Commissioner vs.

Algue
Facts: The Philippine Sugar Estate Development Company (PSEDC) appointed Algue
Inc. as its agent, authorizing it to sell its land, factories, and oil manufacturing process.
The Vegetable Oil Investment Corporation (VOICP) purchased PSEDC properties. For
the sale, Algue received a commission of P125,000 and it was from this commission that
it paid Guevara, et. al. organizers of the VOICP, P75,000in promotional fees. In 1965,
Algue received an assessment from the Commissioner of Internal Revenue in the amount
of P83,183.85 as delinquency income tax for years 1958 and 1959. Algue filed a protestor
request for reconsideration which was not acted upon by the Bureau of Internal Revenue
(BIR). The counsel for Algue had to accept the warrant of distrant and levy. Algue,
however, filed a petition for review with the Court of Tax Appeals.
Issue: Whether the assessment was reasonable.
Held: Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. Every person who is able to pay must contribute his share in the
running of the government. The Government, for his part, is expected to respond in the
form of tangible and intangible benefits intended to improve the lives of the people and
enhance their moral and material values. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that is an arbitrary method of exaction by
those in the seat of power. Tax collection, however, should be made in accordance with
law as any arbitrariness will negate the very reason for government itself. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer
can demonstrate that the law has not been observed. Herein, the claimed deduction
(pursuant to Section 30[a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation
2: as to compensation for personal services) had been legitimately by Algue Inc. It has
further proven that the payment of fees was reasonable and necessary in light of the
efforts exerted by the payees in inducing investors (in VOICP) to involve themselves in
an experimental enterprise or a business requiring millions of pesos. The assessment was
not reasonable.
NATIONAL POWER CORPORATION vs. CITY OF CABANATUAN
GR. No. 149110, April 9, 2003
Facts: NAPOCOR, the petitioner, is a government-owed and controlled corporation
created under Commonwealth Act 120. It is tasked to undertake the development of
hydroelectric generations 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.
For many years now, NAPOCOR sells electric power to the resident Cabanatuan City,
posting a gross income of P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance
No. 165-92, the respondent assessed the petitioner a franchise tax amounting to
P808,606.41, representing 75% of 1% of the formers gross receipts for the preceding
year.

Petitioner, whose capital stock was subscribed and wholly paid by the Philippine
Government, refused to pay the tax assessment. It argued that the respondent has no
authority to impose tax on government entities. Petitioner also contend that as a nonprofit organization, it is exempted from the payment of all forms of taxes, charges, duties
or fees in accordance with Sec. 13 of RA 6395, as amended. The respondent filed a
collection suit in the RTC of Cabanatuan City, demanding that petitioner pay the assessed
tax, plus surcharge equivalent to 25% of the amount of tax and 2% monthly interest.
Respondent alleged that petitioners exemption from local taxes has been repealed by
Sec. 193 of RA 7160 (Local Government Code). The trial court issued an order
dismissing the case. On appeal, the Court of Appeals reversed the decision of the RTC
and ordered the petitioner to pay the city government the tax assessment.
Issues:
(1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its
stocks are wholly owned by the National Government and its charter characterized is as a
non-profit organization?
(2) Is the NAPOCORs exemption from all forms of taxes repealed by the provisions of
the Local Government Code (LGC)?
Held:
(1) NO. To stress, a franchise tax is imposed based not on the ownership but on the
exercise by the corporation of a privilege to do business. The taxable entity is the
corporation which exercises the franchise, and not the individual stockholders. By virtue
of its charter, petitioner was created as a separate and distinct entity from the National
Government. It can sue and be sued under its own name, and can exercise all the powers
of a corporation under the Corporation Code. To be sure, the ownership by the National
Government of its entire capital stock does not necessarily imply that petitioner is no
engage din business.
(2) YES. One of the most significant provisions of the LGC is the removal of the blanket
exclusion of instrumentalities and agencies of the National Government from the
coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees,
or charges of any kind on the National Government, its agencies and instrumentalities,
this rule now admits an exception, i.e. when specific provisions of the LGC authorize the
LGUs to impose taxes, fees, or charges on the aforementioned entities. The legislative
purpose to withdraw tax privileges enjoyed under existing laws or charter is clearly
manifested by the language used on Sec. 137 and 193 categorically withdrawing such
exemption subject only to the exceptions enumerated. Since it would be tedious and
impractical to attempt to enumerate all the existing statutes providing for special tax
exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of
such exemptions or privileges. No more unequivocal language could have been used
BPI vs. CIR
Facts:

Petitioner BPI, sold $500,000 in 1985 to the Central Bank for the total amount of
$1,000,000.On October 1989, the BIR assessed BPI for tax deficiency of documentary
tax on itsaforementioned sales of foreign bills of exchange. BPI filed and protested the
assessment on1989 through its counsel. BPI did not receive any immediate reply to its
protest. On 1992BIR issued a warrant of Distraint and/or Levy against the petitioner. The
warrant was servedon 1992 but never heard anything from the BIR until the 1997 when
the reconsideration wasdenied.BPI filed a petition for Review with the CTA and raised
prescription as a defense. It allegedthat the right to collect must be done within 3 years
only, but the BIR waited more than 7years to deny the protest. BIR reiterated its position
and remained silent as regards theissue on prescription.CTA rendered the decision in
favor BIR stating that the action has not prescribed but thesale of foreign currency is not
subject to documentary stamp tax. Further the assessment was order for cancellation
because the transaction between BPI and the Central Bank was tax exempt. The CA
sustained the finding of the CAT that the action has not yet prescribed, but itadopted the
position of the BIR that the sale of foreign currency was not tax exempt.
Issue :
Whether or not the right of the BIR to collect from BPI the alleged deficiency on
documentary stamp tax had prescribed
Held:
The Supreme Court ruled that the action for collection had already prescribed. The
period to collect the deficiency is limited to 3 years as provided by Section 203 of the Tax
Code. The statute of limitation on collection may be interrupted or suspended by a valid
waiver executed in accordance with paragraph (d) of Sections 223 and 224 of the Tax
Code as amended. The purpose of the limitation is to protect the taxpayer form the
prolonged and unreasonable assessment and investigation by the BIR.
TIO VS. VIDEOGRAM REGULATORY BOARD
Facts: The case is a petition filed by petitioner on behalf of videogram operators
adversely affected by Presidential Decree No. 1987, An Act Creating the Videogram
Regulatory Board" with broad powers to regulate and supervise the videogram industry.
A month after the promulgation of the said Presidential Decree, the amended the National
Internal Revenue Code provided that:
"SEC. 134. Video Tapes. There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided,
That locally manufactured or imported blank video tapes shall be subject to sales tax."
"Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any
provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of
the purchase price or rental rate, as the case may be, for every sale, lease or disposition of
a videogram containing a reproduction of any motion picture or audiovisual program.

Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and
the other fifty percent (50%) shall accrue to the municipality where the tax is collected;
PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the
City/Municipality and the Metropolitan Manila Commission.
The rationale behind the tax provision is to curb the proliferation and unregulated
circulation of videograms including, among others, videotapes, discs, cassettes or any
technical improvement or variation thereof, have greatly prejudiced the operations of
movie houses and theaters. Such unregulated circulation have caused a sharp decline in
theatrical attendance by at least forty percent (40%) and a tremendous drop in the
collection of sales, contractor's specific, amusement and other taxes, thereby resulting in
substantial losses estimated at P450 Million annually in government revenues.
Videogram(s) establishments collectively earn around P600 Million per annum from
rentals, sales and disposition of videograms, and these earnings have not been subjected
to tax, thereby depriving the Government of approximately P180 Million in taxes each
year.
The unregulated activities of videogram establishments have also affected the viability of
the movie industry.
Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.
Held: Taxation has been made the implement of the state's police power. The levy of the
30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant
violation of intellectual property rights, and the proliferation of pornographic video tapes.
And while it was also an objective of the DECREE to protect the movie industry, the tax
remains a valid imposition.
We find no clear violation of the Constitution which would justify us in pronouncing
Presidential Decree No. 1987 as unconstitutional and void. While the underlying
objective of the DECREE is to protect the moribund movie industry, there is no question
that public welfare is at bottom of its enactment, considering "the unfair competition
posed by rampant film piracy; the erosion of the moral fiber of the viewing public
brought about by the availability of unclassified and unreviewed video tapes containing
pornographic films and films with brutally violent sequences; and losses in government
revenues due to the drop in theatrical attendance, not to mention the fact that the activities
of video establishments are virtually untaxed since mere payment of Mayor's permit and
municipal license fees are required to engage in business."

WHEREFORE, the instant Petition is hereby dismissed. No costs.

Mactan Cebu (MCIAA) vs. Marcos
FACTS:
Mactan Cebu International Airport Authority (MCIAA) was created to principally
undertake to economical, efficient and effective control, management and supervision of
the Mactan International Airport and such other airports as may be established in the
province of Cebu Section 14 of its charter exempts the Authority from payment of
realty taxes but in 1994, the City Treasurer demanded payment for realty taxes on several
parcels of land belonging to the other. MCIAA filed a petition in RTC contending that, by
nature of its powers and functions, it has the same footing of an agency or instrumentality
of the national government. The RTC dismissed the petition based on Section 193 & 234
of the local Government Code or R.A. 7160. Thus this petition.
ISSUE:
Whether or not the MCIAA is exempted from realty taxes?
RULING:
With the repealing clause of RA 7160 the tax exemption provided. All general and
special in the charter of the MCIAA has been expressly repeated. It state laws, acts, City
Charters, decrees, executive orders, proclamations and administrative regulations, or part
of parts thereof which are inconsistent with any of the provisions of the Code are hereby
repeated or modified accordingly. Therefore the SC affirmed the decision and order of
the RTC and herein petitioner has to pay the assessed realty tax of its properties effective
January 1, 1992 up to the present.
FELS ENERGY vs. BATANGAS
FACTS:
Power energy leased its power barge to NPC for a period of 5 years. In the agreement,
NPC was made to shoulder any tax expenses related to the power barge then Polar
assigned its rights to FELS. Batangas assessed the property and FELS referred the matter
to NPC pursuant to the Agreement. NPC sought reconsideration to Provincial Assessor
but was denied. LBAA affirmed provincial assessor while CBAA found the power barges
exempt from real property tax, consequently reversed its own ruling. FELS & NPC
separately filed a petition for review before CA.
ISSUE:
Whether or not local assessor has the jurisdiction to entertain any request for a review or
readjustment.
RULING:

The appropriate forum where the aggrieved party may bring his appeal is the LBAA as
provided by law. It follows that the 60-day period for making the appeal to LBAA runs
without interruption.
If the taxpayer fails to appeal in due course, the right of the local government to collect
the taxes due with respect to the taxpayers property becomes absolute upon the
expiration of the period to appeal. Also, failure of taxpayer to question the assessment in
the LBAA renders the assessment of the local assessor final, executory and demandable,
thus precluding the taxpayer from questioning the correctness of the assessment, or from
invoking any defense that would re open the question of its liability on the merits.
CIR V TOKYO SHIPPING CO., LTD
Facts: Private respondent is a foreign corporation represented in the Philippines by
Soriamont Steamship Agencies, Inc. It owns and operates tramper vessel M/V Gardenia.
In December 1980, NASUTRA chartered M/V Gardenia to load 16,500 metric tons of
raw sugar in the Philippines. On December 23, 1980 Mr. Edilberto Lising, the
operationssupervisor of Soriamont Agency, paid the required income and common
carriers taxes in the sum total of P107,142.75 based on the expected gross receipts of the
vessel. Upon arriving, however, at Guimaras Port of Iloilo, the vessel found no sugar for
loading. On January 10, 1981, NASUTRA and private respondents agent mutually
agreed to have thevessel sail for Japan without any cargo.
Claiming the pre-payment of income and common carriers taxes as erroneous since no
receipt was realized from the charter agreement private respondent instituted a claim for
tax credit or refund of the sum of P107,142,75 before petitioner commissioner of Internal
Revenue on March 23, 1981. Petitioner failed to act promptly on the claim, hence, on
May 14, 1981, private respondent filed a petition for review before public respondent
CTA.
Petitioner contested the petition. As special and affirmative defenses, it alleged the
following: that taxes are presumed to have been collected in accordance with law; that in
an action for refund, the burden of proof is upon the taxpayer to show that taxes are
erroneously or illegally collected and the taxpayers failure to sustain said burden is fatal
to the action for refund; and that claims for refund are construed strictly against tax
claimants.
After trial, respondent tax court decided in favor of the private respondent.
Issue: Whether or not tax claimants has the burden of proof to support its claim of refund.
Held: A claim for refund is in the nature of a claim for exemption and should be
construed in strictissimi juris against the taxpayer. Likewise, there can be no
disagreement with petitioners stance that private respondent has the burden of proof to
establish the factual basis of its claim for tax refund.

CIR vs. Fortune Tobacco Corporation, [G.R. Nos. 167274-75, July 21, 2008]
Facts: Respondent FTC is a domestic corporation that manufactures cigarettes packed by
machine under several brands. Prior to January 1, 1997, Section 142 of the 1977 Tax
Code subjected said cigarette brands to ad valorem tax. Annex D of R.A. No. 4280
prescribed the cigarette brands tax classification rates based on their net retail price. On
January 1, 1997, R.A. No. 8240 took effect. Sec. 145 thereof now subjects the cigarette
brands to specific tax and also provides that: (1) the excise tax from any brand of
cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not
be lower than the tax, which is due from each brand on October 1, 1996; (2) the rates of
excise tax on cigarettes enumerated therein shall be increased by 12% on January 1,
2000; and (3) the classification of each brand of cigarettes based on its average retail
price as of October 1, 1996, as set forth in Annex D shall remain in force until revised by
Congress.
The Secretary of Finance issued RR No. 17-99 to implement the provision for the 12%
excise tax increase. RR No. 17-99 added the qualification that the new specific tax rate
xxx shall not be lower than the excise tax that is actually being paid prior to January 1,
2000. In effect, it provided that the 12% tax increase must be based on the excise tax
actually being paid prior to January 1, 2000 and not on their actual net retail price.
FTC filed 2 separate claims for refund or tax credit of its purportedly overpaid excise
taxes for the month of January 2000 and for the period January 1-December 31, 2002. It
assailed the validity of RR No. 17-99 in that it enlarges Section 145 by providing the
aforesaid qualification. In this petition, petitioner CIR alleges that the literal
interpretation given by the CTA and the CA of Section 145 would lead to a lower tax
imposable on 1 January 2000 than that imposable during the transition period, which is
contrary to the legislative intent to raise revenue.
Issue: Should the 12% tax increase be based on the net retail price of the cigarettes in the
market as outlined in Section 145 of the 1997Tax Code?
Held: YES. Section 145 is clear and unequivocal. It states that during the transition
period, i.e., within the next 3 years from the effectivity of the 1997 Tax Code, the excise
tax from any brand of cigarettes shall not be lower than the tax due from each brand on 1
October 1996. This qualification, however, is conspicuously absent as regards the 12%
increase which is to be applied on cigars and cigarettes packed by machine, among
others, effective on 1 January 2000.
Clearly, Section 145 mandates a new rate of excise tax for cigarettes packed by machine
due to the 12% increase effective on 1 January 2000 without regard to whether the
revenue collection starting from this period may turn out to be lower than that collected
prior to this date.
The qualification added by RR No. 17-99 imposes a tax which is the higher amount
between the ad valorem tax being paid at the end of the 3-year transition period and the

specific tax under Section 145, as increased by 12%a situation not supported by the
plain wording of Section 145 of the 1997 Tax Code. Administrative issuances must not
override, supplant or modify the law, but must remain consistent with the law they intend
to carry out.
Revenue generation is not the sole purpose of the passage of the 1997 Tax Code. The
shift from the ad valorem system to the specific tax system in the Code is likewise meant
to promote fair competition among the players in the industries concerned and to ensure
an equitable distribution of the tax burden.
CIR v. PLDT
Facts: For equipment, machineries and spare parts it imported from October 1, 1992 to
May 31,1994, PLDT paid the BIR the amount of P164,510,953.00, broken down as
follows: (a)compensating tax of P126,713,037.00; (b) advance sales tax of
P12,460,219.00 and (c)other internal revenue taxes of P25,337,697.00. For similar
importations made between March 1994 to May 31, 1994, PLDT paid P116,041,333.00
value-added tax (VAT).(Note: PLDT did not necessarily pay VAT directly to the
BIR.)After a ruling was handed down by the BIR to the effect that the PLDT is exempt
from paying all taxes on its franchise and earnings including the VAT because of the
3%franchise tax imposed on it by Section 12 of RA 7082, the PLDT claimed from the
BIR a tax credit/refund of the VAT, compensating taxes, advance sales taxes and other
taxes it had been paying. When its claim was not acted upon by the BIR, PLDT went to
the CTA. The CTA ruled for PLDT, but made deductions (refundable amounts which
period to claim had already prescribed) from the total tax refund prayed for by PLDT.
The CIR appealed to the CA. The CA affirmed the CTAs decision. The CIR appealed to
the SC, saying that the CA erred in ruling that because of the 3% franchise tax the PLDT
is exempt from paying all taxes, including indirect taxes.
Issue: WON the 3% franchise tax exempts the PLDT from paying all other taxes,
including indirect taxes.
Held: No.
1.Direct taxes are those exacted from the very person who, it is intended or desired,
should pay them. They are impositions for which a taxpayer is directly liable on the
transaction or business he is engaged in.
2.Indirect taxes are those that are demanded, in the first instance, from, or are paid by,
one person in the expectation and intention that he can shift the burden to someone else.
In other words, indirect taxes are taxes wherein the liability for the payment of the tax
falls on one person but the burden thereof can be shifted or passed on to another person,
such as when the tax is imposed upon goods beforereaching the consumer who ultimately
pays for it. When the seller passes on thetax to his buyer, he, in effect, shifts the tax
burden, not the liability to pay it, to the purchaser as part of the price of goods sold or
services rendered.
3.The NIRC classifies VAT as an indirect tax the amount of [which] may be shifted
or passed on to the buyer, transferee or lessee of the goods.

The 10%VAT on importation of goods is in the nature of an excise tax levied on the
privilege of importing articles. It is imposed on all taxpayers who import goods. It is not a
tax on the franchise of a business enterprise or on its earnings, as stated in Section 2 of
RA 7082.
4.Advance sales tax has the attributes of an indirect tax because the tax-paying importer
of goods for sale or of raw materials to be processed into merchandise can shift the tax or
lay the economic burden of the tax on the purchaser by subsequently adding the tax to
the selling price of the imported article or finished product.
5.Compensating tax also partakes of the nature of an excise tax payable by all persons
who import articles, whether in the course of business or not.
6.The liability for the payment of the indirect taxes lies with the seller of the goods or
services, not in the buyer thereof. Thus, one cannot invoke ones exemption privilege to
avoid the passing on or the shifting of the VAT to him by themanufacturers/suppliers of
the goods he purchased. Hence, it is important todetermine if the tax exemption granted
to a taxpayer specifically includes the indirect tax which is shifted to him as part of the
purchase price, otherwise it is presumed that the tax exemption embraces only those taxes
for which the buyer is directly liable. Since RA 7082 did not specifically include indirect
taxes in the exemption granted to PLDT, the latter cannot claim exemption from VAT,
advance sales tax and compensating tax.
7.The clause in lieu of all taxes in Section 12 of RA 7082 is immediately followed by
the qualifying clause on this franchise or earnings thereof, suggesting that the
exemption is limited to taxes imposed directly on PLDT since taxes pertaining to PLDTs
franchise or earnings are its direct liability. Accordingly, indirect taxes, not being taxes
on PLDTs franchise or earnings, are not included in the exemption provision.
8.PLDTs allegation that the Bureau of Customs assessed the company for advance sales
tax and compensating tax for importations entered between October 1, 1992 and May 31,
1994 when the value-added tax system already replaced, if not totally eliminated,
advance sales and compensating taxes, is with merit. Pursuant to Executive Order No.
273, a multi-stage value-added tax was put into place to replace the tax on original and
subsequent sales tax. Therefore, compensating tax and advance sales tax were no longer
collectible internal revenue taxes under the NIRC when the Bureau of Customs made the
assessments in question and collected the corresponding tax. Stated a bit differently,
PLDT was no longer under legal obligation to pay compensating tax and advance sales
tax on its importation from 1992 to 1994. A refund of the amounts paid as such taxes is
thus proper.
9.P87,257,031.00 of compensating tax + P7,416,391.00 advanced sales tax
=P94,673,422.00 total refund.
QUEZON CITY vs. ABS-CBN G.R. No. 166408, October 6, 2008)
Facts: Petitioner City Government of Quezon City is a local government unit duly
organized and existing by virtue of Republic Act (R.A.) No.537, otherwise known as the
Revised Charter of QuezonCity. Petitioner City Treasurer of Quezon City is primarily
responsible for the imposition and collection of taxes within the territorial jurisdiction of

Quezon City. ABS-CBN was granted the franchise to install and operate radio and
television broadcasting stations in the Philippines under R.A. No.7966. ABS-CBN had
been paying local franchise tax imposed by Quezon City. However, in view of the
provision in R.A. No. 9766 that it shall pay a franchise tax x x x in lieu of all taxes, the
corporation developed the opinion that it is not liable to pay the local franchise tax
imposed by Quezon City. ABS-CBN filed a written claim for refund for local franchise
tax paid to Quezon City for 1996and for the first quarter of 1997. For failure to obtain
any response from the Quezon City Treasurer, ABS-CBN filed a complaint before the
RTC in Quezon City seeking the declaration of nullity of the imposition of local franchise
tax by the City Government of Quezon City for being unconstitutional. The RTC
rendered judgment declaring as invalid the imposition on and collection from ABS-CBN
of local franchise tax and ordered the refund of all payments made. The City of Quezon
and its Treasurer filed a motion for reconsideration which was subsequently denied by the
RTC. Thus, appeal was made to the CA. The CA dismissed the petition of Quezon City
and its Treasurer. According to the appellate court, the issues raised were purely legal
questions cognizable only by the Supreme Court.
Issue: Whether or not the petitioners-appellants raised factual and legal issues before the
Honorable Court of Appeals
Ruling: Obviously, these are purely legal questions, cognizable by the Supreme Court, to
the exclusion of all other courts. There is a question of law when the doubt or difference
arises as to what the law is pertaining to a certain state of facts. Section 2, Rule 50 of the
Rules of Court provides that an appeal taken to the CA under Rule 41 raising only
questions of law is erroneous and shall be dismissed, issues of pure law not being within
its jurisdiction. Consequently, the dismissal by the CA of petitioners appeal was in order.
However, to serve the demands of substantial justice and equity, the Court opts to relax
procedural rules and rule upon on the merits of the case
1. Why are tax laws construed strictly against the State and liberally in favor of the
State ?
SUGGESTED ANSWER: In case of doubt, tax laws must be construed strictly against
the State and liberally in favor of the taxpayer because taxes, as burdens which must be
endured by the taxpayer, should not be presumed to go beyond what the law expressly
and clearly declares.(Lincoln Philippine Life Insurance Company, Inc., etc.,v. Court of
Appeals, et al., 293 SCRA 92, 99)
2. Why are tax exemptions are strictly construed against the taxpayer and liberally in
favor of the State ?
SUGGESTED ANSWER: Taxes are necessary for the continued existence of the State.
3. Strict interpretation of tax exemption laws.
Taxes are what civilized people pay for civilized society. They are the lifeblood of the
nation. Thus, statutes granting tax exemptions are construed stricissimi juris against the
taxpayer and liberally in favor of the taxing authority. A claim of tax exemption must be

clearly shown and based on language in law too plain to be mistaken. Otherwise stated,
taxation is the rule, exemption is the exception. (Quezon City, et al., v. ABS-CBN
Broadcasting Corporation, G. R. No. 166408, October 6, 2008 citing Mactan Cebu
International Airport Authority v. Marcos, G.R. No. 120082, September 11, 1996,
261SCRA 667, 680) The burden of proof rests upon the party claiming the exemption to
prove that it is in fact covered by the exemption so claimed. (Quezon City, supra citing
Agpalo, R.E., Statutory Construction, 2003 ed., p. 301)
4.Rationale for strict interpretation of tax exemption laws. The basis for the rule on strict
construction to statutory provisions granting tax exemptions or deductions is to minimize
differential treatment and foster impartiality, fairness and equality of treatment among
taxpayers. (Quezon City, et al., v. ABS-CBN Broadcasting Corporation, G. R. No.
166408, October 6, 2008) He who claims an exemption from his share of common
burden must justify his claim that the legislature intended to exempt him by unmistakable
terms. For exemptions from taxation are not favored in law, nor are they presumed. They
must be expressed in the clearest and most unambiguous language and not left to mere
implications. It has been held that exemptions are never presumed the burden is on the
claimant to establish clearly his right to exemption and cannot be made out of inference
or implications but must be laid beyond reasonable doubt. In other words, since taxation
is the rule and exemption the exception, the intention to make an exemption ought to be
expressed in clear and unambiguous terms. (Quezon City,supraciting Agpalo, R.E.,
Statutory Construction, 2003 ed., p. 302)