1. SWEDISH MATCH vs. TREASURER DOCTRINE: FACTS: 1.

On 20 October 2001, petitioner paid business taxes in the total amount of P470,932.21. The assessed amount was based on Sections 14 and 21 of Manila Revenue Code, as amended by. Out of that amount, P164,552.04 corresponded to the payment under Section 21. 2. Assenting that it was not liable to pay taxes under Section 21, petitioner wrote a letter on 17 September 2003 to respondent claiming a refund of business taxes he paid pursuant to the said provision. 3. Petitioner argued that payment under Section 21 constituted double taxation in view of its payment under Section 14. The respondent failed to refund said sum hence, petitioner filed a Petition for Refund of Taxes with the RTC of Manila in accordance with Section 196 of the Local Government Code of 1991. 4. Respondent argues that Sections 14 and 21 pertain to two different objects of tax; thus, they are not of the same kind and character so as to constitute double taxation. Section 14 is a tax on manufacturers, assemblers, and other processors, while Section 21 applies to businesses subject to excise, value-added, or percentage tax. Respondent posits that under Section 21, petitioner is merely a withholding tax agent of the City of Manila. RTC: dismissed Petition for failure of petitioner to plead the latters capacity to sue and to state the authority of Tiarra T. Batilaran-Beleno, who had executed the Verification and Certificate of Non-Forum Shopping MFR : denied RTC: Sections 14 and 21 pertained to taxes of a different nature and, thus, the elements of double taxation were wanting in this case. CTA: affirmed the RTCs dismissal of the Petition for Refund of Taxes on the ground that petitioner had failed to state the authority of Ms. Beleno to institute the suit. CTA En Banc: likewise denied the Petition for Review, and ruled that: In this case, the plaintiff is the Swedish Match Philippines, Inc. However, as found by the RTC as well as the Court in Division, the signatory of the verification and/or certification of non-forum shopping is Ms. Beleno, the companys Finance Manager, and that there was no board resolution or secretary's certificate showing proof

of Ms. Belenos authority in acting in behalf of the corporation at the time the initiatory pleading was filed in the RTC. It is therefore, correct that the case be dismissed. ISSUES: 1) Whether Ms. Beleno was authorized to file the Petition for Refund of Taxes with the RTC; and 2) Whether the imposition of tax under Section 21 of the Manila Revenue Code constitutes double taxation in view of the tax collected and paid under Section 14 of the same code.12 HELD: 2. a. as it has already been settled by this Court in The City of Manila v. Coca-Cola Bottlers Philippines, Inc.,27 in this wise: Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their own detriment. Said exempting proviso was precisely included in said section so as to avoid double taxation. b. Double taxation - means taxing the same property twice when it should be taxed only once; that is, "taxing the same person twice by the same jurisdiction for the same thing." It is obnoxious when the taxpayer is taxed twice, when it should be but once. Otherwise described as "direct duplicate taxation," the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same kind or character. Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the same subject matter the privilege of doing business in the City of Manila; (2) for the same purpose to make persons conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority petitioner City of Manila;

(4) within the same taxing jurisdiction within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods per calendar year; and (6) of the same kind or character a local business tax imposed on gross sales or receipts of the business. c. The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance No. 7794 is specious. The Court revisits Section 143 of the LGC, the very source of the power of municipalities and cities to impose a local business tax, and to which any local business tax imposed by petitioner City of Manila must conform. It is apparent from a perusal thereof that when a municipality or city has already imposed a business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section 143(a) of the LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business tax under Section 143(h) of the same Code. d. Section 143(h) may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are "not otherwise specified in preceding paragraphs." In the same way, businesses such as respondents, already subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which is based on Section 143(a) of the LGC], can no longer be made liable for local business tax under Section 21 of the same Tax Ordinance [which is based on Section 143(h) of the LGC].28 e. Based on these reasons, petitioner should not have been subjected to taxes under Section 21 of the Manila Revenue Code for the fourth quarter of 2001, considering that it had already been paying local business tax under Section 14 of the same ordinance. f. Ordinance Nos. 7988 and 8011 cannot be the basis for the collection of business taxes. g. In Coca-Cola, this Court had the occasion to rule that Ordinance Nos. 7988 and 8011 were null and void for failure to comply with the required publication for three (3) consecutive days as said ordinance was published only for one day in the 22 May 2000 issue of the

Philippine Post in contravention of the unmistakable directive of the Local Government Code of 1991. h. Despite the nullity of Tax Ordinance No. 7988, the court a quo, in the assailed Order, dated 8 May 2002, went on to dismiss petitioners case on the force of the enactment of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988. Significantly, said amending ordinance was likewise declared null and void by the DOJ Secretary in a Resolution, dated 5 July 2001, elucidating that "Instead of amending Ordinance No. 7988, herein respondent should have enacted another tax measure which strictly complies with the requirements of law, both procedural and substantive. The passage of the assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any way, does not legally exist." Said Resolution of the DOJ Secretary had, as well, attained finality by virtue of the dismissal with finality by this Court of respondents Petition for Review on Certiorari in G.R. No. 157490 assailing the dismissal by the RTC of Manila, Branch 17, of its appeal due to lack of jurisdiction in its Order, dated 11 August 2003.30 (Emphasis in the original) i. Respondents assessment under both Sections 14 and 21 had no basis. Petitioner is indeed liable to pay business taxes to the City of Manila; nevertheless, considering that the former has already paid these taxes under Section 14 of the Manila Revenue Code, it is exempt from the same payments under Section 21 of the same code. Hence, payments made under Section 21 must be refunded in favor of petitioner. j. petitioner paid business taxes based on Sections 14 and 21 for the fourth quarter of 2001 in the total amount of P470,932.21.31 Therefore, it is entitled to a refund of P164,552.0432 corresponding to the payment under Section 21 of the Manila Revenue Code. instant Petition is GRANTED. Accordingly, the Court of Tax Appeals En Banc Decision dated 1 October 2007 and Resolution dated 14 January 2008 are REVERSED and SET ASIDE.

2. MACTAN CEBU INTL v. MARCOS DOCTRINE : As a general rule, the power to tax is an incident of sovereignity and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it. The rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of taxation. FACTS: Mactan Cebu International Airport Authority (MCIAA) was created to principally undertake to economical, efficient and effective control, management and supervision of the Mactan International Airport and such other airports as may be established in the province of Cebu Section 14 of its charter excempts the Authority from payment of realty taxes but in 1994, the City Treasurer demanded payment for realty taxes on several parcels of land belonging to the other. MCIAA filed a petition in RTC contending that, by nature of its powers and functions, it has the same footing of an agency or instrumentality of the national government. The RTC dismissed the petition based on Section 193 & 234 of the local Government Code or R.A. 7160. Thus this petition. ISSUE: Whether or not the MCIAA is excempted from realty taxes? RULING: With the repealing clause of RA 7160 the tax exemption provided. All general and special in the charter of the MCIAA has been expressly repeated. It state laws, acts, City Charters, decrees, executive orders, proclamations and administrative regulations, or part of parts thereof which are inconsistent with any of the provisions of the Code are hereby repeated or modified accordingly. Therefore the SC affirmed

the decision and order of the RTC and herein petitioner has to pay the assessed realty tax of its properties effective January 1, 1992 up to the present.

3. VILLEGAS vs. HIU FACTS: 1. Ordinance No. 6537 , passed on Feb.22,1968, prohibits aliens from being employed or to engage or participate in any position or occupation or business enumerated therein whether permanent, temporary or casual, without securing an employment permit from the Mayor of Manila and paying the fees with the exception of those employed in the diplomatic or consular missions of foreign countries or in the technical assistance programs of both the Philippine Government and any foreign Government, and those working in their respective households, and members of religious orders or congregations, sect or denomination who are not paid monetarily or in any kind. Violations of this ordinance is punishable by an imprisonment of not less than 3 months to 6 months or a fine of not less than 100 but not more than 200, or both fine and imprisonment upon conviction. Respondent Hiu Chiong Tsai Pao Ho, who was employed in Manila filed a petition with the CFI of Manila praying for the issuance of the writ of preliminary injunction and restraining order to stop the enforcement of Ordinance 6537 and to declare such as null and void. Respondent avers that the ordinance is discriminatory and violative of the rule in uniformity in taxation; as a police power measure, It is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus, deprived of their rights to life, liberty and property and therefore, violates the due process and equal protection clauses of the Constitution. On May 24, 1968, respondent Judge issued the writ of preliminary injunction and on September 17, 1968 rendered judgment declaring Ordinance No. 6537 null and void and making permanent the writ of preliminary injunction.

Issue: Whether or not Ordinance No. 6537 is null and void because it violates the rule on uniformity of taxation. Held: Yes. The contention that Ordinance No. 6537 is not a purely tax or revenue measure because its principal purpose is regulatory in nature has no merit. While it is true that the first part which requires that the alien shall secure an employment permit from the Mayor involves the exercise of discretion and judgment in the processing and approval or disapproval of applications for employment permits and therefore is regulatory in character the second part which requires the payment of P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic or justification in exacting P50.00 from aliens who have been cleared for employment. It is obvious that the purpose of the ordinance is to raise money under the guise of regulation. Moreover, the P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Ordinance No. 6537 does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion. Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the exercise of the power which has been granted to him by the ordinance. The ordinance in question violates the due process of law and equal protection rule of the Constitution. Requiring a person before he can be employed to get a permit from the City Mayor of Manila who may withhold or refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a means of livelihood. While it is true that the Philippines as a State is not obliged to admit aliens within its territory, once an alien is admitted, he cannot be deprived of life without due process of law. This guarantee includes the means of livelihood. The shelter of protection under the due process and equal protection clause is given to all persons, both aliens and citizens.

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4. American Bible Society vs. City of Manila GR No. L-9637 | April 30, 1957 Facts: American Bible Society is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines through its Philippine agency established in Manila in November, 1898 City of Manila is a municipal corporation with powers that are to be exercised in conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila American Bible Society has been distributing and selling bibles and/or gospel portions throughout the Philippines and translating the same into several Philippine dialect City Treasurer of Manila informed American Bible Society that it was violating several Ordinances for operating without the necessary permit and license, thereby requiring the corporation to secure the permit and license fees covering the period from 4Q 1945-2Q 1953 To avoid closing of its business, American Bible Society paid the City of Manila its permit and license fees under protest American Bible filed a complaint, questioning the constitutionality and legality of the Ordinances 2529 and 3000, and prayed for a refund of the payment made to the City of Manila. They contended: a. They had been in the Philippines since 1899 and were not required to pay any license fee or sales tax b. it never made any profit from the sale of its bibles City of Manila prayed that the complaint be dismissed, reiterating the constitutionality of the Ordinances in question Trial Court dismissed the complaint American Bible Society appealed to the Court of Appeals Issue: WON American Bible Society liable to pay sales tax for the distribution and sale of bibles Ruling: NO Under Sec. 1 of Ordinance 3000, one of the ordinance in question, person or entity engaged in any of the business, trades or occupation enumerated under Sec. 3 must obtain a Mayors permit

and license from the City Treasurer. American Bible Societys business is not among those enumerated However, item 79 of Sec. 3 of the Ordinance provides that all other businesses, trade or occupation not mentioned, except those upon which the City is not empowered to license or to tax P5.00 Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax said business, trade or occupation. 2 provisions of law that may have bearing on this case: a. Chapter 60 of the Revised Administrative Code, the Municipal Board of the City of Manila is empowered to tax and fix the license fees on retail dealers engaged in the sale of books b. Sec. 18(o) of RA 409: to tax and fix the license fee on dealers in general merchandise, including importers and indentors, except those dealers who may be expressly subject to the payment of some other municipal tax. Further, Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For purposes of the tax on retail dealers, general merchandise shall be classified into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A separate license shall be prescribed for each class but where commodities of different classes are sold in the same establishment, it shall not be compulsory for the owner to secure more than one license if he pays the higher or highest rate of tax prescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may be provided by ordinance The only difference between the 2 provisions is the limitation as to the amount of tax or license fee that a retail dealer has to pay per annum As held in Murdock vs. Pennsylvania, The power to impose a license tax on the exercise of these freedoms provided for in the Bill of Rights, is indeed as potent as the power of censorship which this Court has repeatedly struck down. It is not a nominal fee imposed as a regulatory measure to defray the expenses of policing the activities in question. It is in no way apportioned. It is flat license tax levied and collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their exercise. That is almost uniformly recognized as the inherent vice and evil of this flat license tax.

 Further, the case also mentioned that the power to tax the exercise of a privilege is the power to control or suppress its enjoyment. Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance. Those who can tax the privilege of engaging in this form of missionary evangelism can close all its doors to all those who do not have a full purse Under Sec. 27(e) of Commonwealth Act No. 466 or the National Internal Revenue Code, Corporations or associations organized and operated exclusively for religious, charitable, . . . or educational purposes, . . .: Provided, however, That the income of whatever kind and character from any of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be liable to the tax imposed under this Code shall not be taxed The price asked for the bibles and other religious pamphlets was in some instances a little bit higher than the actual cost of the same but this cannot mean that American Bible Society was engaged in the business or occupation of selling said "merchandise" for profit Therefore, the Ordinance cannot be applied for in doing so it would impair American Bible Societys free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs. Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it

5. CITY ASSESSOR OF CEBU VS. ASSOCIATION OF BENEVOLA DE CEBU G.R 152904 June 28, 2007 Velasco, Jr. J.: FACTS: Benevola de Cebu is a non-stock non-profit organization which in 1990, a medical arts building was constructed and in 1998 was issued with a certification classifying the building as commercial. City assessor of Cebu assessed the building with a market value of Php 28,060,520 and on assessed value of Php 9,821,180 at the assessment level of 35% and not 10% which is currently imposed on private respondent herein. Petitioner claimed that the building is used as commercial clinic/spaces for renting out to physicians and thus classified as commercial. Benevola de Cebu contended that the building is used actually, directly and exclusively part of hospital and should have an assessment level of 10% ISSUE: Whether or not the new building is liable to pay the 35% assessment level? RULING: We hold that the new building is an integral part of the hospital and should not be assessed as commercial. Being a tertiary hospital, it is mandated to fully departmentalized and be equipped with the service capabilities needed to support certified medical specialist and other licensed physicians. The fact that they are holding office is a separate building does not take away the essence and nature of their services vis-a-vis the overall operation of the hospital and to its patients. Under the Local Government Code, Sec. 26: All lands, buildings and other improvements thereon actually, directly and exclusively used for hospitals, cultural or scientific purposes and those owned and used by local water districts shall be classified as special.

6. PROVINCE OF ABRA vs. HERNANDO DOCTRINE: To be exempt from realty taxation, there must be proof that the property of a religious institution is actually and directly being used for religious purposes. DUE PROCESS A judge errs in relying solely on the allegation of the petitioner below that its lands are devoted to religious purposes without holding a hearing. FACTS: The Province of Abra sought to tax the properties of the Roman Catholic Bishop, Inc. of Bangued. Judge Hernando dismissed the petition of Abra without hearing its side. Hernando ruled that there is no question that the real properties sought to be taxed by the Province of Abra are properties of the respondent Roman Catholic Bishop of Bangued, Inc. Likewise, there is no dispute that the properties including their produce are actually, directly and exclusively used by the Roman Catholic Bishop of Bangued, Inc. for religious or charitable purposes. The proper remedy of the petitioner is appeal and not this special civil action. ISSUE: Whether or not the properties of the church (in this case) is exempt from taxes. HELD: The Constitution provides that 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. The exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. In this case, there is no showing that the said properties are actually and directly used for religious or charitable uses. Further, there is no merit in Abras contention that the validity of a tax assessment may be questioned before the Local Board of Assessment Appeals and not with a court. 7. ABRA VALLEY COLLEGE v. AQUINO Facts: Abra Valley College, an educational corporation and institution of higher learning duly incorporated with the Securities and Exchange

Commission in 1948, filed a complaint to annul and declare void the "Notice of Seizure' and the "Notice of Sale" of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties. Said "Notice of Seizure"was issued for the satisfaction of the said taxes thereon. It was found during trial that: 1.) the elementary pupils are housed in a two-storey building across the street 2.) that the high school and college students are housed in the main building; 3. )that the Director with his family is in the second floor of the main building; and 4.) that the annual gross income of the school reaches more than one hundred thousand pesos. Petitioner contends that the primary use of the lot and building for educational purposes, and not the incidental use thereof, determines and exemption from property taxes under Section 22 (3), Article VI of the 1935 Constitution. Hence, the seizure and sale of subject college lot and building, which are contrary thereto as well as to the provision of Commonwealth Act No. 470, otherwise known as the Assessment Law, are without legal basis and therefore void.On the other hand, private respondents maintain that the college lot and building in question which were subjected to seizure and sale to answer for the unpaid tax are used: (1) for the educational purposes of the college; (2) as the permanent residence of the President and Director thereof, Mr. Pedro V. Borgonia, and his family including the in-laws and grandchildren; and (3) for commercial purposes because the ground floor of the college building is being used and rented by a commercial establishment, the Northern Marketing Corporation Issue: Whether or not the school is used exclusively for educational purposes and are therefore exempt from taxes? Held: No. But only the first floor leased out for commercial purposes should be taxed. The rest is exempted including the second floor where the director and his family resides because it is considered as incidental use thereof. While the Court allows a more liberal and non-restrictive interpretation of the phrase "exclusively used for educational purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made that

exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise stated, the use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of the main building in the case at bar for residential purposes of the Director and his family, may find justification under the concept of incidental use, which is complimentary to the main or primary purposeeducational, the lease of the first floor thereof to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education. Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school building as well as the lot where it is built, should be taxed, not because the second floor of the same is being used by the Director and his family for residential purposes, but because the first floor thereof is being used for commercial purposes. However, since only a portion is used for purposes of commerce, it is only fair that half of the assessed tax be returned to the school involved. NOTE: Other cases cited: exclusively used for educational purposes" was clarified by the Court in the cases of Herrera vs. Quezon City Board of assessment Appeals, 3 SCRA 186 [1961] and Commissioner of Internal Revenue vs. Bishop of the Missionary District, 14 SCRA 991 [1965], Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is 'not limited to property actually indispensable' therefor (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as in the case of hospitals, "a school for training nurses, a nurses' home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns, and residents' (84 CJS 6621), such as "Athletic fields" including "a firm used for the inmates of the institution. (Cooley on Taxation, Vol. 2, p. 1430).Nueva Segovia v. Provincial Board of Ilocos Norte, It was clarified that the term "used exclusively" considers incidental use also.

8. 9. COMMISSIONER OF INTERNAL REVENUE v. YMCA G.R. No. 124043 October 14, 1998 Panganiban, J. Doctrine: - Rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not exempt from income taxation, even if such income is exclusively used for the accomplishment of its objectives. - A claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, it must expressly be granted in a statute stated in a language too clear to be mistaken. Verba legis non est recedendum where the law does not distinguish, neither should we. - The bare allegation alone that one is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. It must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. - The Court cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be overspilling its role and invading the realm of legislation. The Court, given its limited constitutional authority, cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the political departments of government. Facts: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. YMCA earned income from leasing out a portion of its premises to

small shop owners, like restaurants and canteen operators, and from parking fees collected from non-members. Petitioner issued an assessment to private respondent for deficiency taxes. Private respondent formally protested the assessment. In reply, the CIR denied the claims of YMCA. Issue: Whether or not the income derived from rentals of real property owned by YMCA subject to income tax Held: Yes. Income of whatever kind and character of non-stock nonprofit organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to the tax imposed under the NIRC. Rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not exempt from income taxation, even if such income is exclusively used for the accomplishment of its objectives. Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions (Commissioner of Internal Revenue v. Court of Appeals, 271 SCRA 605, 613, April 18, 1997). Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, the claimed exemption must expressly be granted in a statute stated in a language too clear to be mistaken (Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue and Court of Appeals, G.R. No. 117359, p. 15 July 23, 1998). Verba legis non est recedendum. The law does not make a distinction. The rental income is taxable regardless of whence such income is derived and how it is used or disposed of. Where the law does not distinguish, neither should we. Private respondent also invokes Article XIV, Section 4, par. 3 of the

Constitution, claiming that it is a non-stock, non-profit educational institution whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and income. This is without merit since the exemption provided lies on the payment of property tax, and not on the income tax on the rentals of its property. The bare allegation alone that one is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. For the YMCA to be granted the exemption it claims under the above provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. Unfortunately for respondent, the Court noted that not a scintilla of evidence was submitted to prove that it met the said requisites. The Court appreciates the nobility of respondents cause. However, the Courts power and function are limited merely to applying the law fairly and objectively. It cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be overspilling its role and invading the realm of legislation. The Court regrets that, given its limited constitutional authority, it cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the political departments of government. 10. Deutsche Bank AG Manila Branch vs. Commissioner of Internal Revenue Facts: On October 21, 2003, Petitioner Deutsche Bank AG Manila Branch (Deutsche Bank) remitted after-tax branch profits to its head office in Germany using the 15% branch profits remittance tax (BPRT) prescribed under the Tax Code. On October 4, 2005, believing that it overpaid the BPRT, Deutsche Bank filed

With the BIR Large Taxpayers Assessment and Investigation Division (LTAID) an administrative claim for refund or issuance of a tax credit certificate (TCC) for the difference between the 15% BPRT that it had paid in 2003, and the 10% BPRT rate prescribed under the RP-Germany Tax Treaty; and With the BIR International Tax Affairs Division (ITAD) a request for confirmation of its entitlement to the 10% BPRT rate under the RP-Germany Tax Treaty on the basis of paragraph 6, Article 10, of the RP-Germany Tax Treaty, which provides that where a resident of the Federal Republic of Germany has a branch in the Republic of the Philippines, this branch may be subjected to the BPRT withheld at source in accordance with Philippine law but shall not exceed 10% of the gross amount of the profits remitted by that branch to the head office. On October 18, 2005, Deutsche Bank filed a Petition for Review with the CTA reiterating its claim for refund or issuance of a TCC for the amount of BPRT it had overpaid. The CTA denied the refund on the ground that the tax treaty relief (TTRA) was not filed with the BIR ITAD 15 days prior to the payment of the BPRT and actual remittance of the branch profits to Germany. RMO No. 1-2000 requires that any availment of the tax treaty relief must be preceded by an application with ITAD at least 15 days before the transaction. RMO No. 1-2000 was issued to streamline the processing of the application of tax treaty relief in order to improve efficiency and service to the taxpayers. Further, it also aims to prevent the consequences of an erroneous interpretation and/or application of the treaty provisions (i.e., filing a claim for a tax refund/credit for the overpayment of taxes or for deficiency tax liabilities for underpayment). Citing the Mirant case, the CTA En Banc held that a ruling from the BIRs ITAD must be secured prior to the availment of a preferential tax rate under a tax treaty. Applying the principle of stare decisis et non quieta movere, the CTA En Banc took into consideration that in Minute Resolutions dated 12 November 2007 and 18 February 2008, the Supreme Court denied the Petition filed by Mirant for failure to sufficiently show any reversible error in the assailed judgment. The CTA En Banc ruled that once a case has been decided in one way, any

other case involving exactly the same point at issue should be decided in the same manner. Deutsche Bank argued that, considering that it has met all the conditions under Article 10 of the RP-Germany Tax Treaty, the CTA erred in denying its claim solely on the basis of RMO No. 1-2000. The filing of a TTRA is not a condition precedent to the availment of a preferential tax rate. Deutsche Bank also argued that, contrary to the ruling of the CTA, Mirant is not a binding judicial precedent to deny a claim for refund solely on the basis of noncompliance with RMO No. 1-2000. On the other hand, Respondent CIR countered that the requirement of prior application under RMO No. 1-2000 is mandatory in character. RMO No. 1-2000 was issued pursuant to the unquestioned authority of the Secretary of Finance to promulgate rules and regulations for the effective implementation of the Tax Code. Thus, courts cannot ignore administrative issuances which partake the nature of a statute and have in their favor a presumption of legality. Issues: 1. 2. 3. Ruling: 1. No. The failure to strictly comply with the requirement under RMO No. 1-2000 to file a TTRA 15 days prior to the availment of the provisions of a tax treaty should not deprive a taxpayer of the benefit of a tax treaty. Is the failure to strictly comply with RMO No. 1-2000 sufficient to deprive persons or corporations of the benefit of a tax treaty? Is the decision of the Court in Mirant a binding precedent? Is Deutsche Bank entitled to the refund or TCC?

The crux of the controversy lies in the implementation of RMO No. 12000. The Constitution provides for adherence to the general principles of international law as part of the law of the land. The time-honored international principle of pacta sunt servanda demands the performance in good faith of treaty obligations on the part of the states that enter into the agreement. Every treaty in force is binding upon the parties, and obligations under the treaty must be performed by them in good faith. More importantly, treaties have the force and effect of law in this jurisdiction. Tax treaties are entered into to reconcile the national fiscal legislations of the contracting parties and, in turn, help the taxpayer avoid simultaneous taxations in two different jurisdictions. A state that has contracted valid international obligations is bound to make in its legislations those modifications that may be necessary to ensure the fulfillment of the obligations undertaken. Thus, laws and issuances must ensure that the reliefs granted under tax treaties are accorded to the parties entitled thereto. The BIR must not impose additional requirements that would negate the availment of the reliefs provided for under international agreements. More so, when the RPGermany Tax Treaty does not provide for any pre-requisite for the availment of the benefits under said agreement. Likewise, there is nothing in RMO No. 1-2000 which would indicate a deprivation of entitlement to a tax treaty relief for failure to comply with the 15-day period. The Court said: We recognize the clear intention of the BIR in implementing RMO No. 1-2000, but the CTAs outright denial of a tax treaty relief for failure to strictly comply with the prescribed period is not in harmony with the objectives of the contracting state to ensure that the benefits granted under tax treaties are enjoyed by duly entitled persons or corporations. Bearing in mind the rationale of tax treaties, the period of application for the availment of tax treaty relief as required by RMO No. 1-2000

should not operate to divest entitlement to the relief as it would constitute a violation of the duty required by good faith in complying with a tax treaty. The denial of the availment of tax relief for the failure of a taxpayer to apply within the prescribed period under the administrative issuance would impair the value of the tax treaty. At most, the application for a tax treaty relief from the BIR should merely operate to confirm the entitlement of the taxpayer to the relief. While the consequences sought to be prevented by RMO No. 1-2000 involve an administrative procedure, these may be remedied through other system management processes, e.g., the imposition of a fine or penalty. But we cannot totally deprive those who are entitled to the benefit of a treaty for failure to strictly comply with an administrative issuance requiring prior application for tax treaty relief. 2. No, the Supreme Courts Minute Resolution in Mirant is not a binding precedent. The Court has clarified this matter in Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue (G.R. No. 167330, 18 September 2009, 600 SCRA 413) as follows: It is true that, although contained in a minute resolution, our dismissal of the petition was a disposition of the merits of the case. When we dismissed the petition, we effectively affirmed the CA ruling being questioned. As a result, our ruling in that case has already become final. When a minute resolution denies or dismisses a petition for failure to comply with formal and substantive requirements, the challenged decision, together with its findings of fact and legal conclusions, are deemed sustained. But what is its effect on other cases? With respect to the same subject matter and the same issues concerning the same parties, it constitutes res judicata. However, if other parties or another subject matter (even with the same parties and issues) is involved, the minute resolution is not binding precedent.

Besides, there are substantial, not simply formal, distinctions between a minute resolution and a decision. The constitutional requirement under the first paragraph of Section 14, Article VIII of the Constitution that the facts and the law on which the judgment is based must be expressed clearly and distinctly applies only to decisions, not to minute resolutions. A minute resolution is signed only by the clerk of court by authority of the justices, unlike a decision. It does not require the certification of the Chief Justice. Moreover, unlike decisions, minute resolutions are not published in the Philippine Reports. Finally, the proviso of Section 4(3) of Article VIII speaks of a decision. Indeed, as a rule, this Court lays down doctrines or principles of law which constitute binding precedent in a decision duly signed by the members of the Court and certified by the Chief Justice. Even if we had affirmed the CTA in Mirant, the doctrine laid down in that Decision cannot bind this Court in cases of a similar nature. There are differences in parties, taxes, taxable periods, and treaties involved; more importantly, the disposition of that case was made only through a minute resolution. 3. Yes, Deutsche Bank is entitled to the refund or TCC. RMO No. 1-2000 was implemented to obviate any erroneous interpretation and/ or application of the treaty provisions. The objective of the BIR is to forestall assessments against corporations who erroneously availed themselves of the benefits of the tax treaty but are not legally entitled thereto, as well as to save such investors from the tedious process of claims for a refund due to an inaccurate application of the tax treaty provisions. However, noncompliance with the 15-day period for prior application should not operate to automatically divest entitlement to the tax treaty relief especially in claims for refund. The underlying principle of prior application with the BIR becomes moot in refund cases, such as the present case, where the very basis of the claim is erroneous or there is excessive payment arising from non-availment of a tax treaty relief at the first instance. In this case, petitioner should not be faulted for not complying with RMO No. 1-

2000 prior to the transaction. It could not have applied for a tax treaty relief within the period prescribed, or 15 days prior to the payment of its BPRT, precisely because it erroneously paid the BPRT not on the basis of the preferential tax rate under the RP-Germany Tax Treaty, but on the regular rate as prescribed by the Tax Code. Hence, the prior application requirement becomes illogical. Therefore, the fact that Deutsche Bank invoked the provisions of the RP-Germany Tax Treaty when it requested for a confirmation from the ITAD before filing an administrative claim for a refund should be deemed substantial compliance with RMO No. 1-2000. Section 229 of the Tax Code provides the taxpayer a remedy for tax recovery when there has been an erroneous payment of tax. The outright denial of petitioners claim for a refund, on the sole ground of failure to apply for a tax treaty relief prior to the payment of the BPRT, would defeat the purpose of Section 229. It is significant to emphasize that petitioner applied though belatedly for a tax treaty relief, in substantial compliance with RMO No. 1-2000. A ruling by the BIR would have confirmed whether petitioner was entitled to the lower rate of 10% BPRT pursuant to the RP-Germany Tax Treaty. Nevertheless, even without the BIR ruling, the CTA Second Division found that based on the evidence presented, both documentary and testimonial, petitioner was able to establish the following facts: 1. 2. That petitioner is a branch office in the Philippines of Deutsche Bank AG, a corporation organized and existing under the laws of the Federal Republic of Germany; That on October 21, 2003, it filed its Monthly Remittance Return of Final Income Taxes Withheld under BIR Form No. 1601-F and remitted the amount of P67,688,553.51 as BPRT with the BIR; and That on October 29, 2003, the Bangko Sentral ng Pilipinas having issued a clearance, petitioner remitted to Frankfurt Head Office the amount of Euro5,174,847.38 (or PhP330,175,961.88).

3.

Likewise, both the administrative and the judicial actions were filed within the two-year prescriptive period pursuant to Section 229 of the Tax Code. Clearly, there is no reason to deprive petitioner of the benefit of a preferential tax rate of 10% BPRT in accordance with the RP-Germany Tax Treaty.