G.R. No.

L-75697 June 18, 1987

VALENTIN TIO vs. VIDEOGRAM REGULATORY BOARD
MELENCIO-HERRERA, J.:

NATURE: Petitioner assails constitutionality of PD 1987

FACTS:
PD 1987 entitled "An Act Creating the Videogram Regulatory Board" took effect on April 10, 1986
with broad powers to regulate and supervise the videogram industry. One month after promulgation
of PD 1987, PD 1994 amended the NIRC providing in Sec. 134 an additional annual tax of P5.00 on
each processed video-tape cassette.

ISSUE:
Whether the tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in
violation of the due process clause of the Constitution

RULING:
No, the court ruled that a tax does not cease to be valid merely because it regulates, discourages,
or even definitely deters the activities taxed. The power to impose taxes is one so unlimited in force
and so searching in extent, that the courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the discretion of the authority which exercises it. In
imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security
against erroneous and oppressive taxation. Taxation has been made the implement of the state's
police power.

G.R. No. L-7859 December 22, 1955

WALTER LUTZ v. J. ANTONIO ARANETA
REYES, J. B. L., J.

NATURE: This case was initiated in the Court of First Instance of Negros Occidental to test the
legality of the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar
Adjustment Act.

FACTS:
Walter Lutz, as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, sought to
recover the sum of P14,666.40 paid by the estate as taxes from the Commissioner under Section e
of Commonwealth Act 567 or the Sugar Adjustment Act, alleging that such tax is unconstitutional as
it levied for the aid and support of the sugar industry exclusively, which is in his opinion not a public
purpose.

ISSUE:
Whether the tax is valid

RULING:
Yes. The tax is levied with a regulatory purpose, i.e. to provide means for the rehabilitation and
stabilization of the threatened sugar industry. The act is primarily an exercise of police power and is
not a pure exercise of taxing power.

Further, it cannot be said that the devotion of tax money to experimental stations to seek increase
of efficiency in sugar production, utilization of by-products, etc., as well as to the improvement of
living and working conditions in sugar mills and plantations without any part of such money being
channeled directly to private persons, constitute expenditure of tax money for private purposes.

Hence, the tax is valid.

G.R. Nos. L-28508-9 July 7, 1989
ESSO STANDARD EASTERN, INC. vs. THE COMMISSIONER OF INTERNAL REVENUE
CRUZ, J.:

NATURE: Appeal from the decision of the CA

FACTS:

ESSO deducted from its gross income for 1959, as part of its ordinary and necessary business
expenses, the amount it had spent for drilling and exploration of its petroleum concessions. The
Commissioner disallowed the claim on the ground that the expenses should be capitalized and
might be written off as a loss only when a “dry hole” should result. Hence, ESSO filed an amended
return where it asked for the refund of P323,270 by reason of its abandonment, as dry holes, of
several of its oil wells. Petitioner appealed to the CTA contending that it is entitled to deduct margin
fees from the gross income either as a tax or as an ordinary and necessary business expense.
Further, that ESSO is entitled to refund for excess interest paid. CTA denied the petition for refund
of them margin fees but sustained petitioner’s claim for excess interest. CIR appealed the decision
on the excess interest but was denied. ESSO appealed the decision of the CTA denying the refund
of margin fees to the SC.

ISSUE:
1. Whether margin fees are taxes and are thus deductible from ESSO’s gross income
2. Whether margin fees are considered ordinary and necessary business expense and thus
deductible from ESSO’s gross income

RULING:
1. No, the court ruled that a tax is levied to provide revenue for government operations, while
the proceeds of the margin fee are applied to strengthen our country's international
reserves.

2. No, ESSO has not shown that the remittance to the head office of part of its profits was
made in furtherance of its own trade or business. Since the margin fees in question were
incurred for the remittance of funds to petitioner's Head Office in New York, which is a
separate and distinct income taxpayer from the branch in the Philippines, for its disposal
abroad, it can never be said therefore that the margin fees were appropriate and helpful in
the development of petitioner's business in the Philippines exclusively or were incurred for
purposes proper to the conduct of the affairs of petitioner's branch in the Philippines
exclusively or for the purpose of realizing a profit or of minimizing a loss in the Philippines
exclusively.

G.R. No. 100959 June 29, 1992

BENGUET CORPORATION vs. CENTRAL BOARD OF ASSESSMENT APPEALS
BELLOSILLO, J.:

NATURE: Original petition for certiorari seeking to annul and set aside the Decision of the Central
Board of Assessment Appeals

FACTS:
The Provincial Assessor of Benguet, through the Municipal Assessor of Itogon, assessed real
property tax on the bunkhouses of petitioner Benguet Corporation occupied for residential purposes
by its rank and file employees. According to the Provincial Assessor, the tax exemption of
bunkhouses under Sec. 3 (a), P.D. 745 was withdrawn by P.D. 1955. Petitioner appealed the
assessment on Tax Declarations Nos. 8471 and 10454 to the Local Board of Assessment Appeals
(LBAA) of the Province of Benguet, docketed as LBAA Cases Nos. 42 and 43, respectively. Both
were heard jointly. Thereafter, the proceedings in LBAA Cases Nos. 42 and 43 proceeded after
which a decision was rendered affirming the taxability of subject property of petitioner. On appeal,
CBAA sustained the decision holding that the realty tax exemption under P.D. 745 was withdrawn
by P.D. 1955 and E.O. 93. Hence, this petition.

ISSUE:
Whether realty taxes are local taxes

RULING:
No. While local government units are charged with fixing the rate of real property taxes, it does not
necessarily follow from that authority the determination of whether or not to impose the tax. In fact,
local governments have no alternative but to collect taxes as mandated in Sec. 38 of the Real
Property Tax Code, which states:

It is thus clear from the foregoing that it is the national government, expressing itself through the
legislative branch that levies the real property tax. Consequently, when local governments are
required to fix the rates, they are merely constituted as agents of the national government in the
enforcement of the Real Property Tax Code. The delegation of taxing power is not even involved
here because the national government has already imposed realty tax in Sec. 38 above-quoted,
leaving only the enforcement to be done by local governments.

G.R. No. 76778 June 6, 1990

FRANCISCO I. CHAVEZ vs. JAIME B. ONGPIN, et al.
MEDIALDEA, J.:

NATURE: Original petition to the SC questioning the constitutionality of EO 73

FACTS:
EO no. 73, which provides for the collection of real property taxes based on the 1984 real property
values, was enacted on Nov. 25, 1986 and was subsequently suspended by MO no. 77 from Mar
31, 1987 to June 30, 1987. Petitioner Francisco Chavez, a taxpayer and owner of 3 parcels of land,
alleged the unconstitutionality of EO no. 73 because it accelerated the application of the general
revision of assessments to January 1, 1987 thereby mandating an excessive increase in real
property taxes. This amounted, the petitioner’s argument, into confiscation of property repugnant to
the constitutional guarantee of due process.

He was joined by Realty Owners Association of the Phils Inc (ROAP) as intervenor.

ISSUE:
Whether EO 73 is unconstitutional

RULING:
No, EO 73 is valid. EO 73 did not impose new taxes nor increase the taxes. What it did was only to
accelerate the implementation of the increase in real property taxes provided by EO 1019 from
January 1, 1988 to January 1, 1987. The court found ample justification in the acceleration as
provided in the ‘whereas’ clause of EO 73 which stated that the delay in implementation deprived
local government units of an additional source of revenue. Further, that there is an urgent need for
local governments to augment their financial resources to meet the rising cost of rendering effective
services to the people. Certainly, to continue collecting real property taxes based on valuations
arrived at several years ago, in disregard of the increases in the value of real properties that have
occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one
of the characteristics of a sound tax system, requires that sources of revenues must be adequate
to meet government expenditures and their variations.