12.

PROGRESSIVE DEVT CORP VS QUEZON CITY

Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where privately owned and
operated public markets to pay 10% of the gross receipts from stall rentals to the City, as supervision
fee. Such ordinance was amended by Ordinance 9236 (1972), which imposed a 5% tax on gross receipts
on rentals or lease of space in privately-owned public markets in Quezon City. Progressive Development
Corp., owned and operator of Farmers Market and Shopping Center, filed a petition for prohibition
against the city on the ground that the supervision fee or license tax imposed is in reality a tax on
income the city cannot impose.

Issue: Whether the supervision fee / license tax is a tax on income.

Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on income, nor a city income
tax(distinguished from the national income tax by the Tax Code) within the meaning of Section 2 (g) of
the LocalAutonomy Act, but rather a license tax or fee for the regulation of business in which the
company is engaged. To be considered a license fee, the imposition must relate to an occupation or
activity that so engages the public interest in health, morals, safety and development as to require
regulations for the protection and promotion of such public interest; the imposition must also bear a
reasonable relation to the probable expenses of the regulation, taking into account not only the costs of
direct regulation but also its incidental consequences as well. The gross receipts from stall rentals have
been used only as a basis for computing the fees or taxes due to the city to cover the latters
administrative expenses. The use of the gross amount of stall rentals, as basis for the determination of
the collectible amount of license tax, does not by itself convert or render the license tax into a
prohibited city tax on income. For ordinarily, the higher the amount of stall rentals, the higher the
aggregate volume of foodstuffs and related items sold in the privately owned market; and the higher the
volume of goods sold in such market, the greater extent and frequency of inspection and supervision
that may be reasonably required in the interest of the buying public.




14. CIR VS LEDNICKY

Facts: The respondents, V. E. Lednicky and Maria Valero Lednicky, are husband and wife, respectively,
both American citizens residing in the Philippines, and have derived all their income from Philippine
sources for the taxable years in question.
On March, 1957, filed their ITR for 1956, reporting gross income of P1,017,287.65 and a net income of P
733,809.44. On March 1959, file an amended claimed deduction of P 205,939.24 paid in 1956 to the
United States government as federal income tax of 1956.

ISSUE:
Whether a citizen of the United States residing in the Philippines, who derives wholly from sources
within the Philippines, may deduct his gross income from the income taxes he has paid to the United
States government for the said taxable year?


HELD:
An alien resident who derives income wholly from sources within the Philippines may not deduct from
gross income the income taxes he paid to his home country for the taxable year. The right to deduct
foreign income taxes paid given only where alternative right to tax credit exists.

Section 30 of the NIRC, Gross Income Par. C (3): Credits against tax per taxes of foreign countries.

If the taxpayer signifies in his return his desire to have the benefits of this paragraph, the tax imposed by
this shall be credited with: Paragraph (B), Alien resident of the Philippines; and, Paragraph C (4),
Limitation on credit.

An alien resident not entitled to tax credit for foreign income taxes paid when his income is derived
wholly from sources within the Philippines.

Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity. In the present case, although the taxpayer would have to pay two taxes on the
same income but the Philippine government only receives the proceeds of one tax, there is no
obnoxious double taxation.


16. VICTORIA MILLING VS MUNICIPALITY OF VICTORIA

Facts: Ordinance 1 (1956) was approved by the municipal council of Victorias by way of an amendment
to 2
municipal ordinances separately imposing license taxes on operators of sugar centrals and sugar
refineries.
The changes were: (1) with respect to sugar centrals, by increasing the rates of license taxes; and (2) as
to
sugar refineries, by increasing the rates of license taxes as well as teh range of graduated schedule of
annual
output capacity. Victorias Milling questioned the validity of Ordinance 1 as it, among others, allegedly
singled
out Victorias Milling Co. since it is the only operator of a sugar central and a sugar refinery within the
jurisdiction of the municipality.
Plaintiff contended that it constitutes double taxation. Its reason is that in computing the amount of
taxes to be paid by the sugar refinery the cost of the raw sugar coming from the sugar central is not
deducted; ergo, plaintiff is taxed twice on the raw sugar.
Issue: W/N it constitutes double taxation
Held: Double taxation has been otherwise described as "direct duplicate taxation." 48 For double
taxation to exist, "the same property must be taxed twice, when it should be taxed but once." 49 Double
taxation has also been "defined as taxing the same person twice by the same jurisdiction for the same
thing." 50 As stated in Manila Motor Company, Inc. vs. Ciudad de Manila, 51 there is double taxation
"cuando la misma propiedad se sujeta a dos impuestos por la misma entidad o Gobierno, para el mismo
fin y durante el mismo periodo de tiempo."

With the foregoing precepts in mind, we find no difficulty in saying that plaintiff's argument on double
taxation does not inspire assent. First. The two taxes cover two different objects. Section 1 of the
ordinance taxes a person operating sugar centrals or engaged in the manufacture of centrifugal sugar.
While under Section 2, those taxed are the operators of sugar refinery mills. One occupation or business
is different from the other. Second. The disputed taxes are imposed on occupation or business. Both
taxes are not on sugar. The amount thereof depends on the annual output capacity of the mills
concerned, regardless of the actual sugar milled. Plaintiff's argument perhaps could make out a point if
the object of taxation here were the sugar it produces, not the business of producing it.

There is no double taxation.

For the reasons given

The judgment under review is hereby reversed; and

Judgment is hereby rendered: (a) declaring valid and subsisting Ordinance No. 1, series of 1956, of the
Municipality of Victorias, Province of Negros Occidental; and (b) dismissing plaintiff's complaint as
supplemented and amended. Costs against plaintiff. So ordered.


18. CITY OF MANILA VS COCA COLA BOTTLERS

FACTS:
Respondent paid the local business tax only as a manufacturers as it was expressly exempted from the
business tax under a different section and which applied to businesses subject to excise, VAT or
percentage tax under the Tax Code. The City of Manila subsequently amended the ordinance by deleting
the provision exempting businesses under the latter section if they have already paid taxes under a
different section in the ordinance. This amending ordinance was later declared by the Supreme Court
null and void. Respondent then filed a protest on the ground of double taxation. RTC decided in favor of
Respondent and the decision was received by Petitioner on April 20, 2007. On May 4, 2007, Petitioner
filed with the CTA a Motion for Extension of Time to File Petition for Review asking for a 15-day
extension or until May 20, 2007 within which to file its Petition. A second Motion for Extension was filed
on May 18, 2007, this time asking for a 10-day extension to file the Petition. Petitioner finally filed the
Petition on May 30, 2007 even if the CTA had earlier issued a resolution dismissing the case for failure to
timely file the Petition.

Issue: Does the enforcement of the latter section of the tax ordinance constitute double taxation

Held: 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.
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.

There is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of
the tax ordinance 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.


20. COMMISIONER VS SC JOHNSON AND SONS

Facts: Respondent, JOHNSON AND SON, INC a domestic corporation organized and operating under the
Philippine laws, entered into a license agreement with SC Johnson and Son, United States of America
(USA), a non-resident foreign corporation based in the U.S.A. pursuant to which the [respondent] was
granted the right to use the trademark, patents and technology owned by the latter including the right
to manufacture, package and distribute the products covered by the Agreement and secure assistance in
management, marketing and production from SC Johnson and Son, U. S. A.
The said License Agreement was duly registered with the Technology Transfer Board of the Bureau of
Patents, Trade Marks and Technology Transfer under Certificate of Registration No. 8064 . For the use of
the trademark or technology, SC JOHNSON AND SON, INC was obliged to pay SC Johnson and Son, USA
royalties based on a percentage of net sales and subjected the same to 25% withholding tax on royalty
payments which respondent paid for the period covering July 1992 to May 1993.00 On October 29,
1993, SC JOHNSON AND SON, USA filed with the International Tax Affairs Division (ITAD) of the BIR a
claim for refund of overpaid withholding tax on royalties arguing that, since the agreement was
approved by the Technology Transfer Board, the preferential tax rate of 10% should apply to the
respondent. Respondent submits that royalties paid to SC Johnson and Son, USA is only subject to 10%
withholding tax pursuant to the most-favored nation clause of the RP-US Tax Treaty in relation to the
RP-West Germany Tax Treaty. The Internal Tax Affairs Division of the BIR ruled against SC Johnson and
Son, Inc. and an appeal was filed by the former to the Court of tax appeals.
The CTA ruled against CIR and ordered that a tax credit be issued in favor of SC Johnson and Son, Inc.
Unpleased with the decision, the CIR filed an appeal to the CA which subsequently affirmed in toto the
decision of the CTA. Hence, an appeal on certiorari was filed to the SC.
Issue: w/n CA erred in affirming the decision of CTA

Held:
Yes.
We are unable to sustain the position of the Court of Tax Appeals, which was upheld by the Court of
Appeals, that the phrase paid under similar circumstances in Article 13 (2) (b), (iii) of the RP-US Tax
Treaty should be interpreted to refer to payment of royalty, and not to the payment of the tax, for the
reason that the phrase paid under similar circumstances is followed by the phrase to a resident of a
third state. The respondent court held that Words are to be understood in the context in which they
are used, and since what is paid to a resident of a third state is not a tax but a royalty logic instructs
that the treaty provision in question should refer to royalties of the same kind paid under similar
circumstances.
Double taxation usually takes place when a person is resident of a contracting state and derives income
from, or owns capital in, the other contracting state and both states impose tax on that income or
capital. In order to eliminate double taxation, a tax treaty resorts to several methods. First, it sets out
the respective rights to tax of the state of source or situs and of the state of residence with regard to
certain classes of income or capital. In some cases, an exclusive right to tax is conferred on one of the
contracting states; however, for other items of income or capital, both states are given the right to tax,
although the amount of tax that may be imposed by the state of source is limited.
methods of eliminating double taxation:

First, it sets out the respective rights to tax of the state of source or situs and of the state of
residence with regard to certain classes of income or capital. In some cases, an exclusive right to tax is
conferred on one of the contracting states; however, for other items of income or capital, both states
are given the right to tax, although the amount of tax that may be imposed by the state of source is
limited.

The second method for the elimination of double taxation applies whenever the state of source
is given a full or limited right to tax together with the state of residence. In this case, the treaties make it
incumbent upon the state of residence to allow relief in order to avoid double taxation. In this case, the
treaties make it incumbent upon the state of residence to allow relief in order to avoid double taxation.

methods of relief under the second method:

There are two methods of reliefthe exemption method and the credit method.
Exemption method, the income or capital which is taxable in the state of source or situs is
exempted in the state of residence, although in some instances it may be taken into account in
determining the rate of tax applicable to the taxpayers remaining income or capital.
Credit method, although the income or capital which is taxed in the state of source is still
taxable in the state of residence, the tax paid in the former is credited against the tax levied in the latter.

The basic difference between the two methods is that in the exemption method, the focus is on
the income or capital itself, whereas the credit method focuses upon the tax.