Collected Digests
31
1. GASTON VS REPUBLIC
 Petitioners are sugar producers, sugarcane planters and millers. Respondent
Philippine Sugar Commission was formerly the government office tasked with
supervising the sugar industry until it was superseded by its co-respondent Sugar
Regulatory Administration.
 Petitioners prayed a Writ of Mandamus to transfer the distribution of the shares of
Republic Planters Bank to accomplish its privatization to the sugar producer,
planters and millers who are the true owners of the P36,548,000 paid under PD388.
Stabilization fees are collected from planters and millers in the amount of P2 for
every picul for 5 years and P1 for every picul for the next years.
 Respondents argue that no trust results from Section 7 of PD388 that the
stabilization fees collected are considered government funds under the Government
auditing codes
Issue: WON The stabilization fees collected from sugar planters and millers pursuant to
Section 7 of PD388 are considered government funds in trust for them or public funds
Held: The stabilization fees collected are in the nature of tax, which is within the power of the
State to impose for the promotion of the sugar industry. The tax collected is not in pure
exercise of the taxing power. It is levied with a regulatory purpose, to provide means for the
stabilization of the sugar industry. The levy is primarily the exercise of the police power of the
State.
The protection of large industry constituting one of the great sources of the state’s wealth and
therefore directly or indirectly affecting the welfare of so great a portion of the population of
the State is affected to such an extent by public interests as to be within the police power of
the sovereign.
The stabilization fees in question are levied by the state upon sugar millers, planters and
producers for a special purpose – that of financing the growth and development of the sugar
industry and all its components, stabilization of the domestic market including the foreign
market, the fact that the State has taken possession of moneys pursuant to law is sufficient to
constitute them state funds, even though they are held for a special purpose. Having been
levied for a special purpose, the revenues collected are to be treated as a special funds, to be I
the language of the statute, administered in trust for the purpose intended.
The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, “and all its
components, stabilization of the domestic market”
2. PLANTERS PRODUCTS VS FERTIPHIL
 Planters Product (PPI) and respondent Fertiphil are private corporations engaged in
the distribution of fertilizers, pesticides and agricultural chemicals.
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 Pres. Marcos issued LOI 1465 imposing a Capital Recovery Component (CRC) on the
domestic sale of all grades of fertilizers in the Philippines of not less than P10 per
bag. This contribution shall be collected until adequate capital is raised to make PPI
viable.
 Fertiphil paid a total of P6,689,144. With the return of democracy, Fertiphil
demanded a refund of the amount paid arguing that it was enacted to give benefit
to a private company. PPI refused to accede to the demand. RTC ruled in favour of
Fertiphil ruling that taxes can only be levied for public purpose. CA affirmed RTC
decision arguing that it did not promote public welfare.
Issue: WON Fertiphil may collect from PPI; WON LOI 1465 is constitutional exercise of taxation
Held: Yes/No
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 behaviour 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.
The P10 levy under LOI1465 is too excessive to serve a mere regulatory purpose. The levy no
doubt was a big burden on the seller or the ultimate consumer. A plain reading of the LOI
supports the conclusion that the levy was for revenue generation. Taxes are exacted only for a
public purpose. The P10 levy is unconstitutional because it was not for a public purpose. They
levy was imposed to give undue benefit to PPI. 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 robbery for the State to tax its citizens and use the funds for private purposes.
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, the
law will not satisfy the requirement of public purpose. The LOI benefits PPI, a private
company, to pay its corporate debts.
3. JOHN HAY VS VICTOR LIM
 RA 7227 created respondent Bases Conversion and Development Authority (BCDA).
It likewise created Subic Special Economic Zone (Subic SEZ) granting it incentives
ranging from tax and duty-free importations, exemption of business therein from
local and national taxes.
 BCDA entered into a MoA with Tuntex and Asiaworld for a joint venture for the
development of Poro Point in La Union and Camp John Hay as premier tourist
destinations and recreation centers. They bound themselves to put up a joint
company of Baguio International Development Coporation which would lease within
Camp John Hay.
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 Baguio Sanggunian passed resolutions in response to BCDA, Tuntex and Asiaworld.
Respondents rejected, or modified the other proposals.
 President Ramos issued Proclamation 420 which established SEZ on a portion of
Camp John Hay called the John Hay Special Economic Zone.
 Petitioner John Hay Peoples Alternative Coalition filed this petition alleging that
Proclamation 420 is unconstitutional as it is granting tax exemptions, a power
granted only to legislature
Issue: WON Proclamation 420 is constitutional for granting national and local tax exemption
within the John Hay Special Economic Zone
Held: Unconstitutional.
The incentives under RA 7227 are exclusive only to Subic EEZ, the extension of the same to
John Hay SEZ has no support therein.
The nature of most of the assailed privileges is one of tax exemption. It is the legislature,
unless limited by a provision of the state constitution, has the full power to exempt any person
or corporation or class of property from taxation, its power to exempt being as broad as its
power to tax. Other than congress, the Constitution itself may provide for specific tax
exemptions or local governments may pass ordinances on exemption from local taxes.
The challenged grant of tax exemption would circumvent the Constitution’s imposition that a
law granting any tax exemption must have the concurrence of a majority of all the members of
the Congress.
If it were the intent of the legislature to grant to the John Hay SEZ the same tax exemption to
Subic, it would have so expressly provided in RA 7227. Second sentence of Section 3 of
Proclamation 420 is Null and Void.
4. STA. LUCIA REALTY & DEVELOPMENT, INC., PETITIONER V. CITY OF PASIG.
RESPONDENT
GR NO 166838 June 15, 2011
Leonarde-De Castro, J.
SV: Pasig filed a complaint against Sta. Lucia for the collection of Real estate Taxes. The subject
properties are alleged to be within the boundaries of Cainta and Sta. lucia has been paying the
taxes to Cainta like its predecessors-in-interest did although the TCTs of the subject properties
indicate that the properties where in the locality of Pasig. Cainta has already filed a petition for
the settlement of land boundary dispute with Pasig before an RTC in Antipolo when the
complaint by Pasig was filed. Said boundary dispute case is still pending before the Antipolo
RTC. the RTC which handled the tax case ruled in favor of Pasig and ordered STa. Lucia to pay
Pasig real estate taxes on the properties and its improvements. It held that the titles were
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conclusive as to where the properties were located and that the pending case in antipolo does
not pose a prejudicial question to the case at bar since both are civil cases.
SC: The Municipality, before it can exercise its powers in a certain area, must show first that
the area is within its geographical boundaries. A certificate of title is conclusive as to its
ownership and location, this does not preclude the filing of an action for the very purpose of
attacking the statements therein. Antipolo RTC would be able to best determine once and for
all the precise metes and bounds of both Pasig’s and Cainta’s respective territorial jurisdiction.
And this would then ascertain as to which municipality can exercise its powers over the
subject properties. Although the general rule is that for there to be a prejudicial question, one
must be acriminal case while the other is a civil case, the SC has relaxed the application of the
rule and at one time allowed one civil case to be held in abeyance while another civil case was
pending that was interrelated to it. For the meantime Sta. Lucia is asked to deposit the taxes
due in an escrow account with Land Bank.
FACTS: Petitioner Sta. Lucia Realty & Development, Inc. (Sta. Lucia) is the registered owner of
several parcels of land with Transfer Certificates of Title (TCT) Nos. 39112, 39110 and 38457,
all of which indicated that the lots were located in Barrio Tatlong Kawayan, Municipality of
Pasig.
The parcel of land covered by TCT No. 39112 was consolidated with that covered by TCT No.
518403, which was situated in Barrio Tatlong Kawayan, Municipality of Cainta, Province of
Rizal. The two combined lots were subsequently partitioned into three, for which TCT Nos.
532250, 598424, and 599131, now all bearing the Cainta address, were issued. TCT No. 39110
was also divided into two lots, becoming TCT Nos. 92869 and 92870. The lot covered by
TCT No. 38457 was not segregated, but a commercial building owned by Sta. Lucia
East Commercial Center, Inc., a separate corporation, was built on it.
Upon Pasig’s petition to correct the location stated in TCT Nos. 532250, 598424, and 599131,
the Land Registration Court, on June 9, 1995, ordered the amendment of the TCTs to read that
the lots with respect to TCT No. 39112 were located in Barrio Tatlong Kawayan, Pasig City. On
January 31, 1994, Cainta filed a petition for the settlement of its land boundary dispute with
Pasig before the RTC, Branch 74 of Antipolo City. This case, docketed as Civil Case No. 94-
3006, is still pending up to this date.
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On November 28, 1995, Pasig filed a Complaint, docketed as Civil Case No. 65420, against Sta.
Lucia for the collection of real estate taxes, including penalties and interests, on the lots
covered by TCT Nos. 532250, 598424,599131, 92869, 92870 and 38457, including the
improvements thereon (the subject properties).
Sta. Lucia, in its Answer, alleged that it had been religiously paying its real estate taxes to
Cainta, just like what its predecessors-in-interest did, by virtue of the demands and
assessments made and the Tax Declarations issued by Cainta on the claim that the subject
properties were within its territorial jurisdiction. Sta. Lucia further argued that since 1913, the
real estate taxes for the lots covered by the above TCTs had been paid to Cainta.
The RTC ruled in favor of Pasig. Upon Pasig's motion for execution pending appeal, the same
was granted by the RTC. The CA ruled in favor of Sta. Lucia. Hence, this petition.
ISSUE: Whether Sta. Lucia should continue paying its real property taxes to Cainta, as it alleged
to have always done, or to Pasig, as the location stated in Sta. Lucia’s TCTs.
HELD: Under Presidential Decree No. 464, or the “Real Property Tax
Code,” the authority to collect real property taxes is vested in the locality where the property
is situated. This requisite was reiterated in Republic Act No. 7160, or the Local Government
Code. Thus, while a local government unit is authorized under several laws to collect real
estate tax on properties falling under its territorial jurisdiction, it is imperative to first show
that these properties are unquestionably within its geographical boundaries. The Court cited
the case of Mariano, Jr. v Commission on Elections which stated that “the importance of
drawing with precise strokes the territorial boundaries of a local unit of government cannot be
overemphasized. The boundaries must be clear for they define the limits of the territorial
jurisdiction of a local government unit. It can legitimately exercise powers of government only
within the limits of its territorial jurisdiction. Beyond these limits, its acts are ultra vires.”
Clearly therefore, the local government unit entitled to collect real property taxes
from Sta. Lucia must undoubtedly show that the subject properties are situated within its
territorial jurisdiction; otherwise, it would be acting beyond the powers vested to it by law.
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We hold that the Pasig RTC should have held in abeyance the proceedings in Civil
Case No. 65420, in view of the fact that the outcome of the boundary dispute case before the
Antipolo RTC will undeniably affect both Pasig’s and Cainta’s rights. In fact, the only reason
Pasig had to file a tax collection case against Sta. Lucia was not that Sta. Lucia refused to pay,
but that Sta. Lucia had already paid, albeit to another local government unit.
Evidently, had the territorial boundaries of the contending local government units
herein been delineated with accuracy, then there would be no controversy at all.
In the meantime, to avoid further animosity, Sta. Lucia is directed to deposit the succeeding
real property taxes due on the subject properties, in an escrow account with the Land Bank of
the Philippines.
WHEREFORE, the instant petition is GRANTED. The June 30, 2004 Decision and the January 27,
2005 Resolution of the Court of Appeals in CA-G.R. CV No. 69603 are SET ASIDE. The City of
Pasig and the Municipality of Cainta are both directed to await the judgment in their boundary
dispute case (Civil Case No. 94-3006), pending before Branch 74 of the Regional Trial Court in
Antipolo City, to determine which local government unit is entitled to exercise its powers,
including the collection of real property taxes, on the properties subject of the dispute.
In the meantime, Sta. Lucia Realty and Development, Inc. is directed to deposit the succeeding
real property taxes due on the lots and improvements covered by TCT Nos. 532250, 598424,
599131, 92869, 92870 and 38457 in an escrow account with the Land Bank of the Philippines.
5. MACTAN INT’L AIRPORT VS. LAPU-LAPU CITY, G.R. NO. 181756
Petitioner, Mactan-Cebu International Airport Authority (MCIAA) was created by Congress
under Republic Act No. 6958. Upon its creation, petitioner enjoyed exemption from realty
taxes imposed by the National Government or any of its political subdivision. However, upon
the effectivity of the LGC the Supreme Court rendered a decision that the petitioner is no
longer exempt from realty estate taxes.
Respondent City issued to petitioner a Statement of Real Estate Tax assessing the lots
comprising the Mactan International Airport which included the airfield, runway, taxi way and
the lots on which these are built. Petitioner contends that these lots, and the lots to which
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they are built, are utilized solely and exclusively for public purposes and are exempt from real
property tax. Petitioner based its claim for exemption on DOJ Opinion No. 50.
Respondent issued notices of levy on 18 sets of real properties of petitioners. Petitioner filed
a petition for Prohibition, TRO, and a writ of preliminary injunction with RTC Lapulapu which
sought to enjoin respondent City from issuing the warrant of levy against petitioner’s
properties from selling them at public auction for delinquency in realty tax obligations.
Petitioner claimed before the RTC that it had discovered that respondent City did not pass any
ordinance authorizing the collection of real property tax, a tax for the special education fund
(SEF), and a penalty interest for its nonpayment. Petitioner argued that without the
corresponding tax ordinances, respondent City could not impose and collect real property tax,
an additional tax for the SEF, and penalty interest from petitioner.
RTC granted the writ of preliminary which was later on lifted upon motion by the respondents.
(fait accompli)
RULING OF THE CA: Court of Appeals held that petitioner’s airport terminal building, airfield,
runway, taxiway, and the lots on which they are situated are not exempt from real estate tax
reasoning as follows: Under the Local Government Code (LGC for brevity), enacted pursuant to
the constitutional mandate of local autonomy, all natural and juridical persons, including
government-owned or controlled corporations (GOCCs), instrumentalities and agencies, are
no longer exempt from local taxes even if previously granted an exemption. The only
exemptions from local taxes are those specifically provided under the Code itself, or those
enacted through subsequent legislation.
WHEREFORE, in view of the foregoing, judgment is hereby rendered by us as follows:
a. We DECLARE the airport terminal building, the airfield, runway, taxiway and the lots
on which they are situatedNOT EXEMPT from the real estate tax imposed by the
respondent City of Lapu-Lapu;
b. We DECLARE the imposition and collection of the real estate tax, the additional levy
for the Special Education Fund and the penalty interest as VALID and LEGAL.
However, pursuant to Section 255 of the Local Government Code, respondent city
can only collect an interest of 2% per month on the unpaid tax which total interest
shall, in no case, exceed thirty-six (36) months;
We DECLARE the sale in public auction of the aforesaid properties and the eventual forfeiture
and purchase of the subject property by the respondent City of Lapu-Lapu asNULL and VOID.
However, petitioner MCIAA’s property is encumbered only by a limited lien possessed by the
respondent City of Lapu-Lapu in accord with Section 257 of the Local Government Code.
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RULING OF THE SUPREME COURT:
MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or
non-stock corporation.Neither is MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test
of economic viability. MIAA is a government instrumentality vested with corporate powers and
performing essential public services pursuant to Section 2(10) of the Introductory Provisions of
the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of
tax by local governments under Section 133(o) of the Local Government Code. The exception
to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable
entity under the Local Government Code. Such exception applies only if the beneficial use of
real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus
are properties of public dominion. Properties of public dominion are owned by the State or
the Republic.
As properties of public dominion owned by the Republic, there is no doubt whatsoever that
the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a)
of the Local Government Code. This Court has also repeatedly ruled that properties of public
dominion are not subject to execution or foreclosure sale.
1. Petitioner’s properties that are actually, solely and exclusively used for public
purpose, consisting of the airport terminal building, airfield, runway, taxiway and the
lots on which they are situated, EXEMPT from real property tax imposed by the City
of Lapu-Lapu.
2. VOID all the real property tax assessments, including the additional tax for the
special education fund and the penalty interest, as well as the final notices of real
property tax delinquencies, issued by the City of Lapu-Lapu on petitioner’s
properties, except the assessment covering the portions that petitioner has leased
to private parties.
3. NULL and VOID the sale in public auction of 27 of petitioner’s properties and the
eventual forfeiture and purchase of the said properties by respondent City of Lapu-
Lapu. We likewise declare VOID the corresponding Certificates of Sale of Delinquent
Property issued to respondent City of Lapu-Lapu.
6. COMMISSION OF INTERNAL REVENUE VS. AQUAFRESH SEAFOODS, INC.
G.R. No. 170389; October 20, 2010; SECOND DIVISION; 634 SCRA 82
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FACTS:
Aquafresh Seafoods Inc. sold to Philips Seafoods, Inc. two parcels of land, including
improvements thereon, for Php 3,100, 000.00. Aquafresh paid Php 186,000.00, representing
the Capital Gains Tax (CGT) and Php 46,500.00, representing the Documentary Stamp Tax
(DST) due from the said sale.
The Bureau of Internal Revenue (BIR) received a report that the lots sold were undervalued for
taxation purposes. After an investigation, BIR concluded that the subject properties were
commercial with a zonal value of Php 2,000.00 per square meter. BIR assessed Aquafresh of
CGT and DST defencies in the sum of Php 1,372,171.46 and Php 356,267.62, respectively.
Aquafresh protested the assessments. Aquafresh's argued that the subject properties were
located in Barrio Banica, Roxas, where the pre-defined zonal value was Php 650.00 per square
meter based on the “Revised Zonal Values of Real Properties in the City of Roxas”. Aquafresh
argued that since there was already a pre-defined zonal value for properties located in Barrio
Banica, the BIR officials had no business re-classifying the subject properties to commercial.
ISSUE: Whether the existing Revised Zonal Values of Real Properties in the City of Roxas or the
fair market value as determined by BIR will be used as basis for the capital gains tax and
documentary tax
HELD: The Revised Zonal Values of Real Properties in the City of Roxas must be followed for
purposes of computing the CGT and DST.
It is undisputed that at the time of the sale of the subject properties found in Barrio Banica,
Roxas City, the same were classified as “RR,” or residential, based on the 1995 Revised Zonal
Value of Real Properties. CIR, thus, cannot unilaterally change the zonal valuation of such
properties to “commercial” without first conducting a re-evaluation of the zonal values as
mandated under Section 6(E) of the NIRC.
Zonal value is determined for the purpose of establishing a more realistic basis for real
property valuation. Since internal revenue taxes, such as CGT and DST, are assessed on the
basis of valuation, the zonal valuation existing at the time of the sale should be taken into
account.
7. COCA-COLA VS MANILA
 City Mayor of Manila approved Tax Ordinance 7988 increasing the tax rates
applicable to certain establishments operating within territorial jurisdiction of City of
Manila including herein petitioner.
 DOJ declared such Tax Ordinance as null and void. LGC provides that revenue
measures shall be published in full for 3 consecutive days in a newspaper of local
circulation. If the Tax ordinances or revenue measure contains penal provisions as
authorized under Art 279 of this rule, the gist of such tax ordinance or revenue
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measure shall be published in a newspaper of general circulation within the
province.
 Despite the DOJ resolution, Manila continues to assess Coca-Cola. RTC affirmed DOJ
decision and enjoined Manila from enforcing the Tax Ordinance
 Manila approved Taax Ordinance 8011 “An Ordiannce Amending Certain Sections of
Ordinance 7988”.
Issue: WON Ordinance 8011 is valid and enforceable
Held: No. If an order or law sought to be amended is invalid then it does not legally exist.
There would be no occasion or need to amend it. Instead of amending Ordinance 7988,
Manila should have enacted another tax measure which strictly complies with the
requirements of law.
8. PEPSI VS TANAUAN
 Pepsi commenced a complaint before CFI to declare S2 of RA 2264 otherwise known
as Local Autonomy Act as unconstitutional as an undue delegation of taxing
authority as well as to declare Ordinance 23 and 27 of Tauanan, Leyte null and void.
 MO 23 levies and collects from soft drinks producers 1/16 of a centavo for every
bottle of soft drink corked. MO 27 collects one centavo on each gallon.
Issue: WON S2 of RA 2264 is an undue delegation of power, confiscatory and oppressive; WON
Municipal Ordinance 23 and 27 constitute double taxation and impose percentage of specific
taxes
Held: No/No. The power of taxation is an essential and inherent attribute of sovereignty,
belonging as a matter of right to every independent government. It is a power that is purely
legislative and which the central legislative body cannot delegate either to the executive or
judicial. The exception, however, lies in the case of municipal corporations, to which said
theory does not apply. By necessary implication, the legislative power to create political
corporations for local self-government carries with it the power to confer on such local
governmental agencies the power to tax. Section 5 Article XI provides “Each Local Government
Unit shall have the power to create its sources of revenue and to levy taxes”
Municipalities may be permitted to tax subjects which for reasons of public policy the State
has not deemed wise to tax for more general purposes. The taking of the property is in the
lawful exercise of the taxing power, as when
1. The tax is for public purpose
2. The rule of uniformity of taxation is observed
3. Either the person or property taxed is within the jurisdiction of the government
levying the tax
4. In the assessment and collection of certain kinds of taxes notice and opportunity for
hearing are provided
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Double taxation, in general, is not forbidden by our fundamental law. We have not adopted as
part thereof the injunction against double taxation in United States. Double Taxation becomes
obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental
entity or by the same jurisdiction for the same purpose but not in a case where one tax is
imposed by the State and the other by the city or municipality.
The imposition of tax of MO 23 and 27 on all softdrinks produced or manufactured does not
partake the nature of percentage tax on sales or other taxes in any form. The taax is levied on
the produce and not on the sales.
The tax of P.01 on each gallon cannot be considered unjust and unfair. An increase in tax alone
would not support the claim that the tax is oppressive, unjust and confiscatory.
9. PEPSI VS BUTUAN
 Pepsi filed a complaint for the recovery of P14,177 it paid under protest under
Ordinance 110 as amended by Ordinance 122 in the City of Butuan.
 Ordinance 110 imposes a tax on any person, association of P.10 per case of 24
bottles of Pepsi-Cola.
 Pepsi maintains it partakes the nature of an import tax and it is highly unjust and
discriminatory
Issue: WON Ordinance 110 is valid
Held: No. Ordinance 110 is annulled.
The tax prescribed was imposed upon dealers “engaged in selling” soft drinks or carbonated
drinks. As amended by Ordinance 122, the tax imposed only upon “any agent and/or
consignee of any person or corporation engaged in selling soft drinks”
As a consequence, merchants engaged in the sale of soft drink or carbonated drinks are not
subject to tax unless they are agents and/or consignees of another dealer engaged outside the
City. The intention is to limit the application of the ordinance to soft drinks and carbonated
drinks brought into the City from outside.
It is invalid as discriminatory and violative of uniformity since only sales by “agents or
consignees” of outside dealers would be subject to the taax. Sales by local dealers, regardless
of the volume would be exempt from the disputed tax.
Uniformity is essential to the valid exercise of taxation. The requirements are not deemed
satisfied unless
1. It is based upon substantial distinctions which make real differences
2. These are germane to the purpose of the legislation or ordinance
3. Classification applies not only to present conditions but also to future conditions
substantially identical to those of the present
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4. Classification applies equally to all those who belong to the same class
10. VILLANUEVA VS ILO ILO
 IloIlo City enacted Ordinance 86 imposing license tax fees to tenement houses P25
houses annually. However, it was declared ultra vires by the Supreme Court because
it not appearing that the power to tax owners of tenement houses is expressly
granted to the City of IloIlo
 After the passage of RA 2264, Local Autonomy Act, IloIlo city passed ordinance 11
imposing municipal license tax on persons engaged in the business of operating
tenement houses.
 IloIlo collected from spouses Villanueva the sum of P5,824. Villanueva complained
that the ordinance 11 for being invalid for being beyond the power of the Municipal
Council of the City of Iloilo, and unconstitutional of the rule as to uniformity of
taxation and for depriving Villanueva of equal protection
Issue: WON Ordinance 11 is invalid for being unconstitutional; WON Ordinance fall within the
exception of the Local Autonomy Act
Held: No. Valid.
RA 2264 confers on local governments broad taxing authority which extends to almost
“everything, excepting those which are mentioned therein” provided that the tax so levied is
“for public purposes, just and uniform”. When a tax is levied under the authority of a city or
municipal ordinance, the same comes within the ambit of the general rule pursuant to the
rules of expression unius est exclusion alterius.
Vaillanueva maintain that it is a property tax or real estate tax and not a tax on persons
engaged in any occupation or business. Indeed the title designates it as a municipal license tax
on persons engaged in the business of operating tenement houses, while section 1 of it states
municipal license tax is hereby imposed on tenement houses.
The Tax in question is not a real estate tax. Real estate tax is a direct tax on the ownership of
lands and buildings or other improvements thereon, not specially exempted and is payable
regardless of whether the property is used or not, althought the value may vary in accordance
with such factor. The tax is usually signle or indivisible although the land and building are
assessed sperately.
The tax imposed by the ordinance in question does not possess the aforestated attributes. It is
within neither the letter nor the spirit of the ordinance that an additional real estate tax is
being imposed, otherwise the subject matter would have been not merely tenement houses.
The character of a tax is not fixed by any isolated words that may be employed in the statute
creating it, but such words must be taken in the connection in which they are used and the
true character is to be deduced from the nature and essence of the subject.
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While the ordinance in the case at bar was enacted pursuant to the provisions of the Local
Autonomy Act. Local governments may now tax any taxable subject-matter or object not
included in the enumeration of matters removed from the taxing power of local governments.
11. SWEDISH MATCH VS CITY TREASURER OF MANILA
 Swedish Match paid business taxes P470,932. Out of it, it paid P164,552
corresponded to payment under Section 21. Swedish Match argued it was not liable
to pay taxes under Section 21 claiming a refund of business taxes. RTC went on to
say that Sections 14 and 21 pertained to taxes of a different nature and thus, the
elements of double taxation were wanting in this case.
Issue: WON The imposition of tax under Section 21 of the Manila Revenue Code constitutes
double taxation in view of the tax collected and paid under Section 14 of the same code.
Held: Yes. Petitioner entitled to refund.
Double taxation means taking the same property twice when it should be taxed only once;
that is “taxing the same person twice by the same jurisdiction for the same thing” Otherwise
described as “direct duplicate taxation”. The two tax must be imposed on the same subject
matter, for the same purpose, by the same taxing authority, within the same jurisdiction,
during the same taxing period; and the taxes must be of the same kind or character.
The court finds that there is indeed double taxation if respondent is subjected to the taxes
under both Sections 14 and 21 of Tax Ordinance 7794 since these are imposed on
1. The same subject matter – the privilege od doing business in the City of Manila
2. For the same purpose – to make persons conducting business within the City of
Manila
3. By the same taxing authority – Petitioner City of Manila
4. Within the same taxing jurisdiction – within the territorial jurisdiction of the City of
Manila
5. For the same taxing periods – per calendar year
6. The same kind or character – local business tax
12. VILLEGAS VS HIU CHIONG TSAI PAO HO
 City ordinance 6537 of Manila prohibits aliens from being employed or to engage or
participate in any position or occupation without securing an employment permit
from Mayor of Manila and paying the permit fee of P50.
 Hiu Chiong Tsai Pao Ho asserts that the ordinance be declared null and void as it is a
revenue measure imposed on aliens in the City of Manila, it is discriminatory and
violative of the rule of the uniformity of taxation
Issue: WON Ordinance 6537 is void for violative of due process and equal protection of law for
taxing aliens arbitrarily
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Held: Yes. Void.
It is void because it does not contain or suggest any standard or criterion to guide the mayor in
the exercise of the power which has been granted to him by the ordinance. While it is true
that the Philippines as a State is not obliged to admit aliens within its territory, once an alien is
admitted, he cannot be deprived of life without due process of law. There is no logic or
justification in exacting P50 from aliens who have been cleared for employment. It is obvious
that the purpose of the ordinance is to raise money under the guise of regulation. This
guarantee includes the means of livelihood. The shelter of protection under the due process
and equal protection clause is given to all persons, both aliens and citizens.
13. AMERICAN BIBLE VS CITY OF MANILA
 American Bible Society paid under protest the permit and license fees required to it
by the City Treasurer of Manila as it is in violation of ordinance no. 3000. It requires
American Bible to secure the corresponding permit and license fee.
 American Bible maintains that it is exempt from real estate taxes and it was never
required to pay any municipal license fee or tax before the war neither does
American Bible Society of US are required to pay any license or fees. It argues the
ordinance is unconstitutional and illegal because they provide for religious
censorship and restrain the free exercise and enjoyment of its religious
 RTC ruled in favour of City of Manila
Issue: WON City Ordinance 3000 is applicable to American Bible of Manila
Held: Not applicable to American Bible.
As may be seen, the license fees to be paid quarterly are not imposed directly upon any
religious institution but upon those engaged in any of the business or occupations therein
enumerated such as retail “dealers in general merchandise” which it is alleged, cover the
business or occupation of selling bibles, books, etc.
Those who can tax the exercise of this religious practice can make its exercise so costly as to
deprive it of the resources necessary for its maintenance. Those who can tax the privilege of
engaging in this form of missionary evangelism can close all its doors to all those who do not
have a full purse. Spreading religious beliefs in this ancient and honourable manner would
thus be denied the needy.
The following organizations shall not be taxed under Section 27 Commonwealth Act 466. In
the case at bar the price asked for the bibles and other religious pamphlets was in some
instances a little bit higher than the actual cost of the same but this cannot mean that
appellant was engaged in the business or occupation of selling said “merchandise” for profit.
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The provisions of City of Manila ordinance 2529 cannot be applied to American Bible for in
doing so it would impair its free exercise and enjoyment of its religious profession and worship
as well as its rights of dissemination of religious beliefs.
14. CITY ASSESSOR CEBU VS BENEVOLA
 Association of Benevola de Cebu is a non-stock non-profit it is the owner of Chong
Hua Hospital (CHH) in Cebu City. It constructed the CHH Medical Arts Center
(CHHMAC).
 Petitioner City Assessor of Cebu City Assessed the CHHMAC building at the
assessment level of 35% for commercial buildings and not the 10% special
assessment imposed for CHH and its other separate buildings.
 City assessor argues that CHHMAC is not part of CHH and it is used for renting out to
physicians and thus classified as commercial. Benevola argued that CHHMAC is
actually, directly, and exclusively part of CHH and should have a special assessment
of 10% like CHH.
 Local Board of Assessment Appeals entered a decision declaring that the building is
entitled to 10% assessment level. Central Board of Assessment of Appeals Held that
the fact that it is detached from the main building is of no consequence as the
exemption in favour of the property used for charitable purposes extends to
facilities which are incidental and reasonably necessary for the accomplishment of
such purposes.
Issue: WON CHHMAC is entitled to the 10% special assessment
Held: Yes. It is undisputed that the doctors and medical specialists holding clinics in CHHMAC
are those duly accredited by CHH. This fact alone takes away CHHMAC from being categorized
as “commercial” since a tertiary hospital like CHH is required by law to have a pool of
physicians who comprises the required medical departments in various medical fields.
These physicians holding offices or clinics in CHHMAC precisely fulfil and carry out their roles
in the hospital’s services for its patients through CHHMAC. The fact that they are holding
office in a separate building, like at CHHMAC, does not take away the essence and nature of
their services. CHHMAC is only for its consultants or accredited doctors and medical
specialists. Charging of rentals is a practical necessity.
15. CIR VS ST. LUKES
 St. Luke’s Medical Center is a hospital organized as a non-stock and non-profit
corporation. BIR assess St. Luke’s deficiency to P76,063,116. St. Luke’s filed an
administrative protest. BIR argued before CTA that Section 27(b) of the NIRC
imposes a preferential tax rate on the income of proprietary non-profit hospitals
should be applicable to St. Luke’s.
 BIR claimed that St. Luke’s was actually operating for profit because only 13% of its
revenues came from charitable purposes. St. Lukes contended that the BIR should
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not consider its total revenues because its free services to patients was
P218,187,498
 The BIR prays that St. Luke’s be ordered to pay P57,659,981 as deficiency.
Issue: WON St. Luke’s is liable for deficiency income tax in 1998 under Section 27(B) of the
NIRC which imposes a preferential tax rate of 10% on the income of propriety non-profit
hospitals
Held: CTA En Banc ordered St. Luke’s to pay for failure of St. Luke’s to prove that part of its
income came from charitable activities. CTA cancelled the remainder of P63,113,952
deficiency assessed by BIR based on the 10% tax rate under Section 27(b).
San Juan de Dios vs Pasay: A Charitable institution does not lose its charitable character and its
consequent exemption from taxation merely because recipients of its benefits who are able to
pay are required to do so, where funds derived in this manner are devoted to the charitable
purpose of the institution. The generation of income from paying taxes does not per se
destroy the charitable nature of St. Luke’s.
Section 27(B) of NIRC imposes a 10% preferential tax rate on the income of proprietary non-
profit hospitals. The only qualifications for hospitals are that they must be proprietary and
non-profit. Proprietary means private, following the definition of a “proprietary educational
institution” as “any private school maintained and administered by private individuals” with
government permit.
“non-profit” does not necessarily mean “charitable”. Charity is essentially a gift to an indefinite
number of persons which lessons the burden of the government. Charitable institutions are
not ipso facto entitled to tax exemption. The constitution exempts charitable institutions from
real property taxes.
It cannot be disputed that a hospital which receives approximately P1.73 billion from paying
patients is not an institution “operated exclusively” for charitable purposes. The P1.73 billion
revenues from paying patients is not even incidental to St. Luke’s charity expenditure of
P218,187,498 for non-paying patients.
The Court finds that St. Luke’s is a corporation that is not “operated exclusively” for charitable
or social welfare purposes insofar as its revenue from paying patients are concerned. St.
Luke’s as a propriety non-profit hospital is entitled to the preferential tax rate of 10% on its
net income from its for-profit activities. St. Luke’s fails to meet the requirements under
Section 30(E) and (G) of NIRC to be completely tax exempt from all its income.
16. LUNG CENTER VS QC
 Petitioner of Lung Center is leasing a big space at the ground floor for private
parties, for canteen and small store spaces and to medical or professional
practitioners . While a big portion on the right side is being leased for commercial
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purposes to a private enterprise known as the elliptical orchids and garden centers.
Lung Center accepts paying and non-paying patients. It also renders medical services
to out patients, both paying and non-paying. It also receives subsidies from the
government.
 It was assessed for real property taxes in the amount of P4,554. Petitioner Lung
Center filed for exemption with the City Assessor predicated that it is a charitable
institution. Averring that a minimum of 60% of its hospital beds are exclusively used
for charity and its major thrust is its hospital operations is to serve charity patients.
QC-LBAA held that Lung Center is liable for real property taxes.
Issue: WON Lung Center is a charitable institution and exempt from real property taxes
Held: A charity may be fully defined 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
otherwise lessening the burden of government.
PD1823 organized Lung Center for the benefit of the Filipino people principally to help combat
high incidence of lung and pulmonary diseases in the Philippines.
As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-
patient, or confined in the hospital, or receives subsidies from the government, so long as the
money received is devoted or used altogether to the charitable object which it is intended to
achieve; and no money inures to the private benefit of the persons managing the institution.
Chartiable institutions are exempt from real property taxes provided that the lands and
building are actually, directly and exclusively used for charitable purposes. What is exempted
is not the institution itself but the lands, buildings and improvements thereon. However,
petitioner failed to discharged that the entirety of its real property is actually directly and
exclusively used for charitable purposes.
17. ABRA VALLEY COLLEGE VS AQUINO
 Petitioner Abra Valley College is assailing the decision of Judge Aquino of CFI Abra
for validating the seizure of the Abra Valley Junior College by the Municipal
Treasurer. The school is not exempt from paying taxes and failed to pay the amount
of P5,140 so the Municipality Seized and Sold the school.
 Abra Valley College alleges that the primary use of the lot and building is for
educational purposes and exempt from real property taxes. Respondent maintains
that the college are used for educational purposes of the college, as permanent
residence of the president and director and his family including the in-laws and
grandchildren, for commercial purposes that the ground floor is used and rented by
a commercial establishment.
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 The following are exempted from real property tax under the Assesment Law
(Commonwealth Act 470 as amended by RA409)
o C. Churches and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvemetns used exclusively for religious,
charitable, scientific or educational purposes
Issue: WON Abra Valley College falls within the ambit of “used exclusively”
Held: Partially. Half of the tax be returned.
This Court allows a more liberal interpretation of the phrase “exclusively used for educational
purposes” as the exemption extends to facilities which are incidental to and reasonably
necessary for the accomplishment of the main purposes.
Thus, while the use of the second floor for residential purposes of the Director and his family,
may find justification under the concept of incidental use, the lease of the first floor to
Northern Marketing cannot by any stretch of the imagination be considered incidental to the
purpose of education.
18. CIR VS CA & YMCA
 YMCA earned an income of P676,829 from leasing out a portion of its premises to
small shop owners, like restaurants and canteen operators, and P44,259 from
parking fees collected from non-members. CIR issued an assessment to private
respondent in P415,615. YMCA filed a protest in which CIR denied the claims of
YMCA.
 CTA issued a ruling in favour of YMCA that the facilities leased and the parking lot
are reasonably incidental for the accomplishment of the objectives of YMCA.
 CA initially ruled in favour CIR but reversed itself.
Issue: WON the income of YMCA from rentals and parking fees are exempt from taxation
Held: No.
YMCA argues Artivle VI, Section 28 par 3 of the 1987 constitution which exempts “charitable
institutions” from the payment not only of property taxes but also of income tax from any
source. The intent of the framers of the Constitution reveals that the exemption pertains only
to property taxes.
Also for YMCA to be granted the exception it claims under the provision it must prove that it
falls under the classification of non-stock, non-profit educational institution and the income it
seeks to be exempted is used actually, directly, and exclusively for educational purpose.
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YMCA is not even an educational institution. We concede that YMCA deserves the help and
the encouragement of the government but the court cannot change the law or bend it to suit
its sympathies.
However, YMCA is undoubtedly exempt from corporate income tax it being a civic league or
organization not organized for profit but promotion of social welfare and it is a club organized
and operated exclusively for pleasure, recreation and other non-profitable purposes
19. DEUTSCHE BANK VS CIR
 Deutsche Bank remitted to CIR P67,688,553 which represented 15% of Branch Profit
Remittance Tax (BPRT) on its regular banking unit net income remitted to DB
Germany.
 Deutsche Bank filed with BIR Assessment a claim for refund in the amount of
P22,562,851. It requested from International Tax Affairs Division a confirmation of
its entitlement to the preferential tax rate of 10% under RP-Germany Tax Treaty.
 DB’s claim was denied that the application for a tax treaty relief was not filed with
International Tax Affairs Division (ITAD). That it violated the 15 day period in
Revenue Memorandum Order (RMO) 1-2000.
 CTA En Banc affirmed CTA that a ruling from ITAD must be secured prior to the
availment of a preferential tax rate under a tax treaty
Issue: WON the failure to comply with RMO 1-2000 will deprive persons or corporations of the
benefit of a tax treaty
Held: No.
By virtue of the RP-Germany tax treaty, we are bound to extend to a branch in the Philippines,
remitting to its office in Germany the preferential rate equivalent to 10% BPRT.
BIR issued RMO 1-2000 which requires any availment of the tax treaty relief must be preceded
by an application with ITAD at least 15 days before the transaction.
Pacta sunt servanda demands the performance in good faith of treaty obligations on the part
of the states that enter into the agreement. Every treaty in force is binding upon the parties,
and obligations under the treaty must be performed in good faith.
Tax Treaties are entered into to “reconcile the national fiscal legislations of the contracting
parties and, in turn, help the taxpayer avoid simultaneous taxations in two different
jurisdictions”. Tax treaties are entered into to minimize, if not eliminate, the harshness of
international juridical double taxation, which is why they are also known as double tax treaty
or double tax agreements.
There is nothing in RMO 1-2000 which would indicate a deprivation of entitled to a tax treaty
relief for failure to comply with the 15 day period. CTA’s outright denial of a tax treaty relief
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for failure to comply with the period is not in harmony with the objectives of the contracting
state to ensure that the benefits granted under tax treaties are enjoyed by duly entitled
persons or corporations.
The obligation to comply with a tax treaty must take precedence over RMO 1-2000.
20. COMMISSIONER OF INTERNAL REVENUE, VS. DE LA SALLE UNIVERSITY,
INC.
G.R. No. 196596, November 09, 2016
The Commissioner submits the following arguments:
DLSU's rental income is taxable regardless of how such income is derived, used or disposed
of. DLSU's operations of canteens and bookstores within its campus even though exclusively
serving the university community do not negate income tax liability.
Article XIV, Section 4 (3) of the Constitution and Section 30 (H) of the Tax Code
“the income of whatever kind and character of [a non-stock and non-profit educational
institution] from any of [its] properties, real or personal, or from any of (its] activities
conducted for profit regardless of the disposition made of such income, shall be subject to tax
imposed by this Code.”
The Commissioner posits that a tax-exempt organization like DLSU is exempt only from
property tax but not from income tax on the rentals earned from property. Thus, DLSU's income
from the leases of its real properties is not exempt from taxation even if the income would be
used for educational purposes.41
DLSU stresses that Article XIV, Section 4 (3) of the Constitution is clear that all assets and
revenues of non-stock, non-profit educational institutions used actually, directly and
exclusively for educational purposes are exempt from taxes and duties.
ISSUE: Whether DLSU's income and revenues proved to have been used actually,
directly and exclusively for educational purposes are exempt from duties and taxes.
RULING: YES.
The requisites for availing the tax exemption under Article XIV, Section 4
(3), namely: (1) the taxpayer 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.
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A plain reading of the Constitution would show that Article XIV, Section 4 (3) does
not require that the revenues and income must have also been sourced from educational
activities or activities related to the purposes of an educational institution. The phrase all
revenues is unqualified by any reference to the source of revenues. Thus, so long as the
revenues and income are used actually, directly and exclusively for educational purposes, then
said revenues and income shall be exempt from taxes and duties.
Thus, when a non-stock, non-profit educational institution proves that it uses
its revenues actually, directly, and exclusively for educational purposes, it shall be exempted
from income tax, VAT, and LBT. On the other hand, when it also shows that it uses its assets in
the form of real property for educational purposes, it shall be exempted from RPT.
We further declare that the last paragraph of Section 30 of the Tax Code is without
force and effect for being contrary to the Constitution insofar as it subjects to tax the income
and revenues of non-stock, non-profit educational institutions used actually, directly and
exclusively for educational purpose. We make this declaration in the exercise of and consistent
with our duty to uphold the primacy of the Constitution. We stress that our holding here
pertains only to non-stock, non-profit educational institutions and does not cover the other
exempt organizations under Section 30 of the Tax Code.
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HELD: Petitioners, as taxpayers, possess locus standi to file the present suit. Briefly stated,
locus standi is a right of appearance in a court of justice on a given question. More
particularly, it is a party’s personal and substantial interest in a case such that he has sustained
or will sustain direct injury as a result of the governmental act being challenged. Locus standi,
however, is merely a matter of procedure and it has been recognized that in some cases, suits
are not brought by parties who have been personally injured by the operation of a law or any
other government act but by concerned citizens, taxpayers or voters who actually sue in the
public interest. Consequently, the Court, in a catena of cases, has invariably adopted a liberal
stance on locus standi, including those cases involving taxpayers.
The prevailing doctrine in taxpayer’s suits is to allow taxpayers to question contracts entered
into by the national government or government- owned or controlled corporations allegedly
in contravention of law. A taxpayer is allowed to sue where there is a claim that public funds
are illegally disbursed, or that public money is being deflected to any improper purpose, or
that there is a wastage of public funds through the enforcement of an invalid or
unconstitutional law. Significantly, a taxpayer need not be a party to the contract to challenge
its validity

For all these reasons, we hold that the income and revenues of DLSU proven to have
been used actually, directly and exclusively for educational purposes are exempt from duties
and taxes.

21. ABAYA VS EBDANE

ABAYA vs. EBDANE, JR.
515 SCRA 720
GR No. 167919, February 14, 2007
"A taxpayer need not be a party to the contract to challenge its validity."

FACTS: The petitioners, Plaridel M. Abaya who claims that he filed the instant petition as a
taxpayer, former lawmaker, and a Filipino citizen, and Plaridel C. Garcia likewise claiming that
he filed the suit as a taxpayer, former military officer, and a Filipino citizen, mainly seek to
nullify a DPWH resolution which recommended the award to private respondent China Road &
Bridge Corporation of the contract for the implementation of the civil works known as
Contract Package No. I (CP I). They also seek to annul the contract of agreement subsequently
entered into by and between the DPWH and private respondent China Road & Bridge
Corporation pursuant to the said resolution.

ISSUE: Has petitioners the legal standing to file the instant case against the government?

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