St. Luke’s vs.

CIR
Facts:
This case is for a petition for review filed by St. Luke’s against the decision of CTA
ordering them to pay deficiency income tax and deficiency expanded withholding tax as
well as delinquency interests to BIR considering that they are tax exemptees.
Facts as to Taxpayer:
St. Luke’s is a hospital organized as a non-stock, non-profit corporation which has
specific functions for charitable, health, education and medical purposes as stated
under its articles of incorporation. It claims that it is a charitable institution and an
organization which promotes social welfare thus, it should not be taxed as provided for
by Section 30(E) and (G) of the NIRC for tax exemptees.
Facts as to the Government:
BIR, assessed St. Luke’s taxes which includes its deficiency income tax, VAT, and
several withholding taxes on 1998 which amounted to PHP 76,063,116.06 but was
reduced during the trial in the First Division of CTA. BIR claimed that St. Luke’s is
actually operating for profit because only 13% of its revenue came from charitable
purposes and that its officers directly benefit from its profits thus, under Section 27(B) of
the NIRC, they shall be taxed. CTA En Banc then, upon petition for review by St.
Luke’s, affirmed the previous decision rendered by its First Division.
Issue as to Taxpayer:
WON St. Luke’s is exempted from income tax as provided for under Section 30 of the
NIRC.
Issue as to Government:
WON St. Luke’s, although exempted, shall be taxed for its income as it was not realized
from charitable activities and purposes as provided by Section 27(B) of the NIRC.
Ruling:
St. Luke’s shall be taxed under Section 248 and 249 of the NIRC for surcharge and
delinquency interest, respectively.
The effect of the introduction of Section 27 is to subject the taxable income of two
specific institutions, namely, proprietary non-profit educational institutions and
proprietary non-profits hospital, among the institutions covered by section 30, to the
10% preferential rate under section 27 instead of the 30% corporate rate under section
30.
“Proprietary” means private with government permit. “Non-profit” means no net income
or asset accrues to or benefits any member or specific person, with all the net income or
asset devoted to the institution’s purposes and all its activities conducted not for profit.
“Non-profit” does not necessarily mean “charitable”. The Court defined “charity” as “a
gift. To be applied consistently with existing laws, for the benefit of an indefinite number
of persons, either by bringing their minds and hearts under the influence of education or
religion, by assisting them to establish themselves in life or by otherwise lessening the
burden of government.” A non-profit club for the benefit of its members fails this test. An
organization may be considered as non-profit if it does not distribute any part of its
income to stockholders or members. However, despite its being tax exempt institution,
any income such institution earns from activities conducted for profit is taxable, as
expressly provided in the last paragraph of Section 30.
Thus, both the organization and operations of the charitable institution must be devoted
“exclusively” for charitable purposes. The operations of the charitable institution
generally refer to its regular activities.
There is no dispute that St. Luke’s is organized as non-stock and non-profit charitable
institution. However, this does not automatically exempt St. Luke’s from paying taxes.
The last paragraph of Section 30 of the NIRC qualifies the words “organized and
operated exclusively” by providing that:
Notwithstanding the provisions in the preceding paragraphs, the income of whatever
kind amd character of the foregoing organizations from any of their properties, real or
personal, or from any of their activities conducted for profit regardless of the disposition
made of such income, shall be subject to tax impose under this Code.
In short, the last paragraph of Section 30 provides that if a tax exempt charitable
institution conducts “any” activity for profit, such activity is not tax exempt even as its
not-for-profit activities remain tax exempt.
In 1998, St. Luke’s had total revenues of PHP1, 730,367,965 from services to paying
patients. It cannot be disputed that a hospital which receives approximately PHP1.73
billion from paying patients is not an institution “operated exclusively” for charitable
purposes. Clearly, revenue from paying patients are income received from “activities
conducted for profit.”
St. Luke’s fails to meet the requirements under Section 30(E) and (G) of the NIRC to be
completely tax exempt from all its income. However, it remains a proprietary non-profit
hospital under Section 27(B) of the NIRC as long as it does not distribute any of its
profits to its members and such profits are reinvested pursuant to its corporate
purposes.
PEN:
 SEC.30.
(E) Nonstock corporation or association organized and operated exclusively for
religious, charitable, scientific, athletic, or cultural purposes, or for the
 rehabilitation of veterans, no part of its net income or asset shall belong to or
inure to the benefit of any member, organizer, officer or any specific person;
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(G) Civic league or organization not organized for profit but operated exclusively
for the promotion of social welfare;
 A tax exemption is effectively a social subsidy granted by the State because and
exempt institution is spared from sharing in the expenses of the government and
yet benefits from them.
Ferrer, Jr. vs. Bautista
Facts:
This case involves a petition for certiorari seeking to declare Ordinance Nos. SP-2095,
S-2011 and SP-2235, S-2013 on the Socialized Housing Tax and Garbage Fee
unconstitutional and illegal because LGUs has no power and authority to tax.
Facts as TP:
Petitioner alleges that he is a registered co-owner of a residential property in Quezon
City and is paying his real property taxes. He assails that the ordinances enacted by the
LGU of Quezon City is unconstitutional as the Power to Tax is exclusively vested to the
Legislature hence the LGU has authority to impose and enact its own tax laws.
Facts as to G:
The LGU of Quezon City enacted two ordinances which imposes additional taxes to its
constituents namely, the Socialized Housing Tax which allows special assessments and
the Ordinance No. SP-2235, S-2013 which imposes fees for garbage collection
depending on the area of the property owned by a resident.
Issue as to TP:
WON LGUs have no power to tax.
Issue as to G:
WON said ordinances are valid in pursuance to the power of the LGU to enact their
rules to acquire revenue.
Ruling:
Respondents correctly argued that an ordinance, as in every law, is presumed valid.
An ordinance carries with it the presumption of validity. The question of reasonableness
though is open to judicial inquiry. Much should be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an ordinance as unreasonable unless the
amount is so excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or
confiscatory. A rule which has gained acceptance is that factors relevant to such an
inquiry are the municipal conditions as a whole and the nature of the business made
subject to imposition.
For an ordinance to be valid though, it must not only be within the corporate powers of
the LGU to enact and must be passed according to the procedure prescribed by law, it
should also conform to the following requirements: (1) not contrary to the Constitution or
any statute; (2) not unfair or oppressive; (3) not partial or discriminatory; (4) not prohibit
but may regulate trade; (5) general and consistent with public policy; and (6) not
unreasonable.
It is a fundamental principle that municipal ordinances are inferior in status and
subordinate to the laws of the state.
The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local
councils exercise only delegated legislative powers conferred on them by Congress as
the national lawmaking body. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. It is a heresy to suggest that the local
government units can undo the acts of Congress, from which they have derived their
power in the first place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot
exist. As it creates, so it may destroy.
By and large, however, the national legislature is still the principal of the local
government units, which cannot defy its will or modify or violate it.
LGUs are able to legislate only by virtue of a valid delegation of legislative power from
the national legislature; they are mere agents vested with what is called the power of
subordinate legislation.
Thenceforth, the power to tax is no longer vested exclusively on Congress; local
legislative bodies are now given direct authority to levy taxes, fees and other charges
pursuant to Article X, Section 5 of the 1987 Constitution.
This paradigm shift results from the realization that genuine development can be
achieved only by strengthening local autonomy and promoting decentralization of
governance. For a long time, the country’s highly centralized government structure has
bred a culture of dependence among local government leaders upon the national
leadership
The only way to shatter this culture of dependence is to give the LGUs a wider role in
the delivery of basic services, and confer them sufficient powers to generate their own
sources for the purpose. To achieve this goal, Section 3 of Article X of the 1987
Constitution mandates Congress to enact a local government code that will, consistent
with the basic policy of local autonomy, set the guidelines and limitations to this grant of
taxing powers.
Subject to the provisions of the LGC and consistent with the basic policy of local
autonomy, every LGU is now empowered and authorized to create its own sources of
revenue and to levy taxes, fees, and charges which shall accrue exclusively to the local
government unit as well as to apply its resources and assets for productive,
developmental, or welfare purposes, in the exercise or furtherance of their
governmental or proprietary powers and functions.
PEN:
Article X, Section 5 of the 1987 Constitution:
Section 5. Each Local Government unit shall have the power to create its own sources
of revenue, to levy taxes, fees and charges subject to such guidelines and limitations as
the Congress may provide, consistent with the basic policy of local autonomy. Such
taxes, fees and charges shall accrue exclusively to the local governments.
Requirements for a valid ordinance:
(1) not contrary to the Constitution or any statute;
(2) not unfair or oppressive;
(3) not partial or discriminatory;
(4) not prohibit but may regulate trade;
(5) general and consistent with public policy; and
(6) not unreasonable.
Sec. 130, Local Government Code:
SECTION 130. Fundamental Principles. – The following fundamental principles shall
govern the exercise of the taxing and other revenue-raising powers of local government
units:

(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:

(1) be equitable and based as far as practicable on the taxpayer’s ability to pay;

(2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;

(4) not be contrary to law, public policy, national economic policy, or in restraint of trade;

(c) The collection of local taxes, fees, charges and other impositions shall in no case be
let to any private person;

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to
the benefit of, and be subject to the disposition by, the local government unit levying the
tax, fee, charge or other imposition unless otherwise specifically provided herein; and,

(e) Each local government unit shall, as far as practicable, evolve a progressive system
of taxation.

Sec. 131, Local Government Code:

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units.
– Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided herein;

(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues,
and all other kinds of customs fees, charges and dues except wharfage on wharves
constructed and maintained by the local government unit concerned;

(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or
passing through, the territorial jurisdictions of local government units in the guise of
charges for wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in
any form whatsoever upon such goods or merchandise;

(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal
farmers or fishermen;

(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or

non-pioneer for a period of six (6) and four (4) years, respectively from the date of
registration;

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as
amended, and taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein;

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or
water, except as provided in this Code;

(k) Taxes on premiums paid by way of reinsurance or retrocession;

(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of
all kinds of licenses or permits for the driving thereof, except tricycles;

(m) Taxes, fees, or other charges on Philippine products actually exported, except as
otherwise provided herein;

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and
cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-
nine hundred thirty-eight (R.A. No. 6938) otherwise known as the “Cooperative Code of
the Philippines” respectively; and

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.
Sec. 151, Local Government Code:
SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in this Code,
the city, may levy the taxes, fees, and charges which the province or municipality may
impose: Provided, however, That the taxes, fees and charges levied and collected by
highly urbanized and independent component cities shall accrue to them and distributed
in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the
province or municipality by not more than fifty percent (50%) except the rates of
professional and amusement taxes.

Sec 186. Local Government Code:

SECTION 186. Power To Levy Other Taxes, Fees or Charges. – Local government
units may exercise the power to levy taxes, fees or charges on any base or subject not
otherwise specifically enumerated herein or taxed under the provisions of the National
Internal Revenue Code, as amended, or other applicable laws: Provided, That the
taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or
contrary to declared national policy: Provided, further, That the ordinance levying such
taxes, fees or charges shall not be enacted without any prior public hearing conducted
for the purpose.

CIR vs. CA
Facts:
This case is a petition for review of certiorari filed by petitioner CIR against CA, et al. for
its Resolution affirming the decision of CTA allowing the YMCA, herein private
respondent, to claim tax exemption on the income of the lease of its real property.
Facts as to TP:
YMCA, herein private respondent, is a non-stock, non-profit organization whose
purpose is to conduct programs and activities which benefit, especially, the well-being of
children. For its purpose’s incident, YMCA then proceeded to lease its property to small
store owners and also used its premises for pay parking claiming that the income
thereof is were just enough to cover the costs of operation and maintenance of the
corporation’s property and that such act is reasonably necessary to achieve its purpose.
Facts as to Govt:
On July 2, 1984, CIR made an assessment over the corporation for deficiency income
tax, deficiency expanded withholding taxes on rentals and professional fees and
deficiency withholding tax on wages to which YMCA contested to the CTA.
Issue TP:
WON YMCA is income tax exempted.
Issue G:
WON YMCA should be taxed for its income realized from the lease of its property.
Ruling:
SEC. 27. Exemptions from tax on corporations. -- The following organizations shall not
be taxed under this Title in respect to income received by them as such --
xxxxxxxxx
(g) Civic league or organization not organized for profit but operated exclusively for the
promotion of social welfare;
(h) Club organized and operated exclusively for pleasure, recreation, and other non-
profitable purposes, no part of the net income of which inures to the benefit of any
private stockholder or member;
Because taxes are the lifeblood of the nation, the Court has always applied the doctrine
of strict interpretation in construing tax exemptions. Furthermore, a claim of statutory
exemption from taxation should be manifest and unmistakable from the language of the
law on which it is based. Thus, the claimed exemption must expressly be granted in a
statute stated in a language too clear to be mistaken.
In the instant case, the exemption claimed by the YMCA is expressly disallowed by the
very wording of the last paragraph of then Section 27 of the NIRC which mandates that
the income of exempt organizations (such as the YMCA) from any of their properties,
real or personal, be subject to the imposed by the same Code. Because the last
paragraph of said section unequivocally subjects to tax the rent income f the YMCA
from its rental property, [20] the Court is duty-bound to abide strictly by its literal meaning
and to refrain from resorting to any convoluted attempt at construction.
Hence, for the YMCA to be granted the exemption it claims under the aforecited
provision, it must prove with substantial evidence that (1) it falls under the
classification non-stock, non-profit educational institution; and (2) the income it seeks to
be exempted from taxation is used actually, directly, and exclusively for educational
purposes. However, the Court notes that not a scintilla of evidence was submitted by
private respondent to prove that it met the said requisites.
PEN:
Article VI, Section 28 of par. 3 of the 1987 Constitution, exempts charitable institutions
from the payment not only of property taxes but also of income tax from any source.

Asia Int’l Auctioneers vs. CIR

Facts:
This case involves the qualification of a corporation to Tax Amnesty Program as
provided for by RA 9480.
Facts TP:
AIA is a duly formed corporation for the importation and sale of used motor vehicles and
heavy equipment at public auctions. On August 25, 2004, CIR subjected AIA to an
assessment for deficiency value added tax (VAT) and excise tax plus penalties and
interest for auction sales.
Facts G:
August 25, 2004, CIR sent a letter of assessment to AIA for the payment of several
taxes plus penalties and interest thereof to which AIA contested via a protest letter.
Anent the alleged failure of AIA to timely file its protest which thereby rendered the
assessment final and executory, CIR filed for it to be dismissed and was granted by
CTA.
Issue TP:
WON AIA is qualified for the Tax Amnesty Program of RA 9480
Issue G:
WON AIA shall be subject to several taxes plus penalties and interest as it was
disqualified to for the Tax Amnesty Program.
Ruling:
A tax amnesty is a general pardon or the intentional overlooking by the State of its
authority to impose penalties on persons otherwise guilty of violating a tax law. It
partakes of an absolute waiver by the government of its right to collect what is due it
and to give tax evaders who wish to relent a chance to start with a clean slate.
In 2007, RA 9480 took effect granting a tax amnesty to qualified taxpayers for all
national internal revenue taxes for the taxable year 2005 and prior years, with or without
assessments duly issued therefor, that have remained unpaid as of December 31,
2005.
The Tax Amnesty Program under RA 9480 may be availed of by any person except
those who are disqualified under Section 8 thereof, to wit:
Section 8. Exceptions. The tax amnesty provided in Section 5 hereof shall not extend to
the following persons or cases existing as of the effectivity of this Act:
(a) Withholding agents with respect to their withholding tax liabilities;
The CIR contends that AIA is disqualified under Section 8(a) of RA 9480 from availing
itself of the Tax Amnesty Program because it is "deemed" a withholding agent for the
deficiency taxes. This argument is untenable.
The CIR did not assess AIA as a withholding agent that failed to withhold or remit the
deficiency VAT and excise tax to the BIR under relevant provisions of the Tax Code.
Hence, the argument that AIA is "deemed" a withholding agent for these deficiency
taxes is fallacious.
Indirect taxes, like VAT and excise tax, are different from withholding taxes.
PEN:
 tax amnesty granted under RA 9399- accredited investor/taxpayer
 - does not preclude taxpayers within its coverage from availing of other tax
amnesty programs available or enacted in futuro like RA 9480
- does not exclude from its coverage taxpayers operating within special
economic zones. As long as it is within the bounds of the law, a taxpayer has
the liberty to choose which tax amnesty program it wants to avail.

CS Garment vs. CIR

Facts:
This case involves the qualification of CS Garment Inc. to the Tax Amnesty Law of
2007.
Facts TP:
CS Garment is a domestic corpo duly organized engaged in the business of
manufacturing garments for sale abroad and is registered with the Philippine Economic
Zone Authority (PEZA). Upon the authorized inspection of CIR on the petitioner’s books
of accounts, CS Garment was found to be liable of several tax deficiencies which was
demanded by CIR and was contested by CS Garment by filing their letter of protest to
CTA who ruled in favour of CIR. Subsequently, CS Garment filed a petition for review
and while pending, availed of the Tax Amnesty Law of 2007.
Facts G:
The CIR, upon examining the CS Garment’s book of acoounts, found that said corpo
was liable and should pay the alleged deficiency VAT, Income, DST and withholding
taxes. Hence, upon learning of the assessment, they sent 5 formal demand letters to
herein petitioner which was contested by petitioner by its letter of protest to CTA to
which was ruled in favour of CIR.
Issue TP:
WON the availment of CS Garment to the Tax Amnesty Law is proper and shall be
considered.
Issue G:
WON the petitioner is not immune from paying taxes under the Tax Law of 2007.
Ruling:
Tax amnesty refers to the articulation of the absolute waiver by a sovereign of its right to
collect taxes and power to impose penalties on persons or entities guilty of violating a
tax law.14 Tax amnesty aims to grant a general reprieve to tax evaders who wish to
come clean by giving them an opportunity to straighten out their records. In 2007,
Congress enacted R.A. 9480, which granted a tax amnesty covering "all national
internal revenue taxes for the taxable year 2005 and prior years, with or without
assessments duly issued therefor, that have remained unpaid as of December 31,
2005."16 These national internal revenue taxes include (a) income tax; (b) VAT; (c)
estate tax; (d) excise tax; (e) donor’s tax; (f) documentary stamp tax; (g) capital gains
tax; and (h) other percentage taxes. 17Pursuant to Section 6 of the 2007 Tax Amnesty
Law, those who availed themselves of the benefits of the law became "immune from the
payment of taxes, as well as additions thereto, and the appurtenant civil, criminal or
administrative penalties under the National Internal Revenue Code of 1997, as
amended, arising from the failure to pay any and all internal revenue taxes for taxable
year 2005 and prior years."
Amnesty taxpayers may immediately enjoy the privileges and immunities under the
2007 Tax Amnesty Law, as soon as they fulfill the suspensive conditions imposed
therein
The OSG has already confirmed 26 to this Court that CS Garment has complied with all
of the documentary requirements of the law. Consequently, and contrary to the
assertion of the OSG, no further assessment by the BIR is necessary. CS Garment is
now entitled to invoke the immunities and privileges under Section 6 of the law.
Similarly, we reject the contention of OSG that the BIR was given a one-year period to
contest the correctness of the SALN filed by CS Garment, thus making petitioner’s
motion premature. Neither the 2007 Tax Amnesty Law nor Department of Finance
(DOF) Order No. 29-07 (Tax Amnesty Law IRR) imposes a waiting period of one year
before the applicant can enjoy the benefits of the Tax Amnesty Law.
Considering the completion of the aforementioned requirements, we find that petitioner
has successfully availed itself of the tax amnesty benefits granted under the Tax
Amnesty Law. Therefore, we no longer see any need to further discuss the issue of the
deficiency tax assessments. CS Garment is now deemed to have been absolved of its
obligations and is already immune from the payment of taxes.
PEN:
Tax amnesty
 refers to the articulation of the absolute waiver by a sovereign of its right to
collect taxes and power to impose penalties on persons or entities guilty of
violating a tax law
 Includes all national internal revenue taxes
 (a) income tax; (b) VAT; (c) estate tax; (d) excise tax; (e) donor’s tax; (f)
documentary stamp tax; (g) capital gains tax; and (h) other percentage taxes
 Amnesty taxpayers may immediately enjoy the privileges and immunities under
the 2007 Tax Amnesty Law, as soon as they fulfill the suspensive conditions
imposed therein

Forms
(1) Notice of Availment of Tax Amnesty Form;
(2) Tax Amnesty Return Form (BIR Form No. 2116);
(3) Statement of Assets, Liabilities and Net worth (SALN) as of December 31,
2005; and (4) Tax Amnesty Payment Form.
RCBC vs. CIR
Facts:
This case involves RCBC’s payment of other tax assessment covered by their waiver of
the Statute of Limitations. Will such payment be a ground for estoppel in questioning the
validity of such waiver?
Facts as to TP:
RCBC is a corporation engaged in general banking operations. It received a letter of
authority issued by the CIR for the examination of the books and records of said
corporation. RCBC then executed two Waivers of Defense of Prescription under the
Statute of Limitations on its taxes due for 1994 and 1995. Subsequently, RCBC
received a Formal Letter of Demand with Assessment Notice from the BIR pertaining to
its deficiency taxes which it pretested to the CTA and upon the decision of the
reinvestigation, RCBC paid said deficiency tax but not those for onshore and
documentary stamp. RCBC claims that the waivers it executed were void as it was not
signed and conformed to by the CIR.
Facts as to G:
The CIR issued a Letter of Authority authorizing the examination of the books and
records of the RCBC for the years 1994 and 1995. Upon the waiver executed by the
RCBC BIR’s period of assessment was extended. Subsequently, CIR issued a Letter of
Demand to RCBC for its deficiency taxes which was protested by the RCBC and, upon
the issuance of the decision of the CTA, subsequently refused to pay alleging that the
waiver it executed was void.
Issue as to TP:
WON RCBC is not estopped to question the validity of the waiver it previously executed.
Issue as to G:
WON RCBC, in paying other tax assessment, is estopped from questioning the validity
of the waivers it executed.
Ruling:
Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule
that an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon. A party is
precluded from denying his own acts, admissions or representations to the prejudice of
the other party in order to prevent fraud and falsehood.
Estoppel is clearly applicable to the case at bench. RCBC, through its partial payment of
the revised assessments issued within the extended period as provided for in the
questioned waivers, impliedly admitted the validity of those waivers. Had petitioner truly
believed that the waivers were invalid and that the assessments were issued beyond
the prescriptive period, then it should not have paid the reduced amount of taxes in the
revised assessment. RCBCs subsequent action effectively belies its insistence that the
waivers are invalid. The records show that on December 6, 2000, upon receipt of the
revised assessment, RCBC immediately made payment on the uncontested taxes.
Thus, RCBC is estopped from questioning the validity of the waivers. To hold otherwise
and allow a party to gainsay its own act or deny rights which it had previously
recognized would run counter to the principle of equity which this institution holds dear.
PEN:
Silkair Pte. Ltd. vs. CIR
Facts:
This case involves an action for refund filed by Silkair against the CIR concerning its
excise tax on the purchase of jet fuel from a domestic company.
Facts as to TP:
Silkair is a corporation engaged in online international air carrier under Singapore law
but has a representative company in the Philippines. In regards the purchase of jet fuel
from Petron, a domestic petroleum company, Silkair submitted to BIR an application for
refund for the excise tax of said petroleum product. BIR failed to act on the application
hence, they proceeded to the CTA. Petitioner claim that they are entitled to a refund or
tax credit in pursuant to Section 135 of the NIRC of 1997 and Article 4(2) of the Air
Transport Agreement between RP and Singapore.
Facts as to G:
The petitioner submitted an application for refund on the excise tax of jet fuel it
purchased from a domestic petroleum company. The BIR failed to act on the
application, hence, the petitioner filed an action to the CTA. The CIR, as an answer to
the action filed by Silkair, stated that the petitioner is not entitled for refund because
Petitioner failed to prove that the sale of the petroleum products was directly made from
a domestic oil company to the international carrier and that it is not the proper party to
claim refund on the excise tax.
Issue as TP:
WON it is entitled to the refund of excise taxes.
Issue as to G:
WON the petitioner is the proper party to claim for refund or tax credit.
Ruling:
The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if
he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides that
"[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid
by the manufacturer or producer before removal of domestic products from place of
production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is
entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of
the Air Transport Agreement between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional
amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to
pay as a purchaser.
The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2) of
the Air Transport Agreement between RP and Singapore cannot, without a clear
showing of legislative intent, be construed as including indirect taxes. Statutes granting
tax exemptions must be construed in strictissimi juris against the taxpayer and liberally
in favor of the taxing authority, 43 and if an exemption is found to exist, it must not be
enlarged by construction.
PEN:
Sec. 135. Petroleum Products sold to International Carriers and Exempt Entities
of Agencies. – Petroleum products sold to the following are exempt from excise tax:
xxxx
(b) Exempt entities or agencies covered by tax treaties, conventions, and other
international agreements for their use and consumption: Provided, however, That the
country of said foreign international carrier or exempt entities or agencies exempts from
similar taxes petroleum products sold to Philippine carriers, entities or agencies; x x x
Article 4(2) of the Air Transport Agreement between the Government of the Republic of
the Philippines and the Government of the Republic of Singapore (Air Transport
Agreement between RP and Singapore) which reads:
Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or
taken on board aircraft in the territory of one Contracting party by, or on behalf of, a
designated airline of the other Contracting Party and intended solely for use in the
operation of the agreed services shall, with the exception of charges corresponding to
the service performed, be exempt from the same customs duties, inspection fees and
other duties or taxes imposed in the territories of the first Contracting Party , even when
these supplies are to be used on the parts of the journey performed over the territory of
the Contracting Party in which they are introduced into or taken on board. The materials
referred to above may be required to be kept under customs supervision and control.

Planters vs. Fertiphil Corp.

Facts:
The case involves the constitutionality and validity of LOI 1465 as an exercise of the
powers of taxation and police power as well as the inherent limitations of the power to
tax.
Facts as to TP:
Fertiphil, the herein taxpayer, is a private corporation is engaged in the importation and
distribution of fertilizers, pesticides and other agricultural chemicals. Pursuant to the
passage of the LOI 1465, Fertiphil was obliged to pay an additional P10 for every bag of
fertilizers it sold in the market. Upon the happening of the 1986 EDSA revolution, FPA
stopped the implementation of the LOI hence, afterwards, Fertiphil moved for a refund
of the additional payment but was refused. Fertiphil the questioned the constitutionality
of the LOI and claimed damages thereof. Both the RTC and CA ruled in its favour
stating that the LOI is an exercise of the power of taxation and thus subject to one of the
inherent limitations- the levy for public purpose.
Fact as to G:
The Fertilizer Pesticide Authority or FPA, pursuant to the issued LOI 1465, collected
additional payment from Fertiphil for every bag of sold fertilizers. Upon the claim of
Fertiphil of refund, it maintained that validity of the collection and refused the claim of
refund. Moreover, it submits that the LOI was a valid exercise of police power for the
benefit of the Planters Foundation, Inc. which is created by law to hold in trust for the
farmers.
Issue as to TP:
WON LOI 1465 is unconstitutional and is an invalid exercise of the power of taxation as
it is not for public purposes.
Issue as to G:
WON LOI 1465 is both a valid exercise of police power and power of taxation.
Ruling:
At any rate, the Court holds that the RTC and the CA did not err in ruling against the
constitutionality of the LOI.
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.
We agree with the RTC that the imposition of the levy was an exercise by the State of
its taxation power. While it is true that the power of taxation can be used as an
implement of police power, the primary purpose of the levy is 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.
The P10 levy under LOI No. 1465 is too excessive to serve a mere regulatory
purpose. The levy, no doubt, was a big burden on the seller or the ultimate consumer. It
increased the price of a bag of fertilizer by as much as five percent. A plain reading of
the LOI also supports the conclusion that the levy was for revenue generation. The LOI
expressly provided that the levy was imposed until adequate capital is raised to make
PPI viable.
Taxes are exacted only for a public purpose. The P10 levy is unconstitutional
because it was not for a public purpose. The levy was imposed to give undue
benefit to PPI.
An inherent limitation on the power of taxation is public purpose. Taxes are exacted only
for a public purpose. They cannot be used for purely private purposes or for the
exclusive benefit of private persons. The reason for this is simple. The power to tax
exists for the general welfare; hence, implicit in its power is the limitation that it should
be used only for a public purpose. It would be a robbery for the State to tax its citizens
and use the funds generated for a private purpose.
The term public purpose is not defined. It is an elastic concept that can be hammered to
fit modern standards. Jurisprudence states that public purpose should be given a broad
interpretation. It does not only pertain to those purposes which are traditionally viewed
as essentially government functions, such as building roads and delivery of basic
services, but also includes those purposes designed to promote social justice.
Public purpose is the heart of a tax law. When a tax law is only a mask to exact funds
from the public when its true intent is to give undue benefit and advantage to a private
enterprise, that law will not satisfy the requirement of public purpose.
The LOI provides that the imposition of the P10 levy was conditional and dependent
upon PPI becoming financially viable. This suggests that the levy was actually imposed
to benefit PPI. The LOI notably does not fix a maximum amount when PPI is deemed
financially viable. Worse, the liability of Fertiphil and other domestic sellers of fertilizer to
pay the levy is made indefinite. They are required to continuously pay the levy until
adequate capital is raised for PPI.
The LOI is still unconstitutional even if enacted under the police power; it did not
promote public interest.
Even if We consider LOI No. 1695 enacted under the police power of the State, it would
still be invalid for failing to comply with the test of lawful subjects and lawful
means. Jurisprudence states the test as follows: (1) the interest of the public generally,
as distinguished from those of particular class, requires its exercise; and (2) the means
employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals.
PEN:
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
 The main purpose of police power is the regulation of a behavior or conduct
Power of Taxation
 power of taxation is the power to levy taxes to be used for public purpose
 purpose is revenue generation
  Circumscribed by inherent and constitutional limitations

Doctrine of locus standi

 right of appearance in a court of justice
 requires a litigant to have a material interest in the outcome of a case
 requires a litigant to be a real party in interest, which is defined as the
party who stands to be benefited or injured by the judgment in the suit or the
party entitled to the avails of the suit
 a person who impugns the validity of a statute must have a personal and
substantial interest in the case such that he has sustained, or will sustain direct
injury as a result
 Direct Injury Test
Doctrine of operative fact
 which provides that an unconstitutional law has an effect before being declared
unconstitutional
 as an exception to the general rule, only applies as a matter of equity and fair
play
 nullifies the effects of an unconstitutional law by recognizing that the existence of
a statute prior to a determination of unconstitutionality is an operative fact and
may have consequences which cannot always be ignored.
Dela Llana vs. COA Chairperson
Facts:
This case involves the legal standing of the petitioner Dela Llana in this petition for
certiorari that is filed as a taxpayer’s suit. It is for the lifting and reinstitution of the pre-
audit duties of the COA by mere issuance of circulars.
Facts as to TP:
Dela Llana initially wrote to the COA with regard to the Senate Committee on
Agriculture and Food recommendation of setting up an internal pre-audit service in the
Department of Agriculture. He alleged that the pre-audit duty of the COA cannot be
lifted by a mere circular since such duty is mandated by the Constitution.
Facts as to G:
The COA, in its discretion, determines whether or not to lift and reinstitute its pre-audit
duties by the mere issuance of circulars stating the same. Upon the action filed by
petitioner Dele Llana, the commission moved for the dismissal of the case and it argued
that the manner of petition is erroneous as there is no concurrence of the elements
pertaining to the propriety of the petition.
Issue as TP:
WON there is a legal standing in a taxpayer’s suit.
Issue as to G:
WON the petitioner has a legal standing.
Ruling:

This Petition has been filed as a taxpayer’s suit.

A taxpayer is deemed to have the standing to raise a constitutional issue when it is
established that public funds from taxation have been disbursed in alleged
contravention of the law or the Constitution. [9] Petitioner claims that the issuance of
Circular No. 89-299 has led to the dissipation of public funds through numerous
irregularities in government financial transactions. These transactions have allegedly
been left unchecked by the lifting of the pre-audit performed by COA, which, petitioner
argues, is its Constitutional duty. Thus, petitioner has standing to file this suit as a
taxpayer, since he would be adversely affected by the illegal use of public money.