VITORILLO, ALPHONS N.

40.) Osmena vs Orboz

220 scra 703

Facts: Pres. Marcos issued PD 1956 creating the Oil Price Stabilization Fund (OPSF), which was designed
to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting
from; exchange rate adjustments AND increases in the world market prices of crude oil. By virtue of an
EO, the OPSF was reclassified into a trust liability account and ordered released from the National
Treasury to the Ministry of Energy. Said EO also authorized the investment of the fund in government
securities, with the earnings accruing to the fund. Aquino then amended PD 1956 by promulgating EO
137. The said cost underrecovery was left to the determination of the Ministry of Finance. Osmena then
questioned the creation of the trust fund, saying that it violates the Constitution. This is because the
money collected pursuant to PD 1956 is a special fund, and under the Constitution, if a special tax is
collected for a specific purpose, the revenue generated from it shall be treated as a special fund to be
used only for the indicated purpose. It must not be channeled to another government objective.

Issue: W/N the creation of trust fund violates the Constitution.

Held: No, the creation of the trust fund was valid. In order for the funds to fall under the prohibition, it
must be shown that they were collected as taxes – as a form of revenue. While the funds collected may
be referred to as taxes, they are exacted in the exercise of the police power of the State. The main
objective was not revenue but to stabilize the price of oil and petroleum. The OPSF is actually a special
fund, as seen from the special treatment given to it by EO 137. It is segregated from the general fund;
and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless
remains subject to the scrutiny and review of the COA.

80.) CIR vs CA and YMCA

298 scra 83

Facts: YMCA earned an income from leasing out a portion of its premises to small shop owners, like
restaurants and canteen operators and from parking fees collected from non-members. The CIR issued an
assessment to YMCA for deficiency taxes which included the income from lease of YMCA’s real
property. YMCA formally protested the assessment but the CIR denied the claims of YMCA. On appeal,
the CTA ruled in favor of YMCA and excluded income from lease to small shop owners and parking fees.
However, the CA reversed the CTA but affirmed the CTA upon motion for reconsideration.

Issue: W/N the rental income of YMCA is taxable.

Held: Yes. The exemption claimed by YMCA is expressly disallowed by the very wording 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. While the
income received by the organizations enumerated in Section 26 of the NIRC is, as a rule, exempted from
the payment of tax in respect to income received by them as such, the exemption does not apply to
income derived from any of their properties, real or personal or from any of their activities conducted for
profit, regardless of the disposition made of such income.

120.) PLDT vs City of Bacolod

G.R No. 149179 July 15, 2006

Facts: The City of Bacolod made an assessment on PLDT for the payment of franchise tax due the City.
Complying therewith, PLDT began paying the City franchise tax from the year 1994 until the third
quarter of 1998, at which time. On June 1998, the Department of Finance through its Bureau of Local
Government Finance (BLGF), issued a ruling to the effect that as of 16 March 1995, the effectivity date
of the R.A. No. 7925 that, PLDT, among other telecommunication companies, became exempt from local
franchise tax. PLDT then stopped paying local franchise and business taxes to Bacolod City starting the
fourth quarter of 1998. Sometime inb 1999, PLDT applied for the issuance of a Mayor’s Permit but the
City of Bacolod withheld issuance thereof pending PLDT’s payment of its franchise tax liability for the
fourth quarter of 1998 and for the year 1999.

Issue: W/N Sec. 23 of R.A. No. 7925 operates to exempt petitioner PLDT from the payment of franchise
tax imposed by the respondent City of Bacolod.

Held: No. Sec. 23 of R.A No. 7925 cannot be considered as having amended petitioner’s franchise so as
to entitle it to exemption from the imposition of local franchise taxes, as it does not appear that
Congress intended it to operate as a blanket tax exemption to all telecommunications entities…the term
‘exemption’ in Section 23 does not mean tax exemption. The term refers to exemption from certain
regulations and requirements imposed by the National Telecommunications Commission (NTC).
Inherently, 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, tax exemption is strictly
construed against the taxpayer and liberally construed in favor of the government. The SC held that that
the “in-lieu-of-all-taxes” clause does not refer to “tax exemption” but to “tax exclusion” nor ‘exemption’
in Section 23 means tax exemption. Consequently, the petitioner is liable to pay local franchise taxes
covering fourth quarter of 1998 and for the year 1999 onwards.