Republic of the Philippines, et al. v. City of Kidapawan, et al.

Gr. No 166651, December 9, 2005

FACTS:
In order to reduce the country's dependence on imported energy supplies and accelerate the
development of geothermal resources, then President Ferdinand E. Marcos issued Presidential
Decree No. 1442 which allowed the government to enter into service contracts for financial,
technical, management or other forms of assistance with qualified domestic and foreign entities,
for the exploration, development, exploitation, or utilization of the country's geothermal resources.
On January 30, 1992, then President Corazon C. Aquino issued Proclamation No. 853 which
excluded certain portions of the land embraced in the Mt. Apo National Park and declared the same
as geothermal reservation under the administration of the PNOC, now referred to as the MAGRA.
On March 24, 1992, the government through the Office of Energy Affairs (now Department of
Energy, DOE) entered into a service contract with PNOC-EDC, a government owned or controlled
corporation created and existing under the Corporation Code, to exclusively conduct geothermal
operations within the MAGRA. Under the contract, the PNOCEDC would furnish the necessary
services, technology and financing for the geothermal operations subject to the direct supervision
of the DOE. Thereafter, PNOC-EDC built a 104megawatt power plant within the MAGRA which
produces electricity through turbines using steam extracted from the MAGRA as fuel.
Subsequently, the City Treasurer of Kidapawan, Cotabato notified PNOC-EDC of its tax
delinquency after which, he issued a warrant of levy on the 701hectare MAGRA for failure to pay
real property taxes, covering the tax period from 1993-2002. Thereafter, he sent a notice of sale of
delinquent real property to PNOCEDC declaring that delinquent real property will be sold through
public auction.
PNOCEDC thus filed a petition for prohibition with prayer for the issuance of a writ of preliminary
injunction and/or temporary restraining order which sought to enjoin the respondents from issuing
assessments or notice of delinquency and from proceeding with the public auction of the
Geothermal Reservation Area.
On May 14, 2003, the Regional Trial Court of Kidapawan City, Branch 23, issued an Order
directing respondents to desist from proceeding with the public auction on the ground that the same
is part of the public domain and thus inalienable. The order was reiterated on June 3, 2003, and
the respondents were again directed to desist from enforcing the warrant of levy and from selling
at public auction the subject property until the case is finally resolved or upon further order.
The trial court found that PNOC-EDC is not exempt from paying the real property taxes and that
the MAGRA is part of the Mt. Apo National Park which has not been reclassified as alienable
agricultural land. Thus, it could not be sold at public auction. However, the trial court ordered that
the improvements on the subject land, not being in the nature of public dominion, may be validly
levied and sold at public auction to satisfy the payment of realty tax delinquencies.

Issue:
Whether Republic Act No. 7160 or the Local Government Code (LGC) withdrew the exemption
under the service contract

Held:
Yes, the court ruled that PNOC-EDC is a government owned or controlled corporation conferred
by law with corporate powers. Under its charter, no tax exemptions were granted. Even if PNOC-
EDC was awarded exemptions in its charter, the same were withdrawn by the LGC.
The power to tax and to grant tax exemptions is vested in the Congress and, to a certain extent, in
the local legislative bodies. Under Section 28(4), Article VI of the Constitution, no law granting
any tax exemption shall be passed without the concurrence of a majority of all Members of
Congress. Thus the exemption provided in the service contract cannot be given effect because the
DOE, representing the government in the execution of the contract, has no authority to grant the
same.
Moreover, the Local Government Code specifically enumerates the entities exempt from real
property taxation and PNOC-EDC is not one of them.

Davao Gulf v CIR

Gr no 117359, July 23, 1998

Facts:
Petitioner is a licensed forest concessionaire possessing a Timber License
Agreement granted by the Ministry of Natural Resources (now Department of Environment and
Natural
Resources). From July 1, 1980 to January 31, 1982 petitioner purchased, from various oil
companies, refined and manufactured mineral oils as well as motor and diesel fuels, which it used
exclusively for the exploitation and operation of its forest concession. Said oil companies paid the
specific taxes imposed, under Sections 153 and 156 of the 1977 National Internal Revenue Code
(NIRC), on the sale of said products. Being included in the purchase price of the oil products, the
specific taxes paid by the oil companies were eventually passed on to the user On December 13,
1982, petitioner filed before Respondent Commissioner of Internal Revenue (CIR) a claim for
refund in the amount of P120, 825.11, representing 25% of the specific taxes actually paid on the
above-mentioned fuels and oils that were used by petitioner in its operations as forest
concessionaire. The claim was based on Insular Lumber Co. vs. Court of Tax Appeals and Section
5 of RA 1435.
It is an unquestioned fact that petitioner complied with the procedure for refund, including the
submission of proof of the actual use of the aforementioned oils in its forest concession. Petitioner,
in support of its claim for refund, submitted to the CIR the affidavits of its general manager, the
president of the Philippine Wood Products Association, and three disinterested persons, all
attesting that the said manufactured diesel and fuel oils were actually used in the exploitation and
operation of its forest concession.
On January 20, 1983, petitioner filed at the CTA a petition for review docketed as CTA Case No.
3574. On June 21, 1994, the CTA rendered its decision finding petitioner entitled to a partial refund
of specific taxes the latter had paid in the reduced amount of P2,923.15. The CTA ruled that the
claim on purchases of lubricating oil (from July 1, 1980 to January 19, 1981) and on manufactured
oils other than lubricating oils (from July 1, 1980 to January 4, 1981) had prescribed. Disallowed
on the ground that they were not included in the original claim filed before the CIR were the claims
for refund on purchases of manufactured oils from January 1, 1980 to June 30, 1980 and from
February 1, 1982 to June 30, 1982. In regard to the other purchases, the CTA granted the claim,
but it computed the refund based on rates deemed paid under RA 1435, and not on the higher rates
actualhy paid by petitioner under the NIRC.
Insisting that the basis for computing the refund should be the increased rates prescribed by
Sections
153 and 156 of the NIRC, petitioner elevated the matter to the Court of Appeals.

Issue:
Whether to rule that the basis for computation of the refunded taxes should be Sections 1 and 2 of
R.A. 1435 rather than Section 153 and 156 of the National Internal Revenue Code is unfair,
erroneous, arbitrary, inequitable and oppressive.

Held:
No. the court disagree on petitioner’s assertion that "equity and justice demand that the
computation of the tax refunds be based on actual amounts paid under Sections 153 and 156 of the
NIRC." According to an eminent authority on taxation, "there is no tax exemption solely on the,
ground of equity."

Tolentino v Secretary of Finance

235 SCRA 630, 249 SCRA 628

Facts:
The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-
Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had
originated in the House of Representatives, it was not passed by the Senate but was simply
consolidated with the Senate version (S. No. 1630) in the Conference Committee to produce the
bill which the President signed into law.

It appears that on various dates between July 22, 1992 and August 31, 1993, several bills were
introduced in the House of Representatives seeking to amend certain provisions of the National
Internal Revenue Code relative to the value-added tax or VAT. These bills were referred to the
House Ways and Means Committee which recommended for approval a substitute measure, H.
No. 11197.The bill (H. No. 11197) was considered on second reading starting November 6, 1993
and, on November 17, 1993, it was approved by the House of Representatives after third and final
reading. It was sent to the Senate on November 23, 1993 and later referred by that body to its
Committee on Ways and Means. On February 7, 1994, the Senate Committee submitted its report
recommending approval of S. No. 1630. It was stated that the bill was being submitted "in
substitution of Senate Bill No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No.
11197."

On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates
on the bill and approved it on second reading on March 24, 1994. On the same day, it approved
the bill on third reading by the affirmative votes of 13 of its members, with one abstention.
H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee
which, after meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill
No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the
attached copy of the bill as reconciled and approved by the conferees."

The Conference Committee bill, was thereafter approved by the House of Representatives on April
27, 1994 and by the Senate on May 2, 1994. The enrolled bill was then presented to the President
of the Philippines who, on May 5, 1994, signed it. It became Republic Act No. 7716. On May 12,
1994, Republic Act No. 7716 was published in two newspapers of general circulation and, on May
28, 1994, it took effect, although its implementation was suspended until June 30, 1994 to allow
time for the registration of business entities. It would have been enforced on July 1, 1994 but its
enforcement was stopped because the Court, by the vote of 11 to 4 of its members, granted a
temporary restraining order on June 30, 1994.

Issue:

whether the amendment of 103 of the NIRC is fairly embraced in the title of Republic Act No.
7716, although no mention is made therein of P.D. No. 1590 as among those which the statute
amends.

Held:

Yes. Since the title states that the purpose of the statute is to expand the VAT system, and one way
of doing this is to widen its base by withdrawing some of the exemptions granted before. To insist
that P.D. No. 1590 be mentioned in the title of the law, in addition to 103 of the NIRC, in which it
is specifically referred to, would be to insist that the title of a bill should be a complete index of its
content. The constitutional requirement that every bill passed by Congress shall embrace only one
subject which shall be expressed in its title is intended to prevent surprise upon the members of
Congress and to inform the people of pending legislation so that, if they wish to, they can be heard
regarding it. Republic Act No. 7716 expressly amends PAL's franchise (P.D. No. 1590) by
specifically excepting from the grant of exemptions from the VAT PAL's exemption under P.D.
No. 1590. This is within the power of Congress to do under Art. XII, § 11 of the Constitution,
which provides that the grant of a franchise for the operation of a public utility is subject to
amendment, alteration or repeal by Congress when the common good so requires.

PLDT v City of Davao

Gr no. 143867, August 22, 2001

Facts:
On January 1999, petitioner Philippine Long Distance Telephone Co., Inc. (PLDT) applied for a
Mayor's Permit to operate its Davao Metro Exchange. Respondent City of Davao withheld action
on the application pending payment by petitioner of the local franchise tax in the amount of P3,
681,985.72 for the first to the fourth quarter of 1999. 2 In a letter dated May 31, 1999, 3 petitioner
protested the assessment of the local franchise tax and requested a refund of the franchise tax paid
by it for the year 1997 and the first to the third quarters of 1998.
Petitioner contended that it was exempt from the payment of franchise tax based on an opinion of
the Bureau of Local Government Finance (BLGF). It appears that RA 7082 further amending Act
No. 3436 which granted to PLDT a franchise to install, operate and maintain a telephone system
throughout the Philippine Islands was approved on August 3, 1991. Section 12 of said franchise,
likewise, contains the "in lieu of all taxes" proviso. In this connection, Section 23 of RA 7925,
which was approved on March 1, 1995, provides for the equality of treatment in the
telecommunications industry. On the basis of the aforequoted Section 23 of RA 7925, PLDT as a
telecommunications franchise holder becomes automatically covered by the tax exemption
provisions of RA 7925, which took effect on March 16, 1995.
Accordingly, PLDT shall be exempt from the payment of franchise and business taxes imposable
by LGUs under Sections 137 and 143 (sic), respectively, of the LGC, upon the effectivity of RA
7925 on March 16, 1995. However, PLDT shall be liable to pay the franchise and business taxes
on its gross receipts realized from January 1, 1992 up to March 15, 1995, during which period
PLDT was not enjoying the "most favoured clause" proviso of RA 7025. In a letter dated
September 27, 1999, respondent Adelaida B. Barcelona, City Treasurer of Davao, denied the
protest and claim for tax refund of petitioner, citing the legal opinion of the City Legal Officer of
Davao and Art. 10, §1 of Ordinance No. 230, Series of 1991, as amended by Ordinance No. 519,
Series of 1992. Petitioner received respondent City Treasurer's order of denial on October 1, 1999.
On November 3, 1999, it filed a petition in the Regional Trial Court of Davao seeking a reversal
of respondent City Treasurer's denial of petitioner's protest and the refund of the franchise tax paid
by it for the year 1998 in the amount of P2,580,829.23. The petition was filed pursuant to §§195
and 196 of the Local Government Code (R.A. No. 7160). No claim for refund of franchise taxes
paid in 1997 was made as the same had already prescribed under §196 of the LGC, which provides
that claims for the refund of taxes paid under it must be made within two (2) years from the date
of payment of such taxes.

Issue:
whether, after the withdrawal of its exemption by virtue of §137 of the LGC, petitioner has again
become entitled to exemption from local franchise tax.

Held:
The tax exemption must be expressed in the statute in clear language that leaves no doubt of the
intention of the legislature to grant such exemption. And, even if it is granted, the exemption must
be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
The fact is that the term "exemption" in §23 is too general. A cardinal rule in statutory construction
is that legislative intent must be ascertained from a consideration of the statute as a whole and not
merely of a particular provision. For, taken in the abstract, a word or phrase might easily convey
a meaning which is different from the one actually intended. A general provision may actually
have a limited application if read together with other provisions. R.A. No. 7925 is thus a legislative
enactment designed to set the national policy on telecommunications and provide the structures to
implement it to keep up with the technological advances in the industry and the needs of the public.
The thrust of the law is to promote gradually the deregulation of the entry, pricing, and operations
of all public telecommunications entities and thus promote a level playing field in the
telecommunications industry. There is nothing in the language of §23 nor in the proceedings of
both the House of Representatives and the Senate in enacting R.A. No. 7925 which shows that it
contemplates the grant of tax exemptions to all telecommunications entities, including those whose
exemptions had been withdrawn by the LGC.
What this Court said in Asiatic Petroleum Co. v. Llanes applies mutatis mutandis to this case:
"When exemption is claimed, it must be shown indubitably to exist. At the outset, every
presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of
the concession are too explicit to admit fairly of any other construction that the proposition can be
supported." In this case, the word "exemption" in §23 of R.A. No. 7925 could contemplate
exemption from certain regulatory or reporting requirements, bearing in mind the policy of the
law. It is noteworthy that, in holding Smart and Globe exempt from local taxes, the BLGF did not
base its opinion on §23 but on the fact that the franchises granted to them after the effectivity of
the LGC exempted them from the payment of local franchise and business taxes.

Philippine Acetylene v Commissioner

20 SCRA 1056

Facts:
The petitioner is a corporation engaged in the manufacture and sale of oxygen and acetylene gases.
During the period from June 2, 1953 to June 30, 1958, it made various sales of its products to the
National Power Corporation, an agency of the Philippine Government, and to the Voice of
America an agency of the United States Government. The sales to the NPC amounted to
P145,866.70, while those to the VOA amounted to P1,683, on account of which the respondent
Commission of Internal Revenue assessed against, and demanded from, the petitioner the payment
of P12,910.60 as deficiency sales tax and surcharge, pursuant to the provisions of the National
Internal Revenue Code. The petitioner denied liability for the payment of the tax on the ground
that both the NPC and the VOA are exempt from taxation. It asked for a reconsideration of the
assessment and, failing to secure one, appealed to the Court of Tax Appeals. The court ruled that
the tax on the sale of articles or goods in section 186 of the Code is a tax on the manufacturer and
not on the buyer with the result that the "petitioner Philippine Acetylene Company, the
manufacturer or producer of oxygen and acetylene gases sold to 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 of all taxes." With respect to the sales made to
the VOA, the court held that goods purchased by the American Government or its agencies from
manufacturers or producers are exempt from the payment of the sales tax under the agreement
between the Government of the Philippines and that of the United States, provided the purchases
are supported by certificates of exemption, and since purchases amounting to only P558, out of a
total of P1,683, were not covered by certificates of exemption, only the sales in the sum of P558
were subject to the payment of tax. Accordingly, the assessment was revised and the petitioner's
liability was reduced from P12,910.60, as assessed by the respondent commission, to P12,812.16.

Issue:
Whether petitioner is not liable for the payment of tax on the sales it made to the NPC and the
VOA because both entities are exempt from taxation.

Held:
With respect to NPC, the court ruled that 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 price and the tax separately and defining taxable gross receipts as the amount received
less the amount of the tax added, merely avoids payment by the seller of a tax on the amount of
the tax. The effect is still the same, namely, that the purchaser does not pay the tax. He pays or
may pay the seller more for the goods because of the seller's obligation, but that is all and the
amount added because of the tax is paid to get the goods and for nothing else. But the tax burden
may not even be shifted to the purchaser at all. A decision to absorb the burden of the tax is largely
a matter of economics. Then it can no longer be contended that a sales tax is a tax on the purchaser.
We therefore hold that the tax imposed by section 186 of the National Internal Revenue Code is a
tax on the manufacturer or producer and not a tax on the purchaser except probably in a very
remote and inconsequential sense. Accordingly its levy on the sales made to tax-exempt entities
like the NPC is permissible. with respect to sales made to the VOA, the court ruled that only sales
made "for exclusive use in the construction, maintenance, operation or defense of the bases," in a
word, only sales to the quartermaster, are exempt under article V from taxation. Sales of goods to
any other party even if it be an agency of the United States, such as the VOA, or even to the
quartermaster but for a different purpose, are not free from the payment of the tax. On the other
hand, article XVIII exempts from the payment of the tax sales made within the base by (not sales
to) commissaries and the like in recognition of the principle that a sales tax is a tax on the seller
and not on the purchaser. It is a familiar learning in the American law of taxation that tax
exemption must be strictly construed and that the exemption will not be held to be conferred unless
the terms under which it is granted clearly and distinctly show that such was the intention of the
parties.

Republic of the Philippines, et al. v. City of Kidapawan, et al.

Gr. No 166651, December 9, 2005

FACTS:
In order to reduce the country's dependence on imported energy supplies and accelerate the
development of geothermal resources, then President Ferdinand E. Marcos issued Presidential
Decree No. 1442 which allowed the government to enter into service contracts for financial,
technical, management or other forms of assistance with qualified domestic and foreign entities,
for the exploration, development, exploitation, or utilization of the country's geothermal resources.
On January 30, 1992, then President Corazon C. Aquino issued Proclamation No. 853 which
excluded certain portions of the land embraced in the Mt. Apo National Park and declared the same
as geothermal reservation under the administration of the PNOC, now referred to as the MAGRA.
On March 24, 1992, the government through the Office of Energy Affairs (now Department of
Energy, DOE) entered into a service contract with PNOC-EDC, a government owned or controlled
corporation created and existing under the Corporation Code, to exclusively conduct geothermal
operations within the MAGRA. Under the contract, the PNOCEDC would furnish the necessary
services, technology and financing for the geothermal operations subject to the direct supervision
of the DOE. Thereafter, PNOC-EDC built a 104megawatt power plant within the MAGRA which
produces electricity through turbines using steam extracted from the MAGRA as fuel.
Subsequently, the City Treasurer of Kidapawan, Cotabato notified PNOC-EDC of its tax
delinquency after which, he issued a warrant of levy on the 701hectare MAGRA for failure to pay
real property taxes, covering the tax period from 1993-2002. Thereafter, he sent a notice of sale of
delinquent real property to PNOCEDC declaring that delinquent real property will be sold through
public auction.
PNOCEDC thus filed a petition for prohibition with prayer for the issuance of a writ of preliminary
injunction and/or temporary restraining order which sought to enjoin the respondents from issuing
assessments or notice of delinquency and from proceeding with the public auction of the
Geothermal Reservation Area.
On May 14, 2003, the Regional Trial Court of Kidapawan City, Branch 23, issued an Order
directing respondents to desist from proceeding with the public auction on the ground that the same
is part of the public domain and thus inalienable. The order was reiterated on June 3, 2003, and
the respondents were again directed to desist from enforcing the warrant of levy and from selling
at public auction the subject property until the case is finally resolved or upon further order.
The trial court found that PNOC-EDC is not exempt from paying the real property taxes and that
the MAGRA is part of the Mt. Apo National Park which has not been reclassified as alienable
agricultural land. Thus, it could not be sold at public auction. However, the trial court ordered that
the improvements on the subject land, not being in the nature of public dominion, may be validly
levied and sold at public auction to satisfy the payment of realty tax delinquencies.

Issue:
whether, after the withdrawal of its exemption by virtue of §137 of the LGC, petitioner has again
become entitled to exemption from local franchise tax.

Held:
The tax exemption must be expressed in the statute in clear language that leaves no doubt of the
intention of the legislature to grant such exemption. And, even if it is granted, the exemption must
be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
The fact is that the term "exemption" in §23 is too general. A cardinal rule in statutory construction
is that legislative intent must be ascertained from a consideration of the statute as a whole and not
merely of a particular provision. For, taken in the abstract, a word or phrase might easily convey
a meaning which is different from the one actually intended. A general provision may actually
have a limited application if read together with other provisions. R.A. No. 7925 is thus a legislative
enactment designed to set the national policy on telecommunications and provide the structures to
implement it to keep up with the technological advances in the industry and the needs of the public.
The thrust of the law is to promote gradually the deregulation of the entry, pricing, and operations
of all public telecommunications entities and thus promote a level playing field in the
telecommunications industry. There is nothing in the language of §23 nor in the proceedings of
both the House of Representatives and the Senate in enacting R.A. No. 7925 which shows that it
contemplates the grant of tax exemptions to all telecommunications entities, including those whose
exemptions had been withdrawn by the LGC.
What this Court said in Asiatic Petroleum Co. v. Llanes applies mutatis mutandis to this case:
"When exemption is claimed, it must be shown indubitably to exist. At the outset, every
presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of
the concession are too explicit to admit fairly of any other construction that the proposition can be
supported." In this case, the word "exemption" in §23 of R.A. No. 7925 could contemplate
exemption from certain regulatory or reporting requirements, bearing in mind the policy of the
law. It is noteworthy that, in holding Smart and Globe exempt from local taxes, the BLGF did not
base its opinion on §23 but on the fact that the franchises granted to them after the effectivity of
the LGC exempted them from the payment of local franchise and business taxes.

Abra Valley College v Aquino

162 SCRA 106

Facts:
Petitioner, an educational corporation and institution of higher learning duly incorporated with the
Securities and Exchange Commission in 1948, filed a complaint on July 10, 1972 in the court a
quo 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 amounting to
P5,140.31. Said "Notice of Seizure" of the college lot and building covered by Original Certificate
of Title No. Q83 duly registered in the name of petitioner, plaintiff below, on July 6, 1972, by
respondents Municipal Treasurer and Provincial Treasurer, defendants below, was issued for the
satisfaction of the said taxes thereon. The "Notice of Sale" was caused to be served upon the
petitioner by the respondent treasurers on July 8, 1972 for the sale at public auction of said college
lot and building, which sale was held on the same date. Dr. Paterno Millare, then Municipal Mayor
of Bangued, Abra, offered the highest bid of P6,000.00 which was duly accepted. The certificate
of sale was correspondingly issued to him.
On August 10, 1972, the respondent Paterno Millare (now deceased) filed through counstel a
motion to dismiss the complaint.
On August 23, 1972, the respondent Provincial Treasurer and Municipal Treasurer, through then
Provincial Fiscal Loreto C. Roldan, filed their answer to the complaint. This was followed by an
amended answer on
August 31, 1972.
On September 1, 1972 the respondent Paterno Millare filed his answer. On October 12, 1972, with
the aforesaid sale of the school premises at public auction, the respondent Judge, Hon. Juan P.
Aquino of the Court of First Instance of Abra, Branch I, ordered the respondents provincial and
municipal treasurers to deliver to the Clerk of Court the proceeds of the auction sale. Hence, on
December 14, 1972, petitioner, through Director Borgonia, deposited with the trial court the sum
of P6,000.00 evidenced by PNB Check No. 904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted and embodied by the trial
court in its questioned decision.
Aside from the Stipulation of Facts, the trial court among others, found the following: (a) that the
school is recognized by the government and is offering Primary, High School and College Courses,
and has a school population of more than one thousand students all in all; (b) that it is located right
in the heart of the town of Bangued, a few meters from the plaza and about 120 meters from the
Court of First Instance building; (c) that the elementary pupils are housed in a twostorey building
across the street; (d) that the high school and college students are housed in the main building; (e)
that the Director with his family is in the second floor of the main
building; and (f) that the annual gross income of the school reaches more than one hundred
thousand pesos.
From all the foregoing, the only issue left for the Court to determine and as agreed by the parties,
is whether or not the lot and building in question are used exclusively for educational purposes.
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon. Eustaquio Z.
Montero, filed a Memorandum for the Government on March 25, 1974, and a Supplemental
Memorandum on May 7, 1974, wherein they opined "that based on the evidence, the laws
applicable, court decisions and jurisprudence, the school building and school lot used for
educational purposes of the Abra Valley College, Inc., are exempted from the payment of taxes.
Nonetheless, the trial court disagreed because of the use of the second floor by the Director of
petitioner school for residential purposes.

Issue:
Whether the court a quo erred in declaring that the college lot and building of the petitioner are
not used exclusively for educational purposes merely because the college president resides in one
room of the college building.

Held:
The court ruled that while this 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
purpose—educational, 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.

Commissioner v CA
Gr no. 124043, October 14, 1998

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.
In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a
portion of its premises to small shop owners, like restaurants and canteen operators, and
P44,259.00 from parking fees collected from non-members.
On July 2, 1984, the commissioner of internal revenue (CIR) issued an assessment to private
respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency
income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency
withholding tax on wages. Private respondent formally protested the assessment and, as a
supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the
claims of YMCA.

Issue:

Whether the income from rentals of small shops and parking fees [is] exempt from taxation
Held:
No. the court agreed with commssioner’s contention that "rental income derived by a tax- exempt
from the lease of its properties, real or personal, [is] not, therefore, exempt from income taxation,
even if such income [is] exclusively used for the accomplishment of its objectives. The exemption
claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then
Section 27 of the NIRC which mandates that the income of exempt organizations (such as the
YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same
Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of
the YMCA from its real property, the rental income is taxable regardless of whence such income
is derived and how it is used or disposed of.

Misamis Oriental Asso. v Deartment of Finance

238 SCRA 63

Facts:
Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose
members, individually or collectively, are engaged in the buying and selling of copra in Misamis
Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum Circular 4791
on June 11, 1991, which implemented VAT Ruling 19090, copra was classified as agricultural
food product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from
VAT at all stages of production or distribution. Respondents represent departments of the
executive branch of government charged with the generation of funds and the assessment, levy
and collection of taxes and other imposts.
Under §103(a) of the NIRC, the sale of agricultural non-food products in their original state is
exempt from
VAT only if the sale is made by the primary producer or owner of the land from which the same
are produced. The sale made by any other person or entity, like a trader or dealer, is not exempt
from the tax. On the other hand, under §103(b) the sale of agricultural food products in their
original state is exempt from VAT at all stages of production or distribution regardless of who the
seller is.
The question is whether copra is an agricultural food or non-food product for purposes of this
provision of the
NIRC. On June 11, 1991, respondent Commissioner of Internal Revenue issued the circular in
question, classifying copra as an agricultural non-food product and declaring it "exempt from VAT
only if the sale is made by the primary producer pursuant to Section 103(a) of the Tax Code, as
amended."
The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed
when copra was classified as an agricultural food product under §103(b) of the NIRC. Petitioner
challenges RMC No. 4791 on various grounds, which will be presently discussed although not in
the order raised in the petition for prohibition.

Issue:
Whether the opinion of the BIR, as the government agency charged with the implementation and
interpretation of the tax laws, is entitled to great respect.

Held:
Yes. The court ruled that In interpreting §103(a) and (b) of the NIRC, the Commissioner of Internal
Revenue gave it a strict construction consistent with the rule that tax exemptions must be strictly
construed against the taxpayer and liberally in favor of the state.
Moreover, as the government agency charged with the enforcement of the law, the opinion of the
Commissioner of Internal Revenue, in the absence of any showing that it is plainly wrong, is
entitled to great weight. Indeed, the ruling was made by the Commissioner of Internal Revenue in
the exercise of his power under § 245 of the NIRC to "make rulings or opinions in connection with
the implementation of the provisions of internal revenue laws, including rulings on the
classification of articles for sales tax and similar purposes."

Nestle Philippines v CA
Gr no 134114, July 6, 2001

Facts:
Petitioner is a duly organized domestic corporation engaged in the importations of milk and milk
products for processing, distribution and sale in the Philippines. Between July and November
1984, petitioner transacted sixteen (16) separate importations of milk and milk products from
different countries. Petitioner was assessed customs duties and advance sales taxes by the Collector
of Customs of Manila for each of these separate importations on the basis of the published Home
Consumption Value (HCV) indicated in the Bureau of Customs Revision Orders. Petitioner paid
the same but seasonably filed the corresponding protests before the said Collector of Customs from
October 25 to December 5, 1984, uniformly alleging therein that the latter erroneously applied
higher home consumption values in determining the dutiable value for each of these separate
importations. In the said protests, petitioner claims for refund of both the alleged overpaid import
duties amounting to Five Million Eight Thousand and Twenty Nine Pesos (P5,008,029.00) and
advance sales taxes aggregating to Four Million Five Hundred Sixty Four Thousand One Hundred
Seventy Nine Pesos and Thirty Centavos (P4,564,179.30).
On October 14, 1986, petitioner formally filed a claim for refund of allegedly over paid advance
sales taxes with the Bureau of Internal Revenue (BIR) amounting to Four Million Five Hundred
SixtyFour Thousand One Hundred SeventyNine Pesos and Thirty Centavos (P4,564,179.30)
covering the same sixteen (16) importations of milk and milk products from different countries.
Not long after, on October 15, 1986 and within the twoyear prescriptive period provided for under
the National Internal Revenue Code (NIRC) for claiming a tax refund, petitioner filed the
corresponding petition for review with the Court of Tax Appeals (CTA) which was docketed
therein as C.T.A. Case No. 4114. On January 3, 1994, the tax court ruled in favor of petitioner and
forthwith ordered the BIR to refund to the petitioner the sum of Four Million Four Hundred
EightyNine Thousand Six Hundred SixtyOne Pesos and NinetyFour Centavos (P4,489,661.94)
representing the overpaid Advance Sales Taxes on the aforesaid importations.
On the other hand, the sixteen (16) protest cases for refund of alleged overpaid customs duties
amounting to Five Million Eight Thousand TwentyNine Pesos (P5,008,029.00) were left with the
Collector of Customs of Manila. However, the said Collector of Customs failed to render his
decision thereon after almost six (6) years since petitioner paid under protest the customs duties
on the said sixteen (16) importations of milk and milk products and filed the corresponding
protests.

Issue:
Whether petitioner’s claims for refund of overpaid customs duties must likewise be granted and
awarded in its favor.

Held:
"Customs duties" is 'the name given to taxes on the importation and exportation of commodities,
the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country. Any
claim, for refund of customs duties, therefore, take the nature of tax exemptions that must be
construed strictissimi juris against the claimants and liberal]y in favor of the taxing authority. This
power of taxation being a high prerogative of sovereignty, its relinquishment is never presumed.
Any reduction or diminution thereof with respect to its mode or its rate must be strictly construed,
and the same must be couched in clear and unmistakable terms in order that it may be applied.

ERNESTO M. MACEDA vs. HON. CATALINO MACARAIG, JR.

196 SCRA 771, 223 SCRA 217

FACTS:
On November 3, 1986, Commonwealth Act No. 120 created the National Power
Corporation as a public corporation to undertake the development of hydraulic power and the
production of power from other sources. On June 4, 1949, Republic Act No. 358 granted NPC tax
and duty exemption privileges. On September 10, 1971, Republic Act No. 6395 revised the charter
of the NPC wherein Congress declared as a national policy the total electrification of the
Philippines through the development of power from all sources to meet the needs of industrial
development and rural electrification which should be pursued coordinately and supported by all
instrumentalities and agencies of the government, including its financial institutions. The corporate
existence of NPC was extended to carry out this policy, specifically to undertake the development
of hydro-electric generation of power and the production of electricity from nuclear, geothermal
and other sources, as well as the transmission of electric power on a nationwide basis. Being a
non-profit corporation, Section 13 of the law provided in detail the exemption of the NPC from all
taxes, duties, fees, imposts and other charges by the government and its instrumentalities. On
January 22, 1974, Presidential Decree No. 380 amended section 13, paragraphs (a) and (d) of
Republic Act No. 6395 by specifying, among others, the exemption of NPC from such taxes,
duties, fees, imposts and other charges imposed "directly or indirectly," on all petroleum products
used by NPC in its operation. Presidential Decree No. 938 dated May 27, 1976 further amended
the aforesaid provision by integrating the tax exemption in general terms under one paragraph. On
June 11, 1984, Presidential Decree No. 1931 withdrew all tax exemption privileges granted in
favor of government-owned or controlled corporations including their subsidiaries. However, said
law empowered the President and/or the then Minister of Finance, upon recommendation of the
Fiscal Incentives Review Board to restore, partially or totally, the exemption withdrawn, or
otherwise revise the scope and coverage of any applicable tax and duty. Pursuant to said law, on
February 7, 1985, the FIRB issued Resolution No. 10-85 restoring the tax and duty exemption
privileges of NPC from June 11, 1984 to June 30, 1985. On January 7, 1986, the FIRB issued
resolution No. 1-86 indefinitely restoring the NPC tax and duty exemption privileges effective July
1, 1985.
However, effective March 10, 1987, Executive Order No. 93 once again withdrew all tax
and duty incentives granted to government and private entities which had been restored under
Presidential Decree Nos. 1931 and 1955 but it gave the authority to FIRB to restore, revise the
scope and prescribe the date of effectivity of such tax and/or duty exemptions. On June 24, 1987
the FIRB issued Resolution No. 17-87 restoring NPC's tax and duty exemption privileges effective
March 10, 1987. On October 5, 1987, the President, through respondent Executive Secretary
Macaraig, Jr., confirmed and approved FIRB Resolution No. 17-87.

Issue:
Whether petitioner can invoke the rule on strictissimi juris with respect to the interpretation of
statutes granting tax exemptions to NPC.

Held:
No. petitioner cannot invoke the rule on strictissimi juris with respect to the interpretation of
statutes granting tax exemptions to NPC. Moreover, it is a recognized principle that the rule on
strict interpretation does not apply in the case of exemptions in favor of a government political
subdivision or instrumentality.
The basis for applying the rule of strict construction to statutory provisions granting tax
exemptions or deductions, even more obvious than with reference to the affirmative or levying
provisions of tax statutes, is to minimize differential treatment and foster impartiality, fairness,
and equality of treatment among tax payers.
The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to
reduce the amount of money that has to be handled by government in the course of its operations.
For these reasons, provisions granting exemptions to government agencies may be construed
liberally, in favor of non tax liability of such
Agencies.

ERNESTO M. MACEDA vs. HON. CATALINO MACARAIG, JR.

196 SCRA 771, 223 SCRA 217

FACTS:
On November 3, 1986, Commonwealth Act No. 120 created the National Power
Corporation as a public corporation to undertake the development of hydraulic power and the
production of power from other sources. On June 4, 1949, Republic Act No. 358 granted NPC tax
and duty exemption privileges. On September 10, 1971, Republic Act No. 6395 revised the charter
of the NPC wherein Congress declared as a national policy the total electrification of the
Philippines through the development of power from all sources to meet the needs of industrial
development and rural electrification which should be pursued coordinately and supported by all
instrumentalities and agencies of the government, including its financial institutions. The corporate
existence of NPC was extended to carry out this policy, specifically to undertake the development
of hydro-electric generation of power and the production of electricity from nuclear, geothermal
and other sources, as well as the transmission of electric power on a nationwide basis. Being a
non-profit corporation, Section 13 of the law provided in detail the exemption of the NPC from all
taxes, duties, fees, imposts and other charges by the government and its instrumentalities. On
January 22, 1974, Presidential Decree No. 380 amended section 13, paragraphs (a) and (d) of
Republic Act No. 6395 by specifying, among others, the exemption of NPC from such taxes,
duties, fees, imposts and other charges imposed "directly or indirectly," on all petroleum products
used by NPC in its operation. Presidential Decree No. 938 dated May 27, 1976 further amended
the aforesaid provision by integrating the tax exemption in general terms under one paragraph. On
June 11, 1984, Presidential Decree No. 1931 withdrew all tax exemption privileges granted in
favor of government-owned or controlled corporations including their subsidiaries. However, said
law empowered the President and/or the then Minister of Finance, upon recommendation of the
Fiscal Incentives Review Board to restore, partially or totally, the exemption withdrawn, or
otherwise revise the scope and coverage of any applicable tax and duty. Pursuant to said law, on
February 7, 1985, the FIRB issued Resolution No. 10-85 restoring the tax and duty exemption
privileges of NPC from June 11, 1984 to June 30, 1985. On January 7, 1986, the FIRB issued
resolution No. 1-86 indefinitely restoring the NPC tax and duty exemption privileges effective July
1, 1985.
However, effective March 10, 1987, Executive Order No. 93 once again withdrew all tax and duty
incentives granted to government and private entities which had been restored under Presidential
Decree Nos. 1931 and 1955 but it gave the authority to FIRB to restore, revise the scope and
prescribe the date of effectivity of such tax and/or duty exemptions. On June 24, 1987 the FIRB
issued Resolution No. 17-87 restoring NPC's tax and duty exemption privileges effective March
10, 1987. On October 5, 1987, the President, through respondent Executive Secretary Macaraig,
Jr., confirmed and approved FIRB Resolution No. 17-87.

Issue:
Whether international agreements with provisions of any general or special law to the contrary
notwithstanding, all tax and duty incentives granted " to government and private entities is
withdrawn,

Held:
No. the court enumerated those that are not withdrawn under Section 1 of Executive Order No. 93.
Section 1 includes b) those conferred by effective international agreements to which the
Government of the Republic of the Philippines is a signatory.

Commissioner v CA
Gr 117982, February 6, 1997

Facts:
ALHAMBRA INDUSTRIES, INC., is a domestic corporation engaged in the manufacture and
sale of cigar and cigarette products. On 7 May 1991 private respondent received a letter dated 26
April 1991 from the Commissioner of Internal Revenue assessing it deficiency Ad Valorem Tax
(AVT) in the total amount of
P488,396.62, inclusive of increments, on the removals of cigarette products from their place of
production during the period 2 November 1990 to 22 January 1991.
In a letter dated 22 May 1991 received by petitioner on even date, private respondent thru counsel
filed a protest against the proposed assessment with a request that the same be withdrawn and
cancelled. On 31 May 1991 private respondent received petitioner's reply dated 27 May 1991
denying its protest and request for cancellation stating that the decision was final, and at the same
time requesting payment of the revised amount of P520,835.29, with interest updated, within ten
(10) days from receipt thereof. In a letter dated 10 June 1991 which petitioner received on the same
day, private respondent requested for the reconsideration of petitioner's denial of its protest.
Without waiting for petitioner's reply to its request for reconsideration, private respondent filed on
19 June 1991 a petition for review with the Court of Tax Appeals. On 25 June 1991 private
respondent received from petitioner a letter dated 21 June 1991 denying its request for
reconsideration declaring again that its decision was final. On 8 July 1991 private respondent paid
under protest the disputed ad valorem tax in the sum of P520,835.29.
In its Decision of 1 December 1993 the Court of Tax Appeals ordered petitioner to refund to
private respondent the amount of P520,835.29 representing erroneously paid ad valorem tax for
the period 2 November 1990 to 22 January 1991.
The Court of Tax Appeals explained that the subject deficiency excise tax assessment resulted
from private respondent's use of the computation mandated by BIR Ruling 47388 dated 4 October
1988 as basis for computing the fifteen percent (15%) ad valorem tax due on its removals of
cigarettes from 2 November 1990 to 22 January 1991. BIR Circular 47388 was issued by Deputy
Commissioner Eufracio D. Santos to Insular-Yebana Tobacco Corporation allowing the latter to
exclude the valueadded tax (VAT) in the determination of the gross selling price for purposes of
computing the ad valorem tax of its cigar and cigarette products in accordance with Sec. 127 of
the Tax Code as amended by Executive Order No. 273.

Issue:
whether private respondent's reliance on a void BIR ruling conferred upon the latter a vested right
to apply the same in the computation of its ad valorem tax and claim for tax refund.

Held:
the rule that rulings and circulars, rules and regulations promulgated by the Commissioner of
Internal Revenue would have no retroactive application if to so apply them would be prejudicial
to the taxpayers.
The applicable law is Sec. 246 of the Tax Code which provides — Sec. 246. Nonretroactivity of
rulings. — Any revocation, modification, or reversal of any rules and regulations promulgated in
accordance with the preceding section or any of the rulings or circulars promulgated by the
Commissioner of Internal Revenue shall not be given retroactive application if the revocation,
modification, or reversal will be prejudicial to the taxpayers except in the following cases:
a) where the taxpayer deliberately misstates or omits material facts from his return or in any
document required of him by the Bureau of Internal Revenue; b) where the facts
subsequently gathered by the Bureau of Internal Revenue are materially different from the
facts on which the ruling is based; or c) where the taxpayer acted in bad faith.
Without doubt, private respondent would be prejudiced by the retroactive application of the
revocation as it would be assessed deficiency excise tax.

Tan v Del Rosario

237 SCRA 234

Facts:
Petitioner files special civil action for prohibition challenging the constitutionality of Republic
Act No. 7496, also commonly known as the Simplified Net Income Taxation Scheme ("SNIT"),
amending certain provisions of the National Internal Revenue Code
Petitioner contends that the title of House Bill No. 34314, progenitor of Republic Act No. 7496, is
a misnomer or, at least, deficient for being merely entitled, "Simplified Net Income Taxation
Scheme for the Self-Employed and Professionals Engaged in the Practice of their Profession"

Issue:
Whether RA 7496 is unconstitutional

Held:
it would be difficult to accept petitioner's view that the amendatory law should be considered as
having now adopted a gross income, instead of as having still retained the net income, taxation
scheme. The allowance for deductible items, it is true, may have significantly been reduced by the
questioned law in comparison with that which has prevailed prior to the amendment; limiting,
however, allowable deductions from gross income is neither discordant with, nor opposed to, the
net income tax concept.
The fact of the matter is still that various deductions, which are by no means inconsequential,
continue to be well provided under the new law.
Article VI, Section 26(1), of the Constitution has been envisioned so as (a) to prevent logrolling
legislation intended to unite the members of the legislature who favor any one of unrelated subjects
in support of the whole act, (b) to avoid surprises or even fraud upon the legislature, and (c) to
fairly apprise the people, through such publications of its proceedings as are usually made, of the
subjects of legislation.
Uniformity of taxation, like the kindred concept of equal protection, merely requires that all
subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and
liabilities (Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend
classification as long as: (1) the standards that are used therefor are substantial and not arbitrary,
(2) the categorization is germane to achieve the legislative purpose, (3) the law applies, all things
being equal, to both present and future conditions, and (4) the classification applies equally well
to all those belonging to the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs.
PAGCOR, 197 SCRA 52).

Commissioner v Ca
240 SCRA 368

Facts:
On 22 August 1986, during the period when the President of the Republic still wielded legislative
powers, Executive Order No. 41 was promulgated declaring a onetime tax amnesty on unpaid
income taxes, later amended to include estate and donor's taxes and taxes on business, for the
taxable years 1981 to 1985.
Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, in October
1986 and November 1986, its Tax Amnesty Return No. 34F0014641 and Supplemental Tax
Amnesty Return No. 34F0014664B, respectively, and paid the corresponding amnesty taxes due.
Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication received
by private respondent on 13 August 1986, assessed the latter deficiency income and business taxes
for its fiscal years ended 30 September 1981 and 30 September 1982 in 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 cancelled and withdrawn. The request was
denied by the Commissioner, in his letter of 22 November 1988, on the ground that Revenue
Memorandum Order No. 487, dated 09 February 1987, implementing Executive Order No. 41, had
construed the amnesty coverage 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.

Issue:
whether or not the position taken by the Commissioner coincides with the meaning and intent of
executive Order No. 41.

Held:
Executive Order No. 41 is quite explicit and requires hardly anything beyond a simple application
of its provisions.
The period of the amnesty was later extended to 05 December 1986 from 31 October 1986 by
Executive Order No. 54, dated 04 November 1986, and, its coverage expanded, under Executive
Order No. 64, dated 17 November 1986, to include estate and honors taxes and taxes on business.
If, as the Commissioner argues, Executive Order No. 41 had not been intended to include
19811985 tax 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
it is that the executive order has bee designed to be in the nature of a general grant of tax amnesty
subject only to the cases specifically excepted by it.
It might not be amiss to recall that the taxable periods covered by the amnesty include the years
immediately preceding the 1986 revolution during which time there had been persistent calls, all
too vivid to be easily forgotten, for civil disobedience, most particularly in the payment of taxes,
to the martial law regime. It should be understandable then that those who ultimately took over the
reigns of government following the successful revolution would promptly provide for abroad, and
not a confined, tax amnesty.

Tuazon v CA
212 SCRA 739

Facts:
The case goes back to March 14, 1977, when the Sangguniang Bayan of Camalaniugan, Cagayan,
unanimously adopted Resolution No. 9.
Soon thereafter, private respondent Saturnino T. Jurado sent his agent to the municipal treasurer’s
office to pay the license fee of P285.00 for thresher operators. Mapagu refused to accept the
payment and required him to first secure a mayor’s permit. For his part, Mayor Domingo Tuzon,
the herein other petitioner, said that Jurado should first comply with Resolution No. 9 and sign the
agreement before the permit could be issued. Jurado ignored the requirement. Instead, he sent the
P285.00 license fee by postal money order to the office of the municipal treasurer who, however,
returned the said amount. The reason given was the failure of the respondent to comply with
Resolution No. 9.
On April 4, 1977, Jurado filed with the Court of First Instance of Cagayan a special civil action
for mandamus with actual and moral damages to compel the issuance of the mayor’s permit and
license.
On May 31, 1977, he filed another petition with the same court. this time for declaratory judgment
against the said resolution (and the implementing agreement) for being illegal either as a donation
or as a tax measure. Named defendants were the same respondents and all the members of the
Sangguniang Bayan of Camalaniugan.
In a joint decision dated March 31, 1982, the trial court 1 upheld the challenged measure. However,
it dismissed the claims for damages of both parties for lack of evidence. Jurado appealed to the
Court of Appeals, which in it decision dated August 31, 1989, 2 affirmed the validity of Resolution
No. 9 and the implementing agreement. Nevertheless, it found Tuzon and
Mapagu to have acted maliciously and in bad faith when they denied Jurado’s application for the
mayor’s permit and license. Consequently
Issue:
Whether the resolution is valid

Held:
We need not concern ourselves at this time with the validity of Resolution No. 9 and the
implementing agreement because the issue has not been raised in this petition as an assigned error
of the respondent court. The measures have been sustained in the challenged decision, from which
the respondent has not appealed. The decision is final and binding as to him. It is true that he did
question the measures in his Comment, but only half-heartedly and obliquely, to support his claim
for damages. We may therefore defer examination of these measures to a more appropriate case,
where it may be discussed more fully by the proper parties
While it would appear from the wording of the resolution that the municipal government merely
intends to "solicit" the 1% contribution from the threshers, the implementing agreement seems to
make the donation obligatory and a condition precedent to the issuance of the mayor’s permit. This
goes against the nature of a donation, which is an act of liberality and is never obligatory.
If, on the other hand, it is to be considered a tax ordinance, then it must be shown in view of the
challenge raised by the private respondents to have been enacted in accordance with the
requirements of the Local Tax Code. These would include the holding of a public hearing on the
measure and its subsequent approval by the Secretary of Finance, in addition to the usual requisites
for publication of ordinances in general.

Hagonoy Market Vendor Asso. v Municipality of Hagonoy

Gr no 137621, February 6, 2002

Facts:
On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance,
Kautusan Blg. 28, which increased the stall rentals of the market vendors in Hagonoy. Article 3
provided that it shall take effect upon approval. The subject ordinance was posted from November
425, 1996.
In the last week of November, 1997, the petitioner’s members were personally given copies of the
approved
Ordinance and were informed that it shall be enforced in January, 1998. On December 8, 1997,
the petitioner’s President filed an appeal with the Secretary of Justice assailing the constitutionality
of the tax ordinance. Petitioner claimed it was unaware of the posting of the ordinance. Respondent
opposed the appeal. It contended that the ordinance took effect on October 6, 1996 and that the
ordinance, as approved, was posted as required by law. Hence, it was pointed out that petitioner’s
appeal, made over a year later, was already time-barred.
The Secretary of Justice dismissed the appeal on the ground that it was filed out of time, i.e.,
beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996, as prescribed
under Section 187 of the 1991 Local Government Code. Citing the case of Tañada vs. Tuvera, the
Secretary of Justice held that the date of effectivity of the subject ordinance retroacted to the date
of its approval in October 1996, after the required publication or posting has been complied with,
pursuant to Section 3 of said ordinance.
After its motion for reconsideration was denied, petitioner appealed to the Court of Appeals.
Petitioner did not assail the finding of the Secretary of Justice that their appeal was filed beyond
the reglementary period. Instead, it urged that the Secretary of Justice should have overlooked this
"mere technicality" and ruled on its petition on the merits. Unfortunately, its petition for review
was dismissed by the Court of Appeals for being formally deficient as it was not accompanied by
certified true copies of the assailed Resolutions of the Secretary of Justice.
ISSUE:
Whether the subject ordinance was not posted as required by law.

Held:
Municipal Ordinance No. 28 was enacted by the Sangguniang Bayan of Hagonoy on October 1,
1996. Then Acting Municipal Mayor Maria Garcia Santos approved the Ordinance on October 7,
1996. After its approval, copies of the Ordinance were given to the Municipal Treasurer on the
same day. On November 9, 1996, the Ordinance was approved by the Sangguniang Panlalawigan.
The Ordinance was posted during the period from November 4 25, 1996 in three (3) public places,
viz: in front of the municipal building, at the bulletin board of the Sta. Ana Parish Church and on
the front door of the Office of the Market Master in the public market. Posting was validly made
in lieu of publication as there was no newspaper of local circulation in the municipality of
Hagonoy. This fact was known to and admitted by petitioner. Thus, petitioner’s ambiguous and
unsupported claim that it was only "sometime in November 1997" that the Provincial Board
approved Municipal Ordinance No. 28 and so the posting could not have been made in November
1996 was sufficiently disproved by the positive evidence of respondent municipality. Given the
foregoing circumstances, petitioner cannot validly claim lack of knowledge of the approved
ordinance. The filing of its appeal a year after the effectivity of the subject ordinance is fatal to its
cause.

Jardine Davies Insurace v Aliposa

Gr no 118900, February 27, 2003

Facts:
Pursuant to Republic Act No. 7160, otherwise known as the Local Government Code of 1991, the
then Sangguniang Bayan of Makati enacted Municipal Ordinance No. 92072, otherwise known as
the Makati Revenue Code, which provides, inter alia, for the schedule of real estate, business and
franchise taxes in the Municipality of Makati at rates higher than those in the Metro Manila
Revenue Code.
On May 10, 1993, the Philippine Racing Club, Inc. ("PRCI" for brevity), a taxpayer of Makati,
appealed to the Department of Justice ("DOJ" for brevity) for the nullification of said ordinance,
alleging that it was approved without previous public hearings, in violation of the Local
Government Code and Article 276 of its Implementing
Rules, and that some of the ordinance’s provisions were unconstitutional:
(2) "The ‘inlieuofalltaxes’ clause of the franchise of the Philippine Racing Club, Inc. exempts it
from payment of the real property tax, annual business tax and other new taxes imposed by the
ordinance here in question. To withdraw the exemption would impair the obligation of contract in
violation of its constitutional right as franchise holder.
(3) "The imposition of the franchise tax is not within the scope of the taxing powers of the
Municipality of Makati (Sections 134, 137 and 142 of Republic Act No. 7160 and Articles 223,
226 and 231 of Rule XXX of the Implementing Rules and Regulations of the Local Government
Code of 1991). and
(4) "The Municipality of Makati already shares 5 of the 25% franchise tax provided for in Section
8 of the franchise of the Philippine Racing Club, Inc. To allow the said municipality to impose
another franchise tax and to base the tax on the gross annual receipts, as it does in the ordinance,
would certainly be unjust, excessive, oppressive or confiscatory (Section 130 of Republic Act No.
7160 and Article 219 of Rule XXX of the Implementing Rules and Regulations).
Although required by the DOJ to comment on the appeal, respondent Makati failed to do so.
On July 5, 1993, the DOJ came out with a resolution declaring "null and void and without legal
effect" the said ordinance for having been enacted in contravention of Section 187 of the Local
Government Code of 1991 and its implementing rules and regulations.
On August 19, 1993, respondent Makati sought a reconsideration of the ruling of the DOJ. Pending
resolution of its motion, said respondent filed a petition ad cautelam with the Regional Trial Court
(RTC) of Makati, entitled Hon. Jejomar C. Binay and the Municipality of Makati, Petitioners, v.
Hon. Franklin M. Drilon, Department of Justice and Philippine Racing Club, Inc., Respondents,
and docketed as Case No. 932844.
The case was raffled to Branch 148 of the Makati RTC. Respondent Makati alleged, inter alia,
that public hearings were conducted before the approval of the ordinance and hence the ordinance
was valid. It prayed that after due proceedings judgment be rendered in its favor.
In the meantime, respondent Makati continued to implement the ordinance. Petitioner Jardine
Davies Insurance Brokers, Inc., a dulyorganized corporation with principal place of business at
No. 222 Sen. Gil J. Puyat Avenue,
Makati, Metro Manila, was assessed and billed by Makati the amount of P63,822.47 for taxes, fees
and charges under the ordinance for the second quarter of 1993. It was again billed by respondent
Makati the same amount for the third quarter of 1993 and the same amount for the fourth quarter
of 1993. Petitioner did not protest the assessment for its quarterly business taxes for the second,
third and fourth quarters of 1993 based on said ordinance effective April 1, 1993. Petitioner, in
fact, paid the said amounts on April 26, 1993 (for the second quarter), July 12, 1993 (for the third
quarter) and October 19, 1993 (for the fourth quarter), respectively, without any protest.
Respondent Makati issued the corresponding receipts in favor of petitioner. compute its business
tax liabilities in accordance with the Metro Manila Revenue Code and not under the ordinance
considering that said ordinance was already declared by the DOJ null and void. Petitioner likewise
requested that respondent Makati credit the overpayment in the total amount of P27,854.91 for the
second to fourth quarters of 1993 against its 1994 liabilities for 1994, or in the alternative, for
Makati to refund the said amount to petitioner.
In a Letter dated February 4, 1994, respondent Makati, through Maximo L. Paulino Jr., Acting
Chief of its
Municipal License Division, denied the request of petitioner for tax credit/refund. Respondent
Makati insisted that the questioned ordinance code was valid and enforceable pending the final
outcome of its petition ad cautelam with the Regional Trial Court of Makati.
In the meantime, on October 26, 1993, the RTC rendered judgment in Case No. 932844 granting
the petition of Makati and declaring the ordinance valid. On November 9, 1993, the DOJ issued a
memorandum to the Chief State Counsel directing the latter to refrain from accepting any appeal
or to act on pending appeals on the validity/constitutionality of the ordinance until the same shall
have been finally resolved by courts of competent jurisdiction.
When informed of the denial by respondent Makati of its letterrequest, petitioner filed a complaint
on March 7,
1994 with the RTC of Makati against respondents Makati and its Acting Municipal Treasurer. The
case was raffled to Branch 150 of said court. Petitioner alleged in its complaint that in view of the
resolution of the DOJ declaring the Makati Revenue Code "null and void and without legal effect,"
the provisions of the Metro Manila Revenue Code continued to remain in full force and effect;
however, petitioner was assessed and billed by respondent Makati for taxes, fees and charges for
second, third and fourth quarters for 1993 beginning on April 4, 1993 up to October 14, 1994 at
rates fixed in the ordinance despite the nullity thereof.
On May 18, 1994, respondents Makati and its Acting Municipal Treasurer filed a motion to
dismiss9 the complaint on the ground of prematurity. They argued that petitioner’s cause of action
was predicated on the appealed resolution of the DOJ, and unless and until nullified by final
judgment of a competent court, the ordinance remained in full force and effect.
On May 26, 1994, petitioner opposed the motion to dismiss of respondents, contending that its
complaint was not predicated solely on the invalidity and unconstitutionality of the ordinance but
also on its claim that the ordinance took effect only in July 1, 1993 but Makati applied the
ordinance effective April 1, 1993. Petitioner further averred that under Section 166 of the Local
Government Code, new taxes, fees or charges or charges provided for in the ordinance shall accrue
on the first day of the quarter following the effectivity of the new ordinance. Hence, assuming that
the tax ordinance was valid, the same should have been enforced only from the "first (1st) day of
the quarter following next the effectivity of the ordinance imposing such new levies or rates" as
provided for in
Section 166 of the Local Government Code.
On August 29, 1994, the RTC issued an order granting the motion to dismiss of respondent and
ordering the dismissal of the complaint. The trial court ruled that plaintiff’s cause of action, if any,
had prescribed. Citing Sections 187 and 195 of the Local Government Code of 1991, the trial court
ratiocinated that petitioner failed to file an opposition or protest to the written notice of assessment
of Makati for taxes, fees and charges at rates provided for in the ordinance within 60 days from
the notice of said assessment as required by Section 195 of the Local Government Code. Hence,
petitioner was barred from demanding a refund of its payment or that it be credited for said
amounts.
Petitioner received a copy of said order on October 7, 1994. On October 13, 1994, petitioner filed
with the trial court a motion for reconsideration of the order of dismissal, arguing that the trial
court erred in applying Section 195 of the Local Government Code of 1991 as its complaint did
not involve an assessment for deficiency taxes but one for refund/tax credit. Petitioner further
claimed that it was never served with any notice of assessment from respondents and hence there
was no need for petitioner to protest. Petitioner argued that what was applicable was Section 196
of the Local Government Code in conjunction with Article 286 of its Implementing Rules and
Regulations, both of which simply require the filing of a written claim for refund or tax credit
within two years from the date of payment.

Issue:
Whether a taxpayer may file a complaint assailing the validity of the ordinance and praying for a
refund of its perceived overpayments without first filing a protest to the payment of taxes due
under the ordinance.

Held:
Yes. The Court agrees with petitioner that as a general precept, a taxpayer may file a complaint
assailing the validity of the ordinance and praying for a refund of its perceived overpayments
without first filing a protest to the payment of taxes due under the ordinance. Stating their ruling
in Ty v. Judge Trampe: . . . Hence, if a taxpayer disputes the reasonableness of an increase in a
real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or
municipal treasurer will not act on his protest. In the case at bench, however, the petitioners are
questioning the very authority and power of the assessor, acting solely and independently, to
impose the assessment and of the treasurer to collect the tax. These are not questions merely of
amounts of the increase in the tax but attacks on the very validity of any increase.
Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a
tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity
thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an
aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days,
a party could already proceed to seek relief in court. These three separate periods are clearly given
for compliance as a prerequisite before seeking redress in a competent court. Such statutory periods
are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions.
For this reason the courts construe these provisions of statutes as mandatory.
A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax
is the most effective instrument to raise needed revenues to finance and support the myriad
activities of local government units for the delivery of basic services essential to the promotion of
the general welfare and enhancement of peace, progress, and prosperity of the people.
Consequently, any delay in implementing tax measures would be to the detriment of the public. It
is for this reason that protests over tax ordinances are required to be done within certain time
frames. In the instant case, it is our view that the failure of petitioners to appeal to the Secretary of
Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause.

Hilado v Collector
100 Phil 288

Facts:
On March 31, 1952, Petitioner filed his income tax return for 1951 with the treasurer of Bacolod
City wherein he claimed, among other things, the amount of P12,837.65 as a deductible item from
his gross income pursuant to General Circular No. V‐123 issued by the Collector of Internal
Revenue. This circular was issued pursuant to certain rules laid down by the Secretary of Finance
On the basis of said return, an assessment notice demanding the payment of P9,419 was sent to
Petitioner, who paid the tax in monthly installments, the last payment having been made on
January 2, 1953.
Meanwhile, on August 30, 1952, the Secretary of Finance, through the Collector of Internal
Revenue, issued General Circular No. V‐139 which not only revoked and declared void his general
Circular No. V‐ 123 but laid down the rule that losses of property which occurred during the period
of World War II from fires, storms, shipwreck or other casualty, or from robbery, theft or
embezzlement are deductible in the year of actual loss or destruction of said property. As a
consequence, the amount of P12,837.65 was disallowed as a deduction from the gross income of
Petitioner for 1951 and the Collector of Internal Revenue demanded from him the payment of the
sum of P3,546 as deficiency income tax for said year. When the petition for reconsideration filed
by Petitiooner was denied, he filed a petition for review with the Court of Tax Appeals. In due
time, this court rendered decision affirming the assessment made by Respondent Collector of
Internal Revenue.

Issue:
Whether or not Hilado can claim compensation of his property during the war under the laws
ineffect that time.

Held:
Philippines Internal Revenue Laws are not political in nature and as such were continued in force
during the period of enemy occupation and in effect were actually enforced by the occupation
government. Such tax laws are deemed to be laws of the occupied territory and not of the
occupying enemy. As of the end of 1945, there was no law which Hilado could claim for the
destruction of his properties during the battle for the liberation of the Philippines. Under the
Philippine Rehabilitation Act of 1948, the payment of claims by the War Damage Commission
depended upon its discretion non-payment of which does not give rise to any enforceable right.
Assuming that the loss represents a portion of the 75% of his war damage claim, the amount would
be at most proper deduction of his 1950 gross income as the last instalment and notice of
discontinuation of payment by the war Damage Commission was made in 1950.

Lorenzo v Posadas
64 Phil 353

Facts:
On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas
Hanley, deceased, brought this action in the Court of First Instance of Zamboanga against the
defendant, Juan Posadas, Jr., then the Collector of Internal Revenue, for the refund of the amount
of P2,052.74, paid by the plaintiff as inheritance tax on the estate of the deceased, and for the
collection of interst thereon at the rate of 6 per cent per annum, computed from September 15,
1932, the date when the aforesaid tax was [paid under protest. The defendant set up a counterclaim
for P1,191.27 alleged to be interest due on the tax in question and which was not included in the
original assessment. From the decision of the Court of First Instance of Zamboanga dismissing
both the plaintiff's complaint and the defendant's counterclaim, both parties appealed to this court.
It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a
will and considerable amount of real and personal properties. On june 14, 1922, proceedings for
the probate of his will and the settlement and distribution of his estate were begun in the Court of
First Instance of Zamboanga. The will was admitted to probate.
The Court of First Instance of Zamboanga considered it proper for the best interests of ther estate
to appoint a trustee to administer the real properties which, under the will, were to pass to Matthew
Hanley ten years after the two executors named in the will, was, on March 8, 1924, appointed
trustee. Moore took his oath of office and gave bond on March 10, 1924. He acted as trustee until
February 29, 1932, when he resigned and the plaintiff herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue,
alleging that the estate left by the deceased at the time of his death consisted of realty valued at
P27,920 and personalty valued at P1,465, and allowing a deduction of P480.81, assessed against
the estate an inheritance tax in the amount of P1,434.24 which, together with the penalties for
deliquency in payment consisting of a 1 per cent monthly interest from July 1, 1931 to the date of
payment and a surcharge of 25 per cent on the tax, amounted to P2,052.74. On March 15, 1932,
the defendant filed a motion in the testamentary proceedings pending before the Court of First
Instance of Zamboanga (Special proceedings No. 302) praying that the trustee, plaintiff herein, be
ordered to pay to the Government the said sum of P2,052.74. The motion was granted. On
September 15, 1932, the plaintiff paid said amount under protest, notifying the defendant at the
same time that unless the amount was promptly refunded suit would be brought for its recovery.
The defendant overruled the plaintiff's protest and refused to refund the said amount hausted,
plaintiff went to court with the result herein above indicated.

Issue:
Whether inheritance taxation is governed by the statute in force at the time of the death of the
decedent.

Held:
It is well-settled that inheritance taxation is governed by the statute in force at the time of the death
of the decedent. The taxpayer cannot foresee and ought not to be required to guess the outcome of
pending measures. Of course, a tax statute may be made retroactive in its operation. Liability for
taxes under retroactive legislation has been "one of the incidents of social life." But legislative
intent that a tax statute should operate retroactively should be perfectly clear. (Scwab vs. Doyle,
42 Sup. Ct. Rep., 491; Smietanka vs.
First Trust & Savings Bank, 257 U. S., 602; Stockdale vs. Insurance Co., 20 Wall., 323; Lunch vs.
Turrish, 247 U. S., 221.) "A statute should be considered as prospective in its operation, whether
it enacts, amends, or repeals an inheritance tax, unless the language of the statute clearly demands
or expresses that it shall have a retroactive effect, . . . ." (61 C. J., P. 1602.) Though the last
paragraph of section 5 of Regulations No. 65 of the Department of Finance makes section 3 of Act
No. 3606, amending section 1544 of the Revised Administrative Code, applicable to all estates the
inheritance taxes due from which have not been paid, Act No. 3606 itself contains no But
legislative intent that a tax statute should operate retroactively should be perfectly clear. (Scwab
vs. Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First Trust & Savings Bank, 257 U. S., 602;
Stockdale vs. Insurance Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute should
be considered as prospective in its operation, whether it enacts, amends, or repeals an inheritance
tax, unless the language of the statute clearly demands or expresses that it shall have a retroactive
effect, . . . ." (61 C. J., P. 1602.) Though the last paragraph of section 5 of Regulations No. 65 of
the Department of Finance makes section 3 of Act No. 3606, amending section 1544 of the Revised
Administrative Code, applicable to all estates the inheritance taxes due from which have not been
paid, Act No. 3606 itself contains no provisions indicating legislative intent to give it retroactive
effect. No such effect can begiven the statute by this court.
Properly speaking, a statute is penal when it imposes punishment for an offense committed against
the state which, under the Constitution, the Executive has the power to pardon. In common use,
however, this sense has been enlarged to include within the term "penal statutes" all status which
command or prohibit certain acts, and establish penalties for their violation, and even those which,
without expressly prohibiting certain acts, impose a penalty upon their commission (59 C. J., p.
1110). Revenue laws, generally, which impose taxes collected by the means ordinarily resorted to
for the collection of taxes are not classed as penal laws, although there are authorities to the
contrary. (See Sutherland, Statutory Construction, 361; Twine Co. vs. Worthington, 141 U. S.,
468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A., 104; 53 Fed., 910; Com. vs. Standard Oil Co., 101
Pa. St., 150;
State vs. Wheeler, 44 P., 430; 25 Nev. 143.) Article 22 of the Revised Penal Code is not applicable
to the case at bar, and in the absence of clear legislative intent, we cannot give Act No. 3606 a
retroactive effect.