COMPANY v. CIR
twelve ocean-going vessel
Petitioner as withholding agent of the government is responsible to withold tax due on the interest earned by the Japanese
shipbuilders.—The petitioner also forgets that it is not the NDC that is being taxed. The tax was due on the interests earned by the
Japanese shipbuilders. It was the income of these companies and not the Republic of the Philippines that was subject to the tax
the NDC did not withhold. In effect, therefore, the imposition of the deficiency taxes on the NDC is a penalty for its failure to
withhold the same from the Japanese shipbuilders.
DECISION AFFIRMED.
III. SOURCES of TAX LAW
A. ADMINISTRATIVE ISSUANCES
1. REVENUE REGULATIONS
1) ASTURIAS SUGAR CENTRAL v. CIR
One-year period in Section, 23 of Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory.
JUDGMENT AFFIRMED.
2) CIR v. SEAGATE
Special Economic Zone in Naga, Cebu
Tax Exemption; Value Added Tax (VAT); Petitioner is not subject to internal revenue laws and regulations and is even entitled to tax
credits.—From the above-cited laws, it is immediately clear that petitioner enjoys preferential tax treatment. It is not subject to
internal revenue laws and regulations and is even entitled to tax credits. The VAT on capital goods is an internal revenue tax from
which petitioner as an entity is exempt. Although the transactions involving such tax are not exempt, petitioner as a VAT-registered
person, however, is entitled to their credits.
2.BIR RULINGS
1) CIR v. BURROUGHS LTD.
B.I.R rulings cannot, as a rule, be given retroactive effect-Exceptions.—Petitioner contends that respondent is no longer entitled to
a refund because Memorandum Circular No. 8- 82 dated March 17, 1982 had revoked and/or repealed the BIR ruling of January
21, 1980. The said memorandum circular states —“Considering that the 15% branch profit remittance tax is imposed and collected
at source, necessarily the tax base should be the amount actually applied for by the branch with the Central Bank of the Philippines
as profit to be remitted abroad.” Petitioner’s aforesaid contention is without merit. What is applicable in the case at bar is still the
Revenue Ruling of January 21, 1980 because private respondent Burroughs Limited paid the branch profit remittance tax in
question on March 14, 1979. Memorandum Circular No. -82 dated March 17, 1982 cannot be given retroactive effect in the light
of Section 327 of the National Internal Revenue Code.
“Sec. 327. Non-retroactivity of rulings. Any revocation, modification, or reversal of any of the rules and regulations promulgated in
accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given
retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayer except in the following cases
(a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the
Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different
from the facts on which the ruling is based, or (c) where the taxpayer acted in bad faith.”
CTA AFFIRMED.
2) PBCOM v. CIR
Revenue Memorandum Circular (RMC) 7-85, changing the prescriptive period of two years to ten years on claims of excess
quarterly income tax payments, created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC.—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 1977 NIRC. In so doing,
the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.
PETITION DENIED.
TAX/REVENUE ORDINANCES
1) HAGONOY MARKET VENDOR v. MUNICIPALITY of HAGONOY
An appeal of a tax ordinance or revenue measure should be made to the Secretary of Justice within thirty (30) days from effectivity
of the ordinance and even during its pendency, the effectivity of the assailed ordinance shall not be suspended.- In the case at
bar, Municipal Ordinance No. 28 took effect in October 1996. Petitioner filed its appeal only in December 1997, more than a year
after the effectivity of the ordinance in 1996. Clearly, the Secretary of Justice correctly dismissed it for being time -barred.
TAX TREATIES
1) TANADA v. ANGARA
By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered
to be automatically part of our own laws. One of the oldest and most fundamental rules in international law is pacta sunt servanda
— international agreements must be performed in good faith. "A treaty engagement is not a mere moral obligation but creates a
legally binding obligation on the parties . . . A state which has contracted valid international obligations is bound to make in its
legislations such modi??cations as may be necessary to ensure the fulfillment of the obligations undertaken."
PETITION DISMISSED.
IV. CLASSIFICATION of TAXPAYERS
1) PHILEX MINING CORP v. CIR
Baguio Gold-Sto. Nino Mine
50%-50% SHARING IN THE NET PROFITS of the Sto. Nino Mine indicates that Philex is a PARTNER of Baguio Gold in the development
of the Sto. Nino Mine notwithstanding the clear absence of any intent on the part of Philex and Baguio Gold to form a partnership.
ART 1769 (4) of the Civil Code explicitly provides that the "receipt by a person of a share in the profits of a business is prima facie
evidence that he is a partner in the business." On this score, the tax court correctly noted that petitioner was not an employee of
Baguio Gold who will be paid "wages" pursuant to an employer-employee relationship. To begin with, petitioner was the manager
of the project and had put substantial sums into the venture in order to ensure its viability and profitability. By pegging its
compensation to profits, petitioner also stood not to be remunerated in case the mine had no income. It is hard to believe that
petitioner would take the risk of not being paid at all for its services, if it were truly just an ordinary employee. Consequently, we
find that petitioner's "compensation" under paragraph 12 of the agreement actually constitutes its share in the net profits of the
partnership. Indeed, petitioner would not be entitled to an equal share in the income of the mine if it were just an employee of
Baguio Gold. It is not surprising that petitioner was to receive a 50% share in the net profits, considering that the "Power of Attorney"
also provided for an almost equal contribution of the parties to the St. Niño mine. The "compensation" agreed upon only serves to
reinforce the notion that the parties' relations were indeed of partners and not employer-employee.
PETITION DENIED.
2) TAN v. DEL ROSARIO
SNIT-Simplified Net Income Tax- GPP
Partnerships; A general professional partnership, unlike an ordinary business partnership, is not itself an income taxpayer, as the
income tax is imposed not on the professional partnership but on the partners themselves in their individual capacity.—The Court,
first of all, should like to correct the apparent misconception that general professional partnerships are subject to the payment of
income tax or that here is a difference in the tax treatment between individuals engaged in business or in the practice of th eir
respective professions and partners in general professional partnerships. The fact of the matter is that a general professional
partnership, unlike an ordinary business partnership (which is treated as a corporation for income tax purposes and so subject to
the corporate income tax), is not itself an income taxpayer. The income tax is imposed not on the professional partnership, which
is tax exempt, but on the partners themselves in their individual capacity computed on their distributive shares of partnership profits.
OBILLOS JR. v. CIR
CO-OWNERSHIP- 4 brothers and sisters who sold two parcels of land which they had acquired from their father
Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible to build their residences on
the lots because of the high cost of construction, then they had no choice but to resell the same to dissolve the co-ownership. The
division of the profit was merely incidental to the dissolution of the co-ownership which was in the nature of things a temporary
state.
JUDGMENT is REVERSED and SET ASIDE.
4) PASCUAL v. CIR
CO-OWNERSHIP-2 parcels sold to Marenir Dev’t Corp- 3 parcels of land to Erlinda Retes and Maria Samson
1. CIVIL LAW; PARTNERSHIP; HOW ESTABLISHED. — The sharing of returns does not in itself establish a partnership whether or not the
persons sharing therein have a joint or common right or interest in the property. There must be a clear intent to form a partnership,
the existence of a juridical personality different from the individual partners, and the freedom of each party to transfer or assign
the whole property.
2. COMMERCIAL LAW; CORPORATE INCOME TAX; PARTIES IN CASE AT BAR NOT LIABLE FOR THE PAYMENT THEREOF. — In the present
case, there is clear evidence of co-ownership between the petitioners. There is no adequate basis to support the proposition that
they thereby formed an unregistered partnership. The two isolated transactions whereby they purchased properties and sold the
same a few years thereafter did not thereby make them partners. They shared in the gross profits as co-owners and paid their
capital gains taxes on their net profits and availed of the tax amnesty thereby. Under the circumstances, they cannot be
considered to have formed an unregistered partnership which is thereby liable for corporate income tax, as the respondent
commissioner proposes. As petitioners have availed of the benefits of tax amnesty as individual taxpayers in these transactions,
they are thereby relieved of any further tax liability arising therefrom.
5) ONA v. CIR
UNREGISTERED PARTNERSHIP-Lorenzo Ona and five children-properties were used in business by leasing or selling and investing the
income derived
1. TAXATION; INTERNAL REVENUE CODE; CORPORATE TAX; UNREGISTERED PARTNERSHIP; FORMATION THEREOF WHERE INCOME
FROM SHARES OF COHEIRS CONTRIBUTED TO COMMON FUND. — From the moment petitioners allowed not only the incomes from
their respective shares of the inheritance but even the inherited properties themselves to be used by Lorenzo T. Oña (who
managed the properties) as a common fund in undertaking several transactions or in business, with the intention of deriving profit
to be shared by them proportionally, such act was tantamount to actually contributing such incomes to a common fund and, in
effect, they thereby formed an unregistered partnership within the purview of the provisions of the Tax Code.
2. WHEN HEIRS NOT CONSIDERED AS UNREGISTERED COPARTNERS AND NOT SUBJECT TO SUCH TAX. — In cases of inheritance, there
is a period when the heirs can be considered as co-owners rather than unregistered co-partners within the contemplation of our
corporate tax laws. Before the partition and distribution of the estate of the deceased, all the income thereof does belong
commonly to all the heirs, obviously, without them becoming thereby unregistered co-partners.
3. CIRCUMVENTIONS OF SECTIONS 24 AND 84(b) OF TAX CODE WHEN HEIRS CONTINUE AS CO-OWNERS. — For tax purposes, the
co-ownership of inherited properties is automatically converted into an unregistered partnership, for it is easily conceivable that
after knowing their respective shares in the partition, they (heirs) might decide to continue holding said shares under the common
management of the administrator or executor or of anyone chosen by them and engage in business on that basis. Withal, if this
were not so, it would be the easiest thing for heirs in any inheritance to circumvent and render meaningless Sections 24 and 84(b)
of the National Internal Revenue Code.
4. HEIRS AS UNREGISTERED CO-PARTNERS; PARTNERSHIP CONTEMPLATED IN CIVIL CODE NOT APPLICABLE. — Petitioners' reliance on
Article 1769, par. (3) of the Civil Code, providing that: "The sharing of gross returns does not of itself establish a partnership, whether
or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived," and,
for that matter, on any other provision of said code on partnerships is unavailing. In Evangelista (102 Phil. 140), this Court clearly
differentiated the concept of partnerships under the Civil Code from that of unregistered partnerships which are considered as
"corporations" under Sections 24 and 84(b) of the National Internal Revenue Code.
6) EVANGELISTA v. CIR
UNREGISTERED PARTNERSHIP-petitioners borrowed from their father a sum of money to buy real properties which were then leased
and rented to various tenants
1. TAXATION; TAX ON CORPORATIONS INCLUDES ORGANIZATION WHICH ARE NOT NECESSARY PARTNERSHIP. — "Corporations"
strictly speaking are distinct and different from "partnership". When our Internal Revenue Code includes "partnership" among the
entities subject to the tax on "corporations", it must be allude to organization which are not necessarily "partnership" in the technical
sense of the term.
2. DULY REGISTERED GENERAL PARTNERSHIP ARE EXEMPTED FROM THE TAX UPON CORPORATIONS. — Section 24 of the Internal
Revenue Code exempts from the tax imposed upon corporations "duly registered general partnership", which constitute precisely
one of the most typical form of partnership in this jurisdiction.
3. CORPORATION INCLUDES PARTNERSHIP NO MATTER HOW ORGANIZED. — As defined in section 84 (b ) of the Internal Revenue
Code "the term corporation includes partnership, no matter how created or organized." This qualifying expression clearly indicates
that a joint venture need not be undertaken in any of the standards form, or conformity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted for the purposes of the tax on corporations.
4. CORPORATIONS INCLUDES "JOINT ACCOUNT" AND ASSOCIATIONS WITHOUT LEGAL PERSONALITY. — Pursuant to Section 84 (b )
of the Internal Revenue Code, the term "corporations" includes, among the others, "joint accounts (cuenta en participacion)" and
"associations", none of which has a legal personality of its own independent of that of its members. For purposes of the tax on
corporations, our National Internal Revenue Code includes these partnership . — with the exception only of duly registered general
partnership. — within the purview of the term "corporations."
Held : That the petitioners in the case at bar, who are engaged in real estate transactions for monetary gain and divide the same
among themselves, constitute a partnership, so far as the said Code is concerned, and are subject to the income tax for the
corporation.
5. CORPORATION; PARTNERSHIP WITHOUT LEGAL PERSONALITY SUBJECT TO RESIDENCE TAX ON CORPORATION. — The pertinent part
of the provision of Section 2 of Commonwealth Act No. 465 which says: "The term corporation as used in this Act includes joint-
stock company, partnership, joint account (cuentas en participacion), association or insurance company, no matter how created
or organized." is analogous to that of Section 24 and 84 (b ) of our Internal Revenue Code which was approved the day
immediately after the approval of said Commonwealth Act No. 565. Apparently, the terms "corporation" and "Partnership" are
used both statutes with substantially the same meaning, Held: That the petitioners are subject to the residence tax corporati ons.
7) AFISCO v. CA
41 non-life insurance corporations-Quota Share Reinsurance Treaty and Surplus Reinsurance Treatry
INSURANCE POOL IN CASE AT BAR DEEMED PARTNERSHIP OR ASSOCIATION TAXABLE AS A CORPORATION UNDER SECTION 24 OF
THE NIRC. — In the case before us, the ceding companies entered into a Pool Agreement or an associationcthat would handle all
the insurance businesses covered under their quota-share reinsurance treaty and surplus reinsurance treaty with Munich. The
following unmistakablycindicates a partnership or an association covered by Section 24 of the NIRC: (1) The pool has a common
fund, consisting of money and other valuables that are deposited in the name and credit of the pool. This common fund pays for
the administration and operation expenses of the pool. (2) The pool functions through an executive board, which resembles the
board of directors of a corporation, composed of one representative for each of the ceding companies. (3) True, the pool itself is
not a reinsurer and does not issue any insurance policy; however, its work is indispensable, beneficial and economically useful to
the business of the ceding companies and Munich, because without it they would not have received their premiums. The ceding
companies share "in the business ceded to the pool" and in the "expenses" according to a "Rules of Distribution" annexed to the
Pool Agreement. Profit motive or business is, therefore, the primordial reason for the pool's formation.
TAXATION; NIRC; SECTION 24 THEREOF, UNREGISTERED PARTNERSHIPS AND ASSOCIATIONS ARE CONSIDERED AS CORPORATIONS
FOR TAX PURPOSES. — This Court rules that the Court of Appeals, in affirming the CTA which had previously sustained the internal
revenue commissioner, committed no reversible error. Section 24 of the NIRC, as worded in the year ending 1975, provides: "SEC.
24. Rate of tax on corporations. — (a) Tax on domestic corporations. — A tax is hereby imposed upon the taxable net income
received during each taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines,
no matter how created or organized, but not including duly registered general co-partnership (compañias colectivas), general
professional partnerships, private educational institutions, and building and loan associations . . . ." Ineludibly, the Philippine
legislature included in the concept of corporations those entities that resembled them such as unregistered partnerships and
associations. Parenthetically, the NLRC's inclusion of such entities in the tax on corporations was made even clearer by the Tax
Reform Act of 1997, which amended the Tax Code. The Court of Appeals did not err in applying Evangelista, which involved a
partnership that engaged in a series of transactions spanning more than ten years, as in the case before us.
V.GENERAL PRINCIPLES (SECTIONS 22,23 and 42 of NIRC)
SITUS RULE
1) NATIONAL DEV'T CORP v. CIR
12 ocean-going vessel-interest
Taxation; Income from sources within the Philippines; Residence of obligor who pays the interest rather than the physical location
of the securities bonds or notes or the place of payment is the determining factor of the source of interest income.- Accordingly,
if the obligor is a resident of the Philippines the interest payment paid by him can have no other source than within the Philippines.
The interest is paid not by the bond, note or other interest-bearing obligations, but by the obligor. The interest remitted to the
Japanese shipbuilders in Japan in 1960, 1961 and 1962 on the unpaid balance of the purchase price of the vessels acquired by
petitioner is interest derived from sources within the Philippines subject to income tax under the then Section 24(b)(1) of the National
Internal Revenue Code.”
APPEALED DECISION AFFIRMED.
2) CIR v. MARUBENI CORP
turn-key
Clearly, the service of "design and engineering, supply and delivery, construction, erection and installation, supervision, direction
and control of testing and commissioning, coordination. . . " of the two projects involved two taxing jurisdictions. These acts
occurred in two countries — Japan and the Philippines. While the construction and installation work were completed within the
Philippines, the evidence is clear that some pieces of equipment and supplies were completely designed and engineered in
Japan. The two sets of ship unloader and loader, the boats and mobile equipment for the NDC project and the ammonia storage
tanks and refrigeration units were made and completed in Japan. They were already finished products when shipped to the
Philippines. The other construction supplies listed under the Offshore Portion such as the steel sheets, pipes and structures, electrical
and instrumental apparatus, these were not ??nished products when shipped to the Philippines. They, however, were likewise
fabricated and manufactured by the sub-contractors in Japan. All services for the design, fabrication, engineering and
manufacture of the materials and equipment under Japanese Yen Portion I were made and completed in Japan. These services
were rendered outside the taxing jurisdiction of the Philippines and are therefore not subject to contractor's tax.
PETITION DENIED.
3) PHIL GUARANTY CO INC. v. CIR
Swiss Reinsurance-reinsurance with foreign insurance companies not doing business in the Philippines
1. Taxation; Income Tax; Reinsurance premiums ceded to foreign reinsurers subject to withholding tax.—Reinsurance premiums on
local risks ceded by domestic insurers to foreign reinsurers not doing business in the Philippines are subject to withholding tax.
2. Reinsurance premiums ceded to foreign reinsurers considered income from Philippine sources.—Where the reinsurance
contracts show that the activities that constituted the undertaking to reinsure a domestic insurer against losses arising from the
original insurances in the Philippines were performed in the Philippines, the reinsurance premiums are considered as coming from
sources within the Philippines and are subject to Philippine Income Tax.
3. Place of activity creating income controlling.—Section 24 of the Tax Code does not require a foreign corporation to engage in
business in the Philippines in subjecting its income to tax. It suffices that the activity creating the income is performed or done in
the Philippines. What is controlling, therefore, is not the place of business but the place of activity that created an income.
4. Section 37 of Tax Code not all inclusive enumeration.—Section 37 of the Tax Code is not an all-inclusive enumeration, for it merely
directs that the kinds of income mentioned therein should be treated as income from sources within the Philippines but it does not
require that other kinds of income should not be considered likewise.
DECISION AFFIRMED.
4) ALEXANDER HOWDEN & CO. LTD v. CIR
reinsurance contract with British insurance companies
TAXATION; INSURANCE; REINSURANCE PREMIUMS REMITTED TO FOREIGN INSURANCE COMPANIES TAXABLE WITHIN PHILIPPINES. —
The portions of premiums earned from insurance locally underwritten by domestic corporations, ceded to and received by non-
resident foreign reinsurance companies, through a non-resident foreign insurance broker, pursuant to reinsurance contracts signed
by the reinsurers abroad but signed by the domestic corporation in the Philippines, are subject to income tax locally.
INCOME FROM SOURCES WITHIN THE PHILIPPINES; REINSURANCE PREMIUMS. — Reinsurance premiums remitted by domestic
insurance corporation to foreign reinsurance companies are considered income of the latter derived from sources within the
Philippines.
JUDGMENT AFFIRMED.
5) PHILAMLIFE v. CTA and CIR
Management Services Agreement with American International Reinsurance Co., Inc.-advisory services- rentals and royalties from
properties located in the PH
A reading of the various management services enumerated in the said Management Services Agreement will show that they can
easily fall under any of the aforequoted EXPANDED MEANING of ROYALTIES. Basically, from the heading 'Investments' to 'Personnel',
the services call for the supply by the non-resident foreign corporation of technical and commercial information, knowledge,
advice, assistance or services in connection with technical management or administration of an insurance business — a
commercial undertaking. Therefore, the income derived for the services performed by AIGI for PHILAMLIFE under the said
management contract shall be considered as income from services WITHIN the Philippines. AIGI being a non-resident foreign
corporation not engaged in trade or business in the Philippines 'shall pay a tax equal to thirty-five (35%) percent of the gross income
received during each taxable year from all sources within the Philippines as interest, dividends, rents, royalties (including
remuneration for technical services), salaries, premiums, annuities, emoluments or other fixed or determinable annual, periodical
or casual gains, profits and income and capital gains: . . . (Section 12(6) (I) of the National Internal Revenue Code.
In our jurisprudence, the test of taxability is the 'source', and the source of an income is "that activity . . . which produced the
income".It is not the presence of any property from which one derives rentals and royalties that is controlling, but rather as
expressed under the expanded meaning of "royalties", it includes " royalties for the supply of scientific, technical, industrial, or
commercial knowledge or informations; and the technical advice, assistance or services rendered in connection with the
technical management and administration of any scientific, industrial or commercial undertaking, venture, project or scheme",
and others (Section 37 (a) (7) as amended by P.D. 1457).
PETITION DISMISSED.
VI. LIMITATIONS ON THE TAXING POWER
A. INHERENT LIMITATIONS ON THE TAXING POWER
a) PUBLIC PURPOSE of TAXES
1) PASCUAL, Provincial Governor of Rizal v. SEC of PUBLIC WORKS and COMMUNICATIONS
RA 920- An Act Appropriating Funds for Public Works- Pasig feeder road terminals- Antonio Subdivision- Jose Zulueta
"It is a general rule that the legislature is without power to appropriate public revenues for anything but a public purpose. . . . It is
the essential character of the direct object of the expenditure which must determine its validity as justifying a tax and not the
magnitude of the interests to be affected nor the degree to which the general advantage of the community, and thus the public
welfare, may be ultimately benefited by their promotion. Incidental advantage to the public or to the state, which results from the
promotion of private interests, and the prosperity of private enterprises or business, does not justify their aid by the use of public
money."
DECISION APPEALED from is hereby REVERSED.
b) NON-DELEGABILITY of the TAXING POWER
1) OSMENA v. ORBOS
PD 1956- Oil Price Stabilization Fund- Ministry of Energy-Trust Account- EO 137- expanding reimbursement for possible cos under
recovery
No undue delegation of legislative power where Energy Regulatory Board authorized to impose additional amounts to augment
the resources of the Fund.—With regard to the alleged undue delegation of legislative power, the Court finds that the provision
conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by
which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and
subsidizing domestic pump rates, § 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the
resources of the "Fund.
For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set
forth the policy to be executed by the delegate and (2) it must fix a standard—limits of which are sufficiently determinate or
determinable—to which the delegate must conform.
PETITION GRANTED.
c) SITUS of TAXATION
1) PHIL GUARANTY CO v. CIR
Swiss Reinsurance
REINSURANCE PREMIUMS CEDED TO FOREIGN REINSURERS CONSIDERED INCOME FROM PHILIPPINE SOURCES. — Where the
reinsurance contracts show that the activities that constituted the undertaking to reinsure a domestic insurer against losses arising
from the original insurances in the Philippines were performed in the Philippines, the reinsurance premiums are considered as
coming from sources within the Philippines and are subject to Philippine Income Tax.
PLACE OF ACTIVITY CREATING INCOME CONTROLLING. — Section 24 of the Tax Code does not require a foreign corporation to
engage in business in the Philippines in subjecting its income to tax. It su??ces that the activity creating the income is performed
or done in the Philippines. What is controlling, therefore, is not the place of business but the place of activity that created an
income.
DECISION AFFIRMED.
2) REAGAN v. CIR
selling of cadillac
CLARK AIR FORCE BASE, NOT FOREIGN SOIL; SALE THEREIN SUBJECT TO TAX. — Petitioner was liable for the income tax arising from
a sale of his car in the Clark Field Air Base, which clearly is and cannot otherwise be other than, within the territorial jurisdiction of
the Philippines to tax. The Military Bases agreement does not lend support to the assertion that said base has become a foreign
soil or territory.
d) EXEMPTION of GOVT' from TAXES
1) SSS v. CITY OF BACOLOD
SSS Building in Bacolod City-forfeiture-SEC 29 of CA 326- Charter of the City of Bacolod
CONSTITUTIONAL LAW; TAXATION; CHARTER OF BACOLOD CITY; GOVERNMENT LANDS AND BUILDINGS ARE EXEMPT FROM REAL
ESTATE TAX. — The subject of inquiry in the case at bar is not whether a government corporation exercising ministrant or proprietary
function, such as petitioner Social Security System, is exempt from the payment of legal fees, but whether the properties in question,
which are concededly owned by the government, are exempt from realty taxes. We hold that under Section 29 of the Charter of
the City of Bacolod, they are so exempt. It bears emphasis that the said section does not contain any qualification whatsoever in
providing for the exemption from real estate taxes of "lands and buildings owned by the Commonwealth or Republic of the
Philippines." Hence, when the legislature exempted lands and buildings owned by the government from payment of said taxes,
what it intended was a broad and comprehensive application of such mandate, REGARDLESS of whether such property is devoted
to governmental or proprietary purpose.
PRESIDENTIAL DECREE NO. 24 EXEMPTS SOCIAL SECURITY SYSTEM FROM TAXATION. — Presidential Decree No. 24, which amended
the Social Security Act of 1954, has already removed all doubts as to the exemption of the SSS from taxation.
"SEC. 16. Exemption from tax, legal process, and lien. — All laws to the contrary notwithstanding, the SSS and all its assets, all
contributions collected and all accruals thereto and income therefrom as well as all benefit payments and all papers or documents
which may be required in connection with the operation or execution of this Act shall be EXEMPT from any tax, assessment, fee,
charge or customs or import duty; and all benefit payments made by the SSS shall likewise be exempt from all kinds of taxes, fees
or charges, and shall not be liable to attachment, garnishments, levy or seizure by or under any legal or equitable process
whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay any debt of the covered
employee to the SSS."
DECISION SET ASIDE.
B. CONSTITUTIONAL LIMITATIONS ON TAXING POWER
a. DUE PROCESS OF LAW
1) PROVINCE of ABRA v. HERNANDO
Roman Catholic Bishop of Bangued- tax exemption of church properties- present requirement of ACTUAL, EXCLUSIVE and DIRECT
use of property for charitable and religious purposes
PROOF TO DEMONSTRATE EXEMPTION; ABSENCE OF HEARING, VIOLATIVE OF PROCEDURAL DUE PROCESS. — Where respondent
judge accepted at its face the allegation of private respondent that certain parcels of land owned by it are used "actually, directly
and exclusively" as sources of support of the parish priest and his helpers and also of the Bishop; denied petitioner's motion to
dismiss; and rendered a SUMMARY JUDGMENT granting such exemption WITHOUT EVEN HEARING the side of petitioner, it clearly
appears that respondent judge failed to abide by the constitutional command of procedural due process.
b. EQUAL PROTECTION OF THE LAW
1) TIU v. CA
Subic Special Economic Zone- RA 7227-"An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses,
Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes.
1. CONSTITUTIONAL LAW; BILL OF RIGHTS; EQUAL PROTECTION CLAUSE; NOT ABSOLUTE BUT SUBJECT TO REASONABLE
CLASSIFICATION; REQUISITES FOR VALIDITY OF CLASSIFICATION, ENUMERATED. — The fundamental right of equal protection of the
laws is not absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that
make real differences, one class may be treated and regulated differently from another. The classi??cation must also be germane
to the purpose of the law and must apply to all those belonging to the same class. Classi??cation, to be valid, must (1) rest on
substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply
equally to all members of the same class.
2. ID.; ID.; DOES NOT REQUIRE TERRITORIAL UNIFORMITY OF LAWS. — It is wellsettled that the equal-protection guarantee does not
require territorial uniformity of laws. As long as there are actual and material differences between territories, there is no violation of
the constitutional clause. And of course, anyone, including the petitioners, possessing the requisite investment capital can always
avail of the same benefits by channeling his or her resources or business operations into the fenced-off free port zone.
3. ID.; ID.; NOT VIOLATED BY AN EXECUTIVE ORDER GRANTING TAX AND DUTY INCENTIVES ONLY TO BUSINESSES AND RESIDENTS WITHIN
THE "SECURED AREA" OF THE SUBIC SPECIAL ECONOMIC ZONE. — The constitutional right to equal protection of the law is not
violated by an executive order, issued pursuant to law, granting tax and duty incentives only to businesses and residents within the
"secured area" of the Subic Special Economic Zone and denying them to those who live within the Zone but outside such "fenced-
in" territory. The Constitution does not require absolute equality among residents. It is enough that all persons under like
circumstances or conditions are given the same privileges and required to follow the same obligations. In short, a classification
based on valid and reasonable standards does not violate the equal protection clause.
4 ID.; ID.; EXECUTIVE ORDER 97-A; NEITHER VIOLATIVE OF EQUAL PROTECTION CLAUSE NOR CONSIDERED DISCRIMINATORY. — We
rule in favor of the constitutionality and validity of the assailed EO 97-A. Said Order is not violative of the equal protection clause;
neither is it discriminatory. Rather, we ??nd real and substantive distinctions between the circumstances obtaining inside and those
outside the Subic Naval Base, thereby justifying a valid and reasonable classification.
5. ID.; ID.; ID.; LIMITATION OF THE APPLICATION OF INCENTIVES TO THE CONFINES OF THE FORMER SUBIC MILITARY BASE, CONSIDERED
REASONABLE IN CASE AT BAR; CLASSIFICATION IS GERMANE TO THE PURPOSES OF THE LAW. — We believe it was reasonable for the
President to have delimited the application of some incentives to the confines of the former Subic military base. It is this specific
area which the government intends to transform and develop from its status quo ante as an abandoned naval facility into a self-
sustaining industrial and commercial zone, particularly for big foreign and local investors to use as operational bases for their
businesses and industries. Why the seeming bias for big investors? Undeniably, they are the ones who can pour huge investments
to spur economic growth in the country and to generate employment opportunities for the Filipinos, the ultimate goals of the
government for such conversion. The classification is, therefore, germane to the purposes of the law. And as the legal maxim goes,
"The intent of a statute is the law."
6. ID.; ID.; ID.; ID.; REASONS. — Certainly, there are substantial differences between the big investors who are being lured to establish
and operate their industries in the so-called "secured area" and the present business operators outside the area. On the one hand,
we are talking of billion-peso investments and thousands of new jobs. On the other hand, definitely none of such magnitude. In
the ??rst, the economic impact will be national; in the second, only local. Even more important, at this time the business activities
outside the "secured area" are not likely to have any impact in achieving the purpose of the law, which is to turn the former military
base to productive use for the benefit of the Philippine economy. There is, then, hardly any reasonable basis to extend to them
the bene??ts and incentives accorded in RA 7227. Additionally, as the Court of Appeals pointed out, it will be easier to manage
and monitor the activities within the "secured area," which is already fenced off, to prevent "fraudulent importation of
merchandise" or smuggling.
7. ID.; ID.; ID.; CLASSIFICATION SET FORTH THEREIN, DOES NOT APPLY MERELY TO EXISTING CONDITIONS. — We believe that the
classi??cation set forth by the executive issuance does not apply merely to existing conditions. As laid down in RA 7227, the
objective is to establish a "self-sustaining, industrial, commercial, financial and investment center" in the area. There will, therefore,
be a long-term difference between such investment center and the areas outside it. aITECA
8. ID.; ID.; ID.; CLASSIFICATION SET FORTH THEREIN, NOT UNREASONABLE, CAPRICIOUS OR UNFOUNDED; APPLIES EQUALLY TO ALL
RESIDENT INDIVIDUALS AND BUSINESSES WITHIN THE "SECURED AREA." — The classi??cation applies equally to all the resident
individuals and businesses within the "secured area." The residents, being in like circumstances or contributing directly to the
achievement of the end purpose of the law, are not categorized further. Instead, they are all similarly treated, both in privileges
granted and in obligations required. All told, the Court holds that no undue favor or privilege was extended. The classi??cation
occasioned by EO 97-A was not unreasonable, capricious or unfounded. To repeat, it was based, rather, on fair and substantive
considerations that were germane to the legislative purpose.
PETITION DENIED.
2) SISON v. ANCHETA
BP 135-higher rates of tax imposed upon fixed income or salaried individual taxpayers
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."
AMPLE JUSTIFICATION EXISTS FOR THE ADOPTION OF THE GROS 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 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 RECEPIENTS 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.
PETITION DENIED.
3) ORMOC SUGAR v. TREASURER of ORMOC CITY
CONSTITUTIONAL LAW; EQUAL PROTECTION OF LAW; REASONABLE CLASSIFICATION; REQUISITES. — The equal protection clause
applies only to persons or things identically situated and does not bar a reasonable classification of the subject of legislation. A
classification is reasonable where (1) it is based on substantial distinctions which make real differences; (2) these are germane to
the purpose of the law; (3) the classification applies not only to present conditions but also to future conditions which are
substantially identical to those of the present; (4) the classification applies only to those who belong to the same class.
TAX ORDINANCE SHOULD NOT BE SINGULAR AND EXCLUSIVE. — When the taxing ordinance was enacted, Ormoc Sugar Co,, Inc.
was the only sugar central in the City. A reasonable classification should be in terms applicable to future conditions as well. The
taxing ordinance should not be singular and exclusive as to exclude any subsequently established sugar central.
c. FREEDOM of SPEECH and of the PRESS
1) AMERICAN BIBLE SOCIETY v. CITY OF MANILA
distributing and selling bibles and/or gospel portions-Ordinance 2529-business of general merchandise- ordinance 3000-Mayor's
permit
CONSTITUTIONAL LAW; RELIGIOUS FREEDOM; DISSEMINATION OF RELIGIOUS INFORMATION, WHEN MAY BE RESTRAINED; PAYMENT
OF LICENSE FEE, IMPAIRS FREE EXERCISE OF RELIGION. — The constitutional guaranty of the free exercise and enjoyment of religious
profession and worship carries with it the right to disseminate religious information. Any restraint of such right can only be justified
like other restraints of freedom of expression on the grounds that there is a clear and present danger of any substantive evi l which
the State has the right to prevent." (Tañada and Fernando on the Constitution of the Philippines, Vol. I, 4th ed., p. 297). In the case
at bar, plaintiff is engaged in the distribution and sales of bibles and religious articles. The City Treasurer of Manila informed the
plaintiff that it was conducting the business of general merchandise without providing itself with the necessary Mayor's permit and
municipal license, in violation of Ordinance No. 3000, as amended, and Ordinance No. 2529, as amended, and required plaintiff
to secure the corresponding permit and license. Plaintiff protested against this requirement and claimed that it never made any
profit from the sale of its bibles. Held: It is true the price asked for the religious articles was in some instances a little bit higher than
the actual cost of the same, but this cannot mean that plaintiff was engaged in the business or occupation of selling said
"merchandise" for profit. For this reasons, the provisions of City Ordinance No. 2529, as amended, which requires the payment of
license fee for conducting the business of general merchandise, cannot be applied to plaintiff society, for in doing so, it would
impair its free exercise and enjoyment of its religious profession and worship, as well as its rights of dissemination of religious beliefs.
Upon the other hand, City Ordinance No. 3000, as amended, which requires the obtention of the Mayor's permit before any person
can engage in any of the businesses, trades or occupations enumerated therein, does not impose any charge upon the enjoyment
of a right granted by the Constitution, nor tax the exercise of religious practices. Hence, it cannot be considered unconstitutional,
even if applied to plaintiff Society. But as Ordinance No. 2529 is not applicable to plaintiff and the City of Manila is powerless to
license or tax the business of plaintiff society involved herein, for the reasons above stated, Ordinance No. 3000 is also inapplicable
to said business, trade or occupation of the plaintiff.
DECISION APPEALED from REVERSED.
2) LLADOC v. CIR
donor's gift tax
1. TAXATION; CONSTITUTIONAL EXEMPTION FOR RELIGIOUS PURPOSES REFERS ONLY TO PROPERTY TAXES. — Section 22 (3), Art. VI of
the Constitution of the Philippines, exempts from taxation cemeteries, churches and personages or convents, appurtenants
thereto, and all lands, buildings, and improvements used exclusively for religious purposes. The exemption is only from the payment
of taxes assessed on such properties enumerated, as property taxes, as CONTRADISTINGUISHED FROM EXCISE TAXES.
2. ID.; ID.; GIFT TAX ON PROPERTY USED FOR RELIGIOUS PURPOSES NOT VIOLATION OF CONSTITUTION. — A gift tax is not an assessment
on the properties themselves. It did not rest upon general ownership. Rather it is an excise upon the use made of the properties
and upon the privilege of receiving them. It is not, therefore a property tax, but an excise tax imposed on the transfer of property
by way of gift inter vivos, the imposition of which a property used exclusively for religious purposes, does not constitute an
impairment of the Constitution.
3. ID.; ID.; HEAD OF DIOCESE: REAL PARTY IN INTEREST IN GIFT ON CHURCH PROPERTY. — The head of the diocese and not the parish
priest is the real party in interest in the imposition of a donee's tax on property donated to the church for religious purposes.
DECISION AFFIRMED.
e. NON-IMPAIRMENT of CONTRACTS
1) CASANOVAS v. HORD, CIR
mining claims- SEC 134 of Act 1189- Internal Revenue Act-annual tax on all valid perfected mining concessions- SEC 5 of the Act
of Congress of July 1, 1902- exempt from the annual tax for a period of thirty years
1. TAXATION; CONTRACT BY GOVERNMENT. — A government may make a valid contract with an individual in respect to taxation,
which contract can be enforced against it.
2. INTERNAL REVENUE LAW; OBLIGATION OF CONTRACTS. — Section 134 of the Internal Revenue Law of 1904 (Act No. 1189) is void
because it impairs the obligation of the contracts contained in the concessions of mines made by the Spanish Government.
3. ID.; ID. — Section 134 of the Internal Revenue Law of 1904 (Act No. 1189) is VOID because it is in conflict with section 60 of the
act of Congress of July 1, 1902.
JUDGMENT REVERSED.
2) MERALCO v. PROVINCE of LAGUNA
franchise tax- RA 7160-authorizes provincial governments, notwithstanding any exemption granted by any law or other special
law, . . . (to) impose a tax on businesses enjoying a franchise.
CONTRACTUAL TAX EXEMPTIONS; DISTINGUISHED FROM TAX EXEMPTIONS GRANTED UNDER FRANCHISES; CASE AT BAR. — The Court
has viewed its previous rulings as laying stress more on the legislative intent of the amendatory law — whether the tax exemption
privilege is to be withdrawn or not — rather than on whether the law can withdraw, without violating the Constitution, the tax
exemption or not. While the Court has, not too infrequently, referred to tax exemptions contained in special franchises as being in
the nature of contracts and a part of the inducement for carrying on the franchise, these exemptions, nevertheless, are far from
being strictly contractual in nature. Contractual tax exemptions, in the real sense of the term and where the non-impairment clause
of the Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in
government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its private
capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not be revoked
without impairing the obligations of contracts. These contractual tax exemptions, however, are not to be confused with tax
exemptions granted under franchises. A franchise partakes the nature of a grant which is beyond the purview of the non-
impairment clause of the Constitution. Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935
and the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the
condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so
requires.
PETITION DISMISSED.
3) CAGAYAN ELECTRIC POWER and LIGHT CO v. CIR
income tax- RA3247-tax exemption- RA 5431 amended SEC 24 of the Tax Code-by making liable for income tax all corporate
taxpayers
The Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress when the public interest
so requires (Sec. 8, Art. XIV, 1935 Constitution; Sec. 5, Art. XIV, 1973 Constitution). Section 1 of petitioner's franchise, Republic Act
No. 3247, provides that it is subject to the provisions of the Constitution and to the terms and conditions established in Act No. 3636
whose section 12 provides that the franchise is subject to amendment, alteration or repeal by Congress. Republic Act No. 5431, in
amending section 24 of the Tax Code by subjecting to income tax all corporate taxpayers not expressly exempted therein and in
section 27 of the Code, had the effect of withdrawing petitioner's exemption from income tax.
JUDGMENT AFFIRMED.
h. UNIFORMITY, EQUITABILITY and PROGRESSIVITY of TAXATION
1) Mayor VILLEGAS v. HIU CHIONG TSAI PAO HAO
Ordinance No. 6537-alien must secure employment permit
Petitioner Mayor Villegas argues that Ordinance No. 6537 cannot be declared null and void on the ground that it violated the rule
on uniformity of taxation because the rule on uniformity of taxation applies only to purely tax or revenue measures and that
Ordinance No. 6537 is not a tax or revenue measure but is an exercise of the police power of the state, it being principally a
regulatory measure in nature. The contention that Ordinance No. 6537 is not a purely tax or revenue measure because its principal
purpose is regulatory in nature has no merit. While it is true that the ??rst part which requires that the alien shall secure an
employment permit from the Mayor involves the exercise of discretion and judgment in the processing and approval or disapprov al
of applications for employment permits and therefore is regulatory in character the second part which requires the payment of
P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic or justi??cation in exacting P50.00 from aliens
who have been cleared for employment. It is obvious that the purpose of the ordinance is to raise money under the guise of
regulation.
DECISION AFFIRMED.
2) ASSOC of CUSTOMS BROKERS INC v. MUN BOARD of MANILA
Ordinance No. 3379- An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila
UNIFORMITY OF TAXATION. — The said ordinance infringes also the rule of uniformity of taxation ordained by our Constitution. It
exacts the tax upon all motor vehicles operating within the City of Manila.It does not distinguish between a motor vehicle for hire
and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila and
one registered in another place but occasionally comes to Manila and uses its streets and public highways. There is no pretense
that the ordinance equally applies to motor vehicles which come to Manila for a temporary stay or for short errands, and it cannot
be denied that they contribute in no small degree to the deterioration of the streets and public highways. As they are benefited
by their use they should also be made to share the corresponding burden. This is an inequality which is found in the ordinance in
question end which renders it offensive to the Constitution.
DECISION REVERSED.
i. NON-DELEGATION of LEGISLATIVE POWER
1) ABAKADA GURO PARTY LIST v. ERMITA
RA 9337- stand-by authority to raise the VAT rate from 10% to 12%
LEGISLATIVE DEPARTMENT; CONGRESS IS PROHIBITED FROM DELEGATING THOSE WHICH ARE STRICTLY, OR INHERENTLY AND
EXCLUSIVELY, LEGISLATIVE. — With respect to the Legislature, Section 1 of Article VI of the Constitution provides that "the Legislative
power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives." The
powers which Congress is prohibited from delegating are those which are strictly, or inherently and exclusively, legislative. Purely
legislative power, which can never be delegated, has been described as the authority to make a complete law — complete as
to the time when it shall take effect and as to whom it shall be applicable — and to determine the expediency of its enactment.
Thus, the rule is that in order that a court may be justified in holding a statute unconstitutional as a delegation of legislative power,
it must appear that the power involved is purely legislative in nature — that is, one appertaining exclusively to the legislative
department. It is the nature of the power, and not the liability of its use or the manner of its exercise, which determines the v alidity
of its delegation.
EXCEPTIONS. — Nonetheless, the general rule barring delegation of legislative powers is subject to the following recognized
limitations or exceptions: (1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the Constitution; (2)
Delegation of emergency powers to the President under Section 23 (2) of Article VI of the Constitution; (3) Delegation to the people
at large; (4) Delegation to local governments; and (5) Delegation to administrative bodies.
TESTS OF VALID DELEGATION. — In every case of permissible delegation, there must be a showing that the delegation itself is valid.
It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or imple mented by the
delegate; and (b) fixes a standard — the limits of which are sufficiently determinate and determinable — to which the delegate
must conform in the performance of his functions. A sufficient standard is one which de??nes legislative policy, marks its li mits,
maps out its boundaries and speci??es the public agency to apply it. It indicates the circumstances under which the legislative
command is to be effected. Both tests are intended to prevent a total transference of legislative authority to the delegate, who is
not allowed to step into the shoes of the legislature and exercise a power essentially legislative.
THE LEGISLATURE MAY DELEGATE TO EXECUTIVE OFFICERS OR BODIES THE POWER TO DETERMINE CERTAIN FACTS OR CONDITIONS
ON WHICH THE OPERATION OF A STATUTE IS MADE TO DEPEND. — Clearly, the legislature may delegate to executive officers or
bodies the power to determine certain facts or conditions, or the happening of contingencies, on which the operation of a statute
is, by its terms, made to depend, but the legislature must prescribe sufficient standards, policies or limitations on their authority.
While the power to tax cannot be delegated to executive agencies, details as to the enforcement and administration of an
exercise of such power may be left to them, including the power to determine the existence of facts on which its operation
depends.
RATIONALE. — The rationale for this is that the preliminary ascertainment of facts as basis for the enactment of legislation is not of
itself a legislative function, but is simply ancillary to legislation. Thus, the duty of correlating information and making
recommendations is the kind of subsidiary activity which the legislature may perform through its members, or which it may delegate
to others to perform. Intelligent legislation on the complicated problems of modern society is impossible in the absence of accurate
information on the part of the legislators, and any reasonable method of securing such information is proper. The Constitution as
a continuously operative charter of government does not require that Congress find for itself every fact upon which it desires to
base legislative action or that it make for itself detailed determinations which it has declared to be prerequisite to application of
legislative policy to particular facts and circumstances impossible for Congress itself properly to investigate.
PETITIONS DISMISSED.
k. TAX EXEMPTION of PROPERTIES ACTUALLY, DIRECTLY and EXCLUSIVELY USED for RELIGIOUS, CHARITABLE and
EDUCATIONAL PURPOSES
1) ABRA VALLEY COLLEGE v. AQUINO
2nd floor-permanent residence of the President and the Director-1st floor-leased by Northern Marketing Corporation
It must be stressed however, that while this Court allows a more liberal and non-restrictive interpretation of the phrase "EXCLUSIVELY
used for educational purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable
emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the
accomplishment of the main purposes. Otherwise stated, the use of the school building or lot for commercial purposes is neither
contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of the main building in the case at bar fo r
residential purposes of the Director and his family, may find justification under the concept of incidental use, which is
complimentary to the main or primary purpose — educational, the lease of the first floor thereof to the Northern Marketing
Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education.
CFI AFFIRMED.
2) CIR v. CA and YMCA
lease to small shop owners-parking fees
EDUCATIONAL INSTITUTION, CONSTRUED; WHEN NOT APPLICABLE CASE AT BAR. — Is the YMCA and educational institution within
the purview of Article XIV, Section 4, par. 3 of the Constitution? We rule that it is not. The term "educational institution" or "institution
of learning" has acquired a well-known technical meaning, of which the members of the Constitutional Commission are deemed
cognizant. Under the Education Act of 1982, such term refers to schools. The school system is synonymous with formal education,
which "refers to the hierarchically structured and chronologically graded learnings organized and provided by the formal school
system and for which certification is required in order for the learner to progress through the grades or move to the higher levels."
The Court has examined the "Amended Articles of Incorporation" and "By-Laws" of the YMCA, but found nothing in them that even
hints that it is a school or an educational institution. Furthermore, under the Education Act of 1982, even non-formal education is
understood to be school-based and "private auspices such as foundations and civic-spirited organizations" are ruled out. It is settled
that the term "educational institution," when used in laws granting tax exemptions, refers to a ". . . school seminary, college or
educational establishment . . . ." Therefore, the private respondent cannot be deemed one of the educational institutions cov ered
by the constitutional provision under consideration. ". . . Words used in the Constitution are to be taken in their ordinary acceptation.
While in its broadest and best sense education embraces all forms and phases of instruction, improvement and development of
mind and body, and as well of religious and moral sentiments, yet in the common understanding and application it means a place
where systematic institution in any or all of the useful branches of learning is given by methods common to schools and instruction
of learning. That we conceive to be the true intent and scope of the term [educational institutions] as used in the Constitution."
PETITION GRANTED.
C. DOUBLE TAXATION and TAX EXEMPTIONS
a. DOUBLE TAXATION DEFINED
1) VICTORIAS MILLING CO INC v. MUNICIPALITY of VICTORIAS
two municipal ordinances separately imposing license taxes on operators of sugar centrals and sugar refineries
Double taxation; Description; Existence; Definition; Where no double taxation exists; Case at bar.—Double taxation has been
otherwise described as "direct duplicate taxation". For double taxation to exist, the same property must be taxed twice, when it
should be taxed but once. Double taxation has been also defined as taxing the same person twice by the same jurisdiction for the
same thing. In the case at bar, plaintiff's argument on double taxation does not inspire assent. First. The two taxes cover two
different objects. Section 1 of the ordinance taxes a person operating sugar centrals or engaged in the manufacture of centrifugal
sugar. While under Section 2, those taxed are the operators of sugar refinery mills. One occupation or business is different from the
other. Second. The disputed taxes are imposed on occupation or business. Both taxes are not on sugar. The amount thereof
depends on the annual output capacity of the mills concerned, regardless of the actual sugar milled. Plaintiff's argument perhaps
could make out a point if the object of taxation here were the sugar it produces, not the business of producing it.
ORDINANCE VALID. COMPLAINT DISMISSED.
b. ELEMENTS of DOUBLE TAXATION
1) VILLANUEVA v. CITY of ILOILO
Ordinance 11-An Ordinance Imposing MUNICIPAL LICENSE TAX On Persons Engaged In the Business Of Operating Tenement Houses
THE SAME TAX MAY BE IMPOSED BY THE NATIONAL GOVERNMENT AS WELL AS LOCAL GOVERNMENT. — While it is true that the
plaintiffs-appellees are taxable under the provisions of the National Internal Revenue Code as a real estate dealers, and still taxable
under the ordinance in question, the argument against double taxation may not be invoked. The same tax may be imposed by
the national government as well as by the local government. There is nothing inherently obnoxious in the exaction of license fees
or taxes with respect to the same occupation, calling or activity by both the State and a political subdivision thereof.
TAX MAY BE LEVIED UPON A BUSINESS ALTHOUGH THE LAND OR PROPERTY USED THEREWITH IS SUBJECT TO PROPERTY TAX. — It is a
well settled rule that a LICENSE TAX may be levied upon business or occupation although the land or property used in connection
therewith is subject to property tax. The State may collect an ad valorem tax on property used in a calling, and at the same time
impose a license tax on that calling. The imposition of the latter kind of tax being in no sense a double tax.
JUDGMENT A QUO REVERSED. ORDINANCE VALID.
2) PROCTER and GAMBLE PH MANUFACTURING CORP v. MUN of JAGNA
Ordinance 4- STORAGE FEES on all exportable copra deposited in the bodega within the jurisdiction of the Municipality of Jagna,
Bohol
The question of whether appellant is engaged in that business or not is irrelevant because the storage fee, as previously mentioned,
is an imposition on the privilege of storing copra in a bodega within defendant municipality by persons, firms or corporations.
Section 1 of the Ordinance in question does not state that said persons, firms or corporations should be engaged in the business
or occupation of buying or selling copra. Moreover, by plaintiff's own admission that it is a consolidated corporation with its trading
company, it will be hard to segregate the copra it uses for trading from that it utilizes for manufacturing.
Thus, it can be said that plaintiff's payment of storage fees imposed by the Ordinance in question does not amount to double
taxation. For double taxation to exist, the same property must be taxed twice, when it should be taxed but once. Double taxation
has also been de�ned as taxing the same person twice by the same jurisdiction for the same thing. Surely, a tax on plaintiff's
products is different from a tax on the privilege of storing copra in a bodega situated within the territorial boundary of defendant
municipality.
c. TAX AVOIDANCE, TAX EVASION and TAX FRAUD
1) DELPHER TRADES CORP v. IAC
Pachecos who owned in common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their control over
the property through the corporation and to avoid taxes-estate planning
TAXATION; RESORT TO LEGAL MEANS TO DECREASE PAYMENT OF TAXES BY A TAXPAYER; RIGHT CANNOT BE DOUBTED. — The records
do not point to anything wrong or objectionable about this "estate planning" scheme resorted to by the Pachecos. "The legal right
of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law
permits, cannot be doubted."
PETITION GRANTED.
2) CIR v. ESTATE of BENIGNO TODA, JR.
sale of Cibeles building-in connivance with its dummy Rafael Altonaga, who was financially incapable of purchasing it
TAX AVOIDANCE is the tax saving device within the means sanctioned by law. This method should be used by the taxpayer in
good faith and at arms length. TAX EVASION, on the other hand, is a scheme used outside of those lawful means and when availed
of, it usually subjects the taxpayer to further or additional civil or criminal liabilities. Tax evasion connotes the integration of three
factors: (1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non -
payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being "evil," in "bad
faith," "willful," or "deliberate and not accidental"; and (3) a course of action or failure of action which is unlawful.
Fraud in its general sense, "is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment
involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which
an undue and unconscionable advantage is taken of another."
PETITION GRANTED.

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TAXATION LAW 1- ATTY.

GENERAL PRINCIPLES OF TAXATION

A. NATURE of INTERNAL REVENUE LAW

losses of property which occurred during World War II

SCOPE and NATURE of TAXATION

INHERENT ATTRIBUTE of SOVEREIGNTY

death of Atanasio Pineda-estate divided to heirs

3) PHIL GUARANTY v. CIR

reinsurance with foreign reinsurance companies

THEORY and BASIS of TAXATION

trustee of the estate of Thomas Hanley

registration fees-Act 42739-legislative franchise-PAL is exempt from the payment of taxes

PETITION PARTIALLY GRANTED.

3) TOLENTINO v. SEC of FINANCE

RA 7716-Expanded Value-Added Tax Law

PETITIONS are DISMISSED.

1) OSMENA v. ORBOS and 2) CALTEX v. CoA

CHARACTERTISTICS of a SOUND TAX SYSTEM

2) TAGANITO MINING v. CIR

TAXATION DISTINGUISHED from POLICE POWER and EMINENT DOMAIN

1) REPUBLIC v. BACOLOD-MURCIA MILLING CO.

WTO-World Trade Organization

PETITION PARTLY GRANTED and DISMISSED in all other respects.

WHEN is TAX considered as an IMPLEMENT of POLICE POWER?

2) TIO v. VIDEOGRAM REGULATORY BOARD

1) CIR v. CENTRAL LUZON DRUG CORP

Mercury drug-senior citizen's discount

A. ESSENTIAL CHARACTERISTICS of TAXES

delinquency in real estate taxes-backpay certificate

2.PERSONAL to the TAXPAYER

1) TAN v. DEL ROSARIO

SNIT-Simplified Net Income tax

PETITIONS are DISMISSED.

Guild of Philippine Jewellers

AS to WHO BEARS the BURDEN and INCIDENCE

1) TOLENTINO v. SEC of FINANCE

TAXES DISTINGUISHED from other IMPOSITIONS

3) REPUBLIC v. MAMBULAO LUMBER COMPANY

1) VICTORIAS MILLING CO. v. MUNICIPALITY of VICTORIAS, NEGROS OCCIDENTAL

ORDINANCE VALID. COMPLAINT DISMISSED.

1) NATIONAL DEV'T COMPANY v. CIR

twelve ocean-going vessel

III. SOURCES of TAX LAW

1) ASTURIAS SUGAR CENTRAL v. CIR

Special Economic Zone in Naga, Cebu

1) CIR v. BURROUGHS LTD.

1) HAGONOY MARKET VENDOR v. MUNICIPALITY of HAGONOY

IV. CLASSIFICATION of TAXPAYERS

1) PHILEX MINING CORP v. CIR

Baguio Gold-Sto. Nino Mine

2) TAN v. DEL ROSARIO

SNIT-Simplified Net Income Tax- GPP

PETITIONS are DISMISSED.

OBILLOS JR. v. CIR

JUDGMENT is REVERSED and SET ASIDE.

V.GENERAL PRINCIPLES (SECTIONS 22,23 and 42 of NIRC)

1) NATIONAL DEV'T CORP v. CIR

APPEALED DECISION AFFIRMED.

2) CIR v. MARUBENI CORP

3) PHIL GUARANTY CO INC. v. CIR

4) ALEXANDER HOWDEN & CO. LTD v. CIR

reinsurance contract with British insurance companies

5) PHILAMLIFE v. CTA and CIR