Constitutional Limitations: Art Iii, Sec. 10

3S TAX 1 DIGEST | ATTY.
ACOSTA WEEK 5 COVERAGE
CONSTITUTIONAL LIMITATIONS gross receipts from March 1, 1948 to December 31, 1954 as prescribed in Section 259 of the
National Internal Revenue Code, instead of the lower rates as provided in the municipal
D. NON-IMPAIRMENT OF CONTRACTS franchises.
ART III, SEC. 10. The private respondent then requested for a reinvestigation of the case on the ground that
No law impairing the obligation of contracts shall be passed. instead of incurring a deficiency liability, it made an overpayment of the franchise tax, which
was however denied. Private respondent further protested the said assessment and
requested for a conference with a view to settling the liability amicably. The commissioner
ART XII, SEC. 11.
No franchise, certificate, or any other form of authorization for the operation of a public utility likewise denied the request of the private respondent. Private respondent elevated the case
shall be granted except to citizens of the Philippines or to corporations or associations to the CTA and while the case was pending, Republic Act (R.A.) No. 3843 was passed which
organized under the laws of the Philippines at least sixty per centum of whose capital is grants the private respondent a legislative franchise for the operation of the electric light,
owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in heat, and power system in the same municipalities of Pangasinan.
character or for a longer period than fifty years. Neither shall any such franchise or right be
granted except under the condition that it shall be subject to amendment, alteration, or The respondent court ruled that the provisions of R.A. No. 3843 should apply and accordingly
repeal by the Congress when the common good so requires. The State shall encourage equity dismissed the claim of the Commissioner of Internal Revenue. Hence, the present petition.
participation in public utilities by the general public. The participation of foreign investors in
the governing body of any public utility enterprise shall be limited to their proportionate share ISSUES:
in its capital, and all the executive and managing officers of such corporation or association (1) Whether or not the 5% franchise tax prescribed in Section 259 of the NIRC assessed
against the private respondent on its gross receipts realized before the effectivity of R.A
must be citizens of the Philippines.
3843 is collectible.
(2) Whether or not Section 4 of R.A. No. 3843 is unconstitutional.
CIR vs. LINGAYEN GULF
FACTS: Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the
HELD:
adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan,
(1) NO. R.A. No. 3843 granted the private respondent a legislative franchise in June, 1963,
pursuant to the municipal franchise granted it by their respective municipal councils.
amending, altering, or even repealing the original municipal franchises, and providing
that the private respondent should pay only a 2% franchise tax on its gross receipts,
A provision in the franchise provides that the grantee in consideration of the franchise
"in lieu of any and all taxes and/or licenses of any kind, nature or description levied,
granted, shall pay quarterly into the Provincial Treasury of Pangasinan, 1% of the gross
established, or collected by any authority whatsoever, municipal, provincial, or national,
earnings obtained thru this privilege during the first 20 years and 2% during the remaining
now or in the future ... and effective further upon the date the original franchise was
15 years of the life of the franchise. In 1955, the BIR assessed against and demanded from
granted, no other tax and/or licenses other than the franchise tax of two per centum
the private respondent the total amount of P19,293.41 representing deficiency franchise
on the gross receipts ... shall be collected, any provision of law to the contrary
taxes and surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on
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3S TAX 1 DIGEST | ATTY. ACOSTA WEEK 5 COVERAGE
notwithstanding." Thus, by virtue of R.A- No. 3843, the private respondent was liable benefits to the State ... in passing a special charter the attention of the
to pay only the 2% franchise tax, effective from the date the original municipal franchise Legislature is directed to the facts and circumstances which the act or charter
was granted. (1946) is intended to meet. The Legislature consider and make provision for all the
(2) NO. A tax is uniform when it operates with the same force and effect in every place circumstances of a particular case.
where the subject of it is found. Uniformity means that all property belonging to the
same class shall be taxed alike The Legislature has the inherent power not only to select Wherefore, the court find no reason to disturb the respondent court's ruling of upholding the
the subjects of taxation but to grant exemptions. Tax exemptions have never been constitutionality of the law in question.
deemed violative of the equal protection clause. It is true that the private respondents
1
municipal franchises were obtained under Act No. 667 of the Philippine Commission,
2
but these original franchises have been replaced by a new legislative franchise, i.e. R.A. MISAMIS ORIENTAL vs. CEPALCO
No. 3843. As correctly held by the respondent court, the latter was granted subject to FACTS: CEPALCO was granted a franchise on June 17, 1961 under R.A. 3247 to install,
the terms and conditions established in Act No. 3636, 3
as amended by C.A. No. 132. operate and maintain an electric light, heat and power system in the City of Cagayan De Oro
These conditions Identify the private respondent's power plant as falling within that and its suburbs. It was amended by R.A. 3570 which added the municipalities of Tagolon
class of power plants created by Act No. 3636, as amended. The benefits of the tax and Opol to CEPALCO’s sphere of operations, and was further amended by R.A. 6020 which
reduction provided by law (Act No. 3636 as amended by C.A. No. 132 and R.A. No. extended its field of operations to the municipalities of Villanueva and Jasaan.
3843) apply to the respondent's power plant and others circumscribed within this class.
R.A-No. 3843 merely transferred the petitioner's power plant from that class provided The 3 R.A.s provides under Section 3 that:
for in Act No. 667, as amended, to which it belonged until the approval of R.A- No.
3843, and placed it within the class falling under Act No. 3636, as amended. Thus, it “In consideration of the franchise and rights…” CEPALCO “…shall pay a franchise tax equal
only effected the transfer of a taxable property from one class to another. Furthermore, to three (3) per centum of the gross earnings for electric current sold under this franchise,
the 5% franchise tax rate provided in Section 259 of the Tax Code was never intended of whiche two (2) per centum goes into the National Treasury and one (1) per centum goes
to have a universal application. Section 259 of the Tax Code expressly allows the into the treasury of the Municipalities of Tagolon, Opol, Villanueva and Jasaan and Cagayan
payment of taxes at rates lower than 5% when the charter granting the franchise of a De Oro City…Provided, that the said franchise tax of three (3) per centum of the gross
grantee, like the one granted to the private respondent under Section 4 of R.A. No. earnings shall be in lieu of all taxes and assessments of whatever authority upon privileges,
3843, precludes the imposition of a higher tax. R.A. No. 3843 did not only fix and specify earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee
a franchise tax of 2% on its gross receipts, but made it "in lieu of any and all taxes, all from which taxes and assessments the grantee is hereby expressly exempted.”
laws to the contrary notwithstanding," thus, leaving no room for doubt regarding the
legislative intent”. Charters or special laws granted and enacted by the On June 28, 1973, the Local Tax Code (P.D. 231) was promulgated which stated that the
Legislature are in the nature of private contracts. They do not constitute a province may impose a tax on businesses enjoying franchise. Section 9 provides:
part of the machinery of the general government. They are usually adopted
after careful consideration of the private rights in relation with resultant
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“Any provision of special laws to the contrary notwithstanding, the province may impose a perceived repugnancy between the two statutes should be very clear before the Court may
tax on businesses enjoying franchise, based on the gross receipts realized within its territorial hold that the prior one has been repealed by the later, since there is no express provision to
jurisdiction, at the rate of not exceeding one-half of one per cent of the gross annual receipts that effect (Manila Railroad Co. vs. Rafferty, 40 Phil. 224). The rule is that a special and local
for the preceding calendar year. statute applicable to a particular case is not repealed by a later statute which is general in
its terms, provisions and application even if the terms of the general act are broad enough
In the case of newly started business, the rate shall not exceed three thousand pesos per to include the cases in the special law (id.) unless there is manifest intent to repeal or alter
year. Sixty per cent of the proceeds of the tax shall accrue to the general fund of the province the special law.
and forty per cent to the general fund of the municipalities serviced by the business on the
basis of the gross annual receipts derived therefrom by the franchise holder. In the case of Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while
a newly started business, forty per cent of the proceeds of the tax shall.” P.D. No. 231 is a general tax law. The presumption is that the special statutes are exceptions
to the general law (P.D. No. 231) because they pertain to a special charter granted to meet
Pursuant thereto, the province of Misamis Oriental enacted Provincial Revenue Ordinance a particular set of conditions and circumstances.
No. 19, whose section 12 states:
The franchise of respondent CEPALCO expressly exempts it from payment of "all taxes of
“There shall be levied, collected and paid on businesses enjoying franchise tax of one- whatever authority" except the three per centum (3%) tax on its gross earnings.
half of one per cent of their gross annual receipts for the preceding calendar year
realized within the territorial jurisdiction of the province of Misamis Oriental.” The provision "shall be in lieu of all taxes of every name and nature" in the franchise, this
Court pointed out that such exemption is part of the inducement for the acceptance of the
Because of this, the province of Misamis Oriental demanded CEPALCO to pay the provincial franchise and the rendition of public service by the grantee. As a charter is in the nature of
franchise tax. CEPALCO refused to pay alleging that it is exempt from all taxes except the a private contract, the imposition of another franchise tax on the corporation by the local
franchise tax required by R.A. 6020. authority would constitute an impairment of the contract between the government and the
corporation.
The province filed a complaint of declaratory relief praying the Court exercise the power to
construe P.D. 231 in relation to the franchise of CEPALCO and to declare the franchise
amended by P.D. 231. PHIL. RURAL vs. SECRETARY
FACTS:
ISSUE: Whether or not CEPALCO is exempt from paying a provincial franchise tax due to • On May 23, 2003, a class suit was filed by petitioners in their own behalf and in behalf
the exempting clause in the contract of franchise. of other electric cooperatives organized and existing under PD 269 which are members
of petitioner Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA).
HELD: Yes, CEPALCO is exempt from paying the provincial franchise tax. There is no • The other petitioners, electric cooperatives of Agusan del Norte (ANECO), Iloilo 1 (ILECO
provision in P.D. 231 expressly or impliedly amending or repealing Sec. 3 of R.A. 6020. The 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric cooperatives organized
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and existing under PD 269, as amended, and registered with the National Electrification HELD:
Administration (NEA). (1) No. The guaranty of the equal protection clause is not violated by a law based on a
• Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment of all reasonable classification. Classification, to be reasonable must (a) rest on substantial
National Government, local government, and municipal taxes and fee, including classifications; (b) germane to the purpose of the law; (c) not limited to the existing
franchise, fling recordation, license or permit fees or taxes and any fees, charges, or conditions only; and (d) apply equally to all members of the same class. We hold that there
costs involved in any court or administrative proceedings in which it may be party. is reasonable classificationunder the Local Government Code to justify the different tax
• From 1971to 1978, in order to finance the electrification projects envisioned by PD 269, treatment between electric cooperatives covered by PD 269 and electric cooperatives under
as amended, the Philippine Government, acting through the National Economic council RA 6938. First, substantial distinctions exist between cooperatives under PD 269 and those
(now National Economic Development Authority) and the NEA, entered into six loan under RA 6938. In the former, the government is the one that funds those so-called electric
agreements (approximately US$86,000,000.00) with the government of the United cooperatives, while in the latter, the members make equitable contribution as source of
States of America, through the United States Agency for International funds.
Development (USAID) with electric cooperatives as beneficiaries. a. Capital Contributions by Members – Nowhere in PD 269 doe sit require cooperatives to
• The loan agreements contain similarly worded provisions on the tax application of the make equitable contributions to capital. Petitioners themselves admit that to qualify as a
loan and any property or commodity acquired through the proceeds of the loan. member of an electric cooperative under PD 269, only the payment of a
• Petitioners allege that with the passage of the Local Government Code their tax P5.00 membership fee is required which is even refundable the moment the member is no
exemptions have been validly withdrawn. longer interested in getting electric service from the cooperative or will transfer to another
• Particularly, petitioners assail the validity of Sec. 193 and 234 of the said code. Sec. 193 place outside the area covered by the cooperative. However, under the Cooperative Code,
provides for the withdrawal of tax exemption privileges granted to all persons, whether the articles of cooperation of a cooperative applying for registration must be accompanied
natural or juridical, except cooperatives duly registered under RA 6938, while Sec. 234 with the bonds of the accountable officers and a sworn statement of the treasurer elected
exempts the same cooperatives from payment of real property tax. by the subscribers showing that at least 25% of the authorized share capital has been
subscribed and at least 25% of the total subscription has been paid and in no case shall the
ISSUES: paid-up share capital be less than P2,000.00.
(1) Does the Local Government Code (under Sec. 193 and 234) violate the equal protection b. Extent of Government Control over Cooperatives – The extent of government control over
clause since the provisions unduly discriminate against petitioners who are duly electric cooperatives covered by PD 269 is largely a function of the role of the NEA as a
registered cooperatives under PD 269, as amended, and no under RA 6938 or the primary source of funds of these electric cooperatives. It is crystal clear that NEA incurred
Cooperatives Code of the Philippines? loans from various sources to finance the development and operations of these electric
(2) Is there an impairment of the obligations of contract under the loan entered into cooperatives. Consequently, amendments were primarily geared to expand the powers of
between the Philippine and the US Governments? NEA over the electric cooperatives o ensure that loans granted to them would be repaid to
the government. In contrast, cooperatives under RA 6938 are envisioned to be self-sufficient
and independent organizations with minimal government intervention or regulation.
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Second, the classification of tax-exempt entities in the Local Government Code is germane F. PROHIBITION AGAINST TAXATION OF
to the purpose of the law. The Constitutional mandate that “every local government unit RELIGIOUS AND CHARITABLE INSTITUTIONS
shall enjoy local autonomy,” does not mean that the exercise of the power by the local
governments is beyond the regulation of Congress. Sec. 193 of the LGC is indicative of the ART VI, SEC. 28 (3).
legislative intent to vet broad taxing powers upon the local government units and to limit Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques,
exemptions from local taxation to entities specifically provided therein. non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and
Finally, Sec. 193 and 234 of the LGC permit reasonable classification as these exemptions exclusively used for religious, charitable, or educational purposes shall be exempt from
are not limited to existing conditions and apply equally to all members of the same class. taxation.
No. It is ingrained in jurisprudence that the constitutional prohibition on the impairment of

the obligations of contracts does not prohibit every change in existing laws. To fall within the LLADOC vs. CIR
prohibition, the change must not only impair the obligation of the existing contract, but the FACTS: Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, received
impairment must be substantial. Moreover, to constitute impairment, the law must affect a from the M.B. Estate, Inc., of Bacolod City, P10,000.00 in cash for the construction of a new
change in the rights of the parties with reference to each other and not with respect to non- Catholic Church in the locality sometime in the year 1957. The money was actually spent to
parties. build the church. The donor M.B. Estate, Inc., filed the donor's gift tax return on March 3,
1958.
(2) The quoted provision under the loan agreement does not purport to grant any tax
exemption in favor of any party to the contract, including the beneficiaries thereof. The The CIR issued an assessment for donee's gift tax against the Catholic Parish of Victorias,
provisions simply shift the tax burden, if any, on the transactions under the loan agreements Negros Occidental, of which petitioner (Lladoc) was now the priest of said church. The tax
to the borrower and/or beneficiary of the loan. Thus, the withdrawal by the Local amounted to P1,370.00 including surcharges, interests of 1% monthly from May 15, 1958 to
Government Code under Sec. 193 and 234 of the tax exemptions previously enjoyed by June 15, 1960, and the compromise for the late filing of the return.
petitioners does not impair the obligation of the borrower, the lender or the beneficiary under Petitioner filed a protest which was denied by the CIR. He then filed an appeal with the CTA
the loan agreements as, in fact, no tax exemption is granted therein. citing that he was not the parish priest at the time of donation, that there is no legal entity
or juridical person known as the "Catholic Parish Priest of Victorias,". Therefore, he should
E. NON-IMPRISONMENT OF NON-PAYMENT OF POLL TAX not be liable for the donee's gift tax and that assessment of the gift tax is unconstitutional
citing Section 22(3) Article VI of the Constitution. The CTA denied his appeal.
ART III, SEC. 20. Hence, this petition.
No person shall be imprisoned for debt or non-payment of poll tax.

ISSUES:
(1) WON the Catholic Parish is exempted from the donor’s gift tax.
(2) WON petitioner shall pay the donor’s tax.
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HELD: argued that petitioner failed to exhaust the administrative remedies available under P.D. No.
(1) NO. Under Section 22(3) Article VI of the Constitution contemplates exemption only 464 before filing such court action. When asked to comment, respondent Judge began with
from payment of taxes assessed on such properties as Property taxes. The phrase the allegation that there "is no question that the real properties sought to be taxed by the
“exempt from taxation” should not be interpreted to mean exemption from all kinds of Province of Abra are properties of the respondent Roman Catholic Bishop of Bangued, Inc.
taxes. The exemption is only from the payment of taxes assessed on such properties as Likewise, there is no dispute that the properties including their procedure are actually,
property taxes as contradistinguished from excise taxes. A donee’s gift tax is not a directly and exclusively used by the Roman Catholic Bishop of Bangued, Inc. for religious or
property tax but an excise tax imposed on the transfer of property by way of gift inter charitable purposes." For him then: "The proper remedy of the petitioner is appeal and not
vivos. It does not rest upon general ownership, but an excise upon the use made of the this special civil action."
properties, upon the exercise of the privilege of receiving the properties. A gift tax is
not a property tax, but an excise tax imposed on the transfer of property by way of gift ISSUE: Whether or not respondent Judge Hernando erred in granting the tax exemption of
inter vivos, the imposition of which on property used exclusively for religious purposes, private respondent Roman Catholic Bishop of Bangued.
does not constitute an impairment of the Constitution. Therefore, The tax exemption of
the church under the Constitution, thus, does not extend to excise taxes. HELD: Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents
(2) NO. The head of the Diocese and not the parish priest is the real party in interest in the appurtenant thereto, and all lands, buildings, and improvements used exclusively for
imposition of the donee's tax on the property donated to the church for religious religious, charitable, or educational purposes shall be exempt from taxation." 10 The present
purpose and not herein Petitioner Lladoc. Constitution added "charitable institutions, mosques, and non-profit cemeteries" and
required that for the exemption of ":lands, buildings, and improvements," they should not
only be "exclusively" but also "actually and "directly" used for religious or charitable purposes.
PROVINCE OF ABRA vs. HERNANDO 11 The Constitution is worded differently. The change should not be ignored. It must be duly
FACTS: The Provincial Assessor of Abra made a tax assessment on the properties of private taken into consideration. According to Commissioner of Internal Revenue v. Guerrero: 12
respondent Roman Catholic Bishop of Bangued. Private respondent contested the "From 1906, in Catholic Church v. Hastings to 1966, in Esso Standard Eastern, Inc. v. Acting
assessment arguing that it is exempted from a real estate tax. It filed an action for declaratory Commissioner of Customs, it has been the constant and uniform holding that exemption from
relief. Respondent Judge Harold M. Hernando of CFI of Abra granted such exemption, taxation is not favored and is never presumed, so that if granted it must be strictly construed
allegedly without even hearing the side of petitioner. Petitioner contented that respondent against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence,
Judge "virtually ignored the pertinent provisions of the Rules of Court; ... wantonly violated an exempting provision should be construed strictissimi juris."
the rights of petitioner to due process, by giving due course to the petition of private Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural
respondent for declaratory relief, and thereafter without allowing petitioner to answer and due process. If there is any case where proof is necessary to demonstrate that there is
without any hearing, adjudged the case; all in total disregard of basic laws of procedure and compliance with the constitutional provision that allows an exemption, this is it. Instead,
basic provisions of due process in the constitution, thereby indicating a failure to grasp and respondent Judge accepted at its face the allegation of private respondent. All that was
understand the law, which goes into the competence of the Honorable Presiding Judge." alleged in the petition for declaratory relief filed by private respondents, after mentioning
Petitioner Province of Abra filed for a motion to dismiss but it was denied. Private respondent certain parcels of land owned by it, are that they are used "actually, directly and exclusively"
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as sources of support of the parish priest and his helpers and also of private respondent The trial court ruled in favor of the government holding that the property was not use
Bishop. 18 In the motion to dismiss filed on behalf of petitioner Province of Abra, the exclusively for educational purposes because of the use of the second floor by the Director
objection was based primarily on the lack of jurisdiction, as the validity of a tax assessment of petitioner school for residential purposes and the ground floor for commercial purposes.
may be questioned before the Local Board of Assessment Appeals and not with a court.
There was also mention of a lack of a cause of action, but only because, in its view, ISSUE: WON the portion of AVC occupied by a commercial establishment and residence of
declaratory relief is not proper, as there had been breach or violation of the right of the director be exempt from real estate tax because it falls under the exemption mentioned
government to assess and collect taxes on such property. It clearly appears, therefore, that in the Constitution.
in failing to accord a hearing to petitioner Province of Abra and deciding the case immediately
in favor of private respondent, respondent Judge failed to abide by the constitutional HELD: NO, as to the commercial establishment.
command of procedural due process.
In the case of YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil. 217 [1916], the
Court ruled that while it may be true that the YMCA keeps a lodging and a boarding house
ABRA VALLEY COLLEGE vs. AQUINO and maintains a restaurant for its members, still these do not constitute business in the
FACTS: Abra Valley College (AVC) is an educational corporation and institution of higher ordinary acceptance of the word, but an institution used exclusively for religious, charitable
learning duly incorporated with the SEC in 1948. and educational purposes, and as such, it is entitled to be exempted from taxation.
Respondents are Abra municipal and provincial treasurers and the heirs of Dr. Paterno Millare However, that while this Court allows a more liberal and non-restrictive interpretation of the
(then municipal mayor of Bangued, Abra was the highest bidder of the said public auction). phrase "exclusively used for educational purposes" as provided for in Article VI, Section 22,
paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made
AVC filed a complaint with the Benguet provincial fiscal to annul and declare void the NOTICE that exemption extends to facilities which are incidental to and reasonably necessary for the
OF SEIZURE and a NOTICE OF SALE of its lot and building by the municipal and provincial accomplishment of the main purposes.
treasurers for non-payment of real estate taxes and its penalties. The parties entered into a
stipulation of facts adopted and embodied by the trial court in its questioned decision. Among In other words, the use of the school building or lot for commercial purposes is neither
therein are: contemplated by law, nor by jurisprudence. The lease of the first floor thereof to the Northern
• That the Director with his family is in the second floor of the main building Marketing Corporation cannot by any stretch of imagination be considered incidental to the
• That the ground floor was leased to Northern Marketing Corporation, a commercial purpose of education.
establishment.
YES, as to the Director’s residence on the second floor because the usage may find
Petitioner contends that the primary use of the lot and building for educational purposes, justification under the concept of incidental use, which is complimentary to the main or
and not the incidental use thereof, determines and exemption from property taxes under primary purpose—educational.
Section 22 (3), Article VI of the 1935 Constitution.
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Since only a portion is used for purposes of commerce, it is only fair that half of the assessed is not substantially related to the exercise or performance by such educational institution or
tax be returned to the school involved. Hence, the decision of the lower court is hereby hospital of its primary purpose or function. A 'proprietary educational institution' is any private
AFFIRMED subject to the modification that half of the assessed tax be returned to the school maintained and administered by private individuals or groups with an issued permit
petitioner. to operate from the Department of Education, Culture and Sports (DECS), or the Commission
on Higher Education (CHED), or the Technical Education and Skills Development Authority
G. PROHIBITION AGAINST TAXATION OF (TESDA), as the case may be, in accordance with existing laws and regulations.
NON-STOCK NON-PROFIT EDUCATIONAL INSTITUTIONS
TAX CODE, SEC. 30(H).

ART. XIV, SEC. 4 (3).
A nonstock and nonprofit educational institution
All revenues and assets of non-stock, non-profit educational institutions used actually,
directly, and exclusively for educational purposes shall be exempt from taxes and duties.
CIR vs. CA and YMCA
Upon the dissolution or cessation of the corporate existence of such institutions, their assets
FACTS: Young Men’s Christian Association of the Philippines, Inc. is a non-stock, non-profit
shall be disposed of in the manner provided by law. Proprietary educational institutions,
institution which conducts various programs and activities that are beneficial to the public,
including those cooperatively owned, may likewise be entitled to such exemptions subject to
especially the young people, pursuant to its religious, educational and charitable objectives.
the limitations provided by law including restrictions on dividends and provisions for
In 1980, the private respondent earned, among others an income from the leasing out of
reinvestment.
aportion of its premises to small shop owners, like restaurants and canteen operators and
parking fees collected from non-members.
ART. VI, SEC. 28. (3).
Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, CIR issued an assessment to private respondent for deficiency income tax, deficiency
non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and expanded withholding taxes on rentals and professional fees and deficiency withholding
exclusively used for religious, charitable, or educational purposes shall be exempt from taxon wages . Private respondent protested the assessment. CIR denied the claims of YMCA
taxation. considering that it was no engaged in the business of operating or contracting parking lot
asit is only for members with stickers. The rentals and parking fees were only enough to
TAX CODE, SEC. 27(B). coverthe costs of operation and maintenance.
Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of ten
percent (10%) on their taxable income except those covered by Subsection (D) hereof: CIR elevated the case to the CA who decided in favor of CIR, reversing the CTA decision.
Provided, that if the gross income from 'unrelated trade, business or other activity' exceeds YMCA asked for reconsideration, which CA granted. CTA decision now affirmed.
fifty percent (50%) of the total gross income derived by such educational institutions or CIR then filed motion for reconsideration which was denied by CA.
hospitals from all sources, the tax prescribed in Subsection (A) hereof shall be imposed on
the entire taxable income. For purposes of this Subsection, the term 'unrelated trade,
business or other activity' means any trade, business or other activity, the conduct of which
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ISSUE: WON the income derived from the rentals of real property owned by YMCA (a Exemptions from tax on corporations- the following organizations shall not be taxed under
welfare, educational and charitable non-profit corporation) is subject to income tax under this title in respect to income received by them as such-
NIRC and the constitution. (g) Civic league organization not organized for profit but operated exclusively for the
promotion of social welfare
HELD: YES. The exemption claimed by YMCA is expressly disallowed by the very wording of (h) club organized and operated exclusively for pleasure, recreation, and other non-profitable
the last paragraph of the then section 27 of the NIRC which mandates that the income of purposes, no part of the net income of which inures to the benefit of any private stockholder
exempt organizations (such as the YMCA) from any of their properties, real or personal, be or member.
subject to the tax imposed by the same Code. The last paragraph of said section
unequivocally subjects to tax the rent income of the YMCA from its real property. Thus the Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind
Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to and character of the foregoing organization from any of their properties, real or personal, or
any convoluted attempt at construction. The CA committed reversible error when it allowed from any of their activities conducted for profit, regardless of the disposition made of such
on reconsideration, the tax exemption claimed by YMCA on income it derived from renting income, shall be subject to the tax imposed under this code.
out its real property, on the solitary but unconvincing ground that the said income is not
collected for profit but is merely incidental to its operation. The law does not make a The CA decision is reversed.
distinction. The rental income is taxable regardless of where such income is derived and how
it is used or disposed of. Where the law does not distinguish, neither should we. On YMCA’s
argument that the constitution gives tax exemption on charitable institutions, the Court is CIR vs. DE LA SALLE UNIVERSITY, INC.
not persuaded. Justice Hilario Davide, Jr., stressed during the Concom debates that “…what FACTS: The Commissioner submits the following arguments: DLSU's rental income is taxable
is exempted is not the institution itself…; those exempted from real estate taxes are lands, regardless of how such income is derived, used or disposed of. DLSU's operations of canteens
buildings and improvements actually, directly and exclusively used for religious charitable or and bookstores within its campus even though exclusively serving the university community
education purposes .” Father Joaquin Bernas adhered to the same view (in short, only do not negate income tax liability.
property taxes). YMCA is only exempt from payment of property tax, but not income tax on
the rentals from its property . Laws allowing tax exemptions are construed strictissimi juris Article XIV, Section 4 (3) of the Constitution and Section 30 (H) of the Tax Code:
as taxes are the lifeblood of the government. “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
ADDITIONAL: For YMCA to be granted the exemption it claims, it must prove with substantial conducted for profit regardless of the disposition made of such income, shall be subject to
evidence that 1) it falls under the classification non-stock, non-profit educational institution; tax imposed by this Code.”
and 2) the income it seeks to be exempted from taxation is used actually, directly and
exclusively for educational purposes. Such was not proven by the YMCA. 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
Sec. 27 of the NIRC (NOW SEC. 26) provides:
3S 2018 9
income from the leases of its real properties is not exempt from taxation even if the income consistent with our duty to uphold the primacy of the Constitution. We stress that our holding
would be used for educational purposes. 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.
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 For all these reasons, we hold that the income and revenues of DLSU proven to have been
exclusively for educational purposes are exempt from taxes and duties. used actually, directly and exclusively for educational purposes are exempt from duties and
taxes.
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.
CIR vs. ST. LUKE’S MEDICAN CENTER, INC.

HELD: YES. The requisites for availing the tax exemption under Article XIV, Section 4 (3), FACTS: On December 14, 2007, St. Luke’s Medical Center, Inc. (SLMC) received from the
namely: (1) the taxpayer falls under the classification non-stock, non-profit educational BIR Audit Results/Assessment Notice Nos. QA-07-0000965 and QA-07-000097 assessing
institution; and (2) the income it seeks to be exempted from taxation is used actually, directly SLMC deficiency income tax under Section 27(B) 7 of the Tax Code in the aggregate amount
and exclusively for educational purposes. of P135,737,301 for taxable years 2005 and 2006. SLMC filed an administrative protest
assailing the assessments. SLMC claimed that as a non-stock, non-profit charitable and social
A plain reading of the Constitution would show that Article XIV, Section 4 (3) does not require welfare organization under Section 30(E) and (G)9 of the 1997 NIRC, as amended, it is
that the revenues and income must have also been sourced from educational activities or exempt from paying income tax. Meanwhile, on September 26, 2012, the Court rendered a
activities related to the purposes of an educational institution. The phrase all revenues is Decision in G.R. Nos. 195909 and 195960, entitled CIR v. St. Luke's Medical Center, Inc.,
unqualified by any reference to the source of revenues. Thus, so long as the revenues and finding SLMC not entitled to the tax exemption under Section 30(E) and (G) of the NIRC of
income are used actually, directly and exclusively for educational purposes, then said 1997 as it does not operate exclusively for charitable or social welfare purposes insofar at its
revenues and income shall be exempt from taxes and duties. revenue from paying patients are concerned. Accordingly, SLMC was ordered to pay the
deficiency income tax based on the I0% preferential income tax rate under Section 27(B) of
Thus, when a non-stock, non-profit educational institution proves that it uses the National Internal Revenue Code. SLMC argues that earning a profit by a charitable,
its revenues actually, directly, and exclusively for educational purposes, it shall be exempted benevolent hospital or educational institution does not result in the withdrawal of its tax
from income tax, VAT, and LBT. On the other hand, when it also shows that it uses its assets exempt privilege. SLMC further claims that the income it derives from operating a hospital is
in the form of real property for educational purposes, it shall be exempted from RPT. not income from "activities conducted for profit.
We further declare that the last paragraph of Section 30 of the Tax Code is without force ISSUE: Whether SLMC’s profits from hospital operation exempt from income tax under
and effect for being contrary to the Constitution insofar as it subjects to tax the income and Section 30 (E) and (G).
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
3S 2018 10
HELD: The Court reaffirmed its ruling in G.R. Nos. 195909 and 195960 (Commissioner What is a VAT? A Value Added Tax is levied on the sale, barter or exchange of goods and
Internal Revenue v. St. Luke's Medical Center, Inc.). For an institution to be completely properties as well as on the sale or exchange of services. First contention of the petitioners
exempt from income tax, Section 30(E) and (G) of the 1997 NIRC requires said institution to that RA 7716 did not originate exclusively from the House of Representatives but is a mere
operate exclusively for charitable or social welfare purpose. But in case an exempt institution consolidation of House Bill. No. 11197 and Senate Bill. No. 1630 and it did not pass three
under Section 30(E) or (G) of the said Code earns income from its “for-profit activities”, it readings on separate days on the Senate thus violating Article VI, Sections 24 and 26(2) of
will not lose its tax exemption. However, its income from “for-profit activities” will be subject the Constitution, respectively. Citing Art. VI, Section 24 and Art. VI, Section 26(2) of the
to income tax at the preferential 10% rate pursuant to Section 27(B) thereof. Following Constitution. Second, R.A. No. 7716 impairs the obligations of contracts. Third, RA No. 7716
earlier cases, St. Luke's fails to meet the requirements under Section 30(E) and (G) of the classifies transactions as covered or exempt without reasonable basis. Fourth, it violates the
NIRC to be completely tax exempt from all its income. However, it remains a proprietary rule that taxes should be uniform and equitable and that Congress shall "evolve a progressive
non-profit hospital under Section 27(B) of the NIRC as long as it does not distribute any of system of taxation.
its profits to its members and such profits are reinvested pursuant to its corporate purposes.
St. Luke's, as a proprietary non-profit hospital, is entitled to the preferential tax rate of 10% ISSUE: WON RA 7716 violated Art. VI, Section 24 and Art. VI, Section 26(2) of the
on its net income from its for-profit activities. Constitution.
I. PASSAGE OF TAX BILLS and GRANTING OF EXCEPTIONS HELD: NO. As to the first contention, The enactment of S. No. 1630 is not the only instance
in which the Senate proposed an amendment to a House revenue bill by enacting its own
ART. VI, SEC. 24. version of a revenue bill. On at least two occasions during the Eighth Congress, the Senate
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of passed its own version of revenue bills, which, in consolidation with House bills earlier passed,
local application, and private bills shall originate exclusively in the House of Representatives, became the enrolled bills. These were: R.A. No. 7369, R.A. No. 7549, R.A. NO. 7642, R.A.
but the Senate may propose or concur with amendments. NO. 7643, etc.
Therefore, the enactment of S. No. 1630 is not the only instance in which the Senate, in the
ART. VI, SEC. 28 (4).
exercise of its power to propose amendments to bills required to originate in the House,
No law granting any tax exemption shall be passed without the concurrence of a majority of
passed its own version of a House revenue measure. It is noteworthy that, in the particular
all the Members of the Congress.
case of S. No. 1630, petitioners Tolentino and Roco, as members of the Senate, voted to
approve it on second and third readings.
TOLENTINO vs. SEC. OF FINANCE
FACTS: The present case involves motions seeking reconsideration of the Court’s decision
As to the second contention, the claim is baseless. A short answer to this is was given by
dismissing the petitions for the declaration of unconstitutionality of R.A. No. 7716, otherwise
this Court in an early case: "Authorities from numerous sources are cited by the plaintiffs,
known as the Expanded Value-Added Tax Law. The motions, of which there are 10 in all,
but none of them show that a lawful tax on a new subject, or an increased tax on an old
have been filed by the several petitioners. RA 7716 seeks to widen the tax base of the existing
one, interferes with a contract or impairs its obligation, within the meaning of the
VAT system and enhance its administration by amending the National Internal Revenue Code.
3S 2018 11
Constitution. Even though such taxation may affect particular contracts, as it may increase As to the last contention, The SC answered this citing City of Baguio v. De Leon case that
the debt of one person and lessen the security of another, or may impose additional burdens Equality and uniformity of taxation means that all taxable articles or kinds of property of the
upon one class and release the burdens of another, still the tax must be paid unless same class be taxed at the same rate. The taxing power has the authority to make reasonable
prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing and natural classifications for purposes of taxation. To satisfy this requirement it is enough
contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 that the statute or ordinance applies equally to all persons, forms and corporations placed in
Phil. 567, 574 (1919)). Indeed not only existing laws but also "the reservation of the essential similar situation.
attributes of sovereignty, is . . . read into contracts as a postulate of the legal order."
(Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135, 147 (1968)) Contracts The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT,
must be understood as having been made in reference to the possible exercise of the rightful are regressive. What it simply provides is that Congress shall "evolve a progressive system
authority of the government and no obligation of contract can extend to the defeat of that of taxation." The constitutional provision has been interpreted to mean simply that "direct
authority. taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized."
As to the third contention which the petitioners pointed out that while §4 of R.A. No. 7716 Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system.
exempts such transactions as the sale of agricultural products, food items, petroleum, and Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been
medical and veterinary services, it grants no exemption on the sale of real property which is prohibited with the proclamation of Art. VIII, §17(1) of the 1973 Constitution from which the
equally essential. The sale of real property for socialized and low-cost housing is exempted present Art. VI, §28(1) was taken. Sales taxes are also regressive.
from the tax, but CREBA claims that real estate transactions of "the less poor," i.e., the
middle class, who are equally homeless, should likewise be exempted. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult,
if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to
The sale of food items, petroleum, medical and veterinary services, etc., which are essential pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by
goods and services was already exempt under §103, pars. (b) (d) (1) of the NIRC before the providing for zero rating of certain transactions (R.A. No. 7716, §3, amending §102 (b) of
enactment of R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716 granted the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, §4, amending
exemption to these transactions, while subjecting those of petitioner to the payment of the §103 of the NIRC).
VAT. Moreover, there is a difference between the "homeless poor" and the "homeless less
poor" in the example given by petitioner, because the second group or middle class can With all the foregoing ratiocinations, it is clear that the subject law bears no constitutional
afford to rent houses in the meantime that they cannot yet buy their own homes. The two infirmities and the motions for reconsideration are denied with finality and the temporary
social classes are thus differently situated in life. "It is inherent in the power to tax that the restraining order previously issued is hereby lifted.
State be free to select the subjects of taxation, and it has been repeatedly held that
'inequalities which result from a singling out of one particular class for taxation, or exemption
infringe no constitutional limitation.'
3S 2018 12
J. VETO POWER OF THE PRESIDENT assets, and that the loss arising from the sale of the same should be allowed only to the
extent of the gains from such sales, which gains were already taken into consideration in the
ART. VI, SEC. 27 (2). computation of the alleged net loss of P67,307.80.
The President shall have the power to veto any particular item or items in an appropriation,
revenue, or tariff bill, but the veto shall not affect the item or items to which he does not The defendant in computing the assessed tax included the graduated rate of income tax due
object. on the entire net income as per office audit, without first deducting therefrom the amount of
personal and additional exemptions to which the plaintiff is entitled. Plaintiff now filed the
present petition to recover from the defendant the amount of P9,008.14 paid as income tax
EXEMPTION FROM TAXATION
for the year 1939 by plaintiff under protest, or in the alternative case the sum of P475
A. IN GENERAL collected by defendant from plaintiff illegally according to the latter, because the former has
erroneously computed the tax on personal and additional exemptions.
GREENFIELD vs. MEER

FACTS: Greenfield has been continuously engaged in the embroidery business since 1933. ISSUE: Whether the personal and additional exemptions granted by section 23 of CA 466,
In 1935 plaintiff began engaging in buying and selling mining stocks and securities for his should be considered as a credit against or be deducted from the net income, or whether it
own exclusive account but however has not been a dealer in securities as defined in section is the tax on such exemptions that should be deducted from the tax on the total net income.
84 (t) of Commonwealth Act No. 466 and that he has no established place of business for
the purchase and sale of mining stocks and securities; and that he was never a member of HELD: YES. Section 7 of the old law provided: "For the purpose of the normal tax only, there
any stock exchange. shall be allowed as an exemption in the nature of a deduction from the amount of the net
income . . ."; while section 23 of the new law provides: "For the purpose of the tax provided
Thereafter, the plaintiff filed an income tax return for the calendar year 1939 showing that for in this Title there shall be allowed the following exemptions." Now, the question to be
he made a net profit amounting to P52,449.29 on embroidery business and P17,850 on determined or answered is: Does this change in the phraseology of the law show the intention
dividends from various corporations; and that from the purchase and sales of mining stocks of the National Assembly to change the theory or policy of the old law so as to deduct now
and securities he made a profit of P10,741.30 and incurred losses in the amount of the tax on the personal and additional exemptions from the tax fixed on the amount of the
P78,049.10, thereby sustaining a net loss of P67,307.80. In the same income tax return, the net income, instead of deducting the amount of personal and additional exemptions from
plaintiff declared the results of his stock transactions but the defendant ruled that they should that of the net income, before determining the tax due on the latter?
be declared in the income tax return.

It is a well-settled rule of statutory construction that where a statue has been enacted which
Furthermore, in said income tax return, plaintiff claims his deduction of P67,307.80 is susceptible of several interpretations there is no better means for ascertaining the will and
representing the net loss sustained by him in mining stocks securities during the year 1939. intention of the legislature than that which is afforded by the history of the statue. Taking
The defendant likewise disallowed said item of deduction on the ground that said losses were into consideration the history of section 23 of the Commonwealth Act No. 466, the answer
sustained by the plaintiff from the sale of mining stocks and securities which are capital to the above-propounded question must obviously be in the negative. Section 22 of the bill
3S 2018 13
entitled "An Act to revise, amend and codify the Internal Revenue Laws of the Philippines," as incorporated in the code, or that same general idea will be expressed in briefer phrases.
prepared by the Tax Commission and submitted to the National Assembly of the Philippines, No design of altering the law itself could rightly be predicated upon such modifications of the
in substitution of section 7 of the old Income Tax Law. language.”
The National Assembly, instead of adopting or incorporating said proposed section 22 in the Our Income Tax Law is patterned after the United States Revenue or Income Tax Laws. The
National Internal Revenue Code, CA 466, copied substantially in section 23 of the latter United States Revenue Laws of 1916, 1918, 1921, 1924, 1926, 1928 and 1932 considered
provision of section 7 of the old law relating to personal and additional exemptions, with the the personal and additional exemptions as credits against the net income for the purpose of
only modification that the amount of personal exemption of single individuals has been the normal tax; and subsequently, the United States Revenue Acts of 1934, 1936 and 1938
reduced from 2,000 to 1,000 and that of married persons or heads of family from 4,000 to amended the former acts by making said exemptions as credits against the net income for
2,500. the purpose of both the normal tax and surtax. Section 7 of our old Income Tax Law,
instead of providing that the personal and additional exemptions shall be allowed
The mere fact that the phrase "in the nature of a deduction" found in section 7 of the old as a credit against the net income, as in the United States Revenue Acts,
law was omitted in section 23 of the new or National Internal Revenue Code did not and prescribed that the amounts specified therein shall be allowed as an exemption
could not effect any change in the law. It is evident that said phrase was added or inserted in a nature of deduction from the amount of the net income. Which has exactly
in said section 7 only out of extreme caution, because, even without it, the exemption would the same effect as the provision regarding personal and additional exemptions in
have to be deducted from the gross income in order to determine the net income subject to the said United States Revenue Acts. For, as it was explained in the Ways and
tax. If the amounts of personal and additional exemptions fixed in section 23 are exempt Means Committee Report No. 764, 73d Congress, 2d Session, pages 6, 23:
from taxation, they should not be included as part of the net income, which is taxable. There
is nothing in said section 23 to justify the contention that the tax on personal exemptions To carry out the policy of retaining practically the same tax burden on ordinary income, it is
should first be fixed, and then deducted from the tax on the net income. necessary in connection with the proposed plan to allow the personal exemption and credits
for dependents as an offset against surtax as well as normal tax. The personal exemption
The change of phraseology alone does not lead to the conclusion that it was the intention of and credits for defendants would appear to be in lieu of deductions for necessary living
the lawmaker to amend or change the constructions of the old law as contended by the expenses.
appellee. For it is a well-established rule, recognized by the Supreme Court of Ohio, ”that in
the revision of statutes, neither an alteration in phraseology nor the omission or addition of Wherefore, defendant-appellee is ordered to refund to plaintiff-appellant the sum of P475
words in the latter statute, shall be held, necessarily, to alter the construction of the former claimed in the second cause of action of the complaint.
act. And the court is only warranted in holding the construction of a statute, when revised,
to be changed, where the intent of the legislature to make such change is clear, or the
language used in the new act plainly requires such change of construction. It should be BASCO vs. PAGCOR
remembered that condensation is a necessity in the work of compilation or codification. Very FACTS:
frequently words which do not materially affect the sense will be omitted from the statutes ISSUE:
3S 2018 14
HELD: or exception — is given without any reason therefor. In much the same way as other
statutory commands, its avowed purpose is some public benefit or interest, which the law-
making body considers sufficient to offset the monetary loss entitled in the grant of the
CIR vs. BOTELHO exemption. Indeed, section 20 of Republic Act No. 3079 exacts a valuable consideration for
FACTS: Reparations Commission of the Philippines sold to Botelho the vessel "M/S Maria the retroactivity of its favorable provisions, namely, the voluntary assumption, by the end-
Rosello" for the amount of P6,798,888.88. The former likewise sold to General Shipping the user who bought reparations goods prior to June 17, 1961 of "all the new obligations
vessel "M/S General Lim" at the price of P6,951,666.66. Upon arrival at the port of Manila, provided for in" said Act. Furthermore, Section 14 of the Law on Reparations, as amended,
the Bureau of Customs placed the same under custody and refused to give due course [to exempts from the compensating tax, not particular persons, but persons belonging to a
applications for registration], unless the aforementioned sums of P483,433 and P494,824 be particular class. Indeed, appellants do not assail the constitutionality of said section
paid as compensating tax. The buyers subsequently filed with the CTA their respective 14,insofar as it grants exemptions to end-users who, after the approval of Republic Act No.
petitions for review. Pending the case, Republic Act No. 3079amended Republic Act No. 1789 3079, on June 17, 1961,purchased reparations goods procured by the Commission. From the
— the Original Reparations Act, under which the aforementioned contracts with the Buyers viewpoint of Constitutional Law, especially the equal protection clause, there is no difference
had been executed — by exempting buyers of reparations goods acquired from the between the grant of exemption to said end-users, and the extension of the grant to those
Commission, from liability for the compensating tax. Invoking [section 20 of the RA 3079], whose contracts of purchase and sale mere made before said date, under Republic Act No.
the Buyers applied, for the renovation of their utilizations contracts with the Commission, 1789.
which granted the application, and, then, filed with the Tax Court, their supplemental
petitions for review. The CTA ruled in favor of the buyers.[On appeal, the CIR and COC
maintain that such proviso should not be applied retroactively], upon the ground that a tax CIR vs. CTA, GCL RETIREMENT PLAN
exemption must be clear and explicit; that there is no express provision for the retroactivity FACTS: Private Respondent, GCL Retirement Plan (GCL, for brevity) is an employees' trust
of the exemption, established by Republic Act No. 3079, from the compensating tax; that maintained by the employer, GCL Inc., to provide retirement, pension, disability and death
the favorable provisions, which are referred to in section 20 thereof, cannot include the benefits to its employees. The Plan as submitted was approved and qualified as exempt
exemption from compensating tax; and, that Congress could not have intended ny retroactive from income tax by Petitioner Commissioner of Internal Revenue in accordance with
exemption, considering that the result thereof would be prejudicial to the Government. Rep. Act No. 4917. Respondent GCL made investsments and earned therefrom
interestincome from which was witheld the fifteen per centum (15%) final witholding tax
ISSUE: Whether or not the tax exemption can be applied retroactively? imposed by Pres. Decree No. 1959. Respondent GCL filed with Petitioner a claim for refund
in the amounts of P1,312.66 withheld by Anscor Capital and Investment Corp.,
HELD: YES. The inherent weakness of the last ground becomes manifest when we consider andP2,064.15 by Commercial Bank of Manila. On 12 February 1985, it filed a second
that, if true, there could be no tax exemption of any kind whatsoever, even if Congress claim for refund of the amount of P7,925.00 withheld by Anscor, stating in both letters that
should wish to create one, because every such exemption implies a waiver of the right to it disagreed with the collection of the 15% final withholding tax from the interestincome as
collect what otherwise would be due to the Government, and, in this sense, is prejudicial it is an entity fully exempt from income tax as provided under Rep. Act No. 4917 in relation
thereto. It may not be amiss to add that no tax exemption —like any other legal exemption to Section 56 (b)of the Tax Code. The refund requested having been denied, Respondent
3S 2018 15
GCL elevated the matter to respondent Court of Tax Appeals (CTA). The latter ruled in In so far as employees' trusts are concerned, the foregoing provision should be taken in
favor of GCL, holding that employees' trusts are exempt from the 15% final withholding tax relation to then Section 56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act No.
on interest income and ordering a refund of the tax withheld. 1983, supra, which took effect on 22 June 1957. This provision specifically exempted
employee's trusts from income tax and is repeated hereunder for emphasis: Sec. 56.
ISSUE: whether or not GCL Plan is exempt from the final tax withholding on the interest Imposition of Tax. (a) Application of tax. The taxes imposed by this Title upon individuals
income. shall apply to the income of estates or of any kind of property held in trust. xxx xxx xxx (b)
Exception.
HELD: It is to be noted that the exemption from withholding tax on interest on bank
deposits previously extended by Pres. Decree No. 1739 if the recipient (individual or The tax imposed by this Title shall not apply to employee's trust which forms part of a
corporation) of the interest income is exempt from income taxation, and the imposition of pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of
the preferential tax rates if the recipient of the income is enjoying preferential income his employees . . . The tax-exemption privilege of employees' trusts, as distinguished from
tax treatment, were both abolished by Pres. Decree No. 1959. Petitioner thus submits that any other kind of property held in trust, springs from the foregoing provision. It is
the deletion of the exempting and preferential tax treatment provisions under the old law is unambiguous. Manifest therefrom is that the tax law has singled out employees' trusts for
a clear manifestation that the single 15% (now 20%) rate is impossible on all interest tax exemption. And rightly so, by virtue of the raison de'etre behind the creation of
incomes from deposits, deposit substitutes, trust funds and similar arrangements, employees' trusts. Employees' trusts or benefit plans normally provide economic assistance
regardless of the tax status or character of the recipients thereof. In short, petitioner's to employees upon the occurrence of certain contingencies, particularly, old age
position is that from 15 October 1984 when Pres. Decree No. 1959 was promulgated, retirement, death, sickness, or disability. It provides security against certain hazards
employees' trusts ceased to be exempt and thereafter became subject to the final withholding to which members of the Plan may be exposed. It is an independent and additional
tax. source of protection for the working group. What is more, it is established for their
exclusive benefit and for no other purpose.
To begin with, it is significant to note that the GCLPlan was qualified as exempt
from income tax by the Commissioner of Internal Revenue in accordance with Rep. The tax advantage in Rep. Act No. 1983, Section 56(b), was conceived in order to encourage
Act No. 4917 approved on 17 June 1967. This law specifically provided: Sec. 1. Any the formation and establishment of such private Plans for the benefit of laborers and
provision of law to the contrary notwithstanding, the retirement benefits received by employees outside of the Social Security Act. It is evident that tax-exemption is likewise to
officials and employees of private firms, whether individual or corporate, in accordance with be enjoyed by the income of the pension trust. Otherwise, taxation of those earnings would
a reasonable private benefit plan maintained by the employer shall be exempt from all taxes result in a diminution accumulated income and reduce whatever the trust beneficiaries would
and shall not be liable to attachment, levy or seizure by or under any legal or equitable receive out of the trust fund. This would run afoul of the very intendment of the law.
process whatsoever except to pay a debt of the official or employee concerned to the private
benefit plan or that arising from liability imposed in a criminal action; . . . (emphasis ours). The deletion in Pres. Decree No. 1959 of the provisos regarding tax exemption and
preferential tax rates under the old law, therefore, cannot be deemed to extent to employees'
trusts. Said Decree, being a general law, cannot repeal by implication a specific provision.
3S 2018 16
and official invoice and discharge permit – which Guerrero has not shown – it follows that he
is bound to pay the aforementioned forest charges and surcharges, in the sum of
CIR vs. GUERRERO Php3,775.66.
FACTS: Antonio G. Guerrero was, during the years of 1949 and 1950, a dealer of logs, which
he used to sell to Aparri Lumber Company, hereinafter referred to as the company. On April At this juncture, it may not be amiss to advert to a problem of semantics arising from the
2, 1954, the then collector of internal revenue made an assessment and demands requiring operation of section 1588 of the revised administrative code, the counterpart of which is now
Guerrero to pay the sum of Php4,014.91, representing fixed and percentage taxes and forests section 315 of the NIRC, pursuant to which:
charges, as well as surcharges and penalties, in connection with his aforementioned business
transactions with the company. Upon Guerrero’s requests, the matter was submitted to the Every internal revenue tax on property or on any business or occupation, and every tax on
conference staff of the Bureau of Internal Revenue (BIR), which, in due course, thereafter resources and receipts, and any increment to any of them incident to delinquency, shall
on January 11, 1956, recommended that the assessment be increased to Php5,139.17. In constitute a lien superior to all other charges or liens not only on the property itself upon
addition to, the sums of Php20 and Php100 as compromise penalties in extrajudicial which such tax may be imposed but also upon the property used in any business or
settlement of his penal liabilities under sections 208 and 209 of the NIRC should be reiterated. occupation upon which the tax is imposed and upon all property rights therein.
That another sum of Php50 as compromise penalty for his violation of the bookkeeping
regulations should be imposed against the taxpayer, he having admitted during the hearing The enforcement of this lien by the commissioner (formerly collector) of internal revenue,
of this case that he did not keep books of accounts of his timber business. This has often induced the parties adversely affected thereby to raise the question whether a
recommendation was approved by the collection of internal revenue, who, accordingly made given charge is a tax or not, on the theory that there would be no lien if said question were
the corresponding reassessment upon receipt of notice which Guerrero requested, on decided in the negative. In connection therewith, said parties had tended to distinguish
February 10, 1956, a rehearing before the conference staff. Instead of acting on this request, between taxes, on the one hand – as burdens imposed upon persons and/or properties, by
on April 20, 1956, the corresponding internal revenue director issued an assessment of way of contributions to the support of the government, in consideration of general benefits
distraint and levy against the properties of Guerrero, in order to effect the collection of his derived from its operation – and license fees – charged in the exercise of the regulatory
tax liability under said reassessment. Hence, on June 8, 1956, Guerrero filed with the court authority of the state, under its police power – and other charges – for specific things or
of tax appeals the corresponding petition for review. Subsequently, said court rendered the special or particular benefits received from the government – on the other hand.
decision appealed from. Hence, these appeals.
ISSUE: Whether or not reassessment by the BIR is proper. PHIL. ACETYLENE vs. CIR
FACTS: The petitioner is a corporation engaged in the manufacture and sale of oxygen and
HELD: No. The foregoing circumstances clearly indicate that the logs involved in said acetylene gases. During the period from June 2, 1953 to June 30, 1958, it made various
reassessment were obtained from illegal sources, and that the forest charges due thereon sales of its products to the National Power Corporation, an agency of the Philippine
had not been paid. Since these charges “are lieu on the products and collectible from Government, and to the Voice of America an agency of the United States Government. The
whomsoever is in possession” thereof, unless he can show that he has the required auxiliary sales to the NPC amounted to P145,866.70, while those to the VOA amounted to P1,683, on
3S 2018 17
account of which the respondent Commission of Internal Revenue assessed against, and pays or may pay the seller more for the goods because of the seller's obligation, but that is
demanded from, the petitioner the payment of P12,910.60 as deficiency sales tax and all and the amount added because of the tax is paid to get the goods and for nothing else.
surcharge, pursuant to the provisions of the National Internal Revenue Code.
But the tax burden may not even be shifted to the purchaser at all. A decision to absorb the
The petitioner denied liability for the payment of the tax on the ground that both the NPC burden of the tax is largely a matter of economics. Then it can no longer be contended that
and the VOA are exempt from taxation. It asked for a reconsideration of the assessment and, a sales tax is a tax on the purchaser.
failing to secure one, appealed to the Court of Tax Appeals.
We therefore hold that the tax imposed by section 186 of the National Internal Revenue
The court ruled that the tax on the sale of articles or goods in section 186 of the Code is a Code is a tax on the manufacturer or producer and not a tax on the purchaser except
tax on the manufacturer and not on the buyer with the result that the "petitioner Philippine probably in a very remote and inconsequential sense. Accordingly its levy on the sales made
Acetylene Company, the manufacturer or producer of oxygen and acetylene gases sold to to tax-exempt entities like the NPC is permissible.
the National Power Corporation, cannot claim exemption from the payment of sales tax
simply because its buyer — the National Power Corporation — is exempt from the payment With regard to petitioner's sales to the Voice of America, it appears that the petitioner and
of all taxes." With respect to the sales made to the VOA, the court held that goods purchased the respondent are in agreement that the Voice of America is an agency of the United States
by the American Government or its agencies from manufacturers or producers are exempt Government and as such, all goods purchased locally by it directly from manufacturers or
from the payment of the sales tax under the agreement between the Government of the producers are exempt from the payment of the sales tax under the provisions of the
Philippines and that of the United States. agreement between the Government of the Philippines and the Government of the United
States, provided such purchases are supported by serially numbered Certificates of Tax
The petitioner appealed to this Court. Its position is that it is not liable for the payment of Exemption issued by the vendee-agency, as required by General Circular No. V-41, dated
tax on the sales it made to the NPC and the VOA because both entities are exempt from October 16, 1947.
taxation.
It was issued purportedly to implement the Agreement between the Republic of the
ISSUE: Whether or not petitioner is exempted from sales tax. Philippines and the United States of America Concerning Military Bases,16 but we find nothing
in the language of the Agreement to warrant the general exemption granted by that circular.
HELD: It may indeed be that the economic burden of the tax finally falls on the purchaser;
when it does the tax becomes a part of the price which the purchaser must pay. It does not
matter that an additional amount is billed as tax to the purchaser. The method of listing the MACEDA vs. MACARAIG JR.
price and the tax separately and defining taxable gross receipts as the amount received less FACTS: Commonwealth Act No. 120 created the NPC as a public corporation to undertake
the amount of the tax added, merely avoids payment by the seller of a tax on the amount of the development of hydraulic power and the production of power from other sources. R.A.
the tax. The effect is still the same, namely, that the purchaser does not pay the tax. He 358 granted the NPC tax and duty exemption privileges under Sec. 2-
3S 2018 18
“Sec. 2 To facilitate payment of its indebtedness, the National Power Corporation Since 1976, oil firms never paid excise or specific and ad valorem taxes for petroleum
shall be exempt from all taxes, duties, fees, imposts, charges and restrictions of products sold and delivered to NPC. Such taxes were paid on their sales of oil products to
the Republic of the Philippines, its provinces, cities and municipalities.” NPC only in 1984. NPC claimed for a refund of Php 468.58M, and only a portion was approved
and released by Caltex. The claim for the refund of taxes paid by PetroPhil, Shell, and Caltex
R.A. 6395 revised the charter of the NPC wherein the Congress declared as a national policy was denied. NPC moved for reconsideration, stating that all the deliveries of petroleum
the total electrification of the Philippines through development of power from all sources to products to NPC are exempt from taxes.
meet the needs of industrial development and rural electrification. Sec. 13 of the said law
provided in detail the exemption of the NPC from all taxes, duties, fees, imposts and other Petitioner contends that P.D. 938 repealed the indirect tax exemption of the NPC as Sec. 10
charges by the government and its instrumentalities. thereof does not expressly include indirect taxes.
P.D. 380 amended section 13, paragraphs (a) and (d) of Republic Act No. 6395 by specifying, ISSUES:
among others, the exemption of NPC from such taxes, duties, fees, imposts and other (1) WON the NPC still possessed indirect tax exemption after the repeal made in P.D. 938.
charges imposed "directly or indirectly," on all petroleum products used by NPC in its (2) WON the powers conferred upon the FIBR by E.O. 93 constitute undue delegation of
operation. legislative power and is unconstitutional.
(3) WON the grant of tax exemption to NPC is a case of tax evasion.
P.D. 938 amended R.A. 6395 which integrated the tax exemption privilege of NPC in general (4) WON NPC can still claim a refund or credit for the recovery of tax erroneously or illegally
terms - collected.
“Sec. 10 … To enable the Corporation to pay its indebtedness and obligations and in (5) WON granting of tax exemption is unconstitutional.
furtherance and effective implementation of the policy enunciated in Section One of
this Act, the Corporation, including its subsidiaries, is hereby declared exempt from the HELD:
payment of all forms of taxes, duties, fees, appeal bonds, supersedes bonds, in an (1) Yes, NPC still possessed tax exemption after the repeal made in P.D. 938. The contention
court or administrative proceedings.” of petitioner that the exemption of NPC from indirect taxes under Section 13 of R.A. No. 6395
and P.D. No. 380, is deemed repealed by P.D. No. 938 when the reference to it was deleted
In 1984, P.D. 1931 and E.O. 93 withdrew all tax exemptions granted to all GOCCs including is not well-taken. Repeal by implication is not favored unless it is manifest that the legislature
NPC but granted the president and/or the Secretary of Finance by recommendation of the so intended. As laws are presumed to be passed with deliberation and with knowledge of all
FIRB the power to restore certain tax exemptions. existing ones on the subject, it is logical to conclude that in passing a statute it is not intended
to interfere with or abrogate a former law relating to the same subject matter, unless the
After a series of withdrawal and restoration of NPC’s tax exemption, the Fiscal Incentives repugnancy between the two is not only irreconcilable but also clear and convincing as a
Review Board, possessing the power to restore tax exemptions, issued Resolution 10-85 result of the language used, or unless the latter Act fully embraces the subject matter of the
restoring NPC’s exemption from July 11, 1985 to June 30, 1985. earlier. The first effort of a court must always be to reconcile or adjust the provisions of one
statute with those of another so as to give sensible effect to both provisions. The legislative
3S 2018 19
intent must be ascertained from a consideration of the statute as a whole, and not of an (2) With the growing complexities of modern life and the many technical fields of
isolated part or a particular provision alone. When construing a statute, the reason for its governmental functions, as in matters pertaining to tax exemptions, delegation of legislative
enactment should be kept in mind and the statute should be construed with reference to its powers has become the rule and non-delegation the exception. The legislature may not have
intended scope and purpose and the evil sought to be remedied. The NPC is a government the competence, let alone the interest and the time, to provide direct and efficacious
instrumentality with the enormous task of undertaking development of hydroelectric solutions to many problems attendant upon present day undertakings. The legislature could
generation of power and production of electricity from other sources, as well as the not be expected to state all the detailed situations wherein the tax exemption privilege would
transmission of electric power on a nationwide basis, to improve the quality of life of the be restored. The task may be assigned to an administrative body like the Fiscal Incentives
people pursuant to the State policy embodied in Section E, Article II of the 1987 Constitution. Review Board (FIRB).
It is evident from the provisions of P.D. No. 938 that its purpose is to maintain the tax
exemption of NPC from all forms of taxes including indirect taxes as provided for under R.A. When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and
No. 6395 and P.D. No. 380 if it is to attain its goals. Legislative powers. Thus, there was no power delegated to her, rather it was she who was
delegating her power. She delegated it to the FIRB, which, for purposes of E.O No. 93 (S'86),
NPC laws show that it has been the lawmaker’s intention that the NPC was to be completely is a delegate of the legislature. Clearly, she was not sub-delegating her power.
tax exempt from all forms of taxes – direct and indirect. One common theme in all these
laws is that the NPC must be able to pay its indebtedness which, as of P.D. No. 938, was And E.O. No. 93 (S'86), as a delegating law, was complete in itself — it set forth the policy
P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign to be carried out 85 and it fixed the standard to which the delegate had to conform in the
loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this performance of his functions, 86 both qualities having been enunciated by this Court in Pelaez
goal is to be achieved. In addition to this, the then President Marcos mandated that 200 vs. Auditor General. 87
Million pesos be appropriated annually to NPC, such amount should be taken from the general
fund of the government. It does not stand to reason that the then President would order 200 For delegation to be constitutionally valid, the law must be complete in itself and must set
million pesos to be taken partially or totally from the tax money to be used to pay the forth sufficient standards.
government subscription in the NPC on one hand and order NPC to pay its indirect tax.
Certain aspects of the taxing process that are not really legislative in nature are vested in
Furthermore, section 10 of PD 938 was intended to be in its general form, President Marcos administrative agencies. In this case, there really is no delegation, to wit: a) power to value
must have considered all the NPC statutes from C.A 120 up to its latest amendments, PD property; b) power to assess and collect taxes; c) power to perform details of computation,
380, PD 395 and PD 758 and came up with a very simple Section 13, RA 6395, as amended appraisement or adjustment; among others.
by PD 938. When construing a series of statutes, they shall be taken and construed together,
as in statutes in pari materia. And in addition, repeal by implication is not favoured unless it (3) No, it is not a case of tax evasion. This tax exemption is intended not only to insure that
is manifest that the legislature so intended. the NPC shall continue to generate electricity for the country but more importantly, to assure
cheaper rates to be paid by the consumers. The allegation that this is in effect allowing tax
evasion by oil companies is not quite correct. There are various arrangements in the payment
3S 2018 20
of crude oil purchased by NPC from oil companies. Generally, the custom duties paid by the SEALAND SERVICE vs. CA
oil companies are added to the selling price paid by NPC. As to the specific and ad valorem FACTS: Appeal via certiorari from the decision of the Court of Appeals affirming in toto that
taxes, they are added as part of the seller's price, but NPC pays the price net of tax, on of the Court of Tax Appeals which denied petitioners claim for tax credit or refund of income
condition that NPC would seek a tax refund to the oil companies. No tax component on fuel tax paid on its gross Philippine billings.
had been charged or recovered by NPC from the consumers through its power rates. Thus,
this is not a case of tax evasion of the oil companies but of tax relief for the NPC. Sea-Land Service Incorporated (SEA-LAND), an American international shipping company
licensed by the SEC to do business in the Philippines entered into a contract with the United
The law governing recovery of erroneously or illegally collected taxes is Section 230 of the States Government to transport military household goods and effects of U. S. military
National Internal Revenue Code of 1977, as amended. A careful examination of petitioner's personnel assigned to the Subic Naval Base. From the aforesaid contract, SEA-LAND derived
pleadings and annexes attached thereto does not reveal when the alleged claim for a an income for the taxable year 1984 amounting to P58,006,207.54. During the taxable year
P410,580,000.00. Actually, as the Court sees it, this is a clear case of a "Mexican standoff." in question, SEA-LAND filed with the BIR the corresponding corporate Income Tax Return
We cannot restrain the BIR from refunding said amount because of Our ruling that NPC has (ITR) and paid the income tax due thereon of 1.5% as required in Section 25 (a) (2) of the
both direct and indirect tax exemption privileges. Neither can We order the BIR to refund National Internal Revenue Code (NIRC) in relation to Article 9 of the RP-US Tax Treaty,
said amount to NPC as there is no pending petition for review on certiorari of a suit for its amounting to P870,093.12.
collection before Us. At any rate, at this point in time, NPC can no longer file any suit to
collect said amount EVEN IF it has previously filed a claim with the BIR because it is time- Claiming that it paid the aforementioned income tax by mistake, a written claim for refund
barred under Section 230 of the Internal Revenue Code of 1977, as amended. The date of was filed with the BIR. However, before the said claim for refund could be acted upon by the
the Deed of Assignment is June 6, 1986. Even if We were to assume that payment by NPC Commissioner of Internal Revenue, SEA-LAND filed a petition for review with the CTA
for the amount of P410,580,000.00 had been made on said date, it is clear that more than docketed, to judicially pursue its claim for refund and to stop the running of the two-year
two (2) years had already elapsed from said date. At the same time, We should note that prescriptive period under the then Section 243 of the NIRC. CTA rendered its decision denying
there is no legal obstacle to the BIR granting, even without a suit by NPC, the tax credit or SEA-LANDs claim for refund of the income tax it paid in 1984. Petitioner appealed the decision
refund claimed by NPC, assuming that NPC's claim had been made seasonably, and assuming of the CTA to the CA. The CA promulgated its decision dismissing the appeal and affirming in
the amounts covered had actually been paid previously by the oil companies to the BIR. toto the decision of the CTA. Hence, this petition.
No, it is not unconstitutional. The rule that under the 1973 Constitution "no law granting a ISSUE: Whether the income that petitioner derived from services in transporting the
tax exemption shall be passed without the concurrence of a majority of all the members of household goods and effects of U. S. military personnel falls within the tax exemption
the Batasang Pambansa" does not apply as said P.D. No. 1931 was not passed by the Interim provided in Article XII, paragraph 4 of the RP-US Military Bases Agreement
Batasang Pambansa but by then President Marcos under His Amendment No. 6 power. P.D.
No. 1931 was validly issued by then President Marco under his Amendment No. 6 authority. HELD: No. Laws granting exemption from tax are construed strictissimi juris against the
taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the
exception. The law does not look with favor on tax exemptions and that he who would seek
3S 2018 21
to be thus privileged must justify it by words too plain to be mistaken and too categorical to P120, 825 representing 25% of the specific taxes actually paid based on Insular Lumber Co.
be misinterpreted. v. CTA and Sec. 5 of RA 1435 and complied with its procedure.
Then, petitioner filed before CA a Petition for Review: Favored petitioner to a partial refund
Under Article XII (4) of the RPUS Military Bases Agreement, the Philippine Government
P2,923 (excluding those that have prescribed) and based on the rates deemed paid under
agreed to exempt from payment of Philippine income tax nationals of the United States, or
RA 1435 (NOT higher rates actually paid under the NIRC). Insisting that the basis be the
corporations organized under the laws of the United States, residents in the United States in
higher rate, petitioner elevated the case to the CTA who affirmed the CA's decision.
respect of any profit derived under a contract made in the United States with the Government
of the United States in connection with the construction, maintenance, operation and
ISSUE: Whether or not the basis should be the higher rates prescribed by Sec. 153 and 156
defense of the bases.
of the 1997 NIRC?
It is obvious that the transport or shipment of household goods and effects of U. S. military
personnel is not included in the term construction, maintenance, operation and defense of HELD: NO. A tax cannot be imposed unless it is supported by the clear and express language
the bases. Neither could the performance of this service to the U. S. government be of a statute; On the other hand, once the tax is unquestionably imposed, a claim of exemption
interpreted as directly related to the defense and security of the Philippine territories. When from tax payments must be clearly shown and based on language in the law too plain to be
the law speaks in clear and categorical language, there is no reason for interpretation or mistaken. Section 5, RA 1435 as a tax exemption, must be construed strictissimi juris against
construction, but only for application. the grantee.
The avowed purpose of tax exemption is some public benefit or interest, which the lawmaking
We have carefully scrutinized RA 1435 and the subsequent pertinent statutes and found no
body considers sufficient to offset the monetary loss entailed in the grant of the exemption.
expression of a legislative will authorizing a refund based on the higher rates claimed by
The hauling or transport of household goods and personal effects of U. S. military personnel
petitioner. The mere fact that the privilege of refund was included in Section 5, and not in
would not directly contribute to the defense and security of the Philippines.
Section 1, is insufficient to support petitioners claim. When the law itself does not explicitly
provide that a refund under RA 1435 may be based on higher rates which were nonexistent
at the time of its enactment, this Court cannot presume otherwise. A legislative lacuna cannot
DAVAO GULF vs. CUR be filled by judicial fiat.
FACTS: Davao Gulf Lumber Corporation, a licensed forest concessionaire possessing a

Timber License Agreement granted by the Ministry of Natural Resources (Now DENR), According to an eminent authority on taxation, there is no tax exemption solely on the ground
purchased from various oil companies refined and manufactured oils as well as motor and of equity.
diesel fuels for its exploitation and operation.
Selling companies paid and passed the specific taxes imposed under Sec. 153 and 156 of the PLDT vs. DAVAO CITY
1997 NIRC to petitioner as purchaser who in turn filed before CIR a Claim for Refund for FACTS: Petitioner PLDT paid a franchise tax equal to three percent (3%) of the gross
receipts. The franchise tax was paid "in lieu of all taxes on this franchise or earnings thereof"
3S 2018 22
pursuant to RA No. 7082 amending its charter, Act No. 3436. The exemption from "all taxes
on this franchise or earnings thereof" was subsequently withdrawn by R.A. No. 7160 (Local SURIGAO vs. CIR
Government Code of 1991), which at the same time gave local government units the power FACTS: Before the outbreak of World War II, petitioner Surigao Consolidated, a domestic
to tax businesses enjoying a franchise on the basis of income received or earned by them corporation which then had its principal office in Iloilo was operating its mining concessions
within their territorial jurisdiction. Subsequently, RA No. 7925 was passed exempting Globe in Mainit, Surigao. Pursuant to Sec. 246 of the Internal Revenue Code (prescribed the time
and Smart from payment of local franchise tax. The issue in this case is whether or not the and manner of payment of royalties or ad valorem taxes) it filed a bond and had been
franchise of petitioner PLDT giving it tax exemption, being a special law, should prevail over regularly filing its returns for minerals removed from its mines during each calendar quarter
the LGC, a general law, giving the City of Davao the power to impose the franchise tax on within 20 days after the close of every quarter. Computation of the ad valorem tax was based
PLDT. Petitioner further argues that as between two laws on the same subject matter (LGC on the market value of the minerals set forth in the returns, subject to adjustment upon the
and RA No. 7925), which are inconsistent, that which is passed later prevails as it is the latest receipt of the smelter showing the actual market value of the mineral to the US.
expression of the legislative will.
Due to the war, there were communications interruptions and the principal office lost contact
ISSUE: Whether, by virtue of RA. No. 7925, § 23, PLDT is again entitled to exemption from with its mines and never received the production reports for the 4th quarter of 1941. To
the payment of local franchise tax in view of the grant of tax exemption to Globe and Smart. avoid the tax penalty, on Jan. 19, 1942, petitioner deposited a check amount of P27,000 in
payment of ad valorem taxes.
HELD: The Supreme Court held that after petitioner's tax exemption by RA No. 7092 had
been withdrawn by the LGC, no amendment to re-enact its previous tax exemption has been CA 722 was enacted and provided for the filing of returns for minerals removed during the
made by Congress. The phrase "in lieu of all taxes" in special franchises granting tax last quarter of 1941 up to Dec. 31, 1945 and the payment of ad valorem tax on said minerals
exemptions must be interpreted strictly against the taxpayer and it should give way to the to Feb 28, 1946. On Dec. 28, 1945, ad valorem tax returns for the 4th quarter declaring as
peremptory language of Sec. 193 of the LGC specically providing for the withdrawal of such its tax liability P43,486.54. Applying the previously deposited P27,000, the returns indicated
exemption privileges. The Court also held that the rule that a special law must prevail over an unpaid balance of P16,486.54 as the “tax subject to revision.”
the provisions of a later general law does not apply in this case. Finally, the ruling of the
Bureau of Local Government Finance (BLGF) that petitioner's exemption from local taxes has On subsequent dates, petitioner filed multiple amended ad valorem tax returns which
been restored must give way to the ruling of the Court of Tax Appeals which is the special declared the reduction of the amount. On the latter statements of adjustment, petitioner
court created for the purpose of reviewing tax cases, unlike the BLGF which was created only requested not only the reduction but a refund of an amount of P17,051.14. Collector of
for the purpose of providing consultative services and technical assistance to local Internal Revenue denied the request for refund on the grand that the money already paid
governments and the general public on local taxation and other related matters. was legally due to the government.
B. COMPARED WITH OTHER TERMS Petitioner, thus, filed with the CFI which was later remanded to the CTA a civil action for its
recovery. The CTA denied its claim for refund.
TAX REMISSIONS/CONDONATION
3S 2018 23
ISSUE: Whether or not petitioner is entitled to the refund of ad valorem tax. CIR vs. CA
FACTS: On 22 August 1986, Executive Order No. 41 was promulgated declaring a one-time
HELD: The ad valorem tax paid is itemized into 3: (1) AVT on minerals removed from the tax amnesty on unpaid income taxes, later amended to include estate and donor's taxes and
mines but allegedly lost in transit on account of war; (2) AVT on minerals extracted from the taxes on business, for the taxable years 1981 to 1985. Availing itself of the amnesty,
mines but allegedly looted during the Japanese occupation; (3) Alleged overpayment of ad respondent R.O.H. Auto Products Philippines, Inc., filed, in October 1986 and November
valorem tax on minerals shipped to the US. 1986, its Tax Amnesty Return and Supplemental Tax Amnesty Return, respectively, and paid
the corresponding amnesty taxes due.
The refund under (1) is based on Sec. 1(d) of RA No. 81: Any provision of existing law to the
contrary notwithstanding: xxx xxx (d) All unpaid royalties, ad valorem or specific taxes on all Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication
minerals mined from mining claims or concessions existing and in force on January first, received by private respondent on 13 August 1986, assessed the latter deficiency income
1942, and which were lost by reason of the war or circumstances arising therefrom, are and business taxes for its fiscal years ended 30 September 1981 and 30 September 1982 in
hereby condoned: Provided xxx. an aggregate amount of P1,410,157.71. The taxpayer wrote back to state that since it had
been able to avail itself of the tax amnesty, the deficiency tax notice should forthwith be
Petitioner argues that since the law condones the taxes due from taxpayers who failed to cancelled and withdrawn. The request was denied by the Commissioner, in his letter of 22
pay their taxes, it would be unfair to deny this benefit to those taxpayers who had been November 1988, on the ground that Revenue Memorandum Order No. 4-87, dated 09
prompt in paying theirs. However, the aforequoted section clearly refers to the condonation February 1987, implementing Executive Order No. 41, had construed the amnesty coverage
of unpaid taxes only. to include only assessments issued by the Bureau of Internal Revenue after the promulgation
of the executive order on 22 August 1986 and not to assessments theretofore made.
The condonation of a tax liability is equivalent and is in the nature of a tax exemption. It
should be sustained only when expressed in explicit terms. He who claims an exemption from PR appealed to CTA, which ruled in its favor.
his share of the common burden of taxation must justify his claim by showing that the
Legislature intended to exempt him by words too plain to be mistaken. On appeal by the Commissioner to the CA, the decision of the tax court was affirmed.
Such a statute has no retrospective operation, unless by the terms thereof it clearly appears ISSUE: Whether or not the position taken by the Commissioner coincides with the meaning
to be the intention of the legislature that the exemption shall relate back to taxes which have and intent of Executive Order No. 41.
already become fixed, as a statute which releases a person or corporation from a burden
common to the whole community should be strictly construed. Decision of the CTA is HELD: We agree with both the CA and CTA that EO No. 41 is quite explicit and requires
affirmed. hardly anything beyond a simple application of its provisions. It reads:
TAX AMNESTY "SEC. 1. Scope of Amnesty. — A one-time tax amnesty covering unpaid income taxes for the
years 1981 to 1985 is hereby declared.
3S 2018 24
"SEC. 2. Conditions of the Amnesty. — A taxpayer who wishes to avail himself of the tax
amnesty shall, on or before October 31, 1986; CIR vs. MARUBENI
"a) file a sworn statement declaring his net worth as of December 31, 1985; FACTS: CIR assails the CA decision which affirmed CTA, ordering CIR to desist from
"b) file a certified true copy of his statement declaring his net worth as of December 31, collecting the 1985 deficiency income, branch profit remittance and contractor’s taxes from
1980 on record with the Bureau of Internal Revenue, or if no such record exists, file a Marubeni Corp after finding the latter to have properly availed of the tax amnesty under EO
statement of said net worth therewith, subject to verification by the Bureau of Internal 41 & 64, as amended.
Revenue;
"c) file a return and pay a tax equivalent to ten percent (10%) of the increase in net worth Marubeni, a Japanese corporation, engaged in general import and export trading, financing
from December 31, 1980 to December 31, 1985: Provided, That in no case shall the tax be and construction, is duly registered in the Philippines with Manila branch office. CIR examined
less than P5,000.00 for individuals and P10,000.00 for judicial persons. the Manila branch’s books of accounts for fiscal year ending March 1985, and found that
respondent had undeclared income from contracts with NDC and Philphos for construction
The period of the amnesty was later extended to 05 December 1986 from 31 October 1986 of port complex and ammonia storage complex in Leyte.
by Executive Order No. 54, dated 04 November 1986, and, its coverage expanded, under EO
On August 27, 1986, Marubeni received a letter from CIR assessing it for several deficiency
No. 64, dated 17 November 1986, to include estate and donors taxes and taxes on business.
taxes. CIR claims that the income respondent derived were income from Philippine sources,
There is no pretension that the tax amnesty returns and due payments made by the taxpayer
hence subject to internal revenue taxes. On Sept 1986, respondent filed 2 petitions for review
did not conform with the conditions expressed in the amnesty order.
with CTA: the first, questioned the deficiency income, branch profit remittance and
contractor’s tax assessments and second questioned the deficiency commercial broker’s
If, as the Commissioner argues, EO No. 41 had not been intended to include 1981-1985 tax
assessment.
liabilities already assessed (administratively) prior to 22 August 1986, the law could have
simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and
On Aug 2, 1986, EO 41 declared a tax amnesty for unpaid income taxes for 1981-85, and
it is that the executive order has been designed to be in the nature of a general grant of tax
that taxpayers who wished to avail this should on or before Oct 31, 1986. Marubeni filed its
amnesty subject only to the cases specifically excepted by it.
tax amnesty return on Oct 30, 1986.
It might not be amiss to recall that the taxable periods covered by the amnesty include the
On Nov 17, 1986, EO 64 expanded EO 41’s scope to include estate and donor’s taxes under
years immediately preceding the 1986 revolution during which time there had been persistent
Title 3 and business tax under Chap 2, Title 5 of NIRC, extended the period of availment to
calls, all too vivid to be easily forgotten, for civil disobedience, most particularly in the
Dec 15, 1986 and stated those who already availed amnesty under EO 41 should file an
payment of taxes, to the martial law regime. It should be understandable then that those
amended return to avail of the new benefits. Marubeni filed a supplemental tax amnesty
who ultimately took over the reins of government following the successful revolution would
return on Dec 15, 1986.
promptly provide for a broad, and not a confined, tax amnesty.
3S 2018 25
CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled the Due to the EO 64 amendment, Sec 4b cannot be construed to refer to EO 41 and its date of
deficiency taxes. CA affirmed on appeal. effectivity. The general rule is that an amendatory act operates prospectively. It
may not be given a retroactive effect unless it is so provided expressly or by
ISSUE: W/N Marubeni is exempted from paying tax. necessary implication and no vested right or obligations of contract are thereby
impaired.
HELD: Yes.
1. On date of effectivity 2. On situs of taxation
CIR claims Marubeni is disqualified from the tax amnesty because it falls under the exception Marubeni contends that assuming it did not validly avail of the amnesty, it is still not liable
in Sec 4b of EO 41: for the deficiency tax because the income from the projects came from the “Offshore Portion”
as opposed to “Onshore Portion”. It claims all materials and equipment in the
“Sec. 4. Exceptions.—The following taxpayers may not avail themselves of the amnesty
contract under the “Offshore Portion” were manufactured and completed in
herein granted: xxx b) Those with income tax cases already filed in Court as of the effectivity
Japan, not in the Philippines, and are therefore not subject to Philippine taxes.
hereof;”
(BG: Marubeni won in the public bidding for projects with government corporations NDC and
Petitioner argues that at the time respondent filed for income tax amnesty on Oct 30, 1986,
Philphos. In the contracts, the prices were broken down into a Japanese Yen Portion (I and
a case had already been filed and was pending before the CTA and Marubeni therefore fell
II) and Philippine Pesos Portion and financed either by OECF or by supplier’s credit. The
under the exception. However, the point of reference is the date of effectivity of EO 41 and
Japanese Yen Portion I corresponds to the Foreign Offshore Portion, while Japanese Yen
that the filing of income tax cases must have been made before and as of its effectivity.
Portion II and the Philippine Pesos Portion correspond to the Philippine Onshore Portion.
Marubeni has already paid the Onshore Portion, a fact that CIR does not deny.)
EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was filed with
CTA on Sept 26, 1986. When EO 41 became effective, the case had not yet been filed.
CIR argues that since the two agreements are turn-key, they call for the supply of both
Marubeni does not fall in the exception and is thus, not disqualified from availing of the
materials and services to the client, they are contracts for a piece of work and are indivisible.
amnesty under EO 41 for taxes on income and branch profit remittance.
The situs of the two projects is in the Philippines, and the materials provided and services
rendered were all done and completed within the territorial jurisdiction of the Philippines.
The difficulty herein is with respect to the contractor’s tax assessment (business tax) and
Accordingly, respondent’s entire receipts from the contracts, including its receipts from the
respondent’s availment of the amnesty under EO 64, which expanded EO 41’s coverage.
Offshore Portion, constitute income from Philippine sources. The total gross receipts covering
When EO 64 took effect on Nov 17, 1986, it did not provide for exceptions to the coverage
both labor and materials should be subjected to contractor’s tax (a tax on the exercise of a
of the amnesty for business, estate and donor’s taxes. Instead, Section 8 said EO provided
privilege of selling services or labor rather than a sale on products).
that:
Marubeni, however, was able to sufficiently prove in trial that not all its work was performed
“Section 8. The provisions of Executive Orders Nos. 41 and 54 which are not contrary to or in the Philippines because some of them were completed in Japan (and in fact subcontracted)
inconsistent with this amendatory Executive Order shall remain in full force and effect.” in accordance with the provisions of the contracts. All services for the design, fabrication,
engineering and manufacture of the materials and equipment under Japanese Yen Portion I
were made and completed in Japan. These services were rendered outside
3S 2018 26
Philippines’ taxing jurisdiction and are therefore not subject to contractor’s tax. • Necessary will operate on a commercial scale in conformity with up-to date practices
Petition denied. and will make its products available to the general public in quantities and prices which
justify operation with a reasonable degree of certainty
EXCLUSION/DEDUCTION • Necessary where the imported raw materials represent a value not exceeding sixty
percent of the manufacture costs plus reasonable selling price and administrative
TAX CODE, SEC. 32 (B). – Exclusions from Gross Income. expenses.
Provided the grantee shall use domestic materials wherever available Wonder Mechanical
Engineering was granted tax exemption privileges in respect to the “manufacture of machines
TAX CODE, SEC. 34. – Deductions from Gross Incomes
for making cigarette paper, pails, lead washers, rivets, nails, candies, chairs, etc.” which
expired on 30 May 1951.
C. CONSTRUCTION OF TAX EXEMPTIONS
It applied for reinstatement on 14 September 1953 under RA 901 to take effect on the day
E. RODRIGUEZ vs. CIR
RA 901 took effect. However, sometime in 1955, the Commissioner of Internal Revenue
FACTS:
investigated petitioner and found that during the years 1953 and 1954 the petitioner was
ISSUE:
engaged in the business of manufacturing auto spare parts, lamp shades, rice threshers,
HELD:
post clip, radio screws, washers, electronic irons, kerosene stoves and other articles; that it
was engaged in electroplating and repair of machines; that it did not provide privilege tax
receipts as required under Sec. 182 of the Tax Code and did not pay sales tax and the
REPUBLIC FLOUR MILLS vs. CIR
percentage tax due under the same Code. Hence, it was assessed a sales and percentage
FACTS:
taxes with 25% surcharge. Respondent also suggested payment of penalties in extrajudicial
ISSUE:
settlement of the petitioner’s violations. Also, in 1960, petitioner was assessed additional tax
HELD:
liability for its manufacture and sale of steel chairs without paying the 30% sales tax;
accepted job orders without paying the 3% tax in gross receipts; 7% sales tax on other
articles; and various violations of the Bookkeeping Regulations.
WONDER MECHANICAL ENGINEERING vs. CTA
FACTS: Republic Act 35 approved on 30 September 1946 grants to persons “who or which
The CTA dismissed the appeal of petitioner for lack of jurisdiction the same having been filed
shall engage in a new and necessary industry” for a period of 4 years from the organization
beyond the 30 day reglementary period. The other decision in question also ordered
of such industry, exemption from the payment of all revenue taxes directly payable by such
petitioner to pay the deficiency tax as assessed by the CIR.
person. Republic Act 901, approved on 20 June 1953, amended RA 35 extending the period
of exemption, elaborated the meaning of “new and necessary industry” as follows:
ISSUE: Whether or not the manufacture and sale of steel chairs, jeepney parts and other
• New is not existing or operating prior to 1 January 1945
articles which are not machines for making other products, and job orders done by petitioner
• Necessary will contribute to attainment of a stable and balanced national economy
3S 2018 27
come within the purview of the tax exemption granted it under Republic Act Nos. 35 and under protest. Unable to secure a tax refund from the Commissioner for the amount of
901. P33,442.13, it filed a petition for review with the Court of Tax Appeals. The CTA denied the
petition as well as the motion for reconsideration filed thereafter. Hence, this petition.
HELD: There is no question that the first appeal was filed out of date being filed beyond the
statutory period of 30 days. ISSUE: Whether or not petitioner's “tugboats” are considered "cargo vessels" subject to
compensating tax exemption under the law?
On the vital issue of tax exemption, petitioner was granted tax exemption in the manufacture
and sale "of machines for making cigarette paper, pails, lead washers, nails, rivets, candies, HELD: No. As the power of taxation is a high prerogative of sovereignty, the relinquishment
etc.", as explicitly stated in the Certificate of Exemption, but certainly not for the manufacture of such is never presumed and any reduction or diminution thereof with respect to its mode
and sale of the articles produced by those machines. This intention can be deduced from the or its rate, must be strictly construed, and the same must be couched in clear and
memorandum of the State stating: “The manufacture of the above-mentioned machines can unmistakable terms in order that it may be applied.
be considered a new and necessary industry for the purpose of Republic Act No. 35. It is
recommended that the benefits of said Act be extended to this corporation in respect to said The law, specifically the amendatory provisions of Republic Act 3176, limits tax exemption
industry.” Further, the manufacture of steel chairs and other articles for making certain from the compensating tax to imported items to be used by the importer himself as operator
products does not fall under the classification “new and unnecessary under the Acts. of passenger or cargo vessel or both, whether coastwise or oceangoing, including engines
and spare parts of said vessel.
There is no way to dispute the "cardinal rule in taxation that exemptions therefrom are highly
disfavored in law and he who claims tax exemption must be able to justify his claim or right Here, the petitioner’s "tugboats" are not "cargo vessels" because they are mainly employed
thereto by the dearest grant of organic or statute law" as succinctly stated in the decision of for towing and pulling purposes, not in carrying or transporting passengers or cargoes. In
the respondent Court of Tax Appeals in C.T.A. No. 1265 (L-27858). fact, a tugboat is defined as a strongly built, powerful steam or power vessel, used for towing
and, now, also used for attendance on vessel.
Tax exemption must be clearly expressed and cannot be established by implication.
Exemption from a common burden cannot be permitted to exist upon vague implication.
(Asiatic Petroleum Co. vs. Llanes, 49 Phil. 466; House vs. Posadas, 53 Phil. 338; Collector of FLORO CEMENT vs. GOROSPE
Internal Revenue vs. Manila Jockey Club, Inc., G.R. No. L-8755, March 23, 1956, 98 Phil. FACTS: Taxes sought to be collected by the Municipal and Provincial Treasurers of the
676). Municipality of Lugait, Misamis Oriental refers to “manufacturer’s and exporter’s taxes” for
the period from Jan 1, 1974 to Sept. 30, 1975, inclusive, in the total amount of P161,875.00
plus 25% thereof as surcharge.
LUZON STEVEDORING CORP. vs. CTA
FACTS: Luzon Stevedoring Corp imported various engine parts and other equipment for
tugboat repair and maintenance in 1961 and 1962. It paid the assessed compensation tax
3S 2018 28
Respondents alleged that the imposition and collection these taxes is based on its Municipal HELD: Yes. Petitioner argues that the ordinances do not apply to its business in view of the
Ordinance (MO) No. 5 (Municipal Revenue Code of 1974) which was passed pursuant to PD limitation on the taxing power of local government as provided for by Sec. 5 (m) of PD 231:
No. 231 and also MO No. 10 pursuant to PD No. 426 amending PD No. 231. Common Limitations on the Taxing Powers of Local Governments.
Petitioner Floro Cement set up the defense that it is not liable to pay the said taxes alleging The exercise of taxing power of provinces, cities, municipalities and barrios shall not extend
that the respondent’s power to levy and collect taxes, fees, rentals, royalties or charges of to the imposition of the ff: (m) Taxes on mines, mining operations and mineral products and
any kind whatsoever has been limited or withdrawn by Sec. 52 of PD No. 463: Power to Levy their by-products sold domestically by the operator. It likewise argues that cement is a
Taxes on Mines, Mining Corp and Mineral Products. - Any law to the contrary notwithstanding, mineral product. Respondent admits that petitioner undertakes exploration, development and
no province, city, municipal district shall levy and collect taxes, fees, rentals, royalties or exploitation of mineral products, the taxes sought to be collected were not imposed on these
charges of any kind whatsoever on mines, mining claims, mineral products, or on any activities in view of the prohibition by Sec. 52 PD 463. Taxes sought were levied on the
operation, process or activity connected therewith. corporation’s business of manufacturing and exporting cement.
Among petitioner’s defenses was that it was granted by the Sec. of Agriculture and Natural The business of manufacturing and exporting cement does not fall under exploration,
Resources a Certificate of Qualification for Tax Exemption entitling Floro Cement from development nor exploitation of mineral resources as defined by Sec. 2 PD 463 hence it is
payment of all taxes except income tax for 5 years from Apr. 30, 1969 to Apr. 29, 1974 and outside the scope of Sec. 52. Respondent’s power to tax is provided for in Art. 2, Sec. 19 PD
the same Certificate was amended entitling the same to exemption for 5 years from all taxes, 231 as amended by PD 426. Cement is not a mineral product but rather a manufactured
duties and fees except income tax, from the date of actual commercial production of saleable product; before cement reaches it saleable form, the minerals had already undergone a
mineral products (May 17, 1974 to Jan. 1, 1978). It also invoked RA 3823 as implemented chemical change through manufacturing process. The general rule is that any claim for
by Mines AO No.V-25 and PD No. 463 which are the basis for the exemption granted to it exemption from the tax statute should be strictly construed against the taxpayer. He who
are special laws and the municipal ordinances are based on PD 231 and PD 426 are general claims an exemption must be able to point out some provision of law creating the right; it
laws and that a special law cannot be amended and/or repealed by a general law. cannot be allowed to exist upon a mere vague implication or inference.
Pursuant to MO 5 and 10, respondents demanded of petitioner the payment of the The exemption mentioned in Sec. 52 PD 463 refers only to machineries, equipment, tools for
manufacturer’s and exporter’s taxes including surcharge. production, etc. As provided in Sec. 53 PD 463. The manufacture and export of cement does
not fall under the said provision for it is not a mineral product. What is mined is only the
Trial Court ruled in favor the Municipal and Provincial Treasurers. Hence, this appeal. mineral products composing the finished product. By petitioner’s admission, it is engaged in
the manufacturing and selling, including exporting of cement.
ISSUE: Whether or not MO 5 and 10 apply to petitioner notwithstanding the limitation on
the taxing power of the local government. Since the taxes sought are levied on these activities pursuant to Sec. 19 PD 231, MO 5 and
10, properly apply to petitioner. Petition is denied.
3S 2018 29
Revenue, in the absence of any showing that it is plainly wrong, is entitled to great weight.
CIR vs. LEDESMA Indeed, the ruling was made by the Commissioner of Internal Revenue in the exercise of his
FACTS: power under § 245 of the NIRC to "make rulings or opinions in connection with the
ISSUE: implementation of the provisions of internal revenue laws, including rulings on the
HELD: classification of articles for sales tax and similar purposes."
RESINS vs. AUDITOR GENERAL NESTLE PHIL. vs. CA

FACTS: FACTS: Petitioner Nestle Philippines, Inc. transacted sixteen separate importations of milk
ISSUE: and milk products from different countries between the period of July and November 1984.
HELD: It paid the corresponding customs duties and advance sales taxes to the Collector of Customs
of Manila for each transaction based on the published Home Consumption Value (HCV) as
indicated in the Bureau of Customs Revision Orders, but it seasonably led the corresponding
MISAMIS ORIENTAL vs. DOF protests before the said Collector of Customs. In the said protests, petitioner claimed for the
FACTS: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic refund of the alleged overpaid import duties and advance sales taxes. With regards to the
corporation whose members, are engaged in the buying and selling of copra. The petitioner advance sales taxes, the Court of Tax Appeals eventually ruled in favor of the petitioner.
alleges that prior to the issuance of Revenue Memorandum Circular 47-91, which However, the Collector of Customs failed to render a decision on the sixteen protest cases
implemented VAT Ruling 190-90, copra was classified as agricultural food product under § for almost six years for the alleged overpaid customs duties. In order to prevent the claims
103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages from becoming stale on the ground of prescription, petitioner immediately led a petition for
of production or distribution. Said circular classified copra as an agricultural nonfood product review with the Court of Tax Appeals (CTA). The CTA dismissed the said petition for want of
and declared it "exempt from VAT only if the sale is made by the primary producer pursuant jurisdiction. The issue was raised to the Court of Appeals by way of petition for review, but
to Section 103(a) of the Tax Code, as amended." The reclassification had the effect of it was also dismissed for failure to exhaust administrative remedies.
denying to the petitioner the exemption it previously enjoyed when copra was classified as
an agricultural food product under §103(b) of the NIRC. HELD: The Court ruled that the remand of this case to the CTA is warranted for the proper
verification and determination of the factual basis and merits of the petition and in order that
ISSUE: WON the petitioner is exempt from the tax. the ends of substantial justice and fair play may be subserved. In the light of Sections 2308
and 2309 of the Tariff and Customs Code, it appeared that in all cases subject to protest,
HELD: NO. In interpreting §103(a) and (b) of the NIRC, the Commissioner of Internal the claim for refund of customs duties may be foreclosed only when the interested party
Revenue gave it a strict construction consistent with the rule that tax exemptions must be claiming refund fails to le a written protest before the Collector of Customs. Accordingly,
strictly construed against the taxpayer and liberally in favor of the state. As the government once a written protest is seasonably led with the Collector of Customs the failure or inaction
agency charged with the enforcement of the law, the opinion of the Commissioner of Internal of the latter to promptly perform his mandated duty under the Tariff and Customs Code
3S 2018 30
should not be allowed to prejudice the right of the party adversely affected thereby.
Technicalities and legalisms, however exalted, should not be misused by the government to
keep money not belonging to it, if any is proven , and thereby enrich itself at the expense of
the taxpayers. If the State expects its taxpayers to observe fairness and honesty in paying
their taxes, so must it apply the same standard against itself in refunding excess payments,
if any, of such taxes. Indeed the state must lead by its own example of honor, dignity and
uprightness. Thus, in order for the rule on solution indebiti to apply, it is an essential condition
that petitioner must show that its payment of the customs duties was in excess of what was
required by the law at the time when the subject sixteen (16) importations of milk and milk
products were made. Unless shown otherwise, the disputable presumption of regularity of
performance of duty lies in favor of the Collector of Customs.
COCONUT OIL REFINERS vs. TORRES

FACTS:
ISSUE:
HELD:
SORIANO vs. SEC. OF FINANCE

FACTS:
ISSUE:
HELD:
SEC. OF FINANCE vs. LAZATIN

FACTS:
ISSUE:
HELD:
3S 2018 31

Constitutional Limitations: Art Iii, Sec. 10

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3S TAX 1 DIGEST | ATTY.

ACOSTA WEEK 5 COVERAGE

D. NON-IMPAIRMENT OF CONTRACTS franchises.

No. It is ingrained in jurisprudence that the constitutional prohibition on the impairment of

ART III, SEC. 20. Hence, this petition.

No person shall be imprisoned for debt or non-payment of poll tax.

Section 22 (3), Article VI of the 1935 Constitution.

TAX CODE, SEC. 30(H).

CIR vs. ST. LUKE’S MEDICAN CENTER, INC.

GREENFIELD vs. MEER

be declared in the income tax return.

CIR vs. GUERRERO Php3,775.66.

decision appealed from. Hence, these appeals.

DAVAO GULF vs. CUR be filled by judicial fiat.

FACTS: Davao Gulf Lumber Corporation, a licensed forest concessionaire possessing a

RESINS vs. AUDITOR GENERAL NESTLE PHIL. vs. CA

COCONUT OIL REFINERS vs. TORRES

SORIANO vs. SEC. OF FINANCE

SEC. OF FINANCE vs. LAZATIN

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