1. CIR vs. Fortune Tobacco Corporation, [G.R. Nos.

167274-75, July 21, 2008]

Facts: Respondent FTC is a domestic corporation that manufactures cigarettes packed by machine under several brands.
Prior to January 1, 1997, Section 142 of the 1977 Tax Code subjected said cigarette brands to ad valorem tax. Annex D of
R.A. No. 4280 prescribed the cigarette brands’ tax classification rates based on their net retail price. On January 1, 1997,
R.A. No. 8240 took effect. Sec. 145 thereof now subjects the cigarette brands to specific tax and also provides that: (1) the
excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be
lower than the tax, which is due from each brand on October 1, 1996; (2) the rates of excise tax on cigarettes enumerated
therein shall be increased by 12% on January 1, 2000; and (3) the classification of each brand of cigarettes based on its
average retail price as of October 1, 1996, as set forth in Annex D shall remain in force until revised by Congress.

The Secretary of Finance issued RR No. 17-99 to implement the provision for the 12% excise tax increase. RR No. 17-99
added the qualification that “the new specific tax rate xxx shall not be lower than the excise tax that is actually being paid
prior to January 1, 2000.” In effect, it provided that the 12% tax increase must be based on the excise tax actually being
paid prior to January 1, 2000 and not on their actual net retail price.

FTC filed 2 separate claims for refund or tax credit of its purportedly overpaid excise taxes for the month of January 2000
and for the period January 1-December 31, 2002. It assailed the validity of RR No. 17-99 in that it enlarges Section 145 by
providing the aforesaid qualification. In this petition, petitioner CIR alleges that the literal interpretation given by the CTA
and the CA of Section 145 would lead to a lower tax imposable on 1 January 2000 than that imposable during the transition
period, which is contrary to the legislative intent to raise revenue.

Issue: Should the 12% tax increase be based on the net retail price of the cigarettes in the market as outlined in Section 145
of the 1997 Tax Code?

Held: YES. Section 145 is clear and unequivocal. It states that during the transition period, i.e., within the next 3 years from
the effectivity of the 1997 Tax Code, the excise tax from any brand of cigarettes shall not be lower than the tax due from
each brand on 1 October 1996. This qualification, however, is conspicuously absent as regards the 12% increase which is to
be applied on cigars and cigarettes packed by machine, among others, effective on 1 January 2000.

Clearly, Section 145 mandates a new rate of excise tax for cigarettes packed by machine due to the 12% increase effective
on 1 January 2000 without regard to whether the revenue collection starting from this period may turn out to be lower
than that collected prior to this date.

The qualification added by RR No. 17-99 imposes a tax which is the higher amount between the ad valorem tax being paid
at the end of the 3-year transition period and the specific tax under Section 145, as increased by 12%—a situation not
supported by the plain wording of Section 145 of the 1997 Tax Code. Administrative issuances must not override, supplant
or modify the law, but must remain consistent with the law they intend to carry out.

Revenue generation is not the sole purpose of the passage of the 1997 Tax Code. The shift from the ad valorem system to
the specific tax system in the Code is likewise meant to promote fair competition among the players in the industries
concerned and to ensure an equitable distribution of the tax burden.

1
2. Commissioner of Internal Revenue vs. Central Luzon Drug Corporation
Facts:
Respondents operated six drugstores under the business name Mercury Drug. From January to December 1996
respondent granted 20% sales discount to qualified senior citizens on their purchases of medicines pursuant to RA 7432
for a total of ₱ 904,769.

On April 15, 1997, respondent filed its annual Income Tax Return for taxable year 1996 declaring therein net losses. On
Jan. 16, 1998 respondent filed with petitioner a claim for tax refund/credit of ₱ 904,769.00 allegedly arising from the 20%
sales discount. Unable to obtain affirmative response from petitioner, respondent elevated its claim to the Court of Tax
Appeals. The court dismissed the same but upon reconsideration, the latter reversed its earlier ruling and ordered
petitioner to issue a Tax Credit Certificate in favor of respondent citing CA GR SP No. 60057 (May 31, 2001, Central Luzon
Drug Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or erroneously paid taxes but
that there are other situations which may warrant a tax credit/refund.

CA affirmed Court of Tax Appeal's decision reasoning that RA 7432 required neither a tax liability nor a payment of taxes
by private establishments prior to the availment of a tax credit. Moreover, such credit is not tantamount to an unintended
benefit from the law, but rather a just compensation for the taking of private property for public use.

Issue:
Whether or not respondent, despite incurring a net loss, may still claim the 20% sales discount as a tax credit.

Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount on their purchase
of medicine from any private establishment in the country. The latter may then claim the cost of the discount as a tax
credit. Such credit can be claimed even if the establishment operates at a loss.

A tax credit generally refers to an amount that is “subtracted directly from one’s total tax liability.” It is an “allowance
against the tax itself” or “a deduction from what is owed” by a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts. One of these is tax deduction – which is subtraction
“from income for tax purposes,” or an amount that is “allowed by law to reduce income prior to the application of the tax
rate to compute the amount of tax which is due.” In other words, whereas a tax credit reduces the tax due, tax deduction
reduces the income subject to tax in order to arrive at the taxable income.

A tax credit is used to reduce directly the tax that is due, there ought to be a tax liability before the tax credit can be
applied. Without that liability, any tax credit application will be useless. There will be no reason for deducting the latter
when there is, to begin with, no existing obligation to the government. However, as will be presented shortly, the
existence of a tax credit or its grant by law is not the same as the availment or use of such credit. While the grant is
mandatory, the availment or use is not. If a net loss is reported by, and no other taxes are currently due from, a business
establishment, there will obviously be no tax liability against which any tax credit can be applied. For the establishment to
choose the immediate availment of a tax credit will be premature and impracticable.

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3. SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. CEMENT MANUFACTURERS ASSOCIATION OF THE
PHILIPPINES, THE SECRETARY OF THE DEPARTMENT OF TRADE AND INDUSTRY, THE SECRETARY OF THE DEPARTMENT
OF FINANCE and THE COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents.

Facts:

Republic Act No. 8800, the Safeguard Measures Act (SMA), which was one of the laws enacted by Congress soon after the
Philippines ratified the General Agreement on Tariff and Trade (GATT) and the World Trade Organization (WTO)
Agreement.[3] The SMA provides the structure and mechanics for the imposition of emergency measures, including
tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on
them.

Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation engaged in the business of
cement manufacturing, production, importation and exportation. Its principal stockholders are Taiheiyo Cement
Corporation and Tokuyama Corporation, purportedly the largest cement manufacturers in Japan.[5]

Private respondent Philippine Cement Manufacturers Corporation[6] (Philcemcor) is an association of domestic cement
manufacturers. It has eighteen (18) members,[7] per Record. While Philcemcor heralds itself to be an association of
domestic cement manufacturers, it appears that considerable equity holdings, if not controlling interests in at least twelve
(12) of its member-corporations, were acquired by the three largest cement manufacturers in the world, namely
Financiere Lafarge S.A. of France, Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank
Financiere Glaris, Ltd., then Holderfin B.V.).

the DTIs disagreement with the conclusions of the Tariff Commission, but at the same time, ultimately denying
Philcemcors application for safeguard measures on the ground that the he was bound to do so in light of the Tariff
Commissions negative findings.

Philcemcor challenged this Decision of the DTI Secretary by filing with the Court of Appeals a Petition for Certiorari,
Prohibition and Mandamus[11] seeking to set aside the DTI Decision, as well as the Tariff Commissions Report. The Court
of Appeals Twelfth Division, in a Decision[13] penned by Court of Appeals Associate Justice Elvi John Asuncion,[14]
partially granted Philcemcors petition.

On 23 June 2003, Southern Cross filed the present petition, arguing that the Court of Appeals has no jurisdiction over
Philcemcors petition, as the proper remedy is a petition for review with the CTA conformably with the SMA, and; that the
factual findings of the Tariff Commission on the existence or non-existence of conditions warranting the imposition of
general safeguard measures are binding upon the DTI Secretary.

Despite the fact that the Court of Appeals Decision had not yet become final, its binding force was cited by the DTI
Secretary when he issued a new Decision on 25 June 2003, wherein he ruled that that in light of the appellate courts
Decision, there was no longer any legal impediment to his deciding Philcemcors application for definitive safeguard
measures.

The Court of Appeals had held that based on the foregoing premises, petitioner’s prayer to set aside the findings of the
Tariff Commission in its assailed Report dated March 13, 2002 is DENIED. On the other hand, the assailed April 5, 2002
Decision of the Secretary of the Department of Trade and Industry is hereby SET ASIDE. Consequently, the case is
REMANDED to the public respondent Secretary of Department of Trade and Industry for a final decision in accordance
with RA 8800 and its Implementing Rules and Regulations. Hence, the appeal.

3
Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time that that in light of the appellate courts
Decision there was no longer any legal impediment to his deciding Philcemcors application for definitive safeguard
measures.[41] He made a determination that, contrary to the findings of the Tariff Commission, the local cement industry
had suffered serious injury as a result of the import surges.[42] Accordingly, he imposed a definitive safeguard measure on
the importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for
three years on imported gray Portland Cement. Hence, the appeal.

Issue:

Whether or not the decision of DTI Secretary, to impose safeguard measures is valid.

Held:

NO, due to the nature of this case, the Court found that the DTI should follow the regulations prescribed by SMA. The
Court held that he assailed Decision of the Court of Appeals is DECLARED NULL AND VOID and SET ASIDE. The Decision of
the DTI Secretary dated 25 June 2003 is also DECLARED NULL AND VOID and SET ASIDE. No Costs.

Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time that that in light of the appellate
courts Decision there was no longer any legal impediment to his deciding Philcemcors application for definitive safeguard
measures.[41] He made a determination that, contrary to the findings of the Tariff Commission, the local cement industry
had suffered serious injury as a result of the import surges.[42] Accordingly, he imposed a definitive safeguard measure on
the importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for
three years on imported gray Portland Cement.

4
4. CIR v. SM PRIME HOLDINGS, GR No. 183505, 2010-02-26

Facts:

Respondents SM Prime Holdings, Inc. (SM Prime) and First Asia Realty Development Corporation (First Asia) are domestic
corporations duly organized and existing under the laws of the Republic of the Philippines. Both are engaged in the
business of operating cinema houses, among... others.

On September 26, 2003, the Bureau of Internal Revenue (BIR) sent SM Prime a Preliminary Assessment Notice (PAN) for
value added tax (VAT) deficiency on cinema ticket sales in the amount of P119,276,047.40 for taxable year 2000.[8] In
response, SM Prime... filed a letter-protest dated December 15, 2003.

On September 6, 2004, the BIR denied the protest filed by SM Prime and ordered it to pay the VAT deficiency for taxable
year 2000 in the amount of P124,035,874.12.

On May 15, 2002, the BIR sent First Asia a PAN for VAT deficiency on... cinema ticket sales for taxable year 1999 in the
total amount of P35,823,680.93.[13] First Asia protested the PAN in a letter dated July 9, 2002.

On September 6, 2004, the BIR rendered a Decision denying the protest and ordering First Asia to pay the amount of
P35,823,680.93 for VAT deficiency for taxable year 1999.

A PAN for VAT deficiency on cinema ticket sales for the taxable year 2002 in the total amount of P32,802,912.21 was
issued against First Asia by the BIR. In response, First Asia filed a protest-letter dated November 11, 2004. The BIR then
sent a Formal Letter of Demand, which... was protested by First Asia on December 14, 2004.[

A PAN for VAT deficiency on cinema ticket sales in the total amount of P28,196,376.46 for the taxable year 2003 was
issued by the BIR against First Asia. In a letter dated September 23, 2004, First Asia protested the PAN. A Formal Letter of
Demand was thereafter issued by the

BIR to First Asia, which the latter protested through a letter dated November 11, 2004. [24]

On July 1, 2005, SM Prime filed a Motion to Consolidate CTA Case Nos. 7085, 7111 and 7272 with CTA Case No. 7079 on
the grounds that the issues raised therein are identical and that SM Prime is a majority shareholder of First Asia. The
motion was granted.

Upon submission of the parties' respective memoranda, the consolidated cases were submitted for decision on the sole
issue of whether gross receipts derived from admission tickets by cinema/theater operators or proprietors are subject to
VAT.

On September 22, 2006, the First Division of the CTA rendered a Decision granting the Petition for Review.

Issues:

5
(1) In not finding/holding that the gross receipts derived by operators/proprietors of cinema houses from admission
tickets [are] subject to the 10% VAT because:

(a)

THE EXHIBITION OF MOVIES BY CINEMA OPERATORS/PROPRIETORS TO THE PAYING PUBLIC IS A SALE OF SERVICE;

Ruling:

The petition is bereft of merit.

The phrase "sale or exchange of services" means the performance of all kinds of services in the Philippines for others for a
fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock,
real estate,... commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing
services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or
repacking goods for others; proprietors, operators... or keepers of hotels, motels, rest houses, pension houses, inns,
resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and
caterers; dealers in securities; lending investors; transportation contractors on their... transport of goods or cargoes,
including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water
relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and
television... broadcasting and all other franchise grantees except those under Section 119 of this Code; services of banks,
non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop
insurances), including surety, fidelity, indemnity and... bonding companies; and similar services regardless of whether or
not the performance thereof calls for the exercise or use of the physical or mental faculties.

A cursory reading of the foregoing provision clearly shows that the enumeration of the "sale or exchange of services"
subject to VAT is not exhaustive. The words, "including," "similar services," and "shall likewise include," indicate that the
enumeration is by way of example... only

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5. REYES v. ALMANZOR

FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased and occupied as dwelling
units by tenants who were paying monthly rentals of not exceeding P300. Sometimes in 1971 the
Rental

Freezing Law was passed prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling
units where rentals do not exceed three hundred pesos (P300.00), so that the Reyeses were precluded from
raising the rents and from ejecting the tenants. In 1973, respondent City Assessor of Manila reclassified and
reassessed the value of the subject properties based on the schedule of market values, which entailed an
increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement averring
that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional"
considering that the taxes imposed upon them greatly exceeded the annual income derived from their
properties. They argued that the income approach should have been used in determining the land values instead of the
comparable sales approach which the City Assessor adopted.

ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?

HELD: No. The taxing power has the authority to make a reasonable and natural classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at the very least discrimination
that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under
similar circumstances or that all persons must be treated in the same manner, the conditions not being different
both in the privileges conferred and the liabilities imposed.
Consequently, it stands to reason that petitioners who are burdened by the government by its
Rental Freezing
Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the
same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of
their properties.

6. ANTERO M. SISON, JR. vs. RUBEN B. ANCHETA, Acting Commissioner of BIR, et al. G.R. No. L-59431 July 25, 1984

FACTS:
The challenged posed in this suit for declaratory relief or prohibition proceeding on the validity of Section 1 of Batas
Pambansa Blg. 135 which further amends Section 21 of the National Internal Revenue Code of 1977, which provides for
rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and
other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from
trust fund and similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership,
(f) adjusted gross income. Petitioner as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against
by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are
imposed upon fixed income or salaried individual taxpayers. He characterizes the above section as arbitrary amounting to
class legislation, oppressive and capricious in character. For the petitioner there is transgression of both the equal
protection and due process clause as well as the rule requiring uniformity in taxation.

ISSUE: Is Section 1 of BP 135 is violative of due process and equal protection clause?

RULING:

7
No. The power to tax, an inherent prerogative, has to be availed of to assure the performance of vital state functions. It is a
source of bulk of public funds. To paraphrase a recent decision, taxes being the lifeblood of the government, their prompt
and certain availability are of the essence. The power to tax is an attribute of sovereignty. The Constitution as the
fundamental law overrides any legislative or executive act that runs counter to it. The injury is centered on the question
whether the imposition of a higher tax rate on taxable net income derived from business or profession than on
compensation is constitutionally infirm. The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A
mere allegation does not suffice. There must be a factual foundation of such unconstitutional taint. Considering that
petitioner here would condemn such a provision as void or its face, he has not made out a case. This is merely to adhere to
the authoritative doctrine that were the due process and equal protection clauses are invoked, considering that the arc not
fixed rules but rather broad standards, there is a need for of such persuasive character as would lead to such a conclusion.
Absent such a showing, the presumption of validity must prevail. Due process and equal protection was not violated.
Petition is dismissed.

7. CIR –v– Algue, Inc., & CTA G.R. No. L-28896 February 17, 1988
FACTS: Algue, Inc., a domestic corporation engaged in engineering, construction and other allied activities. Philippine Sugar
Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil
manufacturing process. [There was a sale for which] Algue received as agent a commission of P126,000.00, and it was from
this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. The payees duly reported
their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon, and there was no
distribution of dividends was involved.
[Algue claimed the 75,000 to be deductible from their tax, to which the CIR disallowed.]
ISSUE: Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private
respondent Algue as legitimate business expenses in its income tax returns.
HELD: NO – CIR is not correct. The burden is on the taxpayer to prove the validity of the claimed deduction. In the present
case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the
payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors
and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring
millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed.

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 necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that
the real purpose of taxation, which is the promotion of the common good, may be achieved.

It is said that taxes are what we pay for civilization 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.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it
be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to

8
complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be
stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.

8. Phil. Bank of Communications vs. CIR

FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported profits, and paid income
taxes amounting to P5.2M in 1985. However, at the end of the year PBCom suffered losses so that when it filed
its Annual Income Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported a net
loss of P14.1 M, and thus declared no tax payable for the year. In 1988, the bank requested from CIR for a tax
credit and tax refunds representing overpayment of taxes. Pending investigation of the respondent CIR,
petitioner instituted a Petition for Review before the Court of Tax Appeals (CTA). CTA denied its petition for tax
credit and refund for failing to file within the prescriptive period to which the petitioner belies arguing the
Revenue Circular No.7-85 issued by the CIR itself states that claim for overpaid taxes are not covered by the two-year
prescriptive period mandated under the Tax Code.

ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid exemption to the NIRC?

HELD: No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive
period set by law.
Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for
the State to finance the needs of the citizenry and to advance the common weal. Due process of law under the
Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon
taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as
little as possible.
From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law
because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or
hampered by incidental matters.

9. NATIONAL POWER CORPORATION vs. CITY OF CABANATUAN GR. No. 149110, April 9, 2003

Facts: NAPOCOR, the petitioner, is a government-owed and controlled corporation created under Commonwealth Act 120.
It is tasked to undertake the “development of hydroelectric generations of power and the production of electricity from
nuclear, geothermal, and other sources, as well as, the transmission of electric power on a nationwide basis.”
For many years now, NAPOCOR sells electric power to the resident Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance No. 165-92, the respondent assessed the petitioner a franchise
tax amounting to P808,606.41, representing 75% of 1% of the former’s gross receipts for the preceding year.
Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government, refused to pay the tax
assessment. It argued that the respondent has no authority to impose tax on government entities. Petitioner also contend
that as a non-profit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in
accordance with Sec. 13 of RA 6395, as amended.
The respondent filed a collection suit in the RTC of Cabanatuan City, demanding that petitioner pay the assessed tax, plus
surcharge equivalent to 25% of the amount of tax and 2% monthly interest. Respondent alleged that petitioner’s
exemption from local taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code). The trial court issued an
order dismissing the case. On appeal, the Court of Appeals reversed the decision of the RTC and ordered the petitioner to
pay the city government the tax assessment.

9
Issues: (1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its stocks are wholly owned by
the National Government and its charter characterized is as a ‘nonprofit organization’?
(2) Is the NAPOCOR’s exemption from all forms of taxes repealed by the provisions of the Local Government Code (LGC)?

Held: (1) NO. To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a
privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the individual
stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from the National
Government. It can sue and be sued under its own name, and can exercise all the powers of a corporation under the
Corporation Code. To be sure, the ownership by the National Government of its entire capital stock does not necessarily
imply that petitioner is no engage din business.
(2) YES. One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and
agencies of the National Government from the coverage of local taxation. Although as a general rule, LGUs cannot impose
taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits an
exception, i.e. when specific provisions of the LGC authorize the LGUs to impose taxes, fees, or charges on the
aforementioned entities. The legislative purpose to withdraw tax privileges enjoyed under existing laws or charter is clearly
manifested by the language used on Sec. 137 and 193 categorically withdrawing such exemption subject only to the
exceptions enumerated. Since it would be tedious and impractical to attempt to enumerate all the existing statutes
providing for special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such
exemptions or privileges. No more unequivocal language could have been used.

10. Planters Products Inc vs Fertiphil Corp G.R. No. 166006 March 14, 2008
FACTS: Petitioner PPI and respondent Fertiphil are private corporations incorporated under Philippine laws, both
engaged in the importation and distribution of fertilizers, pesticides and agricultural chemicals.
Marcos issued Letter of Instruction (LOI) 1465, imposing a capital recovery component of
Php10.00 per bag of fertilizer. The levy was to continue until adequate capital was raised to make PPI financially viable.
Fertiphil remitted to the Fertilizer and Pesticide Authority (FPA), which was then remitted the depository bank of PPI.
Fertiphil paid P6,689,144 to FPA from 1985 to 1986.
After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Fertiphil demanded from PPI a
refund of the amount it remitted, however PPI refused. Fertiphil filed a complaint for collection and damages, questioning
the constitutionality of LOI 1465, claiming that it was unjust, unreasonable, oppressive, invalid and an unlawful imposition
that amounted to a denial of due process. PPI argues that Fertiphil has no locus standi to question the constitutionality of
LOI No. 1465 because it does not have a "personal and substantial interest in the case or will sustain direct injury as a result
of its enforcement." It asserts that Fertiphil did not suffer any damage from the imposition because "incidence of the levy
fell on the ultimate consumer or the farmers themselves, not on the seller fertilizer company.
ISSUE: Whether or not Fertiphil has locus standi to question the constitutionality of LOI No. 1465.
What is the power of taxation?
RULING: Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere procedural technicality
which may be waived.
The imposition of the levy was an exercise of the taxation power of the state. While it is true that the power to tax can be
used as an implement of police power, the primary purpose of the levy was revenue generation. If the purpose is primarily
revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax.

10
Police power and the power of taxation are inherent powers of the State. These powers are distinct and have different
tests for validity. Police power is the power of the State to enact legislation that may interfere with personal liberty or
property in order to promote the general welfare, while the power of taxation is the power to levy taxes to be used for
public purpose. The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue
generation. The "lawful subjects" and "lawful means" tests are used to determine the validity of a law enacted under the
police power. The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations.

11. BAGATSING vs. RAMIREZ

"The entrusting of the tax collection to private entities does not destroy the public purpose of a tax ordinance."

FACTS: Aside from the issue on publication, private respondent bewails that the market stall fees imposed in the disputed
City Ordinance No. 7522, which regulates public markets and prescribes fees for rentals of stalls, are diverted to the
exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila
to the said corporation in a "Management and Operating Contract."

ISSUE: Does the delegation of the collection of taxes to a private entity invalidates a tax ordinance and defeats its public
purpose?

HELD: No. The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the private
coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues
for the city. That is the object it serves. The entrusting of the collection of the fees does not destroy the public purpose of
the ordinance. So long as the purpose is public, it does not matter whether the agency through which the money is
dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object for which the fund is
raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used
in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private
corporation.

12. Chamber of Real Estate and Builders’ Associations, Inc., v. The Hon. Executive Secretary Alberto Romulo, et al

Facts: Petitioner Chamber of Real Estate and Builders’ Associations, Inc. (CREBA), an association of real estate developers
and builders in the Philippines, questioned the validity of Section 27(E) of the Tax Code which imposes the minimum
corporate income tax (MCIT) on corporations.

Under the Tax Code, a corporation can become subject to the MCIT at the rate of 2% of gross income, beginning on the 4th
taxable year immediately following the year in which it commenced its business operations, when such MCIT is greater than
the normal corporate income tax. If the regular income tax is higher than the MCIT, the corporation does not pay the MCIT.

CREBA argued, among others, that the use of gross income as MCIT base amounts to a confiscation of capital because gross
income, unlike net income, is not realized gain.

CREBA also sought to invalidate the provisions of RR No. 2-98, as amended, otherwise known as the Consolidated
Withholding Tax Regulations, which prescribe the rules and procedures for the collection of CWT on sales of real properties
classified as ordinary assets, on the grounds that these regulations:

11
Ø Use gross selling price (GSP) or fair market value (FMV) as basis for determining
the income tax on the sale of real estate classified as ordinary assets, instead of the entity’s net taxable income as provided
for under the Tax Code;
Ø Mandate the collection of income tax on a per transaction basis, contrary to the Tax Code provision which imposes
income tax on net income at the end of the taxable period;
Ø Go against the due process clause because the government collects income tax even when the net income has not yet
been determined; gain is never assured by mere receipt of the selling price; and
Ø Contravene the equal protection clause because the CWT is being charged upon real estate enterprises, but not on other
business enterprises, more particularly, those in the manufacturing sector, which do business similar to that of a real estate
enterprise.

Issues: (1) Is the imposition of MCIT constitutional? (2) Is the imposition of CWT on income from sales of real properties
classified as ordinary assets constitutional?

Held: (1) Yes. The imposition of the MCIT is constitutional. An income tax is arbitrary and confiscatory if it taxes capital,
because it is income, and not capital, which is subject to income tax. However, MCIT is imposed on gross income which is
computed by deducting from gross sales the capital spent by a corporation in the sale of its goods, i.e., the cost of goods
and other direct expenses from gross sales. Clearly, the capital is not being taxed.

Various safeguards were incorporated into the law imposing MCIT.

Firstly, recognizing the birth pangs of businesses and the reality of the need to recoup initial major capital expenditures, the
MCIT is imposed only on the 4th taxable year immediately following the year in which the corporation commenced its
operations.

Secondly, the law allows the carry-forward of any excess of the MCIT paid over the normal income tax which shall be
credited against the normal income tax for the three immediately succeeding years.

Thirdly, since certain businesses may be incurring genuine repeated losses, the law authorizes the Secretary of Finance to
suspend the imposition of MCIT if a corporation suffers losses due to prolonged labor dispute, force majeure and legitimate
business reverses.

(2) Yes. Despite the imposition of CWT on GSP or FMV, the income tax base for sales of real property classified as ordinary
assets remains as the entity’s net taxable income as provided in the Tax Code, i.e., gross income less allowable costs and
deductions. The seller shall file its income tax return and credit the taxes withheld by the withholding agent-buyer against
its tax due. If the tax due is greater than the tax withheld, then the taxpayer shall pay the difference. If, on the other hand,
the tax due is less than the tax withheld, the taxpayer will be entitled to a refund or tax credit.

The use of the GSP or FMV as basis to determine the CWT is for purposes of practicality and convenience. The knowledge of
the withholding agent-buyer is limited to the particular transaction in which he is a party. Hence, his basis can only be the
GSP or FMV which figures are reasonably known to him.

Also, the collection of income tax via the CWT on a per transaction basis, i.e., upon consummation of the sale, is not
contrary to the Tax Code which calls for the payment of the net income at the end of the taxable period. The taxes withheld
are in the nature of advance tax payments by a taxpayer in order to cancel its possible future tax obligation. They are
installments on the annual tax which may be due at the end of the taxable year. The withholding agent-buyer’s act of
collecting the tax at the time of the transaction, by withholding the tax due from the income payable, is the very essence of
the withholding tax method of tax collection.

12
On the alleged violation of the equal protection clause, the taxing power has the authority to make reasonable
classifications for purposes of taxation. Inequalities which result from singling out a particular class for taxation, or
exemption, infringe no constitutional limitation. The real estate industry is, by itself, a class and can be validly treated
differently from other business enterprises.

What distinguishes the real estate business from other manufacturing enterprises, for purposes of the imposition of the
CWT, is not their production processes but the prices of their goods sold and the number of transactions involved. The
income from the sale of a real property is bigger and its frequency of transaction limited, making it less cumbersome for the
parties to comply with the withholding tax scheme. On the other hand, each manufacturing enterprise may have tens of
thousands of transactions with several thousand customers every month involving both minimal and substantial amounts.

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14
14. Villanueva vs. City of Iloilo [December 28, 1968, L-26521]

Facts: On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86. The Supreme Court, however,
declared the ordinance ultra vires. On January 15, 1960 the municipal board of Iloilo City, believing that with the passage
of Republic Act 2264, otherwise known as the Local Autonomy Act, it had acquired the authority or power to enact an
ordinance similar to that previously declared by the Supreme Court as ultra vires, enacted Ordinance 11 (eleven), series
of 1960, imposing municipal license tax on persons engaged in the business of operating tenement houses.

In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five tenement houses, aggregately
containing 43 apartments, while the other appellees and the same Remedios S. Villanueva are owners of ten apartments.
By virtue of the ordinance in question, the appellant City collected from spouses Eusebio Villanueva and Remedios S.
Villanueva, for the years 1960-1964, the sum of P5,824.30, and from the appellees Pio Sian Melliza, Teresita S.
Topacio, and Remedios S. Villanueva, for the years 1960-1964, the sum of P1,317.00.
On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed acomplaint, and an amended complaint, respectively,
against the City of Iloilo, praying that Ordinance 11, series of 1960, be declared "invalid for being beyond the powers of the
Municipal Council of the City of Iloilo to enact, and unconstitutional for being violative of the rule as to uniformity of
taxation and for depriving said plaintiffs of the equal protection clause of the Constitution," and that the City be ordered to
refund the amounts collected from them under the said ordinance. The lower court rendered judgment declaring the
ordinance illegal.

Issues:
(1) Whether or not the City of Iloilo is empowered by the Local Autonomy Act to impose tenement taxes.

(2) Whether or not Ordinance 11, series of 1960, does violate the rule of uniformity of taxation.

Held:
(1) Yes. The lower court has interchangeably denominated the tax in question as a tenement tax or an apartment tax.
Called by either name, it is not among the exceptions listed in Section 2 of the Local Autonomy Act. The imposition by the
ordinance of a license tax on persons engaged in the business of operating tenement houses finds authority in Section 2 of
the Local Autonomy Act which provides that chartered cities have the authority to impose municipal license taxes or fees
upon persons engaged in any occupation or business, or exercising privileges within their respective territories, and
"otherwise to levy for public purposes, just and uniform taxes, licenses, or fees."

(2) No. The ordinance is not violative of the rule of uniformity in taxation. The Supreme Court has already ruled that
tenement houses constitute a distinct class of property. It has likewise ruled that "taxes are uniform and equal when
imposed upon all property of the same class or character within the taxing authority." The fact, therefore, that the owners
of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in question is no argument

15
at all against uniformity and equality of the tax imposition. Neither is the rule of equality and uniformity violated by the fact
that tenement taxes are not imposed in other cities, for the same rule does not require that taxes for the same purpose
should be imposed in different territorial subdivisions at the same time. So long as the burden of the tax falls equally and
impartially on all owners or operators of tenement houses similarly classified or situated, equality and uniformity of
taxation is accomplished.

Hence, the judgment of the lower court is reversed. The ordinance in question is valid.

15. CIR V SC JOHNSON INC. June 25, 1999

Facts: Respondent is a domestic corporation organized and operating under the Philippine Laws, entered into a
licensedagreement with the SC Johnson and Son, USA, a non-resident foreign corporation based in the USA pursuant to
which the respondent was granted the right to use the trademark, patents and technology owned by the later including
the right to manufacture, package and distribute the products covered by the Agreement and secure assistance in
management, marketing and production from SC Johnson and Son USA.

For the use of trademark or technology, respondent was obliged to pay SC Johnson and Son, USA royalties based on a
percentage of net sales and subjected the same to 25% withholding tax on royalty paymentswhich respondent paid for the
period covering July 1992 to May 1993 in the total amount of P1,603,443.00.
On October 29, 1993, respondent filed with the International Tax Affairs Division (ITAD) of the BIR a claim for refund of
overpaidwithholding tax on royalties arguing that, the antecedent facts attending respondents case fall squarely within
the same circumstances under which said MacGeorge and Gillette rulings were issued. Since the agreement was approved
by the Technology Transfer Board, the preferential tax rate of 10% should apply to the respondent. So, royalties paid by
the respondent to SC Johnson and Son, USA is only subject to 10% withholding tax.

The Commissioner did not act on said claim for refund. Private respondent SC Johnson & Son, Inc. then filed a petition
for review before the CTA, to claim a refund of the overpaid withholding tax on royalty payments from July 1992 to May
1993.

On May 7, 1996, the CTA rendered its decision in favor of SC Johnson and ordered the CIR to issue a tax credit certificate in
the amount of P163,266.00 representing overpaid withholding tax on royaltypayments beginning July 1992 to May 1993.

The CIR thus filed a petition for review with the CA which rendered the decision subject of this appeal on November 7, 1996
finding no merit in the petition and affirming in toto the CTA ruling.

Issue: Whether or not tax refunds are considered as tax exemptions.

Held: It bears stress that tax refunds are in the nature of tax exemptions. As such they are registered as in derogation of
sovereign authority and to be construed strictissimi juris against the person or entity claiming the exemption. The burden
of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of
organic or statute law. Private respondent is claiming for a refund of the alleged overpayment of tax on royalties; however
there is nothing on record to support a claim that the tax on royalties under the RP-US Treaty is paid under similar
circumstances as the tax on royalties under the RPWest Germany Tax Treaty.

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16. TALENTO VS. ESCALADA

Facts: Petron received from the Provincial Assessor's Office of Bataan a notice of revised assessment over its machineries
and pieces of equipment in Lamao, Limay, Bataan. Petron filed a petition with the LBAA. Petron received from petitioner a
final notice of delinquent real property tax with a warning that the subject properties would be levied and auctioned
should Petron fail to settle the revised assessment due.

Consequently, Petron sent a letter to petitioner stating that in view of the pendency of its appeal with the LBAA, any action
by the Treasurer's Office on the subject properties would be premature. However, petitioner replied that only Petron's
payment under protest shall bar the collection of the realty taxes due, pursuant to Sections 231 and 252 of the LGC. On
even date, Petron filed with the Regional Trial Court of Bataan the instant case (docketed as Civil Case No. 8801) for
prohibition with prayer for the issuance of a temporary restraining order (TRO) and preliminary injunction. The trial court
issued the assailed Order granting Petron's petition for issuance of writ of preliminary injunction, subject to Petron's
posting of a P444,967,503.52 bond in addition to its previously posted surety bond of P1,286,057,899.54, to complete the
total amount equivalent to the revised assessment of P1,731,025,403.06. The trial court held that in scheduling the sale of
the properties despite the pendency of Petron's appeal and posting of the surety bond with the LBAA, petitioner deprived
Petron of the right to appeal.

Issue/Held: W/N the trial court properly issued the injunction order- YES

Ratio: We are not unaware of the doctrine that taxes are the lifeblood of the government, without which it cannot
properly perform its functions; and that appeal shall not suspend the collection of realty taxes. However, there is an
exception to the foregoing rule, i.e., where the taxpayer has shown a clear and unmistakable right to refuse or to hold in
abeyance the payment of taxes. In the instant case, we note that respondent contested the revised assessment on the
following grounds: that the subject assessment pertained to properties that have been previously declared; that the
assessment covered periods of more than 10 years which is not allowed under the LGC; that the fair market value or
replacement cost used by petitioner included items which should be properly excluded; that prompt payment of discounts
were not considered in determining the fair market value; and that the subject assessment should take effect a year after
or on January 1, 2008. To our mind, the resolution of these issues would have a direct bearing on the assessment made by
petitioner. Hence, it is necessary that the issues must first be passed upon before the properties of respondent are sold in
public auction.

17. CIR v. RAUL M. GONZALEZ, GR No. 177279, 2010-10-13

Facts:

conducted a fraud investigation for all internal revenue taxes to ascertain/determine the tax liabilities of respondent L. M.
Camus Engineering Corporation (LMCEC) for the... taxable years 1997, 1998 and 1999.

a criminal complaint was instituted by the Bureau of Internal Revenue (BIR) against LMCEC on January 19, 2001

Based on data obtained from an "informer" and various clients of LMCEC... it was discovered that LMCEC filed fraudulent
tax returns with substantial underdeclarations of taxable income for the years 1997, 1998 and 1999.

Petitioner thus assessed the... company of total deficiency taxes

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The Preliminary Assessment Notice (PAN) was received by LMCEC on February 22, 2001.

In view of the above findings, assessment notices together with a formal letter of demand dated August 7, 2002 were sent
to LMCEC through personal service on October 1, 2002

On May 21, 2003, petitioner,... referred to the Secretary of Justice for preliminary investigation its complaint against
LMCEC... it was alleged that despite the receipt of the final assessment notice and formal demand letter on

October 1, 2002, LMCEC failed and refused to pay the deficiency tax assessment... which had become final and executory
as a result of the said taxpayer's failure to file a protest thereon within the thirty (30)-day... reglementary period...
contending that LMCEC cannot be held liable whatsoever for the alleged tax deficiency which had become due and
demandable

They also assail as invalid the assessment notices which bear no serial numbers... petitioner disagreed with the contention
of LMCEC that the complaint filed is not criminal in nature, pointing out that LMCEC and its officers Camus and Mendoza
were being charged for the criminal offenses... defined and penalized under Sections 254 (Attempt to Evade or Defeat Tax)
and 255 (Willful Failure to Pay Tax) of the NIRC.

On the lack of control number in the assessment notice, petitioner explained that such is a mere office requirement in the
Assessment Service for the purpose of internal control and monitoring; hence, the unnumbered assessment notices should
not be interpreted as irregular or... anomalous

On September 22, 2003, the Chief State Prosecutor issued a Resolution[27] finding no sufficient evidence to establish
probable cause against respondents LMCEC, Camus and Mendoza.

On... the required prior determination of fraud... ruled that (1) there was no prior determination of fraud

Petitioner appealed to respondent Secretary of Justice but the latter denied its petition for review

On the allegation of fraud, respondent Secretary ruled that petitioner failed to establish the existence of the following
circumstances indicating fraud in the settlement of LMCEC's tax liabilities: (1) there must be intentional and substantial
understatement of tax liability by... the taxpayer; (2) there must be intentional and substantial overstatement of
deductions or exemptions; and (3) recurrence of the foregoing circumstances.

second, the claim... that the tax fraud investigation was precipitated by an alleged "informant" has not been corroborated
nor was it clearly established, hence there is no other conclusion but that the Bureau engaged in a "fishing expedition"

Petitioner filed the criminal complaint against the private respondents for violation of the following provisions of the
NIRC,... Respondent Secretary concurred with the Chief State Prosecutor's conclusion that there is insufficient evidence to
establish probable cause to charge private respondents... the assessment notices... are unnumbered, hence irregular and
suspect

Issues:

whether LMCEC and its corporate officers may be prosecuted for violation of Sections 254 (Attempt to Evade or Defeat
Tax) and 255 (Willful Failure to Supply Correct and Accurate Information and Pay Tax).

Ruling:

a preliminary investigation should first be conducted to determine if a... prima facie case for tax fraud exists

[t]he crime is complete when the [taxpayer] has x x x knowingly and willfully filed [a] fraudulent [return] with intent to
evade and defeat x x x the tax." Thus, respondent

Secretary erred in holding that petitioner committed forum shopping when it filed the... present criminal complaint during
the pendency of its appeal from the City Prosecutor's dismissal of I.S. No. 00-956 involving the act of disobedience to the

18
summons in the course of the... preliminary investigation on LMCEC's correct tax liabilities for taxable years 1997, 1998
and 1999.

Respondent Secretary, however, fully concurred with private respondents' contention that the assessment notices were
invalid for being unnumbered and the tax liabilities therein stated have already been settled and/or terminated.

As it is, the formality of a control number in the assessment notice is not a requirement for its validity but rather the
contents thereof which should inform the taxpayer of the declaration of deficiency tax against said taxpayer. Both the
formal letter of demand and the notice... of assessment shall be void if the former failed to state the fact, the law, rules
and regulations or jurisprudence on which the assessment is based, which is a mandatory requirement under Section 228
of the NIRC.

Principles:

The rationale for dismissing the complaint on the ground of lack of control number in the assessment... notice likewise
betrays a lack of awareness of tax laws and jurisprudence, such circumstance not being an element of the offense.

18. PEOPLE OF THE PHILIPPINES, PETITIONER, VS. THE HONORABLE SANDIGANBAYAN (FIFTH DIVISION) AND EFREN L.
ALAS, RESPONDENTS. D E C I S I O N

CORONA, J.:

Does the Sandiganbayan have jurisdiction over presidents, directors or trustees, or managers of government-owned or
controlled corporations organized and incorporated under the Corporation Code for purposes of the provisions of RA
3019, otherwise known as the Anti-Graft and Corrupt Practices Act? The petitioner, represented by the Office of the
Special Prosecutor (OSP), takes the affirmative position in this petition for certiorari under Rule 65 of the Rules of Court.
Respondent Efren L. Alas contends otherwise, together with the respondent court. Pursuant to a resolution dated
September 30, 1999 of the Office of the Ombudsman, two separate informations[1] for violation of Section 3(e) of RA
3019, otherwise known as the Anti-Graft and Corrupt Practices Act, were filed with the Sandiganbayan on November 17,
1999 against Efren L. Alas. The charges emanated from the alleged anomalous advertising contracts entered into by Alas,
in his capacity as President and Chief Operating Officer of the Philippine Postal Savings Bank (PPSB), with Bagong Buhay
Publishing Company which purportedly caused damage and prejudice to the government. On October 30, 2002, Alas filed
a motion to quash the informations for lack of jurisdiction, which motion was vehemently opposed by the prosecution.
After considering the arguments of both parties, the respondent court ruled that PPSB was a private corporation and that
its officers, particularly herein respondent Alas, did not fall under Sandiganbayan jurisdiction. According to the
Sandiganbayan:

After a careful consideration of the arguments of the accused-movant as well as of that of the prosecution, we are of the
considered opinion that the instant motion of the accused is well taken. Indeed, it is the basic thrust of Republic Act as
well as (sic) Presidential Decree No. 1606 as amended by President Decree No. 1486 and Republic Act No. 7975 and
Republic Act No. 8249 that the Sandiganbayan has jurisdiction only over public officers unless private persons are
charged with them in the commission of the offenses. The records disclosed that while Philippine Postal Savings Bank is a
subsidiary of the Philippine Postal Corporation which is a government owned corporation, the same is not created by a
special law. It was organized and incorporated under the

Corporation Code which is Batas Pambansa Blg. 68. It was registered with the Securities and Exchange Commission under
SEC No. AS094-005593 on June 22, 1994 with a lifetime of fifty (50) years. Under its Articles of Incorporation the purpose
for which said entity is formed was primarily for business, xxx Likewise, a scrutiny of the seven (7) secondary purposes of
the corporation points to the conclusion that it exists for business. Obviously, it is not involved in the performance of a

19
particular function in the exercise of government power. Thus, its officers and employees are not covered by the GSIS and
are under the SSS law, and actions for reinstatement and backwages are not within the jurisdiction of the Civil Service
Commission but by the National Labor Relations Commission (NLRC). The Supreme Court, in the case of Trade Unions of
the Philippines and Allied Services vs. National Housing Corp., 173 SCRA 33, held that the Civil Service now covers only
government owned or controlled corporations with original or legislative charters, those created by an act of Congress or
by special law, and not those incorporated under and pursuant to a general legislation. The Highest Court categorically
ruled that the Civil Service does not include government-owned or controlled corporation which are organized as
subsidiaries of government-owned or controlled corporation under the general corporation law. In Philippine National Oil
Company – Energy Development Corporation vs. Leogardo, 175 SCRA 26, the Supreme Court emphasized that:

The test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the
manner of its creation such that government corporation created by special charter are subject to its provision while those
incorporated under the general corporation law are not within its coverage.

Likewise in Davao City Water District vs. Civil Service Commission, 201 SCRA 601 it was held that “by government-owned
or controlled corporation with original charter we mean government-owned or controlled corporation created by a special
law and not under the Corporation Code of the Philippines” while in Llenes vs. Dicdican, et al., 260 SCRA 207, a public
officer has been ruled, as a person whose duties involve the exercise of discretion in the performance of the function of
government. Clearly, on the basis of the foregoing pronouncements of the Supreme Court, the accused herein cannot be
considered a public officer. Thus, this Court may not exercise jurisdiction over his act.[2]

Dissatisfied, the People, through the Office of the Special Prosecutor (OSP), filed this petition[3] arguing, in essence, that
the PPSB was a government-owned or controlled corporation as the term was defined under Section 2(13) of the
Administrative Code of 1987. [4] Likewise, in further defining the jurisdiction of the Sandiganbayan, RA 8249 did not make
a distinction as to the manner of creation of the government-owned or controlled corporations for their officers to fall
under its jurisdiction. Hence, being President and Chief

Operating Officer of the PPSB at the time of commission of the crimes charged, respondent Alas came under the
jurisdiction of the Sandiganbayan. Quoting at length from the assailed resolution dated February 15, 2001, respondent
Alas, on the other hand, practically reiterated the pronouncements made by the respondent court in support of his
conclusion that the PPSB was not created by special law, hence, its officers did not fall within the jurisdiction of the
Sandiganbayan.[5] We find merit in the petition. Section 2(13) of EO 292[6] defines government-owned or controlled
corporations as follows:

Sec. 2. General Terms Defined – Unless the specific words of the text or the context as a whole or a particular statute, shall
require a different meaning: xxx xxx xxx (13) government owned or controlled corporations refer to any
agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental
or proprietary in nature, and owned by the government directly or indirectly or through its instrumentalities either wholly,
or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock: provided, that
government owned or controlled corporations maybe further categorized by the department of the budget, the civil
service commission and the commission on audit for the purpose of the exercise and discharge of their respective powers,
functions and responsibilities with respect to such corporations.

20
From the foregoing, PPSB fits the bill as a government-owned or controlled corporation, and organized and incorporated
under the Corporation Code as a subsidiary of the Philippine Postal Corporation (PHILPOST). More than 99% of the
authorized capital stock of PPSB belongs to the government while the rest is nominally held by its incorporators who
are/were themselves officers of PHILPOST. The creation of PPSB was expressly sanctioned by Section 32 of RA 7354,
otherwise known as the Postal Service Act of 1992, for purposes of, among others, “to encourage and promote the virtue
of thrift and the habit of savings among the general public, especially the youth and the marginalized sector in the
countryside xxx” and to facilitate postal service by “receiving collections and making payments, including postal money
orders.”[7] It is not disputed that the Sandiganbayan has jurisdiction over presidents, directors or trustees, or managers of
government-owned or controlled corporations with original charters whenever charges of graft and corruption are
involved. However, a question arises whether the Sandiganbayan has jurisdiction over the same officers in government-
owned or controlled corporations organized and incorporated under the Corporation Code in view of the delimitation
provided for in Article IX-B Section 2(1) of the 1987 Constitution which states that:

SEC. 2. (1) The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government,
including government-owned or controlled corporations with original charters.

It should be pointed out however, that the jurisdiction of the Sandiganbayan is separate and distinct from the Civil Service
Commission. The same is governed by Article XI, Section 4 of the 1987 Constitution which provides that “the present anti-
graft court known as the Sandiganbayan shall continue to function and exercise its jurisdiction as now or hereafter may be
provided by law.” This provision, in effect, retained the jurisdiction of the anti-graft court as defined under Article XIII,
Section 5 of the 1973 Constitution which mandated its creation, thus:

Sec. 5. The Batasang Pambansa shall create a special court, to be known as Sandiganbayan, which shall have jurisdiction
over criminal and civil cases involving graft and corrupt practices and such other offense committed by public officers and
employees, including those in government-owned or controlled corporations, in relation to their office as may be
determined by law. (Italics ours)

On March 30, 1995, Congress, pursuant to its authority vested under the 1987 Constitution, enacted RA 7975[8]
maintaining the jurisdiction of the Sandiganbayan over presidents, directors or trustees, or managers of government-
owned or controlled corporations without any distinction whatsoever. Thereafter, on February 5, 1997, Congress enacted
RA 8249[9] which preserved the subject provision:

Section 4, Jurisdiction. The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving:

a. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic
Act No. 1379, and Chapter II, Section, Title VII, Book II of the Revised Penal Code, where one or more of the accused are
officials occupying the following positions in the government, whether in a permanent, acting or interim capacity, at the
time of the commission of the offense,

(1) Officials of the executive branch occupying the positions of regional director, and higher, otherwise classified as grade
“27” and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758) specifically including:
xxx xxx xxx (g) Presidents, directors or trustees, or managers of governmentowned or controlled
corporations, state universities or educational institutions or foundations. (Italics ours)

21
The legislature, in mandating the inclusion of “presidents, directors or trustees, or managers of government-owned or
controlled corporations” within the jurisdiction of the Sandiganbayan, has consistently refrained from making any
distinction with respect to the manner of their creation.

The deliberate omission, in our view, clearly reveals the intention of the legislature to include the presidents, directors or
trustees, or managers of both types of corporations within the jurisdiction of the Sandiganbayan whenever they are
involved in graft and corruption. Had it been otherwise, it could have simply made the necessary distinction. But it did not.
It is a basic principle of statutory construction that when the law does not distinguish, we should not distinguish. Ubi lex
non distinguit nec nos distinguere debemos. Corollarily, Article XI Section 12 of the 1987 Constitution, on the jurisdiction
of the Ombudsman (the government’s prosecutory arm against persons charged with graft and corruption), includes
officers and employees of government-owned or controlled corporations, likewise without any distinction. In Quimpo v.
Tanodbayan,[10] this Court, already mindful of the pertinent provisions of the 1987 Constitution, ruled that the concerned
officers of government-owned or controlled corporations, whether created by special law or formed under the
Corporation Code, come under the jurisdiction of the Sandiganbayan for purposes of the provisions of the Anti-Graft and
Corrupt Practices Act. Otherwise, as we emphasized therein, a major policy of Government, which is to eradicate, or at the
very least minimize, the graft and corruption that has permeated the fabric of the public service like a malignant social
cancer, would be seriously undermined. In fact, Section 1 of the Anti-Graft and Corrupt Practices Act embodies this policy
of the government, that is, to repress certain acts not only of public officers but also of private persons constituting graft
or corrupt practices or which may lead thereto. The foregoing pronouncement has not outlived its usefulness. On the
contrary, it has become even more relevant today due to the rampant cases of graft and corruption that erode the
people’s faith in government. For indeed, a government-owned or controlled corporation can conceivably create as many
subsidiary corporations under the Corporation Code as it might wish, use public funds, disclaim public accountability and
escape the liabilities and responsibilities provided by law. By including the concerned officers of government-owned or
controlled corporations organized and incorporated under the Corporation Code within the jurisdiction of the
Sandiganbayan, the legislature evidently seeks to avoid just that. WHEREFORE, in view of the foregoing, the petition is
hereby GRANTED and the assailed resolution dated February 15, 2001 of the respondent court is hereby REVERSED and
SET ASIDE. SO ORDERED.

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